Hancock Whitney - 10-Q quarterly report FY

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2009

£ 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 S 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 S 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):

Large accelerated filer S	Accelerated filer £

Non-accelerated filer £	Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No S

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

31,834,277 common shares were outstanding as of July 31, 2009 for financial statement purposes.

Hancock Holding Company

Index

Part I. Financial Information		Page Number

ITEM 1.	Financial Statements
	Condensed Consolidated Balance Sheets -- June 30, 2009 (unaudited) and December 31, 2008	1

	Condensed Consolidated Statements of Income (unaudited) -- Three and six months ended June 30, 2009 and 2008	2

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – Six months ended June 30, 2009 and 2008	3

	Condensed Consolidated Statements of Cash Flows (unaudited) -- Six months ended June 30, 2009 and 2008	4

	Notes to Condensed Consolidated Financial Statements (unaudited) -- June 30, 2009	5-19

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20-33

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	34

ITEM 4.	Controls and Procedures	34

Part II. Other Information

ITEM 1A.	Risk Factors	35

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

ITEM 4.	Submission of Matters to a Vote of Security Holders	35

ITEM 6.	Exhibits	35

Signatures		36

Index

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	June 30,
	2009			December 31,
	(unaudited)			2008
ASSETS
Cash and due from banks (non-interest bearing)	$	152,774		$	199,775
Interest-bearing deposits with other banks		111,511			11,355
Federal funds sold		99			175,166
Other short-term investments		379,064			362,895
Trading securities		1,752			2,201
Securities available for sale, at fair value (amortized cost of $1,557,437 and $1,651,499)		1,594,405			1,679,756
Loans held for sale		47,194			22,115
Loans		4,285,388			4,264,324
Less: allowance for loan losses		(63,850	)		(61,725	)
unearned income		(12,732	)		(14,859	)
Loans, net		4,208,806			4,187,740
Property and equipment, net of accumulated depreciation of $108,163 and $101,050		201,666			205,912
Other real estate, net		8,804			5,195
Accrued interest receivable		30,694			33,067
Goodwill		62,277			62,277
Other intangible assets, net		5,697			6,363
Life insurance contracts		148,029			144,959
Deferred tax asset, net		3,647			5,819
Other assets		90,896			62,659
Total assets	$	7,047,315		$	7,167,254

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand	$	953,435		$	962,886
Interest-bearing savings, NOW, money market and time		4,702,793			4,968,051
Total deposits		5,656,228			5,930,937
Federal funds purchased		1,825			-
Securities sold under agreements to repurchase		524,755			505,932
Other short-term borrowings		100,000			-
Long-term notes		858			638
Other liabilities		132,875			120,248
Total liabilities		6,416,541			6,557,755

Stockholders' Equity
Common stock - $3.33 par value per share; 350,000,000 shares authorized, 31,826,712 and 31,769,679 issued and outstanding, respectively		105,983			105,793
Capital surplus		103,519			101,210
Retained earnings		423,966			411,579
Accumulated other comprehensive loss, net		(2,694	)		(9,083	)
Total stockholders' equity		630,774			609,499

Total liabilities and stockholders' equity	$	7,047,315		$	7,167,254

See notes to unaudited condensed consolidated financial statements.

Index

Hancock Holding Company and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Interest income:
Loans, including fees	$	59,863	$	59,529	$	119,325	$	122,023
Securities - taxable		17,981		20,594		37,026		40,015
Securities - tax exempt		1,063		1,304		2,133		2,699
Federal funds sold		1		263		5		1,708
Other investments		1,197		42		3,064		58
Total interest income		80,105		81,732		161,553		166,503

Interest expense:
Deposits		20,703		25,532		46,057		56,131
Federal funds purchased and securities sold under agreements to repurchase		2,680		3,997		5,333		7,759
Long-term notes and other interest expense		30		44		25		27
Total interest expense		23,413		29,573		51,415		63,917

Net interest income		56,692		52,159		110,138		102,586
Provision for loan losses, net		16,919		2,787		25,261		11,605
Net interest income after provision for loan losses		39,773		49,372		84,877		90,981

Noninterest income:
Service charges on deposit accounts		11,242		10,879		21,745		21,669
Other service charges, commissions and fees		14,384		16,202		28,369		31,758
Securities gains, net		-		426		-		6,078
Other income		8,878		4,331		13,445		8,755
Total noninterest income		34,504		31,838		63,559		68,260

Noninterest expense:
Salaries and employee benefits		28,703		27,031		59,478		52,662
Net occupancy expense		5,016		4,702		10,071		9,303
Equipment rentals, depreciation and maintenance		2,583		2,785		5,117		5,694
Amortization of intangibles		354		364		709		729
Other expense		21,570		17,307		38,689		33,935
Total noninterest expense		58,226		52,189		114,064		102,323

Net income before income taxes		16,051		29,021		34,372		56,918
Income tax expense		2,305		8,037		6,595		15,877
Net income	$	13,746	$	20,984	$	27,777	$	41,041
Basic earnings per share	$	0.43	$	0.67	$	0.87	$	1.31
Diluted earnings per share	$	0.43	$	0.66	$	0.87	$	1.29
Dividends paid per share	$	0.24	$	0.24	$	0.48	$	0.48
Weighted avg. shares outstanding-basic		31,820		31,382		31,812		31,366
Weighted avg. shares outstanding-diluted		32,009		31,814		31,973		31,779

See notes to unaudited condensed consolidated financial statements.

Index

Hancock Holding Company and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share data)

										Accumulated
										Other
	Common Stock				Capital		Retained			Comprehensive
	Shares		Amount		Surplus		Earnings			Loss, net			Total
Balance, January 1, 2008		31,294,607	$	104,211	$	87,122	$	377,481		$	(14,627	)	$	554,187
Comprehensive income
Net income per consolidated statements of income		-		-		-		41,041			-			41,041
Net change in unfunded accumulated benefit obligation, net of tax		-		-		-		-			475			475
Net change in fair value of securities available for sale, net of tax		-		-		-		-			(9,002	)		(9,002	)
Comprehensive income														32,514
SFAS 158, change in measurement date		-		-		-		(815	)		-			(815	)
Cash dividends declared ($0.48 per common share)		-		-		-		(15,164	)		-			(15,164	)
Common stock issued, long-term incentive plan, including income tax benefit of $150		91,263		304		1,066		-			-			1,370
Compensation expense, long-term incentive plan		-		-		1,313		-			-			1,313
Balance, June 30, 2008		31,385,870	$	104,515	$	89,501	$	402,543		$	(23,154	)	$	573,405

Balance, January 1, 2009		31,769,679	$	105,793	$	101,210	$	411,579		$	(9,083	)	$	609,499
Comprehensive income
Net income per consolidated statements of income		-		-		-		27,777			-			27,777
Net change in unfunded accumulated benefit obligation, net of tax		-		-		-		-			907			907
Net change in fair value of securities available for sale, net of tax		-		-		-		-			5,482			5,482
Comprehensive income														34,166
Cash dividends declared ($0.48 per common share)		-		-		-		(15,390	)		-			(15,390	)
Common stock issued, long-term incentive plan, including income tax benefit of $86		57,033		190		708		-			-			898
Compensation expense, long-term incentive plan		-		-		1,601		-			-			1,601
Balance, June 30, 2009		31,826,712	$	105,983	$	103,519	$	423,966		$	(2,694	)	$	630,774

See notes to unaudited condensed consolidated financial statements.

Index

Hancock Holding Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	27,777		$	41,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,113			7,899
Provision for loan losses		25,261			11,605
Loss in connection with other real estate owned		334			123
Deferred tax benefit		(1,598	)		(2,334	)
Increase in cash surrender value of life insurance contracts		(3,070	)		(4,089	)
Gain on sales/paydowns of securities available for sale, net		-			(2,695	)
Gain on sale or disposal of other assets		(1,676	)		(663	)
Gain on sale of loans held for sale		(451	)		(224	)
Gain on trading securities		-			(3,383	)
Net (amortization)/accretion of securities premium/discount		(170	)		843
Amortization of mortgage servicing rights		83			111
Amortization of intangible assets		709			729
Stock-based compensation expense		1,601			1,313
Increase in accrued interest receivable		2,373			2,935
Increase in accrued expenses		10,256			6,866
Increase in other liabilities		4,085			504
Decrease in interest payable		(1,845	)		(2,892	)
Decrease in policy reserves and liabilities		(5,285	)		(7,271	)
Decrease in reinsurance receivable		2,003			4,272
Increase in other assets		(29,574	)		(236	)
Proceeds from sale of loans held for sale		174,230			100,290
Originations of loans held for sale		(198,858	)		(109,917	)
Proceeds from paydowns of securities held for trading		-			7,635
Excess tax benefit from share based payments		(86	)		(92	)
Other, net		323			18
Net cash provided by operating activities		14,535			52,388

CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing time deposits		(100,156	)		(1,256	)
Proceeds from sales of securities available for sale		-			3,045
Proceeds from maturities of securities available for sale		387,160			699,584
Purchases of securities available for sale		(289,037	)		(849,081	)
Proceeds from maturities of short term investments		1,000,000			-
Purchase of short term investments		(1,013,806	)		-
Net decrease in federal funds sold		175,067			117,689
Net increase in loans		(52,403	)		(199,514	)
Purchases of property and equipment		(4,514	)		(14,730	)
Proceeds from sales of property and equipment		2,654			1,802
Proceeds from sales of other real estate		2,133			3,340
Net cash (used in) provided by investing activities		107,098			(239,121	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		(274,709	)		11,274
Net increase in federal funds purchased and securities sold under agreements to repurchase		20,648			187,469
Proceeds from issuance of short-term notes		100,000			-
Repayments of long-term notes		(81	)		(76	)
Dividends paid		(15,390	)		(15,164	)
Proceeds from exercise of stock options		812			1,278
Excess tax benefit from stock option exercises		86			92
Net cash (used in) provided by financing activities		(168,634	)		184,873
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS		(47,001	)		(1,860	)
CASH AND DUE FROM BANKS, BEGINNING		199,775			182,615
CASH AND DUE FROM BANKS, ENDING	$	152,774		$	180,755
SUPPLEMENTAL INFORMATION:
Restricted stock issued to employees of Hancock		215			445
SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES
Transfers from loans to other real estate	$	8,725		$	3,240
Financed sale of foreclosed property		2,649			400
Transfers from trading securities to available for sale securities		-			190,802

See notes to unaudited condensed consolidated financial statements.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements of Hancock Holding Company and all majority-owned subsidiaries (the “Company”) included herein are unaudited; however, they include all adjustments all of which are of a normal recurring nature which, in the opinion of management, are necessary to present fairly the Company’s Condensed Consolidated Balance Sheets at June 30, 2009 and December 31, 2008, the Company’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2009 and 2008, the Company’s Condensed Consolidated Statements of Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Although the Company believes the disclosures in these financial statements are adequate to make the interim information presented not misleading, certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2008 Annual Report on Form 10-K. The results of operations for the six months ended June 30, 2009 are not necessarily indicative of the results expected for the full year.

Use of Estimates

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The accounting principles we follow and the methods for applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry which requires management to make estimates and assumptions about future events. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. On an ongoing basis, the Company evaluates its estimates, including those related to the allowance for loan losses, intangible assets and goodwill, income taxes, pension and postretirement benefit plans and contingent liabilities. These estimates and assumptions are based on our best estimates and judgments. We evaluate estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, rising unemployment levels and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. Allowance for loan losses, deferred income taxes, and goodwill are potentially subject to material changes in the near term. Actual results could differ significantly from those estimates.

Certain reclassifications have been made to conform prior year financial information to the current period presentation. These reclassifications had no material impact on the unaudited condensed consolidated financial statements.

During the quarter, the Company corrected an error within other income that was immaterial to current and prior years and increased net income by approximately $1.1 million after taxes.

Critical Accounting Policies

There have been no material changes or developments in the Company’s evaluation of accounting estimates and underlying assumptions or methodologies that the Company believes to be Critical Accounting Policies and Estimates as disclosed in our Form 10-K, for the year ended December 31, 2008.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

2. Fair Value

Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (“SFAS No. 157”), establishes a framework for measuring fair value under generally accepted accounting principles (GAAP), clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. SFAS No. 157 defines 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 (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. Available for sale securities classified as level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and other debt and equity securities. Level 2 classified available for sale securities include mortgage-backed debt securities, collateralized mortgage obligations, and state and municipal bonds.

The Company adopted Financial Accounting Standards Board Staff Position No. 157-2 "The Effective Date of FASB Statement No. 157" for nonfinancial assets and nonfinancial liabilities on January 1, 2009.

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 financial assets and liabilities that are measured at fair value (in thousands) on a recurring basis at June 30, 2009 and December 31, 2008.

	As of June 30, 2009
	Level 1		Level 2		Net Balance
Assets
Available for sale securities:
Debt securities issued by the U.S. Treasury and other government corporations and agencies	$	202,398	$	-	$	202,398
Debt securities issued by states of the United States and political subdivisions of the states		-		167,125		167,125
Corporate debt securities		24,785		-		24,785
Residential mortgage-backed securities		-		1,038,502		1,038,502
Collateralized mortgage obligations		-		161,459		161,459
Equity securities		161		-		161
Trading securities:
Equity securities		1,752		-		1,752
Short-term investments		379,064		-		379,064
Interest rate lock commitments		-		3		3
Loans carried at fair value		-		39,439		39,439
Total assets	$	608,160	$	1,406,528	$	2,014,688
Liabilities
Swaps	$	-	$	2,460	$	2,460
Total Liabilities	$	-	$	2,460	$	2,460

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

2. Fair Value (continued)

	As of December 31, 2008
	Level 1		Level 2		Net Balance
Assets
Available for sale securities:
Debt securities issued by the U.S. Treasury and other government corporations and agencies	$	264,309	$	-	$	264,309
Debt securities issued by states of the United States and political subdivisions of the states		-		151,805		151,805
Corporate debt securities		25,916		-		25,916
Residential mortgage-backed securities		-		1,041,806		1,041,806
Collateralized mortgage obligations		-		195,771		195,771
Equity securities		149		-		149
Trading securities:
Equity securities		2,201		-		2,201
Short-term investments		362,895		-		362,895
Interest rate lock commitments		-		10		10
Loans carried at fair value		-		29,232		29,232
Total assets	$	655,470	$	1,418,624	$	2,074,094
Liabilities
Swaps	$	-	$	4,123	$	4,123
Total Liabilities	$	-	$	4,123	$	4,123

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis and, therefore, are not included in the above table. Impaired loans are level 2 assets measured using appraisals from external parties of the collateral less any prior liens or based on recent sales activity for similar assets in the property’s market. Other real estate owned are level 2 properties recorded at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less, at the date acquired. Fair values are determined by sales agreement or appraisal. Inputs include appraisal values on the properties or recent sales activity for similar assets in the property’s market. The following table presents for each of the fair value hierarchy levels the Company’s financial assets that are measured at fair value (in thousands) on a nonrecurring basis at June 30, 2009.

	As of June 30, 2009
	Level 1		Level 2		Net Balance
Assets
Impaired loans	$	-	$	32,267	$	32,267
Other real estate owned		-		8,804		8,804
Total assets	$	-	$	41,071	$	41,071

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

2. Fair Value (continued)

The following methods and assumptions were used to estimate the fair value in accordance with SFAS No. 107, Disclosures about Fair Value of Financial Instruments, of each class of financial instruments for which it is practicable to estimate:

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

Securities - Estimated fair values for securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Loans, Net of Unearned Income - The fair value of loans is estimated by discounting the future cash flows using the current rates for similar loans with the same remaining maturities.

Accrued Interest Receivable and Accrued Interest Payable– The carrying amounts are a reasonable estimate of their fair values.

Deposits – SFAS No. 107 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.

Federal Funds Purchased - For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

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

Long-Term Notes - Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. The fair value is estimated by discounting the future contractual cash flows using current market rates at which similar Notes over the same remaining term could be obtained.

Commitments - The fair value of loan commitments and letters of credit approximate the fees currently charged for similar agreements or the estimated cost to terminate or otherwise settle similar obligations. The fees associated with these financial instruments, or the estimated cost to terminate, as applicable are immaterial.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

2. Fair Value (continued)

The estimated fair values of the Company's financial instruments were as follows (in thousands):

	June 30, 2009				December 31, 2008
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash, interest-bearing deposits, federal funds sold, and short-term investments	$	643,448	$	643,448	$	749,191	$	749,191
Securities		1,596,157		1,596,157		1,681,957		1,681,957
Loans, net of unearned income		4,319,850		4,460,517		4,271,580		4,625,130
Accrued interest receivable		30,694		30,694		33,067		33,067

Financial liabilities:
Deposits	$	5,656,228	$	5,698,706	$	5,930,937	$	5,990,883
Federal funds purchased		1,825		1,825		-		-
Securities sold under agreements to repurchase		524,755		524,755		505,932		505,932
Other short-term borrowings		100,000		100,000		-		-
Long-term notes		858		858		638		638
Accrued interest payable		4,475		4,475		6,322		6,322

3. Loans and Allowance for Loan Losses

Loans, net of unearned income, totaled $4.3 billion at June 30, 2009 compared to $4.2 billion at December 31, 2008. The Company also held $47.2 million and $22.1 million in loans held for sale at June 30, 2009 and December 31, 2008, respectively, carried at lower of cost or fair value. These loans are originated on a best-efforts basis, whereby a commitment by a third party to purchase the loan has been received concurrent with the Banks’ commitment to the borrower to originate the loan.

In some instances, loans are placed on nonaccrual status. All accrued but uncollected interest related to the loan is deducted from income in the period the loan is assigned a nonaccrual status. For such period as a loan is in nonaccrual status, any cash receipts are applied first to principal, second to expenses incurred to cause payment to be made and lastly to the recovery of any reversed interest income and interest that would be due and owing subsequent to the loan being placed on nonaccrual status. Nonaccrual loans and foreclosed assets, which make up total non-performing assets, amounted to approximately 1.01% and 0.83% of total loans at June 30, 2009 and December 31, 2008, respectively. The amount of interest that would have been recognized on nonaccrual loans for the three and six months ended June 30, 2009 was approximately $0.9 million and $1.4 million, respectively. Interest recovered on nonaccrual loans that were recorded in net income for the three and six months ended June 30, 2009 was $0.03 million and $0.2 million, respectively.

