Hancock Whitney Corporation - 6 (HWC) 10-Q 2007 Q3 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 September 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.

31,608,403 common shares were outstanding as of October 31, 2007 for financial statement purposes.

Hancock Holding Company

Index

Part I.	Financial Information	Page Number
ITEM 1.	Financial Statements Condensed Consolidated Balance Sheets — September 30, 2007 (unaudited) and December 31, 2006	1
	Condensed Consolidated Statements of Income (unaudited) — Three and nine months ended September 30, 2007 and 2006	2
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – Nine months ended September 30, 2007 and 2006	3
	Condensed Consolidated Statements of Cash Flows (unaudited) — Nine months ended September 30, 2007 and 2006	4
	Notes to Condensed Consolidated Financial Statements (unaudited) — September 30, 2007	5-22
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23-33
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	34
ITEM 4.	Controls and Procedures	34
Part II.	Other Information
ITEM 1A.	Risk Factors	35
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 4.	Submission of Matters to a Vote of Security Holders	36
ITEM 6.	Exhibits	36
Signatures		37

Part I. Financial Information

Item 1. Financial Statements

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

	September 30, 2007 (unaudited)			December 31, 2006
ASSETS
Cash and due from banks (non-interest bearing)	$	155,524		$	190,114
Interest-bearing time deposits with other banks		11,898			10,197
Federal funds sold		87,278			212,242
Trading securities		1,634			—
Securities available for sale, at fair value         (amortized cost of $1,690,428 and $1,916,944)		1,680,216			1,903,658
Loans held for sale		17,698			16,946
Loans		3,530,139			3,267,058
Less: allowance for loan losses		(45,901	)		(46,772	)
unearned income		(16,846	)		(17,420	)
Loans, net		3,467,392			3,202,866
Property and equipment, net of accumulated         depreciation of $93,293 and $85,397		192,719			143,462
Other real estate, net		1,183			568
Accrued interest receivable		33,247			32,984
Goodwill, net		62,277			62,277
Other intangible assets, net		8,827			10,355
Life insurance contracts		114,640			110,751
Reinsurance receivables		33,338			38,042
Deferred tax asset, net		17,419			16,544
Other assets		20,763			13,559
Total assets	$	5,906,053		$	5,964,565
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	891,842		$	1,057,358
Interest-bearing savings, NOW, money market            and time		4,107,707			3,973,633
Total deposits		4,999,549			5,030,991
Federal funds purchased		—			3,800
Securities sold under agreements to repurchase		206,963			218,591
Long-term notes		251			258
Policy reserves and liabilities		76,876			93,669
Other liabilities		64,439			58,846
Total liabilities		5,348,078			5,406,155
Stockholders’ Equity
Common Stock-$3.33 par value per share; 350,000,000         shares authorized, 31,785,742 and 32,666,052 issued         and outstanding, respectively		105,847			108,778
Capital surplus		104,792			139,099
Retained earnings		368,450			334,546
Accumulated other comprehensive loss, net		(21,114	)		(24,013	)
Total stockholders’ equity		557,975			558,410
Total liabilities and stockholders’ equity	$	5,906,053		$	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 September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Interest income:
Loans, including fees	$	65,911		$	60,034		$	189,965		$	169,633
Securities - taxable		18,822			26,422			58,546			73,909
Securities - tax exempt		1,538			1,649			4,736			5,000
Federal funds sold		1,376			1,117			4,964			8,618
Other investments		14			11			96			66
Total interest income		87,661			89,233			258,307			257,226
Interest expense:
Deposits		34,729			28,936			99,452			78,845
Federal funds purchased and securities sold     under agreements to repurchase		1,866			3,115			5,550			6,368
Long-term notes and other interest expense		27			87			39			931
Capitalized interest		(155	)		(150	)		(872	)		(247	)
Total interest expense		36,467			31,988			104,169			85,897
Net interest income		51,194			57,245			154,138			171,329
Provision for (reversal of) loan losses, net		1,554			(20,000	)		4,002			(20,705	)
Net interest income after provision for      (reversal of) loan losses		49,640			77,245			150,136			192,034
Noninterest income:
Service charges on deposit accounts		11,085			9,719			30,747			26,826
Other service charges, commissions and fees		13,860			11,881			41,705			37,118
Securities gains, net		34			110			74			228
Other income		5,540			4,027			14,114			12,515
Total noninterest income		30,519			25,737			86,640			76,687
Noninterest expense:
Salaries and employee benefits		28,531			27,059			79,932			79,661
Net occupancy expense		4,731			2,882			13,273			10,015
Equipment rentals, depreciation and maintenance		2,814			2,647			7,855			8,131
Amortization of intangibles		412			445			1,219			1,626
Other expense		18,708			17,304			53,913			51,241
Total noninterest expense		55,196			50,337			156,192			150,674
Net income before income taxes		24,963			52,645			80,584			118,047
Income tax expense		7,224			16,614			23,292			38,006
Net income	$	17,739		$	36,031		$	57,292		$	80,041
Basic earnings per share	$	0.55		$	1.11		$	1.77		$	2.46
Diluted earnings per share	$	0.55		$	1.08		$	1.74		$	2.41
Dividends paid per share	$	0.240		$	0.240		$	0.720		$	0.655
Weighted avg. shares outstanding-basic		32,005			32,566			32,299			32,500
Weighted avg. shares outstanding-diluted		32,492			33,333			32,847			33,274

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		—			—			—			80,041			—			—			80,041
Net change in fair value of         securities available for sale,          net of tax		—			—			—			—			(1,651	)		—			(1,651	)
Comprehensive income																				78,390
Cash dividends paid ($0.655 per    common share)		—			—			—			(21,429	)		—			—			(21,429	)
Common stock issued, long-term   incentive plan including income tax   benefit of $233		322,218			1,073			8,044			—			—			—			9,117
Compensation expense, long-term   incentive plan		—			—			2,977			—			—			—			2,977
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, September 30, 2006		32,583,948		$	108,505		$	133,662		$	320,667		$	(23,717	)	$	—		$	539,117
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		—			—			—			57,292			—			—			57,292
Recognized pension and other         employee benefit plan costs		—			—			—			—			626			—			626
Net change in fair value of         securities available for sale,         net of tax		—			—			—			—			2,273			—			2,273
Comprehensive income																				60,191
Cash dividends paid ($0.720 per    common share)		—			—			—			(23,388	)		—			—			(23,388	)
Common stock issued, long-term   incentive plan, including income    tax  benefit of $169		123,629			412			1,048			—			—			—			1,460
Compensation expense, long-term    incentive plan		—			—			1,664			—			—			—			1,664
Repurchase/retirement of    common stock		(1,003,939	)		(3,343	)		(37,019	)		—			—			—			(40,362	)
Balance, September 30, 2007		31,785,742		$	105,847		$	104,792		$	368,450		$	(21,114	)	$	—		$	557,975

See notes to unaudited condensed consolidated financial statements.

