Hancock Holding Company
) reported its fourth-quarter 2012 operating earnings of 54 cents
per share, lagging the Zacks Consensus Estimate of 63 cents.
Moreover, this compares unfavorably with the earnings of 58 cents
in the prior quarter.
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After considering certain non-recurring items, Hancock's net
income came in at $47.0 compared with $47.0 million in the prior
quarter. However, earnings per share remained same as the
operating income compared with 55 cents in the previous quarter.
Augmented top line, reduced expenses as well as growth in loans
and deposits were the highlights of the quarter. Yet, mixed
trends in asset quality remain the causes of concern.
For full year 2012, operating income came in at nearly $184.0
million, up 38.1% from $133.2 million in 2011.
For the full year, Hancock recorded operating earnings per share
of $2.13 compared with $2.02 in 2011. However, the earnings
missed the Zacks Consensus Estimate of $2.24.
Performance in Detail
On an operating basis, Hancock's total revenue was $255.4
million, slightly rising 1.3% from $252.1 million in the previous
quarter. It also surpassed the Zacks Consensus Estimate of $244.0
million by 4.7%.
For 2012, total revenue came in at $1.01 billion, up 27.1% from
$798.6 million. Moreover, it surpassed the Zacks Consensus
Estimate of $968.0 million by 4.8%.
Net interest income (taxable equivalent) came in at $182.8
million, up 1.5% from prior quarter. However, net interest margin
(NIM) fell 6 basis points from the prior quarter to 4.48%.
Non-interest income (excluding securities transaction gain) stood
at $64.3 million, increasing 2.3% from $62.8 million in the prior
quarter. The hike was driven by higher trust fees, bankcard fees,
investment & annuity fees and higher income from secondary
mortgage operations along with other income, partly offset by
decreases in service charges on deposit accounts, insurance fees
and ATM fees.
Non-interest expenses stood at $157.9 million, dropping 7.3%
sequentially. The fall was mainly due to lower personnel expense,
net occupancy expenses, other operating expenses and amortization
Efficiency ratio was recorded at 60.78%, down from 64.33% in the
previous quarter. The decline reflects improvement in
Credit quality displayed mixed results in the reported quarter.
Provision for loan losses came in at $28.1 million, rising
substantially from $8.1 million recorded in the prior quarter.
Also, net charge-offs from the non-covered loan portfolio were
$28.0 million or 0.97% of average total loans, compared with $9.7
million or 0.34% of average total loans.
However, the ratio of allowance for loan losses to period-end
loans stood at 1.18%, almost unchanged from the prior quarter.
Non-performing assets were $256.1 million, down 14.2% from $298.5
million from the prior quarter.
Loans and Deposits
Total loans excluding loans held for sale, reached $11.6 billion,
climbing 1.3% from the previous quarter. All the loan portfolios,
except construction and land development loans and consumer
loans, increased during the quarter, leading to the expansion in
total loans. Average total loans stood at $11.5 billion, rising
2.5% from the last quarter.
Total deposits were $15.7 billion, up 6.6% from the last quarter.
The rise was primarily due to higher levels of noninterest
bearing deposits, interest bearing transaction and savings
deposits, interest bearing public fund deposits and time
deposits. Moreover, average deposits inched up 1.9% from the
previous quarter to $15.1 billion.
Capital and Profitability Ratios
Hancock's capital ratios improved in the quarter. As of Dec 31,
2012, tier 1 leverage ratio was 9.18% versus 9.17% in the
previous quarter and 8.17% in the year-ago quarter. Likewise,
tier 1 risk-based capital ratio was 12.61% compared with 12.53%
as of Sep 30, 2012 and 11.48% as of Dec 31, 2011.
On an operating basis, return on average assets deteriorated to
0.98% in the reported quarter from 1.07% in the prior quarter,
but improved from 0.93% in the prior-year quarter. As of Dec 31,
2012, tangible common equity ratio was 8.77%, down from 9.09% in
the prior quarter but increased from 7.96% in the year-ago
Management expects the effective tax rate to be in the range of
26%-28% in 2013.
We believe that Hancock's consistent dividend policy makes it an
attractive asset for yield-seeking investors. Moreover, we are
quite impressed with the company's decent top-line growth.
However, escalating operating expenses remain a concern.
Nevertheless, we are apprehensive about the impacts of the
prevailing low interest rate environment, sluggish economic
growth and stringent regulatory landscape on the company's
financials in the subsequent quarters.
Hancock currently retains a Zacks Rank #4 (Sell). However,
Pinnacle Financial Partners Inc.
Chesapeake Financial Shares Inc.
) are among those south-east bank stocks, which are performing
well and can be recommended for investment. All these
companies retain a Zacks Rank #1 (Strong Buy).