DBRS Confirms Hancock Holding Company – A (low) after Peoples First Acquisition; Stable Trend

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 confirmation follows Hancock’s acquisition of certain assets and liabilities of Peoples First Community Bank (Peoples First) from the Federal Deposit Insurance Corporation (FDIC).

Today’s rating confirmation considers that the acquisition of select assets ($1.8 billion) and liabilities ($1.7 billion) of Peoples First are immediately accretive to earnings. Positively, the Peoples First acquisition deepens Hancock’s presence in northwestern Florida and extends its geographic reach into the Jacksonville and Orlando markets. Although DBRS maintains a stable trend, it notes concern regarding the near- to medium-term risk related to Hancock successfully integrating the Peoples First franchise. Hancock has a history of successful bank integrations, however this is by far the Company’s largest. Moreover, there is a significant component of loss content embedded within Peoples First loan portfolio. Offsetting this, future credit costs related to the acquired loans will be mitigated by a loss sharing agreement with the FDIC.

The additional branches may enhance the Company’s deposit and loan generating capacity. The acquired assets include $1.4 billion in loans, consisting of 1-4 family residential mortgage loans (48% of total loans), construction & development (31%), and commercial real estate (15%). The acquired liabilities include retail time (34% of total liabilities), jumbo time (32%), money market and savings (23%), demand (6%) and NOW (5%) accounts. The acquisition includes 29 branches in Florida, most of which are near Interstate 10, a corridor that runs parallel to most of Hancock’s markets.

Hancock’s ratings reflect the Company’s solid earnings generation capacity, sound asset quality, healthy and recently augmented capital position and solid liquidity base. Moreover, Hancock’s ratings are underpinned by 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 northern Florida.

Despite the steep downturn in the national economy, Hancock’s asset quality remains sound and credit costs modest. At September 30, 2009, the Company’s non-performing assets (NPAs) represented 1.06% of loans, versus 1.01% at June 30, 2009. Meanwhile, during Q3 2009 Hancock’s net charge-offs (NCOs) contracted noticeably to 1.24% of average loans versus 1.50% for the prior quarter. DBRS notes that the Company’s allowance for loan loss reserves to NPAs remains solid at 141%. Moreover, DBRS comments that Hancock’s income before provisions and taxes is robust ($32 million for Q3 2009) and provides ample loss absorption capacity, at current loss rates ($13.5 million for Q3 2009).

Including the acquisition, Hancock’s pro-forma capital position will remain strong. Specifically, the Company’s tangible common equity ratio exceeds 9%, post acquisition. DBRS comments that during November 2009, Hancock raised approximately $175.5 million in gross proceeds from a common stock offering.

Notes:
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.