FOR IMMEDIATE RELEASE

July 17, 2018

For more information

Trisha Voltz Carlson, EVP, Investor Relations Manager

504.299.5208 or trisha.carlson@hancockwhitney.com

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Hancock Whitney reports second quarter 2018 EPS of $.82

Results include $15.8 million, or $.14 per share after tax, impact from nonoperating items

GULFPORT, Miss. (July 17, 2018) — Hancock Whitney Corporation (Nasdaq: HWC) today announced its financial results for the second quarter of 2018. Net income for the second quarter of 2018 was $71.2 million, or $.82 per diluted common share (EPS), compared to $72.5 million, or $.83 EPS in the first quarter of 2018 and $52.3 million, or $.60 EPS, in the second quarter of 2017. The second quarter of 2018 included $15.8 million ($.14 per share after-tax impact) of nonoperating items. The first quarter of 2018 included $7.0 million ($.07 per share impact) of nonoperating items and the second quarter of 2017 included nonoperating items of $10.6 million ($.08 per share impact).

 

 

“Results for the second quarter reflected continued improvement in operating EPS, ROA, efficiency ratio and ROTCE,” said John M. Hairston, President & CEO. “We are pleased to report progress towards attaining our Corporate Strategic Objectives (CSOs), along with notable linked quarter improvement in credit metrics, as criticized and nonaccrual loans trended positively for both energy and nonenergy. As we begin the second half of 2018 operating with a new name, logo and ticker, we remain relentlessly focused on achieving our CSOs, maintaining credit performance and being opportunistic with our capital, all with the primary focus of achieving our stated targets.”

Loans

Total loans at June 30, 2018 were $19.4 billion, up approximately $278 million, or 1%, linked-quarter. Net loan growth during the quarter continues to be diversified across the regions and also in areas identified as part of the company’s revenue-generating initiatives.

Average loans totaled $19.2 billion for the second quarter of 2018, up $165 million, or 1%, linked-quarter.

Energy

At June 30, 2018, loans to the energy industry totaled $985 million, or 5.1% of total loans. The energy portfolio declined $69 million linked-quarter, and is comprised of credits to both the exploration and production (E&P) sector and the support and services sectors. Payoffs and paydowns of $137 million and charge-offs of $5.0 million were partially offset by $73 million in fundings. During the second quarter there were $6.9 million in recoveries on energy credits.

Higher oil prices are helpful in the recovery of credits impacted by the energy cycle, however, we believe the key to resolution of many of those credits, especially in support services, is stabilization of prices over the longer term. Management continues to estimate that net charge-offs from energy-related credits could approximate up to $95 million over the duration of the cycle, of which approximately $79 million has been taken to-date.

Deposits

Total deposits at June 30, 2018 were $22.2 billion, down $250 million, or 1%, from March 31, 2018. Average deposits for the second quarter of 2018 were $22.1 billion, up $58 million, or less than 1%, linked-quarter.

Noninterest-bearing demand deposits (DDAs) totaled $8.2 billion at June 30, 2018, down $64 million, or 1%, from March 31, 2018. DDAs comprised 37% of total period-end deposits at June 30, 2018.

Interest-bearing transaction and savings deposits totaled $7.7 billion at the end of the second quarter of 2018, down $347 million, or 4%, from March 31, 2018. Time deposits of $3.5 billion were up $414 million, or 13%, while interest-bearing public fund deposits decreased $253 million, or 8%, to $2.9 billion at June 30, 2018.

Asset Quality

Nonperforming assets (NPAs) totaled $416.5 million at June 30, 2018, down $51.8 million, or 11%, from March 31, 2018. During the second quarter of 2018, total nonperforming loans decreased approximately $47.5 million, while foreclosed and surplus real estate (ORE) and other foreclosed assets decreased approximately $4.3 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 2.15% at June 30, 2018, down 30 bps from March 31, 2018.

The total allowance for loan losses (ALLL) was $214.5 million at June 30, 2018, up $3.8 million from March 31, 2018. The ratio of the allowance for loan losses to period-end loans was 1.11% at June 30, 2018, up 1 bp from 1.10% at March 31, 2018. The allowance for credits in the energy portfolio totaled $59.0 million, or 6.0% of energy loans, at June 30, 2018, as compared to $62.6 million, or 5.9% of energy loans, at March 31, 2018.

Net charge-offs were $5.1 million, or 0.11% of average total loans on an annualized basis in the second quarter of 2018, down from $12.2 million, or 0.26% of average total loans in the first quarter of 2018. Included in the total were $5.0 million of charge-offs related to energy credits in the second quarter of 2018, offset by energy-related recoveries of $6.9 million.

During the second quarter of 2018, the company recorded a total provision for loan losses of $8.9 million, down from $12.3 million in the first quarter of 2018.

Net Interest Income and Net Interest Margin (NIM)

Net interest income (TE) for the second quarter of 2018 was $215.6 million, up $6.0 million from the first quarter of 2018. The increase is primarily related to the impact of the March 2018 rate hike and interest activity on nonaccrual loans.

Average earning assets were $25.4 billion for the second quarter of 2018, up $285 million, or 1%, from the first quarter of 2018. The net interest margin (TE) was 3.40% for the second quarter of 2018, up 3 bps from the first quarter of 2018. The increase in the margin includes 2 bps of positive impact from interest recoveries on nonaccrual loans this quarter versus 3 bps negative impact of interest reversals last quarter, a 5 bps negative impact from the sale of HFC, and a 3 bps positive impact from the March 2018 rate hike.

