-----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, OUcryhwnc5dAeJG5ZOhlAZVieujm9W6FZrfq8ckOLk8LxP7qThajqoq89qj2vrtH 7Az0MPc8yGGAuaZ5PL4MCA== 0001030798-06-000044.txt : 20060316 0001030798-06-000044.hdr.sgml : 20060316 20060316095256 ACCESSION NUMBER: 0001030798-06-000044 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060316 DATE AS OF CHANGE: 20060316 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: 1934 Act SEC FILE NUMBER: 000-13089 FILM NUMBER: 06690196 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 hhc_10k-123105.htm HHC 10K, 12/31/05 Hancock Holding Company Form 10K 12/31/05 
                                                   UNITED STATES
                                        SECURITIES AND EXCHANGE COMMISSION
                                              WASHINGTON, D. C. 20549

                                                     FORM 10-K

(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, 2005.

       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 the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes    X        No
    ------         ------

       Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes             No   X
    ------        ------


                                                               Continued
Page 1 of 54
         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes    X        No
    ------        ------


         Indicate by check mark 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.
                                                                           ------


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

Large accelerated filer   X                 Accelerated filer                   Non-accelerated filer
                        ------                                ------                                  ------


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

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of February 28, 2006 was approximately $1,088,719,828 (based on an average market price of $44.66). 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, 2005, the registrant had outstanding 32,301,123 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, 2005 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 to be held on March 30, 2006, filed by the Registrant on March 3, 2006, are incorporated by reference into Part III of this report.

Page 2 of 54
                                                               CONTENTS


PART I

Item 1.      Business                                                                                    4
Item 1A.     Risk Factors                                                                               32
Item 1B.     Unresolved Staff Comments                                                                  36
Item 2.      Properties                                                                                 37
Item 3.      Legal Proceedings                                                                          38
Item 4.      Submission of Matters to a Vote of Security Holders                                        38

PART II

Item 5.      Market for the Registrant's Common Stock
              and Related Stockholder Matters                                                           38
Item 6.      Selected Financial Data                                                                    39
Item 7.      Management's Discussion and Analysis of Financial
              Condition and Results of Operations                                                       39
Item 7A.     Quantitative and Qualitative Disclosures About
              Market Risk                                                                               44
Item 8.      Financial Statements and Supplementary Data                                                44
Item 9.      Changes in and Disagreements with Accountants
               on Accounting and Financial Disclosure                                                   44
Item 9A.     Controls and Procedures                                                                    45

PART III

Item 10.     Directors and Executive Officers of the
               Registrant                                                                               46
Item 11.     Executive Compensation                                                                     48
Item 12.     Security Ownership of Certain Beneficial
                Owners and Management                                                                   48
Item 13.     Certain Relationships and Related Transactions                                             49
Item 14.     Principal Accountant Fees and Services                                                     49

PART IV

Item 15.     Exhibits and Financial Statement Schedules                                                 49
Page 3 of 54
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. In 2002, the Company qualified as a financial holding company giving it broader powers. At December 31, 2005, the Company operated 100 banking offices and more than 120 automated teller machines (ATMs) in the states of Mississippi, Louisiana and Florida through three wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank MS), Hancock Bank of Louisiana, Baton Rouge, Louisiana (Hancock Bank LA) and Hancock Bank of Florida, Tallahassee, Florida (Hancock Bank FL). Hancock Bank MS also operates a loan production office in the State of Alabama. Hancock Bank MS, Hancock Bank LA and Hancock Bank FL 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, 2005, the Company had total assets of $5.95 billion and employed on a full-time equivalent basis 1,203 persons in Mississippi, 495 persons in Louisiana and 37 persons in Florida.

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 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 following four counties: Harrison, Hancock, Jackson and Pearl River. In addition, Hancock Bank MS has a significant presence in the following counties: Lamar, Forrest and Jefferson Davis. With assets of $3.6 billion at December 31, 2005, Hancock Bank MS was ranked the third 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 $2.2 billion at December 31, 2005, Hancock Bank LA was ranked the fourth largest bank in Louisiana.

Page 4 of 54
Natural Disaster Affecting Hancock in 2005:

Hurricane Katrina made landfall along the coasts of Mississippi and Louisiana on August 29, 2005 and significantly impacted the operating region of the Company. Specifically, the storm caused widespread damage in the Company’s primary operating region in the Coastal Mississippi counties of Hancock, Harrison, Pearl River and Jackson. While Louisiana also suffered widespread damage from the storm, the Company’s base of operation in Louisiana is primarily in the Baton Rouge region, Central Louisiana, the communities on the North Shore of Lake Pontchartrain and Jefferson Parish (suburb of New Orleans). Due to the Company’s limited footprint in the more severely affected areas of Louisiana, damage to the Company’s facilities there was limited.

The Company implemented its disaster response plan as Hurricane Katrina approached the coast line. This plan consisted of alerting and readying key personnel to be transported to the Company’s disaster recovery site in Chicago, Illinois. Additional personnel were moved to Company-owned sites in Baton Rouge, Louisiana and Tallahassee, Florida. The Company continued to operate in a disaster recovery mode until such time it was safe and practical to resume full operations in the Gulfport, Mississippi area. As of December 31, 2005, essentially all disaster recovery operations have ceased and the Company had resumed full operations in the Gulfport, Mississippi area. See analysis of allowance for loan losses in Item 1, Item 2 and Item 7 for further discussion.

Recent Acquisition Activity:

On July 1, 2005, Hancock Insurance Agency acquired 100% of the stock of J Everett Eaves, Inc., a well-known commercial insurance agency operating in the New Orleans, Louisiana market. The transaction resulted in recording intangibles of approximately $4.7 million. Upon completion of an intangibles valuation to be performed by an independent third party, the intangibles will be reallocated among goodwill (its current classification), value of insurance expirations and non-compete agreements. The latter two categories are amortizable intangibles and will be assigned appropriate lives based on valuations.

An intangibles valuation relating to the intangibles recorded in the acquisition of Ross King Walker, Inc. in late 2004 was completed during 2005. The reallocation of intangibles resulted in the recording of three separate categories of intangible assets: value of insurance expirations, $1.1 million; non-compete agreements, $0.2 million and goodwill of $1.3 million. The value of insurance expirations and non-compete agreement assets are being amortized over 10 year and 5 year lives, respectively, on an accelerated basis.

During March 2004, the Company acquired the majority of loans, securities and deposits of the former Guaranty National Bank (GNB) of Tallahassee, Florida. The Office of the Comptroller of Currency (OCC) closed all locations of GNB on March 12, 2004. With the transaction, the Company acquired five locations with approximately $40.0 million in performing loans and approximately $69.0 million in deposits from the FDIC for a premium of $12.6 million, or 18% of acquired deposits. The Company acquired $77.4 million in assets, net of related deposit liabilities. In accounting for the transaction, management considered it to be an “acquisition of business” and, accordingly, accounted for it under the purchase method of accounting pursuant to Statement of Financial Accounting Standards (SFAS) No. 141. Final allocations of asset and liability fair values have been recorded based on an analysis performed by an independent third party, of deposit balances acquired in this transaction. In addition to adjustments to properly allocate asset fair values, an adjustment to reduce goodwill by approximately $1.1 million was recorded in association with the sale of a building acquired through a subsequent settlement activity related to this transaction.

Page 5 of 54
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 $500,000 or more is reviewed every 12 to 18 months by the respective Bank to identify any deficiencies and to take corrective actions as necessary. Periodically, selected loan relationships aggregating less than $500,000 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 regulatory auditor 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 considered, 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. 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 of collection.

Page 6 of 54

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 Bank’s 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, 2005, the book value of real estate held for resale was approximately $1.8 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 quality securities of investment grade quality and with a target duration, for the overall portfolio, generally between two to five years.

The Banks’ policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a Nationally Recognized Statistical Rating Agency, except for certain obligations of Mississippi, Louisiana or Florida counties, parishes and municipalities.

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 120 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 “STAR”, “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, 2005, the Trust Departments of the Banks had approximately $5.5 billion of assets under administration compared to $5.1 billion as of December 31, 2004. As of December 31, 2005, $3.3 billion of administered assets were corporate accounts and the remaining balances were personal, employee benefit, estate and other trust accounts.

Page 7 of 54
Operating Efficiency Strategy:

The primary focus of the Company’s operating strategy is to increase operating income and to reduce operating expense. A Company’s operating efficiency ratio indicates the percentage of each dollar of net revenue that is used to fund operating expenses Net revenue for a financial institution is the total of net interest income plus non-interest income, excluding securities transactions gains or losses. Operating expenses exclude the amortization of intangibles.

Other Activities:

Hancock Bank MS has 6 subsidiaries through which it engages in the following activities: providing consumer financing services; mortgage lending; owning, managing and maintaining certain real property; providing general insurance agency services; holding investment securities; 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 activity with Company objectives.

During 2001, the Company began servicing mortgage loans for the Federal National Mortgage Association. At that time the loans serviced were originated and closed by the Company’s mortgage subsidiary. The servicing activity was also performed by this same subsidiary. In the middle of 2003, however, the Company modified its strategy and reverted to selling the majority of its conforming loans with servicing released. In December 2004, the Company’s mortgage subsidiary merged with Hancock Bank MS, its parent. Currently all mortgage activity is being reported by Hancock Bank (MS), Hancock Bank of Louisiana, and Hancock Bank of Florida.

In July 2003, Hancock Bank MS opened a loan production office in Mobile, Alabama. Until September 2005, no deposits were accepted at this location. Subsequent to Hurricane Katrina the State of Alabama granted the Company an emergency temporary charter The Company is evaluating the possibility of requesting that the temporary charter be changed to permanent status.

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 net income.

Page 8 of 54
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.

Available Information

The Company maintains an internet website at www.hancockbank.com. The Company makes available free of charge on the website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with the Securities and Exchange Commission. The Company’s Annual Report to Stockholders is also available on the Company’s website. These reports are made available on the Company’s website as soon as reasonably practical after the reports are filed with the Commission. Information on the Company’s website is not incorporated into this Form 10-K or the Company’s other securities filings and is not part of them.

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). On January 26, 2002 the Company qualified as a financial holding company, giving it broader powers as discussed below. To date the Company has exercised its powers as a financial holding company to acquire a non-controlling interest in a third party service provider for insurance companies and, in December 2003 acquired Magna Insurance Company. The Company also is required to file certain reports with, and otherwise complies with the rules and regulations of, the Securities and Exchange Commission (the Commission) under federal securities laws.

Page 9 of 54
Federal Regulation:

The Bank Holding Company Act generally prohibits a corporation owning a bank from engaging in activities other than banking, managing or controlling banks or other permissible subsidiaries. Acquiring or obtaining control of more than 5% of the voting shares 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, (3) before it may merge with any other bank holding company, or (4) before it may engage in permissible non-banking activities. 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 bank holding company or bank acquisitions or mergers must be delayed for a period of not less than 15 nor more than 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.

On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 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 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 qualified bank holding companies, 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 activities, 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 do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

Page 10 of 54
         Generally, the Financial Services Modernization Act:

             •        Repeals  historical  restrictions  on, and eliminates  many federal and state law barriers to,  affiliations
             among banks, 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 requires that each bank subsidiary of a financial holding company be well capitalized and well managed as determined by the subsidiary bank’s principal regulator. To be considered well managed, the bank must have received at least a satisfactory composite rating and a satisfactory management rating at its last examination. To be well capitalized, the bank must have a leverage capital ratio of 5%, a Tier 1 Risk-based capital ratio of 6% and a total risk-based capital ratio of 10%. These ratios are discussed further below. In the event a financial holding company becomes aware that a subsidiary bank ceases to be well capitalized or well managed, it must notify the Federal Reserve and enter into an agreement to cure such condition. The consequences of a failure to cure such condition are that the Federal Reserve Board may order divestiture of the bank. Alternatively, a financial holding company may comply with such order by ceasing to engage in the financial holding company activities that are unrelated to banking or otherwise impermissible for a bank holding company.

Page 11 of 54

The Federal Reserve has adopted capital adequacy guidelines for use in its examination and regulation of bank holding companies and financial holding companies. The regulatory capital of a bank holding company or financial holding company under applicable federal capital adequacy guidelines is particularly important in the Federal Reserve’s evaluation of a holding company and any applications by the bank holding company to the Federal Reserve. If regulatory capital falls below minimum guideline levels, a financial holding company may lose its status as a financial holding company and 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, the adequacy of liquidity and 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, 2005 was 7.85% and 8.97% at December 31, 2004.

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, 2005, the Company’s off-balance sheet items aggregated $608.4 million; however, after the credit conversion these items represented $191.5 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-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, 2005, the Company’s Tier 1 and Total Capital ratios were 11.47% and 12.73%, respectively. At December 31, 2004, the Company’s Tier 1 and Total Capital ratios were 12.39% and 13.58%, respectively.

Page 12 of 54

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. 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.

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 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 any law, regulation, Federal Reserve order or directive or any condition imposed by, or written agreement with, the Federal Reserve.

In November 1985, the Federal Reserve adopted its Policy Statement on Cash Dividends Not Fully Covered by Earnings (the Policy Statement). The Policy Statement sets forth various guidelines that the Federal Reserve believes that a bank holding company should follow in establishing its dividend policy. In general, the Federal Reserve stated that bank holding companies should 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 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.

Page 13 of 54
Bank Regulation

The operations of the Banks are subject to state and federal statutes applicable to state banks and the regulations of the Federal Reserve and the FDIC, to the extent states 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. Hancock Bank FL is subject to regulation and periodic examinations by the FDIC and the Florida Department of Financial Services. 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 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 assessment averaged 3.46 cents per hundred dollars of insured deposits during 2005 and 3.30 (annualized) for the first quarter of 2006. Total assessments paid to the FDIC amounted to $516 thousand in 2005. For the year ended December 31, 2005, premiums on OAKAR deposits from the acquisitions of Peoples Federal Savings Association, Lamar Bank, two Dryades Savings Bank branches and Guaranty National Bank totaled $24 thousand.

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 recapitalize 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.

Page 14 of 54

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,” “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 has broad authority to prevent the development or continuance of unsafe or unsound banking practices. Pursuant to this authority, the FDIC has 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, Hancock Bank LA and Hancock Bank FL 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 $40.5 million, or, if the aggregate of such accounts exceeds $40.5 million, $1.215 million plus 10% of the total in excess of $40.5 million. This regulation is subject to an exemption from reserve requirements on a limited amount of an institution’s transaction accounts.

The Financial Services Modernization Act also permits national banks, and through state parity statutes, state banks, to engage in expanded activities through the formation of financial subsidiaries. A state bank may have a subsidiary engaged in any activity authorized for state 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 state 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 state 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.

Page 15 of 54

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 national 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.

In July 2002, Congress enacted the Sarbanes-Oxley Act of 2002, which addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. Section 404 of the Sarbanes-Oxley Act requires the Company to include in its Annual Report, a report stating management’s responsibility to establish and maintain adequate internal control over financial reporting and management’s conclusion on the effectiveness of the internal controls at year end. Additionally, the Company’s independent registered public accounting firm is required to attest to and report on management’s evaluation of internal control over financial reporting.

Summary:

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.

The Company’s management has exercised its powers as a financial holding company to acquire a non-controlling interest in a third party service company for the insurance industry and, in December 2003, acquired Magna Insurance Company. Management continues to examine its strategic business plan to determine whether, based on market conditions, the relative financial conditions of the Banks, regulatory capital requirements, general economic conditions, and other factors, the Company or Banks desire to further utilize any of their expanded powers provided in the Financial Services Modernization Act.

The Company does not believe that the Financial Services Modernization Act will have a material adverse effect on the Company’s operations in the near-term. However, to the extent that it permits holding companies, banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant to 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.

Page 16 of 54

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.

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 will 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 (also referred to as the net interest margin), which is the average of net interest earned, net interest income (te) less net interest expense, on the Company’s average earning assets. The difference between the average yield on earning assets and the effective rate paid for all deposits and borrowed funds, non-interest-bearing as well as interest-bearing, is the net interest spread. Since a portion of the Bank’s deposits does not bear interest, such as demand accounts, the rate paid for all funds is lower than the rate on interest-bearing liabilities alone. The net interest margin (te) for the years 2005 and 2004 was 4.40% and 4.44%, respectively.

Page 17 of 54

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 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 11 - Summary of Average Balance Sheets, Net Interest Income (te) & Interest Rates” included under the caption “Results of Operations” on pages 62 and 63 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

The following table is a summary of average balance sheets that reflects average taxable and non-taxable investment income.

Page 18 of 54
SUMMARY  OF  AVERAGE  BALANCE  SHEETS
NET  INTEREST  INCOME  (te)*  &  INTEREST  RATES
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                  2005                          2004                          2003
- -----------------------------------------------------------------------------------------------------------------------------------
                                            Average                       Average                      Average
                                            Balance   Interest   Rate     Balance    Interest   Rate   Balance     Interest   Rate
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
  Loans** (te)                            $2,883,020  $201,446   6.99%   $2,599,561  $172,868  6.65% $2,238,245   $161,850   7.23%
- -----------------------------------------------------------------------------------------------------------------------------------
  Investments:
     Taxable                               1,279,001    54,181   4.24%    1,178,810    48,921  4.15%  1,277,108     49,440   3.87%
     Tax-exempt *                            155,414    10,822   6.96%      166,540    11,874  7.13%    189,048     13,393   7.08%
- -----------------------------------------------------------------------------------------------------------------------------------
       Total investment in securities      1,434,415    65,003   4.53%    1,345,350    60,795  4.52%  1,466,156     62,833   4.29%
- -----------------------------------------------------------------------------------------------------------------------------------
  Federal funds sold and
    short-term investments                   129,629     4,479   3.46%       27,670       310  1.12%     51,850        597   1.15%
  Interest bearing deposits with
    other banks                                8,192        80   0.98%        7,241        74  1.02%      6,136         40   0.65%
- -----------------------------------------------------------------------------------------------------------------------------------
       Total earning assets (te)           4,455,256   271,008   6.08%    3,979,822   234,047  5.88%  3,762,387    225,320   5.99%
- -----------------------------------------------------------------------------------------------------------------------------------
NON-EARNING ASSETS
  Other assets                               525,881                        482,629                     384,953
  Allowance for loan losses                  (50,107)                       (38,117)                    (35,391)
- -----------------------------------------------------------------------------------------------------------------------------------
       Total assets                       $4,931,030                     $4,424,334                  $4,111,949
- -----------------------------------------------------------------------------------------------------------------------------------

LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
  Interest-bearing transaction deposits   $1,384,605     9,203   0.66%   $1,360,198     8,191  0.60% $1,303,441     10,461   0.80%
  Time deposits                            1,149,239    40,654   3.54%    1,018,165    35,056  3.44%    980,703     34,429   3.51%
  Public funds                               644,849    17,724   2.75%      574,266     9,323  1.62%    518,613      9,301   1.79%
- -----------------------------------------------------------------------------------------------------------------------------------
       Total interest-bearing deposits     3,178,693    67,581   2.13%    2,952,629    52,570  1.78%  2,802,757     54,191   1.93%
- -----------------------------------------------------------------------------------------------------------------------------------
  Customer repurchase agreements             224,842     4,351   1.94%      195,470     1,909  0.98%    177,535      1,446   0.81%
  Other interest-bearing liabilities          69,057     2,887   4.18%       69,960     2,791  3.99%     56,672      2,324   4.10%
- -----------------------------------------------------------------------------------------------------------------------------------
       Total interest-bearing liabilities  3,472,592    74,819   2.15%    3,218,059    57,270  1.78%  3,036,964     57,961   1.91%
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST BEARING LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
  Demand deposits                            822,733                        650,106                     604,448
  Other liabilities                          160,004                        106,545                      37,434
  Preferred stockholders' equity                   -                          2,240                      37,069
  Common stockholders' equity                475,701                        447,384                     396,034
- -----------------------------------------------------------------------------------------------------------------------------------
       Total liabilities, preferred stock &
        common stockholders' equity       $4,931,030                     $4,424,334                  $4,111,949
- -----------------------------------------------------------------------------------------------------------------------------------
       Net interest income and margin (te)            $196,189   4.40%              $176,777   4.44%               $167,359   4.45%
       Net earning assets and spread        $982,664             3.93%     $761,763            4.10%   $725,423               4.08%
- -----------------------------------------------------------------------------------------------------------------------------------
 *Tax-equivalent and tax-effected (te) amounts are calculated using a marginal federal tax income tax rate of 35%.
**Loan interest income includes loan fees of $9.2 million, $11.1 million and $9.5 million for each of the three years ended
  December 31, 2004. Non-accrual  loans in average balances and income on such loans, if recognized, is recorded on a cash basis.

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 12 - Summary of Changes in Net Interest Income (te)” under the caption “Results of Operations” on pages 62 through 64 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

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 risk 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.

Page 19 of 54

The interest sensitivity gap is the difference between total interest sensitive assets and liabilities that reprice within a given time period. At December 31, 2005, the Company’s cumulative repricing gap in the one year interval was 0% or relatively evenly gapped. The neutral position represents a balance between the Company’s floating rate loan portfolio, securities portfolio cash flows and the level of short-term deposits at year end. Management believes it is well positioned for the current rate environment.

The following tables set forth the scheduled re-pricing or maturity of the Company’s assets and liabilities at December 31, 2005 and December 31, 2004. 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 54
                                                     Analysis of Interest Sensitivity at December 31, 2005

                                                       Within       6 months         1 to 3        > 3     Non-Sensitive
                                       Overnight      6 months      to 1 year        years        years       Balance      Total
                                       -----------  -----------  ---------------- -----------  -----------  ----------  -----------
                                                                   (amounts in thousands)
Assets
     Securities                          $      -  $  321,224         $ 396,374    $  544,557   $  685,504   $  11,602   $1,959,261
     Federal funds sold & short-term
       investments                        402,968           -             7,258             -            -           -      410,226
     Loans                                 43,145   1,413,210           240,200       634,416      583,657           -    2,914,628
     Other assets                               -           -                 -             -            -     666,072      666,072
                                       ----------- -----------    --------------   -----------  -----------  ---------- ------------
               Total Assets              $446,113  $1,734,434          $643,832    $1,178,973   $1,269,161    $677,674   $5,950,187
                                       =========== ===========    ==============   ===========  ===========  ========== ============
Liabilities
     Interest bearing transaction
       deposits                         $       -  $  776,515         $ 309,737    $  923,166    $ 155,417    $      -   $2,164,835
     Time deposits                              -     410,815           495,558       452,356      141,318           -    1,500,047
     Non-interest bearing deposits              -     425,444           159,876       533,352      206,266           -    1,324,938
     Federal funds purchased                1,475           -                 -             -            -           -        1,475
     Borrowings                           250,807           9                 3            21       50,233           -      301,073
     Other liabilities                          -           -                 -             -            -     180,404      180,404
     Shareholders' Equity                       -           -                 -             -            -     477,415      477,415
                                       ----------- -----------    --------------   -----------  -----------  ---------- ------------
        Total Liabilities & Equity      $ 252,282  $1,612,783         $ 965,174    $1,908,895    $ 553,234    $657,819   $5,950,187
                                       =========== ===========    ==============   ===========  ===========  ========== ============
Interest sensitivity gap                $ 193,831  $  121,651         $(321,342)   $ (729,922)   $ 715,927    $ 19,855
Cumulative interest rate sensitivity
  gap                                   $ 193,831  $  315,482         $  (5,860)   $ (735,782)   $ (19,855)   $      -
Cumulative interest rate
     sensitivity gap as a percentage
     of total earning assets                 4.0%        6.0%             (0.1)%       (14.0)%       (0.4)%




                                                     Analysis of Interest Sensitivity at December 31, 2004

                                                       Within       6 months         1 to 3        > 3     Non-Sensitive
                                       Overnight      6 months      to 1 year        years        years       Balance      Total
                                       -----------  -----------  ---------------- -----------  -----------  ----------  -----------
                                                                   (amounts in thousands)
Assets
     Securities                         $       -  $  216,564         $ 130,944    $  371,665   $  583,196   $       -   $1,302,369
     Federal funds sold & short-term
       investments                        142,135           -             8,126             -            -           -      150,261
     Loans                                 39,370   1,327,083           214,990       583,394      543,041           -    2,707,878
     Other assets                               -           -                 -             -            -     504,218      504,218
                                       ----------- -----------    --------------   -----------  -----------  ---------- -----------
               Total Assets             $ 181,505  $1,543,647         $ 354,060    $  955,059   $1,126,237   $ 504,218   $4,664,726
                                       =========== ===========    ==============   ===========  ===========  ========== ===========
Liabilities
     Interest bearing transaction
       deposits                         $       -  $  867,682         $ 249,596    $  703,988   $   68,429   $       -   $1,889,695
     Time deposits                              -     418,642           116,162       436,094      239,999           -    1,210,897
     Non-interest bearing deposits              -           -                 -             -      697,353           -      697,353
     Federal funds purchased                  800           -                 -             -            -           -          800
     Borrowings                           200,036           3                 3            17       50,250           -      250,309
     Other liabilities                          -           -                 -             -            -     151,090      151,090
     Shareholders' Equity                       -           -                 -             -            -     464,582      464,582
                                       ----------- -----------    --------------   -----------  -----------  ---------- -----------
        Total Liabilities & Equity      $ 200,836  $1,286,327         $ 365,761    $1,140,099   $1,056,031   $ 615,672   $4,664,726
                                       =========== ===========    ==============   ===========  ===========  ========== ===========
Interest sensitivity gap                $ (19,331) $  257,320         $ (11,701)   $ (185,040)  $   70,206   $(111,454)
Cumulative interest rate sensitivity
  gap                                   $ (19,331) $  237,989         $ 226,288    $   41,248   $  111,454   $       -
Cumulative interest rate
     sensitivity gap as a percentage
     of total earning assets                 0.0%        6.0%              5.0%          1.0%         3.0%
Page 21 of 54
Income Taxes:

Income tax expense was $18.9 million in 2005, $26.6 million in 2004 and $24.6 million in 2003. Income tax expense decreased because of the lower level of pretax income in 2005. The effective income tax rate of the Company continues to be less than the statutory rate of 35%, due primarily to tax-exempt interest income. The effective tax rates for 2005, 2004 and 2003 were 26%, 30% and 31%, respectively. The 4% decrease in the Company’s effective tax rate was due to a variety of factors including an increase in tax exempt income as a percentage of pre-tax income to 17% in 2005 from 13% in 2004, Hurricane Katrina tax credits available in 2005 and relief of a tax contingency reserve for non-taxable income primarily related to bank owned life insurance. The Company expects its effective tax rate to be approximately 29% for the year 2006.

Performance and Equity Ratios:

Information regarding performance and equity ratios is as follows: 

                                                                        December 31,
                                                   --------------------------------------------------------------
                                                      2005         2004         2003         2002         2001
                                                   ----------   ----------   ----------   ----------   ----------
Return on average assets                               1.10%        1.39%        1.34%        1.32%        1.15%
Return on average common equity                       11.36%       13.79%       13.88%       13.13%       10.93%
Dividend payout ratio                                 43.11%       30.37%       25.88%       25.97%       31.78%
Average common equity to average
  assets ratio                                         9.65%       10.11%        9.63%       10.08%       10.51%

Additional performance ratios are contained in the “Financial Highlights” on pages 14 and 15 of the Company’s 2005 Annual Report to Stockholders incorporated herein by reference.

Securities Portfolio:

The Company’s general investment objective is to purchase securities that provide stable cash flows for liquidity purposes while limiting the amount of prepayment risk. Securities have been classified into one of two categories: held to maturity or available for sale.

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 after considering the Company’s liquidity requirements and the portfolio’s exposure to changes in market interest rates, portfolio prepayment activity and balance sheet strategy. The fair value of the available-for-sale portfolio balance was approximately $2.0 billion at December 31, 2005.

Page 22 of 54

The amortized costs of securities classified as available-for-sale at December 31, 2005, 2004 and 2003, were as follows (in thousands): 

                                                       December 31,
                                 ----------------------------------------------------
                                       2005              2004               2003
                                 ---------------   ----------------   ---------------
U.S. Treasury                       $    50,883        $     9,985       $     9,966
U.S. government agencies              1,029,656            413,419           346,836
Municipal obligations                   165,180             60,956            70,070
Mortgage-backed securities              484,131            352,510           348,266
CMOs                                    194,899            263,471           321,324
Other debt securities                    48,476              7,056             7,219
Equity securities                         7,520             11,225            11,723
                                 ---------------   ----------------   ---------------
                                    $ 1,980,745        $ 1,118,622       $ 1,115,404
                                 ===============   ================   ===============

The amortized cost, yield and fair value of debt securities classified as available-for-sale at December 31, 2005, 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                     $  49,563     $     497     $     823     $      -     $    50,883     $    50,870        4.34%
U.S. government agencies            568,433       323,876       136,193        1,154       1,029,656       1,019,260        4.41%
Municipal obligations                31,763       101,936        29,713        1,768         165,180         168,207        4.44%
Other debt securities                   148         9,240        26,481       12,607          48,476          47,211        5.74%
                              --------------  ------------  ------------ ------------  -------------   --------------
                                  $ 649,907     $ 435,549     $ 193,210     $ 15,529     $ 1,294,195     $ 1,285,548        4.46%
                              ==============  ============  ============ ============  ==============  ==============

Fair Value                        $ 648,929     $ 432,026     $ 189,475     $ 15,118     $ 1,285,548
                              ==============  ============  ============ ============  ==============

Weighted Average Yield                4.63%         4.11%         4.62%        5.60%           4.46%

Mortgage-backed securities & CMOs                                                         $  679,030     $   665,616        4.76%
                                                                                       ==============  ==============

During 2005, securities classified as held to maturity in the portfolio of one of the Company’s subsidiaries were sold. A determination was made that this action tainted the investment portfolio of the entire Company. As a result of this action and determination, all securities held by the Company have been classified to available for sale and the carrying value of those securities are adjusted to market as prescribed in Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities.

The amortized cost of securities classified as held-to-maturity at December 31, 2004 and 2003 were as follows (in thousands): 

                                                  December 31,
                                       -----------------------------------
                                            2004               2003
                                       ----------------   ----------------
U.S. Treasury                                $   1,057          $     574
U.S. government agencies                        13,160             14,737
Municipal obligations                          103,914            117,484
Mortgage-backed securities                      23,058             18,727
CMOs                                               602              1,403
Other debt securities                           46,110              7,058
                                       ----------------   ----------------
                                             $ 187,901          $ 159,983
                                       ================   ================
Page 23 of 54
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 reduces the impact of credit risk to the Company. Loans are underwritten on the basis of cash flow capacity and collateral fair 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 anticipated 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,
                                        -------------------------------------------------------------------------------------
                                                 2005             2004            2003              2002             2001
                                        ------------------ --------------- ----------------  --------------- ----------------
                                                                           (in thousands)

Real estate:
   Residential mortgages 1-4 family           $   703,769     $   713,266      $   645,123      $   539,808      $   458,372
   Residential mortgages multifamily               40,678          25,544           22,803           20,305           21,875
   Home equity lines/loans                        133,823         134,405          110,634           86,609           56,887
   Construction and development                   391,194         296,114          235,049          197,166          184,750
   Nonresidential                                 609,647         595,013          536,389          445,733          398,704
Commercial, industrial and other                  546,635         437,670          395,678          346,808          308,306
Consumer                                          512,549         496,926          463,642          434,407          435,205
Lease financing and depository
  Institutions                                     48,007          44,357           34,388           29,565           23,632
Credit cards and other revolving credit            14,316          16,970           15,437           14,085           12,333
                                        ------------------ --------------- ----------------  --------------- ----------------
                                                3,000,618       2,760,265        2,459,143        2,114,486        1,900,064
  Less, unearned income                            11,432          11,705           10,499            9,504           10,025
                                        ------------------ --------------- ----------------  --------------- ----------------
  Net loans                                   $ 2,989,186     $ 2,748,560      $ 2,448,644      $ 2,104,982      $ 1,890,039
                                        ================== =============== ================  =============== ================

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, 2005                              December 31, 2004
                            ----------------------------------------------------- -------------------------------------------------
                                                  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                         $ 258,333   $   247,378  $  40,924   $   546,635   $ 196,348  $   209,179  $  32,143    $   437,670
Real estate - construction        252,395       120,933     17,866       391,194     168,631      114,805     12,678        296,114
All other loans                   218,950     1,170,336    673,502     2,062,789     211,409    1,114,048    701,024      2,026,481
                            -------------- ------------- ----------  ------------ ----------- ------------ ---------- -------------

Total loans                     $ 729,679   $ 1,538,647  $ 732,292   $ 3,000,618   $ 576,388  $ 1,438,032  $ 745,845    $ 2,760,265
                            ============== ============= ==========  ============ =========== ============ ========== =============
Page 24 of 54

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,
                                                                    ----------------------------------------
                                                                           2005                 2004
                                                                    -------------------   ------------------
                                                                                 (in thousands)
Commercial, industrial, and real estate construction
  maturing after one year:
    Fixed rate                                                             $   332,032          $   233,589
    Floating rate                                                              126,213              135,216
Other loans maturing after one year:
    Fixed rate                                                               1,320,456            1,258,394
    Floating rate                                                              492,238              556,678
                                                                    -------------------   ------------------

Total                                                                      $ 2,270,939          $ 2,183,877
                                                                    ===================   ==================
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,
                                                   ---------------------------------------------------------------------------
                                                       2005            2004           2003            2002           2001
                                                   -------------   -------------  -------------   -------------  -------------
                                                                            (Amounts in thousands)
Nonaccrual loans:
  Real estate                                          $  9,433        $  6,945       $ 10,031        $ 10,521       $ 14,358
  Commercial, industrial and other                        1,185             535          2,088           1,276          2,877
  Consumer, credit card and other
     revolving credit                                         -               -             42              73             93
                                                   -------------   -------------  -------------   -------------  -------------
Total nonperforming loans                                10,617           7,480         12,161          11,870         17,328
Acquired other real estate                                    -               -              -               -          1,330
Foreclosed assets                                         1,898           3,513          5,809           5,936          1,673
                                                   -------------   -------------  -------------   -------------  -------------
Total nonperforming assets                             $ 12,515        $ 10,993       $ 17,970        $ 17,806       $ 20,331
                                                   =============   =============  =============   =============  =============

Loans 90+ days past due and still accruing             $ 25,622        $  5,160       $  3,682        $  6,407       $ 12,591
                                                   =============   =============  =============   =============  =============
Ratios (%):
  Nonperforming loans to net loans                        0.36%           0.27%          0.50%           0.56%          0.92%
  Nonperforming assets to net loans and
    foreclosed assets                                     0.42%           0.40%          0.73%           0.84%          1.07%
  Nonperforming loans to average net loans                0.37%           0.29%          0.54%           0.61%          0.97%
  Allowance for loan losses to nonperforming
   loans                                                   702%            544%           302%            293%           199%

The amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as “nonaccrual” was $747,000, $574,000, $762,000, $662,000 and $735,000 for the years ended December 31, 2005, 2004, 2003, 2002 and 2001, 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.

