FOR IMMEDIATE RELEASE
January 26, 2012
GULFPORT, Miss. (January 26, 2012) — Hancock Holding Company (Nasdaq: HBHC) (the "Company" or "Hancock") today announced financial results for the fourth quarter of 2011. Operating income for the fourth quarter of 2011 was $45.1 million or $.53 per diluted common share compared to $45.2 million, or $.53, and $17.0 million, or $.46, in the third quarter of 2011 and fourth quarter of 2010, respectively. Operating income is defined as net income excluding tax-effected merger costs and securities transactions gains or losses. Included in the financial tables is a reconciliation of net income to operating income.
Hancock's return on average assets, excluding merger-related items and securities transactions, was 0.93% for the fourth quarter of 2011, a slight improvement from the third quarter of 2011, and an increase of 10 basis points (bps) over the prior year period.
Net income for the fourth quarter of 2011 was $19.0 million, or $.22 per diluted common share, compared to $30.4 million, or $.36, and $17.0 million, or $.46, respectively, in the third quarter of 2011 and fourth quarter of 2010. Included in pre-tax earnings for the fourth quarter of 2011 were $40.2 million of merger-related costs. Pre-tax merger costs for the third quarter of 2011 totaled $22.8 million. Merger costs in the fourth quarter of 2010 were immaterial.
The Company's pre-tax, pre-provision profit for the fourth quarter of 2011 was $76.5 million compared to $73.9 million in the third quarter of 2011. Pre-tax pre-provision profit is total revenue (TE) less non-interest expense and excludes merger-related costs and securities transactions. Included in the financial tables is a reconciliation of net income to pre-tax, pre-provision profit.
"The fourth quarter's results reflect the ongoing integration of two well-known Gulf South brands, the continued retention of legacy business and the successful generation of new business across our footprint," said Hancock's President and Chief Executive Officer Carl J. Chaney. "We are pleased to report net loan growth this quarter and we are bringing in new customers with products such as trust, treasury management, international and specialty finance. We remain focused on expense control as evidenced by a decline in total operating expense during the quarter. I am proud of what our bankers have accomplished to-date and look forward to what the future holds."
On June 4, 2011, Hancock completed its acquisition of Whitney Holding Corporation ("Whitney") headquartered in New Orleans, Louisiana. The impact of the acquisition is reflected in the Company's financial information from the acquisition date. Under purchase accounting, the Whitney balance sheet was marked to fair value at acquisition date. The fourth quarter's results reflect changes made for updated purchase accounting valuations. Goodwill and other intangibles increased approximately $33 million.
On September 16, 2011, the Company completed the sale of seven Whitney Bank branches located on the Mississippi Gulf Coast and one Whitney branch in Bogalusa, Louisiana. Hancock and Whitney agreed to sell the eight branches to resolve certain branch concentration concerns of the U.S. Department of Justice relating to the merger of Whitney into Hancock. As part of the divestiture, Hancock sold approximately $47 million in loans and approximately $180 million in deposits.
On December 29, 2011, the Company completed the sale of Magna Insurance Company ("Magna"), a wholly-owned subsidiary, with a negligible impact on results for the fourth quarter. While the Company is still focused on growing Hancock and Whitney insurance agencies, Magna was no longer part of the overall insurance strategy.
|Highlights & Key Operating Items from Hancock's Fourth Quarter Results|
Total assets at December 31, 2011, were $19.8 billion, compared to $19.4 billion at September 30, 2011.
Total loans at December 31, 2011 were $11.2 billion, an increase of $75 million, or 1%, from September 30, 2011. The linked-quarter increase reflects growth in the commercial and industrial (C&I) portfolio, the residential mortgage and consumer loan portfolios. Linked-quarter declines in both construction and commercial real estate loans reflect in part anticipated payoffs and scheduled paydowns in excess of new loans funded within these portfolios. Adjusting for the $50 million decline in the FDIC covered Peoples First portfolio during the fourth quarter, total loans increased $125 million.
For the quarter ended December 31, 2011, Hancock's average total loans were $11.1 billion compared to $11.2 billion in the third quarter of 2011.
Total deposits at December 31, 2011 were $15.7 billion, up $421 million, or 3%, from September 30, 2011. The linked-quarter increase reflects year-end seasonality of both commercial and public fund customers. Historically, both legacy Hancock and legacy Whitney customers have built deposits at year-end, with some of those deposits leaving in the first quarter, particularly in DDA balances.
Noninterest-bearing demand deposits (DDAs) totaled $5.5 billion at December 31, 2011, up $466 million, or 9%, compared to September 30, 2011. Noninterest-bearing demand deposits comprised 35% of total period-end deposits at December 31, 2011, compared to 33% at September 30, 2011.
