UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2011.
OR
For the fiscal year ended December 31, 2008.
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Commission file number 0-13089
Hancock Holding Company
(Exact name of registrant as specified in its charter)
Mississippi | 64-0693170 | |||
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||
One Hancock Plaza, Gulfport, Mississippi | 39501 |
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(Address of principal executive offices) | (Zip Code) |
(228) 868-4727
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code
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(Title of Class) | (Name of Exchange on Which Registered) | |
COMMON STOCK, $3.33 PAR VALUE | The NASDAQ Stock Market, LLC |
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ox No x¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer | x | Accelerated filer | ¨ | |||
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o¨ No x
The aggregate market value of the voting stock held by nonaffiliates of the registrant as of June 30, 2008December 31, 2011 was $1,016,381,401$2.6 billion based upon the closing market price on NASDAQ as of such date.on June 30, 2011. For purposes of this calculation only, shares held by nonaffiliates are deemed to consist of (a) shares held by all shareholders other than directors and executive officers of the registrant plus (b) shares held by directors and officers as to which beneficial ownership has been disclaimed.
On February 2, 2009,1, 2012, the registrant had outstanding 31,802,84884,749,038 shares of common stock for financial statement purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Annual Report to Stockholders for the year ended December 31, 2008 are incorporated by reference into Part I and Part II of this report.
Portions of the definitive Proxy Statement used in connection withfor the Registrant’s Annual Meeting of Shareholders to be held on March 26, 2009filed with the Securities and Exchange Commission are incorporated by reference into Part III of this report.
Form 10-K
Index
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
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BUSINESS |
ORGANIZATION AND RECENT DEVELOPMENTS
Hancock Holding Company (the Company),(“Hancock or the Company”) was organized in 1984 as a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and is headquartered in Gulfport, Mississippi. In 2002, the Company qualified as a financial holding company giving it broader powers. At December 31, 2008, the Company operated more than 157 banking and financial services offices and more than 137 automated teller machines (ATMs) in the states of Mississippi, Louisiana, Florida and Alabama through four wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank MS), Hancock Bank of Louisiana, Baton Rouge, Louisiana (Hancock Bank LA), Hancock Bank of Florida, Tallahassee, Florida (Hancock Bank FL) and Hancock Bank of Alabama, Mobile, Alabama (Hancock Bank AL). Hancock Bank MS, Hancock Bank LA, Hancock Bank FL and Hancock Bank AL are referred to collectively as the “Banks”.
The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. The Company’s operating strategy is to provide its customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. At December 31, 2008, the Company had total assets of $7.2 billion and 1,952 employees on a full-time equivalent basis.
Hancock Bank MS was originally chartered as Hancock County Bank in 1899. Since its organization, the strategy of Hancock Bank MS has been to achieve a dominant market share on the Mississippi Gulf Coast. Prior to a series of smaller acquisitions begun in 1985, growth was primarily internal and was accomplished by branch expansions in areas of population growth where no dominant financial institution previously served the market area. Economic expansionMore recently the Company has acquired two sizeable institutions which have changed the dynamics of the overall organization.
On December 18, 2009, the Company acquired the assets and assumed the liabilities of Panama City, Florida, based Peoples First Community Bank (Peoples First) in a FDIC transaction. This acquisition added approximately $2 billion in assets.
On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation (Whitney), a bank holding company based in New Orleans, Louisiana, in a stock and cash transaction. The impact of the acquisition is reflected in the Company’s financial information from the acquisition date. Whitney’s bank subsidiary, Whitney National Bank, was merged into Hancock Bank of Louisiana and renamed Whitney Bank. The acquisition added $11.7 billion in assets, $6.5 billion in loans, and $9.2 billion in deposits. As part of the merger, Hancock Bank of Alabama was merged into Whitney Bank. The assets and liabilities of the former Hancock Bank of Alabama were then transferred to Hancock Bank.
On September 16, 2011, seven Whitney Bank branches located on the Mississippi Gulf Coast and one branch located in Bogalusa, Louisiana with approximately $47 million in loans and $180 million in deposits were divested in order to resolve branch concentration concerns of the U.S. Department of Justice relating to the merger.
The integration of Whitney into Hancock continues to progress as scheduled. Professional consulting groups have been assisting Hancock with the integration and accounting matters related to the transaction, and there are a group of bankers from both Whitney and Hancock dedicated to this process. Customer and employee retention remains a priority. To-date, the Company has resulted primarily from growthnot lost any major customer relationships as a result of the transaction and it has been able to retain key employees throughout the organization.
NATURE OF BUSINESS AND MARKETS
With $20 billion in assets, Hancock is the parent company of two wholly-owned bank subsidiaries, Hancock Bank, headquartered in Gulfport, Mississippi and Whitney Bank, headquartered in New Orleans, Louisiana.
Hancock Bank and Whitney Bank are referred to collectively as the “Banks” and they operate a combined total of nearly 300 full-service bank branches and almost 400 ATMs across a Gulf south corridor comprising South Mississippi; southern and central Alabama; southern Louisiana; the northern, central, and Panhandle regions of Florida; and Houston, Texas. Given the strong brand recognition of both Banks in their respective hometown markets, the Company will operate as Hancock Bank in Mississippi, Alabama and Florida, and Whitney Bank in Louisiana and Texas post systems conversion (currently scheduled for March 2012).
Hancock’s family of financial services companies also includes Hancock Investment Services, Inc., Hancock Insurance Agency and Whitney Insurance Agency, Inc., Harrison Finance Company, and corporate trust offices in Gulfport and Jackson, Miss., New Orleans and Baton Rouge, La., and Orlando, Fla.
The Company’s operating strategy is to provide customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. The Banks offer a broad range of community banking services to commercial, small business and retail customers, providing a variety of transaction and savings deposit products, treasury management services, investment brokerage services, secured and unsecured loan products, including revolving credit facilities, and letters of credit and similar financial guarantees. The Banks also provide trust and investment management services to retirement plans, corporations and individuals. Through its subsidiaries, the Banks also offer personal and business lines of insurance and annuity products to its customers.
The main industries along the Gulf Coast are energy and related service industries, military and government-related facilities, tourism, port facility activities, industrial complexes and the gaming industry. Based on the most current available published data, Hancock Bank MS has the largest deposit market share in each of the following five counties: Harrison, Hancock, Jackson, Lamar and Pearl River. In addition, Hancock Bank MS has a presence in the following counties: Forrest and Jefferson Davis. At December 31, 2008, Hancock Bank MS had total assets of $3.8 billion and 1,279 employees on a full-time equivalent basis.
In August 1990, the Company formed Hancock Bank LA to assume the deposit liabilities and acquire the consumer loan portfolio, corporate credit card portfolio and non-adversely classified securities portfolio of American Bank and Trust, Baton Rouge, Louisiana, (AmBank), from the Federal Deposit Insurance Corporation (FDIC). Economic expansion in East Baton Rouge Parish has resulted from growth in state government and related service industries, educational and medical complexes, petrochemical industries, port facility activities and transportation and related industries. With the purchase of two Dryades Savings Bank, F.S.B. branches in 2003industries, tourism and related service industries, and the 2007 openinggaming industry.
The Company will evaluate future acquisition transactions that can add value for its shareholders once the Whitney integration is completed. The first priority would be in-market expansion. However, the Company would also consider strategic opportunities in new markets such as Texas locations outside the Houston area and northern Alabama.
Recent acquisitions and internal growth have diversified revenue streams and enhanced core deposit funding. The Company’s size and scale has helped it attract and retain high quality associates. From a financial perspective, the recent Whitney acquisition is expected to be accretive from 2012 onward as cost savings are fully phased in. The Company is also focused on maintaining two hallmarks of a new financial center in New Orleans’ Central Business District, Hancock Bank LA established a long-awaited presence in the Greater New Orleans area. its past culture -— strong capital and excellent credit quality.
At December 31, 2008, Hancock Bank LA2011, the Company had total assets of $3.0$19.8 billion and 5734,745 employees on a full-time equivalent basis.
Hancock Bank FL was formed in March 2004 with the acquisition of Tallahassee’s Guaranty National Bank. In addition to the five branches acquired in the Tallahassee area in 2004, Hancock Bank FL has since opened two more branches in the Pensacola market. Hancock Bank FL had total assets of $367.1 millionAdditional information is available at www.hancockbank.com and 58 employees on a full-time equivalent basis at December 31, 2008.www.whitneybank.com.
In February 2007, Hancock Bank AL was incorporated in Mobile, AL. During 2007 and 2008, five branches have been opened to serve the Mobile area and Alabama’s Eastern Shore. At December 31, 2008, Hancock Bank AL had total assets of $155.9 million and 43 employees on a full-time equivalent basis.
CURRENT OPERATIONS
Loan Production and Credit Review
The Banks’ primary lending focus is to provide commercial, consumer, commercial leasing and real estate loans to consumers, and to small and middle market businesses, and to corporate clients in their respective market areas. The Banks have no significant concentrations of loans to particular borrowers or industries or loans to any foreign entities. Each loan officer has BoardDesignated relationship managers have approved loan limits on the principal amount of secured and unsecured loansauthorities that can be approvedutilized to approve credit commitments for a single borrower without prior approvalborrowing relationship. The amount of designated authority is based upon the experience, skill, and training of the relationship manager. Certain types of loans are submitted for consideration by one or more Regional Credit Officers. All loans, however, mustof the Banks’ centralized underwriting units. Loans are underwritten to meet the credit underwriting standards and loan policies of the Banks.
All loans overBanks and are subject to review by an individual loan officer’s Board approved lending authority must be approved by one of the Bank’s centralized loan underwriting units, by a senior lender or one or more Regional Credit Officers. Each loan file is reviewed by the Bank’s loan operationsinternal quality assurance function, a component of its loan review system, to ensure proper documentation and asset quality.
Loan Review and Asset Quality
Each Bank’s portfolio of loan relationships aggregating $500,000 or more is reviewed every 12 to 18 months by the Bank’s Loan Review staff to identify any deficiencies and report them to management to take corrective actions as necessary. Periodically, selected loan relationships aggregating less than $500,000 are also reviewed. As a result of such reviews, each Bank places on its Watch list loans requiring close or frequent review. All loans over $100,000 classified by a regulatory auditor are also placed on the Watch list. All Watch list and past due loans are reviewed monthly by the Banks’ senior lending officers. All Watch list loans are reviewed monthly by the Bank’s Asset Quality Committee and quarterly by the Banks’ Board of Directors’ Loan Oversight Committee.
In addition, in the approval process, all loans to a particular borrower are considered, regardless of classification, each time such borrower requests a renewal or extension of any loan or requests a new loan. All lines of credit are reviewed before renewal. The Banks currently have mechanisms in place that require borrowers to submit annual financial statements, except borrowers with secured installment and residential mortgage loans.
Consumer loans which become 30 days delinquent are reviewed regularly by management. As a matter of policy, loans are placed on a non-accrual status when (1) payment in full, of principal or interest is not expected or (2) the principal or interest has been in default for a period of 90 days, unless the loan is well secured and in the process of collection.
The Banks follow the standard FDIC loan classification system. This system provides management with (1) a general view of the quality of the overall loan portfolio (each Bank’s loan portfolio and each commercial loan officer’s loan portfolio) and (2) information on specific loans that may need individual attention.
The Bank’s nonperforming assets, consisting of real property, vehicles and other items held for resale, were acquired generally through the process of foreclosure. At December 31, 2008, the book value of those assets held for resale was approximately $5.2 million.function.
Securities Portfolio
The Banks maintain portfolios of securities consisting primarily of U.S. Treasury securities, U.S. government agency issues, agency mortgage-backed securities, agency CMOs and tax-exempt obligations of states and political subdivisions. The portfolios are designed to provide a source of liquidity to fund loan growthdemand and deposit outflows while maximizing interest income within pre-defined risk parameters. Therefore, the Banks invest only in high quality securities of investment grade quality and with a target effective duration, for the overall portfolio, generally between two to five years.
The Banks’ policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a Nationally Recognized Statistical Rating Agency, except for certain obligations of counties, parishes and municipalities in Mississippi, Louisiana, Florida or Alabama counties, parishes and municipalities.Alabama.
Deposits
The Banks have several programs designed to attract depository accounts offered to consumers and to small and middle market businesses at interest rates generally consistent with market conditions. Additionally, the Banks operate more than 130approximately 400 ATMs at the Company’s banking offices as well as free-standing ATMsand at other locations. As members of regional and international ATM networks such as “STAR”, “PLUS” and “CIRRUS”, the Banks offer customers access to their depository accounts from regional, national and international ATM facilities. Deposit flows are controlled by the Banks primarily through pricing, and to a certain extent, through promotional activities. Management believes that the rates it offers, which are posted weekly on deposit accounts, are generally competitive with other financial institutions in the Banks’ respective market areas.
Trust Services
The Banks, through their respective Trust Departments, offer a full range of trust services on a fee basis. The Banks act as executor, administrator or guardian in administering estates. Also provided are investment custodial services for individuals, businesses and charitable and religious organizations. In their trust capacities, the Banks provide investment management services on an agency basis and act as trustee for pension plans, profit sharing plans, corporate and municipal bond issues, living trusts, life insurance trusts and various other types of trusts created by or for individuals, businesses, and charitable and religious organizations. As of December 31, 2008,2011, the Trust Departments of the Banks had approximately $7.7$12.5 billion of assets under administration compared to $8.3 billion as of December 31, 2007.2010. As of December 31, 2008, $4.22011, $9.3 billion of administered assets were corporate trust accounts and the remaining balances were personal, employee benefit, estate and other trust accounts.
Operating Efficiency StrategyCOMPETITION
The primary focus of the Company’s operating strategy is to increase operating income and to reduce operating expense. A Company’s operating efficiency ratio indicates the percentage of each dollar of net revenue that is used to fund operating expenses. Net revenue for a financial institution is the total of net interest income plus non-interest income, excluding securities transactions gains or losses. Operating expenses exclude the amortization of intangibles.
Other Activities
Hancock Bank MS has 6 subsidiaries through which it engages in the following activities: providing consumer financing services; owning, managing and maintaining certain real property; providing general insurance agency services; holding investment securities; marketing credit life insurance; and providing discount investment brokerage services. The income of these subsidiaries generally accounts for less than 10% of the Company’s total net earnings.
During 2001, the Company began servicing mortgage loans for the Federal National Mortgage Association. At that time the loans serviced were originated and closed by the Company’s mortgage subsidiary. The servicing activity was also performed by this same subsidiary. In the middle of 2003, however, the Company modified its strategy and reverted to selling the majority of its conforming loans with servicing released. In December 2004, the Company’s mortgage subsidiary merged with Hancock Bank MS, its parent. Currently all mortgage activity is being reported by Hancock Bank MS, Hancock Bank of Louisiana, Hancock Bank of Florida and Hancock Bank of Alabama.
Hancock Bank MS also owns approximately 3,700 acres of timberland in Hancock County, Mississippi, most of which was acquired through foreclosure in the 1930’s. Timber sales and oil and gas leases on this acreage generate less than 1% of the Company’s annual net income.
Competition
The deregulation of the financial services industry, the elimination of many previous distinctions between commercial banks and other financial institutions as well as legislation enacted in Mississippi, Louisiana and other states allowing state-wide branching, multi-bank holding companies and regional interstate banking have all served to foster a highly competitive environment for commercial banking in our market area. The principal competitive factors in the markets for deposits and loans are interest rates and fee structures associated with the various products offered. We also compete through the efficiency, quality, and range of services and products it provides,we provide, as well as the convenience provided by an extensive network of customer access channels including local branch offices, ATM’s,ATMs, online banking, and telebanking centers. Access to the bank’s extensive network of customer access points is further enhanced by convenient hours including Saturday banking at selected branch locations and through the bank’s telebanking service center.
In attracting deposits and in our lending activities, we generally compete with other commercial banks, savings associations, credit unions, mortgage banking firms, consumer finance companies, securities brokerage firms, mutual funds and insurance companies, and other financial institutions.
Available Information
We maintain an internet website at www.hancockbank.com. We make available free of charge on the website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with the Securities and Exchange Commission. Our Annual Report to Stockholders is also available on our website. These reports are made available on our website as soon as reasonably practical after the reports are filed with the Commission. Information on our website is not incorporated into this Form 10-K or our other securities filings and is not part of them.
SUPERVISION AND REGULATION
Bank Holding Company Regulation
General
The Company is subject to extensive regulation by the Board of Governors of the Federal Reserve System (the Federal Reserve) pursuant to the Bank Holding Company Act of 1956, as amended (the Bank Holding Company Act). On January 26, 2002 the Company qualified as a financial holding company, giving it broader powers as discussed below. To date, the Company has exercised its powers as a financial holding company to acquire a non-controlling interest in a third party service provider for insurance companies and, in December 2003, acquired Magna Insurance Company. The Company also is required to file certain reports with, and otherwise complies with the rules and regulations of, the Securities and Exchange Commission (the Commission) under federal securities laws.
Federal Regulation
The Bank Holding Company Act generally prohibits a corporation owning a bank from engaging in activities other than banking, managing or controlling banks or other permissible subsidiaries. Acquiring or obtaining control of more than 5% of the voting shares of any company engaged in activities other than those activities determined by the Federal Reserve to be so closely related to banking, managing or controlling banks as to be proper incident thereto is also prohibited. In determining whether a particular activity is permissible, the Federal Reserve considers whether the performance of the activity can reasonably be expected to produce benefits to the public that outweigh possible adverse effects. For example: making, acquiring or servicing loans; leasing personal property; providing certain investment or financial advice; performing certain data processing services; acting as agent or broker in selling credit life insurance, and performing certain insurance underwriting activities have all been determined by regulations of the Federal Reserve to be permissible activities. The Bank Holding Company Act does not place territorial limitations on permissible bank-related activities of bank holding companies. Despite prior approval, however, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity or its control of any subsidiary when it has reasonable cause to believe that continuation of such activity or control of such subsidiary constitutes a serious risk to
the financial safety, soundness or stability of any bank subsidiary of that holding company.
The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve: (1) before it may acquire ownership or control of any voting shares of any bank if, after such acquisition, such bank holding company will own or control more than 5% of the voting shares of such bank, (2) before it or any of its subsidiaries other than a bank may acquire all of the assets of a bank, (3) before it may merge with any other bank holding company, or (4) before it may engage in permissible non-banking activities. In reviewing a proposed acquisition, the Federal Reserve considers financial, managerial and competitive aspects. The future prospects of the companies and banks concerned and the convenience and needs of the community to be served must also be considered. The Federal Reserve also reviews the indebtedness to be incurred by a bank holding company in connection with the proposed acquisition to ensure that the holding company can service such indebtedness without adversely affecting the capital requirements of the holding company or its subsidiaries. The Bank Holding Company Act further requires that consummation of approved bank holding company or bank acquisitions or mergers must be delayed for a period of not less than 15 or more than 30 days following the date of approval. During such 15 to 30-day period, complaining parties may obtain a review of the Federal Reserve’s order granting its approval by filing a petition in the appropriate United States Court of Appeals petitioning that the order be set aside.
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 1999 (the “Financial Services Modernization Act”). The Financial Services Modernization Act repealsrepealed the two affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve Member Banks with firms “engaged principally” in specified securities activities; and Section 32, which restricts officer, director, or employee interlocks between a member bank and any company or person “primarily engaged” in specified securities activities. In addition, the Financial Services Modernization Act also containscontained provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law iswas to establish a comprehensive framework to permit affiliations among qualified bank holding companies, commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the Bank Holding Company Act framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a Financial Holding Company. “Financial activities” is broadly defined to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.
Generally, the Financial Services Modernization Act:
• Repeals historical restrictions on, and eliminates many federal and state law barriers to, affiliations among banks, securities firms, insurance companies, and other financial service providers;
• Provides a uniform framework for the functional regulation of the activities of banks, savings institutions, and their holding companies;
• Broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their financial subsidiaries;
• Provides an enhanced framework for protecting the privacy of consumer information;
• Adopts a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernize the Federal Home Loan Bank system;
• Modifies the laws governing the implementation of the Community Reinvestment Act (“CRA”); and
• Addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.
The Financial Services Modernization Act requires that each bank subsidiary of a financial holding company be well capitalized and well managed as determined by the subsidiary bank’s principal regulator.
To be considered well managed, the bank must have received at least a satisfactory composite rating and a satisfactory management rating at its last examination. To be well capitalized, the bank must have a leverage capital ratio of 5%, a Tier 1 Risk-basedrisk-based capital ratio of 6% and a total risk-based capital ratio of 10%. These ratios are discussed further below. In the event a financial holding company becomes aware that a subsidiary bank ceases to be well capitalized or well managed, it must notify the Federal Reserve and enter into an agreement to cure such condition. The consequences of a failure to cure such condition are that the Federal Reserve Board may order divestiture of the bank. Alternatively, a financial holding company may comply with such order by ceasing to engage in the financial holding company activities that are unrelated to banking or otherwise impermissible for a bank holding company.
The Federal Reserve has adopted capital adequacy guidelines for use in its examination and regulation of bank holding companies and financial holding companies. The regulatory capital of a bank holding company or financial holding company under applicable federal capital adequacy guidelines is particularly important in the Federal Reserve’s evaluation of a holding company and any applications by the bank holding company to the Federal Reserve. If regulatory capital falls below minimum guideline levels, a financial holding company may lose its status as a financial holding company and a bank holding company or bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open additional facilities. In addition, a financial institution’s failure to meet minimum regulatory capital standards can lead to other penalties, including termination of deposit insurance or appointment of a conservator or receiver for the financial institution. There are two measures of regulatory capital presently applicable to bank holding companies: (1) risk-based capital and (2) leverage capital ratios.
The Federal Reserve rates bank holding companies by a component and composite 1-5 rating system.system that is confidential. This system is designed to help identify institutions, which require special attention. Financial institutions are assigned ratings based on evaluation and rating of their financial condition and operations. Components reviewed include capital adequacy, asset quality, management capability, the quality and level of earnings, the adequacy of liquidity and sensitivity to interest rate fluctuations.
The leverage ratios adopted by the Federal Reserve require all but the most highly rated bank holding companies to maintain Tier 1 Capital at 4% of total assets. Certain bank holding companies having a composite 1 rating and not experiencing or anticipating significant growth may satisfy the Federal Reserve guidelines by maintaining Tier 1 Capital of at least 3% of total assets.assets reduced by deductions from Tier 1 capital discussed below. Tier 1 Capital for bank holding companies generally includes: stockholders’common equity, minorityretained earnings, non-controlling interest in equity accounts of consolidated subsidiaries and a limited amount of qualifying perpetual preferred stock. In addition, Tier 1 Capital excludes goodwill and other disallowed intangibles.intangibles and disallowed deferred tax assets and certain other assets. The Company’s leverage capital ratio at December 31, 20082011 was 8.06% and 8.51% at December 31, 2007.8.17%.
The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Under the risk-based capital guidelines, assets are assigned to one of four risk categories: 0%, 20% 50% and 100%. As an example, U.S. Treasury securities are assigned to the 0% risk category while most categories of loans are assigned to the 100% risk category. A two-step process determines the risk weight of off-balance sheet items such as standby letters of credit. First, the amount of the off-balance sheet item is multiplied by a credit conversion factor of either 0%, 20%, 50% or 100%. The result is then assigned to one of the four risk categories. At December 31, 2008, the Company’s off-balance sheet items aggregated $998.4 million; however, after the credit conversion these items represented $292.3 million of balance sheet equivalents.
The primary component of risk-based capital is Tier 1 Capital, which for the Company is essentially equal to common stockholders’ equity, less goodwill and other intangibles.was described above. Tier 2 Capital, which consists primarily of the excess of any perpetual preferred stock not qualifying for Tier 1 Capital, mandatory convertible securities, certain types of subordinated debt and generala limited amount of the allowances for loan losses, is a secondary component of risk-based capital. The risk-weighted asset base is equal to the sum of the aggregate dollar values of assets and off-balance sheet items in each risk category, multiplied by the weight assigned to that category. A ratio of Tier 1 Capital to risk-weighted assets of at least 4% and a ratio of Total Capital (Tier 1 and Tier 2) to risk-weighted assets of at least 8% must be maintained by bank holding companies. At December 31, 2008,2011, the Company’s Tier 1 and Total Capital ratios were 10.09%11.48% and 11.22%, respectively. At December 31, 2007, the Company’s Tier 1 and Total Capital ratios were 11.03% and 12.07%13.59%, respectively.
The prior approval of the Federal Reserve must be obtained before the Company may acquire substantially all the assets of any bank, or ownership or control of any voting shares of any bank, if, after such acquisition, it would own or control, directly or indirectly, more than 5% of the voting shares of such bank. In no case, however, may the Federal Reserve approve an acquisition of any bank located outside Mississippi unless such acquisition is specifically authorized by the laws of the state in which the bank to be acquired is located. The banking laws of Mississippi presently permit out-of-state banking organizations to acquire Mississippi banking organizations, provided the Mississippi banking organization has been operating for at least five years. In addition, Mississippi banking organizations were granted similar powers to acquire certain out-of-state financial institutions pursuant to the Interstate Bank Branching Act, which was adopted in 1994.
With the passage of The Interstate Banking and Branching Efficiency Act of 1994, adequately capitalized and managed bank holding companies are permitted to acquire control of banks in any state, subject to federal regulatory approval, without regard to whether such a transaction is prohibited by the laws of any state. Beginning June 1, 1997, federal banking regulators may approve merger transactions involving banks located in different states, without regard to laws of any state prohibiting such transactions; except that mergers may not be approved with respect to banks located in states that, before June 1, 1997, enacted legislation prohibiting mergers by banks located in such state with out-of-state institutions. Federal banking regulators may permit an out-of-state bank to open new branches in another state if such state has enacted legislation permitting interstate branching. The legislation further provides that a bank holding company may not, following an interstate acquisition, control more than 10% of nationwide insured deposits or 30% of deposits in the relevant state. States have the right to adopt legislation to lower the 30% limit. Additional provisions require that interstate activities conform to the Community Reinvestment Act.
The Company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Company’s consolidated net worth. The Federal Reserve may disapprove such a transaction if it determines that the proposal constitutes an unsafe or unsound practice, would violate any law, regulation, Federal Reserve order or directive or any condition imposed by, or written agreement with, the Federal Reserve.
In November 1985, the Federal Reserve adopted its Policy Statement on Cash Dividends Not Fully Covered by Earnings (the Policy Statement). The Policy Statement sets forth various guidelines that the Federal Reserve believes that a bank holding company should follow in establishing its dividend policy. In general, the Federal Reserve stated that bank holding companies should pay dividends only out of current earnings. It also stated that dividends should not be paid unless the prospective rate of earnings retention by the holding company appears consistent with its capital needs, asset quality and overall financial condition.
The Company is a legal entity separate and distinct from the Banks. There are various restrictions that limit the ability of the Banks to finance, pay dividends or otherwise supply funds to the Company or other affiliates. In addition, subsidiary banks of holding companies are subject to certain restrictions on any extension of credit to the bank holding company or any of its subsidiaries, on investments in the stock or other securities thereof and on the taking of such stock or securities as collateral for loans to any borrower. Further, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with extensions of credit, or leases or sales of property or furnishing of services.
Bank Regulation
The operations of the Banks are subject to state and federal statutes applicable to state banks and the regulations of the Federal Reserve and the FDIC. The operation of the Banks may also be subject to applicable OCC regulation, to the extent states banks are granted parity with national banks. Such statutes and regulations relate to, among other things, required reserves, investments, loans, mergers and consolidations, issuance of securities, payment of dividends, establishment of branches and other aspects of the Banks’ operations.
Hancock Bank MS is subject to regulation and periodic examinations by the FDIC and the State of Mississippi Department of Banking and Consumer Finance. HancockWhitney Bank LA is subject to regulation and periodic examinations by the FDIC and the Office of Financial Institutions, State of Louisiana. Hancock Bank FL is subject to regulation and periodic examinations by the FDIC and the Florida Department of Financial Services.
Hancock Bank AL is subject to regulation and periodic examinations by the FDIC and the Alabama State Banking Department. These regulatory authorities examine such areas as reserves, loan and investment quality, management policies, procedures and practices and other aspects of operations. These examinations are designed for the protection of the Banks’ depositors, rather than their stockholders. In addition to these regular examinations, the Company and the Banks must furnish periodic reports to their respective regulatory authorities containing a full and accurate statement of their affairs.
The Company is required to file annual reports with the Federal Reserve Board, and such additional information as the Federal Reserve Board may require pursuant to the Bank Holding Company Act. The Federal Reserve Board may examine a bank holding company or any of its subsidiaries, and charge the company for the cost of such examination.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) has removed many limitations on the Federal Reserve Board’s authority to make examinations of banks that are subsidiaries of bank holding companies. Under the Dodd-Frank Act, the Federal Reserve Board will generally be permitted to examine bank holding companies and their subsidiaries, provided that the Federal Reserve Board must rely on reports submitted directly by the institution and examination reports of the appropriate regulators (such as the FDIC and the Banking Department) to the fullest extent possible; must provide reasonable notice to, and consult with, the appropriate regulators before commencing an examination of a bank holding company subsidiary; and, to the fullest extent possible, must avoid duplication of examination activities, reporting requirements, and requests for information.
As a result of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), a financial institution insured by the FDIC can be held liable for any losses incurred by, or reasonably expected to be incurred by, the FDIC in connection with (1) the default of a commonly controlled FDIC-insured financial institution or (2) any assistance provided by the FDIC to a commonly controlled financial institution in danger of default.
The Banks are members of the FDIC, and their deposits are insured as provided by law by the Deposit Insurance Fund, (DIF)or the DIF. The deposits of the Banks are insured up to applicable limits and the Banks are subject to deposit insurance assessments to maintain the DIF. The FDIC utilizes a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a bank’s capital level and supervisory rating.
Effective January 1, 2007, the FDIC began imposing deposit assessment rates based on the risk category of the bank, with Risk Category I being the lowest risk category and Risk Category IV being the highest risk category. Because of favorable loss experience and a healthy reserve ratio in the Bank Insurance Fund, or the BIF, of the FDIC, well-capitalized and well-managed banks, have in recent years paid minimal premiums for FDIC insurance.
The Dodd-Frank Act changed the method of calculation for FDIC insurance assessments. Under the previous system, the assessment base was domestic deposits minus a few allowable exclusions, such as pass-through reserve balances. Under the Dodd-Frank Act, assessments are to be calculated based on the depository institution’s average consolidated total assets, less its average amount of tangible equity. In addition to providing for the required change in assessment base, the FDIC’s final deposit insurance regulations implementing the Dodd-Frank provisions eliminated the assessment adjustments based on unsecured debt, secured liabilities, and brokered deposits; added a new adjustment for holding unsecured debt issued by another insured depository institution; and lowered the initial base assessment rate schedule in order to collect approximately the same amount of revenue under the new base as under the old base, among other changes.
Beginning April 1, 2011, the base assessment rates ranged from 5 to 35 basis points, with the initial assessment rates subject to adjustments which could increase or decrease the total base assessment rates. The adjustments included (1) a decrease for long-term unsecured debt, including most senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; and (2) for non-Risk Category I institutions, an increase for brokered deposits above a threshold amount.
The enactment of the Emergency Economic Stabilization Act of 2008 temporarily raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor. However, with the passage of the Dodd-Frank Act, this increase in the basic coverage limit has been made permanent.
On October 14, 2008, the FDIC announced the Temporary Liquidity Guarantee Program (“TLGP”). OnThe final rule was adopted on November 21, 2008. The FDIC stated that its purpose was to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of 31 days or greater of banks, thrifts, and certain holding companies (the “Debt Guarantee Program”), and by providing full coverage of non-interest-bearing transaction accounts, as well as certain low-interest NOW accounts and IOLTA accounts, regardless of dollar amount (the “Transaction Account Guarantee Program”). Inclusion in the program was voluntary. Institutions participating in the Debt Guarantee Program are assessed fees based on a sliding scale, depending on length of maturity. Shorter-term debt has a lower fee structure and longer-term debt has a higher fee structure. The fee ranged from 50 basis points on debt of 180 days or less to a maximum of 100 basis points for debt with maturities of one year or longer, on an annualized basis. For institutions participating in the Transaction Account Guarantee Program, a 10-basis point surcharge was added to the institution’s current insurance assessment in order to fully cover all transaction accounts. The Banks did not elect to participate in the Debt Guaranty Program but did elect to participate in the Transaction Account Guarantee Program.
The Transaction Account Guarantee Program was set to expire on December 19, 1991,31, 2010. However, with the passage of the Dodd-Frank Act, the insurance coverage provided under the Transaction Account Guarantee Program has in effect been extended until December 31, 2012, with some changes. Perhaps the most significant differences between the current version of the Transaction Account Guarantee Program and the Dodd-Frank extension of the program are (i) that all banks are required to participate in the new coverage, with no opt-out available, (ii) that interest-bearing NOW accounts no longer benefit from the unlimited insurance coverage effective January 1, 2011 (although IOLTA accounts continue to benefit from the unlimited coverage) and (iii) that the surcharge was eliminated.
In addition, since the first quarter of 2000, all institutions with deposits insured by the FDIC have been required to pay assessments to fund interest payments on bonds issued by the Financing Corporation (“FICO”), a mixed-ownership government corporation established to recapitalize a predecessor to the Deposit Insurance Fund. The FICO assessment rate is adjusted quarterly to reflect changes in the assessment bases of the fund based on quarterly Call Report and Thrift Financial Report submissions. The current annualized assessment rate is 1.020 basis points, or approximately 0.255 basis points per quarter. These assessments will continue until the FICO bonds mature in 2017 through 2019.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) was enacted. The Federal Deposit Insurance Act, as amended by Section 302 of FDICIA, calls for risk-related deposit insurance assessment rates. The risk classification of an institution will determine its deposit insurance premium. The Federal Deposit Insurance Reform act of 2005 created a new risk differentiation system and established a new base assessment rate schedule, effective January 1, 2007. The final rule consolidates the existing nine risk categories into four and names them Risk Categories I, II, III, and IV. Risk Category I replaces the 1A risk category. The annual rates (in basis points) are now from 5 cents to 43 cents per hundred dollars of insured deposits, with category I rates having a range of 5 cents to 7 cents per hundred dollars of insured deposits. In 2007, the Banks received a risk classification of I for assessment purposes. Total FICO assessments paid to the FDIC amounted to $0.6 million in 2008 and $0.6 million in 2007.
Under the provisions of the Federal Deposit Insurance Reform Act of 2005, Hancock Bank MS and Hancock Bank LA received a one-time FDIC assessment credit of $1.9 million and $1.3 million, respectively, to be used against deposit insurance assessments beginning January 1, 2007. $1.8 million of this credit offset the entire FDIC assessment for 2007 and the remaining $1.4 million offset the 2008 assessment. FDIC insurance expense totaled $1.2 million in 2008.
In October 2008, in an effort to restore capitalization levels and to ensure the DIF will adequately cover projected losses from future bank failures, the FDIC proposed a rule to alter the way in which it differentiates for risk in the risk-based assessment system and to revise deposit insurance assessment rates, including base assessment rates. For Risk Category 1 institutions that have long-term debt issuer ratings, the FDIC proposes (i) to determine the initial base assessment rate using a combination of weighted-average CAMELS component ratings, long-term debt issuer ratings (converted to numbers and averaged) and the financial ratios method assessment rate (as defined), each equally weighted and (ii) to revise the uniform amount and the pricing multipliers. The FDIC also proposes to introduce three adjustments that could be made to an institution’s initial base assessment rate, including (i) a potential decrease of up to 2 basis points for long-term unsecured debt, including senior and subordinated debt, (ii) a potential increase for secured liabilities in excess of 15% of domestic deposits and (iii) for non-Risk Category 1 institutions, a potential increase for brokered deposits in excess of 10% of domestic deposits. In addition, the FDIC proposed raising the current rates uniformly by 7 basis points for the assessment for the first quarter of 2009 resulting in annualized assessment rates for Risk Category 1 institutions ranging from 12 to 14 basis points. The proposal for first quarter 2009 assessment rates was adopted as a final rule in December 2008. The FDIC also proposed, effective April 1, 2009, initial base assessment rates for Risk Category 1 institutions of 10 to 14 basis points. After the effect of potential baserate adjustments, the annualized assessment rate for Risk Category 1 institutions would range from 8 to 21 basis points. A final rule related to this proposal is expected to be issued during the first quarter of 2009. The Company cannot provide any assurance as to the amount of any proposed increase in its deposit insurance premium rate, should such an increase occur, as such changes are dependent upon a variety of factors, some of which are beyond the Company’s control.
In general, FDICIA subjects banks and bank holding companies to significantly increased regulation and supervision. FDICIA increased the borrowing authority of the FDIC in order to recapitalize the DIF, and the future borrowings are to be repaid by increased assessments on FDIC member banks. Other significant provisions of FDICIA requiresupervision, including a new regulatory emphasis linking supervision to bank capital levels.
Also, federal banking regulators are required to take prompt regulatory action with respect to depository institutions that fall below specified capital levels and to draft non-capital regulatory measures to assure bank safety.
FDICIA contains a “prompt corrective action” section intended to resolve problem institutions at the least possible long-term cost to the deposit insurance funds. Pursuant to this section, the federal banking agencies are required to prescribe a leverage limit and a risk-based capital requirement indicating levels at which institutions will be deemed to be “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” In the case of a depository institution that is “critically undercapitalized” (a term defined to include institutions which still have positive net worth); the federal banking regulators are generally required to appoint a conservator or receiver.
FDICIA further requires regulators to perform annual on-site bank examinations, places limits on real estate lending and tightens audit requirements. The new legislation eliminated the “too big to fail” doctrine, which protects uninsured deposits of large banks, and restricts the ability of undercapitalized banks to obtain extended loans from the Federal Reserve Board discount window. FDICIA also imposes new disclosure requirements relating to fees charged and interest paid on checking and deposit accounts. Most of the significant changes brought about by FDICIA required new regulations.
In addition to regulating capital, the FDIC has broad authority to prevent the development or continuance of unsafe or unsound banking practices. Pursuant to this authority, the FDIC has adopted regulations that restrict preferential loans and loan amounts to “affiliates” and “insiders” of banks, require banks to keep information on loans to major stockholders and executive officers and bar certain director and officer interlocks between financial institutions. The FDIC is also authorized to approve mergers, consolidations and assumption of deposit liability transactions between insured banks and between insured banks and uninsured banks or institutions to prevent capital or surplus diminution in such transactions where the resulting, continuing or assumed bank is an insured nonmember state bank, like Hancock Bank (MS,) Hancock Bank of LA, Hancock Bank of FL and Hancock Bank of AL.Whitney Bank.
Although Hancock Bank (MS,) Hancockand Whitney Bank of LA, Hancock Bank of FL and Hancock Bank of AL are not members of the Federal Reserve System, they are subject to Federal Reserve regulations that require the Banks to maintain reserves against transaction accounts (primarily checking accounts). Because reserves generally must be maintained in cash or in noninterest-bearing accounts, the effect of the reserve requirements is to increase the cost of funds for the Banks. The Federal Reserve regulations currently require that reserves be maintained against net transaction accounts in the amount of 3% of the aggregate of such accounts up to $34.1$71 million, or, if the aggregate of such accounts exceeds $34.1$71 million, $1.023 million plus 10% of the total in excess of $34.1$71 million. This regulation is subject to an exemption from reserve requirements on a limited amount$11.5 million of an institution’s transaction accounts.
The Financial Services Modernization Act also permits national banks, and through state parity statutes, state banks, to engage in expanded activities through the formation of financial subsidiaries. A state bank may have a subsidiary engaged in any activity authorized for state banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, each of which activity may only be conducted through a subsidiary of a Financial Holding Company. Financial activities include all activities permitted under new sections of the Bank Holding Company Act or permitted by regulation.
A state bank seeking to have a financial subsidiary, and each of its depository institution affiliates, must be “well-capitalized” and “well-managed.” The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank’s total assets, or $50 billion. A state bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary. The assets of the subsidiary may not be consolidated with the bank’s assets. The bank must also have policies and procedures to assess financial subsidiary risk and protect the bank from such risks and potential liabilities.
The Financial Services Modernization Act also includes a new section of the Federal Deposit Insurance Act governing subsidiaries of state banks that engage in “activities as principal that would only be permissible” for a national bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all existing subsidiaries. Because Mississippi permits commercial banks chartered by the state to engage in any activity permissible for national banks, the Bank will be permitted to form subsidiaries to engage in the
activities authorized by the Financial Services Modernization Act. In order to form a financial subsidiary, a state bank must be well-capitalized, and the state bank would be subject to the same capital deduction, risk management and affiliate transaction rules as applicable to national banks.
In 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct TerrorismUSA Patriot Act of 2001 (USA Patriot Act) was signed into law. The USA Patriot Act broadened the application of anti-money laundering regulations to apply to additional types of financial institutions, such as broker-dealers, and strengthened the ability of the U.S. Government to detect and prosecute international money laundering and the financing of terrorism. The principal provisions of Title III of the USA Patriot Act require that regulated financial institutions, including state member banks: (i) establish an anti-money laundering program that includes training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain verification and certification of money laundering risk for their foreign correspondent banking relationships. The USA Patriot Act also expanded the conditions under which funds in a U.S. interbank account may be subject to forfeiture and increased the penalties for violation of anti-money laundering regulations. Failure of a financial institution to comply with the USA Patriot Act’s requirements could have serious legal and reputational consequences for the institution. The Bank has adopted policies, procedures and controls to address compliance with the requirements of the USA Patriot Act under the existing regulations and will continue to revise and update its policies, procedures and controls to reflect changes required by the USA Patriot Act and implementing regulations.
In July 2002, Congress enacted the Sarbanes-Oxley Act of 2002, which addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. Section 404 of the Sarbanes-Oxley Act requires the Company to include in its Annual Report, a report stating management’s responsibility to establish and maintain adequate internal control over financial reporting and management’s conclusion on the effectiveness of the internal controls at year end. Additionally, the Company’s independent registered public accounting firm is required to attest to and report on management’s evaluation of internal control over financial reporting.
In October 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted. For more information onThe EESA see below under Recent Developments.
Summary
authorized the Treasury Department to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program (“TARP”). The foregoingpurpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other. The Treasury Department has allocated $250 billion towards the TARP Capital Purchase Program (“CPP”). Under the CPP, Treasury purchases debt or equity securities from participating institutions. The TARP also may include direct purchases or guarantees of troubled assets of financial institutions. Participants in the CPP are subject to executive compensation limits and are encouraged to expand their lending and mortgage loan modifications. On November 13, 2008, following a brief summary of certain statutes, rulesthorough evaluation and regulations affectinganalysis, the Company announced it would decline the Treasury’s invitation to participate in the CPP. Whitney participated in the TARP program, but the preferred stock issued to Treasury was subsequently purchased and retired by Hancock in conjunction with the Banks. acquisition.
It is not intended to be an exhaustive discussionclear at this time what impact the EESA, the TARP Capital Purchase Program, the Temporary Liquidity Guarantee Program, other liquidity and funding initiatives of all the statutes and regulations having an impact on the operations of such entities.
We do not believe that the Financial Services Modernization Act will have a material adverse effect on our operations in the near-term. However, to the extent that it permits holding companies, banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing the amount of competition that the Company and the Banks face from larger institutionsFederal Reserve and other types of companies offering financial products, some of which mayagencies that have substantially more financial resources than us.
It is not known whether EESA will havebeen previously announced, and any effect on the Company’s operations.
Finally, additional billsprograms that may be introducedinitiated in the future, inwill have on the United States Congress and state legislatures to alter the structure, regulation and competitive relationships of financial institutions. It cannot be predicted whether and what form any of these proposals will be adoptedCompany or the extent to which the business of the CompanyU.S. and the Banks may be affected thereby.global financial markets.
Recent Developments
The Congress, Treasury Department and the federal banking regulators, including the FDIC, have taken broad action since early September, 2008 to address volatility in the U.S. banking system.
In October 2008,system, including the Emergency Economic Stabilizationpassage of EESA (discussed above), the provision of other direct and indirect assistance to financial institutions, assistance by the banking authorities in arranging acquisitions of weakened banks and broker-dealers, implementation of programs by the Federal Reserve Board to provide liquidity to the commercial paper markets and expansion of deposit insurance coverage. The new administration and Congress have pursued additional initiatives in an effort to stimulate the economy and stabilize the financial markets, including the enactment of the American Recovery and Reinvestment Act of 2008 (“EESA”) was enacted. 2010, and have altered the terms of some previously announced policies.
The EESA authorizesenactment of the Treasury DepartmentDodd-Frank Act will likely result in increased regulation of the financial services industry. Provisions likely to purchase from financial institutionsaffect the activities of the Company and the Banks include, without limitation, the following:
• | Asset-based deposit insurance assessments. FDIC deposit insurance premium assessments will be based on bank assets rather than domestic deposits. |
• | Deposit insurance limit increase.The deposit insurance coverage limit has been permanently increased from $100,000 to $250,000. |
• | Extension of Transaction Account Guarantee Program. Unlimited deposit insurance coverage is extended for non-interest-bearing transaction accounts and certain other accounts for two years. This applies to all banks; there is no opt-in or opt-out requirement. |
• | Establishment of the Consumer Financial Protection Bureau (CFPB). The CFPB will be housed within the Federal Reserve and, in consultation with the Federal banking agencies, will make rules relating to consumer protection. The CFPB has the authority, should it wish to do so, to rewrite virtually all of the consumer protection regulations governing banks, including those implementing the Truth in Lending Act, the Real Estate Settlement Procedures Act (or RESPA), the Truth in Savings Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the S.A.F.E. Mortgage Licensing Act, the Fair Credit Reporting Act (except Sections 615(e) and 628), the Fair Debt Collection Practices Act, and the Gramm-Leach-Bliley Act (sections 502 through 509 relating to privacy), among others. On January 4, 2012 President Obama named the first Director of the CFPB by way of recess appointment. |
• | Risk-retention rule. Banks originating loans for sale on the secondary market or securitization must retain 5% of any loan they sell or securitize, except for mortgages that meet low-risk standards to be developed by regulators. |
• | Limitation on federal preemption. Limitations have been imposed on the ability of national bank regulators to preempt state law. Formerly, the national bank and federal thrift regulators possessed preemption powers with regard to transactions, operating subsidiaries and attorney general civil enforcement authority. These preemption requirements have been limited by the Dodd-Frank Act, which will likely impact state banks by affecting activities previously permitted through parity with national banks. |
• | Changes to regulation of bank holding companies. Under Dodd-Frank, bank holding companies must be well-capitalized and well-managed to engage in interstate transactions. In the past, only the subsidiary banks were required to meet those standards. The Federal Reserve Board’s “source of strength doctrine” has now been codified, mandating that bank holding companies such as the Company serve as a source of strength for their subsidiary banks, meaning that the bank holding company must be able to provide financial assistance in the event the subsidiary bank experiences financial distress. |
• | Executive compensation limitations. The Dodd-Frank Act codified executive compensation limitations similar to those previously imposed on TARP recipients. |
The Dodd-Frank Act contains 16 different titles, is over 800 pages long, and calls for the completion of dozens of studies and reports and hundreds of new regulations. The information provided herein regarding the effect of the Dodd-Frank Act is intended merely for illustration and is not exhaustive, as the full impact of the legislation on banks and bank holding companies up to $700 billionis still being studied and in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program (“TARP”). The purposeany event cannot be fully known until the completion of TARP is to restore confidence and stabilitynew federal agency rulemakings over the next few years. Interested shareholders should refer directly to the U.S. banking systemDodd-Frank Act itself for additional information.
The Dodd-Frank Act is one of a number of legislative initiatives that have been proposed in recent years due to the national and global financial crisis. It is not possible to encourage financial institutionspredict whether any other similar legislation may be adopted that would significantly affect the operations and performance of the Company and the Banks.
Regulation E
On November 12, 2009, the Federal Reserve issued amendments to increase their lending toRegulation E which implements the Electronic Fund Transfer Act. The rules became effective on July 1, 2010 for new bank customers and August 16, 2010 for existing customers. These amendments prohibit banks from charging an overdraft fee for non-recurring debit card transactions (specifically, point-of-sale and ATM transactions) that overdraw a consumer’s account unless the consumer affirmatively consents, or “opts-in,” to each other.the bank’s payment of overdrafts for those transactions. The Treasury Department has allocated $250 billion towardsBank does not pay such transactions unless the TARP Capital Purchase Program (“CPP”).consumer affirmatively elects, or “opts-in,” to have the Bank do so.
Debit Interchange Fees
Effective June 29, 2011, the Federal Reserve issued a final rule to implement the “Durbin Amendment” to the Dodd-Frank Act of 2010. The rule included standards for assessing whether debit card interchange fees received by debit card issuers are reasonable and proportional to the costs incurred by issuers for electronic debit transactions. Interchange fees, or “swipe” fees, are charges that merchants pay to credit card companies and card-issuing banks like us for processing electronic payment transactions. Under the CPP, Treasuryfinal rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. The rule further allows for an upward adjustment of 1 cent to the interchange fee if an issuer certifies that it has implemented policies and procedures reasonably designed to achieve the fraud-prevention standards set forth by the Federal Reserve.
In addition, the legislation prohibits card issuers and networks from entering into exclusive arrangements requiring that debit card transactions be processed on a single network or only two affiliated networks, and allows merchants to determine transaction routing. The limits that the Dodd-Frank Act and Federal Reserve rules place on debit interchange fees will purchase debt or equity securities from participating institutions.significantly reduce our debit card interchange revenues. The TARP alsorule became effective October 1, 2011. The initial phase of implementation reduced Hancock’s revenue by approximately $2.5 million in the fourth quarter of 2011. Hancock projects that, when fully implemented in 2012, the rule will include direct purchases or guaranteescause a further revenue reduction of troubled assetsapproximately $2.0 million per quarter.
Summary
The foregoing is a brief summary of certain statutes, rules and regulations affecting the Company and the Banks. It is not intended to be an exhaustive discussion of all the statutes and regulations having an impact on the operations of such entities.
It is not known whether the above acts and regulations will have any material effect on the Company’s operations. However, increased regulation will generally result in increased legal and compliance expense.
Finally, additional bills may be introduced in the future in the United States Congress and state legislatures to alter the structure, regulation and competitive relationships of financial institutions. Participants inIt cannot be predicted whether and what form any of these proposals will be adopted or the CPP are subjectextent to executive compensation limits and are encouraged to expand their lending and mortgage loan modifications. On November 13, 2008, following a thorough evaluation and analysis,which the business of the Company announced it would decline the Treasury’s invitation to participate in the CPP.
EESA also increased FDIC deposit insurance on most accounts from $100,000 to $250,000. This increase is in place until the end of 2009 and is not covered by deposit insurance premiums paid by the banking industry.
Following a systemic risk determination, the FDIC established a Temporary Liquidity Guarantee Program (“TLGP”) on October 14, 2008. The TLGP includes the Transaction Account Guarantee Program (“TAGP”), which provides unlimited deposit insurance coverage through December 31, 2009 for noninterest-bearing transaction accounts (typically checking accounts) and certain funds swept into noninterest-bearing savings accounts. Institutions participating in the TAGP pay a 10 basis points fee (annualized) on the balance of each covered account in excess of $250,000, while the extra deposit insurance is in place. The TLGP also includes the Debt Guarantee Program (“DGP”), under which the FDIC guarantees certain senior unsecured debt of FDIC-insured institutions and their holding companies. The unsecured debt must be issued on or after October 14, 2008 and not later than June 30, 2009, and the guarantee is effective through the earlier of the maturity date or June 30, 2012. The DGP coverage limit is generally 125% of the eligible entity’s eligible debt outstanding on September 30, 2008 and scheduled to mature on or before June 30, 2009 or, for certain insured institutions, 2% of their liabilities as of September 30, 2008. Depending on the term of the debt maturity, the nonrefundable DGP fee ranges from 50 to 100 basis points (annualized) for covered debt outstanding until the earlier of maturity or June 30, 2012. The TAGP and DGP are in effect for all eligible entities, unless the entity opted out on or before December 5, 2008. The Company will participate in the TAGP but has opted out of the DGP.
It is not clear at this time what impact the EESA, the TARP Capital Purchase Program, the Temporary Liquidity Guarantee Program, other liquidity and funding initiatives of the Federal Reserve and other agencies that have been previously announced, and any additional programs thatBanks may be initiated in the future, will have on the Company or the U.S. and global financial markets.affected thereby.
Effect of Governmental Policies
The difference between the interest rate paid on deposits and other borrowings and the interest rate received on loans and securities comprise most of a bank’s earnings. In order to mitigate the interest rate risk inherent in the industry, the banking business is becoming increasingly dependent on the generation of fee and service charge revenue.
The earnings and growth of a bank will be affected by both general economic conditions and the monetary and fiscal policy of the United States Government and its agencies, particularly the Federal Reserve. The Federal Reserve sets national monetary policy such as seeking to curb inflation and combat recession. This is accomplished by its open-market operations in United States government securities, adjustments in the amount of reserves that financial institutions are required to maintain and adjustments to the discount rates on borrowings and target rates for federal funds transactions. The actions of the Federal Reserve in these areas influence the growth of bank loans, investments and deposits and also affect interest rates on loans and deposits. The nature and timing of any future changes in monetary policies and their potential impact on the Company cannot be predicted.
Impact of Inflation
Our noninterest income and expenses can be affected by increasing rates of inflation; however, unlike most industrial companies, the assets and liabilities of financial institutions such as the Banks are primarily monetary in nature. Interest rates, therefore, have a more significant impact on the Banks’ performance than the effect of general levels of inflation on the price of goods and services.
RISK FACTORS |
Making or continuing an investmentWe face a number of significant risks and uncertainties in securities issuedconnection with our operations. Our business, results of operations and financial condition could be materially adversely affected by us, including our common stock, involvesthe factors described below.
While we describe each risk separately, some of these risks are interrelated and certain risks that you should carefully consider. Thecould trigger the applicability of other risks described below. Also, the risks and uncertainties described below are not the only ones that we may face. Additional risks and uncertainties not presently known to us, or that maywe currently do not consider significant, could also potentially impair, and have a material adverse effect on, us. Additional risks and uncertainties also could adversely affect our business, and results of operations. If any of the following risks actually occur, our business, financial condition or results of operations could be negatively affected, the market price for your securities could decline, and you could lose all or a part of your investment. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.financial condition.
We may be vulnerable to certain sectors of the economy.economy.
A substantial portion of our loan portfolio is secured by real estate. If the economy deteriorated and depressed real estate values beyond a certain point, thatthe collateral value of the portfolio and the revenue stream from those loans could come under stress and possibly require additional provision to the allowance for loan losses. Our ability to dispose of foreclosed real estate at prices above the respective carrying values could also be impinged, causing additional losses.
Difficult market conditions have adversely affected the industry in which we operate.
The capital and credit markets have been experiencing volatility and disruption for more than twelve months. In recent months, the volatility and disruption has reached unprecedented levels.disruption. Dramatic declines in the housing market, over the past year, with falling home prices and increasing foreclosures, unemployment and under-employment, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities as well as major commercial and investment banks. These write-downs have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced or ceased providing funding to borrowers, including to other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. We do not expect that the difficult conditions in the financial markets are likely to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institution industry. In particular, we may face the following risks in connection with these events:
We may expect to face increased regulation of our industry, including as a result of the Emergency Economic Stabilization Act of 2008 (EESA) and the Dodd-Frank Act. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities. Market developments and the resulting economic pressure on consumers may affect consumer confidence levels and may cause increases in delinquencies and default rates, which, among other effects, could affect our charge-offs and provision for loan losses. Competition in the industry could intensify as a result of the increasing consolidation of financial services companies in connection with current market conditions. The current market disruptions make valuation even more difficult and subjective, and our ability to measure the fair value of our assets could be adversely affected. If we determine that a significant portion of our assets have values that are significantly below their recorded carrying value, we could recognize a material charge to earnings in the quarter during which such determination was made, our capital ratios would be adversely affected and a rating agency might downgrade our credit rating or put us on credit watch. | ||
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There can be no assurance that the Emergency Economic Stabilization Act of 2008 will help stabilize the U.S. Financial System.
On Oct.October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (EESA) was signed into law in response to the current crisis in the financial sector. The U.S. Department of the Treasury and banking regulators are implementingimplemented a number of programs under this legislation to address capital and liquidity issues in the banking system. There can be no assurance, however, as to the actual impact that the EESA will have on the financial markets, including the extreme levels of volatility and limited credit availability currently being experienced. The failure of the EESA to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common stock.
We are subject to a risk of rapid and significant changes in market interest rates.
Our assets and liabilities are primarily monetary in nature, and as a result, we are subject to significant risks tied to changes in interest rates. Our ability to operate profitably is largely dependent upon net interest income. In 2008,2011, net interest income made up 64%72% of our revenue. Unexpected movement in interest rates markedly changing the slope of the current yield curve could cause our net interest margins to decrease, subsequently decreasing net interest income. In addition, such changes could adversely affect the valuation of our assets and liabilities.
At present, our one-year interest rate sensitivity position is asset sensitive, such that a gradual increase in interest rates during the next twelve months should not have a significantpositive impact on net interest income during that period. However, as with most financial institutions, our results of operations are affected by changes in interest rates and our ability to manage this risk. The difference between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities may be affected by changes in market interest rates, changes in relationships between interest rate indices, and/or changes in the relationships between long-term and short-term market interest rates. A change in this difference might result in an increase in interest expense relative to interest income, or a decrease in our interest rate spread.
Certain changes in interest rates, inflation, deflation, or the financial markets could affect demand for our products and our ability to deliver products efficiently.
Loan originations, and potentially loan revenues, could be adversely impacted by sharply rising interest rates. Conversely, sharply falling rates could increase prepayments within our securities portfolio lowering interest earnings from those investments. An underperforming stock market could reduce brokerage transactions, therefore reducing investment brokerage revenues; in addition, wealth management fees associated with managed securities portfolios could also be adversely affected. An unanticipated increase in inflation could cause our operating costs related to salaries &and benefits, technology, and supplies to increase at a faster pace than revenues.
The fair market value of our securities portfolio and the investment income from these securities also fluctuate depending on general economic and market conditions. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.
Changes in the policies of monetary authorities and other government action could adversely affect our profitability.
The results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve Board. The instruments of monetary policy employed by the Federal Reserve Board include open market operations in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks and the current military operations in the Middle East, we cannot predict possiblethe potential impact of future changes in interest rates, deposit levels, loan demand oron our business and earnings. Furthermore, the actions of the United States government and other governments in responding to such terrorist attacks or the military operations in the Middle East may result in currency fluctuations, exchange controls, market disruption and other adverse effects.
Natural disasters could affect our ability to operate.
Our market areas are susceptible to hurricanes. Natural disasters, such as hurricanes, can disrupt our operations, result in damage to properties and negatively affect the local economies in which we operate.
We cannot predict whether or to what extent damage caused by future hurricanes will affect our operations or the economies in our market areas, but such weather events could cause a decline in loan originations, a decline in the value or destruction of properties securing the loans and an increase in the risk of delinquencies, foreclosures or loan losses.
Insurance.
With the less severe hurricane seasons in 2007 and 2008, Hancock Bank has been able to place its property insurance at limits sufficient to protect it from its maximum probable loss and secure more favorable terms and conditions. Due to Hancock Bank’s favorable financial performance, the cost of the Financial Institution Insurance program has continued to be written with favorable terms and conditions. The long term relationship Hancock Bank has with Chubb Insurance Company provides stability and security and should serve the bank well over the coming years.
Greater loan losses than expected may adversely affect our earnings.
We, as lenders, are exposed to the risk that our customers will be unable to repay their loans in accordance with their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. Credit losses are inherent in the business of making loans and could have a material adverse effect on our operating results. Our credit risk with respect to our real estate and construction loan portfolio will relate principally to the creditworthiness of corporations and the value of the real estate serving as security for the repayment of loans. Our credit risk with respect to our commercial and consumer loan portfolio will relate principally to the general creditworthiness of businesses and individuals within our local markets.
We make various assumptions and judgments about the collectibilitycollectability of our loan portfolio and provide an allowance for estimated loan losses based on a number of factors. We believe that our current allowance for loan losses is adequate. However, if our assumptions or judgments prove to be incorrect, the allowance for loan losses may not be sufficient to cover actual loan losses. We may have to increase our allowance in the future in response to the request of one of our primary banking regulators, to adjust for changing conditions and assumptions, or as a result of any deterioration in the quality of our loan portfolio. The actual amount of future provisions for loan losses cannot be determined at this time and may vary from the amounts of past provisions.
The projected benefit obligations of our pension plan exceed the fair value of the Plan’s assets.
Investments in the portfolio of our pension plan may not provide adequate returns to fully fund benefits as they come due, thus causing higher annual plan expenses and requiring additional contributions by us.
We may need to rely on the financial markets to provide needed capital.
Our stock is listed and traded on the NASDAQ Global Select. Although we anticipate that our capital resources will be adequate for the foreseeable future to meet our capital requirements, at times we may depend on the liquidity of the NASDAQ market to raise equity capital. If the market should fail to operate, or if conditions in the capital markets are adverse, we may be constrained in raising capital. We maintain a consistent analyst following; therefore, downgrades in our prospects by an analyst(s) may cause our stock price to fall and significantly limit our ability to access the markets for additional capital requirements. Should these risks materialize, our ability to further expand our operations through internal growth may be limited.
Sales of a significant number of shares of our Common Stock in the public markets, or the perception of such sales, could depress the market price of our Common Stock.
Sales of a substantial number of shares of our Common Stock in the public markets and the availability of those shares for sale could adversely affect the market price of our Common Stock. In addition, future issuances of equity securities, including pursuant to outstanding options, could dilute the interests of our existing stockholders, including you, and could cause the market price of our Common Stock to decline. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional shares of common or preferred stock could be substantially dilutive to shareholders of our Common Stock. Moreover, to the extent that we issue restricted stock units, phantom shares, stock appreciation rights, options or warrants to purchase our Common Stock in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution.
Holders of our shares of Common Stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders. We cannot predict the effect that future sales of our Common Stock would have on the market price of our Common Stock.
We may invest or spend the proceeds in stock offerings in ways with which you may not agree and in ways that may not earn a profit.
We intend to use the proceeds of offerings for general corporate purposes, including for possible acquisition opportunities that may become available or to establish de novo branches. There can be no assurances that suitable acquisition opportunities may become available, or that we will be able to successfully complete any such acquisitions. We may use the proceeds only to focus on sustaining our organic, or internal, growth, or for other purposes. In addition, we may choose to use all or a portion of the proceeds to support our capital. We retain broad discretion over the use of the proceeds from offerings and may use them for purposes other than those contemplated at the time of this offering. You may not agree with the ways we decide to use proceeds, and our use of the proceeds may not yield any profits.
We engage in acquisitions of other businesses from time to time, including FDIC-assisted acquisitions. These acquisitions may not produce revenue or earnings enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties.
On occasion, we will engage in acquisitions of other businesses, such as the acquisition of Whitney Holding Corporation completed on June 4, 2011. Difficulty in integrating an acquired business or company may cause us not to realize expected revenue increases, cost savings, increases in geographic or product presence, or other anticipated benefits from any acquisition. The integration could result in higher than expected deposit attrition (run-off), loss of key employees, disruption of our business or the business of the acquired company, or otherwise adversely affect our ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition. We are likely to need to make additional investment in equipment and personnel to manage higher asset levels and loan balances as a result of any significant acquisition, which may adversely impact our earnings. Also, the negative effect of any divestitures required by regulatory authorities in acquisitions or business combinations may be greater than expected.
In evaluating potential acquisition opportunities we may seek to acquire failed banks through FDIC-assisted transactions. While the FDIC may, in such transactions, provide assistance to mitigate certain risks, such as sharing in exposure to loan losses, and providing indemnification against certain liabilities, of the failed institution, we may not be able to accurately estimate our potential exposure to loan losses and other potential liabilities, or the difficulty of integration, in acquiring such institution.
Depending on the condition of any institution that we may acquire, any acquisition may, at least in the near term, adversely affect our capital earnings and, if not successfully integrated following the acquisition, may continue to have such effects.
We may fail to realize the anticipated cost savings and other financial benefits of the Hancock/Whitney merger on the anticipated schedule, if at all.
We may face significant challenges in integrating Whitney Holding Corporation operations in our operations in a timely and efficient manner and in retaining Whitney personnel. Achieving the anticipated cost savings and financial benefits of the merger will depend on part on whether we integrate Whitney’s businesses in an efficient and effective manner. We may not be able to accomplish this integration process smoothly or successfully. In addition, the integration of certain operations will require the dedication of significant management resources, which may temporarily distract management’s attention from the day-to-day business of the combined company. Any inability to realize the full extent of, or any of, the anticipated cost savings and financial benefits of the merger, as well as any delays encountered in the integration process, could have an adverse effect on the business and results of operations of the combined company, which may affect the market price of Hancock common stock.
Our growth and financial performance may be negatively impacted if we are unable to successfully execute our growth plans.
There can be no assurances that we will be successful in continuing our organic, or internal, growth, which depends upon economic conditions, our ability to identify appropriate markets for expansion, our ability to recruit and retain qualified personnel, our ability to fund growth at a reasonable cost, sufficient capital to support our growth initiatives, competitive factors, banking laws, and other factors.
We may seek to supplement our internal growth through acquisitions. We cannot predict the number, size or timing of acquisitions, or whether any such acquisition will occur at all. Our acquisition efforts have traditionally focused on targeted banking or insurance entities in markets in which we currently operate and markets in which we believe we can compete effectively. However, as consolidation of the financial services industry continues, the competition for suitable acquisition candidates may increase. We may compete with other financial services companies for acquisition opportunities, and many of these competitors have greater financial resources than we do and may be able to pay more for an acquisition than we are able or willing to pay. We also may need additional debt or equity financing in the future to fund acquisitions. We may not be able to obtain additional financing or, if available, it may not be in amounts and on terms acceptable to us. If we are unable to locate suitable acquisition candidates willing to sell on terms acceptable to us, or we are otherwise unable to obtain additional debt or equity financing necessary for us to continue making acquisitions, we would be required to find other methods to grow our business and we may not grow at the same rate we have in the past, or at all.
We must generally receive federal regulatory approval before we can acquire a bank or bank holding company. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on the competition, financial condition, and future prospects. The regulators also review current and projected capital ratios and levels, the competence, experience, and integrity of management and its record of compliance with laws and regulations, the convenience and needs of the communities to be served (including the acquiring institution’s record of compliance under the Community Reinvestment Act) and the effectiveness of the acquiring institution in combating money laundering activities. We cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. We may also be required to sell banks or branches as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.
In addition to the acquisition of existing financial institutions, as opportunities arise we plan to continue de novo branching as a part of our internal growth strategy and possibly entry into new markets through de novo branching. De novo branching and any acquisition carries with it numerous risks, including the following:
the inability to obtain all required regulatory approvals;
significant costs and anticipated operating losses associated with establishing a de novo branch or a new bank;
the inability to secure the services of qualified senior management;
the local market may not accept the services of a new bank owned and managed by a bank holding company headquartered outside of the market area of the new bank;
economic downturns in the new market;
the inability to obtain attractive locations within a new market at a reasonable cost; and
the additional strain on management resources and internal systems and controls.
We have experienced to some extent many of these risks with our de novo branching to date.
We are subject to regulation by various Federal and State entities.
We are subject to the regulations of the Securities and Exchange Commission (“SEC”), the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Mississippi Department of Banking and Consumer Finance, the Louisiana Office of Financial Institutions the Florida Office of Financial Regulation, the Alabama Banking Department and the Mississippi Department of Insurance. New regulations issued by these agencies may adversely affect our ability to carry on our business activities. We are subject to various Federal and State laws and certain changes in these laws and regulations may adversely affect our operations. Noncompliance with certain of these regulations may impact our business plans, including ability to branch, offer certain products, or execute existing or planned business strategies.
We are also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board. Changes in accounting rules could adversely affect the reported financial statements or our results of operations and may also require extraordinary efforts or additional costs to implement. Any of these laws or regulations may be modified or changed from time to time, and we cannot be assured that such modifications or changes will not adversely affect us.
We engage in acquisitions of other businesses from time to time.
On occasion, we will engage in acquisitions of other businesses. Inability to successfully integrate acquired businesses can pose varied risks to us, including customer and employee turnover, thus increasing the cost of operating the new businesses. The acquired companies may also have legal contingencies, beyond those that we are aware of, that could result in unexpected costs. Moreover, there can be no assurance that acquired businesses will achieve prior or planned results of operations.
We are subject to industry competition which may have an impact upon our success.
Our profitability depends on our ability to compete successfully. We operate in a highly competitive financial services environment. Certain competitors are larger and may have more resources than we do. We face competition in our regional market areas from other commercial banks, savings and loan associations, credit unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries that offer similar services. Some of our nonbank competitors are not subject to the same extensive regulations that govern us or the Bank and may have greater flexibility in competing for business.
Another competitive factor is that the financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. Our future success may depend, in part, on our ability to use technology competitively to provide products and services that provide convenience to customers and create additional efficiencies in our operations.
FutureWe may issue debt and equity securities or securities convertible into equity securities, any of which may be senior to our Common Stock as to distributions and in liquidation, which could negatively affect the value of our Common Stock.
In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured or secured by all or up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of additionalsecured or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, preferred stock or securities convertible into or exchangeable for equity securities. In the event of our liquidation, our lenders and holders of our debt and preferred securities would receive a distribution of our available assets before distributions to the holders of our Common Stock. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financings. Further, market conditions could result in dilution of shareholders’ ownership.
We may determine from timerequire us to time to issue additional securities to raise additional capital, support growth, or to make acquisitions. Further, we may issue stock options or other stock grants to retain and motivate our employees. Such issuancesaccept less favorable terms for the issuance of our securities will dilutein the ownership interestsfuture.
Our ability to deliver and pay dividends depends primarily upon the results of operations of our shareholders.subsidiaries.
We are a bank holding company that conducts substantially all of our operations through our subsidiary Banks. As a result, our ability to make dividend payments on our Common Stock will depend primarily upon the receipt of dividends and other distributions from our subsidiaries.
The ability of the Banks to pay dividends or make other payments to us is limited by their obligations to maintain sufficient capital and by other general regulatory restrictions on their dividends. If these requirements are not satisfied, we will be unable to pay dividends on our Common Stock.
Cash available to pay dividends to our shareholders is derived primarily, if not entirely, from dividends paid to us from the Banks. The ability of our subsidiary banks to pay dividends to us as well as our ability to pay dividends to our shareholders is limited by regulatory and legal restrictions and the need to maintain sufficient consolidated capital. We may also decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for use in our business. There can be no assurance of whether or when we may pay dividends in the future.
We and/or the holders of our securities could be adversely affected by unfavorable rating actions from rating agencies.
Our ability to access the capital markets is important to our overall funding profile. This access is affected by the ratings assigned by rating agencies to us, certain of our affiliates and particular classes of securities that we and our affiliates issue. The interest rates that we pay on our securities are also influenced by, among other things, the credit ratings that we, our affiliates and/or our securities receive from recognized rating agencies. A downgrade to us, our affiliates or our securities could create obligations or liabilities to us under the terms of our outstanding securities that could increase our costs or otherwise have a negative effect on our results of operations or financial condition. Additionally, a downgrade of the credit rating of any particular security issued by us or our affiliates could negatively affect the ability of the holders of that security to sell the securities and the prices at which any such securities may be sold.
Anti-takeover lawsprovisions in our amended articles of incorporation and certain agreementsbylaws, Mississippi law, and charter provisionsour Shareholder Rights Plan could make a third party acquisition of us difficult and may adversely affect share value.
CertainOur amended articles of incorporation and bylaws contain provisions that make it more difficult for a third party to acquire us (even if doing so might be beneficial to our stockholders) and for holders of our securities to receive any related takeover premium for their securities. In addition, under our Shareholder Rights Plan, “rights” are issued to all Hancock common shareholders that, if activated upon an attempted unfriendly acquisition, would allow our shareholders to buy our common stock at a reduced price, thereby minimizing the risk of any potential hostile takeover.
We are also subject to certain provisions of state and federal law and our articles of incorporation may make it more difficult for someone to acquire control of us. Under federal law, subject to certain exemptions, a person, entity, or group must notify the federal banking agencies before acquiring 10% or more of the outstanding voting stock of a bank holding company, including our shares. Banking agencies review the acquisition to determine if it will result in a change of control. The banking agencies have 60 days to act on the notice, and take into account several factors, including the resources of the acquirer and the antitrust effects of the acquisition. There also are Mississippi statutory provisions and provisions in our articles of incorporation that may be used to delay or block a takeover attempt. As a result, these statutory provisions and provisions in our articles of incorporation could result in our being less attractive to a potential acquirer.
Securities issued by us, includingacquirer and limit the price that investors might be willing to pay in the future for shares of our common stock,stock.
Governmental responses to recent market disruptions may be inadequate and may have unintended consequences.
In response to recent market disruptions, legislators and financial regulators have taken a number of steps to stabilize the financial markets. These steps include the enactment and partial implementation of the Emergency Economic Stabilization Act of 2008, the provision of other direct and indirect assistance to financial institutions, assistance by the banking authorities in arranging acquisitions of weakened banks and broker-dealers, implementation of programs by the Federal Reserve Board to provide liquidity to the commercial paper markets and expansion of deposit insurance coverage. The administration and Congress have pursued additional initiatives in an effort to stimulate the economy and stabilize the financial markets, including the enactment of the American Recovery and Reinvestment Act of 2010, and have altered the terms of some previously announced policies.
