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TMCNet:  Hancock Reports Second Quarter 2014 Financial Results

[July 24, 2014]

Hancock Reports Second Quarter 2014 Financial Results

(GlobeNewswire Via Acquire Media NewsEdge) GULFPORT, Miss., July 24, 2014 (GLOBE NEWSWIRE) -- Hancock Holding Company (Nasdaq:HBHC) today announced its financial results for the second quarter of 2014. Operating income for the second quarter of 2014 was $49.6 million or $.59 per diluted common share, compared to $49.1 million, or $.58 in the first quarter of 2014. Operating income was $46.9 million, or $.55, in the second quarter of 2013. We define our operating income as net income excluding tax-effected securities transactions gains or losses and nonoperating expense items. Management believes that operating income provides a useful measure of financial performance that helps investors compare the company's fundamental operations over time. The financial tables include a reconciliation of net income to operating income.


In the second quarter of 2014 net income was $40.0 million, or $.48 per diluted common share. Net income reflects the impact of certain nonoperating expenses of $12.1 million. Nonoperating expenses are detailed in the slide presentation accompanying the release. There were no adjustments between operating income and net income for the first quarter of 2014 and second quarter of 2013.

Highlights of the company's second quarter of 2014 results: Ongoing improvement in the overall quality of earnings (replacing declining purchase accounting income with core results); core net interest income (TE) increased approximately $700,000 linked-quarter; core net interest margin (NIM) narrowed 2 basis points (bps) (we define our core results as reported results less the impact of net purchase accounting adjustments); core noninterest income increased approximately $1.0 million (after adjusting for the impact from purchase accounting items and normalizing for the sale of selected insurance lines in early second quarter 2014) Operating expenses declined $2.3 million linked-quarter, or 1.5%, exceeding the company's expense management goals; however, management expects increases in operating expense in the near-term as investments are made in revenue-generating initiatives Efficiency ratio declined slightly to just under 62%; the company continues working on its goal of lowering the efficiency ratio to below 60% Approximately $383 million, or 13%, linked-quarter annualized net loan growth, and approximately $1.3 billion, or 12%, year-over-year loan growth (each excluding the FDIC-covered portfolio) Purchase accounting loan accretion declined $1.6 million linked-quarter; management expects sizeable quarterly declines in both the third and fourth quarters of 2014 Continued improvement in asset quality metrics Solid capital levels with a tangible common equity (TCE) ratio of 9.29% Return on average assets (ROA) (operating) of 1.04% compared to 1.05% in the first quarter of 2014 and 0.99% in the second quarter a year ago "The quarter's results reflected solid performance across the company as we continued to improve the quality of our earnings by replacing purchase accounting income with core earnings," said Hancock's President and Chief Executive Officer Carl J. Chaney. "The double-digit loan growth, improvements in core revenue, reduced operating expense, improved asset quality and capital strength reflected in the second quarter's numbers, contributed to the board's decision and confidence in authorizing another common stock buyback. We remain focused on executing and achieving the strategic initiatives currently underway, with the ultimate goal of enhancing shareholder value."  Loans Total loans at June 30, 2014 were $12.9 billion, up $356 million from March 31, 2014. Excluding the FDIC-covered portfolio, which declined $27 million during the second quarter of 2014, total loans increased approximately $383 million, or 3% linked-quarter.  The largest component of linked-quarter net loan growth (excluding the FDIC-covered portfolio) was in the commercial and industrial portfolio, with additional growth and change in mix from the construction, residential mortgage and consumer portfolios. The majority of the growth during the second quarter came from the Houston and south Louisiana markets. For the full year of 2014 management expects period-end annual loan growth to be in the 8-11% range.

Average loans totaled $12.7 billion for the second quarter of 2014, up $302 million, or 2%, from the first quarter of 2014.  Deposits Total deposits at June 30, 2014 were $15.2 billion, virtually unchanged from March 31, 2014. Average deposits for the second quarter of 2014 were $15.1 billion, down $209 million, or 1%, from the first quarter of 2014.  Noninterest-bearing demand deposits (DDAs) totaled $5.7 billion at June 30, 2014, up $110 million, or 2%, compared to March 31, 2014. DDAs comprised 38% of total period-end deposits at June 30, 2014.  Interest-bearing transaction and savings deposits totaled $6.1 billion at the end of the second quarter of 2014, down $38 million, or less than 1%, from March 31, 2014.

Time deposits (CDs) and interest-bearing public fund deposits totaled $3.4 billion at June 30, 2014, down $101 million, or 3%, from March 31, 2014. The decline was related to short-term time deposits that matured during the second quarter and were not renewed.

