HANCOCK WHITNEY CORP - FORM 10-Q

HANCOCK WHITNEY CORP - FORM 10-Q - May 8, 2015

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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 March 31, 2015

¨	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. 77,891,909 common shares were outstanding as of May 1, 2015.

Hancock Holding Company

Index


		Page Number

Part I. Financial Information

ITEM 1.	Financial Statements

	Consolidated Balance Sheets — March 31, 2015 (unaudited) and December 31, 2014		1

	Consolidated Statements of Income (unaudited) — Three months ended March 31, 2015 and 2014		2

	Consolidated Statements of Comprehensive Income (unaudited) — Three months ended March 31, 2015 and 2014		3

	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) — Three months ended March 31, 2015 and 2014		4

	Consolidated Statements of Cash Flows (unaudited) — Three months ended March 31, 2015 and 2014		5

	Notes to Consolidated Financial Statements (unaudited) — March 31, 2015		6-48

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		49-72

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		72

ITEM 4.	Controls and Procedures		73

Part II. Other Information

ITEM 1.	Legal Proceedings		73

ITEM 1A.	Risk Factors		73

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		74

ITEM 3.	Default on Senior Securities		N/A

ITEM 4.	Mine Safety Disclosures		N/A

ITEM 5.	Other Information		N/A

ITEM 6	Exhibits		74

Signatures			76

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries

Consolidated Balance Sheets


(in thousands, except share data)	March 31 2015			December 31 2014
ASSETS		unaudited
Cash and due from banks	$	333,736		$	356,455
Interest-bearing bank deposits		515,025			801,576
Federal funds sold		772			1,372
Securities available for sale, at fair value (amortized cost of $1,792,947 and $1,631,761)		1,825,608			1,660,165
Securities held to maturity (fair value of $2,316,118 and $2,186,340)		2,282,296			2,166,289
Loans held for sale		19,950			20,252
Loans		13,924,386			13,895,276
Less: allowance for loan losses		(128,386	)		(128,762	)

Loans, net		13,796,000			13,766,514

Property and equipment, net of accumulated depreciation of $200,424 and $193,527		399,762			398,384
Prepaid expenses		28,221			28,277
Other real estate, net		41,701			58,415
Accrued interest receivable		48,473			47,501
Goodwill		621,193			621,193
Other intangible assets, net		125,404			132,810
Life insurance contracts		429,412			426,617
FDIC loss share receivable		49,897			60,272
Deferred tax asset, net		69,495			74,335
Other assets		137,566			126,839

Total assets	$	20,724,511		$	20,747,266

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	6,201,403		$	5,945,208
Interest-bearing		10,659,082			10,627,623

Total deposits		16,860,485			16,572,831

Short-term borrowings		755,250			1,151,573
Long-term debt		516,007			374,371
Accrued interest payable		6,609			4,204
Other liabilities		161,062			171,885

Total liabilities		18,299,413			18,274,864

Stockholders’ equity
Common stock — $3.33 par value per share; 350,000,000 shares authorized, 77,886,120 and 80,426,485 shares outstanding		259,361			267,820
Capital surplus		1,701,377			1,689,291
Treasury shares at cost — 8,917,814 and 7,053,028, respectively		(234,002	)		(158,131	)
Retained earnings		744,131			723,496
Accumulated other comprehensive (loss), net		(45,769	)		(50,074	)

Total stockholders’ equity		2,425,098			2,472,402

Total liabilities and stockholders’ equity	$	20,724,511		$	20,747,266

See notes to consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Income

(Unaudited)


	Three Months Ended March 31,
(in thousands, except per share data)	2015			2014
Interest income:
Loans, including fees	$	146,967		$	150,982
Loans held for sale		96			195
Securities-taxable		20,790			22,708
Securities-tax exempt		880			1,027
Federal funds sold and other short term investments		354			228

Total interest income		169,087			175,140


Interest expense:
Deposits		7,126			5,352
Short-term borrowings		172			1,049
Long-term debt and other interest expense		3,631			3,177

Total interest expense		10,929			9,578

Net interest income		158,158			165,562
Provision for loan losses		6,154			7,963

Net interest income after provision for loan losses		152,004			157,599


Noninterest income:
Service charges on deposit accounts		17,315			18,712
Trust fees		11,200			10,238
Bank card and ATM fees		11,183			10,569
Investment and annuity fees		5,050			4,952
Secondary mortgage market operations		2,664			1,965
Insurance commissions and fees		1,754			3,744
Amortization of FDIC loss share receivable		(1,197	)		(3,908	)
Other income		8,244			10,427
Securities transactions gains, net		333			—

Total noninterest income		56,546			56,699


Noninterest expense:
Compensation expense		65,017			67,165
Employee benefits		15,634			14,267

Personnel expense		80,651			81,432

Net occupancy expense		11,177			11,266
Equipment expense		3,935			4,274
Data processing expense		13,556			12,419
Professional services expense		15,370			6,409
Amortization of intangibles		6,318			7,038
Telecommunications and postage		3,651			3,583
Deposit insurance and regulatory fees		3,595			2,967
Other real estate expense, net		456			1,777
Other expense		14,806			15,817

Total noninterest expense		153,515			146,982


Income before income taxes		55,035			67,316
Income taxes		14,876			18,201

Net income	$	40,159		$	49,115

Basic earnings per common share	$	0.49		$	0.58

Diluted earnings per common share	$	0.49		$	0.58

Dividends paid per share	$	0.24		$	0.24

Weighted average shares outstanding-basic		79,496			82,277

Weighted average shares outstanding-diluted		79,661			82,534

See notes to unaudited consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2015		2014
Net income	$	40,159	$	49,115
Other comprehensive income:
Net change in unrealized gains		5,413		4,514
Reclassification adjustment for net losses realized and included in earnings		605		53
Amortization of unrealized net gain on securities transferred to held to maturity		647		665

Other comprehensive income, before income taxes		6,665		5,232
Income tax expense		2,360		1,842

Other comprehensive income net of income taxes		4,305		3,390

Comprehensive income	$	44,464	$	52,505

See notes to unaudited consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


(in thousands, except share data)	Common Stock						Capital Surplus		Retained Earnings			Accumulated Other Comprehensive Income (Loss), net			Treasury Stock			Total
(in thousands, except share data)	Shares			Amount			Capital Surplus		Retained Earnings						Treasury Stock			Total
Balance, January 1, 2014		82,237,162		$	273,850		$	1,647,467	$	628,166		$	(35,379	)	$	(89,035	)	$	2,425,069

Net income		—			—			—		49,115			—			—			49,115
Other comprehensive income		—			—			—		—			3,390			—			3,390

Comprehensive income		—			—			—		49,115			3,390			—			52,505
Cash dividends declared ($0.24 per common share)		—			—			—		(20,219	)		—			—			(20,219	)
Common stock activity, long-term incentive plan		44,895			149			4,294		—			—			736			5,179

Balance, March 31, 2014		82,282,057		$	273,999		$	1,651,761	$	657,062		$	(31,989	)	$	(88,299	)	$	2,462,534


Balance, January 1, 2015		80,426,485		$	267,820		$	1,689,291	$	723,496		$	(50,074	)	$	(158,131	)	$	2,472,402

Net income		—			—			—		40,159			—			—			40,159
Other comprehensive income		—			—			—		—			4,305			—			4,305

Comprehensive income		—			—			—		40,159			4,305			—			44,464
Cash dividends declared ($0.24 per common share)		—			—			—		(19,524	)		—			—			(19,524	)
Common stock activity, long-term incentive plan		23,242			78			12,086		—			—			(9,138	)		3,026
Purchase of common stock under stock buyback program		(2,563,607	)		(8,537	)		—		—			—			(66,733	)		(75,270	)

Balance, March 31, 2015		77,886,120		$	259,361		$	1,701,377	$	744,131		$	(45,769	)	$	(234,002	)	$	2,425,098

See notes to unaudited consolidated financial statements.

Hancock Holding Company and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	40,159		$	49,115
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,218			7,899
Provision for loan losses		6,154			7,963
(Gain) loss on other real estate owned		(248	)		1,388
Deferred tax expense		9,252			13,182
Increase in cash surrender value of life insurance contracts		(2,596	)		(2,282	)
Gain on disposal of other assets		(7	)		(1,682	)
Net decrease in loans held for sale		356			9,264
Net amortization of securities premium/discount		4,223			4,236
Amortization of intangible assets		6,318			7,038
Amortization of FDIC indemnification asset		1,197			3,908
Stock-based compensation expense		3,071			3,832
Decrease in interest payable and other liabilities		(8,577	)		(7,814	)
Net payments from FDIC for loss share claims		7,580			—
Increase in FDIC loss share receivable		(1,188	)		(1,414	)
(Increase) decrease in other assets		(6,657	)		6,545
Other, net		(949	)		1,947

Net cash provided by operating activities		65,306			103,125


CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities		9,221			1,301
Proceeds from maturities of securities available for sale		468,358			76,221
Purchases of securities available for sale		(638,861	)		(24,703	)
Proceeds from maturities of securities held to maturity		88,381			183,363
Purchases of securities held to maturity		(207,849	)		—
Net decrease (increase) in interest-bearing bank deposits		286,551			(12,086	)
Net decrease in federal funds sold and short-term investments		600			553
Net increase in loans		(36,137	)		(217,289	)
Purchases of property and equipment		(8,609	)		(6,111	)
Proceeds from sales of property and equipment		—			6,562
Proceeds from sales of other real estate		21,969			11,348
Other, net		(4,582	)		758

Net cash (used in) provided by investing activities		(20,958	)		19,917


CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		287,654			(85,742	)
Net (decrease) increase in short-term borrowings		(396,323	)		54,674
Repayments of long-term debt		(8,800	)		(8,955	)
Net proceeds from issuance of long-term debt		145,196			3,130
Dividends paid		(19,524	)		(20,219	)
Purchase of common stock under stock buyback program		(75,270	)		—
Proceeds from exercise of stock options		—			654

Net cash used in financing activities		(67,067	)		(56,458	)

NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS		(22,719	)		66,584
CASH AND DUE FROM BANKS, BEGINNING		356,455			348,440

CASH AND DUE FROM BANKS, ENDING	$	333,736		$	415,024


SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans	$	4,161		$	6,337

See notes to unaudited 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 other entities in which it has a controlling interest (the “Company”). The financial statements 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 accounting principles generally accepted in the U.S. (“GAAP”) 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 Annual Report on Form 10-K for the year ended December 31, 2014. 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 period.

Use of Estimates

The accounting principles the Company follows and the methods for applying these principles conform with GAAP and with those generally practiced within 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 from those estimates.

Critical Accounting Policies and Estimates

There were no material changes or developments with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

2. Securities

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


Securities Available for Sale
(in thousands)	March 31, 2015								December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
US Treasury and government agency securities	$	100,182	$	—	$	766	$	99,416	$	300,207	$	372	$	71	$	300,508
Municipal obligations		12,734		231		—		12,965		13,995		186		5		14,176
Mortgage-backed securities		1,441,474		35,262		1,947		1,474,789		1,217,293		31,094		2,823		1,245,564
CMOs		232,545		378		811		232,112		88,093		—		1,229		86,864
Corporate debt securities		3,500		—		—		3,500		3,500		—		—		3,500
Equity securities		2,512		322		8		2,826		8,673		891		11		9,553

	$	1,792,947	$	36,193	$	3,532	$	1,825,608	$	1,631,761	$	32,543	$	4,139	$	1,660,165


Securities Held to Maturity
(in thousands)	March 31, 2015								December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losse		Fair Value
US Treasury and government agency securities	$	200,000	$	99	$	149		199,950	$	—	$	—	$	—	$	—
Municipal obligations		183,206		4,003		634		186,575		180,615		3,416		1,144		182,887
Mortgage-backed securities		873,729		28,061		—		901,790		899,923		23,897		162		923,658
CMOs		1,025,361		8,443		6,001		1,027,803		1,085,751		5,590		11,546		1,079,795

	$	2,282,296	$	40,606	$	6,784	$	2,316,118	$	2,166,289	$	32,903	$	12,852	$	2,186,340

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

2. Securities (continued)

The following table presents the amortized cost and fair value of debt securities at March 31, 2015 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and CMOs.


(in thousands)	Amortized Cost		Fair Value
Debt Securities Available for Sale	Amortized Cost		Fair Value
Due in one year or less	$	105,262	$	104,516
Due after one year through five years		136,962		138,138
Due after five years through ten years		232,151		240,235
Due after ten years		1,316,060		1,339,893

Total available for sale debt securities	$	1,790,435	$	1,822,782


	Amortized Cost		Fair Value
Debt Securities Held to Maturity	Amortized Cost		Fair Value
Due in one year or less	$	425,253	$	427,208
Due after one year through five years		387,765		386,448
Due after five years through ten years		108,198		108,110
Due after ten years		1,361,080		1,394,352

Total held to maturity securities	$	2,282,296	$	2,316,118

The Company held no securities classified as trading at March 31, 2015 or December 31, 2014.

The details for securities classified as available for sale with unrealized losses for the periods indicated follow:


March 31, 2015	Losses < 12 months				Losses 12 months or >				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Unrealized Gross Losses
US Treasury and government agency securities	$	99,249	$	765	$	106	$	1	$	99,355	$	766
Mortgage-backed securities		23,484		152		124,102		1,795		147,586		1,947
CMOs		104,199		105		37,979		706		142,178		811
Equity securities		1,848		6		2		2		1,850		8

	$	228,780	$	1,028	$	162,189	$	2,504	$	390,969	$	3,532

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

2. Securities (continued)


December 31, 2014	Losses < 12 months				Losses 12 months or >				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
US Treasury and government agency securities	$	99,950	$	70	$	121	$	1	$	100,071	$	71
Municipal obligations		2,995		5		—		—		2,995		5
Mortgage-backed securities		38,955		163		125,641		2,660		164,596		2,823
CMOs		—		—		86,864		1,229		86,864		1,229
Equity securities		5,998		10		3		1		6,001		11

	$	147,898	$	248	$	212,629	$	3,891	$	360,527	$	4,139

The details for securities classified as held to maturity with unrealized losses for the periods indicated follow:


Held to maturity March 31, 2015	Losses < 12 months				Losses 12 months or >				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
US Treasury and government agency securities	$	99,851	$	149	$	—	$	—	$	99,851	$	149
Municipal obligations		8,757		17		49,110		617		57,867		634
CMOs		84,621		429		387,944		5,572		472,565		6,001

	$	193,229	$	595	$	437,054	$	6,189	$	630,283	$	6,784


Held to maturity December 31, 2014	Losses < 12 months				Losses 12 months or >				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Municipal obligations	$	4,316	$	12	$	58,105	$	1,132	$	62,421	$	1,144
Mortgage-backed securities		—		—		95,522		162		95,522		162
CMOs		119,222		616		540,607		10,930		659,829		11,546

	$	123,538	$	628	$	694,234	$	12,224	$	817,772	$	12,852

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

2. Securities (continued)

The unrealized losses relate to changes in market rates on fixed-rate debt securities since the respective purchase dates. In all cases, the indicated impairment would be recovered no later than 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 meet contractual obligations. The Company believes it has adequate liquidity and, therefore, does not plan to 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 carrying values totaling $3.0 billion at March 31, 2015 and $3.2 billion at December 31, 2014 were pledged as collateral primarily to secure public deposits or securities sold under agreements to repurchase.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses

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


(in thousands)	March 31, 2015		December 31, 2014

Originated loans:
Commercial non-real estate	$	5,861,887	$	5,917,728
Construction and land development		1,087,449		1,073,964
Commercial real estate		2,492,351		2,428,195
Residential mortgages		1,736,033		1,704,770
Consumer		1,742,810		1,685,542

Total originated loans	$	12,920,530	$	12,810,199


Acquired loans:
Commercial non-real estate	$	118,260	$	120,137
Construction and land development		14,579		21,123
Commercial real estate		629,975		688,045
Residential mortgages		2,485		2,378
Consumer		25		985

Total acquired loans	$	765,324	$	832,668


FDIC acquired loans:
Commercial non-real estate	$	6,937	$	6,195
Construction and land development		11,482		11,674
Commercial real estate		27,777		27,808
Residential mortgages		175,367		187,033
Consumer		16,969		19,699

Total FDIC acquired loans	$	238,532	$	252,409


Total loans:
Commercial non-real estate	$	5,987,084	$	6,044,060
Construction and land development		1,113,510		1,106,761
Commercial real estate		3,150,103		3,144,048
Residential mortgages		1,913,885		1,894,181
Consumer		1,759,804		1,706,226

Total loans	$	13,924,386	$	13,895,276

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

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

Originated loans

Loans reported as “originated” include both loans originated for investment and acquired-performing loans where the discount (premium) has been fully accreted (amortized). Originated loans are reported at the principal balance outstanding, net of unearned income. Interest on loans and accretion of unearned income, including deferred loan fees, 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 an originated loan 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. When accrual of interest is discontinued on a loan, all unpaid accrued interest is reversed and payments subsequently received are applied first to recover principal. Interest income is recognized for payments received after contractual principal has been satisfied. Loans are returned to accrual status when all the principal and interest contractually due are brought current and future payment performance is reasonably assured.

