Hancock Whitney (HWC) 10-Q 2010 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, 2010

OR

¨ 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

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

36,877,812 common shares were outstanding as of July 30, 2010 for financial statement purposes.

Hancock Holding Company

Index

		Page Number
Part I. Financial Information		1
ITEM 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets—June 30, 2010 (unaudited) and December 31, 2009	1
	Condensed Consolidated Statements of Income (unaudited)—Three and six months ended June 30, 2010 and 2009	2
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)—Six months ended June 30, 2010 and 2009	3
	Condensed Consolidated Statements of Cash Flows (unaudited)—Six months ended June 30, 2010 and 2009	4
	Notes to Condensed Consolidated Financial Statements (unaudited)—June 30, 2010	5-19
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-35
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	36
ITEM 4.	Controls and Procedures	36
Part II. Other Information		37
ITEM 1A.	Risk Factors	37
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 4.	Reserved	37
ITEM 5.	Other Information	37
ITEM 6.	Exhibits	38
Signatures		39

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	June  30, 2010 (unaudited)			December 31, 2009
ASSETS
Cash and due from banks (non-interest bearing)	$	169,320		$	204,714
Interest-bearing deposits with other banks		620,201			582,081
Federal funds sold		115			410
Other short-term investments		99,998			214,771
Securities available for sale, at fair value (amortized cost of $1,615,333 and $1,566,403)		1,686,671			1,611,327
Loans held for sale		42,769			36,112
Loans		4,984,431			5,127,339
Less: allowance for loan losses		(77,221	)		(66,050	)
unearned income		(12,230	)		(13,164	)
Loans, net		4,894,980			5,048,125
Property and equipment, net of accumulated depreciation of $119,985 and $113,967		207,574			203,133
Other real estate, net		44,311			13,786
Accrued interest receivable		34,594			35,468
Goodwill		61,631			62,277
Other intangible assets, net		14,779			16,546
Life insurance contracts		155,456			151,355
FDIC loss share receivable		326,993			325,606
Other assets		140,626			191,372
Total assets	$	8,500,018		$	8,697,083
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	1,050,118		$	1,073,341
Interest-bearing savings, NOW, money market and time		5,910,453			6,122,471
Total deposits		6,960,571			7,195,812
Federal funds purchased		1,500			250
Securities sold under agreements to repurchase		501,365			484,457
FHLB borrowings		30,369			30,805
Long-term notes		488			671
Deferred tax liability, net		8,953			7,116
Other liabilities		135,490			140,309
Total liabilities		7,638,736			7,859,420
Stockholders’ Equity
Common stock—$3.33 par value per share; 350,000,000 shares authorized, 36,877,454 and 36,840,453 issued and outstanding, respectively		122,802			122,679
Capital surplus		261,145			257,643
Retained earnings		456,834			454,343
Accumulated other comprehensive gain, net		20,501			2,998
Total stockholders’ equity		861,282			837,663
Total liabilities and stockholders’ equity	$	8,500,018		$	8,697,083

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,
	2010		2009		2010		2009
Interest income:
Loans, including fees	$	71,487	$	59,863	$	145,653	$	119,325
Securities—taxable		16,343		17,981		32,772		37,026
Securities—tax exempt		1,460		1,063		2,655		2,133
Federal funds sold		13		1		28		5
Other investments		438		1,197		1,011		3,064
Total interest income		89,741		80,105		182,119		161,553
Interest expense:
Deposits		19,400		20,703		42,684		46,057
Federal funds purchased and securities sold under agreements to repurchase		2,451		2,680		4,887		5,333
Long-term notes and other interest expense		17		30		97		25
Total interest expense		21,868		23,413		47,668		51,415
Net interest income		67,873		56,692		134,451		110,138
Provision for loan losses		24,517		16,919		38,343		25,261
Net interest income after provision for loan losses		43,356		39,773		96,108		84,877
Noninterest income:
Service charges on deposit accounts		12,327		11,242		23,816		21,745
Other service charges, commissions and fees		16,961		14,384		32,145		28,369
Other income		6,005		8,878		10,713		13,445
Total noninterest income		35,293		34,504		66,674		63,559
Noninterest expense:
Salaries and employee benefits		35,379		28,703		70,146		59,478
Net occupancy expense		6,026		5,016		12,169		10,071
Equipment rentals, depreciation and maintenance		2,642		2,583		5,367		5,117
Amortization of intangibles		684		354		1,422		709
Other expense		27,391		21,570		50,839		38,689
Total noninterest expense		72,122		58,226		139,943		114,064
Net income before income taxes		6,527		16,051		22,839		34,372
Income tax expense		27		2,305		2,505		6,595
Net income	$	6,500	$	13,746	$	20,334	$	27,777
Basic earnings per share	$	0.17	$	0.43	$	0.55	$	0.87
Diluted earnings per share	$	0.17	$	0.43	$	0.55	$	0.87
Dividends paid per share	$	0.24	$	0.24	$	0.48	$	0.48
Weighted avg. shares outstanding-basic		36,876		31,820		36,855		31,812
Weighted avg. shares outstanding-diluted		37,078		32,009		37,075		31,973

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)

									Accumulated Other Comprehensive Loss, net			Total
	Common Stock			Capital Surplus		Retained Earnings
	Shares	Amount
Balance, January 1, 2009	31,769,679	$	105,793	$	101,210	$	411,579		$	(9,083	)	$	609,499
Comprehensive income
Net income per consolidated statements of income	—		—		—		27,777			—			27,777
Net change in unfunded accumulated benefit obligation, net of tax	—		—		—		—			907			907
Net change in fair value of securities available for sale, net of tax	—		—		—		—			5,482			5,482
Comprehensive income													34,166
Cash dividends declared ($0.48 per common share)	—		—		—		(15,390	)		—			(15,390	)
Common stock issued, long-term incentive plan, including income tax benefit of $86	57,033		190		708		—			—			898
Compensation expense, long-term incentive plan	—		—		1,601		—			—			1,601
Balance, June 30, 2009	31,826,712	$	105,983	$	103,519	$	423,966		$	(2,694	)	$	630,774
Balance, January 1, 2010	36,840,453	$	122,679	$	257,643	$	454,343		$	2,998		$	837,663
Comprehensive income
Net income per consolidated statements of income	—		—		—		20,334			—			20,334
Net change in unfunded accumulated benefit obligation, net of tax	—		—		—		—			794			794
Net change in fair value of securities available for sale, net of tax	—		—		—		—			16,709			16,709
Comprehensive income													37,837
Cash dividends declared ($0.48 per common share)	—		—		—		(17,843	)		—			(17,843	)
Common stock issued, long-term incentive plan, including income tax benefit of $259	37,001		123		1,473		—			—			1,596
Compensation expense, long-term incentive plan	—		—		2,029		—			—			2,029
Balance, June 30, 2010	36,877,454	$	122,802	$	261,145	$	456,834		$	20,501		$	861,282

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,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	20,334		$	27,777
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,051			8,113
Provision for loan losses		38,343			25,261
Loss in connection with other real estate owned		1,470			334
Deferred tax benefit		(8,342	)		(1,598	)
Increase in cash surrender value of life insurance contracts		(4,101	)		(3,070	)
Gain on sale or disposal of other assets		(295	)		(1,676	)
Gain on sale of loans held for sale		(1,328	)		(451	)
Discount accretion on acquired FHLB Borrowings		(436	)		—
Net amortization (accretion) of securities premium/discount		2,658			(170	)
Amortization of intangible assets		1,487			792
Stock-based compensation expense		2,029			1,601
Increase (decrease) in other liabilities		(2,518	)		7,211
Increase in FDIC Indemnification Asset		(1,387	)		—
Decrease (increase) in other assets		51,620			(25,198	)
Proceeds from sale of loans held for sale		698,245			174,230
Originations of loans held for sale		(692,961	)		(198,858	)
Excess tax benefit from share based payments		(259	)		(86	)
Other, net		(41	)		323
Net cash provided by operating activities		111,569			14,535
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing time deposits		(38,120	)		(100,156	)
Proceeds from maturities of securities available for sale		218,618			387,160
Purchases of securities available for sale		(270,433	)		(289,037	)
Proceeds from maturities of short term investments		270,000			1,000,000
Purchase of short term investments		(154,999	)		(1,013,806	)
Net decrease in federal funds sold		295			175,067
Net decrease (increase) in loans		64,862			(52,403	)
Purchases of property and equipment		(11,416	)		(4,514	)
Proceeds from sales of property and equipment		411			2,654
Proceeds from sales of other real estate		7,332			2,133
Net cash provided by investing activities		86,550			107,098
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits		(235,241	)		(274,709	)
Net increase in federal funds purchased and securities sold under agreements to repurchase		18,158			20,648
Proceeds from issuance of short-term notes		—			100,000
Repayments of long-term notes		(183	)		(81	)
Dividends paid		(17,843	)		(15,390	)
Proceeds from exercise of stock options		1,337			812
Excess tax benefit from stock option exercises		259			86
Net cash used in financing activities		(233,513	)		(168,634	)
NET DECREASE IN CASH AND DUE FROM BANKS		(35,394	)		(47,001	)
CASH AND DUE FROM BANKS, BEGINNING		204,714			199,775
CASH AND DUE FROM BANKS, ENDING	$	169,320		$	152,774
SUPPLEMENTAL INFORMATION:
Restricted stock issued to employees of Hancock		420			215
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Transfers from loans to other real estate	$	39,587		$	8,725
Financed sale of foreclosed property		260			2,649
Transfer from loans to loans held for sale		10,613			—

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, 2010 and December 31, 2009, the Company’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010 and 2009, the Company’s Condensed Consolidated Statements of Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. 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 and the notes thereto included in the Company’s 2009 Annual Report on Form 10-K. The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results expected for the full year.

