-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UnvuQtHWqkLKp0ioXcBEUlKdInngN4tNP1PyHzayu6sgpzGC6nzHn0jC0d+pIjfi f7oQzKoxeNiZy2dXXffBGQ== 0001030798-99-000038.txt : 19990331 0001030798-99-000038.hdr.sgml : 19990331 ACCESSION NUMBER: 0001030798-99-000038 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK HOLDING CO CENTRAL INDEX KEY: 0000750577 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640693170 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-13089 FILM NUMBER: 99577042 BUSINESS ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P.O. BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39501 BUSINESS PHONE: 6018684605 MAIL ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P O BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39501 10-K 1 FORM 10-K OF HANCOCK HOLDING COMPANY 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, 1998 . ------------------ 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 Identification incorporation or organization) Number) One Hancock Plaza, Gulfport, Mississippi 39501 - ------------------------------------------ ----------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (228) 868-4727 ---------------------------- 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. ---------- 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 ----- ----- Continued The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 1, 1999, was approximately $404,674,339 (based on an average market price of $45.875). 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, 1998, the registrant had outstanding 10,508,161 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, 1998 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 25, 1999, filed by the Registrant on January 25, 1999, are incorporated by reference into Part III of this report. CONTENTS PART I Item 1. Business 4 Item 2. Properties 37 Item 3. Legal Proceedings 38 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 39 Item 6. Selected Financial Data 39 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7a. Quantitative and Qualitative Disclosures About Market Risk 39 Item 8. Financial Statements and Supplementary Data 39 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 40 PART III Item 10. Directors and Executive Officers of the Registrant 40 Item 11. Executive Compensation 40 Item 12. Security Ownership of Certain Beneficial Owners and Management 40 Item 13. Certain Relationships and Related Transactions 40 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 41 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. At December 31, 1998 the Company operated 81 banking offices and over 125 automated teller machines (ATMs) 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, 1998, the Company had total assets of $2.8 billion and employed on a full-time equivalent basis 1,049 persons in Mississippi and 528 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 government-related facilities, tourism, port facility activities, industrial complexes and the gaming industry. Based on the most current available published data, Hancock Bank MS has the largest deposit market share in each of the four counties in which it operates: Harrison, Hancock, Jackson and Pearl River. With assets of $1.8 billion at December 31, 1998, Hancock Bank MS currently ranks as the fifth 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 $1.0 billion at December 31, 1998, Hancock Bank LA is one of the largest banks headquartered in East Baton Rouge Parish. Beginning with the 1985 acquisition of the Pascagoula-Moss Point Bank in Pascagoula, Mississippi, the Company has acquired approximately $1.0 billion in assets and approximately $938 million in deposit liabilities through selected acquisitions or purchase and assumption transactions. RECENT ACQUISITION ACTIVITY: 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 approximately 606,000 shares (adjusted for a 15% stock dividend in 1996) 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 $4.0 million cash and 890,000 shares (adjusted for a 15% stock dividend in 1996) of common stock of the Company. The acquisition was accounted for using the purchase method. Bancshares had total assets of approximately $111.0 million and stockholders' equity of approximately $11.3 million as of December 31, 1994 and net earnings of approximately $2.6 million 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 approximately 624,000 shares (adjusted for a 15% stock dividend in 1996) 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 $86.1 million and stockholders' equity of approximately $12.4 million as of December 31, 1994, and net earnings of approximately $1.3 million for the year then ended. In November 1996, the Company acquired Community Bancshares, Inc., Independence, Louisiana, (Community) which owned 100% of the stock of Community State Bank. The acquisition was in return for approximately $5.0 million cash and 513,000 shares (adjusted for a 15% stock dividend in 1996) of common stock of the Company. The acquisition was accounted for using the purchase method. Community had total assets of approximately $91.0 million and stockholders' equity of approximately $11.0 million as of December 31, 1995 and net earnings of approximately $900,000 for the year then ended. On January 17, 1997, the Company acquired Southeast National Bank, Hammond, Louisiana (Southeast). The acquisition was in return for approximately $3.7 million cash and 121,000 shares of common stock of the Company. The acquisition was accounted for using the purchase method. Southeast had total assets of approximately $40.0 million and stockholders' equity of approximately $4.0 million as of December 31, 1996 and net earnings of approximately $500,000 for the year then ended. On July 15, 1997, the Company acquired Commerce Corporation, Inc., St Francisville, Louisiana (Commerce), which owned 100% of the stock of Bank of Commerce and Trust Company, for approximately $330,000 cash, 65,000 shares of common stock of the Company and the assumption of Commerce debt owed to certain individuals in the aggregate principal amount of $1,250,000. The transaction was accounted for using the purchase method. Commerce had total assets of approximately $29.0 million and stockholders' equity of approximately $800,000 as of December 31, 1996 and net earnings of approximately $260,000 for the year then ended. SUBSEQUENT ACQUISITION: On January 15, 1999, Hancock Holding Company acquired American Security Bancshares of Ville Platte, Inc. (ASB), Ville Platte, Louisiana, the holding company of American Security Bank. The acquisition, accounted for using the purchase method, called for the exchange of ASB stock in return for approximately $15.2 million cash and 644,000 shares of common stock of the Company. ASB had total assets of approximately $230.0 million and stockholders' equity of approximately $23.0 million at December 31, 1998 and net earnings of approximately $3.0 million for the year then ended. The results of operations of ASB will be included in the 1999 consolidated statements of earnings from the date of acquisition. The acquisition resulted in the recognition of goodwill amounting to approximately $21.0 million, which will be amortized over 15 years. 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 significant 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 that can be approved 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. All loans over an individual loan officer's Board approved lending authority must be approved by the Bank's loan committee, the 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. 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 allowance 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 been 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, 1998, the book value of nonperforming assets held for resale was approximately $3.4 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 125 ATMs: over 80 ATMs at the 81 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 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, 1998, the Trust Departments of the Banks had approximately $1.5 billion of assets under management, of which $827 million were corporate accounts and $702 million 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, employee to asset ratios at Hancock Bank MS have been reduced from .78 per $1 million in assets in February 1988 to .54 as of December 31, 1998. Since its acquisition in August 1990, Hancock Bank LA employee to asset ratios have been reduced from .97 per $1 million of assets to .51 as of December 31, 1998. 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 $.61 to $1.00 at Hancock Bank MS. Hancock Bank LA has a higher level of fee income and through December 31, 1998, has achieved a ratio of $.81 to $1.00. OTHER ACTIVITIES: Hancock Bank MS has 7 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 centers are now located in several branch locations in Mississippi and Louisiana to accommodate the investment needs of customers whose financial portfolio requirements 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 and 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, 1998 was 9.69%. 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, 1998, the Company's off-balance sheet items aggregated $257.6 million; however, after the credit conversion these items represented $32.3 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 less goodwill and certain other intangibles. Tier 2 Capital, which consists primarily of the excess of any perpetual preferred stock, mandatory convertible securities, subordinated debt and general allowances 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, 1998, the Company's Tier 1 and Total Capital ratios were 16.88% and 17.41%, 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. In 1997 an assessment for the Financing Corporation's debt service was added to the FDIC quarterly premium payment. That assessment was 1.22 cents per hundred dollars of insured deposits during 1998 and for the first and second quarters of 1999. Total assessments paid to the FDIC amounted to $276 thousand in 1998. For the year ended December 31, 1998, premiums on OAKAR deposits from the 1991 acquisition of Peoples Federal Savings Association totalled $23,000. 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 BIF, 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 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). 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 $41.6 million, or, if the aggregate of such accounts exceeds $41.6 million, $1.248 million plus 10% of the total in excess of $41.6 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 comprise most of a bank's earnings. In order to mitigate the interest rate risk inherent in the industry, 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 deposits and borrowed funds, noninterest-bearing as well as interest-bearing. Since a portion of the Bank's deposits do not bear interest, such as demand accounts, the rate paid for all funds is lower than the rate on interest-bearing liabilities alone. The rate differential for the years 1998 and 1997 was 4.54% and 4.91%, respectively. 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 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, -------------------------------------------------------------------------------------------------- 1998 1997 1996 --------------------------------- ----------------------------- ------------------------------ Interest FTE Interest FTE Interest FTE Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate ----------- ---------- ------ ------------ --------- ------ ---------- --------- -------- (amounts in thousands) ASSETS Interest-earning assets: Investment securities: U.S. Treasury $ 243,224 $ 14,469 5.95% $ 240,539 $ 14,734 6.13% $ 221,120 $ 13,567 6.14% U.S. government obligations 477,045 29,963 6.28% 552,154 34,699 6.28% 449,687 34,886 7.76% Municipal obligations(1) 137,584 10,562 7.68% 74,838 6,385 8.53% 60,690 5,451 8.98% Other securities 326,845 20,736 6.34% 116,672 10,041 8.61% 171,889 6,780 3.94% Federal funds sold & securities purchased under agreements to resell 56,958 3,089 5.42% 50,256 2,733 5.44% 106,316 5,580 5.25% Interest-bearing time deposits with other banks 413 33 7.99% 996 64 6.43% 1,543 87 5.64% Net loans (1)(2)(3) 1,243,617 119,015 9.57% 1,201,381 115,468 9.61% 1,083,165 105,361 9.73% ----------- ---------- ----- ----------- ---------- ----- ----------- ---------- ----- Total interest-earning assets/interest income (1) 2,485,686 197,867 7.96% 2,236,836 184,124 8.23% 2,094,410 171,712 8.20% Noninterest-earning assets: Less: Allowance for loan losses (21,040) --- --- (20,410) --- --- (17,670) --- --- Cash and due from banks 114,935 --- --- 119,271 --- --- 121,157 --- --- Property and equipment 45,457 --- --- 40,149 --- --- 37,185 --- --- Other assets 71,069 --- --- 67,107 --- --- 50,795 --- --- ----------- ---------- ----- ----------- ---------- ----- ----------- ---------- ----- Total assets $2,696,107 $ 197,867 7.34% $2,442,953 $ 184,124 7.54% $2,285,877 $ 171,712 7.51% =========== ========== ===== =========== ========== ===== =========== ========== ===== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Savings, NOW and money market $ 849,297 $ 26,586 3.13% $ 746,665 $ 20,714 2.77% $ 694,017 $ 19,001 2.74% Time 891,322 47,879 5.37% 834,147 45,436 5.45% 778,602 41,624 5.35% Federal funds purchased 3,773 179 4.74% 2,304 107 4.64% 11,425 549 4.81% Securities sold under agreements to repurchase 152,426 7,037 4.62% 118,855 5,277 4.44% 79,411 3,465 4.36% Long-term bonds 586 61 10.41% 1,369 164 11.98% 1,795 158 8.80% Capital notes 500 --- --- --- --- --- --- 7 --- ----------- ---------- ------ ----------- ---------- ------ ----------- --------- ----- Total interest-bearing liabilities/interest expense 1,897,904 81,742 4.31% 1,703,340 71,698 4.21% 1,565,250 64,804 4.14% Noninterest-bearing liabilities: Demand deposits 493,218 --- --- 453,218 --- --- 472,909 --- --- Other liabilities 15,107 --- --- 15,092 --- --- 17,667 --- --- Stockholders' equity 289,878 --- --- 271,303 --- --- 230,051 --- --- ----------- ---------- ----- ----------- ---------- ----- ----------- ---------- ----- Total liabilities & stockholders' equity $2,696,107 $ 81,742 3.03% $2,442,953 $ 71,698 2.93% $2,285,877 $ 64,804 2.83% =========== ========== ===== =========== ========== ===== =========== ========== ===== Interest-earning assets $2,485,686 $2,236,836 $2,094,410 Interest-bearing liabilities 1,897,904 1,703,340 1,565,250 Interest income (1) $ 197,867 $ 184,124 $ 171,712 Interest expense 81,742 71,698 64,804 ---------- ---------- ---------- Interest income/interest- earning assets (1) 7.96% 8.23% 8.20% Interest expense/interest- bearing liabilities 4.31% 4.21% 4.14% Interest spread 3.65% 4.02% 4.06% Net interest income (1) $ 116,125 $ 112,426 $ 106,908 ========== ========== ========== Net interest margin (1) 4.67% 5.03% 5.10% (1) Includes tax equivalent adjustments to interest income of $4.2 million, $2.7 million and $2.3 million in 1998, 1997 and 1996, respectively, using an effective Federal income tax rate of 35% . (2) Interest income includes fees on loans of $3.0 million, $4.0 million and $4.0 million in 1998, 1997 and 1996, respectively. (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. 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, -------------------------------------------------------------------------------------------------- 1998 1997 1996 -------------------------------- ------------------------------ ---------------------------------- Changes Due to Total Changes Due to Total Changes Due to Total ------------------- Increase -------------------- Increase ------------------ Increase Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease) --------- -------- ---------- --------- ------- ---------- ------- ------- ---------- (in thousands) INTEREST INCOME Investment securities: U.S. Treasury $ 167 $( 432) $( 265) $ 1,192 $( 25) $ 1,167 $ (2,044) $ 1,043 $ (1,001) U.S. government obligations ( 4,736) --- ( 4,736) 7,985 (8,172) ( 187) (2,984) 4,144 1,160 Municipal obligations (1) 4,811 ( 634) 4,177 1,270 ( 336) 934 351 ( 326) 25 Other securities 13,343 ( 2,648) 10,695 (2,188) 5,449 3,261 5,992 (5,443) 549 Federal funds sold & securities purchased under agreements to resell 365 ( 9) 356 (2,943) 96 ( 2,847) 395 ( 635) ( 240) Interest-bearing time deposits with other banks ( 37) 6 ( 31) ( 31) 8 ( 23) 65 ( 9) 56 Net loans (1) 4,028 ( 481) 3,547 11,692 (1,585) 10,107 7,824 1,923 9,747 ---------- --------- --------- --------- -------- --------- -------- ------- -------- Total (1) 17,941 ( 4,198) 13,743 16,977 (4,565) 12,412 9,599 697 10,296 ---------- --------- --------- --------- -------- --------- -------- ------- -------- INTEREST EXPENSE Deposits: Savings, NOW and money market 2,889 2,983 5,872 1,489 224 1,713 (1,253) ( 261) ( 1,514) Time 3,116 ( 673) 2,443 2,972 840 3,812 3,181 1,346 4,527 Federal funds purchased 69 3 72 ( 438) ( 4) ( 442) ( 218) ( 96) ( 314) Securities sold under agreements to repurchase 1,490 270 1,760 1,720 92 1,812 1,050 196 1,246 Long-term bonds ( 94) ( 9) ( 103) ( 39) 38 ( 1) ( 73) 28 ( 45) Capital notes --- --- --- --- --- --- ( 258) --- ( 258) ---------- --------- --------- --------- -------- --------- --------- -------- --------- Total 7,470 2,574 10,044 5,704 1,190 6,894 2,429 1,213 3,642 ---------- --------- --------- --------- -------- --------- --------- -------- --------- Increase (decrease) in net interest income (1) $ 10,471 $( 6,772) $ 3,699 $ 11,273 $(5,755) $ 5,518 $ 7,170 $( 516) $ 6,654 ========== ========= ========= ========= ======== ========= ========= ======== ========= (1) Yields on tax-exempt loans and investments have been adjusted to a tax equivalent basis utilizing a 35% effective Federal income tax rate.
