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 October 22, 2015 - 5:00 PM EDT
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Hancock Reports Third Quarter 2015 Financial Results

Strategic Initiatives Drive Improving Revenue and EPS; Continue to Build Energy Reserve

Highlights of the company’s third quarter of 2015 results (compared to second quarter 2015):

  • Earnings increased $6.3 million, or 18%
  • E.P.S. of $.52 increased 18%
  • Pre-tax, pre-provision earnings grew 22%
  • Provision reflects additional $5 million build for energy portfolio with reserve exceeding 2%
  • Loans increased $418 million, or 12% (annualized)
  • Deposits increased $138 million, or 3% (annualized)
  • Core revenue increased $6.2 million
  • Core NIM of 3.15% increased 1 basis point; core loan yield expanded 4 basis points
  • Operating expense up less than 1%

GULFPORT, Miss., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Hancock Holding Company (Nasdaq:HBHC) today announced its financial results for the third quarter of 2015.  Net income for the third quarter of 2015 was $41.2 million, or $.52 per diluted common share, compared to $34.8 million, or $.44 in the second quarter of 2015 and $46.6 million, or $.56, in the third quarter of 2014.  The year-over-year decline in earnings was mainly related to a decrease in purchase accounting income of approximately $13.0 million (pre-tax).  The quarter-over-quarter change was mainly related to the $8.9 million of nonoperating expenses included in the second quarter of 2015.

“The quality of our results is improving each quarter and we are growing our company while also managing through the current energy cycle,” said President and CEO John M. Hairston.  “The initiatives we have put in place are working.  We grew core revenue over $6 million linked-quarter while pre-tax, pre-provision earnings increased over $12 million.  This quarter we added another $5 million, or almost a nickel of earnings, to the provision to build the energy reserve and remain confident that any credit losses we see today from the low oil prices are reserved for and should not be significant.  As we have noted since the beginning of this energy cycle, we believe the cycle to be manageable without putting our strong capital levels at risk.”

Loans

Total loans at September 30, 2015 were $14.8 billion, up $418 million, or 3%, from June 30, 2015.  Many markets across the footprint reported net loan growth during the quarter, with growth also noted in various business lines such as indirect, mortgage and specialty finance.

At September 30, 2015, loans in the energy segment totaled $1.6 billion, or 11% of total loans.  The energy portfolio declined approximately $10 million linked-quarter and is comprised of credits to both the E&P industry and support industries.  Additional details of the energy portfolio are included in the presentation slides posted on our Investor Relations website.  

Average loans totaled $14.5 billion for the third quarter of 2015, up $373 million, or 3%, linked-quarter. 

On October 6, 2015, the company announced the opening of a loan production office in Nashville, Tennessee, and an agreement to purchase approximately $190 million of healthcare loans.  This transaction supports our initiative to continue diversifying our loan portfolio, in addition to capitalizing on opportunities we see to expand the healthcare lending business across our Gulf South footprint.  The acquired loans will be included in our fourth quarter of 2015 results. 

Deposits

Total deposits at September 30, 2015 were $17.4 billion, up $138 million, or 1%, from June 30, 2015.  Average deposits for the third quarter of 2015 were $17.3 billion, up $451 million, or 3%, linked-quarter.

Noninterest-bearing demand deposits (DDAs) totaled $6.1 billion at September 30, 2015, down $105 million from June 30, 2015.  DDAs comprised 35% of total period-end deposits at September 30, 2015. 

Interest-bearing transaction and savings deposits totaled $7.4 billion at the end of the third quarter of 2015, up $366 million, or 5%, from June 30, 2015.  Time deposits of $2.2 billion increased $72 million, or 3%, while interest-bearing public fund deposits decreased $194 million, or 10%, to $1.8 billion at September 30, 2015. 

Asset Quality

Nonperforming assets (NPAs) totaled $206 million at September 30, 2015, up $41 million from June 30, 2015.  During the third quarter of 2015, total nonperforming loans increased approximately $46 million while foreclosed and surplus real estate (ORE) and other foreclosed assets decreased approximately $5 million.  The net increase in nonperforming loans was mainly related to three energy loans which were downgraded during the quarter.  Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 1.39% at September 30, 2015, up 24 bps from June 30, 2015. 

