The acquisition of Whitney Holding has resulted in significant growth in Hancock Holding's (Nasdaq: HBHC) loan portfolio. The Gulfport, Miss.-based regional bank witnessed a significant jump in its commercial and industrial loans, and has been showing noticeable improvements in its operations. I'm going to take a closer look to find out whether it deserves a place in my portfolio.

The merger with Whitney more than doubled Hancock's size, while credit quality has improved. Although net income for the second quarter declined by 21%, to $12.1 million, that figure included $22.2 million in merger-related costs. The bank witnessed a 46% jump in its net interest income, as compared to the preceding quarter, thanks to the acquisition. Net interest margin improved slightly, owing to a favorable shift in funding sources and a decline in funding costs.

Hancock also witnessed an improvement in its asset quality. Net charge-offs as a percent of average loans declined to 0.49%, compared to 1.11% a year ago. That helped it whittle down provisions for loan losses.

But, as savvy investors, we need to look at earnings and beyond to decide whether a stock is worth investing in. Let's narrow things down by comparing the company and its closest peers against a few important parameters:

  • Price/earnings (P/E) ratio: This ratio lets us look at a company's earnings relative to its price, to help determine how cheap or expensive the stock is.
  • The price-to-book (P/B) ratio: Widely linked with value investing and a relevant metric for banks and other asset-heavy companies, P/B gives us a clear idea about a stock's valuation. It compares its market price with its intrinsic value and indicates opportunities.
  • The tier 1 capital ratio: This metric, dividing the core equity capital by the bank's total risk-weighted assets, is crucial for measuring a bank's capital adequacy and its ability to stay afloat during bad times. It compares equity and reserves with total risk-weighted assets.
  • The dividend yield: A stream of dividends can be a cushion during market downturns. This metric shows how much a company is paying out relative to its price.

Take a look at the numbers to get a better understanding of how Hancock fares in terms of valuation, when compared with its peers.

Company

Forward P/E

P/B

Tier 1 Capital Ratio

Dividend Yield

Hancock 12.3 1.01 10.6% 3.4%
First Midwest Bancorp (Nasdaq: FMBI) 14.4 0.64 14.6% 0.5%

Texas Capital Bancshares

(Nasdaq: TCBI)

12.4 1.61 10.2% N/A

Investors Bancorp

(Nasdaq: ISBC)

17.4 1.55 12.0% N/A

Source: Capital IQ, a Standard & Poor's company.

Considering the improvement in its asset quality and a decent capital position, alongside some reasonably cheap valuation multiples, Hancock is beginning to look pretty interesting. But its tasty dividend yield is what makes Hancock truly stand out.

The Foolish bottom line
While Hancock's valuation may not be rock-bottom, its strong operations and fat yield do give us reasons to stay interested. To stay up to speed on Hancock, click here to add it to your personalized stock-tracking watchlist.