FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (I.R.S. Employer
incorporation or organization) Identification
Number)
ONE HANCOCK PLAZA, GULFPORT, MISSISSIPPI 39501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 868-4715
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $3.33 PAR VALUE
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No
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
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of January 2, 1997, was approximately $367,105,000. For purposes
of this calculation only, shares held by non-affiliates are deemed to consist of
(a) shares held by all shareholders other than directors and executive officers
of the registrant plus (b) shares held by directors and officers as to which
beneficial ownership has been disclaimed.
On December 31, 1996, the registrant had outstanding 10,725,102 shares of
common stock for financial statement purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year
ended December 31, 1996 are incorporated by reference into Part II of this
report.
Portions of the definitive Proxy Statement used in connection with the
Registrant's Annual Meeting of Shareholders held on February 20, 1997, filed by
the Registrant on January 21, 1997, are incorporated by reference into Part III
of this report.
CONTENTS
PART I
Item 1. Business 4
Item 2. Properties 38
Item 3. Legal Proceedings 39
Item 4. Submission of Matters to a Vote of Security
Holders 39
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters 40
Item 6. Selected Financial Data 40
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 40
Item 8. Financial Statements and Supplementary Data 40
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 41
PART III
Item 10. Directors and Executive Officers of the
Registrant 41
Item 11. Executive Compensation 41
Item 12. Security Ownership of Certain Beneficial
Owners and Management 41
Item 13. Certain Relationships and Related
Transactions 41
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 42
PART I
ITEM 1 - BUSINESS
BACKGROUND AND CURRENT OPERATIONS
BACKGROUND
GENERAL:
Hancock Holding Company (the "Company"), organized in 1984 as a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended, is headquartered in Gulfport, Mississippi. The Company operates 80
banking offices and over 100 automated teller machines ("ATM's") in the states
of Mississippi and Louisiana through two wholly-owned bank subsidiaries, Hancock
Bank, Gulfport, Mississippi ("Hancock Bank MS") and Hancock Bank of Louisiana,
Baton Rouge, Louisiana ("Hancock Bank LA"). Hancock Bank MS and Hancock Bank LA
are referred to collectively as the "Banks."
The Banks are community oriented and focus primarily on offering
commercial, consumer and mortgage loans and deposit services to individuals and
small to middle market businesses in their respective market areas. The
Company's operating strategy is to provide its 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 December
31, 1996, the Company had total assets of $2.3 billion and employed on a
full-time basis 845 persons in Mississippi and 436 persons in Louisiana.
Hancock Bank MS was originally chartered as Hancock County Bank in 1899.
Since its organization, the strategy of Hancock Bank MS has been to achieve a
dominant market share on the Mississippi Gulf Coast. Prior to a series of
acquisitions begun in 1985, growth was primarily internal and was accomplished
by concentrating branch expansions in areas of population growth where no
dominant financial institution previously served the market area. Economic
expansion on the Mississippi Gulf Coast has resulted primarily from growth of
military and governmentrelated facilities, tourism, port facility activities,
industrial complexes and the gaming industry. Hancock Bank MS currently has the
largest market share in each of the four counties in which it operates:
Harrison, Hancock, Jackson and Pearl River. With assets of $1.4 billion at
December 31, 1996, Hancock Bank MS currently ranks as the fourth largest bank in
Mississippi.
In August 1990, the Company formed Hancock Bank LA to assume the deposit
liabilities and acquire the consumer loan portfolio, corporate credit card
portfolio and non-adversely classified securities portfolio of American Bank and
Trust, Baton Rouge, Louisiana, ("AmBank"), from the Federal Deposit Insurance
Corporation ("FDIC"). Economic expansion in East Baton Rouge Parish has resulted
from growth in state government and related service industries, educational and
medical complexes, petrochemical industries, port facility activities and
transportation and related industries. With assets of $868 million at December
31, 1996, Hancock Bank LA is the largest bank in East Baton Rouge Parish.
In November 1996, the Company acquired Community Bancshares, Inc.,
Independence, Louisiana which owned 100% of the stock of Community State Bank
(Community). This acquisition expanded the Baton Rouge market area into the
Hammond area where many of the people who work in Baton Rouge live.
Beginning with the 1985 acquisition of the Pascagoula-Moss Point Bank
("PMP") in Pascagoula, Mississippi, the Company has acquired approximately
$976.2 million in assets and approximately $876.5 million in deposit liabilities
through selected acquisitions or purchase and assumption transactions.
RECENT ACQUISITION ACTIVITY:
In August 1991, Hancock Bank MS acquired certain assets and deposit
liabilities of Peoples Federal Savings Association, Bay St. Louis, Mississippi,
from the RTC. As a result of this transaction, the Bank acquired assets of
approximately $39.0 million and deposit liabilities of approximately $38.5
million.
The Company borrowed $18,750,000 from Whitney National Bank, New Orleans,
Louisiana ("Whitney"), to partially fund the acquisition of Metropolitan
National Bank and AmBank in 1990. On November 28, 1991, the Company sold
1,552,500 shares of its common stock at $17 per share. This followed a
two-for-one stock split in the form of a 100% stock dividend on October 15,
1991, and an increase in authorized shares to 20,000,000. The net proceeds of
this sale, after underwriting discount and expenses, of approximately
$24,700,000, were used to pay the principal and interest on $18,500,000 of
principal debt on the Whitney loans and increase Hancock Bank LA's capital by
$5,000,000.
In April 1994, the Company merged Hancock Bank LA with First State Bank and
Trust Company of East Baton Rouge Parish, Baker, Louisiana ("Baker"). The merger
was consummated by the exchange of all outstanding common stock of Baker in
return for 527,235 shares of common stock of the Company. The merger was
accounted for using the pooling-of-interests method; therefore, all prior years'
financial information has been restated.
On January 13, 1995, the Company acquired First Denham Bancshares, Inc.
("Bancshares") which owned 100% of the stock of First National Bank of Denham
Springs ("Denham"), Denham Springs, Louisiana. The acquisition was in return for
approximately $4,000,000 cash and 774,098 shares of common stock of the Company.
The acquisition was accounted for using the purchase method. Bancshares had
total assets of approximately $111,000,000 and stockholders' equity of
approximately $11,300,000 as of December 31, 1994 and net earnings of
approximately $2,600,000 for the year then ended. On August 15, 1996, Denham was
merged into Hancock Bank LA.
On February 1, 1995, the Company merged Hancock Bank LA with Washington Bank
& Trust Company, Franklinton, Louisiana ("Washington"). The merger was
consummated by the exchange of all outstanding common stock of Washington in
return for 542,650 shares of common stock of the Company. The merger was
accounted for using the pooling-of-interests method; therefore, all prior years'
financial information has been restated. Washington had total assets of
approximately $86,100,000 and stockholders' equity of approximately $12,400,000
as of December 31, 1994, and net earnings of approximately $1,300,000 for the
year then ended.
In November 1996, the Company acquired Community Bancshares, Inc., which
owned 100% of the stock of Community State Bank ("Community"). This acquisition
expanded the Company's market to the Hammond, Louisiana area, where many of the
people who are employed in East Baton Rouge Parish reside.
On January 17, 1997, the Company acquired Southeast National Bank, Hammond,
Louisiana (Southeast). The acquisition was in return for approximately
$3,700,000 cash and 105,000 shares of common stock of the Company. The
acquisition was accounted for using the purchase method. Southeast had total
assets of approximately $40,000,000 and stockholders' equity of approximately
$4,000,000 as of December 31, 1996 and net earnings of approximately $500,000
for the year then ended.
CURRENT OPERATIONS
LOAN PRODUCTION AND CREDIT REVIEW:
The Banks' primary lending focus is to provide commercial, consumer, leasing
and real estate loans to consumers and to small and middle market businesses in
their respective market areas. The Banks have no concentrations of loans to
particular borrowers or loans to any foreign entities. Each loan officer has
Board approved loan limits on the principal amount of secured and unsecured
loans he or she can approve for a single borrower without prior approval of a
loan committee. All loans, however, must meet the credit underwriting standards
and loan policies of the Banks.
For Hancock Bank MS, all loans over an individual loan officer's Board
approved lending authority and below a regional approved limit must be approved
by his or her region's loan committee or by another loan officer with greater
lending authority. Both the regional loan committee and the Bank's senior loan
committee must review and approve any loan for a borrower whose total
indebtedness exceeds the region's approved limit. 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.
For Hancock Bank LA, all loans over an individual loan officer's Board
approved lending authority must be approved by the Bank's, his or h region's
loan committee or by another loan officer with greater lending authority. Both
the regional loan committee and the Bank's senior loan committee must review and
approve any loan for a borrower whose total indebtedness exceeds $500,000. 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.
LOAN REVIEW AND ASSET QUALITY:
Each Bank's portfolio of loan relationships aggregating $250,000 or more is
annually reviewed by the respective Bank to identify any deficiencies and to
take corrective actions as necessary. Periodically, selected loan relationships
aggregating less than $250,000 are reviewed. As a result of such reviews, each
Bank places on its Watchlist loans requiring close or frequent review. All loans
classified by a regulator are also placed on the Watchlist. All Watchlist and
past due loans are reviewed monthly by the Banks' senior lending officers and by
the Banks' Board of Directors.
In addition, all loans to a particular borrower are reviewed, regardless of
classification, each time such borrower requests a renewal or extension of any
loan or requests a new loan. All lines of credit are reviewed annually before
renewal. The Banks currently have mechanisms in place that allow for at least an
annual review of the financial statements and the financial condition of all
borrowers, except borrowers with secured installment and residential mortgage
loans.
