10-Q: Hancock Whitney Q2 2025: Margin Expands, Loans Grow

Hancock Whitney Corporation reports expanded net interest margin and loan growth in Q2 2025, despite a slight dip in net income and increased charge-offs.

Summary

• Net income for Q2 2025 was $113.5 million, or $1.32 per diluted common share, compared to $119.5 million ($1.38 diluted EPS) in Q1 2025 and $114.6 million ($1.31 diluted EPS) in Q2 2024.
• Adjusted pre-provision net revenue (non-GAAP) totaled $167.9 million in Q2 2025, an increase of $5.5 million, or 3%, from Q1 2025.
• Period-end loans reached $23.5 billion, up $363.6 million (2%) from March 31, 2025.
• Period-end deposits totaled $29.0 billion, a decrease of $148.1 million (1%) from March 31, 2025.
• Net interest margin (taxable equivalent) expanded to 3.49% in Q2 2025, up 6 basis points from 3.43% in Q1 2025.
• The efficiency ratio (non-GAAP) improved to 54.91% in Q2 2025, compared to 55.22% in Q1 2025.
• Provision for credit losses increased to $14.9 million in Q2 2025, up from $10.5 million in Q1 2025.
• Annualized net charge-offs as a percentage of average loans were 0.31% in Q2 2025, up from 0.18% in Q1 2025, including a $14.6 million commercial charge-off related to a single borrower.
• Nonaccrual loans decreased to $94.9 million at June 30, 2025, from $104.2 million at March 31, 2025.
• The allowance for credit losses coverage to total loans was 1.45% at June 30, 2025, down 4 basis points from 1.49% at March 31, 2025.
• The acquisition of Sabal Trust Company was completed on May 2, 2025, adding approximately $3 billion in assets under management and administration.
• The company repurchased 750,000 shares of its common stock in Q2 2025 at an average price of $52.39 per share.

Sentiment

Score: 7

Explanation: The company demonstrated solid performance with net interest margin expansion and loan growth, indicating effective management in a volatile economic environment. While net income slightly decreased quarter-over-quarter and charge-offs increased due to a specific event, the underlying credit quality outlook remains stable, and capital ratios are strong. The strategic acquisition of Sabal Trust Company also points to future growth opportunities.

Positives

• Net interest margin expanded to 3.49% in Q2 2025, driven by a decrease in deposit rates and higher yields on loan and securities portfolios.
• Adjusted pre-provision net revenue increased by 3% quarter-over-quarter, indicating strong operational performance.
• Period-end loans grew by 2% from Q1 2025, reflecting stronger demand and increased line utilization.
• The efficiency ratio improved to 54.91%, demonstrating effective cost management.
• Nonaccrual loans and criticized commercial loans decreased, indicating improving asset quality metrics in certain areas.
• Capital ratios remain strong and well above regulatory minimums, with a Tangible Common Equity ratio of 9.84%, CET1 ratio of 13.97%, and Total Risk-Based Capital ratio of 15.82%.
• The acquisition of Sabal Trust Company expands the company's market share in investment management and trust business in high-growth markets in Central Florida.
• The company has maintained uninterrupted dividends to its shareholders since 1967.
• Available on and off-balance sheet liquidity of $19.4 billion is well in excess of estimated uninsured, noncollateralized deposits of approximately $11.2 billion.
• The ratio of free securities to total securities was 59.44% at June 30, 2025, exceeding the internal target of 20% or greater.

Negatives

• Net income decreased to $113.5 million in Q2 2025 from $119.5 million in Q1 2025.
• Diluted earnings per share decreased to $1.32 in Q2 2025 from $1.38 in Q1 2025.
• Period-end deposits decreased by $148.1 million (1%) from Q1 2025, primarily due to typical seasonal movement in public funds deposits.
• Provision for credit losses increased to $14.9 million in Q2 2025 from $10.5 million in Q1 2025.
• Annualized net charge-offs to average loans increased to 0.31% in Q2 2025, primarily due to a $14.6 million commercial charge-off related to a single borrower.
• The allowance for credit losses coverage to total loans decreased by 4 basis points to 1.45%.
• Wholesale funds increased by 67% from Q1 2025 to $1.3 billion, indicating a greater reliance on non-core funding sources.
• Acquisition-related costs of $5.9 million impacted noninterest expense in Q2 2025.
• A $3.6 million valuation charge attributable to one commercial property was included in net losses from other real estate and foreclosed assets for the six months ended June 30, 2025.
• Loans 90 days past due still accruing increased significantly to $58.7 million, including $36.7 million related to a single relationship with matured loans that were extended shortly after quarter-end.