President Obama signed into law the Dodd-Frank Act, which provides for sweeping changes to financial sector regulation and oversight, including new substantive authorities and practices in government regulation and supervision, and a restructuring of the regulatory system, including the creation of new federal agencies, offices, and councils. See “Recent Developments” under “SUPERVISION AND REGULATION” above.
The overall effects of these and other legislative and regulatory efforts on the financial markets are uncertain. Should these or other legislative or regulatory initiatives fail to stabilize the financial markets, the Company’s business, financial condition, results of operations, and prospects could be materially and adversely affected. Moreover, the implementation of the Dodd-Frank Act will likely result in significant changes to the banking industry as a whole which, depending on how its provisions are implemented by the agencies, could adversely affect the Company’s business.
In addition, the Company competes with a number of financial services companies that are not subject to the same degree of regulatory oversight to which the Company is subject. The impact of the existing regulatory framework and any future changes to it could negatively affect the Company’s ability to compete with these institutions, which could have a material and adverse effect on the Company’s results of operations and prospects.
The FDIC insured.has increased insurance premiums to rebuild and maintain the Federal Deposit Insurance Fund.
Securities issued by us, including our common stock, are not savings or deposit accounts or other obligations of any bank and are not insured byIn December 2008 the FDIC adopted a restoration plan designed to replenish the BankDeposit Insurance Fund or any other governmental agency or instrumentality, or any private insurer,over a period of five years and to increase the deposit insurance reserve ratio, which had decreased to 1.01% of insured deposits on June 30, 2008, to the statutory minimum of 1.15% of insured deposits by December 31, 2013. In order to implement the restoration plan, the FDIC changed both its risk-based assessment system and its base assessment rates.
The Dodd-Frank Act changed the method of calculation for FDIC insurance assessments. Under the previous system, the assessment base was domestic deposits minus a few allowable exclusions, such as pass-through reserve balances. Under the Dodd-Frank Act, assessments are subject to investment risk, includingbe calculated based on the possible lossdepository institution’s average consolidated total assets, less its average amount of principal.tangible equity. For more information regarding the implementation of the Dodd-Frank Act provisions, see the section on “Bank Regulation” in the earlier discussion of “Supervision and Regulation” in Item 1.
UNRESOLVED STAFF COMMENTS |
None.
PROPERTIES |
OurThe Company’s main office, which is the holding company and Hancock Bank headquarters, is located at One Hancock Plaza, in Gulfport, Mississippi. The Whitney Bank main office is located in downtown New Orleans, Louisiana. The Banks make portions of its main office facilities and certain other facilities available for lease to third parties, although such incidental leasing activity is not material to the Company’s overall operations.
We operate 157The Company operates over 300 full service banking and financial services offices and 137almost 400 automated teller machines across south Mississippi, Louisiana, southSouth Alabama, Florida and Texas. The Company owns approximately 41% of these facilities, and the Florida Panhandle. We lease 68remaining banking facilities are subject to leases, each of which management considers reasonable and appropriate for its location. Management ensures that all properties, whether owned or leased, are maintained in suitable condition. Management also evaluates its banking facilities on an ongoing basis to identify possible under-utilization and to determine the need for functional improvements, relocations, or possible sales.
The Banks and subsidiaries of the 157 locations with the remainder being owned. In addition, Hancock Bank MS owns land and other propertiesBanks hold a variety of property interests acquired through foreclosuresthe years in settlement of loan collateral. The major item is approximately 3,700 acres of timber land in Hancock County, Mississippi, which Hancock Bank MS acquired by foreclosure in the 1930’s.loans.
LEGAL PROCEEDINGS |
We areOn January 7, 2011, a shareholder of Whitney filed a lawsuit in the Civil District Court for the Parish of Orleans of the State of Louisiana captionedDe LaPouyade v. Whitney Holding Corporation, et al., No. 11-189, naming Whitney and members of Whitney’s board of directors as defendants. This lawsuit is purportedly brought on behalf of a putative class of Whitney’s common shareholders and seeks a declaration that it is properly maintainable as a class action. The lawsuit alleges that Whitney’s directors breached their fiduciary duties and/or violated Louisiana state law and that Whitney aided and abetted those alleged breaches of fiduciary duty by, among other things, (a) agreeing to consideration that undervalues Whitney, (b) agreeing to deal protection devices that preclude a fair sales process, (c) engaging in self-dealing, and (d) failing to protect against conflicts of interest. Among other relief, the plaintiff sought to enjoin the merger. The parties have reached a settlement in principle.
On February 17, 2011, a complaint in intervention was filed by the Louisiana Municipal Police Employees Retirement System (“MPERS”) in theDe LaPouyade case. The MPERS complaint is substantially identical to and seeks to join in theDe LaPouyade complaint. The parties have reached a settlement in principle.
On February 7, 2011, another putative shareholder class action lawsuit,Realistic Partners v. Whitney Holding Corporation, et al., Case No. 2:11-cv-00256, was filed in the United States District Court for the Eastern District of Louisiana against Whitney, members of Whitney’s board of directors, and Hancock asserting violations of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty under Louisiana state law, and aiding and abetting breach of fiduciary duty by, among other things, (a) making material misstatements or omissions in the proxy statement, (b) agreeing to consideration that undervalues Whitney, (c) agreeing to deal protection devices that preclude a fair sales process, (d) engaging in self-dealing, and (e) failing to protect against conflicts of interest. Among other relief, the plaintiff sought to enjoin the merger. On February 24, 2011, the plaintiff moved for class certification. The parties have reached a settlement in principle.
On April 11, 2011, another putative shareholder class action lawsuit,Jane Doe v. Whitney Holding Corporation, et al., Case No. 2:11-cv-00794-ILRL-JCW, was filed in the United States District Court for the Eastern District of Louisiana against Whitney, members of Whitney’s board of directors, and the defendants’ insurance carrier asserting breach of fiduciary duty under Louisiana state law by, among other things, (a) agreeing to consideration that undervalues Whitney, (b) agreeing to deal protection devices that preclude a fair sales process, (c) engaging in self-dealing, and (d) failing to protect against conflicts of interest. Among other relief, the plaintiff sought to enjoin the merger. On April 20, 2011, this case was consolidated with theRealistic Partners case. The parties have reached a settlement in principle.
Whitney Bank is a defendant in a class action lawsuit (Angelique LaCour v. Whitney Bank, D. (M.D. Fla.)) alleging that it improperly assessed overdraft fees on consumer and business deposit accounts owned by persons and entities that maintained those accounts, within the class period, at Whitney National Bank, or any of the entities that it acquired during the class period before its merger with Hancock Bank of Louisiana, due to the order in which it posted or processed debit card transactions against such deposit accounts. Plaintiff alleges that these posting practices resulted in excessive overdraft fees being imposed by the Company. While the Company admits no wrong doing, in order to fully and finally resolve the litigation and avoid the significant costs and expenses that would be involved in defending the case as well as the distraction caused by the litigation, Whitney Bank has entered into an agreement in principal whereby Whitney would pay the sum of $6.8 million in exchange for a full and complete release of all claims brought in the pending action. The proposed settlement is contingent on several factors, including final court approval and sufficient class participation. The Company establishes a liability for contingent litigation losses for any legal matter when payments associated with the claims become probable and the costs can be reasonably estimated. The Company accrued for the proposed settlement in the 4th quarter of 2011.
The Company is party to various other legal proceedings arising in the ordinary course of business. InBased on current knowledge, management does not believe that loss contingencies, if any, arising from other pending litigation and regulatory matters, including the opinion of management, after consultation with legal counsel, each matter is adequately covered by insurance or, if not so covered, is not expected tolitigation matters described above, will have a material adverse effect on ourthe consolidated financial statements.position or liquidity of the Company.
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There were no matters submitted to a vote of security holders during the quarter ended December 31, 2008.Not applicable.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 5. | MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
OurThe Company’s common stock trades on the NASDAQ StockGlobal Select Market under the ticker symbol “HBHC” and is quoted in publications under “HancHd.”. The following table sets forth the high and low sale prices of our common stock as reported on the NASDAQ Stock Market. These prices do not reflect retail mark-ups, mark-downs or commissions.
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| High |
| Low |
| Cash |
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2008 |
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| 4th quarter |
| $ | 56.45 |
| $ | 34.20 |
| $ | 0.240 |
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| 3rd quarter |
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| 68.42 |
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| 33.34 |
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| 0.240 |
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| 2nd quarter |
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| 45.68 |
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| 38.38 |
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| 0.240 |
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| 1st quarter |
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| 44.29 |
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| 33.45 |
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| 0.240 |
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2007 |
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| 4th quarter |
| $ | 43.47 |
| $ | 33.35 |
| $ | 0.240 |
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| 3rd quarter |
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| 43.90 |
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| 32.78 |
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| 0.240 |
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| 2nd quarter |
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| 44.37 |
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| 37.50 |
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| 0.240 |
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| 1st quarter |
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| 54.09 |
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| 41.88 |
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| 0.240 |
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There were 5,855 registered holders and approximately 10,277 unregistered holders of common stock of the Company at February 2, 2008 and 31,802,848 shares issued. On February 2, 2008, the high and low sale prices of the Company’s common stock as reported on the NASDAQ StockGlobal Select Market. These prices do not reflect retail mark-ups, mark-downs or commissions.
High Sale | Low Sale | Cash Dividends Paid | ||||||||||
2011 | ||||||||||||
4th quarter | $ | 33.72 | $ | 25.38 | $ | 0.24 | ||||||
3rd quarter | 33.25 | 25.61 | 0.24 | |||||||||
2nd quarter | 34.57 | 30.04 | 0.24 | |||||||||
1st quarter | 35.68 | 30.67 | 0.24 | |||||||||
2010 | ||||||||||||
4th quarter | $ | 37.26 | $ | 28.88 | $ | 0.24 | ||||||
3rd quarter | 35.40 | 26.82 | 0.24 | |||||||||
2nd quarter | 43.90 | 33.27 | 0.24 | |||||||||
1st quarter | 45.86 | 38.23 | 0.24 |
There were 10,814 registered shareholders and approximately 42,000 beneficial holders of the Company’s common stock at February 1, 2012 and 84,749,038 shares outstanding. On February 1, 2012, the high and low sale prices of the Company’s common stock as reported on the NASDAQ Global Select Market were $27.88$34.22 and $27.00,$33.33, respectively.
The principal source of funds to the Company to pay cash dividends is the dividends received from Hancock Bank, Gulfport, Mississippi, Hancockand Whitney Bank, of Louisiana, Baton Rouge, Louisiana, Hancock Bank of Alabama, Mobile, Alabama, and Hancock Bank of Florida, Tallahassee, Florida.New Orleans, Louisiana. Consequently, dividends are dependent upon earnings, capital needs, regulatory policies and statutory limitations affecting the banks. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. Dividends paid to the Company by Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi and those paid by HancockWhitney Bank of Louisiana are subject to approval by the Commissioner for Financial Institutions of the State of Louisiana. Dividends paid by Hancock Bank of Florida are subject to approval by the Florida Department of Financial Services. The Company’s management does not expect regulatory restrictions to affect its policy of paying cash dividends. Although no assurance can be given that Hancock Holding Company will continue to declare and pay regular quarterly cash dividends on its common stock, the Company has paid regular cash dividends since 1937.
Stock Performance Graph
The following is a lineperformance graph presentation comparingand related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent the Company specifically incorporates it by reference into such filing.
The performance graph compares the cumulative five-year shareholder returnsreturn on the Company’s common stock, assuming an indexed basis with a performance indicatorinvestment of $100 on December 31, 2006 and the reinvestment of dividends thereafter, to that of the overallcommon stocks of United States companies reported in the Nasdaq Total Return Index and the common stocks of the KBW Regional Banks Total Return Index. The KBW Regional Banks Total Return Index is a proprietary stock market and an index of peerKeefe, Bruyette & Woods, Inc., that tracks the returns of 50 regional banking companies selected by us. The broad market index used inthroughout the graph is the NASDAQ Market Index. The peer group index is a group of financial institutions in the southeast that are similar in asset size and business strategy; a list of the Companies included in the index follows the graph.United States.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURNAMONG HANCOCK HOLDING CO.,NASDAQ MARKET INDEX AND PEER GROUP INDEX
ASSUMES $100 INVESTED ON DEC. 31, 2003ASSUMES DIVIDEND REINVESTEDFISCAL YEAR ENDING DEC. 31, 2008
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Issuer Purchases of Equity Securities
The following table provides information with respect to purchases madeThere are a maximum of 2,982,700 shares that may be purchased under the buy-back program approved in 2007. No shares were purchased by the issuer or any affiliated purchaser of the issuer’s equity securities.in 2011.
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| (a) |
| (b) |
| (c) |
| (d) |
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Oct. 1, 2008 - Oct. 31, 2008 |
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| — |
| $ | — |
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| — |
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| 2,989,158 |
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Nov. 1, 2008 - Nov. 30, 2008 |
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| — |
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| — |
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| — |
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| 2,989,158 |
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Dec.1, 2008 - Dec. 31, 2008 |
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| 6,458 |
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| 40.26 |
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| 6,458 |
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| 2,982,700 |
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Total |
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| 6,458 |
| $ | 40.26 |
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| 6,458 |
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Equity Compensation Plan Information
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Plan Category |
| Number of securities to |
| Weighted-average |
| Number of securities remaining |
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Equity compensation plans approved by security holders |
| $ | 1,268,150 |
| $ | 26.98 |
| $ | 4,572,802 |
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Equity compensation plans not approved by security holders |
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| — |
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| — |
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| — |
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Total |
| $ | 1,268,150 |
| $ | 26.98 |
| $ | 4,572,802 |
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Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by security holders | 1,059,436 | $ | 37.93 | 4,384,108 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 1,059,436 | $ | 37.93 | 4,384,108 |
(1) | The total shown in column (a) does not include securities to be issued upon the exercise of options that were assumed by the Company in the acquisition of Whitney Holding Corporation. At December 31, 2011, 403,319 Whitney options were outstanding with a weighted-average exercise price of $61.83. |
SELECTED FINANCIAL DATA |
The following tables set forth certain selected historical consolidated financial data and should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated Financial Statements and Notes thereto included elsewhere herein. The following information may not be deemed indicative of our future operating results.
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| At and For the Years Ended December 31, |
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| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
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| (Unaudited, in thousands) |
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Period-End Balance Sheet Data: |
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Securities |
| $ | 1,681,957 |
| $ | 1,670,208 |
| $ | 1,895,157 |
| $ | 1,953,245 |
| $ | 1,294,697 |
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Short-term investments |
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| 549,416 |
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| 126,281 |
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| 222,439 |
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| 410,226 |
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| 150,261 |
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Loans held for sale |
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| 22,115 |
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| 18,957 |
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| 16,946 |
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| 24,219 |
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| 30,129 |
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Loans, net of unearned income |
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| 4,249,465 |
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| 3,596,557 |
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| 3,249,638 |
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| 2,964,967 |
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| 2,718,431 |
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Total earning assets |
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| 6,502,953 |
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| 5,412,003 |
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| 5,384,180 |
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| 5,352,657 |
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| 4,193,519 |
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Allowance for loan losses |
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| 61,725 |
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| 47,123 |
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| 46,772 |
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| 74,558 |
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| 40,682 |
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Total assets |
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| 7,167,254 |
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| 6,055,979 |
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| 5,964,565 |
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| 5,950,187 |
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| 4,664,726 |
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Total deposits |
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| 5,930,937 |
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| 5,009,534 |
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| 5,030,991 |
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| 4,989,820 |
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| 3,797,945 |
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Total common stockholders’ equity |
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| 609,499 |
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| 554,187 |
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| 558,410 |
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| 477,415 |
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| 464,582 |
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Average Balance Sheet Data: |
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Securities |
| $ | 1,743,998 |
| $ | 1,726,714 |
| $ | 2,222,114 |
| $ | 1,426,461 |
| $ | 1,337,324 |
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Short-term investments |
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| 175,891 |
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| 117,158 |
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| 211,511 |
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| 137,821 |
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| 34,911 |
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Loans, net of unearned income |
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| 3,873,908 |
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| 3,428,009 |
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| 3,062,222 |
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| 2,883,020 |
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| 2,599,561 |
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Total earning assets |
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| 5,793,797 |
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| 5,271,881 |
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| 5,495,847 |
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| 4,447,302 |
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| 3,971,796 |
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Allowance for loan losses |
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| 53,354 |
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| 46,443 |
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| 64,285 |
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| 50,107 |
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| 38,117 |
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Total assets |
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| 6,426,389 |
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| 5,851,889 |
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| 6,031,800 |
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| 4,931,030 |
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| 4,424,334 |
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Total deposits |
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| 5,182,407 |
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| 4,929,176 |
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| 5,069,427 |
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| 4,001,426 |
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| 3,602,734 |
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Total common stockholders’ equity |
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| 584,805 |
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| 562,383 |
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| 513,656 |
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| 475,701 |
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| 447,384 |
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| At and For the Years Ended December 31, |
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| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
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| (Unaudited, in thousands) |
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Key Ratios: |
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Return on average assets |
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| 1.02 | % |
| 1.26 | % |
| 1.69 | % |
| 1.10 | % |
| 1.39 | % |
Return on average common equity |
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| 11.18 | % |
| 13.14 | % |
| 19.82 | % |
| 11.36 | % |
| 13.79 | % |
Net interest margin (te)* |
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| 3.80 | % |
| 4.08 | % |
| 4.23 | % |
| 4.40 | % |
| 4.44 | % |
Average loans to average deposits |
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| 74.75 | % |
| 69.55 | % |
| 60.41 | % |
| 72.05 | % |
| 72.16 | % |
Noninterest income excluding storm-related insurance gain, gain on sale of branches and credit card merchant, and securities transactions, as a percent of total revenue (te) |
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| 35.86 | % |
| 35.89 | % |
| 31.44 | % |
| 32.38 | % |
| 33.78 | % |
Noninterest expense as a percent of total revenue (te) before amortization of purchased intangibles, storm-related insurance gain, gains on sale of branches and credit card merchant, and securities transactions |
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| 61.84 | % |
| 64.13 | % |
| 59.28 | % |
| 59.08 | % |
| 59.27 | % |
Allowance for loan losses to period-end loans |
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| 1.45 | % |
| 1.31 | % |
| 1.44 | % |
| 2.51 | % |
| 1.50 | % |
Non-performing assets to loans plus other real estate |
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| 0.83 | % |
| 0.43 | % |
| 0.13 | % |
| 0.42 | % |
| 0.40 | % |
Allowance for loan losses to non-performing loans and accruing loans 90 days past due |
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| 133.16 | % |
| 241.43 | % |
| 694.67 | % |
| 195.50 | % |
| 251.85 | % |
Net charge-offs to average loans |
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| 0.57 | % |
| 0.21 | % |
| 0.23 | % |
| 0.30 | % |
| 0.48 | % |
FTE employees (period-end) |
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| 1,952 |
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| 1,888 |
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| 1,848 |
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| 1,735 |
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| 1,767 |
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Common stockholders’ equity to total assets |
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| 8.50 | % |
| 9.15 | % |
| 9.36 | % |
| 8.02 | % |
| 9.96 | % |
Tangible common equity to total assets |
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| 7.62 | % |
| 8.08 | % |
| 8.24 | % |
| 6.89 | % |
| 8.58 | % |
Tier 1 leverage |
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| 8.06 | % |
| 8.51 | % |
| 8.63 | % |
| 7.85 | % |
| 8.97 | % |
Tier 1 risk-based |
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| 10.09 | % |
| 11.03 | % |
| 12.46 | % |
| 11.47 | % |
| 12.39 | % |
Total risk-based |
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| 11.22 | % |
| 12.07 | % |
| 13.60 | % |
| 12.73 | % |
| 13.58 | % |
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Income Data: |
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Interest income |
| $ | 335,437 |
| $ | 345,697 |
| $ | 344,063 |
| $ | 263,378 |
| $ | 226,622 |
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Interest expense |
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| 126,002 |
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| 140,236 |
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| 119,863 |
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| 74,819 |
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| 57,270 |
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Net interest income |
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| 209,435 |
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| 205,461 |
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| 224,200 |
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| 188,559 |
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| 169,352 |
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Net interest income (te) |
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| 219,889 |
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| 215,000 |
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| 232,463 |
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| 195,936 |
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| 176,626 |
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Provision for (reversal of) loan losses |
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| 36,785 |
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| 7,593 |
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| (20,762 | ) |
| 42,635 |
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| 16,537 |
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Noninterest income excluding storm-related insurance gain, gains on sale of branches and credit card merchant and securities transactions |
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| 122,953 |
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| 120,378 |
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| 106,585 |
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| 93,840 |
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| 90,116 |
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Net storm-related items |
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| — |
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| — |
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| 5,084 |
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| 6,584 |
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| — |
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Gains/(losses) on sales of securities, net |
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| 4,825 |
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| 308 |
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| (5,169 | ) |
| (53 | ) |
| 163 |
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Gains on sales of branches |
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| — |
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| — |
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| — |
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| — |
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| 2,258 |
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Gain on sale of credit card merchant services business |
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| — |
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| — |
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| — |
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| — |
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| 3,000 |
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Noninterest expense excluding amortization of intangibles |
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| 212,011 |
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| 215,092 |
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| 200,991 |
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| 171,197 |
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| 158,109 |
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Amortization of intangibles |
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| 1,432 |
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| 1,651 |
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| 2,125 |
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| 2,194 |
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| 1,945 |
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Net income before income taxes |
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| 86,985 |
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| 101,811 |
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| 148,346 |
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| 72,903 |
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| 88,297 |
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Net income |
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| 65,366 |
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| 73,892 |
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| 101,802 |
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| 54,032 |
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| 61,704 |
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Net income available to common stockholders |
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| 65,366 |
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| 73,892 |
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| 101,802 |
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| 54,032 |
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| 61,704 |
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* Tax Equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.
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| At and For the Years Ended December 31, |
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| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
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Per Common Share Data: |
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Basic earnings per share |
| $ | 2.08 |
| $ | 2.31 |
| $ | 3.13 |
| $ | 1.67 |
| $ | 1.91 |
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Diluted earnings per share |
| $ | 2.05 |
| $ | 2.27 |
| $ | 3.06 |
| $ | 1.64 |
| $ | 1.87 |
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Cash dividends paid |
| $ | 0.960 |
| $ | 0.960 |
| $ | 0.895 |
| $ | 0.72 |
| $ | 0.58 |
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Book value |
| $ | 19.18 |
| $ | 17.71 |
| $ | 17.09 |
| $ | 14.78 |
| $ | 14.32 |
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Dividend payout ratio |
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| 46.15 | % |
| 41.56 | % |
| 28.59 | % |
| 43.11 | % |
| 30.37 | % |
Weighted average number of shares outstanding |
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Basic |
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| 31,491 |
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| 32,000 |
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| 32,534 |
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| 32,365 |
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| 32,390 |
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Diluted |
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| 31,883 |
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| 32,545 |
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| 33,304 |
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| 32,966 |
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| 33,052 |
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Number of shares outstanding (period end) |
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| 31,770 |
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| 31,295 |
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| 32,666 |
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| 32,301 |
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| 32,440 |
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Market data: |
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High closing price |
| $ | 68.42 |
| $ | 54.09 |
| $ | 57.19 |
| $ | 39.90 |
| $ | 34.83 |
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Low closing price |
| $ | 33.34 |
| $ | 32.78 |
| $ | 37.75 |
| $ | 28.25 |
| $ | 25.00 |
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Period-end closing price |
| $ | 45.46 |
| $ | 38.20 |
| $ | 52.84 |
| $ | 37.81 |
| $ | 33.46 |
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Trading volume |
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| 73,843 |
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| 48,169 |
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| 27,275 |
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| 22,404 |
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| 11,572 |
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At and For the Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Period-End Balance Sheet Data: | ||||||||||||||||||||
Loans, net of unearned income | $ | 11,177,026 | $ | 4,957,164 | $ | 5,114,175 | $ | 4,249,290 | $ | 3,596,557 | ||||||||||
Loans held for sale | 72,378 | 21,866 | 36,112 | 22,290 | 18,957 | |||||||||||||||
Securities | 4,496,900 | 1,488,885 | 1,611,327 | 1,680,096 | 1,668,583 | |||||||||||||||
Short-term investments | 1,184,419 | 639,164 | 797,262 | 549,416 | 126,281 | |||||||||||||||
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Total earning assets | 16,930,723 | 7,107,079 | 7,558,876 | 6,501,092 | 5,410,378 | |||||||||||||||
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Allowance for loan losses | 124,881 | 81,997 | 66,050 | 61,725 | 47,123 | |||||||||||||||
Other assets | 2,968,254 | 1,113,245 | 1,204,257 | 727,887 | 692,724 | |||||||||||||||
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Total assets | 19,774,096 | 8,138,327 | 8,697,083 | 7,167,254 | 6,055,979 | |||||||||||||||
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Noninterest bearing deposits | 5,516,336 | 1,127,246 | 1,073,341 | 962,886 | 907,874 | |||||||||||||||
Interest bearing deposits | 10,197,243 | 5,648,473 | 6,122,471 | 4,968,051 | 4,101,660 | |||||||||||||||
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Total deposits | 15,713,579 | 6,775,719 | 7,195,812 | 5,930,937 | 5,009,534 | |||||||||||||||
Other borrowed funds | 1,415,694 | 388,352 | 516,183 | 506,570 | 376,497 | |||||||||||||||
Other liabilities | 277,660 | 117,708 | 147,425 | 120,248 | 115,761 | |||||||||||||||
Common stockholders’ equity | 2,367,163 | 856,548 | 837,663 | 609,499 | 554,187 | |||||||||||||||
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| |||||||||||
Total liabilities & common stockholders’ equity | $ | 19,774,096 | $ | 8,138,327 | $ | 8,697,083 | $ | 7,167,254 | $ | 6,055,979 | ||||||||||
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Average Balance Sheet Data: | ||||||||||||||||||||
Loans, net of unearned income | $ | 8,514,021 | $ | 5,005,753 | $ | 4,310,120 | $ | 3,873,908 | $ | 3,428,009 | ||||||||||
Securities | 3,074,373 | 1,559,019 | 1,559,570 | 1,742,130 | 1,725,895 | |||||||||||||||
Short-term investments | 955,325 | 698,042 | 497,048 | 175,891 | 117,158 | |||||||||||||||
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Total earning assets | 12,543,719 | 7,262,814 | 6,366,738 | 5,791,929 | 5,271,062 | |||||||||||||||
Allowance for loan losses | 102,784 | 73,190 | 63,450 | 53,354 | 46,443 | |||||||||||||||
Other assets | 2,281,136 | 1,236,610 | 796,479 | 687,814 | 627,270 | |||||||||||||||
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Total assets | 14,722,071 | 8,426,234 | 7,099,767 | 6,426,389 | 5,851,889 | |||||||||||||||
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Noninterest bearing deposits | 3,400,064 | 1,076,829 | 935,985 | 876,669 | 927,656 | |||||||||||||||
Interest bearing deposits | 8,316,489 | 5,840,669 | 4,761,614 | 4,305,738 | 4,001,520 | |||||||||||||||
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| |||||||||||
Total deposits | 11,716,553 | 6,917,498 | 5,697,599 | 5,182,407 | 4,929,176 | |||||||||||||||
Other borrowed funds | 1,000,998 | 515,626 | 613,523 | 554,898 | 228,010 | |||||||||||||||
Other liabilities | 203,403 | 127,400 | 114,270 | 104,279 | 132,320 | |||||||||||||||
Common stockholders’ equity | 1,801,117 | 865,710 | 674,375 | 584,805 | 562,383 | |||||||||||||||
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Total liabilities & common stockholders’ equity | $ | 14,722,071 | $ | 8,426,234 | $ | 7,099,767 | $ | 6,426,389 | $ | 5,851,889 | ||||||||||
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At and For the Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Performance Ratios: | ||||||||||||||||||||
Return on average assets | 0.52 | % | 0.62 | % | 1.05 | % | 1.02 | % | 1.26 | % | ||||||||||
Return on average assets—operating (a) | 0.90 | % | 0.64 | % | 0.79 | % | 0.97 | % | 1.26 | % | ||||||||||
Return on average common equity | 4.26 | % | 6.03 | % | 11.09 | % | 11.18 | % | 13.14 | % | ||||||||||
Return on average common equity—operating (a) | 7.40 | % | 6.27 | % | 8.36 | % | 10.64 | % | 13.10 | % | ||||||||||
Earning asset yield (tax equivalent—te) | 4.83 | % | 5.01 | % | 5.27 | % | 5.97 | % | 6.74 | % | ||||||||||
Total cost of funds | 0.57 | % | 1.13 | % | 1.50 | % | 2.17 | % | 2.66 | % | ||||||||||
Net interest margin(te) | 4.25 | % | 3.88 | % | 3.78 | % | 3.80 | % | 4.08 | % | ||||||||||
Noninterest income excluding bargain purchase gain on acquisition and securities transactions as a percent of total revenue(te) | 27.91 | % | 32.69 | % | 33.95 | % | 35.86 | % | 35.89 | % | ||||||||||
Efficiency ratio (a) | 66.35 | % | 65.24 | % | 62.71 | % | 61.84 | % | 64.13 | % | ||||||||||
Average loan/deposit ratio | 72.67 | % | 72.36 | % | 75.65 | % | 74.75 | % | 69.55 | % | ||||||||||
FTE employees (period-end) | 4,745 | 2,271 | 2,240 | 1,952 | 1,888 | |||||||||||||||
Capital Ratios: | ||||||||||||||||||||
Common stockholders’ equity to total assets | 11.97 | % | 10.52 | % | 9.63 | % | 8.50 | % | 9.15 | % | ||||||||||
Tangible common equity to total assets | 7.96 | % | 9.69 | % | 8.81 | % | 7.62 | % | 8.08 | % | ||||||||||
Tier 1 leverage (b) | 8.17 | % | 9.65 | % | 10.60 | % | 8.06 | % | 8.51 | % | ||||||||||
Asset Quality Information: | ||||||||||||||||||||
Non-accrual loans | $ | 99,128 | $ | 112,274 | $ | 86,555 | $ | 29,976 | $ | 13,067 | ||||||||||
Restructured loans (c) | 18,145 | 12,641 | — | — | — | |||||||||||||||
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Total non-performing loans | 117,273 | 124,915 | 86,555 | 29,976 | 13,067 | |||||||||||||||
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Foreclosed assets | 159,751 | 33,277 | 14,336 | 5,360 | 2,297 | |||||||||||||||
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Total non-performing assets | $ | 277,024 | $ | 158,192 | $ | 100,891 | $ | 35,336 | $ | 15,364 | ||||||||||
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Non-performing assets to loans plus other real estate | 2.44 | % | 3.17 | % | 1.97 | % | 0.83 | % | 0.43 | % | ||||||||||
Accruing loans 90 days past due (d) | $ | 5,880 | $ | 1,492 | $ | 11,647 | $ | 11,005 | $ | 4,154 | ||||||||||
Accruing loans 90 days past due as a percent of loans | 0.05 | % | 0.03 | % | 0.23 | % | 0.26 | % | 0.11 | % | ||||||||||
Non-performing assets + accruing loans 90 days past due to loans and foreclosed assets | 2.50 | % | 3.19 | % | 2.19 | % | 1.09 | % | 0.54 | % | ||||||||||
Net charge-offs—non-covered | $ | 33,804 | $ | 50,682 | $ | 50,265 | $ | 22,183 | $ | 7,242 | ||||||||||
Net charge-offs—covered | $ | 11,475 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Net charge-offs—non-covered to average loans | 0.40 | % | 1.01 | % | 1.17 | % | 0.57 | % | 0.21 | % | ||||||||||
Allowance for loan losses | $ | 124,881 | $ | 81,997 | $ | 66,050 | $ | 61,725 | $ | 47,123 | ||||||||||
Allowance for loan losses to period-end loans | 1.12 | % | 1.65 | % | 1.29 | % | 1.45 | % | 1.31 | % | ||||||||||
Allowance for loan losses to non-performing loans and accruing loans 90 days past due | 101.00 | % | 51.35 | % | 58.69 | % | 133.16 | % | 241.43 | % |
(a) | Excludes tax-effected merger related expenses, bargain purchase gain on acquisition and securities transactions. The efficiency ratio also excludes amortization of purchased intangibles. |
(b) | Calculated as Tier 1 capital divided by average total assets. |
(c) | Included in restructured loans are $4.1 million and $8.7 million of non-accrual loans at December 31, 2011 and December 31, 2010, respectively. |
(d) | Non-accrual loans and accruing loans past due 90 days or more do not include purchased impaired loans which were written down to their fair value upon acquisition and accrete interest income over the remaining life of the loan. |
At and For the Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(dollar amounts in thousands) | ||||||||||||||||||||
Supplemental Asset Quality Information (excluding covered assets and acquired loans) (1) | ||||||||||||||||||||
Non-accrual loans (2) (3) | $ | 79,164 | $ | 66,988 | $ | 30,978 | $ | 29,976 | $ | 13,067 | ||||||||||
Restructured loans | 18,145 | 12,641 | — | — | — | |||||||||||||||
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Total non-performing loans | 97,309 | 79,629 | 30,978 | 29,976 | 13,067 | |||||||||||||||
Foreclosed assets (4) | 115,769 | 17,595 | 14,336 | 5,360 | 2,297 | |||||||||||||||
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Total non-performing assets | $ | 213,078 | $ | 97,224 | $ | 45,314 | $ | 35,336 | $ | 15,364 | ||||||||||
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Non-performing assets as a percent of loans and foreclosed assets | 4.26 | % | 2.33 | % | 1.08 | % | 0.83 | % | 0.43 | % | ||||||||||
Accruing loans 90 days past due | $ | 4,871 | $ | 1,492 | $ | 11,647 | $ | 11,005 | $ | 4,154 | ||||||||||
Accruing loans 90 days past due as a percent of loans | 0.10 | % | 0.04 | % | 0.23 | % | 0.26 | % | 0.11 | % | ||||||||||
Non-performing assets + accruing loans 90 days past due to loans and foreclosed assets | 4.36 | % | 2.37 | % | 1.36 | % | 1.09 | % | 0.54 | % | ||||||||||
Allowance for loan losses (5) | $ | 83,246 | $ | 81,325 | $ | 66,050 | $ | 61,725 | $ | 47,123 | ||||||||||
Allowance for loan losses as a percent of period-end loans | 1.70 | % | 1.96 | % | 1.29 | % | 1.45 | % | 1.31 | % | ||||||||||
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due | 81.47 | % | 100.25 | % | 154.96 | % | 150.62 | % | 273.64 | % |
(1) | Covered and acquired loans are considered to be performing due to the application of the accretion method under acquisition accounting. Acquired loans are recorded at fair value with no allowance brought forward in accordance with acquisition accounting. Certain acquired loans and foreclosed assets are also covered under FDIC loss sharing agreements, which provide considerable protection against credit risk. Due to the protection of loss sharing agreements and the impact of acquisition accounting, management has excluded acquired loans and covered assets from this table to provide comparability to prior periods and better perspective into asset quality trends. |
(2) | Excludes acquired covered loans not accounted for under the accretion method of $18,846, $45,286 and $55,577 for the years 2011, 2010 and 2009. These loans are accounted for under the cost recovery method. There were no acquired covered loans in 2008 or 2007. |
(3) | Excludes non-covered acquired loans at fair value not accounted for under the accretion method of $1,117 for the year ended December 31, 2011. There were no non-covered acquired loans in earlier periods. |
(4) | Excludes covered foreclosed assets of $43,982 and $15,682 for 2011 and 2010, respectively. There were no covered foreclosed assets in earlier periods. On June 4, 2011 Hancock acquired $87,895 of foreclosed assets in the Whitney merger. |
(5) | Excludes impairment recorded on covered acquired loans of $41,634 and $672 in 2011 and 2010. There was no impairment recorded on covered acquired loans in earlier periods. |
At and For the Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Income Statement: | ||||||||||||||||||||
Interest income | $ | 592,204 | $ | 352,558 | $ | 323,727 | $ | 335,437 | $ | 345,697 | ||||||||||
Interest income (TE) | 604,130 | 364,385 | 335,787 | 345,891 | 355,236 | |||||||||||||||
Interest expense | 70,971 | 82,345 | 95,300 | 126,002 | 140,236 | |||||||||||||||
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| |||||||||||
Net interest income (TE) | 533,159 | 282,040 | 240,487 | 219,889 | 215,000 | |||||||||||||||
Provision for loan losses | 38,732 | 65,991 | 54,590 | 36,785 | 7,593 | |||||||||||||||
Noninterest income excluding securities transactions | 206,426 | 136,949 | 157,258 | 122,953 | 120,378 | |||||||||||||||
Securities transactions gains/(losses) | (91 | ) | — | 69 | 4,825 | 308 | ||||||||||||||
Noninterest expense excluding amortization of intangibles | 577,463 | 276,532 | 232,053 | 212,011 | 215,092 | |||||||||||||||
Amortization of intangibles | 16,551 | 2,728 | 1,417 | 1,432 | 1,651 | |||||||||||||||
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Income before income taxes | 94,823 | 61,911 | 97,694 | 86,985 | 101,811 | |||||||||||||||
Income tax expense | 18,064 | 9,705 | 22,919 | 21,619 | 27,919 | |||||||||||||||
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Net income | $ | 76,759 | $ | 52,206 | $ | 74,775 | $ | 65,366 | $ | 73,892 | ||||||||||
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Bargain purchase gain | — | — | (33,623 | ) | — | — | ||||||||||||||
Merger-related expenses | 86,762 | 3,167 | 3,682 | — | — | |||||||||||||||
Securities transactions gains/(losses) | (91 | ) | — | 69 | 4,825 | 308 | ||||||||||||||
Taxes on adjustments | 30,398 | 1,108 | (11,587 | ) | (1,689 | ) | (108 | ) | ||||||||||||
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Operating income (a) | $ | 133,214 | $ | 54,265 | $ | 56,352 | $ | 62,230 | $ | 73,692 | ||||||||||
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(a) | Net income less tax-effected merger costs, bargain purchase gain on acquisition and securities gains/losses. Management believes that this a useful financial measure because it enables investors to assess ongoing operations. |
At and For the Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Common Share Data: | ||||||||||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic earnings per share | $ | 1.16 | $ | 1.41 | $ | 2.28 | $ | 2.07 | $ | 2.30 | ||||||||||
Diluted earnings per share | 1.15 | 1.40 | 2.26 | 2.04 | 2.26 | |||||||||||||||
Operating earnings per share: (a) | ||||||||||||||||||||
Basic operating earnings per share | $ | 2.03 | $ | 1.47 | $ | 1.72 | $ | 1.98 | $ | 2.30 | ||||||||||
Diluted operating earnings per share | 2.02 | 1.46 | 1.71 | 1.95 | 2.26 | |||||||||||||||
Cash dividends paid | 0.96 | 0.96 | 0.96 | 0.96 | 0.96 | |||||||||||||||
Book value (period end) | 27.95 | 23.22 | 22.74 | 19.18 | 17.71 | |||||||||||||||
Weighted average number of shares outstanding (000s) | ||||||||||||||||||||
Basic | 65,590 | 36,876 | 32,747 | 31,491 | 32,000 | |||||||||||||||
Diluted (b) | 66,070 | 37,054 | 32,934 | 31,883 | 32,545 | |||||||||||||||
Period end number of shares outstanding (000s) | 84,705 | 36,893 | 36,840 | 31,877 | 31,295 | |||||||||||||||
Market data: | ||||||||||||||||||||
High sales price | $ | 35.68 | $ | 45.86 | $ | 45.56 | $ | 68.42 | $ | 54.09 | ||||||||||
Low sales price | $ | 25.38 | $ | 26.82 | $ | 22.51 | $ | 33.34 | $ | 32.78 | ||||||||||
Period-end closing price | $ | 31.97 | $ | 34.86 | $ | 43.81 | $ | 45.46 | $ | 38.20 | ||||||||||
Trading volume (000s) ( c) | 137,360 | 50,102 | 66,346 | 73,843 | 48,169 |
(a) | Excludes tax-effected merger related expenses, bargain purchase gain, and securities transactions. |
(b) | Weighted-average anti-dilutive potential common shares totalled 680,611, for the twelve months ended December 31, 2011. There were no anti-dilutive potential common shares in earlier periods. |
(c) | Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The purpose of this discussion and analysis is to focus on significant changes and events in the financial condition and results of operations of Hancock Holding Company and our subsidiaries (Hancock) during 20082011 and selected prior periods. This discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this report, including the consolidated financial statements and related notes. Certain information relating to prior years has been reclassified to conform to the current year’s presentation.
FORWARD-LOOKING STATEMENTS
Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company’s anticipated future financial performance. This act provides a safe harbor for such disclosure, which protects us from unwarranted litigation, if actual results are different from management expectations. This discussion and analysis contains forward-looking statements and reflects management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The words “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “estimate” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of factors and uncertainties, which could cause our actual results and experience to differ from the anticipated results and expectations, expressed in such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements. Hancock does not intend, and undertakes no obligations, 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.
EXECUTIVE OVERVIEW
On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation (Whitney), the parent company of Whitney National Bank based in New Orleans, Louisiana, in a stock and cash transaction. Whitney common shareholders received 0.418 shares of Hancock common stock in exchange for each share of Whitney stock, resulting in Hancock issuing 40.8 million common shares at a fair value of $1.3 billion. Whitney’s preferred stock and common stock warrant issued under TARP were purchased by the Company for $307.7 million and retired as part of the merger transaction. In total, the purchase price was approximately $1.6 billion. The fair value of the assets acquired, excluding goodwill, totaled $11.2 billion, including $6.5 billion in loans, $2.4 billion of investment securities, and $224 million of identifiable intangibles. The fair value of the liabilities assumed was $10.1 billion, including $9.2 billion of deposits. In September 2011, seven Whitney Bank branches located on the Mississippi Gulf Coast with approximately $47 million in loans and $180 million in deposits were divested in order to resolve branch concentration concerns of the U.S. Department of Justice relating to the merger.
Net income for the year ended December 31, 20082011 was $65.4$76.8 million, a decreasean increase of $8.5$24.6 million, or 11.5%47%, from 2007’s2010’s net income of $73.9$52.2 million. This increase was primarily due to the addition of the Whitney operations since the acquisition date, partially offset by merger-related expenses. Diluted earnings per share were $2.05,for 2011 was $1.15, a $0.25 decrease of $0.22 from 2007’s2010’s diluted earnings per share. Diluted earnings per share of $2.27. Ouron operating income, which excludes tax effected merger-related expenses and securities gains and losses, was $2.02 for 2011 compared to $1.46 for 2010. Hancock’s return on average assets (ROA) for 20082011 was 1.02%0.52% compared to 1.26%0.62% for 2007.2010, while the operating ROA increased to 0.90% in 2011 from 0.64% in 2010.
Our year-end resultsThe provision for loan losses was $38.7 million in 2011 compared to a provision of $66.0 million in the prior year. Net charge-offs for 2011 were heavily impacted by$45.3 million, or $33.8 million, excluding net charge-offs on loans covered under FDIC loss-sharing agreements. Net charge-offs on non-covered loans was 0.40% percent of average loans. This compares to the continuing financial crisis and on-going national economic recession. Weaknessesnet-charge off ratio of 1.01% in residential development and rising unemployment levels in our market areas also impacted earnings which had a significant impact on our net charge-off levels and resulted in a higher2010. The allowance for loan losses in 2008. As a result of these difficult national and regional issues, we recorded a provision for loan losses of $36.8 million, which represents an increase of $29.2 million compared to 2007. Of the $36.8 million provision, $17.1 million was recorded in the fourth quarter of 2008 as a result of the ongoing recession, the continued rise in unemployment levels, and an increase in non-performing loans and higher past dues. Net charge-offs for 2008 were $22.2 million, or 0.57% of average loans and were up $14.9 million compared to 2007. Of the $22.2 million in net charge-offs in 2008, $12.6 million of that was recorded in the fourth quarter of 2008 and was primarily related to the construction and land development segments as the housing market continued to struggle. The construction and land development loan segment represents approximately 13.7% of Hancock’s total loan portfolio, or about $585.4 million at year end 2008. These weakening economic conditions also impacted our allowance for loan losses, which increased to 1.45% of period-end loans$124.9 million at December 31, 20082011 from the 1.31%$82.0 million recorded at December 31, 2007.2010. Substantially all of the $42.9 million increase came from additions to the allowance for covered loans. The determination of allowances for covered loans and other loans acquired with existing credit impairment is discussed in Note 1 to the consolidated financial statements.
Our balance sheet showed strong growth
With the Whitney acquisition, total assets increased $11.6 billion during 2008. At year end, our total asset level reached $7.22011 to $19.8 billion an increase of $1.1 billion, or 18.4%, fromat December 31, 2007. We experienced strong growth2011. This included a $6.2 billion increase in total loans in 2008. Period-end loans were up $652.9 million, or 18.2%, fromto $11.2 billion at December 31, 2007. Loan growth increased across our2011. In general, loan categories of commercial/ real estate, direct consumer, indirect consumer, and finance company loans. Alldemand from the Company’s customer base continued to be restrained by economic conditions during 2011, although some improvement was noted toward the end of the growth in assets was organic growthyear. Loan trends will continue to be impacted as we did not record any acquisitionsexpected by declines in the past year. We also experienced strong growth in deposits overFDIC-covered portfolio acquired with People’s First at the past year. Period-endend of 2009.
Excluding the impact of the Whitney’s deposit base, total deposits at December 31, 20082011 were $5.9 billion, up $921.4 million, or 18.4%,down slightly from December 31, 2007. Our growth was related to deposit rate campaigns2010, reflecting in growing marketspart the anticipated runoff of higher-rate time deposits acquired in addition to customers seeking a safe and secure bank for their money as some other banks experienced capital concerns in 2008. We continue to remain well capitalized withthe People’s First transaction. Including Whitney, noninterest-bearing demand deposits totaled $5.5 billion, or 35% of total equity of $609.5 milliondeposits, at December 31, 2008, up $55.3 million,2011, compared to $1.1 billion, or 10.0%, from17% of deposits, at the end of 2010. The increase reflects both the composition of the acquired Whitney deposit base as well as customers’ response to the continued low market rate environment.
Total stockholders’ equity increased $1.5 billion during 2011 to $2.4 billion at December 31, 2007.2011, reflecting mainly both the value of the stock issued in the Whitney transaction as well as the capital that was raised in the Company’s public stock offering in March 2011. Hancock’s regulatory capital ratios and those of its subsidiary banks remain above levels required to be considered well capitalized for various regulatory purposes.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income (te) is the primary component of our earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets. For internal analytical purposes, management adjusts net interest income to a “taxable equivalent” basis using a 35% federal tax rate on tax exempt items (primarily interest on municipal securities and loans). Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities can materially impact net
Net interest income (te).
Another significant statistic for 2011 totaled $533.2 million, almost double the $282.0 million earned in 2010. Earning assets in 2011 were up 71% over 2010, reflecting mainly the analysis of net interest income is the effective interest differential (also referred to asWhitney acquisition, and the net interest margin),margin improved by 37 basis points to 4.25% in 2011. The net interest margin, which is the ratio of net interest income (te) to our average earning assets. earnings assets, is an important metric used by Hancock to manage net interest income.
The difference between the averageoverall yield on earning assets decreased 19 basis points to 4.82% in 2011. Loan yields increased 11 basis points to 5.97% in 2011, while the yield on the investment portfolio declined 137 basis points from 2010. Positive adjustments to the yield earned on the acquired Whitney portfolio based on post-merger portfolio performance benefited the overall loan yield in 2011. Both the lower yields available on the reinvestment of repayments and maturities from the effective rate paid for all deposits and borrowed funds, non-interest-bearingCompany’s mainly fixed-rate investment portfolio, as well as the market yield on Whitney’s acquired investment portfolio at the acquisition date, contributed to the decrease in investment portfolio yield in 2011. The overall mix of average earning assets was relatively stable between 2011 and 2010, with loans comprising approximately 68% of the total in each year.
The overall cost of funding earning assets decreased 56 basis points to 0.57% in 2011. The overall rate paid on interest-bearing isdeposits was down 58 basis points from 2010 to 0.67% in 2011, reflecting mainly the impact of the sustained low rate environment on deposit rates and the expected runoff or re-pricing of higher rate time deposits from People’s First. There was a favorable shift in the mix of funding sources during 2011, related mainly to the composition of the acquired Whitney deposit base. Interest-free sources, including non-interest bearing demand deposits, funded 26% of average earnings assets in 2011 compared to 12% in 2010.
The impact of purchase accounting adjustments and the acquired deposit base should favorably affect the net interest spread. Since a portion of the Bank’s deposits does not bear interest, such as demand accounts, the rate paid for all funds is lower than the rate on interest-bearing liabilities alone. Themargin in 2012. However, various factors could challenge our ability to increase net interest margin (te) forincome and net interest margin. For example, continued weak loan demand will make it difficult to grow earning assets and maintain or increase the years 2008, 2007, and 2006 was 3.80%, 4.08%, and 4.23%, respectively.proportion of loans in the earning asset mix. The rates on many variable rate loans with rate floors currently exceed the underlying indexed market rates. This will limit the benefit to loan yields from any rise in market rates.
Net interest income (te) of $219.9$282.0 million was recorded for the year 2008,in 2010 represented an increase of $4.9$41.6 million, or 2.3%17.3%, from 2007. We experienced2009. Average earning assets increased 14.0% between these years, related mainly to the Peoples First acquisition in December 2009. The net interest margin increased 10 basis points between these periods, as a decrease36 basis point reduction in the overall cost of $17.5 million, or 8%, from 2007funds more than offset a 26 basis decline in the yield on earning assets. The decline in funding costs reflected mainly the impact of the low market rate environment on deposit rates, which declined 52 basis points between these periods. Loan yields were relatively stable in 2010 compared to 2006. 2009, but the re-pricing of investment securities in the low rate environment reduced the yield on the investment portfolio by 56 basis points. The mix of earnings assets and funding sources were both relatively stable between 2010 and 2009.
The factors contributing to the changes in net interest income (te) for 2008, 20072011, 2010, and 20062009 are presented in Tables 1 and 2.2 below. Table 1 is an analysis of the components ofshows average balance sheets, levels ofbalances and related interest income and expense and the resulting earning asset yields and liability rates. Table 2 details the overalleffects of changes in the level ofbalances (volume) and rate on net interest income into ratein 2011 and volume.2010.
TABLE 1. Summary of Average Balance Sheets (w/Net Interest Income (te) & Interest Rates)(a)
The increase
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||||||||||||||||||
Average Balance | Interest | Rate | Average Balance | Interest | Rate | Average Balance | Interest | Rate | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Interest-Earnings Assets: | ||||||||||||||||||||||||||||||||||||
Loans (te) (b) | $ | 8,514,021 | $ | 508,399 | 5.97 | % | $ | 5,005,753 | $ | 293,933 | 5.86 | % | $ | 4,310,120 | $ | 253,732 | 5.89 | % | ||||||||||||||||||
U.S. Treasury securities | 8,652 | 42 | 0.49 | 11,437 | 72 | 0.63 | 10,986 | 175 | 1.59 | |||||||||||||||||||||||||||
U.S. agency securities | 277,509 | 5,628 | 2.03 | 152,268 | 3,964 | 2.60 | 165,725 | 6,778 | 4.09 | |||||||||||||||||||||||||||
CMOs | 742,508 | 18,900 | 2.55 | 284,397 | 10,493 | 3.69 | 162,811 | 8,251 | 5.07 | |||||||||||||||||||||||||||
Mortgage-backed securities | 1,772,212 | 55,572 | 3.14 | 905,212 | 42,350 | 4.68 | 1,029,860 | 51,553 | 5.01 | |||||||||||||||||||||||||||
Obligations of states and political subdivisions: taxable | 57,496 | 3,060 | 5.32 | 61,605 | 2,919 | 4.74 | 56,414 | 2,493 | 4.42 | |||||||||||||||||||||||||||
nontaxable (te) | 191,668 | 9,278 | 4.84 | 127,164 | 8,047 | 6.33 | 110,517 | 7,008 | 6.34 | |||||||||||||||||||||||||||
Other securities | 24,328 | 1,120 | 4.60 | 16,936 | 856 | 5.05 | 23,257 | 1,323 | 5.33 | |||||||||||||||||||||||||||
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Total investment in securities | 3,074,373 | 93,600 | 3.04 | 1,559,019 | 68,701 | 4.41 | 1,559,570 | 77,581 | 4.97 | |||||||||||||||||||||||||||
Federal funds sold and | 955,325 | 2,131 | 0.22 | 698,042 | 1,750 | 0.25 | 497,048 | 4,475 | 0.90 | |||||||||||||||||||||||||||
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Total interest- | 12,543,719 | 604,130 | 4.82 | % | 7,262,814 | 364,384 | 5.01 | % | 6,366,738 | 335,788 | 5.27 | % | ||||||||||||||||||||||||
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Non-earning assets: | ||||||||||||||||||||||||||||||||||||
Other assets | 2,281,136 | 1,236,610 | 796,479 | |||||||||||||||||||||||||||||||||
Allowance for loan losses | (102,784 | ) | (73,190 | ) | (63,450 | ) | ||||||||||||||||||||||||||||||
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Total assets | $ | 14,722,071 | $ | 8,426,234 | $ | 7,099,767 | ||||||||||||||||||||||||||||||
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Liabilities and Stockholder’s Equity | ||||||||||||||||||||||||||||||||||||
Interest-bearing Liabilities: | ||||||||||||||||||||||||||||||||||||
Interest-bearing transaction deposits | $ | 4,194,758 | 8,789 | 0.21 | % | $ | 1,940,470 | 9,013 | 0.46 | % | $ | 1,486,438 | 7,264 | 0.49 | % | |||||||||||||||||||||
Time deposits | 2,807,098 | 41,755 | 1.49 | 2,736,206 | 54,371 | 1.99 | 1,987,059 | 58,252 | 2.93 | |||||||||||||||||||||||||||
Public funds | 1,314,633 | 5,147 | 0.39 | 1,163,993 | 9,519 | 0.82 | 1,288,117 | 18,797 | 1.46 | |||||||||||||||||||||||||||
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Total interest-bearing deposits | 8,316,489 | 55,691 | 0.67 | 5,840,669 | 72,903 | 1.25 | 4,761,614 | 84,313 | 1.77 | |||||||||||||||||||||||||||
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Repurchase agreements | 681,474 | 7,011 | 1.03 | 477,174 | 9,303 | 1.95 | 523,351 | 10,802 | 2.06 | |||||||||||||||||||||||||||
Other interest-bearing liabilities | 114,571 | 165 | 0.14 | 37,947 | 172 | 0.45 | 89,463 | 167 | 0.19 | |||||||||||||||||||||||||||
Long-term debt | 204,953 | 8,116 | 3.96 | 505 | 37 | 7.33 | 709 | 39 | 5.50 | |||||||||||||||||||||||||||
Capitalized Interest | — | (12 | ) | — | (70 | ) | (20 | ) | ||||||||||||||||||||||||||||
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Total interest- | 9,317,487 | 70,971 | 0.76 | 6,356,295 | 82,345 | 1.30 | % | 5,375,137 | 95,301 | 1.77 | % | |||||||||||||||||||||||||
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Non-interest bearing: | ||||||||||||||||||||||||||||||||||||
Demand deposits | 3,400,064 | 1,076,829 | 935,985 | |||||||||||||||||||||||||||||||||
Other liabilities | 203,403 | 127,400 | 114,270 | |||||||||||||||||||||||||||||||||
Stockholders’ equity | 1,801,117 | 865,710 | 674,375 | |||||||||||||||||||||||||||||||||
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Total liabilities & | $ | 14,722,071 | $ | 8,426,234 | $ | 7,099,767 | ||||||||||||||||||||||||||||||
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Net interest income and margin (te) | $ | 533,159 | 4.25 | % | $ | 282,039 | 3.88 | % | $ | 240,487 | 3.78 | % | ||||||||||||||||||||||||
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Net earning assets and spread | $ | 3,226,232 | 4.06 | % | $ | 906,519 | 3.71 | % | $ | 991,601 | | 3.50 | % | |||||||||||||||||||||||
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Interest cost of funding earning assets | 0.57 | % | 1.13 | % | 1.50 | % | ||||||||||||||||||||||||||||||
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(a) | Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%. |
(b) | Includes nonaccrual loans and loans held for sale. |
TABLE 2. Summary of $4.9 millionChanges in net interest incomeNet Interest Income (te) in 2008 from 2007 was caused by an increase in average earnings assets of $521.9 million, or 9.9%. In 2008, our average loan growth increased $445.9 million, or 13%, from 2007 along with a slight increase in average securities of $17.3 million. With short-term interest rates down significantly from last year, our loan yield fell 107 basis points, pushing the yield on average earnings assets down 77 basis points. There was also an unfavorable change in 2008 in our average funding mix with most new deposits more heavily weighted to mostly time deposits of $304.2 million and lower levels of non-interest bearing transaction deposits of $51 million.(a)(b)
When comparing 2007 to 2006, the primary driver of the $17.5 million, or 8% decrease, in net interest income (te) was a $223.9 million, or 4%, decrease in average earning assets. In 2008, our average loan growth increased $366 million offset by a decrease in average securities of $495 million. There was an unfavorable change in 2007 in our average funding mix with higher levels of more costly time deposits of $233 million and lower levels of transaction deposits of $205 million. The impact of this change on net interest margin was managed by reducing rates paid on the interest bearing deposits.
2011 Compared to 2010 | 2010 Compared to 2009 | |||||||||||||||||||||||
Due to Change in | Total Increase | Due to Change in | Total Increase | |||||||||||||||||||||
Volume | Rate | (Decrease) | Volume | Rate | (Decrease) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Interest Income (te) | ||||||||||||||||||||||||
Loans(te)(c) | $ | 209,576 | $ | 4,890 | $ | 214,466 | $ | 39,668 | $ | 533 | $ | 40,201 | ||||||||||||
U.S. Treasury securities | (16 | ) | (14 | ) | (30 | ) | 7 | (110 | ) | (103 | ) | |||||||||||||
U.S. agency securities | 2,763 | (1,099 | ) | 1,664 | (516 | ) | (2,298 | ) | (2,814 | ) | ||||||||||||||
CMOs | 10,928 | (2,521 | ) | 8,407 | 4,937 | (2,695 | ) | 2,242 | ||||||||||||||||
Mortgage-backed securities | 32,333 | (19,111 | ) | 13,222 | (5,974 | ) | (3,229 | ) | (9,203 | ) | ||||||||||||||
Obligations of states and political subdivisions: | ||||||||||||||||||||||||
Taxable | (192 | ) | 333 | 141 | 241 | 185 | 426 | |||||||||||||||||
Nontaxable (te) | 3,221 | (1,990 | ) | 1,231 | 1,053 | (14 | ) | 1,039 | ||||||||||||||||
FHLB stock and other securities | 370 | (106 | ) | 264 | (331 | ) | (136 | ) | (467 | ) | ||||||||||||||
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Total investment in securities | 49,407 | (24,508 | ) | 24,899 | (583 | ) | (8,297 | ) | (8,880 | ) | ||||||||||||||
Federal funds and short-term investments | 541 | (160 | ) | 381 | 1,341 | (4,066 | ) | (2,725 | ) | |||||||||||||||
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| |||||||||||||
Total interest income (te) | 259,524 | (19,778 | ) | 239,746 | 40,426 | (11,830 | ) | 28,596 | ||||||||||||||||
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Interest-bearing transaction deposits | 5,401 | (5,625 | ) | (224 | ) | 2,124 | (375 | ) | 1,749 | |||||||||||||||
Time deposits | 900 | (13,516 | ) | (12,616 | ) | 18,146 | (22,027 | ) | (3,881 | ) | ||||||||||||||
Public funds | 1,211 | (5,583 | ) | (4,372 | ) | (1,668 | ) | (7,610 | ) | (9,278 | ) | |||||||||||||
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| |||||||||||||
Total interest-bearing deposits | 7,512 | (24,724 | ) | (17,212 | ) | 18,602 | (30,012 | ) | (11,410 | ) | ||||||||||||||
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Repurchase agreements | 3,324 | (5,616 | ) | (2,292 | ) | (920 | ) | (579 | ) | (1,499 | ) | |||||||||||||
Other interest-bearing liabilities | 304 | (253 | ) | 51 | (118 | ) | 72 | (46 | ) | |||||||||||||||
Long-term debt | 8,114 | (35 | ) | 8,079 | (13 | ) | 12 | (1 | ) | |||||||||||||||
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Total interest expense | 19,254 | (30,628 | ) | (11,374 | ) | 17,551 | (30,507 | ) | (12,956 | ) | ||||||||||||||
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Net interest income (te) variance | $ | 240,270 | $ | 10,850 | $ | 251,120 | $ | 22,875 | $ | 18,677 | $ | 41,552 | ||||||||||||
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Recognizing the importance of interest differential to total earnings, management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional, and area economics our loan and investment policies are designed to maximize interest differential while maintain sufficient liquidity and availability of funds for purposes of meeting existing commitments and for investment in loans and other investment opportunities that may arise.
(a) | Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%. |
The following table is a summary of average balance sheets that reflects average interest earned, average interest paid, average yield and average rate:
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TABLE 1. Summary of Average Balance Sheets (w/Net Interest Income (te) & Interest Rates) |
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| Years Ended December 31, |
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| 2008 |
| 2007 |
| 2006 |
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| Average |
| Interest |
| Rate |
| Average |
| Interest |
| Rate |
| Average |
| Interest |
| Rate |
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| (In thousands) |
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Assets |
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Interest-Earnings Assets: |
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Loans* (te) |
| $ | 3,873,908 |
| $ | 254,347 |
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| 6.57 | % | $ | 3,428,009 |
| $ | 261,944 |
|
| 7.64 | % | $ | 3,062,222 |
| $ | 235,067 |
|
| 7.68 | % |
U.S. Treasury securities |
|
| 11,366 |
|
| 296 |
|
| 2.60 | % |
| 29,095 |
|
| 1,379 |
|
| 4.74 | % |
| 63,668 |
|
| 3,018 |
|
| 4.74 | % |
U.S. agency securities |
|
| 349,931 |
|
| 16,000 |
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| 4.57 | % |
| 810,299 |
|
| 41,111 |
|
| 5.07 | % |
| 1,270,128 |
|
| 60,701 |
|
| 4.78 | % |
CMOs |
|
| 150,692 |
|
| 7,465 |
|
| 4.95 | % |
| 94,731 |
|
| 3,997 |
|
| 4.22 | % |
| 154,673 |
|
| 6,142 |
|
| 3.97 | % |
Mortgage-backed securities |
|
| 1,012,274 |
|
| 52,564 |
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| 5.19 | % |
| 534,893 |
|
| 27,190 |
|
| 5.08 | % |
| 491,130 |
|
| 23,313 |
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| 4.75 | % |
Obligations of states and political subdivisions: |
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taxable |
|
| 52,070 |
|
| 1,661 |
|
| 3.19 | % |
| 50,944 |
|
| 1,189 |
|
| 2.33 | % |
| 20,205 |
|
| 350 |
|
| 1.73 | % |
nontaxable (te) |
|
| 120,237 |
|
| 7,659 |
|
| 6.37 | % |
| 146,060 |
|
| 9,590 |
|
| 6.57 | % |
| 151,681 |
|
| 10,416 |
|
| 6.87 | % |
Other corporate securities |
|
| 47,428 |
|
| 2,061 |
|
| 4.34 | % |
| 60,692 |
|
| 3,223 |
|
| 5.31 | % |
| 70,629 |
|
| 3,559 |
|
| 5.04 | % |
Total investment in securities |
|
| 1,743,998 |
|
| 87,706 |
|
| 5.03 | % |
| 1,726,714 |
|
| 87,679 |
|
| 5.08 | % |
| 2,222,114 |
|
| 107,499 |
|
| 4.84 | % |
Federal funds sold and short-term investments |
|
| 175,891 |
|
| 3,838 |
|
| 2.18 | % |
| 117,158 |
|
| 5,613 |
|
| 4.79 | % |
| 211,511 |
|
| 9,760 |
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| 4.61 | % |
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Total interest-earning assets (te) |
|
| 5,793,797 |
|
| 345,891 |
|
| 5.97 | % |
| 5,271,881 |
|
| 355,236 |
|
| 6.74 | % |
| 5,495,847 |
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| 352,326 |
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| 6.41 | % |
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Non-earning assets: |
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Other assets |
|
| 685,946 |
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| 626,451 |
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| 600,238 |
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Allowance for loan losses |
|
| (53,354 | ) |
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|
|
| (46,443 | ) |
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| (64,285 | ) |
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Total assets |
| $ | 6,426,389 |
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| $ | 5,851,889 |
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| $ | 6,031,800 |
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Liabilities and Stockholder’s Equity |
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Interest-bearing Liabilities: |
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Interest-bearing transaction deposits |
| $ | 1,415,288 |
|
| 13,751 |
|
| 0.97 | % | $ | 1,419,077 |
|
| 18,135 |
|
| 1.28 | % | $ | 1,623,597 |
|
| 14,931 |
|
| 0.92 | % |
Time deposits |
|
| 1,843,966 |
|
| 70,659 |
|
| 3.83 | % |
| 1,778,854 |
|
| 81,223 |
|
| 4.57 | % |
| 1,545,834 |
|
| 62,807 |
|
| 4.06 | % |
Public funds |
|
| 1,046,484 |
|
| 26,642 |
|
| 2.55 | % |
| 803,589 |
|
| 33,561 |
|
| 4.18 | % |
| 771,146 |
|
| 32,354 |
|
| 4.20 | % |
|
| |||||||||||||||||||||||||||
Total interest-bearing deposits |
|
| 4,305,738 |
|
| 111,052 |
|
| 2.58 | % |
| 4,001,520 |
|
| 132,919 |
|
| 3.32 | % |
| 3,940,577 |
|
| 110,092 |
|
| 2.79 | % |
|
| |||||||||||||||||||||||||||
Customer repurchase agreements |
|
| 524,712 |
|
| 14,491 |
|
| 2.76 | % |
| 216,730 |
|
| 8,023 |
|
| 3.70 | % |
| 250,603 |
|
| 9,060 |
|
| 3.62 | % |
Other interest-bearing liabilities |
|
| 30,186 |
|
| 536 |
|
| 1.78 | % |
| 11,280 |
|
| 289 |
|
| 2.56 | % |
| 30,580 |
|
| 1,517 |
|
| 4.96 | % |
Capitalized Interest |
|
| — |
|
| (77 | ) |
| 0.00 | % |
| — |
|
| (995 | ) |
| 0.00 | % |
| — |
|
| (806 | ) |
| 0.00 | % |
|
| |||||||||||||||||||||||||||
Total interest-bearing liabilities |
|
| 4,860,636 |
|
| 126,002 |
|
| 2.59 | % |
| 4,229,530 |
|
| 140,236 |
|
| 3.32 | % |
| 4,221,760 |
|
| 119,863 |
|
| 2.84 | % |
|
| |||||||||||||||||||||||||||
Non-interest bearing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
| 876,669 |
|
|
|
|
|
|
|
| 927,656 |
|
|
|
|
|
|
|
| 1,128,850 |
|
|
|
|
|
|
|
Other liabilities |
|
| 104,279 |
|
|
|
|
|
|
|
| 132,320 |
|
|
|
|
|
|
|
| 167,534 |
|
|
|
|
|
|
|
Stockholders’ equity |
|
| 584,805 |
|
|
|
|
|
|
|
| 562,383 |
|
|
|
|
|
|
|
| 513,656 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total liabilities & stockholders’ equity |
| $ | 6,426,389 |
|
|
|
|
| 2.17 | % | $ | 5,851,889 |
|
|
|
|
| 2.66 | % | $ | 6,031,800 |
|
|
|
|
| 2.18 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest income and margin (te) |
|
|
|
| $ | 219,889 |
|
| 3.80 | % |
|
|
| $ | 215,000 |
|
| 4.08 | % |
|
|
| $ | 232,463 |
|
| 4.23 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net earning assets and spread |
| $ | 933,161 |
|
|
|
|
| 3.38 | % | $ | 1,042,349 |
|
|
|
|
| 3.42 | % | $ | 1,280,795 |
|
|
|
|
| 3.57 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Loan interest income includes loan fees of $483,000, $1.3 million and $9.0 million for each of the three years ended December 31, 2008, 2007 and 2006. Non-accrual loans in average balances and income on such loans, if recognized, is recorded on a cash basis. Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.
(b) | Amounts shown as due to changes in either volume or rate includes an allocation of the amount that reflects the interaction of volume and rate changes. This allocation of the amount that reflects the interaction of volume and rate changes. This allocation is based on the absolute dollar amounts of change due solely to changes in volume or rate. |
The following table presents the change in interest income and the change in interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 2. Summary of Changes in Net Interest Income (te) |
|
|
|
|
|
|
|
|
|
| |||||||||
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2008 Compared to 2007 |
| 2007 Compared to 2006 |
| ||||||||||||||
|
| ||||||||||||||||||
|
| Due to |
| Total |
| Due to |
| Total |
| ||||||||||
|
|
|
|
|
| ||||||||||||||
|
| Volume |
| Rate |
|
| Volume |
| Rate |
|
| ||||||||
|
| ||||||||||||||||||
|
| (In thousands) |
| ||||||||||||||||
Interest Income (te) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 31,558 |
| ($ | 39,155 | ) | ($ | 7,597 | ) | $ | 30,204 |
| ($ | 3,327 | ) | $ | 26,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
| (622 | ) |
| (461 | ) |
| (1,083 | ) |
| (1,639 | ) |
| — |
|
| (1,639 | ) |
U.S. agency securities |
|
| (21,386 | ) |
| (3,725 | ) |
| (25,111 | ) |
| (17,270 | ) |
| (2,320 | ) |
| (19,590 | ) |
CMOs |
|
| 2,678 |
|
| 790 |
|
| 3,468 |
|
| (1,902 | ) |
| (243 | ) |
| (2,145 | ) |
Mortgage-backed securities |
|
| 24,777 |
|
| 597 |
|
| 25,374 |
|
| 2,157 |
|
| 1,720 |
|
| 3,877 |
|
Obligations of states and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 25 |
|
| 447 |
|
| 472 |
|
| 684 |
|
| 155 |
|
| 839 |
|
Nontaxable (te) |
|
| (1,365 | ) |
| (566 | ) |
| (1,931 | ) |
| (528 | ) |
| (298 | ) |
| (826 | ) |
FHLB stock and other corporate securities |
|
| (634 | ) |
| (528 | ) |
| (1,162 | ) |
| (336 | ) |
| — |
|
| (336 | ) |
Total investment in securities |
|
| 3,473 |
|
| (3,446 | ) |
| 27 |
|
| (18,834 | ) |
| (986 | ) |
| (19,820 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds and short-term investments |
|
| 2,080 |
|
| (3,855 | ) |
| (1,775 | ) |
| (4,507 | ) |
| 360 |
|
| (4,147 | ) |
|
| ||||||||||||||||||
Total interest income (te) |
| $ | 37,111 |
| ($ | 46,456 | ) | ($ | 9,345 | ) | $ | 6,863 |
| ($ | 3,953 | ) | $ | 2,910 |
|
|
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction deposits |
| $ | 48 |
| $ | 4,336 |
| $ | 4,384 |
| $ | 2,060 |
| ($ | 5,264 | ) | ($ | 3,204 | ) |
Time deposits |
|
| (2,884 | ) |
| 13,448 |
|
| 10,564 |
|
| (10,112 | ) |
| (8,304 | ) |
| (18,416 | ) |
Public funds |
|
| (8,416 | ) |
| 15,335 |
|
| 6,919 |
|
| (1,356 | ) |
| 149 |
|
| (1,207 | ) |
|
| ||||||||||||||||||
Total interest-bearing deposits |
|
| (11,252 | ) |
| 33,119 |
|
| 21,867 |
|
| (9,408 | ) |
| (13,419 | ) |
| (22,827 | ) |
|
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under repurchase agreements |
|
| (8,945 | ) |
| 2,477 |
|
| (6,468 | ) |
| 1,250 |
|
| (213 | ) |
| 1,037 |
|
Other interest-bearing liabilities |
|
| (22 | ) |
| (1,143 | ) |
| (1,165 | ) |
| 1,095 |
|
| 322 |
|
| 1,417 |
|
|
| ||||||||||||||||||
Total interest expense |
|
| (20,219 | ) |
| 34,453 |
|
| 14,234 |
|
| (7,063 | ) |
| (13,310 | ) |
| (20,373 | ) |
|
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income (te) |
| $ | 16,892 |
| ($ | 12,003 | ) | $ | 4,889 |
| ($ | 200 | ) | ($ | 17,263 | ) | ($ | 17,463 | ) |
|
|
(c) | Includes nonaccrual loans held for sale. |
Provision for Loan Losses
Weaknesses in residential development and rising unemployment levels in our market areas had a significant impact on our net charge-off levels and resulted in a higher allowance for loan losses in 2008 than 2007. Net charge-offs were $22.2 million, an increase of $14.9 million, or 206.3%, from 2007 to 2008. The increase was primarily reflected in our construction and land development loan segment. The construction and land development loan segment represents approximately 13.7% of Hancock’s total loan portfolio, or about $585.4 million at year end 2008. The provision for loan losses was $36.8$38.7 million in 2008, an increase2011 compared to a provision of $29.2$66.0 million in the prior year. Net charge-offs for 2011 were $45.3 million, or 384.5%$33.8 million excluding net charge-offs on loans covered under FDIC loss-sharing agreements. Non-covered net charge-offs were $50.7 million in 2010. The loans purchased in the 2009 acquisition of Peoples First Community Bank are covered by two loss share agreements between the FDIC and the Company which afford the Company significant loss protection. Net charge-offs on non-covered loans in 2011 was 0.40% of average loans. This compares to a net-charge off ratio of 1.01% in 2010. The allowance for loan losses increased to $124.9 million at December 31, 2011 from 2007. Major drivers$82.0 million recorded at December 31, 2010. Substantially all of the overall higher level$42.9 million increase came from additions to the allowance for covered loans, although the impact on provision expense was only $3.0 million net of the related increase in the loss share indemnification asset. The covered loan provision in 2010 was negligible. The determination of allowances for covered loans and other loans acquired with existing credit impairment is discussed in Note 1 to the consolidated financial statements.
