GULFPORT, Miss., April 23, 2015 (GLOBE NEWSWIRE) -- Hancock Holding Company (Nasdaq:HBHC) today announced its financial results for the first quarter of 2015. Operating income for the first quarter of 2015 was $44.7 million, or $.55 per diluted common share, compared to $46.4 million, or $.56, in the fourth quarter of 2014. Operating income was $49.1 million, or $.58, in the first quarter of 2014. We define our operating income as net income excluding tax-effected securities transactions gains or losses and nonoperating expense items. Nonoperating expenses totaled $7.3 million and $9.7 million (pre-tax), in the first quarter of 2015 and fourth quarter of 2014, respectively. There were no adjustments between operating income and net income for the first quarter 2014. Management believes that operating income is one useful measure of our 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.
Net income for the first quarter of 2015 was $40.2 million, or $.49 per diluted common share, compared to $40.1 million, or $.48 and $49.1 million, or $.58, in the fourth and first quarters of 2014 respectively.
Over the past several quarters we have disclosed our focus on strategic initiatives that are designed to replace declining levels of purchase accounting income from acquisitions with improvement in core income, which the company defines as operating income excluding tax-effected purchase accounting adjustments. Over time, this strategic focus should improve the company's core income. Management believes that consistent reporting of core income helps investors understand the success management has had in executing its strategic initiatives. Our core income for the first quarter of 2015 was $39.6 million or $.49 per diluted common share, compared to $41.5 million or $.50 in the fourth quarter of 2014 and $37.7 million, or $.45, in the first quarter of 2014. The financial tables include a reconciliation of net income to core income.
Based on current projections for net purchase accounting adjustments, management expects core and operating results to be the same (or not significantly different) beginning in the second quarter of 2015, with net, operating and core results to be essentially the same in the second half of 2015.
"Our first quarter's results were impacted by both typical seasonality and the current energy cycle," said Hancock's President and Chief Executive Officer John M. Hairston, "however, we reported solid results and positioned our company for future opportunities. During the quarter we completed our previously announced common stock buyback and issued $150 million of holding company subordinated debt. Our efforts to grow revenue continued, and while the current economic impact of the energy cycle in a few of our markets may delay the timing of achieving some of our consolidated goals, we have not lost sight of those targets and are focused on growing our company for the long term."
Highlights of the company's first quarter of 2015 results:
- Stable operating results -- in line with expectations
- Completed 5% common stock buyback authorization
- Issued subordinated debt -- fuel for growth
- Investing now for the future
- Loans increased $92 million, or 3% LQA; excludes net paydowns in the energy and FDIC acquired loan portfolios
- Noninterest-bearing demand deposits (DDAs) increased $256 million, or 4%, linked-quarter
- Seasonality and energy cycle impacted results
Loans
Total loans at March 31, 2015 were $13.9 billion, up $29.1 million from December 31, 2014.
Net loan growth during the quarter was mainly in the Alabama and Florida markets, with additional growth in indirect and mortgage lending. Louisiana and Texas markets were impacted by both the energy cycle and annual seasonality. Historically, loans build towards year end with payoffs and paydowns in the first quarter of each year.
At March 31, 2015, loans in the energy segment totaled $1.67 billion, or 12% of total loans. The energy portfolio declined approximately $50 million linked-quarter and is comprised of credits to both the E&P industry and support industries. Additional details of the energy portfolio are included in the presentation slides posted on our Investor Relations website.
In light of the first quarter's net paydowns in the energy portfolio, and the expected headwinds related to the current energy cycle, management has updated its end of period annual loan growth guidance for 2015 to 5-8%.
Average loans totaled $13.9 billion for the first quarter of 2015, up $291 million, or 2%, from the fourth quarter of 2014.
Deposits
Total deposits at March 31, 2015 were $16.9 billion, up $288 million, or 2%, from December 31, 2014. Average deposits for the first quarter of 2015 were $16.5 billion, up $593 million, or 4%, from the fourth quarter of 2014.
Noninterest-bearing demand deposits (DDAs) totaled $6.2 billion at March 31, 2015, up $256 million, or 4%, compared to December 31, 2014. DDAs comprised 37% of total period-end deposits at March 31, 2015.