Page 25 of 54
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, 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, and the estimated value of any underlying collateral and current economic conditions. All commercial loans in lending relationships with an aggregate balance of $500,000 or more are risk rated and evaluated on an individual basis, as 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 loan 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, indicative of the Banks’ inherent loss, 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 loan 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 uncertainties in the process of estimating inherent losses.

During 2005, the Company’s management was presented with the challenge of developing estimates for the impact of Hurricane Katrina on the Company’s credit quality. The Company’s Chief Credit Policy Officer undertook a detailed process to review the impact of the storm on its credit customers and to develop a process to estimate the Company’s credit losses. In establishing the special allowance for the loss exposure created by Hurricane Katrina, commercial and direct installment loans were segmented by division and loss factors applied based on the estimated percentage of loans affected by the storm. The result of the aforementioned credit review process was that, on September 30, 2005, the Company established a $35.2 million specific allowance for estimated credit losses related to the impact of Hurricane Katrina on its loan portfolio. The Company is continuously reviewing the adequacy of the special storm-related allowance and views the current level to be adequate and, as such, expects no material deviations once all storm-related net charge-offs are known. Net charge-offs amounted to $8.8 million in 2005, as compared to $12.6 million in 2004. The $3.8 million decrease in net charge-offs from 2004 was related to decreases in each net charge-off category. The Company recorded storm-related net charge-offs of $2.4 million that were charged directly against the storm-related allowance of $35.2 million. As a result, the storm-related allowance was reduced by $2.4 million and as of December 31, 2005 stands at $32.9 million. Overall, the allowance for loan losses was 196% of non-performing loans and accruing loans 90 days past due at year-end 2005, compared to 252% at year-end 2004. 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, 2005 is adequate.

Page 26 of 54

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,
                                                   --------------------------------------------------------------------------------
                                                        2005            2004            2003             2002            2001
                                                   --------------- ---------------  --------------  --------------- ---------------
                                                                                    (in thousands)

Net loans outstanding at end of period                 $2,989,186      $2,748,560      $2,448,644       $2,104,982      $1,890,039
                                                   =============== ===============  ==============  =============== ===============

Average net loans outstanding                          $2,883,020      $2,599,561      $2,238,245       $1,961,299      $1,792,559
                                                   =============== ===============  ==============  =============== ===============

Balance of allowance for loan losses
  at beginning of period                               $   40,682      $   36,750      $   34,740       $   34,417      $   28,604
                                                   --------------- ---------------  --------------  --------------- ---------------
Loans charged-off:
  Real estate                                                 226             403             291              109              45
  Commercial                                                4,001           5,381           4,868            9,143           6,386
  Consumer, credit cards and other
    revolving credit                                       11,537          14,383          14,311           14,291           9,853
  Lease financing                                              47             261              73               10              14
                                                   --------------- ---------------  --------------  --------------- ---------------
  Total charge-offs                                        15,811          20,428          19,543           23,553          16,298
                                                   --------------- ---------------  --------------  --------------- ---------------
Recoveries of loans previously
  charged-off:
  Real estate                                                  33             179             180                7               2
  Commercial                                                2,757           1,957           1,112              639             319
  Consumer, credit cards and other
    revolving credit                                        4,258           5,687           5,103            5,135           4,365
  Lease financing                                               4               -               4                -               1
                                                   --------------- ---------------  --------------  --------------- ---------------
  Total recoveries                                          7,052           7,823           6,399            5,781           4,687
                                                   --------------- ---------------  --------------  --------------- ---------------
  Net charge-offs                                           8,759          12,605          13,144           17,772          11,611
  Provision for loan losses                                42,635          16,537          15,154           18,495           9,082
  Balance acquired through acquisition & other                  -               -               -             (400)          8,342
                                                   --------------- ---------------  --------------  --------------- ---------------
  Balance of allowance for loan losses
    at end of period                                   $   74,558      $   40,682      $   36,750       $   34,740      $   34,417
                                                   =============== ===============  ==============  =============== ===============

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,
                                                        ----------------------------------------------------------------------
                                                           2005           2004          2003           2002           2001
                                                        ------------   -----------   ------------   ------------   -----------
Ratios:
  Net charge-offs to average net loans                        0.30%         0.48%          0.59%          0.91%         0.65%
  Net charge-offs to period-end net loans                     0.29%         0.46%          0.54%          0.84%         0.61%
  Allowance for loan losses to average net loans              2.59%         1.56%          1.64%          1.77%         1.92%
  Allowance for loan losses to period-end net loans           2.49%         1.48%          1.50%          1.65%         1.82%
  Net charge-offs to loan loss allowance                     11.75%        30.98%         35.77%         51.16%        33.74%
  Loan loss provision to net charge-offs                    486.75%       131.19%        115.29%        104.07%        78.22%
Page 27 of 54

An allocation of the loan loss allowance by major loan category is set forth in the following table. There were no relevant variations in loan concentrations, quality or terms, except for an increase in the outstanding loan portfolio balance and a decrease in the unallocated amount. The unallocated portion of the allowance is necessary given the estimates which are inherently a part of this process and is available to address inherent loss which has been previously identified. The allocation is not necessarily indicative of the category of future losses, and the full allowance at December 31, 2005 is available to absorb losses occurring in any category of loans. 

                                                                   December 31,
                          ---------------------------------------------------------------------------------------------
                                    2005               2004               2003               2002               2001
                          ----------------- ------------------ ------------------ ------------------ ------------------
                          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               $23,042    62.86   $11,253    64.19   $ 9,711    63.30   $ 7,664    61.26   $ 6,701    59.29
Commercial, industrial
  and other                34,128    19.74    14,974    17.37    15,311    17.41    11,610    17.72    14,380    17.56
Consumer and other
   revolving credit        15,812    17.40    11,453    18.44    10,718    19.29    10,174    21.02     9,848    23.15
Unallocated                 1,576        -     3,002        -     1,010        -     5,292        -     3,488        -
                          --------  ------- --------- -------- --------- -------- --------- -------- --------- --------

                          $74,558   100.00   $40,682   100.00   $36,750   100.00   $34,740   100.00   $34,417   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: 

                                                2005                              2004                             2003
                               ---------------------------------  -------------------------------  --------------------------------
                                               Percent                           Percent                          Percent
                                 Average         of       Rate      Average        of       Rate     Average        of        Rate
                                 Balance      Deposits     (%)      Balance     Deposits    (%)      Balance      Deposits     (%)
                               -------------  ---------- -------  ------------  --------- -------  ------------- ----------  ------
                                                                   (amounts in thousands)

Non-interest bearing accounts   $   822,733     20.56       -    $   650,106       18.04       -    $   604,448      17.74        -
NOW accounts                        893,521     22.33    1.55        798,286       22.16    1.01        694,681      20.39     1.14
Money market and other
    savings accounts                966,636     24.16    0.83      1,007,366       27.96    0.75        984,667      28.90     0.99
Time deposits                     1,318,536     32.95    3.47      1,146,976       31.84    3.23      1,123,409      32.97     3.25
                               -------------  --------          -------------  ----------          ------------- ----------

                                $ 4,001,426    100.00            $ 3,602,734      100.00            $ 3,407,205     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.

Page 28 of 54

Time certificates of deposit of $100,000 and greater at December 31, 2005 had maturities as follows: 

                                                  December 31, 2005
                                                  -----------------
                                                   (in thousands)

Three months or less                                    $ 150,900
Over three through six months                              75,311
Over six months through one year                          195,381
Over one year                                             212,033
                                                   ---------------
Total                                                   $ 633,625
                                                   ===============
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,
                                                            ---------------------------------------------
                                                                2005            2004            2003
                                                            -------------   -------------   -------------
                                                                       (amounts in thousands)
Federal funds purchased and FHLB advances:
  Amount outstanding at period-end                                $1,475            $800              $0
  Weighted average interest at period-end                          3.95%           2.15%           0.00%
  Maximum amount at any month-end during period                  $55,120         $41,852         $37,000
  Average amount outstanding during period                       $10,262         $14,181          $5,335
  Weighted average interest rate during period                     3.27%           1.64%           1.19%

Securities sold under agreements to repurchase:
  Amount outstanding at period-end                              $250,807        $195,478        $150,096
  Weighted average interest at period-end                          4.29%           1.13%           0.80%
  Maximum amount at any month end during-period                 $258,508        $243,101        $105,641
  Average amount outstanding during period                      $224,842        $195,470        $177,535
  Weighted average interest rate during period                     1.94%           0.98%           0.81%
Liquidity:

Liquidity management encompasses the Company’s ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that the Company has adequate cash flow to meet it’s various needs, including operating, strategic and capital. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would not be able to meet the needs of the communities in which it has a presence and serves. In addition, the parent holding company’s principal source of liquidity is dividends from its subsidiary banks. Liquidity is required at the parent holding company level for the purpose of paying dividends to stockholders, servicing of any debt the Company may have, business combinations as well as general corporate expenses.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and maturing interest-bearing deposits with other banks are additional sources of liquidity funding. As of December 31, 2005 and 2004, free securities stood at 41.8% or $819.0 million and 28.0% or $362.8 million, respectively.

Page 29 of 54

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts. Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and represent the Company’s incremental borrowing capacity. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs. The Company’s short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $323 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $100 million. As of December 31, 2005 and 2004, the Company’s core deposits were $4.304 billion and $3.050 billion, respectively, and Net Wholesale Funding stood at $514.0 million and $480.1 million, respectively.

The Consolidated Statements of Cash Flows, (included on page 24 and 25 of the Company’s 2005 Annual Report to Stockholders, which is incorporated herein by reference), provide an analysis of cash from operating, investing, and financing activities for each of the three years in the period ended December 31, 2005. Cash flows from operations are a significant part of liquidity management, contributing significant levels of funds in 2005, 2004 and 2003.

Cash flows from operations decreased to $70.5 million in 2005 from $153.2 million in 2004 primarily due to activity related to Magna Insurance Company and lower net earnings (as a direct result of Hurricane Katrina). Net cash used by investing activities increased to $1,171.8 million in 2005 from $511.8 million in 2004 due to securities transactions, the increase in federal funds sold and sales/purchase of branches. In 2005, securities transaction activity resulted in a net use of funds, while in 2004 proceeds from the sales and maturities of securities were greater than purchases of securities. Federal funds sold increased to $260.8 million during 2005 and increased $136.4 million during 2004. The Company paid approximately $3.9 million in connection with the acquisition of a business combination in 2005 and paid approximately $29.4 million in connection with sale/purchase transactions in 2004. Cash flows from financing activities increased to $1,216.6 million in 2005 from $336.4 million in 2004 primarily due to deposit growth.

Cash flows from operations increased to $153.3 million in 2004 from $86.8 million in 2003. Net cash used by investing activities increased to $511.8 million in 2004 from $172.8 million in 2003 due to securities transactions. In 2004, securities transaction activity resulted in a net use of funds, while in 2003 proceeds from the sales and maturities of securities exceeded purchases of securities. During 2003, the Company experienced increased loan growth, which resulted in an increase in cash used by investing activities when comparing 2004 to 2003. Cash flows from financing activities increased to $336.4 million in 2004 from $76.3 million in 2003 primarily due to a net increase in deposits.

More information on liquidity can be found under the caption “Liquidity” - Table 6. Liquidity Ratios on pages 57 and 58 of the Company’s 2005 Annual Report to Stockholders, which is incorporated herein by reference.

Page 30 of 54
Capital Resources:

The information under the caption “Notes to Consolidated Financial Statements”, Note 12 - Common Stockholders’ Equity on pages 38 and 39 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

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 do not relate to historical facts and are 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 this 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.

Page 31 of 54
ITEM 1A - RISK FACTORS

Making or continuing an investment in securities issued by the Company, including the Company's common stock, involves certain risks that you should carefully consider. The risks and uncertainties described below are not the only risks that may have a material adverse effect on the Company. Additional risks and uncertainties also could adversely affect the Company’s business and results of operations. If any of the following risks actually occur, the Company’s business, financial condition or results of operations could be negatively affected, the market price for your securities could decline, and you could lose all or a part of your investment. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause the Company’s actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company.

The Company may be vulnerable to certain sectors of the economy.

A portion of the Company’s loan portfolio is secured by real estate. If the economy deteriorated and depressed real estate values beyond a certain point, that collateral value of the portfolio and the revenue stream from those loans could come under stress and possibly require additional provision to the allowance for loan losses. The Company’s ability to dispose of foreclosed real estate at prices above the respective carrying values could also be impinged, causing additional losses.

General economic conditions in the areas where the Company's operations or loans are concentrated may adversely affect our customers' ability to meet their obligations.

A sudden or severe downturn in the economy in the geographic markets served by the Company in the states of Mississippi, Louisiana, Alabama, and Florida may affect the ability of the Company’s customers to meet loan payment obligations on a timely basis. The local economic conditions in these areas have a significant impact on the Company’s commercial, real estate, and construction loans, the ability of borrowers to repay these loans and the value of the collateral securing such loans. Changes resulting in adverse economic conditions of the Company’s market areas could negatively impact the financial results of the Company’s banking operations and its profitability. Additionally, adverse economic changes may cause customers to withdraw deposit balances, thereby causing a strain on the Company’s liquidity.

The Company is subject to a risk of rapid and significant changes in market interest rates.

The Company’s assets and liabilities are primarily monetary in nature, and as a result the Company is subject to significant risks tied to changes in interest rates. The Company’s ability to operate profitably is largely dependent upon net interest income. Unexpected movement in interest rates markedly changing the slope of the current yield curve could cause the Company’s net interest margins to decrease, subsequently decreasing net interest income. In addition, such changes could adversely affect the valuation of the Company’s assets and liabilities.

At present the Company’s one-year interest rate sensitivity position is effectively neutral, such that a gradual increase in interest rates during the next twelve months should not have a significant impact on net interest income during that period. However, as with most financial institutions, the Company’s results of operations are affected by changes in interest rates and the Company’s ability to manage this risk. The difference between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities may be affected by changes in market interest rates, changes in relationships between interest rate indices, and/or changes in the relationships between long-term and short-term market interest rates. A change in this difference might result in an increase in interest expense relative to interest income, or a decrease in the Company’s interest rate spread. More detailed discussion of this risk may be found under the caption “Interest Rate Sensitivity” at “Item 1. Business” above.

Page 32 of 54
Certain changes in interest rates, inflation, or the financial markets could affect demand for the Company’s products and the Company’s ability to deliver products efficiently.

Loan originations, and potentially loan revenues, could be adversely impacted by sharply rising interest rates. Conversely, sharply falling rates could increase prepayments within the Company’s securities portfolio lowering interest earnings from those investments. An underperforming stock market could reduce brokerage transactions, therefore reducing investment brokerage revenues; in addition, wealth management fees associated with managed securities portfolios could also be adversely affected. An unanticipated increase in inflation could cause the Company’s operating costs related to salaries & benefits, technology, & supplies to increase at a faster pace than revenues.

The fair market value of the Company’s securities portfolio and the investment income from these securities also fluctuate depending on general economic and market conditions. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.

Changes in the policies of monetary authorities and other government action could adversely affect the Company's profitability.

The results of operations of the Company are affected by credit policies of monetary authorities, particularly the Federal Reserve Board. The instruments of monetary policy employed by the Federal Reserve Board include open market operations in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks and the current military operations in the Middle East, we cannot predict possible future changes in interest rates, deposit levels, loan demand or the Company’s business and earnings. Furthermore, the actions of the United States government and other governments in responding to such terrorist attacks or the military operations in the Middle East may result in currency fluctuations, exchange controls, market disruption and other adverse effects.

Natural disasters could affect the Company's ability to operate

The Company’s market areas are susceptible to hurricanes. Natural disasters, such as hurricanes, can disrupt the Company’s operations, result in damage to properties and negatively affect the local economies in which the Company operates.

On August 29, 2005, the Company realized such a risk when Hurricane Katrina made landfall along the coasts of Mississippi and Louisiana and significantly impacted the operating region of the Company. The pretax negative impact of the storm on 2005 earnings was $32.4 million. The $32.4 million net pretax negative impact included the following items: $35.2 million (pretax) to establish a storm-related provision for credit losses, a $7.6 million charge (pretax) related to direct expenses incurred, and approximately $3.8 million (pretax) of fees and service charges that were waived to assist affected individuals and businesses. Also included in the $32.4 million impact was a pretax gain of $14.1 million on net property and casualty insurance proceeds, which had either been received or where their receipt was considered substantially assured.

Page 33 of 54

The Company cannot predict whether or to what extent damage caused by future hurricanes will affect the Company’s operations or the economies in the Company’s market areas, but such weather events could cause a decline in loan originations, a decline in the value or destruction of properties securing the loans and an increase in the risk of delinquencies, foreclosures or loan losses.

Greater loan losses than expected may adversely affect the Company's earnings.

The Company as lender is exposed to the risk that its customers will be unable to repay their loans in accordance with their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. Credit losses are inherent in the business of making loans and could have a material adverse effect on the Company’s operating results. The Company’s credit risk with respect to its real estate and construction loan portfolio will relate principally to the creditworthiness of corporations and the value of the real estate serving as security for the repayment of loans. The Company’s credit risk with respect to its commercial and consumer loan portfolio will relate principally to the general creditworthiness of businesses and individuals within the Company’s local markets.

The Company makes various assumptions and judgments about the collectibility of its loan portfolio and provide an allowance for estimated loan losses based on a number of factors. The Company believes that its current allowance for loan losses is adequate. However, if the Company’s assumptions or judgments prove to be incorrect, the allowance for loan losses may not be sufficient to cover actual loan losses. The Company may have to increase its allowance in the future in response to the request of one of its primary banking regulators, to adjust for changing conditions and assumptions, or as a result of any deterioration in the quality of the Company’s loan portfolio. The actual amount of future provisions for loan losses cannot be determined at this time and may vary from the amounts of past provisions.

The projected benefit obligations of the Company's pension plan exceed the fair market value of its assets

Investments in the portfolio of the Company’s pension plan may not provide adequate returns to fully fund benefits as they come due, thus causing higher annual plan expenses and requiring additional contributions by the Company.

The Company may need to rely on the financial markets to provide needed capital

The Company’s stock is listed and traded on the NASDAQ National Market System. Although the Company anticipates that its capital resources will be adequate for the foreseeable future to meet its capital requirements, at times the Company may depend on the liquidity of the NASDAQ market to raise equity capital. If the market should fail to operate, or if conditions in the capital markets are adverse, the Company may be constrained in raising capital. The Company maintains a consistent analyst following; therefore, downgrades in the Company’s prospects by an analyst(s) may cause the Company’s stock price to fall and significantly limit the Company’s ability to access the markets for additional capital requirements. Should these risks materialize, the Company’s ability to further expand its operations through internal growth may be limited.

Page 34 of 54
The Company is subject to regulation by various Federal and State entities

The Company is subject to the regulations of the Securities and Exchange Commission (“SEC”), the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Mississippi Department of Banking and Consumer Finance, the Louisiana Office of Financial Institutions , the Florida Office of Financial Regulation, the Alabama Banking Department and the Mississippi Department of Insurance. New regulations issued by these agencies may adversely affect the Company’s ability to carry on its business activities. The Company is subject to various Federal and State laws and certain changes in these laws and regulations may adversely affect the Company’s operations. Noncompliance with certain of these regulations may impact the Company's business plans, including ability to branch, offer certain products, or execute existing or planned business strategies.

The Company is also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board. Changes in accounting rules could adversely affect the reported financial statements or results of operations of the Company and may also require extraordinary efforts or additional costs to implement.

Any of these laws or regulations may be modified or changed from time to time, and the Company cannot be assured that such modifications or changes will not adversely affect the Company. The Company’s regulatory status is discussed in more detail under “Item 1. Business. Supervision and Regulation” above.

The Company engages in acquisitions of other businesses from time to time.

On occasion, the Company will engage in acquisitions of other businesses. Inability to successfully integrate acquired businesses can pose varied risks to the Company, including customer and employee turnover, thus increasing the cost of operating the new businesses. The acquired companies may also have legal contingencies, beyond those that the Company is aware of, that could result in unexpected costs. Moreover, there can be no assurance that acquired businesses will achieve prior or planned results of operations.

The Company is subject to industry competition which may have an impact upon its success.

The profitability of the Company depends on its ability to compete successfully. The Company operates in a highly competitive financial services environment. Certain competitors are larger and may have more resources than the Company does. The Company faces competition in its regional market areas from other commercial banks, savings and loan associations, credit unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries that offer similar services. Some of the Company’s nonbank competitors are not subject to the same extensive regulations that govern the Company or the Bank and may have greater flexibility in competing for business.

Another competitive factor is that the financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. The Company’s future success may depend, in part, on its ability to use technology competitively to provide products and services that provide convenience to customers and create additional efficiencies in the Company’s operations.

Page 35 of 54
Future issuances of additional securities could result in dilution of shareholders' ownership.

The Company may determine from time to time to issue additional securities to raise additional capital, support growth, or to make acquisitions. Further, the Company may issue stock options or other stock grants to retain and motivate the Company’s employees. Such issuances of Company securities will dilute the ownership interests of the Company’s shareholders.

Anti-takeover laws and certain agreements and charter provisions may adversely affect share value.

Certain provisions of state and federal law and the Company’s articles of incorporation may make it more difficult for someone to acquire control of the Company. Under federal law, subject to certain exemptions, a person, entity, or group must notify the federal banking agencies before acquiring 10% or more of the outstanding voting stock of a bank holding company, including the Company’s shares. Banking agencies review the acquisition to determine if it will result in a change of control. The banking agencies have 60 days to act on the notice, and take into account several factors, including the resources of the acquirer and the antitrust effects of the acquisition. There also are Mississippi statutory provisions and provisions in the Company’s articles of incorporation that may be used to delay or block a takeover attempt. As a result, these statutory provisions and provisions in the Company’s articles of incorporation could result in the Company being less attractive to a potential acquirer.

Securities issued by the Company, including the Company's common stock, are not FDIC insured.

Securities issued by the Company, including the Company’s common stock, are not savings or deposit accounts or other obligations of any bank and are not insured by the FDIC, the Bank Insurance Fund, or any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of principal.

ITEM 1B - UNRESOLVED STAFF COMMENTS

None.

Page 36 of 54
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.

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

Albany, LA                         (1)                 Mandeville, LA                (1)
Alexandria, LA                     (2)                 Metairie, LA                  (2)
Baker, LA                          (1)                 Moss Point, MS                (1)
Baton Rouge, LA                   (13)                 Ocean Springs, MS             (2)
Bay St. Louis, MS                  (2)                 Opelousas, LA                 (1)
Biloxi, MS                         (4)                 Pascagoula, MS                (2)
Bogalusa, LA                       (1)                 Pass Christian, MS            (1)
Covington, LA                      (1)                 Petal, MS                     (1)
Denham Springs, LA                 (3)                 Picayune, MS                  (1)
D'Iberville, MS                    (1)                 Pineville, LA                 (1)
Escatawpa, MS                      (1)                 Poplarville, MS               (1)
Eunice, LA                         (1)                 Prentiss, MS                  (1)
Franklinton, LA                    (1)                 Purvis, MS                    (2)
Gautier, MS                        (1)                 St. Francisville, LA          (1)
Gonzales, LA                       (1)                 Sumrall, MS                   (1)
Gulfport, MS                       (5)                 Tallahassee, FL               (4)
Hammond, LA                        (3)                 Vancleave, MS                 (1)
Hattiesburg, MS                    (3)                 Ville Platte, LA              (1)
Independence, LA                   (1)                 Walker, LA                    (1)
Long Beach, MS                     (1)                 Waveland, MS                  (1)
Loranger, LA                       (1)                 Zachary, LA                   (1)
Lyman, MS                          (1)

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

Baton Rouge, LA              (4)       Pascagoula, MS           (2)
Bay St. Louis, MS            (3)       Picayune, MS             (2)
Diamondhead, MS              (1)       Ponchatoula, LA          (1)
Gulfport, MS                 (5)       Saucier, MS              (1)
Kiln, MS                     (1)       Slidell, LA              (1)
Kenner, LA                   (1)       Springfield, LA          (1)
Long Beach, MS               (1)       Tallahassee, FL          (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.

Hurricane Katrina inflicted significant damage to many of the Company’s facilities. Of the Company’s 104 branch facilities, 40 sustained at least some damage. There were 9 branches that sustained damage between 50 and 90 percent, while an additional 7 branches were essentially 100% damaged. In addition, the Company’s main headquarters building in Gulfport, Mississippi sustained significant damage and will be uninhabitable until repairs are complete in late summer 2006. Management has identified specific fixed asset impairment costs due to the storm totaling $8.8 million through December 31, 2005.

Page 37 of 54

The Company is very well insured against property and casualty and other related losses associated with natural disasters, such as hurricanes. Through property and casualty, flood, business interruption and other forms of insurance, the Company filed insurance claims with its various providers totaling $44.0 million. Based on management’s best estimate of claims for which collection was received or substantially assured, a receivable related to insurance proceeds of $23.5 million was booked on September 30, 2005. Additional insurance proceeds are considered contingent upon reaching further agreement on claims and may be recognized as gains upon their receipt.

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, 2005.

PART II

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

Stock Split:

On February 26, 2004, the Company’s Board of Directors declared a two-for-one stock split in the form of 100% common stock dividend. The additional shares were payable March 18, 2004 to stockholders of record at the close of business on March 8, 2004.

All balances and information concerning earnings per share, dividends per share, and number of shares outstanding have been adjusted to give effect to this split.

The information under the caption “Market Information” on page 16 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

The information under the caption “Notes to Consolidated Financial Statements”, Note 15 - Employee Stock Plans on pages 44 through 46 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

Page 38 of 54
ITEM 6 - SELECTED FINANCIAL DATA

The information under the caption “Financial Highlights” on pages 14 and 15 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Pages 52 through 66 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

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.

At December 31, 2005 the Company had $550.9 million in unused loan commitments outstanding, of which approximately $348.9 million were at variable rates and the remainder was 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. At December 31, 2005 the Company had $57.4 million in letters of credit issued and outstanding.

The following table shows the commitments to extend credit and letters of credit at December 31, 2005 according to expiration date.

Page 39 of 54
                                                                        Expiration Date
                                                        ---------------------------------------------
(dollars in thousands)                                    Less than         1-3             3-5         More than
                                           Total           1 year          years           years         5 years
                                       --------------   --------------  -------------  --------------  -------------
Commitments to extend credit               $ 550,948        $ 284,249       $ 34,999        $ 25,815      $ 205,885
Letters of credit                             57,427           34,261          1,287          21,397            483
                                       --------------   --------------  -------------  --------------  -------------
     Total                                 $ 608,375        $ 318,510       $ 36,286        $ 47,212      $ 206,368
                                       ==============   ==============  =============  ==============  =============
Segment Reporting

The Company’s primary segments are geographically divided into the Mississippi (MS), Louisiana (LA) and Florida (FL) markets. Each segment offers the same products and services but is managed separately due to different pricing, product demand, and consumer markets. Each segment offers commercial, consumer and mortgage loans and deposit services. In the following tables, the column “Other” includes additional consolidated subsidiaries of the Company: Hancock Mortgage Corporation, Hancock Investment Services, Inc., Hancock Insurance Agency, Inc., Harrison Finance Company, Magna Insurance Company and three real estate corporations owning land and buildings that house bank branches and other facilities. Following is selected information for the Company’s segments:

Page 40 of 54
                                                                            Year ended
(amounts in thousands)                                                   December 31, 2005
                                     MS             LA              FL              Other          Eliminations      Consolidated
                                ------------   ------------    ------------    ---------------   ---------------   ---------------
Interest income                   $ 140,583      $ 109,248         $ 6,563           $ 13,136          $ (5,899)        $ 263,631
Interest expense                     45,392         33,184           1,796                  -            (5,553)           74,819
                                ------------   ------------    ------------    ---------------   ---------------   ---------------
     Net interest income             95,191         76,064           4,767             13,136              (346)          188,812
Provision for loan losses            24,744         14,836             493              2,562                 -            42,635
Non-interest income                  46,197         28,061             476             23,670              (135)           98,269
Depreciation and amortization         5,299          2,467             454                497                 -             8,717
Other non-interest expense           73,725         56,065           4,349             28,820              (133)          162,826
                                ------------   ------------    ------------    ---------------   ---------------   ---------------
Earnings before income taxes         37,620         30,757             (53)             4,927              (348)           72,903
Income tax expense                   16,673           (191)            170              2,260               (41)           18,871
                                ------------   ------------    ------------    ---------------   ---------------   ---------------
     Net earnings                 $  20,947      $  30,948         $  (223)          $  2,667          $   (307)        $  54,032
                                ============   ============    ============    ===============   ===============   ===============


                                                                            Year ended
(amounts in thousands)                                                   December 31, 2004
                                     MS              LA              FL             Other         Eliminations      Consolidated
                               ------------    ------------    ------------    ---------------   ---------------   ---------------
Interest income                   $ 120,197      $  91,148         $ 3,089           $ 14,673          $ (2,333)        $ 226,774
Interest expense                     37,953         20,385             922                 65            (2,055)           57,270
                               ------------    ------------    ------------    ---------------   ---------------   ---------------
     Net interest income             82,244         70,763           2,167             14,608              (278)          169,504
Provision for loan losses             5,564          6,429             928              3,616                 -            16,537
Non-interest income                  39,894         33,255             445             19,084            (2,397)           90,281
Depreciation and amortization         5,879          2,648              67                563                 -             9,157
Other non-interest expense           67,370         51,348           3,047             24,157              (128)          145,794
                               ------------    ------------    ------------    ---------------   ---------------   ---------------
Earnings before income taxes         43,325         43,593          (1,430)             5,356            (2,547)           88,297
Income tax expense                   12,808         13,213            (547)             1,913              (794)           26,593
                               ------------    ------------    ------------    ---------------   ---------------   ---------------
     Net earnings                 $  30,517      $  30,380         $  (883)          $  3,443          $ (1,753)        $  61,704
                               ============    ============    ============    ===============   ===============   ===============


                                                                            Year ended
(amounts in thousands)                                                   December 31, 2003
                                     MS             LA              FL             Other          Eliminations      Consolidated
                               -------------   ------------    ------------    ---------------   ---------------   ---------------
Interest income                   $ 121,664       $ 83,368      $        -           $ 13,648            $ (531)        $ 218,149
Interest expense                     38,982         19,301               -                 (2)             (320)           57,961
                               -------------   ------------    ------------    ---------------   ---------------   ---------------
     Net interest income             82,682         64,067               -             13,650              (211)          160,188
Provision for loan losses             7,385          5,720               -              2,049                 -            15,154
Non-interest income                  37,497         26,725               -             10,563               (29)           74,756
Depreciation and amortization         6,335          3,053               -                494                 -             9,882
Other non-interest expense           64,358         51,493               -             14,504               (29)          130,326
                               -------------   ------------    ------------    ---------------   ---------------   ---------------
Earnings before income taxes         42,101         30,526               -              7,166              (211)           79,582
Income tax expense                   12,780          9,226               -              2,621                 -            24,627
                               -------------   ------------    ------------    ---------------   ---------------   ---------------
     Net earnings                 $  29,321       $ 21,300      $        -           $  4,545            $ (211)        $  54,955
                               =============   ============    ============    ===============   ===============   ===============
Page 41 of 54
Issuer Purchases of Equity Securities

The following table provides information with respect to purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities. 