The decrease in the provision for loan losses were an increase in period-end2011 was driven by a $16.9 million reduction in net charge offs on originated loans of $652.9 million, or 18.2%, from December 31, 2007, continued weaknessas well as a slowdown in the identification of new problem loans due to the stabilization of the national and local and national economies, and increases in nonperforming loans and higher past dues.economies. The provision for loan losses reflects management’s assessment of the adequacy of the allowance for loan losses to absorb inherent losses in the loan portfolio. The amount of provision for each period is dependent on many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, identified loan impairment, management’s assessment of the loan portfolio quality, the value of collateral, as well as, overall economic factors. Our allowance for loan losses as a percent of period-end loans was 1.45% at December 31, 2008, an increase of 14 basis points from 1.31% at December 31, 2007.
Net charge-offs were $7.2 million for 2007, an increase of $0.2 million, or 3.1%, from 2006 to 2007. The provision for loan losses in 2007 was $7.6 million. In 2006, we reversed $20.8 million of the allowance for loan losses through the provision primarily due to better than expected loss experience with Hurricane Katrina storm impacted credits.
The allowance for loan losses as a percent of period-end loans was 1.31%1.12% at December 31, 2011 compared to 1.65% at December 31, 2010. The allowance calculated on the loan portfolio that excludes covered loans and loans acquired at fair value in 2007,the Whitney merger totaled $83.2 million, or 1.70% of this portfolio at December 31, 2011. These results compare to $81.3 million and 1.96%, respectively, for December 31, 2010.
The provision for loan losses in 2010 increased $11.4 million, or 21% over 2009. Major drivers of this increase were continued weakness in the local and national economies and increases in nonperforming loans. Net charge-offs were $50.7 million in 2010, up slightly from 2009. The allowance for loan losses as a decreasepercent of 12 basis points from 1.44%period-end loans was 1.65% in 2006.2010 compared to 1.29% at December 31, 2009.
Noninterest Income
Noninterest income for 2011 totaled $206.3 million, or 51% higher than in 2010. Excluding the estimated impact of the acquired Whitney operations, noninterest income was up $10.0 million, or 7%. An $11.8 million increase in 2011 on the accretion of the FDIC indemnification asset related to the Peoples First loss sharing agreements was the most significant factor. Changes in accretion on the indemnification asset will occur as projected losses on the related covered loan portfolio are reforecast periodically. Table 3 presents a three-year analysis of the components of noninterest income. Overall,income along with the percentage changes between years for each component.
TABLE 3. Noninterest Income
2011 | % Change | 2010 | % Change | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Service charges on deposit accounts | $ | 55,265 | 22 | % | $ | 45,335 | — | % | $ | 45,354 | ||||||||||
Trust fees | 23,940 | 43 | 16,715 | 10 | 15,127 | |||||||||||||||
Bank card fees | 28,879 | 93 | 14,941 | 33 | 11,252 | |||||||||||||||
Insurance commissions and fees | 16,524 | 14 | 14,461 | 1 | 14,355 | |||||||||||||||
Investment and annuity fees | 15,016 | 47 | 10,181 | 24 | 8,220 | |||||||||||||||
ATM fees | 14,052 | 48 | 9,486 | 29 | 7,374 | |||||||||||||||
Secondary mortgage market operations | 10,484 | 18 | 8,915 | 51 | 5,906 | |||||||||||||||
Income from bank owned life insurance | 9,311 | 78 | 5,219 | (6 | ) | 5,527 | ||||||||||||||
Letter of credit fees | 4,193 | 189 | 1,451 | 11 | 1,309 | |||||||||||||||
Safe deposit box rental income | 1,591 | 89 | 841 | 6 | 794 | |||||||||||||||
Gain on acquisition | — | n/m | — | (100 | ) | 33,623 | ||||||||||||||
Accretion of indemnification asset | 16,689 | 241 | 4,890 | n/m | — | |||||||||||||||
Other income | 10,483 | 132 | 4,514 | (46 | ) | 8,417 | ||||||||||||||
Securities transactions gains, net | (91 | ) | n/m | — | (100 | ) | 69 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total noninterest income | $ | 206,336 | 51 | % | $ | 136,949 | (13 | )% | $ | 157,327 | ||||||||||
|
|
|
|
|
|
|
|
|
|
n/m = Not meaningful
The Dodd-Frank Act that was signed into law in July 2010 represents a significant overhaul of many aspects of the regulation of the financial services industry and includes provisions that have had or likely will have an impact on the nature and pricing of services offered by the Banks and other financial services industry participants. The independent Consumer Financial Protection Bureau that was established under the Dodd-Frank Act has broad rulemaking, supervisory and enforcement authority over consumer financial products, including deposit products, residential mortgages, home-equity loans and credit cards. The Dodd-Frank Act directs applicable regulatory authorities to promulgate a large number of regulations implementing its provisions over time. The discussion of “Supervision and Regulation” located in Item 1 of this annual report on Form 10-K includes more detailed information on the provision of the Dodd-Frank Act.
The following discussion of changes in noninterest income of $127.8 million was reported in 2008, asfor 2011 compared to $120.7 million for 2007 and $106.5 million for 2006. This represents an increase2010 excludes the estimated impact of $7.1 million, or 6%,acquired Whitney operations in 2011.
Income from 2007 to 2008 and an increase of $14.2 million, or 13%, from 2006 to 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 3. Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2008 |
| % Change |
| 2007 |
| % Change |
| 2006 |
| |||||
|
| |||||||||||||||
|
| (In thousands) |
| |||||||||||||
Service charges on deposit accounts |
| $ | 44,243 |
|
| 6 | % | $ | 41,929 |
|
| 16 | % | $ | 36,228 |
|
Trust fees |
|
| 16,858 |
|
| 6 | % |
| 15,902 |
|
| 20 | % |
| 13,286 |
|
Insurance commissions and fees |
|
| 16,554 |
|
| -14 | % |
| 19,229 |
|
| 0 | % |
| 19,248 |
|
Investment and annuity fees |
|
| 10,807 |
|
| 24 | % |
| 8,746 |
|
| 46 | % |
| 5,970 |
|
Debit card and merchant fees |
|
| 11,082 |
|
| 9 | % |
| 10,126 |
|
| 8 | % |
| 9,365 |
|
ATM fees |
|
| 6,856 |
|
| 15 | % |
| 5,983 |
|
| 12 | % |
| 5,338 |
|
Secondary mortgage market operations |
|
| 2,977 |
|
| -20 | % |
| 3,723 |
|
| 6 | % |
| 3,528 |
|
Other fees and income |
|
| 13,576 |
|
| -8 | % |
| 14,740 |
|
| 8 | % |
| 13,622 |
|
Net storm-related gains |
|
| — |
|
| N/M | * |
| — |
|
| N/M | * |
| 5,084 |
|
Securities gains/(losses) |
|
| 4,825 |
|
| N/M | * |
| 308 |
|
| N/M | * |
| (5,169 | ) |
|
| |||||||||||||||
Total non-interest income |
| $ | 127,778 |
|
| 6 | % | $ | 120,686 |
|
| 13 | % | $ | 106,500 |
|
|
|
*Not meaningful
Noninterest income increased $7.1 million, or 6%, when comparing 2008 to 2007. Increases were experienced in service charges on deposit accounts trustwas down $6.0 million, or 13%, mainly because of a decrease in overdraft and NSF fees investment and annuity fees, debit card and merchant fees, ATM fees, and securities gains/(losses).related mainly to new consumer protection regulations implemented during the third quarter of 2010. Service charges oninclude periodic account maintenance fees for both commercial and personal customers, charges for specific transactions or services, such as processing return items or wire transfers, and other revenue associated with deposit accounts, such as commissions on check sales.
Bank card fees were stable between 2011 and 2010. Revenue from increased $2.3activity on cards issued under the Hancock name offset the effect of the sale of the People’s First credit card portfolio at year-end 2010. New limits on interchange rates went into effect in the fourth quarter of 2011 as part of the implementation of the Durbin amendment to the Dodd-Frank Act. Because of an exemption for smaller issuers, the new limits applied initially only to transactions on card accounts acquired with Whitney. When the limits are applied to all the Banks card accounts in 2012, the Company expects debit interchange income will decline by approximately $2 million or 6%, whenper quarter compared to 2007, due to a $1.3 million increase in overdraft fees as a result of an increase in rate per item, effective January 1, 2008, in addition to the increase in period-end deposits of $921 million in 2008. Trust fee income increased $1.0 million, or 6%, when compared to the previous year. current levels.
Investment and annuity fees increased $2.5 million, or 24%, in 2011 mainly due to improved financial market conditions. Investment and annuity fees include stock brokerage and annuity sales as well as fixed-income securities transactions for correspondent banks and other commercial and personal customers.
ATM fees were up $2.1 million, or 22%, over 2010 due to increased activity and the full year effect of changes during 2010 to the fee structure for ATM transactions. Fee income generated by our secondary mortgage market operations decreased $2.4 million, or 27%, between 2011 and 2010. Refinancing as a result of the historically low rate environment peaked in 2010.
Excluding the $33.6 million purchase gain recognized on the acquisition of Peoples First in December 2009 and the $4.9 million accretion on the FDIC indemnification asset in 2010, total noninterest income in 2010 increased $8.4 million compared to the prior year. Bank card fees were up $3.7 million, or 33%, compared to 2009, due mainly to activity on Peoples First card accounts. Fee income generated by our secondary mortgage market operations increased $3.0 million, or 51%, reflecting strong refinancing activity in response to the historically low rate environment. Investment and annuity fees increased $2.0 million, or 24%, from 20072009 to 2008 due to an increase in annuity sales to customers from our subsidiary, Hancock Investment Services. Debit card and merchant fees increased $1.0 million or 9% and ATM fees increased $0.9 million or 15% due to an increase in customers. Securities gains increased $4.5 million in 2008. For additional information on securities activity, see Note 2 of Notes to the Consolidated Financial Statements. Insurance commissions and fees decreased $2.7 million or 14%,2010 mainly due to our subsidiary Magna Insurance Company’s reduction of the annuity business which was accelerated with the 1035 exchange program promoted in the fourth quarter of 2007. Otherimproved market conditions. ATM fees and income decreased $1.2rose $2.1 million, or 8%29%, and secondary mortgage market operations decreased $0.7 million, or 20%.
Increases in noninterest income, when comparing 2007over 2009 due to 2006, were experienced in service charges on deposit accounts, trust fees, investment and annuity fees, insurance commissions and fees, debit card and merchant fees, ATM fees, secondary mortgage market operations, and other fees and income. Service charges on deposit accounts increased $5.7 million, or 16%, when compared to 2006. This was caused by service charge fee increases in 2007 on consumer and business accounts and an increase in accountsactivity from the expanding Alabama market. Trust fee income increased $2.6 million, or 20%, when compared to the previous year as a result of increasesPeoples First customers and growth in assets under care (either managed or in custody). Investmentour Mississippi and annuity fees increased $2.8 million, or 46%, from 2006 to 2007 and there were higher levels of other fees and income (up $1.1 million or 8%).Louisiana markets.
Noninterest Expense
Noninterest expense for 2011 increased $314.8 million, or 113%, to $594.0 million, primarily due to the impact of the Whitney acquisition. Excluding merger-related expenses totaling $86.8 million in 2011 and $3.2 million in 2010 and approximately $213 million of expenses added in the Whitney acquisition, noninterest expense increased $17.8 million, or 6%. Table 4 presents an analysis of the components of noninterest expense for the years 2008, 20072011, 2010, and 2006. 2009.
TABLE 4. Noninterest Expense
2011 | % Change | 2010 | % Change | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Employee compensation | $ | 220,720 | 96 | % | $ | 112,457 | 20 | % | $ | 93,924 | ||||||||||
Employee benefits | 51,922 | 76 | 29,558 | 15 | 25,765 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total personnel expense | 272,642 | 92 | 142,015 | 19 | 119,689 | |||||||||||||||
Net occupancy expense | 42,890 | 80 | 23,799 | 18 | 20,222 | |||||||||||||||
Equipment | 16,972 | 61 | 10,512 | 7 | 9,849 | |||||||||||||||
Data processing expense | 39,906 | 76 | 22,702 | 19 | 19,037 | |||||||||||||||
Professional services | 29,029 | 91 | 15,184 | 38 | 11,038 | |||||||||||||||
Postage and communications | 17,617 | 61 | 10,959 | 29 | 8,473 | |||||||||||||||
Advertising | 11,729 | 54 | 7,600 | 46 | 5,189 | |||||||||||||||
Deposit insurance and regulatory fees | 12,974 | 14 | 11,401 | (9 | ) | 12,589 | ||||||||||||||
Amortization of intangible assets | 16,551 | 507 | 2,728 | 93 | 1,417 | |||||||||||||||
Ad valorem and franchise taxes | 5,330 | 49 | 3,568 | (1 | ) | 3,621 | ||||||||||||||
Printing and supplies | 5,040 | 131 | 2,186 | 15 | 1,899 | |||||||||||||||
Other real estate owned expense, net | 6,910 | 54 | 4,475 | 230 | 1,357 | |||||||||||||||
Insurance expense | 4,313 | 115 | 2,010 | 6 | 1,905 | |||||||||||||||
Merger-related expenses | 86,762 | n/m | 3,167 | n/m | 3,682 | |||||||||||||||
Other expense | 25,349 | 50 | 16,954 | 26 | 13,503 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total noninterest expense | $ | 594,014 | 113 | % | $ | 279,260 | 20 | % | $ | 233,470 | ||||||||||
|
|
|
|
|
|
|
|
|
|
n/m = not meaningful
The levelcomponents of operating expenses decreased $3.3merger-related expenses:
2011 | 2010 | 2009 | ||||||||||
Personnel | $ | 13,960 | $ | 27 | $ | 1,760 | ||||||
Net occupancy expense | 330 | 4 | 118 | |||||||||
Equipment | 552 | 57 | — | |||||||||
Data processing expense | 3,163 | 944 | 6 | |||||||||
Professional services expense | 40,902 | 1,263 | 1,283 | |||||||||
Postage and communications | 897 | 60 | 1 | |||||||||
Advertising | 5,958 | 113 | 408 | |||||||||
Printing and supplies | 568 | 194 | 12 | |||||||||
Insurance expense | 3,177 | — | — | |||||||||
Other expense | 17,255 | 505 | 94 | |||||||||
|
|
|
|
|
| |||||||
Total merger-related expenses | $ | 86,762 | $ | 3,167 | $ | 3,682 | ||||||
|
|
|
|
|
|
The following discussion of noninterest expense for 2011 compared to 2010 excludes the effect of the Whitney acquisition in 2011.
Total personnel expense (excluding $114.3 million of Whitney expenses), increased $16.3 million, or 2%11%, from 2007in 2011 compared to 2008 andthe prior year. Employee compensation increased $13.6$13.1 million, or 7%12%, from 2006reflecting normal salary adjustments as well as additional incentive-based compensation and some strategic staff additions appropriate to 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 4. Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2008 |
| % Change |
| 2007 |
| % Change |
| 2006 |
| |||||
|
| |||||||||||||||
|
| (In thousands) |
| |||||||||||||
Employee compensation |
| $ | 88,670 |
|
| 5 | % | $ | 84,654 |
|
| 0 | % | $ | 84,569 |
|
Employee benefits |
|
| 21,103 |
|
| -5 | % |
| 22,305 |
|
| 16 | % |
| 19,184 |
|
|
| |||||||||||||||
Total personnel expense |
|
| 109,773 |
|
| 3 | % |
| 106,959 |
|
| 3 | % |
| 103,753 |
|
Equipment and data processing expense |
|
| 29,424 |
|
| 5 | % |
| 28,050 |
|
| 13 | % |
| 24,729 |
|
Net occupancy expense |
|
| 19,538 |
|
| 1 | % |
| 19,435 |
|
| 46 | % |
| 13,350 |
|
Postage and communications |
|
| 9,454 |
|
| -10 | % |
| 10,453 |
|
| 8 | % |
| 9,649 |
|
Ad valorem and franchise taxes |
|
| 3,532 |
|
| 1 | % |
| 3,514 |
|
| 5 | % |
| 3,346 |
|
Legal and professional services |
|
| 12,718 |
|
| -17 | % |
| 15,234 |
|
| 9 | % |
| 13,968 |
|
Printing and supplies |
|
| 1,833 |
|
| -19 | % |
| 2,252 |
|
| 13 | % |
| 1,997 |
|
Amortization of intangible assets |
|
| 1,432 |
|
| -13 | % |
| 1,651 |
|
| -22 | % |
| 2,125 |
|
Advertising |
|
| 6,917 |
|
| -2 | % |
| 7,032 |
|
| 6 | % |
| 6,642 |
|
Deposit insurance and regulatory fees |
|
| 2,851 |
|
| 174 | % |
| 1,039 |
|
| 10 | % |
| 946 |
|
Training expenses |
|
| 655 |
|
| 0 | % |
| 656 |
|
| 16 | % |
| 564 |
|
Other real estate owned expense/(income) |
|
| 917 |
|
| 285 | % |
| (497 | ) |
| 27 | % |
| (390 | ) |
Other expense |
|
| 14,399 |
|
| -31 | % |
| 20,965 |
|
| -7 | % |
| 22,437 |
|
|
| |||||||||||||||
Total noninterest expense |
| $ | 213,443 |
|
| -2 | % | $ | 216,743 |
|
| 7 | % | $ | 203,116 |
|
|
|
In 2008, operating expenses decreased $3.3the Company’s expanded scope of operations following the Whitney acquisition. Employee benefits expense was up $3.2 million, or 2%11%, over 2007. The significant factors drivingincluding increases in both health and pension benefits. Employee compensation includes base salaries and contract labor costs, compensation earned under sales-based and other employee incentive programs, and compensation expense under management incentive plans. Employee benefits, in addition to payroll taxes, are the decrease in operating expenses from 2007 to 2008 includecost of providing health benefits for active and retired employees and the cost of providing pension benefits through both the defined-benefit plans and a decrease in legal401(k) employee savings plan.
Deposit insurance and professional services ($2.5regulatory fees decreased $3.6 million, or 17%) caused primarily by32%, in 2011. The implementation of a new deposit insurance assessment calculation method in 2011 had a favorable impact on the decrease in commissions for Magna with the reduction of the annuity business, postage and communications ($1.0Banks’ premiums. This new method applies a bank’s risk-based rates to an assessment base defined as average assets less average tangible equity. Insurance expenses were up $2.2 million, or 10%), printing and supplies expense ($0.4 million, or 19%), amortization of intangible assets ($0.2 million, or 13%). Other expense also decreased $6.6 million, or 31% over 2007, mainly due to our VISA litigation entries, accruing $2.5 million in 2007 and reversing $1.5 million in 2008, and our subsidiary Magna Insurance Company’s reduction of the annuity business which was accelerated with the 1035 exchange program. These decreases were offset primarily by increases in equipment and data processing expense ($1.4 million, or 5%) due to increases in officer and director liability costs resulting from increased limits associated with the expanded operations after the Whitney acquisition.
Excluding the impact of the Whitney acquisition, no significant trends were identified underlying the changes in other noninterest expense categories between 2011 and 2010.
Merger-related expenses include certain merger transaction costs, costs incurred to integrate operations and systems, personnel supportcosts associated with severance and retention arrangements and various other nonrecurring costs directly attributable to grow deposits and loans; total personnelthe acquisition.
Total noninterest expense ($2.8in 2010 increased $45.8 million, or 3%) increased20%, compared to grow deposits and loans; deposit and regulatory fees ($1.8 million, or 174%) due2009. Almost all of this increase was related to changesthe Peoples First operations acquired in FDIC insurance assessment rates that became effective in 2007, where the 2007 assessment was offset by a one-time credit from the FDIC; and other real estate owned expense ($1.4 million, or 285%) due to an increase in maintenance for the growth in foreclosed assets in 2008 caused by the ongoing recession.
In 2007, operating expenses increased $13.6 million, or 7%, over 2006. Increases were reflected in net occupancy expense ($6.1 million, or 46%) due to reoccupying One Hancock Plaza, our corporate headquarters, in 2007, the opening of our data center and the opening of new branches, legal and professional services ($1.3 million, or 9%), personnel expense ($3.2 million, or 3%) and equipment and data processing expense ($3.3 million, or 13%).December 2009.
Income Taxes
Income tax expense was $21.6$18.1 million in 2008, $27.92011, $9.7 million in 20072010 and $46.5$22.9 million in 2006. Income tax expense decreased due to a lower level of pretax income in 2008.2009. Our effective income tax rate continues to be less than the statutory rate of 35%, due primarily to tax-exempt interest income and tax credits. The effective tax rates for 2008, 20072011, 2010 and 20062009 were 25%19%, 27%15% and 31%24%, respectively. The 2% decrease in our effective tax rate was due primarilyNote 17 to the increase inconsolidated financial statements reconciles reported income tax expense to the percentage of tax-exemptamount determined by applying the statutory rate to income as it relates to pre-tax book income.before income taxes.
SEGMENT REPORTING
SeeThe Company’s primary operating segments are divided into Hancock, Whitney, and Other. The Hancock segment coincides generally with the Company’s Hancock Bank subsidiary and the Whitney segment with its Whitney Bank subsidiary. Each Bank segment offers commercial, consumer and mortgage loans and deposit services. Although the Bank segments offer the same products and services, they are managed separately due to different pricing, product demand, and consumer markets. On June 4, 2011, the Company completed its acquisition of Whitney Holding Corporation, the parent of Whitney National Bank. Whitney National Bank was merged into Hancock Bank of Louisiana, and the combined entity was renamed Whitney Bank. The “Other” segment includes activities of other consolidated subsidiaries that provide investment services, insurance agency services, insurance underwriting and various other services to third parties. Note 1619 to our Consolidated Financial Statements included elsewherethe consolidated financial statements provide comparative financial information for the operating segments for 2011, 2010 and 2009. Net income in this report.2011 for the Hancock segment increased $21.2 million over 2010. Net interest income increased $14.3 million driven mainly by a lower cost of funds associated in part with the run-off or re-pricing of higher-cost time deposits in the Florida deposit base acquired with Peoples First. The provision for loan losses for the Hancock segment declined $20.6 million in 2011, reflecting the improvement in certain credit quality metrics and general economic conditions, as discussed earlier. The addition of Whitney National Bank’s operations drove the significant changes in the Whitney segment’s operating results and financial position in 2011 compared to 2010. After deducting merger-related expenses in excess of $80 million, however, net income for 2011 for the Whitney segment increased only $5.0 million over 2010.
BALANCE SHEET ANALYSIS
Securities Available for Sale
Our investment in securities was $1.68$4.5 billion at December 31, 2008,2011, compared to $1.67$1.5 billion at December 31, 2007.2010. At December 31, 2008, 99.87% of the portfolio was comprised of2011, all securities were classified as available for sale, 0.13% of the securities were classified as trading while none were classified as held to maturity. At December 31, 2007, 88.18% of the portfolio was comprised of securities classified as available for sale, 11.82% of the securities were classified as trading while none were classified as held to maturity.sale. Average investment securities were $1.74$3.1 billion for 2008 as compared2011 and $1.6 for 2010. The increases in both period end and average investment securities were due mainly to $1.73 billion for 2007.the Whitney acquisition.
The vast majority of securities in our portfolio are fixed rate and there were no investments in securities of a single issuer, other than U.S. Treasury and U.S. government agency securities and mortgage-backed securities issued or guaranteed by U.S. government agencies that exceeded 10% of stockholders’ equity. We do not invest in subprime or “Alt A” home mortgage loans. The investments are classified as available for sale and are carried at fair value. Unrealized holding gains are excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive income, a separate component of stockholders’ equity, until realized. At December 31, 2008,2011, the average maturity of the portfolio was 1.563.69 years with an effective duration of 5.032.26 and an average yield of 2.74%3.22%.
Our securities portfolio is an important source of liquidity and earnings for us.earnings. A stated objective in managing the securities portfolio is to provide consistent liquidity to support balance sheet growth but also to providewhile providing a safe and consistent stream of earnings. To that end, management is open to opportunities that present themselves which enables us to improve the structure and earnings potential of the securities portfolio.
The amortized costs of securities classified as available for sale and trading at December 31, 2008, 20072011, 2010 and 2006,2009, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
TABLE 5. Securities by Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Available for sale securities |
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 11,250 |
| $ | 11,353 |
| $ | 60,231 |
|
U.S. government agencies |
|
| 224,803 |
|
| 431,772 |
|
| 1,016,811 |
|
Municipal obligations |
|
| 151,706 |
|
| 197,596 |
|
| 200,891 |
|
Mortgage-backed securities |
|
| 1,041,805 |
|
| 637,578 |
|
| 443,410 |
|
CMOs |
|
| 195,771 |
|
| 143,639 |
|
| 116,161 |
|
Other debt securities |
|
| 25,117 |
|
| 49,653 |
|
| 44,664 |
|
Equity securities |
|
| 1,047 |
|
| 959 |
|
| 26,176 |
|
|
|
|
|
| ||||||
|
| $ | 1,651,499 |
| $ | 1,472,550 |
| $ | 1,908,344 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Trading securities |
|
|
|
|
|
|
|
|
|
|
U.S. government agencies |
|
| — |
|
| 69,793 |
|
| — |
|
Mortgage-backed securities |
|
| — |
|
| 125,387 |
|
| — |
|
Equity securities |
|
| 2,201 |
|
| 2,245 |
|
| — |
|
|
|
|
|
| ||||||
|
| $ | 2,201 |
| $ | 197,425 |
| $ | — |
|
|
|
|
|
|
TABLE 5. Securities by Type
Years Ended December 31, | ||||||||||||
Available for sale securities | 2011 | 2010 | 2009 | |||||||||
U.S. Treasury | $ | 150 | $ | 10,797 | $ | 11,869 | ||||||
U.S. government agencies | 248,595 | 106,054 | 131,858 | |||||||||
Municipal obligations | 294,489 | 181,747 | 188,656 | |||||||||
Mortgage-backed securities | 2,422,891 | 761,704 | 1,076,708 | |||||||||
CMOs | 1,426,495 | 367,662 | 140,663 | |||||||||
Other debt securities | 4,517 | 14,329 | 15,578 | |||||||||
Equity securities | 4,208 | 3,428 | 1,071 | |||||||||
|
|
|
|
|
| |||||||
$ | 4,401,345 | $ | 1,445,721 | $ | 1,566,403 | |||||||
|
|
|
|
|
|
The amortized cost, yield and fair value of debt securities at December 31, 2008,2011, by contractual maturity, were as follows (amounts in(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 6. Securities Maturities by Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| One Year |
| Over One |
| Over Five |
| Over |
| Total |
| Fair |
| Weighted |
| |||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
Available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 10,328 |
| $ | 613 |
| $ | 309 |
| $ | — |
| $ | 11,250 |
| $ | 11,442 |
|
| 1.82 | % |
U.S. government agencies |
|
| 20,192 |
|
| 54,300 |
|
| 150,260 |
|
| 51 |
|
| 224,803 |
|
| 226,610 |
|
| 4.45 | % |
Municipal obligations |
|
| 16,805 |
|
| 62,265 |
|
| 46,059 |
|
| 26,577 |
|
| 151,706 |
|
| 152,470 |
|
| 4.67 | % |
Other debt securities |
|
| 1,410 |
|
| 12,480 |
|
| 8,810 |
|
| 2,417 |
|
| 25,117 |
|
| 22,272 |
|
| 4.97 | % |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| $ | 48,735 |
| $ | 129,658 |
| $ | 205,438 |
| $ | 29,045 |
| $ | 412,876 |
| $ | 412,794 |
|
| 4.50 | % |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
| $ | 49,190 |
| $ | 132,290 |
| $ | 204,412 |
| $ | 26,902 |
| $ | 412,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Yield |
|
| 2.94 | % |
| 4.15 | % |
| 5.04 | % |
| 4.82 | % |
| 4.50 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,047 |
| $ | 1,379 |
|
| N/A |
|
Mortgage-backed securities & CMOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,237,576 |
|
| 1,265,583 |
|
| 5.21 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total available for sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,651,499 |
| $ | 1,679,756 |
|
| 5.03 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Trading securities |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,201 |
| $ | 2,201 |
|
| N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds Sold and Short-term InvestmentsTABLE 6. Securities Maturities by Type
The Company held $175.2 million in federal funds sold in 2008, an increase of $57.4 million from 2007. In the fourth quarter of 2008, the Company purchased a total of $365 million in agency discount notes that all mature in 2009. The Company did this primarily for liquidity and to use these investments as collateral for public fund deposit and customer repos.
Available for sale | One Year or Less | Over One Year Through Five Years | Over Five Years Through Ten Years | Over Ten Years | Total | Fair Value | Weighted Average Yield | |||||||||||||||||||||
U.S. Treasury | $ | — | $ | 150 | $ | — | $ | — | $ | 150 | $ | 164 | 4.65 | % | ||||||||||||||
U.S. government agencies | 230,083 | 18,512 | — | — | 248,595 | 249,903 | 2.43 | % | ||||||||||||||||||||
Municipal obligations | 58,563 | 108,055 | 106,984 | 20,887 | 294,489 | 309,665 | 3.79 | % | ||||||||||||||||||||
Mortgage-backed securities | 3 | 20,231 | 281,997 | 2,120,660 | 2,422,891 | 2,480,345 | 3.65 | % | ||||||||||||||||||||
CMOs | — | 768,787 | 16,090 | 641,618 | 1,426,495 | 1,446,076 | 2.52 | % | ||||||||||||||||||||
Other debt securities | 3,785 | 250 | 217 | 265 | 4,517 | 4,494 | 4.34 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 292,434 | $ | 915,985 | $ | 405,288 | $ | 2,783,430 | $ | 4,397,137 | $ | 4,490,647 | 3.22 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Fair Value | $ | 293,803 | $ | 934,279 | $ | 421,935 | $ | 2,840,630 | $ | 4,490,647 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Weighted Average Yield | 2.59 | % | 1.83 | % | 4.32 | % | 3.60 | % | 3.22 | % | ||||||||||||||||||
Other Equity Securities | $ | 4,208 | $ | 6,253 | N/A | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total available for sale securities | $ | 4,401,345 | $ | 4,496,900 | 3.22 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Loan Portfolio
We experienced an increase in loan growth during 2008 as our efforts to generate loan volume continue. Average loans were $3.9 billion in 2008, an increase of $445.9 million, or 13.0%, over 2007. As indicated by Table 7, commercial and real estateWith the Whitney acquisition, total loans increased $317.4 million, or 15.3%, from 2007. Included in this category are commercial real estate loans, which are secured by properties, used in commercial or industrial operations. We originate commercial and real estate loans$6.2 billion during 2011 to a wide variety of customers in many different industries and, as such, no single industry concentrations existed$11.2 billion at December 31, 2008.
Mortgage loans2011. In general, loan demand from the Company’s customer base continued to be restrained by economic conditions during 2011, although some improvement was noted toward the end of $418.1 million were $32.6 million, or 8.5%, lower than in 2007. We originate both fixed-rate and adjustable-rate mortgage loans. Certain types of mortgage loans are soldthe year. Loan trends will continue to be impacted by expected declines in the secondary mortgage market, while Hancock retains other types. We also originate home equity loans. This product offers customersFDIC-covered portfolio acquired with People’s First at the opportunity to leverage rising home values and equity, when the market allows, to obtain tax-advantaged consumer financing.
Direct consumer loans, which include loans and revolving linesend of credit made directly to consumers, were up $48.6 million, or 9.9%, from 2007. We also originate indirect consumer loans, which consist primarily of consumer loans originated through third parties such as automobile dealers or other point-of-sale channels.
Indirect consumer loans of $406.0 million for 2008 were up $36.8 million, or 10.0%, from 2007. We own a finance company subsidiary, which originates both direct and indirect consumer loans. Finance company loans increased approximately $10.5 million, or 10.0%, at December 31, 2008, compared to the subsidiary’s outstanding loans on December 31, 2007. The loan growth in the finance company was mainly due to continued growth in direct consumer loans.
2009. The following table shows average loan growthsets forth, for the three-year period ended December 31, 2008:periods indicated, the composition of our loan portfolio distinguished between loans originated, acquired and covered.
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|
|
|
|
|
|
TABLE 7. Average Loans |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2008 |
| 2007 |
| 2006 |
| |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
|
| Balance |
| TE Yield |
| Mix |
| Balance |
| TE Yield |
| Mix |
| Balance |
| TE Yield |
| Mix |
| |||||||||
|
| (In thousands) |
| |||||||||||||||||||||||||
Commercial & R.E. Loans |
| $ | 2,393,856 |
|
| 6.00 | % |
| 61.8 | % | $ | 2,076,429 |
|
| 7.37 | % |
| 60.6 | % | $ | 1,747,816 |
|
| 7.21 | % |
| 57.0 | % |
Mortgage loans |
|
| 418,133 |
|
| 5.93 | % |
| 10.8 | % |
| 385,568 |
|
| 5.90 | % |
| 11.2 | % |
| 418,273 |
|
| 5.93 | % |
| 13.7 | % |
Direct consumer loans |
|
| 540,885 |
|
| 6.73 | % |
| 13.9 | % |
| 492,298 |
|
| 8.03 | % |
| 14.4 | % |
| 470,942 |
|
| 8.17 | % |
| 15.4 | % |
Indirect consumer loans |
|
| 405,964 |
|
| 6.81 | % |
| 10.5 | % |
| 369,147 |
|
| 6.68 | % |
| 10.8 | % |
| 349,518 |
|
| 6.21 | % |
| 11.4 | % |
Finance company loans |
|
| 115,070 |
|
| 18.53 | % |
| 3.0 | % |
| 104,567 |
|
| 19.89 | % |
| 3.0 | % |
| 75,673 |
|
| 19.98 | % |
| 2.5 | % |
|
| |||||||||||||||||||||||||||
Total average loans (net of unearned) |
| $ | 3,873,908 |
|
| 6.57 | % |
| 100.0 | % | $ | 3,428,009 |
|
| 7.64 | % |
| 100.0 | % | $ | 3,062,222 |
|
| 7.68 | % |
| 100.0 | % |
|
|
The following table sets forth, for the periods indicated, the composition of our loan portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 8. Loans Outstanding by Type |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loan Portfolio |
| |||||||||||||
|
| Years Ended December 31, |
| |||||||||||||
|
|
| ||||||||||||||
|
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| |||||
|
|
|
|
|
|
| ||||||||||
|
| (In thousands) |
| |||||||||||||
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages 1-4 family |
| $ | 772,170 |
| $ | 705,566 |
| $ | 702,772 |
| $ | 685,681 |
| $ | 701,913 |
|
Residential mortgages multifamily |
|
| 65,979 |
|
| 53,442 |
|
| 69,296 |
|
| 40,678 |
|
| 25,544 |
|
Home equity lines/loans |
|
| 312,598 |
|
| 214,528 |
|
| 133,540 |
|
| 133,823 |
|
| 134,405 |
|
Construction and development |
|
| 586,830 |
|
| 628,037 |
|
| 534,460 |
|
| 391,194 |
|
| 296,114 |
|
Nonresidential |
|
| 943,105 |
|
| 731,318 |
|
| 666,593 |
|
| 609,647 |
|
| 595,013 |
|
Commercial, industrial and other |
|
| 884,102 |
|
| 627,015 |
|
| 551,484 |
|
| 546,635 |
|
| 437,670 |
|
Consumer |
|
| 611,036 |
|
| 564,869 |
|
| 525,164 |
|
| 506,418 |
|
| 478,150 |
|
Lease financing and depository institutions |
|
| 72,571 |
|
| 72,717 |
|
| 69,487 |
|
| 48,007 |
|
| 44,357 |
|
Credit cards and other revolving credit |
|
| 15,933 |
|
| 15,391 |
|
| 14,262 |
|
| 14,316 |
|
| 16,970 |
|
|
|
|
|
|
|
| ||||||||||
|
|
| 4,264,324 |
|
| 3,612,883 |
|
| 3,267,058 |
|
| 2,976,399 |
|
| 2,730,136 |
|
Less, unearned income |
|
| 14,859 |
|
| 16,326 |
|
| 17,420 |
|
| 11,432 |
|
| 11,705 |
|
|
|
|
|
|
|
| ||||||||||
Net loans |
| $ | 4,249,465 |
| $ | 3,596,557 |
| $ | 3,249,638 |
| $ | 2,964,967 |
| $ | 2,718,431 |
|
|
|
|
|
|
|
|
Table 7. Loans Outstanding by Type
Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Originated loans: | ||||||||||||||||||||
Commercial | $ | 1,525,409 | $ | 1,046,431 | $ | 984,057 | $ | 1,011,942 | $ | 727,985 | ||||||||||
Construction | 540,806 | 495,590 | 535,439 | 585,375 | 571,018 | |||||||||||||||
Real estate | 1,259,757 | 1,231,414 | 1,162,838 | 1,083,828 | 898,535 | |||||||||||||||
Residential mortgage loans | 487,147 | 366,183 | 395,946 | 427,545 | 389,684 | |||||||||||||||
Consumer loans | 1,074,611 | 1,008,395 | 1,084,925 | 1,140,600 | 1,009,335 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total originated loans | $ | 4,887,730 | $ | 4,148,013 | $ | 4,163,205 | $ | 4,249,290 | $ | 3,596,557 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquired loans: | ||||||||||||||||||||
Commercial | $ | 2,236,758 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Construction | 603,371 | — | — | — | — | |||||||||||||||
Real estate | 1,656,515 | — | — | — | — | |||||||||||||||
Residential mortgage loans | 734,669 | — | — | — | — | |||||||||||||||
Consumer loans | 386,540 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total acquired loans | $ | 5,617,853 | $ | — | $ | — | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Covered loans: | ||||||||||||||||||||
Commercial | $ | 38,063 | $ | 35,190 | $ | 661 | $ | — | $ | — | ||||||||||
Construction | 118,828 | 157,267 | 298,500 | — | — | |||||||||||||||
Real estate | 82,651 | 181,873 | 179,416 | — | — | |||||||||||||||
Residential mortgage loans | 285,682 | 293,506 | 343,953 | — | — | |||||||||||||||
Consumer loans | 146,219 | 141,315 | 128,440 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total covered loans | $ | 671,443 | $ | 809,151 | $ | 950,970 | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans: | ||||||||||||||||||||
Commercial | $ | 3,800,230 | $ | 1,081,621 | $ | 984,718 | $ | 1,011,942 | $ | 727,985 | ||||||||||
Construction | 1,263,005 | 652,857 | 833,939 | 585,375 | 571,018 | |||||||||||||||
Real estate | 2,998,923 | 1,413,287 | 1,342,254 | 1,083,828 | 898,535 | |||||||||||||||
Residential mortgage loans | 1,507,498 | 659,689 | 739,899 | 427,545 | 389,684 | |||||||||||||||
Consumer loans | 1,607,370 | 1,149,710 | 1,213,365 | 1,140,600 | 1,009,335 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans | $ | 11,177,026 | $ | 4,957,164 | $ | 5,114,175 | $ | 4,249,290 | $ | 3,596,557 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Originated loans include loans from legacy Hancock and loans newly originated from legacy Whitney locations since the acquisition in 2011. Acquired loans are those purchased in the Whitney acquisition on June 4, 2011, including loans that were performing satisfactorily at the date (acquired performing) and loans acquired with evidence of credit deterioration (acquired impaired). Covered loans are those purchased in the December 2009 acquisition of Peoples First, which are covered by loss share agreements between the FDIC and the Company that afford significant loss protection. Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without carryover of any allowance for loan losses. Certain differences in the accounting for originated loans and for acquired performing and acquired impaired loans (which include all Peoples First covered loans) are described in Note 1 to the consolidated financial statements.
Total originated loans increased $739.7 million from December 31, 2010 through year-end 2011 associated mainly with customers of legacy Whitney locations. Originated commercial loans were up $479.0 million, reflecting in part some improvement in overall loan demand across the Company’s market areas toward the end of 2011, seasonal demand from certain Whitney customers and new customer development. The Whitney acquisition brought with it a relatively large base of commercial customers and a team of experienced commercial lending officers.
The Company’s commercial base is diversified over a range of industries, including oil and gas (O&G), wholesale and retail trade in various durable and nondurable products and the manufacture of such products, marine transportation and maritime construction, financial and professional services, and agricultural production. Loans outstanding to O&G industry customers totaled approximately $600 million at December 31, 2011, the majority of which are with customers who provide transportation and other services and products to support exploration and production activities. The Banks lend mainly to middle-market and smaller commercial entities, although they do occasionally participate in larger shared-credit loan facilities with familiar businesses operating in the Company’s market areas. Shared-credits funded at December 31, 2011 totaled $630 million, of which $164 million was with O&G customers.
Originated construction loans, which include land development loans, and originated commercial real estate loans, which include loans on both income-producing and owner-occupied properties, increased a combined $73.6 million in 2011. Although the Banks seek and are funding new loans on construction and commercial real estate projects, the availability of creditworthy projects continues to be limited following the weak economic conditions in recent years and a severe downturn in parts of the real estate market. These conditions and the anticipated payoffs and scheduled payments on existing construction and commercial mortgage loans will limit the rate of growth in these portfolios. Approximately $1.6 billion of the total $3.0 billion in commercial real estate loans at December 31, 2011 is secured by properties used in the borrower’s business.
The $121.0 million increase in originated residential mortgage loans reflected mainly the incremental impact of Whitney lending operations since the acquisition date. The Banks originate both fixed-rate and adjustable-rate home loans, although most fixed-rate production is sold in the secondary mortgage market on a best-efforts basis.
The portfolio of acquired Whitney loans has decreased approximately $840 million since the acquisition date, with $220 million in the commercial category, $440 million in the construction and commercial real estate categories, and $180 million in the residential mortgage and consumer loan categories. The required divestiture of certain Whitney branches included approximately $47 million of loans. There were no significant trends underlying the reduction in the commercial category, although approximately $60 million of commercial relationships with identified credit issues prior to the acquisition date were successfully resolved post-acquisition. Reductions in the acquired construction and commercial real estate categories as well as the residential mortgage and consumer categories reflected mainly normal repayment and refinancing activity. Approximately $140 million of loans with pre-acquisition credit issues were paid off by the end of 2011.
The covered loan portfolio decreased $138 million reflecting normal repayments, charge-offs and foreclosures. The covered portfolio will continue to decline over the terms of the loss share agreements.
The following table shows average loans for each of the prior three years and the effective taxable-equivalent yield earned on each category presented.
Table 8. Average Loans
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Balance | TE Yield | Mix | Balance | TE Yield | Mix | Balance | TE Yield | Mix | ||||||||||||||||||||||||||||
Total loans: | ||||||||||||||||||||||||||||||||||||
Commercial Loans | $ | 2,590,707 | 4.90 | % | 30.42 | % | $ | 1,012,950 | 5.72 | % | 20.24 | % | $ | 1,007,030 | 5.33 | % | 23.37 | % | ||||||||||||||||||
Construction loans | 1,022,344 | 6.04 | % | 12.01 | % | 712,818 | 4.21 | % | 14.24 | % | 578,563 | 4.81 | % | 13.42 | % | |||||||||||||||||||||
Real estate loans | 2,354,944 | 6.01 | % | 27.66 | % | 1,369,077 | 5.54 | % | 27.35 | % | 1,140,300 | 5.67 | % | 26.46 | % | |||||||||||||||||||||
Residential mortgage loans | 1,137,922 | 6.85 | % | 13.37 | % | 733,996 | 6.14 | % | 14.66 | % | 451,823 | 5.75 | % | 10.48 | % | |||||||||||||||||||||
Consumer loans | 1,408,104 | 6.98 | % | 16.54 | % | 1,176,912 | 7.21 | % | 23.51 | % | 1,132,404 | 7.14 | % | 26.27 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total loans | $ | 8,514,021 | 5.97 | % | 100.00 | % | $ | 5,005,753 | 5.86 | % | 100.00 | % | $ | 4,310,120 | 5.89 | % | 100.00 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth, for the periods indicated, the approximate contractual maturity by type of the loan portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 9. Loans Maturities by Type |
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2008 |
| ||||||||||
|
| Within |
| After One |
| After Five |
| Total |
| ||||
|
|
| |||||||||||
|
| (In thousands) |
| ||||||||||
Commercial, industrial and other |
| $ | 352,770 |
| $ | 271,343 |
| $ | 257,037 |
| $ | 881,150 |
|
Real estate - construction |
|
| 324,705 |
|
| 222,952 |
|
| 44,077 |
|
| 591,734 |
|
All other loans |
|
| 333,536 |
|
| 1,290,795 |
|
| 1,167,109 |
|
| 2,791,440 |
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
| $ | 1,011,011 |
| $ | 1,785,090 |
| $ | 1,468,223 |
| $ | 4,264,324 |
|
|
|
|
|
|
|
Table 9. Loans Maturities by Type
December 31, 2011 Maturity Range | ||||||||||||||||
Within One Year | After One Through Five Years | After Five Years | Total | |||||||||||||
Total loans: | ||||||||||||||||
Commercial Loans: | ||||||||||||||||
Commercial | $ | 1,913,917 | $ | 1,304,072 | $ | 582,241 | $ | 3,800,230 | ||||||||
Construction | 593,579 | 524,262 | 145,164 | 1,263,005 | ||||||||||||
Real estate | 593,439 | 2,025,110 | 380,374 | 2,998,923 | ||||||||||||
Residential mortgage loans | 132,316 | 364,392 | 1,010,790 | 1,507,498 | ||||||||||||
Consumer loans | 340,111 | 636,929 | 630,330 | 1,607,370 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loans | $ | 3,573,362 | $ | 4,854,765 | $ | 2,748,899 | $ | 11,177,026 | ||||||||
|
|
|
|
|
|
|
|
The sensitivity to interest rate changes of that portion of our loan portfolio that matures after one year is shown below:
|
|
|
|
|
TABLE 10. Loans Sensitivity to Changes in Interest Rates | ||||
|
|
|
|
|
|
| December 31, |
| |
|
|
| ||
|
| (In thousands) |
| |
Commercial, industrial, and real estate construction maturing after one year: |
|
|
|
|
Fixed rate |
| $ | 669,196 |
|
Floating rate |
|
| 126,213 |
|
Other loans maturing after one year: |
|
|
|
|
Fixed rate |
|
| 1,837,284 |
|
Floating rate |
|
| 620,620 |
|
|
|
| ||
|
|
|
|
|
Total |
| $ | 3,253,313 |
|
|
|
|
TABLE 10. Loans Sensitivity to Changes in Interest Rates
December 31, 2011 | ||||||||||||
Fixed rate | Floating rate | Total | ||||||||||
(In thousands) | ||||||||||||
Total loans: | ||||||||||||
Commercial Loans: | ||||||||||||
Commercial | $ | 1,028,458 | $ | 857,855 | $ | 1,886,313 | ||||||
Construction | 373,844 | 295,582 | 669,426 | |||||||||
Real estate | 1,548,756 | 856,728 | 2,405,484 | |||||||||
Residential mortgage loans | 779,556 | 595,626 | 1,375,182 | |||||||||
Consumer loans | 687,208 | 580,051 | 1,267,259 | |||||||||
|
|
|
|
|
| |||||||
Total loans | $ | 4,417,822 | $ | 3,185,842 | $ | 7,603,664 | ||||||
|
|
|
|
|
|
Non-performing Assets
Non-performing assets consist of loans accounted for on a non-accrual basis, restructured loans and foreclosed assets. Loans are placed on a non-accrual status when (1) payment in full, of principal or interest is not expected or (2) the principal or interest has been in default for a period of 90 days, unless the loan is well secured and in the process of collection. All accrued but uncollected interest related to the loan is deducted from income in the period the loan is assigned a non-accrual status. For such period as a loan is in nonaccrual status, any cash receipts are applied first to principal, second to expenses incurred to cause payment to be made and lastly to the recovery of any reversed interest income and interest that would be due and owing subsequent to the loan being placed on non-accrual status.
The following table sets forth non-performing assets by type for the periods indicated, consisting of non-accrual loans, restructured loanstroubled debt restructurings and real estate owned. Loans past due 90 days or more and still accruing are also disclosed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 11. Non-performing Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| |||||||||||||
|
| |||||||||||||||
|
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| |||||
|
| |||||||||||||||
|
| (In thousands) |
| |||||||||||||
Loans accounted for on a non-accrual basis |
| $ | 29,976 |
| $ | 13,067 |
| $ | 3,500 |
| $ | 10,617 |
| $ | 7,480 |
|
Restructured loans |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| |||||||||||||||
Total non-performing loans |
|
| 29,976 |
|
| 13,067 |
|
| 3,500 |
|
| 10,617 |
|
| 7,480 |
|
Foreclosed assets |
|
| 5,360 |
|
| 2,297 |
|
| 681 |
|
| 1,898 |
|
| 3,513 |
|
|
| |||||||||||||||
Total non-performing assets |
| $ | 35,336 |
| $ | 15,364 |
| $ | 4,181 |
| $ | 12,515 |
| $ | 10,993 |
|
|
| |||||||||||||||
Loans 90 days past due still accruing |
| $ | 11,005 |
| $ | 4,154 |
| $ | 2,552 |
| $ | 25,622 |
| $ | 5,160 |
|
|
| |||||||||||||||
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing assets to loans plus other real estate |
|
| 0.83 | % |
| 0.43 | % |
| 0.13 | % |
| 0.42 | % |
| 0.40 | % |
Allowance for loan losses to non-performing loans and accruing loans 90 days past due |
|
| 133.16 | % |
| 241.43 | % |
| 694.67 | % |
| 195.50 | % |
| 251.85 | % |
Loans 90 days past due still accruing to loans |
|
| 0.26 | % |
| 0.11 | % |
| 0.08 | % |
| 0.86 | % |
| 0.19 | % |
TABLE 11. Non-performing Assets
December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Total loans: | ||||||||||||||||||||
Loans accounted for on a non-accrual basis: | ||||||||||||||||||||
Commercial loans | $ | 69,113 | $ | 83,994 | $ | 46,739 | $ | 25,510 | $ | 11,971 | ||||||||||
Commercial loans—restructured | 4,142 | 8,302 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Commercial loans | 73,255 | 92,296 | 46,739 | 25,510 | 11,971 | |||||||||||||||
Residential mortgage loans | 25,043 | 21,489 | 32,293 | 4,466 | 1,096 | |||||||||||||||
Residential mortgage loans—restructured | — | 409 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total residential mortgage loans | 25,043 | 21,898 | 32,293 | 4,466 | 1,096 | |||||||||||||||
Consumer loans | 4,972 | 6,791 | 7,523 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total non-accrual loans | 103,270 | 120,985 | 86,555 | 29,976 | 13,067 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Restructured loans: | ||||||||||||||||||||
Commercial loans—non-accrual | 4,142 | 8,302 | — | — | — | |||||||||||||||
Residential mortgage loans—non-accrual | — | 409 | — | — | — | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total restructured loans—non-accrual | 4,142 | 8,711 | — | — | — | |||||||||||||||
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|
|
|
| |||||||||||
Commercial loans—still accruing | 12,812 | 3,301 | — | — | — | |||||||||||||||
Residential mortgage loans—still accruing | 1,191 | 629 | — | — | — | |||||||||||||||
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|
|
|
|
|
| |||||||||||
Total restructured loans—still accruing | 14,003 | 3,930 | — | — | — | |||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total restructured loans | 18,145 | 12,641 | — | — | — | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Foreclosed assets | 159,751 | 33,277 | 14,336 | 5,360 | 2,297 | |||||||||||||||
Total non-performing assets* | $ | 277,024 | $ | 158,192 | $ | 100,891 | $ | 35,336 | $ | 15,364 | ||||||||||
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|
|
|
|
| |||||||||||
Loans 90 days past due still accruing | $ | 5,880 | $ | 1,492 | $ | 11,647 | $ | 11,005 | $ | 4,154 | ||||||||||
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|
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|
| |||||||||||
Ratios | ||||||||||||||||||||
Non-performing assets to loans plus foreclosed assets | 2.44 | % | 3.17 | % | 1.97 | % | 0.83 | % | 0.43 | % | ||||||||||
Allowance for loan losses to non-performing assets and accruing loans 90 days past due | 44.14 | % | 51.35 | % | 58.69 | % | 133.16 | % | 241.43 | % | ||||||||||
Loans 90 days past due still accruing to loans | 0.05 | % | 0.03 | % | 0.23 | % | 0.26 | % | 0.11 | % |
* | Includes total non-accrual loans, total restructured loans—still accruing and total foreclosed assets. |
Total non-performing assets at December 31, 2011 were $277.0 million, an increase of $118.8 million, or 75%, from December 31, 2010. The main factor was an increase in foreclosed assets of $126.5 million, including foreclosures from loans on $95.1 million related to the Whitney acquisition and approximately $28.3 million from loans covered under FDIC loss-sharing agreements.
Non-accrual loans were $103.3 million at December 31, 2011, a decrease of $17.7 million from December 31, 2010. Covered and acquired loans accounted for in accordance with ASC 310-30 are considered to be performing due to the application of the accretion method. These loans are excluded from the above table due to their performing status. Certain covered loans accounted for using the cost recovery method or acquired loans accounted for in accordance with ASC 310-20 are disclosed as non-accrual loans. Covered loans accounted for using the cost recovery method totaled $18.8 million and $45.3 million at December 31, 2011 and 2010, respectively. Non-accrual acquired loans accounted for in accordance with ASC 310-20 totaled $1.1 million at December 31, 2011. Included in non-accrual loans is $4.1 million in restructured commercial loans.
Total troubled debt restructurings for the period were $18.1 million. Loan restructurings occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term and, consequently, a modification that would otherwise not be considered is granted to the borrower. The concessions involve paying interest only for a period of 6 to 12 months or extensions of maturity date. We do not typically lower the interest rate or forgive principal or interest as part of the loan modification. There have been no commitments to lend additional funds to any borrowers whose loans have been restructured. Troubled debt restructurings can involve loans remaining on non-accrual, moving to non-accrual, or continuing to accrue, depending on the individual facts and circumstances of the borrower. In accordance with accounting guidance, modified acquired credit-impaired loans are not removed from a pool even if the loans would otherwise be deemed troubled debt restructurings.
The evaluation of the borrower’s financial condition and prospects include consideration of the borrower’s sustained historical repayment performance for a reasonable period prior to the date on which the loan is returned to accrual status. A sustained period of repayment performance generally would be a minimum of six months and would involve payments of cash or cash equivalents. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains classified as a non-accrual loan.
The amount of interest that would have been recorded on non-accrual loans had the loans not been classified as “non-accrual” was $4.9 million, $5.7 million, $2.0 million, $1.1 million $.05 million, $0.8 million, $0.7 million and $0.6$0.05 million for the years ended December 31, 2011, 2010, 2009, 2008 2007, 2006, 2005 and 2004,2007, respectively. Interest actually received on non-accrual loans at December 31, 2011 and 2010 was not material.
Non-performing assets consist of loans accounted for on a non-accrual basis, restructured loans$1.1 million and foreclosed assets. Table 11 presents information related to non-performing assets$1.0 million, respectively, and for the five years ended December 31, 2008. Total non-performing assets at December 31,2009, 2008 were $35.3 million, an increaseand 2007 was not material.
Certain loans that are 90 days or more past due as to interest or principal but are well secured and in the process of $20.0 million, or 130%, from December 31, 2007.collection, are considered still accruing. Loans that are over 90 days past due but still accruing were $11.0$5.9 million at December 31, 2008. This compares2011 compared to $4.2$1.5 million at December 31, 2007. The increase2010. Acquired loans accounted for in non-performing loans, foreclosed assets, and loansaccordance with ASC 310-20 that are 90 days or more past due areand still accruing were $1.0 million at December 31, 2011. As mentioned above, non-accrual loans and accruing loans 90 days past due do not include acquired credit-impaired loans which were written down to their fair value at acquisition and accrete interest income over the effectsremaining life of the on-going national recession, weakness in residential development, and higher unemployment levels across all of our markets. The loans contributing to the increase have been identified, and appropriate write-downs or allowances have been made based on underlying collateral values and those relationships have been placed in the hands of special asset personnel for handling. Management believes that the loans included in the non-performing assets total are being handled appropriately.loan.
Allowance for Loan and Lease Losses
Management, and thewith Audit Committee areoversight, is responsible for maintaining an effective loan review system, and internal controls, which include an effective risk rating system that identifies, monitors, and addresses asset quality problems in an accurate and timely manner. The allowance is evaluated for adequacy on at least a quarterly basis.
The Company’s loan loss reserve methodology is established and maintained at an amount sufficient to cover the estimated credit loss associated with the loan and lease portfolios For a discussion of the Bank as of the date of determination. Credit losses arise not only from credit risk, but also from other risks inherent in the lendingthis process, including, but not limited to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the Allowance for Loan and Lease Losses (ALLL).
The methodology for determining the allowance for loan and lease losses involves significant judgment. Therefore, the Company has established a methodology for measuring the adequacy of the ALLL, which is systematic and consistently applied each quarter. The analysis and methodology include three primary segments: (1) a specific reserve analysis for those loans considered impaired under Statement of Financial Accounting Standards (SFAS) No. 114; (2) a pool analysis of groups of loans within the portfolio that have similar characteristics; and (3) qualitative risk factors and general economic conditions.
A SFAS No. 114 reserve analysis is completed on all loans that have been determined to be impaired by Management. When a loan is determined to be impaired, the amount of that impairment must be measured by either the loan’s observable market price, the fair value of the collateral of the loan, less liquidation costs, if it is collateral dependent, or by calculating the present value of expected future cash flows discounted at the loan’s effective interest rate. If the value of the impaired loan is less than the current balance of the loan, the Company must recognize the impairment by creating a specific reserve allowance for the shortfall.
The second reserve segment, the pool analysis methodology is governed by SFAS No. 5, Accounting for Contingencies. A historical loss rate is calculated for each loan type over the 12 prior quarters to determine the 3 year average loss rate. As circumstances dictate, Management will make adjustmentssee Note 1 to the loss history to reflect significant changesconsolidated financial statements located in the Company’s loss history.
The third segment relates to risks not captured elsewhere. Adjustments are made to historical loss rates to cover risks associated with trends in delinquencies, non-accruals, current economic conditions, credit administration/ underwriting practices, and borrower concentrations.
At December 31, 2008, the allowance for loan losses was $61.7 million, or 1.45%,Item 8 of year-end loans, compared to $47.1 million, or 1.31%, of year-end loans for 2007. Net charge-offs increased significantly to $22.2 million in 2008, as compared to $7.2 million in 2007. Overall, the allowance for loan losses was 133.2% of non-performing loans and accruing loans 90 days past due at year-end 2008 compared to 241.4% at year-end 2007.this annual report on Form 10-K. We utilize quantitative methodologies and modeling to determine the adequacy of the allowance for loan and lease losses and are of the opinion that the allowance at December 31, 20082011 is adequate.
At December 31, 2011, the allowance for loan losses was $124.9 million compared to $82.0 million at December 31, 2010, an increase of $42.9 million. The increase in the allowance for loan losses during 2011 is primarily attributed to a $52.4 million allowance on covered loans. The increase was offset by a $49.4 million increase in the FDIC loss share indemnification asset. The ratio of the allowance for loan losses as a percent of period-end loans was 1.12% at December 31, 2011 compared to 1.65% at December 31, 2010. The decrease in the allowance ratio is related to the addition of Whitney’s loan portfolio. Whitney’s allowance was not carried forward at acquisition. The ratio of the allowance for loan losses as a percent of period-end loans, excluding the acquired and covered portfolios, was 1.70% at December 31, 2011 compared to 1.96% at December 31, 2010. Additional asset quality metrics for the acquired (Whitney), covered (Peoples First) and originated (legacy Hancock plus newly originated) portfolios are included in Selected Financial Data.
Net charge-offs decreased to $45.3 million in 2011, as compared to $50.7 million in 2010. Overall, the allowance for loan losses was 101.0% of non-performing loans and accruing loans 90 days past due at year-end 2011 compared to 51.4% at year-end 2010.
The following table sets forth, for the periods indicated,presents average net loans outstanding, both period-end and average, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off:charged-off for 2011 and the preceding four years:
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TABLE 12. Summary of Activity in the Allowance for Loan Losses |
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|
|
| At and For The Years Ended December 31, |
| |||||||||||||
|
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| ||||||||||||||
|
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| |||||
|
|
|
|
|
|
| ||||||||||
|
| (In thousands) |
| |||||||||||||
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|
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|
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|
|
|
|
|
|
|
|
Net loans outstanding at end of period |
| $ | 4,249,465 |
| $ | 3,596,557 |
| $ | 3,249,638 |
| $ | 2,964,967 |
| $ | 2,718,431 |
|
|
|
|
|
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|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average net loans outstanding |
| $ | 3,873,908 |
| $ | 3,428,009 |
| $ | 3,062,222 |
| $ | 2,883,020 |
| $ | 2,599,561 |
|
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|
| ||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
Balance of allowance for loan losses at beginning of period |
| $ | 47,123 |
| $ | 46,772 |
| $ | 74,558 |
| $ | 40,682 |
| $ | 36,750 |
|
|
|
|
|
|
|
| ||||||||||
Loans charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate |
|
| 1,360 |
|
| 530 |
|
| 758 |
|
| 226 |
|
| 403 |
|
Commercial |
|
| 12,974 |
|
| 2,597 |
|
| 3,676 |
|
| 4,001 |
|
| 5,381 |
|
Consumer, credit cards and other revolving credit |
|
| 13,051 |
|
| 11,159 |
|
| 14,712 |
|
| 11,537 |
|
| 14,383 |
|
Lease financing |
|
| 22 |
|
| 166 |
|
| 369 |
|
| 47 |
|
| 261 |
|
|
|
|
|
|
|
| ||||||||||
Total charge-offs |
|
| 27,407 |
|
| 14,452 |
|
| 19,515 |
|
| 15,811 |
|
| 20,428 |
|
|
|
|
|
|
|
| ||||||||||
Recoveries of loans previously |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate |
|
| 162 |
|
| 188 |
|
| 263 |
|
| 33 |
|
| 179 |
|
Commercial |
|
| 1,036 |
|
| 2,774 |
|
| 4,729 |
|
| 2,757 |
|
| 1,957 |
|
Consumer, credit cards and other revolving credit |
|
| 4,026 |
|
| 4,205 |
|
| 7,489 |
|
| 4,258 |
|
| 5,687 |
|
Lease financing |
|
| — |
|
| 43 |
|
| 10 |
|
| 4 |
|
| — |
|
|
|
|
|
|
|
| ||||||||||
Total recoveries |
|
| 5,224 |
|
| 7,210 |
|
| 12,491 |
|
| 7,052 |
|
| 7,823 |
|
|
|
|
|
|
|
| ||||||||||
Net charge-offs |
|
| 22,183 |
|
| 7,242 |
|
| 7,024 |
|
| 8,759 |
|
| 12,605 |
|
Provision for (reversal of) loan losses |
|
| 36,785 |
|
| 7,593 |
|
| (20,762 | ) |
| 42,635 |
|
| 16,537 |
|
|
|
|
|
|
|
| ||||||||||
Balance of allowance for loan losses at end of period |
| $ | 61,725 |
| $ | 47,123 |
| $ | 46,772 |
| $ | 74,558 |
| $ | 40,682 |
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| ||||||||||
Ratios |
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|
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|
|
|
|
Gross charge-offs to average loans |
|
| 0.71 | % |
| 0.42 | % |
| 0.64 | % |
| 0.55 | % |
| 0.79 | % |
Recoveries to average loans |
|
| 0.13 | % |
| 0.21 | % |
| 0.41 | % |
| 0.24 | % |
| 0.30 | % |
Net charge-offs to average loans |
|
| 0.57 | % |
| 0.21 | % |
| 0.23 | % |
| 0.30 | % |
| 0.48 | % |
Allowance for loan losses to year end loans |
|
| 1.45 | % |
| 1.31 | % |
| 1.44 | % |
| 2.51 | % |
| 1.50 | % |
Net charge-offs to period-end net loans |
|
| 0.52 | % |
| 0.20 | % |
| 0.22 | % |
| 0.30 | % |
| 0.46 | % |
Allowance for loan losses to average net loans |
|
| 1.59 | % |
| 1.37 | % |
| 1.53 | % |
| 2.59 | % |
| 1.56 | % |
Net charge-offs to loan loss allowance |
|
| 35.94 | % |
| 15.37 | % |
| 15.02 | % |
| 11.75 | % |
| 30.98 | % |
TABLE 12. Summary of Activity in the Allowance for Loan Losses
At and For The Years Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net loans outstanding at end of period: | ||||||||||||||||||||
Non-covered | $ | 10,505,583 | $ | 4,148,013 | $ | 4,163,235 | $ | 4,249,290 | $ | 3,596,557 | ||||||||||
Covered | 671,443 | 809,151 | 950,940 | — | — | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total net loans outstanding at end of period | $ | 11,177,026 | $ | 4,957,164 | $ | 5,114,175 | $ | 4,249,290 | $ | 3,596,557 | ||||||||||
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|
|
|
|
|
| |||||||||||
Average net loans outstanding: | ||||||||||||||||||||
Non-covered | $ | 7,764,584 | $ | 4,138,007 | $ | 4,276,259 | $ | 3,873,908 | $ | 3,428,009 | ||||||||||
Covered | 749,437 | 867,746 | 33,861 | — | — | |||||||||||||||
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|
|
|
|
|
| |||||||||||
Total average net loans outstanding | $ | 8,514,021 | $ | 5,005,753 | $ | 4,310,120 | $ | 3,873,908 | $ | 3,428,009 | ||||||||||
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|
|
|
|
|
|
| |||||||||||
Balance of allowance for loan losses at beginning of period | $ | 81,997 | $ | 66,050 | $ | 61,725 | $ | 47,123 | $ | 46,772 | ||||||||||
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|
|
|
|
| |||||||||||
Loans charged-off: | ||||||||||||||||||||
Non-covered loans: | ||||||||||||||||||||
Commercial | $ | 43,654 | $ | 39,393 | $ | 36,912 | $ | 12,996 | $ | 2,763 | ||||||||||
Residential mortgages | 2,634 | 4,615 | 3,670 | 1,360 | 530 | |||||||||||||||
Consumer | 12,500 | 14,258 | 14,333 | 13,051 | 11,159 | |||||||||||||||
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|
|
|
|
|
| |||||||||||
Total non-covered charge-offs | $ | 58,788 | $ | 58,266 | $ | 54,915 | $ | 27,407 | $ | 14,452 | ||||||||||
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| |||||||||||
Covered loans: | ||||||||||||||||||||
Commercial | $ | 11,100 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Consumer | 375 | — | — | — | — | |||||||||||||||
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| |||||||||||
Total covered charge-offs | 11,475 | — | — | — | — | |||||||||||||||
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| |||||||||||
Total charge-offs | $ | 70,263 | $ | 58,266 | $ | 54,915 | $ | 27,407 | $ | 14,452 | ||||||||||
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|
|
|
|
|
| |||||||||||
Recoveries of loans previously charged-off: | ||||||||||||||||||||
Non-covered loans: | ||||||||||||||||||||
Commercial | $ | 20,006 | $ | 3,491 | $ | 767 | $ | 1,036 | $ | 2,817 | ||||||||||
Residential mortgages | 1,091 | 740 | 241 | 162 | 188 | |||||||||||||||
Consumer | 3,887 | 3,353 | 3,642 | 4,026 | 4,205 | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total recoveries | 24,984 | 7,584 | 4,650 | 5,224 | 7,210 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net charge-offs—non-covered | 33,804 | 50,682 | 50,265 | 22,183 | 7,242 | |||||||||||||||
Net charge-offs—covered | 11,475 | — | — | — | — | |||||||||||||||
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|
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|
|
|
|
|
|
| |||||||||||
Total net charge-offs | 45,279 | 50,682 | 50,265 | 22,183 | 7,242 | |||||||||||||||
Provision for loan losses, net (a) | 38,732 | 65,991 | 54,590 | 36,785 | 7,593 | |||||||||||||||
Increase in indemnification asset (a) | 49,431 | 638 | — | — | — | |||||||||||||||
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|
|
|
|
|
| |||||||||||
Balance of allowance for loan losses at end of period | $ | 124,881 | $ | 81,997 | $ | 66,050 | $ | 61,725 | $ | 47,123 | ||||||||||
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|
|
|
|
|
|
| |||||||||||
Ratios: | ||||||||||||||||||||
Non-covered: | ||||||||||||||||||||
Gross charge-offs—non-covered to average loans | 0.69 | % | 1.16 | % | 1.27 | % | 0.71 | % | 0.42 | % | ||||||||||
Recoveries—non-covered to average loans | 0.29 | % | 0.15 | % | 0.11 | % | 0.13 | % | 0.21 | % | ||||||||||
Net charge-offs—non-covered to average loans | 0.40 | % | 1.01 | % | 1.17 | % | 0.57 | % | 0.21 | % | ||||||||||
Allowance for loan losses—non-covered to period-end net loans | 0.75 | % | 1.64 | % | 1.29 | % | 1.45 | % | 1.31 | % | ||||||||||
Net charge-offs—non-covered to period-end net loans | 0.30 | % | 1.02 | % | 0.98 | % | 0.52 | % | 0.20 | % | ||||||||||
Allowance for loan losses—non-covered to average loans | 0.98 | % | 1.62 | % | 1.53 | % | 1.59 | % | 1.37 | % | ||||||||||
Net charge-offs to loan loss allowance—non-covered | 40.61 | % | 62.32 | % | 76.10 | % | 35.94 | % | 15.37 | % | ||||||||||
Covered: | ||||||||||||||||||||
Gross charge-offs—covered to average loans | 0.13 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Recoveries to average loans | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Net charge-offs—covered to average loans | 0.13 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Allowance for loan losses—covered to year end loans | 0.37 | % | 0.08 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Net charge-offs—covered to period-end net loans | 0.10 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Allowance for loan losses—covered to average loans | 0.49 | % | 0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Net charge-offs to loan loss allowance—covered | 27.56 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % |
(a) | The provision for loan losses is shown “net” after coverage provided by FDIC loss share agreements on covered loans. This results in an increase in the indemnification asset, which is the difference between the provision for loan losses on covered loans of $52,437, and the impairment ($3,006) on those covered loans at December 31, 2011. |
At December 31, 2010, the increase in the indemnification asset was the difference between the provision for loan losses on covered loans of $672, and the impairment ($34) on those covered loans.
TABLE 12. Summary of Activity in the Allowance for Loan Losses—(continued)
$000000 | $000000 | $000000 | ||||||||||
December 31, 2011 | ||||||||||||
Originated Loans | Covered Loans | Total | ||||||||||
Beginning Balance | $ | 81,325 | $ | 672 | $ | 81,997 | ||||||
Provision for loan losses before FDIC loss share benefit | 35,726 | 52,437 | 88,163 | |||||||||
Benefit attributable to FDIC loss share agreement | — | (49,431 | ) | (49,431 | ) | |||||||
|
|
|
|
|
| |||||||
Net provision for loan losses | 35,726 | 3,006 | 38,732 | |||||||||
|
|
|
|
|
| |||||||
Increase in indemnification asset | — | 49,431 | 49,431 | |||||||||
Charge-offs | 58,788 | 11,475 | 70,263 | |||||||||
Recoveries | 24,984 | — | 24,984 | |||||||||
|
|
|
|
|
| |||||||
Net charge-offs | 33,804 | 11,475 | 45,279 | |||||||||
|
|
|
|
|
| |||||||
Ending Balance | $ | 83,247 | $ | 41,634 | $ | 124,881 | ||||||
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|
$000000 | $000000 | $000000 | ||||||||||
December 31, 2010 | ||||||||||||
Originated Loans | Covered Loans | Total | ||||||||||
Beginning Balance | $ | 66,050 | $ | — | $ | 66,050 | ||||||
Provision for loan losses before FDIC loss share benefit | 65,957 | 672 | 66,629 | |||||||||
Benefit attributable to FDIC loss share agreement | — | (638 | ) | (638 | ) | |||||||
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|
|
|
|
| |||||||
Net provision for loan losses | 65,957 | 34 | 65,991 | |||||||||
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|
|
|
|
| |||||||
Increase in indemnification asset | — | 638 | 638 | |||||||||
Charge-offs | 58,266 | — | 58,266 | |||||||||
Recoveries | 7,584 | — | 7,584 | |||||||||
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|
|
|
|
| |||||||
Net charge-offs | 50,682 | — | 50,682 | |||||||||
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|
|
|
|
| |||||||
Ending Balance | $ | 81,325 | $ | 672 | $ | 81,997 | ||||||
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|
|
An allocation of the loan loss allowance by major loan category is set forth in the following table. There were no relevant variations in loan concentrations, quality or terms, except for an increase in the outstanding loan portfolio balance. The unallocated portion of the allowance represents supportable estimates of probable losses inherent in the loan portfolio but not specifically related to one category of the portfolio.terms. The allocation is not necessarily indicative of the category of incurred losses, and the full allowance at December 31, 20082011 is available to absorb losses occurring in any category of loans.
