Overview

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 March 31, 2009, we had total assets of $7.1 billion and employed on a full-time equivalent basis 1,272 persons in Mississippi, 570 persons in Louisiana, 56 persons in Florida and 40 persons in Alabama.

RESULTS OF OPERATIONS

Net income for the first quarter of 2009 totaled $14.0 million, a decrease of $6.0 million, or 30.0%, from the first quarter of 2008. Diluted earnings per share for the first quarter of 2009 were $0.44, a decrease of $0.19 from the same quarter a year ago. Return on average assets for the first quarter of 2009 was 0.79% compared to 1.30% for the first quarter of 2008. Return on average common equity was 9.12% compared to 14.13% for the same quarter a year ago.

Our first quarter results were significantly impacted by the ongoing financial crisis and national economic recession. The continued rise in unemployment levels impacted our charge-off levels and resulted in a higher allowance for loans losses from the first quarter of 2008. Net charge-offs were 0.67% of average loans in the first quarter, or 35 basis points higher than the 0.32% charge-off in the same quarter a year ago. Our allowance for loan losses increased to $63.0 million, a $9.9 million increase from March 31, 2008. In an effort to continue our proactive stance in recognizing asset quality issues, we increased nonaccrual loans to $38.3 million at March 31, 2009, a $25.3 million increase from the first quarter of 2008. The majority of this increase was concentrated in construction and land development loans and in commercial real estate.

Our balance sheet showed strong growth this quarter compared to the same quarter a year ago. Total assets increased $0.7 billion, or 10.5% compared to March 31, 2008. The aforementioned growth in assets was organic as we did not record any acquisitions in the past twelve months. Period-end loans increased $595.6 million, or 16.4%, from the same quarter a year ago. Period-end deposits increased $660.4 million, or 12.8%, from March 31, 2008. We also remain very well capitalized with total equity of $625.3 million at March 31, 2009, up $47.9 million, or 8.3%, from March 31, 2008.

Net Interest Income

Net interest income (te) for the first quarter of 2009 increased $3.5 million, or 6.6%, from the first quarter of 2008. The net interest margin (te) of 3.50% was 30 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 $901.0 million, or 16.2%, mostly reflected in higher average loans (up $646.8 million, or 17.8%). With short-term interest rates down significantly from a year ago, the Company's loan yield fell 125 basis points, with the yield on average earning assets down 102 basis points. However, total funding costs over the same quarter a year ago were down 73 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. The Company recorded a provision for loan losses of $8.3 million in the first quarter of 2009 compared to $8.8 million in the first quarter of 2008. The provision remains elevated within the current economic crisis.

Allowance for Loan Losses and Asset Quality

At March 31, 2009, the allowance for loan losses was $63.0 million compared with $61.7 million at December 31, 2008, an increase of $1.2 million. The increase in the allowance for loan losses through the first three months of 2009 is primarily attributed to 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. Management believes the March 31, 2009 allowance level is adequate.

Net charge-offs, as a percent of average loans, were 0.67% for the first quarter of 2009, compared to 0.32% in the first 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.

Nonaccrual loans were $38.3 million at March 31, 2009, an increase of $25.3 million, from $13.0 million at March 31, 2008. This increase is due to the weakening real estate markets across all markets.

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 March 31,
                                                      2009                  2008

Net charge-offs to average loans
(annualized)                                                0.67 %                0.32 %

Provision for loan losses to average loans
(annualized)                                                0.79 %                0.97 %

Allowance for loan losses to average loans                  1.49 %                1.46 %

Gross charge-offs                               $          8,277      $          4,197

Gross recoveries                                $          1,160      $          1,264

Non-accrual loans                               $         38,327      $         12,983

Accruing loans 90 days or more past due         $          8,306      $          3,340

Noninterest Income

Noninterest income (excluding securities transactions) for the first quarter of 2009 was down $1.7 million, or 6%, compared to the same quarter a year ago. Trust fees were down $0.8 million, or 20%, because of reduced market values of accounts due to poor economic conditions. Income from insurance operations was down $0.9 million, or 20%, because of decreased credit life premium production and service charges on deposit accounts decreased $0.3 million, or 3%, due to a decrease in consumer spending lowering check volumes. Secondary mortgage market operations were up $0.4 million, or 49%, due to increased volume of secondary market loans. Because of the historically low rate environment, the refinancing of current loans increased during the first quarter of 2009.

The components of noninterest income for the three months ended March 31, 2009 and 2008 are presented in the following table:

                                                   Three Months Ended March 31,
                                                     2009               2008

                                                          (In thousands)

  Service charges on deposit accounts           $        10,503    $        10,789
  Trust fees                                              3,327              4,176
  Credit card merchant discount fees                      2,568              2,540
  Income from insurance operations                        3,452              4,340
  Investment and annuity fees                             2,861              2,810
  ATM fees                                                1,779              1,691
  Secondary mortgage market operations                    1,158                778
  Other income                                            3,407              3,645
  Securities transactions gains (losses), net                 -              5,652

  Total noninterest income                      $        29,055    $        36,421

Noninterest Expense

Operating expenses for the first quarter of 2009 were $5.7 million, or 11.0%, 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 total personnel expense which was up $5.1 million, or 20%, primarily due to a 2% increase in full-time equivalent employees to support increased loan production and a 3% increase in salaries. Deposit insurance and regulatory fees were up $1.7 million, or 509%, due to the expiration of the FDIC special credit in the second quarter of 2008. Occupancy expense was up $0.5 million, or 10%, because of increases in insurance and property taxes. There were also some offsets to the increase in operating expenses over the same quarter a year ago. Postage and communications expense was down $0.6 million, or 42%, due to a $0.5 million credit paid back to us from a vendor for prior year overcharges. Advertising expense was down $0.6 million, or 35%, and equipment expense decreased $0.4 million, or 13%.

