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FOR
IMMEDIATE RELEASE
October 14, 2004
Hancock
Holding Company earnings up 16 percent for first nine months
of 2004
GULFPORT, MS (October 14, 2004) - Hancock Holding Company
(NASDAQ: HBHC) today announced earnings for the nine-month
period ended September 30, 2004. Net income for the first
nine months of 2004 totaled $45.91 million, compared to $39.71
million reported for the first nine months of 2003, an increase
of $6.20 million, or 16 percent. Diluted earnings per share
for the first nine months of 2004 were $1.39, compared to
$1.19 for the same period in 2003, resulting in an increase
of $0.20 per share, or 17 percent.
Net income for the third quarter
of 2004 was $15.40 million, an increase of $1.74 million,
or 13 percent, from the $13.66 million reported for the third
quarter of 2003. Diluted earnings per share were $0.47 for
the third quarter of 2004, compared to $0.41 for the third
quarter of 2003, an increase of $0.06 per share, or 15 percent.
The Company's returns on average
assets and returns on average common stockholders' equity
for the third quarter of 2004 were 1.37 percent and 13.67
percent, respectively, compared with 1.31 percent and 13.79
percent for the third quarter of 2003. Annualized returns
on average assets and average common stockholders' equity
for the nine months ended September 30, 2004, were 1.40 percent
and 13.88 percent, respectively, compared with 1.29 percent
and 13.42 percent for the nine months ended September 30,
2003.
Net
income for the third quarter of 2004 decreased by $976,000,
or 6 percent, from the second quarter of 2004. Third quarter
of 2004 diluted earnings per share were $0.47, or $.03 lower
than the second quarter of 2004. Second quarter earnings included
a $1.95 million, or $.06 per share, after-tax gain on the
partnership of the Company's merchant services business. Excluding
the aforementioned second quarter gain, third quarter earnings
were actually up $974,000, or 7 percent, with diluted earnings
per share up $.03, or 7 percent. Other key performance trends
and highlights for the third quarter of 2004 included:
- For
the second time during 2004, the Company increased the quarterly
per share common stock dividend. On August 12, 2004, the
Company announced a $.04 per share common stock dividend,
or 32 percent increase in the quarterly common stock dividend
to $.165 per share. Thus far in 2004, the quarterly common
dividend has been increased $.05 per share, or 43 percent.
- Net
interest margin (tax equivalent "te") was 4.42
percent in the current quarter, 2 basis points wider than
the prior quarter, and 12 basis points narrower than the
same quarter a year ago. In addition, net interest income
was up $720,000, or 2 percent, from the prior quarter, aided
by a better earning asset mix due to $77 million of average
loan growth, a 5 basis point increase in the yield on the
Company's security portfolio, and only a 1 basis point increase
in the total cost of funds.
-
The efficiency ratio (before amortization of purchased intangibles,
gains on sale of branches and credit card merchant services,
and securities transactions) was 57.55 percent for the third
quarter of 2004, an improvement of 185 basis points compared
to the second quarter of 2004 and 35 basis points compared
to the third quarter of 2003.
- The
Company reversed approximately $1.0 million of pre-tax operating
expense items in the third quarter of 2004. About $400,000
related to incentive compensation that will not be paid
in 2004, while $600,000 related to the Company's medical
insurance, which was reversed due to favorable claims experience
over the past year.
- Returns
on average assets and average common stockholders' equity
were 6 and 49 basis points higher, respectively, in the
third quarter versus the second quarter - after adjusting
for the second quarter gain on the sale of the merchant
services business.
- As
previously mentioned, average loans grew $77 million, or
3 percent, over the previous quarter. The loan/deposit ratio
was 73 percent for the current quarter - 294 basis points
higher than the previous quarter and 629 basis points higher
than the same quarter a year ago; average loans grew $352
million, or 15 percent, compared to the same quarter a year
ago.
- Average
deposits decreased $42 million, or 1 percent, over the previous
quarter but grew $186 million, or 5 percent, over the same
quarter a year ago. Nearly this entire decrease was due
to seasonal declines in the Company's public funds deposit
portfolio. Excluding public funds decreases, average deposits
for the Company were flat with the prior quarter, but were
up $147 million, or 5 percent, from the same quarter a year
ago.