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TABLE 13. Allocation of Loan Loss by Category |
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| |||||||||||||||||||||||||||||||
|
| For Years Ended December 31, |
| ||||||||||||||||||||||||||||
|
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| ||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||||||||
|
| Allowance |
| % of |
| Allowance |
| % of |
| Allowance |
| % of |
| Allowance |
| % of |
| Allowance |
| % of |
| ||||||||||
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| ||||||||||||||||||||
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| (In thousands) |
| ||||||||||||||||||||||||||||
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|
|
Real estate |
| $ | 5,315 |
|
| 63.08 |
| $ | 1,998 |
|
| 64.85 |
| $ | 1,697 |
|
| 64.84 |
| $ | 23,042 |
|
| 62.86 |
| $ | 11,253 |
|
| 64.19 |
|
Commercial, industrial and other |
|
| 36,448 |
|
| 22.35 |
|
| 27,546 |
|
| 19.15 |
|
| 27,838 |
|
| 18.77 |
|
| 34,128 |
|
| 19.74 |
|
| 14,974 |
|
| 17.37 |
|
Consumer and other revolving credit |
|
| 19,063 |
|
| 14.57 |
|
| 16,111 |
|
| 16.00 |
|
| 15,363 |
|
| 16.39 |
|
| 15,812 |
|
| 17.40 |
|
| 11,453 |
|
| 18.44 |
|
Unallocated |
|
| 899 |
|
| — |
|
| 1,468 |
|
| — |
|
| 1,874 |
|
| — |
|
| 1,576 |
|
| — |
|
| 3,002 |
|
| — |
|
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|
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| ||||||||||||||||||||
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|
|
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|
|
|
| $ | 61,725 |
|
| 100.00 |
| $ | 47,123 |
|
| 100.00 |
| $ | 46,772 |
|
| 100.00 |
| $ | 74,558 |
|
| 100.00 |
| $ | 40,682 |
|
| 100.00 |
|
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TABLE 13. Allocation of Loan Loss by Category
For Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
Allowance for Loan Losses (1) | % of Loans to Total Loans (2) | Allowance for Loan Losses (1) | % of Loans to Total Loans (2) | Allowance for Loan Losses (1) | % of Loans to Total Loans (2) | Allowance for Loan Losses (1) | % of Loans to Total Loans (2) | Allowance for Loan Losses (1) | % of Loans to Total Loans (2) | |||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||
Total loans: | ||||||||||||||||||||||||||||||||||||||||
Commercial | $ | 78,414 | 71.76 | $ | 56,859 | 63.22 | $ | 42,483 | 61.37 | $ | 37,347 | 62.77 | $ | 29,015 | 60.78 | |||||||||||||||||||||||||
Residential mortgages | 13,918 | 13.94 | 4,626 | 13.53 | 4,782 | 14.82 | 5,315 | 10.30 | 1,998 | 11.10 | ||||||||||||||||||||||||||||||
Consumer | 32,549 | 14.30 | 20,512 | 23.25 | 18,785 | 23.81 | 19,063 | 26.93 | 16,110 | 28.12 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
$ | 124,881 | 100.00 | $ | 81,997 | 100.00 | $ | 66,050 | 100.00 | $ | 61,725 | 100.00 | $ | 47,123 | 100.00 | ||||||||||||||||||||||||||
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(1) | Loans used in the calculation of “allowance for loan losses” are grouped according to loan purpose. |
(2) | Loans used in the calculation of “% of loans to total loans” are grouped by collateral type. |
Deposits
Total average deposits increased by $253.2$4.8 billion, or 69%, to $11.7 billion in 2011 compared to 2010. Whitney’s acquired deposit base added approximately $5.2 billion to total average deposits in 2011, including $2.2 billion of demand deposits, $2.1 billion of interest-bearing transaction accounts, and $0.9 million of time deposits. Foreign branch deposits also came from the Whitney acquisition. Excluding the impact of the Whitney deposit base, total average deposits were down $425.1 million or 5.1%, from $4.9 billion at December 31, 2007 to $5.2 billion at December 31, 2008. The increase occurred primarily6%. Decreases in time deposits which grew $151.5and NOW account balances were partially offset by increases in demand deposits and money market accounts. Average time deposits decreased $684.6 million or 7.7%,due mainly to $2.1 billionthe expected runoff of high priced deposits in 2008. We experienced a slight decreasethe Peoples First deposit base. The Banks have also adjusted the pricing of time deposits in non-interestlight of low market rates, strong liquidity in the deposit base, and weak to moderate loan demand, particularly following the Whitney acquisition. The $185.2 million decline in average NOW balances came largely from public fund customers. Average balances of noninterest bearing demand deposits of $51.0 million.
Over the course of 2008, we continued our focus on multiple accounts, core deposit relationships and strategic placement of time deposit campaigns to stimulate overall deposit growth. In addition, we keep as our highest priority, continued customer demand for safety and liquidity of deposit products. The composition of our deposit mix continued to change during 2008, and ended with a slightly less favorable funding mix thanwere up $151.3 million, or 14%, in 2007. As a percent of our average deposit mix, time2011. Money market account deposits increased by an average of $185.2 million, or 21%, including the movement of some funds from maturing Peoples First time deposits. In the current low rate environment, management continues to 41% from 40% while low cost interest bearing transactionexpect customers will be motivated to hold funds in no or low-cost transactions accounts and demand deposits decreased from 19%until rates begin to 17%. The Banks traditionally price their deposits to position themselves competitively with the local market.rise.
Table 14 shows average deposits for aeach year in the three-year period.period ended December 31, 2011 as well as the effective rates paid during the year.
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TABLE 14. Average Deposits |
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|
| 2008 |
| 2007 |
| 2006 |
| |||||||||||||||||||||
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| |||||||||||||||||||||||||||
|
| Balance |
| Rate |
| Mix |
| Balance |
| Rate |
| Mix |
| Balance |
| Rate |
| Mix |
| |||||||||
|
| (In thousands) |
| |||||||||||||||||||||||||
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|
Non-interest bearing demand deposits |
| $ | 876,669 |
|
| 0.00 | % |
| 17 | % | $ | 927,655 |
|
| 0.00 | % |
| 19 | % | $ | 1,128,850 |
|
| 0.00 | % |
| 22 | % |
NOW account deposits |
|
| 1,195,900 |
|
| 1.65 | % |
| 23 | % |
| 1,067,775 |
|
| 2.52 | % |
| 22 | % |
| 1,167,047 |
|
| 2.45 | % |
| 23 | % |
Money market deposits |
|
| 612,510 |
|
| 1.91 | % |
| 12 | % |
| 529,976 |
|
| 2.50 | % |
| 11 | % |
| 517,542 |
|
| 1.74 | % |
| 10 | % |
Savings deposits |
|
| 370,705 |
|
| 0.26 | % |
| 7 | % |
| 428,599 |
|
| 0.61 | % |
| 8 | % |
| 564,177 |
|
| 0.63 | % |
| 11 | % |
Time deposits (including Public Funds CDs) |
|
| 2,126,623 |
|
| 3.70 | % |
| 41 | % |
| 1,975,171 |
|
| 4.56 | % |
| 40 | % |
| 1,691,811 |
|
| 4.08 | % |
| 34 | % |
|
|
|
|
| ||||||||||||||||||||||||
Total average deposits |
| $ | 5,182,407 |
|
|
|
|
| 100 | % | $ | 4,929,176 |
|
|
|
|
| 100 | % | $ | 5,069,427 |
|
|
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 14. Average Deposits
2011 | 2010 | 2009 | ||||||||||||||||||||||||||||||||||
Balance | Rate | Mix | Balance | Rate | Mix | Balance | Rate | Mix | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
NOW account deposits | $ | 2,252,605 | 0.27 | % | 19 | % | $ | 1,697,720 | 0.65 | % | 25 | % | $ | 1,616,523 | 1.09 | % | 28 | % | ||||||||||||||||||
Money market deposits | 2,076,017 | 0.31 | 18 | 864,582 | 0.71 | 12 | 652,572 | 0.95 | 11 | |||||||||||||||||||||||||||
Savings deposits | 988,645 | 0.07 | 8 | 428,083 | 0.12 | 6 | 372,781 | 0.12 | 7 | |||||||||||||||||||||||||||
Foreign branch deposits | 94,377 | 0.34 | 1 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Time deposits (including Public Funds CDs) | 2,904,845 | 1.45 | 25 | 2,850,284 | 1.94 | 41 | 2,119,738 | 2.84 | 38 | |||||||||||||||||||||||||||
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|
|
|
|
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| |||||||||||||||||||
Total interest-bearing deposits | 8,316,489 | 0.67 | % | 71 | 5,840,669 | 1.25 | % | 84 | 4,761,614 | 1.77 | % | 84 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Non-interest bearing demand deposits | 3,400,064 | 29 | 1,076,829 | 16 | 935,985 | 16 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||
Total deposits | $ | 11,716,553 | 100 | % | $ | 6,917,498 | 100 | % | $ | 5,697,599 | 100 | % | ||||||||||||||||||||||||
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|
Time certificates of deposit of $100,000 and greater at December 31, 20082011 had maturities as follows:
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|
|
TABLE 15. Maturity of Time Deposits greater than or equal to $100,000 |
|
|
|
|
| ||||
|
| December 31, 2008 |
| |
|
|
| ||
|
| (In thousands) |
| |
|
|
|
|
|
Three months |
| $ | 382,551 |
|
Over three through six months |
|
| 166,597 |
|
Over six months through one year |
|
| 94,554 |
|
Over one year |
|
| 413,648 |
|
|
|
| ||
Total |
| $ | 1,057,350 |
|
|
|
|
TABLE 15. Maturity of Time Deposits greater than or equal to $100,000
December 31 2011 | ||||
(In thousands) | ||||
Three months | $ | 653,285 | ||
Over three through six months | 285,194 | |||
Over six months through one year | 321,953 | |||
Over one year | 309,588 | |||
|
| |||
Total | $ | 1,570,020 | ||
|
|
Short-Term Borrowings
The following table sets forth certain information concerning our short-term borrowings, which consist of federal funds purchased, and securities sold under agreements to repurchase.repurchase and FHLB borrowings. The additional borrowings under repurchase agreements in 2011 came mainly through the Whitney acquisition and treasury-management services offered to Whitney deposit customers. Customer repurchase agreements are the main source of such borrowings in each year.
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TABLE 16. Short-Term Borrowings |
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|
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|
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| ||||||||||
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
|
| (In thousands) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased: |
|
|
|
|
|
|
|
|
|
|
Amount outstanding at period-end |
| $ | — |
| $ | 4,100 |
| $ | 3,800 |
|
Weighted average interest at period-end |
|
| — |
|
| 4.02 | % |
| 4.95 | % |
Maximum amount at any month-end during period |
| $ | 33,775 |
| $ | 4,100 |
| $ | 49,160 |
|
Average amount outstanding during period |
| $ | 16,003 |
| $ | 4,174 |
| $ | 11,557 |
|
Weighted average interest rate during period |
|
| 2.20 | % |
| 4.99 | % |
| 5.38 | % |
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase: |
|
|
|
|
|
|
|
|
|
|
Amount outstanding at period-end |
| $ | 505,932 |
| $ | 371,604 |
| $ | 218,591 |
|
Weighted average interest at period-end |
|
| 2.10 | % |
| 3.63 | % |
| 3.72 | % |
Maximum amount at any month end during-period |
| $ | 621,424 |
| $ | 371,604 |
| $ | 425,753 |
|
Average amount outstanding during period |
| $ | 524,712 |
| $ | 216,730 |
| $ | 250,603 |
|
Weighted average interest rate during period |
|
| 2.76 | % |
| 3.70 | % |
| 3.62 | % |
Return on Equity and AssetsTABLE 16. Short-Term Borrowings
Information regarding performance and equity ratios is as follows:
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TABLE 17. Return on Equity and Assets |
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| ||||||||||
|
| Years Ended December 31, |
| |||||||
|
|
|
|
| ||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Return on average assets |
|
| 1.02 | % |
| 1.26 | % |
| 1.69 | % |
Return on average common equity |
|
| 11.18 | % |
| 13.14 | % |
| 19.82 | % |
Dividend payout ratio |
|
| 46.15 | % |
| 41.56 | % |
| 28.59 | % |
|
|
|
|
|
|
|
|
|
|
|
Average common equity to average assets ratio |
|
| 9.10 | % |
| 9.61 | % |
| 8.52 | % |
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
(In thousands) | ||||||||||||
Federal funds purchased: | ||||||||||||
Amount outstanding at period-end | $ | 16,819 | $ | — | $ | 250 | ||||||
Weighted average interest at period-end | 0.19 | % | 0.00 | % | 0.11 | % | ||||||
Maximum amount at any month-end during period | $ | 26,666 | $ | 6,900 | $ | 4,700 | ||||||
Average amount outstanding during period | $ | 12,911 | $ | 2,734 | $ | 3,484 | ||||||
Weighted average interest rate during period | 0.18 | % | 0.13 | % | 0.21 | % | ||||||
Securities sold under agreements to repurchase: | ||||||||||||
Amount outstanding at period-end | $ | 1,027,635 | $ | 364,676 | $ | 484,457 | ||||||
Weighted average interest at period-end | 0.65 | % | 1.69 | % | 1.99 | % | ||||||
Maximum amount at any month end during-period | $ | 1,027,635 | $ | 534,627 | $ | 567,888 | ||||||
Average amount outstanding during period | $ | 681,474 | $ | 477,174 | $ | 523,351 | ||||||
Weighted average interest rate during period | 1.03 | % | 1.95 | % | 2.06 | % | ||||||
FHLB borrowings: | ||||||||||||
Amount outstanding at period-end | $ | — | $ | 10,172 | $ | 30,805 | ||||||
Weighted average interest at period-end | 0.00 | % | 1.19 | % | 0.38 | % | ||||||
Maximum amount at any month end during-period | $ | 10,153 | $ | 30,676 | $ | 156,000 | ||||||
Average amount outstanding during period | $ | 81,673 | $ | 22,846 | $ | 75,160 | ||||||
Weighted average interest rate during period | 0.15 | % | 0.57 | % | 0.17 | % |
COMMITMENTS AND CONTINGENCIES
Loan Commitments and Letters of Credit
In the normal course of business, wethe Banks enter into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of ourtheir customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, and involve,although they expose the Banks to varying degrees elements of credit risk not reflectedand interest rate risk in the consolidated balance sheets. The contract amounts of these instruments reflect our exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued. We undertakemuch the same credit evaluation in making commitments and conditional obligationsway as we do for on-balance-sheet instruments and may require collateral or other credit support for off-balance-sheet financial instruments.funded loans.
At December 31, 2008, we had $885.2 million in unused loan commitments outstanding, of which approximately $610.4 million were at variable rates and the remainder was at fixed rates. A commitmentCommitments to extend credit is an agreementinclude revolving commercial credit lines, nonrevolving loan commitments issued mainly to lendfinance the acquisition and development of construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to a customer as long as the conditionsmeet credit standards established in the agreementunderlying contract and has not violated other contractual conditions. Loan commitments generally have been satisfied. A commitment to extend credit generally has a fixed expiration datedates or other termination clauses and may require payment of a fee by the borrower. Since commitments oftenCredit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, without being fully drawn,and the total commitment amounts do not necessarily represent our future cash requirements. We continually evaluate each customer’s credit worthiness on a case-by-case basis. Occasionally, a credit evaluationrequirements of a customer requesting a commitment to extend credit results in our obtaining collateral to support the obligation.Company.
Letters
A substantial majority of the letters of credit are conditionalstandby agreements that obligate the Banks to fulfill a customer’s financial commitments issued by us to guarantee the performance of a customer to a third party.party if the customer is unable to perform. The credit risk involved in issuing a letter of credit is essentially the same as that involved in extending a loan. At December 31, 2008, we had $113.3 million inBanks issue standby letters of credit issuedprimarily to provide credit enhancement to their customers’ other commercial or public financing arrangements and outstanding.to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Banks undertake the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support.
The following table shows the commitments to extend credit and letters of credit at December 31, 20082011 and 20072010 according to expiration date.
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TABLE 18. Commitments and Letters of Credit |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| ||||||||||||||||
|
|
|
|
| Expiration Date |
|
|
|
| |||||||
|
|
|
|
|
|
|
|
| ||||||||
|
| Total |
| Less than |
| 1-3 |
| 3-5 |
| More than |
| |||||
|
|
|
|
|
|
| ||||||||||
|
| (In thousands) |
| |||||||||||||
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit |
| $ | 885,156 |
| $ | 527,118 |
| $ | 43,454 |
| $ | 66,348 |
| $ | 248,236 |
|
Letters of credit |
|
| 113,274 |
|
| 51,366 |
|
| 11,003 |
|
| 50,905 |
|
| — |
|
|
|
|
|
|
|
| ||||||||||
Total |
| $ | 998,430 |
| $ | 578,484 |
| $ | 54,457 |
| $ | 117,253 |
| $ | 248,236 |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
| Expiration Date |
|
|
|
| |||||||
|
|
|
|
|
|
|
|
| ||||||||
|
| Total |
| Less than |
| 1-3 |
| 3-5 |
| More than |
| |||||
|
|
|
|
|
|
| ||||||||||
|
| (In thousands) |
| |||||||||||||
December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit |
| $ | 1,110,935 |
| $ | 744,412 |
| $ | 46,759 |
| $ | 69,008 |
| $ | 250,756 |
|
Letters of credit |
|
| 86,969 |
|
| 25,225 |
|
| 48,983 |
|
| 12,761 |
|
| — |
|
|
|
|
|
|
|
| ||||||||||
Total |
| $ | 1,197,904 |
| $ | 769,637 |
| $ | 95,742 |
| $ | 81,769 |
| $ | 250,756 |
|
|
|
|
|
|
|
|
Visa IPO and Litigation
In Of the fourth quarter of 2007, we recorded a $2.5 million pretax charge pursuantcommitments to FASB Interpretation No. 45 “Guarantors Accounting and Disclosure Requirements, Including Indirect Guarantees of Indebtedness of Others” (“FIN No. 45”) for liabilities related to VISA USA’s antitrust settlement with American Express and other pending VISA litigation (reflecting our share as a VISA member.) In the first quarter of 2008 as part of VISA’s initial public offering, VISA redeemed 37.5% of shares held by us resulting in proceeds of $2.8 million in a realized security gain. The remaining 62.5% of the Class B shares are restricted and must be held for the longer period of 3 years or until all settlements are complete. At that time, we can keep the Class B shares or convert them to Class A publicly tradeable shares at a conversion rate to be determined.
These shares are recorded at historical cost. The realized securities gain is included in the securities gain line of the noninterest income section of the Consolidated Statements of Incomeextend credit, approximately $3.8 billion carry variable rates and the cash received is recorded in cashremainder fixed rates.
TABLE 17. Commitments and due from banks in the assets sectionLetters of the Consolidated Balance Sheets. In addition, VISA lowered its estimate of pending litigation settlements. Consequently, $1.3 million of the $2.5 million FIN No. 45 liability that was recorded in the fourth quarter was reversed in the first quarter of 2008. The reduction in the litigation liability is recorded in the other liabilities section of the Consolidated Balance Sheets and the reduction in litigation expense is recorded in the other expense line of the noninterest expense section of the Consolidated Statements of Income.Credit
In the fourth quarter of 2008, VISA, Discover Financial Services Inc., and MasterCard Inc. announced that they have settled the antitrust lawsuit and that they are working on the specific terms on the settlement. On December 22, 2008, VISA, Inc. announced that it had deposited $1.1 billion into the litigation escrow account as settlement for the Discover case. Under terms of the plan, Hancock Bank as a member bank bore its portion of the expense via a reduction in share count of Class B shares. There was no cash outlay required of us. Based on the funding and settlement with Discover, we reversed as of December 31, 2008, the portion of the VISA contingency reserve related to Discover of $0.3 million. The reduction in the litigation liability is recorded in the other liabilities section of the Consolidated Balance Sheets and the reduction in litigation expense is recorded in the other expense line of the noninterest expense section of the Consolidated Statements of Income. The settlement did not have a material impact on the Company’s results of operations or financial position. As of December 31, 2008, $0.9 million of the initial $2.5 million FIN No. 45 liability remained in the other liabilities section of the Consolidated Balance Sheets.
RISK MANAGEMENT
Expiration Date | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
December 31, 2011 | ||||||||||||||||||||
Commitments to extend credit | $ | 4,189,421 | $ | 2,948,411 | $ | 556,500 | $ | 420,372 | $ | 264,138 | ||||||||||
Letters of credit | 441,048 | 286,934 | 140,494 | 13,620 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 4,630,469 | $ | 3,235,345 | $ | 696,994 | $ | 433,992 | $ | 264,138 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Expiration Date | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
December 31, 2010 | ||||||||||||||||||||
Commitments to extend credit | $ | 912,206 | $ | 527,426 | $ | 81,719 | $ | 56,715 | $ | 246,346 | ||||||||||
Letters of credit | 87,038 | 31,271 | 35,920 | 19,231 | 616 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 999,244 | $ | 558,697 | $ | 117,639 | $ | 75,946 | $ | 246,962 | ||||||||||
|
|
|
|
|
|
|
|
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|
Credit Risk
The Banks’ primary lending focus is to provide commercial, consumer, and real estate loans to consumers, and to small and middle market businesses, to corporate clients in their respective market areas.areas, and to State, County, and Municipal government entities. Diversification in the loan portfolio is a means of reducing the risks associated with economic fluctuations. The Banks have no significant concentrations of loans to particular borrowers or loans toindustries or any foreign entities. There have been increases in some categories of loans – home equity,The Banks monitor real estate construction/termlending concentrations throughout the year, and C&I loans are examples. These are principally within and in support of the markets that are continuing to rebuild and repair since Hurricane Katrina. Loan demand continues to be strong within those markets. Loan underwriting standards reduce the impact of credit risk to us. Loans are underwritten on the basis of repayment ability and collateral value. Generally, real estate mortgage loans are made when the borrower produces evidence of repayment ability along with equity in the property to offset historical market devaluations.
Allowance for Loan and Lease Losses
The allowance for loan and lease losses “ALLL” is a valuation account available to absorb losses on loans. The ALLL is established and maintained at an amount sufficient to cover the estimated credit loss associated with the loan and lease portfolios as of the date of the determination. Credit losses arisedo not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance for loan and lease losses. Quarterly, we estimate the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on our past loan loss and delinquency experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, and the estimated value ofhave any underlying collateral and current economic conditions. The analysis and methodology include three primary segments. These segments include a pool analysis of various retail loans based upon loss history, a pool analysis of commercial and commercial real estate loans based upon loss historyconcentrations, as defined by loaninteragency guidelines. The Banks have actively decreased their exposure to residential construction/development lending over the course of the last three years. Considering national housing trends, local market demand for housing, price softness in some markets, population migration trends, as well as general economic conditions, the Company will continue to closely monitor this type and a specific reserve analysisof lending in the near future.
Third party property valuations are obtained at the time of origination for those loans considered impaired under SFAS No. 114. All commercial and commercial real estate loans with an outstanding balance of $100,000 or greater are individually reviewed for impairment; substandard mortgage loans with balances of $100,000 or greater are also included in the analysis. All losses are charged to the allowance for loan and lease losses when the loss actually occurs or whensecured loans. When a determination is made that a loss is likely to occur; recoveries are creditedloan has deteriorated to the point of becoming a problem loan, updated valuations may be ordered to help determine if there is impairment, leading to a recommendation for partial charge off or appropriate allowance allocation. The impairment on collateral-dependent loans is measured against the property valuation less estimated selling costs. Selling costs are estimated based on the Bank’s actual experience with the disposition of similar properties. Loans that are risk-graded as substandard or doubtful and are $1,000,000 and greater in size are required to have third party valuations performed annually to determine the extent of impairment and the need for loss allowances or charge-offs. Property valuations are ordered through, and reviewed by, the Bank’s Appraisal Department consistent with regulatory requirements. The Bank typically orders an “as is” valuation for collateral property if the loan losses at the timeis in a criticized loan classification.
For loans under $1,000,000 but over $500,000, we use current loss statistics from sales of receipt.
Commercial loans are considered impaired when it is probable (the future event or events are likelyother real estate to occur) that the bank will be unable to collect all amounts due (including principal and interest) according to the contractual termsdiscount prior property valuations as part of the loan agreement. In order to ensure consideration of all possible impairments, for purposesongoing assessment of the modellevel of impairment in these real estate secured loans. If, in the Banks consider all loans that are risk rated substandard as impaired. When a loan is determined to be impaired, the amountopinion of that impairment must be measured by either the loan’s observable market price, the fair value of the collateral of the loan (less liquidation costs) if it is collateral dependent, or by calculating the present value of expected future cash flows discounted at the loan’s effective interest rate. If the value of the impaired loan is less than the current balance of the loan, the impairment is recognized by creating a specific reserve allowance for the shortfall. Ifmanagement, the value is greater or equal to the loan balance, then no reserve allocationstill in question, it may be made fornecessary to obtain a recertification of the loan. In addition, anyappraisal on hand or obtain an updated or completely new appraisal. New appraisals that indicate impairment are discussed monthly with management and appropriate provisions or charge-offs are recognized promptly.
The Bank maintains an active Loan Review function to help ensure that developing credit problems are captured and recognized in a timely manner. Further, an active Watch List review routine is in place as part of the Bank’s problem loan management strategy and a list of loans included in90 days past due and still accruing is reviewed with management, including the impairment review are not incorporated intoChief Credit Officer, at least monthly. Recommendations flow from all of the pool analysisabove activities to avoid double counting.
Pool analysis is applied for all retail loans. The retail loans are subdivided into three groups, which currently include: mortgage real estate, indirectrecognize non-performing loans and direct consumer loans. A historical loss rate is calculated for each group over the twelve prior quarters to determine the three year average loss rate. As circumstances dictate, management will make adjustments to the loss history to reflect significant changes in our loss history. Adjustments will also be made to historical loss rates to cover risks associated with trends in delinquencies, non-accruals, current economic conditions and credit administration/ underwriting practices and policies.
A historical loss ratio is applied to all commercial loans, commercial real estate loans and leases grouped by product type for which SFAS No. 5 exposure can best be evaluated collectively due to similar attributes. A historical loss rate is calculated for each group over the twelve prior quarters to determine the three year average loss rate. As circumstances dictate, we will make adjustments to the loss history to reflect significant changes in our loss history. Adjustments will also be made to historical loss rates to cover risks associated with trends in delinquencies, non-accruals, current economic conditions and credit administration/ underwriting practices and policies and borrower concentrations.accrual status.
Asset/Liability ManagementASSET/LIABILITY MANAGEMENT
Our assetAsset liability management (ALM) process consists of quantifying, analyzing and controlling interest rate risk (IRR) to maintain stability in net interest income (NII) under varying interest rate environments. The principal objective of ALM is to maximize net interest income while operating within acceptable risk limits established for interest rate risk and maintaining adequate levels of liquidity. Our net earnings are materially dependent on our net interest income. Net
IRR on the Company’s balance sheets consists of reprice, option, yield curve, and basis risks. Reprice risk results from differences in the maturity, or repricing, of asset and liability portfolios. Option risk arises from “embedded options” present in many financial instruments such as loan prepayment options, deposit early withdrawal options and interest income is susceptiblerate options. These options allow customers opportunities to IRRbenefit when market interest rates change, which typically results in higher costs or lower revenue for the Company. Yield Curve risk refers to the degree that interest-bearing liabilities maturerisk resulting from unequal changes in the spread between two or reprice on amore rates for different basis and timing than interest-earning assets. This timing difference represents amaturities for the same instrument. Basis risk refers to the potential risk to our future earnings. When interest-bearing liabilities mature or reprice more quickly than interest-earning assetsfor changes in a given period, a significant increase inthe underlying relationship between market rates of interest and the subsequent impact on customer behavior could adversely affect NII. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates and changes in customer behavior couldindices, which subsequently result in a decreasenarrowing of the profit spread on an earning asset or liability. Basis risk is also present in NII.administered rate liabilities, such as savings accounts, negotiable order of withdrawal accounts, and money market accounts where historical pricing relationships to market rates may change due to the level or directional change in market interest rates.
Management and theThe Asset/Liability Committee (ALCO) directmanages our IRR exposures through pro-active measurement, monitoring, and management actions. ALCO strives to maintain levels of IRR within limits approved by the Board of Directors through a Risk Management policy that is designed to produce a stable net interest margin (NIM) in periods of interest rate fluctuation. In adjusting our asset/liability position,Accordingly, the board of directorsCompany’s interest rate sensitivity and liquidity are monitored on an ongoing basis by its ALCO, which oversees market risk management attempt to direct our IRR while enhancingand establishes risk measures, limits and policy guidelines for managing the NIM. At times, depending on the general levelamount of interest rates,rate risk and its effect on net interest income and capital. A variety of measures are used to provide for a comprehensive view of the relationship between long-term and short-termmagnitude of interest rates, market conditions and competitive factors, we may determine strategies that could add torate risk, the distribution of risk, the level of IRRrisk over time and the exposure to changes in order to increase its NIM. Not withstanding our IRR management activities,certain interest rate relationships.
The Company utilizes an asset/liability model as the potential for changing interest rates is an uncertainty that can have an adverse effect on net earnings.
To controlprimary quantitative tool in measuring the amount of interest rate risk we regularly monitorassociated with changing market rates. The model is used to perform net interest income (NII), economic value of equity (EVE), and GAP analysis. The model quantifies the volumeeffects of various interest rate scenarios on projected net interest income and net income over the next 12 months and 24 month periods. The model measures the impact on net interest income relative to a base case scenario of hypothetical fluctuations in interest rates over the next 12 months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet. The impact of interest sensitive assets compared with interest sensitive liabilities over specific time intervals. Interest-sensitive assets and liabilities are those that are subject to maturity or repricing within a given time period. We also administer this sensitivity through the development and implementation of investment, lending, funding and pricing strategies designed to achieve NII performance goals while minimizing the potential negative variations in NII under differentrate derivatives, such as interest rate scenarios. Investment strategies, including portfolio durationsswaps, caps and cash flows, are formulated and continually adjusted during the implementation to assure attainment of objectivesfloors, is also included in the most effective manner. Loanmodel. Other interest rate-related risks such as prepayment, basis and deposit pricingoption risk are adjusted weekly to reflect current interest rate and competitive market environments, with duration targets on both reviewed monthly.also considered.
The static gap reportStatic Gap Report shown in Table 1918 measures the net amounts of assets and liabilities that repricere-price within a given time period over the remaining lives of those instruments. At December 31, 2008,2011, our cumulative repricingre-pricing gap in the one year interval was 9.0%+10.0%. The asset sensitive position representsresults from a deposit funding mix with significant security portfolio cash flow within one year.balances in non-interest bearing and core interest bearing transaction deposits along with a large asset position short-term interest bearing investments and fed funds sold. The earning asset position is strategically managed with a balance in our loan growth (fixed versus floating and duration targets) and securities portfolio cash flows. We believe we are welladequately positioned for the current rate environment.
To further control IRR, we structure our loan portfolio to provide appropriate investment opportunities while minimizing potential volatility in earnings from extension risk. Deposit strategies continue to emphasize a mix of non-certificate of deposit core accounts and consumer time deposits. However, the 2008 yield curve environment has created more demand on consumer time deposits with maturities less than one year.
The following table sets forth the scheduled re-pricing or maturity of our assets and liabilities at December 31, 2008 and December 31, 2007. The assumed prepayment of investments and loans was based on our assessment of current market conditions on such dates. Estimates have been made for the re-pricing of savings, NOW and money market accounts. Actual prepayments and deposit withdrawals will differ from the following analysis due to variable economic circumstances and consumer behavior. Although assets and liabilities may have similar maturities or repricingre-pricing periods, reactions will vary as to timing and degree of interest rate change.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 19. Analysis of Interest Sensitivity | ||||||||||||||||||||||
| ||||||||||||||||||||||
|
| December 31, 2008 | ||||||||||||||||||||
| ||||||||||||||||||||||
|
| Overnight |
| Within |
| 6 months |
| 1 to 3 |
| > 3 |
| Non-Sensitive |
| Total |
| |||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| (In thousands) | ||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
| $ | 1,666 |
| $ | 743,616 |
| $ | 283,566 |
| $ | 300,332 |
| $ | 349,755 |
| $ | 3,022 |
| $ | 1,681,957 |
|
Federal funds sold & short-term investments |
|
| — |
|
| 376,499 |
|
| 172,917 |
|
| — |
|
| — |
|
| — |
|
| 549,416 |
|
Loans |
|
| — |
|
| 1,912,989 |
|
| 324,287 |
|
| 947,141 |
|
| 1,025,438 |
|
| — |
|
| 4,209,855 |
|
Other assets |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 726,026 |
|
| 726,026 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total Assets |
| $ | 1,666 |
| $ | 3,033,104 |
| $ | 780,770 |
| $ | 1,247,473 |
| $ | 1,375,193 |
| $ | 729,048 |
| $ | 7,167,254 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing transaction deposits |
| $ | — |
| $ | 1,289,545 |
| $ | 353,995 |
| $ | 856,040 |
| $ | 196,735 |
| $ | — |
| $ | 2,696,315 |
|
Time deposits |
|
| — |
|
| 1,064,269 |
|
| 256,781 |
|
| 737,807 |
|
| 212,879 |
|
| — |
|
| 2,271,736 |
|
Non-interest bearing deposits |
|
| — |
|
| — |
|
| — |
|
| 48,144 |
|
| 914,742 |
|
| — |
|
| 962,886 |
|
Federal funds purchased |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Borrowings |
|
| 255,932 |
|
| 9,427 |
|
| — |
|
| 131,978 |
|
| 119,920 |
|
| — |
|
| 517,257 |
|
Other liabilities |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 109,561 |
|
| 109,561 |
|
Stockholders’ equity |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 609,499 |
|
| 609,499 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total Liabilities & Equity |
| $ | 255,932 |
| $ | 2,363,241 |
| $ | 610,776 |
| $ | 1,773,969 |
| $ | 1,444,276 |
| $ | 719,060 |
| $ | 7,167,254 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Interest sensitivity gap |
| $ | (254,266 | ) | $ | 669,863 |
| $ | 169,994 |
| $ | (526,496 | ) | $ | (69,083 | ) | $ | 9,988 |
|
|
|
|
Cumulative interest rate sensitivity gap |
| $ | (254,266 | ) | $ | 415,597 |
| $ | 585,591 |
| $ | 59,095 |
| $ | (9,988 | ) |
| — |
|
|
|
|
Cumulative interest rate sensitivity gap as a percentage of total earning assets |
|
| (3.9 | )% |
| 6.4 | % |
| 9.0 | % |
| 0.9 | % |
| (0.2 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 19. Analysis of Interest Sensitivity (continued) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2007 | ||||||||||||||||||||
| ||||||||||||||||||||||
|
| Overnight |
| Within |
| 6 months |
| 1 to 3 |
| > 3 |
| Non-Sensitive |
| Total |
| |||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| (In thousands) | ||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
| $ | 2,003 |
| $ | 513,981 |
| $ | 188,854 |
| $ | 412,428 |
| $ | 530,680 |
| $ | 29,675 |
| $ | 1,677,621 |
|
Federal funds sold & short-term investments |
|
| 126,281 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 126,281 |
|
Loans |
|
| — |
|
| 1,811,351 |
|
| 289,337 |
|
| 745,239 |
|
| 722,464 |
|
| — |
|
| 3,568,391 |
|
Other assets |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 683,686 |
|
| 683,686 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total Assets |
| $ | 128,284 |
| $ | 2,325,332 |
| $ | 478,191 |
| $ | 1,157,667 |
| $ | 1,253,144 |
| $ | 713,361 |
| $ | 6,055,979 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing transaction deposits |
| $ | — |
| $ | 652,915 |
| $ | 299,590 |
| $ | 875,616 |
| $ | 139,795 |
| $ | — |
| $ | 1,967,916 |
|
Time deposits |
|
| — |
|
| 1,414,005 |
|
| 511,260 |
|
| 144,284 |
|
| 64,195 |
|
| — |
|
| 2,133,744 |
|
Non-interest bearing deposits |
|
| — |
|
| — |
|
| — |
|
| 45,402 |
|
| 862,472 |
|
| — |
|
| 907,874 |
|
Federal funds purchased |
|
| 4,100 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,100 |
|
Borrowings |
|
| 371,604 |
|
| 11 |
|
| — |
|
| 30 |
|
| 10,518 |
|
| — |
|
| 382,163 |
|
Other liabilities |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 105,995 |
|
| 105,995 |
|
Stockholders’ equity |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 554,187 |
|
| 554,187 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total Liabilities & Equity |
| $ | 375,704 |
| $ | 2,066,931 |
| $ | 810,850 |
| $ | 1,065,332 |
| $ | 1,076,980 |
| $ | 660,182 |
| $ | 6,055,979 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Interest sensitivity gap |
| $ | (247,420 | ) | $ | 258,401 |
| $ | (332,659 | ) | $ | 92,335 |
| $ | 176,164 |
| $ | 53,179 |
|
|
|
|
Cumulative interest rate sensitivity gap |
| $ | (247,420 | ) | $ | 10,981 |
| $ | (321,678 | ) | $ | (229,343 | ) | $ | (53,179 | ) |
| — |
|
|
|
|
Cumulative interest rate sensitivity gap as a percentage of total earning assets |
|
| (4.6 | )% |
| 0.2 | % |
| (5.9 | )% |
| (4.2 | )% |
| (1.0 | )% |
|
|
|
|
|
|
TABLE 18. Analysis of Interest Sensitivity
December 31, 2011 | ||||||||||||||||||||||||||||
Within 1 month | 1 month to 6 months | 6 months to 1 year | 1 to 3 years | > 3 years | Non-Sensitive Balance | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Securities | $ | 106,109 | $ | 659,094 | $ | 403,431 | $ | 1,243,943 | $ | 2,084,323 | $ | — | $ | 4,496,900 | ||||||||||||||
Federal funds sold & short-term investments | 1,184,419 | — | — | — | — | — | 1,184,419 | |||||||||||||||||||||
Loans | 5,114,894 | 1,028,648 | 961,649 | 2,332,689 | 882,159 | 929,365 | 11,249,404 | |||||||||||||||||||||
Other assets | — | — | — | — | — | 2,843,373 | 2,843,373 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Assets | $ | 6,405,422 | $ | 1,687,742 | $ | 1,365,080 | $ | 3,576,632 | $ | 2,966,482 | $ | 3,772,738 | $ | 19,774,096 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Interest bearing transaction deposits | $ | 562,092 | $ | 1,638,962 | $ | 1,171,298 | $ | 1,852,459 | $ | 2,009,717 | $ | — | $ | 7,234,528 | ||||||||||||||
Time deposits | 373,027 | 1,276,723 | 691,318 | 423,668 | 197,979 | — | 2,962,715 | |||||||||||||||||||||
Non-interest bearing deposits | 90,503 | 430,730 | 471,996 | 1,482,295 | 3,040,812 | — | 5,516,336 | |||||||||||||||||||||
Fed funds purchased | 16,819 | — | — | — | — | — | 16,819 | |||||||||||||||||||||
Borrowings | 816,403 | 183,882 | 25,000 | 85,000 | 271,240 | — | 1,381,525 | |||||||||||||||||||||
Other liabilities | — | — | — | — | — | 295,010 | 295,010 | |||||||||||||||||||||
Stockholders’ equity | — | — | — | — | — | 2,367,163 | 2,367,163 | |||||||||||||||||||||
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|
| |||||||||||||||
Total Liabilities & Equity | $ | 1,858,844 | $ | 3,530,297 | $ | 2,359,612 | $ | 3,843,422 | $ | 5,519,748 | $ | 2,662,173 | $ | 19,774,096 | ||||||||||||||
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|
|
| |||||||||||||||
Interest sensitivity gap | $ | 4,546,578 | $ | (1,842,555 | ) | $ | (994,532 | ) | $ | (266,790 | ) | $ | (2,553,266 | ) | $ | 1,110,565 | ||||||||||||
Cumulative interest rate sensitivity gap | $ | 4,546,578 | $ | 2,704,023 | $ | 1,709,491 | $ | 1,442,701 | $ | (1,110,565 | ) | — | ||||||||||||||||
Rate sensitive assets to rate sensitive liabilities | 3.45 | 0.48 | 0.58 | 0.93 | 0.54 | |||||||||||||||||||||||
Cumulative interest rate sensitivity gap as a percentage of total earning assets | 26.9 | % | 16.0 | % | 10.1 | % | 8.5 | % | (6.6 | )% |
Net Interest Income at Risk
NIINet interest income at risk measures the risk of a declinechange in earnings due to changes in interest rates. Table 2019 presents an analysis of our IRRinterest rate risk as measured by the estimated changes in NIInet interest income resulting from an instantaneous and sustained parallel shift in the yield curve at December 31, 2008.2011. Shifts are measured in 100 basis point increments in a range of as much as +/-500 basis points (+ 300 through - 100+100 basis points)points presented in Table 19) from base case. Base case encompasses key assumptions for asset/liability mix, loan and deposit growth, pricing, prepayment speeds, deposit decay rates, securities portfolio cash flows and reinvestment strategy, and the market value of certain assets under the various interest rate scenarios. The base case scenario assumes that the current interest rate environment is held constant throughout the forecast period; the instantaneous shocks are performed against that yield curve.
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|
|
|
|
TABLE 20. Net Interest Income (te) at Risk | ||||
| ||||
Change in |
| Estimated Increase | ||
| ||||
(basis points) |
|
| ||
|
|
|
|
|
-100 |
|
| -8.5 | % |
Stable |
|
| 0.0 | % |
+ 100 |
|
| 7.2 | % |
+ 200 |
|
| 11.4 | % |
+ 300 |
|
| 12.3 | % |
| ||||
Most Likely |
|
| 2.0 | % |
TABLE 19. Net Interest Income (te) at Risk
Additionally, we have forecasted a Most Likely NII scenario based on its conservative projection of yield curve changes for the coming 12 month period. This scenario utilizes all base case assumptions, applying those assumptions against a yield curve forecast that incorporates the
Change in Interest Rates | Estimated Increase (Decrease) in NII December 31, 2011 | |||
(basis points) | ||||
Stable | 0.0 | % | ||
+ 100 | 1.7 | % | ||
+ 200 | 4.4 | % | ||
+ 300 | 7.3 | % |
Note: Decrease in interest rates discontinued in current interest rate environment and projects certain strategic pricing changes over the forecast period. Table 20 indicates that our level of NII significantly increases under rising rates and declines under falling rates. It should be noted that -100 is only presented as interest rates are at historic lows with Fed Funds target at 0.25% at December 31, 2008. The most likely scenario for interest rates projects a modest 2.0% increase in net interest income to base case indicating that the
balance sheet is appropriately structured for the current rate environment.
The increasing rate scenarios show significant increase to levels of net interest income while the down 100 scenario shows lower levels of NII. These scenarios are instantaneous shocks that assume balance sheet management will mirror base case. Should the yield curve begin to rise or fall, management has several strategies available to maximize earnings opportunities or offset the negative impact to earnings. For example, in a rising rate environment, deposit pricing strategies could be adjusted to offer more competitive rates on long and medium-term CDs and less competitive rates on short-term CDs. Another opportunity at the start of such a cycle would be reinvesting the securities portfolio cash flows into short-term or floating-rate securities. On the loan side the company can make more floating-rate loans that tie to indexindices that re-price more frequently, such as LIBOR (London interbank offered rate) and make fewer fixed-rate loans. Finally, there are a number of hedge strategies by which management could use derivatives, including swaps and purchased ceilings, to lock in net interest margin protection; to date, we have not entered into any hedge transactions for the purpose of earnings protection.
Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to NII than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring IRR,interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing,re-pricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. We consider all of these factors in monitoring its exposure to interest rate risk.
LIQUIDITY
Liquidity Management
Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that we have adequate cash flow to meet our various needs, including operating, strategic and capital. Without proper liquidity management, we would not be able to perform the primary function of a financial intermediary and would not be able to meet the needs of the communities in which we have a presence and serve. In addition, the parent holding company’s principal source of liquidity is dividends from its subsidiary banks. Liquidity is required at the parent holding company level for the purpose of paying dividends to stockholders, servicing of any debt we may have, business combinations as well as general corporate expenses.
The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and maturing interest-bearing deposits with other banks are additional sources of liquidity funding. As shown in Table 2120 below, our liquidity ratios as of December 31, 20082011 and 20072010 for free securities stood at 22.5% or $378.4 million31.2% and 17.1% or $286.9 million,15.3%, respectively. Free securities represent unencumbered and unpledged securities assigned to dealer repo agreements that mature within 30 days and securities assigned to the Federal Reserve Bank discount window which are not pledged against current funding and which are available within one day.
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|
TABLE 21. Liquidity Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2008 |
| 2007 |
| ||
|
| ||||||
|
| (In thousands) |
| ||||
Free securities |
|
| 22.50 | % |
| 17.10 | % |
Free securities-net wholesale funds/core deposits |
|
| -5.25 | % |
| -7.40 | % |
|
| ||||||
Wholesale funding diversification |
|
|
|
|
|
|
|
Certificate of deposits > $100,000 (excluding public funds) |
|
| 11.57 | % |
| 11.10 | % |
Brokered certificate of deposits |
|
| 0.00 | % |
| 0.00 | % |
Public fund certificate of deposits |
| $ | 168,388 |
| $ | 220,942 |
|
|
| ||||||
Net wholesale funding maturity concentrations |
|
|
|
|
|
|
|
Overnight |
|
| 0.00 | % |
| 0.10 | % |
Up to 3 months |
|
| 6.92 | % |
| 6.00 | % |
Up to 6 months |
|
| 1.64 | % |
| 3.80 | % |
Over 6 months |
|
| 9.94 | % |
| 7.30 | % |
|
| ||||||
Net wholesale funds |
| $ | 1,325,274 |
| $ | 1,037,475 |
|
Core deposits |
| $ | 4,474,625 |
| $ | 4,158,189 |
|
|
|
TABLE 20. Liquidity Ratios
2011 | 2010 | |||||||
(In thousands) | ||||||||
Free securities | 31.20 | % | 15.30 | % | ||||
Free securities-net wholesale funds/core deposits | 0.23 | % | 2.65 | % | ||||
|
|
|
| |||||
Wholesale funding diversification | ||||||||
Certificate of deposits > $100,000* | 9.53 | % | 15.55 | % | ||||
Brokered certificate of deposits | 0.00 | % | 0.00 | % | ||||
Public fund certificate of deposits | $ | 111,030 | $ | 114,084 | ||||
|
|
|
| |||||
Net wholesale funds | $ | 1,340,299 | $ | 1,001,318 | ||||
Core deposits | $ | 14,216,496 | $ | 5,510,460 | ||||
|
|
|
|
*CDs > $100K includes public funds in 2011 and 2010
The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts. Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and represent our incremental borrowing capacity.liquidity. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs. Our short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $359.8 million$2.73 billion and borrowing capacity at the Federal Reserve’s Discount Windowdiscount window in excess of $100$954.6 million. As of December 31, 20082011 and 2007,2010, our core deposits were $4.5$14.2 billion and $4.2$5.5 billion, respectively, and Net Wholesale Fundingnet wholesale funding stood at $1.3 billion and $1.0 billion, respectively. Core deposits represent total deposits less CDs greater than $100,000 and foreign branch deposits.
Cash generated from operations is another important source of funds to meet liquidity needs. The Consolidated Statements of Cash Flows provide an analysisconsolidated statements of cash fromflows provide present operating investing,cash flows and financing activitiessummarize all significant sources and uses of funds for each of the three years in the period ended December 31, 2008. Cash flows from operations are a significant part of liquidity management, contributing significant levels of funds in 2008, 2007 and 2006.2011.
Cash flows from operations increased to $94.4 million in 2008 from $56.1 million in 2007. Net cash used by investing activities increased to $1.11 billion in 2008 from $107.3 million in 2007. Federal funds sold increased $57.4 million during 2008 and decreased $94.5 million during 2007. Cash flows provided by financing activities were $1.03 billion in 2008, primarily from the increase in deposits compared to cash flows provided by financing activities of $43.7 million in 2007.
Contractual Obligations
We have contractual obligations to make future payments on certain debt and lease agreements. Table 2221 summarizes all significant contractual obligations at December 31, 2008,2011, according to payments due by period. Obligations under deposit contracts and short-term borrowings are not included. The maturities of time deposits are scheduled in Table 15. Purchased obligations represent legal and binding contracts to purchase services and goods that cannot be settled or terminated without paying substantially all of the contractual amounts. Not included are contracts entered into to support ongoing operations that either do not specify fixed or minimum amounts of goods or services or are cancelable on short notice without cause and without significant penalty.
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|
TABLE 22. Contractual Obligations | ||||||||||||||||
| ||||||||||||||||
|
| Payment due by period |
| |||||||||||||
|
| |||||||||||||||
|
| Total |
| Less than |
| 1-3 |
| 3-5 |
| More than |
| |||||
|
| |||||||||||||||
|
| (In thousands) |
| |||||||||||||
Certificates of deposit |
| $ | 2,271,736 |
| $ | 1,321,050 |
| $ | 737,807 |
| $ | 212,879 |
| $ | — |
|
Short-term debt obligations |
|
| 516,619 |
|
| 265,359 |
|
| 131,978 |
|
| 119,282 |
|
| — |
|
Long-term debt obligations |
|
| 236 |
|
| 14 |
|
| 35 |
|
| 49 |
|
| 138 |
|
Capital lease obligations |
|
| 402 |
|
| 152 |
|
| 107 |
|
| 60 |
|
| 83 |
|
Operating lease obligations |
|
| 32,583 |
|
| 4,563 |
|
| 6,677 |
|
| 4,152 |
|
| 17,191 |
|
|
| |||||||||||||||
Total |
| $ | 2,821,576 |
| $ | 1,591,138 |
| $ | 876,604 |
| $ | 336,422 |
| $ | 17,412 |
|
|
|
TABLE 21. Contractual Obligations
Payment due by period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Long-term debt obligations | $ | 415,374 | $ | 13,664 | $ | 162,337 | $ | 53,505 | $ | 185,868 | ||||||||||
Capital lease obligations | 196 | 71 | 81 | 11 | 33 | |||||||||||||||
Operating lease obligations | 117,652 | 12,944 | 23,070 | 19,176 | 62,462 | |||||||||||||||
Purchase obligations | 59,027 | 27,725 | 25,251 | 5,152 | 899 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 592,249 | $ | 54,404 | $ | 210,739 | $ | 77,844 | $ | 249,262 | ||||||||||
|
|
|
|
|
|
|
|
|
|
CAPITAL RESOURCES
A strong capital position, which is vital to continued profitability, also promotes depositor and investor confidence and provides a solid foundation for future growth. Composite ratings by the respective regulatory authorities of the Company and the Banks establish minimum capital levels. Currently, we are required to maintain minimum Tier 1 leverage ratios of at least 3%, subject to an increase up to 5%, depending on the composite rating. At December 31, 2008,2011, our capital balances and those of the Banks were well in excess of current regulatory minimum requirements. Asrequirements as indicated in Table 23 below, our regulatory capital ratios far exceed22 below. The Company and the minimum required ratios, and weBanks have been categorized as “well capitalized” in the most recent notice received from theirour regulators.
We remain very well capitalized. As of December 31, 2008,2011, our Leverage (tier one) Ratio(Tier 1) ratio stands at 8.06%8.17%, while the Tangible Equity Ratiotangible equity ratio is 7.62% (see below in Table 23)7.96%. WhileAlthough these and certain other ratios declined from the end of 2010 as a result of the Whitney acquisition, we remain very well capitalized so that we can maintain flexibility for future capitalstrategic needs, including acquisitions, weadditional acquisitions. We may consider raising additional capital at some point in the future.
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|
TABLE 23. Risk-Based Capital and Capital Ratios | ||||||||||||||||
| ||||||||||||||||
|
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| |||||
|
| |||||||||||||||
|
| (In thousands) |
| |||||||||||||
Tier 1 regulatory capital |
| $ | 550,216 |
| $ | 498,731 |
| $ | 510,639 |
| $ | 420,283 |
| $ | 399,320 |
|
Tier 2 regulatory capital |
|
| 61,874 |
|
| 47,447 |
|
| 46,583 |
|
| 46,218 |
|
| 38,161 |
|
|
| |||||||||||||||
Total regulatory capital |
| $ | 612,090 |
| $ | 546,178 |
| $ | 557,222 |
| $ | 466,501 |
| $ | 437,481 |
|
|
| |||||||||||||||
Risk-weighted assets |
| $ | 5,452,992 |
| $ | 4,523,479 |
| $ | 4,097,400 |
| $ | 3,665,722 |
| $ | 3,222,554 |
|
|
| |||||||||||||||
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage (Tier 1 capital to average assets) |
|
| 8.06 | % |
| 8.51 | % |
| 8.63 | % |
| 7.85 | % |
| 8.97 | % |
Tier 1 capital to risk-weighted assets |
|
| 10.09 | % |
| 11.03 | % |
| 12.46 | % |
| 11.47 | % |
| 12.39 | % |
Total capital to risk-weighted assets |
|
| 11.22 | % |
| 12.07 | % |
| 13.60 | % |
| 12.73 | % |
| 13.58 | % |
Common stockholders’ equity to total assets |
|
| 8.50 | % |
| 9.15 | % |
| 9.36 | % |
| 8.02 | % |
| 9.96 | % |
Tangible common equity to total assets |
|
| 7.62 | % |
| 8.08 | % |
| 8.24 | % |
| 6.89 | % |
| 8.58 | % |
|
|
TABLE 22. Risk-Based Capital and Capital Ratios
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Tier 1 regulatory capital | $ | 1,506,218 | $ | 782,301 | $ | 756,108 | $ | 550,216 | $ | 498,731 | ||||||||||
Tier 2 regulatory capital | 276,819 | 64,240 | 66,397 | 61,874 | 47,447 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total regulatory capital | $ | 1,783,037 | $ | 846,541 | $ | 822,505 | $ | 612,090 | $ | 546,178 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Risk-weighted assets | $ | 13,118,693 | $ | 5,099,630 | $ | 6,305,707 | $ | 5,162,676 | $ | 4,523,479 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios | ||||||||||||||||||||
Leverage (Tier 1 capital to average assets) | 8.17 | % | 9.65 | % | 10.60 | % | 8.06 | % | 8.51 | % | ||||||||||
Tier 1 capital to risk-weighted assets | 11.48 | % | 15.34 | % | 11.99 | % | 10.66 | % | 11.03 | % | ||||||||||
Total capital to risk-weighted assets | 13.59 | % | 16.60 | % | 13.04 | % | 11.86 | % | 12.07 | % | ||||||||||
Common stockholders’ equity to total assets | 11.97 | % | 10.52 | % | 9.63 | % | 8.50 | % | 9.15 | % | ||||||||||
Tangible common equity to total assets | 7.96 | % | 9.69 | % | 8.81 | % | 7.62 | % | 8.08 | % |
We made no stock purchases in 2011 or 2010. During 2008, we purchased a total of 6,458 shares of common stock at an aggregate price of $260,000, or $40.26 per share. During 2007, weThese shares were purchased a total of 1,556,220 shares of common stock at an aggregate price of $60.4 million, or approximately $38.84 per share.
In November 2007, the board of directors approvedunder the 2007 Stock Repurchase Plan, authorizing the repurchase of 3,000,000 shares, or approximately 10% of our outstanding common stock. Subject to market conditions, repurchases will be conducted solely through a Rule 10b-1 repurchase plan. Shares repurchased under this plan will be held in treasury and used for general corporate purposes as determined by our board of directors. In 2007, we purchased 10,842 shares of common stock under this plan at an aggregate price of $421,000, or approximately $38.84 per share.
During 2007, we completed the July 2000 common stock buyback program, which provided
FOURTH QUARTER RESULTS
Net income for the repurchasefourth quarter of 3,320,000 shares or 10% of the outstanding common stock at that time. In 2007, we purchased the remaining 1,545,378 shares of common stock available to be repurchased under this plan at an aggregate price of $60.02011 was $19.0 million, or $0.22 per diluted common share, compared to $30.4 million, or $0.36, and $17.0 million, or $0.46, respectively in the third quarter of 2011 and the fourth quarter of 2010. Tax-effected merger-related expenses reduced diluted earnings per share by $0.31 in the fourth quarter of 2011 and by $0.17 in 2011’s third quarter. Merger-related expenses totaled $40.2 million and $22.8 million, respectively, in the fourth and third quarters of 2011. Merger expenses in the fourth quarter of 2010 were immaterial. The following discussion highlights recent factors impacting Hancock’s results of operations and financial position.
Total loans at December 31, 2011 were $11.2 billion, an increase of $75 million, or 1% from September 301, 2011. The linked-quarter increase reflected growth in the commercial and industrial portfolio and in the residential mortgage and consumer loan portfolios. Linked-quarter declines in both construction and commercial real estate loans reflected in part anticipated payoffs and scheduled payments in excess of new loans funded. After adjusting for the $50 million decline in the FDIC covered Peoples First portfolio during the fourth quarter, total loans increased $125 million.
Total deposits at December 31, 2011 were $15.7 billion, up $421 million, or 3% from September 30, 2011. The linked-quarter increase reflected year-end seasonality of both commercial and public fund customers. Historically, both legacy Hancock and legacy Whitney customers have built deposits at year-end, with some of those deposits leaving in the first quarter, particularly in demand deposits.
Demand deposits comprised 35% of total deposits at year-end 2011 compared to 33% at September 30, 2011. Interest bearing public fund deposits totaled $1.6 billion at year-end 2011, up $258 million, or 19%, from September 30, 2011. The increase was mainly related to seasonal tax collections toward year end. Time deposits decreased $279 million during the fourth quarter of 2011 with approximately $38.84 per share.$56 million from the anticipated runoff in the Peoples First deposit base. In the current low rate environment management continues to expect customers will be motivated to hold funds in no or low-cost transaction accounts until rates begin to rise.
Table 24 summarizes our unaudited quarterly financial resultsHancock recorded a total provision for 2008 and 2007.loan losses for the fourth quarter of 2011 of $11.5 million compared to $9.3 million in the third quarter of 2011. The fourth quarter total provision included $1.3 million, net, related to the Peoples First portfolio which is covered under FDIC loss-sharing agreements, compared to $0.2 million for the third quarter of 2011. Net charge-offs from the non-covered loan portfolio in the fourth quarter of 2011 were $11.3 million, or 0.40% of average total loans on an annualized basis. This compares to net non-covered loan charge-offs of $7.8 million, or 0.28% of average total loans, for the third quarter of 2011. Net charge-offs from previously impaired loan pools in the covered portfolio were $11.1 million for the fourth quarter of 2011.
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|
TABLE 24. Summary of Quarterly Results | |||||||||||||
| |||||||||||||
|
| 2008 |
| ||||||||||
|
|
| |||||||||||
|
| First |
| Second |
| Third |
| Fourth |
| ||||
|
|
|
|
|
| ||||||||
|
| (In thousands, except per share data) |
| ||||||||||
Interest income (te) |
| $ | 87,227 |
| $ | 84,164 |
| $ | 86,774 |
| $ | 87,726 |
|
Interest expense |
|
| (34,345 | ) |
| (29,573 | ) |
| (29,357 | ) |
| (32,727 | ) |
|
|
|
|
|
| ||||||||
Net interest income (te) |
|
| 52,882 |
|
| 54,591 |
|
| 57,417 |
|
| 54,999 |
|
Provision for loan losses |
|
| (8,818 | ) |
| (2,787 | ) |
| (8,064 | ) |
| (17,116 | ) |
Noninterest income |
|
| 36,421 |
|
| 31,838 |
|
| 30,115 |
|
| 29,404 |
|
Noninterest expense |
|
| (50,134 | ) |
| (52,189 | ) |
| (55,483 | ) |
| (55,637 | ) |
Taxable equivalent adjustment |
|
| (2,455 | ) |
| (2,432 | ) |
| (2,642 | ) |
| (2,925 | ) |
|
|
|
|
|
| ||||||||
Income before income taxes |
|
| 27,896 |
|
| 29,021 |
|
| 21,343 |
|
| 8,725 |
|
Income tax expense |
|
| (7,839 | ) |
| (8,037 | ) |
| (5,338 | ) |
| (405 | ) |
|
|
|
|
|
| ||||||||
Net income |
| $ | 20,057 |
| $ | 20,984 |
| $ | 16,005 |
| $ | 8,320 |
|
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|
|
|
|
| ||||||||
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|
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|
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|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.64 |
| $ | 0.67 |
| $ | 0.51 |
| $ | 0.26 |
|
Diluted |
| $ | 0.63 |
| $ | 0.66 |
| $ | 0.50 |
| $ | 0.26 |
|
|
|
|
|
|
|
|
|
|
|
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|
|
| 2007 |
| ||||||||||
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| |||||||||||
|
| First |
| Second |
| Third |
| Fourth |
| ||||
|
|
|
|
|
| ||||||||
|
| (In thousands, except per share data) |
| ||||||||||
Interest income (te) |
| $ | 88,077 |
| $ | 87,162 |
| $ | 89,982 |
| $ | 90,015 |
|
Interest expense |
|
| (34,308 | ) |
| (33,394 | ) |
| (36,467 | ) |
| (36,067 | ) |
|
|
|
|
|
| ||||||||
Net interest income (te) |
|
| 53,769 |
|
| 53,768 |
|
| 53,515 |
|
| 53,948 |
|
Provision for loan losses |
|
| (1,211 | ) |
| (1,238 | ) |
| (1,554 | ) |
| (3,590 | ) |
Noninterest income |
|
| 26,510 |
|
| 30,786 |
|
| 31,232 |
|
| 32,158 |
|
Noninterest expense |
|
| (49,708 | ) |
| (52,374 | ) |
| (55,857 | ) |
| (58,804 | ) |
Taxable equivalent adjustment |
|
| (2,416 | ) |
| (2,267 | ) |
| (2,373 | ) |
| (2,483 | ) |
|
|
|
|
|
| ||||||||
Income before income taxes |
|
| 26,944 |
|
| 28,675 |
|
| 24,963 |
|
| 21,229 |
|
Income tax expense |
|
| (7,715 | ) |
| (8,352 | ) |
| (7,224 | ) |
| (4,628 | ) |
|
|
|
|
|
| ||||||||
Net income |
| $ | 19,229 |
| $ | 20,323 |
| $ | 17,739 |
| $ | 16,601 |
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.59 |
| $ | 0.63 |
| $ | 0.55 |
| $ | 0.53 |
|
Diluted |
| $ | 0.58 |
| $ | 0.62 |
| $ | 0.55 |
| $ | 0.53 |
|
Net interest income (te) isfor the primary componentfourth quarter of earnings2011 was $181.3 million, compared to $180.2 million in the third quarter of 2011. Average earning assets declined approximately 1% between these periods, while the net interest margin (te) increased by 7 basis points to 4.39% in the fourth quarter of 2011. The impact of net purchase accounting adjustments drove the increase in the margin. The margin continued to be favorably impacted by a shift in funding sources and representsa decline in funding costs, offset by a less favorable shift in the difference, or spread, between revenue generated from interest-earningmix of earning assets and a decline in investment portfolio yields.
Noninterest income totaled $60.6 million for the interest expensefourth quarter of 2011 compared to $65.0 million in the third quarter of 2011. Approximately 60%, or $2.5 million, of the linked-quarter decline in noninterest income reflects the impact of the reduction in debit card interchange rates related to funding those assets.the Durbin amendment. These changes began to be implemented at the beginning of the fourth quarter for certain of the Banks’ card accounts. As discussed earlier, the Company expects an additional loss of revenue of approximately $2 million per quarter when the new rates become effective for all of the Banks’ card accounts in 2012.
Noninterest expense, excluding merger-related expense, was down $5.9 million, or 3%, for the fourth quarter of 2011 compared to the prior quarter in 2011. This decline mainly reflects a $4 million reduction in personnel expense and a $3 million reduction in ORE expense. The efficiency ratio, excluding merger costs, was 65.39% for the fourth quarter of 2011 compared to 66.98% for the third quarter of 2011.
The summary of quarterly financial information appearing in Item 8 of this annual report on Form 10-K provides selected comparative financial information for each of the four quarters on 2011 and 2010.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The accounting principles we follow and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry whichindustry. The significant accounting principles and practices we follow are described in Note 1 to the consolidated financial statements. These principles and practices requires management to make estimates and assumptions about future events. Theseevents that affect the amounts reported in the consolidated financial statements and accompanying notes. We evaluate the estimates and assumptions are based on our best estimates and judgments. We evaluate estimates and assumptionswe make on an ongoing basis using historical experience and other factors, includingto help ensure that the current economic environment. We adjust suchresulting reported amounts reflect management’s best estimates and assumptions whenjudgments given current facts and circumstances dictate. Illiquid credit markets, volatile equity markets, rising unemployment levels and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. CertainThe following discusses certain critical accounting policies that involve a higher degree of judgment and complexity in producing estimates that may significantly affect the more significant judgments and estimates usedamounts reported in the preparation of the consolidated financial statements.statements and notes.
Acquisition Accounting
Acquisitions areaccounted for under the purchase method of accounting. Purchased assets, including identifiable intangible assets, and assumed liabilities are recorded at their respective acquisition date fair values. Management applies various valuation methodologies to these assets and liabilities which often involve a significant degree of judgment, particularly when liquid markets do not exist for the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets and certain other assets and liabilities acquired or assumed in business combinations. Management uses significant estimates and assumption to value such items, including, among others, projected cash flows, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The purchase date valuations and any subsequent adjustments also determine the amount of goodwill or bargain purchase gain recognized in connection with the business combination. Certain assumptions and estimates must be updated regularly in connection with the ongoing accounting for purchased loans. Valuation assumptions and estimates may also have to be revisited in connection with periodic assessments of possible value impairment, including impairment of goodwill, intangible assets and certain other long-lived assets. The use of different assumptions could produce significantly different valuation results, which could have material positive or negative effects on the Company’s results of operations.
Allowance for Loan Losses
Our most critical accounting policy relates to ourThe allowance for loan losses represents the amount which, reflects the estimated losses resulting from the inability of our borrowers to make loan payments. If the financial condition of its borrowers were to deteriorate, resulting in an impairment of their ability to make payments, the estimates of the allowance wouldmanagement’s judgment, will be updated, and additional provisions for loan losses may be required.
The allowance for loan and lease losses (ALLL) is a valuation account availableadequate to absorb credit losses on loans. The ALLL is established and maintained at an amount sufficient to cover the estimated credit loss associated withinherent in the loan and lease portfolios of the Banksportfolio as of the datebalance sheet date. In estimating inherent losses, management applies judgment and assumptions to project the amount and timing of the determination. Credit losses arise not only from credit risk, but also fromfuture cash flows, collateral values and other risks inherent in the lending process including, but not limitedfactors used to collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance for loan and lease losses. Quarterly, management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on our past loan loss and delinquency experience, known and inherent risks in the portfolio, adverse situations that may affectassess the borrowers’ ability to repay and the estimated value of any underlying collateral and current economic conditions. The analysis and methodology include three primary segments. These segments include a pool analysis of various retail loans based upontheir obligations. Historical loss history, a pool analysis of commercial and commercial real estate loans based upon loss history by loan type, and a specific reserve analysis for those loans considered impaired under SFAS No. 114. All commercial and commercial real estate loans with an outstanding balance of $100,000 or greater are individually reviewed for impairment; substandard mortgage loans with balances of $100,000 or greatertrends are also includedconsidered, as are economic conditions, industry trends, portfolio trends and borrower-specific financial information. Although we believe we have identified appropriate factors for review and designed and implemented adequate procedures to support our estimation process, the allowance remains an estimate about the effect of matters that are inherently uncertain. Changes in the analysis. All lossescircumstances considered when management develops its judgments and assumptions can materially impact the allowance estimate, potentially subjecting the Company to significant earnings volatility.
Accounting for Retirement Benefits
Management makes a variety of assumptions in applying principles that govern the accounting for benefits under the Company’s defined benefit pension plans and other postretirement benefit plans. These assumptions are chargedessential to the allowance for loanactuarial valuation that determines the amounts recognized and lease losses whencertain disclosures it makes in the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are creditedconsolidated financial statements related to the allowance for loan losses at the timeoperation of receipt.
Retirement Employee Benefit Plans
Retirement and employee benefit plan assets, liabilities and pension costs are determined utilizing actuarially determined present value calculations. The valuationthese plans. Two of the benefit obligation and net periodic expense is considered critical, as it requires management and its actuaries to make estimates regardingmore significant assumptions concern the amount and timing of expected cash outflows including assumptions about mortality, expected service periods,long-term rate of compensation increases and the long-term return on plan assets and the rate needed to discount projected benefits to their present value. Changes in these assumptions impact the cost of retirement benefits recognized in net income and comprehensive income. Certain assumptions are closely tied to current conditions and are generally revised at each measurement date. For example, the discount rate is reset annually with reference to market yields on high quality fixed-income investments. Other assumptions, such as the rate of return on assets, are determined, in part, with reference to historical and expected conditions over time and are not as susceptible to frequent revision. Holding other factors constant, the cost of retirement benefits will move opposite to changes in either the discount rate or the rate of return on assets. Note 9 – Retirement and Employee Benefit Plans, included in the accompanying Notes12 to the Consolidated Financial Statements,consolidated financial statements provides further discussion on the accounting for Hancock’s retirement and employee benefit plans and the estimates used in determining the actuarial present value of the benefit obligations and the net periodic benefit expense.
Fair Value Accounting Estimates
Generally accepted accounting principles require the use of fair values in determining the carrying values of certain assets and liabilities, as well as for specific disclosures. The most significant include securities, loans held for sale, mortgage servicing rights and net assets acquired in business combinations. Certain of these assets do not have a readily available market to determine fair value and require an estimate based on specific parameters. When market prices are unavailable, we determine fair values utilizing parameters, which are constantly changing, including interest rates, duration, prepayment speeds and other specific conditions.
In most cases, these specific parameters require a significant amount of judgment by management.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (“SFAS No. 157”), on January 1, 2008.SFAS No. 157establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. SFAS No. 157 defines a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value giving preference to quoted prices in active markets (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Available for sale securities classified as Level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and other debt and equity securities. Level 2 classified available for sale securities include mortgage-backed debt securities, collateralized mortgage obligations, and state and municipal bonds.
In October 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a Financial Asset in a Market That is Not Active, which clarifies the application of Statement of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements, in an inactive market. Application issues clarified include: how management’s internal assumptions should be considered when measuring fair value when relevant observable data do not exist; how observable market information in a market that is not active should be considered when measuring fair value; and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. FSP 157-3 was effective immediately and did not have a material impact on the Company’s financial condition or results of operations.
The Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment SFAS No. 115 (“SFAS No. 159”), on January 1, 2008. The Company did not elect to fair value any additional items under SFAS No. 159. The Company, in accordance with Financial Accounting Standards Board Staff Position No. 157-2 “The Effective Date of FASB Statement No. 157”, will defer application of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities until January 1, 2009.
Income Taxes
We use the asset and liability method of accounting for income taxes. Determination of the deferred and current provision requires analysis by management of certain transactions and the related tax laws and regulations. Management exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. Those judgments and estimates are re-evaluated on a continual basis as regulatory and business factors change.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 to our Consolidated Financial Statements included elsewherethat appears in Item 8 of this report.Form 10-K.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The information required for this item is included in the section entitled “Asset/Liability Management” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that appears in Item 7 of this Form 10-K and is incorporated here by reference.
ITEM 8. |
The Company’s unaudited quarterly results for 2011 and 2010 are presented below. The operations acquired in the Whitney merger are reflected in 2011 from the June 4, 2011 acquisition date.
