10-Q: Hancock Whitney Reports Strong Q3 Earnings Amid Economic Headwinds

Hancock Whitney Corporation announced robust third-quarter 2025 results, with increased net income and improved efficiency, while navigating a complex economic landscape.

Summary

• Net income for the third quarter of 2025 was $127.5 million, or $1.49 per diluted common share, compared to $113.5 million ($1.32 per diluted share) in Q2 2025 and $115.6 million ($1.33 per diluted share) in Q3 2024.
• Year-to-date net income for the nine months ended September 30, 2025, reached $360.5 million, or $4.17 per diluted common share, up from $338.7 million ($3.88 per diluted share) in the same period of 2024.
• Adjusted pre-provision net revenue, a non-GAAP measure, totaled $175.6 million in Q3 2025, a 5% increase from Q2 2025.
• Period-end loans grew by $134.8 million (1%) to $23.6 billion from Q2 2025, while period-end deposits decreased by $386.9 million (1%) to $28.7 billion.
• The net interest margin remained stable at 3.49% in Q3 2025, unchanged from Q2 2025.
• The efficiency ratio improved to 54.10% in Q3 2025, down from 54.91% in Q2 2025.
• The allowance for credit losses coverage to total loans remained solid at 1.45%, consistent with June 30, 2025.
• Annualized net charge-offs to average loans decreased to 0.19% in Q3 2025, down from 0.31% in Q2 2025.
• Nonaccrual loans increased to $113.6 million at September 30, 2025, up from $94.9 million at June 30, 2025.
• The company repurchased 662,500 shares of common stock in Q3 2025 and 1.8 million shares year-to-date at an average cost of $56.80 per share.
• The acquisition of Sabal Trust Company on May 2, 2025, added approximately $3 billion in assets under management and administration.

Sentiment

Score: 7

Explanation: The company reported strong financial performance with increased net income, improved efficiency, and robust capital ratios. However, the economic outlook remains cautious with a 50% probability assigned to a mild recession scenario, and nonaccrual loans have increased, tempering overall sentiment.

Positives

• Net income increased significantly in Q3 2025 to $127.5 million, up from $113.5 million in Q2 2025 and $115.6 million in Q3 2024.
• Diluted earnings per share rose to $1.49 in Q3 2025, compared to $1.32 in Q2 2025 and $1.33 in Q3 2024.
• Adjusted pre-provision net revenue increased by 5% to $175.6 million in Q3 2025.
• The efficiency ratio improved to 54.10% in Q3 2025, indicating better cost management.
• Net interest margin remained stable at 3.49% despite a declining interest rate environment.
• Annualized net charge-offs to average loans decreased to 0.19% in Q3 2025 from 0.31% in Q2 2025, indicating improved loan performance.
• Capital ratios strengthened, with Tangible Common Equity ratio at 10.01% (up 17 bps), Common Equity Tier 1 ratio at 14.09% (up 12 bps), and Total Risk-Based Capital ratio at 15.92% (up 10 bps).
• Available liquidity of $19.2 billion significantly exceeds uninsured, noncollateralized deposits of $11.2 billion.
• The ratio of free securities to total securities was 60.83%, well above the internal target of 20% or greater.
• The acquisition of Sabal Trust Company expanded market share in investment management and trust business in high-growth Central Florida markets, adding $3 billion in assets under management.
• The company continues to pay uninterrupted dividends, with $0.45 per share declared for Q3 2025.

Negatives

• Period-end deposits decreased by $386.9 million (1%) from Q2 2025 and $833.1 million (3%) from December 31, 2024, primarily due to seasonal movement in public funds and retail time deposit maturities.
• Total nonaccrual loans increased to $113.6 million at September 30, 2025, up $18.6 million from June 30, 2025, and $16.2 million from December 31, 2024.
• The loan-to-deposit ratio (average) for Q3 2025 was 82.22%, still below the management's established target range of 87% to 89%.
• Wholesale funds to core deposits increased to 7.74% at September 30, 2025, up from 4.57% at June 30, 2025, largely driven by higher short-term FHLB borrowings.
• Noninterest-bearing demand deposits decreased by $333.5 million (3%) from June 30, 2025, and $292.2 million (3%) from December 31, 2024.

Risks

• General economic and business conditions, including employment levels, interest rates, inflation, and the threat of recession, could negatively affect customer behavior, credit quality, and deposit activity.
• Uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy, including tariffs, could disrupt supply chains, reduce economic growth, and impact demand for banking products.
• Adverse developments in the banking industry, such as high-profile bank failures, could impact customer confidence, liquidity, and increase deposit insurance assessment costs.
• The provision for credit losses may be inadequate or negatively affected by credit risk exposure, especially given the potential for a mild recession.
• 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.
• Integration risks associated with current (Sabal Trust Company) and future business combinations could impact performance and financial condition.
• Changes in interest rates, including actions by the Federal Reserve Board, could affect financial projections, models, and net interest margin trends.
• Reliance on third parties for key business infrastructure components poses risks of service disruptions or financial difficulties of vendors.
• Potential claims, damages, penalties, fines, and reputational damage could arise from pending or future litigation, regulatory proceedings, or enforcement actions.
• Operational risks, including cybersecurity risks exacerbated by generative artificial intelligence, could lead to system breaches, data misuse, increased costs, or reputational damage.
• The ability to receive dividends from Hancock Whitney Bank could affect the Parent company's liquidity, including its capacity to pay dividends or undertake other capital actions.
• The company may be required to make substantial expenditures to keep pace with regulatory initiatives and rapid technology changes in the financial services market.
• 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 financial resources or different regulatory standards, could affect the company's competitive position.
• Geopolitical conflicts, natural disasters, health emergencies, or other catastrophic events could affect general economic conditions and increase costs.
• Changes in laws and regulations, including those related to diversity, equity, and inclusion, and environmental, social, and governance (ESG), could alter reputation and affiliations.
• The impact of government shutdowns and potential regulatory reform agendas create significant uncertainty for the U.S. and global economies.

