-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WnLYuWkZHsrToJRYHCBApSbG6mCRDGxhAmnYLuEe0i0s90f6B/Y4GLB0G8SAFvrn lyWZJYsG3SilzPw2gki48A== 0001030798-01-000065.txt : 20010409 0001030798-01-000065.hdr.sgml : 20010409 ACCESSION NUMBER: 0001030798-01-000065 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 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-K SEC ACT: SEC FILE NUMBER: 000-13089 FILM NUMBER: 1591668 BUSINESS ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P.O. BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39501 BUSINESS PHONE: 6018684605 MAIL ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P O BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39501 10-K 1 0001.htm 2000 HANCOCK HOLDING COMPANY FORM 10-K 2000 Hancock Holding Company Form 10-K

                                                     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, 2000
                          ------------------

       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 Number)
  incorporation or organization)

One Hancock Plaza, Gulfport, Mississippi                  39501
- ----------------------------------------      ------------------------------------
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code     (228) 868-4727
                                                   -------------------------
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.   X
            -----

         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

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The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 1, 2001, was approximately $323,291,000 (based on an average market price of $38.25). 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, 2000, the registrant had outstanding 10,739,806 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, 2000 are incorporated by reference into Part I and Part II of this report.

Portions of the definitive Proxy Statement used in connection with the Registrant's Annual Meeting of Shareholders held on February 22, 2001, filed by the Registrant on January 22, 2001, are incorporated by reference into Part III of this report.

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CONTENTS

PART I

Item 1. Business 4
Item 2. Properties 32
Item 3. Legal Proceedings 33
Item 4. Submission of Matters to a Vote of Security Holders 33

PART II

Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters 33
Item 6. Selected Financial Data 33
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 33
Item 7a Quantitative and Qualitative Disclosures About
Market Risk 33
Item 8. Financial Statements and Supplementary Data 34
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 34

PART III

Item 10. Directors and Executive Officers of the
Registrant 34
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial
Owners and Management 36
Item 13. Certain Relationships and Related Transactions 36

PART IV

Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 36

Page 3 of 41

PART I

ITEM 1 - BUSINESS
-----------------

BACKGROUND AND CURRENT OPERATIONS
---------------------------------

Background

General:

Hancock Holding Company (the Company), organized in 1984 as a bank holding company registered under the Bank Holding Company Act of 1956, as amended, is headquartered in Gulfport, Mississippi. At December 31, 2000 the Company operated 91 banking offices and 130 automated teller machines (ATMs) 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 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, 2000, the Company had total assets of $3.0 billion and employed on a full-time equivalent basis 1,075 persons in Mississippi and 515 persons in Louisiana.

Hancock Bank MS was originally chartered as Hancock County Bank in 1899. 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 military and government-related facilities, tourism, port facility activities, industrial complexes and the gaming industry. Based on the most current available published data, Hancock Bank MS has the largest deposit market share in each of the four counties in which it operates: Harrison, Hancock, Jackson and Pearl River. With assets of $1.8 billion at December 31, 1999, Hancock Bank MS currently ranks as the fifth largest bank in Mississippi.

In August 1990, the Company formed Hancock Bank LA to assume the deposit liabilities and acquire the consumer loan portfolio, corporate credit card portfolio and non-adversely classified securities portfolio of American Bank and Trust, Baton Rouge, Louisiana, (AmBank), from the Federal Deposit Insurance Corporation (FDIC). Economic expansion in East Baton Rouge Parish has resulted from growth in state government and related service industries, educational and medical complexes, petrochemical industries, port facility activities and transportation and related industries. With assets of $1.3 billion at December 31, 2000, Hancock Bank LA is one of the largest banks headquartered in East

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Baton Rouge Parish.

Beginning with the 1985 acquisition of the Pascagoula-Moss Point Bank in Pascagoula, Mississippi, the Company has acquired approximately $1.2 billion in assets and approximately $1.1 billion in deposit liabilities through selected acquisitions or purchase and assumption transactions.

Recent Acquisition Activity:

In November 1996, the Company acquired Community Bancshares, Inc., Independence, Louisiana, (Community) which owned 100% of the stock of Community State Bank. The acquisition was in return for approximately $5.0 million cash and 513,000 shares (adjusted for a 15% stock dividend in 1996) of common stock of the Company. The acquisition was accounted for using the purchase method. Community had total assets of approximately $91.0 million and stockholders' equity of approximately $11.0 million as of December 31, 1995 and net earnings of approximately $900,000 for the year then ended.

On January 17, 1997, the Company acquired Southeast National Bank, Hammond, Louisiana (Southeast). The acquisition was in return for approximately $3.7 million cash and 121,000 shares of common stock of the Company. The acquisition was accounted for using the purchase method. Southeast had total assets of approximately $40.0 million and stockholders' equity of approximately $4.0 million as of December 31, 1996 and net earnings of approximately $500,000 for the year then ended.

On July 15, 1997, the Company acquired Commerce Corporation, Inc., St Francisville, Louisiana (Commerce), which owned 100% of the stock of Bank of Commerce and Trust Company, for approximately $330,000 cash, 65,000 shares of common stock of the Company and the assumption of Commerce debt owed to certain individuals in the aggregate principal amount of $1,250,000. The transaction was accounted for using the purchase method. Commerce had total assets of approximately $29.0 million and stockholders' equity of approximately $800,000 as of December 31, 1996 and net earnings of approximately $260,000 for the year then ended.

On January 15, 1999, Hancock Holding Company acquired American Security Bancshares of Ville Platte, Inc. (ASB), Ville Platte, Louisiana, the holding company of American Security Bank. The acquisition, accounted for using the purchase method, called for the exchange of ASB stock in return for approximately $15.2 million cash and 644,000 shares of common stock of the Company. ASB had total assets of approximately $230.0 million and stockholders' equity of approximately $21.0 million at December 31, 1998 and net earnings of approximately $2.0 million for the year then ended. The results of operations of ASB were included in the 1999 consolidated statements of earnings from the date of acquisition. The acquisition resulted in the recognition of goodwill amounting to approximately $21.9 million, which is being amortized over 15 years.

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Current Operations

Loan Production and Credit Review:

The Banks' primary lending focus is to provide commercial, consumer, leasing and real estate loans to consumers and to small and middle market businesses in their respective market areas. The Banks have no significant 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 that can be approved for a single borrower without prior approval of a loan committee. All loans, however, must meet the credit underwriting standards and loan policies of the Banks.

All loans over an individual loan officer's Board approved lending authority must be approved by the Bank's loan committee, the region's loan committee or by another loan officer with greater lending authority. Both the regional loan committee and the Bank's senior loan committee must review and approve any loan for a borrower whose total indebtedness exceeds the region's approved limit. Each loan file is reviewed by the Bank's loan operations quality assurance function, a component of its loan review system, to ensure proper documentation and asset quality.

Loan Review and Asset Quality:

Each Bank's portfolio of loan relationships aggregating $250,000 or more is annually reviewed by the respective Bank to identify any deficiencies and to take corrective actions as necessary. Periodically, selected loan relationships aggregating less than $250,000 are reviewed. As a result of such reviews, each Bank places on its Watchlist loans requiring close or frequent review. All loans classified by a regulator are also placed on the Watchlist. All Watchlist and past due loans are reviewed monthly by the Banks' senior lending officers and 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 a new loan. All lines of credit are reviewed annually before renewal. The Banks currently have mechanisms in place that 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.

Consumer loans which become 60 days delinquent are reviewed regularly by management. Generally, a consumer loan which is delinquent 120 days is in process of collection through repossession and liquidation of collateral or has been deemed currently uncollectible. Loans deemed currently uncollectible are charged-off against the allowance account. As a matter of policy, loans are placed on a nonaccrual status when the loan is 1) maintained on a cash basis due to the deterioration in the financial condition of the borrower, 2) payments, in full, of principal or interest are not expected or 3) the principal or interest has been in default for a period of 90 days, unless the loan is well secured and in the process

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of collection.

The Banks follow the standard FDIC loan classification system. This system provides management with (1) a general view of the quality of the overall loan portfolio (each branch's loan portfolio and each commercial loan officer's loan portfolio) and (2) information on specific loans that 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, 2000, the book value of real estate held for resale and other repossessed properties was approximately $3.3 million.

Securities Portfolio:

The Banks maintain portfolios of securities consisting primarily of U.S. Treasury securities, U.S. government agency issues, mortgage-backed securities, CMOs 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 durations of less than 7 years.

The Banks' policies limit investments to securities having a rating of no less than "Baa" by Moody's Investors' Service, Inc., except for certain obligations of Mississippi or Louisiana counties and municipalities.

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Deposits:

The Banks have several programs designed to attract depository accounts offered to consumers and to small and middle market businesses at interest rates generally consistent with market conditions. Additionally, the Banks offer 126 ATMs: ATMs at the Company's banking offices and free-standing ATMs at other locations. As members of regional and international ATM networks such as "PULSE", "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, 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 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 individuals, 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, 2000, the Trust Departments of the Banks had approximately $2.9 billion of assets under management, of which $1.7 billion were corporate accounts and the remaining balances were personal, employee benefit, estate and other trust accounts.

Operating Efficiency Strategy:

The primary focus of the Company's operating strategy is to increase shareholder value through superior returns on a wide range of financial services offered to our customers throughout our operating region. The Company's operating efficiency ratio, excluding intangible amortization and securities gains, was 58.50% for the year ended December 31, 2000, compared to 63.84% for the prior year. Excluding the impact of the gain realized on the sale of the majority of the Company's credit card portfolio, the efficiency ratio for 2000 was 59.74%. In the latter part of 1999, management took steps to improve operating efficiencies after concentrating on income-producing strategies during the first half of the year. With management's efforts focused on cost containment, the number of full-time equivalent employees was reduced from a high at March 31, 1999 of 1,804 to 1,590 at December 31, 2000. Other initiatives, including the reengineering of certain back-office processes, were put into place with the intention of limiting non-interest expense growth in the year 2000.

Other Activities:

Hancock Bank MS has 7 subsidiaries through which it engages in the following activities: providing

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consumer financing services; mortgage lending; owning, managing and maintaining certain real property; providing general insurance agency services; holding investment securities; marketing credit life insurance; and providing discount investment brokerage services. The income of these subsidiaries generally accounts for less than 10% of the Company’s total net earnings.

In 1994, the Company began offering alternative investments through a third party vendor. The investment centers are now located in several branch locations in Mississippi and Louisiana to accommodate the investment needs of customers whose financial portfolio requirements fall outside the traditional commercial bank product line. During 1999, the investment sales force was internalized and the management structure reorganized in order to align sales actively with Company objectives.

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. Timber sales and oil and gas leases on this acreage generate less than 1% of the Company's annual income.

Competition:

The deregulation of the financial services industry, the elimination of many previous distinctions between commercial banks and other financial institutions and legislation enacted in Mississippi, Louisiana and other states allowing state-wide branching, multi-bank holding companies and 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 and insurance companies and other financial institutions. Many of these institutions have greater available resources than the Company.

SUPERVISION AND REGULATION

Bank Holding Company Regulation

General:

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

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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, managing or controlling banks or other permissible subsidiaries. Acquiring or obtaining control of any company engaged in activities other than those activities determined by the Federal Reserve to be so closely related to banking, managing or controlling banks as to be proper incident thereto is also prohibited. In determining whether a particular activity is permissible, the Federal Reserve considers whether the performance of the activity can reasonably be expected to produce benefits to the public that outweigh possible adverse effects. 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 performing 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 bank-related activities of bank holding companies. Despite prior approval, however, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity or its control of any subsidiary when it has reasonable cause to believe that continuation of such activity or control of such subsidiary 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 ownership or control of any voting shares of any bank if, after such acquisition, such bank holding company will 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 of the assets of a bank, or (3) before it may merge with any other bank holding company. In reviewing a proposed acquisition, the Federal Reserve considers financial, managerial and competitive aspects. The future prospects of the companies and banks concerned and the convenience and needs of the community to be served must also be considered. The Federal Reserve also reviews the indebtedness to be incurred by a bank holding company in connection with the proposed acquisition to ensure that the holding company can service such indebtedness without adversely affecting the capital requirements of the holding company or its subsidiaries. The Bank Holding Company Act further requires that consummation of approved acquisitions or mergers must be delayed for a period of not less than 15 nor more than least 30 days following the date of approval. During such 15 to 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

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holding company and any applications by the bank holding company to the 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. This system is designed to help identify institutions which require special attention. Financial institutions are assigned ratings based on evaluation and rating of their financial condition and operations. Components reviewed include capital adequacy, asset quality, management capability, the quality and level of earnings, and the adequacy of liquidity. Effective January 1, 1997, a sixth component was added to the rating system - sensitivity to market risk. This component addresses primarily the issue of a bank’s sensitivity to interest rate fluctuations.

The leverage ratios adopted by the Federal Reserve require all but the most highly rated bank holding companies to maintain Tier 1 Capital at 4% of total assets. Certain bank holding companies having a composite 1 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: stockholders' 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 capital ratio at December 31, 2000 was 10.20%.

The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles 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; 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. A two-step process determines the risk weight of off-balance sheet items such as standby letters of credit. First, the amount of the off-balance sheet item is multiplied by a credit conversion factor of either 0%, 20%, 50% or 100%. The result is then assigned to one of the four risk categories. At December 31, 2000, the Company's off-balance sheet items aggregated $401.5 million; however, after the credit conversion these items represented $74.0 million of balance sheet equivalents.

The primary component of risk-based capital is Tier 1 Capital, which for the Company is essentially equal to common stockholders' equity, less goodwill and other intangibles. Tier 2 Capital, which consists primarily of the excess of any perpetual preferred stock, mandatory convertible securities, subordinated debt and general allowances for loan losses, is a secondary component of risk-based capital. The risk-

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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. 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% must be maintained by bank holding companies. At December 31, 2000, the Company's Tier 1 and Total Capital ratios were 15.95% and 17.20%, respectively.

The prior approval of the Federal Reserve must be obtained before the Company 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 an acquisition 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 organizations, provided the out-of-state banking organization's home state grants similar privileges to banking organizations in Mississippi. This reciprocity privilege was restricted to banking organizations in specified geographic regions that encompassed the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas, Virginia and West Virginia. However, effective September 29, 1995, such regional limitation was expanded by the Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994 to a nationwide basis. In addition, Mississippi banking organizations were granted similar powers to acquire certain out-of-state financial institutions pursuant to the Interstate Bank Branching Act which was adopted in 1996. A bank holding company is additionally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in non-banking activities.

With the passage of The Interstate Banking and Branching Efficiency Act of 1994, adequately capitalized and managed bank holding companies are permitted to acquire control of banks in any state, subject to federal regulatory approval, without regard to whether such a transaction is prohibited by the laws of any state. Beginning June 1, 1997, federal banking regulators may approve merger transactions involving banks located in different states, without regard to laws of any state prohibiting such transactions; except that, mergers may not be approved with respect to banks located in states that, before June 1, 1997, enacted legislation prohibiting mergers by banks located in such state with out-of- state institutions. Federal banking regulators may permit an out-of-state bank to open new branches in another state if such state has enacted legislation permitting interstate branching. The legislation further provides that a bank holding company may not, following an interstate acquisition, control more than 10% of nationwide insured deposits or 30% of deposits in the relevant state. States have the right to adopt legislation to lower the 30% limit. Additional provisions require that interstate activities conform to the Community Reinvestment Act.

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

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preceding 12 months, is equal to 10% or more of the Company’s consolidated net worth. The Federal Reserve may disapprove such a transaction if it determines that the proposal constitutes an unsafe or unsound practice, would violate anylaw, 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 pay dividends only out of current earnings. It also stated that dividends should not be paid 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 from owning subsidiaries engaged principally in the issue, floatation, underwriting, public sale or distribution of securities.

The Company is a legal entity separate and distinct from the Banks. There are various restrictions that 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 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 national banks, respectively, and the regulations of the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency (OCC), to the extent state banks are granted parity with national banks. 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 operations. These examinations are designed for

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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.

As a result of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), a financial institution insured by the FDIC can be held liable for any losses incurred by, or reasonably expected to be incurred by, the FDIC in connection with (1) the default of a commonly controlled FDIC-insured financial institution or (2) any assistance provided by the FDIC to a commonly controlled financial institution in danger of default.

The Banks are members of the FDIC, and their deposits are insured as provided by law by the Bank Insurance Fund (BIF). On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) was enacted. The Federal Deposit Insurance Act, as amended by Section 302 of FDICIA, 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.

Effective in the first quarter of 1996, the FDIC lowered banks' deposit insurance premiums from 4 to 31 cents per hundred dollars in insured deposits to a rate of 0 to 27 cents. The Banks have received a risk classification of 1A for assessment purposes. In 1997 an assessment for the Financing Corporation's debt service was added to the FDIC quarterly premium payment. That annual assessment averaged 2.12 cents per hundred dollars of insured deposits during 2000 and 1.96 (annualized) for the first quarter of 2001. Total assessments paid to the FDIC amounted to $488 thousand in 2000. For the year ended December 31, 2000, premiums on OAKAR deposits from the 1991 acquisition of Peoples Federal Savings Association totaled $7,600.

In general, FDICIA subjects banks and bank holding companies to significantly increased regulation and supervision. FDICIA increased the borrowing authority of the FDIC in order to re-capitalize the BIF, and the future borrowings are to be repaid by increased assessments on FDIC member banks. Other significant provisions of FDICIA require a new regulatory emphasis linking supervision to bank capital levels. Also, federal banking regulators are required 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.

FDICIA contains a "prompt corrective action" section intended to resolve problem institutions at the least possible long-term cost to the deposit insurance funds. Pursuant to this section, the federal banking agencies are required to prescribe a leverage limit and a risk-based capital requirement indicating levels at which institutions will be deemed to be "well capitalized," "adequately capitalized," "undercapitalized,"

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“significantly undercapitalized” and “critically undercapitalized.” In the case of a depository institution that is “critically undercapitalized” (a term defined to include institutions which still have positive net worth), the federal banking regulators are generally required to appoint a conservator or receiver.

FDICIA further requires regulators to perform annual on-site bank examinations, places limits on real estate lending and tightens audit requirements. The new legislation eliminated 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. FDICIA 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 FDICIA required new regulations.

In addition to regulating capital, the FDIC and the OCC have broad authority to prevent the development or continuance of unsafe or unsound banking practices. Pursuant to this authority, the FDIC and OCC have adopted regulations that restrict preferential loans and loan amounts 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 is also authorized to approve mergers, consolidations and assumption of deposit liability transactions between insured banks and between insured banks and 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 Hancock Bank MS and Hancock Bank LA.

Although Hancock Bank MS and Hancock Bank LA 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). 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. 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 $37.3 million, or, if the aggregate of such accounts exceeds $37.3 million, $1.119 million plus 10% of the total in excess of $37.3 million. This regulation is subject to an exemption from reserve requirements on a limited amount of an institution's transaction accounts.

The foregoing is a brief summary of certain statutes, rules and regulations affecting the Company and the Banks. It is not intended to be an exhaustive discussion of all the statutes and regulations having an impact on the operations of such entities.

Page 15 of 41

Recent Legislation:

On November 12, 1999, President Clinton signed into law the Gramm-Leach-Billey Act on 1999 (the "Financial Services Modernization Act"). The Financial Services Modernization Act repeals the two affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve Member Banks with firms "engaged principally" in specified securities activities; and Section 32, which restricts officer, director or other employee interlocks between a member bank and any company or person "primarily engaged" in specified securities activities. In addition, the Financial Services Modernization Act also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the Bank Holding Company Act framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a Financial Holding Company. "Financial activities" is broadly defined to include not only banking, insurance, and securities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that to not pose a substantial risk to the safety and soundness of depository institutions of the financial system generally.

Generally, the Financial Services Modernization Act:

•	Repeals historical restrictions on, and eliminates many federal and state law barriers to, affiliations among bank, securities firms, insurance companies, and other financial service providers;

•	Provides a uniform framework for the functional regulation of the activities of banks, savings institutions, and their holding companies;

•	Broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their financial subsidiaries;

•	Provides an enhanced framework for protecting the privacy of consumer information;

•	Adopts a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernize the Federal Home Loan Bank system;

•	Modifies the laws governing the implementation of the Community Reinvestment Act ("CRA"); and

•	Addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.

The Financial Services Modernization Act also permits national banks to engage in expended activities through the formation of financial subsidiaries. A national bank may have a subsidiary engaged in any activity

Page 16 of 41

authorized for national banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development or merchant banking, which may only be conducted through a subsidiary of a Financial Holding Company. Financial activities include all activities permitted under new sections of the Bank Holding Company Act or permitted by regulation.

A national bank seeking to have a financial subsidiary, and each of its depository institution affiliates, must be "well-capitalized" and "well-managed". The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank's total assets, or $50 billion. A national bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary. The assets of the subsidiary may not be consolidated with the bank's assets. The bank must also have policies and procedures to assess financial subsidiary risk and protect the bank from such risks and potential liabilities.

The Financial Services Modernization Act also includes a new section of the Federal Deposit Insurance Act governing subsidiaries of state banks that engage in "activities as principal that would only be permissible" for a nationally bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all existing subsidiaries. Because Mississippi permits commercial banks chartered by the state to engage in any activity permissible for national banks, the Bank will be permitted to form subsidiaries to engage in the activities authorized by the Financial Services Modernization Act. In order to form a financial subsidiary, a state bank must be well-capitalized and the state bank would be subject to the same capital deduction, risk management and affiliate transaction rules as applicable to national banks.

