The following tables and other material present certain statistical information regarding the Company. This information is not audited and should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes.
Net interest income, the difference between interest income and interest expense, is the most significant component of the Banks’ earnings. 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).
Another significant statistic in the analysis of net interest income is the effective interest differential (also referred to as the net interest margin), which is the average of net interest earned, net interest income (te) less net interest expense, on the Company’s average earning assets. The difference between the average yield on earning assets and the effective rate paid for all deposits and borrowed funds, non-interest-bearing as well as interest-bearing, is 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. The net interest margin (te) for the years 2004 and 2003 was 4.44% and 4.45%, respectively.
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 economic conditions, including the level of loan demand and interest rates, there are opportunities to influence interest differential through appropriate loan and investment policies. These policies are designed to maximize interest differential while maintaining sufficient liquidity and availability of funds for purposes of meeting existing commitments and for investment in loans and other investment opportunities that may arise.
“Table 11 - Summary of Average Balance Sheets, Net Interest Income (te) & Interest Rates” included under the caption “Results of Operations” on pages 51 through 52 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference.
The following table is a summary of average balance sheets that reflects average taxable and non-taxable investment income.
SUMMARY OF AVERAGE BALANCE SHEETS
NET INTEREST INCOME (te)* & INTEREST RATES
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans** (te) $2,599,561 $172,868 6.65% $2,238,245 $161,850 7.23% $1,961,299 $159,453 8.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Securities:
Taxable 1,178,810 53,076 4.50% 1,277,108 54,128 4.24% 1,283,159 67,852 5.29%
Tax-exempt * 166,540 7,719 4.63% 189,048 8,705 4.60% 210,415 9,486 4.51%
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 1,345,350 60,795 4.52% 1,466,156 62,833 4.29% 1,493,574 77,338 5.18%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 27,670 310 1.12% 51,850 597 1.15% 76,001 1,277 1.68%
Interest bearing deposits with other banks 7,241 74 1.02% 6,136 40 0.65% 7,426 175 2.36%
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets (te) 3,979,822 234,047 5.88% 3,762,387 225,320 5.99% 3,538,300 238,243 6.73%
- ------------------------------------------------------------------------------------------------------------------------------------
NON-EARNING ASSETS
Other assets 482,629 384,953 352,533
Allowance for loan losses (38,117) (35,391) (33,135)
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $4,424,334 $4,111,949 $3,857,698
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing transaction deposits $1,360,198 $8,191 0.60% $1,303,441 $10,461 0.80% $1,126,594 $15,678 1.39%
Time deposits 1,018,165 35,056 3.44% 980,703 34,429 3.51% 971,457 39,532 4.07%
Public funds 574,266 9,323 1.62% 518,613 9,301 1.79% 475,521 12,175 2.56%
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 2,952,629 52,570 1.78% 2,802,757 54,191 1.93% 2,573,572 67,385 2.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Customer repurchase agreements 195,470 1,909 0.98% 177,535 1,446 0.81% 173,084 2,214 1.28%
Other interest-bearing liabilities 69,960 2,791 3.99% 56,672 2,324 4.10% 54,798 2,454 4.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 3,218,059 57,270 1.78% 3,036,964 57,961 1.91% 2,801,454 72,053 2.57%
- ------------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST BEARING LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
Demand deposits 650,106 604,448 601,374
Other liabilities 106,545 37,434 28,980
Preferred stockholders' equity 2,240 37,069 37,069
Common stockholders' equity 447,384 396,034 388,821
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities, preferred stock &
common stockholders' equity $4,424,334 1.44% $4,111,949 1.54% $3,857,698 2.04%
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (te) $176,777 4.44% $167,359 4.45% $166,190 4.70%
Net earning assets and spread $761,763 4.10% $725,423 4.08% $736,846 4.16%
- ------------------------------------------------------------------------------------------------------------------------------------
*Tax-equivalent and tax-effected (te) amounts are calculated using a marginal federal tax income tax rate of 35%.
**Loan interest income includes loan fees of $9.2 million, $11.1 million and $9.5 million for each of the three years ended
December 31, 2004. Non-accrual loans in average balances and income on such loans, if recognized, is recorded on a cash basis.
Information regarding the changes in interest income on interest-earning assets and interest expense on interest-bearing liabilities relating to rate and volume variances is included in “Table 12 - Summary of Changes in Net Interest Income (te)” under the caption “Results of Operations” on pages 51 through 53 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference.
Page 20 of 49
Interest Rate Sensitivity:To control interest rate risk, management regularly monitors the volume of interest sensitive assets compared with interest sensitive liabilities over specific time intervals. The Company’s interest rate risk management policy is designed to reduce the exposure to changes in its net interest margin in periods of interest rate fluctuations. Interest rate risk is monitored, quantified and managed to produce an acceptable impact on short-term earnings.
The interest sensitivity gap is the difference between total interest sensitive assets and liabilities in a given time period. At December 31, 2004, the Company’s cumulative interest sensitivity gap in the one year interval was 5.0%. The percentage reflects a higher level of interest sensitive liabilities than assets re-pricing within one year. Generally, when rate sensitive liabilities exceed rate sensitive assets, the net interest margin is expected to be positively affected during periods of decreasing interest rates and negatively affected during periods of increasing rates.
The following tables set forth the scheduled re-pricing or maturity of the Company’s assets and liabilities at December 31, 2004 and December 31, 2003. The assumed prepayment of investments and loans were based on the Company’s 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 re-pricing periods, reactions will vary as to timing and degree of interest rate change.
