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Strong Opportunities
2012 Annual Report
Hancock Holding company
Financial
HigHligHts
(unaudited, amounts in thousands, except per share data)
2012
2011
Operating incOme (a)
(in millions)
$184.0
$133.2
$62.2
$56.4
$54.3
'08
'09
'10
'11
'12
Operating DiluteD epS cOmmOn (a)
(per share)
$2.02
$2.13
$1.95
$1.71
Income Data
Net income
Operating income (a)
Net interest income (te)*
Per Common Share Data
Net income – basic
Net income – diluted
Operating income – basic (a)
Operating income – diluted (a)
Book value (end of period)
Tangible book value (end of period)
Cash dividends paid
$1.46
Period-end Balance Sheet Data
'08
'09
'10
'11
'12
return On aSSetS - Operating (a)
1.09%
0.97%
0.97%
0.90%
0.64%
'08
'09
'10
'11
'12
return On equity - Operating (a)
11.4%
10.6%
7.4%
7.7%
6.3%
Securities
Loans, net of unearned income
Total earning assets
Total assets
Total deposits
Total common stockholders’ equity
Key Ratios
Return on average assets
Return on average assets, operating (a)
Return on average common equity
Return on average common equity, operating (a)
Net interest margin (te)*
Noninterest expense as a percent of total revenue (te)
before amortization of purchased intangibles,
securities transactions, sub debt redemption cost
and merger expenses*
Allowance for loan losses to period-end loans
Tangible common equity ratio
Leverage ratio
$
$
151,742
183,965
722,452
1.77
1.75
2.15
2.13
28.91
19.27
0.96
$ 3,716,460
11,577,802
16,845,055
19,464,485
15,744,188
2,453,278
0.80%
0.97%
6.32%
7.66%
4.48%
64.63%
1.18%
8.77%
9.10%
$
$
76,759
133,214
533,159
1.16
1.15
2.03
2.02
27.95
17.76
0.96
$ 4,496,900
11,177,026
16,930,723
19,774,096
15,713,579
2,367,163
0.52%
0.90%
4.26%
7.40%
4.25%
66.35%
1.12%
7.96%
8.17%
'08
'09
'10
'11
'12
Hancock acquired Whitney Holding Corporation effective June 4, 2011, and Peoples First Community Bank effective December 18,
2009. The impact of those acquisitions are reflected in the company’s financial information from the acquisition dates.
*Tax Equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.
(a) Net income less tax-effected merger-related expenses, bargain purchase gain on acquisition, sub debt redemption costs, and
securities gains/losses. Management believes that this is a useful financial measure because it enables investors to assess
ongoing operations.
Strong Opportunities
Deep history. Sound capital. Enduring relationships.
Strong ties that create opportunities for the region.
Opportunities that strengthen ties to the region.
Whether helping the Gulf South build a robust economic
engine or local people achieve their financial goals and
dreams, Hancock Holding Company and its two strong
banks continue to forge resilient bonds to the places
Hancock and Whitney call home—solid ties secured by
core values and reinforced by steady commitment to stability,
community, growth, and innovation.
To Our Shareholders
Carl J. Chaney
President & CeO
John M. Hairston
CeO & Chief OPerating OffiCer
In 2012 Hancock Holding Company accomplished
Second, was the discount taken on Whitney’s loan
an extraordinary year of positive change, innovative
portfolio enough, considering the history of that
progress, and new opportunity—once again
portfolio? As we have detailed in quarterly earnings
affirming your company as a solid organization
presentations, we have seen very few losses on
well-positioned and fully focused on our future as
the Whitney acquired portfolio. Therefore, with
one strong, consolidated institution. Our more than
performance much better than the initial forecast,
4,300 associates devoted much of the year to finishing
our answer is YES.
work begun in 2011 to combine Hancock and
Whitney, successfully completing a milestone core
systems integration in early spring and achieving the
cost-savings targets we announced at the time of
the merger. In fact, as we reflect on the year, we believe
we were fully able to answer three main questions
first posed when Hancock and Whitney announced
the transaction.
Third, could we achieve the cost savings we announced
with the transaction? Not only did your company
achieve those efficiencies, we exceeded expectations,
reporting results at the lower end of our range of
expense guidance . Our new expense base now includes
$134 million of annual cost savings from the Whitney
merger; so again, the answer is YES.
First, could two similar-sized banks successfully
From the moment we announced the transaction,
assimilate into one combined organization? With
through the closing of the merger, during systems
a successful core systems integration completed in
conversion, and now today, we have been confident that
mid-March with no significant loss of clients, and with
bringing Hancock and Whitney together was the right
a blended management team, board, associate talent
combination for our shareholders, clients, associates,
base, and franchise-wide products and services, we
and communities. Moving forward together, Hancock
believe the answer to that question is a resounding YES.
and Whitney are helping people achieve their financial
Hancock Holding Company
goals and dreams under two
significant part of the Gulf’s energy
us to weather economic uncertainty
distinguished brands that have tied
sector—performed exceptionally
and excel amid challenge. They
both institutions to people and
well. Our Mississippi and Alabama
know that they can trust us because
places across the Gulf South since
markets continued to contribute
we have sound, proactive business
the late 1800s.
with solid results, and our Florida
practices in place to preserve credit
Financial Highlights
At December 31, 2012, the
consolidated company had
assets of $19.5 billion, loans of
$11.6 billion, and deposits of $15.7
billion. Operating income for 2012
markets, recently impacted by that
quality and prevent small issues
state’s real estate issues, are rapidly
from becoming unmanageable
growing and are contributing
problems; and we have a strong
positively to our balance sheet
recovery program and strong
growth. Our strategies deployed in
earnings to mitigate losses.
2011 and 2012 are now taking hold.
Strong numbers and effective
was $2.13 per diluted common
While our earnings for 2012 may
systems are just two secrets for
share, up from $2.02 in 2011.
have included some unique,
successful banking today. Banking,
We believe operating income,
one-time items, the results
from a client’s perspective, is all
which excludes certain tax-effected
reflected your company’s strong
about staying local—a concept
items detailed in the financial
overall operating fundamentals
small community banks discovered
statements, is a useful financial
and achievement of projected
years ago and used to build success.
measure for investors to assess
cost savings from the Whitney
Banking, from our perspective, is
ongoing operations.
transaction. Our return on average
all about helping people succeed.
Banking, from our perspective, is
all about helping people succeed.
While the environment for
generating new loans remained
competitive, we originated over
$2 billion in new loans during the
assets (ROA) was approximately
We believe we have the strategic
one percent (1%) for the year. While
advantages of strength, longevity,
this figure is very solid compared to
and innovation as well as local
our peers and others in the industry,
decision-making backed by
we are committed to improving this
regional resources.
ratio while growing your company.
Strength, Stability,
History, & Service
Hancock Holding Company’s
We have been part of three
centuries of opportunity: the
19th century, when opportunities
grew the Gulf South exponentially;
year throughout the company’s
strong capital and our ability to
the 20th century, when America
footprint from both existing and
manage risk properly across our
created opportunities that changed
new clients. Mainly in commercial
five-state business footprint should
the world; and the 21st century, when
loans, that growth reflected the
reassure you as a shareholder.
global commerce and technology
economic climates in most markets
Certainly, solid capital and risk
set the stage for unimaginable
across our footprint. Houston,
management generate confidence
opportunity. We have been
Greater New Orleans, and western
among our clients. They know
advocates for smart economic
Louisiana—the homes of a
strong capital and low risk enables
development balanced by the unique
2
2012 Annual Report
traditions and timeless values
service options to ensure clients
that distinguish our region. We
can always bank with us when,
have cultivated corporate cultures
where, and how they prefer. We
anchored in trustworthiness,
are dedicated to maintaining
common-sense, mutual respect, and
an efficient branch network and
rock-solid resilience.
high-quality, self-serve technology
Our local bankers and their teams
contribute to a market-based business
model that blends the personal touch
of community banking with the broad
reach of regional banking.
Our local bankers—often industry
veterans who grew up in the
cities, towns, and neighborhoods
they serve—understand the local
business climate and know the
economic drivers, challenges
and opportunities, and cultural
considerations influencing
community growth and individual
success. These leaders and their
teams contribute to a market-
based business model that blends
the personal touch of community
banking with the broad reach of
regional banking.
that make sense for clients and
positions, speed up collections
the company across our five-state
and receivables, manage their
footprint. We are opening new
disbursements and payables,
branches and regularly evaluating
and provide valuable
existing locations and hours of
information services.
operation at most branches to
offer clients the most convenience
and best service. We are upgrading
our 300-plus ATMs with the
latest software and hardware
and constantly enhancing our
robust online banking and bill
pay. Mobile banking applications
Accolades For
Excellence
In 2012 both Hancock and Whitney
continued to receive accolades
reinforcing both banks’ legacies
of performance, service,
and leadership:
offer innovative options for today’s
• Morningstar awarded the
active, on-the-move clients. Our
Hancock Horizon Burkenroad
treasury solution commercial
Small Cap Fund an overall 5 star
Additionally, your company is
banking online platform allows
rating out of 607 Small Blend
making the most of its full array of
businesses to leverage cash
Funds as of December 31, 2012.
Hancock Holding Company’s business footprint spans five
Gulf South states. The company operates as Hancock
Bank in Mississippi, Alabama, and Florida and
as Whitney Bank in Louisiana and Texas.
Hancock Bank locations
Whitney Bank locations
3
• BauerFinancial, Inc., the nation’s leading bank rating and research
agency, rated Hancock Bank and Whitney Bank among the
strongest, safest financial institutions in the country based on
strong capital, asset quality, profitability, risk management, and
sound business practices.
• J.D. Power & Associates named Hancock Bank among the nation’s
top-50 “Service Champions.”
• Hancock Bank and Whitney Bank earned top customer service
marks with Greenwich Excellence Awards in small business and
middle market banking.
• The American Bankers Association (ABA) elected John Hairston to
a three-year term on ABA’s board of directors.
Looking To The Future
At Hancock Holding Company, our fundamental values are steadfast.
Our history is deep; our local legacies, rich. Our capital is strong,
and our risk management is focused and effective. Our combined
culture supports a business structure that carries on our century-old
commitment to Gulf South communities, businesses, and residents
who know and trust the Hancock and Whitney names. We expect our
future to hold opportunities that will further strengthen us as one solid
company with two strong brands. We thank you for your continued
confidence and trust as we move forward together.
With appreciation,
Carl J. Chaney
President & CEO
John M. Hairston
CEO & Chief Operating Officer
Hancock Holding Company
Corporate Mission
To help people achieve their
financial goals and dreams.
Corporate Values
· Honor & Integrity ·
· Strength & Stability ·
· Commitment to Service ·
· Teamwork ·
· Personal Responsibility ·
Corporate Purpose
To create opportunities for people
and the communities we serve.
4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2012.
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-13089
Hancock Holding Company
(Exact name of registrant as specified in its charter)
Mississippi
(State or other jurisdiction of
incorporation or organization)
64-0693170
(I.R.S. Employer
Identification Number)
One Hancock Plaza, Gulfport, Mississippi
(Address of principal executive offices)
39501
(Zip Code)
(228) 868-4727
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $3.33 PAR VALUE
(Title of Class)
The NASDAQ Stock Market, LLC
(Name of Exchange on Which Registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
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 È 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 È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer È
Non-accelerated filer ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
Accelerated filer
Smaller reporting company ‘
‘
The aggregate market value of the voting stock held by nonaffiliates of the registrant as of December 31, 2012 was $2.5 billion based upon
the closing market price on NASDAQ on June 30, 2012. For purposes of this calculation only, shares held by nonaffiliates are deemed to
consist of (a) shares held by all shareholders other than directors and executive officers of the registrant plus (b) shares held by directors
and officers as to which beneficial ownership has been disclaimed.
On February 1, 2013, the registrant had outstanding 84,878,522 shares of common stock.
Portions of the definitive proxy statement for our annual meeting of shareholders to be filed with the Securities and Exchange Commission
are incorporated by reference into Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
[THIS PAGE INTENTIONALLY LEFT BLANK]
Hancock Holding Company
Form 10-K
Index
PART I
BUSINESS
ITEM 1.
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4. MINE SAFETY DISCLOSURES
PROPERTIES
LEGAL PROCEEDINGS
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
ITEM 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 14.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
1
16
24
24
24
24
25
27
31
62
62
144
144
144
145
146
146
146
146
147
[THIS PAGE INTENTIONALLY LEFT BLANK]
PART I
ITEM 1. BUSINESS
ORGANIZATION AND RECENT DEVELOPMENTS
Hancock Holding Company (“Hancock or the Company”) was organized in 1984 as a bank holding
company registered under the Bank Holding Company Act of 1956, as amended. In 2002, the Company qualified
as a financial holding company giving it broader powers. The corporate headquarters of the Company is in
Gulfport, Mississippi.
Prior to 1985, our growth was primarily internal through branch expansions into areas of population growth
that were not served by a dominant financial institution. After 1985, we made several small acquisitions to
further our expansion. Within the past five years we have acquired two sizeable institutions which have
significantly expanded the geographic scope of the overall organization.
On December 18, 2009, the Company acquired the assets and assumed the liabilities of Panama City,
Florida based Peoples First Community Bank (Peoples First) in an FDIC-assisted transaction. This acquisition
added approximately $2 billion in assets.
On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation
(Whitney), a bank holding company based in New Orleans, Louisiana, in a stock and cash transaction. The
impact of the acquisition is reflected in the Company’s financial information from the acquisition date.
Whitney’s bank subsidiary, Whitney National Bank, was merged into Hancock Bank of Louisiana and renamed
Whitney Bank. The acquisition added $11.7 billion in assets, $6.5 billion in loans, and $9.2 billion in
deposits. As part of the merger, Hancock Bank of Alabama was merged into Whitney Bank.
On September 16, 2011, seven Whitney Bank branches located on the Mississippi Gulf Coast and one
branch located in Bogalusa, Louisiana with approximately $47 million in loans and $180 million in deposits were
divested in order to resolve branch concentration concerns of the U.S. Department of Justice relating to the
merger.
On March 16, 2012, we completed the integration of the core systems of Whitney into
Hancock. Professional consulting groups assisted Hancock with the integration and accounting matters related to
the transaction, and there were a group of bankers from both Whitney and Hancock dedicated to this process,
with over 300 associates logging more than 1 million hours to complete the integration. Approximately
$1.6 billion of assets were transferred from Whitney Bank to Hancock Bank in conjunction with the transfer of
Whitney’s Alabama and Florida branches to Hancock Bank. As of March 16, 2012, Hancock Bank owns and
operates all branches in Mississippi, Alabama and Florida and Whitney Bank owns and operates all branches in
Louisiana and Texas. Additionally, on that same date, we closed 28 duplicate branches arising from the Whitney
merger. To date, the Company has not lost any major customer relationships as a result of the transaction, and it
has been able to retain key employees throughout the organization.
NATURE OF BUSINESS AND MARKETS
With $19.5 billion in assets, Hancock is the parent company of two wholly-owned bank subsidiaries,
Hancock Bank, headquartered in Gulfport, Mississippi and Whitney Bank, headquartered in New Orleans,
Louisiana.
Hancock Bank and Whitney Bank (referred to collectively as the “Banks”) operate a combined total of
nearly 250 full-service bank branches and almost 350 ATMs across a Gulf south corridor comprising southern
Mississippi; southern and central Alabama; southern and central Louisiana; the northern, central, and panhandle
1
regions of Florida; and Houston, Texas. Given the strong brand recognition of both Banks in their respective
hometown markets, the Company operates as Hancock Bank in Mississippi, Alabama and Florida, and Whitney
Bank in Louisiana and Texas. See “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Segment Reporting” and Note 19 to the consolidated financial statements for information
regarding Hancock’s reportable operating segments.
We also offer other services through several non-bank subsidiaries. Hancock Investment Services, Inc.
provides discount investment brokerage services. Hancock Insurance Agency and Whitney Insurance Agency
provide general insurance agency services. Harrison Finance Company provides consumer financing services.
We also have several special purpose subsidiaries that operate and sell certain foreclosed assets. Total revenue
from non-bank subsidiaries accounted for less than ten percent of our consolidated revenue in 2012.
Our operating strategy is to provide customers with the financial sophistication and range of products of a
regional bank, while successfully retaining the commercial appeal and level of service of a community bank. The
Banks offer a broad range of community banking services to commercial, small business and retail customers,
providing a variety of transaction and savings deposit products, treasury management services, investment
brokerage services, secured and unsecured loan products, including revolving credit facilities, and letters of
credit and similar financial guarantees. The Banks also provide trust and investment management services to
retirement plans, corporations and individuals. Through their subsidiaries, the Banks also offer personal and
business lines of insurance and annuity products to their customers.
The main industries along the Gulf Coast are energy and related service industries, military and
government-related facilities, educational and medical complexes, petrochemical industries, port facility
activities and transportation and related industries, tourism and related service industries, and the gaming
industry.
Having completed the integration of Whitney and Hancock, we will evaluate future acquisition
opportunities that have the potential to increase shareholder value. In-market expansion is our first priority.
However, we would also consider strategic opportunities in new markets such as Texas locations outside the
Houston area and northern Alabama.
Recent acquisitions and continued internal growth have diversified our sources of revenue and enhanced
core deposit funding. Hancock’s size and scale enables us attract and retain high quality associates. From a
financial perspective, the recent Whitney acquisition is expected to be accretive from 2012 onward as cost
savings are fully phased in. We are also focused on maintaining two hallmarks of our past culture: a strong
balance sheet and a commitment to excellent credit quality.
At December 31, 2012, the Company had total assets of $19.5 billion and 4,235 employees on a full-time
equivalent basis.
Additional information is available at www.hancockbank.com and www.whitneybank.com.
Loan Production and Credit Review
The Banks’ primary lending focus is to provide commercial, consumer and real estate loans to consumers, to
small and middle market businesses, and to corporate clients in their respective markets. We seek to provide
quality loan products that are attractive to the borrower and to the client and profitable to Hancock. We look to
build strong, profitable client relationships over time and maintain a strong presence and position of influence in
the communities we serve. Through this relationship-based approach we have developed a deep knowledge of
our customers and the markets in which they operate. The Company continually works to improve the
consistency of our lending processes across all of our banking divisions, to strengthen the underwriting criteria
we employ to evaluate new loans and loan renewals, and to diversify its loan portfolio in terms of type, industry
2
and geographical concentration. We believe that these measures will better position Hancock to meet the credit
needs of businesses and consumers in the markets it serves while pursuing a balanced strategy of loan
profitability, loan growth and loan quality.
The following discussion describes the underwriting procedures of the lending function and presents our
principal categories of loans. The results of our lending activities and the relative risk of the loan portfolio are
discussed in “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of this Report.
During 2011, Hancock began the process of integrating the loan policies, underwriting standards and key
underwriting functions of Whitney to achieve a consistent approach by both banks. These underwriting standards
address:
•
•
•
•
•
•
•
•
collateral requirements;
guarantor requirements (including policies on financial statement, tax return, and guarantees);
requirements regarding appraisals and their review;
loan approval hierarchy;
standard consumer and small business credit scoring underwriting criteria (including credit score
thresholds, maximum maturity and amortization, loan-to-value limits, global debt service coverage,
and debt to income limits);
commercial real estate and commercial and industrial underwriting guidelines (including minimum
debt service coverage ratio, maximum amortization, minimum equity requirements, maximum
loan-to-value ratios);
lending limits; and
credit approval authorities.
Additionally, we continue to enhance our loan concentration policy to limit and manage our exposure to
certain loan concentrations. This policy calls for a more detailed process for portfolio risk management and
reporting, the imposition of large borrower concentration limits and more systematic monitoring of large
commercial loans and increased monitoring of our portfolio mix. The Company currently has no significant
concentrations of loans to particular borrowers or to any foreign entities, although it continues to have significant
industry concentration in commercial real estate loans that it is working to reduce. Utilizing the regulatory
definition for concentrations (25% of total capital) and excluding loans acquired during the Peoples First
transaction (those covered under Loss Sharing Agreements with the FDIC) the company had the following
industry concentrations as of December 31, 2012, including both funded and unfunded commitments:
• Commercial Real Estate (144% of RBC)
• Mining, Oil and Gas (98% of RBC)
• Manufacturing (48% of RBC)
• Construction (45% of RBC)
• Retail Trade (38% of RBC)
• Healthcare (34% of RBC)
• Wholesale Trade (34% of RBC)
Our underwriting process is structured to require oversight that is proportional to the size and complexity of
the lending relationship. We delegate designated relationship managers and credit officers loan authority that can
be utilized to approve credit commitments for a single borrowing relationship. The limit of delegated authority is
based upon the experience, skill, and training of the relationship manager or credit officer. Certain types of loans
must be approved by either one of the Banks’ centralized underwriting units or the Banks’ executive loan
committee.
3
Loans are underwritten in accordance with the credit underwriting standards and loan policies of the Banks.
Loans are underwritten primarily on the basis of the borrower’s ability to make debt service and secondarily on
collateral value. Generally, real estate secured loans and mortgage loans are made when the borrower produces
evidence of the ability to make debt service along with appropriate equity in the property. Appropriate and
regulatory compliant third party valuations are required at the time of origination for real estate secured loans.
We present loan portfolio as originated, acquired and covered loans because these segments use different
accounting and allowance methodologies. Originated loans include legacy Hancock loans and loans originated
from the acquired Banks’ locations since their acquisitions. Acquired loans are those purchased in the Whitney
acquisition on June 4, 2011. Covered loans are those purchased in the December 2009 acquisition of Peoples
First, which are covered by loss share agreements between the FDIC and the Company that afford significant loss
protection. Within these categories, we have commercial, residential mortgage and consumer loans.
Commercial
The Banks offer a variety of commercial loan services to a diversified customer base over a range of
industries, including energy, wholesale and retail trade in various durable and nondurable products,
manufacturing of such products, marine transportation and maritime construction, financial and professional
services, and agricultural production. Commercial loans are categorized as commercial and industrial,
construction and land development, and commercial real estate loans.
Commercial and industrial loans, both secured and unsecured, are made available to businesses for working
capital (including financing of inventory and receivables), business expansion (including acquisition and
development of real estate and improvements), and the purchase of equipment and machinery. These loans are
primarily made based on the identified cash flows of the borrower and, if secured, on the underlying collateral.
Most commercial and industrial loans are secured by the assets being financed or other business assets such as
accounts receivable or inventory and may incorporate a personal or corporate guarantee; however, some short-
term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the
availability of funds for the repayment of these loans may be substantially dependent on the ability of the
borrower to collect amounts due from its customers.
The Banks make construction and land development loans to builders and real estate developers for the
acquisition, development and construction of business and residential purpose properties. Construction loans are
underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and
lease rates and financial analysis of the developers and property owners. Construction loans are generally based
upon cost estimates and the projected value of the complete project. The Banks monitor the construction process
to mitigate or identify risks as they arise. Construction loans often involve the disbursement of substantial funds
with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these
types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed
property or an interim loan commitment from the Banks until permanent financing is obtained. These loans are
typically closely monitored by on-site inspections and are considered to have higher risks than other real estate
loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real
property, general economic conditions and the availability of long-term financing. We have actively reduced our
overall residential construction and development lending activities over the course of the last three years.
Commercial real estate loans consist of commercial mortgages on both income-producing and owner-
occupied properties. We have executed a strategy to increase the proportion of loans secured by owner-occupied
properties in recent years and reduce the number of speculative real estate projects. These loans are viewed
primarily as cash flow loans and undergo the analysis and underwriting process of a commercial and industrial
loan, as well as that of a real estate loan. Repayment of non-owner occupied loans is generally dependent on the
successful operation of the income-producing property securing the loan. Commercial real estate loans may be
adversely affected by conditions in the real estate markets or in the general economy. The properties securing the
4
Banks’ commercial real estate portfolios are diverse in terms of type and geographic location. We monitor and
evaluate commercial real estate loans based on collateral, geography and risk grade criteria. While some markets
within the footprint have shown signs of improvement, commercial real estate lending represents an area of
elevated risk and we continue to limit this segment of the portfolio.
Residential Mortgage
A portion of the Banks’ lending activities consists of the origination of both fixed-rate and adjustable-rate
home loans, although we re-sell most fixed-rate production in the secondary mortgage market on a best-efforts
basis origination. The sale of mortgage loans allows the Banks to manage the interest rate risks related to such
lending operations.
Because of the uncertainty of the supply and demand, the general condition of the economy, coupled with
unemployment levels, we believe that values of residential real estate have not yet stabilized in many markets.
Consumer
Consumer loans include second mortgage home loans, home equity lines of credit and non-residential
consumer purpose loans. Non-residential consumer loans include direct and indirect loans made to finance
automobiles, recreation vehicles, boats purchases, and other personal (secured and unsecured) and deposit
account secured loans. Consumer loans are attractive because they typically have a shorter term, provide
granularity of size for the overall portfolio, and produce a higher overall yield. The Banks also have a small
portfolio of credit card receivables issued on the basis of applications received through referrals from the Banks’
branches and other marketing efforts. The Banks approve consumer loans based on employment and financial
information submitted by prospective borrowers as well as credit reports collected from various credit agencies.
Financial stability and credit history of the borrower are the primary factors the Banks consider in granting such
loans. The availability of collateral is also a factor considered in making such loans. The geographic area of the
borrower is another consideration, with preference given to borrowers in the Banks’ primary market areas.
A small consumer finance portfolio is maintained by Harrison Finance Company. While it was expected that
this customer base would be much more likely to be severely impacted by employment weakness and loss of
access to credit, losses to date have been very manageable. The portfolio has a higher risk profile than the Banks’
consumer portfolio, but carries a higher yield.
Securities Portfolio
Our investment portfolio includes, among other asset classes, U.S. agency debt securities, U.S. agency
mortgage-related securities and obligations of states and municipalities classified as available for sale and held to
maturity. As such, the Company considers the available for sale portfolio as one of many sources of liquidity
used to fund our operations. Investments are made in accordance with the investment policy and also tested under
multiple stressed interest rate scenarios, the results of which are used to manage our interest rate risk position.
The rate scenarios include regulatory and management agreed upon instantaneous and ramped rate movements
that may be up to plus and minus 500 basis points. The combined portfolio has a target effective duration of two
to five years.
We also utilize a significant portion of the securities portfolio to secure certain deposits and other liabilities
requiring collateralization. To retain a source of liquidity, we limit the percentage of securities that can be
pledged in order to keep a portion of securities available for sale. The securities portfolio can also be pledged to
increase our line of credit availability at the Federal Home Loan Bank of Dallas although we have not had to do
so.
The investments subcommittee of the asset\liability committee (ALCO) is responsible for evaluating issues
related to the management of the investment portfolio. The investments subcommittee is also responsible for the
development of investment strategies for the consideration and approval of the ALCO. Final authority and
5
responsibility for all aspects of the conduct of investment activities rests with the board risk committee, all in
accordance with the overall guidance and limitations of the investment policy.
Deposits
The Banks have several programs designed to attract depository accounts offered to consumers and to small
and middle market businesses at interest rates generally consistent with market conditions. Deposits provide the
most significant funding source for the Company’s interest earning assets. Deposits are attracted principally from
clients within our retail branch network through the offering of a broad array of deposit products to individuals
and businesses, including non-interest bearing demand deposit accounts, interest-bearing transaction accounts,
savings accounts, money market deposit accounts, and time deposit accounts. Terms vary among deposit
products with respect to commitment periods, minimum balances, and applicable fees. Interest paid on deposits
represents the largest component of our interest expense. Interest rates offered on interest-bearing deposits are
determined based on a number of factors, including, but not limited to, (1) interest rates offered in local markets
by competitors, (2) current and expected economic conditions, (3) anticipated future interest rates, (4) the
expected amount and timing of funding needs, and (5) the availability and cost of alternative funding sources.
Deposit flows are controlled by the Banks primarily through pricing, and to a certain extent, through promotional
activities. Management believes that the rates it offers, which are posted weekly on deposit accounts, are
generally competitive with other financial institutions in the Banks’ respective market areas. Client deposits are
attractive sources of funding because of their stability and relative cost. Deposits are regarded as an important
part of the overall client relationship and provide opportunities to cross-sell other Company services.
The Banks also hold public funds as deposits. The Banks’ appetite for public funds, as with any type of
deposit, is determined by ALCO’s funding and liquidity sub-committee while pricing decisions are determined
by ALCO’s deposit pricing sub-committee. Typically many public fund deposits are allocated based upon the
rate of interest offered and the ability of the bank to provide collateralization. The Banks can influence the level
of its public fund deposits through pricing decisions. Public deposits typically require the pledging of collateral,
most commonly marketable securities. This is taken into account when determining the level of interest to be
paid on public deposits. The pledging of collateral, monitoring and management reporting represents additional
operational requirements for the Banks. These deposits are more volatile because they tend to be high balance
deposits. Public funds have not historically presented any special risks to the Banks. Public funds are only one of
many possible sources of liquidity that the Banks have available to draw upon as part of its liquidity funding
strategy as defined by ALCO.
The Banks may accept and did accept in 2012 brokered deposits as part of their funding. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), only “well-capitalized” and “adequately-
capitalized” institutions may accept brokered deposits. The Company issued brokered deposits through the use of
third-party intermediaries. While we did not expect to see deposits leave in conjunction with the expiration of the
TAG program, these CDs were issued as a temporary liquidity source in the event we saw any such activity.
However, our banks did not experience any material outflow of deposits as a result of the TAG expiration.
Trust Services
The Banks, through their respective trust departments, offer a full range of trust services on a fee basis. In
their trust capacities, the Banks provide investment management services on an agency basis and act as trustee
for pension plans, profit sharing plans, corporate and municipal bond issues, living trusts, life insurance trusts
and various other types of trusts created by or for individuals, businesses, charitable and religious organizations.
As of December 31, 2012, the trust departments of the Banks had approximately $13.6 billion of assets under
administration compared to $12.5 billion as of December 31, 2011. As of December 31, 2012, $4.1 billion of
administered assets were corporate trust accounts and the remaining balances were personal, employee benefit,
estate and other trust accounts.
6
COMPETITION
The deregulation of the financial services industry, the elimination of many previous distinctions between
commercial banks and other financial institutions as well as legislation enacted in Mississippi, Louisiana and
other states allowing state-wide branching, multi-bank holding companies and regional interstate banking have
all served to foster a highly competitive environment for commercial banking in our market area. The principal
competitive factors in the markets for deposits and loans are interest rates and fee structures associated with the
various products offered. We also compete through the efficiency, quality, and range of services and products we
provide, as well as the convenience provided by an extensive network of customer access channels including
local branch offices, ATMs, online banking, and telebanking centers. In attracting deposits and in our lending
activities, we generally compete with other commercial banks, savings associations, credit unions, mortgage
banking firms, consumer finance companies, securities brokerage firms, mutual funds and insurance companies,
and other financial institutions.
AVAILABLE INFORMATION
We make available free of charge, on or through our website www.hancockbank.com, our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and amendments to such filings, as soon as
reasonably practicable after each is electronically filed with, or furnished to, the SEC. You may read and copy
any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC
20549. Information on the operation of the Public Reference Room may be obtained by calling the Commission
at 1-800-SEC-0330. The SEC maintains a website that contains the Company’s reports, proxy and information
statements, and the Company’s other SEC filings. The address of the SEC’s website is www.sec.gov.
Information appearing on the Company’s website is not part of any report that it files with the SEC.
SUPERVISION AND REGULATION
Bank Holding Company Regulation
General
The Company is subject to extensive regulation by the Board of Governors of the Federal Reserve System
(the Federal Reserve) pursuant to the Bank Holding Company Act of 1956, as amended (the Bank Holding
Company Act). On January 26, 2002 the Company qualified as a financial holding company, giving it broader
powers as discussed below. The Company also is required to file certain reports with, and otherwise complies
with the rules and regulations of, the Securities and Exchange Commission (the Commission) under federal
securities laws.
Federal Regulation
The Bank Holding Company Act generally prohibits a corporation that owns a bank from engaging in
activities other than banking, managing or controlling banks or other permissible subsidiaries. Acquiring or
obtaining control of more than 5% of the voting shares of any company that engages in activities other than those
activities determined by the Federal Reserve to be so closely related to banking, managing or controlling banks
as to be proper incident thereto is also prohibited. In determining whether a particular activity is permissible, the
Federal Reserve considers whether the performance of the activity can reasonably be expected to produce
benefits to the public that outweigh possible adverse effects. For example: making, acquiring or servicing loans;
leasing personal property; providing certain investment or financial advice; performing certain data processing
services; acting as agent or broker in selling credit life insurance, and performing certain insurance underwriting
activities have all been determined by the Federal Reserve to be permissible activities. The Bank Holding
Company Act does not place territorial limits on permissible bank-related activities of bank holding companies.
Even with respect to permissible activities, however, the Federal Reserve has the power to order a holding
company or its subsidiaries to terminate any activity or its control of any subsidiary when it has reasonable cause
7
to believe that continuation of such activity or control of such subsidiary constitutes a serious risk to the financial
safety, soundness or stability of any bank subsidiary of that holding company.
The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the
Federal Reserve: (1) before it acquires ownership or control of any voting shares of any bank if, after such
acquisition, such bank holding company will own or control more than 5% of the voting shares of such bank,
(2) before it or any of its subsidiaries other than a bank acquires all of the assets of a bank, (3) before it merges
with any other bank holding company, or (4) before it engages in permissible non-banking activities. In
reviewing a proposed covered acquisition, the Federal Reserve considers its financial, managerial and
competitive aspects. The future prospects of the companies and banks concerned and the convenience and needs
of the community to be served are also considered. The Federal Reserve also reviews the indebtedness to be
incurred by a bank holding company in connection with the proposed acquisition to ensure that the holding
company can service such indebtedness without adversely affecting its ability to meet the regulatory capital
requirements imposed on the holding company or its subsidiaries. The Bank Holding Company Act further
requires that consummation of approved bank holding company or bank acquisitions or mergers must be delayed
for a period of not less than 15 or more than 30 days following the date of approval. During such 15 to 30-day
period, complaining parties may obtain a review of the Federal Reserve’s order granting its approval by filing a
petition in the appropriate United States Court of Appeals petitioning that the order be set aside.
The Gramm-Leach-Bliley Act of 1999 (the “Financial Services Modernization Act”) repealed the two
affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve
Member Banks with firms “engaged principally” in specified securities activities; and Section 32, which
restricted officer, director, or employee interlocks between a member bank and any company or person
“primarily engaged” in specified securities activities. The Financial Services Modernization Act also preempted
any state law restricting the establishment of financial affiliations, primarily related to insurance. Generally, the
Act establishes a comprehensive framework that permits affiliations among qualified bank holding companies,
commercial banks, insurance companies, securities firms, and other financial service providers by revising and
expanding the Bank Holding Company Act framework to permit a holding company to engage in a full range of
financial activities through a new entity known as a Financial Holding Company.
The Financial Services Modernization Act requires that each bank subsidiary of a financial holding
company be well capitalized and well managed as determined by the subsidiary bank’s principal regulator. To be
considered well managed, the bank must have received at least a satisfactory composite rating and a satisfactory
management rating at its most recent examination. To be well capitalized, the bank must have a leverage capital
ratio of 5%, a Tier 1 risk-based capital ratio of 6% and a total risk-based capital ratio of 10%. These ratios are
discussed further below. A financial holding company that becomes aware that a subsidiary bank has ceased to
be well capitalized or well managed must notify the Federal Reserve and enter into an agreement to cure such
condition. The consequences of a failure to cure such condition are that the Federal Reserve Board may order the
financial holding company to divest the bank. Alternatively, a financial holding company may cease to engage in
the financial holding company activities that are unrelated to banking or otherwise impermissible for a bank
holding company.
The Federal Reserve has adopted capital adequacy guidelines for use in its examination and regulation of
bank holding companies and financial holding companies. The regulatory capital of a bank holding company or
financial holding company under applicable federal capital adequacy guidelines is particularly important in the
Federal Reserve’s evaluation of a holding company and any applications made by the bank holding company to
the Federal Reserve. If regulatory capital falls below minimum guideline levels, a financial holding company
may lose its status as a financial holding company and a bank holding company or bank may be denied approval
to acquire or establish additional banks or non-bank businesses or to open additional facilities. There are two
measures of regulatory capital presently applicable to bank holding companies: (1) risk-based capital and
(2) leverage capital ratios.
8
The Federal Reserve rates bank holding companies through a confidential component and composite 1-5
rating system, with a composite rating of 1 being the highest rating and 5 being the lowest. This system is
designed to help identify institutions requiring special attention. Financial institutions are assigned ratings based
on evaluation and rating of their financial condition and operations. Components reviewed include capital
adequacy, asset quality, management capability, the quality and level of earnings, the adequacy of liquidity and
sensitivity to interest rate fluctuations.
The leverage ratios adopted by the Federal Reserve require all but the most highly rated bank holding
companies to maintain Tier 1 Capital at 4% of total assets. Certain bank holding companies having a composite 1
rating and not experiencing or anticipating significant growth may satisfy the Federal Reserve guidelines by
maintaining Tier 1 Capital of at least 3% of total assets reduced by deductions from Tier 1 capital discussed
below. Tier 1 Capital for bank holding companies generally includes: common equity, retained earnings, non-
controlling interest in equity accounts of consolidated subsidiaries and a limited amount of qualifying perpetual
preferred stock. In calculating Tier 1 Capital, goodwill and other disallowed intangibles and disallowed deferred
tax assets and certain other assets are excluded. The Company’s Tier 1 capital leverage ratio at December 31,
2012 was 9.10%.
The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure
and to minimize disincentives for holding liquid assets. Under the risk-based capital guidelines, assets are
assigned to one of four risk categories: 0%, 20% 50% and 100%. As an example, U.S. Treasury securities are
assigned to the 0% risk category while most categories of loans are assigned to the 100% risk category. A two-
step process determines the risk weight of off-balance sheet items such as standby letters of credit. First, the
amount of the off-balance sheet item is multiplied by a credit conversion factor of either 0%, 20%, 50% or 100%.
The result is then assigned to one of the four risk categories.
The primary component of risk-based capital is Tier 1 Capital, which was described above. Tier 2 Capital,
which consists primarily of perpetual preferred stock not qualifying as Tier 1 Capital, mandatory convertible
securities, certain types of subordinated debt and a limited amount of the allowances for loan losses, is a
secondary component of risk-based capital. The risk-weighted asset base is equal to the sum of the aggregate
dollar values of assets and off-balance sheet items in each risk category, multiplied by the weight assigned to that
category. A ratio of Tier 1 Capital to risk-weighted assets of at least 4% and a ratio of Total Capital (Tier 1 and
Tier 2) to risk-weighted assets of at least 8% must be maintained by bank holding companies. At December 31,
2012, the Company’s Tier 1 and Total Capital risk based ratios were 12.65% and 14.28%, respectively.
As described above, the prior approval of the Federal Reserve must be obtained before the Company may
acquire substantially all the assets of any bank, or ownership or control of any voting shares of any bank, if, after
such acquisition, it would own or control, directly or indirectly, more than 5% of the voting shares of such bank.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Riegle-Neal Act) permits adequately
capitalized and managed bank holding companies to acquire control of banks in any state, subject to federal
regulatory approval, without regard to whether such a transaction is prohibited by the laws of any state. Federal
banking regulators may approve merger transactions involving banks located in different states, without regard to
laws of any state prohibiting such transactions; except that mergers may not be approved with respect to banks
located in states that, before June 1, 1997, opted out of the Riegle-Neal Act by enacting legislation prohibiting
mergers by banks located in such state with out-of-state institutions. Mississippi opted into the interstate
branching provision of the Riegle-Neal Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) authorizes national
and state banks to establish de novo branches in other states to the same extent as a bank chartered by that state
would be so permitted. Previously, banks could only establish branches in other states if the host state expressly
permitted out-of-state banks to establish branches in that state. Accordingly, banks will be able to enter new
markets more freely.
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The Riegle-Neal Act further provides that a bank holding company may not, following an interstate
acquisition, control more than 10% of nationwide insured deposits or 30% of deposits in any state where the
acquiring bank operates. States have the right to adopt legislation to lower the 30% limit. Additional provisions
require that interstate activities conform to the Community Reinvestment Act.
The Company is required to give the Federal Reserve prior written notice of any purchase or redemption of
its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with
the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10%
or more of the Company’s consolidated net worth. The Federal Reserve may disapprove such a transaction if it
determines that the proposal constitutes an unsafe or unsound practice, would violate any law, regulation, Federal
Reserve order or directive or any condition imposed by, or written agreement with, the Federal Reserve.
In November 1985, the Federal Reserve adopted its Policy Statement on Cash Dividends Not Fully Covered
by Earnings (the Policy Statement). The Policy Statement sets forth various guidelines that the Federal Reserve
believes that a bank holding company should follow in establishing its dividend policy. In general, the Federal
Reserve stated that bank holding companies should pay dividends only out of current earnings. It also stated that
dividends should not be paid unless the prospective rate of earnings retention by the holding company appears
consistent with its capital needs, asset quality and overall financial condition.
The Company is a legal entity separate and distinct from the Banks. There are various restrictions that limit
the ability of the Banks to finance, pay dividends or otherwise supply funds to the Company or other affiliates. In
addition, subsidiary banks of holding companies are subject to certain restrictions on any extension of credit to
the bank holding company or any of its subsidiaries, on investments in the stock or other securities thereof and on
the taking of such stock or securities as collateral for loans to any borrower. Further, a bank holding company
and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with extensions of
credit, or leases or sales of property or furnishing of services.
Bank Regulation
The operations of the Banks are subject to state and federal statutes applicable to state banks and the
regulations of the Federal Reserve and the FDIC. The operation of the Banks may also be subject to applicable
OCC regulation, to the extent state banks are granted parity with national banks. Such statutes and regulations
relate to, among other things, required reserves, investments, loans, mergers and consolidations, issuance of
securities, payment of dividends, establishment of branches and other aspects of the Banks’ operations.
Hancock Bank is subject to regulation and periodic examinations by the FDIC and the State of Mississippi
Department of Banking and Consumer Finance. Whitney Bank is subject to regulation and periodic examinations
by the FDIC and the Office of Financial Institutions, State of Louisiana. These regulatory authorities examine
such areas as reserves, loan and investment quality, management policies, procedures and practices and other
aspects of operations. These examinations are designed to protect the Banks’ depositors, rather than their
stockholders. In addition to these regular examinations, the Company and the Banks must furnish periodic
reports to their respective regulatory authorities containing a full and accurate statement of their affairs.
The Company is required to file annual reports with the Federal Reserve Board, and such additional
information as the Federal Reserve Board may require pursuant to the Bank Holding Company Act. The Federal
Reserve Board may examine a bank holding company or any of its subsidiaries, and charge the company for the
cost of such examination.
The Dodd-Frank Act has removed many limitations on the Federal Reserve Board’s authority to make
examinations of banks that are subsidiaries of bank holding companies. Under the Dodd-Frank Act, the Federal
Reserve Board is generally permitted to examine bank holding companies and their subsidiaries, provided that
the Federal Reserve Board must rely on reports submitted directly by the institution and examination reports of
the appropriate regulators (such as the FDIC and the Banking Department) to the fullest extent possible; must
10
provide reasonable notice to, and consult with, the appropriate regulators before commencing an examination of
a bank holding company subsidiary; and, to the fullest extent possible, must avoid duplication of examination
activities, reporting requirements, and requests for information.
As a result of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA), a financial institution insured by the FDIC can be held liable for any losses incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (1) the default of a commonly controlled FDIC-insured
financial institution or (2) any assistance provided by the FDIC to a commonly controlled financial institution in
danger of default. Thus, Hancock Bank and Whitney Bank have potential exposure for any losses incurred by the
FDIC with respect to the activities of each other.
The Banks are members of the FDIC, and their deposits are insured as provided by law by the Deposit
Insurance Fund, or the DIF. The deposits of the Banks are insured up to applicable limits and the Banks are
subject to deposit insurance assessments to maintain the DIF. The FDIC utilizes a risk-based assessment system
that imposes insurance premiums based upon a risk matrix that takes into account a bank’s capital level and
supervisory rating.
Effective January 1, 2007, the FDIC began imposing deposit assessment rates based on the risk category of
the bank, with Risk Category I being the lowest risk category and Risk Category IV being the highest risk
category. The Dodd-Frank Act changed the method of calculation for FDIC insurance assessments. Under the
previous system, the assessment base was domestic deposits minus a few allowable exclusions, such as pass-
through reserve balances. Under the Dodd-Frank Act, assessments are calculated based on the depository
institution’s average consolidated total assets, less its average amount of tangible equity. In addition to providing
for the required change in assessment base, the FDIC’s final deposit insurance regulations implementing the
Dodd-Frank provisions eliminated the assessment adjustments based on unsecured debt, secured liabilities, and
brokered deposits; added a new adjustment for holding unsecured debt issued by another insured depository
institution; and lowered the initial base assessment rate schedule in order to collect approximately the same
amount of revenue under the new base as under the old base, among other changes.