Acquired loans

Loans reported as “acquired” are those loans that were purchased in the 2011 Whitney Holding Corporation acquisition. These loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The Whitney acquired loans were segregated between those considered to be performing (“acquired-performing”) and those with evidence of credit deterioration (“acquired-impaired”) based on such factors as past due status, nonaccrual status and credit risk ratings (rated substandard or worse). The acquired loans were further segregated into loan pools designed to facilitate the development of expected cash flows to be used in estimating fair value to facilitate purchase accounting. Acquired-performing loans are accounted for under ASC 310-20 and acquired-impaired loans are accounted for under ASC 310-30.

Acquired-performing loans were segregated into pools based on common risk characteristics such as loan type, credit risk ratings, and contractual interest rate and repayment terms. The major loan types included commercial and industrial loans not secured by real estate, real estate construction and land development loans, commercial real estate loans, residential mortgage loans, and consumer loans, with further segregation within certain loan types as needed. Expected cash flows, both principal and interest, from each pool were estimated based on key assumptions covering such factors as prepayments, default rates, and severity of loss given a default. These assumptions were developed using both historical experience and the portfolio characteristics at acquisition as well as available market research. The fair value estimate for each acquired-performing pool was based on the estimate of expected cash flows from the pool discounted at prevailing market rates.

The difference at the acquisition date between the fair value and the contractual amounts due of an acquired-performing loan pool (the “fair value discount”) is accreted into income over the estimated life of the pool. Acquired-performing loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The acquired-impaired loans were segregated into pools by identifying loans with common credit risk profiles and were based primarily on characteristics such as loan type and market area in which originated. The major loan types included commercial and industrial loans not secured by real estate, real estate construction and land development loans, commercial real estate loans, and residential mortgage loans, with further segregation within certain loan types as needed. The acquired-impaired loans were further disaggregated by geographic region in recognition of the differences in general economic conditions affecting borrowers in certain states. The fair value estimate for each pool of acquired-impaired loans was based on the estimate of expected cash flows from the pool discounted at prevailing market rates.

The excess of estimated cash flows expected to be collected from an acquired-impaired loan pool over the pool’s carrying value is referred to as the accretable yield and is recognized in interest income using an effective yield method over the expected life of the loan pool. Each pool of acquired-impaired loans is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Acquired-impaired loans in pools with an accretable yield and expected cash flows that are reasonably estimable are considered to be accruing and performing even though collection of contractual payments on loans within the pool may be in doubt, because the pool is the unit of accounting. Acquired-impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans or troubled debt restructurings even if they would otherwise qualify for such treatment.

FDIC acquired loans and the related loss share receivable

Loans reported as “FDIC acquired” are loans purchased in the 2009 acquisition of Peoples First Community Bank (Peoples First) that were covered by two loss share agreements between the FDIC and the Company. These loans are accounted for as acquired-impaired loans as described above in the section on acquired loans. The Company treated all loans for the Peoples First acquisition as impaired based on the significant amount of deteriorating and nonperforming loans, comprised mainly of adjustable rate mortgages and home equity loans, located in Florida. The loss share receivable is measured separately from the related covered loans as it is not contractually embedded in the loans and is not transferrable should the loans be sold. The fair value of the loss share receivable at acquisition was estimated by discounting expected reimbursements for losses from the loans covered by the loss share agreements, including appropriate consideration of possible true-up payments to the FDIC at the expiration of the agreements.

The loss share receivable is reviewed and updated prospectively as loss estimates related to covered loan pools change. Increases in expected reimbursements under the loss sharing agreement will lead to an increase in the loss share receivable. A decrease in expected reimbursements is reflected first as a reversal of any previously recorded increase in the loss share receivable on the covered loan pool with the remainder reflected as a reduction in the loss share receivable’s accretion rate. Increases and decreases in the loss share receivable related to changes in loss estimates result in reductions in or additions to the provision for loan losses, which serves to offset the impact on the provision from impairments or impairment reversals recognized on the underlying covered loan pool. The excess (or shortfall) of expected claims as compared to the carrying value of the loss share receivable is accreted (amortized) into noninterest income over the shorter of the remaining life of the covered loan pool or the life of the loss share agreement. The impact on operations of a reduction in the loss share receivable’s accretion rate is associated with an increase in the accretable yield on the underlying loan pool. The loss share receivable is reduced as cash is received from the FDIC related to losses incurred on covered assets.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The following schedule shows activity in the loss share receivable for the three months ended March 31, 2015 and 2014:


	Three Months Ended
(in thousands)	March 31, 2015			March 31, 2014
Balance, January 1	$	60,272		$	113,834
Amortization		(1,197	)		(3,908	)
Charge-offs, write-downs and other recoveries		(1,475	)		(452	)
External expenses qualifying under loss share agreement		298			1,848
Changes due to changes in cash flow projections		(421	)		(6,853	)
Net payments from FDIC		(7,580	)		—

Ending balance	$	49,897		$	104,469

The loss share agreement covering the non-single family FDIC acquired portfolio expired in December 2014. The loss share agreement covering the single family portfolio expires in December 2019.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The following schedule shows activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2015 and 2014 as well as the corresponding recorded investment in loans at the end of each period.


(in thousands)	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
	Three Months Ended March 31, 2015
Originated loans
Allowance for loan losses:
Beginning balance	$	50,258		$	5,413		$	16,544		$	8,051		$	17,435		$	97,701
Charge-offs		(1,697	)		(747	)		(251	)		(1,209	)		(3,556	)		(7,460	)
Recoveries		981			1,243			(3	)		305			1,280			3,806
Net provision for loan losses		6,754			(1,500	)		(966	)		738			1,421			6,447

Ending balance	$	56,296		$	4,409		$	15,324		$	7,885		$	16,580		$	100,494

Ending balance:
Individually evaluated for impairment	$	529		$	71		$	147		$	88		$	3		$	838
Collectively evaluated for impairment		55,767			4,338			15,177			7,797			16,577			99,656

Loans:
Ending balance:	$	5,861,887		$	1,087,449		$	2,492,351		$	1,736,033		$	1,742,810		$	12,920,530
Individually evaluated for impairment		14,566			4,381			17,210			2,423			120			38,700
Collectively evaluated for impairment		5,847,321			1,083,068			2,475,141			1,733,610			1,742,690			12,881,830

Acquired loans
Allowance for loan losses:
Beginning balance	$	—		$	—		$	477		$	—		$	—		$	477
Charge-offs		—			—			—			—			—			—
Recoveries		—			—			—			—			—			—
Net provision for loan losses		—			—			(223	)		—			—			(223	)

Ending balance	$	—		$	—		$	254		$	—		$	—		$	254

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	254		$	—		$	—		$	254
Amounts related to acquired-impaired loans		—			—			—			—			—			—
Collectively evaluated for impairment		—			—			—			—			—			—

Loans:
Ending balance:	$	118,260		$	14,579		$	629,975		$	2,485		$	25		$	765,324
Individually evaluated for impairment		—			—			2,579			—			—			2,579
Acquired-impaired loans		8,708			12,801			21,226			2,485			25			45,245
Collectively evaluated for impairment		109,552			1,778			606,170			—			—			717,500

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)


(in thousands)	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
	Three Months Ended March 31, 2015
FDIC acquired loans
Allowance for loan losses:
Beginning balance	$	911		$	1,008		$	4,061		$	20,609		$	3,995		$	30,584
Charge-offs		(127	)		(276	)		(2,368	)		(93	)		(140	)		(3,004	)
Recoveries		14			406			113			—			16			549
Net provision for loan losses		(2	)		(6	)		202			(195	)		(69	)		(70	)
(Decrease) increase in FDIC loss share receivable		(13	)		(34	)		1,207			(1,171	)		(410	)		(421	)

Ending balance	$	783		$	1,098		$	3,215		$	19,150		$	3,392		$	27,638

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—		$	—
Amounts related to acquired-impaired loans		783			1,098			3,215			19,150			3,392			27,638
Collectively evaluated for impairment		—			—			—			—			—			—

Loans:
Ending balance:	$	6,937		$	11,482		$	27,777		$	175,367		$	16,969		$	238,532
Individually evaluated for impairment		—			—			—			—			—			—
Acquired-impaired loans		6,937			11,482			27,777			175,367			16,969			238,532
Collectively evaluated for impairment		—			—			—			—			—			—


Total loans
Allowance for loan losses:
Beginning balance	$	51,169		$	6,421		$	21,082		$	28,660		$	21,430		$	128,762
Charge-offs		(1,824	)		(1,023	)		(2,619	)		(1,302	)		(3,696	)		(10,464	)
Recoveries		995			1,649			110			305			1,296			4,355
Net provision for loan losses		6,752			(1,506	)		(987	)		543			1,352			6,154
(Decrease) increase in FDIC loss share receivable		(13	)		(34	)		1,207			(1,171	)		(410	)		(421	)

Ending balance	$	57,079		$	5,507		$	18,793		$	27,035		$	19,972		$	128,386

Ending balance:
Individually evaluated for impairment	$	529		$	71		$	401		$	88		$	3		$	1,092
Amounts related to acquired-impaired loans		783			1,098			3,215			19,150			3,392			27,638
Collectively evaluated for impairment		55,767			4,338			15,177			7,797			16,577			99,656

Loans:
Ending balance:	$	5,987,084		$	1,113,510		$	3,150,103		$	1,913,885		$	1,759,804		$	13,924,386
Individually evaluated for impairment		14,566			4,381			19,789			2,423			120			41,279
Acquired-impaired loans		15,645			24,283			49,003			177,852			16,994			283,777
Collectively evaluated for impairment		5,956,873			1,084,846			3,081,311			1,733,610			1,742,690			13,599,330

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)


(in thousands)	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
	Three Months Ended March 31, 2014
Originated loans
Allowance for loan losses:
Beginning balance	$	33,091		$	6,180		$	20,649		$	6,892		$	12,073		$	78,885
Charge-offs		(2,386	)		(91	)		(723	)		(241	)		(4,041	)		(7,482	)
Recoveries		826			651			331			94			1,602			3,504
Net provision for loan losses		2,202			(739	)		716			(153	)		2,627			4,653

Ending balance	$	33,733		$	6,001		$	20,973		$	6,592		$	12,261		$	79,560

Ending balance:
Individually evaluated for impairment	$	1,457		$	508		$	189		$	196		$	—		$	2,350
Collectively evaluated for impairment		32,276			5,493			20,784			6,396			12,261			77,210

Loans:
Ending balance:	$	4,353,549		$	824,837		$	2,110,096		$	1,228,170		$	1,407,712		$	9,924,364
Individually evaluated for impairment		9,109			11,064			12,418			2,549			—			35,140
Collectively evaluated for impairment		4,344,440			813,773			2,097,678			1,225,621			1,407,712			9,889,224

Acquired loans
Allowance for loan losses:
Beginning balance	$	1,603		$	10		$	34		$	—		$	—		$	1,647
Charge-offs		—			—			—			—			—			—
Recoveries		—			—			—			—			—			—
Net provision for loan losses		2,396			108			424			496			188			3,612

Ending balance	$	3,999		$	118		$	458		$	496		$	188		$	5,259

Ending balance:
Individually evaluated for impairment	$	88		$	32		$	282		$	—		$	—		$	402
Amounts related to acquired-impaired loans		—			—			—			—			—			—
Collectively evaluated for impairment		3,911			86			176			496			188			4,857

Loans:
Ending balance:	$	830,211		$	134,443		$	907,170		$	293,111		$	107,501		$	2,272,436
Individually evaluated for impairment		1,998			721			2,281			—			—			5,000
Acquired-impaired loans		13,272			17,560			30,018			5,545			102			66,497
Collectively evaluated for impairment		814,941			116,162			874,871			287,566			107,399			2,200,939

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)


(in thousands)	Commercial non-real estate			Construction and land development			Commercial real estate			Residential mortgages			Consumer			Total
	Three Months Ended March 31, 2014
FDIC acquired loans
Allowance for loan losses:
Beginning balance	$	2,323		$	2,655		$	10,929		$	27,989		$	9,198		$	53,094
Charge-offs		(46	)		(458	)		(3,117	)		(308	)		(81	)		(4,010	)
Recoveries		445			857			136			6			56			1,500
Net provision for loan losses		(36	)		(32	)		(22	)		(118	)		(94	)		(302	)
Decrease in FDIC loss share receivable		(809	)		(732	)		(507	)		(2,666	)		(2,139	)		(6,853	)

Ending balance	$	1,877		$	2,290		$	7,419		$	24,903		$	6,940		$	43,429

Ending balance:
Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—		$	—
Amounts related to acquired-impaired loans		1,877			2,290			7,419			24,903			6,940			43,429
Collectively evaluated for impairment		—			—			—			—			—			—

Loans:
Ending balance:	$	14,269		$	19,518		$	52,050		$	199,026		$	46,274		$	331,137
Individually evaluated for impairment		—			—			—			—			—			—
Acquired-impaired loans		14,269			19,518			52,050			199,026			46,274			331,137
Collectively evaluated for impairment		—			—			—			—			—			—


Total loans
Allowance for loan losses:
Beginning balance	$	37,017		$	8,845		$	31,612		$	34,881		$	21,271		$	133,626
Charge-offs		(2,432	)		(549	)		(3,840	)		(549	)		(4,122	)		(11,492	)
Recoveries		1,271			1,508			467			100			1,658			5,004
Net provision for loan losses		4,562			(663	)		1,118			225			2,721			7,963
Decrease in FDIC loss share receivable		(809	)		(732	)		(507	)		(2,666	)		(2,139	)		(6,853	)

Ending balance	$	39,609		$	8,409		$	28,850		$	31,991		$	19,389		$	128,248

Ending balance:
Individually evaluated for impairment	$	1,545		$	540		$	471		$	196		$	—		$	2,752
Amounts related to acquired-impaired loans		1,877			2,290			7,419			24,903			6,940			43,429
Collectively evaluated for impairment		36,187			5,579			20,960			6,892			12,449			82,067

Loans:
Ending balance:	$	5,198,029		$	978,798		$	3,069,316		$	1,720,307		$	1,561,487		$	12,527,937
Individually evaluated for impairment		11,107			11,785			14,699			2,549			—			40,140
Acquired-impaired loans		27,541			37,078			82,068			204,571			46,376			397,634
Collectively evaluated for impairment		5,159,381			929,935			2,972,549			1,513,187			1,515,111			12,090,163

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

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


(in thousands)	March 31, 2015		December 31, 2014
Originated loans:
Commercial non-real estate	$	25,614	$	15,511
Construction and land development		5,255		6,462
Commercial real estate		24,668		22,047
Residential mortgages		22,383		21,702
Consumer		5,492		5,574

Total originated loans	$	83,412	$	71,296

Acquired loans:
Commercial non-real estate	$	—	$	—
Construction and land development		—		—
Commercial real estate		5,820		6,139
Residential mortgages		—		—
Consumer		—		—

Total acquired loans	$	5,820	$	6,139

FDIC acquired loans:
Commercial non-real estate	$	—	$	—
Construction and land development		1,156		1,103
Commercial real estate		433		433
Residential mortgages		—		392
Consumer		—		174

Total FDIC acquired loans	$	1,589	$	2,102

Total loans:
Commercial non-real estate	$	25,614	$	15,511
Construction and land development		6,411		7,565
Commercial real estate		30,921		28,619
Residential mortgages		22,383		22,094
Consumer		5,492		5,748

Total loans	$	90,821	$	79,537

The estimated amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as nonaccrual in the three months ended March 31, 2015 was approximately $0.8 million. Interest actually received and recorded as income on nonaccrual loans during the three months ended March 31, 2015 was approximately $0.3 million.

Nonaccrual loans include loans modified in troubled debt restructurings (“TDRs”) of $5.0 million and $7.0 million at March 31, 2015 and December 31, 2014, respectively. Total TDRs both accruing and nonaccruing were $12.5 million as of March 31, 2015 and $16.0 million at December 31, 2014. 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

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The tables below detail TDRs that were modified during the three months ended March 31, 2015 and March 31, 2014 by portfolio segment. All TDRs are individually evaluated for impairment.


