XNAS:HBHC Hancock Holding Company Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 0-13089

 

 

HANCOCK HOLDING COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Mississippi   64-0693170

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

One Hancock Plaza, P.O. Box 4019, Gulfport, Mississippi   39502
(Address of principal executive offices)   (Zip Code)

(228) 868-4000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, address and fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x    No  ¨

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

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

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨  

  

Smaller reporting company

 

¨

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

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

84,771,111 common shares were outstanding as of April 30, 2012 for financial statement purposes.

 

 

 


Table of Contents

Hancock Holding Company

Index

 

          Page Number  

Part I. Financial Information

  

ITEM 1.

  

Financial Statements

  
   Consolidated Balance Sheets —
March 31, 2012 (unaudited) and December 31, 2011
     1   
   Consolidated Statements of Income (unaudited) —
Three months ended March 31, 2012 and 2011
     2   
   Consolidated Statements of Comprehensive Income (unaudited) —
Three months ended March 31, 2012 and 2011
     3   
   Consolidated Statements of Changes in Stockholders’ Equity (unaudited) —
Three months ended March 31, 2012 and 2011
     4   
   Consolidated Statements of Cash Flows (unaudited) —
Three months ended March 31, 2012 and 2011
     5   
   Notes to Consolidated Financial Statements (unaudited) —
March 31, 2012
     6-34   

ITEM 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     35   

ITEM 3.

  

Quantitative and Qualitative Disclosures about Market Risk

     54   

ITEM 4.

  

Controls and Procedures

     54   

Part II. Other Information

  

ITEM 1.

  

Legal Proceedings

     55   

ITEM 1A.

  

Risk Factors

     55   

ITEM 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     56   

ITEM 3.

  

Default on Senior Securities

  

ITEM 4.

  

Mine Safety Disclosures

  

ITEM 5.

  

Other Information

  

ITEM 6.

  

Exhibits

     56   

Signatures

     57   


Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

 

     

March 31,
2012

unaudited

    December 31,
2011
 
ASSETS     

Cash and due from banks

   $ 357,814      $ 437,947   

Interest-bearing bank deposits

     1,007,814        1,184,222   

Federal funds sold

     691        197   

Securities available for sale, at fair value (amortized cost of $2,513,207 and $4,401,345)

     2,578,531        4,496,900   

Securities held to maturity (fair value of $ 1,814,603)

     1,815,314        —     

Loans held for sale

     42,484        72,378   

Loans

     11,146,076        11,191,901   

Less: allowance for loan losses

     (142,337     (124,881

unearned income

     (15,803     (14,875

Loans, net

     10,987,936        11,052,145   

Property and equipment, net of accumulated depreciation of $152,952 and $ 148,780

     482,620        505,387   

Prepaid expenses

     67,007        69,064   

Other real estate, net

     155,803        144,367   

Accrued interest receivable

     52,821        53,973   

Goodwill

     647,216        651,162   

Other intangible assets, net

     202,772        211,075   

Life insurance contracts

     361,197        355,026   

FDIC loss share indemnification asset

     222,570        212,885   

Deferred tax asset, net

     148,219        145,760   

Other assets

     160,288        181,608   

Total assets

   $ 19,291,097      $ 19,774,096   

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Deposits:

    

Non-interest bearing demand

   $ 5,242,973      $ 5,516,336   

Interest-bearing savings, NOW, money market and time

     10,189,794        10,197,243   

Total deposits

     15,432,767        15,713,579   

Short-term borrowings

     850,289        1,044,454   

Long-term debt

     360,272        353,890   

Accrued interest payable

     9,093        8,284   

Other liabilities

     263,473        286,726   

Total liabilities

     16,915,894        17,406,933   

Stockholders’ equity

    

Common stock—$3.33 par value per share; 350,000,000 shares authorized, 84,769,973 and 84,705,496 issued and outstanding, respectively

     282,284        282,069   

Capital surplus

     1,638,225        1,634,634   

Retained earnings

     474,879        476,970   

Accumulated other comprehensive income (loss), net

     (20,185     (26,510

Total stockholders’ equity

     2,375,203        2,367,163   

Total liabilities and stockholders’ equity

   $ 19,291,097      $ 19,774,096   

 

 

See notes to unaudited condensed consolidated financial statements.

 

1


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share)

 

     Three Months Ended
March 31,
 
      2012      2011  

Interest income:

     

Loans, including fees

   $ 166,228       $ 68,001   

Securities-taxable

     23,317         12,994   

Securities-tax exempt

     1,644         1,239   

Federal funds sold and other short term investments

     527         299   

Total interest income

     191,716         82,533   

Interest expense:

     

Deposits

     10,263         14,009   

Short-term borrowings

     1,639         1,688   

Long-term debt and other interest expense

     3,526         72   

Total interest expense

     15,428         15,769   

Net interest income

     176,288         66,764   

Provision for loan losses

     10,015         8,822   

Net interest income after provision for loan losses

     166,273         57,942   

Noninterest income:

     

Service charges on deposit accounts

     16,274         9,544   

Bank card fees

     8,464         3,510   

Trust fees

     8,738         3,991   

Insurance commissions and fees

     3,477         3,249   

Investment and annuity fees

     4,415         3,133   

ATM fees

     4,334         2,731   

Secondary mortgage market operations

     4,002         1,567   

Accretion of indemnification asset

     3,000         3,044   

Other income

     8,790         3,414   

Securities gains (losses), net

     12         (51

Total noninterest income

     61,506         34,132   

Noninterest expense:

     

Compensation expense

     75,584         29,408   

Employee benefits

     19,743         8,427   

Salaries and employee benefits

     95,327         37,835   

Net occupancy expense

     14,642         5,911   

Equipment expense

     7,090         2,854   

Data processing expense

     14,191         5,145   

Professional services expense

     25,102         5,260   

Telecommunications and postage

     6,158         2,760   

Advertising

     6,690         2,049   

Deposit insurance and regulatory fees

     3,392         3,112   

Amortization of intangibles

     8,304         614   

Other expense

     24,567         7,479   

Total noninterest expense

     205,463         73,019   

Income before income taxes

     22,316         19,055   

Income taxes

     3,821         3,727   

Net income

   $ 18,495       $ 15,328   

 

 

Basic earnings per common share

   $ 0.22       $ 0.41   

 

 

Diluted earnings per common share

   $ 0.21       $ 0.41   

 

 

Dividends paid per share

   $ 0.24       $ 0.24   

 

 

Weighted avg. shares outstanding-basic

     84,741         37,333   

 

 

Weighted avg. shares outstanding-diluted

     85,442         37,521   

 

 

See notes to unaudited condensed consolidated financial statements.

 

2


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands, except share and per share data)

 

     Three Months Ended
March 31,
 
      2012     2011  

Net income

   $ 18,495      $ 15,328   

Other comprehensive income, net of tax:

    

Net change from retirement benefits plans

     1,097        (316

Unrealized net holding gain on securities, net of reclassifications

     5,413        2,942   

Net unrealized loss on derivatives and hedging

     (185     —     

Other comprehensive income

     6,325        2,626   

Comprehensive income

   $ 24,820      $ 17,954   
                  

See notes to unaudited condensed consolidated financial statements.