Analysis of Interest Sensitivity at December 31, 2004
Within 6 months 1 to 3 > 3 Non-Sensitive
Overnight 6 months to 1 year years years Balance Total
----------- ---------- ----------- ---------- ---------- ------------- ----------
(amounts in thousands)
Assets
Securities $ - $ 216,564 $130,944 $371,665 $ 583,196 $ - $1,302,369
Federal funds sold & short-term
investments 142,135 - 8,126 - - - 150,261
Loans 39,370 1,327,083 214,990 583,394 543,041 - 2,707,878
Other assets - - - - - 504,218 504,218
----------- ---------- ----------- ---------- ---------- ------------- -----------
Total Assets $181,505 $1,543,647 $354,060 $955,059 $1,126,237 $ 504,218 $4,664,726
=========== ========== =========== ========== ========== ============= ==========
Liabilities
Interest bearing transaction
deposits $ - $ 867,682 $249,596 $703,988 $68,429 $ - $1,889,695
Time deposits - 418,642 116,162 436,094 239,999 - 1,210,897
Non-interest bearing deposits - - - - 697,353 - 697,353
Federal funds purchased 800 - - - - - 800
Borrowings 200,036 3 3 17 50,250 - 250,309
Other liabilities - - - - - 151,090 151,090
Shareholders' Equity - - - - - 464,582 464,582
----------- ---------- ----------- ---------- ---------- ------------- -----------
Total Liabilities amp; Equity $200,836 1,286,327 $365,761 $1,140,099 $1,056,031 $ 615,672 $4,664,726
=========== ========== =========== ========== ========== ============= ==========
Interest sensitivity gap $(19,331) $ 257,320 $(11,701) $ (185,040) $ 70,206 $(111,454)
Cumulative interest rate sensitivity
gap $(19,331) $ 237,989 $226,288 $ 41,248 $ 111,454 $ -
Cumulative interest rate
sensitivity gap as a percentage
of total earning assets 0.0% 6.0% 5.0% 1.0% 3.0%
Analysis of Interest Sensitivity at December 31, 2003
Within 6 months 1 to 3 > 3 Non-Sensitive
Overnight 6 months to 1 year years years Balance Total
------------ ----------- ------------- ------------- ------------ ------------ ------------
(amounts in thousands)
Assets
Securities $ - $ 222,439 $ 184,857 $ 415,614 $ 455,139 $ - $1,278,049
Federal funds sold & short-term
investments 11,138 - 150 - - - 11,288
Loans 31,477 1,190,556 213,713 514,248 498,650 - 2,448,644
Other assets - - - - - 412,377 412,377
------------ ----------- ------------- ---------- ------------ ------------ ------------
Total Assets $ 42,615 $1,412,995 $ 398,720 $ 929,862 $ 953,789 $412,377 $4,150,358
============ =========== ============= ========== ============ ============ ============
Liabilities
Interest bearing transaction
deposits $ - $ 811,256 $ 212,119 $ 612,678 $ 62,661 $ - $1,698,714
Time deposits - 351,459 118,889 330,758 311,281 - 1,112,387
Non-interest bearing deposits - - - - 636,745 - 636,745
Federal funds purchased - - - - - - -
Borrowings 159,496 78 77 15 50,258 234 210,158
Other liabilities - - - - - 57,473 57,473
Shareholders' Equity - 37,067 - - - 397,814 434,881
------------ ----------- ------------- ---------- ------------ ------------ ------------
Total Liabilities & Equity $ 159,496 $1,199,860 $ 331,085 $ 943,451 $1,060,945 $455,521 $4,150,358
============ =========== ============= ========== ============ ============ ============
Interest sensitivity gap $ (116,881) $ 213,135 $ 67,635 $ (13,589) $ (107,156) $(43,144)
Cumulative interest rate sensitivity
gap $ (116,881) $ 96,254 $ 163,889 $ 150,300 $ 43,144 $ -
Cumulative interest rate
sensitivity gap as a percentage
of total earning assets (3.0%) 3.0% 4.0% 4.0% 1.0%
Page 21 of 49
Income Taxes:The Company had income tax expense of $26.6 million, $24.6 million and $22.5 million for the years ended December 31, 2004, 2003 and 2002, respectively. This represents effective income tax rates of 30.1% for 2004, 30.9% for 2003 and 30.6% for 2002. The effective income tax rates are lower than the statutory rates due to the fact that the Company earns a portion of its income on tax-exempt loans and securities.
Performance and Equity Ratios:Information regarding performance and equity ratios is contained in the “Financial Highlights” on pages 10 and 11 of the Company’s 2004 Annual Report to Stockholders incorporated herein by reference.
Securities Portfolio:The Company generally purchases securities to be held to maturity, with a maturity schedule that provides ample liquidity. Securities classified as held-to-maturity are carried at amortized cost. Certain securities have been classified as available-for-sale based on management’s internal assessment of the portfolio considering future liquidity, earning requirements and capital position.
The available-for-sale portfolio balance was $1.1 billion at December 31, 2004. At December 31, 2004, the amortized cost of the held-to-maturity portfolio was $187.9 million and the fair value was $193.6 million.
The amortized costs of securities classified as available-for-sale at December 31, 2004, 2003 and 2002, were as follows (in thousands):
December 31,
--------------------------------------------------
2004 2003 2002
-------------- -------------- --------------
U.S. Treasury $ 9,985 $ 9,966 $ 49,970
U.S. government agencies 413,419 346,836 517,482
Municipal obligations 60,956 70,070 74,270
Mortgage-backed securities 352,510 348,266 43,820
CMOs 263,471 321,324 524,414
Other debt securities 7,056 7,219 12,288
Equity securities 11,225 11,723 11,216
-------------- -------------- --------------
$1,118,622 $1,115,404 $1,233,460
============== ============== ==============
Page 22 of 49
The amortized cost, yield and fair value of debt securities classified as available-for-sale at December 31, 2004, by contractual maturity, were as follows (amounts in thousands):
Over One Over Five
One Year Year Years Over Weighted
or Through Through Ten Fair Average
Less Five Years Ten Years Years Total Value Yield
------------- -------------- ----------- ------------ ------------ ------------ -------------
U.S. Treasury $ 9,985 $ - $ - $ - $ 9,985 $ 9,919 1.82%
U.S. government agencies 118,212 159,920 135,207 80 413,419 410,939 4.02%
Municipal obligations 3,035 36,694 19,718 1,509 60,956 63,356 4.36%
Other debt securities - 4,905 - 2,151 7,056 7,504 6.72%
------------ ----------- ------------- ------------ ------------ -----------
$ 131,232 $ 201,519 $ 154,925 $ 3,740 $ 491,416 $ 491,718 4.06%
============ =========== ============= ============ ============ ===========
Fair Value $ 130,880 $ 203,318 $ 153,736 $ 3,784 $ 491,718
============ =========== ============= ============ ============
Weighted Average Yield 3.43% 3.93% 4.71% 5.57% 4.06%
Mortgage-backed securities & CMOs $ 615,981 $ 611,422 4.54%
============= ===========
The amortized cost of securities classified as held-to-maturity at December 31, 2004, 2003 and 2002 were as follows (in thousands):
December 31,
----------------------------------------------------
2004 2003 2002
--------------- -------------- ---------------
U.S. Treasury $ 1,057 $ 574 $ 294
U.S. government agencies 13,160 14,737 16,350
Municipal obligations 103,914 117,484 136,122
Mortgage-backed securities 23,058 18,727 35,950
CMOs 602 1,403 30,087
Other debt securities 46,110 7,058 9,176
--------------- -------------- ---------------
$ 187,901 $ 159,983 $ 227,979
=============== ============== ===============
The amortized cost, yield and fair value of securities classified as held-to-maturity at December 31, 2004, by contractual maturity, were as follows (amounts in thousands):
Over One Over Five
One Year Year Years Over Weighted
or Through Through Ten Fair Average
Less Five Years Ten Years Years Total Value Yield
----------- ----------- ----------- ---------- ----------- ----------- -----------
U.S. Treasury $ 100 $ 398 $ 559 $ - $ 1,057 $ 1,073 4.77%
U.S. government agencies 2,050 1,826 6,945 2,339 13,160 13,192 5.28%
Municipal obligations 13,211 74,898 15,780 25 103,914 109,154 4.78%
Other debt securities 2,756 7,323 24,436 11,595 46,110 45,856 4.40%
----------- ----------- ----------- ---------- ----------- -----------
$ 18,117 $84,445 $47,720 $ 13,959 $164,241 $169,275 4.71%
=========== =========== =========== ========== =========== ===========
Fair Value $ 18,301 $88,442 $48,925 13,607 $169,275
=========== =========== =========== ========== ===========
Weighted Average Yield 5.11% 4.82% 5.48% 0.84% 4.71%
Mortgage-backed securities & CMOs $ 23,660 $ 24,303 6.23%
=========== ===========
Page 23 of 49
Loan Portfolio:The Banks’ primary lending focus is to provide commercial, consumer and real estate loans to consumers and to small and middle market businesses in their respective market areas. 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 to any foreign entities.
Loan underwriting standards reduces the impact of credit risk to the Company. Loans are underwritten on the basis of cash flow capacity and collateral fair value. Generally, real estate mortgage loans are made when the borrower produces sufficient cash flow capacity and equity in the property to offset historical market devaluations. The loan loss allowance adequacy is tested quarterly based on historical losses through different economic cycles and anticipated losses specifically identified.