Consumer loans which become 60 days delinquent are reviewed regularly by
management. Generally, a consumer loan which is delinquent 120 days is in
process of collection through repossession and liquidation of collateral or has
been deemed currently uncollectible. Loans deemed currently uncollectible are
charged-off against the reserve account. As a matter of policy, loans are placed
on a nonaccrual status when the loan is 1) maintained on a cash basis due to the
deterioration in the financial condition of the borrower, 2) payments, in full,
of principal or interest are not expected or 3) the principal or interest has
bee in default for a period of 90 days, unless the loan is well secured AND in
the process of collection.
The Banks follow the standard FDIC loan classification system. This system
provides management with (1) a general view of the quality of the overall loan
portfolio (each branch's loan portfolio and each commercial loan officer's loan
portfolio) and (2) information on specific loans that may need individual
attention.
The Banks hold nonperforming assets, consisting of real property, vehicles
and other items held for resale, which were acquired generally through the
process of foreclosure. At December 31, 1996, the book value of nonperforming
assets held for resale was approximately $1.9 million.
SECURITIES PORTFOLIO:
The Banks maintain portfolios of securities consisting primarily of U.S.
Treasury securities, U.S. government agency issues, mortgage-backed securities,
CMOs and tax-exempt obligations of states and political subdivisions. The
portfolios are designed to enhance liquidity while providing acceptable rates of
return. Therefore, the Banks invest only in high grade investment quality
securities with acceptable yields and generally with durations of less than 7
years.
The Banks' policies limit investments to securities having a rating of no
less than "Baa" by Moody's Investors' Service, Inc., except for certain
obligations of Mississippi or Louisiana counties and municipalities.
DEPOSITS:
The Banks 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. Additionally, the Banks offer over
100 ATMs: over 65 ATMs at the 80 banking offices and over 40 free-standing ATMs
at other locations. As members of regional and international ATM networks such
as "PULSE", "PLUS" and "CIRRUS," the Banks offer customers access to their
depository accounts from regional, national and international ATM facilities.
Deposit flows are controlled by the Banks primarily through pricing, and to a
certain extent, through promotional activities. Management believes that the
rates it offers, which are posted weekly on deposit accounts, are generally
competitive with or, in some cases, slightly below other financial institutions
in the Banks' respective market areas.
TRUST SERVICES:
The Banks', through their respective Trust Departments, offer a full range
of trust services on a fee basis. The Banks act as executor, administrator or
guardian in administering estates. Also provided are investment custodial
services for individuals, businesses and charitable and religious organizations.
In their trust capacities, the Banks provide investment management services on
an agency basis and act as trustee for pension plans, profit sharing plans,
corporate and municipal bond issues, living trusts, life insurance trusts and
various other types of trusts created by or for individuals, businesses and
charitable and religious organizations. As of December 31, 1996, the Trust
Departments of the Banks had approximately $1.6 billion of assets under
management, of which $1.0 billion were corporate accounts and $0.6 billion were
personal, employee benefit, estate and other trust accounts.
OPERATING EFFICIENCY STRATEGY:
The primary focus of the Company's operating strategy is to increase
operating income and to reduce operating expense. Beginning in January of 1988,
management has taken steps to improve operating efficiencies. As a result,
employees at Hancock Bank MS have been reduced from .78 per $1 million in assets
in February 1988 to .59 as of December 31, 1996. Since its acquisition in August
1990, Hancock Bank LA employees have been reduced from .97 per $1 million of
assets to .50 as of December 31, 1996. Management annually establishes an
employee to asset goal for each Bank. The Banks also have set an internal long
range goal of at least covering total salary and benefit costs by fee income.
The ratio of fee income to total salary and benefit costs is $.56 to $1.00 at
Hancock Bank MS. Hancock Bank LA has a higher level of fee income and through
December 31, 1996, has achieved a ratio of $.86 to $1.00.
OTHER ACTIVITIES:
Hancock Bank MS has seven subsidiaries through which it engages in the
following activities: providing consumer financing services; mortgage lending;
owning, managing and maintaining certain real property; providing general
insurance agency services; holding investment securities; marketing credit life
insurance; and providing discount investment brokerage services. The income of
these subsidiaries generally accounts for less than 10% of the Company's total
annual income.
During 1994, the Company began offering alternative investments through a
third party vendor. The Investment Center is now located in several branch
locations in Mississippi and Louisiana to accommodate the investment needs of
customers whose needs fall outside the traditional commercial bank product line.
Hancock Bank MS also owns approximately 3,700 acres of timberland in
Hancock County, Mississippi, most of which was acquired through foreclosure in
the 1930's. Timber sales and oil and gas leases on this acreage generate less
than 1% of the Company's annual income.
COMPETITION:
The deregulation of the financial services industry, the elimination of
many previous distinctions between commercial banks and other financial
institutions and legislation enacted in Mississippi, Louisiana and other states
allowing state-wide branching, multi-bank holding companies and regional
interstate banking has created a highly competitive environment for commercial
banking in the Company's market area. The principal competitive factors in the
markets for deposits and loans are interest rates paid and charged. The Company
also competes through the efficiency, quality, range of services and products it
provides, convenience of office and ATM locations and office hours.
In attracting deposits and in its lending activities, the Company competes
generally with other commercial banks, savings associations, credit unions,
mortgage banking firms, consumer finance companies, securities brokerage firms,
mutual funds, insurance companies and other financial institutions. Many of
these institutions have greater available resources than the Company.
SUPERVISION AND REGULATION
BANK HOLDING COMPANY REGULATION
GENERAL:
The Company is subject to extensive regulation by the Board of Governors of
the Federal Reserve System (the "Federal Reserve") pursuant to the Bank Holding
Company Act of 1956, as amended (the "Bank Holding Company Act"). The Company
also is required to file certain reports with, and otherwise comply with the
rules and regulations of, the Securities and Exchange Commission (the
"Commission") under federal securities laws.
FEDERAL REGULATION:
The Bank Holding Company Act generally prohibits the Company from engaging
in activities other than banking, managing or controlling banks or other
permissible subsidiaries. Acquiring or obtaining control of any company engaged
in activities other than those activities determined by the Federal Reserve to
be so closely related to banking, managing or controlling banks as to be proper
incident thereto is also prohibited. In determining whether a particular
activity is permissible, the Federal Reserve considers whether the performance
of the activity can reasonably be expected to produce benefits to the public
that outweigh possible adverse effects. For example: making, acquiring or
servicing loans; leasing personal property; providing certain investment or
financial advice; performing certain data processing services; acting as agent
or broker in selling credit life insurance, and performing certain insurance
underwriting activities have all been determined by regulations of the Federal
Reserve to be permissible activities. The Bank Holding Company Act does not
place territorial limitations on permissible bank-related activities of bank
holding companies. Despite prior approval, however, the Federal Reserve has the
power to order a holding company or its subsidiaries to terminate any activity
or its control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or control of such subsidiary constitutes a
serious risk to the financial safety, soundness or stability of any bank
subsidiary of that holding company.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve: (1) before it may acquire ownership
or control of any voting shares of any bank if, after such acquisition, such
bank holding company will own or control more than 5% of the voting shares of
such bank, (2) before it or any of its subsidiaries other than a bank may
acquire all of the assets of a bank, or (3) before it may merge with any other
bank holding company. In reviewing a proposed acquisition, the Federal Reserve
considers financial, managerial and competitive aspects. The future prospects of
the companies and banks concerned and the convenience and needs of the community
to be served must also be considered. The Federal Reserve also reviews the
indebtedness to be incurred by a bank holding company in connection with the
proposed acquisition to ensure that the holding company can service such
indebtedness without adversely affecting the capital requirements of the holding
company or its subsidiaries. The Bank Holding Company Act further requires that
consummation of approved acquisitions or mergers must be delayed at least 30
days following the date of approval. During such 30-day period, complaining
parties may obtain a review of the Federal Reserve's order granting its approval
by filing a petition in the appropriate United States Court of Appeals
petitioning that the order be set aside.
The Federal Reserve has adopted capital adequacy guidelines for use in its
examination and regulation of bank holding companies. The regulatory capital of
a bank holding company under applicable federal capital adequacy guidelines is
particularly important in the Federal Reserve's evaluation of a bank holding
company and any applications by the bank holding company to the Federal Reserve.
If regulatory capital falls below minimum guideline levels, a bank holding
company or bank may be denied approval to acquire or establish additional banks
or non-bank businesses or to open additional facilities. In addition, a
financial institution's failure to meet minimum regulatory capital standards can
lead to other penalties, including termination of deposit insurance or
appointment of a conservator or receiver for the financial institution. There
are two measures of regulatory capital presently applicable to bank holding
companies, (1) risk-based capital and (2) leverage capital ratios.
The Federal Reserve rates bank holding companies by a component and
composite 1-5 rating system. This system is designed to help identify
institutions which require special attention. Financial institutions are
assigned ratings based on evaluation and rating of their financial condition and
operations. Components reviewed include capital adequacy, asset quality,
management capability, the quality and level of earnings, and the adequacy of
liquidity. Effective January 1, 1997, a sixth component was added to the rating
system Sensitivity to market risk. This component addresses primarily the issue
of a bank's sensitivity to interest rate fluctuations.
The leverage ratios adopted by the Federal Reserve require all but the most
highly rated bank holding companies to maintain Tier 1 Capital at 4% to 5% of
total assets. Certain bank holding companies having a composite 1 rating and not
experiencing or anticipating significant growth may satisfy the Federal Reserve
guidelines by maintaining Tier 1 Capital of at least 3% of total assets. Tier 1
Capital for bank holding companies includes: stockholders' equity, minority
interest in equity accounts of consolidated subsidiaries and qualifying
perpetual preferred stock. In addition, Tier 1 Capital excludes goodwill and
other disallowed intangibles. The Company's leverage capital ratio at December
31, 1996, was 10.37%.