 

3


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share data)

 

                               

Accumulated

Other
Comprehensive

Income (Loss), net

       
     Common Stock     

Capital

Surplus

    

Retained

Earnings

     

Total

 
    

Shares

    

Amount

           
   

Balance, January 1, 2011

     36,893,276       $ 122,855       $ 263,484       $ 470,828      $ (619   $ 856,548   

Net income

     —           —           —           15,328        —          15,328   

Other comprehensive income

     —           —           —           —          2,626        2,626   

Cash dividends declared ($0.24 per common share)

     —           —           —           (8,961     —          (8,961

Common stock offering

     6,201,500         20,651         170,267         —          —          190,918   

Common stock activity, long-term incentive plan, including excess income tax benefit of $74

     43,831         146         1,094         —          —          1,240   

Balance, March 31, 2011

     43,138,607       $ 143,652       $ 434,845       $ 477,195      $ 2,007      $ 1,057,699   
                                                     

Balance, January 1, 2012

     84,705,496       $ 282,069       $ 1,634,634       $ 476,970      $ (26,510   $ 2,367,163   

Net income

     —           —           —           18,495        —          18,495   

Other comprehensive income

     —           —           —           —          6,325        6,325   

Cash dividends declared ($0.24 per common share)

     —           —           —           (20,586     —          (20,586

Common stock issued, long-term incentive plan, including excess income tax benefit of $15.

     64,477         215         3,591         —          —          3,806   

Balance, March 31, 2012

     84,769,973       $ 282,284       $ 1,638,225       $ 474,879      $ (20,185   $ 2,375,203   
                                                     

See notes to unaudited condensed consolidated financial statements.

 

4


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Three Months Ended March 31,  
      2012     2011  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 18,495      $ 15,328   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     8,695        3,196   

Provision for loan losses

     10,015        8,822   

Losses on other real estate owned

     1,502        473   

Deferred tax (benefit)

     (2,035     (1,851

(Increase) in cash surrender value of life insurance contracts

     (6,171     (3,468

Loss (gain) on disposal of other assets

     78        (597

Net decrease on loans originated for sale

     29,894        6,612   

Net amortization of securities premium/discount

     13,603        1,767   

Amortization of intangible assets

     8,304        620   

Stock-based compensation expense

     2,424        1,094   

(Decrease) in interest payable and other liabilities

     (21,090     (2,570

(Increase) in FDIC indemnification asset

     (9,685     (14,125

Decrease (increase) in other assets

     24,524        (11,164

Other, net

     (15     (100

Net cash provided by operating activities

     78,538        4,037   

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Proceeds from sales of securities available for sale

     477        —     

Proceeds from maturities of securities available for sale

     348,222        98,488   

Purchases of securities available for sale

     (10,013     (200,334

Purchases of investment securities held to maturity

     (253,114     —     

Net decrease (increase) in interest-bearing time deposits

     176,408        (110,463

Net (increase) in federal funds sold and short term investments

     (494     (9,946

Net (increase) decrease in loans

     45,143        114,748   

Purchases of property and equipment

     (3,756     (33,197

Proceeds from sales of property and equipment

     1,799        1,612   

Proceeds from sales of other real estate

     24,457        3,635   

Net cash provided by (used in) investing activities

     329,129        (135,457

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net (decrease) in deposits

     (280,813     (78,409

Net (decrease) increase in short-term borrowings

     (194,165     51,489   

Proceeds (repayments) of long-term debt

     6,382        (11

Repayments of short-term debt

     —          (58

Dividends paid

     (20,586     (8,961

Proceeds from exercise of stock options

     1,367        72   

Proceeds from stock offering

     —          190,918   

Excess tax benefit from stock option exercises

     15        74   

Net cash (used in) provided by financing activities

     (487,800     155,114   

NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS

     (80,133     23,694   

CASH AND DUE FROM BANKS, BEGINNING

     437,947        139,687   

CASH AND DUE FROM BANKS, ENDING

   $ 357,814      $ 163,381   
                  

SUPPLEMENTAL INFORMATION FOR NON-CASH

    

INVESTING AND FINANCING ACTIVITIES

    

Assets acquired in settlement of loans

   $ 84,710      $ 13,086   

Transfers from available for sale securities to held to maturity securities

     1,484,957        —     

See notes to unaudited condensed consolidated financial statements.

 

5


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Holding Company and all majority-owned subsidiaries (the “Company”). They include all adjustments that are, in the opinion of management, necessary to present fairly the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. Some financial information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2011 Annual Report on Form 10-K. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual periods.

Use of Estimates

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry. These accounting principles require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying footnotes. Actual results could differ significantly from those estimates.

Critical Accounting Policies and Estimates

There have been no material changes or developments underlying assumption or methodologies that the Company uses when applying what management believes are critical accounting policies and estimates and developing critical accounting estimates as disclosed in our Form 10-K for the year ended December 31, 2011.

Securities

Securities that the Company both positively intends and has the ability to hold to maturity are classified as securities held to maturity and are carried at amortized cost. The intent and ability to hold are not considered satisfied when a security is available to be sold in response to changes in interest rates, prepayment rates, liquidity needs or other reasons as part of an overall asset/liability management strategy.

Premiums and discounts on securities, both those held to maturity and those available for sale, are amortized and accreted to income as an adjustment to the securities’ yields using the interest method. Realized gains and losses on securities, including declines in value judged to be other than temporary, are reported net as a component of noninterest income. The cost of securities sold is specifically identified for use in calculating realized gains and losses.

2. Fair Value

The FASB defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The FASB’s guidance also established a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

6


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s financial assets and liabilities that are measured at fair value (in thousands) on a recurring basis in the consolidated balance sheets.

 

     March 31, 2012  
      (Level 1)      (Level 2)      Total  

Assets

        

Available for sale debt securities:

        

U.S. Treasury and government agency securities

   $ 169,134       $ —         $ 169,134   

Debt securities issued by states of the United States and political subdivisions of the states

     —           95,923         95,923   

Corporate debt securities

     3,750         —           3,750   

Residential mortgage-backed securities

     —           2,294,897         2,294,897   

Equity securities

     14,827         —           14,827   

 

 

Total available-for-sale securities

     187,711         2,390,820         2,578,531   

 

 

Derivatives

        

Interest rate contracts - assets

     —           14,845         14,845   

 

 

Total recurring fair value measurements - assets

   $ 187,711       $ 2,405,665       $ 2,593,376   

 

 

Liabilities

        

Derivatives

        

Interest rate contracts - liabilities

     —           15,656         15,656   

 

 

Total recurring fair value measurements - liabilities

   $ —         $ 15,656       $ 15,656   

 

 
        
     December 31, 2011  
      (Level 1)      (Level 2)      Total  

Assets

        

Available for sale debt securities:

        

U.S. Treasury and government agency securities

   $ 250,067       $ —         $ 250,067   

Debt securities issued by states of the United

        

States and political subdivisions of the states

     —           309,665         309,665   

Corporate debt securities

     4,494         —           4,494   

Residential mortgage-backed securities

     —           2,480,345         2,480,345   

Collateralized mortgage obligations

     —           1,446,076         1,446,076   

Equity securities

     6,253         —           6,253   

 

 

Total available-for-sale securities

     260,814         4,236,086         4,496,900   

 

 

Derivatives

        

Interest rate contracts - assets

     —           14,952         14,952   

 

 

Total recurring fair value measurements - assets

   $ 260,814       $ 4,251,038       $ 4,511,852   

 

 

Liabilities

        

Derivatives

        

Interest rate contracts - liabilities

     —           15,643         15,643   

 

 

Total recurring fair value measurements - liabilities

   $ —         $ 15,643       $ 15,643   

 

 

 

7


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

Securities classified as level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and certain other debt and equity securities. Level 2 classified securities include mortgage-backed debt securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for investment securities were obtained from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs were observable in the marketplace or can be supported by observable data. The Company invests only in high quality securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two to five years. Company policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a nationally recognized statistical rating agency, except for certain non-rated obligations of counties, parishes and municipalities within our markets in Mississippi, Louisiana, Texas, Florida and Alabama. There were no transfers between valuation hierarchy levels during the periods shown.