The Bank's management has not determined at this time, but is examining its strategic business plan to determine whether, based on market conditions, the relative financial conditions of the Bank, regulatory capital requirements, general economic conditions and other factors, the Bank desires to utilize any of its expanded powers provided in the Financial Services Modernization Act.

The Bank does not believe that the Financial Services Modernization Act will have a material adverse effect on the Bank's operations in the near-term. However, to the extent that it permits bank, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing the amount of competition that the Company and the Banks face from larger institutions and other types of companies offering financial products, some of which may have substantially more financial resources than the Company and the Banks.

Finally, additional bills may be introduced in the future in the United States Congress and state legislatures to alter the structure, regulation and competitive relationships of financial institutions. It cannot be predicted whether and what form any of these proposals will be adopted or the extent to which the business of the Company and the Banks may be affected thereby.

Page 17 of 41

Effect of Governmental Policies:

The difference between the interest rate paid on deposits and other borrowings and the interest rate received on loans and securities comprise most of a bank's earnings. In order to mitigate the interest rate risk inherent in the industry, the banking business is becoming increasingly dependent on the generation of fee and service charge revenue.

The earnings and growth of a bank may be affected by both general economic conditions and the monetary and fiscal policy of the United States Government and its agencies, particularly the Federal Reserve. The Federal Reserve sets national monetary policy such as seeking to curb inflation and combat recession. This is accomplished by its open- market operations in United States government securities, adjustments in the amount of reserves that financial institutions are required to maintain and adjustments to the discount rates on borrowings 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 on loans and deposits. The nature and timing of any future changes in monetary policies and their potential impact on the Company cannot be predicted.

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 Stockholders' 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 35% federal tax rate on tax exempt items (primarily interest on municipal securities and loans).

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 deposits and borrowed funds, noninterest-bearing as well as interest-bearing. Since a portion of the Bank's deposits do not bear interest, such as demand accounts, the rate paid for all funds is lower than the rate on interest-bearing liabilities alone. The rate differential for the years 2000 and 1999 was 4.70% and 4.73%, 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 loan demand and interest rates, there are opportunities to influence interest differential through appropriate loan and investment policies. These policies are designed to maximize interest differential while

Page 18 of 41

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.

"Table 7 - Summary of Average Balance Sheets, Net Interest Income (TE) & Interest Rates" included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 35 through 43 of the Company's 2000 Annual Report to Stockholders is incorporated herein by reference.

Information regarding the changes in interest income on interest-earning assets and interest expense on interest- bearing liabilities relating to rate and volume variances is included in "Table 8 - Summary of Changes in Net Interest Income (TE)" included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 35 through 43 of the Company's 2000 Annual Report to Stockholders is incorporated herein by reference.

Page 19 of 41

Interest Rate Sensitivity:

To control interest rate risk, management regularly monitors the volume of interest sensitive assets compared with interest sensitive liabilities over specific time intervals. The Company's interest rate management policy is designed to reduce the exposure to changes in its net interest margin in periods of interest rate fluctuations. Interest rate risk is monitored, quantified and managed to produce an acceptable impact on short-term earnings.

The interest sensitivity gap is the difference between total interest sensitive assets and liabilities in a given time period. At December 31, 2000, the Company's cumulative interest sensitivity gap in the one year interval was (4.45%). The percentage reflects a higher level of interest sensitive liabilities than assets re-pricing within one year. Generally, when rate sensitive liabilities exceed rate sensitive assets, the net interest margin is expected to be positively affected during periods of decreasing interest rates and negatively affected during periods of increasing rates.

The following tables set forth the scheduled re-pricing or maturity of the Company's assets and liabilities at December 31, 2000 and December 31, 1999. The assumed prepayment of investments and loans were based on the Company's assessment of current market conditions on such dates. Estimates have been made for the re-pricing of savings, NOW and money market accounts. Actual prepayments and deposit withdrawals will differ from the following analysis due to variable economic circumstances and consumer behavior. Although assets and liabilities may have similar maturities or re-pricing periods, reactions will vary as to timing and degree of interest rate change.

Page 20 of 41

                                                      Analysis of Interest Sensitivity at December 31, 2000

                                                           After Three
                                          Within             Through            One           After Five
                                          Three               Twelve          Through          Years and
                                          Months              Months         Five Years       Insentitive          Total
                                   --------------------  ---------------- ----------------  ---------------  -----------------
                                                               (amounts in thousands)


Net loans                             $      573,007      $     322,47      $    707,316       $    97,04      $   1,699,841
Securities and time deposits                  52,444           147,578           513,454          280,619            994,095
Federal funds                                 59,000                 -                 -                -             59,000
Interest-bearing time deposits                 3,877                 -                 -                -              3,877

                                   --------------------  ---------------- ----------------  ---------------  -----------------
Total earning assets                  $      688,328      $    470,049      $  1,220,770       $  377,666      $   2,756,813
                                   ====================  ================ ================  ===============  =================

                                               24.97%           17.05%            44.28%           13.70%            100.00%

Interest bearing deposits, excluding
  time deposits $100,000 and greater  $      557,199      $    366,939      $    547,008       $  191,856          1,663,002
Time deposits $100,000 and greater            69,245           142,648           100,139                -            312,032
Short-term borrowings                        144,561                 -                 -                -            144,561
Other borrowings                                 138               432             1,607                -              2,177
                                   --------------------  ---------------- ----------------  ---------------  -----------------
Total interest-bearing funds                 771,143           510,019           648,754          191,856          2,121,772
Net non-interest bearing funds                     -                 -                 -          635,041            635,041
                                   --------------------  ---------------- ----------------  ---------------  -----------------
Funds supporting earning assets       $      771,143      $    510,019      $    648,754       $  826,897      $   2,756,813
                                   ====================  ================ ================  ===============  =================


                                              27.97%            18.50%            23.53%           29.99%            100.00%

Interest sensitivity gap              $     (82,815)      $   (39,970)      $    572,016       $ (449,231)
Cumulative gap                        $     (82,815)      $  (122,785)      $    449,231       $        -
Percent of total earning assets              (3.00)%           (4.45)%            16.30%            0.00%

                                                         Analysis of Interest Sensitivity at December 31, 1999

                                                           After Three
                                          Within             Through                   One       After Five
                                          Three               Twelve               Through        Years and
                                          Months              Months            Five Years      Insentitive              Total
                                   --------------------  ---------------- ----------------  ---------------  -----------------
                                                                 (amounts in thousands)


Net loans                              $      440,736     $    310,691      $   741,659        $    48,435     $    1,541,521
Securities and time deposits                  105,977          129,407          535,547            377,791          1,148,722
Federal funds                                   3,000                -                -                  -              3,000
                                   --------------------  ---------------- ----------------  ---------------  -----------------
Total earning assets                   $      549,713     $    440,098      $ 1,277,206        $   426,226     $    2,693,243
                                   ====================  ================ ================  ===============  =================

                                               20.41%           16.34%           47.42%             15.83%            100.00%

Interest bearing deposits, excluding
  time deposits $100,000 and greater   $     491,941      $   682,530       $  441,839         $      178      $    1,616,488
Time deposits $100,000 and greater            87,681           94,700           71,566                  -             253,947
Short-term borrowings                        213,773                -                -                  -             213,773
Other borrowings                              50,130              404            2,180                  -              52,714
                                   --------------------  ---------------- ----------------  ---------------  -----------------
Total interest-bearing funds                 843,525          777,634          515,585                178           2,136,922
Net non-interest bearing funds                     -                -                -            556,321             556,321
                                   --------------------  ---------------- ----------------  ---------------  -----------------
Funds supporting earning assets         $    843,525      $   777,634       $  515,585         $  556,499      $    2,693,243
                                   ====================  ================ ================  ===============  =================

                                               31.32%           28.87%           19.14%             20.66%            100.00%

Interest sensitivity gap                $   (293,812)     $  (337,536)      $   761,621        $ (130,273)
Cumulative gap                          $   (293,812)     $  (631,348)      $   130,273        $        -
Percent of total earning assets              (10.91)%         (23.44)%            4.84%             0.00%

Page 21 of 41

Income Taxes:

The Company had income tax expense of $16.9 million and $14.6 million for the years ended December 31, 2000 and 1999, respectively. This represents an effective income tax rate of 31.5% for the each of those years.

Performance and Equity Ratios:

Information regarding performance and equity ratios is contained in the "Financial Highlights" on pages 5 through 6 of the Company's 2000 Annual Report to Stockholders incorporated herein by reference.

Securities Portfolio:

The Company generally purchases securities to be held to maturity, with a maturity schedule that provides ample liquidity. Securities classified as held-to-maturity are carried at amortized cost. Certain securities have been classified as available-for-sale based on management's internal assessment of the portfolio considering future liquidity, earning requirements and capital position.

The December 31, 2000 amortized cost of the held-to-maturity portfolio was $417.8 million and the fair value was $418.6 million. The available-for-sale portfolio balance was $576.3 million at December 31, 2000.

The amortized cost of securities classified as available-for-sale at December 31, 1999, 1998 and 1997, were as follows (in thousands):

                                                                 December 31,
                                      ------------------------------------------------------------------
                                              2000                     1999                 1998
                                      ---------------------    -------------------- --------------------
U.S. Treasury                           $         77,054        $        84,341       $      101,493
U.S. government agencies                         265,029                302,450              272,564
Municipal obligations                             36,400                 33,382                5,851
Mortgage-backed securities                        48,841                 70,465               31,652
CMOs                                             137,170                151,693               45,347
Other debt securities                              6,140                 10,601                    -
Equity securities                                  7,932                  7,659                5,969
                                      ---------------------    -------------------- --------------------
                                        $        578,566        $       660,591       $      462,876
                                      =====================    ==================== ====================

Page 22 of 41

   The amortized cost, yield and fair value of debt securities classified as available-for-sale at
   December 31, 2000, by contractual maturity, were as follows (amounts in thousands):

                                              Over One        Over Five
                             One Year           Year            Years            Over                                      Weighted
                                or            Through          Through           Ten                           Fair         Average
                               Less          Five Years       Ten Years         Years           Total          Value         Yield
                         ----------------  --------------  ---------------  --------------  -------------  -------------   --------
U.S. Treasury              $     77,054      $        -        $       -     $         -     $   77,054  $      77,173       5.78%
U.S. government                  55,256         172,386           31,828           5,559        265,029        263,866        5.88
agencies
Municipal obligations             1,044           9,050           13,418          12,888         36,400         36,396       4.84%
Mortgage-backed                      12               1           12,420          36,408         48,841         48,707       6.47%
securities
CMOs                                  -                           23,670                                                     6.19%
                                                      -                          113,500        137,170        136,288
Other debt securities                 -                              182           5,958                                     7.01%
                                                      -                                           6,140          5,956
                         --------------  --------------    ---------------  --------------  -------------  -------------  ---------
                            $   133,366       $ 181,437        $  81,518     $   174,313     $  570,634   $    568,386       5.94%
                         ================  ==============  ===============  ==============  =============  =============  =========

Fair Value                  $   133,276       $ 180,718        $  81,181     $   173,211     $  568,386

Weighted Average Yield            5.80%           5.78%            5.99%           6.19%          5.94%

         The amortized cost of securities classified as held-to-maturity at December 31, 2000, 1999 and 1998
were as follows (in thousands):

                                                               December 31,
                                  ------------------------------------------ ----------------------
                                         2000                 1999                    1998
                                  ------------------- ---------------------  ----------------------
U.S. Treasury                      $        8,292      $        24,277$         $       114,506
U.S. government agencies                   71,286               95,409                  200,149
Municipal obligations                     159,977              165,891                  167,997
Mortgage-backed securities                 69,896               81,340                  114,747
CMOs                                      102,167              136,286                  177,796
Other debt securities                       6,159                6,103                    6,054
                                  ------------------  ------------------  ------------------------
                                   $      417,777      $       509,306          $       781,249
                                  ==================  ==================  ========================



        The amortized cost, yield and fair value of securities classified as held-to-maturity at December 31, 2000, by
contractual maturity, were as follows (amounts in thousands):

                                             Over One       Over Five
                             One Year          Year           Years           Over                                       Weighted
                                or            Through        Through           Ten                          Fair         Average
                               Less         Five Years      Ten Years         Years          Total          Value         Yield
                          ---------------  -------------  --------------  -------------  --------------  ------------ ------------
U.S. Treasury                 $   8,001      $       -       $     291     $       -      $   8,292       $     8,348       6.75%
U.S. government agencies         21,563         43,944           5,779             -         71,286            71,224       6.44%
Municipal obligations             9,685         37,024          63,070        50,198        159,977           160,813       4.84%
Mortgage-backed securities          437          3,996          31,324        34,139         69,896            70,151       6.58%
CMOs                                  -          5,281          29,884        67,002        102,167           101,918       6.50%
Other debt securities                 -          6,055               -           104          6,159             6,159       5.54%
                           ---------------  -------------  --------------  -------------  --------------  ------------ -----------
                               $ 39,686      $  96,300       $ 130,348      $151,443      $ 417,777       $   418,613       5.85%
                           ===============  =============  ==============  =============  ==============  ============ ===========

Fair Value                     $ 39,810      $  96,606       $ 131,061      $151,136      $ 418,613

Weighted Average Yield            6.23%          5.71%           5.75%         5.94%          5.85%

Page 23 of 41

Loan Portfolio:

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. Diversification in the loan portfolio is a means of reducing the risks associated with economic fluctuations. The Banks have no significant concentrations of loans to particular borrowers or loans to any foreign entities.

Loan underwriting standards and loan loss allowance maintenance further reduce the impact of credit risk to the Company. Loans are underwritten on the basis of cash flow capacity and collateral market value. Generally, real estate mortgage loans are made when the borrower produces sufficient cash flow capacity and equity in the property to offset historical market devaluations. The loan loss allowance adequacy is tested quarterly based on historical losses through different economic cycles and projected future losses specifically identified.

The following table sets forth, for the periods indicated, the composition of the loan portfolio of the Company:

                                                                                 Loan Portfolio
                                                                                 --------------

                                                                                 December 31,
                                      ------------------ ----------------- -------------------- ---------------- ------------------
                                                    2000        1999              1998                1997                1996
                                      ------------------  ----------------  -----------------   ----------------   ----------------
                                                                               (in thousands)

Real estate:
  Residential mortgages 1-4 family     $       410,716   $       342,443      $      244,150     $      260,132     $      260,945
  Residential mortgages multifamily             20,510            18,939              12,220             10,881              7,642
  Home equity lines/loans                       42,644            29,549               8,815             10,814             10,169
  Construction and development                 171,009           136,179              73,789             55,454             55,585
Nonresidential                                 328,005           309,488             143,445            139,332            131,578
Commercial, industrial and other               281,701           214,041             224,686            177,379            169,061
Consumer                                       396,112           417,594             544,137            513,362            494,456
Lease financing and depository
  Institutions                                  27,394            24,727              17,324             16,327             15,881
Political subdivisions                          21,755            24,687              21,069             16,889             12,142
Credit cards and other revolving                11,393            40,789              40,649             44,785                  -
credit
                                      ------------------  ----------------  -----------------   ----------------   ----------------
                                             1,711,239         1,558,436           1,330,284          1,245,355          1,157,459
  Less, unearned income                         11,398            16,915              24,729             24,726             24,803
                                      ------------------  ----------------  -----------------   ----------------   ----------------
  Net loans                            $     1,699,841    $    1,541,521      $    1,305,555      $   1,220,629      $   1,132,656
                                      ==================  ================  =================   ================   ================

Page 24 of 41

         The following table sets forth, for the periods indicated, the approximate contractual maturity by type of the
loan portfolio of the Company:

                                                                            Loan Maturity Schedule

                                               December 31, 2000                                 December 31, 1999
                             --------------------------------------------------  --------------------------------------------------
                                                 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
                            -----------   ------------ -----------  -----------  -----------  ------------  -----------  ----------
                                                                           (in thousands)
                                                                            -----------

Commercial, industrial and
  other                       $ 127,56    $  117,959   $   36,182   $   281,701  $   93,968    $   92,985   $   27,088   $  214,041
Real estate - construction     133,923        29,262        7,824       171,009      96,918        30,979        8,282      136,179
All other loans                449,766        88,779      219,984     1,258,529     366,084       619,369      222,763    1,208,216
                             -----------   ----------- -----------   ------------ -----------  ------------  ----------- ----------

Total loans                   $711,249     $ 736,000   $  263,990   $ 1,711,239   $ 556,970    $  743,333    $ 258,133   $1,558,436
                             ===========   =========== ===========   ============ ===========  ============  =========== ==========

         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,
                                                         ------------------------------------------------------
                                                                   2000                        1999
                                                         ------------------------   ---------------------------
                                                                             (in thousands)

Commercial, industrial, and real estate construction
  maturing after one year:
    Fixed rate                                            $       170,631                   $    146,724
    Floating rate                                                  20,596                         12,610
Other loans maturing after one year:
    Fixed rate                                                    754,859                        795,859
    Floating rate                                                  53,904                         46,273
                                                         ------------------------   ---------------------------

Total                                                     $       999,990                   $  1,001,466
                                                         ========================   ===========================

Page 25 of 41

Nonperforming Assets:

The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, restructured loans and real estate owned. Loans past due 90 days or more and still accruing are also disclosed.

                                                                            December 31,
                                              --------------------------------------------------------------------------------
                                                       2000       1999             1998             1997             1996
                                              ------------- ---------------- ---------------- ----------------  --------------
                                                                              (Amounts in thousands)

Nonaccrual loans:
  Real estate                                   $    7,856   $      5,129     $       2,459    $      2,869      $        753
  Commercial, industrial and other                   2,296          1,236             1,023             650               169
  Consumer, credit card and other
     revolving credit                                   30            536             1,120             378             1,298
  Lease financing                                        -              -                 -               1                 -
  Depository institutions                                -              -                 -               -                 -
  Political subdivisions                                 -              -                 -               -                 -
Restructured loans                                       -            152             1,380           1,134               685
                                              ------------- ---------------- ---------------- ----------------  --------------
Total nonperforming loans                           10,182          7,053             5,982           5,032             2,905
Acquired real estate owned                               -              -                 -             435               147
Real estate owned and repossessions                  1,492          1,616             2,246           1,923             1,728
                                              ------------- ---------------- ---------------- ----------------  --------------
Total nonperforming assets                      $   11,674   $      8,669     $       8,228    $      7,390      $      4,780
                                              ============= ================ ================ ================  ==============

Loans 90+ days past due and still accruing      $    9,277   $      4,442     $       2,907    $      5,423      $      8,361
                                              ============= ================ ================ ================  ==============
Ratios (%):
  Nonperforming loans to net loans                    0.60           0.46              0.46            0.41              0.25
  Nonperforming assets to net loans and
    real estate owned                                 0.69           0.56              0.63            0.61              0.41
  Nonperforming loans to average net loans            0.63           0.49              0.48            0.42              0.27
  Allowance for loan losses to nonperforming
   Loans                                               281            365               367             313               435

The amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as "nonaccrual" was $686,000, $462,000, $424,000, $220,000 and $463,000 for the years ended December 31, 2000, 1999, 1998, 1997 and 1996, respectively.

Interest actually received on nonaccrual loans was not material. The amount of interest recorded on restructured loans did not differ significantly from the interest that would have been recorded under the original terms of those loans.

Analysis of Allowance for Loan Losses:

The allowance for loan losses is a valuation account available to absorb losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the time of receipt. Periodically during the year management estimates the probable level of future losses to determine whether the allowance is adequate to absorb reasonably foreseeable anticipated losses in the existing portfolio based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay and the estimated value of any underlying collateral and current economic conditions. All commercial loans in lending relationships with an aggregate balance of $250,000 or more are risk rated and evaluated on an individual basis, as

Page 26 of 41

well as, all consumer and mortgage real estate loans with a balance of $100,000 or more. All consumer and mortgage real estate loans under $100,000 are risk rated as pools of homogeneous loans and classified according to past due status. Commercial loans are reviewed for impairment at the time a loans is no longer current or at the time management is made aware of a degradation in a borrower’s financial status or a deficiency in collateral. Loss factors recommended by the Banks’ regulators are applied to loans graded by standard loan classifications in determining a general allowance. Unclassified loans are categorized and reserved for at the greater of a five-year average net charge-off ratio or a minimum threshold stated as a percentage of loans outstanding. The allowance for loan loss stated as a percentage of period end loans, used in conjunction with the evaluation of current and anticipated economic conditions, composition of the Company’s present loans portfolio, and trends in both delinquencies and nonaccruals, is a measurement standard utilized by management in determining the adequacy of the allowance. The unallocated portion of the allowance for loan losses is available to compensate for the uncertainties in estimating the potential losses.

