DBRS Confirms Ratings of Hancock Holding Co. – Senior at A (low)

DBRS has today confirmed the ratings of Hancock Holding Company (Hancock or the Company) and its rated bank subsidiaries, including Hancock’s Issuer & Senior Debt rating of A (low). The trend for all ratings remains Stable. The rating actions followed a review by DBRS of the Company’s operating performance, financial fundamentals and future prospects.

Notwithstanding the deteriorating economy, which has led to a narrowing margin and higher credit costs, Hancock’s credit fundamentals remain sound. The rating confirmation and Stable trend recognize Hancock’s good core earnings generation capacity, driven by its high yielding loan portfolio, low cost core deposit base and solid fee revenues. Furthermore ratings are underpinned by Hancock’s sound asset quality, healthy capital position and solid liquidity base.

Hancock’s ratings also reflect a deeply rooted community-based banking franchise in its legacy markets of southern Mississippi and central and southeastern Louisiana, and more recent markets of coastal Alabama and northwestern Florida. The revenue mix is sufficiently diverse, arising from various commercial and consumer loan types, while insurance, trust, investment and operating services contribute relatively stable non-interest income to net revenues. Although the loan portfolio is sufficiently granular, it does contain a substantial amount of commercial real estate (CRE) exposure, which represents a higher level of risk, especially in the event of a prolonged economic downturn. Somewhat offsetting, a sizeable component of the CRE portfolio is owner occupied, which are generally underwritten on both the underlying business cash flows and real estate considerations, and thus behave more like C&I loans.

Despite a declining economy, Hancock’s asset quality remains sound. The Company’s non-performing assets (NPAs) increased to a relatively moderate 1.04% of loans at March 31, 2009 from 0.83% at December 31, 2008, while Q1 2009 net charge-offs (NCOs) decreased to a fairly modest 0.67% of average loans, from 1.20% for Q4 2008. DBRS notes that the bulk of the sequential quarterly increase in NPAs was related to construction and land development loans and commercial real estate. Although the Company’s asset quality remains under pressure, its credit quality metrics were better than the majority of its rated peers. Nonetheless, DBRS believes that further erosion in Hancock’s asset quality is likely, however the increase will be somewhat restrained in scope, due to the continuing post-Hurricane Katrina rebuilding efforts within Hancock’s footprint.

Although margin remains pressured due to a significant decrease in interest rates over the past year, Hancock’s Q1 2009 net interest margin was solid at 3.48%.

Hancock’s liquidity position remains sound. Core deposits represent approximately 116% (at March 31, 2009) of net loans. Moreover, the Company’s good quality securities portfolio, which represents 24% of total assets and access to the Federal Home Loan Bank and Federal Reserve discount window round out its liquidity profile.

Unlike most banks, Hancock did not seek funds from the U.S. Department of the Treasury, Capital Purchase Program. At March 31, 2009, the Company’s capital position was healthy, as reflected by its tangible common equity ratio of 7.92%.

DBRS believes that the principal challenge faced by Hancock is to sustain solid asset quality and maintain its deposits and profitability to avoid weakening of its solid fundamentals.

Hancock Holding Company, a bank holding company headquartered in Gulfport, Mississippi, reported $7.1 billion in assets at March 31, 2009.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Banks and Bank Holding Companies Operating in the United States, and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.