INTEREST 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 reduce the exposure to changes in its net interest margin in periods of interest rate fluctuations. Interest rate risk is monitored, quantified and managed to produce an acceptable 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, 1998, the Company's cumulative interest sensitivity gap in the one year interval was (5.38%) as compared to a cumulative interest sensitivity gap in the one year interval of (22.91%) at December 31, 1997. 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 scheduled repricing or maturity of the Company's assets and liabilities at December 31, 1998 and December 31, 1997. The assumed prepayment of investments and loans were based on the Company's assessment of current market conditions on such dates. Estimates have been made for the repricing of savings, NOW and money market accounts. Actual prepayments and deposit withdrawals will differ from the following analysis due to variable economic circumstances and consumer behavior. Although assets and liabilities may have similar maturities or repricing periods, reactions will vary as to timing and degree of interest rate change. Analysis of Interest Sensitivity at December 31, 1998 ----------------------------------------------------- After Three Within Through One After Five Three Twelve Through Years and Months Months Five Years Insensitive Total --------- --------- ---------- ----------- ---------- (amounts in thousands) Net loans $ 398,047 $ 286,996 $ 603,758 $ 16,754 $1,305,555 Securities and time deposits 309,531 290,544 474,271 170,119 1,244,465 Federal funds -- -- -- -- -- --------- --------- ---------- --------- ---------- Total earning assets $ 707,578 $ 577,540 $1,078,029 $ 186,873 $2,550,020 ========= ========= ========== ========= ========== 27.75% 22.65% 42.27% 7.33% 100.00% Interest bearing deposits, excluding time deposits $100,000 and greater $ 486,125 $ 580,990 $ 481,870 $ 563 $1,549,548 Time deposits $100,000 and greater 122,930 92,138 63,290 -- 278,358 Short-term borrowings 140,207 -- -- -- 140,207 Other borrowings -- -- -- -- -- --------- --------- ---------- --------- ----------- Total interest-bearing funds 749,262 673,128 545,160 563 1,968,113 Non-interest bearing funds -- -- -- 581,907 581,907 --------- --------- ---------- --------- ----------- Funds supporting earning assets $ 749,262 $ 673,128 $ 545,160 $ 582,470 $2,550,020 ========= ========= ========== ========= =========== 29.38% 26.40% 21.38% 22.84% 100.00% Interest sensitivity gap $( 41,684) $( 95,588) $ 532,869 $(395,597) -- Cumulative gap $( 41,684) $(137,272) $ 395,597 -- -- Percent of total earning assets ( 1.63)% ( 5.38)% 15.51% -- -- Analysis of Interest Sensitivity at December 31, 1997 ----------------------------------------------------- After Three Within Through One After Five Three Twelve Through Years and Months Months Five Years Insensitive Total -------- ---------- ---------- ----------- ----------- (amounts in thousands) Net loans $ 252,135 $ 116,538 $ 623,655 $ 228,301 $1,220,629 Securities and time deposits 112,815 103,824 411,090 454,334 1,082,063 Federal funds 35,500 -- -- -- 35,500 --------- --------- ---------- --------- ----------- Total earning assets $ 400,450 $ 220,362 $1,034,745 $ 682,635 $2,338,192 ========== ========== ========== ========== =========== 17.13% 9.42% 44.25% 29.20% 100.00% Interest bearing deposits, excluding time deposits $100,000 and greater $ 645,178 $ 272,983 $ 392,167 $ 29,311 $1,339,639 Time deposits $100,000 and greater 100,267 91,361 68,650 -- 260,278 Short-term borrowings 44,867 -- -- 125,667 170,534 Other borrowings 500 1,279 -- -- 1,779 ---------- ---------- ---------- ---------- ----------- Total interest-bearing funds 790,812 365,623 460,817 154,978 1,772,230 Non-interest bearing funds -- -- -- 565,962 565,962 ---------- ---------- ---------- ---------- ----------- Funds supporting earning assets $ 790,812 $ 365,623 $ 460,817 $ 720,940 $2,338,192 ========== ========= =========== ========== =========== 33.82% 15.64% 19.71% 30.83% 100.00% Interest sensitivity gap $(390,362) $(145,261) $ 573,928 $( 38,305) -- Cumulative gap $(390,362) $(535,623) $ 38,305 -- -- Percent of total earning assets (16.70%) (22.91%) 1.64% -- -- INCOME TAXES: The Company had income tax expense on earnings before cumulative effect of a change in accounting principle of $14.4 million and $17.4 million for the years ended December 31, 1998 and 1997, respectively. This represents effective income tax rates of 32.6% and 36.2% for the years ended December 31, 1998 and 1997, respectively. The 16.9% decrease in 1998 income tax expense is due to decreased taxable income. PERFORMANCE AND EQUITY RATIOS: The following table sets forth, for the periods indicated, the percentage of net earnings to average assets and average stockholders' equity, the percentage of common stock dividends declared per share to net earnings per share and the percentage of average stockholders' equity to average assets. Years Ended December 31, ------------------------- 1998 1997 1996 ---- ---- ---- % Return on average assets, excluding cumulative effect of change in accounting principle 1.11 1.25 1.38 Return on average assets 1.15 1.25 1.38 Return on avg. stockholders' equity, excluding cumulative effect of change in accounting principle 10.28 11.29 13.74 Return on average stockholders' equity 10.68 11.29 13.74 Dividend payout ratio, excluding cumulative effect of change in accounting principle 35.84 35.46 28.57 Dividend payout ratio 34.48 35.46 28.57 Average stockholders' equity to average assets 10.75 11.11 10.06 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 1998. Generally, securities with a market risk have been placed in this category. The December 31, 1998 amortized cost of the held-to-maturity portfolio was $781 million and the fair value was $790 million. The available-for-sale portfolio balance was $463 million at December 31, 1998. The amortized cost of securities classified as available-for-sale at December 31, 1998, 1997 and 1996, were as follows (in thousands): December 31, ------------------------------------ 1998 1997 1996 --------- --------- --------- U.S. Treasury $101,493 $ 54,637 $ 499 U.S. government agencies 272,564 46,039 53,802 Municipal obligations 5,851 1,496 923 Mortgage-backed securities 31,652 27,538 5,373 CMOs 45,347 21,427 33,038 Other debt securities --- 6,305 --- Equity securities 5,969 6,089 4,932 --------- --------- --------- $462,876 $163,531 $ 98,567 ========= ========= ========= The amortized cost, yield and fair value of debt securities classified as available-for-sale at December 31, 1998, by contractual maturity, were as follows (amounts in thousands): Over One Over Five One Year Year Years Over or Through Through Ten Less Five Years Ten Years Years Total --------- ----------- ---------- --------- --------- U.S. Treasury $ 45,071 $ 56,422 $ --- $ --- $101,493 U.S. government agencies 87,989 136,299 36,580 11,696 272,564 Municipal obligations 110 880 1,360 3,501 5,851 Mortgage-backed securities 1,267 131 9,621 20,633 31,652 CMOs --- --- 26,353 18,994 45,347 Other debt securities --- --- --- --- --- --------- --------- --------- --------- --------- $134,437 $193,732 $ 73,914 $ 54,824 $456,907 ========= ========= ========= ========= ========= Weighted Average Yield 5.84% 5.62% 6.18% 6.12% 5.84% The amortized cost of securities classified as held-to-maturity at December 31, 1998, 1997 and 1996 were as follows (in thousands): December 31, ------------------------------------- 1998 1997 1996 --------- --------- ---------- U.S. Treasury $114,506 $210,525 $175,171 U.S. government agencies 200,149 267,437 338,796 Municipal obligations 167,997 88,062 66,367 Mortgage-backed securities 114,747 133,925 87,991 CMOs 177,796 190,539 135,673 Other debt securities 6,054 25,874 --- --------- --------- --------- $781,249 $916,362 $803,998 ========= ========= ========= The amortized cost, yield and fair value of securities classified as held-to- maturity at December 31, 1998, by contractual maturity, were as follows (amounts in thousands): Over One Over Five One Year Year Years Over or Through Through Ten Less Five Years Ten Years Years Total --------- ----------- ---------- --------- --------- U.S. Treasury $ 90,242 $ 23,975 $ 289 $ --- $114,506 U.S. government agencies 95,089 66,879 36,476 1,705 200,149 Municipal obligations 6,179 34,707 49,608 77,503 167,997 Mortgage-backed securities 2,355 3,629 48,623 60,140 114,747 CMOs 1,250 5,015 63,151 108,380 177,796 Other debt securities --- 5,827 --- 227 6,054 --------- --------- --------- --------- --------- $195,115 $140,032 $198,147 $247,955 $781,249 ========= ========= ========= ========= ========= Weighted Average Yield 6.12% 6.14% 5.88% 6.13% 6.07% 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 significant concentrations of loans to particular borrowers or loans to any foreign entities. Loan underwriting standards and loan loss allowance 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 allowance 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, ----------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (in thousands) Real estate: Residential mortgages 1-4 family $ 244,150 $ 260,132 $ 260,945 $ 224,646 $ 214,247 Residential mortgages multifamily 12,220 10,881 7,642 9,674 7,302 Home equity lines/loans 8,815 10,814 10,169 11,825 11,740 Construction and development 73,789 55,454 55,585 41,602 35,719 Nonresidential 143,445 139,332 131,578 127,027 112,957 Commercial, industrial and other 224,686 177,379 169,061 176,942 119,997 Consumer 544,137 513,362 494,456 409,608 397,879 Lease financing and depository institutions 17,324 16,327 15,881 13,811 10,074 Political subdivisions 21,069 16,889 12,142 14,394 12,806 Credit cards and other revolving credit 40,649 44,785 41,311 32,104 30,794 ---------- ----------- ----------- ----------- ----------- 1,330,284 1,245,355 1,198,770 1,061,633 953,515 Less, unearned income 24,729 24,726 24,803 26,656 27,850 ---------- ---------- ---------- ---------- ----------- Net loans $1,305,555 $1,220,629 $1,173,967 $1,034,977 $ 925,665 =========== =========== =========== =========== ===========
The following table sets forth, for the periods indicated, the approximate contractual maturity by type of the loan portfolio of the Company: Loan Maturity Schedule ---------------------- December 31, 1998 December 31, 1997 ---------------------------------------- --------------------------------------------- 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 -------- ---------- --------- ---------- --------- ---------- --------- ----------- (in thousands) Commercial, industrial and other $111,743 $ 97,029 $ 15,914 $ 224,686 $ 69,220 $ 86,461 $ 21,698 $ 177,379 Real estate - construction 52,515 16,786 4,488 73,789 32,889 18,912 3,653 55,454 All other loans 351,366 457,742 222,701 1,031,809 156,119 573,886 282,517 1,012,522 --------- --------- --------- ----------- --------- --------- --------- ----------- Total loans $515,624 $571,557 $243,103 $1,330,284 $258,228 $679,259 $307,868 $1,245,355 ========= ========= ========= =========== ========= ========= ========= ===========
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, --------------------- 1998 1997 --------- --------- (in thousands) Commercial, industrial, and real estate construction maturing after one year: Fixed rate $113,023 $ 94,517 Floating rate 21,194 31,190 Other loans maturing after one year: Fixed rate 648,566 831,716 Floating rate 31,877 31,610 --------- --------- Total $814,660 $989,033 ========= ========= NONPERFORMING ASSETS: The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, restructured loans and real estate owned. Loans past due 90 days or more and still accruing are also disclosed. December 31, ------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (Amounts in thousands) Nonaccrual loans: Real estate $ 2,459 $ 2,869 $ 753 $ 2,406 $ 1,914 Commercial, industrial and other 1,023 650 169 1,144 525 Consumer, credit card and other revolving credit 1,120 378 1,298 1,176 1,287 Lease financing --- 1 --- --- --- Depository institutions --- --- --- --- --- Political subdivisions --- --- --- --- --- Restructured loans 1,380 1,134 685 611 614 -------- -------- -------- -------- ------- Total nonperforming loans 5,982 5,032 2,905 5,337 4,340 Acquired real estate owned --- 435 147 140 --- Real estate owned 2,246 1,923 1,728 946 1,001 -------- -------- -------- -------- ------- Total nonperforming assets $ 8,228 $ 7,390 $ 4,780 $ 6,423 $ 5,341 ======== ======== ======== ======== ======= Loans 90+ days past due and still accruing $ 2,907 $ 5,423 $ 8,361 $ 4,089 $ 2,692 ======== ======== ======== ======== ======= Ratios (%): Nonperforming loans to net loans 0.46 0.41 0.25 0.52 0.47 Nonperforming assets to net loans and real estate owned 0.63 0.61 0.41 0.62 0.58 Nonperforming loans to average net loans 0.48 0.42 0.27 0.53 0.48 Allowance for loan losses to nonperforming loans 364.43 417.33 681.58 325.86 354.19 The amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as "nonaccrual" was $462,000, $424,000, $220,000, $463,000 and $340,000 for the years ended December 31, 1998, 1997, 1996, 1995 and 1994, respectively. Interest actually received on nonaccrual loans was insignificant. The amount of interest recorded on restructured loans did not differ significantly from the interest that would have been recorded under the original terms of those loans. ANALYSIS OF ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation account available to absorb losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the time of receipt. Periodically during the year management estimates the probable level of future losses to determine whether the allowance is adequate to absorb reasonably foreseeable anticipated losses in the existing portfolio based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay and the estimated value of any underlying collateral and current economic conditions. All commercial loans in lending relationships with an aggregate balance of $250,000 or more are risk rated and evaluated on an individual basis, as well as, all consumer and mortgage real estate loans with a balance of $100,000 or more. All consumer and mortgage real estate loans under $100,000 are risk rated as pools of homogeneous loans and classified according to past due status. Commercial loans are reviewed for impairment at the time a loans is no longer current or at the time management is made aware of a degradation in a borrower's financial status or a deficiency in collateral. Loss factors recommended by the Banks' regulators are applied to loans graded by standard loan classifications in determining a general allowance. Unclassified loans are categorized and reserved for at the greater of a five-year average net charge-off ratio or a minimum threshold stated as a percentage of loans outstanding. The allowance for loan loss stated as a percentage of period end loans, used in conjunction with the evaluation of current and anticipated economic conditions, composition of the Company's present loans portfolio, and trends in both delinquencies and nonaccruals, is a measurement standard utilized by management in determining the adequacy of the allowance. The unallocated portion of the allowance for loan losses is available to compensate for the uncertainties in estimating the potential losses including possible adverse effects to borrowers' ability to repay resulting from Year 2000 compliance issues.