Page 27 of 41

         The following table sets forth, for the periods indicated, average net loans outstanding, allowance for loan
losses, amounts charged-off and recoveries of loans previously charged-off:

                                                                      At and For The Years Ended December 31,
                                          -----------------------------------------------------------------------------------------
                                                  2000                 1999             1998             1997             1996
                                          ---------------------   --------------   --------------   --------------   --------------
                                                                          (in thousands)

Net loans outstanding at end of period               $1,699,841       $1,541,521       $1,305,555       $1,220,629       $1,173,967
                                          =====================   ==============   ==============   ==============   ==============

Average net loans outstanding                        $1,611,046       $1,452,305       $1,243,617       $1,201,381       $1,083,165
                                          =====================   ==============   ==============   ==============   ==============

Balance of allowance for loan losses
  at beginning of period                                $25,713          $21,800          $21,000          $19,800          $17,391
Loans charged-off:
  Real estate                                                80               85               26               22               73
  Commercial                                              2,380            3,112            1,076              997              975
  Consumer, credit cards and other
    revolving credit                                      8,508            6,769            6,008            7,145            5,417
  Lease financing                                            34                5               20               49                1
  Depository institutions                                     0                0                0                0                0
  Political subdivisions                                      0                0                0                0                0
                                          ---------------------   --------------   --------------   --------------   --------------
  Total charge-offs                                      11,002            9,971            7,130            8,213            6,466
                                          ---------------------   --------------   --------------   --------------   --------------
Recoveries of loans previously
  charged-off:
  Real estate                                                 1                5                5                5              186
  Commercial                                                462              809              540              646              937
  Consumer, credit cards and other
    revolving credit                                      2,046            1,669            1,156            1,529              945
  Lease financing                                             0                1                0                1                0
  Depository institutions                                     0                0                0                0                0
  Political subdivisions                                      0                0                0                0                0
                                          ---------------------   --------------   --------------   --------------   --------------
  Total recoveries                                        2,509            2,484            1,701            2,181            2,068
                                          ---------------------   --------------   --------------   ---------------- --------------
  Net charge-offs                                         8,493            7,487            5,429            6,032            4,398
  Provision for loan losses                              11,531            7,585            6,229            6,399            6,153
  Balance acquired through acquisition
    & other                                            (147)           3,815                0              833              654
                                          ---------------------   --------------   --------------   --------------   --------------
  Balance of allowance for loan losses
    at end of period                                    $28,604          $25,713          $21,800          $21,000          $19,800
                                          =====================   ==============   ==============   ==============   ==============

         The following table sets forth, for the periods indicated, certain ratios related to the Company's charge-offs,
allowance for loan losses and outstanding loans:

                                                                       At and For The Years Ended December 31,
                                                       ------------------------------------------------------------------------
                                                               2000       1999           1998           1997           1996
                                                       ------------   ------------   ------------   ------------   ------------
Ratios (%):
  Net charge-offs to average net loans                         0.53           0.52           0.44           0.50           0.41
  Net charge-offs to period-end net loans                      0.50           0.49           0.42           0.49           0.37
  Allowance for loan losses to average net loans               1.78           1.77           1.75           1.75           1.83
  Allowance for loan losses to period-end net loans            1.68           1.67           1.67           1.72           1.69
  Net charge-offs to loan loss allowance                      29.69          29.12          24.90          28.72          22.21
  Net charge-offs to loan loss provision                      73.65          98.71          87.16          94.26          71.47

An allocation of the loan loss allowance by major loan category is set forth in the following table. Except for an increase in the outstanding loan portfolio balance, there were no relevant variations in loan concentrations, quality or terms. The allocation is not necessarily indicative of the category of future losses, and the full allowance at December 31, 2000 is available to absorb losses occurring in any category of loans.

Page 28 of 41

                                                                      December 31,
                  -----------------------------------------------------------------------------------------------------------------
                             2000                   1999                   1998                   1997                    1996
                  --------------------   --------------------   --------------------   --------------------   ---------------------
                  Allowance    % of      Allowance    % of      Allowance    % of      Allowance     % of     Allowance     % 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          $5,700     57.26     $4,300       53.68     $2,500      36.26      $2,500       38.30     $3,000        38.87
Commercial, industrial
  and other           8,200     19.39      7,900       16.71      7,000      19.78       5,900       16.91      5,750        16.44
Consumer             10,744     22.64     10,200       26.99      9,200      40.90       9,300       41.22      8,250        41.25
Credit card             700      0.71      1,000        2.62      1,000       3.06       1,200        3.57        800         3.44
Unallocated           3,260         -      2,313           -      2,100          -       2,100           -      2,000            -
                  ---------  ---------   ---------  ---------   ---------  ---------   ---------   --------   ---------   ---------

                    $28,604    100.00    $25,713      100.00    $21,800     100.00     $21,000      100.00    $19,800       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 rate paid on each category of deposits:


                                              2000                                1999                              1998
                              ---------------------------------   ---------------------------------   -----------------------------
                                           Percent                              Percent                          Percent
                                Average       of                    Average       of                   Average      of
                                Balance    Deposits     Rate        Balance    Deposits     Rate       Balance    Deposits   Rate
                                                         (%)                                 (%)                             (%)
                              ------------ ----------  --------   -----------  ----------  --------   ---------- --------- --------
                                                                   (amounts in thousands)

Non-interest bearing accounts $  537,057      21.67         -      $ 562,552      22.45        -       $ 493,218    22.08         -
NOW accounts                     219,511       8.86      2.30        234,231       9.35     2.91         432,093    19.34      3.09
Money market and other                                      -                         -                                 -
savings accounts                 761,855      30.75      3.62        788,030      31.45     3.04         417,204    18.68      3.16
Time deposits                    959,493      38.72      5.62        920,718      36.75     5.02         891,322    39.90      5.37
                              ------------   ----------           ------------  ----------            -----------  ----------

                              $2,477,916     100.00               $2,505,531     100.00               $2,233,837   100.00
                              ============   ==========           ============= ==========            ===========  ==========


         The Banks traditionally price their deposits to position themselves competitively with the local market.  The
Banks' policy is not to accept brokered deposits.
Time certificates of deposit of $100,000 and greater at December 31, 2000 had maturities as follows:


                                                        December 31, 2000
                                                        -----------------
                                                          (in thousands)

Three months or less                                      $      69,245
Over three through six months                                    69,650
Over six months through one year                                 72,998
Over one year                                                   100,139
                                                   ----------------------------
Total                                                     $     312,032
                                                   ============================

Page 29 of 41

Short-Term Borrowings:

The following table sets forth certain information concerning the Company's short-term borrowings, which consist of federal funds purchased and Federal Home Loan Bank ("FHLB") advances as well as securities sold under agreements to repurchase.

                                                                                   Years Ended December 31,
                                                                 -----------------------------------------------------
                                                                            2000         1999               1998
                                                                 ---------------   -----------------   ---------------
                                                                                     (amounts in thousands)

Federal funds purchased and FHLB advances:
  Amount outstanding at period-end                                            $0             $50,000                $0
  Weighted average interest at period-end                                  0.00%               5.85%             0.00%
  Maximum amount at any month-end during period                           17,700              98,000           $53,850
  Average amount outstanding during period                                41,282              28,275            $3,773
  Weighted average interest rate during period                             5.89%               5.07%             4.74%

Securities sold under agreements to repurchase:
  Amount outstanding at period-end                                      $144,561            $213,773          $140,207
  Weighted average interest at period-end                                  5.42%               5.89%             3.80%
  Maximum amount at any month end during-period                          180,767             213,773          $182,062
  Average amount outstanding during period                               157,633             136,255          $152,426
  Weighted average interest rate during period                             4.46%               4.02%             4.62%

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 that 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, 2000, cash and due from banks and securities available-for-sale were in excess of 28.2% of total deposits.

The Company depends upon the dividends paid to it from the Banks as a principal source of funds for its debt service and dividend requirements. At December 31, 2000, the Banks had approximately $130 million available for dividends to the Company.

Capital Resources:

The information under the caption "Notes to Consolidated Financial Statements" on page 25, Note 7 - Stockholders' Equity is incorporated herein by reference.

Page 30 of 41

Impact of Inflation:

The Company's non-interest income and expenses can be affected by increasing rates of inflation; however, unlike most industrial companies, the assets and liabilities of financial institutions such as the Banks are primarily monetary in nature. Interest rates, therefore, have a more significant impact on the Banks' performance than the effect of general levels of inflation on the price of goods and services.

Forward Looking Statements

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. In addition to historical information, this report contains forward-looking statements and information which are based on management's beliefs, plans, expectations and assumptions and on information currently available to management. Forward-looking statements and information presented reflects management's views and estimates of future economic circumstances, industry conditions, Company performance and financial results. The words "may", "should", "expect", "anticipate", "intend", "plan", "continue", "believe", "seek", "estimate" and similar expressions used in this report that do not relate to historical facts and intended to identify forward-looking statements. These statements appear in a number of places in this report, including, but not limited to, statements found in Item 1 "Business" and in Item 7 "Management's Discussion and Analysis". All phases of the Company's operations are subject to a number of risks and uncertainties. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in the report, including, without limitation, the portions referenced above, and the uncertainties set forth from time to time in the Company's other public reports and filings and public statements, many of which are beyond the control of the Company, and any of which, or a combination of which, could materially affect the results of the Company's operations and whether forward-looking statements made by the Company ultimately prove accurate.

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.

Page 31 of 41

        Title to the following banking offices in Mississippi and Louisiana is owned in fee (number of locations shown in
parenthesis):

        Albany, LA                     (1)          Independence, LA                    (1)
        Alexandria, LA                 (2)          Long Beach, MS                      (2)
        Baker, LA                      (1)          Loranger, LA                        (1)
        Baton Rouge, LA               (13)          Lyman, MS                           (1)
        Bay St. Louis, MS              (2)          Mamou, LA                           (1)
        Biloxi, MS                     (3)          Mandeville, LA                      (1)
        Bogolusa, LA                   (1)          Moss Point, MS                      (1)
        Boyce, LA                      (1)          Oakdale, LA                         (1)
        Bunkie, LA                     (1)          Ocean Springs, MS                   (2)
        Denham Springs, LA             (3)          Pascagoula, MS                      (4)
        D'Iberville, MS                (1)          Pass Christian, MS                  (1)
        Escatawpa, MS                  (1)          Picayune, MS                        (2)
        Eunice, LA                     (2)          Pineville, LA                       (1)
        Franklinton, LA                (1)          Poplarville, MS                     (1)
        Gautier, MS                    (1)          St. Francisville, LA                (1)
        Glenmora, LA                   (1)          Ville Platte, LA                    (1)
        Gulfport, MS                   (5)          Vancleave, MS                       (1)
        Hineston, LA                   (1)          Walker, LA                          (1)
        Hammond, LA                    (2)          Waveland, MS                        (1)


        The following banking offices in Mississippi and Louisiana are leased under agreements with unexpired terms of
from four to forty-nine years including renewal options (number of locations shown in parenthesis):

        Baton Rouge, LA                (4)          Opelousas, LA                       (1)
        Bay St. Louis, MS              (3)          Pascagoula, MS                      (1)
        Biloxi, MS                     (1)          Picayune, MS                        (2)
        Diamondhead, MS                (1)          Ponchatoula, LA                     (1)
        Gulfport, MS                   (4)          Saucier, MS                         (1)
        Hammond, LA                    (1)          Slidell, LA                         (1)
        Mandeville, LA                 (1)          Springfield, LA                     (1)
                                                    Ville Platte, LA                    (1)


        In addition to the above, Hancock Bank MS owns land and other properties acquired through foreclosures of
loan collateral.  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

Page 32 of 41

ITEM 3 - LEGAL PROCEEDINGS

The Company is party to various legal proceedings arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, all such matters are adequately covered by insurance or, if not so covered, are not expected to have a material adverse effect on the financial statements of the Company.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the quarter ended December 31, 2000.

PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK
- --------------------------------------------------
AND RELATED STOCKHOLDER MATTERS
- -------------------------------

The information under the caption "Market Information" on page 7 of the Company's 2000 Annual Report to Stockholders is incorporated herein by reference.

ITEM 6 - SELECTED FINANCIAL DATA

The information under the caption "Financial Highlights" on pages 5 and 6 of the Company's 2000 Annual Report to Stockholders is incorporated herein by reference.

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 35 through 43 of the Company's 2000 Annual Report to Stockholders is incorporated herein by reference.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption "Asset/Liability Management" on pages 38 and 39 of the Company's 2000 Annual Report to Stockholders is incorporated herein by reference.

Page 33 of 41

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 5 through 43 of the Company's 2000 Annual Report to Stockholders is incorporated herein by reference:

        Financial Highlights on Pages 5 and 6
        Consolidated Balance Sheets on Page 16
        Consolidated Statements of Earnings on Page 17
        Consolidated Statements of Stockholders' Equity on Page 18
        Consolidated Statements of Comprehensive Earnings on Page 18
        Consolidated Statements of Cash Flows on Page 19
        Notes to Consolidated Financial Statements on Pages 20 through 33
        Independent Auditors' Report on Page 34
        Management's Discussion and Analysis of Financial Condition
               And Results of Operations on Pages 35 through 43

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON
ACCOUNTING AND FINANCIAL DISCLOSURE

There has been no change in the two most recent fiscal years nor has there been any disagreements with the Company's independent accountants and auditors on any matter of accounting principles or practices or financial statement disclosure.

PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

For information concerning directors who are not also executive officers of the registrant, see "Election of Directors" (Pages 3-7) in the Proxy Statement for the Annual Meeting of Shareholders held February 22, 2001, which was filed by the Registrant in definitive form with the Commission on January 22, 2001 and is incorporated herein by reference.

Information concerning executive officers of the registrant is listed below.

Leo W. Seal, Jr.
- ----------------

Director of the Company since 1984. President, Hancock Bank, Gulfport, Mississippi since 1963; President and Chief Executive Officer, Hancock Holding Company, 1984; through 2000, Advisory Director, Hancock Bank of Louisiana since 1993. Mr. Seal was employed by Hancock Bank in 1947. He was elected to the Board of Directors of Hancock Bank in 1961 and named President in 1963. In 1977, he was named President and Chief Executive Officer of Hancock Bank.

George A. Schloegel
- -------------------

Director of Company since 1984. President and Chief Executive Officer, Hancock Holding Company since 2000. President, Hancock Bank, Gulfport, Mississipi, 1990, Vice Chairman of the Board of Hancock Holding Company since 1984. Director of Hancock Bank of Louisiana, since 1990. Director of Mississippi Power Company, Gulfport, Mississippi. Mr. Schloegel was employed part-time with Hancock Bank from 1956-1959 and began full-time employment in 1962. He served in various capacities until being named President in 1990.

Page 34 of 41

A. Hartie Spence
- ----------------

President, Hancock Bank of Louisiana since 1997, Chairman of the Board, Hancock Bank of Louisiana 1996. Prior to that Mr. Spence served as President, Calcasieu Marine National Bank, Calcasieu, Louisiana from 1987 to 1996.

Charles A. Webb, Jr.
- --------------------

Executive Vice President and Secretary, Hancock Holding Company since 1992; Director Hancock Bank since 1995; Executive Vice President, Hancock Bank since 1977; Director, Hancock Bank of Louisiana since 1990. Mr. Webb was employed by Hancock Bank in 1948. He served as Vice President and Secretary of the Company from 1984 until 1992.

James R. Ginn
- -------------

Executive Vice President and Mississippi Region Head, Hancock Bank since 1996. Mr. Ginn joined Hancock Bank in 1962, and has served in the capacities of Assistant Cashier, Branch Officer and Division Coordinator.

Robert E. Easterly
- ------------------

Executive Vice President and Chief Operating Officer, Hancock Bank of Louisiana since 1995; President and Chief Executive Officer, First National Bank of Denham Springs from 1981-1996; Chairman of the Board, First National Bank of Denham Springs from 1993-1996; Director, Hancock Bank since 1995.

Carl J. Chaney
- --------------

Senior Vice President and Chief Financial Officer, Hancock Holding Company since 1998. Prior to Mr. Chaney joining Hancock, he was Director and Shareholder of the Law Firm, Watkins Ludlam Winter & Stennis, P.A., Jackson Mississippi from 1995 to 1998, where he specialized in Investment Banking and Merger and Acquisitions in the Banking Industry.

John M. Hairston
- ----------------

Senior Vice President and Chief Operating Officer, since 1997; Senior Operations Officer, 1994-1996, Hancock Holding Company; Manager, Financial Services Consulting, a Division of Anderson Consulting, headquartered in Chicago, Illinois.

Richard T. Hill
- ---------------

Senior Vice President and Louisiana Retail Banking Executive, Hancock Bank of Louisiana, since June 1998; Executive Vice President and Retail Banking Executive, City National Bank (a subsidiary of First Commerce Corporation), November 1993 -June 1998.

Clifton J. Saik
- ---------------

Senior Vice President and Director, Trust and Financial Services Group, Hancock Bank since July 1998. Prior to coming to Hancock Bank, Mr. Saik served in the following capacities at First Commerce Corporation, New Orleans, Louisiana: Executive Vice President and Director, Card Services; CEO, Marquis Insurance Agency, L.L.C.; and Member, Marquis Investments, L.L.C. Management Committee, June 1997 - June 1998; Executive Vice President and Director, Trust and Retail Brokerage Services Group, Senior Vice President and Director, Trust Group; October 1994 to June 1997; Senior Vice President and Senior Trust Officer, October 1992 to October 1994.

Page 35 of 41

Barbara P. Atchley
- ------------------

Vice President and Corporate Director Human Resources, since June 1997. Prior to Mrs. Atchley's employment with Hancock, she served as Director of Human Resources for Provident Life and Accident, Chattanooga, Tenneessee, 1994 - 1997.

Robert G. Chatham
- -----------------

Vice President and Auditor, Hancock Holding Company since 1995. Mr. Chatham was employed by Hancock Bank in 1979 as staff auditor, and served in various auditing capacities for the Company before being named as Bank Auditor in 1988.

ITEM 11 - EXECUTIVE COMPENSATION

For information concerning this item see "Executive Compensation" (pges 11-18) in the Proxy Statement for the Annual Meeting of Shareholders held February 22, 2001, which was filed by the Registrant in definitive form with the Commission on January 22, 2001 and is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

For information concerning this item see "Security Ownership of Certain Beneficial Owners" (pge 9) and "Security Ownership of Management" (page 10) in the Proxy Statement for the Annual Meeting of Shareholders held February 22, 2001, which was filed by the Registrant in definitive form with the Commission on January 22, 2001 and is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For information concerning this item see "Certain Transactions and Relationships" (Page-18) in the Proxy Statement for the Annual Meeting of Shareholders held February 22, 2001, which was filed by the Registrant in definitive form with the Commission on January 22, 2001 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 1999 Annual Report to Stockholders and are incorporated herein by reference:

    Independent Auditors' Report
    Consolidated Balance Sheets as of December 31, 2000 and 1999 and
    Consolidated Statements of Earnings for the three years ended December 31, 2000
    Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2000
    Consolidated Statements of Comprehensive Earnings for the three years ended December 31, 2000
    Consolidated Statements of Cash Flows for the three years ended December 31, 2000
    Notes to Consolidated Financial Statements for the three years ended December 31, 2000
    Financial Highlights at and as of each of the five years ended December 31, 2000

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.

Page 36 of 41

(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).

   (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).

   (2.6)       Agreement and Plan of Reorganization dated July 6, 1994 among Hancock Holding Company and
               Washington Bancorp, Franklinton, Louisiana (filed as Exhibit 2 to the Registrant's Form S-4, Registration
               Number 33-56505, dated November 16, 1994).

   (2.7)       Agreement and Plan of Reorganization dated August 20, 1994 among Hancock Holding Company and
               First Denham Bancshares, Inc., Denham Springs, Louisiana (filed as Exhibit 2 to the Registrant's Form S-
               4, Registration Number 33-56285, dated November 2, 1994).

   (2.8)       Agreement and Plan of Reorganization dated June 19, 1996 among Hancock Holding Company,
               Hancock Bank of Louisiana, Community Bancshares, Inc. and Community State Bank, Hammond
               Louisiana (filed as Exhibit 2 to the Registrant's Form S-4, Registration Number 333-11873, dated
               September 12, 1996).

   (2.9)       Agreement and Plan of Reorganization dated July 31, 1997 among Hancock Holding Company, Hancock
               Bank of Louisiana and Southeast National Bank, Hammond, Louisiana (filed as Exhibit 2 to the
               Registrant's Form S-4, Registration Number 333-14223, dated October 16, 1996).

  (2.10)       Agreement and Plan of Reorganization dated February 28, 1997 among Hancock Holding Company,
               Hancock Bank of Louisiana and Commerce Corporation, St. Francisville, Louisiana (filed as Exhibit 2 to
               the Registrant's Form S-4, Registration Number 323-26577, dated May 6, 1997).

  (2.11)       Amended and Restated Agreement and Plan of Reorganization dated October 15, 1998 among Hancock
               Holding Company, Hancock Bank of Louisiana and American Security Bancsharesof Ville Platte, Inc.,
               Ville Platte, Louisiana (filed as Exhibit 2 to the Registrant's Form S-4, Registration Number 333-67181,
               dated November 12, 1998).

   (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).

Page 37 of 41

   (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).

   (3.7)       Articles of Amendment to the Articles of Incorporation adopted February 20, 1997 (filed as Exhibit 3.7 to
               the Registrant's Form 10-K for the year ended December 31, 1996 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).

   (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)       1996 Long Term Incentive Plan (filed as Exhibit 10.1 to the Registrant's Form 10-K for the year ended
               December 31, 1995, and incorporated herein by reference).