The following table sets forth, for the periods indicated, the composition of the loan portfolio of the Company:
Loan Portfolio
--------------
December 31,
-----------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------- ---------------- -------------- -------------- ------------
(in thousands)
Real estate:
Residential mortgages 1-4 family $ 713,266 $ 645,123 $ 539,808 $ 458,372 $ 410,716
Residential mortgages multifamily 25,544 22,803 20,305 21,875 20,510
Home equity lines/loans 134,405 110,634 86,609 56,887 42,644
Construction and development 296,114 235,049 197,166 184,750 171,009
Nonresidential 595,013 536,389 445,733 398,704 328,005
Commercial, industrial and other 437,670 395,678 346,808 308,306 281,701
Consumer 496,926 463,642 434,407 435,205 396,112
Lease financing and depository
Institutions 44,357 34,388 29,565 23,632 27,394
Political subdivisions - - - - 21,755
Credit cards and other revolving credit 16,970 15,437 14,085 12,333 11,393
------------ ---------------- -------------- -------------- -------------
2,760,265 2,459,143 2,114,486 1,900,064 1,711,239
Less, unearned income 11,705 10,499 9,504 10,025 11,398
------------ ---------------- -------------- -------------- -------------
Net loans $2,748,560 $2,448,644 $2,104,982 $1,890,039 $1,699,841
============ ================ ============== ============== =============
Page 24 of 49
The following table sets forth, for the periods indicated, the approximate contractual maturity by type of the loan portfolio of the Company:
Loan Maturity Schedule
December 31, 2004 December 31, 2003
--------------------------------------------------- -------------------------------------------------
Maturity Range Maturity Range
--------------------------------------------------- -------------------------------------------------
After One After After One After
Within Through Five Within Through Five
One Year Five Years Years Total One Year Five Years Years Total
------------ ------------ ---------- ---------- ------------ ------------ ---------- -----------
(in thousands)
Commercial, industrial and
other $196,348 $ 209,179 $32,143 $ 437,670 $ 173,898 $ 166,247 $ 55,533 $ 395,678
Real estate - construction 168,631 114,805 12,678 296,114 160,014 64,348 10,687 235,049
All other loans 211,409 1,114,048 701,024 2,026,481 175,810 970,795 681,811 1,828,416
------------ ------------ ---------- ---------- ------------ ------------ ---------- ------------
Total loans $576,388 $1,438,032 $745,845 $2,760,265 $ 509,722 $1,201,390 $748,031 $2,459,143
============ ============ ========== ========== ============ ============ ========== ============
The sensitivity to interest rate changes of that portion of the Company’s loan portfolio that matures after one year is shown below:
Loan Sensitivity to Changes in Interest Rates
December 31,
---------------------------------------
2004 2003
---------------- -------------
(in thousands)
Commercial, industrial, and real estate construction
maturing after one year:
Fixed rate $ 233,589 $ 191,297
Floating rate 135,216 105,518
Other loans maturing after one year:
Fixed rate 1,258,394 1,133,027
Floating rate 556,678 519,579
---------------- -------------
Total $2,183,877 $1,949,421
================ =============
Page 25 of 49
Nonperforming Assets:The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, restructured loans and real estate owned. Loans past due 90 days or more and still accruing are also disclosed.
December 31,
-------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ------------ ----------- ----------- -----------
(Amounts in thousands)
Nonaccrual loans:
Real estate $ 6,945 $ 10,031 $ 10,521 $ 14,358 $ 7,856
Commercial, industrial and other 535 2,088 1,276 2,877 2,296
Consumer, credit card and other
revolving credit - 42 73 93 30
Lease financing - - - - -
Depository institutions - - - - -
Political subdivisions - - - - -
Restructured loans - - - - -
----------- ------------ ----------- ----------- -----------
Total nonperforming loans 7,480 12,161 11,870 17,328 10,182
Acquired other real estate - - - 1,330 -
Foreclosed assets 3,513 5,809 5,936 1,673 1,492
----------- ------------ ----------- ----------- -----------
Total nonperforming assets $ 10,993 $ 17,970 $ 17,806 $ 20,331 $ 11,674
=========== ============ =========== =========== ===========
Loans 90+ days past due and still accruing $ 5,160 $ 3,682 $ 6,407 $ 12,591 $ 9,277
=========== ============ =========== =========== ===========
Ratios (%):
Nonperforming loans to net loans 0.27% 0.50% 0.56% 0.92% 0.60%
Nonperforming assets to net loans and
foreclosed assets 0.40% 0.73% 0.84% 1.07% 0.69%
Nonperforming loans to average net loans 0.29% 0.54% 0.61% 0.97% 0.63%
Allowance for loan losses to nonperforming
loans 544% 302% 293% 199% 281%
The amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as “nonaccrual” was $574,000, $762,000, $662,000, $735,000 and $686,000 for the years ended December 31, 2004, 2003, 2002, 2001 and 2000, respectively.
Interest actually received on nonaccrual loans was not material. The amount of interest recorded on restructured loans did not differ significantly from the interest that would have been recorded under the original terms of those loans.
Page 26 of 49
Analysis of Allowance for Loan Losses:The allowance for loan losses is a valuation account available to absorb losses on loans. All losses are charged to the allowance for loan 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 time of receipt. Periodically, 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 the Company’s past loan loss 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. All commercial loans in lending relationships with an aggregate balance of $250,000 or more are risk rated and evaluated on an individual basis, as well as, all consumer and mortgage real estate loans with a balance of $100,000 or more. All consumer and mortgage real estate loans under $100,000 are risk rated as pools of homogeneous loans and classified according to past due status. Commercial loans are reviewed for impairment at the time a loan is no longer current or at the time management is made aware of a degradation in a borrower’s financial status or a deficiency in collateral. Loss factors acceptable to the Banks’ regulators are applied to loans graded by standard loan classifications in determining a general allowance. Unclassified loans are categorized and reserved for at the greater of a five-year average net charge-off ratio or a minimum threshold stated as a percentage of loans outstanding. The allowance for loan loss stated as a percentage of period end loans, used in conjunction with the evaluation of current and anticipated economic conditions, composition of the Company’s present loan portfolio, and trends in both delinquencies and nonaccruals, is a measurement standard utilized by management in determining the adequacy of the allowance. The unallocated portion of the allowance for loan losses is available to compensate for uncertainties in the process of estimating inherent losses.
