Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For
the quarterly period ending March 31, 2007
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For
the transition period from _____________________ to ________________________
For Quarter Ending
March 31, 2007
Commission File Number
0-13089
HANCOCK
HOLDING COMPANY
(Exact name of registrant as specified in its charter)
MISSISSIPPI
64-0693170
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification Number)
ONE HANCOCK PLAZA, P.O. BOX 4019, GULFPORT, MISSISSIPPI
39502
(Address of principal executive offices)
(Zip Code)
(228) 868-4000
(Registrant’s telephone number, including area code)
NOT
APPLICABLE
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ____ Non-accelerated filer ____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 32,389,893 common shares were outstanding as of April 30, 2007 for financial statement purposes.
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 of a normal recurring nature which, in the opinion of management, are
necessary to present fairly the Company’s Condensed Consolidated Balance Sheets at March 31,
2007 and December 31, 2006, the Company’s Condensed Consolidated Statements of Stockholders’
Equity and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007
and 2006 and the Company’s Condensed Consolidated Statements of Income for the three months
ended March 31, 2007 and 2006. 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
for the year ended December 31, 2006 and the notes thereto included in the Company’s Annual
Report on Form 10-K. The results of operations for the three months ended March 31, 2007 are not
necessarily indicative of the results expected for the full year.
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period and disclosure of contingent liabilities.
On an ongoing basis, the Company evaluates its estimates, including those related to allowance for
loan losses, investments, intangible assets and goodwill, property, plant and equipment, income taxes,
insurance, employment benefits and contingent liabilities. 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 that are not readily apparent from other sources. Actual results could differ 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 condensed consolidated financial statements.
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, 2006.
During
the quarter ended March 31, 2007, a subsidiary of the Company, Magna Insurance
Company, sold three securities out of its portfolio to provide liquidity
for surrenders of annuities for Magna Insurance Company. These three securities
had a gross loss of $4,160.
5
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
3. Loans and Allowance
for Loan Losses
The following table sets forth, for the periods indicated, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off (amounts in thousands):
Three Months Ended March 31,
2007
2006
Balance of allowance for loan losses
at beginning of period
$
46,772
$
74,558
Provision for (reversal of) loan losses, net
1,211
(705
)
Loans charged-off:
Commercial, real estate and mortgage
503
603
Direct and indirect consumer
1,215
1,938
Finance company
633
441
Demand deposit accounts
725
940
Total charge-offs
3,076
3,922
Recoveries of loans previously
charged-off:
Commercial, real estate and mortgage
312
2,190
Direct and indirect consumer
546
452
Finance company
144
193
Demand deposit accounts
608
1,195
Total recoveries
1,610
4,030
Net charge-offs
1,466
(108
)
Balance of allowance for loan losses
at end of period
$
46,517
$
73,961
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
0.16% and 0.13% of total loans at March 31, 2007 and December 31, 2006, respectively. Interest recognized
on nonaccrual loans is immaterial to the Company’s operating results.
As of March 31, 2007 and December 31, 2006, the Company had $17.2 million in loans carried at fair
value.
The Company held $21.3 million and $16.9 million in loans held for sale at March 31, 2007 and December
31, 2006, respectively, carried at 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.
6
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, certain ratios related
to the Company’s charge-offs, allowance for loan losses and outstanding loans:
Three Months Ended March 31,
2007
2006
Ratios :
Net charge-offs (recoveries) to average net loans (annualized)
0.18
%
-0.01
%
Net charge-offs (recoveries) to period-end net loans (annualized)
0.18
%
-0.01
%
Allowance for loan losses to average net loans
1.41
%
2.49
%
Allowance for loan losses to period-end net loans
1.41
%
2.49
%
Net charge-offs (recoveries) to loan loss allowance
3.15
%
-0.15
%
Provision for loan losses to net charge-offs
82.66
%
652.78
%
7
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
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”, the Company tests its goodwill for impairment annually. No impairment charges were recognized as
of March 31, 2007. The carrying amount of goodwill was $62.3 million as of March 31, 2007 and December
31, 2006.
