Note 2. Acquisitions

Whitney Holding Corporation

On June 4, 2011, Hancock acquired all of the outstanding common stock of Whitney Holding Corporation (Whitney), a bank holding company based in New Orleans, Louisiana, in a stock and cash transaction. Whitney common shareholders received 0.418 shares of Hancock common stock in exchange for each share of Whitney stock, resulting in Hancock issuing 40,794,261 common shares at a fair value of $1.3 billion. Whitney’s preferred stock and common stock warrant issued under TARP were purchased by the Company for $307.7 million and retired as part of the merger transaction. In total, the purchase price was approximately $1.6 billion including the value of the options to purchase common stock assumed in the merger. On September 16, 2011, seven Whitney Bank branches located on the Mississippi Gulf Coast and one branch located in Bogalusa, LA with approximately $47 million in loans and $180 million in deposits were divested in order to resolve branch concentration concerns of the U.S. Department of Justice relating to the merger.

The Whitney transaction was accounted for using the purchase method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Fair values were subject to refinement for up to one year after the closing date of the acquisition. Assets acquired, excluding goodwill, totaled $11.2 billion, including $6.5 billion in loans, $2.6 billion of investment securities, and $224 million of identifiable intangible assets. Liabilities assumed were $10.1 billion, including $9.2 billion of deposits.

Goodwill of $589.5 million was calculated as the excess of the consideration exchanged over the net identifiable assets acquired. In 2012, goodwill was reduced $22.3 million for deferred tax purchase accounting adjustments.

The following table provides the assets purchased, the liabilities assumed and the consideration transferred:


Statement of Net Assets Acquired (at fair value) and Consideration Transferred (in millions except per share)
	Fair value of net assets acquired at date of acquisition June 4, 2011		Subsequent acquisition-date adjustments			As recorded by HHC December 31, 2011
ASSETS
Cash and cash equivalents	$	957	$	—		$	957
Loans held for sale		57		—			57
Securities		2,635		1			2,636
Loans and leases		6,456		(9	)		6,447
Property and equipment		284		(21	)		263
Other intangible assets (1)		266		(42	)		224
Other assets		580		(7	)		573

Total identifiable assets		11,235		(78	)		11,157

LIABILITIES
Deposits		9,182		—			9,182
Borrowings		776		—			776
Other liabilities		175		(3	)		172

Total liabilities		10,133		(3	)		10,130

Net identifiable assets acquired		1,102		(75	)		1,027
Goodwill (2)		514		75			589

Net assets acquired	$	1,616		—		$	1,616

CONSIDERATION:
Hancock Holding Company common shares issued		41
Purchase price per share of the Company’s common stock (3)		32.04

Company common stock issued and cash exchanged for fractional shares	$	1,307
Stock options converted		1
Cash paid for TARP preferred stock and warrants		308

Fair value of total consideration transferred	$	1,616

(1)	Intangible assets consists of core deposit intangible of $189.4 million, trade name of $11.7 million, trust relationships of $11.1 million, and credit card relationships of $11.3 million.

The amortization life is 12—20 years for the CDI intangible asset; 15 years for credit card relationships, 12 years for trust and 2.5 years for trade name intangible asset.

They will be amortized on an accelerated basis.

(2)	No goodwill is expected to be deductible for federal income tax purposes. The goodwill will be primarily allocated to the Whitney Bank segment.

(3)	The value of the shares of common stock exchanged with Whitney shareholders was based upon the closing price of the Company’s common stock at June 3, 2011, the last traded day prior to the date of acquisition.

The following table (in thousands) provides a reconciliation of goodwill:


Goodwill balance at December 31, 2010	$	61,631
Additions:
Goodwill from Whitney acquistion at acquisition date		513,917
Purchase accounting fair value adjustments subsequent to acquisition date made during the fourth quarter of 2011		75,614

Goodwill balance at December 31, 2011	$	651,162

Reductions:
Deferred tax purchase accounting adjustment made during 2012		(22,285	)

Goodwill balance at December 31, 2012	$	628,877

The operating results of the Company for the year ended December 31, 2011 included the results from the operations acquired in the Whitney transaction since June 4, 2011. Whitney’s operations contributed approximately $232.5 million in revenue, net of interest expense, and an estimated $35.8 million in net income for the period from the acquisition date.