The following table sets forth, for the periods indicated, average net loans outstanding, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off: At and For The Years Ended December 31, ---------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (in thousands) Net loans outstanding at end of period $1,305,555 $1,220,629 $1,173,96 $1,034,977 $ 925,665 ========== ========== ========= ========== =========== Average net loans outstanding $1,243,617 $1,201,381 $1,083,165 $1,000,907 $ 904,342 ========== ========== ========== ========== =========== Balance of allowance for loan losses at beginning of period $ 21,000 $ 19,800 $ 17,391 $ 15,372 $ 15,306 Loans charged-off: Real estate 26 22 73 210 106 Commercial 1,076 997 975 636 637 Consumer, credit cards and other revolving credit 6,008 7,145 5,417 4,524 2,706 Lease financing 20 49 1 13 --- Depository institutions --- --- --- --- --- Political subdivisions --- --- --- --- --- ---------- ---------- ---------- ---------- ----------- Total charge-offs 7,130 8,213 6,466 5,383 3,449 ---------- ---------- ---------- ---------- ----------- Recoveries of loans previously charged-off: Real estate 5 5 186 15 53 Commercial 540 646 937 971 570 Consumer, credit cards and other revolving credit 1,156 1,529 945 839 886 Lease financing --- 1 --- 5 8 Depository institutions --- --- --- --- --- Political subdivisions --- --- --- --- --- ---------- ---------- ---------- ---------- ----------- Total recoveries 1,701 2,181 2,068 1,830 1,517 ---------- ---------- ---------- ---------- ----------- Net charge-offs 5,429 6,032 4,398 3,553 1,932 Provision for loan losses 6,229 6,399 6,153 4,425 1,998 Balance acquired through acquisition --- 833 654 1,147 --- ---------- ---------- ---------- ---------- ----------- Balance of allowance for loan losses at end of period $ 21,800 $ 21,000 $ 19,800 $ 17,391 $ 15,372 ========== ========== ========== ========== ===========
The following table sets forth, for the periods indicated, certain ratios related to the Company's charge-offs, allowance for loan losses and outstanding loans: At and For The Years Ended December 31, ---------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Ratios (%): Net charge-offs to average net loans 0.44 0.50 0.41 0.35 0.21 Net charge-offs to period-end net loans 0.42 0.49 0.37 0.34 0.21 Allowance for loan losses to average net loans 1.75 1.75 1.83 1.74 1.70 Allowance for loan losses to period-end net loans 1.67 1.72 1.69 1.68 1.66 Net charge-offs to loan loss allowance 24.90 28.72 22.21 20.43 12.57 Net charge-offs to loan loss provision 87.16 94.26 71.47 80.29 96.70
An allocation of the loan loss allowance by major loan category is set forth in the following table. Except for an increase in the outstanding loan portfolio balance, there were no relevant variations in loan concentrations, quality or terms. The allocation is not necessarily indicative of the category of future losses, and the full allowance at December 31, 1998 is available to absorb losses occurring in any category of loans. December 31, ------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------------- ------------------ ------------------- ------------------- ------------------ Allowance of Allowance % of Allowance % of Allowance % of Allowance % 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 $ 2,500 36.26 $ 2,500 38.30 $ 3,000 38.87 $ 2,000 39.08 $ 1,250 40.06 Commercial, industrial and other 7,000 19.78 5,900 16.91 5,750 16.44 5,250 19.32 5,000 14.98 Consumer 9,200 40.90 9,300 41.22 8,250 41.25 7,500 38.58 6,500 41.73 Credit card/revolving 1,000 3.06 1,200 3.57 800 3.44 500 3.02 500 3.23 Unallocated 2,100 --- 2,100 --- 2,000 --- 2,141 --- 2,122 --- -------- ------- -------- ------- -------- ------- -------- ------- -------- ------ $21,800 100.00 $21,000 100.00 $19,800 100.00 17,391 100.00 $15,372 100.00 ======== ======= ======== ======= ======== ======= ======== ======= ======== ======
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 rate paid on each category of deposits: 1998 1997 1996 ------------------------------- ---------------------------------- --------------------------------- Percent Percent Percent Average of Average of Average of Balance Deposits Rate (%) Balance Deposits Rate (%) Balance Deposits Rate (%) ------- -------- -------- ------- -------- -------- ------- -------- -------- (amounts in thousands) Non-interest bearing accounts $ 493,218 22.08 --- $ 453,218 22.28 --- $ 472,909 24.30 --- NOW accounts 323,017 14.46 3.09 306,120 15.05 2.52 268,391 13.80 2.68 Money market and other savings accounts 526,280 23.56 3.16 440,545 21.66 2.95 425,626 21.88 2.78 Time deposits 891,322 39.90 5.37 834,147 41.01 5.45 778,602 40.02 5.35 --------- ----- --------- ----- --------- ----- $2,233,837 100.00 $2,034,030 100.00 $1,945,528 100.00 ========== ====== ========== ====== ========== ====== The Banks traditionally price their deposits to position themselves competitively with the local market. The Banks' policy is not to accept brokered deposits.
Time certificates of deposit of $100,000 and greater at December 31, 1998 had maturities as follows: December 31, 1998 ----------------- (in thousands) Three months or less $122,930 Over three through six months 35,785 Over six months through one year 56,353 Over one year 63,290 -------- Total $278,358 ======== 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, ------------------------------- 1998 1997 1996 ---- ---- ---- (amounts in thousands) Federal funds purchased: Amount outstanding at period-end $ --- $ --- $ --- Weighted average interest at period-end ---% ---% ---% Maximum amount at any month-end during period $ 53,850 $ 5,875 $ 19,725 Average amount outstanding during period $ 3,773 $ 2,304 $ 11,425 Weighted average interest rate during period 4.74% 4.64% 4.81% Securities sold under agreements to repurchase: Amount outstanding at period-end $140,207 $170,534 $ 87,609 Weighted average interest at period-end 3.80% 4.61% 4.25% Maximum amount at any month end during-period $182,062 $172,827 $156,595 Average amount outstanding during period $152,426 $118,855 $ 79,411 Weighted average interest rate during period 4.62% 4.44% 4.36% 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, 1998, cash and due from banks and securities available-for-sale were in excess of 26.3% of total deposits.
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. At December 31, 1998, the Banks had approximately $100 million available for dividends to the Company. CAPITAL RESOURCES: Risk-based and leverage capital ratios for the Company and the Banks for the periods indicated are shown in the following table: December 31, ------------------------------------------------------------ Risk-Based Capital Ratios -------------------------------------- Tier 1 Leverage Total Tier 1 Ratio ------------------ ------------------- ----------------- 1998 1997 1998 1997 1998 1997 ---- ---- ---- ---- ----- ----- Hancock Bank MS 17.44% 19.71% 16.19% 18.46% 8.83% 9.79% Hancock Bank LA 19.46 20.42 18.21 19.16 10.46 11.63 Company 17.41 20.33 16.88 19.08 9.69 10.41
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. IMPACT OF INFLATION: The Company's non-interest income and expenses can be affected by increasing rates of inflation; however, 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 impact on the Banks' performance than the effect of general levels of inflation on the price of goods and services. FORWARD LOOKING STATEMENTS -------------------------- Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. In addition to historical information, this report contains forward-looking statements and information which are based on management's beliefs, plans, expectations and assumptions and on information currently available to management. Forward-looking statements and information presented reflects management's views and estimates of future economic circumstances, industry conditions, Company performance and financial results. The words "may", "should", "expect", "anticipate", "intend", "plan", "continue", "believe", "seek", "estimate" and similar expressions used in this report that do not relate to historical facts are intended to identify forward-looking statements. These statements appear in a number of places in this report, including, but not limited to, statements found in Item 1 "Business" and in Item 7 "Management's Discussion and Analysis". All phases of the Company's operations are subject to a number of risks and uncertainties. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in the report, including, without limitation, the portions referenced above, and the uncertainties set forth from time to time in the Company's other public reports and filings and public statements, many of which are beyond the control of the Company, and any of which, or a combination of which, could materially affect the results of the Company's operations and whether forward-looking statements made by the Company ultimately prove accurate. 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 has been leased from the City of Gulfport in connection with an urban development revenue bond issue. The bonds matured and were paid in full during 1997. Hancock Bank MS, however, effectively has had ownership of the building since, under the terms of the bond documents, title to the facility reverts to Hancock Bank MS when all outstanding bonds have been paid. For this reason, the Company has historically carried the building as an asset and the bonds as a long term payable on its balance sheet. Pending the filing of certain documents, ownership will legally transfer to Hancock Bank MS. Title to the following banking offices in Mississippi and Louisiana is owned in fee (number of locations shown in parenthesis): Albany, LA (1) Hammond, LA (2) 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 (1) Bogalusa, LA (1) Mt. Hermon, LA (1) Denham Springs, LA (3) 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 (2) St. Francisville, LA (1) Gulfport, MS (5) Walker, LA (1) Vancleave (1) 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) Pascagoula, MS (1) Bay St. Louis, MS (3) Picayune, MS (2) Biloxi, MS (1) Ponchatoula, LA (1) Diamondhead, MS (1) Slidell, LA (1) Gulfport, MS (4) Springfield, LA (1) Hammond, LA (1) Mandeville, LA (1) In addition to the above, Hancock Bank MS owns land and other properties acquired through foreclosures of loan collateral. 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 statements 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, 1998. PART II ------- ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK ------------------------------------------------- AND RELATED STOCKHOLDER MATTERS ------------------------------- The information under the caption "Market Information" on page 7 of the Company's 1998 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 5 of the Company's 1998 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 37 and 38 of the Company's 1998 Annual Report to Stockholders is incorporated herein by reference. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK -------------------------------------------------------------------- The information under the caption "Quantitative and Qualitative Disclosures About Market Risk" on Pages 38 and 39 of the Company's 1998 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 36 of the Company's 1998 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 Comprehensive Earnings on Page 20 Consolidated Statements of Cash Flows on Page 21 Notes to Consolidated Financial Statements on Pages 22 through 35 Independent Auditors' Report on Page 36 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ------------------------------------------------------ ON ACCOUNTING AND FINANCIAL DISCLOSURE -------------------------------------- There has been no change in the two most recent fiscal years nor has there been any 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 9-14) in the Proxy Statement for the Annual Meeting of Shareholders held February 25, 1999, which was filed by the Registrant in definitive form with the Commission on January 25, 1999 and is incorporated herein by reference. ITEM 11 - EXECUTIVE COMPENSATION -------------------------------- For information concerning this item see "Executive Compensation" (Pages 8-14) in the Proxy Statement for the Annual Meeting of Shareholders held February 25, 1999, which was filed by the Registrant in definitive form with the Commission on January 25, 1999 and is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ------------------------------------------------------------------------ For information concerning this item see "Security Ownership of Certain Beneficial Owners" (Page 5) and "Security Ownership of Management" (Page 7) in the Proxy Statement for the Annual Meeting of Shareholders held February 25, 1999, which was filed by the Registrant in definitive form with the Commission on January 25, 1999 and is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------------------------------------------------------- For information concerning this item see "Certain Transactions and Relationships" (Pages 14-15) in the Proxy Statement for the Annual Meeting of Shareholders held February 25, 1999, which was filed by the Registrant in definitive form with the Commission on January 25, 1999 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 1998 Annual Report to Stockholders and are incorporated herein by reference: - Independent Auditors' Report - Consolidated Balance Sheets as of December 31, 1998 and 1997 - Consolidated Statements of Earnings for the three years ended December 31, 1998 - Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1998 - Consolidated Statements of Comprehensive Earnings for the three years ended December 31, 1998 - Consolidated Statements of Cash Flows for the three years ended December 31, 1998 - Notes to Consolidated Financial Statements for the three years ended December 31, 1998 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 June 19, 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 July 31, 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). (2.10) Agreement and Plan of Reorganization dated February 28, 1997 among Hancock Holding Company, Hancock Bank of Louisiana and Commerce Corporation, St. Francisville, Louisiana (filed as Exhibit 2 to the Registrant's Form S-4, Registration Number 323-26577, dated May 6, 1997). (2.11) Amended and Restated Agreement and Plan of Reorganization dated October 15, 1998 among Hancock Holding Company, Hancock Bank of Louisiana and American Security Bancsharesof Ville Platte, Inc., Ville Platte, Louisiana (filed as Exhibit 2 to the Registrant's Form S-4, Registration Number 333-67181, dated November 12, 1998). (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 as Exhibit 3.7 to the Registrant's Form 10- K for the year ended December 31, 1996 and incorporated herein by reference). (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 (filed as Exhibit 10.2 to the Registrant's Form 10- K for the year ended December 31, 1996, and incorporated herein by reference). (10.3) Description of Hancock Bank Automobile Plan (filed as Exhibit 10.3 to the Registrant's Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). (10.4) Description of Deferred Compensation Arrangement for Directors (filed as Exhibit 10.4 to the Registrant's Form 10-K for the year ended December 31, 1996, 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, 1998 (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 25, 1999 (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. 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 Corporation Mississippi Hancock Bank Hancock Insurance Agency Mississippi Hancock Bank Hancock Investment Services, Inc. Mississippi Hancock Bank Town Properties, Inc. Mississippi Hancock Bank The Gulfport Building, Inc. of Mississippi Mississippi Hancock Bank Harrison Finance Company Mississippi Hancock Bank Hancock Mortgage Corporation Mississippi Hancock Bank and Hancock Bank Securities Corporation Harrison Life Insurance Mississippi 79% owned by Hancock Company Bank (1) All are 100% owned except as indicated. (23) Independent Auditors' Consent (27) Financial Data Schedule. (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. 