The following tables present information regarding the components of
the Company’s identifiable intangible assets, and related amortization for the dates indicated
(amounts in thousands):
As of
March 31, 2007
As of
December 31, 2006
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Amortizable intangible assets:
Core deposit intangibles
$
14,137
$
7,564
$
14,137
$
7,290
Value of insurance business acquired
3,767
1,585
3,767
1,459
Non-compete agreements
368
197
368
179
Trade Name
100
35
100
30
Total
$
18,372
$
9,381
$
18,372
$
8,958
Three Months Ended March 31,
2007
2006
Aggregate amortization expense for:
Core deposit intangibles
$
274
$
341
Value of insurance businesses acquired
126
280
Non-compete agreements
18
54
Trade Name
5
—
Total
$
423
$
675
8
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
4. Goodwill
and Other Intangible Assets (continued)
The remaining amortization expense for the core deposit intangibles in
2007 is estimated to be approximately $0.9 million. The amortization expense for core deposit intangibles
is estimated to be approximately $1.1 million in 2008, $1.1 million in 2009, $1.1 million in 2010,
$0.9 million in 2011 and the remainder of $1.4 million thereafter. The amortization of the value
of business acquired, non-compete agreements and trade name are expected to approximate $349,974
for the remainder of 2007, $404,327 in 2008, $369,709 in 2009, $311,091 in 2010, $267,673 in 2011
and the remainder of $715,226 thereafter. The weighted-average amortization period used for intangibles
is 10 years.
The Company adopted FASB Statement No. 156, Accounting for Servicing of Financial Assets (“SFAS No. 156”) on January 1, 2007 without material impact. SFAS No. 156 requires all separately
recognized servicing assets and servicing liabilities to be initially measured at fair value, if
practicable, and permits an entity to subsequently measure those servicing assets and servicing liabilities
at fair value. Under SFAS No. 156, the Company decided to continue to use the amortization method
instead of adopting the fair value measurement method. Management has determined that it has one
class of servicing rights – mortgage servicing rights – which are based on the type of
loan. The following are the risk characteristics of the underlying financial assets used to stratify
servicing assets for purposes of measuring impairment: interest rate, type of product (fixed
vs. variable), duration and asset quality. The fair value of the mortgage servicing rights was $2.1
million and $2.2 million as of March 31, 2007 and December 31, 2006, respectively. The fair value
was based upon Bloomberg prepayment speeds for the performing portion of the portfolio and actual
prepayment speeds for the watch list portion of the portfolio. The following table shows the amount
of contractually specified fees for the three months ended March 31, 2007 and 2006, respectively:
Three Months Ended March 31,
2007
2006
Servicing fees
$
167
$
218
Late fees
17
7
Ancillary fees
8
7
Total
$
192
$
232
9
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
The gross carrying amount of mortgage servicing rights is equal to the net carrying amount. There
was no valuation allowance on the mortgage servicing rights portfolio for the three months ended
March 31, 2007 and the twelve months ended December 31, 2006.
The changes in the carrying amounts of mortgage servicing
rights for the three months ended March 31, 2007 and for the twelve months ended December 31, 2006
are as follows ( in thousands):
Net Carrying
Amount
Balance as of December 31, 2005
$
1,576
Additions
21
Disposals
(107
)
Amortization
(549
)
Balance as of December 31, 2006
941
Additions
1
Disposals
(21
)
Amortization
(92
)
Balance as of March 31, 2007
$
829
Amortization of servicing rights is estimated to be approximately $261,000 for the remainder of 2007, $230,000 in 2008, $159,000 in 2009, $103,000 in 2010, $55,000 in 2011, and the remainder of $21,000 thereafter.
10
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
Comprehensive income (loss) is the change in equity
during a period from transactions and other events and circumstances from nonowner sources. It includes
all changes in equity during a period except those resulting from investments by owners and distributions
to owners.
In addition to net income, the Company has identified
changes related to other nonowner transactions in the Consolidated Statements of Stockholders’
Equity. Changes in other nonowner transactions consist of changes in the fair value of securities
available for sale and liability adjustments for pension and post-retirement benefit plans.
In the calculation of comprehensive income, certain
reclassification adjustments are made to avoid duplicating items that are displayed as part of net
income and other comprehensive income in that period or earlier periods. The following table reflects
the reclassification amounts and the related tax effects of changes in fair value of securities available
for sale and the liability adjustment for pension and post-retirement benefit plans for the year
ended December 31, 2006 and the three months ended March 31, 2007.