Interest bearing public fund deposits totaled $1.6 billion at year-end 2011, up $258 million, or 19%, from September 30, 2011. The increase is mainly related to seasonal tax collections toward year end.
Time deposits (CDs) totaled $2.9 billion at December 31, 2011, down $279 million compared to $3.1 billion at September 30, 2011. During the fourth quarter, approximately $835 million of time deposits matured at an average rate of 1.25%, of which approximately 71% renewed at an average cost of .31%. Included in the decline is approximately $56 million from the anticipated runoff in the Peoples First time deposit portfolio. There are approximately $1.6 billion of CDs scheduled to mature within the next two quarters at an average rate of 1.22%. In the current low rate environment management continues to expect customers will be motivated to hold funds in no or low-cost transaction accounts until rates begin to rise.
Average deposits for the fourth quarter of 2011 were $15.3 billion compared to $15.5 billion in the third quarter of 2011.
The Company's allowance for loan losses was $124.9 million at December 31, 2011, compared to $118.1 million at September 30, 2011. The ratio of the allowance for loan losses to period-end loans was 1.12% at December 31, 2011, compared to 1.06% at September 30, 2011.
Hancock recorded a total provision for loan losses for the fourth quarter of 2011 of $11.5 million compared to $9.3 million in the third quarter of 2011. The fourth quarter total provision included $1.3 million, net, related to the Peoples First portfolio which is covered under a FDIC loss-sharing agreement, compared to $.2 million for the third quarter of 2011. During the fourth quarter of 2011 the Company recorded a $19.0 million increase in the allowance for losses related to impairment of certain pools of covered loans. The allowance increase was mostly offset by a $17.7 million increase in the Company's FDIC loss share indemnification asset.
Net charge-offs from the non-covered loan portfolio were $11.3 million, or .40% of average total loans on an annualized basis. This compares to net non-covered loan charge-offs of $7.8 million, or .28% of average total loans, for the third quarter of 2011. Net charge-offs from previously impaired loan pools in the covered portfolio were $11.1 million for the fourth quarter of 2011.
The allowance calculated on the loan portfolio that excludes covered loans and loans acquired at fair value in the Whitney merger totaled $83.2 million, or 1.70% of this portfolio at December 31, 2011 and $84.4 million, or 1.86% at September 30, 2011.
Non-performing assets (NPAs) totaled $278 million at December 31, 2011, compared to $238 million at September 30, 2011. Non-performing assets as a percent of total loans and foreclosed assets was 2.45% at December 31, 2011, compared to 2.12% at September 30, 2011. The overall increase in NPAs reflects movement to foreclosed assets from the covered Peoples First portfolio and a movement to non-accrual status of several previously identified legacy Hancock commercial real estate-related credits. Non-performing loans exclude loans from Whitney's and Peoples First's acquired credit-impaired loan portfolios that were recorded at estimated fair value at acquisition and are accreting interest income.
Additional asset quality metrics for the acquired (Whitney), covered (Peoples First) and originated (Hancock legacy plus all newly originated loans) portfolios are included in the financial tables.
Net Interest Income
Net interest income (TE) for the fourth quarter of 2011 was $181.3 million, compared to $180.2 million in the third quarter of 2011.
Average earning assets were $16.4 billion in the fourth quarter of 2011 compared to $16.6 billion in the third quarter of 2011.
The net interest margin (TE) was 4.39% for the fourth quarter of 2011, compared to 4.32% for the third quarter of 2011. Net purchase accounting adjustments for the Whitney transaction added approximately 37bps and 24bps to the fourth quarter and third quarter net interest margins, respectively.
The margin continued to be favorably impacted by a shift in funding sources and a decline in funding costs (6bps), offset by a less favorable shift in the mix of earning assets and a decline in investment portfolio yields (46bps).
Non-interest income totaled $60.6 million for the fourth quarter of 2011 compared to $65.0 million in the third quarter of 2011. Approximately 60%, or $2.5 million, of the linked-quarter decline in non-interest income reflects the anticipated impact of the reduction in interchange rates related to the Durbin amendment. These changes were implemented in the beginning of the fourth quarter. Beginning in the first quarter of 2012, the Company expects an additional $2 million per quarter in lost income related to the new interchange rates.
Trust fees totaled $7.4 million for the fourth quarter of 2011, up $.2 million from third quarter of 2011, reflecting new business. Investment and annuity fees of $4.0 million for the fourth quarter of 2011 were down $.7 million linked-quarter.
There were no significant changes to other recurring sources of income during the fourth quarter.