Use of Estimates

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The accounting principles the Company follows and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry which requires management to make estimates and assumptions about future events. 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 not readily apparent from other sources. On an ongoing basis, the Company evaluates its estimates, including those related to the allowance for loan losses, intangible assets and goodwill, income taxes, pension and postretirement benefit plans and contingent liabilities. These estimates and assumptions are based on the Company’s best estimates and judgments. The Company evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, rising unemployment levels and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. Allowance for loan losses, deferred income taxes, and goodwill are potentially subject to material changes in the near term. Actual results could differ significantly 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 unaudited 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, 2009.

5

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

2. Fair Value

The Financial Accounting Standards Board (FASB) issued authoritative guidance that establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements.The guidance defines a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value giving preference to quoted prices in active markets (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3).Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.Available for sale securities classified as level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and other debt and equity securities. Level 2 classified available for sale securities include mortgage-backed debt securities, collateralized mortgage obligations, and state and municipal bonds. The Company invests only in high quality securities of investment grade quality with a target duration, for the overall portfolio, generally between two to five years. The Company policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a Nationally Recognized Statistical Rating Agency, except for certain obligations of Mississippi, Louisiana, Florida or Alabama counties, parishes and municipalities. There were no transfers between levels.

The Company adopted the provisions of the guidance for nonfinancial assets and nonfinancial liabilities on January 1, 2009.

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s financial assets and liabilities that are measured at fair value (in thousands) on a recurring basis at June 30, 2010 and December 31, 2009.

	As of June 30, 2010
	Level 1		Level 2		Net Balance
Assets
Available for sale securities:
Debt securities issued by the U.S. Treasury and other government corporations and agencies	$	219,676	$	—	$	219,676
Debt securities issued by states of the United States and political subdivisions of the states		—		194,934		194,934
Corporate debt securities		15,684		—		15,684
Residential mortgage-backed securities		—		973,223		973,223
Collateralized mortgage obligations		—		283,126		283,126
Equity securities		185		—		185
Short-term investments		99,998		—		99,998
Loans carried at fair value		—		37,144		37,144
Total assets	$	335,543	$	1,488,427	$	1,823,970
Liabilities
Swaps	$	—	$	3,547	$	3,547
Total Liabilities	$	—	$	3,547	$	3,547

6

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

2. Fair Value (continued)

	As of December 31, 2009
	Level 1		Level 2		Total Balance
Assets
Available for sale securities:
Debt securities issued by the U.S. Treasury and other government corporations and agencies	$	143,755	$	—	$	143,755
Debt securities issued by states of the United States and political subdivisions of the states		—		191,668		191,668
Corporate debt securities		16,326		—		16,326
Residential mortgage-backed securities		—		1,110,547		1,110,547
Collateralized mortgage obligations		—		147,169		147,169
Equity securities		1,862		—		1,862
Short-term investments		214,771		—		214,771
Loans carried at fair value		—		38,021		38,021
Total assets	$	376,714	$	1,487,405	$	1,864,119
Liabilities
Swaps	$	—	$	2,209	$	2,209
Total Liabilities	$	—	$	2,209	$	2,209

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis and, therefore, are not included in the above table. Impaired loans are level 2 assets measured using appraisals from external parties of the collateral less any prior liens or based on recent sales activity for similar assets in the property’s market. Other real estate owned are level 2 properties recorded at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less, at the date acquired. Fair values are determined by sales agreement or appraisal. Inputs include appraisal values on the properties or recent sales activity for similar assets in the property’s market. The following table presents for each of the fair value hierarchy levels the Company’s financial assets that are measured at fair value (in thousands) on a nonrecurring basis at June 30, 2010 and December 31, 2009.

	As of June 30, 2010
	Level 1		Level 2		Net Balance
Assets
Impaired loans	$	—	$	105,712	$	105,712
Other real estate owned		—		44,311		44,311
Total assets		—	$	150,023	$	150,023
	As of December 31, 2009
	Level 1		Level 2		Total Balance
Assets
Impaired loans	$	—	$	122,610	$	122,610
Other real estate owned		—		13,786		13,786
Total assets	$	—	$	136,396	$	136,396

7

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

2. Fair Value (continued)

The following methods and assumptions were used to estimate the fair value regarding disclosures about fair value of financial instruments of each class of financial instruments for which it is practicable to estimate:

Cash, Short-Term Investments and Federal Funds Sold—For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities—Estimated fair values for securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Loans, Net of Unearned Income—The fair value of loans is estimated by discounting the future cash flows using the current rates for similar loans with the same remaining maturities.

Accrued Interest Receivable and Accrued Interest Payable—The carrying amounts are a reasonable estimate of their fair values.

Deposits—The guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (carrying amounts). The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Federal Funds Purchased—For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

Securities Sold under Agreements to Repurchase, FHLB Borrowings and Federal Funds Purchased—For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

Long-Term Notes—Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value. The fair value is estimated by discounting the future contractual cash flows using current market rates at which similar notes over the same remaining term could be obtained.

Commitments—The fair value of loan commitments and letters of credit approximate the fees currently charged for similar agreements or the estimated cost to terminate or otherwise settle similar obligations. The fees associated with these financial instruments, or the estimated cost to terminate, as applicable are immaterial.

8

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

2. Fair Value (continued)

The estimated fair values of the Company’s financial instruments were as follows (in thousands):

	June 30, 2010				December 31, 2009
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash, interest-bearing deposits, federal funds sold, and short-term investments	$	889,634	$	889,634	$	1,001,976	$	1,001,976
Securities		1,686,671		1,686,671		1,611,327		1,611,327
Loans, net of unearned income		4,972,202		5,144,930		5,114,175		5,263,246
Accrued interest receivable		34,594		34,594		35,468		35,468
Financial liabilities:
Deposits	$	6,960,571	$	7,004,750	$	7,195,812	$	7,241,363
Federal funds purchased		1,500		1,500		250		250
Securities sold under agreements to repurchase		501,365		501,365		484,457		484,457
FHLB Borrowings		30,369		30,369		30,805		30,805
Long-term notes		488		488		671		671
Accrued interest payable		3,899		3,899		4,824		4,824

3. Loans and Allowance for Loan Losses

Loans, net of unearned income, totaled $5.0 billion at June 30, 2010 compared to $5.1 billion at December 31, 2009. The Company also held $42.8 million and $36.1 million in loans held for sale at June 30, 2010 and December 31, 2009, respectively, carried at lower of cost or fair value. At June 30, 2010, the Company transferred $10.6 million of credit card loans to loans held for sale. 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. Nonaccrual loans and foreclosed assets, which make up total non-performing assets, amounted to approximately 3.66% and 1.97% of total loans at June 30, 2010 and December 31, 2009, respectively. The amount of interest that would have been recognized on nonaccrual loans for the three and six months ended June 30, 2010 was approximately $1.6 million and $3.0 million, respectively. Interest recovered on nonaccrual loans that were recorded in net income for the three and six months ended June 30, 2010 was $0.1 million and $0.2 million, respectively.

The following table presents information on loans evaluated for possible impairment loss:

	June 30, 2010		December 31, 2009
	(In thousands)
Impaired loans
Requiring a loss allowance	$	39,964	$	38,839
Not requiring a loss allowance		77,721		82,359
Total recorded investment in impaired loans		117,685		121,198
Impairment loss allowance required	$	11,973	$	10,972

9

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:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
	(In thousands)
Balance of allowance for loan losses at beginning of period	$	66,625	$	62,950	$	66,050	$	61,725
Provision for loan losses		24,517		16,919		38,343		25,261
Loans charged-off:
Commercial, real estate and mortgage		11,372		12,962		23,208		17,790
Direct and indirect consumer		1,959		2,052		3,568		3,684
Finance company		1,376		1,572		2,818		2,723
Demand deposit accounts		291		558		564		1,224
Total charge-offs		14,998		17,144		30,158		25,421
Recoveries of loans previously charged-off:
Commercial, real estate and mortgage		266		239		1,256		354
Direct and indirect consumer		424		412		865		862
Finance company		251		219		504		412
Demand deposit accounts		136		255		361		657
Total recoveries		1,077		1,125		2,986		2,285
Net charge-offs		13,921		16,019		27,172		23,136
Balance of allowance for loan losses at end of period	$	77,221	$	63,850	$	77,221	$	63,850

Changes in the carrying amount of covered acquired loans and accretable yield for loans receivable at June 30, 2010 are presented in the following table (in thousands):

	Three Months Ended June 30, 2010						Six Months Ended June 30, 2010
	Net Accretable Discount			Carrying Amount of Loans			Net Accretable Discount			Carrying Amount of Loans
	(In thousands)						(In thousands)
Balance at beginning of period	$	301,192		$	895,791		$	315,782		$	950,430
Payments received, net		—			(43,665	)		—			(112,894	)
Accretion		(15,517	)		15,517			(30,107	)		30,107
Balance at end of period	$	285,675		$	867,643		$	285,675		$	867,643

The unpaid principal balance for purchased loans was $1,306 million and $1,462 million at June 30, 2010, and December 31, 2009, respectively.

