The Company also controls interest rate risk by emphasizing the core relationship aspects of non-certificate depositor accounts and selected maturity targets for certificate of deposit accounts. As of March 31, 2005, regular savings and club accounts represented $288.3 million and money market accounts and now accounts totaled $1.0 billion. Excluding public fund accounts, this represents 54.6% of total interest bearing deposit accounts.
During the past year, the Company has controlled the interest rate sensitivity of its depositor accounts through tight control of funding costs. Excluding public funds, interest-bearing transaction rates have been flat, while time deposits have gone up only 4 basis points, March 2005 versus March 2004. Average interest-bearing deposit balances were down 2.32%, but most of these dollars disinter mediated into time deposits, which grew 12.73%. During this period, the Federal Reserve increased rates by 175 basis points. At the same time, the Company’s loan-to-deposit ratio has risen from 69.93% to 72.09%, and the average earning asset yield has grown by 14 basis points. This growth was driven primarily by continued emphasis on variable rate loans that adjusted with the rising rate environment. The impact of the strategies can be seen in the Company’s static gap report as of March 31, 2005.
Analysis of Interest Sensitivity at March 31, 2005
Within 6 months 1 to 3 > 3 Non-Sensitive
Overnight 6 months to 1 year years years Balance Total
---------- -------------- ----------- ------------ ------------ ---------- -----------
(amounts in thousands)
Assets
Securities $ - $ 105,257 $ 115,525 $ 480,226 $ 713,029 $ - $ 1,414,037
Federal funds sold & Short-term
investments 94,399 - 531 - - - 94,930
Loans 42,004 1,329,214 223,524 607,022 548,882 - 2,750,646
Other assets - - - - - 509,403 509,403
---------- -------------- ----------- ------------ ------------ ---------- ------------
Total Assets $136,403 $ 1,434,471 $ 339,580 $ 1,087,248 $ 1,261,911 $ 509,403 $ 4,769,016
========== ============== =========== ============ ============ ========== ============
Liabilities
Interest bearing transaction deposits $ - $ 849,453 $ 255,005 $ 721,877 $ 69,207 $ - $ 1,895,542
Time deposits - 392,857 125,324 560,210 188,937 - 1,267,328
Non-interest bearing deposits - - - - 724,338 - 724,338
Federal funds purchased 2,175 - - - - - 2,175
Borrowings 209,580 4 4 21 54,744 - 264,353
Other liabilities - - - - - 155,729 155,729
Shareholders' Equity - - - - - 459,551 459,551
---------- -------------- ----------- ------------ ------------ ---------- ------------
Total Liabilities & Equity $ 211,755 $ 1,242,314 $ 380,333 $ 1,282,108 $ 1,037,226 $ 615,280 $ 4,769,016
========== ============== =========== ============ ============ ========== ============
Interest sensitivity gap $ (75,352) $ 192,157 $ (40,753) $ (194,860) $ 224,685 $(105,877)
Cumulative interest rate sensitivity gap $ (75,352) $ 116,805 $ 76,052 $ (118,808) $ 105,877 $ -
Cumulative interest rate
sensitivity gap as a percentage of
total earning assets (2.0)% 3.0 % 2.0 % (3.0)% 2.0 %
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 & 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 %
Page 29 of 34
Certain assumptions in assessing interest rate risk were employed in preparing data for the Company included in the preceding tables portraying the Company’s interest rate risk sensitivity. These assumptions relate to interest rates, loan and deposit growth, pricing, loan prepayment speeds, deposit decay rates, securities portfolio strategy and market value of certain assets under the various interest rate scenarios. Even if interest rates change in the designated amounts, there can be no assurance that the Company’s assets and liabilities would perform as anticipated. In addition, a change in 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 the net interest income than indicated above.
As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented. For example, although certain assets and liabilities may have similar maturities or periods to repricing, 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. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. The Company considers all of these factors in monitoring its exposure to interest rate risk.
Even though permissible under the Asset Liability Management Policy approved by the Board of Directors, the Company is not currently engaged in the use of derivatives to control interest rate risk. Management and the Board of Directors review the need for such activities on a regular basis as part of its monthly interest rate risk analysis.
Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company’s business activities.