The risk-based capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance sheet exposure and to minimize
disincentives for holding liquid assets. Under the risk-based capital
guidelines, assets are assigned to one of four risk categories; 0%, 20% 50% and
100%. As an example, U.S. Treasury securities are assigned to the 0% risk
category while most categories of loans are assigned to the 100% risk category.
A two-step process determines the risk weight of off-balance sheet items such as
standby letters of credit. First, the amount of the off-balance sheet item is
multiplied by a credit conversion factor of either 0%, 20%, 50% or 100%. The
result is then assigned to one of the four risk categories. At December 31,
1996, the Company's off-balance sheet items aggregated $253.2 million; however,
after the credit conversion these items represented $19.1 million of balance
sheet equivalents.
The primary component of risk-based capital is Tier 1 Capital, which is
essentially equal to common stockholders' equity, plus a certain portion of
perpetual preferred stock. Tier 2 Capital, which consists primarily of the
excess of any perpetual preferred stock, mandatory convertible securities,
subordinated debt and general reserves for loan losses, is a secondary component
of risk-based capital. The risk-weighted asset base is equal to the sum of the
aggregate dollar values of assets and off-balance sheet items in each risk
category, multiplied by the weight assigned to that category. A ratio of Tier 1
Capital to risk-weighted assets of at least 4% and a ratio of Total Capital
(Tier 1 and Tier 2) to risk-weighted assets of at least 8% must be maintained by
bank holding companies. At December 31, 1996, the Company's Tier 1 and Total
Capital ratios were 18.03% and 19.02%, respectively.
The prior approval of the Federal Reserve must be obtained before the
Company may acquire substantially all the assets of any bank, or ownership or
control of any voting shares of any bank, if, after such acquisition, it would
own or control, directly or indirectly, more than 5% of the voting shares of
such bank. In no case, however, may the Federal Reserve approve an acquisition
of any bank located outside Mississippi unless such acquisition is specifically
authorized by the laws of the state in which the bank to be acquired is located.
The banking laws of Mississippi presently permit out-of-state banking
organizations to acquire Mississippi banking organizations, provided the
out-of-state banking organization's home state grants similar privileges to
banking organizations in Mississippi. This reciprocity privilege is restricted
to banking organizations in specified geographic regions that encompass the
states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi,
Missouri, North Carolina, South Carolina, Tennessee, Texas, Virginia and West
Virginia. In addition, Mississippi banking organizations are permitted to
acquire certain out-of-state financial institutions. A bank holding company is
additionally prohibited from engaging in non-banking activities, or acquiring
direct or indirect control of more than 5% of the voting shares of any company
engaged in non-banking activities.
With the passage of The Interstate Banking and Branching Efficiency Act of
1994, adequately capitalized and managed bank holding companies are permitted to
acquire control of banks in any state, subject to federal regulatory approval,
without regard to whether such a transaction is prohibited by the laws of any
state. Beginning June 1, 1997, federal banking regulators may approve merger
transactions involving banks located in different states, without regard to laws
of any state prohibiting such transactions; except that, mergers may not be
approved with respect to banks located in states that, before June 1, 1997,
enacted legislation prohibiting mergers by banks located in such state with
out-of-state institutions. Federal banking regulators may permit an out-of-state
bank to open new branches in another state if such state has enacted legislation
permitting interstate branching. The legislation further provides that a bank
holding company may not, following an interstate acquisition, control more than
10% of nationwide insured deposits or 30% of deposits in the relevant state.
States have the right to adopt legislation to lower the 30% limit. Additional
provisions require that interstate activities conform to the Community
Reinvestment Act.
The Company is required to give the Federal Reserve prior written notice of
any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of the Company's consolidated net worth. The
Federal Reserve may disapprove such a transaction if it determines that the
proposal constitutes an unsafe or unsound practice, would violate any law,
regulation, Federal Reserve order or directive or any condition imposed by, or
written agreement with, the Federal Reserve.
In November 1985, the Federal Reserve adopted its Policy Statement on Cash
Dividends Not Fully Covered by Earnings (the "Policy Statement"). The Policy
Statement sets forth various guidelines that the Federal Reserve believes that a
bank holding company should follow in establishing its dividend policy. In
general, the Federal Reserve stated that bank holding companies should pay
dividends only out of current earnings. It also stated that dividends should not
be paid unless the prospective rate of earnings retention by the holding company
appears consistent with its capital needs, asset quality and overall financial
condition.
The activities of the Company are also restricted by the provisions of the
Glass-Steagall Act of 1933 (the "Act"). The Act prohibits the Company from
owning subsidiaries engaged principally in the issue, floatation, underwriting,
public sale or distribution of securities. Regulators and legislators are
currently reviewing the interpretation, scope and application of the provisions
of the Act. The outcome of the current examination and the effect of the outcome
on the ability of bank holding companies to engage in securities related
activities cannot be predicted.
The Company is a legal entity separate and distinct from the Banks. There
are various restrictions that limit the ability of the Banks to finance, pay
dividends or otherwise supply funds to the Company or other affiliates. In
addition, subsidiary banks of holding companies are subject to certain
restrictions on any extension of credit to the bank holding company or any of
its subsidiaries, on investments in the stock or other securities thereof and on
the taking of such stock or securities as collateral for loans to any borrower.
Further, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with extensions of credit,
or leases or sales of property or furnishing of services.
BANK REGULATION:
The operations of the Banks are subject to state and federal statutes
applicable to state banks and national banks, respectively, and the regulations
of the Federal Reserve, the FDIC and the Office of the Comptroller of the
Currency ("OCC"). Such statutes and regulations relate to, among other things,
required reserves, investments, loans, mergers and consolidations, issuance of
securities, payment of dividends, establishment of branches and other aspects of
the Banks' operations.
Hancock Bank MS is subject to regulation and periodic examinations by the
FDIC and the State of Mississippi Department of Banking and Consumer Finance.
Hancock Bank LA is subject to regulation and periodic examinations by the FDIC
and the Office of Financial Institutions, State of Louisiana. These regulatory
authorities examine such areas as reserves, loan and investment quality,
management policies, procedures and practices and other aspects of operations.
These examinations are designed for the protection of the Banks' depositors,
rather than their stockholders. In addition to these regular examinations, the
Company and the Banks must furnish periodic reports to their respective
regulatory authorities containing a full and accurate statement of their
affairs.
As a result of the enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 ("FIRREA"), a financial institution insured by the
FDIC can be held liable for any losses incurred by, or reasonably expected to be
incurred by, the FDIC in connection with (1) the default of a commonly
controlled FDIC-insured financial institution or (2) any assistance provided by
the FDIC to a commonly controlled financial institution in danger of default.
The Banks are members of the FDIC, and their deposits are insured as
provided by law by the Bank Insurance Fund ("BIF"). On December 19, 1991, the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was
enacted. The Federal Deposit Insurance Act, as amended by Section 302 of FDICIA,
calls for risk-related deposit insurance assessment rates. The risk
classification of an institution will determine its deposit insurance premium.
Assignment to one of three capital groups, coupled with assignment to one of
three supervisory sub-groups, determines which of the nine risk classifications
is appropriate for an institution.
Effective in the first quarter of 1996, the FDIC lowered banks' deposit
insurance premiums from 4 to 31 cents per hundred dollars in insured deposits to
a rate of 0 to 27 cents. The Banks have received a risk classification of 1A for
assessment purposes. Total assessments paid to the FDIC amounted to $285
thousand. The Banks paid BIF premiums of 0 cents per hundred dollars of insured
deposits during 1996. The decrease in the 1996 rates resulted in $1.9 million
FDIC premium reductions over the 1995 level of $2.2 million. Premiums for the
first and second quarters of 1997 have remained 0 cents per hundred dollars of
insured deposits. Premiums on OAKAR deposits from the 1991 acquisition of
Peoples Federal Savings Association totalled $86 thousand. In addition to the
normal premiums paid on OAKAR deposits, a one-time assessment of $191 thousand
was paid.
In general, FDICIA subjects banks and bank holding companies to
significantly increased regulation and supervision. FDICIA increased the
borrowing authority of the FDIC in order to recapitalize the Bank Insurance
Fund, and the future borrowings are to be repaid by increased assessments on
FDIC member banks. Other significant provisions of FDICIA require a new
regulatory emphasis linking supervision to bank capital levels. Also, federal
banking regulators are required to take prompt regulatory action with respect to
depository institutions that fall below specified capital levels and to draft
non-capital regulatory measures to assure bank safety.
FDICIA contains a "prompt corrective action" section intended to resolve
problem institutions at the least possible long-term cost to the deposit
insurance funds. Pursuant to this section, the federal banking agencies are
required to prescribe a leverage limit and a risk-based capital requirement
indicating levels at which institutions will be deemed to be "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized." In the case of a depository institution that
is "critically undercapitalized" (a term defined to include institutions which
still have positive net worth), the federal banking regulators are generally
required to appoint a conservator or receiver.
FDICIA further requires regulators to perform annual on-site bank
examinations, places limits on real estate lending and tightens audit
requirements. The new legislation eliminated the "too big to fail" doctrine,
which protects uninsured deposits of large banks, and restricts the ability of
undercapitalized banks to obtain extended loans from the Federal Reserve Board
discount window. FDICIA also imposes new disclosure requirements relating to
fees charged and interest paid on checking and deposit accounts. Most of the
significant changes brought about by FDICIA required new regulations.
In addition to regulating capital, the FDIC and the OCC have broad authority
to prevent the development or continuance of unsafe or unsound banking
practices. Pursuant to this authority, the FDIC and OCC have adopted regulations
that restrict preferential loans and loan amounts to "affiliates" and "insiders"
of banks, require banks to keep information on loans to major stockholders and
executive officers and bar certain director and officer interlocks between
financial institutions. The FDIC is also authorized to approve mergers,
consolidations and assumption of deposit liability transactions between insured
banks and between insured banks and uninsured banks or institutions to prevent
capital or surplus diminution in such transactions where the resulting,
continuing or assumed bank is an insured nonmember state bank, like Hancock Bank
MS and Hancock Bank LA.
