XNAS:HBHC Hancock Holding Company Quarterly Report 10-Q Filing - 6/30/2012

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 June 30, 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.

84,778,525 common shares were outstanding as of July 31, 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 — June 30, 2012 (unaudited) and December 31, 2011			1
Consolidated Statements of Income (unaudited) — Three and six months ended June 30, 2012 and 2011			2
Consolidated Statements of Comprehensive Income (unaudited) — Three and six months ended June  30, 2012 and 2011			3
Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three and six months ended June 30, 2012 and 2011			4
Consolidated Statements of Cash Flows (unaudited) — Three and six months ended June  30, 2012 and 2011			5
Notes to Consolidated Financial Statements (unaudited) — June 30, 2012			6-39
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			40-61
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			62
ITEM 4. Controls and Procedures			62
Part II. Other Information
ITEM 1. Legal Proceedings			63
ITEM 1A. Risk Factors			63-64
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			64
ITEM 3. Default on Senior Securities			N/A
ITEM 4. Mine Safety Disclosures			N/A
ITEM 5. Other Information			N/A
ITEM 6. Exhibits			65
Signatures			66

---

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

 

		June 30,				December 31,
		2012				2011
		unaudited
ASSETS
Cash and due from banks		$	392,601			$	437,947
Interest-bearing bank deposits			648,748				1,184,222
Federal funds sold			1,722				197
Securities available for sale, at fair value     (amortized cost of $2,249,310 and $4,401,345)			2,320,133				4,496,900
Securities held to maturity (fair value of $2,039,058)			2,000,324				—
Loans held for sale			44,918				72,378
Loans			11,094,762				11,191,901
Less: allowance for loan losses			(140,768	)			(124,881	)
unearned income			(16,616	)			(14,875	)
Loans, net			10,937,378				11,052,145
Property and equipment, net of accumulated depreciation of $148,422 and $148,780			477,806				505,387
Prepaid expenses			63,908				69,064
Other real estate, net			137,630				144,367
Accrued interest receivable			49,313				53,973
Goodwill			628,877				651,162
Other intangible assets, net			205,249				211,075
Life insurance contracts			363,876				355,026
FDIC loss share indemnification asset			200,988				212,885
Deferred tax asset, net			150,323				145,760
Other assets			154,913				181,608
Total assets		$	18,778,707			$	19,774,096
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand		$	5,040,484			$	5,516,336
Interest-bearing savings, NOW, money market and time			9,890,336				10,197,243
Total deposits			14,930,820				15,713,579
Short-term borrowings			832,709				1,044,454
Long-term debt			360,312				353,890
Accrued interest payable			6,442				8,284
Other liabilities			249,062				286,726
Total liabilities			16,379,345				17,406,933
Stockholders’ equity
Common stock - $3.33 par value per share; 350,000,000 shares authorized, 84,773,981 and 84,705,496 issued and outstanding, respectively			282,297				282,069
Capital surplus			1,641,010				1,634,634
Retained earnings			493,517				476,970
Accumulated other comprehensive income (loss), net			(17,462	)			(26,510	)
Total stockholders’ equity			2,399,362				2,367,163
Total liabilities and stockholders’ equity		$	18,778,707			$	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 amounts)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2012				2011				2012				2011
Interest income:
Loans, including fees		$	165,278			$	94,591			$	331,506			$	162,592
Securities-taxable			23,431				19,023				46,748				32,017
Securities-tax exempt			1,311				1,347				2,955				2,586
Federal funds sold and other short term investments			469				516				996				815
Total interest income			190,489				115,477				382,205				198,010
Interest expense:
Deposits			7,872				13,570				18,135				27,579
Short-term borrowings			1,623				1,755				3,262				3,443
Long-term debt and other interest expense			3,535				1,093				7,061				1,165
Total interest expense			13,030				16,418				28,458				32,187
Net interest income			177,459				99,059				353,747				165,823
Provision for loan losses			8,025				9,144				18,040				17,966
Net interest income after provision for loan losses			169,434				89,915				335,707				147,857
Noninterest income:
Service charges on deposit accounts			20,907				12,343				37,181				21,887
Bank card fees			8,075				5,968				16,539				9,478
Trust fees			7,983				5,301				16,721				9,292
Insurance commissions and fees			4,581				4,629				8,058				7,878
Investment and annuity fees			4,607				3,267				9,022				6,400
ATM fees			4,843				3,290				9,177				6,021
Secondary mortgage market operations			3,015				1,877				7,017				3,444
Accretion of indemnification asset			2,000				5,450				5,000				8,494
Other income			7,541				4,591				16,331				8,005
Securities gains (losses), net			—				(36	)			12				(87	)
Total noninterest income			63,552				46,680				125,058				80,812
Noninterest expense:
Compensation expense			72,188				46,971				147,772				76,379
Employee benefits			17,936				10,564				37,679				18,991
Salaries and employee benefits			90,124				57,535				185,451				95,370
Net occupancy expense			13,784				8,760				28,426				14,671
Equipment expense			6,744				3,661				13,834				6,515
Data processing expense			14,327				7,106				28,518				12,251
Professional services expense			14,658				22,886				39,760				28,146
Telecommunications and postage			5,597				3,642				11,755				6,402
Advertising			3,330				2,127				10,020				4,176
Deposit insurance and regulatory fees			3,903				3,232				7,295				6,344
Amortization of intangibles			7,922				1,621				16,226				2,235
Other expense			19,583				10,796				44,150				18,275
Total noninterest expense			179,972				121,366				385,435				194,385
Income before income taxes			53,014				15,229				75,330				34,284
Income taxes			13,710				3,141				17,531				6,868
Net income		$	39,304			$	12,088			$	57,799			$	27,416
Basic earnings per common share		$	0.46			$	0.22			$	0.68			$	0.59
Diluted earnings per common share		$	0.46			$	0.22			$	0.67			$	0.59
Dividends paid per share		$	0.24			$	0.24			$	0.48			$	0.48
Weighted avg. shares outstanding-basic			84,751				54,890				84,742				46,160
Weighted avg. shares outstanding-diluted			85,500				55,035				85,467				46,310

