|
FOR
IMMEDIATE RELEASE
January
31 , 2006
Hancock
Holding Company announces earnings for fourth quarter 2005
GULFPORT, MS (January 31, 2006)
- Hancock Holding Company (NASDAQ: HBHC), today announced
earnings for the quarter ended December 31, 2005. Hancock's
fourth quarter 2005 earnings were $19.07 million, an increase
of $3.27 million, or 21 percent, from the fourth quarter of
2004. Diluted earnings per share for the fourth quarter of
2005 were $0.58, an increase of $0.10, or 21 percent, from
the same quarter a year ago. Compared to the third quarter
of 2005, fourth quarter earnings were up $17.63 million, with
diluted earnings per share up $0.54.
Net
income for 2005 totaled $54.03 million, compared to $61.70
million reported for 2004, a decrease of $7.67 million, or
12 percent. Diluted earnings per share for 2005 were $1.64,
compared to $1.87 for 2004, resulting in a decrease of $0.23
per share, or 12 percent.
Hancock's
earnings for the third and fourth quarters of 2005 were significantly
impacted by Hurricane Katrina, which struck the coasts of
Mississippi and Louisiana on August 29, 2005. While the total
impact of this hurricane on Hancock's financial condition
and results of operation may not be known for some time, the
Company has included in third and fourth quarter earnings
certain charges, including the establishment of specific reserves,
related to the hurricane.
The
pre-tax negative impact of Hurricane Katrina on Hancock's
third quarter earnings totaled $26.71 million. The $26.71
million net pre-tax negative impact included the following
items: $35.20 million (pre-tax) to establish a storm-related
provision for credit losses, a $1.86 million charge (pre-tax)
related to direct expenses incurred through September 30,
2005, and approximately $3.79 million (pre-tax) of fees and
service charges that were waived to assist affected individuals
and businesses. Also included in the $26.71 million impact
was a pre-tax gain of $14.14 million on net property and casualty
insurance proceeds, which had either been received or where
their receipt was considered substantially assured. The Company
believes there is a possibility that additional gains might
be recognized with respect to ongoing casualty claims, but
this is contingent upon reaching further agreement on these
claims.
The
pre-tax negative impact of Hurricane Katrina on fourth quarter's
earnings totaled $5.69 million and consisted primarily of
direct storm-related expenses incurred through December 31,
2005. These expenses included items related to the operation
of a remote disaster recovery site for the Company's technology
operations, moving and setup costs associated with establishing
an interim operations site in Mississippi, clean up and building
repairs of damaged facilities, transportation/lodging/meals
related to displaced employees, and other storm-related costs.
Excluding
the impact of the aforementioned storm-related charges and
reserves, earnings for the fourth quarter of 2005 would have
been $22.77 million, an increase of $3.97 million, or 21 percent,
compared to third quarter's earnings of $18.80 million, adjusted
to exclude the impact of the storm. Similarly, on an
adjusted basis, diluted earnings per share for the fourth
quarter would have been $0.69 per share, compared to $0.57
per share for the third quarter. Adjusted earnings for 2005
totaled $75.09 million, or diluted earnings per share of $2.28.
The
financial impact of the above storm-related charges and accruals
on the Company's earnings for the third and fourth quarter
of 2005 is summarized in the table below.
In
commenting on Hancock's operating results for 2005, Chief
Executive Officer George A. Schloegel stated, "The Company
is pleased with our earnings performance for the third and
fourth quarters in light of the unique circumstances we have
operated in due to Hurricane Katrina. Speaking for the Board
of Directors and our Management Team, we are all extremely
proud of how our associates have risen to the challenges of
the past four months. Hancock is rebuilding, as is our home
region. We will continue to be a leader in this recovery and
will always work hard to maintain the trust and respect of
our customers, shareholders, friends and neighbors.
Leo
W. Seal, Jr., President of Hancock Holding Company, added,
"In the midst of the aftermath of the nation's worst
and most costly natural disaster, Hancock will continue to
be there for our customers and to lead the recovery in our
home region."
Balance
Sheet Growth and Capital
The
Company's balance sheet continues to experience significant
growth since Hurricane Katrina impacted Hancock's market area.
At December 31, 2005, Hancock had total loans of $2.99 billion
and total deposits of $4.99 billion. The Company's total asset
size at December 31, 2005, was $5.95 billion. For the period
from August 31, 2005, to December 31, 2005, total loans have
grown $51 million, or 2 percent, and total deposits have grown
$1.19 billion, or 31 percent, while total assets have increased
$1.16 billion, or 24 percent.