  (10.2)       Description of Hancock Bank Executive Supplemental Reimbursement Plan, as amended (filed as Exhibit
               10.2 to the Registrant's Form 10-K for the year ended December 31, 1996, and incorporated herein by
               reference).

  (10.3)       Description of Hancock Bank Automobile Plan (filed as Exhibit 10.3 to the Registrant's Form 10-K for the
               year ended December 31, 1996, and incorporated herein by reference).

  (10.4)       Description of Deferred Compensation Arrangement for Directors (filed as Exhibit 10.4 to the  Registrant's
               Form 10-K for the year ended December 31, 1996, and incorporated herein by reference).

  (10.5)       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).

  (10.6)       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).

  (10.7)       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).

  (10.8)       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).

  (10.9)       Guaranty Agreement dated as of March 1, 1989 from Hancock Bank to Deposit Guaranty National Bank
               as trustee (filed as Exhibit 10.8 to the Registrant's Form 10-K for the year ended December 31, 1989 and
               incorporated herein by reference).

Page 38 of 41

 (10.10)       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).

   (13)        Annual Report to Stockholders for year ending December 31, 2000 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 22, 2001 (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.  (Filed as Exhibit 22 to the Registrant's Form 10-K for the year ended
               December 31, 2000 and incorporated herein by reference.)


   (23)        Independent Auditors' Consent

 (b) Reports on Form 8-K:
- ------------------------
               No reports on Form 8-K were filed during the last quarter of the period covered by this report.

(c):
- ---
               Not applicable.

(d):
- ---
               Not applicable.

Page 39 of 41

                                                           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   March 27, 2001                                                 /s/ George A. Schloegel
     ----------------------                                           --------------------------------------
                                                                       by George A. Schloegel, President and
                                                                       Chief Executive Officer

               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.                      Director                                    March 27, 2001
- ----------------------------------
 Leo W. Seal, Jr.



                                          Director,                                   March 27, 2001
- ----------------------------
 Joseph F. Boardman, Jr.                    Chairman of the Board



/s/ George A. Schloegel                   President, Chief Executive                  March 27, 2001
- ------------------------------
 George A. Schloegel                        Officer, Director,
                                            Vice Chairman of the Board

                                          Director                                     March 27, 2001
- ------------------------------
 Thomas W. Milner, Jr.



                                          Director                                     March 27, 2001
- ----------------------------
 Dr. Homer C. Moody, Jr.


                                          Director                                     March 27, 2001
- ----------------------------
 James B. Estabrook, Jr.



                                          Director                                     March 27, 2001
- ------------------------------
 Charles H. Johnson



/s/ L. A. Koenenn, Jr.                    Director                                     March 27, 2001
- -------------------------------
 L. A. Koenenn, Jr.



                                          Director                                     March 27, 2001
- -----------------------------------
 Victor Mavar



/s/ Christine L. Smilek                   Director                                      March 27, 2001
- --------------------------------
 Christine L. Smilek



/s/ Frank E. Bertucci                     Director                                       March 27, 2001
- ---------------------------------
 Frank E. Bertucci

Page 40 of 41

(signatures continued)



/s/ James H. Horne                        Director                                      March 27, 2001
- ---------------------------------
 James H. Horne


/s/ Carl J. Chaney                        Sr. Vice President and                        March 27, 2001
- -----------------------------------
 Carl J. Chaney                                      Chief Financial Officer

Page 41 of 41

EX-13 2 0002.htm FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements and Supplementary Data

Exhibit 13
Financial Statements and Supplementary Data


                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES

                                                        FINANCIAL HIGHLIGHTS


(amounts in thousands)
                                                                           At and For the Years Ended December 31,
                                                         ---------------------------------------------------------------------
                                                              2000          1999           1998        1997           1996
                                                         -------------   ------------  -----------  ------------  ------------
Period End Balance Sheet Data:
  Securities ...........................................   $  994,095    $1,148,722    $1,244,369    $1,079,995    $  901,592
  Loans, net of unearned income ........................    1,699,841     1,541,521     1,305,555     1,220,629     1,173,967
  Allowance for loan losses ............................       28,604        25,713        21,800        21,000        19,800
  Total assets .........................................    3,013,430     2,991,874     2,814,695     2,537,957     2,289,582
  Total deposits .......................................    2,503,788     2,397,653     2,374,591     2,062,648     1,926,576
  Long-term bonds and notes ............................        2,177         2,714          --           1,279         1,050
  Total stockholders' equity ...........................      341,390       310,427       286,807       288,573       261,938

Average Balance Sheet Data:
  Securities ...........................................   $1,090,588    $1,251,971    $1,184,698    $  984,203    $  903,386
  Loans, net of unearned income ........................    1,611,046     1,455,086     1,243,617     1,201,381     1,083,165
  Allowance for loan losses ............................       26,591        23,939        21,040        20,410        17,670
  Total  assets ........................................    2,993,972     3,006,195     2,696,107     2,442,953     2,285,877
  Total  deposits ......................................    2,477,916     2,505,531     2,233,837     2,034,030     1,945,528
  Long-term bonds and notes ............................        2,426         2,795           586         1,369         1,795
  Total stockholders' equity ...........................      325,508       308,854       289,878       271,303       230,051

Performance Ratios:
   Return on average assets ............................         1.23%         1.05%         1.15%         1.25%         1.38%
   Return on average assets excluding
     cumulative effect of accounting change ............         1.23%         1.05%         1.11%         1.25%         1.38%
   Return on average assets excluding gain on sale of
     credit card portfolio and securities transactions .         1.15%         1.05%         1.15%         1.25%         1.38%
   Return on average equity ............................        11.31%        10.27%        10.68%        11.29%        13.74%
   Return on average equity excluding cumulative
     effect of accounting change .......................        11.31%        10.27%        10.28%        11.29%        13.74%
   Return on average equity excluding gain on sale of
     credit card portfolio and securities transactions .        10.56%        10.25%        10.68%        11.29%        13.74%
   Net interest margin (TE) ............................         4.70%         4.73%         4.67%         5.14%         5.20%
   Average loans to average deposits ...................        65.02%        58.07%        55.67%        59.06%        55.67%
   Non-interest expense as a percent
     of total revenue (TE) and excluding amortization of
      purchased intangibles and securities transactions         58.50%        63.84%        61.62%        59.09%        56.76%
   Non-interest expense as a percent
     of total revenue (TE) and excluding amortization of
     purchased intangibles and securities transactions
     and gain on sale of credit card portfolio .........        59.74%        63.84%        61.62%        59.09%        56.76%
   Allowance for loan losses to period-end loans .......         1.68%         1.67%         1.67%         1.72%         1.69%
   Non-performing assets to loans plus other real estate         0.69%         0.56%         0.63%         0.74%         0.55%
   Allowance for loan losses to non-performing loans ...          281%          365%          367%          313%          435%
   Net charge-offs to average loans ....................         0.53%         0.51%         0.44%         0.50%         0.41%

See notes to consolidated financial statements

                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                                        FINANCIAL HIGHLIGHTS


(amounts in thousands, except per share data)
                                                                        At and For the Years Ended December 31,
                                                         -------------------------------------------------------------
                                                              2000        1999        1998         1997       1996
                                                         ------------  -----------  ---------   ---------   ----------
Capital Ratios:
   Average stockholders' equity to average assets .....      10.87%      10.27%      10.75%      11.11%      10.06%
   Stockholders' equity to total assets ...............      11.33%      10.38%      10.19%      11.37%      11.44%
   Tier 1 leverage ....................................      10.20%       9.61%       9.50%      10.41%      10.53%
   Tier 1 risk-based ..................................      15.95%      15.60%      17.15%      19.08%      18.59%
   Total risk-based ...................................      17.20%      16.85%      18.40%      20.33%      19.85%

Income Data:
  Interest income .....................................   $216,947    $207,674    $193,659    $181,459    $169,404
  Interest expense ....................................     94,251      83,961      81,742      71,698      64,804
  Net interest income .................................    122,696     123,713     111,917     109,761     104,600
  Net interest income (TE) ............................    128,981     129,375     116,125     112,425     108,626
  Provision for loan losses ...........................     11,531       7,585       6,229       6,399       6,154
  Non-interest income
    (excluding securities transactions and gain on sale
     of credit card portfolio) ........................     48,695      45,545      32,164      31,889      28,391
  Securities transactions .............................          3          67         167         279          31
  Gain on sale of credit card portfolio ...............      3,753        --          --          --          --
  Non-interest expense ................................    109,896     115,442      93,782      87,554      80,095
  Earnings before income taxes and cumulative
    effect of accounting change .......................     53,720      46,298      44,237      47,976      46,773
  Net earnings ........................................     36,824      31,710      30,960      30,624      31,603
  Net earnings excluding credit card gain
    and securities transactions .......................     34,382      31,666      30,851      30,443      31,583

Per Share Data:
  Earnings before cumulative effect
    of accounting change:
      Basic ...........................................   $   3.39    $   2.91    $   2.79    $   2.82    $   3.08
      Diluted .........................................       3.39        2.91        2.78        2.82        3.08
  Net earnings:
      Basic ...........................................       3.39        2.91        2.90        2.82        3.08
      Diluted .........................................       3.39        2.91        2.89        2.82        3.08
  Net earnings excluding gain on sale of
   credit card portfolio and securities transactions:
      Basic ...........................................       3.17        2.91        2.89        2.80        3.07
      Diluted .........................................       3.16        2.90        2.88        2.80        3.07
  Cash dividends paid .................................       1.25        1.00        1.00        1.00        0.88
  Book value ..........................................      31.79       28.55       27.29       26.44       24.42
  Weighted average number of shares outstanding:
    Basic .............................................     10,860      10,887      10,693      10,870      10,277
    Diluted ...........................................     10,867      10,901      10,705      10,877      10,277
  Number of shares outstanding (period end) ...........     10,740      10,873      10,508      10,916      10,725

See notes to consolidated financial statements

                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES

Summary of Quarterly Operating Results (in thousands, except per share data)


                                                                   2000                                               1999
                                   ------------------------------------------------  ------------------------ ---------------------
                                      First        Second       Third      Fourth       First      Second       Third      Fourth
                                    -----------  ----------   ----------  ----------  ----------  ---------  ----------  ----------

 Interest income (TE) .............   $ 54,653    $ 54,719    $ 56,590    $ 57,270    $ 52,612    $ 53,105    $ 53,649    $ 53,970
 Interest expense .................    (21,935)    (22,316)    (24,591)    (25,409)    (21,170)    (20,998)    (20,626)    (21,167)
                                      --------    --------    --------    --------    --------    --------    --------    --------
 Net Interest Income (TE) .........     32,718      32,403      31,999      31,861      31,442      32,107      33,023      32,803
 Provision for loan losses ........     (1,769)     (2,434)     (3,038)     (4,290)     (1,420)     (1,621)     (1,918)     (2,626)
 Non-interest income ..............     14,539      11,812      12,400      13,699      10,016      10,912      11,762      12,922
 Non-interest expense .............    (28,560)    (27,967)    (27,036)    (26,333)    (27,820)    (28,213)    (29,740)    (29,669)
 Taxable equivalent adjustment ....     (1,494)     (1,528)     (1,625)     (1,637)     (1,360)     (1,400)     (1,401)     (1,501)
                                      --------    --------    --------    --------    --------    --------    --------    --------
   Earnings before income taxes ...     15,434      12,286      12,700      13,300      10,858      11,785      11,726      11,929
 Income taxes .....................     (5,048)     (3,744)     (4,032)     (4,072)     (3,227)     (3,975)     (3,882)     (3,504)
                                      --------    --------    --------    --------    --------    --------    --------    --------
 Net earnings .....................   $ 10,386    $  8,542    $  8,668    $  9,228    $  7,631    $  7,810    $  7,844    $  8,425
                                      ========    ========    ========    ========    ========    ========    ========    ========
Basic earnings per share:
Net earnings ......................   $   0.95    $   0.79    $   0.80    $   0.85    $   0.70    $   0.72    $   0.72    $   0.77
Net earnings excluding gain on
  sale of credit card portfolio and
  securities transactions .........       0.78        0.78        0.80        0.81        0.70        0.72        0.72        0.77
Diluted earnings per share:
Net earnings ......................       0.95        0.79        0.80        0.85        0.70        0.72        0.72        0.77
Net earnings excluding gain on
  sale of credit card portfolio and
  securities transactions .........       0.78        0.78        0.80        0.81        0.70        0.72        0.72        0.77

See notes to consolidated financial statements

Market Information

The Company's common stock trades on the Nasdaq Stock Market under the symbol "HBHC" and is quoted in publications under
"HancHd".  The following table sets forth the high and low sale prices of the Company's common stock as reported on the Nasdaq
Stock Market.   These prices do not reflect retail mark-ups, mark-downs or commissions.

                                                                                                Cash
                                               High                      Low                   Dividends
                                               Sale                      Sale                    Paid
                                          -------------             ------------             ------------
2000
              1st quarter                     $40.00                    $30.88                     $0.25
              2nd quarter                      34.63                     31.00                      0.25
              3rd quarter                      32.50                     29.63                      0.25
              4th quarter                      39.63                     29.00                      0.50

1999
              1st quarter                     $48.00                    $41.00                     $0.25
              2nd quarter                      47.00                     42.00                      0.25
              3rd quarter                      45.00                     37.75                      0.25
              4th quarter                      41.50                     37.13                      0.25

     There  were  5,549  holders  of record of common  stock of the  Company  at
January 3, 2001 and 11,072,770  shares issued.  On January 3, 2001, the high and
low sale prices of the  Company's  common  stock as reported on the Nasdaq Stock
Market were $38.13 and $35.00,  respectively.  The principal  source of funds to
the Company to pay cash  dividends  are the  dividends  received from the Banks.
Consequently,  dividends are dependent upon earnings,  capital needs, regulatory
policies  and  statutory  limitations  affecting  the Banks.  Federal  and state
banking laws and  regulations  restrict the amount of dividends and loans a bank
may make to its parent  company.  Dividends  paid to the Company by Hancock Bank
are subject to approval by the  Commissioner of Banking and Consumer  Finance of
the State of Mississippi and those paid by Hancock Bank of Louisiana are subject
to approval  by the  Commissioner  for  Financial  Institutions  of the State of
Louisiana.  The Company's management does not expect regulatory  restrictions to
affect its policy of paying cash  dividends.  Although no assurance can be given
that Hancock Holding Company will continue to declare and pay regular  quarterly
cash dividends on its common stock,  the Company has paid regular cash dividends
since 1937.

                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                                    CONSOLIDATED BALANCE SHEETS


                                                                          December 31,
                                                            ---------------------------------------
                                                                    2000               1999
                                                            ----------------    -------------------
Assets:
Cash and due from banks ..................................   $   130,379,760    $   156,738,459
Interest-bearing time deposits with other banks ..........         3,877,021            100,000
Securities available for sale, at fair value
  (amortized cost of $578,566,308 and $660,591,000) ......       576,318,477        639,415,961
Securities held to maturity, at amortized cost
  (fair value of $418,612,487 and $498,467,000) ..........       417,777,000        509,306,344
Federal funds sold .......................................        59,000,000          3,000,000
Loans ....................................................     1,711,239,390      1,558,435,659
  Less:
    Allowance for loan losses ............................       (28,603,557)       (25,712,557)
    Unearned income ......................................       (11,398,823)       (16,915,072)
                                                            ----------------    -------------------
      Loans, net .........................................     1,671,237,010      1,515,808,030
Property and equipment, net ..............................        51,636,196         55,007,662
Other real estate ........................................         1,492,010          1,616,490
Accrued interest receivable ..............................        25,585,151         23,805,308
Goodwill and other intangibles, net ......................        40,756,892         44,512,562
Other assets .............................................        35,370,804         42,563,268
                                                            ----------------    -------------------
  Total Assets ...........................................   $ 3,013,430,321    $ 2,991,874,084
                                                            ================    ===================

Liabilities and Stockholders' Equity:
Deposits:
  Non-interest bearing demand ............................   $   528,753,513    $   527,218,971
  Interest-bearing savings, NOW,
    money market and time ................................     1,975,034,043      1,870,434,519
                                                            ----------------    -------------------
  Total deposits .........................................     2,503,787,556      2,397,653,490
Securities sold under agreements to repurchase ...........       144,560,609        213,773,219
Federal Home Loan Bank advance ...........................              --           50,000,000
Other liabilities ........................................        21,514,775         17,305,727
Long-term notes ..........................................         2,177,189          2,714,220
                                                            ----------------    -------------------
    Total Liabilities ....................................     2,672,040,129      2,681,446,656
Commitments and contingencies (notes 12 and 13) ..........              --                 --
Stockholders' equity:
  Common stock - $3.33 par value per share;
    75,000,000 shares authorized, 11,072,770 shares issued        36,872,324         36,872,324
  Capital surplus ........................................       196,024,178        196,047,463
  Retained earnings ......................................       115,365,765         92,153,278
  Unrealized loss on securities available
    for sale, net of deferred taxes ......................        (1,461,090)       (13,764,053)
  Unearned compensation ..................................          (843,503)          (808,203)
  Treasury stock, 139,655 shares in 2000 and 1,906
     shares in 1999, at cost .............................        (4,567,482)           (73,381)
                                                            ----------------    -------------------
    Total Stockholders' Equity ...........................       341,390,192        310,427,428
                                                            ----------------    -------------------
      Total Liabilities and Stockholders' Equity .........   $ 3,013,430,321    $ 2,991,874,084
                                                            ================    ===================

                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF EARNINGS



                                                                              Years Ended December 31,
                                                                  ---------------------------------------------
                                                                        2000          1999          1998
                                                                  --------------  -------------  --------------
Interest Income:
             Loans .............................................   $149,526,248   $133,420,326   $118,502,095
             U.S. Treasury securities ..........................      5,494,273     10,059,273     14,469,447
             Obligations of U.S. government agencies ...........     21,819,311     25,175,384     26,180,328
             Obligations of states and political subdivisions ..      9,475,402      9,448,205      6,864,952
             Mortgage-backed securities ........................      9,313,238     10,044,833      9,799,653
             CMOs ..............................................     16,740,452     17,091,380     13,631,324
             Federal funds sold ................................      2,432,906      1,290,135      3,089,792
             Other investments .................................      2,144,837      1,145,199      1,120,961
                                                                  --------------  -------------  --------------
               Total interest income ...........................    216,946,667    207,674,735    193,658,552
                                                                  --------------  -------------  --------------
Interest Expense:
             Deposits ..........................................     86,548,381     76,809,975     74,463,671
             Federal funds purchased and securities sold
               under agreements to repurchase ..................      7,495,280      6,975,740      7,216,677
             Long-term notes and other interest ................        206,985        175,667         61,483
                                                                  --------------  -------------  --------------
               Total interest expense ..........................     94,250,646     83,961,382     81,741,831
                                                                  --------------  -------------  --------------
             Net Interest Income ...............................    122,696,021    123,713,353    111,916,721
Provision for loan losses ......................................     11,530,652      7,585,294      6,228,965
                                                                  --------------  -------------  --------------
             Net interest income after provision for loan losses    111,165,369    116,128,059    105,687,756
                                                                  --------------  -------------  --------------
Non-Interest Income:
             Service charges on deposit accounts ...............     27,179,737     24,978,788     19,164,074
             Other service charges, commissions and fees .......     18,629,044     17,739,001     10,161,475
             Securities gains, net .............................          3,259         66,937        167,139
             Gain on sale of credit card portfolio .............      3,753,498           --             --
             Other .............................................      2,885,102      2,827,518      2,838,834
                                                                  --------------  -------------  --------------
               Total non-interest income .......................     52,450,640     45,612,244     32,331,522
                                                                  --------------  -------------  --------------
Non-Interest Expense:
             Salaries and employee benefits ....................     59,185,839     61,595,623     50,832,743
             Net occupancy expense of premises .................      7,135,408      7,267,740      5,559,608
             Equipment rentals, depreciation and maintenance ...      8,323,356      9,538,585      7,707,028
             Amortization of intangibles .......................      3,755,670      3,775,255      2,404,914
             Other .............................................     31,496,072     33,264,877     27,278,170
                                                                  --------------  -------------  --------------
               Total non-interest expense ......................    109,896,345    115,442,080     93,782,463
                                                                  --------------  -------------  --------------
             Earnings before income taxes and cumulative effect
               of accounting change ............................     53,719,664     46,298,223     44,236,815
Income taxes ...................................................     16,896,084     14,588,153     14,427,427
                                                                  --------------  -------------  --------------
             Earnings before cumulative effect of accounting ...     36,823,580     31,710,070     29,809,388
             change
Cumulative effect of accounting change .........................           --             --        1,150,811
                                                                  --------------  -------------  --------------
             Net Earnings ......................................   $ 36,823,580   $ 31,710,070   $ 30,960,199
                                                                  ==============  =============  ==============

Basic earnings per common share:
             Before cumulative effect of accounting change .....   $       3.39   $       2.91    $      2.79
             Cumulative effect of accounting change ............           --             --             0.11
                                                                  --------------  -------------  --------------
               Net Earnings ....................................   $       3.39   $       2.91    $      2.90
                                                                  ==============  =============  ==============


Diluted earnings per common share:
              Before cumulative effect of accounting change ....   $       3.39   $       2.91    $      2.78
                     Cumulative effect of accounting change ....           --             --             0.11
                                                                   ------------   ------------   -------------
                                               Net Earnings ....   $       3.39   $       2.91    $      2.89
                                                                   ============   ============   =============

See notes to consolidated financial statements.