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								Six Months Ended
		June 30,								June 30,
		2012				2011				2012				2011
Net income		$	39,304			$	12,088			$	57,799			$	27,416
Other comprehensive income, net of tax:
Net change from retirement benefits plans			1,096				468				2,193				152
Unrealized net holding gain on securities, net of reclassifications			1,615				3,227				7,028				6,169
Net unrealized gain (loss) on derivatives and hedging			12				96				(173	)			96
Other comprehensive income			2,723				3,791				9,048				6,417
Comprehensive income		$	42,027			$	15,879			$	66,847			$	33,833

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)

 

		Common Stock								Capital				Retained				Accumulated Other Comprehensive
		Shares				Amount				Surplus				Earnings				Income (Loss), net				Total
Balance, January 1, 2011			36,893,276			$	122,855			$	263,484			$	470,828			$	(619	)		$	856,548
Net income			—				—				—				27,416				—				27,416
Other comprehensive income			—				—				—				—				6,417				6,417
Cash dividends declared ($0.48 per common share)			—				—				—				(29,501	)			—				(29,501	)
Common stock offering			6,958,143				23,170				190,824				—				—				213,994
Common stock issued in connection with Whitney acquisition			40,794,261				135,845				1,171,203				—				—				1,307,048
Common stock activity, long-term incentive plan, including excess income tax benefit of $151			48,794				162				4,229				—				—				4,391
Balance, June 30, 2011			84,694,474			$	282,032			$	1,629,740			$	468,743			$	5,798			$	2,386,313
Balance, January 1, 2012			84,705,496			$	282,069			$	1,634,634			$	476,970			$	(26,510	)		$	2,367,163
Net income			—				—				—				57,799				—				57,799
Other comprehensive income			—				—				—				—				9,048				9,048
Cash dividends declared ($0.48 per common share)			—				—				—				(41,252	)			—				(41,252	)
Common stock issued, long-term incentive plan, including excess income tax benefit of $116			68,485				228				6,376				—				—				6,604
Balance, June 30, 2012			84,773,981			$	282,297			$	1,641,010			$	493,517			$	(17,462	)		$	2,399,362

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)

 

