HWC 10-Q Quarterly Report June 30, 2012

HWC 10-Q Quarter ended June 30, 2012

HANCOCK WHITNEY CORP

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10-Q 1 d361449d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-13089

HANCOCK HOLDING COMPANY

(Exact name of registrant as specified in its charter)


Mississippi		64-0693170
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

One Hancock Plaza, P.O. Box 4019, Gulfport, Mississippi		39502
(Address of principal executive offices)		(Zip Code)

(228) 868-4000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, address and fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

84,778,525 common shares were outstanding as of July 31, 2012 for financial statement purposes.

Hancock Holding Company

Index


	Page Number
Part I. Financial Information

ITEM 1. Financial Statements

Consolidated Balance Sheets — June 30, 2012 (unaudited) and December 31, 2011		1

Consolidated Statements of Income (unaudited) — Three and six months ended June 30, 2012 and 2011		2

Consolidated Statements of Comprehensive Income (unaudited) — Three and six months ended June 30, 2012 and 2011		3

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three and six months ended June 30, 2012 and 2011		4

Consolidated Statements of Cash Flows (unaudited) — Three and six months ended June 30, 2012 and 2011		5

Notes to Consolidated Financial Statements (unaudited) — June 30, 2012		6-39

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		40-61

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk		62

ITEM 4. Controls and Procedures		62

Part II. Other Information

ITEM 1. Legal Proceedings		63

ITEM 1A. Risk Factors		63-64

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		64

ITEM 3. Default on Senior Securities		N/A

ITEM 4. Mine Safety Disclosures		N/A

ITEM 5. Other Information		N/A

ITEM 6. Exhibits		65

Signatures		66

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)


	June 30,			December 31,
	2012			2011
	unaudited
ASSETS
Cash and due from banks	$	392,601		$	437,947
Interest-bearing bank deposits		648,748			1,184,222
Federal funds sold		1,722			197
Securities available for sale, at fair value (amortized cost of $2,249,310 and $4,401,345)		2,320,133			4,496,900
Securities held to maturity (fair value of $2,039,058)		2,000,324			—
Loans held for sale		44,918			72,378
Loans		11,094,762			11,191,901
Less: allowance for loan losses		(140,768	)		(124,881	)
unearned income		(16,616	)		(14,875	)

Loans, net		10,937,378			11,052,145

Property and equipment, net of accumulated depreciation of $148,422 and $148,780		477,806			505,387
Prepaid expenses		63,908			69,064
Other real estate, net		137,630			144,367
Accrued interest receivable		49,313			53,973
Goodwill		628,877			651,162
Other intangible assets, net		205,249			211,075
Life insurance contracts		363,876			355,026
FDIC loss share indemnification asset		200,988			212,885
Deferred tax asset, net		150,323			145,760
Other assets		154,913			181,608

Total assets	$	18,778,707		$	19,774,096

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand	$	5,040,484		$	5,516,336
Interest-bearing savings, NOW, money market and time		9,890,336			10,197,243

Total deposits		14,930,820			15,713,579

Short-term borrowings		832,709			1,044,454
Long-term debt		360,312			353,890
Accrued interest payable		6,442			8,284
Other liabilities		249,062			286,726

Total liabilities		16,379,345			17,406,933

Stockholders’ equity
Common stock - $3.33 par value per share; 350,000,000 shares authorized, 84,773,981 and 84,705,496 issued and outstanding, respectively		282,297			282,069
Capital surplus		1,641,010			1,634,634
Retained earnings		493,517			476,970
Accumulated other comprehensive income (loss), net		(17,462	)		(26,510	)

Total stockholders’ equity		2,399,362			2,367,163

Total liabilities and stockholders’ equity	$	18,778,707		$	19,774,096

See notes to unaudited condensed consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012		2011			2012		2011
Interest income:
Loans, including fees	$	165,278	$	94,591		$	331,506	$	162,592
Securities-taxable		23,431		19,023			46,748		32,017
Securities-tax exempt		1,311		1,347			2,955		2,586
Federal funds sold and other short term investments		469		516			996		815

Total interest income		190,489		115,477			382,205		198,010

Interest expense:
Deposits		7,872		13,570			18,135		27,579
Short-term borrowings		1,623		1,755			3,262		3,443
Long-term debt and other interest expense		3,535		1,093			7,061		1,165

Total interest expense		13,030		16,418			28,458		32,187

Net interest income		177,459		99,059			353,747		165,823
Provision for loan losses		8,025		9,144			18,040		17,966

Net interest income after provision for loan losses		169,434		89,915			335,707		147,857

Noninterest income:
Service charges on deposit accounts		20,907		12,343			37,181		21,887
Bank card fees		8,075		5,968			16,539		9,478
Trust fees		7,983		5,301			16,721		9,292
Insurance commissions and fees		4,581		4,629			8,058		7,878
Investment and annuity fees		4,607		3,267			9,022		6,400
ATM fees		4,843		3,290			9,177		6,021
Secondary mortgage market operations		3,015		1,877			7,017		3,444
Accretion of indemnification asset		2,000		5,450			5,000		8,494
Other income		7,541		4,591			16,331		8,005
Securities gains (losses), net		—		(36	)		12		(87	)

Total noninterest income		63,552		46,680			125,058		80,812

Noninterest expense:
Compensation expense		72,188		46,971			147,772		76,379
Employee benefits		17,936		10,564			37,679		18,991

Salaries and employee benefits		90,124		57,535			185,451		95,370

Net occupancy expense		13,784		8,760			28,426		14,671
Equipment expense		6,744		3,661			13,834		6,515
Data processing expense		14,327		7,106			28,518		12,251
Professional services expense		14,658		22,886			39,760		28,146
Telecommunications and postage		5,597		3,642			11,755		6,402
Advertising		3,330		2,127			10,020		4,176
Deposit insurance and regulatory fees		3,903		3,232			7,295		6,344
Amortization of intangibles		7,922		1,621			16,226		2,235
Other expense		19,583		10,796			44,150		18,275

Total noninterest expense		179,972		121,366			385,435		194,385

Income before income taxes		53,014		15,229			75,330		34,284
Income taxes		13,710		3,141			17,531		6,868

Net income	$	39,304	$	12,088		$	57,799	$	27,416

Basic earnings per common share	$	0.46	$	0.22		$	0.68	$	0.59

Diluted earnings per common share	$	0.46	$	0.22		$	0.67	$	0.59

Dividends paid per share	$	0.24	$	0.24		$	0.48	$	0.48

Weighted avg. shares outstanding-basic		84,751		54,890			84,742		46,160

Weighted avg. shares outstanding-diluted		85,500		55,035			85,467		46,310

See notes to unaudited condensed consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012			2011
Net income	$	39,304	$	12,088	$	57,799		$	27,416

Other comprehensive income, net of tax:
Net change from retirement benefits plans		1,096		468		2,193			152
Unrealized net holding gain on securities, net of reclassifications		1,615		3,227		7,028			6,169
Net unrealized gain (loss) on derivatives and hedging		12		96		(173	)		96

Other comprehensive income		2,723		3,791		9,048			6,417

Comprehensive income	$	42,027	$	15,879	$	66,847		$	33,833

See notes to unaudited condensed consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share data)


	Common Stock				Capital		Retained			Accumulated Other Comprehensive
	Shares		Amount		Surplus		Earnings			Income (Loss), net			Total
Balance, January 1, 2011		36,893,276	$	122,855	$	263,484	$	470,828		$	(619	)	$	856,548

Net income		—		—		—		27,416			—			27,416
Other comprehensive income		—		—		—		—			6,417			6,417
Cash dividends declared ($0.48 per common share)		—		—		—		(29,501	)		—			(29,501	)
Common stock offering		6,958,143		23,170		190,824		—			—			213,994
Common stock issued in connection with Whitney acquisition		40,794,261		135,845		1,171,203		—			—			1,307,048
Common stock activity, long-term incentive plan, including excess income tax benefit of $151		48,794		162		4,229		—			—			4,391

Balance, June 30, 2011		84,694,474	$	282,032	$	1,629,740	$	468,743		$	5,798		$	2,386,313

Balance, January 1, 2012		84,705,496	$	282,069	$	1,634,634	$	476,970		$	(26,510	)	$	2,367,163

Net income		—		—		—		57,799			—			57,799
Other comprehensive income		—		—		—		—			9,048			9,048
Cash dividends declared ($0.48 per common share)		—		—		—		(41,252	)		—			(41,252	)
Common stock issued, long-term incentive plan, including excess income tax benefit of $116		68,485		228		6,376		—			—			6,604

Balance, June 30, 2012		84,773,981	$	282,297	$	1,641,010	$	493,517		$	(17,462	)	$	2,399,362

See notes to unaudited condensed consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	57,799		$	27,416
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17,159			9,256
Provision for loan losses		18,040			17,966
Losses on other real estate owned		9,774			969
Deferred tax expense		12,571			26,190
(Increase) in cash surrender value of life insurance contracts		(8,850	)		(5,746	)
Loss on sales of securities available for sale, net		—			87
Loss (gain) on disposal of other assets		383			(598	)
Net decrease in loans originated for sale		27,460			3,943
Net amortization of securities premium/discount		26,154			3,960
Amortization of intangible assets		16,264			2,235
Stock-based compensation expense		5,014			2,900
(Decrease) increase in interest payable and other liabilities		(35,074	)		193,126
Decrease in FDIC indemnification asset		11,897			47,002
Decrease (increase) in other assets		36,505			(40,431	)
Other, net		(116	)		(5	)

Net cash provided by operating activities		194,980			288,270

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale		477			323,426
Proceeds from maturities of securities available for sale		697,366			383,235
Purchases of securities available for sale		(103,344	)		(1,151,041	)
Proceeds from maturities of securities held to maturity		114,925			—
Purchases of investment securities held to maturity		(560,436	)		—
Net decrease in interest-bearing bank deposits		535,474			107,634
Net (increase) decrease in federal funds sold and short term investments		(1,525	)		278,128
Net decrease in loans		66,251			144,707
Purchases of property, equipment and intangible assets		(20,118	)		(38,544	)
Proceeds from sales of property and equipment		3,394			1,912
Cash paid for acquisition, net of cash received		—			(74,653	)
Proceeds from sales of other real estate		55,791			30,660

Net cash provided by investing activities		788,255			5,464

CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits		(782,760	)		(369,734	)
Net decrease in short-term borrowings		(211,745	)		(7,128	)
Proceeds of long-term debt		6,422			140,014
Dividends paid		(41,252	)		(29,501	)
Proceeds from exercise of stock options		754			267
Proceeds from stock offering		—			213,994

Net cash used in financing activities		(1,028,581	)		(52,088	)

NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS		(45,346	)		241,646
CASH AND DUE FROM BANKS, BEGINNING		437,947			139,687

CASH AND DUE FROM BANKS, ENDING	$	392,601		$	381,333

SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans	$	42,751		$	40,273
Transfers from available for sale securities to held to maturity securities		1,523,585			—

Fair value of assets acquired				$	11,235,000
Liabilities assumed					(10,133,000	)

Net identifiable assets acquired					1,102,000

See notes to unaudited condensed consolidated financial statements.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Holding Company and all majority-owned subsidiaries (the “Company”). They include all adjustments that are, in the opinion of management, necessary to present fairly the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. Some financial information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2011 Annual Report on Form 10-K. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual periods.

Use of Estimates

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry. These accounting principles require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ significantly from those estimates.

Critical Accounting Policies and Estimates

There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Form 10-K for the year ended December 31, 2011.

Securities

Securities that the Company both positively intends and has the ability to hold to maturity are classified as securities held to maturity and are carried at amortized cost. The intent and ability to hold are not considered satisfied when a security is available to be sold in response to changes in interest rates, prepayment rates, liquidity needs or other reasons as part of an overall asset/liability management strategy. Premiums and discounts on securities, both those held to maturity and those available for sale, are amortized and accreted to income as an adjustment to the securities’ yields using the interest method. Realized gains and losses on securities, including declines in value judged to be other than temporary, are reported net as a component of noninterest income. The cost of securities sold is specifically identified for use in calculating realized gains and losses.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

2. Fair Value

The FASB defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The FASB’s guidance also established a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value (in thousands) on a recurring basis in the consolidated balance sheets.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

2. Fair Value (continued)


	June 30, 2012
	(Level 1)		(Level 2)		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	18,514	$	—	$	18,514
Obligations of states and political subdivisions		—		77,693		77,693
Corporate debt securities		3,750		—		3,750
Residential mortgage-backed securities		—		2,112,969		2,112,969
Collateralized mortgage obligations		—		101,022		101,022
Equity securities		6,185		—		6,185

Total available-for-sale securities		28,449		2,291,684		2,320,133

Derivatives
Interest rate contracts - assets		—		18,833		18,833

Total recurring fair value measurements - assets	$	28,449	$	2,310,517	$	2,338,966

Liabilities
Derivatives
Interest rate contracts - liabilities	$	—	$	19,880	$	19,880

Total recurring fair value measurements - liabilities	$	—	$	19,880	$	19,880


	December 31, 2011
	(Level 1)		(Level 2)		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	250,067	$	—	$	250,067
Obligations of states and political subdivisions		—		309,665		309,665
Corporate debt securities		4,494		—		4,494
Residential mortgage-backed securities		—		2,480,345		2,480,345
Collateralized mortgage obligations		—		1,446,076		1,446,076
Equity securities		6,253		—		6,253

Total available-for-sale securities		260,814		4,236,086		4,496,900

Derivatives
Interest rate contracts - assets		—		14,952		14,952

Total recurring fair value measurements - assets	$	260,814	$	4,251,038	$	4,511,852

Liabilities
Derivatives
Interest rate contracts - liabilities	$	—	$	15,643	$	15,643

Total recurring fair value measurements - liabilities	$	—	$	15,643	$	15,643

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

2. Fair Value (continued)

Securities classified as level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and certain other debt and equity securities. Level 2 classified securities include residential mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for investment securities were obtained from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs were observable in the marketplace or can be supported by observable data. The Company invests only in high quality securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two to five years. Company policies limit investments to securities having a rating of no less than “Baa” or its equivalent by a nationally recognized statistical rating agency, except for certain non-rated obligations of counties, parishes and municipalities within our markets in Mississippi, Louisiana, Texas, Florida and Alabama. There were no transfers between valuation hierarchy levels during the periods shown.

The fair value of derivative financial instruments, which are predominantly interest rate swaps, is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, such as interest rate futures, observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and the counterparties. Although the Company has determined that the majority of the inputs used to value the derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations in their entirety in level 2 of the fair value hierarchy. The Company’s policy is to measure counterparty credit risk for all derivative instruments subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent impaired loans are level 2 assets measured using third-party appraisals of the collateral or other market-based information such as recent sales activity for similar assets in the property’s market. Other real estate owned are level 2 assets carried at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less. Fair values are determined by sales agreement or third-party appraisal.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

2. Fair Value (continued)

The following tables present for each of the fair value hierarchy levels the Company’s financial assets that are measured at fair value (in thousands) on a nonrecurring basis.


	June 30, 2012
	(Level 1)		(Level 2)		Total
Impaired loans	$	—	$	55,686	$	55,686
Other real estate owned		—		137,630		137,630

Total nonrecurring fair value measurements	$	—	$	193,316	$	193,316


	December 31, 2011
	(Level 1)		(Level 2)		Total
Impaired loans	$	—	$	55,252	$	55,252
Other real estate owned		—		144,367		144,367

Total nonrecurring fair value measurements	$	—	$	199,619	$	199,619

Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off- balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.

Cash, Short-Term Investments and Federal Funds Sold - For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities – The fair value measurement for securities available for sale was discussed earlier. The same measurement techniques were applied to the valuation of securities held to maturity.

Loans, Net - The fair value measurement for certain impaired loans was discussed earlier. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows by discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.

Accrued Interest Receivable and Accrued Interest Payable - The carrying amounts are a reasonable estimate of fair value.

Deposits - The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (carrying amounts). The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Securities Sold under Agreements to Repurchase and Federal Funds Purchased - For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

2. Fair Value (continued)

Long-Term Debt - The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained.

Derivative Financial Instruments – The fair value measurement for derivative financial instruments was discussed earlier.