Beginning April 1, 2011, the base assessment rates ranged from 5 to 35 basis points, with the initial
assessment rates subject to adjustments which could increase or decrease the total base assessment rates. The
adjustments included (1) a decrease for long-term unsecured debt, including most senior and subordinated debt
and, for small institutions, a portion of Tier 1 capital; and (2) for non-Risk Category I institutions, an increase for
brokered deposits above a threshold amount. The enactment of the Emergency Economic Stabilization Act of
2008 temporarily raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per
depositor. However, with the passage of the Dodd-Frank Act, this increase in the basic coverage limit has been
made permanent.
Since the first quarter of 2000, all institutions with deposits insured by the FDIC have been required to pay
assessments to fund interest payments on bonds issued by the Financing Corporation (FICO), a mixed-ownership
government corporation established to recapitalize a predecessor to the Deposit Insurance Fund. The FICO
assessment rate is adjusted quarterly to reflect changes in the assessment bases of the fund based on quarterly
Call Report and Thrift Financial Report submissions. The current annualized assessment rate is 1.020 basis
points, or approximately 0.255 basis points per quarter. These assessments will continue until the FICO bonds
mature in 2017 through 2019.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) subjects banks and bank
holding companies to increased regulation and supervision, including a new regulatory emphasis linking
supervision to bank capital levels. Also, federal banking regulators are required to take prompt regulatory action
with respect to depository institutions that fall below specified capital levels and to draft non-capital regulatory
measures to assure bank safety.
11
FDICIA contains a “prompt corrective action” section intended to address problem institutions at the least
possible long-term cost to the deposit insurance funds. Pursuant to this section, the federal banking agencies are
required to prescribe a leverage limit and a risk-based capital requirement indicating levels at which institutions
will be deemed to be “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly
undercapitalized” and “critically undercapitalized.” In the case of a depository institution that is “critically
undercapitalized” (a term defined to include institutions which still have positive net worth); the federal banking
regulators are generally required to appoint a conservator or receiver.
FDICIA further requires regulators to perform annual on-site bank examinations, places limits on real estate
lending and tightens audit requirements. The legislation eliminated the “too big to fail” doctrine, which protects
uninsured deposits of large banks, and restricts the ability of undercapitalized banks to obtain extended loans
from the Federal Reserve Board discount window. FDICIA also imposes new disclosure requirements relating to
fees charged and interest paid on checking and deposit accounts.
In addition to regulating capital, the FDIC has broad authority to prevent the development or continuance of
unsafe or unsound banking practices. Pursuant to this authority, the FDIC has adopted regulations that restrict
preferential loans and loan amounts to “affiliates” and “insiders” of banks, require banks to keep information on
loans to major stockholders and executive officers and bar certain director and officer interlocks between
financial institutions. The FDIC is also authorized to approve mergers, consolidations and assumption of deposit
liability transactions between insured banks and between insured banks and uninsured banks or institutions to
prevent capital or surplus diminution in such transactions where the resulting, continuing or assumed bank is an
insured nonmember state bank, like Hancock Bank and Whitney Bank.
Although Hancock Bank and Whitney Bank are not members of the Federal Reserve System, they are
subject to Federal Reserve regulations that require the Banks to maintain reserves against transaction accounts
(primarily checking accounts). The Federal Reserve regulations currently require that reserves be maintained
against net transaction accounts in the amount of 3% of the aggregate of such accounts up to $71 million, or, if
the aggregate of such accounts exceeds $71 million, 10% of the total in excess of $71 million. This regulation is
subject to an exemption from reserve requirements on $11.5 million of an institution’s transaction accounts.
The Financial Services Modernization Act also permits national banks, and through state parity statutes,
state banks, to engage in expanded activities through the formation of financial subsidiaries. A state bank may
have a subsidiary engaged in any activity authorized for state banks directly or any financial activity, except for
insurance underwriting, insurance investments, real estate investment or development, or merchant banking, each
of which activity may only be conducted through a subsidiary of a Financial Holding Company. Financial
activities include all activities permitted under new sections of the Bank Holding Company Act or permitted by
regulation.
A state bank seeking to have a financial subsidiary, and each of its depository institution affiliates, must be
“well-capitalized” and “well-managed.” The total assets of all financial subsidiaries may not exceed the lesser of
45% of a bank’s total assets, or $50 billion. A state bank must exclude from its assets and equity all equity
investments, including retained earnings, in a financial subsidiary. The assets of the subsidiary may not be
consolidated with the bank’s assets. The bank must also have policies and procedures to assess financial
subsidiary risk and protect the bank from such risks and potential liabilities.
The Financial Services Modernization Act also includes a new section of the Federal Deposit Insurance Act
governing subsidiaries of state banks that engage in “activities as principal that would only be permissible” for a
national bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all
existing subsidiaries. Because Mississippi and Louisiana permit commercial banks chartered by the state to
engage in any activity permissible for national banks, the Banks will be permitted to form subsidiaries to engage
in the activities authorized by the Financial Services Modernization Act. In order to form a financial subsidiary, a
state bank must be well-capitalized, and the state bank would be subject to the same capital deduction, risk
management and affiliate transaction rules as applicable to national banks.
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In 2001, the USA Patriot Act was signed into law. The USA Patriot Act broadened the application of anti-
money laundering regulations to apply to additional types of financial institutions, such as broker-dealers, and
strengthened the ability of the U.S. Government to detect and prosecute international money laundering and the
financing of terrorism. The principal provisions of Title III of the USA Patriot Act require that regulated financial
institutions, including state member banks: (i) establish an anti-money laundering program that includes training
and audit components; (ii) comply with regulations regarding the verification of the identity of any person
seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and
(iv) perform certain verification and certification of money laundering risk for their foreign correspondent
banking relationships. The USA Patriot Act also expanded the conditions under which funds in a U.S. interbank
account may be subject to forfeiture and increased the penalties for violation of anti-money laundering
regulations. Failure of a financial institution to comply with the USA Patriot Act’s requirements could have
serious legal and reputational consequences for the institution. The Banks have adopted policies, procedures and
controls to address compliance with the requirements of the USA Patriot Act under the existing regulations and
will continue to revise and update its policies, procedures and controls to reflect changes required by the USA
Patriot Act and implementing regulations.
In October 2008, the Emergency Economic Stabilization Act of 2008 (EESA) was enacted. EESA
authorized the Treasury Department to purchase from financial institutions and their holding companies up to
$700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including
debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief
program (TARP). On November 13, 2008, following a thorough evaluation and analysis, the Company
announced it would not participate in the CPP. Whitney participated in the TARP program, but the preferred
stock issued to Treasury was subsequently purchased and retired by Hancock in conjunction with the acquisition.
Recent Developments
The Congress, Treasury Department and the federal banking regulators, including the FDIC, have taken
broad action since early September, 2008 to address volatility in the U.S. banking system, including the passage
of EESA (discussed above), the provision of other direct and indirect assistance to financial institutions,
assistance by the banking authorities in arranging acquisitions of weakened banks and broker-dealers,
implementation of programs by the Federal Reserve Board to provide liquidity to the commercial paper markets
and expansion of deposit insurance coverage. The federal government has pursued additional initiatives in an
effort to stimulate the economy and stabilize the financial markets, including the enactment of the American
Recovery and Reinvestment Act of 2010, and have altered the terms of some previously announced policies.
The enactment of the Dodd-Frank Act will likely result in increased regulation of the financial services
industry. Provisions likely to affect the activities of the Company and the Banks include, without limitation, the
following:
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Asset-based deposit insurance assessments. FDIC deposit insurance premium assessments are based on
bank assets rather than domestic deposits.
Deposit insurance limit increase. The deposit insurance coverage limit has been permanently increased
from $100,000 to $250,000.
Establishment of the Consumer Financial Protection Bureau (CFPB). The CFPB is housed within the
Federal Reserve and, in consultation with the Federal banking agencies, makes rules relating to
consumer protection. The CFPB has the authority, should it wish to do so, to rewrite virtually all of the
consumer protection regulations governing banks, including those implementing the Truth in Lending
Act, the Real Estate Settlement Procedures Act (or RESPA), the Truth in Savings Act, the Electronic
Funds Transfer Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the
S.A.F.E. Mortgage Licensing Act, the Fair Credit Reporting Act (except Sections 615(e) and 628), the
Fair Debt Collection Practices Act, and the Gramm-Leach-Bliley Act (sections 502 through 509
relating to privacy), among others. On January 4, 2012 President Obama named the first Director of the
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CFPB by way of recess appointment. Hancock is subject to direct supervision and examination by the
CFPB in respect of the foregoing consumer protection acts and regulations.
Risk-retention rule. Under current proposed rules, banks originating loans for sale on the secondary
market or securitization would be required to retain 5% of any loan they sell or securitize, except for
mortgages that meet low-risk standards to be developed by regulators.
Limitation on federal preemption. Limitations have been imposed on the ability of national bank
regulators to preempt state law. Formerly, the national bank and federal thrift regulators possessed
preemption powers with regard to transactions, operating subsidiaries and attorney general civil
enforcement authority. These preemption requirements have been limited by the Dodd-Frank Act,
which will likely impact state banks by affecting activities previously permitted through parity with
national banks.
Changes to regulation of bank holding companies. Under the Dodd-Frank Act, bank holding
companies must be well-capitalized and well-managed to engage in interstate transactions. In the past,
only the subsidiary banks were required to meet those standards. The Federal Reserve Board’s “source
of strength doctrine” has now been codified, mandating that bank holding companies such as the
Company serve as a source of strength for their subsidiary banks, such that the bank holding company
must be able to provide financial assistance in the event the subsidiary bank experiences financial
distress.
Executive compensation limitations. The Dodd-Frank Act codified executive compensation limitations
similar to those previously imposed on TARP recipients.
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The Dodd-Frank Act contains 16 different titles, is over 800 pages long, and calls for the completion of
dozens of studies and reports and hundreds of new regulations. The information provided herein regarding the
effect of the Dodd-Frank Act is intended merely for illustration and is not exhaustive, as the full impact of the
legislation on banks and bank holding companies is still being studied and in any event cannot be fully known
until the completion of new federal agency rulemakings over the next few years. Interested shareholders should
refer directly to the Dodd-Frank Act itself for additional information.
The Dodd-Frank Act is one of a number of legislative initiatives that have been proposed in recent years due
to the national and global financial crisis. It is not possible to predict whether any other additional legislation
may be adopted that would significantly affect the operations and performance of the Company and the Banks.
In the summer of 2012, our primary federal regulators—the Federal Reserve Board and the Federal Deposit
Insurance Corporation – published two notices of proposed rulemaking that would substantially revise the risk-
based capital requirements applicable to bank holding companies and depository institutions, compared to the
current U.S. risk-based capital rules, which are based on the international capital accords of the Basel Committee
on Banking Supervision (Basel Committee).
One of the 2012 capital proposals (Basel III Proposal) addresses the components of capital and other issues
affecting the numerator in banking institutions’ regulatory capital ratios, and would implement the Basel
Committee’s December 2010 framework, known as “Basel III,” for strengthening international capital standards.
The other proposal (Standardized Approach Proposal) addresses risk weights and other issues affecting the
denominator in banking institutions’ regulatory capital ratios, and would replace the existing Basel I-derived risk
weighting approach with a more risk-sensitive approach based, in part, on the standardized approach in the Basel
Committee’s 2004 “Basel II” capital accords. Although the Basel III Proposal was proposed to come into effect
on January 1, 2013, the federal banking agencies jointly announced on November 9, 2012 that the
implementation date would be deferred without establishing a new effective date. As proposed, the Standardized
Approach Proposal will become effective on January 1, 2015. The federal banking agencies have not yet
proposed rules implementing the final liquidity framework of Basel III, and have not yet determined to what
extent they will apply to U.S. banks that are not large, internationally active banks.
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Regulation E
As amended in late 2009, Regulation E prohibits banks from charging an overdraft fee for non-recurring
debit card transactions (specifically, point-of-sale and ATM transactions) that overdraw a consumer’s account
unless the consumer affirmatively consents, or “opts-in,” to the bank’s payment of overdrafts for those
transactions. The Banks do not pay such transactions unless the consumer affirmatively elects, or “opts-in,” to
have the Banks do so.
Debit Interchange Fees
Effective June 29, 2011, the Federal Reserve issued a final rule implementing the “Durbin Amendment” to
the Dodd-Frank Act. The rule included standards for assessing whether debit card interchange fees received by
debit card issuers are reasonable and proportional to the costs incurred by issuers for electronic debit
transactions. Interchange fees, or “swipe” fees, are fees that merchants pay to credit card companies and card-
issuing banks like us for processing electronic payment transactions on their behalf. Under the final rule, the
maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of
21 cents per transaction and 5 basis points multiplied by the value of the transaction. The rule further allows for
an upward adjustment of 1 cent to the interchange fee if an issuer certifies that it has implemented policies and
procedures reasonably designed to achieve the fraud-prevention standards set forth by the Federal Reserve.
In addition, the legislation prohibits card issuers and networks from entering into exclusive arrangements
requiring that debit card transactions be processed on a single network or only two affiliated networks, and
allows merchants to determine transaction routing. The limits that the Dodd-Frank Act and Federal Reserve rules
place on debit interchange fees have reduced our debit card interchange revenues. The rule became effective
October 1, 2011.
Summary
The foregoing is a brief summary of certain statutes, rules and regulations affecting the Company and the
Banks. It is not intended to be an exhaustive discussion of all the statutes and regulations having an impact on the
operations of such entities.
It is not known whether the above acts and regulations will have any material effect on the Company’s
operations. However, increased regulation will generally result in increased legal and compliance expense.
Finally, additional bills may be introduced in the future in the United States Congress and state legislatures
to alter the structure, regulation and competitive relationships of financial institutions. It cannot be predicted
whether and what form any of these proposals will be adopted or the extent to which the business of the
Company and the Banks may be affected thereby.
Effect of Governmental Monetary and Fiscal Policies
The difference between the interest rate paid on deposits and other borrowings and the interest rate received
on loans and securities comprise most of a bank’s earnings. In order to mitigate the interest rate risk inherent in
the industry, the banking business is becoming increasingly dependent on the generation of fee and service
charge revenue.
The earnings and growth of a bank will be affected by both general economic conditions and the monetary and
fiscal policy of the United States Government and its agencies, particularly the Federal Reserve. The Federal
Reserve sets national monetary policy such as seeking to curb inflation and combat recession. This is accomplished
by its open-market operations in United States government securities, adjustments in the amount of reserves that
financial institutions are required to maintain and adjustments to the discount rates on borrowings and target rates
for federal funds transactions. The actions of the Federal Reserve in these areas influence the growth of bank loans,
investments and deposits and also affect interest rates on loans and deposits. The nature and timing of any future
changes in monetary policies and their potential impact on the Company cannot be predicted.
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ITEM 1A. RISK FACTORS
We face a number of significant risks and uncertainties in connection with our operations. Our business,
results of operations and financial condition could be materially adversely affected by the factors described
below.
While we describe each risk separately, some of these risks are interrelated and certain risks could trigger
the applicability of other risks described below. Also, the risks and uncertainties described below are not the only
ones that we may face. Additional risks and uncertainties not presently known to us, or that we currently do not
consider significant, could also potentially impair, and have a material adverse effect on, our business, results of
operations and financial condition.
We may be vulnerable to certain sectors of the economy.
A substantial portion of our loan portfolio is secured by real estate. In a weak economy, or in areas where real
estate market conditions are distressed, we may experience a higher than normal level of nonperforming real estate
loans, the collateral value of the portfolio and the revenue stream from those loans could come under stress, and
additional provisions to the allowance for loan losses could be necessitated. Our ability to dispose of foreclosed real
estate at prices above the respective carrying values could also be impaired, causing additional losses.
Difficult market conditions have adversely affected the industry in which we operate.
The capital and credit markets continue to experience volatility and disruption. Continuing distressed
conditions in the housing market, with depressed home prices and increased foreclosures, unemployment and
under-employment, have negatively impacted the performance of mortgage loans and resulted in significant
write-downs of asset values by financial institutions, including government-sponsored entities as well as major
commercial and investment banks. These write-downs have caused many financial institutions to seek additional
capital, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the
stability of the financial markets generally and the strength of counterparties, many lenders and institutional
investors have reduced or ceased providing funding to borrowers, including to other financial institutions. This
market turmoil and tightening of credit have led to an increased level of commercial and consumer
delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business
activity generally. A worsening of these conditions would likely exacerbate the adverse effects of these difficult
market conditions on us and others in the financial institution industry. In particular, we face the following risks
related to these conditions:
• There is increased regulation of our industry, including as a result of the Emergency Economic
Stabilization Act of 2008 (EESA) and the Dodd-Frank Act. Compliance with such regulation may
increase our costs and limit our ability to pursue business opportunities.
• Market developments and the resulting economic pressure on consumers may affect consumer
confidence levels and may cause increases in delinquencies and default rates, which, among other
effects, could affect our charge-offs and provision for loan losses.
• Competition in the industry could intensify as a result of the increasing consolidation of financial
services companies in connection with current market conditions.
• The current market disruptions make valuation even more difficult and subjective, and our ability to
measure the fair value of our assets could be adversely affected. If we determine that a significant
portion of our assets have values that are significantly below their recorded carrying value, we could
recognize a material charge to earnings in the quarter during which such determination was made, our
capital ratios would be adversely affected and a rating agency might downgrade our credit rating or put
us on credit watch.
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The financial soundness and stability of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be adversely affected by the actions and financial
soundness and stability of other financial institutions as a result of credit, trading, clearing or other relationships
between such institutions. We routinely execute transactions with counterparties in the financial industry,
including brokers and dealers, commercial banks and other institutional clients. As a result, defaults by, and even
rumors regarding, other financial institutions, or the financial services industry generally, could impair our ability
to effect such transactions and could lead to losses or defaults by us. In addition, many of our transactions expose
us to credit risk in the event of default of a counterparty or client. Additionally, our credit risk may be increased
if the collateral we hold in connection with such transactions cannot be realized or can only be liquidated at
prices insufficient to recover the full amount of our financial exposure. Any such losses could have a material
adverse effect on our financial condition and results of operations.
We are subject to a risk of rapid and significant changes in market interest rates.
Our assets and liabilities are primarily monetary in nature, and as a result, we are subject to significant risks
tied to changes in interest rates. Our ability to operate profitably is largely dependent upon net interest income.
Unexpected movement in interest rates markedly changing the slope of the current yield curve could cause our
net interest margins to decrease, subsequently reducing net interest income. In addition, such changes could
adversely affect the valuation of our assets and liabilities.
Certain changes in interest rates, inflation, deflation, or the financial markets could affect demand for our
products and our ability to deliver products efficiently.
Loan originations, and potentially loan revenues, could be adversely impacted by sharply rising interest rates.
Conversely, sharply falling rates could increase prepayments within our securities portfolio lowering interest
earnings from those investments. An underperforming stock market could reduce brokerage transactions, therefore
reducing investment brokerage revenues; in addition, wealth management fees associated with managed securities
portfolios could also be adversely affected. An unanticipated increase in inflation could cause our operating costs
related to salaries and benefits, technology, and supplies to increase at a faster pace than revenues.
The fair market value of our securities portfolio and the investment income from these securities also
fluctuate depending on general economic and market conditions. In addition, actual net investment income and/or
cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed
securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.
Changes in the policies of monetary authorities and other government action could adversely affect our
profitability.
Our financial performance is affected by credit policies of monetary authorities, particularly the Federal
Reserve Board. The instruments of monetary policy employed by the Federal Reserve Board include open market
transactions in U.S. government securities, changes in the discount rate or the federal funds rate on bank
borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the
national economy and in the money markets, we cannot predict the potential impact of future changes in interest
rates, deposit levels, and loan demand on our business and earnings. Furthermore, the actions of the United States
government and other governments may result in currency fluctuations, exchange controls, market disruption and
other adverse effects.
A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity,
disrupt our businesses, result in the unauthorized disclosure of confidential information, damage our
reputation and cause financial losses.
Our ability to adequately conduct and grow our business is dependent on our ability to create and maintain
an appropriate operational and organizational control infrastructure. Operational risk can arise in numerous ways
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including employee fraud, customer fraud, and control lapses in bank operations and information technology.
Our dependence on our employees and automated systems, including the automated systems used by acquired
entities and third parties, to record and process transactions may further increase the risk that technical failures or
tampering of those systems will result in losses that are difficult to detect. We are also subject to disruptions of
our operating systems arising from events that are wholly or partially beyond our control. Failure to maintain an
appropriate operational infrastructure can lead to loss of service to customers, legal actions, and noncompliance
with various laws and regulations.
We continuously monitor our operational and technological capabilities and make modifications and
improvements when we believe it will be cost effective to do so. In some instances, we may build and maintain
these capabilities ourselves. We also outsource some of these functions to third parties. These third parties may
experience errors or disruptions that could adversely impact us and over which we may have limited control. We
also face risk from the integration of new infrastructure platforms and/or new third party providers of such
platforms into its existing businesses.
An interruption or breach in our information systems or infrastructure, or those of third parties, could
disrupt our business, result in the unauthorized disclosure of confidential information, damage our
reputation and cause financial losses.
Our business is dependent on our ability to process and monitor a large number of transactions on a daily
basis and to securely process, store and transmit confidential and other information on our computer systems and
networks. We rely heavily on our information and communications systems and those of third parties who
provide critical components of our information and communications infrastructure. These systems are critical to
the operation of our business and essential to our ability to perform day-to-day operations. Our financial,
accounting, data processing or other information systems and facilities, or those of third parties on whom we
rely, may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our
control, such as a spike in transaction volume, cyber-attack or other unforeseen catastrophic events, which may
adversely affect our ability to process transactions or provide services.
Although we make continuous efforts to maintain the security and integrity of our information systems and
have not experienced a cyber-attack, threats to information systems continue to evolve and there can be no
assurance that our security efforts and measures will continue to be effective. The risk of a security breach or
disruption, particularly through cyber-attack or cyber intrusion, has increased as the number, intensity and
sophistication of attempted attacks and intrusions from around the world have increased. Threats to our information
systems may originate externally from third parties such as foreign governments, organized crime and other
hackers, outsource or infrastructure-support providers and application developers, or may originate internally. As a
financial institution, we face a heightened risk of a security breach or disruption from attempts to gain unauthorized
access to our and our customers’ data and financial information, whether through cyber-attack, cyber intrusion over
the internet, malware, computer viruses, attachments to e-mails, spoofing, phishing, or spyware.
As a result, our information, communications and related systems, software and networks may be vulnerable
to breaches or other significant disruptions that could: (1) disrupt the proper functioning of our networks and
systems, which could disrupt our operations and those of certain of our customers; (2) result in the unauthorized
access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable
information of ours or our customers, including account numbers and other financial information; (3) result in a
violation of applicable privacy and other laws, subjecting the Bank to additional regulatory scrutiny and expose
the Bank to civil litigation and possible financial liability; (4) require significant management attention and
resources to remedy the damages that result; and (5) harm our reputation or impair our customer relationships.
The occurrence of such failures, disruptions or security breaches could have a negative impact on our results of
operations, financial condition, and cash flows. To date we have not experienced an attack that has impacted the
results of our operations, financial condition, and cash flows.
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Natural disasters could affect our ability to operate.
Our market areas are susceptible to hurricanes. Natural disasters, such as hurricanes, can disrupt our
operations, result in significant damage to properties and interrupt our ability to conduct business, and negatively
affect the local economies in which we operate.
We cannot predict whether or to what extent damage caused by future hurricanes will affect our operations
or the economies in our market areas, but such weather events could cause a decline in loan originations, a
decline in the value or destruction of properties securing the loans and an increase in the risk of delinquencies,
foreclosures or loan losses.
Greater loan losses than expected may adversely affect our earnings.
We are exposed to the risk that our customers will be unable to repay their loans in accordance with their
terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment.
Credit risk is inherent in the business of making loans and could have a material adverse effect on our operating
results. Our credit risk with respect to our real estate and construction loan portfolio relates principally to the
creditworthiness of our corporate borrowers and the value of the real estate pledged as security for the repayment
of loans. Our credit risk with respect to our commercial and consumer loan portfolio will relate principally to the
general creditworthiness of businesses and individuals within our local markets.
We make various assumptions and judgments about the collectability of our loan portfolio and provide an
allowance for estimated loan losses based on a number of factors. If our assumptions or judgments prove to be
incorrect, the allowance for loan losses may not be sufficient to cover actual loan losses. We may have to
increase our allowance in the future in response to the request of one of our primary banking regulators, to adjust
for changing conditions and assumptions, or as a result of any deterioration in the quality of our loan portfolio.
Future provisions for loan losses may vary materially from the amounts of past provisions.
The projected benefit obligations of our pension plan exceed the fair value of the Plan’s assets.
Investments in the portfolio of our pension plan may not provide adequate returns to fully fund benefits as
they come due, thus causing higher annual plan expenses and requiring additional contributions by us.
We may need to rely on the financial markets to provide needed capital.
Our stock is listed and traded on the NASDAQ Global Select. If our capital resources prove in the future to
be inadequate to meet our capital requirements, we may need to raise additional equity. If the market should fail
to operate, or if conditions in the capital markets are adverse, we may be constrained in raising capital. We
maintain a consistent analyst following; therefore, downgrades in our prospects by an analyst(s) may cause our
stock price to fall and significantly limit our ability to access the markets for additional capital requirements.
Sales of a significant number of shares of our Common Stock in the public markets, or the perception of
such sales, could depress the market price of our Common Stock.
Sales of a substantial number of shares of our Common Stock in the public markets and the availability of
those shares for sale could adversely affect the market price of our Common Stock. In addition, future issuances
of equity securities, including pursuant to outstanding options, could dilute the interests of our existing
stockholders, including you, and could cause the market price of our Common Stock to decline. We may issue
such additional equity or convertible securities to raise additional capital. The issuance of any additional shares
of common or preferred stock could be substantially dilutive to shareholders of our Common Stock. Moreover, to
the extent that we issue restricted stock units, phantom shares, stock appreciation rights, options or warrants to
purchase our Common Stock in the future and those stock appreciation rights, options or warrants are exercised
or as the restricted stock units vest, our shareholders may experience further dilution.
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Holders of our shares of Common Stock do not have preemptive rights; therefore, future stock offerings
could dilute our shareholders. We cannot predict the effect that future sales of our Common Stock would have on
the market price of our Common Stock.
Our future growth and financial performance may be negatively affected if we are unable to successfully
execute our growth plans.
We may not be able to continue our organic, or internal, growth, which depends upon economic conditions,
our ability to identify appropriate markets for expansion, our ability to recruit and retain qualified personnel, our
ability to fund growth at a reasonable cost, sufficient capital to support our growth initiatives, competitive
factors, banking laws, and other factors.
We may seek to supplement our internal growth through acquisitions. We cannot predict the number, size or
timing of acquisitions, or whether any such acquisition will occur at all. Our acquisition efforts have traditionally
focused on targeted banking or insurance entities in markets in which we currently operate and markets in which
we believe we can compete effectively. However, as consolidation of the financial services industry continues,
the competition for suitable acquisition candidates may increase. We may compete with other financial services
companies for acquisition opportunities, and many of these competitors have greater financial resources than we
do and may be able to pay more for an acquisition than we are able or willing to pay. We also may need
additional debt or equity financing in the future to fund acquisitions. We may not be able to obtain additional
financing or, if available, it may not be in amounts and on terms acceptable to us. If we are unable to locate
suitable acquisition candidates willing to sell on terms acceptable to us, or we are otherwise unable to obtain
additional debt or equity financing necessary for us to continue making acquisitions, we would be required to
find other methods to grow our business and we may not grow at the same rate we have in the past, or at all.
We must generally receive federal regulatory approval before we can acquire a bank or bank holding
company. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider,
among other factors, the effect of the acquisition on the competition, financial condition, and future prospects.
The regulators also review current and projected capital ratios and levels, the competence, experience, and
integrity of management and its record of compliance with laws and regulations, the convenience and needs of
the communities to be served (including the acquiring institution’s record of compliance under the Community
Reinvestment Act) and the effectiveness of the acquiring institution in combating money laundering activities.
We cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be
granted. We may also be required to sell banks or branches as a condition to receiving regulatory approval, which
condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.
In addition to the acquisition of existing financial institutions, as opportunities arise we plan to continue de
novo branching as a part of our internal growth strategy and possibly entry into new markets through de novo
branching. De novo branching and any acquisition carries with it numerous risks, including the following:
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the inability to obtain all required regulatory approvals;
significant costs and anticipated operating losses associated with establishing a de novo branch or a
new bank;
the inability to secure the services of qualified senior management;
the local market may not accept the services of a new bank owned and managed by a bank holding
company headquartered outside of the market area of the new bank;
economic downturns in the new market;
the inability to obtain attractive locations within a new market at a reasonable cost; and
the additional strain on management resources and internal systems and controls.
We have experienced to some extent many of these risks with our de novo branching to date.
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Our inability to control the inherent risks of acquiring businesses and assets could adversely affect our
operations.
Acquisitions of businesses in the financial services industry are an important element of our business
strategy. We cannot assure that we will be able to identify and acquire businesses in execution of this strategy on
terms acceptable to us in the future. We must also generally satisfy several conditions before we complete an
acquisition of another bank or bank holding company, including federal and/or state regulatory approvals. We
may be required to incur substantial indebtedness to finance future acquisitions. Such additional debt service
requirements may impose a significant burden on our results of operations and financial condition. We cannot
assure you that we will be able to successfully consolidate any business or assets we acquire with our existing
business. The integration of acquired operations and assets may require substantial management effort, time and
resources and may divert management’s focus from other strategic opportunities and operational matters.
Acquisitions may not perform as expected when the transaction was consummated and may be dilutive to our
overall operating results.
We are subject to regulation by various Federal and State entities.
We are subject to the regulations of the Securities and Exchange Commission (“SEC”), the Federal Reserve
Board, the Federal Deposit Insurance Corporation, the Mississippi Department of Banking and Consumer
Finance, and the Louisiana Office of Financial Institutions. New regulations issued by these agencies may
adversely affect our ability to carry on our business activities. We are subject to various Federal and State laws
and certain changes in these laws and regulations may adversely affect our operations. Noncompliance with
certain of these regulations may impact our business plans, including ability to branch, offer certain products, or
execute existing or planned business strategies.
For example, the Dodd-Frank Act contains various provisions designed to enhance the regulation of
depository institutions and prevent the recurrence of a financial crisis such as occurred in 2008-2009. The full
impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations
implementing the statute are written and adopted. The Dodd-Frank Act may have a material impact on our
operations, particularly through increased compliance costs resulting from possible future consumer and fair
lending regulations.
Additionally, on August 30, 2012, the federal banking regulatory agencies issued proposed rules that would
implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. If adopted as
proposed, Basel III and regulations proposed by the federal banking regulatory agencies will require bank
holding companies and banks to undertake significant activities to demonstrate compliance with the new and
higher capital standards. Compliance with these rules, if and when they become effective, will impose additional
costs on banking entities and their holding companies. For additional information regarding the Dodd-Frank Act
and Basel III, see “Supervision and Regulation.”
We are also subject to the accounting rules and regulations of the SEC and the Financial Accounting
Standards Board. Changes in accounting rules could adversely affect the reported financial statements or our
results of operations and may also require extraordinary efforts or additional costs to implement. Any of these
laws or regulations may be modified or changed from time to time, and we cannot be assured that such
modifications or changes will not adversely affect us.
Changes in accounting policies or in accounting standards could materially affect how we report our
financial condition and results of operations.
Our accounting policies are fundamental to the understanding of our financial condition and results of
operations. The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make significant estimates and assumptions that affect the financial statements by affecting the
value of our assets or liabilities and results of operations. Some of our accounting policies are critical because
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they require management to make difficult, subjective and complex judgments about matters that are inherently
uncertain and because materially different amounts may be reported if different estimates or assumptions were
used. If such estimates or assumptions underlying the financial statements are incorrect, we could experience
material losses. From time to time, FASB and the SEC change the financial accounting and reporting standards
or the interpretation of such standards that govern the preparation of our external financial statements. These
changes are beyond our control, can be difficult to predict and could materially impact how we report our
financial condition and results of operations. Additionally, it is possible, if unlikely, we could be required to
apply a new or revised standard retrospectively, resulting in the restatement of prior period financial statements
in material amounts.
We are subject to industry competition which may have an impact upon our success.
Our profitability depends on our ability to compete successfully. We operate in a highly competitive
financial services environment. Certain competitors are larger and may have more resources than we do. We face
competition in our regional market areas from other commercial banks, savings and loan associations, credit
unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment
banking firms, and other financial intermediaries that offer similar services. Some of our nonbank competitors
are not subject to the same extensive regulations that govern us or the Bank and may have greater flexibility in
competing for business.
Another competitive factor is that the financial services market, including banking services, is undergoing
rapid changes with frequent introductions of new technology-driven products and services. Our future success
may depend, in part, on our ability to use technology competitively to provide products and services that provide
convenience to customers and create additional efficiencies in our operations.
We and other financial institutions have been the subject of increased litigation which could result in legal
liability and damage to our reputation.
We and certain of our directors and officers may be named from time to time as defendants in various class
actions and other litigation relating to our business and activities. Past, present and future litigation have included
or could include claims for substantial compensatory and/or punitive damages or claims for indeterminate
amounts of damages. We are also involved from time to time in other reviews, investigations and proceedings
(both formal and informal) by governmental and self-regulatory agencies regarding our business. These matters
also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Like other
financial institutions and companies, we are also subject to risk from employee misconduct, including non-
compliance with policies and improper use or disclosure of confidential information. Substantial legal liability or
significant regulatory action against us could materially adversely affect our business, financial condition or
results of operations and/or cause significant reputational harm to our business.
We may issue debt and equity securities or securities convertible into equity securities, any of which may
be senior to our Common Stock as to distributions and in liquidation, which could negatively affect the
value of our Common Stock.
In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that
is unsecured or secured by all or up to all of our assets, or by issuing additional debt or equity securities, which
could include issuances of secured or unsecured commercial paper, medium-term notes, senior notes, subordinated
notes, preferred stock or securities convertible into or exchangeable for equity securities. In the event of our
liquidation, our lenders and holders of our debt and preferred securities would receive a distribution of our available
assets before distributions to the holders of our Common Stock. Because our decision to incur debt and issue
securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot
predict or estimate the amount, timing or nature of our future offerings and debt financings. Further, market
conditions could require us to accept less favorable terms for the issuance of our securities in the future.
22
Our ability to deliver and pay dividends depends primarily upon the results of operations of our
subsidiaries.
We are a bank holding company that conducts substantially all of our operations through our subsidiary
Banks. As a result, our ability to make dividend payments on our Common Stock will depend primarily upon the
receipt of dividends and other distributions from our subsidiaries.
The ability of the Banks to pay dividends or make other payments to us is limited by their obligations to
maintain sufficient capital and by other general regulatory restrictions on their dividends. If these requirements
are not satisfied, we will be unable to pay dividends on our Common Stock.
Cash available to pay dividends to our shareholders is derived primarily, if not entirely, from dividends paid
to us from the Banks. The ability of our subsidiary banks to pay dividends to us as well as our ability to pay
dividends to our shareholders is limited by regulatory and legal restrictions and the need to maintain sufficient
consolidated capital. We may also decide to limit the payment of dividends even when we have the legal ability
to pay them in order to retain earnings for use in our business. There can be no assurance of whether or when we
may pay dividends in the future.
We and/or the holders of our securities could be adversely affected by unfavorable rating actions from
rating agencies.
Our ability to access the capital markets is important to our overall funding profile. This access is affected
by the ratings assigned by rating agencies to us, certain of our affiliates and particular classes of securities that
we and our affiliates issue. The interest rates that we pay on our securities are also influenced by, among other
things, the credit ratings that we, our affiliates and/or our securities receive from recognized rating agencies. A
downgrade to us, our affiliates or our securities could create obligations or liabilities to us under the terms of our
outstanding securities that could increase our costs or otherwise have a negative effect on our results of
operations or financial condition. Additionally, a downgrade of the credit rating of any particular security issued
by us or our affiliates could negatively affect the ability of the holders of that security to sell the securities and
the prices at which any such securities may be sold.
Anti-takeover provisions in our amended articles of incorporation and bylaws, Mississippi law, and our
Shareholder Rights Plan could make a third party acquisition of us difficult and may adversely affect
share value.
Our amended articles of incorporation and bylaws contain provisions that make it more difficult for a third
party to acquire us (even if doing so might be beneficial to our stockholders) and for holders of our securities to
receive any related takeover premium for their securities. In addition, under our Shareholder Rights Plan, “rights”
are issued to all Hancock common shareholders that, if activated upon an attempted unfriendly acquisition,
would allow our shareholders to buy our common stock at a reduced price, thereby minimizing the risk of any
potential hostile takeover.
We are also subject to certain provisions of state and federal law and our articles of incorporation may make
it more difficult for someone to acquire control of us. Under federal law, subject to certain exemptions, a person,
entity, or group must notify the federal banking agencies before acquiring 10% or more of the outstanding voting
stock of a bank holding company, including our shares. Banking agencies review the acquisition to determine if it
will result in a change of control. The banking agencies have 60 days to act on the notice, and take into account
several factors, including the resources of the acquirer and the antitrust effects of the acquisition. There also are
Mississippi statutory provisions and provisions in our articles of incorporation that may be used to delay or block
a takeover attempt. As a result, these statutory provisions and provisions in our articles of incorporation could
result in our being less attractive to a potential acquirer and limit the price that investors might be willing to pay
in the future for shares of our common stock.
23
Governmental responses to recent market disruptions may be inadequate and may have unintended
consequences.
In response to recent market disruptions, legislators and financial regulators have taken a number of steps to
stabilize the financial markets. These steps include the enactment and partial implementation of the Emergency
Economic Stabilization Act of 2008, the provision of other direct and indirect assistance to financial institutions,
assistance by the banking authorities in arranging acquisitions of weakened banks and broker-dealers,
implementation of programs by the Federal Reserve Board to provide liquidity to the commercial paper markets
and expansion of deposit insurance coverage. The administration and Congress have pursued additional
initiatives to stimulate the economy and stabilize the financial markets, including the enactment of the American
Recovery and Reinvestment Act of 2010, and have altered the terms of some previously announced policies.
The overall effects of these and other legislative and regulatory efforts on the financial markets are
uncertain. Should these or other legislative or regulatory initiatives fail to stabilize the financial markets, the
Company’s business, financial condition, results of operations, and prospects could be materially and adversely
affected. Moreover, the implementation of the Dodd-Frank Act will likely result in significant changes to the
banking industry as a whole which, depending on how its provisions are implemented by the agencies, could
adversely affect the Company’s business.
In addition, the Company competes with a number of financial services companies that are not subject to the
same degree of regulatory oversight to which the Company is subject. The impact of the existing regulatory
framework and any future changes to it could negatively affect the Company’s ability to compete with these
institutions, which could have a material and adverse effect on the Company’s results of operations and prospects.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company’s main office, which is also the headquarters of the holding company and Hancock Bank, is
located at One Hancock Plaza, in Gulfport, Mississippi. The Whitney Bank main office is located in downtown
New Orleans, Louisiana. The Banks make portions of their main office facilities and certain other facilities
available for lease to third parties, although such incidental leasing activity is not material to the Company’s
overall operations.
The Company operates almost 300 full service banking and financial services offices and almost 350
automated teller machines across a Gulf south corridor comprising south Mississippi; southern and central
Alabama; southern Louisiana; the northern, central, and Panhandle regions of Florida; and Houston, Texas. The
Company owns approximately 57% of these facilities, and the remaining banking facilities are subject to leases,
each of which we consider reasonable and appropriate for its location. We ensure that all properties, whether
owned or leased, are maintained in suitable condition. We also evaluate our banking facilities on an ongoing
basis to identify possible under-utilization and to determine the need for functional improvements, relocations,
closures or possible sales. The Banks and subsidiaries of the Banks hold a variety of property interests acquired
in settlement of loans.
ITEM 3. LEGAL PROCEEDINGS
We and our subsidiaries are party to various legal proceedings arising in the ordinary course of business. We
do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a
material adverse effect on our consolidated financial position or liquidity.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
24
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s common stock trades on the NASDAQ Global Select Market under the ticker symbol
“HBHC”. The following table sets forth the high and low sale prices of the Company’s common stock as
reported on the NASDAQ Global Select Market. These prices do not reflect retail mark-ups, mark-downs or
commissions.
2012
2011
4th quarter
3rd quarter
2nd quarter
1st quarter
4th quarter
3rd quarter
2nd quarter
1st quarter
High
Sale
Low
Sale
Cash
Dividends
Paid
$32.50
33.27
36.56
36.73
$33.72
33.25
34.57
35.68
$29.47
27.99
27.96
31.56
$25.38
25.61
30.04
30.67
$0.24
0.24
0.24
0.24
$0.24
0.24
0.24
0.24
There were 10,711 registered shareholders and approximately 40,400 beneficial holders of the Company’s
common stock at February 1, 2013 and 84,878,522 shares outstanding. On February 1, 2013, the high and low
sale prices of the Company’s common stock as reported on the NASDAQ Global Select Market were $30.67 and
$30.20, respectively.
The principal sources of funds to the Company to pay cash dividends are the dividends received from
Hancock Bank, Gulfport, Mississippi, and Whitney Bank, New Orleans, Louisiana. Consequently, dividends are
dependent upon the Banks’ earnings, capital needs, regulatory policies as well as statutory and regulatory
limitations. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may
make to its parent company. Dividends paid to the Company by Hancock Bank are subject to approval by the
Commissioner of Banking and Consumer Finance of the State of Mississippi and those paid by Whitney Bank are
subject to approval by the Commissioner for Financial Institutions of the State of Louisiana. We do not expect
regulatory restrictions to affect our ability to pay cash dividends. Although no assurance can be given that
Hancock Holding Company will continue to declare and pay regular quarterly cash dividends on its common
stock, Hancock Bank has paid regular cash dividends since 1937 and Hancock Holding Company has paid
regular cash dividends since its organization.
25
Stock Performance Graph
The following performance graph and related information are neither “soliciting material” nor “filed” with
the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act
of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent the Company specifically
incorporates it by reference into such filing.
The performance graph compares the cumulative five-year shareholder return on the Company’s common
stock, assuming an investment of $100 on December 31, 2007 and the reinvestment of dividends thereafter, to
that of the common stocks of United States companies reported in the Nasdaq Total Return Index and the
common stocks of the KBW Regional Banks Total Return Index. The KBW Regional Banks Total Return Index
is a proprietary stock index of Keefe, Bruyette & Woods, Inc., that tracks the returns of 50 regional banking
companies throughout the United States.
Comparison of 5-Year Cumulative Total Return
150
100
50
0
2007
2008
2009
2010
2011
2012
Hancock Holding Company Common Stock
KBW Regional Banks Total Return Index
Nasdaq Total Return Index (U.S. Companies)
Issuer Purchases of Equity Securities
There are a maximum of 2,975,644 shares that may be purchased under the buy-back program approved in
2007. No shares were purchased by the issuer or any affiliated purchaser in 2012.
26
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth certain selected historical consolidated financial data and should be read in
conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and the consolidated Financial Statements and Notes thereto included elsewhere herein.
Income Statement:
Interest income
Interest income (TE)
Interest expense
Net interest income (TE)
Provision for loan losses
Noninterest income excluding securities transactions
Securities transactions gains/(losses)
Noninterest expense excluding amortization of
intangibles
Amortization of intangibles
Income before income taxes
Income tax expense
Net income
Bargain purchase gain
Merger-related expenses
Securities transactions gains/(losses)
Debt early redemption
Taxes on adjustments
At and For the Years Ended December 31,
2012
2011
2010
2009
2008
$762,549
774,134
51,682
$592,204
604,130
70,971
$352,558
364,385
82,345
$323,727
335,787
95,300
$335,437
345,891
126,002
722,452
54,192
252,195
1,552
681,000
32,067
197,355
45,613
533,159
38,732
206,427
(91)
577,463
16,551
94,823
18,064
282,040
65,991
136,949
—
276,532
2,728
61,911
9,705
240,487
54,590
157,258
69
232,053
1,417
97,694
22,919
219,889
36,785
122,953
4,825
212,011
1,432
86,985
21,619
$151,742
$ 76,759
$ 52,206
$ 74,775
$ 65,366
—
45,789
1,552
5,336
17,350
—
86,762
(91)
—
30,398
—
3,167
—
—
1,108
(33,623)
3,682
69
—
(11,587)
—
—
4,825
—
(1,689)
Operating income (a)
$183,965
$133,214
$ 54,265
$ 56,352
$ 62,230
(a) Net income less tax-effected merger costs, bargain purchase gain on acquisition, debt early redemption and
securities gains/losses. Management believes that this a useful financial measure because it enables
investors to assess ongoing operations.