Before-Tax
Amount
Tax
Effect
Accumulated
Other
Comprehensive
Loss
Balance, December 31, 2005
$
(33,271
)
$
11,205
$
(22,066
)
Minimum pension liability
1,685
(628
)
1,057
Adoption of SFAS No. 158
(12,663
)
4,719
(7,944
)
Net change in fair value of securities available
for sale
3,100
(1,352
)
1,748
Less adjustment for net losses included in income
5,169
(1,977
)
3,192
Balance, December 31, 2006
(35,980
)
11,967
(24,013
)
Net change in fair value of securities available
for sale
974
(14
)
960
$
(35,006
)
$
11,953
$
(23,053
)
11
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
Following is a summary of the information used in the computation of
earnings per common share (in thousands):
Three Months Ended March 31,
2007
2006
Net income - used in computation of
earnings per share
$
19,229
$
22,011
Weighted average number of shares
outstanding - used in computation of basic
earnings per share
32,665
32,393
Effect of dilutive securities
Stock options and restricted stock awards
634
695
Weighted average number of shares
outstanding plus effect of dilutive
securities - used in computation of
diluted earnings per share
33,299
33,088
12
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
8. Stock-Based Payment
Arrangements
Stock Option Plans
At March 31, 2007, the Company had two stock option plans. The 1996 Hancock
Holding Company Long-Term Incentive Plan (the “1996 Plan”) that was approved by the Company’s
shareholders in 1996 was designed to provide annual incentive stock awards. Awards as defined in
the 1996 Plan include, with limitations, stock options (including restricted stock options), restricted
and performance shares, and performance stock awards, all on a stand-alone, combination or tandem
basis. A total of fifteen million (15,000,000) common shares can be granted under the 1996 Plan with
an annual grant maximum of two percent (2%) of the Company’s outstanding common stock as reported
for the fiscal year ending immediately prior to such plan year. Grants of restricted stock awards
are limited to one-third of the grant totals.
The exercise price is equal to the market price on the date of grant,
except for certain of those granted to major stockholders where the option price is 110% of
the market price. Options awards generally vest based on five years of continuous service and have
ten-year contractual terms. The Company’s policy is to issue new shares upon share option exercise
and issue treasury shares upon restricted stock award vesting. The 1996 Long-Term Incentive Plan
expired in 2006.
In March of 2005, the stockholders of the Company approved Hancock Holding
Company’s 2005 Long-Term Incentive Plan (the “2005 Plan”). The 2005 Plan is designed
to enable employees and directors to obtain a proprietary interest in the Company and to attract
and retain outstanding personnel. The 2005 Plan provides that awards for up to an aggregate of five
million (5,000,000) shares of the Company’s common stock may be granted during the term of the
2005 Plan. The 2005 Plan limits the number of shares for which awards may be granted during any calendar
year to two percent (2%) of the outstanding Company’s common stock as reported for the fiscal
year ending immediately prior to such plan year.
The fair value of each option award is estimated on the date of grant
using Black-Scholes-Merton option valuation model that uses the assumptions noted in the following
table. No grants have been issued in 2007. Expected volatilities are based on implied volatilities
from traded options on the Company’s stock, historical volatility of the Company’s stock
and other factors. The expected term of options granted is derived from the output of the option
valuation model and represents the period of time that options granted are expected to be outstanding.
The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury
yield curve in effect at the time of grant.
Three Months Ended
March 31, 2006
Expected volatility
29.87
%
Expected dividends
1.61% - 1.96
%
Expected term (in years)
5 - 8
Risk-free rates
4.30% - 4.54
%
13
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
8. Stock-Based Payment
Arrangements (continued)
A summary of option activity under the plans for the three months ended March 31,
2007, and changes during the three months then ended is presented below:
Options
Number of
Shares
Weighted-
Average
Exercise
Price ($)
Weighted-
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value ($000)
Outstanding at January 1, 2007
1,511,261
$
27.04
6.6
Granted
—
$
—
—
Exercised
(103,392
)
$
14.43
4.1
$
3,356,106
Forfeited or expired
(2,860
)
$
44.04
8.9
Outstanding at March 31, 2007
1,405,009
$
27.57
6.5
$
21,929,497
Exercisable at March 31, 2007
1,048,042
$
23.81
6.0
$
21,138,258
Share options expected to vest
232,777
$
41.58
8.8
$
557,692
The total intrinsic value of options exercised during the three months ended March 31, 2007 and 2006 was $3.4 million and $5.3 million, respectively.
A summary of the status of the Company’s nonvested shares as of March 31, 2007, and changes during the three months ended March 31, 2007, is presented below:
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value ($)
Nonvested at January 1, 2007
522,570
$
26.67
Granted
50
$
49.27
Vested
(66,522
)
$
18.00
Forfeited
(4,074
)
$
24.93
Nonvested at March 31, 2007
452,024
$
23.53
As of March 31, 2007, there was $6.2 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 3.5 years. The total fair value of shares which vested during the three months ended March 31, 2007 and 2006 was $1.2 million and $0 million, respectively.