Although the Hancock Bank MS and Hancock Bank LA are not members of the
Federal Reserve System, they are subject to Federal Reserve regulations that
require the Banks to maintain reserves against transaction accounts (primarily
checking accounts), money market deposit accounts and nonpersonal time deposits.
Because reserves generally must be maintained in cash or in noninterest-bearing
accounts, the effect of the reserve requirements is to increase the cost of
funds for the Banks. The Federal Reserve regulations currently require that
reserves be maintained against net transaction accounts in the amount of 3% of
the aggregate of such accounts up to $47,700 million, or, if the aggregate of
such accounts exceeds $47,700 million, $1.302 million plus 10% of the total in
excess of $47,700 million. This regulation is subject to an exemption from
reserve requirements on a limited amount of an institution's transaction
accounts.
The foregoing is a brief summary of certain statutes, rules and regulations
affecting the Company and the Banks. It is not intended to be an exhaustive
discussion of all the statutes and regulations having an impact on the
operations of such entities.
EFFECT OF GOVERNMENTAL POLICIES:
The difference between the interest rate paid on deposits and other
borrowings and the interest rate received on loans and securities will comprise
most of a bank's earnings. Due to recent deregulation of the industry, however,
the banking business is becoming increasingly dependent on the generation of fee
and service charge revenue.
The earnings and growth of a bank will be affected by both general economic
conditions and the monetary and fiscal policy of the United States Government
and its agencies, particularly the Federal Reserve. The Federal Reserve sets
national monetary policy such as seeking to curb inflation and combat recession.
This is accomplished by its open-market operations in United States Government
securities, adjustments in the amount of reserves that financial institutions
are required to maintain and adjustments to the discount rates on borrowings and
target rates for federal funds transactions. The actions of the Federal Reserve
in these areas influence the growth of bank loans, investments and deposits and
also affect interest rates on loans and deposits. The nature and timing of any
future changes in monetary policies and their potential impact on the Company
cannot be predicted.
STATISTICAL INFORMATION
The following tables and other material present certain statistical
information regarding the Company. This information is not audited and should be
read in conjunction with the Company's consolidated financial statements and the
accompanying notes.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY
AND INTEREST RATES AND DIFFERENTIALS
Net interest income, the difference between interest income and interest
expense, is the most significant component of the Banks earnings. For internal
analytical purposes, management adjusts net interest income to a "taxable
equivalent" basis using a 35% federal tax rate on tax exempt items (primarily
interest on municipal securities and loans).
Another significant statistic in the analysis of net interest income is the
effective interest differential, which is the difference between the average
rate of interest earned on earning assets and the effective rate paid for all
funds, noninterest-bearing as well as interest-bearing. Since a portion of the
Bank's deposits do not bear interest, such as demand deposits, the rate paid for
all funds is lower than the rate on interest-bearing liabilities alone. The rate
differential for the years 1996 and 1995 was 5.10%.
Recognizing the importance of interest differential to total earnings,
management places great emphasis on managing interest rate spreads. Although
interest differential is affected by national, regional, and area economic
conditions, including the level of loan demand and interest rates, there are
significant opportunities to influence interest differential through appropriate
loan and investment policies. These policies are designed to maximize interest
differential while maintaining sufficient liquidity and availability of funds
for purposes of meeting existing commitments and for investment in loans and
other investment opportunities that may arise.
The following table shows interest income on interest-earning assets and
related average yields earned and interest expense on interest-bearing
liabilities and related average rates paid for the periods indicated:
COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
-----------------------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1995 1994
--------------------------------- ------------------------------ --------------------------------
Interest Average Interest Average Interest Average
Average Income or Yield or Average Income or Yield Average Income or Yield
Balance Expense Rate Balance Expense or Rate Balance Expense or Rate
(%) (%) (%)
- -------------------------------------------------------------------------------------------------------------------
(Amounts in thousands)
ASSETS
Interest-earning
assets:
Investment
securities:
U.S. Treasury $221,120 $13,567 6.14% $257,228 $14,568 5.66% $316,232 $17,168 5.43%
U.S. government
obligations 449,687 34,886 7.76% 493,315 33,726 6.84% 423,555 24,772 5.85%
Municipal
obligations 60,690 5,451 8.98% 57,001 5,426 9.52% 48,194 4,912 10.19%
Other
securities 171,889 6,780 3.94% 87,606 6,231 7.11% 75,956 4,713 6.20%
Federal funds
sold &
securities
purchased
Under agreements
to resell 106,316 5,580 5.25% 99,559 5,820 5.85% 89,341 3,832 4.29%
Interest-bearing
time deposits
with other
banks 1,543 87 5.64% 500 31 6.20% 725 38 5.24%
Net loans
(2)(3) 1,083,165 107,079 9.89% 1,000,907 98,029 9.79% 906,342 82,967 9.15%
Total
interest- --------------------------------------------------------------------------------------------------
earning
assets/
interest
income (1) 2,094,410 173,430 8.28% 1,996,116 163,831 8.21% 1,860,345 138,402 7.44%
Less: Reserve
for loan
losses (17,670) --- (16,532) --- (15,251) ---
Noninterest-
earning assets:
Cash and due
from banks 121,157 --- 104,854 --- 112,931 ---
Property and
equipment 37,185 --- 37,786 --- 34,815 ---
Other assets 50,795 --- 93,302 --- 50,435 ---
- ------------------------------------------------------------------------------------------------------
Total assets $2,285,877 $173,430 7.58% $2,215,526 $163,831 7.39% $2,043,275 $138,402 6.77%
=====================================================================================================
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Interest-bearing
liabilities:
Deposits:
Savings, NOW
and money
market $ 694,017 19,001 2.74% $ 739,091 $ 20,515 2.78% $ 755,888 $ 20,703 2.74%
Time 778,602 41,624 5.35% 717,064 37,097 5.17% 657,587 27,490 4.18%
Federal funds
purchased 11,425 549 4.80% 15,284 863 5.65% 18,622 754 4.05%
Securities sold
under
agreements to
repurchase 79,411 3,465 4.36% 53,924 2,219 4.12% 24,710 718 2.91%
Long-term bonds 1,795 158 8.80% 2,799 203 7.25% 3,656 256 7.00%
Capital notes 7 --- --- 265 0.00% 1,571 76 4.84%
-----------------------------------------------------------------------------------------------------
Total interest-
bearing
liabilities/
interest
expense 1,565,250 64,804 4.14% 1,528,162 61,162 4.00% 1,462,034 49,997 3.42%
Noninterest-
bearing
liabilities:
Demand deposits 472,909 --- --- 439,495 --- --- 393,120 --- ---
Other
liabilities 17,667 --- --- 32,135 --- --- 13,183 --- ---
Stockholders'
equity 230,051 --- --- 215,734 --- --- 174,938 --- ---
-----------------------------------------------------------------------------------------------------
Total
liabilities &
stockholders'
equity $2,285,877 $ 64,804 2.83% $2,215,526 $ 61,162 2.76% $2,043,275 $ 49,997 2.45%
======================================================================================================
Interest-earning
assets $2,094,410 $1,996,116 $1,860,345
Interest-bearing
liabilities 1,565,250 1,528,162 1,462,034
Interest income $173,430 $163,831 $138,402
Interest expense 64,804 61,162 49,997
-------- -------- --------
Interest income/
interest-
earning assets 8.28% 8.21% 7.44%
Interest
expense/interest-
bearing liabilities 4.14% 4.00% 3.42%
Interest spread 4.14% 4.21% 4.02%
Net interest income $108,626 $102,669 $ 88,405
======== ======== ========
Net interest margin 5.19% 5.13% 4.75%
- ----------
(1) Includes tax equivalent adjustments to interest income of $1.9 million,
$2.3 million, and $2.1 million in 1996, 1995 and 1994, respectively, using
an effective tax rate of 35%.
(2) Interest income includes fees on loans of $4.5 million in 1996, $4.1
million in 1995 and $3.2 million in 1994.
(3) Includes nonaccrual loans. See "Nonperforming Assets."
The following table sets forth, for the periods indicated, a summary of the
changes in interest income on interest-earning assets and interest expense on
interest-bearing liabilities relating to rate and volume variances. Nonaccrual
loans are included in average amounts of loans and do not bear interest for
purposes of the presentation. Changes that are not solely due to volume or rate
are allocated to volume.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
------------------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994
--------------------------- ------------------------------ ------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
--------------------------- ------------------------------ ------------------------
(Amounts in thousands)
INTEREST INCOME Investment securities:
U.S. Treasury $(2,044) $ 1,043 $(1,001) $( 3,327) $ 727 $( 2,600) $ 1,301 $( 994)$ 307
U.S. government obligations (2,984) 4,144 1,160 4,761 4,193 8,954 1,528 (1,630) ( 102)
Municipal obligations (1) 351 ( 326) 25 837 ( 323) 514 463 ( 751) ( 288)
Other securities 5,992 (5,443) 549 827 691 1,518 ( 602) 540 ( 62)
Federal funds sold & securities
purchased under agreements
to resell 395 ( 635) ( 240) 594 1,394 1,988 (1,536) 1,765 229
Interest bearing time deposits
with other banks 65 ( 9) 56 ( 14) 7 ( 7) ( 19) 12 ( 7)
Net Loans 8,053 997 9,050 9,261 5,801 15,062 5,459 (3,136) 2,323
-----------------------------------------------------------------------------------------
Total 9,828 ( 229) 9,599 12,939 12,490 25,429 6,594 (4,194) 2,400
-----------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits:
Savings, NOW and money
market (1,253) ( 261) (1,514) ( 490) 302 ( 188) 978 359 1,337
Time 3,181 1,346 4,527 3,097 6,510 9,607 ( 212) 133 ( 79)
Federal funds purchased ( 218) ( 96) ( 314) ( 189) 298 109 24 193 217
Securities sold under
agreements to repurchase 1,050 196 1,246 1,202 299 1,501 63 171 234
Long-term bonds ( 73) 28 ( 45) ( 62) 9 ( 53) ( 69)( 25) ( 94)
Capital notes ( 258) --- ( 258) 265 ( 76) 189 12 ( 26) ( 14)
-----------------------------------------------------------------------------------------------
Total 2,429 1,213 3,642 3,823 7,342 11,165 796 805 1,601
---------------------------------------------------------------------------------------------
Increase (decrease) in
net interest income $ 7,399 $(1,442) $ 5,957 $ 9,116 $ 5,148 $ 14,264 $ 5,798 $(4,999) $ 799
=============================================================================================
- ----------
(1) Yields on tax-exempt investments have been adjusted to a tax equivalent
basis utilizing a 35% effective tax rate.