The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amount at June 30, 2012 and December 31, 2011 (in thousands):


	(Level 1)		June 30, 2012 (Level 2)		(Level 3)		Total Fair Value		Carrying Amount
Financial assets:
Cash, interest-bearing deposits, and federal funds sold	$	1,043,071	$	—	$	—	$	1,043,071	$	1,043,071
Available for sale securities		28,449		2,291,684		—		2,320,133		2,320,133
Held to maturity securities		—		2,039,058		—		2,039,058		2,000,324
Loans, net		—		55,686		11,188,609		11,244,295		10,937,378
Loans held for sale		—		44,918		—		44,918		44,918
Accrued interest receivable		49,313		—		—		49,313		49,313
Derivative financial instruments		—		18,833		—		18,833		18,833

Financial liabilities:
Deposits	$	—	$	—	$	14,948,184	$	14,948,184	$	14,930,820
Federal funds purchased		30,411		—		—		30,411		30,411
Securities sold under agreements to repurchase		802,298		—		—		802,298		802,298
Long-term debt		—		387,650		—		387,650		360,312
Accrued interest payable		6,442		—		—		6,442		6,442
Derivative financial instruments		—		19,880		—		19,880		19,880

	(Level 1)		December 31, 2011 (Level 2)		(Level 3)		Total Fair Value		Carrying Amount
Financial assets:
Cash, interest-bearing deposits, and federal funds sold	$	1,622,366	$	—	$	—		1,622,366	$	1,622,366
Available for sale securities		260,814		4,236,086		—		4,496,900		4,496,900
Loans, net		—		55,252		11,134,410		11,189,662		11,052,144
Loans held for sale		—		72,378		—		72,378		72,378
Accrued interest receivable		53,973		—		—		53,973		53,973
Derivative financial instruments		—		14,952		—		14,952		14,952

Financial liabilities:
Deposits	$	—	$	—	$	15,737,667	$	15,737,667	$	15,713,579
Federal funds purchased		16,819		—		—		16,819		16,819
Securities sold under agreements to repurchase		1,027,635		—		—		1,027,635		1,027,635
Long-term debt		—		365,421		—		365,421		353,890
Accrued interest payable		8,284		—		—		8,284		8,284
Derivative financial instruments		—		15,643		—		15,643		15,643

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

3. Securities

The amortized cost and fair value of securities classified as available for sale and held to maturity follow (in thousands):

Securitites Available for Sale


	June 30, 2012								December 31, 2011
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury	$	150	$	11	$	—	$	161	$	150	$	14	$	—	$	164
U.S. government agencies		18,305		48		—		18,353		248,595		1,308		—		249,903
Municipal obligations		76,585		1,111		3		77,693		294,489		15,218		42		309,665
Mortgage-backed securities		2,045,296		67,718		45		2,112,969		2,422,891		58,150		696		2,480,345
CMOs		100,655		367		—		101,022		1,426,495		21,774		2,193		1,446,076
Corporate debt securities		3,750		—		—		3,750		4,517		11		34		4,494
Other equity securities		4,569		1,634		18		6,185		4,208		2,086		41		6,253

	$	2,249,310	$	70,889	$	66	$	2,320,133	$	4,401,345	$	98,561	$	3,006	$	4,496,900

Securitites Held to Maturity


	June 30, 2012								December 31, 2011
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
Municipal obligations	$	180,812	$	15,133	$	2	$	195,943		—		—		—		—
Mortgage-backed securities		202,761		1,550		—		204,311		—		—		—		—
CMOs		1,616,751		24,586		2,533		1,638,804		—		—		—		—

	$	2,000,324	$	41,269	$	2,535	$	2,039,058		—		—		—		—

During the first quarter of 2012, the Company reclassified approximately $1.5 billion of securities available for sale as securities held to maturity. As a result of the acquisition of Whitney National Bank, the securities portfolio grew to such a size that the company determined that only a portion of the portfolio is needed for liquidity purposes. The securities reclassified consisted primarily of CMOs and in-market municipal securities. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. The unrealized net holding gain on the available for sale securities on the date of transfer totaled approximately $39 million, and continued to be reported, net of tax, as a component of accumulated other comprehensive income. This net unrealized gain is being accreted to interest income over the remaining life of the securities as a yield adjustment, which serves to offset the impact of the amortization of the net premium created in the transfer. There were no gains or losses recognized as a result of this transfer.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

3. Securities (continued)

The following table presents the amortized cost and fair value of debt securities classified as available for sale and held to maturity at June 30, 2012, by contractual maturity (in thousands). Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties.


	Amortized Cost		Fair Value
Debt Securities Available for Sale
Due in one year or less	$	45,827	$	45,973
Due after one year through five years		157,876		159,283
Due after five years through ten years		275,463		286,168
Due after ten years		1,765,575		1,822,524

Total available for sale debt securities	$	2,244,741	$	2,313,948


	Amortized		Fair
	Cost		Value
Held to maturity
Due in one year or less	$	16,596	$	16,685
Due after one year through five years		436,496		440,576
Due after five years through ten years		96,856		106,023
Due after ten years		1,450,376		1,475,774

Total held to maturity securities	$	2,000,324	$	2,039,058

The Company held no securities classified as trading at June 30, 2012 or December 31, 2011. The Company held no securities classified as held to maturity at December 31, 2011.

The details concerning securities classified as available for sale with unrealized losses as of June 30, 2012 follow (in thousands):

Available for sale


	Losses < 12 months				Losses 12 months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government agencies		—		—		—		—		—		—
Municipal obligations		2,071		3		—		—		2,071		3
Mortgage-backed securities		4,259		43		246		2		4,505		45
CMOs		—		—		—		—		—		—
Corporate debt securities		—		—		—		—		—		—
Equity securities		208		16		2		2		210		18

	$	6,538	$	62	$	248	$	4	$	6,786	$	66

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

3. Securities (continued)

The details concerning securities classified as available for sale with unrealized losses as of December 31, 2011 follow (in thousands):

Available for sale


	Losses < 12 months				Losses 12 months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government agencies		—		—		—		—		—		—
Municipal obligations		18,854		42		—		—		18,854		42
Mortgage-backed securities		212,900		692		337		4		213,237		696
CMOs		296,860		2,193		—		—		296,860		2,193
Corporate debt securities		398		34		—		—		398		34
Equity securities		1,685		39		2		2		1,687		41

	$	530,697	$	3,000	$	339	$	6	$	531,036	$	3,006

The details concerning securities classified as held to maturity with unrealized losses as of June 30, 2012 follow (in thousands):

Held to maturity


	Losses < 12 months				Losses 12 months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Municpal obligations	$	540	$	1	$	256	$	1	$	796	$	2
CMOs		391,383		1,523		174,084		1,010		565,467	$	2,533

	$	391,923	$	1,524	$	174,340	$	1,011	$	566,263	$	2,535

Substantially all of the unrealized losses relate mainly to changes in market rates on fixed-rate debt securities since the respective purchase date. In all cases, the indicated impairment would be recovered by the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. The Company has adequate liquidity and, therefore, does not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

Securities with a fair value of approximately $2.5 billion at June 30, 2012 and $3.0 billion at December 31, 2011 were pledged primarily to secure public deposits or securities sold under agreements to repurchase.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses

Loans, net of unearned income, consisted of the following:


	June 30,		December 31,
	2012		2011
	(In thousands)
Originated loans:
Commerical non-real estate	$	1,902,292	$	1,525,409
Construction and land development		630,997		540,806
Commerical real estate		1,316,772		1,259,757
Residential mortgage loans		654,149		487,147
Consumer loans		1,306,648		1,074,611

Total originated loans	$	5,810,858	$	4,887,730

Acquired loans:
Commerical non-real estate	$	1,948,226	$	2,236,758
Construction and land development		443,057		603,371
Commerical real estate		1,450,796		1,656,515
Residential mortgage loans		598,199		734,669
Consumer loans		239,276		386,540

Total acquired loans	$	4,679,554	$	5,617,853

Covered loans:
Commerical non-real estate	$	39,971	$	38,063
Construction and land development		93,442		118,828
Commerical real estate		62,962		82,651
Residential mortgage loans		267,363		285,682
Consumer loans		123,996		146,219

Total covered loans	$	587,734	$	671,443

Total loans:
Commerical non-real estate	$	3,890,489	$	3,800,230
Construction and land development		1,167,496		1,263,005
Commerical real estate		2,830,530		2,998,923
Residential mortgage loans		1,519,711		1,507,498
Consumer loans		1,669,920		1,607,370

Total loans	$	11,078,146	$	11,177,026

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

The following briefly describes the distinction between originated, acquired and covered loans and certain significant accounting policies relevant to each category.

Originated loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recognized in income as earned. The accrual of interest on originated loans is discontinued when it is probable that the borrower will be unable to meet payment obligations as they become due. The Company maintains an allowance for loan losses on originated loans that represents management’s estimate of probable losses inherent in this portfolio category. The methodology for estimating the allowance is described in Note 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. As actual losses are incurred, they are charged against the allowance. Subsequent recoveries are added back to the allowance when collected.

Acquired loans

Acquired loans are those purchased in the Whitney Holding Corporation acquisition on June 4, 2011. These loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated between those considered to be performing (“acquired performing”) and those with evidence of credit deterioration (“acquired impaired”), and then further segregated into pools using common risk characteristics, such as loan type, geography and risk rating. The fair value estimate for each pool was based on an estimate of cash flows, both principal and interest, expected to be collected from that pool, discounted at prevailing market rates of interest. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

The difference between the fair value of an acquired performing loan pool and the contractual amounts due at the acquisition date (the “fair value discount”) is accreted into income over the estimated life of the pool. Management estimates an allowance for loan losses for acquired performing loans at each subsequent reporting date using a methodology similar to that used for originated loans. The allowance determined for each loan pool is compared to the remaining fair value discount for that pool. If greater, the excess is added to the reported allowance through a provision for loan losses. If less, no additional allowance or provision is recognized. Actual losses are first charged against any remaining fair value discount for the loan pool. Once the discount is fully depleted, losses are applied against the allowance established for that pool. Acquired performing loans are considered and reported as nonperforming and past due using the same criteria applied to the originated portfolio. The accrual of interest on acquired performing loans is discontinued when, in management’s opinion, it is probable that the borrower will be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.

The excess of cash flows expected to be collected from an acquired impaired loan pool over the pool’s estimated fair value at acquisition is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the pool. Management updates the estimate of cash flows expected to be collected on each acquired impaired loan pool at each reporting date. If expected cash flows for a pool decrease, an increase in the reported allowance for loan losses is made through a provision for loan losses. If expected cash flows for a pool increase, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into interest income over the remaining life of the loan pool.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

Covered loans and the related loss share indemnification asset

The loans purchased in the 2009 acquisition of Peoples First Community Bank are covered by two loss share agreements between the FDIC and the Company that afford the Company significant loss protection. Covered loans are accounted for as acquired impaired loans as described above. The loss share indemnification asset is measured separately from the related covered loans as it is not contractually embedded in the loans and is not transferable should the loans be sold. The fair value of the indemnification asset at acquisition was estimated by discounting projected cash flows from the loss share agreements based on expected reimbursements for allowable loss claims, including appropriate consideration of possible true-up payments to the FDIC at the expiration of the agreements. The discounted amount is accreted into non-interest income over the remaining life of the covered loan pool or the life of the shared loss agreement.

In the following discussion and tables, commercial loans include the commercial non-real estate, construction and land development and commercial real estate loans categories shown in previous table.

The following schedule shows activity in the allowance for loan losses, by portfolio segment and the corresponding recorded investment in loans, for the six months ended June 30, 2012 and June 30, 2011.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)


Originated loans:	Commercial			Residential mortgages			Consumer			Total
(In thousands)	June 30, 2012
Allowance for loan losses:

Beginning balance, January 1, 2012	$	60,211		$	4,894		$	18,141		$	83,246
Charge-offs		(12,971	)		(2,633	)		(6,773	)		(22,377	)
Recoveries		3,065			66			1,981			5,112
Net provision for loan losses		9,888			6,009			(502	)		15,395
Increase (decrease) in indemnification asset		—			—			—			—

Ending balance	$	60,193		$	8,336		$	12,847		$	81,376

Ending balance:
Individually evaluated for impairment	$	8,076		$	1,916		$	—		$	9,992

Ending balance:
Collectively evaluated for impairment	$	52,117		$	6,420		$	12,847		$	71,384

Loans:

Ending balance:	$	3,850,061		$	654,149		$	1,306,648		$	5,810,858
Ending balance:
Individually evaluated for impairment	$	54,050		$	11,628		$	—		$	65,678
Ending balance:
Collectively evaluated for impairment	$	3,796,011		$	642,521		$	1,306,648		$	5,745,180

Covered loans:	Commercial			Residential mortgages			Consumer			Total
(In thousands)	June 30, 2012
Allowance for loan losses:

Beginning balance, January 1, 2012	$	18,203		$	9,024		$	14,408		$	41,635
Charge-offs		(19,289	)		—			—			(19,289	)
Recoveries		—			—			—			—
Net provision for loan losses (a)		2,700			351			(406	)		2,645
Increase (decrease) in indemnification asset (a)		22,650			11,189			562			34,401

Ending balance	$	24,264		$	20,564		$	14,564		$	59,392

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	—		$	—

Ending balance:
Collectively evaluated for impairment	$	24,264		$	20,564		$	14,564		$	59,392

Loans:

Ending balance:	$	196,375		$	267,363		$	123,996		$	587,734

Ending balance:
Individually evaluated for impairment	$	5,781		$	393		$	—		$	6,174

Ending balance:
Collectively evaluated for impairment	$	190,594		$	266,970		$	123,996		$	581,560

Total loans:	Commercial			Residential mortgages			Consumer			Total
(In thousands)	June 30, 2012
Allowance for loan losses:

Beginning balance, January 1, 2012	$	78,414		$	13,918		$	32,549		$	124,881
Charge-offs		(32,260	)		(2,633	)		(6,773	)		(41,666	)
Recoveries		3,065			66			1,981			5,112
Net provision for loan losses (a)		12,588			6,360			(908	)		18,040
Increase (decrease) in indemnification asset (a)		22,650			11,189			562			34,401

Ending balance	$	84,457		$	28,900		$	27,411		$	140,768

Ending balance:
Individually evaluated for impairment	$	8,076		$	1,916		$	—		$	9,992

Ending balance:
Collectively evaluated for impairment	$	76,381		$	26,984		$	27,411		$	130,776

Loans:

Ending balance:	$	7,888,515		$	1,519,711		$	1,669,920		$	11,078,146

Ending balance:
Individually evaluated for impairment	$	59,831		$	12,021		$	—		$	71,852

Ending balance:
Collectively evaluated for impairment	$	7,828,684		$	1,507,690		$	1,669,920		$	11,006,294

Ending balance:
Acquired loans (b)	$	3,842,079		$	598,199		$	239,276		$	4,679,554

(a)	The Company increased the allowance by $37.0 million for losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $34.4 million increase in the FDIC indemnification asset.

(b)

In accordance with purchase accounting rules, the Whitney loans were recorded at their fair value at the time of the acquisition, and the prior allowance for loan losses was eliminated. No allowance has been established on these acquired loans since the acquisition date. These loans are included in the ending balance of loans collectively evaluated for impairment.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)


Originated loans:	Commercial			Residential mortgages			Consumer			Total
(In thousands)	June 30, 2011
Allowance for loan losses:

Beginning balance, January 1, 2011	$	56,859		$	4,626		$	19,840		$	81,325
Charge-offs		(13,664	)		(2,332	)		(5,701	)		(21,697	)
Recoveries		4,274			960			1,780			7,014
Net provision for loan losses		10,863			6,225			(570	)		16,518
Increase (decrease) in indemnification asset		—			—			—			—

Ending balance	$	58,332		$	9,479		$	15,349		$	83,160

Ending balance:
Individually evaluated for impairment	$	9,468		$	1,420		$	—		$	10,888
Ending balance:
Collectively evaluated for impairment	$	48,864		$	8,059		$	15,349		$	72,272

Loans:

Ending balance:	$	2,845,955		$	365,661		$	971,742		$	4,183,358
Ending balance:
Individually evaluated for impairment	$	48,181		$	7,678		$	—		$	55,859
Ending balance:
Collectively evaluated for impairment	$	2,797,774		$	357,983		$	971,742		$	4,127,499

Covered loans:	Commercial			Residential mortgages			Consumer			Total
(In thousands)	June 30, 2011
Allowance for loan losses:

Beginning balance, January 1, 2011	$	—		$	—		$	672		$	672
Charge-offs		—			—			(375	)		(375	)
Recoveries		—			—			—			—
Net provision for loan losses (a)		1,021			224			203			1,448
Increase (decrease) in indemnification asset (a)		19,378			3,864			4,260			27,502

Ending balance	$	20,399		$	4,088		$	4,760		$	29,247

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	—		$	—

Ending balance:
Collectively evaluated for impairment	$	20,399		$	4,088		$	4,760		$	29,247

Loans:

Ending balance:	$	347,441		$	247,489		$	152,879		$	747,809

Ending balance:
Individually evaluated for impairment	$	33,869		$	2,710		$	2,935		$	39,514

Ending balance:
Collectively evaluated for impairment	$	313,572		$	244,779		$	149,944		$	708,295

Total loans:	Commercial			Residential mortgages			Consumer			Total
(In thousands)	June 30, 2011
Allowance for loan losses:

Beginning balance, January 1, 2011	$	56,859		$	4,626		$	20,512		$	81,997
Charge-offs		(13,664	)		(2,332	)		(6,076	)		(22,072	)
Recoveries		4,274			960			1,780			7,014
Net provision for loan losses (a)		11,884			6,449			(367	)		17,966
Increase (decrease) in indemnification asset (a)		19,378			3,864			4,260			27,502

Ending balance	$	78,731		$	13,567		$	20,109		$	112,407

Ending balance:
Individually evaluated for impairment	$	9,468		$	1,420		$	—		$	10,888

Ending balance:
Collectively evaluated for impairment	$	69,263		$	12,147		$	20,109		$	101,519

Loans:

Ending balance:	$	8,233,519		$	1,443,817		$	1,571,717		$	11,249,053

Ending balance:
Individually evaluated for impairment	$	82,050		$	10,388		$	2,935		$	95,373

Ending balance:
Collectively evaluated for impairment	$	8,151,469		$	1,433,429		$	1,568,782		$	11,153,680

Ending balance:
Acquired loans (b)	$	5,040,123		$	830,667		$	447,096		$	6,317,886

(a)	The Company increased the allowance by $29.2 million for losses related to impairment on certain pools of covered loans. This provision was mostly offset by a $27.5 million increase in the FDIC indemnification asset.