14
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
9. Retirement Plans
Net periodic benefits cost includes the following components for the
three months ended March 31, 2007 and 2006:
Pension Benefits
Other Post-retirement Benefits
Three Months Ended March 31,
2007
2006
2007
2006
Service cost
$
663,956
$
575,934
$
68,500
$
78,750
Interest cost
958,450
874,760
102,000
98,500
Expected return on plan assets
(1,051,435
)
(966,840
)
—
—
Amortization of prior service cost
—
—
(13,250
)
(13,250
)
Amortization of net loss
280,549
265,527
19,250
29,000
Amortization of transition obligation
—
—
1,250
1,250
Net periodic benefit cost
$
851,520
$
749,381
$
177,750
$
194,250
The Company anticipates that it will contribute $4.64 million to its pension plan and approximately $565,000 to its post-retirement benefits in 2007. During the first three months of 2007, the Company contributed approximately $1.1 million to its pension plan.
15
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
10.
Other
Service Charges, Commission and Fees, and Other Income
Components of other service charges, commission and fees are as follows:
Three Months Ended March 31,
2007
2006
(amounts in thousands)
Trust fees
$
3,693
$
3,078
Credit card merchant discount fees
1,778
1,709
Income from insurance operations
4,369
5,159
Investment and annuity fees
1,978
1,264
ATM fees
1,324
1,295
Total
$
13,142
$
12,505
Components of other income are as follows:
Three Months Ended March 31,
2007
2006
(amounts in thousands)
Secondary mortgage market operations
$
911
$
817
Income from bank owned life insurance
1,192
864
Outsourced check income
653
639
Other
801
2,181
Total other non-interest income
$
3,557
$
4,501
11. Other Expense
Components of other expense are as follows:
Three Months Ended March 31,
2007
2006
(amounts in thousands)
Data processing expense
$
2,467
$
1,920
Postage and communications
2,260
2,376
Ad valorem and franchise taxes
822
998
Legal and professional services
4,962
2,213
Stationery and supplies
491
548
Advertising
1,562
1,359
Deposit insurance and regulatory fees
256
56
Training expenses
174
165
Other fees
827
956
Annuity expense
463
1,791
Claims paid
428
295
Other expense
1,097
3,284
Total non-interest expense
$
15,809
$
15,961
16
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
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 and determined that there was no need to make an adjustment
to retained earnings due to the adoption of this Interpretation. The total balance of unrecognized
tax benefits at January 1, 2007, was $317,175. 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. As of January 1, 2007, $36,735 in interest,
and $80,053 in penalties, had been accrued on the Company’s balance sheet.
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 2003.
17
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
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 subsidiary and three real
estate corporations owning land and buildings that house bank branches and other facilities.
Following is selected information for the Company’s segments (amounts in thousands):
Three Months Ended March 31, 2007
MS
LA
FL
AL
Other
Eliminations
Consolidated
Interest income
$
46,314
$
35,492
$
2,501
$
119
$
5,957
$
(4,675
)
$
85,708
Interest expense
19,952
15,737
1,234
3
1,942
(4,560
)
34,308
Net interest income
26,362
19,755
1,267
116
4,015
(115
)
51,400
Provision for (reversal of) loan losses
(1,589
)
2,208
(84
)
—
676
—
1,211
Noninterest income
11,067
8,156
170
0
6,514
(12
)
25,895
Depreciation and amortization
1,898
723
95
0
110
—
2,826
Other noninterest expense
20,244
16,872
1,375
42
7,788
(7
)
46,314
Net income before
income taxes
16,876
8,108
51
74
1,955
(120
)
26,944
Income tax expense (benefit)
5,753
1,892
(75
)
29
116
—
7,715
Net income
$
11,123
$
6,216
$
126
$
45
$
1,839
$
(120
)
$
19,229
Total assets
$
3,389,175
$
2,429,839
$
165,129
$
12,765
$
819,540
$
(971,334
)
$
5,845,114
Total interest income from
affiliates
$
4,487
$
—
$
—
$
73
$
—
$
(4,560
)
$
—
Total interest income from
external customers
$
41,827
$
35,492
$
2,501
$
46
$
5,957
$
(115
)
$
85,708
Amortization & (accretion) of
securities
$
(876
)
$
(844
)
$
10
$
—
$
10
$
—
$
(1,700
)
18
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
13. Segment Reporting
(continued)
Three Months Ended March 31, 2006
MS
LA
FL
AL
Other
Eliminations
Consolidated
Interest income
$
45,713
$
31,042
$
2,362
$
—
$
4,469
$
(1,996
)
$
81,590
Interest expense
15,121
10,328
501
—
1,225
(1,902
)
25,273
Net interest income
30,592
20,714
1,861
—
3,244
(94
)
56,317
Provision for (reversal of ) loan losses
(1,412
)
519
43
—
145
—
(705
)
Noninterest income
10,879
7,491
112
—
6,565
(39
)
25,008
Depreciation and amortization
1,440
610
74
—
114
—
2,238
Other noninterest expense
21,969
15,269
1,106
—
8,598
(15
)
46,927
Net income (loss) before
income taxes