3

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

	Nine Months Ended September 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	57,292		$	80,041
Adjustments to reconcile net income to net                cash provided by operating activities:
Depreciation and amortization		9,484			7,042
Provision for (reversal of) loan losses, net		4,002			(20,705	)
Provision for (gains) losses on other real estate owned, net		(2	)		170
Gain on sales of ORE		(725	)		(22	)
Deferred tax expense (benefit)		(2,334	)		9,332
Increase in cash surrender value of life insurance contracts		(3,889	)		(2,869	)
Gain on sales/paydowns of securities available for sale, net		(57	)		(228	)
Loss on disposal of other assets		62			2
Gain on sale of loans held for sale		(508	)		(512	)
Loss on trading securities		137			—
Accretion of securities premium/discount, net		(2,025	)		(9,050	)
Amortization of mortgage servicing rights		264			422
Amortization of intangible assets		1,219			1,626
Stock-based compensation expense		1,664			2,977
Increase in accrued interest receivable		(263	)		(4,421	)
Increase (decrease) in accrued expenses		227			(19,024	)
Decrease in other liabilities		(721	)		(680	)
Increase in interest payable		143			1,114
Decrease in policy reserves and liabilities		(16,793	)		(9,081	)
Decrease in reinsurance receivable		4,704			8,831
Increase in other assets		(4,000	)		(2,718	)
Proceeds from sale of loans held for sale		200,595			175,431
Originations of loans held for sale		(200,839	)		(169,398	)
(Purchase of) Proceeds from sale of trading securities, net		(10	)		—
Excess tax benefit from share based payments		(169	)		(233	)
Other, net		336			(571	)
Net cash provided by operating activities		47,794			47,476
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing time deposits		(1,701	)		(1,121	)
Proceeds from sales of securities available for sale		8,985			10,654
Proceeds from maturities of securities available for sale		978,181			624,509
Purchases of securities available for sale		(759,068	)		(971,672	)
Net decrease in federal funds sold		124,964			336,444
Net increase in loans		(269,876	)		(164,260	)
Purchases of property and equipment		(56,217	)		(52,242	)
��Proceeds from sales of property and equipment		55			250
Premiums paid on life insurance contracts		—			(20,000	)
Proceeds from sales of other real estate		1,460			2,086
Net cash provided by (used in) investing activities		26,783			(235,352	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits		(31,442	)		10,744
Net (decrease) increase in federal funds purchased and            securities sold under agreements to repurchase		(15,428	)		173,721
Repayments of long-term notes		(7	)		(50,002	)
Dividends paid		(23,388	)		(21,429	)
Proceeds from exercise of stock options		1,291			8,884
Repurchase/retirement of common stock		(40,362	)		(4,136	)
Excess tax benefit from stock option exercises		169			233
Net cash (used in) provided by financing activities		(109,167	)		118,015
NET DECREASE IN CASH AND DUE FROM BANKS		(34,590	)		(69,861	)
CASH AND DUE FROM BANKS, BEGINNING		190,114			271,104
CASH AND DUE FROM BANKS, ENDING	$	155,524		$	201,243
SUPPLEMENTAL INFORMATION:
Income taxes paid	$	23,478		$	48,491
Interest paid, including capitalized interest            of $872 and $247, respectively		104,026			79,174
Restricted stock issued to employees of Hancock		251			2,500
SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES
Transfers from loans to other real estate	$	1,348		$	1,264
Financed sale of foreclosed property		—			294

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 September 30, 2007 and December 31, 2006, the Company’s Condensed Consolidated Statements of Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 and the Company’s Condensed Consolidated Statements of Income for the three and nine months ended September 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 nine months ended September 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 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 nine months ended September 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. The net gain on available for sale securities related sales and paydowns was $56,711.

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 $3.5 billion and $3.2 billion at September 30, 2007 and December 31, 2006, respectively. The Company also held $17.7 million and $16.9 million in loans held for sale at September 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 September 30, 2007 and December 31, 2006 were $33.0 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 nine months ended September 30, 2007 and September 30, 2006.

        Nonaccrual loans and foreclosed assets, which make up total non-performing assets, amounted to approximately 0.28% and 0.13% of total loans at September 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:

	September 30, 2007		December 31, 2006
	(In thousands)
Non-accrual loans	$	8,500	$	3,500
Foreclosed assets		1,374		681
Total non-performing assets	$	9,874	$	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 September 30,					Nine Months Ended September 30,
	2007		2006			2007		2006
Balance of allowance for loan losses   at beginning of period	$	46,227	$	70,960		$	46,772	$	74,558
Provision for (reversal of) loan losses, net		1,554		(20,000	)		4,002		(20,705	)
Loans charged-off:
Commercial, real estate and mortgage		602		1,525			2,083		3,209
Direct and indirect consumer		921		1,113			3,315		4,551
Finance company		917		555			2,198		1,414
Demand deposit accounts		1,170		3,165			2,611		5,848
Total charge-offs		3,610		6,358			10,207		15,022
Recoveries of loans previously   charged-off:
Commercial, real estate and mortgage		659		636			2,034		3,261
Direct and indirect consumer		422		423			1,351		1,468
Finance company		158		133			425		463
Demand deposit accounts		491		2,558			1,524		4,329
Total recoveries		1,730		3,750			5,334		9,521
Net charge-offs		1,880		2,608			4,873		5,501
Balance of allowance for loan losses     at end of period	$	45,901	$	48,352		$	45,901	$	48,352

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

	September 30, 2007		December 31, 2006
	(In thousands)
Balance of allowance for loan losses
Non-impaired	$	38,060	$	38,986
Impaired		7,841		7,786
Total allowance for loan losses	$	45,901	$	46,772