The carrying value of loans receivable with deterioration of credit quality accounted for using the cost recovery method was $43.2 million at June 30, 2010, and at December 31, 2009. Each of these loans is on nonaccrual status. Loans with deterioration of credit quality that have an accretable difference are not included in nonperforming balances even though the customer may be contractually past due. These loans will accrete interest income over the remaining life of the loan.

10

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

4. Earnings Per Share

The Company adopted the FASB’s authoritative guidance regarding the determination of whether instruments granted in share-based payment transactions are participating securities. This guidance provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. This guidance was effective January 1, 2009.

Following is a summary of the information used in the computation of earnings per common share (in thousands), using the two-class method:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Numerator:
Net income to common shareholders	$	6,500	$	13,746	$	20,334	$	27,777
Net income allocated to participating securities—basic and diluted		58		48		115		95
Net income allocated to common shareholders—basic and diluted	$	6,442	$	13,698	$	20,219	$	27,682
Denominator:
Weighted-average common shares—basic		36,876		31,820		36,855		31,812
Dilutive potential common shares		202		189		220		161
Weighted average common shares—diluted		37,078		32,009		37,075		31,973
Earnings per common share:
Basic	$	0.17	$	0.43	$	0.55	$	0.87
Diluted	$	0.17	$	0.43	$	0.55	$	0.87

There were no anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2010 and June 30, 2009.

5. Share-Based Payment Arrangements

Stock Option Plans

Hancock maintains incentive compensation plans that incorporate share-based compensation. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in note 11 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2009. No options were granted in the first six months of 2010.

11

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

5. Share-Based Payment Arrangements (Continued)

A summary of option activity under the plans for the six months ended June 30, 2010, and changes during the six months then ended is presented below:

Options	Number of Shares		Weighted- Average Exercise Price ($)		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2010	1,000,249		$	35.15	6.3
Granted	—		$	—
Exercised	(36,202	)	$	26.67		$	584
Forfeited or expired	(1,254	)	$	39.88
Outstanding at June 30, 2010	962,793		$	35.46	6.0	$	2,303
Exercisable at June 30, 2010	608,701		$	32.84	4.6	$	2,303
Share options expected to vest	354,092		$	39.96	8.3	$	—

The total intrinsic value of options exercised during the six months ended June 30, 2010 and 2009 was $0.6 million and $0.2 million, respectively.

A summary of the status of the Company’s nonvested shares as of June 30, 2010, and changes during the six months ended June 30, 2010, is presented below:

	Number of Shares		Weighted- Average Grant-Date Fair Value ($)
Nonvested at January 1, 2010	688,370		$	24.25
Granted	24,150		$	42.46
Vested	(78,233	)	$	20.48
Forfeited	(4,568	)	$	33.01
Nonvested at June 30, 2010	629,719		$	25.35

As of June 30, 2010, there was $10.8 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 3.4 years. The total fair value of shares which vested during the six months ended June 30, 2010 and 2009 was $1.6 million and $1.9 million, respectively.

12

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

6. Retirement Plans

Net periodic benefits cost includes the following components for the three and six months ended June 30, 2010 and 2009:

	Pension Benefits						Other Post-retirement Benefits
	Three Months Ended June 30,
	2010			2009			2010			2009
	(In thousands)
Service cost	$	875		$	777		$	31		$	10
Interest cost		1,308			1,208			139			164
Expected return on plan assets		(1,161	)		(968	)		—			—
Amortization of prior service cost		—			—			(13	)		(13	)
Amortization of net loss		570			662			76			103
Amortization of transition obligation		—			—			1			1
Net periodic benefit cost	$	1,592		$	1,679		$	234		$	265
	Pension Benefits						Other Post-retirement Benefits
	Six Months Ended June 30,
	2010			2009			2010			2009
	(In thousands)
Service cost	$	1,750		$	1,553		$	62		$	57
Interest cost		2,617			2,417			278			282
Expected return on plan assets		(2,323	)		(1,936	)		—			—
Amortization of prior service cost		—			—			(26	)		(27	)
Amortization of net loss		1,140			1,324			151			148
Amortization of transition obligation		—			—			2			3
Net periodic benefit cost	$	3,184		$	3,358		$	467		$	463

The Company anticipates that it will contribute $6.7 million to its pension plan and approximately $1.3 million to its post-retirement benefits in 2010. During the first six months of 2010, the Company contributed approximately $3.4 million to its pension plan and approximately $0.7 million for post-retirement benefits.

13

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

7. 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,
	2010			2009			2010			2009
	(In thousands)
Trust fees	$	4,408		$	3,855		$	8,254		$	7,181
Credit card merchant discount fees		3,928			2,895			7,524			5,463
Income from insurance operations		3,641			4,048			7,153			7,500
Investment and annuity fees		2,663			1,691			4,942			4,551
ATM fees		2,321			1,895			4,272			3,674
Total other service charges, commissions and fees	$	16,961		$	14,384		$	32,145		$	28,369
Components of other income are as follows:
	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(In thousands)
Secondary mortgage market operations	$	1,529		$	1,827		$	3,169		$	2,985
Income from bank owned life insurance		1,402			1,814			2,676			3,269
Outsourced check income		(47	)		(10	)		(94	)		(20	)
Letter of credit fees		370			322			632			672
Gain on sale of property and equipment		168			1,078			295			1,361
Other		2,583			3,847			4,035			5,178
Total other income	$	6,005		$	8,878		$	10,713		$	13,445

8. Other Expense

Components of other expense are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
	(In thousands)
Data processing expense	$	6,382	$	4,694	$	12,520	$	9,339
Postage and communications		2,651		2,240		5,223		3,926
Ad valorem and franchise taxes		1,049		647		2,030		1,533
Legal and professional services		4,497		2,425		8,005		5,117
Stationery and supplies		773		444		1,357		908
Advertising		2,193		1,255		3,538		2,428
Deposit insurance and regulatory fees		2,904		5,962		5,538		7,945
Training expenses		163		81		333		179
Other fees		876		1,034		1,877		1,996
Annuity expense		173		188		373		466
Claims paid		380		337		717		578
Other expense		5,350		2,263		9,328		4,274
Total other expense	$	27,391	$	21,570	$	50,839	$	38,689

14

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

9. Income Taxes

There were no material uncertain tax positions as of June 30, 2010 and December 31, 2009. 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. The interest accrual is considered immaterial to the Company’s consolidated balance sheet as of June 30, 2010 and December 31, 2009.

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 2006.

10. Segment Reporting

The Company’s primary segments are divided into the Mississippi (MS), Louisiana (LA), Alabama (AL), and Other. Effective January 1, 2010, the Company’s Florida segment was merged into Mississippi. The activity and assets of Peoples First acquired in December 2009 are included in Mississippi. 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, Lighthouse Services Corp., Invest-Sure, Inc., Peoples First Transportation, Inc., Community First and subsidiaries, and three real estate corporations owning land and buildings that house bank branches and other facilities.

15

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

10. Segment Reporting (continued)

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

	Three Months Ended June 30, 2010
	MS			LA		AL			Other		Eliminations			Consolidated
Interest income	$	50,064		$	33,354	$	2,249		$	5,334	$	(1,260	)	$	89,741
Interest expense		15,585			5,743		591			1,094		(1,145	)		21,868
Net interest income		34,479			27,611		1,658			4,240		(115	)		67,873
Provision for loan losses		11,777			9,481		2,475			784		—			24,517
Noninterest income		17,104			10,914		543			6,751		(19	)		35,293
Depreciation and amortization		2,361			833		80			206		—			3,480
Other noninterest expense		38,334			20,488		1,463			8,392		(35	)		68,642
Net income before income taxes		(889	)		7,723		(1,817	)		1,609		(99	)		6,527
Income tax expense (benefit)		(1,240	)		1,740		(658	)		185		—			27
Net income (loss)	$	351		$	5,983	$	(1,159	)	$	1,424	$	(99	)	$	6,500
Total assets	$	5,439,866		$	2,862,112	$	188,349		$	1,143,616	$	(1,133,925	)	$	8,500,018
Total interest income from affiliates	$	1,251		$	1	$	2		$	6	$	(1,260	)	$	—
Total interest income from external customers	$	48,813		$	33,353	$	2,247		$	5,328	$	—		$	89,741
	Three Months Ended June 30, 2009
	MS			LA		AL			Other		Eliminations			Consolidated
Interest income	$	39,218		$	34,372	$	2,085		$	6,050	$	(1,620	)	$	80,105
Interest expense		15,768			7,164		664			1,322		(1,505	)		23,413
Net interest income		23,450			27,208		1,421			4,728		(115	)		56,692
Provision for loan losses		8,935			5,281		1,059			1,644		—			16,919
Noninterest income		16,209			10,559		393			7,352		(9	)		34,504
Depreciation and amortization		3,283			866		78			132		—			4,359
Other noninterest expense		23,832			21,676		1,299			7,085		(25	)		53,867
Net income before income taxes		3,609			9,944		(622	)		3,219		(99	)		16,051
Income tax expense (benefit)		(822	)		2,679		(186	)		634		—			2,305
Net income (loss)	$	4,431		$	7,265	$	(436	)	$	2,585	$	(99	)	$	13,746
Total assets	$	4,200,665		$	2,896,103	$	179,244		$	891,586	$	(1,120,283	)	$	7,047,315
Total interest income from affiliates	$	1,620		$	—	$	—		$	—	$	(1,620	)	$	—
Total interest income from external customers	$	37,598		$	34,372	$	2,085		$	6,050	$	—		$	80,105