The foregoing disclosures related to the market risk of the Company should be read in conjunction with the Company’s audited consolidated financial statements, related notes and management’s discussion and analysis for the year ended December 31, 2004 included in the Company’s 2004 Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURESThe Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2005, (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act.
During the Company’s last fiscal quarter ended March 31, 2005, there have not been any changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Page 30 of 34
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSOn February 4, 2004 the Company completed the redemption/conversion of substantially all $37.1 million of the 8% Cumulative Convertible Preferred Stock issued in partial payment for the acquisition of Lamar Capital Corporation in July, 2001. The conversion factor was .6666 shares of Hancock Holding Company common stock for each share of the preferred stock. A total of 7,304 shares of the preferred stock was redeemed for cash at the contract price of $20.00 per share plus pro rated dividends of $0.1511 per share.
In July 2000, the Company announced the execution of a stock buyback program that provides for the repurchase of up to 10 % of the Company’s issued common stock. The program authorizes the repurchase of approximately 3,320,000 shares of the Company’s issued common stock.
On February 26, 2004 the Company’s Board of Directors declared a two-for-one stock split in the form of a 100% common stock dividend. The additional shares were payable March 18, 2004 to shareholders of record at the close of business on March 8, 2004.
All information concerning earnings per share, dividends per share, and number of shares outstanding has been adjusted to give effect to this split.
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, 2005 - Jan. 31, 2005 993 (2) $ 31.4890 - 721,310
Feb. 1, 2005 - Feb. 28, 2005 16,608 (3) 31.3067 16,200 705,110
Mar. 1, 2005 - Mar. 31, 2005 26,812 (4) 32.0913 23,809 681,301
------------------- ------------------ ---------------------
Total as of Mar. 31, 2005 44,413 31.6290 40,009
=================== ================== =====================
(1) The Company publicly announced its stock buy-back program on July 18, 2000.
(2) 993 shares were purchased on the open market during January in order to satisfy obligations
pursuant to the Company's long term incentive plan that was established in 1996.
(3) 408 shares were purchased on the open market during February in order to satisfy obligations
pursuant to the Company's long term incentive plan that was established in 1996.
(4) 3,003 shares were purchased on the open market during March in order to satisfy obligations
pursuant to the Company's long term incentive plan that was established in 1996.
Page 31 of 34
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. The Company's Annual Meeting was held on March 31, 2005.
B. The Directors elected at the Annual Meeting held on March 31, 2005 were:
Votes Cast
----------
For Withheld
--- --------
1. Alton G. Bankston 27,405,691 899,757
2. Frank E. Bertucci 26,964,929 1,340,519
3. Joseph F. Boardman, Jr. 26,945,572 1,359,870
4. Don P. Descant 27,407,712 897,736
5. Charles H. Johnson, Sr. 26,961,085 1,344,363
6. John H. Pace 27,386,957 918,491
Continuing Directors:
7. James B. Estabrook, Jr.
8. James H. Horne
9. Robert W. Roseberry
10. George A. Schloegel
11. Leo W. Seal, Jr.
12. Christine L. Smilek
C. KPMG was approved as the independent public accountants of the Company.
For Against Abstained
---------- ---------- -----------
28,208,377 47,391 50,154
D. The 2005 Long Term Incentive Plan was approved.
For Against Abstained
---------- ---------- -----------
18,205,333 5,928,587 187,872
ITEM 5. OTHER INFORMATION
Not ApplicablePage 32 of 34
ITEM 6. EXHIBITS
Exhibits:
1. Exhibit 31 - Rule 13a-14(a) / 15d-14(a) Certifications
2. Exhibit 32 - Section 1350 Certifications
3. Exhibit 99.1 - Form 8-K filed on January 5, 2005.
4. Exhibit 99.2 - Form 8-K filed on January 18, 2005.
5. Exhibit 99.3 - Form 8-K filed on February 23, 2005.
6. Exhibit 99.4 - Form 8-K filed on March 17, 2005.
Page 33 of 34
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
May 9, 2005 By: /s/ George A. Schloegel
- ----------------- -------------------------------------------
Date George A. Schloegel
Vice-Chairman of the Board &
Chief Executive Officer
May 9, 2005 By: /s/ Carl J. Chaney
- ----------------- -------------------------------------------
Date Carl J. Chaney
Executive Vice President &
Chief Financial Officer
Page 34 of 34