"It was a disaster."
Perhaps that's the understatement of the century, but it was all the folks from Hancock Bank could say as they went through a slide show for me of photographs depicting the aftermath of Hurricane Katrina. The pictures were still saved on their PDAs, the stories still seared in their memories. Sharing both over dinner in New Orleans this April seemed as cathartic for them as it was enlightening for me.
Of course, Hurricane Katrina was a disaster of national proportions. And the measure of its effects is sobering: nearly 2,000 dead, more still missing, and $80 billion worth of damage to homes, businesses, and property.
As with the tragic events of Sept. 11, 2001, every American seems to have been affected by Hurricane Katrina in some way. We all have a story. The story of Hancock Bank is a particularly good one.
The history of Hancock
Hancock Bank was founded in 1899 and is headquartered in Gulfport, Miss. Today, the firm boasts that it is "the only financial services company headquartered in the Gulf South to rate among the top 25 of America's top-performing banks." Hancock Holding Company (Nasdaq: HBHC ) stock has also traded on the Nasdaq for the past 15 years, during which time it has returned more than 1,500% -- or an incredible 20% annually. Incidentally, that performance bests that of Nasdaq heavyweights such as Symantec (Nasdaq: SYMC ) , Adobe Systems (Nasdaq: ADBE ) , Intel (Nasdaq: INTC ) , and Apple Computer (Nasdaq: AAPL ) which posted 13%, 17%, 17%, and 12% annualized gains, respectively, over the same time period.
What's been Hancock's secret to success? According to senior management, the bank's core values of "honor and integrity, strength and stability, service, teamwork, and personal responsibility" make the company do business the right way. That has helped Hancock differentiate itself as the leading provider of banking services in Louisiana and Mississippi. The company also recently expanded to Florida.
As an investment, the company also exhibits a number of traits we like to find in small cap stocks:
- Insiders own more than 15% of shares.
- The company pays a solid 1.8% dividend, which it initiated early on in its life as a public company.
- It has dominant positioning in a profitable niche.
Of course, Hurricane Katrina threatened to derail Hancock's impressive performance.
The effects of disaster
When Katrina arrived in Gulfport on Aug. 29, 2005, more than 20 employees stayed at One Hancock Plaza to ride out the storm. With debris and broken windows flying around them, the group knew this was no ordinary storm.
When all was said and done, 190 Hancock associates had lost their homes and 400 more saw damage. The company suffered $49 million worth of damage to its 155 properties as well. Nevertheless, like so many in the region, Hancock employees set out to do what they could. Efforts included improvising outdoor teller windows, helping businesses in the area meet their payrolls, waiving ATM and overdraft fees, extending banking hours, and sending out mobile banks to service particularly hard-hit areas.
Recovery and revitalization
Hancock's performance in the wake of the hurricane has been nothing short of amazing. The stock has returned more than 48% as the company has grown its portfolio and watched deposits tick up substantially. In fact, in the first four months following Katrina, Hancock's business grew more than in the first 95 years of the company's history -- with deposits alone increasing by more than $1 billion and new account volume growing 70% to 33,000.
Not only is that activity good for Hancock and its employees and shareholders, but it also points to the success of efforts to start rebuilding and revitalizing the areas devastated by Hurricane Katrina. While there remains a lot of work to do (the company's headquarters at One Hancock Plaza won't reopen until October at an estimated cost of $35 million, for example), work is being done and progress is being made. The company expects significant residential and commercial development in the coastal area and north of Interstate 10 within the next year, and there have been more than 40,000 building permits issued along the Mississippi Gulf Coast alone since Hurricane Katrina hit.
The Foolish bottom line
While rebuilding efforts along the Gulf Coast will continue to help Hancock increase its loan portfolio and incoming insurance and federal dollars should keep deposits high, interested investors should be aware that much of that growth has already been priced into the company's stock. Looking longer-term, the company needs to grow outside of its region and find ways to compete in Florida. That, however, seems like small potatoes given what Hancock and its region have already come through to this point. And as the folks from Hancock Bank ring the opening bell at Nasdaq tomorrow, it seems like as good a time as any to remember that disaster can make us stronger as long as we stay on the difficult path to recovery.
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