The
Company's balance sheet growth was not limited to the immediate
aftermath of the storm and continued throughout the fourth
quarter. Total deposits grew $965 million, or 24 percent,
from September 30, 2005, to December 31, 2005. The composition
of deposit inflows since August 31, 2005 has been favorable
to the Company's funding mix and consisted of 50 percent non-interest-bearing
demand accounts, 38 percent low cost interest-bearing transaction
accounts, and 12 percent time deposits. In addition, during
the fourth quarter of 2005, the Company added 12,663 new transaction
accounts (net of account closures). This level of new transaction
accounts compares to 7,770 new transaction accounts (net of
account closures) during the fourth quarter of 2004, an increase
of 4,893 accounts, or 63 percent.
During
this same time period, overall loan growth was relatively
flat and totaled $5 million. It is not uncommon for loan growth
to lag deposit growth in the aftermath of a storm such as
Hurricane Katrina. Loan growth in the Company's operating
region is expected to increase significantly once the inflows
of insurance and federal aid funds begin to subside at some
point later in 2006.
With
loan growth relatively flat since the storm, all of the aforementioned
deposit growth was invested in a combination of short-term
investments (fed funds) and in the Company's securities portfolio.
Mindful of the fact that 88 percent of the deposit inflows
during this period were in transaction accounts, great care
was taken in investing this money so that future potential
liquidity needs could be met. To that end, approximately $628
million of the total deposit inflows since the storm were
invested in either fed funds or very short-term U.S. Agency
Discount notes and Treasuries. The remaining funds (approximately
$562 million) were invested in primarily short duration U.S.
Agency bullet maturity bonds.
The
Loan/Deposit Ratio averaged 77 percent for the third quarter,
but dropped to 66 percent for the fourth quarter of 2005,
due to an average increase in deposits of $712 million, compared
to $80 million increase in average loans for the same period.
At December 31, 2005, the Loan/Deposit Ratio was 60 percent.
Hancock
remains very well capitalized, even with a $1.16 billion increase
in total assets since the storm made landfall on August 29,
2005. As of December 31, 2005, Hancock's Leverage (tier one)
Ratio stands at 7.85 percent, while the Tangible Equity Ratio
is 6.89 percent. Both ratios are down from June 30, 2005,
where they stood at 8.83 percent and 8.71 percent, respectively.
While Hancock remains very well capitalized, so that the Company
maintains flexibility for future capital needs, including
acquisitions, the Company may consider raising additional
capital at some point in 2006.
Net
Interest Income
Net
interest income (te) for the fourth quarter of 2005 increased
$8.49 million, or 18 percent, from the fourth quarter of 2004,
and was up $6.68 million, or 14 percent, from the third quarter
of 2005. The Company's net interest margin (te) was 4.44 percent
in the fourth quarter of 2005, 9 basis points narrower than
the same quarter a year ago and 4 basis points wider than
the previous quarter.
Compared
to the same quarter a year ago, the primary driver of the
$8.49 million increase in net interest income (te) was an
$834 million, or 21 percent, increase in average earning assets,
mainly from average deposit growth of $904 million, or 25
percent, much of which was related to deposits inflows in
the aftermath of Hurricane Katrina. The unprecedented deposit
growth caused the Loan/Deposit Ratio to decline to 66 percent
in the fourth quarter of 2005. The $834 million increase in
average earning assets was deployed into loans (average increase
of $285 million, or 11 percent), short-term investments (average
increase of $298 million), and in the Company's securities
portfolio (average increase of $251 million, or 19 percent).
Loans now comprise 61 percent of the Company's average earning
asset base, as compared to 67 percent for the same quarter
a year ago. The net interest margin (te) narrowed 9 basis
points as the
increase in the average earning asset yield (14 basis points)
did not offset the increase in total funding costs (23 basis
points).
The
Company's level of net interest income (te) in the fourth
quarter of 2005 increased $6.68 million, or 14 percent, from
the prior quarter. The Company experienced loan growth in
the fourth quarter with average loans increasing $80 million,
mostly in commercial loans. Average earning assets increased
$552 million, or 13 percent, over the previous quarter. Fueled
by storm-related deposit inflows, average deposits increased
$712 million, or 19 percent, compared to the prior quarter.
