Hancock Holding Company reports first half of 2004 earnings - up 17 percent

GULFPORT, MS (July 8, 2004) - Hancock Holding Company (NASDAQ: HBHC) today announced earnings for the six-month period ended June 30, 2004. Net income for the first half of 2004 totaled $30.52 million, compared to $26.05 million reported for the first half of 2003, an increase of $4.47 million, or 17 percent. Diluted earnings per share for the first six months of 2004 were $0.93, compared to $0.78 for the same period in 2003, resulting in an increase of $0.15 per share, or 19 percent.

Net income for the second quarter of 2004 was $16.37 million, an increase of $3.99 million, or 32 percent, from the $12.38 million reported for the second quarter of 2003. Diluted earnings per share were $0.50 for the second quarter of 2004, compared to $0.37 for the second quarter of 2003, an increase of $0.13 per share, or 35 percent.

The Company's returns on average assets and average common stockholders' equity for the second quarter of 2004 were 1.49 percent and 14.97 percent, respectively, compared with 1.20 percent and 12.42 percent for the second quarter of 2003. Annualized returns on average assets and average common stockholders' equity for the six months ended June 30, 2004, were 1.41 percent and 13.99 percent, respectively, compared with 1.28 percent and 13.24 percent for the six months ended June 30, 2003.

The second quarter of 2004 included an after-tax gain of $1.95 million, or $0.06 per share, related to the recently announced partnership of the Company's merchant services business with Denver-based First Data Corporation. Excluding the impact of this gain, net income increased $2.04 million, or 16 percent from the second quarter of 2003 and was $278,000, or 2 percent, higher than the first quarter of 2004. Under the terms of the recently signed agreement with First Data Corporation, all merchant payment processing services will be provided by First Data on behalf of Hancock Bank. Hancock will participate in revenue related to both the existing book of business and new business.

Inclusive of the second quarter gain on the merchant services partnership with First Data Corporation, net income for the second quarter of 2004 was $2.2 million, or 16 percent, higher than the first quarter of 2004. Second quarter of 2004 diluted earnings per share were $0.50, or $.07, higher than the first quarter of 2004. Other key performance trends for the second quarter of 2004 included

• Net interest margin (te) was 4.40 percent in the current quarter, 1 basis point narrower than the prior quarter, and 3 basis points wider than the same quarter a year ago.
• The efficiency ratio (before amortization of purchased intangibles, gains on sale of branches and credit card merchant services, and securities transactions) was 59.40 percent for the second quarter of 2004 and was 69 basis points lower than the second quarter of 2003.
• Returns on average assets and average common stockholders' equity were 16 and 196 basis points higher, respectively, in the second quarter versus the first quarter.
• Average loans grew $86 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 675 basis points from the same quarter a year ago; average loans grew $391 million, or 18 percent, compared to the same quarter a year ago.
• Average deposits grew $124 million, or 4 percent, over the previous quarter and $228 million, or 7 percent, over the same quarter a year ago.
• Non-performing assets ratio at June 30, 2004 improved 4 basis points from March 31, 2004 to 0.55 percent. The ratio of net charge-offs to average loans was 0.47 percent for the second quarter of 2004, an increase of 2 basis points from the previous quarter and a decrease of 17 basis points from the same quarter a year ago.
• Common stock repurchases totaled 100,000 shares in the second quarter of 2004, bringing the total number of shares repurchased thus far this year to 151,754

In commenting on Hancock's operating results for the second quarter of 2004, George A. Schloegel, Chief Executive Officer, stated, "Hancock's second quarter results continue to be consistent with the long-term strategic focus of the Company. Our management team continues to evaluate opportunities for growth and expansion as evidenced by last quarter's entrance into Florida, but also is cognizant of opportunities where exiting a business line makes sense for our shareholders, such as this quarter's decision related to the partnership of our merchant services area. Both actions represent strategic decisions that were made in the best interests of our shareholders."

Net Interest Income

Net interest income (te) for the second quarter of 2004 increased $2.5 million or 6 percent, from the second quarter of 2003 and was $1.7 million, or 4 percent, higher than the first quarter of 2004. The Company's net interest margin (te) was 4.40 percent in the second quarter of 2004, 3 basis points wider than the same quarter a year ago and 1 basis point narrower than the previous quarter.

Compared to the same quarter a year ago, the primary driver of the $2.5 million increase in net interest income (te) was a $203 million, or 5 percent, increase in average earning assets mainly from average loan growth of $391 million, or 18 percent. Average deposit growth of $228 million, or 7 percent, along with a net decrease in the securities portfolio of $171 million, or 11 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 approximately 70 percent since the fourth quarter of 2003. In addition, loans now comprise 64 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 3 basis points as the reduction in total funding costs (15 basis points) more than offset the decline in the yield on average earning assets (12 basis points).

The higher level of net interest income (te) (up $1.7 million, or 4 percent) and the relatively flat net interest margin (down 1 basis point) as compared to the previous quarter was primarily due to a larger earning asset base (average earning assets were up $157 million from the prior quarter). Average loans grew $86 million, or 4 percent, from the previous quarter and were funded largely through average deposit growth. Average deposits were up $124 million, or 4 percent, from the prior quarter primarily due to a $79 million increase in time deposits - mostly related to an effort to lock in longer-term CDs at historically low rates. The yield on the Company's $1.40 billion securities portfolio improved 2 basis points to 4.50 percent. The Company's overall funding costs increased by 2 basis points from the prior quarter, mostly through a 5 basis point increase in the cost of interest-bearing deposits.

