Hancock Whitney Corporation - 6 (HWC) 10-Q 2007 Q2 Quarterly report

UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

                                                                                                OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to ________________________

Commission File Number     0-13089

HANCOCK HOLDING COMPANY

 (Exact name of registrant as specified in its charter)

Mississippi	64-0693170
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

One Hancock Plaza, P.O. Box 4019, Gulfport, Mississippi	39502
(Address of principal executive offices)	(Zip Code)

(228) 868-4000

 (Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, address and fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

                                       Yes    x      No    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    x            Accelerated filer   o          Non-accelerated filer    o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

                                       Yes     o      No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

32,020,143 common shares were outstanding as of July 31, 2007 for financial statement purposes.

Hancock Holding Company

Index

		Page Number
Part I.	Financial Information
ITEM 1.	Financial Statements Condensed Consolidated Balance Sheets — June 30, 2007 (unaudited) and December 31, 2006	1
	Condensed Consolidated Statements of Income (unaudited) — Three and six months ended June 30, 2007 and 2006	2
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – Six months ended June 30, 2007 and 2006	3
	Condensed Consolidated Statements of Cash Flows (unaudited) — Six Months Ended June 30, 2007 and 2006	4
	Notes to Condensed Consolidated Financial Statements (unaudited) — June 30, 2007	5-22
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23-34
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	35
ITEM 4.	Controls and Procedures	35
Part II.	Other Information
ITEM 1A.	Risk Factors	36
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
ITEM 4.	Submission of Matters to a Vote of Security Holders	37
ITEM 6.	Exhibits	37
Signatures		38

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)

	June 30, 2007 (unaudited)			December 31, 2006
ASSETS
Cash and due from banks (non-interest bearing)	$	183,330		$	190,114
Interest-bearing time deposits with other banks		12,616			10,197
Federal funds sold		184,328			212,242
Trading securities		1,731			—
Securities available for sale, at fair value         (amortized cost of $1,642,287 and $1,916,944)		1,615,473			1,903,658
Loans held for sale		25,198			16,946
Loans		3,433,605			3,267,058
Less: allowance for loan losses		(46,227	)		(46,772	)
unearned income		(17,453	)		(17,420	)
Loans, net		3,369,925			3,202,866
Property and equipment, net of accumulated         depreciation of $69,860 and $66,043		182,246			140,554
Other real estate, net		1,063			568
Accrued interest receivable		34,445			32,984
Goodwill, net		62,277			62,277
Other intangible assets, net		9,336			10,355
Life insurance contracts		116,554			110,751
Reinsurance receivables		34,497			38,042
Deferred tax asset, net		22,141			16,544
Other assets		19,646			16,467
Total assets	$	5,874,806		$	5,964,565
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	938,638		$	1,057,358
Interest-bearing savings, NOW, money market            and time		4,039,032			3,973,633
Total deposits		4,977,670			5,030,991
Federal funds purchased		3,000			3,800
Securities sold under agreements to repurchase		196,639			218,591
Long-term notes		253			258
Policy reserves and liabilities		82,465			93,669
Other liabilities		65,081			58,846
Total liabilities		5,325,108			5,406,155
Stockholders’ Equity
Common Stock-$3.33 par value per share; 350,000,000         shares authorized, 32,093,858 and 32,666,052 issued         and outstanding, respectively		106,873			108,778
Capital surplus		115,735			139,099
Retained earnings		358,445			334,546
Accumulated other comprehensive loss, net		(31,355	)		(24,013	)
Total stockholders’ equity		549,698			558,410
Total liabilities and stockholders’ equity	$	5,874,806		$	5,964,565
See notes to unaudited condensed consolidated financial statements.

1

Hancock Holding Company and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Interest income:
Loans, including fees	$	63,202	$	56,339	$	124,054	$	109,599
Securities - taxable		19,397		24,451		39,723		47,487
Securities - tax exempt		1,550		1,659		3,198		3,352
Federal funds sold		722		3,915		3,588		7,501
Other investments		66		39		84		54
Total interest income		84,937		86,403		170,647		167,993
Interest expense:
Deposits		31,557		26,791		64,006		49,812
Federal funds purchased and securities sold     under agreements to repurchase		1,827		1,593		3,684		3,252
Long-term notes and other interest expense		10		252		12		844
Total interest expense		33,394		28,636		67,702		53,908
Net interest income		51,543		57,767		102,945		114,085
Provision for (reversal of) loan losses, net		1,238		—		2,449		(705	)
Net interest income after provision for  (reversal of) loan losses		50,305		57,767		100,496		114,790
Noninterest income:
Service charges on deposit accounts		10,471		9,223		19,662		17,107
Other service charges, commissions and fees		14,704		12,732		27,844		25,235
Securities gains, net		34		—		40		118
Other income		5,018		3,987		8,575		8,490
Total noninterest income		30,227		25,942		56,121		50,950
Noninterest expense:
Salaries and employee benefits		24,837		26,400		51,401		52,602
Net occupancy expense		4,469		3,474		8,542		7,134
Equipment rentals, depreciation and maintenance		2,768		2,816		5,041		5,484
Amortization of intangibles		384		507		807		1,181
Other expense		19,399		17,975		35,205		33,937
Total noninterest expense		51,857		51,172		100,996		100,338
Net income before income taxes		28,675		32,537		55,621		65,402
Income tax expense		8,352		10,539		16,068		21,393
Net income	$	20,323	$	21,998	$	39,553	$	44,009
Basic earnings per share	$	0.63	$	0.68	$	1.22	$	1.36
Diluted earnings per share	$	0.62	$	0.66	$	1.20	$	1.32
Dividends paid per share	$	0.240	$	0.220	$	0.480	$	0.415
Weighted avg. shares outstanding-basic		32,233		32,531		32,447		32,462
Weighted avg. shares outstanding-diluted		32,749		33,322		33,024		33,237
See notes to unaudited condensed consolidated financial statements.

2

Hancock Holding Company and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share and per share data)

							Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Loss, net			Unearned Compensation			Total
	Common Stock
	Shares			Amount
Balance, January 1, 2006		32,301,123		$	107,563		$	129,222		$	262,055		$	(22,066	)	$	(2,343	)	$	474,431
Comprehensive income
Net income per consolidated         statements of income		—			—			—			44,009			—			—			44,009
Net change in fair value of         securities available for sale, net of tax		—			—			—			—			(21,593	)		—			(21,593	)
Comprehensive income																				22,416
Cash dividends paid ($0.415 per common share)		—			—			—			(13,564	)		—			—			(13,564	)
Common stock issued, long-term incentive plan   including income tax benefit of $524		292,899			975			7,058			—			—			—			8,033
Compensation expense, long-term incentive plan		—			—			2,329			—			—			—			2,329
SFAS No. 123(R) reclass of unearned   compensation		—			—			(2,343	)		—			—			2,343			—
Repurchase/retirement of common stock		(39,393	)		(131	)		(4,238	)		—			—			—			(4,369	)
Balance, June 30, 2006		32,554,629		$	108,407		$	132,028		$	292,500		$	(43,659	)	$	—		$	489,276
Balance, January 1, 2007		32,666,052		$	108,778		$	139,099		$	334,546		$	(24,013	)	$	—		$	558,410
Comprehensive income
Net income per consolidated         statements of income		—			—			—			39,553			—			—			39,553
Recognized pension and other employee         benefit plan cost		—			—			—			—			443			—			443
Net change in fair value of         securities available for sale, net of tax		—			—			—			—			(7,785	)		—			(7,785	)
Comprehensive income																				32,211
Cash dividends paid ($0.480 per common share)		—			—			—			(15,654	)		—			—			(15,654	)
Common stock issued, long-term incentive plan,   including income tax benefit of $96		88,826			296			433			—			—			—			729
Compensation expense, long-term incentive plan		—			—			1,070			—			—			—			1,070
Repurchase/retirement of common stock		(661,020	)		(2,201	)		(24,867	)		—			—			—			(27,068	)
Balance, June 30, 2007		32,093,858		$	106,873		$	115,735		$	358,445		$	(31,355	)	$	—		$	549,698
See notes to unaudited condensed consolidated financial statements.