(b)

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

The following table shows the composition of non-accrual loans by portfolio segment and class. Acquired impaired and certain covered loans are considered to be performing due to the application of the accretion method and are excluded from the table. Covered loans accounted for using the cost recovery method do not have an accretable yield and are disclosed below as non-accrual loans. Acquired performing loans that have subsequently been placed on non-accrual status are also disclosed below.


	June 30,		December 31,
	2012		2011
	(In thousands)
Originated loans:
Commercial loans	$	92,510	$	55,046
Residential mortgage loans		11,066		24,406
Consumer loans		6,193		3,855

Total originated loans	$	109,769	$	83,307

Acquired loans:
Commercial loans	$	5,466	$	—
Residential mortgage loans		1,169		—
Consumer loans		508		1,117

Total acquired loans	$	7,143	$	1,117

Covered loans:
Commercial loans	$	5,781	$	18,209
Residential mortgage loans		393		637
Consumer loans		—		—

Total covered loans	$	6,174	$	18,846

Total loans:
Commercial loans	$	103,757	$	73,255
Residential mortgage loans		12,628		25,043
Consumer loans		6,701		4,972

Total loans	$	123,086	$	103,270

The amount of interest that would have been recorded on nonaccrual loans for the six months ended June 30, 2012 was approximately $3.6 million. Interest actually received on nonaccrual loans during the six months ended June 30, 2012 was $1.1 million.

Included in nonaccrual loans is $9.7 million in restructured commercial loans. Total troubled debt restructurings as of June 30, 2012 were $19.5 million and $18.1 million at December 31, 2011. Modified acquired impaired loans are not removed from their accounting pool and accounted for as TDRs, even if those loans would otherwise be deemed TDRs.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

The table below details the troubled debt restructurings (TDR) that occurred for the periods ended June 30, 2012 and 2011 by portfolio segment (dollar amounts in thousands). During these periods, no loan modified as a TDR defaulted within twelve months of its modification date. A reserve analysis is completed on all loans that have been determined to be troubled debt restructurings by management. All troubled debt restructurings are rated substandard and are considered impaired in calculating the allowance for loan losses.


	June 30, 2012						June 30, 2011
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
			Outstanding		Outstanding				Outstanding		Outstanding
	Number of		Recorded		Recorded		Number of		Recorded		Recorded
Troubled Debt Restructurings:	Contracts		Investment		Investment		Contracts		Investment		Investment
Originated loans:
Commercial loans		22	$	23,050	$	18,349		17	$	21,668	$	17,288
Residential mortgage loans		3		1,169		1,169		3		1,342		1,318
Consumer loans		—		—		—		—		—		—

Total originated loans		25	$	24,219	$	19,518		20	$	23,010	$	18,606

Aquired loans:
Commercial loans		—	$	—	$	—		—	$	—	$	—
Residential mortgage loans		—		—		—		—		—		—
Consumer loans		—		—		—		—		—		—

Total acquired loans		—	$	—	$	—		—	$	—	$	—

Covered loans:
Commercial loans		—	$	—	$	—		—	$	—	$	—
Residential mortgage loans		—		—		—		—		—		—
Consumer loans		—		—		—		—		—		—

Total covered loans		—	$	—	$	—		—	$	—	$	—

Total loans:
Commercial loans		22	$	23,050	$	18,349		17	$	21,668	$	17,288
Residential mortgage loans		3		1,169		1,169		3		1,342		1,318
Consumer loans		—		—		—		—		—		—

Total loans		25	$	24,219	$	19,518		20	$	23,010	$	18,606

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

The following table presents impaired loans disaggregated by class at June 30, 2012 and December 31, 2011:


	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
June 30, 2012					(In thousands)
Originated loans:
With no related allowance recorded:
Commercial	$	14,653	$	27,849	$	—	$	11,985	$	141
Residential mortgages		2,239		3,967		—		1,541		9
Direct consumer		—		—		—		—		—

		16,892		31,816		—		13,526		150
With an allowance recorded:
Commercial		39,397		48,665		8,076		36,450		385
Residential mortgages		9,389		11,530		1,916		6,382		47
Direct consumer		—		—		—		—		—

		48,786		60,195		9,992		42,832		432
Total:
Commercial		54,050		76,514		8,076		48,435		526
Residential mortgages		11,628		15,497		1,916		7,923		56
Direct consumer		—		—		—		—		—

Total originated loans	$	65,678	$	92,011	$	9,992	$	56,358	$	582

Covered loans:
With no related allowance recorded:
Commercial		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Direct consumer		—		—		—		—		—

With an allowance recorded:
Commercial		5,781		13,182		—		16,409		—
Residential mortgages		393		481		—		718		—
Direct consumer		—		—		—		—		—

		6,174		13,663		—		17,127		—
Total:
Commercial		5,781		13,182		—		16,409		—
Residential mortgages		393		481		—		718		—
Direct consumer		—		—		—		—		—

Total covered loans	$	6,174	$	13,663	$	—	$	17,127	$	—

Total loans:
With no related allowance recorded:
Commercial		14,653		27,849		—		11,985		141
Residential mortgages		2,239		3,967		—		1,541		9
Direct consumer		—		—		—		—		—

		16,892		31,816		—		13,526		150
With an allowance recorded:
Commercial		45,178		61,847		8,076		52,859		385
Residential mortgages		9,782		12,011		1,916		7,100		47
Direct consumer		—		—		—		—		—

		54,960		73,858		9,992		59,959		432
Total:
Commercial		59,831		89,696		8,076		64,844		526
Residential mortgages		12,021		15,978		1,916		8,641		56
Direct consumer		—		—		—		—		—

Total loans	$	71,852	$	105,674	$	9,992	$	73,485	$	582

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)


			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
December 31, 2011	(In thousands)
Originated loans:
With no related allowance recorded:
Commercial	$	10,177	$	24,935	$	—	$	13,992	$	359
Residential mortgages		1,153		1,957		—		1,087		58
Direct consumer		—		—		—		—		—

		11,330		26,892		—		15,079		417
With an allowance recorded:
Commercial		28,034		33,168		6,988		31,959		254
Residential mortgages		4,090		5,360		551		5,007		7
Direct consumer		—		—		—		—		—

		32,124		38,528		7,539		36,966		261
Total:
Commercial		38,211		58,103		6,988		45,951		613
Residential mortgages		5,243		7,317		551		6,094		65
Direct consumer		—		—		—		—		—

Total originated loans	$	43,454	$	65,420	$	7,539	$	52,045	$	678

Covered loans:
With no related allowance recorded:
Commercial		17,874		21,757		—		4,469		—
Residential mortgages		429		845		—		1,847		—
Direct consumer		—		—		—		—		—

		18,303		22,602		—		6,316		—
With an allowance recorded:
Commercial		335		335		9		27,765		—
Residential mortgages		208		228		19		52		—
Direct consumer

		543		563		28		27,817		—
Total:
Commercial		18,209		22,092		9		32,234		—
Residential mortgages		637		1,073		19		1,899		—
Direct consumer		—		—		—		—		—

Total covered loans	$	18,846	$	23,165	$	28	$	34,133	$	—

Total loans:
With no related allowance recorded:
Commercial		28,051		46,692		—		18,461		359
Residential mortgages		1,582		2,802		—		2,934		58
Direct consumer		—		—		—		—		—

		29,633		49,494		—		21,395		417
With an allowance recorded:
Commercial		28,369		33,503		6,997		59,724		254
Residential mortgages		4,298		5,588		570		5,059		7
Direct consumer		—		—		—		—		—

		32,667		39,091		7,567		64,783		261
Total:
Commercial		56,420		80,195		6,997		78,185		613
Residential mortgages		5,880		8,390		570		7,993		65
Direct consumer		—		—		—		—		—

Total loans	$	62,300	$	88,585	$	7,567	$	86,178	$	678

No acquired loans were evaluated individually for impairment at June 30, 2012 or December 31, 2011.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

Covered and acquired loans with an accretable yield are considered to be current in the following delinquency table. Certain covered loans accounted for using the cost recovery method are disclosed according to their contractual payment status below. The following table presents the age analysis of past due loans at June 30, 2012 and December 31, 2011:

Age Analysis of Past Due Loans

As of June 30, 2012 and December 31, 2011


													Recorded
					Greater than								investment
	30-59 days		60-89 days		90 days		Total				Total		> 90 days
	past due		past due		past due		past due		Current		Loans		and accruing
June 30, 2012	(In thousands)
Originated loans:
Commercial loans	$	19,592	$	10,580	$	59,727	$	89,899	$	3,760,162	$	3,850,061	$	1,388
Residential mortgages loans		51		1,327		8,404		9,782		644,367		654,149		29
Consumer loans		3,538		2,625		5,248		11,411		1,295,237		1,306,648		26

Total	$	23,181	$	14,532	$	73,379	$	111,092	$	5,699,766	$	5,810,858	$	1,443

Acquired loans:
Commercial loans	$	8,880	$	2,908	$	10,218	$	22,006	$	3,820,073	$	3,842,079	$	—
Residential mortgages loans		1,860		2,656		4,750		9,266		588,933		598,199		—
Consumer loans		1,100		53		1,964		3,117		236,159		239,276		—

Total	$	11,840	$	5,617	$	16,932	$	34,389	$	4,645,165	$	4,679,554	$	—

Covered loans:
Commercial loans	$	—	$	—	$	5,781	$	5,781	$	190,594	$	196,375	$	—
Residential mortgages loans		—		—		393		393		266,970		267,363		—
Consumer loans		—		—		—		—		123,996		123,996		—

Total	$	—	$	—	$	6,174	$	6,174	$	581,560	$	587,734	$	—

Total loans:
Commercial loans	$	28,472	$	13,488	$	75,726	$	117,686	$	7,770,829	$	7,888,515	$	1,388
Residential mortgages loans		1,911		3,983		13,547		19,441		1,500,270		1,519,711		29
Consumer loans		4,638		2,678		7,212		14,528		1,655,392		1,669,920		26

Total	$	35,021	$	20,149	$	96,485	$	151,655	$	10,926,491	$	11,078,146	$	1,443


													Recorded
					Greater than								investment
	30-59 days		60-89 days		90 days		Total				Total		> 90 days
	past due		past due		past due		past due		Current		Loans		and accruing
December 31, 2011	(In thousands)
Originated loans:
Commercial loans	$	23,996	$	943	$	58,867	$	83,806	$	3,242,166	$	3,325,972	$	3,821
Residential mortgages loans		17,884		4,364		25,400		47,648		439,499		487,147		994
Consumer loans		1,803		2,481		3,911		8,195		1,066,416		1,074,611		56

Total	$	43,683	$	7,788	$	88,178	$	139,649	$	4,748,081	$	4,887,730	$	4,871

Acquired loans:
Commercial loans	$	—	$	—	$	—	$	—	$	4,496,644	$	4,496,644	$	—
Residential mortgages loans		—		—		—		—		734,669		734,669		—
Consumer loans		1,698		430		2,126		4,254		382,286		386,540		1,009

Total	$	1,698	$	430	$	2,126	$	4,254	$	5,613,599	$	5,617,853	$	1,009

Covered loans:
Commercial loans	$	—	$	—	$	18,209	$	18,209	$	221,333	$	239,542	$	—
Residential mortgages loans		—		—		637		637		285,045		285,682		—
Consumer loans		—		—		—		—		146,219		146,219		—

Total	$	—	$	—	$	18,846	$	18,846	$	652,597	$	671,443	$	—

Total loans:
Commercial loans	$	23,996	$	943	$	77,076	$	102,015	$	7,960,143	$	8,062,158	$	3,821
Residential mortgages loans		17,884		4,364		26,037		48,285		1,459,213		1,507,498		994
Consumer loans		3,501		2,911		6,037		12,449		1,594,921		1,607,370		1,065

Total	$	45,381	$	8,218	$	109,150	$	162,749	$	11,014,277	$	11,177,026	$	5,880

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

The following table presents the credit quality indicators of the Company’s various classes of loans at June 30, 2012 and December 31, 2011. December 31, 2011 commercial-originated and commercial-acquired, pass and substandard grades, were restated due to the correction of a misclassification. Commercial-originated pass was overstated with commercial-originated substandard understated by $91.6 million. Commercial-acquired pass was understated and commercial-acquired substandard was overstated by the same amount. Portfolio totals by risk grade were unchanged.

Commercial Credit Exposure

Credit Risk Profile by Internally Assigned Grade


	June 30, 2012								December 31, 2011
	Commercial - originated		Commercial - acquired		Commercial - covered		Total commercial		Commercial - originated		Commercial - acquired		Commercial - covered		Total commercial
	(In thousands)								(In thousands)
Grade:
Pass	$	3,470,880	$	3,477,638	$	28,308	$	6,976,826	$	3,019,100	$	3,974,463	$	16,843	$	7,010,406
Pass-Watch		105,563		69,714		24,093		199,370		76,393		60,042		13,606		150,041
Special Mention		40,604		52,448		7,167		100,219		35,155		125,852		9,368		170,375
Substandard		232,530		241,839		71,465		545,834		194,900		334,357		124,371		653,628
Doubtful		484		440		65,342		66,266		424		1,930		75,242		77,596
Loss		—		—		—		—		—		—		112		112

Total	$	3,850,061	$	3,842,079	$	196,375	$	7,888,515	$	3,325,972	$	4,496,644	$	239,542	$	8,062,158

Residential Mortgage Credit Exposure

Credit Risk Profile by Internally Assigned Grade


	June 30, 2012								December 31, 2011
	Residential mortgages - originated		Residential mortgages - acquired		Residential mortgages - covered		Total residential mortgages		Residential mortgages - originated		Residential mortgages - acquired		Residential mortgages - covered		Total residential mortgages
	(In thousands)								(In thousands)
Grade:
Pass	$	624,138	$	551,326	$	128,289	$	1,303,753	$	460,261	$	673,751	$	120,180	$	1,254,192
Pass-Watch		4,896		4,246		14,865		24,007		7,499		1,773		18,133		27,405
Special Mention		793		6,463		1,799		9,055		542		9,686		3,286		13,514
Substandard		24,322		36,102		108,379		168,803		18,845		48,581		139,643		207,069
Doubtful		—		62		14,031		14,093		—		878		4,440		5,318
Loss		—		—		—		—		—		—		—		—

Total	$	654,149	$	598,199	$	267,363	$	1,519,711	$	487,147	$	734,669	$	285,682	$	1,507,498

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity


	June 30, 2012								December 31, 2011
	Consumer -		Consumer -		Consumer -		Total		Consumer -		Consumer -		Consumer -		Total
	originated		acquired		covered		Consumer		originated		acquired		covered		Consumer
	(In thousands)								(In thousands)
Performing	$	1,300,455	$	238,768	$	123,996	$	1,663,219	$	1,070,756	$	385,423	$	146,219	$	1,602,398
Nonperforming		6,193		508		—		6,701		3,855		1,117		—		4,972

Total	$	1,306,648	$	239,276	$	123,996	$	1,669,920	$	1,074,611	$	386,540	$	146,219	$	1,607,370

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

Loan review uses a risk-focused continuous monitoring program that provides for an independent, objective and timely review of credit risk within the company.

Below are the definitions of the Company’s internally assigned grades:

Commercial:

•

Pass - loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.

•

Pass - Watch - Credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.

•

Special Mention - These credits exhibit some signs of “Watch”, but to a greater magnitude. These credits constitute an undue and unwarranted credit risk, but not to a point of justifying a classification of “Substandard”. They have weaknesses that, if not checked or corrected, weaken the asset or inadequately protect the bank.

•

Substandard - These credits constitute an unacceptable risk to the bank. They have recognized credit weaknesses that jeopardize the repayment of the debt. Repayment sources are marginal or unclear.

•

Doubtful - A Doubtful credit has all of the weaknesses inherent in one classified “Substandard” with the added characteristic that weaknesses make collection in full highly questionable or improbable.

•

Loss - Credits classified as Loss are considered uncollectable and are charged off promptly once so classified.

Consumer:

•

Performing – Loans on which payments of principal and interest are less than 90 days past due.

•

Non-performing – A non-performing loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans rated as non-accrual are also non-performing.