                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                              Years Ended December 31, 2000, 1999 and 1998
                            -------------------------------------------------------------------------------------------------------
                                                                                             Unrealized
                                                                                            Gain (Loss)
                                                                                           on Securities
                                           Common         Capital        Retained     Available For   Unearned         Treasury
                                           Amount         Surplus        Earnings       Sale, Net    Compensation       Stock
                                     --------------- --------------  ---------------  -------------  -------------  ---------------
Balance, January 1, 1998              $  36,872,324   $ 200,766,498   $ 51,401,100    $     65,742   $  (532,467)   $         -
Net earnings                                                            30,960,199
Cash dividends - $1.00 per share                                       (10,862,585)
Change in unrealized gain (loss) on
  securities available for sale, net                                                        93,136
Transactions relating to restricted
  stock grants, net                                                                                     (477,482)
Purchase of treasury stock, net                            (230,216)                                                  (21,249,049)
                                     --------------- --------------  ---------------  -------------  -------------  ---------------
 Balance, December 31, 1998              36,872,324     200,536,282     71,498,714         158,878    (1,009,949)     (21,249,049)
Net earnings                                                            31,710,070
Cash dividends - $1.00 per share                                       (11,055,506)
Change in unrealized gain (loss) on
  securities available for sale, net                                                   (13,922,931)
Transactions relating to restricted
  stock grants, net                                                                                      201,746
Issuance of treasury stock, net                          (4,488,819)                                                   21,175,668
                                     --------------- --------------  ---------------  -------------  -------------  ---------------
 Balance, December 31, 1999              36,872,324     196,047,463     92,153,278     (13,764,053)     (808,203)         (73,381)
Net earnings                                                            36,823,580
Cash dividends - $1.25 per share                                       (13,611,093)
Change in unrealized gain (loss) on
  securities available for sale, net                                                    12,302,963
Transactions relating to restricted
  stock grants, net                                                                                      (35,300)
Purchase of treasury stock, net                             (23,285)                                                   (4,494,101)
                                     --------------- --------------  ---------------  -------------  -------------  ---------------
 Balance, December 31, 2000           $  36,872,324   $ 196,024,178   $115,365,765    $ (1,461,090)   $ (843,503)    $ (4,567,482)
                                     =============== ==============  ===============  =============  =============  ===============


                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS


                                                                                          Years Ended December 31,
                                                                         --------------------------------------------------
                                                                                 2000           1999             1998
                                                                         -----------------  -------------   ---------------

Net earnings .............................................................   $ 36,823,580   $ 31,710,070    $ 30,960,199
Other comprehensive earnings
(loss):
             Unrealized gain (loss) on securities available for sale, net:
             Unrealized holding gains (losses) arising during the year ...     12,106,963    (13,916,931)        114,136
             Reclassification adjustments for losses (gains)
                included in net earnings..................................        201,000         (6,000)        (21,000)
                                                                         -----------------  -------------   ---------------
                       Total other comprehensive earnings (loss) .........     12,307,963    (13,922,931)         93,136
                                                                         -----------------  -------------   ---------------
                                 Total Comprehensive Earnings ............   $ 49,131,543   $ 17,787,139    $ 31,053,335
                                                                         =================  =============   ===============

See notes to consolidated financial statements.

                                              HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                   Years Ended December 31,
                                                                  ----------------------------------------------------
                                                                           2000              1999            1998
                                                                     ---------------   --------------   --------------
Cash Flows from Operating Activities:
Net earnings ......................................................   $  36,823,580    $  31,710,070    $  30,960,199

Adjustments to reconcile net earnings to
       net cash provided by operating activities:
               Depreciation .......................................       8,270,874        7,693,612        5,188,749
               Provision for loan losses ..........................      11,530,652        7,585,294        6,228,965
               Provision for deferred income taxes ................        (284,000)      (2,039,000)        (435,000)
               Cumulative effect of accounting change
                                      (before income taxes) .......            --               --         (1,863,662)
               Gains on sales/calls of securities .................          (3,259)         (66,937)        (167,139)
               (Increase) decrease in interest receivable .........      (1,779,843)       1,373,210       (2,821,561)
               Amortization of intangible assets ..................       3,757,670        3,775,255        2,404,914
               Increase (decrease) in interest payable ............       3,031,954          (52,540)         847,700
               Other, net .........................................      (1,262,800)      (3,730,918)      (6,894,964)
                                                                     ---------------   --------------   --------------
                    Net cash provided by operating activities......      60,084,828       46,248,046       33,448,201
                                                                     ---------------   --------------   --------------

Cash Flows from Investing Activities:
       Net (increase) decrease in interest-bearing time deposits ..      (3,777,021)          (4,000)       1,971,500
       Proceeds from maturities of securities held to maturity ....      98,053,228      350,002,513      225,302,135
       Purchase of securities held to maturity ....................      (6,523,884)     (79,243,000)     (99,464,050)
       Proceeds from sales and maturities of trading
               and available-for-sale securities ..................     195,017,484      207,189,122       83,297,803
       Purchase of securities available for sale ..................    (112,989,533)    (330,963,660)    (375,620,262)
       Net (increase) decrease in federal funds sold ..............     (56,000,000)       4,825,000       35,500,000
       Net increase in loans ......................................    (185,663,203)    (135,992,653)     (91,010,541)
       Proceeds from sale of credit card portfolio ................      21,330,000
       Purchase of property, equipment and software, net ..........      (5,133,121)      (8,688,754)     (12,675,267)
       Proceeds from sales of other real estate ...................       1,420,277        1,098,664          802,512
       Net cash received in connection with
               business acquisitions ..............................            --         23,927,000             --
                                                                     ---------------   --------------   --------------
                   Net cash (used) provided by investing activities     (54,265,773)      32,150,232     (231,896,170)
                                                                     ---------------   --------------   --------------

Cash Flows from Financing Activities:
       Net increase (decrease) in deposits ........................     106,134,066     (183,514,994)     311,942,900
       Dividends paid .............................................     (13,611,093)     (11,055,506)     (10,862,585)
       Treasury stock transactions, net ...........................      (4,951,086)     (11,484,087)     (22,857,810)
       Repayments of long-term bonds and notes ....................        (537,031)        (464,864)      (1,279,402)
       Net (decrease) increase in federal funds purchased and
         securities sold under agreements to repurchase ...........     (69,212,610)      73,565,973      (30,326,372)
       (Repayments of) proceeds from FHLB advance .................     (50,000,000)      50,000,000             --
                                                                     ---------------   --------------   --------------
               Net cash (used) provided by financing activities ...     (32,177,754)     (82,953,478)     246,616,731
                                                                     ---------------   --------------   --------------
Net (decrease) increase in cash and due from banks ................     (26,358,699)      (4,555,200)      48,168,762
Cash and due from banks, beginning ................................     156,738,459      161,293,659      113,124,897
                                                                     ---------------   --------------   --------------
Cash and due from banks, ending ...................................   $ 130,379,760    $ 156,738,459    $ 161,293,659
                                                                     ===============   ==============   ==============

Supplemental Information:
    Income taxes paid .............................................   $  17,800,000    $  14,839,133    $  16,460,355
    Interest ......................................................      91,218,691       84,013,922       80,894,131
    paid

See notes to consolidated financial statements

HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Hancock Holding Company (the Company) is a bank holding company headquartered in Gulfport, Mississippi operating in the states of Mississippi and Louisiana through two wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi and Hancock Bank of Louisiana, Baton Rouge, Louisiana (the Banks). The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. The Company’s operating strategy is to provide its customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank.

Summary of Significant Accounting Policies

The accounting and reporting policies of the Company conform with generally accepted accounting principles and general practices within the banking industry. The following is a summary of the more significant of those policies.

Consolidation - - The consolidated financial statements of the Company include the accounts of the Company, the Banks and other subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.

Comprehensive Income - Comprehensive income includes net earnings and other comprehensive income which, in the case of the Company, includes only unrealized gains and losses on securities available for sale.

Use of Estimates - In preparing the financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. The determination of the allowance for loan losses is a material estimate that is particularly subject to significant change.

Cash - - For the purpose of presentation in the statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “Cash and due from banks”.

Securities - - Securities have been classified into one of three categories: trading, available-for-sale, or held-to-maturity. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically. Trading account securities are held for resale in anticipation of short-term market movements. Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Securities not classified as held to maturity or trading are classified as available for sale.

With the exception of securities reclassified from held to maturity to trading and subsequently sold upon adoption of Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (SFAS No.133) during 1998, the Company had no significant trading account securities during the three years ended December 31, 2000.

Held-to-maturity securities are stated at amortized cost. Available-for-sale securities are stated at fair value with unrealized gains and losses, net of income taxes, reported as a separate component of stockholders’ equity until realized.

The amortized cost of debt securities classified as held to maturity or available for sale is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over the estimated life of the security. Amortization, accretion and accrued interest are included in interest income on securities. Realized gains and losses, and declines in value judged to be other than temporary, are included in net securities gains and losses. Gains and losses on the sale of securities available for sale are determined using the specific-identification method.

Derivative Instruments - Effective October 1, 1998, the Company adopted SFAS No. 133. The Statement was issued in June 1998 and required the Company to recognize all derivatives as either assets or liabilities in the Company’s balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specially designated as a hedge. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Further, SFAS No. 133 permitted, at the time of implementation, the reclassification of securities classified as held to maturity without calling into question the Company’s original intent.

The Company is not currently engaged in any significant activities with derivatives. At the time of implementation of this Statement, the Company reclassified a portion of its held-to-maturity portfolio to trading securities. The securities that were transferred to trading had an amortized cost of $5,126,000 and unrealized gross gains of $1,864,000 ($1,151,000 net of income taxes) at October 1, 1998. This amount is reported as a cumulative effect of accounting change in the 1998 consolidated statement of earnings. These securities were sold in 1998 subsequent to the transfer.

Loans – Certain loan origination fees and certain direct origination costs are deferred and recognized as an adjustment to the yield on the related loan. Interest on loans is recorded to income as earned. Where doubt exists as to collectibility of a loan, the accrual of interest is discontinued, all unpaid accrued interest is reversed and payments subsequently received are applied first to principal. Interest income is recorded after principal has been satisfied and as payments are received.

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 include troubled debt restructurings, and performing and non-performing major loans for which full payment of principal or interest is not expected. Non-major homogenous loans, which are evaluated on an overall basis, generally include all loans under $500,000. The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of its collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a component of the allowance for loan losses. Changes to the valuation allowance are recorded as a component of the provision for loan losses.

Generally, loans of all types which become 90 days delinquent are deemed currently uncollectible unless such loans are in the process of collection through repossession or foreclosure. Loans deemed currently uncollectible are charged off against the allowance account. As a matter of policy, loans are placed on a non-accrual status when doubt exists as to collectibility.

Allowance for Loan Losses - The allowance for loan losses is a valuation account available to absorb losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the time of receipt. Periodically during the year management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, the estimated value of any underlying collateral and current economic conditions. The allowance for loan losses is increased by charges to expense and decreased by loan charge-offs (net of recoveries).

Property and Equipment - Property and equipment are recorded at amortized cost. Depreciation is computed principally by the straight-line method based on the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the term of the lease or the asset’s useful life.

Other Real Estate - Other real estate acquired through foreclosure and bank acquisitions is stated at the fair market value at the date of acquisition, net of the costs of disposal. When a reduction to fair market value at the time of foreclosure is required, it is charged to the allowance for loan losses. Any subsequent adjustments are charged to expense.

Intangible Assets - Intangible assets include the values assigned to core deposits of acquired banks which are being amortized over lives ranging from six to seven years using accelerated methods and goodwill which is being amortized over fifteen years. Accumulated amortization of intangible assets amounted to approximately $16.3 million and $12.6 million at December 31, 2000 and 1999, respectively.

Trust Fees - Trust fees are recorded as earned.

Income Taxes - Provisions for income taxes are based on taxes payable or refundable for the current year (after exclusion of non-taxable income such as interest on state and municipal securities) and deferred taxes on temporary differences between the amount of taxable income and pre-tax financial income. Deferred taxes on temporary differences are calculated at the currently enacted tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Stock Based Compensation - The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock options. The pro forma disclosures required by Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" (SFAS No. 123) are included in Note 10.

Basic and Diluted Earnings Per Common Share - Basic earnings per share (EPS) excludes dilution and is computed by dividing earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Reclassifications - Certain prior year amounts have been reclassified to conform with the 2000 presentation.

NOTE 2 - ACQUISITIONS

On January 15, 1999, Hancock Holding Company acquired American Securities Bancshares of Ville Platte, Inc.(ASB), Ville Platte, Louisiana which owned 100% of the stock of American Security Bank for approximately $15,200,000 cash and 644,000 shares of common stock of the Company. These transactions were accounted for using the purchase method of accounting and the results of operations since the date of acquisition are included in the consolidated statements of earnings. The excess of the purchase price over the value of the net tangible assets acquired was assigned to goodwill and is being amortized over 15 years.

The following unaudited pro forma consolidated results of operations give effect to the acquisition of ASB as though it had occurred on January 1, 1998 (in thousands, except per share data):

                                                                   Years Ended December 31,
                                                          --------------------------------------
                                                               1999                     1998
                                                          -------------            -------------
Interest income                                            $  208,362               $  208,359
Interest expense                                              (84,331)                 (89,104)
Provision for loan losses                                      (7,610)                  (8,811)
                                                          -------------            -------------
  Net interest income after provision for loan losses         116,421                  110,444

Net earnings                                              $    31,318              $    30,867
Basic earnings per common share                                  2.87                     2.72
Diluted earnings per common share                                2.87                     2.71

The unaudited pro forma information is not necessarily indicative either of results of operations that would have occurred had the purchases been made as of January 1, 1998 or of future results of operations of the combined companies.

In connection with the 1999 acquisition, liabilities were assumed as follows (in thousands):

                                                               1999
                                                          -------------
Fair value of all assets, excluding cash                   $  214,573
Cash acquired, net of amount paid                              23,927
Market value of common stock issued                           (28,006)
                                                          -------------
Liabilities assumed                                        $  210,494
                                                          =============

NOTE 3 - SECURITIES

The amortized cost and fair value of securities classified as available for sale were as follows (in thousands):

                                              December 31, 2000                                   December 31, 1999
                           -----------------------------------------------------  ------------------------------------------------
                                            Gross          Gross                                  Gross       Gross
                              Amortized   Unrealized    Unrealized      Fair       Amortized   Unrealized  Unrealized      Fair
                                Cost        Gains          Losses       Value          Cost       Gains       Losses       Value
                           ------------  -----------   ------------ ------------  ------------ ----------- -----------  ----------
U.S. Treasury ............   $ 77,054   $    189          $     70   $  77,173     $  84,341     $      8   $   875     $ 83,474
U.S. government agencies .    265,029        629             1,792     263,866       302,450           --    12,326      290,124
Municipal obligations ....     36,400        425               429      36,396        33,382          121     1,475       32,028
Mortgage-backed securities     48,841        153               287      48,707        70,465           88     1,561       68,992
CMOs .....................    137,170        390             1,272     136,288       151,693           --     5,128      146,565
Other debt securities ....      6,140         --               184       5,956        10,601           --        27       10,574
Equity securities ........      7,932         --                --       7,932         7,659           --        --        7,659
                           ------------  -----------   ------------ ------------  ------------ ----------- -----------  ----------
                             $578,566   $  1,786          $  4,034   $ 576,318     $ 660,591     $    217   $21,392     $639,416
                           ============  ===========   ============ ============  ============ =========== ===========  ==========

The amortized cost and fair value of debt securities classified as available for sale at December 31, 2000, by contractual maturity, were as follows (in thousands):

                                              Amortized Cost        Fair Value
                                              --------------       -----------
Due in one year or less                       $     133,366         $  133,274
Due after one year through five years               181,437            180,718
Due after five years through ten years               81,517             81,318
Due after ten years                                 174,314            173,076
                                              --------------       -----------
                                              $     570,634         $  568,386
                                              ==============       ===========

The amortized cost and fair value of securities classified as held to maturity were as follows (in thousands):


                                               December 31, 2000                                  December 31, 1999
                        --------------------------------------------------------   ----------------------------------------------
                                             Gross        Gross                                   Gross       Gross
                             Amortized     Unrealized   Unrealized      Fair       Amortized   Unrealized   Unrealized    Fair
                               Cost          Gains        Losses        Value        Cost         Gains       Losses      Value
                        --------------   ------------- ------------ ------------  -----------  -----------  --------- -----------
U.S. Treasury ............   $  8,292     $       56   $        -    $   8,348    $   24,277    $    105     $     2   $  24,380
U.S. government agencies .     71,286            123          185       71,224        95,409           5       2,794      92,620
Municipal obligations ....    159,977          1,885        1,049      160,813       165,891         597       5,282     161,206
Mortgage-backed securities     69,896            585          330       70,151        81,340         195       1,411      80,124
CMOs .....................    102,167            200          449      101,918       136,286          93       2,345     134,034
Other debt securities ....      6,159              1            1        6,159         6,103           1           1       6,103
                        --------------   ------------- ------------ ------------  -----------  -----------  --------- -----------
                             $417,777     $    2,850   $    2,014    $ 418,613    $  509,306    $    996     $11,835   $ 498,467
                        ==============   ============= ============ ============  ===========  ===========  ========= ===========

     The  amortized  cost and fair  value of  securities  classified  as held to
     maturity at December 31, 2000, by contractual maturity, were as follows (in
     thousands):


                                             Amortized Cost        Fair Value
                                             -------------        ------------
Due in one year or less                       $    39,686         $    39,810
Due after one year through five years              96,300              96,606
Due after five years through ten years            130,348             131,062
Due after ten years                               151,443             151,135
                                             -------------        ------------
                                              $   417,777         $   418,613
                                             =============        ============

Proceeds from sales of available-for-sale securities were $97,417,000 in 2000, $18,693,000 in 1999 and 19,222,000 in 1998. Gross gains of $51,000 in 2000, $9,000 in 1999 and $540,000 in 1998 and gross losses of $360,000 in 2000, $0 in 1999 and $508,000 in 1998 were realized on such sales. There were no material gains or losses on held-to-maturity securities called during 2000. Gross gains of $58,000 were recognized on held-to-maturity securities called during 1999. The Company realized trading gains of approximately $300,000 in 2000.

Securities with an amortized cost of approximately $570,173,000 at December 31, 2000 and $598,998,000 at December 31, 1999, were pledged primarily to secure public deposits and securities sold under agreements to repurchase.

The Company’s collateralized mortgage obligations (CMOs) generally consist of first and second tranche sequential pay and/or planned amortization class (PAC) instruments.

NOTE 4 - LOANS

Loans, net of unearned income, consisted of the following (in thousands):

                                                                      December 31,
                                                   -----------------------------------------------
                                                         2000                          1999
                                                   ----------------             ------------------
  Real estate loans                                 $      973,390               $       838,017
  Commercial and industrial loans                          280,358                       213,939
  Loans to individuals for household, family
     and other consumer expenditures                       396,944                       439,280
  Leases and other loans                                    49,149                        50,285
                                                   ----------------             ------------------
                                                    $    1,699,841               $     1,541,521
                                                   ================             ==================

The Company generally makes loans in its market areas of South Mississippi and Southern Louisiana. Loans are made in the normal course of business to its directors, executive officers and their associates on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. Such loans did not involve more

than normal risk of collectibility. The balance of loans to the Company's direct 2000 and 1999 was approximately and $8,800,356 and $3,745,000, respectively.ors, executive officers and their affiliates at December 31, 2000 and 1999 was approximately and $8,800,356 and $3,745,000, respectively.

         Changes in the allowance for loan losses were as follows (in thousands):


                                                                    Years Ended December 31,
                                                ---------------------------------------------------------------
                                                               2000            1999                 1998
                                                ----------------    --------------------    -------------------
Balance at January 1 ........................      $ 25,713                $ 21,800              $ 21,000
Balance acquired through acquisitions & other          (147)                  3,815                   --
Recoveries ..................................         2,509                   2,484                 1,701
Loans charged off ...........................       (11,002)                 (9,971)               (7,130)
Provision charged to operating expense ......        11,531                   7,585                 6,229
                                                ----------------    --------------------    -------------------
Balance at December 31 ......................      $ 28,604                $ 25,713              $ 21,800
                                                ================    ====================    ===================

Non-accrual and renegotiated loans amounted to approximately 0.60% and 0.46% of total loans at December 31, 2000 and December 31, 1999, respectively. In addition, the Company's other individually evaluated impaired loans amounted to approximately 0.55% and 0.23% of total loans at December 31, 2000 and 1999, respectively. Related reserve amounts were not significant and there was no significant change in these amounts during the years ended December 31, 2000, 1999 or 1998. The amount of interest not accrued on these loans did not have a significant effect on earnings in 2000, 1999 or 1998.