3

Hancock Holding Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

	Six Months Ended June 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	39,553		$	44,009
Adjustments to reconcile net income to net                   cash provided by operating activities:
Depreciation and amortization		6,034			4,759
Provision for (reversal of) loan losses, net		2,449			(705	)
Gain on sales of ORE		(761	)		(146	)
Deferred tax benefit		(773	)		(1,397	)
Increase in cash surrender value of life insurance contracts		(2,531	)		(1,754	)
Gain on sales/paydowns of securities available for sale, net		(40	)		(118	)
Gain on disposal of other assets		(16	)		(4	)
Accretion of securities premium/discount, net		(1,973	)		(6,263	)
Amortization of mortgage servicing rights		179			289
Amortization of intangible assets		807			1,182
Stock-based compensation expense		1,070			2,329
(Increase) decrease in accrued interest receivable		(1,461	)		1,604
(Decrease) increase in accrued expenses		(2,602	)		18,632
(Decrease) increase in other liabilities		986			(600	)
(Decrease) increase in interest payable		(1,047	)		1,351
Decrease in policy reserves and liabilities		(11,204	)		(7,356	)
Decrease in reinsurance receivable		3,545			7,057
Decrease (increase) in other assets		(2,137	)		2,244
Increase in loans held for sale		(8,252	)		(486	)
Excess tax benefit from share based payments		(96	)		(524	)
Other, net		691			24
Net cash provided by operating activities		22,421			64,127
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing time deposits		(2,419	)		(1,674	)
Proceeds from sales of securities available for sale		8,969			9,954
Proceeds from maturities of securities available for sale		650,546			421,946
Purchases of securities available for sale		(382,845	)		(634,240	)
Net decrease (increase) in federal funds sold		27,914			(2,163	)
Net increase in loans		(170,422	)		(58,128	)
Purchases of property and equipment		(44,261	)		(31,347	)
Proceeds from sales of property and equipment		204			250
Proceeds from sales of other real estate		1,180			1,293
Net cash provided by (used in) investing activities		88,866			(294,109	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits		(53,321	)		257,507
Net decrease in federal funds purchased and             securities sold under agreements to repurchase		(22,752	)		(29,373	)
Repayments of long-term notes		(5	)		(50,001	)
Dividends paid		(15,654	)		(13,564	)
Proceeds from exercise of stock options		633			8,034
Repurchase/retirement of common stock		(27,068	)		(4,369	)
Excess tax benefit from stock option exercises		96			524
Net cash (used in) provided by financing activities		(118,071	)		168,758
NET DECREASE IN CASH AND DUE FROM BANKS		(6,784	)		(61,224	)
CASH AND DUE FROM BANKS, BEGINNING		190,114			271,104
CASH AND DUE FROM BANKS, ENDING	$	183,330		$	209,880
SUPPLEMENTAL INFORMATION:
Income taxes paid	$	17,003		$	2,103
Interest paid, including capitalized interest             of $717 and $97, respectively		68,750			52,558
Restricted stock issued to employees of Hancock		137			2,460
SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES
Transfers from loans to other real estate	$	915		$	842
Financed sale of foreclosed property		—			253
See notes to unaudited condensed consolidated financial statements.

4

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

     The condensed consolidated financial statements of Hancock Holding Company and all majority-owned subsidiaries (the “Company”) included herein are unaudited; however, they include all adjustments all of which are of a normal recurring nature which, in the opinion of management, are necessary to present fairly the Company’s Condensed Consolidated Balance Sheets at June 30, 2007 and December 31, 2006, the Company’s Condensed Consolidated Statements of Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 and the Company’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2007 and 2006. Although the Company believes the disclosures in these financial statements are adequate to make the interim information presented not misleading, certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006 and the notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for the six months ended June 30, 2007 are not necessarily indicative of the results expected for the full year.

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to allowance for loan losses, investments, intangible assets and goodwill, property, plant and equipment, income taxes, insurance, employment benefits and contingent liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

     Certain reclassifications have been made to conform prior year financial information to the current period presentation. These reclassifications had no material impact on the condensed consolidated financial statements.

Critical Accounting Policies

        There have been no material changes or developments in the Company’s evaluation of accounting estimates and underlying assumptions or methodologies that the Company believes to be Critical Accounting Policies and Estimates as disclosed in our Form 10-K, for the year ended December 31, 2006.

2. Securities

Available for Sale Securities

        For the six months ended June 30, 2007, a subsidiary of the Company, Magna Insurance Company, sold thirty securities out of its portfolio to provide liquidity for surrenders of annuities for Magna Insurance Company. These securities had a gross loss of $37,164.

Trading Securities

        As of June 30, 2007, the Company held in trust $1.7 million in securities related to its own stock for the 2005 Nonqualified Deferred Compensation Plan.

5

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

3. Loans and Allowance for Loan Losses

     Loans, net of unearned income, totaled $3.4 billion and $3.3 billion at June 30, 2007 and December 31, 2006, respectively. The Company also held $25.2 million and $16.9 million in loans held for sale at June 30, 2007 and December 31, 2006, respectively, carried at lower of cost or fair value. These loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.

        In some instances, loans are placed on nonaccrual status. All accrued but uncollected interest related to the loan is deducted from income in the period the loan is assigned a nonaccrual status. For such period as a loan is in nonaccrual status, any cash receipts are applied first to principal, second to expenses incurred to cause payment to be made and lastly to the recovery of any reversed interest income and interest that would be due and owing subsequent to the loan being placed on nonaccrual status.

        The Company’s investments in impaired loans at June 30, 2007 and December 31, 2006 were $22.9 million and $26.8 million, respectively. The amount of interest that was not recognized on nonaccrual loans would not have had a material effect on earnings for the three and six months ended June 30, 2007 and June 30, 2006.

        Nonaccrual loans and foreclosed assets, which make up total non-performing assets, amounted to approximately 0.25% and 0.13% of total loans at June 30, 2007 and December 31, 2006, respectively. Interest recognized on nonaccrual loans is immaterial to the Company’s operating results.

        The following table presents, for the periods indicated, non-performing assets:

	June 30, 2007		December 31, 2006
	(In thousands)
Non-accrual loans	$	7,544	$	3,500
Foreclosed assets		1,146		681
Total non-performing assets	$	8,690	$	4,181

6

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

3.  Loans and Allowance for Loan Losses (continued)

The following table sets forth, for the periods indicated, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off (In thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Balance of allowance for loan losses   at beginning of period	$	46,517	$	73,961	$	46,772	$	74,558
Provision for (reversal of) loan losses, net		1,238		—		2,449		(705	)
Loans charged-off:
Commercial, real estate and mortgage		978		1,082		1,481		1,685
Direct and indirect consumer		1,179		1,500		2,394		3,438
Finance company		648		417		1,281		858
Demand deposit accounts		716		1,743		1,441		2,683
Total charge-offs		3,521		4,742		6,597		8,664
Recoveries of loans previously   charged-off:
Commercial, real estate and mortgage		1,064		435		1,375		2,625
Direct and indirect consumer		383		594		929		1,046
Finance company		123		136		267		329
Demand deposit accounts		423		576		1,032		1,771
Total recoveries		1,993		1,741		3,603		5,771
Net charge-offs		1,528		3,001		2,994		2,893
Balance of allowance for loan losses     at end of period	$	46,227	$	70,960	$	46,227	$	70,960

        The following table presents the makeup of allowance for loan losses by:

	June 30, 2007		December 31, 2006
	(In thousands)
Balance of allowance for loan losses
Non-impaired	$	39,280	$	38,986
Impaired		6,947		7,786
Total allowance for loan losses	$	46,227	$	46,772

        As of June 30, 2007 and December 31, 2006, the Company had $18.2 million and $17.2 million, respectively, in loans carried at fair value.

7

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

3.  Loans and Allowance for Loan Losses (continued)

    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:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Ratios :
Net charge-offs to average net loans (annualized)		0.18%		0.40%		0.18%		0.20%
Net charge-offs to period-end net loans (annualized)		0.18%		0.39%		0.18%		0.19%
Allowance for loan losses to average net loans		1.37%		2.37%		1.39%		2.38%
Allowance for loan losses to period-end net loans		1.35%		2.35%		1.35%		2.35%
Net charge-offs to loan loss allowance		3.31%		4.23%		6.48%		4.08%
Provision for loan losses to net charge-offs		81.02%		0.00%		81.80%		-24.39%

8

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

4. Goodwill and Other Intangible Assets

     Goodwill represents costs in excess of the fair value of net assets acquired in connection with purchase business combinations. In accordance with the provisions of Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangibles, the Company tests its goodwill for impairment annually. No impairment charges were recognized as of June 30, 2007. The carrying amount of goodwill was $62.3 million as of June 30, 2007 and December 31, 2006.