	Three Months Ended
(in thousands)	March 31, 2015						March 31, 2014
Troubled Debt Restructurings:	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Originated loans:
Commercial non-real estate		—	$	—	$	—		—	$	—	$	—
Construction and land development		—		—		—		—		—		—
Commercial real estate		—		—				1		963		918
Residential mortgages		2		68		68		2		773		507
Consumer		1		20		20		—		—		—

Total originated loans		3	$	88	$	88		3	$	1,736	$	1,425

Acquired loans:
Commercial non-real estate		—	$	—	$	—		—	$	—	$	—
Construction and land development		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

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

FDIC acquired loans:
Commercial non-real estate		—	$	—	$	—		—	$	—	$	—
Construction and land development		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

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

Total loans:
Commercial non-real estate		—	$	—	$	—		—	$	—	$	—
Construction and land development		—		—		—		—		—		—
Commercial real estate		—		—		—		1		963		918
Residential mortgages		2		68		68		2		773		507
Consumer		1		20		20		—		—		—

Total loans		3	$	88	$	88		3	$	1,736	$	1,425

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The table below details TDRs that subsequently defaulted within twelve months of modification.


	Three Months Ended
(in thousands)	March 31, 2015				March 31, 2014
Troubled Debt Restructurings:	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Originated loans:
Commercial non-real estate		—	$	—		1	$	926
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total originated loans		—	$	—		1	$	926

Acquired loans:
Commercial non-real estate		—	$	—		—	$	—
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total acquired loans		—	$	—		—	$	—

FDIC acquired loans:
Commercial non-real estate		—	$	—		—	$	—
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total FDIC acquired loans		—	$	—		—	$	—

Total loans:
Commercial non-real estate		—	$	—		1	$	926
Construction and land development		—		—		—		—
Commercial real estate		—		—		—		—
Residential mortgages		—		—		—		—
Consumer		—		—		—		—

Total loans		—	$	—		1	$	926

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

Those loans that are determined to be impaired and have balances of $1 million or more are individually evaluated for impairment. The tables below present loans that are individually evaluated for impairment disaggregated by class at March 31, 2015 and December 31, 2014:


March 31, 2015 (in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

Originated loans:
With no related allowance recorded:
Commercial non-real estate	$	11,389	$	11,893	$	—	$	7,196	$	—
Construction and land development		484		2,045		—		1,915		—
Commercial real estate		10,659		12,598		—		9,563		10
Residential mortgages		1,034		1,435		—		517		1
Consumer		101		101		—		51		—

		23,667		28,072		—		19,242		11
With an allowance recorded:
Commercial non-real estate	$	3,177	$	3,928	$	529	$	2,081		2
Construction and land development		3,897		4,555		71		4,401		32
Commercial real estate		6,551		6,556		147		5,103		17
Residential mortgages		1,389		1,900		88		2,023		11
Consumer		19		19		3		13		2

		15,033		16,958		838		13,621		64
Total:
Commercial non-real estate		14,566		15,821		529	$	9,277		2
Construction and land development		4,381		6,600		71		6,316		32
Commercial real estate		17,210		19,154		147		14,666		27
Residential mortgages		2,423		3,335		88		2,540		12
Consumer		120		120		3		63		2

Total originated loans	$	38,700	$	45,030	$	838	$	32,862	$	75


Acquired loans:
With no related allowance recorded:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	—
Construction and land development		—		—		—		—		—
Commercial real estate		—		—		—		—		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		—		—		—		—		—
With an allowance recorded:
Commercial non-real estate		—		—		—	$	—		—
Construction and land development		—		—		—		—		—
Commercial real estate		2,579		2,602		254		2,635		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		2,579		2,602		254		2,635		—
Total:
Commercial non-real estate		—		—		—	$	—		—
Construction and land development		—		—		—		—		—
Commercial real estate		2,579		2,602		254		2,635		—
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

Total acquired loans	$	2,579	$	2,602	$	254	$	2,635	$	—

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)


March 31, 2015 (in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Total loans:
With no related allowance recorded:
Commercial non-real estate	$	11,389	$	11,893	$	—	$	7,196	$	—
Construction and land development		484		2,045		—		1,915		—
Commercial real estate		10,659		12,598		—		9,563		10
Residential mortgages		1,034		1,435		—		517		1
Consumer		101		101		—		51		—

		23,667		28,072		—		19,242		11
With an allowance recorded:
Commercial non-real estate		3,177		3,928		529	$	2,081		2
Construction and land development		3,897		4,555		71		4,401		32
Commercial real estate		9,130		9,158		401		7,738		17
Residential mortgages		1,389		1,900		88		2,023		11
Consumer		19		19		3		13		2

		17,612		19,560		1,092		16,256		64
Total:
Commercial non-real estate		14,566		15,821		529	$	9,277		2
Construction and land development		4,381		6,600		71		6,316		32
Commercial real estate		19,789		21,756		401		17,301		27
Residential mortgages		2,423		3,335		88		2,540		12
Consumer		120		120		3		63		2

Total loans	$	41,279	$	47,632	$	1,092	$	35,497	$	75

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)


December 31, 2014 (in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Incsme Recsgnized
Originated loans:
With no related allowance recorded:
Commercial non-real estate	$	3,003	$	3,646	$	—	$	1,209	$	51
Construction and land development		3,345		6,486		—		3,330		142
Commercial real estate		8,467		10,575		—		8,461		331
Residential mortgages		—		—		—		88		3
Consumer		—		—		—		—		—

		14,815		20,707		—		13,088		527
With an allowance recorded:
Commercial non-real estate		984		984		14		5,522		99
Construction and land development		4,905		4,906		19		6,660		137
Commercial real estate		3,654		3,654		11		7,500		109
Residential mortgages		2,656		3,311		330		2,204		50
Consumer		6		6		3		1		—

		12,205		12,861		377		21,887		395
Total:
Commercial non-real estate		3,987		4,630		14		6,732		150
Construction and land development		8,250		11,392		19		9,990		279
Commercial real estate		12,121		14,229		11		15,961		439
Residential mortgages		2,656		3,311		330		2,292		53
Consumer		6		6		3		1		—

Total originated loans	$	27,020	$	33,568	$	377	$	34,976	$	921


Acquired loans:
With no related allowance recorded:
Commercial non-real estate	$	—	$	—	$	—	$	357	$	—
Construction and land development		—		—		—		121		—
Commercial real estate		—		—		—		311		—
Residential mortgages		—		—		—		88		—
Consumer		—		—		—		—		—

		—		—		—		877		—
With an allowance recorded:
Commercial non-real estate		—		—		—		1,059		122
Construction and land development		—		—		—		1,037		56
Commercial real estate		2,691		2,720		477		1,357		75
Residential mortgages		—		—		—		—		—
Consumer		—		—		—		—		—

		2,691		2,720		477		3,453		253
Total:
Commercial non-real estate		—		—		—		1,416		122
Construction and land development		—		—		—		1,158		56
Commercial real estate		2,691		2,720		477		1,668		75
Residential mortgages		—		—		—		88		—
Consumer		—		—		—		—		—

Total acquired loans	$	2,691	$	2,720	$	477	$	4,330	$	253

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)


December 31, 2014 (in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Incsme Recsgnized
Total loans:
With no related allowance recorded:
Commercial non-real estate	$	3,003	$	3,646	$	—	$	1,566	$	51
Construction and land development		3,345		6,486		—		3,451		142
Commercial real estate		8,467		10,575		—		8,772		331
Residential mortgages		—		—		—		176		3
Consumer		—		—		—		—		—

		14,815		20,707		—		13,965		527
With an allowance recorded:
Commercial non-real estate		984		984		14		6,581		221
Construction and land development		4,905		4,906		19		7,697		193
Commercial real estate		6,345		6,374		488		8,857		184
Residential mortgages		2,656		3,311		330		2,204		50
Consumer		6		6		3		1		—

		14,896		15,581		854		25,340		648
Total:
Commercial non-real estate		3,987		4,630		14		8,147		272
Construction and land development		8,250		11,392		19		11,148		335
Commercial real estate		14,812		16,949		488		17,629		515
Residential mortgages		2,656		3,311		330		2,380		53
Consumer		6		6		3		1		—

Total loans	$	29,711	$	36,288	$	854	$	39,305	$	1,175

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The following tables present the age analysis of past due loans at March 31, 2015 and December 31, 2014. FDIC acquired and acquired-impaired loans with an accretable yield are considered to be current in the table.


March 31, 2015	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
(in thousands)

Originated loans:
Commercial non-real estate	$	4,969	$	3,498	$	8,692	$	17,159	$	5,844,728	$	5,861,887	$	1,114
Construction and land development		4,014		741		4,777		9,532		1,077,917		1,087,449		768
Commercial real estate		2,456		2,549		15,694		20,699		2,471,652		2,492,351		1,831
Residential mortgages		21,365		2,062		7,072		30,499		1,705,534		1,736,033		1,067
Consumer		11,631		1,994		2,992		16,617		1,726,193		1,742,810		879

Total	$	44,435	$	10,844	$	39,227	$	94,506	$	12,826,024	$	12,920,530	$	5,659


Acquired loans:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	118,260	$	118,260	$	—
Construction and land development		—		—		—		—		14,579		14,579		—
Commercial real estate		564		2,579		2,095		5,238		624,737		629,975		213
Residential mortgages		—		—		—		—		2,485		2,485		—
Consumer		—		—		—		—		25		25		—

Total	$	564	$	2,579	$	2,095	$	5,238	$	760,086	$	765,324	$	213


FDIC acquired loans:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	6,937	$	6,937	$	—
Construction and land development		—		—		1,156		1,156		10,326		11,482		—
Commercial real estate		—		—		433		433		27,344		27,777		—
Residential mortgages		—		—		—		—		175,367		175,367		—
Consumer		—		—		—		—		16,969		16,969		—

Total	$	—	$	—	$	1,589	$	1,589	$	236,943	$	238,532	$	—


Total loans:
Commercial non-real estate	$	4,969	$	3,498	$	8,692	$	17,159	$	5,969,925	$	5,987,084	$	1,114
Construction and land development		4,014		741		5,933		10,688		1,102,822		1,113,510		768
Commercial real estate		3,020		5,128		18,222		26,370		3,123,733		3,150,103		2,044
Residential mortgages		21,365		2,062		7,072		30,499		1,883,386		1,913,885		1,067
Consumer		11,631		1,994		2,992		16,617		1,743,187		1,759,804		879

Total	$	44,999	$	13,423	$	42,911	$	101,333	$	13,823,053	$	13,924,386	$	5,872

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)


December 31, 2014	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
(in thousands)

Originated loans:
Commercial non-real estate	$	4,380	$	1,742	$	8,560	$	14,682	$	5,903,046	$	5,917,728	$	630
Construction and land development		6,620		1,532		4,453		12,605		1,061,359		1,073,964		142
Commercial real estate		6,527		2,964		13,234		22,725		2,405,470		2,428,195		696
Residential mortgages		14,730		3,261		11,208		29,199		1,675,571		1,704,770		1,199
Consumer		8,422		2,450		4,365		15,237		1,670,305		1,685,542		1,897

Total	$	40,679	$	11,949	$	41,820	$	94,448	$	12,715,751	$	12,810,199	$	4,564


Acquired loans:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	120,137	$	120,137	$	—
Construction and land development		111		—		—		111		21,012		21,123		—
Commercial real estate		3,861		282		1,591		5,734		682,311		688,045		261
Residential mortgages		—		—		—		—		2,378		2,378		—
Consumer		—		—		—		—		985		985		—

Total	$	3,972	$	282	$	1,591	$	5,845	$	826,823	$	832,668	$	261


FDIC acquired loans:
Commercial non-real estate	$	—	$	—	$	—	$	—	$	6,195	$	6,195	$	—
Construction and land development		—		—		1,103		1,103		10,571		11,674		—
Commercial real estate		—		—		433		433		27,375		27,808		—
Residential mortgages		—		272		—		272		186,761		187,033		—
Consumer		1		—		34		35		19,664		19,699		—

Total	$	1	$	272	$	1,570	$	1,843	$	250,566	$	252,409	$	—


Total loans:
Commercial non-real estate	$	4,380	$	1,742	$	8,560	$	14,682	$	6,029,378	$	6,044,060	$	630
Construction and land development		6,731		1,532		5,556		13,819		1,092,942		1,106,761		142
Commercial real estate		10,388		3,246		15,258		28,892		3,115,156		3,144,048		957
Residential mortgages		14,730		3,533		11,208		29,471		1,864,710		1,894,181		1,199
Consumer		8,423		2,450		4,399		15,272		1,690,954		1,706,226		1,897

Total	$	44,652	$	12,503	$	44,981	$	102,136	$	13,793,140	$	13,895,276	$	4,825

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The following tables present the credit quality indicators of the Company’s various classes of loans at March 31, 2015 and December 31, 2014.

Commercial Non-Real Estate Credit Exposure

Credit Risk Profile by Internally Assigned Grade


(in thousands)	March 31, 2015								December 31, 2014
	Originated		Acquired		FDIC acquired		Total		Originated		Acquired		FDIC acquired		Total

Grade:
Pass	$	5,438,058	$	109,784	$	2,892	$	5,550,734	$	5,577,827	$	111,847	$	2,027	$	5,691,701
Pass-Watch		235,510		282		995		236,787		174,742		715		1,120		176,577
Special Mention		64,045		367		—		64,412		52,962		350		—		53,312
Substandard		124,219		7,827		3,021		135,067		112,153		7,225		3,017		122,395
Doubtful		40		—		29		69		44		—		31		75
Loss		15		—		—		15		—		—		—		—

Total	$	5,861,887	$	118,260	$	6,937	$	5,987,084	$	5,917,728	$	120,137	$	6,195	$	6,044,060

Construction Credit Exposure

Credit Risk Profile Based on Payment Activity


(in thousands)	March 31, 2015								December 31, 2014
	Originated		Acquired		FDIC acquired		Total		Originated		Acquired		FDIC acquired		Total

Grade:
Pass	$	1,032,054	$	5,225	$	2,750	$	1,040,029	$	1,012,128	$	14,377	$	2,468	$	1,028,973
Pass-Watch		18,493		2,727		534		21,754		21,516		432		532		22,480
Special Mention		9,100		139		315		9,554		7,097		129		319		7,545
Substandard		27,802		6,488		7,883		42,173		33,223		6,185		8,355		47,763

Total	$	1,087,449	$	14,579	$	11,482	$	1,113,510	$	1,073,964	$	21,123	$	11,674	$	1,106,761

Commercial Real Estate Credit Exposure

Credit Risk Profile by Internally Assigned Grade


(in thousands)	March 31, 2015								December 31, 2014
	Originated		Acquired		FDIC acquired		Total		Originated		Acquired		FDIC acquired		Total

Grade:
Pass	$	2,316,577	$	588,942	$	5,869	$	2,911,388	$	2,241,391	$	641,966	$	4,139	$	2,887,496
Pass-Watch		58,743		9,644		2,872		71,259		61,589		11,142		4,547		77,278
Special Mention		14,915		9,531		1,654		26,100		21,543		8,113		1,319		30,975
Substandard		102,097		21,858		17,382		141,337		103,651		26,824		17,803		148,278
Doubtful		19		—		—		19		21		—		—		21

Total	$	2,492,351	$	629,975	$	27,777	$	3,150,103	$	2,428,195	$	688,045	$	27,808	$	3,144,048

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

Residential Mortgage Credit Exposure

Credit Risk Profile Based on Payment Activity and Accrual Status


(in thousands)	March 31, 2015								December 31, 2014
	Originated		Acquired		FDIC acquired		Total		Originated		Acquired		FDIC acquired		Total
Performing	$	1,712,583	$	2,485	$	175,367	$	1,890,435	$	1,681,868	$	2,378	$	186,641	$	1,870,887
Nonperforming		23,450		—		—		23,450		22,902		—		392		23,294

Total	$	1,736,033	$	2,485	$	175,367	$	1,913,885	$	1,704,770	$	2,378	$	187,033	$	1,894,181

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity and Accrual Status


(in thousands)	March 31, 2015								December 31, 2014
	Originated		Acquired		FDIC acquired		Total		Originated		Acquired		FDIC acquired		Total
Performing	$	1,736,438	$	25	$	16,969	$	1,753,432	$	1,678,069	$	985	$	19,525	$	1,698,579
Nonperforming		6,372		—		—		6,372		7,473		—		174		7,647

Total	$	1,742,810	$	25	$	16,969	$	1,759,804	$	1,685,542	$	985	$	19,699	$	1,706,226

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 – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the Classified credit categories and do not expose an institution to sufficient risk to warrant adverse classification.

•

Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

•

Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection nor liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

•

Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified.

Residential and Consumer:

•

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

•

Nonperforming – a nonperforming 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 nonaccrual loans are also classified as nonperforming.