The fair value of derivative financial instruments, which are predominantly interest rate swaps, is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, such as interest rate futures, observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and the counterparties. Although the Company has determined that the majority of the inputs used to value the derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations in their entirety in level 2 of the fair value hierarchy. The Company’s policy is to measure counterparty credit risk for all derivative instruments subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.

 

8


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent impaired loans are level 2 assets measured using third-party appraisals of the collateral or other market-based information such as recent sales activity for similar assets in the property’s market. Other real estate owned are level 2 assets carried at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less. Fair values are determined by sales agreement or third-party appraisal.

The following tables present for each of the fair value hierarchy levels the Company’s financial assets that are measured at fair value (in thousands) on a nonrecurring basis.

 

      (Level 1)      (Level 2)      Total  

Impaired loans

   $ —         $ 53,643       $ 53,643   

Other real estate owned

     —           155,803         155,803   

 

 

Total nonrecurring fair value measurements

   $ —         $ 209,446       $ 209,446   

 

 
     

Quoted Prices

in Active Markets for
Identical Assets
(Level 1)

    

December 31, 2011
Significant

Other

Observable Inputs
(Level 2)

     Total  

Impaired loans

   $ —         $ 55,252       $ 55,252   

Other real estate owned

     —           144,367         144,367   

 

 

Total nonrecurring fair value measurements

   $ —         $ 199,619       $ 199,619   

 

 

 

9


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off- balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.

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

Securities - The fair values measurement for securities available for sale was discussed earlier. The same measurement techniques were applied to the valuation of securities held to maturity.

Loans, Net - The fair value measurement for certain impaired loans was discussed earlier. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows by discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.

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

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

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

Long-Term Debt- The fair value is estimated by discounting the future contractual cash flows using current market rates at which similar notes over the same remaining term could be obtained.

Derivative Financial Instruments - The fair value measurement for derivative financial instrument was discussed earlier.

 

10


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amount at March 31, 2012 and December 31, 2011 (in thousands):

 

     March 31, 2012     

Total

Fair Value

    

Carrying

Amount

 
     (Level 1)      (Level 2)      (Level 3)        

 

 

Financial assets:

              

Cash, interest-bearing deposits, federal funds sold, and short-term investments

   $ 1,366,319       $ —         $ —         $ 1,366,319       $ 1,366,319   

Available for sale securities

     187,711         2,390,820            2,578,531         2,578,531   

Held to maturity securities

     182,471         1,632,132            1,814,603         1,815,314   

Loans, net

     —           —           11,172,701         11,172,701         10,987,936   

Loans held for sale

     —           —           42,484         42,484         42,484   

Accrued interest receivable

     52,821         —           —           52,821         52,821   

Derivative financial instruments

     —           14,845         —           14,845         14,845   

Financial liabilities:

              

Deposits

   $ —         $ —         $ 15,449,563       $ 15,449,563         15,432,767   

Federal funds purchased

     23,692         —           —           23,692         23,692   

Securities sold under agreements to repurchase

     826,596         —           —           826,596         826,596   

Long-term debt

     —           383,483            383,483         360,272   

Accrued interest payable

     9,093         —           —           9,093         9,093   

Derivative financial instruments

     —           15,246         —           15,246         15,246   
              
     December 31, 2011     

Total

Fair Value

    

Carrying

Amount

 
     (Level 1)      (Level 2)      (Level 3)        

 

 

Financial assets:

              

Cash, interest-bearing deposits, federal funds sold, and short-term investments

   $ 1,622,366       $ —         $ —           1,622,366       $ 1,622,366   

Available for sale securities

     260,814         4,236,086            4,496,900         4,496,900   

Loans, net

     —           —           11,189,662         11,189,662         11,052,144   

Loans held for sale

     —           —           72,378         72,378         72,378   

Accrued interest receivable

     53,973         —           —           53,973         53,973   

Derivative financial instruments

     —           14,952         —           14,952         14,952   

Financial liabilities:

              

Deposits

   $ —         $ —         $ 15,737,667       $ 15,737,667         15,713,579   

Federal funds purchased

     16,819         —           —           16,819         16,819   

Securities sold under agreements to repurchase

     1,027,635         —           —           1,027,635         1,027,635   

Long-term debt

     —           365,421            365,421         353,890   

Accrued interest payable

     8,284         —           —           8,284         8,284   

Derivative financial instruments

     —           15,643         —           15,643         15,643   

 

11


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

3. Securities

The amortized cost and fair value of securities classified as available for sale and held to maturity follow (in thousands):

 

Securities Available for Sale  
              March 31, 2012                      December 31, 2011          
      Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    

Fair

Value

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    

Fair

Value

 

U.S. Treasury

   $ 150       $ 13       $ —         $ 163       $ 150       $ 14       $ —         $ 164   

U.S. government agencies

     168,409         562         —           168,971         248,595         1,308         —           249,903   

Municipal obligations

     94,843         1,118         38         95,923         294,489         15,218         42         309,665   

Mortgage-backed securities

     2,232,306         62,927         336         2,294,897         2,422,891         58,150         696         2,480,345   

CMOs

     —           —           —           —           1,426,495         21,774         2,193         1,446,076   

Other debt securities

     3,750         —           —           3,750         4,517         11         34         4,494   

Other equity securities

     13,749         1,088         10         14,827         4,208         2,086         41         6,253   

 

 
   $ 2,513,207       $ 65,708       $ 384       $ 2,578,531       $ 4,401,345       $ 98,561       $ 3,006       $ 4,496,900   

 

 
Securities Held to Maturity  
              March 31, 2012                      December 31, 2011          
      Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair Value      Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair Value  

Municipal obligations

   $ 182,471       $ —         $ —         $ 182,471         —           —           —           —     

Mortgage-backed securities

     153,864         —           1,096         152,768         —           —           —           —     

CMOs

     1,478,979         385         —           1,479,364         —           —           —           —     

 

 
   $ 1,815,314       $ 385       $ 1,096       $ 1,814,603         —           —           —           —     

 

 

During the first quarter of 2012, the Company reclassified approximately $1.5 billion of securities available for sale as securities held to maturity. As a result of the acquisition of Whitney National Bank, the securities portfolio grew to such a size that the company determined that only a portion of the portfolio is needed for liquidity purposes. The securities reclassified consisted primarily of CMOs and in-market municipal securities. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. The unrealized net holding gain on the available for sale securities on the date of transfer totaled approximately $39 million, and continues to be reported, net of tax, as a component of accumulated other comprehensive income. This net unrealized gain will be accreted to interest income over the remaining life of the securities as a yield adjustment, which will serve to offset the impact of the amortization of the net premium created in the transfer. There were no gains or losses recognized as a result of this transfer.

 

12


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

3. Securities (continued)

 

The following table presents the amortized cost and fair value of securities classified as available for sale and held to maturity at March 31, 2012, by contractual maturity (in thousands). Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties.

 

      Amortized
Cost
    

Fair

Value

 

Securities Available for Sale

     

 

 

Due in one year or less

   $ 217,412       $ 218,057   

Due after one year through five years

     61,956         63,133   

Due after five years through ten years

     290,851         300,361   

Due after ten years

     1,938,703         1,991,617   

Equity securities

     4,285         5,363   

 

 

Total available for sale securities

   $ 2,513,207       $ 2,578,531   

 

 

 

      Amortized
Cost
    

Fair

Value

 

Held to maturity

     

 

 

Due in one year or less

   $ 16,838       $ 16,940   

Due after one year through five years

     187,112         191,205   

Due after five years through ten years

     100,147         108,840   

Due after ten years

     1,511,217         1,497,618   

 

 

Total held to maturity securities

   $ 1,815,314       $ 1,814,603   

 

 

The Company held no securities classified as trading at March 31, 2012 or December 31, 2011. The Company held no securities classified as held to maturity at December 31, 2011.