Non-interest Expense & Taxes
Operating expense for the fourth quarter of 2011 totaled $165.4 million, down from $171.3 million in the third quarter of 2011. Operating expense excludes merger-related expenses. The linked-quarter decline mainly reflects a $4 million reduction in personnel expense and a $3 million reduction in ORE expense.
The efficiency ratio, excluding merger costs, was 65.39% for the fourth quarter of 2011 compared to 66.98% for the third quarter of 2011.
The effective income tax rate for the fourth quarter of 2011 was 13%, down from 22% in the third quarter of 2011. The effective tax rate for full-year 2011 was 19%. The effective income tax rate continues to be less than the statutory rate of 35%, due primarily to tax-exempt interest income and tax credits.
The integration of Whitney into Hancock continues to progress as scheduled. The core systems conversion remains on track and is scheduled for March 16, 2012. The trust systems successfully converted at the end of 2011.
Merger-related expenses incurred to-date total approximately $87 million. Management currently expects that total merger costs related to the Whitney acquisition will be less than the previous guidance of approximately $125 million pre-tax. The majority of the remaining expenses are expected to be booked in the first quarter of 2012.
The Company realized approximately $21 million in merger-related cost saves during the fourth quarter of 2011 compared to the base period (proforma 3Q10) expense levels, or 63% of its projected target. Management remains confident it will meet its total projected annual cost saves of $134 million by the beginning of 2013.
Hancock continues to remain well capitalized, with total equity of $2.4 billion at year-end 2011. The Company's tangible common equity ratio was 7.96% at December 31, 2011, a decline of 60bps from 8.56% at September 30, 2011. About half of the decline is related to actuarial losses arising from the normal year-end retirement plan revaluations. The remainder of the decline reflects an increase in total assets during the quarter and a change to goodwill reflecting updated purchase accounting valuations. Additional capital ratios are included in the financial tables.
Management will host a conference call for analysts and investors at 9:00 a.m. Central Daylight Time Friday, January 27, 2012 to review the results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock's website at www.hancockbank.com.
To participate in the Q&A portion of the call, dial (877) 564-1219 or (973) 638-3429. An audio archive of the conference call will be available under the Investor Relations section of Hancock's website. A replay of the call will also be available through February 3, 2012, by dialing (855) 859-2056 or (404) 537-3406, passcode 40620591.
About Hancock Holding Company
Hancock Holding Company, the parent company of Hancock Bank and Whitney Bank, operates a combined total of nearly 300 full-service bank branches and almost 400 ATMs across a Gulf south corridor comprising South Mississippi; southern and central Alabama; southern Louisiana; the northern, central, and Panhandle regions of Florida; and Houston, Texas.
The Hancock Holding Company family of financial services companies also includes Hancock Investment Services, Inc.; Hancock Insurance Agency and Whitney Insurance Agency, Inc.; and corporate trust offices in Gulfport and Jackson, Miss., New Orleans and Baton Rouge, La., and Orlando, Fla.; and Harrison Finance Company.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about companies' 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 news release contains "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and we intend such forward-looking statements to be covered by the safe harbor provisions therein and are including this statement for purposes of invoking these safe-harbor provisions. Forward-looking statements reflect management's current views and provide projections of results of operations or of financial condition or state other forward-looking information, such as expectations about future conditions and descriptions of plans and strategies for the future. The forward-looking statements made in this release include, but may not be limited to, comments with respect to, loan growth, deposit trends, credit quality trends, future profitability, purchase accounting impacts such as accretion levels, the timing, merger costs, cost synergies, profitability and long-term success of the Hancock/Whitney integration and the financial impact of regulatory requirements such as the Durbin amendment.
Hancock's ability to accurately project results or predict the effects of future plans or strategies is inherently limited. Although Hancock believes that the expectations reflected in its forward-looking statements are based on reasonable assumptions, actual results and performance in future periods could differ materially from those set forth in the forward-looking statements. Factors that could cause Hancock's actual results to differ from those expressed in Hancock's forward-looking statements include, but are not limited to, those risk factors outlined in Hancock's public filings with the Securities and Exchange Commission, which are available at the SEC's internet site (http://www.sec.gov), the anticipated benefits from the Whitney acquisition such as it being accretive to earnings, expanding our geographic presence and synergies are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations (including changes to capital requirements) and their enforcement, and the degree of competition in the geographic and business areas in which the companies operate; the ability to promptly and effectively integrate the businesses of Whitney and Hancock; reputational risks and the reaction of the company's customers to the transaction; unanticipated losses related to the integration of, and accounting for, acquired business and assets, current market volatility and diversion of management time on merger-related issues.
You are cautioned not to place undue reliance on these forward-looking statements. Hancock does not intend, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.
For More Information
Trisha Voltz Carlson, SVP, Investor Relations Manager