		Six Months Ended June 30,
		2012				2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	57,799			$	27,416
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			17,159				9,256
Provision for loan losses			18,040				17,966
Losses on other real estate owned			9,774				969
Deferred tax expense			12,571				26,190
(Increase) in cash surrender value of life insurance contracts			(8,850	)			(5,746	)
Loss on sales of securities available for sale, net			—				87
Loss (gain) on disposal of other assets			383				(598	)
Net decrease in loans originated for sale			27,460				3,943
Net amortization of securities premium/discount			26,154				3,960
Amortization of intangible assets			16,264				2,235
Stock-based compensation expense			5,014				2,900
(Decrease) increase in interest payable and other liabilities			(35,074	)			193,126
Decrease in FDIC indemnification asset			11,897				47,002
Decrease (increase) in other assets			36,505				(40,431	)
Other, net			(116	)			(5	)
Net cash provided by operating activities			194,980				288,270
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale			477				323,426
Proceeds from maturities of securities available for sale			697,366				383,235
Purchases of securities available for sale			(103,344	)			(1,151,041	)
Proceeds from maturities of securities held to maturity			114,925				—
Purchases of investment securities held to maturity			(560,436	)			—
Net decrease in interest-bearing bank deposits			535,474				107,634
Net (increase) decrease in federal funds sold and short term investments			(1,525	)			278,128
Net decrease in loans			66,251				144,707
Purchases of property, equipment and intangible assets			(20,118	)			(38,544	)
Proceeds from sales of property and equipment			3,394				1,912
Cash paid for acquisition, net of cash received			—				(74,653	)
Proceeds from sales of other real estate			55,791				30,660
Net cash provided by investing activities			788,255				5,464
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits			(782,760	)			(369,734	)
Net decrease in short-term borrowings			(211,745	)			(7,128	)
Proceeds of long-term debt			6,422				140,014
Dividends paid			(41,252	)			(29,501	)
Proceeds from exercise of stock options			754				267
Proceeds from stock offering			—				213,994
Net cash used in financing activities			(1,028,581	)			(52,088	)
NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS			(45,346	)			241,646
CASH AND DUE FROM BANKS, BEGINNING			437,947				139,687
CASH AND DUE FROM BANKS, ENDING		$	392,601			$	381,333
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans		$	42,751			$	40,273
Transfers from available for sale securities to held to maturity securities			1,523,585				—
Fair value of assets acquired						$	11,235,000
Liabilities assumed							(10,133,000	)
Net identifiable assets acquired							1,102,000

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 notes. Actual results could differ significantly from those estimates.

Critical Accounting Policies and Estimates

There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies 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.

 

6

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

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.

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 assets and liabilities that are measured at fair value (in thousands) on a recurring basis in the consolidated balance sheets.

 

7

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

 

		June 30, 2012
		(Level 1)				(Level 2)				Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities		$	18,514			$	—			$	18,514
Obligations of states and political subdivisions			—				77,693				77,693
Corporate debt securities			3,750				—				3,750
Residential mortgage-backed securities			—				2,112,969				2,112,969
Collateralized mortgage obligations			—				101,022				101,022
Equity securities			6,185				—				6,185
Total available-for-sale securities			28,449				2,291,684				2,320,133
Derivatives
Interest rate contracts - assets			—				18,833				18,833
Total recurring fair value measurements - assets		$	28,449			$	2,310,517			$	2,338,966
Liabilities
Derivatives
Interest rate contracts - liabilities		$	—			$	19,880			$	19,880
Total recurring fair value measurements - liabilities		$	—			$	19,880			$	19,880
		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
Obligations of states and political subdivisions			—				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

 

8

---

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 residential mortgage-backed 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.

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.

 

9

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

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.

 

		June 30, 2012
		(Level 1)				(Level 2)				Total
Impaired loans		$	—			$	55,686			$	55,686
Other real estate owned			—				137,630				137,630
Total nonrecurring fair value measurements		$	—			$	193,316			$	193,316

 

		December 31, 2011
		(Level 1)				(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

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 these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities – The fair value 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 fair value.

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.

 

10

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

2. Fair Value (continued)

 

Long-Term Debt - The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained.

Derivative Financial Instruments – The fair value measurement for derivative financial instruments was discussed earlier.