The details concerning securities classified as available for sale with unrealized losses as of March 31, 2012 follow (in thousands):

Available for sale

 

      Losses < 12 months      Losses 12 months or >      Total  
      Fair
Value
     Gross
Unrealized
Losses
     Fair
Value
     Gross
Unrealized
Losses
     Fair
Value
     Gross
Unrealized
Losses
 

U.S. Treasury

   $ —         $ —         $ —         $ —         $ —         $ —     

U.S. government agencies

     —           —           —           —           —           —     

Municipal obligations

     8,992         35         569         3         9,561         38   

Mortgage-backed securities

     39,066         333         300         3         39,366         336   

CMOs

     —           —           —           —           —           —     

Other debt securities

     —           —           —           —           —           —     

Equity securities

     215         8         2         2         217         10   

 

 
   $ 48,273       $ 376       $ 871       $ 8       $ 49,144       $ 384   

 

 

 

13


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

3. Securities (continued)

 

The details concerning securities classified as available for sale with unrealized losses as of December 31, 2011 follow (in thousands):

 

Available for sale                                          
      Losses < 12 months      Losses 12 months or >      Total  
      Fair Value     

Gross

Unrealized

Losses

     Fair
Value
     Gross
Unrealized
Losses
    

Fair

Value

     Gross
Unrealized
Losses
 

U.S. Treasury

   $ —         $ —         $ —         $ —         $ —         $ —     

U.S. government agencies

     —           —           —           —           —           —     

Municipal obligations

     18,854         42         —           —           18,854         42   

Mortgage-backed securities

     212,900         692         337         4         213,237         696   

CMOs

     296,860         2,193         —           —           296,860         2,193   

Other debt securities

     398         34         —           —           398         34   

Equity securities

     1,685         39         2         2         1,687         41   

 

 
   $ 530,697       $ 3,000       $ 339       $ 6       $ 531,036       $ 3,006   

 

 

The details concerning securities classified as held to maturity with unrealized losses as of March 31, 2012 follow (in thousands):

 

Held to maturity                                          
      Losses < 12 months      Losses 12 months or >      Total  
      Fair
Value
     Gross
Unrealized
Losses
     Fair Value      Gross
Unrealized
Losses
    

Fair

Value

     Gross
Unrealized
Losses
 

Mortgage-backed securities

   $ —         $ —         $ 152,768       $ 1,096       $ 152,768       $ 1,096   

 

 
   $ —         $ —         $ 152,768       $ 1,096       $ 152,768       $ 1,096   

 

 

Substantially all of the unrealized losses relate mainly to changes in market rates on fixed-rate debt securities since the respective purchase date. In all cases, the indicated impairment would be recovered by the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. The Company has adequate liquidity and, therefore, does not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

Securities with a fair value of approximately $2.7 billion at March 31, 2012 and $3.0 billion at December 31, 2011 were pledged primarily to secure public deposits or securities sold under agreements to repurchase.

 

14


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses

Loans, net of unearned income, totaled $11.1 billion at March 31, 2012 compared to $11.2 billion at December 31, 2011. Originated loans totaled $5.5 billion at March 31, 2012 compared to $4.9 billion at December 31, 2011. Originated loans include loans from legacy Hancock and loans newly originated from legacy Whitney locations. Acquired loans totaled $5.0 billion at March 31, 2012 compared to $5.6 billion at December 31, 2011. Acquired loans are those purchased in the Whitney acquisition on June 4, 2011. Covered loans totaled $633.8 million at March 31, 2012 compared to $671.4 million at December 31, 2011. Covered loans refer to loans acquired in the Peoples First FDIC-assisted transaction that are subject to loss-sharing agreements with the FDIC.

Loans, net of unearned income, consisted of the following:

 

     March 31,
2012
     December 31,
2011
 
     (In thousands)  

Originated loans:

     

Commerical

   $ 1,666,845       $ 1,525,409   

Construction

     639,217         540,806   

Real estate

     1,396,466         1,259,757   

Residential mortgage loans

     564,218         487,147   

Consumer loans

     1,184,261         1,074,611   
  

 

 

    

 

 

 

Total originated loans

   $ 5,451,007       $ 4,887,730   
  

 

 

    

 

 

 

Acquired loans:

     

Commerical

   $ 2,045,474       $ 2,236,758   

Construction

     524,570         603,371   

Real estate

     1,495,280         1,656,515   

Residential mortgage loans

     671,275         734,669   

Consumer loans

     308,883         386,540   
  

 

 

    

 

 

 

Total acquired loans

   $ 5,045,482       $ 5,617,853   
  

 

 

    

 

 

 

Covered loans:

     

Commerical

   $ 42,273       $ 38,063   

Construction

     121,427         118,828   

Real estate

     60,823         82,651   

Residential mortgage loans

     275,856         285,682   

Consumer loans

     133,405         146,219   
  

 

 

    

 

 

 

Total covered loans

   $ 633,784       $ 671,443   
  

 

 

    

 

 

 

Total loans:

     

Commerical

   $ 3,754,592       $ 3,800,230   

Construction

     1,285,214         1,263,005   

Real estate

     2,952,569         2,998,923   

Residential mortgage loans

     1,511,349         1,507,498   

Consumer loans

     1,626,549         1,607,370   
  

 

 

    

 

 

 

Total loans

   $ 11,130,273       $ 11,177,026   
  

 

 

    

 

 

 

 

15


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

The following briefly describes the distinction between originated, acquired and covered loans and certain significant accounting policies relevant to each category.

Originated loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recognized in income as earned. The accrual of interest on originated loans is discontinued when it is probable that the borrower will be unable to meet payment obligations as they become due. The Company maintains an allowance for loan losses on originated loans that represents management’s estimate of probable losses inherent in this portfolio category. The methodology for estimating the allowance is described in Note 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. As actual losses are incurred, they are charged against the allowance. Subsequent recoveries are added back to the allowance when collected.

Acquired loans

Acquired loans are those purchased in the Whitney Holding Corporation acquisition on June 4, 2011. These loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated between those considered to be performing (“acquired performing”) and those with evidence of credit deterioration (“acquired impaired”), and then further segregated into pools using common risk characteristics, such as loan type, geography and risk rating. The fair value estimate for each pool was based on an estimate of cash flows, both principal and interest, expected to be collected from that pool, discounted at prevailing market rates of interest. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

The difference between the fair value of a acquired performing loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool. Management estimates an allowance for loan losses for acquired performing loans at each subsequent reporting date using a methodology similar to that used for originated loans. The allowance determined for each loan pool is compared to the remaining fair value discount for that pool. If greater, the excess is added to the reported allowance through a provision for loan losses. If less, no additional allowance or provision is recognized. Actual losses are first charged against any remaining fair value discount for the loan pool. Once the discount is fully depleted, losses are applied against the allowance established for that pool.

The excess of cash flows expected to be collected from an acquired impaired loan pool over the pool’s estimated fair value at acquisition is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the pool. Management updates the estimate of cash flows expected to be collected on each acquired impaired loan pool at each reporting date. If expected cash flows for a pool decrease, an increase in the reported allowance for loan losses is made through a provision for loan losses. If expected cash flows for a pool increase, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into interest income over the remaining life of the loan pool.

Covered loans and the related loss share indemnification asset

The loans purchased in the 2009 acquisition of Peoples First Community Bank are covered by two loss share agreements between the FDIC and the Company that afford the Company significant loss protection. Covered loans are accounted for as acquired impaired loans as described above. The loss share indemnification asset is measured separately from the related covered loans as it is not contractually embedded in the loans and is not transferable should the loans be sold. The fair value of the indemnification asset at acquisition was estimated by discounting projected cash flows from the loss share agreements based on expected reimbursements for allowable loss claims, including appropriate consideration of possible true-up payments to the FDIC at the expiration of the agreements. The discounted amount is accreted into non-interest income over the remaining life of the covered loan pool or the life of the shared loss agreement.