The following table presents information on loans evaluated for possible impairment loss:

	June 30, 2009		December 31, 2008
Impaired loans	(In thousands)
Requiring a loss allowance	$	29,714	$	15,089
Not requiring a loss allowance		12,173		7,015
Total recorded investment in impaired loans		41,887		22,104
Impairment loss allowance required	$	9,620	$	7,317

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

3. Loans and Allowance for Loan Losses (continued)

The following table sets forth, for the periods indicated, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
	(In thousands)

Balance of allowance for loan losses at beginning of period	$	62,950	$	53,008	$	61,725	$	47,123
Provision for loan losses, net		16,919		2,787		25,261		11,605
Loans charged-off:
Commercial, real estate and mortgage		12,962		981		17,790		2,016
Direct and indirect consumer		2,052		1,361		3,684		2,670
Finance company		1,572		945		2,723		2,197
Demand deposit accounts		558		681		1,224		1,282
Total charge-offs		17,144		3,968		25,421		8,165
Recoveries of loans previously charged-off:
Commercial, real estate and mortgage		239		320		354		521
Direct and indirect consumer		412		544		862		954
Finance company		219		234		412		438
Demand deposit accounts		255		375		657		824
Total recoveries		1,125		1,473		2,285		2,737
Net charge-offs		16,019		2,495		23,136		5,428
Balance of allowance for loan losses at end of period	$	63,850	$	53,300	$	63,850	$	53,300

4. Earnings Per Share

Following is a summary of the information used in the computation of earnings per common share (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008


Net income - used in computation of earnings per share	$	13,746	$	20,984	$	27,777	$	41,041

Weighted average number of shares outstanding - used in computation of basic earnings per share		31,820		31,382		31,812		31,366


Effect of dilutive securities		189		432		161		413

Weighted average number of shares outstanding plus effect of dilutive securities - used in computation of diluted earnings per share		32,009		31,814		31,973		31,779

There were no anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2009 and June 30, 2008.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

5. Share-Based Payment Arrangements

Stock Option Plans

Hancock maintains incentive compensation plans that incorporate share-based compensation. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in note 10 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2008. No options were granted in the first six months of 2009.

A summary of option activity under the plans for the six months ended June 30, 2009, and changes during the six months then ended is presented below:

						Weighted-
						Average
				Weighted-		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Term		Intrinsic
Options	Shares			Price ($)		(Years)		Value ($000)

Outstanding at January 1, 2009		1,013,677		$	33.75		6.2
Granted		-		$	-
Exercised		(12,064	)	$	20.29			$	204
Forfeited or expired		(5,817	)	$	34.51
Outstanding at June 30, 2009		995,796		$	33.91		5.8	$	3,077
Exercisable at June 30, 2009		665,312		$	30.41		4.6	$	3,077
Share options expected to vest		350,408		$	41.00		7.9	$	-

The total intrinsic value of options exercised during the six months ended June 30, 2009 and 2008 was $0.2 million and $0.9 million, respectively.

A summary of the status of the Company’s nonvested shares as of June 30, 2009, and changes during the six months ended June 30, 2009, is presented below:

				Weighted-
				Average
	Number of			Grant-Date
	Shares			Fair Value ($)

Nonvested at January 1, 2009		621,621		$	22.59
Granted		25,275		$	43.34
Vested		(91,813	)	$	21.00
Forfeited		(4,101	)	$	28.16
Nonvested at June 30, 2009		550,982		$	23.77

As of June 30, 2009, there was $9.2 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 3.48 years. The total fair value of shares which vested during the six months ended June 30, 2009 and 2008 was $1.9 million and $1.7 million, respectively.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

6. Retirement Plans

Net periodic benefits cost includes the following components for the three and six months ended June 30, 2009 and 2008:

	Pension Benefits						Other Post-retirement Benefits
	Three Months Ended June 30,
	2009			2008			2009			2008
	(In thousands)

Service cost	$	777		$	657		$	10		$	41

Interest cost		1,208			1,129			164			122

Expected return on plan assets		(968	)		(1,208	)		-			-

Amortization of prior service cost		-			-			(13	)		(13	)

Amortization of net loss		662			237			103			37

Amortization of transition obligation		-			-			1			1

Net periodic benefit cost	$	1,679		$	815		$	265		$	188


	Pension Benefits						Other Post-retirement Benefits
	Six Months Ended June 30,
	2009			2008			2009			2008
	(In thousands)

Service cost	$	1,553		$	1,313		$	57		$	81

Interest cost		2,417			2,258			282			245

Expected return on plan assets		(1,936	)		(2,415	)		-			-

Amortization of prior service cost		-			-			(27	)		(27	)

Amortization of net loss		1,324			474			148			74

Amortization of transition obligation		-			-			3			2

Net periodic benefit cost	$	3,358		$	1,630		$	463		$	375

The Company anticipates that it will contribute $6.4 million to its pension plan and approximately $1.4 million to its post-retirement benefits in 2009. During the first six months of 2009, the Company contributed approximately $2.5 million to its pension plan and approximately $0.8 million for post-retirement benefits.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

7. Other Service Charges, Commission and Fees, and Other Income

Components of other service charges, commission and fees are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
	(In thousands)

Trust fees	$	3,855	$	4,575	$	7,181	$	8,751
Credit card merchant discount fees		2,895		2,884		5,463		5,423
Income from insurance operations		4,048		4,259		7,500		8,600
Investment and annuity fees		1,691		2,727		4,551		5,536
ATM fees		1,895		1,757		3,674		3,448
Total other service charges, commissions and fees	$	14,384	$	16,202	$	28,369	$	31,758

Components of other income are as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009			2008
	(In thousands)

Secondary mortgage market operations	$	1,827		$	753	$	2,985		$	1,531
Income from bank owned life insurance		1,814			1,580		3,269			3,024
Outsourced check income		(10	)		52		(20	)		234
Other		5,247			1,946		7,211			3,966
Total other income	$	8,878		$	4,331	$	13,445		$	8,755

8. Other Expense

Components of other expense are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
	(In thousands)

Data processing expense	$	4,694	$	4,635	$	9,339	$	8,838
Postage and communications		2,240		2,285		3,926		4,599
Ad valorem and franchise taxes		647		1,010		1,533		2,125
Legal and professional services		2,425		3,083		5,117		5,828
Stationery and supplies		444		551		908		978
Advertising		1,255		1,446		2,428		3,250
Deposit insurance and regulatory fees		5,962		689		7,945		1,014
Training expenses		81		167		179		353
Other fees		1,034		872		1,996		1,982
Annuity expense		188		141		466		1,114
Claims paid		337		384		578		654
Other expense		2,263		2,044		4,274		3,200
Total other expense	$	21,570	$	17,307	$	38,689	$	33,935

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

9. Income Taxes

The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, An Interpretation of FASB Statement No. 109 (“FIN 48”), on January 1, 2007. There were no material uncertain tax positions as of June 30, 2009 and December 31, 2008. The Company does not expect that unrecognized tax benefits will significantly increase or decrease within the next 12 months.

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. The interest accrual is considered immaterial to the Company’s consolidated balance sheet as of June 30, 2009 and December 31, 2008.

The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various returns in the states where its banking offices are located. Its filed income tax returns are no longer subject to examination by taxing authorities for years before 2005.

10. Segment Reporting

The Company’s primary segments are geographically divided into the Mississippi (MS), Louisiana (LA), Florida (FL) and Alabama (AL) markets. Each segment offers the same products and services but is managed separately due to different pricing, product demand, and consumer markets. Each segment offers commercial, consumer and mortgage loans and deposit services. In the following tables, the column “Other” includes additional consolidated subsidiaries of the Company: Hancock Investment Services, Inc. and subsidiaries, Hancock Insurance Agency, Inc. and subsidiaries, Harrison Finance Company, Magna Insurance Company and three real estate corporations owning land and buildings that house bank branches and other facilities.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

10. Segment Reporting (continued)

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

	Three Months Ended June 30, 2009

	MS			LA		FL			AL			Other		Eliminations			Consolidated
Interest income	$	34,962		$	34,372	$	4,256		$	2,085		$	6,050	$	(1,620	)	$	80,105
Interest expense		14,433			7,164		1,335			664			1,322		(1,505	)		23,413
Net interest income		20,529			27,208		2,921			1,421			4,728		(115	)		56,692
Provision for loan losses		6,851			5,281		2,084			1,059			1,644		-			16,919
Noninterest income		15,832			10,559		377			393			7,352		(9	)		34,504
Depreciation and amortization		3,156			866		127			78			132		-			4,359
Other noninterest expense		21,701			21,676		2,131			1,299			7,085		(25	)		53,867
Net income before income taxes		4,653			9,944		(1,044	)		(622	)		3,219		(99	)		16,051
Income tax expense (benefit)		(22	)		2,679		(800	)		(186	)		634		-			2,305
Net income (loss)	$	4,675		$	7,265	$	(244	)	$	(436	)	$	2,585	$	(99	)	$	13,746

Total assets	$	3,711,000		$	2,896,103	$	489,665		$	179,244		$	891,586	$	(1,120,283	)	$	7,047,315

Total interest income from affiliates	$	1,620		$	-	$	-		$	-		$	-	$	(1,620	)	$	-

Total interest income from external customers	$	33,342		$	34,372	$	4,256		$	2,085		$	6,050	$	-		$	80,105