     The following tables present information regarding the components of the Company’s identifiable intangible assets, and related amortization for the dates indicated (In thousands):

	As of June 30, 2007				As of December 31, 2006
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable intangible assets:
Core deposit intangibles	$	14,137	$	7,895	$	14,137	$	7,290
Value of insurance business acquired		3,768		1,615		3,767		1,459
Non-compete agreements		368		216		368		179
Trade name		100		40		100		30
Total	$	18,373	$	9,766	$	18,372	$	8,958

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Aggregate amortization expense for:
Core deposit intangibles	$	331	$	342	$	605	$	683
Value of insurance businesses acquired		29		138		155		418
Non-compete agreements		19		27		37		81
Trade name		5		—		10		—
Total	$	384	$	507	$	807	$	1,182

9

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

4.  Goodwill and Other Intangible Assets (continued)

     The remaining amortization expense for the core deposit intangibles in 2007 is estimated to be approximately $605,000. The amortization expense for core deposit intangibles is estimated to be approximately $1.1 million in 2008, $1.1 million in 2009, $1.1 million in 2010, $0.9 million in 2011 and the remainder of $1.4 million thereafter. The amortization of the value of business acquired, non-compete agreements and trade name are expected to approximate $220,000 for the remainder of 2007, $404,000 in 2008, $370,000 in 2009, $311,000 in 2010, $267,000 in 2011 and the remainder of $792,000 thereafter. The weighted-average amortization period used for intangibles is 10 years.

5.  Mortgage Banking (including Mortgage Servicing Rights)

     The Company adopted SFAS 156, Accounting for Servicing of Financial Assets (“SFAS No. 156”) on January 1, 2007 without material impact. SFAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and permits an entity to subsequently measure those servicing assets and servicing liabilities at fair value. Under SFAS No. 156, the Company decided to continue to use the amortization method instead of adopting the fair value measurement method. Management has determined that it has one class of servicing rights – mortgage servicing rights – which are based on the type of loan. The following are the risk characteristics of the underlying financial assets used to stratify servicing assets for purposes of measuring impairment: interest rate, type of product (fixed versus variable), duration and asset quality. The fair value of the mortgage servicing rights was $1.7 million and $2.2 million as of June 30, 2007 and December 31, 2006, respectively. The fair value was based upon Bloomberg prepayment speeds for the performing portion of the portfolio and actual prepayment speeds for the watch list portion of the portfolio. The following table shows the amount (In thousands) of contractually specified fees for the three and six months ended June 30, 2007 and 2006, respectively:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Servicing fees	$	160	$	191	$	326	$	410
Late fees		16		7		33		14
Ancillary fees		2		7		10		14
Total	$	178	$	205	$	369	$	438

10

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

5.  Mortgage Banking (including Mortgage Servicing Rights) (continued)

        The gross carrying amount of mortgage servicing rights is equal to the net carrying amount. There was no valuation allowance on the mortgage servicing rights portfolio as of June 30, 2007 or December 31, 2006.

        The changes in the carrying amounts of mortgage servicing rights as of June 30, 2007 and as of December 31, 2006 are as follows ( in thousands):

	Net Carrying Amount
Balance as of December 31, 2005	$	1,576
Additions		21
Disposals		(107	)
Amortization		(549	)
Balance as of December 31, 2006		941
Additions		5
Disposals		(38	)
Amortization		(179	)
Balance as of June 30, 2007	$	729

          Amortization of servicing rights is estimated to be approximately $170,000 for the remainder of 2007, $226,000 in 2008, $157,000 in 2009, $101,000 in 2010, $54,000 in 2011, and the remainder of $21,000 thereafter.

11

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

6. Comprehensive Income

        Comprehensive income is the change in equity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

        In addition to net income, the Company has identified changes related to other nonowner transactions in the Consolidated Statements of Stockholders’ Equity. Changes in other nonowner transactions consist of changes in the fair value of securities available for sale and liability adjustments for pension and post-retirement benefit plans.

        In the calculation of comprehensive income, certain reclassification adjustments are made to avoid duplicating items that are displayed as part of net income and other comprehensive income in that period or earlier periods. The following table reflects the reclassification amounts and the related tax effects of changes in fair value of securities available for sale and the liability adjustment for pension and post-retirement benefit plans as of December 31, 2006 and as of June 30, 2007.

	Before-Tax Amount			Tax Effect			Accumulated Other Comprehensive Loss
Balance, December 31, 2005	$	(33,271	)	$	11,205		$	(22,066	)
Minimum pension liability		1,685			(628	)		1,057
Adoption of SFAS No. 158		(12,663	)		4,719			(7,944	)
Net change in fair value of securities available   for sale		3,100			(1,352	)		1,748
Less adjustment for net losses included in income		5,169			(1,977	)		3,192
Balance, December 31, 2006		(35,980	)		11,967			(24,013	)
Recognized pension and other employee benefit   plan cost		705			(262	)		443
Net change in fair value of securities available for sale		(13,488	)		5,728			(7,760	)
Less adjustment for net (gains) included in income		(40	)		15			(25	)
Balance, June 30, 2007	$	(48,803	)	$	17,448		$	(31,355	)

12

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

7. Earnings Per Share

     Following is a summary of the information used in the computation of earnings per common share (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Net income - used in computation of      earnings per share	$	20,323	$	21,998	$	39,553	$	44,009
Weighted average number of shares      outstanding - used in computation of basic      earnings per share		32,233		32,531		32,447		32,462
Effect of dilutive securities      Stock options and restricted stock awards		516		791		577		775
Weighted average number of shares      outstanding plus effect of dilutive      securities - used in computation of      diluted earnings per share		32,749		33,322		33,024		33,237

There were 60,585 and 42,347 anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2007, respectively. There were 53,359 and 89,894 anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2006, respectively.

13

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

8. Stock-Based Payment Arrangements

Stock Option Plans

     At June 30, 2007, the Company had two stock option plans. The 1996 Hancock Holding Company Long-Term Incentive Plan (the “1996 Plan”) that was approved by the Company’s shareholders in 1996 was designed to provide annual incentive stock awards. Awards as defined in the 1996 Plan include, with limitations, stock options (including restricted stock options), restricted and performance shares, and performance stock awards, all on a stand-alone, combination or tandem basis. A total of fifteen million (15,000,000) common shares can be granted under the 1996 Plan with an annual grant maximum of two percent (2%) of the Company’s outstanding common stock as reported for the fiscal year ending immediately prior to such plan year. Grants of restricted stock awards are limited to one-third of the grant totals.

     The exercise price is equal to the market price on the date of grant, except for certain of those granted to major stockholders where the option price is 110% of the market price. Option awards generally vest based on five years of continuous service and have ten-year contractual terms. The Company’s policy is to issue new shares upon share option exercise and upon restricted stock award vesting. The 1996 Long-Term Incentive Plan expired in 2006 and no additional awards may be granted under the 1996 Plan.

     In March of 2005, the stockholders of the Company approved Hancock Holding Company’s 2005 Long-Term Incentive Plan (the “2005 Plan”). The 2005 Plan is designed to enable employees and directors to obtain a proprietary interest in the Company and to attract and retain outstanding personnel. The 2005 Plan provides that awards for up to an aggregate of five million (5,000,000) shares of the Company’s common stock may be granted during the term of the 2005 Plan. The 2005 Plan limits the number of shares for which awards may be granted during any calendar year to two percent (2%) of the outstanding Company’s common stock as reported for the fiscal year ending immediately prior to such plan year.

     The fair value of each option award is estimated on the date of grant using Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. No grants have been issued in 2007. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock and other factors. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Six Months Ended June 30, 2006
Expected volatility		29.87	%
Expected dividends		1.61% - 1.96	%
Expected term (in years)		5 - 8
Risk-free rates		4.30% - 4.54	%

14

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

8. Stock-Based Payment Arrangements (continued)

   A summary of option activity under the plans for the six months ended June 30, 2007, and changes during the six months then ended is presented below:

Options	Number of Shares		Weighted- Average Exercise Price ($)		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2007	1,511,261		$	27.04		6.6
Granted	—		$	—		—
Exercised	(110,456	)	$	14.98		4.0	$	3,457,259
Forfeited or expired	(4,100	)	$	35.25		7.1
Outstanding at June 30, 2007	1,396,705		$	27.97		6.3	$	13,380,615
Exercisable at June 30, 2007	1,131,634		$	24.78		5.8	$	14,452,527
Share options expected to vest	232,777		$	41.58		8.6		N/A

   The total intrinsic value of options exercised during the six months ended June 30, 2007 and 2006 was $3.5 million and $7.6 million, respectively.

     A summary of the status of the Company’s nonvested shares as of June 30, 2007, and changes during the six months ended June 30, 2007, is presented below:

	Number of Shares			Weighted- Average Grant-Date Fair Value ($)
Nonvested at January 1, 2007		522,570		$	26.67
Granted		3,386		$	40.58
Vested		(67,812	)	$	18.34
Forfeited		(4,434	)	$	26.04
Nonvested at June 30, 2007		453,710		$	23.60

        As of June 30, 2007, there was $5.4 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 3.0 years. The total fair value of shares which vested during the six months ended June 30, 2007 and 2006 was $1.2 million and $0 million, respectively.