The Company held $44.9 million and $72.4 million, respectively, in loans held for sale at June 30, 2012 and December 31, 2011. Of the $44.9 million, $5.5 million are problem commercial loans held for sale. The remainder of $39.4 million represents mortgage loans originated for sale, which are carried at the lower of cost or estimated fair value. Residential mortgage loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

4. Loans and Allowance for Loan Losses (continued)

Changes in the carrying amount of acquired impaired loans and accretable yield are presented in the following table:


	June 30, 2012												December 31, 2011
	Covered						Non-covered						Covered						Non-covered
	Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans			Accretable Yield
(In thousands)
Balance at beginning of period	$	671,443		$	153,137		$	339,452		$	130,691		$	809,459		$	107,638		$	—		$	—
Additions		—			—			—			—			—			—			535,489			132,136
Payments received, net		(107,745	)		—			(113,951	)		—			(193,432	)		—			(206,306	)		—
Accretion		24,036			(24,036	)		26,448			(26,448	)		55,416			(55,416	)		10,269			(22,719	)
Decrease in expected cash flows based on actual cash flow and changes in cash flow assumptions		—			(6,108	)		—			(118	)		—			(18,930	)		—			(26,630	)
Net transfers from (to) nonaccretable difference to accretable yield		—			7,024			—			56,964			—			119,845			—			47,904

Balance at end of period	$	587,734		$	130,017		$	251,949		$	161,089		$	671,443		$	153,137		$	339,452		$	130,691

5. Derivatives

Risk Management Objective of Using Derivatives

The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to our variable rate borrowing. The Company has also entered into interest rate derivative agreements as a service provided to certain qualifying customers. The Company manages a matched book with respect to its customer derivatives in order to minimize its net risk exposure resulting from such agreements.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

5. Derivatives (continued)

Fair Values of Derivative Instruments on the Balance Sheet

The Company is making an accounting policy election to use the exception in Accounting Standards Codicfication (ASC) 820-10-35-18D (commonly referred to as the “portfolio exception”) with respect to measuring counterparty credit risk for derivative instruments, consistent with the guidance in ASC 820-10-35-18G. The table below presents the fair value (in thousands) of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2012 and December 31, 2011.

Fair Values of Derivative Instruments


	Asset Derivatives						Liability Derivatives
	As of June 30, 2012			As of December 31, 2011			As of June 30, 2012			As of December 31, 2011
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate products	Other assets	$	—	Other assets	$	—	Other liabilities	$	391	Other liabilities	$	107

Total derivatives designated as hedging instruments		$	—		$	—		$	391		$	107

Derivatives not designated as hedging instruments
Interest rate products	Other assets	$	18,833	Other assets	$	14,952	Other liabilities	$	19,489	Other liabilities	$	15,536

Total derivatives not designated as hedging instruments		$	18,833		$	14,952		$	19,489		$	15,536

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps. For hedges of the Company’s variable-rate borrowings, interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments. As of June 30, 2012, the Company had one interest rate swap with an aggregate notional amount of $140.0 million that was designated as a cash flow hedge of the Company’s forecasted variable cash flows beginning in June 2012 under a variable-rate term loan agreement.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

5. Derivatives (continued)

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The impact on AOCI was insignificant during 2011, and the impact of reclassifications on earnings during 2012 is expected to also be insignificant. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. No hedge ineffectiveness was recognized during the three or six months ended June 30, 2012. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate liabilities. During the next twelve months, the Company estimates that $0.4 million will be reclassified as a decrease to interest expense.

Derivatives Not Designated as Hedges

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate derivatives, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Company simultaneously enters into offsetting agreements with unrelated financial institutions, thereby minimizing its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. As of June 30, 2012, the Company had entered into interest rate derivatives, including both customer and offsetting agreements, with an aggregate notional amount of $720.1 million related to this program.

Effect of Derivative Instruments on the Income Statement

The effect of the Company’s derivative financial instruments on the income statement was immaterial for the three and six months ended June 30, 2012 and 2011.

Credit-risk-related Contingent Features

Certain of the Banks’ derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as the downgrade of the Banks’ credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of a Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. As of June 30, 2012, the aggregate fair value of derivative instruments with credit-risk-related contingent features that were in a net liability position was $16.6 million, for which the Banks had posted collateral of $15.9 million.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

6. Earnings Per Share

Hancock calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating securities consist of unvested stock-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.

Following is a summary of the information used in the computation of earnings per common share using the two-class method (in thousands, except per share amounts):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011

*Numerator:*

Net income to common shareholders	$	39,304	$	12,088	$	57,799	$	27,416

Net income allocated to participating securities - basic and diluted		294		77		587		151


Net income allocated to common shareholders - basic and diluted	$	39,010	$	12,011	$	57,212	$	27,265


*Denominator:*
Weighted-average common shares - basic		84,751		54,890		84,742		46,160
Dilutive potential common shares		749		145		725		150

Weighted average common shares - diluted		85,500		55,035		85,467		46,310


Earnings per common share:
Basic	$	0.46	$	0.22	$	0.68	$	0.59
Diluted	$	0.46	$	0.22	$	0.67	$	0.59

7. Share-Based Payment Arrangements

Stock Option Plans

Hancock maintains incentive compensation plans that incorporate share-based compensation for employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 13 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2011.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

7. Share-Based Payment Arrangements (continued)

A summary of option activity for the six months ended June 30, 2012 is presented below:


						Weighted-
						Average
				Weighted-		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Term		Intrinsic
Options	Shares			Price ($)		(Years)		Value ($000)
Outstanding at January 1, 2012		1,686,907		$	41.05
Granted		152,140			29.73
Exercised		(30,489	)		20.94
Forfeited or expired		(145,632	)		60.05

Outstanding at June 30, 2012		1,662,926		$	38.72		5.6	$	774

Exercisable at June 30, 2012		1,009,601		$	42.66		3.6	$	570

152,140 stock options were granted on May 24, 2012 with a fair value on the grant date of $8.43 per share. The fair value of each option award was estimated as of the grant date using the Black-Scholes-Merton option-pricing model.

The total intrinsic value of options exercised during the six months ended June 30, 2012 and 2011 was $0.4 million and $0.1 million, respectively.

A summary of the status of the Company’s nonvested restricted share awards as of June 30, 2012, and changes during the six months ended June 30, 2012, is presented below. These restricted shares are subject to service requirements.


				Weighted-
				Average
	Number of			Grant-Date
	Shares			Fair Value ($)
Nonvested at January 1, 2012		1,460,776		$	25.66
Granted		536,252			23.52
Vested		(25,415	)		41.49
Forfeited		(32,193	)		31.71

Nonvested at June 30, 2012		1,939,420		$	24.77

Hancock also makes annual grants of performance stock to key members of executive and senior management. On January 26, 2012, Hancock granted a target award of 14,858 performance shares and on May 24, 2012, Hancock granted a target award of 12,939 performance shares with a fair value on the grant date of $36.16 per share. The number of 2012 performance shares that ultimately vest at the end of the three-year required service period will be based on the relative rank of Hancock’s three-year total shareholder return (TSR) among the TSRs of a peer group of fifty regional banks. The maximum number of performance shares that could vest is 200% of the target award. The fair value of this award at the grant date was determined using a Monte Carlo simulation method. Compensation expense for these performance shares will be recognized on a straight-line basis over the service period.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

7. Share-Based Payment Arrangements (continued)

As of June 30, 2012, there was $34.2 million of total unrecognized compensation expense related to nonvested restricted shares and performance shares. This compensation is expected to be recognized in expense over a weighted-average period of 3.5 years. The total fair value of restricted shares which vested during the six months ended June 30, 2012 and 2011 was $0.8 million and $2.2 million, respectively.

8. Retirement Plans

The Company has a defined benefit pension plans covering legacy Hancock employees as well as plans covering certain legacy Whitney employees. The Whitney plans have been closed to new participants since 2008, and benefit accruals have been frozen for participants who did not meet certain vesting, age and years of service criteria as of December 31, 2008. The Company also sponsors defined benefit postretirement plans for both legacy Hancock and legacy Whitney employees that provide health care and life insurance benefits. Benefits under the Whitney plan are restricted to retirees who were already receiving benefits at the time of plan amendments in 2007 or active participants who were eligible to receive benefits as of December 31, 2007. The Company is in the process of reviewing all retirement benefit plans to determine appropriate changes needed to transition legacy Whitney employees into the Company’s benefit plans.

The following tables show the components of net periodic benefits cost included in expense for both the Hancock and Whitney Plans for the three-month and six-month periods of 2012 and 2011. The Whitney plans reflect amounts from the date of the merger in June 2011.

Hancock Plans


							Other
	Pension Benefits						Postretirement Benefits
	Three Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Service cost	$	1,703		$	1,172		$	48		$	35
Interest cost		1,484			1,363			209			152
Expected return on plan assets		(2,101	)		(1,373	)		—			—
Amortization of prior service cost		—			—			(14	)		(13	)
Amortization of net loss		1,220			586			177			134
Amortization of transition obligation		—			—			1			2

Net periodic benefit cost	$	2,306		$	1,748		$	421		$	310

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

8. Retirement Plans (continued)


							Other
	Pension Benefits						Postretirement Benefits
	Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Service cost	$	3,406		$	2,344		$	96		$	69
Interest cost		2,967			2,726			418			305
Expected return on plan assets		(4,201	)		(2,745	)		—			—
Amortization of prior service cost		—			—			(28	)		(27	)
Amortization of net loss		2,440			1,172			354			269
Amortization of transition obligation		—			—			3			3

Net periodic benefit cost	$	4,612		$	3,497		$	843		$	619

Whitney Plans


	Pension Benefits										Other Post-
	Qualified						Nonqualified				retirement Benefits
	Three Months Ended June 30
	2012			2011			2012		2011		2012		2011
	(In thousands)
Service cost	$	1,532		$	536		$	12	$	4	$	—	$	—
Interest cost		2,646			952			172		62		152		69
Expected return on plan assets		(4,249	)		(1,375	)		—		—		—		—
Amortization of prior service cost		—			—			—		—		—		—
Amortization of net loss		412			—			14		—		—		—
Amortization of transition obligation		—			—			—		—		—		—

Net periodic benefit cost	$	341		$	113		$	198	$	66	$	152	$	69


	Pension Benefits										Other Post-
	Qualified						Nonqualified				retirement Benefits
	Six Months Ended June 30
	2012			2011			2012		2011		2012		2011
	(In thousands)
Service cost	$	3,064		$	536		$	24	$	4	$	—	$	—
Interest cost		5,292			952			344		62		304		69
Expected return on plan assets		(8,498	)		(1,375	)		—		—		—		—
Amortization of prior service cost		—			—			—		—		—		—
Amortization of net loss		823			—			28		—		—		—
Amortization of transition obligation		—			—			—		—		—		—

Net periodic benefit cost	$	681		$	113		$	396	$	66	$	304	$	69

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

8. Retirement Plans (continued)

The Company contributed approximately $18 million to its pension plans for the first six months in 2012 and anticipates making a total contribution of $26 million for all of 2012. The Company contributed approximately $0.5 million to its post-retirement plans for the first six months in 2012. For the entire year, the Company anticipates a total contribution of $1.6 million in 2012.

9. Other Noninterest Income

Components of other noninterest income are as follows:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012		2011			2012		2011
	(In thousands)					(In thousands)
Income from bank owned life insurance	$	2,787	$	1,842		$	5,678	$	3,163
Safety deposit box income		488		285			1,022		536
Credit related fees		1,596		966			3,585		1,312
Income from derivatives		728		(6	)		1,636		(6	)
Gain on sale of assets		837		11			918		608
Other miscellaneous		1,105		1,493			3,492		2,392

Total other noninterest income	$	7,541	$	4,591		$	16,331	$	8,005

10. Other Noninterest Expense

Components of other noninterest expense are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
(In thousands)	(In thousands)				(In thousands)
Insurance expense	$	1,624	$	652	$	3,221	$	1,154
Ad valorem and franchise taxes		2,216		1,558		4,423		2,594
Printing and supplies		2,203		1,512		4,674		2,085
Public relations and contributions		1,583		842		3,762		1,224
Travel expense		1,598		678		3,182		1,065
Other real estate owned expense, net		4,607		1,860		7,040		3,301
Tax credit investment amortization		1,512		215		3,025		215
Other miscellaneous		4,240		3,479		14,823		6,637

Total other noninterest expense	$	19,583	$	10,796	$	44,150	$	18,275

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

10. Other Noninterest Expense (continued)

Other noninterest expense includes costs associated with the Whitney acquisition and the integration of Whitney’s operations into Hancock totaling $1.1 million for the second quarter of 2012 and $7.0 million for the first six months of 2012. Such costs totaled approximately $0.5 million for both the quarterly and year-to-date periods in 2011.

Total merger-related costs included in noninterest expense were $11.9 million for the second quarter and $45.8 million for the first six months of 2012, compared to $22.2 million and $23.8 million, respectively, in the second quarter and first six months of 2011.

11. Segment Reporting

The Company’s reportable operating segments consist of the Hancock segment, which coincides with the Company’s Hancock Bank subsidiary, and the Whitney segment, which coincides with its Whitney Bank subsidiary. Each of the bank segments offers commercial, consumer and mortgage loans and deposit services as well as certain other services, such as trust and treasury management services. Although the bank segments offer the same products and services, they are managed separately due to different pricing, product demand, and consumer markets. On June 4, 2011, the Company completed its acquisition of Whitney Holding Corporation, the parent of Whitney National Bank. Whitney National Bank was merged into Hancock Bank of Louisiana and the combined entity was renamed Whitney Bank. Prior to the merger the segment now called Whitney Bank was comprised generally of Hancock Bank Louisiana. On March 15, 2012 Whitney Bank transferred the assets and liabilities of its operations in Florida, Alabama and Mississippi to Hancock Bank. In the following tables, the “Other” column includes activities of other consolidated subsidiaries which do not constitute reportable segments under the quantitative and aggregation accounting guidelines. These subsidiaries provide investment services, insurance agency services, insurance underwriting and various other services to third parties.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

11. Segment Reporting (continued)

Following is selected information for the Company’s segments (in thousands):


	Three Months Ended June 30, 2012
	Hancock			Whitney			Other			Eliminations			Consolidated
Interest income	$	74,725		$	111,110		$	4,978		$	(324	)	$	190,489
Interest expense		(5,645	)		(6,400	)		(1,194	)		209		$	(13,030	)

Net interest income		69,080			104,710			3,784			(115	)		177,459

Provision for loan losses		(4,664	)		(2,702	)		(659	)		—			(8,025	)
Noninterest income		20,622			32,493			10,438			(1	)		63,552
Depreciation and amortization		(3,767	)		(4,430	)		(270	)		—			(8,467	)
Other noninterest expense		(63,096	)		(96,784	)		(11,626	)		1			(171,505	)
Securities transactions		—			—			—			—			—

Income before income taxes		18,175			33,287			1,667			(115	)		53,014
Income tax expense		5,840			7,293			577			—			13,710

Net income	$	12,335		$	25,994		$	1,090		$	(115	)	$	39,304

Goodwill	$	94,130		$	530,265		$	4,482		$	—		$	628,877

Total assets	$	6,448,429		$	12,426,207		$	2,709,431		$	(2,805,360	)	$	18,778,707

Total interest income from affiliates	$	884		$	—		$	—		$	(884	)	$	—

Total interest income from external customers	$	73,841		$	104,318		$	11,770		$	560		$	190,489

	Three Months Ended June 30, 2011
	Hancock			Whitney			Other			Eliminations			Consolidated
Interest income	$	47,371		$	62,731		$	4,684		$	691		$	115,477
Interest expense		(8,422	)		(5,872	)		(1,318	)		(806	)		(16,418	)

Net interest income		38,949			56,859			3,366			(115	)		99,059

Provision for loan losses		(3,388	)		(5,030	)		(726	)		—			(9,144	)
Noninterest income		26,255			18,192			2,280			(11	)		46,716
Depreciation and amortization		(2,162	)		(1,848	)		(148	)		—			(4,158	)
Other noninterest expense		(44,984	)		(68,155	)		(4,096	)		27			(117,208	)
Securitites transactions		—			20			(56	)		—			(36	)

Income before income taxes		14,670			38			620			(99	)		15,229
Income tax expense		3,184			(263	)		220			—			3,141

Net income	$	11,486		$	301		$	400		$	(99	)	$	12,088

Goodwill	$	23,386		$	601,820		$	4,482		$	—		$	629,688

Total assets	$	5,810,757		$	14,419,232		$	2,770,204		$	(3,242,648	)	$	19,757,545

Total interest income from affiliates	$	866		$	197		$	—		$	(1,063	)	$	—

Total interest income from external customers	$	46,505		$	62,534		$	4,684		$	1,754		$	115,477

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

11. Segment Reporting (continued)


	Six Months Ended June 30, 2012
	Hancock			Whitney			Other			Eliminations			Consolidated
Interest income	$	127,968		$	244,859		$	9,978		$	(600	)	$	382,205
Interest expense		(12,185	)		(14,246	)		(2,397	)		370			(28,458	)

Net interest income		115,783			230,613			7,581			(230	)		353,747

Provision for loan losses		(2,499	)		(16,343	)		802			—			(18,040	)
Noninterest income		39,438			66,184			19,427			(3	)		125,046
Depreciation and amortization		(7,054	)		(9,615	)		(493	)		—			(17,162	)
Other noninterest expense		(114,974	)		(230,897	)		(22,405	)		3			(368,273	)
Securities transactions		4			1			7			—			12