Changes in the carrying amount of acquired-impaired loans and accretable yield are presented in the following table for the three months ended March 31, 2015 and the year ended December 31, 2014:


(in thousands)	March 31, 2015												December 31, 2014
	FDIC acquired						Acquired						FDIC acquired						Acquired
	Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans			Accretable Yield
Balance at beginning of period	$	252,409		$	112,788		$	61,276		$	74,668		$	358,666		$	122,715		$	68,075		$	131,370
Payments received, net		(17,483	)		(371	)		(21,396	)		(9,036	)		(125,388	)		(1,071	)		(50,178	)		(32,855	)
Accretion		3,606			(3,606	)		5,365			(5,365	)		19,131			(19,131	)		43,379			(43,379	)
(Decrease) Increase in expected cash flows based on actual cash flows and changes in cash flow assumptions		—			(1,389	)		—			87			—			(1,137	)		—			(203	)
Net transfers from nonaccretable difference to accretable yield		—			150			—			(2,265	)		—			11,412			—			19,735

Balance at end of period	$	238,532		$	107,572		$	45,245		$	58,089		$	252,409		$	112,788		$	61,276		$	74,668

Included in loans are $10.1 million and $13.7 million of consumer loans secured by single family residential mortgage real estate that are in process of foreclosure as of March 31, 2015 and December 31, 2014, respectively. Of these loans, $6.0 million and $8.1 million, respectively, are covered by an FDIC loss share agreement that provides significant protection against losses. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the company also held $12.4 million and $12.7 million of foreclosed single family residential properties in other real estate owned as of March 31, 2015 and December 31, 2014, respectively. Of these foreclosed properties, $7.1 million and $8.2 million as of March 31, 2015 and December 31, 2014, respectively, are also covered by the FDIC loss share agreement.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note 4. Long-Term Debt

Long-term debt consisted of the following:


(in thousands)	March 31, 2015		December 31, 2014
Subordinated notes payable maturing June 2045	$	150,000	$	—
Subordinated notes payable maturing April 2017		98,011		98,011
Term note payable maturing December 2015		140,800		149,600
Other long-term debt		127,196		126,760

Total long-term debt	$	516,007	$	374,371

On March 9, 2015, the Company completed the issuance of subordinated notes payable with an aggregate principal amount of $150 million. The notes mature on June 15, 2045 and accrue interest at a rate of 5.95% per annum, with quarterly interest payments beginning in June 2015. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part on any interest payment date on or after June 15, 2020. This debt qualifies as Tier 2 capital in the calculation of certain regulatory capital ratios.

The 5.875% fixed-rate subordinated notes maturing April 2017 had been issued by Whitney National Bank and were assumed by Hancock in the Whitney acquisition. As of March 31, 2015, 40% of the balance of these notes qualifies as capital in the calculation of certain regulatory capital ratios. The qualifying amount will be further reduced to 20% in the second quarter of 2015 and will no longer qualify as capital as of April 1, 2016.

On December 21, 2012, the Company entered into a three-year term loan agreement that provides for a $220 million term loan facility, all of which was borrowed on the closing date. The agreement also provides for up to $50 million in additional borrowings under the loan facility, subject to obtaining additional commitments from existing or new lenders and satisfaction of certain other conditions. Amounts borrowed under the loan facility bear interest at a variable rate based on LIBOR plus 1.875% per annum. The loan agreement requires quarterly principal payments of $8.8 million, and outstanding borrowings may be prepaid in whole or in part at any time prior to the December 21, 2015 maturity date without premium or penalty.

The Company and the Bank must satisfy certain financial covenants in the term loan agreement and is subject to other restrictions customary in financings of this nature, none of which is expected to adversely impact the operations of the Company. The financial covenants cover, among other things, the maintenance of minimum levels for regulatory capital ratios, consolidated net worth, consolidated return on assets, and holding company liquidity and dividend capacity, and specify a maximum ratio of consolidated nonperforming assets to consolidated total loans and other real estate, calculated without FDIC acquired assets. The Company was in compliance with all covenants as of March 31, 2015 and December 31, 2014.

Substantially all of the other long-term debt consists of borrowings associated with tax credit fund activities. Although these borrowings have indicated maturities beginning in the second quarter of 2015 through 2052, they are expected to be paid off at the end of their seven-year compliance period.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Fair Value

The Financial Accounting Standards Board (“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 on a recurring basis in the consolidated balance sheets.


	March 31, 2015
(in thousands)	Level 1		Level 2		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	99,416	$	99,416
Municipal obligations		—		12,965		12,965
Corporate debt securities		—		3,500		3,500
Mortgage-backed securities		—		1,474,789		1,474,789
Collateralized mortgage obligations		—		232,112		232,112
Equity securities		2,826		—		2,826

Total available for sale securities		2,826		1,822,782		1,825,608

Derivative assets ⁽¹⁾		—		28,562		28,562

Total recurring fair value measurements - assets	$	2,826	$	1,851,344	$	1,854,170


Liabilities
Derivative liabilities ⁽¹⁾	$	—	$	29,379	$	29,379

Total recurring fair value measurements - liabilities	$	—	$	29,379	$	29,379

(1)	For further disaggregation of derivative assets and liabilities, see Note 6 - Derivatives.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Fair Value (continued)


	December 31, 2014
(in thousands)	Level 1		Level 2		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	300,508	$	300,508
Municipal obligations		—		14,176		14,176
Corporate debt securities		—		3,500		3,500
Mortgage-backed securities		—		1,245,564		1,245,564
Collateralized mortgage obligations		—		86,864		86,864
Equity securities		9,553		—		9,553

Total available for sale securities		9,553		1,650,612		1,660,165

Derivative assets ⁽¹⁾		—		19,432		19,432

Total recurring fair value measurements - assets	$	9,553	$	1,670,044	$	1,679,597


Liabilities
Derivative liabilities ⁽¹⁾	$	—	$	20,860	$	20,860

Total recurring fair value measurements - liabilities	$	—	$	20,860	$	20,860

(1)	For further disaggregation of derivative assets and liabilities, see Note 6 - Derivatives.

Securities classified as level 1 within the valuation hierarchy include U.S. Treasury securities and certain other debt and equity securities. Level 2 classified securities include U.S. Treasury securities, obligations of the U.S. Government-sponsored agencies, 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 are obtained quarterly from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs are 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 and five. Company policies generally limit investments to agency securities and municipal securities determined to be investment grade according to an internally generated score which generally includes a rating of not less than “Baa” or its equivalent by a nationally recognized statistical rating agency. There were no transfers between valuation hierarchy levels during the periods shown.

The fair value of derivative financial instruments, which are predominantly customer interest rate swaps, is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, LIBOR swap curves and Overnight Index swap rate curves, 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 quarterly for all derivative instruments, including those subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Fair Value (continued)

The Company also has certain derivative instruments associated with the Bank’s mortgage-banking activities. These derivative instruments include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis. The fair value of these derivative instruments is measured using observable market prices for similar instruments and is classified as a level 2 measurement.

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 at the fair value of the underlying collateral based on independent third-party appraisals that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.

Other real estate owned, including both foreclosed property and surplus banking property, are level 3 assets that are adjusted to fair value, less estimated selling costs, upon transfer to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales, and marketability of the property.

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


	March 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Collateral-dependent impaired loans	$	—	$	33,818	$	—	$	33,818
Other real estate owned		—		—		18,414		18,414

Total nonrecurring fair value measurements	$	—	$	33,818	$	18,414	$	52,232


	December 31, 2014
(in thousands)	Level 1		Level 2		Level 3		Total
Collateral-dependent impaired loans	$	—	$	30,204	$	—	$	30,204
Other real estate owned		—		—		29,715		29,715

Total nonrecurring fair value measurements	$	—	$	30,204	$	29,715	$	59,919

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.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Fair Value (continued)

Securities – The fair value measurement for securities available for sale was discussed earlier in the note. 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 in the note. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.

Loans Held for Sale – These loans are recorded at fair value and carried at the lower of cost or market. The carrying amount is considered 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, Federal Funds Purchased, and FHLB Borrowings – For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

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 in the note.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Fair Value (continued)

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 March 31, 2015 and December 31, 2014:


	March 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total Fair Value		Carrying Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold	$	849,533	$	—	$	—	$	849,533	$	849,533
Available for sale securities		2,826		1,822,782		—		1,825,608		1,825,608
Held to maturity securities		—		2,316,118		—		2,316,118		2,282,296
Loans, net		—		33,818		13,833,218		13,867,036		13,796,000
Loans held for sale		—		19,950		—		19,950		19,950
Derivative financial instruments		—		28,562		—		28,562		28,562

Financial liabilities:
Deposits	$	—	$	—	$	16,430,295	$	16,430,295	$	16,860,485
Federal funds purchased		11,175		—		—		11,175		11,175
Securities sold under agreements to repurchase		544,075		—		—		544,075		544,075
FHLB borrowings		200,000		—		—		200,000		200,000
Long-term debt		—		508,095		—		508,095		516,007
Derivative financial instruments		—		29,379		—		29,379		29,379

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

5. Fair Value (continued)


	December 31, 2014
(in thousands)	Level 1		Level 2		Level 3		Total Fair Value		Carrying Amount
Financial assets:
Cash, interest-bearing bankdeposits, and federal funds sold	$	1,159,403	$	—	$	—	$	1,159,403	$	1,159,403
Available for sale securities		9,553		1,650,612		—		1,660,165		1,660,165
Held to maturity securities		—		2,186,340		—		2,186,340		2,166,289
Loans, net		—		30,204		13,672,427		13,702,631		13,766,514
Loans held for sale		—		20,252		—		20,252		20,252
Derivative financial instruments		—		19,432		—		19,432		19,432

Financial liabilities:
Deposits	$	—	$	—	$	16,398,878	$	16,398,878	$	16,572,831
Federal funds purchased		12,000		—		—		12,000		12,000
Securities sold under agreements to repurchase		624,573		—		—		624,573		624,573
FHLB borrowings		515,000		—		—		—		515,000
Long-term debt		—		346,379		—		346,379		374,371
Derivative financial instruments		—		20,860		—		20,860		20,860

6. 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 Bank has also entered into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize their net risk exposure resulting from such agreements. The Bank also enters into risk participation agreements under which they may either sell or buy credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

6. Derivatives (continued)

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the notional amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2015 and December 31, 2014.


						Fair Values (1)
	Type of Hedge	Notional Amounts				Assets				Liabilities
(in thousands)	Type of Hedge	March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014
Derivatives designated as hedging instruments:
Interest rate swaps	Cash Flow	$	300,000	$	300,000	$	399	$	—	$	—	$	592

		$	300,000	$	300,000	$	399	$	—	$	—	$	592


Derivatives not designated as hedging instruments:
Interest rate swaps ⁽²⁾	N/A	$	754,970	$	747,754	$	22,914	$	17,806	$	23,830	$	18,419
Risk participation agreements	N/A		79,887		80,438		127		125		241		208
Forward commitments to sell residential mortgage loans	N/A		70,421		52,238		55		80		764		250
Interest rate-lock commitments on residential mortgage loans	N/A		51,986		33,068		577		111		25		44
Foreign exchange forward contracts	N/A		68,756		89,432		4,490		1,310		4,519		1,347

		$	1,026,020	$	1,002,930	$	28,163	$	19,432	$	29,379	$	20,268

(1)	Derivative assets and liabilities are reported with other assets or other liabilities, respectively, in the consolidated balance sheets.

(2)	The notional amount represents both the customer accommodation agreements and offsetting agreements with unrelated financial institutions.

Cash Flow Hedges of Interest Rate Risk

The Company is party to an interest rate swap agreement with a notional amount of $300 million under which the Company received interest at a fixed rate and paid at a variable rate. The derivative instrument represented by this swap agreement was designated as and qualifies as a cash flow hedge of the Company’s forecasted variable cash flows for a pool of variable rate loans. The swap agreement expires in January, 2017.

During the term of the swap agreement, the effective portion of changes in the fair value of the derivative instrument is recorded in accumulated other comprehensive income (“AOCI”) and subsequently reclassified into earnings in the periods that the hedged forecasted variable-rate interest payments affects earnings. The impact on AOCI was insignificant in the first quarter of 2015. There was no ineffective portion of the change in fair value of the derivative recognized directly in earnings.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

6. Derivatives (continued)

Derivatives Not Designated as Hedges

Customer interest rate derivative program

The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

Risk participation agreements

The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan agreement. The Bank manages their credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on its normal credit review process.

Mortgage banking derivatives

The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis.

Customer foreign exchange forward contract derivatives

The Bank enters into foreign exchange forward derivative agreements, primarily forward currency contracts, with commercial banking customers to facilitate its risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

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-month periods ended March 31, 2015 and 2014.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

6. Derivatives (continued)

Credit risk-related Contingent Features

Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as the downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the 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 March 31, 2015, the aggregate fair value of derivative instruments with credit risk-related contingent features that were in a net liability position was $9.6 million, for which the Bank had posted collateral of $27.3 million.

Offsetting Assets and Liabilities

Offsetting information in regards to derivative assets and liabilities subject to master netting agreements at March 31, 2015 and December 31, 2014 is presented in the following tables:


	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
(in thousands)	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position				Financial Instruments		Cash Collateral		Net Amount
As of March 31, 2015
Derivative Assets	$	23,041	$	—	$	23,041	$	189	$	—	$	22,852

Total	$	23,041	$	—	$	23,041	$	189	$	—	$	22,852


Derivative Liabilities	$	24,071	$	—	$	24,071	$	189	$	27,118	$	(3,236	)

Total	$	24,071	$	—	$	24,071	$	189	$	27,118	$	(3,236	)


As of December 31, 2014
Derivative Assets	$	17,931	$	—	$	17,931	$	936	$	—	$	16,995

Total	$	17,931	$	—	$	17,931	$	936	$	—	$	16,995


Derivative Liabilities	$	18,627	$	—	$	18,627	$	936	$	17,343	$	348

Total	$	18,627	$	—	$	18,627	$	936	$	17,343	$	348

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

7. Stockholders’ Equity

Stock Repurchase Program

In March 2015, the Company completed the stock repurchase program approved by the Company’s board of directors on July 16, 2014 which authorized the repurchase of up to 5%, or approximately 4 million shares, of its outstanding common stock. The approved plan allowed the Company to repurchase its common shares either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company. Under this plan, the Company repurchased a total of 4.1 million shares of our common stock at an average price of $30.02 per share.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), gains and losses associated with pension or other post retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains/losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. The components of AOCI are reported net of related tax effects.

The components of AOCI and changes in those components are presented in the following table:


(in thousands)	Available for Sale Securities			HTM Securities Transferred from AFS			Employee Benefit Plans			Loss on Effective Cash Flow Hedges			Total
Balance, December 31, 2013	$	8,263		$	(21,189	)	$	(22,453	)	$	—		$	(35,379	)

Other comprehensive income before income taxes:
Net change in unrealized (loss) gain		4,514			—			—			—			4,514
Reclassification of net losses realized and included in earnings		—			—			53			—			53
Amortization of unrealized net loss on securities transferred to HTM		—			665			—			—			665
Income tax expense		1,598			225			19			—			1,842

Balance, March 31, 2014	$	11,179		$	(20,749	)	$	(22,419	)	$	—		$	(31,989	)


Balance, December 31, 2014	$	18,001		$	(19,074	)	$	(48,626	)	$	(375	)	$	(50,074	)

Other comprehensive income before income taxes:
Net change in unrealized gain		4,421			—			—			992			5,413
Reclassification of net losses realized and included in earnings		(165	)		—			770			—			605
Amortization of unrealized net loss on securities transferred to HTM		—			647			—			—			647
Income tax expense		1,481			238			280			361			2,360

Balance, March 31, 2015	$	20,776		$	(18,665	)	$	(48,136	)	$	256		$	(45,769	)

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

7. Stockholders’ Equity (continued)

The following table shows the line item affected by amounts reclassified from accumulated other comprehensive income:


Amount reclassified from AOCI (in thousands)	Three Months Ended March 31,				Increase (decrease) in affected line item on the income statement
Amount reclassified from AOCI (in thousands)	2015		2014
Gain on sale of AFS securities	$	165	$	—	Securities gains (losses)
Tax effect		58		—	Income taxes

Net of tax		107		—	Net income

Amortization/accretion of unrealized net gain/(loss) on securities transferred to HTM	$	647	$	665	Interest income
Tax effect		238		225	Income taxes

Net of tax		409		440	Net income

Amortization of defined benefit pension and post-retirement items	$	770	$	53	(a) Employee benefits expense
Tax effect		280		19	Income taxes

Net of tax		490		34	Net income

Total reclassifications, net of tax	$	1,006	$	474	Net income

(a)	These accumulated other comprehensive income components are included in the computation of net periodic pension and post-retirement cost that is reported with employee benefits expense (see Note 10 for additional details).

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

8. 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.

