GULFPORT, Miss., April 16, 2014 (GLOBE NEWSWIRE) -- Hancock Holding Company (Nasdaq:HBHC) today announced its financial results for the first quarter of 2014. Operating income for the first quarter of 2014 was $49.1 million or $.58 per diluted common share, compared to $45.8 million, and $.55 in the fourth quarter of 2013. Operating income was $48.6 million, or $.56, in the first quarter of 2013. We define our operating income as net income excluding tax-effected securities transactions gains or losses and one-time noninterest 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.
There were no adjustments between operating income and net income for the first quarters of 2013 and 2014. In the fourth quarter of 2013, net income reflected the impact of certain one-time noninterest expenses of $17.1 million. Net income for the fourth quarter of 2013 was $34.7 million, or $.41 per diluted common share, with a ROA of 0.74%.
Highlights of the Company's first quarter of 2014 results:
- Continued improvement in the overall quality of earnings (replacing declining purchase accounting income with core results)
- Operating expenses declined $10.1 million linked-quarter, or 6%, exceeding the first quarter's expense goal and achieving the targeted fourth quarter goal ahead of schedule
- Efficiency ratio improved to 62%; additional branch closures and the previously announced divestiture of selected insurance lines of business will fund revenue-generating projects that will contribute to achieving the efficiency ratio target for 2016 of 57%-59%
- Core net interest income (TE) was flat linked-quarter; core net interest margin (NIM) narrowed 3 basis points (bps) (we define our core results as reported results less the impact of net purchase accounting adjustments)
- Approximately $231 million linked-quarter net loan growth, or 8% annualized, and approximately $1.2 billion, or 11%, year-over-year loan growth (each excluding the FDIC-covered portfolio)
- Purchase accounting loan accretion declined $.6 million; expect continuation of quarterly declines with accelerating declines in the second half of 2014
- Continued improvement in overall asset quality metrics
- Return on average assets (ROA) (operating) improved to 1.05% from 0.97% in the fourth quarter of 2013 and 1.03% in the first quarter a year ago
"A lot of hard work and focus has allowed us to meet our fourth quarter of 2014 expense target three quarters ahead of schedule, and I would like to thank all of our associates for achieving this aggressive goal," said Hancock's President and Chief Executive Officer Carl J. Chaney. "But we are not done. As we continue our work to improve the quality of our earnings (replacing declining purchase accounting income with core income), we expect operating EPS to remain flat in the near term. Over the next couple of quarters you may see expenses rise slightly as we reinvest in higher-return, revenue-generating lines of business to help achieve our efficiency ratio targets, however we remain committed to keeping expenses for the fourth quarter of 2014 in line with our stated goal."
Total loans at March 31, 2014 were $12.5 billion, up $203 million from December 31, 2013. Excluding the FDIC-covered portfolio, which declined $28 million during the first quarter of 2014, total loans increased approximately $231 million, or 2% linked-quarter.
The largest component of linked-quarter net growth (excluding the FDIC-covered portfolio) was in the commercial and industrial (C&I) portfolio, with additional growth in the construction, commercial real estate (CRE) and residential mortgage portfolios. Many of the markets across the company's footprint reported net period-end loan growth during the quarter, with the majority of the growth in the Houston, southwest Louisiana, Mississippi, and central Florida regions. For the full year of 2014 management expects period-end loan growth in the upper single digit range.
Average loans totaled $12.4 billion for the first quarter of 2014, up $476 million, or 4%, from the fourth quarter of 2013. A substantial portion of the fourth quarter's net loan growth came toward the latter part of the period, impacting the average for the first quarter.
Total deposits at March 31, 2014 were $15.3 billion, down $86 million, or less than 1%, from December 31, 2013. Average deposits for the first quarter of 2014 were $15.3 billion, up $353 million, or 2%, from the fourth quarter of 2013.
Noninterest-bearing demand deposits (DDAs) totaled $5.6 billion at March 31, 2014, up $84 million, or 2%, compared to December 31, 2013. DDAs comprised 37% of total period-end deposits at March 31, 2014.
Interest-bearing transaction and savings deposits totaled $6.1 billion at the end of the first quarter, down $45 million, or 1%, from December 31, 2013.
Time deposits (CDs) and interest-bearing public fund deposits totaled $3.5 billion at March 31, 2014, down $125 million, or 3%, from December 31, 2013. Almost all of the decline was in the public fund deposit category, and reflects the seasonality of those deposits. Typically public fund balances increase toward year end with subsequent reductions beginning in the first quarter.
Non-performing assets (NPAs) totaled $180 million at March 31, 2014, down $6 million from December 31, 2013. During the first quarter, total non-performing loans remained virtually unchanged while foreclosed and surplus real estate (ORE) and other foreclosed assets decreased $7 million. Non-performing assets as a percent of total loans, ORE and other foreclosed assets was 1.43% at March 31, 2014, down from 1.50% at December 31, 2013.
