Hancock Holding Company reports first quarter 2004 earnings - up 4 percent

GULFPORT, MS (April 8, 2004) - Hancock Holding Company (NASDAQ: HBHC) today announced earnings for the quarter ended March 31, 2004. Net income for the first quarter of 2004 totaled $14.14 million, compared to $13.66 million reported for the first quarter of 2003, an increase of $.5 million, or 4 percent. Diluted earnings per share for the first quarter of 2004 were $0.43, compared to $0.41 for the first quarter of 2003, resulting in an increase of $0.02 per share, or 5 percent.

The following significant items impacted Hancock's first-quarter results:

• Hancock completed the acquisition of the former Guaranty National Bank of Tallahassee located in Tallahassee, FL, on March 12, 2004. The Office of the Comptroller of the Currency closed all locations of Guaranty National on March 12, 2004. With the transaction, Hancock acquired five locations with approximately $40.0 million in performing loans and approximately $69.1 million in deposits from the Federal Deposit Insurance Corporation (FDIC) for a premium of $13.6 million, or 20 percent of acquired deposits.
  


• The Company completed the sale of four Louisiana branches to Sabine State Bank on March 8, 2004, resulting in a $2.3 million pre-tax gain. Approximately $19.7 million in loans and $42.9 million in deposits were sold to Sabine State Bank in this transaction. Other items affecting the first-quarter results were a pre-tax charge of $1.3 million related to several deferred compensation contracts and a $250,000 charge related to an accrual for contingent legal liabilities.



• On March 18, 2004, the Company completed a two-for-one stock split in the form of a 100 percent common stock dividend. All share and per-share information contained in this release has been adjusted to give effect to this stock split. In addition, the Company increased its regular quarterly common stock cash dividend by $0.01 per common share, or 9 percent, (adjusted for aforementioned split), in the first quarter of 2004. Hancock's quarterly common dividend per share now stands at $0.125 per common share.



• On February 4, 2004, Hancock completed the redemption/conversion of all $37.1 million of the 8 percent Cumulative Convertible Preferred Stock issued in partial payment for the acquisition of Lamar Capital Corporation in July 2001.

The Company's annualized returns on average assets and average common stockholders' equity for the first quarter of 2004 were 1.33 percent and 13.01 percent, respectively, compared with 1.37 percent and 14.08 percent, respectively, for the first quarter of 2003. Annualized returns on average assets and average common stockholders' equity for the fourth quarter of 2003 were 1.47 percent and 15.21 percent, respectively. As compared to the fourth quarter of 2003, net income for the first quarter of 2004 was $1.1 million, or 7 percent, lower. First quarter of 2004 diluted earnings per share were $0.03, or 7 percent, lower than the fourth quarter of 2003. Other key performance trends for the first quarter of 2004 included:

• Net interest margin (te) was 4.41 percent in the current quarter, 13 basis points narrower than the prior quarter, but 7 basis points wider than the same quarter a year ago. The efficiency ratio increased 622 basis points to 62.34 percent and was 501 basis points higher than the first quarter of 2003.



• Average loans grew $84 million, or 4 percent, over the previous quarter. The loan/deposit ratio was 70 percent for the current quarter - unchanged from the previous quarter, but improved 781 basis points from the same quarter a year ago; average loans grew $385 million, or 18 percent, compared to the same quarter a year ago.



• Average deposits grew $117 million, or 3 percent, over the previous quarter and $175 million, or 5 percent, over the same quarter a year ago.



• Non-performing assets ratio at March 31, 2004 improved 14 basis points from December 31, 2004 to 0.59 percent. The ratio of net charge-offs to average loans was 0.45 percent for the first quarter of 2004, an improvement of 16 basis points from the previous quarter and 14 basis points from the same quarter a year ago.



• Common stock repurchases totaled 51,754 shares in the first quarter of 2004

In commenting on Hancock's operating results for the first quarter of 2004, George A. Schloegel, chief executive officer, stated, "The Company's first quarter results reflect the dedication of all company associates to making decisions that positively affect the long-term value of your investment in Hancock. Examples of two important strategic decisions made this quarter include the Company's expansion into Florida and the sale of four branches in the Central Louisiana region. While both decisions have a nominal effect on first quarter's earnings, the long-term impact, we feel, will be very significant."