Page 27 of 49
The following table sets forth, for the periods indicated, average net loans outstanding, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off:
At and For The Years Ended December 31,
-------------------------------------------------------------------------------
2004 2003 2002 2001 2000
------------- ------------- ------------- ------------- -----------
(in thousands)
Net loans outstanding at end of period $2,748,560 $2,448,644 $2,104,982 $1,890,039 $1,699,841
============= ============= ============= ============= ===========
Average net loans outstanding $2,599,561 $2,238,245 $1,961,299 $1,792,559 $1,611,046
============= ============= ============= ============= ===========
Balance of allowance for loan losses
at beginning of period $ 36,750 $ 34,740 $ 34,417 $ 28,604 $ 25,713
Loans charged-off:
Real estate 403 291 109 45 80
Commercial 5,381 4,868 9,143 6,386 6,803
Consumer, credit cards and other
revolving credit 14,383 14,311 14,291 9,853 6,802
Lease financing 261 73 10 14 34
Depository institutions - - - - -
Political subdivisions - - - - -
------------- ------------- ------------- ------------- -----------
Total charge-offs 20,428 19,543 23,553 16,298 13,719
------------- ------------- ------------- ------------- -----------
Recoveries of loans previously
charged-off:
Real estate 179 180 7 2 1
Commercial 1,957 1,112 639 319 1,333
Consumer, credit cards and other
revolving credit 5,687 5,103 5,135 4,365 2,814
Lease financing - 4 - 1 -
Depository institutions - - - - -
Political subdivisions - - - - -
------------- ------------- ------------- ------------- -----------
Total recoveries 7,823 6,399 5,781 4,687 4,148
------------- ------------- ------------- ------------- -----------
Net charge-offs 12,605 13,144 17,772 11,611 9,571
Provision for loan losses 16,537 15,154 18,495 9,082 12,609
Balance acquired through acquisition & other - - (400) 8,342 (147)
------------- ------------- ------------- ------------- -----------
Balance of allowance for loan losses
at end of period $ 40,682 $ 36,750 $ 34,740 $ 34,417 $ 28,604
============= ============= ============= ============= ===========
The following table sets forth, for the periods indicated, certain ratios related to the Company's charge-offs,
allowance for loan losses and outstanding loans:
At and For The Years Ended December 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
------------ ----------- ------------ ------------ -----------
Ratios:
Net charge-offs to average net loans 0.48% 0.59% 0.91% 0.65% 0.59%
Net charge-offs to period-end net loans 0.46% 0.54% 0.84% 0.61% 0.56%
Allowance for loan losses to average net loans 1.56% 1.64% 1.77% 1.92% 1.78%
Allowance for loan losses to period-end net loans 1.48% 1.50% 1.65% 1.82% 1.68%
Net charge-offs to loan loss allowance 30.98% 35.77% 51.16% 33.74% 33.46%
Loan loss provision to net charge-offs 131.19% 115.29% 104.07% 78.22% 131.74%
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 and the unallocated amount. The unallocated category increased by $2.0 million from 2003 due to the adoption of a formal loan loss calculation methodology and the Florida acquisition. The allocation is not necessarily indicative of the category of future losses, and the full allowance at December 31, 2004 is available to absorb losses occurring in any category of loans.
Page 28 of 49
December 31,
---------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------- ------------------- ---------------------- ----------------- -----------------
% of % of % of % of % of
Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans
for to for to for to for to for to
Loan Total Loan Total Loan Total Loan Total Loan Total
Losses Loans Losses Loans Losses Loans Losses Loans Losses Loans
---------- ------- ---------- ------- --------- ----------- --------- ------ --------- ------
(amounts in thousands)
Real estate $11,253 64.19 $ 9,711 63.30 $ 7,664 61.26 $ 6,701 59.29 $ 5,700 57.26
Commercial,
industrial
and other 14,974 17.37 15,311 17.41 11,610 17.72 14,380 17.56 8,200 19.39
Consumer and
other revolving
credit 11,453 18.44 10,718 19.29 10,174 21.02 9,848 23.15 11,444 23.35
Unallocated 3,002 - 1,010 - 5,292 - 3,488 - 3,260 -
---------- ------- ---------- ------- --------- --------- --------- ------ --------- ------
$40,682 100.00 $36,750 100.00 $34,740 100.00 $34,417 100.00 $28,604 100.00
========== ======= ========== ======= ========= ========= ========= ===== ========= =======
Deposits and Other Debt Instruments:The following table sets forth the distribution of the average deposit accounts for the periods indicated and the weighted average interest rate paid on each category of deposits:
2004 2003 2002
------------------------------- -------------------------------- -----------------------------
Percent Percent Percent
Average of Rate Average of Rate Average of Rate
Balance Deposits (%) Balance Deposits (%) Balance Deposits (%)
----------- --------- ------ ----------- --------- ------ ---------- -------- -----
(amounts in thousands)
Non-interest bearing accounts $ 650,106 18.04 - $ 604,448 17.74 - $ 601,374 18.94 -
NOW accounts 798,286 22.16 1.01 694,681 20.39 1.14 552,419 17.40 1.84
Money market and other
savings accounts 1,007,366 27.96 0.75 984,667 28.90 0.99 887,357 27.95 1.60
Time deposits 1,146,976 31.84 3.23 1,123,409 32.97 3.25 1,133,796 35.71 3.80
----------- --------- ----------- --------- ------------ ---------
$3,602,734 100.00 $3,407,205 100.00 $3,174,946 100.00
=========== ========= =========== ========= ============ =========
The Banks traditionally price their deposits to position themselves competitively with the local market. The Banks’ policy is not to accept brokered deposits.
Time certificates of deposit of $100,000 and greater at December 31, 2004 had maturities as follows:
December 31, 2004
-----------------
(in thousands)
Three months or less $ 21,767
Over three through six months 40,852
Over six months through one year 94,191
Over one year 322,976
--------------
Total $479,786
==============
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Short-Term Borrowings:The following table sets forth certain information concerning the Company’s short-term borrowings, which consist of federal funds purchased and Federal Home Loan Bank (“FHLB”) advances as well as securities sold under agreements to repurchase.
Years Ended December 31,
-----------------------------------------------
2004 2003 2002
------------ --------------- ------------
(amounts in thousands)
Federal funds purchased and FHLB advances:
Amount outstanding at period-end $800 $0 $0
Weighted average interest at period-end 2.15% 0.00% 0.00%
Maximum amount at any month-end during period $41,852 $37,000 $1,550
Average amount outstanding during period $14,181 $5,335 $1,832
Weighted average interest rate during period 1.64% 1.19% 1.57%
Securities sold under agreements to repurchase:
Amount outstanding at period-end $195,478 $150,096 $161,058
Weighted average interest at period-end 1.13% 0.80% 0.92%
Maximum amount at any month end during-period $243,101 $105,641 $189,858
Average amount outstanding during period $195,470 $177,535 $173,084
Weighted average interest rate during period 0.98% 0.81% 1.28%
Liquidity:Liquidity management encompasses the Company’s ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that the Company has adequate cash flow to meet it’s various needs, including operating, strategic and capital. Without proper liquidity management, the Company 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 it has a presence and serves. 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 the Company 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 of December 31, 2004 and 2003, free securities stood at 28.0% or $362.8 million and 41.4% or $529.1 million, respectively.
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 the Company’s incremental borrowing capacity. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs. The Company’s short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $221 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $100 million. As of December 31, 2004 and 2003, the Company’s core deposits were $3.050 billion and $2.905 billion, respectively, and Net Wholesale Funding stood at $480.1 million and $620.9 million, respectively.
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The Consolidated Statements of Cash Flows, (included on page 20 of the Company's 2004 Annual Report to Stockholders, which is incorporated herein by reference), provide an analysis of cash from operating, investing, and financing activities for each of the three years in the period ended December 31, 2004. Cash flows from operations are a significant part of liquidity management, contributing significant levels of funds in 2004, 2003 and 2002.
Cash flows from operations increased to $153.2 million in 2004 from $86.8 million in 2003 primarily due to activity related to Magna Insurance Company and to increased net earnings. Net cash used by investing activities increased to $511.8 million in 2004 from $172.8 million in 2003 due to securities transactions, the increase in federal funds sold and sales/purchase of branches. In 2004, securities transaction activity resulted in a net use of funds, while in 2003 proceeds from the sales and maturities of securities were greater than purchases of securities. Federal funds sold increased $122.9 million during 2004 and decreased $37.3 million during 2003. The Company paid approximately $29.4 million in connection with the sale/purchase of branches in 2004 and received $32.8 million in connection with purchase transactions in 2003. Cash flows from financing activities increased to $336.4 million in 2004 from $76.3 million in 2003 primarily due to deposit growth and short-term borrowing activities outpacing repayment of these funds.