Net income before income taxes		30,698			39,943			4,919			(230	)		75,330
Income tax expense		6,375			8,808			2,348			—			17,531

Net income	$	24,323		$	31,135		$	2,571		$	(230	)	$	57,799

Goodwill	$	94,130		$	530,265		$	4,482		$	—		$	628,877

Total assets	$	6,448,429		$	12,426,207		$	2,709,431		$	(2,805,360	)	$	18,778,707

Total interest income from affiliates	$	1,792		$	—		$	—		$	(1,792	)	$	—

Total interest income from external customers	$	126,176		$	238,067		$	16,770		$	1,192		$	382,205

	Six Months Ended June 30, 2011
	Hancock			Whitney			Other			Eliminations			Consolidated
Interest income	$	95,001		$	93,858		$	9,633		$	(482	)	$	198,010
Interest expense		(20,042	)		(10,069	)		(2,328	)		252			(32,187	)

Net interest income		74,959			83,789			7,305			(230	)		165,823

Provision for loan losses		(10,964	)		(5,702	)		(1,300	)		—			(17,966	)
Noninterest income		44,081			27,887			8,950			(19	)		80,899
Depreciation and amortization		(4,508	)		(2,490	)		(355	)		—			(7,353	)
Other noninterest expense		(84,786	)		(90,111	)		(12,185	)		50			(187,032	)
Securities transactions		(51	)		20			(56	)		—			(87	)

Net income before income taxes		18,731			13,393			2,359			(199	)		34,284
Income tax expense		2,570			3,452			846			—			6,868

Net income	$	16,161		$	9,941		$	1,513		$	(199	)	$	27,416

Goodwill	$	23,386		$	601,820		$	4,482		$	—		$	629,688

Total assets	$	5,810,757		$	14,419,232		$	2,770,204		$	(3,242,648	)	$	19,757,545

Total interest income from affiliates	$	2,032		$	204		$	—		$	(2,236	)	$	—

Total interest income from external customers	$	92,969		$	93,654		$	9,633		$	1,754		$	198,010

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

12. New Accounting Pronouncements

In June 2011, the FASB issued updated guidance regarding the presentation of comprehensive income, and subsequently amended this guidance in December 2011, prior to its effective date. The updated guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes to stockholders’ equity, and, requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This amendment does not change the items that must be reported in other comprehensive income or when an item in other comprehensive income must be reclassified to net income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and should be applied retrospectively. The adoption of this guidance changed presentation only and did not have a material impact on the Company’s financial condition or results of operations. The FASB is currently re-deliberating whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income.

In May 2011, the FASB issued updated guidance to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. Certain provisions clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements, while others change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The guidance is to be applied prospectively and is effective during interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

In April 2011, FASB issued an update to improve the accounting for repurchase agreements (“repos”) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The guidance modifies the criteria for assessing if a transferor has maintained effective control over the transferred asset in determining when these transactions would be accounted for as financings (secured borrowings/lending agreements) as opposed to sales (purchases) with commitments to repurchase (resell). Specifically, the updated guidance removes the criterion requiring a transferor to have the ability to repurchase or redeem the financial assets on substantially the same terms, even in the event of default by the transferee, as well as the collateral maintenance guidance related to that criterion. The guidance is effective prospectively for new transfers and existing transactions that are modified in the first interim or annual period beginning on or after December 15, 2011. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

13. Whitney Acquisition

On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation (Whitney), a bank holding company based in New Orleans, Louisiana, in a stock and cash transaction. Whitney common shareholders received 0.418 shares of Hancock common stock in exchange for each share of Whitney stock, resulting in Hancock issuing 40,794,261 common shares at a fair value of $1.3 billion. Whitney’s preferred stock and common stock warrant issued under TARP were purchased by the Company for $307.7 million and retired as part of the merger transaction. In total, the purchase price was approximately $1.6 billion including the value of the options to purchase common stock assumed in the merger. On September 16, 2011, seven Whitney Bank branches located on the Mississippi Gulf Coast and one branch located in Bogalusa, LA with approximately $47 million in loans and $180 million in deposits were divested in order to resolve branch concentration concerns of the U.S. Department of Justice relating to the merger.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements – (continued)

(Unaudited)

13. Whitney Acquisition (continued)

The Whitney transaction was accounted for using the purchase method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Assets acquired, excluding goodwill, totaled $11.2 billion, including $6.5 billion in loans, $2.6 billion of investment securities, and $224 million of identifiable intangible assets. Liabilities assumed were $10.1 billion, including $9.2 billion of deposits. Goodwill of $589 million was calculated as the excess of the consideration exchanged over the net identifiable assets acquired. In the third quarter, goodwill was reduced $22.2 million for deferred tax purchase accounting adjustments.

The operating results of the Company include the results from Whitney’s operations since the acquisition date. The following table represents unaudited pro forma results for illustrative purposes and is not intended to represent or be indicative of actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of the period presented, nor are they intended to represent or be indicative of future results of operations.


	Three Months Ended		Six Months Ended
(In millions)	June 30, 2011		June 30, 2011
Total revenues, net of interest expense	$	197	$	463
Net income		20		36

See the Company’s 2011 Annual Report on Form 10-K for additional information.

14. Subsequent Event

On June 18, 2012, Hancock Holding Company’ subsidiary Whitney Bank launched a tender offer for a portion of its $150 million of 5.875% subordinated debt due 2017. At completion of the tender period July 16, 2012, $52.0 million of the principal amount was tendered and accepted. Whitney Bank paid a premium of 9.625% over the face amount of the notes to repurchase the debt. That premium of $5.2 million will appear as other expense in Hancock’s financial statements for the third quarter of 2012.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements included with this report and our financial statements and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2011 Annual Report on Form 10-K. Our discussion includes various forward-looking statements about our markets, the demand for our products and services and our future results. These statements are based on certain assumptions we consider reasonable. For information about these assumptions, you should refer to the section below entitled “Forward-Looking Statements.”

OVERVIEW

Acquisition of Whitney Holding Corporation

On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation (Whitney), the parent of Whitney National Bank based in New Orleans, Louisiana, in a stock and cash transaction. Whitney common shareholders received 0.418 shares of Hancock common stock in exchange for each share of Whitney stock, resulting in Hancock issuing 40.8 million common shares at a fair value of $1.3 billion. Whitney’s preferred stock and common stock warrant issued under TARP were purchased by the Company for $307.7 million and retired as part of the merger transaction. In total, the purchase price was approximately $1.6 billion. The fair value of the assets acquired, excluding goodwill, totaled $11.2 billion, including $.6.5 billion in loans, $2.4 billion of investment securities, and $224 million of identifiable intangibles. The fair value of the liabilities assumed was $10.1 billion, including $9.2 billion of deposits. In September 2011, seven Whitney Bank branches located on the Mississippi Gulf Coast and one branch located in Louisiana with approximately $47 million in loans and $180 million in deposits were divested in order to resolve branch concentration concerns of the U.S. Department of Justice relating to the merger. As a result, Hancock Holding Company is now the parent company of two wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank) and Whitney Bank, New Orleans, Louisiana (Whitney Bank).

On March 15, 2012 Whitney Bank transferred the assets and liabilities of its operations in Florida and Alabama to Hancock Bank. As a result, Hancock Bank operates in Mississippi, Alabama and Florida, while Whitney Bank operates in Louisiana and Texas.

Hancock Bank and Whitney Bank are referred to collectively as the “Banks.”

Recent Economic and Industry Developments

Recent reports from the Federal Reserve point to a modest expansion of economic activity throughout most of Hancock’s market area, but they also recognize significant risks to maintaining this level of activity or attaining an increased level of sustainable economic growth. Manufacturing continued to grow overall, although the current performance and near-term prospects varied among the different sectors. Activity at energy-related businesses, which are concentrated mainly in Hancock’s south Louisiana and Houston, Texas market areas, remained generally strong. Tourism and convention activity, which is important to several of the Company’s market areas, also remained strong with a positive near-term outlook. Retail sales activity improved, but buying behavior suggests consumers remain conservative in managing their personal finances. Strong auto demand was supported by dealer incentives, low-cost financing options and healthy trade-in values.

The real estate market for both residential and commercial properties has shown some recent improvement. Home sales have recently registered modest year-over-year growth and prices are stabilizing and trending higher for some markets and product categories. New home construction activity has shown some improvement. These are encouraging signs of a modest recovery in the housing market, albeit from a low and, in some markets, severely depressed level of sales and prices. The sustainability of a housing market recovery will be sensitive to the continued availability of attractive financing rates, the ability of prospective homeowners to meet underwriting standards, the rate of foreclosed properties entering the market and consumer expectations about future economic conditions, among other factors. The commercial real estate market saw solid growth in occupancy and increased rental rates in the apartment sector, with smaller improvements noted in the leasing of office and industrial properties and a mixed performance in the retail sector. Commercial real estate construction activity has been generally stable, supported by demand for new multi-family complexes. Growth in commercial construction will depend in large part on further improvement in overall economic activity and increased confidence that these improvements can be sustained.

Employment growth was generally positive across Hancock’s market area, but at a very subdued rate, and employers remain very cautious in hiring. The unemployment rate in Hancock’s Louisiana, Texas and Alabama markets has generally tracked lower than the national level, while our Mississippi and Florida markets are tracking somewhat higher.

The recovery of the overall U.S. economy continues, but the rate of growth is slow and erratic. Confidence in the prospect of a higher rate of sustained growth remains fragile for businesses and consumers alike, with uncertainty about the health of the international economy, the impact of ongoing European debt issues, and the implications of a changing U.S. political landscape for future economic policies and regulations, among other matters. The Federal Reserve has responded to the slow and tenuous recovery from the deep recession by taking steps to hold interest rates at unprecedented low levels and has expressed its intent to maintain rates at these levels through 2013.

The Dodd-Frank Act that was signed into law in July 2010 represents a significant overhaul of many aspects of the regulation of the financial services industry and includes provisions that have had or likely will have an impact on the nature and pricing of services offered by the Banks and other financial services industry participants. The independent Consumer Financial Protection Bureau that was established under the Dodd-Frank Act has broad rulemaking, supervisory and enforcement authority over consumer financial products, including deposit products, residential mortgages, home-equity loans and credit cards. The Dodd-Frank Act directs applicable regulatory authorities to promulgate a large number of regulations implementing its provisions over time.

Highlights of Second Quarter 2012 Financial Results

Net income for the second quarter of 2012 was $39.3 million, or $.46 per diluted common share, compared to $18.5 million, or $.21 in the first quarter of 2012. Net income was $12.1 million, or $.22, in the second quarter of 2011. Pre-tax earnings for the second and first quarters of 2012 included merger-related costs of $11.9 million and $33.9 million, respectively. Pre-tax merger costs for the second quarter of 2011 totaled $22.2 million.

Operating income for the second quarter of 2012 was $47.0 million or $.55 per diluted common share, compared to $40.5 million, or $.47 per diluted share in the first quarter of 2012. Operating income was $26.6 million, or $.48 per diluted share, in the second quarter of 2011. Operating income is defined as net income excluding tax-effected merger costs and securities transactions gains or losses. The Selected Financial Data below includes a reconciliation of net income to operating income.

Hancock’s return on average assets, excluding merger-related expenses and securities transactions, was 1.00% for the second quarter of 2012, compared to 0.85% in the first quarter of 2012, and 0.92% in the second quarter a year ago.

Total assets at June 30, 2012, were $18.8 billion, compared to $19.3 billion at March 31, 2012 and $19.8 billion at June 30, 2011. Average total assets for the second quarter of 2012 were $19.0 billion compared to $19.2 billion in the first quarter of 2012. All periods reflect the $11.7 billion in assets acquired in the Whitney merger.

Hancock remains well capitalized, and improved its tangible common equity ratio to 8.72% at June 30, 2012, up from 8.27% at March 31, 2012.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (taxable equivalent or TE) for the second quarter increased $1.1 million, or less than 1%, from the first quarter of 2012. Average earning assets declined 0.5% between these periods, while the net interest margin (TE) widened by 5 basis points (bps) to 4.48% in the second quarter of 2012 Net interest income for the current quarter increased $78.4 million, or 77%, from 2011’s second quarter. Earning assets increased 63% on average between these periods due mainly to the Whitney acquisition, and the net interest margin (TE) was up 37 bps. The following discussion will focus on linked-quarter comparisons between the second and first quarters of 2012, both of which include Whitney’s operations for the entire period.

The overall yield on earning assets was basically stable, down only one basis point from the first quarter of 2012. Loan yields were stable at 6.04% and were supported by an increase in loan discount accretion on the acquired portfolio in the current period. The yield on the investment portfolio declined 9 bps compared to the first quarter of 2012, driven largely by lower reinvestment yields. The overall mix of average earning assets improved moderately in the second quarter of 2012, as the proportion of loans was stable at approximately 69% and the proportion of short-term liquidity investments declined.

The overall cost of funding earning assets was down 6 bps to 0.32% in the second quarter of 2012 compared to the first quarter of 2012. Noninterest bearing deposits averaged 31.9% of earning assets in the current quarter, compared to 33.0% in the prior quarter. The overall rate paid on interest-bearing deposits was down 9 bps to 0.32% in the second quarter of 2012, reflecting mainly the impact of the sustained low rate environment on the re-pricing of time deposits. During the second quarter, approximately $745 million of time deposits matured at an average rate of 1.09%, of which approximately 70% renewed at an average cost of 0.48%. The opportunity to re-price time deposits at significantly lower rates over the near term has largely been eliminated.

The following table details the components of our net interest spread and net interest margin.


	Three Months Ended
	June 30, 2012							March 31, 2012							June 30, 2011
(dollars in thousands)	Interest		Volume		Rate			Interest		Volume		Rate			Interest		Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	108,777	$	7,946,781		5.50	%	$	112,509	$	8,017,691		5.64	%	$	60,125	$	4,564,701		5.28	%
Mortgage loans		28,709		1,548,803		7.41	%		26,422		1,549,131		6.82	%		14,839		864,768		6.87	%
Consumer loans		28,372		1,644,532		6.92	%		28,562		1,626,052		7.05	%		21,628		1,249,168		6.94	%
Loan fees & late charges		1,548		—		0.00	%		799		—		0.00	%		234		—		0.00	%

Total loans (TE)		167,406		11,140,116		6.04	%		168,292		11,192,874		6.04	%		96,826		6,678,637		5.81	%

US treasury securities		2		150		4.66	%		2		150		4.67	%		13		10,802		0.47	%
US agency securities		736		141,999		2.07	%		1,262		219,287		2.30	%		1,468		315,300		1.86	%
CMOs		7,983		1,578,438		2.02	%		6,783		1,361,132		1.99	%		3,276		398,863		3.29	%
Mortgage backed securities		13,921		2,296,126		2.43	%		14,406		2,321,703		2.48	%		13,233		1,251,563		4.23	%
Municipals (TE)		2,741		266,661		4.11	%		3,267		284,113		4.60	%		2,728		211,301		5.16	%
Other securities		65		9,312		2.79	%		126		8,098		6.21	%		275		36,836		2.99	%

Total securities (TE) (a)		25,448		4,292,686		2.37	%		25,846		4,194,483		2.46	%		20,993		2,224,665		3.77	%

Total short-term investments		469		733,489		0.26	%		527		852,843		0.25	%		516		1,028,067		0.20	%

Average earning assets yield (TE)	$	193,323	$	16,166,291		4.80	%	$	194,665	$	16,240,200		4.81	%	$	118,335	$	9,931,369		4.77	%

Interest bearing liabilities
Interest bearing transaction deposits	$	1,764	$	5,881,673		0.12	%	$	2,181	$	5,625,963		0.16	%	$	1,531	$	3,080,497		0.20	%
Time deposits		5,018		2,604,387		0.77	%		6,889		2,795,935		0.99	%		10,631		2,615,876		1.63	%
Public funds		1,090		1,517,743		0.29	%		1,192		1,531,110		0.31	%		1,409		1,283,183		0.44	%

Total interest bearing deposits		7,872		10,003,803		0.32	%		10,262		9,953,008		0.41	%		13,571		6,979,556		0.78	%

Total borrowings		5,158		1,212,692		1.71	%		5,165		1,237,849		1.68	%		2,847		761,438		1.50	%

Total interest bearing liability cost	$	13,030	$	11,216,495		0.47	%	$	15,427	$	11,190,857		0.55	%	$	16,418	$	7,740,994		0.85	%

Net interest-free funding sources				4,949,796							5,049,343							2,190,375

Total Cost of Funds	$	13,030	$	16,166,291		0.32	%	$	15,427	$	16,240,200		0.38	%	$	16,418	$	9,931,369		0.66	%

Net Interest Spread (TE)	$	180,293				4.33	%	$	179,238				4.26	%	$	101,917				3.92	%

Net Interest Margin (TE)	$	180,293	$	16,166,291		4.48	%	$	179,238	$	16,240,200		4.43	%	$	101,917	$	9,931,369		4.11	%

(a)	Average securities does not include unrealized holding gains/losses on available for sale securities.