A summary of the information used in the computation of earnings per common share follows:


	Three Months Ended March 31,
(in thousands, except per share data)	2015		2014

*Numerator:*
Net income to common shareholders	$	40,159	$	49,115
Net income allocated to participating securities - basic and diluted		935		1,081

Net income allocated to common shareholders - basic and diluted	$	39,224	$	48,034


*Denominator:*
Weighted-average common shares - basic		79,496		82,277
Dilutive potential common shares		165		257

Weighted-average common shares - diluted		79,661		82,534


Earnings per common share:
Basic	$	0.49	$	0.58
Diluted	$	0.49	$	0.58

Potential common shares consist of employee and director stock options. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be anti-dilutive, i.e., increase earnings per share or reduce a loss per share. Weighted-average anti-dilutive potential common shares totaled 862,402 and 689,958, respectively, for the three months ended March 31, 2015 and March 31, 2014.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

9. Share-Based Payment Arrangements

Hancock maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 12 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

A summary of option activity for the three months ended March 31, 2015 is presented below:


Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2015		933,750		$	37.03
Exercised		—			—
Cancelled/Forfeited		(11,473	)		36.79
Expired		(75,480	)		31.20

Outstanding at March 31, 2015		846,797		$	37.55		4.4	$	15

Exercisable at March 31, 2015		691,344		$	39.20		3.8	$	6

The total intrinsic value of options exercised during the three months ended March 31, 2015 and 2014 was $0.5 million and $0.2 million, respectively.

A summary of the status of the Company’s nonvested restricted and performance shares as of March 31, 2015 and changes during the three months ended March 31, 2015, is presented below. These restricted and performance shares are subject to service requirements.


	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2015		2,040,299		$	32.27
Granted		79,410			26.70
Vested		(19,136	)		36.15
Forfeited		(63,796	)		33.51

Nonvested at March 31, 2015		2,036,777		$	31.98

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

9. Share-Based Payment Arrangements (continued)

As of March 31, 2015, there were $40.1 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest. This compensation is expected to be recognized in expense over a weighted average period of 3.5 years. The total fair value of shares which vested during the three months ended March 31, 2015 and 2014 was $0.9 million and $0.8 million, respectively.

During the three months ended March 31, 2015, the Company granted 59,312 performance shares with a grant date fair value of $25.77 per share to key members of executive and senior management. The number of 2015 performance shares that ultimately vest at the end of the three-year required service period, if any, 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 the performance awards 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.

10. Retirement Plans

The Company has a qualified defined benefit pension plan covering all eligible employees. Eligibility is based on minimum age-related and service-related requirements as well as job classification. Accrued benefits under a nonqualified plan covering certain legacy Whitney employees were frozen as of December 31, 2012 and no future benefits will be accrued under this plan.

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 Hancock plan are not available to employees hired on or after January 1, 2000. 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 following table shows the components of net periodic benefits cost included in expense for the plans for the periods indicated:


	Three Months Ended March 31,
(in thousands)	2015			2014			2015		2014
	Pension benefits						Other Post- retirement Benefits
Service cost	$	3,363		$	3,425		$	50	$	37
Interest cost		4,619			4,809			369		338
Expected return on plan assets		(8,213	)		(8,061	)		—		—
Amortization of net loss		644			8			125		157

Net periodic benefit cost	$	413		$	181		$	544	$	532

Hancock contributed $10 million to the pension plan during the first quarter of 2015. Based on currently available information, the Company does not anticipate making any further contribution during the remainder of 2015.

The Company also provides a defined contribution 401(k) retirement benefit plan. Under the plan, the Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

11. Other Noninterest Income

Components of other noninterest income are as follows:


	Three Months Ended March 31,
(in thousands)	2015			2014
Income from bank owned life insurance	$	2,666		$	2,314
Credit related fees		2,457			2,732
(Loss) income from derivatives		(52	)		759
Net gain on sale of assets		7			1,682
Safety deposit box income		486			513
Other miscellaneous		2,680			2,427

Total other noninterest income	$	8,244		$	10,427

12. Other Noninterest Expense

Components of other noninterest expense are as follows:


	Three Months Ended March 31,
(in thousands)	2015		2014
Advertising	$	2,165	$	1,759
Ad valorem and franchise taxes		2,715		2,661
Printing and supplies		1,217		1,031
Insurance expense		922		1,040
Travel expense		1,219		896
Entertainment and contributions		1,639		1,412
Tax credit investment amortization		2,095		2,172
Other miscellaneous		2,834		4,846

Total other noninterest expense	$	14,806	$	15,817

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

13. New Accounting Pronouncements

In April 2015, the FASB (Financial Accounting Standards Board) issued an Accounting Standard Update (“ASU”) to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2015. Early adoption of the amendments in this update is permitted for financial statements that have not been previously issued. The adoption of this guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In January 2015, the FASB issued an ASU to address the elimination of the concept of extraordinary items. The standard is the first in the FASB’s simplification initiative that is aimed at reducing the cost and complexity of financial reporting while improving or maintaining the usefulness of information reported to investors. The amendments in this update are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted but adoption must occur at the beginning of the year. The Company adopted this guidance in January and it did not have a material impact on the Company’s financial condition or results of operations.

In August 2014, the FASB issued an ASU to address the diversity in practice regarding the classification and measurement of foreclosed loans which were part of a government-sponsored loan guarantee program (e.g. “HUD,” “FHA,” “VA”). The ASU outlines certain criteria that, if met, the loan (residential or commercial) should be derecognized and a separate other receivable should be recorded upon foreclosure at the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. This ASU was effective for annual reporting periods beginning after December 15, 2014, including interim periods within that reporting period. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

In June 2014, the FASB issued an ASU regarding repurchase-to-maturity transactions, repurchase financings, and disclosures. Under the new standard, repurchase-to-maturity transactions will be reported as secured borrowings, and transferors will no longer apply the current “linked” accounting model to repurchase agreements executed contemporaneously with the initial transfer of the underlying financial asset with the same counterparty. Public business entities are generally required to apply the accounting changes and comply with the enhanced disclosure requirements for periods beginning after December 15, 2014 and interim periods beginning after March 15, 2015. A public business entity may not early adopt the standard’s provisions. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

13. New Accounting Pronouncements (continued)

In May 2014, the FASB issued an ASU regarding revenue from contracts with customers affecting any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for the Company for periods beginning after December 15, 2016. The Company is currently assessing this pronouncement and adoption of this guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In January 2014, the FASB issued an ASU on reclassification of residential real estate collateralized consumer mortgage loans upon foreclosure. The new ASU clarifies when an in substance repossession or foreclosure occurs – that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The new ASU requires a creditor to reclassify a collateralized consumer mortgage loan to real estate property upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The ASU is effective for interim and annual reporting periods beginning after December 15, 2014. The new disclosure requirements are included at the end of Note 3 - Loans and Allowance for Loan Losses. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

In January 2014, the FASB issued an ASU in order to provide guidance on accounting for investments in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credit (“LIHTC”). Through the Company’s investments in these entities, the Company receives tax credits and/or tax deductions from operating losses, which are allowable on the Company’s filed income tax returns over the life of the project beginning with the first year the tax credits are earned. The ASU was effective beginning with the Company’s first quarter ending March 31, 2015. The adoption of this guidance did not have a material impact to the financial condition, results of operations, or liquidity of the Company.

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

OVERVIEW

NON-GAAP FINANCIAL MEASURES

Throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations, management uses several non-GAAP financial measures including Operating Income, Core Income, Core Net Interest Income and Core Net Interest Margin. These measures are provided to assist the reader with better understanding the Company’s financial condition and results of operations.

We define Operating Income as net income less tax-effected nonoperating expense items and securities gains/losses. Management believes this is a useful financial measure as it enables investors to assess ongoing operations and compare the Company’s fundamental operational performance from period to period. A reconciliation of Net Income to Operating Income is included in Selected Financial Data. The components of nonoperating expense are further discussed in the Noninterest Expense section of this item.

We define Core Income as Operating Income excluding the tax-effected purchase accounting adjustments. A reconciliation of Operating Income to Core Income is included in Selected Financial Data. We define Core Net Interest Income as reported taxable equivalent (te) net interest income excluding net purchase accounting adjustments. We define Core Net Interest Margin as Core Net Interest Income expressed as a percentage of average earning assets. A reconciliation of Reported Net Interest Income to Core Net Interest Income and Reported Net Interest Margin to Core Net Interest Margin is included in the Net Interest Income section of this item. Management believes that Core Income, Core Net Interest Income and Core Net Interest Margin provide a useful measure to investors regarding the Company’s performance period over period as well as providing investors with assistance in understanding the success management has experienced in executing its strategic initiatives.

Recent Economic and Industry Developments

The Federal Reserve publishes its Summary of Commentary on Current Economic Conditions (the “Beige Book”) eight times a year, most recently on April 15, 2015. The Beige Book includes summaries from all 12 Banks in the Federal Reserve System. Reports from the Atlanta Bank and the Dallas Bank indicate continued improvement of economic activity throughout most of Hancock’s market area. However, activity among energy-related businesses operating mainly in Hancock’s south Louisiana and Houston, Texas market areas continued to decline. The travel and tourism industry, which is important within several of the Company’s market areas, saw an increase in activity with many hotels and resorts reporting high occupancy levels. Companies reported that lower gas prices encouraged travel to the areas in which we operate. Outlooks for the second quarter were optimistic. Auto sales were a little softer, but dealers noted that buyers were purchasing larger vehicles due to low gas prices. Reports on manufacturing activity were generally positive, with nearly half of purchasing managers polled expecting higher production over the next three to six months.

The real estate markets for residential properties were mixed. Some of Hancock’s market areas reported growth in activity, while others were slightly down to flat. Inventory levels declined year-over-year. The demand for apartments increased, keeping occupancy rates at high levels. The outlook for home sales is positive, with brokers expecting to see an increase in sales over the next three months. New home sales and construction activity are flat to slightly ahead of prior-year levels and expected to improve modestly.

The commercial real estate market continues to improve, with growing demand for office and industrial space in certain market areas. Commercial construction activity has increased in these sectors. Continued improvement is expected in the commercial real estate market.

Loan demand across most of the markets that Hancock serves has increased slightly since the last Beige Book report, but competition for quality borrowers remains stiff. Consumer lending and business outside the oil and gas industry increased, while commercial real estate held steady. The outlook for increased growth was cautiously optimistic.

The overall U.S. economy continued to expand, with almost all regions showing modest to moderate growth rates. Confidence in the prospect of a higher rate of sustained growth is improving for businesses and consumers alike, although uncertainties remain about such matters as the health of the international economy and the implications of pending or proposed changes in U.S. fiscal and tax policies and regulations.

Highlights of First Quarter 2015 Financial Results

Net income in the first quarter of 2015 was $40.2 million, or $0.49 per diluted common share, compared to $40.1 million, or $0.48 per share, in the fourth quarter of 2014. Net income was $49.1 million, or $0.58 per share, in the first quarter of 2014. Net income for the first quarter of 2015 and fourth quarter of 2014 reflect the impact of nonoperating items totaling $7.3 million in the first quarter and $9.7 million in the fourth quarter. The first quarter of 2014 was not impacted by certain nonoperating items.

Operating income for the first quarter of 2015 was $44.7 million or $0.55 per diluted common share, compared to $46.4 million, or $0.56 per share, in the fourth quarter of 2014. Operating income was $49.1 million, or $0.58 per share, in the first quarter of 2014. First quarter 2015 core income was $39.6 million, or $0.49 per diluted common share, compared to $41.5 million, or $0.50 per share, in the fourth quarter of 2014. Core income was $37.7 million, or $0.45, in the first quarter of 2014.

Highlights of the Company’s first quarter of 2015 results:

•

Relatively stable operating results impacted by seasonality and the energy cycle

•

Completed 5% share buyback authorization

•

Issued $150 million of subordinated debt to support future growth

•

End of period loan balances increased $92 million, or 3% linked-quarter annualized (“LQA”); excludes net paydowns in the energy and non-FDIC acquired loan portfolios; average loans increased $291 million, or 8.6% LQA

•

Average noninterest-bearing demand deposits increased $75 million, or 5.1%, LQA

The Company’s total allowance for loan losses was $128.4 million at March 31, 2015, down $0.4 million from December 31, 2014. The allowance maintained on the non-FDIC acquired portion of the loan portfolio increased $2.6 million linked quarter, totaling $100.7 million, and the impaired reserve on the FDIC acquired portfolio declined $2.9 million from December 31, 2014. The increase in the non-FDIC acquired portion of the loan portfolio is attributable to some downward pressure on risk ratings related to loans in the Company’s energy portfolio as pricing pressures on oil continued during the quarter. Management believes that if further risk rating downgrades occur in the energy portfolio, additional loan loss provisions may be necessary, but will not translate to significant losses. The impact and severity will ultimately depend on the overall oil price reduction and duration of the cycle.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) for the first quarter of 2015 was $161.1 million, down $2.5 million from the fourth quarter of 2014, primarily due to two fewer days in the first quarter of 2015 compared to the fourth quarter of 2014. Excluding the impact of purchase accounting adjustments and the number of days in the quarter, net interest income (te) was up approximately $0.8 million as average total loans increased $291million. For analytical purposes, management adjusts net interest income to a taxable equivalent basis using a 35% federal tax rate on tax exempt items (primarily interest on municipal securities and loans).

Net interest income (te) for the first quarter of 2015 was down $7.1 million, or 4%, compared to the first quarter of 2014. The $13 million reduction in total purchase accounting accretion was partially offset by interest earned on a $1.5 billion increase in average loans. A number of loan growth initiatives were implemented in 2014 to improve the Company’s earning asset mix and generate additional revenue. As a result of these initiatives, average loans comprised 76% of average earning assets in the current quarter compared to 74% in the first quarter of 2014.

The net interest margin was 3.55% for the first quarter of 2015, down 8 bps from the fourth quarter of 2015, and down 51 bps from the first quarter of 2014. The current quarter’s core net interest margin of 3.21% compressed 6 bps compared to the fourth quarter of 2014 and 16 bps compared to the first quarter of 2014. The primary driver for the reduction in the net interest margin was the decline in the loan yield. The reported loan portfolio yield of 4.36% for the current quarter was down 5 bps from the fourth quarter of 2014 and 64 bps from the first quarter of 2014. Excluding purchase-accounting accretion, the loan yield of 3.88% in the current quarter was down 3 bps from the fourth quarter of 2014 and 15 bps from a year earlier. However, when excluding, the impact of fees and interest income related to the volatile FDIC acquired portfolio, loan yield excluding purchase accounting adjustments was basically flat linked quarter.

The overall reported yield on earning assets was 3.79% in the first quarter of 2015, declining 7 bps from the fourth quarter of 2014 and 50 bps from the first quarter of 2014. This decrease was primarily a result of the lower yields on the loan portfolio noted above.

The cost of funding earning assets was 0.24% in the first quarter of 2015, up 1 bp from the fourth quarter of 2014. This increase was attributable to the issuance of $150 million in subordinated debt in early March at a rate of 5.95%.

The cost of funding earning assets also increased 1 bp from the first quarter of 2014. The 23 bps increase in the rate paid on long-term debt and a 5 bps increase in overall rate paid on interest-bearing deposits were offset by the effect of the early redemption in the second quarter of 2014 of $115 million in fixed rate reverse repurchase obligations with an average rate of 3.43%. This early redemption resulted in a 46 bps reduction in the average rate paid on short-term borrowings compared to the first quarter of 2014. The increase in deposit rates reflects the initiatives implemented during the second quarter of 2014 to increase deposits in an effort to support the funding for loan growth.

The following tables detail the components of our net interest income and net interest margin.


