For Immediate Release October 23, 2014 For More Information Trisha Voltz Carlson SVP, Investor Relations Manager 504.299.5208 trisha.carlson@hancockbank.com Hancock reports third quarter 2014 financial results Operating E.P.S. flat linked-quarter; core E.P.S. up 6.5% GULFPORT, Miss. (October 23, 2014) — Hancock Holding Company (Nasdaq: HBHC) today announced its financial results for the third quarter of 2014. Net income for the third quarter of 2014 was $46.6 million, or $.56 per diluted common share, compared to $40.0 million, or $.48 in the second quarter of 2014 and $33.2 million, or $.40 in the third quarter of 2013. Operating income for the third quarter of 2014 was $49.1 million, or $.59 per diluted common share, compared to $49.6 million, or $.59, in the second quarter of 2014. Operating income was $46.8 million, or $.56, in the third quarter of 2013. We define our operating income as net income excluding tax-effected securities transactions gains or losses and nonoperating expense items. Nonoperating expenses totaled $3.9 million and $12.1 million (pre-tax), in the third and second quarters of 2014, respectively, and $20.9 million (pre-tax) in the third quarter of 2013. Management believes that operating income is a useful measure of financial performance that helps investors compare the company’s fundamental operational performance from period to period. The financial tables include a reconciliation of net income to operating income. Over the past several quarters we have disclosed our strategic initiatives designed to replace declining levels of purchase accounting income from recent acquisitions with improvement in core income, which the company defines as operating income (defined above) excluding tax- effected purchase accounting adjustments. This effort should improve the overall quality of the Company’s earnings. Management believes that consistent reporting of core income helps investors recognize the pace of management successfully executing its strategic initiatives. Our core income for the third quarter of 2014 was $41.2 million or $.49 per diluted common share, compared to $38.7 million, or $.46 in the second quarter of 2014 and $28.7 million, or $.34, in the third quarter of 2013. The financial tables include a reconciliation of net income to core income. "The combination of our successful expense reduction initiative and investments in revenue- generating initiatives, along with our emphasis on loan and deposit growth across our footprint, is allowing us to gradually replace declining purchase accounting income with solid core results,” said Hancock's President and Chief Executive Officer Carl J. Chaney. “Our success in 1
Hancock reports third quarter 2014 financial results October 23, 2014 growing core revenue this quarter has narrowed the gap between operating and core results, with core E.P.S. growing 6.5% linked-quarter. I am very proud of what we have been able to accomplish so far, and look forward to continuing our success in future quarters.” Highlights of the company’s third quarter of 2014 results: • Net loan growth of $488 million, or 16% linked-quarter annualized; approximately $1.7 billion, or 15%, year-over-year loan growth (each excluding the FDIC-covered portfolio) • Net deposit growth of $491 million, or 13% linked-quarter annualized; completely funding the loan growth in the third quarter • An increase of $5 million in core revenue offset a $5 million decline in purchase accounting revenue • Operating expenses remained relatively stable and remain below the targeted expense goal of $147 million for the fourth quarter of 2014 • Solid capital levels with a tangible common equity (TCE) ratio of 9.10%; approximately $10 million of capital used to repurchase stock during the quarter • Return on average assets (ROA) (operating) of 1.00% down from 1.04%; core ROA up 2bps; total assets grew to $20 billion from second quarter of 2014 Loans Total loans at September 30, 2014 were $13.3 billion, up $465 million from June 30, 2014. Excluding the FDIC-covered portfolio, which declined $23 million during the third quarter of 2014, total loans increased $488 million, or 4% linked-quarter. The growth in deposits, noted in the section below, fully funded the loan growth in the third quarter of 2014. All markets across the franchise reported net loan growth during the quarter, with south Louisiana, Houston and central Florida generating over half of the increase. Mortgage and indirect lending generated approximately 30% of the quarter’s net loan growth. Average loans totaled $13.1 billion for the third quarter of 2014, up $421 million, or 3%, from the second quarter of 2014. Deposits Total deposits at September 30, 2014 were $15.7 billion, up $491 million, or 3%, from June 30, 2014. Average deposits for the third quarter of 2014 were $15.4 billion, up $311 million, or 2%, from the second quarter of 2014. Initiatives were put in place recently with a focus on growing deposits in order to fund the Company’s loan growth. Previously the loan growth had been funded primarily through runoff in the securities portfolio. Noninterest-bearing demand deposits (DDAs) totaled $5.9 billion at September 30, 2014, up $143 million, or 2.5%, compared to June 30, 2014. DDAs comprised 37% of total period-end deposits at September 30, 2014. Interest-bearing transaction and savings deposits totaled $6.3 billion at the end of the third quarter of 2014, up $246 million, or 4%, from June 30, 2014. Time deposits (CDs) and interest- 2
Hancock reports third quarter 2014 financial results October 23, 2014 bearing public fund deposits totaled $3.5 billion at September 30, 2014, up $103 million, or 3%, from June 30, 2014. Asset Quality Nonperforming assets (NPAs) totaled $147.2 million at September 30, 2014, down $10.3 million from June 30, 2014. During the third quarter of 2014, total nonperforming loans declined $6.7 million, and foreclosed and surplus real estate (ORE) and other foreclosed assets decreased $3.6 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 1.10% at September 30, 2014, down 12 bps from June 30, 2014. The total allowance for loan losses was $125.6 million at September 30, 2014, down $3.1 million from June 30, 2014. The ratio of the allowance for loan losses to period-end loans was .94% at September 30, 2014, compared to 1.00% at the end of the second quarter of 2014. The change in the allowance during the third quarter reflects a $3.4 million increase in the allowance maintained on the noncovered portion of the loan portfolio, offset by a $6.5 million reduction in the allowance on covered loans. Net charge-offs from the noncovered loan portfolio were $6.4 million, or 0.19% of average total loans on an annualized basis in the third quarter of 2014, up from $4.1 million, or 0.13% of average total loans in the second quarter of 2014. During the third quarter of 2014, Hancock recorded a total provision for loan losses of $9.5 million, up $2.8 million from the second quarter of 2014, primarily related to the noncovered portion of the allowance. The increase in the loan loss provision was primarily related to the growth in loans during the third quarter. Net Interest Income and Net Interest Margin Net interest income (TE) for the third quarter of 2014 was $166.2 million, down $1.1 million from the second quarter of 2014. The impact of purchase accounting items on net interest income was $21.5 million, down $5.2 million linked-quarter. Excluding the impact from purchase accounting items, core net interest income increased $4.1 million linked-quarter. Average earning assets were $17.3 billion for the third quarter of 2014, up $533 million, or 3%, from the second quarter of 2014. The reported net interest margin (TE) was 3.81% for the third quarter of 2014, down 18 bps from the second 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 3 bps to 3.32% during the third quarter of 2014. Declines in the core loan yield (-3 bps) and securities portfolio yield (-7 bps) were partly offset by an improved earning asset mix and a lower cost of funds (-1 bp). Noninterest Income Noninterest income, including securities transactions, totaled $57.9 million for the third quarter of 2014, up $1.5 million, or 3%, from the second quarter of 2014. Included in the total is a reduction of $2.8 million related to the amortization of the indemnification asset, compared to 3
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