	Three Months Ended June 30, 2008

	MS			LA		FL			AL			Other		Eliminations			Consolidated
Interest income	$	38,723		$	35,790	$	2,275		$	1,076		$	6,593	$	(2,725	)	$	81,732
Interest expense		17,371			11,787		1,173			552			1,300		(2,610	)		29,573
Net interest income		21,352			24,003		1,102			524			5,293		(115	)		52,159
Provision for loan losses		214			1,074		195			392			912		-			2,787
Noninterest income		14,523			9,835		318			184			6,986		(8	)		31,838
Depreciation and amortization		2,626			908		122			91			146		-			3,893
Other noninterest expense		21,307			16,720		1,598			1,074			7,620		(23	)		48,296
Net income before income taxes		11,728			15,136		(495	)		(849	)		3,601		(100	)		29,021
Income tax expense (benefit)		3,121			4,160		(325	)		(313	)		1,394		-			8,037
Net income (loss)	$	8,607		$	10,976	$	(170	)	$	(536	)	$	2,207	$	(100	)	$	20,984

Total assets	$	3,449,989		$	2,743,175	$	197,230		$	101,095		$	820,843	$	(1,042,216	)	$	6,270,116

Total interest income from affiliates	$	2,710		$	-	$	-		$	-		$	15	$	(2,725	)	$	-

Total interest income from external customers	$	36,013		$	35,790	$	2,275		$	1,076		$	6,578	$	-		$	81,732

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

10. Segment Reporting (continued)

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

	Six Months Ended June 30, 2009

	MS		LA		FL			AL			Other		Eliminations			Consolidated
Interest income	$	70,323	$	69,741	$	8,230		$	3,997		$	12,324	$	(3,062	)	$	161,553
Interest expense		31,050		16,235		2,991			1,471			2,499		(2,831	)		51,415
Net interest income		39,273		53,506		5,239			2,526			9,825		(231	)		110,138
Provision for loan losses		6,500		9,249		2,647			3,852			3,013		-			25,261
Noninterest income		28,123		20,142		692			619			14,001		(18	)		63,559
Depreciation and amortization		5,695		1,744		254			156			265		-			8,114
Other noninterest expense		42,946		41,259		4,032			2,822			14,941		(50	)		105,950
Net income before income taxes		12,255		21,396		(1,002	)		(3,685	)		5,607		(199	)		34,372
Income tax expense (benefit)		1,266		5,604		(1,041	)		(1,324	)		2,090		-			6,595
Net income (loss)	$	10,989	$	15,792	$	39		$	(2,361	)	$	3,517	$	(199	)	$	27,777

Total assets	$	3,711,000	$	2,896,103	$	489,665		$	179,244		$	891,586	$	(1,120,283	)	$	7,047,315

Total interest income from affiliates	$	3,043	$	-	$	9		$	-		$	10	$	(3,062	)	$	-

Total interest income from external customers	$	67,280	$	69,741	$	8,221		$	3,997		$	12,314	$	-		$	161,553


	Six Months Ended June 30, 2008

	MS		LA		FL			AL			Other		Eliminations			Consolidated
Interest income	$	80,934	$	71,261	$	4,442		$	1,838		$	13,404	$	(5,376	)	$	166,503
Interest expense		37,130		25,603		2,400			974			2,956		(5,146	)		63,917
Net interest income		43,804		45,658		2,042			864			10,448		(230	)		102,586
Provision for loan losses		4,896		3,981		271			646			1,811		-			11,605
Noninterest income		27,304		25,619		563			304			14,486		(16	)		68,260
Depreciation and amortization		5,358		1,806		226			221			287		-			7,898
Other noninterest expense		41,538		31,865		3,114			2,200			15,775		(67	)		94,425
Net income before income taxes		19,316		33,625		(1,006	)		(1,899	)		7,061		(179	)		56,918
Income tax expense (benefit)		4,880		9,622		(677	)		(689	)		2,741		-			15,877
Net income (loss)	$	14,436	$	24,003	$	(329	)	$	(1,210	)	$	4,320	$	(179	)	$	41,041

Total assets	$	3,449,989	$	2,743,175	$	197,230		$	101,095		$	820,843	$	(1,042,216	)	$	6,270,116

Total interest income from affiliates	$	5,320	$	7	$	4		$	-		$	45	$	(5,376	)	$	-

Total interest income from external customers	$	75,614	$	71,254	$	4,438		$	1,838		$	13,359	$	-		$	166,503

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

11. New Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 168, (SFAS No. 168) The “FASB Accounting Standards CodificationTM” and the Hierarchy of Generally Accepted Accounting Principles. Statement 168 establishes the FASB Accounting Standards CodificationTM (Codification) to become the source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. Statement 168 and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company will adopt the provisions of SFAS No. 168, when required, but does not expect the impact to be material to the Company’s financial condition or results of operations.

In May 2009, the FASB issued FASB Statement No. 165, Subsequent Events. SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 provides the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The impact on the Company’s financial condition or results of operations is dependent on the extent of any future subsequent events. The Company performed a review through August 6, 2009, and there were no transactions qualifying as subsequent events.

In April 2009, the FASB issued FASB Staff Position (FSP) 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction; includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market is inactive; eliminates the presumption that all transactions are distressed unless proven otherwise requiring an entity to base its conclusion on the weight of evidence; and requires an entity to disclose a change in valuation technique resulting from application of the FSP and to quantify its effects, if practicable. FSP 157-4 is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of FSP 157-4 in the second quarter did not have a material impact on the Company’s financial condition or results of operations.

In April 2009, the FASB issued FSP 115-2 and FSP 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP changes existing guidance for determining whether an impairment is other than temporary to debt securities; replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis; requires that an entity recognize noncredit losses on held-to-maturity debt securities in other comprehensive income and amortize the amount over the remaining life of the security in a prospective manner by offsetting the recorded value of the asset unless the security is subsequently sold or there are credit losses; requires an entity to present the total other-than-temporary impairment in the statement of earnings with an offset for the amount recognized in other comprehensive income; and at adoption, requires an entity to record a cumulative-effect adjustment as of the beginning of the period of adoption to reclassify the noncredit component of a previously recognized other-than-temporary impairment from retained earnings to accumulated other comprehensive income if the entity does not intend to sell the security and it is more likely than not

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

11. New Accounting Pronouncements (continued)

that the entity will be required to sell the security before recovery. FSP 115-2 and 124-2 are effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of FSP 115-2 and FSP 124-2 in the second quarter did not have a material impact on the Company’s financial condition or results of operations.

In April 2009, the FASB issued FSP 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. Under this FSP, a publicly traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. In addition, an entity shall disclose in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position. FSP 107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of FSP 107-1 and APB 28-1 in the second quarter did not have a material impact on the Company’s financial condition or results of operations.

In February 2009, the FASB issued FSP 141(R)-a, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies, that amends provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination. The FSP is effective for all business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact on the Company’s financial condition or results of operations is dependent on the extent of future business combinations.

In January 2009, FASB issued Emerging Issues Task Force (“EITF”) 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20. EITF No. 99-20-1 replaces the requirement to use market participant assumptions when determining future cash flows and, instead, requires an assessment of whether it is probable that there has been an adverse change in estimated cash flows. It requires an entity to consider all available information relevant to the collectability of the security, including information about past events, current conditions, and reasonable and supportable forecasts when developing estimates of future cash flows. EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. The adoption of EITF 99-20-1 did not have a material impact on the Company’s financial condition or results of operations.

In December 2008, the FASB issued FSP No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, which provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of the disclosures are to provide users of financial statements with an understanding of how investment allocation decisions are made; the major categories of plan assets; the inputs and valuation techniques used to measure fair value of plan assets; the effect of fair value measurements using significant unobservable inputs (level 3) on changes in plan assets for the period; and significant concentrations on risk within plan assets. FAS No. 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Company is assessing the impact of adopting FSP No. 132(R)-1, but does not expect the impact to be material to the Company’s financial condition or results of operations.

Index

Hancock Holding Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

11. New Accounting Pronouncements (continued)

In October 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a Financial Asset in a Market That is Not Active, which clarifies the application of SFAS No. 157, Fair Value Measurements, in an inactive market. Application issues clarified include: how management’s internal assumptions should be considered when measuring fair value when relevant observable data do not exist; how observable market information in a market that is not active should be considered when measuring fair value; and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. FSP 157-3 was effective immediately and did not have a material impact on the Company’s financial condition or results of operations.

In June 2008, the FASB issued EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities, which provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data including any amounts related to interim periods, summaries of earnings and selected financial data. The adoption of EITF 03-6-1 during the first quarter of 2009 did not have a material impact on the Company’s financial condition or results of operations.

In April 2008, the FASB issued FSP 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142.) The intent of the FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R and other U.S. generally accepted accounting principles. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of FSP 142-3 during the first quarter of 2009 did not have a material impact on the Company’s financial condition or results of operations.

In February 2008, the FASB issued FSP 157-2, Effective Date of FASB Statement No. 157, which deferred the effective date for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) and was effective January 1, 2009. The adoption of FSP 157-2 during the first quarter of 2009 did not have a material impact on the Company’s financial condition or results of operations.