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 29, 1999 /s/ Leo W. Seal, Jr. -------------------- ---------------------------------- By Leo W. Seal, Jr., President and Chief Executive Officer 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, Chief Executive March 29, 1999 - ------------------------------ Officer (Principal Executive Leo W. Seal, Jr. Officer) and Director /s/ Joseph F. Boardman, Jr. Director, March 29, 1999 - ------------------------------ Chairman of the Board Joseph F. Boardman, Jr. /s/ George A. Schloegel Director, March 29, 1999 - ------------------------------ Vice Chairman of the Board George A. Schloegel Director March 29, 1999 - ------------------------------ Thomas W. Milner, Jr. /s/ Dr. Homer C. Moody, Jr. Director March 29, 1999 - ------------------------------ Dr. Homer C. Moody, Jr. Director March 29, 1999 - ------------------------------ James B. Estabrook, Jr. /s/ Charles H. Johnson Director March 29, 1999 - ------------------------------ Charles H. Johnson /s/ L. A. Koenenn, Jr. Director March 29, 1999 - ------------------------------ L. A. Koenenn, Jr. /s/ Victor Mavar Director March 29, 1999 - ------------------------------ Victor Mavar /s/ Carl J. Chaney Assistant Secretary and March 29, 1999 - ------------------------------ Chief Fiancial Officer Carl J. Chaney (Principal Financial and Accounting Officer) EX-13 2 HHC 10-K 12/31/98 ANNUAL REPORT Hancock Holding Company and Subsidiaries Financial Highlights (amounts in thousands, except per share data) At and For the Years Ended December 31, --------------------------------------- 1998 1997 % Change -------- -------- -------- Earnings Data: Net interest income $ 111,917 $ 109,761 1.96 Provision for loan losses 6,229 6,399 (2.66) Earnings before income taxes and cumulative effect of accounting change 44,237 47,976 (7.79) Net earnings 30,960 30,624 1.10 Per Share Data: Earnings before cumulative effect of accounting change: Basic $ 2.79 $ 2.82 (1.06) Diluted 2.78 2.82 (1.42) Net earnings: Basic 2.90 2.82 2.84 Diluted 2.89 2.82 2.48 Cash dividends paid 1.00 1.00 - Book value (period end) 27.29 26.44 3.21 Weighted average number of shares outstanding 10,693 10,870 (1.63) Number of shares outstanding 10,508 10,916 (3.74) Balance Sheet Data (period end): Securities $ 1,244,369 $ 1,079,995 15.22 Loans, net of unearned income 1,305,555 1,220,630 6.96 Allowance for loan losses 21,800 21,000 3.81 Total assets 2,814,695 2,537,957 10.90 Total deposits and deposit-related liabilities 2,514,798 2,233,181 12.61 Long-term bonds and notes - 1,279 (100.00) Total stockholders' equity 286,807 288,573 (0.61) Balance Sheet Data (average): Securities $ 1,184,698 $ 984,203 20.37 Loans, net of unearned income 1,243,617 1,201,381 3.52 Allowance for loan losses 21,040 20,410 3.09 Total assets 2,696,107 2,442,953 10.36 Total deposits and deposit-related liabilities 2,390,036 2,155,189 10.90 Long-term bonds and notes 586 1,369 (57.20) Total stockholders' equity 289,878 271,303 6.85 Performance Ratios (%): Return on average assets 1.15 1.25 (8.00) Return on average assets, excluding cumulative effect of accounting change 1.11 1.25 (11.20) Return on average equity 10.68 11.29 (5.40) Return on average equity, excluding cumulative effect of accounting change 10.28 11.29 (8.95) Allowance for loan losses to period-end loans 1.67 1.72 (2.91) Allowance for loan losses to non-performing loans 364.43 417.33 (12.68) Net charge-offs to average loans 0.44 0.50 (12.00) Net interest margin (1) 4.67 5.03 (7.16) Regulatory Capital Ratios (%): Requirement ----------- Tier I leveraged 9.69 10.41 3.00 Tier I risk-based 16.88 19.08 4.00 Total risk-based 17.41 20.33 8.00 (1) Fully taxable equivalent basis (FTE). Hancock Holding Company and Subsidiaries Consolidated Summary of Selected Financial Information (amounts in thousands, except per share data)
At and For the Years Ended December 31, ----------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------- Interest Income: Loans $ 118,502 $ 115,038 $ 104,961 $ 95,213 $ 80,157 Federal funds sold 3,090 2,733 5,580 5,820 3,831 Other investments 72,067 63,688 58,863 58,083 49,882 ------------ ------------ ------------ ------------ ------------- Total interest income 193,659 181,459 169,404 159,116 133,870 ------------ ------------ ------------ ------------ ------------- Interest Expense: Deposits 74,464 66,150 60,625 57,612 48,193 Federal funds purchased and securities sold under agreements to repurchase 7,217 5,383 4,013 3,082 1,472 Bonds, notes and other 61 165 166 468 332 ------------ ------------ ------------ ------------ ------------- Total interest expense 81,742 71,698 64,804 61,162 49,997 ------------ ------------ ------------ ------------ ------------- Net Interest Income 111,917 109,761 104,600 97,954 83,873 Provision for loan losses 6,229 6,399 6,154 4,425 1,998 ------------ ------------ ------------ ------------ ------------- Net interest income after provision for loan losses 105,688 103,362 98,446 93,529 81,875 Non-interest income 32,331 32,168 28,421 26,709 22,788 Non-interest expense 93,782 87,554 80,094 80,156 71,040 ------------ ------------ ------------ ------------ ------------- Earnings before income taxes and cumulative effect of accounting change 44,237 47,976 46,773 40,082 33,623 Income taxes 14,428 17,352 15,170 13,065 10,493 ------------ ------------ ------------ ------------ ------------- Earnings before cumulative effect of accounting change 29,809 30,624 31,603 27,017 23,130 Cumulative effect of accounting change 1,151 - - - - ------------ ------------ ------------ ------------ ------------- Net Earnings $ 30,960 $ 30,624 $ 31,603 $ 27,017 $ 23,130 ============ ============ ============ ============ ============= Per Common Share*: Earnings before cumulative effect of accounting change: Basic $ 2.79 $ 2.82 $ 3.08 $ 2.65 $ 2.48 Diluted 2.78 2.82 3.08 2.65 2.48 Net earnings: Basic 2.90 2.82 3.08 2.65 2.48 Diluted 2.89 2.82 3.08 2.65 2.48 Cash dividends paid 1.00 1.00 0.88 0.84 0.80 Weighted average number of shares*: Basic 10,693 10,870 10,277 10,181 9,314 Diluted 10,705 10,877 10,277 10,181 9,314 Return on average assets 1.15% 1.25% 1.38% 1.22% 1.13% Dividend payout 34.48% 35.46% 28.57% 31.70% 32.26% Balance Sheet Data: Total assets $ 2,814,695 $ 2,537,957 $ 2,289,582 $ 2,234,286 $ 2,026,929 Total deposits and deposit- related liabilities 2,514,798 2,233,181 2,014,185 1,991,069 1,800,810 Total long-term bonds and notes - 1,279 1,050 2,035 2,955 Stockholders' equity 286,807 288,573 261,938 224,179 182,277 * Per common share data is based on the weighted average number of shares after giving retroactive effect for a 15% stock dividend in December 1996. Actual cash dividends paid in 1996, 1995 and 1994 were $1.00, $0.96 and $0.92, respectively.
Hancock Holding Company and Subsidiaries Description of Business Hancock Holding Company (the Company) is a bank holding company headquartered in Gulfport, Mississippi with total consolidated assets of approximately $2.8 billion at December 31, 1998. The Company operates a total of 81 banking offices and over 125 automated teller machines (ATMs) in the states of Mississippi and Louisiana through two wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi and Hancock Bank of Louisiana, Baton Rouge, Louisiana (the Banks). The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans in addition to 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. Summary of Quarterly Operating Results (1) (in thousands, except per share data)
1998 1997 --------------------------------------------- --------------------------------------------- First Second Third Fourth First Second Third Fourth --------- ---------- ---------- ---------- --------- --------- --------- ----------- Interest income (2) $ 48,589 $ 48,809 $ 49,863 $ 50,608 $ 44,352 $ 45,743 $ 46,440 $ 47,588 Interest expense (19,217) (20,796) (21,223) (20,506) (17,003) (17,783) (18,158) (18,754) --------- ---------- ---------- ---------- --------- --------- --------- ----------- Net interest income 29,372 28,013 28,640 30,102 27,349 27,960 28,282 28,834 Provision for loan losses (1,359) (929) (1,203) (2,738) (836) (1,508) (2,993) (1,062) Non-interest income 7,311 8,287 8,147 8,586 7,686 8,130 8,485 7,867 Non-interest expense (22,270) (21,717) (24,314) (25,481) (21,318) (21,137) (22,617) (22,483) Taxable equivalent adjustment (846) (1,032) (1,124) (1,208) (600) (627) (680) (757) --------- ---------- ---------- ---------- --------- --------- --------- ----------- Earnings before income taxes and cumulative effect of accounting change 12,208 12,622 10,146 9,261 12,281 12,818 10,477 12,399 Income taxes (4,155) (4,087) (3,297) (2,889) (4,024) (4,625) (3,790) (4,912) --------- ---------- ---------- ---------- --------- --------- --------- ----------- Earnings before cumulative effect of accounting change 8,053 8,535 6,849 6,372 8,257 8,193 6,687 7,487 Cumulative effect of accounting change - - - 1,151 - - - - --------- ---------- ---------- ---------- --------- --------- --------- ----------- Net earnings $ 8,053 $ 8,535 $ 6,849 $ 7,523 $ 8,257 $ 8,193 $ 6,687 $ 7,487 ========= ========== ========== ========== ========= ========= ========= =========== Basic earnings per share: Before cumulative effect of accounting change $ 0.74 $ 0.78 $ 0.66 $ 0.61 $ 0.76 $ 0.76 $ 0.61 $ 0.69 Net earnings $ 0.74 $ 0.78 $ 0.66 $ 0.72 $ 0.76 $ 0.76 $ 0.61 $ 0.69 Diluted earnings per share: Before cumulative effect of accounting change $ 0.74 $ 0.78 $ 0.65 $ 0.61 $ 0.76 $ 0.76 $ 0.61 $ 0.69 Net earnings $ 0.74 $ 0.78 $ 0.65 $ 0.72 $ 0.76 $ 0.76 $ 0.61 $ 0.69 (1) Certain quarterly amounts have been reclassified to conform with current presentation. (2) Fully taxable equivalent basis (FTE).
Market Information The Company's common stock trades on the Nasdaq Stock Market under the symbol "HBHC" and is quoted in publications under "HancHd". The following table sets forth the high and low sale prices of the Company's common stock as reported on the Nasdaq Stock Market. These prices do not reflect retail mark-ups, mark-downs or commissions. Cash High Low Dividends Sale Sale Paid ------- ------- ----------- 1998 1st quarter $ 62.75 $ 58.88 $ 0.25 2nd quarter $ 63.50 $ 52.50 $ 0.25 3rd quarter $ 55.50 $ 45.25 $ 0.25 4th quarter $ 49.50 $ 40.88 $ 0.25 1997 1st quarter $ 42.50 $ 39.25 $ 0.25 2nd quarter $ 49.00 $ 39.50 $ 0.25 3rd quarter $ 51.50 $ 46.00 $ 0.25 4th quarter $ 63.25 $ 50.12 $ 0.25 There were 5,471 holders of record of common stock of the Company at January 4, 1999 and 11,072,770 shares issued. On January 4, 1999, the high and low sale prices of the Company's common stock as reported on the Nasdaq Stock Market were $46.50 and $45.00, respectively. The principal source of funds to the Company to pay cash dividends are the dividends received from the Banks. Consequently, dividends are dependent upon earnings, capital needs, regulatory policies and statutory limitations affecting the Banks. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. Dividends paid to the Company by Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi. The Company's management does not expect regulatory restrictions to affect its policy of paying cash dividends. Although no assurance can be given that Hancock Holding Company will continue to declare and pay regular quarterly cash dividends on its common stock, the Company has paid regular cash dividends since 1937. Acquisitions On April 29, 1994, the Company merged Hancock Bank of Louisiana, a wholly-owned subsidiary of the Company, with First State Bank and Trust Company of East Baton Rouge Parish (Baker), Baker, Louisiana. On February 1, 1995, the Company merged Hancock Bank of Louisiana with Washington Bank and Trust Company (Washington), Franklinton, Louisiana. These mergers were accounted for using the pooling-of- interests method and all prior years' financial information has been restated. On January 13, 1995, the Company acquired First Denham Bancshares, Inc., Denham Springs, Louisiana, which owned 100% of the stock of First National Bank of Denham Springs (Denham). On November 15, 1996, the Company acquired Community Bancshares, Inc. (Community), Independence, Louisiana, which owned 100% of the stock of Community State Bank. On January 17, 1997, the Company acquired Southeast National Bank (Southeast), Hammond, Louisiana, and on July 15, 1997, the Company acquired Commerce Corporation, Inc. (Commerce), St. Francisville, Louisiana, which owned 100% of the stock of Bank of Commerce and Trust Company. The transactions were accounted for using the purchase method of accounting and the results of operations since acquisition are included in the consolidated statements of earnings. The excess of the purchase price over the value of net tangible assets acquired in each transaction was assigned to goodwill and is being amortized over 15 years. Hancock Holding Company and Subsidiaries Consolidated Balance Sheets December 31, -------------------------------- 1998 1997 --------------- --------------- Assets: Cash and due from banks $ 161,293,659 $ 113,124,897 Interest-bearing time deposits with other banks 96,000 2,067,500 Securities available for sale (amortized cost of $462,876,000 and $163,531,000) 463,120,442 163,633,434 Securities held to maturity (fair value of $790,379,000 and $924,958,000) 781,248,857 916,361,847 Federal funds sold - 35,500,000 Loans 1,330,283,979 1,245,355,439 Less: Allowance for loan losses (21,800,000) (21,000,000) Unearned income (24,729,271) (24,725,896) --------------- --------------- Loans, net 1,283,754,708 1,199,629,543 Property and equipment, net 44,546,636 42,810,352 Other real estate 2,245,711 2,357,399 Accrued interest receivable 23,798,439 20,976,878 Goodwill and other intangibles 26,449,170 28,632,744 Other assets 28,141,852 12,861,951 --------------- --------------- Total Assets $ 2,814,695,474 $ 2,537,956,545 ================ ================ Liabilities and Stockholders' Equity: Deposits: Non-interest bearing demand $ 546,684,623 $ 462,730,852 Interest-bearing savings, NOW, money market and time 1,827,905,922 1,599,916,793 ---------------- ---------------- Total deposits 2,374,590,545 2,062,647,645 Securities sold under agreements to repurchase 140,207,246 170,533,618 Other liabilities 13,090,483 14,922,683 Long-term bonds and notes - 1,279,402 ---------------- ---------------- Total Liabilities 2,527,888,274 2,249,383,348 Commitments and contingencies (notes 11 and 12) - - Stockholders' equity: Common stock - $3.33 par value per share; 75,000,000 shares authorized, 11,072,770 shares issued 36,872,324 36,872,324 Capital surplus 200,536,282 200,766,498 Retained earnings 71,498,714 51,401,100 Unrealized gain on securities available for sale, net of deferred taxes 158,878 65,742 Unearned compensation (1,009,949) (532,467) Treasury stock, 402,409 shares, at cost (21,249,049) - ---------------- --------------- Total Stockholders' Equity 286,807,200 288,573,197 ---------------- --------------- Total Liabilities and Stockholders' Equity $ 2,814,695,474 $ 2,537,956,545 ================ ================ See notes to consolidated financial statements. Hancock Holding Company and Subsidiaries Consolidated Statements of Earnings Years Ended December 31, --------------------------------------------- 1998 1997 1996 --------------- -------------- ------------- Interest Income: Loans $ 118,502,095 $ 115,037,735 $ 104,960,423 U.S. Treasury securities 14,469,447 14,733,156 13,567,085 Obligations of U.S. government agencies 29,962,683 34,699,383 34,885,873 Obligations of states and political subdivisions 6,864,947 4,150,307 3,543,436 Federal funds sold 3,089,792 2,733,341 5,580,275 Other investments 20,769,588 10,105,014 6,866,644 --------------- -------------- ------------- Total interest income 193,658,552 181,458,936 169,403,736 --------------- -------------- ------------- Interest Expense: Deposits 74,463,671 66,149,396 60,624,862 Federal funds purchased and securities sold under agreements to repurchase 7,216,677 5,383,358 4,013,259 Bonds and notes 61,483 165,449 165,840 --------------- -------------- ------------- Total interest expense 81,741,831 71,698,203 64,803,961 --------------- -------------- ------------- Net Interest Income 111,916,721 109,760,733 104,599,775 Provision for loan losses 6,228,965 6,399,481 6,153,753 --------------- -------------- ------------- Net interest income after provision for loan losses 105,687,756 103,361,252 98,446,022 Non-Interest Income: Service charges on deposit accounts 19,164,074 18,528,677 16,877,678 Other service charges, commissions and fees 10,161,475 9,775,185 8,907,368 Securities gains, net 167,139 278,651 30,531 Other 2,838,834 3,586,377 2,605,950 --------------- -------------- ------------- Total non-interest income 32,331,522 32,168,890 28,421,527 --------------- -------------- ------------- Non-Interest Expense: Salaries and employee benefits 50,832,743 46,472,455 42,384,113 Net occupancy expense of premises 5,559,608 4,882,277 4,764,473 Equipment rentals, depreciation and maintenance 7,707,028 7,259,428 7,365,090 Amortization of intangibles 2,404,914 2,281,666 2,330,082 Other 27,278,170 26,658,497 23,250,787 -------------- -------------- ------------- Total non-interest expense 93,782,463 87,554,323 80,094,545 -------------- -------------- ------------- Earnings before income taxes and cumulative effect of accounting change 44,236,815 47,975,819 46,773,004 Income taxes 14,427,427 17,351,400 15,170,000 -------------- -------------- ------------- Earnings before cumulative effect of accounting change 29,809,388 30,624,419 31,603,004 Cumulative effect of accounting change 1,150,811 - - --------------- -------------- ------------- Net Earnings $ 30,960,199 $ 30,624,419 $ 31,603,004 =============== ============== ============= Basic earnings per common share: Before cumulative effect of accounting change $ 2.79 $ 2.82 $ 3.08 Cumulative effect of accounting change 0.11 - - --------------- -------------- ------------- Net Earnings $ 2.90 $ 2.82 $ 3.08 =============== ============== ============= Diluted earnings per common share: Before cumulative effect of accounting change $ 2.78 $ 2.82 $ 3.08 Cumulative effect of accounting change 0.11 - - --------------- -------------- ------------- Net Earnings $ 2.89 $ 2.82 $ 3.08 =============== ============== ============= See notes to consolidated financial statements. Hancock Holding Company and Subsidiaries Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1998, 1997 and 1996 --------------------------------------------------------------------------------------------------- Unrealized Common Stock Gain (Loss) ------------------------ on Securities Shares Capital Retained Available For Unearned Treasury Issued Amount Surplus Earnings Sale, Net Compensation Stock ---------- ------------ ------------- ------------- ------------- -------------- ------------ Balance, January 1, 1996 9,021,949 $ 30,043,090 $ 130,000,000 $ 63,823,349 $ 312,078 $ - $ - Net earnings 31,603,004 Cash dividends - $0.88 per share (9,193,395) Change in unrealized gain (loss) on securities available for sale, net (944,839) 15% stock dividend 1,351,960 4,502,027 49,914,363 (54,416,390) Acquisition of Community accounted for as a purchase 513,393 1,709,599 14,585,059 ---------- ------------ -------------- -------------- ---------- ------------- -------------- Balance, December 31, 1996 10,887,302 36,254,716 194,499,422 31,816,568 (632,761) - - Net earnings 30,624,419 Cash dividends - $1.00 per share (11,039,887) Change in unrealized gain (loss) on securities available for sale, net 698,503 Acquisition of Southeast accounted for as a purchase 120,900 402,597 3,486,530 Acquisition of Commerce accounted for as a purchase 64,568 215,011 2,780,546 Transactions relating to restricted stock grants, net (532,467) ---------- ------------ -------------- -------------- ---------- ------------- -------------- Balance, December 31, 1997 11,072,770 36,872,324 200,766,498 51,401,100 65,742 (532,467) - Net earnings 30,960,199 Cash dividends - $1.00 per share (10,862,585) Change in unrealized gain (loss) on securities available for sale, net 93,136 Transactions relating to restricted stock grants, net (477,482) Purchase of treasury stock, net (230,216) (21,249,049) ---------- ------------ -------------- -------------- ---------- ------------- -------------- Balance, December 31, 1998 11,072,770 $ 36,872,324 $ 200,536,282 $ 71,498,714 $ 158,878 $ (1,009,949) $ (21,249,049) ========== ============ ============== ============== ========== ============= ==============
Hancock Holding Company and Subsidiaries Consolidated Statements of Comprehensive Earnings Years Ended December 31, ------------------------------------------- 1998 1997 1996 ------------- ------------- ------------- Net earnings $ 30,960,199 $ 30,624,419 $ 31,603,004 Other comprehensive earnings (loss): Unrealized gain (loss) on securities available for sale, net: Unrealized holding gains (losses) arising during the year 114,136 879,503 (924,839) Less reclassification adjustment for gains included in net earnings (21,000) (181,000) (20,000) ------------- ------------- ------------- Total other comprehensive earnings (loss) 93,136 698,503 (944,839) ------------- ------------- ------------- Total Comprehensive Earnings $ 31,053,335 $ 31,322,922 $ 30,658,165 ============= ============= ============= See notes to consolidated financial statements. Hancock Holding Company and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, ----------------------------------------- 1998 1997 1996 ------------- ------------- ------------- Cash Flows from Operating Activities: Net earnings $ 30,960,199 $ 30,624,419 $ 31,603,004 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 5,188,749 4,705,432 4,818,532 Provision for loan losses 6,228,965 6,399,481 6,153,753 Provision for deferred income taxes (435,000) (395,000) (754,000) Cumulative effect of accounting change (before income taxes) (1,863,662) - - Gains on sales of securities (167,139) (278,651) (30,531) Increase in interest receivable (2,821,561) (282,032) (117,042) Amortization of intangible assets 2,404,914 2,281,666 2,330,082 Increase (decrease) in interest payable 847,700 14,102 (215,863) Other, net (6,894,964) 1,140,190 (834,320) -------------- ------------- ------------ Net cash provided by operating activities 33,448,201 44,209,607 42,953,615 -------------- ------------- ------------ Cash Flows from Investing Activities: Net decrease (increase) in interest- bearing time deposits 1,971,500 (2,056,716) 1,395,000 Proceeds from maturities of securities held to maturity 225,302,135 261,488,556 372,251,124 Purchase of securities held to maturity (99,464,050) (359,318,934)(375,169,554) Proceeds from sales and maturities of trading and available-for-sale securities 83,297,803 31,441,417 25,122,385 Purchase of securities available for sale (375,620,262) (97,379,020) (34,102,782) Net decrease (increase) in federal funds sold 35,500,000 (18,525,000) 147,175,000 Net increase in loans (91,010,541) (11,363,057)(109,554,135) Purchase of property, equipment and software, net (12,675,267) (5,206,091) (5,029,439) Proceeds from sales of other real estate 802,512 1,737,568 1,169,568 Net cash received in connection with purchase transactions - 2,288,000 201,830 -------------- ------------- ------------ Net cash (used) provided by investing activities (231,896,170) (196,893,277) 23,458,997 -------------- ------------- ------------ Cash Flows from Financing Activities: Net increase (decrease) in deposits 311,942,900 75,490,602 (82,051,076) Dividends paid (10,862,585) (11,039,887) (9,193,395) Treasury stock transactions, net (22,857,810) - - Repayments of long-term bonds and notes (1,279,402) (1,050,000) (985,000) Net (decrease) increase in federal funds purchased, securities sold under agreements to repurchase and other temporary funds (30,326,372) 82,924,580 21,023,725 -------------- ------------- ------------ Net cash provided (used) by financing activities 246,616,731 146,325,295 (71,205,746) -------------- ------------- ------------ Net increase (decrease) in cash and due from banks 48,168,762 (6,358,375) (4,793,134) Cash and due from banks, beginning 113,124,897 119,483,272 124,276,406 ------------- ------------- ------------- Cash and due from banks, ending $ 161,293,659 $ 113,124,897 $119,483,272 ============= ============= ============= Supplemental Information Income taxes paid $ 16,460,355 $ 16,410,052 $ 17,185,000 Interest paid 80,894,131 71,684,101 65,019,824 See notes to consolidated financial statements. Hancock Holding Company and Subsidiaries Notes to Consolidated Financial Statements NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Hancock Holding Company (the Company) is a bank holding company headquartered in Gulfport, Mississippi operating in the states of Mississippi and Louisiana through two wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi and Hancock Bank of Louisiana, Baton Rouge, Louisiana (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. Summary of Significant Accounting Policies The accounting and reporting policies of the Company conform with generally accepted accounting principles and general practices within the banking industry. The following is a summary of the more significant of those policies. Consolidation - The consolidated financial statements of the Company include the accounts of the Company, the Banks and other subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation. Comprehensive Income - The Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS No. 130) effective January 1, 1998 and has provided the required information for all periods presented. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its major components. Comprehensive income includes net earnings and other comprehensive income which, in the case of the Company, includes only unrealized gains and losses on securities available for sale. Use of Estimates - In preparing the financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. The determination of the allowance for loan losses is a material estimate that is particularly subject to significant change. Cash - For the purpose of presentation in the statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption "Cash and Due from Banks". Securities - Securities have been classified into one of three categories: trading, available-for-sale, or held-to-maturity. Management determines the appropriate classification of debt securities at the time of purchase and re- evaluates this classification periodically. Trading account securities are held for resale in anticipation of short-term market movements. Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Securities not classified as held to maturity or trading are classified as available for sale. With the exception of securities reclassified from held to maturity to trading and subsequently sold upon adoption of Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.133), the Company had no trading account securities during the three years ended December 31, 1998. Held-to-maturity securities are stated at amortized cost. Available-for- sale securities are stated at fair value with unrealized gains and losses, net of income taxes, reported as a separate component of stockholders' equity until realized. The amortized cost of debt securities classified as held to maturity or available for sale is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over the estimated life of the security. Amortization, accretion and accrued interest are included in interest income on securities. Realized gains and losses, and declines in value judged to be other than temporary, are included in net securities gains and losses. Gains and losses on the sale of securities available for sale are determined using the specific-identification method. Derivative Instruments - Effective October 1, 1998, the Company adopted SFAS No. 133. The Statement was issued in June 1998 and requires the Company to recognize all derivatives as either assets or liabilities in the Company's balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specially designated as a hedge. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Further, SFAS No. 133 permits, at the time of implementation, the reclassification of securities currently classified as held to maturity without calling into question the Company's original intent. The Company is not currently engaged in any significant activities with derivatives; therefore, management believes that the impact of the adoption of this Statement is not significant. However, at the time of implementation of this Statement, the Company reclassified a portion of its held-to-maturity portfolio to trading securities. The securities that were transferred to trading had an amortized cost of $5,126,000 and unrealized gross gains of $1,864,000 ($1,151,000 net of income taxes) at October 1, 1998. This amount is reported as a cumulative effect of accounting change in the 1998 consolidated statement of earnings. These securities were sold subsequent to the transfer. Loans - Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment of the yield on the related loan. Interest on loans is recorded to income as earned. Where doubt exists as to collectibility of a loan, the accrual of interest is discontinued, all unpaid accrued interest is reversed and payments subsequently received are applied first to principal. Interest income is recorded after principal has been satisfied and as payments are received. The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company's impaired loans include troubled debt restructurings, and performing and non-performing major loans for which full payment of principal or interest is not expected. Non-major homogenous loans, which are evaluated on an overall basis, generally include all loans under $500,000. The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price or the fair value of its collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is required as a component of the allowance for loan losses. Changes to the valuation allowance are recorded as a component of the provision for loan losses. Generally, loans of all types which become 90 days delinquent are deemed currently uncollectible unless such loans are in the process of collection through repossession or foreclosure. Loans deemed currently uncollectible are charged off against the allowance account. As a matter of policy, loans are placed on a non-accrual status when doubt exists as to collectibility. Allowance for Loan Losses - The allowance for loan losses is a valuation account available to absorb losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur; recoveries are credited to the allowance for loan losses at the time of receipt. Periodically during the year management estimates the probable level of future losses to determine whether the allowance is adequate to absorb reasonably foreseeable, anticipated losses in the existing portfolio based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay, the estimated value of any underlying collateral and current economic conditions. The allowance for loan losses is increased by charges to expense and decreased by loan charge-offs (net of recoveries). Property and Equipment - Property and equipment are recorded at amortized cost. Depreciation is computed principally by the straight-line method based on the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the term of the lease or the asset's useful life. Other Real Estate - Other real estate acquired through foreclosure is stated at the fair market value at the date of acquisition, net of the costs of disposal. When a reduction to fair market value at the time of foreclosure is required, a charge is made to the allowance for loan losses. Any subsequent adjustments are charged to expense. Intangible Assets - Intangible assets include the values assigned to core deposits of acquired banks which are being amortized over lives ranging from six to seven years using accelerated methods and goodwill which is being amortized over fifteen years. Trust Fees - Trust fees are recorded as earned. Income Taxes - Provisions for income taxes are based on taxes payable or refundable for the current year (after exclusion of non-taxable income such as interest on state and municipal securities) and deferred taxes on temporary differences between the amount of taxable income and pre-tax financial income. Deferred taxes on temporary differences are calculated at the currently enacted tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Pension and Other Plans - The Company adopted Statement of Financial Accounting Standards No. 132 "Employers' Disclosures about Pensions and Other Post-Retirement Benefits" (SFAS No. 132) effective January 1, 1998 and has provided the required information for all periods presented. SFAS No. 132 establishes revised disclosure standards for pension and other post-retirement plan information. Stock Based Compensation - The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock options. The pro forma disclosures required by Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" (SFAS No. 123) are included in Note 9. Basic and Diluted Earnings Per Common Share - Basic earnings per share (EPS) excludes dilution and is computed by dividing earnings by the weighted- average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Reclassifications - Certain prior year amounts have been reclassified to conform with the 1998 presentation. NOTE 2 - ACQUISITIONS Completed Acquisitions On November 15, 1996, the Company acquired Community Bancshares, Inc. (Community), Independence, Louisiana, for approximately $5,000,000 cash and 513,000 shares (adjusted for a 15% stock dividend in 1996) of common stock of the Company. On January 17, 1997, the Company acquired Southeast National Bank (Southeast), Hammond, Louisiana for approximately $3,700,000 cash and 121,000 shares of common stock of the Company. On July 15, 1997, the Company acquired Commerce Corporation, Inc. (Commerce), St. Francisville, Louisiana, which owned 100% of the stock of Bank of Commerce and Trust Company, for approximately $330,000 cash, 65,000 shares of the Company's common stock and the assumption of Commerce debt owed to certain individuals in the aggregate principal amount of $1,250,000. These transactions were accounted for using the purchase method of accounting and the results of operations since the date of acquisition were included in the consolidated statements of earnings. The excess of the purchase price over the value of the net tangible assets acquired was assigned to goodwill and is being amortized over 15 years. The following unaudited pro forma consolidated results of operations give effect to the acquisitions of Community, Southeast and Commerce as though they had occurred on January 1, 1996 (in thousands, except per share data): Years Ended December 31, ----------------------------- 1997 1996 ------------- ------------ Interest income $ 182,688 $ 180,253 Interest expense (72,162) (69,278) Provision for loan losses (6,565) (6,179) ------------- ------------ Net interest income after provision for loan losses 103,961 104,796 Net earnings $ 30,643 $ 32,624 Basic and diluted earnings per common share $ 2.81 $ 2.99 The unaudited pro forma information is not necessarily indicative either of results of operations that would have occurred had the purchases been made as of January 1, 1996 or of future results of operations of the combined companies. In connection with the 1997 and 1996 acquisitions, liabilities were assumed as follows (in thousands): 1997 1996 ----------- ----------- Fair value of all assets, excluding cash $ 68,815 $ 96,623 Cash acquired, net of amount paid 2,288 202 Market value of common stock issued (6,885) (16,295) ----------- ----------- Liabilities assumed $ 64,218 $ 80,530 =========== =========== Pending Acquisition During 1998, Hancock Holding Company entered into an agreement to acquire American Security Bancshares of Ville Platte, Inc.