Per Common Share Data:
Earnings per share:
Basic earnings per share
Diluted earnings per share
Operating earnings per share: (a)
Basic operating earnings per share
Diluted operating earnings per share
Cash dividends paid
Book value (period end)
$ 1.77
1.75
$ 1.16
1.15
$ 1.41
1.40
$ 2.28
2.26
$ 2.07
2.04
2.15
2.13
0.96
28.91
2.03
2.02
0.96
27.95
1.47
1.46
0.96
23.22
1.72
1.71
0.96
22.74
1.98
1.95
0.96
19.18
27
Period-End Balance Sheet Data:
Loans, net of unearned income
Loans held for sale
Securities
Short-term investments
Total earning assets
Allowance for loan losses
Other assets
Total assets
Noninterest bearing deposits
Interest bearing deposits
Total deposits
Other borrowed funds
Other liabilities
Common stockholders’ equity
At and For the Years Ended December 31,
2012
2011
2010
2009
2008
(in thousands)
$11,577,802
50,605
3,716,460
1,500,188
$11,177,026
72,378
4,496,900
1,184,419
$4,957,164
21,866
1,488,885
639,164
$5,114,175
36,112
1,611,327
797,262
$4,249,290
22,290
1,680,096
549,416
16,845,055
16,930,723
7,107,079
7,558,876
6,501,092
(136,171)
2,755,601
(124,881)
2,968,254
(81,997)
1,113,245
(66,050)
1,204,257
(61,725)
727,887
$19,464,485
$19,774,096
$8,138,327
$8,697,083
$7,167,254
$ 5,624,127
10,120,061
$ 5,516,336
10,197,243
$1,127,246
5,648,473
$1,073,341
6,122,471
$ 962,886
4,968,051
15,744,188
1,035,722
231,297
2,453,278
15,713,579
1,398,346
295,008
2,367,163
6,775,719
375,224
130,836
856,548
7,195,812
516,183
147,425
837,663
5,930,937
506,570
120,248
609,499
Total liabilities & common stockholders’
equity
$19,464,485
$19,774,096
$8,138,327
$8,697,083
$7,167,254
Average Balance Sheet Data:
Loans, net of unearned income
Securities
Short-term investments
Total earning assets
Allowance for loan losses
Other assets
Total assets
Noninterest bearing deposits
Interest bearing deposits
Total deposits
Other borrowed funds
Other liabilities
Common stockholders’ equity
$11,284,739
4,063,817
771,523
$ 8,514,021
3,074,373
955,325
$5,005,753
1,559,019
698,042
$4,310,120
1,559,570
497,048
$3,873,908
1,742,130
175,891
16,120,079
(136,257)
2,951,547
12,543,719
(102,784)
2,281,136
7,262,814
(73,190)
1,236,610
6,366,738
(63,450)
796,479
5,791,929
(53,354)
687,814
$18,935,369
$14,722,071
$8,426,234
$7,099,767
$6,426,389
$ 5,251,391
9,858,792
$ 3,400,064
8,316,489
$1,076,829
5,840,669
$ 935,985
4,761,614
$ 876,669
4,305,738
15,110,183
1,182,673
241,710
2,400,803
11,716,553
1,000,998
203,403
1,801,117
6,917,498
515,626
127,400
865,710
5,697,599
613,523
114,270
674,375
5,182,407
554,898
104,279
584,805
Total liabilities & common stockholders’
equity
$18,935,369
$14,722,071
$8,426,234
$7,099,767
$6,426,389
28
Performance Ratios:
Return on average assets
Return on average assets—operating (a)
Return on average common equity
Return on average common equity—
operating (a)
Return on average tangible common equity
Return on average tangible common equity—
operating (a)
Earning asset yield (tax equivalent—te)
Total cost of funds
Net interest margin (te)
Noninterest income excluding bargain purchase
gain on acquisition and securities transactions
as a percent of total revenue (te)
Efficiency ratio (e)
Average loan/deposit ratio
FTE employees (period-end)
Capital Ratios:
Common stockholders’ equity to total assets
Tangible common equity to total assets
Tier 1 leverage (b)
Asset Quality Information:
Non-accrual loans
Restructured loans (c)
Total non-performing loans
Other real estate (ORE) and foreclosed assets
Total non-performing assets
Non-performing assets to loans + ORE and
foreclosed assets
Accruing loans 90 days past due (d)
Accruing loans 90 days past due as a percent of
loans
Non-performing assets + accruing loans 90 days
past due to loans and foreclosed assets
Net charge-offs—non-covered
Net charge-offs—covered
Net charge-offs—non-covered to average loans
Allowance for loan losses
Allowance for loan losses to period-end loans
Allowance for loan losses to non-performing
loans and accruing loans 90 days past due
At and For the Years Ended December 31,
2012
2011
2010
2009
2008
(in thousands)
0.80%
0.97%
6.32%
7.66%
9.72%
11.78%
4.80%
0.32%
4.48%
25.88%
64.63%
74.68%
4,235
12.60%
8.77%
9.10%
0.52%
0.90%
4.26%
7.40%
5.98%
10.37%
4.82%
0.57%
4.25%
27.91%
66.35%
72.67%
4,736
11.97%
7.96%
8.17%
0.62%
0.64%
6.03%
6.27%
6.62%
6.88%
5.01%
1.13%
3.88%
32.69%
65.24%
72.36%
2,271
10.52%
9.69%
9.65%
1.05%
0.79%
11.09%
8.36%
12.34%
9.30%
5.27%
1.50%
3.78%
33.95%
62.71%
75.65%
2,240
9.63%
8.81%
10.60%
1.02%
0.97%
11.18%
10.64%
12.69%
12.08%
5.97%
2.17%
3.80%
35.86%
61.84%
74.75%
1,952
8.50%
7.62%
8.06%
$
$
$
$
$
$
121,837
32,215
154,052
102,072
256,124
$
$
99,128
18,145
117,273
159,751
277,024
$ 112,274
12,641
124,915
33,277
$ 158,192
$
86,555
—
86,555
14,336
$ 100,891
$
$
29,976
—
29,976
5,360
35,336
2.19%
13,244
$
2.44%
5,880
$
3.17%
1,492
$
1.97%
0.83%
11,647
$
11,005
0.11%
2.31%
55,031
26,069
0.49%
136,171
1.18%
$
$
$
0.05%
0.03%
0.23%
0.26%
2.50%
33,805 $
$
11,475
0.40%
124,881
$
1.12%
3.19%
50,682
$
— $
1.01%
81,997
$
1.65%
2.19%
50,265
$
— $
1.17%
66,050
$
1.29%
1.09%
22,183
—
0.57%
61,725
1.45%
81.40%
101.40%
64.87%
67.26%
150.62%
(a) Excludes tax-effected merger related expenses, bargain purchase gain on acquisition, debt redemption costs and
securities transactions. See operating income calculation previously in Selected Financial Data.
(b) Calculated as Tier 1 capital divided by average total assets for leverage capital purposes.
(c)
Included in restructured loans are $15.8 million, $4.1 million and $8.7 million of non-accrual loans at
December 31, 2012, 2011 and 2010, respectively. Total excludes acquired credit-impaired loans.
(d) Non-accrual loans and accruing loans past due 90 days or more do not include acquired impaired loans which were
written down to fair value upon acquisition and accrete interest income over the remaining life of the related loan pool.
(e) Noninterest expense as a percent of total revenue (te) before amortization of purchased intangibles, securities
transactions, merger-related expenses and debt redemption costs.
29
Supplemental Asset Quality Information
(excluding covered assets and acquired loans) (a)
Non-accrual loans (b)(c)
Restructured loans (d)
Total non-performing loans
Foreclosed assets (e)
Total non-performing assets
Non-performing assets as a percent of
loans and foreclosed assets
Accruing loans 90 days past due
Accruing loans 90 days past due as a percent of loans
Non-performing assets + accruing loans 90 days past due
to loans and foreclosed assets
Allowance for loan losses (f)(g)
Allowance for loan losses as a percent of period-end loans
Allowance for loan losses to nonperforming loans
At and For the Years Ended December 31,
2012
2011
2010
2009
2008
(dollar amounts in thousands)
$ 87,651
27,451
$ 79,164
18,145
$66,988
12,641
$30,978
$29,976
—
—
115,102
75,771
97,309
115,769
79,629
17,595
30,978
14,336
29,976
5,360
$190,873
$213,078
$97,224
$45,314
$35,336
$
2.66%
7,737
0.11%
$
4.26%
4,871
0.10%
2.33%
1.08%
0.83%
$ 1,492
$11,647
$11,005
0.04%
0.23%
0.26%
2.77%
4.36%
2.37%
1.36%
1.09%
$ 78,774
$ 83,246
$81,325
$66,050
$61,725
1.11%
1.70%
1.96%
1.29%
1.45%
+ accruing loans 90 days past due
64.13%
81.47% 100.25% 154.96% 150.62%
(a) Covered and acquired loans are considered to be performing due to the application of the accretion method
under acquisition accounting. Acquired loans are recorded at fair value with no allowance brought forward
in accordance with acquisition accounting. Certain acquired loans and foreclosed assets are also covered
under FDIC loss sharing agreements, which provide considerable protection against credit risk. Due to the
protection of loss sharing agreements and the impact of acquisition accounting, management has excluded
acquired loans and covered assets from this table to provide comparability to prior periods and better
perspective into asset quality trends.
(b) Excludes acquired covered loans not accounted for under the accretion method of $4,100, $18,846, $45, 286
and $55,577 for the years 2012, 2011, 2010 and 2009. These loans are accounted for under the cost recovery
method. There were no acquired covered loans in 2008.
(c) Excludes non-covered acquired loans at fair value not accounted for under the accretion method of $30,087
and $1,117 for the years ended December 31, 2012 and 2011. There were no non-covered acquired loans in
earlier periods.
(d) Excludes non-covered acquired performing loans at fair value of $4,764 in 2012. There were no restructured
non-covered acquired performing loans in earlier periods.
(e) Excludes covered foreclosed assets of $26,301, $43,982 and $15,682 for 2012, 2011 and 2010, respectively.
There were no covered foreclosed assets in earlier periods. On June 4, 2011 Hancock acquired $87,895 of
foreclosed assets in the Whitney merger.
(f) Excludes impairment recorded on covered acquired loans of $56,609, $41,634, and $672 in 2012, 2011 and
2010. There was no impairment recorded on covered acquired loans in earlier periods.
(g) Excludes allowance for loan losses recorded on non-covered acquired-performing loans of $788 in 2012.
There were no allowance for loan losses on non-covered acquired-performing loans in earlier periods.
30
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion and analysis is to focus on significant changes and events in the financial
condition and results of operations of Hancock Holding Company and our subsidiaries during 2012 and selected
prior periods. This discussion and analysis is intended to highlight and supplement data and information
presented elsewhere in this report, including the consolidated financial statements and related notes.
FORWARD-LOOKING STATEMENTS
In accordance with safe harbor provisions of the Private Securities Litigation Reform Act of 1995, this
annual report contains forward-looking statements that reflect management’s current views and estimates of
future economic circumstances, industry conditions, company performance and financial results. The words
“may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “estimate,” “project,”
“forecast” and similar expressions are intended to identify forward-looking statements. All such forward-looking
statements are subject to risks and uncertainties, and our future results of operations could differ materially from
our historical results or current expectations reflected by such forward-looking statements. Some of these risks
are discussed in “Item 1A. Risk Factors” and include, without limitation:
•
•
•
•
•
•
•
•
•
•
general economic or business conditions, either nationally or regionally, may be less favorable than
expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for
credit or other services;
disruptions to the credit and financial markets, either nationally or globally, including the impact of a
downgrade of U.S. government obligations by one of the credit ratings agencies and the adverse effects
of the ongoing sovereign debt crisis in Europe;
changes in the interest rate environment may reduce net interest margins and/or the volumes and values
of loans made or held as well as the value of other financial assets held;
competitive pressures among depository and other financial institutions may increase significantly;
legislative, regulatory or accounting changes, including changes resulting from the implementation of
the Dodd-Frank Act may adversely affect the businesses in which Hancock is engaged;
local, state or federal taxing authorities may take tax positions that are adverse to us;
reduction in Hancock’s credit ratings;
adverse changes may occur in the securities markets;
unpredictable natural or other disasters could have an adverse effect on us by materially interrupting
our operations or the ability or willingness of our customers to access the financial services we offer;
and
deposit attrition, customer loss and/or revenue loss following completed mergers and acquisitions may
be greater than expected.
We undertake no obligation to update any forward-looking statements. You are cautioned that forward-
looking statements are not guarantees of future performance, our actual results may differ materially from those
anticipated, projected or assumed in the forward-looking statements and you should not place undue reliance on
these forward-looking statements.
31
EXECUTIVE OVERVIEW
Recent Economic and Industry Developments
Recent reports from the Federal Reserve indicate slow, but steady improvement of economic activity
throughout most of Hancock’s market areas. Activity at energy-related businesses operating mainly in Hancock’s
south Louisiana and Houston, Texas market areas remained at high levels that are expected to continue in 2013,
despite low prices for natural gas. There is some concern regarding the availability of a shortage of specialized
skilled labor needed to further expand activity in this industry. Tourism and convention activity, which is
important to several of the Company’s market areas, also remained strong with a positive near-term outlook.
Retail sales activity is generally improved from prior year levels, although there is room for additional
improvement and buying behavior suggest consumers remain conservative in managing their personal finances.
Manufacturing activity has shown mixed results, with current performance and near-term prospects varied among
the different sectors. Uncertainties regarding such matters as the health of the international economy, domestic
fiscal and tax policy, changing regulations, and costs associated with proposed regulations and coming healthcare
provisions, have led manufacturers to remain cautious about expanding operations and increasing hiring.
The real estate market for both residential and commercial properties continues to show some improvement.
Home sales are growing modestly year-over-year, with the strongest growth in Florida, and prices are stabilizing
and trending higher in most markets. New home construction activity is also showing some continued
improvement. The sustainability of a housing market recovery will be sensitive to the continued availability of
attractive financing rates, the ability of prospective homeowners to meet underwriting standards, the rate of
foreclosed properties entering the market and consumer expectations about future economic conditions, among
other factors. Commercial construction activity has improved modestly, with apartment development particularly
strong. Absorption rates in office, industrial and retail property markets have been modestly positive, and the
prospect is improving for some increase in commercial real estate investment and construction activity. Growth
in commercial construction will depend in large part on continued improvement in overall economic activity and
increased confidence that these improvements can be sustained.
Employment growth was generally positive across Hancock’s market area, with recent strong growth in
Florida and Louisiana. The unemployment rates in several market areas have generally tracked lower than the
national level throughout the recent recession and slow recovery. Uncertainty over fiscal policy and healthcare
costs have tempered some employers’ hiring decisions. Pricing pressures remain subdued, but employment costs
related to tax policy, regulation and healthcare are concerns of many businesses.
Loan demand across most of the markets that Hancock serves has increased, but competition for quality
borrowers remains stiff. Auto lending, mortgage lending on both new and existing homes, energy lending and
some commercial real estate development financing all had expanded activity.
The overall U.S. economy continued to expand, with most all regions showing modest to moderate growth
rates. Confidence in the prospect of a higher rate of sustained growth is improving for businesses and consumers
alike, although uncertainties remain about such matters as the health of the international economy and the
implications of pending or proposed changes in U.S. fiscal and tax policies and regulations. The Federal Reserve
has responded to the slow recovery from the deep recession by taking steps to hold interest rates at
unprecedented low levels and has expressed its intent to maintain rates at these levels pending further
improvement in the unemployment rate.
The Dodd-Frank Act that was signed into law in July 2010 significantly overhauled many aspects of the
financial services industry and includes provisions that have had or likely will have an impact on the nature and
pricing of services offered by the Banks and other financial services industry participants. The independent
Consumer Financial Protection Bureau that was established under the Dodd-Frank Act has broad rulemaking,
supervisory and enforcement authority over consumer financial products, including deposit products, residential
mortgages, home-equity loans and credit cards. The Dodd-Frank Act directs applicable regulatory authorities to
promulgate a large number of regulations implementing its provisions over time. The CFPB now conducts
consumer compliance examinations of the Banks.
32
Acquisition of Whitney Holding Corporation
On June 4, 2011, Hancock acquired Whitney Holding Corporation, the parent of Whitney National Bank
based in New Orleans, Louisiana, in a stock and cash transaction. The total purchase price was approximately
$1.6 billion, including 40.8 million Hancock common shares issued to Whitney common shareholders at a fair
value of $1.3 billion and $308 million paid by the Company to purchase and subsequently retire Whitney’s
preferred stock and common stock warrant that had been issued under TARP. The fair value of the assets
acquired, excluding goodwill, totaled $11.2 billion, and included $6.5 billion in loans, $2.6 billion of investment
securities, and $224 million of identifiable intangible assets. Liabilities assumed were $10.1 billion, including
$9.2 billion of deposits. Whitney National Bank served the five-state Gulf Coast region stretching from Houston,
Texas, across southern Louisiana and the coastal region of Mississippi, to central and south Alabama, the
panhandle of Florida, and the metropolitan area of Tampa, Florida.
Highlights of 2012 Financial Results
Net income for the year ended December 31, 2012 was $151.7 million, almost double the $76.8 million net
income in 2011. This increase was primarily due to the full-year impact of the acquired Whitney operations and
lower merger-related expenses in 2012. Diluted earnings per share for 2012 were $1.75, a $0.60 increase from
2011. Diluted earnings per share on operating income, which excludes tax-effected merger-related expenses, debt
reduction costs and securities gains and losses, were $2.13 for 2012, an $0.11 improvement over 2011.
Hancock’s return on average assets (ROA) for 2012 was 0.80% compared to 0.52% for 2011, while the operating
ROA increased to 0.97% in 2012, up 7 basis points from 2011.
Net interest income (te) in 2012 totaled $722.5 million, a $189.3 million (36%) increase over 2011. Average
earning assets in 2012 were up almost 30% over 2011, related mainly to the Whitney acquisition in June 2011.
The reported net interest margin widened 23 basis points to 4.48% in 2012, reflecting a relatively stable yield on
earning assets and a further decline in funding costs. Asset yields were supported by the continued favorable
performance of Whitney’s acquired loan portfolio and an increase in interest income recognized on the portfolio
under purchase accounting. The core net interest margin, which is calculated excluding total net purchase
accounting adjustments, has compressed some during 2012, mainly on lower core yields on the loan and
securities portfolios.
The provision for loan losses was $54.2 million in 2012 compared to $38.7 million in 2011, with each
related mainly to loans not covered under FDIC loss-sharing agreements. Approximately $13.7 million of the
2012 provision was associated with a bulk sale of non-covered problem loans toward the end of that year. Net
charge-offs from the non-covered portfolio during 2012 were $55.0 million or 0.49% of average total loans,
including $16.2 million related to the bulk loan sale. This compares to the net non-covered charge-offs of
$33.8 million, or 0.40% of average total loans, in 2011. The determination of allowances for covered loans and
other loans acquired with existing credit impairment is discussed in Note 1 to the consolidated financial
statements.
Total assets at December 31, 2012 were $19.5 billion, down less than 2% from the prior year-end. Total
loans increased $400.8 million (4%) during 2012, and were up $556 million (5%) excluding the FDIC-covered
portfolio. During 2012, net growth primarily in commercial non-real estate (C&I) loans, but also in residential
mortgages and consumer loans, was partially offset by net reductions in construction and land development and
commercial real estate credits. The Banks increased their level of liquidity investments toward the end of 2012 to
address the potential for some run-off of deposits in early 2013 following the expiration of a special deposit
insurance program. No material outflows were noted and the excess liquidity will be redeployed during the first
quarter of 2013.
At December 31, 2012, deposits in total were up slightly from the end of 2011, as growth in noninterest-
bearing and lower rate interest-bearing deposits outpaced the run-off of higher rate time deposits. Noninterest-
bearing demand deposits increased 2% and comprised 36% of total deposits at December 31, 2012.
33
RESULTS OF OPERATIONS
Net Interest Income
Net interest income (tax equivalent or “te”) is the primary component of our earnings and represents the
difference, or spread, between revenue generated from interest-earning assets and the interest expense related to
funding those assets. For internal analytical purposes, management adjusts net interest income to a “taxable
equivalent” basis using a 35% federal tax rate on tax exempt items (primarily interest on municipal securities and
loans).
Net interest income (te) for 2012 totaled $722.5 million, a $189.3 million (36%) increase over 2011.
Average earning assets in 2012 were up almost 30% over 2011, reflecting mainly the Whitney acquisition in June
2011. The reported net interest margin improved 23 basis points (bps) to 4.48% in 2012. The net interest margin
is the ratio of net interest income (te) to average earnings assets. The core margin (net interest margin calculated
excluding total net purchase accounting adjustments) was approximately 3.74% in 2012. The core margin has
compressed 23 bps during 2012 to approximately 3.61% in the fourth quarter compared to the fourth quarter of
2011, mainly from a decline in the core yields on the loan and securities portfolios. The reported net interest
margin was stable to slightly higher during 2012. Whitney’s acquired portfolio continued to perform better than
expected over this period. As a result, re-projections of expected cash flows from the acquired portfolio led to
increased loan accretion that favorably impacted both net interest income and the net interest margin. Changes in
activity related to prepayments and payoffs in the acquired portfolio can cause quarterly accretion levels to be
volatile.
The overall reported yield on earning assets was 4.80% in 2012, down 2 bps from 2011. The reported loan
portfolio yield of 6.00% in 2012 was up 3 bps from 2011. Recent growth in commercial loans has been in very
competitively priced segments, but the increasing yield recognized on the acquired portfolio has helped to
support the overall loan yield. The reported yield on the mainly fixed-rate portfolio of investment securities
declined 69 bps from 2011, reflecting both lower yields available on the reinvestment of repayments and
maturities and the market yield on Whitney’s securities portfolio at the acquisition date. The mix of average
earning assets improved moderately in 2012, as the proportion of loans increased to 70% of earnings assets
compared to 68% in 2011 with a corresponding decline in short-term investments.
The cost of funding earning assets declined to 0.32% in 2012, down 25 bps from 2011. The overall rate paid
on interest-bearing deposits declined 34 bps from 2011 to 0.33% in 2012. This decrease was due primarily to the
impact of the sustained low rate environment on deposit rates in general and on the re-pricing of time deposits in
particular. The opportunity to re-price time deposits at significantly lower rates over the near term has largely
been eliminated. The mix of funding sources improved during 2012, related mainly to the full-year effect of the
composition of the acquired Whitney deposit base. Interest-free sources, including non-interest bearing demand
deposits, funded 32% of average earnings assets in 2012 compared to 26% in 2011.
As earning assets continue to re-price at lower rates, and with little opportunity to further reduce funding
costs, management expects continued compression in the core net interest margin in the near term. All else equal,
some near-term compression in the reported margin is also anticipated.
Net interest income (te) for 2011 totaled $533.2 million, almost double the $282.0 million earned in 2010.
Earning assets in 2011 were up 71% over 2010, reflecting mainly the Whitney acquisition, and the net interest
margin improved by 37 basis points to 4.25% in 2011.
The yield on average earning assets decreased 19 basis points to 4.82% in 2011. Loan yields increased 11
basis points to 5.97% in 2011, while the yield on the investment portfolio declined 137 basis points from 2010.
Positive adjustments to the yield earned on the acquired Whitney portfolio based on post-merger portfolio
performance benefited the overall loan yield in 2011. The overall mix of average earning assets was relatively
stable between 2011 and 2010, with loans comprising approximately 68% of the total in each year.
34
The cost of funding earning assets decreased 56 basis points to 0.57% in 2011. The overall rate paid on
interest-bearing deposits was down 58 basis points from 2010 to 0.67% in 2011, reflecting mainly the impact of
the sustained low rate environment on deposit rates and the expected runoff or re-pricing of higher rate time
deposits from the People’s First acquisition. There was a favorable shift in the mix of funding sources during
2011, related mainly to the composition of the acquired Whitney deposit base. Interest-free sources, including
non-interest bearing demand deposits, funded 26% of average earnings assets in 2011 compared to 12% in 2010.
The factors contributing to the changes in net interest income (te) for 2012, 2011, and 2010 are presented in
Tables 1 and 2 below. Table 1 shows average balances and related interest and rates. Table 2 details the effects of
changes in balances (volume) and rate on net interest income in 2012 and 2011.
35
TABLE 1. Summary of Average Balances, Interest and Rates (te) (a)
2012
Years Ended December 31,
2011
2010
Average
Balance
Interest Rate
Average
Balance
Interest Rate
Average
Balance Interest Rate
($ in millions)
Assets
Interest-Earnings Assets:
Loans (te) (b)
U.S. Treasury securities
U.S. agency securities
CMOs
Mortgage-backed securities
Obligations of states and political subdivisions:
taxable
nontaxable (te)
Other securities
$11,284.7 $676.8 6.00% $ 8,514.0 $508.4 5.97% $5,005.8 $293.9 5.86%
0.2
99.0
1,545.5
2,150.8
0.0 4.66
2.1 2.12
29.8 1.93
51.3 2.39
8.7
277.5
742.5
1,772.2
0.0 0.49
5.6 2.03
18.9 2.55
55.6 3.14
59.8
200.7
7.9
2.8 4.73
9.0 4.48
0.4 4.43
57.5
191.7
24.3
3.1 5.32
9.3 4.84
1.1 4.60
11.4
152.3
284.4
905.2
61.6
127.2
16.9
0.1 0.63
4.0 2.60
10.5 3.69
42.3 4.68
2.9 4.74
8.0 6.33
0.9 5.05
Total investment in
securities (te) (c)
Federal funds sold and short-term investments
4,063.9
771.5
95.4 2.35
1.9 0.25
3,074.4
955.3
93.6 3.04
2.1 0.22
1,559.0
698.0
68.7 4.41
1.7 0.25
Total earning assets (te)
16,120.1 774.1 4.80% 12,543.7 604.1 4.82% 7,262.8 364.3 5.01%
Non-earning assets:
Other assets
Allowance for loan losses
Total assets
Liabilities and Stockholder’s Equity
Interest-bearing Liabilities:
Interest-bearing transaction and savings
2,951.5
(136.3)
$18,935.4
2,281.2
(102.8)
$14,722.1
1,236.6
(73.2)
$8,426.2
deposits
Time deposits
Public funds
$ 5,827.3 $
2,580.0
1,451.5
7.4 0.13% $ 4,100.4 $
21.2 0.82
4.1 0.29
2,901.5
1,314.6
8.5 0.21% $1,940.5 $
42.1 1.45
5.1 0.39
2,736.2
1,164.0
9.0 0.46%
54.4 1.99
9.5 0.82
Total interest-bearing deposits
9,858.8
32.7 0.33
8,316.5
55.7 0.67
5,840.7
72.9 1.25
Repurchase agreements
Other interest-bearing liabilities
Long-term debt
760.9
82.9
338.9
5.9 0.78
0.1 0.14
12.9 3.80
681.5
114.6
205.0
7.0 1.03
0.2 0.14
8.1 3.95
477.2
37.9
0.5
9.2 1.93
0.2 0.45
0.0 7.33
Total interest-bearing liabilities
11,041.5
51.6 0.47% 9,317.5
71.0 0.76% 6,356.3
82.3 1.30%
Non-interest bearing:
Demand deposits
Other liabilities
Stockholders’ equity
5,251.4
241.7
2,400.8
3,400.1
203.4
1,801.1
1,076.8
127.4
865.7
Total liabilities & stockholders’
equity
$18,935.4
$14,722.1
$8,426.2
Net interest income and margin (te)
722.5 4.48%
$533.1 4.25%
$282.0 3.88%
Net earning assets and spread
$ 5,078.6
4.33% $ 3,226.2
4.06% $ 906.5
Interest cost of funding earning assets
0.32%
0.57%
3.71%
1.13%
(a) Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.
(b)
(c) Average securities do not include unrealized holding gains or losses on available for sale securities.
Includes nonaccrual loans and loans held for sale.
36
TABLE 2. Summary of Changes in Net Interest Income (te) (a) (b)
Interest Income (te)
Loans (te) (c)
Investment Securities:
U.S. Treasury securities
U.S. agency securities
CMOs
Mortgage-backed securities
Obligations of states and political
subdivisions:
Taxable
Nontaxable (te)
Other securities
Total investment in securities (te)
Federal funds sold and short-term investments
2012 Compared to 2011
2011 Compared to 2010
Due to
Change in
Volume
Rate
Total
Increase
(Decrease)
Due to
Change in
Volume
Rate
Total
Increase
(Decrease)
(In thousands)
$166,170 $ 2,259 $168,429 $209,576 $ 4,890 $214,466
(78)
(3,772)
16,388
10,533
43
241
(5,498)
(14,773)
(35)
(3,531)
10,890
(4,240)
(16)
2,763
10,928
32,333
(14)
(1,099)
(2,521)
(19,111)
(30)
1,664
8,407
13,222
120
424
(731)
(350)
(718)
(42)
22,884
(440)
(21,097)
228
(230)
(294)
(773)
1,787
(212)
(192)
3,221
370
333
(1,990)
(106)
141
1,231
264
49,407
541
(24,508)
(160)
24,899
381
Total interest income (te)
188,614
(18,610) 170,004
259,524
(19,778) 239,746
Interest-bearing transaction deposits
Time deposits
Public funds
2,846
(4,251)
495
(3,966)
(16,578)
(1,496)
(1,120)
(20,829)
(1,001)
5,401
900
1,211
(5,625)
(13,516)
(5,583)
(224)
(12,616)
(4,372)
Total interest-bearing deposits
(910)
(22,040)
(22,950)
7,512
(24,724)
(17,212)
Repurchase agreements
Other interest-bearing liabilities
Long-term debt
753
(75)
5,307
(1,825)
39
(538)
(1,072)
(36)
4,769
3,324
304
8,114
(5,616)
(253)
(35)
(2,292)
51
8,079
Total interest expense
5,075
(24,364)
(19,289)
19,254
(30,628)
(11,374)
Net interest income (te) variance
$183,539 $ 5,754 $189,293 $240,270 $ 10,850 $251,120
(a) Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Amounts shown as due to changes in either volume or rate includes an allocation of the amount that reflects
the interaction of volume and rate changes. This allocation is based on the absolute dollar amounts of
change due soley to changes in volume or rate.
Includes nonaccrual loans and loans held for sale.
(c)
37
Provision for Loan Losses
The provision for loan losses was $54.2 million in 2012 compared to a provision of $38.7 million in 2011.
At the end of 2012, the Company completed a bulk sale of approximately $40 million of loans. Approximately
$36 million of the loans sold were previously reported as nonperforming loans. The remaining $4 million of
loans sold were acquired credit-impaired credits that were not reported as nonperforming loans under purchase
accounting. The sale added $13.7 million to the provision for loan losses, and $16.2 million to net charge-offs for
2012. Specific reserves totaling $2.5 million had been previously recorded on loans included in the sale. The
credits sold had a total of approximately $56 million in remaining contractual principal.
During 2012, the Company recorded a $41.0 million increase in the allowance for losses related to
impairment of certain pools of covered loans, with a related increase of $38.2 million in the Company’s FDIC
loss share receivable. The net impact on provision expense was $2.8 million in 2012 compared to $3.0 million in
2011. Decreases in the expected cash flows on covered loans are recorded as an adjustment to the allowance for
loan losses with a corresponding increase to the loss share receivable, and the difference is recorded as a
provision for loan losses in the consolidated statement of income.
The section below on the “Allowance for Loan and Lease Losses” provides additional information on
changes in the allowance for loans losses and general credit quality. Certain differences in the determination of
the allowance for loan losses for originated loans and for acquired performing loans and acquired impaired loans
(which includes all covered loans) are described in Note 1 to the consolidated financial statements.
Noninterest Income
Noninterest income for 2012 totaled $253.7 million, a $47.4 million (23%) increase from 2011. The full-
year impact of the acquired Whitney operations in 2012 was the primary factor behind this overall increase.
Income from service charges on deposit accounts increased $23.0 million (42%) in 2012 compared to 2011.
The Company began offering new and standardized products and services across its footprint in conjunction with
the core systems integration in March 2012. The additional revenue generated from these product changes
supplemented the increase of service charge income from the full-year impact of Whitney’s operations. Service
charges include periodic account maintenance fees for both commercial and personal customers, charges for
specific transactions or services, such as processing return items or wire transfers, and other revenue associated
with deposit accounts, such as commissions on check sales.
Bank card fees were up 10%, but would have shown a decline excluding the full-year impact of Whitney’s
operations. Restrictions on debit card interchange rates that arose from the implementation of the Durbin
amendment to the Dodd-Frank Act began impacting Whitney Bank in the fourth quarter of 2011 and Hancock
Bank at the beginning of the third quarter of 2012. The restrictions reduced Whitney Bank fees by approximately
$2.5 million per quarter and Hancock Bank fees by approximately $2.0 million per quarter. The Durbin
interchange restrictions also negatively impacted ATM fees beginning in the third quarter of 2012. These revenue
losses were partially offset by an increase in merchant processing revenue starting with the third quarter of 2012
that was related to the reacquisition of the Company’s merchant business and a change in the terms of the
servicing agreement.
Fees from secondary mortgage market operations increased $6.0 million in 2012 (57%) compared to 2011.
In addition to the favorable impact from a full-year of Whitney’s operations in 2012, the Company’s origination
volume and fees benefited as consumers took advantage of historically low rates to refinance or purchase their
homes in an improving economic environment.
Fluctuations in the accretion on the FDIC loss share receivable reflect changes in the amount and timing of
projected cash flows related to the reimbursements under the loss sharing agreements. These projections are
updated as loss estimates related to the various covered loan pools change.
38
Noninterest income for 2011 totaled $206.3 million, a $69.4 million (51%) increase over 2010. Excluding
the estimated impact of the Whitney acquisition, noninterest income was up $10.0 million, or 7%. An $11.8
million increase in the accretion of the FDIC loss share receivable and improvements in several other income
categories were partly offset by a $6.0 million reduction in service charge revenue from legacy Hancock
customers. Investment brokerage and annuity sales fees from legacy Hancock operations increased $2.5 million
(24%) due mainly to improved financial market conditions. ATM fees were up $2.1 million (22%) in 2011 due to
increased activity and the impact of changes in the fee structure during 2010. The decrease in service charges was
due mainly to lower overdraft and NSF fees resulting from new consumer protection regulations implemented
during the third quarter of 2010.
Table 3 presents the components of noninterest income for the prior three years along with the percentage
changes between years:
TABLE 3. Noninterest Income
Service charges on deposit accounts
Trust fees
Bank card fees
Investment and annuity fees
ATM fees
Secondary mortgage market operations
Insurance commissions and fees
Accretion of FDIC loss share receivable
Income from bank-owned life insurance
Credit-related fees
Income from derivatives
Gain on sales of assets
Safety deposit box income
Other miscellaneous income
Securities transactions gains, net
Total noninterest income
n/m = not meaningful
Noninterest Expense
2012
% Change
2011
% Change
2010
$ 78,246
32,736
31,698
18,033
17,414
16,488
15,692
5,000
11,163
6,681
3,600
4,366
2,006
9,072
1,552
$253,747
($ in thousands)
42% $ 55,265
23,940
37
28,879
10
15,016
20
14,052
24
10,484
57
16,524
(5)
16,689
(70)
9,311
20
5,752
16
760
374
1,083
303
1,591
26
7,081
28
(91)
1,805
22% $ 45,335
16,715
43
14,941
93
10,181
47
9,486
48
18
8,915
14,461
14
4,890
241
5,219
78
1,451
296
—
n/m
618
75
841
89
3,896
82
—
n/m
23% $206,336
51% $136,949
Noninterest expense for 2012 totaled $713.1 million, an increase of $119.1 million (20%) compared to
2011. Excluding merger-related expenses totaling $45.8 million in 2012 and $86.8 million in 2011, noninterest
expense increased $160.0 million (32%) to $667.3 million in 2012 compared to 2011. The overall increase was
due primarily to the full-year impact of Whitney’s acquired operations, net of the cost savings realized as
Whitney’s operations were successfully integrated into Hancock.
Table 4 presents the components of noninterest expense for the prior three years along with the percentage
changes between years. In Table 4 and the following discussion, merger-related expenses are excluded from the
individual components and addressed separately.
39
TABLE 4. Noninterest Expense
Employee compensation
Employee benefits
Total personnel expense
Net occupancy expense
Equipment
Data processing expense
Professional services
Amortization of intangible assets
Telecommunications and postage
Deposit insurance and regulatory fees
Advertising
Ad valorem and franchise taxes
Printing and supplies
Other real estate owned expense, net
Insurance expense
Merger-related expenses
Other expense
2012
% Change
2011
% Change
2010
$284,962
71,772
356,734
53,856
21,862
46,819
33,021
32,067
21,062
14,902
8,155
8,321
6,534
13,866
5,494
45,789
44,585
($ in thousands)
29% $220,720
51,922
38
96% $112,457
29,558
76
31
26
29
17
14
94
20
15
(30)
56
30
101
27
n/m
76
272,642
42,890
16,972
39,906
29,029
16,551
17,617
12,974
11,729
5,330
5,040
6,910
4,313
86,762
25,349
92
80
61
76
91
507
61
14
54
49
131
54
115
n/m
50
142,015
23,799
10,512
22,702
15,184
2,728
10,959
11,401
7,600
3,568
2,186
4,475
2,010
3,167
16,954
Total noninterest expense
$713,067
20% $594,014
113% $279,260
n/m = not meaningful
The components of merger-related expenses:
Personnel
Net occupancy expense
Equipment
Data processing expense
Professional services
Telecommunications and postage
Advertising
Printing and supplies
Insurance expense
Other expense
Total merger-related expenses
2012
2011
$ 9,450
611
2,235
3,116
24,436
375
5,360
957
—
(751)
$13,960
330
552
3,163
40,902
897
5,958
568
3,177
17,255
$
2010
27
4
57
944
1,263
60
113
194
—
505
$45,789
$86,762
$3,167
Total personnel expense increased $84.1 million (31%) in 2012 compared to 2011. The full-time equivalent
workforce has been reduced by approximately 14% from the level shortly after the Whitney acquisition in June
2011 through the end of 2012, with most of the reductions following the completion of the core systems
conversion and merger-related branch consolidations in March 2012. Several additional branches were closed in
the fourth quarter of 2012 as part of management’s ongoing branch rationalization process.
Occupancy, equipment and data processing expense increased a combined $22.8 million (23%), as the
impact of Whitney’s operations was partially offset by reductions associated with the data systems conversion,
the consolidated of branch networks and back-office operations, and the branch rationalization process.
40
Amortization of intangible assets is associated mainly with the value of core deposit relationships and other
identifiable intangibles acquired in bank acquisitions. Amortization expense of $29.5 million is scheduled for
2013. Note 2 to the consolidated financial statements reviews recently completed acquisitions and Note 8
presents additional information on intangible assets subject to amortization.
Expenses related to other real estate owned (ORE) increased $7.0 million (101%) in 2012 compared to
2011, due mainly to valuation losses on ORE acquired from Whitney and unreimbursed losses on the increased
volume of covered loans moving through the foreclosure process into ORE and to final resolution.
Other expenses for 2012 includes the $5.3 million expense associated with the repurchase of a portion of
Whitney Bank’s subordinated debt. The remaining increase of $13.9 million reflects mainly the impact of
Whitney’s operations.
Total noninterest expense for 2011 increased $314.8 million (113%) to $594.0 million, primarily due to the
part-year impact of the Whitney acquisition. Excluding merger-related expenses totaling $86.8 million in 2011
and $3.2 million in 2010, and approximately $213 million of expenses added in 2011 from the Whitney
acquisition, noninterest expense increased $17.8 million (6%).
Total personnel expense in 2011(excluding $114.3 million of Whitney expenses), increased $16.3 million
(11%) compared to the prior year. Normal salary adjustments, additional incentive-based compensation and some
strategic staff additions appropriate to the Company’s expanded scope of operations following the Whitney
acquisition and increases in both health and pension benefits were the primary components of this increase.
Deposit insurance and regulatory fees decreased $3.6 million (32%) in 2011, excluding expenses associated
with Whitney’s operations. The implementation of a new deposit insurance assessment calculation method in
2011 had a favorable impact on the Banks’ premiums. Excluding the impact of the Whitney acquisition, no
significant trends were identified underlying the changes in other noninterest expense categories between 2011
and 2010.
Income Taxes
Income tax expense was $45.6 million in 2012, $18.1 million in 2011 and $9.7 million in 2010. Our
effective income tax rate continues to be less than the statutory rate of 35%, due primarily to tax-exempt income
and tax credits. The effective tax rates for 2012, 2011 and 2010 were 23%, 19% and 15%, respectively. Note 17
to the consolidated financial statements reconciles reported income tax expense to the amount determined by
applying the statutory rate to income before income taxes.
SEGMENT REPORTING
The Company’s primary operating segments consist of the Hancock segment, which coincides generally
with the Company’s Hancock Bank subsidiary, and the Whitney segment, which coincides generally 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. On March 15, 2012, Whitney Bank transferred
the assets and liabilities of its operations in Florida, Alabama and Mississippi to Hancock Bank. The transfer
included approximately $1.4 billion of earning assets and a comparable amount of deposits. Note 19 to the
consolidated financial statements provides comparative financial information for the reportable operating
segments for 2012, 2011, and 2010. In the tables in Note 19, the “Other” column includes activities of other
consolidated subsidiaries and the holding company which do not constitute reportable segments under the
relevant accounting guidelines. These subsidiaries provide investment services, insurance agency services,
insurance underwriting and various other services to third parties.
Of the Company’s total operating income of $184.0 million for 2012, the Hancock segment generated
approximately $55.4 million and the Whitney segment generated approximately $124.2 million. Operating
income is defined as net income less tax-effected merger-related expenses, debt redemption costs and securities
41
transactions. Operating income was up $18.6 million (50%) over 2011 for the Hancock segment and $32.7
million (36%) for the Whitney segment, with each increase reflecting primarily the full-year impact of Whitney’s
acquired operations and the reorganization of these operations in March 2012.
Net interest income for both the Hancock and Whitney segments also benefited from an increased rate of
accretion on the purchased loan portfolios during 2012. The Hancock segment includes the FDIC covered
portfolio as well as a portion of the portfolio acquired in the Whitney transaction, while the Whitney segment
includes the majority of the Whitney acquired loans. A decrease in the accretion on the FDIC loss share
receivable in 2012 reduced the Hancock segment’s noninterest income by $11.7 million compared to 2011. The
bulk sale of problem loans toward the end of 2012 added approximately $5.1 million to the provision for loan
losses for the Hancock segment and $8.6 million to the provision for the Whitney segment. There was a small
decrease for 2012 in the Hancock segment’s provision associated with the FDIC covered portfolio. Excluding the
impact of the bulk loan sale in late 2012, the Whitney segment’s provision for loan losses increased
approximately $6.7 million compared to 2011, reflecting both loan growth and the impact of a moderate increase
in non-performing loans and charge-offs associated with a limited number of originated commercial credits in
Louisiana markets and some smaller dollar residential mortgage and commercial credits from the Whitney
acquired performing portfolio. The cost savings realized as Whitney’s operations were successfully integrated
into Hancock are primarily reflected in the comparative results of the Whitney segment.
BALANCE SHEET ANALYSIS
Investment Securities
Our investment in securities was $3.7 billion at December 31, 2012, compared to $4.5 billion at
December 31, 2011. The decline of $780 million from the end of 2011 reflects mainly the use of proceeds from
maturities and scheduled repayments to fund the net loan growth and reduction in short-term borrowings
discussed below. Also as discussed later, the Company opted to maintain additional short-term liquidity balances
at the end of 2012 in anticipation of possible increased demands on liquidity as a result of the expiration of the
FDIC’s Transaction Account Guarantee (TAG) program.
At December 31, 2011, all securities were classified as available for sale. At December 31, 2012, we had
$2.0 billion in available for sale securities and $1.7 billion in held to maturity.
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 increased to a level that caused us to conclude that only a portion of the portfolio is needed to be held
for sale 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.