19,474
11,807
750
—
952
(118
)
32,865
Income tax expense (benefit)
6,645
3,560
274
—
420
(45
)
10,854
Net income (loss)
$
12,829
$
8,247
$
476
$
—
$
532
$
(73
)
$
22,011
Total assets
$
3,745,211
$
2,332,736
$
121,028
$
—
$
701,692
$
(644,078
)
$
6,256,589
Total interest income from
affiliates
$
1,854
$
—
$
48
$
—
$
—
$
(1,902
)
$
—
Total interest income from
external customers
$
43,859
$
31,042
$
2,314
$
—
$
4,469
$
(94
)
$
81,590
Amortization & (accretion) of
securities
$
(3,179
)
$
(310
)
$
13
$
—
$
15
$
—
$
(3,459
)
19
Hancock Holding Company and Subsidiaries Notes to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
In February 2007, the Financial Accounting Standards Board (“FASB”)
issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115 (“SFAS No. 159”) which permits an entity to choose to measure many financial instruments
and certain other items at fair value. Most of the provisions in SFAS No. 159 are elective; however,
the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. Some requirements apply differently
to entities that do not report net income. The FASB’s stated objective in issuing this standard
is as follows: “to improve financial reporting by providing entities with the opportunity
to
mitigate volatility in reported earnings caused by measuring related assets and liabilities
differently
without having to apply complex hedge accounting provisions.”
The fair value option established by Statement 159 permits all entities
to choose to measure eligible items at fair value at specified election dates. A business entity
will report unrealized gains and losses on items for which the fair value option has been elected
in earnings (or another performance indicator if the business entity does not report earnings) at
each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument,
with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable
(unless a new election date occurs); and (c) is applied only to entire instruments and not to portions
of instruments. The Company will adopt the provisions of SFAS No. 159 in the first quarter of 2008,
as required.
In September 2006, the FASB issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – An Amendment
of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”). This pronouncement requires an employer to recognize the over funded or
under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as
an asset or liability on its balance sheet. SFAS No. 158 also requires an employer to recognize changes
in that funded status in the year in which the changes occur through comprehensive income effective
for fiscal years ending after December 15, 2006. In addition, this statement requires an employer
to measure the funded status of a plan as of its year-end balance sheet date effective for fiscal
years ending after December 15, 2008. The Company adopted the requirement to recognize the funded
status of the benefit plans and related disclosure requirements as of December 31, 2006. The Company
is currently evaluating the requirements of SFAS No. 158 related to the measurement date and has
not yet determined the impact of adoption on the Company’s consolidated financial statements.
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”) which defines fair value, establishes a framework for measuring fair value
under accounting principles generally accepted in the United States of America, and expands disclosures
about fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require
or permit fair value measurements. This statement is effective for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. The Company will be required to adopt SFAS No.
157 in the first quarter of fiscal year 2008. Management is currently evaluating the requirements
of SFAS No. 157 but does not expect the impact to be significant.
In September 2006, the FASB ratified the consensus the EITF reached regarding EITF No.06-5, Accounting for Purchases of Life Insurance - Determining the Amount that Could Be Realized in Accordance
with FASB Technical Bulletin 85-4 (“EITF 06-5”). The EITF
concluded that a policyholder should consider any additional amounts included in
the contractual terms of the life insurance policy in determining the
“amount that could be realized under the insurance contract.” For
group policies with multiple certificates or multiple policies with a group
rider, the Task Force also tentatively concluded that the amount that could be
realized should be determined at the individual policy or certificate level,
i.e., amounts that would be realized only upon surrendering all of the policies
or certificates would not be included when measuring the assets. The Company
adopted EITF 06-5 effective January 1, 2007. The adoption of EITF 06-5 has not
had a material impact on the Company’s financial condition or results of
operations.