15

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

9. Retirement Plans

     Net periodic benefits cost includes the following components for the three and six months ended June 30, 2007 and 2006:

	Pension Benefits						Other Post-retirement Benefits
	Three Months Ended June 30,
	2007			2006			2007			2006
Service cost	$	663,956		$	575,934		$	68,500		$	78,750
Interest cost		958,450			874,760			102,000			98,500
Expected return on plan assets		(1,051,435	)		(966,840	)		—			—
Amortization of prior service cost		—			—			(13,250	)		(13,250	)
Amortization of net loss		280,549			265,527			148,651			29,000
Amortization of transition obligation		—			—			1,250			1,250
Net periodic benefit cost	$	851,520		$	749,381		$	307,151		$	194,250

	Pension Benefits						Other Post-retirement Benefits
	Six Months Ended June 30,
	2007			2006			2007			2006
Service cost	$	1,327,912		$	1,151,868		$	137,000		$	157,500
Interest cost		1,916,900			1,749,520			204,000			197,000
Expected return on plan assets		(2,102,870	)		(1,933,680	)		—			—
Amortization of prior service cost		—			—			(26,500	)		(26,500	)
Amortization of net loss		561,098			531,054			168,151			58,000
Amortization of transition obligation		—			—			2,500			2,500
Net periodic benefit cost	$	1,703,040		$	1,498,762		$	485,151		$	388,500

     The Company anticipates that it will contribute $4.6 million to its pension plan and approximately $565,000 to its post-retirement benefits in 2007. During the first six months of 2007, the Company contributed approximately $2.0 million to its pension plan and approximately $284,000 for post-retirement benefits.

16

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

10.  Other Service Charges, Commission and Fees, and Other Income

         Components of other service charges, commission and fees are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
	(In thousands)
Trust fees	$	4,124	$	3,409	$	7,816	$	6,487
Credit card merchant discount fees		2,171		1,863		3,949		3,571
Income from insurance operations		5,033		4,596		9,402		9,755
Investment and annuity fees		2,018		1,591		3,995		2,855
ATM fees		1,358		1,273		2,682		2,567
Total other service charges, commissions and fees	$	14,704	$	12,732	$	27,844	$	25,235

        Components of other income are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
	(In thousands)
Secondary mortgage market operations	$	1,116	$	749	$	2,027	$	1,566
Income from bank owned life insurance		1,227		890		2,419		1,754
Outsourced check income		637		733		1,289		1,371
Other		2,038		1,615		2,840		3,799
Total other income	$	5,018	$	3,987	$	8,575	$	8,490

11. Other Expense

        Components of other expense are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
	(In thousands)
Data processing expense	$	2,430	$	2,579	$	4,897	$	4,499
Postage and communications		2,688		2,569		4,947		4,945
Ad valorem and franchise taxes		827		1,163		1,648		2,161
Legal and professional services		6,077		3,710		11,039		5,923
Stationery and supplies		640		537		1,132		1,085
Advertising		2,033		1,748		3,595		3,107
Deposit insurance and regulatory fees		253		237		509		293
Training expenses		161		147		335		312
Other fees		549		1,296		1,376		2,252
Annuity expense		339		959		802		2,750
Claims paid		470		709		898		1,004
Other expense		2,932		2,321		4,027		5,606
Total other expense	$	19,399	$	17,975	$	35,205	$	33,937

17

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

12. Income Taxes

     The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, An Interpretation of FASB Statement No. 109  (“FIN 48”), on January 1, 2007 and determined that there was no need to make an adjustment to retained earnings due to the adoption of this Interpretation. The total balance of unrecognized tax benefits at January 1, 2007, was $317,175. The Company does not expect that unrecognized tax benefits will significantly increase or decrease within the next 12 months.

     It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. As of January 1, 2007, $36,735 in interest, and $80,053 in penalties, had been accrued on the Company’s balance sheet. As of June 30, 2007, no significant changes to these amounts have occurred since the adoption of FIN 48.

     The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various returns in the states where its banking offices are located. Its filed income tax returns are no longer subject to examination by taxing authorities for years before 2003.

13. Segment Reporting

     The Company’s primary segments are geographically divided into the Mississippi (MS), Louisiana (LA), Florida (FL) and Alabama (AL) 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 Investment Services, Inc. and subsidiaries, Hancock Insurance Agency, Inc. and subsidiaries, Harrison Finance Company, Magna Insurance Company and subsidiary and three real estate corporations owning land and buildings that house bank branches and other facilities.

18

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

13. Segment Reporting (continued)

     Following is selected information for the Company’s segments (in thousands):

	Three Months Ended June 30, 2007
	MS			LA			FL			AL			Other		Eliminations			Consolidated
Interest income	$	44,117		$	37,306		$	2,347		$	316		$	6,464	$	(5,613	)	$	84,937
Interest expense		19,005			16,765			1,260			23			1,839		(5,498	)		33,394
Net interest income		25,112			20,541			1,087			293			4,625		(115	)		51,543
Provision for (reversal of ) loan losses		2,003			(1,161	)		(238	)		121			513		—			1,238
Noninterest income		13,252			9,506			219			1			7,261		(12	)		30,227
Depreciation and amortization		2,237			741			110			6			114		—			3,208
Other noninterest expense		22,370			16,376			1,330			361			8,517		(305	)		48,649
Net income (loss) before    income taxes		11,754			14,091			104			(194	)		2,742		178			28,675
Income tax expense (benefit)		3,338			3,997			(12	)		(75	)		1,104		—			8,352
Net income (loss)	$	8,416		$	10,094		$	116		$	(119	)	$	1,638	$	178		$	20,323
Total assets	$	3,307,456		$	2,523,738		$	172,904		$	17,066		$	799,179	$	(945,537	)	$	5,874,806
Total interest income from   affiliates	$	5,613		$	—		$	—		$	(24	)	$	—	$	(5,589	)	$	—
Total interest income from   external customers	$	38,504		$	37,306		$	2,347		$	340		$	6,464	$	(24	)	$	84,937
Amortization & (accretion) of   securities	$	(172	)	$	(124	)	$	12		$	—		$	11	$	—		$	(273	)

	Three Months Ended June 30, 2006
	MS			LA			FL			AL		Other		Eliminations			Consolidated
Interest income	$	49,218		$	33,980		$	1,227		$	—	$	5,209	$	(3,231	)	$	86,403
Interest expense		17,045			12,760			536			—		1,421		(3,126	)		28,636
Net interest income		32,173			21,220			691			—		3,788		(105	)		57,767
Provision for (reversal of ) loan losses		—			—			—			—		—		—			—
Noninterest income		11,370			7,881			107			—		6,622		(38	)		25,942
Depreciation and amortization		1,686			648			76			—		111		—			2,521
Other noninterest expense		23,166			16,330			1,206			—		7,959		(10	)		48,651
Net income (loss) before    income taxes		18,691			12,123			(484	)		—		2,340		(133	)		32,537
Income tax expense (benefit)		6,175			3,659			(196	)		—		856		45			10,539
Net income (loss)	$	12,516		$	8,464		$	(288	)	$	—	$	1,484	$	(178	)	$	21,998
Total assets	$	3,647,836		$	2,337,408		$	122,508		$	—	$	710,125	$	(662,685	)	$	6,155,192
Total interest income from   affiliates	$	2,910		$	70		$	145		$	—	$	106	$	(3,231	)	$	—
Total interest income from   external customers	$	46,308		$	33,910		$	1,082		$	—	$	5,103	$	—		$	86,403
Amortization & (accretion) of   securities	$	(2,485	)	$	(350	)	$	14		$	—	$	18	$	—		$	(2,803	)

19

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

13. Segment Reporting (continued)

	Six Months Ended June 30, 2007
	MS			LA			FL			AL			Other		Eliminations			Consolidated
Interest income	$	90,431		$	72,798		$	4,848		$	434		$	12,424	$	(10,288	)	$	170,647
Interest expense		38,957			32,502			2,494			26			3,781		(10,058	)		67,702
Net interest income		51,474			40,296			2,354			408			8,643		(230	)		102,945
Provision for (reversal of ) loan losses		491			1,047			(322	)		121			1,112		—			2,449
Noninterest income		24,319			17,662			389			1			13,773		(23	)		56,121
Depreciation and amortization		4,136			1,464			204			6			224		—			6,034
Other noninterest expense		42,614			33,248			2,705			403			16,304		(312	)		94,962
Net income (loss) before    income taxes		28,552			22,199			156			(121	)		4,776		59			55,621
Income tax expense (benefit)		8,483			5,889			(87	)		(46	)		1,829		—			16,068
Net income (loss)	$	20,069		$	16,310		$	243		$	(75	)	$	2,947	$	59		$	39,553
Total assets	$	3,307,456		$	2,523,738		$	172,904		$	17,066		$	799,179	$	(945,537	)	$	5,874,806
Total interest income from   affiliates	$	10,288		$	—		$	—		$	49		$	—	$	(10,337	)	$	—
Total interest income from   external customers	$	80,143		$	72,798		$	4,848		$	385		$	12,424	$	49		$	170,647
Amortization & (accretion) of   securities	$	(1,048	)	$	(968	)	$	22		$	—		$	21	$	—		$	(1,973	)