- Overall
asset quality improved in the third quarter of 2004. The
non-performing assets ratio at September 30, 2004 improved
11 basis points from June 30, 2004, to 0.44 percent. The
ratio of net charge-offs to average loans was 0.45 percent
for the third quarter of 2004, a decrease of 2 basis points
from the previous quarter and a decrease of 7 basis points
from the same quarter a year ago. The coverage of non-performing
assets and past dues increased to over 225 percent at September
30, 2004 from just 147 percent, one year ago.
- Common
stock repurchases totaled 84,280 shares in the third quarter
of 2004, bringing the total number of shares repurchased
thus far this year to 236,034.
In
commenting on Hancock's operating results for the third quarter
of 2004, George A. Schloegel, Chief Executive Officer, stated,
"The Company is pleased to continue our positive earnings
momentum through the third quarter of 2004. We continue to
be focused on our strategic goals of serving our customers
throughout the Gulf South and earning a superior return for
our shareholders."
Net
Interest Income
Net
interest income (te) for the third quarter of 2004 increased
$1.5 million, or 4 percent, from the third quarter of 2003
and was $720,000, or 2 percent, higher than the second quarter
of 2004. The Company's net interest margin (te) was 4.42 percent
in the third quarter of 2004, 2 basis point wider than the
previous quarter and 12 basis points narrower than the same
quarter a year ago.
Compared
to the same quarter a year ago, the primary driver of the
$1.5 million increase in net interest income (te) was a $242
million, or 6 percent, increase in average earning assets,
mainly from average loan growth of $352 million, or 15 percent.
The Company's loan growth and overall increase in earning
assets was primarily funded by average deposit growth of $186
million, or 5 percent, together with a net decrease in the
securities portfolio of $93 million, or 6 percent. This overall
improvement in earning asset mix enabled the Company to increase
its loan to deposit ratio to approximately 73 percent. In
addition, loans now comprise 66 percent of the Company's earning
asset base, as compared to 61 percent for the same quarter
a year ago. The net interest margin (te) narrowed 12 basis
points primarily due to the decline in the yield on average
earning assets (13 basis points), which was partially offset
by a reduction in total funding costs (1 basis point).
The higher level of net interest
income (te) (up $720,000, or 2 percent) and the higher net
interest margin (up 2 basis points) as compared to the previous
quarter was primarily due to a larger earning asset base (average
earning assets were up $27 million from the prior quarter).
Average loans grew $77 million, or 3 percent, from the previous
quarter and were funded largely through short-term borrowings
and cash flows from the securities portfolio. Average deposits
were down $42 million, or 1 percent, from the prior quarter
primarily due to a $42 million decrease in public funds. In
addition to the impact of a better earning asset mix, the
net interest margin expanded by 2 basis points due to an increase
in the yield on average earning assets (3 basis points), which
was partially offset by a 1 basis point increase in funding
costs.
Asset-Liability
Management
Management
recognizes that the levels of net interest income are susceptible
to interest rate risk to the degree that interest-bearing
liabilities mature or reprice on a different basis than interest
earning assets. Accordingly, the Company's management of operations
and net portfolio values have responded positively to the
recent rise in interest rates. Strategic planning forecasts
reflect similar stability in earnings growth.
According
to the Company's methodology, rate increases of 100 and 200
basis points are projected to increase net interest income
between 3 percent and 6 percent. A key component to the Company's
ability to increase earnings in a rising rate environment
is maintaining its current level of variable rate lending.
Variable rate loans comprised 40 percent of the total loan
portfolio for the second consecutive quarter versus 38 percent
of total loans one year ago. In addition, management of the
securities portfolio and laddering of its cash flows match
appropriately with an increasing rate environment.
As
part of its Asset-Liability Management strategy, the Company
closely monitors the effective duration of its securities
portfolio. Despite the rate volatility of the past quarter,
the portfolio's effective duration remains essentially unchanged.
Currently, the effective duration is 2.76 versus 2.79 one
quarter ago. A rate increase of 100 basis points would move
the effective duration to 3.74, while a 200 basis points rise
would result in an effective duration of 4.16.