	Six Months Ended
	June 30, 2012							June 30, 2011
(dollars in thousands)	Interest		Volume		Rate			Interest		Volume		Rate
Average earning assets
Commercial & real estate loans (TE)	$	221,285	$	7,982,217		5.57	%	$	100,393	$	3,836,050		5.27	%
Mortgage loans		55,132		1,548,945		7.12	%		25,663		759,543		6.76	%
Consumer loans		56,934		1,635,334		6.98	%		40,802		1,192,547		6.90	%
Loan fees & late charges		2,347		—		0.00	%		174		—		0.00	%

Total loans (TE)		335,698		11,166,496		6.04	%		167,032		5,788,140		5.81	%

US treasury securities		3		150		4.67	%		25		10,800		0.47	%
US agency securities		1,998		180,643		2.21	%		2,238		244,104		1.83	%
CMOs		14,766		1,469,785		2.01	%		6,294		375,175		3.36	%
Mortgage backed securities		28,327		2,308,915		2.45	%		21,406		984,159		4.35	%
Municipals (TE)		6,009		275,387		4.36	%		5,407		195,192		5.54	%
Other securities		191		8,705		4.38	%		523		27,493		3.81	%

Total securities (TE) (a)		51,294		4,243,585		2.42	%		35,893		1,836,923		3.91	%

Total short-term investments		996		793,166		0.25	%		815		886,203		0.19	%

Average earning assets yield (TE)	$	387,988	$	16,203,247		4.80	%	$	203,740	$	8,511,266		4.81	%

Interest bearing liabilities
Interest bearing transaction deposits	$	3,946	$	5,753,817		0.14	%	$	3,126	$	2,558,005		0.25	%
Time deposits		11,906		2,700,161		0.88	%		21,451		2,483,957		1.74	%
Public funds		2,283		1,524,426		0.30	%		3,001		1,255,606		0.48	%

Total interest bearing deposits		18,135		9,978,404		0.36	%		27,578		6,297,568		0.88	%

Total borrowings		10,323		1,225,271		1.69	%		4,608		631,952		1.47	%

Total interest bearing liability cost	$	28,458	$	11,203,675		0.51	%	$	32,187	$	6,929,520		0.94	%

Net interest-free funding sources				4,999,572							1,581,746

Total Cost of Funds	$	28,458	$	16,203,247		0.35	%	$	32,187	$	8,511,266		0.76	%

Net Interest Spread (TE)	$	359,530				4.30	%	$	171,553				3.87	%

Net Interest Margin (TE)	$	359,530	$	16,203,247		4.45	%	$	171,553	$	8,511,266		4.05	%

(a)	Average securities does not include unrealized holding gains/losses on available for sale securities.

Provision for Loan Losses

During the second quarter of 2012, the Company recorded a $5.1 million increase in the allowance for loan losses related to impairment of certain pools of covered loans, with a related increase of $4.1 million in the FDIC loss share indemnification asset. The net impact on provision expense was $1.0 million.

Hancock recorded a total provision for loan losses for the second quarter of 2012 of $8.0 million, down from $10.0 million in the first quarter of 2012. The provision in the second quarter of 2012 included $1.0 million, net, related to the portfolio that is covered under FDIC loss-sharing agreements, compared to $1.6 million for the first quarter of 2012. The provision for non-covered loans declined to $7.0 million in the second quarter of 2012 compared to $8.4 million in the first quarter of 2012. The provision totaled $9.1 million in the second quarter of 2011.

The section below on the “Allowance for Loan Losses and Asset Quality” provides additional information on changes in the allowance for loans losses and general credit quality. Certain differences in the determination of the allowance for loan losses for acquired loans, which includes loans acquired in the Whitney merger and all Peoples First covered loans, and originated loans are described in Note 4 to the consolidated financial statements.

Noninterest Income

Noninterest income totaled $63.6 million for the second quarter of 2012, up $2.1 million, or 3%, from $61.5 million in the first quarter of 2012. Compared to the same quarter a year ago, noninterest income was up $16.9 million mainly due to the impact of the Whitney acquisition in June 2011. The following discussion will focus on linked-quarter comparisons between the second quarter of 2012 and the first quarter of 2012, both of which include Whitney’s operations for the entire period.

As disclosed in the annual report on Form 10-K, the Dodd-Frank Act that was signed into law in July 2010 represents a significant overhaul of many aspects of the regulation of the financial services industry and includes provisions that have had or likely will have an impact on the nature and pricing of services offered by the Banks and other financial services industry participants.

Service charges on deposits totaled $20.9 million for the second quarter of 2012, up $4.6 million, or 28% from the first quarter of 2012. In conjunction with the core systems integration March 2012, the Company began offering new and standardized products and services across its footprint. These product changes accounted for the majority of the increase in service charge revenue.

Trust fees totaled $8.0 million for the second quarter of 2012, down from $8.7 million in the first quarter of 2012. As noted last quarter, a one-time event associated with the trust systems conversion at year-end 2011 increased first quarter results. Excluding the impact of that event, trust fees were up slightly compared to the first quarter of 2012.

Insurance fees were $4.6 million for the second quarter, up $1.1 million from the first quarter of 2012. The increase reflected mainly the timing of annual policy renewals. Fees from secondary mortgage operations were $3.0 million for the second quarter, down $1.0 million from the first quarter of 2012. The decrease reflects a lower volume of mortgages being sold into the secondary market due, in part, to some increased emphasis on originations to be held in the loan portfolio.

Management expects the overall level of fee income to decline in the third quarter of 2012 reflecting, in part, the impact on Hancock Bank of the restrictions on debit card interchange rates that arose from the implementation of the Durbin amendment to the Dodd-Frank Act. The Durbin restrictions began impacting Hancock Bank on July 1, 2012, and are expected to result in a loss of fee income of approximately $2.5 million per quarter. The restrictions had begun impacting Whitney Bank in October 2011.

The components of noninterest income for the three-month periods ended June 30, 2012, March 31, 2012 and June 30, 2011 and for the six-month periods ended June 30, 2012 and 2011 are presented in the following table:


	Three Months Ended							Six Months Ended
	June 30,		March 31,		June 30,			June 30,
	2012		2012		2011			2012		2011
(In thousands)
Service charges on deposit accounts	$	20,907	$	16,274	$	12,343		$	37,181	$	21,887
Bank card fees		8,075		8,464		5,968			16,539		9,478
Trust fees		7,983		8,738		5,301			16,721		9,292
Insurance commissions and fees		4,581		3,477		4,629			8,058		7,878
Investment and annuity fees		4,607		4,415		3,267			9,022		6,400
ATM fees		4,843		4,334		3,290			9,177		6,021
Secondary mortgage market operations		3,015		4,002		1,877			7,017		3,444
Accretion of indemnification asset		2,000		3,000		5,450			5,000		8,494
Income from bank owned life insurance		2,787		2,891		1,842			5,678		3,163
Safety deposit box income		488		534		285			1,022		536
Credit related fees		1,596		1,989		966			3,585		1,312
Income from derivatives		728		908		(6	)		1,636		(6	)
Gain on sale of assets		134		81		11			204		608
Other miscellaneous		1,808		2,387		1,493			4,206		2,392
Securities transactions gain/(loss), net		—		12		(36	)		12		(87	)

Total noninterest income	$	63,552	$	61,506	$	46,680		$	125,058	$	80,812

Noninterest Expense

Total noninterest expense for the second quarter of 2012 was down $25.5 million from the first quarter of 2012. Excluding merger-related expenses totaling $11.9 million in the current period and $33.9 million in the first quarter of 2012, noninterest expense decreased $3.5 million, or 2%, between these periods. Compared to the second quarter of 2011, noninterest expense, excluding merger-related costs, was up $68.9 million, reflecting mainly the Whitney acquisition in June 2011. The following discussion will exclude merger-related expenses and will focus on linked-quarter comparisons between the second quarter of 2012 and the first quarter of 2012, both of which include Whitney’s operations for the entire period.

Total personnel expense was $89.3 million in the second quarter of 2012, a $2.5 million decrease from the first quarter of 2012. The decrease reflects the reduction in payroll taxes from the normal higher level at the beginning of the year and the reduction in force associated with the core systems conversion and branch consolidations in mid-March. These declines were partly offset by the Company’s annual merit increase and recent strategic hires.

Net occupancy expense was down $0.8 million due mainly to branch consolidations near the end of the first quarter.

Advertising expense increased $1.6 million compared to the first quarter. The Company resumed normal advertising and marketing efforts during the second quarter of 2012, after focusing in the first quarter on customer communications essential to the successful conversion of Whitney’s core data processing systems and certain customer applications.

The following table presents the components of noninterest expense for the three-month periods ended June 30, 2012, March 31, 2012 and June 30, 2011 and for the six-month periods ended June 30, 2012 and 2011.


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June, 30
	2012		2012		2011		2012		2011
(In thousands)
Compensation expense	$	71,581	$	72,569	$	42,962	$	144,150	$	72,370
Employee benefits		17,749		19,302		10,550		37,051		18,966

Salaries and employee benefits		89,330		91,871		53,512		181,201		91,336

Net occupancy expense		13,604		14,401		8,704		28,005		14,615
Equipment expense		5,924		5,877		3,599		11,801		6,408
Data processing expense		12,389		13,152		7,101		25,541		12,190
Professional services expense		7,781		8,562		5,647		16,343		9,498
Telecommunications and postage		5,604		5,776		3,534		11,380		6,289
Advertising		3,120		1,540		1,900		4,660		3,914
Deposit insurance and regulatory fees		3,903		3,392		3,232		7,295		6,338
Amortization of intangibles		7,922		8,304		1,621		16,226		2,235
Insurance expense		1,624		1,597		652		3,221		1,154
Ad valorem and franchise taxes		2,216		2,207		1,558		4,423		2,594
Printing and supplies		1,978		1,770		1,113		3,748		1,685
Public relations and contributions		1,520		1,619		815		3,139		1,195
Travel expense		1,295		1,116		640		2,411		1,025
Other real estate owned expense, net		2,991		2,433		1,860		5,424		3,301
Tax credit investment amortization		1,512		1,513		215		3,025		215
Merger-related expenses		11,913		33,913		22,220		45,826		23,808
Other miscellaneous expense		5,346		6,420		3,443		11,766		6,585

Total noninterest expense	$	179,972	$	205,463	$	121,366	$	385,435	$	194,385

Noninterest expense, excluding merger-related	$	168,059		171,550	$	99,146		339,609		170,577

The components of merger-related expenses for the five periods follow:


	Three Months Ended							Six Months Ended
	June 30,			March 31,		June 30,		June, 30
	2012			2012		2011		2012		2011
(In thousands)
Salaries and employee benefits	$	795		$	3,456	$	4,024	$	4,251	$	4,035
Net occupancy expense		180			241		56		421		56
Equipment expense		820			1,213		62		2,033		107
Data processing expense		1,938			1,039		5		2,977		61
Professional services expense		6,877			16,540		17,239		23,417		18,648
Telecommunications and postage		(7	)		382		108		375		113
Advertising		210			5,150		227		5,360		262
Insurance expense		—			—		—		—		—
Printing and supplies		225			701		399		926		400
Public relations and contributions		63			560		27		623		29
Travel expense		303			468		38		771		40
Other expense		509			4,163		35		4,672		57

Total merger-related expenses	$	11,913		$	33,913	$	22,220	$	45,826	$	23,808

Income Taxes

The effective income tax rate for the second quarter of 2012 was approximately 26%, compared to 17% in the first quarter of 2012 and 21% in the second quarter of 2011. The actual effective tax rate of 17% for the first quarter of 2012 was reduced by certain discrete items related mainly to the impact of the transfers of branches from Whitney Bank to Hancock Bank. As a result of the transfers, our state tax profile changed and we re-measured our deferred taxes accordingly. The effective tax rate for the first six months of 2012 was approximately 23%, compared to 20% for the same period on 2011.

The Company’s effective tax rates have varied from the 35% federal statutory rate primarily because of tax-exempt income and the availability of tax credits. Interest income from the financing of state and local governments and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The source of the tax credits for 2012 and 2011 has been investments that generate New Market Tax Credits, Low-Income Housing Credits and Qualified Bond Credits.

Selected Financial Data

The following tables contain selected financial data comparing our consolidated results of operations for the three-month periods ended June 30, 2012, March 31, 2012 and June 30, 2011 and for the six-month periods ended June 30, 2012 and 2011.


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
	2012		2012		2011		2012		2011
Per Common Share Data
Earnings per share:
Basic	$	0.46	$	0.22	$	0.22	$	0.68	$	0.59
Diluted	$	0.46	$	0.21	$	0.22	$	0.67	$	0.59
Operating earnings per share: (a)
Basic	$	0.55	$	0.48	$	0.48	$	1.03	$	0.93
Diluted	$	0.55	$	0.47	$	0.48	$	1.02	$	0.93
Cash dividends per share	$	0.24	$	0.24	$	0.24	$	0.48	$	0.48
Book value per share (period-end)	$	28.30	$	28.02	$	28.18	$	28.30	$	28.18
Tangible book value per share (period-end)	$	18.46	$	17.99	$	18.06	$	18.46	$	18.06
Weighted average number of shares (000s):
Basic		84,751		84,741		54,890		84,742		46,160
Diluted		85,500		85,442		55,035		85,467		46,310
Period-end number of shares (000s)		84,774		84,770		84,694		84,774		84,694
Market data:
High price	$	36.56	$	36.73	$	34.57	$	36.73	$	35.68
Low price	$	27.96	$	31.56	$	30.04	$	27.96	$	30.04
Period-end closing price	$	30.44	$	35.51	$	30.98	$	30.44	$	30.98
Trading volume (b)		39,310		32,423		32,122		71,733		58,064

(a)	Excludes tax-affected merger related expenses and securities transactions.

(b)	Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter.


	Three Months Ended							Six Months Ended
	June 30,		March 31,		June 30,			June 30,
(in thousands)	2012		2012		2011			2012		2011
Income Statement:
Interest income	$	190,489	$	191,716	$	115,477		$	382,205	$	198,010
Interest income (TE)		193,323		194,665		118,335			387,988		203,740
Interest expense		13,030		15,428		16,418			28,458		32,187

Net interest income (TE)		180,293		179,237		101,917			359,530		171,553
Provision for loan losses		8,025		10,015		9,144			18,040		17,966
Noninterest income excluding securities transactions		63,552		61,494		46,716			125,046		80,899
Securities transactions gains/(losses)		—		12		(36	)		12		(87	)
Noninterest expense		179,972		205,463		121,366			385,435		194,385

Income before income taxes		53,014		22,316		15,229			75,330		34,284
Income tax expense		13,710		3,821		3,141			17,531		6,868

Net income	$	39,304	$	18,495	$	12,088		$	57,799	$	27,416

Merger-related expenses		11,913		33,913		22,220			45,826		23,808
Securities transactions gains/(losses)		—		12		(36	)		12		(87	)
Taxes on adjustments		4,170		11,865		7,790			16,035		8,364

Operating income (a)	$	47,047	$	40,531	$	26,554		$	87,578	$	42,947

(a)	Net income less tax-effected merger costs and securities gains/losses. Management believes that this a useful financial measure because it enables investors to assess ongoing operations.


	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30
	2012			2012			2011			2012			2011
Performance Ratios
Return on average assets		0.83	%		0.39	%		0.42	%		0.61	%		0.56	%
Return on average assets (operating) (a)		1.00	%		0.85	%		0.92	%		0.92	%		0.87	%
Return on average common equity		6.62	%		3.13	%		3.32	%		4.88	%		4.72	%
Return on average common equity (operating) (a)		7.93	%		6.86	%		7.30	%		7.40	%		7.40	%
Tangible common equity ratio		8.72	%		8.27	%		8.09	%		8.72	%		8.09	%
Earning asset yield (TE)		4.80	%		4.81	%		4.77	%		4.80	%		4.81	%
Total cost of funds		0.32	%		0.38	%		0.66	%		0.35	%		0.76	%
Net interest margin (TE)		4.48	%		4.43	%		4.11	%		4.45	%		4.05	%
Noninterest expense as a percent of total revenue (TE) before amortization of purchased intangibles and securities transactions and merger expenses		65.67	%		67.81	%		65.62	%		66.73	%		66.68	%
Allowance for loan losses as a percent of period-end loans		1.27	%		1.28	%		1.00	%		1.27	%		1.00	%
Allowance for loan losses to non-performing loans + accruing loans 90 days past due		104.78	%		105.37	%		85.22	%		104.78	%		85.22	%
Average loan/deposit ratio		73.51	%		73.10	%		72.51	%		73.30	%		72.46	%
Noninterest income excluding securities transactions as a percent of total revenue (TE)		26.06	%		25.54	%		31.43	%		25.81	%		32.05	%

(a)	Excludes tax-effected merger costs and securities gains/losses


	(dollar amounts in thousands)
Asset Quality Information
Non-accrual loans (a)	$	113,384		$	111,378		$	109,234		$	113,384		$	109,234
Restructured loans (b)		19,518			19,926			18,606			19,518			18,606

Total non-performing loans		132,902			131,304			127,840			132,902			127,840
Foreclosed assets		138,118			156,332			130,320			138,118			130,320

Total non-performing assets	$	271,020		$	287,636		$	258,160		$	271,020		$	258,160

Non-performing assets as a percent of loans and foreclosed assets		2.42	%		2.55	%		2.27	%		2.42	%		2.27	%
Accruing loans 90 days past due (a)	$	1,443		$	3,780		$	4,057		$	1,443		$	4,057
Accruing loans 90 days past due as a percent of loans		0.01	%		0.03	%		0.04	%		0.01	%		0.04	%
Non-performing assets + accruing loans 90 days past due to loans and foreclosed assets		2.43	%		2.58	%		2.30	%		2.43	%		2.30	%
Net charge-offs—non-covered	$	10,211		$	7,054		$	8,241		$	17,265		$	14,683
Net charge-offs—covered		3,499			15,790			—			19,289			375
Net charge-offs—non-covered as a percent of average loans		0.37	%		0.25	%		0.49	%		0.31	%		0.51	%
Allowance for loan losses	$	140,768		$	142,337		$	112,407		$	140,768		$	112,407
Allowance for loan losses as a percent of period-end loans		1.27	%		1.28	%		1.00	%		1.27	%		1.00	%
Allowance for loan losses to non-performing loans + accruing loans 90 days past due		104.78	%		105.37	%		85.22	%		104.78	%		85.22	%

Provision for loan losses	$	8,025		$	10,015		$	9,144		$	18,040		$	17,966

(a)	Non-accrual loans and accruing loans past due 90 days or more do not include acquired credit-impaired loans which were written down to fair balue upon acquisition and accrete interest income over the remaining life of the loan.