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 June 30, 2012 and December 31, 2011 (in thousands):

 

		(Level 1)				June 30, 2012 (Level 2)				(Level 3)				Total Fair Value				Carrying Amount
Financial assets:
Cash, interest-bearing deposits, and federal funds sold		$	1,043,071			$	—			$	—			$	1,043,071			$	1,043,071
Available for sale securities			28,449				2,291,684				—				2,320,133				2,320,133
Held to maturity securities			—				2,039,058				—				2,039,058				2,000,324
Loans, net			—				55,686				11,188,609				11,244,295				10,937,378
Loans held for sale			—				44,918				—				44,918				44,918
Accrued interest receivable			49,313				—				—				49,313				49,313
Derivative financial instruments			—				18,833				—				18,833				18,833
Financial liabilities:
Deposits		$	—			$	—			$	14,948,184			$	14,948,184			$	14,930,820
Federal funds purchased			30,411				—				—				30,411				30,411
Securities sold under agreements to repurchase			802,298				—				—				802,298				802,298
Long-term debt			—				387,650				—				387,650				360,312
Accrued interest payable			6,442				—				—				6,442				6,442
Derivative financial instruments			—				19,880				—				19,880				19,880
		(Level 1)				December 31, 2011 (Level 2)				(Level 3)				Total Fair Value				Carrying Amount
Financial assets:
Cash, interest-bearing deposits, and federal funds sold		$	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			—				55,252				11,134,410				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):

Securitites Available for Sale

 

		June 30, 2012																December 31, 2011
						Gross				Gross												Gross				Gross
		Amortized				Unrealized				Unrealized				Fair				Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
U.S. Treasury		$	150			$	11			$	—			$	161			$	150			$	14			$	—			$	164
U.S. government agencies			18,305				48				—				18,353				248,595				1,308				—				249,903
Municipal obligations			76,585				1,111				3				77,693				294,489				15,218				42				309,665
Mortgage-backed securities			2,045,296				67,718				45				2,112,969				2,422,891				58,150				696				2,480,345
CMOs			100,655				367				—				101,022				1,426,495				21,774				2,193				1,446,076
Corporate debt securities			3,750				—				—				3,750				4,517				11				34				4,494
Other equity securities			4,569				1,634				18				6,185				4,208				2,086				41				6,253
		$	2,249,310			$	70,889			$	66			$	2,320,133			$	4,401,345			$	98,561			$	3,006			$	4,496,900

Securitites Held to Maturity

 

		June 30, 2012																December 31, 2011
						Gross				Gross												Gross				Gross
		Amortized				Unrealized				Unrealized				Fair				Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
Municipal obligations		$	180,812			$	15,133			$	2			$	195,943				—				—				—				—
Mortgage-backed securities			202,761				1,550				—				204,311				—				—				—				—
CMOs			1,616,751				24,586				2,533				1,638,804				—				—				—				—
		$	2,000,324			$	41,269			$	2,535			$	2,039,058				—				—				—				—

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 continued to be reported, net of tax, as a component of accumulated other comprehensive income. This net unrealized gain is being accreted to interest income over the remaining life of the securities as a yield adjustment, which serves 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 debt securities classified as available for sale and held to maturity at June 30, 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
Debt Securities Available for Sale
Due in one year or less		$	45,827			$	45,973
Due after one year through five years			157,876				159,283
Due after five years through ten years			275,463				286,168
Due after ten years			1,765,575				1,822,524
Total available for sale debt securities		$	2,244,741			$	2,313,948

 

		Amortized				Fair
		Cost				Value
Held to maturity
Due in one year or less		$	16,596			$	16,685
Due after one year through five years			436,496				440,576
Due after five years through ten years			96,856				106,023
Due after ten years			1,450,376				1,475,774
Total held to maturity securities		$	2,000,324			$	2,039,058

The Company held no securities classified as trading at June 30, 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 June 30, 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			2,071				3				—				—				2,071				3
Mortgage-backed securities			4,259				43				246				2				4,505				45
CMOs			—				—				—				—				—				—
Corporate debt securities			—				—				—				—				—				—
Equity securities			208				16				2				2				210				18
		$	6,538			$	62			$	248			$	4			$	6,786			$	66

 

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
Corporate 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 June 30, 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
Municpal obligations		$	540			$	1			$	256			$	1			$	796			$	2
CMOs			391,383				1,523				174,084				1,010				565,467			$	2,533
		$	391,923			$	1,524			$	174,340			$	1,011			$	566,263			$	2,535