                                          (a)                     (b)                    (c)                      (d)
                                                                                   Total number of          Maximum number
                                                                                   shares purchased            of shares
                                      Total number                                as a part of publicly     that may yet be
                                      of shares or           Average Price            announced plans       purchased under
                                       units purchased       Paid per Share         or programs (1)        Plans or Programs
                                   --------------------   --------------------  ---------------------    --------------------

Jan. 1, 2005 - Mar. 31, 2005                    44,413 (2)     $ 31.6290                    40,009                681,301
Apr. 1, 2005 - Jun. 30, 2005                   189,508 (3)       31.7650                    96,100                585,201
Jul. 1, 2005 - Sep. 30, 2005                    28,929 (4)       32.3294                    11,800                573,401
Oct. 1, 2005 - Dec. 31, 2005                    32,999 (5)       39.0339                         -                573,401
                                   -------------------    --------------------   ---------------------
Total as of Dec. 31, 2005                      295,849         $ 26.0194                   147,909
                                   ===================    ====================   =====================

 (1)  The Company publicly announced its stock buy-back program on July 18, 2000.

 (2)  4,404 shares were purchased on the open market from January through March in order to satisfy
      obligations pursuant to the Company's long term incentive plan that was established in 1996.

 (3)  93,408 shares were purchased on the open market from April through June in order to satisfy
      obligations pursuant to the Company's long term incentive plan that was established in 1996.

 (4)  17,129 shares were purchased on the open market from July through September in order to satisfy
      obligations pursuant to the Company's long term incentive plan that was established in 1996.

 (5)  32,999 shares were purchased on the open market from October through December in order to satisfy
      obligations pursuant to the Company's long term incentive plan that was established in 1996.
Recent Accounting Pronouncements

In October 2003, the American Institute of Certified Public Accountants (AICPA) issued Statement of Accounting Position (SOP) 03-03, which addresses accounting for differences between contractual cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. This SOP prohibits “carry over” or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. The Company adopted this SOP during the first quarter of 2005 as required and its effect on the consolidated financial statements, to date, has not been material.

Page 42 of 54

The guidance in Emerging Issues Task Force (EITF) 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, was originally effective for other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. However, the guidance contained in paragraphs 10-20 of the Issue was delayed by FASB Staff Position (FSP) EITF Issue 03-1-1, The Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, posted on September 30, 2004. The disclosure requirements continue to be effective and have been implemented by the Company. In November 2005, the FASB issued Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which amends SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and No. 124, Accounting for Certain Investments Held by Not for Profit Organizations and APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is other than temporary, and the measurement of an impairment loss. FSP FAS 115-1 and FAS 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP is effective for reporting periods beginning after December 15, 2005. The Company does not expect the adoption of FAS 115-1 and FAS 124-1 will have a material impact on its financial condition or results of operations.

On December 16, 2004, the FASB published SFAS No. 123(R), Share-Based Payments. This Statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. It will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements based on the fair value of the equity or liability instruments issued. The Company will adopt SFAS No.123(R) effective January 1, 2006. The estimated effect on 2006 earnings is an increase in compensation expense of $900,000, or a reduction in diluted earnings per share of $0.03.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. This Statement is a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine period-specific effects of an accounting change on one or more individual prior periods presented. Then the new accounting principle is applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings for that period rather that being reported in an income statement. Further, the accounting principle is to be applied prospectively from the earliest date when it is impracticable to determine the effect to all prior periods. This Statement is effective for the Company as of January 1, 2006. Adoption of this statement could have an impact if there are future voluntary accounting changes and correction of errors.

Page 43 of 54
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption “Asset/Liability Management” on pages 58 through 60 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial information of the Company and subsidiaries, and the report of independent registered public accounting firm, appearing on Pages 14 through 66 of the Company’s 2005 Annual Report to Stockholders is incorporated herein by reference: 

        Financial Highlights on Pages 14 and 15
        Summary of Quarterly Operating Results and Market Information on Page 16
        Management's Report on Internal Control over Financial Reporting on Page 17
        Reports of Independent Registered Public Accounting Firm on Pages 18 and 19
        Consolidated Balance Sheets on Page 20
        Consolidated Statements of Earnings on Page 21
        Consolidated Statements of Common Stockholders' Equity on Page 22
        Consolidated Statements of Comprehensive Earnings on Page 23
        Consolidated Statements of Cash Flows on Page 24 and 25
        Notes to Consolidated Financial Statements on Pages 26 through 51
        Management's Discussion and Analysis of Financial Condition
               And Results of Operations on Pages 52 through 66
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

On January 20, 2004 the Company dismissed Deloitte & Touche LLP as its independent auditors, after Deloitte & Touche LLP completed its audit of the financial statements of the Company for the fiscal year ended December 31, 2003. The Audit Committee of the Board of Directors of the Company approved the decision to change auditors.

During the two fiscal years ended December 31, 2003 and 2002 and the interim period from January 1, 2004 to January 20, 2004, there were no disagreements between the Company and Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to make a reference to the subject matter of the disagreements in their reports on the financial statements for such years.

During the two most recent fiscal years prior to the dismissal of Deloitte & Touche, LLP and the interim period from January 1, 2004 to January 20, 2004, Deloitte & Touche LLP’s reports on the financial statements of the Company did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified to uncertainty, audit scope, or accounting principles.

Page 44 of 54

During the two most recent fiscal years and the interim period from January 1, 2006 to February 23, 2006, the Company did not consult with Deloitte & Touche LLP regarding any of the matters or events set forth in Item 304(a)(1)(v) of Regulation S-K.

On January 20, 2004, the Board of Directors appointed KPMG LLP, an independent registered public accounting firm, as auditors for the fiscal year ending December 31, 2004, and until their successors are selected. The Audit Committee of the Company’s Board of Directors approved the decision to change auditors.

The Company has been advised that neither KPMG LLP nor any of its partners has any direct or any material indirect financial interest in the securities of the Company or any of its subsidiaries, except as auditors and consultants on accounting procedures and tax matters. Additionally, during the two fiscal years ended December 31, 2003 and 2002, there were no consultations between the Company and KPMG LLP regarding application of accounting principles, the type of audit opinion that might be issued on the Company’s financial statements, or on any other matter.

Although not required to do so, the Board of Directors chose to submit its appointment of KPMG LLP for ratification by the Company’s shareholders. This matter was submitted to the Company’s shareholders for ratification during the Company’s annual meeting held on February 26, 2004.

ITEM 9A - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As defined by the Securities and Exchange Commission in Exchange Act Rules 13a-14(c) and 15d-14(c), a company’s “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

As of December 31, 2005, (the “Evaluation Date”), the Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in the Exchange Act Rules. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are sufficiently effective to ensure that material information relating to the Company and required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

Internal Control over Financial Reporting

The management of Hancock Holding Company has prepared the consolidated financial statements and other information in our Annual Report in accordance with accounting principles generally accepted in the United States of America and is responsible for its accuracy. The financial statements necessarily include amounts that are based on management’s best estimates and judgments.

In meeting its responsibility, management relies on internal accounting and related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the Company’s financial records and to safeguard the Company’s assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal control system.

Page 45 of 54

The Company’s management is responsible for establishing and maintaining the adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13(a) - 15(f). Under the supervision and with the participation of management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). This section relates to management’s evaluation of internal control over financial reporting including controls over the preparation of the schedules equivalent to the basic financial statements and compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the effectiveness of internal controls.

Based on the Company’s evaluation under the framework in Internal Control - Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2005. Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 has been audited by KPMG, LLP, an independent registered public accounting firm, as stated in their report which is incorporated herein by reference.

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 “Directors of HHC” (page 9) in the Proxy Statement for the Annual Meeting of Shareholders to be held March 30, 2006, which was filed by the Registrant in definitive form with the Commission on March 3, 2006 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 from 1963 to 1990; President of Hancock Holding Company since 1984, Chief Executive Officer from 1984 to 2000, Advisory Director, Hancock Bank of Louisiana since 1993. Mr. Seal has been employed with Hancock Bank since 1947. He was elected to the Board of Directors of Hancock Bank in 1961 and named President in 1963 and in 1977 he was named Chief Executive Officer.

George A. Schloegel

Director of the Company since 1984. President, Hancock Bank, Gulfport, Mississippi, since 1990, Vice Chairman of the Board of Hancock Holding Company since 1984 and named Chief Executive Officer, Hancock Holding Company 2000; Director of Hancock Bank of Louisiana, since 1990 and named President in July 2003; 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 46 of 54
Alfred G. Rath

Chief Credit Officer, Hancock Holding Company since October 2002; Executive Vice President, Hancock Holding Company since February 2003; Mr. Rath has been employed with Hancock Bank since 1969. He served in various capacities until being named Chief Credit Officer in October 2002.

Robert E. Easterly

Executive Vice President, 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

Chief Financial Officer, Hancock Holding Company and Hancock Bank since 1998; Executive Vice President, Hancock Holding Company and Hancock Bank since 2001; Senior Vice President, Hancock Holding Company and Hancock Bank from 1999 to 2001. 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

Chief Operating Officer, Hancock Holding Company and Hancock Bank since 1997; Executive Vice President, Hancock Holding Company and Hancock Bank since 2001; Senior Vice President, Hancock Holding Company and Hancock Bank from 1996 to 2001; Vice President, Hancock Bank from 1994 to 1995; Senior Operations Officer, Hancock Holding Company from 1994 to 1996. Prior to Mr. Hairston joining Hancock, he was a Manager with Financial Services Consulting, a Division of Andersen Consulting, headquartered in Chicago, Illinois.

Richard T. Hill

Executive Vice President, Hancock Holding Company, since February 2002; Senior Vice President and Louisiana Retail Banking Executive, Hancock Bank of Louisiana, from June 1998 to January 2002; Executive Vice President and Retail Banking Executive, City National Bank (a subsidiary of First Commerce Corporation), November 1993 -June 1998.

Clifton J. Saik

Executive Vice President, Hancock Holding Company, since February 2002; Senior Vice President and Director, Trust and Financial Services Group, Hancock Bank from July 1998 to January 2002. 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 47 of 54
Compliance with Section 16(a) of the Exchange Act

For information concerning compliance with Section 16(a) of the Exchange Act, see “Section 16(a) Beneficial Ownership Reporting Compliance” (pages 8-16) in the Proxy Statement for the Annual Meeting of Shareholders to be held on March 30, 2006, which was filed by the Registrant in definitive form with the Commission on March 3, 2006 and is incorporated herein by reference.

Audit Committee

For information concerning the Audit Committee, its members and its financial expert, see “Audit Committee” (page 18) in the Proxy Statement for the Annual Meeting of Shareholders to be held on March 30, 2006, which was filed by the Registrant in definitive form with the Commission on March 3, 2006 and is incorporated herein by reference.

Code of Ethics

The Company’s Board of Directors has adopted a Code of Ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions. A copy of this Code of Ethics can be found at the Company’s internet website at www.hancockbank.com. The Company intends to disclose any amendments to its Code of Ethics, and any waiver from a provision of the Code of Ethics granted to the Company’s principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, on the Company’s internet website within five business days following such amendment or waiver. The information contained on or connected to the Company’s internet website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC.

ITEM 11 - EXECUTIVE COMPENSATION

For information concerning this item see “Executive Compensation” (page 10) in the Proxy Statement for the Annual Meeting of Shareholders to be held on March 30, 2006, which was filed by the Registrant in definitive form with the Commission on March 3, 2006 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” (page 8) and “Security Ownership of Management” (pages 9-10) in the Proxy Statement for the Annual Meeting of Shareholders to be held March 30, 2006, which was filed by the Registrant in definitive form with the Commission on March 3, 2006 and is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For information concerning this item see “Certain Transactions and Relationships” (page 16) in the Proxy Statement for the Annual Meeting of Shareholders to be held March 30, 2006, which was filed by the Registrant in definitive form with the Commission on March 3, 2006 and is incorporated herein by reference.

Page 48 of 54
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

For information concerning this item, see “Principal Accounting Firm Fees” on Page 20 of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held March 30, 2006, which was filed by the Registrant in definitive form with the Commission on March 3, 2006 and is incorporated herein by reference.

PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Hancock Holding Company and Consolidated Subsidiaries
(a) 1. and 2. Consolidated Financial Statements:

The following have been incorporated herein from the Company’s 2005 Annual Report to Stockholders and are incorporated herein by reference: 

- -        Management's Report on Internal Control over Financial Reporting
- -        Reports of Independent Registered Public Accounting Firm
- -        Consolidated Balance Sheets as of December 31, 2005 and 2004
- -        Consolidated Statements of Earnings for the three years ended December 31, 2005
- -        Consolidated Statements of Common Stockholders' Equity for the three years ended December 31, 2005
- -        Consolidated Statements of Comprehensive Earnings for the three years ended December 31, 2005
- -        Consolidated Statements of Cash Flows for the three years ended December 31, 2005
- -        Notes to Consolidated Financial Statements for the three years ended December 31, 2005
- -        Financial Highlights at and as of each of the five years ended December 31, 2005

All other financial statements and schedules are omitted as the required information is inapplicable or the required information is presented in the consolidated financial statements or related notes. 

(a) 3. Exhibits:

   (2.1)       Agreement and Plan of Merger between Hancock Holding Company and Lamar Capital
               Corporation dated February 21, 2001 (Appendix C to the Prospectus contained in the S-4
               Registration Statement 333-60280 filed on May 4, 2001 and incorporated by reference
               herein).

   (3.1)       Amended and Restated Articles of Incorporation dated November 8, 1990 (filed as Exhibit
               3.1 to the Registrant's Form 10-K for the year ended December 31, 1990 and incorporated
               herein by reference).

   (3.2)       Amended and Restated Bylaws dated November 8, 1990 (filed as Exhibit 3.2 to the Registrant's Form 10-K
               for the year ended December 31, 1990 and incorporated herein by reference).

   (3.3)       Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, dated
               October 16, 1991 (filed as Exhibit 4.1 to the Registrant's Form 10-Q for the quarter
               ended September 30, 1991).

   (3.4)       Articles of Correction, filed with Mississippi Secretary of State on November 15, 1991
               (filed as Exhibit 4.2 to the Registrant's Form 10-Q for the quarter ended September 30,
               1991).

   (3.5)       Articles of Amendment to the Articles of Incorporation of Hancock Holding Company,
               adopted February 13, 1992 (filed as Exhibit 3.5 to the Registrant's Form 10-K for the
               year ended December 31, 1992 and incorporated herein by reference).
Page 49 of 54
    (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).

  (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, 2005 furnished for the
               information of the Commission only and not deemed "filed" except for those portions which
               are specifically incorporated herein by reference).
Page 50 of 54
    (21)    Proxy Statement for the Registrant's Annual Meeting of Shareholders on March 30, 2006 (deemed "filed"
            for the purposes of this Form 10-K only for those portions which are specifically
            incorporated herein by reference).

    (22)    Subsidiaries of the Registrant.

                                                        Jurisdiction                    Holder of
                 Name                                 of Incorporation              Outstanding Stock *
                 ----                                 ----------------              -------------------
    Hancock Bank                                         Mississippi              Hancock Holding Company
    Hancock Bank of Louisiana                            Louisiana                Hancock Holding Company
    HBLA Properties, LLC                                 Louisiana                Hancock Bank of Louisiana
    Hancock Bank of Florida                              Florida                  Hancock Holding Company
    Magna Insurance Company                              Mississippi              Hancock Holding Company
    Harrison Life Insurance Company                      Mississippi              Magna Insurance Co.
    Hancock Bank Securities Corp., LLC                   Mississippi              Hancock Bank
    Hancock Insurance Agency                             Mississippi              Hancock Bank
    Hancock Insurance Agency of AL, Inc.                 Alabama                  Hancock Insurance Agency
    Hancock Investment Services, Inc.                    Mississippi              Hancock Bank
    Hancock Investment Services of MS, Inc.              Mississippi              Hancock Investment Services, Inc.
    Hancock Investment Services of LA, Inc.              Louisiana                Hancock Investment Services, Inc.
    Hancock Investment Services of FL, Inc.              Florida                  Hancock Investment Services, Inc.
    Town Properties, Inc.                                Mississippi              Hancock Bank
    The Gulfport Building, Inc.                          Mississippi              Hancock Bank
    Harrison Finance Company                             Mississippi              Hancock Bank


            * All are 100% owned except as indicated.

    (23)    Consent of Independent Registered Public Accounting Firm - KPMG LLP

  (23.1)    Consent of Independent Registered Public Accounting Firm - Deloitte & Touche LLP

  (23.2)    Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP

    (31)    Rule 13a-14(a)/15d-14(a) - Certifications of George A. Schloegel and Carl J. Chaney

    (32)    Section 1350 Certifications of George A. Schloegel and Carl J. Chaney
Page 51 of 54
                                            SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


                                                                  HANCOCK HOLDING COMPANY
                                                               ------------------------------------------
                                                                Registrant



  March 15, 2006                             By:  /s/ George A. Schloegel
- ------------------                              -------------------------------------
        Date                                      George A. Schloegel
                                                  Vice-Chairman of the Board &
                                                  Chief Executive Officer



  March 15, 2006                             By:  /s/ Carl J. Chaney
- ------------------                              -------------------------------------
        Date                                      Carl J. Chaney
                                                  Executive Vice President &
                                                  Chief Financial 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.                        President,                                   March 15, 2006
- --------------------------------
Leo W. Seal, Jr.                            Director


/s/ Joseph F. Boardman, Jr.                 Chairman of the Board,                       March 15, 2006
- --------------------------------
Joseph F. Boardman, Jr.                     Director


/s/ George A. Schloegel                     Vice Chairman of the Board,                  March 15, 2006
- --------------------------------
George A. Schloegel                         Director,
                                            Chief Executive Officer


/s/ James B. Estabrook, Jr.                 Director                                     March 15, 2006
- --------------------------------
James B. Estabrook, Jr.


                                            Director                                     March 15, 2006
- --------------------------------
Charles H. Johnson


/s/ Alton G. Bankston                       Director                                     March 15, 2006
- --------------------------------
Alton G. Bankston


/s/ Don P. Descant                          Director                                     March 15, 2006
- --------------------------------
Don P. Descant
Page 52 of 54

(signatures continued)


/s/ Christine L. Smilek                     Director                                     March 15, 2006
- --------------------------------
Christine L. Smilek


                                            Director                                     March 15, 2006
- --------------------------------
Frank E. Bertucci


/s/ James H. Horne                          Director                                     March 15, 2006
- --------------------------------
James H. Horne


/s/ Carl J. Chaney                          Executive Vice President and                 March 15, 2006
- --------------------------------
Carl J. Chaney                              Chief Financial Officer


                                            Director                                     March 15, 2006
- --------------------------------
Robert W. Roseberry


                                            Director                                     March 15, 2006
- --------------------------------
John H. Pace
Page 53 of 54
 EX-13 2 hhc_exhibit13-10k123105.htm EX. 13 TO HHC 10K, 12/31/05 Financial Statements and Supplemental Data 

                                                   EXHIBIT 13


                                     HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                               FINANCIAL HIGHLIGHTS



     (unaudited, amounts in thousands)                                     At and For the Years Ended December 31,
                                                             --------------------------------------------------------------------
                                                                  2005          2004            2003         2002        2001
                                                             --------------  ------------   -----------  -----------  -----------
Period-End Balance Sheet Data:
     Securities                                                 $1,959,261   $1,302,369      $1,278,049  $1,486,810   $1,372,794
     Short-term investments                                        410,226      150,261          11,288      47,257      100,433
     Loans, net of unearned income                               2,989,186    2,748,560       2,448,644   2,104,982    1,890,039
     Total earning assets                                        5,358,673    4,201,191       3,737,981   3,639,049    3,363,266
     Allowance for loan losses                                      74,558       40,682          36,750      34,740       34,417
     Total assets                                                5,950,187    4,664,726       4,150,358   3,973,147    3,679,845
     Total deposits                                              4,989,820    3,797,945       3,447,847   3,301,500    3,039,734

     Short-term notes                                                    -            -           9,400           -            -
     Long-term notes                                                50,266       50,273          50,428      51,020       51,606

     Total preferred stockholders' equity                                -            -          37,067      37,069       37,069
     Total common stockholders' equity                             477,415      464,582         397,814     387,513      367,548

Average Balance Sheet Data:
     Securities                                                 $1,434,415   $1,345,350      $1,466,156  $1,493,574   $1,220,074
     Short-term investments                                        137,821       34,911          57,986      83,427      119,832
     Loans, net of unearned income                               2,883,020    2,599,561       2,238,245   1,961,299    1,792,559
     Total earning assets                                        4,455,256    3,979,822       3,762,387   3,538,300    3,132,465
     Allowance for loan losses                                      50,107       38,117          35,391      33,135       32,487
     Total  assets                                               4,931,030    4,424,334       4,111,949   3,857,698    3,416,044
     Total  deposits                                             4,001,426    3,602,734       3,407,205   3,174,946    2,820,351

     Short-term notes                                                3,836        2,311              26           -            -
     Long-term notes                                                50,275       50,312          50,677      51,299       31,569

     Total preferred stockholders' equity                                -        2,240          37,069      37,069       16,733
     Total common stockholders' equity                             475,701      447,384         396,034     388,821      359,097

Performance Ratios:
     Return on average assets                                        1.10%        1.39%           1.34%       1.32%        1.15%
     Return on average common equity                                11.36%       13.79%          13.88%      13.13%       10.93%
     Net interest margin (te)*                                       4.40%        4.44%           4.45%       4.70%        4.50%
     Average loans to average deposits                              72.05%       72.16%          65.69%      61.77%       63.56%
     Non-interest income excluding storm-related insurance
          gain, gain on sale of branches and credit card
         merchant, and securities transactions,
         as a percent of total revenue (te)                         31.86%       33.77%          30.40%      30.11%       27.82%
     Non-interest expense as a percent of total revenue (te)
        before amortization of purchased intangibles,
        storm-related insurance gain, gains on sale of
        branches and credit card merchant, and
        securities transactions                                     58.82%       57.33%          57.83%      57.83%       59.73%
     Allowance for loan losses to period-end loans                   2.49%        1.48%           1.50%       1.65%        1.82%
     Non-performing assets to loans plus other real estate           0.42%        0.40%           0.73%       0.84%        1.07%
     Allowance for loan losses to non-performing loans
        and accruing loans 90 days past due                        195.50%      251.85%         169.73%     143.48%      104.54%
     Net charge-offs to average loans                                0.30%        0.48%           0.59%       0.91%        0.65%
     FTE employees (period end)                                      1,735        1,767           1,734       1,790        1,736





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


                                     HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                               FINANCIAL HIGHLIGHTS



     (unaudited, amounts in thousands)                                     At and For the Years Ended December 31,
                                                             --------------------------------------------------------------------
                                                                  2005          2004            2003         2002        2001
                                                             --------------  ------------   -----------  -----------  -----------

Capital Ratios:
     Average common stockholders' equity to
        average assets                                                9.65%         10.11%          9.63%      10.08%        10.51%
     Common stockholders' equity to total assets                      9.65%          9.96%          9.59%       9.75%         9.99%
     Tier 1 leverage                                                  7.85%          8.97%          9.29%       9.19%         8.50%
     Tier 1 risk-based                                               11.47%         12.39%         13.65%      14.88%        14.47%
     Total risk-based                                                12.73%         13.58%         14.88%      16.11%        15.73%

Income Data:
     Interest income                                               $263,631       $226,774       $218,149    $230,781      $234,870
     Interest expense                                                74,819         57,270         57,961      72,053       101,362
     Net interest income                                            188,812        169,504        160,188     158,728       133,508
     Net interest income (te)                                       196,189        176,777        167,358     166,190       140,941
     Provision for loan losses                                       42,635         16,537         15,154      18,495         9,082
     Non-interest income excluding net storm-related items,
        gains on sale of  branches and  credit card
        merchant and securities transactions                         91,738         84,860         73,089      71,589        54,326
     Net storm-related items                                          6,584              -              -           -             -
     Gains/(losses) on sales of securities, net                         (53)           163          1,667           4            18
     Gains on sales of branches                                           -          2,258              -           -             -
     Gain on sale of credit card merchant
        services business                                                 -          3,000              -           -             -
     Non-interest expense excluding merger-related
        costs and amortization of intangibles                       169,349        153,006        139,060     137,508       116,633
     Merger-related costs                                                 -              -              -           -           670
     Amortization of intangibles                                      2,194          1,945          1,148         750         4,349
     Earnings before income taxes                                    72,903         88,297         79,582      73,569        57,118
     Net earnings                                                    54,032         61,704         54,955      51,043        39,255
     Net earnings available to common stockholders                   54,032         61,704         52,302      48,390        37,928

Per Common Share Data:
     Net earnings:
           Basic                                                      $1.67          $1.91          $1.70       $1.54         $1.18
           Diluted                                                     1.64           1.87           1.64        1.50          1.18
     Cash dividends paid                                               0.72           0.58           0.44        0.40          0.38
     Book value                                                      $14.78         $14.32         $13.06      $12.55        $11.56
     Dividend payout ratio                                           43.11%         30.37%         25.88%      25.97%        31.78%
     Weighted average number of shares outstanding
        Basic                                                        32,365         32,390         30,714      31,486        32,094
        Diluted                                                      32,966         33,052         33,410      34,084        33,278
     Number of shares outstanding (period end)                       32,301         32,440         30,455      30,887        31,786
     Market data:
        High closing price                                           $39.90         $34.83         $29.25      $25.19        $14.99
        Low closing price                                             28.25          25.00          21.00       13.78         11.67
        Period-end closing price                                      37.81          33.46          27.29       22.33         14.35
        Trading volume                                               22,404         11,572         11,410      18,812         6,551


                                                  HANCOCK HOLDING COMPANY AND SUBSIDIARIES

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

                                                      2005                                            2004
                                 -------------------------------------------------------------------------------------------------
                                   Fourth       Third      Second      First       Fourth       Third        Second       First
                                 -----------  ---------- ----------- ----------  -----------  ----------   -----------  ----------

Interest income (te)               $ 75,433    $ 67,506    $ 65,767   $ 62,302     $ 61,051    $ 59,184      $ 58,115    $ 55,696
Interest expense                    (20,910)    (19,659)    (17,961)   (16,289)     (15,014)    (14,567)      (14,218)    (13,470)
                                 -----------  ---------- ----------- ----------  -----------  ----------   -----------  ----------
Net interest income (te)             54,523      47,847      47,806     46,013       46,037      44,617        43,897      42,226
Provision for loan losses            (1,079)    (36,905)     (1,891)    (2,760)      (5,796)     (3,388)       (3,817)     (3,536)
Non-interest income                  17,298      33,858      24,680     22,433       22,040      20,970        24,630      22,638
Non-interest expense                (44,626)    (42,770)    (42,505)   (41,642)     (37,945)    (38,306)      (39,437)    (39,262)
Taxable equivalent adjustment        (2,004)     (1,862)     (1,740)    (1,771)      (1,861)     (1,760)       (1,797)     (1,854)
                                 -----------  ---------- ----------- ----------  -----------  ----------   -----------  ----------
  Earnings before income taxes       24,112         168      26,350     22,273       22,475      22,133        23,476      20,212
Income taxes                         (5,047)      1,267      (8,256)    (6,835)      (6,684)     (6,737)       (7,104)     (6,068)
                                 -----------  ---------- ----------- ----------  -----------  ----------   -----------  ----------
Net earnings                      $  19,065    $  1,435    $ 18,094   $ 15,438     $ 15,791    $ 15,396      $ 16,372    $ 14,144
                                 ===========  ========== =========== ==========  ===========  ==========   ===========  ==========

Net earnings:
 Basic                                $0.59       $0.04       $0.56      $0.48        $0.49       $0.47         $0.50       $0.44
 Diluted                               0.58        0.04        0.55       0.47         0.48        0.47          0.50        0.43
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
                                                               ------------            ------------            ------------
2005
      4th quarter                                                 $39.90                  $31.08                 $0.195
      3rd quarter                                                  37.84                   29.93                  0.195
      2nd quarter                                                  34.87                   28.25                  0.165
      1st quarter                                                  34.20                   30.25                  0.165

2004
      4th quarter                                                 $34.83                  $30.00                 $0.165
      3rd quarter                                                  34.27                   27.32                  0.165
      2nd quarter                                                  32.25                   25.00                  0.125
      1st quarter                                                  32.00                   27.08                  0.125

There were 5,668 registered holders and approximately 4,500 unregistered holders of common stock of the Company at January 3, 2006 and 32,301,123 shares issued. On January 3, 2006, the high and low sale prices of the Company’s common stock as reported on the Nasdaq Stock Market were $39.11 and $37.74, respectively. The principal source of funds to the Company to pay cash dividends is the dividends received from Hancock Bank, Gulfport, Mississippi and Hancock Bank of Louisiana, Baton Rouge, Louisiana and Hancock Bank of Florida, Tallahassee, Florida. 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. Dividends paid by Hancock Bank of Florida are subject to approval by the Florida Department of Financial Services. 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.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
- -------------------------------------------------------------------------------------------------------------------

The management of Hancock Holding Company has prepared the consolidated financial statements and other information in our Annual Report in accordance with accounting principles generally accepted in the United States of America and is responsible for its accuracy. The financial statements necessarily include amounts that are based on management’s best estimates and judgments.

In meeting its responsibility, management relies on internal accounting and related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the Company’s financial records and to safeguard the Company’s assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal control system.

The Company’s management is responsible for establishing and maintaining the adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13(a) - 15(f). Under the supervision and with the participation of management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). This section relates to management’s evaluation of internal control over financial reporting including controls over the preparation of the schedules equivalent to the basic financial statements and compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the effectiveness of internal controls.

Based on the Company’s evaluation under the framework in Internal Control - Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2005. Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 has been audited by KPMG, LLP, an independent registered public accounting firm, as stated in their report which is contained herein. 


George A. Schloegel                                                                      Carl J. Chaney
Vice Chairman &                                                                          Executive Vice President &
Chief Executive Officer                                                                  Chief Financial Officer
February 23, 2006                                                                        February 23, 2006
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- -------------------------------------------------------------------------------------------------------------------------

Board of Directors and Stockholders
Hancock Holding Company
Gulfport, Mississippi

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Hancock Holding Company maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Hancock Holding Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because management’s assessment and our audit were conducted to also meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of Hancock Holding Company’s internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9 C). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Hancock Holding Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our opinion, Hancock Holding Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We do not express an opinion or any other form of assurance on management’s statement referring to compliance with laws and regulations.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hancock Holding Company and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of earnings, comprehensive earnings, common stockholders’ equity, and cash flows for the years then ended and our report dated February 23, 2006 expressed an unqualified opinion on those financial statements. 

/s/ KPMG, LLP

KPMG LLP
Birmingham, Alabama
February 23, 2006
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------------------------------------------------

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, 2005 and 2004, and the related consolidated statements of earnings, comprehensive earnings, common stockholders’ equity and cash flows for the years then ended. 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. The accompanying consolidated statements of earnings, comprehensive earnings, common stockholders’ equity and cash flows of Hancock Holding Company and subsidiaries for the year ended December 31, 2003, were audited by other auditors, whose report thereon dated January 19, 2004 expressed an unqualified opinion on those statements.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hancock Holding Company and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for the years then ended, in conformity with U. S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Hancock Holding Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting. 

/s/ KPMG, LLP

KPMG LLP
Birmingham, Alabama
February 23, 2006


                                     HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)                                         December 31,
                                                                               ----------------------------------------------
                                                                                    2005                          2004
                                                                               ----------------              ----------------
Assets:
Cash and due from banks (non-interest bearing)                                      $  271,104                    $  155,797
Interest-bearing deposits with other banks                                               7,258                         8,126
Federal funds sold                                                                     402,968                       142,135
Securities available for sale, at fair value
      (amortized cost of $1,980,745 and $1,118,622)                                  1,959,261                     1,114,468
Securities held to maturity, at amortized cost
      (fair value of $0 and $193,578)                                                        -                       187,901
Loans                                                                                3,000,618                     2,760,266
      Less:
         Allowance for loan losses                                                     (74,558)                      (40,682)
         Unearned income                                                               (11,432)                      (11,706)
                                                                               ----------------              ----------------
            Loans, net                                                               2,914,628                     2,707,878
Property and equipment, net                                                             79,386                        79,848
Other real estate, net                                                                   1,833                         3,007
Accrued interest receivable                                                             35,046                        23,783
Goodwill                                                                                61,418                        55,409
Other  intangible assets, net                                                           10,781                        14,783
Life insurance contracts                                                                83,080                        79,630
Reinsurance receivables                                                                 49,452                        56,756
Deferred tax asset, net                                                                 40,380                        15,621
Other assets                                                                            33,592                        19,584
                                                                               ----------------              ----------------
  Total Assets                                                                      $5,950,187                    $4,664,726
                                                                               ================              ================

Liabilities and Common Stockholders' Equity:
Deposits:
      Non-interest bearing demand                                                   $1,324,938                    $  697,353
      Interest-bearing savings, NOW,
         money market and time                                                       3,664,882                     3,100,592
                                                                               ----------------              ----------------
      Total deposits                                                                 4,989,820                     3,797,945
Federal funds purchased                                                                  1,475                           800
Securities sold under agreements to repurchase                                         250,807                       195,478
Long-term notes                                                                         50,266                        50,273
Policy reserves and liabilities                                                        105,368                       111,107
Other liabilities                                                                       75,036                        44,541
                                                                               ----------------              ----------------
      Total Liabilities                                                              5,472,772                     4,200,144
Commitments and contingencies (notes 18 and 19)
Common Stockholders' Equity:
Common stock - $3.33 par value per share; 75,000,000 shares
      authorized, 32,301,123 and 32,439,702 shares issued, respectively                107,563                       108,024
Capital surplus                                                                        129,222                       134,905
Retained earnings                                                                      265,039                       234,423
Accumulated other comprehensive loss, net                                              (22,066)                      (11,121)
Unearned compensation                                                                   (2,343)                       (1,649)
                                                                               ----------------              ----------------
      Total Common Stockholders' Equity                                                477,415                       464,582
                                                                               ----------------              ----------------
         Total Liabilities and
            Common Stockholders' Equity                                             $5,950,187                    $4,664,726
                                                                               ================              ================

See notes to consolidated financial statements.