16

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

10. Segment Reporting (continued)

	Six Months Ended June 30, 2010
	MS			LA		AL			Other		Eliminations			Consolidated
Interest income	$	102,277		$	66,702	$	4,395		$	11,300	$	(2,555	)	$	182,119
Interest expense		34,757			11,823		1,183			2,230		(2,325	)		47,668
Net interest income		67,520			54,879		3,212			9,070		(230	)		134,451
Provision for loan losses		22,471			9,738		3,382			2,752		—			38,343
Noninterest income		31,697			21,090		943			12,991		(47	)		66,674
Depreciation and amortization		4,799			1,679		161			414		—			7,053
Other noninterest expense		72,843			40,457		2,917			16,752		(79	)		132,890
Net income before income taxes		(896	)		24,095		(2,305	)		2,143		(198	)		22,839
Income tax expense (benefit)		(3,106	)		6,459		(850	)	��	2		—			2,505
Net income (loss)	$	2,210		$	17,636	$	(1,455	)	$	2,141	$	(198	)	$	20,334
Total assets	$	5,439,866		$	2,862,112	$	188,349		$	1,143,616	$	(1,133,925	)	$	8,500,018
Total interest income from affiliates	$	2,533		$	9	$	2		$	11	$	(2,555	)	$	—
Total interest income from external customers	$	99,744		$	66,693	$	4,393		$	11,289	$	—		$	182,119
	Six Months Ended June 30, 2009
	MS			LA		AL			Other		Eliminations			Consolidated
Interest income	$	78,553		$	69,741	$	3,997		$	12,324	$	(3,062	)	$	161,553
Interest expense		34,041			16,235		1,471			2,499		(2,831	)		51,415
Net interest income		44,512			53,506		2,526			9,825		(231	)		110,138
Provision for loan losses		9,147			9,249		3,852			3,013		—			25,261
Noninterest income		28,815			20,142		619			14,001		(18	)		63,559
Depreciation and amortization		5,949			1,744		156			265		—			8,114
Other noninterest expense		46,978			41,259		2,822			14,941		(50	)		105,950
Net income before income taxes		11,253			21,396		(3,685	)		5,607		(199	)		34,372
Income tax expense (benefit)		225			5,604		(1,324	)		2,090		—			6,595
Net income (loss)	$	11,028		$	15,792	$	(2,361	)	$	3,517	$	(199	)	$	27,777
Total assets	$	4,200,665		$	2,896,103	$	179,244		$	891,586	$	(1,120,283	)	$	7,047,315
Total interest income from affiliates	$	3,052		$	—	$	—		$	10	$	(3,062	)	$	—
Total interest income from external customers	$	75,501		$	69,741	$	3,997		$	12,314	$	—		$	161,553

17

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

11. New Accounting Pronouncements

In July, 2010, the Financial Accounting Standards Board (FASB) issued guidance on disclosures about the credit quality of financing receivables and the allowance for credit losses. The new guidance enhances disclosures to provide information for both the finance receivables and the related allowance for credit losses at disaggregated levels presented by portfolio segment which is the level an entity determines its allowance for credit losses and class which is defined as a group of receivables determined based on measurement basis, risk characteristics and the entity’s method for monitoring and assessing credit risk. A rollforward schedule by portfolio segment of the allowance for credit losses and the related ending balance of finance receivables with significant purchases and sales of finance receivables will be required. The following disclosures are required to be presented by class: credit quality of the financing receivables portfolio at the end of the reporting period; the aging of past due financing receivables at the end of the period; the nature and the extent of troubled debt restructurings that occurred during the period and their impact of the allowance for credit losses; the nature and extent of troubled debt restructurings that occurred within the last year that have defaulted in the current reporting period and their impact on the allowance for credit losses; the nonacrrual status of financing receivables; and impaired financing receivables. The new disclosures of information as of the end of the reporting period will become effective for both interim and annual reporting periods ending after December 15, 2010. Specific items regarding activity that occurred before the issuance of the guidance, such as the allowance rollforward and modification disclosures will be required for periods beginning after December 15, 2010. The new disclosure requirements will have no impact on the Company’s financial condition or results of operations.

In May 2010, the FASB issued guidance on receivables regarding the effect of a loan modification when the loan is part of a pool that is accounted for as a single asset. Modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. This guidance is effective prospectively for modifications of loans accounted for within pools occurring in the first interim or annual period ending on or after July 15, 2010. This guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In February 2010, the FASB issued guidance removing the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated in both issued and revised financial statements. This amendment was effective immediately and had no impact on the Company’s financial condition or results of operations.

In January 2010, the FASB issued guidance on fair value measurements and disclosures that requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. Specifically, the guidance now requires a reporting entity to disclose separately the amounts of significant transfers in and out of level 1 and level 2 fair value measurements and describe the reasons for the transfers and in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. In addition, the guidance clarifies the requirements of reporting fair value measurement for each class of assets and liabilities and clarifies that a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities based on the nature and risks of the investments. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in level 3 fair value measurements

18

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

11. New Accounting Pronouncements (continued)

which is required for annual reporting periods beginning after December 15, 2010, and for interim reporting periods within those years. The adoption of the guidance did not have a material impact on the Company’s financial condition or results of operations and the adoption of the additional disclosures of level 3 fair value measurements is not expected to have a material impact on the Company’s financial condition or results of operations.

19

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 included in our 2009 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 180 banking and financial services offices and more than 160 automated teller machines (ATMs) in the states of Mississippi, Louisiana, Florida and Alabama through three wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank MS), Hancock Bank of Louisiana, Baton Rouge, Louisiana (Hancock Bank LA) and Hancock Bank of Alabama, Mobile, Alabama (Hancock Bank AL). Hancock Bank MS, Hancock Bank LA, and Hancock Bank AL are referred to collectively as the “Banks.” Hancock Bank subsidiaries include Hancock Investment Services, Hancock Insurance Agency, and Harrison Finance Company.

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, 2010, we had total assets of $8.5 billion and employed 2,278 persons on a full-time equivalent basis.

RESULTS OF OPERATIONS

Our second quarter 2010 net income was $6.5 million, a decrease of $7.2 million, or 52.7%, from the second quarter of 2009. Diluted earnings per share were $0.17, a decrease of $0.26, or 60.5%, from the same quarter a year ago. Return on average assets for the second quarter of 2010 was 0.31% compared to 0.78% for the second quarter of 2009. Our 2010 results include the impact of our recent common stock offering and acquisition of Peoples First Community Bank (Peoples First), both of which were completed in the fourth quarter of 2009.

Our second quarter earnings were significantly impacted by a larger allowance for loan losses. At June 30, 2010, our allowance for loan losses was $77.2 million, which represents an increase of $10.6 million, or 15.9%, from the level at March 31, 2010, and a $13.4 million, or 20.9%, increase from the second quarter of 2009. Approximately $5.4 million of the higher allowance level was necessitated by an increase in substandard loans that resulted from our normal loan review process. The majority of the credit quality deterioration was related to the ongoing economic impact of the national recession. In addition, due to recent extraordinary events in the Gulf of Mexico (described below), we have established a specific reserve for potential loan losses of $5.2 million.

On April 20, 2010, BP’s Deepwater Horizon oil rig exploded and sank in the Gulf of Mexico just off the Louisiana coast. The Gulf Oil Spill continues to be a complex and ongoing event with significant economic and ecological impacts. In addition, the Gulf Oil Spill already is the largest spill of its kind in both U.S. and Gulf of Mexico history. Much of the relevant information and ultimate impact related to these events is still unknown, including the economic consequences of any deepwater drilling moratorium. We expect significant and potentially lasting impact to the coastal regions in the four U.S. states that comprise Hancock’s footprint.