Index

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

Overview

General

The following discussion should be read in conjunction with our financial statements included with this report and our financial statements and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2008 Annual Report on Form 10-K. Our discussion includes various forward-looking statements about our markets, the demand for our products and services and our future results. These statements are based on certain assumptions we consider reasonable. For information about these assumptions, you should refer to the section below entitled “Forward-Looking Statements.”

We were organized in 1984 as a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and are headquartered in Gulfport, Mississippi. We currently operate more than 150 banking and financial services offices and more than 130 automated teller machines (ATMs) in the states of Mississippi, Louisiana, Florida and Alabama through four wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi (Hancock Bank MS), Hancock Bank of Louisiana, Baton Rouge, Louisiana (Hancock Bank LA), Hancock Bank of Florida, Tallahassee, Florida (Hancock Bank FL) and Hancock Bank of Alabama, Mobile, Alabama (Hancock Bank AL). Hancock Bank MS, Hancock Bank LA, Hancock Bank FL and Hancock Bank AL are referred to collectively as the “Banks.” Hancock Bank subsidiaries include Hancock Investment Services, Hancock Insurance Agency, and Harrison Finance Company.

The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. Our operating strategy is to provide our customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. At June 30, 2009, we had total assets of $7.0 billion and employed on a full-time equivalent basis 1,257 persons in Mississippi, 559 persons in Louisiana, 52 persons in Florida and 43 persons in Alabama.

RESULTS OF OPERATIONS

Net income for the second quarter of 2009 totaled $13.7 million, a decrease of $7.2 million, or 34.5%, from the second quarter of 2008. Diluted earnings per share for the second quarter of 2009 were $0.43, a decrease of $0.23 from the same quarter a year ago. Return on average assets for the second quarter of 2009 was 0.78% compared to 1.36% for the second quarter of 2008.

Our second quarter net income was significantly impacted by a higher level of net charge-offs due to the ongoing recession and continued rise in unemployment. Net charge-offs for 2009’s second quarter were $16.0 million, or 1.50 percent of average loans, compared to $2.5 million, or 0.27% of average loans in the second quarter of 2008. Of the overall increase in net charge-offs of $13.5 million, $11.9 million was reflected in commercial loans and the balance of $1.6 million in consumer loan categories. The higher level of commercial net charge-offs were largely confined to land development and commercial real estate credits in various parts of our four state footprint.

Our balance sheet showed strong growth this quarter compared to the same quarter a year ago. Total assets increased $0.8 billion, or 12.4% compared to June 30, 2008. The growth in assets was organic as we did not record any acquisitions in the past twelve months. Period-end loans increased $484.9 million, or 12.8%, from the same quarter a year ago. Period-end deposits increased $635.4 million, or 12.7%, from June 30, 2008. We also remain very well capitalized with total equity of $630.8 million at June 30, 2009, up $57.4 million, or 10.0%, from June 30, 2008.

Index

Net Interest Income

Net interest income (te) for the second quarter increased $5.0 million, or 9.2 percent, while the net interest margin (te) of 3.78 percent was 13 basis points narrower than the same quarter a year ago. Growth in average earning assets was strong compared to the same quarter a year ago with an increase of $725.6 million, or 13.0 percent, reflected in higher average loans (up $565.3 million) and short-term investments (up $408.8 million) partially offset by lower securities (down $248.6 million). With short-term interest rates down significantly from the same quarter a year ago, our loan yield fell 80 basis points, pushing the yield on average earning assets down 77 basis points. However, total funding costs over the same quarter a year ago were down 64 basis points.

Provision for Loan Losses

The amount of the allowance for loan losses equals the cumulative total of the provision for loan losses, reduced by actual loan charge-offs, and increased by recoveries of loans previously charged-off. A specific loan is charged-off when management believes, after considering, among other things, the borrower's financial condition and the value of any collateral, that collection of the loan is unlikely. Provisions are made to the allowance to reflect incurred losses associated with our loan portfolio. We recorded a provision for loan losses of $16.9 million in the second quarter which is a $14.1 million increase in the provision for loan losses compared to $2.8 million for the quarter ended June 30, 2008. This increase was necessary to adjust the allowance to the level dictated by the Company’s reserving methodologies. The provision remains elevated due to the ongoing recession and continued rise in unemployment.

Allowance for Loan Losses and Asset Quality

At June 30, 2009, the allowance for loan losses was $63.9 million compared with $61.7 million at December 31, 2008, an increase of $2.2 million. The increase in the allowance for loan losses through the first six months of 2009 is primarily attributed to both an increased estimated provision for SFAS No. 5 pooled loan loss analysis and an increased specific reserve for SFAS No. 114 impairment across all markets. Management utilizes quantitative methodologies and modeling to determine the adequacy of the allowance for loan and lease losses. A detailed description of our methodology was included in the Company’s annual report on Form 10-K for the year ended December 31, 2008. Management believes the June 30, 2009 allowance level is adequate.

Net charge-offs, as a percent of average loans, were 1.50% for the second quarter of 2009, compared to 0.27% in the second quarter of 2008. The majority of the increase in net charge-offs, as compared to the same time last year, was caused by the weakening local real estate markets, mostly in commercial real estate loans. Of the overall increase in net charge-offs of $13.5 million, $11.9 million was reflected in commercial loans with the balance of $1.6 million in consumer loan categories. The higher level of commercial net charge-offs were largely confined to land development and commercial real estate credits and were confined to a relatively small number of credits.

Nonaccrual loans were $34.2 million at June 30, 2009, an increase of $16.1 million, from $18.1 million at June 30, 2008. This increase is due to the weakening real estate markets across all markets due to the ongoing recession.

Index

The following information is useful in determining the adequacy of the loan loss allowance and loan loss provision. The ratios are calculated using average loan balances (amounts in thousands).

	At and for the
	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Net charge-offs to average loans (annualized)		1.50	%		0.27	%		1.09	%		0.30	%

Provision for loan losses to average loans (annualized)		1.59	%		0.30	%		1.19	%		0.63	%

Allowance for loan losses to average loans		1.49	%		1.44	%		1.49	%		1.45	%

Gross charge-offs	$	17,144		$	3,968		$	25,421		$	8,165

Gross recoveries	$	1,125		$	1,473		$	2,285		$	2,737

Non-accrual loans	$	34,189		$	18,106		$	34,189		$	18,106

Accruing loans 90 days or more past due	$	11,435		$	6,449		$	11,435		$	6,449

Noninterest Income

Noninterest income for the second quarter of 2009 was up $2.7 million, or 8%, compared to the same quarter a year ago. Other income increased $3.5 million mainly due to a $1.8 million increase in other investment income, $1.4 million in gains on the sales of land and $0.4 million received on a legal settlement. Secondary mortgage market operations were up $1.1 million, or 143%, due to increased volume of secondary market loans. Because of the historically low rate environment, the refinancing of current loans increased during the first half of 2009. Offsetting the increases were trust fees (down $0.7 million, or 16%), because of reduced market values of accounts due to poor economic conditions and investment and annuity fees (down $1.0 million, or 38%), because of decreased production and poor economic factors. Noninterest income for the first six months of 2009 was down $4.7 million, or 7%, compared to the first six months of 2008 for the same reasons stated above additionally offset by a $1.1 million decrease in income from insurance operations that occurred mostly in the first quarter due a decrease in credit life premium production. Also contributing to the reduction of noninterest income from the first six months of last year were securities transaction gains of $6.0 million in the first quarter of 2008. We received proceeds from the VISA IPO which resulted in a $2.8 million realized securities gain and we had a $3.2 million net gain for a fair value adjustment up to the point in time of a transfer on trading securities we reclassified from trading to available for sale because we intended to hold them for a longer period of time.

The components of noninterest income for the three and six months ended June 30, 2009 and 2008 are presented in the following table:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
	(In thousands)

Service charges on deposit accounts	$	11,242	$	10,879	$	21,745	$	21,669
Trust fees		3,855		4,575		7,181		8,751
Credit card merchant discount fees		2,895		2,884		5,463		5,423
Income from insurance operations		4,048		4,259		7,500		8,600
Investment and annuity fees		1,691		2,727		4,551		5,536
ATM fees		1,895		1,757		3,674		3,448
Secondary mortgage market operations		1,827		753		2,985		1,531
Other income		7,051		3,578		10,460		7,224
Securities transactions gains, net		-		426		-		6,078
Total noninterest income	$	34,504	$	31,838	$	63,559	$	68,260

Index

Noninterest Expense

Operating expenses for the second quarter of 2009 were $6.0 million, or 12%, higher compared to the same quarter a year ago. The main increase from the same quarter a year ago was reflected in higher levels of deposit insurance and regulatory fees which were up $5.3 million, or 766%, due to the expiration of the FDIC special credit in the second quarter of 2008 and a $3.4 million FDIC special assessment in the second quarter of 2009. Total personnel expense also increased $1.7 million, or 6%, due to salary increases and increased pension and postretirement expense. There were also some offsets to the increase in operating expenses over the same quarter a year ago. Legal and professional services expense was down $0.7 million, or 21%, due to reduced audit fees and reduced commissions paid in Magna Insurance Company. Franchise taxes were down $0.4 million, or 36%, because of refunds received in Magna and Harrison Finance Company. Operating expenses for the first six months of 2009 were $11.7 million, or 11%, higher compared to the first six months of 2008. As explained above, deposit insurance and regulatory fees increased $6.9 million in addition to an increase of $6.8 million in personnel expenses due to an increase in employees to support increased loan production. These increases were partially offset by decreases in postage and communications ($0.7 million or 15%), legal and professional services ($0.7 million or 12%) and advertising ($0.8 million or 25%).