Asset-Liability Management

As with any commercial banking enterprise, the Company's 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. The Company's results of operations and net portfolio values are well positioned for a rising rate environment.

Rate increases of 100 and 200 basis points would result in percentage increases in net interest income of 3.61 percent and 6.76 percent, respectively. Over the past six quarters, the Company has effectively mitigated its deposit rate sensitivity by increasing its percentage of variable rate loans from 31 percent in the first quarter of 2003 to 40 percent in the current quarter. During the same period, the loan-to-deposit ratio has risen from 62 percent to 70 percent.

As part of its Asset-Liability Management strategy, the Company pays close attention to the effective duration of its securities portfolio. Currently, the effective duration is 2.79. A rate increase of 100 basis points would move the effective duration to 3.30, while a 200 basis points rise would result in an effective duration of 3.46.

Non-Interest Income and Expense

Non-interest income (excluding the gain on sale of branches, merchant services, and securities transactions) for the second quarter of 2004 was up $4.6 million, or 27 percent, compared to the same quarter a year ago and was up $1.4 million, or 7 percent, compared to the first quarter of 2004. The primary factor impacting the higher levels of non-interest income as compared to the quarter a year ago, were higher levels of insurance fees (up $2.0 million) mostly related to the December 31, 2003 purchase of Magna Insurance Company. In addition, other income was up $1.2 million when compared to the quarter a year ago due to income related to a bank owned life insurance program that was initiated in July 2003. Driving the higher levels of non-interest income from the prior quarter were increases in service charges on deposit accounts (up $541,000), trust fees (up $292,000), and insurance fees (up $344,000).

Operating expenses for the second quarter of 2004 were $4.1 million, or 12 percent, higher compared to the same quarter a year ago and were $175,000, or 0.4 percent, higher than the previous quarter. An increase from the prior quarter was reflected in increased other operating expense (up $1.7 million) and higher amortization of intangibles (up $199,000) but was substantially offset by decreased personnel expense (down $1.8 million). The increase from the same quarter a year ago was reflected in higher personnel expense (up $432,000), higher other operating expense (up $3.1 million), and higher amortization of intangibles (up $346,000).

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) decreased to 59.40 percent for the second quarter of 2004. This was compared to 60.09 percent for the same quarter a year ago, and 62.34 percent for the previous quarter. The Company's number of full-service banking facilities stands at 103 as of June 30, 2004, and the number of full-time equivalent employees was 1,754 at June 30, 2004, a reduction of 35 from one year ago.

Asset Quality

Non-performing assets as a percent of total loans and foreclosed assets was 0.55 percent at June 30, 2004, compared to 0.59 percent at March 31, 2004. Non-performing assets decreased $478,000 from March 31, 2004, reflected primarily in lower levels of foreclosed assets. Compared to the second quarter of 2003, non-performing assets as a percent of total loans and foreclosed assets was down 45 basis points from the 1.00 percent reported at June 30, 2003. The composition of the Company's $14.4 million non-performing asset base continues to reflect significant granularity with only five credits or properties exceeding $250,000 and 211 credits/properties below $250,000. The Company's ratio of accruing loans 90 days or more past due to total loans was 0.14 percent at June 30, 2004, compared to 0.20 percent at March 31, 2004 and to 0.13 percent at June 30, 2003.

The Company's allowance for loan losses was $38.30 million at June 30, 2004, up $800,000 from the $37.50 million reported at March 31, 2004, and was $3.06 million higher than the $35.24 million reported at June 30, 2003. The ratio of the allowance for loan losses as a percent of period-end loans was 1.47 percent at June 30, 2004, compared to 1.49 percent at March 31, 2004 and 1.57 percent at June 30, 2003. The reserve coverage ratio (allowance for loan losses to non-performers and past dues) was 212 percent in second quarter 2004, as compared to 139 percent in second quarter 2003, and 189 percent in first quarter 2004.

Annualized net charge-offs as a percent of average loans for the second quarter of 2004 were 0.47 percent, compared to 0.45 percent for the first quarter of 2004. Net charge-offs increased $231,000, or 2 basis points (expressed as a percent of average loans) from the first quarter of 2004 and were reflected primarily in higher levels of charge-offs in consumer loans. Compared to the second quarter of 2003, net charge-offs decreased $449,000, or 17 basis points (expressed as a percent of average loans). The provision for loan losses in the second quarter of 2004 was $3.8 million, or 127 percent of the quarter's net charge-offs. This compares to the $3.5 million provision for the first quarter of 2004 and $4.0 million for the second quarter of 2003. The ratio of provision for loan losses to net charge-offs was 127 percent in the first quarter of 2004 and was 114 percent in the second 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 $4.5 billion at June 30, 2004. Founded in 1899, Hancock Bank stands among the strongest, safest financial institutions in America. Hancock Bank operates 103 full-service offices and more than 130 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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