Summary of Quarterly Results
Index(Unaudited)
2011 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Interest income (te) | $ | 85,405 | $ | 118,335 | $ | 200,936 | $ | 199,453 | ||||||||
Interest expense | (15,769 | ) | (16,418 | ) | (20,653 | ) | (18,131 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income (te) | 69,636 | 101,917 | 180,283 | 181,322 | ||||||||||||
Taxable equivalent adjustment | (2,872 | ) | (2,858 | ) | (3,241 | ) | (2,953 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income | 66,764 | 99,059 | 177,042 | 178,369 | ||||||||||||
Provision for loan losses | (8,822 | ) | (9,144 | ) | (9,256 | ) | (11,512 | ) | ||||||||
Noninterest income | 34,132 | 46,679 | 64,951 | 60,572 | ||||||||||||
Noninterest expense | (73,019 | ) | (121,366 | ) | (194,019 | ) | (205,610 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 19,055 | 15,228 | 38,718 | 21,819 | ||||||||||||
Income tax expense | (3,727 | ) | (3,140 | ) | (8,342 | ) | (2,854 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | $ | 15,328 | $ | 12,088 | $ | 30,376 | $ | 18,965 | ||||||||
|
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|
| |||||||||
Period end balance sheet data | ||||||||||||||||
Total assets | $ | 8,311,034 | $ | 19,757,545 | $ | 19,415,689 | $ | 19,774,096 | ||||||||
Earning assets | 7,201,598 | 16,867,167 | 16,666,181 | 16,930,723 | ||||||||||||
Loans | 4,840,975 | 11,249,053 | 11,101,566 | 11,177,026 | ||||||||||||
Deposits | 6,697,310 | 15,587,909 | 15,292,209 | 15,713,579 | ||||||||||||
Stockholders’ equity | 1,057,699 | 2,386,313 | 2,426,662 | 2,367,163 | ||||||||||||
Average balance sheet data | ||||||||||||||||
Total assets | $ | 8,237,371 | $ | 11,588,822 | $ | 19,555,684 | $ | 19,331,379 | ||||||||
Earning assets | 7,075,382 | 9,931,572 | 16,591,314 | 16,429,537 | ||||||||||||
Loans | 4,887,749 | 6,678,840 | 11,248,728 | 11,142,188 | ||||||||||||
Deposits | 6,752,470 | 9,211,332 | 15,461,704 | 15,305,563 | ||||||||||||
Stockholders’ equity | 879,838 | 1,458,552 | 2,419,403 | 2,422,924 | ||||||||||||
Ratios | ||||||||||||||||
Return on average assets | 0.75 | % | 0.42 | % | 0.62 | % | 0.39 | % | ||||||||
Return on average common equity | 7.07 | % | 3.32 | % | 4.98 | % | 3.11 | % | ||||||||
Net interest margin (te) | 3.97 | % | 4.11 | % | 4.32 | % | 4.39 | % | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.41 | $ | 0.22 | $ | 0.36 | $ | 0.22 | ||||||||
Diluted | $ | 0.41 | $ | 0.22 | $ | 0.36 | $ | 0.22 | ||||||||
Cash dividends per common share | $ | 0.24 | $ | 0.24 | $ | 0.24 | $ | 0.24 | ||||||||
Market data: | ||||||||||||||||
High sales price | $ | 35.68 | $ | 34.57 | $ | 33.25 | $ | 33.72 | ||||||||
Low sales price | 30.67 | 30.04 | 25.61 | 25.38 | ||||||||||||
Period-end closing price | 32.84 | 30.98 | 26.81 | 31.97 | ||||||||||||
Trading volume | 25,942 | 32,122 | 38,205 | 41,091 |
Net interest income (te) is the primary component of earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to Financial Statementsfunding those assets.
Summary of Quarterly Results (continued)
(Unaudited)
2010 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Interest income (te) | $ | 95,396 | $ | 92,788 | $ | 88,284 | $ | 87,917 | ||||||||
Interest expense | (25,800 | ) | (21,868 | ) | (18,576 | ) | (16,100 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income (te) | 69,596 | 70,920 | 69,708 | 71,817 | ||||||||||||
Taxable equivalent adjustment | (3,017 | ) | (3,047 | ) | (2,886 | ) | (2,878 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income | 66,579 | 67,873 | 66,822 | 68,939 | ||||||||||||
Provision for loan losses | (13,826 | ) | (24,517 | ) | (16,258 | ) | (11,390 | ) | ||||||||
Noninterest income | 31,381 | 35,293 | 35,208 | 35,067 | ||||||||||||
Noninterest expense | (67,823 | ) | (72,122 | ) | (68,060 | ) | (71,257 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 16,311 | 6,527 | 17,712 | 21,359 | ||||||||||||
Income tax expense | (2,478 | ) | (27 | ) | (2,859 | ) | (4,339 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | $ | 13,833 | $ | 6,500 | $ | 14,853 | $ | 17,020 | ||||||||
|
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| |||||||||
Period end balance sheet data | ||||||||||||||||
Total assets | $ | 8,565,480 | $ | 8,500,018 | $ | 8,239,362 | $ | 8,138,327 | ||||||||
Earning assets | 7,481,886 | 7,421,956 | 7,157,273 | 7,107,078 | ||||||||||||
Loans | 5,011,690 | 4,972,202 | 4,907,697 | 4,957,164 | ||||||||||||
Deposits | 7,004,727 | 6,960,571 | 6,708,798 | 6,775,719 | ||||||||||||
Stockholders’ equity | 850,803 | 861,282 | 865,780 | 856,548 | ||||||||||||
Average balance sheet data | ||||||||||||||||
Total assets | $ | 8,654,396 | $ | 8,511,555 | $ | 8,364,660 | $ | 8,180,211 | ||||||||
Earning assets | 7,474,544 | 7,343,904 | 7,194,100 | 7,044,192 | ||||||||||||
Loans | 5,008,539 | 5,008,838 | 4,975,934 | 4,951,533 | ||||||||||||
Deposits | 7,122,156 | 6,993,017 | 6,836,626 | 6,723,464 | ||||||||||||
Stockholders’ equity | 853,119 | 861,135 | 872,936 | 875,327 | ||||||||||||
Ratios | ||||||||||||||||
Return on average assets | 0.65 | % | 0.31 | % | 0.70 | % | 0.83 | % | ||||||||
Return on average common equity | 6.58 | % | 3.03 | % | 6.75 | % | 7.71 | % | ||||||||
Net interest margin (te) | 3.75 | % | 3.87 | % | 3.85 | % | 4.06 | % | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.37 | $ | 0.17 | $ | 0.40 | $ | 0.46 | ||||||||
Diluted | $ | 0.37 | $ | 0.17 | $ | 0.40 | $ | 0.46 | ||||||||
Cash dividends per common share | $ | 0.24 | $ | 0.24 | $ | 0.24 | $ | 0.24 | ||||||||
Market data: | ||||||||||||||||
High closing price | $ | 45.86 | $ | 43.90 | $ | 35.40 | $ | 37.26 | ||||||||
Low closing price | 38.23 | 33.27 | 26.82 | 28.88 | ||||||||||||
Period-end closing price | 41.81 | 33.36 | 30.07 | 34.86 | ||||||||||||
Trading volume | 9,612 | 12,443 | 14,318 | 13,701 |
Net interest income (te) is the primary component of earnings and Financial Statement Schedulerepresents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
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The management of Hancock Holding Company has prepared the consolidated financial statements and other information in our Annual Report in accordance with accounting principles generally accepted in the United States of America and is responsible for its accuracy. The financial statements necessarily include amounts that are based on management’s best estimates and judgments.
In meeting its responsibility, management relies on internal accounting and related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the Company’s financial records and to safeguard the Company’s assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal control system.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13(a) – 15(f). Under the supervision and with the participation of management, including the Company’s principal executive officers and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). This section relates to management’s evaluation of internal control over financial reporting, including controls over the preparation of the schedules equivalent to the basic financial statements and compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the effectiveness of internal controls.
The Company’s internal controls over financial reporting as of December 31, 2011 has been audited by PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their accompany report which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011.
Based on the Company’s evaluation under the framework inInternal Control – Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2008.2011.
Carl J. Chaney | John M. Hairston | Michael M. Achary | ||
President & | Chief Executive Officer & | Chief Financial Officer | ||
Chief Executive Officer | Chief Operating Officer | February 28, 2012 | ||
February | February |
|
Report of Independent Registered Public Accounting Firm
TheTo the Board of Directors and Stockholders
Shareholders
of Hancock Holding Company:
We have auditedIn our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Hancock Holding Company’sCompany (the “Company”) and its subsidiaries at December 31, 2011 and December 31, 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008,2011, based on criteria established inInternal Control - Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Hancock HoldingCommission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Hancock Holdingthese financial statements and on the Company’s internal control over financial reporting based on our audit.
integrated audits. We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our auditaudits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audits of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our auditaudits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit providesaudits provide a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because management’s assessment and our audit were conducted to also meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’sManagement’s assessment and our audit of Hancock Holdingthe Company’s internal control over financial reporting also included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9 C)Y-9C) to comply with the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). A company’s internal control over financial reporting includes those policies and procedures that (1)(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3)(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Hancock Holding Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission./s/PricewaterhouseCoopers LLP
We do not express an opinion or any other form of assurance on management’s statement referring to compliance with laws and regulations.February 28, 2012
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hancock Holding Company and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008, and our report dated February 27, 2009 expressed an unqualified opinion on those consolidated financial statements.New Orleans, Louisiana
/s/ KPMG LLPBirmingham, AlabamaFebruary 27, 2009
Report of Independent Registered Public Accounting Firm
The Board of Directors and StockholdersHancock Holding Company:
We have audited the accompanying consolidated balance sheets of Hancock Holding Company and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hancock Holding Company and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hancock Holding Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2009 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for defined benefit pension postretirement benefit plans effective December 31, 2006.
/s/ KPMG LLPBirmingham, AlabamaFebruary 27, 2009
Hancock Holding Company and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
|
| (In thousands, except share data) |
| ||||
Assets: |
|
|
|
|
|
|
|
Cash and due from banks (non-interest bearing) |
| $ | 199,775 |
| $ | 182,615 |
|
Interest-bearing time deposits with other banks |
|
| 11,355 |
|
| 8,560 |
|
Federal funds sold |
|
| 175,166 |
|
| 117,721 |
|
Other short-term investments |
|
| 362,895 |
|
| — |
|
Trading securities |
|
| 2,201 |
|
| 197,425 |
|
Securities available for sale, at fair value |
|
| 1,679,756 |
|
| 1,472,783 |
|
Loans held for sale |
|
| 22,115 |
|
| 18,957 |
|
Loans |
|
| 4,264,324 |
|
| 3,612,883 |
|
Less: Allowance for loan losses |
|
| (61,725 | ) |
| (47,123 | ) |
Unearned income |
|
| (14,859 | ) |
| (16,326 | ) |
|
|
|
| ||||
Loans, net |
|
| 4,187,740 |
|
| 3,549,434 |
|
Property and equipment, net of accumulated depreciation of $101,050 and $87,160 |
|
| 205,912 |
|
| 200,566 |
|
Other real estate, net |
|
| 5,195 |
|
| 2,172 |
|
Accrued interest receivable |
|
| 33,067 |
|
| 35,117 |
|
Goodwill |
|
| 62,277 |
|
| 62,277 |
|
Other intangible assets, net |
|
| 6,363 |
|
| 8,298 |
|
Life insurance contracts |
|
| 144,959 |
|
| 139,421 |
|
Deferred tax asset, net |
|
| 5,819 |
|
| 3,976 |
|
Other assets |
|
| 62,659 |
|
| 56,657 |
|
|
|
|
| ||||
Total assets |
| $ | 7,167,254 |
| $ | 6,055,979 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity: |
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
Non-interest bearing demand |
| $ | 962,886 |
| $ | 907,874 |
|
Interest-bearing savings, NOW, money market and time |
|
| 4,968,051 |
|
| 4,101,660 |
|
|
|
|
| ||||
Total deposits |
|
| 5,930,937 |
|
| 5,009,534 |
|
Federal funds purchased |
|
| — |
|
| 4,100 |
|
Securities sold under agreements to repurchase |
|
| 505,932 |
|
| 371,604 |
|
Long-term notes |
|
| 638 |
|
| 793 |
|
Other liabilities |
|
| 120,248 |
|
| 115,761 |
|
|
|
|
| ||||
Total liabilities |
|
| 6,557,755 |
|
| 5,501,792 |
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
Common stock-$3.33 par value per share; 350,000,000 shares authorized, 31,769,679 and 31,294,607 issued and outstanding, respectively |
|
| 105,793 |
|
| 104,211 |
|
Capital surplus |
|
| 101,210 |
|
| 87,122 |
|
Retained earnings |
|
| 411,579 |
|
| 377,481 |
|
Accumulated other comprehensive loss, net |
|
| (9,083 | ) |
| (14,627 | ) |
|
|
|
| ||||
Total stockholders’ equity |
|
| 609,499 |
|
| 554,187 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 7,167,254 |
| $ | 6,055,979 |
|
|
|
|
|
December 31, | ||||||||
2011 | 2010 | |||||||
(In thousands, except share data) | ||||||||
Assets: | ||||||||
Cash and due from banks | $ | 437,947 | $ | 139,687 | ||||
Interest-bearing bank deposits | 1,184,222 | 364,066 | ||||||
Federal funds sold | 197 | 124 | ||||||
Other short-term investments | — | 274,974 | ||||||
Securities available for sale, at fair value (amortized cost of $4,401,345 and $1,445,721) | 4,496,900 | 1,488,885 | ||||||
Loans held for sale | 72,378 | 21,866 | ||||||
Loans | 11,191,901 | 4,968,149 | ||||||
Less: allowance for loan losses | (124,881 | ) | (81,997 | ) | ||||
unearned income | (14,875 | ) | (10,985 | ) | ||||
|
|
|
| |||||
Loans, net | 11,052,145 | 4,875,167 | ||||||
|
|
|
| |||||
Property and equipment, net of accumulated depreciation of $148,780 and $125,383 | 505,387 | 209,919 | ||||||
Prepaid expense | 69,064 | 29,786 | ||||||
Other real estate, net | 144,367 | 32,520 | ||||||
Accrued interest receivable | 53,973 | 30,157 | ||||||
Goodwill | 651,162 | 61,631 | ||||||
Other intangible assets, net | 211,075 | 13,203 | ||||||
Life insurance contracts | 355,026 | 159,377 | ||||||
FDIC loss share receivable | 212,885 | 329,136 | ||||||
Deferred tax asset, net | 145,760 | 6,541 | ||||||
Other assets | 181,608 | 101,288 | ||||||
|
|
|
| |||||
Total assets | $ | 19,774,096 | $ | 8,138,327 | ||||
|
|
|
| |||||
Liabilities and Stockholders’ Equity: | ||||||||
Deposits: | ||||||||
Non-interest bearing demand | $ | 5,516,336 | $ | 1,127,246 | ||||
Interest-bearing savings, NOW, money market and time | 10,197,243 | 5,648,473 | ||||||
|
|
|
| |||||
Total deposits | 15,713,579 | 6,775,719 | ||||||
|
|
|
| |||||
Short-term borrowings | 1,044,454 | 364,676 | ||||||
FHLB borrowings | — | 10,172 | ||||||
Long-term debt | 353,890 | 376 | ||||||
Accrued interest payable | 8,284 | 4,007 | ||||||
Other liabilities | 286,726 | 126,829 | ||||||
|
|
|
| |||||
Total liabilities | 17,406,933 | 7,281,779 | ||||||
|
|
|
| |||||
Stockholders’ equity: | ||||||||
Common stock-$3.33 par value per share; 350,000,000 shares authorized, 84,705,496 and 36,893,276 issued and outstanding, respectively | 282,069 | 122,855 | ||||||
Capital surplus | 1,634,634 | 263,484 | ||||||
Retained earnings | 476,970 | 470,828 | ||||||
Accumulated other comprehensive income(loss), net | (26,510 | ) | (619 | ) | ||||
|
|
|
| |||||
Total stockholders’ equity | 2,367,163 | 856,548 | ||||||
|
|
|
| |||||
Total liabilities and stockholders' equity | $ | 19,774,096 | $ | 8,138,327 | ||||
|
|
|
|
See accompanying notes to consolidated financial statements.
Hancock Holding Company and Subsidiaries
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
|
| (In thousands, except per share data) |
| |||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 246,573 |
| $ | 255,761 |
| $ | 230,450 |
|
Securities-taxable |
|
| 80,048 |
|
| 78,089 |
|
| 97,084 |
|
Securities-tax exempt |
|
| 4,978 |
|
| 6,234 |
|
| 6,770 |
|
Federal funds sold |
|
| 1,858 |
|
| 5,458 |
|
| 9,657 |
|
Other investments |
|
| 1,980 |
|
| 155 |
|
| 102 |
|
|
|
|
|
| ||||||
Total interest income |
|
| 335,437 |
|
| 345,697 |
|
| 344,063 |
|
|
|
|
|
| ||||||
Interest expense: |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 111,052 |
|
| 132,920 |
|
| 110,092 |
|
Federal funds purchased and securities sold under agreements |
|
| 14,843 |
|
| 8,231 |
|
| 9,682 |
|
Long-term notes and other interest expense |
|
| 184 |
|
| 80 |
|
| 895 |
|
Capitalized interest |
|
| (77 | ) |
| (995 | ) |
| (806 | ) |
|
|
|
|
| ||||||
Total interest expense |
|
| 126,002 |
|
| 140,236 |
|
| 119,863 |
|
|
|
|
|
| ||||||
Net interest income |
|
| 209,435 |
|
| 205,461 |
|
| 224,200 |
|
Provision for (reversal of) loan losses |
|
| 36,785 |
|
| 7,593 |
|
| (20,762 | ) |
|
|
|
|
| ||||||
Net interest income after provision for (reversal of) loan losses |
|
| 172,650 |
|
| 197,868 |
|
| 244,962 |
|
|
|
|
|
| ||||||
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 44,243 |
|
| 41,929 |
|
| 36,228 |
|
Trust fees |
|
| 16,858 |
|
| 15,902 |
|
| 13,286 |
|
Insurance commissions and fees |
|
| 16,554 |
|
| 19,229 |
|
| 19,248 |
|
Investment and annuity fees |
|
| 10,807 |
|
| 8,746 |
|
| 5,970 |
|
Debit card and merchant fees |
|
| 11,082 |
|
| 10,126 |
|
| 9,365 |
|
ATM fees |
|
| 6,856 |
|
| 5,983 |
|
| 5,338 |
|
Secondary mortgage market operations |
|
| 2,977 |
|
| 3,723 |
|
| 3,528 |
|
Securities gains (losses), net |
|
| 4,825 |
|
| 308 |
|
| (5,169 | ) |
Net storm-related gain |
|
| — |
|
| — |
|
| 5,084 |
|
Other income |
|
| 13,576 |
|
| 14,740 |
|
| 13,622 |
|
|
|
|
|
| ||||||
Total noninterest income |
|
| 127,778 |
|
| 120,686 |
|
| 106,500 |
|
|
|
|
|
| ||||||
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 109,773 |
|
| 106,959 |
|
| 103,753 |
|
Net occupancy expense |
|
| 19,538 |
|
| 19,435 |
|
| 13,350 |
|
Equipment rentals, depreciation and maintenance |
|
| 10,992 |
|
| 10,465 |
|
| 10,796 |
|
Amortization of intangibles |
|
| 1,432 |
|
| 1,651 |
|
| 2,125 |
|
Other expense |
|
| 71,708 |
|
| 78,233 |
|
| 73,092 |
|
|
|
|
|
| ||||||
Total noninterest expense |
|
| 213,443 |
|
| 216,743 |
|
| 203,116 |
|
|
|
|
|
| ||||||
Income before income taxes |
|
| 86,985 |
|
| 101,811 |
|
| 148,346 |
|
Income taxes |
|
| 21,619 |
|
| 27,919 |
|
| 46,544 |
|
|
|
|
|
| ||||||
Net income |
| $ | 65,366 |
| $ | 73,892 |
| $ | 101,802 |
|
|
|
|
|
| ||||||
Basic earnings per common share |
| $ | 2.08 |
| $ | 2.31 |
| $ | 3.13 |
|
|
|
|
|
| ||||||
Diluted earnings per common share |
| $ | 2.05 |
| $ | 2.27 |
| $ | 3.06 |
|
|
|
|
|
|
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Interest income: | ||||||||||||
Loans, including fees | $ | 499,721 | $ | 284,922 | $ | 244,124 | ||||||
Securities-taxable | 84,321 | 60,653 | 70,573 | |||||||||
Securities-tax exempt | 6,031 | 5,232 | 4,555 | |||||||||
Federal funds sold and other short term investments | 2,131 | 1,751 | 4,475 | |||||||||
|
|
|
|
|
| |||||||
Total interest income | 592,204 | 352,558 | 323,727 | |||||||||
|
|
|
|
|
| |||||||
Interest expense: | ||||||||||||
Deposits | 55,691 | 72,903 | 84,313 | |||||||||
Short-term borrowings | 7,034 | 9,306 | 10,809 | |||||||||
Long-term debt and other interest expense | 8,246 | 136 | 178 | |||||||||
|
|
|
|
|
| |||||||
Total interest expense | 70,971 | 82,345 | 95,300 | |||||||||
|
|
|
|
|
| |||||||
Net interest income | 521,233 | 270,213 | 228,427 | |||||||||
Provision for loan losses | 38,732 | 65,991 | 54,590 | |||||||||
|
|
|
|
|
| |||||||
Net interest income after provision for loan losses | 482,501 | 204,222 | 173,837 | |||||||||
|
|
|
|
|
| |||||||
Noninterest income: | ||||||||||||
Service charges on deposit accounts | 55,265 | 45,335 | 45,354 | |||||||||
Bank card fees | 28,879 | 14,941 | 11,252 | |||||||||
Trust fees | 23,940 | 16,715 | 15,127 | |||||||||
Insurance commissions and fees | 16,524 | 14,461 | 14,355 | |||||||||
Investment and annuity fees | 15,016 | 10,181 | 8,220 | |||||||||
ATM fees | 14,052 | 9,486 | 7,374 | |||||||||
Secondary mortgage market operations | 10,484 | 8,915 | 5,906 | |||||||||
Accretion of indemnification asset | 16,689 | 4,890 | — | |||||||||
Bargain purchase gain on acquisition | — | — | 33,623 | |||||||||
Other income | 25,578 | 12,025 | 16,047 | |||||||||
Securities gains (losses), net | (91 | ) | — | 69 | ||||||||
|
|
|
|
|
| |||||||
Total noninterest income | 206,336 | 136,949 | 157,327 | |||||||||
|
|
|
|
|
| |||||||
Noninterest expense: | ||||||||||||
Compensation expense | 234,071 | 112,478 | 95,674 | |||||||||
Employee benefits | 52,531 | 29,564 | 25,775 | |||||||||
|
|
|
|
|
| |||||||
Salaries and employee benefits | 286,602 | 142,042 | 121,449 | |||||||||
|
|
|
|
|
| |||||||
Net occupancy expense | 43,220 | 23,803 | 20,340 | |||||||||
Equipment expense | 17,524 | 10,569 | 9,849 | |||||||||
Data processing expense | 43,069 | 23,646 | 19,043 | |||||||||
Professional services expense | 69,931 | 16,447 | 12,321 | |||||||||
Telecommunications and postage | 18,514 | 11,019 | 8,474 | |||||||||
Advertising | 17,687 | 7,713 | 5,597 | |||||||||
Deposit insurance and regulatory fees | 12,980 | 11,401 | 12,589 | |||||||||
Amortization of intangibles | 16,551 | 2,728 | 1,417 | |||||||||
Other expense | 67,936 | 29,892 | 22,391 | |||||||||
|
|
|
|
|
| |||||||
Total noninterest expense | 594,014 | 279,260 | 233,470 | |||||||||
|
|
|
|
|
| |||||||
Income before income taxes | 94,823 | 61,911 | 97,694 | |||||||||
Income taxes | 18,064 | 9,705 | 22,919 | |||||||||
|
|
|
|
|
| |||||||
Net income | $ | 76,759 | $ | 52,206 | $ | 74,775 | ||||||
|
|
|
|
|
| |||||||
Basic earnings per common share | $ | 1.16 | $ | 1.41 | $ | 2.28 | ||||||
|
|
|
|
|
| |||||||
Diluted earnings per common share | $ | 1.15 | $ | 1.40 | $ | 2.26 | ||||||
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Hancock Holding Company and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
| Capital |
| Retained |
| Accumulated |
| Unearned |
|
|
| ||||||||
|
| Shares |
| Amount |
| Surplus |
| Earnings |
| Loss, net |
| Compensation |
| Total |
| ||||||
|
|
|
|
|
|
|
|
| |||||||||||||
|
| (In thousands, except share and per share data) |
| ||||||||||||||||||
| |||||||||||||||||||||
Balance, January 1, 2006 |
| 32,301,123 |
| $ | 107,563 |
| $ | 129,222 |
| $ | 262,055 |
| $ | (22,066 | ) | $ | (2,343 | ) | $ | 474,431 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per consolidated statements of income |
| — |
|
| — |
|
| — |
|
| 101,802 |
|
| — |
|
| — |
|
| 101,802 |
|
Net change in fair value of securities available for sale, net of tax |
| — |
|
| — |
|
| — |
|
| — |
|
| 4,940 |
|
| — |
|
| 4,940 |
|
Net change in unfunded accumulated benefit obligation, net of tax |
| — |
|
| — |
|
| — |
|
| — |
|
| 1,057 |
|
| — |
|
| 1,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 107,799 |
|
Adoption of SFAS No. 158, net of tax |
| — |
|
| — |
|
| — |
|
| — |
|
| (7,944 | ) |
| — |
|
| (7,944 | ) |
Cash dividends paid ($0.895 per share) |
| — |
|
| — |
|
| — |
|
| (29,311 | ) |
| — |
|
| — |
|
| (29,311 | ) |
Common stock issued, long - term incentive plan, including excess income tax benefit of $3,493 |
| 398,338 |
|
| 1,326 |
|
| 10,169 |
|
| — |
|
| — |
|
| — |
|
| 11,495 |
|
Compensation expense, long - term incentive plan |
| — |
|
| — |
|
| 3,690 |
|
| — |
|
| — |
|
| — |
|
| 3,690 |
|
SFAS No. 123(R) reclass of unearned compensation |
| — |
|
| — |
|
| (2,343 | ) |
| — |
|
| — |
|
| 2,343 |
|
| — |
|
Purchase of common stock |
| (33,409 | ) |
| (111 | ) |
| (1,639 | ) |
| — |
|
| — |
|
| — |
|
| (1,750 | ) |
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2006 |
| 32,666,052 |
|
| 108,778 |
|
| 139,099 |
|
| 334,546 |
|
| (24,013 | ) |
| — |
|
| 558,410 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per consolidated statements of income |
| — |
|
| — |
|
| — |
|
| 73,892 |
|
| — |
|
| — |
|
| 73,892 |
|
Net change in fair value of securities available for sale, net of tax |
| — |
|
| — |
|
| — |
|
| — |
|
| 8,846 |
|
| — |
|
| 8,846 |
|
Net change in unfunded accumulated benefit obligation, net of tax |
| — |
|
| — |
|
| — |
|
| — |
|
| 540 |
|
| — |
|
| 540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 83,278 |
|
Cash dividends paid ($0.96 per share) |
| — |
|
| — |
|
| — |
|
| (30,957 | ) |
| — |
|
| — |
|
| (30,957 | ) |
Common stock issued, long - term incentive plan, including excess income tax benefit of $345 |
| 184,775 |
|
| 615 |
|
| 2,134 |
|
| — |
|
| — |
|
|
|
|
| 2,749 |
|
Compensation expense, long - term incentive plan |
| — |
|
| — |
|
| 1,155 |
|
| — |
|
| — |
|
| — |
|
| 1,155 |
|
Purchase of common stock |
| (1,556,220 | ) |
| (5,182 | ) |
| (55,266 | ) |
| — |
|
| — |
|
| — |
|
| (60,448 | ) |
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2007 |
| 31,294,607 |
| $ | 104,211 |
| $ | 87,122 |
| $ | 377,481 |
| $ | (14,627 | ) | $ | — |
| $ | 554,187 |
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per consolidated statements of income |
| — |
|
| — |
|
| — |
|
| 65,366 |
|
| — |
|
| — |
|
| 65,366 |
|
Net change in unfunded accumulated benefit obligation, net of tax |
| — |
|
| — |
|
| — |
|
| — |
|
| (12,095 | ) |
| — |
|
| (12,095 | ) |
Net change in fair value of securities available for sale, net of tax |
| — |
|
| — |
|
| — |
|
| — |
|
| 17,639 |
|
| — |
|
| 17,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 70,910 |
|
SFAS No. 158, change in measurement date |
| — |
|
| — |
|
| — |
|
| (815 | ) |
| — |
|
| — |
|
| (815 | ) |
Cash dividends declared ($0.96 per common share) |
| — |
|
| — |
|
| — |
|
| (30,453 | ) |
| — |
|
| — |
|
| (30,453 | ) |
Common stock issued, long-term incentive plan, including excess income tax benefit of $4,512 |
| 481,530 |
|
| 1,604 |
|
| 11,520 |
|
| — |
|
| — |
|
| — |
|
| 13,124 |
|
Compensation expense, long-term incentive plan |
| — |
|
| — |
|
| 2,806 |
|
| — |
|
| — |
|
| — |
|
| 2,806 |
|
Purchase of common stock |
| (6,458 | ) |
| (22 | ) |
| (238 | ) |
| — |
|
| — |
|
| — |
|
| (260 | ) |
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2008 |
| 31,769,679 |
| $ | 105,793 |
| $ | 101,210 |
| $ | 411,579 |
| $ | (9,083 | ) | $ | — |
| $ | 609,499 |
|
|
|
|
|
|
|
|
|
|
Common Stock | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive income (loss) | Total | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||
Balance, January 1, 2009 | 31,769,679 | $ | 105,793 | $ | 101,210 | $ | 411,579 | $ | (9,083 | ) | $ | 609,499 | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | — | 74,775 | — | 74,775 | ||||||||||||||||||
Net change from retirement benefit plans, net of tax | — | — | — | — | 1,473 | 1,473 | ||||||||||||||||||
Unrealized net holding gain (or loss) on securities, net of reclassifications and tax | — | — | — | — | 10,608 | 10,608 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income | 86,856 | |||||||||||||||||||||||
Cash dividends declared ($0.96 per common share) | — | — | — | (32,011 | ) | — | (32,011 | ) | ||||||||||||||||
Common stock issued | 4,945,000 | 16,467 | 150,905 | — | — | 167,372 | ||||||||||||||||||
Common stock activity, long-term incentive plan including excess income tax benefit of $480 | 125,774 | 419 | 5,528 | — | — | 5,947 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2009 | 36,840,453 | 122,679 | 257,643 | 454,343 | 2,998 | 837,663 | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | 52,206 | — | 52,206 | ||||||||||||||||||
Net change from retirement benefit plans, net of tax | — | — | — | — | (2,463 | ) | (2,463 | ) | ||||||||||||||||
Unrealized net holding gain (or loss) on securities, net of reclassifications and tax | — | — | — | — | (1,154 | ) | (1,154 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income | 48,589 | |||||||||||||||||||||||
Cash dividends declared ($0.96 per common share) | — | — | — | (35,721 | ) | (35,721 | ) | |||||||||||||||||
Common stock activity, long-term incentive plan, including excess income tax benefit of $322 | 52,823 | 176 | 5,841 | — | — | 6,017 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2010 | 36,893,276 | 122,855 | 263,484 | 470,828 | (619 | ) | 856,548 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net income | — | — | — | 76,759 | — | 76,759 | ||||||||||||||||||
Net change from retirement benefit plans, net of tax | — | — | — | — | (59,072 | ) | (59,072 | ) | ||||||||||||||||
Unrealized net holding gain (or loss) on securities, net of reclassifications and tax | — | — | — | — | 33,246 | 33,246 | ||||||||||||||||||
Net unrealized gains on derivatives and hedging activites, net of reclassification | — | — | — | — | (65 | ) | (65 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income | 50,868 | |||||||||||||||||||||||
Cash dividends declared ($0.96 per common share) | — | — | — | (70,617 | ) | — | (70,617 | ) | ||||||||||||||||
Common stock issued in stock offering | 6,958,143 | 23,170 | 190,824 | — | — | 213,994 | ||||||||||||||||||
Common stock issued in business combination | 40,794,261 | 135,845 | 1,172,199 | — | — | 1,308,044 | ||||||||||||||||||
Common stock activity, long-term incentive plan, including excess income tax benefit of $104 | 59,816 | 199 | 8,127 | — | — | 8,326 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2011 | 84,705,496 | $ | 282,069 | $ | 1,634,634 | $ | 476,970 | $ | (26,510 | ) | $ | 2,367,163 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Hancock Holding Company and Subsidiaries
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
|
| (In thousands) |
| |||||||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 65,366 |
| $ | 73,892 |
| $ | 101,802 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 15,761 |
|
| 14,041 |
|
| 10,443 |
|
Provision for (reversal of) loan losses, net |
|
| 36,785 |
|
| 7,593 |
|
| (20,762 | ) |
(Gains) losses on other real estate owned |
|
| 230 |
|
| (732 | ) |
| 79 |
|
Deferred tax expense (benefit) |
|
| (5,012 | ) |
| 7,560 |
|
| 24,599 |
|
Increase in cash surrender value of life insurance contracts |
|
| (5,538 | ) |
| (5,397 | ) |
| (4,090 | ) |
(Gain) loss on sales/paydowns of securities available for sale, net |
|
| (1,950 | ) |
| (273 | ) |
| 5,169 |
|
(Gain) loss on disposal of other assets |
|
| (602 | ) |
| 193 |
|
| — |
|
Gain on involuntary conversion of assets, net |
|
| — |
|
| — |
|
| (5,084 | ) |
Gain on sale of loans held for sale |
|
| (427 | ) |
| (583 | ) |
| (564 | ) |
(Gain) loss on trading securities |
|
| (2,875 | ) |
| 114 |
|
| — |
|
Purchase of trading securities, net |
|
| — |
|
| (10 | ) |
| — |
|
Proceeds from paydowns of securities held for trading |
|
| 7,635 |
|
| — |
|
| — |
|
Amortization (accretion) of securities premium/discount, net |
|
| 2,012 |
|
| (1,773 | ) |
| (11,300 | ) |
Amortization of mortgage servicing rights |
|
| 210 |
|
| 345 |
|
| 549 |
|
Amortization of intangible assets |
|
| 1,432 |
|
| 1,651 |
|
| 2,125 |
|
Stock-based compensation expense |
|
| 2,806 |
|
| 1,155 |
|
| 3,690 |
|
(Increase) decrease in accrued interest receivable |
|
| 2,050 |
|
| (1,417 | ) |
| 1,346 |
|
Increase (decrease) in accrued expenses |
|
| 2,624 |
|
| (12,197 | ) |
| (30,133 | ) |
Increase in other liabilities |
|
| 2,309 |
|
| 4,430 |
|
| 2,636 |
|
Increase (decrease) in interest payable |
|
| (2,785 | ) |
| 883 |
|
| 2,341 |
|
Decrease in policy reserves and liabilities |
|
| (12,051 | ) |
| (35,180 | ) |
| (11,699 | ) |
Decrease in reinsurance receivables |
|
| 8,060 |
|
| 3,215 |
|
| 11,410 |
|
(Increase) decrease in other assets |
|
| (14,062 | ) |
| 274 |
|
| 308 |
|
Proceeds from sale of loans held for sale |
|
| 192,838 |
|
| 251,684 |
|
| 238,045 |
|
Originations of loans held for sale |
|
| (195,569 | ) |
| (253,112 | ) |
| (230,208 | ) |
Excess tax benefit from share based payments |
|
| (4,512 | ) |
| (345 | ) |
| (3,493 | ) |
Other, net |
|
| (367 | ) |
| 60 |
|
| (2,790 | ) |
|
|
|
|
| ||||||
Net cash provided by operating activities |
|
| 94,368 |
|
| 56,071 |
|
| 84,419 |
|
|
|
|
|
|
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
(In thousands) | ||||||||||||
Operating Activities: | ||||||||||||
Net income | $ | 76,759 | $ | 52,206 | $ | 74,775 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 24,605 | 13,526 | 15,549 | |||||||||
Provision for loan losses | 38,732 | 65,991 | 54,590 | |||||||||
Losses (gains) on other real estate owned | 4,922 | (1,960 | ) | 768 | ||||||||
Deferred tax expense (benefit) | 26,577 | (11,612 | ) | (6,953 | ) | |||||||
Increase in cash surrender value of life insurance contracts | (12,169 | ) | (8,022 | ) | (6,396 | ) | ||||||
Gain on acquisition | — | — | (20,732 | ) | ||||||||
Loss (gain) on sales/paydowns of securities available for sale, net | 91 | — | (69 | ) | ||||||||
(Gain) on disposal of other assets | (424 | ) | (316 | ) | (1,478 | ) | ||||||
Net (increase) decrease in loans originated for sale | (1,560 | ) | 22,032 | (13,822 | ) | |||||||
Net amortization of securities premium/discount | 29,523 | 7,071 | 917 | |||||||||
Amortization of intangible assets | 16,551 | 2,728 | 1,417 | |||||||||
Stock-based compensation expense | 7,196 | 4,077 | 3,254 | |||||||||
(Decrease) increase in interest payable and other liabilities | (99,986 | ) | (12,405 | ) | 16,702 | |||||||
Decrease (increase) in FDIC indemnification asset | 116,251 | (3,530 | ) | — | ||||||||
Decrease (increase) in other assets | 46,082 | 65,963 | (100,474 | ) | ||||||||
Other, net | (104 | ) | (951 | ) | 94 | |||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 273,046 | 194,798 | 18,142 | |||||||||
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Hancock Holding Company and Subsidiaries
Consolidated Statements of Cash Flows (continued)
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
|
| (In thousands) |
| |||||||
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
Net (increase) decrease in interest-bearing time deposits |
| $ | (2,795 | ) | $ | 1,637 |
| $ | (2,939 | ) |
Proceeds from sales of securities available for sale |
|
| 213,814 |
|
| 9,222 |
|
| 157,300 |
|
Proceeds from maturities of securities available for sale |
|
| 938,939 |
|
| 1,270,294 |
|
| 1,083,845 |
|
Purchases of securities available for sale |
|
| (1,140,901 | ) |
| (1,038,175 | ) |
| (1,169,592 | ) |
Purchase of short-term investments |
|
| (362,895 | ) |
| — |
|
| — |
|
Net (increase) decrease in federal funds sold |
|
| (57,445 | ) |
| 94,521 |
|
| 190,726 |
|
Net increase in loans |
|
| (684,528 | ) |
| (356,787 | ) |
| (293,117 | ) |
Purchases of property and equipment |
|
| (23,618 | ) |
| (70,267 | ) |
| (76,943 | ) |
Proceeds from sales of property and equipment |
|
| 2,150 |
|
| 497 |
|
| 4,097 |
|
Premiums paid on life insurance contracts |
|
| — |
|
| (20,000 | ) |
| (20,000 | ) |
Proceeds from sales of other real estate |
|
| 6,184 |
|
| 1,753 |
|
| 1,749 |
|
Proceeds from insurance settlements |
|
| — |
|
| — |
|
| 22,469 |
|
Purchase of interest in unconsolidated joint venture |
|
| — |
|
| — |
|
| (4,710 | ) |
|
|
|
|
| ||||||
Net cash used in investing activities |
|
| (1,111,095 | ) |
| (107,305 | ) |
| (107,115 | ) |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits |
|
| 921,403 |
|
| (21,457 | ) |
| 41,171 |
|
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase |
|
| 130,228 |
|
| 153,313 |
|
| (29,891 | ) |
(Proceeds) repayments of long-term notes |
|
| (155 | ) |
| 535 |
|
| (50,008 | ) |
Dividends paid |
|
| (30,453 | ) |
| (30,957 | ) |
| (29,311 | ) |
Proceeds from exercise of stock options |
|
| 8,612 |
|
| 2,404 |
|
| 8,002 |
|
Repurchase/retirement of common stock |
|
| (260 | ) |
| (60,448 | ) |
| (1,750 | ) |
Excess tax benefit from stock option exercises |
|
| 4,512 |
|
| 345 |
|
| 3,493 |
|
|
|
|
|
| ||||||
Net cash provided by (used in) financing activities |
|
| 1,033,887 |
|
| 43,735 |
|
| (58,294 | ) |
|
|
|
|
| ||||||
Increase (decrease) in cash and due from banks |
|
| 17,160 |
|
| (7,499 | ) |
| (80,990 | ) |
Cash and due from banks at beginning of year |
|
| 182,615 |
|
| 190,114 |
|
| 271,104 |
|
|
|
|
|
| ||||||
Cash and due from banks at end of year |
| $ | 199,775 |
| $ | 182,615 |
| $ | 190,114 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | 19,413 |
| $ | 29,209 |
| $ | 55,503 |
|
Interest paid, including capitalized interest of $77, $995,and $806, respectively |
|
| 128,787 |
|
| 139,353 |
|
| 112,447 |
|
Restricted stock issued to employees of Hancock |
|
| 3,045 |
|
| 2,495 |
|
| 2,518 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information for Non-Cash |
|
|
|
|
|
|
|
|
|
|
Investing and Financing Activities |
|
|
|
|
|
|
|
|
|
|
Transfers from loans to other real estate |
| $ | 10,671 |
| $ | 2,694 |
| $ | 1,304 |
|
Financed sales of foreclosed property |
|
| 1,234 |
|
| 339 |
|
| 741 |
|
Transfers from trading securities to available for sale securities |
|
| 190,802 |
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| — |
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Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
(In thousands) | ||||||||||||
Investing Activities: | ||||||||||||
Net (increase) decrease in interest-bearing time deposits | $ | (104,647 | ) | $ | 218,015 | $ | (558,271 | ) | ||||
Proceeds from sales of securities available for sale | 342,864 | — | 10,202 | |||||||||
Proceeds from maturities of securities available for sale | 998,726 | 603,102 | 599,066 | |||||||||
Purchases of securities available for sale | (1,732,757 | ) | (489,835 | ) | (509,304 | ) | ||||||
Net decrease (increase) in federal funds sold and short-term investments | 281,639 | (59,573 | ) | 317,319 | ||||||||
Net decrease in loans | 86,057 | 40,400 | 17,906 | |||||||||
Purchases of property and equipment | (72,975 | ) | (21,899 | ) | (12,305 | ) | ||||||
Proceeds from sales of property and equipment | 9,326 | 2,220 | 2,700 | |||||||||
Proceeds from sales of other real estate | 80,125 | 41,945 | 8,015 | |||||||||
Cash paid for acquisition, net of cash received | (74,736 | ) | — | 378,367 | ||||||||
Net cash paid for divestiture of branches | (114,645 | ) | — | — | ||||||||
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Net cash (used in) provided by investing activities | (301,023 | ) | 334,375 | 253,695 | ||||||||
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Financing Activities: | ||||||||||||
Net decrease in deposits | (65,298 | ) | (420,093 | ) | (298,062 | ) | ||||||
Increase (decrease) in other short-term borrowings | 123,525 | (120,031 | ) | (21,225 | ) | |||||||
Proceeds from issuance of long-term debt | 150,317 | — | — | |||||||||
Repayments of long-term notes | (16,641 | ) | (295 | ) | (166 | ) | ||||||
Proceeds from issuance of short-term notes | — | — | 1,609,399 | |||||||||
Repayments of short-term notes | (10,172 | ) | (20,000 | ) | (1,694,898 | ) | ||||||
Dividends paid | (70,617 | ) | (35,721 | ) | (32,011 | ) | ||||||
Proceeds from exercise of stock options | 1,025 | 1,618 | 2,213 | |||||||||
Proceeds from stock offering | 213,994 | — | 167,372 | |||||||||
Excess tax benefit from stock option exercises | 104 | 322 | 480 | |||||||||
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Net cash provided by (used in) financing activities | 326,237 | (594,200 | ) | (266,898 | ) | |||||||
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Increase (decrease) in cash and due from banks | 298,260 | (65,027 | ) | 4,939 | ||||||||
Cash and due from banks at beginning of year | 139,687 | 204,714 | 199,775 | |||||||||
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Cash and due from banks at end of year | $ | 437,947 | $ | 139,687 | $ | 204,714 | ||||||
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Supplemental Information | ||||||||||||
Income taxes paid | $ | 24,529 | $ | 22,878 | $ | 5,810 | ||||||
Interest paid, including capitalized interest of $12, $70, and $20, respectively | 66,695 | 83,161 | 96,797 | |||||||||
Supplemental Information for Non-Cash | ||||||||||||
Investing and Financing Activities | ||||||||||||
Assets acquired in settlement of loans | $ | 117,690 | $ | 59,758 | $ | 20,023 | ||||||
Acquisitions | ||||||||||||
Fair value of assets acquired | $ | 11,156,952 | $ | — | $ | 1,715,266 | ||||||
Fair value of liabilities assumed | (10,130,706 | ) | — | (1,694,534 | ) | |||||||
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Net identifiable assets acquired | $ | 1,026,246 | $ | — | $ | 20,732 | ||||||
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Common stock issued in connection with acquisition | 1,308,044 | — | — |
See accompanying notes to consolidated financial statements.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Description of BusinessDESCRIPTION OF BUSINESS
Hancock Holding Company “the Company” or “Hancock” is a financial holding company headquartered in Gulfport, Mississippi and operating in the states of Mississippi, Louisiana, Alabama, Florida and Florida. Hancock Holding Company, the ParentTexas. The Company operates through fourtwo wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank) and Whitney Bank, New Orleans, Louisiana (Whitney Bank). Hancock Bank of Louisiana, Baton Rouge, Louisiana, Hancockand Whitney Bank of Florida, Tallahassee, Florida and Hancock Bank of Alabama, Mobile, Alabama (“are referred to collectively as the Banks.“Banks.”) The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. The Company’s operating strategy is to provide its customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. The Banks or their subsidiaries also offer trust services, investment services and insurance agency services. Hancock Bank subsidiaries include Hancock Investment Services, Hancock Insurance Agency, and Harrison Finance Company.
ConsolidationSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles and those generally practiced within the banking industry. The following is a summary of the more significant accounting policies.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling interest. Significant inter-company transactions and balances have been eliminated in consolidation.
Use of Estimates
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The accounting principles we followthe Company follows and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry which requiresindustry. These accounting principles and practices require management to make estimates and assumptions about future events. On an ongoing basis,events that affect the Company evaluates its estimates, includingamounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those related toestimates.
Fair Value Accounting
Generally accepted accounting principles require the allowance for loan losses, intangible assets and goodwill, income taxes, pension and postretirement benefit plans and contingent liabilities. These estimates and assumptions are based on our best estimates and judgments. We evaluate estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, rising unemployment levels and declinesuse of fair values in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments aboutdetermining the carrying values of certain assets and liabilities not readily apparent from other sources. Allowance for loan losses, deferred income taxes, and goodwill are potentially subject to material changes in the near term. Actual results could differ significantlyfinancial statements, as well as for specific disclosures about certain assets and liabilities.
Accounting guidance established a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value giving preference to quoted prices in active markets (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3).Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from those estimates.or corroborated by observable market data by correlation or other means.
Reclassifications
Certain reclassifications have been made to prior periods to conform to the current year presentation. These reclassifications had no material impact on the consolidated financial statements. For the periods presented, these reclassifications include the Company’s investment in the stock of the Federal Home Loan Bank (FHLB), that has been reclassified from investment securities to other assets since these equity securities are restricted and do not have a readily determinable fair value. The balance of FHLB stock as of December 31, 2007, was $2.3 million. The Company also reclassified its investment in an equity method investment from investment securities into other assets. The balance of the equity method investment as of December 31, 2007, was $5.0 million. The dividend income on the FHLB stock has also been reclassified from other investments to other income. The dividend on FHLB stock for the years ended 2007 and 2006 was $16,621 and $7,958, respectively. In addition, the Company reclassified debit card, merchant, and ATM charges from non-interest income to non-interest expense. Debit card, merchant, and ATM charges were $2.4 million in 2007 and $2.4 million in 2006.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Acquisition Accounting
Acquisitions are accounted for under the purchase method of accounting. Purchased assets, including identifiable intangibles, and assumed liabilities are recorded at their respective acquisition date fair values. If the fair value of net assets purchased exceeds the consideration given, a “bargain purchase gain” is recognized. If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. See Acquired Loans section below for accounting policy regarding loans acquired in a business combination.
All identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented, or exchanged separately from the entity).
Securities
Securities have beenare classified into one of two categories:as trading, held to maturity or available for sale or trading.sale. Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates this classification periodically.periodically as conditions change that could require reclassification. All securities were classified as available for sale at December 31, 2011.
Available for sale securities are stated at fair value with unrealizedvalue. Unrealized holding gains and unrealized holding losses, other than those determined to be other than temporary, are reported net of tax in other comprehensive income taxes, reported as a separate component of stockholders’ equityand in accumulated other comprehensive income, until realized. TradingPremiums and discounts on securities are stated at fair value with unrealized gainsamortized and losses reported in results of operations.
The amortized cost of debt securities classifiedaccreted to interest income as available for sale is adjusted for amortization of premiums and accretion of discountsan adjustment to maturity or, in the case of mortgage-backed securities, over the estimated life of the securitysecurities’ yields using the constant-yieldinterest method. The prepayment speed chosen to determine the estimated life of a mortgage-backed security is the security’s historical 3-month prepayment speed. When prepayment speeds are faster than expected, the average life of the mortgage-backed security is shorter than the original estimate. Amortization, accretion and accrued interest are included in interest income on securities.
Realized gains and losses andon securities, including declines in value judged to be other than temporary, are included in net securities gains and losses.losses as a component of noninterest income. Gains and losses on the sales of securities available for sale are determined using the specific-identification method. Using this basis results in the most accurate reporting of gains and losses realized on these sales, as well as the appropriate adjustment to accumulated other comprehensive income. A decline in the fair value of securities below cost that is deemed to be other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Gains and losses on the sales of trading securities are also determined using the specific-identification method with the gain or loss reported in the results of operations.
Short-term Investments
Short-term investments represent U.S. government agency discount notes that all mature in less than one year, but with maturities greater than 90 days. These investments were purchased for liquidity purposes..
Loans
Originated loans
Loans originated for investment are reported at the principal balance outstanding. Non-refundableoutstanding net of unearned income. Interest on loans and accretion of unearned income, including deferred loan origination fees, and certain direct origination costs are recognized as an adjustment to thecomputed in a manner that approximates a level yield on the related loan.recorded principal. Interest on loans is recorded torecognized in income as earned.
The accrual of interest on loans is discontinued when, in management’s opinion, it is probable that the borrower maywill be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When accrual of interest is discontinued on a loan, all unpaid accrued interest is reversed and payments subsequently received are applied first to recover principal. Interest income is recordedrecognized for payments received after contractual principal has been satisfied and as payments are received.satisfied. Loans are returned to accrual status when all the principal and interest contractually due are brought current and future amounts arepayment performance is reasonably assured.
Generally,
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
It is the policy of the Company to promptly charge off commercial and mortgage loans, or portions of all types which becomeloans, when available information reasonably confirms that they are wholly or partially uncollectible. Prior to recognizing a loss, asset value is established based on an assessment of the value of the collateral securing the loan, the borrower’s and the guarantor’s ability and willingness to pay and the status of the account in bankruptcy court, if applicable. Consumer loans are generally charged down to the fair value of the collateral, if any, less estimated selling costs when the loan is 90 days delinquent are reviewed relative to collectability. Unless such loans arepast due, unless the loan is clearly both well secured and in the process of terms revision to bring to a current status, collection through repossession or foreclosure, those loans deemed uncollectiblecollection. Loans are charged off against the allowance account.for loan losses with subsequent recoveries added back to the allowance.
Acquired loans
Management has defined the loans purchased in the June 2011 Whitney acquisition as acquired loans. Acquired loans are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. Acquired loans were segregated between those considered to be credit impaired and those deemed performing. To make this determination, management considered such factors as past due status, nonaccrual status and credit risk ratings. The fair value of acquired performing loans was determined by discounting expected cash flows, both principal and interest, for each pool at prevailing market interest rates. The difference between the fair value and principal balances due at acquisition date, the fair value discount, is accreted into income over the estimated life of each loan pool.
Credit impaired acquired loans showed evidence of credit deterioration that makes it probable that all contractually required principal and interest payments will not be collected. Acquired loans were further segregated into pools using common risk characteristics such as loan type, geography and risk rating. Their fair value was initially based on an estimate of cash flows for each pool, both principal and interest, expected to be collected, discounted at prevailing market rates of interest. Management estimated cash flows using key assumptions such as default rates, loss severity rates assuming default, prepayment speeds and estimated collateral values. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The excess of cash flows expected to be collected from a loan pool over its estimated fair value at acquisition is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan pool. Subsequent to acquisition, management must update these estimates of cash flows expected to be collected at each reporting date. These updates require the continued use of key assumptions and estimates, similar to those used in the initial estimate of fair value.
Acquired impaired loans with an accretable yield are not classified as nonperforming even though collection of contractual payments may be in doubt because income is accreted on the related loan pool, which is the unit of accounting.
Covered loans and the related loss share receivable
The loans purchased in the 2009 acquisition of Peoples First Community Bank (Peoples First) are covered by two loss share agreements between the FDIC and the Company which afford the Company significant loss protection. These covered loans are accounted for as acquired impaired loans as described above in the section on acquired loans. The loss share indemnification asset is measured separately from the related covered loans as it is not contractually embedded in the loans and is not transferrable should the loans be sold. The fair value of the indemnification asset at acquisition was estimated by discounting projected cash flows related to the loss share agreements based on the expected reimbursements for losses using the applicable loss share percentages, including appropriate consideration of possible true-up payments to the FDIC at the expiration of the loss share agreements. The discounted amount is accreted into non-interest income over the remaining life of the loan pool or the life of the shared loss agreement.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
The indemnification asset is reviewed and updated prospectively as loss estimates related to the covered loans change. Decreases in the expected cash flows on covered loans are recorded as an adjustment to the allowance for loan losses with a corresponding increase to the indemnification asset, and the difference is recorded as a provision for loan losses in the consolidated statement of income. Increases in expected cash flows of these loans first reverse any previously recorded increase in the indemnification asset on the loan pool with the remainder reflected as an adjustment to the indemnification asset’s accretion rate.
Loans Held for Sale
Loans held for sale are stated at the lower of cost or market on the consolidated balance sheets. These loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS At times, management may decide to sell loans that were not originated for that purpose. These loans are reclassified as held for sale when that decision is made and are also carried at the lower of cost or market.
Note 1. SummaryTroubled Debt Restructurings
Troubled debt restructurings (TDRs) occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term and a modification in loan terms is granted that would otherwise not have been considered.
Troubled debt restructurings can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing to accrue, depending on the individual facts and circumstances of Significant Accounting Policies (continued)the borrower. All loans whose terms have been modified in a TDR, including both commercial and retail loans, are considered “impaired.” When measuring impairment on a TDR, the present value of expected cash flows is calculated using the effective interest rate of the original loan, i.e., before the restructuring, as the discount rate or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. If the measurement is less than the recorded investment in the loan, the difference is charged-off through the allowance for loan and lease losses. A loan is not considered impaired due to a delay in payment if all amounts due, including interest accrued at the contractual interest rate for the period of delay, is expected to be collected. Modified acquired impaired loans are not removed from their accounting pool and accounted for as a TDR even if those loans would otherwise be deemed TDRs.
Allowance for Loan Losses
Originated loans
The allowance for loan and lease losses “ALLL” is a valuation account available to absorb losses on loans. The ALLL is established and maintained at an amount sufficient to cover the estimated inherent credit losslosses associated with the loan and lease portfolios of the Company as of the date of the determination. Credit losses arise not only from credit risk, , but also from other risks inherent in the lending process including, but not limited to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance for loan and lease losses. Quarterly, management estimates the probable level of losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipatedinherent losses in the existing loan portfolio based on the Company’s past loan loss and delinquency experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, and the estimated value of any underlying collateral and current economic conditions.
The analysis and methodology include three primary segments.elements. These segmentselements include a pool analysis of various retail loans based upon loss history, a pool analysis of commercial and commercial real estate loans based upon loss history by loan type, and a specific reserve analysis for those loans considered impaired under Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan. All commercial and commercial real estate loans with an outstanding balance of $100,000 or greater are individually reviewed for impairment; substandard mortgage loans with balances of $100,000 or greater are also included in the analysis.impaired. All losses are charged to the allowance for loan and lease losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the timelosses.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of receipt.Significant Accounting Policies and Recent Accounting Pronouncements (continued)
The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impairedagreement will not be collected. Impaired loans include troubled debt restructurings, and performing and non-performing major loans for which full paymentloans. In order to ensure consideration of principal or interest is not expected. Categories of non-major homogeneous loans, which are evaluated on an overall basis, generally includeall possible impairments, management considers all loans under $500,000.that are risk rated substandard or doubtful as impaired. When a loan is determined to be impaired, the amount of impairment is recognized by creating a specific allowance for any shortfall between the loans value and its recorded investment. The Company determines an allowance required for impaired loans based onloan’s value is measured by either the loan’s observable market price, the fair value of the collateral of the loan (less liquidation costs) if it is collateral dependent, or by the present value of expected future cash flows discounted at the loan’s effective interest rate. Any loans individually analyzed for impairment are not incorporated into the pool analysis to avoid double counting. Beginning in 2011, the Company changed the scope of the specific reserve analysis to include all impaired commercial, commercial real estate and mortgage loans with balances of $500,000 or greater.
Pool analysis is applied for all retail loans. The retail loans are subdivided into three groups, which currently include: mortgage real estate, indirect loans and direct consumer loans. The Company applies pool analysis for commercial and commercial real estate loans by applying a historical loss ratio to all commercial loans, commercial real estate loans and leases grouped by product type for both retail and commercial loans. A historical loss rate is calculated for each group over the loan’s observable market price ortwelve prior quarters to determine the three year average loss rate. As circumstances dictate, management will make adjustments to the loss history to reflect significant changes in our loss history. Adjustments will also be made to historical loss rates to cover risks associated with trends in delinquencies, non-accruals, current economic conditions and credit administration/underwriting practices and policies.
Acquired loans
Purchased loans acquired in a business combination are recorded at their estimated fair value on their purchase date and with no carryover of its collateral. If the recorded investment inrelated allowance for loan losses. Performing acquired loans are subsequently evaluated for any required allowance at each reporting date. An allowance for loan losses is calculated using a methodology similar to that described above for originated loans. The allowance as determined for each loan pool is compared to the impaired loan exceeds the measure ofremaining fair value discount for that pool. If greater, the excess is recognized as an addition to the allowance through a valuationprovision for loan losses. If less than the discount, no additional allowance is requiredrecorded. Charge-offs and losses first reduce any remaining fair value discount for the loan pool and once the discount is depleted, losses are applied against the allowance established for that pool.
For impaired acquired loans and covered loans, cash flows expected to be collected are recast at each reporting date for each loan pool. These evaluations require the continued use and updating of key assumptions and estimates such as default rates, loss severity given default and prepayment speed assumptions, similar to those used for the initial fair value estimate. Management judgment must be applied in developing these assumptions. If expected cash flows for a component ofpool decreases, an increase in the allowance for loan losses is made through a charge to the provision for loan losses. If expected cash flows for a pool increase, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into income over the remaining life of the loan pool.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is charged to expense over the estimated useful lives of the assets, which are up to 39 years for buildings and three to seven years for furniture and equipment. Amortization expense for software is charged over 3three years. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. In cases where Hancockthe Company has the right to renew the lease for additional periods, the lease term for the purpose of calculating amortization of the capitalized cost of the leasehold improvements is extended when Hancockthe Company is “reasonably assured” that it will renew the lease.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Depreciation and amortization expenses are computed using a straight-line basis for assets acquired after January 1, 2006 and the double declining balance basis for assets acquired prior to January 1, 2006. HancockGains and losses related to retirement or disposition of fixed assets are recorded in other income under noninterest income on the consolidated statements of income. The Company continually evaluates whether events and circumstances have occurred that indicate that such long-lived assets have been impaired. Measurement of any impairment of such long-lived assets is based on those assets’ fair values. There were no impairment losses on property and equipment recorded during 2008, 2007,2011, 2010, or 2006.2009.
Other Real Estate
Other real estate owned includes assetsreal property that havehas been acquired in satisfaction of debt through foreclosure. Other real estate owned is reportedloans and property no longer used in otherthe Banks’ business. Generally these assets and isare recorded at the lower of either cost or estimated fair value less the estimated cost of disposition. Valuation adjustments required at foreclosure areAny initial reduction in the carrying amount of a loan to the fair value of the collateral received is charged to the allowance for loan losses. Subsequent to foreclosure, losses on the periodic revaluation of the property are
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (continued)
charged to net incomecurrent earnings, as other expense. Costsare revenues from and costs of operating and maintaining the properties are included in other noninterest expenses, whileand gains (losses)or losses recognized on their disposition are charged to other income as incurred.disposition. Improvements made to properties are capitalized if the expenditures are expected to be recovered upon the sale of the properties.
Goodwill and Other Intangible Assets
Goodwill, which represents the excess of cost over the fair value of the net assets of an acquired business, is not amortized but tested for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. Impairment is defined as the amount by which the implied fair value of the goodwill contained in any reporting unit within a company is less than the goodwill’s carrying value. Impairment losses would be charged to operating expense. Management reviews goodwill for impairment based on the Company’s primary reporting segments, the banks. If the reporting unit’s fair value is less than its carrying value, an estimate of the implied fair value of the goodwill is compared to the unit’s carrying value. The Company uses a present value technique to estimate fair value when testing for impairment. The cash flow estimates incorporate assumptions that market participants would use in their estimates of fair value. The cash flow analysis requires assumptions about the economic environment, expected net interest margins, growth rates, and the rate at which cash flows are discounted.
Identifiable intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or legal rights or because the assets are capable of being sold or exchanged either on their own on in combination with a related contract, asset, or liability. Hancock’sOther identifiable intangible assets primarily relate towith finite lives, such as core deposits, insurance customer relationships, non-compete agreementsdeposit intangibles and trade name. These intangibles, which have definite useful lives,name, are amortized based on the sum-of-the-years-digits method over their estimated useful lives for assets acquired prior to January 1, 2006 and on a straight-line basis for assets acquired subsequent to January 1, 2006. In addition, these intangibles are evaluated annually for impairment or whenever events and changes in circumstances indicate that the carrying amount should be reevaluated.
Mortgage Servicing Rights
The Company adopted SFAS No. 156, Accounting for Servicing of Financial Assets on January 1, 2007 without material impact. SFAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measuredrecorded at fair value if practicable, and permitsare generally amortized over the periods benefited and are evaluated for impairment similar to long-lived assets.
Bank-Owned Life Insurance
Bank-owned life insurance (BOLI) is long-term life insurance on the lives of certain current and past employees where the insurance policy benefits and ownership are retained by the employer. Its cash surrender value is an entity to subsequently measure those servicing assets and servicing liabilities at fair value. Under SFAS. No. 156,asset that the Company decideduses to continue to usepartially offset the amortization method insteadfuture cost of adoptingemployee benefits. The cash value accumulation on BOLI is permanently tax deferred if the fair value method. Management has determined that it has one class of servicing rights whichpolicy is based on the type of loan. The risk characteristics of the underlying financial assets used to stratify servicing assets for purposes of measuring impairment are interest rate, type of product (fixed versus variable), duration and asset quality. The book value of mortgage servicing rights at December 31, 2008 and December 31, 2007 was $0.3 million and $0.5 million, respectively. The fair value of mortgage servicing rights at December 31, 2008 and December 31, 2007 was $1.0 million and $1.8 million, respectively.
Reinsurance Receivables
Certain premiums and losses are assumed from and ceded to other insurance companies under various reinsurance agreements. Reinsurance premiums, loss reimbursement, and reserves related to reinsurance business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contract. The Company may receive a ceding commission in connection with ceded reinsurance. If so, the ceding commission is earned on a monthly pro rata basis in the same manner as the premium and is recorded as a reduction of other operating expenses.
Derivative Instruments
The Company has certain Interest Rate Lock Commitments “IRLC’s” that are reported on the consolidated balance sheets at fair value with changes in fair value reported in statements of income. The Company also has interest rate swaps which are recognized on the consolidated balance sheets as other assets at fair value as required by SFAS No. 133. These interest rate swaps do not qualify for hedge accounting under the guidelines of SFAS No. 133, Accounting for Derivative Instruments and Hedging. Gains and losses relatedheld to the change in fair valueinsured person’s death and certain other conditions are recognized in earnings during the period of change in fair value as other non-interest income.met.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Derivative Instruments and Hedging Activities
Accounting guidance provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
Income Taxes
HancockThe Company accounts for deferred income taxes using the liability method. Deferred tax assets and liabilities are based on temporary differences between the financial statement carrying amounts and the tax basis of Hancock’sthe Company’s assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled.
Pension AccountingRetirement Benefits
The Company has accountedManagement makes a variety of assumptions in applying principles that govern the accounting for itsbenefits under the Company’s defined benefit pension plan usingplans and other postretirement benefit plans. These assumptions are essential to the actuarial model required by SFAS No. 87, Employers’ Accounting for Pensions.valuation that determines the amounts recognized and certain disclosures it makes in the consolidated financial statements related to the operation of these plans. Two of the more significant assumptions concern the expected long-term rate of return on plan assets and the rate needed to discount projected benefits to their present value. Changes in these assumptions impact the cost of retirement benefits recognized in net income and comprehensive income. Certain assumptions are closely tied to current conditions and are generally revised at each measurement date. For example, the discount rate is reset annually with reference to market yields on high quality fixed-income investments. Other assumptions, such as the rate of return on assets, are determined, in part, with reference to historical and expected conditions over time and are not as susceptible to frequent revision. Holding other factors constant, the cost of retirement benefits will move opposite to changes in either the discount rate or the rate of return on assets. The compensation cost of an employee’s pension benefit is recognized on the projected unit credit method over the employee’s approximate service period. The aggregate cost method is utilized for funding purposes. The Company also sponsors two defined benefit postretirement plans, which provide medical benefits and life insurance benefits. The Company has accounted for these plans using the actuarial computations required by SFAS No. 106, Employers Accountingguidance regarding employers’ accounting for Postretirement Benefits Other Than Pensions as amended by SFAS No. 132.postretirement benefits other than pensions. The cost of the defined benefit postretirement plan has been recognized on the projected unit credit method over the employee’s approximate service period. Effective December 31, 2006,
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Stock-Based Payment Arrangements
The grant date fair value of equity instruments awarded to employees and directors establishes the Company adopted SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R); which required the recognitioncost of the over funded or under funded status of a defined benefit postretirement plan as an asset or liability onservices received in exchange, and the balance sheet. In 2008, the Company changed the measurement date of the funded status of the plan from September 30cost associated with awards that are expected to December 31.
Policy Reserves and Liabilities
Unearned premium reserves are based on the assumption that the portion of the original premium applicable to the remaining term and amount of insurance will be adequate to pay future benefits. The reserve is calculated by multiplying the original gross premium times an unearned premium factor. Factors are developed which represent the proportion of the remaining coverage compared to the total coverage provided over the entire term of insurance.
Policy reserves for future life and health claims not yet incurred are based on assumed mortality and interest rates. For disability, the reserves are based upon unearned premium, which is the portion of the original premium applicable to the remaining term and amount of insurance that will be adequate to pay future benefits. Present value of amounts not yet due is an amount for disability claims already reported and incurred and represents the present value of all the future benefits using actuarial disability tables. IBNR “Incurred But Not Reported” is an estimate of claims incurred but not yet reported, and is based upon historical analysis of claims payments.
Stock-Based Compensation
In recognizing stock-based compensation, Hancock follows the provisions of SFAS No. 123(R), Share-Based Payment. This statement establishes fair value as the measurement objective in accounting for stock awards and requires the application of a fair value based measurement method in accounting for compensation cost, whichvest is recognized over the requisite service period.
Revenue Recognition
The largest source of revenue for Hancockthe Company is interest revenue. Interest revenue is recognized on an accrual basis driven by written contracts, such as loan agreements or securities contracts. Credit-related fees, including letter of credit fees, are recognized in non-interest income when earned. HancockThe Company recognizes commission revenue and brokerage, exchange and clearance fessfees on a trade-date basis. Other types of non-interest revenue such as service charges on deposits and trust revenues, are accrued and recognized into income as services are provided and the amount of fees earned are reasonably determinable.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (continued)
Earnings Per Share
Basic earnings per common share “EPS” excludes dilution and is computed by dividing net income applicable to common shareholders by the weighted-average number of common shares outstanding.outstanding for the applicable period. Shares outstanding are adjusted for restricted shares issued to employees under the long-term incentive compensation plan and for certain shares that will be issued under the directors’ compensation plan. Diluted EPSearnings per common share is computed using the weighted-average number of common shares outstanding increased by dividing net income, adjusted for the effectnumber of shares in which employees would vest under performance-based restricted stock and stock unit awards based on expected performance factors and by the number of additional shares that would have been issued if potentially dilutive stock options outstanding duringwere exercised, each as determined using the period by the weighted-averagetreasury stock outstanding.method.
Recent Accounting Pronouncements
New Accounting Standards
In December 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (FSP) No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, which provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of the disclosures are to provide users of financial statements with an understanding of how investment allocation decisions are made; the major categories of plan assets; the inputs and valuation techniques used to measure fair value of plan assets; the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and significant concentrations on risk within plan assets. FSP No. 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Company is assessingadopted the impactFASB’s authoritative guidance regarding the determination of adopting FSP No. 132(R)-1, but does not expect the impact to be material to the Company’s financial condition or results of operations.
In October 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a Financial Assetwhether instruments granted in a Market That is Not Active, which clarifies the application of SFAS No. 157, Fair Value Measurements, in an inactive market. Application issues clarified include: how management’s internal assumptions should be considered when measuring fair value when relevant observable data do not exist; how observable market information in a market that is not active should be considered when measuring fair value; and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. FSP No. 157-3 was effective immediately and did not have a material impact on the Company’s financial condition or results of operations.
In November 2008, the FASB issued Emerging Issues Task Force (“EITF”) No 08-10, Selected Statement 160 Implementation Questions, which clarifies how an entity should account for the transfer of an interest in a subsidiary that is in-substance real estate; how an entity should account for the transfer of an interest in a subsidiary to an equity method investee that results in deconsolidation of the subsidiary; and how an entity should account for the transfer of an interest in a subsidiary in exchange for a joint venture interest that results in deconsolidation of the subsidiary. The Company will adopt the provisions of EITF No. 08-10 in the first quarter of 2009, as required, and the impact on the Company’s financial condition or results of operations is dependent on the extent of future business combinations.
In September 2008, the FASB issued EITF No 08-6, Equity Method Investment Accounting Considerations, which clarifies how the initial carrying value of an equity method investment should be determined; how the difference between the investor’s carrying value and the investor’s share of the underlying equity of the investee should be allocated to the underlying assets and liabilities of the investee; how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed; how an equity method investee’s issuance of shares should be accounted for; and how to account for a change in an investment from the equity method to the cost method. The Company will adopt the provisions of EITF No. 08-6 in the first quarter of 2009, as required, and the impact on the Company’s financial condition or results of operations is dependent on the extent of future business combinations.
In June 2008, the FASB issued EITF No. 03-6-1, whichshare-based payment transactions are participating securities. This guidance provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. EITF No. 03-6-1This guidance was effective January 1, 2010, and was applied retrospectively.
Statements of Cash Flows
The Company considers only cash on hand, cash items in process of collection and balances due from financial institutions as cash and cash equivalents for purposes of the consolidated statements of cash flows.
Reportable Segment Disclosures
As defined by authoritative guidance, segment disclosures require reporting information about a company’s operating segments using a “management approach.” Reportable segments are identified as those revenue-producing components for which separate financial information is effective for financial statements issued for fiscal years beginning after December 15, 2008produced internally and interim periods within those years. Upon adoption,which are subject to evaluation by the chief operating decision maker in deciding how to allocate resources to segments. The Company defines reportable segments as the banks.
Other
Assets held by the banks in a company is required tofiduciary capacity are not assets of the banks and are not included in the consolidated balance sheets.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
retrospectively adjust its earnings per share data including any amounts
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, the FASB issued updated guidance to address the differences between international financial reporting standards (IFRS) and generally accepted accounting principles (GAAP) regarding the offsetting of assets and liabilities. Instead of proposing new criteria for netting assets and liabilities the FASB and International Accounting Standards Board (IASB) jointly issued common disclosure requirements related to offsetting arrangements, irrespective of whether they are offset on the statement of financial position, which require disclosure of both net and gross information for these assets and liabilities. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods summaries of earningswithin those annual periods. This guidance impacts only the disclosures in financial statements and selected financial data. The Company is assessingwill not impact the impact of adopting EITF No. 03-6-1, but does not expect the impact to be material to the Company’scompany’s financial condition or results of operations.
In May 2008,September 2011, the FASB issued SFAS No. 162, guidance to simplify how entities test goodwill for impairment. The Hierarchyfinal standard allows an entity to first assess qualitative factors to determine whether is it “more likely than not” that the fair value of Generally Accepted Principles whicha reporting unit is intendedless than its carrying amount as a basis for determining whether it is necessary to improve financial reporting by identifyingperform the two-step goodwill impairment test as described in Accounting Standards Codification (ASC) Topic 350,Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a consistent framework, or hierarchy,likelihood of more than 50%. The amendments are effective for selecting accounting principles to be used in preparingfiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. SFAS No. 162 will be effective 60 days following the SEC’s approvalmost recent annual or interim period have not yet been issued. The adoption of this guidance is not expected to have a material impact on the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company will adopt the provisions of SFAS No. 162, when required, but does not expect the impact to be material to the Company’scompany’s financial condition or results of operations.