20
Hancock
Holding Company and Subsidiaries Notes
to Condensed Consolidated Financial Statements – (Continued) (Unaudited)
14.
New Accounting Pronouncements (continued)
In September 2005, the American Institute of Certified Public Accountants (“AICPA”) issued
Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications
or Exchanges of Insurance Contracts (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred
acquisition costs on internal replacements of insurance and investment contracts other than those
specifically described in FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized
Gains and Losses from the Sale of Investments. The Company adopted SOP 05-1 effective January 1, 2007. The adoption of SOP 05-1 has not had a material
impact on the Company’s financial condition or results of operations.
The following discussion should be read in conjunction with our financial
statements included with this report and our financial statements and related Management’s Discussion
and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2006
included in our 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 140 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.”
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 March 31, 2007, we had total assets of $5.8 billion
and employed on a full-time equivalent basis 1,311 persons in Mississippi, 573 persons in Louisiana,
43 persons in Florida and 2 persons in Alabama.
Selected Financial Data
(amounts in thousands, except per share data)
Three Months Ended March 31,
2007
2006
Per Common Share Data
Earnings per share:
Basic
$
0.59
$
0.68
Diluted
$
0.58
$
0.67
Cash dividends per share
$
0.240
$
0.195
Book value per share (period end)
$
17.27
$
15.06
Weighted average number of shares:
Basic
32,665
32,393
Diluted (1)
33,299
33,088
Period end number of shares
32,518
32,494
Market data:
High price
$
54.09
$
46.67
Low price
$
41.88
$
37.75
Period end closing price
$
43.98
$
46.52
Trading volume
8,577
3,990
(1)
There were 70,088 anti-dilutive share-based incentives outstanding
for the three months ended March 31, 2007. There were no anti-dilutive
share-based incentives outstanding for the three months ended March 31, 2006.
22
Three Months Ended March 31,
2007
2006
(dollar amounts in thousands)
Performance Ratios
Return on average assets
1.32
%
1.49
%
Return on average common equity
13.77
%
18.34
%
Earning asset yield (Tax Equivalent (“TE”))
6.64
%
6.17
%
Total cost of funds
2.60
%
1.88
%
Net interest margin (TE)
4.04
%
4.30
%
Common equity (period end) as a percent of total assets (period end)
9.61
%
7.82
%
Leverage ratio (period end)
8.80
%
7.45
%
FTE Headcount
1,929
1,768
Asset Quality Information
Non-accrual loans
$
4,494
$
8,676
Foreclosed assets
$
718
$
1,779
Total non-performing assets
$
5,212
$
10,455
Non-performing assets as a percent of loans and
foreclosed assets
0.16
%
0.35
%
Accruing loans 90 days past due
$
6,035
$
3,626
Accruing loans 90 days past due as a percent of loans
0.18
%
0.22
%
Non-performing assets + accruing loans 90 days past due
to loans and foreclosed assets
0.34
%
0.57
%
Net charge-offs
$
1,466
($108
)
Net charge-offs as a percent of average loans
0.18
%
-0.01
%
Allowance for loan losses
$
46,517
$
73,961
Allowance for loan losses as a percent of period end loans
1.41
%
2.51
%
Allowance for loan losses to NPAs + accruing loans
90 days past due
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. In addition, 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 $346.8 million and borrowing capacity at the Federal Reserve’s
Discount Window in excess of $100 million.
During
the quarter ended March 31, 2007, our subsidiary, Magna Insurance Company,
sold three securities out of their portfolio to provide liquidity for
surrenders of annuities for Magna Insurance Company. These three securities
had a gross loss of $4,160.
The following liquidity ratios at March 31, 2007 and December 31, 2006 compare certain assets and liabilities to total deposits or total assets:
March 31,
2007
December 31,
2006
Total securities to total deposits
36.98
%
37.84
%
Total loans (net of unearned
income) to total deposits
We continue to maintain an adequate capital position. The ratios as of March 31, 2007 and December 31, 2006 are as follows:
26
March 31,
2007
December 31,
2006
Common equity (period-end) as a percent of
total assets (period-end)
9.61
%
9.36
%
Regulatory ratios:
Total capital to risk-weighted assets (1)
13.14
%
13.60
%
Tier 1 capital to risk-weighted
assets (2)
12.04
%
12.46
%
Leverage capital to average total assets (3)
8.80
%
8.63
%
(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.