Cash flows from operations decreased to $86.8 million in 2003 from $90.8 million in 2002. Net cash used by investing activities decreased to $172.8 million in 2003 from $291.6 million in 2002 due to the securities transactions. In 2003, securities transaction activity resulted in a net source of funds, while in 2002 purchases of securities were greater than proceeds from the sales and maturities of securities. During 2003, the Company experienced increased loan growth, which resulted in an increase in cash used by investing activities when comparing 2003 to 2002. Cash flows from financing activities decreased to $76.3 million in 2003 from $223.7 million in 2002 primarily due to a net decrease in deposits.
More information on liquidity can be found under the caption “Liquidity” - Table 6. Liquidity Ratios on pages 47 through 48 of the Company’s 2004 Annual Report to Stockholders, which is incorporated herein by reference.
Capital Resources:The information under the caption “Notes to Consolidated Financial Statements”, Note 11 - Common Stockholders’ Equity on pages 25 through 26 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference.
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Impact of Inflation:The Company’s non-interest 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.
Forward Looking StatementsCongress 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 the companies from unwarranted litigation, if actual results are different from management expectations. In addition to historical information, this report contains forward-looking statements and information, which are based on management’s beliefs, plans, expectations and assumptions and on information currently available to management. Forward-looking statements and information presented reflects management’s 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 used in this report do not relate to historical facts and are intended to identify forward-looking statements. These statements appear in a number of places in this report, including, but not limited to, statements found in Item 1 “Business” and in Item 7 “Management’s Discussion and Analysis”. All phases of the Company’s operations are subject to a number of risks and uncertainties. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this report, including, without limitation, the portions referenced above, and the uncertainties set forth from time to time in the Company’s other public reports and filings and public statements, many of which are beyond the control of the Company, and any of which, or a combination of which, could materially affect the results of the Company’s operations and whether forward-looking statements made by the Company ultimately prove accurate.
ITEM 2 - PROPERTIESThe Company’s main offices are located at One Hancock Plaza, Gulfport, Mississippi. The building has fourteen stories, of which seven are utilized by the Company. The remaining seven stories are presently leased to outside parties.
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Title to the following banking offices in Mississippi and Louisiana is owned in fee (number of locations shown in parenthesis):
Albany, LA (1) Lyman, MS (1)
Alexandria, LA (2) Mandeville, LA (1)
Baker, LA (1) Metairie, LA (2)
Baton Rouge, LA (13) Moss Point, MS (1)
Bay St. Louis, MS (2) Ocean Springs, MS (2)
Biloxi, MS (3) Opelousas, LA (1)
Bogalusa, LA (1) Pascagoula, MS (2)
Covington, LA (1) Pass Christian, MS (1)
Denham Springs, LA (3) Petal, MS (1)
D'Iberville, MS (1) Picayune, MS (1)
Escatawpa, MS (1) Pineville, LA (1)
Eunice, LA (1) Poplarville, MS (1)
Franklinton, LA (1) Prentiss, MS (1)
Gautier, MS (1) Purvis, MS (2)
Gonzales, LA (1) St. Francisville, LA (1)
Gulfport, MS (6) Sumrall, MS (1)
Hammond, LA (3) Tallahassee, FL (4)
Hattiesburg, MS (3) Vancleave, MS (1)
Independence, LA (1) Ville Platte, LA (1)
Long Beach, MS (1) Walker, LA (1)
Loranger, LA (1) Waveland, MS (1)
The following banking offices in Mississippi and Louisiana are leased under agreements with unexpired terms of from four to forty-nine years including renewal options (number of locations shown in parenthesis):
Baton Rouge, LA (4) Pascagoula, MS (2)
Bay St. Louis, MS (3) Picayune, MS (2)
Biloxi, MS (1) Ponchatoula, LA (1)
Diamondhead, MS (1) Saucier, MS (1)
Gulfport, MS (5) Slidell, LA (1)
Kiln, MS (1) Springfield, LA (1)
Kenner, LA (1) Tallahassee, FL (1)
Long Beach, MS (1)
In addition to the above, Hancock Bank MS owns land and other properties acquired through foreclosures 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.
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ITEM 3 - LEGAL PROCEEDINGSThe Company is party to various legal proceedings arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, all such matters are adequately covered by insurance or, if not so covered, are not expected to have a material adverse effect on the financial statements of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSThere were no matters submitted to a vote of security holders during the quarter ended December 31, 2004.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCKAND RELATED STOCKHOLDER MATTERS
Stock Split:On February 26, 2004, the Company’s Board of Directors declared a two-for-one stock split in the form of 100% common stock dividend. The additional shares were payable March 18, 2004 to stockholders of record at the close of business on March 8, 2004.
All balances and information concerning earnings per share, dividends per share, and number of shares outstanding have been adjusted to give effect to this split.
The information under the caption “Market Information” on page 12 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference.
The information under the caption "Notes to Consolidated Financial Statements", Note 14 - Employee Stock Plans on pages 36 and 37 of the Company's 2004 Annual Report to Stockholders is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATAThe information under the caption “Financial Highlights” on pages 10 and 11 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONSThe information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Pages 43 through 55 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference.
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Off-Balance Sheet RiskIn the normal course of business, the Company enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded and involve, to varying degrees, elements of credit risk not reflected in the consolidated balance sheets. 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. The Company undertakes the same credit evaluation in making commitments and conditional obligations as it does for on-balance-sheet instruments and may require collateral or other credit support for off-balance-sheet financial instruments.
At December 31, 2004 the Company had $554.9 million in unused loan commitments outstanding, of which approximately $319.7 million were at variable 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. At December 31, 2004 the Company had $44.2 million in letters of credit issued and outstanding.
The following table shows the commitments to extend credit and letters of credit at December 31, 2004 according to expiration date.