In April 2008,June 2011, the FASB issued FSP No. 142-3, Determinationupdated guidance regarding the presentation of comprehensive income, and subsequently amended this guidance in December 2011, prior to its effective date. The updated guidance eliminates the option to present the components of other comprehensive income as part of the Useful Lifestatement of Intangible Asset, which amendschanges to stockholders’ equity, and, requires an entity to present the factors that should be considered in developing renewal or extension assumptions used to determinetotal of comprehensive income, the useful lifecomponents of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of the FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142net income, and the periodcomponents of expected cash flows used to measure the fair valueother comprehensive income either in a single continuous statement of the asset under SFAS No. 141R and other U.S. generally accepted accounting principles.comprehensive income or in two separate but consecutive statements. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company is assessing the impact of FSP No. 142-3, butamendment does not expectchange the impactitems that must be reported in other comprehensive income or when an item in other comprehensive income must be reclassified to be material to the Company’s financial condition or results of operations.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB 133, which enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged itemsnet income. The amendments are accounting for under SFAS No. 133, Accounting forDerivative Instruments and Hedging Activities; and (c) derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years, and interim periods within those years, beginning after NovemberDecember 15, 2008.2011, and should be applied retrospectively. The Company is assessingadoption of this guidance will change presentation only and will not have a material impact on the impact of SFAS No. 161, but does not expect the impact to be material to the Company’scompany’s financial condition or results of operations. The FASB is currently re-deliberating whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income.
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, was issued in December 2007. This standard that is effective for 2009 governs the accounting for and reporting of noncontrolling interests in partially owned consolidated subsidiaries and the loss of control of subsidiaries. The Company currently has no such partially owned consolidated subsidiaries.
In December 2007,May 2011, the FASB issued SFAS No. 141R, Business Combinations which appliesupdated guidance to all business combinations.achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. Certain provisions clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements, while others change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The statement requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combinationguidance is to be recorded at “full fair value.” All business combinations will be accounted for by applying the acquisition method (previously referred to as the purchase method.) Companies will have to identify the acquirer; determine the acquisition dateapplied prospectively and purchase price; recognize at their acquisition-date fair values the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree, and recognize goodwill or, in the case of a bargain purchase, a gain. SFAS No. 141R is effective forduring interim and annual periods beginning on or after December 15, 2008, and early2011. The adoption of this guidance is prohibited. It will be appliednot expected to business combinations occurring after the effective date. The Company will adopt the provisions of SFAS No. 141R in the first quarter of 2009, as required, and thehave a material impact on the Company’scompany’s financial condition or results of operations is dependent on the extent of future business combinations.operations.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Accounting Standards Adopted in 2008
In November 2007,April 2011, FASB issued updated guidance for receivables regarding a creditor’s determination of whether a restructuring is a troubled debt restructuring (TDR). The final standard does not change the SEC issued Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings, SAB No. 109 rescinds SAB No. 105’s prohibition on inclusionlong-standing guidance that a restructuring of expected net future cash flowsa debt constitutes a TDR “if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider”. The update clarifies which loan servicing activitiesmodifications constitute troubled debt restructurings and is intended to assist creditors in determining whether a modification of the fair value measurementterms of a written loan commitment. SAB No. 109 appliesreceivable meets the criteria to any loan commitmentsbe considered a troubled debt restructuring, both for which fair value accounting is elected under SFAS No. 159. SAB No. 109purposes of recording an impairment loss and for disclosure of troubled debt restructurings. The new guidance is effective prospectively for derivative loan commitments issuedinterim and annual periods beginning on June 15, 2011, and should be applied retrospectively to restructurings occurring on or modified inafter the beginning of the fiscal quarters beginning after December 15, 2007.year of adoption. The adoption of SAB No. 109 during the first quarter of 2008this guidance did not have a material impact on the Company’scompany’s financial condition or results of operations or financial position.operations.
In June 2007, theApril 2011, FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Award. The objective of this issue isissued an update to determineimprove the accounting for repurchase agreements (“repos”) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The guidance modifies the income tax benefitscriteria for assessing if a transferor has maintained effective control over the transferred asset in determining when these transactions would be accounted for as financings (secured borrowings/lending agreements) as opposed to sales (purchases) with commitments to repurchase (resell). Specifically, the updated guidance removes the criterion requiring a transferor to have the ability to repurchase or redeem the financial assets on substantially the same terms, even in the event of dividend or dividend equivalents whendefault by the dividends or dividend equivalents are: (a) linkedtransferee, as well as the collateral maintenance guidance related to equity-classified nonvested shares or share units or equity-classified outstanding share optionsthat criterion. The guidance is effective prospectively for new transfers and (b) charged to retained earnings under SFAS Statement No. 123 (Revised 2004), Share-Based Payment. The Task Force reached a consensus that EITF No. 06-11 should be applied prospectively to the income tax benefits of dividends on equity-classified employee share-based payment awardsexisting transactions that are declaredmodified in fiscal yearsthe first interim or annual period beginning on or after SeptemberDecember 15, 2007.2011. The adoption of EITF No. 06-11 during the first quarter of 2008 didthis guidance is not expected to have a material impact on the Company’scompany’s financial condition or results of operations or financial position.operations.
Note 2. Acquisitions
Whitney Holding Corporation
On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation (Whitney), a bank holding company based in New Orleans, Louisiana, in a stock and cash transaction. Whitney common shareholders received 0.418 shares of Hancock common stock in exchange for each share of Whitney stock, resulting in Hancock issuing 40,794,261 common shares at a fair value of $1.3 billion. Whitney’s preferred stock and common stock warrant issued under TARP were purchased by the Company for $307.7 million and retired as part of the merger transaction. In March 2007,total, the FASB ratified EITF No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements. One objectivepurchase price was approximately $1.6 billion including the value of EITF No. 06-10 isthe options to determine whether a liability for future benefits under a collateral assignment split-dollar life insurance arrangement that provides a benefit to an employee that extends into postretirement periods should be recognizedpurchase common stock assumed in accordance with SFAS No. 106 or APB Opinion 12, as appropriate, basedthe merger. On September 16, 2011, seven Whitney Bank branches located on the substantive agreementMississippi Gulf Coast and one branch located in Bogalusa, LA with approximately $47 million in loans and $180 million in deposits were divested in order to resolve branch concentration concerns of the employee. Another objectiveU.S. Department of EITF No. 06-10 isJustice relating to determine how the asset arising from a collateral assignment split-dollar life insurance arrangement should be recognizedmerger.
The Whitney transaction was accounted for using the purchase method of accounting and, measured. EITF No. 06-10 is effective for fiscal years beginning after December 15, 2007. The adoption of EITF No. 06-10 during the first quarter of 2008 did not have a material impactaccordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the Company’s results of operations or financial position.
In February 2007,acquisition date. Fair values are preliminary and subject to refinement for up to one year after the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment SFAS No. 115 which permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in SFAS No. 159 are elective; however, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. The fair value option established by SFAS No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. The adoption of SFAS No. 159 during the first quarter of 2008 did not have a material impact on the Company’s results of operations or financial position.
Effective December 31, 2006, the Company adopted SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R); which required the recognition of the over funded or under funded status of a defined benefit postretirement plan as an asset or liability on the balance sheet. In 2008, the Company changed the measurementclosing date of the funded statusacquisition. Assets acquired, excluding goodwill, totaled $11.2 billion, including $6.5 billion in loans, $2.6 billion of investment securities, and $224 million of identifiable intangible assets. Liabilities assumed were $10.1 billion, including $9.2 billion of deposits.
Goodwill of $589 million was calculated as the excess of the plan from September 30 to December 31.consideration exchanged over the net identifiable assets acquired.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies2. Acquisitions (continued)
The following table provides the assets purchased, the liabilities assumed and the consideration transferred:
Preliminary Statement of Net Assets Acquired (at fair value) and Consideration Transferred (in millions except per share) | ||||||||||||
Fair value of net assets acquired June 4, 2011 | Subsequent acquisition-date adjustments | As recorded by HHC December 31, 2011 | ||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 957 | $ | — | $ | 957 | ||||||
Loans held for sale | 57 | — | 57 | |||||||||
Securities | 2,635 | 1 | 2,636 | |||||||||
Loans and leases | 6,456 | (9 | ) | 6,447 | ||||||||
Property and equipment | 284 | (21 | ) | 263 | ||||||||
Other intangible assets (1) | 266 | (42 | ) | 224 | ||||||||
Other assets | 580 | (7 | ) | 573 | ||||||||
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Total identifiable assets | 11,235 | (78 | ) | 11,157 | ||||||||
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LIABILITIES | ||||||||||||
Deposits | 9,182 | — | 9,182 | |||||||||
Borrowings | 776 | — | 776 | |||||||||
Other liabilities | 175 | (3 | ) | 172 | ||||||||
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Total liabilities | 10,133 | (3 | ) | 10,130 | ||||||||
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Net identifiable assets acquired | 1,102 | (75 | ) | 1,027 | ||||||||
Goodwill (2) | 514 | 75 | 589 | |||||||||
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Net assets acquired | $ | 1,616 | — | $ | 1,616 | |||||||
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CONSIDERATION: | ||||||||||||
Hancock Holding Company common shares issued | 41 | |||||||||||
Purchase price per share of the Company’s common stock (3) | 32.04 | |||||||||||
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Company common stock issued and cash exchanged for fractional shares | $ | 1,307 | ||||||||||
Stock options converted | 1 | |||||||||||
Cash paid for TARP preferred stock and warrants | 308 | |||||||||||
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Fair value of total consideration transferred | $ | 1,616 | ||||||||||
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(1) | Intangible assets consists of core deposit intangible of $189.4 million, trade name of $11.7 million, trust relationships of $11.1 million, and credit card relationships of $11.3 million. |
The amortization life is 12—20 years for the CDI intangible asset; 15 years for credit card relationships, 12 years for trust and 2.5 years for tradename intangible asset. |
They will be amortized on an accelerated basis.
(2) | No goodwill is expected to be deductible for federal income tax purposes. The goodwill will be primarily allocated to the Whitney Bank segment. |
(3) | The value of the shares of common stock exchanged with Whitney shareholders was based upon the closing price of the Company's common stock at June 3, 2011, the last traded day prior to the date of acquisition. |
The following table (in thousands) provides a restatement of interim periods for the more significant subsequent purchase accounting fair value adjustments to the acquisition date valuations:
June 30, 2011 Prior | June 30, 2011 Restated | September 30, 2011 Prior | September 30, 2011 Restated | |||||||||||||
Goodwill | $ | 513,917 | $ | 589,531 | $ | 513,917 | $ | 589,531 | ||||||||
Intangible assets | 222,621 | 234,343 | 206,424 | 218,146 |
The following table (in thousands) provides a reconciliation of goodwill:
Goodwill balance at December 31, 2010 | $ | 61,631 | ||
Additions: | ||||
Goodwill from Whitney acquistion at acquisition date | 513,917 | |||
Purchase accounting fair value adjustments subsequent to acquisition date made during the fourth quarter of 2011 | 75,614 | |||
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Goodwill balance at December 31, 2011 | $ | 651,162 | ||
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
The operating results of the Company for the year ended December 31, 2011 include the results from the operations acquired in the Whitney transaction since June 4, 2011. Whitney’s operations contributed approximately $232.5 million in revenue, net of interest expense, and an estimated $35.8 million in net income for the period from the acquisition date.
Merger-related charges of $86.8 million associated with the Whitney acquisition are included in noninterest expense for 2011. Such expenses were for professional services and other incremental costs associated with the conversion of systems and integration of operations, costs related to branch and office consolidations, costs related to termination of existing contractual arrangements for various services, marketing and promotion expenses, and retention and severance and incentive compensation costs. The following table provides a breakdown (in thousands) of merger expenses by category:
Year Ended December 31, 2011 | ||||
Personnel expense | $ | 13,960 | ||
Equipment expense | 552 | |||
Data processing expense | 3,163 | |||
Net occupancy expense | 330 | |||
Postage and communications | 897 | |||
Professional services expense | 40,902 | |||
Printing and supplies | 568 | |||
Advertising | 5,958 | |||
Insurance expense | 3,177 | |||
Other expense | 17,255 | |||
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Total merger-related expenses | $ | 86,762 | ||
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The following unaudited pro forma information presents the results of operations for the twelve months ended December 31, 2011 and 2010, as if the acquisition had occurred at the beginning of the earliest period presented. These adjustments include the impact of certain purchase accounting adjustments such as intangible assets amortization, fixed assets depreciation and elimination of Whitney’s provision. In September 2006,addition, the FASB issued SFAS No. 157, $86.8 million in merger expenses discussed above are included in each year. Any additional future operating cost savings and other synergies the Company anticipates as a result of the acquisition are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of the earliest period presented, nor are they intended to represent or be indicative of future results of operations.
Twelve Months Ended | ||||||||
December 31, 2011 | December 31, 2010 | |||||||
(In millions) | ||||||||
Total revenues , net of interest expense | $ | 979 | $ | 983 | ||||
Net Income | $ | 124 | $ | 94 |
In many cases, determining the fair value of the acquired assets and assumed liabilities required the Company to estimate future cash flows associated with those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant estimates related to the valuation of acquired loans. For such loans, the excess of cash flows expected to be collected as of the acquisition date over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at acquisition date and the expected cash flows at acquisition reflects the impact of estimated credit losses and other factors, such as prepayments. In accordance with GAAP, there was no carry-over of Whitney’s previously established allowance for credit losses.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
The acquired loans were divided into loans with evidence of credit quality deterioration (acquired impaired) and loans that do not meet this criteria (acquired performing). In addition, the loans were further categorized into different loan pools by loan types. The Company determined expected cash flows on the acquired loans based on the best available information at the date of acquisition. If new information is obtained about circumstances as of the acquisition date that impact cash flows, management will revise the related purchase accounting adjustments in accordance with accounting for business combinations.
Loans at the acquisition date of June 4, 2011 are presented in the following table.
Acquired Impaired | Acquired Performing | Total Acquired Loans | ||||||||||
(In thousands) |
|
| ||||||||||
Commercial non-real estate | $ | 128,813 | $ | 2,414,002 | $ | 2,542,815 | ||||||
Commercial real estate owner-occupied | 91,885 | 856,583 | 948,468 | |||||||||
Construction and land development | 159,438 | 564,795 | 724,233 | |||||||||
Commercial real estate non-owner occupied | 86,573 | 839,258 | 925,831 | |||||||||
|
|
|
|
|
| |||||||
Total commercial/real estate | 466,709 | 4,674,638 | 5,141,347 | |||||||||
|
|
|
|
|
| |||||||
Residential mortgage | 68,780 | 818,152 | 886,932 | |||||||||
Consumer | — | 418,563 | 418,563 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 535,489 | $ | 5,911,353 | $ | 6,446,842 | ||||||
|
|
|
|
|
|
The following table presents information about the acquired impaired loans at acquisition (in thousands).
Contractually required principal and interest payments | $ | 880,612 | ||
Nonaccretable difference | 212,987 | |||
|
| |||
Cash flows expected to be collected | 667,625 | |||
Accretable difference | 132,136 | |||
|
| |||
Fair value of loans acquired with a deterioration of credit quality | $ | 535,489 | ||
|
|
The fair value of the acquired performing loans at June 4, 2011, was $5.9 billion. The gross contractually required principal and interest payments receivable for acquired performing loans was $6.8 billion.
The fair value of net assets acquired includes certain contingent liabilities that were recorded as of the acquisition date. Whitney has been named as a defendant in various pending legal actions and proceedings arising in connection with its activities as a financial services institution. Some of these legal actions and proceedings include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Whitney is also involved in investigations and/or proceedings by governmental and self-regulatory agencies. Due to the number of variables and assumptions involved in assessing the possible outcome of these legal actions, sufficient information did not exist to reasonably estimate the fair value of these contingent liabilities. As such, these contingences have been measured in accordance with accounting guidance on contingencies which states that a loss is recognized when it is probable of occurring and the loss amount can be reasonably estimated.
In connection with the Whitney acquisition, on June 4, 2011, the Company recorded a liability for contingent payments to certain employees for arrangements that were in existence prior to acquisition. The fair value of this liability was $58.0 million. The Company also recorded a liability with a fair value of $14.0 million for a contractual contingency assumed in connection with Whitney’s obligations under contracts for a systems conversion and replacement initiative. This initiative was suspended in anticipation of the acquisition. Substantially all of these liabilities are expected to be paid within one year from acquisition date.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
Peoples First Community Bank
On December 18, 2009, the Company entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (FDIC), as receiver for Peoples First Community Bank (Peoples First) based in Panama City, Florida. According to terms of the agreement, the Company acquired substantially all of the assets of Peoples First and all deposits and borrowings. There was no consideration paid for the acquisition. Peoples First operated 29 branches in Florida with assets totaling approximately $1.7 billion and approximately 437 employees.
The loans purchased are covered by loss share agreements between the FDIC and the Company, which affords the Company significant loss protection. Under the loss share agreement, the FDIC will cover 80% of covered loan losses up to $385 million and 95% of losses in excess of that amount. The term for loss sharing on residential real estate loans is ten years. The term for loss sharing on non-residential real estate loans and other loans is five years. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction.
New loans made after the purchase date are not covered by the loss share agreements. The loss sharing agreements are subject to our compliance with servicing procedures specified in the agreements with the FDIC. The Company recorded an estimated receivable from the FDIC at the acquisition date of $325.6 million which represents the fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed to the Company. The outstanding receivable balance at December 31, 2011 and 2010 was $212.9 million and $329.1 million, respectively.
The acquisition was accounted for under the purchase method of accounting in accordance with generally accepted accounting principles regarding acquisitions. The purchased assets and assumed liabilities were recorded at their respective acquisition date fair values. A net acquisition bargain purchase gain of $20.7 million ($33.6 million pretax) resulted from the acquisition and is included as a component of noninterest income on the statement of income. The amount of the gain is equal to the amount by which the fair value of assets purchased exceeded the fair value of liabilities assumed.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
The statement of net assets acquired as of December 18, 2009 and the resulting gain are presented in the following table.
As Recorded by Peoples First Community Bank | Fair Value Adjustments | As Recorded by Hancock | ||||||||||
(In thousands) | ||||||||||||
Assets | ||||||||||||
Cash | $ | 98,068 | $ | 302,208 | (a) | $ | 400,276 | |||||
Securities | 16,149 | — | 16,149 | |||||||||
Loans | 1,461,541 | (511,111 | ) (b) | 950,430 | ||||||||
Property and equipment | 8 | — | 8 | |||||||||
Core deposit intangible | — | 11,610 | (c) | 11,610 | ||||||||
FIDC loss share receivable | — | 325,606 | (d) | 325,606 | ||||||||
Other assets | 13,000 | (1,813 | ) (e) | 11,187 | ||||||||
|
|
|
|
|
| |||||||
Total assets acquired | $ | 1,588,766 | $ | 126,500 | $ | 1,715,266 | ||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Deposits | $ | 1,552,454 | $ | 10,483 | (f) | $ | 1,562,937 | |||||
FHLB advances | 115,500 | 804 | (g) | 116,304 | ||||||||
Other liabilities | 2,402 | 12,891 | (h) | 15,293 | ||||||||
|
|
|
|
|
| |||||||
Total liabilitites acquired | $ | 1,670,356 | $ | 24,178 | $ | 1,694,534 | ||||||
|
|
|
|
|
| |||||||
|
| |||||||||||
Net assets acquired “bargain purchase” gain | $ | 20,732 | ||||||||||
|
|
Explanation of Fair Value Measurements.Adjustments
(a) Adjustment is for cash received from the FDIC for first losses.
(b) This standard definesestimated adjustment is necessary as of the acquisition date to write down People's First book value of loans to the estimated fair value establishesas a framework for measuringresult of future loan losses.
(c) This fair value in accounting principles generally acceptedadjustment represents the value of the core deposit base assumed in the United Statesacquisition based on a study performed by an independent valuation firm. This amount was recorded by the Company as an identifiable asset and will be amortized as an expense on a straight-line basis over the average life of America, and expands disclosure aboutthe core deposit base, which is estimated to be 10 years.
(d) This adjustment is the estimated fair value measurements. This pronouncement appliesof the amount that the Company will receive from the FDIC under its loss sharing agreement as a result of future loan losses.
(e) These are adjustments made to other accounting standards that require or permitacquired assets to reflect fair value measurements. Accordingly, this statement does not require any newprimarily for a write-down of an investment in a subsidiary and accrued interest receivable for loans that should have been placed on non-accrual prior to the acquisition.
(f) This fair value measurement.adjustment was recorded because the weighted average interest rate of People's First time deposits exceeded the cost of similar wholesale funding at the time of the acquisition. This statement is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Atamount will be amortized to reduce interest expense on a declining basis over the November 14, 2007 Board meeting,average life of the Board decided to defer the effective date for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed atportifolio of approximately 7 months.
(g) The fair value adjustment was recorded because the interest rates of People's fixed rate borrowings exceeded the current interest rates on similar borrowings. This amount will be amortized to interest expense over terms of the borrowings.
(h) This adjustment is for the tax effect of the merger.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
The Company expensed merger-related charges of $3.2 million in 2010 and $3.7 million in 2009. These charges represent costs associated with severance and employee related charges, systems integrations, and other merger-related charges.
Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
Personnel expense | $ | 27 | $ | 1,760 | ||||
Equipment expense | 57 | — | ||||||
Data processing expense | 944 | 6 | ||||||
Net occupancy expense | 4 | 118 | ||||||
Postage and communications | 60 | 1 | ||||||
Professional services expense | 1,263 | 1,283 | ||||||
Printing and supplies | 194 | 12 | ||||||
Advertising | 113 | 408 | ||||||
Insurance expense | — | — | ||||||
Other expense | 505 | 94 | ||||||
|
|
|
| |||||
Total merger-related expenses | $ | 3,167 | $ | 3,682 | ||||
|
|
|
|
Due primarily to the significant amount of fair value adjustments and the FDIC loss sharing agreements now in place, historical results of Peoples First are not believed to be relevant to the Company’s results, and thus no pro forma information is presented.
Note 3. Long-Term Debt
Long-term debt consisted of the following:
December 31, 2011 | December 31, 2010 | |||||||
Subordinated notes payable | $ | 150,000 | $ | — | ||||
Term note payable | 140,000 | — | ||||||
Subordinated debentures | — | — | ||||||
Other long-term debt | 63,890 | 376 | ||||||
|
|
|
| |||||
Total long-term debt | $ | 353,890 | $ | 376 | ||||
|
|
|
|
As part of the merger with Whitney, the Company assumed Whitney National Bank’s $150 million par value subordinated notes which carry an interest rate of 5.875% and mature April 1, 2017. These notes qualify as capital for the calculation of the regulatory ratio of total capital to risk-weighted assets. Beginning in the second quarter of 2012, the amount qualifying as capital will be reduced by 20% per year as the notes approach maturity.
During the second quarter of 2011, the Company borrowed $140 million under a term loan facility at a variable rate based on LIBOR plus 2.00% per annum. The note matures on June 3, 2013 and is pre-payable at any time. The Company is subject to covenants customary in financings of this nature, and compliance with these covenants is not expected to impact the operations of the Company. The Company must maintain the following financial statements oncovenants: maximum ratio of consolidated non-performing assets to consolidated total loans and other real estate excluding covered loans of 4.0% through June 2012 and 3.5% thereafter; an initial minimum consolidated net worth of $2.1 billion increasing each quarter by 50% of consolidated net income, but not decreasing for net losses, and increasing by 100% of any common stock issuance. The Company must also maintain a recurring basis (atTier 1 leverage ratio of at least annually)7%; a Tier 1 risk based capital ratio of at least 9.5%; and a total risk based capital ratio of at least 11.5%. The adoptionCompany was in compliance with all covenants as of SFAS No. 157 duringDecember 31, 2011.
Substantially all of the first quarterother long-term debt consists of 2008borrowings associated with tax credit fund activities. These borrowings mature at various dates beginning in 2015 through 2041.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Derivatives
Risk Management Objective of Using Derivatives
The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to our variable rate borrowing and fixed rate loans. The Company has also entered into interest rate derivative agreements as a service to certain qualifying customers. The Company manages a matched book with respect to its customer derivatives in order to minimize its net risk exposure resulting from such agreements.
Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value (in thousands) of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2011 and December 31, 2010.
Tabular Disclosure of Fair Values of Derivative Instruments | ||||||||||||||||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||||
As of December 31, 2011 | As of December 31, 2010 | As of December 31, 2011 | As of December 31, 2010 | |||||||||||||||||||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||||||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||||||||||||||||
Interest rate products | Other assets | $ | — | Other assets | $ | — | Other liabilities | $ | 107 | Other liabilities | $ | — | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total derivatives designated as hedging instruments | $ | — | $ | — | $ | 107 | $ | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||||||||||||
Interest rate products | Other assets | $ | 14,952 | Other assets | $ | 2,952 | Other liabilities | $ | 15,536 | Other liabilities | $ | 2,952 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total derivatives not designated as hedging instruments | $ | 14,952 | $ | 2,952 | $ | 15,536 | $ | 2,952 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. For hedges of the Company’s variable-rate borrowings, interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments. As of December 31, 2011, the Company had one interest rate swap with an aggregate notional amount of $140.0 million that was designated as a cash flow hedge of the Company’s forecasted variable cash flows under a variable-rate term loan agreement. The Company did not have a materialany cash flow hedges outstanding at December 31, 2010 or during 2010.
The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The impact on AOCI during 2011 was insignificant, and the Company’s resultsimpact of operations or financial position.reclassifications on earnings during 2012 is expected to also be insignificant. The ineffective portion of the change in fair value of derivatives is recognized directly in earnings. No hedge ineffectiveness was recognized during the year ended December 31, 2011.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2.4. Derivatives (continued)
Derivatives Not Designated as Hedges
Derivatives not designated as hedges are not speculative and result from a service the Banks provide to certain customers. The Banks execute interest rate derivatives, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Banks simultaneously enter into offsetting agreements with unrelated financial institutions, thereby minimizing its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. As of December 31, 2011, the Banks had entered into interest rate derivatives, including both customer and offsetting agreements, with an aggregate notional amount of $541.8 million related to this program.
Effect of Derivative Instruments on the Income Statement
The tables below present the effect of the Company’s derivative financial instruments (in thousands) on the income statement for the years ended December 31, 2011 and December 31, 2010, respectively.
Derivatives in FASB ASC 815 Cash Flow Hedging Relationships | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) Year Ended | Gain or (Loss) Reclassified from Accumulated OCI into Income | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Year Ended | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Year Ended | |||||||||||||||||||||||
31-Dec-11 | 31-Dec-10 | 31-Dec-11 | 31-Dec-10 | 31-Dec-11 | 31-Dec-10 | |||||||||||||||||||||||
Interest Rate Products | $ | (107 | ) | $ | — | Interest income Other non- interest income | $ | — | $ | — | Other non-interest income | $ | — | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | $ | (107 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Year Ended | ||||||||
31-Dec-11 | 31-Dec-10 | |||||||||
Interest Rate Products | Other non-interest income | $ | (315 | ) | $ | — | ||||
|
|
|
| |||||||
Total | $ | (315 | ) | $ | — | |||||
|
|
|
|
Credit Risk-Related Contingent Features
Certain of the Banks’ derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as the downgrade of the Banks’ credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of a Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the positing of collateral by each party. The aggregate fair value of derivative instruments with credit-risk-related contingent features that were in a liability position on December 31, 2011 was $12.2 million, for which the Bank’s had posted collateral of $11.6 million.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Securities
The amortized cost and fair value of securities classified as available for sale follow (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2008 |
| December 31, 2007 |
| ||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
|
| Amortized |
| Gross |
| Gross |
| Fair |
| Amortized |
| Gross |
| Gross |
| Fair |
| ||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
U.S. Treasury |
| $ | 11,250 |
| $ | 192 |
| $ | — |
| $ | 11,442 |
| $ | 11,353 |
| $ | 41 |
| $ | — |
| $ | 11,394 |
|
U.S. government agencies |
|
| 224,803 |
|
| 1,836 |
|
| 29 |
|
| 226,610 |
|
| 431,772 |
|
| 1,999 |
|
| 107 |
|
| 433,664 |
|
Municipal obligations |
|
| 151,706 |
|
| 3,182 |
|
| 2,418 |
|
| 152,470 |
|
| 197,596 |
|
| 2,347 |
|
| 1,361 |
|
| 198,582 |
|
Mortgage-backed securities |
|
| 1,041,805 |
|
| 25,703 |
|
| 387 |
|
| 1,067,121 |
|
| 637,578 |
|
| 3,519 |
|
| 4,717 |
|
| 636,380 |
|
CMOs |
|
| 195,771 |
|
| 2,692 |
|
| 1 |
|
| 198,462 |
|
| 143,639 |
|
| 392 |
|
| 1,219 |
|
| 142,812 |
|
Other debt securities |
|
| 25,117 |
|
| 5 |
|
| 2,850 |
|
| 22,272 |
|
| 49,653 |
|
| 342 |
|
| 1,597 |
|
| 48,398 |
|
Other equity securities |
|
| 1,047 |
|
| 462 |
|
| 130 |
|
| 1,379 |
|
| 959 |
|
| 613 |
|
| 19 |
|
| 1,553 |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| $ | 1,651,499 |
| $ | 34,072 |
| $ | 5,815 |
| $ | 1,679,756 |
| $ | 1,472,550 |
| $ | 9,253 |
| $ | 9,020 |
| $ | 1,472,783 |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||||||||
U.S. Treasury | $ | 150 | $ | 14 | $ | — | 164 | $ | 10,797 | $ | 52 | $ | 5 | 10,844 | ||||||||||||||||||
U.S. government agencies | 248,595 | 1,308 | — | 249,903 | 106,054 | 971 | 434 | 106,591 | ||||||||||||||||||||||||
Municipal obligations | 294,489 | 15,218 | 42 | 309,665 | 181,747 | 4,107 | 5,411 | 180,443 | ||||||||||||||||||||||||
Mortgage-backed securities | 2,422,891 | 58,150 | 696 | 2,480,345 | 761,704 | 38,032 | 50 | 799,686 | ||||||||||||||||||||||||
CMOs | 1,426,495 | 21,774 | 2,193 | 1,446,076 | 367,662 | 6,880 | 2,491 | 372,051 | ||||||||||||||||||||||||
Other debt securities | 4,517 | 11 | 34 | 4,494 | 14,329 | 999 | 43 | 15,285 | ||||||||||||||||||||||||
Other equity securities | 4,208 | 2,086 | 41 | 6,253 | 3,428 | 660 | 103 | 3,985 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 4,401,345 | $ | 98,561 | $ | 3,006 | $ | 4,496,900 | $ | 1,445,721 | $ | 51,701 | $ | 8,537 | $ | 1,488,885 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the amortized cost and fair value of securities classified as available for sale at December 31, 2008,2011, by contractual maturity (expected(in thousands). Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties), and the amortized cost and fair value of trading securities were as follows (in thousands):penalties.
|
|
|
|
|
|
|
|
|
| Amortized |
| Fair |
| ||
|
|
|
| ||||
Due in one year or less |
| $ | 48,735 |
| $ | 49,190 |
|
Due after one year through five years |
|
| 129,658 |
|
| 132,290 |
|
Due after five years through ten years |
|
| 205,438 |
|
| 204,412 |
|
Due after ten years |
|
| 29,045 |
|
| 26,902 |
|
|
|
|
| ||||
|
|
| 412,876 |
|
| 412,794 |
|
|
|
|
|
|
|
|
|
Mortgage-backed securities & CMOs |
|
| 1,237,576 |
|
| 1,265,583 |
|
Equity securities |
|
| 1,047 |
|
| 1,379 |
|
|
|
|
| ||||
Total available for sale securities |
| $ | 1,651,499 |
| $ | 1,679,756 |
|
|
|
|
|
Amortized Cost | Fair Value | |||||||
Due in one year or less | $ | 292,434 | $ | 293,803 | ||||
Due after one year through five years | 915,985 | 934,279 | ||||||
Due after five years through ten years | 405,288 | 421,935 | ||||||
Due after ten years | 2,783,430 | 2,840,630 | ||||||
Equity securities | 4,208 | 6,253 | ||||||
|
|
|
| |||||
Total available for sale securities | $ | 4,401,345 | $ | 4,496,900 | ||||
|
|
|
|
The Company held no securities classified as held to maturity or trading at December 31, 20082011 or 2007.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2010.
Note 2. Securities (continued)
The details concerning securities classified as available for sale with unrealized losses as of December 31, 20082011 follow (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Losses < 12 months |
| Losses 12 months or > |
| Total |
| ||||||||||||
|
|
|
|
|
|
| |||||||||||||
|
| Fair |
| Gross |
| Fair |
| Gross |
| Fair |
| Gross |
| ||||||
|
|
|
|
|
|
|
| ||||||||||||
U.S. government agencies |
| $ | — |
| $ | — |
| $ | 20,077 |
| $ | 29 |
| $ | 20,077 |
| $ | 29 |
|
Municipal obligations |
|
| — |
|
| — |
|
| 38,610 |
|
| 2,418 |
|
| 38,610 |
|
| 2,418 |
|
Mortgage-backed securities |
|
| — |
|
| — |
|
| 20,385 |
|
| 387 |
|
| 20,385 |
|
| 387 |
|
CMOs |
|
| — |
|
| — |
|
| 4,442 |
|
| 1 |
|
| 4,442 |
|
| 1 |
|
Other debt securities |
|
| 1,029 |
|
| 25 |
|
| 22,077 |
|
| 2,825 |
|
| 23,106 |
|
| 2,850 |
|
Equity securities |
|
| — |
|
| — |
|
| 135 |
|
| 130 |
|
| 135 |
|
| 130 |
|
|
|
|
|
|
|
|
| ||||||||||||
|
| $ | 1,029 |
| $ | 25 |
| $ | 105,726 |
| $ | 5,790 |
| $ | 106,755 |
| $ | 5,815 |
|
|
|
|
|
|
|
|
|
Losses < 12 months | Losses 12 months or > | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
U.S. Treasury | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. government agencies | — | — | — | — | — | — | ||||||||||||||||||
Municipal obligations | 18,854 | 42 | — | — | 18,854 | 42 | ||||||||||||||||||
Mortgage-backed securities | 212,900 | 692 | 337 | 4 | 213,237 | 696 | ||||||||||||||||||
CMOs | 296,860 | 2,193 | — | — | 296,860 | 2,193 | ||||||||||||||||||
Other debt securities | 398 | 34 | — | — | 398 | 34 | ||||||||||||||||||
Equity securities | 1,685 | 39 | 2 | 2 | 1,687 | 41 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 530,697 | $ | 3,000 | $ | 339 | $ | 6 | $ | 531,036 | $ | 3,006 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Securities (continued)
The details concerning securities classified as available for sale with unrealized losses as of December 31, 20072010 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Losses < 12 months |
| Losses 12 months or > |
| Total |
| ||||||||||||
|
|
|
|
|
|
| |||||||||||||
|
| Fair |
| Gross |
| Fair |
| Gross |
| Fair |
| Gross |
| ||||||
|
|
|
|
|
|
|
| ||||||||||||
U.S. government agencies |
| $ | 29,893 |
| $ | 107 |
| $ | — |
| $ | — |
| $ | 29,893 |
| $ | 107 |
|
Municipal obligations |
|
| 4,946 |
|
| 17 |
|
| 37,327 |
|
| 1,344 |
|
| 42,273 |
|
| 1,361 |
|
Mortgage-backed securities |
|
| — |
|
| — |
|
| 206,894 |
|
| 4,717 |
|
| 206,894 |
|
| 4,717 |
|
CMOs |
|
| — |
|
| — |
|
| 117,489 |
|
| 1,219 |
|
| 117,489 |
|
| 1,219 |
|
Other debt securities |
|
| 4,177 |
|
| 147 |
|
| 23,230 |
|
| 1,450 |
|
| 27,407 |
|
| 1,597 |
|
Equity securities |
|
| — |
|
| — |
|
| 17 |
|
| 19 |
|
| 17 |
|
| 19 |
|
|
|
|
|
|
|
|
| ||||||||||||
|
| $ | 39,016 |
| $ | 271 |
| $ | 384,957 |
| $ | 8,749 |
| $ | 423,973 |
| $ | 9,020 |
|
|
|
|
|
|
|
|
|
The
Losses < 12 months | Losses 12 months or > | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
U.S Treasury | $ | 9,980 | $ | 5 | $ | — | $ | — | $ | 9,980 | $ | 5 | ||||||||||||
U.S. government agencies | 74,566 | 434 | — | — | 74,566 | 434 | ||||||||||||||||||
Municipal obligations | 57,713 | 3,092 | 19,870 | 2,319 | 77,583 | 5,411 | ||||||||||||||||||
Mortgage-backed securities | 122 | 1 | 1,340 | 49 | 1,462 | 50 | ||||||||||||||||||
CMOs | 122,312 | 2,491 | — | — | 122,312 | 2,491 | ||||||||||||||||||
Other debt securities | 379 | 6 | 459 | 37 | 838 | 43 | ||||||||||||||||||
Equity securities | 2,552 | 87 | 11 | 16 | 2,563 | 103 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 267,624 | $ | 6,116 | $ | 21,680 | $ | 2,421 | $ | 289,304 | $ | 8,537 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all of the unrealized losses relate mainly to changes in market rates on fixed-rate debt securities that have incurred fair value reductions due to higher market interest rates since the respective purchase date. The unrealized losses are not likely to reverse unless and untilIn all cases, the indicated impairment would be recovered by the security’s maturity date or possibly earlier if the market interest rates decline toprice for the levels that existed whensecurity increases with a reduction in the securities were purchased. Since noneyield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption obligations, none of the securities are deemed to be other than temporarily impaired.
As of December 31, 2008, the securities portfolio totaled $1.68 billion. Of the total portfolio, $106.8 million of securities were in an unrealized loss position of $5.8 million. Management and the Asset/Liability Committee continually monitor the securities portfolio and management is able to effectively measure and monitor the unrealized loss position on these securities.obligations. The Company has adequate liquidity and, therefore, has the abilitydoes not plan to sell and, additionally the intentis more likely than not, will not be required to holdsell these securities to recovery.before recovery of the indicated impairment. Accordingly, the unrealized loss oflosses on these securities hashave been determined to be temporary.
The Company’s securities portfolio is an important source of liquidity and earnings for the Company. A stated objective in managing the securities portfolio is to provide consistent liquidity to support balance sheet growth but also to provide a safe and consistent stream of earnings. To that end, management is open to opportunities that present themselves which enables the Company to improve the structure and earnings potential of the securities portfolio.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Securities (continued)
Available for Sale Securities
Proceeds from sales and pay downs of available for sale securities were approximately $213.8$342.9 million in 2008, $9.2 million in 2007 and $157.3 million in 2006. Gross gains of $6.0 million in 2008, $0.4 million in 2007 and2011, $0.3 million in 20062010 and gross losses of $4.1$11.7 million in 2008, $0.1 million2009. Realized gross gains and losses were insignificant. Substantially all of the proceeds in 2007 and $5.5 million2011 came from the sale of a portion of the portfolio acquired in 2006 were realized on such sales and pay downs.the Whitney acquisition.
Securities with an amortized cost ofcarrying values totaling approximately $1.49$3.0 billion at December 31, 20082011 and $1.15$1.3 billion at December 31, 2007,2010 were pledged primarily to secure public deposits and securitiesor sold under agreements to repurchase. The Company has approximately $4.8 million and $6.4 million of securities pledged with various state regulatory authorities to secure reinsurance receivables as of December 31, 2008 and 2007, respectively.
Trading Securities
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company recognized $2.9 million in net gains, including a net gain of $3.2 million on a portfolio of trading securities which were subsequently transferred to available for sale. There were no trading gains or losses in 2007.
Note 3.6. Loans
Loans, net of unearned income, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
Real estate loans |
| $ | 2,680,682 |
| $ | 2,332,891 |
|
Commercial and industrial loans |
|
| 420,981 |
|
| 359,519 |
|
Loans to individuals for household, family and other consumer expenditures |
|
| 619,115 |
|
| 571,349 |
|
Leases and other loans |
|
| 528,687 |
|
| 332,798 |
|
|
|
|
| ||||
|
| $ | 4,249,465 |
| $ | 3,596,557 |
|
|
|
|
|
December 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Originated loans: | ||||||||
Commerical | $ | 1,525,409 | $ | 1,046,431 | ||||
Construction | 540,806 | 495,590 | ||||||
Real estate | 1,259,757 | 1,231,414 | ||||||
Residential mortgage loans | 487,147 | 366,183 | ||||||
Consumer loans | 1,074,611 | 1,008,395 | ||||||
|
|
|
| |||||
Total originated loans | $ | 4,887,730 | $ | 4,148,013 | ||||
|
|
|
| |||||
Acquired loans: | ||||||||
Commerical | $ | 2,236,758 | $ | — | ||||
Construction | 603,371 | — | ||||||
Real estate | 1,656,515 | — | ||||||
Residential mortgage loans | 734,669 | — | ||||||
Consumer loans | 386,540 | — | ||||||
|
|
|
| |||||
Total acquired loans | 5,617,853 | — | ||||||
|
|
|
| |||||
Covered loans: | ||||||||
Commerical | $ | 38,063 | $ | 35,190 | ||||
Construction | 118,828 | 157,267 | ||||||
Real estate | 82,651 | 181,873 | ||||||
Residential mortgage loans | 285,682 | 293,506 | ||||||
Consumer loans | 146,219 | 141,315 | ||||||
|
|
|
| |||||
Total covered loans | $ | 671,443 | $ | 809,151 | ||||
|
|
|
| |||||
Total loans: | ||||||||
Commerical | $ | 3,800,230 | $ | 1,081,621 | ||||
Construction | 1,263,005 | 652,857 | ||||||
Real estate | 2,998,923 | 1,413,287 | ||||||
Residential mortgage loans | 1,507,498 | 659,689 | ||||||
Consumer loans | 1,607,370 | 1,149,710 | ||||||
|
|
|
| |||||
Total loans | $ | 11,177,026 | $ | 4,957,164 | ||||
|
|
|
|
The Company generally makes loans in its market areas of South Mississippi, South Alabama, South and Central Louisiana, the Houston, Texas area and NorthwestCentral and North Florida. Loans are made in the normal course of business to its directors, executive officers and their associates on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. Such loans did not involve more than normal risk of collectibility.collectability. Balances of loans to the Company’s directors, executive officers and their affiliates at December 31, 20082011 and 20072010 were approximately $31.6$64.7 million and $13.1$40.5 million, respectively. New loans, repayments and net balances from changes ofin directors and executive officers and their affiliates on these loans for 20082011 were $20.7$28.0 million, $4.3$33.1 million and $2.1$29.3 million, respectively. New loans, repayments and changes of directors and executive officers and their affiliates on these loans for 2007 were $3.7 million, $1.6 million and $3.5 million, respectively.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3.6. Loans (continued)
Changes
The following schedule shows activity in the allowance for loan losses follow (in thousands):for 2011 and 2010 by portfolio segment and the related corresponding recorded investment in loans as of December 31, 2011 and December 31, 2010. The information for 2009 is shown in summary form:
|
|
|
|
|
|
|
|
|
|
|
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Balance at January 1 |
| $ | 47,123 |
| $ | 46,772 |
| $ | 74,558 |
|
Recoveries |
|
| 5,224 |
|
| 7,210 |
|
| 12,491 |
|
Loans charged off |
|
| (27,407 | ) |
| (14,452 | ) |
| (19,515 | ) |
Provision for (reversal of) loan losses |
|
| 36,785 |
|
| 7,593 |
|
| (20,762 | ) |
|
|
|
|
| ||||||
Balance at December 31 |
| $ | 61,725 |
| $ | 47,123 |
| $ | 46,772 |
|
|
|
|
|
|
In 2005,
Commercial | Residential mortgages | Consumer | Total | |||||||||||||
(In thousands) | December 31, 2011 | |||||||||||||||
Allowance for loan losses: | ||||||||||||||||
Beginning balance | $ | 56,859 | $ | 4,626 | $ | 20,512 | $ | 81,997 | ||||||||
Charge-offs | (54,754 | ) | (2,634 | ) | (12,875 | ) | (70,263 | ) | ||||||||
Recoveries | 20,006 | 1,091 | 3,887 | 24,984 | ||||||||||||
Net provision for loan losses (a) | 29,762 | 1,632 | 7,338 | 38,732 | ||||||||||||
Increase in indemnification asset (a) | 26,541 | 9,203 | 13,687 | 49,431 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | $ | 78,414 | $ | 13,918 | $ | 32,549 | $ | 124,881 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance: | ||||||||||||||||
Individually evaluated for impairment | $ | 6,988 | $ | 551 | $ | — | $ | 7,539 | ||||||||
Ending balance: | ||||||||||||||||
Collectively evaluated for impairment | $ | 71,426 | $ | 13,367 | $ | 32,549 | $ | 117,342 | ||||||||
Ending balance: | ||||||||||||||||
Covered loans with deteriorated credit quality | $ | 18,203 | $ | 9,024 | $ | 14,408 | $ | 41,635 | ||||||||
Loans: | ||||||||||||||||
Ending balance: | $ | 8,062,158 | $ | 1,507,498 | $ | 1,607,370 | $ | 11,177,026 | ||||||||
Ending balance: | ||||||||||||||||
Individually evaluated for impairment | $ | 28,034 | $ | 4,090 | $ | — | $ | 32,124 | ||||||||
Ending balance: | ||||||||||||||||
Collectively evaluated for impairment | $ | 7,794,582 | $ | 1,217,726 | $ | 1,461,151 | $ | 10,473,459 | ||||||||
Ending balance: | ||||||||||||||||
Covered loans | $ | 239,542 | $ | 285,682 | $ | 146,219 | $ | 671,443 | ||||||||
Ending balance: | ||||||||||||||||
Acquired loans (b) | $ | 4,496,644 | $ | 734,669 | $ | 386,540 | $ | 5,617,853 |
(a) The Company increased the Company established a $35.2allowance by $51.7 million specific allowance for estimated credit losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $48.8 million increase in the impact of Hurricane Katrina on its loan portfolio. In 2005, theFDIC indemnification asset.
(b) Acquired loans were recorded at fair value with no allowance brought forward in accordance with acquisition accounting. There has been no allowance since acquisition.
Commercial | Residential mortgages | Consumer | Total | Total | ||||||||||||||||
(In thousands) | December 31, 2010 | 2009 | ||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Beginning balance | $ | 42,484 | $ | 4,782 | $ | 18,784 | $ | 66,050 | $ | 61,725 | ||||||||||
Charge-offs | (39,393 | ) | (4,615 | ) | (14,258 | ) | (58,266 | ) | (54,915 | ) | ||||||||||
Recoveries | 3,491 | 740 | 3,353 | 7,584 | 4,650 | |||||||||||||||
Net provision for loan losses (a) | 50,277 | 3,719 | 11,995 | 65,991 | 54,590 | |||||||||||||||
Increase in indemnification asset (a) | — | — | 638 | 638 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance | $ | 56,859 | $ | 4,626 | $ | 20,512 | $ | 81,997 | $ | 66,050 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: | ||||||||||||||||||||
Individually evaluated for impairment | $ | 10,648 | $ | 1,304 | $ | — | $ | 11,952 | $ | 10,972 | ||||||||||
Ending balance: | ||||||||||||||||||||
Collectively evaluated for impairment | $ | 46,211 | $ | 3,322 | $ | 20,512 | $ | 70,045 | $ | 55,078 | ||||||||||
Ending balance: | ||||||||||||||||||||
Covered loans with deteriorated credit quality | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Loans: | ||||||||||||||||||||
Ending balance: | $ | 3,147,765 | $ | 659,689 | $ | 1,149,710 | $ | 4,957,164 | $ | 5,114,175 | ||||||||||
Ending balance: | ||||||||||||||||||||
Individually evaluated for impairment | $ | 56,836 | $ | 5,618 | $ | — | $ | 62,454 | $ | 78,005 | ||||||||||
Ending balance: | ||||||||||||||||||||
Collectively evaluated for impairment | $ | 2,716,598 | $ | 360,566 | $ | 1,008,395 | $ | 4,085,559 | $ | 4,085,740 | ||||||||||
Ending balance: | ||||||||||||||||||||
Covered loans | $ | 374,331 | $ | 293,505 | $ | 141,315 | $ | 809,151 | $ | 950,430 |
(a) The Company reducedincreased the allowance by $2.4$0.7 million for storm-related net charge-offs. Of this remaining amount,losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $0.6 million increase in the Company reversed $20.0 millionFDIC indemnification asset.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Loans (continued)
The following table shows the composition of non-accrual loans by portfolio segment and class. Covered and acquired loans are considered to be performing due to the application of the allowance to income in 2006 based on its review ofaccretion method and are excluded from the asset quality of significant credits included intable. Certain covered loans accounted for using the original $35.2 million storm-related allowance.cost recovery method do not have an accretable yield and are disclosed below as non-accrual loans.
In some instances, loans are placed on non-accrual status. All accrued but uncollected interest related to the loan is deducted from income in the period the loan is assigned a non-accrual status. For such period as a loan is in non-accrual status, any cash receipts are applied first to principal, second to expenses incurred to cause payment to be made and lastly to the recovery of any reversed interest income and interest that would be due and owing subsequent to the loan being placed on non-accrual status.
December 31, 2011 | December 31, 2010 | |||||||
(In thousands) | ||||||||
Originated loans: | ||||||||
Commercial loans | $ | 55,046 | $ | 50,379 | ||||
Residential mortgage loans | 24,406 | 18,699 | ||||||
Consumer loans | 3,855 | 6,621 | ||||||
|
|
|
| |||||
Total originated loans | $ | 83,307 | $ | 75,699 | ||||
|
|
|
| |||||
Acquired loans: | ||||||||
Commercial loans | $ | — | $ | — | ||||
Residential mortgage loans | — | — | ||||||
Consumer loans | 1,117 | — | ||||||
|
|
|
| |||||
Total acquired loans | $ | 1,117 | $ | — | ||||
|
|
|
| |||||
Covered loans: | ||||||||
Commercial loans | $ | 18,209 | $ | 41,917 | ||||
Residential mortgage loans | 637 | 3,199 | ||||||
Consumer loans | — | 170 | ||||||
|
|
|
| |||||
Total covered loans | $ | 18,846 | $ | 45,286 | ||||
|
|
|
| |||||
Total loans: | ||||||||
Commercial loans | $ | 73,255 | $ | 92,296 | ||||
Residential mortgage loans | 25,043 | 21,898 | ||||||
Consumer loans | 4,972 | 6,791 | ||||||
|
|
|
| |||||
Total loans | $ | 103,270 | $ | 120,985 | ||||
|
|
|
|
The Company’s investments in impaired loans at December 31, 2008 and December 31, 2007 were $22.1 million and $10.4 million, respectively. Non-accrual and renegotiated loans amounted to approximately 0.71% and 0.36% of total loans at December 31, 2008 and 2007, respectively. Accruing loans 90 days past due as a percent of loans was 0.26% and 0.12% at December 31, 2008 and 2007, respectively. The average amounts of impaired loans carried on the Company’s books for 2008, 2007 and 2006 were $19.3 million, $7.7 million and $7.4 million, respectively. The amount of interest that would have been recorded on non-accrual loans had the loans not been classified as non-accrual in 2008, 2007 or 2006,2011, 2010 and 2009, was $4.9 million, $5.7 million and $2.0 million, respectively. Interest actually received on non-accrual loans during 2011, 2010 and 2009 was $1.1 million, $0.5$1.0 million and $0.8$0.3 million, respectively.
Included in non-accrual loans is $4.1 million in restructured commercial loans. Total troubled debt restructurings for the period ending December 31, 2011, were $18.1 million. The amountCompany had $12.6 in loans classified as restructured at December 31, 2010. Non-accrual and restructured loans amounted to approximately 1.05% and 2.52% of interest actually collected was immaterialtotal loans at December 31, 2011 and December 31, 2010, respectively. Modified acquired impaired loans are not removed from their accounting pool and accounted for as TDRs, even if those loans would otherwise be deemed TDRs.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Loans (continued)
The table below details the troubled debt restructurings that occurred during 2011 and 2010 by portfolio segment and troubled debt restructurings that subsequently defaulted within twelve months of modification (dollar amounts in 2008, 2007,thousands).
2011 | 2010 | |||||||||||||||||||||||
Troubled Debt Restructurings: | Number of Contracts | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment | Number of Contracts | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment | ||||||||||||||||||
Total loans: | ||||||||||||||||||||||||
Commercial loans | 24 | $ | 20,040 | $ | 16,954 | 7 | $ | 12,408 | $ | 11,603 | ||||||||||||||
Residential mortgage loans | 3 | 1,206 | 1,191 | 2 | 1,177 | 1,038 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total loans | 27 | $ | 21,246 | $ | 18,145 | 9 | $ | 13,585 | $ | 12,641 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
�� | 2011 | 2010 | ||||||||||||||
Troubled Debt Restructurings That Subsequently Defaulted: | Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | ||||||||||||
Total loans: | ||||||||||||||||
Commercial loans | 2 | $ | 742 | — | $ | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loans | 2 | $ | 742 | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
The table below presents impaired loans disaggregated by class at December 31, 2011 and 2006.2010:
December 31, 2011 | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Total loans: | ||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
Commercial | $ | 28,051 | $ | 46,692 | $ | — | $ | 18,461 | $ | 359 | ||||||||||
Residential mortgages | 1,582 | 2,802 | — | 2,934 | 58 | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
29,633 | 49,494 | — | 21,395 | 417 | ||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
Commercial | 28,369 | 33,503 | 6,997 | 59,724 | 254 | |||||||||||||||
Residential mortgages | 4,298 | 5,588 | 570 | 5,059 | 7 | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
32,667 | 39,091 | 7,567 | 64,783 | 261 | ||||||||||||||||
Total: | ||||||||||||||||||||
Commercial | 56,420 | 80,195 | 6,997 | 78,185 | 613 | |||||||||||||||
Residential mortgages | 5,880 | 8,390 | 570 | 7,993 | 65 | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans | $ | 62,300 | $ | 88,585 | $ | 7,567 | $ | 86,178 | $ | 678 | ||||||||||
|
|
|
|
|
|
|
|
|
|
December 31, 2010 | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Total loans: | ||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
Commercial | $ | 64,558 | $ | 102,144 | $ | — | $ | 75,543 | $ | 224 | ||||||||||
Residential mortgages | 4,462 | 6,207 | — | 5,232 | 26 | |||||||||||||||
Consumer | 170 | 170 | — | 184 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
69,190 | 108,521 | — | 80,959 | 250 | ||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
Commercial | 34,194 | 40,244 | 10,648 | 36,650 | 523 | |||||||||||||||
Residential mortgages | 4,355 | 4,873 | 1,304 | 4,358 | 88 | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
38,549 | 45,117 | 11,952 | 41,008 | 611 | ||||||||||||||||
Total: | ||||||||||||||||||||
Commercial | 98,752 | 142,388 | 10,648 | 112,193 | 747 | |||||||||||||||
Residential mortgages | 8,817 | 11,080 | 1,304 | 9,590 | 114 | |||||||||||||||
Consumer | 170 | 170 | — | 184 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans | $ | 107,739 | $ | 153,638 | $ | 11,952 | $ | 121,967 | $ | 861 | ||||||||||
|
|
|
|
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Loans (continued)
Covered and acquired loans with an accretable yield are considered to be current in the following delinquency table. Certain covered loans accounted for using the cost recovery method are disclosed according to their contractual payment status below. The following table presents the makeupage analysis of allowance for loan losses by:
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
|
| (In thousands) |
| ||||
Balance of allowance for loan losses |
|
|
|
|
|
|
|
Non-impaired |
| $ | 54,408 |
| $ | 43,070 |
|
Impaired |
|
| 7,317 |
|
| 4,053 |
|
|
|
|
| ||||
Total allowance for loan losses |
| $ | 61,725 |
| $ | 47,123 |
|
|
|
|
|
As ofpast due loans at December 31, 20082011 and 2007,2010:
December 31, 2011 | 30-89 days past due | Greater than 90 days past due | Total past due | Current | Total Loans | Recorded investment > 90 days and accruing | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Originated loans: | ||||||||||||||||||||||||
Commercial loans | $ | 24,939 | $ | 58,867 | $ | 83,806 | $ | 3,242,166 | $ | 3,325,972 | $ | 3,821 | ||||||||||||
Residential mortgages loans | 22,248 | 25,400 | 47,648 | 439,499 | 487,147 | 994 | ||||||||||||||||||
Consumer loans | 4,284 | 3,911 | 8,195 | 1,066,416 | 1,074,611 | 56 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 51,471 | $ | 88,178 | $ | 139,649 | $ | 4,748,081 | $ | 4,887,730 | $ | 4,871 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Acquired loans: | ||||||||||||||||||||||||
Commercial loans | $ | — | $ | — | $ | — | $ | 4,496,644 | $ | 4,496,644 | $ | — | ||||||||||||
Residential mortgages loans | — | — | — | 734,669 | 734,669 | — | ||||||||||||||||||
Consumer loans | 2,128 | 2,126 | 4,254 | 382,286 | 386,540 | 1,009 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 2,128 | $ | 2,126 | $ | 4,254 | $ | 5,613,599 | $ | 5,617,853 | $ | 1,009 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Covered loans: | ||||||||||||||||||||||||
Commercial loans | $ | — | $ | 18,209 | $ | 18,209 | $ | 221,333 | $ | 239,542 | $ | — | ||||||||||||
Residential mortgages loans | — | 637 | 637 | 285,045 | 285,682 | — | ||||||||||||||||||
Consumer loans | — | — | — | 146,219 | 146,219 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | — | $ | 18,846 | $ | 18,846 | $ | 652,597 | $ | 671,443 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total loans: | ||||||||||||||||||||||||
Commercial loans | $ | 24,939 | $ | 77,076 | $ | 102,015 | $ | 7,960,143 | $ | 8,062,158 | $ | 3,821 | ||||||||||||
Residential mortgages loans | 22,248 | 26,037 | 48,285 | 1,459,213 | 1,507,498 | 994 | ||||||||||||||||||
Consumer loans | 6,412 | 6,037 | 12,449 | 1,594,921 | 1,607,370 | 1,065 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 53,599 | $ | 109,150 | $ | 162,749 | $ | 11,014,277 | $ | 11,177,026 | $ | 5,880 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 | 30-89 days past due | Greater than 90 days past due | Total past due | Current | Total Loans | Recorded investment > 90 days and accruing | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Originated loans: | ||||||||||||||||||||||||
Commercial loans | $ | 12,463 | $ | 50,679 | $ | 63,142 | $ | 2,710,292 | $ | 2,773,434 | $ | 300 | ||||||||||||
Residential mortgages loans | 22,109 | 19,573 | 41,682 | 324,502 | 366,184 | 874 | ||||||||||||||||||
Consumer loans | 6,499 | 6,939 | 13,438 | 994,957 | 1,008,395 | 318 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 41,071 | $ | 77,191 | $ | 118,262 | $ | 4,029,751 | $ | 4,148,013 | $ | 1,492 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Acquired loans: | ||||||||||||||||||||||||
Commercial loans | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Residential mortgages loans | — | — | — | — | — | — | ||||||||||||||||||
Consumer loans | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Covered loans: | ||||||||||||||||||||||||
Commercial loans | $ | — | $ | 41,917 | $ | 41,917 | $ | 332,414 | $ | 374,331 | $ | — | ||||||||||||
Residential mortgages loans | — | 3,199 | 3,199 | 290,306 | 293,505 | — | ||||||||||||||||||
Consumer loans | — | 170 | 170 | 141,145 | 141,315 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | — | $ | 45,286 | $ | 45,286 | $ | 763,865 | $ | 809,151 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total loans: | ||||||||||||||||||||||||
Commercial loans | $ | 12,463 | $ | 92,596 | $ | 105,059 | $ | 3,042,706 | $ | 3,147,765 | $ | 300 | ||||||||||||
Residential mortgages loans | 22,109 | 22,772 | 44,881 | 614,808 | 659,689 | 874 | ||||||||||||||||||
Consumer loans | 6,499 | 7,109 | 13,608 | 1,136,102 | 1,149,710 | 318 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 41,071 | $ | 122,477 | $ | 163,548 | $ | 4,793,616 | $ | 4,957,164 | $ | 1,492 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Loans (continued)
The following table presents the Company had $24.1 millioncredit quality indicators of the Company’s various classes of loans at December 31, 2011 and $18.8 million, respectively,2010:
Commercial Credit Exposure
Credit Risk Profile by Internally Assigned Grade
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||||
Commercial - originated | Commercial - acquired | Commercial - covered | Total commercial | Commercial - originated | Commercial - covered | Total commercial | ||||||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||||||
Pass | $ | 3,110,746 | $ | 3,882,817 | $ | 16,843 | $ | 7,010,406 | $ | 2,332,952 | $ | 45,609 | $ | 2,378,561 | ||||||||||||||
Pass-Watch | 76,393 | 60,042 | 13,606 | 150,041 | 138,839 | 35,289 | 174,128 | |||||||||||||||||||||
Special Mention | 35,155 | 125,852 | 9,368 | 170,375 | 26,216 | 21,031 | 47,247 | |||||||||||||||||||||
Substandard | 103,254 | 426,003 | 124,371 | 653,628 | 265,180 | 254,033 | 519,213 | |||||||||||||||||||||
Doubtful | 424 | 1,930 | 75,242 | 77,596 | 10,247 | 18,369 | 28,616 | |||||||||||||||||||||
Loss | — | — | 112 | 112 | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 3,325,972 | $ | 4,496,644 | $ | 239,542 | $ | 8,062,158 | $ | 2,773,434 | $ | 374,331 | $ | 3,147,765 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgage Credit Exposure
Credit Risk Profile by Internally Assigned Grade
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||||
Residential mortgages - originated | Residential mortgages - acquired | Residential mortgages - covered | Total residential mortgages | Residential mortgages - originated | Residential mortgages - covered | Total residential mortgages | ||||||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||||||
Pass | $ | 460,261 | $ | 673,751 | $ | 120,180 | $ | 1,254,192 | $ | 284,712 | $ | 159,885 | $ | 444,597 | ||||||||||||||
Pass-Watch | 7,499 | 1,773 | 18,133 | 27,405 | 7,857 | 29,673 | 37,530 | |||||||||||||||||||||
Special Mention | 542 | 9,686 | 3,286 | 13,514 | — | 15,220 | 15,220 | |||||||||||||||||||||
Substandard | 18,845 | 48,581 | 139,643 | 207,069 | 73,615 | 87,636 | 161,251 | |||||||||||||||||||||
Doubtful | — | 878 | 4,440 | 5,318 | — | 1,091 | 1,091 | |||||||||||||||||||||
Loss | — | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 487,147 | $ | 734,669 | $ | 285,682 | $ | 1,507,498 | $ | 366,184 | $ | 293,505 | $ | 659,689 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||||||
Consumer - originated | Consumer - acquired | Consumer - covered | Total Consumer | Consumer - originated | Consumer - covered | Total Consumer | ||||||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||||||
Performing | $ | 1,070,756 | $ | 385,423 | $ | 146,219 | $ | 1,602,398 | $ | 1,001,774 | $ | 141,145 | $ | 1,142,919 | ||||||||||||||
Nonperforming | 3,855 | 1,117 | — | 4,972 | 6,621 | 170 | 6,791 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 1,074,611 | $ | 386,540 | $ | 146,219 | $ | 1,607,370 | $ | 1,008,395 | $ | 141,315 | $ | 1,149,710 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All loans are reviewed periodically over the course of the year. Each Bank’s portfolio of loan relationships aggregating $500,000 or more is reviewed every 12 to 18 months by the Bank’s Loan Review staff with other loans also periodically reviewed.
Below are the definitions of the Company’s internally assigned grades:
Pass—loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
Pass—Watch—Credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Loans (continued)
Special Mention—These credits exhibit some signs of “Watch”, but to a greater magnitude. These credits constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of “Substandard”. They have weaknesses that, if not checked or corrected, weaken the asset or inadequately protect the bank.
Substandard—These credits constitute an unacceptable risk to the bank. They have recognized established credit weaknesses that jeopardize the repayment of the debt. Repayment sources are marginal or unclear.
Doubtful—A Doubtful credit has all of the weaknesses inherent in one classified “Substandard” with the added characteristic that weaknesses make collection in full highly questionable or improbable.
Loss—Credits classified as Loss are considered uncollectable and should be charged off promptly once so classified.
Performing—Loans on which payments of principal and interest are less than 90 days past due.
Non-performing—A non-performing loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans carried at fair value. rated as non-accrual are also non-performing.
The Company held $22.1$72.4 million and $19.0$21.9 million, respectively, in loans held for sale at December 31, 20082011 and 20072010. Of the $72.4 million at December 31, 2011, $10.8 million are problem commercial loans held for sale which are carried at estimated fair value. The remaining $61.6 million represents mortgage loans originated for sale, which are carried at the lower of cost or market. Theseestimated fair value. Residential mortgage loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.
Changes during 2011 and 2010 in the carrying amount of covered and non-covered acquired loans and accretable yield are presented in the following table (in thousands):
2011 | 2010 | |||||||||||||||||||||||||||||||
Covered | Non-covered | Covered | Non-covered | |||||||||||||||||||||||||||||
Carrying Amount of Loans | Accretable Yield | Carrying Amount of Loans | Accretable Yield | Carrying Amount of Loans | Accretable Yield | Carrying Amount of Loans | Accretable Yield | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | 809,459 | $ | 107,638 | $ | — | $ | — | $ | 913,063 | $ | 159,932 | $ | — | $ | — | ||||||||||||||||
Additions | — | — | 535,489 | 132,136 | — | — | — | — | ||||||||||||||||||||||||
Payments received, net | (193,432 | ) | — | (206,306 | ) | — | (155,898 | ) | — | — | — | |||||||||||||||||||||
Accretion | 55,416 | (55,416 | ) | 10,269 | (22,719 | ) | 52,294 | (52,294 | ) | — | — | |||||||||||||||||||||
Decrease in expected cash flows based on actual cash flow, loan sales and foreclosures assumptions | — | (18,930 | ) | — | (26,630 | ) | — | — | — | — | ||||||||||||||||||||||
Net transfers from (to) nonaccretable difference to accretable yield | — | 119,845 | — | 47,904 | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at end of period | $ | 671,443 | $ | 153,137 | $ | 339,452 | $ | 130,691 | $ | 809,459 | $ | 107,638 | $ | — | $ | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4.7. Property and Equipment
Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
Land and land improvements |
| $ | 38,090 |
| $ | 32,679 |
|
Buildings and leasehold improvements |
|
| 178,374 |
|
| 156,666 |
|
Furniture, fixtures and equipment |
|
| 61,525 |
|
| 59,837 |
|
Construction in progress |
|
| 4,111 |
|
| 14,836 |
|
Software |
|
| 24,862 |
|
| 23,708 |
|
|
|
|
| ||||
|
|
| 306,962 |
|
| 287,726 |
|
Accumulated depreciation and amortization |
|
| (101,050 | ) |
| (87,160 | ) |
|
|
|
| ||||
Property and equipment, net |
| $ | 205,912 |
| $ | 200,566 |
|
|
|
|
|
December 31, | ||||||||
2011 | 2010 | |||||||
Land and land improvements | $ | 130,358 | $ | 39,837 | ||||
Buildings and leasehold improvements | 372,232 | 185,878 | ||||||
Furniture, fixtures and equipment | 92,097 | 71,179 | ||||||
Software | 34,184 | 28,283 | ||||||
Assets under development | 25,296 | 10,125 | ||||||
|
|
|
| |||||
654,167 | 335,302 | |||||||
Accumulated depreciation and amortization | (148,780 | ) | (125,383 | ) | ||||
|
|
|
| |||||
Property and equipment, net | $ | 505,387 | $ | 209,919 | ||||
|
|
|
|
Depreciation and amortization expense was $15.8$24.6 million, $14.0$13.5 million and $10.4$15.5 million for the years ended December 31, 2008, 20072011, 2010 and 2006, respectively. Capitalized interest was $77,000, $1.0 million, and $0.8 million for the years ended December 31, 2008, 2007, and 2006,2009, respectively.
Note 5.8. Goodwill and Other Intangible Assets
Goodwill represents costs inthe excess of the consideration exchanged over the fair value of the net assets acquired in connection with purchase business combinations. In accordance with the provisions of SFAS No. 142, Goodwill and Other Intangibles, theThe Company tests its goodwill for impairment annually.annually and no impairment charges were identified in the most recent test as of September 30, 2011. No goodwill impairment charges were recognized during 2008, 2007,2011, 2010, or 2006.2009. The carrying amount of goodwill was $62.3$651.2 million and $61.6 million at both December 31, 20082011 and 2007.2010, respectively. As discussed in Note 2 to the consolidated financial statements, the Company recorded approximately $589 million of goodwill during 2011 in connection with its acquisition of Whitney.
Identifiable intangible assets with finite lives are amortized over the periods benefited and are evaluated for impairment similar to other long-lived assets. The identifiable assets recorded in connection with the Whitney acquisition during 2011 are detailed in Note 2 to the consolidated financial statements.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5.8. Goodwill and Other Intangible Assets (continued)
The following tables present information regarding the componentscarrying value of the Company’s other intangible assets and relatedsubject to amortization for the dates indicatedwas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2008 |
| |||||||
|
|
| ||||||||
|
|
| Gross Carrying |
|
| Accumulated |
|
| Net Carrying |
|
|
|
|
|
| ||||||
Core deposit intangibles |
| $ | 14,137 |
| $ | 9,613 |
| $ | 4,524 |
|
Value of insurance business acquired |
|
| 2,752 |
|
| 1,289 |
|
| 1,463 |
|
Non-compete agreements |
|
| 322 |
|
| 280 |
|
| 42 |
|
Trade name |
|
| 100 |
|
| 70 |
|
| 30 |
|
|
|
|
|
| ||||||
|
| $ | 17,311 |
| $ | 11,252 |
| $ | 6,059 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2007 |
| |||||||
|
|
| ||||||||
|
|
| Gross Carrying |
|
| Accumulated |
|
| Net Carrying |
|
|
|
|
|
| ||||||
Core deposit intangibles |
| $ | 14,137 |
| $ | 8,500 |
| $ | 5,637 |
|
Value of insurance business acquired |
|
| 3,757 |
|
| 1,807 |
|
| 1,950 |
|
Non-compete agreements |
|
| 368 |
|
| 252 |
|
| 116 |
|
Trade name |
|
| 100 |
|
| 50 |
|
| 50 |
|
|
|
|
|
| ||||||
|
| $ | 18,362 |
| $ | 10,609 |
| $ | 7,753 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Aggregate amortization expense for: |
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles |
| $ | 1,113 |
| $ | 1,210 |
| $ | 1,366 |
|
Value of insurance business acquired |
|
| 271 |
|
| 348 |
|
| 626 |
|
Non-compete agreements |
|
| 28 |
|
| 73 |
|
| 103 |
|
Trade name |
|
| 20 |
|
| 20 |
|
| 30 |
|
|
|
|
|
| ||||||
|
| $ | 1,432 |
| $ | 1,651 |
| $ | 2,125 |
|
|
|
|
|
|
December 31, 2011 | ||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Core deposit intangibles | $ | 206,047 | $ | 27,691 | $ | 178,356 | ||||||
Credit card and trust relationships | 22,400 | 1,908 | 20,492 | |||||||||
Value of insurance business acquired | 2,431 | 1,926 | 505 | |||||||||
Non-compete agreements | 322 | 322 | — | |||||||||
Trade name | 11,822 | 100 | 11,722 | |||||||||
|
|
|
|
|
| |||||||
$ | 243,022 | $ | 31,947 | $ | 211,075 | |||||||
|
|
|
|
|
|
December 31, 2010 | ||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Core deposit intangibles | $ | 25,747 | $ | 13,218 | $ | 12,529 | ||||||
Value of insurance business acquired | 2,431 | 1,757 | 674 | |||||||||
Non-compete agreements | 322 | 322 | — | |||||||||
Trade name | 100 | 100 | — | |||||||||
|
|
|
|
|
| |||||||
$ | 28,600 | $ | 15,397 | $ | 13,203 | |||||||
|
|
|
|
|
|
Gross Carrying | Gross Carrying | Gross Carrying | ||||||||||
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Aggregate amortization expense for: | ||||||||||||
Core deposit intangibles | $ | 14,474 | $ | 2,491 | $ | 1,114 | ||||||
Credit card and trust relationships | 1,908 | — | — | |||||||||
Value of insurance business acquired | 169 | 213 | 255 | |||||||||
Non-compete agreements | — | 14 | 28 | |||||||||
Trade name | — | 10 | 20 | |||||||||
|
|
|
|
|
| |||||||
$ | 16,551 | $ | 2,728 | $ | 1,417 | |||||||
|
|
|
|
|
|
The amortization period used forweighted-average remaining life of core deposit intangibles and value of insurance business acquired is 1019 years. The amortization period used for non-compete agreements and trade nameweighted-average remaining life of other identifiable intangibles is 59 years.