Transfers from loans to other real estate amounted to approximately $1,130,000, $764,000 and $656,000 in 2000, 1999 and 1998, respectively. Valuation allowances associated with other real estate amounted to $887,000, $1,199,000 and $1,088,000 at December 31, 2000, 1999 and 1998, respectively.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment, stated at cost less accumulated depreciation and amortization, consisted of the following (in thousands):

                                                                   December 31,
                                                   -------------------------------------------
                                                           2000                     1999
                                                   ----------------         ------------------
  Land, buildings and leasehold improvements        $      59,249            $      57,608
  Furniture, fixtures and equipment                        50,793                   53,667
                                                   ----------------         ------------------
                                                          110,042                  111,275
  Accumulated depreciation and amortization               (58,406)                 (56,267)
                                                   ----------------         ------------------
                                                    $      51,636            $      55,008
                                                   ================         ==================

NOTE 6 - FEDERAL HOME LOAN BANK ADVANCE

At December 31, 1999, the Company had a $50,000,000 advance outstanding under a $147,000,000 line of credit with the Federal Home Loan Bank of Dallas (FHLB). This advance bore interest at 5.85% and was due January 21, 2000. The advance was collateralized by a blanket floating lien on the Company's residential first mortgage loans. All funds drawn on that advance were repaid by February 4, 2000. At December 31, 2000 the Company had a line of credit with the FHLB of approximately $220,000,000.

NOTE 7 - STOCKHOLDERS' EQUITY

Basic and diluted earnings per common share were based on the weighted average number of shares outstanding of approximately 10,860,000 and 10,867,000 in 2000, 10,887,000 and 10,901,000 in 1999 and 10,693,000 and 10,705,000 in 1998. Outstanding amounts reflect reductions for treasury stock and 162,200 shares of stock owned by subsidiaries.

Stockholders' equity of the Company includes the undistributed earnings of the bank subsidiaries. Dividends are payable only out of undivided profits or current earnings. Moreover, dividends to the Company's stockholders can generally be paid only from dividends paid to the Company by the Banks. Consequently, dividends are dependent upon earnings, capital needs, regulatory policies and statutory limitations affecting the Banks. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. Dividends paid by Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi and those paid by Hancock Bank of Louisiana are subject to approval by the Commissioner of Financial Institutions of the State of Louisiana. The amount of capital of the subsidiary banks available for dividends at December 31, 2000 was approximately $130 million.

The Company and its bank subsidiaries are required to maintain certain minimum capital levels. At December 31, 2000 and 1999, the Company and the Banks were in compliance with their respective statutory minimum capital requirements. Following is a summary of the actual capital levels at December 31, 2000 and 1999 (amounts in thousands):

                                                                                                               To be Well
                                                                                Required for              Capitalized Under
                                                                                Minimum Capital            Prompt Corrective
                                                          Actual                   Adequacy                Action Provisions
                                               --------------------------  ----------------------   -----------------------------
                                                    Amount      Ratio %       Amount      Ratio %       Amount           Ratio %
                                               ------------    ---------   ------------  --------   -----------     -------------
At December 31, 2000
     Total capital (to risk weighted assets)
            Company                             $  325,774      17.20      $  151,554     8.00       $       N/A             N/A
            Hancock Bank                           191,709      17.48          87,752     8.00           109,691           10.00
            Hancock Bank of Louisiana              137,038      17.12          64,046     8.00            80,058           10.00

     Tier 1 capital (to risk weighted assets)
            Company                             $  302,094      15.95     $    75,777     4.00       $       N/A             N/A
            Hancock Bank                           177,998      16.23          43,876     4.00            65,814            6.00
            Hancock Bank of Louisiana              127,031      15.87          32,023     4.00            48,035            6.00

     Tier 1 leverage capital
            Company                             $  302,094      10.20     $    88,837     3.00       $       N/A             N/A
            Hancock Bank                           177,998       9.77          54,648     3.00            91,080            5.00
            Hancock Bank of Louisiana              127,031      10.66          35,739     3.00            59,566            5.00




                                                                                                               To be Well
                                                                                Required for              Capitalized Under
                                                                                Minimum Capital            Prompt Corrective
                                                          Actual                   Adequacy                Action Provisions
                                               --------------------------  ----------------------   -----------------------------
                                                    Amount      Ratio %       Amount      Ratio %       Amount           Ratio %
                                               ------------    ---------   ------------  --------   -----------     -------------

At December 31, 1999
     Total capital (to risk weighted assets)
           Company                              $  302,106       16.85      $  143,400     8.00      $     N/A       $      N/A
           Hancock Bank                            187,527       17.62          85,150     8.00        106,438            10.00
           Hancock Bank of Louisiana               116,573       15.77          59,100     8.00         73,900            10.00

     Tier 1 capital (to risk weighted assets)
           Company                              $  279,659       15.61      $   71,700     4.00      $     N/A       $      N/A
           Hancock Bank                            174,214       16.37          42,575     4.00         63,862             6.00
           Hancock Bank of Louisiana               107,302       14.52          29,600     4.00         44,400             6.00

     Tier 1 leverage capital
           Company                              $  279,659        9.61      $   87,350     3.00      $     N/A       $      N/A
           Hancock Bank                            174,214        9.71          53,832     3.00         89,700             5.00
           Hancock Bank of Louisiana               107,302        9.34          34,500     3.00         57,500             5.00

Risk-based capital requirements are intended to make regulatory capital more sensitive to risk elements of the Company. Currently, the Company and its bank subsidiaries are 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 and its bank subsidiaries must maintain a minimum Tier 1 leverage ratio (Tier 1 capital to total average assets) of at least 3.0% based upon the regulators latest composite rating of the institution.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required each federal banking agency to implement prompt corrective actions for institutions that it regulates. The rules provide that an institution is "well capitalized" if its total risk-based capital ratio is 10.0% or greater, its Tier 1 risked-based capital ratio is 6.0% or greater, its leverage ratio is 5.0% or greater and the institution is not subject to a capital directive. Under this regulation, each of the subsidiary banks was deemed to be "well capitalized" as of December 31, 2000 and 1999 based upon the most recent notifications from their regulators. There are no conditions or events since those notifications that management believes would change these classifications.

NOTE 8 - INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows (in thousands):

                                                                     December 31,
                                                     ----------------------------------------
                                                              2000                  1999
                                                     ----------------         ---------------
Deferred tax assets:
Unrealized loss on securities available for sale        $       787             $     7,411
Post-retirement benefit obligation                            1,646                   1,408
Allowance for loan losses                                     8,896                   8,300
Other real estate valuation allowances                          337                     268
Deferred compensation                                         1,065                   1,090
Lease accounting                                                300                     330
Other                                                           179                     599
                                                     ----------------         ---------------
                                                             13,210                  19,406
                                                     ----------------         ---------------
Deferred tax liabilities:
Property and equipment depreciation                          (3,631)                 (3,960)
Prepaid pension                                              (1,679)                 (1,322)
Discount accretion on securities                             (1,628)                 (1,512)
                                                     ----------------         ---------------
                                                             (6,938)                 (6,794)
                                                     ----------------         ---------------
  Net deferred tax asset                               $      6,272             $    12,612
                                                     ================         ===============

Income taxes consisted of the following components (in thousands):


                                            Years Ended December 31,
                              -----------------------------------------------------
                                         2000         1999               1998
                              ---------------    ---------------    ---------------
Currently payable              $     17,180        $    16,627        $     14,862
Deferred                               (284)            (2,039)               (435)
                              ---------------    ---------------    ---------------
                               $     16,896        $    14,588        $     14,427
                              ===============    ===============    ===============

          The  reason for  differences  in income  taxes  reported  compared  to
     amounts  computed  by  applying  the  statutory  income  tax rate of 35% to
     earnings before income taxes were as follows (in thousands):


                                                                                    Years Ended December 31,
                                                          -------------------------------------------------------------------------
                                                                     2000                   1999                      1998
                                                          ------------------------ ----------------------  ------------------------
                                                                 Amount       %        Amount        %        Amount            %
                                                          -------------   -------- -------------  -------  ------------    --------
Taxes computed at statutory rate                             $   18,802        35    $   16,204       35    $   15,483          35
Increases (decreases) in taxes resulting from:
    State income taxes, net of federal income tax benefit           272         1           283        1           410           1
    Tax-exempt interest                                          (3,610)       (7)       (3,260)      (7)       (2,380)         (5)
    Goodwill amortization                                         1,303         2         1,300        3           840           2
    Other, net                                                      129         -            61        -            74           -
                                                          -------------   -------- -------------  -------  ------------    --------
       Income tax expense                                    $   16,896        31    $   14,588       32    $   14,427          33
                                                          =============   ======== =============  =======  ============    ========

The income tax provisions related to items included in the Statement of Other Comprehensive Earnings were as follows (in thousands):

                                                                      Years Ended December 31,
                                                       ----------------------------------------------------
                                                              2000              1999               1998
                                                       ---------------    --------------    ---------------
Unrealized holdings gains (losses)                      $        6,516    $      (7,493)    $         60
Reclassification adjustments                                       108               (3)             (11)
                                                       ---------------    --------------    ---------------
       Total other comprehensive earnings               $        6,624    $      (7,496)    $         49
                                                       ===============    ==============    ===============

NOTE 9 - EMPLOYEE BENEFIT PLANS

The Company has a non-contributory pension plan covering substantially all salaried full-time employees who have been employed by the Company the required length of time. The Company's current policy is to contribute annually the minimum amount that can be deducted for federal income tax purposes. The benefits are based upon years of service and the employee's compensation during the last five years of employment. Data relative to the pension plan follows (in thousands):

                                                    Years Ended December 31,
                                                   -------------------------
                                                       2000          1999
                                                   ----------    -----------
Change in Benefit Obligation:
    Benefit obligation at beginning of year .....   $ 30,870     $ 29,120
    Service cost ................................      1,180        1,183
    Interest cost ...............................      2,178        1,986
    Actuarial loss ..............................      1,656           67
    Benefits paid ...............................     (1,681)      (1,486)
                                                   ----------    -----------
        Benefit obligation at end of year .......     34,203       30,870
                                                   ----------    -----------

Change in Plan Assets:
    Fair value of plan assets at
        beginning of year .......................     30,937       28,791
    Actual return on plan assets ................      2,748        2,343
    Employer contributions ......................      1,968        1,537
    Benefits paid ...............................     (1,681)      (1,486)
    Expenses ....................................       (169)        (248)
                                                   ----------    -----------
        Fair value of plan assets at end of year      33,803       30,937
                                                   ----------    -----------

            (Unfunded) funded status ............       (400)          67

Unrecognized portion of net obligation being
        amortized over 15 years .................         46           91
Unrecognized net actuarial loss .................      4,428        2,963
Unrecognized prior service cost .................        382          476
                                                   ----------    -----------
    Prepaid pension cost included in other assets   $  4,456     $  3,597
                                                   ==========    ===========


Rate assumptions at December 31:
    Discount rate ...............................       7.50%        7.25%
    Expected return on plan assets ..............       8.00%        8.00%
    Rate of compensation increase ...............       3.00%        3.00%


                                                      Years Ended December 31,
                                                 -------------------------------
                                                   2000       1999       1998
                                                 --------   --------   ---------
Net pension expense included the following
 (income) expense components:
Service cost benefits earned during the period   $ 1,180    $ 1,183    $ 1,041
Interest cost on projected benefit obligation      2,178      1,986      2,018
Return on plan assets ........................    (2,748)    (2,343)    (2,249)
Amortization of prior service cost ...........        92         92         92
Net amortization and deferral ................       406        174        244
                                                 --------   --------   ---------
    Net pension expense ......................   $ 1,108    $ 1,092    $ 1,146
                                                 ========   ========   =========

The Company sponsors two defined benefit post-retirement plans, other than the pension plan, that cover full-time employees who have reached 45 years of age. One plan provides medical benefits and the other provides life insurance benefits. The post-retirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain employer contribution maximums; the life insurance plan is non- contributory. Data relative to these post-retirement benefits, none of which have been funded, were as follows (in thousands):

                                             Years Ended December 31,
                                           --------------------------
                                               2000        1999
                                           ----------   -------------
Change in Benefit Obligation:
Benefit obligation at beginning of year .   $ 6,094     $ 6,238
Service cost ............................       216         397
Interest cost ...........................       341         412
Actuarial gain ..........................    (1,564)       (667)
Benefits paid ...........................      (261)       (286)
                                           ----------   -------------
     Benefit obligation at end of year ..     4,826       6,094

Fair value of plan assets ...............      --          --
                                           ----------   -------------
     Amount unfunded ....................    (4,826)     (6,094)

Unrecognized transition obligation being
     amortized over 20 years ............       581       1,680
Unrecognized net actuarial (gain) loss ..      (208)        318
                                           ----------   -------------
     Accrued post-retirement benefit cost   $(4,453)    $(4,096)
                                           ==========   =============

Rate assumptions at December 31:
     Discount rate ......................      7.75%       7.75%

For measurement purposes in 2000, a 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001. The rate was assumed to decrease gradually to 5.75% over 5 years and remain at that level thereafter. In 1999, rates of 7.5% and 5.5% were assumed and in 1998, rates of 8.0% and 5.5% were assumed. The health care cost trend rate assumption has an effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by 1% in each year would increase the accumulated post-retirement benefit obligation at December 31, 2000, by $862,000 and the aggregate of the service and interest cost components of net periodic post-retirement benefit cost for the year then ended by $150,000. A 1% decrease in the rate would decrease those items by $684,000 and $114,000, respectively.

                                                                                 Years Ended December 31,
                                                                       ---------- ----------------------------
                                                                           2000          1999          1998
                                                                       ----------    -----------   -----------
Net Periodic Post-Retirement Benefit Cost:
Amortization of unrecognized net loss and other                         $     8       $     30      $     12
Service cost benefits attributed to service during the year                 216            397           293
Interest costs on accumulated post-retirement benefit obligation            341            412           375
Amortization of transition obligation over 20 years                          53            143           143
                                                                       ----------    -----------   -----------
    Net Periodic Post-Retirement Cost                                   $   618       $    982      $    823
                                                                       ==========    ===========   ===========

The Company has a non-contributory profit sharing plan covering substantially all salaried full-time employees who have been employed the required length of time. Contributions are made at the discretion of the Board of Directors and amounted to $647,900 in 2000, $504,000 in 1999 and $569,000 in 1998.

In addition, the Company has an employee stock purchase plan that is designed to provide the employees of the Company a convenient means of purchasing common stock of the Company. Substantially all salaried, full-time employees, with the exception of Leo W. Seal, Jr., who have been employed by the Company the required length of time are eligible to participate. The Company contributes an amount equal to 25% of each participant's contribution, which contribution cannot exceed 5% of the employee's base pay. The Company's contribution amounted to $124,900 in 2000, $116,300 in 1999 and $101,300 in 1998.

The post-retirement plans relating to health care payments and life insurance and the stock purchase plan are not guaranteed and are subject to immediate cancellation and/or amendment. These plans are predicated on future Company profit levels that will justify their continuance. Overall health care costs are also a factor in the level of benefits provided and continuance of these post-retirement plans. There are no vested rights under the post-retirement health or life insurance plans.

NOTE 10 - EMPLOYEE STOCK PLANS

In February 1996, the stockholders of the Company approved the Hancock Holding Company 1996 Long-Term Incentive Plan (the Plan) to provide incentives and awards for employees of the Company and its subsidiaries. Awards as defined in the Plan include, with limitations, stock options (including restricted stock options), restricted and performance shares, and performance stock awards, all on a stand-alone, combination or tandem basis. A total of 5,000,000 common shares can be granted under the Plan with an annual grant maximum of 1% of the Company's outstanding common stock (as reported for the fiscal year ending immediately prior to such plan year). The exercise price is equal to the market price on the date of grant, except for certain of those granted to major shareholders where the option price is 110% of the market price.

On December 14, 2000, options to purchase 85,300 shares were granted, of which 82,703 are exercisable at $35.00 per share and 2,597 are exercisable at $38.50 per share. Options totaling 82,703 are exercisable at a vesting rate of 25% per year on the anniversary date of grant and 2,597 are exercisable six months after the date of grant.

On December 21, 1999, options to purchase 86,526 shares were granted, of which 84,150 are exercisable at $38.25 per share and 2,376 are exercisable at $42.075 per share. Options totaling 84,150 are exercisable at a vesting rate of 25% per year on the anniversary date of grant and 2,376 are exercisable six months after the date of grant.

On December 24, 1998, options to purchase 72,125 shares were granted, of which 70,036 are exercisable at $43.50 per share and 2,089 are exercisable at $47.85 per share. Options totaling 70,036 are exercisable at a vesting rate of 25% per year on the anniversary date of grant and 2,089 are exercisable six months after the date of grant.

Following is a summary of the transactions:

                                                  Number of       Average           Exercise
                                                   Options      Exercise Price     of Options
                                                  Outstanding     Per Share          Aggregate
                                                 -----------    -----------    -------------------
Balance January 1, 1998                               96,325     $    53.14     $     5,119,000
Granted                                               72,125          43.63           3,146,525
Exercised                                             (8,500)         40.00            (340,000)
Cancelled                                             (4,425)         60.00            (265,500)
                                                 -----------    -----------    -------------------
    Balance December 31, 1998                        155,525          49.25           7,660,025
Granted                                               86,526          38.35           3,318,681
Cancelled                                             (1,775)         60.00            (106,500)
                                                 -----------    -----------    -------------------
    Balance December 31, 1999                        240,276          45.25          10,872,206
Granted                                               85,300          35.11           2,994,590
Cancelled                                            (14,926)         46.01            (686,697)
                                                 -----------    -----------    -------------------
    Balance December 31, 2000                        310,650      $   42.43      $   13,180,099
                                                 ===========    ===========    ===================

At December 31, 2000, options on 132,508 shares were exercisable at $38.25 to $60.00 per share, with a weighted average price of $48.76 per share. At December 31, 1999, options on 101,173 shares were exercisable at $40.00 to $60.00 per share, with a weighted average price of $52.04 per share. At December 31, 1998, options on 83,400 shares were exercisable at $40.00 to $60.00 per share, with a weighted average price of $54.12 per share. The weighted average remaining contractual life of options outstanding at December 31, 2000 was 7.63 years.

The Company has adopted the disclosure-only option under SFAS No. 123. The weighted average fair value of options granted during 2000, 1999 and 1998 was $10.20, $12.20 and $13.48, respectively. Had compensation costs for the Company's stock options been determined based on the fair value at the grant date, consistent with the method under SFAS No. 123, the Company's net earnings and earnings per share would have been as indicated below:

                                                           Years Ended December 31,
                                             -------------------------------------------------
                                                    2000            1999              1998
                                             --------------   --------------    --------------
Net earnings (in thousands):
    As reported                               $      36,824     $     31,710    $     30,960
    Pro forma                                        36,390           31,496          29,936

Basic earnings per share:
    As reported                               $        3.39     $       2.91    $       2.90
    Pro forma                                          3.35             2.89            2.80

Diluted earnings per share:
    As reported                               $        3.39     $       2.91    $       2.89
    Pro forma                                          3.35             2.89            2.80

The fair value of the options granted under the Company's stock option plans during the years ended December 31, 2000, 1999 and 1998 was estimated using the Black-Scholes Pricing Model with the following assumptions used: dividend yield of 2.5%, 2.4% and 1.9%, expected volatility of 25%, 25% and 24%, risk-free interest rates of 5.3%, 6.2% and 4.9%, respectively and expected lives of 8 years in 2000, 1999, and 1998.

During 2000, the Company granted 12,620 restricted shares which vest at the end of three years. During 1999, the Company granted 434 restricted shares which vest at 12, 18 and 24 month intervals and 11,827 shares which vest at the end of three years. During 1998, the Company granted 12,070 restricted shares which vest at 12, 18 and 24 month intervals, and 7,050 shares were granted which vest at the end of three years. Vesting is contingent upon continued employment by the Company. On December 31, 2000, 30,327 of these restricted grants were not vested. The 2000 shares had respective market values of $32.00 and $35.00 at the dates of grant. The 1999 shares had respective market values of $38.25 and $42.075 at the dates of grant. The 1998 shares had respective market values of $46.00 and $43.50 at the dates of grant. Compensation expense related to restricted stock grants totaled $398,400 for 2000, $630,000 for 1999 and $308,000 for 1998. The remaining unearned compensation of $843,503 is being amortized over the life of the grants.

NOTE 11 - DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate:

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

Securities - For securities, fair value equals quoted market price, if available. If a quoted market price is not available, a reasonable estimate of fair value is used.

Loans - The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans with the same remaining maturities would be made to borrowers with similar credit ratings.

Deposits - The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Long-Term Notes - Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments - The fair value of commitments to extend credit was not significant.