The total allowance for loan losses was $139.6 million at September 30, 2015, up $8.5 million from June 30, 2015.  The ratio of the allowance for loan losses to period-end loans was 0.95% at September 30, 2015, up from 0.91% at June 30, 2015.  The allowance maintained on the non-FDIC acquired portion of the loan portfolio increased $7.0 million linked-quarter, totaling $114 million, and the reserve on the FDIC acquired loan portfolio increased approximately $1.5 million linked-quarter.

Pricing pressures on oil continued during the third quarter and led to additional downward pressure on risk ratings.  Based on those changes, and updates to the qualitative factors related to energy, the reserve for the energy portfolio was increased approximately $5.0 million, to $35 million, linked-quarter.  The increase in risk rating downgrades within the energy portfolio during the third quarter included approximately $66 million of shared national credits that were on appeal at June 30, 2015.  The impact to the allowance for the possible downgrades on these shared national credits was included in the second quarter of 2015.

Management believes that if further risk rating downgrades occur they could lead to additional loan loss provisions but not translate to significant credit losses.  The impact and severity of risk rating migration, associated provision and net charge-offs will depend on overall oil price reduction and the duration of the cycle.  Additional details of the energy portfolio are included in the presentation slides posted on our Investor Relations website.  

Net charge-offs from the non-FDIC acquired loan portfolio were $3.5 million, or 0.09% of average total loans on an annualized basis in the third quarter of 2015, up from $1.2 million, or 0.03% of average total loans in the second quarter of 2015. 

During the third quarter of 2015, Hancock recorded a total provision for loan losses of $10.1 million, up $3.5 million from the second quarter of 2015. 

Net Interest Income and Net Interest Margin

Net interest income (TE) for the third quarter of 2015 was $160.1 million, up $5.3 million from the second quarter of 2015.  During the third quarter, the impact on net interest income from purchase accounting adjustments (PAAs) declined $1.3 million compared to the second quarter of 2015.  Excluding the impact from purchase accounting items, core net interest income increased $6.6 million linked-quarter.  Average earning assets were $19.4 billion for the third quarter of 2015, up $653 million, or 3%, from the second quarter of 2015. 

The reported net interest margin (TE) was 3.28% for the third quarter of 2015, down 2 bps from the second quarter of 2015.  The decline was mainly related to the decrease in purchase accounting adjustments noted above.  The core net interest margin (reported net interest income (TE) excluding total net purchase accounting adjustments, annualized, as a percent of average earning assets) increased 1 basis point to 3.15% during the third quarter of 2015.  An increase in the core loan yield (4 bps) and an increase in the securities portfolio yield (3 bps), offset by a slight increase in the cost of funds (2 bps), contributed to the expansion in the margin. 

Noninterest Income

Noninterest income, including securities transactions, totaled $60.2 million for the third quarter of 2015, down $0.7 million, or 1%, from the second quarter of 2015.  Included in the total is a reduction of $1.6 million related to the amortization of the FDIC indemnification asset, compared to a reduction of $1.3 million in the second quarter of 2015.  Excluding the impact of this item and securities transactions, core noninterest income totaled $61.8 million, down slightly linked-quarter. 

Service charges on deposits totaled $18.6 million for the third quarter of 2015, up $0.7 million, or 4%, from the second quarter of 2015.  Bank card and ATM fees totaled $11.6 million, down $0.2 million, or 2%, from the second quarter of 2015. 

Trust fees totaled $11.3 million, down $0.4 million, or 4%, linked-quarter.  The decrease was due, in part, to seasonal tax return preparation fees in the second quarter of 2015.   Investment and annuity income and insurance fees totaled $8.4 million, up $1 million, or 13%, linked-quarter.   

Fees from secondary mortgage operations totaled $3.4 million for the third quarter of 2015, down $0.2 million, or 6%, linked-quarter.  During the third quarter, a slightly smaller portion of loan production was sold in the secondary market compared to last quarter. 

Other noninterest income (excluding the amortization of the FDIC indemnification asset noted above) totaled $8.4 million, down $1.2 million, or 12%, from the second quarter of 2015.  The decline is mainly related to a lower level of customer interest rate swap income in the third quarter.

Noninterest Expense & Taxes

Noninterest expense for the third quarter of 2015 totaled $151.2 million.  There were no nonoperating expenses in the third quarter of 2015 compared to $8.9 million in the second quarter of 2015.  Excluding nonoperating items, expenses were up $1.2 million, or less than 1%, linked-quarter.  (The details of the changes in the noninterest expense categories noted below exclude the impact of nonoperating items.)