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, 2006. The most significant obligations, other than obligations under deposit contracts and short-term borrowings, were for operating leases for banking facilities.
Net income for the first quarter of 2007 totaled $19.2 million, a decrease of $2.8 million, or 13%, from the first quarter of 2006. Diluted earnings per share for the first quarter of 2007 were $0.58, a decrease of $0.09 from the same quarter a year ago. Return on average assets for the first quarter of 2007 was 1.32% compared to 1.49% for the first quarter of 2006. Return on average common equity was 13.77% compared to 18.34% for the same quarter a year ago.
Net
interest income (te) for the first quarter decreased $4.5 million, or
8%, from the first quarter of 2006. The primary driver of the $4.5 million
decrease in net interest income (te) was a $104.7 million, or 2%, decrease
in average earning assets mainly from a reduction in total borrowings
of $82.0 million, or 29%, and a decrease in average deposits of $39.8
million, or .8%. Our net interest margin (te) was 4% in the first quarter,
26 basis points narrower than the same quarter a year ago as the increase
in the average earning asset yield (46 basis points) did not offset the
increase in total funding costs (72 basis points).
27
The following tables detail the components of our net interest spread and net interest margin.
The amount of the allowance for loan losses equals the cumulative total of the provisions for loan losses, reduced by actual loan charge-offs, and increased by recoveries of loans previously charged-off. Provisions are made to the allowance to reflect the currently perceived risks of loss associated with our loan portfolio. 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.
Annualized net charge-offs, as a percent of average loans, were 0.18% for the first quarter of 2007, compared to -0.01% in the first quarter of 2006. During the first quarter of 2006, we recorded a large recovery that drove the negative net charge-off ratio. The provision for the quarter ended March 31, 2007 reflects more normalized activity and is within management’s expectations.
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. (Dollar amounts shown are in thousands.)
At and for the
Three Months Ended March 31,
2007
2006
Annualized net charge-offs to average loans
0.18
%
-0.01
%
Annualized provision (recovery) for loan losses
to average loans
0.15
%
-0.10
%
Average allowance for loan losses to average loans
1.42
%
2.51
%
Gross charge-offs
$
3,076
$
3,922
Gross recoveries
$
1,610
$
4,030
Non-accrual loans
$
4,494
$
8,676
Accruing loans 90 days or more past due
$
6,035
$
6,632
Accruing loans 90 days or more past due decreased $0.6 million from March 31, 2006. Since December 31, 2005, accruing loans 90 days or more past due, net of deferrals, have decreased $19.6 million to $6.0 million at March 31, 2007. This decrease is related to improved ability of certain borrowers to meet their regular payments after Hurricane Katrina.
Noninterest Income
Noninterest income for the first quarter was up $1.0 million, or 4%, compared to the same quarter a year ago. The primary factors impacting the higher levels of non-interest income as compared to the same quarter a year ago, were higher levels of service charge fees (up $1.3 million, or 17%) and trust fees (up $0.6 million, or 20%). However, other income was down $1.0 million, or 21%.
29
The components of noninterest income for the three months ended March 31, 2007 and 2006 are presented in the following table:
Operating expenses for the first quarter were $0.2 million, or .4%, higher compared to the same quarter a year ago. The increase from the same quarter a year ago was reflected in higher levels of personnel expense (up $0.4 million) and occupancy expense (up $0.4 million), with lower levels of equipment expense (down $0.4 million) and other expenses (down $0.2 million).
The following table presents the components of noninterest expense for the three months ended March 31, 2007 and 2006.
Our effective federal income tax rate continues to be less than the statutory rate of 35% due primarily to tax-exempt interest income. For the three months ended March 31, 2007 and 2006, the effective federal income tax rate was approximately 29% and 33%, respectively. The decrease in the effective rate in 2007 is due primarily to the increase in the percentage of tax-exempt interest income as it relates to book income. The total amount of tax-exempt income earned during the first three months of 2007 was $4.4 million compared to $3.5 million for the comparable period in 2006. Tax-exempt income for three months ended March 31, 2007 consisted of $1.7 million from securities and $2.7 million from loans and leases. Tax-exempt income for the first three months of 2006 consisted of $1.7 million from securities and $1.8 million from loans and leases.
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 March 31, 2007, we had $1.2 billion in unused loan commitments outstanding, of which approximately $478.4 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 March 31, 2007, we had $70.5 million in letters of credit issued and outstanding.