        As of September 30, 2007 and December 31, 2006, the Company had $18.9 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 September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Ratios :
Net charge-offs to average net loans (annualized)		0.21	%		0.34	%		0.19	%		0.24	%
Net charge-offs to period-end net loans (annualized)		0.21	%		0.33	%		0.18	%		0.23	%
Allowance for loan losses to average net loans		1.32	%		1.57	%		1.36	%		1.60	%
Allowance for loan losses to period-end net loans		1.31	%		1.55	%		1.31	%		1.55	%
Net charge-offs to loan loss allowance		4.10	%		5.39	%		10.62	%		11.37	%

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 (SFAS) No. 142Goodwill and Other Intangibles (“SFAS 142”), the Company tests its goodwill for impairment annually. No impairment charges were recognized as of September 30, 2007. The carrying amount of goodwill was $62.3 million as of September 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 September 30, 2007						As of December 31, 2006
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortizable intangible assets:
Core deposit intangibles	$	14,137	$	8,197	$	5,940	$	14,137	$	7,290	$	6,847
Value of insurance business acquired		3,767		1,701		2,066		3,767		1,459		2,308
Non-compete agreements		368		234		134		368		179		189
Trade name		100		45		55		100		30		70
Total	$	18,372	$	10,177	$	8,195	$	18,372	$	8,958	$	9,414

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Aggregate amortization expense for:
Core deposit intangibles	$	302	$	341	$	907	$	1,024
Value of insurance businesses acquired		87		79		242		496
Non-compete agreements		18		—		55		81
Trade name		5		25		15		25
Total	$	412	$	445	$	1,219	$	1,626

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 $303,000. The amortization expense for core deposit intangibles is estimated to be approximately $1.114 million in 2008, $1.114 million in 2009, $1.114 million in 2010, $0.909 million in 2011 and the remainder of $1.386 million thereafter. The amortization of the value of business acquired, non-compete agreements and trade name are expected to approximate $110,000 for the remainder of 2007, $404,000 in 2008, $370,000 in 2009, $311,000 in 2010, $268,000 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 values of the mortgage servicing rights were $1.8 million and $2.2 million as of September 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 amounts (in thousands) of contractually specified fees for the three and nine months ended September 30, 2007 and 2006, respectively:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Servicing fees	$	152	$	177	$	478	$	586
Late fees		18		14		51		28
Ancillary fees		4		—		15		14
Total	$	174	$	191	$	544	$	628

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 were no valuation allowances on the mortgage servicing rights portfolio as of September 30, 2007 or December 31, 2006.

        The changes in the carrying amounts of mortgage servicing rights as of September 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		7
Disposals		(52	)
Amortization		(264	)
Balance as of September 30, 2007	$	632

          Amortization of servicing rights is estimated to be approximately $82,000 for the remainder of 2007, $221,000 in 2008, $154,000 in 2009, $100,000 in 2010, $53,000 in 2011, and the remainder of $22,000 thereafter.

11

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

6. Earnings Per Share

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Net income - used in computation of       earnings per share	$	17,739	$	36,031	$	57,292	$	80,041
Weighted average number of shares       outstanding - used in computation of basic       earnings per share		32,005		32,566		32,299		32,500
Effect of dilutive securities       Stock options and restricted stock awards		487		767		548		774
Weighted average number of shares       outstanding plus effect of dilutive       securities - used in computation of       diluted earnings per share		32,492		33,333		32,847		33,274

There were 0 and 49,852 anti-dilutive share-based incentives outstanding for the three and nine months ended September 30, 2007, respectively. There were 31,925 and 67,911 anti-dilutive share-based incentives outstanding for the three and nine months ended September 30, 2006, respectively.

12

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

7. Stock-Based Payment Arrangements

Stock Option Plans

     At September 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. 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.

	Nine Months Ended September 30,
	2007			2006
Expected volatility		30.89	%		29.87	%
Expected dividends		2.52	%		1.61% - 1.96	%
Expected term (in years)		9			5 - 8
Risk-free rates		5.10	%		4.30% - 4.54	%

13

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

7. Stock-Based Payment Arrangements (continued)

   A summary of option activity under the plans for the nine months ended September 30, 2007, and changes during the nine 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		2,535		$	38.11		9.7
Exercised		(144,297	)	$	15.45		3.7	$	4,013,774
Forfeited or expired		(13,639	)	$	37.57		7.4
Outstanding at September 30, 2007		1,355,860		$	28.01		6.1	$	16,261,500
Exercisable at September 30, 2007		1,095,285		$	24.99		5.6	$	16,632,731
Share options expected to vest		227,681		$	41.50		8.4		N/A

   The total intrinsic value of options exercised during the nine months ended September 30, 2007 and 2006 was $4.0 million and $8.2 million, respectively.

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

	Number of Shares			Weighted- Average Grant-Date Fair Value ($)
Nonvested at January 1, 2007		522,570		$	22.83
Granted		8,953		$	33.28
Vested		(70,560	)	$	18.44
Forfeited		(12,198	)	$	24.30
Nonvested at September 30, 2007		448,765		$	23.69

        As of September 30, 2007, there was $5.2 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 2.9 years. The total fair value of shares which vested during the nine months ended September 30, 2007 and 2006 was $1.3 million and $.53 million, respectively.

14

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

8. Retirement Plans

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

	Pension Benefits						Other Post-retirement Benefits
	Three Months Ended September 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		284,636			265,527			19,550			29,000
Amortization of transition obligation		—			—			1,250			1,250
Net periodic benefit cost	$	855,607		$	749,381		$	178,050		$	194,250

	Pension Benefits						Other Post-retirement Benefits
	Nine Months Ended September 30,
	2007			2006			2007			2006
Service cost	$	1,991,869		$	1,727,802		$	205,500		$	236,250
Interest cost		2,875,350			2,624,280			306,000			295,500
Expected return on plan assets		(3,154,305	)		(2,900,520	)		—			—
Amortization of prior service cost		—			—			(39,750	)		(39,750	)
Amortization of net loss		845,734			796,581			187,701			87,000
Amortization of transition obligation		—			—			3,750			3,750
Net periodic benefit cost	$	2,558,648		$	2,248,143		$	663,201		$	582,750

     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 nine months of 2007, the Company contributed approximately $3.0 million to its pension plan and approximately $433,000 for post-retirement benefits.