Interest-bearing transaction and savings deposits totaled $6.6 billion at the end of the first quarter of 2015, up $45 million, or 1%, from December 31, 2014. Time deposits (CDs) of $2.3 billion grew $140 million, or 7%, while interest-bearing public fund deposits decreased $154 million, or 8%, to $1.8 billion at March 31, 2015. A portion of the public fund balances were seasonal, with runoff in those deposits expected in the first quarter of 2015.
Asset Quality
Nonperforming assets (NPAs) totaled $141 million at March 31, 2015, down $7 million from December 31, 2014. During the first quarter of 2015, total nonperforming loans increased approximately $10 million while foreclosed and surplus real estate (ORE) and other foreclosed assets decreased approximately $17 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 1.01% at March 31, 2015, down 5 bps from December 31, 2014.
The total allowance for loan losses was $128.4 million at March 31, 2015, down $0.4 million from December 31, 2014. The ratio of the allowance for loan losses to period-end loans was 0.92% at March 31, 2015, virtually unchanged from December 31, 2014. The allowance maintained on the non-FDIC acquired portion of the loan portfolio increased $2.6 million linked-quarter, totaling $100.7 million, and the impaired reserve on the FDIC acquired loan portfolio declined $2.9 million linked-quarter.
Pricing pressures on oil continued during the first quarter and led to some downward pressure on risk ratings during the quarter. Based on those changes, plus updates to the qualitative factors related to energy, the reserve for the energy portfolio increased approximately $8 million linked-quarter. Management believes that if further risk rating downgrades occur they could lead to additional loan loss provisions but not translate to significant losses. The impact and severity will depend on the overall oil price reduction and the duration of the cycle. Additional details of the energy portfolio are included in the presentation slides posted on our Investor Relations website.
Net charge-offs from the non-FDIC acquired loan portfolio were $3.7 million, or 0.11% of average total loans on an annualized basis in the first quarter of 2015, up from $2.6 million, or 0.08% of average total loans in the fourth quarter of 2014.
During the first quarter of 2015, Hancock recorded a total provision for loan losses of $6.2 million, down $3.6 million from the fourth quarter of 2014.
Net Interest Income and Net Interest Margin
Net interest income (TE) for the first quarter of 2015 was $161.1 million, down $2.5 million from the fourth quarter of 2014. There were 2 less calendar days in the first quarter which accounted for most of the decline. The impact of purchase accounting adjustments (PAAs) on net interest income was $15.3 million, down approximately $0.7 million linked-quarter. Excluding the impact from purchase accounting items, core net interest income decreased $1.8 million linked-quarter and reflected the change in days noted above. Average earning assets were $18.3 billion for the first quarter of 2015, up $405 million, or 2%, from the fourth quarter of 2014.
The reported net interest margin (TE) was 3.55% for the first quarter of 2015, down 8 bps from the fourth quarter of 2014. Approximately 2 bps of the decline was related to the decline in purchase accounting adjustments noted above. 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 6 bps to 3.21% during the first quarter of 2015. Declines in the core loan yield (-3 bps) and the securities portfolio yield (-1 bp), and an increase in the cost of funds (+1 bp) were drivers of the margin compression. Interest on the issuance of $150 million in holding company subordinated debt in early March compressed the net interest margin 1 bp.
Noninterest Income
Noninterest income, including securities transactions, totaled $56.5 million for the first quarter of 2015, down $0.4 million, or 0.7%, from the fourth quarter of 2014. Included in the total is $0.3 million of securities transactions gains. Also included in the total is a reduction of $1.2 million related to the amortization of the FDIC indemnification asset, compared to a reduction of $2.1 million in the fourth quarter of 2014. Excluding the impact of these items, core noninterest income totaled $57.4 million, down $1.7 million linked-quarter.
Service charges on deposits totaled $17.3 million for the first quarter of 2015, down $1.7 million, or 9%, from the fourth quarter of 2014. Bank card and ATM fees totaled $11.2 million, virtually unchanged from the fourth quarter of 2014.