	Six Months Ended June 30, 2006
	MS			LA			FL		AL		Other		Eliminations			Consolidated
Interest income	$	94,931		$	65,023		$	3,589	$	—	$	9,676	$	(5,226	)	$	167,993
Interest expense		32,167			23,088			1,037		—		2,643		(5,027	)		53,908
Net interest income		62,764			41,935			2,552		—		7,033		(199	)		114,085
Provision for (reversal of ) loan losses		(1,412	)		519			43		—		145		—			(705	)
Noninterest income		22,250			15,372			219		—		13,186		(77	)		50,950
Depreciation and amortization		3,126			1,257			149		—		227		—			4,759
Other noninterest expense		45,135			31,601			2,312		—		16,555		(24	)		95,579
Net income (loss) before    income taxes		38,165			23,930			267		—		3,292		(252	)		65,402
Income tax expense (benefit)		12,819			7,219			78		—		1,277		—			21,393
Net income (loss)	$	25,346		$	16,711		$	189	$	—	$	2,015	$	(252	)	$	44,009
Total assets	$	3,647,836		$	2,337,408		$	122,508	$	—	$	710,125	$	(662,685	)	$	6,155,192
Total interest income from   affiliates	$	4,828		$	6		$	193	$	—	$	199	$	(5,226	)	$	—
Total interest income from   external customers	$	90,103		$	65,017		$	3,396	$	—	$	9,477	$	—		$	167,993
Amortization & (accretion) of   securities	$	(5,663	)	$	(660	)	$	28	$	—	$	32	$	—		$	(6,263	)

20

Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

14. New Accounting Pronouncements

     In June 2007, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Award. The objective of this issue is to determine the accounting for the income tax benefits of dividend or dividend equivalents when the dividends or dividend equivalents are: (a) linked to equity-classified nonvested shares or share units or equity-classified outstanding share options and (b) charged to retained earnings under FASB Statement No. 123 (Revised 2004), Share-Based Payment. The Task Force reached a consensus that EITF No. 06-11 should be applied prospectively to the income tax benefits of dividends on equity-classified employee share-based payment awards that are declared in fiscal years beginning after September 15, 2007. Management is currently evaluating the requirements of EITF No. 06-11 but does not expect the impact to be significant.

     In March 2007, the FASB ratified EITF No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements. One objective of EITF No. 06-10 is to determine whether a liability for future benefits under a collateral assignment split-dollar life insurance arrangement that provides a benefit to an employee that extends into postretirement periods should be recognized in accordance with SFAS No. 106 or APB Opinion 12, as appropriate, based on the substantive agreement with the employee. Another objective of EITF No. 06-10 is to determine how the asset arising from a collateral assignment split-dollar life insurance arrangement should be recognized and measured. EITF No. 06-10 is effective for fiscal years beginning after December 15, 2007. Management is currently evaluating the requirements of EITF No. 06-10 but does not expect the impact to be significant.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment SFAS No. 115 (“SFAS No. 159”) which permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in SFAS No. 159 are elective; however, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. The FASB’s stated objective in issuing this standard is as follows: “to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.”

     The fair value option established by SFAS No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. The Company will adopt the provisions of SFAS No. 159 in the first quarter of 2008, as required but does not expect the impact to be significant.

21

     Hancock Holding Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)

14. New Accounting Pronouncements (continued)

     In September 2006, the FASB issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – An Amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”). This pronouncement requires an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability on its balance sheet. SFAS No. 158 also requires an employer to recognize changes in that funded status in the year in which the changes occur through comprehensive income effective for fiscal years ending after December 15, 2006. In addition, this statement requires an employer to measure the funded status of a plan as of its year-end balance sheet date effective for fiscal years ending after December 15, 2008. The Company adopted the requirement to recognize the funded status of the benefit plans and related disclosure requirements as of December 31, 2006. The Company is currently evaluating the requirements of SFAS No. 158 related to the measurement date and has not yet determined the impact of adoption on the Company’s consolidated financial statements.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”) which defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurements. This statement is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company will be required to adopt SFAS No. 157 in the first quarter of fiscal year 2008. Management is currently evaluating the requirements of SFAS No. 157 but does not expect the impact to be significant.

In September 2006, the FASB ratified the consensus the EITF reached regarding EITF No. 06-5, Accounting for Purchases of Life Insurance - Determining the Amount that Could Be Realized in Accordance with FASB Technical Bulletin 85-4. EITF No. 06-5 concluded that a policyholder should consider any additional amounts included in the contractual terms of the life insurance policy in determining the “amount that could be realized under the insurance contract.” For group policies with multiple certificates or multiple policies with a group rider, the Task Force also tentatively concluded that the amount that could be realized should be determined at the individual policy or certificate level, i.e., amounts that would be realized only upon surrendering all of the policies or certificates would not be included when measuring the assets. The Company adopted EITF No. 06-5 effective January 1, 2007. The adoption of EITF No. 06-5 has not had a material impact on the Company’s financial condition or results of operations.

In September 2005, the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. The Company adopted SOP 05-1 effective January 1, 2007. The adoption of SOP 05-1 has not had a material impact on the Company’s financial condition or results of operations.

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview  

      General

     The following discussion should be read in conjunction with our financial statements included with this report and our financial statements and related Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2006 included in our Annual Report on Form 10-K. Our discussion includes various forward-looking statements about our markets, the demand for our products and services and our future results. These statements are based on certain assumptions we consider reasonable. For information about these assumptions, you should refer to the section below entitled “Forward-Looking Statements.”

     We were organized in 1984 as a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and are headquartered in Gulfport, Mississippi. We currently operate more than 140 banking and financial services offices and more than 130 automated teller machines (ATMs) in the states of Mississippi, Louisiana, Florida and Alabama through four wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank MS), Hancock Bank of Louisiana, Baton Rouge, Louisiana (Hancock Bank LA), Hancock Bank of Florida, Tallahassee, Florida (Hancock Bank FL) and Hancock Bank of Alabama, Mobile, Alabama (Hancock Bank AL). Hancock Bank MS, Hancock Bank LA, Hancock Bank FL and Hancock Bank AL are referred to collectively as the “Banks.”

     The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. Our operating strategy is to provide our customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. At June 30, 2007, we had total assets of $5.9 billion and employed on a full-time equivalent basis 1,311 persons in Mississippi, 575 persons in Louisiana, 46 persons in Florida and 12 persons in Alabama.

RESULTS OF OPERATIONS

Net Interest Income

     Net interest income (te) for the second quarter decreased $5.9 million, or 10%, from the second quarter of 2006. The primary driver of the $5.9 million decrease in net interest income (te) was a $432.7 million, or 8%, decrease in average earning assets mainly to fund a reduction in total borrowings of $13.2 million, or 6%, and a decrease in average deposits of $374.0 million, or 7%. The decrease in borrowings and deposits was generally attributable to the regional post-Katrina economy. Our net interest margin (te) was 4% in the second quarter, 10 basis points narrower than the same quarter a year ago as the increase in the average earning asset yield (44 basis points) did not offset the increase in total funding costs (54 basis points). See tables on pages 26-31 for details.

Provision for Loan Losses

          The amount of the allowance for loan losses equals the cumulative total of the provisions for loan losses, reduced by actual loan charge-offs, and increased by recoveries of loans previously charged-off. A specific loan is charged-off when management believes, after considering, among other things, the borrower’s financial condition and the value of any collateral, that collection of the loan is unlikely. Provisions are made to the allowance to reflect the currently perceived risks of loss associated with our loan portfolio. Management utilizes quantitative methodologies and modeling to determine the adequacy of the allowance for loan and lease losses and is of the opinion that the allowance at June 30, 2007 is adequate.

23

        Annualized net charge-offs, as a percent of average loans, were 0.18% for the second quarter of 2007, compared to 0.40% in the second quarter of 2006.

        The following information is useful in determining the adequacy of the loan loss allowance and loan loss provision. The ratios are calculated using average loan balances (amounts in thousands).

	At and for the
	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Annualized net charge-offs to average loans		0.18%		0.40%		0.18%		0.20%
Annualized provision (recovery) for loan losses       to average loans		0.15%		0.00%		0.15%		(0.05%	)
Average allowance for loan losses to average loans		1.38%		2.46%		1.40%		2.48%
Gross charge-offs	$	3,521	$	4,742	$	6,597	$	8,664
Gross recoveries	$	1,993	$	1,741	$	3,603	$	5,771
Non-accrual loans	$	7,544	$	7,237	$	7,544	$	7,237
Accruing loans 90 days or more past due	$	2,558	$	6,681	$	2,558	$	6,681

        Accruing loans 90 days or more past due decreased $4.1 million from June 30, 2006. Since December 31, 2005, accruing loans 90 days or more past due, net of deferrals, have decreased $23.0 million to $2.6 million at June 30, 2007. This decrease is related to improved ability of certain borrowers to meet their regular payments after Hurricane Katrina.