Our securities portfolio consists mainly of residential mortgage-backed securities and CMOs that are issued
or guaranteed by U.S. government agencies. The portfolio is designed to enhance liquidity while providing an
acceptable rate of return. We invest only in high quality securities of investment grade quality with a targeted
duration, for the overall portfolio, generally between two to five years, At December 31, 2012, the average
maturity of the portfolio was 3.16 years with an effective duration of 2.19 years and a weighted-average yield of
2.71%. At December 31, 2011, the average maturity of the portfolio was 3.69 years with an effective duration of
2.26 years and a weighted-average yield of 3.22%.
There were no investments in securities of a single issuer, other than U.S. Treasury and U.S. government
agency securities and mortgage-backed securities issued or guaranteed by U.S. government agencies that
42
exceeded 10% of stockholders’ equity. We do not invest in subprime or “Alt A” home mortgage loans.
Investments classified as available for sale are carried at fair value with held to maturity securities carried at
amortized cost. Unrealized holding gains on available for sale securities are excluded from net income and are
recognized, net of tax, in other comprehensive income and in accumulated other comprehensive income, a
separate component of stockholders’ equity, until realized.
The amortized costs of securities at December 31, 2012 and 2011 was as follows (in thousands):
TABLE 5. Securities by Type
Available for sale securities
U.S. Treasury
U.S. government agencies
Municipal obligations
Mortgage-backed securities
CMOs
Other debt securities
Equity securities
Held to maturity securities
Municipal obligations
Mortgage-backed securities
CMOs
December 31,
2012
2011
$
150
18,096
49,608
1,715,524
196,723
2,250
4,531
$1,986,882
$
150
248,595
294,489
2,422,891
1,426,495
4,517
4,208
$4,401,345
$ 164,493
180,397
1,323,128
$1,668,018
$
$
—
—
—
—
The amortized cost, yield and fair value of debt securities at December 31, 2012, by contractual maturity,
were as follows (in thousands):
TABLE 6. Securities Maturities by Type
One
Year or
Less
Over One
Year
Through
Five Years
Over Five
Years
Through
Ten Years
Over
Ten
Years
Total
Fair Value
Weighted
Average
Yield
Available for sale
U.S. Treasury
U.S. government agencies
Municipal obligations
Mortgage-backed securities
CMOs
Other debt securities
Total debt securities
$ — $
18,096
24,584
925
—
250
$43,855
150
—
21,298
21,818
196,723
2,000
$241,989
$ — $
—
3,703
246,098
—
—
$249,801
— $
—
23
1,446,683
—
—
$1,446,706
150
18,096
49,608
1,715,524
196,723
2,250
$1,982,351
$
158
18,107
50,165
1,774,406
198,077
2,250
$2,043,163
4.65%
1.85%
2.62%
3.43%
1.37%
2.28%
3.19%
Fair Value
$44,003
$244,207
$259,924
$1,495,029
$2,043,163
Weighted Average Yield
2.41%
1.77%
4.59%
3.22%
3.19%
Held to maturity
Municipal obligations
Mortgage-backed securities
CMOs
Total debt securities
$14,545
—
—
$14,545
$ 45,611
—
372,257
$417,868
$ 88,795
—
5,789
$ 94,584
$
15,542
180,397
945,082
$1,141,021
$ 164,493
180,397
1,323,128
$1,668,018
$ 180,510
183,826
1,346,129
$1,710,465
4.35%
1.90%
1.92%
2.15%
Fair Value
$14,626
$427,022
$104,739
$1,164,078
$1,710,465
Weighted Average Yield
3.56%
1.14%
4.39%
2.33%
2.15%
43
Loan Portfolio
Total loans (net of unearned discount) at December 31, 2012 were $11.6 billion, an increase of $400.8
million (4%) from December 31, 2011, with most of the growth coming in the last half of the year. Excluding the
FDIC-covered portfolio acquired with Peoples First, total loans were up $556 million (5%) compared to year-end
2011. During 2012, net growth in commercial non-real estate (C&I), residential mortgage and consumer loans
was partially offset by net reductions in construction and land development (C&D) and commercial real estate
(CRE) credits. Hancock’s loan pipeline remains strong, but the market for new loans remains highly competitive.
Although management expects continued net loan growth in future quarters, the rate of growth may be below that
experienced over the last half of 2012.
The assessment and monitoring of the risk and performance of the loan portfolio is currently performed at
the aggregate levels of commercial, residential mortgage and consumer, where the commercial category includes
C&I, C&D, and CRE loans. As a result, we have historically reported credit quality information at these
aggregate levels, without further break out of the commercial category. We are in the process of enhancing
certain aspects of our allowance methodology and credit risk monitoring activities that will include refining
certain data and reporting methods and that will lead to a higher level of disaggregation of the commercial loan
portfolio for purposes of reporting credit quality statistical information in future periods. We intend to have these
new processes and refinements operational in 2013. We provide the more detailed breakout of commercial loans
where the information is currently available in the following loan tables.
The following table sets forth, for the periods indicated, the composition of our loan portfolio distinguished
among loans originated, acquired and covered.
Table 7. Loans Outstanding by Type
Originated loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total originated loans
Acquired loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total acquired loans
Covered loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total covered loans
Total loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total loans
2012
2011
2010
2009
2008
December 31,
(In thousands)
$ 2,713,385
665,673
1,548,402
827,985
1,351,776
$ 7,107,221
$ 1,525,409
540,806
1,259,757
487,147
1,074,611
$ 4,887,730
$1,046,431
495,590
1,231,414
366,183
1,008,395
$4,148,013
$ 984,057
535,439
1,162,838
395,946
1,084,925
$4,163,205
$1,011,942
585,375
1,083,828
427,545
1,140,600
$4,249,290
$ 1,690,643
295,151
1,279,546
486,444
202,974
$ 3,954,758
$ 2,236,758
603,371
1,656,515
734,669
386,540
$ 5,617,853
$
$
— $
—
—
—
—
— $
— $
—
—
—
—
— $
$
$
29,260
28,482
95,146
263,515
99,420
515,823
$
$
38,063
118,828
82,651
285,682
146,219
671,443
$
35,190
157,267
181,873
293,506
141,315
$ 809,151
$
661
298,500
179,416
343,953
128,440
$ 950,970
$
$
—
—
—
—
—
—
—
—
—
—
—
—
$ 4,433,288
989,306
2,923,094
1,577,944
1,654,170
$11,577,802
$ 3,800,230
1,263,005
2,998,923
1,507,498
1,607,370
$11,177,026
$1,081,621
652,857
1,413,287
659,689
1,149,710
$4,957,164
$ 984,718
833,939
1,342,254
739,899
1,213,365
$5,114,175
$1,011,942
585,375
1,083,828
427,545
1,140,600
$4,249,290
44
Originated loans include all loans not included in the acquired and covered loan portfolios described below.
Acquired loans are those purchased in the Whitney acquisition on June 4, 2011, including loans that were
performing satisfactorily at the date (acquired performing) and loans acquired with evidence of credit
deterioration (acquired impaired). Covered loans are those purchased in the December 2009 acquisition of
Peoples First, which are covered by loss share agreements between the FDIC and the Company that afford
significant loss protection. Purchased loans acquired in a business combination are recorded at estimated fair
value on their purchase date without carryover of any allowance for loan losses. Certain differences in the
accounting for originated loans and for acquired performing and acquired impaired loans (which include all
covered loans) are described in Note 4 to the consolidated financial statements.
Originated C&I loans were up $1.2 billion since December 31, 2011. The net increase reflected activity with
both new and existing customers, including certain activity with relationships acquired in the Whitney
acquisition. Considered together, originated and acquired C&I loans increased a combined $642 million during
2012. While most markets across the Company’s footprint reported C&I growth, the most significant activity
was concentrated in the Company’s market areas in Louisiana, the Houston, Texas market, and several Florida
market areas, with a sizeable portion of the new business generated from customers in the oil and gas energy
sector.
The Company’s commercial customer base is diversified over a range of industries, including oil and gas
(O&G), wholesale and retail trade in various durable and nondurable products and the manufacture of such
products, marine transportation and maritime construction, financial and professional services, and agricultural
production. Loans outstanding to O&G industry customers totaled approximately $905 million at December 31,
2012, up approximately $300 million from December 31, 2011. The majority of the O&G portfolio is with
customers who provide transportation and other services and products to support exploration and production
activities. The Banks’ C&I lending is mainly to middle-market and smaller commercial entities, although they do
occasionally participate in larger shared-credit loan facilities with businesses well known to the relationship
officers and operating in the Company’s market areas. Shared credits funded at December 31, 2012 totaled
approximately $1.0 billion, of which approximately $466 million was with O&G customers.
Originated C&D loans and originated commercial real estate (CRE) loans, which include loans on both
income-producing and owner-occupied properties, increased a combined $414 million during 2012, with $164
million of net growth in the fourth quarter. This increase reflects the funding of existing commitments as well as
some new business across the Company’s footprint and covers a variety of retail, multi-family residential,
commercial and other projects, including some sizable projects to expand or renovate established properties in
Louisiana. Overall, however, opportunities for funding new quality projects in today’s environment remain
limited.
Originated residential mortgages were up $341 million during 2012, and originated consumer loans
increased $277 million over this period. The Company has increased its emphasis on residential mortgages to be
held in the loan portfolio, and customer demand has been supported by historically low interest rates for home
loans. Lending campaigns for indirect auto loans and home equity loans initiated in the second quarter of 2012
contributed to the growth in the originated consumer portfolio.
The portfolio of acquired Whitney loans has declined $1.7 billion since December 31, 2011, with a $546
million decline in the C&I category, $685 million in the C&D and CRE categories, and $432 million in the
residential mortgage and consumer loans categories. There were no significant trends underlying the reduction in
the C&I category, and, as noted earlier the Company continues its relationship with many of the commercial
customers who have paid down their loans since the acquisition. Reductions in acquired C&D and CRE
categories as well as the residential mortgage and consumer categories reflected mainly normal repayment and
refinancing activity.
Total covered loans at December 31, 2012 were down $156 million from December 31, 2011. These
reductions reflect normal repayments, charge-offs and foreclosures. The covered portfolio will continue to
decline over the terms of the loss share agreements.
45
The following table shows average loans for each of the prior three years and the effective taxable-
equivalent yield earned on each category presented.
Table 8. Average Loans
Total loans:
Years Ended December 31,
2012
2011
2010
Balance
($000s)
Yield
(te)
Pct of
total
Balance
($000s)
Yield
(te)
Pct of
total
Balance
($000s)
Yield
(te)
Pct of
total
Commercial non-real estate $ 4,007,506 4.61% 35% $2,590,707 4.90% 30% $1,012,950 5.72% 20%
Construction and land
development
Commercial real estate
Residential mortgages
Consumer
1,157,064 7.23% 10% 1,022,344 6.04% 12% 712,818 4.21% 14%
2,897,317 6.25% 26% 2,354,944 6.01% 28% 1,369,077 5.54% 27%
1,571,465 7.11% 14% 1,137,922 6.85% 13% 733,996 6.14% 15%
1,651,387 6.99% 15% 1,408,104 6.98% 17% 1,176,912 7.21% 24%
Total loans
$11,284,739 6.00% 100% $8,514,021 5.97% 100% $5,005,753 5.86% 100%
The following table sets forth, for the periods indicated, the approximate contractual maturity by type of the
loan portfolio:
TABLE 9. Loans Maturities by Type
Total loans:
Commercial loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgage loans
Consumer loans
Total loans
December 31, 2012
Maturity Range
Within
One Year
After One
Through
Five Years
After Five
Years
Total
(In thousands)
$2,163,513
386,204
735,140
146,662
296,646
$1,599,121
390,815
1,534,718
239,979
605,607
$ 670,654
212,287
653,236
1,191,303
751,917
$ 4,433,288
989,306
2,923,094
1,577,944
1,654,170
$3,728,165
$4,370,240
$3,479,397
$11,577,802
The sensitivity to interest rate changes of that portion of our loan portfolio that matures after one year is
shown below:
TABLE 10. Loans Sensitivity to Changes in Interest Rates
Total loans:
Commercial loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgage loans
Consumer loans
Total loans
46
December 31, 2012
Fixed rate
Floating rate
Total
(In thousands)
$1,089,963
248,290
1,230,215
761,425
744,417
$1,179,812
354,812
957,739
669,857
613,107
$2,269,775
603,102
2,187,954
1,431,282
1,357,524
$4,074,310
$3,775,327
$7,849,637
Non-performing Assets
The following table sets forth non-performing assets by type for the periods indicated, consisting of non-
accrual loans, troubled debt restructurings and other real estate owned (ORE) and foreclosed assets. Loans past
due 90 days or more and still accruing are also disclosed. In the following table, commercial loans encompass
commercial non-real estate loans, construction and land development loans and commercial real estate loans.
TABLE 11. Non-performing Assets
Total loans:
Loans accounted for on a non-accrual basis:
Commercial loans
Commercial loans—restructured
December 31,
2012
2011
2010
2009
2008
(In thousands)
$ 98,103 $ 69,113 $ 83,994 $ 46,739 $25,510
—
14,414
8,302
4,142
—
Total commercial loans
Residential mortgage loans
Residential mortgage loans—restructured
Total residential mortgage loans
Consumer loans
112,517
17,285
1,364
18,649
6,449
73,255
25,043
—
25,043
4,972
92,296
21,489
409
21,898
6,791
46,739
32,293
—
32,293
7,523
25,510
4,466
—
4,466
—
Total non-accrual loans
137,615
103,270
120,985
86,555
29,976
Restructured loans:
Commercial loans—non-accrual
Residential mortgage loans—non-accrual
Total restructured loans—non-accrual
Commercial loans—still accruing
Residential mortgage loans—still accruing
Total restructured loans—still accruing
Total restructured loans
14,414
1,364
15,778
15,888
549
16,437
32,215
4,142
—
4,142
12,812
1,191
14,003
18,145
8,302
409
8,711
3,301
629
3,930
12,641
—
—
—
—
—
—
—
—
—
—
—
—
—
—
ORE and foreclosed assets
Total non-performing assets*
102,072
5,360
$256,124 $277,024 $158,192 $100,891 $35,336
159,751
14,336
33,277
Loans 90 days past due still accruing
$ 13,244 $
5,880 $
1,492 $ 11,647 $11,005
Ratios
Non-performing assets to loans plus ORE and foreclosed
assets
2.19%
2.44%
3.17%
1.97% 0.83%
Allowance for loan losses to non-performing loans and
accruing loans 90 days past due
Loans 90 days past due still accruing to loans
81.40% 101.40% 64.87% 67.26% 150.62%
0.23% 0.26%
0.03%
0.11%
0.05%
* Includes total non-accrual loans, total restructured loans—still accruing and total ORE and foreclosed assets.
Non-performing assets (NPAs) totaled $256.1 million at December 31, 2012, compared to $277.0 million at
December 31, 2011. Non-performing assets as a percent of total loans and ORE and foreclosed assets was 2.19%
at December 31, 2012, compared to 2.44% at December 31, 2011. Non-performing loans exclude loans from the
Whitney and covered Peoples First acquired credit-impaired portfolios that were recorded at estimated fair value
at acquisition and are accreting interest income. ORE and foreclosed assets decreased a net $57.7 million during
2012, reflecting in part some significant sales of legacy Whitney properties.
Non-accrual loans were $137.6 million at December 31, 2012, an increase of $34.3 million from
December 31, 2011. The net increase in non-accrual loans since the end of 2011 reflects mainly the movement to
47
non-accrual status of a small number of legacy Hancock credits, primarily CRE credits and a few C&I credits
located in Louisiana. The increase also includes certain Whitney acquired performing loans that have moved to
non-accrual consisting mainly of smaller dollar residential mortgage and commercial credits, primarily located in
Louisiana. Covered loans and Whitney acquired impaired loans were accounted for as loans with prior credit
impairment at acquisition and are considered to be performing and accruing due to the application of the
accretion method to the underlying loan pools. Covered loans accounted for using the cost recovery method and
reported as non-accrual totaled $4.1 million and $18.8 million at December 31, 2012 and 2011, respectively.
Acquired performing loans subsequently placed in non-accrual status totaled $30.1 million at December 31, 2012
and $1.1 million at December 31, 2011.
Loans modified in troubled debt restructurings (TDRs) totaled $32.2 million at December 31, 2012
compared to $18.1 million at December 31, 2011. These totals included $14.4 million and $1.4 million,
respectively, of loans reported with non-accrual loans. TDRs arise when a borrower is experiencing, or is
expected to experience, financial difficulties in the near-term and, consequently, a modification that would
otherwise not be considered is granted to the borrower. Certain loans modified in a TDR may continue to accrue
interest, depending on the individual facts and circumstances of the borrower.
ORE and foreclosed assets decreased a net $57.7 million during 2012. Net reductions were realized both for
those assets covered by FDIC loss sharing agreements and for non-covered assets and reflected in part the
prudent use of auctions for certain covered assets as well as the sale of some significant legacy Whitney
properties. The Company had ORE with a total carrying value of approximately $33 million under contract at
December 31, 2012, with the sales expected to close in the first quarter of 2013. A relatively high rate of
additions to covered ORE is expected in the near term as covered loans continue to move through the foreclosure
process.
Allowance for Loan and Lease Losses
Management, with Audit Committee oversight, is responsible for maintaining an effective loan review system,
and internal controls, which include an effective risk rating system that identifies, monitors, and addresses asset
quality problems in an accurate and timely manner. The allowance is evaluated for adequacy on at least a quarterly
basis. For a discussion of this process, see Note 1 to the consolidated financial statements located in Item 8 of this
annual report on Form 10-K.
At December 31, 2012, the allowance for loan losses was $136.2 million compared with $124.9 million at
December 31, 2011. The ratio of the allowance for loan losses as a percent of period-end loans was 1.18% at
December 31, 2012, compared to 1.12% at December 31, 2011. The increase in the allowance since the end of
2011 was related mainly to the portfolio covered under FDIC loss-sharing agreements.
The Company recorded a total provision for loan losses during 2012 of $54.2 million, compared to $38.7
million in 2011. The majority of the 2012 provision, or $51.4 million, was for non-covered loans, compared to
$35.7 million in 2011. Approximately $13.7 million of the 2012 provision was related to the bulk sale of problem
credits toward the end of 2012, as discussed in the section entitled “Provision for Loan Losses” in the earlier
discussion of “Results of Operations.” The Company recorded a $41.0 million increase in the allowance for
losses related to additional impairment on certain pools of FDIC-covered loans, with a related increase of $38.2
million in the FDIC loss share receivable. The net impact on provision expense from the covered portfolio was
$2.8 million in 2012 compared to $3.0 million in 2011.
Net charge-offs from the non-covered loan portfolio during 2012 were $55.0 million, or 0.49% of average
total loans, including $16.2 million related to the bulk loan sale mentioned above. This compares to net non-
covered charge-offs of $33.8 million, or 0.40% of average total loans, for the year ended December 31, 2011. Net
charge-offs on the FDIC-covered portfolio totaled $26.1 million in 2012 compared to $11.5 million in 2011. The
48
allowance calculated on the portion of the loan portfolio that excludes covered loans and loans acquired at fair
value in the Whitney merger totaled $78.8 million, or 1.11% of this portfolio at December 31, 2012, and $83.2
million, or 1.70% at December 31, 2011. This ratio is expected to decline for a period of time as the proportion
of this portfolio representing new business from Whitney’s operations grows, other factors held constant.
The following table sets forth activity in the allowance for loan losses for the periods indicated. In the
following tables, commercial loans encompass commercial non-real estate loans, construction and land
development loans and commercial real estate loans.
TABLE 12. Summary of Activity in the Allowance for Loan Losses
Balance of allowance for loan losses at beginning of
period
Loans charged-off:
Non-covered loans:
Commercial
Residential mortgages
Consumer
Total non-covered charge-offs
Covered loans:
Commercial
Consumer
Total covered charge-offs
Total charge-offs
Recoveries of loans previously charged-off:
Non-covered loans:
Commercial
Residential mortgages
Consumer
Total non-covered recoveries
Covered loans:
Commercial
Consumer
Total covered recoveries
Total recoveries
Net charge-offs—non-covered
Net charge-offs—covered
Total net charge-offs
Provision for loan losses before FDIC benefit—covered
At and For The Years Ended December 31,
2012
2011
2010
2009
2008
(In thousands)
$124,881 $ 81,997
$66,050
$61,725 $47,123
6,275
16,208
$ 42,277 $ 43,654
2,634
12,500
$ 64,760 $ 58,788
$39,393
4,615
14,258
$58,266
$36,912 $12,996
1,360
3,670
14,333
13,051
$54,915 $27,407
1,094
31,041
$ 29,947 $ 11,100
375
11,475
$ 95,801 $ 70,263
$ — $ — $ —
—
—
$54,915 $27,407
—
—
$58,266
—
—
$
$
$
5,375 $ 20,006
1,091
324
4,030
3,887
9,729 $ 24,984
$ 3,491
740
3,353
$ 7,584
$
767 $ 1,036
162
241
4,026
3,642
$ 4,650 $ 5,224
78
4,972
4,894 $ — $ — $ — $ —
—
—
$ 4,650 $ 5,224
22,183
50,265
—
—
$50,265 $22,183
—
—
$ 14,701 $ 24,984
33,804
11,475
$ 81,100 $ 45,279
—
—
$ 7,584
50,682
—
$50,682
55,031
26,069
—
—
loans
Benefit attributable to FDIC loss share agreement
Provision for loan losses non-covered loans
52,437
(49,431)
35,726
38,732
Provision for loan losses, net
49,431
Increase in FDIC loss share receivable
Balance of allowance for loan losses at end of period $136,171 $124,881
41,021
(38,198)
51,369
54,192
38,198
672
(638)
65,957
65,991
638
$81,997
—
—
—
54,590
—
—
—
—
36,785
—
$66,050 $61,725
Ratios:
Gross charge-offs—non-covered to average loans
Recoveries—non-covered to average loans
Net charge-offs—non-covered to average loans
Allowance for loan losses to period-end loans
0.57%
0.09%
0.49%
1.18%
0.69%
0.29%
0.40%
1.12%
1.16%
0.15%
1.01%
1.65%
1.27% 0.71%
0.11% 0.13%
1.17% 0.57%
1.29% 1.45%
49
An allocation of the loan loss allowance by major loan category is set forth in the following table. The
changes in the allowance allocated to the residential mortgage and consumer categories in 2012 reflect mainly
changes in the estimate of impairment on pools of covered loans within these categories.
TABLE 13. Allocation of Loan Loss by Category
2012
2011
December 31,
2010
2009
2008
Allowance
for
Loan
Losses
% of
Loans
to Total
Loans
Allowance
for
Loan
Losses
% of
Loans
to Total
Loans
Allowance
for
Loan
Losses
% of
Loans
to Total
Loans
Allowance
for
Loan
Losses
% of
Loans
to Total
Loans
Allowance
for
Loan
Losses
% of
Loans
to Total
Loans
(In thousands)
$ 77,969
72.08 $ 78,414
71.76 $56,859
63.22 $42,483
61.37 $37,347
62.77
39,080
19,122
13.63
14.29
13,918
32,549
13.94
14.30
4,626
20,512
13.53
23.25
4,782
18,785
14.82
23.81
5,315
19,063
10.30
26.93
$136,171 100.00 $124,881 100.00 $81,997 100.00 $66,050 100.00 $61,725 100.00
Total loans:
Commercial
Residential
mortgages
Consumer
Deposits
Short-Term Investments
Short-term liquidity investments, including interest-bearing bank deposits and Federal funds sold, increased
$316 million from December 31, 2011 to a total of $1.5 billion at December 31, 2012. Toward the end of 2012,
management decided to increase the Banks’ level of liquidity investments as a precautionary measure against the
potential for some run-off of deposits in early 2013 due to the expiration of the FDIC Transaction Account
Guarantee (TAG) Program which had provided for unlimited deposit insurance on noninterest-bearing
transaction accounts. The Banks have not experienced any material outflow of deposits as a result of the TAG
Program expiration, and excess liquidity investments will be redeployed by management during the first quarter
of 2013.
Deposits
Total deposits at December 31, 2012 were $15.7 billion, basically flat from December 31, 2011.
Noninterest-bearing demand deposits (DDAs) at December 31, 2012 totaled $5.6 billion, a $108 million (2%)
increase during the year. The proportion of DDAs in the overall deposit mix improved slightly to 36% at the end
of 2012. Approximately $240 million of DDAs were converted to low-cost interest-bearing transaction accounts
during the core system conversion in March 2012 in order to best match the existing product benefits offered.
Total interest-bearing deposits declined less than 1% during 2012. Time deposits (CDs) decreased by
$472 million (16%) reflecting mainly the renewal rates available during this sustained period of low market
interest rates. Of the balance of CDs that matured during 2012 at an average rate of approximately 0.90%,
approximately two-thirds renewed at an average rate of approximately 0.30%. The decrease in CDs included the
expected runoff of some of the remaining high-priced deposits in the Peoples First deposit base. In late 2012, the
Banks issued $200 million in brokered CDs. These CDs were issued as a temporary liquidity source related to the
year-end expiration of the TAG program discussed above in the section on “Short-Term Investments.” The
brokered CDs have maturities of 3 or 6 months and an average rate of approximately 0.58%. The Banks have not
experienced any material outflow of deposits as a result of the TAG Program expiration.
50
Interest-bearing transaction and savings deposits increased $435 million (8%) during 2012, reflecting in part
some movement of balance from maturing CDs and the conversion of certain DDA accounts to low-cost interest-
bearing accounts as discussed earlier. Interest-bearing public fund deposits declined $40 million (2%) from the
end of 2011 to December 31, 2012. Public fund deposits typically reflect higher balances at year-end due to
seasonal cash inflows to these public entities, with subsequent reductions beginning in the first quarter of the
following year. In the current low rate environment, management expects customers will continue to hold funds
in no or low-cost transaction accounts until rates begin to rise.
Table 14 shows deposits for each year in the three-year period ended December 31, 2012 as well as the
percentage of total deposits for each category. The table shows an increasing share of demand deposits, primarily
due to deposits acquired in the Whitney transaction, and reduced reliance on time deposits over the three year
period.
TABLE 14. Deposits
Interest-bearing deposits:
Transaction and savings
Public funds
Time
Total interest-bearing deposits
Noninterest-bearing demand deposit
2012
2011
2010
Balance
Percent
of total
Balance
Percent
of total
Balance
Percent
of total
(Dollars in thousands)
$ 6,038,003
1,580,260
2,501,798
10,120,061
5,624,127
38% $ 5,602,962
1,620,261
10
2,974,020
16
64
36
10,197,243
5,516,336
36% $1,995,081
1,216,702
10
2,436,690
19
65
35
5,648,473
1,127,246
29%
18
36
83
17
Total deposits
$15,744,188
100% $15,713,579
100% $6,775,719
100%
Time certificates of deposit of $100,000 and greater at December 31, 2012 had maturities as follows:
TABLE 15. Maturity of Time Deposits greater than or equal to $100,000*
Three months
Over three through six months
Over six months through one year
Over one year
Total
* Includes public fund time deposits
Short-Term Borrowings
December 31
2012
(In thousands)
$ 379,478
261,980
325,475
307,285
$1,274,218
The following table sets forth certain information concerning our short-term borrowings, which consist of
federal funds purchased, securities sold under agreements to repurchase and FHLB borrowings. Customer
repurchase agreements are the main source of such borrowings in each year. These agreements are offered
mainly to commercial customers to assist them with their ongoing cash management strategies or to provide a
temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment
purposes. While customer repurchase agreements provide a recurring source of funds to the Banks, the amounts
available over time can be volatile.
51
TABLE 16. Short-Term Borrowings
Federal funds purchased:
Amount outstanding at period-end
Weighted average interest at period-end
Maximum amount at any month-end during period
Average amount outstanding during period
Weighted average interest rate during period
Securities sold under agreements to repurchase:
Amount outstanding at period-end
Weighted average interest at period-end
Maximum amount at any month-end during period
Average amount outstanding during period
Weighted average interest rate during period
FHLB borrowings:
Amount outstanding at period-end
Weighted average interest at period-end
Maximum amount at any month-end during period
Average amount outstanding during period
Weighted average interest rate during period
Loan Commitments and Letters of Credit
Years Ended December 31,
2012
2011
2010
(In thousands)
$
$
$
25,704
0.37%
33,964
30,137
0.22%
$
$
$
16,819
0.19%
26,666
12,911
0.18%
$ —
—
6,900
2,734
0.13%
$
$
$ 613,429
$1,027,635
$364,676
0.72%
0.65%
1.69%
$1,005,014
$ 760,938
$1,027,635
$ 681,474
$534,627
$477,174
0.78%
1.03%
1.95%
$
$
$
—
—
—
32,571
$
$
$
—
—
10,153
81,673
$ 10,172
1.19%
$ 30,676
$ 22,846
0.16%
0.15%
0.57%
In the normal course of business, the Banks enter into financial instruments, such as commitments to extend
credit and letters of credit, to meet the financing needs of their customers. Such instruments are not reflected in
the accompanying consolidated financial statements until they are funded, although they expose the Banks to
varying degrees of credit risk and interest rate risk in much the same way as funded loans.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments
issued mainly to finance the acquisition and development of construction of real property or equipment, and
credit card and personal credit lines. The availability of funds under commercial credit lines and loan
commitments generally depends on whether the borrower continues to meet credit standards established in the
underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and
personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number
of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire,
and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Banks to fulfill a
customer’s financial commitments to a third party if the customer is unable to perform. The Banks issue standby
letters of credit primarily to provide credit enhancement to their customers’ other commercial or public financing
arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Banks
undertake the same credit evaluation in making loan commitments and assuming conditional obligations as it
does for on-balance sheet instruments and may require collateral or other credit support.
52
The following table shows the commitments to extend credit and letters of credit at December 31, 2012 and
2011 according to expiration date.
TABLE 17. Loan Commitments and Letters of Credit
December 31, 2012
Commitments to extend credit
Letters of credit
Total
December 31, 2011
Commitments to extend credit
Letters of credit
Total
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
Expiration Date
(In thousands)
$4,373,679
401,861
$2,556,159
253,824
$779,844
116,287
$697,011
30,550
$340,665
1,200
$4,775,540
$2,809,983
$896,131
$727,561
$341,865
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
Expiration Date
(In thousands)
$4,189,421
441,048
$2,948,411
286,934
$556,500
140,494
$420,372
13,620
$264,138
—
$4,630,469
$3,235,345
$696,994
$433,992
$264,138
ENTERPRISE RISK MANAGEMENT
The Company balances revenue generation and profitability with the inherent risks of its business activities.
Enterprise risk management helps preserve shareholder value by assessing, monitoring, and managing the risks
associated with our business. Strong risk management practices foster enhanced decision-making, facilitate
successful implementation of new initiatives, and, where appropriate, support acceptance of greater levels of risk
to drive growth and achieve strategic objectives. The Company’s risk management culture integrates a board-
approved risk appetite with senior management direction and governance to facilitate the execution of the
Company’s strategic plan. This integration ensures the daily management of risks by business lines and
continuous corporate monitoring of the levels of risk in each business line and across the Company.
Risk Categories and Definitions
The primary risk exposures of the Company are credit, market, liquidity, operational, legal, reputational, and
strategic. The Company has adopted the risk categories outlined by the Federal Reserve to govern the risk
management of bank holding companies. The risk categories are:
•
Credit risk arises from a borrower or counterparty’s failure to perform on an obligation.
• Market risk resulting from adverse movements in market rates or prices, such as interest rates, foreign
exchange rates, or equity prices.
•
•
•
Liquidity risk rising from our inability to meet our obligations as they come due because of an inability
to liquidate assets or obtain adequate funding or from an inability to easily unwind or offset specific
exposures without significantly lowering market prices because of inadequate market depth or market
disruptions.
Operational risk arising from inadequate information systems, operational problems, breaches in
internal controls, fraud, or unforeseen catastrophes that result in unexpected losses.
Legal risk arising from unenforceable contracts, lawsuits, or adverse judgments that disrupt or
otherwise negatively affect the operations or condition of the Company.
53
•
•
Reputational risk arising from negative publicity about the Company’s business practices, whether true
or not, will cause a decline in the customer base, costly litigation, or revenue reductions.
Strategic risk to earnings or capital arising from adverse business decisions or improper
implementation of those decisions. This risk is a function of the compatibility of a Company’s strategic
goals, the business strategies developed to achieve those goals, the resources deployed against these
goals, and the quality of implementation.
As a component of the Company’s risk management program these risk categories are organized into four
risk classifications or genres that are reflected in the Company’s portfolio risk committees. The Company’s risk
categories are:
•
Credit focusing specifically on credit risk
• Market including risk categories of liquidity, interest rate and market risk
•
•
Operational including risk categories of operational, legal, and compliance risk
Strategic including risk categories of strategic and reputational risk
Risk Committee Governance Structure
Effective risk management governance requires active oversight, participation, and interaction by and
between the board of directors and senior management. Our enterprise risk management framework uses a tiered
risk/reward committee structure to facilitate the timely discussion of significant risk issues and risk mitigation
strategies and/or tactics. Risk committees exist at the board, management and portfolio levels.
•
Board-level committee. The board risk committee is the senior risk/reward committee of the Company
responsible for establishing our risk tolerance, reviewing enterprise risk positions and strategic
activities, and providing oversight of senior management’s strategic decisions and risk responses. The
board risk committee is chaired by an independent director who meets the risk management
qualifications outlined in Dodd-Frank.
• Management-level committees. The company has two management-level risk/reward committees that
oversee the business strategy, organizational structure, and capital and liquidity strategies for the
Company. These committees also provide oversight of the portfolio risk/reward committees to ensure
tactics to address business strategy changes are properly vetted and adopted. The capital committee
(CAPCO) is the senior most management committee charged with corporate business strategy
development and the capital plan management. The executive committee (EXCO) is the management
committee responsible for business strategy execution, corporate financial oversight, and portfolio risk
committee governance and oversight. The CEO’s report to the board and are the co-chairs of CAPCO
and EXCO.
•
Portfolio-level committees. The Company has four portfolio risk/reward committees focusing on
credit, market, operational, and strategic risk categories. These committees review and monitor the risk
categories in a portfolio context ensuring risk assessment and management processes are being
effectively executed to identify and manage risk. The committees also monitor the risk portfolios for
changes to the Company’s risk profile as well as ensure the risk portfolio is performing within the
board-approved tolerance for risk. Portfolio committees report to EXCO.
Risk Leadership and Organization
The risk management organization of the Company is led by the Chief Risk Officer. The Chief Risk
Officer reports to the Chief Executive Officer and provides overall vision, direction and leadership
regarding our enterprise risk management program. The Chief Risk Officer exercises independent judgment
and reporting of risk through a direct working relationship with the board risk committee. The functional
areas reporting to the Chief Risk Officer are the enterprise risk management program office, operational risk
54
management, credit risk management which includes loan review, appraisal, and credit risk analytics,
regulatory relations and the enterprise-wide compliance program. The Chief Risk Officer also works closely
with the Chief Internal Auditor to provide assurance to the board and senior management regarding risk
management controls and their effectiveness. The Chief Internal Auditor reports to the board audit
committee to assure independence of the internal audit function.
Credit Risk
The Banks’ primary lending focus is to provide commercial, consumer, and real estate loans to consumers,
to small and middle market businesses, to corporate clients in their respective market areas, and to state, county,
and municipal government entities. Diversification in the loan portfolio is a means of reducing the risks
associated with economic fluctuations. The Banks have no significant concentrations of loans to particular
borrowers or foreign entities.
The Banks monitor real estate lending concentrations throughout the year, and do not have any commercial
real estate concentrations, as defined by interagency guidelines. The Banks have actively decreased their
exposure to residential construction/development lending over the course of the last several years. Considering
national housing trends, local market demand for housing, price softness in some markets, population migration
trends, as well as general economic conditions, the Company will continue to closely monitor this type of
lending.
Third party valuations are obtained at the time of origination for real estate secured loans. When a
determination is made that a loan has deteriorated to the point of becoming a problem loan, updated valuations
may be ordered to help determine if there is impairment, leading to a recommendation for partial charge off or
appropriate allowance allocation. The impairment on collateral-dependent loans is measured against the fair
value of the collateral for the loan less cost estimated selling. Property valuations are ordered through, and
reviewed by, the Banks’ appraisal department. The Banks typically order an “as is” valuation for collateral
property if the loan is in a criticized loan classification.
The Banks maintain an active loan review function to help ensure that developing credit problems are
captured and recognized in a timely manner. Further, an active watch list review routine is in place as part of the
Banks’ problem loan management strategy and a list of loans 90 days past due and still accruing is reviewed with
management, including the Chief Credit Officer, at least monthly. Recommendations flow from all of the above
activities to recognize non-performing loans and determine accrual status.
Asset/Liability Management
Asset liability management consists of quantifying, analyzing and controlling interest rate risk (IRR) to
maintain stability in net interest income under varying interest rate environments. The principal objective of asset
liability management is to maximize net interest income while operating within acceptable risk limits established
for interest rate risk and maintaining adequate levels of liquidity. Our net earnings are materially dependent on
our net interest income.
IRR on the Company’s balance sheets consists of re-price, option, yield curve, and basis risks. Re-price risk
results from differences in the maturity or re-pricing of asset and liability portfolios. Option risk arises from
“embedded options” present in many financial instruments such as loan prepayment options, deposit early
withdrawal options and interest rate options. These options allow customers opportunities to benefit when market
interest rates change, which typically results in higher costs or lower revenue for the Company. Yield Curve risk
refers to the risk resulting from unequal changes in the spread between two or more rates for different maturities
for the same instrument. Basis risk refers to the potential for changes in the underlying relationship between
market rates and indices, which subsequently result in a narrowing of the profit spread on an earning asset or
55
liability. Basis risk is also present in administered rate liabilities, such as savings accounts, negotiable order of
withdrawal accounts, and money market accounts where historical pricing relationships to market rates may
change due to the level or directional change in market interest rates.
The asset/liability committee (ALCO) manages our IRR exposures through pro-active measurement,
monitoring, and management actions. ALCO strives to maintain levels of IRR within limits approved by the board
of directors through a risk management policy that is designed to produce a stable net interest margin in periods of
interest rate fluctuation. Accordingly, the Company’s interest rate sensitivity and liquidity are monitored on an
ongoing basis by its ALCO, which oversees market risk management and establishes risk measures, limits and
policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. A
variety of measures are used to provide for a comprehensive view of the magnitude of interest rate risk, the
distribution of risk, the level of risk over time and the exposure to changes in certain interest rate relationships.
The Company utilizes an asset/liability model as the primary quantitative tool in measuring the amount of
interest rate risk associated with changing market rates. The model is used to perform net interest income,
economic value of equity , and GAP analyses. The model quantifies the effects of various interest rate scenarios
on projected net interest income and net income over the next 12 months and 24 month periods. The model
measures the impact on net interest income relative to a base case scenario of hypothetical fluctuations in interest
rates over the next 12 months. These simulations incorporate assumptions regarding balance sheet growth and
mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet. The impact
of interest rate derivatives, such as interest rate swaps, caps and floors, is also included in the model. Other
interest rate-related risks such as prepayment, basis and option risk are also considered.
Net Interest Income at Risk
Net interest income at risk measures the risk of a change in earnings due to changes in interest rates. Table
18 presents an analysis of our interest rate risk as measured by the estimated changes in net interest income
resulting from an instantaneous and sustained parallel shift in the yield curve at December 31, 2012. Shifts are
measured in 100 basis point increments in a range of as much as +/-500 basis points (+ 300 through +100 basis
points presented in Table 18) from base case. Base case encompasses key assumptions for asset/liability mix,
loan and deposit growth, pricing, prepayment speeds, deposit decay rates, securities portfolio cash flows and
reinvestment strategy, and the market value of certain assets. The base case scenario assumes that the current
interest rate environment is held constant throughout the 12 month forecast period; the instantaneous shocks are
performed against that yield curve.
During the third quarter of 2012, the asset liability committee made a decision, as a precaution, to increase
its level of overnight liquidity in the fourth quarter of 2012 against potential deposit run-off due to the expiration
of TAG. This elevated level of liquidity, combined with normal, seasonal increases in deposits at year end
resulted in an elevated level of interest rate risk sensitivity as of December 31, 2012. Management subsequently
determined that TAG expiration had not resulted in a significant outflow of deposits and redeployed much of the
elevated level of liquidity from overnight federal funds to the securities portfolio. This redeployment of liquidity
in the first quarter of 2013 will reduce the Company’s interest rate risk to levels more consistent with prior
periods.
TABLE 18. Net Interest Income (te) at Risk
Change in
Interest
Rates
(basis points)
Stable
+100
+200
+300
Estimated Increase
(Decrease) in NII
December 31, 2012
0.00%
4.12%
9.17%
14.38%
Note: Decrease in interest rates discontinued in current rate environment
56
These scenarios are instantaneous shocks that assume balance sheet management will mirror base case.
Should the yield curve begin to rise or fall, management has strategies available to maximize earnings
opportunities or offset the negative impact to earnings. For example, in a rising rate environment, deposit pricing
strategies could be adjusted to offer more competitive rates on long and medium-term CDs and less competitive
rates on short-term CDs. Another opportunity at the start of such a cycle would be reinvesting the securities
portfolio cash flows into short-term or floating-rate securities. On the loan side the company can make more
floating-rate loans that tie to indices that re-price more frequently, such as LIBOR (London interbank offered
rate) and make fewer fixed-rate loans. Finally, there are a number of hedge strategies by which management
could use derivatives, including swaps and purchased ceilings, to lock in net interest margin protection.
Even if interest rates change in the designated amounts, there can be no assurance that our assets and
liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated
amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly
different changes to NII than indicated above. Strategic management of our balance sheet and earnings is fluid
and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk,
certain shortcomings are inherent in the methods of analysis presented above. For example, although certain
assets and liabilities may have similar maturities or periods to re-pricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types may lag behind changes in market
rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-
term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in
the event of an interest rate increase. We consider all of these factors in monitoring exposure to interest rate risk.
Liquidity
Liquidity management is focused on ensuring that funds are available to meet the cash flow requirements of
our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the
Company, the Banks and other subsidiaries. Hancock develops its liquidity management strategies and measures
and monitors liquidity risk as part of its overall asset/liability management process.
The asset portion of the balance sheet provides liquidity primarily through loan principal repayments,
maturities of investment securities and occasional sales of various assets. Short-term investments such as federal
funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve
Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. As
shown in table 19 below, our ratios of free securities to total securities were 27% and 31%, respectively, at
December 31, 2012 and 2011. Free securities represent securities that are not pledged for any purpose, and
include unpledged securities assigned to short-term dealer repo agreements or to the Federal Reserve Bank
discount window.
TABLE 19. Liquidity Metrics
Free securities / total securities
Noncore deposits / total deposits
Wholesale funds / core deposits
2012
2011
27.00% 31.20%
9.20% 10.18%
7.39% 9.43%
The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and
non-interest-bearing deposit accounts. Core deposits represent total less CDs of $100,000 or more, brokered
deposits, and foreign branch deposits. As discussed earlier, the Banks issued $200 million of brokered CDs
toward the end of 2012 as a precautionary measure in anticipation of possible deposit outflows associated with
the expiration of the FDIC TAG Program at December 31, 2012. The Banks have not experienced any material
57
deposit outflows in early 2013. Non-core deposits were 9.20% of total deposits at December 31, 2012, compared
to 10.18% a year earlier. Purchases of federal funds, securities sold under agreements to repurchase and other
short-term borrowings are additional sources of liquidity to meet short-term funding requirements. Wholesale
funds, which represent short-term borrowings and long-term debt, were 7.39% of core deposits at December 31,
2012 and 9.43% at December 31, 2011. Our short-term borrowing capacity includes an approved line of credit
with the Federal Home Loan Bank of $1.7 billion and borrowing capacity at the Federal Reserve’s discount
window in excess of $1 billion at December 31, 2012. No amounts had been borrowed under these lines at
year-end 2012.
Cash generated from operations is another important source of funds to meet liquidity needs. The
consolidated statements of cash flows present operating cash flows and summarize all significant sources and
uses of funds for each of the three years in the period ended December 31, 2012.
Dividends received from the Banks have been the primary source of funds available to the Company for the
payment of dividends to our stockholders and for servicing any debt issued by the holding company. The
liquidity management process recognizes the various regulatory provisions that can limit the amount of dividends
that the Banks can distribute to the Company, as described in Note 11 to the consolidated financial statements. It
is the Company’s policy to maintain assets at the holding company to provide liquidity sufficient to fund five
quarters of anticipated stockholder dividends, debt service and operations.