                                          HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENTS OF EARNINGS

(amounts in thousands, except per share data)                                              Years Ended December 31,
                                                                            -------------------------------------------------------
                                                                                 2005                2004                2003
                                                                            ---------------      --------------     ---------------
Interest Income:
     Loans, including fees                                                        $197,857            $169,750            $159,367
     Securities-taxable                                                             51,360              46,672              48,226
     Securities-tax exempt                                                           7,034               7,719               8,705
     Federal funds sold                                                              4,447                 297                 532
     Other investments                                                               2,933               2,336               1,319
                                                                            ---------------      --------------     ---------------
       Total interest income                                                       263,631             226,774             218,149
                                                                            ---------------      --------------     ---------------
Interest Expense:
     Deposits                                                                       67,581              52,570              54,191
     Federal funds purchased and securities sold
        under agreements to repurchase                                               4,687               2,141               1,509
     Long-term notes and other interest expense                                      2,551               2,559               2,261
                                                                            ---------------      --------------     ---------------
        Total interest expense                                                      74,819              57,270              57,961
                                                                            ---------------      --------------     ---------------
     Net Interest Income                                                           188,812             169,504             160,188
Provision for loan losses                                                           42,635              16,537              15,154
                                                                            ---------------      --------------     ---------------
     Net interest income after provision for loan losses                           146,177             152,967             145,034
                                                                            ---------------      --------------     ---------------
Non-Interest Income:
     Service charges on deposit accounts                                            34,773              43,631              42,544
     Trust fees                                                                     11,107               9,030               7,724
     Insurance commissions and fees                                                 17,099               9,193               2,750
     Investment and annuity fees                                                     5,076               2,295               3,615
     Debit card and merchant fees                                                    4,878               4,271               3,643
     ATM fees                                                                        4,202               4,512               3,994
     Secondary mortgage market operations                                            2,221               2,934               1,728
     Securities gains (loss), net                                                      (53)                163               1,667
     Gains on sales of branches and credit card merchant
        services business                                                                -               5,258                   -
     Net storm-related items                                                         6,584                   -                   -
     Other income                                                                   12,382               8,994               7,091
                                                                            ---------------      --------------     ---------------
        Total non-interest income                                                   98,269              90,281              74,756
                                                                            ---------------      --------------     ---------------
Non-Interest Expense:
     Salaries and employee benefits                                                 94,158              86,404              81,409
     Net occupancy expense of premises                                              10,926               9,915               9,286
     Equipment rentals, depreciation and maintenance                                 9,553               9,669               9,097
     Amortization of intangibles                                                     2,194               1,945               1,148
     Other expense                                                                  54,712              47,018              39,268
                                                                            ---------------      --------------     ---------------
        Total non-interest expense                                                 171,543             154,951             140,208
                                                                            ---------------      --------------     ---------------
     Earnings Before Income Taxes                                                   72,903              88,297              79,582
Income taxes                                                                        18,871              26,593              24,627
                                                                            ---------------      --------------     ---------------
     Net Earnings                                                                   54,032              61,704              54,955

Preferred dividends                                                                      -                   -               2,653
                                                                            ---------------      --------------     ---------------
     Net Earnings Available to Common Stockholders                                $ 54,032            $ 61,704            $ 52,302
                                                                            ===============      ==============     ===============

Basic earnings per common share                                                   $   1.67            $   1.91            $   1.70
                                                                            ===============      ==============     ===============

Diluted earnings per common share                                                 $   1.64            $   1.87            $   1.64
                                                                            ===============      ==============     ===============

See notes to consolidated financial statements.


                                          HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

(amounts in thousands, except share and per share data)
                                                                                                       Accumulated
                                                                                                          Other
                                                      Common Stock            Capital      Retained    Comprehensive   Unearned
                                               Shares          Amount         Surplus      Earnings     (Loss), net  Compensation
                                             --------------  ------------    -----------  ----------    -----------  ------------

Balance, January 1, 2003                        30,886,865     $102,853      $122,215     $152,948       $ 10,049    $ (552)
Net earnings                                                                                54,955
Cash dividends - $0.44 per common share                                                    (13,554)
Cash dividends - $1.60 per preferred share                                                  (2,653)
Minimum pension liability adjustment, net                                                                  (1,574)
Change in fair value of securities
  available for sale, net                                                                                 (14,779)
Restricted stock awards granted                                                   969                                   (969)
Restricted stock awards vested                      38,810          129
Restricted stock awards forfeited                                                  (8)                                     8
Restricted stock amortization                                                                                            556
Repurchase/retirement of common stock             (572,362)      (1,906)      (12,024)
Transactions relating to options exercised,
   net                                              88,716          296         1,006
Other stock transactions, net                       13,329           44          (195)
                                             --------------  -----------   ----------- ------------  ------------- ----------
Balance, December 31, 2003                      30,455,358      101,416       111,963      191,696         (6,304)      (957)
Net earnings                                                                                61,704
Cash dividends - $0.58 per common share                                                    (18,977)
Preferred stock conversion                       2,200,976        7,329        29,886
Minimum pension liability adjustment, net                                                                    (442)
Change in fair value of securities
  available for sale, net                                                                                  (4,375)
Restricted stock awards granted                                                 1,387                                 (1,387)
Restricted stock awards vested                       4,875           16
Restricted stock awards forfeited                                                 (16)                                    16
Restricted stock amortization                                                                                            679
Repurchase/retirement of common stock             (370,793)      (1,235)       (9,733)
Transactions relating to options exercised,
   net                                             137,200          457         1,373
Other stock transactions, net                       12,086           41            45
                                             --------------  -----------   ----------- ------------  ------------- ----------
Balance, December 31, 2004                      32,439,702      108,024       134,905      234,423        (11,121)    (1,649)
Net earnings                                                                                54,032
Cash dividends - $0.72 per common share                                                    (23,416)
Minimum pension liability adjustment, net                                                                      38
Change in fair value of securities
  available for sale, net                                                                                 (10,983)
Restricted stock awards granted                                                 1,490                                 (1,490)
Restricted stock awards vested                      37,426          125
Restricted stock awards forfeited                                                 (65)                                    65
Restricted stock amortization                                                                                            731
Repurchase/retirement of common stock             (295,849)        (985)       (8,564)
Transactions relating to options exercised,
   net                                             105,258          350           863
Other stock transactions, net                       14,586           49           593
                                             --------------  -----------   ----------- ------------  ------------- ----------
Balance, December 31, 2005                      32,301,123     $107,563      $129,222     $265,039     $  (22,066)  $ (2,343)
                                             ==============  ===========   =========== ============  ============= ==========







See notes to consolidated financial statements.


                                          HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENS OF COMPREHENSIVE EARNINGS

(amounts in thousands)                                                                 Years Ended December 31,
                                                                     ----------------------------------------------------------
                                                                           2005                 2004                2003
                                                                     -----------------    -----------------    ----------------
Net earnings                                                                 $ 54,032             $ 61,704            $ 54,955
Other comprehensive earnings, (net of income tax):
  Minimum pension liability adjustment, net of tax of $24, $142
   and $965, respectively                                                          38                 (442)             (1,574)
  Change in fair value of securities available for sale, net:
   Change in fair value, net of tax of $6,347, $2,526
   and $7,384, respectively                                                   (10,987)              (4,269)            (13,695)
   Reclassification adjustments for (losses) gains included in net
     earnings, net of tax (benefit) expense of $(49), $72 and $574,
     respectively                                                                   4                 (106)             (1,084)
                                                                     -----------------    -----------------    ----------------
       Total other comprehensive (loss) earnings                              (10,945)              (4,817)            (16,353)
                                                                     -----------------    -----------------    ----------------
         Total Comprehensive Earnings                                        $ 43,087             $ 56,887            $ 38,602
                                                                     =================    =================    ================

See notes to consolidated financial statements.



                                          HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands)                                                                   Years Ended December 31,
                                                                         ----------------------------------------------------------
                                                                              2005                 2004                 2003
                                                                         ----------------     ----------------    -----------------
Cash Flows from Operating Activities:
Net earnings                                                                 $54,032              $61,704              $54,955
Adjustments to reconcile net earnings to net cash provided by operating
  activities:
         Depreciation and amortization of software                             8,717                9,157                9,882
         Provision for loan losses                                            42,635               16,537               15,154
         Deferred tax (benefit) provision                                    (18,401)              (3,529)                 150
         Provision for losses on other real estate owned                           -                  142                1,068
         Increase in cash surrender value of life insurance contracts         (3,450)              (3,465)              (1,165)
         Loss (gains) on sales of securities available for sale, net              53                 (163)              (1,667)
         Gain on sale of other real estate owned, net                           (444)                   -                    -
         Gains on sales of branches and credit card merchant service
            business                                                               -               (5,258)                   -
         Gain on involuntary conversion of assets, net                       (14,135)                   -                    -
         (Accretion) amortization of securities premium/discount              (1,849)               5,550               11,366
         Amortization of intangible assets                                     2,194                1,945                1,148
         Amortization of compensation element of restricted stock                731                  679                  556
         Pension expense                                                       3,163                3,186                2,969
         (Increase) decrease in accrued interest receivable                  (11,263)                (445)               2,355
         Increase in accrued expenses                                         28,349                1,025                5,995
         Increase (decrease) in other liabilities                              1,625                6,089               (2,765)
         Increase (decrease) in interest payable                                 521                  513               (1,303)
         Increase (decrease) in unearned premiums                             (5,739)              90,315               20,792
         Decrease (increase) in reinsurance receivables                        9,738              (42,893)             (13,863)
         Pension plan contributions                                           (3,119)              (3,032)              (2,957)
         (Increase) decrease in other assets, net                            (26,154)              15,214              (17,002)
         Other, net                                                            3,292                  (88)               1,168
                                                                         ------------     ----------------    -----------------
             Net cash provided by operating activities                        70,496              153,183               86,836
                                                                         ------------     ----------------    -----------------






See notes to consolidated financial statements



                                          HANCOCK HOLDING COMPANY AND SUBSIDIARIES
                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(amounts in thousands)                                                                     Years Ended December 31,
                                                                           ----------------    -----------------    ----------------
                                                                                2005                 2004                2003
                                                                           ----------------    -----------------    ----------------

Cash Flows from Investing Activities:
      Net (increase) decrease in interest-bearing time deposits                        868               (2,572)           (1,286)
      Proceeds from maturities, calls or prepayments of securities held to
         maturity                                                                  195,599               27,890            67,780
      Purchases of securities held to maturity                                      (7,736)             (54,216)                -
      Proceeds from sales and maturities of securities available for sale          511,905              706,237         1,353,722
      Purchases of securities available for sale                                (1,354,864)            (714,750)       (1,245,149)
      Net (increase) decrease in federal funds sold                               (260,833)            (122,903)           37,255
      Net increase in loans                                                       (248,056)            (295,410)         (381,565)
      Net (increase) decrease in loans held for sale                                (6,735)              (2,469)           17,932
      Purchase of property, equipment and software, net                            (14,765)              (9,223)           (8,338)
      Leasehold improvements                                                          (130)                 (27)             (829)
      Proceeds from sales of other real estate                                       4,338                6,981             4,911
      Proceeds from insurance settlements                                           12,562                    -                 -
      Proceeds from sale of credit card merchant services business                       -                3,000                 -
      Premiums paid on life insurance contracts                                          -              (25,000)          (50,000)
      Net cash paid in connection with sale of branches                                  -              (22,999)                -
      Net cash (paid) received in business combinations                             (3,922)              (6,378)           32,769
                                                                           ----------------    -----------------   ---------------
             Net cash used by investing activities                              (1,171,769)            (511,839)         (172,798)
                                                                           ----------------    -----------------   ---------------

Cash Flows from Financing Activities:
      Net increase in deposits                                                   1,191,875              327,788           107,106
      Net increase (decrease) in federal funds purchased and
        securities sold under agreements to repurchase                              56,004               46,182           (10,962)
      (Repayments) advances of short-term notes                                          -               (9,400)            9,400
      Repayments of long-term notes                                                     (7)                (155)             (592)
      Dividends paid                                                               (23,416)             (18,977)          (16,207)
      Conversion of preferred stock to cash                                              -                 (148)                -
      Proceeds from exercise of stock options                                        1,213                1,830             1,301
      Repurchase/retirement of common stock                                         (9,549)             (10,968)          (13,930)
      Other stock transactions, net                                                    460                  219               142
                                                                           ----------------    -----------------   ---------------
             Net cash provided by financing activities                           1,216,580              336,371            76,258
                                                                           ----------------    -----------------   ---------------
Net (decrease) increase in cash and due from banks                                 115,307              (22,285)           (9,704)
Cash and due from banks, beginning                                                 155,797              178,082           187,786
                                                                           ----------------    -----------------   ---------------
Cash and due from banks, ending                                                   $271,104             $155,797          $178,082
                                                                           ================    =================   ===============





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 financial holding company headquartered in Gulfport, Mississippi operating in the states of Mississippi, Louisiana, Alabama and Florida. Hancock Holding Company, the Parent Company operates through three wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi, Hancock Bank of Louisiana, Baton Rouge, Louisiana and Hancock Bank of Florida, Tallahassee, Florida (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 accounting principles generally accepted in the United States of America 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, Hancock Mortgage Corporation, Inc., Hancock Investment Services, Inc., Hancock Insurance Agency, Inc., Harrison Finance Company, Magna Insurance Company and subsidiary, as well as three real estate corporations owning land and buildings that house bank branches and other facilities. 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 unrealized gains and losses on securities available for sale and a minimum pension liability.

Use of Estimates - In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, 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.

Statement of Cash Flows - Cash and cash equivalents are defined as only cash on hand and balances due from financial institutions. Supplemental information to the statements of cash flows include income taxes paid of $12.5 million, $26.7 million and $22.8 million for the years ended December 31, 2005, 2004 and 2003, respectively. Interest paid for the years ended December 2005, 2004 and 2003 was $74.3 million, $56.8 million and $59.3 million, respectively. Supplemental information of non-cash investing and financing activities include transfers from loans to other real estate and financed sales of foreclosed property. Transfers from loans to other real estate amounted to $2.7 million, $4.7 million and $7.1 million for the years ended December 31, 2005, 2004 and 2003, respectively. Financed sale of foreclosed property amounted to $1.3 million, $1.2 million and $3.3 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Securities - Securities have been classified into one of two categories: 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. 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 are classified as available for sale.

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 option date or, in the case of mortgage-backed securities, over the estimated life of the security using the constant-yield method. The pre-payment speed chosen to determine the estimated life of a mortgage-backed security is the security’s historical 3-month pre-payment speed. When pre-payment speeds are faster than expected, the average life of the mortgage-backed security is shorter than the original estimate. 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. Using this basis results in the most accurate reporting of gains and losses realized on these sales, as well as the appropriate adjustment to Accumulated Other Comprehensive Income. A decline in the fair value of securities below cost that is deemed to be other than temporary results in a charge to earnings and the establishment of a new cost basis for the security.

During 2005, securities classified as held to maturity in the portfolio of one of the Company’s subsidiaries were sold. A determination was made that this action tainted the investment portfolio of the entire Company. As a result of this action and determination, all securities held by the Company have been reclassified to available for sale and the carrying value of those securities are adjusted to fair value as prescribed in Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities.

Derivative Instruments - The Company does not apply for hedge accounting treatment under the guidelines of SFAS No. 133. The Company does have certain Interest Rate Lock Commitments (IRLC’s) that are carried off balance sheet. These represent forward commitments to fund customer mortgage loans that will be sold, servicing released upon funding. The Company values its position for the outstanding IRLC’s on a quarterly basis versus current market rates and tests its position for exposure to future earnings from the sale of those commitments.

Loans - Non-refundable loan origination fees and certain direct origination costs are 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. Categories of 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 reviewed relative to collectibility. Unless such loans are in the process of terms revision to bring to a current status, collection through repossession or foreclosure, those loans deemed 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.

Gains or losses on sales of mortgage loans are recognized at settlement dates and are computed as the difference between the sales proceeds received and the net book value of the mortgage loans sold. At the time of sale, a servicing asset is recorded on the sale of loans where the rights to service the loans are retained if expected servicing revenues exceed an amount approximating adequate servicing compensation. The Company held $18.1 million and $11.4 million in mortgage loans held for sale at December 31, 2005 and 2004. These loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.

Allowance for Loan Losses - The allowance for loan losses is a valuation account available to absorb losses inherent in the loan portfolio. This methodology considers all loans, includes a routine detailed analysis of the loan portfolio, economic factors, collateral values and considers risks inherent in the various types of lending the Company performs. 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. The Company has a developed and documented systematic methodology for the determining and maintaining an allowance for loan losses. The allowance for loan losses is increased by charges to expense and decreased by loan charge-offs (net of recoveries).

In 2005, management was presented with a unique and unfamiliar level of uncertainty in developing loan loss estimates for the impact of Hurricane Katrina. The Company’s Chief Credit Policy Officer undertook a detailed process to review the impact of the storm on our credit customers. This review resulted in recording a storm-related provision of $35.2 million. The establishment of this allowance was the result of management’s best estimates, based on available information of inherent credit losses resulting from the impact of Hurricane Katrina.

Property and Equipment - Property and equipment are recorded at amortized cost. Depreciation is computed using multiple methods based on the estimated useful lives of the related assets, which generally range from 7 to 39 years for buildings and improvements and from 3 to 7 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the term of the lease or the asset’s useful life.

The Company sustained significant impairment to several of its facilities and equipment in its coastal markets in Mississippi and Louisiana on August 29, 2005 as Hurricane Katrina passed over the Mississippi and Louisiana coasts. Losses related to the damaged facilities and equipment have been charged against earnings. The percent of damage sustained was determined by independent consultants, insurance adjusters and the Company’s Facilities Management personnel. Should the sustained damage differ from these assessments, the result may cause additional charges against or adjustment of the estimated losses.

Goodwill - Goodwill represents costs in excess of the fair value of net assets acquired in connection with purchase business combinations. In accordance with the provisions of SFAS No. 142, Goodwill and Other Intangibles, the Company tests its goodwill for impairment annually or if impairment indicators are present. If indicators of impairment were present in goodwill and undiscounted future cash flows were not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified.

Other Real Estate - Other real estate acquired through foreclosure is stated at 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. Valuation allowances associated with other real estate amounted to $450,000, $1.3 million and $2.2 million at December 31, 2005, 2004 and 2003, respectively.

The Company determines the fair value of other real estate utilizing observations of current market conditions, adjusted for contracts existing at the date of valuation. The carrying value of other real estate is adjusted on a quarterly basis.

Any subsequent adjustments as well as the costs associated with holding the real estate are charged to expense.

Other Intangible Assets - Other intangible assets consist of core deposit intangibles, value of business acquired, value of insurance expirations, non-compete agreements and mortgage servicing rights (MSRs). Core deposit intangibles relating to acquired banks, the value of business acquired relating to the insurance businesses acquired, the value on insurance expirations and non-compete agreements relating to the acquisition of an insurance agency are being amortized using accelerated methods. If indicators of impairment were present in amortizable intangible assets and undiscounted future cash flows were not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified.

MSRs are rights to service mortgage loans for others, on loans not retained by the Company. For loans originated and sold, where the servicing rights have been retained, the Company allocates the cost of the loan and servicing right based on their relative fair values. The Company amortizes MSRs over the estimated lives of the underlying loans in proportion to the resultant servicing income stream. For the valuation of MSRs, management obtains external information, evaluates overall portfolio characteristics and monitors economic conditions to arrive at appropriate prepayment speeds and other assumptions. These characteristics are used to stratify the servicing portfolio on which MSRs have been recognized to determine valuation and impairment. Impairment is recognized for the amount by which MSRs for a stratum exceed their fair value.

Life Insurance Contracts - Life insurance contracts represent single premium life insurance contracts on the lives of certain officers of the Company. The Company is the beneficiary of these policies, which were purchased during the third quarter of 2003 for $50.0 million, and an additional $25.0 million during the first quarter of 2004. These contracts are reported at their cash surrender values of $83.1 million and $79.6 million at December 31, 2005 and 2004, respectively. Changes in the cash surrender value are included in other income and amounted to $3.5 million in both 2005 and 2004.

Reinsurance Receivables - Certain premiums and losses are assumed from and ceded to other insurance companies under various reinsurance agreements. Reinsurance premiums, loss reimbursement, and reserves related to reinsurance business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contract. The Company may receive a ceding commission in connection with ceded reinsurance. If so, the ceding commission is earned on a monthly pro rata basis in the same manner as the premium and is recorded as a reduction of other operating expenses. The Company currently has $6.7 million of securities pledged with various state regulatory authorities.

Self Insurance - The Company is self insured for certain risks including employee health insurance and records estimated liabilities for these risks.

Transfers of Financial Assets - The Company recognizes the financial and servicing assets it controls and the liabilities it incurs, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. All measurements and allocations are based on fair value.

Trust Income - Trust income is 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 loans and earnings on the Company’s bank-owned life insurance policies). 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.

Pension Accounting - The Company accounts for its defined benefit pension plan using the actuarial model required by SFAS No. 87, Employers’ Accounting for Pensions. The compensation cost of an employee’s pension benefit is recognized on the projected unit credit method over the employee’s approximate service period. The aggregate cost method is utilized for funding purposes. The Company also sponsors two defined benefit post-retirement plans, which provide medical benefits and life insurance benefits. The Company accounts for these plans using the actuarial computations required by SFAS 106, Employers Accounting for Postretirement Benefits Other Than Pensions as amended by SFAS No. 132. The cost of the defined benefit post-retirement plan is recognized on the projected unit credit method over the employee’s approximate service period.

Policy Reserves and Liabilities - Unearned premium reserves are based on the assumption that the portion of the original premium applicable to the remaining term and amount of insurance will be adequate to pay future benefits. The reserve is calculated by multiplying the original gross premium times an unearned premium factor. Factors are developed which represent the proportion of the remaining coverage compared to the total coverage provided over the entire term of insurance.

Policy reserves for future life and health claims not yet incurred are based on assumed mortality and interest rates. For disability, the reserves are based upon unearned premium, which is the portion of the original premium applicable to the remaining term and amount of insurance that will be adequate to pay future benefits. PVANYD (Present Value of Amounts Not Yet Due) is an amount for disability claims already reported and incurred and represents the present value of all the future benefits using actuarial disability tables. IBNR (Incurred But Not Reported) is an estimate of claims incurred but not yet reported, and is based upon historical analysis of claims payments.

Stock-Based Compensation - -The Company applies APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock option plans. Accordingly, compensation cost is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the amount an employee must pay to acquire the stock. Deferred compensation associated with restricted stock awards is recognized ratably over the vesting period.

On December 21, 2005, the Board of Directors of the Company approved the accelerated vesting of all outstanding unvested options granted to employees. The Company used guidance provided in FASB Interpretations (FIN) No. 44, Accounting for Certain Transactions Involving Stock Compensation in the determination of the expense associated with the accelerated vesting of the unvested options outstanding. Compensation expense was calculated as the difference between the grant price and the current market price on the date of the vesting. Forfeiture rates were calculated based on observation of historical trends. The impact of this action was a reduction in 2005 pretax income of approximately $558,000. The acceleration of the vesting of these options allowed the Company to avoid future compensation expense estimated to be approximately $6.4 million.

The Company has adopted the disclosure-only option under SFAS No. 123 through December 31, 2005. The weighted average fair values of options granted during 2005 and 2004 were $13.43 and $11.87, 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,
                                                                                        -----------------------------------------
                                                                                           2005           2004           2003
                                                                                        -----------    -----------    -----------
Net earnings available to common
     stockholders (in thousands):
     As reported                                                                          $ 54,032       $ 61,704       $ 52,302
     Add stock based compensation expense included in reported
        net income, net of tax                                                                 558              -              -
     Deduct total stock based compensation determined under
       the fair value method for all awards, net of tax                                     (8,954)        (1,858)        (1,202)
                                                                                        -----------    -----------    -----------
     Pro forma net earnings available to common stockholders                              $ 45,636       $ 59,846       $ 51,100
                                                                                        ===========    ===========    ===========

Basic earnings per share:
     As reported                                                                          $   1.67       $   1.91       $   1.70
     Pro forma                                                                                1.41           1.85           1.66

Diluted earnings per share:
     As reported                                                                          $   1.64       $   1.87       $   1.64
     Pro forma                                                                                1.38           1.81           1.61

The fair values of options granted under the Company’s stock option plans during the years ended December 31, 2005, 2004, and 2003 were estimated using the Black-Scholes Pricing Model with the following assumptions used: The following table reflects the fair value of stock options at their grant dates and the weighted-average assumptions which were utilized in the Black-Scholes option-pricing model. 

                                                  2005            2004            2003
                                             -------------   -------------   -------------
Fair value of options                            $13.43          $11.87           $7.09
Risk-free investment rate                         4.00%           3.98%           3.64%
Expected volatility                              31.33%          31.33%          28.00%
Expected dividend yield                           2.12%           2.07%           1.97%
Expected life (in years)                              8               8               8

The Company will adopt SFAS No. 123R, Accounting for Stock-Based Compensation, effective January 1, 2006. Under the provisions of this statement, compensation expense is recognized for options granted, modified or settled after January 1, 2006, utilizing the fair value of the grants over the vesting period. The Company will estimate the fair value of each pool of options granted using the Black-Scholes options pricing model.

Basic and Diluted Earnings Per Common Share - Basic earnings per common share (EPS) excludes dilution and is computed by dividing net earnings available to common stockholders 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. Diluted EPS is computed by dividing net earnings available to common stockholders by the total of the weighted-average number of shares outstanding plus the “if-converted” effect of outstanding options and outstanding convertible preferred stock.

Off-Balance Sheet Credit Related Financial Instruments - In the ordinary course of business, the Company has entered into commitments to extend credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Recent Accounting Pronouncements -In October 2003, the American Institute of Certified Public Accountants (AICPA) issued Statement of Accounting Position (SOP) 03-03, which addresses accounting for differences between contractual cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. This SOP prohibits “carry over” or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. The Company adopted this SOP during the first quarter of 2005 as required and its effect on the consolidated financial statements, to date, has not been material.

The guidance in Emerging Issues Task Force (EITF) 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, was originally effective for other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. However, the guidance contained in paragraphs 10-20 of the Issue was delayed by FASB Staff Position (FSP) EITF Issue 03-1-1, The Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, posted on September 30, 2004. The disclosure requirements continue to be effective and have been implemented by the Company. In November 2005, the FASB issued Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which amends SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and No. 124, Accounting for Certain Investments Held by Not for Profit Organizations and APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is other than temporary, and the measurement of an impairment loss. FSP FAS 115-1 and FAS 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP is effective for reporting periods beginning after December 15, 2005. The Company does not expect the adoption of FAS 115-1 and FAS 124-1 will have a material impact on its financial condition or results of operations.

On December 16, 2004, the FASB published SFAS No. 123(R), Share-Based Payments. This Statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. It will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements based on the fair value of the equity or liability instruments issued. The Company will adopt SFAS No.123(R) effective January 1, 2006. The estimated effect on 2006 earnings is an increase in compensation expense of $900,000, or a reduction in diluted earnings per share of $0.03.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. This Statement is a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine period-specific effects of an accounting change on one or more individual prior periods presented. Then the new accounting principle is applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings for that period rather that being reported in an income statement. Further, the accounting principle is to be applied prospectively from the earliest date when it is impracticable to determine the effect to all prior periods. This Statement is effective for the Company as of January 1, 2006. Adoption of this statement could have an impact if there are future voluntary accounting changes and correction of errors.

Reclassifications - Certain prior year amounts have been reclassified to conform to the 2005 presentation.

NOTE 2 - NATURAL DISASTER AFFECTING HANCOCK IN 2005

Hurricane Katrina made landfall along the coasts of Mississippi and Louisiana on August 29, 2005 and significantly impacted the operating region of the Company. Specifically, the storm caused widespread damage in the Company’s primary operating region in the Coastal Mississippi counties of Hancock, Harrison, Pearl River and Jackson. While Louisiana also suffered widespread damage from the storm, the Company’s base of operation in Louisiana is primarily in the Baton Rouge region, Central Louisiana, the communities on the North Shore of Lake Pontchartrain and Jefferson Parish (suburb of New Orleans). Due to the Company’s limited footprint in the more severely affected areas of Louisiana, damage to the Company’s facilities there was limited.

The following table and discussion summarizes the more significant financial impacts the storm had on the Company in 2005 (in thousands): 

                                                                                          3Q05            4Q05          2005
                                                                                     ------------    ----------- ----------------

Reported earnings                                                                        $ 1,435       $ 19,065         $ 54,032
                                                                                     ============    =========== ================
Storm-related items included in earnings:
     Estimated credit losses                                                             (35,201)             -          (35,201)
     Gain on involuntary conversion of assets, net                                        14,135              -           14,135
     Other direct expenses, net                                                           (1,859)        (5,692)          (7,551)
     Waived fees                                                                          (3,785)             -           (3,785)
                                                                                     ------------    ----------- ----------------
Total storm-related impact                                                             $ (26,710)      $ (5,692)       $ (32,402)
                                                                                     ============    =========== ================

The Company implemented its disaster response plan as Hurricane Katrina approached the coast line. This plan consisted of alerting and readying key personnel to be transported to the Company’s disaster recovery site in Chicago, Illinois. Additional personnel were moved to Company-owned sites in Baton Rouge, Louisiana and Tallahassee, Florida. The Company continued to operate in a disaster recovery mode until such time it was safe and practical to resume full operations in the Gulfport, Mississippi area. As of December 31, 2005, essentially all disaster recovery operations have ceased and the Company had resumed full operations in the Gulfport, Mississippi area.

During the time period that the Company was in disaster recovery mode, certain costs were incurred, such as those related to the operation of a remote disaster recovery site ($2.4 million), moving costs and setup of equipment ($.5 million), airfare, lodging and meals related to displaced employees ($1.2 million), equipment and facility rental costs ($.2 million), building repairs and clean up costs ($1.6 million), advertising ($.8 million) and other various storm-related costs ($1.0 million).

Hurricane Katrina inflicted significant damage to many of the Company’s facilities. Of the Company’s 104 branch facilities, 40 sustained at least some damage. There were 9 branches that sustained damage between 50 and 90 percent, while an additional 7 branches were essentially 100% damaged. In addition, the Company’s main headquarters building in Gulfport, Mississippi sustained significant damage and will be uninhabitable until repairs are complete in late summer 2006. Management has identified specific fixed asset impairment costs due to the storm totaling $8.8 million through December 31, 2005.

The Company is very well insured against property and casualty and other related losses associated with natural disasters, such as hurricanes. Through property and casualty, flood, business interruption and other forms of insurance, the Company filed insurance claims with its various providers totaling $44.0 million. Based on management’s best estimate of claims for which collection was received or substantially assured, a receivable related to insurance proceeds of $23.5 million was booked on September 30, 2005. Additional insurance proceeds are considered contingent upon reaching further agreement on claims and may be recognized as gains upon their receipt.

The Company’s management was presented with a unique and unfamiliar level of uncertainty in developing estimates for the impact of Hurricane Katrina on the Company’s credit quality. As such, in the immediate aftermath of the storm, the Company’s Chief Credit Policy Officer undertook a detailed process to review the impact of the storm on our credit customers and to develop a process to estimate the Company’s storm-related credit losses. The result of the aforementioned credit review process was that the Company at September 30, 2005 took a $35.2 million storm-related provision for loan losses that increased the allowance for loan losses to $76.6 million. The establishment of this allowance was the result of management’s best estimates, based on available information, of inherent credit losses resulting from the impact of Hurricane Katrina. As additional information becomes available related to the overall economic condition of the affected areas and with further assessments by credit officers of individual credit customers, the loss estimate will be revised as necessary.

Since the establishment of the $35.2 million storm-related allowance for loan losses at September 30, 2005, the Company has recorded storm-related net charge-offs of $2.35 million. The impact of these storm-related net charge-offs reduced the overall storm-related allowance to $32.85 million. The Company updated its review of the storm-related allowance at December 31, 2005 and concluded that the remaining allowance of $32.85 million was appropriate.

In the immediate aftermath of Hurricane Katrina, the Company recognized that many of our customers were in a position where assistance in recovering from the storm would be necessary. The Company immediately ceased charging service charges, return item fees and ATM fees for all depository customers in Mississippi through October 14, 2005 and in Louisiana through September 30, 2005. In addition, certain other late and loan fees, mortgage fees and rental income were waived as a direct result of the storm. The total fees waived through September, 30, 2005 were $3.8 million.

NOTE 3 - ACQUISITIONS

On July 1, 2005, Hancock Insurance Agency acquired 100% of the stock of J Everett Eaves, Inc., a well-known commercial insurance agency operating in the New Orleans, Louisiana market. The transaction resulted in recording intangibles of approximately $4.7 million. Upon completion of an intangibles valuation to be performed by an independent third party, the intangibles will be reallocated among goodwill (its current classification), value of insurance expirations and non-compete agreements. The latter two categories are amortizable intangibles and will be assigned appropriate lives based on valuations.