(b)	Included in restructured loans are $9.7 million, $5.2 million and $8.4 million in non-accrual loans at June 30, 2012 March 31, 2012 and June 30, 2011 respectively. Total excludes acquired credit-impaired loans.


	Three Months Ended
	June 30,			March 31,			June 30,
	2012			2012			2011
Supplemental Asset Quality Information (excluding covered assets and acquired loans) (a)
Non-accrual loans (b)	$	100,067		$	100,192		$	68,216
Restructured loans		19,518			19,926			18,606

Total non-performing loans		119,585			120,118			86,822
Foreclosed assets (c)		93,339			107,804			104,975

Total non-performing assets	$	212,924		$	227,922		$	191,797

Non-performing assets as a percent of loans and foreclosed assets		3.61	%		4.10	%		4.47	%
Accruing loans 90 days past due	$	1,443		$	2,524		$	2,504
Accruing loans 90 days past due as a percent of loans		0.02	%		0.05	%		0.06	%
Non-performing assets + accruing loans 90 days past due to loans and foreclosed assets		3.63	%		4.15	%		4.53	%
Allowance for loan losses (d)	$	81,376		$	84,496		$	83,160
Allowance for loan losses as a percent of period-end loans		1.40	%		1.55	%		1.99	%
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due		67.24	%		68.90	%		93.10	%

(a)

Covered and acquired loans are considered to be performing due to the application of the accretion method under acquisition accounting. Acquired loans are recorded at fair value with no allowance brought forward in accordance with acquisition accounting. Certain acquired loans and foreclosed assets are also covered under FDIC loss sharing agreements, which provide considerable protection against risk. Due to the protection of loss sharing agreements and the impact of acquisition accounting, management has excluded acquired loans and covered assets from this table to provide improved comparability to prior periods and better perspective into asset quality trends.

(b)	Excludes acquired covered loans not accounted for under the accretion method of $6,174, $9,377 and $39,514. Also excludes non-covered acquired loans at fair value not accounted for under the accretion method of $7,143, $1,809 and $1,504.

(c)	Excludes covered foreclosed assets of $44,779, $48,528, and $25,345.

(d)	Excludes allowance for loan losses recorded on covered acquired loans of $59,392, $57,841, and $29,247.


	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
	2012			2012			2011			2012			2011
	(in thousands)
Period-end Balance Sheet
Total loans	$	11,078,146		$	11,130,273		$	11,249,053		$	11,078,146		$	11,249,053
Loans held for sale		44,918			42,484			67,081			44,918			67,081
Securities		4,320,457			4,393,845			4,573,973			4,320,457			4,573,973
Short-term investments		650,470			1,008,505			977,060			650,470			977,060

Earning assets		16,093,991			16,575,107			16,867,167			16,093,991			16,867,167
Allowance for loan losses		(140,768	)		(142,337	)		(112,407	)		(140,768	)		(112,407	)
Other assets		2,825,484			2,858,327			3,002,785			2,825,484			3,002,785

Total assets	$	18,778,707		$	19,291,097		$	19,757,545		$	18,778,707		$	19,757,545

Noninterest bearing deposits	$	5,040,484		$	5,242,973		$	4,852,440		$	5,040,484		$	4,852,440
Interest bearing transaction and savings deposits		5,876,843			5,995,622			5,586,151			5,876,843			5,586,151
Interest bearing public funds deposits		1,479,378			1,543,867			1,522,002			1,479,378			1,522,002
Time deposits		2,534,115			2,650,305			3,627,316			2,534,115			3,627,316

Total interest bearing deposits		9,890,336			10,189,794			10,735,469			9,890,336			10,735,469

Total deposits		14,930,820			15,432,767			15,587,909			14,930,820			15,587,909
Other borrowed funds		1,193,021			1,210,561			1,290,875			1,193,021			1,290,875
Other liabilities		255,504			272,566			492,448			255,504			492,448
Stockholders’ equity		2,399,362			2,375,203			2,386,313			2,399,362			2,386,313

Total liabilities & stockholders’ equity	$	18,778,707		$	19,291,097		$	19,757,545		$	18,778,707		$	19,757,545

Average Balance Sheet
Total loans	$	11,140,116		$	11,192,874		$	6,678,637		$	11,166,496		$	5,788,140
Securities (a)		4,292,686			4,194,483			2,224,665			4,243,585			1,836,923
Short-term investments		733,489			852,843			1,028,067			793,166			886,203

Earning assets		16,166,291			16,240,200			9,931,369			16,203,247			8,511,266
Allowance for loan losses		(142,991	)		(125,072	)		(95,313	)		(134,031	)		(89,070	)
Other assets		2,964,097			3,078,392			1,752,765			3,021,242			1,500,158

Total assets	$	18,987,397		$	19,193,520		$	11,588,821		$	19,090,458		$	9,922,354

Noninterest bearing deposits	$	5,149,898		$	5,359,504		$	2,231,775		$	5,254,701		$	1,691,126
Interest bearing transaction and savings deposits		5,881,673			5,625,963			3,080,497			5,753,817			2,558,005
Interest bearing public fund deposits		1,517,743			1,531,110			1,283,183			1,524,426			1,255,606
Time deposits		2,604,387			2,795,935			2,615,876			2,700,161			2,483,957

Total interest bearing deposits		10,003,803			9,953,008			6,979,556			9,978,404			6,297,568

Total deposits		15,153,701			15,312,512			9,211,331			15,233,105			7,988,694
Other borrowed funds		1,212,692			1,237,849			761,438			1,225,271			631,952
Other liabilities		233,539			268,255			157,500			250,897			130,914
Stockholders’ equity		2,387,465			2,374,904			1,458,552			2,381,185			1,170,794

Total liabilities & stockholders’ equity	$	18,987,397		$	19,193,520		$	11,588,821		$	19,090,458		$	9,922,354

(a)	Average securities does not include unrealized holding gains/losses on available for sale securities.

LIQUIDITY

Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that we have adequate cash flow to meet our various needs, including operating, strategic and capital. Without proper liquidity management, we would not be able to perform the primary function of a financial intermediary and would not be able to meet the needs of the communities in which we have a presence and serve. In addition, the parent holding company’s principal source of liquidity is dividends from its subsidiary banks. Liquidity is required at the parent holding company level for the purpose of paying dividends to stockholders, servicing any debt we may have, funding net outlays business combinations as well as general corporate expenses.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities, the ability to use the loan and securities portfolios as collateral for borrowings and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with banks are additional sources of liquidity funding. Free securities represent unencumbered and unpledged securities assigned to dealer repo agreements that mature within 30 days and securities assigned to the Federal Reserve Bank discount window which are not pledged against current funding and which are available within one day.

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts. Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs. Our short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $2.08 billion and borrowing capacity at the Federal Reserve’s discount window in excess of $925.6 million. Our core deposits at June 30, 2012 were down from year end at $13.7 billion. Core deposits represent total deposits less CDs greater than $100,000 and foreign branch deposits. Net wholesale funding was also down at $1.1 billion.

Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows provide present operating cash flows and summarize all significant sources and uses of funds for the first six months of 2012 and 2011.

The following table presents certain liquidity ratios used in the liquidity management process.

Liquidity Ratios


	June 30,			December 31,
($ in thousands)	2012			2011
Free securities		38.00	%		31.20	%
Free securities-net wholesale funds/core deposits		3.40	%		0.23	%

Wholesale funding diversification:
Certificate of deposits > $100,000*		8.15	%		9.53	%
Brokered certificate of deposits		0.00	%		0.00	%
Public fund certificate of deposits	$	109,756		$	111,030

Net wholesale funds	$	1,106,688		$	1,340,299
Core deposits	$	13,714,376		$	14,216,496

*	CDs > $100K includes public funds

CAPITAL RESOURCES

Stockholders’ equity totaled $2.4 billion at June 30, 2012, essentially unchanged from December 31, 2011. The tangible common equity ratio increased to 8.72% at June 30, 2012 from 7.96% at December 31, 2011. The primary quantitative measures that regulators use to gauge capital adequacy are the ratios of total and Tier 1 regulatory capital to risk-weighted assets (risk-based capital ratios) and the ratio of Tier 1 capital to average total assets (leverage ratio). Both the Company and its bank subsidiaries are required to maintain minimum risk-based capital ratios of 8.0% total regulatory capital and 4.0% Tier 1 capital. The minimum leverage ratio is 3.0% for bank holding companies and banks that meet certain specified criteria, including having the highest supervisory rating. All others are required to maintain a leverage ratio of at least 4.0%. At June 30, 2012, our regulatory capital ratios and those of the Banks were well in excess of current regulatory minimum requirements, as indicated in the table below. The Company and the Banks have been categorized as “well capitalized” in the most recent notices received from our regulators.


	June 30,			December 31,
	2012			2011
Regulatory ratios:
Total capital (to risk weighted assets)
Company		13.78	%		13.59	%
Hancock Bank		13.37	%		14.21	%
Whitney Bank		14.06	%		12.76	%
Tier 1 capital (to risk weighted assets)
Company		11.53	%		11.48	%
Hancock Bank		12.10	%		12.94	%
Whitney Bank		11.76	%		10.90	%
Tier 1 leverage capital
Company		8.27	%		8.17	%
Hancock Bank		11.01	%		8.15	%
Whitney Bank		7.54	%		8.19	%

(1)

Tier 1 capital generally includes common equity, retained earnings, non-controlling interest in equity of consolidated subsidiaries and a limited amount of qualifying perpetual preferred stock, reduced by goodwill and other disallowed intangibles and disallowed deferred tax assets and certain other assets. Total capital consists of Tier 1 capital plus perpetual preferred stock not qualifying as Tier 1 capital, mandatory convertible securities, certain types of subordinated debt and a limited amount of allowances for credit losses.

(2)	The risk-weighted asset base is equal to the sum of the aggregate value of assets and credit-converted off-balance sheet items in each risk category as specified in regulatory guidelines, multiplied by the weight assigned by the guidelines to that category.

(3)	The Tier 1 leverage capital ratio is Tier 1 capital divided by average total assets reduced by the deductions for Tier 1 capital noted above.

BALANCE SHEET ANALYSIS

Securities

Investment in securities totaled $4.3 billion at June 30, 2012 and $4.5 billion at December 31, 2011. The decline from the end of 2011 reflects mainly the use of some of the proceeds from maturities and scheduled repayments to fund the reduction in deposits and short-term borrowings discussed below. At June 30, 2012 securities available for sale totaled $2.3 billion and securities held to maturity totaled $2.0 billion. Our securities portfolio consists mainly of residential mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. The portfolio is designed to enhance liquidity while providing acceptable rates of return. Therefore, we invest only in high quality securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two to five years. Our policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a nationally recognized statistical rating Agency, except for certain non-rated obligations of counties, parishes and municipalities within our markets in Mississippi, Louisiana, Texas, Florida or Alabama.

Loans

Total loans at June 30, 2012 were $11.1 billion, a decrease of $99 million, or less than 1%, from December 31, 2011. Adjusting for an $84 million decline in the FDIC covered Peoples First portfolio during this period, total loans were virtually unchanged compared to year-end 2011. During the first half of 2012, net growth in commercial non-real estate (C&I) residential mortgage and consumer loans was offset by net reductions in construction and land development (C&D) and commercial real estate (CRE) credits. The environment to generate new quality loans remains competitive. However, the Company’s pipeline for new originations is strong and management remains cautiously optimistic there will be net loan growth in the second half of 2012.

See note 4 of the financial statements for the composition of originated, acquired and covered loans for June 30, 2012 and December 31, 2011. Originated loans include all loans not included in the acquired and covered loan portfolios described below. Acquired loans are those purchased in the Whitney acquisition on June 4, 2011, including loans that were performing satisfactorily at the date (acquired performing) and loans acquired with evidence of credit deterioration (acquired impaired). Covered loans are those purchased in the December 2009 acquisition of Peoples First, which are covered by loss share agreements between the FDIC and the Company that afford significant loss protection. Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without carryover of any allowance for loan losses. Certain differences in the accounting for originated loans and for acquired performing and acquired impaired loans (which include all Peoples First covered loans) are described in Note 4 to the consolidated financial statements.

Total originated loans increased $923 million since the end of 2011, including a net increase of $360 million during the second quarter of 2012. Originated C&I loans were up $377 million since year end, including $235 million during the second quarter of 2012. The net increase reflected activity with both existing and new customers and was concentrated mainly in the Company’s markets in central Florida, western Louisiana and the greater New Orleans area of Louisiana.

The Company’s commercial customer base is diversified over a range of industries, including oil and gas (O&G), wholesale and retail trade in various durable and nondurable products and the manufacture of such products, marine transportation and maritime construction, financial and professional services, and agricultural production. Loans outstanding to O&G industry customers totaled approximately $630 million at June 30, 2012, similar to the balance at March 31, 2012 and up some from December 31, 2011. The majority of the O&G portfolio is with customers who provide transportation and other services and products to support exploration and production activities. The Banks lend mainly to middle-market and smaller commercial entities, although they do occasionally participate in larger shared-credit loan facilities with familiar businesses operating in the Company’s market areas. Shared credits funded at June 30, 2012 totaled approximately $720 million, of which approximately $250 million was with O&G customers.

Originated C&D loans and originated CRE loans, which include loans on both income-producing and owner-occupied properties, increased a combined $147 million in the first six months of 2012. This increase reflects the funding of existing commitments as well as some new business across the Company’s footprint and covers a variety of retail, multi-family residential, commercial and other projects, including some sizable projects to expand or renovate established properties in Louisiana. Overall, however, there continues to be limited opportunities for funding new quality projects in today’s environment.

Originated residential mortgages were up $167 million over the first half of 2012, and originated consumer loans increased $232 million over this period. As noted earlier, the Company has increased its emphasis on residential mortgages to be held in the loan portfolio, and customer demand has been supported by historically low market rates for home loans. Lending campaigns for indirect auto and home equity loans initiated in the second quarter of 2012 contributed to the growth in the originated consumer portfolio.

The portfolio of acquired Whitney loans has declined $938 million since December 31, 2011, with a $366 million decrease during the second quarter of 2012. The year-to-date decrease included a $289 million decline in the C&I category, $366 million in the C&D and CRE categories, and $284 million in the residential mortgage and consumer loans categories. There were no significant trends underlying the reduction in the C&I category, and the Company continues its relationship with many of the commercial customers who have paid down their loans since the acquisition. Reductions in acquired C&D and CRE categories as well as the residential mortgage and consumer categories reflected mainly normal repayment and refinancing activity.

Total covered loans at June 30, 2012 were down $83 million from December 31, 2011, including a $46 million decrease during the second quarter of 2012. These reductions reflect normal repayments, charge-offs and foreclosures. The covered portfolio will continue to decline over the terms of the loss share agreements.

Allowance for Loan Losses and Asset Quality

At June 30, 2012, the allowance for loan losses was $140.8 million compared with $142.3 at March 31, 2012 and $124.9 million at December 31, 2011. The ratio of the allowance for loan losses as a percent of period-end loans was 1.27% at June 30, 2012, virtually unchanged from the prior quarter and up 15 basis points from December 31, 2011. The increase in the allowance since the end of 2011 was mainly related to the Peoples First portfolio which is covered under FDIC loss-sharing agreements.

The Company recorded a total provision for loan losses for the second quarter of 2012 of $8.0 million, down from $10.0 million in the first quarter of 2012. As noted above, the second quarter provision included $1.0 million, net, related to the Peoples First portfolio, compared to $1.6 million for the first quarter of 2012. The provision for non-covered loans was down to $7.0 million in the second quarter of 2012 compared to $8.4 million in the first quarter of 2012.