Net Interest Income

Net interest income (te) for the first quarter of 2004 increased $2.3 million or 6 percent, from the first quarter of 2003, but was $710,000, or 2 percent, lower than the fourth quarter of 2003. The Company's net interest margin (te) was 4.41 percent in the first quarter of 2004, 7 basis points wider than the same quarter a year ago, but 13 basis points narrower than the previous quarter.

Compared to the same quarter a year ago, the primary driver of the $2.3 million increase in net interest income (te) was a $140 million, or 4 percent, increase in average earning assets mainly from average loan growth of $385 million, or 18 percent. Average deposit growth of $175 million, or 5 percent, along with a net decrease in the securities portfolio of $179 million, or 12 percent, funded the Company's loan growth and related increase in earning assets. This overall improvement in earning asset mix enabled the Company to maintain its loan to deposit ratio at 70 percent in both the first quarter of 2004 and the prior quarter. In addition, loans now comprise 65 percent of the Company's earning asset base, as compared to 57 percent for the same quarter a year ago. The net interest margin (te) widened 7 basis points as the reduction in total funding costs (30 basis points) more than offset the decline in the yield on loans, securities and short-term investments (23 basis points). The lower level of net interest income (te) (down $710,000, or 2 percent) and net interest margin (13 basis points) as compared to the previous quarter was primarily due to a 22 basis point decline in total loan yield, partially offset by a larger earning asset base (average earning assets were up $71 million from the prior quarter). Average loans grew $84 million, or 4 percent, from the previous quarter and were funded largely through average deposit growth. Average deposits were up $117 million, or 3 percent, from the prior quarter primarily due to a $119 million increase in interest-bearing transaction deposits. The loan to deposit ratio for the first quarter was unchanged at 70 percent in the current quarter as compared to the previous quarter. The yield on the Company's $1.3 billion securities portfolio improved 6 basis points to 4.48 percent. The portfolio's effective duration remains a relatively short 2.40 at March 31, 2004, a decrease from the 2.61 reported at December 31, 2003. Finally, the Company was able to reduce its overall funding costs by one basis point from the prior quarter, mostly through a 6 basis point reduction in the cost of interest-bearing deposits.

Non-Interest Income and Expense

Non-interest income (excluding the gain on sale of branches and securities transactions) for the first quarter of 2004 was up $2.9 million, or 17 percent, compared to the same quarter a year ago and was up $574,000, or 3 percent, compared to the fourth quarter of 2003. The primary factor impacting the higher levels of non-interest income as compared to the prior quarter, as well as the same quarter a year ago, were higher levels of insurance fees mostly related to the December 31, 2003, purchase of Magna Insurance Company.

Operating expenses for the first quarter of 2004 were $6.3 million, or 19 percent, higher compared to the same quarter a year ago and were $3.7 million, or 10 percent, higher than the previous quarter. The increase from the prior quarter was mainly due to higher personnel expense (up $3.7 million). The increases from the same quarter a year ago were reflected in higher personnel expense (up $2.7 million) and higher other operating expense (up $2.9 million). Comparisons to prior quarters (both previous quarter and same quarter a year ago) were impacted by the $1.3 million in increased amortization related to deferred compensation contracts that was previously mentioned. The comparison to the prior quarter was also impacted by approximately $1.6 million of incentive compensation reversals effected in the fourth quarter of 2003.

The Company's efficiency ratio (expressed as operating expenses as a percent of total revenue (te) before gain on sale of branches, securities transactions and amortization of purchased intangibles) increased to 62.34 percent for the first quarter of 2004. This was compared to 57.33 percent for the same quarter a year ago, and 56.12 percent for the previous quarter. The Company's number of full service banking facilities was increased by a net of 2 facilities during the first quarter of 2004 and stands at 103 as of March 31, 2004. Five facilities were added as a result of the aforementioned Guaranty National Bank of Florida acquisition. In addition, Hancock leased an 11,800 square foot branch in Metairie, La. (a suburb of New Orleans). As previously mentioned, Hancock sold four central Louisiana branches to Sabine State Bank in the first quarter of 2004. The Company's number of full-time equivalent employees was 1,717 at March 31, 2004, a reduction of 29 from one year ago.