Future Outlook

The company utilizes Moody's Analytics September 2025 economic forecast, weighting a baseline scenario and a downside mild recessionary S-2 scenario each at 50% for credit loss calculations. The baseline predicts increasing tariffs to 15%, Federal Reserve rate cuts (25 bps in September and December 2025, then gradual to 3%), unemployment rising to 4.8% by Q4 2026, and modest GDP growth (1.8% in 2025, 1.5% in 2026, 1.8% in 2027). The S-2 scenario projects a more severe outcome with tariffs increasing to 22%, a mild recession starting in Q4 2025 lasting three quarters, a 23% stock market contraction, 1% GDP decline, and unemployment peaking at 7.2% by Q3 2026, with the Fed raising rates in Q4 2025 before easing. The credit loss outlook for the portfolio has not materially changed since June 30, 2025, but the company continues to monitor customers sensitive to inflation, elevated interest rates, tariffs, and labor market conditions. The full impact of fiscal and other policy changes, including the ongoing government shutdown, remains uncertain and could lead to an economic recession or slower growth.

Management Comments

• "Our results for the third quarter of 2025 again reflect strong performance and profitability."
• "Adjusted pre-provision net revenue and return on assets grew, efficiency ratio improved, credit quality remained stable and net interest margin was unchanged despite a declining interest rate environment."
• "Solid earnings performance drove growth in our capital ratios, even as we continued to deploy capital to fund organic balance sheet growth and repurchase 662,500 shares of our common stock."
• "We remain committed to executing on our organic growth plan while maintaining operational efficiency and proactively managing capital 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 September 30, 2025."
• "The credit loss outlook for our portfolio as a whole has not changed materially since June 30, 2025."
• "We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation, the elevated interest rate environment, tariffs, labor market conditions and/or other economic circumstances that may impact credit quality."

Industry Context

The financial services industry continues to face headwinds from economic uncertainty and prolonged elevated interest rates, impacting loan demand and deposit behavior. Despite these pressures, Hancock Whitney experienced loan growth and maintained its net interest margin, suggesting resilience compared to broader industry challenges. The company's strategic acquisition of Sabal Trust Company aligns with a trend of regional banks expanding wealth management and trust services to diversify revenue streams and capture growth in specific high-growth markets, particularly in Florida. The increased nonaccrual loans and the cautious economic outlook, including the potential for a mild recession, reflect broader concerns within the banking sector regarding credit quality and economic stability.

Comparison to Industry Standards

• The company's Tangible Common Equity ratio of 10.01% and Common Equity Tier 1 ratio of 14.09% are well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least $1.2 billion, indicating strong capital adequacy compared to industry standards.
• The efficiency ratio improved to 54.10%, which is generally considered competitive within the regional banking sector, though specific peer comparisons are not provided in the filing.
• The allowance for credit losses coverage to total loans at 1.45% is maintained at a solid level, reflecting a cautious approach to credit risk in the current economic environment, consistent with prudent banking practices.
• The company's available liquidity of $19.2 billion significantly exceeding uninsured, noncollateralized deposits of $11.2 billion demonstrates a robust liquidity position, which is a critical strength in the current banking climate marked by recent bank failures and deposit runs.

Legal Proceedings

• The company is party to various legal proceedings arising in the ordinary course of business, but management does not believe that loss contingencies will have a material adverse effect on consolidated financial position or liquidity.

Stakeholder Impact

• Shareholders: Benefited from increased net income, improved EPS, strengthening capital ratios, and continued common stock dividends of $0.45 per share. The stock buyback program also aims to enhance shareholder value.
• Customers: The acquisition of Sabal Trust Company expands investment management and trust services, offering more comprehensive financial solutions. The company's strong liquidity and capital position ensure continued stability and service availability.
• Employees: The acquisition of Sabal Trust Company likely integrated new employees. Personnel expense increased due to bonus and incentive compensation and increased headcount, indicating ongoing investment in human capital.
• Creditors: Strong capital ratios and robust liquidity provide assurance of the company's ability to meet its financial obligations.
• Regulators: The company maintains regulatory capital ratios well in excess of minimum requirements and has been categorized as well-capitalized, demonstrating compliance and financial health.

Next Steps

• Continue to execute on the organic growth plan.
• Maintain operational efficiency.
• Proactively manage capital to enhance shareholder value.
• Closely monitor the portfolio for customers sensitive to prolonged inflation, elevated interest rates, tariffs, and labor market conditions.
• Continue making investments in tax credit projects, subject to federal and state tax policies and competition for credits.

Key Dates

Recommendation

Hancock Whitney Corporation demonstrates strong financial health with increased net income, improved efficiency, and robust capital. The acquisition of Sabal Trust Company is a positive strategic move. However, the economic outlook is uncertain, with management assigning a 50% probability to a mild recession scenario, and nonaccrual loans have increased. While the company is well-positioned to navigate these challenges, the broader economic headwinds suggest a cautious approach. The stock is likely to maintain its value due to solid fundamentals but may not see significant upside until economic uncertainties abate.

Keywords

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