An intangibles valuation relating to the intangibles recorded in the acquisition of Ross King Walker, Inc. in late 2004 was completed during 2005. The reallocation of intangibles resulted in the recording of three separate categories of intangible assets: value of insurance expirations, $1.1 million; non-compete agreements, $0.2 million and goodwill of $1.3 million. The value of insurance expirations and non-compete agreement assets are being amortized over 10 year and 5 year lives, respectively, on an accelerated basis.

During March 2004, the Company acquired the majority of loans, securities and deposits of the former Guaranty National Bank (GNB) of Tallahassee, Florida. The Office of the Comptroller of Currency closed all locations of GNB on March 12, 2004. With this transaction, the Company acquired five locations with approximately $40.0 million in performing loans and approximately $69.0 million in deposits from the Federal Deposit Insurance Corporation (FDIC) for a premium of $12.6 million, or 18% of acquired deposits. The Company acquired $77.4 million in assets, which included the core deposit intangible totaling $1.3 million. The Company paid $5.0 million in consideration for the acquisition of the assets, net of related deposit liabilities. In accounting for the transaction, management considered it to be an “acquisition of business” and accordingly, accounted for it under the purchase method of accounting pursuant to SFAS No. 141. Final allocations of asset fair values were recorded based on an analysis, performed by an independent third party, of deposit balances acquired in this transaction. In addition to adjustments to properly allocate asset fair values, an adjustment to reduce goodwill by approximately $1.1 million was recorded in association with the sale of a building acquired through a subsequent settlement activity related to this transaction.

The following table summarized the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands): 

Securities and Other Investments                                                               $ 15,182
Loans                                                                                            39,923
Property and Equipment                                                                            6,154
Goodwill                                                                                         11,309
Core Deposit Intangibles                                                                          1,258
Other                                                                                               276
                                                                                           -------------
     Total Assets Acquired                                                                       74,102
                                                                                           -------------

Deposits                                                                                         68,997
Other                                                                                               101
                                                                                           -------------
     Total Liabilities Assumed                                                                   69,098
                                                                                           -------------
          Net Cash Paid in Connection with the Acquisition                                     $ (5,004)
                                                                                           =============
NOTE 4 - SECURITIES

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

                                                December 31, 2005                                December 31, 2004
                              -------------------------------------------------- -------------------------------------------------
                                               Gross         Gross                                 Gross        Gross
                               Amortized     Unrealized   Unrealized      Fair      Amortized   Unrealized   Unrealized     Fair
                                 Cost          Gains        Losses       Value         Cost       Gains        Losses       Value
                              ------------- -----------  ----------- ----------- ------------- ---------- ------------ -----------
U.S. Treasury                   $   50,883    $    22    $     35    $    50,870  $     9,985    $     -   $     66    $     9,919
U.S. government agencies         1,029,656        299      10,695      1,019,260      413,419      1,079      3,559        410,939
Municipal obligations              165,180      3,548         521        168,207       60,956      2,520        120         63,356
Mortgage-backed securities         484,131      1,064      11,657        473,538      352,510      1,428      4,758        349,180
CMOs                               194,899          6       2,827        192,078      263,471        238      1,467        262,242
Other debt securities               48,476        288       1,553         47,211        7,056        448          -          7,504
Federal home loan bank stock         5,422          -           -          5,422        7,079          -          -          7,079
Other equity securities              2,098        631          54          2,675        4,146        456        353          4,249
                              ------------- -----------  ----------- ----------- ------------- ---------- ------------ -----------
                                $1,980,745    $ 5,858    $ 27,342    $ 1,959,261  $ 1,118,622    $ 6,169   $ 10,323    $ 1,114,468
                              ============= ===========  =========== =========== ============= ========== ============ ===========



     The amortized cost and fair value of securities classified as available for sale at December 31, 2005, by contractual
maturity, (expected maturities will differ from contractual maturities because of rights to call or repay obligations with or
without penalties)were as follows (in thousands):

                                                                                                Amortized        Fair
                                                                                                   Cost          Value
                                                                                            --------------- ---------------
Due in one year or less                                                                        $   649,907    $   648,929
Due after one year through five years                                                              435,549        432,026
Due after five years through ten years                                                             193,210        189,475
Due after ten years                                                                                 15,529         15,118
                                                                                            --------------- ---------------
                                                                                                 1,294,195      1,285,548

Mortgage-backed securities & CMOs                                                                  679,030        665,616
Equity securities                                                                                    7,520          8,097
                                                                                            --------------- ---------------
                                                                                               $ 1,980,745    $ 1,959,261
                                                                                            =============== ===============



     During 2005, securities classified as held to maturity in the portfolio of one of the Company's subsidiaries were sold.  A
determination was made that this action tainted the investment portfolio of the entire Company.  As a result of this action and
determination, all securities held by the Company have been classified to available for sale and the carrying value of those
securities are adjusted to market as prescribed in Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities.  Investments with a carrying value of approximately $167 million were reclassified
and resulted in the recording of net unrealized gains of approximately $480,000.  There were no associated gains or losses in
accumulated other comprehensive income related to any derivative which hedged the acquisition of these securities.
     Accordingly, the Company held no securities classified as held to maturity at December 31, 2005.
     The amortized cost and fair value of securities classified as held to maturity at December 31, 2004 were as follows (in
thousands):

                                                     December 31, 2004
                                 ---------------------------------------------------------
                                                      Gross        Gross
                                     Amortized      Unrealized   Unrealized       Fair
                                        Cost          Gains        Losses         Value
                                 --------------- ------------- ------------- --------------
U.S. Treasury                         $   1,057       $    18        $   2      $   1,073
U.S. government agencies                 13,160            90           58         13,192
Municipal obligations                   103,914         5,239            -        109,153
Mortgage-backed securities               23,058           691           64         23,685
CMOs                                        602            16            -            618
Other debt securities                    46,110           433          686         45,857
                                 --------------- ------------- ------------- --------------
                                      $ 187,901       $ 6,487        $ 810      $ 193,578
                                 =============== ============= ============= ==============



     The details concerning securities classified as available for sale with unrealized losses as of December 31, 2005 were as
follows (in thousands):

                                              Losses < 12 months          Losses 12 months or >              Total
                                      ------------------------------ ------------------------------ -----------------------------
                                                           Gross                        Gross                          Gross
                                             Fair        Unrealized      Fair         Unrealized        Fair         Unrealized
                                            Value          Losses        Value          Losses          Value          Losses
                                      --------------- -------------- ------------- ---------------- --------------- -------------
U.S. Treasury                              $  49,992       $    30    $      193        $      5     $    50,185      $     35
U.S. government agencies                     269,754           569       537,172          10,126         806,926        10,695
Municipal obligations                            889             3        21,625             518          22,514           521
Mortgage-backed securities                     8,767           188       379,133          11,469         387,900        11,657
CMOs                                               -             -       191,371           2,827         191,371         2,827
Other debt securities                         12,972           583        21,121             970          34,093         1,553
Equity securities                                 67            54             -               -              67            54
                                      --------------- -------------- ------------- ---------------- --------------- -------------
                                           $ 342,441       $ 1,427    $1,150,615        $ 25,915     $ 1,493,056      $ 27,342
                                      =============== ============== ============= ================ =============== =============



     The details concerning securities classified as available for sale with unrealized losses as of December 31, 2004 were as
follows (in thousands):


                                      Losses < 12 months               losses 12 months or >                  Total
                                 ------------------------------    -----------------------------   -------------------------------
                                                      Gross                           Gross                             Gross
                                     Fair          Unrealized         Fair         Unrealized            Fair         Unrealized
                                     Value           Losses           Value          Losses             Value           Losses
                                 --------------    ------------    ------------   --------------    ---------------  -------------
U.S. Treasury                         $  9,919          $   66       $       -          $     -           $  9,919       $     66
U.S. government agencies               135,447           1,587          93,656            1,972            229,103          3,559
Municipal obligations                    1,257               7           7,246              113              8,503            120
Mortgage-backed securities             114,888           1,096         172,372            3,662            287,260          4,758
CMOs                                    28,727             182         174,818            1,285            203,545          1,467
Equity securities                          118              41           1,806              312              1,924            353
                                 --------------    ------------    ------------   --------------    ---------------  -------------
                                      $290,356          $2,979       $ 449,898          $ 7,344           $740,254       $ 10,323
                                 ==============    ============    ============   ============== == ===============  =============


     The details concerning securities classified as held to maturity with unrealized losses as of December 31, 2004 were as
follows (in thousands):


                                    Losses < 12 months             Losses 12 months or >                    Total
                               ----------------------------    ------------------------------    -----------------------------
                                                  Gross                            Gross                            Gross
                                   Fair        Unrealized         Fair          Unrealized           Fair        Unrealized
                                  Value          Losses           Value           Losses             Value         Losses
                               -------------   ------------    ------------    --------------    --------------  ------------
U.S. Treasury                       $    99          $   2         $     -              $  -           $    99         $   2
U.S. government agencies              4,518             42           1,699                16             6,217            58
Municipal obligations                 5,837             59             331                 5             6,168            64
Mortgage-backed securities           27,977            678             363                 8            28,340           686
                               -------------   ------------    ------------    --------------    --------------  ------------
                                    $38,431          $ 781         $ 2,393              $ 29           $40,824         $ 810
                               =============   ============    ============    ==============    ==============  ============

As of December 31, 2005, the Company had 1,438 investments. Of the total portfolio, 383 securities were in an unrealized loss position. Management and the Asset/Liability Committee are continually monitoring the securities portfolio and the Company believes that its premium amortization policies are appropriate. Accordingly, management is able to effectively measure and monitor the unrealized loss position on these securities and because the Company has adequate liquidity, it can hold these securities to recovery. The unrealized loss of these securities has been determined to be temporary.

Proceeds from sales of available for sale securities were approximately $133.7 million in 2005, $20.0 million in 2004 and $256.6 million in 2003. Gross gains of $781,000 in 2005, $165,000 in 2004, $1.978 million in 2003 and gross losses of $834,000 in 2005, $2,000 in 2004 and $311,000 in 2003 were realized on such sales.

Securities with an amortized cost of approximately $1,030.9 million at December 31, 2005 and $943.7 million at December 31, 2004, were pledged primarily to secure public deposits and securities sold under agreements to repurchase.

NOTE 5 - LOANS

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

                                                                                                     December 31,
                                                                                           -------------------------------
                                                                                                2005            2004
                                                                                           --------------- ---------------
  Real estate loans                                                                           $ 1,879,107     $ 1,764,334
  Commercial and industrial loans                                                                 364,163         290,005
  Loans to individuals for household, family
     and other consumer expenditures                                                              520,218         506,949
  Leases and other loans                                                                          225,698         187,272
                                                                                           --------------- ---------------
                                                                                              $ 2,989,186     $ 2,748,560
                                                                                           =============== ===============

The Company generally makes loans in its market areas of South Mississippi, South Alabama, South Central Louisiana and Northwest Florida. 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. Balances of loans to the Company’s directors, executive officers and their affiliates at December 31, 2005 and 2004 were approximately $15.2 million and $14.8 million, respectively. New loans and repayments of directors and executive officers and their affiliates on these loans for 2005 were $4.4 million and $4.0 million, respectively. New loans, repayments and changes in directors and executive officers and their affiliates on these loans for 2004 were $3.0 million, $3.6 million and $110,000, respectively.

The Company’s management was presented with the challenge of developing estimates for the impact of Hurricane Katrina on the Company’s credit quality. As such, in the immediate aftermath of the storm, the Company’s Chief Credit Policy Officer undertook a detailed process to review the impact of storm on our credit customers and to develop a process to estimate the Company’s storm-related credit losses. The result of the aforementioned credit review process was that the Company at September 30, 2005 took a $35.2 million storm-related provision for loan losses that increased the allowance for loan losses to $76.6 million. The establishment of this allowance was the result of management’s best estimates, based on available information, of inherent credit losses resulting from the impact of Hurricane Katrina. As additional information becomes available related to the overall economic condition of the affected areas and with further assessments by credit officers of individual credit customers, the loss estimate will be revised as necessary.

Since the establishment of the $35.2 million storm-related allowance for loan losses at September 30, 2005, the Company has recorded storm-related net charge-offs of $2.35 million. The impact of these storm-related net charge-offs reduced the overall storm-related reserve to $32.85 million. The Company updated its review of the storm-related allowance at December 31, 2005 concluded that the remaining allowance of $32.85 million was adequate.

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

                                                                          Years Ended December 31,
                                               --------------------------------------------------------------------------------
                                                                                     2005            2004            2003
                                               ------------------------------------------------ --------------- ---------------
                                                 Non-Storm     Storm-Related        Total
                                               --------------- ----------------  --------------- --------------- ---------------
Balance at January 1                                 $ 40,682        $      -         $ 40,682        $ 36,750        $ 34,740
Recoveries                                              7,052               -            7,052           7,823           6,399
Loans charged off                                     (13,461)         (2,350)         (15,811)        (20,428)        (19,543)
Provision charged to operating expense                  7,434          35,201           42,635          16,537          15,154
                                               --------------- ----------------  --------------- --------------- ---------------
Balance at December 31                               $ 41,707        $ 32,851         $ 74,558        $ 40,682        $ 36,750
                                               =============== ================  =============== =============== ===============

Non-accrual and renegotiated loans amounted to approximately 0.36% and 0.27% of total loans at December 31, 2005 and 2004, respectively. In addition, the Company’s other individually evaluated impaired loans amounted to approximately 0.86% and 0.19% of total loans at December 31, 2005 and 2004, respectively. The average amounts of impaired loans carried on the Company’s books for 2005, 2004 and 2003 were $9.3 million, $9.8 million and $14.1 million, respectively. Interest recognized on impaired loans is immaterial to the Company’s operating results. Related allowance amounts were not significant during the years ended December 31, 2005, 2004 or 2003. The amount of interest not accrued on these loans did not have a material effect on earnings in 2005, 2004 or 2003.

As of December 31, 2005 and December 31, 2004, the Company had investments in classified loans totaling $112.1 million and $115.7 million, respectively. The Company’s allowance for loan losses includes accruals of $17.1 million and $13.9 million associated with these loans as of December 31, 2005 and 2004, respectively. The remaining amount of these loans, $95.0 million and $101.7, respectively, is not provided for specifically in the allowance for loan losses.

In some instances, loans are placed on nonaccrual status. All accrued but uncollected interest related to the loan is deducted from income in the period the loan is assigned a nonaccrual status. For such period as a loan is in nonaccrual status, any cash receipts are applied first to principal, second to expenses incurred to cause payment to be made and lastly to the recovery of any reversed interest income and interest that would be due and owing subsequent to the loan being placed on nonaccrual status.

In the aftermath of Hurricane Katrina, Hancock recognized that many of our credit customers (mostly residential mortgage holders) were in a position where time would be needed to recover sufficiently from the storm before they could resume payments on their loans. Accommodations in the form of loan payment extensions (most for 90 days) were granted on a customer-by-customer basis. While these accommodations gave customers time to re-align their finances after the storm the result of this cooperative effort has increased the Company’s past due loan percentages. As customers receive insurance proceeds, loans for which alternate payment arrangements had been made will resume payments on their loans. In some cases, such as customer loans collateralized by property that was damaged, the insurance proceeds will be applied toward satisfying the outstanding balance.

NOTE 6 - PROPERTY AND EQUIPMENT

Hurricane Katrina inflicted significant damage to many of the Company’s facilities. Forty of the Company’s 104 branch facilities sustained at least some damage. Nine branches sustained damage between 50 and 90 percent, while an additional 7 branches were essentially 100% damaged. In addition, the Company’s main headquarters building in Gulfport, Mississippi sustained significant damage and will be uninhabitable until repairs are complete in late summer 2006. Management has identified specific fixed asset impairments due to the storm totaling $8.8 million through December 31, 2005. 

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

                                          December 31, 2004     Additions      Dispositions     Impairment    December 31, 2005
                                          ----------------- ---------------  --------------- ---------------  ------------------
Land                                             $18,964            $1,699           $ (320)       $      -             $20,343
Land improvements                                  1,058               246                -              (8)              1,296
Buildings and leasehold improvements              72,876             8,354           (1,221)        (15,617)             64,392
Furniture, fixtures and equipment                 64,715             5,330             (372)        (18,396)             51,277
                                          ---------------   ---------------  --------------- ---------------  ------------------
                                                 157,613            15,629           (1,913)        (34,021)            137,308
Accumulated depreciation and amortization        (77,765)           (6,784)           1,458          25,169             (57,922)
                                          ---------------   ---------------  --------------- ---------------  ------------------
Total Property and Equipment, net                $79,848            $8,845           $ (455)       $ (8,852)            $79,386
                                          ===============   ===============  =============== ===============  ==================



NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

     The changes in the carrying amount of goodwill for 2005 and 2004 were as follows (in thousands):

                                                                                                December 31,
                                                                                        ----------------------------
                                                                                          2005            2004
                                                                                        ------------  --------------
  Balance at January 1                                                                     $ 55,409        $ 49,100
  Goodwill on business acquisition                                                            4,715          11,309
  Reallocation based on subsequent valuation                                                  1,304               -
  Goodwill allocated to core deposit intangibles during the period                                -          (5,000)
  Goodwill adjustment related to consolidation of branches                                      (10)              -
                                                                                        ------------  --------------
  Balance at December 31                                                                   $ 61,418        $ 55,409
                                                                                        ============  ==============



     The following tables present information regarding the components of the Company's other intangible assets, and related
amortization for the dates indicated (in thousands):

                                                                December 31, 2005               December 31, 2004
                                                          ------------------------------- -------------------------------
                                                          Gross Carrying   Accumulated    Gross Carrying   Accumulated
Amortizable intangible assets:                                Amount       Amortization       Amount       Amortization
                                                          --------------- --------------- --------------- ---------------
  Core deposit intangibles                                      $ 14,137         $ 5,924        $ 14,148         $ 4,281
  Value of insurance business acquired                             1,673             833           2,575             179
  Non-compete agreements                                             228              76               -               -
  Mortgage servicing rights                                        4,292           2,716           4,835           2,315
                                                          --------------- --------------- --------------- ---------------
                                                                $ 20,330         $ 9,549        $ 21,558         $ 6,775
                                                          =============== =============== =============== ===============

                                                                                               Years Ended December 31,
                                                                                          -------------------------------
Aggregate amortization expense for:                                                            2005            2004
                                                                                          --------------- ---------------
  Core deposit intangibles                                                                       $ 1,654         $ 1,766
  Value of insurance business acquired                                                               471             179
  Non-compete agreements                                                                              69               -
  Mortgage servicing rights                                                                          818           1,048
                                                                                          --------------- ---------------
                                                                                                 $ 3,012         $ 2,993
                                                                                          =============== ===============

Amortization of the core deposit intangibles is estimated to be approximately $1.4 million in 2006, $1.2 million in 2007, $1.1 million in 2008, $1.1 million in 2009, $1.1 million in 2010 and the remainder of $2.3 million thereafter. The amortization of the value of business acquired and non-compete agreements are expected to approximate $237,000 in 2006, $201,000 in 2007, $166,000 in 2008, $132,000 in 2009, $97,000 in 2010 and the remainder of $158,000 million thereafter. Amortization of servicing rights is estimated to be approximately $570,000 in 2006, $402,000 in 2007, $266,000 in 2008, $182,000 in 2009, $118,000 in 2010 and the remainder of $38,000 million thereafter. The weighted-average amortization period used for intangibles is 10 years. The servicing rights are included in the mortgage subsidiary’s assets, which have been reported within the Mississippi segment.

NOTE 8 - DEPOSITS

The Company experienced significant deposit growth since Hurricane Katrina impacted our market area. The majority of the deposit inflows consisted of transaction accounts and, to a lesser extent, short duration (12 months or less) time deposits. This rapid inflow of deposit dollars creates the potential for additional future liquidity needs; accordingly, the deposit inflows since the storm were primarily invested in Fed Funds, short-term U. S. Treasury Bills and U. S. Agency Discount notes, and short duration U. S. Agency bonds. 

         The maturities of time deposits at December 31, 2005 are as follows (in thousands):



  2006                                                                                                         $  906,373
  2007                                                                                                            277,045
  2008                                                                                                            175,311
  2009                                                                                                             98,255
  2010                                                                                                             43,049
  thereafter                                                                                                           14
                                                                                                            --------------
                                                                                                               $1,500,047
                                                                                                            ==============


     Time deposits of $100,000 or more totaled approximately $633.6 million and $479.8 million at December 31, 2005 and 2004,
respectively.

NOTE 9 - FEDERAL FUNDS SOLD, FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

     The following table presents information concerning federal funds purchased and sold and securities sold under agreements
to repurchase (in thousands):

                                                                                                              December 31,
                                                                                                    -------------------------------
                                                                                                         2005            2004
                                                                                                    --------------- ---------------
Federal funds sold
  Amount Outstanding at period-end                                                                       $ 402,968       $ 142,135
  Weighted average interest rate at period-end                                                               4.00%           2.13%

Federal funds purchased
  Amount Outstanding at period-end                                                                       $   1,475       $     800
  Weighted average interest rate at period-end                                                               3.95%           2.15%
  Weighted average interest rate during the year                                                             3.27%           1.64%
  Average daily balance during the year                                                                  $  10,262       $  14,181
  Maximum month end balance during the year                                                              $  55,120       $  41,852

Securities sold under agreements to repurchase
  Amount Outstanding at period-end                                                                       $ 250,807       $ 195,478
  Weighted average interest rate at period-end                                                               4.29%           1.13%
  Weighted average interest rate during the year                                                             1.94%           0.98%
  Average daily balance during the year                                                                  $ 224,842       $ 195,470
  Maximum month end balance during the year                                                              $ 258,508       $ 243,101


     The carrying values of federal funds purchased and securities sold under agreements to repurchase, by contractual maturity
are as follows (in thousands):

                                                                                                        December 31,
                                                                                               ------------------------------
                                                                                                   2005            2004
                                                                                               -------------- ---------------

Demand/in one day                                                                                  $ 252,282       $ 146,278
Term up to 1 year                                                                                          -          50,000
                                                                                               -------------- ---------------
                                                                                                   $ 252,282       $ 196,278
                                                                                               ============== ===============


     Specific U. S. Treasury and U. S. Government agencies with carrying values of $250.8 million at December 31, 2005 and
$198.7 million at December 31, 2004, collateralized the repurchase agreements.  The fair value of this collateral approximated
$259.2 million at December 31, 2005 and $198.3 million at December 31, 2004.
NOTE 10 - SHORT-TERM AND LONG-TERM NOTES

At December 31, 2003, short-term notes consisted of a promissory note for $9.4 million. These funds were used to fund the purchase of Magna Insurance Company on December 31, 2003. The note carried a rate of 2.75% and matured March 31, 2004. There were no such notes outstanding at December 31, 2005 or 2004.

Long-term notes consist primarily of $50.0 million of advances from the Federal Home Loan Bank (FHLB), which were assumed through acquisition. The advances consist of two notes, $40.0 million bears interest at 4.49% and is due January 21, 2009 and $10.0 million bears interest at 4.75% and is due November 11, 2008. These advances are fixed rate, non-prepayable and are callable quarterly at the FHLB’s option. These advances are collateralized by a blanket pledge of certain residential mortgage loans. The Company has an approved line of credit with the FHLB of approximately $220.9 million, which had no outstanding balance at December 31, 2005 and 2004.

NOTE 11 - REDEEMABLE PREFERRED STOCK

On June 28, 2001, the Company’s stockholders approved the issuance of up to 50 million shares of $20 par value preferred stock on terms to be determined by the Company’s Board of Directors.

The issuance of 1,658,275 shares of 8% Cumulative Convertible Preferred Stock Series A was authorized by the Board of Directors in connection with the acquisition of Lamar Capital Corporation on July 1, 2001. Each share of the preferred stock was convertible into 1.3332 of the Company’s common stock at any time after issuance. The Company was able to call for conversion of the preferred stock into common stock or for redemption at par any time between the 30th and 60th month following issuance if the closing price of the Company’s common stock exceeded $18.75 for 20 consecutive days. After 60 months, the Company was able to call for redemption at par at any time. At the end of 30 years the Company must have redeemed the preferred stock at par.

The Series A Preferred stock qualified as Tier 1 capital for regulatory purposes but was classified between liabilities and stockholders’ equity for reporting under accounting principles generally accepted in the United States of America.

On February 4, 2004, the Company completed the redemption/conversion of substantially all the shares of 8% Cumulative Convertible Preferred Stock. The conversion factor was 1.3332 shares of the Company’s common stock for each share of preferred stock. A total of 7,304 shares of the preferred stock were redeemed for cash at the contract price of $20.00 per share plus pro rated dividends of $0.1511 per share.

NOTE 12 - COMMON STOCKHOLDERS' EQUITY

Common 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. Dividends paid by Hancock Bank of Florida are subject to approval by the Florida Department of Financial Services. The amount of capital of the subsidiary banks available for dividends at December 31, 2005 was approximately $82 million.

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, all of the subsidiary banks were deemed to be “well capitalized” as of December 31, 2005 and 2004 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.

The Company and its bank subsidiaries are required to maintain certain minimum capital levels. At December 31, 2005 and 2004, 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, 2005 and 2004 (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, 2005
     Total capital (to risk weighted assets)
        Company                                  $ 466,501        12.73        $ 293,166          8.00     $     N/A           N/A
        Hancock Bank                               241,626        12.21          158,314          8.00       197,892         10.00
        Hancock Bank of Louisiana                  181,077        11.40          127,072          8.00       158,839         10.00
        Hancock Bank of Florida                     27,067        26.08            8,303          8.00        10,378         10.00

     Tier 1 capital (to risk weighted assets)
        Company                                  $ 420,283        11.47        $ 146,568          4.00     $     N/A           N/A
        Hancock Bank                               216,594        10.95           79,121          4.00       118,682          6.00
        Hancock Bank of Louisiana                  161,147        10.15           63,506          4.00        95,259          6.00
        Hancock Bank of Florida                     25,768        24.83            4,151          4.00         6,227          6.00

     Tier 1 leverage capital
        Company                                  $ 420,283         7.85        $ 160,618          3.00     $     N/A           N/A
        Hancock Bank                               216,594         6.84           94,997          3.00       158,329          5.00
        Hancock Bank of Louisiana                  161,147         7.67           63,030          3.00       105,050          5.00
        Hancock Bank of Florida                     25,768        24.01            3,220          3.00         5,366          5.00

At December 31, 2004
     Total capital (to risk weighted assets)
        Company                                  $ 437,481        13.58        $ 257,804          8.00     $     N/A           N/A
        Hancock Bank                               251,273        14.44          139,163          8.00       173,954         10.00
        Hancock Bank of Louisiana                  167,338        11.96          111,907          8.00       139,884         10.00
        Hancock Bank of Florida                      6,545        11.51            4,548          8.00         5,685         10.00

     Tier 1 capital (to risk weighted assets)
        Company                                  $ 399,320        12.39        $ 128,902          4.00     $     N/A           N/A
        Hancock Bank                               229,500        13.19           69,582          4.00       104,372          6.00
        Hancock Bank of Louisiana                  151,664        10.84           55,954          4.00        83,930          6.00
        Hancock Bank of Florida                      5,831        10.26            2,274          4.00         3,411          6.00

     Tier 1 leverage capital
        Company                                  $ 399,320         8.97        $ 133,587          3.00     $     N/A           N/A
        Hancock Bank                               229,500         8.74           78,768          3.00       131,281          5.00
        Hancock Bank of Louisiana                  151,664         8.46           53,779          3.00        89,631          5.00
        Hancock Bank of Florida                      5,831         8.19            2,136          3.00         3,560          5.00



NOTE 13 - INCOME TAXES

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

                                                                                 Years Ended December 31,
                                                                        -------------------------------------------
                                                                          2005            2004            2003
                                                                        -----------    ------------   -------------
Current federal                                                           $ 34,183        $ 28,001        $ 23,589
Current state                                                                3,089           2,121             888
                                                                        -----------    ------------   -------------
Total currently payable                                                     37,272          30,122          24,477
                                                                        -----------    ------------   -------------

Deferred federal                                                           (14,864)         (2,960)            126
Deferred state                                                              (3,537)           (569)             24
                                                                        -----------    ------------   -------------
Total deferred                                                             (18,401)         (3,529)            150
                                                                        -----------    ------------   -------------

Total tax expense                                                         $ 18,871        $ 26,593        $ 24,627
                                                                        ===========    ============   =============


     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,
                                                                                               ----------------------------
                                                                                                   2005          2004
                                                                                               ------------- --------------
Deferred tax assets:
Minimum pension liability                                                                          $  5,031       $  5,055
Post-retirement benefit obligation                                                                    2,039          1,915
Allowance for loan losses                                                                            27,711         15,055
Deferred compensation                                                                                 1,851          1,559
Unrealized loss on securities available for sale                                                      7,908          1,550
Premium amortization on securities, net                                                               5,186              -
Other                                                                                                     -             29
                                                                                               ------------- --------------
Gross deferred tax assets                                                                            49,726         25,163
                                                                                               ------------- --------------

Deferred tax liabilities:
Prepaid pension                                                                                      (1,856)        (1,829)
Loan servicing assets                                                                                  (603)          (964)
Property and equipment depreciation                                                                  (5,034)        (5,035)
Core deposit intangible                                                                                (339)          (736)
Discount accretion on securities, net                                                                     -           (978)
Prepaid expenses                                                                                     (1,353)             -
Other                                                                                                  (161)             -
                                                                                               ------------- --------------
Gross deferred tax liabilities                                                                       (9,346)        (9,542)
                                                                                               ------------- --------------
  Net deferred tax assets                                                                          $ 40,380       $ 15,621
                                                                                               ============= ==============


     Based upon the level of historical taxable income and projections for future taxable income over the periods, which the
deferred tax assets are deductible, management believes that it is more likely than not that the Company will realize the
benefits of these deductible differences existing at December 31, 2005.  Therefore, no valuation allowance is necessary at this
time.
     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,
                                                    -------------------------------------------------------------------------------
                                                              2005                        2004                        2003
                                                    -----------------------    ------------------------    ------------------------
                                                      Amount           %           Amount          %           Amount          %
                                                    ------------   --------    --------------  --------    --------------  --------
Taxes computed at statutory rate                        $25,526         35           $30,904        35           $27,854        35
Increases (decreases) in taxes resulting from:
     State income taxes, net of federal income
       tax benefit                                        1,059          1             1,099         1               619         1
     Tax-exempt interest                                 (4,105)        (5)           (4,015)       (5)           (3,964)       (5)
     Bank owned life insurance                           (1,279)        (2)           (1,248)        -                 -         -
     Contingency release, net                            (1,163)        (1)                -         -                 -         -
     Tax Credits                                           (674)        (1)                -         -                 -         -
     Other, net                                            (493)        (1)             (147)        -               118         -
                                                    ------------   --------    --------------  --------    --------------  --------
        Income tax expense                              $18,871         26           $26,593        31           $24,627        31
                                                    ============   ========    ==============  ========    ==============  ========


     The release of contingency reserve is due to recent indications that the Company is meeting the qualifications required by
the IRS for tax-exempt income from Bank Owned Life Insurance.
     Due to recent tax legislation following Hurricane Katrina, there are several tax credits that will be available to the
Company for the 2005 tax year, the Worker's Opportunity Tax Credit and the Employee Retention Tax Credit.
     The income tax provisions related to items included in the Consolidated Statements of Other Comprehensive Earnings were as
follows (in thousands):

                                                                                     Years Ended December 31,
                                                                        -------------------------------------------------
                                                                           2005              2004              2003
                                                                        -------------    --------------    --------------
Minimum pension liability                                                   $     24          $   (142)         $   (965)
Unrealized holdings (losses) gains                                            (6,347)           (2,526)           (7,384)
Reclassification adjustments                                                      49               (72)             (574)
                                                                        -------------    --------------    --------------
      Total (Benefit)                                                       $ (6,274)         $ (2,740)         $ (8,923)
                                                                        =============    ==============    ==============


NOTE 14 - 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.  The measurement date for the pension plan is September 30, 2005.  Data
relative to the pension plan follows (in thousands):

                                                                                                  Years Ended September 30,
                                                                                          ---------------------------------------
                                                                                                2005                 2004
                                                                                          -----------------    ------------------
Reconciliation of Benefit Obligation:
     Benefit obligation at beginning of year                                                      $ 57,925              $ 51,602
     Service cost                                                                                    2,153                 2,058
     Interest cost                                                                                   3,395                 3,151
     Actuarial loss                                                                                  4,400                 3,686
     Benefits paid                                                                                  (2,682)               (2,572)
                                                                                          -----------------    ------------------
         Benefit obligation at end of year                                                          65,191                57,925
                                                                                          -----------------    ------------------

Reconciliation of Plan Assets:
     Fair value of plan assets at
         beginning of year                                                                          42,565                37,798
     Actual return on plan assets                                                                    5,600                 4,495
     Employer contributions                                                                          3,119                 3,032
     Benefits paid                                                                                  (2,683)               (2,572)
     Expenses                                                                                          (92)                 (188)
                                                                                          -----------------    ------------------
         Fair value of plan assets at end of year                                                   48,509                42,565
                                                                                          -----------------    ------------------

             Unfunded status                                                                       (16,682)              (15,360)

Unrecognized net actuarial loss                                                                     19,774                18,471
Unrecognized prior service cost                                                                          -                    26
Adjustment to recognize minimum pension liability                                                  (13,451)              (13,513)
                                                                                          -----------------    ------------------
     Accrued pension cost, net                                                                   $ (10,359)            $ (10,376)
                                                                                          =================    ==================

Rate assumptions at December 31:
     Discount rate                                                                                   5.50%                 6.00%
     Expected return on plan assets                                                                  8.00%                 8.00%
     Rate of compensation increase                                                                   3.00%                 3.00%


                                                                                             Years Ended December 31,
                                                                                      ---------------------------------------
                                                                                         2005          2004          2003
                                                                                      -----------   -----------   -----------
Net pension expense included the following
 (income) expense components:
Service cost benefits earned during the period                                           $ 2,153       $ 2,057       $ 1,808
Interest cost on projected benefit obligation                                              3,395         3,151         2,977
Return on plan assets                                                                     (3,410)       (3,043)       (2,711)
Amortization of prior service cost                                                            26            83            92
Net amortization and deferral                                                                999           938           804
                                                                                      -----------   -----------   -----------
     Net pension expense                                                                 $ 3,163       $ 3,186       $ 2,970
                                                                                      ===========   ===========   ===========

Rate assumptions for the years ended December 31:
     Discount rate                                                                         5.50%         6.00%         6.25%
     Expected return on plan assets                                                        8.00%         8.00%         8.00%
     Rate of compensation increase                                                         3.00%         3.00%         3.00%

The long term rate of return is determined by using the weighted-average of historical real returns for major asset classes based on target asset allocations. The result is then adjusted for inflation. The discount rate is based on published Aa Seasoned Moody Twenty Year Bond Rate as the measurement date, adjusted within a band of 25 basis points. The adjustment reflects the general longer duration of liabilities under the Hancock Bank Pension Plan since the Plan does not pay lump sums in excess of $6,000.