Asset Quality

Non-performing assets as a percent of total loans and foreclosed assets was 0.59 percent at March 31, 2004, compared to 0.73 percent at December 31, 2003. Non-performing assets decreased $3.1 million from December 31, 2003, reflected primarily in lower levels of non-accrual loans. Compared to the first quarter of 2003, non-performing assets as a percent of total loans and foreclosed assets was down 22 basis points from the 0.81 percent reported at March 31, 2003. The composition of the Company's $14.9 million non-performing asset base continues to reflect significant granularity with only 4 credits or properties exceeding $250,000 and 218 credit/properties below $250,000. The Company's ratio of accruing loans 90 days or more past due to total loans was 0.20 percent at March 31, 2004, compared to 0.15 percent at December 31, 2003 and to 0.28 percent at March 31, 2003.

The Company's allowance for loan losses increased $750,000, or 2 percent to $37.50 million at March 31, 2004 from $36.75 million at December 31, 2003 and was $2.76 million higher than the $34.74 million reported at March 31, 2003. The ratio of the allowance for loan losses as a percent of period-end loans was 1.49 percent at March 31, 2004, compared to 1.50 percent at December 31, 2003 and 1.64 percent at March 31, 2003. The increase in the allowance for loan losses from March 31, 2003 was a function of the $402 million of period-end loan growth experienced between March 31, 2003, and March 31, 2004. However, the ratio of the allowance for loan losses to period-end loans did decrease from 1.64 percent at March 31, 2003, to 1.49 percent at March 31, 2004. The reserve coverage ratio (allowance for loan losses to non-performers and past dues) was 189 percent in first quarter 2004 as compared to 150 percent in first quarter 2003 and 170 percent in fourth quarter 2003.

Annualized net charge-offs as a percent of average loans for the first quarter of 2004 were 0.45 percent, compared to 0.61 percent for the fourth quarter of 2003. Net charge-offs decreased $894,000, or 16 basis points (expressed as a percent of average loans) from the fourth quarter of 2003 and were reflected primarily in lower levels of charge-offs in consumer loans and Finance Company loans. Compared to the first quarter of 2003, net charge-offs decreased $234,000, or 14 basis points (expressed as a percent of average loans). The provision for loan losses in the first quarter of 2004 was $3.5 million, or 127 percent of the quarter's net charge-offs. This compares to the $4.2 million provision for the fourth quarter of 2003 and $3.0 million provision for the first quarter of 2003. The ratio of provision for loan losses to net charge-offs was 127 percent in the first quarter of 2004 compared to 114 percent in the fourth quarter of 2003 and 100 percent in the first quarter of 2003.

General

Hancock Holding Company subscribes to the highest standards of corporate responsibility with respect to legal, moral, and regulatory relationships with shareholders, customers, employees, and communities Hancock serves. Accordingly, these unwavering business principles support a corporate culture of ethical compliance and accountability that ensures that financial statements are prepared and audited in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company's systems of internal controls and risk management processes are in place and fully functional.

Hancock Holding Company - parent company of Hancock Bank (Mississippi), Hancock Bank of Louisiana, Hancock Bank of Florida and Magna Insurance Company - has assets of $4.366 billion at March 31, 2004. Founded in 1899, Hancock Bank stands among the strongest, safest five-star financial institutions in America. Hancock Bank operates 103 full-service offices and more than 140 automated teller machines throughout South Mississippi, Louisiana and Florida as well as subsidiaries Hancock Investment Services, Inc., Hancock Insurance Agency, Hancock Mortgage Corporation and Harrison Finance Company. Investors can access additional corporate information or online banking and bill pay services at www.hancockbank.com.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about companies' anticipated future financial performance. This act provides a safe harbor for such disclosure, which protects the companies from unwarranted litigation if actual results are different from management expectations. This release contains forward-looking statements and reflects management's current views and estimates of future economic circumstances, industry conditions, company performance, and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the company's actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.

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