(2) Interest earned includes fees on loans of $4.5 million in 1996, $4.1
million in 1995 and $3.2 million in 1994.
RATE SENSITIVITY:
To control interest rate risk, management regularly monitors the volume of
interest sensitive assets compared with interest sensitive liabilities over
specific time intervals. The Company's interest rate management policy is
designed to produce a stable net interest margin in periods of interest rate
fluctuations. Interest sensitive assets and liabilities are those that are
subject to maturity or repricing within a given time period. Interest rate risk
is monitored, quantified and managed to produce a 5% or less impact on
short-term earnings.
The interest sensitivity gap is the difference between total interest
sensitive assets and liabilities in a given time period. At December 31, 1996,
the Company's cumulative interest sensitivity gap in the one year interval was
(21.75%) as compared to a cumulative interest sensitivity gap in the one year
interval of (18.44%) at December 31, 1995. The percentage reflects a higher
level of interest sensitive liabilities than assets repricing within one year.
Generally, when rate sensitive liabilities exceed rate sensitive assets, the net
interest margin is expected to be positively affected during periods of
decreasing interest rates and negatively affected during periods of increasing
rates.
The following tables set forth the Company's interest rate sensitivity gap
at December 31, 1996 and December 31, 1995:
ANALYSIS OF INTEREST SENSITIVITY AT DECEMBER 31, 1996
-----------------------------------------------------
AFTER THREE
WITHIN THROUGH ONE AFTER FIVE
THREE TWELVE THROUGH YEARS AND
MONTHS MONTHS FIVE YEARS INSENSITIVE TOTAL
--------------------------------------------------------------------------
(Amounts in thousands)
Net loans $ 302,553 $ 107,128 $ 531,015 $ 233,271 $1,173,967
Securities and time deposits 119,629 94,242 225,752 464,914 904,537
Federal funds 12,000 -- -- -- 12,000
--------------------------------------------------------------------------
Total earning assets $ 434,182 $ 201,370 $ 756,767 $ 698,185 $2,090,504
===========================================================================
20.77% 9.64% 36.20% 33.39% 100.00%
Interest bearing deposits, excluding
CDs greater than $100,000 $ 542,277 $ 285,565 $ 440,733 $ 3,339 $1,271,914
CDs greater than $100,000 97,686 75,521 48,491 -- 221,698
Short-term borrowings 87,609 -- -- -- 87,609
Other borrowings 500 1,050 -- -- 1,550
--------------------------------------------------------------------------
Total interest-bearing funds 728,072 362,136 489,224 3,339 1,582,771
Interest-free funds -- -- -- 507,733 507,733
--------------------------------------------------------------------------
Funds supporting earning assets $ 728,072 $ 362,136 $ 489,224 $ 511,072 $2,090,504
==========================================================================
34.82% 17.33% 23.40% 24.45% 100.00%
Interest sensitivity gap $(293,890) $(160,766) $ 267,543 $ 187,113 --
Cumulative gap $(293,890) $(454,656) $(187,113) -- --
Percent of total earning assets (14.06%) (21.75%) (8.95%) -- --
ANALYSIS OF INTEREST SENSITIVITY AT DECEMBER 31, 1995
-----------------------------------------------------
AFTER THREE
WITHIN THROUGH ONE AFTER FIVE
THREE TWELVE THROUGH YEARS AND
MONTHS MONTHS FIVE YEARS INSENSITIVE TOTAL
-------------------------------------------------------------------
(Amounts in thousands)
Net loans $ 281,636 $ 103,346 $ 429,298 $ 220,697 $1,034,977
Securities and time deposits 181,199 137,057 219,763 311,837 849,856
Federal funds 153,725 -- -- -- 153,725
-------------------------------------------------------------------
Total earning assets $ 616,560 $ 240,403 $ 649,061 $ 532,534 $2,038,558
===================================================================
30.25% 11.79% 31.84% 26.12% 100.00%
Interest bearing deposits, excluding
CDs greater than $100,000 $ 566,967 $ 443,939 $ 234,772 $ 15 $1,245,693
CDs greater than $100,000 73,320 79,031 61,191 -- 213,542
Short-term borrowings 66,585 -- -- -- 66,585
Other borrowings 1,045 1,970 2,100 -- 5,115
Total interest-bearing funds 707,917 524,940 298,063 15 1,530,935
-------------------------------------------------------------------
Interest-free funds -- -- -- 507,623 507,623
-------------------------------------------------------------------
Funds supporting earning assets $ 707,917 $ 524,940 $ 298,063 $ 507,638 $2,038,558
===================================================================
34.73% 25.75% 14.62% 24.90% 100.00%
Interest sensitivity gap $ (91,357) $(284,537) $ 350,998 $ 24,896 --
Cumulative gap $ (91,357) $(375,894) $ (24,896) -- --
Percent of total earning assets (4.48%) (18.44%) (1.22%) -- --
INCOME TAXES:
The Company had income tax expense of $15.2 million and $13.1 million for the
years ended December 31, 1996 and 1995, respectively. This represents effective
tax rates of 32.4% and 32.6% for December 31, 1996 and 1995, respectively.
PERFORMANCE AND EQUITY RATIOS:
The following table sets forth, for the periods indicated, the percentage of
net income to average assets and average stockholders' equity, the percentage of
common stock dividends to net income and the percentage of average stockholders'
equity to average assets.
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995 1994
-------------------------
Return on average assets (%) 1.38 1.22 1.13
Return on average stockholders'
equity (%) 13.74 12.50 13.22
Dividend payout ratio (%) 28.90 31.45 32.21
Average stockholders' equity to
average assets (%) 10.06 9.74 8.56
SECURITIES PORTFOLIO:
The Company generally purchases securities to be held to maturity, with a
maturity schedule that provides ample liquidity. Securities classified as
held-to-maturity are carried at amortized cost. Certain securities have been
classified as available-for-sale based on management's internal assessment of
the portfolio considering future liquidity, earning requirements and capital
position. The Company increased its available-for-sale portfolio during 1995.
Generally, securities with a market risk have been placed in this category. The
December 31, 1996 book value of the held-to-maturity portfolio was $804 million
and the market value was $807 million. The available-for-sale portfolio balance
was $98 million at December 31, 1996.
The book values of securities classified as available-for-sale as of December
31, 1996, 1995 and 1994, were as follows (in thousands):
DECEMBER 31
-------------------------------
1996 1995 1994
-------------------------------
U.S. Treasury securities $ 499 $ 1,493 $ 2
Other U.S. gov. obligations 53,802 61,470 659
Municipal obligations 923 962 997
Other securities --- 544 ---
Mortgage-backed securities 5,373 5,140 ---
CMOs 33,038 34,695 19,385
Equity securities 4,932 4,993 ---
--------------------------------
$ 98,567 $109,297 $ 20,382
================================
The book value, book yield and market value of the debt securities
classified as available-for-sale as of December 31, 1996, by estimated maturity,
were as follows (in thousands):
BOOK VALUE YIELD (%) MARKET VALUE
-------------------------------------
Due in one year or less $ 4,029 6.40 $ 3,939
Due after one year through
five years 17,403 6.56 17,149
Due after five years through
ten years 15,908 6.60 15,753
Due after ten years 56,295 6.57 55,822
-------------------------------------
$ 93,635 6.57 $92,663
=====================================
The book value and market values of securities classified as
held-to-maturity as of December 31, 1996, 1995 and 1994 were as follows (in
thousands):
DECEMBER 31
--------------------------------
1996 1995 1994
--------------------------------
U.S. Treasury securities $175,171 $239,892 $280,578
Other U.S. gov. obligations 338,796 317,140 275,209
Municipal obligations 66,367 56,961 58,224
Other securities --- 11,027 15,747
Mortgage-backed securities 87,991 50,427 129,028
CMOs 135,673 63,082 88,807
--------------------------------
$809,998 $738,529 $847,593
================================
The book value, book yield and market value of the securities classified as
held-to-maturity as of December 31, 1996, by contractual maturity, were as
follows (in thousands):
BOOK VALUE YIELD (%) MARKET VALUE
-----------------------------------
Due in one year or less $ 99,189 6.60 $ 99,328
Due after one year through
five years 227,023 6.64 227,834
Due after five years through
ten years 249,010 6.70 248,796
Due after ten years 228,776 6.64 230,752
----------------------------------
$803,998 6.65 $806,710
==================================
LOAN PORTFOLIO:
The Banks' primary lending focus is to provide commercial, consumer and real
estate loans to consumers and to small and middle market businesses in their
respective market areas. Diversification in the loan portfolio is a means of
reducing the risks associated with economic fluctuations. The Banks have no
concentrations of loans to particular borrowers or loans to any foreign
entities.