Risks

• General economic and business conditions, including employment levels, interest rates, inflation, and the threat of recession, may affect customer behavior and credit quality.
• Uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy could impact future economic growth.
• Adverse developments in the banking industry, such as high-profile bank failures, could affect customer confidence, liquidity, and increase deposit insurance assessments.
• The provision for credit losses may be inadequate or negatively affected by credit risk exposure.
• Fluctuations in commercial and residential real estate values could impact the value of collateral supporting loans.
• The enterprise risk management framework may not adequately identify or address all risks, potentially leading to unexpected losses.
• Challenges in successfully integrating current and future business combinations, including Sabal Trust Company, could impact performance and financial condition.
• Changes in interest rates, including Federal Reserve actions, could affect financial projections and net interest margin trends.
• The cost and availability of funding could change due to shifts in deposit and credit markets.
• Reliance on third parties for key business infrastructure components poses risks of service disruptions or financial difficulties.
• Potential claims, damages, penalties, fines, and reputational damage may arise from pending or future litigation, regulatory proceedings, or enforcement actions.
• Operational risks, including cybersecurity threats exacerbated by generative AI, could disrupt business and lead to data breaches or system damage.
• The extensive use, reliability, disruption, and accuracy of internal models and data are critical to business operations.
• Risks associated with implementing new lines of business, products, services, and technologies.
• The ability to receive dividends from Hancock Whitney Bank could affect the Parent company's liquidity and ability to pay dividends or undertake capital actions.
• The company may be required to make substantial expenditures to keep pace with regulatory initiatives and rapid technology changes.
• Non-compliance with applicable federal and state regulations or supervisory actions could negatively impact financial results, reputation, and business.
• Competition from other traditional and non-traditional financial services companies, some with greater resources or different regulatory standards, could affect competitiveness.
• Maintaining adequate internal controls over financial reporting is crucial.
• Future tax legislation could have a financial impact.
• Catastrophic events such as war, terrorism, climate change, natural disasters, or health emergencies could affect economic conditions and increase costs.
• Risks related to diversity, equity, and inclusion, and environmental, social, and governance legislation, rulemaking, activism, and litigation could alter reputation and affiliations.
• Changes in laws and regulations affecting businesses, including increased regulatory scrutiny, could require changes in business practices, increase compliance risk, or reduce revenue.
• The potential implementation of a regulatory reform agenda could impact rulemaking, supervision, examination, and enforcement priorities.
• The regulatory environment may not be conducive to or may prohibit future mergers and/or business combinations, increasing transaction time and resources.

Future Outlook

The company expects full year 2025 net interest income (taxable equivalent) to increase by 3% to 4% compared to 2024, with modest and consistent expansion in net interest margin during the second half of 2025. This improvement is anticipated to be driven by lower deposit costs, low single-digit loan growth, and continued repricing of cash flows from both securities and fixed-rate loan portfolios, assuming 25 basis point rate cuts by the Federal Reserve in September and December 2025, though similar results are expected even without rate cuts. Net charge-offs as a percentage of average loans are projected to range from 0.15% to 0.25% for 2025. Noninterest income is expected to be up 9% to 10% for the full year 2025, and adjusted noninterest expense is expected to increase by 4% to 5%. The effective income tax rate for 2025 is forecasted to be in the 20% to 21% range. Period-end loan and deposit growth percentages for December 31, 2025, are expected to be in the low single digits compared to December 31, 2024 balances. The company also anticipates realizing benefits from federal and state tax credits totaling $8.2 million in 2026, $8.0 million in 2027, and $5.5 million in 2028.

Management Comments

• "Our results for the three months ended June 30, 2025 reflect another quarter of strong performance."
• "Our net interest margin continued to expand, adjusted pre-provision net revenue grew, and our efficiency ratio and certain asset quality metrics improved."
• "We deployed capital to fund both organic growth and inorganic growth, including the acquisition of Sabal Trust Company on May 2, 2025, and to repurchase 750,000 shares of our common stock."
• "The Sabal acquisition expands our trust and asset management business in Florida and provides opportunities to build relationships in the region."
• "We experienced loan growth of 2% across our footprint and in most business segments, driven by the stronger demand that we were expecting to see as the year progressed."
• "We look forward to continued progress as we carry out our multi-year growth plan, while remaining focused on balance sheet optimization and effective expense control."
• "We believe we are well positioned to continue to enhance shareholder value."
• "Management has deemed certain assumptions underlying the downside S-2 scenario to be as likely to occur in the near term as those underlying the baseline scenario, and, as such, the baseline scenario and the S-2 scenario were each given probability weightings of 50% in the calculation of our allowance for credit losses calculation at June 30, 2025."
• "The change in weighting does not represent a significant shift in our outlook, but rather is a function of a shift in the assumptions underlying the forecasts."
• "The credit loss outlook for our portfolio as a whole has not changed materially since March 31, 2025."
• "We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation, the elevated interest rate environment, tariffs and/or other economic circumstances that may impact credit quality."
• "We remain focused on identifying specific and broader risk indicators that may be impacting certain segments in our portfolio, and we have not seen signs of significant weakening in any particular industry, sector or geographic segment beyond what we believe has been experienced by the banking industry as a whole."