Trust fees totaled $11.2 million, down $0.4 million linked-quarter. Trust fees were impacted by the decline in energy stocks related to the current energy cycle. Investment and annuity income and insurance fees totaled $6.8 million, up $0.2 million, or 3%, linked-quarter.
Fees from secondary mortgage operations totaled $2.7 million for the first quarter of 2015, up $0.7 million, or 33%, linked-quarter. During the first quarter, a greater portion of loan production was sold in the secondary market compared to last quarter. Management expects this trend to continue through 2015.
Other noninterest income totaled $8.2 million, down $0.4 million, or 5%, from the fourth quarter of 2014.
Noninterest Expense & Taxes
Noninterest expense for the first quarter of 2015 totaled $153.5 million and included $7.3 million of nonoperating expenses. Excluding these costs, operating expense totaled $146.2 million in the first quarter of 2015, up $2.1 million, or 1.5%, linked-quarter. (The details of the changes in the noninterest expense categories noted below exclude the impact of nonoperating items.)
Total personnel expense was $80.1 million in the first quarter of 2015, up $0.6 million, or less than 1%, from the fourth quarter of 2014. Annual seasonality impacted benefits (up $3.0 million linked-quarter), which was offset by a reduction in salary expense of $2.4 million during the first quarter of 2015.
Occupancy and equipment expense totaled $15.1 million in the first quarter of 2015, up $0.5 million, or 4%, from the fourth quarter of 2014.
ORE expense totaled $0.5 million for the first quarter of 2015, down $0.5 million, or 54% linked-quarter.
Other operating expense totaled $44.2 million in the first quarter of 2015, up $1.7 million, or 4%, from the fourth quarter of 2014.
The effective income tax rate for the first quarter 2015 was 27%, virtually unchanged from the fourth quarter of 2014. Management expects the effective income tax rate to approximate 27-29% in 2015. The effective income tax rate continues to be less than the statutory rate of 35% due primarily to tax-exempt income and tax credits.
Capital
Common shareholders' equity at March 31, 2015 totaled $2.4 billion. The tangible common equity (TCE) ratio was 8.40%, down 19 bps from December 31, 2014. The decline in the TCE ratio mainly reflects the repurchase of common shares during the quarter.
In July of 2014, the Board of Directors authorized a new common stock repurchase program for up to 5%, or approximately 4 million shares, of the Company's common stock. During the first quarter the company completed this buyback authorization. The company repurchased 2,563,607 shares of its common stock at an average price of $29.36. Since the third quarter of 2014 the company has repurchased approximately 4.1 million shares at an average price of $30.02
On March 9, 2015 the company issued $150 million of 30-year subordinated debt at a rate of 5.95%. The subordinated debt was used to complete the recent stock buyback authorization with the remainder to be used for general corporate purposes. Management and the board will continue to review additional options to deploy excess capital in the best interest of the company and its shareholders through organic growth, mergers and acquisitions, stock buybacks and/or dividends.
Additional capital ratios are included in the financial tables.
Conference Call and Slide Presentation
Management will host a conference call for analysts and investors at 9:00 a.m. Central Time on Friday, April 24, 2015 to review the results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock's website at www.hancockbank.com. Additional financial tables and a slide presentation related to first quarter results are also posted as part of the webcast link. To participate in the Q&A portion of the call, dial (877) 564-1219 or (973) 638-3429. An audio archive of the conference call will be available under the Investor Relations section of our website. A replay of the call will also be available through May 1, 2015 by dialing (855) 859-2056 or (404) 537-3406, passcode 16414837.
About Hancock Holding Company
Hancock Holding Company is a financial services company with regional business headquarters and locations throughout a growing Gulf South corridor. The company's banking subsidiary provides a comprehensive network of full-service financial choices through Hancock Bank locations in Mississippi, Alabama, and Florida and Whitney Bank offices in Louisiana and Texas, including traditional and online banking; commercial and small business banking; energy banking; private banking; trust and investment services; certain insurance services; mortgage services; and consumer financing. More information and online banking are available at www.hancockbank.com and www.whitneybank.com.
Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and we intend such forward-looking statements to be covered by the safe harbor provisions therein and are including this statement for purposes of invoking these safe-harbor provisions. Forward-looking statements provide projections of results of operations or of financial condition or state other forward-looking information, such as expectations about future conditions and descriptions of plans and strategies for the future. Forward-looking statements that we may make include, but may not be limited to, comments with respect to future levels of economic activity in our markets, including the impact of volatility of oil and gas prices on our energy portfolio and associated loan loss reserves and the downstream impact on businesses that support the energy sector, especially in the Gulf Coast region, loan growth expectations, deposit trends, credit quality trends, net interest margin trends, future expense levels, success of revenue-generating initiatives, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, the impact of the branch rationalization process, details of the common stock buyback, possible repurchases of shares under stock buyback programs, and the financial impact of regulatory requirements. Hancock's ability to accurately project results, predict the effects of future plans or strategies, or predict market or economic developments is inherently limited. Although Hancock believes that the expectations reflected in its forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ from those expressed in Hancock's forward-looking statements include, but are not limited to, those risk factors outlined in Hancock's public filings with the Securities and Exchange Commission, which are available at the SEC's internet site (http://www.sec.gov).
You are cautioned not to place undue reliance on these forward-looking statements. Hancock does not intend, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.
| HANCOCK HOLDING COMPANY | |||||
| QUARTERLY HIGHLIGHTS | |||||
| (Unaudited) | |||||
| Three Months Ended | |||||
| (amounts in thousands, except per share data) | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | 3/31/2014 |
| INCOME STATEMENT DATA | |||||
| Net interest income | $158,158 | $160,813 | $163,541 | $164,778 | $165,562 |
| Net interest income (TE) (a) | 161,114 | 163,581 | 166,230 | 167,332 | 168,198 |
| Provision for loan losses | 6,154 | 9,718 | 9,468 | 6,691 | 7,963 |
| Noninterest income excluding securities transactions | 56,213 | 56,961 | 57,941 | 56,398 | 56,699 |
| Securities transactions gains | 333 | -- | -- | -- | -- |
| Noninterest expense (excluding nonoperating expense items) | 146,201 | 144,080 | 145,192 | 144,727 | 146,982 |
| Nonoperating expense items | 7,314 | 9,667 | 3,887 | 12,131 | -- |
| Net income | 40,159 | 40,092 | 46,553 | 39,962 | 49,115 |
| Operating income (b) | 44,697 | 46,376 | 49,079 | 49,575 | 49,115 |
| Core income (c) | 39,619 | 41,537 | 41,176 | 38,736 | 37,742 |
| PERIOD-END BALANCE SHEET DATA | |||||
| Loans | $13,924,386 | $13,895,276 | $13,348,574 | $12,884,056 | $12,527,937 |
| Investment securities | 4,107,904 | 3,826,454 | 3,913,370 | 3,677,229 | 3,797,883 |
| Earning assets | 18,568,037 | 18,544,930 | 17,748,600 | 17,023,990 | 16,622,104 |
| Total assets | 20,724,511 | 20,747,266 | 19,985,950 | 19,349,431 | 19,004,170 |
| Noninterest-bearing deposits | 6,201,403 | 5,945,208 | 5,866,255 | 5,723,663 | 5,613,872 |
| Total deposits | 16,860,485 | 16,572,831 | 15,736,694 | 15,245,227 | 15,274,774 |
| Common shareholders' equity | 2,425,098 | 2,472,402 | 2,509,342 | 2,492,582 | 2,462,534 |
| AVERAGE BALANCE SHEET DATA | |||||
| Loans | $13,869,397 | $13,578,223 | $13,102,108 | $12,680,861 | $12,379,316 |