In the following discussion and tables, commercial loans include the commercial, construction and real estate loans categories shown in previous table.

 

16


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

The following schedule shows activity in the allowance for loan losses, by portfolio segment and the related corresponding recorded investment in loans, for the three months ended March 31, 2012 and March 31, 2011:

 

     Commercial     Residential
mortgages
    Consumer     Total  
(In thousands)    March 31, 2012  

Allowance for loan losses:

        

Beginning balance

   $ 78,414      $ 13,918      $ 32,549      $ 124,881   

Charge-offs

     (24,919     (1,118     (3,578     (29,615

Recoveries

     4,212        397        1,523        6,132   

Net provision for loan losses (a)

     10,473        3,639        (4,097     10,015   

Increase in indemnification asset (a)

     15,758        12,397        2,769        30,924   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 83,938      $ 29,233      $ 29,166      $ 142,337   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balances:

        

Individually evaluated for impairment

   $ 10,634      $ 565      $ —        $ 11,199   

Collectively evaluated for impairment

   $ 73,304      $ 28,668      $ 29,166      $ 131,138   

Covered loans with deteriorated credit quality

   $ 18,446      $ 22,074      $ 17,322      $ 57,842   

Loans:

        

Ending balances:

        

Total

   $ 7,992,375      $ 1,511,349      $ 1,626,549      $ 11,130,273   

Individually evaluated for impairment

   $ 48,338      $ 8,084      $ —        $ 56,422   

Collectively evaluated for impairment

   $ 7,719,514      $ 1,227,409      $ 1,493,144      $ 10,440,067   

Covered loans

   $ 224,523      $ 275,856      $ 133,405      $ 633,784   

Acquired loans (b)

   $ 4,065,324      $ 671,275      $ 308,883      $ 5,045,482   

 

(a)

The Company increased the allowance by $32.6 million for losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $30.9 million increase in the FDIC indemnification asset.

(b)

Acquired loans were recorded at fair value with no allowance brought forward in accordance with acquisition accounting. There has been no allowance since acquisition.

 

     Commercial     Residential
mortgages
    Consumer     Total  
(In thousands)    March 31, 2011  

Allowance for loan losses:

        

Beginning balance

   $ 56,859      $ 4,626      $ 20,512      $ 81,997   

Charge-offs

     (4,754     (1,142     (3,183     (9,079

Recoveries

     574        771        917        2,262   

Net provision for loan losses (a)

     6,837        687        1,298        8,822   

Increase in indemnification asset (a)

     10,354        —          —          10,354   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 69,870      $ 4,942      $ 19,544      $ 94,356   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balances:

        

Total

   $ 10,627      $ 1,310      $ —        $ 11,937   

Collectively evaluated for impairment

   $ 59,243      $ 3,632      $ 19,544      $ 82,419   

Covered loans with deteriorated credit quality

   $ 10,899      $ —        $ —        $ 10,899   

Loans:

        

Ending balance:

   $ 3,089,365      $ 630,092      $ 1,121,518      $ 4,840,975   

Individually evaluated for impairment

   $ 53,093      $ 6,258      $ —        $ 59,351   

Collectively evaluated for impairment

   $ 2,673,605      $ 353,793      $ 977,132      $ 4,004,530   

Covered loans

   $ 362,667      $ 270,041      $ 144,386      $ 777,094   

 

(a)

The Company increased the allowance by $10.9 million for losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $10.4 million increase in the FDIC indemnification asset.

 

17


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

The following table shows the composition of non-accrual loans by portfolio segment and class. Covered and acquired loans are considered to be performing due to the application of the accretion method and are excluded from the table. Certain covered loans accounted for using the cost recovery method do not have an accretable yield and are disclosed below as non-accrual loans.

 

     March 31,      December 31,  
     2012      2011  
     (In thousands)  

Originated loans:

     

Commercial loans

   $ 77,237       $ 55,046   

Residential mortgage loans

     24,253         24,406   

Consumer loans

     3,883         3,855   
  

 

 

    

 

 

 

Total originated loans

   $ 105,373       $ 83,307   
  

 

 

    

 

 

 

Acquired loans:

     

Commercial loans

   $ 284       $ —     

Residential mortgage loans

     1,251         —     

Consumer loans

     274         1,117   
  

 

 

    

 

 

 

Total acquired loans

   $ 1,809       $ 1,117   
  

 

 

    

 

 

 

Covered loans:

     

Commercial loans

   $ 8,774       $ 18,209   

Residential mortgage loans

     603         637   

Consumer loans

     —           —     
  

 

 

    

 

 

 

Total covered loans

   $ 9,377       $ 18,846   
  

 

 

    

 

 

 

Total loans:

     

Commercial loans

   $ 86,295       $ 73,255   

Residential mortgage loans

     26,107         25,043   

Consumer loans

     4,157         4,972   
  

 

 

    

 

 

 

Total loans

   $ 116,559       $ 103,270   
  

 

 

    

 

 

 

The amount of interest that would have been recorded on nonaccrual loans for the three months ended March 31, 2012 was approximately $1.7 million. Interest actually received on nonaccrual loans during the three months ended March 31, 2012 was $0.5 million.

 

18


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

The table below details the troubled debt restructurings (TDR) that occurred during the current and prior year quarter by portfolio segment (dollar amounts in thousands). During these periods, no loan modified as a TDR defaulted within twelve months of its modification date. A reserve analysis is completed on all loans that have been determined to be troubled debt restructurings by Management. All troubled debt restructurings are rated substandard and are considered impaired in calculating the allowance for loan losses.

 

              March 31, 2012                      March 31, 2011          
      Number
of
Contracts
     Pre-Modification
Outstanding
Recorded
Investment
     Post-Modification
Outstanding
Recorded
Investment
     Number
of
Contracts
     Pre-Modification
Outstanding
Recorded
Investment
     Post-Modification
Outstanding
Recorded
Investment
 

Troubled Debt Restructurings:

                 

Commercial

     30       $ 21,770       $ 18,165         15       $ 20,694       $ 18,431   

Mortgage real estate

     4         1,879         1,761         3         1,342         1,326   

 

 

Total

     34       $ 23,649       $ 19,926         18       $ 22,036       $ 19,757   

 

 

 

19


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

The following table presents impaired loans disaggregated by class at March 31, 2012 and December 31, 2011:

 

March 31, 2012    Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
            (In thousands)                       

Total loans:

              

With no related allowance recorded:

              

Commercial

   $ 8,821       $ 21,651       $ —         $ 16,030       $ 24   

Residential mortgages

     1,540         3,087         —           2,316         —     

Consumer

     —           —           —           —           —     

 

 
     10,361         24,738         —           18,346         24   

With an allowance recorded:

              

Commercial

     57,112         79,203         10,634         55,102         179   

Residential mortgages

     8,687         10,723         565         5,917         32   

Consumer

     —           —           —           —           —     

 

 
     65,799         89,926         11,199         61,019         211   

Total:

              

Commercial

     65,933         100,854         10,634         71,132         203   

Residential mortgages

     10,227         13,810         565         8,233         32   

Consumer

     —           —           —           —           —     

 

 

Total loans

   $ 76,160       $ 114,664       $ 11,199       $ 79,365       $ 235   

 

 
December 31, 2011    Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
            (In thousands)                       

Total loans:

              

With no related allowance recorded:

              

Commercial

   $ 28,051       $ 46,692       $ —         $ 18,461       $ 359   

Residential mortgages

     1,582         2,802         —           2,934         58   

Consumer

     —           —           —           —           —     

 

 
     29,633         49,494         —           21,395         417   

With an allowance recorded:

              

Commercial

     28,369         33,503         6,997         59,724         254   

Residential mortgages

     4,298         5,588         570         5,059         7   

Consumer

     —           —           —           —           —     

 

 
     32,667         39,091         7,567         64,783         261   

Total:

              

Commercial

     56,420         80,195         6,997         78,185         613   

Residential mortgages

     5,880         8,390         570         7,993         65   

Consumer

     —           —           —           —           —     

 

 

Total loans

   $ 62,300       $ 88,585       $ 7,567       $ 86,178       $ 678   

 

 

 

20


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Condensed and Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

Covered and acquired loans with an accretable yield are considered to be current in the following table. Certain covered loans accounted for using the cost recovery method are disclosed according to their contractual payment status below. The following table presents the age analysis of past due loans.