CONTRACTUAL OBLIGATIONS
Table 20 summarizes all significant contractual obligations at December 31, 2012, according to payments
due by period. Obligations under deposit contracts and short-term borrowings are not included. The maturities of
time deposits are scheduled in Table 15. Purchase obligations represent legal and binding contracts to purchase
services and goods that cannot be settled or terminated without paying substantially all of the contractual
amounts. Not included are contracts entered into to support ongoing operations that either do not specify fixed or
minimum amounts of goods or services or are cancelable on short notice without cause and without significant
penalty.
TABLE 20. Contractual Obligations
Payment due by period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
$439,785
87
79,662
31,303
$47,046
69
12,873
12,810
(In thousands)
$235,018
17
21,287
12,442
$132,029
1
15,896
6,051
$25,692
—
29,606
—
$550,837
$72,798
$268,764
$153,977
$55,298
Long-term debt obligations
Capital lease obligations
Operating lease obligations
Purchase obligations
Total
CAPITAL RESOURCES
A strong capital position, which is vital to continued profitability, also promotes depositor and investor
confidence and provides a solid foundation for future growth and flexibility in addressing strategic opportunities.
Stockholders’ equity totaled $2.45 billion at December 31, 2012, up $86 million from December 31, 2011. Our
tangible common equity ratio increased to 9.10% at the end of 2012, compared to 8.17% at December 31, 2011.
The primary quantitative measures that regulators use to gauge capital adequacy are the ratios of total and Tier 1
regulatory capital to risk-weighted assets (risk-based capital ratios) and the ratio of Tier 1 capital to average total
assets (leverage ratio). Both the Company and the Banks are required to maintain minimum risk-based capital
58
ratios of 8.0% total regulatory capital and 4.0% Tier 1 capital. The minimum leverage ratio is 3% for bank
holding companies and banks that meet certain specified criteria, including having the highest supervisory rating.
All others are required to maintain a leverage ratio of at least 4.0%. At December 31, 2012, our capital balances
and those of the Banks were well in excess of current regulatory minimum requirements. Table 21 below shows
the Company’s regulatory ratios for the past five years. Note 11 to the consolidated financial statements provides
additional information about the Banks’ regulatory capital ratios. The Company and the Banks have been
categorized as “well capitalized” in the most recent notices received from our regulators.
All of the Company’s regulatory capital ratios increased during 2012. Tier 1 and total regulatory capital
grew primarily on the earnings retained for 2012 and the elimination of certain reductions to regulatory capital
required for a period of time after the Whitney acquisition. The reduction in Tier 2 regulatory capital related
mainly to the partial redemption of Whitney Bank’s subordinated debt. Risk-weighted assets grew moderately
during 2012 reflecting mainly the growth in loans which generally carry higher risk-weightings than other
earnings assets. The decline in regulatory ratios during 2011 reflected the impact of the Whitney acquisition.
TABLE 21. Risk-Based Capital and Capital Ratios
2012
2011
2010
2009
2008
Tier 1 regulatory capital
Tier 2 regulatory capital
(In thousands)
$ 1,666,042 $ 1,506,218 $ 782,301 $ 756,108 $ 550,216
61,874
215,516
276,819
64,240
66,397
Total regulatory capital
$ 1,881,558 $ 1,783,037 $ 846,541 $ 822,505 $ 612,090
Risk-weighted assets
$13,172,259 $13,118,693 $5,099,630 $6,305,707 $5,162,676
Ratios
Leverage (Tier 1 capital to average
assets)
Tier 1 capital to risk-weighted assets
Total capital to risk-weighted assets
Common stockholders’ equity to total
assets
Tangible common equity to total assets
FOURTH QUARTER RESULTS
9.10%
12.65%
14.28%
12.60%
8.77%
8.17%
11.48%
13.59%
11.97%
7.96%
9.65%
15.34%
16.60%
10.52%
9.69%
10.60%
11.99%
13.04%
9.63%
8.81%
8.06%
10.66%
11.86%
8.50%
7.62%
Net income for the fourth quarter of 2012 was $47.0 million, or $0.54 per diluted common share, compared
to $47.0 million, or $0.55, and $19.0 million, or $0.22, respectively in the third quarter of 2012 and the fourth
quarter of 2011. Pre-tax earnings for the third and fourth quarters of 2012 included no merger-related costs. The
fourth quarter of 2011 included pre-tax merger-related costs of $40.2 million. The following discussion
highlights recent factors impacting Hancock’s results of operations and financial position.
Total loans at December 31, 2012 were $11.6 billion, an increase of $143 million (1%) from September 30,
2012. The net loan growth was mainly generated in the commercial and industrial (C&I) portfolio, most notably
in Louisiana and Houston, home to a significant part of the Gulf Coast’s energy sector. Excluding the FDIC-
covered portfolio, which declined approximately $40 million during the fourth quarter, and excluding the
reduction from the bulk loan sale of approximately $40 million, total loans were up $223 million (2%) from
September 30, 2012. This compares to an increase of $388 million (4%) during the fourth quarter of 2012.
Total deposits at December 31, 2012 were $15.7 billion, up $1.0 billion (7%) from September 30, 2012. The
fourth quarter increase reflected year-end seasonality of both commercial and public fund customers.
Historically, both legacy Hancock and legacy Whitney customers have built deposits at year-end, with some of
those deposits leaving in the first quarter, particularly in demand deposits.
59
Noninterest-bearing demand deposits (DDAs) totaled $5.6 billion at December 31, 2012, up $473 million
(9%) compared to September 30, 2012. DDAs comprised 36% of total period-end deposits at December 31,
2012, up slightly from September 30, 2012. Interest-bearing public fund deposits totaled $1.6 billion at year-end
2012, up $259 million (20%) compared to September 30, 2012. DDA and public fund deposits typically reflect
higher balances at year-end with subsequent reductions beginning in the first quarter.
Time deposits, primarily certificates of deposits (CDs), totaled $2.5 billion at December 31, 2012, up $78
million (3%) from September 30, 2012. In November of 2012, the Company issued $200 million in brokered
CDs as a temporary liquidity source in anticipation of the year-end expiration of the FDIC Transaction Account
Guarantee (TAG) Program. The Company has not experienced any material outflow of deposits as a result of the
TAG expiration.
Hancock recorded a total provision for loan losses for the fourth quarter of 2012 of $28.1 million, up from
$8.1 million in the third quarter of 2012. Excluding the impact of the bulk sale, provision expense for the fourth
quarter of 2012 was $14.4 million. The provision for non-covered loans, excluding the impact of the bulk sale,
increased to $14.2 million in the fourth quarter of 2012 from $8.1 million in the third quarter of 2012. Net
charge-offs from the non-covered loan portfolio were $28.0 million, or 0.97% of average total loans on an
annualized basis in the fourth quarter. Excluding the impact of the bulk sale, non-covered net charge-offs for the
fourth quarter of 2012 were $11.8 million, or 0.41% of average total loans, compared to $9.7 million, or 0.34%
of average total loans, for the third quarter of 2012. Net charge-offs from previously impaired loan pools in the
covered portfolio were $3.2 million for the fourth quarter of 2012.
Net interest income (TE) for the fourth quarter of 2012 was $182.8 million, up from $180.1 million in the
third quarter of 2012. Average earning assets were $16.2 billion in the fourth quarter of 2012, up $416 million
from the third quarter of 2012. The net interest margin (TE) was 4.48% for the fourth quarter of 2012, down 6
basis points (bps) from 4.54% in the third quarter of 2012. The core margin of 3.61% (reported net interest
income (TE) excluding total net purchase accounting adjustments, annualized, as a percent of total earning
assets) compressed approximately 14 bps during the fourth quarter, mainly from a decline in both the core yield
on the loan and the securities portfolios. The margin was favorably impacted by changes in the mix of earning
assets and funding sources and a slight decline in funding costs.
Noninterest income totaled $64.9 million for the fourth quarter of 2012, up from $63.8 million in the third
quarter of 2012.
Operating expense for the fourth quarter of 2012 totaled $157.9 million, down $6.5 million (4%) from the
third quarter of 2012. Operating expense excludes merger-related costs and, for the third quarter of 2012, $5.3
million of subordinated debt repurchase expenses. There were essentially no merger-related costs in the fourth or
third quarters of 2012. There was a $0.8 million decrease in personnel expense as a result of staff reductions
associated with previously announced branch consolidations. Reductions in professional service, telephone and
data processing, advertising and ORE expenses and amortization of intangibles further contributed $5.7 million
to the decline. The fourth quarter’s operating expense level reflects realization of 100% of the cost savings
targeted with the Whitney acquisition.
The effective income tax rate for the fourth quarter of 2012 was 20%, compared to 23% for the full-year in
2012. The effective rate in the fourth quarter reflected the impact of certain tax credits added during the period.
The summary of quarterly financial information appearing in Item 8 of this annual report on Form 10-K
provides selected comparative financial information for each of the four quarters on 2012 and 2011.
60
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
The accounting principles we follow and the methods for applying these principles conform with accounting
principles generally accepted in the United States of America and with general practices followed by the banking
industry. The significant accounting principles and practices we follow are described in Note 1 to the
consolidated financial statements. These principles and practices require management to make estimates and
assumptions about future events that affect the amounts reported in the consolidated financial statements and
accompanying notes. We evaluate the estimates and assumptions we make on an ongoing basis to help ensure
that the resulting reported amounts reflect management’s best estimates and judgments given current facts and
circumstances. The following discusses certain critical accounting policies that involve a higher degree of
judgment and complexity in producing estimates that may significantly affect amounts reported in the
consolidated financial statements and notes.
Acquisition Accounting
Acquisitions are accounted for under the purchase method of accounting. Purchased assets, including
identifiable intangible assets, and assumed liabilities are recorded at their respective acquisition date fair values.
Management applies various valuation methodologies to these assets and liabilities which often involve a
significant degree of judgment, particularly when liquid markets do not exist for the particular item being valued.
Examples of such items include loans, deposits, identifiable intangible assets and certain other assets and
liabilities acquired or assumed in business combinations. Management uses significant estimates and assumption
to value such items, including, among others, projected cash flows, repayment rates, default rates and losses
assuming default, discount rates, and realizable collateral values. The purchase date valuations and any
subsequent adjustments also determine the amount of goodwill or bargain purchase gain recognized in
connection with the business combination. Certain assumptions and estimates must be updated regularly in
connection with the ongoing accounting for purchased loans. Valuation assumptions and estimates may also have
to be revisited in connection with periodic assessments of possible value impairment, including impairment of
goodwill, intangible assets and certain other long-lived assets. The use of different assumptions could produce
significantly different valuation results, which could have material positive or negative effects on the Company’s
results of operations.
Allowance for Loan Losses
The allowance for loan losses represents the amount which, in management’s judgment, will be adequate to
absorb credit losses inherent in the loan portfolio as of the balance sheet date. In estimating inherent losses,
management applies judgment and assumptions to project the amount and timing of future cash flows, collateral
values and other factors used to assess the borrowers’ ability to repay their obligations. Historical loss trends are
also considered, as are economic conditions, industry trends, portfolio trends and borrower-specific financial
information. Although we believe we have identified appropriate factors for review and designed and
implemented adequate procedures to support our estimation process, the allowance remains an estimate about the
effect of matters that are inherently uncertain. Changes in the circumstances considered when management
develops its judgments and assumptions can materially impact the allowance estimate, potentially subjecting the
Company to significant earnings volatility.
Accounting for Retirement Benefits
Management makes a variety of assumptions in applying principles that govern the accounting for benefits
under the Company’s defined benefit pension plans and other postretirement benefit plans. These assumptions
are essential to the actuarial valuation that determines the amounts recognized and certain disclosures it makes in
the consolidated financial statements related to the operation of these plans. Two of the more significant
assumptions concern the expected long-term rate of return on plan assets and the rate needed to discount
projected benefits to their present value. Changes in these assumptions impact the cost of retirement benefits
61
recognized in net income and comprehensive income. Certain assumptions are closely tied to current conditions
and are generally revised at each measurement date. For example, the discount rate is reset annually with
reference to market yields on high quality fixed-income investments. Other assumptions, such as the rate of
return on assets, are determined, in part, with reference to historical and expected conditions over time and are
not as susceptible to frequent revision. Holding other factors constant, the cost of retirement benefits will move
opposite to changes in either the discount rate or the rate of return on assets. Note 12 to the consolidated financial
statements provides further discussion on the accounting for Hancock’s retirement and employee benefit plans
and the estimates used in determining the actuarial present value of the benefit obligations and the net periodic
benefit expense.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 to our consolidated financial statements that appears in Item 8 of this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required for this item is included in the section entitled “Asset/Liability Management” in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” that appears in
Item 7 of this Form 10-K and is incorporated here by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company’s unaudited quarterly results for 2012 and 2011 are presented below. The operations acquired
in the Whitney merger are reflected in 2011 from the June 4, 2011 acquisition date.
62
Summary of Quarterly Results
(Unaudited)
Interest income (te)
Interest expense
Net interest income (te)
Taxable equivalent adjustment
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income before income taxes
Income tax expense
Net income
Period end balance sheet data
Total assets
Earning assets
Loans
Deposits
Stockholders’ equity
Average balance sheet data
Total assets
Earning assets
Loans
Deposits
Stockholders’ equity
Ratios
Return on average assets
Return on average common equity
Net interest margin (te)
Earnings per share
Basic
Diluted
Cash dividends per common share
Market data:
High sales price
Low sales price
Period-end closing price
Trading volume
First
Second
Third
Fourth
2012
$
194,665
(15,428)
179,237
(2,949)
176,288
(10,015)
61,506
(205,463)
22,316
(3,821)
(In thousands, except per share data)
192,071
$
(11,949)
193,323
(13,030)
$
180,293
(2,834)
177,459
(8,025)
63,552
(179,972)
53,014
(13,710)
180,122
(2,866)
177,256
(8,101)
63,759
(169,714)
63,200
(16,216)
$
194,075
(11,275)
182,800
(2,935)
179,865
(28,051)
64,931
(157,920)
58,825
(11,866)
$
18,495
$
39,304
$
46,984
$
46,959
$19,291,097
16,575,107
11,130,273
15,432,767
2,375,203
$18,778,707
16,093,991
11,078,146
14,930,820
2,399,362
$18,523,046
15,858,165
11,434,448
14,772,951
2,434,488
$19,464,485
16,845,055
11,577,802
15,744,188
2,453,278
$19,193,520
16,240,200
11,192,874
15,312,512
2,374,904
$18,987,397
16,166,291
11,140,116
15,153,701
2,387,465
$18,598,966
15,829,978
11,259,592
14,845,288
2,405,240
$18,964,952
16,245,641
11,543,789
15,131,902
2,435,179
0.39%
3.13%
4.43%
0.22
0.21
0.24
36.73
31.56
35.51
32,423
$
$
$
$
0.83%
6.62%
4.48%
0.46
0.46
0.24
36.56
27.96
30.44
39,310
$
$
$
$
1.00%
7.77%
4.54%
0.55
0.55
0.24
33.27
27.99
30.98
26,877
$
$
$
$
0.99%
7.67%
4.48%
0.55
0.54
0.24
32.50
29.47
31.73
20,910
$
$
$
$
Net interest income (te) is the primary component of earnings and represents the difference, or spread, between
revenue generated from interest-earning assets and the interest expense related to funding those assets.
63
Summary of Quarterly Results (continued)
(Unaudited)
First
Second
Third
Fourth
2011
Interest income (te)
Interest expense
Net interest income (te)
Taxable equivalent adjustment
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income before income taxes
Income tax expense
Net income
Period end balance sheet data
Total assets
Earning assets
Loans
Deposits
Stockholders’ equity
Average balance sheet data
Total assets
Earning assets
Loans
Deposits
Stockholders’ equity
Ratios
Return on average assets
Return on average common equity
Net interest margin (te)
Earnings per share
Basic
Diluted
Cash dividends per common share
Market data:
High sales price
Low sales price
Period-end closing price
Trading volume
$
85,405
(15,769)
69,636
(2,872)
66,764
(8,822)
34,132
(73,019)
19,055
(3,727)
(In thousands, except per share data)
$
$
118,335
(16,418)
200,936
(20,653)
101,917
(2,858)
99,059
(9,144)
46,679
(121,366)
15,228
(3,140)
180,283
(3,241)
177,042
(9,256)
64,951
(194,019)
38,718
(8,342)
$
199,453
(18,131)
181,322
(2,953)
178,369
(11,512)
60,572
(205,610)
21,819
(2,854)
$
15,328
$
12,088
$
30,376
$
18,965
$8,311,034
7,201,598
4,840,975
6,697,310
1,057,699
$19,757,545
16,867,167
11,249,053
15,587,909
2,386,313
$19,415,689
16,666,181
11,101,566
15,292,209
2,426,662
$19,774,096
16,930,723
11,177,026
15,713,579
2,367,163
$8,237,371
7,075,382
4,887,749
6,752,470
879,838
$11,588,822
9,931,572
6,678,840
9,211,332
1,458,552
$19,555,684
16,591,314
11,248,728
15,461,704
2,419,403
$19,331,379
16,429,537
11,142,188
15,305,563
2,422,924
0.75%
7.07%
3.97%
0.41
0.41
0.24
35.68
30.67
32.84
25,942
$
$
$
$
$
$
$
$
0.42%
3.32%
4.11%
0.22
0.22
0.24
34.57
30.04
30.98
32,122
$
$
$
$
0.62%
4.98%
4.32%
0.36
0.36
0.24
33.25
25.61
26.81
38,205
$
$
$
$
0.39%
3.11%
4.39%
0.22
0.22
0.24
33.72
25.38
31.97
41,091
Net interest income (te) is the primary component of earnings and represents the difference, or spread, between
revenue generated from interest-earning assets and the interest expense related to funding those assets.
64
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Hancock Holding Company has prepared the consolidated financial statements and
other information in our Annual Report in accordance with accounting principles generally accepted in the
United States of America and is responsible for its accuracy. The financial statements necessarily include
amounts that are based on management’s best estimates and judgments.
In meeting its responsibility, management relies on internal accounting and related control systems. The
internal control systems are designed to ensure that transactions are properly authorized and recorded in the
Company’s financial records and to safeguard the Company’s assets from material loss or misuse. Such
assurance cannot be absolute because of inherent limitations in any internal control system.
The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in the Rule 13(a) – 15(f) under the Securities Exchange Act of 1934.
Under the supervision and with the participation of management, including the Company’s principal executive
officers and principal financial officer, the Company conducted an evaluation of the effectiveness of internal
control over financial reporting based on the framework in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted an
assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement
Act. This section relates to management’s evaluation of internal control over financial reporting, including
controls over the preparation of the schedules equivalent to the basic financial statements and compliance with
laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of the
design of the internal control system and tests of the effectiveness of internal controls.
The Company’s internal controls over financial reporting as of December 31, 2012 have been audited by
PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their accompanying
report which expresses an unqualified opinion on the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2012.
Based on the Company’s evaluation under the framework in Internal Control – Integrated Framework,
management concluded that internal control over financial reporting was effective as of December 31, 2012.
Carl J. Chaney
President &
Chief Executive Officer
February 28, 2013
John M. Hairston
Chief Executive Officer &
Chief Operating Officer
February 28, 2013
Michael M. Achary
Chief Financial Officer
February 28, 2013
65
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
of Hancock Holding Company:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income,
comprehensive income, stockholders’ equity and cash flows present fairly, in all material respects, the financial
position of Hancock Holding Company (the “Company”) and its subsidiaries at December 31, 2012 and
December 31, 2011, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2012, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on these financial statements and on the Company’s internal control over financial reporting
based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our audits of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Management’s assessment and our audit of the
Company’s internal control over financial reporting also included controls over the preparation of financial
statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding
Companies (Form FR Y-9C) to comply with the reporting requirements of Section 112 of the Federal Deposit
Insurance Corporation Improvement Act (FDICIA). A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/PricewaterhouseCoopers LLP
February 28, 2013
New Orleans, Louisiana
66
Hancock Holding Company and Subsidiaries
Consolidated Balance Sheets
Assets:
Cash and due from banks
Interest-bearing bank deposits
Federal funds sold
Securities available for sale, at fair value (amortized cost of $1,986,882 and
$4,401,345)
Securities held to maturity (fair value of $1,710,465)
Loans held for sale
Loans
Less: allowance for loan losses
unearned income
Loans, net
Property and equipment, net of accumulated depreciation of $160,592 and
$148,780
Prepaid expense
Other real estate, net
Accrued interest receivable
Goodwill
Other intangible assets, net
Life insurance contracts
FDIC loss share receivable
Deferred tax asset, net
Other assets
Total assets
Liabilities and Stockholders’ Equity:
Deposits:
Non-interest bearing demand
Interest-bearing savings, NOW, money market and time
Total deposits
Short-term borrowings
Long-term debt
Accrued interest payable
Other liabilities
Total liabilities
Stockholders’ equity:
Common stock-$3.33 par value per share; 350,000,000 shares authorized,
84,847,796 and 84,705,496 and outstanding, respectively
Capital surplus
Retained earnings
Accumulated other comprehensive income (loss), net
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
67
December 31,
2012
2011
(In thousands, except share data)
$
448,491
1,498,985
1,203
$
437,947
1,184,222
197
2,048,442
1,668,018
50,605
11,595,512
(136,171)
(17,710)
4,496,900
—
72,378
11,191,901
(124,881)
(14,875)
11,441,631
11,052,145
477,864
55,359
101,442
45,616
628,877
189,409
367,317
177,844
128,385
134,997
505,387
69,064
144,367
53,973
651,162
211,075
355,026
231,085
145,760
163,408
$19,464,485
$19,774,096
$ 5,624,127
10,120,061
$ 5,516,336
10,197,243
15,744,188
15,713,579
639,133
396,589
4,814
226,483
1,044,454
353,890
8,284
286,726
17,011,207
17,406,933
282,543
1,647,638
546,022
(22,925)
282,069
1,634,634
476,970
(26,510)
2,453,278
2,367,163
$19,464,485
$19,774,096
Hancock Holding Company and Subsidiaries
Consolidated Statements of Income
Interest income:
Loans, including fees
Securities-taxable
Securities-tax exempt
Federal funds sold and other short term investments
Total interest income
Interest expense:
Deposits
Short-term borrowings
Long-term debt and other interest expense
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income:
Service charges on deposit accounts
Trust fees
Bank card fees
Investment and annuity fees
ATM fees
Secondary mortgage market operations
Insurance commissions and fees
Accretion of FDIC loss share receivable
Other income
Securities gains (losses), net
Total noninterest income
Noninterest expense:
Compensation expense
Employee benefits
Salaries and employee benefits
Net occupancy expense
Equipment expense
Data processing expense
Professional services expense
Amortization of intangibles
Telecommunications and postage
Deposit insurance and regulatory fees
Other real estate owned expense, net
Other expense
Total noninterest expense
Income before income taxes
Income taxes
Net income
Basic earnings per common share
Diluted earnings per common share
See accompanying notes to consolidated financial statements.
68
Years Ended December 31,
2012
2011
2010
(In thousands, except per share data)
$668,387
86,402
5,841
1,919
$499,721
84,321
6,031
2,131
$284,922
60,653
5,232
1,751
762,549
592,204
352,558
32,741
6,005
12,936
51,682
55,691
7,034
8,246
70,971
72,903
9,306
136
82,345
710,867
54,192
521,233
38,732
270,213
65,991
656,675
482,501
204,222
78,246
32,736
31,698
18,033
17,414
16,488
15,692
5,000
36,888
1,552
55,265
23,940
28,879
15,016
14,052
10,484
16,524
16,689
25,578
(91)
45,335
16,715
14,941
10,181
9,486
8,915
14,461
4,890
12,025
—
253,747
206,336
136,949
293,783
72,401
234,071
52,531
112,478
29,564
366,184
286,602
142,042
54,467
24,097
49,935
57,457
32,067
21,437
14,902
13,866
78,655
43,220
17,524
43,069
69,931
16,551
18,514
12,980
6,910
78,713
23,803
10,569
23,646
16,447
2,728
11,019
11,401
4,475
33,130
713,067
594,014
279,260
197,355
45,613
94,823
18,064
61,911
9,705
$151,742
$ 76,759
$ 52,206
$
$
1.77
1.75
$
$
1.16
1.15
$
$
1.41
1.40
Hancock Holding Company and Subsidiaries
Consolidated Statements of Comprehensive Income
Net income
Other comprehensive income before income taxes:
Net change in unrealized gain (loss)
Reclassification adjustment for net losses realized and included in earnings
Amortization of unrealized net gain on securities transferred to held-to-
maturity
Other comprehensive income before income taxes
Income tax expense (benefit)
Other comprehensive income net of income taxes
Comprehensive income
See accompanying notes to consolidated financial statements.
Years Ended December 31,
2012
2011
2010
$151,742
(In thousands)
$ 76,759
$52,206
8,140
6,327
(42,655)
2,923
(8,197)
2,535
(8,752)
—
—
5,715
2,130
3,585
(39,732)
(13,841)
(5,662)
(2,045)
(25,891)
(3,617)
$155,327
$ 50,868
$48,589
69
Hancock Holding Company and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
Balance, January 1, 2010
Comprehensive income
Net income
Other comprehensive income
Comprehensive income
Cash dividends declared ($0.96 per
common share)
Common stock activity, long-term
incentive plan, including excess
income tax benefit of $322
Balance, December 31, 2010
Comprehensive income
Net income
Other comprehensive income
Comprehensive income
Cash dividends declared ($0.96 per
common share)
Common stock issued in stock
Common stock activity, long-term
incentive plan, including excess
income tax benefit of $104
Balance, December 31, 2011
Net income
Other comprehensive income
Comprehensive income
Cash dividends declared ($0.96 per
common share)
Common stock activity, long-term
incentive plan, including excess
income tax benefit of $376
Common Stock
Shares
Amount
Capital
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss), net
Total
36,840,453 $122,679 $ 257,643 $454,343
$ 2,998
$ 837,663
(In thousands, except share and per share data)
—
—
—
—
—
—
—
—
52,206
—
—
(3,617)
— (35,721)
52,206
(3,617)
48,589
(35,721)
52,823
176
5,841
—
—
6,017
36,893,276 $122,855 $ 263,484 $470,828
$
(619)
$ 856,548
—
—
—
—
—
—
—
—
76,759
—
—
(25,891)
— (70,617)
—
—
—
76,759
(25,891)
50,868
(70,617)
213,994
1,308,044
8,326
$2,367,163
151,742
3,585
155,327
(82,690)
13,478
—
—
—
—
$(26,510)
—
3,585
—
—
59,816
199
8,127
84,705,496 $282,069 $1,634,634 $476,970
— 151,742
—
—
—
—
—
—
—
—
— (82,690)
142,300
474
13,004
—
offering
6,958,143
23,170
190,824
Common stock issued in business
combination
40,794,261
135,845
1,172,199
Balance, December 31, 2012
84,847,796 $282,543 $1,647,638 $546,022
$(22,925)
$2,453,278
See accompanying notes to consolidated financial statements.
70
Hancock Holding Company and Subsidiaries
Consolidated Statements of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Provision for loan losses
Losses (gains) on other real estate owned
Deferred tax expense (benefit)
Increase in cash surrender value of life insurance
contracts
(Gain) loss on sales of securities, net
Loss (gain) on disposal of other assets
Net decrease (increase) in loans originated for sale
Net amortization of securities premium/discount
Amortization of intangible assets
Stock-based compensation expense
(Decrease) in interest payable and other liabilities
Funds collected under FDIC loss share agreements
Increase in FDIC loss share receivable
Decrease in other assets
Other, net
Net cash provided by operating activities
Years Ended December 31,
2012
2011
2010
(In thousands)
$ 151,742
$
76,759
$ 52,206
32,856
54,192
8,353
32,465
(12,807)
(1,552)
51
21,991
49,887
32,067
11,019
(53,703)
114,976
(50,284)
52,155
(376)
443,032
24,605
38,732
4,922
8,703
(12,169)
91
(424)
(1,560)
29,523
16,551
7,196
(99,986)
181,753
(65,502)
63,956
(104)
13,526
65,991
(1,960)
(11,602)
(8,022)
—
(316)
22,032
7,071
2,728
4,077
(12,405)
1,753
(5,283)
65,953
(951)
273,046
194,798
71
Hancock Holding Company and Subsidiaries
Consolidated Statements of Cash Flows (continued)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale
Proceeds from maturities of securities available for sale
Purchases of securities available for sale
Proceeds from maturities of securities held to maturity
Purchases of securities held to maturity
Net (increase) decrease in interest-bearing bank deposits
Net (increase) decrease in federal funds sold and short term
investments
Net (increase) decrease in loans
Purchases of property, equipment and intangible assets
Proceeds from sales of property and equipment
Cash paid for acquisition, net of cash received
Proceeds from sales of other real estate
Net cash paid for divestiture of branches
Other, net
Years Ended December 31,
2012
2011
2010
(In thousands)
$
48,336
1,081,193
(285,825)
432,331
(560,324)
(314,763)
(1,006)
(507,530)
(42,979)
6,270
—
120,083
—
6,481
$
342,864
998,726
(1,732,757)
$
—
603,102
(489,835)
—
—
(104,647)
281,639
86,057
(72,975)
9,326
(74,736)
80,125
(114,645)
—
—
—
218,015
(59,573)
40,400
(21,899)
2,220
—
41,945
—
—
Net cash provided by (used in) investing activities
(17,733)
(301,023)
334,375
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits
Net increase (decrease) in short-term borrowings
Repayments of long-term debt
Issuance of long term debt
Dividends paid
Proceeds from exercise of stock options
Proceeds from stock offering
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND DUE FROM
BANKS
CASH AND DUE FROM BANKS, BEGINNING
30,609
(405,321)
(192,087)
232,720
(82,690)
2,014
—
(414,755)
(65,298)
113,353
(16,641)
150,317
(70,617)
1,129
213,994
(420,093)
(140,031)
(295)
—
(35,721)
1,940
—
326,237
(594,200)
10,544
437,947
298,260
139,687
(65,027)
204,714
CASH AND DUE FROM BANKS, ENDING
$ 448,491
$
437,947
$ 139,687
SUPPLEMENTAL INFORMATION
Income taxes paid (refunded)
Interest paid
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans
Transfers from available for sale securities to held to maturity
securities
Fair value of assets acquired
Liabilities assumed
Net identifiable assets acquired
Common stock issued in connection with acquisition
See accompanying notes to consolidated financial statements.
$ (24,237) $
57,370
24,529
66,695
$ 22,878
83,161
$
76,128
$
117,690
$ 59,758
1,523,585
—
$
$
— $ 11,156,952
(10,130,706)
—
— $ 1,026,246
$
$
—
1,308,044
—
—
—
—
—
72
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
DESCRIPTION OF BUSINESS
Hancock Holding Company “the Company” or “Hancock” is a financial holding company headquartered in
Gulfport, Mississippi and operating in the states of Mississippi, Louisiana, Alabama, Florida and Texas. The
Company operates through two wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock
Bank) and Whitney Bank, New Orleans, Louisiana (Whitney Bank). Hancock Bank and Whitney Bank are
referred to collectively as the “Banks.” The Banks are community oriented and focus primarily on offering
commercial, consumer and mortgage loans and deposit services to individuals and small to middle market
businesses in their respective market areas. The Company’s operating strategy is to provide its customers with
the financial sophistication and breadth of products of a regional bank, while successfully retaining the local
appeal and level of service of a community bank. The Banks or their subsidiaries also offer trust services,
investment services and insurance agency services.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity with U.S. generally accepted
accounting principles (U.S. GAAP) and those generally practiced within the banking industry. The following is a
summary of the more significant accounting policies.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and all other entities in which
the Company has a controlling interest. Significant inter-company transactions and balances have been
eliminated in consolidation.
Use of Estimates
The accounting principles the Company follows and the methods for applying these principles conform with
accounting principles generally accepted in the United States of America and with general practices followed by
the banking industry. These accounting principles and practices 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 from those estimates.
Fair Value Accounting
Generally accepted accounting principles require the use of fair values in determining the carrying values of
certain assets and liabilities in the financial statements, as well as for specific disclosures about certain assets and
liabilities.
Accounting guidance 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 (level 1) and the
lowest priority to unobservable inputs such as a reporting entity’s own data or assumptions developed from this
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.
73
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Acquisition Accounting
Acquisitions are accounted for under the purchase method of accounting. Purchased assets, including
identifiable intangibles, and assumed liabilities are recorded at their respective acquisition date fair values. If the
fair value of net assets purchased exceeds the consideration given, a bargain purchase gain is recognized. If the
consideration given exceeds the fair value of the net assets received, goodwill is recognized. Fair values are
subject to refinement for up to one year after the closing date of an acquisition as information relative to closing
date fair values becomes available. Purchased loans acquired in a business combination are recorded at estimated
fair value on their purchase date with no carryover of the related allowance for loan losses. See the Acquired
Loans section below for accounting policy regarding loans acquired in a business combination.
All identifiable intangible assets that are acquired in a business combination are recognized at fair value on
the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other
legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented, or exchanged
separately from the entity).
Securities
Securities are classified as trading, held to maturity or available for sale. Management determines the
appropriate classification of debt securities at the time of purchase and re-evaluates this classification
periodically as conditions change that could require reclassification.
Available for sale securities are stated at fair value. Unrealized holding gains and unrealized holding losses,
other than those determined to be other than temporary, are reported net of tax in other comprehensive income
and in accumulated other comprehensive income until realized.
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 effective 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.
Loans
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, including deferred loan fees, 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 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. When accrual of interest is discontinued on a loan, all unpaid accrued interest is reversed and
payments subsequently received are applied first to recover principal. Interest income is recognized for payments
received after contractual principal has been satisfied. Loans are returned to accrual status when all the principal
and interest contractually due are brought current and future payment performance is reasonably assured.
74
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Acquired loans
Management has defined the loans purchased in the June 2011 Whitney acquisition as acquired loans. These
loans were recorded at estimated fair value on the purchase 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”) based on such factors as past
due status, nonaccrual status and credit risk ratings (rated substandard or worse).
The acquired loans were further segregated into loan pools designed to facilitate the development of
expected cash flows to be used in estimating fair value. Acquired performing loans were segregated into pools
based on characteristics such as loan type, credit risk ratings, and contractual interest rate and repayment terms.
The major loan types included commercial and industrial loans not secured by real estate, real estate construction
and land development loans, commercial real estate mortgages, residential mortgage loans, and consumer loans,
with further segregation within certain types as needed. Expected cash flows, both principal and interest, from
each pool were estimated based on key assumptions covering such factors as prepayments, default rates and
severity of loss given a default. These assumptions were developed using both Whitney’s historical experience
and the portfolio characteristics at acquisition as well as available market research. The segregation of acquired
impaired loans into pools placed additional focus on identifying loans with similar credit risk profiles and was
based primarily on characteristics such as loan type and market area in which originated. Loan types included
most of the major types used for the acquired performing portfolio. The acquired impaired loans that had been
originated in Louisiana and Texas were further segregated from loans originated in Mississippi, Alabama and
Florida, in recognition of the differences in general economic conditions affecting borrowers in these market
areas. The fair value estimate for each pool of acquired performing and acquired impaired loans was based on the
estimate of expected cash flows from the pool discounted at prevailing market interest rates.
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. The
Company’s policy for determining when to discontinue accruing interest on acquired performing loans and the
subsequent accounting for such loans is essentially the same as the policy for originated loans described earlier.
The excess of cash flows expected to be collected from an acquired impaired loan pool over its 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 loan pool. Each pool of acquired impaired loans is
accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.
Acquired impaired loans in pools with an accretable yield are considered to be accruing and performing even
though collection of contractual payments on loans within the pool may be in doubt, because the pool is the unit
of accounting and income continues to be accreted on the pool as long as expected cash flows are reasonably
estimable.
Covered loans and the related loss share receivable
The loans purchased in the 2009 acquisition of Peoples First Community Bank (Peoples First) are covered
by two loss share agreements between the FDIC and the Company which afford the Company significant loss
protection. These covered loans are accounted for as acquired impaired loans as described above in the section on
acquired loans. The Company treated all loans for the Peoples First acquisition under ASC 310-30 based on the
significant amount of deteriorating and nonperforming loans comprised mainly of ARM/HELOC loans located in
Florida. The loss share receivable is measured separately from the related covered loans as it is not contractually
75
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
embedded in the loans and is not transferrable should the loans be sold. The fair value of the loss share receivable
at acquisition was estimated by discounting projected cash flows related to the loss share agreements based on
the expected reimbursements for losses using the applicable loss share percentages, including appropriate
consideration of possible true-up payments to the FDIC at the expiration of the loss share agreements. The
discounted amount is accreted into non-interest income over the remaining life of the loan pool or the life of the
shared loss agreement.
The loss share receivable is reviewed and updated prospectively as loss estimates related to the covered
loans change. Increases in expected reimbursements from a covered loan pool will lead to an increase in the loss
share receivable. A decrease in expected reimbursements is reflected first as a reversal of any previously
recorded increase in the loss share receivable on the covered loan pool with the remainder reflected as a
reduction in the loss share receivable’s accretion rate. Increases and decreases in the loss share receivable result
in reductions in or additions to the provision for loan losses, which serve to offset the impact on the provision
from impairment recognized on the underlying covered loan pool and reversals of previously recognized
impairment. The impact on operations of a reduction in the loss share receivable’s accretion rate is associated
with an increase in the accretable yield on the underlying loan pool.
Loans Held for Sale
Loans held for sale are stated at the lower of cost or market. These 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. At times, management may decide to sell loans that were not
originated for that purpose. Those loans would be reclassified as held for sale when that decision is made and
also carried at the lower of cost or market.
Troubled Debt Restructurings
Troubled debt restructurings (TDRs) occur when a borrower is experiencing, or is expected to experience,
financial difficulties in the near-term and a modification in loan terms is granted that would otherwise not have
been considered.
Troubled debt restructurings can involve loans remaining on nonaccrual, moving to nonaccrual, or
continuing to accrue, depending on the individual facts and circumstances of the borrower. All loans whose terms
have been modified in a TDR, including both commercial and retail loans, are considered “impaired.” When
measuring impairment on a TDR, the present value of expected cash flows is calculated using the effective
interest rate of the original loan, i.e., before the restructuring, as the discount rate or at the loan’s observable
market price or the fair value of the collateral if the loan is collateral dependent. If the measurement is less than
the recorded investment in the loan, the difference is charged-off through the allowance for loan and lease losses.
A loan is not considered impaired due to a delay in payment if all amounts due, including interest accrued at the
contractual interest rate for the period of delay, is expected to be collected. Modified acquired impaired loans are
not removed from their accounting pool and accounted for as a TDR even if those loans would otherwise be
deemed TDRs.
76
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Allowance for Loan Losses
Originated loans
The allowance for loan and lease losses “ALLL” is a valuation account available to absorb losses on loans.
The ALLL is established and maintained at an amount sufficient to cover the estimated inherent credit losses
associated with the loan and lease portfolios of the Company as of the date of the determination. Credit losses
arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited
to, collateral risk, operational risk, concentration risk, and economic risk. As such, all related risks of lending are
considered when assessing the adequacy of the allowance for loan and lease losses. Quarterly, management
estimates the inherent losses in the existing loan portfolio based on the Company’s past loan loss and
delinquency experience, known and inherent risks in the portfolio, adverse situations that may affect the
borrowers’ ability to repay, the estimated value of any underlying collateral and current economic conditions.
The analysis and methodology include two primary elements. These elements include a loss-rate analysis of
various loan groups which incorporates a historical loss rate as updated for current conditions, and a specific
reserve analysis for those loans considered impaired.
For the loss-rate analysis, loans are subdivided into three primary groups, commercial, residential mortgage
and consumer, with consumer further segmented into, indirect and direct consumer loans. A historical loss rate is
calculated for each group over the twelve prior quarters to determine the three year average loss rate. As
circumstances dictate, management will make adjustments to the loss history to reflect differences in current
conditions as compared to those during the historical loss period. Adjustments will also be made to cover risks
associated with trends in delinquencies, non-accruals, current economic conditions and credit administration/
underwriting practices and policies.
The Company considers a loan to be impaired when, based upon current information and events, it believes
it is probable all amounts due according to the contractual terms of the loan agreement will not be collected.
Impaired loans include troubled debt restructurings, and performing and non-performing loans. When a loan is
determined to be impaired, the amount of impairment is recognized by creating a specific allowance for any
shortfall between the loans value and its recorded investment. The loan’s value is measured by either the loan’s
observable market price, the fair value of the collateral of the loan (less liquidation costs) if it is collateral
dependent, or by the present value of expected future cash flows discounted at the loan’s effective interest rate.
Any loans individually analyzed for impairment are not incorporated into the pool analysis to avoid double
counting. The Company limits the specific reserve analysis to include all impaired commercial, commercial real
estate and mortgage loans with balances of $500,000 or greater.
It is the policy of the Company to promptly recognize a loan charge-off when available information
reasonably confirms that the loan is wholly or partially uncollectible. For commercial and industrial, construction
and land development and commercial real estate loans, the need for a charge-off requires consideration of,
among other factors, the estimated realizable value of the collateral securing the loan, the borrower’s and any
guarantor’s capacity and willingness to pay, and the status of the account in bankruptcy, if applicable. Charge-
offs are recognized on residential mortgage and consumer loans that are 120 days past due, unless the loan is
clearly both well secured and in the process of collection. These loans are generally charged down to the
estimated fair value of any collateral less estimated selling costs. Loans are charged off against the allowance for
loan losses, with subsequent recoveries added back to the allowance.
77
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Acquired loans
An allowance for loan losses is calculated using a methodology similar to that described above for
originated loans. Performing acquired loans are subsequently evaluated for any required allowance at each
reporting date. The allowance as determined for each loan pool is compared to the remaining fair value discount
for that pool. If greater, the excess is recognized as an addition to the allowance through a provision for loan
losses. If less than the discount, no additional allowance is recorded. Charge-offs and losses first reduce any
remaining fair value discount for the loan pool and once the discount is depleted, losses are applied against the
allowance established for that pool.
For impaired acquired loans and covered loans, cash flows expected to be collected are recast at each
reporting date for each loan pool. These evaluations require the continued use and updating of key assumptions
and estimates such as default rates, loss severity given default and prepayment speed assumptions, similar to
those used for the initial fair value estimate. Management judgment must be applied in developing these
assumptions. If the present value of expected cash flows for a pool is less than its carrying value, an impairment
is reflected by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the
present value of expected cash flows for a pool is greater than its carrying value, any previously established
allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be
taken into income over the remaining life of the loan pool. Acquired impaired loans are generally not subject to
individual evaluation for impairment and are not reported with impaired loans or TDRs, even if they would
otherwise be deemed to be impaired or modified in a TDR.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation
is charged to expense over the estimated useful lives of the assets, which are up to 39 years for buildings and
three to seven years for furniture and equipment. Amortization expense for software is charged over three years.
Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the
improvements, whichever is shorter. In cases where the Company has the right to renew the lease for additional
periods, the lease term for the purpose of calculating amortization of the capitalized cost of the leasehold
improvements is extended when the Company is “reasonably assured” that it will renew the lease.
Gains and losses related to retirement or disposition of property and equipment are recorded in other income
under noninterest income on the consolidated statements of income. The Company continually evaluates whether
events and circumstances have occurred that indicate that such long-lived assets have been impaired.
Measurement of any impairment of such long-lived assets is based on those assets’ fair values. There were no
impairment losses on property and equipment recorded during 2012, 2011, or 2010.
Other Real Estate
Other real estate owned includes real property that has been acquired in satisfaction of loans and property no
longer used in the Banks’ business. Generally these assets are recorded at the lower of either cost or estimated
fair value less the estimated cost of disposition. Any initial reduction in the carrying amount of a loan to the fair
value of the collateral received less selling costs is charged to the allowance for loan losses. Subsequent losses on
the periodic revaluation of the property are charged to current earnings, as are revenues from and costs of
operating and maintaining the properties and gains or losses recognized on their disposition. Improvements made
to properties are capitalized if the expenditures are expected to be recovered upon the sale of the properties.
78
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Goodwill and Other Intangible Assets
Goodwill, which represents the excess of cost over the fair value of the net assets of an acquired business, is
not amortized but tested for impairment on an annual basis, or more often if events or circumstances indicate
there may be impairment. Impairment is defined as the amount by which the implied fair value of the goodwill
contained in any reporting unit within a company is less than the goodwill’s carrying value. Impairment losses
would be charged to operating expense. Management reviews goodwill for impairment based on the Company’s
primary reporting segments, the Banks. If the reporting unit’s fair value is less than its carrying value, an
estimate of the implied fair value of the goodwill is compared to the unit’s carrying value. The Company uses a
present value technique to estimate fair value when testing for impairment. The cash flow estimates incorporate
assumptions that market participants would use in their estimates of fair value. The cash flow analysis requires
assumptions about the economic environment, expected net interest margins, growth rates, and the rate at which
cash flows are discounted.