Asset Quality Nonperforming assets (NPAs) totaled $157.5 million at June 30, 2014, down $22.2 million from March 31, 2014. During the second quarter of 2014, total nonperforming loans declined $12.1 million while foreclosed and surplus real estate (ORE) and other foreclosed assets decreased $10.1 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 1.22% at June 30, 2014, down 21 bps from March 31, 2014.  The total allowance for loan losses was $128.7 million at June 30, 2014, up slightly from $128.2 million at March 31, 2014.  The ratio of the allowance for loan losses to period-end loans was 1.00%, compared to 1.02% at the end of the first quarter of 2014. The change in the allowance during the second quarter was primarily related to a $2.7 million increase in allowance maintained on the noncovered portion of the loan portfolio, offset by a $2.3 million reduction in the allowance on covered loans.  Net charge-offs from the noncovered loan portfolio were $4.1 million, or 0.13% of average total loans on an annualized basis in the second quarter of 2014, virtually unchanged from $4.0 million, or 0.13% of average total loans in the first quarter of 2014.  During the second quarter of 2014, Hancock recorded a total provision for loan losses of $6.7 million, down $1.3 million from the first quarter of 2014. The provision for noncovered loans was $6.8 million in the second quarter of 2014, down from $8.3 million in the first quarter of 2014.  Net Interest Income and Net Interest Margin Net interest income (TE) for the second quarter of 2014 was $167.3 million, down less than $1 million from the first quarter of 2014. The impact of purchase accounting items on net interest income was $26.7 million, down $1.6 million linked-quarter. Excluding the impact from purchase accounting items, core net interest income increased $0.7 million linked-quarter. Average earning assets were $16.8 billion, up approximately $51 million from the first quarter of 2014.  The reported net interest margin (TE) was 3.99% for the second quarter of 2014, down 7 bps from the first quarter of 2014. The core net interest margin (reported net interest income (TE) excluding total net purchase accounting adjustments, annualized, as a percent of average earning assets) declined 2 bps to 3.35% during the second quarter of 2014. Declines in the core loan yield (-5 bps) and securities portfolio yield (-4 bps) were partly offset by an improved earning asset mix and lower cost of funds (-1 bp).  Noninterest Income Noninterest income, including securities transactions, totaled $56.4 million for the second quarter of 2014, virtually unchanged from the first quarter of 2014. Included in the total is a reduction of $3.3 million related to the amortization of the indemnification asset, compared to a reduction of $3.9 million in the first quarter of 2014.  The total for the second quarter also reflects the divestiture of selected insurance business lines effective April 1, 2014. The loss of income from the divestiture was approximately $1.8 million per quarter. Excluding the impact of these items, core noninterest income increased by approximately $1.0 million linked-quarter.

Service charges on deposits totaled $19.3 million for the second quarter of 2014, up $0.6 million, or 3%, from the first quarter of 2014. Bankcard and ATM fees totaled $11.6 million, up $1.0 million, or 10%, from the first quarter of 2014.  Trust fees totaled $11.5 million, up $1.3 million, or 12%, from the first quarter of 2014 reflecting, in part, a seasonal increase related to tax preparation fees.  Fees from secondary mortgage operations totaled $1.8 million for the second quarter of 2014, down $0.2 million, or 11%, linked-quarter. A slightly higher percentage of the mortgage loans originated during the quarter were kept on the balance sheet as opposed to being sold in the secondary market.

Noninterest Expense & Taxes Noninterest expense for the second quarter of 2014 totaled $156.9 million and included $12.1 million of nonoperating expenses. Excluding these costs, operating expense totaled $144.7 million in the second quarter of 2014, down $2.3 million, or 1.5%, linked-quarter. (The details of the changes in the noninterest expense categories noted below exclude the impact of nonoperating items.) Total personnel expense was $79.5 million in the second quarter of 2014, down $1.9 million, or 2%, from the first quarter of 2014 reflecting, in part, seasonal items included in the first quarter. Occupancy and equipment expense totaled $14.9 million in the second quarter of 2014, down $0.6 million, or 4%, from the first quarter of 2014.  ORE expense totaled $84,000 in the second quarter of 2014, compared to $1.8 million in the first quarter of 2014. ORE expense in the second quarter includes net gains on ORE dispositions, and management does not expect this low level of ORE expense to be sustainable in future quarters.

Other operating expense totaled $43.5 million in the second quarter of 2014, up $2.3 million, or 6%, from the first quarter of 2014. The increase reflects a lower level of miscellaneous expense items in the first quarter.