Loan underwriting standards and loan loss reserve maintenance further reduce
the impact of credit risk to the Company. Loans are underwritten on the basis of
cash flow capacity and collateral market value. Generally, real estate mortgage
loans are made when the borrower produces sufficient cash flow capacity and
equity in the property to offset historical market devaluations. The loan loss
reserve adequacy is tested monthly based on historical losses through different
economic cycles and projected future losses specifically identified.
The following table sets forth, for the periods indicated, the composition
of the loan portfolio of the Company:
LOAN PORTFOLIO
DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------------
(Amounts in thousands)
Real estate:
Residential mortgages
1-4 family $ 333,581 $ 224,646 $ 214,247 $ 213,216 $ 211,931
Residential mortgages
multifamily 12,769 9,674 7,302 7,124 7,804
Home equity lines 13,000 11,825 11,740 13,147 12,873
Construction and development 71,057 41,602 35,719 24,234 18,454
Nonresidential 168,203 127,027 112,957 119,094 111,504
Commercial, industrial and
other 169,814 176,942 119,997 160,385 157,797
Consumer 372,951 409,608 397,879 366,401 297,401
Lease financing and depository
institutions 16,095 13,811 10,074 6,673 6,079
Political subdivisions 12,142 14,394 12,806 11,668 12,791
Credit card 29,158 32,104 30,794 27,466 26,482
---------------------------------------------------------------
1,198,770 1,061,633 953,515 949,408 863,116
Less, unearned income 24,806 26,656 27,850 26,396 22,393
---------------------------------------------------------------
Net loans $1,173,967 $1,034,977 $ 925,665 $ 923,012 $ 840,723
===============================================================
Prior to July 1991, a correspondent bank of Hancock Bank MS issued credit
cards under the Bank's name to customers of Hancock Bank MS and retained the
outstanding receivables. In July 1991, Hancock Bank MS purchased, at par, from
its correspondent bank, certain credit cards with outstanding balances of
approximately $7.8 million and simultaneously transferred, at par, the cards and
balances to Hancock Bank LA. The resulting combined consumer and corporate
credit card portfolio aggregated approximately $11.5 million with approximately
17,700 cards outstanding. At December 31, 1996, the portfolio balance had
increased to approximately $20.8 million with approximately 37,000 cards
outstanding.
The following table sets forth, for the periods indicated, the approximate
maturity by type of the loan portfolio of the Company:
LOAN MATURITY SCHEDULE
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------------------- ------------------------------------------
MATURITY RANGE MATURITY RANGE
---------------------------------------- ------------------------------------------
AFTER ONE AFTER ONE
WITHIN THROUGH AFTER FIVE WITHIN THROUGH AFTER FIVE
ONE YEAR FIVE YEARS YEARS TOTAL ONE YEAR FIVE YEARS YEARS TOTAL
--------------------------------------------------------------------------------------
(Amounts in thousands)
Commercial, industrial and
other $ 68,436 $ 77,960 $ 23,418 $ 169,814 $ 70,958 $ 77,897 $ 28,087 $ 176,942
Real estate - construction 44,714 18,994 7,349 71,057 20,227 14,685 6,690 41,602
All other loans 148,232 557,936 251,731 957,899 154,587 454,385 234,117 843,089
---------------------------------------------------------------------------------------
Total loans $261,382 $654,891 $282,498 $1,198,770 $245,772 $546,967 $268,894 $1,061,633
=======================================================================================
The sensitivity to interest rate changes of that portion of the Company's
loan portfolio that matures after one year is shown below:
LOAN SENSITIVITY TO CHANGES IN INTEREST RATES
DECEMBER 31, DECEMBER 31,
1996 1995
-------------------------
(Amounts in thousands)
Commercial, industrial, and real estate construction maturing after one year:
Fixed rate $188,476 $150,111
Floating rate 80,793 80,298
Other loans maturing after one year:
Fixed rate 594,593 559,592
Floating rate 18,781 25,860
----------------------
Total $882,643 $815,861
=====================
NONPERFORMING ASSETS:
The following table sets forth nonperforming assets by type for the periods
indicated, consisting of nonaccrual loans, restructured loans, real estate owned
and loans past due 90 days or more and still accruing:
DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
(Amounts in thousands)
Nonaccrual loans:
Real estate $ 753 $ 2,406 $ 1,914 $ 1,888 $ 4,050
Commercial, industrial
and other 169 1,144 525 1,424 399
Consumer 1,298 1,176 1,287 1,322 1,735
Lease financing --- --- --- --- 22
Depository institutions --- --- --- --- ---
Political subdivisions --- --- --- --- ---
Restructured loans 685 611 614 482 194
-------------------------------------------------------------------------------------------
Total nonperforming
loans 2,905 5,337 4,340 5,116 6,400
Acquired real estate
owned 147 140 --- --- ---
Real estate owned 1,728 946 1,001 1,029 1,673
-------------------------------------------------------------------------------------------
Total nonperforming
assets $ 4,780 $ 6,423 $ 5,341 $ 6,145 $ 8,073
===========================================================================================
Loans 90+ days past
due and still
accruing $8,361 $ 4,089 $ 2,692 $ 4,338 $ 7,356
===========================================================================================
Ratios (%):
Nonperforming loans
to net loans 0.71 0.52 0.47 0.55 0.76
Nonperforming assets
to net loans and
real estate owned 0.41 0.62 0.58 0.67 0.96
Nonperforming loans
to average net loans 0.77 0.53 0.48 0.60 0.80
Reserve for loan
losses to
nonperforming loans 681.58 325.86 354.19 299.18 229.41
The following table sets forth, for the periods indicated, the amount of
interest that would have been recorded on nonaccrual loans had the loans not
been classified as "nonaccrual" as well as the interest that would have been
recorded under the original terms of restructured loans:
DECEMBER 31,
------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------------
(Amounts in thousands)
Nonaccrual $ 220 $ 463 $ 340 $ 441 $ 603
Restructured 68 60 56 45 17
------------------------------------------------------------------------------------------------
Total $ 288 $ 523 $ 396 $ 486 $ 620
===========================================================================================
Interest actually received on nonaccrual and restructured loans was
insignificant.
LOAN LOSS, CHARGE-OFF AND RECOVERY EXPENSES:
The following table sets forth, for the periods indicated, average net loans
outstanding, reserve for loan losses, amounts charged-off and recoveries of
loans previously charged-off:
DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------------------------------------
(Amounts in thousands)
Net loans outstanding at end of period $1,173,967 $1,034,978 $ 925,665 $ 923,012 $ 840,723
================================================================================
Average net loans outstanding $1,083,165 $1,000,907 $ 904,342 $ 847,526 $ 796,018
================================================================================
Balance of reserve for loan losses
at beginning of period $ 17,391 $ 15,372 $ 15,306 $ 14,682 $ 12,805
Loans charged-off:
Real estate 73 210 106 318 766
Commercial 975 636 637 2,218 2,516
Consumer 5,417 4,524 2,706 3,087 3,981
Lease financing 1 13 --- 53 2
Depository institutions --- --- --- --- ---
Political subdivisions --- --- --- --- ---
--------------------------------------------------------------------------------
Total charge-offs 6,466 5,383 3,449 5,676 7,265
--------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
Real estate 186 15 53 102 85
Commercial 937 971 570 695 430
Consumer 945 839 886 869 648
Lease financing 0 5 8 2 1
Depository institutions --- --- --- --- ---
Political subdivisions --- --- --- --- ---
------------------------------------------------------------------------
Total recoveries 2,068 1,830 1,517 1,668 1,164
------------------------------------------------------------------------
Net charge-offs 4,398 3,553 1,932 4,008 6,101
Provision for loan losses 6,153 4,425 1,998 4,632 7,978
Balance acquired through acquisition 654 1,147 --- --- ---
------------------------------------------------------------------------
Balance of reserve for loan losses
at end of period $ 19,800 $ 17,391 $ 15,372 $ 15,306 $ 14,682
========================================================================
The following table sets forth, for the periods indicated, certain ratios
related to the Company's charge-offs, reserve for loan losses and outstanding
loans:
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------
Ratios (%):
Net charge-offs to average net loans 0.41 0.35 0.21 0.47 0.77
Net charge-offs to period-end net loans 0.37 0.34 0.21 0.43 0.73
Reserve for loan losses to average net loans 1.83 1.74 1.70 1.81 1.84
Reserve for loan losses to period-end net loans 1.69 1.68 1.66 1.66 1.75
Net charge-offs to loan loss reserve 22.21 20.43 12.57 26.19 41.55
Net charge-offs to loan loss provision 71.47 80.29 96.70 86.53 76.47
An allocation of the loan loss reserve by major loan category is set forth
in the following table. The allocation is not necessarily indicative of the
category of future losses, and the full reserve at December 31, 1996, is
available to absorb losses occurring in any category of loans.