Net charge-offs from the non-covered loan portfolio in the second quarter of 2012 were $10.2 million, or 0.37% of average total loans on an annualized basis. This compares to net non-covered charge-offs of $7.1 million, or 0.25% of average total loans, for the first quarter of 2012, and $8.2 million, or 0.49%, for the second quarter of 2011. The allowance calculated on the portion of the loan portfolio that excludes covered loans and loans acquired at fair value in the Whitney merger totaled $81.4 million, or 1.40% of this portfolio at June 30, 2012, and $83.2 million, or 1.70% at December 31, 2011. This ratio will tend to decline as the proportion of this portfolio representing new business from Whitney’s operations grows, other factors held constant.

The following table sets forth, for the periods indicated activity in the allowance for loan losses. In the following tables, commercial loans encompass commercial non-real estate loans, construction and land development loans and commercial real estate loans.


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
				(In thousands)
Balance of allowance for loan losses at beginning of period	$	142,337		$	94,356		$	124,881		$	81,997

Loans charged-off:
Non-covered loans:
Commercial		7,213			8,910			12,971			13,664
Residential mortgages		1,846			1,190			2,633			2,332
Consumer		3,652			2,893			6,773			5,701

Total non-covered charge-offs		12,711			12,993			22,377			21,697

Covered loans:
Commercial		3,499			—			19,289			—
Consumer		—			—			—			375

Total covered charge-offs		3,499			—			19,289			375

Total charge-offs		16,210			12,993			41,666			22,072

Recoveries of loans previously charged-off:
Non-covered loans:
Commercial		1,586			3,700			3,065			4,274
Residential mortgages		—			189			66			960
Consumer		914			863			1,981			1,780

Total recoveries		2,500			4,752			5,112			7,014

Net charge-offs—non-covered		10,211			8,241			17,265			14,683
Net charge-offs—covered		3,499			—			19,289			375

Total net charge-offs		13,710			8,241			36,554			15,058

Provision for loan losses before FDIC benefit—covered loans		5,146			18,049			37,025			28,948
Benefit attributable to FDIC loss share agreement		(4,116	)		(17,148	)		(34,401	)		(27,502	)
Provision for loan losses non-covered loans		6,995			8,243			15,416			16,520

Provision for loan losses, net (a)		8,025			9,144			18,040			17,966
Increase in indemnification asset (a)		4,116			17,148			34,401			27,502

Balance of allowance for loan losses at end of period	$	140,768		$	112,407		$	140,768		$	112,407


	Three Months Ended June 30,						Three Months Ended June 30,
	2012			2011			2012			2011
Ratios:
Non-covered:
Gross charge-offs—non-covered to average loans		0.46	%		0.78	%		0.40	%		0.76	%
Recoveries—non-covered to average loans		0.09	%		0.29	%		0.09	%		0.24	%
Net charge-offs—non-covered to average loans		0.37	%		0.49	%		0.31	%		0.51	%
Allowance for loan losses—non-covered to period-end net loans		0.73	%		0.74	%		0.73	%		0.74	%

The following table sets forth non-performing assets by type for the periods indicated, consisting of non-accrual loans, troubled debt restructurings and other real estate owned (ORE) and foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.


	June 30,			December 31,
	2012			2011
	(In thousands)
Loans accounted for on a non-accrual basis:
Commercial loans	$	94,662		$	69,113
Commercial loans—restructured		9,095			4,142

Total commercial loans		103,757			73,255

Residential mortgage loans		12,021			25,043
Residential mortgage loans—restructured		607			—

Total residential mortgage loans		12,628			25,043

Consumer loans		6,701			4,972

Total non-accrual loans		123,086			103,270

Restructured loans:
Commercial loans—non-accrual		9,095			4,142
Residential mortgage loans—non-accrual		607			—

Total restructured loans—non-accrual		9,702			4,142

Commercial loans—still accruing		9,254			12,812
Residential mortgage loans—still accruing		562			1,191

Total restructured loans—still accruing		9,816			14,003

Total restructured loans		19,518			18,145

ORE and foreclosed assets		138,118			159,751

Total non-performing assets*	$	271,020		$	277,024

Loans 90 days past due still accruing	$	1,443		$	5,880

Ratios
Non-performing assets to loans plus foreclosed assets		2.43	%		2.44	%
Allowance for loan losses to non-performing loans and accruing loans 90 days past due		104.78	%		101.00	%
Loans 90 days past due still accruing to loans		0.01	%		0.05	%

*	Includes total non-accrual loans, total restructured loans—still accruing and ORE and foreclosed assets.

Non-performing assets (NPAs) totaled $271.0 million at June 30, 2012, compared to $277.0 million at year-end 2011. Non-performing assets as a percent of total loans and ORE and foreclosed assets was 2.42% at June 30, 2012, compared to 2.44% at December 31, 2011. The overall decrease in NPAs mainly reflects the movement to non-accrual status of a few legacy Hancock credits, primarily commercial real estate-related credits located in Louisiana, that were previously categorized as potential problems. The increase also includes certain Whitney acquired performing loans that have moved to non-accrual. Non-performing loans exclude loans from Whitney’s and Peoples First’s acquired credit-impaired loan portfolios that were recorded at estimated fair value at acquisition and are accreting interest income. ORE and foreclosed assets decreased a net $21.6 million in the first six months of 2012, reflecting in part some significant sales of legacy Whitney properties.

Additional asset quality metrics for the acquired (Whitney), covered (Peoples First) and legacy (Hancock legacy plus Whitney non-acquired loans) portfolios are included in Selected Financial Data.

Short-Term Investments

Short-term liquidity investments, including interest-bearing bank deposits and Federal funds sold, declined $534 million from December 31, 2011 to a total of $650 million at June 30, 2012. Average short-term investments were down $119 million, or 14%, from the first quarter of 2012. During the first half of 2012, the Company’s has used its excess liquidity mainly to fund reductions in deposits and short-term borrowings as discussed below.

Deposits

Total deposits were $14.9 billion at June 30, 2012, down $502 million, or 3%, from March 31, 2012, and $783 million, or 5%, from December 31, 2011. Average deposits were down approximately 1% compared to the first quarter of 2012.

Noninterest-bearing demand deposits (DDAs) totaled $5.0 billion at June 30, 2012, a decrease of $202 million, or 4%, compared to March 31, 2012, and $476 million, or 9%, from December 31, 2011. Interest-bearing transaction and savings deposits totaled $5.9 billion at June 30, 2012, down $119 million from March 31, 2012, but up $274 million, or 5%, from year-end 2011. Approximately $240 million of DDAs were converted to low-cost interest-bearing deposits during the core systems conversion in March 2012 in order to best match the existing product benefits offered. The redeployment of temporary excess liquidity in a few customer relationships accounted for approximately half of the declines in DDAs and interest-bearing transaction and savings deposits during the second quarter of 2012. Noninterest-bearing demand deposits comprised 34% of total period-end deposits at both June 30, 2012 and March 31, 2012, compared to 35% at year-end 2011.

Interest-bearing public fund deposits totaled $1.5 billion at June 30, 2012, down $64 million, or 4%, from March 31, 2012, reflecting the seasonal nature of these deposits.

Time deposits (CDs) totaled $2.5 billion at June 30, 2012, down $116 million compared to $2.6 billion at March 31, 2012. During the second quarter, approximately $745 million of time deposits matured at an average rate of 1.09%, of which approximately 70% renewed at an average cost of 0.48%. The $1 billion of CDs that will mature by the end of the year carry an average rate approaching the renewal rate, so the opportunity to reprice CDs at significantly lower rates over the near term has diminished.

Borrowings

Total borrowings at June 30, 2012 were $1.2 billion, virtually unchanged from March 31, 2012 and down $188 million from December 31, 2011. Short-term borrowings, which come mainly from customer repurchase agreements, declined $212 million from year-end 2011 to a total of $833 million at June 30, 2012, with substantially all of the decrease coming in the first quarter of 2012. Additional funds were available to certain corporate customers at the end of 2011 reflecting temporary inflows from both year-end funds management activities and specific transactions. There was no significant change in long-term debt during the period.

On June 18, 2012, the Company announced that Whitney Bank had commenced a tender offer to repurchase up to 50% of the $150 million in outstanding subordinated debt that had been assumed in the Whitney acquisition. The 5.875% subordinated notes which mature in 2017 had been issued by Whitney National Bank in 2007. These notes qualify as capital in the calculation of certain regulatory capital ratios, but the qualified amount is being reduced by 20% per year starting in the second quarter of 2012 through maturity. As of the expiration date of the offer on July 16, 2012, approximately $52 million of the subordinated notes was tendered and accepted at a premium of $5.2 million. The transaction will be settled and reported in the Company’s third quarter 2012 financial statements. By using its excess liquidity to repurchase this outstanding debt, the Company will lower its overall funding costs by approximately $3 million annually.

OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

In the normal course of business, the Banks enter into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of their customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Banks to varying degrees of credit risk and interest rate risk in much the same way as funded loans.

Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development of construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.

A substantial majority of the letters of credit are standby agreements that obligate the Banks to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Banks issue standby letters of credit primarily to provide credit enhancement to their customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services. The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Banks undertake the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support.

The following table shows the commitments to extend credit and letters of credit at June 30, 2012 according to expiration date. Of the commitments to extend credit, approximately $618.7 million carry variable rates and the remainder fixed rates.


					Expiration Date
			Less than		1-3		3-5		More than
	Total		1 year		years		years		5 years
					(In thousands)
Commitments to extend credit	$	3,729,486	$	2,289,148	$	491,703	$	535,833	$	412,802
Letters of credit		442,510		296,999		100,334		45,086		91

Total	$	4,171,996	$	2,586,147	$	592,037	$	580,919	$	412,893

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry which requires management to make estimates and assumptions about future events. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 12 to our Condensed Consolidated Financial Statements included elsewhere in this report.

SEGMENT REPORTING

Note 11 to the consolidated financial statements provides information about the Company’s operating segments and presents comparative financial information for the operating segments for the three and six months ended June 30, 2012 and June 30, 2011. Excluding tax-effected merger-related expenses, net income for the Whitney segment in the second quarter of 2012 totaled approximately $30 million or an increase of over $15 million from the second quarter of 2011. Net income in the second quarter of 2012 for the Hancock segment, also excluding tax-effected merger-related expenses, totaled approximately $15 million, was up almost $40.8 million to $12.3 million compared to the second quarter of 2011. A portion of the operations from the Whitney merger, primarily those in Florida and Alabama, were transferred to the Hancock segment coincident with the completion of the conversion of Whitney’s core systems in mid-March 2012. The increase in net interest income for the Hancock segment resulting from the transfer of operations from Whitney Bank were mostly offset by increases in the provision, depreciation and amortization, and other noninterest expense, as well as a decrease in the amount of accretion of the indemnification assets

FORWARD LOOKING STATEMENTS

This Form 10-Q 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 loan growth, deposit trends, credit quality trends, net interest margin trends, future expense levels (including merger costs and cost synergies), projected tax rates, economic conditions in our markets, future profitability, purchase accounting impacts such as accretion levels, and the financial impact of regulatory requirements such as the Durbin amendment. Hancock’s ability to accurately project results or predict the effects of future plans or strategies 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our net income is materially dependent on our net interest income. Hancock’s primary market risk is interest rate risk that stems from uncertainty with respect to absolute and relative levels of future market interest rates that affect our financial products and services. In an attempt to manage our exposure to interest rate risk, management measures the sensitivity of our net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to produce a relatively stable net interest margin under varying rate environments.

Hancock measures its interest rate sensitivity primarily by running net interest income simulations. The model measures annual net interest income sensitivity relative to a base case scenario and incorporates assumptions regarding balance sheet growth and the mix of earning assets and funding sources as well as pricing, re-pricing and maturity characteristics of the existing and projected balance sheet. The table below presents the results of simulations run as of June 30, 2012 assuming the indicated instantaneous and sustained parallel shift in the yield curve at the measurement date. These results indicate that we are slightly asset sensitive as compared to the stable rate environment assumed for the base case.


Net Interest Income (te) at Risk
Change in interest rate (basis point)	Estimated increase (decrease) in net interest income
Stable		0.00	%
+100		2.03	%
+200		5.20	%
+300		8.71	%

Note: Decrease in interest rates discontinued in the current rate environment

The foregoing disclosures related to our market risk should be read in conjunction with our audited consolidated financial statements, related notes and management’s discussion and analysis for the year ended December 31, 2011 included in our 2011 Annual Report on Form 10-K.

Item 4. Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officers and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to timely alert them to material information relating to us (including our consolidated subsidiaries) required to be included in our Exchange Act filings.

Other than changes required in connection with the ongoing integration of Whitney and Hancock operations, our management, including the Chief Executive Officers and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended June 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As previously reported, the putative class action lawsuit, Angelique LaCour, et al. v. Whitney Bank , is subject to a pending settlement agreement. The Court granted preliminary certification of the defined class and approval of the proposed settlement on June 4, 2012. Notices have been mailed to the identified class members. The Company had established a liability for the proposed settlement in the fourth quarter of 2011 and that reserve ($6.8 million) has been provided to the Settlement Administrator to establish the escrow account for the pending proposed settlement.

The Company is party to various other legal proceedings arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, each matter is not expected to have a material adverse effect on the financial statements of the Company.

Item 1A. Risk Factors

An interruption or breach in our information systems or infrastructure, or those of third parties, could disrupt our business, result in the unauthorized disclosure of confidential information, damage our reputation and cause financial losses.

Our business is dependent on our ability to process and monitor a large number of transactions on a daily basis and to securely process, store and transmit confidential and other information on our computer systems and networks. We rely heavily on our information and communications systems and those of third parties who provide critical components of our information and communications infrastructure. These systems are critical to the operation of our business and essential to our ability to perform day-to-day operations. Our financial, accounting, data processing or other information systems and facilities, or those of third parties on whom we rely, may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control, such as a spike in transaction volume, cyber attack or other unforeseen catastrophic events, which may adversely affect our ability to process transactions or provide services.

Although we make continuous efforts to maintain the security and integrity of our information systems and have not experienced a cyber attack, threats to information systems continue to evolve and there can be no assurance that our security efforts and measures will continue to be effective. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Threats to our information systems may originate externally from third parties such as foreign governments, organized crime and other hackers, outsource or infrastructure-support providers and application developers, or may originate internally. As a financial institution, we face a heightened risk of a security breach or disruption from attempts to gain unauthorized access to our and our customers’ data and financial information, whether through cyber attack, cyber intrusion over the internet, malware, computer viruses, attachments to e-mails, spoofing, phishing, or spyware.

As a result, our information, communications and related systems, software and networks may be vulnerable to breaches or other significant disruptions that could: (1) disrupt the proper functioning of our networks and systems, which could disrupt our operations and those of certain of our customers; (2) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers, including account numbers and other financial information; (3) result in a violation of applicable privacy and other laws, subjecting the Bank to additional regulatory scrutiny and expose the Bank to civil litigation and possible financial liability; (4) require significant management attention and resources to remedy the damages that result; and (5) harm our reputation or impair our customer relationships. The occurrence of such failures, disruptions or security breaches could have a negative impact on our results of operations, financial condition, and cash flows. To date we have not experienced an attack that has impacted the results of our operations, financial condition, and cash flows.

A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity, disrupt our businesses, result in the unauthorized disclosure of confidential information, damage our reputation and cause financial losses.

Our ability to adequately conduct and grow our business and manage its risks is dependent on our ability to create and maintain an appropriate operational and organizational control infrastructure. Operational risk can arise in numerous ways including employee fraud, customer fraud, and control lapses in bank operations and information technology. Our dependence on our employees and automated systems, including the automated systems used by acquired entities and third parties, to record and process transactions, and monitor our loan and securities portfolios, may further increase the risk that technical failures of, or tampering with, those systems will result in operational or systemic disruption that could be challenging to remediate or losses that are difficult to detect. We are also subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control such as hurricanes and other natural events. Failure to maintain an appropriate operational infrastructure can lead to loss of service to customers, legal actions, and noncompliance with various laws and regulations.

We continuously monitor our operational and technological capabilities and make modifications and improvements when we believe it will be cost effective to do so. In some instances, we may build and maintain these capabilities ourselves. We also outsource some of these functions to third parties. These third parties may experience errors or disruptions that could adversely impact us and over which we may have no or only limited control. We also face risk from the integration of new infrastructure platforms and/or new third party providers of such platforms into our existing businesses.

There have been no other material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2011. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities for the six months ended June 30, 2012.

Item 6. Exhibits .

(a)

Exhibits:


Exhibit Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		XBRL Interactive Data.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Hancock Holding Company

By:		/s/ Carl J. Chaney
		Carl J. Chaney President & Chief Executive Officer

		/s/ John M. Hairston
		John M. Hairston
		Chief Executive Officer & Chief Operating Officer

		/s/ Michael M. Achary
		Michael M. Achary
		Chief Financial Officer

Date:		August 8, 2012

Index to Exhibits


Exhibit Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		XBRL Interactive Data.

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 6. Exhibits

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company