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 $2.5 billion at June 30, 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, consisted of the following:

 

		June 30,				December 31,
		2012				2011
		(In thousands)
Originated loans:
Commerical non-real estate		$	1,902,292			$	1,525,409
Construction and land development			630,997				540,806
Commerical real estate			1,316,772				1,259,757
Residential mortgage loans			654,149				487,147
Consumer loans			1,306,648				1,074,611
Total originated loans		$	5,810,858			$	4,887,730
Acquired loans:
Commerical non-real estate		$	1,948,226			$	2,236,758
Construction and land development			443,057				603,371
Commerical real estate			1,450,796				1,656,515
Residential mortgage loans			598,199				734,669
Consumer loans			239,276				386,540
Total acquired loans		$	4,679,554			$	5,617,853
Covered loans:
Commerical non-real estate		$	39,971			$	38,063
Construction and land development			93,442				118,828
Commerical real estate			62,962				82,651
Residential mortgage loans			267,363				285,682
Consumer loans			123,996				146,219
Total covered loans		$	587,734			$	671,443
Total loans:
Commerical non-real estate		$	3,890,489			$	3,800,230
Construction and land development			1,167,496				1,263,005
Commerical real estate			2,830,530				2,998,923
Residential mortgage loans			1,519,711				1,507,498
Consumer loans			1,669,920				1,607,370
Total loans		$	11,078,146			$	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 an 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. Acquired performing loans are considered and reported as nonperforming and past due using the same criteria applied to the originated portfolio. The accrual of interest on acquired performing loans is discontinued when, in management’s opinion, it is probable that the borrower will be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.

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.

 

16

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

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 non-real estate, construction and land development and commercial real estate loans categories shown in previous table.

The following schedule shows activity in the allowance for loan losses, by portfolio segment and the corresponding recorded investment in loans, for the six months ended June 30, 2012 and June 30, 2011.

 

17

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

 

Originated loans:		Commercial				Residential mortgages				Consumer				Total
(In thousands)		June 30, 2012
Allowance for loan losses:
Beginning balance, January 1, 2012		$	60,211			$	4,894			$	18,141			$	83,246
Charge-offs			(12,971	)			(2,633	)			(6,773	)			(22,377	)
Recoveries			3,065				66				1,981				5,112
Net provision for loan losses			9,888				6,009				(502	)			15,395
Increase (decrease) in indemnification asset			—				—				—				—
Ending balance		$	60,193			$	8,336			$	12,847			$	81,376
Ending balance:
Individually evaluated for impairment		$	8,076			$	1,916			$	—			$	9,992
Ending balance:
Collectively evaluated for impairment		$	52,117			$	6,420			$	12,847			$	71,384
Loans:
Ending balance:		$	3,850,061			$	654,149			$	1,306,648			$	5,810,858
Ending balance:
Individually evaluated for impairment		$	54,050			$	11,628			$	—			$	65,678
Ending balance:
Collectively evaluated for impairment		$	3,796,011			$	642,521			$	1,306,648			$	5,745,180
Covered loans:		Commercial				Residential mortgages				Consumer				Total
(In thousands)		June 30, 2012
Allowance for loan losses:
Beginning balance, January 1, 2012		$	18,203			$	9,024			$	14,408			$	41,635
Charge-offs			(19,289	)			—				—				(19,289	)
Recoveries			—				—				—				—
Net provision for loan losses (a)			2,700				351				(406	)			2,645
Increase (decrease) in indemnification asset (a)			22,650				11,189				562				34,401
Ending balance		$	24,264			$	20,564			$	14,564			$	59,392
Ending balance:
Individually evaluated for impairment		$	—			$	—			$	—			$	—
Ending balance:
Collectively evaluated for impairment		$	24,264			$	20,564			$	14,564			$	59,392
Loans:
Ending balance:		$	196,375			$	267,363			$	123,996			$	587,734
Ending balance:
Individually evaluated for impairment		$	5,781			$	393			$	—			$	6,174
Ending balance:
Collectively evaluated for impairment		$	190,594			$	266,970			$	123,996			$	581,560
Total loans:		Commercial				Residential mortgages				Consumer				Total
(In thousands)		June 30, 2012
Allowance for loan losses:
Beginning balance, January 1, 2012		$	78,414			$	13,918			$	32,549			$	124,881
Charge-offs			(32,260	)			(2,633	)			(6,773	)			(41,666	)
Recoveries			3,065				66				1,981				5,112
Net provision for loan losses (a)			12,588				6,360				(908	)			18,040
Increase (decrease) in indemnification asset (a)			22,650				11,189				562				34,401
Ending balance		$	84,457			$	28,900			$	27,411			$	140,768
Ending balance:
Individually evaluated for impairment		$	8,076			$	1,916			$	—			$	9,992
Ending balance:
Collectively evaluated for impairment		$	76,381			$	26,984			$	27,411			$	130,776
Loans:
Ending balance:		$	7,888,515			$	1,519,711			$	1,669,920			$	11,078,146
Ending balance:
Individually evaluated for impairment		$	59,831			$	12,021			$	—			$	71,852
Ending balance:
Collectively evaluated for impairment		$	7,828,684			$	1,507,690			$	1,669,920			$	11,006,294
Ending balance:
Acquired loans (b)		$	3,842,079			$	598,199			$	239,276			$	4,679,554