Other identifiable intangible assets with finite lives, such as core deposit intangibles and trade name, are
initially recorded at fair value and are generally amortized over the periods benefited and are evaluated for
impairment similar to long-lived assets.
Bank-Owned Life Insurance
Bank-owned life insurance (BOLI) is long-term life insurance on the lives of certain current and past
employees where the insurance policy benefits and ownership are retained by the employer. Its cash surrender
value is an asset that the Company uses to partially offset the future cost of employee benefits. The cash value
accumulation on BOLI is permanently tax deferred if the policy is held to the insured person’s death and certain
other conditions are met.
Derivative Instruments and Hedging Activities
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the
fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to
designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship
has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge
of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular
risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge
of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are
considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss
recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged
forecasted transactions in a cash flow hedge. Changes in the fair value of derivatives to which hedge accounting
does not apply are recognized immediately in earnings. Note 6 describes the derivative instruments currently
used by the Company and discloses how these derivatives impact Hancock’s financial position and results of
operations.
79
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
Income Taxes
Income taxes are accounted for using the asset and liability method. Current tax liabilities or assets are
recognized for the estimated income taxes payable or refundable on tax returns to be filed with respect to the
current year. Deferred tax assets and liabilities are based on temporary differences between the financial
statement carrying amounts and the tax bases of the Company’s assets and liabilities. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be realized or settled. Valuation allowances are established against
deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the assets will
not be realized. The benefit of a position taken or expected to be taken in a tax return is recognized when it is
more likely than not that the position will be sustained on its technical merits.
Retirement Benefits
The Company sponsors defined benefit pension plans and certain other defined benefit postretirement plans
for eligible employees. The amounts reported in the consolidated financial statements with respect to these plans
are based on actuarial valuations that incorporate various assumptions regarding future experience under the
plans. Note 12 recaps some of the more significant actuarial assumptions and provides information about the
liabilities or assets recognized for the funded status of the Company’s obligations under these plans, the net
benefit expense charged to current operations, and the amounts recognized as a component of other
comprehensive income and accumulated other comprehensive income.
Share-Based Payment Arrangements
The grant date fair value of equity instruments awarded to employees and directors establishes the cost of
the services received in exchange, and the cost associated with awards that are expected to vest is recognized
over the requisite service period.
Revenue Recognition
The largest source of revenue for the Company is interest revenue. Interest revenue is recognized on an
accrual basis driven by written contracts, such as loan agreements or securities contracts. Credit-related fees,
including letter of credit fees, are recognized in non-interest income when earned. The Company recognizes
commission revenue and brokerage, exchange and clearance fees on a trade-date basis. Other types of non-
interest revenue such as service charges on deposits and trust revenues, are accrued and recognized into income
as services are provided and the amount of fees earned are reasonably determinable.
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 the common dividends declared
and participation rights in undistributed earnings. Participating securities currently consist of unvested share-
based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.
Basic earnings per common share is computed by dividing income applicable to common shareholders by
the weighted-average number of common shares outstanding for the applicable period. Shares outstanding are
adjusted for restricted shares issued to employees under the long-term incentive compensation plan and for
certain shares that will be issued under the directors’ compensation plan. Diluted earnings per common share is
80
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
computed using the weighted-average number of common shares outstanding increased by the number of shares
in which employees would vest under performance-based restricted stock and stock unit awards based on
expected performance factors and by the number of additional shares that would have been issued if potentially
dilutive stock options were exercised, each as determined using the treasury stock method.
Statements of Cash Flows
The Company considers only cash on hand, cash items in process of collection and balances due from
financial institutions as cash and cash equivalents for purposes of the consolidated statements of cash flows.
Reportable Segment Disclosures
Accounting standards require that information be reported about a company’s operating segments using a
“management approach.” Reportable segments are identified in these standards as those revenue-producing
components for which separate financial information is produced internally and which are subject to evaluation
by the chief operating decision maker in deciding how to allocate resources to segments. The Company defines
reportable segments as the banks.
Other
Assets held by the banks in a fiduciary capacity are not assets of the banks and are not included in the
consolidated balance sheets.
RECENT ACCOUNTING PRONOUNCEMENTS
In February, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update (ASU)
No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive
income includes gains and losses that are initially excluded from net income for an accounting period. Those
gains and losses are later reclassified out of accumulated other comprehensive income into net income. The
amendments in the ASU do not change the current requirements for reporting net income or other comprehensive
income in financial statements. All of the information that this ASU requires already is required to be disclosed
elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization
to: Present (either on the face of the statement where net income is presented or in the notes) the effects on the
line items of net income of significant amounts reclassified out of accumulated other comprehensive income—
but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the
same reporting period; and Cross-reference to other disclosures currently required under U.S. GAAP for other
reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their
entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of
accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for
pension-related amounts) instead of directly to income or expense. The new requirements will take effect for
public companies in interim and annual reporting periods beginning after December 15, 2012 (the first quarter of
2013 for public, calendar-year companies). This guidance impacts only the disclosures in financial statements
and did not impact the company’s financial condition or results of operations.
In January 2013, FASB issued an update to clarify ordinary trade receivables and receivables are not in the
scope of ASU No. 2011-11 Balance Sheet Disclosures about Offsetting Assets and Liabilities. The update further
81
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
defined that the 2011 ASU applies only to derivatives, repurchase and reverse purchase agreements, and
securities borrowing and lending transactions that are either offset in accordance with specific criteria contained
in the FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement.
The amendments in this update are effective for fiscal years beginning January 1, 2013 and interim periods
within those annual periods. The amendments should be applied retrospectively for all comparative periods
presented. The effective date is the same as that of ASU No. 2011-11. This guidance impacts only the disclosures
in financial statements and did not impact the company’s financial condition or results of operations.
In October 2012, FASB issued an update for entities that recognize an indemnification asset as a result of a
government-assisted acquisition of a financial institution. When a reporting entity recognizes an indemnification
asset as a result of a government-assisted acquisition of a financial institution and subsequently a change in the
cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows
expected to be collected on the assets subject to indemnification), the reporting entity should subsequently
account for the change in the measurement of the indemnification asset on the same basis as the change in the
assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term
of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the
remaining life of the indemnified assets). The amendments in this update are effective for fiscal years, and
interim periods within those years, beginning on or after December 15, 2012. Early adoption is permitted. The
amendments should be applied prospectively to any new indemnification assets acquired after the date of
adoption and to indemnification assets existing as of the date of adoption arising from a government-assisted
acquisition of a financial institution. The adoption of this guidance is not expected to have a material impact on
the Company’s financial condition or results of operations.
In July 2012, FASB issued an update that an entity has the option first to assess qualitative factors to
determine whether the existence of events and circumstances indicates that it is more likely than not that the
indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity
concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is
not required to take further action. However, if an entity concludes otherwise, then it is required to determine the
fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the
fair value with the carrying amount. Under the guidance in this ASU, an entity also has the option to bypass the
qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing
the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any
subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed
for fiscal years beginning after September 15, 2012, early adoption is permitted. The adoption of this guidance is
not expected to have a material impact on the Company’s financial condition or results of operations.
In December 2011, the FASB issued updated guidance to address the differences between international
financial reporting standards (IFRS) and generally accepted accounting principles (GAAP) regarding the
offsetting of assets and liabilities. Instead of proposing new criteria for netting assets and liabilities the FASB and
International Accounting Standards Board (IASB) jointly issued common disclosure requirements related to
offsetting arrangements, irrespective of whether they are offset on the statement of financial position, which
require disclosure of both net and gross information for these assets and liabilities. An entity is required to apply
the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within
those annual periods. This guidance impacts only the disclosures in financial statements and did not impact the
company’s financial condition or results of operations.
82
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (continued)
In June 2011, the FASB issued updated guidance regarding the presentation of comprehensive income, and
subsequently amended this guidance in December 2011, prior to its effective date. The updated guidance
eliminates the option to present the components of other comprehensive income as part of the statement of
changes to stockholders’ equity, and, requires an entity to present the total of comprehensive income, the
components of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. This amendment does not
change the items that must be reported in other comprehensive income or when an item in other comprehensive
income must be reclassified to net income. The amendments are effective for fiscal years, and interim periods
within those years, beginning after December 15, 2011, and should be applied retrospectively. The adoption of
this guidance changed presentation only and did not have a material impact on the Company’s financial condition
or results of operations.
In May 2011, the FASB issued updated guidance to achieve common fair value measurement and disclosure
requirements in U.S. GAAP and IFRS. Certain provisions clarify the Board’s intent about the application of
existing fair value measurement and disclosure requirements, while others change a particular principle or
requirement for measuring fair value or for disclosing information about fair value measurements. The guidance
is to be applied prospectively and is effective during interim and annual periods beginning after December 15,
2011. The adoption of this guidance did not have a material impact on the Company’s financial condition or
results of operations.
In April 2011, FASB issued an update to improve the accounting for repurchase agreements (“repos”) and
other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their
maturity. The guidance modifies the criteria for assessing if a transferor has maintained effective control over the
transferred asset in determining when these transactions would be accounted for as financings (secured
borrowings/lending agreements) as opposed to sales (purchases) with commitments to repurchase (resell).
Specifically, the updated guidance removes the criterion requiring a transferor to have the ability to repurchase or
redeem the financial assets on substantially the same terms, even in the event of default by the transferee, as well
as the collateral maintenance guidance related to that criterion. The guidance is effective prospectively for new
transfers and existing transactions that are modified in the first interim or annual period beginning on or after
December 15, 2011. The adoption of this guidance did not have a material impact on the Company’s financial
condition or results of operations.
Note 2. Acquisitions
Whitney Holding Corporation
On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation
(Whitney), a bank holding company based in New Orleans, Louisiana, in a stock and cash transaction. Whitney
common shareholders received 0.418 shares of Hancock common stock in exchange for each share of Whitney
stock, resulting in Hancock issuing 40,794,261 common shares at a fair value of $1.3 billion. Whitney’s preferred
stock and common stock warrant issued under TARP were purchased by the Company for $307.7 million and
retired as part of the merger transaction. In total, the purchase price was approximately $1.6 billion including the
value of the options to purchase common stock assumed in the merger. On September 16, 2011, seven Whitney
Bank branches located on the Mississippi Gulf Coast and one branch located in Bogalusa, LA with
approximately $47 million in loans and $180 million in deposits were divested in order to resolve branch
concentration concerns of the U.S. Department of Justice relating to the merger.
83
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
The Whitney transaction was accounted for using the purchase method of accounting and, accordingly,
assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the
acquisition date. Fair values were subject to refinement for up to one year after the closing date of the
acquisition. Assets acquired, excluding goodwill, totaled $11.2 billion, including $6.5 billion in loans, $2.6
billion of investment securities, and $224 million of identifiable intangible assets. Liabilities assumed were $10.1
billion, including $9.2 billion of deposits.
Goodwill of $589.5 million was calculated as the excess of the consideration exchanged over the net
identifiable assets acquired. In 2012, goodwill was reduced $22.3 million for deferred tax purchase accounting
adjustments.
The following table provides the assets purchased, the liabilities assumed and the consideration transferred:
Statement of Net Assets Acquired (at fair value) and Consideration Transferred
(in millions except per share)
Fair value of net assets
acquired at
date of acquisition
June 4, 2011
Subsequent
acquisition-date
adjustments
As recorded by
HHC
December 31, 2011
$—
—
1
(9)
(21)
(42)
(7)
(78)
—
—
(3)
(3)
(75)
75
—
$
957
57
2,636
6,447
263
224
573
11,157
9,182
776
172
10,130
1,027
589
$ 1,616
ASSETS
Cash and cash equivalents
Loans held for sale
Securities
Loans and leases
Property and equipment
Other intangible assets (1)
Other assets
Total identifiable assets
LIABILITIES
Deposits
Borrowings
Other liabilities
Total liabilities
Net identifiable assets acquired
Goodwill (2)
Net assets acquired
CONSIDERATION:
Hancock Holding Company common shares issued
Purchase price per share of the Company’s common
stock (3)
Company common stock issued and cash
exchanged for fractional shares
Stock options converted
Cash paid for TARP preferred stock and
warrants
Fair value of total consideration transferred
84
$
957
57
2,635
6,456
284
266
580
11,235
9,182
776
175
10,133
1,102
514
$ 1,616
41
32.04
$ 1,307
1
308
$ 1,616
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
(1)
Intangible assets consists of core deposit intangible of $189.4 million, trade name of $11.7 million, trust
relationships of $11.1 million, and credit card relationships of $11.3 million.
The amortization life is 12—20 years for the CDI intangible asset; 15 years for credit card relationships, 12
years for trust and 2.5 years for trade name intangible asset.
They will be amortized on an accelerated basis.
(2) No goodwill is expected to be deductible for federal income tax purposes. The goodwill will be primarily
allocated to the Whitney Bank segment.
(3) The value of the shares of common stock exchanged with Whitney shareholders was based upon the closing
price of the Company’s common stock at June 3, 2011, the last traded day prior to the date of acquisition.
The following table (in thousands) provides a reconciliation of goodwill:
Goodwill balance at December 31, 2010
Additions:
Goodwill from Whitney acquistion at acquisition date
Purchase accounting fair value adjustments subsequent to acquisition date made during the
fourth quarter of 2011
Goodwill balance at December 31, 2011
Reductions:
Deferred tax purchase accounting adjustment made during 2012
Goodwill balance at December 31, 2012
$ 61,631
513,917
75,614
$651,162
(22,285)
$628,877
The operating results of the Company for the year ended December 31, 2011 included the results from the
operations acquired in the Whitney transaction since June 4, 2011. Whitney’s operations contributed
approximately $232.5 million in revenue, net of interest expense, and an estimated $35.8 million in net income
for the period from the acquisition date.
85
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
Merger-related charges of $45.8 million and $86.8 million associated with the Whitney acquisition were
included in noninterest expense for 2012 and 2011. Such expenses were for professional services and other
incremental costs associated with the conversion of systems and integration of operations, costs related to branch
and office consolidations, costs related to termination of existing contractual arrangements for various services,
marketing and promotion expenses, and retention and severance and incentive compensation costs. The following
table provides a breakdown (in thousands) of merger expenses by category:
Personnel
Net occupancy expense
Equipment
Data processing expense
Professional services expense
Postage and communications
Advertising
Printing and supplies
Insurance expense
Other expense
Total merger-related expenses
Years Ended December 31,
2012
2011
$ 9,450
611
2,235
3,116
24,436
375
5,360
957
—
(751)
$45,789
$13,960
330
552
3,163
40,902
897
5,958
568
3,177
17,255
$86,762
The following unaudited pro forma information presents the results of operations for the twelve months
ended December 31, 2011 and 2010, as if the acquisition had occurred at the beginning of the earliest period
presented. These adjustments include the impact of certain purchase accounting adjustments such as intangible
assets amortization, fixed assets depreciation and elimination of Whitney’s provision. In addition, the $86.8
million in merger expenses discussed above are included in each year. Any additional future operating cost
savings and other synergies the Company anticipates as a result of the acquisition are not reflected in the pro
forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to
represent or be indicative of the actual results of operations of the combined company that would have been
achieved had the acquisition occurred at the beginning of the earliest period presented, nor are they intended to
represent or be indicative of future results of operations.
(In millions)
Total revenues , net of interest expense
Net Income
$979
$124
$983
$ 94
Twelve Months Ended
December 31, 2011
December 31, 2010
In many cases, determining the fair value of the acquired assets and assumed liabilities required the
Company to estimate future cash flows associated with those assets and liabilities and to discount those cash
flows at appropriate rates of interest. The most significant estimates related to the valuation of acquired loans,
including loans with evidence of credit quality deterioration (acquired impaired) and loans that did not meet this
criteria (acquired performing). Note 1 discusses the Company’s valuation of the acquired loan portfolios as well
as significant aspects of the ongoing accounting for such acquired loans.
86
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions (continued)
Loans at the acquisition date of June 4, 2011 are presented in the following table.
Commercial non-real estate
Commercial real estate owner-occupied
Construction and land development
Commercial real estate non-owner occupied
Acquired
Impaired
Acquired
Performing
$128,813
91,885
159,438
86,573
(In thousands)
$2,414,002
856,583
564,795
839,258
Total
Acquired
Loans
$2,542,815
948,468
724,233
925,831
Total commercial/real estate
466,709
4,674,638
5,141,347
Residential mortgage
Consumer
Total
68,780
—
818,152
418,563
886,932
418,563
$535,489
$5,911,353
$6,446,842
The following table presents information about the acquired impaired loans at acquisition (in thousands).
Contractually required principal and interest payments
Nonaccretable difference
Cash flows expected to be collected
Accretable difference
Fair value of loans acquired with a deterioration of credit quality
$880,612
212,987
667,625
132,136
$535,489
The fair value of the acquired performing loans at June 4, 2011, was $5.9 billion. The gross contractually
required principal and interest payments receivable for acquired performing loans was $6.8 billion.
In connection with the Whitney acquisition, the Company recorded a liability for contingent payments to
certain employees for arrangements that were in existence prior to acquisition. The fair value of this liability was
$58.0 million. The following table presents the changes in the liability for 2012 and 2011. Payments are expected
to continue into 2014.
Balance, January 1
Adjustments
Cash Payments
Balance, December 31
December 31,
2012
2011
$ 23,183
1,127
(16,145)
$ —
57,964
(34,781)
$ 8,165
$ 23,183
The Company also recorded a liability with a fair value of $14.0 million for a contractual contingency
assumed in connection with Whitney’s obligations under contracts for a systems conversion and replacement
initiative. This initiative was suspended in anticipation of the acquisition. Payments against this liability during
2012 and 2011 respectively were $2.6 million and $1.1 million. During 2012, the remainder was reversed upon
reaching settlement terms.
87
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 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
December 31, 2012
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Amortized
Cost
Fair Value
Amortized
Cost
December 31, 2011
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
U.S. Treasury
U.S. government agencies
Municipal obligations
Mortgage-backed securities
CMOs
Corporate debt securities
Other equity securities
$
150 $
18,096
49,608
1,715,524
196,723
2,250
4,531
8
11
571
58,903
1,354
—
752
158 $
150 $
$— $
—
14
21
—
—
4
18,107
50,165
248,595
294,489
1,774,406 2,422,891
198,077 1,426,495
4,517
4,208
2,250
5,279
14
1,308
15,218
58,150
21,774
11
2,086
$ — $
—
42
696
2,193
34
41
164
249,903
309,665
2,480,345
1,446,076
4,494
6,253
$1,986,882 $61,599
$ 39
$2,048,442 $4,401,345 $98,561
$3,006 $4,496,900
Securities Held to Maturity
December 31, 2012
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Amortized
Cost
Fair Value
Amortized
Cost
December 31, 2011
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Municipal obligations
Mortgage-backed securities
CMOs
$ 164,493 $16,017
3,429
23,942
180,397
1,323,128
$— $ 180,510 —
183,826 —
—
1,346,129 —
941
$1,668,018 $43,388
$941
$1,710,465 —
—
—
—
—
—
—
—
—
—
—
—
—
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 increased to such a size that the Company determined that only a portion of the portfolio needed to be
classified as available for sale for liquidity purposes. The securities reclassified consisted primarily of collateral
mortgage obligations (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.
88
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Securities (continued)
The following table presents the amortized cost and fair value of debt securities at December 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.
Debt Securities Available for Sale
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Amortized
Cost
Fair
Value
$
43,855
241,988
249,802
1,446,706
$
44,003
244,207
259,924
1,495,029
Total available for sale debt securities
$1,982,351
$2,043,163
Debt Securities Held to Maturity
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total held to maturity securities
Amortized
Cost
Fair
Value
$
14,545
417,869
94,584
1,141,020
$
14,626
427,022
104,739
1,164,078
$1,668,018
$1,710,465
The Company held no securities classified as trading at December 31, 2012 or 2011.
The details for securities classified as available for sale with unrealized losses as of December 31, 2012
follow (in thousands):
Available for sale
U.S. Treasury
U.S. government agencies
Municipal obligations
Mortgage-backed securities
CMOs
Corporate debt securities
Equity securities
Losses < 12 months
Losses 12 months or >
Total
Fair
Value
$ —
—
5,278
57,752
—
—
268
Gross
Unrealized
Losses
$—
—
14
14
—
—
2
$63,298
$ 30
Fair
Value
$ —
—
—
1,097
—
—
2
$1,099
Gross
Unrealized
Losses
$—
—
—
7
—
—
2
Fair
Value
$ —
—
5,278
58,849
—
—
270
Gross
Unrealized
Losses
$—
—
14
21
—
—
4
$
9
$64,397
$ 39
89
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Securities (continued)
The details for securities classified as available for sale with unrealized losses as of December 31, 2011
follow (in thousands):
Available for sale
U.S. Treasury
U.S. government agencies
Municipal obligations
Mortgage-backed securities
CMOs
Corporate debt securities
Equity securities
Losses < 12 months
Losses 12 months or >
Total
Gross
Unrealized
Losses
Fair Value
$ — $ —
—
42
692
2,193
34
39
—
18,854
212,900
296,860
398
1,685
$530,697
$3,000
Fair
Value
$—
—
—
337
—
—
2
$339
Gross
Unrealized
Losses
Gross
Unrealized
Losses
Fair Value
$—
—
—
—
—
$
4
2
6
$ — $ —
—
42
696
2,193
34
41
—
18,854
213,237
296,860
398
1,687
$531,036
$3,006
The details for securities classified as held to maturity with unrealized losses as of December 31, 2012
follow (in thousands):
Held to maturity
Municpal obligations
Mortgage-backed securities
CMOs
Losses < 12 months
Losses 12 months or >
Total
Fair
Value
$ —
—
87,852
$87,852
Gross
Unrealized
Losses
$—
—
259
$259
Fair
Value
$ —
—
54,445
$54,445
Gross
Unrealized
Losses
$—
—
682
$682
Fair Value
$ —
—
142,297
$142,297
Gross
Unrealized
Losses
$—
—
941
$941
Substantially all of the unrealized losses relate 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 meet
contractual obligations. The Company has adequate liquidity and, therefore, does not plan to 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.
Proceeds from sales of securities available for sale were approximately $48 million in 2012, $343 million in
2011 and less than $1 million in 2010. Realized gross gains and losses, computed through specific identification,
were insignificant. Substantially all of the proceeds in 2011 came from the sale of a portion of the portfolio
acquired in the Whitney acquisition.
Securities with carrying values totaling approximately $2.6 billion at December 31, 2012 and $3.0 billion at
December 31, 2011 were pledged primarily to secure public deposits or sold under agreements to repurchase.
90
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans
The distinction between originated, acquired and covered loans and certain significant accounting policies
relevant to each category are discussed in detail in Note 1. Loans, net of unearned income, consisted of the
following:
Originated loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total originated loans
Acquired loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total acquired loans
Covered loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total covered loans
Total loans:
Commercial non-real estate
Construction and land development
Commercial real estate
Residential mortgages
Consumer
Total loans
December 31,
2012
December 31,
2011
(In thousands)
$ 2,713,385
665,673
1,548,402
827,985
1,351,776
$ 1,525,409
540,806
1,259,757
487,147
1,074,611
$ 7,107,221
$ 4,887,730
$ 1,690,643
295,151
1,279,546
486,444
202,974
$ 2,236,758
603,371
1,656,515
734,669
386,540
$ 3,954,758
$ 5,617,853
$
29,260
28,482
95,146
263,515
99,420
$
38,063
118,828
82,651
285,682
146,219
$
515,823
$
671,443
$ 4,433,288
989,306
2,923,094
1,577,944
1,654,170
$ 3,800,230
1,263,005
2,998,923
1,507,498
1,607,370
$11,577,802
$11,177,026
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 the previous table.
The Company generally makes loans in its market areas of south Mississippi, southern and central Alabama,
southern and central Louisiana, the Houston, Texas area and the northern, central and panhandle regions of
Florida. The Banks make loans in the normal course of business to directors and executive officers of the
Company and the Banks and to their associates. Loans to such related parties are made on substantially the same
terms, including interest rates and collateral requirements, as those prevailing at the time for comparable
91
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
transactions with unrelated parties and do not involve more than normal risk of collectability when originated.
Balances of loans to the Company’s directors, executive officers and their associates at December 31, 2012 and
2011 were approximately $76.6 million and $65.0 million, respectively. New loans, repayments and net balances
from changes in directors and executive officers and their associates for 2012 were $138.4 million, $126.5
million and ($0.3 million), respectively.
The following schedules show activity in the allowance for loan losses for 2012 and 2011 by portfolio
segment and the corresponding recorded investment in loans as of December 31, 2012 and December 31, 2011.
The allowance activity is summarized for December 31, 2010 because the allowance for covered loans was
insignificant.
Originated loans:
(In thousands)
Allowance for loan losses:
Beginning balance, January 1, 2012
Charge-offs
Recoveries
Net provision for loan losses
Increase in FDIC loss share receivable
Ending balance
Ending balance:
Individually evaluated for impairment
Ending balance:
Collectively evaluated for impairment
Loans:
Ending balance:
Ending balance:
Commercial
Residential
mortgages
Consumer
Total
December 31, 2012
$
$
$
$
60,211
(42,277)
5,375
35,840
—
$
4,894
(6,275)
324
7,463
—
$
18,141
(16,208)
4,030
7,256
—
$
83,246
(64,760)
9,729
50,559
—
59,149
$
6,406
$
13,219
$
78,774
6,377
$ — $
— $
6,377
52,772
$
6,406
$
13,219
$
72,397
$4,927,460
$827,985
$1,351,776
$7,107,221
Individually evaluated for impairment
$
70,555
$
2,721
$
— $
73,276
Ending balance:
Collectively evaluated for impairment
$4,856,905
$825,264
$1,351,776
$7,033,945
92
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
Acquired loans:
(In thousands)
Allowance for loan losses:
Beginning balance, January 1, 2012
Charge-offs
Recoveries
Net Provision for loan losses (a)
Increase in FDIC loss share receivable (a)
Ending balance
Ending balance:
Individually evaluated for impairment
Ending balance:
Collectively evaluated for impairment
Loans:
Ending balance:
Ending balance:
Commercial
Residential
mortgages
Consumer
Total
December 31, 2012
$
$
$
$
— $ —
—
—
—
—
—
788
—
—
788
$ —
$ —
—
—
—
—
$ —
788
$ —
$ —
— $ —
$ —
$
$
$
$
—
—
—
788
—
788
788
—
$3,265,340
$486,444
$202,974
$3,954,758
Individually evaluated for impairment
$
6,202
$ —
$ —
$
6,202
Ending balance:
Collectively evaluated for impairment
$3,259,138
$486,444
$202,974
$3,948,556
Covered loans:
(In thousands)
Allowance for loan losses:
Beginning balance, January 1, 2012
Charge-offs
Recoveries
Net provision for loan losses (a)
Increase in FDIC loss share receivable (a)
Ending balance
Ending balance:
Individually evaluated for impairment
Ending balance:
Collectively evaluated for impairment
Loans:
Ending balance:
Ending balance:
Commercial
Residential
mortgages
Consumer
Total
December 31, 2012
$
$
$
$
18,203
(29,947)
4,894
(895)
25,777
$
9,024
—
—
11,948
11,702
$ 14,408
(1,094)
78
(8,208)
719
18,032
$ 32,674
$
5,903
— $ —
$ —
18,032
$ 32,674
$
5,903
$
$
$
$
41,635
(31,041)
4,972
2,845
38,198
56,609
—
56,609
$ 152,888
$263,515
$ 99,420
$ 515,823
Individually evaluated for impairment
$
3,707
$
393
$ —
$
4,100
Ending balance:
Collectively evaluated for impairment
$ 149,181
$263,122
$ 99,420
$ 511,723
93
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
Total loans:
(In thousands)
Allowance for loan losses:
Beginning balance, January 1, 2012
Charge-offs
Recoveries
Net provision for loan losses (a)
Increase in FDIC loss share
receivable (a)
Ending balance
Ending balance:
Individually evaluated for impairment
Ending balance:
Collectively evaluated for impairment
Loans:
Ending balance:
Ending balance:
Commercial
Residential
mortgages
Consumer
Total
December 31, 2012
$
$
$
$
78,414
(72,224)
10,269
35,733
25,777
77,969
7,165
70,804
$
$
$
$
$
13,918
(6,275)
324
19,411
$
32,549
(17,302)
4,108
(952)
124,881
(95,801)
14,701
54,192
11,702
719
38,198
39,080
$
19,122
$
136,171
— $
— $
7,165
39,080
$
19,122
$
129,006
$8,345,688
$1,577,944
$1,654,170
$11,577,802
Individually evaluated for impairment
$
80,464
$
3,114
$
— $
83,578
Ending balance:
Collectively evaluated for impairment
$8,265,224
$1,574,830
$1,654,170
$11,494,224
(a) The Company increased the allowance by $41.0 million for losses related to impairment on certain pools of
covered loans. This provision was mostly offset by a $38.2 million increase in the FDIC loss share receivable.
94
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
Originated loans:
(In thousands)
Allowance for loan losses:
Beginning balance, January 1, 2011
Charge-offs
Recoveries
Net provision for loan losses
Increase in FDIC loss share receivable
Ending balance
Ending balance:
Individually evaluated for impairment
Ending balance:
Collectively evaluated for impairment
Loans:
Ending balance:
Ending balance:
Commercial
Residential
mortgages Consumer
December 31, 2011
Total
$
$
$
$
56,859 $
(43,654)
20,006
27,000
—
4,626 $
(2,634)
1,091
1,811
—
19,840 $
(12,500)
3,887
6,914
—
81,325
(58,788)
24,984
35,725
—
60,211 $
4,894 $
18,141 $
83,246
6,988 $
551 $
— $
7,539
53,223 $
4,343 $
18,141 $
75,707
$3,325,972 $487,147 $1,074,611 $4,887,730
Individually evaluated for impairment
$
28,034 $
4,090 $
— $
32,124
Ending balance:
Collectively evaluated for impairment
$3,297,938 $483,057 $1,074,611 $4,855,606
Covered loans:
(In thousands)
Allowance for loan losses:
Beginning balance, January 1, 2011
Charge-offs
Recoveries
Net provision for loan losses (a)
Increase in FDIC loss share
receivable (a)
Ending balance
Ending balance:
Commercial
Residential
mortgages
Consumer
Total
December 31, 2011
$ —
(11,100)
—
2,762
$ —
—
—
(179)
$
672
(375)
—
424
$
672
(11,475)
—
3,007
26,541
9,203
13,687
49,431
$ 18,203
$
9,024
$ 14,408
$ 41,635
Individually evaluated for impairment
$ —
$ —
$ —
$ —
Ending balance:
Collectively evaluated for impairment
$ 18,203
$
9,024
$ 14,408
$ 41,635
Loans:
Ending balance:
Ending balance:
$239,542
$285,682
$146,219
$671,443
Individually evaluated for impairment
$ 18,209
$
637
$ —
$ 18,846
Ending balance:
Collectively evaluated for impairment
$221,333
$285,045
$146,219
$652,597
95
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
Total loans:
(In thousands)
Allowance for loan losses:
Beginning balance, January 1,
2011
Charge-offs
Recoveries
Net provision for loan
losses (a)(c)
Increase in FDIC loss
Commercial
Residential
mortgages
Consumer
Total
December 31, 2011
Total
2010
$
$
56,859
(54,754)
20,006
4,626
(2,634)
1,091
$
20,512
(12,875)
3,887
$
81,997
(70,263)
24,984
$
66,050
(58,266)
7,584
29,762
1,632
7,338
38,732
65,991
share receivable (a)(c)
26,541
9,203
13,687
49,431
638
Ending balance
Ending balance:
Individually evaluated
for impairment
Ending balance:
Collectively evaluated
for impairment
Loans:
Ending balance:
Ending balance:
Individually evaluated
for impairment
Ending balance:
Collectively evaluated
for impairment (d)
Ending balance:
$
78,414
$
13,918
$
32,549
$
124,881
$
81,997
$
6,988
$
551
$
— $
7,539
$
11,952
$
71,426
$
13,367
$
32,549
$
117,342
$
70,045
$8,062,158
$1,507,498
$1,607,370
$11,177,026
$4,957,164
$
46,243
$
4,727
$
— $
50,970
$
62,454
$8,015,915
$1,502,771
$1,607,370
$11,126,056
$4,894,710
Acquired loans (b)
$4,496,644
$ 734,669
$ 386,540
$ 5,617,853
$
—
(a) During 2011, the Company increased the allowance by $52.4 million for losses related to impairment on
(b)
certain pools of covered loans. This provision was mostly offset by a $49.4 million increase in the FDIC loss
share receivable.
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 was
established on these acquired loans in 2011. These loans are included in the ending balance of loans
collectively evaluated for impairment.
(c) During 2010, the Company increased the allowance by $672 thousand for losses related to impairment on
certain covered consumer loans. This provision was mostly offset by a $638 thousand increase in the FDIC
loss share receivable.
(d) Covered loans of $809.2 million are included in the ending balance of loans collectively evaluated for
impairment at December 31, 2010.
96
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
FDIC Loss Share Receivable
The receivable arising from the loss-sharing agreements (referred to as the “FDIC loss-share receivable” on
our consolidated statements of financial condition) is measured separately from the covered loan portfolio
because the agreements are not contractually part of the covered loans and are not transferable should the
Company choose to dispose of the covered loans. The following schedule shows activity in the loss share
receivable for 2012 and 2011:
(In thousands)
Balance, January 1
Discount accretion
Charge-offs, writedowns and other losses
External expenses qualifying under loss share agreements
Payments received from the FDIC
Balance, December 31
December 31,
2012
2011
$ 231,085
5,000
45,459
11,276
(114,976)
$ 332,521
16,689
48,540
15,088
(181,753)
$ 177,844
$ 231,085
97
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (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.
Originated loans:
Commercial
Residential mortgages
Consumer
Total originated loans
Acquired loans:
Commercial
Residential mortgages
Consumer
Total acquired loans
Covered loans:
Commercial
Residential mortgages
Consumer
Total covered loans
Total loans:
Commercial
Residential mortgages
Consumer
Total loans
December 31,
2012
December 31,
2011
(In thousands)
$ 91,908
7,705
3,815
$103,428
$ 16,902
10,551
2,634
$ 30,087
$
3,707
393
—
$
4,100
$112,517
18,649
6,449
$137,615
$ 55,046
24,406
3,855
$ 83,307
$ —
—
1,117
$
1,117
$ 18,209
637
—
$ 18,846
$ 73,255
25,043
4,972
$103,270
The amount of interest that would have been recorded on non-accrual loans had the loans not been classified
as non-accrual in 2012, 2011 and 2010, was $7.8 million, $4.9 million and $5.7 million, respectively. Interest
actually received on non-accrual loans during 2012, 2011 and 2010 was $2.6 million, $1.1 million and
$1.0 million, respectively.
Included in non-accrual loans is $30.3 million in restructured commercial loans. Total troubled debt
restructurings (TDRs) for the period ending December 31, 2012, were $32.2 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.
98
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
The table below details the troubled debt restructurings (TDR) that occurred during 2012 and 2011 by
portfolio segment and troubled debt restructurings that subsequently defaulted within twelve months of
modification (dollar amounts in thousands). 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.
Troubled Debt Restructurings:
Originated loans:
Commercial
Residential mortgages
Consumer
Total originated loans
Aquired loans:
Commercial
Residential mortgages
Consumer
Total acquired loans
Covered loans:
Commercial
Residential mortgages
Consumer
Total covered loans
Total loans:
Commercial
Residential mortgages
Consumer
Total loans
2012
2011*
Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment
Number of
Contracts
Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment
Number of
Contracts
15
3
—
18
4
—
—
4
—
—
—
—
19
3
—
22
$15,150
865
—
$16,015
$ 4,823
—
—
$ 4,823
$ —
—
—
$ —
$19,973
865
—
$20,838
$ 8,102
722
—
$ 8,824
$ 4,764
—
—
$ 4,764
$ —
—
—
$ —
$12,866
722
—
$13,588
23
1
—
24
—
—
—
—
—
—
—
—
23
1
—
24
$17,450
660
—
$18,110
$ —
—
—
$ —
$ —
—
—
$ —
$17,450
660
—
$18,110
$7,150
153
—
$7,303
$ —
—
—
$ —
$ —
—
—
$ —
$7,150
153
—
$7,303
99
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
Troubled Debt Restructurings That
Subsequently Defaulted:
Originated loans:
Commercial
Residential mortgages
Consumer
Total originated loans
Acquired loans:
Commercial
Residential mortgages
Consumer
Total acquired loans
Covered loans:
Commercial
Residential mortgages
Consumer
Total covered loans
Total loans:
Commercial
Residential mortgages
Consumer
Total loans
2012
2011
Number of
Contracts
Recorded
Investment
Number of
Contracts
Recorded
Investment
—
—
4
4
—
—
—
—
—
—
—
—
—
—
4
4
$1,895
—
—
$1,895
$ —
—
—
$ —
$ —
—
—
$ —
$1,895
—
—
$1,895
—
—
2
2
—
—
—
—
—
—
—
—
—
—
2
2
$742
—
—
$742
$—
—
—
$—
$—
—
—
$—
$742
—
—
$742
* 2011 TDR numbers were restated to reflect TDR activity during the year rather than the period-end balance
that was reported in the 2011 10K.
100
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
The Banks’ loans that are risk rated Substandard and Doubtful are reviewed for impairment. However, for
FAS 114 analysis used in the ALLL methodology, only loans greater than $500,000 are included in the
impairment review. This information is the source for the following impaired table. For the credit quality
indicator tables presented later in this note, all loans are included. The tables below present impaired loans
disaggregated by class at December 31, 2012 and 2011:
December 31, 2012
Originated loans:
With no related allowance recorded:
Commercial
Residential mortgages
Consumer
With an allowance recorded:
Commercial
Residential mortgages
Consumer
Total:
Commercial
Residential mortgages
Consumer
Total originated loans
Acquired loans:
With no related allowance recorded:
Commercial
Residential mortgages
Consumer
With an allowance recorded:
Commercial
Residential mortgages
Consumer
Total:
Commercial
Residential mortgages
Consumer
Total acquired loans
Recorded
Investment
Unpaid
Principal
Balance
Average
Recorded
Investment
Interest
Income
Recognized
Related
Allowance
(In thousands)
$34,705
2,721
—
$55,101
4,874
—
37,426
59,975
$ —
—
—
—
35,850
—
—
35,850
70,555
2,721
—
37,917
—
—
37,917
93,018
4,874
—
6,377
—
—
6,377
6,377
—
—
$23,793
3,255
—
27,048
41,232
4,619
—
45,851
65,025
7,874
—
$ 464
155
—
619
703
—
—
703
1,167
155
—
$73,276
$97,892
$6,377
$72,899
$1,322
$ — $ — $ —
—
—
—
—
—
—
—
—
6,202
—
—
6,202
6,202
—
—
6,386
—
—
6,386
6,386
—
—
—
788
—
—
788
788
—
—
$ —
—
—
—
1,551
—
—
1,551
1,551
—
—
$ —
—
—
—
—
—
—
—
—
—
—
$ 6,202
$ 6,386
$ 788
$ 1,551
$ —
101
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
December 31, 2012
Covered loans:
With no related allowance recorded:
Commercial
Residential mortgages
Consumer
With an allowance recorded:
Commercial
Residential mortgages
Consumer
Total:
Commercial
Residential mortgages
Consumer
Total covered loans
Total loans:
With no related allowance recorded:
Commercial
Residential mortgages
Consumer
With an allowance recorded:
Commercial
Residential mortgages
Consumer
Total:
Commercial
Residential mortgages
Consumer
Total loans
Recorded
Investment
Unpaid
Principal
Balance
Average
Recorded
Investment
Interest
Income
Recognized
Related
Allowance
(In thousands)
$ 3,707
393
—
$ 10,208
787
—
$ —
—
—
4,100
10,995
—
—
—
—
—
—
—
—
3,707
393
—
10,208
787
—
—
—
—
—
—
—
—
—
$ 6,008
446
—
6,454
—
—
—
—
6,008
446
—
$ —
—
—
—
—
—
—
—
—
—
—
$ 4,100
$ 10,995
$ —
$ 6,454
$ —
$38,412
3,114
—
$ 65,309
5,661
—
41,526
70,970
$ —
—
—
—
42,052
—
—
42,052
80,464
3,114
—
44,303
—
—
44,303
109,612
5,661
—
7,165
—
—
7,165
7,165
—
—
$29,801
3,701
—
33,502
42,783
4,619
—
47,402
72,584
8,320
—
$ 464
155
—
619
703
—
—
703
1,167
155
—
$83,578
$115,273
$7,165
$80,904
$1,322
102
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
December 31, 2011
Originated loans:
With no related allowance recorded:
Commercial
Residential mortgages
Consumer
With an allowance recorded:
Commercial
Residential mortgages
Consumer
Total:
Commercial
Residential mortgages
Consumer
Total originated loans
Covered loans:
With no related allowance recorded:
Commercial
Residential mortgages
Consumer
With an allowance recorded:
Commercial
Residential mortgages
Consumer
Total:
Commercial
Residential mortgages
Consumer
Total covered loans
Total loans:
With no related allowance recorded:
Commercial
Residential mortgages
Consumer
With an allowance recorded:
Commercial
Residential mortgages
Consumer
Total:
Commercial
Residential mortgages
Consumer
Total loans
Recorded
Investment
Unpaid
Principal
Balance
Average
Recorded
Investment
Interest
Income
Recognized
Related
Allowance
(In thousands)
$10,177
1,153
—
$24,935
1,957
—
11,330
26,892
$ —
—
—
—
28,034
4,090
—
32,124
38,211
5,243
—
33,168
5,360
—
38,528
58,103
7,317
—
6,988
551
—
7,539
6,988
551
—
$13,992
1,087
—
15,079
31,959
5,007
—
36,966
45,951
6,094
—
$359
58
—
417
254
7
—
261
613
65
—
$43,454
$65,420
$7,539
$52,045
$678
$17,874
429
—
$21,757
845
—
18,303
22,602
$ —
—
—
—
335
208
543
335
228
563
18,209
637
—
22,092
1,073
—
9
19
28
9
19
—
$ 4,469
1,847
—
6,316
27,765
52
27,817
32,234
1,899
—
$—
—
—
—
—
—
—
—
—
—
$18,846
$23,165
$
28
$34,133
$—
$28,051
1,582
—
$46,692
2,802
—
29,633
49,494
$ —
—
—
—
28,369
4,298
—
32,667
56,420
5,880
—
33,503
5,588
—
39,091
80,195
8,390
—
6,997
570
—
7,567
6,997
570
—
$18,461
2,934
—
21,395
59,724
5,059
—
64,783
78,185
7,993
—
$359
58
—
417
254
7
—
261
613
65
—
$62,300
$88,585
$7,567
$86,178
$678
103
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
No acquired loans were evaluated individually for impairment at December 31, 2011.
