Sometimes bad luck can bring good results.
Hancock Holding Co. in Gulfport, Miss., is in a stronger position today than most of its regional rivals partly as a result of a devastating natural disaster.
The 110-year-old bank company, which less than five years ago was focused on recovering from Hurricane Katrina, has slowly and conservatively built its business. While its counterparts aggressively reached into Florida and other markets that appeared to be smart expansion targets last decade, Hancock stuck close to home. As a result, it didn't end up with tons of troubled assets on its books.
Now with a war chest of capital, a clean balance sheet and willing management, Hancock is primed to take advantage of down-cycle opportunities and is actively seeking acquisitions in Florida, said Carl J. Chaney, Hancock's president chief executive.
"During the worst economic times is when our company actually grew the greatest," he said. "The reason for that is we are conservatively run and have a strong capital base. … This recession is no different than others that we have survived. We've been able to take advantage of opportunities."
In December, the $8.7 billion-asset company acquired the failed Peoples First Community Bank in Panama City, Fla., adding $1.17 billion of assets and $1.69 billion of deposits. With that acquisition, Hancock added 29 branches in the Florida Panhandle and central Florida to the seven branches it already had in the state.
The purchase followed Hancock's efforts to raise $175.5 million. (The October offering was so well received that after only two days of marketing, Hancock had raised more than $600 million, declining to accept most of it.)
Analysts following Hancock said the company's strong footing is a result of both timing and solid banking skills.
"They are among the small subset of big winners coming out of this current banking crisis, and it is a function of they kept their nose clean in the last decade and somewhat pulled in their horns," said Jeff Davis, an analyst at First Horizon National Corp.'s FTN Equity Capital Markets. "There are a handful of those companies around the country, where deposits and loss-protected assets are going to find their way to them."
Hancock ended 2009 in good shape. In its fourth-quarter results released late Tuesday, the company reported earnings of $31.8 million, up 282% from the fourth quarter of 2008, largely resulting from the acquisition of Peoples First. Purchasing the Panama City bank resulted in a pretax gain to Hancock of $33.6 million and expenses of $3.7 million.
And it cannot be ignored that Hurricane Katrina proved to have a silver lining for Hancock. Davis noted that in the aftermath of Katrina, Hancock had to focus internally on loan quality, while other community banks were in a much more bullish mode. That element of timing turned Hancock into one of this cycle's winners.
"As much as anything, what served them well for this downturn is 'better lucky than good,' " Davis said. "I don't want to portray Katrina as being lucky in any way, but when that hit in August 2005, one thing it assured is over the next two years, Hancock would be inwardly focused in cleaning up from Katrina and not out buying banks and pushing for loan growth. That is a subplot to their history and the reason they are not having problems today."
The states hit by hurricanes Katrina and Rita have also benefited from federal rebuilding funds that flowed into the region, buoying local economies particularly in coastal areas, Chaney said. For example, Hancock added $1.4 billion of deposits in the three months following the hurricane as the rebuilding began.
Hancock has long had an appetite to grow in Florida, though the company has proceeded cautiously in that market. It first entered the state in 2004, with the acquisition of the failed Guaranty National Bank in Tallahassee. And while the company was considering further expansion there, those plans were put on hold by Hurricane Katrina.
Going forward, while other would-be buyers in the Southeast are still reeling from internal problems, Hancock is one of the few banks poised to take advantage of what is expected to be many bank failures in Florida.
Andy Stapp, an analyst with B. Riley & Co. Inc., said Hancock's conservative style will serve it well as the economy recovers.
"I expect results from them. It is a solid company, a very conservative company," he said. "I remember years ago, analysts asked them why didn't you go more into Florida, and they said the market scares us."
So far, the company appears to be holding true to its conservative instincts. Chaney said Hancock stopped raising capital at $175.5 million to avoid going after more acquisitions than the company's management could handle.
As of Dec. 31, Hancock's reported leverage ratio was 10.65% and its tangible common equity ratio was 8.85%.
For the fourth quarater, nonperforming assets rose to 4.10% of total loans and foreclosed assets. The bulk of the nonperforming assets stemmed from the acquisition of Peoples First and are covered by loss-sharing agreements with the Federal Deposit Insurance Corp. At the end of the third quarter, Hancock reported nonperforming assets of 1.06%.