The following table presents the components of noninterest expense for the three months ended March 31, 2009 and 2008.

                                                Three Months Ended March 31,
                                                  2009               2008

                                                       (In thousands)

     Employee compensation                   $        23,662    $        19,618
     Employee benefits                                 7,113              6,013

     Total personnel expense                          30,775             25,631

     Equipment and data processing expense             7,179              6,416
     Net occupancy expense                             5,055              4,601
     Postage and communications                        1,686              2,314
     Ad valorem and franchise taxes                      886              1,114
     Legal and professional services                   2,692              3,442
     Stationery and supplies                             464                427
     Amortization of intangible assets                   354                365
     Advertising                                       1,172              1,803
     Deposit insurance and regulatory fees             1,983                326
     Training expenses                                    98                187
     Other real estate owned expense, net                365                211
     Other expense                                     3,129              3,297

     Total noninterest expense               $        55,838    $        50,134

Income Taxes

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, 2009 and 2008, the effective federal income tax rates were approximately 23% and 28%, respectively. The decrease in the effective rate in 2009 is due to an increase of the Company's income from state jurisdictions with lower tax rates and an increase in tax-exempt income. The total amount of tax-exempt income earned during the first quarter of 2009 was $5.2 million compared to $4.4 million in the comparable period in 2008. Tax-exempt income for the three months ended March 31, 2009 consisted of $1.3 million from securities and $3.9 million from loans and leases. Tax-exempt income for the first three months of 2008 consisted of $1.4 million from securities and $3.0 million from loans and leases.

Selected Financial Data

     The following tables contain selected financial data comparing our
consolidated results of operations for the three months ended March 31, 2009 and
2008.


                                              Three Months Ended March 31,
                                              2009                    2008

                                          (In thousands, except per share data)
  Per Common Share Data
  Earnings per share:
  Basic                                $              0.44     $              0.64
  Diluted                              $              0.44     $              0.63
  Cash dividends per share             $              0.24     $              0.24
  Book value per share (period-end)    $             19.66     $             18.41
  Weighted average number of shares:
  Basic                                             31,805                  31,346
  Diluted (1)                                       31,937                  31,790
  Period-end number of shares                       31,813                  31,372
  Market data:
  High price                           $             45.56     $             44.29
  Low price                            $             22.51     $             33.45
  Period-end closing price             $             31.28     $             42.02
  Trading volume                                    18,026                  17,204

(1) There were no anti-dilutive share-based incentives outstanding for the three months ended March 31, 2009 and March 31, 2008.

                                                           Three Months Ended March 31,
                                                             2009               2008

                                                          (dollar amounts in thousands)
Performance Ratios
Return on average assets                                           0.79 %             1.30 %
Return on average common equity                                    9.12 %            14.13 %
Earning asset yield (tax equivalent ("TE"))                        5.26 %             6.28 %
Total cost of funds                                                1.75 %             2.48 %
Net interest margin (TE)                                           3.50 %             3.80 %
Common equity (period-end) as a percent of total
assets (period-end)                                                8.81 %             8.99 %
Leverage ratio (period-end)                                        7.85 %             8.34 %
FTE headcount                                                     1,938              1,877

Asset Quality Information
Non-accrual loans                                       $        38,327    $        12,983
Foreclosed assets                                       $         5,946    $         3,619

Total non-performing assets                             $        44,273    $        16,602

Non-performing assets as a percent of loans and
foreclosed assets                                                  1.04 %             0.46 %
Accruing loans 90 days past due                         $         8,306    $         3,340
Accruing loans 90 days past due as a percent of
loans                                                              0.20 %             0.09 %
Non-performing assets + accruing loans 90 days past
due to loans and foreclosed assets                                 1.24 %             0.55 %
Net charge-offs                                         $         7,117    $         2,933
Net charge-offs as a percent of average loans                      0.67 %             0.32 %
Allowance for loan losses                               $        62,950    $        53,008
Allowance for loan losses as a percent of period-end
loans                                                              1.49 %             1.46 %
Allowance for loan losses to NPAs + accruing loans
90 days past due                                                 119.72 %           265.81 %
Provision for loan losses                               $         8,342    $         8,818

Average Balance Sheet
Total loans                                             $     4,285,376    $     3,638,608
Securities                                                    1,651,251          1,734,997
Short-term investments                                          537,420            199,484

Earning assets                                                6,474,047          5,573,089
Allowance for loan losses                                       (62,332 )          (47,385 )
Other assets                                                    772,171            686,425

Total assets                                            $     7,183,886    $     6,212,129


Noninterest bearing deposits                            $       913,807    $       858,706
Interest bearing transaction deposits                         1,462,801          1,376,712
Interest bearing public fund deposits                         1,499,354            962,170
Time deposits                                                 2,033,925          1,848,825

Total interest bearing deposits                               4,996,080          4,187,707

Total deposits                                                5,909,887          5,046,413
Other borrowed funds                                            536,474            484,542
Other liabilities                                               113,286            110,468
Common stockholders' equity                                     624,239            570,706

Total liabilities & common stockholders' equity         $     7,183,886    $     6,212,129