Shortly after the explosion and sinking of the Deepwater Horizon rig, we began an in-depth assessment of our loan portfolio in the coastal regions of our market area in Louisiana, Mississippi, Alabama and Florida (similar to the process followed to assess loss             

20

exposure in the aftermath of Hurricane Katrina in 2005). The process first assessed the overall pool of loans that could have some potential impact from the Gulf Oil Spill. Based on the FDIC loss share coverage on the Peoples First acquired loans, the information contained in the following table is focused on our legacy loan portfolio (in thousands):

Portfolio Analysis as of May 31, 2010

SIC	Industry Description	LA		MS		AL		FL		Total
900	Fishing	$	200	$	1,100	$	240			$	1,540
7011	Hotel/Motel		25,000		30,600		13,500				69,100
5800	Restaurants		22,500		17,500		2,200		1,500		43,700
2092	Seafood Processing		3,600		1,500						5,100
1300	Oil/Gas Extraction		7,000		150						7,150
5551	Boat Dealers		500		1,200						1,700
4400	Transportation by Water		6,500		400		900				7,800
	Total	$	65,300	$	52,450	$	16,840	$	1,500	$	136,090

The assessment identified $136.1 million of loans with potential exposure which represents just 2.7% of our total loan portfolio at May 31, 2010. The loan concentrations were then rated for potential negative or even positive impact. This analysis concluded that we could have about $26.1 million of negatively impacted loans in the following states (in thousands):

State	Negatively impacted  loans
Mississippi	$	5,300
Louisiana		13,700
Alabama		7,100
Florida		—
	$	26,100

From this analysis, it was then determined that a specific reserve of $5.2 million would be necessary to cover any potential losses that could arise from events related to the Gulf Oil Spill.

Separate from the Gulf Oil Spill, we have experienced some deterioration in our loan portfolio, which required a separate $5.4 million increase in the allowance for loan losses. Net charge-offs for 2010’s second quarter were $13.9 million, or 1.11% of average loans, down $2.1 million from the $16.0 million, or 1.50% of average loans, reported for the second quarter of 2009. Non-performing assets as a percent of total loans and foreclosed assets were 3.66% at June 30, 2010, up from 1.01% at June 30, 2009. Non-accrual loans increased $104.6 million, while other real estate owned (ORE) increased $36.0 million compared to the second quarter of 2009. Loans 90 days past due or greater (accruing) as a percent of period-end loans, decreased 11 basis points from June 30, 2009 to 0.16% at June 30, 2010. We recorded a provision for loan losses for the second quarter of $24.5 million, an increase of $7.6 million, or 44.9% from the second quarter of 2009. Our allowance for loan losses was $77.2 million at June 30, 2010, and $63.9 million at June 30, 2009. The ratio of the allowance for loan losses as a percent of period-end loans was 1.55% at June 30, 2010, compared to 1.49% at June 30, 2009.

Total assets at June 30, 2010 were $8.5 billion, down $197.1 million, or 2.3% from $8.70 billion at December 31, 2009. Compared to June 30, 2009, total assets increased $1.5 billion, or 20.6%. Period-end loans were down $153.1 million, or 3.0% from December 31, 2009, and were up $695.1 million, or 16.1%, from the same quarter a year ago. Period-end deposits decreased $235.2 million, or 3.3% from December 31, 2009, and increased $1.3 billion, or 23.1%, from June 30, 2009. The increases in period-end loans and period-end deposits, compared to June 30, 2009, were primarily due to the acquisition of Peoples First. We also remain very well capitalized with total equity of $861.3 million at June 30, 2010, up $23.6 million, or 2.8% from December 31, 2009 and up $230.5 million, or 36.5%, from June 30, 2009.

21

Net Interest Income

Net interest income taxable equivalent (te) for the second quarter 2010 increased $11.3 million, or 18.9%, while the net interest margin (te) of 3.87% was 9 basis points wider than the same quarter a year ago. Growth in average earning assets was strong compared to the same quarter a year ago with an increase of $1.00 billion, or 16.1%, mostly reflected in higher average loans (up $731.5 million, or 17.1%) and was due primarily to the fourth quarter 2009 acquisition of Peoples First. Accretion on the acquired Peoples First loan portfolio was approximately $15.5 million during the second quarter of 2010. Accretion on the fair market value discount on the acquired Peoples First deposits was approximately $2.4 million for the second quarter of 2010.

Provision for Loan Losses

The amount of the allowance for loan losses equals the cumulative total of the provision 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 incurred losses associated with our loan portfolio. We recorded a provision for loan losses of $24.5 million in the second quarter which is a $7.6 million, or 44.9%, increase in the provision for loan losses compared to $16.9 million for the quarter ended June 30, 2009. This increase was necessary to adjust the allowance to the level dictated by our reserving methodologies. The provision remains elevated due to the ongoing stress on commercial real estate values. In addition, the company added an additional $5.2 million specific reserve due to the Gulf Oil Spill based on a detailed review of potentially impacted credits.

Allowance for Loan Losses and Asset Quality

At June 30, 2010, the allowance for loan losses was $77.2 million compared with $66.1 million at December 31, 2009, an increase of $11.1 million. The increase in the allowance for loan losses through the first six months of 2010 is primarily attributed to an additional $5.2 million provision designated to the 2010 Gulf Oil Spill based on detailed review of potentially impacted credits. In addition, an increased estimated provision of $5.4 million was added for specific reserve analysis for those loans considered impaired under FAS 114. We do not offer subprime home mortgage loans, and therefore, our increased reserve is not associated with those high risk loans. The only higher risk loans we offer are through our finance company but those loans are immaterial to our loan portfolio. Management utilizes quantitative methodologies and modeling to determine the adequacy of the allowance for loan and lease losses. Within the allowance for loan losses modeling, adequate segregation of geographic and specific loan types are documented and analyzed for appropriate risk metrics. We maintain a continuous credit quality policy that establishes acceptable loan-to-value thresholds on the front end underwriting process. Residential home values are continuously monitored by each market. A detailed description of our methodology was included in our annual report on Form 10-K for the year ended December 31, 2009. Management believes the June 30, 2010 allowance level is adequate.

Net charge-offs, as a percent of average loans, were 1.11% for the second quarter of 2010, compared to 1.50% in the second quarter of 2009. The percent variance over the one year period is materially impacted by the Peoples First Community Bank FDIC transaction. Of the overall decrease in net charge-offs of $2.1 million, $2.0 million was reflected in commercial loans. The lower level of commercial net charge-offs were largely confined to land development and commercial real estate credits across all markets.

Nonaccrual loans were $138.8 million at June 30, 2010, an increase of $104.6 million over $34.2 million at June 30, 2009. This increase is mainly due to the acquisition of Peoples First. In addition, we have experienced continued deterioration in our legacy loan portfolio, mostly related to the continued decline in real estate values and overall duration of the current economic recession.

22

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,
	2010			2009			2010			2009
Net charge-offs to average loans (annualized)		1.11	%		1.50	%		1.09	%		1.09	%
Provision for loan losses to average loans (annualized)		1.96	%		1.59	%		1.53	%		1.19	%
Allowance for loan losses as a percent of period-end loans		1.55	%		1.49	%		1.55	%		1.49	%
Gross charge-offs	$	14,998		$	17,144		$	30,158		$	25,421
Gross recoveries	$	1,077		$	1,125		$	2,986		$	2,285
Non-accrual loans	$	138,793		$	34,189		$	138,793		$	34,189
Accruing loans 90 days or more past due	$	8,002		$	11,435		$	8,002		$	11,435

Noninterest Income

Noninterest income for the second quarter of 2010 was up $0.8 million, or 2%, compared to the same quarter a year ago and was up $3.1 million, or 5%, for the first half of 2010 compared to the first half of 2009.

Service charges on deposit accounts increased $1.1 million, or 10%, compared to the same quarter a year ago and increased $2.1 million, or 10% for the first six months of 2010 compared to 2009. The increase was due to a risk management program that was put in place to better manage risk and from increased deposit accounts from the Peoples First acquisition. Service charges include periodic account maintenance fees for both commercial and personal customers, charges for specific transactions or services, such as processing return items or wire transfers, and other revenue associated with deposit accounts, such as commissions on check sales.

Credit card merchant discount fees were up $1.0 million, or 36%, compared to the second quarter of 2009 and were up $2.1 million, or 38%, compared to the first half of 2009, mainly due to increased activity from the Peoples First acquisition.

Investment and annuity fees were up $1.0 million, or 57%, compared to the second quarter of 2009 and were up $0.4 million, or 9%, when compared to the first six months of 2009, mainly because the second quarter of 2009 presented a large decrease in production due to poor market conditions.

Gain on sale of property and equipment decreased $0.9 million, or 84%, compared to the second quarter of 2009 and decreased $1.1 million, or 78%, when compared to the first six months of 2009, mainly because of gains on sales of land in 2009.

The increases to noninterest income for the second quarter were partially offset by a $1.3 million, or 33% decrease in other income, primarily other investment income. On a year to date basis, insurance fees decreased $0.3 million, or 5% and other income was down $2.4 million, or 47%. Insurance fees were down mainly because of lost renewals and lower commissions during the current year. Other income decreased mainly because of an increase in other investments and BOLI income in the first half of 2009.