The following table presents the components of noninterest expense for the three and six months ended June 30, 2009 and 2008.

	Three Months Ended June 30,					Six Months Ended June 30,
	2009		2008			2009		2008
	(In thousands)

Employee compensation	$	22,577	$	21,565		$	46,238	$	41,183
Employee benefits		6,126		5,466			13,240		11,479
Total personnel expense		28,703		27,031			59,478		52,662
Equipment and data processing expense		7,277		7,420			14,456		14,532
Net occupancy expense		5,016		4,702			10,071		9,303
Postage and communications		2,240		2,285			3,926		4,599
Ad valorem and franchise taxes		647		1,010			1,533		2,125
Legal and professional services		2,425		3,083			5,117		5,828
Stationery and supplies		444		551			908		978
Amortization of intangible assets		354		364			709		729
Advertising		1,255		1,446			2,428		3,250
Deposit insurance and regulatory fees		5,962		689			7,945		1,014
Training expenses		81		167			179		353
Other real estate owned expense, net		213		(79	)		578		132
Other expense		3,609		3,520			6,736		6,818
Total noninterest expense	$	58,226	$	52,189		$	114,064	$	102,323

Income Taxes

For the six months ended June 30, 2009 and 2008, the effective income tax rates were approximately 19% and 28%, respectively. Because of the reduced level of pretax income in 2009, the tax exempt interest income and the utilization of tax credits had a significant impact on the effective tax rate. The total amount of tax-exempt income earned during the first six months of 2009 was $10.4 million compared to $8.8 million in the comparable period in 2008. Tax-exempt income for the six months ended June 30, 2009 consisted of $2.5 million from securities and $7.9 million from loans and leases. Tax-exempt income for the first six months of 2008 consisted of $3.0 million from securities and $5.8 million from loans and leases. The total amount of tax credits earned during the first six months of 2009 was $2.6 million compared to $2.0 million in the comparable period in 2008. The source of the tax credits for 2009 resulted from investments in New Market Tax Credits, Qualified Zone Activity Bonds Credits, Work Opportunity Tax Credits, related to hiring individuals in the Go Zone, and Historic Tax Credits.

Index

Selected Financial Data

The following tables contain selected financial data comparing our consolidated results of operations for the three and six months ended June 30, 2009 and 2008.

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Per Common Share Data	(In thousands, except per share data)
Earnings per share:
Basic	$	0.43	$	0.67	$	0.87	$	1.31
Diluted	$	0.43	$	0.66	$	0.87	$	1.29
Cash dividends per share	$	0.24	$	0.24	$	0.48	$	0.48
Book value per share (period-end)	$	19.82	$	18.27	$	19.82	$	18.27
Weighted average number of shares:
Basic		31,820		31,382		31,812		31,366
Diluted (1)		32,009		31,814		31,973		31,779
Period-end number of shares		31,827		31,386		31,827		31,386
Market data:
High price	$	41.19	$	45.68	$	45.56	$	45.68
Low price	$	30.12	$	38.38	$	22.51	$	33.45
Period-end closing price	$	32.49	$	39.29	$	32.49	$	39.29
Trading volume		17,040		14,527		35,093		31,731

(1) There were no anti-dilutive share-based incentives outstanding for the three and six months ended June 30, 2009 and June 30, 2008.

Index

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Performance Ratios	(dollar amounts in thousands)
Return on average assets		0.78	%		1.36	%		0.79	%		1.33	%
Return on average common equity		8.67	%		14.51	%		8.89	%		14.32	%
Earning asset yield (tax equivalent ("TE"))		5.26	%		6.03	%		5.26	%		6.16	%
Total cost of funds		1.48	%		2.12	%		1.62	%		2.30	%
Net interest margin (TE)		3.78	%		3.91	%		3.64	%		3.86	%
Common equity (period-end) as a percent of total assets (period-end)		8.95	%		9.15	%		8.95	%		9.15	%
Leverage ratio (period-end)		8.13	%		8.57	%		8.13	%		8.57	%
FTE headcount		1,911			1,903			1,911			1,903

Asset Quality Information
Non-accrual loans	$	34,189		$	18,106		$	34,189		$	18,106
Foreclosed assets	$	8,884		$	1,693		$	8,884		$	1,693
Total non-performing assets	$	43,073		$	19,799		$	43,073		$	19,799
Non-performing assets as a percent of loans and foreclosed assets		1.01	%		0.52	%		1.01	%		0.52	%
Accruing loans 90 days past due	$	11,435		$	6,449		$	11,435		$	6,449
Accruing loans 90 days past due as a percent of loans		0.27	%		0.17	%		0.27	%		0.17	%
Non-performing assets + accruing loans 90 days past due to loans and foreclosed assets		1.27	%		0.69	%		1.27	%		0.69	%
Net charge-offs	$	16,019		$	2,495		$	23,136		$	5,428
Net charge-offs as a percent of average loans		1.50	%		0.27	%		1.09	%		0.30	%
Allowance for loan losses	$	63,850		$	53,300		$	63,850		$	53,300
Allowance for loan losses as a percent of period-end loans		1.49	%		1.41	%		1.49	%		1.41	%
Allowance for loan losses to NPAs + accruing loans 90 days past due		117.14	%		203.06	%		117.14	%		203.06	%
Provision for loan losses	$	16,919		$	2,787		$	25,261		$	11,605

Average Balance Sheet
Total loans	$	4,277,351		$	3,712,005		$	4,281,342		$	3,675,306
Securities		1,581,966			1,830,533			1,616,417			1,782,765
Short-term investments		466,350			57,518			501,688			128,502
Earning assets		6,325,667			5,600,056			6,399,447			5,586,573
Allowance for loan losses		(63,027	)		(53,012	)		(62,681	)		(50,198	)
Other assets		762,972			676,189			767,546			681,306
Total assets	$	7,025,612		$	6,223,233		$	7,104,312		$	6,217,681

Noninterest bearing deposits	$	955,050		$	880,375		$	934,542		$	869,541
Interest bearing transaction deposits		1,497,395			1,447,301			1,480,194			1,412,006
Interest bearing public fund deposits		1,376,203			946,411			1,437,438			954,290
Time deposits		1,878,473			1,687,218			1,955,770			1,768,022
Total interest bearing deposits		4,752,071			4,080,930			4,873,402			4,134,318
Total deposits		5,707,121			4,961,305			5,807,944			5,003,859
Other borrowed funds		573,739			567,151			555,209			525,847
Other liabilities		108,666			113,096			110,963			111,781
Common stockholders' equity		636,086			581,681			630,196			576,194
Total liabilities & common stockholders' equity	$	7,025,612		$	6,223,233		$	7,104,312		$	6,217,681

Index

							Six Months Ended June 30,
							2009			2008
Period-end Balance Sheet							(dollar amounts in thousands)
Commercial/real estate loans							$	2,747,048		$	2,346,241
Mortgage loans								405,896			410,469
Direct consumer loans								590,742			522,805
Indirect consumer loans								418,595			393,625
Finance company loans								110,375			114,664
Total loans								4,272,656			3,787,804
Loans held for sale								47,194			28,808
Securities								1,596,157			1,796,016
Short-term investments								490,674			9,848
Earning assets								6,406,681			5,622,476
Allowance for loan losses								(63,850	)		(53,300	)
Other assets								704,484			700,940
Total assets							$	7,047,315		$	6,270,116

Noninterest bearing deposits							$	953,435		$	894,544
Interest bearing transaction deposits								1,457,020			1,460,848
Interest bearing public funds deposits								1,316,740			1,003,415
Time deposits								1,929,033			1,662,001
Total interest bearing deposits								4,702,793			4,126,264
Total deposits								5,656,228			5,020,808
Other borrowed funds								638,166			574,981
Other liabilities								122,147			100,922
Common stockholders' equity								630,774			573,405
Total liabilities & common stockholders' equity							$	7,047,315		$	6,270,116


	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008				2009			2008
Net Charge-Off Information	(dollar amounts in thousands)
Net charge-offs:
Commercial/real estate loans	$	12,524		$	600		$	17,060		$	1,434
Mortgage loans		199			61			376			61
Direct consumer loans		1,226			442			1,825			1,031
Indirect consumer loans		717			681			1,564			1,143
Finance company loans		1,353			711			2,311			1,759
Total net charge-offs	$	16,019		$	2,495		$	23,136		$	5,428

Net charge-offs to average loans:
Commercial/real estate loans		1.86	%		0.11	%		1.28	%		0.13	%
Mortgage loans		0.18	%		0.06	%		0.17	%		0.03	%
Direct consumer loans		0.82	%		0.34	%		0.61	%		0.40	%
Indirect consumer loans		0.68	%		0.71	%		0.74	%		0.59	%
Finance company loans		4.87	%		2.52	%		4.13	%		3.12	%
Total net charge-offs to average net loans		1.50	%		0.27	%		1.09	%		0.30	%