| Investment securities (d) | 3,772,997 | 3,836,123 | 3,780,089 | 3,716,563 | 3,935,616 |
| Earning assets | 18,315,839 | 17,911,143 | 17,324,444 | 16,791,744 | 16,740,353 |
| Total assets | 20,443,859 | 20,090,372 | 19,549,947 | 19,039,264 | 19,055,107 |
| Noninterest-bearing deposits | 5,924,196 | 5,849,356 | 5,707,523 | 5,505,735 | 5,499,993 |
| Total deposits | 16,485,259 | 15,892,507 | 15,371,209 | 15,060,581 | 15,269,143 |
| Common shareholders' equity | 2,447,870 | 2,509,509 | 2,489,948 | 2,463,385 | 2,435,980 |
| COMMON SHARE DATA | |||||
| Earnings per share - diluted | $0.49 | $0.48 | $0.56 | $0.48 | $0.58 |
| Operating earnings per share - diluted (b) | 0.55 | 0.56 | 0.59 | 0.59 | 0.58 |
| Core earnings per share - diluted (c) | 0.49 | 0.50 | 0.49 | 0.46 | 0.45 |
| Cash dividends per share | $0.24 | $0.24 | $0.24 | $0.24 | $0.24 |
| Book value per share (period-end) | $31.14 | $30.74 | $30.76 | $30.45 | $29.93 |
| Tangible book value per share (period-end) | 21.55 | 21.37 | 21.44 | 21.08 | 20.47 |
| Weighted average number of shares - diluted | 79,661 | 81,530 | 81,942 | 82,174 | 82,534 |
| Period-end number of shares | 77,886 | 80,426 | 81,567 | 81,860 | 82,282 |
| Market data | |||||
| High sales price | $31.13 | $35.67 | $36.47 | $37.86 | $38.50 |
| Low sales price | 24.96 | 28.68 | 31.25 | 32.02 | 32.66 |
| Period-end closing price | 29.86 | 30.70 | 32.05 | 35.32 | 36.65 |
| Trading volume | 51,866 | 36,396 | 25,553 | 27,432 | 31,328 |
| PERFORMANCE RATIOS | |||||
| Return on average assets | 0.80% | 0.79% | 0.94% | 0.84% | 1.05% |
| Return on average assets (operating) (b) | 0.89% | 0.92% | 1.00% | 1.04% | 1.05% |
| Return on average common equity | 6.65% | 6.34% | 7.42% | 6.51% | 8.18% |
| Return on average common equity (operating) (b) | 7.41% | 7.33% | 7.82% | 8.07% | 8.18% |
| Return on average tangible common equity | 9.60% | 9.08% | 10.70% | 9.47% | 12.04% |
| Return on average tangible common equity (operating) (b) | 10.68% | 10.50% | 11.28% | 11.75% | 12.04% |
| Tangible common equity ratio (e) | 8.40% | 8.59% | 9.10% | 9.29% | 9.24% |
| Net interest margin (TE) (a) | 3.55% | 3.63% | 3.81% | 3.99% | 4.06% |
| Average loan/deposit ratio | 84.13% | 85.44% | 85.24% | 84.20% | 81.07% |
| Efficiency ratio (f) | 64.36% | 62.41% | 61.84% | 61.67% | 62.23% |
| Allowance for loan losses as a percent of period-end loans | 0.92% | 0.93% | 0.94% | 1.00% | 1.02% |
| Annualized net noncovered charge-offs to average loans | 0.11% | 0.08% | 0.19% | 0.13% | 0.13% |
| Allowance for loan losses to non-performing loans + accruing loans 90 days past due | 123.14% | 137.96% | 128.44% | 126.26% | 112.64% |
| Noninterest income excluding securities transactions as a percent of total revenue (TE) (a) | 25.87% | 25.83% | 25.85% | 25.21% | 25.21% |
| FTE headcount | 3,785 | 3,794 | 3,787 | 3,901 | 3,974 |
(a) Tax-equivalent (TE) amounts are calculated using a federal income tax rate of 35%.
(b) Net income less tax-effected securities transactions 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.
(c) Operating income excluding tax-effected purchase accounting adjustments. Management believes that reporting on core income provides a useful measure of financial performance that helps investors determine whether management is successfully executing its strategic initiatives.
(d) Average securities does not include unrealized holding gains/losses on available for sale securities.
(e) The tangible common equity ratio is common shareholders' equity less intangible assets divided by total assets less intangible assets.
(f) The efficiency ratio is noninterest expense to total net interest (TE) and noninterest income, excluding amortization of purchased intangibles, nonoperating expense items, and securities transactions.