	Three Months Ended
	March 31, 2015							December 31, 2014							March 31, 2014
(dollars in millions)	Volume		Interest		Rate			Volume		Interest		Rate			Volume		Interest		Rate
Average earning assets
Commercial & real estate loans (te) (a) (b)	$	10,235.2	$	106.8		4.23	%	$	9,943.4	$	105.8		4.23	%	$	9,095.7	$	107.9		4.81	%
Mortgage loans		1,902.9		20.4		4.30			1,886.2		20.3		4.31			1,720.6		21.3		4.96
Consumer loans		1,731.3		21.9		5.13			1,748.6		23.9		5.43			1,563.1		23.1		6.00
Loan fees & late charges		—		0.3					—		0.6		—			—		0.8

Total loans (te)		13,869.4		149.4		4.36			13,578.2		150.6		4.41			12,379.4		153.1		5.00

Loans held for sale		15.6		0.1		2.45			15.4		0.2		4.27			19.2		0.2		4.06
US Treasury and agency securities		275.0		1.1		1.58			300.0		1.1		1.52			93.5		0.5		2.28
Mortgage-backed securities and CMOs		3,290.5		18.6		2.26			3,324.5		19.1		2.30			3,612.8		21.2		2.34
Municipals (te) (a)		195.8		2.3		4.61			199.3		2.3		4.63			217.0		2.5		4.56
Other securities		11.6		0.1		4.47			12.3		0.1		2.24			12.3		0.1		3.87

Total securities (te) (c)		3,772.9		22.1		2.35			3,836.1		22.6		2.36			3,935.6		24.3		2.47

Total short-term investments		657.9		0.4		0.22			481.4		0.3		0.23			406.2		0.2		0.23

Average earning assets (te)	$	18,315.8	$	172.0		3.79	%	$	17,911.1	$	173.7		3.86	%	$	16,740.4	$	177.8		4.29	%


Average interest-bearing liabilities
Interest-bearing transaction and savings deposits	$	6,506.8	$	2.2		0.14	%	$	6,380.3	$	2.1		0.13	%	$	6,072.1	$	1.5		0.10	%
Time deposits		2,238.8		3.7		0.67			2,064.3		3.5		0.68			2,170.4		3.1		0.58
Public funds		1,815.4		1.2		0.27			1,598.5		1.1		0.28			1,526.6		0.8		0.20

Total interest-bearing deposits		10,561.0		7.1		0.27			10,043.1		6.7		0.27			9,769.1		5.4		0.22

Short-term borrowings		920.5		0.2		0.08			1,135.3		0.3		0.09			785.1		1.0		0.54
Long-term debt		412.9		3.6		3.57			376.8		3.1		3.28			386.0		3.2		3.34

Total borrowings		1,333.4		3.8		1.16			1,512.1		3.4		0.88			1,171.1		4.2		1.46

Total interest-bearing liabilities		11,894.4		10.9		0.37	%		11,555.2		10.1		0.35	%		10,940.2		9.6		0.36	%

Net interest-free funding sources		6,421.4							6,355.9							5,800.2

Total cost of funds	$	18,315.8	$	10.9		0.24	%	$	17,911.1	$	10.1		0.23	%	$	16,740.4	$	9.6		0.23	%

Net interest spread (te)			$	161.1		3.42	%			$	163.6		3.51	%			$	168.2		3.93	%
Net interest margin	$	18,315.8	$	161.1		3.55	%	$	17,911.1	$	163.6		3.63	%	$	16,740.4	$	168.2		4.06	%

(a)	Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.

(b)	Includes nonaccrual loans.

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

Due to the significant, unsustainable contribution from purchase accounting accretion, management believes that core net interest income and core net interest margin provide meaningful financial measures to investors of the Company’s performance over time. The following table provides a reconciliation of reported and core net interest income and reported and core net interest margin.

Reconciliation of Reported Net Interest Income and Margin to Core Net interest Income and Margin


	Three Months Ended
(dollars in millions)	March 31, 2015			December 31, 2014			March 31, 2014
Net interest income (te) (a)	$	161.1		$	163.6		$	168.2
Purchase accounting adjustments
Loan discount accretion		16.4			17.2			29.7
Bond premium amortization		(1.1	)		(1.2	)		(1.5	)
CD premium accretion		—			—			0.1

Total net purchase accounting adjustments		15.3			16.0			28.3

Net interest income (te) - core	$	145.8		$	147.6		$	139.9

Average earning assets	$	18,315.8		$	17,911.1		$	16,740.4
Net interest margin - reported		3.55	%		3.63	%		4.06	%
Net purchase accounting adjustments		0.34	%		0.36	%		0.69	%

Net interest margin - core		3.21	%		3.27	%		3.37	%

(a)	Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.

Provision for Loan Losses

During the first quarter of 2015, Hancock recorded a total provision for loan losses of $6.2 million, declining $3.6 million from the fourth quarter of 2014 and $1.8 million from the first quarter of 2014. The linked-quarter reduction in provision for loan losses was attributable to a lower level of loan growth and a lower amount of risk rating downgrades during the first quarter of 2015 as compared to the fourth quarter of 2014. Loans increased $547 million, or 16% LQA, during the fourth quarter of 2014 as compared to $29 million, or 1% LQA, during the first quarter of 2015. The fourth quarter risk rating downgrades were primarily due to a small number of loans that were downgraded for specific reasons related to the individual credits and not indicative of any deteriorating credit trend related to a specific industry or geography. The provision for the FDIC acquired portfolio was a small net credit in each of the three-month periods ended March 31, 2015, December 31, 2014, and March 31, 2014.

The section below on “Allowance for Loan Losses and Asset Quality” provides additional information on changes in the allowance for loan losses and general credit quality. Certain differences in the determination of the allowance for loan losses for originated loans and for acquired-performing loans and acquired-impaired loans (which includes all FDIC acquired loans) are described in Note 3 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Noninterest Income

Noninterest income totaled $56.5 million for the first quarter of 2015, a $0.4 million, or 1%, decrease compared to the fourth quarter of 2014, and down $0.2 million from the first quarter of 2014. Excluding the impacts of lost revenue from the sale of certain insurance business lines during the second quarter of 2014, the amortization of the FDIC loss share receivable discussed further below, and securities gains, first quarter 2015 noninterest income decreased approximately $1.7 million from fourth quarter 2014, and was down $1.4 million from the first quarter of 2014.

Service charges on deposits totaled $17.3 million for the first quarter of 2015, down $1.7 million, or 9%, from the fourth quarter of 2014, and down $1.4 million, or 8%, from the first quarter of 2014. The year-over-year decrease in service charges is primarily related to a decrease in overdraft (“OD”) and NSF charges as a result of a 14% decline in OD/NSF occurrences.

This decline is attributable, in part, to a 9% increase in average balances per account in the consumer noninterest-bearing checking portfolio, a reduction in the number of consumer accounts, mostly attributable to branch closings and sales, and a higher customer penetration rate for our OD protection product. In addition to these reasons, the linked quarter decrease is attributable to seasonality and the number of days within the reporting period.

Trust fees totaled $11.2 million for the quarter ended March 31, 2015, down $0.4 million, or 3%, from the fourth quarter of 2014. Trust fees in the fourth quarter of 2014 included approximately $0.2 million of one-time fee income. Trust fees increased $1.0 million, or 9%, compared to the first quarter of 2014 as a result of increased revenues from sales of our Hancock Horizon mutual funds via national distribution channels and increased new business in personal trusts.

Bank card and ATM fees totaled $11.2 million in the first quarter of 2015 virtually unchanged from the fourth quarter of 2014, and up $0.6 million, or 6%, compared to the first quarter of 2014. Included in bank card and ATM fees are fees from credit card, debit card and ATM transactions, and merchant service fees. Compared to the first quarter of 2014, a $0.7 million increase in credit card-related interchange fee income was partially offset by a decrease in merchant service fees. The increase in credit card fees resulted from various strategic initiatives during 2014 to increase card usage, including specific commercial card enhancements. ATM fee income in the first quarter of 2015 compared to the first quarter of 2014 was down $0.1 million, or 5%, due in part to the closing of 16 branches in July 2014 as part of the Company’s branch rationalization program.

Insurance fees totaled $1.8 million in the first quarter of 2015 compared to $1.9 million in the fourth quarter of 2014, and $3.7 million in the first quarter of 2014. The 53% decrease compared to the first quarter of 2014 resulted from the Company selling its property and casualty and group benefits insurance intermediary business in April 2014.

Fees from the secondary mortgage operations in the first quarter of 2015 were up $0.7 million, or over 30%, compared to both the fourth quarter of 2014 and the first quarter of 2014. The Company typically sells its longer-term fixed-rate loans in the secondary market while retaining in the portfolio the majority of its adjustable rate loans. We also retain loans generated through certain programs to support customer relationships including programs for high net worth individuals and non-builder construction loans. The increase in fee income during the first quarter of 2015 compared to the fourth quarter of 2014 was due to a greater portion of mortgage loans originated during the quarter being sold in the secondary market. Management expects this trend to continue through 2015.

Amortization of the FDIC loss share receivable totaled $1.2 million in the first quarter of 2015 compared to $2.1 million in the fourth quarter of 2014 and $3.9 million in the first quarter of 2014. The amortization reflects a reduction in the amount of expected reimbursements under the loss share agreements due to lower loss projections for the related FDIC acquired loan pools and the expiration of the non-single family loss share agreement.

The components of noninterest income are presented in the following table for the indicated periods:


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Service charges on deposit accounts	$	17,315		$	19,025		$	18,712
Trust fees		11,200			11,559			10,238
Bank card and ATM fees		11,183			11,225			10,569
Investment and annuity fees		5,050			4,736			4,952
Secondary mortgage market operations		2,664			2,000			1,965
Insurance commissions and fees		1,754			1,862			3,744
Amortization of FDIC loss share receivable		(1,197	)		(2,113	)		(3,908	)
Income from bank owned life insurance		2,666			3,266			2,314
Credit-related fees		2,457			2,733			2,732
Income from derivatives		(52	)		214			759
Gain (loss) on sale of assets		7			(130	)		1,682
Safety deposit box income		486			426			513
Other miscellaneous		2,680			2,158			2,427
Securities transactions gains, net		333			—			—

Total noninterest income	$	56,546		$	56,961		$	56,699

Noninterest Expense

Noninterest expense for the first quarter of 2015 was $153.5 million, virtually flat with the fourth quarter of 2014, and up $6.5 million, or 4%, from the first quarter of 2014. Excluding nonoperating expense items, operating expense for the first quarter of 2015 totaled $146.2 million, which was up $2.1 million, or 1%, from the fourth quarter of 2014 and almost unchanged from the same period in 2014.

Nonoperating expense totaled $7.3 million in the first quarter of 2015 and $9.7 million in the fourth quarter of 2014. There were no nonoperating expenses in the first quarter of 2014. Nonoperating expenses for the first three months of 2015 included consulting and professional fees related to investments in technology to enhance the Company’s risk management processes and a net premium related to the sale of four Houston branches.

Total personnel expense, excluding $0.5 million in nonoperating expense, totaled $80.1 million for the first quarter of 2015, up slightly compared to the fourth quarter of 2014. Compensation expense decreased $2.4 million, or 4%, during the first quarter of 2015, while benefits expense increased $3.0 million linked-quarter due to both annual seasonal payroll tax expense and increased pension costs. Total personnel expense in the current quarter was $1.3 million, or 2%, less than the prior year as the 3,785 full-time-equivalent employees as of March 31, 2015, were almost 200 fewer than a year earlier.

Occupancy and equipment expenses totaled $15.1 million for the first quarter of 2015, up $0.5 million, or 4%, from the fourth quarter of 2014 and down $0.4 million, or 3%, from the first quarter of 2014, partially due to branch closings and sales in 2014.

ORE expense in the first quarter of 2015 was $0.5 million, compared to $1.0 million expense in the fourth quarter of 2014 and $1.8 million in the first quarter of 2014. The total for fourth quarter of 2014 reflects a more normalized level of quarterly expense.

All other expenses, excluding amortization of intangibles and $6.3 million of nonoperating expense items, totaled $44.2 million for the first quarter of 2015, up $1.7 million, or 4%, from the fourth quarter of 2014 and up $3.0 million, or 7%, from the first quarter of 2014.

The components of noninterest expense are presented in the following table for the indicated periods:


	Three Months Ended
(in thousands)	March 31, 2015		December 31, 2014		March 31, 2014
Operating expense
Compensation expense	$	64,547	$	66,986	$	67,165
Employee benefits		15,570		12,536		14,267

Personnel expense		80,117		79,522		81,432

Net occupancy expense		11,162		10,571		11,266
Equipment expense		3,933		3,986		4,274
Data processing expense		13,536		13,048		12,419
Professional services expense		6,320		7,046		6,409
Amortization of intangibles		6,318		6,445		7,038
Telecommunications and postage		3,651		3,582		3,583
Deposit insurance and regulatory fees		3,595		3,195		2,967
Other real estate owned expense, net		456		1,001		1,777
Advertising		2,157		2,525		1,759
Ad valorem and franchise taxes		2,715		2,095		2,661
Printing and supplies		1,217		1,066		1,031
Insurance expense		922		917		1,040
Travel		1,219		1,096		896
Entertainment and contributions		1,639		1,425		1,412
Tax credit investment amortization		2,095		2,227		2,172
Other expense		5,149		4,333		4,846

Total operating expense	$	146,201	$	144,080	$	146,982

Nonoperating expense items
Expense and efficiency initiatives and other items		7,314		9,667		—

Total nonoperating expense items	$	7,314	$	9,667	$	—

Total noninterest expense	$	153,515	$	153,747	$	146,982

Income Taxes

The effective income tax rate for the first quarter of 2015 was approximately 27% compared to 26% in the fourth quarter of 2014 and 27% in the first quarter of 2014. Management expects the effective tax rate for the remainder of 2015 to be approximately 27%. Hancock’s effective tax rates have varied from the 35% federal statutory rate primarily because of tax-exempt income and the use of tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets the Company serves and are directed at tax credits issued under the Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds (“QSCB”), Federal and State New Market Tax Credit (“NMTC”) and Low-Income Housing Tax Credit (“LIHTC”) programs. The investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes.

The Company invests in Federal and State NMTC projects related to tax credit allocations that have been awarded to its wholly-owned Community Development Entity (“CDE”) as well as projects that utilize credits awarded to unrelated CDEs. From 2008 through 2014, the Company’s CDE was awarded three allocations totaling $148 million. These awards are expected to generate tax credits totaling $57.7 million over their respective seven-year compliance periods.

The Company intends to continue making investments in tax credit projects, though its ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits. Based on tax credit investments that have been made, the Company expects to realize tax credits over the next three years of $10.1 million, $9.0 million and $7.8 million for 2016, 2017 and 2018, respectively.

The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the quarters-ended March 31, 2015, December 31, 2014, and March 31, 2014.


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Taxes computed at statutory rate	$	19,262		$	19,008		$	23,561
Tax credits:
QZAB/QSCB		(730	)		(793	)		(769	)
NMTC - Federal and State		(2,573	)		(3,173	)		(3,433	)
LIHTC		(24	)		(113	)		(113	)

Total tax credits		(3,327	)		(4,079	)		(4,315	)
State income taxes, net of federal income tax benefit		728			1,226			1,674
Tax-exempt interest		(1,710	)		(1,610	)		(1,584	)
Bank owned life insurance		(919	)		(1,129	)		(810	)
Other, net		842			801			(325	)

Income tax expense	$	14,876		$	14,217		$	18,201

Selected Financial Data

The following tables contain selected financial data as of the dates and for the periods indicated.


	Three Months Ended
(in thousands)	March 31, 2015		December 31, 2014		March 31, 2014
Common Share Data
Earnings per share:
Basic	$	0.49	$	0.48	$	0.58
Diluted	$	0.49	$	0.48	$	0.58
Operating earnings per share: (a)
Basic	$	0.55	$	0.56	$	0.58
Diluted	$	0.55	$	0.56	$	0.58
Core earnings per share: (b)
Basic	$	0.49	$	0.50	$	0.45
Diluted	$	0.49	$	0.50	$	0.45
Cash dividends paid	$	0.24	$	0.24	$	0.24
Book value per share (period-end)	$	31.14	$	30.74	$	29.93
Tangible book value per share (period-end)	$	21.55	$	21.37	$	20.47
Weighted average number of shares (000s):
Basic		79,496		81,326		82,277
Diluted		79,661		81,530		82,534
Period-end number of shares (000s)		77,886		80,426		82,282
Market data:
High sales price	$	31.13	$	35.67	$	38.50
Low sales price	$	24.96	$	28.68	$	32.66
Period-end closing price	$	29.86	$	30.70	$	36.65
Trading volume (000s) (c)		51,866		36,396		31,328

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

(b)	Operating income excluding tax-effected purchase accounting adjustments. Management believes that reporting on core income provides a useful measure of financial performance that helps investors determine whether management is successfully executing its strategic initiatives.

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


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014		March 31, 2014
Income Statement:
Interest income	$	169,087		$	170,971	$	175,140
Interest income (te) (a)		172,043			173,739		177,776
Interest expense		10,929			10,158		9,578

Net interest income (te)		161,114			163,581		168,198
Provision for loan losses		6,154			9,718		7,963
Noninterest income excluding securities transactions		56,213			56,961		56,699
Securities transactions gains, net		333			—		—
Operating expense (excluding amortization of intangibles)		147,197			147,302		139,944
Amortization of intangibles		6,318			6,445		7,038

Income before income taxes		55,035			54,309		67,316
Income tax expense		14,876			14,217		18,201

Net income	$	40,159		$	40,092	$	49,115


Securities transactions gains, net		(333	)		—		—
Total nonoperating expense items		7,314			9,667		—
Taxes on adjustments at marginal tax rate		2,443			3,383		—

Total adjustments, net of taxes		4,538			6,284		—

Operating income (b)	$	44,697		$	46,376	$	49,115

Purchase accounting adjustments (net of tax)		5,078			4,839		11,373

Core income (c)	$	39,619		$	41,537	$	37,742

(a)	For analytical purposes, management adjusts net interest income to a “taxable equivalent” basis using a 35% federal tax rate on tax exempt items (primarily interest on municipal securities and loans).