Of the $552 million increase in average earning assets, $80
million was deployed into loans, $264 million into short-term
investments (mostly fed funds), and the balance, $208 million,
into the securities portfolio. The net interest margin (te)
widened 4 basis points from the prior quarter as the yield
on average earning assets decreased 5 basis points, while
total funding costs were down 10 basis points. The decrease
in the yield on average earning assets was due to an overall
larger percent of the Company's earning assets in securities
and short-term investments (39 percent) than the previous
quarter (33 percent). The total cost of funds was down 10
basis points due to favorable impact on the Company's funding
mix related to the mix of fourth quarter deposit inflows (50
percent non-interesting bearing accounts and 38 percent low
cost interest-bearing transaction accounts).
Non-Interest
Income, Non-interest Expense and Taxes
Excluding
the impact of net storm-related items and securities transactions,
non-interest income for the fourth quarter of 2005 was up
$979,000, or 4 percent, compared to the same quarter a year
ago. Non-interest income was up $1.42 million, or 7 percent,
compared to the third quarter of 2005. The primary factors
impacting the higher levels of non-interest income as compared
to the same quarter a year ago, were higher levels of insurance
fees (up $3.01 million) mostly related to the higher revenues
associated with Magna Insurance Company, the Company's wholly
owned insurance company and the July, 1, 2005 acquisition
of J. Everett Eaves, Inc. In addition, other income was up
$1.85 million, when compared to the same quarter a year ago.
However, service charges were down $4.21 million, principally
due to waived return item fees and other service charges as
a result of accommodations to customers impacted by Hurricane
Katrina. The increase in non-interest income for the fourth
quarter of 2005 (excluding the 2005 net storm-related items
and securities transactions) compared to the prior quarter
was due to increases in debit card and merchant services fees
(up $662,000) and other income (up $1.78 million). However,
service charges on deposit accounts were down $1.13 million
from an already depressed level in the third quarter due to
customer accommodations related to the storm. The $1.13 million
decrease in service charges for the fourth quarter was due
only partly to additional customer accommodations, but was
primarily due to changes in customer behavior since many had
significant cash available from insurance proceeds.
Operating
expenses for the fourth quarter of 2005 were $6.68 million
higher, or 18 percent, compared to the same quarter a year
ago and were $1.87 million higher, or 4 percent, than the
previous quarter. The increase from the same quarter a year
ago was reflected in higher personnel expense (up $2.87 million)
and higher expenses associated with Magna Insurance Company
(up $1.95 million). The increase from the prior quarter was
reflected in increased other operating expense (up $736,000)
and higher occupancy expenses (up $620,000).
Hancock's
effective tax rate for 2005 was 26 percent, compared to 30
percent for 2004. The 4 percent decrease in the Company's
effective tax rate was due to variety of factors including
the following:
- Increase
in tax exempt income as a percent of book income to 17 percent
in 2005 from 13 percent in 2004
- Hurricane
Katrina tax credits available in 2005
- Reduction
of tax accruals for non-taxable income primarily related
to bank owned life insurance
The
Company expects its effective tax rate to be approximately
29 percent for the year 2006.
Asset
Quality
Annualized
net charge-offs as a percent of average loans for the fourth
quarter of 2005 were 0.41 percent, compared to 0.23 percent
for the third quarter of 2005, and to 0.56 percent in the
fourth quarter of 2004. Of the 0.41 percent or $3.10 million
in fourth quarter net charge-offs, $2.35 million, or 0.31
percent, were related to Hurricane Katrina. The storm-related
net charge-offs were charged directly against the $35.2 million
storm-related allowance for loan losses established by the
Company in the third quarter of 2005. The Company does anticipate
that the level of storm-related net charge-offs will be significantly
higher during the first half of 2006. However, Hancock does
not expect that the level of total storm-related net charge-offs
to be materially different from the $35.2 million allowance
established during the third quarter. Excluding the fourth
quarter storm-related net charge-offs of $2.35 million, net
charge-offs for the fourth quarter was 0.10 percent of average
loans, or $754,000. That represents a decrease of 13 basis
points, or $950,000 from the prior quarter and a decrease
of 46 basis points, or $3.09 million from the same quarter
a year ago.