15

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

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

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(In thousands)
Trust fees	$	3,892	$	3,174	$	11,708	$	9,662
Credit card merchant discount fees		2,025		1,744		5,975		5,316
Income from insurance operations		4,256		4,145		13,657		13,900
Investment and annuity fees		2,253		1,595		6,249		4,450
ATM fees		1,434		1,223		4,116		3,790
Total other service charges, commissions     and fees	$	13,860	$	11,881	$	41,705	$	37,118

        Components of other income are as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2007		2006			2007		2006
	(In thousands)
Secondary mortgage market operations	$	935	$	1,018		$	2,962	$	2,583
Income from bank owned life insurance		1,246		1,115	��		3,665		2,870
Outsourced check income		550		762			1,837		2,133
Other		2,809		1,132			5,650		4,929
Total other income	$	5,540	$	4,027		$	14,114	$	12,515

10. Other Expense

         Components of other expense are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(In thousands)
Data processing expense	$	4,509	$	3,632	$	12,355	$	8,189
Postage and communications		2,616		1,936		7,564		6,881
Ad valorem and franchise taxes		1,016		519		2,664		2,680
Legal and professional services		3,482		3,641		11,572		9,506
Stationery and supplies		483		519		1,614		1,604
Advertising		1,796		1,985		5,390		5,091
Deposit insurance and regulatory fees		257		257		766		550
Training expenses		112		106		447		418
Other fees		1,068		1,144		2,444		3,396
Annuity expense		420		1,075		1,222		3,826
Claims paid		447		560		1,345		1,564
Other expense		2,502		1,930		6,530		7,536
Total other expense	$	18,708	$	17,304	$	53,913	$	51,241

16

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

11. 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 September 30, 2007, was $30,044. 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 September 30, 2007, $3,571 in interest has been accrued on the Company’s balance sheet.

     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 2004.

12. 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.

17

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

12. Segment Reporting (continued)

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

	Three Months Ended September 30, 2007
	MS			LA			FL			AL			Other		Eliminations			Consolidated
Interest income	$	45,388		$	37,917		$	2,379		$	237		$	6,635	$	(4,895	)	$	87,661
Interest expense		20,186			17,703			1,277			151			1,930		(4,780	)		36,467
Net interest income		25,202			20,214			1,102			86			4,705		(115	)		51,194
Provision for (reversal of ) loan losses		(1,043	)		518			889			103			1,087		—			1,554
Noninterest income		13,804			9,754			236			14			6,721		(10	)		30,519
Depreciation and amortization		2,322			873			119			19			117		—			3,450
Other noninterest expense		23,469			17,771			1,459			385			8,714		(52	)		51,746
Net income (loss) before    income taxes		14,258			10,806			(1,129	)		(407	)		1,508		(73	)		24,963
Income tax expense (benefit)		4,013			2,854			(382	)		(126	)		865		—			7,224
Net income (loss)	$	10,245		$	7,952		$	(747	)	$	(281	)	$	643	$	(73	)	$	17,739
Total assets	$	3,227,798		$	2,594,664		$	158,669		$	28,111		$	818,740	$	(921,929	)	$	5,906,053
Total interest income from   affiliates	$	4,895		$	—		$	—		$	—		$	—	$	(4,895	)	$	—
Total interest income from   external customers	$	40,493		$	37,917		$	2,379		$	237		$	6,635	$	—		$	87,661
Amortization & (accretion) of   securities	$	2		$	(72	)	$	10		$	—		$	7	$	—		$	(53	)

	Three Months Ended September 30, 2006
	MS			LA			FL			AL		Other		Eliminations			Consolidated
Interest income	$	49,909		$	35,789		$	2,044		$	—	$	5,935	$	(4,444	)	$	89,233
Interest expense		19,515			14,434			739			—		1,628		(4,328	)		31,988
Net interest income		30,394			21,355			1,305			—		4,307		(116	)		57,245
Provision for (reversal of ) loan losses		(15,294	)		(4,706	)		—			—		—		—			(20,000	)
Noninterest income		11,681			8,179			117			—		5,776		(16	)		25,737
Depreciation and amortization		1,474			609			76			—		124		—			2,283
Other noninterest expense		22,984			15,404			1,429			—		8,248		(11	)		48,054
Net income (loss) before    income taxes		32,911			18,227			(83	)		—		1,711		(121	)		52,645
Income tax expense (benefit)		10,931			5,195			(96	)		—		584		—			16,614
Net income (loss)	$	21,980		$	13,032		$	13		$	—	$	1,127	$	(121	)	$	36,031
Total assets	$	3,655,470		$	2,405,757		$	139,009		$	—	$	780,778	$	(859,349	)	$	6,121,665
Total interest income from   affiliates	$	4,262		$	—		$	66		$	—	$	116	$	(4,444	)	$	—
Total interest income from   external customers	$	45,647		$	35,789		$	1,978		$	—	$	5,819	$	—		$	89,233
Amortization & (accretion) of   securities	$	(2,529	)	$	(284	)	$	13		$	—	$	13	$	—		$	(2,787	)

18

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

12. Segment Reporting (continued)

	Nine Months Ended September 30, 2007
	MS			LA			FL			AL			Other		Eliminations			Consolidated
Interest income	$	135,819		$	110,715		$	7,228		$	671		$	19,056	$	(15,182	)	$	258,307
Interest expense		59,143			50,204			3,771			177			5,711		(14,837	)		104,169
Net interest income		76,676			60,511			3,457			494			13,345		(345	)		154,138
Provision for (reversal of ) loan losses		(552	)		1,565			566			224			2,199		—			4,002
Noninterest income		38,123			27,416			624			15			20,495		(33	)		86,640
Depreciation and amortization		6,458			2,337			323			25			341		—			9,484
Other noninterest expense		66,083			51,019			4,165			788			25,016		(363	)		146,708
Net income (loss) before    income taxes		42,810			33,006			(973	)		(528	)		6,284		(15	)		80,584
Income tax expense (benefit)		12,496			8,743			(469	)		(172	)		2,694		—			23,292
Net income (loss)	$	30,314		$	24,263		$	(504	)	$	(356	)	$	3,590	$	(15	)	$	57,292
Total assets	$	3,227,798		$	2,594,664		$	158,669		$	28,111		$	818,740	$	(921,929	)	$	5,906,053
Total interest income from   affiliates	$	15,133		$	—		$	—		$	49		$	—	$	(15,182	)	$	—
Total interest income from   external customers	$	120,686		$	110,715		$	7,228		$	622		$	19,056	$	—		$	258,307
Amortization & (accretion) of   securities	$	(1,046	)	$	(1,040	)	$	32		$	—		$	29	$	—		$	(2,025	)