In accordance with SFAS No. 87, the Company has recorded an additional minimum pension liability for underfunded plans of $13.5 million at December 31, 2005 and 2004. This amount represents the excess of accumulated benefit obligations over the Plan’s assets as adjusted for prepaid pension costs. Accumulated benefit obligations represent the actuarial present value of benefits attributable to employee service through the measurement date, excluding the effect of projected future pay increases. The Company uses a measurement date of September 30. A corresponding amount, net of related income taxes of $5.0 million and $5.1 million for December 31, 2005 and 2004 was charged directly to common stockholders’ equity and is a component of other comprehensive income. The principal cause of this underfunded pension liability is that the actual return on plan assets in recent years has been less than expected due to overall market conditions and the discount rate used to measure the liability has declined in a direction consistent with the recent trend in interest rates. The Company has been making the contributions required by the Internal Revenue Service (IRS). During 2005, 2004 and 2003 the Company’s contributions to this plan were $2.7 million, $3.1 million, and $3.0 million, respectively. The Company expects to contribute $3.0 million to the pension plan in 2006.

The accumulated benefit obligation as of December 31, 2005 and 2004 was $57.0 million and $51.2 million, respectively. The benefits expected to be paid in each year from 2006 to 2010 are $2.9 million, $2.9 million, $3.0 million and $3.1 million, $3.2 million, respectively. The aggregate benefits to be paid in the five years from 2011 through 2015 are $19.6 million. The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2005 and include estimated future employee service.

The Company’s pension plan weighted-average asset allocations and target allocations at December 31, 2005 and 2004, by asset category, are as follows: 

                                                         Plan Assets                   Target Allocation
                                                       at December 31,                  at December 31,
                                                ------------------------------  ------------------------------
Asset Category                                      2005            2004            2005            2004
                                                -------------- ---------------  --------------  --------------
  Equity Securities                                       54%             56%      30-60%          30%-60%
  Fixed Income Securities                                 45%             41%      40-70%          40%-70%
  Cash Equivalents                                         1%              3%       0-10%           0%-10%
                                                -------------- ---------------
                                                         100%            100%
                                                ============== ===============

The investment strategy of the pension plan is to emphasize a balanced return of current income and growth of principal while accepting a moderate level of risk. The investment goal of the plan is to meet or exceed the return of balanced market index comprised of 50% S&P 500 and 50% Lehman Brothers Intermediate Aggregate Index. The pension plan investment committee meets periodically to review the policy, strategy and performance of the plan.

The pension plan’s assets do not include any of the Company’s common stock at December 31, 2005 and 2004, respectively.

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. The Company has not recognized assets associated with these plans and neither of these plans have been funded. The measurement date for the plans is September 30, 2005. Data relative to these post-retirement benefits, were as follows (in thousands): 

                                                                                         Years Ended December 31,
                                                                                      -----------------------------
                                                                                         2005              2004
                                                                                      -----------       -----------
Change in Benefit Obligation:
Benefit obligation at beginning of year                                                  $ 6,818           $ 5,747
Service cost                                                                                 269               278
Interest cost                                                                                380               371
Actuarial loss                                                                               529               949
Benefits paid                                                                               (479)             (527)
                                                                                      -----------       -----------
     Benefit obligation at end of year                                                     7,517             6,818

Fair value of plan assets                                                                      -                 -
                                                                                      -----------       -----------
     Amount unfunded                                                                      (7,517)           (6,818)

Unrecognized transition obligation being
     amortized over 20 years                                                                  31                36
Unrecognized net actuarial loss                                                            1,886             1,535
                                                                                      -----------       -----------
     Accrued post-retirement benefit cost                                               $ (5,600)         $ (5,247)
                                                                                      ===========       ===========

Rate assumptions at December 31:
     Discount rate                                                                         5.50%             6.00%


                                                                                      Years Ended December 31,
                                                                              --------------------------------------
                                                                                 2005          2004         2003
                                                                              -----------   -----------   ----------
Net Periodic Post-Retirement Benefit Cost:
Service cost benefits attributed to service during the year                        $ 269         $ 278        $ 226
Interest costs on accumulated post-retirement benefit obligation                     380           371          335
Amortization of transition obligation over 20 years                                    5             5            5
Amortization of unrecognized net loss and other                                       33            29          (29)
                                                                              -----------   -----------   ----------
     Net Periodic Post-Retirement Cost                                             $ 688         $ 683        $ 537
                                                                              ===========   ===========   ==========

For measurement purposes in 2005, an 8.5% annual rate of increase in the over age 65 per capita cost of covered health care benefits was assumed for 2006. The rate was assumed to decrease gradually to 5.00% over 4 years and remain at that level thereafter. In 2004, a 12% annual rate of increase in the over age 65 per capita cost of covered health care benefits was assumed. The rate was assumed to decrease gradually to 5.00% over 6 years and remain at that level thereafter. The health care cost trend rate assumption has an effect on the amounts reported. The discount rate is based on the published Aa Seasoned Moody Twenty Year Bond Rate as of the measurement date, adjusted within a band of 25 basis points. The adjustment reflects the general longer duration of liabilities under the Hancock Bank Pension Plan since the Plan does not pay lump sums in excess of $6,000. 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, 2005, by $7.8 million and the aggregate of the service and interest cost components of net periodic post-retirement benefit cost for the year then ended by $703,000. A 1% decrease in the rate would decrease those items by $5.7 million and $493,000, respectively. The Company expects to contribute $322,000 to the plans in 2006.

In determining the end-of-year valuation of the post-retirement benefit plan, it was assumed that the prescription drug benefit is actuarially equivalent to the Medicare Prescription Drug Act which becomes effective January 1, 2006. This act provides a 28% subsidy for post-65 prescription drug benefits. The valuation reflected an estimated decrease in the accumulated benefit obligation of $2.3 million and a decrease in the aggregate service and interest costs of $240,000 at the adoption date of December 31, 2004 due the prescription drug subsidy. 

     Expected benefits to be paid over the next ten years and are reflected the following table (in thousands):

2006                                                                                                                   $   322
2007                                                                                                                       331
2008                                                                                                                       333
2009                                                                                                                       336
2010                                                                                                                       378
2011 - 2015                                                                                                              2,020
                                                                                                                ---------------
                                                                                                                       $ 3,720
                                                                                                                ===============

The Company has a 401(k) retirement plan covering substantially all employees who have been employed the required length of time and meet certain other requirements. Under this plan, employees can defer a portion of their salary and matching contributions are made at the discretion of the Board of Directors, which amounted to $1.2 million in 2005, $1.0 million in 2004 and $1.1 million in 2003.

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., President, who have been employed by the Company the required length of time, are eligible to participate. The Company makes no contribution to each participant’s contribution. The numbers of shares purchased under this plan were 10,461 in 2005, 11,418 in 2004 and 21,832 in 2003.

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 15 - 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 15,000,000 common shares can be granted under the Plan with an annual grant maximum of 2% of the Company’s outstanding common stock (as reported for the fiscal year ending immediately prior to such plan year). Since the inception of this plan, 2,957,561 shares have been granted. Grants of restricted stock awards are limited to 1/3 of the grant totals. The exercise price is equal to the market price on the date of grant, except for certain of those granted to major stockholders where the option price is 110% of the market price.

On January 13, 2005, options to purchase 378,886 shares were granted, of which 375,973 are exercisable at $31.20 per share and 2,913 are exercisable at $34.32 per share. Options totaling 375,973 had a vesting rate of 20% per year on the anniversary date of grant and 2,913 are exercisable six months after the date of grant.

On January 8, 2004, options to purchase 338,880 shares were granted, of which 335,630 are exercisable at $27.97 per share and 3,250 are exercisable at $30.76 per share. Options totaling 335,630 had a vesting rate of 20% per year on the anniversary date of grant and 3,250 became exercisable six months after the date of grant.

On May 3, 2004 and July 26, 2004, options to purchase 2,000 and 250 shares, respectively were granted, which are exercisable at $27.99 and $29.54 per share, respectively. These options were assigned a vesting rate of 20% per year on the anniversary date of grant.

On January 6, 2003, options to purchase 325,860 shares were granted, of which 321,794 are exercisable at $22.36 per share and 4,066 are exercisable at $24.59 per share. Options totaling 321,794 had a vesting rate of 20% per year on the anniversary date of grant and 4,066 became exercisable six months after the date of grant. 

                                                                    Number of           Average             Exercise
                                                                     Options         Exercise Price        of Options
                                                                   Outstanding         Per Share           Aggregate
                                                                  ---------------   -----------------   -----------------
Balance January 1, 2003                                                1,062,894             $ 14.25         $15,147,093
Granted                                                                  325,860               22.38           7,293,688
Exercised                                                               (100,850)              13.48          (1,359,816)
Cancelled                                                                (33,892)              17.44            (591,179)
                                                                  ---------------   -----------------   -----------------
     Balance December 31, 2003                                         1,254,012               16.34          20,489,786
Granted                                                                  341,130               27.99           9,549,233
Exercised                                                               (152,342)              15.01          (2,286,759)
Cancelled                                                                (35,289)              16.79            (592,489)
                                                                  ---------------   -----------------   -----------------
     Balance December 31, 2004                                         1,407,511               19.30          27,159,771
Granted                                                                  378,886               31.22          11,830,332
Exercised                                                               (132,870)              15.96          (2,121,216)
Cancelled                                                                (36,748)              21.61            (794,181)
                                                                  ---------------   -----------------   -----------------
     Balance December 31, 2005                                         1,616,779             $ 22.32         $36,074,705
                                                                  ===============   =================   =================

On December 21, 2005, the Board of Directors of the Company approved the accelerated vesting of all outstanding unvested options granted to employees. In determining the expense associated with the accelerated vesting of the unvested options outstanding, compensation expense was calculated as the difference between the grant price and the current market price on the date of the vesting. Forfeiture rates were calculated based on observation of historical trends. The impact of this action was a reduction in 2005 pretax income of approximately $558,000. The acceleration of the vesting of these options allowed the Company to avoid future compensation expense estimated to be approximately $6.4 million.

The Company will adopt SFAS No. 123R, Accounting for Stock-Based Compensation effective January 1, 2006. Under the provisions of this statement, compensation expense is recognized using the straight-line method for options granted, modified or settled after January 1, 2006, utilizing the fair value of the grants over the vesting period. Hancock estimates the fair value of each option granted using the Black-Scholes options pricing model. Through December 31, 2005, Hancock accounted for incentive stock options under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to employee. Under APB No. 25, because the exercise price of Hancock’s stock options equaled the market price for the underlying stock on the date of grant, no compensation expense was recognized.

Following is a summary of certain information about the exercisable stock options outstanding as of December 31, 2005: 

                                                                        Number of        Weighted Avg.         Average
Range of                                                                 Options           Years to        Exercise Price
Exercise Prices                                                        Outstanding        Expiration          Per Share
                                                                      ---------------   ----------------   ----------------
$13.33                                                                        29,934               1.00            $ 13.33
$20.00                                                                        94,069               2.00              20.00
$14.50                                                                       260,042               5.18              14.50
$12.75                                                                       123,901               4.00              12.75
$11.67                                                                       138,242               5.00              11.67
$22.36 - 24.59                                                               275,396               6.93              22.39
$27.97-30.76                                                                 317,790               7.95              27.99
$27.99                                                                         2,000               8.25              27.99
$29.54                                                                           250               8.58              29.54
$31.20 - 34.32                                                               375,155               9.04              31.22
                                                                      ---------------   ----------------   ----------------
$11.67-$30.76                                                              1,616,779               6.55            $ 22.32
                                                                      ===============   ================   ================

During 2005, 2004 and 2003, the Company granted 46,711, 49,712 and 43,200 restricted shares, respectively. The shares granted in 2005 vest at the end of five years. Shares granted in 2004 and 2003 also vest at the end of five years. Vesting is contingent upon continued employment by the Company. On December 31, 2005, 132,635 of restricted stock grants were not yet vested. The 2005 restricted shares were granted on two separate dates and had market values of $31.23 and $31.06, respectively, at the date of grant. The 2004 shares had market values of $27.97, $27.99 and $29.54 and the 2003 shares granted had a market value of $22.36. Compensation expense related to restricted stock grants totaled approximately $731,000 for 2005, $679,000 for 2004, and $556,000 for 2003. The remaining unearned compensation of $2.3 million is being amortized over the life of the respective grants.

In March 2005, the stockholders of the Company approved the Hancock Holding Company 2005 Long-Term Incentive Plan. The Plan is designed to enable employees and directors to obtain a proprietary interest in the Company and to attract and retain outstanding personnel. The Plan provides for the issuance of awards up to an aggregate of 5,000,000 shares of the Company’s Common Stock. Awards may be in the form of incentive stock options. The number of awards granted in any calendar year is limited to 2% of the outstanding Company Common Stock as reported in the Company’s most recent Annual Report on form 10-K for the fiscal year ending, immediately prior to that Plan year.

NOTE 16 - NET INCOME PER COMMON SHARE

Following is a summary of the information used in the computation of earnings per common share (in thousands): 

                                                                                          Years Ended December 31,
                                                                            ------------------------------------------------
                                                                                    2005             2004            2003
                                                                            ------------------------------------------------
Net earnings - used in computation of diluted
       earnings per common share                                                   $ 54,032         $ 61,704       $ 54,955
Preferred dividend requirement                                                            -                -          2,653
                                                                            ------------------------------------------------

Net earnings available to common stockholders -
       used in computation of basic earnings
       per common share                                                            $ 54,032         $ 61,704       $ 52,302
                                                                            ================================================

Weighted average number of common shares
       outstanding - used in computation of
       basic earnings per common share                                               32,365           32,390         30,714
Effect of dilutive securities
       Stock options                                                                    601              556            486
       Convertible preferred stock                                                        -              106          2,210
                                                                            ------------------------------------------------

Weighted average number of common shares
       outstanding plus effect of dilutive
       securities - used in computation of
       diluted earnings per common share                                             32,966           33,052         33,410
                                                                            ================================================

The Company had no anti-dilutive options in 2004 or 2003.

NOTE 17 - 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 - Estimated fair values for securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Loans, Net of Unearned Income - 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.

Accrued Interest Receivable and Accrued Interest Payable - The carrying amounts are a reasonable estimate of their fair values.

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.

Federal Funds Purchased - For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

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

Short-Term Notes - For short-term notes, the carrying amount is a reasonable estimate of fair value.

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. The fair value is estimated by discounting the future contractual cash flows using current market rates at which similar Notes over the same remaining term could be obtained.

Commitments - The fair value of loan commitments and letters of credit approximate the fees currently charged for similar agreements or the estimated cost to terminate or otherwise settle similar obligations. The fees associated with these financial instruments, or the estimated cost to terminate, as applicable are immaterial.

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

                                                                                          December 31,
                                                               -----------------------------------------------------------------
                                                                              2005                              2004
                                                               -------------------------------  --------------------------------
                                                                   Carrying           Fair           Carrying          Fair
                                                                    Amount           Value            Amount           Value
                                                               --------------  ---------------  --------------- ----------------
Financial assets:
    Cash, interest-bearing deposits and federal funds sold       $   681,330      $   681,330      $   306,058      $   306,058
    Securities available for sale                                  1,959,261        1,959,261        1,114,468        1,114,468
    Securities held to maturity                                            -                -          187,901          193,578
    Loans, net of unearned income                                  2,989,186        3,079,084        2,748,560        2,901,561
    Accrued interest receivable                                       35,046           35,046           23,783           23,783

Financial liabilities:
    Deposits                                                     $ 4,989,820      $ 4,890,632      $ 3,797,945      $ 3,797,958
    Federal funds purchased                                            1,475            1,475              800              800
    Securities sold under agreements to repurchase                   250,807          250,807          195,478          195,478
    Long-term notes                                                   50,266           50,566           50,273           52,383
    Accrued interest payable                                           5,881            5,881            5,380            5,380
NOTE 18 - 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,
                                                                                       -----------------------------
                                                                                             2005           2004
                                                                                       -------------  --------------
  Commitments to extend credit                                                            $ 550,948       $ 554,870
  Letters of credit                                                                          57,427          44,241

Approximately $348.9 million and $319.7 million of commitments to extend credit at December 31, 2005 and 2004, respectively, were at variable rates and the remainder was 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. The Company accounts for these commitments under the provisions of the FASB Interpretation No. 45, Guarantees of Indebtedness of Others. The liability associated with letters of credit is not material to the Company’s consolidated financial statements. Letters of credit are supported by collateral sufficient to cover any draw on the letter that would result in an outstanding loan.

NOTE 19 - COMMITMENTS AND CONTINGENCIES

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.

At December 31, 2005, the Company carried an accrued liability of $1.2 million in connection with invoices received for clean-up activity at the Company’s headquarters in Gulfport, Mississippi. Payment is pending adequate documentation and verification.

Future minimum lease payments for all non-cancelable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 2005: 

2006                                                                                                           $  4,495
2007                                                                                                              2,645
2008                                                                                                              2,047
2009                                                                                                              1,829
2010                                                                                                              1,620
  thereafter                                                                                                      4,993
                                                                                                         ---------------
                                                                                                               $ 17,629
                                                                                                         ===============
NOTE 20 - SUPPLEMENTAL INFORMATION

The following is selected supplemental information (in thousands): 

                                                                                           Years Ended December 31,
                                                                          ----------------------------------------------------
                                                                                 2005               2004              2003
                                                                          --------------    ---------------   ----------------
Other non-interest income:
     Income from bank owned life insurance                                     $  3,449           $  3,466           $  1,165
     Outsourced check income                                                      1,345                632                488
     Option income on real estate transaction                                     1,145                  -                  -
     Safety deposit box income                                                      807                836                870
     Appraisal fee income                                                           694                686                731
     Other                                                                        4,942              3,374              3,837
                                                                          --------------    ---------------   ----------------

                                                                               $ 12,382           $  8,994           $  7,091
                                                                          ==============    ===============   ================

Other non-interest expense:
     Postage                                                                   $  3,780           $  4,199           $  3,972
     Communication                                                                4,040              3,953              4,381
     Data processing                                                              7,805              7,618              7,158
     Professional fees                                                           10,429              8,322              3,718
     Taxes and licenses                                                           3,607              1,699              2,907
     Printing and supplies                                                        1,787              1,702              1,724
     Marketing                                                                    5,232              4,292              4,381
     Other fees                                                                   2,849              2,826              2,790
     Miscellaneous expense                                                        8,578              5,186              1,168
     Other expense                                                                6,605              7,221              7,069
                                                                          --------------    ---------------   ----------------

                                                                               $ 54,712           $ 47,018           $ 39,268
                                                                          ==============    ===============   ================
NOTE 21 - SEGMENT REPORTING

The Company’s primary segments are geographically divided into the Mississippi (MS), Louisiana (LA) and Florida (FL) markets. Each segment offers the same products and services but is managed separately due to different pricing, product demand and consumer markets. The three segments offer commercial, consumer and mortgage loans and deposit services. In the second table, the column “Other” includes additional consolidated subsidiaries of the Company: Hancock Mortgage Corporation, Hancock Investment Services, Inc., Hancock Insurance Agency, Inc., Harrison Finance Company, Magna Insurance Company and three real estate corporations owning land and buildings that house bank branches and other facilities. Following is selected information for the Company’s segments (in thousands): 

                                                                  Years Ended December 31,
                                 -----------------------------------------------------------------------------------------
                                                                            2005
                                 -----------------------------------------------------------------------------------------
                                        MS              LA            FL        Other        Eliminations   Consolidated
                                 -------------  -------------- ------------ --------------- --------------- --------------
Interest income                     $ 140,583       $ 109,248      $ 6,563        $ 13,136        $ (5,899)     $ 263,631
Interest expense                       45,392          33,184        1,796               -          (5,553)        74,819
                                 -------------  -------------- ------------ --------------- --------------- --------------
    Net interest income                95,191          76,064        4,767          13,136            (346)       188,812
Provision for loan losses              24,744          14,836          493           2,562               -         42,635
Non-interest income                    46,197          28,061          476          23,670            (135)        98,269
Depreciation and
    amortization                        5,299           2,467          454             497               -          8,717
Other non-interest expense             73,725          56,065        4,349          28,820            (133)       162,826
                                 -------------  -------------- ------------ --------------- --------------- --------------
Earnings before income
    taxes                              37,620          30,757          (53)          4,927            (348)        72,903
Income tax expense (benefit)           16,673            (191)         170           2,260             (41)        18,871
                                 -------------  -------------- ------------ --------------- --------------- --------------
    Net earnings                    $  20,947       $  30,948      $  (223)       $  2,667         $  (307)     $  54,032
                                 =============  ============== ============ =============== =============== ==============


                                                                     Years Ended December 31,
                                 -----------------------------------------------------------------------------------------
                                                                            2004
                                 -----------------------------------------------------------------------------------------
                                        MS             LA             FL        Other       Eliminations    Consolidated
                                 ------------- -------------- ------------- --------------- -------------- ---------------
Interest income                     $ 120,197       $ 91,148       $ 3,089        $ 14,673       $ (2,333)      $ 226,774
Interest expense                       37,953         20,385           922              65         (2,055)         57,270
                                 ------------- -------------- ------------- --------------- -------------- ---------------
    Net interest income                82,244         70,763         2,167          14,608           (278)        169,504
Provision for loan losses               5,564          6,429           928           3,616              -          16,537
Non-interest income                    39,894         33,255           445          19,084         (2,397)         90,281
Depreciation and
    amortization                        5,879          2,648            67             563              -           9,157
Other non-interest expense             67,370         51,348         3,047          24,157           (128)        145,794
                                 ------------- -------------- ------------- --------------- -------------- ---------------
Earnings before income
    taxes                              43,325         43,593        (1,430)          5,356         (2,547)         88,297
Income tax expense (benefit)           12,808         13,213          (547)          1,913           (794)         26,593
                                 ------------- -------------- ------------- --------------- -------------- ---------------
    Net earnings                    $  30,517       $ 30,380       $  (883)       $  3,443       $ (1,753)      $  61,704
                                 ============= ============== ============= =============== ============== ===============


                                                                    Years Ended December 31,
                                 ------------------------------------------------------------------------------------------
                                                                            2003
                                 ------------------------------------------------------------------------------------------
                                         MS             LA             FL        Other       Eliminations    Consolidated
                                 -------------- -------------- ------------- --------------  -------------- ---------------
Interest income                      $ 121,664       $ 83,368           $ -       $ 13,648          $ (531)      $ 218,149
Interest expense                        38,982         19,301             -             (2)           (320)         57,961
                                 -------------- -------------- ------------- --------------  -------------- ---------------
    Net interest income                 82,682         64,067             -         13,650            (211)        160,188
Provision for loan losses                7,385          5,720             -          2,049               -          15,154
Non-interest income                     37,497         26,725             -         10,563             (29)         74,756
Depreciation and
    amortization                         6,335          3,053             -            494               -           9,882
Other non-interest expense              64,358         51,493             -         14,504             (29)        130,326
                                 -------------- -------------- ------------- --------------  -------------- ---------------
Earnings before income
    taxes                               42,101         30,526             -          7,166            (211)         79,582
Income tax expense                      12,780          9,226             -          2,621               -          24,627
                                 -------------- -------------- ------------- --------------  -------------- ---------------
    Net earnings                     $  29,321       $ 21,300           $ -       $  4,545          $ (211)      $  54,955
                                 ============== ============== ============= ==============  ============== ===============


                                                                              At and For Years Ended December 31,
                                                                  ------------------------------------------------------------
                                                                         2005                 2004                 2003
                                                                  ------------------   -----------------   -------------------
Net Interest Income:
    MS                                                                  $    95,191         $    82,244           $    82,682
    LA                                                                       76,064              70,763                64,067
    FL                                                                        4,767               2,167                     -
    Other                                                                    13,136              14,608                13,650
    Eliminations                                                               (346)               (278)                 (211)
                                                                  ------------------   -----------------   -------------------
       Consolidated net interest income                                 $   188,812         $   169,504           $   160,188
                                                                  ==================   =================   ===================

Net Earnings:
    MS                                                                  $    20,947         $    30,517           $    29,321
    LA                                                                       30,948              30,380                21,300
    FL                                                                         (223)               (883)                    -
    Other                                                                     2,667               3,443                 4,545
    Eliminations                                                               (307)             (1,753)                 (211)
                                                                  ------------------   -----------------   -------------------
       Consolidated net earnings                                        $    54,032         $    61,704           $    54,955
                                                                  ==================   =================   ===================

Assets:
    MS                                                                  $ 3,546,748         $ 2,628,221           $ 2,471,918
    LA                                                                    2,138,894           1,895,832             1,673,973
    FL                                                                      122,845              88,070                     -
    Other                                                                   606,740             609,309               497,651
    Eliminations                                                           (465,040)           (556,706)             (493,184)
                                                                  ------------------   -----------------   -------------------
       Consolidated assets                                              $ 5,950,187         $ 4,664,726           $ 4,150,358
                                                                  ==================   =================   ===================

The Company allocated administrative charges between its Louisiana, Florida and Other segments and its Mississippi segment and the Parent Company. This allocation was based on an analysis of costs for 2005. The administrative charges allocated to the Louisiana segment were $11.55 million in 2005, $10.87 million in 2004 and $14.08 million in 2003. The Florida segment received $200,000 in allocated administrative charges in 2005. The Other segments allocated charges were $150,000 in 2005. No charges were allocated to the Florida or Other segments in 2004 or 2003. The aforementioned administrative charges were allocated from the Mississippi segment ($11.60 million in 2005, $10.75 million in 2004 and $11.33 million in 2003). Subsidiaries of the Mississippi segment were included in the cost allocation process beginning in 2004. Administrative charges allocated from the Parent Company were $300,000 in 2005, $124,000 in 2004 and $2.75 million in 2003.

Goodwill and other intangible assets assigned to the Mississippi segment totaled approximately $15.9 million, of which $12.1 million represented goodwill and $2.2 million represented core deposit intangibles at December 31, 2005. At December 31, 2004, goodwill and other intangible assets assigned to the Mississippi segment totaled approximately $14.9 million, of which $12.1 million represented goodwill and $2.8 million represented core deposit intangibles. The related core deposit amortization was approximately $518,000 in 2005, $666,000 in 2004 and $712,000 in 2003.

Goodwill and other intangible assets assigned to the Louisiana segment totaled approximately $37.0 million, of which $32.0 million represented goodwill and $5.0 million represented core deposit intangibles at December 31, 2005. Goodwill and other intangible assets assigned to the Louisiana segment totaled approximately $38.0 million, of which $32.0 million represented goodwill and $6.0 million represented core deposit intangibles, at December 31, 2004. The related core deposit amortization was approximately $977,000 in 2005, $951,000 in 2004 and $436,000 in 2003.

Goodwill and other intangible assets assigned to the Florida segment totaled approximately $12.3 million, of which $11.3 million represented goodwill and $1.0 million represented core deposit intangibles, at December 31, 2005. The related core deposit amortization was approximately $160,000 in 2005. Goodwill and other intangible assets assigned to the Florida segment totaled approximately $12.4 million, of which $11.3 million represented goodwill and $1.0 million represented core deposit intangibles, at December 31, 2004. The related core deposit amortization was approximately $149,000 in 2004.

Other intangible assets are also assigned to subsidiaries that are included in the “Other” category in the table above and totaled $7.0 million at December 31, 2005. Those intangibles consist of goodwill, $6.0 million; non-compete agreements, $228,000; and the value of insurance expirations, approximately $800,000. On July 1, 2005, Hancock Insurance Agency acquired 100% of the stock of J Everett Eaves, Inc., a well-known commercial insurance agency operating in the New Orleans, Louisiana market. The transaction resulted in the recording of intangibles of approximately $4.7 million. Upon completion of an intangibles valuation to be performed by an independent third party, the intangibles will be reallocated among goodwill (its current classification), value of insurance expirations and non-compete agreements. The latter two categories are amortizable intangibles and will be assigned appropriate lives based on valuations.

An intangibles valuation relating to the intangibles recorded in the acquisition of Ross King Walker, Inc. in late 2004 was completed during 2005. The reallocation of intangibles resulted in the recording of three separate categories of intangible assets: value of insurance expirations, $1.1 million; non-compete agreements, $0.2 million and goodwill of $1.3 million. The value of insurance expirations and non-compete agreement assets are being amortized over 10 year and 5 year lives, respectively, on an accelerated basis. The related amortization related to the non-compete agreements and the value of insurance expirations was approximately $540,000 in 2005, and approximately $179,000 in 2004.

None of the segments recorded amortization of goodwill during 2005, 2004 and 2003 in accordance with SFAS No. 142 as discussed in Note 1. The segments performed a fair value based impairment test on its goodwill and determined that the fair value exceeded the recorded value at December 2005, 2004 and 2003. No impairment loss, therefore, was recorded.

NOTE 22 - CONDENSED PARENT COMPANY INFORMATION

The following condensed financial information reflects the accounts and transactions of Hancock Holding Company (parent company only) for the dates indicated (in thousands): 

                                                      Condensed Balance Sheets

                                                                                              December 31,
                                                                                  ------------------------------------
                                                                                          2005                2004
                                                                                  -----------------   ----------------
Assets:
    Cash                                                                                 $   3,161          $   3,783
    Investment in bank subsidiaries                                                        461,375            451,849
    Investment in non-bank subsidiaries                                                     12,757             11,254
    Due from subsidiaries and other assets                                                   2,342              2,403
                                                                                  -----------------   ----------------
                                                                                         $ 479,635          $ 469,289
                                                                                  =================   ================

Liabilities and Stockholders' Equity:
    Due to subsidiaries                                                                  $   2,194          $   4,675
    Other liabilities                                                                           26                 32
    Common stockholders' equity                                                            477,415            464,582
                                                                                  -----------------   ----------------
                                                                                         $ 479,635          $ 469,289
                                                                                  =================   ================


                                                   Condensed Statements of Earnings

                                                                                        Years Ended December 31,
                                                                      ---------------------------------------------------------
                                                                            2005                2004                 2003
                                                                      ---------------   ------------------   ------------------
Operating Income
From subsidiaries
    Dividends received from bank subsidiaries                               $ 34,900             $ 45,506             $ 42,501
    Dividends received from non-bank subsidiaries                                  -               10,000                    -
    Equity in earnings of subsidiaries greater than
    dividends received                                                        20,702                6,484               12,098
Other operating income                                                             -                    -                  356
                                                                      ---------------   ------------------   ------------------
       Total operating income                                                 55,602               61,990               54,955
                                                                      ---------------   ------------------   ------------------
Operating expense
Other operating expense                                                       (1,570)                (286)                   -
                                                                      ---------------   ------------------   ------------------
       Total operating expense                                                (1,570)                (286)                   -
                                                                      ---------------   ------------------   ------------------
Net earnings                                                                  54,032               61,704               54,955
Preferred dividends                                                                -                    -               (2,653)
                                                                      ---------------   ------------------   ------------------
Net earnings available to common stockholders                               $ 54,032             $ 61,704             $ 52,302
                                                                      ===============   ==================   ==================

                                                  Condensed Statements of Cash Flows

                                                                                        Years Ended December 31,
                                                                      ---------------------------------------------------------
                                                                            2005                2004                 2003
                                                                      ---------------   ------------------   ------------------
Cash flows from operating activities - principally
    dividends received from subsidiaries                                    $ 50,670             $ 60,411             $ 36,854
                                                                      ---------------   ------------------   ------------------
Cash flows from investing  activities:
    Business acquisitions                                                          -               (4,533)             (19,400)
    Infusion of capital to subsidiary                                        (20,000)             (15,949)                   -
                                                                      ---------------   ------------------   ------------------
       Net cash used by investing activities                                 (20,000)             (20,482)             (19,400)
                                                                      ---------------   ------------------   ------------------
Cash flows from financing activities:
    (Repayments) advances of short-term notes                                      -               (9,400)               9,400
    Dividends paid to stockholders                                           (23,416)             (18,977)             (16,207)
                                                                                                                             -
    Stock transactions, net                                                   (7,876)              (8,919)             (12,487)
                                                                      ---------------   ------------------   ------------------
       Net cash used by financing activities                                 (31,292)             (37,296)             (19,294)
                                                                      ---------------   ------------------   ------------------
    Net increase (decrease) in cash                                             (622)               2,633               (1,840)
Cash, beginning                                                                3,783                1,150                2,990
                                                                      ---------------   ------------------   ------------------
Cash, ending                                                                $  3,161             $  3,783             $  1,150
                                                                      ===============   ==================   ==================
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 2005 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

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 company from unwarranted litigation, if actual results are different from Management expectations. This discussion and analysis contains forward-looking statements and reflects management’s current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties, which could cause the Company’s actual results and experience to differ from the anticipated results and expectations, expressed in such forward-looking statements.