Expiration Date
------------------------------------------
(dollars in thousands) Less than 1-3 3-5 More than
Total 1 year years years 5 years
--------------- ------------ ------------ ------------ -------------
Commitments to extend credit $554,870 $308,066 $26,738 $43,321 $176,745
Letters of credit 44,241 15,605 15,700 12,936 -
--------------- ------------ ------------ ------------ -------------
Total $599,111 $323,671 $42,438 $56,257 $176,745
=============== ============ ============ ============ =============
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Segment ReportingThe Company's primary segments are geographically divided into the Mississippi (MS), Louisiana (LA) and Florida (FL) markets. Each segment offers the same products and services but is managed separately due to different pricing, product demand, and consumer markets. Each segment offers commercial, consumer and mortgage loans and deposit services. In the following tables, the column "Other" includes additional consolidated subsidiaries of the Company: Hancock Mortgage Corporation, Hancock Investment Services, Inc., Hancock Insurance Agency, Inc., Harrison Finance Company, Magna Insurance Company and three real estate corporations owning land and buildings that house bank branches and other facilities. Following is selected information for the Company's segments:
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Year ended
(amounts in thousands) December 31, 2004
MS* LA* FL* Other Consolidated
-------------- -------------- -------------- -------------- --------------
Interest income $ 115,702 $ 91,148 $ 3,014 $ 16,910 $ 226,774
Interest expense 37,878 18,415 911 66 57,270
-------------- -------------- -------------- -------------- --------------
Net interest income 77,824 72,733 2,103 16,844 169,504
Provision for loan losses 5,564 6,429 928 3,616 16,537
Non-interest income 39,561 33,534 445 16,741 90,281
Depreciation and amortization 5,879 2,648 67 563 9,157
Other non-interest expense 67,189 51,348 3,047 24,210 145,794
-------------- -------------- -------------- -------------- --------------
Earnings before income taxes 38,753 45,842 (1,494) 5,196 88,297
Income tax expense 12,808 13,213 (547) 1,119 26,593
-------------- -------------- -------------- -------------- --------------
Net earnings $ 25,945 $ 32,629 $ (947) $ 4,077 $ 61,704
============== ============== ============== ============== ==============
Year ended
(amounts in thousands) December 31, 2003
MS* LA* FL* Other Consolidated
-------------- -------------- -------------- -------------- --------------
Interest income $ 118,858 $ 83,211 $ - $ 16,080 $ 218,149
Interest expense 38,823 19,138 - - 57,961
-------------- -------------- -------------- -------------- --------------
Net interest income 80,035 64,073 - 16,080 160,188
Provision for loan losses 7,635 5,970 - 1,549 15,154
Non-interest income 36,934 26,790 - 11,032 74,756
Depreciation and amortization 6,335 3,053 - 494 9,882
Other non-interest expense 64,425 51,528 - 14,373 130,326
-------------- -------------- -------------- -------------- --------------
Earnings before income taxes 38,574 30,312 - 10,696 79,582
Income tax expense 12,480 9,074 - 3,073 24,627
-------------- -------------- -------------- -------------- --------------
Net earnings $ 26,094 $ 21,238 $ - $ 7,623 $ 54,955
============== ============== ============== ============== ==============
Year ended
(amounts in thousands) December 31, 2002
MS* LA* FL* Other Consolidated
-------------- -------------- -------------- -------------- --------------
Interest income $ 128,651 $ 87,976 $ - $ 14,153 $ 230,780
Interest expense 49,538 22,514 - - 72,052
-------------- -------------- -------------- -------------- --------------
Net interest income 79,113 65,462 - 14,153 158,728
Provision for loan losses 9,895 6,803 - 1,797 18,495
Non-interest income 35,447 26,120 - 10,026 71,593
Depreciation and amortization 5,587 2,757 - 447 8,791
Other non-interest expense 72,596 40,696 - 16,174 129,466
-------------- -------------- -------------- -------------- --------------
Earnings before income taxes 26,482 41,326 - 5,761 73,569
Income tax expense 7,909 13,138 - 1,479 22,526
-------------- -------------- -------------- -------------- --------------
Net earnings $ 18,573 $ 28,188 $ - $ 4,282 $ 51,043
============== ============== ============== ============== ==============
*Includes income from external customers only.
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Issuer Purchases of Equity SecuritiesThe following table provides information with respect to purchases made by the issuer or any affiliated purchaser of the issuer's equity securities.
(a) (b) (c) (d)
Total number of Maximum number
shares purchased of shares
Total number as a part of publicly that may yet be
of shares or Average Price announced plans purchased under
units purchased Paid per Share or programs (1) Plans or Programs
--------------------- ---------------------- --------------------- --------------------
Jan. 1, 2004 - Mar. 31, 2004 131,123 (2) $ 29.0645 51,754 938,870
Apr. 1, 2004 - Jun. 30, 2004 103,880 (3) 28.5769 100,000 838,870
Jul. 1, 2004 - Sep. 30, 2004 89,389(4) 29.3771 84,280 754,590
Oct. 1, 2004 - Dec. 31, 2004 46,401(5) 32.2566 - 754,590
--------------------- -------------------- ----------------------- --------------------
Total as of Dec. 31, 2004 370,793 $ 29.4027 236,034
===================== ==================== =====================
(1) The Company publicly announced its stock buy-back program on July 18, 2000.
(2) 79,369 shares were purchased on the open market from January through March in order to satisfy
obligations pursuant to the Company's long term incentive plan that was established in 1996.
(3) 3,880 shares were purchased on the open market from April through June in order to satisfy
obligations pursuant to the Company's long term incentive plan that was established in 1996.
(4) 5,109 shares were purchased on the open market from July through September in order to satisfy
obligations pursuant to the Company's long term incentive plan that was established in 1996.
(5) 46,401 shares were purchased on the open market from October through December in order to satisfy
obligations pursuant to the Company's long term incentive plan that was established in 1996.
Recent Accounting PronouncementsIn October 2003, the American Institute of Certified Public Accountants (AICPA) issued Statement of Accounting Position (SOP) 03-3, which addresses accounting for differences between contractual cash flows expected to be collected from an investor's initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. It includes such loans acquired in purchase business combinations. This SOP would apply to loans originated by the Company and would limit the yield that may be accreted (accretable yield) to the excess of the investor's estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the investor's initial investment in the loan. This SOP requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual, or valuation allowance. This SOP prohibits investors from displaying accretable yield and nonaccretable difference in the balance sheet. Subsequent increases in cash flows expected to be collected generally would be recognized prospectively through adjustment of the loan's yield over its remaining life. Decreases in cash flows expected to be collected would be recognized as impairment. This SOP prohibits "carrying over" or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. This SOP is effective for loans acquired in fiscal years beginning after December 15, 2004. The Company adopted this SOP and its effect on the consolidated financial statements was not material.
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On December 16, 2004, the FASB published SFAS No. 123(R), "Share-Based Payment". This Statement is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees", and its related implementation guidance. It will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. This Statement is the result of a two-year effort to respond to requests from investors and many others that the FASB improve the accounting for share-based payment arrangements with employees. Public entities (other than those filing as small business issuers) will be required to apply SFAS No. 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. SFAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. In addition to the accounting standard that sets forth the financial reporting objectives and related accounting principles, SFAS No. 123(R) includes an appendix of implementation guidance that provides expanded guidance on measuring the fair value of share-based payment awards. SFAS No. 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Although those disclosures helped to mitigate the problems associated with accounting under Opinion 25, many investors and other users of financial statements said that the failure to include employee compensation costs in the income statement impaired the transparency, comparability, and credibility of financial statements. The Company will adopt SFAS No.123(R) as prescribed. The effect of this statement on the consolidated financial statements is not expected to be material.
In January 2003, the Company adopted the provisions of the FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The liability associated with letters of credit is not material to the Company’s financial statements.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe information under the caption “Asset/Liability Management” on pages 48 through 49 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference.
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ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe following consolidated financial information of the Company and subsidiaries, and the report of independent registered public accounting firm, appearing on Pages 10 through 55 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference:
Financial Highlights on Pages 10 through 12
Management’s Report on Internal Control over Financial Reporting on Page 13
Reports of Independent Registered Public Accounting Firm on Pages 14 through 15
Consolidated Balance Sheets on Page 16
Consolidated Statements of Earnings on Page 17
Consolidated Statements of Stockholders’ Equity on Page 18
Consolidated Statements of Comprehensive Earnings on Page 19
Consolidated Statements of Cash Flows on Page 20
Notes to Consolidated Financial Statements on Pages 21 through 42
Management’s Discussion and Analysis of Financial Condition
And Results of Operations on Pages 43 through 55
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSUREOn January 20, 2004 the Company dismissed Deloitte & Touche LLP as its independent auditors, after Deloitte & Touche LLP completed its audit of the financial statements of the Company for the fiscal year ended December 31, 2003. The Audit Committee of the Board of Directors of the Company approved the decision to change auditors.
During the two fiscal years ended December 31, 2003 and 2002 and the interim period from January 1, 2004 to January 20, 2004, there were no disagreements between the Company and Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to make a reference to the subject matter of the disagreements in their reports on the financial statements fo such years.
During the two most recent fiscal years and the interim period from January 1, 2005 to February 22, 2005, Deloitte & Touche LLP’s reports on the financial statements of the Company did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified to uncertainty, audit scope, or accounting principles.
