For Immediate Release July 24, 2014 For More Information Trisha Voltz Carlson SVP, Investor Relations Manager 504.299.5208 trisha.carlson@hancockbank.com Hancock reports second quarter 2014 financial results Board of Directors Authorizes New 5% Common Stock Buyback GULFPORT, Miss. (July 24, 2014) — Hancock Holding Company (Nasdaq: HBHC) today announced its financial results for the second quarter of 2014. Operating income for the second quarter of 2014 was $49.6 million or $.59 per diluted common share, compared to $49.1 million, or $.58 in the first quarter of 2014. Operating income was $46.9 million, or $.55, in the second quarter of 2013. We define our operating income as net income excluding tax- effected securities transactions gains or losses and nonoperating expense items. Management believes that operating income provides a useful measure of financial performance that helps investors compare the company’s fundamental operations over time. The financial tables include a reconciliation of net income to operating income. In the second quarter of 2014 net income was $40.0 million, or $.48 per diluted common share. Net income reflects the impact of certain nonoperating expenses of $12.1 million. Nonoperating expenses are detailed in the slide presentation accompanying the release. There were no adjustments between operating income and net income for the first quarter of 2014 and second quarter of 2013. Highlights of the company’s second quarter of 2014 results: • Ongoing improvement in the overall quality of earnings (replacing declining purchase accounting income with core results); core net interest income (TE) increased approximately $700,000 linked-quarter; core net interest margin (NIM) narrowed 2 basis points (bps) (we define our core results as reported results less the impact of net purchase accounting adjustments); core noninterest income increased approximately $1.0 million (after adjusting for the impact from purchase accounting items and normalizing for the sale of selected insurance lines in early second quarter 2014) • Operating expenses declined $2.3 million linked-quarter, or 1.5%, exceeding the company’s expense management goals; however, management expects increases in operating expense in the near-term as investments are made in revenue- generating initiatives 1
Hancock reports second quarter 2014 financial results July 24, 2014 • Efficiency ratio declined slightly to just under 62%; the company continues working on its goal of lowering the efficiency ratio to below 60% • Approximately $383 million, or 13%, linked-quarter annualized net loan growth, and approximately $1.3 billion, or 12%, year-over-year loan growth (each excluding the FDIC-covered portfolio) • Purchase accounting loan accretion declined $1.6 million linked-quarter; management expects sizeable quarterly declines in both the third and fourth quarters of 2014 • Continued improvement in asset quality metrics • Solid capital levels with a tangible common equity (TCE) ratio of 9.29% • Return on average assets (ROA) (operating) of 1.04% compared to 1.05% in the first quarter of 2014 and 0.99% in the second quarter a year ago "The quarter’s results reflected solid performance across the company as we continued to improve the quality of our earnings by replacing purchase accounting income with core earnings,” said Hancock's President and Chief Executive Officer Carl J. Chaney. “The double- digit loan growth, improvements in core revenue, reduced operating expense, improved asset quality and capital strength reflected in the second quarter’s numbers, contributed to the board’s decision and confidence in authorizing another common stock buyback. We remain focused on executing and achieving the strategic initiatives currently underway, with the ultimate goal of enhancing shareholder value.” Loans Total loans at June 30, 2014 were $12.9 billion, up $356 million from March 31, 2014. Excluding the FDIC-covered portfolio, which declined $27 million during the second quarter of 2014, total loans increased approximately $383 million, or 3% linked-quarter. The largest component of linked-quarter net loan growth (excluding the FDIC-covered portfolio) was in the commercial and industrial portfolio, with additional growth and change in mix from the construction, residential mortgage and consumer portfolios. The majority of the growth during the second quarter came from the Houston and south Louisiana markets. For the full year of 2014 management expects period-end annual loan growth to be in the 8-11% range. Average loans totaled $12.7 billion for the second quarter of 2014, up $302 million, or 2%, from the first quarter of 2014. Deposits Total deposits at June 30, 2014 were $15.2 billion, virtually unchanged from March 31, 2014. Average deposits for the second quarter of 2014 were $15.1 billion, down $209 million, or 1%, from the first quarter of 2014. Noninterest-bearing demand deposits (DDAs) totaled $5.7 billion at June 30, 2014, up $110 million, or 2%, compared to March 31, 2014. DDAs comprised 38% of total period-end deposits at June 30, 2014. 2
Hancock reports second quarter 2014 financial results July 24, 2014 Interest-bearing transaction and savings deposits totaled $6.1 billion at the end of the second quarter of 2014, down $38 million, or less than 1%, from March 31, 2014. Time deposits (CDs) and interest-bearing public fund deposits totaled $3.4 billion at June 30, 2014, down $101 million, or 3%, from March 31, 2014. The decline was related to short-term time deposits that matured during the second quarter and were not renewed. Asset Quality Nonperforming assets (NPAs) totaled $157.5 million at June 30, 2014, down $22.2 million from March 31, 2014. During the second quarter of 2014, total nonperforming loans declined $12.1 million while foreclosed and surplus real estate (ORE) and other foreclosed assets decreased $10.1 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 1.22% at June 30, 2014, down 21 bps from March 31, 2014. The total allowance for loan losses was $128.7 million at June 30, 2014, up slightly from $128.2 million at March 31, 2014. The ratio of the allowance for loan losses to period-end loans was 1.00%, compared to 1.02% at the end of the first quarter of 2014. The change in the allowance during the second quarter was primarily related to a $2.7 million increase in allowance maintained on the noncovered portion of the loan portfolio, offset by a $2.3 million reduction in the allowance on covered loans. Net charge-offs from the noncovered loan portfolio were $4.1 million, or 0.13% of average total loans on an annualized basis in the second quarter of 2014, virtually unchanged from $4.0 million, or 0.13% of average total loans in the first quarter of 2014. During the second quarter of 2014, Hancock recorded a total provision for loan losses of $6.7 million, down $1.3 million from the first quarter of 2014. The provision for noncovered loans was $6.8 million in the second quarter of 2014, down from $8.3 million in the first quarter of 2014. Net Interest Income and Net Interest Margin Net interest income (TE) for the second quarter of 2014 was $167.3 million, down less than $1 million from the first quarter of 2014. The impact of purchase accounting items on net interest income was $26.7 million, down $1.6 million linked-quarter. Excluding the impact from purchase accounting items, core net interest income increased $0.7 million linked-quarter. Average earning assets were $16.8 billion, up approximately $51 million from the first quarter of 2014. The reported net interest margin (TE) was 3.99% for the second quarter of 2014, down 7 bps from the first quarter of 2014. The core net interest margin (reported net interest income (TE) excluding total net purchase accounting adjustments, annualized, as a percent of average earning assets) declined 2 bps to 3.35% during the second quarter of 2014. Declines in the core loan yield (-5 bps) and securities portfolio yield (-4 bps) were partly offset by an improved earning asset mix and lower cost of funds (-1 bp). 3
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