Critical Accounting Policies

The accounting principles followed by the Company and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry. Certain critical accounting policies affect the more significant judgements and estimates used in the preparation of the consolidated financial statements.

The Company’s most critical accounting policy relates to its allowance for loan losses, which reflects the estimated losses resulting from the inability of its borrowers to make loan payments. If the financial condition of its borrowers were to deteriorate, resulting in an impairment of their ability to make payments, the estimates of the allowance would be updated, and additional provisions for loan losses may be required.

The allowance for loan losses is a valuation account available to absorb losses inherent in the loan portfolio. All loan losses are charged to the allowance when the loss actually occurs; recoveries are credited to the allowance for loan losses at the time of receipt. Periodically, 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. On August 29, 2005 Hurricane Katrina struck the coasts of Mississippi and Louisiana causing extensive damage to coastal communities in which the Company conducts business. The Company established a specific allowance for estimated credit losses related to the impact of Hurricane Katrina on the Company’s loan portfolio. In establishing the special allowance for the loss exposure created by Hurricane Katrina, commercial, direct installment and home equity loans were segmented by division and loss factors applied based on the estimated percentage of loans affected by the storm.

The allowance for loan losses is increased by charges to expense and decreased by loan charge-offs (net of recoveries). See Note 1 in the Notes to consolidated financial statements for discussion of other accounting policies.

Recent Accounting Pronouncements -In October 2003, the American Institute of Certified Public Accountants (AICPA) issued Statement of Accounting Position (SOP) 03-03, which addresses accounting for differences between contractual cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. This SOP prohibits “carry over” or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. The Company adopted this SOP during the first quarter of 2005 as required and its effect on the consolidated financial statements, to date, has not been material.

The guidance in Emerging Issues Task Force (EITF) 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, was originally effective for other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. However, the guidance contained in paragraphs 10-20 of the Issue was delayed by FASB Staff Position (FSP) EITF Issue 03-1-1, The Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, posted on September 30, 2004. The disclosure requirements continue to be effective and have been implemented by the Company. In November 2005, the FASB issued Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which amends SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and No. 124, Accounting for Certain Investments Held by Not for Profit Organizations and APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is other than temporary, and the measurement of an impairment loss. FSP FAS 115-1 and FAS 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP is effective for reporting periods beginning after December 15, 2005. The Company does not expect the adoption of FAS 115-1 and FAS 124-1 will have a material impact on its financial condition or results of operations.

On December 16, 2004, the FASB published SFAS No. 123(R), Share-Based Payment. This Statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. It will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements based on the fair value of the equity or liability instruments issued. The Company will adopt SFAS No.123(R) effective January 1, 2006. The estimated effect on earnings for 2006 is an increase in compensation expense of $900,000, or a reduction in diluted earnings per share of $0.03.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. This Statement is a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine period-specific effects of an accounting change on one or more individual prior periods presented. Then the new accounting principle is applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earning for that period rather that being reported in an income statement. Further, the accounting principle is to be applied prospectively from the earliest date when it is impracticable to determine the effect to all prior periods. This Statement is effective for the Company as of January 1, 2006. Adoption of this statement could have an impact if there are future voluntary accounting changes and correction of errors.

Executive Overview

Diluted earnings per common share for 2005 were $1.64 on earnings of $54.0 million. Diluted earnings per common share were down 12% and net earnings decreased by 12% as compared to 2004. The August 29, 2005 impact of Hurricane Katrina on the Gulf Coast had a significant effect on the Company’s earnings. Excluding the impact of Hurricane Katrina, the Company continued its positive earnings momentum through 2005. The Company continues to be focused on strategic goals of serving customers throughout the Gulf South and earning a superior return for its stockholders.

The Company’s management team continues to evaluate opportunities for growth and expansion as evidenced by entrance into the New Orleans insurance market with the acquisition of J. Everett Eaves on July 1, 2005. Strategic management of earning assets and deposit mix, continued focus on efficiency and credit quality, and improved non-interest income drove the increase (excluding the impact of Hurricane Katrina) in operating earnings in 2005.

Summary

The Company reported net earnings of $54.0 million in 2005, a decrease of $7.7 million, or 12%, from the $61.7 million earned in 2004. Diluted earnings per common share were $1.64 in 2005, a decrease of $0.23, or 12%, from 2004‘s $1.87. The 2005 net earnings were unfavorably impacted by the effects of Hurricane Katrina’s landfall along the coastal areas of Louisiana and Mississippi. Storm related items negatively impacted pretax earnings by $32.4 million. Table 1 compares net income and diluted earnings per common share for 2005 and 2004, excluding the 2005 impact of Hurricane Katrina and the 2004 gains on sale of branches and credit card merchant services business. 

TABLE  1.
EFFECT OF STORM-RELATED ITEMS AND GAINS ON SALE OF  BRANCHES & CREDIT CARD MERCHANT SERVICES
- -----------------------------------------------------------------------------------------------------------------------------
(dollars in thousand, except per share data)                                      2005              2004              2003
- -----------------------------------------------------------------------------------------------------------------------------

Reported Earnings (GAAP)                                                          $54,032          $61,704           $54,955
Plus tax-effected* estimated credit losses                                         22,881                -                 -
Less tax-effected* gain on insurance, net of direct expenses                        4,280                -                 -
Plus tax-effected* waived fees                                                      2,460                -                 -
Less tax-effected* gain on sale of branches                                             -            1,468                 -
Less tax-effected* gain on sale of credit card merchant services business               -            1,950                 -
- -----------------------------------------------------------------------------------------------------------------------------

Adjusted Earnings (Non GAAP)                                                      $75,093          $58,286           $54,955
- -----------------------------------------------------------------------------------------------------------------------------

Reported (GAAP) Diluted Earnings per Share                                          $1.64            $1.87             $1.64
Plus tax-effected* estimated credit losses                                           0.69                -                 -
Less tax-effected* gain on insurance, net of direct expenses                         0.13                -                 -
Plus tax-effected* waived fees                                                       0.08                -                 -
Less tax-effected* gain on sale of branches                                             -             0.04                 -
Less tax-effected* gain on sale of credit card merchant services business               -             0.06                 -
- -----------------------------------------------------------------------------------------------------------------------------
Adjusted (Non GAAP) Diluted Earnings per Share                                      $2.28            $1.77             $1.64
- -----------------------------------------------------------------------------------------------------------------------------
*Marginal federal tax income rate of 35%.

    Excluding the impact of the aforementioned items in Table 1, net income of $75.1 million was $16.8 million, or 29%, higher
than the $58.3 million earned in 2004.  The key components of 2005's earnings performance follow:

•    Net interest income, on a tax-equivalent (te)* basis, increased $19.4 million, or 11%, from 2004 to 2005 due to an
     increase of $475 million, or 12%, in average earning assets. Average loan growth of $283 million, or 11% was funded
     primarily with deposit growth resulting from deposit inflows related to the aftermath of Hurricane Katrina that were
     favorable to the Company's funding mix.  The expansion of the Company's earning asset base, as well as improvement in the
     earning asset mix, were the main factors behind the increase in net interest income (te) compared to a year ago.
•    Non-interest income, exclusive of the storm-related items and waived fees in 2005, gain on sale of branches, credit
     card merchant services business in 2004 and securities transactions grew $6.9 million, or 8%, from 2004 to 2005.   The
     most considerable increases in non-interest income, when comparing 2004 to 2005, were experienced in insurance commission
     fees ($7.9 million or 86%), investment & annuity fees ($2.8 million or 121%) and other fees and income ($3.4 million or
     38%).
•    Non-interest expense increased $16.6 million, or 11%, from 2004 to 2005.  Significant increases were reflected in
     personnel expense ($7.8 million or 9%), legal and professional services ($2.1 million or 25%) and other operating expenses
     ($3.5 million or 26%).
•    The Company provided $42.6 million for loan losses in 2005, compared to $16.5 million for 2004 - an increase of $26.1
     million, or 158%.  The increase in the provision for loan losses was primarily due to the impact of establishing a $35.2
     million storm-related provision for credit losses due to Hurricane Katrina.
•    Income taxes decreased $7.7 million primarily due to a lower level of taxable income in 2005 and certain storm-related
     credits.
    *Tax-equivalent and tax-effected (te) amounts are calculated using a marginal federal tax income tax rate of 35%.

Loans and Allowance for Loan Losses

    Total average loans increased $283 million, or 11%, in 2005 compared to an increase of $361 million, or 16%, in 2004.
Table 2 shows average loans for a three-year period.

TABLE  2.   AVERAGE  LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                         2005                          2004                           2003
- -----------------------------------------------------------------------------------------------------------------------------------
                                 Balance       TE Yield    Mix     Balance     TE Yield    Mix      Balance      TE Yield    Mix
Commercial & R.E. Loans         $1,565,369      6.40%     54.3%  $1,372,014      5.65%    52.8%    $1,140,288      5.85%    50.9%
Mortgage loans                     424,654      5.56%     14.7%     392,028      5.68%    15.1%       336,603      6.09%    15.0%
Direct consumer loans              501,677      7.51%     17.4%     489,040      7.25%    18.8%       494,311      7.88%    22.1%
Indirect consumer loans            328,679      5.91%     11.4%     288,005      6.03%    11.1%       216,080      7.00%     9.7%
Finance company loans               62,640     19.03%      2.2%      58,474     18.88%     2.2%        50,963     18.66%     2.3%
- -----------------------------------------------------------------------------------------------------------------------------------
     Total average loans
      (net of unearned)         $2,883,020      6.99%    100.0%  $2,599,561      6.65%   100.0%    $2,238,245      7.23%   100.0%
- -----------------------------------------------------------------------------------------------------------------------------------

The Company experienced an overall increase in loan growth that affected all loan categories as its efforts to generate loan volume continued.

As indicated by Table 2, average commercial and real estate loans increased $193 million, or 14%, from 2004. Included in this category are commercial real estate loans, which are secured by properties, used in commercial or industrial operations. The Company originates 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, 2005.

Average mortgage loans of $425 million were $33 million, or 8%, higher than in 2004. The majority of the growth in 2005 for this category was in 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 Company retains other types. The Company also originates home equity loans. This product offers customers the opportunity to leverage rising home values and equity to obtain tax-advantaged consumer financing.

Direct consumer loans, which include loans and revolving lines of credit made directly to consumers, were up $13 million, or 3%, from 2004. The Company also originates indirect consumer loans, which consist primarily of consumer loans originated through third parties such as automobile dealers or other point-of-sale channels. Average indirect consumer loans of $329 million for 2005 were up $41 million, or 14%, from 2004. The Company owns a finance company subsidiary, which originates both direct and indirect consumer loans. Finance company loans increased approximately $4 million, or 7%, at December 31, 2005, compared to the subsidiary’s outstanding loans on December 31, 2004. The loan growth in the Finance company was mainly due to continued growth in direct consumer loans. 

TABLE  3.   SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
- ----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                           2005          2004           2003           2002          2001
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at the beginning of year                                $40,682       $36,750        $34,740        $34,417       $28,604
Allowance of acquired banks                                           -             -              -           (400)        8,342
Provision for loan losses
     charged to operations                                       42,635        16,537         15,154         18,495         9,082
Loans charged-off to the allowance
     Commercial, real estate & mortgage                           4,273         6,045          5,232          9,262         6,445
     Direct and indirect consumer                                 7,052         9,335          9,626          9,384         6,324
     Demand deposit accounts                                      4,486         5,048          4,685          4,907         3,529
- ----------------------------------------------------------------------------------------------------------------------------------
         Total gross charge-offs                                 15,811        20,428         19,543         23,553        16,298
- ----------------------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off
     Commercial, real estate & mortgage                           2,794         2,136          1,296            646           322
     Direct and indirect consumer                                 2,043         2,231          2,117          2,071         2,026
     Demand deposit accounts                                      2,215         3,456          2,986          3,064         2,339
- ----------------------------------------------------------------------------------------------------------------------------------
         Total recoveries                                         7,052         7,823          6,399          5,781         4,687
- ----------------------------------------------------------------------------------------------------------------------------------
Net charge-offs                                                   8,759        12,605         13,144         17,772        11,611
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at the end of year                                      $74,558       $40,682        $36,750        $34,740       $34,417
- ----------------------------------------------------------------------------------------------------------------------------------
Storm-related net charge-offs (included above)                   $2,350             -              -              -             -
- ----------------------------------------------------------------------------------------------------------------------------------
Storm-related allowance for loan losses (included above)        $32,851             -              -              -             -
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios
     Gross charge-offs to average loans                           0.55%         0.79%          0.87%          1.20%         0.91%
     Recoveries to average loans                                  0.24%         0.30%          0.29%          0.29%         0.26%
     Net charge-offs to average loans                             0.30%         0.48%          0.59%          0.91%         0.65%
     Allowance for loan losses to year end loans                  2.49%         1.48%          1.50%          1.65%         1.82%
- ----------------------------------------------------------------------------------------------------------------------------------

At December 31, 2005, the allowance for loan losses was $74.6 million, or 2.49%, of year-end loans, compared to $40.7 million, or 1.48%, of year-end loans for 2004. The Company’s management was presented with the challenge of developing estimates for the impact of Hurricane Katrina on the Company’s credit quality. As such, in the immediate aftermath of the storm, the Company’s Chief Credit Policy Officer undertook a detailed process to review the impact of the storm on its credit customers and to develop a process to estimate the Company’s credit losses. In establishing the special allowance for the loss exposure created by Hurricane Katrina, commercial and direct installment loans were segmented by division and loss factors applied based on the estimated percentage of loans affected by the storm. The result of the aforementioned credit review process was that, on September 30, 2005, the Company established a $35.2 million specific allowance for estimated credit losses related to the impact of Hurricane Katrina on its loan portfolio. The Company is continuously reviewing the adequacy of the special storm-related allowance and views the current level to be adequate and, as such, expects no material deviations once all storm-related net charge-offs are known. Net charge-offs amounted to $8.8 million in 2005, as compared to $12.6 million in 2004. The $3.8 million decrease in net charge-offs from 2004 was related to decreases in each net charge-off category. The Company recorded storm-related net charge-offs of $2.4 million that were charged directly against the storm-related allowance of $35.2 million. As a result, the storm-related allowance was reduced by $2.4 million and as of December 31, 2005 stands at $32.9 million. Overall, the allowance for loan losses was 196% of non-performing loans and accruing loans 90 days past due at year-end 2005, compared to 252% at year-end 2004. 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, 2005 is adequate. Table 3 presents the activity in the allowance for loan losses over the past 5 years.

Non-performing assets consists of loans accounted for on a non-accrual basis, restructured loans and foreclosed assets. Table 4 presents information related to non-performing assets for the five years ended December 31, 2005. Total non-performing assets at December 31, 2005 were $12.5 million, an increase of $1.5 million, or 14%, from December 31, 2004. Loans that are over 90 days past due but still accruing were $25.6 million at December 31, 2005. This compares to $5.2 million at December 31, 2004. This increase was due primarily to accommodations granted to certain loan customers related to Hurricane Katrina. In the aftermath of Hurricane Katrina, the Company recognized that many of its credit customers (mostly residential mortgage holders) were in a position where time would be needed to recover sufficiently from the storm before they could resume payments on their loans. Accommodations in the form of loan payment extensions (most for 90 days) were granted on a customer by customer basis.

Efforts on the part of Management to reduce the levels of non-performing assets, as well as past due loans, will continue in 2006. 

TABLE  4.   NON-PERFORMING  ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                      December 31
- -------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                       2005           2004           2003          2002           2001
- -------------------------------------------------------------------------------------------------------------------------------
Loans accounted for on a non-accrual basis                  $10,617         $7,480        $12,161       $11,870        $17,328
Restructured loans                                                -              -              -             -              -
- -------------------------------------------------------------------------------------------------------------------------------
     Total non-performing loans                              10,617          7,480         12,161        11,870         17,328
Foreclosed assets                                             1,898          3,513          5,809         5,936          3,003
- -------------------------------------------------------------------------------------------------------------------------------
     Total non-performing assets                            $12,515        $10,993        $17,970       $17,806        $20,331
- -------------------------------------------------------------------------------------------------------------------------------
Loans 90 days past due still accruing                       $25,622         $5,160         $3,682        $6,407        $12,591
- -------------------------------------------------------------------------------------------------------------------------------
Ratios
     Non-performing assets to loans plus
         other real estate                                    0.42%          0.40%          0.73%         0.84%          1.07%
     Allowance for loan losses to non-performing
         loans and accruing loans 90 days past due             196%           252%           170%          143%           105%
     Loans 90 days past due still accruing to loans           0.86%          0.19%          0.15%         0.30%          0.67%
- -------------------------------------------------------------------------------------------------------------------------------
Investment Securities

The Company’s investment in securities was $1.959 billion at December 31, 2005, compared to $1.302 billion at December 31, 2004. Average investment securities were $1.434 billion for 2005 as compared to $1.345 billion for 2004.

The Company’s general investment objective is to purchase securities that provide stable cash flows for liquidity purposes while limiting the amount of prepayment risk. 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, portfolio prepayment activity and balance sheet strategy.

Specific to our municipal holdings in the hurricane impacted areas, any unrealized losses on these securities have also been determined to be temporary. Numerous factors have been considered, however; the ultimate effects of the hurricanes on local economies, and consequently on government revenues and short-term cash flows, are unknown at this time.

Also during 2005, securities classified as held to maturity in the portfolio of one of the Company’s subsidiaries were sold. A determination was made that this action tainted the investment portfolio of the entire Company. As a result of this action and determination, all securities held by the Company have been reclassified to available for sale and the carrying value of those securities are adjusted to market as prescribed in Statement of Financial Accounting Standard (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities.

At December 31, 2005, the composition of the securities portfolio was 100% classified as available for sale and none were held to maturity. At December 31, 2004, these relative percentages were 86% available for sale and 14% held to maturity. The available-for-sale portfolio was $1.959 billion at December 31, 2005.

The vast majority of securities in the Banks’ portfolios are fixed rate and there were no investments 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 that exceeded 10% of stockholders’ equity. At December 31, 2005, the average life of the portfolio was 2.90 years with an effective duration of 2.26 and an average yield of 4.53%.

During 2005, the Company sold approximately $133.7 million of securities from the available-for-sale portfolio at a pretax net securities loss of $53,000. The Company recorded net securities gains during 2004 and 2003 of $163,000 and $1.7 million, respectively.

Deposits and Other Borrowings

The Company’s deposit base experienced significant growth since Hurricane Katrina impacted its market area. Deposits increased to $4.990 billion at December 31, 2005 from $3.798 billion at December 31, 2004, an increase of $1.192 billion, or approximately 31%. The year-end deposit increase from 2004 to 2005 was primarily driven by non-interest bearing deposit growth of $627.6 million and time deposit growth of $564.3 million. Total average deposits increased by $399 million, or 11%, from $3.603 billion during 2004 to $4.001 billion during 2005.

Over the course of 2005, the Company increased focus on multiple account, core deposit relationships and strategic placement of time deposit campaigns to stimulate overall deposit growth. The Company continues to keep as its highest priority continued customer demand for safety and liquidity of deposit products. Interest-bearing accounts, which include NOW accounts, money market investment accounts, savings accounts and time deposits increased more than $226 million on an average basis during 2005. Additionally, non-interest-bearing deposits were up almost $173 million for the period January through December 2005. The vast majority of the aforementioned net growth occurred as a result of deposit inflows from the impact of Hurricane Katrina, but the inflows were not limited to the immediate aftermath of the storm. The composition of deposit inflows since August 31, 2005 has been favorable to the Company’s funding mix and consisted of 50% non-interest bearing demand accounts, 38% low cost interest-bearing transaction accounts and 12% time deposits.

Borrowings consist primarily of purchases of federal funds, sales of securities under repurchase agreements and borrowings from the FHLB. In total, borrowings were up over $56.3 million from December 31, 2004 to December 31, 2005, driven primarily by an increase in customer repurchase agreements. Sales of securities under repurchase agreements increased $55.3 million from year-end 2004, while borrowings from the FHLB were essentially flat as compared to 2004. Long-term notes consist primarily of $50.0 million of advances from the FHLB, which were assumed through acquisition. The advance consist of two notes, $40.0 million bears interest at 4.49% and is due January 21, 2009 and $10.0 million bears interest at 4.75% and is due November 11, 2008. These advances are fixed rate, non-prepayable and are callable quarterly at the FHLB’s option. These advances are collateralized by a blanket pledge of certain residential mortgage loans. At December 31, 2005, federal funds purchased totaled $1.5 million while purchases of federal funds outstanding at year-end 2004 totaled $800,000. 

TABLE  5.   AVERAGE  DEPOSITS
- ----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                              2005                         2004                         2003
- ----------------------------------------------------------------------------------------------------------------------------
                                         Balance     Rate     Mix     Balance     Rate     Mix     Balance     Rate     Mix
Non-interest bearing demand deposits     $822,733   0.00%     21%     $650,106   0.00%     18%     $604,448   0.00%     18%
NOW account deposits                      893,521   1.55%     22%      798,286   1.01%     22%      694,681   1.14%     20%
Money market deposits                     445,134   0.96%     11%      444,390   0.69%     12%      442,919   0.93%     13%
Savings deposits                          521,502   0.70%     13%      562,976   0.79%     16%      541,748   1.04%     16%
Time deposits                           1,318,536   3.47%     33%    1,146,976   3.23%     32%    1,123,409   3.25%     33%
- ----------------------------------------------------------------------------------------------------------------------------
     Total average deposits            $4,001,426            100%   $3,602,734            100%   $3,407,205            100%
- ----------------------------------------------------------------------------------------------------------------------------
Liquidity

Liquidity management encompasses the Company’s ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that the Company has adequate cash flow to meet its various needs, including operating, strategic and capital. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would not be able to meet the needs of the communities in which it has a presence and serves. The parent holding company’s principal source of liquidity is dividends from its subsidiary banks. Liquidity is required at the parent holding company level for the purpose of paying dividends to stockholders, servicing of any debt the Company may have, business combinations as well as general corporate expenses.

The post-Hurricane Katrina environment has significantly impacted the mix of the Company’s balance sheet. Deposit inflows were at a significantly higher pace than loans. A sizeable portion of these dollars have been invested in the Company’s securities portfolio. Prior to the storm the Company maintained solid liquidity levels; since that time, Management has handled the excess liquidity by maintaining existing strategies for safety and soundness. Management has sought to control the liquidity risk from this movement by laddering securities portfolio investments across overnight Fed Funds Sold, U.S. Agency discount notes, and short duration bullet maturity U.S. Agency bonds.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and maturing interest-bearing deposits with other banks are additional sources of liquidity funding. As of December 31, 2005 and 2004, securities that are not pledged and available for liquidity purposes, or free securities stood at 41.80%, or $827.95 million, and 28.0%, or $362.8 million, respectively. 

TABLE  6.   LIQUIDITY RATIOS
- ------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                                                       2005                 2004
- ------------------------------------------------------------------------------------------------------------------------
Free securities                                                                             41.80%               28.00%
Free securities-net wholesale funds/core deposits                                           11.10%                2.80%
- ------------------------------------------------------------------------------------------------------------------------
Wholesale funding diversification
     Certificate of deposits > $100,000 (excluding public funds)                             6.90%                5.70%
     Brokered certificate of deposits                                                        0.40%                0.50%
     Public fund certificate of deposits                                                  $149,612             $149,032
- ------------------------------------------------------------------------------------------------------------------------
Net wholesale funding maturity concentrations
     Overnight                                                                               0.00%                0.00%
     Up to 3 months                                                                          1.40%                4.20%
     Up to 6 months                                                                          1.70%                1.80%
     Over 6 months                                                                           5.20%                3.90%
- ------------------------------------------------------------------------------------------------------------------------
Net wholesale funds                                                                       $514,003             $480,094
Core deposits                                                                           $4,303,561           $3,050,102
- ------------------------------------------------------------------------------------------------------------------------

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts. Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and represent the Company’s incremental borrowing capacity. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs. The Company’s short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $323 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $100 million. As of December 31, 2005 and 2004, the Company’s core deposits were $4.304 billion and $3.050 billion, respectively and net wholesale funding (the sum of federal funds, dealer repurchase agreements, treasury tax & loan deposits, brokered certificate of deposits, bank notes, securitization and certificates of deposits greater than $100,000 less money market assets) stood at $514.0 million and $480.1 million, respectively.

Contractual Obligations

The Company has contractual obligations to make future payments on certain debt and lease agreements. Table 7 summarizes all significant contractual obligations at December 31, 2005, according to payments due by period. 

TABLE  7.   CONTRACTUAL OBLIGATIONS
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                Payment due by period
- ----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                               Less than          1-3           3-5         More than
                                                        Total          1 year          years         years         5 years
- ----------------------------------------------------------------------------------------------------------------------------
Certificates of deposit                              $1,500,047       $906,373       $452,356       $141,304            $14
Short-term debt obligations                             252,282        252,282              -              -              -
Long-term debt obligations                               50,266             12             21         50,026            207
Operating lease obligations*                             17,629          4,495          4,692          3,449          4,993
- ----------------------------------------------------------------------------------------------------------------------------
     Total                                           $1,820,224     $1,163,162       $457,069       $194,779         $5,214
- ----------------------------------------------------------------------------------------------------------------------------
*The Company has no material capital lease obligations
Asset/Liability Management

The asset liability management (ALM) process at the Company consists of quantifying, analyzing and controlling interest rate risk (IRR) to maintain stability in net interest income (NII) under varying interest rate environments. The principal objective of ALM is to maximize net interest income while operating within acceptable limits established for interest rate risk and maintaining adequate levels of liquidity.

The Company’s net earnings are dependent on its net interest income. Net interest income is susceptible to IRR to the degree that interest-bearing liabilities mature or reprice on a different basis and timing than interest-earning assets. This timing difference represents a potential risk to the Company’s future earnings. 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 and the subsequent impact on customer behavior could adversely affect NII. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates and changes in customer behavior could result in a decrease in NII.

Management and the Asset/Liability Committee (ALCO) direct the Company’s IRR management through a Risk Management policy that is designed to produce a stable net interest margin (NIM) in periods of interest rate fluctuation. In adjusting the Company’s asset/liability position, the Board and Management attempt to direct the Company’s IRR while enhancing the NIM. At times, depending on the general level of interest rates, the relationship between long-term and short-term interest rates, market conditions and competitive factors, Management may determine strategies that could add to the level of IRR in order to increase its NIM. Not withstanding the Company’s IRR management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net earnings.

Interest-sensitive assets and liabilities are those that are subject to maturity or repricing within a given time period. Management also administers this sensitivity through the development and implementation of investment, lending, funding and pricing strategies designed to achieve NII performance goals while minimizing the potential negative variations in NII under different interest rate scenarios. Investment strategies, including portfolio durations and cash flows, are formulated and continually adjusted during the implementation to assure attainment of objectives in the most effective manner. Loan and deposit pricing are adjusted weekly to reflect current interest rate and competitive market environments, with duration targets on both reviewed monthly.

The post-Hurricane Katrina environment has significantly impacted the mix of the Company’s balance sheet. During the last half of 2005, customer behavior had begun to react to the changes in the yield curve by moving towards more liquidity (holding deposits of a shorter nature including contractual obligations less than 24 months in duration). The continued rise in short term rates that flattened the yield curve combined with an inflow of customer deposits after the storm shortened these preferences even further. Similarly, non-interest bearing deposit inflows increased considerably after the storm.

The increase in short term liabilities during the fourth quarter contributed heavily to a shift in the Company’s gap position from asset sensitive to evenly gapped (shown in Table 8 below). Management has sought to control the liquidity risk from this movement by laddering securities portfolio investments across overnight Fed Funds Sold, U.S. Agency discount notes, and short duration bullet maturity U.S. Agency bonds. The reinvestment opportunity from these cash flows was appropriately coordinated with the Company’s existing portfolio investment strategy to assist in controlling the interest rate risk of the resulting balance sheet position.

The static gap report shown in Table 8 measures the net amounts of assets and liabilities that reprice within a given time period over the remaining lives of those instruments. The Company ended 2005 in a neutral position. The forecast includes an aggressive approach for potential deposit outflows related to the post-storm rebuilding effort in the Gulf Coast region. This static position combined with the NII at risk scenarios, noted in Table 9, indicates the Company would benefit from a rising rate environment. Moreover, Management believes it has many strategic options available for continued maximization of NII over time. 

TABLE  8.   INTEREST RATE SENSITIVITY
- ------------------------------------------------------------------------------------------------------------------------------
                                                                  December 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------
                                               Within       6 months       1 to 3         > 3       Non-Sensitive
                                Overnight     6 months      to 1 year      years         years        Balance       Total
                               ------------ -------------  ------------ ------------- ------------- ------------ -------------
                                                            (dollars in thousands)
Assets
    Securities                   $       -    $  321,224     $ 396,374    $  544,557    $  685,504   $   11,602    $1,959,261
    Federal funds sold &
      short-term investments       402,968             -         7,258             -             -            -       410,226
    Loans                           43,145     1,413,210       240,200       634,416       583,657            -     2,914,628
    Other assets                         -             -             -             -             -      666,072       666,072
- ------------------------------------------------------------------------------------------------------------------------------
        Total Assets             $ 446,113    $1,734,434     $ 643,832    $1,178,973    $1,269,161   $  677,674    $5,950,187
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities
    Interest bearing
       transaction deposits      $       -    $  776,515     $ 309,737    $  923,166    $  155,417   $        -    $2,164,835
    Time deposits                        -       410,815       495,558       452,356       141,318            -     1,500,047
    Non-interest bearing deposits        -       425,444       159,876       533,352       206,266            -     1,324,938
    Federal funds purchased          1,475             -             -             -             -            -         1,475
    Borrowings                     250,807             9             3            21        50,233            -       301,073
    Other liabilities                    -             -             -             -             -      180,404       180,404
    Stockholders' equity                 -             -             -             -             -      477,415       477,415
- ------------------------------------------------------------------------------------------------------------------------------
        Total Liabilities &
          Equity                 $ 252,282    $1,612,783     $ 965,174    $1,908,895    $  553,234   $  657,819    $5,950,187
- ------------------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap         $ 193,831    $  121,651     $(321,342)   $ (729,922)   $  715,927   $   19,855
Cumulative interest rate
    sensitivity gap              $ 193,831    $  315,482     $  (5,860)   $ (735,782)   $  (19,855)  $        -
Cumulative interest rate
    sensitivity gap as a
    percentage of total
    earning assets                    4.0%          6.0%         (0.1)%       (14.0)%        (0.4)%
- ------------------------------------------------------------------------------------------------------------------------------

To further control IRR, the Company structures its loan portfolio strategies to provide appropriate investment opportunities while minimizing potential volatility in earnings from extension risk. Deposit strategies continue to emphasize non-certificate of deposit core 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.

NII at risk measures the risk of a decline in earnings due to changes in interest rates. Table 9 presents an analysis of the Company’s IRR as measured by the estimated changes in NII resulting from an instantaneous and sustained parallel shift in the yield curve at December 31, 2005. Shifts are measured in 100 basis point increments (+ 300 through - 200 basis points,) from base case. Current interest rate levels and forecasts make it improbable that rates would fall in excess of 200 basis points; therefore, a down 300 scenario is not presented. Base case encompasses key assumptions for asset/liability mix, loan and deposit growth, pricing, prepayment speeds, deposit decay rates, securities portfolio cash flows and reinvestment strategy, and the market value of certain assets under the various interest rate scenarios. The base case scenario assumes that the current interest rate environment is held constant throughout the forecast period; the instantaneous shocks are performed against that yield curve. 

TABLE  9.   NET  INTEREST INCOME (te) AT RISK
- ---------------------------------------------------------------------------------------------------------------------

                            Change in                                                     Estimated Increase
                             Interest                                                     (Decrease) in NII
                              Rates                                                       December 31, 2005
                          ---------------                                  -------------------------------------
                          (basis points)

                                  -  200                                                      -12.8%
                                  -  100                                                       -5.2%
                                  Stable                                                        0.0%
                                  +  100                                                        2.7%
                                  +  200                                                        4.7%
                                  +  300                                                        6.5%

                             Most Likely                                                        2.2%
- ---------------------------------------------------------------------------------------------------------------------

Additionally, the Company has forecast a Most Likely NII scenario based on its conservative projection of yield curve changes for the coming 12 month period. This scenario utilizes all base case assumptions, applying those assumptions against a yield curve forecast that incorporates the current interest rate environment and projects changes over the forecast period. Table 9 indicates that the Company’s level of NII increases under rising rates and declines under falling rates. The most likely scenario for interest rates projects net interest income to exceed base case by 1.5% indicating that the balance sheet is appropriately structured for the current rate environment.

