DBRS Comments on Q3 2009 Earnings of Hancock Holding Company – Senior at A (low)

DBRS has today commented on the Q3 2009 earnings performance of Hancock Holding Company (Hancock or the Company). DBRS rates Hancock’s Issuer & Senior Debt at A (low) with a Stable trend. Unlike many of its peers across the country, Hancock continues to benefit from fairly resilient economies within its footprint, many of which have been bolstered by the rebuilding efforts related to Hurricane Katrina. Although the Company’s credit fundamentals continue to be pressured by the downturn in the national economy, Q3 2009 results remain within expectations for its ratings.

Hancock reported net income of $15.2 million for the quarter, up from $13.7 million for the prior quarter, yet down from $16.0 million for Q3 2008. On a sequential quarter basis, the Company’s lower provisions for loan loss reserves and contraction in non-interest expenses more than offset the marginal decrease in revenues. During Q3 2009, Hancock’s provisions for loan loss reserves contracted by 20%, while non-interest expenses decreased by 4%, mostly reflecting the $3.4 million FDIC special assessment fee, which accrued during the prior quarter. Hancock’s revenues contracted marginally and reflected a 12% decrease in non-interest income, partially offset by a slight increase in net-interest income. Lower non-interest income reflected lower levels of insurance and secondary mortgage market operations fees and a 60% decline in other income, as Q2 2009 results benefited from a $1.4 million gain on the sale of land and a $1.1 million increase in investment income. Hancock’s modestly higher net interest income benefited from an 8 basis points (bps) widening of net interest margin (NIM) to 3.86%. On an annual quarter basis, Hancock’s earnings contracted by 5%, pressured by a 67% increase in provisions for loan loss reserves, partially offset by higher net interest income, driven by a 9% increase in average earning assets.

In light of the steep downturn in the national economy, Hancock’s asset quality remains sound. At September 30, 2009, the Company’s non-performing assets (NPAs) were moderate and remained relatively flat at 1.06% of loans, versus 1.01% at June 30, 2009. Meanwhile, net charge-offs (NCOs) contracted noticeably to 1.24% of average loans versus 1.50% for the prior quarter. The bulk of the Company’s Q3 2009 NCOs reflected commercial real estate loans and to a far lesser extent indirect consumer and finance company loans. While DBRS believes that further asset quality erosion is possible, it should be manageable in scope, due to the continuing post-Hurricane Katrina rebuilding efforts within Hancock’s footprint. DBRS notes that the Company’s allowance for loan loss reserves to NPAs remains solid at 141%.

Hancock’s liquidity position continues to be sound and underpinned by a strong core deposit base, which represents 111% (at June 30, 2009) of net loans. The Company’s securities portfolio, which represents 22% of total assets, access to the Federal Home Loan Bank and Federal Reserve discount window, round out its liquidity profile.

The Company’s capital base remains solid and provides ample loss absorption capacity. At September 30, 2009, Hancock’s tangible common equity ratio was a high 8.71% up from 8.06% at June 30, 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