Covered loans and loans acquired with existing credit impairment with an accretable yield are considered to
be current in the following delinquency 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 at December 31, 2012 and December 31, 2011:
30-59 days
past due
60-89 days
past due
Greater than
90 days
past due
Total
past due
Current
Total
Loans
(In thousands)
Recorded
investment
> 90 days
and
accruing
December 31, 2012
Originated loans:
Commercial
Residential mortgages
Consumer
$24,398 $16,508
3,303
2,150
11,500
10,348
$46,355
4,100
4,231
$ 87,261 $ 4,840,199 $ 4,927,460 $ 5,262
—
2,474
827,985
1,351,776
809,082
1,335,047
18,903
16,729
Total
$46,246 $21,961
$54,686
$122,893 $ 6,984,328 $ 7,107,221 $ 7,736
Acquired loans:
Commercial
Residential mortgages
Consumer
Total
Covered loans:
$28,791 $ 4,666
1,290
430
9,641
1,282
$15,774
8,996
2,170
$ 49,231 $ 3,216,109 $ 3,265,340 $ 4,354
1,106
47
486,444
202,974
466,517
199,092
19,927
3,882
$39,714 $ 6,386
$26,940
$ 73,040 $ 3,881,718 $ 3,954,758 $ 5,507
Commercial
Residential mortgages
Consumer
$ — $ — $ 3,707
393
—
—
—
—
—
$
3,707 $
393
—
149,181 $
263,122
99,420
152,888 $ —
—
263,515
—
99,420
Total
Total loans:
$ — $ — $ 4,100
$
4,100 $
511,723 $
515,823 $ —
Commercial
Residential mortgages
Consumer
$53,189 $21,174
4,593
2,580
21,141
11,630
$65,836
13,489
6,401
$140,199 $ 8,205,489 $ 8,345,688 $ 9,616
1,106
2,521
1,577,944
1,654,170
1,538,721
1,633,559
39,223
20,611
Total
$85,960 $28,347
$85,726
$200,033 $11,377,769 $11,577,802 $13,243
104
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
December 31, 2011
Originated loans:
30-59 days
past due
60-89 days
past due
Greater than
90 days
past due
Total
past due
Current
Total
Loans
Recorded
investment
> 90 days
and accruing
(In thousands)
Commercial
Residential mortgages
Consumer
$23,996
17,884
1,803
$ 943
4,364
2,481
$ 58,867 $ 83,806 $ 3,242,166 $ 3,325,972
487,147
1,074,611
439,499
1,066,416
47,648
8,195
25,400
3,911
Total
$43,683
$7,788
$ 88,178 $139,649 $ 4,748,081 $ 4,887,730
Acquired loans:
Commercial
Residential mortgages
Consumer
Total
Covered loans:
$ — $ — $ — $ — $ 4,496,644 $ 4,496,644
734,669
386,540
734,669
382,286
—
4,254
—
2,126
—
1,698
—
430
$ 1,698
$ 430
$
2,126 $
4,254 $ 5,613,599 $ 5,617,853
Commercial
Residential mortgages
Consumer
$ — $ — $ 18,209 $ 18,209 $
—
—
—
—
637
—
637
—
221,333 $
285,045
146,219
239,542
285,682
146,219
Total
Total loans:
$ — $ — $ 18,846 $ 18,846 $
652,597 $
671,443
Commercial
Residential mortgages
Consumer
$23,996
17,884
3,501
$ 943
4,364
2,911
$ 77,076 $102,015 $ 7,960,143 $ 8,062,158
1,507,498
1,607,370
1,459,213
1,594,921
48,285
12,449
26,037
6,037
Total
$45,381
$8,218
$109,150 $162,749 $11,014,277 $11,177,026
$3,821
994
56
$4,871
$ —
—
1,009
$1,009
$ —
—
—
$ —
$3,821
994
1,065
$5,880
The following table presents the credit quality indicators of the Company’s various classes of loans at
December 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. Portfolio totals by risk grade were unchanged.
Commercial Credit Exposure
Credit Risk Profile by Internally Assigned Grade
December 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
Pass-Watch
Special
Mention
Substandard
Doubtful
Loss
$4,521,932 $3,011,320 $ 21,881 $7,555,133 $3,019,100 $3,974,463 $ 16,843 $7,010,406
150,041
175,127
60,042
21,117
76,393
82,605
71,405
13,606
83,985
238,486
452
—
39,631
142,618
366
—
7,433
49,041
53,416
—
131,049
430,145
54,234
—
35,155
194,900
424
—
125,852
334,357
1,930
—
9,368
124,371
75,242
112
170,375
653,628
77,596
112
Total
$4,927,460 $3,265,340 $152,888 $8,345,688 $3,325,972 $4,496,644 $239,542 $8,062,158
105
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
Residential Mortgage Credit Exposure
Credit Risk Profile by Internally Assigned Grade
December 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
Pass-Watch
Special Mention
Substandard
Doubtful
Loss
$804,007 $444,571 $124,605 $1,373,183 $460,261 $673,751 $120,180 $1,254,192
27,405
13,514
207,069
5,318
—
18,133
1,773
9,686
3,286
48,581 139,643
4,440
—
24,310
9,147
146,098
25,206
—
5,096
5,251
31,478
48
—
7,499
542
18,845
—
—
3,794
701
19,483
—
—
15,420
3,195
95,137
25,158
—
878
—
Total
$827,985 $486,444 $263,515 $1,577,944 $487,147 $734,669 $285,682 $1,507,498
Consumer Credit Exposure
Credit Risk Profile Based on Payment Activity
December 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
Nonperforming
$1,347,961 $200,340 $99,420 $1,647,721 $1,070,756 $385,423 $146,219 $1,602,398
4,972
3,815
1,117
2,634
3,855
6,449
—
—
Total
$1,351,776 $202,974 $99,420 $1,654,170 $1,074,611 $386,540 $146,219 $1,607,370
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.
Below are the definitions of the Company’s internally assigned grades:
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 in full highly questionable or improbable.
106
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans (continued)
• 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 $50.6 million and $72.4 million, respectively, in loans held for sale at December 31,
2012 and 2011. Of the $50.6 million at December 31, 2012, $3.6 million are problem commercial loans held for
sale. The remainder of $47.0 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.
Changes in the carrying amount of acquired impaired loans and accretable yield are presented in the
following table for the years ended December 31, 2012 and 2011:
December 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
Additions
Payments received, net
Accretion
Decrease in expected
cash flows based on
actual cash flow and
changes in cash flow
assumptions
Net transfers from (to)
nonaccretable
difference to accretable
yield
$ 671,443 $153,137 $ 339,452 $130,691 $ 809,459 $107,638 $
—
(200,719)
45,099
—
—
— (250,338)
52,087
(45,099)
—
—
— (193,432)
55,416
(52,087)
— 535,489
— (206,306)
10,269
(55,416)
—
(22,719)
— $ —
132,136
— (19,326)
— 23,688
— (18,930)
— (26,630)
—
26,882
— 100,894
— 119,845
—
47,904
Balance at end of period
$ 515,823 $115,594 $ 141,201 $203,186 $ 671,443 $153,137 $ 339,452 $130,691
107
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Long-Term Debt
Long-term debt consisted of the following:
Subordinated notes payable
Term note payable dated December 21, 2012
Term note payable dated May 20, 2011
Other long-term debt
Total long-term debt
December 31
2012
2011
$ 98,011
220,000
—
78,578
$150,000
—
140,000
63,890
$396,589
$353,890
On December 21, 2012, the Company entered into a three-year term loan agreement that provides for a
$220 million term loan facility, all of which was borrowed on the closing date. The agreement also provides for
up to $50 million in additional borrowings under the loan facility, subject to obtaining additional commitments
from existing or new lenders and satisfaction of certain other conditions. Amounts borrowed under the loan
facility bear interest at a variable rate based on LIBOR plus 1.875% per annum. The loan agreement requires
quarterly principal payments of $8.8 million, and outstanding borrowings may be prepaid in whole or in part at
any time prior to the December 21, 2015 maturity date without premium or penalty.
The Company must satisfy certain financial covenants and is subject to other restrictions customary in
financings of this nature, none of which is expected to adversely impact the operations of the Company. Under
the financial covenants Hancock’s ratio of consolidated nonperforming assets to consolidated total loans and
other real estate, calculated without FDIC-covered assets, cannot exceed 3.50%. Hancock’s consolidated net
worth must be a minimum of $2.1 billion initially, increasing each quarter by 50% of consolidated net income,
but without reduction for net losses, and increasing by 100% of any common stock issuance. The Company and
its financial institution subsidiaries must also maintain a Tier 1 regulatory capital leverage ratio of at least 8%; a
Tier 1 risk based capital ratio of at least 10%; and a total risk based capital ratio of at least 12%. The Company
was in compliance with all covenants as of December 31, 2012.
In connection with the execution of the new term loan agreement, the Company repaid the $140 million
principal and all remaining interest due under the prior term loan agreement that was scheduled to mature on
June 3, 2013, and the prior agreement was terminated without premium or penalty.
During the second quarter of 2012, the Company initiated a tender offer for up to $75 million of Whitney
Bank’s subordinated debt. A total of $150 million of 10-year 5.875% fixed-rate subordinated debt had been
issued by Whitney National Bank in March 2007 and was assumed by Hancock in the Whitney acquisition. In
July 2012, the tender was consummated, and approximately $52 million of the Whitney subordinated debt was
repurchased. In addition to paying the indebtedness represented by the notes and accrued interest, the Company
incurred approximately $5.3 million in costs, including a premium of $5.1 million that are included in noninterest
expense for the third quarter for 2012. As of December 31, 2012, 80% of the balance of the subordinated notes
qualify as capital in the calculation of certain regulatory capital ratios. The qualifying amount will be reduced by
20% per year in the second quarter of each year through maturity.
Substantially all of the other long-term debt consists of borrowings associated with tax credit fund activities.
These borrowings mature at various dates beginning in 2015 through 2052. These borrowings have an expected
maturity of generally seven years.
108
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. 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. The Banks have also entered into interest rate
derivative agreements as a service to certain qualifying customers. The Banks manage a matched book with
respect to these customer derivatives in order to minimize their net risk exposure resulting from such agreements.
Fair Values of Derivative Instruments on the Balance Sheet
The Company has made an accounting policy election to use the exception in Accounting Standards
Codification (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 ASC
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 December 31, 2012 and
December 31, 2011.
Fair Values of Derivative Instruments
Asset Derivatives
Liability Derivatives
As of December 31,
2012
Balance Sheet
Location
Fair
Value
As of December 31,
2011
Balance Sheet
Location
Fair
Value
As of December 31,
2012
Balance Sheet
Location
Fair
Value
As of December 31,
2011
Balance Sheet
Location
Fair
Value
Derivatives designated as
hedging instruments
Interest rate products
Total derivatives
designated as hedging
instruments
Derivatives not designated
as hedging instruments
Interest rate products
Total derivatives not
designated as hedging
instruments
Other
assets
$ —
Other
assets
Other
Other
$ —
liabilities $
298
liabilities $
107
$ —
$ —
$
298
$
107
Other
assets
$20,093
Other
assets
Other
Other
$14,952
liabilities $20,802
liabilities $15,536
$20,093
$14,952
$20,802
$15,536
Cash Flow Hedges of Interest Rate Risk
At both December 31, 2012 and 2011, the Company was party to an interest rate swap agreement with a
notional amount of $140 million that was designated as a cash flow hedge of the Company’s forecasted variable
cash flows under a variable-rate term borrowing agreement. The swap agreement expires in June 2013. Under the
swap agreement, the Company receives interest on the notional amount at a variable rate and pays interest at a
fixed rate. The Company’s objective is to decrease volatility in interest expense and to manage its exposure to
interest rate movements.
109
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Derivatives (continued)
The effective portion of changes in the fair value of derivatives designated and qualifying 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 2011, and the impact of reclassifications on earnings during 2012 has been and is expected to
continue to 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 2012. Amounts reported in AOCI related to
these derivatives will be reclassified to interest expense as interest payments are made on the Company’s
variable-rate liabilities. During the next twelve months, the Company estimates that $0.3 million will be
reclassified as a decrease to interest expense.
Derivatives Not Designated as Hedges
Customer interest rate derivative program
The Banks enter into interest rate derivative agreements, primarily rate swaps, with commercial banking
customers to facilitate their risk management strategies. The Banks simultaneously enter into offsetting
agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such
transactions. Because 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 December 31, 2012 and 2011, the aggregate notional value of interest
rate contracts with customers was approximately $550 million and $290 million, respectively, with a like amount
of offsetting agreements.
Mortgage banking derivatives
The Banks also enter into certain derivative agreements as part of their mortgage banking activities. These
agreements include interest rate lock commitments on prospective residential mortgage loans and forward
commitments to sell these loans to investors on a best efforts delivery basis. The aggregate notional amount of
mortgage banking derivatives was $173 million at December 31, 2012 and $110 million at December 31, 2011.
The fair value of mortgage banking derivatives was immaterial at both December 31, 2012 and 2011.
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 years ended December 31, 2012, 2011 and 2010.
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
December 31, 2012, the aggregate fair value of derivative instruments with credit-risk-related contingent features
that were in a net liability position was $18.5 million, for which the Banks had posted collateral of $16.8 million.
110
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Property and Equipment
Property and equipment consisted of the following (in thousands):
Land and land improvements
Buildings and leasehold improvements
Furniture, fixtures and equipment
Software
Assets under development
Accumulated depreciation and amortization
Property and equipment, net
December 31,
2012
2011
$ 121,013
373,333
99,288
28,167
16,655
$ 130,358
372,232
92,097
34,184
25,296
638,456
(160,592)
654,167
(148,780)
$ 477,864
$ 505,387
Depreciation and amortization expense was $32.9 million, $24.6 million and $13.5 million for the years
ended December 31, 2012, 2011 and 2010, respectively.
Note 8. Goodwill and Other Intangible Assets
Goodwill represents the excess of the consideration exchanged over the fair value of the net assets acquired
in purchase business combinations. The Company tests goodwill for impairment annually and no impairment
charges were identified in the most recent test as of September 30, 2012. No goodwill impairment charges were
recognized during 2012, 2011, or 2010. The carrying amount of goodwill was $628.9 million and $651.2 million
at December 31, 2012 and 2011, respectively. As discussed in Note 2 to the consolidated financial statements, the
Company recorded approximately $589.5 million of goodwill during 2011 in connection with its acquisition of
Whitney. In 2012, goodwill was reduced $22.3 million for deferred tax purchase accounting adjustments.
Identifiable intangible assets with finite lives are amortized over the periods benefited and are evaluated for
impairment similar to other long-lived assets. The identifiable intangible assets recorded in connection with the
Whitney acquisition during 2011 are detailed in Note 2 to the consolidated financial statements. During 2012, the
Company recorded a $10.0 million customer relationship intangible in connection with the repurchase of its
merchant card processing business.
The carrying value of intangible assets subject to amortization was as follows (in thousands):
Core deposit intangibles
Credit card and trust relationships
Value of insurance business acquired
Non-compete agreements
Trade name
Merchant processing relationships
111
December 31, 2012
Purchase
Value
Accumulated
Amortization
Carrying
Value
$200,547
22,400
2,431
400
11,722
10,000
$247,500
$45,832
4,980
2,084
100
4,124
971
$58,091
$154,715
17,420
347
300
7,598
9,029
$189,409
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Goodwill and Other Intangible Assets (continued)
Core deposit intangibles
Credit card and trust relationships
Value of insurance business acquired
Non-compete agreements
Trade name
Merchant processing relationships
Aggregate amortization expense for:
Core deposit intangibles
Credit card and trust relationships
Value of insurance business acquired
Non-compete agreements
Trade name
Merchant processing relationships
December 31, 2011
Purchase
Value
Accumulated
Amortization
Carrying
Value
$206,047
22,400
2,431
322
11,822
—
$243,022
$27,691
1,908
1,926
322
100
—
$31,947
$178,356
20,492
505
—
11,722
—
$211,075
Years Ended December 31,
2012
2011
2010
$23,642
3,072
158
100
4,124
971
$14,474
1,908
169
—
—
—
$2,491
—
213
14
10
—
$32,067
$16,551
$2,728
The weighted-average remaining life of core deposit intangibles is 5 years. The weighted-average remaining
life of other identifiable intangibles is 4 years.
The following table shows estimated amortization expense of other intangible assets for the five succeeding
years and thereafter, calculated based on current amortization schedules (in thousands):
2013
2014
2015
2016
2017
Thereafter
$ 29,475
26,925
24,363
19,872
17,825
70,949
$189,409
112
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Deposits
The maturities of time deposits at December 31, 2012 follow (in thousands):
2013
2014
2015
2016
2017
Thereafter
Total time deposits
$1,935,235
236,471
210,762
73,137
119,152
6,209
$2,580,966
Time deposits of $100,000 or more totaled approximately $1.3 billion and $1.6 billion at December 31,
2012 and 2011, respectively.
Note 10. Short-Term Borrowings
The following table presents information concerning short-term borrowings (in thousands):
December 31,
2012
2011
Federal funds purchased
Amount outstanding at period-end
Weighted average interest rate at period-end
Weighted average interest rate during the year
Average daily balance during the year
Maximum month end balance during the year
$
25,704
$
16,819
0.37%
0.22%
0.19%
0.18%
$
$
30,137
33,964
$
$
12,911
26,666
Securities sold under agreements to repurchase
Amount outstanding at period-end
Weighted average interest rate at period-end
Weighted average interest rate during the year
Average daily balance during the year
Maximum month end balance during the year
$ 613,429
$1,027,635
0.72%
0.78%
0.65%
1.03%
$ 760,938
$1,005,014
$ 681,474
$1,027,635
FHLB borrowings:
Amount outstanding at period-end
Weighted average interest rate at period-end
Weighted average interest rate during the year
Average daily balance during the year
Maximum month end balance during the year
$
$
$
—
—
0.16%
32,571
—
$
$
$
—
—
0.15%
81,673
10,153
The Banks borrow funds on a secured basis by selling securities under agreements to repurchase, mainly in
connection with treasury-management services offered to their deposit customers. Customer repurchase
agreements generally mature daily. Borrowings under repurchase agreements also include certain term
agreements with dealers with various maturities, all of which are callable by the dealer. The Banks have the
ability to exercise legal authority over the underlying securities. Federal funds purchased represent unsecured
borrowings from other banks, generally on an overnight basis.
113
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Short-Term Borrowings (continued)
The Company has a $1.7 billion line of credit with the Federal Home Loan Bank (FHLB) that is secured by
a blanket pledge of certain mortgage loans. At December 31, 2012, the borrowing capacity under the FHLB line
of credit was approximately $1.6 billion.
Note 11. Stockholders’ Equity
Common Stock Offering
In April 2011, Hancock completed an underwritten public offering of the Company’s common stock. The
underwriters purchased 6,958,143 shares at a public offering price of $32.25 per share. The net proceeds to the
Company after deducting offering expenses and underwriting discounts totaled $214 million. The proceeds of the
offering were used for general corporate purposes, including the enhancement of the Company’s capital position
and the purchase of Whitney Holding Corporation’s TARP preferred stock and warrant in connection with the
Whitney acquisition. The number and value of Company common shares exchanged in the Whitney transaction
are discussed in Note 2.
Accumulated Other Comprehensive Income (Loss)
AOCI includes unrealized gains and losses on available for sale (“AFS”) securities. Unrealized gain (loss)
on AFS securities also includes unrealized gains on AFS securities that were transferred to held to maturity
securities in the first quarter of 2012. Such amounts will be amortized over the estimated remaining life of the
security as an adjustment to yield, offsetting the related amortization of the net premium created in the transfer.
Unrealized losses on employee benefit plans will be reclassified into income as pension and post retirement costs
are recognized over the remaining service period of plan participants. Accumulated losses on the cash flow hedge
of the variable-rate term loan agreement described in Note 6 will be reclassified into income over the life of the
debt. Gains and losses in AOCI are net of deferred income taxes.
114
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Stockholders’ Equity (continued)
A rollforward of the components of accumulated other comprehensive income (loss) is included as follows
(in thousands):
Balance, December 31, 2009
Other comprehensive income before
income taxes:
Net change in unrealized gain (loss)
Reclassification adjustment for net
losses realized and included in
earnings
Income tax expense (benefit)
Balance, December 31, 2010
Other comprehensive income before
income taxes:
Net change in unrealized gain (loss)
Reclassification adjustment for net
losses realized and included in
earnings
Income tax expense (benefit)
Balance, December 31, 2011
Other comprehensive income before
income taxes:
Net change in unrealized gain (loss)
Transfer of net unrealized gain from
AFS to HTM, net of cummulative
tax effect
Reclassification adjustment for net
losses realized and included in
earnings
Amortization of unrealized net gain on
securities transferred to held-to-
maturity
Income tax expense (benefit)
Available for Sale
Securities
Held to Maturity
Securities
Transferred from
AFS
Employee Benefit
Plans
Loss on Effective
Cash Flow
Hedges
Total
$ 28,386
$ —
$(25,388)
$ —
$ 2,998
(1,760)
—
(606)
27,232
52,300
91
19,145
60,478
6,076
—
—
—
—
—
—
—
—
—
(6,437)
2,535
(1,439)
(27,851)
—
—
—
—
(8,197)
2,535
(2,045)
(619)
(94,848)
(107)
(42,655)
2,832
(32,944)
(86,923)
—
(42)
(65)
2,923
(13,841)
(26,510)
2,566
(502)
8,140
(24,598)
24,598
—
—
—
(1,441)
—
7,457
311
6,327
—
1,661
(8,752)
(3,244)
—
3,788
—
(75)
(8,752)
2,130
Balance, December 31, 2012
$ 38,854
$ 19,090
$(80,688)
$(181)
$(22,925)
115
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Stockholders’ Equity (continued)
Regulatory Capital
Measures of regulatory capital are an important tool used by regulators to monitor the financial health of
financial institutions. The primary quantitative measures used to gauge capital adequacy are the ratios of total
and Tier 1 regulatory capital to risk-weighted assets (risk-based capital ratios) and the ratio of Tier 1 capital to
average total asets (leverage ratio). Both the Company and its bank subsidiaries are required to maintain
minimum risk-based capital ratios of 8.0% total regulatory capital and, 4.0% Tier 1 capital. The minimum
leverage ratio is 3.0% for bank holding companies and banks that meet certain specified criteria, including
having the highest supervisory rating. All others are required to maintain a leverage ratio of at least 4.0%.
To evaluate capital adequacy, regulators compare an institution’s regulatory capital ratios with their agency
guidelines, as well as with the guidelines established as part of the uniform regulatory framework for prompt
corrective supervisory action toward financial institutions. The framework for prompt corrective action
categorizes capital levels into one of five classifications rating from well-capitalized to critically under-
capitalized. For an institution to be eligible to be classified as well capitalized its total risk-based capital ratios
must be at least 10.0% for total capital and 6.0% for Tier 1 capital, and its leverage ratio must be at least 5.0%. In
reaching an overall conclusion on capital adequacy or assigning a classification under the uniform framework,
regulators must also consider other subjective and quantitative measures of risk associated with an institution.
The subsidiary banks were deemed to be well capitalized based upon the most recent notifications from their
regulators. There are no conditions or events since those notifications that management believes would change
these classifications. At December 31, 2012 and 2011, the Company and the Banks were in compliance with all
of their respective minimum regulatory capital requirements.
116
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Stockholders’ Equity (continued)
Following is a summary of the actual regulatory capital amounts and ratios for the Company and the Banks
together with corresponding regulatory capital requirements at December 31, 2012 and 2011 (amounts in
thousands):
At December 31, 2012
Total capital (to risk weighted assets)
Company
Hancock Bank
Whitney Bank
Tier 1 capital (to risk weighted assets)
Company
Hancock Bank
Whitney Bank
Tier 1 leverage capital
Company
Hancock Bank
Whitney Bank
At December 31, 2011
Total capital (to risk weighted assets)
Company
Hancock Bank
Whitney Bank
Tier 1 capital (to risk weighted assets)
Company
Hancock Bank
Whitney Bank
Tier 1 leverage capital
Company
Hancock Bank
Whitney Bank
Actual
Required for Minimum
Capital Adequacy
To Be Well Capitalized
Under Prompt
Corrective Action
Provisions
Amount
Ratio %
Amount
Ratio %
Amount
Ratio %
$1,881,558
643,202
1,242,608
$1,666,042
586,623
1,122,341
14.28
14.39
14.25
12.65
13.12
12.87
$1,053,781
357,687
697,528
$ 526,890
178,843
348,764
$1,666,042
586,623
1,122,341
9.10
9.13
9.24
$ 549,185
192,733
364,540
$1,783,037
437,225
1,277,591
$1,506,218
397,900
1,091,770
13.59
14.21
12.76
11.48
12.94
10.90
$1,049,495
246,072
801,025
$ 524,748
123,036
400,512
$1,506,218
397,900
1,091,770
8.17
8.15
8.19
$ 553,318
146,408
399,725
8.00
8.00
8.00
4.00
4.00
4.00
3.00
3.00
3.00
8.00
8.00
8.00
4.00
4.00
4.00
3.00
3.00
3.00
$
$
$
n/a
447,109
871,910
n/a
10.00
10.00
n/a
268,265
523,146
n/a
321,221
607,567
n/a
6.00
6.00
n/a
5.00
5.00
$
n/a
307,590
1,001,281
n/a
10.00
10.00
$
$
n/a
184,554
600,769
n/a
244,013
666,208
n/a
6.00
6.00
n/a
5.00
5.00
Regulatory Restrictions on Dividends
Regulatory policy statements provide that generally bank holding companies should pay dividends only out of
current operating earnings and that the level of dividends must be consistent with current and expected capital
requirements. Dividends received from its subsidiary banks have been the primary source of funds available to the
Company for the payment of dividends to Hancock’s stockholders. Federal and state banking laws and regulations
restrict the amount of dividends the subsidiary banks may distribute to Hancock without prior regulatory approval,
as well as the amount of loans they may make to the Company. Dividends paid by Hancock Bank are subject to
approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi and those paid by
Whitney Bank are subject to approval by the Commissioner of Financial Institutions of the State of Louisiana.
117
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans
Pension Plans - Defined Benefit
The Company has a noncontributory defined benefit pension plan covering eligible legacy Hancock
employees (Hancock Plan). Eligibility is based on minimum age and service-related requirements as well as job
classification. The benefits are based on an employee’s years of service and highest five-year average
compensation as defined in the plan.
Certain legacy Whitney employees are covered by a noncontributory qualified defined benefit pension plan
(Whitney plan). The benefits are based on an employee’s total years of service and his or her highest consecutive
five-year level of compensation during the final ten years of employment. Certain legacy Whitney employees are
also covered by an unfunded nonqualified defined benefit pension plan that provides retirement benefits to
designated executive officers. These benefits are calculated using the qualified plan’s formula, but without
applying the restrictions imposed on qualified plans by certain provisions of the Internal Revenue Code. Benefits
that become payable under the nonqualified plan supplement amounts paid from the qualified plan. The Whitney
plans have been closed to new participants since 2008, and benefit accruals have been frozen for all participants
other than those who met certain vesting, age and years of service criteria as of December 31, 2008.
Effective January 1, 2013, the Company adopted one qualified defined pension plan covering all eligible
employees. The new qualified plan terms are substantially the same for legacy Hancock employees as those in
effect at December 31, 2012 under the Hancock Plan. Retirement benefits for eligible legacy Whitney employees
under the new plan will be based on the employee’s accrued benefit under the Whitney Plan as of December 31,
2012 and any benefit accrued under the new plan based on years of service and compensation beginning in 2013.
Accrued benefits under the Whitney nonqualified plan were frozen as of December 31, 2012 and no future
benefits will be accrued under this plan.
The Company makes contributions to the qualified pension plan in amounts sufficient to meet funding
requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the company
may determine to be appropriate. Based on currently available information, Hancock anticipates making
contributions totaling approximately $16.0 million during 2013.
118
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
The following tables detail the changes in the benefit obligations and plan assets of the combined qualified
plans and for the nonqualified plan for the years ended December 31, 2012 and 2011 as well as the funded status
of the plans at each year end and the amounts recognized in the Company’s balance sheets (in thousands). The
Company uses a December 31 measurement date for all defined benefit pension plans and other postretirement
benefit plans.
Change in benefit obligation
Benefit obligation:
at beginning of year
of Whitney plan at acquisition date
Service cost
Interest cost
Actuarial loss
Benefits paid
Benefit obligation, end of year
Change in plan assets
Fair value of plan assets:
at beginning of year
of Whitney plan at acquisition date
Actual return on plan assets
Employer contributions
Benefit payments
Expenses
Fair value of plan assets, end of year
Years Ended December 31,
2012
Non-
2011
Qualified
qualified Qualified
Non-
qualified
$399,508 $ 15,934 $101,746
— 216,992
8,440
49
12,117
688
67,971
1,401
(7,758)
(1,207)
—
12,940
16,518
4,131
(12,858)
$ —
14,442
27
438
1,597
(570)
420,239
16,865
399,508
15,934
328,060
—
38,464
26,000
(12,858)
(533)
379,133
—
—
1,207
(1,207)
—
71,640
223,495
(3,979)
44,907
(7,758)
(245)
— 328,060
—
—
—
570
(570)
—
—
Funded status at end of year - net liability
$ (41,106) $(16,865) $ (71,448) $(15,934)
Amounts recognized in accumulated other comprehensive loss
Unrecognized loss:
at beginning of year
of Whitney plan at acquisition date
Amount of (loss)/gain recognized during the year
Net actuarial loss/(gain)
$123,780 $ 1,597 $ 38,810
—
(2,343)
87,313
—
(6,526)
(8,402)
—
(56)
1,401
$ —
—
—
1,597
Unrecognized loss at end of year
$108,852 $ 2,942 $123,780
$ 1,597
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
December 31
2012
2011
$437,104
395,543
379,133
$415,442
363,983
328,060
119
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
The following table shows net periodic benefit cost included in expense and the changes in the amounts
recognized in accumulated other comprehensive income during 2012 and 2011 (in thousands). Hancock expects
to recognize $6.0 million of the net actuarial loss included in accumulated other comprehensive income at
December 31, 2012 as a component of net pension expense in 2013.
Years Ended December 31,
2012
Non-
2011
2010
Non-
Qualified
qualified Qualified
qualified Qualified
Net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Recognized net amortization and deferral
49 $ 8,440 $
27 $ 3,500
$ 12,940 $
5,233
438
12,117
16,518
(25,398) — (15,118) — (4,646)
2,281
2,343
6,526
688
56
—
Net periodic benefit cost
10,586
793
7,782
465
6,368
Other changes in plan assets and benefit obligations
recognized in other comprehensive income, before taxes
Net (loss)/gain recognized during the year
Net actuarial loss/(gain)
(6,526)
(8,402)
(56)
1,401
(2,343)
87,313
— (2,281)
4,338
1,597
Total recognized in other comprehensive income
(14,928)
1,345
84,970
1,597
2,057
Total recognized in net periodic benefit cost and other
comprehensive income
$ (4,342) $2,138 $ 92,752 $2,062 $ 8,425
Weighted average assumptions as of measurement date
Discount rate for benefit obligations:
Hancock plan
Whitney plan
Discount rate for net periodic benefit cost:
Hancock plan
Whitney plan
Expected long-term return on plan assets:
Hancock plan
Whitney plan
Rate of compensation increase:
Hancock plan
Whitney plan
3.74% n/a
3.87% 3.87%
4.35% n/a
4.31% 4.31%
5.46%
n/a
4.35% n/a
4.31% 4.31%
5.46% n/a
5.35% 5.35%
5.95%
n/a
7.50% n/a
7.50% n/a
7.50% n/a
7.50% n/a
7.50%
n/a
4.00% n/a
3.58% 3.58%
4.00% n/a
3.58% 3.58%
4.00%
n/a
The long term rate of return on plan assets is determined by using the weighted-average of historical real
returns for major asset classes based on target asset allocations. At December 31, 2012 and 2011, the discount
rate was calculated by matching expected future cash flows to the Citigroup Pension Discount Curve Liability
Index.
120
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
The following shows expected pension plan benefit payments over the next ten years (in thousands):
2013
2014
2015
2016
2017
2018-2022
Qualified
Nonqualified
Total
$ 12,594
13,721
14,599
15,431
16,376
99,128
$171,849
$ 1,147
1,138
1,136
1,143
1,161
5,612
$11,337
$ 13,741
14,859
15,735
16,574
17,537
104,740
$183,186
The expected benefit payments are estimated based on the same assumptions used to measure the
Company’s benefit obligations at December 31, 2012.
121
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
The fair values of pension plan assets at December 31, 2012 and 2011, by asset category, are shown in the
following tables (in thousands):
Asset Category / Fund
Fair Value Measurements at December 31, 2012
Cash and cash-equivalents:
Cash and equivalents
Hancock Horizon Government Money Market Fund
Total cash and cash-equivalents
Fixed income:
US government and agency securities and other
Hancock Horizon Strategic Income Bond Fund
Corporate debt
Total fixed income
Equity:
Hancock Horizon Quantitative Long/Short Fund
Hancock Horizon Diversified International Fund
Hancock Horizon Burkenroad Small Cap Fund
Hancock Horizon Growth Fund
Hancock Horizon Diversified Value Fund
Equity securities - large cap
Equity securities - small cap
Total Equity
TOTAL
Fair Value Measurements at December 31, 2011
Cash and cash-equivalents:
Cash and equivalents
Hancock Horizon Government Money Market Fund
Total cash and cash-equivalents
Fixed income:
US government and agency securities and other
Hancock Horizon Strategic Income Bond Fund
Corporate debt
Total fixed income
Equity:
Hancock Horizon Quantitative Long/Short Fund
Hancock Horizon Diversified International Fund
Hancock Horizon Burkenroad Small Cap Fund
Hancock Horizon Growth Fund
Hancock Horizon Diversified Value Fund
Equity securities - large cap
Equity securities - small cap
Total Equity
TOTAL
122
Quoted Prices
in
Active Markets
for Identical
Assets
(Level 1)
Total
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
4,850
1,596
6,446
$
4,850
1,596
6,446
54,246
49,192
39,273
142,711
7,481
32,984
3,863
27,332
28,543
87,769
42,004
229,976
$379,133
10,405
49,192
—
59,597
7,481
32,984
3,863
27,332
28,543
87,769
42,004
229,976
$296,019
$ 12,189
28,081
40,270
$ 12,189
28,081
40,270
44,017
29,895
33,319
107,231
3,674
24,528
2,414
13,403
19,742
72,607
44,191
180,559
$328,060
15,032
29,895
—
44,927
3,674
24,528
2,414
13,403
19,742
72,607
44,191
180,559
$265,756
$ —
—
—
43,841
—
39,273
83,114
—
—
—
—
—
—
—
—
$83,114
$ —
—
28,985
—
33,319
62,304
—
—
—
—
—
—
—
—
$62,304
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
$—
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
$—
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
The percentage allocations of the plan assets by asset category and corresponding target allocations at
December 31, 2012 and 2011 follow:
Asset category
Equity securities
Fixed income securities
Cash equivalents
Plan Assets
at December 31,
Target Allocation at
December 31,
2012
2011
2012
2011
61%
37%
2%
55% 40 – 70% 40 – 70%
33% 30 – 60% 30 – 60%
12% 0 – 10% 0 – 10%
100% 100%
The Whitney plan assets included 16,375 shares of Hancock common stock with a value of approximately
$0.5 million at both December 31, 2012 and 2011. A $25 million contribution to the Hancock plan late in 2011
was initially invested in cash equivalents. After these funds were reinvested, the distribution of plan assets was
within target allocations.
The investment strategy of the plans is to emphasize a balanced return of current income and growth of
principal while accepting a moderate level of risk. The investment goal of the plans is to meet or exceed the
return of a balanced market index comprised of 55% of the S&P 500 Index and 45% of the Barclays Intermediate
Aggregate Bond Index. The pension plan investment committee meets periodically to review the policy, strategy
and performance of the plans.
Pension Plans - Defined Contribution
The Company sponsors defined contribution retirement plans under Section 401(k) of the Internal Revenue
Code. Through the end of 2012, the Hancock plan covered substantially all legacy Hancock employees who have
been employed 60 days and meet certain other requirements and job classification criteria. Under this plan, the
Company matched 50% of the savings of each participant up to 6% of his or her compensation.
Through the end of 2012, eligible legacy Whitney employees who are employed by the new Whitney Bank
after the merger continued to be covered by an employee savings plan under Section 401(k). An employee of the
new Whitney Bank who was not a participant at the merger date became eligible to participate in the savings plan
after meeting the eligibility conditions, provided the employee performed services at a legacy Whitney location
as of the merger date. Under the savings plan, the Company matched the savings of each participant up to 4% of
his or her compensation. Participants are fully vested in their savings and in the matching Company contribution
at all times. Under the savings plan, the Company could also make discretionary profit sharing contributions on
behalf of participants who were either (a) ineligible to participate in the Whitney qualified defined-benefit plan or
(b) subject to the freeze in benefit accruals under the defined-benefit plan. The discretionary profit sharing
contribution for a plan year was up to 4% of the participants’ eligible compensation for such year and was
allocated only to participants who were employed on the first day of the plan year and at year end. Participants
must complete three years of service to become vested in the Company’s contributions subject to earlier vesting
in the case of retirement, death or disability. The Whitney board amended the plan shortly prior to the merger to
provide that Whitney employees terminated as a result of a force reduction after the closing date of the merger
would also be immediately vested.
123
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
Effective January 1, 2013, the Company combined the Hancock and Whitney 401(k) plans. The combined
plan covers substantially all employees who have been employed 60 days and meet certain other requirements
and employment classification criteria. Under the combined plan, the Company will match 100% of the first 1%
of compensation saved by a participant, and 50% of the next 5% of compensation saved. Eligible employees who
are not participating in the plan and have not actively opted out of participation will be automatically enrolled at
an initial 3% savings rate. Participants are fully vested in their savings and associated earnings at all times. The
Company’s matching contributions and associated earnings vest immediately after the participant has completed
two years of service. The Company’s discretionary profit-sharing contribution under the Whitney plan will no
longer be available for plan years beginning in 2013.
The expense of the Company’s matching contributions to both the Hancock and legacy Whitney 401(k)
plans was $6.1 million in 2012, $4.5 million in 2011 and $2.0 million in 2010. The discretionary profit-sharing
contribution under the legacy Whitney plan will be approximately $2.9 million for 2012 and was $1.6 million for
2011.
Health and Welfare Plans - Defined Benefit
The Company also sponsors defined benefit postretirement plans for both legacy Hancock and legacy
Whitney employees. The Hancock plans provide health care and life insurance benefits to retiring employees
who participate in medical and/or group life insurance benefit plans for active employees at the time of
retirement and have reached 55 years of age with ten years of service or age 65 with five years of service. The
postretirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain
employer contribution maximums. Neither Hancock plan is available to employees hired on or after January 1,
2000.
The legacy Whitney plans offer health care and life insurance benefit plans for retirees and their eligible
dependents. Participant contributions are required under the health plan. Currently, these plans restrict eligibility
for postretirement health benefits to retirees already receiving benefits as of the plan amendments in 2007 and to
those active participants who were eligible to receive benefits as of December 31, 2007. Life insurance benefits
are currently only available to employees who retired before December 31, 2007.
124
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
The following table details the changes in the benefit obligation of the postretirement plans for the years
ended December 31, 2012 and 2011, as well as the funded status of the plans at each year end and the amounts
recognized in the Company’s consolidated balance sheets (in thousands).
Change in postretirement benefit obligation
Projected postretirement benefit
beginning of year
from acquisition date
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss
Benefit payments
Years Ended December 31,
2012
2011
$ 34,107
—
192
1,337
1,419
4,435
(3,659)
$ 12,373
15,949
137
1,091
869
5,939
(2,251)
Projected postretirement benefit obligation, end of year
37,831
34,107
Change in plan assets
Plan assets, beginning of year
Employer contributions
Plan participants’ contributions
Benefit payments
Plan assets, end of year
Funded status at end of year - net liability
Amounts recognized in accumulated other comprehensive loss
Unrecognized loss at beginning of year
Amount of (loss)/gain recognized during the year
Net actuarial loss/(gain)
Unrecognized loss at end of year
—
2,240
1,419
(3,659)
—
—
1,382
869
(2,251)
—
$(37,831)
$(34,107)
$ 10,996
(918)
4,435
$ 5,546
(489)
5,939
$ 14,513
$ 10,996
The Company uses a December 31 measurement date for all defined benefit retirement plans. The discount
rates for the determination of the projected postretirement benefit obligation as of December 31, 2012 and 2011
were:
Hancock plan
Whitney plan
December 31,
2012
2011
3.83% 4.25%
3.55% 4.10%
125
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Retirement Benefit Plans (continued)
The following table shows the composition of net periodic postretirement benefit cost (in thousands):
Net periodic postretirement benefit cost
Service cost
Interest costs
Amortization of net loss
Amortization of prior service cost
Net periodic postretirement benefit cost
Other changes in plan assets and benefit obligations recognized in other
comprehensive income, before taxes
Amount of loss recognized during the year
Net actuarial (gain)/loss
Amortization of prior service cost
Total recognized in other comprehensive income
Years Ended December 31,
2012
2011
2010
$ 192
1,337
966
(48)
$ 137
1,091
538
(48)
$ 124
556
302
(48)
2,447
1,718
934
(966)
4,435
48
(538)
5,938
48
(302)
2,098
48
3,517
5,448
1,844
Total recognized in net periodic benefit cost and other comprehensive income
$5,964
$7,166
$2,778
The Company assumed certain trends in health care costs in the determination of the benefit obligations. At
December 31, 2012, the plans assumed a 7.50% increase in the pre- and post-Medicare age health costs for 2013,
declining uniformly over a period of years to a 5.0% annual rate. At December 31, 2011, the plan assumptions
were substantially the same as in 2012.
The following table illustrates the effect on the annual periodic postretirement benefit costs and
postretirement benefit obligation of a 1% increase or 1% decrease in the assumed health care cost trend rates
from the rates assumed at December 31, 2012:
Aggregated service and interest cost
Postretirement benefit obligation
1% Decrease
in Rates
$ 1,332
33,476
Assumed
Rates
$ 1,529
37,831
1% Increase
in Rates
$ 1,774
43,115
Expected benefits to be paid over the next ten years are reflected in the following table (in thousands):
2013
2014
2015
2016
2017
2018-2022
$ 2,205
2,145
2,042
1,984
1,869
9,353
$19,598
126
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Share-Based Payment Arrangements
Hancock maintains incentive compensation plans that incorporate share-based payment arrangements for
employees and directors. The most recent plan was approved by the Company’s stockholders in 2005 (the
“Plan”). The Compensation Committee of the Company’s Board of Directors administers the Plan, makes
determinations with respect to participation by employees or directors and authorizes share-based awards under
the Plan. Under the Plan, participants may be awarded stock options (including incentive stock options for
employees), restricted shares, performance stock awards and stock appreciation rights, all on a stand-alone,
combination or tandem basis. To date, the Committee has awarded stock options, tenure-based restricted shares
and performance stock awards.
The Plan authorizes the issuance of an aggregate of 5,000,000 shares of the Company’s common stock
pursuant to awards under the Plan. The Plan limits the number of shares for which awards may be granted during
any calendar year to 2% of the outstanding common stock reported at the end of the previous fiscal year, plus any
unused portion of the annual limit for the prior year and subject to certain other adjustments. At December 31,
2012 there were 4.2 million shares available for future issuance under equity compensation plans. Whitney
options converted at the acquisition date do not count against the number of shares available for future issuance.
The awards available for issuance cover outstanding unvested share awards and unexercised option awards as
well as future awards. The Company may use authorized unissued shares or shares held in treasury to satisfy
awards under the Plan.
For the years ended December 31, 2012, 2011 and 2010 total share-based compensation recognized in
income was $11.0 million, $7.2 million and $4.1 million respectively. The total recognized tax benefit related to
the share-based compensation was $3.9 million, $2.5 million and $1.4 million, respectively, for 2012, 2011 and
2010.
A summary of option activity for 2012 is presented below:
Options
Outstanding at January 1, 2012
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2012
Exercisable at December 31, 2012
Number of
Shares
1,686,907
152,140
(73,275)
(210,476)
1,555,296
1,056,172
Weighted-
Average
Exercise
Price ($)
$41.05
29.73
22.36
57.69
$38.57
$41.75
Weighted-
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
($000)
5.3
3.8
$1,112
$ 526
The exercise price for stock options is set at the closing market price of the Company’s stock on the date
immediately preceding the date of grant, except for the exercise price of certain options granted to major
stockholders which is set at 110% of the market price. Option awards generally vest equally over five years of
continuous service and have ten-year contractual terms.
127
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Share-Based Payment Arrangements (continued)
Whitney’s stock options outstanding at the acquisition date were assumed by Hancock, as adjusted for the
share exchange ratio specified in the merger agreement. These options will expire at the earlier of (1) their
expiration date (which is generally ten years after the grant date), except for grants made in 2005 that expired six
months following the merger, or (2) a date on or following termination of employment, as set forth in the prior
grant plan document.
The total intrinsic value of options exercised during 2012, 2011 and 2010 was $0.8 million, $0.3 million,
and $0.8 million, respectively.
The weighted-average grant-date fair values of options awarded during 2012, 2011, and 2010 were $8.43,
$8.64, and $10.73, respectively. The fair value of each option award was estimated as of the grant date using the
Black-Scholes-Merton option-pricing model. The significant assumptions made in applying the option-pricing
model are noted in the following table. Expected volatilities are based on implied volatilities from traded options
on the Company’s stock, historical volatility of the Company’s stock and other factors. The expected term of
options granted was derived from the output of the option valuation model and represents the period of time that
options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the
option was based on the U.S. Treasury yield curve in effect at the time of grant.