Total personnel expense was $84.2 million in the third quarter of 2015, up $1.6 million, or 2%, from the second quarter of 2015.  The increase primarily reflects salary and incentive expenses related to revenue initiatives.

Occupancy and equipment expense totaled $14.8 million in the third quarter of 2015, down $1.0 million, or 6%, from the second quarter of 2015. 

ORE expense totaled $0.4 million for the third quarter of 2015, down $0.1 million from the second quarter of 2015. 

Other operating expense totaled $45.8 million in the third quarter of 2015, up $0.8 million, or 2%, from the second quarter of 2015. 

The effective income tax rate for the third quarter of 2015 was 26%, unchanged from the second quarter of 2015.  Management expects the effective income tax rate to approximate 25-27% in 2015.  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 September 30, 2015 totaled $2.5 billion.  The tangible common equity (TCE) ratio was 8.24%, up 12 bps from June 30, 2015.  During the quarter the company repurchased 568,279 common shares under the new 5% common stock buyback authorization announced in late August 2015.  The shares were repurchased at an average price of $27.39.  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, October 23, 2015 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 third 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 October 30, 2015 by dialing (855) 859-2056 or (404) 537-3406, passcode 50555582. 

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, including the impact of volatility of oil and gas prices on our energy portfolio and associated loan loss reserves and the downstream impact on businesses that support the energy sector, especially in the Gulf Coast region, loan growth expectations, deposit trends, credit quality trends, net interest margin trends, future expense levels, success of revenue-generating initiatives, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, possible repurchases of shares under stock buyback programs, and the financial impact of regulatory requirements.  Hancock’s ability to accurately project results, predict the effects of future plans or strategies, or predict market or economic developments 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 included 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 COMPANY
FINANCIAL HIGHLIGHTS
(Unaudited)
 Three Months EndedNine Months Ended
(amounts in thousands, except per share data)9/30/20156/30/20159/30/20149/30/20159/30/2014
      
INCOME STATEMENT DATA     
Net interest income$156,830 $151,791 $163,541 $466,779 $493,881 
Net interest income (TE) (a) 160,134  154,879  166,230  476,127  501,759 
Provision for loan losses 10,080  6,608  9,468  22,842  24,122 
Noninterest income excluding securities transactions 60,207  60,874  57,941  177,294  171,038 
Securities transactions gains 4  -  -  337  - 
Noninterest expense (excluding nonoperating items) 151,193  149,990  145,192  447,384  436,901 
Nonoperating items -  8,927  3,887  16,241  16,018 
Net income 41,166  34,829  46,553  116,154  135,630 
Operating income (b) 41,166  40,631  49,079  126,494  147,769 
Pre-tax, pre-provision (PTPP) profit (TE) (a) (c) 69,152  56,836  75,092  190,133  219,878 
      
PERIOD-END BALANCE SHEET DATA     
Loans$14,763,050 $14,344,752 $13,348,574 $14,763,050 $13,348,574 
Investment securities 4,548,922  4,445,452  3,913,370  4,548,922  3,913,370 
Earning assets 19,526,150  19,409,963  17,748,600  19,526,150  17,748,600 
Total assets 21,608,150  21,538,405  19,985,950  21,608,150  19,985,950 
Noninterest-bearing deposits 6,075,558  6,180,814  5,866,255  6,075,558  5,866,255 
Total deposits 17,439,948  17,301,788  15,736,694  17,439,948  15,736,694 
Common shareholders' equity 2,453,561  2,430,040  2,509,342  2,453,561  2,509,342 
      
AVERAGE BALANCE SHEET DATA     
Loans$14,511,474 $14,138,904 $13,102,108 $14,175,611 $12,723,409 
Investment securities (d) 4,425,546  4,143,097  3,780,089  4,116,270  3,810,186 
Earning assets 19,433,337  18,780,771  17,324,444  18,847,409  16,954,320 
Total assets 21,481,410  20,875,090  19,549,947  20,937,254  19,216,585 
Noninterest-bearing deposits 6,032,680  6,107,900  5,707,523  6,022,034  5,571,843 
Total deposits 17,313,433  16,862,088  15,371,209  16,890,005  15,234,018 
Common shareholders' equity 2,439,068  2,430,710  2,489,948  2,439,184  2,463,302 
      