The total allowance for loan losses was $128.2 million at March 31, 2014, down from $133.6 million at December 31, 2013. The ratio of the allowance to period-end loans was 1.02%, compared to 1.08% at year-end 2013. The decline in the allowance during the first quarter was primarily related to a $9.7 million reduction in the allowance on covered loans, of which $7.2 million was a reversal of previous impairment. The allowance maintained on the non-covered portion of the loan portfolio increased $4.3 million linked-quarter, totaling $84.8 million at March 31, 2014.
Net charge-offs from the non-covered loan portfolio were $4.0 million, or 0.13% of average total loans on an annualized basis in the first quarter of 2014, down from $5.2 million, or 0.17% of average total loans in the fourth quarter of 2013.
During the first quarter of 2014, Hancock recorded a total provision for loan losses of $8.0 million, up from $7.3 million in the fourth quarter of 2013. The provision for non-covered loans was $8.3 million in the first quarter of 2014, up slightly from $7.9 million in the fourth quarter of 2013. The net provision from the covered portfolio was a credit of $0.3 million for the first quarter of 2014 compared to a credit of $0.5 million in the fourth quarter of 2013.
Net Interest Income and Net Interest Margin
Net interest income (TE) for the first quarter of 2014 was $168.2 million, virtually unchanged from the fourth quarter of 2013. Average earning assets were $16.7 billion, up approximately $364 million from the fourth quarter of 2013.
The reported net interest margin (TE) was 4.06% for the first quarter of 2014, down 3 basis points (bps) from the fourth quarter of 2013. 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 3 bps to 3.37% during the first quarter of 2014. A decline in the core loan yield (-7 bps) was partly offset by an improved earning asset mix and higher yields on investment securities (+4 bps).
Noninterest income, including securities transactions, totaled $56.7 million for the first quarter of 2014, down $2.3 million from the fourth quarter of 2013. Included in the decline is an increase of $2.3 million in the amortization of the indemnification asset. The amortization was $3.9 million in the first quarter of 2014, compared to $1.6 million in the fourth quarter of 2013, and reflects a lower level of expected future losses on covered loans.
Service charges on deposits totaled $18.7 million for the first quarter of 2014, down $0.9 million, or 5%, from the fourth quarter of 2013. Bankcard and ATM fees totaled $10.6 million, down approximately $0.7 million, or 6%, from the fourth quarter of 2013. A portion of the linked-quarter decrease is related to having two fewer business days in the first quarter of 2014 for these fee income categories.
Trust, investment and annuity, and insurance fees totaled $18.9 million, up $0.8 million, or 4%, from the fourth quarter of 2013. Included in the total was $3.7 million of insurance revenue. The company announced on April 1, 2014 the divestiture of selected insurance business lines. As a result, insurance revenue is expected to decline by approximately half beginning in the second quarter of 2014.
Fees from secondary mortgage operations totaled $2.0 million for the first quarter of 2014, up $0.4 million, or 26%, linked-quarter. The increase reflects a higher level of loans sold in the secondary market during the quarter.
Noninterest Expense & Taxes
Noninterest expense for the first quarter of 2014 totaled $147.0 million. Noninterest expense totaled $174.2 million in the fourth quarter of 2013 and included $17.1 million of one-time costs related to the expense and efficiency initiative. Excluding these costs, noninterest expense (or operating expense) totaled $157.1 million in the fourth quarter of 2013 and were down $10.1 million, or 6%, linked-quarter.
Total personnel expense was $81.4 million in the first quarter of 2014, down $3.5 million, or 4%, from the fourth quarter of 2013 excluding one-time costs. Occupancy and equipment expense totaled $15.5 million in the first quarter of 2014, down $0.8 million, or 5%, from the fourth quarter of 2013. The reduction in the personnel, occupancy and equipment expense categories reflects in part a full quarter's impact from the sale of 7 Houston area branches completed on November 8, 2013, the sale of 3 Alexandria, Louisiana area branches completed on January 10, 2014 and the closure of two branches that had been previously announced. Management has continued to review its current branch network and expects to close an additional 16 branch locations in Mississippi, Florida and Louisiana in early third quarter 2014 as part of its ongoing branch rationalization process.
ORE expense totaled $1.8 million in the first quarter of 2014, up $0.2 million from the fourth quarter of 2013.
Other operating expense totaled $41.3 million in the first quarter of 2014, down $5.9 million, or 13%, from the fourth quarter of 2013 excluding one-time costs. The decrease is mainly related to lower costs for advertising and professional services.
