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

Explicit Guidance:

• Full Year 2026: Loan and deposit growth expected to be "low double-digit." Net interest income (NII) guidance revised upward to growth of 9%–9.5% (was unchanged previously). Fee income expected to grow 5.5%–6%. Operating expenses and Pre-provision net revenue (PPNR) expected to grow 8%–8.5%. Net charge-offs to loans anticipated to average 15–25 basis points.
• Fourth Quarter 2026: Modeling assumes one 25 basis point rate hike in December with "minimum impact" on the quarter. NII and NIM expected to continue expanding organically; NIM expansion projected at 3–5 basis points.
• 2027 Outlook: Management expects to have share repurchase authority in place for next year following board review in December. Confidence remains in low double-digit loan and deposit growth for 2027, contingent on rate clarity.
• Capital Metrics: Target Common Equity Tier 1 (CET1) ratio of approximately 12%–12.5% by year-end. Management aims to keep Total Common Equity (TCE) ratio above 8% (cultural threshold) but is currently operating at 8.05% (down 173 bps).

Business-Segment Outlook:

• Loan Growth Drivers: Primary drivers for 2026/Q4 include Commercial Real Estate (CRE) (lift across multiple products), Equipment Finance, Healthcare, and C&I. Construction & Development (C&D) expected to bounce back due to diminishing payoffs and new projects; organic growth expected to return to mid-single digits in Q4.
• Deposit Strategy: Focus on Interest-Bearing Transaction (IBT) deposits via promotional rates (CDs, Money Markets) to fund balance sheet growth. Expecting DDA (Demand Deposit Account) mix to seasonally recover in Q4 after a Q3 decline (down ~3% of mix to ~33%).
• Geographic Expansion: Integration of One Florida Bank (OFB) assets and "New England" bankers expected to contribute to growth; management notes "tailwinds outweigh headwinds."
• Syndicated Loans (SNCC): Ratio dropped to 8.6% (down from ~9%+) due to OFB denominator expansion; management comfortable growing organically within the <10% self-imposed limit without forcing volume.
• Energy Sector: Intentional de-emphasis on energy lending; total concentration remains <1% and will stay below this threshold.

Market and Competitive Outlook:

• Demand Trends: Client sentiment characterized as "cautiously optimistic" with resilience despite macro volatility. Demand for loan production expected to remain healthy, with a potential upside if a 25–50 bps rate hike accelerates in coming quarters.
• Structural Shifts: Anticipated dramatic pullback in commercial payoffs (specifically CRE) if interest rates rise significantly, benefiting asset-sensitive balance sheet.
• Deposit Competition: Aggressive promotional rate campaigns driving growth in interest-bearing deposits, shifting mix from non-interest-bearing to higher-cost funding.
• New Market Dynamics: Data center and manufacturing investments in Mississippi and Louisiana driving deposit growth (pre-payment terms) rather than immediate loan growth; potential for loan demand to pick up as projects move to "care and feeding" phases.

Macro / Industry Outlook:

• Interest Rate Environment: Fed 25 bps hike in December 2026 modeled as the only change for the year; elevated 10-year Treasury yields impacting capital deployment decisions.
• Economic Sentiment: Clients focused on energy costs and inflation impacts on the Fed. Management notes clients are "a little ways away" from a "squeal point" where demand pulls back.
• Rate Sensitivity: Bank remains modestly asset-sensitive; any rate increases beyond the December hike would positively impact NII/NIM.
• Regulatory/Policy Risks: Caution expressed regarding "hyperscaler" race winners and potential political shifts affecting industrial projects, though data center construction is viewed as lower risk due to conservative payment terms.

Strategic Initiatives:

• One Florida Bank Integration: Acquisition closed August 1, 2026. Full conversion and integration of treasury platforms and Homeowner Association (HOA) banking products ongoing.
• Organic Growth (Talent): Hiring ~10–12 net new bankers in Q4 to reach ~50 net new for the year (excluding 20 OFB hires). Goal to reach ~70 total new (including OFB) for 2026.
• Treasury Management Expansion: Recruiting treasury specialists and "deposit-only" gathering roles to capture SME operating accounts and enhance fee generation.
• Share Repurchases: 1 million shares repurchased in Q3. 1 million shares remaining in 2026 authority; suspended in Q4 due to elevated rates and TCE levels, with potential resumption in 2027.
• Hedging Strategy: Added hundreds of millions in cash flow hedges in Q3 to right-size asset sensitivity to policy targets.

Risks and Headwinds to Outlook:

• Capital Deployment: Elevated rates and TCE ratio of 8.05% may delay buybacks until "clarity about where rates go" is achieved.
• Deposit Cost Pressure: Promotional rate programs expected to keep cost of deposits elevated in Q4 and potentially 2027, though offset by balance sheet growth and reinvestment yields.
• One-Time Acquisition Costs: Q3 results included expected one-time expenses; future periods should see cleaner earnings as these normalize.
• Credit Quality: Non-accrual loans increased $19 million (to $133M), though criticized loans improved for the 7th straight quarter. ACL coverage remains solid at 1.42%.
• Concentration Risks: Caution regarding "hyperscaler" winners and potential political volatility in industrial zones.

Management Tone on the Future:

• Confidence: High confidence in organic balance sheet growth and ability to fund it with deposits. Optimistic about closing 2026.
• Tone: Cautiously optimistic; willing to accept short-term deposit cost increases for long-term liquidity and growth.
• Strategic Discipline: Emphasis on "consistency" and reducing volatility in earnings and provision. Hiring discipline remains high (credit involvement in hiring).
• Capital Pragmatism: Willing to pause buybacks (a rare move) to preserve capital adequacy amidst rate uncertainty, prioritizing TCE > 8% and CET1 ~12%.

Miscellaneous:

• Hurricane Recovery: Teams supporting Florida Panhandle communities post-hurricane; no material balance sheet disruption noted beyond localized operational costs.
• Credit Portfolio: "Criticized commercial loans" decreased $7 million to $485 million. Net charge-offs flat at 16 basis points.
• Efficiency: Adjusted efficiency ratio of 54.46%; ROTCE of 16.4%.