The following table shows estimated amortization expense of other intangible assets for the five succeeding years and thereafter, calculated based on current amortization schedules (in thousands):
|
|
|
|
|
2009 |
| $ | 1,417 |
|
2010 |
|
| 1,382 |
|
2011 |
|
| 1,143 |
|
2012 |
|
| 928 |
|
2013 |
|
| 757 |
|
Thereafter |
|
| 432 |
|
|
|
| ||
|
| $ | 6,059 |
|
|
|
|
2012 | $ | 31,561 | ||
2013 | 29,565 | |||
2014 | 24,969 | |||
2015 | 20,579 | |||
2016 | 18,834 | |||
Thereafter | 85,567 | |||
|
| |||
$ | 211,075 | |||
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6.9. Deposits
The maturities of timeinterest bearing deposits at December 31, 20082011 follow (in thousands):
|
|
|
|
|
2009 |
| $ | 1,321,052 |
|
2010 |
|
| 632,621 |
|
2011 |
|
| 105,184 |
|
2012 |
|
| 126,621 |
|
2013 |
|
| 24,716 |
|
thereafter |
|
| 61,542 |
|
|
|
| ||
|
| $ | 2,271,736 |
|
|
|
|
2012 | $ | 2,395,425 | ||
2013 | 327,779 | |||
2014 | 85,203 | |||
2015 | 154,998 | |||
2016 | 65,220 | |||
Thereafter | 47,622 | |||
|
| |||
Total time deposits | 3,076,247 | |||
Interest-bearing deposits with no stated maturity | 7,120,996 | |||
|
| |||
Total interest-bearing deposits | $ | 10,197,243 | ||
|
|
Time deposits of $100,000 or more totaled approximately $1.1$1.6 billion and $935.3 million$1.3 billion at December 31, 20082011 and 2007,2010, respectively.
Note 7.10. Borrowings
Short-Term Borrowings
The following table presents information concerning federal funds purchased and sold and securities sold under agreements to repurchaseshort-term borrowings (in thousands):
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
Federal funds sold |
|
|
|
|
|
|
|
Amount outstanding at period-end |
| $ | 175,166 |
| $ | 117,721 |
|
Weighted average interest rate at period-end |
|
| 0.11 | % |
| 4.32 | % |
|
|
|
|
|
|
|
|
Federal funds purchased |
|
|
|
|
|
|
|
Amount outstanding at period-end |
| $ | — |
| $ | 4,100 |
|
Weighted average interest rate at period-end |
|
| — |
|
| 4.02 | % |
Weighted average interest rate during the year |
|
| 2.20 | % |
| 4.99 | % |
Average daily balance during the year |
| $ | 16,003 |
| $ | 4,174 |
|
Maximum month end balance during the year |
| $ | 33,775 |
| $ | 4,100 |
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase |
|
|
|
|
|
|
|
Amount outstanding at period-end |
| $ | 505,932 |
| $ | 371,604 |
|
Weighted average interest rate at period-end |
|
| 2.10 | % |
| 3.63 | % |
Weighted average interest rate during the year |
|
| 2.76 | % |
| 3.70 | % |
Average daily balance during the year |
| $ | 524,712 |
| $ | 216,730 |
|
Maximum month end balance during the year |
| $ | 621,424 |
| $ | 371,604 |
|
The contractual maturity of federal funds purchased and securities sold under agreements to repurchase is demand or due overnight.
December 31, | ||||||||
2011 | 2010 | |||||||
Federal funds purchased | ||||||||
Amount outstanding at period-end | $ | 16,819 | $ | — | ||||
Weighted average interest rate at period-end | 0.19% | — | ||||||
Weighted average interest rate during the year | 0.18% | 0.13% | ||||||
Average daily balance during the year | $ | 12,911 | $ | 2,734 | ||||
Maximum month end balance during the year | $ | 26,666 | $ | 6,900 | ||||
Securities sold under agreements to repurchase | ||||||||
Amount outstanding at period-end | $ | 1,027,635 | $ | 364,676 | ||||
Weighted average interest rate at period-end | 0.65% | 1.69% | ||||||
Weighted average interest rate during the year | 1.03% | 1.95% | ||||||
Average daily balance during the year | $ | 681,474 | $ | 477,174 | ||||
Maximum month end balance during the year | $ | 1,027,635 | $ | 534,627 | ||||
FHLB borrowings: | ||||||||
Amount outstanding at period-end | $ | — | $ | 10,172 | ||||
Weighted average interest rate at period-end | — | 1.19% | ||||||
Weighted average interest rate during the year | 0.15% | 0.57% | ||||||
Average daily balance during the year | $ | 81,673 | $ | 22,846 | ||||
Maximum month end balance during the year | $ | 10,153 | $ | 30,676 |
Specific U. S. Treasury and U. S. Government agencies with carrying values of $504.8 million at December 31, 2008 and $371.6 million at December 31, 2007 collateralized the retail and wholesale repurchase agreements. The fair value of this collateral approximated $513.3 million at December 31, 2008 and $375.6 million at December 31, 2007. In addition, there was cash collateral in the amount of $12.1 million for the wholesale repurchase agreements at December 31, 2008 and $750,000 in cash collateral at December 31, 2007.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7.10. Borrowings (continued)
The Banks borrow funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury-management services offered to their deposit customers. Customer repurchase agreements generally mature daily. Borrowings under repurchase agreements also include certain term agreements with dealers with various maturities, all of which are callable by the dealer. The Banks have the ability to exercise legal authority over the underlying securities. Federal funds purchased represent unsecured borrowings from other banks, generally on an overnight basis.
Long-Term Borrowings
As of December 31, 2008, the Company had $250.0 million in long-term borrowings classified as securities sold under agreements to repurchase. Combined with short-term borrowings of $255.9 million, the Company’s total position in securities sold under agreements to repurchase was $505.9 million. The Company has an approveda line of credit with the FHLBFederal Home Loan Bank (FHLB) of approximately $308.5 million,$2.7 billion which is secured by a blanket pledge of certain residential mortgage loans. ThisAt December 31, 2011, the borrowing capacity under the FHLB line of credit had no outstanding balances at December 31, 2008 and 2007, however, four letters of credit totaling $200 million have been issued to use as collateral for public deposits.was approximately $2.5 billion.
Note 8.11. Stockholders’ Equity
Common Stock Offering
In April 2011, Hancock completed an underwritten public offering of the Company’s common stock. The underwriters purchased 6,958,143 shares at a public offering price of $32.25 per share. The net proceeds to the Company after deducting offering expenses and underwriting discounts totaled $214 million. The proceeds of the offering were used for general corporate purposes, including the enhancement of the Company’s capital position and the purchase of Whitney Holding Corporation’s TARP preferred stock and warrant in connection with the Whitney acquisition. The number and value of Company common shares exchanged in the Whitney transaction are discussed in Note 2.
Regulatory Capital
Common stockholders’ equityMeasures of regulatory capital are an important tool used by regulators to monitor the financial health of financial institutions. The primary quantitative measures used to gauge capital adequacy are the ratios of total and Tier 1 regulatory capital to risk-weighted assets (risk-based capital ratios) and the ratio of Tier 1 capital to average total assets (leverage ratio). Both the Company and its bank subsidiaries are required to maintain minimum risk-based capital ratios of 8.0% total regulatory capital and, 4.0% Tier 1 capital. The minimum leverage ratio is 3.0% for bank holding companies and banks that meet certain specified criteria, including having the highest supervisory rating. All others are required to maintain a leverage ratio of at least 4.0%.
To evaluate capital adequacy, regulators compare an institution’s regulatory capital ratios with their agency guidelines, as well as with the guidelines established as part of the Company includesuniform regulatory framework for prompt corrective supervisory action toward financial institutions. The framework for prompt corrective action categorizes capital levels into one of five classifications rating from well-capitalized to critically under-capitalized. For an institution to be eligible to be classified as well capitalized its total risk-based capital ratios must be at least 10.0% for total capital and 6.0% for Tier 1 capital, and its leverage ratio must be at least 5.0%. In reaching an overall conclusion on capital adequacy or assigning a classification under the undistributed earningsuniform framework, regulators must also consider other subjective and quantitative measures of risk associated with an institution. All of the subsidiary banks were deemed to be well capitalized based upon the most recent notifications from their regulators. There are no conditions or events since those notifications that management believes would change these classifications. At December 31, 2011 and 2010, the Company and the Banks were in compliance with all of their respective minimum regulatory capital requirements.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Stockholders’ Equity (continued)
Following is a summary of the actual regulatory capital amounts and ratios for the Company and the Banks together with corresponding regulatory capital requirements at December 31, 2011 and 2010 (amounts in thousands):
Actual | Required for Minimum Capital Adequacy | To Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||||||
Amount | Ratio % | Amount | Ratio % | Amount | Ratio % | |||||||||||||||||||
At December 31, 2011 | ||||||||||||||||||||||||
Total capital (to risk weighted assets) | ||||||||||||||||||||||||
Company | $ | 1,783,037 | 13.59 | $ | 1,049,495 | 8.00 | $ | N/A | N/A | |||||||||||||||
Hancock Bank | 437,225 | 14.21 | 246,072 | 8.00 | 307,590 | 10.00 | ||||||||||||||||||
Whitney Bank | 1,277,591 | 12.76 | 801,025 | 8.00 | 1,001,281 | 10.00 | ||||||||||||||||||
Tier 1 capital (to risk weighted assets) | ||||||||||||||||||||||||
Company | $ | 1,506,218 | 11.48 | $ | 524,748 | 4.00 | $ | N/A | N/A | |||||||||||||||
Hancock Bank | 397,900 | 12.94 | 123,036 | 4.00 | 184,554 | 6.00 | ||||||||||||||||||
Whitney Bank | 1,091,770 | 10.90 | 400,512 | 4.00 | 600,769 | 6.00 | ||||||||||||||||||
Tier 1 leverage capital | ||||||||||||||||||||||||
Company | $ | 1,506,218 | 8.17 | $ | 553,318 | 3.00 | $ | N/A | N/A | |||||||||||||||
Hancock Bank | 397,900 | 8.15 | 146,408 | 3.00 | 244,013 | 5.00 | ||||||||||||||||||
Whitney Bank | 1,091,770 | 8.19 | 399,725 | 3.00 | 666,208 | 5.00 | ||||||||||||||||||
At December 31, 2010 | ||||||||||||||||||||||||
Total capital (to risk weighted assets) | ||||||||||||||||||||||||
Company | $ | 846,541 | 16.60 | $ | 407,970 | 8.00 | $ | N/A | N/A | |||||||||||||||
Hancock Bank | 446,894 | 16.46 | 217,206 | 8.00 | 271,507 | 10.00 | ||||||||||||||||||
Hancock Bank of Louisiana | 344,447 | 15.72 | 175,339 | 8.00 | 219,174 | 10.00 | ||||||||||||||||||
Hancock Bank of Alabama | 33,543 | 17.39 | 15,432 | 8.00 | 19,290 | 10.00 | ||||||||||||||||||
Tier 1 capital (to risk weighted assets) | ||||||||||||||||||||||||
Company | $ | 782,301 | 15.34 | $ | 203,985 | 4.00 | $ | N/A | N/A | |||||||||||||||
Hancock Bank | 412,632 | 15.20 | 108,603 | 4.00 | 162,904 | 6.00 | ||||||||||||||||||
Hancock Bank of Louisiana | 316,905 | 14.46 | 87,670 | 4.00 | 131,504 | 6.00 | ||||||||||||||||||
Hancock Bank of Alabama | 31,102 | 16.12 | 7,716 | 4.00 | 11,574 | 6.00 | ||||||||||||||||||
Tier 1 leverage capital | ||||||||||||||||||||||||
Company | $ | 782,301 | 9.65 | $ | 243,160 | 3.00 | $ | N/A | N/A | |||||||||||||||
Hancock Bank | 412,632 | 8.03 | 154,198 | 3.00 | 256,996 | 5.00 | ||||||||||||||||||
Hancock Bank of Louisiana | 316,905 | 11.33 | 83,878 | 3.00 | 139,797 | 5.00 | ||||||||||||||||||
Hancock Bank of Alabama | 31,102 | 16.38 | 5,698 | 3.00 | 9,496 | 5.00 |
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Stockholders’ Equity (continued)
Regulatory Restrictions on Dividends
Regulatory policy statements provide that generally bank subsidiaries. Dividends are payableholding companies should pay dividends only out of undivided profits or current earnings. Moreover,operating earnings and that the level of dividends tomust be consistent with current and expected capital requirements. Dividends received from its subsidiary banks have been the Company’s stockholders can generally be paid only from dividends paidprimary source of funds available to the Company byfor the Banks. Consequently,payment of dividends are dependent upon earnings, capital needs, regulatory policies and statutory limitations affecting the Banks.to Hancock’s stockholders. Federal and state banking laws and regulations restrict the amount of dividends andthe subsidiary banks may distribute to Hancock without prior regulatory approval, as well as the amount of loans a bankthey may make to its parent company.the Company. Dividends paid by Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi and those paid by HancockWhitney Bank of Louisiana are subject to approval by the Commissioner of Financial Institutions of the State of Louisiana. Dividends paid by Hancock Bank of Florida are subject to approval by the Florida Department of Financial Services and those paid by Hancock Bank of Alabama are subject to approval by Alabama State Banking Department. The amount of capital of the subsidiary banks available for dividends at December 31, 2008 was approximately $43.6 million.
Risk-based capital requirements are intended to make regulatory capital more sensitive to risk elements of the Company. Currently, the Company and its bank subsidiaries are required to maintain minimum risk-based capital ratios of 8.0%, with not less than 4.0% in Tier 1 capital. In addition, the Company and its bank subsidiaries must maintain minimum Tier 1 leverage ratios (Tier 1 capital to total average assets) of at least 3.0% based upon the regulators latest composite rating of the institution.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required each federal banking agency to implement prompt corrective actions for institutions that it regulates. The rules provide that an institution is “well capitalized” if its total risk-based capital ratio is 10.0% or greater, its Tier 1 risked-based capital ratio is 6.0% or greater, its leverage ratio is 5.0% or greater and the institution is not subject to a capital directive. Under this regulation, all of the subsidiary banks were deemed to be “well capitalized” as of December 31, 2008 and 2007 based upon the most recent notifications from their regulators. There are no conditions or events since those notifications that management believes would change these classifications.
The Company and its bank subsidiaries are required to maintain certain minimum capital levels. At December 31, 20082011, the Banks had the capacity to declare and 2007,pay approximately $11.1 million in dividends to the Company and the Banks were in compliance with their respective statutory minimum capital requirements.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSwithout prior regulatory approval.
Note 8. Stockholders’ Equity (continued)
Following is a summary of the actual capital levels at December 31, 2008 and 2007 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Actual |
| Required for |
| To Be Well |
| ||||||||||||
|
|
|
|
| |||||||||||||||
|
| Amount |
| Ratio % |
| Amount |
| Ratio % |
| Amount |
| Ratio % |
| ||||||
|
|
|
|
|
|
|
| ||||||||||||
At December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 612,090 |
|
| 11.22 |
| $ | 436,239 |
|
| 8.00 |
| $ | N/A |
|
| N/A |
|
Hancock Bank |
|
| 293,110 |
|
| 10.91 |
|
| 214,846 |
|
| 8.00 |
|
| 268,558 |
|
| 10.00 |
|
Hancock Bank of Louisiana |
|
| 243,117 |
|
| 10.48 |
|
| 185,635 |
|
| 8.00 |
|
| 232,043 |
|
| 10.00 |
|
Hancock Bank of Florida |
|
| 40,173 |
|
| 12.23 |
|
| 26,278 |
|
| 8.00 |
|
| 32,848 |
|
| 10.00 |
|
Hancock Bank of Alabama |
|
| 15,673 |
|
| 10.45 |
|
| 12,000 |
|
| 8.00 |
|
| 15,000 |
|
| 10.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 550,216 |
|
| 10.09 |
| $ | 218,120 |
|
| 4.00 |
| $ | N/A |
|
| N/A |
|
Hancock Bank |
|
| 261,726 |
|
| 9.75 |
|
| 107,423 |
|
| 4.00 |
|
| 161,135 |
|
| 6.00 |
|
Hancock Bank of Louisiana |
|
| 217,186 |
|
| 9.36 |
|
| 92,817 |
|
| 4.00 |
|
| 139,226 |
|
| 6.00 |
|
Hancock Bank of Florida |
|
| 37,144 |
|
| 11.31 |
|
| 13,139 |
|
| 4.00 |
|
| 19,709 |
|
| 6.00 |
|
Hancock Bank of Alabama |
|
| 14,250 |
|
| 9.50 |
|
| 6,000 |
|
| 4.00 |
|
| 9,000 |
|
| 6.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 550,216 |
|
| 8.06 |
| $ | 204,680 |
|
| 3.00 |
| $ | N/A |
|
| N/A |
|
Hancock Bank |
|
| 261,726 |
|
| 7.08 |
|
| 110,878 |
|
| 3.00 |
|
| 184,797 |
|
| 5.00 |
|
Hancock Bank of Louisiana |
|
| 217,186 |
|
| 7.48 |
|
| 87,099 |
|
| 3.00 |
|
| 145,165 |
|
| 5.00 |
|
Hancock Bank of Florida |
|
| 37,144 |
|
| 12.78 |
|
| 8,717 |
|
| 3.00 |
|
| 14,528 |
|
| 5.00 |
|
Hancock Bank of Alabama |
|
| 14,250 |
|
| 10.11 |
|
| 4,230 |
|
| 3.00 |
|
| 7,050 |
|
| 5.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 546,178 |
|
| 12.07 |
| $ | 361,878 |
|
| 8.00 |
| $ | N/A |
|
| N/A |
|
Hancock Bank |
|
| 286,646 |
|
| 12.26 |
|
| 187,098 |
|
| 8.00 |
|
| 233,873 |
|
| 10.00 |
|
Hancock Bank of Louisiana |
|
| 208,285 |
|
| 10.46 |
|
| 159,317 |
|
| 8.00 |
|
| 199,147 |
|
| 10.00 |
|
Hancock Bank of Florida |
|
| 26,928 |
|
| 18.08 |
|
| 11,912 |
|
| 8.00 |
|
| 14,890 |
|
| 10.00 |
|
Hancock Bank of Alabama |
|
| 9,571 |
|
| 19.90 |
|
| 3,848 |
|
| 8.00 |
|
| 4,810 |
|
| 10.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 498,731 |
|
| 11.03 |
| $ | 180,939 |
|
| 4.00 |
| $ | N/A |
|
| N/A |
|
Hancock Bank |
|
| 260,240 |
|
| 11.13 |
|
| 93,549 |
|
| 4.00 |
|
| 140,324 |
|
| 6.00 |
|
Hancock Bank of Louisiana |
|
| 189,324 |
|
| 9.51 |
|
| 79,659 |
|
| 4.00 |
|
| 119,488 |
|
| 6.00 |
|
Hancock Bank of Florida |
|
| 25,384 |
|
| 17.05 |
|
| 5,956 |
|
| 4.00 |
|
| 8,934 |
|
| 6.00 |
|
Hancock Bank of Alabama |
|
| 9,209 |
|
| 19.15 |
|
| 1,924 |
|
| 4.00 |
|
| 2,886 |
|
| 6.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 498,731 |
|
| 8.51 |
| $ | 175,801 |
|
| 3.00 |
| $ | N/A |
|
| N/A |
|
Hancock Bank |
|
| 260,240 |
|
| 7.97 |
|
| 97,968 |
|
| 3.00 |
|
| 163,281 |
|
| 5.00 |
|
Hancock Bank of Louisiana |
|
| 189,324 |
|
| 7.55 |
|
| 75,225 |
|
| 3.00 |
|
| 125,374 |
|
| 5.00 |
|
Hancock Bank of Florida |
|
| 25,384 |
|
| 16.79 |
|
| 4,536 |
|
| 3.00 |
|
| 7,560 |
|
| 5.00 |
|
Hancock Bank of Alabama |
|
| 9,209 |
|
| 25.33 |
|
| 1,091 |
|
| 3.00 |
|
| 1,818 |
|
| 5.00 |
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
At December 31, 2008, the Company had a pension plan and two postretirement plans for employees, which are described more fully below. The Company has accounted for its defined benefit pension plan using the actuarial model required by SFAS No. 87, Employers’ Accounting for Pensions. The compensation cost of an employee’s pension benefit has been recognized on the projected unit credit method over the employee’s approximate service period. The aggregate cost method has been utilized for funding purposes. The Company also sponsors two defined benefit postretirement plans, which provide medical benefits and life insurance benefits. The Company has accounted for these plans using the actuarial computations required by SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions as amended by SFAS No. 132. The cost of the defined benefit postretirement plan has been recognized on the projected unit credit method over the employee’s approximate service period.
Effective December 31, 2006, the Company adopted certain requirements of SFAS No. 158, Employers’ Accounting for Pension Plans—Defined Benefit Pension and Other Postretirement Plans – An Amendment of FASB Statements No. 87, 88, 106, and 132(R). Under SFAS No. 158, the Company is required to recognize the over funded or under funded status of a defined benefit postretirement plan as an asset or liability on its balance sheet. This pronouncement also requires the Company to recognize changes in that funded status in the year in which the changes occur through comprehensive income effective for years ending after December 15, 2006. In addition, this statement requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position effective for fiscal years ending after December 15, 2008. With the adoption of the change in measurement date of SFAS No. 158, the Company recorded an $815,107 adjustment to beginning 2008 retained earnings. Results for prior periods have not been restated.
Defined Benefit Plan - Pension
The Company has a noncontributory defined benefit pension plan covering legacy Hancock employees who have been employed by the Company one year and who have worked a minimum of 1,000 hours during the calendar year. The Company’s current policy is to contribute annually the minimum amount that can be deducted for federal income tax purposes. The benefits are based upon years of service and the employee’s base or benefit base compensation.
Certain legacy Whitney employees are covered by a noncontributory qualified defined benefit pension plan. The benefits are based on an employee’s total years of service and his or her highest consecutive five-year level of compensation during the last fivefinal ten years of employment. Certain legacy Whitney employees are also covered by an unfunded nonqualified defined benefit pension plan that provides retirement benefits to designated executive officers. These benefits are calculated using the qualified plan’s formula, but without applying the restrictions imposed on qualified plans by certain provisions of the Internal Revenue Code. Benefits that become payable under the nonqualified plan supplement amounts paid from the qualified plan. The Whitney plans have been closed to new participants since 2008, and benefit accruals have been frozen for all participants other than those who met certain vesting, age and years of service criteria as of December 31, 2008.
The Company makes contributions to the qualified pension plans in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. Based on currently available information, the Company anticipates making contributions totaling approximately $22.2 million during 2012.
The Company is in the process of reviewing all retirement benefit plans to determine appropriate changes needed to transition legacy Whitney employees into the Company’s benefit plans.
The following tables detail the changes in the benefit obligations and plan assets of each plan for the years ended December 31, 2011 and 2010 as well as the funded status of the plans at each year end and the amounts recognized in the Company’s balance sheets (in thousands). The Company uses a December 31 measurement date for all defined benefit pension plans and other postretirement benefit plans.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
The measurement date for the pension plan is December 31, 2008. Data relative to the pension plan is as follows (in thousands):
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008* |
| 2007 |
| ||
|
|
|
| ||||
Change in benefit obligation |
|
|
|
|
|
|
|
Benefit obligation, beginning of year |
| $ | 73,203 |
| $ | 68,293 |
|
Service cost |
|
| 3,283 |
|
| 2,656 |
|
Interest cost |
|
| 5,646 |
|
| 3,834 |
|
Actuarial loss |
|
| 4,999 |
|
| 1,331 |
|
Benefits paid |
|
| (4,269 | ) |
| (2,911 | ) |
|
|
|
| ||||
Benefit obligation, end of year |
|
| 82,862 |
|
| 73,203 |
|
|
|
|
| ||||
Change in plan assets |
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year |
|
| 59,741 |
|
| 51,935 |
|
Actual return on plan assets |
|
| (11,757 | ) |
| 6,275 |
|
Employer contributions |
|
| 7,467 |
|
| 4,695 |
|
Benefit payments |
|
| (4,269 | ) |
| (2,911 | ) |
Expenses |
|
| (181 | ) |
| (253 | ) |
|
|
|
| ||||
Fair value of plan assets, end of year |
|
| 51,001 |
|
| 59,741 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
Funded status at end of year - net liability |
| $ | (31,861 | ) | $ | (13,462 | ) |
|
|
|
| ||||
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss |
|
|
|
|
|
|
|
Unrecognized loss at beginning of year |
| $ | 18,699 |
| $ | 20,307 |
|
Amount of (loss)/gain recognized during the year |
|
| (1,184 | ) |
| (1,122 | ) |
Net actuarial loss/(gain) |
|
| 22,975 |
|
| (486 | ) |
|
|
|
| ||||
Unrecognized loss at end of year |
| $ | 40,490 |
| $ | 18,699 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
* 2008 amounts are for the 15 month period October 1, 2007 - December 31, 2008. |
|
Note 12. Retirement and Employee Benefit Plans (continued)
Net periodic expense is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Net periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 2,626 |
| $ | 2,656 |
| $ | 2,304 |
|
Interest cost |
|
| 4,517 |
|
| 3,834 |
|
| 3,499 |
|
Expected return on plan assets |
|
| (4,830 | ) |
| (4,206 | ) |
| (3,867 | ) |
Recognized net amortization and deferral |
|
| 947 |
|
| 1,122 |
|
| 1,062 |
|
|
|
|
|
| ||||||
Net pension benefit cost |
|
| 3,260 |
|
| 3,406 |
|
| 2,998 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes |
|
|
|
|
|
|
|
|
|
|
Net (loss)/gain recognized during the year |
|
| (1,184 | ) |
| (1,122 | ) |
| 1,062 |
|
Net actuarial loss/(gain) |
|
| 22,975 |
|
| (486 | ) |
| (623 | ) |
|
|
|
|
| ||||||
Total recognized in other comprehensive income |
|
| 21,791 |
|
| (1,608 | ) |
| 439 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic benefit cost and other comprehensive income |
| $ | 25,051 |
| $ | 1,798 |
| $ | 3,437 |
|
|
|
|
|
| ||||||
Weighted average assumptions as of measurement date |
|
|
|
|
|
|
|
|
|
|
Discount rate for benefit obligations |
|
| 5.96 | % |
| 6.31 | % |
| 5.75 | % |
Discount rate for net periodic benefit cost |
|
| 6.31 | % |
| 5.75 | % |
| 5.50 | % |
Expected long-term return on plan assets |
|
| 7.50 | % |
| 8.00 | % |
| 8.00 | % |
Rate of compensation increase |
|
| 4.00 | % |
| 4.00 | % |
| 4.00 | % |
Hancock Plan
2011 | 2010 | |||||||
Change in benefit obligation | ||||||||
Benefit obligation, beginning of year | $ | 101,746 | $ | 89,720 | ||||
Service cost | 4,689 | 3,501 | ||||||
Interest cost | 5,453 | 5,233 | ||||||
Actuarial loss | 27,429 | 7,155 | ||||||
Benefits paid | (4,202 | ) | (3,863 | ) | ||||
|
|
|
| |||||
Benefit obligation, end of year | 135,115 | 101,746 | ||||||
|
|
|
| |||||
Change in plan assets | ||||||||
Fair value of plan assets, beginning of year | 71,640 | 61,313 | ||||||
Actual return on plan assets | 1,375 | 7,718 | ||||||
Employer contributions | 34,907 | 6,726 | ||||||
Benefit payments | (4,202 | ) | (3,863 | ) | ||||
Expenses | (245 | ) | (254 | ) | ||||
|
|
|
| |||||
Fair value of plan assets, end of year | 103,475 | 71,640 | ||||||
|
|
|
| |||||
Funded status at end of year—net liability | $ | (31,640 | ) | $ | (30,106 | ) | ||
|
|
|
| |||||
Amounts recognized in accumulated other comprehensive loss | ||||||||
Unrecognized loss at beginning of year | $ | 38,810 | $ | 36,753 | ||||
Amount of (loss)/gain recognized during the year | (2,343 | ) | (2,281 | ) | ||||
Net actuarial loss/(gain) | 31,789 | 4,338 | ||||||
|
|
|
| |||||
Unrecognized loss at end of year | $ | 68,256 | $ | 38,810 | ||||
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Note 12. Retirement and Employee Benefit Plans (continued)
Whitney Plan
December 31, 2011 | ||||||||
Qualified | Nonqualified | |||||||
Change in benefit obligation | ||||||||
Benefit obligation at acquisition date | $ | 216,992 | $ | 14,442 | ||||
Service cost | 3,751 | 27 | ||||||
Interest cost | 6,664 | 438 | ||||||
Actuarial loss | 40,542 | 1,597 | ||||||
Benefits paid | (3,556 | ) | (570 | ) | ||||
|
|
|
| |||||
Benefit obligation, end of year | 264,393 | 15,934 | ||||||
|
|
|
| |||||
Change in plan assets | ||||||||
Fair value of plan assets at acquisition date | 223,495 | — | ||||||
Actual return on plan assets | (5,354 | ) | — | |||||
Employer contributions | 10,000 | 570 | ||||||
Benefit payments | (3,556 | ) | (570 | ) | ||||
Expenses | — | — | ||||||
|
|
|
| |||||
Fair value of plan assets, end of year | 224,585 | — | ||||||
|
|
|
| |||||
Funded status at end of year—net liability | $ | (39,808 | ) | $ | (15,934 | ) | ||
|
|
|
| |||||
Amounts recognized in accumulated other comprehensive loss | ||||||||
Unrecognized loss at acquistion date | $ | — | $ | — | ||||
Amount of (loss)/gain recognized during the year | — | — | ||||||
Net actuarial loss/(gain) | 55,524 | 1,597 | ||||||
|
|
|
| |||||
Unrecognized loss at end of year | $ | 55,524 | $ | 1,597 | ||||
|
|
|
|
The accumulated benefit obligation was $109.1 million and $83.6 million, respectively, for the Hancock plan at December 31, 2011 and 2010. The accumulated benefit obligations at December 31, 2011 for the Whitney plans were $239.1 million for qualified plan and $15.7 million for the nonqualified plan.
The following tables show net periodic cost included in expense and the changes in the amounts recognized in accumulated other comprehensive income during 2011 and 2010. Hancock expects to recognize $4.6 million of the net actuarial loss included in accumulated other comprehensive income at December 31, 2011 as a component of net pension expense in 2012. The amount expected to be recognized from the Whitney plans totals $3.0 million.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
The components of net periodic cost included in expense for each plan follows (in thousands):
Hancock Plan
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Net periodic benefit cost | ||||||||||||
Service cost | $ | 4,689 | $ | 3,500 | $ | 3,107 | ||||||
Interest cost | 5,453 | 5,233 | 4,833 | |||||||||
Expected return on plan assets | (5,490 | ) | (4,646 | ) | (3,873 | ) | ||||||
Recognized net amortization and deferral | 2,343 | 2,281 | 2,648 | |||||||||
|
|
|
|
|
| |||||||
Net periodic benefit cost | 6,995 | 6,368 | 6,715 | |||||||||
|
|
|
|
|
| |||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes | ||||||||||||
Net (loss)/gain recognized during the year | (2,343 | ) | (2,281 | ) | (2,648 | ) | ||||||
Net actuarial loss/(gain) | 31,789 | 4,338 | (1,089 | ) | ||||||||
|
|
|
|
|
| |||||||
Total recognized in other comprehensive income | 29,446 | 2,057 | (3,737 | ) | ||||||||
|
|
|
|
|
| |||||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | 36,441 | $ | 8,425 | $ | 2,978 | ||||||
|
|
|
|
|
| |||||||
Weighted average assumptions as of measurement date | ||||||||||||
Discount rate for benefit obligations | 4.35 | % | 5.46 | % | 5.95 | % | ||||||
Discount rate for net periodic benefit cost | 5.46 | % | 5.95 | % | 5.96 | % | ||||||
Expected long-term return on plan assets | 7.50 | % | 7.50 | % | 7.50 | % | ||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % |
Whitney Plan
Year Ended | ||||||||
December 31, 2011 | ||||||||
Qualified | Nonqualified | |||||||
Net periodic benefit cost | ||||||||
Service cost | $ | 3,751 | $ | 27 | ||||
Interest cost | 6,664 | 438 | ||||||
Expected return on plan assets | (9,628 | ) | — | |||||
Recognized net amortization and deferral | — | — | ||||||
|
|
|
| |||||
Net periodic benefit cost | 787 | 465 | ||||||
|
|
|
| |||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes | ||||||||
Net (loss)/gain recognized during the year | — | — | ||||||
Net actuarial loss/(gain) | 55,524 | 1,597 | ||||||
|
|
|
| |||||
Total recognized in other comprehensive income | 55,524 | 1,597 | ||||||
|
|
|
| |||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | 56,311 | $ | 2,062 | ||||
|
|
|
| |||||
Weighted average assumptions as of measurement date | ||||||||
Discount rate for benefit obligations | 4.31 | % | 4.31 | % | ||||
Discount rate for net periodic benefit cost | 5.35 | % | 5.35 | % | ||||
Expected long-term return on plan assets | 7.50 | % | — | |||||
Rate of compensation increase | 3.58 | % | 3.58 | % |
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
The long term rate of return on plan assets is determined by using the weighted-average of historical real returns for major asset classes based on target asset allocations. The result is then adjusted for inflation. The Company changedAt December 31, 2011, the discount rate was calculated by matching expected future cash flows to the Citigroup Pension Discount Pension Curve in 2007 from the Aa Seasoned Moody Twenty Year Bond Rate which was used in 2006. The Company used the Citigroup Discount Pension Curve discount rate at December 31, 2008. This curve had a duration of 15.53 years.Liability Index.
The Company has been making the contributions required by the Internal Revenue Service. The Company’s contributions to this plan were $4.8 million in 2008, $4.6 million in 2007 and $4.7 million in 2006. The Company expects to contribute approximately $6.6 million to the pension plan in 2009. The following shows expected pension plan benefit payments which reflect expected future service, are expected to be madeover the next ten years (in thousands):
|
|
|
|
|
2009 |
| $ | 3,265 |
|
2010 |
|
| 3,386 |
|
2011 |
|
| 3,534 |
|
2012 |
|
| 4,039 |
|
2013 |
|
| 4,175 |
|
2014 - 2018 |
|
| 23,720 |
|
|
|
| ||
|
| $ | 42,119 |
|
|
|
| ||
|
|
|
|
|
Hancock | Whitney | |||||||||||||||
Qualified | Qualified | Nonqualified | Total | |||||||||||||
2012 | $ | 4,273 | $ | 6,993 | $ | 888 | $ | 12,154 | ||||||||
2013 | 4,394 | 7,410 | 883 | 12,687 | ||||||||||||
2014 | 4,640 | 8,020 | 1,041 | 13,701 | ||||||||||||
2015 | 4,971 | 8,735 | 1,134 | 14,840 | ||||||||||||
2016 | 5,342 | 9,432 | 1,138 | 15,912 | ||||||||||||
2017-2021 | 33,222 | 57,629 | 5,792 | 96,643 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 56,842 | $ | 98,219 | $ | 10,876 | $ | 165,937 | |||||||||
|
|
|
|
|
|
|
|
The expected benefits to be paidbenefit payments are estimated based on the same assumptions used to measure the Company’s benefit obligationobligations at December 31, 2008.2011.
The Hancock plan assets are held in the Company’s family of mutual funds. The fair values of the Hancock pension plan weighted-averageassets at December 31, 2011 and 2010, by asset category, are shown in the following tables (in thousands):
Fair Value Measurements at December 31, 2011 | ||||||||||||||||
Asset Category | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Hancock Horizon Government Money Market Fund | $ | 28,081 | $ | 28,081 | $ | — | $ | — | ||||||||
Hancock Horizon Strategic Income Bond Fund | 29,895 | 29,895 | — | — | ||||||||||||
Hancock Horizon Quantitative Long/Short Fund | 3,674 | 3,674 | — | — | ||||||||||||
Hancock Horizon Diversified International Fund | 6,266 | 6,266 | — | — | ||||||||||||
Hancock Horizon Burkenroad Fund | 2,414 | 2,414 | — | — | ||||||||||||
Hancock Horizon Growth Fund | 13,403 | 13,403 | — | — | ||||||||||||
Hancock Horizon Value Fund | 19,742 | 19,742 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TOTAL | $ | 103,475 | $ | 103,475 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
Fair Value Measurements at December 31, 2010 | ||||||||||||||||
Asset Category | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Hancock Horizon Government Money Market Fund | $ | 2,573 | $ | 2,573 | $ | — | $ | — | ||||||||
Hancock Horizon Strategic Income Bond Fund | 25,974 | 25,974 | — | — | ||||||||||||
Hancock Horizon Quantitative Long/Short Fund | 3,525 | 3,525 | — | — | ||||||||||||
Hancock Horizon Diversified International Fund | 6,277 | 6,277 | — | — | ||||||||||||
Hancock Horizon Burkenroad Fund | 2,264 | 2,264 | — | — | ||||||||||||
Hancock Horizon Growth Fund | 12,392 | 12,392 | — | — | ||||||||||||
Hancock Horizon Value Fund | 18,635 | 18,635 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TOTAL | $ | 71,640 | $ | 71,640 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
The Hancock plan’s percentage asset allocations by asset category and corresponding target allocations at December 31, 20082011 and 2007, by asset category, are as follows:2010 follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Plan Assets |
| Target Allocation |
| ||||||||
|
|
|
| ||||||||||
|
| 2008 |
| 2007 |
| 2008 |
| 2007 |
| ||||
|
|
|
|
|
| ||||||||
Asset category |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
| 49% |
|
| 51% |
|
| 40-70% |
|
| 30-60% |
|
Fixed income securities |
|
| 47% |
|
| 44% |
|
| 30-60% |
|
| 40-70% |
|
Cash equivalents |
|
| 4% |
|
| 5% |
|
| 0-10% |
|
| 0-10% |
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
| 100% |
|
| 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets at December 31, | Target Allocation at December 31, | |||||||||||||||
Asset category | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Equity securities | 44 | % | 60 | % | 40-70 | % | 40-70 | % | ||||||||
Fixed income securities | 29 | % | 36 | % | 30-60 | % | 30-60 | % | ||||||||
Cash equivalents | 27 | % | 4 | % | 0-10 | % | 0-10 | % | ||||||||
|
|
|
| |||||||||||||
100 | % | 100 | % | |||||||||||||
|
|
|
|
A $25 million contribution to the plan late in 2011 was initially invested in cash equivalents. After these funds were reinvested, the distribution of plan assets was within target allocations.
The investment strategy of the Hancock pension plan is to emphasize a balanced return of current income and growth of principal while accepting a moderate level of risk. The investment goal of the plan is to meet or exceed the return of a balanced market index comprised of 50%55% of the S&P 500 Index and 50%45% of the Barclays Intermediate Aggregate Bond Index. The pension plan investment committee meets periodically to review the policy, strategy and performance of the plan.
The fair value of the Whitney pension plan assets at December 31, 2011, are shown in the following table (in thousands):
Fair Value Measurements at December 31, 2011 | ||||||||||||||||
Asset Category | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Equity securities—large cap | $ | 72,607 | $ | 72,607 | $ | — | $ | — | ||||||||
Equity securities—small cap | 44,191 | 44,191 | — | — | ||||||||||||
Hancock Horizon Diversified International | 18,262 | 18,262 | — | — | ||||||||||||
Corporate debt | 33,319 | 33,319 | — | |||||||||||||
U.S. government and agency secutities and other | 44,017 | 15,032 | 28,985 | — | ||||||||||||
Cash and equivalents | 12,189 | 12,189 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TOTAL | $ | 224,585 | $ | 162,281 | $ | 62,304 | $ | — | ||||||||
|
|
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
The Whitney plan’s percentage asset allocations by asset category and corresponding target allocations at December 31, 2011 follow:
At December 31, 2011 | ||||||||
Plan | Target | |||||||
Assets | Allocation | |||||||
Asset category | ||||||||
Equity securities | 60 | % | 40-70 | % | ||||
Fixed income securities | 35 | % | 30-50 | % | ||||
Cash equivalents | 5 | % | 0-10 | % | ||||
100 | % | |||||||
The assumption regarding the expected long-term return on Whitney plan assets dowith reference to the plan’s investment policy and practices, including the tolerance for market and credit risk, and historical returns for benchmark indices specified in the policy. The policy communicates risk tolerance in terms of diversification criteria and constraints on investment quality. The plan may not includehold debt securities of any single issuer, except the U.S. Treasury and U.S. government agencies, in excess of 10% of plan assets. The policy also calls for diversification of equity holdings across business segments and states a preference for holdings in companies that demonstrate consistent growth in earnings and dividends. No company’s equity securities shall comprise more than 5% of the plan’s total market value. Limited use of derivatives is authorized by the policy, but the investment manager has not employed these instruments.
As of December 31, 2011, the Whitney plan assets included 16,375 shares of Hancock common stock with a value of $.5 million (.23%) of plan assets.
Pension Plans – Defined Contribution
The Company sponsors defined contribution retirement plans under Section 401(k) of the Internal Revenue Code. The Hancock plan covers substantially all legacy Hancock employees who have been employed 90 days and meet certain other requirements, but excluding on call, temporary, and seasonal employees. Under these plans, the Company will match the 50% of the savings of each participant up to 6% of his or her compensation.
Eligible legacy Whitney employees who are employed by the new Whitney Bank after the merger continue to be covered by an employee savings plan under Section 401(k). An employee of the new Whitney Bank who was not a participant at the merger date can become eligible to participate in the savings plan after meeting the eligibility conditions, provided the employee performed services at a legacy Whitney location as of the merger date. Under the savings plan, the Company will match the savings of each participant up to 4% of his or her compensation. Tax law imposes limits on total annual participant savings. Participants are fully vested in their savings and in the matching Company contribution at all times. Under the savings plan, the Company can also make discretionary profit sharing contributions on behalf of participants who are either (a) ineligible to participate in the Whitney qualified defined-benefit plan or (b) subject to the freeze in benefit accruals under the defined-benefit plan. The discretionary profit sharing contribution for a plan year is up to 4% of the participants’ eligible compensation for such year and is allocated only to participants who were employed on the first day of the plan year and at year end. Participants must complete three years of service to become vested in the Company’s contributions subject to earlier vesting in the case of retirement, death or disability. The Whitney board amended the plan shortly prior to the merger to provide that Whitney employees terminated as a result of a force reduction after the closing date of the merger would also be immediately vested.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
The expense of the Company’s common stock at December 31, 2008 or 2007.matching contributions to both the Hancock and legacy Whitney 401(k) plans was $4.5 million in 2011, $2.0 million in 2010 and $1.8 million in 2009. The discretionary profit-sharing contribution under the legacy Whitney plan was $1.3 million in 2011.
Health and Welfare Plans – Defined Benefit Plan - Postretirement
The Company also sponsors two defined benefit postretirement plans other thanfor both legacy Hancock and legacy Whitney employees. The Hancock plans provide health care and life insurance benefits to retiring employees who participate in medical and/or group life insurance benefit plans for active employees at the pension plan, that cover full-time employees whotime of retirement and have reached 55 years of age with fifteen years of service, age 62 with twelveten years of service or age 65 with tenfive years of service. One plan provides medical benefits and the other provides life insurance benefits. The postretirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain employer contribution maximums; themaximums. Neither Hancock plan is available to employees hired on or after January 1, 2000.
The legacy Whitney plans offer health care and life insurance benefit plans for retirees and their eligible dependents. Participant contributions are required under the health plan. All health care benefits are covered under contracts with health maintenance or preferred provider organizations or insurance contracts. The Company funds its obligations under these plans as contractual payments come due to health care organizations and insurance companies. Currently, these plans restrict eligibility for postretirement health benefits to retirees already receiving benefits as of the plan is noncontributory.amendments in 2007 and to those active participants who were eligible to receive benefits as of December 31, 2007. Life insurance benefits are currently only available to employees who retired before December 31, 2007.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
The following tables detail the changes in the benefit obligation of the Hancock and Whitney plans for the years ended December 31, 2011 and 2010, as well as the funded status of the plans at each year end and the amounts recognized in the Company’s consolidated balance sheets (in thousands). The Company uses a December 31 measurement date for the plans is December 31, 2008.all defined benefit retirement plans. The Company used a 6.00% and 6.40%4.25% discount rate for the determination of the projected postretirement benefit obligation as of December 31, 20082011 and 2007, respectively. Thea 4.10% discount rate is based onfor the Citigroup Discount Pension Curve.Whitney plans. A discount rate of 5.30% was used to determine the Hancock plan benefit obligation as of December 31, 2010.
Data relative to these postretirement benefits is as follows (in thousands):
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
Change in postretirement benefit obligation |
|
|
|
|
|
|
|
Projected postretirement benefit obligation, beginning of year |
| $ | 8,481 |
| $ | 7,438 |
|
Service cost |
|
| 174 |
|
| 168 |
|
Interest cost |
|
| 505 |
|
| 485 |
|
Plan participants’ contributions |
|
| 304 |
|
| 286 |
|
Actuarial loss |
|
| 269 |
|
| 1,012 |
|
Benefit payments |
|
| (1,006 | ) |
| (908 | ) |
|
|
|
| ||||
Projected postretirement benefit obligation, end of year |
|
| 8,727 |
|
| 8,481 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
Change in plan assets |
|
|
|
|
|
|
|
Plan assets, beginning of year |
|
| — |
|
| — |
|
Employer contributions |
|
| 702 |
|
| 622 |
|
Plan participants’ contributions |
|
| 304 |
|
| 286 |
|
Benefit payments |
|
| (1,006 | ) |
| (908 | ) |
|
|
|
| ||||
Plan assets, end of year |
|
| — |
|
| — |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
Funded status at end of year - net liability |
| $ | (8,727 | ) | $ | (8,481 | ) |
|
|
|
| ||||
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss |
|
|
|
|
|
|
|
Net loss |
| $ | 2,568 |
| $ | 2,476 |
|
Prior service cost |
|
| (208 | ) |
| (261 | ) |
Net obligation |
|
| 15 |
|
| 21 |
|
|
|
|
| ||||
|
| $ | 2,375 |
| $ | 2,236 |
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Note 12. Retirement and Employee Benefit Plans (continued)
Hancock Plan
Years Ended December 31, | ||||||||
2011 | 2010 | |||||||
Change in postretirement benefit obligation | ||||||||
Projected postretirement benefit obligation, beginning of year | $ | 12,373 | $ | 10,290 | ||||
Service cost | 137 | 125 | ||||||
Interest cost | 611 | 556 | ||||||
Plan participants’ contributions | 346 | 310 | ||||||
Actuarial loss | 4,294 | 2,098 | ||||||
Benefit payments | (1,108 | ) | (1,006 | ) | ||||
|
|
|
| |||||
Projected postretirement benefit obligation, end of year | 16,653 | 12,373 | ||||||
Change in plan assets | ||||||||
Plan assets, beginning of year | — | — | ||||||
Employer contributions | 763 | 696 | ||||||
Plan participants’ contributions | 345 | 310 | ||||||
Benefit payments | (1,108 | ) | (1,006 | ) | ||||
|
|
|
| |||||
Plan assets, end of year | — | — | ||||||
|
|
|
| |||||
Funded status at end of year—net liability | $ | (16,653 | ) | $ | (12,373 | ) | ||
|
|
|
| |||||
Amounts recognized in accumulated other comprehensive loss | ||||||||
Unrecognized loss at beginning of year | $ | 5,546 | $ | 3,701 | ||||
Amount of (loss)/gain recognized during the year | (489 | ) | (253 | ) | ||||
Net actuarial loss/(gain) | 4,294 | 2,098 | ||||||
|
|
|
| |||||
Unrecognized loss at end of year | $ | 9,351 | $ | 5,546 | ||||
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
Whitney Plans
Period Ended December 31 2011 | ||||
Change in postretirement benefit obligation | ||||
Projected postretirement benefit obligation, from acquisition date | $ | 15,949 | ||
Service cost | — | |||
Interest cost | 480 | |||
Plan participants' contributions | 523 | |||
Actuarial loss | 1,645 | |||
Benefit payments | (1,143 | ) | ||
|
| |||
Projected postretirement benefit obligation, end of year | 17,454 | |||
|
| |||
Change in plan assets | ||||
Plan assets, beginning of year | — | |||
Employer contributions | 620 | |||
Plan participants' contributions | 523 | |||
Benefit payments | (1,143 | ) | ||
|
| |||
Plan assets, end of year | — | |||
|
| |||
Funded status at end of year—net liability | $ | (17,454 | ) | |
|
| |||
Amounts recognized in accumulated other comprehensive loss | ||||
Unrecognized loss at beginning of year | $ | — | ||
Amount of (loss)/gain recognized during the year | — | |||
Net actuarial loss/(gain) | 1,645 | |||
|
| |||
Unrecognized loss at end of year | $ | 1,645 | ||
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
The following tables for the Hancock plans show the composition of net periodic postretirement benefit cost (in thousands):
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Net periodic postretirement benefit cost | ||||||||||||
Service cost | $ | 137 | $ | 124 | $ | 114 | ||||||
Interest costs | 611 | 556 | 565 | |||||||||
Amortization of net loss | 538 | 302 | 296 | |||||||||
Amortization of prior service cost | (48 | ) | (48 | ) | (48 | ) | ||||||
|
|
|
|
|
| |||||||
Net periodic postretirement benefit cost | 1,238 | 934 | 927 | |||||||||
|
|
|
|
|
| |||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes | ||||||||||||
Amount of loss recognized during the year | (538 | ) | (302 | ) | (296 | ) | ||||||
Net actuarial (gain)/loss | 4,293 | 2,098 | 1,574 | |||||||||
Amortization of prior service cost | 48 | 48 | 48 | |||||||||
|
|
|
|
|
| |||||||
Total recognized in other comprehensive income | 3,803 | 1,844 | 1,326 | |||||||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | 5,041 | $ | 2,778 | $ | 2,253 | ||||||
|
|
|
|
|
|
The Company assumed certain trends in health care costs in the determination of the benefit obligations. At December 31, 2011, the Company assumed a 7.5% increase in the pre- and post-Medicare age health costs for 2012, declining uniformly over 5 years to a 5.0% annual rate of increase for years thereafter. At December 31, 2010, the initial rate of increase was assumed to be 8.0%, declining to an ultimate rate of 5.0% over a 6 year period. The following table showsillustrates the effect on the annual periodic postretirement benefit costs and postretirement benefit obligation of a 1% increase or 1% decrease in the assumed health care cost trend rates from the rates assumed at December 31, 2011.
1% Decrease | Assumed | 1% Increase | ||||||||||
in Rates | Rates | in Rates | ||||||||||
Aggregated service and interest cost | $ | 654 | $ | 748 | $ | 866 | ||||||
Postretirement benefit obligation | 14,655 | 16,653 | 19,114 |
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement and Employee Benefit Plans (continued)
The following tables for the Whitney plans show the composition of net period postretirement benefit cost (in thousands):
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|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Net periodic postretirement benefit cost |
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 174 |
| $ | 168 |
| $ | 315 |
|
Interest costs |
|
| 505 |
|
| 485 |
|
| 393 |
|
Amortization of net loss |
|
| 177 |
|
| 249 |
|
| 116 |
|
Amortization of transition obligation |
|
| (5 | ) |
| (5 | ) |
| (5 | ) |
Amortization of prior service cost |
|
| 53 |
|
| 53 |
|
| 53 |
|
|
|
|
|
| ||||||
Net periodic postretirement benefit cost |
|
| 904 |
|
| 950 |
|
| 872 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes |
|
|
|
|
|
|
|
|
|
|
Amount of loss recognized during the year |
|
| (177 | ) |
| (249 | ) |
| (115 | ) |
Net actuarial (gain)/loss |
|
| 269 |
|
| 1,012 |
|
| (426 | ) |
Amortization of transition obligation |
|
| 5 |
|
| 5 |
|
| 5 |
|
Amortization of prior service cost |
|
| (53 | ) |
| (53 | ) |
| (53 | ) |
|
|
|
|
| ||||||
Total recognized in other comprehensive loss |
|
| 44 |
|
| 715 |
|
| (589 | ) |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total recognized in net periodic benefit cost and other comprehensive income |
| $ | 948 |
| $ | 1,665 |
| $ | 283 |
|
|
|
|
|
|
For measurement purposes in 2008,
2011 | ||||
Net periodic postretirement benefit cost | ||||
Service cost | $ | — | ||
Interest costs | 480 | |||
Amortization of net loss | — | |||
Amortization of prior service cost | — | |||
|
| |||
Net periodic postretirement benefit cost | 480 | |||
|
| |||
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes | ||||
Amount of loss recognized during the year | — | |||
Net actuarial (gain)/loss | 1,645 | |||
Amortization of prior service cost | — | |||
|
| |||
Total recognized in other comprehensive income | 1,645 | |||
|
| |||
Total recognized in net periodic benefit cost and other | ||||
|
| |||
comprehensive income | $ | 2,125 | ||
|
|
At December 31, 2011, the Company assumed a 7.0% annual rate of7.75% increase in the overpre- and post-Medicare age 65 per capitahealth costs of covered health care benefits was assumed for 2009. The rate was assumed to decrease2012, declining gradually to a 5.0% over 2 years and remain at that level thereafter. In 2007, an 8.0% annual rate of increase in the over age 65 per capita costs of covered health care benefits was assumed. The rate was assumed to decrease gradually to 5.0% over 3 years and remain at that level thereafter. The health care cost trend rate assumption has an effect on the amounts reported.rate. The following table illustrates the effect on the annual periodic postretirement benefit cost and the postretirement benefit obligation of a 1% increase or 1% decrease in the assumed health care cost trend rates:
|
|
|
|
|
|
|
|
|
|
|
|
| 1% Decrease |
| Assumed |
| 1% Increase |
| |||
|
|
|
|
| ||||||
Aggregated service and interest cost |
| $ | 609 |
| $ | 679 |
| $ | 764 |
|
Postretirement benefit obligation |
|
| 7,935 |
|
| 8,727 |
|
| 9,684 |
|
The Company expects to contribute $0.7 million to the plans in 2009.
1% Decrease in Rates | Assumed Rates | 1% Increase in Rates | ||||||||||
Aggregated service and interest cost | $ | 431 | $ | 480 | $ | 538 | ||||||
Postretirement benefit obligation | 15,620 | 17,454 | 19,631 |
Expected benefits to be paid over the next ten years and are reflected the following table (in thousands):
|
|
|
|
|
2009 |
| $ | 728 |
|
2010 |
|
| 754 |
|
2011 |
|
| 764 |
|
2012 |
|
| 645 |
|
2013 |
|
| 603 |
|
2014 - 2018 |
|
| 2,424 |
|
|
|
| ||
|
| $ | 5,918 |
|
|
|
|
Hancock | Whitney | Total | ||||||||||
2012 | $ | 832 | $ | 1,246 | $ | 2,078 | ||||||
2013 | 795 | 1,293 | 2,088 | |||||||||
2014 | 838 | 1,244 | 2,082 | |||||||||
2015 | 784 | 1,141 | 1,925 | |||||||||
2016 | 813 | 1,056 | 1,869 | |||||||||
2017-2021 | 4,245 | 4,450 | 8,695 | |||||||||
|
|
|
|
|
| |||||||
$ | 8,307 | $ | 10,430 | $ | 18,737 | |||||||
|
|
|
|
|
|
.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
The following table shows the amounts in accumulated other comprehensive loss that the Company expects to be recognized as net periodic benefit cost during the year ending December 31, 2009 (in thousands):
|
|
|
|
|
Prior service cost |
| $ | (53 | ) |
Net transition obligation |
|
| 5 |
|
Net loss |
|
| 170 |
|
|
|
| ||
Total |
| $ | 122 |
|
|
|
|
Defined Contribution Plan – 401(k)Note 13. Stock-Based Payment Arrangements
The Company has a 401(k) retirementHancock maintains an incentive compensation plan covering substantially all employees who have been employed 90 days excluding on call, temporary, and seasonalthat incorporates stock-based payment arrangements for employees and meetdirectors. The most recent plan was approved by the Company’s stockholders in 2005 (the “Plan”). The Compensation Committee of the Company’s Board of Directors administers the Plan, makes determinations with respect to participation by employees or directors and authorizes stock-based awards under the plan. Under the Plan, participants may be awarded stock options (including incentive stock options for employees), restricted shares, performance stock awards and stock appreciation rights, all on a stand-alone, combination or tandem basis. To date, the Committee has awarded stock options, tenure-based restricted shares and performance stock awards.
The Plan authorizes the issuance of an aggregate of 5,000,000 shares of the Company’s common stock pursuant to awards under the Plan. The Plan limits the number of shares for which awards may be granted during any calendar year to 2% of the outstanding common stock reported at the end of the previous fiscal year, plus any unused portion of the annual limit for the prior year and subject to certain other requirements. Under this plan, employees can contribute a portion of their salary within limits provided by the Internal Revenue Code into the plan. The Company’s contributions to this plan were $1.7 million in 2008, $1.5 million in 2007 and $1.4 million in 2006.
Nonqualified Deferred Compensation Plans
The Company has one nonqualified deferred compensation plan covering key employees who have met certain requirements. The Company’s contributions to this plan were $1.0 million in 2008. Contributions to this plan were $0.5 million in 2007 and $0.4 million in 2006.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan that is designed to provide the employees of the Company a convenient means of purchasing common stock of the Company. Substantially all salaried, full time employees, who have been employed by the Company 90 days excluding on call, temporary, and seasonal employees, are eligible to participate. The Company makes no contribution to each participant’s contribution. The numbers of shares purchased under this plan were 9,864 in 2008, 11,623 in 2007 and 7,213 in 2006.
The postretirement plans relating to health care payments and life insurance are not guaranteed and are subject to immediate cancellation and/or amendment. These plans are predicated on future Company profit levels that will justify their continuance. Overall health care costs are also a factor in the level of benefits provided and continuance of these post-retirement plans. There are no vested rights under the postretirement health or life insurance plans.
|
adjustments. At December 31, 2008,2011 there were 4.4 million shares available for future issuance under equity compensation plans. Whitney options converted at the Company had two share-based payment plansacquisition date do not count against the number of shares available for employees, which are described below.future issuance. The awards available for issuance cover outstanding unvested and unexercised awards as well as future awards. The Company followsmay use authorized unissued shares or shares held in treasury to satisfy awards under the Plan.
Restricted stock awards issued under the Plan generally vest at the end of five years of continuous service from the grant date. The fair value recognition provisions of SFAS No. 123(R), Share-Based Payment.each performance stock award is estimated on the grant date’s prior closing price using the Black-Scholes-Merton valuation model. The performance awards issued during the annual grant have a one year performance measurement period followed by a two year service vesting period. The target shares issued are the maximum potential shares to be awarded.
For the years ended December 31, 2008, 2007,2011, 2010 and 20062009 total compensation cost for share-basedstock-based compensation recognized in income was $2.8$7.2 million, $1.2$4.1 million and $3.7$3.3 million respectively. The total recognized tax benefit related to the share-basedstock-based compensation was $1.4 million, $0.7 million $0.3 million, and $1.2$0.8 million, respectively, for years 2008, 20072011, 2010 and 2006.2009.
A summary of option activity for 2011 is presented below:
Prior to the adoption of SFAS No. 123(R), the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statement of Cash Flows. SFAS 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The excess tax benefit classified as a financing cash inflow and classified as an operating cash outflow for the years ended December 31, 2008, 2007, and 2006 was $4.5 million, $0.3 million, and $3.5 million, respectively.
Options | Number of Shares | Weighted- Average Exercise Price ($) | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value ($000) | ||||||||||||
Outstanding at January 1, 2011 | 1,129,520 | $ | 35.08 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Whitney options converted at acquisition date | 775,261 | $ | 62.64 | |||||||||||||
Granted | 200,601 | $ | 29.97 | |||||||||||||
Exercised | (21,919 | ) | $ | 18.14 | ||||||||||||
Forfeited or expired | (396,556 | ) | $ | 61.83 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Outstanding at December 31, 2011 | 1,686,907 | $ | 41.05 | 5.2 | $ | 1,642 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Exercisable at December 31, 2011 | 1,183,667 | $ | 44.25 | 3.6 | $ | 1,241 | ||||||||||
|
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|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Stock Option Plans
The 1996 Hancock Holding Company Long-Term Incentive Plan (the “1996 Plan”) that was approved by the Company’s shareholders in 1996 was designed to provide annual incentive stock awards. Awards as defined in the 1996 Plan include, with limitations, stock options (including restricted stock options), restricted and performance shares, and performance stock awards, all on a stand-alone, combination or tandem basis. A total of fifteen million (15,000,000) common shares can be granted under the 1996 Plan with an annual grant maximum of two percent (2%) of the Company’s outstanding common stock as reported for the fiscal year ending immediately prior to such plan year. Grants of restricted stock awards are limited to one-third of the grant totals.
The exercise price is equal to the closing market price on the date immediately preceding the date of grant, except for certain of those granted to major stockholders where the option price is 110 percent110% of the market price. Option awards generally vest based onequally over five years of continuous service and have ten-year contractual terms. The Company’s policy is to issue new shares upon share option exercise and issue treasury shares upon restricted stock award vesting. The 1996 Long-Term Incentive Plan expired in 2006.
In March of 2005, the stockholders of the Company approved Hancock Holding Company’s 2005 Long-Term Incentive Plan (the “2005 Plan”) as the successor plan to the 1996 LTIP. The 2005 Plan is designed to enable employees and directors to obtain a proprietary interest in the Company and to attract and retain outstanding personnel.
The 2005 Plan provides that awards for up to an aggregate of five million (5,000,000) shares of the Company’s common stock may be granted during the term of the 2005 Plan. The 2005 Plan limits the number of shares for which awards may be granted during any calendar year to two percent (2%) of the outstanding Company’s common stock as reported for the fiscal year ending immediately prior to such plan year.
The fair value of each option award is estimated onusing the date of grant using Black-Scholes-Merton option valuation model.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Stock-Based Payment Arrangements (continued)
Whitney’s stock options outstanding at the acquisition date were assumed by Hancock, as adjusted for the share exchange ratio specified in the merger agreement. These options will expire at the earlier of (1) their expiration date (which is generally ten years after the grant date), except for grants made in 2005 that expired six months following the merger, or (2) a date following termination of employment, as set forth in the prior grant plan document.
The total intrinsic value of options exercised during 2011, 2010 and 2009 was $0.3 million, $0.8 million, and $1.5 million, respectively.
A summary of the status of the Company’s nonvested shares as of December 31, 2011, and changes during 2011, is presented below:
Number of Shares | Weighted- Average Grant-Date Fair Value | |||||||
Nonvested at January 1, 2011 | 855,873 | $ | 23.76 | |||||
Granted | 827,656 | $ | 26.06 | |||||
Vested | (194,452 | ) | $ | 18.41 | ||||
Forfeited | (28,101 | ) | $ | 27.41 | ||||
|
| |||||||
Nonvested at December 31, 2011 | 1,460,976 | $ | 25.70 | |||||
|
|
As of December 31, 2011, there was $27.8 million of total unrecognized compensation related to nonvested restricted shares. This compensation is expected to be recognized in expense over a weighted-average period of 3.4 years. The total fair value of shares which vested during 2011 and 2010 was $6.2 million and $5.9 million, respectively.
The weighted-average grant-date fair values of options awarded during 2011, 2010 and 2009 were $8.64, $10.73, and $14.52, respectively. The fair value of each option award was estimated as of the grant date using the Black-Scholes-Merton option-pricing model. The significant assumptions made in applying the option-pricing model that uses the assumptionsare noted in the following table. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock and other factors. The expected term of options granted iswas derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option iswas based on the U.S. Treasury yield curve in effect at the time of grant.
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|
| Years Ended December 31, |
| ||||
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|
| |||||
|
| 2008 |
| 2007 |
| 2006 |
|
|
|
|
|
| |||
Expected volatility |
| 29.02% - 35.33% |
| 29.02% - 30.89% |
| 29.87% |
|
Expected dividends |
| 2.31% - 2.60% |
| 2.47% - 2.52% |
| 1.61% - 1.96% |
|
Expected term (in years) |
| 5.6 - 8.7 |
| 5.6 - 9 |
| 5 - 8 |
|
Risk-free rates |
| 2.07% - 3.71% |
| 3.87% - 5.10% |
| 4.30% - 4.54% |
|
Years Ended December 31, | ||||||
2011* | 2010 | 2009* | ||||
Expected volatility | 38.90% | 40.53% | 40.45% | |||
Expected dividends | 3.20% | 2.9%-2.99% | 2.49% | |||
Expected term (in years) | 6.38 | 9.55 | 8.7 | |||
Risk-free rates | 1.99% | 2.73%-3.33% | 3.28% |
* | During 2011 and 2009, there was only one option award to one class of recipients. |
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
A summary
Note 14. Fair Value of option activity and changes under the plans for 2008 is presented below:Financial Instruments
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|
Options |
| Number of |
| Average |
| Contractual |
| Aggregate |
| ||||
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|
| |||||||||
|
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|
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|
|
|
Outstanding at January 1, 2008 |
|
| 1,345,333 |
| $ | 29.04 |
|
|
|
|
|
|
|
Granted |
|
| 154,261 |
| $ | 41.43 |
|
|
|
|
|
|
|
Exercised |
|
| (469,985 | ) | $ | 22.67 |
|
|
|
| $ | 12,591 |
|
Forfeited or expired |
|
| (15,932 | ) | $ | 37.08 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Outstanding at December 31, 2008 |
|
| 1,013,677 |
| $ | 33.75 |
|
| 6.4 |
| $ | 11,865 |
|
|
|
|
|
|
| ||||||||
Exercisable at December 31, 2008 |
|
| 622,244 |
| $ | 29.18 |
|
| 5.0 |
| $ | 10,131 |
|
|
|
|
|
|
| ||||||||
Share options expected to vest |
|
| 391,433 |
| $ | 41.03 |
|
| 8.6 |
| $ | 1,734 |
|
|
|
|
|
|
|
The weighted-average grant-date fair values of options granted during 2008, 2007, and 2006 were $13.19, $12.14, and $14.21, respectively, per optioned share. The total intrinsic value of options exercised during 2008, 2007 and 2006 was $12.6 million, $5.2 million, and $8.2 million, respectively.
A summary of the status of the Company’s nonvested shares as of December 31, 2008, and changes during 2008, is presented below:
|
|
|
|
|
|
|
|
| Number of |
| Weighted- |
| |
|
|
|
| |||
| ||||||
Nonvested at January 1, 2008 |
| 589,290 |
| $ | 21.82 |
|
Granted |
| 230,184 |
| $ | 22.24 |
|
Vested |
| (161,022 | ) | $ | 18.41 |
|
Forfeited |
| (12,189 | ) | $ | 23.33 |
|
|
|
|
|
|
| |
Nonvested at December 31, 2008 |
| 646,263 |
| $ | 22.79 |
|
|
|
|
|
|
|
As of December 31, 2008, there was $10.0 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 3.9 years. The totalFASB defines fair value of shares which vested during 2008 and 2007 was $3.0 million and $1.2 million, respectively.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company adopted Statement of SFAS No. 157, Fair Value Measurements, on January 1, 2008. SFAS No. 157 establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. SFAS No. 157 definesFASB’s guidance also established a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level.Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Available for sale securities classified as Levellevel 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and certain other debt and equity securities. Level 2 classified available for sale securities include mortgage-backed debt securities and collateralized mortgage obligations that are agency securities, and state and municipal bonds.
The Company adopted SFAS No. 159, invests only in high quality securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two to five years. Company policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a nationally recognized statistical rating agency, except for certain non-rated obligations of counties, parishes and municipalities within our markets in Mississippi, Louisiana, Texas, Florida and Alabama. There were no transfers between levels during the periods shown.
The Fair Value Optionfair value of derivative financial instruments, which are predominantly interest rate swaps, is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, such as interest rate futures, observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for Financial Assetsboth the Company and Financial Liabilities - Including an Amendment SFAS No. 115 (“SFAS No. 159”), on January 1, 2008.the counterparties. Although the Company has determined that the majority of the inputs used to value the derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company didhas determined that the impact of the credit valuation adjustments is not electsignificant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations in their entirety in level 2 of the fair value any additional items under SFAS No. 159. The Company, in accordance with Financial Accounting Standards Board Staff Position No. 157-2 “The Effective Date of FASB Statement No. 157”, will defer application of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities until January 1, 2009.hierarchy.
Fair Value of Assets Measured on a Recurring Basis
The following table presents for each of the fair-value hierarchy levels the Company’s financial assets and liabilities that are measured at fair value (in thousands) on a recurring basis at December 31, 2008.2011 and 2010.
|
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|
| Level 1 |
| Level 2 |
| Net Balance |
| |||
Assets |
|
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|
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|
|
|
|
|
|
Available for sale securities |
| $ | 290,374 |
| $ | 1,389,382 |
| $ | 1,679,756 |
|
Trading securities |
|
| 2,201 |
|
| — |
|
| 2,201 |
|
Short-term investments |
|
| 362,895 |
|
| — |
|
| 362,895 |
|
Interest rate lock commitments |
|
| — |
|
| 10 |
|
| 10 |
|
Swaps |
|
| — |
|
| (4,123 | ) |
| (4,123 | ) |
Loans carried at fair value |
|
| — |
|
| 24,125 |
|
| 24,125 |
|
Total assets |
| $ | 655,470 |
| $ | 1,409,394 |
| $ | 2,064,864 |
|
As of December 31, 2011 | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Assets | ||||||||||||
Available for sale securities: | ||||||||||||
U.S. Treasury and government agency securities | $ | 250,067 | $ | — | $ | 250,067 | ||||||
Debt securities issued by states of the United States and political subdivisions of the states | — | 309,665 | 309,665 | |||||||||
Corporate debt securities | 4,494 | — | 4,494 | |||||||||
Residential mortgage-backed securities | — | 2,480,345 | 2,480,345 | |||||||||
Collateralized mortgage obligations | — | 1,446,076 | 1,446,076 | |||||||||
Equity securities | 6,253 | — | 6,253 | |||||||||
Derivative financial instruments—assets | — | 14,952 | 14,952 | |||||||||
|
|
|
|
|
| |||||||
Total assets | $ | 260,814 | $ | 4,251,038 | $ | 4,511,852 | ||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Derivative financial instruments—liabilities | — | 15,643 | 15,643 | |||||||||
|
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|
|
|
| |||||||
Total Liabilities | $ | — | $ | 15,643 | $ | 15,643 | ||||||
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Fair Value of Financial Instruments (continued)
As of December 31, 2010 | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Assets | ||||||||||||
Available for sale securities: | ||||||||||||
U.S. Treasury and government agency securities | $ | 117,435 | $ | — | $ | 117,435 | ||||||
Debt securities issued by states of the United States and political subdivisions of the states | — | 180,443 | 180,443 | |||||||||
Corporate debt securities | 15,285 | — | 15,285 | |||||||||
Residential mortgage-backed securities | — | 799,686 | 799,686 | |||||||||
Collateralized mortgage obligations | — | 372,051 | 372,051 | |||||||||
Equity securities | 3,985 | — | 3,985 | |||||||||
Short-term investments | 274,974 | — | 274,974 | |||||||||
Derivative financial instruments—assets | — | 2,952 | 2,952 | |||||||||
|
|
|
|
|
| |||||||
Total assets | $ | 411,679 | $ | 1,355,132 | $ | 1,766,811 | ||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Derivative financial instruments—liabilities | $ | — | $ | 2,952 | $ | 2,952 | ||||||
|
|
|
|
|
| |||||||
Total Liabilities | $ | — | $ | 2,952 | $ | 2,952 | ||||||
|
|
|
|
|
|
Fair Value of Assets Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a non-recurringnonrecurring basis and, therefore, are not included in the table above. Impairedabove table. Collateral-dependent impaired loans are level 2 assets measured using appraisals from external parties of the collateral less any prior liens. Asliens or based on recent sales activity for similar assets in the property’s market. Other real estate owned are level 2 assets carried at the balance of December 31, 2008,the loan or at estimated fair value less estimated selling costs, whichever is less. Fair values are determined by sales agreement or appraisal.
The following table presents for each of the fair value of impaired loans was $14.8 million.hierarchy levels the Company’s financial assets that are measured at fair value (in thousands) on a nonrecurring basis at December 31, 2011 and 2010.
As of December 31, 2011 | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Assets | ||||||||||||
Impaired loans | $ | — | $ | 55,252 | $ | 55,252 | ||||||
Other real estate owned | — | 144,367 | 144,367 | |||||||||
|
|
|
|
|
| |||||||
Total assets | $ | — | $ | 199,619 | $ | 199,619 | ||||||
|
|
|
|
|
|
As of December 31, 2010 | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
Assets | ||||||||||||
Impaired loans | $ | — | $ | 95,787 | $ | 95,787 | ||||||
Other real estate owned | — | 32,520 | 32,520 | |||||||||
|
|
|
|
|
| |||||||
Total assets | $ | — | $ | 128,307 | $ | 128,307 | ||||||
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Fair Value of Financial Instruments (continued)
Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The followingsignificant methods and assumptions were used by the Company to estimate the fair value in accordance with SFAS No. 107, Disclosures about Fair Value of Financial Instruments, of each class of financial instruments for which it is practicable to estimate:are discussed below.
Cash, Short-Term Investments and Federal Funds Sold - —For those short-term instruments, the carrying amount is a reasonable estimate of fair value.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Securities - Estimated fair valuesAvailable for securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.
Loans, Net of Unearned Income -Sale—The fair value ofmeasurement for securities available for sale was discussed earlier.