The following table shows the commitments to extend credit and letters of credit at March 31, 2007 according to expiration date.
Expiration Date
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
(dollars in thousands)
Commitments to extend credit
$
1,178,632
$
863,348
$
34,098
$
41,770
$
239,416
Letters of credit
70,477
20,504
33,161
16,812
—
Total
$
1,249,109
$
883,852
$
67,259
$
58,582
$
239,416
Our liability associated with letters of credit is not material to our condensed consolidated financial statements.
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. We prepare these financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an on-going basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. There have been no material changes or developments in our evaluation of the accounting estimates and the
underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our Form 10-K for the year ended December 31, 2006.
New Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”) which permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in SFAS No. 159 are elective; however, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. The FASB’s stated objective in issuing this standard is as follows: “to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.”
The fair value option established by Statement 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. We will adopt the provisions of SFAS No. 159 in the first quarter of 2008, as required.
In September 2006, the FASB issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – An Amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”). This pronouncement requires an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability on its balance sheet. SFAS No. 158 also requires an employer to recognize changes in that funded status in the year in which the changes occur through comprehensive income effective for fiscal years ending after December 15, 2006. In addition, this statement requires an employer to measure the funded status of a plan as of its year-end balance sheet date effective for fiscal years ending after December 15, 2008. We adopted the requirement to recognize the funded status
of the benefit plans and related disclosure requirements as of December 31, 2006. We are currently evaluating the requirements of SFAS No. 158 related to the measurement date and have not yet determined the impact of adoption on our consolidated financial position, results of operations and cash flows.
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”) which defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurements. This statement is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We will be required to adopt SFAS No. 157 in the first quarter of fiscal year 2008. Management is currently evaluating the requirements of SFAS No. 157 but does not expect the impact to be significant.
32
In September 2006, the FASB ratified the consensus the EITF reached regarding EITF No.06-5, Accounting for Purchases of Life Insurance - Determining the Amount that Could Be Realized in Accordance with FASB Technical Bulletin 85-4 (“EITF 06-5”). The EITF concluded that a policyholder should consider any additional amounts included in the contractual terms of the life insurance policy in determining the “amount that could be realized under the insurance contract.” For group policies with multiple certificates or multiple policies with a group rider, the Task Force also tentatively concluded that the amount that could be realized should be determined at the individual policy or certificate level, i.e., amounts that would be realized only upon surrendering all of the policies or certificates
would not be included when measuring the assets. We adopted EITF 06-5 effective January 1, 2007. The adoption of EITF 06-5 has not had a material impact on our financial condition or results of operations.
In September 2005, the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. We adopted SOP 05-1 effective January 1, 2007. The adoption of SOP 05-1 has not had a material impact on our financial condition or results of
operations.
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.
Our net earnings are 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 quarter close, the effective duration of the securities portfolio was 2.18. A rate increase of 100 basis points would move the effective duration to 2.53, while a reduction in rates of 100 basis points would result in an effective duration of 1.46.
33
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 March 31, 2007 indicate that the Company is to some extent 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.
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, 2006 included in our 2006 Annual Report on Form 10-K.
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 three month period ended March 31, 2007, that
has materially affected, or is reasonably likely to materially affect,
our internal controls over financial reporting.
The following table provides information with respect to purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities.
(a)
(b)
(c)
(d)
Total number
of shares or
units
purchased
Average Price
Paid per Share
Total number of
shares purchased
as a part of
publicly
announced plans
or programs (1)
Maximum number
of shares
that may yet be
purchased under
Plans or
Programs
Jan. 1, 2007 - Jan. 31, 2007
—
(2)
$
—
—
1,545,378
Feb. 1, 2007 - Feb. 28, 2007
—
(3)
—
—
1,545,378
Mar. 1, 2007 - Mar. 31, 2007
228,000
(4)
43.88
228,000
1,317,378
Total as of Mar. 31, 2007
228,000
43.88
228,000
(1)
The Company publicly announced its stock buy-back program on July 18, 2000.
(2)
0 shares were purchased on the open market during January in order to satisfy obligations pursuant to the Company’s long term incentive plan that was established in 1996.
(3)
0 shares were purchased on the open market during February in order to satisfy obligations pursuant to the Company’s long term incentive plan that was established in 1996.
(4)
228,000 shares were purchased on the open market during March in order to satisfy obligations pursuant to the Company’s long term incentive plan that was established in 1996.
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.