23

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

The components of noninterest income for the three and six months ended June 30, 2010 and 2009 are presented in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(In thousands)
Service charges on deposit accounts	$	12,327		$	11,242		$	23,816		$	21,745
Trust fees		4,408			3,855			8,254			7,181
Credit card merchant discount fees		3,928			2,895			7,524			5,463
Income from insurance operations		3,641			4,048			7,153			7,500
Investment and annuity fees		2,663			1,691			4,942			4,551
ATM fees		2,321			1,895			4,272			3,674
Secondary mortgage market operations		1,529			1,827			3,169			2,985
Income from bank owned life insurance		1,402			1,814			2,676			3,269
Outsourced check income		(47	)		(10	)		(94	)		(20	)
Letter of credit fees		370			322			632			672
Gain on sale of property and equipment		168			1,078			295			1,361
Other income		2,583			3,847			4,035			5,178
Total noninterest income	$	35,293		$	34,504		$	66,674		$	63,559

Noninterest Expense

Operating expenses for the second quarter of 2010 were $13.9 million, or 24%, higher compared to the same quarter a year ago and were $25.9 million, or 23% higher than the first half of 2009.

Total personnel expense increased $6.7 million, or 23% compared to the same quarter last year and increased $10.7 million, or 18% compared to the first six months of 2009. The increase is mainly due the additional full time equivalent employees from the Peoples First acquisition. Total personnel expense consists of employee compensation and employee benefits. Employee compensation includes base salaries and contract labor costs, compensation earned under sales-based and other employee incentive programs, and compensation expense under management incentive plans. Employee benefits, in addition to payroll taxes, are the cost of providing health benefits for active and retired employees and the cost of providing pension benefits through both the defined-benefit plans and a 401(k) employee savings plan. Equipment and data processing expense was up $1.7 million, or 24% compared to the second quarter of 2009 and was up $3.4 million, or 24% compared to the first half of 2009 due to increased operating activity and the system conversion project associated with Peoples First.

Legal and professional services increased $2.1 million, or 85% compared to the second quarter of 2009 and increased $2.9 million, or 56% compared to the first six months of 2009. The increase was mainly due to the costs associated with the acquisition, valuation and conversion of Peoples First.

Net occupancy expense was up $1.0 million, or 20%, compared to the same quarter a year ago and was up $2.1 million, or 21% compared to the first half of 2009, mainly due to the facilities acquired from Peoples First. Increased expenses related mainly to building rent, utilities, property taxes and building insurance.

Deposit insurance and regulatory fees decreased $3.1 million, or 51%, compared to the second quarter of 2009 and decreased $2.4 million, or 30%, compared to the first six months of 2009 due to a $3.4 million FDIC special assessment in the second quarter of 2009 slightly offset by an increase due to deposit growth from the December 2009 acquisition of Peoples First.

Other real estate owned expense increased $1.8 million compared to the second quarter of 2009 and increased $2.1 million compared to the first six months of 2009. The increase was due to two large write downs and assets acquired from Peoples First.

24

The following table presents the components of noninterest expense for the three and six months ended June 30, 2010 and 2009.

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
	(In thousands)
Employee compensation	$	27,803	$	22,577	$	54,770	$	46,238
Employee benefits		7,576		6,126		15,376		13,240
Total personnel expense		35,379		28,703		70,146		59,478
Equipment and data processing expense		9,024		7,277		17,887		14,456
Net occupancy expense		6,026		5,016		12,169		10,071
Postage and communications		2,651		2,240		5,223		3,926
Ad valorem and franchise taxes		1,049		647		2,030		1,533
Legal and professional services		4,497		2,425		8,005		5,117
Stationery and supplies		773		444		1,357		908
Amortization of intangible assets		684		354		1,422		709
Advertising		2,193		1,255		3,538		2,428
Deposit insurance and regulatory fees		2,904		5,962		5,538		7,945
Training expenses		163		81		333		179
Other real estate owned expense, net		2,028		213		2,708		578
Insurance expense		498		453		989		908
Other fees		876		1,034		1,877		1,996
Non loan charge-offs		308		155		513		224
Other expense		3,069		1,967		6,208		3,608
Total noninterest expense	$	72,122	$	58,226	$	139,943	$	114,064

Income Taxes

For the six months ended June 30, 2010 and 2009, the effective income tax rates were approximately 11% and 19%, respectively. Because of the reduced level of pretax income in 2010, the tax exempt interest income and the utilization of tax credits had a significant impact on the effective tax rate. The source of the tax credits for 2010 and 2009 resulted from investments in New Market Tax Credits, Qualified Bond Credits and Work Opportunity Tax Credits.

25

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, 2010 and 2009.

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
	(In thousands, except per share data)
Per Common Share Data
Earnings per share:
Basic	$	0.17	$	0.43	$	0.55	$	0.87
Diluted	$	0.17	$	0.43	$	0.55	$	0.87
Cash dividends per share	$	0.24	$	0.24	$	0.48	$	0.48
Book value per share (period-end)	$	23.36	$	19.82	$	23.36	$	19.82
Weighted average number of shares:
Basic		36,876		31,820		36,855		31,812
Diluted (1)		37,078		32,009		37,075		31,973
Period-end number of shares		36,877		31,827		36,877		31,827
Market data:
High price	$	43.90	$	41.19	$	45.86	$	45.56
Low price	$	33.27	$	30.12	$	33.27	$	22.51
Period-end closing price	$	33.36	$	32.49	$	33.36	$	32.49
Trading volume (2)		12,443		17,040		22,055		35,093

(1) There were no anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2010 and June 30, 2009.

(2) Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter.

26

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(dollar amounts in thousands)
Performance Ratios
Return on average assets		0.31	%		0.78	%		0.48	%		0.79	%
Return on average common equity		3.03	%		8.67	%		4.78	%		8.89	%
Earning asset yield (tax equivalent (“TE”))		5.06	%		5.26	%		5.11	%		5.26	%
Total cost of funds		1.19	%		1.48	%		1.30	%		1.62	%
Net interest margin (TE)		3.87	%		3.78	%		3.81	%		3.64	%
Common equity (period-end) as a percent of total assets (period-end)		10.13	%		8.95	%		10.13	%		8.95	%
Leverage ratio (period-end)		9.06	%		8.13	%		9.06	%		8.13	%
FTE headcount		2,278			1,911			2,278			1,911
Asset Quality Information
Non-accrual loans	$	138,793		$	34,189		$	138,793		$	34,189
Foreclosed assets	$	44,901		$	8,884		$	44,901		$	8,884
Total non-performing assets	$	183,694		$	43,073		$	183,694		$	43,073
Non-performing assets as a percent of loans and foreclosed assets		3.66	%		1.01	%		3.66	%		1.01	%
Accruing loans 90 days past due	$	8,002		$	11,435		$	8,002		$	11,435
Accruing loans 90 days past due as a percent of loans		0.16	%		0.27	%		0.16	%		0.27	%
Non-performing assets + accruing loans 90 days past due to loans and foreclosed assets		3.82	%		1.27	%		3.82	%		1.27	%
Net charge-offs	$	13,921		$	16,019		$	27,172		$	23,136
Net charge-offs as a percent of average loans		1.11	%		1.50	%		1.09	%		1.09	%
Allowance for loan losses	$	77,221		$	63,850		$	77,221		$	63,850
Allowance for loan losses as a percent of period-end loans		1.55	%		1.49	%		1.55	%		1.49	%
Allowance for loan losses to NPAs + accruing loans 90 days past due		40.28	%		117.14	%		40.28	%		117.14	%
Provision for loan losses	$	24,517		$	16,919		$	38,343		$	25,261
Average Balance Sheet
Total loans	$	5,008,838		$	4,277,351		$	5,048,469		$	4,281,342
Securities		1,646,418			1,580,287			1,609,853			1,614,758
Short-term investments		688,648			466,350			750,541			501,688
Earning assets		7,343,904			6,323,988			7,408,863			6,397,788
Allowance for loan losses		(67,901	)		(63,027	)		(67,041	)		(62,681	)
Other assets		1,235,552			764,651			1,240,759			769,205
Total assets	$	8,511,555		$	7,025,612		$	8,582,581		$	7,104,312
Noninterest bearing deposits	$	1,069,795		$	955,050		$	1,044,470		$	934,542
Interest bearing transaction deposits		1,920,797			1,497,395			1,907,968			1,480,194
Interest bearing public fund deposits		1,173,579			1,376,203			1,224,110			1,437,438
Time deposits		2,828,846			1,878,473			2,880,682			1,955,770
Total interest bearing deposits		5,923,222			4,752,071			6,012,760			4,873,402
Total deposits		6,993,017			5,707,121			7,057,230			5,807,944
Other borrowed funds		527,808			573,739			535,515			555,209
Other liabilities		129,595			108,666			132,687			110,963
Common stockholders’ equity		861,135			636,086			857,149			630,196
Total liabilities & common stockholders’ equity	$	8,511,555		$	7,025,612		$	8,582,581		$	7,104,312

27

	June 30,
	2010			2009
	(dollar amounts in thousands)
Period-end Balance Sheet
Commercial/real estate loans	$	3,042,654		$	2,747,048
Mortgage loans		751,259			405,896
Direct consumer loans		743,118			590,742
Indirect consumer loans		329,658			418,595
Finance company loans		105,513			110,375
Total loans		4,972,202			4,272,656
Loans held for sale		42,769			47,194
Securities		1,686,671			1,596,157
Short-term investments		720,314			490,674
Earning assets		7,421,956			6,406,681
Allowance for loan losses		(77,221	)		(63,850	)
Other assets		1,155,283			704,484
Total assets	$	8,500,018		$	7,047,315
Noninterest bearing deposits	$	1,050,118		$	953,435
Interest bearing transaction deposits		1,930,738			1,457,020
Interest bearing public funds deposits		1,205,874			1,316,740
Time deposits		2,773,841			1,929,033
Total interest bearing deposits		5,910,453			4,702,793
Total deposits		6,960,571			5,656,228
Other borrowed funds		546,343			638,166
Other liabilities		131,822			122,147
Common stockholders’ equity		861,282			630,774
Total liabilities & common stockholders’ equity	$	8,500,018		$	7,047,315