DECEMBER 31,
---------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------------
RESERVE % OF RESERVE % OF RESERVE % OF RESERVE % OF RESERVE % OF
FOR LOANS FOR LOANS FOR LOANS FOR LOANS FOR LOANS
LOAN TO TOTAL LOAN TO TOTAL LOAN TO TOTAL LOAN TO TOTAL LOAN TO TOTAL
LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS
---------------------------------------------------------------------------------------------------
(Amounts in thousands)
Real estate $3,000 49.94 $ 2,000 39.08 $1,250 46.06 $1,250 36.69 1,250 42.00
Commercial,
industrial
and other 5,750 16.52 5,250 19.32 5,000 14.98 5,000 18.82 4,750 20.47
Consumer 8,250 31.11 7,500 38.58 6,500 41.73 6,500 38.60 6,250 34.46
Credit card 800 2.43 500 3.02 500 3.23 500 2.89 500 3.07
Unallocated 2,000 --- 2,141 --- 2,122 --- 2,056 --- 1,932 ---
------------------------------------------------------------------------------------------------------
$19,800 100.00 17,391 100.00 $15,372 100.00 $15,306 100.00 $14,682 100.00
======================================================================================================
DEPOSITS AND OTHER DEBT INSTRUMENTS:
The following table sets forth the distribution of the average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits:
1996 1995 1994
------------------------------- ------------------------------- -------------------------
PERCENT PERCENT PERCENT
OF OF OF RATE
AMOUNT DEPOSITS RATE (%) AMOUNT DEPOSITS RATE (%) AMOUNT DEPOSITS (%)
------------------------------- ------------------------------- -------------------------
(Amounts in thousands)
Non-interest bearing
accounts $ 472,909 24.30 --- $ 439,495 23.18 --- $393,120 21.76 ---
NOW accounts 268,391 13.8 2.68 288,947 15.24 2.64 293,347 16.24 2.58
Money market and other
savings accounts 425,626 21.88 2.78 450,144 23.75 2.86 462,541 25.60 2.84
Time deposits 778,602 40.02 5.34 717,064 37.83 5.17 657,587 36.40 4.18
---------------------------------------------------------------------------------------------------
$1,945,528 100.00 $1,895,650 100.00 $1,806,595 100.00
===================================================================================================
The Banks traditionally price their deposits to position
themselves in the middle of the local market. The Banks' policy
is not to accept brokered deposits.
Time certificates of deposit of $100,000 and over at December 31, 1996 had
maturities as follows:
DECEMBER 31, 1996
-------------------
(Amounts in thousands)
Three months or less $ 97,686
Over three through six months 29,453
Over six through twelve months 46,068
Over twelve months 48,491
---------
Total $221,698
=========
SHORT-TERM BORROWINGS:
The following table sets forth certain information concerning the Company's
short-term borrowings, which consist of federal funds purchased and securities
sold under agreements to repurchase.
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995 1994
--------------------------
(Amounts in thousands)
Federal funds purchased:
Amount outstanding at
period-end $ 0 $11,300 $29,150
Weighted average interest at
period-end 0.00% 3.12% 2.75%
Maximum amount at any month-end
during period $ 19,725 $16,325 $37,000
Average amount outstanding
during period $ 11,425 $15,284 $18,622
Weighted average interest rate
during period 5.33% 5.65% 4.05%
Securities sold under agreements to repurchase:
Amount outstanding at
period-end $ 87,609 $55,285 $25,146
Weighted average interest at
period-end 4.25% 2.50% 2.50%
Maximum amount at any month
end during-period $156,595 $88,070 $43,096
Average amount outstanding
during period $ 79,411 $53,924 $24,710
Weighted average interest
rate during period 4.26% 4.12% 2.91%
LIQUIDITY:
Liquidity represents an institution's ability to provide funds to satisfy
demands from depositors, borrowers and other commitments by either converting
assets into cash or accessing new or existing sources of incremental funds. The
principal sources of funds that provide liquidity are customer deposits,
payments of interest and principal on loans, maturities in and sales of
investment securities, earnings and borrowings. At December 31, 1996, cash and
due from banks, securities available-for-sale, federal funds sold and repurchase
agreements were in excess of 10% of total deposits at December 31, 1996.
The Company depends upon the dividends paid to it from the Banks as a
principal source of funds for its debt service and dividend requirements. As of
December 31, 1996, there was approximately $85 million available to be
dividended to the Company from the Banks.
CAPITAL RESOURCES:
Risk-based and leverage capital ratios for the Company and the Banks for the
periods indicated are shown in the following table:
RISK-BASED CAPITAL RATIOS TIER 1 LEVERAGE
---------------------------------------------------------------------------------------
TOTAL TIER 1 RATIO
---------------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
---------------------------------------------------------------------------------------
Hancock Bank
MS 18.62% 17.98% 17.79% 17.18% 10.10% 9.26%
Hancock Bank
LA 19.63 22.35 18.38 21.10 10.54 9.61
Company 19.02 18.64 18.03 17.69 10.37 9.28
Risk-based capital requirements are intended to make regulatory capital more
sensitive to risk elements of the Company. Currently, the Company is required to
maintain a minimum risk-based capital ratio of 8.0%, with not less than 4.0% in
Tier 1 capital. In addition, the Company must maintain a minimum Tier 1 leverage
ratio (Tier 1 capital to total assets) of at least 3.0% based upon the
regulator's latest composite rating of the institution.
NEW ACCOUNTING STANDARDS:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125 "Accounting for Transfers and servicing of
Financial Assets and Extinguishments of Liabilities" which provides revised
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. The Company does not anticipate that
the adoption of this statement in 1997 will have a significant effect of its
financial condition or results of operations.
IMPACT OF INFLATION:
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Banks are primarily monetary in nature. Interest rates,
therefore, have a more significant effect on the Banks' performance than the
effect of general levels of inflation on the price of goods and services.
Interest rates earned and paid by the Banks are affected to a degree by the rate
of inflation, and noninterest income and expenses can be affected by increasing
rates of inflation; however, the Company believes that the effects of inflation
are generally manageable through asset/liability management.
ITEM 2 - PROPERTIES
The Company's main offices are located at One Hancock Plaza, Gulfport,
Mississippi. The building has fourteen stories, of which seven are utilized by
the Company. The remaining seven stories are presently leased to outside
parties.
The building is leased from the City of Gulfport in connection with a urban
development revenue bond issue with a present balance of $1,050,000. The lease
payments by Hancock Bank MS, which are equivalent in amount to the payments of
principal and interest on the bonds, are used by the City to make payments on
the bonds. Hancock Bank MS, however, effectively has ownership of the building
since title will revert when all outstanding bonds have been paid. For this
reason, the Company carries the building as an asset and the bonds as a long
term payable on its balance sheet. The bonds mature at various dates through
1997.
The following banking offices in Mississippi and Louisiana are held in fee
(number of locations shown in parenthesis):
Albany, LA (1) Hammond, LA (1)
Angie, LA (1) Independence, LA (1)
Baker, LA (1) Long Beach, MS (2)
Baton Rouge, LA (13) Loranger, LA (1)
Bay St. Louis, MS (2) Lyman, MS (1)
Biloxi, MS (3) Moss Point, MS (3)
Bogalusa, LA (1) Mt. Hermon, LA (1)
Denham Springs, LA (4) Ocean Springs, MS (2)
D'Iberville, MS (1) Pascagoula, MS (4)
Escatawpa, MS (1) Pass Christian, MS (1)
Franklinton, LA (1) Picayune, MS (2)
French Settlement, LA (1) Poplarville, MS (1)
Gautier, MS (1) Walker, LA (1)
Gulfport, MS (7) Waveland, MS (1)
The following banking offices in Mississippi and Louisiana are leased under
agreements with unexpired terms of from one to thirty-four years including
renewal options (number of locations shown in parenthesis):
Baton Rouge, LA (5) Hammond, LA (1)
Bay St. Louis, MS (2) Pascagoula, MS (1)
Biloxi, MS (1) Picayune, MS (2)
Diamondhead, MS (1) Springfield, LA (1)
Gulfport, MS (5) Vancleave, MS (1)
In addition to the above, Hancock Bank MS owns land and other properties
acquired through foreclosures of loans. The major item is approximately 3,700
acres of timber land in Hancock County, Mississippi, which Hancock Bank MS
acquired by foreclosure in the 1930's.
ITEM 3 - LEGAL PROCEEDINGS
The Company is party to various legal proceedings arising in the ordinary
course of business. In the opinion of management, after consultation with
outside legal counsel, all such matters are adequately covered by insurance or,
if not so covered, are not expected to have a material adverse effect on the
financial condition of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no
matters submitted to a vote of security
holders during the quarter ended December 31, 1996.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
The information under the caption "Market Information" on page 6 of the
Company's 1996 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information under the caption "Consolidated Summary of Selected
Financial Information" on Page 7 of the Company's 1996 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on Pages 34 and 35 of the
Company's 1996 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and
subsidiaries, and the independent auditors' report, appearing on Pages 18
through 33 of the Company's 1996 Annual Report to Stockholders is incorporated
herein by reference:
Consolidated Balance Sheets on Page 18 Consolidated Statements of Earnings
on Page 19 Consolidated Statements of Stockholders' Equity on Page 20
Consolidated Statements of Cash Flows on Page 21 Notes to Consolidated
Financial Statements on Pages 22 through 32 Independent Auditors' Report on
Page 33
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's independent accountants
and auditors on any matter of accounting principles or practices or financial
statement disclosure.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning this item, see "Election of Directors" (Pages
3-7) and "Executive Compensation" (Pages 12-18) in the Proxy Statement for the
Annual Meeting of Shareholders held February 20, 1997, which was filed by the
Registrant in definitive form with the Commission on January 21, 1997 and is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
For information concerning this item see "Executive Compensation" (Pages
12-18) in the Proxy Statement for the Annual Meeting of Shareholders held
February 20, 1997, which was filed by the Registrant in definitive form with the
Commission on January 21, 1997 and is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
For information concerning this item see "Principal Shareholders" (Page 10)
and "Election of Directors" (Pages 3-7) in the Proxy Statement for the Annual
Meeting of Shareholders held February 20, 1997, which was filed by the
Registrant in definitive form with the Commission on January 21, 1997 and is
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning this item see "Certain Transactions and
Relationships" (Page 18) in the Proxy Statement for the Annual Meeting of
Shareholders held February 20, 1997, which was filed by the Registrant in
definitive form with the Commission on January 21, 1997 and is incorporated
herein by
reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
HANCOCK HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
(a) 1. AND 2. CONSOLIDATED FINANCIAL STATEMENTS:
The following have been incorporated herein from the Company's 1996 Annual
Report to Stockholders and are incorporated herein by reference:
- Independent Auditors' Report
- Consolidated Balance Sheets as of December 31, 1996 and
1995
- Consolidated Statements of Earnings for the three years
ended December 31, 1996
- Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1996
- Consolidated Statements of Cash Flows for the three
years ended December 31, 1996
- Notes to Consolidated Financial Statements for the three
years ended December 31, 1996
All other financial statements and schedules are omitted as the required
information is inapplicable or the required information is presented in the
consolidated financial statements or related notes.