The effective income tax rate for the second quarter of 2014 was 31%, up from 27% in the first quarter of 2014. The increase in the tax rate was related, in part, to the tax impact from the gain on the divestiture of selected insurance business lines early in the second quarter of 2014. Management expects the effective income tax rate to approximate 27% for the remainder of 2014. The effective income tax rate continues to be less than the statutory rate of 35% due primarily to tax-exempt income and tax credits.  Capital Common shareholders' equity at June 30, 2014 totaled $2.5 billion. The tangible common equity (TCE) ratio was 9.29%, up 5 bps from March 31, 2014. Final settlement of the accelerated share repurchase (ASR) transaction was completed in early May 2014, with approximately 590,000 shares received. As a result of Hancock's continued strong capital position, the Board of Directors authorized a new common stock buyback program in July for up to 5%, or approximately 4 million shares, of the company's common stock. The shares may be repurchased in the open market or in privately negotiated transactions from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The buyback authorization will expire December 31, 2015. Additional capital ratios are included in the financial tables.

Conference Call and Slide Presentation Management will host a conference call for analysts and investors at 9:00 a.m. Central Time on Friday, July 25, 2014 to review the results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock's website at www.hancockbank.com. Additional financial tables and a slide presentation related to second quarter results are also posted as part of the webcast link. To participate in the Q&A portion of the call, dial (877) 564-1219 or (973) 638-3429. An audio archive of the conference call will be available under the Investor Relations section of our website. A replay of the call will also be available through July 31, 2014 by dialing (855) 859-2056 or (404) 537-3406, passcode 69488929.  About Hancock Holding Company Hancock Holding Company is a financial services company with regional business headquarters and locations throughout a growing Gulf South corridor. The company's banking subsidiary provides a comprehensive network of full-service financial choices through Hancock Bank locations in Mississippi, Alabama, and Florida and Whitney Bank offices in Louisiana and Texas, including traditional and online banking; commercial and small business banking; energy banking; private banking; trust and investment services; certain insurance services; mortgage services; and consumer financing. More information and online banking are available at www.hancockbank.com and www.whitneybank.com.

Forward-Looking Statements This news release contains "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and we intend such forward-looking statements to be covered by the safe harbor provisions therein and are including this statement for purposes of invoking these safe-harbor provisions.  Forward-looking statements provide projections of results of operations or of financial condition or state other forward-looking information, such as expectations about future conditions and descriptions of plans and strategies for the future.   Forward-looking statements that we may make include, but may not be limited to, comments with respect to future levels of economic activity in our markets,  loan growth, deposit trends, credit quality trends, future sales of nonperforming assets, net interest margin trends, future expense levels and the ability to achieve reductions in noninterest expense or other cost savings, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, the impact of the branch rationalization process, details of the common stock buyback, possible repurchases of shares under stock buyback programs, and the financial impact of regulatory requirements. Hancock's ability to accurately project results or predict the effects of future plans or strategies is inherently limited.  Although Hancock believes that the expectations reflected in its forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements.  Factors that could cause actual results to differ from those expressed in Hancock's forward-looking statements include, but are not limited to, those risk factors outlined in Hancock's public filings with the Securities and Exchange Commission, which are available at the SEC's internet site (http://www.sec.gov).

You are cautioned not to place undue reliance on these forward-looking statements.  Hancock does not intend, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