Merger-related charges of $45.8 million and $86.8 million associated with the Whitney acquisition were included in noninterest expense for 2012 and 2011. Such expenses were for professional services and other incremental costs associated with the conversion of systems and integration of operations, costs related to branch and office consolidations, costs related to termination of existing contractual arrangements for various services, marketing and promotion expenses, and retention and severance and incentive compensation costs. The following table provides a breakdown (in thousands) of merger expenses by category:


	Years Ended December 31,
	2012			2011
Personnel	$	9,450		$	13,960
Net occupancy expense		611			330
Equipment		2,235			552
Data processing expense		3,116			3,163
Professional services expense		24,436			40,902
Postage and communications		375			897
Advertising		5,360			5,958
Printing and supplies		957			568
Insurance expense		—			3,177
Other expense		(751	)		17,255

Total merger-related expenses	$	45,789		$	86,762

The following unaudited pro forma information presents the results of operations for the twelve months ended December 31, 2011 and 2010, as if the acquisition had occurred at the beginning of the earliest period presented. These adjustments include the impact of certain purchase accounting adjustments such as intangible assets amortization, fixed assets depreciation and elimination of Whitney’s provision. In addition, the $86.8 million in merger expenses discussed above are included in each year. Any additional future operating cost savings and other synergies the Company anticipates as a result of the acquisition are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of the earliest period presented, nor are they intended to represent or be indicative of future results of operations.


	Twelve Months Ended
	December 31, 2011		December 31, 2010
(In millions)
Total revenues , net of interest expense	$	979	$	983
Net Income	$	124	$	94

In many cases, determining the fair value of the acquired assets and assumed liabilities required the Company to estimate future cash flows associated with those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant estimates related to the valuation of acquired loans, including loans with evidence of credit quality deterioration (acquired impaired) and loans that did not meet this criteria (acquired performing). Note 1 discusses the Company’s valuation of the acquired loan portfolios as well as significant aspects of the ongoing accounting for such acquired loans.

Loans at the acquisition date of June 4, 2011 are presented in the following table.


	Acquired Impaired		Acquired Performing		Total Acquired Loans
	(In thousands)
Commercial non-real estate	$	128,813	$	2,414,002	$	2,542,815
Commercial real estate owner-occupied		91,885		856,583		948,468
Construction and land development		159,438		564,795		724,233
Commercial real estate non-owner occupied		86,573		839,258		925,831

Total commercial/real estate		466,709		4,674,638		5,141,347

Residential mortgage		68,780		818,152		886,932
Consumer		—		418,563		418,563

Total	$	535,489	$	5,911,353	$	6,446,842

The following table presents information about the acquired impaired loans at acquisition (in thousands).


Contractually required principal and interest payments	$	880,612
Nonaccretable difference		212,987

Cash flows expected to be collected		667,625
Accretable difference		132,136

Fair value of loans acquired with a deterioration of credit quality	$	535,489

The fair value of the acquired performing loans at June 4, 2011, was $5.9 billion. The gross contractually required principal and interest payments receivable for acquired performing loans was $6.8 billion.

In connection with the Whitney acquisition, the Company recorded a liability for contingent payments to certain employees for arrangements that were in existence prior to acquisition. The fair value of this liability was $58.0 million. The following table presents the changes in the liability for 2012 and 2011. Payments are expected to continue into 2014.


	December 31,
	2012			2011
Balance, January 1	$	23,183		$	—
Adjustments		1,127			57,964
Cash Payments		(16,145	)		(34,781	)

Balance, December 31	$	8,165		$	23,183

The Company also recorded a liability with a fair value of $14.0 million for a contractual contingency assumed in connection with Whitney’s obligations under contracts for a systems conversion and replacement initiative. This initiative was suspended in anticipation of the acquisition. Payments against this liability during 2012 and 2011 respectively were $2.6 million and $1.1 million. During 2012, the remainder was reversed upon reaching settlement terms.