Industry Context

The filing highlights that the financial services industry continues to face economic volatility due to changing tariffs, political actions, and prolonged elevated interest rates, which present headwinds for loan demand and deposit behavior. It acknowledges the heightened focus on liquidity following high-profile bank failures in the first half of 2023. Despite these pressures, the company reported solid linked-quarter loan growth and net interest margin expansion, suggesting effective navigation of the challenging environment. The company's use of Moody's economic forecasts for credit loss modeling aligns with common industry practices for risk assessment.

Comparison to Industry Standards

• The company's regulatory capital ratios (CET1, Tier 1, Total Capital) are well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least $1.2 billion, and the company is categorized as well-capitalized.
• The company's criticized commercial loans are diversified across many industries, and management has not observed signs of significant weakening in any particular industry, sector, or geographic segment beyond what is believed to be experienced by the banking industry as a whole.
• The company's internal target for the ratio of free securities to total securities is 20% or greater, with the actual ratio at 59.44% at June 30, 2025, indicating strong liquidity relative to its own benchmark.
• The company's liquid asset ratio of 17.67% at June 30, 2025, exceeds its internal minimum of 7.5% and internal target of 12% or greater.
• The company's loan-to-deposit ratio for Q2 2025 was 81.15%, which is below its established target range of 87% to 89%, suggesting room for loan growth relative to its deposit base.

Legal Proceedings

• The company is party to various legal proceedings arising in the ordinary course of business.
• Management does not believe that loss contingencies arising from pending litigation and regulatory matters will have a material adverse effect on the consolidated financial position or liquidity.
• The company has expensed $29.4 million related to an FDIC special assessment to recover losses to the Deposit Insurance Fund (DIF) from the failures of Silicon Valley Bank and Signature Bank; the exact exposure remains unknown until receiverships terminate.

Stakeholder Impact

• Shareholders: Experienced a quarterly dividend of $0.45 per share and benefited from common stock repurchases, though net income and diluted EPS saw a slight quarter-over-quarter decrease.
• Employees: The acquisition of Sabal Trust Company added new associates, and personnel expenses reflect annual merit increases and stock-based compensation. The pension plan is closed to new entrants, with no contributions anticipated in 2025.
• Customers: Continue to be offered a wide range of banking products and services, including treasury management and insured cash sweep products, with loan growth indicating continued support for financing needs.
• Regulators: The company maintains capital ratios well above regulatory minimums and is categorized as well-capitalized, but is subject to ongoing FDIC special assessments related to recent bank failures.

Next Steps

• Continue to carry out the multi-year growth plan.
• Remain focused on balance sheet optimization and effective expense control.
• Closely monitor the portfolio for customers sensitive to prolonged inflation, elevated interest rates, tariffs, and other economic circumstances that may impact credit quality.
• Continue making investments in tax credit projects, subject to federal and state tax policies and the level of competition for such credits.
• Management is currently evaluating the potential impacts of the One Big Beautiful Bill Act (OBBBA) on the company's consolidated financial position or results of operations.
• Possible actions to mitigate exposure to interest rate risk include changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying, or terminating existing interest rate swap agreements or other financial instruments.

Key Dates

Recommendation

While Hancock Whitney demonstrated strong net interest margin expansion, solid loan growth, and improved efficiency, the quarter-over-quarter decline in net income and the notable increase in net charge-offs (driven by a single large commercial charge-off) introduce some caution. The strategic acquisition of Sabal Trust Company is a positive strategic move, and capital ratios remain robust. However, the uncertain economic outlook, particularly regarding tariffs and interest rates, and the specific credit event, suggest a 'Hold' position. Investors should monitor the trajectory of credit quality and the integration of the acquired business.

Keywords

Banking, Financial Services, Regional Bank, SEC Filing, 10-Q, Quarterly Report, Net Interest Income, Net Interest Margin, Loan Growth, Deposit Trends, Credit Quality, Allowance for Credit Losses, Capital Ratios, Stock Repurchase, Acquisition, Sabal Trust Company, Commercial Real Estate, Mortgage-Backed Securities, Interest Rate Risk, Cybersecurity, Regulatory Compliance, Financial Performance