Index

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Average Balance Sheet Composition	(dollar amounts in thousands)
Percentage of earning assets/funding sources:
Loans		67.62	%		66.28	%		66.90	%		65.79	%
Securities		25.01	%		32.69	%		25.26	%		31.91	%
Short-term investments		7.37	%		1.03	%		7.84	%		2.30	%
Earning assets		100.00	%		100.00	%		100.00	%		100.00	%

Noninterest bearing deposits		15.10	%		15.72	%		14.60	%		15.56	%
Interest bearing transaction deposits		23.67	%		25.84	%		23.13	%		25.28	%
Interest bearing public funds deposits		21.76	%		16.90	%		22.46	%		17.08	%
Time deposits		29.69	%		30.13	%		30.56	%		31.65	%
Total deposits		90.22	%		88.59	%		90.75	%		89.57	%
Other borrowed funds		9.07	%		10.13	%		8.68	%		9.41	%
Other net interest-free funding sources		0.71	%		1.28	%		0.57	%		1.02	%
Total funding sources		100.00	%		100.00	%		100.00	%		100.00	%

Loan mix:
Commercial/real estate loans		63.05	%		61.21	%		62.89	%		61.19	%
Mortgage loans		10.57	%		11.13	%		10.49	%		11.05	%
Direct consumer loans		13.95	%		14.19	%		14.04	%		14.16	%
Indirect consumer loans		9.83	%		10.41	%		9.94	%		10.52	%
Finance company loans		2.60	%		3.06	%		2.64	%		3.08	%
Total loans		100.00	%		100.00	%		100.00	%		100.00	%

Average dollars
Loans	$	4,277,351		$	3,712,005		$	4,281,342		$	3,675,306
Securities		1,581,966			1,830,533			1,616,417			1,782,765
Short-term investments		466,350			57,518			501,688			128,502
Earning assets	$	6,325,667		$	5,600,056		$	6,399,447		$	5,586,573

Noninterest bearing deposits	$	955,050		$	880,375		$	934,542		$	869,541
Interest bearing transaction deposits		1,497,395			1,447,301			1,480,194			1,412,006
Interest bearing public funds deposits		1,376,203			946,411			1,437,438			954,290
Time deposits		1,878,473			1,687,218			1,955,770			1,768,022
Total deposits		5,707,121			4,961,305			5,807,944			5,003,859
Other borrowed funds		573,739			567,151			555,209			525,847
Other net interest-free funding sources		44,807			71,600			36,294			56,867
Total funding sources	$	6,325,667		$	5,600,056		$	6,399,447		$	5,586,573

Loans:
Commercial/real estate loans	$	2,696,500		$	2,272,057		$	2,692,553		$	2,248,375
Mortgage loans		452,324			413,076			449,050			406,225
Direct consumer loans		596,725			526,752			601,180			520,597
Indirect consumer loans		420,444			386,565			425,675			386,775
Finance company loans		111,358			113,555			112,884			113,334
Total average loans	$	4,277,351		$	3,712,005		$	4,281,342		$	3,675,306

Index

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

	Three Months Ended June 30,							Three Months Ended June 30,
	2009							2008
(dollars in thousands)	Interest		Volume		Rate			Interest			Volume		Rate

Average earning assets
Commercial & real estate loans (TE)	$	35,573	$	2,696,500		5.29	%	$	34,223		$	2,272,057		6.05	%
Mortgage loans		6,411		452,324		5.67	%		6,124			413,076		5.93	%
Consumer loans		20,067		1,128,527		7.13	%		20,960			1,026,872		8.21	%
Loan fees & late charges		188		-		0.00	%		(48	)		-		0.00	%
Total loans (TE)		62,239		4,277,351		5.83	%		61,259			3,712,005		6.63	%

US treasury securities		46		11,146		1.65	%		73			11,364		2.59	%
US agency securities		1,699		171,430		3.96	%		3,728			335,607		4.44	%
CMOs		2,110		167,295		5.04	%		1,843			149,640		4.93	%
Mortgage backed securities		13,052		1,043,590		5.00	%		14,060			1,101,269		5.11	%
Municipals (TE)		2,369		160,703		5.90	%		2,361			182,571		5.17	%
Other securities		340		27,802		4.89	%		535			50,081		4.27	%
Total securities (TE)		19,616		1,581,966		4.96	%		22,600			1,830,532		4.94	%

Total short-term investments		1,198		466,350		1.03	%		305			57,518		2.13	%

Average earning assets yield (TE)	$	83,053	$	6,325,667		5.26	%	$	84,164		$	5,600,055		6.03	%

Interest bearing liabilities
Interest bearing transaction deposits	$	1,966	$	1,497,395		0.53	%	$	3,273		$	1,447,301		0.91	%
Time deposits		13,524		1,878,473		2.89	%		16,089			1,687,218		3.84	%
Public funds		5,213		1,376,203		1.52	%		6,170			946,411		2.62	%
Total interest bearing deposits		20,703		4,752,071		1.75	%		25,532			4,080,930		2.52	%

Total borrowings		2,710		573,739		1.89	%		4,041			567,151		2.87	%

Total interest bearing liability cost	$	23,413	$	5,325,810		1.76	%	$	29,573		$	4,648,081		2.56	%

Noninterest bearing deposits				955,050								880,375
Other net interest-free funding sources				44,807								71,600

Total Cost of Funds	$	23,413	$	6,325,667		1.48	%	$	29,573		$	5,600,056		2.12	%

Net Interest Spread (TE)	$	59,640				3.50	%	$	54,591					3.47	%

Net Interest Margin (TE)	$	59,640	$	6,325,667		3.78	%	$	54,591		$	5,600,056		3.91	%

Index

	Six Months Ended June 30,							Six Months Ended June 30,
	2009							2008
(dollars in thousands)	Interest		Volume		Rate			Interest		Volume		Rate

Average earning assets
Commercial & real estate loans (TE)	$	70,037	$	2,692,553		5.24	%	$	70,805	$	2,248,375		6.33	%
Mortgage loans		12,866		449,050		5.73	%		12,085		406,225		5.95	%
Consumer loans		40,634		1,139,739		7.19	%		42,500		1,020,706		8.37	%
Loan fees & late charges		533		-		0.00	%		68		-		0.00	%
Total loans (TE)		124,070		4,281,342		5.83	%		125,458		3,675,306		6.86	%

US treasury securities		96		11,230		1.73	%		190		11,374		3.36	%
US agency securities		4,015		198,565		4.04	%		9,367		406,619		4.61	%
CMOs		4,418		177,541		4.98	%		3,571		146,665		4.87	%
Mortgage backed securities		26,422		1,044,659		5.06	%		25,085		978,861		5.13	%
Municipals (TE)		4,654		157,502		5.91	%		4,861		188,179		5.17	%
Other securities		702		26,920		5.21	%		1,093		51,067		4.28	%
Total securities (TE)		40,307		1,616,417		4.99	%		44,167		1,782,765		4.96	%

Total short-term investments		3,069		501,688		1.23	%		1,766		128,502		2.76	%

Average earning assets yield (TE)	$	167,446	$	6,399,447		5.26	%	$	171,391	$	5,586,573		6.16	%

Interest bearing liabilities
Interest bearing transaction deposits	$	4,052	$	1,480,194		0.55	%	$	7,225	$	1,412,006		1.03	%
Time deposits		30,230		1,955,770		3.12	%		36,544		1,768,022		4.16	%
Public funds		11,775		1,437,438		1.65	%		12,362		954,290		2.61	%
Total interest bearing deposits		46,057		4,873,402		1.91	%		56,131		4,134,318		2.73	%

Total borrowings		5,358		555,209		1.95	%		7,786		525,847		2.98	%

Total interest bearing liability cost	$	51,415	$	5,428,611		1.91	%	$	63,917	$	4,660,165		2.76	%

Noninterest bearing deposits				934,542							869,541
Other net interest-free funding sources				36,294							56,867

Total Cost of Funds	$	51,415	$	6,399,447		1.62	%	$	63,917	$	5,586,573		2.30	%

Net Interest Spread (TE)	$	116,031				3.35	%	$	107,474				3.40	%

Net Interest Margin (TE)	$	116,031	$	6,399,447		3.64	%	$	107,474	$	5,586,573		3.86	%

LIQUIDITY

Liquidity Management

Liquidity management encompasses our ability to ensure that funds are available to meet the cash flow requirements of depositors and borrowers, while also ensuring that we have adequate cash flow to meet our various needs, including operating, strategic and capital. Our principal source of liquidity is dividends from our subsidiary banks.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and maturing interest-bearing deposits with other banks are additional sources of funding.

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts. Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and represent our incremental borrowing capacity. Our short-term borrowing capacity includes an approved line of credit with the Federal Home Loan Bank of $315 million and borrowing capacity at the Federal Reserve’s Discount Window in excess of $150 million.

Index

For the six months ended June 30, 2009, the Company did not sell any securities.

