Hancock Whitney Corporation - 3Q26 Earnings Conference Call - HANCOCK WHITNEY CORP

Financial Performance:

• Adjusted net income reached $134 million ($1.66 EPS), a 6% increase in PPNR from the prior quarter and 17% improvement in EPS year-over-year.
• Net interest income rose 7% sequentially, with Net Interest Margin (NIM) expanding 5 basis points to 3.61% (3 bps driven by organic yield, 4 bps from acquisition accretion).
• Non-interest-bearing deposits (DDA) dipped to 33% of the mix due to One Florida Bank integration and seasonal flows; cost of deposits increased 12 bps to 1.55% driven by promotional rates on interest-bearing transactions.
• Asset quality remains stable with criticized commercial loans down $7 million for the seventh consecutive quarter to $485 million; non-accrual loans rose modestly to $133 million.
• Allowance for credit losses (ACL) coverage held steady at 1.42% of loans; net charge-offs were 16 bps.
• Return on average assets (ROA) stood at 1.41%, Return on Tangible Common Equity (ROTCE) at 16.4%, and efficiency ratio at 54.46%.
• Tangible Common Equity (TCE) declined 173 bps to 8.05% due to the OFB acquisition cost, share repurchases, and Other Comprehensive Income (OCI) impacts.
• Core deposit growth was 9% annualized (excluding acquired deposits); loan growth was 4% annualized (excluding acquired loans).

Guidance and Future Outlook:

• Full-year 2026 loan and deposit guidance remains unchanged at low double-digit growth.
• Revised FY 2026 Net Interest Income (NII) guidance: up 9% to 9.5%; Fee Income: up 5.5% to 6%; Operating Expenses and PPNR: up 8% to 8.5%.
• Q4 2026 guidance assumes one 25 bps rate hike in December with minimal impact; expects NIM expansion of 3-5 bps on a core basis.
• Full-year net charge-offs expected to average 15-25 bps of average loans.
• Management anticipates balance sheet growth to continue into 2027, with a potential return to share repurchases contingent on rate clarity and maintaining TCE above an 8% cultural threshold.

Business Segments and Product Lines:

• Loan growth driven primarily by Commercial Real Estate (CRE) across multiple products and Equipment Finance.
• Commercial Real Estate, Construction & Development (C&D), and Healthcare anticipated as key growth contributors in Q4 due to diminished payoffs and new project pipelines.
• Energy loans remain de-emphasized with total concentration well below 1%.
• Integration of One Florida Bank (closed August 1) added new colleagues and clients; platform integration focuses on adopting mature Homeowner Association (HOA) banking capabilities.
• Strategic focus on hiring Treasury Management staff to complement existing sales force and capture operating accounts for SMEs.
• Net new bankers contributed 55% of YTD loan growth and 77% of Q3 loan growth.

Market and Competitive Landscape:

• Client sentiment described as "cautiously optimistic," with a focus on energy costs and inflation despite economic resilience.
• Significant industrial and data center investment activity noted in Mississippi and Louisiana footprints is driving deposit growth, though loan demand is currently lagging due to favorable payment terms from hyperscalers.
• The acquisition of One Florida Bank expanded market presence in Florida, providing access to a young, growing bank with a strong deposit base.
• Market competition for talent remains intense; the firm utilizes a "One Bank" concept to foster cross-line-of-business collaboration.

Risks and Challenges:

• Interest rate volatility and the 10-year Treasury yield increases have prompted a pause in share repurchases to preserve capital.
• Rising deposit costs due to promotional pricing on interest-bearing transactions to fuel organic growth.
• Macroeconomic uncertainty regarding the speed and magnitude of future rate hikes could impact loan demand if rates rise significantly (50-100 bps) in coming quarters.
• Potential risks associated with the concentration of data center projects if hyperscalers fail, though contractors are adopting conservative payment terms to mitigate this.
• Seasonal fluctuations in DDA balances, particularly in the third quarter, impacting the non-interest-bearing deposit mix.

Management Commentary and Tone:

• Management tone is confident and optimistic, citing "solid" profitability, efficiency, and balance sheet growth.
• Strong emphasis on disciplined hiring and organic growth over M&A, with M&A viewed opportunistically post-closing.
• Leaders expressed dedication to supporting communities affected by recent hurricanes in the Florida Panhandle.
• Confident in the "One Bank" strategy to drive consistency and reduce earnings volatility.

Analyst Questions and Answers:

• NIM & Rates: Analysts questioned margin expansion drivers; management confirmed modest NIM expansion (3-5 bps) driven by organic balance sheet growth and reinvestment of bond portfolio cash flows at higher yields (reinvesting at >5.5%).
• Deposit Mix: Clarified DDA mix decline is temporary and seasonal; expects DDA recovery in Q4 and continued focus on deposit gathering through new hiring.
• Growth Consistency: Explained consistency via rigorous hiring aligned with credit appetite and the "One Bank" operational model to reduce internal competition.
• Energy Segment: Confirmed no significant appetite for energy loan growth; concentration remains below 1%.
• M&A Appetite: Focus remains on organic growth and integrating One Florida; M&A is opportunistic rather than aggressive.
• Hedging: Added cash flow hedges (hundreds of millions) to right-size asset sensitivity within policy limits.
• SYNCC Loans: Syndicated loan ratio dropped to 8.6% post-acquisition; no immediate plan to aggressively grow this segment, but will not curtail business within the 10% limit.

Other Key Points:

• One Florida Bank acquisition closed on August 1; results reflect all expected one-time acquisition expenses.
• 1 million shares repurchased in Q3; 1 million shares remaining in 2026 authority, paused due to rate environment.
• Projected Common Tier 1 ratio to reach 12-12.5% by year-end, providing comfort for future capital actions.
• Operational efficiency remains high despite offensive reinvestment in people and technology.