Loans, Net—The fair value measurement for certain impaired loans iswas discussed earlier. For the remaining portfolio, fair values were generally estimated by discounting the futurescheduled cash flows using thediscount rates determined with reference to current market rates for similarat which loans with the same remaining maturities.similar terms would be made to borrowers with similar credit quality.
Accrued Interest Receivable and Accrued Interest Payable–Payable—The carrying amounts are a reasonable estimate of their fair values.
Deposits – SFAS No. 107—The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (carrying amounts). The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
Securities Sold under Agreements to Repurchase, Federal Funds Purchased, -and FHLB Borrowings—For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.
Securities Sold under Agreements to Repurchase and Federal Funds Purchased – For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.
Long-Term NotesDebt - Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. —The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar Notes over the same remaining termterms could be obtained.
Commitments -Derivative Financial Instruments –The fair value of loan commitments and letters of credit approximate the fees currently chargedmeasurement for similar agreements or the estimated cost to terminate or otherwise settle similar obligations. The fees associated with thesederivative financial instruments or the estimated cost to terminate, as applicable are immaterial.was discussed earlier.
The estimated fair values of the Company’s financial instruments were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||||||||
|
|
| |||||||||||
|
| 2008 |
| 2007 |
| ||||||||
|
|
|
| ||||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| ||||
|
|
|
|
|
| ||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing deposits, federal funds sold, and short-term investments |
| $ | 749,191 |
| $ | 749,191 |
| $ | 308,896 |
| $ | 308,896 |
|
Securities |
|
| 1,681,957 |
|
| 1,681,957 |
|
| 1,670,208 |
|
| 1,670,208 |
|
Loans, net of unearned income |
|
| 4,271,580 |
|
| 4,625,130 |
|
| 3,615,514 |
|
| 3,828,989 |
|
Accrued interest receivable |
|
| 33,067 |
|
| 33,067 |
|
| 35,117 |
|
| 35,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | 5,930,937 |
| $ | 5,990,883 |
| $ | 5,009,534 |
| $ | 5,026,639 |
|
Federal funds purchased |
|
| — |
|
| — |
|
| 4,100 |
|
| 4,100 |
|
Securities sold under agreements to repurchase |
|
| 505,932 |
|
| 505,932 |
|
| 371,604 |
|
| 371,604 |
|
Long-term notes |
|
| 638 |
|
| 638 |
|
| 793 |
|
| 793 |
|
Accrued interest payable |
|
| 6,322 |
|
| 6,322 |
|
| 9,105 |
|
| 9,105 |
|
December 31, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Financial assets: | ||||||||||||||||
Cash, interest-bearing deposits, federal funds sold, and short-term investments | $ | 1,622,366 | $ | 1,622,366 | $ | 778,851 | $ | 778,851 | ||||||||
Securities available for sale | 4,496,900 | 4,496,900 | 1,488,885 | 1,488,885 | ||||||||||||
Loans, net | 11,052,144 | 11,189,662 | 4,875,167 | 5,085,925 | ||||||||||||
Loans held for sale | 72,378 | 72,378 | 21,866 | 21,866 | ||||||||||||
Accrued interest receivable | 53,973 | 53,973 | 30,157 | 30,157 | ||||||||||||
Derivative financial instruments | 14,952 | 14,952 | 2,952 | 2,952 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposits | $ | 15,713,579 | $ | 15,737,667 | $ | 6,775,719 | $ | 6,787,931 | ||||||||
Federal funds purchased | 16,819 | 16,819 | — | — | ||||||||||||
Securities sold under agreements to repurchase | 1,027,635 | 1,027,635 | 364,676 | 364,676 | ||||||||||||
FHLB borrowings | — | — | 10,172 | 10,172 | ||||||||||||
Long-term debt | 353,890 | 365,421 | 376 | 376 | ||||||||||||
Accrued interest payable | 8,284 | 8,284 | 4,007 | 4,007 | ||||||||||||
Derivative financial instruments | 15,643 | 15,643 | 2,952 | 2,952 |
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Commitments and Contingencies |
Lending Related
In the normal course of business, the Company entersBanks enter into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of itstheir customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, and involve,although they expose the Banks to varying degrees elements of credit risk not reflectedand interest rate risk in much the same way as funded loans.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development of construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the consolidated balance sheets. underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Banks to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Banks issue standby letters of credit primarily to provide credit enhancement to their customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued.credit. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support forsupport. These off-balance sheet financial instruments. These obligationsinstruments are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
Commitments to extend credit |
| $ | 885,156 |
| $ | 1,110,935 |
|
Letters of credit |
|
| 113,274 |
|
| 86,969 |
|
December 31, | ||||||||
2011 | 2010 | |||||||
Commitments to extend credit | $ | 4,189,421 | $ | 912,206 | ||||
Letters of credit | 441,048 | 87,038 |
Approximately $610.4 million$3.8 billion and $524.7$729 million of commitments to extend credit at December 31, 20082011 and 2007,2010, respectively, were atcarry variable interest rates and the remainder was at fixed rates. A commitment to extend credit is an agreement to lend to a customer as long as the conditions established in the agreement have been satisfied. A commitment to extend credit generally has a fixed expiration date or other termination clauses and may require payment of a fee by the borrower. Since commitments often expire without being fully drawn, the total commitment amounts do not necessarily represent future cash requirements of the Company. The Company continually evaluates each customer’s credit worthiness on a case-by-case basis. Occasionally, a credit evaluation of a customer requesting a commitment to extend credit results in the Company obtaining collateral to support the obligation.
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing a letter of credit is essentially the same as that involved in extending a loan. The Company accounts for these commitments under the provisions of the FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements, Including Indirect Guarantees of Indebtedness of Others. The liability associated with letters of credit is not material to the Company’s consolidated financial statements. Letters of credit are supported by collateral or borrower guarantee sufficient to cover any draw on the letter that would result in an outstanding loan.
Visa Litigation
In the fourth quarter of 2007, we recorded a $2.5 million pretax charge pursuant to FASB Interpretation No. 45 “Guarantors Accounting and Disclosure Requirements, Including Indirect Guarantees of Indebtedness of Others” (“FIN No. 45”) for liabilities related to VISA USA’s antitrust settlement with American Express and other pending VISA litigation (reflecting our share as a VISA member.) In the first quarter of 2008 as part of VISA’s initial public offering, VISA redeemed 37.5% of shares held by us resulting in proceeds of $2.8 million in a realized security gain. The remaining 62.5% of the Class B shares are restricted and must be held for the longer period of 3 years or until all settlements are complete. At that time, we can keep the Class B shares or convert them to Class A publicly tradeable shares at a conversion rate to be determined. These shares are recorded at historical cost. The realized securities gain is included in the securities gain line of the noninterest income section of the Consolidated Statements of Income and the cash received is recorded in cash and due from banks in the assets section of the Consolidated Balance Sheets. In addition, VISA lowered its estimate of pending litigation settlements. Consequently, $1.3 million of the $2.5 million FIN No. 45 liability that was recorded in the fourth quarter was reversed in the first quarter of 2008. The reduction in the litigation liability is recorded in the other liabilities section of the Consolidated Balance Sheets and the reduction in litigation expense is recorded in the other expense line of the noninterest expense section of the Consolidated Statements of Income.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
In the fourth quarter of 2008, VISA, Discover Financial Services Inc., and MasterCard Inc. announced that they have settled the antitrust lawsuit and that they are working on the specific terms on the settlement. On December 22, 2008, VISA, Inc. announced that it had deposited $1.1 billion into the litigation escrow account as settlement for the Discover case. Under terms of the plan, Hancock Bank as a member bank bore its portion of the expense via a reduction in share count of Class B shares. There was no cash outlay required of Hancock Bank. Based on the funding and settlement with Discover, Hancock Bank reversed as of December 31, 2008, the portion of the VISA contingency reserve related to Discover of $0.3 million. The reduction in the litigation liability is recorded in the other liabilities section of the Consolidated Balance Sheets and the reduction in litigation expense is recorded in the other expense line of the noninterest expense section of the Consolidated Statements of Income. The settlement did not have a material impact on the Company’s results of operations or financial position. As of December 31, 2008, $0.9 million of the initial $2.5 million FIN No. 45 liability remained in the other liabilities section of the Consolidated Balance Sheets.
Legal Proceedings
On January 7, 2011, a purported shareholder of Whitney filed a lawsuit in the Civil District Court for the Parish of Orleans of the State of Louisiana captionedDe LaPouyade v. Whitney Holding Corporation, et al., No. 11-189, naming Whitney and members of Whitney’s board of directors as defendants. This lawsuit is purportedly brought on behalf of a putative class of Whitney’s common shareholders and seeks a declaration that it is properly maintainable as a class action. The lawsuit alleges that Whitney’s directors breached their fiduciary duties and/or violated Louisiana state law and that Whitney aided and abetted those alleged breaches of fiduciary duty by, among other things, (a) agreeing to consideration that undervalues Whitney, (b) agreeing to deal protection devices that preclude a fair sales process, (c) engaging in self-dealing, and (d) failing to protect against conflicts of interest. Among other relief, the plaintiff sought to enjoin the merger. The parties have reached a settlement in principle.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Commitments and Contingencies (continued)
On February 17, 2011, a complaint in intervention was filed by the Louisiana Municipal Police Employees Retirement System (“MPERS”) in theDe LaPouyade case. The MPERS complaint is substantially identical to and seeks to join in theDe LaPouyade complaint. The parties have reached a settlement in principle.
On February 7, 2011, another putative shareholder class action lawsuit,Realistic Partners v. Whitney Holding Corporation, et al., Case No. 2:11-cv-00256, was filed in the United States District Court for the Eastern District of Louisiana against Whitney, members of Whitney’s board of directors, and Hancock asserting violations of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty under Louisiana state law, and aiding and abetting breach of fiduciary duty by, among other things, (a) making material misstatements or omissions in the proxy statement, (b) agreeing to consideration that undervalues Whitney, (c) agreeing to deal protection devices that preclude a fair sales process, (d) engaging in self-dealing, and (e) failing to protect against conflicts of interest. Among other relief, the plaintiff sought to enjoin the merger. On February 24, 2011, the plaintiff moved for class certification. The parties have reached a settlement in principle.
On April 11, 2011, another putative shareholder class action lawsuit,Jane Doe v. Whitney Holding Corporation, et al., Case No. 2:11-cv-00794-ILRL-JCW, was filed in the United States District Court for the Eastern District of Louisiana against Whitney, members of Whitney’s board of directors, and the defendants’ insurance carrier asserting breach of fiduciary duty under Louisiana state law by, among other things, (a) agreeing to consideration that undervalues Whitney, (b) agreeing to deal protection devices that preclude a fair sales process, (c) engaging in self-dealing, and (d) failing to protect against conflicts of interest. Among other relief, the plaintiff sought to enjoin the merger. On April 20, 2011, this case was consolidated with theRealistic Partners case. The parties have reached a settlement in principle.
Like many other banks, Whitney Bank is a defendant in a class action lawsuit (Angelique LaCour v. Whitney Bank, D. (M.D. Fla.)) alleging that it improperly assessed overdraft fees on consumer and business deposit accounts owned by persons and entities that maintained those accounts, within the class period, at Whitney National Bank, or any of the entities that it acquired during the class period before its merger with Hancock Bank of Louisiana, due to the order in which it posted or processed debit card transactions against such deposit accounts. Plaintiff alleges that these posting practices resulted in excessive overdraft fees being imposed by the Company. While the Company admits no wrong doing, in order to fully and finally resolve the litigation and avoid the significant costs and expenses that would be involved in defending the case as well as the distraction caused by the litigation, Whitney Bank has entered into an agreement in principal whereby Whitney would pay the sum of $6.8 million in exchange for a full and complete release of all claims brought in the pending action. The proposed settlement is contingent on several factors, including final court approval and sufficient class participation. The Company is party to variousestablishes a liability for contingent litigation losses for any legal proceedings arisingmatter when payments associated with the claims become probable and the costs can be reasonably estimated. The Company accrued for the proposed settlement in the ordinary course4th quarter of business. In2011.
The Company accrues a liability for losses associated with litigation and regulatory matters when losses are both probable and estimable. Based on current knowledge, management does not believe that loss contingencies, if any, arising from other pending litigation and regulatory matters, including the opinion of management, after consultation with legal counsel, each matter is not expected tolitigation matters described above, will have a material adverse effect on the consolidated financial statementsposition or liquidity of the Company.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Commitments and Contingencies (continued)
Lease Commitments
HancockThe Company currently hasis obligated under a number of capital and non-cancelable operating leases for buildings and equipment that expire from 2009 to 2048. It is expected that certain leases will be renewed or equipment replaced as leases expire.equipment. Certain of these leases have escalation clauses that are being amortized on a straight-line basis over the term of the lease as required by SFAS No. 13, Accounting for Leases. and renewal options.
Future minimum lease payments for all non-cancelable capital and operating leases with initial or remaining terms in excess of one year or more consisted of the followingwere as follows at December 31, 20082011 (in thousands):
|
|
|
|
|
|
|
|
|
| Captial Leases |
| Operating Leases |
| ||
|
|
|
| ||||
2009 |
| $ | 152 |
| $ | 4,563 |
|
2010 |
|
| 81 |
|
| 3,890 |
|
2011 |
|
| 26 |
|
| 2,787 |
|
2012 |
|
| 28 |
|
| 2,324 |
|
2013 |
|
| 31 |
|
| 1,828 |
|
Thereafter |
|
| 83 |
|
| 17,191 |
|
|
|
|
| ||||
Total minimum lease payments |
| $ | 401 |
| $ | 32,583 |
|
|
|
|
|
|
| ||
Amounts representing interest |
|
| 110 |
|
|
|
|
|
|
|
|
|
| ||
Present value of net minimum lease payments |
| $ | 291 |
|
|
|
|
|
|
|
|
|
|
Captial Leases | Operating Leases | |||||||
2012 | $ | 60 | $ | 12,944 | ||||
2013 | 65 | 11,840 | ||||||
2014 | 9 | 11,230 | ||||||
2015 | 7 | 10,031 | ||||||
2016 | 1 | 9,145 | ||||||
Thereafter | 14 | 62,462 | ||||||
|
|
|
| |||||
Total minimum lease payments | $ | 156 | $ | 117,652 | ||||
|
| |||||||
Amounts representing interest | 40 | |||||||
|
| |||||||
Present value of net minimum lease payments | $ | 116 | ||||||
|
|
Rental expense approximated $5.7$11.9 million, $6.4$7.2 million and $5.0$4.5 million for the years ended December 31, 2008, 2007,2011, 2010, and 2006,2009, respectively. Rental expense is included in net occupancy expense on the Consolidated Statement of Income.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13.16. Other Noninterest Income and Other Noninterest Expense
The components of other noninterest income and other noninterest expense are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Other noninterest income: |
|
|
|
|
|
|
|
|
|
|
Income from bank owned life insurance |
| $ | 5,906 |
| $ | 4,912 |
| $ | 4,091 |
|
Outsourced check income |
|
| 284 |
|
| 2,288 |
|
| 2,801 |
|
Income on real estate option |
|
| — |
|
| — |
|
| 859 |
|
Safety deposit box income |
|
| 821 |
|
| 794 |
|
| 842 |
|
Appraisal fee income |
|
| 1,001 |
|
| 926 |
|
| 852 |
|
Other |
|
| 5,564 |
|
| 5,820 |
|
| 4,177 |
|
|
|
|
|
| ||||||
Total other noninterest income |
| $ | 13,576 |
| $ | 14,740 |
| $ | 13,622 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Other noninterest expense: |
|
|
|
|
|
|
|
|
|
|
Postage |
| $ | 3,902 |
| $ | 3,851 |
| $ | 3,731 |
|
Communication |
|
| 5,552 |
|
| 6,602 |
|
| 5,918 |
|
Data processing |
|
| 18,432 |
|
| 17,585 |
|
| 13,933 |
|
Legal and professional services |
|
| 12,718 |
|
| 15,234 |
|
| 13,968 |
|
Ad valorem and franchise taxes |
|
| 3,532 |
|
| 3,514 |
|
| 3,346 |
|
Printing and supplies |
|
| 1,833 |
|
| 2,252 |
|
| 1,997 |
|
Advertising |
|
| 6,917 |
|
| 7,032 |
|
| 6,642 |
|
Regulatory and other fees |
|
| 6,935 |
|
| 4,433 |
|
| 5,513 |
|
Miscellaneous expense |
|
| 3,705 |
|
| 10,522 |
|
| 9,927 |
|
Other expense |
|
| 8,182 |
|
| 7,208 |
|
| 8,117 |
|
|
|
|
|
| ||||||
Total other noninterest expense |
| $ | 71,708 |
| $ | 78,233 |
| $ | 73,092 |
|
|
|
|
|
|
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Other noninterest income: | ||||||||||||
Income from bank owned life insurance | $ | 9,311 | $ | 5,219 | $ | 5,527 | ||||||
Safety deposit box income | 1,591 | 841 | 794 | |||||||||
Appraisal fee income | 1,088 | 714 | 854 | |||||||||
Letter of credit fees | 4,193 | 1,451 | 1,309 | |||||||||
Other | 9,395 | 3,800 | 7,563 | |||||||||
|
|
|
|
|
| |||||||
Total other noninterest income | $ | 25,578 | $ | 12,025 | $ | 16,047 | ||||||
|
|
|
|
|
| |||||||
Other noninterest expense: | ||||||||||||
Ad valorem and franchise taxes | 5,330 | 3,568 | 3,621 | |||||||||
Printing and supplies | 5,608 | 2,380 | 1,911 | |||||||||
Other fees | 4,677 | 3,649 | 3,802 | |||||||||
ORE expense | 6,910 | 4,475 | 1,357 | |||||||||
Insurance expense | 7,490 | 2,010 | 1,905 | |||||||||
Travel | 3,590 | 2,137 | 1,152 | |||||||||
Entertainment and contributions | 3,954 | 1,651 | 1,346 | |||||||||
Miscellaneous losses | 8,781 | 1,080 | 1,663 | |||||||||
Tax credit investment amortization | 3,515 | — | — | |||||||||
Other expense | 18,081 | 8,942 | 5,634 | |||||||||
|
|
|
|
|
| |||||||
Total other noninterest expense | $ | 67,936 | $ | 29,892 | $ | 22,391 | ||||||
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14.16. Other Noninterest Income and Other Noninterest Expense (continued)
Included in noninterest expense are merger-related expenses related to the Whitney and People’s First acquisitions. See Note 2 for detail.
Note 17. Income Taxes
Income taxestax expense included in net income consisted of the following components (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Current federal |
| $ | 24,603 |
| $ | 19,150 |
| $ | 19,879 |
|
Current state |
|
| 2,028 |
|
| 1,209 |
|
| 2,066 |
|
|
|
|
|
| ||||||
Total current provision |
|
| 26,631 |
|
| 20,359 |
|
| 21,945 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Deferred federal |
|
| (4,675 | ) |
| 6,264 |
|
| 22,641 |
|
Deferred state |
|
| (337 | ) |
| 1,296 |
|
| 1,958 |
|
|
|
|
|
| ||||||
Total deferred provision |
|
| (5,012 | ) |
| 7,560 |
|
| 24,599 |
|
|
|
|
|
| ||||||
Total tax expense |
| $ | 21,619 |
| $ | 27,919 |
| $ | 46,544 |
|
|
|
|
|
|
Deferred income taxes reflect the net tax effects of temporary
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Current federal | $ | 7,400 | $ | 20,707 | $ | 15,816 | ||||||
Current state | 1,961 | 600 | (241 | ) | ||||||||
|
|
|
|
|
| |||||||
Total current provision | 9,361 | 21,307 | 15,575 | |||||||||
|
|
|
|
|
| |||||||
Deferred federal | 9,735 | (10,676 | ) | 6,753 | ||||||||
Deferred state | (1,032 | ) | (926 | ) | 591 | |||||||
|
|
|
|
|
| |||||||
Total deferred provision | 8,703 | (11,602 | ) | 7,344 | ||||||||
|
|
|
|
|
| |||||||
Total tax expense | $ | 18,064 | $ | 9,705 | $ | 22,919 | ||||||
|
|
|
|
|
|
Temporary differences arise between the carrying amountstax bases of assets or liabilities and liabilitiestheir carrying amounts for financial reporting purposes and the amounts used for incomepurposes. The expected tax reporting purposes.
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Income Taxes (continued)
effects when these differences are resolved are recorded currently as deferred tax assets or liabilities. Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
|
| |||||
|
| 2008 |
| 2007 |
| ||
|
|
|
| ||||
Deferred tax assets: |
|
|
|
|
|
|
|
Minimum pension liability |
| $ | 16,004 |
| $ | 8,787 |
|
Allowance for loan losses |
|
| 22,792 |
|
| 17,420 |
|
Compensation |
|
| 8,740 |
|
| 7,960 |
|
Capital loss |
|
| 1,405 |
|
| — |
|
Net operating loss |
|
| 182 |
|
| 182 |
|
Other |
|
| 1,496 |
|
| 1,405 |
|
|
|
|
| ||||
Gross deferred tax assets |
|
| 50,619 |
|
| 35,754 |
|
Valuation allowance |
|
| (85 | ) |
| (85 | ) |
|
|
|
| ||||
Net deferred tax assets |
|
| 50,534 |
|
| 35,669 |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
Fixed assets & intangibles |
|
| (26,432 | ) |
| (25,842 | ) |
Unrealized gain on securities available for sale |
|
| (10,479 | ) |
| (94 | ) |
Other |
|
| (7,804 | ) |
| (5,757 | ) |
|
|
|
| ||||
Gross deferred tax liabilities |
|
| (44,715 | ) |
| (31,693 | ) |
|
|
|
| ||||
Net deferred tax asset |
| $ | 5,819 |
| $ | 3,976 |
|
|
|
|
|
At December 31, 2008, Magna Insurance Company had a deferred tax asset net of a valuation allowance, $1.5 million, related to a federal net operating loss carryforward and capital loss carryforward. This net operating loss carryforward will expire in 2011 and the capital loss carryforward will expire in 2013. Also, the deferred tax assets above are net of an immaterial valuation allowance due to miscellaneous state net operating losses. Other than these items, no valuation allowance related to deferred tax assets has been recorded on December 31, 2008 and 2007, as management believes it is more than not that the remaining deferred tax assets will be fully utilized.
December 31, | ||||||||
2011 | 2010 | |||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 85,289 | $ | 30,356 | ||||
Employee compensation and benefits | 40,013 | 27,086 | ||||||
Loan purchase accounting adjustments | 241,412 | 126,536 | ||||||
Demand deposits | 2,308 | 1,218 | ||||||
Capital loss | — | 153 | ||||||
Tax credit carryforward | 25,465 | 663 | ||||||
Federal net operating loss | 24,524 | 104 | ||||||
State net operating loss | 2,958 | 1,274 | ||||||
Other | 23,128 | 1,637 | ||||||
|
|
|
| |||||
Gross deferred tax assets | 445,097 | 189,027 | ||||||
|
|
|
| |||||
Federal valuation allowance | — | (84 | ) | |||||
State valuation allowance | (2,415 | ) | (1,274 | ) | ||||
|
|
|
| |||||
Subtotal valuation allowance | (2,415 | ) | (1,358 | ) | ||||
|
|
|
| |||||
Net deferred tax assets | 442,682 | 187,669 | ||||||
|
|
|
| |||||
Deferred tax liabilities: | ||||||||
Fixed assets & intangibles | (135,987 | ) | (31,159 | ) | ||||
FHLB Stock Dividend | (1,119 | ) | (3,520 | ) | ||||
Securities | (55,642 | ) | (15,932 | ) | ||||
Deferred gain on acquisition | (13,232 | ) | (17,907 | ) | ||||
FDIC Indemnification Asset | (83,348 | ) | (104,785 | ) | ||||
Other | (7,594 | ) | (7,825 | ) | ||||
|
|
|
| |||||
Gross deferred tax liabilities | (296,922 | ) | (181,128 | ) | ||||
|
|
|
| |||||
Net deferred tax asset (liability) | $ | 145,760 | $ | 6,541 | ||||
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The reason for differences in
Note 17. Income Taxes (continued)
Reported income taxes reported compared totax expense differed from amounts computed by applying the statutory income tax rate of 35% to earnings before income taxes were as followsbecause of the following factors (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| ||||||||||||||||
|
|
| |||||||||||||||||
|
| 2008 |
| 2007 |
| 2006 |
| ||||||||||||
|
|
|
|
| |||||||||||||||
|
| Amount |
| % |
| Amount |
| % |
| Amount |
| % |
| ||||||
|
|
|
|
|
|
|
| ||||||||||||
Taxes computed at statutory rate |
| $ | 30,445 |
|
| 35% |
| $ | 35,634 |
|
| 35% |
| $ | 51,921 |
|
| 35% |
|
Increases (decreases) in taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal income tax benefit |
|
| 1,099 |
|
| 1% |
|
| 1,628 |
|
| 2% |
|
| 2,616 |
|
| 2% |
|
Tax-exempt interest |
|
| (5,827 | ) |
| -7% |
|
| (5,072 | ) |
| -5% |
|
| (4,311 | ) |
| -3% |
|
Bank owned life insurance |
|
| (2,159 | ) |
| -2% |
|
| (1,807 | ) |
| -2% |
|
| (1,417 | ) |
| -1% |
|
Tax credits |
|
| (3,514 | ) |
| -4% |
|
| (3,510 | ) |
| -3% |
|
| (2,357 | ) |
| -2% |
|
Other, net |
|
| 1,575 |
|
| 2% |
|
| 1,046 |
|
| 1% |
|
| 92 |
|
| — |
|
|
|
|
|
|
|
|
| ||||||||||||
Income tax expense |
| $ | 21,619 |
|
| 25% |
| $ | 27,919 |
|
| 28% |
| $ | 46,544 |
|
| 31% |
|
|
|
|
|
|
|
|
|
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Income Taxes (continued)
�� Due to recent tax legislation following Hurricane Katrina, tax credits available to
$33,188 | $33,188 | $33,188 | $33,188 | $33,188 | $33,188 | |||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||||||
Taxes computed at statutory rate | $ | 33,188 | 35 | % | $ | 21,669 | 35 | % | $ | 34,195 | 35 | % | ||||||||||||
Increases (decreases) in taxes resulting from: | ||||||||||||||||||||||||
State income taxes, net of federal income tax benefit | 689 | 1 | % | (410 | ) | -1 | % | 706 | 1 | % | ||||||||||||||
Tax-exempt interest | (6,892 | ) | -8 | % | (6,747 | ) | -11 | % | (6,703 | ) | -7 | % | ||||||||||||
Bank owned life insurance | (3,352 | ) | -4 | % | (1,918 | ) | -3 | % | (2,097 | ) | -2 | % | ||||||||||||
Tax credits | (8,384 | ) | -9 | % | (3,702 | ) | -6 | % | (3,923 | ) | -4 | % | ||||||||||||
Merger transaction costs | 2,178 | 3 | % | — | 0 | % | — | 0 | % | |||||||||||||||
Other, net | 637 | 1 | % | 813 | 1 | % | 741 | 1 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax expense | $ | 18,064 | 19 | % | $ | 9,705 | 15 | % | $ | 22,919 | 24 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2011, the Company forhad approximately $68 million in federal net operating loss carryforwards that originated primarily in the 20082009 and 20072010 tax year. The Company also had approximately $25 million in federal tax credit carryforwards that originated in the tax years include the Worker’s Opportunity Tax Creditfrom 2008 through 2010. The federal net operating loss carry forwards will begin expiring in 2029, and the Gulf Tax Credit.
FIN 48
federal tax credit carryforwards will begin to expire in 2028. The Company adopted FASB Interpretation No. 48, Accountingalso had approximately $72 million in state net operating loss carryforwards that originated in the tax years 2002 through 2011. A state valuation allowance has been established for Uncertaintyapproximately $57 million of the state net operating loss carryforwards. The state net operating losses will begin expiring in Income Taxes, An Interpretation2017.
The tax benefit of FASB Statement No. 109 (“FIN 48”),a position taken or expected to be taken in a tax return should be recognized when it is more likely than not that the position will be sustained on January 1, 2007 and determined that no adjustmentits technical merits. The liability for unrecognized tax benefits was required to retained earnings due to the adoption of this Interpretation. There were no material uncertain tax positionsimmaterial at December 31, 2008.2011 and 2010. The Company does not expect thatthe liability for unrecognized tax benefits willto change significantly increase or decrease within the next 12 months.
It is the Company’s policy to recognizeduring 2012. Hancock recognizes interest and penalties, if any, accrued relativerelated to unrecognizedincome tax benefitsmatters in income tax expense. As of December 31, 2008,expense, and the interest accrued is considered immaterial to the Company’s consolidated balance sheet.amounts recognized during 2011, 2010 and 2009 were insignificant.
The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various returns in the states where its banking offices are located. Its filed income taxThe returns for years before 2008 are no longer subject to examination by taxing authorities for years before 2005.authorities.
Note 15.18. Earnings Per Share
Following is aHancock calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating securities consist of unvested stock-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18. Earnings Per Share (continued)
A summary of the information used in the computation of earnings per common share follows (in thousands)thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
| Years Ended December 31, |
| |||||||
|
|
| ||||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
|
|
|
|
| ||||||
Net income available to common stockholders - used in computation of basic and diluted earnings per common share |
| $ | 65,366 |
| $ | 73,892 |
| $ | 101,802 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - used in computation of basic earnings per common share |
|
| 31,491 |
|
| 32,000 |
|
| 32,534 |
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock awards |
|
| 392 |
|
| 545 |
|
| 770 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding plus effect of dilutive securities - used in computation of diluted earnings per common share |
|
| 31,883 |
|
| 32,545 |
|
| 33,304 |
|
|
|
|
|
|
The Company had no shares of anti-dilutive options in 2008 and no shares of anti-dilutive options in 2007. There were 55,398 anti-dilutive options in 2006.
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Numerator: | ||||||||||||
Net income to common shareholders | $ | 76,759 | $ | 52,206 | $ | 74,775 | ||||||
|
|
|
|
|
| |||||||
Net income allocated to participating securities — basic and diluted | 866 | 320 | 247 | |||||||||
|
|
|
|
|
| |||||||
Net income allocated to common shareholders—basic and diluted | $ | 75,893 | $ | 51,886 | $ | 74,528 | ||||||
|
|
|
|
|
| |||||||
Denominator: | ||||||||||||
Weighted-average common shares—basic | 65,590 | 36,876 | 32,747 | |||||||||
Dilutive potential common shares | 480 | 178 | 187 | |||||||||
|
|
|
|
|
| |||||||
Weighted average common shares—diluted | 66,070 | 37,054 | 32,934 | |||||||||
|
|
|
|
|
| |||||||
Earnings per common share: | ||||||||||||
Basic | $ | 1.16 | $ | 1.41 | $ | 2.28 | ||||||
Diluted | $ | 1.15 | $ | 1.40 | $ | 2.26 |
HANCOCK HOLDING COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Potential common shares consist of employee and director stock options. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be anti-dilutive, i.e., increase earnings per share or reduce a loss per share. Weighted-average anti-dilutive potential common shares totalled 680,611, for the twelve months ended December 31, 2011. There were no anti-dilutive potential common shares in 2010 or 2009. |
Note 16.19. Segment Reporting
The Company’s primary operating segments are geographically divided into Hancock, Whitney, and Other. The Hancock segment coincides generally with the Mississippi (MS), Louisiana (LA), Florida (FL)Company’s Hancock Bank subsidiary and Alabama (AL) markets.the Whitney segment with its Whitney Bank subsidiary. Each bank segment offers commercial, consumer and mortgage loans and deposit services as well as certain other services, such as trust and treasury management services. Although the bank segments offer the same products and services, but isthey are managed separately due to different pricing, product demand, and consumer markets. The four segments offer commercial, consumerOn June 4, 2011, the Company completed its acquisition of Whitney Holding Corporation, the parent of Whitney National Bank. Whitney National Bank was merged into Hancock Bank of Louisiana and mortgage loansthe combined entity was renamed Whitney Bank. Prior to the merger the segment now called Whitney Bank was comprised generally of Hancock Bank Louisiana. As part of the merger, the assets and deposit services.liabilities of the former Hancock Bank of Alabama were transferred to Hancock Bank. In allthe following tables, the column “Other” segment includes additionalactivities of other consolidated subsidiaries of the Company: Hancock Investment Services, Inc., Hancock Insurance Agency, Inc., Harrison Finance Company, Magna Insurance Companythat provide investment services, insurance agency services, insurance underwriting and three real estate corporations owning land and buildings that house bank branches andvarious other facilities. services to third parties.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Segment Reporting (continued)
Following is selected information for the Company’s segments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended |
| |||||||||||||||||||
|
|
| ||||||||||||||||||||
|
| MS |
| LA |
| FL |
| AL |
| Other |
| Eliminations |
| Consolidated |
| |||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| (In thousands) |
| |||||||||||||||||||
Interest income |
| $ | 158,288 |
| $ | 145,546 |
| $ | 9,717 |
| $ | 5,088 |
| $ | 26,574 |
| $ | (9,776 | ) | $ | 335,437 |
|
Interest expense |
|
| 73,477 |
|
| 48,813 |
|
| 5,355 |
|
| 2,508 |
|
| 5,164 |
|
| (9,315 | ) |
| 126,002 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest income |
|
| 84,811 |
|
| 96,733 |
|
| 4,362 |
|
| 2,580 |
|
| 21,410 |
|
| (461 | ) |
| 209,435 |
|
Provision for loan losses |
|
| 11,922 |
|
| 15,715 |
|
| 2,419 |
|
| 1,393 |
|
| 5,336 |
|
| — |
|
| 36,785 |
|
Noninterest income |
|
| 55,640 |
|
| 46,231 |
|
| 1,633 |
|
| 702 |
|
| 23,606 |
|
| (34 | ) |
| 127,778 |
|
Depreciation and amortization |
|
| 10,778 |
|
| 3,555 |
|
| 484 |
|
| 377 |
|
| 567 |
|
| — |
|
| 15,761 |
|
Other noninterest expense |
|
| 87,318 |
|
| 68,340 |
|
| 6,894 |
|
| 4,634 |
|
| 30,613 |
|
| (117 | ) |
| 197,682 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Income before income taxes |
|
| 30,433 |
|
| 55,354 |
|
| (3,802 | ) |
| (3,122 | ) |
| 8,500 |
|
| (378 | ) |
| 86,985 |
|
Income tax expense (benefit) |
|
| 6,627 |
|
| 14,854 |
|
| (1,953 | ) |
| (1,163 | ) |
| 3,254 |
|
| — |
|
| 21,619 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income (loss) |
| $ | 23,806 |
| $ | 40,500 |
| $ | (1,849 | ) | $ | (1,959 | ) | $ | 5,246 |
| $ | (378 | ) | $ | 65,366 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 3,795,890 |
| $ | 3,008,320 |
| $ | 367,134 |
| $ | 155,862 |
| $ | 871,758 |
| $ | (1,031,710 | ) | $ | 7,167,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from affiliates |
| $ | 9,754 |
| $ | 8 |
| $ | 14 |
| $ | — |
| $ | — |
| $ | (9,776 | ) | $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from external customers |
| $ | 148,534 |
| $ | 145,538 |
| $ | 9,703 |
| $ | 5,088 |
| $ | 26,574 |
| $ | — |
| $ | 335,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended |
| |||||||||||||||||||
|
|
| ||||||||||||||||||||
|
| MS |
| LA |
| FL |
| AL |
| Other |
| Eliminations |
| Consolidated |
| |||||||
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| (In thousands) |
| |||||||||||||||||||
Interest income |
| $ | 179,775 |
| $ | 148,708 |
| $ | 9,583 |
| $ | 1,238 |
| $ | 25,769 |
| $ | (19,376 | ) | $ | 345,697 |
|
Interest expense |
|
| 79,189 |
|
| 66,699 |
|
| 5,023 |
|
| 462 |
|
| 7,779 |
|
| (18,916 | ) |
| 140,236 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest income |
|
| 100,586 |
|
| 82,009 |
|
| 4,560 |
|
| 776 |
|
| 17,990 |
|
| (460 | ) |
| 205,461 |
|
Provision for (reversal of) loan losses |
|
| (22 | ) |
| 3,744 |
|
| 427 |
|
| 400 |
|
| 3,044 |
|
| — |
|
| 7,593 |
|
Noninterest income |
|
| 53,787 |
|
| 37,035 |
|
| 883 |
|
| 56 |
|
| 28,967 |
|
| (42 | ) |
| 120,686 |
|
Depreciation and amortization |
|
| 9,665 |
|
| 3,323 |
|
| 452 |
|
| 54 |
|
| 545 |
|
| — |
|
| 14,039 |
|
Other noninterest expense |
|
| 89,626 |
|
| 70,984 |
|
| 5,610 |
|
| 1,567 |
|
| 36,511 |
|
| (1,594 | ) |
| 202,704 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Income before income taxes |
|
| 55,104 |
|
| 40,993 |
|
| (1,046 | ) |
| (1,189 | ) |
| 6,857 |
|
| 1,092 |
|
| 101,811 |
|
Income tax expense (benefit) |
|
| 15,788 |
|
| 10,458 |
|
| (603 | ) |
| (399 | ) |
| 2,675 |
|
| — |
|
| 27,919 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income (loss) |
| $ | 39,316 |
| $ | 30,535 |
| $ | (443 | ) | $ | (790 | ) | $ | 4,182 |
| $ | 1,092 |
| $ | 73,892 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 3,351,986 |
| $ | 2,512,200 |
| $ | 168,790 |
| $ | 48,619 |
| $ | 815,011 |
| $ | (840,627 | ) | $ | 6,055,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from affiliates |
| $ | 19,327 |
| $ | — |
| $ | — |
| $ | 49 |
| $ | — |
| $ | (19,376 | ) | $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from external customers |
| $ | 160,448 |
| $ | 148,708 |
| $ | 9,583 |
| $ | 1,189 |
| $ | 25,769 |
| $ | — |
| $ | 345,697 |
|
Year Ended December 31, 2011 | ||||||||||||||||||||
Hancock | Whitney | Other | Eliminations | Consolidated | ||||||||||||||||
Interest income | $ | 195,230 | $ | 380,072 | $ | 17,892 | $ | (990 | ) | $ | 592,204 | |||||||||
Interest expense | (39,056 | ) | (29,538 | ) | (2,905 | ) | 528 | (70,971 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net interest income | 156,174 | 350,534 | 14,987 | (462 | ) | 521,233 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Provision for loan losses | (17,216 | ) | (17,550 | ) | (3,966 | ) | — | (38,732 | ) | |||||||||||
Noninterest income | 76,846 | 96,349 | 32,761 | 471 | 206,427 | |||||||||||||||
Depreciation and amortization | (10,649 | ) | (13,123 | ) | (834 | ) | — | (24,606 | ) | |||||||||||
Other noninterest expense | (163,088 | ) | (372,034 | ) | (34,894 | ) | 608 | (569,408 | ) | |||||||||||
Securities transactions | (51 | ) | — | (40 | ) | — | (91 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income before income taxes | 42,016 | 44,176 | 8,014 | 617 | 94,823 | |||||||||||||||
Income tax expense (benefit) | 6,513 | 7,584 | 3,967 | — | 18,064 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) | $ | 35,503 | $ | 36,592 | $ | 4,047 | $ | 617 | $ | 76,759 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Goodwill | $ | 23,386 | $ | 623,294 | $ | 4,482 | $ | — | $ | 651,162 | ||||||||||
Total assets | $ | 4,934,003 | $ | 14,792,788 | $ | 2,462,281 | $ | (2,414,976 | ) | $ | 19,774,096 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total interest income from affiliates | $ | 3,946 | $ | 480 | $ | — | $ | (4,426 | ) | $ | — | |||||||||
Total interest income from external customers | $ | 191,284 | $ | 379,592 | $ | 17,892 | $ | 3,436 | $ | 592,204 |
Year Ended December 31, 2010 | ||||||||||||||||||||
Hancock | Whitney | Other | Eliminations | Consolidated | ||||||||||||||||
Interest income | $ | 203,222 | $ | 132,205 | $ | 22,122 | $ | (4,991 | ) | $ | 352,558 | |||||||||
Interest expense | (61,384 | ) | (21,198 | ) | (4,294 | ) | 4,531 | (82,345 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net interest income | 141,838 | 111,007 | 17,828 | (460 | ) | 270,213 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Provision for loan losses | (37,845 | ) | (22,554 | ) | (5,592 | ) | — | (65,991 | ) | |||||||||||
Noninterest income | 67,940 | 43,331 | 25,745 | (67 | ) | 136,949 | ||||||||||||||
Depreciation and amortization | (9,755 | ) | (3,003 | ) | (767 | ) | — | (13,525 | ) | |||||||||||
Other noninterest expense | (152,956 | ) | (81,665 | ) | (31,244 | ) | 130 | (265,735 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income before income taxes | 9,222 | 47,116 | 5,970 | (397 | ) | 61,911 | ||||||||||||||
Income tax expense (benefit) | (5,101 | ) | 12,373 | 2,433 | — | 9,705 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) | $ | 14,323 | $ | 34,743 | $ | 3,537 | $ | (397 | ) | $ | 52,206 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Goodwill | $ | 23,386 | $ | 33,763 | $ | 4,482 | $ | — | $ | 61,631 | ||||||||||
Total assets | $ | 5,247,383 | $ | 2,906,365 | $ | 1,093,565 | $ | (1,108,986 | ) | $ | 8,138,327 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total interest income from affiliates | $ | 5,017 | $ | — | $ | — | $ | (5,017 | ) | $ | — | |||||||||
Total interest income from external customers | $ | 198,205 | $ | 132,205 | $ | 22,122 | $ | 26 | $ | 352,558 |
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16.19. Segment Reporting (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended |
| ||||||||||||||||
|
|
| |||||||||||||||||
|
| MS |
| LA |
| FL |
| Other |
| Eliminations |
| Consolidated |
| ||||||
|
|
|
|
|
|
|
| ||||||||||||
|
| (In thousands) |
| ||||||||||||||||
Interest income |
| $ | 193,461 |
| $ | 136,814 |
| $ | 8,108 |
| $ | 20,270 |
| $ | (14,590 | ) | $ | 344,063 |
|
Interest expense |
|
| 72,154 |
|
| 52,833 |
|
| 2,934 |
|
| 6,103 |
|
| (14,161 | ) |
| 119,863 |
|
|
|
|
|
|
|
|
| ||||||||||||
Net interest income |
|
| 121,307 |
|
| 83,981 |
|
| 5,174 |
|
| 14,167 |
|
| (429 | ) |
| 224,200 |
|
Provision for (reversal of) loan losses |
|
| (19,811 | ) |
| (4,446 | ) |
| 834 |
|
| 2,661 |
|
| — |
|
| (20,762 | ) |
Noninterest income |
|
| 50,260 |
|
| 29,995 |
|
| 384 |
|
| 25,966 |
|
| (105 | ) |
| 106,500 |
|
Depreciation and amortization |
|
| 6,986 |
|
| 2,611 |
|
| 319 |
|
| 527 |
|
| — |
|
| 10,443 |
|
Other noninterest expense |
|
| 92,156 |
|
| 61,872 |
|
| 5,210 |
|
| 33,479 |
|
| (44 | ) |
| 192,673 |
|
|
|
|
|
|
|
|
| ||||||||||||
Income before income taxes |
|
| 92,236 |
|
| 53,939 |
|
| (805 | ) |
| 3,466 |
|
| (490 | ) |
| 148,346 |
|
Income tax expense (benefit) |
|
| 23,074 |
|
| 24,035 |
|
| (603 | ) |
| (796 | ) |
| 834 |
|
| 46,544 |
|
|
|
|
|
|
|
|
| ||||||||||||
Net income (loss) |
| $ | 69,162 |
| $ | 29,904 |
| $ | (202 | ) | $ | 4,262 |
| $ | (1,324 | ) | $ | 101,802 |
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 3,454,274 |
| $ | 2,365,422 |
| $ | 158,836 |
| $ | 807,912 |
| $ | (821,879 | ) | $ | 5,964,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from affiliates |
| $ | 13,895 |
| $ | 6 |
| $ | 260 |
| $ | — |
| $ | (14,161 | ) | $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from external customers |
| $ | 179,566 |
| $ | 136,808 |
| $ | 7,848 |
| $ | 20,270 |
| $ | (429 | ) | $ | 344,063 |
|
Year Ended December 31, 2009 | ||||||||||||||||||||
Hancock | Whitney | Other | Eliminations | Consolidated | ||||||||||||||||
Interest income | $ | 167,114 | $ | 138,767 | $ | 23,931 | $ | (6,085 | ) | $ | 323,727 | |||||||||
Interest expense | (66,210 | ) | (29,772 | ) | (4,942 | ) | 5,624 | (95,300 | ) | |||||||||||
|
|
|
|
|
|
|
|
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| |||||||||||
Net interest income | 100,904 | 108,995 | 18,989 | (461 | ) | 228,427 | ||||||||||||||
Provision for loan losses | (29,513 | ) | (18,398 | ) | (6,679 | ) | — | (54,590 | ) | |||||||||||
Noninterest income | 90,109 | 42,321 | 25,177 | (280 | ) | 157,327 | ||||||||||||||
Depreciation and amortization | (11,485 | ) | (3,467 | ) | (597 | ) | — | (15,549 | ) | |||||||||||
Other noninterest expense | (106,860 | ) | (81,850 | ) | (29,310 | ) | 99 | (217,921 | ) | |||||||||||
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Income before income taxes | 43,155 | 47,601 | 7,580 | (642 | ) | 97,694 | ||||||||||||||
Income tax expense (benefit) | 9,149 | 12,866 | 904 | — | 22,919 | |||||||||||||||
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Net income (loss) | $ | 34,006 | $ | 34,735 | $ | 6,676 | $ | (642 | ) | $ | 74,775 | |||||||||
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Goodwill | $ | 23,386 | $ | 33,763 | $ | 5,128 | $ | — | $ | 62,277 | ||||||||||
Total assets | $ | 5,789,737 | $ | 2,890,341 | $ | 1,114,826 | $ | (1,097,821 | ) | $ | 8,697,083 | |||||||||
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Total interest income from affiliates | $ | 6,085 | $ | — | $ | — | $ | (6,085 | ) | $ | — | |||||||||
Total interest income from external customers | $ | 161,029 | $ | 138,767 | $ | 23,931 | $ | — | $ | 323,727 |
Consolidated other intangible assets totaled $211.1 million and $13.2 million, respectively, at December 31, 2011 and 2010. The Companybalance at the end of 2011 consisted of core deposit intangibles of $178.4 million and other identifiable intangible assets of $32.7 million. The total was allocated administrative charges among its Louisiana, Florida, Alabama and Other segments and its Mississippi$201.4 million to the Whitney segment, $9.4 million to the Hancock segment, and the Parent Company. This allocation was based on an analysis of costs for 2008. The administrative charges allocated$0.3 million to the Louisiana segment were $18.9Other segment. Total other intangible assets at the end of 2010 consisted of core deposit intangibles of $13.2 million in 2008, $18.0and other identifiable intangibles assets of $0.3 million. The 2010 total was allocated $1.7 million in 2007, and $11.8to Whitney, $11.1 million in 2006. The Florida segment received $0.3 million in allocated administrative charges in 2008, $0.2 million in 2007, and $0.2 million in 2006. The administrative charges allocated to the Alabama segment were $0.05 million in 2008 and $0 in 2007. The Other segment’s allocated charges were $1.2 million in 2008, $1.0 million in 2007Hancock, and $0.7 million in 2006.to the Other segment. The aforementioned administrative charges were allocated from the Mississippi segment ($20.3 millionincrease in 2008, $19.2 million in 2007, and $12.7 million in 2006). Subsidiaries of the Mississippi segment were included in the cost allocation process beginning in 2004. Administrative charges allocated from the Parent Company were $0.1 million in 2008, $0.1 million in 2007 and $0.3 million in 2006.
Goodwill and other intangible assets assignedallocated to Whitney in 2011 was related to the Mississippi segment totaled approximately $13.1 million, of which $12.1 million represented goodwill and $1.0 million represented core deposit intangibles at December 31, 2008. At December 31, 2007, goodwill and other intangible assets assigned to the Mississippi segment totaled approximately $13.5 million, of which $12.1 million represented goodwill and $1.4 million represented core deposit intangibles. The related core deposit amortization was approximately $0.4 millionWhitney acquisition as detailed in 2008, $0.4 million in 2007, and $0.4 million in 2006.Note 2.
Goodwill and other intangible assets assigned to the Louisiana segment totaled approximately $36.7 million, of which $33.8 million represented goodwill and $2.9 million represented core deposit intangibles at December 31, 2008. Goodwill and other intangible assets assigned to the Louisiana segment totaled approximately $37.3 million, of which $33.8 million represented goodwill and $3.5 million represented core deposit intangibles at December 31, 2007. The related core deposit amortization was approximately $0.6 million in 2008, $0.7 million in 2007, and $0.8 million in 2006.
Goodwill and other intangible assets assigned to the Florida segment totaled approximately $11.9 million, of which $11.3 million represented goodwill and $0.6 million represented core deposit intangibles, at December 31, 2008. At December 31, 2007, goodwill and other intangible assets assigned to the Florida segment totaled approximately $12.0 million, of which $11.3 million represented goodwill and $0.7 million represented core deposit intangibles. The related core deposit amortization was approximately $0.1 million in 2008, $0.1 million in 2007 and $0.1 million in 2006.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16. Segment Reporting (continued)
Other intangible assets are also assigned to subsidiaries that are included in the “Other” category in the table above and totaled $6.7 million at December 31, 2008 and $7.2 million at December 31, 2007. At December 31, 2008, those intangibles consist of goodwill, $5.1 million; value of insurance expirations, approximately $1.5 million; non-compete agreements, approximately $0.04 million and trade name of $0.03 million.
The Company performed a fair value based impairment test of goodwill and determined that the fair values of these reporting units exceeded their carrying values at December 2008, 2007 and 2006. No impairment loss, therefore, was recorded.
Note 17.20. Condensed Parent Company Information
The following condensed financial information reflectsstatements reflect the accounts and transactions of Hancock Holding Company (parent company only) for the dates indicatedonly (in thousands):
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| December 31, |
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| 2008 |
| 2007 |
| ||
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| ||||
Assets: |
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Cash |
| $ | 4,053 |
| $ | 3,843 |
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Investment in bank subsidiaries |
|
| 592,275 |
|
| 540,071 |
|
Investment in non-bank subsidiaries |
|
| 12,807 |
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| 10,552 |
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Due from subsidiaries and other assets |
|
| 1,115 |
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| 1,616 |
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| ||||
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| $ | 610,250 |
| $ | 556,082 |
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Liabilities and Stockholders’ Equity: |
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Due to subsidiaries |
| $ | 198 |
| $ | 1,281 |
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Other liabilities |
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| 553 |
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| 614 |
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Stockholders’ equity |
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| 609,499 |
|
| 554,187 |
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| ||||
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| $ | 610,250 |
| $ | 556,082 |
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Condensed Balance Sheets | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
Assets: | ||||||||
Cash | $ | 28,015 | $ | 787 | ||||
Investment in bank subsidiaries | 2,358,368 | 833,965 | ||||||
Securities available for sale | 103,788 | — | ||||||
Investment in non-bank subsidiaries | 10,222 | 20,798 | ||||||
Due from subsidiaries and other assets | 9,014 | 1,567 | ||||||
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$ | 2,509,407 | $ | 857,117 | |||||
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Liabilities and Stockholders’ Equity: | ||||||||
Due to subsidiaries | $ | 158 | $ | 569 | ||||
Long term debt | 140,000 | — | ||||||
Other liabilities | 2,086 | — | ||||||
Stockholders’ equity | 2,367,163 | 856,548 | ||||||
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$ | 2,509,407 | $ | 857,117 | |||||
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Condensed Statements of Income | ||||||||||||
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Operating Income | ||||||||||||
From subsidiaries | ||||||||||||
Dividends received from bank subsidiaries | $ | 123,100 | $ | 41,500 | $ | 36,700 | ||||||
Dividends received from non-bank subsidiaries | — | — | �� | — | ||||||||
Equity in earnings of subsidiaries greater than (less than) dividends received | (43,721 | ) | 10,471 | 38,161 | ||||||||
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Total operating income | 79,379 | 51,971 | 74,861 | |||||||||
Other (expense) income | (2,592 | ) | 342 | (178 | ) | |||||||
Income tax provision (benefit) | 28 | 107 | (92 | ) | ||||||||
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| |||||||
Net income | $ | 76,759 | $ | 52,206 | $ | 74,775 | ||||||
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17.20. Condensed Parent Company Information (continued)
Condensed Statements of Income
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| Years Ended December 31, |
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| 2008 |
| 2007 |
| 2006 |
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Operating Income |
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From subsidiaries |
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Dividends received from bank subsidiaries |
| $ | 43,700 |
| $ | 90,400 |
| $ | 19,416 |
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Dividends received from non-bank subsidiaries |
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| — |
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| — |
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| 537 |
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Equity in earnings of subsidiaries greater than (less than) dividends received |
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| 21,646 |
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| (18,214 | ) |
| 80,523 |
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Total operating income |
|
| 65,346 |
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| 72,186 |
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| 100,476 |
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Other (expense) income |
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| (19 | ) |
| 1,473 |
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| (407 | ) |
Income tax provision (benefit) |
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| (39 | ) |
| (233 | ) |
| (1,733 | ) |
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Net income |
| $ | 65,366 |
| $ | 73,892 |
| $ | 101,802 |
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Condensed Statements of Cash Flows
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| Years Ended December 31, |
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| 2007 |
| 2006 |
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Cash flows from operating activities - principally dividends received from subsidiaries |
| $ | 35,493 |
| $ | 93,886 |
| $ | 26,567 |
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Cash flows from investing activities - principally contribution of capital to subsidiary |
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| (20,500 | ) |
| (10,000 | ) |
| — |
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Net cash used by investing activities |
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| (20,500 | ) |
| (10,000 | ) |
| — |
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Cash flows from financing activities: |
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Dividends paid to stockholders |
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| (30,453 | ) |
| (30,957 | ) |
| (29,311 | ) |
Stock transactions, net |
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| 15,670 |
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| (55,755 | ) |
| 6,252 |
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Net cash used by financing activities |
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| (14,783 | ) |
| (86,712 | ) |
| (23,059 | ) |
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Net increase (decrease) in cash |
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| 210 |
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| (2,826 | ) |
| 3,508 |
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Cash, beginning of year |
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| 3,843 |
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| 6,669 |
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| 3,161 |
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Cash, end of year |
| $ | 4,053 |
| $ | 3,843 |
| $ | 6,669 |
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective as of January 1, 2009, the Board of Directors of Hancock Holding Company (“the Company”) has appointed PricewaterhouseCoopers, a firm of independent certified public accountants, as auditors for the fiscal year ending December 31, 2009, and until their successors are selected. The decision to change auditors was approved by the Audit Committee of the Company’s Board of Directors during its December, 2008 meeting.
Years Ended December 31, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Cash flows from operating activities—principally dividends received from subsidiaries | $ | 113,355 | $ | 31,241 | $ | 36,743 | ||||||
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Net cash (used in) provided by operating activities | 113,355 | 31,241 | 36,743 | |||||||||
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Cash flows from investing activities—contribution of capital to subsidiary | (233 | ) | (454 | ) | (181,798 | ) | ||||||
Purchase of available for sale securities | (103,432 | ) | — | — | ||||||||
Proceeds of securities available for sale | 1,396 | — | — | |||||||||
Cash paid in connection with business combination | (275,563 | ) | — | — | ||||||||
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Net cash used by investing activities | (377,832 | ) | (454 | ) | (181,798 | ) | ||||||
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Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of long term debt | 140,000 | — | — | |||||||||
Dividends paid to stockholders | (70,617 | ) | (36,182 | ) | (32,011 | ) | ||||||
Stock transactions, net | 222,322 | 5,876 | 173,319 | |||||||||
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Net cash used by financing activities | 291,705 | (30,306 | ) | 141,308 | ||||||||
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Net increase (decrease) in cash | 27,228 | 481 | (3,747 | ) | ||||||||
Cash, beginning of year | 787 | 306 | 4,053 | |||||||||
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Cash, end of year | $ | 28,015 | $ | 787 | $ | 306 | ||||||
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The Company has been advised that neither the firm nor any of its partners has any direct or any material indirect financial interest in the securities of the Company or any of its subsidiaries, except as auditors and consultants on accounting procedures and tax matters.
Additionally, during the two fiscal years ended December 31, 2008 and 2007, there were no consultations between the Company and PricewaterhouseCoopers regarding: (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements and either a written report was provided to the Company or oral advice was provided that the new accountant concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue (ii) any matter that was the subject of a disagreement under Item 304(a)(1)(iv) of Regulation S-K, or a reportable event under Item 304(a)(1)(v) of Regulation S-K; or (iii) any other matter.
Although not required to do so, the Company’s Board of Directors has chosen to submit its appointment of PricewaterhouseCoopers for ratification by the Company’s shareholders. This matter is being submitted to the Company’s shareholders for ratification during the Company’s annual meeting to be held on March 26, 2009 as more fully described in the Company’s proxy statement to be filed with the Commission.
ITEM 9A. | CONTROLS AND PROCEDURES |
No Adverse Opinion or Disagreement
The audit reports of KPMG LLP on the consolidated financial statements of the Company as of and for the years ended December 31, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainity, audit scope or accounting principles, except as follows: KPMG LLP’s report on the consolidated financial statements of Hancock Holding Company as of and for the years ended December 31, 2008 and 2007, contained a separate paragraph stating that “As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for defined benefit pension postretirement benefit plans effective December 31, 2006”, and additionally as of and for the year ended December 31, 2007, contained a separate paragrph stating that “As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for share based payments and evaluating prior year misstatements effective January 1, 2006”. The audit reports of KPMG LLP on the effectiveness of internal control over financial reporting as of December 31, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of the two fiscal years ended December 31, 2008 and 2007 and the subsequent period and through the current period, there were no: (1) disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to their satisfaction, would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As defined by the Securities and Exchange Commission in Exchange Act Rules 13a-14(c) and 15d-14(c), a company’s “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within time periods specified in the Commission’s rules and forms.
As of December 31, 2008,2011, (the “Evaluation Date”), our Chief Executive Officers and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as defined in the Exchange Act Rules. Based on their evaluation, our Chief Executive Officers and Chief Financial Officer have concluded Hancock’s disclosure controls and procedures are sufficiently effective to ensure that material information relating to us and required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.
Internal Control over Financial Reporting
The management of Hancock Holding Company has prepared the consolidated financial statements and other information in our Annual Report in accordance with accounting principles generally accepted in the United States of America and is responsible for its accuracy. The financial statements necessarily include amounts that are based on management’s best estimates and judgments. In meeting its responsibility, management relies on internal accounting and related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in our financial records and to safeguard our assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal control system.
Management is responsible for establishing and maintaining the adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13 – 15(f). Under the supervision and with the participation of management, including our principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). This section relates to management’s evaluation of internal control over financial reporting including controls over the preparation of the schedules equivalent to the basic financial statements and compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the effectiveness of internal controls. There were no changes in Hancock’s internal control over financial reporting at December 31, 2011 that materially affected, or were reasonable likely to materially affect Hancock’s internal control over financial reporting.
Based on our evaluation under the framework inInternal Control – Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2008. KPMG,2011. PricewatershouseCoopers LLP, under Auditing Standard No. 5, does not express an opinion on management’s assessment as occurred under Auditing Standard No. 2. Under Auditing Standard No. 5 management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. KPMG’sPricewatershouseCoopers’ responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on their audit.
ITEM 9B. | OTHER INFORMATION |
None
Pursuant to General Instruction G (3), information on directors and executive officers of the Registrant will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on Pursuant to General Instructions G (3), information on executive compensation will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on Pursuant to General Instructions G (3), information on security ownership of certain beneficial owners and management will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on Pursuant to General Instructions G (3), information on certain relationships and related transactions will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on Pursuant to General Instructions G (3), information on principal accountant fees and services will be incorporated by reference from the Company’s Definitive Proxy Statement for the annual meeting to be held on (a) The following documents are filed as part of this report: 1. The following consolidated financial statements of Hancock Holding Company and subsidiaries are filed as part of this report under Item 8 – Financial Statements and Supplementary Data: Consolidated balance sheets – December 31, 2011 and 2010 Consolidated statements of income – Years ended December 31, 2011, 2010, and 2009 Consolidated statements of changes in stockholders’ equity – Years ended December 31, 2011, 2010, and 2009 Consolidated statements of cash flows –Years ended December 31, 2011, 2010, and 2009 Notes to consolidated financial statements – December 31, 2011 (pages 66 to 124) 2. Financial schedules required to be filed by Item 8 of this form, and by Item 15(d) below: The schedules to the consolidated financial statements set forth by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.ITEM 9B. OTHER INFORMATION NoneITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE March 26, 2009.ITEM 11. EXECUTIVE COMPENSATIONApril 5, 2012.ITEM 11. EXECUTIVE COMPENSATION March 26, 2009.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSApril 5, 2012.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS March 26, 2009.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEApril 5, 2012.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE March 26, 2009.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESApril 5, 2012.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES March 26, 2009.April 5, 2012.ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Consolidated balance sheets – December 31, 2008 and 2007Consolidated statements of income – Years ended December 31, 2008, 2007, and 2006Consolidated statements of stockholders’ equity – Years ended December 31, 2008, 2007, and 2006Consolidated statements of cash flows –Years ended December 31, 2008, 2007, and 2006Notes to consolidated financial statements – December 31, 2008 (pages 57 to 92)
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3. | Exhibits required to be filed by Item 601 of Regulation S-K, and by Item 15(b) below. | ||
(b) Exhibits:
All other financial statements and schedules are omitted as the required information is inapplicable or the required information is presented in the consolidated financial statements or related notes.
(a) | 3. Exhibits: |
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| |
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| Description | |||||
2.1 | Agreement and Plan of Merger between Hancock Holding Company and Lamar Capital Corporation dated February 21, 2001 (Appendix C to the Prospectus contained in the S-4 Registration Statement 333-60280 filed on May 4, 2001 and incorporated by reference herein). | |||||
3.1 | Amended and Restated Articles of Incorporation dated November 8, 1990 (filed as Exhibit 3.1 to the Registrant’s Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). |
| ||||||
3.2 | Amended and Restated Bylaws | |||||
3.3 | Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991). | |||||
3.4 | Articles of Correction, filed with Mississippi Secretary of State on November 15, 1991 (filed as Exhibit 4.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991). | |||||
3.5 | Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). | |||||
3.6 | Articles of Correction, filed with Mississippi Secretary of State on March 2, 1992 (filed as Exhibit 3.6 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). | |||||
3.7 | Articles of Amendment to the Articles of Incorporation adopted February 20, 1997 (filed as Exhibit 3.7 to the Registrant’s Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). | |||||
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| |||||
| Specimen stock certificate (reflecting change in par value from $10.00 to $3.33, effective March 6, 1989) (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 1989 and incorporated herein by reference). | |||||
4.2 | By executing this Form 10-K, the Registrant hereby agrees to deliver to the Commission upon request copies of instruments defining the rights of holders of long-term debt of the Registrant or its consolidated subsidiaries or its unconsolidated subsidiaries for which financial statements are required to be filed, where the total amount of such securities authorized subsidiaries on a consolidated basis. | |||||
*10.1 | 1996 Long Term Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Form 10-K for the year ended December 31, 1995, and incorporated herein by reference). | |||||
*10.2 | Description of Hancock Bank Executive Supplemental Reimbursement Plan, as amended (filed as Exhibit 10.2 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). | |||||
*10.3 | Description of Hancock Bank Automobile Plan (filed as Exhibit 10.3 to the |
*10.4 | Description of Deferred Compensation Arrangement for Directors (filed as Exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). | |||||
| Hancock Holding Company 2005 Long-Term Incentive Plan, filed as Appendix “A” to the Company’s Definitive Proxy Statement filed with the Commission on February 28, 2005 and incorporated herein by reference. | |||||
| Hancock Holding Company Nonqualified Deferred Compensation Plan, filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 21, 2005 and incorporated herein by reference. | |||||
10.7 | Shareholder Rights Agreement dated as of February 21, 1997, between Hancock Holding Company and Hancock Bank, as Rights Agent (as extended by the Company), attached as Exhibit 1 to Form 8-A12G filed with the Commission on February 27, 1997, as extended by Amendment No. 1 filed with the |
Commission as Exhibit 4.1 to Form 8-K filed with the Commission on February 20, 2007, both of which are incorporated herein by reference. | ||||||
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10.8 | Purchase and Assumption Agreement (“Agreement”) with the Federal Deposit Insurance Corporation, Receiver of Peoples First Community Bank, Panama City Florida (“PCFB”) and the Federal Deposit Insurance Corporation acting in its corporate capacity (“FDIC”) incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed February 17, 2010. | |||||
10.9 | Agreement and Plan of Merger between Hancock Holding Company and Whitney Holding Corporation dated as of December 21, 2010 (Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 23, 2010 and incorporated herein by reference.) | |||||
*10.10 | Hancock Holding Company 2010 Employee Stock Purchase Plan, filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 5, 2011 and incorporated herein by reference. | |||||
10.11 | Term Loan Agreement among the Company, certain lenders from time to time, and Suntrust Bank filed as Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2011 and incorporated herein by reference. | |||||
*10.12 | Form of Change in Control Employment Agreement between certain bank subsidiaries of the Company and certain Named Executive Officers. | |||||
*10.13 | Retention Agreement dated March 1, 2011 between Hancock Bank of Louisiana (n/k/a Whitney Bank) and Joseph S. Exnicious. | |||||
*10.14 | Retention Agreement dated March 31, 2011 between Hancock Bank of Louisiana (n/k/a Whitney Bank) and Suzanne Thomas. | |||||
21 | Subsidiaries of Hancock Holding Company. | |||||
22 | Proxy Statement for the Registrant’s Annual Meeting of Shareholders on March | |||||
| Consent of | |||||
31.1 | Certification of Chief Executive Officers pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | |||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | |||
32.1 | Certification of Chief Executive Officers Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
99.1 | Chief Executive Officer Certification - IFR Section 30.15 | |||
99.2 | Chief Financial Officer Certification - IFR Section 30.15 | |||
101.INS | XBRL Instance Document | |||
101.SCH | XBRL Schema Document | |||
101.CAL | XBRL Calculation Document | |||
101.LAB | XBRL Label Link Document | |||
101.PRE | XBRL Presenation Linkbase Document | |||
101.DEF | XBRL Definition Linkbase Document |
* | Compensatory plan or arrangement. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HANCOCK HOLDING COMPANY | ||||||
Registrant | ||||||
Date February 28, 2012 |
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By: |
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| /s/ Carl J. Chaney | |||||
| Carl J. Chaney | ||||||
President & Chief Executive Officer | |||||||
Director | |||||||
Date February 28, 2012 | |||||||
By: | |||||||
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| /s/ John M. Hairston | |||||
| John M. Hairston | ||||||
Chief Executive Officer & Chief Operating Officer | |||||||
Director | |||||||
Date February 28, 2012 | |||||||
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| /s/ Michael M. Achary | |||||
| Michael M. Achary | ||||||
Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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/s/ James B. Estabrook, |
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James B. Estabrook, Jr. | Chairman of the Board, Director | February 28, 2012 | |||
/s/ Alton G. Bankston Alton G. Bankston | Director | February 28, 2012 | |||
/s/ Frank E. Bertucci Frank E. Bertucci | Director | February 28, 2012 | |||
/s/ Don P. Descant Don P. Descant | Director | February 28, 2012 | |||
/s/ Jerry Levens Jerry Levens | Director | February 28, 2012 | |||
/s/ James H. Horne |
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James H. Horne | Director | February 28, 2012 | |||
(signatures continued) |
/s/ John H. Pace |
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John H. Pace | Director | February 28, 2012 |
(signatures continued)
/s/ Christine L. Pickering |
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Christine L. Pickering | Director | February 28, 2012 | |||
/s/ Robert W. Roseberry |
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Robert W. Roseberry | Director | February 28, 2012 | |||
/s/ Anthony J. Topazi |
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Anthony J. Topazi | Director | February 28, 2012 | |||
/s/ Randy Hanna Randy Hanna | Director | February 28, 2012 | |||
/s/ Thomas Olinde Thomas Olinde | Director | February 28, 2012 | |||
/s/ Richard B. Crowell Richard B. Crowell | Director | February 28, 2012 | |||
/s/ Hardy B. Fowler Hardy B. Fowler | Director | February 28, 2012 | |||
/s/ Terence E. Hall Terence E. Hall | Director | February 28, 2012 | |||
/s/ R. King Milling R. King Milling | Director | February 28, 2012 | |||
/s/ Eric J. Nickelsen Eric J. Nickelsen | Director | February 28, 2012 |
EXHIBIT INDEX
Exhibit Number | Description | |||||
2.1 | Agreement and Plan of Merger between Hancock Holding Company and Lamar Capital Corporation dated February 21, 2001 (Appendix C to the Prospectus contained in the S-4 Registration Statement 333-60280 filed on May 4, 2001 and incorporated by reference | |||||
3.1 | Amended and Restated Articles of Incorporation dated November 8, 1990 (filed as Exhibit 3.1 to the Registrant’s Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). | |||||
3.2 | Amended and Restated Bylaws | |||||
3.3 | Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991). | |||||
3.4 | Articles of Correction, filed with Mississippi Secretary of State on November 15, 1991 (filed as Exhibit 4.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 1991). | |||||
3.5 | Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). | |||||
3.6 | Articles of Correction, filed with Mississippi Secretary of State on March 2, 1992 (filed as Exhibit 3.6 to the Registrant’s Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). | |||||
3.7 | Articles of Amendment to the Articles of Incorporation adopted February 20, 1997 (filed as Exhibit 3.7 to the Registrant’s Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). | |||||
4.1 |
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| Specimen stock certificate (reflecting change in par value from $10.00 to $3.33, effective March 6, 1989) (filed as Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 1989 and incorporated herein by reference). | |||||
4.2 | By executing this Form 10-K, the Registrant hereby agrees to deliver to the Commission upon request copies of instruments defining the rights of holders of long-term debt of the Registrant or its consolidated subsidiaries or its unconsolidated | |||||
*10.1 | 1996 Long Term Incentive Plan (filed as Exhibit 10.1 to the | |||||
*10.2 | Description of Hancock Bank Executive Supplemental Reimbursement Plan, as amended (filed as Exhibit 10.2 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). | |||||
*10.3 | Description of Hancock Bank Automobile Plan (filed as Exhibit 10.3 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). |
*10.4 | Description of Deferred Compensation Arrangement for Directors (filed as Exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). |
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10.5 | Hancock Holding Company 2005 Long-Term Incentive Plan, filed as Appendix “A” to the Company’s Definitive Proxy Statement filed with the Commission on February 28, 2005 and incorporated herein by reference. | |||||
| Hancock Holding Company Nonqualified Deferred Compensation Plan, filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 21, 2005 and incorporated herein by reference. | |||||
10.7 | Shareholder Rights Agreement dated as of February 21, 1997, between Hancock Holding Company and Hancock Bank, as Rights Agent (as extended by the Company), attached as Exhibit 1 to Form 8-A12G filed with the Commission on February 27, 1997, as extended by Amendment No. 1 filed with the | |||||
10.8 | Purchase and Assumption Agreement (“Agreement”) with the Federal Deposit Insurance Corporation, Receiver of Peoples First Community Bank, Panama City Florida (“PCFB”) and the Federal Deposit Insurance Corporation acting in its corporate capacity (“FDIC”) incorporated by reference to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K filed February 17, 2010. | |||||
10.9 | Agreement and Plan of Merger between Hancock Holding Company and Whitney Holding Corporation dated as of December 21, 2010 (Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 23, 2010 and incorporated herein by reference.) | |||||
*10.10 | Hancock Holding Company 2010 Employee Stock Purchase Plan, filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Commission on January 5, 2011 and incorporated herein by reference. | |||||
10.11 | Term Loan Agreement among the Company, certain lenders from time to time, and Suntrust Bank filed as Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2011 and incorporated herein by reference. | |||||
*10.12 | Form of Change in Control Employment Agreement between certain bank subsidiaries of the Company and certain Named Executive Officers. | |||||
*10.13 | Retention Agreement dated March 1, 2011 between Hancock Bank of Louisiana (n/k/a Whitney Bank) and Joseph S. Exnicious. | |||||
*10.14 | Retention Agreement dated March 31, 2011 between Hancock Bank of Louisiana (n/k/a Whitney Bank) and Suzanne Thomas. | |||||
21 | Subsidiaries of Hancock Holding Company. | |||||
22 | Proxy Statement for the Registrant’s Annual Meeting of Shareholders on March | |||||
23.1 | Consent of PricewaterhouseCoopers, LLP. |
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
99.1 | Chief Executive Officer Certification - IFR Section 30.15 | ||
99.2 | Chief Financial Officer Certification - IFR Section 30.15 | ||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Schema Document | ||
101.CAL | XBRL Calculation Document | ||
101.LAB | XBRL Label Link Document | ||
101.PRE | XBRL Presenation Linkbase Document | ||
101.DEF | XBRL Definition Linkbase Document |
* | Compensatory plan or arrangement. |