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CHICAGO--([ BUSINESS WIRE ])--Fitch Ratings has affirmed Hancock Holding Company's (HBHC) as well as its primary banking subsidiaries' long and short-term Issuer Default Ratings (IDRs) at 'BBB+/F2'. The Rating Outlook is Stable. A full list of ratings follows at the end of this release.

Today's rating action reflects HBHC's conservative operating philosophy, continued satisfactory operating performance, and improved capital ratios relative to the prior year period when the company completed its acquisition of Whitney Holding Corporation (WHC).

Fitch believes that HBHC's conservative operating culture has allowed the company to remain profitable over the last several years, including during the recent financial crisis, while at the same time maintaining reasonable levels of non-performing assets (NPAs). Over the last five years HBHC's average annual return on assets (ROA) has been 0.89%, which while below that of some larger institutions, is still good.

More recently, HBHC has been focused on integrating WHC into its operations. Fitch believes that the marriage of these two Southeastern institutions has and will continue to enhance the overall HBHC franchise through a more diversified loan portfolio, incremental opportunities for growth, as well as the ability to cross-sell of additional products to existing customers.

Reflective in today's rating action is Fitch's expectation that HBHC will continue to realize cost savings as it continues the integration process. While there have been some cost savings to date, Fitch expects HBHC to continue to rationalize its branch network, which should primarily create savings related to personnel and real estate costs.

As such, Fitch would expect HBHC's 2Q'12 ROA of 0.83% and its 2Q'12 efficiency ratio of 69.73% (which Fitch views on the high side) to both incrementally improve through the remainder of 2012 and in 2013. Fitch expects some improvement in each of the aforementioned metrics from just realizing additional cost savings over the next 18 to 24 months.

Furthermore, Fitch's rating action takes into account that a more meaningful pick-up in earnings generation is predicated on significant loan growth and cross-selling, both of which Fitch believes are more intermediate term to potentially longer-term opportunities.

HBHC's 2Q'12 net loan portfolio has been down from the prior year period and essentially flat from the sequential quarter, as growth in new loan originations has been offset by payoffs and pay downs of largely credit impaired loans from the WHC acquisition as well as the company's FDIC-assisted People's First acquisition.

Fitch would expect this trend to persist over the remainder of the year, though it does note that HBHC is seeing some incremental loan growth opportunities in both the Houston, Texas market from an energy lending team it recently hired, as well as in the commercial arena in the Tampa, Florida market from new hires there.

RATING DRIVERS AND SENSITIVITIES

Fitch's Stable Rating Outlook takes into account that HBHC's profitability, growth, and capital ratios will continue to incrementally improve in the near-to-intermediate term.

Additionally, Fitch would expect the company's NPA ratio of 2.42% to also improve, though Fitch does acknowledge that given regulatory guidance related to commercial troubled debt restructurings (TDRs), there could be some moderate volatility in that ratio.

Fitch believes that there is limited upside to HBHC's ratings or Rating Outlook should the company continue to improve profitability over a very extended period through both cost savings as well as loan growth, all while maintaining good capital ratios.

Downsides to HBHC's ratings could be the result of the pursuit of an additional large acquisition, similar to the size of the $11 billion WHC deal, while HBHC is still streamlining its overall operations. Ratings would be particularly sensitive to any transaction that caused overall capital ratios to decline.

Intermediate to long-term risks to ratings could result from some growth initiatives. Given that the lending markets in HBHC's footprint are highly competitive, should the company significantly reduce pricing or terms and conditions to win large amounts of new business, this could impact both profitability and credit costs over time, which could therefore impact ratings.

With $18.7 billion in total assets, HBHC is a bank holding company with operations spread across Texas, Louisiana, Mississippi, Alabama, and Florida.

Fitch has affirmed the following ratings:

Hancock Holding Company

--Long-term Issuer Default Rating (IDR) at 'BBB+';

--Short-term IDR at 'F2';

--Viability at 'bbb+';

--Support at '5';

--Support floor at 'NF'.

Hancock Bank

--Long-term deposits at 'A-';

--Short-term deposits at 'F1';

--Long-term IDR at 'BBB+';

--Short-term IDR at 'F2';

--Viability at 'bbb+';

--Support at '5';

--Support floor at 'NF'.

Whitney Bank

--Long term IDR at 'BBB+';

--Short-term IDR at 'F2';

--Long-term deposits at 'A-';

--Short-term Deposits at 'F1';

--Subordinated debt at 'BBB';

--Viability at 'bbb+'.

--Support at '5'

--Support Floor at 'NF'

The Rating Outlook is Stable.

Additional information is available at [ www.fitchratings.com ]. The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 20112).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181 ]

Rating FI Subsidiaries and Holding Companies

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209 ]

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