	Nine Months Ended September 30, 2006
	MS			LA			FL			AL		Other		Eliminations			Consolidated
Interest income	$	144,840		$	100,812		$	5,633		$	—	$	15,611	$	(9,670	)	$	257,226
Interest expense		51,682			37,521			1,777			—		4,273		(9,356	)		85,897
Net interest income		93,158			63,291			3,856			—		11,338		(314	)		171,329
Provision for (reversal of ) loan losses		(16,705	)		(4,188	)		43			—		145		—			(20,705	)
Noninterest income		33,931			23,551			337			—		18,961		(93	)		76,687
Depreciation and amortization		4,600			1,866			225			—		351		—			7,042
Other noninterest expense		68,118			47,005			3,741			—		24,801		(33	)		143,632
Net income (loss) before    income taxes		71,076			42,159			184			—		5,002		(374	)		118,047
Income tax expense (benefit)		23,751			12,415			(17	)		—		1,857		—			38,006
Net income (loss)	$	47,325		$	29,744		$	201		$	—	$	3,145	$	(374	)	$	80,041
Total assets	$	3,655,470		$	2,405,757		$	139,009		$	—	$	780,778	$	(859,349	)	$	6,121,665
Total interest income from   affiliates	$	9,091		$	6		$	259		$	—	$	314	$	(9,670	)	$	—
Total interest income from   external customers	$	135,749		$	100,806		$	5,374		$	—	$	15,297	$	—		$	257,226
Amortization & (accretion) of   securities	$	(8,192	)	$	(944	)	$	40		$	—	$	46	$	—		$	(9,050	)

19

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

13. New Accounting Pronouncements

    In November 2007, the SEC issued Staff Accounting Bulletin No. 109,Written Loan Commitments Recorded at Fair Value Through Earnings (“SAB No. 109”). SAB No. 109 rescinds SAB No. 105’s prohibition on inclusion of expected net future cash flows related to loan servicing activities in the fair value measurement of a written loan commitment. SAB No. 109 also applies to any loan commitments for which fair value accounting is elected under SFAS No. 159. SAB No. 109 is effective prospectively for derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The Company is currently assessing the financial impact of adopting SAB No. 109.

    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.

20

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

13. 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.

21

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 September 30, 2007, we had total assets of $5.9 billion and employed on a full-time equivalent basis 1,319 persons in Mississippi, 571 persons in Louisiana, 49 persons in Florida and 27 persons in Alabama.

        Net income for the third quarter of 2007 totaled $17.7 million, a decrease of $18.3 million, or 51%, from the third quarter of 2006. Diluted earnings per share for the third quarter of 2007 were $0.55, a decrease of $0.56 from the same quarter a year ago. Return on average assets for the third quarter of 2007 was 1.21% compared to 2.36% for the third quarter of 2006. Return on average common equity was 12.58% compared to 27.58% for the same quarter a year ago.

        Net income for 2006 was affected by several items related to the impact of Hurricane Katrina, which made landfall in our operating region on August 29, 2005. In the third quarter of 2006, we reversed $20.0 million from the storm-related allowance for loan losses due to better than expected loss experience with storm-impacted credits, adding $13.0 million in after-tax earnings and $.39 in diluted earnings per share to the third quarter of 2006.

RESULTS OF OPERATIONS

Net Interest Income

     Net interest income (te) for the third quarter decreased $5.7 million, or 10%, from the third quarter of 2006. The primary driver of the $5.7 million decrease in net interest income (te) was a $250 million, or 5%, decrease in average earning assets mainly to fund a reduction in total borrowings of $98.6 million, or 32%, and a decrease in average deposits of $114.1 million, or 2%. The decrease in borrowings and deposits was generally attributable to the regional post-Katrina economy. Our net interest margin (te) was 4% in the third quarter, 23 basis points narrower than the same quarter a year ago as the increase in the average earning asset yield (21 basis points) did not offset the increase in total funding costs (45 basis points). See tables on pages 25-30 for details.

22

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 September 30, 2007 is adequate.

      Annualized net charge-offs, as a percent of average loans, were 0.21% for the third quarter of 2007, compared to 0.34% in the third 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 September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Annualized net charge-offs to average loans		0.21	%		0.34	%		0.19	%		0.24	%
Annualized provision (recovery) for loan losses       to average loans		0.18	%		(2.60	%)		0.16	%		(0.92	%)
Average allowance for loan losses to average loans		1.33	%		1.99	%		1.38	%		2.32	%
Gross charge-offs	$	3,610		$	6,358		$	10,207		$	15,022
Gross recoveries	$	1,730		$	3,750		$	5,334		$	9,521
Non-accrual loans	$	8,500		$	5,179		$	8,500		$	5,179
Accruing loans 90 days or more past due	$	3,819		$	3,626		$	3,819		$	3,626

     Accruing loans 90 days or more past due increased $193,000 from September 30, 2006. Since December 31, 2005, accruing loans 90 days or more past due, net of deferrals, have decreased $21.8 million to $3.8 million at September 30, 2007. In the third quarter of 2006, we reversed $20.0 million from the storm-related allowance for loan losses due to better than expected loss experience with storm-impacted credits, adding $13.0 million in after-tax earnings and $.39 in diluted earnings per share to the third quarter of 2006. This decrease is related to improved ability of certain borrowers to meet their regular payments after Hurricane Katrina.

Noninterest Income

        Noninterest income (excluding securities transactions) for the third quarter was up $4.9 million, or 19%, compared to the same quarter a year ago. The primary factors impacting the higher levels of non-interest income (excluding securities transactions) as compared to the same quarter a year ago, were higher levels of service charge income (up $1.4 million, or 14%), trust fees (up $0.7 million, or 23%), investment and annuity fees (up $0.7 million, or 29%) and other income (up $1.6 million, or 35%).

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

23

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(In thousands)
Service charges on deposit accounts	$	11,085	$	9,719	$	30,747	$	26,826
Trust fees		3,892		3,174		11,708		9,662
Credit card merchant discount fees		2,025		1,744		5,975		5,316
Income from insurance operations		4,256		4,145		13,657		13,900
Investment and annuity fees		2,253		1,595		6,249		4,450
ATM fees		1,434		1,223		4,116		3,790
Secondary mortgage market operations		935		1,018		2,962		2,583
Other income		4,605		3,009		11,152		9,932
Total other noninterest income		30,485		25,627		86,566		76,459
Securities transactions gains, net		34		110		74		228
Total noninterest income	$	30,519	$	25,737	$	86,640	$	76,687

Noninterest Expense

     Operating expenses for the third quarter were $4.9 million, or 10%, higher compared to the same quarter a year ago. The increase from the same quarter a year ago was reflected in higher levels of occupancy expense (up $1.8 million), personnel expense (up $1.5 million) and other operating expense (up $1.4 million).