 

(a)	The Company increased the allowance by $37.0 million for losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $34.4 million increase in the FDIC indemnification asset.

(b)

In accordance with purchase accounting rules, the Whitney loans were recorded at their fair value at the time of the acquisition, and the prior allowance for loan losses was eliminated. No allowance has been established on these acquired loans since the acquisition date. These loans are included in the ending balance of loans collectively evaluated for impairment.

 

18

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

Originated loans:		Commercial				Residential mortgages				Consumer				Total
(In thousands)		June 30, 2011
Allowance for loan losses:
Beginning balance, January 1, 2011		$	56,859			$	4,626			$	19,840			$	81,325
Charge-offs			(13,664	)			(2,332	)			(5,701	)			(21,697	)
Recoveries			4,274				960				1,780				7,014
Net provision for loan losses			10,863				6,225				(570	)			16,518
Increase (decrease) in indemnification asset			—				—				—				—
Ending balance		$	58,332			$	9,479			$	15,349			$	83,160
Ending balance:
Individually evaluated for impairment		$	9,468			$	1,420			$	—			$	10,888
Ending balance:
Collectively evaluated for impairment		$	48,864			$	8,059			$	15,349			$	72,272
Loans:
Ending balance:		$	2,845,955			$	365,661			$	971,742			$	4,183,358
Ending balance:
Individually evaluated for impairment		$	48,181			$	7,678			$	—			$	55,859
Ending balance:
Collectively evaluated for impairment		$	2,797,774			$	357,983			$	971,742			$	4,127,499
Covered loans:		Commercial				Residential mortgages				Consumer				Total
(In thousands)		June 30, 2011
Allowance for loan losses:
Beginning balance, January 1, 2011		$	—			$	—			$	672			$	672
Charge-offs			—				—				(375	)			(375	)
Recoveries			—				—				—				—
Net provision for loan losses (a)			1,021				224				203				1,448
Increase (decrease) in indemnification asset (a)			19,378				3,864				4,260				27,502
Ending balance		$	20,399			$	4,088			$	4,760			$	29,247
Ending balance:
Individually evaluated for impairment		$	—			$	—			$	—			$	—
Ending balance:
Collectively evaluated for impairment		$	20,399			$	4,088			$	4,760			$	29,247
Loans:
Ending balance:		$	347,441			$	247,489			$	152,879			$	747,809
Ending balance:
Individually evaluated for impairment		$	33,869			$	2,710			$	2,935			$	39,514
Ending balance:
Collectively evaluated for impairment		$	313,572			$	244,779			$	149,944			$	708,295
Total loans:		Commercial				Residential mortgages				Consumer				Total
(In thousands)		June 30, 2011
Allowance for loan losses:
Beginning balance, January 1, 2011		$	56,859			$	4,626			$	20,512			$	81,997
Charge-offs			(13,664	)			(2,332	)			(6,076	)			(22,072	)
Recoveries			4,274				960				1,780				7,014
Net provision for loan losses (a)			11,884				6,449				(367	)			17,966
Increase (decrease) in indemnification asset (a)			19,378				3,864				4,260				27,502
Ending balance		$	78,731			$	13,567			$	20,109			$	112,407
Ending balance:
Individually evaluated for impairment		$	9,468			$	1,420			$	—			$	10,888
Ending balance:
Collectively evaluated for impairment		$	69,263			$	12,147			$	20,109			$	101,519
Loans:
Ending balance:		$	8,233,519			$	1,443,817			$	1,571,717			$	11,249,053
Ending balance:
Individually evaluated for impairment		$	82,050			$	10,388			$	2,935			$	95,373
Ending balance:
Collectively evaluated for impairment		$	8,151,469			$	1,433,429			$	1,568,782			$	11,153,680
Ending balance:
Acquired loans (b)		$	5,040,123			$	830,667			$	447,096			$	6,317,886

