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Hancock Reports Third Quarter 2015 Financial Results

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

Source:Hancock Holding Company