Noninterest Income

        Noninterest income for the second quarter was up $4.3 million, or 16%, compared to the same quarter a year ago. The primary factors impacting the higher levels of non-interest income as compared to the same quarter a year ago, were higher levels of service charge fees (up $1.2 million, or 14%) and trust fees (up $0.7 million, or 21%).

        The components of noninterest income for the three and six months ended June 30, 2007 and 2006 are presented in the following table:

24

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
	(In thousands)
Service charges on deposit accounts	$	10,471	$	9,223	$	19,662	$	17,107
Trust fees		4,124		3,409		7,816		6,487
Credit card merchant discount fees		2,171		1,863		3,949		3,571
Income from insurance operations		5,033		4,596		9,402		9,755
Investment and annuity fees		2,018		1,591		3,995		2,855
ATM fees		1,358		1,273		2,682		2,567
Secondary mortgage market operations		1,116		749		2,027		1,566
Other income		3,902		3,238		6,548		6,924
Total other noninterest income		30,193		25,942		56,081		50,832
Securities transactions gains, net		34		—		40		118
Total noninterest income	$	30,227	$	25,942	$	56,121	$	50,950

Noninterest Expense

     Operating expenses for the second quarter were $0.7 million, or 1%, higher compared to the same quarter a year ago. The increase from the same quarter a year ago was reflected in higher levels of other expense (up $1.4 million) and occupancy expense (up $1.0 million), with lower personnel expense (down $1.6 million).

     The following table presents the components of noninterest expense for the three and six months ended June 30, 2007 and 2006.

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007			2006
	(dollars in thousands)
Employee compensation	$	20,086	$	21,553	$	40,620		$	42,639
Employee benefits		4,751		4,847		10,781			9,963
Total salaries and employee benefits		24,837		26,400		51,401			52,602
Equipment and data processing expense		5,198		5,395		9,938			9,983
Net occupancy expense		4,469		3,474		8,542			7,134
Postage and communications		2,688		2,569		4,947			4,945
Ad valorem and franchise taxes		827		1,163		1,648			2,161
Legal and professional services		6,077		3,710		11,039			5,923
Stationery and supplies		640		537		1,132			1,085
Amortization of intangible assets		384		507		807			1,181
Advertising		2,033		1,748		3,595			3,107
Deposit insurance and regulatory fees		253		237		509			293
Training expenses		161		147		335			312
Other real estate owned expense		126		113		(640	)		(335	)
Other expense		4,164		5,172		7,743			11,947
Total noninterest expense	$	51,857	$	51,172	$	100,996		$	100,338

Income Taxes

     Our effective federal income tax rate continues to be less than the statutory rate of 35% due primarily to tax-exempt interest income. For the six months ended June 30, 2007 and 2006, the effective federal income tax rate was approximately 29% and 33%, respectively. The decrease in the effective rate in 2007 is due primarily to the increase in the percentage of tax-exempt interest income as it relates to book income. The total amount of tax-exempt income earned during the first six months of 2007 was $8.4 million compared to $6.9 million for the comparable period in 2006. Tax-exempt income for six months ended June 30, 2007 consisted of $3.2 million from securities and $5.2 million from loans and leases. Tax-exempt income for the first six months of 2006 consisted of $3.4 million from securities and $3.5 million from loans and leases.

25

Net Income

     Net income for the second quarter of 2007 totaled $20.3 million, a decrease of $1.7 million, or 8%, from the second quarter of 2006. Diluted earnings per share for the second quarter of 2007 were $0.62, a decrease of $0.04 from the same quarter a year ago. Return on average assets for the second quarter of 2007 was 1.42% compared to 1.45% for the second quarter of 2006. Return on average common equity was 14.53% compared to 17.89% for the same quarter a year ago.

Selected Financial Data

      The following tables contain selected financial data comparing our consolidated results of operations for the three and six months ended June 30, 2007 and 2006.

(amounts in thousands, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Per Common Share Data
Earnings per share:
Basic	$	0.63	$	0.68	$	1.22	$	1.36
Diluted	$	0.62	$	0.66	$	1.20	$	1.32
Cash dividends per share	$	0.240	$	0.220	$	0.480	$	0.415
Book value per share (period end)	$	17.13	$	15.12	$	17.13	$	15.12
Weighted average number of shares:
Basic		32,233		32,531		32,447		32,462
Diluted (1)		32,749		33,322		33,024		33,237
Period end number of shares		32,094		32,555		32,094		32,555
Market data:
High price	$	44.37	$	57.19	$	54.09	$	57.19
Low price	$	37.50	$	44.02	$	37.50	$	37.75
Period end closing price	$	37.55	$	56.00	$	37.55	$	56.00
Trading volume		11,614		8,737		20,195		12,528

(1) There were 60,585 and 42,347 anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2007, respectively. There were 53,359 and 89,894 anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2006, respectively.

26

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	(In thousands, except percentages)
Performance Ratios
Return on average assets		1.42%			1.45%			1.37%			1.47%
Return on average common equity		14.53%			17.89%			14.15%			18.11%
Earning asset yield (Tax Equivalent (“TE”))		6.76%			6.32%			6.70%			6.25%
Total cost of funds		2.59%			2.05%			2.59%			1.96%
Net interest margin (TE)		4.17%			4.27%			4.10%			4.28%
Common equity (period end) as a percent of total   assets (period end)		9.36%			8.00%			9.36%			8.00%
Leverage ratio (period end)		9.01%			7.59%			9.01%			7.59%
FTE Headcount		1,944			1,777			1,944			1,777
Asset Quality Information
Non-accrual loans	$	7,544		$	7,237		$	7,544		$	7,237
Foreclosed assets	$	1,146		$	1,606		$	1,146		$	1,606
Total non-performing assets	$	8,690		$	8,843		$	8,690		$	8,843
Non-performing assets as a percent of loans and   foreclosed assets		0.25%			0.29%			0.25%			0.29%
Accruing loans 90 days past due	$	2,558		$	6,681		$	2,558		$	6,681
Accruing loans 90 days past due as a percent of loans		0.07%			0.22%			0.07%			0.22%
Non-performing assets + accruing loans 90 days   past due to loans and foreclosed assets		0.33%			0.51%			0.33%			0.51%
Net charge-offs	$	1,528		$	3,001		$	2,994		$	2,893
Net charge-offs as a percent of average loans		0.18%			0.40%			0.18%			0.20%
Allowance for loan losses	$	46,227		$	70,960		$	46,227		$	70,960
Allowance for loan losses as a percent of    period end loans		1.35%			2.35%			1.35%			2.35%
Allowance for loan losses to NPAs + accruing loans   90 days past due		410.98%			457.10%			410.98%			457.10%
Provision for (reversal of) loan losses	$	1,238		$	0		$	2,449			($ 705	)
Average Balance Sheet
Total loans	$	3,371,540		$	2,994,191		$	3,332,285		$	2,982,391
Securities		1,733,850			2,273,012			1,781,937			2,213,317
Short-term investments		67,520			338,443			149,085			337,221
Earning assets		5,172,910			5,605,646			5,263,307			5,532,929
Allowance for loan losses		(46,511	)		(73,706	)		(46,607	)		(74,066	)
Other assets		607,905			570,497			602,954			584,444
Total assets	$	5,734,304		$	6,102,437		$	5,819,654		$	6,043,307
Noninterest bearing deposits	$	950,600		$	1,177,756		$	967,194		$	1,189,407
Interest bearing transaction deposits		1,461,091			1,696,598			1,476,661			1,705,506
Interest bearing public fund deposits		775,431			837,751			797,916			775,418
Time deposits		1,655,322			1,504,343			1,676,651			1,455,925
Total interest bearing deposits		3,891,844			4,038,692			3,951,228			3,936,849
Total deposits		4,842,444			5,216,448			4,918,422			5,126,256
Other borrowed funds		197,206			210,388			201,448			248,849
Other liabilities		133,821			182,452			136,285			178,244
Stockholders’ equity		560,833			493,149			563,499			489,958
Total liabilities & stockholders’ equity	$	5,734,304		$	6,102,437		$	5,819,654		$	6,043,307

