DBRS Comments on Q1 Earnings of Hancock Holding Company -- Senior at A (low)

DBRS has commented today on the Q1 2009 earnings of Hancock Holding Company (Hancock or the Company). The Company reported net income of $14 million for the quarter, up from $8.3 million for the prior quarter, but down from $20 million for Q1 2008. On a sequential quarterly basis, earnings benefited from a 51% decrease in provisions for loan loss reserves, of which 15% was for reserve build, a 3.6% increase in average earning assets and relatively flat non-interest expenses. Partially offsetting was a 1 basis point (bps) narrowing in net interest margin (NIM) to 3.50%, and a 5.0% decrease in core non-interest income (excludes securities gains/losses). On an annual quarter basis, earnings were negatively impacted by a 30 bps narrowing of NIM, a 5.6% decrease in core non-interest income and an 11% increase in non-interest expenses. Positively, and somewhat offsetting, provisions decreased by 5.4%. Hancock’s franchise strengths and credit fundamentals remain unchanged, and its ratings, including its A (low) rated senior obligations and Stable trend, remain unaffected.

Reflecting the deteriorating economy, non-performing assets (NPAs) rose to 1.04% of loans from 0.83% at December 31, 2008 and 0.46% at March 31, 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. Net charge-offs (NCOs) decreased to 0.67% of average loans, from 1.20% for Q4 2008, yet increased from 0.32% for Q1 2008. 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.

On a sequential quarterly basis, Hancock’s NIM was fairly stable and narrowed by 1 bps, as the decline in asset yields slightly outpaced the decline in funding costs. Meanwhile, lower core non-interest income reflected a decrease in service charges on deposit accounts, reduced trust fees and lower debit card and merchant fees.

Hancock’s liquidity position remains sound. Core deposits amount to approximately 116% (at December 31, 2008) of net loans. The Company’s liquidity profile also reflects a securities portfolio, which represents 24% of total assets and access to the Federal Home Loan Bank and Federal Reserve discount window. Capital remains solid, as evidenced by the Company’s healthy tangible common equity ratio of 7.92%.

Hancock with $7.1 billion in assets has a well-established community banking franchise in its legacy markets of southern Mississippi and central and southeastern Louisiana, and more recent markets of Alabama and Florida.

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.