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007			2006
	(In thousands)
Employee compensation	$	22,575	$	21,790	$	63,195		$	64,429
Employee benefits		5,956		5,269		16,737			15,232
Total salaries and employee benefits		28,531		27,059		79,932			79,661
Equipment and data processing expense		7,323		6,279		20,209			16,320
Net occupancy expense		4,731		2,882		13,273			10,015
Postage and communications		2,616		1,936		7,564			6,881
Ad valorem and franchise taxes		1,016		519		2,664			2,680
Legal and professional services		3,482		3,641		11,572			9,506
Stationery and supplies		483		519		1,614			1,604
Amortization of intangible assets		412		445		1,219			1,626
Advertising		1,796		1,985		5,390			5,091
Deposit insurance and regulatory fees		257		257		766			550
Training expenses		112		106		447			418
Other real estate owned expense		7		93		(633	)		(242	)
Other expense		4,430		4,616		12,175			16,564
Total noninterest expense	$	55,196	$	50,337	$	156,192		$	150,674

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 nine months ended September 30, 2007 and 2006, the effective federal income tax rates were approximately 29% and 32%, 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 nine months of 2007 was $12.7 million compared to $10.9 million for the comparable period in 2006. Tax-exempt income for nine months ended September 30, 2007 consisted of $4.8 million from securities and $7.9 million from loans and leases. Tax-exempt income for the

24

first nine months of 2006 consisted of $5.0 million from securities and $5.9 million from loans and leases.

Selected Financial Data

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Per Common Share Data	(In thousands, except per share data)
Earnings per share:
Basic	$	0.55	$	1.11	$	1.77	$	2.46
Diluted	$	0.55	$	1.08	$	1.74	$	2.41
Cash dividends per share	$	0.240	$	0.240	$	0.720	$	0.655
Book value per share (period end)	$	17.55	$	16.64	$	17.55	$	16.64
Weighted average number of shares:
Basic		32,005		32,566		32,299		32,500
Diluted (1)		32,492		33,333		32,847		33,274
Period end number of shares		31,786		32,584		31,786		32,584
Market data:
High price	$	43.90	$	56.79	$	54.09	$	57.19
Low price	$	32.78	$	49.71	$	32.78	$	37.75
Period end closing price	$	40.08	$	53.55	$	40.08	$	53.55
Trading volume		10,290		8,135		30,485		20,883

(1) There were 0 and 49,852 anti-dilutive share-based incentives outstanding for the three and nine months ended September 30, 2007, respectively. There were 31,925 and 67,911 anti-dilutive share-based incentives outstanding for the three and nine months ended September 30, 2006, respectively.

25

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Performance Ratios	(dollar amounts in thousands)
Return on average assets		1.21%			2.36%			1.31%			1.77%
Return on average common equity		12.58%			27.58%			13.63%			21.42%
Earning asset yield (Tax Equivalent (“TE”))		6.81%			6.60%			6.74%			6.36%
Total cost of funds		2.75%			2.30%			2.65%			2.08%
Net interest margin (TE)		4.06%			4.29%			4.09%			4.28%
Common equity (period end) as a percent of   total assets (period end)		9.45%			8.86%			9.45%			8.86%
Leverage ratio (period end)		8.82%			8.15%			8.82%			8.15%
FTE Headcount		1,966			1,788			1,966			1,788
Asset Quality Information
Non-accrual loans	$	8,500		$	5,179		$	8,500		$	5,179
Foreclosed assets	$	1,374		$	970		$	1,374		$	970
Total non-performing assets	$	9,874		$	6,149		$	9,874		$	6,149
Non-performing assets as a percent of loans and  foreclosed assets		0.28%			0.20%			0.28%			0.20%
Accruing loans 90 days past due	$	3,819		$	3,626		$	3,819		$	3,626
Accruing loans 90 days past due as a percent of loans		0.11%			0.12%			0.11%			0.12%
Non-performing assets + accruing loans 90 days    past due to loans and foreclosed assets		0.39%			0.31%			0.39%			0.31%
Net charge-offs	$	1,880		$	2,608		$	4,873		$	5,501
Net charge-offs as a percent of average loans		0.21%			0.34%			0.19%			0.24%
Allowance for loan losses	$	45,901		$	48,352		$	45,901		$	48,352
Allowance for loan losses as a percent    of period end loans		1.31%			1.55%			1.31%			1.55%
Allowance for loan losses to NPAs + accruing    loans 90 days past due		335.22%			494.65%			335.22%			494.65%
Provision for (reversal of) loan losses	$	1,554			($ 20,000	)	$	4,002			($ 20,705	)
Average Balance Sheet
Total loans	$	3,470,282		$	3,080,441		$	3,378,789		$	3,015,434
Securities		1,668,279			2,334,242			1,743,641			2,254,068
Short-term investments		120,116			94,026			139,323			255,265
Earning assets		5,258,677			5,508,709			5,261,753			5,524,767
Allowance for loan losses		(46,216	)		(61,525	)		(46,475	)		(69,840	)
Other assets		624,566			602,833			610,249			590,642
Total assets	$	5,837,027		$	6,050,017		$	5,825,527		$	6,045,569
Noninterest bearing deposits	$	893,455		$	1,098,716		$	942,360		$	1,158,844
Interest bearing transaction deposits		1,383,851			1,590,318			1,445,384			1,666,689
Interest bearing public fund deposits		823,316			791,825			806,476			780,947
Time deposits		1,837,292			1,571,129			1,730,787			1,494,748
Total interest bearing deposits		4,044,459			3,953,272			3,982,647			3,942,384
Total deposits		4,937,914			5,051,988			4,925,007			5,101,228
Other borrowed funds		206,072			304,686			203,025			267,666
Other liabilities		133,695			175,093			135,396			177,183
Stockholders’ equity		559,346			518,250			562,099			499,492
Total liabilities & stockholders’ equity	$	5,837,027		$	6,050,017		$	5,825,527		$	6,045,569