(b)	Net income less nonoperating expense items and securities gains/losses. Management believes that this is a useful financial measure because it enables investors to assess ongoing operations.

(c)	Operating income excluding tax-effected purchase accounting adjustments. Management believes that reporting on core income provides a useful measure of financial performance that helps investors determine whether management is successfully executing its strategic initiatives.


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Performance Ratios
Return on average assets		0.80	%		0.79	%		1.05	%
Return on average assets-operating (a)		0.89	%		0.92	%		1.05	%
Return on average common equity		6.65	%		6.34	%		8.18	%
Return on average common equity-operating (a)		7.41	%		7.33	%		8.18	%
Return on tangible common equity		9.60	%		9.08	%		12.04	%
Return on average tangible common equity—operating (a)		10.68	%		10.50	%		12.04	%
Earning asset yield (te)		3.79	%		3.86	%		4.29	%
Total cost of funds		0.24	%		0.23	%		0.23	%
Net interest margin (te)		3.55	%		3.63	%		4.06	%
Core net interest margin (b)		3.21	%		3.27	%		3.37	%
Noninterest income excluding securities transactions to total revenue (te)		25.87	%		25.83	%		25.21	%
Efficiency ratio (c)		64.36	%		62.41	%		62.23	%
Average loan/deposit ratio		84.13	%		85.44	%		81.07	%
FTE employees (period-end)		3,785			3,794			3,974

Capital Ratios
Common stockholders’ equity to total assets		11.70	%		11.92	%		12.96	%
Tangible common equity ratio		8.40	%		8.59	%		9.24	%

(a)	Excludes tax-effected securities transactions and nonoperating expense items. Management believes that this is a useful financial measure that helps investors compare the Company’s fundamental operations over time.

(b)	Reported taxable equivalent (te) net interest income, excluding net purchase accounting adjustments, expressed as a percentage of average earning assets

(c)	Noninterest expense as a percent of total revenue (te) before amortization of purchased intangibles, securities transactions, and nonoperating expense items.


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Asset Quality Information
Nonaccrual loans (a)	$	90,821		$	79,537		$	101,400
Restructured loans - still accruing		7,564			8,971			8,459

Total nonperforming loans		98,385			88,508			109,859
Other real estate (ORE) and foreclosed assets		42,956			59,569			69,813

Total nonperforming assets	$	141,341		$	148,077		$	179,672

Accruing loans 90 days past due (a)		5,872			4,825			3,998
Net charge-offs - non-FDIC acquired		3,654			2,638			3,978
Net charge-offs - FDIC acquired		2,455			(624	)		2,510
Allowance for loan losses		128,386			128,762			128,248
Provision for loan losses		6,154			9,718			7,963
Nonperforming assets to loans, ORE and foreclosed assets		1.01	%		1.06	%		1.43	%
Accruing loans 90 days past due to loans		0.04	%		0.03	%		0.03	%
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets		1.05	%		1.10	%		1.46	%
Net charge-offs - non-FDIC acquired to average loans		0.11	%		0.08	%		0.13	%
Allowance for loan losses to period-end loans		0.92	%		0.93	%		1.02	%
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due		123.14	%		137.96	%		112.64	%

(a)	Nonaccrual loans and accruing loans past due 90 days or more do not include acquired-impaired loans with an accretable yield. Included in nonaccrual loans are $5.0 million, $7.0 million, and $16.1 million in restructured loans at March 31, 2015, December 31, 2014, and March 31, 2014, respectively.


Supplemental Asset Quality Information	Originated		Acquired (a)		FDIC acquired (b)		Total
(in thousands)	March 31, 2015
Nonaccrual loans (c)	$	83,412	$	5,820	$	1,589	$	90,821
Restructured loans - still accruing		7,564		—		—		7,564

Total nonperforming loans		90,976		5,820		1,589		98,385
ORE and foreclosed assets (d)		29,380		—		13,576		42,956

Total nonperforming assets		120,356		5,820		15,165		141,341

Accruing loans 90 days past due		5,659		213		—		5,872
Allowance for loan losses		100,494		254		27,638		128,386


	December 31, 2014
Nonaccrual loans	$	71,296	$	6,139	$	2,102	$	79,537
Restructured loans - still accruing		8,971		—		—		8,971

Total nonperforming loans		80,267		6,139		2,102		88,508
ORE and foreclosed assets		40,148		—		19,421		59,569

Total nonperforming assets		120,415		6,139		21,523		148,077

Accruing loans 90 days past due		4,564		261		—		4,825
Allowance for loan losses		97,701		477		30,584		128,762


Loans Outstanding	Originated		Acquired (a)			FDIC acquired (b)			Total
(in thousands)	March 31, 2015
Commercial non-real estate loans	$	5,861,887	$	118,260		$	6,937		$	5,987,084
Construction and land development loans		1,087,449		14,579			11,482			1,113,510
Commercial real estate loans		2,492,351		629,975			27,777			3,150,103
Residential mortgage loans		1,736,033		2,485			175,367			1,913,885
Consumer loans		1,742,810		25			16,969			1,759,804

Total loans		12,920,530		765,324			238,532			13,924,386

Change in loan balance from previous quarter		110,331		(67,344	)		(13,877	)		29,110


	December 31, 2014
Commercial non-real estate loans	$	5,917,728	$	120,137		$	6,195		$	6,044,060
Construction and land development loans		1,073,964		21,123			11,674			1,106,761
Commercial real estate loans		2,428,195		688,045			27,808			3,144,048
Residential mortgage loans		1,704,770		2,378			187,033			1,894,181
Consumer loans		1,685,542		985			19,699			1,706,226

Total loans		12,810,199		832,668			252,409			13,895,276

Change in loan balance from previous quarter		1,524,631		(949,508	)		(28,421	)		546,702

(a)	Loans which have been acquired and no allowance brought forward in accordance with acquisition accounting. Acquired-performing loans in pools with fully accreted purchase fair value discounts are reported as originated loans, resulting in changes in classification between periods.

(b)

Loans acquired in an FDIC-assisted transaction. Non-single family loss share agreement expired on December 31, 2014. $186.1 in loans and $6.0 million in ORE remain covered by the FDIC single family loss share agreement as of March 31, 2015, providing considerable protection against credit risk. As of December 31, 2014 $196.7 million in loans and $7.1 million in ORE remained covered by the FDIC single family loss share agreement.

(c)	Included in nonaccrual loans are $5.0 million and $7.0 million of nonaccruing restructured loans at March 31, 2015 and December 31, 2014, respectively.

(d)	ORE received in settlement of acquired loans is no longer subject to purchase accounting guidance and has been included with ORE from originated loans. ORE received in settlement of FDIC acquired loans remains covered under the FDIC loss share agreement.


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Period-End Balance Sheet
Total loans, net of unearned income (a)	$	13,924,386		$	13,895,276		$	12,527,937
Loans held for sale		19,950			20,252			15,911
Securities		4,107,904			3,826,454			3,797,883
Short-term investments		515,797			802,948			280,373

Earning assets		18,568,037			18,544,930			16,622,104
Allowance for loan losses		(128,386	)		(128,762	)		(128,248	)
Goodwill		621,193			621,193			625,675
Other intangible assets, net		125,404			132,810			152,734
Other assets		1,538,263			1,577,095			1,731,905

Total assets	$	20,724,511		$	20,747,266		$	19,004,170


Noninterest-bearing deposits	$	6,201,403		$	5,945,208		$	5,613,872
Interest-bearing transaction and savings deposits		6,576,658			6,531,628			6,118,150
Interest-bearing public funds deposits		1,828,559			1,982,616			1,451,430
Time deposits		2,253,865			2,113,379			2,091,322

Total interest-bearing deposits		10,659,082			10,627,623			9,660,902

Total deposits		16,860,485			16,572,831			15,274,774
Short-term borrowings		755,250			1,151,573			712,634
Long-term debt		516,007			374,371			380,001
Other liabilities		167,671			176,089			174,227
Stockholders’ equity		2,425,098			2,472,402			2,462,534

Total liabilities & stockholders’ equity	$	20,724,511		$	20,747,266		$	19,004,170


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Average Balance Sheet
Total loans, net of unearned income (a)	$	13,869,397		$	13,578,223		$	12,379,316
Loans held for sale		15,567			15,424			19,207
Securities (b)		3,772,997			3,836,123			3,935,616
Short-term investments		657,878			481,373			406,214

Earning assets		18,315,839			17,911,143			16,740,353
Allowance for loan losses		(130,217	)		(127,356	)		(134,670	)
Goodwill and other intangible assets		750,705			757,123			781,434
Other assets		1,507,532			1,549,462			1,667,990

Total assets	$	20,443,859		$	20,090,372		$	19,055,107


Noninterest-bearing deposits	$	5,924,196		$	5,849,356		$	5,499,993
Interest-bearing transaction and savings deposits		6,506,812			6,380,347			6,072,113
Interest-bearing public fund deposits		1,815,445			1,598,482			1,526,611
Time deposits		2,238,806			2,064,322			2,170,426

Total interest-bearing deposits		10,561,063			10,043,151			9,769,150

Total deposits		16,485,259			15,892,507			15,269,143
Short-term borrowings		920,436			1,135,255			785,063
Long-term debt		412,938			376,819			386,026
Other liabilities		177,356			176,282			178,895
Stockholders’ equity		2,447,870			2,509,509			2,435,980

Total liabilities & stockholders’ equity	$	20,443,859		$	20,090,372		$	19,055,107

(a)	Includes nonaccrual loans.

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

LIQUIDITY

Liquidity management is focused on ensuring that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. Hancock develops its liquidity management strategies and measures and monitors liquidity risk as part of its overall asset/liability management process.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. As shown in the table below, our ratio of free securities to total securities was 27% at March 31, 2015, compared to 14% at December 31, 2014 and 21% at March 31, 2014. The increase compared to year-end was due in part to the reduction in securities required to collateralize public funds deposits as discussed below in the section on “Deposits.” Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established a 15% minimum target for the ratio of free securities to total securities although management will allow the ratio to be less than 15% on a temporary basis if it believes there are sufficient securities available to meet the Companies projected funding needs.


Liquidity Metrics
	March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014
Free securities / total securities		27.06	%		14.04	%		23.00	%		20.00	%		21.00	%
Core deposits / total deposits		93.08	%		93.95	%		94.57	%		94.36	%		94.13	%
Wholesale funds / core deposits		8.10	%		9.80	%		10.40	%		10.00	%		7.60	%
Quarter-to-date average loans / quarter-to-date average deposits		84.13	%		85.44	%		85.24	%		84.20	%		81.07	%

The liability portion of the balance sheet provides liquidity mainly through various customers’ interest-bearing and noninterest-bearing deposit and sweep accounts. Core deposits consist of total deposits less certificates of deposits (“CDs”) of $250,000 or more, brokered CDs, and balances in sweep time deposit products used by commercial customers. The ratio of core deposits to total deposits was a very healthy 93.08% at March 31, 2015, down 87 bps from December 31, 2014 and 105 bps from March 31, 2014. Brokered CDs totaled $262 million as of March 31, 2015 and $98 million a year ago. The Company will occasionally use brokered deposits, subject to very strict parameters regarding the maturity and interest rate, as a funding source. There were no brokered CDs outstanding at December 31, 2014.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, our short-term borrowing capacity includes an approved line of credit with the FHLB of $3.4 billion and borrowing capacity at the Federal Reserve’s discount window of $1.8 billion at March 31, 2015. Wholesale funds, which are comprised of short-term borrowings and long-term debt, were 8.10% of core deposits at March 31, 2015, compared to 9.80% at December 31, 2014 and 7.60% at March 31, 2014. The decrease from December 31, 2014 reflects the lower utilization of the FHLB line, partially offset by the $150 million subordinated debt discussed in “Capital Resources,” below. At March 31, 2015, the Company had borrowings from the FHLB totaling $200 million compared to $515 million at December 31, 2014. There were no borrowings from the FHLB as of March 31, 2014. No amounts had been borrowed at the Federal Reserve’s discount window in any period. See the discussion on “Deposits” for more information.

Another key measure the Company uses to monitor its liquidity position is the loan to deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding). The loan to deposit ratio measures the amount of funds the Company lends out for each dollar of deposits on hand. The Company’s loan to deposit ratio for the first quarter of 2015 was 84.13%, a slight decrease from 85.44% for the fourth quarter of 2014, and up 306 bps from the first quarter of 2014. The Company has established an internal loan to deposit ratio target of 85.00%

Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the three months ended March 31, 2015 and 2014.

Dividends received from the Bank have been the primary source of funds available to the Company for the payment of dividends to our stockholders, stock buybacks, and for servicing debt issued by the holding company. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Company. The Company maintains cash and other liquid assets at the holding company to provide liquidity sufficient to fund six quarters of anticipated common stockholder dividends.

CAPITAL RESOURCES

Stockholders’ equity totaled $2.4 billion at March 31, 2015, down $47 million from December 31, 2014. The tangible common equity ratio decreased to 8.40% at March 31, 2015 from 8.59% at December 31, 2014. This decline mainly reflects the repurchase of common stock during the quarter.

The Board of Directors authorized a common stock buyback program in July 2014 for up to 5%, or approximately 4.1 million shares, of the Company’s common stock issued and outstanding. Under the program, the shares could be repurchased in the open market or in privately negotiated transactions from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. During the first quarter of 2015, the Company completed this buyback authorization by repurchasing 2,563,607 shares of its common stock at an average price of $29.36 per share. The Company repurchased a total of 4,093,149 shares at an average price of $30.02 per share.

On March 9, 2015, the Company issued $150 million in subordinated debt at an annual interest rate of 5.95% maturing on June 15, 2045. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part on any interest payment date on or after June 15, 2020. The debt qualifies as Tier 2 Capital under regulatory guidelines. A portion of the proceeds from the subordinated debt issuance was used to repurchase the Company’s common stock as noted above with the remainder available for general corporate purposes.

On July 2, 2013 the Federal Reserve Board finalized its rule implementing the Basel III regulatory capital framework and related Dodd-Frank Act changes. The final rule became effective January 1, 2015 with transition periods for certain changes. The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, and makes selected changes to the calculation of risk-weighted assets. The rule sets the Basel III minimum regulatory capital requirements for all organizations. Under the final rule, the primary quantitative measures that regulators use to gauge capital adequacy are the ratios of Total, Tier 1 and Common Equity 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 subsidiary are currently required to maintain minimum risk-based capital ratios of 8.0% total regulatory capital, 6.0% Tier 1 capital and 4.5% Common Equity Tier 1 capital. Additionally the final rule establishes a new conservation buffer of 2.5% of risk-weighted assets when fully phased in 2019.

At March 31, 2015, the regulatory capital ratios of the Company and the Bank were well in excess of current regulatory minimum requirements, as indicated in the table below. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators and both currently exceed all capital requirements of the new rule, including the fully phased-in conservation buffer.

The additional $150 million of subordinated debt and transitional guidelines under Basel III had positive impacts on capital ratios, while asset growth, the stock repurchase and other changes in the capital calculations under Basel III negatively affected capital ratios.

The following table shows the regulatory capital ratios for the Company and the Bank for the indicated periods.


	March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014
Total capital (to risk weighted assets)
Hancock Holding Company		12.77	%		12.30	%		12.66	%		12.96	%		13.20	%
Whitney Bank		12.17	%		12.20	%		12.40	%		12.72	%		13.02	%

Tier 1 common equity capital (to risk weighted assets)
Hancock Holding Company		10.86	%		11.23	%		11.59	%		11.83	%		11.90	%
Whitney Bank		11.16	%		11.13	%		11.32	%		11.58	%		11.72	%

Tier 1 capital (to risk weighted assets)
Hancock Holding Company		10.86	%		11.23	%		11.59	%		11.83	%		11.90	%
Whitney Bank		11.16	%		11.13	%		11.32	%		11.58	%		11.72	%

Tier 1 leverage capital
Hancock Holding Company		9.17	%		9.17	%		9.48	%		9.61	%		9.43	%
Whitney Bank		9.45	%		9.13	%		9.31	%		9.44	%		9.32	%

Regulatory definitions:

(1)

Tier 1 common equity capital generally includes common equity and retained earnings, reduced by goodwill and other disallowed intangibles and disallowed deferred tax assets and certain other assets.

(2)

Tier 1 capital consists of Tier 1 common equity capital plus non-controlling interest in equity of consolidated subsidiaries and a limited amount of qualifying perpetual preferred stock.