 

(a)	The Company increased the allowance by $29.2 million for losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $27.5 million increase in the FDIC indemnification asset.

(b)

In accordance with purchase accounting rules, the Whitney loans were recorded at their fair value at the time of the acquisition, and the prior allowance for loan losses was eliminated. No allowance has been established on these acquired loans since the acquisition date. These loans are included in the ending balance of loans collectively evaluated for impairment.

 

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 shows the composition of non-accrual loans by portfolio segment and class. Acquired impaired and certain covered loans are considered to be performing due to the application of the accretion method and are excluded from the table. Covered loans accounted for using the cost recovery method do not have an accretable yield and are disclosed below as non-accrual loans. Acquired performing loans that have subsequently been placed on non-accrual status are also disclosed below.

 

		June 30,				December 31,
		2012				2011
		(In thousands)
Originated loans:
Commercial loans		$	92,510			$	55,046
Residential mortgage loans			11,066				24,406
Consumer loans			6,193				3,855
Total originated loans		$	109,769			$	83,307
Acquired loans:
Commercial loans		$	5,466			$	—
Residential mortgage loans			1,169				—
Consumer loans			508				1,117
Total acquired loans		$	7,143			$	1,117
Covered loans:
Commercial loans		$	5,781			$	18,209
Residential mortgage loans			393				637
Consumer loans			—				—
Total covered loans		$	6,174			$	18,846
Total loans:
Commercial loans		$	103,757			$	73,255
Residential mortgage loans			12,628				25,043
Consumer loans			6,701				4,972
Total loans		$	123,086			$	103,270

The amount of interest that would have been recorded on nonaccrual loans for the six months ended June 30, 2012 was approximately $3.6 million. Interest actually received on nonaccrual loans during the six months ended June 30, 2012 was $1.1 million.

Included in nonaccrual loans is $9.7 million in restructured commercial loans. Total troubled debt restructurings as of June 30, 2012 were $19.5 million and $18.1 million at December 31, 2011. Modified acquired impaired loans are not removed from their accounting pool and accounted for as TDRs, even if those loans would otherwise be deemed TDRs.

 

20

---

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 for the periods ended June 30, 2012 and 2011 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.

 

		June 30, 2012												June 30, 2011
						Pre-Modification				Post-Modification								Pre-Modification				Post-Modification
						Outstanding				Outstanding								Outstanding				Outstanding
		Number of				Recorded				Recorded				Number of				Recorded				Recorded
Troubled Debt Restructurings:		Contracts				Investment				Investment				Contracts				Investment				Investment
Originated loans:
Commercial loans			22			$	23,050			$	18,349				17			$	21,668			$	17,288
Residential mortgage loans			3				1,169				1,169				3				1,342				1,318
Consumer loans			—				—				—				—				—				—
Total originated loans			25			$	24,219			$	19,518				20			$	23,010			$	18,606
Aquired loans:
Commercial loans			—			$	—			$	—				—			$	—			$	—
Residential mortgage loans			—				—				—				—				—				—
Consumer loans			—				—				—				—				—				—
Total acquired loans			—			$	—			$	—				—			$	—			$	—
Covered loans:
Commercial loans			—			$	—			$	—				—			$	—			$	—
Residential mortgage loans			—				—				—				—				—				—
Consumer loans			—				—				—				—				—				—
Total covered loans			—			$	—			$	—				—			$	—			$	—
Total loans:
Commercial loans			22			$	23,050			$	18,349				17			$	21,668			$	17,288
Residential mortgage loans			3				1,169				1,169				3				1,342				1,318
Consumer loans			—				—				—				—				—				—
Total loans			25			$	24,219			$	19,518				20			$	23,010			$	18,606