Non-Interest
Income and Expense
Non-interest
income (excluding the gain on sale of branches, merchant services,
and securities transactions) for the third quarter of 2004
was up $1.9 million, or 10 percent, compared to the same quarter
a year ago and was down $646,000, or 3 percent, compared to
the second quarter of 2004. Impacting the change from the
same quarter a year ago were higher levels of insurance fees
(up $1.2 million), mostly related to the December 31, 2003
purchase of Magna Insurance Company. In addition, increases
were reflected in service charges on deposit accounts (up
$450,000), trust fees (up $505,000) and debit card & merchant
fees (up $315,000). However, investment and annuity fees were
down $532,000. The decreases from the prior quarter were concentrated
in insurance fees (down $772,000) and other income (down $674,000),
but were partly offset by an increase in service charges on
deposit accounts (up $796,000).
Operating
expenses for the third quarter of 2004 were $2.0 million,
or 5 percent, higher compared to the same quarter a year ago
and were $1.1 million, or 3 percent, lower than the previous
quarter. As previously mentioned, the decrease from the prior
quarter was largely due to the aforementioned expense reversals.
The increase from the same quarter a year ago was due primarily
to higher expenses associated with the Company's recent (March
2004) expansion into Florida, as well as the acquisition of
Magna Insurance Company (December 2003).
The
Company's efficiency ratio (expressed as operating expenses
as a percent of total revenue (te) before gain on sale of
branches, merchant services, securities transactions, and
amortization of purchased intangibles) was 57.55 percent for
the third quarter of 2004. This was compared to 57.90 percent
for the same quarter a year ago, and 59.40 percent for the
previous quarter. The Company's number of full service banking
facilities stands at 103 as of September 30, 2004, unchanged
from June 30, 2004, but up 1 from the prior year. The number
of full-time equivalent employees was 1,731 at September 30,
2004, down 23 from June 30, 2004 and a reduction of 20 from
one year ago.
Asset
Quality
Non-performing
assets as a percent of total loans and foreclosed assets was
0.44 percent at September 30, 2004, compared to 0.55 percent
at June 30, 2004. Non-performing assets decreased $2.5 million
from June 30, 2004, reflected primarily in lower levels of
non-accrual loans. Compared to the third quarter of 2003,
non-performing assets as a percent of total loans and foreclosed
assets was down 42 basis points from the 0.86 percent reported
at September 30, 2003. The composition of the Company's $11.9
million non-performing asset base continues to reflect significant
granularity with only 5 credits or properties exceeding $250,000
and 192 credits/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 September 30, 2004, compared to 0.14 percent
at June 30, 2004 and to 0.19 percent at September 30, 2003.
The
Company's allowance for loan losses was $38.73 million at
September 30, 2004, up $425,000 from the $38.30 million reported
at June 30, 2004, and was $2.48 million higher than the $36.25
million reported at September 30, 2003. The ratio of the allowance
for loan losses as a percent of period-end loans was 1.45
percent at September 30, 2004, compared to 1.47 percent at
June 30, 2004 and 1.54 percent at September 30, 2003. The
reserve coverage ratio (allowance for loan losses to non-performers
and past dues) was 225 percent in third quarter 2004, as compared
to 147 percent in third quarter 2003, and 212 percent in second
quarter 2004.
Annualized
net charge-offs as a percent of average loans for the third
quarter of 2004 was 0.45 percent, compared to 0.47 percent
for the second quarter of 2004. Net charge-offs decreased
$54,000, or 2 basis points (expressed as a percent of average
loans) from the second quarter of 2004, primarily as a result
of lower levels of charge-offs in commercial loans. Compared
to the third quarter of 2003, net charge-offs decreased $15,000,
or 7 basis points (expressed as a percent of average loans).
The provision for loan losses in the third quarter of 2004
was $3.4 million, or 114 percent of the quarter's net charge-offs.
This compares to the $3.8 million provision for the second
quarter of 2004 and $4.0 million for the third quarter of
2003. The ratio of provision for loan losses to net charge-offs
was 127 percent in the second quarter of 2004 and was 134
percent in the third 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).
Hancock
Holding Company - parent company of Hancock Bank (Mississippi),
Hancock Bank of Louisiana, Hancock Bank of Florida, and Magna
Insurance Company - has assets of $4.5 billion at September
30, 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.
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FOR
MORE INFORMATION
George A. Schloegel, Chief Executive Officer
Carl J. Chaney, Chief Financial Officer
Paul D. Guichet, V.P., Investor Relations
800.522.6542 or 228.214.5242
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