HANCOCK HOLDING COMPANYFINANCIAL HIGHLIGHTS(Unaudited)  Three Months EndedSix Months Ended(amounts in thousands, except per share data)6/30/20143/31/20146/30/20136/30/20146/30/2013 INCOME STATEMENT DATA        Net interest income$164,778 $165,562 $169,179$330,340 $343,194 Net interest income (TE) (a)167,332 168,198 171,822335,530 348,563 Provision for loan losses6,691 7,963 8,25714,654 17,835 Noninterest income excluding securities transactions56,398 56,699 63,897113,097 124,084 Securities transactions gains --  --  -- --  -- Noninterest expense (excluding nonoperating expense items)144,727 146,982 162,250291,709 321,852 Nonoperating expense items12,131  --  --12,131  -- Net income39,962 49,115 46,86289,077 95,438 Operating income (b)49,575 49,115 46,86298,690 95,438 PERIOD-END BALANCE SHEET DATA           Loans$12,884,056 $12,527,937 $11,681,497$12,884,056 $11,681,497 Investment securities3,677,229 3,797,883 4,303,9183,677,229 4,303,918 Earning assets17,023,990 16,622,104 16,448,56517,023,990 16,448,565 Total assets19,349,431 19,004,170 18,934,30119,349,431 18,934,301 Noninterest-bearing deposits5,723,663 5,613,872 5,340,1775,723,663 5,340,177 Total deposits15,245,227 15,274,774 15,155,93815,245,227 15,155,938 Common shareholders' equity2,492,582 2,462,534 2,345,3402,492,582 2,345,340 AVERAGE BALANCE SHEET DATA         Loans$12,680,861 $12,379,316 $11,594,920$12,530,922 $11,544,150 Investment securities3,716,563 3,935,616 4,423,4413,825,484 4,177,713 Earning assets16,791,744 16,740,353 16,500,21516,766,191 16,508,910 Total assets19,039,264 19,055,107 19,022,83219,047,142 19,087,383 Noninterest-bearing deposits5,505,735 5,499,993 5,346,9165,502,878 5,330,871 Total deposits15,060,581 15,269,143 15,211,36315,164,285 15,261,746 Common shareholders' equity2,463,385 2,435,980 2,405,0692,449,758 2,426,420 COMMON SHARE DATA         Earnings per share - diluted$0.48 $0.58 $0.55$1.06 $1.11 Operating earnings per share - diluted (b)0.59 0.58 0.551.17 1.11 Cash dividends per share$0.24 $0.24 $0.24$0.48 $0.48 Book value per share (period-end)$30.45 $29.93 $28.57$30.45 $28.57 Tangible book value per share (period-end)21.08 20.47 18.8321.08 18.83 Weighted average number of shares - diluted82,174 82,534 83,35782,348 84,153 Market data         High sales price$37.86 $38.50 $30.93$38.50 $33.59 Low sales price32.02 32.66 25.0032.02 25.00 Period-end closing price35.32 36.65 30.0735.32 30.07 Trading volume27,432 31,328 38,59958,760 68,068 PERFORMANCE RATIOS         Return on average assets0.84% 1.05% 0.99%0.94% 1.01% Return on average assets (operating) (b)1.04% 1.05% 0.99%1.04% 1.01% Return on average common equity6.51% 8.18% 7.82%7.33% 7.93% Return on average common equity (operating) (b)8.07% 8.18% 7.82%8.12% 7.93% Return on average tangible common equity9.47% 12.04% 11.74%10.73% 11.89% Return on average tangible common equity (operating) (b)11.75% 12.04% 11.74%11.89% 11.89% Tangible common equity ratio (c)9.29% 9.24% 8.52%9.29% 8.52% Net interest margin (TE) (a)3.99% 4.06% 4.17%4.03% 4.24% Average loan/deposit ratio84.20% 81.20% 76.41%82.63% 75.86% Efficiency ratio (d)61.67% 62.23% 65.68%61.95% 64.92% Allowance for loan losses as a percent of period-end loans1.00% 1.02% 1.18%1.00% 1.18% Annualized net charge-offs to average loans0.13% 0.13% 0.24%0.13% 0.24% Allowance for loan losses to non-performing loans + accruing loans 90 days past due126.26% 112.64% 91.43%126.26% 91.43% Noninterest income excluding securities transactions as a percent of total revenue (TE) (a)25.21% 25.21% 27.11%25.21% 26.25% (a) Tax-equivalent (TE) amounts are calculated using a federal income tax rate of 35%.

(b) Operating income excludes tax-effected securities transactions and nonoperating expense items. Management believes that operating income provides a useful measure of financial performance that helps investors compare the Company's fundamental operations over time.

(c) The tangible common equity ratio is common shareholders' equity less intangible assets divided by total assets less intangible assets.

(d) The efficiency ratio is noninterest expense to total net interest (TE) and noninterest income excluding amortization of purchased intangibles, nonoperating expense items, and securities transactions.

