8-K: Hancock Whitney Reports Solid Third Quarter Earnings, Capital Ratios Improve

Hancock Whitney Corporation announced third quarter 2024 earnings of $1.33 per diluted share, showing a slight increase from the previous quarter.

Summary

• Hancock Whitney Corporation reported a net income of $115.6 million, or $1.33 per diluted share, for the third quarter of 2024.
• This compares to a net income of $114.6 million, or $1.31 per diluted share, in the second quarter of 2024, and $97.7 million, or $1.12 per diluted share, in the third quarter of 2023.
• Pre-provision net revenue (PPNR) totaled $166.5 million, up from $156.4 million in the prior quarter.
• Loans decreased by $456 million, or 8% linked quarter annualized (LQA), primarily due to a runoff of a Shared National Credit portfolio.
• Deposits decreased by $218 million, or 3% LQA, driven by a decrease in interest-bearing public funds.
• The company's net interest margin (NIM) was 3.39%, up 2 bps from the prior quarter.
• The CET1 ratio is estimated at 13.79%, up 54 bps linked-quarter, and the TCE ratio is 9.56%, up 79 bps linked-quarter.
• The efficiency ratio improved to 54.42%, down 176 bps linked-quarter.
• The company repurchased 300,000 shares of its common stock at an average price of $50.60 per share during the quarter.

Sentiment

Score: 7

Explanation: The sentiment is positive due to improved profitability, strong capital ratios, and effective cost management. However, there are some concerns about loan and deposit decreases and an increase in criticized commercial loans, which temper the overall sentiment.

Positives

• The company's net income increased slightly compared to the previous quarter.
• Pre-provision net revenue (PPNR) showed a significant increase.
• The net interest margin (NIM) expanded, indicating improved profitability.
• Capital ratios, including CET1 and TCE, improved significantly.
• The efficiency ratio decreased, reflecting better cost management.
• The company's share buyback program continues, returning capital to shareholders.
• The company maintained a solid ACL coverage ratio.

Negatives

• Total loans decreased by $456 million, primarily due to the runoff of a Shared National Credit portfolio.
• Total deposits decreased by $218 million, driven by a decrease in interest-bearing public funds.
• Criticized commercial loans increased, indicating some potential credit quality concerns.
• Net charge-offs increased to $18.0 million, or 0.30% of average total loans on an annualized basis, compared to $7.3 million, or 0.12% in the second quarter of 2024.

Risks

• The decrease in loans and deposits could impact future revenue and profitability.
• The increase in criticized commercial loans suggests potential credit quality issues that need monitoring.
• The company faces headwinds from continued deposit remix and variable loan repricing.
• The company is exposed to potential impacts from economic conditions, interest rate changes, and other market factors.

Future Outlook

Management expects 2024 period-end loan and deposit balances to be flat to down slightly from year-end 2023, and anticipates modest NIM expansion in 4Q24, assuming two 25 bp rate cuts.

Management Comments

• The third quarter results reflect the continued strength and stability of our company, said John M. Hairston, President & CEO.
• Our efforts to improve profitability continued with another quarter of 1.32% ROA, additional NIM expansion, fee income growth, and lower operating expenses.
• Credit metrics continued to normalize with an increase in criticized commercial loans at the end of the quarter.
• Non-accrual loans were down, and we've maintained a solid ACL to loans of 1.46%.
• Our capital ratios continue to grow due to strong earnings and are at top quartile levels.

Industry Context

The results reflect a mixed environment for banks, with challenges in loan and deposit growth, but also opportunities for improved profitability through NIM expansion and cost control. The increase in criticized commercial loans is a trend being watched across the industry.

Comparison to Industry Standards

• Hancock Whitney's CET1 ratio of 13.79% is considered top quartile, indicating a strong capital position compared to many regional banks.
• The efficiency ratio of 54.42% is competitive, suggesting effective cost management relative to peers.
• The company's NIM of 3.39% is in line with industry averages, but the 2 bps increase indicates positive momentum.
• The increase in criticized commercial loans is a trend seen across the industry, but Hancock Whitney's nonaccrual loans remain at top quartile levels.
• Compared to companies like Regions Financial (RF) and Truist Financial (TFC), Hancock Whitney's capital ratios are generally stronger, while its efficiency ratio is comparable.

Stakeholder Impact

• Shareholders benefit from improved earnings, increased capital ratios, and share repurchases.
• Employees may see stability in the company's performance and continued focus on efficiency.
• Customers may experience consistent service and a stable financial institution.
• Creditors may view the company as a lower risk due to its strong capital position.

Next Steps

• Management will host a conference call for analysts and investors on October 15, 2024, to review the third quarter results.
• The company will continue to monitor economic conditions and their impact on asset quality and financial performance.
• The company will continue to execute its share buyback program through December 31, 2024.
• The company expects to reinvest principal runoff of approximately $199 million in 4Q24, $163 million in 1Q25, and $232 million in 2Q25.

Key Dates

Keywords

financial results, net income, earnings per share, loans, deposits, net interest margin, capital ratios, efficiency ratio, asset quality, credit losses, share repurchase