26

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Period end Balance Sheet	(dollar amounts in thousands)
Commercial/real estate loans	$	2,090,992		$	1,800,643		$	2,090,992		$	1,800,643
Mortgage loans		432,154			416,691			432,154			416,691
Direct consumer loans		494,667			471,837			494,667			471,837
Indirect consumer loans		380,561			350,013			380,561			350,013
Finance company loans		114,919			83,278			114,919			83,278
Total loans		3,513,293			3,122,462			3,513,293			3,122,462
Loans held for sale		17,698			18,700			17,698			18,700
Securities		1,681,850			2,303,396			1,681,850			2,303,396
Short-term investments		99,176			74,903			99,176			74,903
Earning assets		5,312,017			5,519,461			5,312,017			5,519,461
Allowance for loan losses		(45,901	)		(48,352	)		(45,901	)		(48,352	)
Other assets		639,937			650,556			639,937			650,556
Total assets	$	5,906,053		$	6,121,665		$	5,906,053		$	6,121,665
Noninterest bearing deposits	$	891,842		$	1,062,392		$	891,842		$	1,062,392
Interest bearing transaction deposits		1,357,835			1,510,785			1,357,835			1,510,785
Interest bearing public funds deposits		837,073			795,927			837,073			795,927
Time deposits		1,912,799			1,631,504			1,912,799			1,631,504
Total interest bearing deposits		4,107,707			3,938,216			4,107,707			3,938,216
Total deposits		4,999,549			5,000,608			4,999,549			5,000,608
Other borrowed funds		216,481			430,827			216,481			430,827
Other liabilities		132,048			148,129			132,048			148,129
Stockholders' equity		557,975			542,101			557,975			542,101
Total liabilities & stockholders’ equity	$	5,906,053		$	6,121,665		$	5,906,053		$	6,121,665
Net Charge-Off Information
Net charge-offs (recoveries):
Commercial/real estate loans		($ 58	)	$	522		$	47			($ 628	)
Mortgage loans		—			367			1			576
Direct consumer loans		864			1,003			1,835			3,264
Indirect consumer loans		314			294			1,216			1,338
Finance company loans		760			422			1,774			951
Total net charge-offs	$	1,880		$	2,608		$	4,873		$	5,501
Net charge-offs to average loans:
Commercial/real estate loans		-0.01	%		0.12	%		0.00	%		-0.05	%
Mortgage loans		0.00	%		0.34	%		0.00	%		0.19	%
Direct consumer loans		0.70	%		0.85	%		0.50	%		0.93	%
Indirect consumer loans		0.33	%		0.34	%		0.45	%		0.51	%
Finance company loans		2.74	%		2.11	%		2.34	%		1.77	%
Total net charge-offs to average net loans		0.21	%		0.34	%		0.19	%		0.24	%

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Average Balance Sheet Composition	(dollar amounts in thousands)
Percentage of earning assets/funding sources:
Loans		65.99%		55.92%		64.21%		54.58%
Securities		31.73%		42.37%		33.14%		40.80%
Short-term investments		2.28%		1.71%		2.65%		4.62%
Earning assets		100.00%		100.00%		100.00%		100.00%
Non-interest bearing deposits		16.99%		19.95%		17.91%		20.98%
Interest bearing transaction deposits		26.32%		28.87%		27.47%		30.16%
Interest bearing public funds deposits		15.66%		14.37%		15.33%		14.14%
Time deposits		34.93%		28.52%		32.89%		27.06%
Total deposits		93.90%		91.71%		93.60%		92.34%
Other borrowed funds		3.92%		5.53%		3.86%		4.84%
Other net interest-free funding sources		2.18%		2.76%		2.54%		2.82%
Total funding sources		100.00%		100.00%		100.00%		100.00%
Loan mix:
Commercial/real estate loans		59.25%		57.11%		58.98%		56.76%
Mortgage loans		12.66%		13.75%		12.82%		13.75%
Direct consumer loans		14.16%		15.28%		14.44%		15.53%
Indirect consumer loans		10.77%		11.28%		10.77%		11.58%
Finance company loans		3.16%		2.58%		2.99%		2.38%
Total loans		100.00%		100.00%		100.00%		100.00%
Average dollars
Loans	$	3,470,282	$	3,080,441	$	3,378,789	$	3,015,434
Securities		1,668,279		2,334,242		1,743,641		2,254,068
Short-term investments		120,116		94,026		139,323		225,265
Earning assets	$	5,258,677	$	5,508,709	$	5,261,753	$	5,494,767
Non-interest bearing deposits	$	893,455	$	1,098,716	$	942,360	$	1,158,844
Interest bearing transaction deposits		1,383,851		1,590,318		1,445,384		1,666,689
Interest bearing public funds deposits		823,316		791,825		806,476		780,947
Time deposits		1,837,292		1,571,129		1,730,787		1,494,748
Total deposits		4,937,914		5,051,988		4,925,007		5,101,228
Other borrowed funds		206,072		304,686		203,025		267,666
Other net interest-free funding sources		114,691		152,035		133,721		155,873
Total funding sources	$	5,258,677	$	5,508,709	$	5,261,753	$	5,524,767
Loans:
Commercial/real estate loans	$	2,055,922	$	1,759,173	$	1,992,890	$	1,711,525
Mortgage loans		439,458		423,610		433,006		414,768
Direct consumer loans		491,417		470,771		487,985		468,196
Indirect consumer loans		373,677		347,404		363,773		349,076
Finance company loans		109,808		79,483		101,135		71,869
Total average loans	$	3,470,282	$	3,080,441	$	3,378,789	$	3,015,434