Years Ended December 31,
2012
2011
2010
Expected volatility
Expected dividends
Expected term (in years)
Risk-free rates
38.64% 38.90%
40.53%
3.23% 3.20% 2.90%-2.99%
6.58
1.78% 1.99% 2.73%-3.33%
9.55
6.38
A summary of the status of the Company’s nonvested restricted and performance shares as of December 31,
2012, and changes during 2012, is presented below:
Nonvested at January 1, 2012
Granted
Vested
Forfeited
Nonvested at December 31, 2012
Number of
Shares
957,536
890,744
(73,598)
(90,322)
1,684,360
Weighted-
Average
Grant-Date
Fair Value ($)
$33.61
29.62
39.69
32.33
$31.30
As of December 31, 2012, there was $37.2 million of total unrecognized compensation related to nonvested
restricted shares expected to vest. This compensation is expected to be recognized in expense over a weighted-
average period of 3.7 years. The total fair value of shares which vested during 2012 and 2011 was $2.3 million
and $1.3 million, respectively.
In 2012, Hancock granted 27,797 performance shares with an average fair value of $36.16 per share to key
members of executive and senior management. 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
128
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Share-Based Payment Arrangements (continued)
performance shares that could vest is 200% of the target award. The fair value of the awards 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.
Note 14. Fair Value of Financial Instruments
The Financial Accounting Standards Board (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 Measured on a Recurring Basis
The following table presents 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 at in the consolidated balance sheets.
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities
Municipal obligations
Corporate debt securities
Mortgage-backed securities
Collateralized mortgage obligations
Equity securities
December 31, 2012
Level 1
Level 2
Total
$18,265
—
2,250
—
—
5,279
$
—
50,165
—
1,774,406
198,077
—
$
18,265
50,165
2,250
1,774,406
198,077
5,279
Total available-for-sale securities
25,794
2,022,648
2,048,442
Derivative assets (1)
—
20,093
20,093
Total recurring fair value measurements - assets
$25,794
$2,042,741
$2,068,535
Liabilities
Derivative liabilities (1)
Total recurring fair value measurements - liabilities
$ —
$ —
$
$
21,100
21,100
$
$
21,100
21,100
(1) For further disaggregation of derivative assets and liabilities, see Note 6 - Derivatives
129
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Fair Value of Financial Instruments (continued)
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities
Municipal obligations
Corporate debt securities
Mortgage-backed securities
Collateralized mortgage obligations
Equity securities
December 31, 2011
Level 1
Level 2
Total
$250,067
—
4,494
—
—
6,253
$
—
309,665
—
2,480,345
1,446,076
—
$ 250,067
309,665
4,494
2,480,345
1,446,076
6,253
Total available-for-sale securities
260,814
4,236,086
4,496,900
Derivative - assets (1)
—
14,952
14,952
Total recurring fair value measurements - assets
$260,814
$4,251,038
$4,511,852
Liabilities
Derivative - liabilities (1)
Total recurring fair value measurements - liabilities
$ —
$ —
$
$
15,643
15,643
$
$
15,643
15,643
(1) For further disaggregation of derivative assets and liabilities, see Note 6 - Derivatives
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 are obtained quarterly 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 not 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 interest rates swaps in level 2 of the fair value hierarchy. The
Company’s policy is to measure counterparty credit risk quarterly for all derivative instruments subject to master
netting arrangements consistent with how market participants would price the net risk exposure at the
measurement date.
130
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Fair Value of Financial Instruments (continued)
The Company also has certain derivative instruments associated with the Banks’ mortgage-banking
activities. These derivative instruments include interest rate lock commitments on prospective residential
mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis. The fair
value of these derivative instruments is measured using observable market prices for similar instruments and are
classified as level 2 measurements. The fair value of mortgage banking derivatives was immaterial at both
December 31, 2012 and 2011.
Fair Value of Assets Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis and, therefore, are not
included in the above table. Collateral-dependent impaired loans are level 2 assets measured using appraisals
from external parties of the collateral less any prior liens or based on 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 appraisal.
The following table presents 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.
Collateral dependent impaired loans
Other real estate owned
Total nonrecurring fair value measurements
Collateral dependent impaired loans
Other real estate owned
Total nonrecurring fair value measurements
(Level 1)
December 31, 2012
(Level 2)
Total
$—
—
$—
$ 76,413
105,835
$ 76,413
105,835
$182,248
$182,248
(Level 1)
December 31, 2011
(Level 2)
Total
$—
—
$—
$ 55,252
144,367
$ 55,252
144,367
$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 those short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Securities Available for Sale - 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 estimated by discounting scheduled cash flows using discount
rates determined with reference to current market rates at which loans with similar terms would be made to
borrowers with similar credit quality.
131
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Fair Value of Financial Instruments (continued)
Accrued Interest Receivable and Accrued Interest Payable - The carrying amounts are a reasonable
estimate of 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, Federal Funds Purchased, and FHLB Borrowings -
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 debt with similar terms could be obtained.
Derivative Financial Instruments – The fair value measurement for derivative financial instruments was
discussed earlier.
132
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Fair Value of Financial Instruments (continued)
The estimated fair values of the Company’s financial instruments were as follows (in thousands):
Financial assets:
Cash, interest-bearing bank deposits, and
federal funds sold
Available for sale securities
Held to maturity securities
Loans, net
Loans held for sale
Accrued interest receivable
Derivative financial instruments
Financial liabilities:
Deposits
Federal funds purchased
Securities sold under agreements to
repurchase
Long-term debt
Accrued interest payable
Derivative financial instruments
Financial assets:
Cash, interest-bearing bank deposits, and
federal funds sold
Available for sale securities
Loans, net
Loans held for sale
Accrued interest receivable
Derivative financial instruments
Financial liabilities:
Deposits
Federal funds purchased
Securities sold under agreements to
repurchase
Long-term debt
Accrued interest payable
Derivative financial instruments
(Level 1)
December 31, 2012
(Level 2)
(Level 3)
Total
Fair Value
Carrying
Amount
$1,948,679
25,794
—
—
—
45,616
—
$
— $
2,022,648
1,710,465
76,413
50,605
—
20,093
— $ 1,948,679
2,048,442
—
1,710,465
—
11,502,066
11,425,653
50,605
—
45,616
—
20,093
—
$ 1,948,679
2,048,442
1,668,018
11,441,631
50,605
45,616
20,093
$
— $
25,704
— $15,757,044
—
—
$15,757,044
25,704
$15,744,188
25,704
613,429
—
4,814
—
—
410,791
—
21,100
—
—
—
—
613,429
410,791
4,814
21,100
613,429
396,589
4,814
21,100
(Level 1)
December 31, 2011
(Level 2)
(Level 3)
Total
Fair Value
Carrying
Amount
$1,622,366
260,814
—
—
53,973
—
$
— $
4,236,086
55,252
72,378
—
14,952
—
—
11,134,410
—
—
—
1,622,366
4,496,900
11,189,662
72,378
53,973
14,952
$ 1,622,366
4,496,900
11,052,145
72,378
53,973
14,952
$
— $
16,819
— $15,737,667
—
—
$15,737,667
16,819
$15,713,579
16,819
1,027,635
—
8,284
—
—
365,421
—
15,643
—
—
—
—
1,027,635
365,421
8,284
15,643
1,027,635
353,890
8,284
15,643
133
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Commitments and Contingencies
Credit Related
In the normal course of business, the Banks enter into financial instruments, such as commitments to extend
credit and letters of credit, to meet the financing needs of their customers. Such instruments are not reflected in
the accompanying consolidated financial statements until they are funded, although they expose the Banks to
varying degrees of credit risk and interest rate risk in much the same way as funded loans.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments
issued mainly to finance the acquisition and development of construction of real property or equipment, and
credit card and personal credit lines. The availability of funds under commercial credit lines and loan
commitments generally depends on whether the borrower continues to meet credit standards established in the
underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and
personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number
of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire,
and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Banks to fulfill a
customer’s financial commitments to a third party if the customer is unable to perform. The Banks issue standby
letters of credit primarily to provide credit enhancement to their customers’ other commercial or public financing
arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit. The Company
undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it
does for on-balance sheet instruments and may require collateral or other credit support. These off-balance sheet
financial instruments are summarized below (in thousands):
Commitments to extend credit
Letters of credit
Legal Proceedings
December 31,
2012
2011
$4,373,679
401,861
$4,189,421
441,048
The Company is party to various legal proceedings arising in the ordinary course of business. Based on
current knowledge, management does not believe that loss contingencies, if any, arising from pending litigation
and regulatory matters will have a material adverse effect on the consolidated financial position or liquidity of
the Company.
134
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Commitments and Contingencies (continued)
Lease Commitments
The Company currently is obligated under a number of non-cancelable operating leases for buildings and
equipment. Certain of these leases have escalation clauses and renewal options. Future minimum lease payments
for non-cancelable operating leases with initial terms in excess of one year were as follows at December 31, 2012
(in thousands):
2013
2014
2015
2016
2017
Thereafter
Total minimum lease payments
Operating
Leases
$12,873
11,358
9,929
8,504
7,392
29,606
$79,662
Rental expense approximated $14.3 million, $11.9 million and $7.2 million for the years ended
December 31, 2012, 2011, and 2010, respectively.
Note 16. Other Noninterest Income and Other Noninterest Expense
The components of other noninterest income and other noninterest expense are as follows (in thousands):
Other noninterest income:
Income from bank-owned life insurance
Credit-related fees
Income from derivatives
Gain on sales of assets
Safety deposit box income
Other miscellaneous income
Total other noninterest income
Other noninterest expense:
Advertising
Ad valorem and franchise taxes
Printing and supplies
Insurance expense
Travel
Entertainment and contributions
Tax credit investment amortization
Other expense
Total other noninterest expense
Years Ended December 31,
2012
2011
2010
$11,163
6,681
3,600
4,366
2,006
9,072
$ 9,311
5,752
760
1,083
1,591
7,081
$ 5,219
1,451
—
618
841
3,896
$36,888
$25,578
$12,025
13,515
8,321
7,491
5,494
5,758
6,049
5,974
26,053
$78,655
17,687
5,330
5,608
7,490
3,590
3,954
3,515
31,539
$78,713
7,713
3,568
2,380
2,010
2,137
1,651
—
13,671
$33,130
Included in other noninterest expense are merger-related expenses related to the Whitney and People’s First
acquisitions totaling $5.6 million in 2012, $27.0 million in 2011 and $0.8 million in 2010.
135
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Income Taxes
Income tax expense included in net income consisted of the following components (in thousands):
Included in net income
Current federal
Current state
Total current provision
Deferred federal
Deferred state
Total deferred provision
Total included in net income
Included in shareholder’s equity
Deferred tax related to retirement benefits
Deferred tax related to securities
Deferred tax related to derivatives and hedging
Total included in shareholder’s equity
Years Ended December 31,
2012
2011
2010
$11,195
1,953
$ 7,400
1,961
$ 20,707
600
13,148
34,219
(1,754)
32,465
9,361
21,307
9,735
(1,032)
(10,676)
(926)
8,703
(11,602)
$45,613
$ 18,064
$ 9,705
$ 3,788
(1,583)
(75)
$(32,944)
19,145
(42)
$ (1,439)
(606)
—
$ 2,130
$(13,841)
$ (2,045)
136
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Income Taxes (continued)
Temporary differences arise between the tax bases of assets or liabilities and their carrying amounts for
financial reporting purposes. The expected tax effects when these differences are resolved are recorded currently
as deferred tax assets or liabilities. Significant components of the Company’s deferred tax assets and liabilities
were as follows (in thousands):
Deferred tax assets:
Allowance for loan losses
Employee compensation and benefits
Loan purchase accounting adjustments
Tax credit carryforward
Federal net operating loss
State net operating loss
Other
Gross deferred tax assets
Federal valuation allowance
State valuation allowance
Subtotal valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Fixed assets & intangibles
Securities
Deferred gain on acquisition
FDIC loss share receivable
Other
Gross deferred tax liabilities
Net deferred tax asset (liability)
December 31,
2012
2011
$ 77,957
64,030
185,789
35,605
—
1,805
18,102
$ 85,289
40,013
241,412
25,465
24,524
2,958
25,436
383,288
445,097
—
(1,805)
(1,805)
—
(2,415)
(2,415)
381,483
442,682
(124,402)
(46,088)
(8,962)
(62,311)
(11,335)
(135,987)
(55,642)
(13,232)
(83,348)
(8,713)
(253,098)
(296,922)
$ 128,385
$ 145,760
137
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Income Taxes (continued)
Reported income tax expense differed from amounts computed by applying the statutory income tax rate of
35% to earnings before income taxes because of the following factors (in thousands):
Taxes computed at statutory rate
Increases (decreases) in taxes resulting from:
State income taxes, net of federal income tax benefit
Tax-exempt interest
Bank owned life insurance
Tax credits
Merger transaction costs
Other, net
Income tax expense
Years Ended December 31,
2012
2011
2010
Amount % Amount % Amount %
$ 69,074
35% $33,188
35% $21,669
35%
(78)
(7,127)
(4,005)
(13,661)
—
1,410
0%
689
-4% (6,892)
-2% (3,352)
-7% (8,384)
0% 2,178
637
1%
1% (410)
-8% (6,747)
-4% (1,918)
-9% (3,702)
3% —
813
1%
-1%
-11%
-3%
-6%
0%
1%
$ 45,613
23% $18,064
19% $ 9,705
15%
As of December 31, 2012, the Company had approximately $36 million in federal tax credit carryforwards
that originated in the tax years from 2008 through 2012 and that begin expiring in 2028. The Company had
approximately $42 million in state net operating loss carryforwards that originated in the tax years 2002 through
2011 and that begin expiring in 2017. A valuation allowance has been established for the state net operating loss
carryforwards. The impact of this valuation allowance is immaterial to the financial statements.
The tax benefit of a position taken or expected to be taken in a tax return should be recognized when it is
more likely than not that the position will be sustained on its technical merits. The liability for unrecognized tax
benefits was immaterial at December 31, 2012 and 2011. The Company does not expect the liability for
unrecognized tax benefits to change significantly during 2013. Hancock recognizes interest and penalties, if any,
related to income tax matters in income tax expense, and the amounts recognized during 2012, 2011 and 2010
were insignificant.
The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various
state returns. Generally, the returns for years before 2009 are no longer subject to examination by taxing
authorities.
Note 18. 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.
138
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18. Earnings Per Share (continued)
A summary of the information used in the computation of earnings per common share follows (in thousands,
except per share data):
Numerator:
Net income to common shareholders
Net income allocated to participating
securities - basic and diluted
Net income allocated to common
shareholders - basic and diluted
Denominator:
Weighted-average common shares - basic
Dilutive potential common shares
Weighted average common shares - diluted
Earnings per common share:
Basic
Diluted
Years Ended December 31,
2012
2011
2010
$151,742
$76,759
$52,206
1,557
866
320
$150,185
$75,893
$51,886
84,767
821
85,588
65,590
480
66,070
36,876
178
37,054
$
$
1.77
1.75
$
$
1.16
1.15
$
$
1.41
1.40
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 totalled 449,377 for the twelve months ended December 31, 2012
and 680,611 for the twelve months ended December 31, 2011. There were no anti-dilutive potential common shares in 2010.
Note 19. Segment Reporting
The Company’s reportable operating segments consist of the Hancock segment, which coincides generally
with the Company’s Hancock Bank subsidiary, and the Whitney segment, which coincides generally with its
Whitney Bank subsidiary. Each of the bank segments offer 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, Alabama, and Mississippi to Hancock Bank and
retained its operations in Louisiana and Texas. In the following tables, the “Other” column includes activities of
other consolidated subsidiaries and the holding company which do not constitute reportable segments under the
quantitative and aggregation accounting guidelines. These subsidiaries provide investment services, insurance
agency services, insurance underwriting and various other services to third parties.
139
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Segment Reporting (continued)
Following is selected information for the Company’s segments (in thousands):
Interest income
Interest expense
Year Ended December 31, 2012
Hancock
Whitney
Other
Eliminations
Consolidated
$ 269,915
(22,553)
$
473,664
(25,178)
$
23,996
(8,516)
$
(5,026) $
4,565
762,549
(51,682)
Net interest income
247,362
448,486
Provision for loan losses
Noninterest income
Depreciation and amortization
Other noninterest expense
Securities transactions
Income before income taxes
Income tax expense
(21,304)
78,785
(14,309)
(230,208)
579
60,905
11,878
(32,834)
133,228
(17,515)
(403,935)
966
128,396
30,998
15,480
(54)
40,219
(1,032)
(46,105)
7
8,515
2,737
(461)
710,867
—
(37)
—
37
—
(461)
—
(54,192)
252,195
(32,856)
(680,211)
1,552
197,355
45,613
Net income
$
49,027
$
97,398
$
5,778
$
(461) $
151,742
Goodwill
Total assets
Total interest income from affiliates
Total interest income from external
customers
Interest income
Interest expense
$
94,130
$6,308,690
$
530,265
$13,127,109
$
4,482
$2,865,346
— $
$
628,877
$(2,836,660) $19,464,485
$
4,042
$ 265,873
Hancock
$ 195,230
(39,056)
$
$
$
984
472,680
$
$
— $
(5,026) $
—
23,996
$
— $
762,549
Year Ended December 31, 2011
Whitney
Other
Eliminations
Consolidated
380,072
(29,538)
$
21,794
(6,807)
$
(4,892) $
4,430
592,204
(70,971)
Net interest income
156,174
350,534
Provision for loan losses
Noninterest income
Depreciation and amortization
Other noninterest expense
Securities transactions
Income before income taxes
Income tax expense
(17,216)
76,846
(10,649)
(163,088)
(51)
42,016
6,513
(17,550)
96,349
(13,123)
(372,034)
—
44,176
7,584
14,987
(3,966)
32,761
(834)
(34,894)
(40)
8,014
3,967
Net income
$
35,503
$
36,592
$
4,047
$
(462)
521,233
—
471
—
608
—
617
—
617
(38,732)
206,427
(24,606)
(569,408)
(91)
94,823
18,064
76,759
$
Goodwill
Total assets
$
23,386
$4,934,003
$
623,294
$14,792,788
$
4,482
$2,462,281
— $
$
651,162
$(2,414,976) $19,774,096
Total interest income from affiliates
Total interest income from external
customers
$
4,364
$ 190,866
$
$
528
379,544
$
$
— $
(4,892) $
—
21,794
$
— $
592,204
140
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Segment Reporting (continued)
Interest income
Interest expense
Year Ended December 31, 2010
Hancock
Whitney
Other
Eliminations
Consolidated
$ 203,222
(61,384)
$ 132,205
(21,198)
$
22,122
(4,294)
$
(4,991) $ 352,558
(82,345)
4,531
Net interest income
141,838
111,007
Provision for loan losses
Noninterest income
Depreciation and amortization
Other noninterest expense
Income before income taxes
Income tax expense (benefit)
Net income
Goodwill
Total assets
Total interest income from affiliates
Total interest income from external
customers
(37,845)
67,940
(9,755)
(152,956)
9,222
(5,101)
(22,554)
43,331
(3,003)
(81,665)
47,116
12,373
17,828
(5,592)
25,745
(767)
(31,244)
5,970
2,433
(460)
270,213
—
(67)
—
130
(397)
—
(65,991)
136,949
(13,525)
(265,735)
61,911
9,705
$
14,323
$
34,743
$
3,537
$
(397) $
52,206
$
23,386
$5,247,383
$
33,763
$2,906,365
$
4,482
$1,093,565
$
61,631
— $
$(1,108,986) $8,138,327
$
4,991
$
— $
— $
(4,991) $
—
$ 198,231
$ 132,205
$
22,122
$
— $ 352,558
Consolidated other intangible assets totaled $189.4 million and $211.1 million, respectively, at
December 31, 2012 and 2011. The balance at the end of 2012 consisted of core deposit intangibles of $154.7
million and other identifiable intangible assets of $34.7 million. The total was allocated $168.9 million to the
Whitney segment, $20.3 million to the Hancock segment, and $0.2 million to the Other segment. Total other
intangible assets at the end of 2011 consisted of core deposit intangibles of $178.4 million and other identifiable
intangibles assets of $32.7 million. The 2011 total was allocated $201.4 million to Whitney, $9.4 million to
Hancock, and $0.3 million to the Other segment.
141
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20. Condensed Parent Company Information
The following condensed financial statements reflect the accounts and transactions of Hancock Holding
Company only (in thousands):
Condensed Balance Sheets
Assets:
Cash
Securities available for sale
Investment in bank subsidiaries
Investment in non-bank subsidiaries
Due from subsidiaries and other assets
Liabilities and Stockholders’ Equity:
Long term debt
Due to subsidiaries and other liabilities
Stockholders’ equity
December 31,
2012
2011
$
26,041
132,551
2,495,412
8,071
13,447
$
28,015
103,788
2,358,368
10,222
9,014
$2,675,522
$2,509,407
$ 220,000
2,244
2,453,278
$ 140,000
2,244
2,367,163
$2,675,522
$2,509,407
Condensed Statements of Income
Years Ended December 31,
2012
2011
2010
Operating Income
From subsidiaries
Cash dividends received from bank subsidiaries
Non-cash dividend from bank subsidiary in restructuring
Dividends received from non-bank subsidiaries
Equity in earnings of subsidiaries greater than (less than) dividends received
$ 25,000 $123,100 $41,500
—
225,000
150
—
(57,172) 10,471
(94,486)
13,451
—
Total operating income
Other (expense) income
Income tax expense (benefit)
Net income
155,664
(6,673)
(2,751)
79,379
(2,592)
28
51,971
342
107
$151,742 $ 76,759 $52,206
142
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20. Condensed Parent Company Information (continued)
Condensed Statements of Cash Flows
Cash flows from operating activities - principally dividends received from
subsidiaries
Net cash (used in) provided by operating activities
Cash flows from investing activities
Contribution of capital to subsidiary
Loans to nonbank subsidiaries, net of repayments
Purchase of available for sale securities
Proceeds of securities available for sale
Cash paid in connection with business combination
Net cash used by investing activities
Cash flows from financing activities:
Proceeds from issuance of long term debt
Repayment of long term debt
Dividends paid to stockholders
Stock transactions, net
Net cash (used by) financing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
Years Ended December 31,
2012
2011
2010
$ 18,789
$ 113,355
$ 31,241
18,789
113,355
31,241
(955)
1,684
(77,058)
47,305
—
(233)
—
(103,432)
1,396
(275,563)
(29,024)
(377,832)
(454)
—
—
—
—
(454)
217,933
(140,000)
(83,151)
13,479
140,000
—
(70,617)
222,322
—
—
(36,182)
5,876
8,261
291,705
(30,306)
(1,974)
28,015
27,228
787
$ 26,041
$ 28,015
$
481
306
787
143
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the Exchange Act). The rules refer to the controls and other procedures
designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange
Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms and (2) accumulated and communicated to its management, including
its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.
As of December 31, 2012, management, including our Chief Executive Officer and Chief Financial Officer,
performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on that evaluation,
management, including our Chief Executive Officer and Chief Financial Officer, concluded that as of
December 31, 2012, our disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in the Rule 13(a)–15(f) under the Exchange Act. Under the
supervision and with the participation of management, including the Company’s principal executive officers and
principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over
financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Management also conducted an assessment of
requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act. This
section relates to management’s evaluation of internal control over financial reporting, including controls over
the preparation of the schedules equivalent to the basic financial statements and compliance with laws and
regulations. Our evaluation included a review of the documentation of controls, evaluations of the design of the
internal control system and tests of the effectiveness of internal controls.
The Company’s internal controls over financial reporting as of December 31, 2012 have been audited by
PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their accompany
report which expresses an unqualified opinion on the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2012.
Based on the Company’s evaluation under the framework in Internal Control – Integrated Framework,
management concluded that internal control over financial reporting was effective as of December 31, 2012.
ITEM 9B. OTHER INFORMATION
Hancock Holding Company (the Company) will hold its Annual Meeting of Shareholders of common stock
on Friday, April 12, 2013, at 10:00 a.m. local time at One Hancock Plaza, 2510 14th Street, Gulfport, Mississippi.
144
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The names, ages, positions and business experience of our executive officers:
Name
Age Position
Carl J. Chaney
John M. Hairston
Michael M. Achary
Joseph S. Exnicios
51
49
52
57
Edward G. Francis
47
President (since 2008) and Chief Executive Officer (since 2006) of the Company;
Director, Mississippi Power Company (since 2009); Director of the Company
since 2006.
Chief Executive Officer (since 2006) and Chief Operating Officer (since 2008) of
the Company; Director of the Company since 2006.
Executive Vice President since 2008; Chief Financial Officer since 2007.
President, Whitney Bank since 2011; Senior Executive Vice President and Chief
Risk Officer of Whitney Holding Corporation and Whitney National Bank from
2009 to 2011; Executive Vice President of Whitney Holding Corporation and
Whitney National Bank from 2004 to 2009.
Executive Vice President since 2008; Chief Commercial Banking Officer since
2010; Executive – Commercial Banking from 2008 to 2010; Senior Commercial
Lending Officer from 2003 to 2008.
Richard T. Hill
56
Executive Vice President since 2002; Chief Retail Banking Officer since
February 2010; Executive – Retail Banking from 2008 to 2010.
Samuel B. Kendricks
53
D. Shane Loper
47
Executive Vice President since 2011; Chief Credit Officer since 2010; Chief
Credit Policy Officer from 2009 to 2010; Senior Regional Credit Officer from
2008 to 2009; Regional Credit Officer from 2004 to 2008.
Chief Risk Officer since 2012; Executive Vice President since 2008; Chief Risk
and Administrative Officer since 2010; Chief Information Officer since 2007;
Director of Corporate Human Resources from 2002 to 2007.
Joy Lambert Phillips
57
Executive Vice President since 2009; Corporate Secretary since June 2011;
General Counsel since 1999.
Clifton J. Saik
59
Suzanne C. Thomas
58
Executive Vice President since 2002; Chief Wealth Management Officer since
2010; Executive, Wealth Management from 2007 to 2010; Director of Trust from
1998 to 20011.
Chief Wholesale Credit Approval Officer since 2012; Executive Vice President
and Chief Credit Officer, Whitney Bank since 2011; Executive Vice President
and Chief Credit Officer of Whitney Holding Corporation and Whitney National
Bank from 2010 to 2011; Senior Vice President of Whitney National Bank from
2001 to 2009.
Stephen E. Barker
56
Chief Accounting Officer, Hancock Holding Company (since 2011); Comptroller,
Whitney National Bank (2000)
Information concerning our directors will appear in our definitive proxy statement to be filed with the
Securities and Exchange Commission for our 2013 annual meeting of shareholders under the captions
“Information About Director Nominees” and “Information About Incumbent Directors.” Information concerning
compliance with Section 16(a) of the Exchange Act will appear in our proxy statement under the caption
“Section 16(a) Beneficial Ownership Reporting Compliance.” Information concerning our code of business
ethics for officers and associates, our code of ethics for financial officers, and our code of ethics for directors will
appear in our proxy statement under the caption “Transactions with Related Persons.” Information concerning
our audit committee will appear in our proxy statement under the caption “Board of Directors and Corporate
Governance – Audit Committee.” Such information is incorporated herein by reference.
145
ITEM 11. EXECUTIVE COMPENSATION
Information concerning our executive compensation will appear in our proxy statement under the caption
“Executive Compensation.” Information concerning our compensation committee interlocks and insider
participation and our compensation committee report will appear in our proxy statement under the caption
“Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report,”
respectively. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Information concerning ownership of certain beneficial owners and management will appear in our proxy
statement under the caption “Security Ownership of Certain Beneficial Owners and Management.” Such
information is incorporated herein by reference.
Equity Compensation Plan Information
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities to
be issued upon
exercise of outstanding
options, warrants and
rights (1)
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights (2)
(b)
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a)) (3)
(c)
1,388,580
—
1,388,580
$34.59
—
$34.59
2,803,569
—
2,803,569
(1)
Includes 55,354 shares potentially issuable upon the vesting of outstanding restricted share units and 4,918
shares potentially issuable upon the vesting of outstanding performance share units that represent awards
deferred into our Nonqualified Deferred Compensation Plan. The total does not include securities to be
issued upon the exercise of options that were assumed by the Company in the acquisition of Whitney
Holding Corporation. At December 31, 2012, 226,988 Whitney options were outstanding with a weighted-
average exercise price of $61.88.
(2) The weighted average exercise price relates only to the exercise of outstanding options included in column
(3)
(a)
Includes 2,803,569 shares remaining available for issuance under the Amended and Restated 2005 Long-
Term Incentive Plan, as amended and 211,173 shares remaining available for issuance under the Company’s
2010 Employee Stock Purchase Plan, as amended.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information concerning certain relationships and related transactions will appear in our proxy statement
under the caption “Transactions with Related Persons.” Information concerning director independence will
appear in our proxy statement under the caption “Board of Directors and Corporate Governance.” Such
information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information concerning principal accountant fees and services will appear in our proxy statement under the
caption “Independent Registered Public Accounting Firm.” Such information is incorporated herein by reference.
146
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
1.
The following consolidated financial statements of Hancock Holding Company and subsidiaries are
filed as part of this report under Item 8 – Financial Statements and Supplementary Data:
Consolidated balance sheets – December 31, 2012 and 2011
Consolidated statements of income – Years ended December 31, 2012, 2011, and 2010
Consolidated statements of changes in stockholders’ equity– Years ended December 31, 2012,
2011, and 2010
Consolidated statements of cash flows –Years ended December 31, 2012, 2011, and 2010
Notes to consolidated financial statements – December 31, 2012 (pages 73 to 143)
2.
Financial schedules required to be filed by Item 8 of this form, and by Item 15(d) below:
The schedules to the consolidated financial statements set forth by Article 9 of Regulation S-X are not
required under the related instructions or are inapplicable and therefore have been omitted.
3.
Exhibits required to be filed by Item 601 of Regulation S-K, and by Item 15(b) below.
(b) Exhibits:
All other financial statements and schedules are omitted as the required information is inapplicable or the
required information is presented in the consolidated financial statements or related notes.
(a) 3. Exhibits:
147
Exhibit
Number
EXHIBIT INDEX
Description
2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
4.3
Agreement and Plan of Merger, dated December 21, 2010, between Hancock Holding Company
and Whitney Holding Corporation (filed as Exhibit 2.1 to Hancock’s Current Report on Form 8-K
filed with the Commission on December 23, 2010 and incorporated herein by reference).
Amended and Restated Articles of Incorporation dated November 8, 1990 (filed as Exhibit 3.1 to
Hancock’s Form 10-K for the year ended December 31, 1990 filed with the Commission and
incorporated herein by reference).
Amended and Restated Bylaws, dated November 8, 1990 (filed as Exhibit 3.2 to Hancock’s
registration statement on Form S-8 filed with the Commission on September 19, 1996 and
incorporated herein by reference).
Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, dated
October 16, 1991 (filed as Exhibit 4.1 to Hancock’s Form 10-Q for the quarter ended
September 30, 1991 filed with the Commission and incorporated herein by reference).
Articles of Correction, filed with Mississippi Secretary of State on November 15, 1991 (filed as
Exhibit 4.2 to Hancock’s Form 10-Q for the quarter ended September 30, 1991 filed with the
Commission and incorporated herein by reference).
Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, adopted
February 13, 1992 (filed as Exhibit 3.5 to Hancock’s Form 10-K for the year ended December 31,
1992 filed with the Commission and incorporated herein by reference).
Articles of Correction, filed with Mississippi Secretary of State on March 2, 1992 (filed as Exhibit
3.6 to Hancock’s Form 10-K for the year ended December 31, 1992 filed with the Commission and
incorporated herein by reference).
Articles of Amendment to the Articles of Incorporation adopted February 20, 1997 (filed as Exhibit
3.7 to Hancock’s Form 10-K filed with the Commission on March 28, 1997 and incorporated herein
by reference).
Specimen stock certificate (reflecting change in par value from $10.00 to $3.33, effective March 6,
1989) (filed as Exhibit 4.1 to Hancock’s Form 10-Q for the quarter ended March 31, 1989 and
incorporated herein by reference).
By executing this Form 10-K, Hancock hereby agrees to deliver to the Commission upon request
copies of instruments defining the rights of holders of long-term debt of Hancock or its
consolidated subsidiaries or its unconsolidated subsidiaries for which financial statements are
required to be filed, where the total amount of such securities authorized thereunder does not
exceed 10 percent of the total assets of Hancock and its subsidiaries on a consolidated basis.
Shareholder Rights Agreement, dated February 21, 1997, between Hancock Holding Company and
Hancock Bank, as Rights Agent (filed as Exhibit 1 to Hancock’s Form 8-A12G filed with the
Commission on February 27, 1997 and incorporated herein by reference) as extended by
Amendment No. 1 to Rights Agreement, dated February 19, 2007, between Hancock and Hancock
Bank (filed with the Commission as Exhibit 4.1 to Hancock’s Form 8-K filed with the Commission
on February 20, 2007 and incorporated herein by reference).
*10.1
1996 Long Term Incentive Plan (filed as Exhibit A to Hancock’s definitive proxy materials filed
with the Commission on January 23, 1996 and incorporated herein by reference).
* **10.2
Amended and Restated Hancock Holding Company 2005 Long-Term Incentive Plan dated
December 18, 2008 and effective January 1, 2009.
148
Exhibit
Number
* **10.3
Amendment to Amended and Restated Hancock Holding Company 2005 Long-Term Incentive
Plan dated May 24, 2012 and effective January 1, 2012.
Description
* **10.4
Form of 2011 Performance Stock Award Agreement.
* **10.5
Form of 2011 Incentive Stock Option Agreement for Section 16 individuals.
* **10.6
Form of 2011 Restricted Stock Award Agreement for Section 16 individuals.
*10.7
*10.8
* **10.9
* **10.10
* **10.11
* **10.12
10.13
Form of 2012 Restricted Stock Agreement (filed as Exhibit 10.2 to Hancock’s Current Report on Form
8-K filed with the Commission on February 14, 2013 and incorporated herein by reference).
Form of Performance Stock Award Agreement for 2012 (filed as Exhibit 10.3 to Hancock’s
Current Report on Form 8-K filed with the Commission on February 14, 2013 and incorporated
herein by reference).
Restated Hancock Holding Company Nonqualified Deferred Compensation Plan, dated December
18, 2008 and effective January 1, 2008.
Amendment to the Hancock Holding Company Nonqualified Deferred Compensation Plan, dated
August 18, 2009.
Amendment to the Hancock Holding Company Nonqualified Deferred Compensation Plan, dated
September 10, 2009.
Amendment to the Hancock Holding Company Nonqualified Deferred Compensation Plan, dated
September 1, 2011.
Purchase and Assumption Agreement, dated December 18, 2009, among the Federal Deposit
Insurance Corporation, in its capacity as receiver of Peoples First Community Bank, Panama City
Florida, Hancock and the Federal Deposit Insurance Corporation acting in its corporate capacity
(filed as Exhibit 10.8 to Hancock’s Annual Report on Form 10-K filed with the Commission on
February 17, 2010 and incorporated herein by reference).
*10.14
Hancock Holding Company 2010 Employee Stock Purchase Plan, (filed as Exhibit 99.1 to
Hancock’s Current Report on Form 8-K filed with the Commission on January 5, 2011 and
incorporated herein by reference).
* **10.15
Amendment to Hancock Holding Company 2010 Employee Stock Purchase Plan, dated December
15, 2011 and effective January 1, 2011.
10.16
Term Loan Agreement, dated December 21, 2012, among Hancock, certain lenders from time to
time party thereto, Suntrust Bank (as administrative agent) and U.S. Bank National Association
(as syndication agent) (filed as Exhibit 10.1 to Hancock’s Current Report on Form 8-K filed with
the Commission on December 28, 2012 and incorporated herein by reference).
* **10.17
Form of Change in Control Employment Agreement between Hancock and certain Executive Officers.
*10.18
*10.19
**21.1
**23.1
**31.1
Retention Agreement, dated March 1, 2011, between Whitney Bank (as successor in interest to
Hancock Bank of Louisiana) and Joseph S. Exnicious (filed as Exhibit 10.13 to Hancock’s Annual
Report on Form 10-K filed with the Commission on February 28, 2012 and incorporated herein by
reference).
Retention Agreement, dated March 31, 2011, between Whitney Bank (as successor in interest to Hancock
Bank of Louisiana) and Suzanne Thomas (filed as Exhibit 10.13 to Hancock’s Annual Report on Form
10-K filed with the Commission on February 28, 2012 and incorporated herein by reference).
Subsidiaries of Hancock Holding Company.
Consent of PricewaterhouseCoopers, LLP.
Certification of Chief Executive Officers pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended.
149
Exhibit
Number
**31.2
**32.1
**32.2
**99.1
**99.2
Description
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended.
Certification of Chief Executive Officers pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes—Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes—Oxley Act of 2002.
Chief Executive Officer Certification—IFR Section 30.15
Chief Financial Officer Certification—IFR Section 30.15
**101.INS
XBRL Instance Document
**101.SCH
XBRL Schema Document
**101.CAL
XBRL Calculation Document
**101.LAB
XBRL Label Link Document
**101.PRE
XBRL Presenation Linkbase Document
**101.DEF
XBRL Definition Linkbase Document
Compensatory plan or arrangement.
*
** Filed with this Form 10-K
150
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
February 28, 2013
Date
February 28, 2013
Date
February 28, 2013
Date
HANCOCK HOLDING COMPANY
Registrant
By: /s/ Carl J. Chaney
Carl J. Chaney
President & Chief Executive Officer
Director
By: /s/ John M. Hairston
John M. Hairston
Chief Executive Officer & Chief Operating Officer
Director
By: /s/ Michael M. Achary
Michael M. Achary
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ James B. Estabrook, Jr
James B. Estabrook, Jr.
Chairman of the Board,
Director
/s/ Frank E. Bertucci
Frank E. Bertucci
/s/ Jerry L. Levens
Jerry L. Levens
/s/ James H. Horne
James H. Horne
/s/ John H. Pace
John H. Pace
/s/ Christine L. Pickering
Christine L. Pickering
Director
Director
Director
Director
Director
151
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
(signatures continued)
/s/ Robert W. Roseberry
Robert W. Roseberry
/s/ Anthony J. Topazi
Anthony J. Topazi
/s/ Randall W. Hanna
Randall W. Hanna
/s/ Thomas H. Olinde
Thomas H. Olinde
/s/ Richard B. Crowell
Richard B. Crowell
/s/ Hardy B. Fowler
Hardy B. Fowler
/s/ Terence E. Hall
Terence E. Hall
/s/ R. King Milling
R. King Milling
/s/ Eric J. Nickelsen
Eric J. Nickelsen
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
Director
Director
Director
Director
Director
Director
Director
Director
Director
152
(unaudited, amounts in thousands, except per share data)
2012
2011
Income Data
Net income
Operating income (a)
Net interest income (te)*
Per Common Share Data
Net income – basic
Net income – diluted
Operating income – basic (a)
Operating income – diluted (a)
Book value (end of period)
Tangible book value (end of period)
Cash dividends paid
Period-end Balance Sheet Data
Securities
Loans, net of unearned income
Total earning assets
Total assets
Total deposits
Total common stockholders’ equity
Key Ratios
Return on average assets
Return on average assets, operating (a)
Return on average common equity
Return on average common equity, operating (a)
Net interest margin (te)*
Noninterest expense as a percent of total revenue (te)
before amortization of purchased intangibles,
securities transactions, sub debt redemption cost
and merger expenses*
Allowance for loan losses to period-end loans
Tangible common equity ratio
Leverage ratio
$
151,742
$
76,759
$
$
$ 3,716,460
11,577,802
16,845,055
19,464,485
15,744,188
2,453,278
$ 4,496,900
11,177,026
16,930,723
19,774,096
15,713,579
2,367,163
133,214
533,159
1.16
1.15
2.03
2.02
27.95
17.76
0.96
0.52%
0.90%
4.26%
7.40%
4.25%
66.35%
1.12%
7.96%
8.17%
183,965
722,452
1.77
1.75
2.15
2.13
28.91
19.27
0.96
0.80%
0.97%
6.32%
7.66%
4.48%
64.63%
1.18%
8.77%
9.10%
corporate inFormation
annual meeting
The annual meeting of stockholders will be held
at 10:00 a.m. local time, Friday, April 12, 2013,
One Hancock Plaza, Gulfport, Mississippi.
corporate offices
One Hancock Plaza
2510 14th Street
Gulfport, MS 39501
(228)868-4000 / 1-800-522-6542
affiliate Banks & companies
Hancock Bank
Whitney Bank
Hancock Insurance Agency
Whitney Insurance Agency, Inc.
Hancock Investment Services, Inc.
Harrison Finance Company
common stock
The company’s common stock is traded on
the NASDAQ Global Select Market under the
symbol HBHC.
click on the Investor Relations tab, then click the
Shareholder Services box; or write:
Hancock Bank
Corporate Trust Services
Post Office Box 4019
Gulfport, MS 39502-4019
dividend reinvestment plan
The plan allows certain Hancock Holding Company
stockholders to reinvest their dividends in Hancock
Holding Company common stock. The plan also
permits those participating to buy additional shares
with optional cash payments. Stockholders seeking
full details about the plan may call (228)563-7657;
email shareholderservices@hancockbank.com; access
on the company website www.hancockbank.com —
click on the Investor Relations tab, then click the
Shareholder Services box; or write:
Hancock Bank
Corporate Trust Services
Post Office Box 4019
Gulfport, MS 39502-4019
stockHolder information
Stockholders seeking information may call
the Transfer Agent at (228)563-7652 or toll
free (800) 522-6542, extension 87652; email
shareholderservices@hancockbank.com; access on
the company website www.hancockbank.com —
casH dividend direct deposit
Stockholders may elect to have their Hancock
Holding Company dividends directly deposited
into a checking, savings, or money market account.
This service provides a safe, convenient method
of receiving dividends and is offered at no cost to
stockholders. To obtain more information and
an enrollment form, call (228)563-7672; email
shareholderservices@hancockbank.com; access on
the company website www.hancockbank.com —
click on the Investor Relations tab, then click the
Shareholder Services box; or write:
Hancock Bank
Corporate Trust Services
Post Office Box 4019
Gulfport, MS 39502-4019
financial information
Copies of Hancock Holding Company financial
reports, including the Annual Report to the
Securities and Exchange Commission on
Form 10-K, are available without charge
upon request to:
Trisha Voltz Carlson
Senior Vice President
Investor Relations Manager
Hancock Holding Company
Post Office Box 4019
Gulfport, MS 39502-4019
trisha.carlson@hancockbank.com
Earnings releases and other information about
the company are available on the company
website www.hancockbank.com. Click on
the Investor Relations tab.
Hancock Holding company
corporate & affiliate Bank officers
Hancock Holding company
Board of directors
Hancock Bank
Board of directors
WHitney Bank
Board of directors
Carl J. Chaney
President & CEO
Richard T. Hill
Chief Retail Banking Officer
John M. Hairston
CEO & Chief Operating Officer
Samuel B. Kendricks
Chief Credit Officer
Michael M. Achary
Chief Financial Officer
Stephen E. Barker
Chief Accounting Officer
Cindy S. Collins
Chief Compliance Officer
Gerald S. Dugal
Treasurer
Joseph S. Exnicios
President, Whitney Bank
Edward G. Francis
Chief Commercial Banking
Officer
Hugh B. “Tre” Harris, III
Chief Internal Auditor
D. Shane Loper
Chief Risk Officer
Joy Lambert Phillips
General Counsel &
Corporate Secretary
Clifton J. Saik
Chief Wealth
Management Officer
Suzanne C. Thomas
Chief Credit Officer
Whitney Bank
Rudi Hall Thompson
Chief Human Resources Officer
Keith A. Williams
Chief Credit Officer
Hancock Bank
Frank E. Bertucci
Carl J. Chaney
Richard B. Crowell
James B. Estabrook, Jr.*
Hardy B. Fowler
John M. Hairston
Terence E. Hall
Randall W. Hanna
James H. Horne
Jerry L. Levens
Victor Mavar**
R. King Milling
Eric J. Nickelsen
Thomas H. Olinde
John H. Pace
Christine L. Pickering
Robert W. Roseberry
Anthony J. Topazi
Carl J. Chaney
Edward Day, VI
Henry N. Dick, III
James R. Ginn
John M. Hairston
Dwain G. Luce, Jr.
Karen B. Moore
Alfred R. Moran, Jr.
Sean A. Pittman
Gordon L. Redd, Jr.
Charles E. Story
C. Richard Wilkins
Ronald R. Anderson
Jefferson M. Angers
Carl J. Chaney
John M. Hairston
Alfred S. Lippman
R. King Milling
Thomas H. Olinde
John H. Pace
Lewis W. Stirling III
Thomas D. Westfeldt
*independent Chairman of the Board
**Director emeritus
Strong Opportunities
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One Hancock Plaza · Post Office Box 4019
Gulfport, Mississippi 39502
hancockbank.com
whitneybank.com