(ASB), Ville Platte, Louisiana. Terms of the agreement call for the acquisition of ASB stock in return for approximately $13,800,000 cash and 672,000 shares of common stock of the Company. The acquisition will be accounted for using the purchase method. ASB had total assets of approximately $230,000,000 (unaudited) and stockholders' equity of approximately $23,000,000 (unaudited) at December 31, 1998 and net earnings of approximately $3,000,000 (unaudited) for the year then ended. The results of operations of ASB will be included in the 1999 consolidated statements of earnings from the date of acquisition. It is expected that this acquisition will result in the recognition of goodwill amounting to approximately $20,000,000, which will be amortized over 15 years. Following is certain selected unaudited pro forma combined financial information at December 31, 1998 and for the year then ended, assuming that the acquisition had been effective January 1, 1998 (in thousands, except per share data): Total assets $ 3,062,000 Stockholders' equity 316,000 Net interest income 119,000 Net earnings 32,000 Basic and diluted earnings per share $ 2.81 NOTE 3 - SECURITIES The amortized cost and fair value of securities classified as available for sale were as follows (in thousands):
December 31, 1998 December 31, 1997 ---------------------------------------------------- -------------------------------------------------- Gross Gross Gross Gross Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value --------- ---------- ---------- --------- --------- ----------- ---------- ---------- U.S. Treasury $ 101,493 $ 692 $ 23 $ 102,162 $ 54,637 $ 79 $ 8 $ 54,708 U.S. government agencies 272,564 288 518 272,334 46,039 5 126 45,918 Municipal obligations 5,851 101 35 5,917 1,496 30 - 1,526 Mortgage-backed securities 31,652 79 395 31,336 27,538 318 29 27,827 CMOs 45,347 92 37 45,402 21,427 - 162 21,265 Other debt securities - - - - 6,305 - 5 6,300 Equity securities 5,969 - - 5,969 6,089 - - 6,089 --------- ---------- --------- --------- --------- -------- ---------- ---------- $ 462,876 $ 1,252 $ 1,008 $ 463,120 $ 163,531 $ 432 $ 330 $ 163,633 ========= ========== ========= ========= ========= ======== ========== =========
The amortized cost and fair value of debt securities classified as available for sale at December 31, 1998, by contractual maturity, were as follows (in thousands): Amortized Cost Fair Value -------------- ---------- Due in one year or less $ 134,436 $ 134,242 Due after one year through five years 193,733 194,481 Due after five years through ten years 73,916 73,934 Due after ten years 54,822 54,494 --------- --------- $ 456,907 $ 457,151 ========= ========= The amortized cost and fair value of securities classified as held to maturity were as follows (in thousands):
December 31, 1998 December 31, 1997 --------------------------------------------------- ------------------------------------------------- Gross Gross Gross Gross Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value --------- ---------- ---------- --------- --------- ---------- ---------- --------- U.S. Treasury $ 114,506 $ 1,043 $ - $ 115,549 $ 210,525 $ 2,533 $ 127 $ 212,931 U.S. government agencies 200,149 2,250 97 202,302 267,437 1,112 312 268,237 Municipal obligations 167,997 4,136 73 172,060 88,062 2,979 37 91,004 Mortgage-backed securities 114,747 851 177 115,421 133,925 1,943 137 135,731 CMOs 177,796 1,346 150 178,992 190,539 1,245 602 191,182 Other debt securities 6,054 1 - 6,055 25,874 19 20 25,873 --------- ---------- -------- --------- --------- ---------- --------- --------- $ 781,249 $ 9,627 $ 497 $ 790,379 $ 916,362 $ 9,831 $ 1,235 $ 924,958 ========= ========== ======== ========= ========= ========== ========= =========
The amortized cost and fair value of securities classified as held to maturity at December 31, 1998, by contractual maturity, were as follows (in thousands): Amortized Cost Fair Value -------------- ---------- Due in one year or less $ 195,115 $ 196,134 Due after one year through five years 140,033 142,978 Due after five years through ten years 198,146 200,667 Due after ten years 247,955 250,600 --------- --------- $ 781,249 $ 790,379 ========= ========= Proceeds from sales of available-for-sale securities were $19,222,000 in 1998, $12,919,000 in 1997 and $20,425,000 in 1996. Gross gains of $540,000 in 1998, $321,000 in 1997 and $178,000 in 1996 and gross losses of $508,000 in 1998, $42,000 in 1997 and $147,000 in 1996 were realized on such sales. Gross gains of $135,000 were recognized on held-to-maturity securities called during 1998. Securities with an amortized cost of approximately $547,491,000 at December 31, 1998 and $600,264,000 at December 31, 1997, were pledged primarily to secure public deposits and securities sold under agreements to repurchase. The Company's collateralized mortgage obligations (CMOs) generally consist of first and second tranche sequential pay and/or planned amortization class (PAC) instruments. Interest income on CMOs and mortgage-backed securities is generally included in other investment income. NOTE 4 - LOANS Loans consisted of the following (in thousands): December 31, ----------------------------- 1998 1997 ----------- ----------- Real estate loans - primarily mortgage $ 482,418 $ 476,612 Commercial and industrial loans 224,686 175,721 Loans to individuals for household, family and other consumer expenditures 583,211 558,147 Leases 17,324 16,889 Other loans 22,645 17,986 ----------- ----------- $ 1,330,284 $ 1,245,355 =========== =========== The Company generally makes loans in its market areas of South Mississippi and Southeastern Louisiana. Loans are made in the normal course of business to its directors, executive officers and their associates on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. Such loans did not involve more than normal risk of collectibility. The balance of loans to the Company's directors, executive officers and their affiliates at December 31, 1998 and 1997 was approximately $2,898,000 and $3,652,000, respectively. Changes in the allowance for loan losses were as follows (in thousands): Years Ended December 31, --------------------------------------- 1998 1997 1996 --------- --------- --------- Balance at January 1 $ 21,000 $ 19,800 $ 17,391 Balance acquired through acquisitions - 833 654 Recoveries 1,701 2,181 2,068 Loans charged off (7,130) (8,213) (6,466) Provision charged to operating expense 6,229 6,399 6,153 --------- --------- --------- Balance at December 31 $ 21,800 $ 21,000 $ 19,800 ========= ========= ========= Non-accrual and renegotiated loans amounted to approximately 0.46% of total loans at December 31, 1998 and 0.41% at December 31, 1997. In addition, the Company's other individually evaluated impaired loans amounted to approximately 0.45% and 0.25% of total loans at December 31, 1998 and 1997, respectively. Related reserve amounts were not significant and there was no significant change in these amounts during the years ended December 31, 1998, 1997 or 1996. The amount of interest not accrued on these loans did not have a significant effect on earnings in 1998, 1997 or 1996. Transfers from loans to other real estate amounted to approximately $656,000, $1,894,000 and $1,952,000 in 1998, 1997 and 1996, respectively. Valuation allowances associated with other real estate amounted to $1,088,000 and $812,000 at December 31, 1998 and 1997, respectively. NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment, stated at cost less accumulated depreciation and amortization, consisted of the following (in thousands): December 31, ------------------------- 1998 1997 --------- --------- Land, buildings and leasehold improvements $ 49,414 $ 47,073 Furniture, fixtures and equipment 46,245 42,022 --------- --------- 95,659 89,095 Accumulated depreciation and amortization (51,112) (46,285) --------- --------- $ 44,547 $ 42,810 ========= ========= NOTE 6 - STOCKHOLDERS' EQUITY Basic and diluted earnings per common share were based on the weighted average number of shares outstanding of approximately 10,693,000 and 10,705,000 in 1998, 10,870,000 and 10,877,000 in 1997 and 10,277,000 and 10,277,000 in 1996. Outstanding amounts reflect reductions for treasury stock and shares of stock owned by subsidiaries and give retroactive effect to the 15% stock dividend paid in 1996. At December 31, 1998 and 1997, subsidiaries owned 162,200 shares of stock. Stockholders' equity of the Company includes the undistributed earnings of the bank subsidiaries. Dividends are payable only out of undivided profits or current earnings. Moreover, dividends to the Company's stockholders can generally be paid only from dividends paid to the Company by the Banks. Consequently, dividends are dependent upon earnings, capital needs, regulatory policies and statutory limitations affecting the Banks. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. With respect to Hancock Bank, dividends paid are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi. The amount of capital of the subsidiary banks available for dividends at December 31, 1998 was approximately $100 million. The Company and its bank subsidiaries are required to maintain certain minimum capital levels. At December 31, 1998 and 1997, the Company and the Banks were in compliance with their respective statutory minimum capital requirements. Following is a summary of the actual capital levels at December 31, 1998 and 1997 (amounts in thousands):
To be Well Required for Capitalized Under Minimum Capital Prompt Corrective Actual Adequacy Action Provisions ------------------- ------------------- ------------------ Amount Ratio % Amount Ratio % Amount Ratio % --------- ------- --------- ------- -------- ------- At December 31, 1998 Total capital (to risk weighted assets) Company $ 277,846 17.41 $ 122,600 8.00 $ N/A N/A Hancock Bank 172,127 17.44 79,000 8.00 98,700 10.00 Hancock Bank of Louisiana 105,864 19.46 43,600 8.00 54,400 10.00 Tier I capital (to risk weighted assets) Company $ 258,663 16.88 $ 61,300 4.00 $ N/A N/A Hancock Bank 159,771 16.19 39,500 4.00 59,300 6.00 Hancock Bank of Louisiana 99,053 18.21 21,800 4.00 32,700 6.00 Tier I leveraged capital Company $ 258,663 9.69 $ 80,100 3.00 $ N/A N/A Hancock Bank 159,771 8.83 54,400 3.00 90,600 5.00 Hancock Bank of Louisiana 99,053 10.46 28,500 3.00 47,400 5.00
To be Well Required for Capitalized Under Minimum Capital Prompt Corrective Actual Adequacy Action Provisions ------------------- ------------------- ------------------ Amount Ratio % Amount Ratio % Amount Ratio % --------- ------- --------- ------- -------- ------- At December 31, 1997 Total capital (to risk weighted assets) Company $ 276,977 20.33 $ 109,000 8.00 $ N/A N/A Hancock Bank 168,498 19.71 68,400 8.00 85,500 10.00 Hancock Bank of Louisiana 109,671 20.42 43,000 8.00 53,800 10.00 Tier I capital (to risk weighted assets) Company $ 259,900 19.08 $ 54,500 4.00 $ N/A N/A Hancock Bank 157,791 18.46 34,200 4.00 51,300 6.00 Hancock Bank of Louisiana 102,934 19.16 21,500 4.00 32,300 6.00 Tier I leveraged capital Company $ 259,900 10.41 $ 75,000 3.00 $ N/A N/A Hancock Bank 157,791 9.79 48,400 3.00 80,600 5.00 Hancock Bank of Louisiana 102,934 11.63 26,600 3.00 44,300 5.00
Risk-based capital requirements are intended to make regulatory capital more sensitive to risk elements of the Company. Currently, the Company and its bank subsidiaries are 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 and its bank subsidiaries must maintain a minimum Tier 1 leveraged ratio (Tier 1 capital to total average assets) of at least 3.0% based upon the regulators latest composite rating of the institution. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required each federal banking agency to implement prompt corrective actions for institutions that it regulates. The rules provide that an institution is "well capitalized" if its total risk-based capital ratio is 10.0% or greater, its Tier 1 risked-based capital ratio is 6.0% or greater, its leveraged ratio is 5.0% or greater and the institution is not subject to a capital directive. Under this regulation, each of the subsidiary banks were deemed to be "well capitalized" as of December 31, 1998 and 1997 based upon the most recent notifications from their regulators. There are no conditions or events since those notifications that management believes would change these classifications. NOTE 7 - INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows (in thousands): December 31, --------------------- 1998 1997 -------- -------- Deferred tax assets: Post-retirement benefit obligation $ 1,167 $ 993 Allowance for loan losses 6,200 6,022 Other real estate valuation allowances 420 284 Deferred compensation 746 725 Lease accounting 344 195 Other 292 242 -------- -------- 9,169 8,461 -------- -------- Deferred tax liabilities: Property and equipment depreciation (3,234) (3,325) Prepaid pension (1,206) (1,088) Unrealized gain on securities available for sale (85) (36) Discount accretion on securities (1,567) (1,321) -------- --------- (6,092) (5,770) -------- --------- Net deferred tax asset $ 3,077 $ 2,691 ======== ========= Income taxes consisted of the following components (in thousands): Years Ended December 31, ----------------------------------------- 1998 1997 1996 --------- --------- --------- Currently payable $ 14,862 $ 17,746 $ 15,924 Deferred (435) (395) (754) --------- --------- --------- $ 14,427 $ 17,351 $ 15,170 ========= ========= ========= The reason for differences in income taxes reported compared to amounts computed by applying the statutory income tax rate of 35% to earnings before income taxes were as follows (in thousands): December 31, --------------------------------------------- 1998 1997 1996 ------------- -------------- -------------- Amount % Amount % Amount % -------- -- -------- -- -------- --- Taxes computed at statutory rate $ 15,483 35 $ 16,792 35 $ 16,371 35 Increases (decreases) in taxes resulting from: State income taxes, net of federal income tax benefit 410 1 550 1 - - Tax-exempt interest (2,380) (5) (1,501) (3) (1,583) (3) Goodwill amortization 840 2 831 2 400 - Other, net 74 - 679 1 (18) - --------- --- --------- --- --------- --- Income tax expense $ 14,427 33 $ 17,351 36 $ 15,170 32 ========= === ========= === ========= === The related deferred income tax provision (credit) on unrealized gains (losses) on securities available for sale included in other comprehensive income was $50,000 in 1998, $375,000 in 1997 and $(510,000) in 1996. NOTE 8 - EMPLOYEE BENEFIT PLANS The Company has a non-contributory pension plan covering substantially all salaried full-time employees who have been employed by the Company the required length of time. The Company's current policy is to contribute annually the minimum amount that can be deducted for federal income tax purposes. The benefits are based upon years of service and employee's compensation during the last five years of employment. Data relative to the pension plan follows (in thousands): Years Ended December 31, -------------------------- 1998 1997 ---------- ---------- Change in Benefit Obligation: Benefit obligation at beginning of year $ 26,742 $ 24,687 Service cost 1,041 942 Interest cost 2,018 1,871 Actuarial loss 588 450 Benefits paid (1,269) (1,208) ---------- ---------- Benefit obligation at end of year 29,120 26,742 ---------- ---------- Change in Plan Assets: Fair value of plan assets at beginning of year 26,524 23,251 Actual return on plan assets 2,249 3,091 Employer contributions 1,486 1,567 Benefits paid (1,268) (1,208) Expenses (200) (177) ---------- ---------- Fair value of plan assets at end of year 28,791 26,524 ---------- ---------- Funded status (329) (218) ---------- ---------- Unrecognized portion of net obligation being amortized over 15 years 137 183 Unrecognized prior service cost 3,072 2,484 Unrecognized net actuarial loss 567 659 ---------- ---------- Prepaid pension cost included in other assets $ 3,447 $ 3,108 ========== ========== Rate assumptions at December 31: Discount rate 7.00% 7.75% Expected return on plan assets 8.00% 8.00% Rate of compensation increase 3.00% 3.00% Years Ended December 31, --------------------------- 1998 1997 1996 -------- -------- -------- Net pension expense included the following (income) expense components: Service cost - benefits earned during the period $ 1,041 $ 942 $ 850 Interest cost on projected benefit obligation 2,018 1,871 1,628 Return on plan assets (2,249) (3,091) (2,222) Net amortization and deferral 92 92 92 Amortization of prior service cost 244 1,386 655 -------- -------- -------- Net pension expense $ 1,146 $ 1,200 $ 1,003 ======== ======== ======== The Company sponsors two defined benefit post-retirement plans, other than the pension plan, that cover full-time employees who have reached 45 years of age. One plan provides medical benefits and the other provides life insurance benefits. The post-retirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain employer contribution maximums; the life insurance plan is non-contributory. Data relative to these post-retirement benefits, none of which have been funded, were as follows (in thousands): Years Ended December 31, ---------------------------- 1998 1997 ---------- ------------ Change in Benefit Obligation: Benefit obligation at beginning of year $ 5,509 $ 4,640 Service cost 293 233 Interest cost 374 357 Actuarial loss 324 428 Benefits paid (262) (149) --------- ------------ Benefit obligation at end of year 6,238 5,509 Fair value of plan assets - - --------- ------------ Amount unfunded (6,238) (5,509) Unrecognized transition obligation being amortized over 20 years 1,863 2,006 Unrecognized net actuarial (gain) loss 976 665 ---------- ------------ Accrued post-retirement benefit cost $ (3,399) $ (2,838) ========== ============ Rate assumptions at December 31: Discount rate 6.50% 7.00% Years Ended December 31, -------------------------- 1998 1997 1996 ------- ------- -------- Net Periodic Post-Retirement Benefit Cost: Amortization of unrecognized net gain (loss) $ 12 $ - $ (30) Service cost - benefits attributed to service during the year 293 233 219 Interest costs on accumulated post-retirement benefit obligation 375 357 254 Amortization of transition obligation over 20 years 143 143 143 ------- ------- -------- Net periodic post-retirement benefit cost $ 823 $ 733 $ 586 ======= ======= ======== For measurement purposes in 1998, an 8.0% annual rate of increase in the per capita cost of covered health care benefits was assumed. The rate was assumed to decrease gradually to 5.5% for 5 years and remain at that level thereafter. In 1997, rates of 8.5% and 5.5% were assumed and in 1996, rates of 9.0% and 5.5% were assumed. The health care cost trend rate assumption has an effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by 1% in each year would increase the accumulated post- retirement benefit obligation at December 31, 1998, by $841,000 and the aggregate of the service and interest cost components of net periodic post- retirement benefit cost for the year then ended by $106,000. A 1% decrease in the rate would decrease those items by $701,000 and $89,000, respectively. The Company has a non-contributory profit sharing plan covering substantially all salaried full-time employees who have been employed the required length of time. Contributions are made at the discretion of the Board of Directors and amounted to $569,000 in 1998 and $568,500 in both 1997 and 1996. In addition, the Company has an employee stock purchase plan that is designed to provide the employees of the Company a convenient means of purchasing common stock of the Company. Substantially all salaried, full-time employees, with the exception of Leo W. Seal, Jr., who have been employed by the Company the required length of time are eligible to participate. The Company contributes an amount equal to 25% of each participant's contribution, which contribution cannot exceed 5% of the employee's base pay. The Company's contribution amounted to $101,300 in 1998, $84,500 in 1997 and $71,000 in 1996. The post-retirement plans relating to health care payments and life insurance and the stock purchase plan are not guaranteed and are subject to immediate cancellation and/or amendment. These plans are predicated on future Company profit levels that will justify their continuance. Overall health care costs are also a factor in the level of benefits provided and continuance of these post-retirement plans. There are no vested rights under the post- retirement health or life insurance plans. NOTE 9 - EMPLOYEE STOCK PLANS In 1996, the stockholders of the Company approved the Hancock Holding Company 1996 Long-Term Incentive Plan (the Plan) to provide incentives and awards for employees of the Company and its subsidiaries. Awards as defined in the Plan include, with limitations, stock options (including restricted stock options), restricted and performance shares, and performance stock awards, all on a stand-alone, combination or tandem basis. A total of 5,000,000 common shares can be granted under the Plan with an annual grant maximum of 1% of the Company's outstanding common stock (as reported for the fiscal year ending immediately prior to such plan year). The exercise price is equal to the market price on the date of grant, except for certain of those granted to major shareholders where the option price is 110% of the market price. On December 24, 1998, options to purchase 25,950 shares were granted, of which 23,861 are exercisable at $43.50 per share and 2,089 are exercisable at $47.85 per share. Options totalling 23,861 are exercisable at a vesting rate of 25% per year on the anniversary of the date of grant and 2,089 are exercisable six months after the date of grant. On December 11, 1997, options to purchase 62,375 were granted, of which 60,860 shares are exercisable at $60.00 per share and 1,515 are exercisable at $66.00 per share. Options totalling 48,288 are exercisable on the first anniversary of the date of grant and 14,087 options are exercisable six months after the date of grant. On December 15, 1996, options to purchase 35,250 shares were granted, of which 32,978 are exercisable at $40.00 per share and 2,272 are exercisable at $44.00 per share. Options totalling 27,522 are exercisable on the first anniversary of the date of grant and 7,728 options are exercisable six months after the date of grant. The options generally expire ten years after the date of grant. Following is a summary of the transactions: Number of Average Aggregate Options Exercise Price Exercise Outstanding Per Share of Options ----------- -------------- ------------ Balance January 1, 1996 - $ - $ - Granted 35,250 40.26 1,419,000 ----------- -------------- ------------ Balance December 31, 1996 35,250 40.26 1,419,000 Granted 62,375 60.15 3,752,000 Cancelled (1,300) 40.00 (52,000) ----------- -------------- ------------ Balance December 31, 1997 96,325 53.14 5,119,000 Granted 25,950 43.89 1,138,939 Exercised (8,800) 40.00 (352,000) Cancelled (4,425) 60.00 (265,500) ----------- -------------- ------------ Balance December 31, 1998 109,050 $ 51.72 $ 5,640,439 =========== ============== ============ Options on 83,400 shares were exercisable at December 31, 1998 with a weighted average exercise price of $54.12 per share. The weighted average remaining contractual life of options outstanding at December 31, 1998 was 7.25 years. The Company has adopted the disclosure-only option under SFAS No. 123. The weighted average fair value of options granted during 1998, 1997 and 1996 was $12.38, $20.36 and $11.53, respectively. Had compensation costs for the Company's stock options been determined based on the fair value at the grant date consistent with the method under SFAS No. 123, the Company's net earnings and earnings per share would have been as indicated below: Years Ended December 31, ------------------------------------------- 1998 1997 1996 -------- --------- ---------- Net earnings (in thousands): As reported $30,960 $ 30,624 $ 31,603 Pro forma 29,936 30,220 31,584 Basic earnings per share: As reported $ 2.90 $ 2.82 $ 3.08 Pro forma 2.80 2.78 3.07 Diluted earnings per share: As reported $ 2.89 $ 2.82 $ 3.08 Pro forma 2.80 2.78 3.07 The fair value of the options granted under the Company's stock option plans during the years ended December 31, 1998, 1997 and 1996 was estimated using the Black-Scholes Pricing Model with the following assumptions used: dividend yield of 1.9%, 1.6% and 2.3%, expected volatility of 24%, 25% and 22%, risk-free interest rates of 4.9%, 5.5% and 5.6%, respectively and expected lives of 8 years in 1998, 1997 and 1996. During 1998, the Company granted 12,070 restricted shares which vest at 12, 18 and 24 month intervals, and 7,050 restricted shares were granted which vest at the end of three years. The Company also granted 12,300 restricted shares during 1997 which vest at the end of three years. Vesting is contingent upon continued employment by the Company. On December 31, 1998, 29,745 of these grants were outstanding. The 1998 shares had respective market values of $46.00 and $43.50 at the dates of grant. The 6,100 and 6,200 shares granted in 1997 had respective market values of $42.00 and $60.00 per share at the dates of grant. Compensation expense related to the grants totalled $308,000 for 1998 and $96,000 for 1997. The remaining unearned compensation of $1,010,000 is being amortized over the life of the grants. NOTE 10 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate: Cash, Short-Term Investments and Federal Funds Sold - For cash and short- term instruments, the carrying amount is a reasonable estimate of fair value. Securities - For securities, fair value equals quoted market price, if available. If a quoted market price was not available, a reasonable estimate of fair value was used. Loans - The fair value of loans was estimated by discounting the future cash flows using the current rates at which similar loans with the same remaining maturities would be made to borrowers with similar credit ratings. Deposits - The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit was estimated using the rates currently offered for deposits of similar remaining maturities. Long-Term Bond and Notes - Rates currently available to the Company for debt with similar terms and remaining maturities were used to estimate fair value of existing debt. Commitments - The fair value of commitments to extend credit was not significant. The estimated fair values of the Company's financial instruments were as follows (in thousands): December 31, ----------------------------------------------- 1998 1997 ---------------------- ----------------------- Carrying Fair Carrying Fair Amount Value Amount Value ----------- ----------- ----------- ----------- Financial assets: Cash, short-term investments and federal funds sold $ 161,390 $ 161,390 $ 150,692 $ 150,692 Securities available for sale 463,120 463,120 163,633 163,633 Securities held to maturity 781,249 790,379 916,362 924,958 Loans, net of unearned income 1,305,555 1,308,412 1,220,630 1,208,958 Less: allowance for loan losses (21,800) (21,800) (21,000) (21,000) ----------- ----------- ----------- ----------- Loans, net 1,283,755 1,286,612 1,199,630 1,187,958 Financial liabilities: Deposits $2,374,591 $2,375,718 $2,062,648 $2,063,604 Securities sold under agreements to repurchase 140,207 140,207 170,534 170,534 Long-term bonds and notes - - 1,279 1,279 NOTE 11 - OFF-BALANCE SHEET RISK In the normal course of business, the Company enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded and involve, to varying degrees, elements of credit risk not reflected in the consolidated balance sheets. The contract amounts of these instruments reflect the Company's exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued. The Company undertakes the same credit evaluation in making commitments and conditional obligations as it does for on-balance-sheet instruments and may require collateral or other credit support for off-balance-sheet financial instruments. These obligations are summarized below (in thousands): December 31, -------------------------- 1998 1997 ------------ ---------- Commitments to extend credit $ 244,135 $ 241,000 Letters of credit 13,425 8,950 Approximately $172,000,000 and $181,000,000 of commitments to extend credit at December 31, 1998 and 1997, respectively, were at variable rates and the remainder were at fixed rates. A commitment to extend credit is an agreement to lend to a customer as long as the conditions established in the agreement have been satisfied. A commitment to extend credit generally has a fixed expiration date or other termination clauses and may require payment of a fee by the borrower. Since commitments often expire without being fully drawn, the total commitment amounts do not necessarily represent future cash requirements at the Company. The Company continually evaluates each customer's credit worthiness on a case-by-case basis. Occasionally, a credit evaluation of a customer requesting a commitment to extend credit results in the Company obtaining collateral to support the obligation. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing a letter of credit is essentially the same as that involved in extending a loan. NOTE 12 - CONTINGENCIES 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 statements of the Company. NOTE 13 - SUPPLEMENTAL INFORMATION The following is selected supplemental information (in thousands): Years Ended December 31, ------------------------------- 1998 1997 1996 -------- -------- ------- Other service charges, commissions and fees: Trust fees $ 3,071 $ 2,946 $ 2,412 Other non-interest expense: Postage $ 3,312 $ 3,051 $ 2,327 Communication 3,405 3,184 2,451 Data processing 3,562 3,823 4,245 Professional fees 2,889 2,485 1,781 Taxes and licenses 2,698 2,695 1,543 Printing and supplies 2,131 2,001 2,464 NOTE 14 - SEGMENT REPORTING The Company's primary segments are geographically divided into the Mississippi (MS) and Louisiana (LA) markets. Each segment offers the same products and services but are managed separately due to different pricing, product demand and consumer markets. Both segments offer commercial, consumer and mortgage loans and deposit services. Following is selected information for the Company's segments (in thousands): Years Ended December 31, --------------------------------------------------------- 1998 1997 1996 ------------------- ------------------ ------------------ MS LA MS LA MS LA --------- --------- --------- -------- --------- -------- Interest income $ 122,813 $ 67,271 $ 112,294 $ 66,299 $ 107,408 $ 59,597 Interest expense 56,896 24,789 48,349 23,350 44,944 19,970 --------- --------- --------- -------- --------- -------- Net interest income 65,917 42,482 63,945 42,949 62,464 39,627 Provision for loan losses 2,731 2,854 1,929 4,260 2,970 3,018 Non-interest income 18,822 13,261 18,524 13,711 17,068 11,626 Depreciation and amortization 3,517 1,671 3,118 1,587 3,344 1,404 Other non-interest expense 48,661 36,727 46,003 34,893 41,744 32,068 --------- --------- --------- -------- --------- -------- Earnings before income taxes and cumulative effect of accounting change 29,830 14,491 31,419 15,920 31,474 14,763 Income taxes 9,390 5,062 11,209 6,347 9,976 5,039 -------- --------- --------- -------- --------- -------- Earnings before cumulative effect of accounting change 20,440 9,429 20,210 9,573 21,498 9,724 Cumulative effect of accounting change 1,151 - - - - - --------- --------- --------- -------- --------- -------- Net earnings $ 21,591 $ 9,429 $ 20,210 $ 9,573 $ 21,498 $ 9,724 ========= ========= ========= ======== ========= ======== At and For Years Ended December 31, --------------------------------------- 1998 1997 1996 ----------- ----------- ----------- Net Interest Income: MS $ 65,917 $ 63,945 $ 62,464 LA 42,482 42,949 39,627 Other 3,518 2,866 2,509 ----------- ----------- ----------- Consolidated net interest income $ 111,917 $ 109,760 $ 104,600 =========== =========== =========== Net Earnings: MS $ 21,591 $ 20,210 $ 21,498 LA 9,429 9,573 9,724 Other (60) 841 381 ----------- ----------- ----------- Consolidated net earnings $ 30,960 $ 30,624 $ 31,603 =========== =========== =========== Assets: MS $1,833,064 $1,612,805 $1,433,698 LA 1,003,620 937,060 868,444 Other 27,487 30,043 25,505 Intersegment (49,476) (41,951) (38,065) ----------- ----------- ----------- Consolidated assets $2,814,695 $2,537,957 $2,289,582 =========== =========== =========== NOTE 15 - SUMMARIZED FINANCIAL INFORMATION OF HANCOCK HOLDING COMPANY (PARENT COMPANY ONLY) Balance Sheets December 