27

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
	(dollar amounts in thousands)
Period end Balance Sheet
Commercial/real estate loans	$	2,044,170		$	1,727,236		$	2,044,170		$	1,727,236
Mortgage loans		420,342			405,416			420,342			405,416
Direct consumer loans		481,565			463,313			481,565			463,313
Indirect consumer loans		364,375			348,342			364,375			348,342
Finance company loans		105,700			75,053			105,700			75,053
Total loans		3,416,152			3,019,360			3,416,152			3,019,360
Loans held for sale		25,198			24,704			25,198			24,704
Securities		1,617,204			2,133,792			1,617,204			2,133,792
Short-term investments		196,944			414,062			196,944			414,062
Earning assets		5,255,498			5,591,918			5,255,498			5,591,918
Allowance for loan losses		(46,227	)		(70,960	)		(46,227	)		(70,960	)
Other assets		665,535			634,233			665,535			634,233
Total assets	$	5,874,806		$	6,155,191		$	5,874,806		$	6,155,191
Noninterest bearing deposits	$	938,638		$	1,206,235		$	938,638		$	1,206,235
Interest bearing transaction deposits		1,412,124			1,640,552			1,412,124			1,640,552
Interest bearing public funds deposits		891,803			853,566			891,803			853,566
Time deposits		1,735,105			1,546,974			1,735,105			1,546,974
Total interest bearing deposits		4,039,032			4,041,092			4,039,032			4,041,092
Total deposits		4,977,670			5,247,327			4,977,670			5,247,327
Other borrowed funds		203,935			227,793			203,935			227,793
Other liabilities		143,503			187,812			143,503			187,812
Stockholders’ equity		549,698			492,260			549,698			492,260
Total liabilities & stockholders’ equity	$	5,874,806		$	6,155,192		$	5,874,806		$	6,155,192
Net Charge-Off Information
Net charge-offs (recoveries):
Commercial/real estate loans		($ 63	)	$	620		$	105			($ 1,149	)
Mortgage loans		(22	)		28			1			209
Direct consumer loans		617			1,681			972			2,260
Indirect consumer loans		471			391			902			1,044
Finance company loans		525			281			1,014			529
Total net charge-offs	$	1,528		$	3,001		$	2,994		$	2,893
Net charge-offs to average loans:
Commercial/real estate loans		-0.01%			0.15%			0.01%			-0.14%
Mortgage loans		-0.02%			0.03%			0.00%			0.10%
Direct consumer loans		0.51%			1.45%			0.40%			0.98%
Indirect consumer loans		0.52%			0.45%			0.51%			0.60%
Finance company loans		2.08%			1.58%			2.11%			1.57%
Total net charge-offs to average net loans		0.18%			0.40%			0.18%			0.20%

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	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
Average Balance Sheet Composition	(In thousands, except percentages)
Percentage of earning assets/funding sources:
Loans		65.18%		53.41%		63.31%		53.91%
Securities		33.52%		40.55%		33.86%		40.00%
Short-term investments		1.30%		6.04%		2.83%		6.09%
Earning assets		100.00%		100.00%		100.00%		100.00%
Non-interest bearing deposits		18.37%		21.01%		18.37%		21.50%
Interest bearing transaction deposits		28.25%		30.27%		28.06%		30.82%
Interest bearing public funds deposits		14.99%		14.94%		15.16%		14.01%
Time deposits		32.00%		26.84%		31.86%		26.31%
Total deposits		93.61%		93.06%		93.45%		92.64%
Other borrowed funds		3.81%		3.75%		3.83%		4.50%
Other net interest-free funding sources		2.58%		3.19%		2.72%		2.86%
Total funding sources		100.00%		100.00%		100.00%		100.00%
Loan mix:
Commercial/real estate loans		59.01%		56.76%		58.84%		56.58%
Mortgage loans		12.85%		13.71%		12.90%		13.76%
Direct consumer loans		14.45%		15.50%		14.59%		15.65%
Indirect consumer loans		10.69%		11.64%		10.77%		11.73
Finance company loans		3.00%		2.39%		2.90%		2.28%
Total loans		100.00%		100.00%		100.00%		100.00%
Average dollars
Loans	$	3,371,540	$	2,994,191	$	3,332,285	$	2,982,391
Securities		1,733,850		2,273,012		1,781,937		2,213,317
Short-term investments		67,520		338,443		149,085		337,221
Earning assets	$	5,172,910	$	5,605,646	$	5,263,307	$	5,532,929
Noninterest bearing deposits	$	950,600	$	1,177,756	$	967,194	$	1,189,407
Interest bearing transaction deposits		1,461,091		1,696,598		1,476,661		1,705,506
Interest bearing public funds deposits		775,431		837,751		797,916		775,418
Time deposits		1,655,322		1,504,343		1,676,651		1,455,925
Total deposits		4,842,444		5,216,448		4,918,422		5,126,256
Other borrowed funds		197,206		210,388		201,448		248,849
Other net interest-free funding sources		133,260		178,810		143,437		157,824
Total funding sources	$	5,172,910	$	5,605,646	$	5,263,307	$	5,532,929
Loans:
Commercial/real estate loans	$	1,989,420	$	1,699,768	$	1,960,853	$	1,687,306
Mortgage loans		433,310		410,522		429,726		410,274
Direct consumer loans		487,267		463,977		486,239		466,888
Indirect consumer loans		360,451		348,463		358,739		349,926
Finance company loans		101,092		71,461		96,728		67,997
Total average loans	$	3,371,540	$	2,994,191	$	3,332,285	$	2,982,391

29

The following tables detail the components of our net interest spread and net interest margin.

	Three Months Ended June 30,							Three Months Ended June 30,
	2007							2006
(dollars in thousands)	Interest		Volume		Rate			Interest		Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	36,689	$	1,989,420		7.40	%	$	30,613	$	1,699,768		7.22%
Mortgage loans		6,677		433,310		6.16	%		5,980		410,522		5.83%
Consumer loans		20,978		948,810		8.87	%		18,356		883,901		8.33%
Loan fees & late charges		291		—		0.00	%		2,476		—		0.00%
Total loans (TE)		64,635		3,371,540		7.69	%		57,425		2,994,191		7.69%
US treasury securities		414		34,141		4.87	%		454		42,028		4.33%
US agency securities		10,988		866,748		5.07	%		15,954		1,346,963		4.74%
CMOs		948		93,145		4.07	%		1,626		164,825		3.95%
Mortgage backed securities		5,847		469,500		4.98	%		5,643		484,002		4.66%
Municipals (TE)		2,653		196,860		5.39	%		2,680		158,553		6.76%
Other securities		932		73,456		5.08	%		944		76,641		4.93%
Total securities (TE)		21,782		1,733,850		5.03	%		27,301		2,273,012		4.80%
Total short-term investments		788		67,520		4.68	%		3,656		338,443		4.33%
Average earning assets yield (TE)	$	87,205	$	5,172,910		6.76	%	$	88,382	$	5,605,646		6.32%
Interest-bearing liabilities
Interest-bearing transaction deposits	$	4,866	$	1,461,091		1.38	%	$	3,780	$	1,696,598		0.89%
Time deposits		18,364		1,655,322		4.58	%		14,354		1,504,343		3.85%
Public Funds		8,327		775,431		4.44	%		8,657		837,751		4.15%
Total interest bearing deposits		31,557		3,891,844		3.35	%		26,791	$	4,038,692		2.67%
Total borrowings		1,837		197,206		1.80	%		1,845		210,388		3.33%
Total interest bearing liability cost	$	33,394	$	4,089,050		3.28	%	$	28,636	$	4,249,080		2.70%
Noninterest-bearing deposits				950,600							1,177,756
Other net interest-free funding sources				133,260							178,810
Total cost of funds	$	33,394	$	5,172,910		2.59	%	$	28,636	$	5,605,646		2.05%
Net interest spread (TE)	$	53,811				3.48	%	$	59,746				3.62%
Net interest margin (TE)	$	53,811	$	5,172,910		4.17	%	$	59,746	$	5,605,646		4.27%