COMMON SHARE DATA     
Earnings per share - diluted$0.52 $0.44 $0.56 $1.45 $1.62 
Operating earnings per share - diluted (b) 0.52  0.51  0.59  1.57  1.76 
Cash dividends per share$0.24 $0.24 $0.24 $0.72 $0.72 
Book value per share (period-end)$31.65 $31.12 $30.76 $31.65 $30.76 
Tangible book value per share (period-end) 22.18  21.63  21.44  22.18  21.44 
Weighted average number of shares - diluted 78,075  78,115  81,942  78,609  82,204 
Period-end number of shares 77,519  78,094  81,567  77,519  81,567 
Market data     
High sales price$32.47 $32.98 $36.47 $32.98 $38.50 
Low sales price 25.20  28.02  31.25  24.96  31.25 
Period-end closing price 27.05  31.91  32.05  27.05  32.05 
Trading volume 44,705  40,162  25,553  136,733  84,239 
      
PERFORMANCE RATIOS     
Return on average assets 0.76% 0.67% 0.94% 0.74% 0.94%
Return on average assets - operating (b) 0.76% 0.78% 1.00% 0.81% 1.03%
Return on average common equity 6.70% 5.75% 7.42% 6.37% 7.36%
Return on average common equity - operating (b) 6.70% 6.70% 7.82% 6.93% 8.02%
Return on average tangible common equity 9.60% 8.28% 10.70% 9.16% 10.72%
Return on average tangible common equity - operating (b) 9.60% 9.66% 11.28% 9.98% 11.68%
Tangible common equity ratio (e) 8.24% 8.12% 9.10% 8.24% 9.10%
Net interest margin (TE) (a) 3.28% 3.30% 3.81% 3.37% 3.95%
Average loan/deposit ratio 83.82% 83.85% 85.24% 83.93% 83.52%
Efficiency ratio (f) 65.88% 66.67% 61.84% 65.64% 61.91%
Allowance for loan losses as a percent of period-end loans 0.95% 0.91% 0.94% 0.95% 0.94%
Annualized net non-FDIC acquired charge-offs to average loans 0.09% 0.03% 0.19% 0.08% 0.15%
Allowance for loan losses to non-performing loans + accruing loans 90 days past due 78.15% 100.92% 128.44% 78.15% 128.44%
Noninterest income excluding securities transactions as a percent of total revenue (TE) (a) 27.32% 28.21% 25.85% 27.13% 25.42%
      
FTE Total Headcount 3,863  3,825  3,787  3,863  3,787 
      

(a) Tax-equivalent (TE) amounts are calculated using a federal income tax rate of 35%. 

(b) Net income less tax-effected securities transactions and nonoperating 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) Net interest income (TE) and noninterest income less noninterest expense.  Management believes that PTPP profit is a useful financial measure because it enables investors to assess the Company's ability to generate capital to cover credit losses through a credit cycle.

(d) Average securities does not include unrealized holding gains/losses on available for sale securities.

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

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


HANCOCK HOLDING COMPANY
QUARTERLY HIGHLIGHTS
(Unaudited)
 Three Months Ended
(amounts in thousands, except per share data)9/30/20156/30/20153/31/201512/31/20149/30/2014
                
INCOME STATEMENT DATA               
Net interest income$156,830 $151,791 $158,158 $160,813 $163,541 
Net interest income (TE) (a) 160,134  154,879  161,114  163,581  166,230 
Provision for loan losses 10,080  6,608  6,154  9,718  9,468 
Noninterest income excluding securities transactions 60,207  60,874  56,213  56,961  57,941 
Securities transactions gains 4  -  333  -  - 
Noninterest expense (excluding nonoperating items) 151,193  149,990  146,201  144,080  145,192 
Nonoperating items -  8,927  7,314  9,667  3,887 
Net income 41,166  34,829  40,159  40,092  46,553 
Operating income (b) 41,166  40,631  44,697  46,376  49,079 
Pre-tax, pre-provision (PTPP) profit (TE) (a) (c) 69,152  56,836  64,145  66,795  75,092 
                