(a) 3. EXHIBITS:
(2.1) Agreement and Plan of Merger dated May 30, 1985 among Hancock Holding
Company, Hancock Bank and Pascagoula-Moss Point Bank (filed as Exhibit 2
to the Registrant's Form 8-K dated June 6, 1985 and incorporated herein
by reference).
(2.2) Amendment dated July 9, 1985 to Agreement and Plan of Merger dated May
30, 1985 among Hancock Holding Company, Hancock Bank and Pascagoula-Moss
Point Bank (filed as Exhibit 19 to Registrant's Form 10-Q for the
quarter ended June 30, 1985 and incorporated herein by reference).
(2.3) Stock Purchase Agreement dated February 12, 1990 among Hancock Holding
Company, Metropolitan Corporation and Metropolitan National Bank (filed
as Exhibit 2.3 to Registrant's Form 10-K for the year ended December 31,
1989 and incorporated herein by reference).
(2.4) Modified Purchase and Assumption Agreement dated August
2, 1990, among Hancock Bank of Louisiana and the Federal
Deposit Insurance Corporation, receiver of American Bank
and Trust Company of Baton Rouge, Louisiana (filed as
Exhibit 2.1 to the Registrant's Form 10-Q for the
quarter ended June 30, 1990 and incorporated herein by
reference).
(2.5) Agreement and Plan of Reorganization dated November 30, 1993 among
Hancock Holding Company, Hancock Bank of Louisiana and First State Bank
and Trust Company of East Baton Rouge Parish, Baker, Louisiana (filed as
Exhibit 2.5 to the Registrant's Form 10-K dated December 31, 1993).
(2.6) Agreement and Plan of Reorganization dated July 6, 1994 among Hancock
Holding Company and Washington Bancorp, Franklinton, Louisiana (filed as
Exhibit 2 to the Registrant's Form S-4, Registration Number 33-56505,
dated November 16, 1994).
(2.7) Agreement and Plan of Reorganization dated August 20, 1994 among Hancock
Holding Company and First Denham Bancshares, Inc., Denham Springs,
Louisiana (filed as Exhibit 2 to the Registrant's Form S-4, Registration
Number 33-56285, dated November 2, 1994).
(2.8) Agreement and Plan of Reorganization dated November 15, 1996 among
Hancock Holding Company, Hancock Bank of Louisiana, Community
Bancshares, Inc. and Community State Bank, Hammond Louisiana (filed as
Exhibit 2 to the Registrant's Form S-4, Registration Number 333-11873,
dated September 12, 1996).
(2.9) Agreement and Plan of Reorganization dated January 17, 1997 among
Hancock Holding Company, Hancock Bank of Louisiana and Southeast
National Bank, Hammond, Louisiana (filed as Exhibit 2 to the
Registrant's Form S-4, Registration Number 333-14223, dated October 16,
1996).
(3.1) Amended and Restated Articles of Incorporation dated November 8, 1990
(filed as Exhibit 3.1 to the Registrant's Form 10-K for the year ended
December 31, 1990 and incorporated herein by reference).
(3.2) Amended and Restated Bylaws dated November 8, 1990 (filed as Exhibit 3.2
to the Registrant's Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference).
(3.3) Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the
Registrant's Form 10-Q for the quarter ended September 30, 1991).
(3.4) Articles of Correction, filed with Mississippi Secretary of State on
November 15, 1991 (filed as Exhibit 4.2 to the Registrant's Form 10-Q
for the quarter ended September 30, 1991).
(3.5) Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the
Registrant's Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference).
(3.6) Articles of Correction, filed with Mississippi Secretary of State on
March 2, 1992 (filed as Exhibit 3.6 to the Registrant's Form 10-K for
the year ended December 31, 1992 and incorporated herein by reference).
(3.7) Articles of Amendment to the Articles of Incorporation adopted February
20, 1997 (filed herewith).
(4.1) Specimen stock certificate (reflecting change in par value from $10.00
to $3.33, effective March 6, 1989) (filed as Exhibit 4.1 to the
Registrant's Form 10-Q for the quarter ended March 31, 1989 and
incorporated herein by reference).
(4.2) By executing this Form 10-K, the Registrant hereby
agrees to deliver to the Commission upon request copies
of instruments defining the rights of holders of
long-term debt of the Registrant or its consolidated
subsidiaries or its unconsolidated subsidiaries for
which financial statements are required to be filed,
where the total amount of such securities authorized
thereunder does not exceed 10 percent of the total
assets of the Registrant and its subsidiaries on a
consolidated basis.
(10.1) 1996 Long Term Incentive Plan (filed as Exhibit 10.1 to the Registrant's
Form 10-K for the year ended December 31, 1995, and incorporated herein
by reference).
(10.2) Description of Hancock Bank Executive Supplemental Reimbursement Plan,
as amended (provided on page 17 of the Registrant's definitive proxy
statement for its annual shareholders' meeting on February 20, 1997
filed with the Registrant's definitive proxy materials on January 21,
1997 and incorporated herein by reference).
(10.3) Description of Hancock Bank Automobile Plan (provided on page 17 of the
Registrant's definitive proxy statement for its annual shareholders'
meeting on February 20, 1997 filed with the Registrant's definitive
proxy materials on January 21, 1997 and incorporated herein by
reference).
(10.4) Description of Deferred Compensation Arrangement for Directors (provided
on pages 12-18 of the Registrant's definitive proxy statement for its
annual shareholders' meeting on February 20, 1997 filed with the
Registrant's definitive proxy materials on January 21, 1997 and
incorporated herein by reference).
(10.5) Site Lease Agreement between Hancock Bank and City of Gulfport,
Mississippi dated as of March 1, 1989 (filed as Exhibit 10.4 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.6) Project Lease Agreement between Hancock Bank and City of Gulfport,
Mississippi dated as of March 1, 1989 (filed as Exhibit 10.5 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.7) Deed of Trust dated as of March 1, 1989 from Hancock Bank to Deposit
Guaranty National Bank as trustee (filed as Exhibit 10.6 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.8) Trust Indenture between City of Gulfport, Mississippi and Deposit
Guaranty National Bank dated as of March 1, 1989 (filed as Exhibit 10.7
to the Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.9) Guaranty Agreement dated as of March 1, 1989 from Hancock Bank to
Deposit Guaranty National Bank as trustee (filed as Exhibit 10.8 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.10) Bond Purchase Agreement dated as of February 23, 1989
among Hancock Bank, J. C. Bradford & Co. and City of
Gulfport, Mississippi (filed as Exhibit 10.9 to the
Registrant's Form 10-K for the year ended December 31,
1989 and incorporated herein by reference).
(13) Annual Report to Stockholders for year ending December 31, 1996
(furnished for the information of the Commission only and not deemed
"filed" except for those portions which are specifically incorporated
herein by reference).
(21) Proxy Statement for the Registrant's Annual Meeting of Shareholders on
February 20, 1997 (deemed "filed" for the purposes of this Form 10-K
only for those portions which are specifically incorporated herein by
reference).
(22) Subsidiaries of the Registrant.
(27) Selected Financial Data
JURISDICTION HOLDER OF
NAME OF INCORPORATION OUTSTANDING STOCK (1)
- -----------------------------------------------------------------
Hancock Bank Mississippi Hancock Holding Company
Hancock Bank of
Louisiana Louisiana Hancock Holding Company
Hancock Bank
Securities Mississippi Hancock Bank
Corporation
Hancock Insurance
Agency Mississippi Hancock Bank
Hancock Investment
Services, Inc. Mississippi Hancock Bank
Town Properties,
Inc. Mississippi Hancock Bank
The Gulfport
Building, Inc. Mississippi Hancock Bank
of Mississippi
Harrison Financial
Services, Inc. Mississippi Hancock Bank
Hancock Mortgage
Corporation Mississippi Hancock Bank and
Hancock Securities Corp.
Harrison Life
Insurance Company Mississippi 79% owned by Hancock Bank
(1) All are 100% owned except as indicated.
(23) Consent of Independent Accountants.
(b) Reports on Form 8-K: No reports on Form 8-k were filed during the last
quarter of the period covered by this report.
(c) The response to this portion of Item 14 is submitted as a separate section
of this report.
(d) Not applicable.
(27) Selected Financial Data
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
DATE MARCH 25, 1997 /S/ LEO W. SEAL, JR.
By Leo W. Seal, Jr., President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ LEO W. SEAL, JR. President and Director March 25, 1997
Leo W. Seal, Jr. (Chief Executive Officer)
/S/ JOSEPH F. BOARDMAN, JR. Director, March 25, 1997
Joseph F. Boardman, Jr. Chairman of the Board
/S/ THOMAS W. MILNER, JR. Director March 25, 1997
Thomas W. Milner, Jr.
/S/ GEORGE A. SCHLOEGEL Director, March 25, 1997
George A. Schloegel Vice-Chairman of the Board
/S/ DR. HOMER C. MOODY, JR. Director March 25, 1997
Dr. Homer C. Moody, Jr.
/S/ JAMES B. ESTABROOK, JR. Director March 25, 1997
James B. Estabrook, Jr.
/S/ CHARLES H. JOHNSON Director March 25, 1997
Charles H. Johnson
/S/ L. A. KOENENN, JR. Director March 25, 1997
L. A. Koenenn, Jr.
/S/ VICTOR MAVAR Director March 25, 1997
Victor Mavar
/S/ C. STANLEY BAILEY Chief Financial March 25, 1997
C. Stanley Bailey Officer