 

March 31, 2012    30-89 days
past due
    

Greater than
90 days

past due

    

Total

past due

     Current     

Total

Loans

    

Recorded
investment

> 90 days

and accruing

 
     (In thousands)  

Originated loans:

                 

Commercial loans

   $ 20,153       $ 79,222       $ 99,375       $ 3,603,153       $ 3,702,528       $ 1,983   

Residential mortgages loans

     19,161         24,636         43,797         520,421         564,218         383   

Consumer loans

     3,818         4,040         7,858         1,176,403         1,184,261         158   

 

 

Total

   $ 43,132       $ 107,898       $ 151,030       $ 5,299,977       $ 5,451,007       $ 2,524   

 

 

Acquired loans:

                 

Commercial loans

   $ 338       $ 305       $ 643       $ 4,064,681       $ 4,065,324       $ 21   

Residential mortgages loans

     4,696         2,450         7,146         664,129         671,275         1,199   

Consumer loans

     310         309         619         308,264         308,883         36   

 

 

Total

   $ 5,344       $ 3,064       $ 8,408       $ 5,037,074       $ 5,045,482       $ 1,256   

 

 

Covered loans:

                 

Commercial loans

   $ —         $ 8,774       $ 8,774       $ 215,749       $ 224,523       $ —     

Residential mortgages loans

     —           603         603         275,253         275,856         —     

Consumer loans

     —           —           —           133,405         133,405         —     

 

 

Total

   $ —         $ 9,377       $ 9,377       $ 624,407       $ 633,784       $ —     

 

 

Total loans:

                 

Commercial loans

   $ 20,491       $ 88,301       $ 108,792       $ 7,883,583       $ 7,992,375       $ 2,004   

Residential mortgages loans

     23,857         27,689         51,546         1,459,803         1,511,349         1,582   

Consumer loans

     4,128         4,349         8,477         1,618,072         1,626,549         194   

 

 

Total

   $ 48,476       $ 120,339       $ 168,815       $ 10,961,458       $ 11,130,273       $ 3,780   

 

 
December 31, 2011    30-89 days
past due
    

Greater than
90 days

past due

    

Total

past due

     Current     

Total

Loans

     Recorded
investment >
90 days and
accruing
 
                   (In thousands)                

Originated loans:

                 

Commercial loans

   $ 24,939       $ 58,867       $ 83,806       $ 3,242,166       $ 3,325,972       $ 3,821   

Residential mortgages loans

     22,248         25,400         47,648         439,499         487,147         994   

Consumer loans

     4,284         3,911         8,195         1,066,416         1,074,611         56   

 

 

Total

   $ 51,471       $ 88,178       $ 139,649       $ 4,748,081       $ 4,887,730       $ 4,871   

 

 

Acquired loans:

                 

Commercial loans

   $ —         $ —         $ —         $ 4,496,644       $ 4,496,644       $ —     

Residential mortgages loans

     —           —           —           734,669         734,669         —     

Consumer loans

     2,128         2,126         4,254         382,286         386,540         1,009   

 

 

Total

   $ 2,128       $ 2,126       $ 4,254       $ 5,613,599       $ 5,617,853       $ 1,009   

 

 

Covered loans:

                 

Commercial loans

   $ —         $ 18,209       $ 18,209       $ 221,333       $ 239,542       $ —     

Residential mortgages loans

     —           637         637         285,045         285,682         —     

Consumer loans

     —           —           —           146,219         146,219         —     

 

 

Total

   $ —         $ 18,846       $ 18,846       $ 652,597       $ 671,443       $ —     

 

 

Total loans:

                 

Commercial loans

   $ 24,939       $ 77,076       $ 102,015       $ 7,960,143       $ 8,062,158       $ 3,821   

Residential mortgages loans

     22,248         26,037         48,285         1,459,213         1,507,498         994   

Consumer loans

     6,412         6,037         12,449         1,594,921         1,607,370         1,065   

 

 

Total

   $ 53,599       $ 109,150       $ 162,749       $ 11,014,277       $ 11,177,026       $ 5,880   

 

 

 

21


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

The following table presents the credit quality indicators of the Company’s various classes of loans at March 31, 2012 and December 31, 2011. December 31, 2011 commercial-originated and commercial-acquired, pass and substandard grades, were restated due to the correction of a misclassification. Commercial-originated pass was overstated with commercial-originated substandard understated by $91.6 million. Commercial-acquired pass was understated and commercial-acquired substandard was overstated by the same amount.

Commercial Credit Exposure

Credit Risk Profile by Internally Assigned Grade

 

      March 31, 2012      December 31, 2011  
      Commercial -
originated
     Commercial -
acquired
     Commercial -
covered
     Total
commercial
     Commercial -
originated
     Commercial -
acquired
     Commercial -
covered
     Total
commercial
 
     (In thousands)      (In thousands)  

Grade:

                       

Pass

   $ 3,345,698       $ 3,605,255       $ 14,209       $ 6,965,162       $ 3,019,100       $ 3,974,463       $ 16,843       $ 7,010,406   

Pass-Watch

     130,717         65,892         31,560         228,169         76,393         60,042         13,606         150,041   

Special Mention

     21,119         101,454         7,284         129,857         35,155         125,852         9,368         170,375   

Substandard

     204,312         292,126         116,703         613,141         194,900         334,357         124,371         653,628   

Doubtful

     682         597         54,767         56,046         424         1,930         75,242         77,596   

Loss

     —           —           —           —           —           —           112         112   

 

 

Total

   $ 3,702,528       $ 4,065,324       $ 224,523       $ 7,992,375       $ 3,325,972       $ 4,496,644       $ 239,542       $ 8,062,158   

 

 

Residential Mortgage Credit Exposure

Credit Risk Profile by Internally Assigned Grade

 

      March 31, 2012      December 31, 2011  
      Residential
mortgages -
originated
     Residential
mortgages -
acquired
     Residential
mortgages -
covered
     Total
residential
mortgages
     Residential
mortgages -
originated
     Residential
mortgages -
acquired
     Residential
mortgages -
covered
     Total
residential
mortgages
 
     (In thousands)      (In thousands)  

Grade:

                       

Pass

   $ 538,782       $ 608,321       $ 146,077       $ 1,293,180       $ 460,261       $ 673,751       $ 120,180       $ 1,254,192   

Pass-Watch

     3,816         3,289         16,577         23,682         7,499         1,773         18,133         27,405   

Special Mention

     1,206         6,230         2,057         9,493         542         9,686         3,286         13,514   

Substandard

     20,414         53,314         110,702         184,430         18,845         48,581         139,643         207,069   

Doubtful

     —           121         443         564         —           878         4,440         5,318   

Loss

     —           —           —           —           —           —           —           —     

 

 

Total

   $ 564,218       $ 671,275       $ 275,856       $ 1,511,349       $ 487,147       $ 734,669       $ 285,682       $ 1,507,498   

 

 

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity

 

      March 31, 2012      December 31, 2011  
      Consumer -
originated
     Consumer -
acquired
     Consumer -
covered
     Total
Consumer
     Consumer -
originated
     Consumer -
acquired
     Consumer -
covered
     Total
Consumer
 
     (In thousands)      (In thousands)  

Performing

   $ 1,180,378       $ 308,609       $ 133,405       $ 1,622,392       $ 1,070,756       $ 385,423       $ 146,219       $ 1,602,398   

Nonperforming

     3,883         274         —           4,157         3,855         1,117         —           4,972   

 

 

Total

   $ 1,184,261       $ 308,883       $ 133,405       $ 1,626,549       $ 1,074,611       $ 386,540       $ 146,219       $ 1,607,370   

 

 

 

22


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

All loans are reviewed periodically over the course of the year. Each Bank’s portfolio of loan relationships aggregating $500,000 or more is reviewed every 12 to 18 months by the Bank’s Loan Review staff with other loans also periodically reviewed.

