Until Hurricane Katrina flattened much of the Gulf Coast, the $5.4 billion-asset Hancock Holding Co. was on pace to report record third-quarter earnings.
Instead, the Gulfport, Miss., company barely eked out a profit - though its top executives insist that the worst is behind it.
Hancock announced late Thursday that it earned just $1.4 million in the quarter that ended Sept. 30, down from more than $15 million in the same quarter last year. It attributed the steep decline largely to a $35.2 million credit provision for anticipated loan losses - primarily mortgages and home equity loans on homes that were flooded but were outside of designated flood areas and did not have the proper insurance.
But Carl Chaney, Hancock's chief financial officer, said it is still too early to assess the damage, and that ultimate losses could be much lower.
"We provided an estimate that was very conservative, and I would be shocked if our amount of losses came to what we reserved," Mr. Chaney said.
The provision should be more than enough to cover any potential losses next quarter, he said.
Analysts, too, said that the news could have been worse. Even if Hancock charged off the entire $35.2 million it reserved, the chargeoff would still represent just 2.4% of its loans in Mississippi, said Gary Tenner, an analyst with SunTrust Robinson Humphrey in Atlanta.
"To me that is not that bad of a scenario," he said. "I think those numbers have put a lot of investors at ease."
In heavy trading Friday, Hancock's stock rose $8.6%, to $34.74.
The company's Hancock Bank, the third-largest bank based in Mississippi, also has operations in Florida and Louisiana. Its Gulfport headquarters were so severely damaged by Katrina that it has temporarily moved its headquarters to Baton Rouge. Roughly half of its more than 100 branches were damaged in the storm, and seven were at least 90% destroyed.
Besides the loss provisions, Hancock took a charge of $1.9 million for expenses directly related to the hurricane, such as cleanup costs, and $3.8 million for fees and service charges that were waived to help affected customers.
Those expenses would be somewhat offset, though, by $14.4 million of insurance proceeds it expects to collect on the damaged branches.
Without the hurricane charges, Hancock said, it would have earned a record $18.8 million last quarter, an increase of 22% from a year earlier. Total loans increased by $123 million in the quarter, up 38% from the same period in 2004.
The company is also anticipating strong deposit growth in the fourth quarter as customers start receiving insurance checks. In just the first 11 days of October it brought in $218 million - more than it gathered for the entire third quarter.
"Based on what we have seen in the fourth quarter thus far, I think we are going to have very strong balance sheet growth for loans and deposits," Mr. Chaney said. "Of course, that will flow down to the bottom line to impact fourth-quarter earnings."