 

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 impaired loans disaggregated by class at June 30, 2012 and December 31, 2011:

 

		Recorded Investment				Unpaid Principal Balance				Related Allowance				Average Recorded Investment				Interest Income Recognized
June 30, 2012										(In thousands)
Originated loans:
With no related allowance recorded:
Commercial		$	14,653			$	27,849			$	—			$	11,985			$	141
Residential mortgages			2,239				3,967				—				1,541				9
Direct consumer			—				—				—				—				—
			16,892				31,816				—				13,526				150
With an allowance recorded:
Commercial			39,397				48,665				8,076				36,450				385
Residential mortgages			9,389				11,530				1,916				6,382				47
Direct consumer			—				—				—				—				—
			48,786				60,195				9,992				42,832				432
Total:
Commercial			54,050				76,514				8,076				48,435				526
Residential mortgages			11,628				15,497				1,916				7,923				56
Direct consumer			—				—				—				—				—
Total originated loans		$	65,678			$	92,011			$	9,992			$	56,358			$	582
Covered loans:
With no related allowance recorded:
Commercial			—				—				—				—				—
Residential mortgages			—				—				—				—				—
Direct consumer			—				—				—				—				—
With an allowance recorded:
Commercial			5,781				13,182				—				16,409				—
Residential mortgages			393				481				—				718				—
Direct consumer			—				—				—				—				—
			6,174				13,663				—				17,127				—
Total:
Commercial			5,781				13,182				—				16,409				—
Residential mortgages			393				481				—				718				—
Direct consumer			—				—				—				—				—
Total covered loans		$	6,174			$	13,663			$	—			$	17,127			$	—
Total loans:
With no related allowance recorded:
Commercial			14,653				27,849				—				11,985				141
Residential mortgages			2,239				3,967				—				1,541				9
Direct consumer			—				—				—				—				—
			16,892				31,816				—				13,526				150
With an allowance recorded:
Commercial			45,178				61,847				8,076				52,859				385
Residential mortgages			9,782				12,011				1,916				7,100				47
Direct consumer			—				—				—				—				—
			54,960				73,858				9,992				59,959				432
Total:
Commercial			59,831				89,696				8,076				64,844				526
Residential mortgages			12,021				15,978				1,916				8,641				56
Direct consumer			—				—				—				—				—
Total loans		$	71,852			$	105,674			$	9,992			$	73,485			$	582

 

22

---

Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

 

4. Loans and Allowance for Loan Losses (continued)

 

						Unpaid								Average				Interest
		Recorded				Principal				Related				Recorded				Income
		Investment				Balance				Allowance				Investment				Recognized
December 31, 2011		(In thousands)
Originated loans:
With no related allowance recorded:
Commercial		$	10,177			$	24,935			$	—			$	13,992			$	359
Residential mortgages			1,153				1,957				—				1,087				58
Direct consumer			—				—				—				—				—
			11,330				26,892				—				15,079				417
With an allowance recorded:
Commercial			28,034				33,168				6,988				31,959				254
Residential mortgages			4,090				5,360				551				5,007				7
Direct consumer			—				—				—				—				—
			32,124				38,528				7,539				36,966				261
Total:
Commercial			38,211				58,103				6,988				45,951				613
Residential mortgages			5,243				7,317				551				6,094				65
Direct consumer			—				—				—				—				—
Total originated loans		$	43,454			$	65,420			$	7,539			$	52,045			$	678
Covered loans:
With no related allowance recorded:
Commercial			17,874				21,757				—				4,469				—
Residential mortgages			429				845				—				1,847				—
Direct consumer			—				—				—				—				—
			18,303				22,602				—				6,316				—
With an allowance recorded:
Commercial			335				335				9				27,765				—
Residential mortgages			208				228				19				52				—
Direct consumer
			543				563				28				27,817				—
Total:
Commercial			18,209				22,092				9				32,234				—
Residential mortgages			637				1,073				19				1,899				—
Direct consumer			—