   HANCOCK HOLDING COMPANYQUARTERLY HIGHLIGHTS(Unaudited)  Three Months Ended(amounts in thousands, except per share data)6/30/20143/31/201412/31/20139/30/20136/30/2013 INCOME STATEMENT DATA         Net interest income$164,778 $165,562 $166,007 $171,530 $169,179 Net interest income (TE) (a)167,332 168,198 168,466 174,112 171,822 Provision for loan losses6,691 7,963 7,331 7,569 8,257 Noninterest income excluding securities transactions56,398 56,699 58,894 63,057 63,897 Securities transactions gains --  -- 105  --  -- Noninterest expense (excluding nonoperating expense items)144,727 146,982 157,097 161,318 162,250 Nonoperating expense items12,131  -- 17,116  20,887  -- Net income39,962 49,115 34,716 33,202 46,862 Operating income (b)49,575 49,115 45,773 46,779 46,862 PERIOD-END BALANCE SHEET DATA           Loans$12,884,056 $12,527,937 $12,324,817 $11,734,472 $11,681,497 Investment securities3,677,229 3,797,883 4,033,124 4,124,202 4,303,918 Earning assets17,023,990 16,622,104 16,651,295 16,339,431 16,448,565 Total assets19,349,431 19,004,170 19,009,251 18,801,846 18,934,301 Noninterest-bearing deposits5,723,663 5,613,872 5,530,253 5,479,696 5,340,177 Total deposits15,245,227 15,274,774 15,360,516 15,054,871 15,155,938 Common shareholders' equity2,492,582 2,462,534 2,425,069 2,356,442 2,345,340 AVERAGE BALANCE SHEET DATA          Loans$12,680,861 $12,379,316 $11,903,603 $11,805,330 $11,594,920 Investment securities3,716,563 3,935,616 4,070,657 4,135,348 4,423,441 Earning assets16,791,744 16,740,353 16,376,587 16,384,635 16,500,215 Total assets19,039,264 19,055,107 18,739,091 18,796,027 19,022,832 Noninterest-bearing deposits5,505,735 5,499,993 5,483,918 5,415,303 5,346,916 Total deposits15,060,581 15,269,143 14,915,677 15,021,685 15,211,363 Common shareholders' equity2,463,385 2,435,980 2,355,768 2,338,945 2,405,069 COMMON SHARE DATA          Earnings per share - diluted$0.48 $0.58 $0.41 $0.40 $0.55 Operating earnings per share - diluted (b)0.59 0.58 0.55 0.56 0.55 Cash dividends per share$0.24 $0.24 $0.24 $0.24 $0.24 Book value per share (period-end)$30.45 $29.93 $29.49 $28.70 $28.57 Tangible book value per share (period-end)21.08 20.47 19.94 19.04 18.83 Weighted average number of shares - diluted82,174 82,534 82,220 82,205 83,357 Market data          High sales price$37.86 $38.50 $37.12 $33.85 $30.93 Low sales price32.02 32.66 30.09 29.00 25.00 Period-end closing price35.32 36.65 36.68 31.38 30.07 Trading volume27,432 31,328 27,816 29,711 38,599 PERFORMANCE RATIOS          Return on average assets0.84% 1.05% 0.74% 0.70% 0.99% Return on average assets (operating) (b)1.04% 1.05% 0.97% 0.99% 0.99% Return on average common equity6.51% 8.18% 5.85% 5.63% 7.82% Return on average common equity (operating) (b)8.07% 8.18% 7.71% 7.93% 7.82% Return on average tangible common equity9.47% 12.04% 8.79% 8.54% 11.74% Return on average tangible common equity (operating) (b)11.75% 12.04% 11.59% 12.03% 11.74% Tangible common equity ratio (c)9.29% 9.24% 9.00% 8.68% 8.52% Net interest margin (TE) (a)3.99% 4.06% 4.09% 4.23% 4.17% Average loan/deposit ratio84.20% 81.20% 79.93% 78.70% 76.41% Efficiency ratio (d)61.67% 62.23% 65.94% 64.95% 65.68% Allowance for loan losses as a percent of period-end loans1.00% 1.02% 1.08% 1.18% 1.18% Annualized net charge-offs to average loans0.13% 0.13% 0.17% 0.18% 0.24% Allowance for loan losses to non-performing loans + accruing loans 90 days past due126.26% 112.64% 111.97% 94.69% 91.43% Noninterest income excluding securities transactions as a percent of total revenue (TE) (a)25.21% 25.21% 25.90% 26.59% 27.11% (a) Tax-equivalent (TE) amounts are calculated using a federal income tax rate of 35%.

(b) Operating income excludes tax-effected securities transactions and nonoperating expense items. Management believes that operating income provides a useful measure of financial performance that helps investors compare the Company's fundamental operations over time.

(c) The tangible common equity ratio is common shareholders' equity less intangible assets divided by total assets less intangible assets.

(d) The efficiency ratio is noninterest expense to total net interest (TE) and noninterest income excluding amortization of purchased intangibles, nonoperating expense items, and securities transactions.CONTACT: For More Information Trisha Voltz Carlson SVP, Investor Relations Manager 504.299.5208 trisha.carlson@hancockbank.com Source: Hancock Holding Company 2014 GlobeNewswire, Inc.

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