31, ------------------------------ 1998 1997 -------------- -------------- Assets: Investment in subsidiaries $ 285,464,704 $ 289,423,238 Other 1,342,496 811,280 -------------- -------------- $ 286,807,200 $ 290,234,518 ============== ============== Liabilities and Stockholders' Equity: Accrued expenses $ - $ 381,919 Note payable - 1,279,402 Stockholders' equity 286,807,200 288,573,197 -------------- -------------- $ 286,807,200 $ 290,234,518 ============== ============== Statements of Earnings Years Ended December 31, ----------------------------------------- 1998 1997 1996 ------------- ------------- ------------- Dividends received from subsidiaries $ 36,555,000 $ 17,150,000 $ 15,391,000 Equity in earnings of subsidiaries greater than (less than) dividends received (5,209,781) 14,793,067 16,632,753 Interest and other expenses (1,689,631) (1,847,491) (555,788) Income tax credit 153,800 528,843 135,039 ------------- ------------- ------------- Earnings before cumulative effect of accounting change 29,809,388 30,624,419 31,603,004 Cumulative effect of accounting change 1,150,811 - - ------------- ------------- ------------- Net earnings $ 30,960,199 $ 30,624,419 $ 31,603,004 ============= ============= ============= Statements of Cash Flows Years Ended December 31, --------------------------------------- 1998 1997 1996 ------------ ------------ ------------- Cash flows from operating activities - principally dividends received from subsidiaries $ 35,952,990 $ 15,116,205 $ 14,872,899 Cash flows from investing activities - principally purchase transactions - (4,062,524) (5,622,371) Cash flows from financing activities: Dividends paid (10,862,585) (11,039,887) (9,193,395) Purchase of treasury stock (22,857,810) - - Repayment of note (1,279,402) - - ------------- ------------ ------------ Net cash used by financing activities (34,999,797) (11,039,887) (9,193,395) ------------- ------------ ------------ Net increase in cash 953,193 13,794 57,133 Cash, beginning 171,101 157,307 100,174 ------------ ------------ ------------- Cash, ending $ 1,124,294 $ 171,101 $ 157,307 ============ ============ ============= Independent Auditors' Report Board of Directors and Stockholders Hancock Holding Company Gulfport, Mississippi We have audited the accompanying consolidated balance sheets of Hancock Holding Company and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of earnings, comprehensive earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Hancock Holding Company and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, in 1998 the Company changed its method of accounting for derivative instruments to conform with the Statement of Financial Accounting Standards No. 133 and in conjunction therewith reclassified certain securities from its held-to-maturity portfolio to trading securities. Deloitte & Touche LLP New Orleans, Louisiana January 15, 1999 Hancock Holding Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- For the Years Ended December 31, 1998 and 1997 The Company's net earnings were $31.0 million, or $2.90 per share, for the year ended December 31, 1998, compared to $30.6 million, or $2.82 per share, for the year ended December 31, 1997. The $2.2 million increase in net interest income for the current year was primarily due to volume increases which were somewhat offset by lower yields on interest earning assets and a slightly higher cost of funds. The Company's net interest margin on a fully taxable equivalent basis decreased to 4.67% in 1998, compared to 5.03% in 1997, partially due to the repricing of and investment in interest-earning assets during a period of short- term market interest rate declines and a deposit growth that surpassed the Company's loan growth. The provision for loan losses decreased to $6.2 million in the current year, compared to $6.4 million in the prior year, due to decreased loan charge-offs. Operating expenses, primarily compensation costs, increased as the Company concentrated on new lines of business and broadened its market area. For the Years Ended December 31, 1997 and 1996 The Company's net earnings were $30.6 million, or $2.82 per share, for the year ended December 31, 1997, compared to $31.6 million, or $3.08 per share, for the year ended December 31, 1996. Net interest income and non-interest income increased as a result of increased volume. Net interest margin declined from 5.10% in 1996 to 5.03% in 1997. Revenue increases were offset by higher levels of operating costs and income taxes. Income taxes increased $2.2 million in 1997 compared to 1996 due to increased taxable income, state income taxes and higher levels of non-deductible goodwill amortization associated with three recent acquisitions. The provision for loan losses increased from $6.2 million to $6.4 million as a result of increased loan charge-off activity. The loan loss allowance was 1.72% of period-end loans and represented 417% of non-performing loan balances at December 31,1997. Financial Condition - ------------------- Securities The Company generally purchases securities with a maturity schedule that provides ample liquidity. Certain securities have been classified as available for sale based on management's internal assessment of the portfolio after considering the Company's liquidity requirements and the portfolio's exposure to changes in market interest rates and prepayment activity. The December 31, 1998 carrying value of the held-to-maturity portfolio was $781.2 million and the market value was $790.4 million. The available-for-sale portfolio was $463.1 million at December 31, 1998. Investment in securities increased by approximately $164.4 million during 1998, primarily due to the availability of investable funds generated from increased deposits. Loans Loans increased $84.9 million to $1.3 billion at December 31, 1998, compared to balances a year earlier. Non-accruing loans were $4.6 million, or 0.35%, of the outstanding loans at December 31, 1998. Restructured loans were $1.4 million at December 31, 1998 and a significant portion was current with the modified terms. The Company generally makes loans in its market areas of South Mississippi and Southeastern Louisiana. Deposits and Deposit-Related Liabilities Deposits increased from $2.1 billion at December 31, 1997 to $2.4 billion at December 31, 1998. Non-interest-bearing demand accounts increased 18.1%, to $546.7 million in 1998. Increases to other transaction and time deposits were partially offset by a decrease in securities sold under agreements to repurchase. Certificates of deposit of $100,000 or more outstanding at December 31, 1998 amounted to $278.4 million. Deposits and deposit-related liabilities are the Company's primary source of funds supporting its earning asset base. Liquidity - --------- Liquidity represents the Company's ability to provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing funds. The principal sources of funds which provide liquidity are customer deposits, payments of principal and interest on loans, maturities and sales of securities, earnings and borrowings. The Company has a line of credit with the Federal Home Loan Bank in excess of $30 million, providing an additional liquidity source. At December 31, 1998, cash and due from banks and securities available for sale were in excess of 26.3% of total deposits. Capital Resources - ----------------- Composite ratings by the respective regulatory authorities of the Company and the Banks establish minimum capital levels. Currently, the Company and the Banks are required to maintain minimum Tier I leverage ratios of at least 3%, subject to increase up to 5%, depending on the composite rating. At December 31, 1998, the Company's and the Banks' capital balances were in excess of current regulatory minimum requirements. Year 2000 - --------- In 1996, the Company began addressing all the systems and business methods requiring modifications to accommodate the turn of the century. Since there is concern that computer systems will not properly recognize dates or date sensitive information when the digit year value rolls over to "00", virtually every computer operation and every system that has an embedded microchip is potentially at risk for failure or improper performance. Many software programs assume the "19" in storing the year and only utilized the last two digits of the year for calculations and date storage. The year "2000" may be recognized by some systems as "1900" which could adversely affect a significant portion of a company's daily operations, especially those of financial institutions. Identification of the Company's major Year 2000 issues is substantially complete and a plan, including replacement of certain systems, has been implemented to resolve the issues of which management is aware. Written assurances of expected Year 2000 readiness have been requested from all material third party vendors, including, but not limited to, correspondent banks, software providers and utility companies. If any of the companies providing services, software or equipment to the Company fail to adequately address the Year 2000 issue at a reasonable cost, the result could be a significant adverse effect on the Company's business and operational results. The readiness of all third parties, including customers and suppliers, is inherently uncertain and cannot be assured. The Company recognized the importance of its customers' need to address Year 2000 issues. Relationships considered material to the Company's financial position have been identified and appropriate documentation from borrowers received. A committee, specifically established for this project, is in the process of reviewing the information obtained and assessing the risk of repayment impairment. Testing of information systems and review of property equipment functions, except those slated for replacement or vendor upgrade, is near completion. It is anticipated that fully integrated systems testing of current and newly-acquired systems will be completed by June 1999. Contingency plans for the most reasonably likely worst-case scenarios, including provisions for liquidity needs due to potentially significant deposit withdrawals during the fourth quarter of 1999, are substantially complete. Plans may be updated as testing and implementation continue. Issues regarding material equipment and applications failure have been addressed. Management believes it has dedicated adequate resources to address the issues associated with the turn of the century. The total amount of expenditures for Year 2000 compliance, including those incurred since 1997, and those anticipated during the next two years, is expected to be less than $4.0 million (before income taxes) but cannot be predicted with certainty at this time. Quantitative and Qualitative Disclosures About Market Risk - ---------------------------------------------------------- The Company's net income is dependent on its net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than interest- earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest- earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net income. In an attempt to manage its exposure to changes in interest rates, management monitors the Company's interest rate risk. 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. Management also reviews the Company's securities portfolio, formulates investment strategies and oversees the timing and implementation of transactions to assure attainment of the Board's objectives in the most effective manner. Notwithstanding the Company's interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income. In adjusting the Company's asset/liability position, the Board and management attempt to manage the Company's interest rate risk while enhancing net interest margins. At times, depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Board and management may determine to increase the Company's interest rate risk position somewhat in order to increase its net interest margin. The Company's results of operations and net portfolio values remain vulnerable to increases in interest rates and to fluctuations in the difference between long and short-term interest rates. The Company also controls interest rate risk reductions by emphasizing non- certificate depositor accounts. The Board and management believe that such accounts carry a lower interest cost than certificate accounts and that a material portion of such accounts may be more resistant to changes in interest rates. At December 31, 1998, the Company had $298 million of regular savings and club accounts and $647 million of money market and NOW accounts, representing 51.7% of total interest-bearing depositor accounts. One approach used to quantify interest rate risk is the net portfolio value (NPV) analysis. NPV includes shareholders' equity of the Company as reported in the financial statements, adjusted for changes in the carrying value of investments, loans and certificates of deposit, when considering changes in market values on a pre-tax basis. In essence, this analysis calculates the difference between the present value of liabilities and the present value of expected cash flows from assets and off-balance sheet contracts. The following table sets forth, at December 31, 1998, an analysis of the Company's interest rate risk as measured by the estimated changes in NPV resulting from an instantaneous and sustained parallel shift in the yield curve (+ or - 400 basis points, measured in 100 basis point increments). December 31, ----------------------------------------------------------------- 1998 1997 -------------------------------- ------------------------------- Estimated Increase Estimated Increase Change in (Decrease) in NPV (Decrease) in NPV Interest Estimated ------------------ Estimated ------------------ Rates NPV Amount Amount Percent NPV Amount Amount Percent - -------------- ---------- ------ ------- ---------- ------ ------- (basis points) (amounts in thousands) +400 105,291 $ (188,460) (64.2) $ 125,143 $(159,398) (56.0) +300 148,425 (145,326) (49.5) 167,841 (116,700) (41.0) +200 192,969 (100,782) (34.3) 205,447 (79,094) (27.8) +100 238,923 (54,828) (18.7) 244,874 (39,667) (13.9) ---- 293,751 - - 284,541 - - -100 331,661 37,910 12.9 315,631 31,090 10.9 -200 337,171 43,420 14.8 346,406 61,865 21.7 -300 344,122 50,371 17.1 378,736 94,195 33.1 -400 352,514 58,763 20.0 411,955 127,414 44.8 Certain assumptions in assessing the interest rate risk were employed in preparing data for the Company included in the preceding table. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under the various interest rate scenarios. It was also assumed that delinquency rates will not change as a result of changes in interest rates although there can be no assurance that this will be the case. Even if interest rates change in the designated amounts, there can be no assurance that the Company's assets and liabilities would perform as anticipated. In addition, a change in U. S. Treasury rates in the designated amounts accompanied by a change in the shape of the U. S. Treasury yield curve would cause significantly different changes to the NPV than indicated above. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. The Company considers all of these factors in monitoring its exposure to interest rate risk. The Company does not currently engage in trading activities or use derivative instruments to control interest rate risk. Even though such activities may be permitted with the approval of the Board of Directors, the Company does not intend to engage in such activities in the immediate future. Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities. Forward Looking Statements - -------------------------- Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. This report contains forward-looking statements and reflects management's current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company's actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements. EX-23 3 HHC 10-K 12/31/98 CONSENTS OF EXPERTS AND COUNSEL Exhibit (23) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements of Hancock Holding Company on Form S-8 (No. 2-99863) and on Form S-3 (No. 33- 31782) of our report dated January 15, 1999 incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 1998. DELOITTE & TOUCHE LLP New Orleans, Louisiana March 26, 1999 EX-27 4 HHC 10-K 12/31/98 FDS
9 Exhibit 27 Selected Financial Data THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HANCOCK HOLDING COMPANY'S DECEMBER 31, 1998 CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND THE ASSOCIATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 161,294 96 0 0 463,120 781,249 790,379 1,305,555 (21,800) 2,814,695 2,374,591 140,207 13,090 0 36,872 0 0 249,935 2,814,695 118,502 75,124 33 193,659 74,464 81,742 111,917 6,229 167 93,782 44,237 29,809 0 1,151 30,960 2.90 2.89 4.67 5,982 2,907 0 0 21,000 7,130 1,701 21,800 21,800 0 2,100
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