The
provision for loan losses in the fourth quarter of 2005 was
$1.08 million. This compares to the $36.91 million provision
booked in the third quarter of 2005, of which $35.20 million
was related to the establishment of a storm-related provision
for credit losses, and to $5.80 million for the fourth quarter
of 2004.
Non-performing
assets as a percent of total loans and foreclosed assets was
0.42 percent at December 31, 2005, compared to 0.45 percent
at September 30, 2005. Compared to the fourth quarter of 2004,
the ratio of non-performing assets as a percent of total loans
and foreclosed assets was up 2 basis points from the 0.40
percent reported at December 31, 2004. Non-performing assets
decreased $1.52 million from September 30, 2005, reflecting
primarily lower levels of foreclosed assets. The composition
of the Company's $12.52 million non-performing asset base
continues to reflect granularity with many smaller credits
and/or properties (only 10 credits or properties exceeding
$250,000 and 119 credits or properties below $250,000). The
Company's ratio of accruing loans 90 days or more past due
to total loans was 0.86 percent at December 31, 2005, compared
to 0.21 percent at September 30, 2005, and to 0.19 percent
at December 31, 2004. The increase in the ratio of 90 days
or more past due ratio was related to storm-related accommodations
granted to certain loan customers. In the aftermath of Hurricane
Katrina, Hancock recognized that many of our credit customers
(mostly residential mortgage holders) were in a position where
time would be needed to recover sufficiently from the storm
before they could resume payments on their loans. Accommodations
in the form of loan payment extensions (most for 90 days)
were granted on a customer-by-customer basis.
The
Company's allowance for loan losses was $74.56 million at
December 31, 2005, down $2.03 million from the $76.58 million
reported at September 30, 2005, and $33.88 million higher
than the $40.68 million reported at December 31, 2004. The
ratio of the allowance for loan losses as a percent of period-end
loans was 2.49 percent at December 31, 2005, compared to 2.57
percent at September 30, 2005, and
1.48 percent at December 31, 2004. The allowance coverage
ratio (allowance for loan losses to non-performers and past
dues) was 196 percent in fourth quarter 2005, as compared
to 252 percent in fourth quarter 2004, and 393 percent in
third quarter 2005. As previously mentioned, the Company had
established a specific allowance of $35.20 million for estimated
credit losses related to the impact of Hurricane Katrina on
Hancock's loan portfolio in the third quarter of 2005. Hancock
recorded storm-related net charge-offs of $2.35 million during
the fourth quarter that were charged directly against the
aforementioned allowance. In doing so, the storm-related allowance
was reduced by $2.35 million and, as of December 31, 2005,
stands at $32.85 million. Hancock is continuously reviewing
the adequacy of the special storm-related allowance and views
the current level to be adequate and, as such, expects no
material deviations once all storm-related net charge-offs
are known.
General
The
Company will provide a live overview of earnings for the fourth
quarter and all of 2005 earnings, as well as an update on
the impact of Hurricane Katrina, beginning at 2:00 p.m. (CST)
on Monday, February 6, 2006. Interested persons may access
the event through HancockBank's
website and Vcall's Investor
Calendar . Individuals unable to attend the webcast may
dial in and listen to the live conference call at (877) 407-0783
from within the U.S. or Canada, or (201) 689-8564 for international
callers. A telephone replay will be available two hours following
completion of the webcast. The replay is accessible to callers
from the U.S. and Canada at (877) 660-6853 and to international
callers at (201) 612-7415 by entering the account number 286
and conference ID number 185478.
Hancock
Holding Company - parent company of Hancock Bank (Mississippi),
Hancock Bank of Louisiana, Hancock Bank of Florida, and Magna
Insurance Company - has assets of $5.95 billion at December
31, 2005. Founded in 1899, Hancock Bank stands among the strongest,
safest financial institutions in America. Hancock Bank operates
100 Hancock full-service
offices and 120 automated
teller machines throughout South Mississippi, Louisiana
and Florida as well as subsidiaries Hancock Investment Services,
Inc., Hancock Insurance Agency, and Harrison Finance Company.
Investors can access additional corporate
information or online
banking and bill
pay services online.
Financial
Highlights Part 1 | Financial
Highlights Part 2 | Financial
Highlights Part 3
"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.
—
30 —
FOR
MORE INFORMATION
R. Paul Maxwell, VP & Corporate Communications
Manager
(228) 214-5252 or 1.800.522.6542 (x.85252)
paul_maxwell@hancockbank.com
|