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

	Three Months Ended September 30,
	2007								2006
(dollars in thousands)	Interest			Volume		Rate			Interest			Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	38,563		$	2,055,922		7.45	%	$	32,520		$	1,759,173		7.34	%
Mortgage loans		6,764			439,458		6.16	%		6,411			423,610		6.05	%
Consumer loans		21,871			974,902		8.90	%		19,547			897,658		8.64	%
Loan fees & late charges		257			—		0.00	%		2,710			—		0.00	%
Total loans (TE)	$	67,455		$	3,470,282		7.72	%	$	61,188		$	3,080,441		7.89	%
US treasury securities		128			11,169		4.53	%		855			67,966		4.99	%
US agency securities		10,223			801,585		5.10	%		16,456			1,356,478		4.85	%
CMOs		830			80,989		4.10	%		1,439			145,494		3.96	%
Mortgage backed securities		6,557			513,545		5.11	%		6,231			511,372		4.87	%
Municipals (TE)		2,634			195,956		5.38	%		2,936			174,744		6.72	%
Other securities		817			65,035		5.03	%		1,042			78,188		5.33	%
Total securities (TE)		21,189			1,668,279		5.08	%		28,959			2,334,242		4.96	%
Total short-term investments		1,389			120,116		4.59	%		1,128			94,026		4.76	%
Average earning assets yield (TE)	$	90,033		$	5,258,677		6.81	%	$	91,275		$	5,508,709		6.60	%
Interest-bearing liabilities
Interest-bearing transaction deposits	$	4,682		$	1,383,851		1.34	%	$	3,955		$	1,590,318		0.99	%
Time deposits		21,295			1,837,292		4.60	%		16,352			1,571,129		4.13	%
Public Funds		8,753			823,316		4.22	%		8,629			791,825		4.32	%
Total interest bearing deposits	$	34,730		$	4,044,459		3.41	%	$	28,936		$	3,953,272		2.90	%
Total borrowings		1,892			206,072		3.64	%		3,202			304,686		4.17	%
Capitalized interest		(155	)							(150	)
Total interest bearing liability cost	$	36,467		$	4,250,531		3.40	%	$	31,988		$	4,257,958		2.98	%
Noninterest-bearing deposits					893,455								1,098,716
Other net interest-free funding sources					114,691								152,035
Total cost of funds	$	36,467		$	5,258,677		2.75	%	$	31,988		$	5,508,709		2.30	%
Net interest spread (TE)	$	53,566					3.41	%	$	59,287					3.62	%
Net interest margin (TE)	$	53,566		$	5,258,677		4.06	%	$	59,287		$	5,508,709		4.29	%

29

	Nine Months Ended September 30,
	2007								2006
(dollars in thousands)	Interest			Volume		Rate			Interest			Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	110,483		$	1,992,890		7.41	%	$	91,769		$	1,711,525		7.17	%
Mortgage loans		19,950			433,006		6.14	%		18,289			414,768		5.88	%
Consumer loans		63,045			952,893		8.85	%		55,376			889,141		8.33	%
Loan fees & late charges		992			—		0.00	%		7,506			—		0.00	%
Total loans (TE)	$	194,470		$	3,378,789		7.69	%	$	172,940		$	3,015,434		7.66	%
US treasury securities		1,278			35,083		4.87	%		1,936			56,722		4.56	%
US agency securities		32,966			869,107		5.06	%		46,196			1,299,845		4.74	%
CMOs		2,882			93,941		4.09	%		4,874			164,723		3.95	%
Mortgage backed securities		17,887			476,077		5.01	%		17,393			491,177		4.72	%
Municipals (TE)		8,148			197,200		5.51	%		8,344			165,533		6.72	%
Other securities		2,671			72,233		4.93	%		2,859			76,068		5.01	%
Total securities (TE)		65,832			1,743,641		5.03	%		81,602			2,254,068		4.83	%
Total short-term investments		5,060			139,323		4.86	%		8,684			255,265		4.55	%
Average earning assets yield (TE)	$	265,362		$	5,261,753		6.74	%	$	263,226		$	5,524,767		6.36	%
Interest-bearing liabilities
Interest-bearing transaction deposits	$	14,360		$	1,445,384		1.33	%	$	11,001		$	1,666,689		0.88	%
Time deposits		58,871			1,730,787		4.55	%		43,809			1,494,748		3.92	%
Public Funds		26,221			806,476		4.35	%		24,036			780,947		4.11	%
Total interest bearing deposits	$	99,452		$	3,982,647		3.34	%	$	78,846		$	3,942,384		2.67	%
Total borrowings		5,589			203,025		3.68	%		7,298			267,666		3.65	%
Capitalized interest		(872	)							(247	)
Total interest bearing liability cost	$	104,169		$	4,185,672		3.33	%	$	85,897		$	4,210,050		2.73	%
Noninterest-bearing deposits					942,360								1,158,844
Other net interest-free funding sources					133,721								155,873
Total cost of funds	$	104,169		$	5,261,753		2.65	%	$	85,897		$	5,524,767		2.08	%
Net interest spread (TE)	$	161,193					3.41	%	$	177,329					3.64	%
Net interest margin (TE)	$	161,193		$	5,261,753		4.09	%	$	177,329		$	5,524,767		4.28	%

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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 $334.4 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $100 million.

        During the nine months ended September 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. During the nine months ended September 30, 2007, FNMA bonds were called at a gross loss of $10, 269.

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

	September 30, 2007			December 31, 2006
Total securities to total deposits		33.64	%		37.84	%
Total loans (net of unearned       income) to total deposits		70.27	%		64.59	%
Interest-earning assets       to total assets		89.94	%		90.41	%
Interest-bearing deposits       to total deposits		82.16	%		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 September 30, 2007 and December 31, 2006 are as follows:

	September 30, 2007			December 31, 2006
Common equity (period-end) as a percent of   total assets (period-end)		9.45	%		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)		8.82	%		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 September 30, 2007, we had $1.2 billion in unused loan commitments outstanding, of which approximately $528.8 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.

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     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 September 30, 2007, we had $84.4 million in letters of credit issued and outstanding.

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

	Expiration Date
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(dollars in thousands)
Commitments to extend credit	$	1,238,199	$	886,791	$	32,135	$	56,530	$	262,743
Letters of credit		84,435		17,930		53,628		12,877		—
Total	$	1,322,634	$	904,721	$	85,763	$	69,407	$	262,743

        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 13 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 September 30, 2007, the effective duration of the securities portfolio was 2.38 years. A rate increase (aged, over 1 year) of 100 basis points would move the effective duration to 2.70 years, while a reduction in rates of 100 basis points would result in an effective duration of 1.20 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 September 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	-3.16%
Stable	0.00%
+100	1.39%

        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 nine month period ended September 30, 2007, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

34

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
July 1, 2007 - July 30, 2007		—	(2)	$	—		—		884,358
Aug. 1, 2007 - Aug. 31, 2007		93,697	(3)	$	35.22		93,697		790,661
Sept. 1, 2007 - Sept. 30, 2007		249,222	(4)	$	40.10		249,222		541,439
Total as of Sept. 30, 2007		342,919		$	38.77		342,919

(1)	The Company publicly announced its stock buy-back program on July 18, 2000.
(2)	0 shares were purchased on the open market during July in order to satisfy obligations pursuant to the Company's long-term incentive plan that was established in 1996.
(3)	93,697 shares were purchased on the open market during August in order to satisfy obligations pursuant to the Company's long-term incentive plan that was established in 1996.
(4)	249,222 shares were purchased on the open market during September in order to satisfy obligations pursuant to the Company's long-term incentive plan that was established in 1996.

35

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.

36

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:	November 7, 2007

37

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.