PERIOD-END BALANCE SHEET DATA               
Loans$14,763,050 $14,344,752 $13,924,386 $13,895,276 $13,348,574 
Investment securities 4,548,922  4,445,452  4,107,904  3,826,454  3,913,370 
Earning assets 19,526,150  19,409,963  18,568,037  18,544,930  17,748,600 
Total assets 21,608,150  21,538,405  20,724,511  20,747,266  19,985,950 
Noninterest-bearing deposits 6,075,558  6,180,814  6,201,403  5,945,208  5,866,255 
Total deposits 17,439,948  17,301,788  16,860,485  16,572,831  15,736,694 
Common shareholders' equity 2,453,561  2,430,040  2,425,098  2,472,402  2,509,342 
      
AVERAGE BALANCE SHEET DATA     
Loans$14,511,474 $14,138,904 $13,869,397 $13,578,223 $13,102,108 
Investment securities (d) 4,425,546  4,143,097  3,772,997  3,836,123  3,780,089 
Earning assets 19,433,337  18,780,771  18,315,839  17,911,143  17,324,444 
Total assets 21,481,410  20,875,090  20,443,859  20,090,372  19,549,947 
Noninterest-bearing deposits 6,032,680  6,107,900  5,924,196  5,849,356  5,707,523 
Total deposits 17,313,433  16,862,088  16,485,259  15,892,507  15,371,209 
Common shareholders' equity 2,439,068  2,430,710  2,447,870  2,509,509  2,489,948 
                
COMMON SHARE DATA               
Earnings per share - diluted$0.52 $0.44 $0.49 $0.48 $0.56 
Operating earnings per share - diluted (b) 0.52  0.51  0.55  0.56  0.59 
Cash dividends per share$0.24 $0.24 $0.24 $0.24 $0.24 
Book value per share (period-end)$31.65 $31.12 $31.14 $30.74 $30.76 
Tangible book value per share (period-end) 22.18  21.63  21.55  21.37  21.44 
Weighted average number of shares - diluted 78,075  78,115  79,661  81,530  81,942 
Period-end number of shares 77,519  78,094  77,886  80,426  81,567 
Market data     
High sales price$32.47 $32.98 $31.13 $35.67 $36.47 
Low sales price 25.20  28.02  24.96  28.68  31.25 
Period-end closing price 27.05  31.91  29.86  30.70  32.05 
Trading volume 44,705  40,162  51,866  36,396  25,553 
                
PERFORMANCE RATIOS               
Return on average assets 0.76% 0.67% 0.80% 0.79% 0.94%
Return on average assets - operating (b) 0.76% 0.78% 0.89% 0.92% 1.00%
Return on average common equity 6.70% 5.75% 6.65% 6.34% 7.42%
Return on average common equity - operating (b) 6.70% 6.70% 7.41% 7.33% 7.82%
Return on average tangible common equity 9.60% 8.28% 9.60% 9.08% 10.70%
Return on average tangible common equity  - operating (b) 9.60% 9.66% 10.68% 10.50% 11.28%
Tangible common equity ratio (e) 8.24% 8.12% 8.40% 8.59% 9.10%
Net interest margin (TE) (a) 3.28% 3.30% 3.55% 3.63% 3.81%
Average loan/deposit ratio 83.82% 83.85% 84.13% 85.44% 85.24%
Efficiency ratio (f) 65.88% 66.67% 64.36% 62.41% 61.84%
Allowance for loan losses as a percent of period-end loans 0.95% 0.91% 0.92% 0.93% 0.94%
Annualized net non-FDIC acquired charge-offs to average loans 0.09% 0.03% 0.11% 0.08% 0.19%
Allowance for loan losses to non-performing loans + accruing loans 90 days past due 78.15% 100.92% 123.14% 137.96% 128.44%
Noninterest income excluding securities transactions as a percent of total revenue (TE) (a) 27.32% 28.21% 25.87% 25.83% 25.85%
                
FTE headcount 3,863  3,825  3,785  3,794  3,787 
 

(a) Tax-equivalent (TE) amounts are calculated using a federal income tax rate of 35%.

(b) Net income less tax-effected securities transactions and nonoperating 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) Net interest income (TE) and noninterest income less noninterest expense.  Management believes that PTPP profit is a useful financial measure because it enables investors to assess the Company's ability to generate capital to cover credit losses through a credit cycle.

(d) Average securities does not include unrealized holding gains/losses on available for sale securities.

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

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

For More Information
Trisha Voltz Carlson 
SVP, Investor Relations Manager
504.299.5208
trisha.carlson@hancockbank.com

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Source: GlobeNewswire (October 22, 2015 - 5:00 PM EDT)

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