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(dollar amounts in thousands)
Net Charge-Off Information
Net charge-offs:
Commercial/real estate loans	$	10,537		$	12,524		$	20,775		$	17,060
Mortgage loans		569			199			1,177			376
Direct consumer loans		1,241			1,226			1,849			1,825
Indirect consumer loans		449			717			1,057			1,564
Finance company loans		1,125			1,353			2,314			2,311
Total net charge-offs	$	13,921		$	16,019		$	27,172		$	23,136
Net charge-offs to average loans:
Commercial/real estate loans		1.37	%		1.86	%		1.34	%		1.28	%
Mortgage loans		0.31	%		0.18	%		0.32	%		0.17	%
Direct consumer loans		0.68	%		0.82	%		0.51	%		0.61	%
Indirect consumer loans		0.54	%		0.68	%		0.61	%		0.74	%
Finance company loans		4.19	%		4.87	%		4.29	%		4.13	%
Total net charge-offs to average net loans		1.11	%		1.50	%		1.09	%		1.09	%

28

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
		(dollar amounts in thousands)
Average Balance Sheet Composition
Percentage of earning assets/funding sources:
Loans		68.20	%		67.64	%		68.14	%		66.92	%
Securities		22.42	%		24.99	%		21.73	%		25.24	%
Short-term investments		9.38	%		7.37	%		10.13	%		7.84	%
Earning assets		100.00	%		100.00	%		100.00	%		100.00	%
Noninterest bearing deposits		14.57	%		15.10	%		14.10	%		14.61	%
Interest bearing transaction deposits		26.15	%		23.68	%		25.75	%		23.14	%
Interest bearing public funds deposits		15.98	%		21.76	%		16.52	%		22.47	%
Time deposits		38.52	%		29.71	%		38.88	%		30.56	%
Total deposits		95.22	%		90.25	%		95.25	%		90.78	%
Other borrowed funds		7.19	%		9.07	%		7.23	%		8.68	%
Other net interest-free funding sources		-2.41	%		0.68	%		-2.48	%		0.54	%
Total funding sources		100.00	%		100.00	%		100.00	%		100.00	%
Loan mix:
Commercial/real estate loans		61.71	%		63.05	%		61.76	%		62.89	%
Mortgage loans		14.87	%		10.57	%		14.66	%		10.49	%
Direct consumer loans		14.56	%		13.95	%		14.53	%		14.04	%
Indirect consumer loans		6.71	%		9.83	%		6.89	%		9.94	%
Finance company loans		2.15	%		2.60	%		2.16	%		2.64	%
Total loans		100.00	%		100.00	%		100.00	%		100.00	%
Average dollars
Loans	$	5,008,838		$	4,277,351		$	5,048,469		$	4,281,342
Securities		1,646,418			1,580,287			1,609,853			1,614,758
Short-term investments		688,648			466,350			750,541			501,688
Earning assets	$	7,343,904		$	6,323,988		$	7,408,863		$	6,397,788
Noninterest bearing deposits	$	1,069,795		$	955,050		$	1,044,470		$	934,542
Interest bearing transaction deposits		1,920,797			1,497,395			1,907,968			1,480,194
Interest bearing public funds deposits		1,173,579			1,376,203			1,224,110			1,437,438
Time deposits		2,828,846			1,878,473			2,880,682			1,955,770
Total deposits		6,993,017			5,707,121			7,057,230			5,807,944
Other borrowed funds		527,808			573,739			535,515			555,209
Other net interest-free funding sources		(176,921	)		43,128			(183,882	)		34,635
Total funding sources	$	7,343,904		$	6,323,988		$	7,408,863		$	6,397,788
Loans:
Commercial/real estate loans	$	3,090,655		$	2,696,500		$	3,118,049		$	2,692,553
Mortgage loans		745,019			452,324			740,176			449,050
Direct consumer loans		729,083			596,725			733,382			601,180
Indirect consumer loans		336,260			420,444			348,047			425,675
Finance company loans		107,821			111,358			108,815			112,884
Total average loans	$	5,008,838		$	4,277,351		$	5,048,469		$	4,281,342

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,
	2010						2009
(dollars in thousands)	Interest		Volume		Rate		Interest		Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	39,728	$	3,090,655	5.15	%	$	35,573	$	2,696,500	5.29	%
Mortgage loans		11,880		745,019	6.38	%		6,411		452,324	5.67	%
Consumer loans		21,882		1,173,164	7.48	%		20,067		1,128,527	7.13	%
Loan fees & late charges		259		—	0.00	%		188		—	0.00	%
Total loans (TE)		73,749		5,008,838	5.90	%		62,239		4,277,351	5.83	%
US treasury securities		26		11,843	0.88	%		46		11,146	1.65	%
US agency securities		1,407		206,522	2.72	%		1,699		171,430	3.96	%
CMOs		2,795		278,198	4.02	%		2,110		167,295	5.04	%
Mortgage backed securities		11,250		942,548	4.77	%		13,052		1,043,590	5.00	%
Municipals (TE)		2,933		190,936	6.14	%		2,369		160,703	5.90	%
Other securities		178		16,371	4.36	%		340		26,123	5.20	%
Total securities (TE)		18,589		1,646,418	4.52	%		19,616		1,580,287	4.97	%
Total short-term investments		450		688,648	0.26	%		1,198		466,350	1.03	%
Average earning assets yield (TE)	$	92,788	$	7,343,904	5.06	%	$	83,053	$	6,323,988	5.26	%
Interest bearing liabilities
Interest bearing transaction deposits	$	2,599	$	1,920,797	0.54	%	$	1,966	$	1,497,395	0.53	%
Time deposits		14,309		2,828,846	2.03	%		13,524		1,878,473	2.89	%
Public funds		2,492		1,173,579	0.85	%		5,213		1,376,203	1.52	%
Total interest bearing deposits		19,400		5,923,222	1.31	%		20,703		4,752,071	1.75	%
Total borrowings		2,468		527,808	1.88	%		2,710		573,739	1.89	%
Total interest bearing liability cost	$	21,868	$	6,451,030	1.36	%	$	23,413	$	5,325,810	1.76	%
Net interest-free funding sources				892,874						998,178
Total Cost of Funds	$	21,868	$	7,343,904	1.19	%	$	23,413	$	6,323,988	1.48	%
Net Interest Spread (TE)	$	70,920			3.70	%	$	59,640			3.50	%
Net Interest Margin (TE)	$	70,920	$	7,343,904	3.87	%	$	59,640	$	6,323,988	3.78	%

30

	Six Months Ended June 30,						Six Months Ended June 30
	2010						2009
(dollars in thousands)	Interest		Volume		Rate		Interest		Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	82,331	$	3,118,049	5.32	%	$	70,037	$	2,692,553	5.24	%
Mortgage loans		24,097		740,176	6.51	%		12,866		449,050	5.73	%
Consumer loans		43,373		1,190,244	7.35	%		40,634		1,139,739	7.19	%
Loan fees & late charges		487		—	0.00	%		533		—	0.00	%
Total loans (TE)		150,288		5,048,469	5.99	%		124,070		4,281,342	5.83	%
US treasury securities		41		11,841	0.69	%		96		11,230	1.73	%
US agency securities		2,793		184,947	3.02	%		4,015		198,565	4.04	%
CMOs		4,858		223,468	4.35	%		4,418		177,541	4.98	%
Mortgage backed securities		23,301		982,197	4.74	%		26,422		1,044,659	5.06	%
Municipals (TE)		5,424		191,687	5.66	%		4,654		157,502	5.91	%
Other securities		440		15,714	5.59	%		702		25,261	5.56	%
Total securities (TE)		36,857		1,609,854	4.58	%		40,307		1,614,758	4.99	%
Total short-term investments		1,039		750,541	0.28	%		3,069		501,688	1.23	%
Average earning assets yield (TE)	$	188,184	$	7,408,864	5.11	%	$	167,446	$	6,397,788	5.26	%
Interest bearing liabilities
Interest bearing transaction deposits	$	5,102	$	1,907,968	0.54	%	$	4,052	$	1,480,194	0.55	%
Time deposits		31,847		2,880,682	2.23	%		30,230		1,955,770	3.12	%
Public funds		5,734		1,224,110	0.94	%		11,775		1,437,438	1.65	%
Total interest bearing deposits		42,683		6,012,760	1.43	%		46,057		4,873,402	1.91	%
Total borrowings		4,985		535,515	1.88	%		5,358		555,209	1.95	%
Total interest bearing liability cost	$	47,668	$	6,548,275	1.47	%	$	51,415	$	5,428,611	1.91	%
Net interest-free funding sources				860,588						969,177
Total Cost of Funds	$	47,668	$	7,408,863	1.30	%	$	51,415	$	6,397,788	1.62	%
Net Interest Spread (TE)	$	140,516			3.64	%	$	116,031			3.35	%
Net Interest Margin (TE)	$	140,516	$	7,408,863	3.81	%	$	116,031	$	6,397,788	3.64	%

LIQUIDITY

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. 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 $701.7 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $148.5 million.