During the two most recent fiscal years and the interim period from January 1, 2004 to January 20, 2004, the Company did not consult with Deloitte & Touche LLP regarding any of the matters or events set forth in Item 304(a)(1)(v) of Regulation S-K.
On January 20, 2004, the Board of Directors appointed KPMG LLP, an independent registered public accounting firm, as auditors for the fiscal year ending December 31, 2004, and until their successors are selected. The Audit Committee of the Company’s Board of Directors approved the decision to change auditors.
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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, 2003 and 2002, there were no consultations between the Company and KPMG LLP regarding application of an accounting principles, the type of audit opinion that might be issued on the Company’s financial statements, or on any other matter.
Although not required to do so, the Board of Directors chose to submit its appointment of KPMG LLP for ratification by the Company’s shareholders. This matter was submitted to the Company’s shareholders for ratification during the Company’s annual meeting held on February 26, 2004.
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and ProceduresAs 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 the time periods specified in the Commission’s rules and forms.
As of December 31, 2004, (the “Evaluation Date”), the Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in the Exchange Act Rules. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are sufficiently effective to ensure that material information relating to the Company and required to be disclosed by the Company in the reports that it files or submits 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 ReportingThe Company's management is responsible for establishing and maintaining the adequate internal control over financial reporting, 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 officer and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal 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.
Based on the Company's evaluation under the framework in Internal Control - Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2004. Management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is contained on Page 14 of the Company's 2004 Annual Report to Stockholders.
There were no changes in the Company's internal controls over financial reporting during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect the Company's internal controls over financial reporting.
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ITEM 9B - OTHER INFORMATION
Reports on Form 8-K:
1. A Form 8-K was filed on October 12, 2004 for the purpose of announcing, by press release, the Company's
negotiation of an agreement to acquire Ross-King-Walker, Inc. as a division of Hancock Insurance
Agency.
2. A Form 8-K was filed on November 5, 2004 for the purpose of announcing, by press release, the completion
of the acquisition of Ross-King-Walker, Inc. as a division of Hancock Insurance Agency.
3. A Form 8-K was filed on December 28, 2004 for the purpose of announcing, by press release, that the
Company had entered into a Bonus and Deferred Compensation Agreement with George A. Schloegel, the
Company's Chief Executive Officer. In connection therewith, the Company entered into a
Cancellation Agreement terminating Mr. Schloegel's prior Split Dollar Arrangement.
No other information was required to be disclosed on Form 8-K during the fourth quarter of 2004.
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTFor information concerning directors who are not also executive officers of the registrant, see “Directors of HHC” (Pages 8 & 9) in the Proxy Statement for the Annual Meeting of Shareholders to be held March 31, 2005, which was filed by the Registrant in definitive form with the Commission on February 28, 2005 and is incorporated herein by reference.
Information concerning executive officers of the registrant is listed below.
Leo W. Seal, Jr.Director of the Company since 1984. President, Hancock Bank, Gulfport, Mississippi from 1963 to 1990; President of Hancock Holding Company since 1984, Chief Executive Officer from 1984 to 2000, Advisory Director, Hancock Bank of Louisiana since 1993. Mr. Seal has been employed with Hancock Bank since 1947. He was elected to the Board of Directors of Hancock Bank in 1961 and named President in 1963 and in 1977 he was named Chief Executive Officer.
George A. SchloegelDirector of the Company since 1984. President, Hancock Bank, Gulfport, Mississippi, since 1990, Vice Chairman of the Board of Hancock Holding Company since 1984 and named Chief Executive Officer, Hancock Holding Company 2000; Director of Hancock Bank of Louisiana, since 1990 and named President in July 2003; Director of Mississippi Power Company, Gulfport, Mississippi. Mr. Schloegel was employed part-time with Hancock Bank from 1956-1959 and began full-time employment in 1962. He served in various capacities until being named President in 1990.
Alfred G. RathChief Credit Officer, Hancock Holding Company since October 2002; Executive Vice President, Hancock Holding Company since February 2003; Mr. Rath has been employed with Hancock Bank since 1969. He served in various capacities until being named Chief Credit Officer in October 2002.
Robert E. EasterlyExecutive Vice President, Hancock Bank of Louisiana since 1995; President and Chief Executive Officer, First National Bank of Denham Springs from 1981-1996; Chairman of the Board, First National Bank of Denham Springs from 1993-1996; Director, Hancock Bank since 1995.
Carl J. ChaneyChief Financial Officer, Hancock Holding Company and Hancock Bank since 1998; Executive Vice President, Hancock Holding Company and Hancock Bank since 2001; Senior Vice President, Hancock Holding Company and Hancock Bank from 1999 to 2001. Prior to Mr. Chaney joining Hancock, he was Director and Shareholder of the law firm, Watkins Ludlam Winter & Stennis, P.A., Jackson Mississippi from 1995 to 1998, where he specialized in Investment Banking and Merger and Acquisitions in the Banking Industry.
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John M. HairstonChief Operating Officer, Hancock Holding Company and Hancock Bank since 1997; Executive Vice President, Hancock Holding Company and Hancock Bank since 2001; Senior Vice President, Hancock Holding Company and Hancock Bank from 1996 to 2001; Vice President, Hancock Bank from 1994 to 1995; Senior Operations Officer, Hancock Holding Company from 1994 to 1996. Prior to Mr. Hairston joining Hancock, he was a Manager with Financial Services Consulting, a Division of Andersen Consulting, headquartered in Chicago, Illinois.
Richard T. HillExecutive Vice President, Hancock Holding Company, since February 2002; Senior Vice President and Louisiana Retail Banking Executive, Hancock Bank of Louisiana, from June 1998 to January 2002; Executive Vice President and Retail Banking Executive, City National Bank (a subsidiary of First Commerce Corporation), November 1993 -June 1998.
Clifton J. SaikExecutive Vice President, Hancock Holding Company, since February 2002; Senior Vice President and Director, Trust and Financial Services Group, Hancock Bank from July 1998 to January 2002. Prior to coming to Hancock Bank, Mr. Saik served in the following capacities at First Commerce Corporation, New Orleans, Louisiana: Executive Vice President and Director, Card Services; CEO, Marquis Insurance Agency, L.L.C.; and Member, Marquis Investments, L.L.C. Management Committee, June 1997 - June 1998; Executive Vice President and Director, Trust and Retail Brokerage Services Group, Senior Vice President and Director, Trust Group; October 1994 to June 1997; Senior Vice President and Senior Trust Officer, October 1992 to October 1994.
Compliance with Section 16(a) of the Exchange ActFor information concerning compliance with Section 16(a) of the Exchange Act, see "Section 16(a) Beneficial Ownership Reporting Compliance" (page 10) in the Proxy Statement for the Annual Meeting of Shareholders to be held on March 31, 2005, which was filed by the Registrant in definitive form with the Commission on February 28, 2005 and is incorporated herein by reference.
Audit CommitteeFor information concerning the Audit Committee, its members and its financial expert, see "Audit Committee" (page 21) in the Proxy Statement for the Annual Meeting of Shareholders to be held on March 31, 2005, which was filed by the Registrant in definitive form with the Commission on February 28, 2005 and is incorporated herein by reference.
Code of EthicsThe Company’s Board of Directors has adopted a Code of Ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions. A copy of this Code of Ethics can be found at the Company’s internet website at www.hancockbank.com. The Company intends to disclose any amendments to its Code of Ethics, and any waiver from a provision of the Code of Ethics granted to the Company’s principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, on the Company’s internet website within five business days following such amendment or waiver. The information contained on or connected to the Company’s internet website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC.