(3)

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.

(4)

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.

(5)

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 $4.1 billion at March 31, 2015, up $282 million from December 31, 2014 and $310 million from March 31, 2014. The quarterly increase in securities was a result of investing liquidity generated during the quarter. At March 31, 2015, securities available for sale totaled $1.8 billion and securities held to maturity totaled $2.3 billion.

The securities portfolio consists mainly of residential mortgage-backed securities and collateralized mortgage obligations issued or guaranteed by U.S. government agencies. The portfolio is designed to enhance liquidity while providing an acceptable rate of return. The Company invests only in high quality securities of investment grade quality with a targeted duration for the overall portfolio of between two and five. At March 31, 2015, the average maturity of the portfolio was 5.01 years with an effective duration of 3.45 and a weighted-average yield of 2.35%. The effective duration increases, under management scenarios, to 4.13 with a 100 basis point increase in the yield curve and to 4.34 with a 200 basis point increase. At year-end 2014, the average maturity of the portfolio was 4.38 years with an effective duration of 3.51 and a weighted-average yield of 2.36%.

Loans

Total loans at March 31, 2015 were $13.9 billion, virtually flat compared to December 31, 2014, and up $1.4 billion, or 11%, compared to March 31, 2014. Excluding the FDIC acquired portfolio, total loans increased $43 million from year end 2014, and $1.5 billion, or 12%, from March 31, 2014. See Note 3 to the consolidated financial statements for the composition of originated, acquired and FDIC acquired loans at March 31, 2015 and December 31, 2014.

Net loan growth during the quarter was mainly in the Alabama and Florida markets, with additional growth in indirect and mortgage lending. Louisiana and Texas markets were impacted by both the energy cycle and annual seasonality. Historically, loan balances increase towards year end with payoffs and paydowns in the first quarter of each year.

The Company’s commercial customer base is diversified over a range of industries, including energy, 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.

At March 31, 2015, loans in the energy segment totaled $1.7 billion, or 12% of total loans. The energy portfolio declined approximately $50 million linked quarter and is comprised of credits to both the exploration and production segment and the support services segment. See Item 7 in the Company’s December 31, 2104 Form 10-K for a further discussion regarding the Company’s energy portfolio. In light of the first quarter’s net paydowns in the energy portfolio, and the expected headwinds related to the current energy cycle, management has updated its end of period annual loan growth guidance for 2015 to 5% - 8%.

The Bank lends mainly to middle-market and smaller commercial entities, although it participates in larger shared-credit loan facilities with familiar businesses operating in the Company’s market areas. Shared credits funded at March 31, 2015 totaled approximately $1.8 billion, up approximately $352 million from March 31, 2014 and $3 million from December 31, 2014. Approximately $1.0 billion of shared national credits were with energy-related customers at March 31, 2015, down $21 million from year end, but up $95 million from March 31, 2014.

Commercial non-real estate loans, construction and land development loans, and commercial real estate (“CRE”) loans in the originated and acquired portfolios decreased a net $45 million over the first three months of 2015. CRE loans include loans on both income-producing properties as well as properties used by borrowers in commercial operations.

Residential mortgages in the originated and acquired portfolios were up a net $31 million during the first quarter. Consumer loans increased by a net $56 million as a result of a number of initiatives implemented by management during 2014.

Total FDIC acquired loans at March 31, 2015 were down $93 million from March 31, 2014 and $14 million from December 31, 2014, reflecting normal repayments, charge-offs and foreclosures.

Allowance for Loan Losses and Asset Quality

The Company’s total allowance for loan losses was $128.4 million at March 31, 2015, compared to $128.8 million at December 31, 2014. A $2.9 million reduction in the allowance on the FDIC acquired portfolio from December 31, 2014 was offset by a $2.7 million increase in the originated portfolio. The increase in the allowance related to the originated portfolio is primarily attributable to risk rating downgrades in the energy portfolio as pricing pressures on oil continued during the quarter. Management believes that if further downgrades occur, additional loan loss reserves may be necessary, but will not translate into significant losses. The impact and severity will depend upon the overall oil price reduction and the duration of the cycle. See Item 7. In the Company’s December 31, 2014 Form 10-K for further discussion of the company’s energy portfolio and its potential impact on the allowance for loan losses.

The ratio of the allowance to period-end loans was 0.92% at March 31, 2015, down slightly from 0.93% at December 31, 2014. The allowance maintained on the originated portion of the loan portfolio totaled $100.5 million, or 0.78% of related loans, at March 31, 2015, as compared to $97.7 million, or 0.76%, at March 31, 2014.

During the first quarter of 2015, Hancock recorded a total provision for loan losses of $6.2 million, down from $9.7 million in the fourth quarter of 2014, and down from $8.0 million for the March 31, 2014. See the Provision for Loan Losses section above for further discussion of the provision for loan losses.

Net charge-offs from the non-FDIC acquired loan portfolio were $3.7 million, or 0.11% of average total loans on an annualized basis in the first quarter of 2015, compared to $2.6 million, or 0.08%, in the fourth quarter of 2014.

The following table sets forth activity in the allowance for loan losses for the periods indicated.


	Three Months Ended
(in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Allowance for loan losses at beginning of period	$	128,762		$	125,572		$	133,626

Loans charged-off:
Non-FDIC acquired loans:
Commercial non real estate		1,697			2,123			2,386
Construction and land development		747			2,155			91
Commercial real estate		251			1,324			723
Residential mortgages		1,209			492			241
Consumer		3,556			2,135			4,041

Total non-FDIC acquired charge-offs		7,460			8,229			7,482

FDIC acquired loans:
Commercial non real estate		127			45			46
Construction and land development		276			(202	)		458
Commercial real estate		2,368			870			3,117
Residential mortgages		93			331			308
Consumer		140			78			81

Total FDIC acquired charge-offs		3,004			1,122			4,010

Total charge-offs		10,464			9,351			11,492

Recoveries of loans previously charged-off:
Non-FDIC acquired loans:
Commercial non real estate		981			929			826
Construction and land development		1,243			2,780			651
Commercial real estate		(3	)		447			331
Residential mortgages		305			143			94
Consumer		1,280			1,292			1,602

Total non-FDIC acquired recoveries		3,806			5,591			3,504

FDIC acquired loans:
Commercial non real estate		14			18			445
Construction and land development		406			1,634			857
Commercial real estate		113			33			136
Residential mortgages		—			—			6
Consumer		16			61			56

Total FDIC acquired recoveries		549			1,746			1,500

Total recoveries		4,355			7,337			5,004

Net charge-offs - non-FDIC acquired		3,654			2,638			3,978
Net charge-offs - FDIC acquired		2,455			(624	)		2,510

Total net charge-offs		6,109			2,014			6,488

Provision for loan losses before FDIC benefit - FDIC acquired loans		(491	)		(4,674	)		(7,155	)
Benefit attributable to FDIC loss share agreement		421			4,514			6,853
Provision for loan losses non-FDIC acquired loans		6,224			9,878			8,265

Provision for loan losses, net		6,154			9,718			7,963
(Decrease) Increase in FDIC loss share receivable		(421	)		(4,514	)		(6,853	)

Allowance for loan losses at end of period	$	128,386		$	128,762		$	128,248

Ratios:
Gross charge-offs - non-FDIC acquired to average loans		0.22	%		0.24	%		0.24	%
Recoveries - non-FDIC acquired to average loans		0.11	%		0.16	%		0.11	%
Net charge-offs - non-FDIC acquired to average loans		0.11	%		0.08	%		0.13	%
Allowance for loan losses to period-end loans		0.92	%		0.93	%		1.02	%

The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt restructurings and foreclosed and surplus ORE and other foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.


(in thousands)	March 31, 2015			December 31, 2014
Loans accounted for on a nonaccrual basis: (a)
Commercial non-real estate loans	$	24,934		$	14,248
Commercial non-real estate loans - restructured		680			1,263

Total commercial non-real estate loans		25,614			15,511

Construction and land development loans		4,790			5,187
Construction and land development loans - restructured		1,621			2,378

Total construction and land development loans		6,411			7,565

Commercial real estate loans		28,973			26,017
Commercial real estate loans - restructured		1,948			2,602

Total commercial real estate loans		30,921			28,619

Residential mortgage loans		21,648			21,348
Residential mortgage loans - restructured		735			746

Total residential mortgage loans		22,383			22,094

Consumer loans		5,492			5,748

Total nonaccrual loans		90,821			79,537

Restructured loans - still accruing:
Commercial non-real estate loans		—			424
Construction and land development loans		2,470			4,905
Commercial real estate loans		4,965			3,580
Residential mortgage loans		110			54
Consumer loans		19			8

Total restructured loans - still accruing		7,564			8,971

Total restructured loans		12,548			15,960

ORE and foreclosed assets		42,956			59,569

Total nonperforming assets (b)	$	141,341		$	148,077

Loans 90 days past due still accruing	$	5,872		$	4,825


Ratios:
Nonperforming assets to loans plus
ORE and foreclosed assets		1.01	%		1.06	%
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due		123.14	%		137.96	%
Loans 90 days past due still accruing to loans		0.04	%		0.03	%

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

(b)	Includes total nonaccrual loans, total restructured loans - still accruing and ORE and foreclosed assets.

Nonperforming assets totaled $141.3 million at March 31, 2015, down $6.7 million from December 31, 2014. Nonperforming assets as a percent of total loans, ORE, and other foreclosed assets was 1.01% at March 31, 2015, compared to 1.43% at March 31, 2014 and 1.06% at December 31, 2014. The increase in nonaccrual non-real estate loans from December 31, 2014 to March 31, 2015 is primarily due to the movement of one energy-related loan to nonaccrual status during the first quarter of 2015.

Short-Term Investments

Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, decreased $287 million from December 31, 2014, to a total of $516 million at March 31, 2015. Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Average short-term investments for the first quarter of 2015 were up $177 million, or 37%, compared to the fourth quarter of 2014.

Deposits

Total deposits were $16.9 billion at March 31, 2015, up $288 million, or 2%, from December 31, 2014. and $1.6 billion, or 10%, from March 31, 2014. Average deposits for the first quarter of 2015 were $16.5 billion, up $593 million, or 4% from the fourth quarter of 2014. The deposit growth is due, in part, to a number of strategic initiatives aimed at growing deposits implemented during 2014.

Noninterest-bearing demand deposits (“DDAs”) increased by $256 million, or 4%, during the first quarter to $6.2 billion at March 31, 2015, and were up $588 million, or 10%, from March 31, 2014. DDAs comprised 37% of total period-end deposits at March 31, 2015, flat with March 31, 2014 and up slightly from year end 2014.

Interest-bearing public fund deposits totaled $1.8 billion at March 31, 2015, down $154 million, or 8%, from December 31, 2014, but up $377 million, or 26%, from March 31, 2014. The decrease compared to the prior quarter was primarily due to the seasonality of public funds, which typically carry higher balances at year end. The increase from March 31, 2014 was related to specific initiatives implement during 2014 related to attracting public fund deposits.

Time deposits totaled $2.3 billion at March 31, 2015, up $140 million, or 7%, from December 31, 2014, and up $162 million, or 8%, from March 31, 2014. CDs increased $233 million, or 14%, from December 31, 2014, due to an increase in brokered CDs. As discussed in the Liquidity section above, the Company will occasionally use brokered deposits, subject to strict parameters regarding maturity and rates, as a short-term funding source. Balances in sweep deposit products decreased $93 million, or 19%, from balances at December 31, 2014.

Short-Term Borrowings

At March 31, 2015, short-term borrowings totaled $755 million, down $396 million, or 34%, from December 31, 2014. The decrease was mainly due to a decrease in the FHLB borrowings from year end, partially replaced by brokered deposits as noted above. Securities sold under agreements to repurchase are another major source of short-term borrowings. These agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time can be volatile.

OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

In the normal course of business, the Bank enters 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 Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company must include unfunded commitments meeting certain criteria in its risk-weighted capital calculation.

Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or 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 Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its 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 Company undertakes 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 March 31, 2015 according to expiration date.


			Expiration Date
(in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Commitments to extend credit	$	5,883,301	$	2,922,059	$	1,132,811	$	1,254,831	$	573,600
Letters of credit		400,669		240,620		58,355		97,801		3,893

Total	$	6,283,970	$	3,162,679	$	1,191,166	$	1,352,632	$	577,493

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 those generally practiced within the banking industry which require 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, and the resulting estimates form the basis for making judgments about the carrying values of certain assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 13 to our Consolidated Financial Statements included elsewhere in this report.

FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and we intend such forward-looking statements to be covered by the safe harbor provisions therein and are including this statement for purposes of invoking these safe-harbor provisions. Forward-looking statements provide projections of results of operations or of financial condition or state other forward-looking information, such as expectations about future conditions and descriptions of plans and strategies for the future.

Forward-looking statements that we may make include, but may not be limited to, comments with respect to future levels of economic activity in our markets, including the impact of volatility of oil and gas prices on our energy portfolio and associated loan loss reserves and the downstream impact on businesses that support the energy sector, especially in the Gulf Coast region, loan growth expectations, deposit trends, credit quality trends, net interest margin trends, future expense levels, success of revenue-generating initiatives, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, the impact of the branch rationalization process, details of the common stock buyback, possible repurchases of shares under stock buyback programs, and the financial impact of regulatory requirements. Hancock’s ability to accurately project results, predict the effects of future plans or strategies, or predict market or economic developments is inherently limited. Although Hancock believes that the expectations reflected in its forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ from those expressed in Hancock’s forward-looking statements include, but are not limited to, those risk factors outlined in Hancock’s public filings with the Securities and Exchange Commission, which are available at the SEC’s internet site (http://www.sec.gov).

You are cautioned not to place undue reliance on these forward-looking statements. Hancock does not intend, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

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 March 31, 2015 for year 1 and year 2, 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	Estimated increase (decrease) in net interest income
(basis points)	Year 1	Year 2
+100	2.26%	2.85%
+200	5.37%	6.32%
+300	7.87%	8.84%

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, 2014 included in our 2014 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 Officer 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 Officer 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.

Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three-month period ended March 31, 2015, 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

The Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.

Item 1A. Risk Factors

There were no changes to the risk factors that were previously disclosed in our Form 10-K for the year ended December 31, 2014. In addition to the risk of vulnerability to certain sectors of the economy related to the real estate portfolio, recent trends in the energy sector point to possible vulnerability.

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.

The following table provides information with respect to purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities for the three months ended March 31, 2015.


	Total number of shares or units purchased		Average price paid per share		Total number of shares purchased as a part of publicly announced plans or programs (1)		Maximum number of shares that may yet be purchased under plans or programs
Jan. 1, 2015 - Jan. 31, 2015		—	$	—		—		2,563,607
Feb. 1, 2015 - Feb. 28, 2015		1,147,446		28.43		1,147,446		1,416,161
Mar. 1, 2015 - Mar. 31, 2015		1,416,161		30.12		1,416,161		—

Total		2,563,607	$	29.36		2,563,607

(1)	The Company publicly announced its 2014 stock buyback program on July 24, 2014.

Item 6. Exhibits.

(a)

Exhibits:


Exhibit Number		Description

*10.1		Hancock Holding Company 2014 Long Term Incentive Plan (filed as Exhibit 10.1 to Hancock’s Form 8-K filed with the Commission on April 21, 2014 and incorporated herein by reference).

*10.2		Form of Change in Control Employment Agreement between the Company and its executive officers (filed as Exhibit 10.2 to Hancock’s Form 8-K filed with the Commission on June 20, 2014 and incorporated herein by reference).

*10.3		Addendum to Nonqualified Deferred Compensation Plan describing SERP benefit (filed as Exhibit 10.3 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).

*10.4		Form of 2014 Restricted Stock Award Agreement (filed as Exhibit 10.4 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).

*10.5		Hancock Holding Company Executive Incentive Plan

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.

*	Compensatory plan or arrangement

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/ John M. Hairston
		John M. Hairston
		President & Chief Executive Officer

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

Date:		May 8, 2015

Index to Exhibits


Exhibit Number		Description

*10.1		Hancock Holding Company 2014 Long Term Incentive Plan (filed as Exhibit 10.1 to Hancock’s Form 8-K filed with the Commission on April 21, 2014 and incorporated herein by reference).

*10.2		Form of Change in Control Employment Agreement between the Company and its executive officers (filed as Exhibit 10.2 to Hancock’s Form 8-K filed with the Commission on June 20, 2014 and incorporated herein by reference).

*10.3		Addendum to Nonqualified Deferred Compensation Plan describing SERP benefit (filed as Exhibit 10.3 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).

*10.4		Form of 2014 Restricted Stock Award Agreement (filed as Exhibit 10.4 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).

*10.5		Hancock Holding Company Executive Incentive Plan

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.

*	Compensatory plan or arrangement

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company