The effective income tax rate for the first quarter of 2014 was 27%, up from 20% in the fourth quarter of 2013. The increase in the tax rate is primarily related to several additional New Market Tax Credit investments that were closed during the fourth quarter of 2013, reducing the rate for that quarter. Management expects the effective 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.
Common shareholders' equity at March 31, 2014 totaled $2.5 billion. The tangible common equity (TCE) ratio was 9.24%, up 24 bps from December 31, 2013. Final settlement of the accelerated share repurchase (ASR) transaction will be completed in May, with approximately 600,000 shares expected to be received. Management continues to review a full range of the strategic options presented by Hancock's strong capital position, including additional stock buybacks, organic growth, acquisitions or increased dividends. 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 Thursday, April 17, 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 first 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 April 23, 2014 by dialing (855) 859-2056 or (404) 537-3406, passcode 23429122.
About Hancock Holding Company
Hancock Holding Company is a multi-faceted 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.
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 non-interest 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, 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 COMPANY|
|Three Months Ended|
|(amounts in thousands, except per share data)||3/31/2014||12/31/2013||9/30/2013||6/30/2013||3/31/2013|
|INCOME STATEMENT DATA|
|Net interest income||$165,562||$166,007||$171,530||$169,179||$174,015|
|Net interest income (TE) (a)||168,198||168,466||174,112||171,822||176,741|
|Provision for loan losses||7,963||7,331||7,569||8,257||9,578|
|Noninterest income excluding securities transactions||56,699||58,894||63,057||63,897||60,187|
|Securities transactions gains||--||105||--||--||--|
|Noninterest expense (excluding one-time noninterest expense items)||146,982||157,097||161,318||162,250||159,602|
|One-time noninterest expense items||--||17,116||20,887||--||--|
|Operating income (b)||49,115||45,773||46,779||46,862||48,576|
|PERIOD-END BALANCE SHEET DATA|
|Common shareholders' equity||2,462,534||2,425,069||2,356,442||2,345,340||2,477,100|
|AVERAGE BALANCE SHEET DATA|
|Common shareholders' equity||2,435,980||2,355,768||2,338,945||2,405,069||2,448,010|
|COMMON SHARE DATA|
|Earnings per share - diluted||$0.58||$0.41||$0.40||$0.55||$0.56|
|Operating earnings per share - diluted (b)||0.58||0.55||0.56||0.55||0.56|
|Cash dividends per share||$0.24||$0.24||$0.24||$0.24||$0.24|
|Book value per share (period-end)||$29.93||$29.49||$28.70||$28.57||$29.18|
|Tangible book value per share (period-end)||20.47||19.94||19.04||18.83||19.67|
|Weighted average number of shares - diluted||82,534||82,220||82,205||83,357||84,972|
|High sales price||$38.50||$37.12||$33.85||$30.93||$33.59|
|Low sales price||32.66||30.09||29.00||25.00||29.37|
|Period-end closing price||36.65||36.68||31.38||30.07||30.92|
|Return on average assets||1.05%||0.74%||0.70%||0.99%||1.03%|
|Return on average assets (operating) (b)||1.05%||0.97%||0.99%||0.99%||1.03%|
|Return on average common equity||8.18%||5.85%||5.63%||7.82%||8.05%|
|Return on average common equity (operating) (b)||8.18%||7.71%||7.93%||7.82%||8.05%|
|Return on average tangible common equity||12.04%||8.79%||8.54%||11.74%||12.04%|
|Return on average tangible common equity (operating) (b)||12.04%||11.59%||12.03%||11.74%||12.04%|
|Tangible common equity ratio (c)||9.24%||9.00%||8.68%||8.52%||9.14%|
|Net interest margin (TE) (a)||4.06%||4.09%||4.23%||4.17%||4.32%|
|Average loan/deposit ratio||81.20%||79.93%||78.70%||76.41%||75.30%|
|Efficiency ratio (d)||62.23%||65.94%||64.95%||65.68%||64.17%|
|Allowance for loan losses as a percent of period-end loans||1.02%||1.08%||1.18%||1.18%||1.20%|
|Annualized net charge-offs to average loans||0.13%||0.17%||0.18%||0.24%||0.23%|
|Allowance for loan losses to non-performing loans + accruing loans 90 days past due||112.64%||111.97%||94.69%||91.43%||87.34%|
|Noninterest income excluding securities transactions as a percent of total revenue (TE) (a)||25.21%||25.90%||26.59%||27.11%||25.40%|
|(a)||Tax-equivalent (TE) amounts are calculated using a federal income tax rate of 35%.|
| (b) ||Operating income excludes tax-effected securities transactions and one-time noninterest 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 total shareholders' equity less preferred stock and 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, one-time noninterest expense items, and securities transactions.|
CONTACT: For More Information Trisha Voltz Carlson SVP, Investor Relations Manager 504.299.5208 firstname.lastname@example.org
Source:Hancock Holding Company