31

We have FHLB advances of $10 million due September 13, 2010 at a fixed rate of 3.1625% and $10 million due September 12, 2011 at a fixed rate 3.455%.

The following liquidity ratios at June 30, 2010 and December 31, 2009 compare certain assets and liabilities to total deposits or total assets:

	June 30, 2010		December 31, 2009
Total securities to total deposits	24.23	%	22.39	%
Total loans (net of unearned income) to total deposits	71.43	%	71.07	%
Interest-earning assets to total assets	87.32	%	86.91	%
Interest-bearing deposits to total deposits	84.91	%	85.08	%

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, 2009. 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.

CAPITAL RESOURCES

We continue to be well capitalized. The ratios as of June 30, 2010 and December 31, 2009 are as follows:

	June 30, 2010		December 31, 2009
Common equity (period-end) as a percent of total assets (period-end)	10.13	%	9.63	%
Regulatory ratios:
Total capital to risk-weighted assets (1)	16.09	%	13.04	%
Tier 1 capital to risk-weighted assets (2)	14.84	%	11.99	%
Leverage capital to average total assets (3)	9.06	%	10.60	%

(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.

32

BALANCE SHEET ANALYSIS

Goodwill

Goodwill represents costs in excess of the fair value of net assets acquired in connection with purchase business combinations. In accordance with FASB authoritative guidance, goodwill is not amortized but tested for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. Management reviews goodwill for impairment based on our primary reporting segments. We analyze goodwill using market capitalization to book value comparison. The last test was conducted as of September 30, 2009. No impairment charges were recognized as of June 30, 2010. The carrying amount of goodwill was $61.6 million as of June 30, 2010 and $62.3 million as of December 31, 2009.

Earnings Assets

Earning assets serve as the primary revenue streams for us and are comprised of securities, loans, federal funds sold, and other short-term investments. At June 30, 2010, average earning assets were $7.4 billion, or 86.3% of total assets, compared with $6.4 billion or 90% of total assets at June 30, 2009. The $1.0 billion, or 15.8%, increase resulted mostly from an increase in the loan portfolios due to the acquisition of Peoples First in the fourth quarter of 2009.

Securities

Our investment in securities was $1.7 billion at June 30, 2010 and $1.6 billion at December 31, 2009. The vast majority of securities in our portfolio are U.S. Treasury and U.S. government agency securities and mortgage-backed securities issued or guaranteed by U.S. government agencies. We also maintain portfolios of securities consisting of CMOs and tax-exempt obligations of states and political subdivisions. The portfolios are designed to enhance liquidity while providing acceptable rates of return. Therefore, we invest only in high quality securities of investment grade quality and with a target duration, for the overall portfolio, generally between two to five years. Our policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a Nationally Recognized Statistical Rating Agency, except for certain obligations of Mississippi, Louisiana, Florida or Alabama counties, parishes and municipalities.

Loans

We held $5.0 billion in loans at June 30, 2010 and $5.1 billion at December 31, 2009.Our primary lending focus is to provide commercial, consumer, commercial leasing and real estate loans to consumers and to small and middle market businesses in their respective market areas. Each loan file is reviewed by the Bank’s loan operations quality assurance function, a component of its loan review system, to ensure proper documentation and asset quality. At June 30, 2010, our average total loans were $5.0 billion, compared to $4.3 billion at June 30, 2009. The $0.8 million, or 17.9%, increase resulted from our acquisition of Peoples First in the fourth quarter of 2009. Commercial and real estate loans comprised 61.8% of the average loan portfolio at June 30, 2010 compared to 62.9% at June 30, 2009. Included in this category are commercial real estate loans, which are secured by properties, used in commercial or industrial operations.

Other Earning Assets

Federal funds sold, interest-bearing deposits in banks, and other short-term investments averaged $750.5 million at June 30, 2010, compared to $497.0 million at December 31, 2009 and compared to $501.7 million at June 30, 2009. The increase of $248.9 million, or 49.6%, from prior year quarter was caused by an increase of $550.4 million in interest-bearing deposits in banks that was offset by a decrease of $293.4 million in other short-term investments and a decrease in fed funds sold of $8.2 million. We utilize these products as a short-term investment alternative whenever we have excess liquidity.

33

Interest Bearing Liabilities

Interest bearing liabilities include our interest bearing deposits as well as borrowings. Deposits represent our primary funding source. We continue our focus on multiple account, core deposit relationships and strategic placement of time deposit campaigns to stimulate overall deposit growth. Borrowings consist primarily of sales of securities under repurchase agreements.

Deposits

Total deposits were $7.0 billion at June 30, 2010 and $7.2 billion at December 31, 2009. Average interest bearing deposits at June 30, 2010 were $6.0 billion, an increase of $1.1 billion, or 23.4%, over June 30, 2009. The increase was primarily attributable to our Peoples First acquisition in the fourth quarter of 2009. We continue to see positive results in retaining deposits for our acquired Peoples First deposit relationships. We have several programs designed to attract depository accounts offered to consumers and to small and middle market businesses at interest rates generally consistent with market conditions. We traditionally price our deposits to position competitively within the local market. Deposit flows are controlled primarily through pricing, and to a certain extent, through promotional activities.

Borrowings

Our borrowings consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and other borrowings. Total borrowings at June 30, 2010 were $533.7 million compared to $516.2 million at December 31, 2009. The increase of $17.5 million, or 3.4%, was primarily in securities sold under agreements to repurchase.

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, 2010, we had $872.9 million in unused loan commitments outstanding, of which approximately $643.1 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.

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, 2010, we had $99.9 million in letters of credit issued and outstanding.

34

The following table shows the commitments to extend credit and letters of credit at June 30, 2010 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	$	872,935	$	505,219	$	109,710	$	54,297	$	203,709
Letters of credit		99,856		47,939		29,437		22,480		—
Total	$	972,791	$	553,158	$	139,147	$	76,777	$	203,709

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The accounting principles we follow and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry which requires management to make estimates and assumptions about future events. We base our 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 not readily apparent from other sources. On an ongoing basis, we evaluate our estimates, including those related to the allowance for loan losses, intangible assets and goodwill, income taxes, pension and postretirement benefit plans and contingent liabilities. These estimates and assumptions are based on our best estimates and judgments. We evaluate estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, rising unemployment levels and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. Allowance for loan losses, deferred income taxes, and goodwill are potentially subject to material changes in the near term. Actual results could differ significantly from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 11 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.

35

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, 2010, the effective duration of the securities portfolio was 1.89 years. A rate increase (aged, over 1 year) of 100 basis points would move the effective duration to 2.59 years, while a reduction in rates of 100 basis points would result in an effective duration of 0.86 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, 2010 indicate that we are liability sensitive 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	-4.99%
Stable	0.00%
+100	1.59%

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, 2009 included in our 2009 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 three month period ended June 30, 2010, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

36

PART II. OTHER INFORMATION

Item 1A. Risk Factors

We are continuing to monitor the oil spill in the Gulf of Mexico. We are assessing how this situation may impact our customers and the areas in which they operate. This quarter, we have established a specific reserve for potential losses of $5.2 million. Still, much of the ultimate impact related this to event is still unknown, including the economic consequences of any deepwater drilling moratorium. We do expect there to be a significant and potentially lasting impact to the coastal regions in the four U.S. states (Louisiana, Mississippi, Alabama, and Florida) that comprise our footprint.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), was signed into law by President Obama on July 21, 2010. The Dodd-Frank Act represents a comprehensive overhaul of the financial services industry within the United States, establishes the new federal Bureau of Consumer Financial Protection (the “BCFP”), and will require the BCFP and other federal agencies to implement many new rules. At this time, it is difficult to predict the extent to which the Dodd-Frank Act or the resulting regulations will impact our business. Among other requirements, the Dodd-Frank Act includes provisions affecting corporate governance and executive compensation at all publicly-traded companies; provisions that would broaden the base for FDIC insurance assessments and permanently increase FDIC deposit insurance to $250,000; and new restrictions on how mortgage brokers and loan originators may be compensated. These provisions, or any other aspects of current proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities or change certain of our business practices, including our ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to our operations in order to comply, and could therefore also materially adversely affect our business, financial condition, and results of operations.

There have been no other material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2009. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results.

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

Issuer Purchases of Equity Securities

There were no purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities for the six months ended June 30, 2010.

Item 4. Reserved.

Item 5. Other Information.

None

37

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.
101	XBRL Interactive Data

38

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
	President & Chief Executive Officer
	/S/    JOHN M. HAIRSTON
	John M. Hairston
	Chief Executive Officer & Chief Operating Officer
	/S/    MICHAEL M. ACHARY
	Michael M. Achary
	Chief Financial Officer
Date:	August 5, 2010

39

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.
101	XBRL Interactive Data