Commercial:

 

   

Pass - loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.

 

   

Pass - Watch - Credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.

 

   

Special Mention - These credits exhibit some signs of “Watch”, but to a greater magnitude. These credits constitute an undue and unwarranted credit risk, but not to a point of justifying a classification of “Substandard”. They have weaknesses that, if not checked or corrected, weaken the asset or inadequately protect the bank.

 

   

Substandard - These credits constitute an unacceptable risk to the bank. They have recognized credit weaknesses that jeopardize the repayment of the debt. Repayment sources are marginal or unclear.

 

   

Doubtful - A Doubtful credit has all of the weaknesses inherent in one classified “Substandard” with the added characteristic that weaknesses make collection or liquidation in full highly questionable or improbable.

 

   

Loss - Credits classified as Loss are considered uncollectable and are charged off promptly once so classified.

Consumer:

 

   

Performing - Loans on which payments of principal and interest are less than 90 days past due.

 

   

Non-performing - A non-performing loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans rated as non-accrual are also non-performing.

The Company held $42.5 million and $72.4 million, respectively, in loans held for sale at March 31, 2012 and December 31, 2011. Of the $42.5 million, $9.3 million are problem commercial loans held for sale. The remainder of $33.2 million represents mortgage loans originated for sale, which are carried at the lower of cost or estimated fair value. Residential mortgage loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.

 

23


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Condensed and Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

Changes in the carrying amount of acquired impaired loans and accretable yield are presented in the following table:

 

     March 31, 2012     December 31, 2011  
     Covered     Non-covered     Covered     Non-covered  
     Carrying
Amount of
Loans
    Accretable
Yield
    Carrying
Amount of
Loans
    Accretable
Yield
    Carrying
Amount of
Loans
    Accretable
Yield
    Carrying
Amount of
Loans
    Accretable
Yield
 

(In thousands)

                

Balance at beginning of period

   $ 671,443      $ 153,137      $ 339,452      $ 130,691      $ 809,459      $ 107,638      $ —        $ —     

Additions

     —          —          —          —          —          —          535,489        132,136   

Payments received, net

     (107,893     —          (40,083     —          (193,432     —          (206,306     —     

Accretion

     12,392        (12,392     8,000        (8,000     55,416        (55,416     10,269        (22,719

Decrease in expected cash flows based on actual cash flow and changes in cash flow assumptions

     —          (1,542     —          (18,609     —          (18,930     —          (26,630

Net transfers from (to) nonaccretable difference to accretable yield

     —          (17,014     —          15,501        —          119,845        —          47,904   
  

 

 

 

Balance at end of period

   $ 575,942      $ 122,189      $ 307,369      $ 119,583      $ 671,443      $ 153,137      $ 339,452      $ 130,691   
  

 

 

 

5. Derivatives

Risk Management Objective of Using Derivatives

The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to our variable rate borrowing and fixed rate loans. The Company has also entered into interest rate derivative agreements as a service provided to certain qualifying customers. The Company manages a matched book with respect to its customer derivatives in order to minimize its net risk exposure resulting from such agreements.

 

24


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

5. Derivatives (continued)

 

Fair Values of Derivative Instruments on the Balance Sheet

The Company is making an accounting policy election to use the exception in ASC 820-10-35-18D (commonly referred to as the “portfolio exception”) with respect to measuring counterparty credit risk for derivative instruments, consistent with the guidance in 820-10-35-18G. The table below presents the fair value (in thousands) of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2012 and December 31, 2011.

 

     Tabular Disclosure of Fair Values of Derivative Instruments  
     Asset Derivatives      Liability Derivatives  
     As of March 31, 2012      As of December 31, 2011      As of March 31, 2012      As of December 31, 2011  
     Balance Sheet
Location
     Fair Value      Balance Sheet
Location
     Fair Value      Balance Sheet
Location
     Fair Value      Balance Sheet
Location
     Fair Value  

Derivatives designated as hedging instruments

                       

Interest rate products

     Other assets       $ —           Other assets       $ —           Other liabilities       $ 410         Other liabilities       $ 107   
     

 

 

       

 

 

       

 

 

       

 

 

 

Total derivatives designated as hedging instruments

      $ —            $ —            $ 410          $ 107   
     

 

 

       

 

 

       

 

 

       

 

 

 

Derivatives not designated as hedging instruments

                       

Interest rate products

     Other assets       $ 14,845         Other assets       $ 14,952         Other liabilities       $ 15,246         Other liabilities       $ 15,536   
     

 

 

       

 

 

       

 

 

       

 

 

 

Total derivatives not designated as hedging instruments

      $ 14,845          $ 14,952          $ 15,246          $ 15,536   
     

 

 

       

 

 

       

 

 

       

 

 

 

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. For hedges of the Company’s variable-rate borrowings, interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments. As of March 31, 2012, the Company had one interest rate swap with an aggregate notional amount of $140.0 million that was designated as a cash flow hedge associated with the Company’s forecasted variable cash flows beginning in June 2012 under a variable-rate term loan agreement. The Company did not have any cash flow hedges outstanding at March 31, 2011 or during the first quarter of 2011.

 

25


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

5. Derivatives (continued)

 

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The impact on AOCI was insignificant during the first quarter of 2012, and the impact of reclassifications on earnings during 2012 is expected to also be insignificant. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. No hedge ineffectiveness was recognized during the three months ended March 31, 2012.

Derivatives Not Designated as Hedges

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate derivatives, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Company simultaneously enters into offsetting agreements with unrelated financial institutions, thereby minimizing its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. As of March 31, 2012, the Company had entered into interest rate derivatives, including both customer and offsetting agreements, with an aggregate notional amount of $610.4 million related to this program.

Effect of Derivative Instruments on the Income Statement

The effect of the Company’s derivative financial instruments on the income statement was immaterial for the three months ended March 31, 2012 and 2011.

Credit-risk-related Contingent Features

Certain of the Banks’ derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as the downgrade of the Banks’ credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of a Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. As of March 31, 2012 the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $17.9 million. The Company has minimum collateral posting thresholds with its derivative counterparties and has posted collateral of $11.5 million against its obligations under these agreements. If the Company had breached any of these provisions at March 31, 2012, it could have been required to settle its obligations under the agreements at the termination value.

 

26


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Condensed and Consolidated Financial Statements – (continued)

(Unaudited)

 

6. Earnings Per Share

Hancock calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating securities consist of unvested stock-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.