30

	Six Months Ended June 30,							Six Months Ended June 30,
	2007							2006
(dollars in thousands)	Interest		Volume		Rate			Interest		Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	71,920	$	1,960,853		7.39	%	$	59,250	$	1,687,306		7.08%
Mortgage loans		13,186		429,726		6.14	%		11,877		410,274		5.79%
Consumer loans		41,175		941,706		8.82	%		35,829		884,811		8.17%
Loan fees & late charges		734		—		0.00	%		4,796		—		0.00%
Total loans (TE)		127,015		3,332,285		7.68	%		111,752		2,982,391		7.55%
US treasury securities		1,151		47,238		4.91	%		1,081		51,007		4.27%
US agency securities		22,743		903,428		5.03	%		29,740		1,271,059		4.68%
CMOs		2,052		100,525		4.08	%		3,435		174,497		3.94%
Mortgage backed securities		11,330		457,033		4.96	%		11,162		480,913		4.64%
Municipals (TE)		5,514		197,832		5.57	%		5,409		160,851		6.73%
Other securities		1,854		75,881		4.89	%		1,817		74,990		4.84%
Total securities (TE)		44,644		1,781,937		5.01	%		52,644		2,213,317		4.76%
Total short-term investments		3,671		149,085		4.97	%		7,556		337,221		4.52%
Average earning assets yield (TE)	$	175,330	$	5,263,307		6.70	%	$	171,952	$	5,532,929		6.25%
Interest-bearing liabilities
Interest-bearing transaction deposits	$	9,632	$	1,476,661		1.33	%	$	7,046	$	1,705,506		0.83%
Time deposits		37,386		1,676,651		4.56	%		27,359		1,455,925		3.80%
Public Funds		17,355		797,916		4.45	%		15,407		775,418		4.01%
Total interest bearing deposits		64,373		3,951,228		3.33	%		49,812		3,936,849		2.56%
Total borrowings		3,329		201,448		2.38	%		4,096		248,849		3.24%
Total interest bearing liability cost	$	67,702	$	4,152,676		3.29	%	$	53,908	$	4,185,698		2.60%
Noninterest-bearing deposits				967,194							1,189,407
Other net interest-free funding sources				143,437							157,824
Total cost of funds	$	67,702	$	5,263,307		2.59	%	$	53,908	$	5,532,929		1.96%
Net interest spread (TE)	$	107,628				3.41	%	$	118,044				3.65%
Net interest margin (TE)	$	107,628	$	5,263,307		4.10	%	$	118,044	$	5,532,929		4.28%

31

LIQUIDITY

Liquidity Management

        Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that we have adequate cash flow to meet our various needs, including operating, strategic and capital. In addition, our principal source of liquidity is dividends from our subsidiary banks.

        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 funding.

        The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts. Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and represent our incremental borrowing capacity. Our short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $359.8 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $100 million.

        During the six months ended June 30, 2007, our subsidiary, Magna Insurance Company, sold thirty securities out of their portfolio to provide liquidity for surrenders of annuities for Magna Insurance Company. These securities had a gross loss of $37,164.

        The following liquidity ratios at June 30, 2007 and December 31, 2006 compare certain assets and liabilities to total deposits or total assets:

	June 30, 2007			December 31, 2006
Total securities to total deposits		32.45	%		37.84	%
Total loans (net of unearned       income) to total deposits		68.63	%		64.59	%
Interest-earning assets       to total assets		89.43	%		90.41	%
Interest-bearing deposits       to total deposits		81.14	%		78.98	%

CONTRACTUAL OBLIGATIONS

     Payments due from us under specified long-term and certain other binding contractual obligations were scheduled in our annual report on Form 10-K for the year ended December 31, 2006. The most significant obligations, other than obligations under deposit contracts and short-term borrowings, were for operating leases for banking facilities. There have been no material changes since year end.

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CAPITAL RESOURCES

        We continue to maintain an adequate capital position. The ratios as of June 30, 2007 and December 31, 2006 are as follows:

	June 30, 2007			December 31, 2006
Common equity (period-end) as a percent of   total assets (period-end)		9.36	%		9.36	%
Regulatory ratios:
Total capital to risk-weighted assets(1)		12.69	%		13.60	%
Tier 1 capital to risk-weighted       assets (2)		11.64	%		12.46	%
Leverage capital to average total assets(3)		9.01	%		8.63	%

(1)	Total capital consists of equity capital less intangible assets plus a limited amount of allowance for loan losses. Risk-weighted assets represent the assigned risk portion of all on and off-balance-sheet assets. Based on Federal Reserve Board guidelines, assets are assigned a risk factor percentage from 0% to 100%. A minimum ratio of total capital to risk-weighted assets of 8% is required.
(2)	Tier 1 capital consists of equity capital less intangible assets. A minimum ratio of tier 1 capital to risk-weighted assets of 4% is required.
(3)	Leverage capital consists of equity capital less goodwill and core deposit intangibles. Regulations require a minimum 3% leverage capital ratio for an entity to be considered adequately capitalized.

Off-Balance Sheet Arrangements

Loan Commitments and Letters of Credit

      In the normal course of business, we enter into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of our customers. Such instruments are not reflected in the accompanying condensed consolidated financial statements until they are funded and involve, to varying degrees, elements of credit risk not reflected in the condensed consolidated balance sheets. The contract amounts of these instruments reflect our exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued. We undertake the same credit evaluation in making commitments and conditional obligations as we do for on-balance-sheet instruments and may require collateral or other credit support for off-balance-sheet financial instruments.

     At June 30, 2007, we had $1.3 billion in unused loan commitments outstanding, of which approximately $468.4 million were at variable rates, with the remainder 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 our future cash requirements. We continually evaluate 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 our obtaining collateral to support the obligation.

33

     Letters of credit are conditional commitments issued by us 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 June 30, 2007, we had $86.0 million in letters of credit issued and outstanding.

     The following table shows the commitments to extend credit and letters of credit at June 30, 2007 according to expiration date.

	Expiration Date
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(In thousands)
Commitments to extend credit	$	1,288,986	$	964,219	$	41,419	$	47,038	$	236,310
Letters of credit		85,989		21,864		53,273		10,852		—
Total	$	1,374,975	$	986,083	$	94,692	$	57,890	$	236,310

        Our liability associated with letters of credit is not material to our condensed consolidated financial statements.

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. We prepare these financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an on-going basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. There have been no material changes or developments in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our Form 10-K for the year ended December 31, 2006.

New Accounting Pronouncements  

See Note 14 to our Condensed Consolidated Financial Statements included elsewhere in this report.

Forward Looking Statements

     Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company’s anticipated future financial performance. This Act provides a safe harbor for such disclosures that protects the companies from unwarranted litigation if the actual results are different from management expectations. This report contains forward-looking statements and reflects management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties that could cause our actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

        Our net income is dependent, in part, on our net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. Interest rate risk sensitivity is the potential impact of changing rate environments on both net interest income and cash flows. In an attempt to manage our exposure to changes in interest rates, management monitors interest rate risk and administers an interest rate risk management policy designed to produce a relatively stable net interest margin in periods of interest rate fluctuations.

        Notwithstanding our interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income and the fair value of our investment securities. As of June 30, 2007, the effective duration of the securities portfolio was 2.50 years. A rate increase of 100 basis points would move the effective duration to 2.65 years, while a reduction in rates of 100 basis points would result in an effective duration of 1.19 years.

    In adjusting our asset/liability position, the Board and management attempt to manage our interest rate risk while enhancing net interest margins. This measurement is done primarily by running net interest income simulations. The net interest income simulations run at June 30, 2007 indicate that we are asset sensitive to some extent as compared to the stable rate environment. Exposure to instantaneous changes in interest rate risk for the current quarter is presented in the following table.

Net Interest Income (te) at Risk
Change in interest rate (basis point)	Estimated increase (decrease) in net interest income
-100	-2.61%
Stable	0.00%
+100	1.52%

        The foregoing disclosures related to our market risk should be read in conjunction with our audited consolidated financial statements, related notes and management’s discussion and analysis for the year ended December 31, 2006 included in our 2006 Annual Report on Form 10-K.

Item 4. Controls and Procedures

        At the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officers and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to timely alert them to material information relating to us (including our consolidated subsidiaries) required to be included in our Exchange Act filings.

        Our management, including the Chief Executive Officers and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the six month period ended June 30, 2007, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

35

PART II. OTHER INFORMATION

Item 1A. Risk Factors

     There have been no material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2006.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

     The 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 shares or units purchased				Average Price Paid per Share		Total number of shares purchased as a part of publicly announced plans or programs (1)		Maximum number of shares that may yet be purchased under Plans or Programs
Apr. 1, 2007 - Apr. 30, 2007		189,020	(2	)	$	39.49		189,020		1,128,358
May 1, 2007 - May 31, 2007		244,000	(3	)	$	39.34		244,000		884,358
Jun. 1, 2007 - Jun. 30, 2007		—	(4	)		—		—		884,358
Total as of Jun. 30, 2007		433,020			$	39.41		433,020

(1)	The Company publicly announced its stock buy-back program on July 18, 2000.
(2)	189,020 shares were purchased on the open market during April in order to satisfy obligations pursuant to the Company’s long-term incentive plan that was established in 1996.
(3)	244,000 shares were purchased on the open market during May in order to satisfy obligations pursuant to the Company’s long-term incentive plan that was established in 1996.
(4)	0 shares were purchased on the open market during June in order to satisfy obligations pursuant to the Company’s long-term incentive plan that was established in 1996.

36

Item 4.  Submission of Matters to a Vote of Security Holders.

     None           

Item 6. Exhibits.

(a)  Exhibits:

Exhibit Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

37

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
By:	/s/ Carl J. Chaney
	Carl J. Chaney
	Chief Executive Officer
	/s/ John M. Hairston
	John M. Hairston
	Chief Executive Officer
	/s/ Michael M. Achary
	Michael M. Achary
	Chief Financial Officer
Date:	August 8, 2007

38

Index to Exhibits
Exhibit Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.