The downward rate scenarios show increased levels of volatility; however, these scenarios are instantaneous shocks that assume balance sheet management will mirror base case. Should the yield curve begin to fall, Management has several strategies available to offset the negative impact to earnings. For example, deposit pricing strategies could be adjusted to further incent customer behavior to non-contractual or short term (less than 12 months) contractual deposit products which would reset downward with the changes in the yield curve and prevailing market rates. Another opportunity at the start of such a cycle would be reinvesting the securities portfolio cash flows into longer term, non-callable bonds that would lock in higher yields. Finally, there are a number of hedge strategies by which Management could use derivatives, including swaps and purchased floors, to lock in net interest margin protection. However, to date, management has not entered into any hedge transactions.

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. Additionally, a change in the 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 NII than indicated above. Strategic management of the Company’s balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring IRR, certain shortcomings are inherent in the methods of analysis presented above. 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. 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.

Capital Resources

Common stockholders’ equity totaled $477.4 million at December 31, 2005, which represented an increase of $12.8 million from the end of 2004. The increase from 2004 was primarily due to net earnings of $54.0 million. This increase was partially offset by a $9.5 million decrease in common stock related to the execution of the Company’s ongoing stock buyback program. Dividends paid by the Company to common stockholders totaled approximately $23.4 million, or $0.72 per common share. This represents an increase of $0.14, or 24%, per common share over 2004. There was no preferred stock outstanding at December 31, 2005 or December 31, 2004; however, preferred stock totaled $37.1 million at December 31, 2003.

On February 4, 2004, the Company completed the redemption/conversion of substantially all the shares of 8% Cumulative Convertible Preferred Stock. The conversion factor was 1.3332 shares of the Company’s common stock for each share of preferred stock. A total of 7,304 shares of the preferred stock were redeemed for cash at the contract price of $20.00 per share plus pro rated dividends of $0.1511 per share. Pursuant to the terms of the preferred stock, the redemption was contingent on the Company’s common stock trading at $18.75 or above for 20 consecutive trading days beginning after January 1, 2004. The closing price of the Company’s common stock on January 2, 2004 was $27.36.

On February 26, 2004, the Company’s Board of Directors declared a two-for-one stock split in the form of a 100% common stock dividend. The additional shares were payable March 18, 2004 to stockholders of record at the close of business on March 8, 2004. On July 12, 2002, the Company’s Board of Directors declared a three-for-two stock split in the form of a 50% stock dividend. The additional shares were payable on August 5, 2002 to stockholders of record at the close of business on July 23, 2002. All information including earnings per share, dividends per share and numbers of shares outstanding have been restated to give effect to these splits.

Common stockholders’ equity at December 31, 2005 reflects a balance of $8.5 million (net of tax) relating to the unfunded portion of the Company’s pension plan. The principal cause of this unfunded pension liability is that the actual return on plan assets in recent years has been less than expected due to overall market conditions and the discount rate used to measure the liability has declined consistently with the recent trend in interest rates. The Company used discount rates on the obligations of 5.5% and 6.0% for 2005 and 2004, respectively. These rates reflect current market conditions at the time of the calculation.

A strong capital position, which is vital to the continued profitability of the Company, also promotes depositor and investor confidence and provides a solid foundation for the future growth of the Company. 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, 2005, the Company’s and the Banks’ capital balances were in excess of current regulatory minimum requirements. As indicated in Table 10 below, 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.

The Company remains very well capitalized even with a $1.16 billion increase in total assets since the storm made landfall on August 29, 2005. As of December 31, 2005, the Company’s Leverage (tier one) Ratio stands at 7.85%, while the Tangible Equity Ratio is 6.89% (see below in Table 10). While the Company remains very well capitalized, so that it maintains flexibility for future capital needs, including acquisitions, the Company may consider raising additional capital at some point in 2006. 

TABLE  10.   RISK-BASED CAPITAL AND CAPITAL RATIOS
- ------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                      2005           2004          2003          2002           2001
- ------------------------------------------------------------------------------------------------------------------------------
Tier 1 regulatory capital                                  $420,283       $399,320      $378,262      $354,535       $345,589
Tier 2 regulatory capital                                    46,218         38,161        34,175        29,544         30,071
- ------------------------------------------------------------------------------------------------------------------------------
     Total regulatory capital                              $466,501       $437,481      $412,437      $384,079       $375,660
- ------------------------------------------------------------------------------------------------------------------------------
Risk-weighted assets                                     $3,665,722     $3,222,554    $2,770,904    $2,383,423     $2,387,945
- ------------------------------------------------------------------------------------------------------------------------------
Ratios
     Leverage (Tier 1 capital to average assets)              7.85%          8.97%         9.29%         9.19%          8.50%
     Tier 1 capital to risk-weighted assets                  11.47%         12.39%        13.65%        14.88%         14.47%
     Total capital to risk-weighted assets                   12.73%         13.58%        14.88%        16.11%         15.73%
     Common stockholders' equity to total assets              9.65%          9.96%         9.59%         9.75%          9.99%
     Tangible common equity to total assets                   6.89%          8.58%         8.32%         8.45%          8.61%
- ------------------------------------------------------------------------------------------------------------------------------

The Company continued the execution of the common stock buyback program, which provides for the repurchase of up to 10% of the Company’s outstanding common stock. This program was announced in July 2000 and authorized the repurchase of approximately 3,320,000 shares of the Company’s outstanding stock. Over the course of 2005, the Company purchased 147,909 shares of common stock at an aggregate price of $4.5 million, or approximately $30.45 per share. In 2004, the Company purchased 236,034 shares of common stock at an aggregate price of $6.8 million, or approximately $29.49 per share. As of December 31, 2005, the total number of common shares purchased under the current stock buyback program since inception was approximately 2,602,000, or 7.9%, of the outstanding common shares at June 30, 2000.

Results of Operations

Net Interest Income

Net interest income (te) is the primary component of the Company’s earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities can materially impact net interest income (te).

Net interest income (te) of $196.2 million was recorded for the year 2005, an increase of $19.4 million, or 11%, from 2004. The Company also experienced a less significant increase of $9.4 million, or 6%, from 2003 to 2004. The factors contributing to the changes in net interest income (te) for 2005, 2004 and 2003 are presented in Tables 11 and 12. Table 11 is an analysis of the components of the Company’s average balance sheets, levels of interest income and expense and the resulting earning asset yields and liability rates. Table 12 breaks down the overall changes in the level of net interest income into rate and volume components. Net interest income (te) in 2005 was primarily impacted by increased average earning assets, which were funded primarily with deposit growth fueled by storm-related average deposit inflows.

When comparing 2005 to 2004, the primary driver of the $19.4 million, or 11% increase, in net interest income (te) was a $475 million, or 12%, increase in average earning assets mainly from average loan growth of $283 million, or 11%. The Company’s loan growth and overall increase in earning assets was primarily funded by average deposit growth of $399 million, or 11%. This overall improvement in the earning asset mix enabled the Company to maintain its average loan-to-deposit ratio at 72% for the year ended December 31, 2005 compared to 72% in 2004. In addition, for the year ended December 31, 2005, loans comprise 56% of the Company’s earning asset base, as compared to 65% for the year ended December 31, 2004. It is not uncommon for loan growth to lag deposit growth in the aftermath of a storm such as Hurricane Katrina. Loan growth in the Company’s operating region is expected to pick up significantly once the inflows of insurance and federal aid funds begin to subside later in 2006. The net interest margin (te) narrowed 4 basis points as the overall increase in average earning asset yield (20 basis points) did not offset the increase in total funding costs (24 basis points). The Company’s ability to effect continuing improvements in the earning asset mix remains a significant positive contributor to future earnings expansion.

Average earning assets increased $475 million, or 12%, during 2005 mainly from average loan growth of $283 million, or 11%. Average securities increased $89 million, or 7%, over 2004. The increase in average earning assets was funded primarily with total average deposit growth of $399 million, or 11%. Average interest-bearing deposits increased $226 million, or 8%, while average non-interest bearing deposits increased $173 million, or 27% resulting primarily from the aforementioned inflows of deposits related to Hurricane Katrina. 

TABLE  11.   SUMMARY  OF  AVERAGE  BALANCE  SHEETS
             NET  INTEREST  INCOME  (te)  &  INTEREST  RATE
- ------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                            2005                          2004                           2003
- ------------------------------------------------------------------------------------------------------------------------------
                                     Average                        Average                       Average
                                     Balance    Interest   Rate     Balance   Interest   Rate     Balance    Interest   Rate
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
    Loans* (te)                     $2,883,020   $201,446  6.99%   $2,599,561  $172,868  6.65%   $2,238,245   $161,850  7.23%
- ------------------------------------------------------------------------------------------------------------------------------
    U.S. Treasury securities            16,838        532  3.16%       11,003       200  1.82%       29,575        948  3.20%
    U.S. agency securities             514,834     21,499  4.18%      424,875    17,755  4.18%      466,809     19,162  4.10%
    CMOs                               241,473      9,492  3.93%      296,625    11,515  3.88%      440,705     14,905  3.38%
    Mortgage-backed securities         437,037     19,407  4.44%      389,871    16,706  4.29%      302,393     12,558  4.15%
    Obligations of states and
      political subdivisions (te)      161,464     11,251  6.97%      173,317    12,371  7.14%      198,599     14,045  7.07%
    FHLB stock and
      other corporate securities        62,769      2,822  4.50%       49,659     2,248  4.53%       28,075      1,215  4.33%
- ------------------------------------------------------------------------------------------------------------------------------
        Total investment in
         securities                  1,434,415     65,003  4.53%    1,345,350    60,795  4.52%    1,466,156     62,833  4.29%
- ------------------------------------------------------------------------------------------------------------------------------
    Federal funds sold and
      short-term investments           137,821      4,559  3.31%       34,911       384  1.10%       57,986        637  1.10%
- ------------------------------------------------------------------------------------------------------------------------------
        Total earning assets (te)    4,455,256    271,008  6.08%    3,979,822   234,047  5.88%    3,762,387    225,320  5.99%
- ------------------------------------------------------------------------------------------------------------------------------
NON-EARNING ASSETS
    Other assets                       525,881                        482,629                       384,953
    Allowance for loan losses          (50,107)                       (38,117)                      (35,391)
- ------------------------------------------------------------------------------------------------------------------------------
        Total assets                $4,931,030                     $4,424,334                    $4,111,949
- ------------------------------------------------------------------------------------------------------------------------------

LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
    Interest-bearing transaction
      deposits                      $1,384,605      9,203  0.66%   $1,360,198     8,191  0.60%   $1,303,441     10,461  0.80%
    Time deposits                    1,149,239     40,654  3.54%    1,018,165    35,056  3.44%      980,703     34,429  3.51%
    Public funds                       644,849     17,724  2.75%      574,266     9,323  1.62%      518,613      9,301  1.79%
- ------------------------------------------------------------------------------------------------------------------------------
      Total interest-bearing
       deposits                      3,178,693     67,581  2.13%    2,952,629    52,570  1.78%    2,802,757     54,191  1.93%
- ------------------------------------------------------------------------------------------------------------------------------
    Customer repurchase agreements     224,842      4,351  1.94%      195,470     1,909  0.98%      177,535      1,446  0.81%
    Other interest-bearing liabilities  69,057      2,887  4.18%       69,960     2,791  3.99%       56,672      2,324  4.10%
- ------------------------------------------------------------------------------------------------------------------------------
      Total interest-bearing
       liabilities                   3,472,592     74,819  2.15%    3,218,059    57,270  1.78%    3,036,964     57,961  1.91%
- ------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST BEARING LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
    Demand deposits                    822,733                        650,106                       604,448
    Other liabilities                  160,004                        106,545                        37,434
    Preferred stockholders' equity           -                          2,240                        37,069
    Common stockholders' equity        475,701                        447,384                       396,034
- ------------------------------------------------------------------------------------------------------------------------------
      Total liabilities, preferred
        stock & common stockholders'
        equity                      $4,931,030             1.68%   $4,424,334            1.44%   $4,111,949             1.54%
- ------------------------------------------------------------------------------------------------------------------------------
      Net interest income and
        margin (te)                              $196,189  4.40%               $176,777  4.44%                $167,359  4.45%
      Net earning assets and spread   $982,664             3.93%     $761,763            4.10%     $725,423             4.08%
- ------------------------------------------------------------------------------------------------------------------------------
*Loan interest income includes loan fees of $8.6 million, $9.2 million and $11.1 million for each of the three years ended
 December 31, 2005.  Non-accrual loans in average balances and income on such loans, if recognized, is recorded on a cash basis.


TABLE  12.   SUMMARY  OF  CHANGES  IN  NET  INTEREST  INCOME  (te)
- -----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                   2005 Compared to 2004                      2004 Compared to 2003
- -----------------------------------------------------------------------------------------------------------------------------
                                                       Due to                                   Due to
                                                     Change in             Total               Change in             Total
                                            --------------------------   Increase      --------------------------   Increase
                                              Volume         Rate       (Decrease)       Volume         Rate       (Decrease)
- -----------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME (te)
    Loans*                                   $16,913        $11,665       $28,578       $20,176        ($9,158)      $11,018
- -----------------------------------------------------------------------------------------------------------------------------

    U.S. Treasury securities                     139            193           332          (443)          (305)         (748)
    U.S. agency securities                     3,735              9         3,744        (1,218)          (189)       (1,407)
    CMOs                                      (1,918)          (105)       (2,023)       (2,586)          (804)       (3,390)
    Mortgage-backed securities                 2,072            629         2,701         3,741            407         4,148
    Obligations of states and
      political subdivisions (te)               (172)          (948)       (1,120)         (409)        (1,265)       (1,674)
    FHLB stock and
      other corporate securities                 589            (15)          574           975             58         1,033
- -----------------------------------------------------------------------------------------------------------------------------
        Total investment in securities         4,445           (237)        4,208            60         (2,098)       (2,038)
- -----------------------------------------------------------------------------------------------------------------------------

    Federal funds and short-term investments   2,483          1,692         4,175          (254)             1          (253)
- -----------------------------------------------------------------------------------------------------------------------------
        Total interest income (te)           $23,841        $13,120       $36,961       $19,982       ($11,255)       $8,727
- -----------------------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE
    Interest-bearing transaction deposits       $149           $863        $1,012          $439        ($2,709)      ($2,270)
    Time deposits                              4,615            983         5,598         1,298           (671)          627
    Public funds                               1,266          7,135         8,401           948           (926)           22
- -----------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing deposits        6,030          8,981        15,011         2,685         (4,306)       (1,621)
- -----------------------------------------------------------------------------------------------------------------------------

    Customer repurchase agreements               324          2,118         2,442           156            307           463
    Other interest-bearing liabilities            65             31            96           332            135           467
- -----------------------------------------------------------------------------------------------------------------------------
        Total interest expense                 6,419        $11,130       $17,549        $3,173        ($3,864)        ($691)
- -----------------------------------------------------------------------------------------------------------------------------

        Change in net interest income (te)   $17,422         $1,990       $19,412       $16,809        ($7,391)       $9,418
- -----------------------------------------------------------------------------------------------------------------------------
*Loan interest income includes loan fees of $8.6 million, $9.2 million and $11.1 million for each of the three years ended December 31, 2005.
  Non-accrual loans in average balances and income on such loans, if recognized, is recorded on a cash basis.
Provision for Loan Losses

The Company’s provision for loan losses was $42.6 million in 2005, $16.5 million in 2004 and $15.2 million in 2003. The provision for loan losses increased $26.1 million, or 158%, when comparing 2005 to 2004. This increase was primarily a function of the Company’s recording of a $35.2 million storm-related provision for credit losses as well as $241 million of period-end loan growth experienced between December 31, 2004 and December 31, 2005. Net charge-offs decreased $3.8 million, or 31%, from 2004 to 2005 and were $8.8 million for 2005. During 2005, the provision for loan losses equaled 487% of net charge-offs compared with 131% in 2004 and 115% in 2003. The provision for loan losses reflects Management’s assessment of the adequacy of the allowance for loan losses to absorb probable losses in the loan portfolio. The amount of provision for each period is dependent on many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, identified loan impairment, Management’s assessment of the loan portfolio quality, the value of collateral, as well as, overall economic factors. The Company’s allowance for loan losses as a percent of period-end loans was 2.49% at December 31, 2005, an increase of 101 basis points from the 1.48% at December 31, 2004.

The Company’s asset quality committee has the responsibility of affirming the allowance methodology and assessing all of the risk elements in order to determine the appropriate level of allowance for the inherent losses in the loan portfolio at the point in time being reviewed. One element of the allowance for loan losses analysis involves the calculation of specific allowances for individual impaired loans as required by SFAS No. 114 and 118. The general allowance for loan pools is determined by applying loan loss allowance factors to groups of loans within the portfolio that have similar characteristics. An additional element includes unallocated components that are not otherwise evaluated in the first two elements.

Non-Interest Income

Table 13 presents a three-year analysis of the components of non-interest income. Overall, non-interest income of $98.3 million was reported in 2005, as compared to $90.3 million for 2004 and $74.8 million for 2003. This represents an increase of $8.0 million, or 9%, from 2004 to 2005 and an increase of $15.5 million, or 21%, from 2003 to 2004. Included in non-interest income are net storm-related items of $6.6 million. This represents gains on involuntary conversions of assets lost in Hurricane Katrina for which insurance proceeds had been received or which the claims proceeds were substantially assured, net of certain direct costs. Excluding the impact of net storm-related items and securities transactions, non-interest income for 2005 was $91.7 million compared to non-interest income in 2004 of $84.9 million (excluding the gains on sales of branches and credit card merchant services business). This represents an increase of $6.8 million, or 8% as compared to 2004. During 2004, the Company sold four Louisiana branches at a $2.3 million pre-tax gain and also sold its credit card merchant services business at a pre-tax gain of $3.0 million.

Considerable increases in non-interest income, when comparing 2005 to 2004, were experienced in trust fees, investment and annuity fees, insurance commission fees, and other fees and income. Smaller increases were also experienced in debit card and merchant fees. Significantly offsetting the increased non-interest income when compared to 2004 were decreases in service charges on deposit accounts principally due to waived return item fees and other service charges as a result of accommodations to customers impacted by Hurricane Katrina along with changes in customer behavior since many had significant cash available from insurance proceeds.

Trust fee income increased $2.1 million, or 23%, when compared to the previous year as a result of increases in the value of assets under care (either managed or in custody). Investment and annuity fees increased $2.8 million, or 121%, from 2004 to 2005. Higher levels of insurance commissions and fees (up $7.9 million or 86%) were mostly related to higher revenues associated with Magna Insurance Company, the Company’s wholly owned insurance company. In addition, on July 1, 2005 the Company acquired J. Everett Eaves, Inc., a property and casualty insurance agency, as a division of Hancock Insurance Agency. Other fees and income increased $3.4 million, or 38%, from 2004 to 2005.

Service charges on deposit accounts decreased $8.9 million, or 20%, when comparing 2005 to 2004, primarily due to the aforementioned waived return items and other service charges resulting from the impact of Hurricane Katrina. The level of ATM fees decreased from last year to this year by $310,000, or 7%, due to decreased volume. Secondary mortgage market operations income decreased $713,000, or 24%, compared to 2004 primarily due to the reversal during 2004 of an $850,000 mortgage servicing rights valuation allowance that had been previously established. Securities transactions gains/losses declined by $216,000, or 133%, from gains of $163,000 in 2004 to losses of $53,000 in 2005. 

TABLE  13.   NON-INTEREST  INCOME
- -----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                         2005        % change        2004        % change        2003
- -----------------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts                           $34,773          -20%       $43,631            3%      $42,544
Trust fees                                                     11,107           23%         9,030           17%        7,724
Investment and annuity fees                                     5,076          121%         2,295          -37%        3,615
Insurance commissions and fees                                 17,099           86%         9,193          234%        2,750
Debit card & merchant fees                                      4,878           14%         4,271           17%        3,643
ATM fees                                                        4,202           -7%         4,512           13%        3,994
Secondary mortgage market operations                            2,221          -24%         2,934           70%        1,728
Other fees and income                                          12,382           38%         8,994           27%        7,091
- -----------------------------------------------------------------------------------------------------------------------------
   Total recurring non-interest income                         91,738            8%        84,860           16%       73,089
Net storm-related items                                         6,584           n/a             -             -            -
Gains on sales of branches & credit card merchant
  services business                                                 -         -100%         5,258             -            -
Securities transactions                                           (53)        -133%           163          -90%        1,667
- -----------------------------------------------------------------------------------------------------------------------------
   Total non-interest income                                  $98,269            9%       $90,281           21%      $74,756
- -----------------------------------------------------------------------------------------------------------------------------

Significant increases in non-interest income in 2004 over 2003 were reflected in trust fees, insurance commissions and fees, debit card and merchant fees, atm fees, secondary mortgage market operations, and other fees and income. Less significant increases were reflected in service charges on deposit accounts. Partially offsetting the increased non-interest income when compared to 2003 was a decrease in investment and annuity fees and a decrease in securities transactions gains.

Trust fees increased $1.3 million from 2003 to 2004. Insurance commissions and fees increased $6.4 million, or 234%, from 2003 to 2004 primarily due to continuing efforts on behalf of the Company to expand the wealth management line of business. Debit card and merchant fees increased $628,000, or 17%, when compared to the previous year, primarily due to an increase in interchange income and a reduction in processing costs. Other fees and income increased $1.9 million, or 27%, from 2003 to 2004 primarily due to recording income ($1.2 million) on bank-owned life insurance. The investment in these life insurance policies totaled approximately $51.2 million at December 31, 2004. The 2004 level of non-interest income includes a pre-tax net securities gain of $163,000, related to the sale of securities available for sale with near-term maturity dates. Investment and annuity fees decreased $1.3 million, or 37%, from 2003 to 2004. During 2003, the Company recorded a mortgage servicing rights temporary impairment expense of $850,000, which is the primary factor behind the secondary mortgage market operations increase of $1.2 million, or 70%, from 2003 to 2004. The $850,000 non-cash pretax expense to establish the valuation allowance was considered necessary due to an increase in the expected speed of mortgage loan prepayments resulting from the low interest rate environment at that time. As mentioned above, this temporary impairment was reversed during 2004.

Non-Interest Expense

Table 14 presents an analysis of the components of non-interest expense for the years 2005, 2004 and 2003. The Company’s level of operating expenses increased $16.6 million, or 11%, from 2004 to 2005 and $14.7 million, or 11%, from 2003 to 2004.

The significant factors driving the increase in operating expenses from 2004 to 2005 included an increase in personnel expense ($7.8 million, or 9%), occupancy expense ($1.0 million, or 10%), legal and professional services ($2.1 million, or 25%), ad valorem and franchise taxes ($1.9 million, or 112%), amortization of intangible assets, ($249,000, or 13%), and other expense ($3.5 million, or 26%).

In 2004, operating expenses increased $14.7 million, or 11%, over 2003. Increases were reflected in personnel expense ($5.0 million, or 6%), equipment and data processing expense ($1.0 million, or 6%), occupancy expense ($629,000, or 7%), legal and professional services ($4.6 million, or 124%), amortization of intangibles ($797,000, or 69%), and other expense ($5.5 million, or 70%). Factors associated with the significant increase in other expense include the entrance into the Florida market with the acquisition of the former Guaranty National Bank (GNB) of Tallahassee, Florida in March of 2004.and the December 21, 2003 acquisition of Magna Insurance Company. Additionally, expenses associated with compliance with section 404 of the Sarbanes-Oxley legislation increased operating expenses. Partially offsetting the overall increase was a decrease in ad valorem and franchise taxes ($1.2 million, or 42%), and costs associated with other real estate owned ($1.2 million, or 70%). A recovery of $1.2 million in previously paid franchise taxes to the state of Mississippi was reflected in the 2004 expense base. 

TABLE  14.   NON-INTEREST  EXPENSE
- -----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                  2005         % change          2004         % change          2003
- -----------------------------------------------------------------------------------------------------------------------------
Employee compensation                                  $76,602            11%         $68,910             5%         $65,597
Employee benefits                                       17,556             0%          17,494            11%          15,812
- -----------------------------------------------------------------------------------------------------------------------------
    Total personnel expense                             94,158             9%          86,404             6%          81,409
Equipment and data processing expense                   17,358             0%          17,287             6%          16,255
Net occupancy expense                                   10,926            10%           9,915             7%           9,286
Postage and communications                               7,820            -4%           8,152            -2%           8,352
Ad valorem and franchise taxes                           3,607           112%           1,699           -42%           2,907
Legal and professional services                         10,429            25%           8,322           124%           3,718
Printing and supplies                                    1,787             5%           1,702            -1%           1,724
Amortization of intangible assets                        2,194            13%           1,945            69%           1,148
Advertising                                              5,232            22%           4,292            -2%           4,381
Deposit insurance and regulatory fees                      814            -4%             844            -3%             867
Training expenses                                          359           -13%             412           -21%             519
Other real estate owned expense/(income)                  (140)         -127%             514           -70%           1,706
Other expense                                           16,999            26%          13,463            70%           7,936
- -----------------------------------------------------------------------------------------------------------------------------
   Total non-interest expense                        $ 171,543            11%       $ 154,951            11%       $ 140,208
- -----------------------------------------------------------------------------------------------------------------------------
Income Taxes

Income tax expense was $18.9 million in 2005, $26.6 million in 2004 and $24.6 million in 2003. Income tax expense decreased because of the lower level of pretax income in 2005. The effective income tax rate of the Company continues to be less than the statutory rate of 35%, due primarily to tax-exempt interest income. The effective tax rates for 2005, 2004 and 2003 were 26%, 30% and 31%, respectively. The 4% decrease in the Company’s effective tax rate was due to a variety of factors including an increase in tax exempt income as a percentage of pre-tax income to 17% in 2005 from 13% in 2004, Hurricane Katrina tax credits available in 2005 and relief of a tax contingency reserve for non-taxable income primarily related to bank owned life insurance. The Company expects its effective tax rate to be approximately 29% for the year 2006.

EX-23 3 hhc_10kex23-123105.htm EX. 23 TO HHC 10K, 12/31/05 Hancock Holding Company, Exhibit 23 to 10-K, 12/31/05 

Exhibit (23)


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements No. 333-11831 (amended by
333-113262), 333-05081, 333-53452 and 2-99863 on Form S-8 and No. 33-31782 on Form S-3 of Hancock
Holding Company of our reports dated February 23, 2006, with respect to (i) the consolidated balance
sheets of Hancock Holding Company as of December 31, 2005, and the related consolidated statements of
earnings, stockholders' equity, comprehensive earnings, and cash flows for the years then ended; (ii)
management's assessment of the effectiveness of internal control over financial reporting as of
December 31, 2005; and (iii) the effectiveness of internal control over financial reporting as of
December 31, 2005, which reports are incorporated by reference in this Form 10-K.

/s/ KPMG LLP

KPMG LLP
Birmingham, Alabama
March 15, 2006

Exhibit (23.1)


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (No. 333-11831 (amended by
333-113262), 333-05081, 333-53452 and 2-99863) on Form S-8 of Hancock Holding Company of our report dated January
19, 2004 included in this Annual Report on Form 10-K for the year ended December 31, 2005.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 10, 2006


Exhibit (23.2)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Hancock Holding Company
Gulfport, Mississippi


   We have audited the accompanying consolidated statements of earnings, comprehensive earnings, common
stockholders' equity and cash flows of Hancock Holding Company and subsidiaries for the year ended December 31,
2003. 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 audit.

   We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States).  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 audit provides a reasonable basis for our opinion.

   In our opinion, such consolidated financial statements present fairly, in all material respects, the results
of operations and cash flows of Hancock Holding Company and subsidiaries for the year ended December 31, 2003 in
conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
New Orleans, Louisiana
January 19, 2004
EX-31 4 hhc_10kexh31-123105.htm EX. 31 TO HHC 10K, 12/31/05 Hancock Holding Exhibit 31 to 10K, 12/31/05 
EXHIBIT 31


RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, George A. Schloegel, certify that:
     1.  I have reviewed this Annual Report on Form 10-K of Hancock Holding Company;

     2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
         state a material fact necessary to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period covered by this report;

     3.  Based on my knowledge, the financial statements, and other financial information included in this
         report, fairly present in all material respects the financial condition, results of operations and cash
         flows of the registrant as of, and for, the periods presented in this report;

     4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining
         disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
         internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
         the registrant and have:

              (a) Designed such disclosure controls and procedures, or caused such disclosure controls and
              procedures to be designed under our supervision, to ensure that material information relating to
              the registrant, including its consolidated subsidiaries, is made known to us by others within those
              entities, particularly during the period in which this report is being prepared;

              (b) Designed such internal control over financial reporting, or caused such internal control over
              financial reporting to be designed under our supervision, to provide reasonable assurance regarding
              the reliability of financial reporting and the preparation of financial statements for external
              purposes in accordance with generally accepted accounting principles;

              (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and
              presented in this report our conclusions about the effectiveness of the disclosure controls and
              procedures, as of the end of the period covered by this report based on such evaluation; and

              (d) Disclosed in this report any change in the registrant's internal control over financial reporting that
              occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
              of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
              internal control over financial reporting; and

     5.  The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation
         of internal control over financial reporting, to the registrant's auditors and the audit committee of
         the registrant's board of directors (or persons performing the equivalent functions):

              (a) All significant deficiencies and material weaknesses in the design or operation of internal
              control over financial reporting which are reasonably likely to adversely affect the registrant's
              ability to record, process, summarize and report financial information; and

              (b) Any fraud, whether or not material, that involves management or other employees who have a
              significant role in the registrant's internal control over financial reporting.


  March 15, 2006                             By:  /s/ George A. Schloegel
- -------------------                             ---------------------------------------
          Date                                    George A. Schloegel
                                                  Vice-Chairman of the Board &
                                                  Chief Executive Officer


EXHIBIT 31


RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, Carl J. Chaney, certify that:

     1.  I have reviewed this Annual Report on Form 10-K of Hancock Holding Company;

     2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
         state a material fact necessary to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period covered by this report;

     3.  Based on my knowledge, the financial statements, and other financial information included in this
         report, fairly present in all material respects the financial condition, results of operations and cash
         flows of the registrant as of, and for, the periods presented in this report;

     4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining
         disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
         internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
         the registrant and have:

              (a) Designed such disclosure controls and procedures, or caused such disclosure controls and
              procedures to be designed under our supervision, to ensure that material information relating to
              the registrant, including its consolidated subsidiaries, is made known to us by others within those
              entities, particularly during the period in which this report is being prepared;

              (b) Designed such internal control over financial reporting, or caused such internal control over
              financial reporting to be designed under our supervision, to provide reasonable assurance regarding
              the reliability of financial reporting and the preparation of financial statements for external
              purposes in accordance with generally accepted accounting principles;

              (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and
              presented in this report our conclusions about the effectiveness of the disclosure controls and
              procedures, as of the end of the period covered by this report based on such evaluation; and

              (d) Disclosed in this report any change in the registrant's internal control over financial
              reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth
              fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
              likely to materially affect, the registrant's internal control over financial reporting; and


     5.  The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation
         of internal control over financial reporting, to the registrant's auditors and the audit committee of
         the registrant's board of directors (or persons performing the equivalent functions):

              (a) All significant deficiencies and material weaknesses in the design or operation of internal
              control over financial reporting which are reasonably likely to adversely affect the registrant's
              ability to record, process, summarize and report financial information; and

              (b) Any fraud, whether or not material, that involves management or other employees who have a
              significant role in the registrant's internal control over financial reporting.


  March 15, 2006                             By:   /s/ Carl J. Chaney
- -------------------                             ---------------------------------------
          Date                                    Carl J. Chaney
                                                  Executive Vice President &
                                                  Chief Financial Officer
EX-32 5 hhc_ex32-123105.htm EX. 32 TO HHC 10K, 12/31/05 Exhibit 32 - Section 1350 Certifications 
EXHIBIT 32


SECTION 1350 CERTIFICATION

        The undersigned hereby certifies in his capacity as an officer of HANCOCK HOLDING COMPANY (the "Company")
that the Annual Report of the Company on Form 10-K for the periods ended December 31, 2005 fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in such report fairly presents, in all material respects, the financial condition of the Company at the
end of such periods and the results of operations of the Company for such periods.


  March 15, 2006                             By:   /s/ George A. Schloegel
- --------------------                             -------------------------------------
          Date                                    George A. Schloegel
                                                  Vice-Chairman of the Board &
                                                  Chief Executive Officer

        A signed original of this written statement required by Section 1350 has been provided to Hancock Holding
Company and will be retained by Hancock Holding Company and furnished to the Securities and Exchange Commission
or its staff upon request.



SECTION 1350 CERTIFICATION

        The undersigned hereby certifies in his capacity as an officer of HANCOCK HOLDING COMPANY (the "Company")
that the Annual Report of the Company on Form 10-K for the periods ended December 31, 2005 fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in such report fairly presents, in all material respects, the financial condition of the Company at the
end of such periods and the results of operations of the Company for such periods.


  March 15, 2006                             By:   /s/ Carl J. Chaney
- --------------------                             -------------------------------------
          Date                                    Carl J. Chaney
                                                  Executive Vice President &
                                                  Chief Financial Officer

        A signed original of this written statement required by Section 1350 has been provided to Hancock Holding
Company and will be retained by Hancock Holding Company and furnished to the Securities and Exchange Commission
or its staff upon request.
-----END PRIVACY-ENHANCED MESSAGE-----