ITEM 11 - EXECUTIVE COMPENSATIONFor information concerning this item see “Executive Compensation” (pages 13-19) in the Proxy Statement for the Annual Meeting of Shareholders to be held on March 31, 2005, which was filed by the Registrant in definitive form with the Commission on February 28, 2005 and is incorporated herein by reference.
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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTFor information concerning this item see “Security Ownership of Certain Beneficial Owners” (page 11) and “Security Ownership of Management” (page 12) in the Proxy Statement for the Annual Meeting of Shareholders to be held March 31, 2005, which was filed by the Registrant in definitive form with the Commission on February 28, 2005 and is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSFor information concerning this item see “Certain Transactions and Relationships” (Page 19) in the Proxy Statement for the Annual Meeting of Shareholders to be held March 31, 2005, which was filed by the Registrant in definitive form with the Commission on February 28, 2005 and is incorporated herein by reference.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICESFor information concerning this item, see “Principal Accounting Firm Fees” on Page 23 of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held March 31, 2005, which was filed by the Registrant in definitive form with the Commission on February 28, 2005 and is incorporated herein by reference.
PART IV
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Hancock Holding Company and Consolidated Subsidiaries
(a) 1. and 2. Consolidated Financial Statements:The following have been incorporated herein from the Company’s 2004 Annual Report to Stockholders and are incorporated herein by reference:
- Management's Report on Internal Control over Financial Reporting
- Reports of Independent Registered Public Accounting Firm
- Consolidated Balance Sheets as of December 31, 2004 and 2003
- Consolidated Statements of Earnings for the three years ended December 31, 2004
- Consolidated Statements of Stockholders' Equity for the three years ended December 31, 2004
- Consolidated Statements of Comprehensive Earnings for the three years ended December 31, 2004
- Consolidated Statements of Cash Flows for the three years ended December 31, 2004
- Notes to Consolidated Financial Statements for the three years ended December 31, 2004
- Financial Highlights at and as of each of the five years ended December 31, 2004
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:
(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 dated November 8, 1990 (filed as Exhibit 3.2 to the Registrant's Form 10-K
for the year ended December 31, 1990 and incorporated herein by reference).
(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).
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(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) 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 thereunder does not
exceed 10 percent of the total assets of the Registrant and its 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 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).
(10.5) Site Lease Agreement between Hancock Bank and City of Gulfport, Mississippi dated as of March 1,
1989 (filed as Exhibit 10.4 to the Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.6) Project Lease Agreement between Hancock Bank and City of Gulfport, Mississippi dated as of March
1, 1989 (filed as Exhibit 10.5 to the Registrant's Form 10-K for the year ended December 31, 1989
and incorporated herein by reference).
(10.7) Deed of Trust dated as of March 1, 1989 from Hancock Bank to Deposit Guaranty National Bank as
trustee (filed as Exhibit 10.6 to the Registrant's Form 10-K for the year ended December 31, 1989
and incorporated herein by reference).
(10.8) Trust Indenture between City of Gulfport, Mississippi and Deposit Guaranty National Bank dated as
of March 1, 1989 (filed as Exhibit 10.7 to the Registrant's Form 10-K for the year ended December
31, 1989 and incorporated herein by reference).
(10.9) Guaranty Agreement dated as of March 1, 1989 from Hancock Bank to Deposit Guaranty National Bank
as trustee (filed as Exhibit 10.8 to the Registrant's Form 10-K for the year ended December 31,
1989 and incorporated herein by reference).
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(10.10) Bond Purchase Agreement dated as of February 23, 1989 among Hancock Bank, J. C. Bradford & Co. and
City of Gulfport, Mississippi (filed as Exhibit 10.9 to the Registrant's Form 10-K for the year
ended December 31, 1989 and incorporated herein by reference).
(13) Annual Report to Stockholders for year ending December 31, 2004 furnished for the information of
the Commission only and not deemed "filed" except for those portions which are specifically
incorporated herein by reference).
(21) Proxy Statement for the Registrant's Annual Meeting of Shareholders on March 31, 2005 (deemed "filed"
for the purposes of this Form 10-K only for those portions which are specifically incorporated
herein by reference).
(22) Subsidiaries of the Registrant.
Jurisdiction Holder of
Name of Incorporation Outstanding Stock *
---- ---------------- -------------------
Hancock Bank Mississippi Hancock Holding Company
Hancock Bank of Louisiana Louisiana Hancock Holding Company
HBLA Properties, LLC Louisiana Hancock Bank of Louisiana
Hancock Bank of Florida Florida Hancock Holding Company
Magna Insurance Company Mississippi Hancock Holding Company
Harrison Life Insurance Company Mississippi 79% owned by Magna Ins. Co.
Hancock Bank Securities Corp., LLC Mississippi Hancock Bank
Hancock Insurance Agency Mississippi Hancock Bank
Hancock Insurance Agency of AL, Inc. Alabama Hancock Insurance Agency
Hancock Investment Services, Inc. Mississippi Hancock Bank
Hancock Investment Services of MS, Inc. Mississippi Hancock Investment Services, Inc.
Hancock Investment Services of LA, Inc. Louisiana Hancock Investment Services, Inc.
Hancock Investment Services of FL, Inc. Florida Hancock Investment Services, Inc.
Town Properties, Inc. Mississippi Hancock Bank
The Gulfport Building, Inc. Mississippi Hancock Bank
Harrison Finance Company Mississippi Hancock Bank
Hancock Mortgage Corporation Mississippi Hancock Bank and
Hancock Bank Securities Corp.
* All are 100% owned except as indicated.
(23) Consent of Independent Registered Public Accounting Firm - KPMG LLP
(23.1) Consent of Independent Registered Public Accounting Firm - Deloitte & Touche LLP
(23.2) Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP
(31) Rule 13a-14(a)/15d-14(a) - Certifications of George A. Schloegel and Carl J. Chaney
(32) Section 1350 Certifications of George A. Schloegel and Carl J. Chaney
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SIGNATURES
Pursuant to the requirements 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
March 15, 2005 By: /s/ George A. Schloegel
- -------------------- ----------------------------------
Date George A. Schloegel
Vice-Chairman of the Board &
Chief Executive Officer
March 15, 2005 By: /s/ Carl J. Chaney
- -------------------- ----------------------------------
Date Carl J. Chaney
Executive Vice President &
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.
/s/ Leo W. Seal, Jr. President, March 15, 2005
- ---------------------------- Director
Leo W. Seal, Jr.
/s/ Joseph F. Boardman, Jr. Chairman of the Board, March 15, 2005
- ---------------------------- Director
Joseph F. Boardman, Jr.
/s/ George A. Schloegel Vice Chairman of the Board, March 15, 2005
- ---------------------------- Director
George A. Schloegel Chief Executive Officer
/s/ James B. Estabrook, Jr. Director March 15, 2005
- ----------------------------
James B. Estabrook, Jr.
- ---------------------------- Director March 15, 2005
Charles H. Johnson
/s/ L. A. Koenenn, Jr. Director, Emeritus March 15, 2005
- ----------------------------
L. A. Koenenn, Jr.
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(signatures continued)
Director, Emeritus March 15, 2005
- ----------------------------
Victor Mavar
- ---------------------------- Director March 15, 2005
Christine L. Smilek
- ---------------------------- Director March 15, 2005
Frank E. Bertucci
/s/ James H. Horne Director March 15, 2005
- ----------------------------
James H. Horne
/s/ Carl J. Chaney Executive Vice President and March 15, 2005
- ---------------------------- Chief Financial Officer
Carl J. Chaney
Director March 15, 2005
- ----------------------------
Robert W. Roseberry
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