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

 

     Three Months Ended
March 31,
 
      2012      2011  

Numerator:

     

Net income to common shareholders

   $ 18,495       $ 15,328   

Net income allocated to participating securities — basic and diluted

     221         74   

 

 

Net income allocated to common shareholders—basic and diluted

   $ 18,274       $ 15,254   

 

 

Denominator:

     

Weighted-average common shares—basic

     84,741         37,333   

Dilutive potential common shares

     701         188   

 

 

Weighted average common shares—diluted

     85,442         37,521   

 

 

Earnings per common share:

     

Basic

   $ 0.22       $ 0.41   

Diluted

   $ 0.21       $ 0.41   

 

 

Potential common shares consist of employee and director stock options. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be anti-dilutive, i.e., increase earnings per share or reduce a loss per share. Weighted-average anti-dilutive potential common shares totaled 378,788 for the three months ended March 31, 2012. There were no anti-dilutive shares for the three months ended March 31, 2011.

7. Share-Based Payment Arrangements

Stock Option Plans

Hancock maintains incentive compensation plans that incorporate share-based compensation for employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in note 13 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2011.

 

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Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

7. Share-Based Payment Arrangements (continued)

 

A summary of option activity for the three months ended March 31, 2012 is presented below:

 

Options    Number of
Shares
    Weighted-
Average
Exercise
Price ($)
     Weighted-
Average
Remaining
Contractual
Term
(Years)
     Aggregate
Intrinsic
Value
($000)
 

 

 

Outstanding at January 1, 2012

     1,686,907      $ 41.05         

Granted

     —          —           

Exercised

     (30,489     20.94         

Forfeited or expired

     (8,679     40.69         

 

 

Outstanding at March 31, 2012

     1,647,739      $ 41.43         5.0       $ 3,657   

 

 

Exercisable at March 31, 2012

     1,146,047      $ 44.89         3.4       $ 2,039   

 

 

The total intrinsic value of options exercised during the three months ended March 31, 2012 and 2011 was $0.4 million and $0.04 million, respectively.

A summary of the status of the Company’s nonvested restricted share awards as of March 31, 2012, and changes during the three months ended March 31, 2012, is presented below. These restricted shares are subject to service requirements.

 

     Number of
Shares
    Weighted-
Average
Grant-Date
Fair Value ($)
 

 

 

Nonvested at January 1, 2012

     1,460,776      $ 25.80   

Granted

     42,674        34.11   

Vested

     (22,679     42.89   

Forfeited

     (7,321     30.24   

 

 

Nonvested at March 31, 2012

     1,473,450      $ 25.76   

 

 

Hancock also makes annual grants of performance stock to key members of executive and senior management. On January 26, 2012, Hancock granted a target award of 14,858 performance shares with a fair value on the grant date of $36.16 per share. The number of 2012 performance shares that ultimately vest at the end of the three-year required service period will be based on the relative rank of Hancock’s three-year total shareholder return (TSR) among the TSRs of a peer group of fifty regional banks. The maximum number of performance shares that could vest is 200% of the target award. The fair value of this award at the grant date was determined using a Monte Carlo simulation method. Compensation expense for these performance shares will be recognized on a straight-line basis over the service period.

As of March 31, 2012, there was $26.7 million of total unrecognized compensation expense related to nonvested restricted shares and performance shares. This compensation is expected to be recognized in expense over a weighted-average period of 3.2 years. The total fair value of restricted shares which vested during the three months ended March 31, 2012 and 2011 was $0.73 million and $2.8 million, respectively.

 

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Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

8. Retirement Plans

The Company has defined benefit pension plans covering legacy Hancock employees as well as plans covering certain legacy Whitney employees. The Whitney plans have been closed to new participants since 2008, and benefit accruals have been frozen for participants who did not meet certain vesting, age and years of service criteria as of December 31, 2008. The Company also sponsors defined benefit postretirement plans for both legacy Hancock and legacy Whitney employees that provide health care and life insurance benefits. Benefits under the Whitney plan are restricted to retirees who were already receiving benefits at the time of plan amendments in 2007 or active participants who were eligible to receive benefits as of December 31, 2007. The Company is in the process of reviewing all retirement benefit plans to determine appropriate changes needed to transition legacy Whitney employees into the Company’s benefit plans.

The following tables show the components of net periodic benefits cost included in expense for both the Hancock and Whitney Plans.

Hancock Plan

 

     Pension Benefits     Other
Postretirement Benefits
 

 

 
     Three Months Ended March 31,  
     2012     2011     2012     2011  

 

 
     (In thousands)  

Service cost

   $ 1,703      $ 1,172      $ 48      $ 34   

Interest cost

     1,484        1,363        209        153   

Expected return on plan assets

     (2,048     (1,372     —          —     

Amortization of prior service cost

     —          —          (14     (14

Amortization of net loss

     1,220        586        177        135   

Amortization of transition obligation

     —          —          1        1   

 

 

Net periodic benefit cost

   $ 2,359      $ 1,749      $ 421      $ 309   

 

 

Whitney Plan

 

     Pension Benefits     

Other

Postretirement Benefits

 

 

 
     Qualified     Nonqualified         

 

 
     (In thousands)  

Service cost

   $ 1,532      $ 12       $ —     

Interest cost

     2,646        172         152   

Expected return on plan assets

     (4,249        —     

Amortization of prior service cost

     —             —     

Amortization of net loss

     —             —     

Amortization of transition obligation

     411        14         —     

 

 

Net periodic benefit cost

   $ 340      $ 198       $ 152   

 

 

During the first three months of 2012, the Company contributed approximately $10 million to its pension plans and anticipates a total contribution of $26 million in 2012.

 

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Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

9. Other Noninterest Income

Components of other income are as follows:

 

     Three Months Ended
March 31,
 
      2012      2011  
     (In thousands)  

Income from bank owned life insurance

   $ 2,891       $ 1,321   

Safety deposit box income

     534         251   

Credit related fees

     1,969         346   

Income from derivatives

     908         —     

Gain on sale of assets

     81         597   

Other miscellaneous income

     2,407         899   
          

Total other noninterest income

   $ 8,790       $ 3,414   

 

 

10. Other Noninterest Expense

Components of other expense are as follows:

 

     Three Months Ended
March 31,
 
      2012      2011  
     (In thousands)  

Insurance expense

   $ 1,597       $ 502   

Ad valorem and franchise taxes

     2,207         1,036   

Printing and supplies

     2,471         573   

Public relations and contributions

     2,179         382   

Travel expense

     1,584         387   

Other real estate owned expense, net

     2,433         1,441   

Tax credit investment amortization

     1,513         —     

Other miscellaneous expense

     10,583         3,158   
          

Total other noninterest expense

   $ 24,567       $ 7,479   

 

 

Other noninterest expense for the first quarter of 2012 includes $5.9 million of costs associated with the Whitney acquisition and the integration of Whitney’s operations into Hancock. Total merger-related costs included in noninterest expense were $33.9 million for the first quarter of 2012 and $1.6 million in the first quarter of 2011.

 

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Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

11. Segment Reporting

The Company’s primary operating segments are divided into Hancock, Whitney, and Other. The Hancock segment coincides with the Company’s Hancock Bank subsidiary and the Whitney segment with its Whitney Bank subsidiary. Each bank segment offers commercial, consumer and mortgage loans and deposit services as well as certain other services, such as trust and treasury management services. Although the bank segments offer the same products and services, they are managed separately due to different pricing, product demand, and consumer markets. On June 4, 2011, the Company completed its acquisition of Whitney Holding Corporation, the parent of Whitney National Bank. Whitney National Bank was merged into Hancock Bank of Louisiana and the combined entity was renamed Whitney Bank. Prior to the merger the segment now called Whitney Bank was comprised generally of Hancock Bank Louisiana. On March 15, 2012 Whitney Bank transferred the assets and liabilities of its operations in Florida and Alabama and Mississippi to Hancock Bank. As part of the merger, the assets and liabilities of the former Hancock Bank of Alabama were transferred to Hancock Bank. In the following tables, the “Other” segment includes activities of other consolidated subsidiaries that provide investment services, insurance agency services, insurance underwriting and various other services to third parties.

 

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Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

11. Segment Reporting (continued)