The estimated fair values of the Company's financial instruments were as follows (in thousands):

                                                                                  December 31,
                                                         -----------------------------------------------------------
                                                                     2000                           1999
                                                         ----------------------------  -----------------------------
                                                            Carrying        Fair         Carrying         Fair
                                                             Amount         Value          Amount         Value
                                                         ------------   -------------  -------------  --------------
Financial assets:
   Cash, short-term investments and federal funds sold   $   193,257    $   193,257    $   159,838    $   159,838
   Securities available for sale .....................       576,318        576,318        639,416        639,416
   Securities held to maturity .......................       417,777        418,612        509,306        498,467
   Loans, net of unearned income .....................     1,699,841      1,654,910      1,541,521      1,542,738
      Less: allowance for loan losses ................       (28,604)       (28,604)       (25,713)       (25,713)
                                                         -----------    -----------    -----------    -----------
         Loans, net ..................................     1,671,237      1,626,306      1,515,808      1,517,025

Financial liabilities:
   Deposits ..........................................   $ 2,503,788    $ 2,415,228    $ 2,397,653    $ 2,398,858
   Securities sold under agreements to repurchase ....       144,561        144,561        213,773        213,773
   Federal Home Loan Bank advances ...................          --             --           50,000         50,000
   Long-term notes ...................................         2,177          2,177          2,714          2,714

NOTE 12 - OFF-BALANCE-SHEET RISK

In the normal course of business, the Company enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded and involve, to varying degrees, elements of credit risk not reflected in the consolidated balance sheets. The contract amounts of these instruments reflect the Company's exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued. The Company undertakes the same credit evaluation in making commitments and conditional obligations as it does for on-balance-sheet instruments and may require collateral or other credit support for off-balance-sheet financial instruments. These obligations are summarized below (in thousands):

                                                                     December 31,
                                                        ---------------------------------
                                                             2000             1999
                                                        -------------   -----------------
  Commitments to extend credit                           $   380,051       $   439,718
  Letters of credit                                           21,403            18,148

Approximately $218,000,000 and $254,000,000 of commitments to extend credit at December 31, 2000 and 1999, respectively, were at variable rates and the remainder were at fixed rates. A commitment to extend credit is an agreement to lend to a customer as long as the conditions established in the agreement have been satisfied. A commitment to extend credit generally has a fixed expiration date or other termination clauses and may require payment of a fee by the borrower. Since commitments often expire without being fully drawn, the total commitment amounts do not necessarily represent future cash requirements of the Company. The Company continually evaluates each customer's credit worthiness on a case-by- case basis. Occasionally, a credit evaluation of a customer requesting a commitment to extend credit results in the Company obtaining collateral to support the obligation.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing a letter of credit is essentially the same as that involved in extending a loan.

NOTE 13 - CONTINGENCIES

NOTE 14 - SUPPLEMENTAL INFORMATION

     The following is selected supplemental information (in thousands):

                                                                     Years Ended December 31,
                                                         ---------------------------------------------
                                                               2000            1999           1998
                                                         ------------    ------------    -------------
Other service charges, commissions and fees:
    Trust fees                                             $    6,058     $     4,445     $     3,071
    Investment commissions and fees                             3,295           3,328             508
    Credit card income                                          2,762           2,654           2,240

                                                                     Years Ended December 31,
                                                         -------------------------------------------
                                                               2000            1999          1998
                                                         -------------   -------------   -----------
Other non-interest expense:
    Postage                                               $      3,496     $    3,857    $    3,312
    Communication                                                4,102          4,692         3,405
    Data processing                                              5,456          5,026         3,562
    Professional fees                                            2,876          2,906         2,889
    Taxes and licenses                                           2,326          2,401         1,873
    Printing and supplies                                        1,349          2,459         2,131
    Marketing                                                    2,386          2,750         1,961

NOTE 15 - SEGMENT REPORTING

The Company's primary segments are geographically divided into the Mississippi (MS) and Louisiana (LA) markets. Each segment offers the same products and services but are managed separately due to different pricing, product demand and consumer markets. Both segments offer commercial, consumer and mortgage loans and deposit services. Following is selected information for the Company's segments (in thousands):

                                                                Years Ended December 31,
                                          --------------------------------------------------------------------
                                                    2000                   1999                  1998
                                          ----------------------- --------------------  ----------------------
                                               MS          LA        MS          LA        MS          LA
                                          -----------  ---------- ---------- ---------  ---------- -----------
Interest income .........................   $127,496   $ 87,166   $122,626   $ 80,366   $122,813   $ 67,271
Interest expense ........................     61,046     37,019     53,171     30,945     56,896     24,789
                                          -----------  ---------- ---------- ---------  ---------- -----------
   Net interest income ..................     66,450     50,147     69,455     49,421     65,917     42,482
Provision for loan losses ...............      5,308      4,957      2,295      4,626      2,731      2,854
Non-interest income .....................     22,341     25,220     21,728     19,866     18,822     13,261
Depreciation and amortization ...........      4,954      2,884      5,013      2,474      3,517      1,671
Other non-interest expense ..............     51,248     42,698     53,674     47,051     48,661     36,727
                                          -----------  ---------- ---------- ---------  ---------- -----------
Earnings before income taxes and
   cumulative effect of accounting change     27,281     24,828     30,201     15,136     29,830     14,491
Income taxes ............................      7,470      8,724      8,637      5,519      9,390      5,062
                                          -----------  ---------- ---------- ---------  ---------- -----------
   Earnings before cumulative effect
      of accounting change ..............      19811     16,104     21,564      9,617     20,440      9,429
Cumulative effect of accounting change ..       --         --         --         --        1,151       --
                                          -----------  ---------- ---------- ---------  ---------- -----------
   Net earnings .........................   $ 19,811   $ 16,104   $ 21,564   $  9,617   $ 21,591   $  9,429
                                          ===========  ========== ========== =========  ========== ===========

                                             At and For Years Ended December 31,
                                        ------------------------------------------
                                            2000          1999            1998
                                       ------------   ------------   -------------
Net Interest Income:
    MS .............................   $    66,450    $    69,455    $    65,917
    LA .............................        50,147         49,421         42,482
    Other ..........................         6,099          4,837          3,518
                                       ------------   ------------   -------------
      Consolidated net interest income $   122,696    $   123,713    $   111,917
                                       ============   ============   =============

Net Earnings:
    MS .............................   $    19,811    $    21,564    $    21,591
    LA .............................        16,104          9,617          9,429
    Other ..........................           909            529            (60)
                                       ------------   ------------   -------------
       Consolidated net earnings       $    36,824    $    31,710    $    30,960
                                       ============   ============   =============

Assets:
    MS .............................   $ 1,847,203    $ 1,826,006    $ 1,833,064
    LA .............................     1,284,735      1,216,238      1,003,620
    Other ..........................        44,219         31,172         27,487
    Intersegment ...................      (162,727)       (81,542)       (49,476)
                                       ------------   ------------   -------------
       Consolidated assets .....       $ 3,013,430    $ 2,991,874    $ 2,814,695
                                       ============   ============   =============

NOTE 16 - SUMMARIZED FINANCIAL INFORMATION OF HANCOCK HOLDING COMPANY
                   (PARENT COMPANY ONLY)


Balance Sheets

                                                December 31,
                                       -----------------------------
                                             2000          1999
                                       --------------  -------------
Assets:
    Investment in subsidiaries ......   $345,749,367   $312,282,926
    Other ...........................        362,643        430,788
                                       --------------  -------------
                                        $346,112,010   $312,713,714
                                       --------------  -------------

Liabilities and Stockholders' Equity:
    Due to subsidiaries .............   $  4,721,818   $  2,286,286
    Stockholders' equity ............    341,390,192    310,427,428
                                       --------------  -------------
                                        $346,112,010   $312,713,714
                                       --------------  -------------

Statements of Earnings

                                                        Years Ended December 31,
                                           ------------------------------------------------
                                                2000           1999             1998
                                           --------------  ------------    ----------------
Dividends received from subsidiaries ...   $ 17,636,385    $ 35,368,193    $ 36,555,000
Equity in earnings of subsidiaries
greater than
    (less than) dividends received .....     20,960,727      (1,914,920)     (5,209,781)
Net expenses ...........................     (1,873,532)     (1,823,036)     (1,689,631)
Income tax credit ......................        100,000          79,833         153,800
                                           --------------  ------------    ----------------
    Earnings before cumulative effect of
       accounting change ...............     36,823,580      31,710,070      29,809,388
Cumulative effect of accounting change .           --               --        1,150,811
                                           --------------  ------------    ----------------
Net earnings ...........................   $ 36,823,580    $ 31,710,070    $ 30,960,199
                                           --------------  ------------    ----------------

Statements of Cash Flows

                                                                   Years Ended December 31,
                                                     ------------------------------------------------
                                                          2000             1999            1998
                                                     ---------------  -------------  ----------------
Cash flows from operating activities - principally
    dividends received from subsidiaries ..........   $ 18,461,767    $ 36,868,662    $ 35,952,990
Cash flows from investing  activities - principally
    business acquisitions .........................           --       (15,176,495)           --
Cash flows from financing activities:
    Dividends paid ................................    (13,611,093)    (11,055,506)    (10,862,585)
    Treasury stock transactions, net ..............     (4,951,086)    (11,484,047)    (22,857,810)
    Repayment of note .............................           --               --       (1,279,402)
                                                     ---------------  -------------  ----------------
       Net cash used by financing activities.......    (18,562,179)    (22,539,553)    (34,999,797)
                                                     ---------------  -------------  ----------------
    Net (decrease) increase in cash ...............       (100,412)       (847,386)        953,193
Cash, beginning ...................................        276,908       1,124,294         171,101
                                                     ---------------  -------------  ----------------
                                                       $   176,496    $    276,908    $  1,124,294
                                                     ---------------  -------------  ----------------

INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Hancock Holding Company
Gulfport, Mississippi

We have audited the accompanying consolidated balance sheets of Hancock Holding Company and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Hancock Holding Company and subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, in 1998 the Company changed its method of accounting for derivative instruments to conform with the Statement of Financial Accounting Standards No. 133 and in conjunction therewith reclassified certain securities from its held-to- maturity portfolio to trading securities.

Deloitte & Touche LLP
New Orleans, Louisiana
January 15, 2001

HANCOCK HOLDING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Purpose

The purpose of this discussion and analysis is to focus on significant changes and events in the financial condition and results of operations of Hancock Holding Company and its subsidiaries during 2000 and selected prior periods. This discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this report, including the preceding consolidated financial statements and related notes. Certain information relating to prior years has been reclassified to conform to the current year's presentation.

Forward-Looking Statements

Summary

The Company earned $36.8 million in 2000, an increase of $5.1 million, or 16%, from 1999. Earnings on a per share basis were $3.39 in 2000, an increase of $0.48 from 1999's $2.91. Earnings were favorably impacted by the sale of most of the Company's credit card portfolio in March, 2000. The sale resulted in a pretax gain of $3.8 million. Excluding the after-tax impact of the credit card gain, earnings were up $2.7 million, or 8%, from 1999. The Company experienced minimal growth in earning assets, which when coupled with rising funding costs, resulted in a reduction of $0.4 million in net interest income (TE) from 1999. Also unfavorably impacting earnings in 2000 was an increase in the provision for loan losses. 2000's provision of $11.5 million was $3.9 million higher than the $7.6 million recorded in 1999. The increase was warranted due to higher net charge-offs as well as the Company's desire to maintain an adequate level of loan loss reserves in response to signs of a slowing in U.S. economic activity. Non-interest income (excluding the impact of the credit card sale and securities transactions) of $48.7 million was up $3.2 million, or 7%, from 1999. The majority of this increase was reflected in Trust income and service charge income. Non-interest expense of $109.9 million was actually down $5.5 million, or nearly 5%, from 1999. Decreases in this area were recorded in nearly every expense category.

Loans and Allowance For Loan Losses

Average loans increased $156 million, or 11%, in 2000 compared to an increase of $211 million, or 17%, in 1999. Table 1 shows average loans for a three-year period.

TABLE 1.  AVERAGE LOANS
(dollars in thousands)                                      2000                          1999                          1998
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial & R.E. Loans                            $791,157         50%          $675,091         47%          $528,670         42%
Mortgage loans                                      212,904         13%           181,527         12%           171,756         14%
Direct consumer loans                               471,585         29%           454,959         31%           404,453         33%
Indirect consumer loans                             135,400          8%           143,509         10%           138,738         11%
- -----------------------------------------------------------------------------------------------------------------------------------
       Total average loans (net of unearned)     $1,611,046        100%        $1,455,086        100%        $1,243,617        100%
- -----------------------------------------------------------------------------------------------------------------------------------

As indicated by Table 1, commercial and real estate loans increased $116 million, or 17%, from 1999. Included in this category are commercial real estate loans, which are loans secured by properties used in commercial or industrial operations. Economic activity in the Company's primary markets both in Mississippi and Louisiana remained strong throughout 2000 and contributed to the sustained loan growth experienced in these loan categories. The Banks originate commercial and real estate loans to a wide variety of customers in many different industries, and as such, no single industry concentrations existed at December 31, 2000.

Average mortgage loans of $212.9 million were $31.4 million, or 17%, higher in 2000. The majority of the growth in 2000 for this category was in the area of retail mortgage loans. The Company originates both fixed-rate and adjustable-rate mortgage loans. Certain types of mortgage loans are sold in the secondary mortgage market, while the Banks retain other types. The Banks also originate home equity loans. This product offers customers the opportunity to leverage rising home prices and equity to obtain tax-advantaged consumer financing.

Direct consumer loans, which includes loans and revolving lines of credit made directly to consumers, were up $16.6 million, or 4%, from 1999. The increase in direct consumer loans from 1999 includes a reduction in credit card loans due to the sale of most of the Company's credit card portfolio. In March, 2000, the Company sold $17.2 million of its credit card portfolio to a national credit card company for a pretax gain of $3.8 million. As of December 31, 2000, the Bank maintains a small credit card portfolio of approximately $3 million. The Company also originates indirect consumer loans, which consist primarily of consumer loans originated through a third party such as an automobile dealer. Average indirect consumer loans of $135.4 million for 2000 were down $8.1 million, or 6%, from 1999. Included with both direct and indirect consumer loans are loans outstanding and originated by the Company's expanding finance company subsidiary, which increased approximately $9.5 million, or 46%, at December 31, 2000, compared to the subsidiary's outstanding loans on December 31, 1999.

At December 31, 2000, the allowance for loan losses was $28.6 million, or 1.68% of year-end loans, compared to $25.7 million, or 1.67% of year- end loans for 1999. The allowance was 281% of non-performing loans at year-end 2000, compared to 365% at year-end 1999. Management utilizes several quantitative methodologies for determining the adequacy of the allowance for loan losses and is of the opinion that the allowance at December 31, 2000 is adequate even after considering signs of a slowing U.S. economy. Table 2 presents the activity in the allowance for loan losses over the past 5 years.

TABLE 2.  SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
                                                          2000           1999            1998           1997           1996
- -------------------------------------------------------------------------------------------------------------------------------
Balance at the beginning of year                        $25,713         $21,800        $21,000        $19,800         $17,391
Reserves acquired in bank purchase and other              (147)           3,815              0            832             654
Provision for possible loan losses
     charged to operations                               11,531           7,585          6,229          6,399           6,154
Loans charged to the allowance
     Commercial, real estate & mortgage                   6,917           3,202          1,087          1,072           1,049
     Direct and indirect consumer                         4,084           6,769          6,043          7,141           5,417
- -------------------------------------------------------------------------------------------------------------------------------
         Total                                           11,001           9,971          7,130          8,213           6,466
- -------------------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off
     Commercial, real estate & mortgage                   1,334             814            546            652           1,123
     Direct and indirect consumer                         1,174           1,670          1,155          1,530             944
- -------------------------------------------------------------------------------------------------------------------------------
         Total                                            2,508           2,484          1,701          2,182           2,067
- -------------------------------------------------------------------------------------------------------------------------------
Net charge-offs                                           8,493           7,487          5,429          6,031           4,399
- -------------------------------------------------------------------------------------------------------------------------------
Balance at the end of year                              $28,604         $25,713        $21,800        $21,000         $19,800
- -------------------------------------------------------------------------------------------------------------------------------
Ratios
     Gross charge-offs to average loans                   0.68%           0.69%          0.57%          0.68%           0.60%
     Recoveries to gross charge-offs                      0.16%           0.17%          0.14%          0.18%           0.19%
     Net charge-offs to average loans                     0.53%           0.51%          0.44%          0.50%           0.41%
     Allowance for loan losses to year end loans          1.68%           1.67%          1.67%          1.72%           1.69%
- -------------------------------------------------------------------------------------------------------------------------------

Non-performing assets consist of non-performing loans, restructured loans and other real estate. Table 3 presents information related to non- performing assets for the five years ended December 31, 2000. Total non-performing assets at December 31, 2000 were $11.7 million, an increase of $3.0 million from December 31, 1999. This increase was due primarily to a specific credit. Loans 90 days past due but still accruing were $9.2 million at December 31, 2000. This compares to $4.4 million at December 31, 1999. Efforts on the part of Management to reduce the levels of past due loans will continue in 2001 as the Company focuses on this issue.

TABLE 3.  NON-PERFORMING ASSETS
                                                                                       December 31
- --------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                       2000           1999           1998            1997           1996
- --------------------------------------------------------------------------------------------------------------------------------
Loans accounted for on a non-accrual basis                $10,182         $6,901         $4,602          $3,898         $2,905
Restructured loans                                              0            152          1,332           2,822          1,645
- --------------------------------------------------------------------------------------------------------------------------------
     Total non-performing loans                            10,182          7,053          5,934           6,720          4,550
Other real estate                                           1,492          1,616          2,245           2,358          1,875
- --------------------------------------------------------------------------------------------------------------------------------
     Total non-performing assets                          $11,674         $8,669         $8,179          $9,078         $6,425
- --------------------------------------------------------------------------------------------------------------------------------
Loans 90 days past due still accruing                      $9,277         $4,442         $2,907          $5,423         $8,361
- --------------------------------------------------------------------------------------------------------------------------------
Ratios
     Non-performing assets to loans plus
         other real estate                                  0.69%          0.56%          0.63%           0.74%          0.55%
     Allowance for loan losses to
         non-performing loans                                281%           365%           367%            313%           435%
     Loans 90 days past due still accruing to loans         0.55%          0.29%          0.22%           0.44%          0.71%
- --------------------------------------------------------------------------------------------------------------------------------

Investment Securities

The Company's investment in securities was $0.994 billion at December 31, 2000, compared to $1.149 billion at December 31, 1999. Average investment securities were $1.091 billion for 2000 as compared to $1.252 billion for 1999. The overall decrease in the security portfolio from 1999 to 2000 was part of balance sheet management strategy that encompassed using maturities from the security portfolio to fund increases in loans not covered by deposit growth. Management feels that the aforementioned strategy is a safe and prudent method of funding loan growth given the relative size of the security portfolio as compared to certain peer banks.

The Company generally purchases securities with a maturity schedule that provides ample liquidity. Certain securities have been classified as available for sale based on management's internal assessment of the portfolio after considering the Company's liquidity requirements and the portfolio's exposure to changes in market interest rates and prepayment activity. At December 31, 2000, the composition of the security portfolio was 58% classified as available for sale and 42% as held to maturity. At December 31, 1999, these relative percentages were 56% available for sale and 44% held to maturity.

The December 31, 2000 carrying value of the held-to-maturity portfolio was $417.7 million and the market value was $418.6 million. The available-for-sale portfolio was $576.3 million at December 31, 2000. The vast majority of securities in the Bank's portfolio are fixed rate and there were no investment in securities of a single issuer, other than U.S. Treasury and U.S. Government agency securities and mortgage-backed securities issued or guaranteed by U.S. government agencies, exceeds 10% of stockholder's equity. The Bank does not normally maintain a securities trading portfolio.

Deposits and Short-Term Borrowings

Year-end total deposits increased $106 million, or more than 4% from 1999 to 2000. However, total average deposits decreased by $27.6 million, or over 1%, in 2000 from 1999. Decreases were registered in nearly all deposit categories with the exception of time deposits and money market deposits. Average demand deposits were down $25 million, or 5%, from 1999. Similarly, NOW deposits decreased $15 million, or 6%. An increase of $1.4 million, or less than 1% from 1999 was recorded in money market deposits. The Bank's premier money market account product, Treasury Checking, was responsible for overall growth of over $58 million, or 40%, from 1999. Decreases of over $56 million in other money market deposit products nearly offset the increase in the aforementioned Treasury Checking product. Time deposits, which consist primarily of certificates of deposit, were up nearly $39 million, or 4%, from 1999.

Short-term borrowings, on average, were down nearly $3 million, or just under 2%, from 1999 to 2000. Short-term borrowings consist of purchases of federal funds and sales of securities under repurchase agreements. Average sales of securities under repurchase agreements were up over $21 million, or 16%, from 1999, while federal funds purchases were down $24 million, or nearly 70%.

TABLE 4.  AVERAGE DEPOSITS
(dollars in thousands)                                     2000                           1999                          1998
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing demand deposits             $537,057         22%           $562,552         22%         $493,218          24%
NOW account deposits                              219,511          9%            234,231          9%          432,093          21%
Money market deposits                             464,140         19%            462,724         18%          134,899           7%
Savings deposits                                  297,715         12%            325,306         13%          282,305           4%
Time deposits                                     959,493         38%            920,718         38%          891,322          44%
- ----------------------------------------------------------------------------------------------------------------------------------
     Total average deposits                    $2,477,916        100%         $2,505,531        100%       $2,233,837         100%
- ----------------------------------------------------------------------------------------------------------------------------------

Liquidity

Liquidity represents the Company's ability to provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing funds. The principal sources of funds which provide liquidity are customer deposits, payments of principal and interest on loans, maturities and sales of securities, earnings and borrowings. The Company has a line of credit with the Federal Home Loan Bank of over $200 million and has borrowing capacity at the Federal Reserve's Discount Window in excess of $100 million. At December 31, 2000, cash and due from banks and securities available for sale were 28.2% of total deposits.