The following liquidity ratios at June 30, 2009 and December 31, 2008 compare certain assets and liabilities to total deposits or total assets:

	June 30,	December 31,
	2009	2008

Total securities to total deposits	28.22%	28.36%

Total loans (net of unearned income) to total deposits	75.54%	71.65%

Interest-earning assets to total assets	90.91%	90.73%

Interest-bearing deposits to total deposits	83.14%	83.77%

CONTRACTUAL OBLIGATIONS

Payments due from us under specified long-term and certain other binding contractual obligations were scheduled in our annual report on Form 10-K for the year ended December 31, 2008. The most significant obligations, other than obligations under deposit contracts and short-term borrowings, were for operating leases for banking facilities. There have been no material changes since year end.

CAPITAL RESOURCES

We continue to maintain an adequate capital position. The ratios as of June 30, 2009 and December 31, 2008 are as follows:

	June 30,	December 31,
	2009	2008

Common equity (period-end) as a percent of total assets (period-end)	8.95%	8.50%

Regulatory ratios:

Total capital to risk-weighted assets (1)	12.20%	11.86%

Tier 1 capital to risk-weighted assets (2)	10.98%	10.09%

Leverage capital to average total assets (3)	8.13%	8.06%

(1)

Total capital consists of equity capital less intangible assets plus a limited amount of allowance for loan losses. Risk-weighted assets represent the assigned risk portion of all on and off-balance-sheet assets. Based on Federal Reserve Board guidelines, assets are assigned a risk factor percentage from 0% to 100%. A minimum ratio of total capital to risk-weighted assets of 8% is required.

(2)	Tier 1 capital consists of equity capital less intangible assets. A minimum ratio of tier 1 capital to risk-weighted assets of 4% is required.

(3)	Leverage capital consists of equity capital less goodwill and core deposit intangibles. Regulations require a minimum 3% leverage capital ratio for an entity to be considered adequately capitalized.

Index

BALANCE SHEET ANALYSIS

Goodwill

Goodwill represents costs in excess of the fair value of net assets acquired in connection with purchase business combinations. In accordance with the provisions of SFAS No. 142 Goodwill and Other Intangibles (“SFAS No. 142”), the Company tests its goodwill for impairment annually. The last test was conducted as of September 30, 2008. No impairment charges were recognized as of June 30, 2009. The carrying amount of goodwill was $62.3 million as of June 30, 2009 and December 31, 2008.

Earnings Assets

Earning assets serve as the primary revenue streams for the Company and are comprised of securities, loans, federal funds sold, and securities purchased under resale agreements. At June 30, 2009, average earning assets were $6.3 billion, or 90% of total assets, compared with $5.6 billion or 90% of total assets at June 30, 2008. This increase resulted mostly from modest increases in the loan portfolios and short-term investments.

Securities

Our investment in securities was $1.6 billion at June 30, 2009 and $1.7 billion at December 31, 2008. The vast majority of securities in our portfolio are U.S. Treasury and U.S. government agency securities and mortgage-backed securities issued or guaranteed by U.S. government agencies. We also maintain portfolios of securities consisting of CMOs and tax-exempt obligations of states and political subdivisions. The portfolios are designed to enhance liquidity while providing acceptable rates of return. Therefore, we invest only in high quality securities of investment grade quality and with a target duration, for the overall portfolio, generally between two to five years. Our policies limit investments to securities having a rating of no less than “Baa”, or its equivalent by a Nationally Recognized Statistical Rating Agency, except for certain obligations of Mississippi, Louisiana, Florida or Alabama counties, parishes and municipalities.

Loans

We held $4.3 billion in loans at June 30, 2009 and at December 31, 2008. Our primary lending focus is to provide commercial, consumer, commercial leasing and real estate loans to consumers and to small and middle market businesses in their respective market areas. Each loan file is reviewed by the Bank's loan operations quality assurance function, a component of its loan review system, to ensure proper documentation and asset quality. At June 30, 2009, Hancock’s average total loans were $4.3 billion, compared to $3.7 billion at June 30, 2008. The $565.3 million, or 15%, increase resulted from growth mostly in commercial and real estate loans and due to branch expansions. Commercial and real estate loans comprised 63% of the average loan portfolio at June 30, 2009 compared to 61% at June 30, 2008. Included in this category are commercial real estate loans, which are secured by properties, used in commercial or industrial operations.

Other Earning Assets

Federal funds sold, CDs in banks, and other short-term investments averaged $466.4 million at June 30, 2009, compared to $57.5 million at June 30, 2008. The increase was primarily in other short-term investments. We utilize these products as a short-term investment alternative whenever we have excess liquidity.

Interest Bearing Liabilities

Interest bearing liabilities include our interest bearing deposits as well as borrowings. Deposits represent our primary funding source. We continue our focus on multiple account, core deposit relationships and strategic placement of time deposit campaigns to stimulate overall deposit growth. Borrowings consist primarily of sales of securities under repurchase agreements.

Index

Deposits

Total deposits were $5.7 billion at June 30, 2009 and $5.9 billion at December 31, 2008. Average interest bearing deposits at June 30, 2009 were $4.8 billion, an increase of $671.1 million over June 30, 2008. The increase was primarily in public fund deposits. We have several programs designed to attract depository accounts offered to consumers and to small and middle market businesses at interest rates generally consistent with market conditions. We traditionally price our deposits to position competitively within the local market. Deposit flows are controlled primarily through pricing, and to a certain extent, through promotional activities.

Borrowings

Our borrowings consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and other borrowings. Total borrowings at June 30, 2009 were $627.4 million compared to $506.6 million at December 31, 2008. The increase was primarily in FHLB advances.

Off-Balance Sheet Arrangements

Loan Commitments and Letters of Credit

In the normal course of business, we enter into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of our customers. Such instruments are not reflected in the accompanying condensed consolidated financial statements until they are funded and involve, to varying degrees, elements of credit risk not reflected in the condensed consolidated balance sheets. The contract amounts of these instruments reflect our exposure to credit loss in the event of non-performance by the other party on whose behalf the instrument has been issued. We undertake the same credit evaluation in making commitments and conditional obligations as we do for on-balance-sheet instruments and may require collateral or other credit support for off-balance-sheet financial instruments.

At June 30, 2009, we had $833.1 million in unused loan commitments outstanding, of which approximately $628.0 million were at variable rates, with the remainder at fixed rates. A commitment to extend credit is an agreement to lend to a customer as long as the conditions established in the agreement have been satisfied. A commitment to extend credit generally has a fixed expiration date or other termination clauses and may require payment of a fee by the borrower. Since commitments often expire without being fully drawn, the total commitment amounts do not necessarily represent our future cash requirements. We continually evaluate each customer's credit worthiness on a case-by-case basis. Occasionally, a credit evaluation of a customer requesting a commitment to extend credit results in our obtaining collateral to support the obligation.

Letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. The credit risk involved in issuing a letter of credit is essentially the same as that involved in extending a loan. At June 30, 2009, we had $80.2 million in letters of credit issued and outstanding.

The following table shows the commitments to extend credit and letters of credit at June 30, 2009 according to expiration date.

					Expiration Date
			Less than		1-3		3-5		More than
	Total		1 year		years		years		5 years
	(dollars in thousands)

Commitments to extend credit	$	833,112	$	451,974	$	84,425	$	71,148	$	225,565
Letters of credit		80,156		48,563		14,506		17,087		-
Total	$	913,268	$	500,537	$	98,931	$	88,235	$	225,565

Our liability associated with letters of credit is not material to our condensed consolidated financial statements.

Index

Critical Accounting Policies and Estimates

New Accounting Pronouncements

See Note 11 to our Condensed Consolidated Financial Statements included elsewhere in this report.

Forward Looking Statements

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This Act provides a safe harbor for such disclosures that protects the companies from unwarranted litigation if the actual results are different from management expectations. This report contains forward-looking statements and reflects management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties that could cause our actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.

Index

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our net income is dependent, in part, on our net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. Interest rate risk sensitivity is the potential impact of changing rate environments on both net interest income and cash flows. In an attempt to manage our exposure to changes in interest rates, management monitors interest rate risk and administers an interest rate risk management policy designed to produce a relatively stable net interest margin in periods of interest rate fluctuations.

Notwithstanding our interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income and the fair value of our investment securities. As of June 30, 2009, the effective duration of the securities portfolio was 2.22 years. A rate increase (aged, over 1 year) of 100 basis points would move the effective duration to 2.87 years, while a reduction in rates of 100 basis points would result in an effective duration of 0.96 years.

In adjusting our asset/liability position, the Board and management attempt to manage our interest rate risk while enhancing net interest margins. This measurement is done primarily by running net interest income simulations. The net interest income simulations run at June 30, 2009 indicate that we are asset sensitive as compared to the stable rate environment. Exposure to instantaneous changes in interest rate risk for the current quarter is presented in the following table.

Net Interest Income (te) at Risk
Change in		Estimated
interest rate		increase (decrease)
(basis point)		in net interest income

-100		-9.38%
Stable		0.00%
+100		2.99%

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, 2008 included in our 2008 Annual Report on Form 10-K.

Item 4. Controls and Procedures

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

Our management, including the Chief Executive Officers and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the six month period ended June 30, 2009, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Index

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2008.

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

Issuer Purchases of Equity Securities

There were no purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities for the six months ended June 30, 2009.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 6. Exhibits.

(a) Exhibits:

Exhibit
Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Index

SIGNATURES

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

	Hancock Holding Company

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

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

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

	Date:	August 6, 2009

Index

Index to Exhibits

Exhibit
Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Hancock Whitney - 10-Q quarterly report FY

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