Asset/Liability Management

The Company's net income is dependent on its net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net income.

In an attempt to manage its exposure to changes in interest rates, the Asset/Liability Committee (ALCO) monitors the Company's interest rate risk. The Company's interest rate management policy is designed to produce 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. Management also reviews the Company's securities portfolio, formulates investment strategies and oversees the timing and implementation of transactions to assure attainment of the Board's objectives in the most effective manner. Notwithstanding the Company's interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income.

In adjusting the Company's asset/liability position, the Board and Management attempt to manage the Company's interest rate risk while enhancing net interest margins. At times, depending on the level of general interest rates, the relationship between long-term and short-term interest rates, market conditions and competitive factors, the Board and Management may determine to increase the Company's interest rate risk position somewhat in order to increase its net interest margin. The Company's results of operations and net portfolio values remain vulnerable to increases in interest rates and to fluctuations in the difference between long-term and short-term interest rates.

The Company also controls interest rate risk reductions by emphasizing non-certificate depositor accounts. The Board and management believe that such accounts carry a lower interest cost than certificate accounts and that a material portion of such accounts may be more resistant to changes in interest rates.

One approach used to quantify interest rate risk is the net portfolio value ("NPV") analysis. NPV includes stockholders' equity of the Company as reported in the financial statements, adjusted for changes in the carrying value of investments, loans and certificates of deposit, when considering changes in market values on a pre-tax basis. In essence, this analysis calculates the difference between the present value of liabilities and the present value of expected cash flows from assets and off-balance sheet contracts. Table 5 presents an analysis of the Company's interest rate risk as measured by the estimated changes in NPV resulting from an instantaneous and sustained parallel shift in the yield curve (+ or - 300 basis points, measured in 100 basis point increments) at December 31, 2000. Table 5 indicates that the Company's level of NPV declines when rates rise but generally increases when rates decline.

TABLE 5.  NET PORTFOLIO VALUE AT RISK
- -------------------------------------------------------------------------------
                           December 31, 2000
- -------------------------------------------------------------------------------
         Change in                                       Estimated Increase
          Interest            Estimated                  (Decrease) in NPV
           Rates              NPV Amount            Amount            Percent
      --------------       ---------------       ------------       -----------
      (basis points)               (amounts in thousands)

           +  300              $350,510           ($57,269)              -14.0%
           +  200              $370,425           ($37,354)               -9.2%
           +  100              $389,159           ($18,620)               -4.6%
           Stable              $407,779                  -                   -
           -  100              $417,340             $9,561                 2.3%
           -  200              $415,217             $7,438                 1.8%
           -  300              $407,681               ($98)                0.0%
- -------------------------------------------------------------------------------

Certain assumptions in assessing the interest rate risk were employed in preparing data for the Company included in the preceding table. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under the various interest rate scenarios. It was also assumed that delinquency rates will not change as a result of changes in interest rates, although there can be no assurance that this will be the case. Even if interest rates change in the designated amounts, there can be no assurance that the Company's assets and liabilities would perform as anticipated. In addition, a change in U. S. Treasury rates in the designated amounts accompanied by a change in the shape of the U. S. Treasury yield curve would cause significantly different changes to the NPV than indicated above.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. The Company considers all of these factors in monitoring its exposure to interest rate risk.

The Company does not currently engaged in any significant trading activities or the use of derivative instruments to control interest rate risk. Even though such activities are permitted with the approval of the Board of Directors, the Company does not intend to engage in a significant level of such activities in the immediate future.

Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities.

Capital Resources

Composite ratings by the respective regulatory authorities of the Company and the Banks establish minimum capital levels. Currently, the Company and the Banks are required to maintain minimum Tier 1 leverage ratios of at least 3%, subject to an increase up to 5%, depending on the composite rating. At December 31, 2000, the Company's and the Banks' capital balances were in excess of current regulatory minimum requirements.

The Company undertook two important actions during 2000 that were designed to better manage the Company's capital position. In July, 2000, the Company announced that it would begin a stock buy-back program consisting of a repurchase of up to 10% of the Company's outstanding common stock. As of December 31, 2000, the Company had repurchased 150,236 common shares, or approximately 1.4% of the outstanding shares at June 30, 2000. Also, in November, 2000, the Company declared a special cash dividend of $.25 per share in addition to the regular $.25 per share dividend.

The regulatory capital ratios of the Company and the Banks far exceed the minimum required ratios, and the Banks have been categorized as "well capitalized" in the most recent notice received from their regulators.

TABLE 6.  RISK-BASED CAPITAL AND CAPITAL RATIOS

(dollars in thousands)                                   2000             1999             1998             1997           1996
- --------------------------------------------------------------------------------------------------------------------------------
Tier 1 regulatory capital                              $302,094         $279,659          $260,182        $259,900      $238,110
Tier 2 regulatory capital                                23,680           22,447            18,997          17,677        16,056
- --------------------------------------------------------------------------------------------------------------------------------
    Total regulatory capital                           $325,774         $302,106          $279,179        $277,577      $254,166
- --------------------------------------------------------------------------------------------------------------------------------
Risk-weighted assets                                 $1,894,423       $1,792,515        $1,516,986      $1,362,261    $1,280,753
- --------------------------------------------------------------------------------------------------------------------------------
Ratios
    Leverage (Tier 1 capital to average assets)          10.20%            9.61%             9.50%          10.41%        10.53%
    Tier 1 capital to risk-weighted assets               15.95%           15.60%            17.15%          19.08%        18.59%
    Total capital to risk-weighted assets                17.20%           16.85%            18.40%          20.33%        19.85%
    Stockholders' equity to total assets                 11.33%           10.38%            10.19%          11.37%        11.44%
    Tangible equity to total assets                       9.98%            9.02%             9.34%          10.36%        10.48%
- --------------------------------------------------------------------------------------------------------------------------------

Results of Operations Net Interest Income

Net interest income (TE) of $129.0 million was recorded for the year 2000, a decrease of $.4 million from 1999. The decrease in 2000 followed an increase of $13.2 million, or 11%, in 1999 from 1998. Higher loan growth in 1999 was the major factor behind the increase from 1998. The factors contributing to the changes in net interest income are presented in Tables 7 and 8. Table 7 is an analysis of the components of the Company's average balance sheets, level of interest income and expense and the resulting earning asset yields and liability rates. Table 8 breaks down the overall changes in the level of net interest income into rate and volume components.

A primary factor behind the decline in net interest income from 1999 to 2000 was an increase in the overall rate paid on interest-bearing liabilities. This rate, which represents the overall cost in terms of interest expense to the Company of all deposits and other interest-bearing funding sources except demand deposits, increased from 3.97% in 1999 to 4.47% in 2000, an increase of 50 basis points. The primary reason for this increase in funding costs was an overall increase in the level of interest rates throughout 2000, which translated into higher deposit costs for the Company's deposit products, especially certificates of deposit and interest-bearing transaction accounts. Yields on earning assets were unable to keep pace with the rising cost of funding sources. The Company's earning assets yield increased from 7.80% in 1999 to 8.13% for the year 2000, an increase of 33 basis points. Although average loans did increase $156 million, or 11%, from 1999, the average yield on loans was up 14 basis points. The yield earned by the security portfolio for 2000 was 6.41%, compared to 6.22% earned for 1999, an increase of 19 basis points. The net interest margin, which is net interest income (TE) as a percent of average earning assets, narrowed from 4.73% in 1999 to 4.70% in 2000.

Another factor that contributed to the decline in net interest income in 2000 was the lower level of growth in earning assets than was experienced by the Company in 1999. Average earning assets in 2000 grew $8 million, or less than 1%, from the prior year. This was after growth of $250 million, or 10%, in 1999. While average loans grew $156 million from 1999, the security portfolio experienced a decline in its average balance of $161 million. Average federal funds sold were up $14 million from 1999. Because average deposits were down $27.6 million, or 1.1%, in 2000 from 1999, the Company relied on maturities from the security portfolio to fund loan growth.

Provision For Loan Losses

The provision for loan losses was $11.5 million for 2000, an increase of $3.9 million from 1999's level of $7.6 million. The higher loan loss provision in 2000 was due to overall higher net charge-offs, which were $1.0 million higher in 2000, higher loan growth of $156 million and additions to the allowance for loan losses in response to signs of a slowing in U.S. economic activity.

TABLE 7.  SUMMARY OF AVERAGE BALANCE SHEETS
                                          NET INTEREST INCOME (TE) & INTEREST RATES
(dollars in thousands)                               2000                            1999                              1998
- -----------------------------------------------------------------------------------------------------------------------------------
                                           Average                       Average                          Average
                                           Balance    Interest   Rate    Balance     Interest    Rate     Balance    Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
    Loans (TE)                            $1,611,046  $150,857   9.36%  $1,455,086   $134,113     9.22%  $1,243,617  $119,015 9.57%
    U.S. Treasury securities                  98,704     5,494   5.57%     180,480     10,059     5.57%     243,224    14,469 5.95%
    U.S. agency securities                   373,295    21,819   5.85%     420,214     25,175     5.99%     340,906    21,175 6.21%
    CMOs                                     264,207    16,740   6.34%     269,427     17,053     6.33%     212,043    13,631 6.43%
    Mortgage-backed securities               136,879     9,313   6.80%     165,291     10,016     6.06%     151,669     9,800 6.46%
    Obligations of states and
       political subdivisions (TE)           196,518    14,429   7.34%     195,861     14,417     7.36%     137,584    10,562 7.68%
    FHLB stock and
       other corporate securities             20,955     2,057   9.81%      20,698      1,204     5.81%      99,272     6,093 6.14%
- -----------------------------------------------------------------------------------------------------------------------------------
          Total investment in              1,090,558    69,852   6.41%   1,251,971     77,924     6.22%   1,184,698    75,730 6.39%
- -----------------------------------------------------------------------------------------------------------------------------------
    Federal funds sold and
       short-term investments                 42,672     2,523   5.91%      28,845      1,300     4.50%      57,371     3,122 5.44%
- -----------------------------------------------------------------------------------------------------------------------------------
          Total earning assets             2,744,276  $223,232   8.13%   2,735,902   $213,337     7.80%   2,485,686  $197,867 7.96%
- -----------------------------------------------------------------------------------------------------------------------------------
NON-EARNING ASSETS
    Other assets                             276,287                       294,232                          231,461
    Allowance for loan losses                (26,591)                      (23,939)                         (21,040)
- -----------------------------------------------------------------------------------------------------------------------------------
          Total assets                    $2,993,972                    $3,006,195                       $2,696,107
- -----------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS'
EQUITY
INTEREST-BEARING LIABILITIES
    Interest-bearing transaction          $  829,760   $27,190   3.28%    $843,535    $24,232     2.87%    $827,007   $25,588 3.09%
    deposits
    Time deposits                            875,627    49,056   5.60%     841,942     42,554     5.05%     762,762    41,236 5.41%
    Public funds                             235,472    10,302   4.37%     257,502     10,023     3.89%     150,850     7,641 5.07%
- -----------------------------------------------------------------------------------------------------------------------------------
       Total interest-bearing deposits     1,940,859    86,548   4.46%   1,942,979     76,809     3.95%   1,740,619    74,465 4.28%
- -----------------------------------------------------------------------------------------------------------------------------------
    Customer repurchase agreements           157,633     7,024   4.46%     136,255      5,387     3.95%     152,421     7,037 4.62%
    Other interest-bearing liabilities        10,533       679   6.44%      34,700      1,765     5.09%       4,859       240 4.94%
- -----------------------------------------------------------------------------------------------------------------------------------
       Total interest-bearing liabilities  2,109,025    94,251   4.47%   2,113,934     83,961     3.97%   1,897,899    81,742 4.31%
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST BEARING LIABILITIES AND
STOCKHOLDERS' EQUITY
    Demand deposits                          537,057                       562,552                          493,218
    Other liabilities                         22,382                        20,855                           15,112
    Stockholders' equity                     325,508                       308,854                          289,878
- -----------------------------------------------------------------------------------------------------------------------------------
       Total liabilities and
          stockholders' equity            $2,993,972                    $3,006,195                      $2,696,107
- -----------------------------------------------------------------------------------------------------------------------------------
       Net interest income and margin (TE)             $128,981  4.70%               $129,375     4.73%              $116,125 4.67%
       Net earning assets and spread        $635,251             3.67%    $621,968                3.83%   $587,787            3.65%
- -----------------------------------------------------------------------------------------------------------------------------------

TABLE 8.  SUMMARY OF CHANGES IN NET INTEREST INCOME (TE)
- ----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                         2000 Compared to 1999               1999 Compared to 1998
- -----------------------------------------------------------------------------------------  ---------------------------------------
                                                           Due to                                   Due to
                                                         Change in             Total               Change in            Total
                                                   ----------------------    Increase      -----------------------    Increase
                                                     Volume      Rate       (Decrease)        Volume       Rate      (Decrease)
INTEREST INCOME (TE)
        Loans                                       $13,608     $3,136      $16,744          $19,955       ($581)      $19,374
- ----------------------------------------------------------------------------------------------------------------------------------
    U.S. Treasury securities                        (4,552)        (13)      (4,565)
                                                                                              (3,724)       (686)       (4,410)
    U.S. agency securities                          (2,755)       (601)      (3,356)
                                                                                                (548)       (456)       (1,004)
    CMOs                                              (296)        (17)        (313)
    Mortgage-backed securities                        (528)       (175)        (703)           4,583        (878)        3,705
    Obligations of states and
       political subdivisions (TE)                       8           4           12            4,476      (4,897)         (421)
    FHLB stock and
       other corporate securities                       15         838          853              270        (214)           56
- ----------------------------------------------------------------------------------------------------------------------------------
              Total investment in securities        (8,108)         36       (8,072)           5,057      (7,131)       (2,074)
- ----------------------------------------------------------------------------------------------------------------------------------
    Federal funds and short-term investments           741         482        1,223           (1,753)        (78)       (1,831)
- ----------------------------------------------------------------------------------------------------------------------------------
              Total interest income (TE)            $6,241      $3,654       $9,895          $23,259     ($7,790)      $15,469
- ----------------------------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE
    Interest-bearing transaction deposits            ($402)     $3,360       $2,958           $3,794      $1,450        $5,244
    Time deposits                                    1,753       4,749        6,502           (2,191)     (3,090)       (5,281)
    Public Funds                                      (900)      1,179          279            5,396      (3,014)        2,382
- ----------------------------------------------------------------------------------------------------------------------------------
              Total interest-bearing deposits          451       9,288        9,739            6,999      (4,654)        2,345
- ----------------------------------------------------------------------------------------------------------------------------------

    Customer repurchase agreements                     905         733        1,638             (668)       (827)       (1,495)
    Other interest-bearing liabilities              (1,466)        378       (1,088)           1,392         (23)        1,369
- ----------------------------------------------------------------------------------------------------------------------------------
              Total interest expense                 ($110)    $10,399      $10,289           $7,723     ($5,504)       $2,219
- ----------------------------------------------------------------------------------------------------------------------------------

              Change in net interest income (TE)    $6,351     ($6,745)       ($394)         $15,536     ($2,286)      $13,250
- ----------------------------------------------------------------------------------------------------------------------------------

Non-Interest Income

Table 9 is a three-year analysis of the components of non-interest income. Overall, non-interest income of $52.5 million was reported in 2000, as compared to $45.6 million for 1999. Excluding the gain on the sale of the Company's credit card portfolio of $3.8 million and insignificant levels of security transactions in both years, non-interest income for 2000 was $48.7 million, compared to $45.5 million for 1999. This represented an increase of $3.2 million, or 7%. Significant increases were reflected in Trust income and service charge income. Service charges on deposit accounts were up $2.2 million, or 9%, from 1999 due mainly to the continuation of pricing initiatives that were begun in 1999. Trust service fees increased $1.6 million, or 36%, from 1999, after an increase of $1.4 million, or 45%, from 1998. The Company's continued emphasis on building new Trust relationships resulted in overall higher levels of fee income in this area.

TABLE 9.  NON-INTEREST INCOME
- ------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands      )                             2000           % change       1999         % change         1998
- ------------------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts                    $27,179              9%        $24,979           30%         $19,164
Trust income                                             6,058             36%          4,445           45%           3,071
Insurance and investment sales commissions               4,835              5%          4,613          464%             818
Credit card income                                       2,762              4%          2,654           18%           2,240
Electronic banking income                                2,075             12%          1,846            0%           1,840
ATM fees                                                 1,461             -1%          1,473           42%           1,037
Other fees and income                                    4,325            -22%          5,535           39%           3,994
- ------------------------------------------------------------------------------------------------------------------------------
   Total other non-interest income                      48,695              7%         45,545           42%          32,164
- ------------------------------------------------------------------------------------------------------------------------------
Gain on sale of credit card portfolio                    3,753               -              -            -                -
Securities transactions                                      3            -96%             67          -60%             167
- ------------------------------------------------------------------------------------------------------------------------------
   Total non-interest income                           $52,451             15%        $45,612           41%         $32,331
- ------------------------------------------------------------------------------------------------------------------------------

Non-Interest Expense

Expense control was an important strategic focus of the Company in 2000. This focus resulted in an overall decline in the level of non- interest expense of $5.5 million, or 5%, from 1999 to 2000. The expense control initiative that was begun in the fourth quarter of 1999 was a broad-based effort by Company management to control all levels of non-interest expense throughout the Company's operations, but without any reduction in customer service levels or risk of loss of control. Nearly every non-interest expense category saw expenses actually reduced or remain relatively flat. The biggest dollar reductions were reflected in personnel expense as that area was reduced $2.4 million, or 4%, from 1999. Other significant reductions were experienced in postage and communications expense, down $1.0 million, or 11%, and stationary and supplies, down $1.1 million, or 45%, from 1999. The Company's efforts toward expense control have been institutionalized into the Banks' culture and will remain a strategic focus in 2001. Table 10 further details the changes in non-interest expense.

TABLE 10.  NON-INTEREST EXPENSE
(dollars in thousands)                                   2000     % change        1999         % change        1998
- ------------------------------------------------------------------------------------------------------------------------------
Employee compensation                                 $48,659         -3%           $50,402        19%           $42,349
Employee benefits                                      10,526         -6%            11,194        32%             8,484
- ------------------------------------------------------------------------------------------------------------------------------
    Total personnel expense                            59,185         -4%            61,596        21%            50,833
Equipment and data processing expense                  13,779          1%            13,706        25%            10,922
Net occupancy expense                                   7,135         -2%             7,268        31%             5,560
Postage and communications                              7,598        -11%             8,549        27%             6,717
Ad valorem and franchise taxes                          2,326         -3%             2,401        28%             1,873
Legal and professional services                         2,876         -1%             2,905         1%             2,889
Stationary and supplies                                 1,349        -45%             2,459        15%             2,131
Amortization of intangible assets                       3,756         -1%             3,775        57%             2,405
Advertising                                             2,386        -13%             2,750        40%             1,961
Deposit insurance and regulatory fees                     802         18%               681        26%               539
Training expenses                                         390        -17%               470         0%               472
Other expense                                           8,314         -6%             8,882        19%             7,480
- ------------------------------------------------------------------------------------------------------------------------------
   Total non-interest expense                        $109,896         -5%          $115,442        23%           $93,782
- ------------------------------------------------------------------------------------------------------------------------------

New Financial Accounting Standards

There are no new financial accounting standards that have been issued, but not yet effective that will have a material effect on the Company's financial statements.

EX-23 3 0003.htm INDEPENDENT AUDITORS' CONSENT Independent Auditors' Consent Exhibit (23)

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the Registration Statements of Hancock Holding Company on Form S- 8 (No. 2-99863) and on Form S-3 (No. 33-31782) of our report dated January 15, 2001 incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 2000.

DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 27, 2001 -----END PRIVACY-ENHANCED MESSAGE-----

Background

General:

Recent Acquisition Activity:

Current Operations

Loan Production and Credit Review:

Loan Review and Asset Quality:

Securities Portfolio:

Deposits:

Trust Services:

Operating Efficiency Strategy:

Other Activities:

Competition:

SUPERVISION AND REGULATION

Bank Holding Company Regulation

General:

Federal Regulation:

Bank Regulation:

Recent Legislation:

Effect of Governmental Policies:

Distribution of Assets, Liabilities and Stockholders' Equity and Interest Rates and Differentials:

Interest Rate Sensitivity:

Income Taxes:

Performance and Equity Ratios:

Securities Portfolio:

Loan Portfolio:

Nonperforming Assets:

Analysis of Allowance for Loan Losses:

Short-Term Borrowings:

Liquidity:

Capital Resources:

Impact of Inflation:

Forward Looking Statements

ITEM 2 - PROPERTIES

ITEM 3 - LEGAL PROCEEDINGS

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK - -------------------------------------------------- AND RELATED STOCKHOLDER MATTERS - -------------------------------

ITEM 6 - SELECTED FINANCIAL DATA

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III -------- ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------------------------------

ITEM 11 - EXECUTIVE COMPENSATION

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Description of Business

Summary of Significant Accounting Policies

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK
- --------------------------------------------------
AND RELATED STOCKHOLDER MATTERS
- -------------------------------

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL
CONDITION AND RESULTS OF OPERATIONS

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON
ACCOUNTING AND FINANCIAL DISCLOSURE

PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------