Noninterest Income

Noninterest income totaled $68.8 million for the second quarter of 2018, up $2.6 million, or 4%, from the first quarter of 2018. The first quarter of 2018 included a loss on the sale of the consumer finance company (HFC) of $1.1 million.

Service charges on deposits totaled $21.0 million for the second quarter of 2018, down $0.5 million, or 2%, from the first quarter of 2018. Bank card and ATM fees totaled $15.5 million, up $1 million, or 7%, from the first quarter of 2018.

Trust fees totaled $11.7 million, up $0.3 million, or 3% linked-quarter. On July 13, 2018, the transaction to purchase Capital One’s trust and asset management business was completed. Beginning in the third quarter of 2018 we expect to add approximately $6 million per quarter in trust fees related to this acquisition.

Investment and annuity income and insurance fees totaled $6.3 million, up $0.1 million, or 2%, linked-quarter. Fees from secondary mortgage operations totaled $4.0 million for the second quarter of 2018, up $0.6 million, or 17%, linked-quarter. Other noninterest income, excluding nonoperating items, totaled $10.5 million, down $0.1 million, or 1%, from the first quarter of 2018.

Noninterest Expense & Taxes

Noninterest expense for the second quarter of 2018 totaled $184.4 million, up $13.6 million, or 8%, from the first quarter of 2018. Included in the second quarter total was $15.8 million of nonoperating expense related to the brand consolidation project ($9.8 million), the Capital One trust and asset management purchase ($1.5 million), the restructuring of a portion of our bank-owned life insurance (BOLI) investments ($3.2 million), and other miscellaneous items ($1.3 million). There was $5.9 million of nonoperating expense in the first quarter of 2018 related to the sale of HFC, the Capital One trust and asset management transaction, the brand consolidation project, and a one-time all hands bonus. Excluding nonoperating items, operating expense for the second quarter of 2018 totaled $168.6 million, up $3.7 million, or 2% linked-quarter.

Expenses associated with the consumer finance company (HFC) totaled $2.5 million in the first quarter of 2018. HFC was sold on March 9, 2018. The discussion below excludes nonoperating items.

Total personnel expense was $96.8 million in the second quarter of 2018, up $0.5 million, or less than 1%, from the first quarter of 2018. Adjusting for HFC, personnel expense was up $1.8 million mainly related to annual merit increases and incentives.

Occupancy and equipment expense totaled $15.3 million in the second quarter of 2018, up $0.9 million, or 6%, from the first quarter of 2018. After adjusting for HFC, occupancy and equipment was up $1.1 million, partly related to annual insurance renewals.

Amortization of intangibles totaled $5.3 million for the second quarter of 2018, down $0.3 million or 5% linked-quarter. Gains on ORE dispositions exceeded ORE expense by $0.3 million in the second quarter of 2018, compared to a net ORE expense of $0.2 million in the first quarter of 2018.

Other operating expense totaled $51.4 million in the second quarter of 2018, up $3.1 million, or 6%, from the first quarter of 2018. After adjusting for HFC, other operating expense was up $4.0 million. The linked quarter increase was mainly related to revenue-generating initiatives such as a $1.0 million increase in expense related to new digital offerings, an increase of $0.7 million in professional services, a $0.6 million increase in regulatory and franchise expense related to growth, and increase of $0.9 million in business development expense.

The effective income tax rate for the second quarter of 2018 was 18%. Management expects the tax rate in the third quarter of 2018 to approximate 18%. The effective income tax rate continues to be less than the statutory rate due primarily to tax-exempt income and tax credits.

Capital

Common shareholders’ equity at June 30, 2018 totaled $2.9 billion, virtually unchanged from first quarter 2018. The tangible common equity (TCE) ratio was 7.76%, down 4 bps from March 31, 2018. The decline is mainly related to the growth in assets during the second quarter. Additional capital ratios are included in the financial tables.

Conference Call and Slide Presentation

Management will host a conference call for analysts and investors at 9:00 a.m. Central Time on Wednesday, July 18, 2018 to review the results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock Whitney’s website at www.hancockwhitney.com/investors. A link to the release with additional financial tables, and a link to a slide presentation related to second quarter results are also posted as part of the webcast link. To participate in the Q&A portion of the call, dial (877) 564-1219 or (973) 638-3429. An audio archive of the conference call will be available under the Investor Relations section of our website. A replay of the call will also be available through July 25, 2018 by dialing (855) 859-2056 or (404) 537-3406, passcode 8299795.

About Hancock Whitney

Since the late 1800s, Hancock Whitney has embodied core values of Honor & Integrity, Strength & Stability, Commitment to Service, Teamwork, and Personal Responsibility. Hancock Whitney offices and financial centers in Mississippi, Alabama, Florida, Louisiana, and Texas offer comprehensive financial products and services, including traditional and online banking; commercial and small business banking; private banking; trust and investment services; healthcare banking; certain insurance services; and mortgage services. The company also operates a loan production office in Nashville, Tennessee. BauerFinancial, Inc., the nation’s leading independent bank rating and analysis firm, consistently recommends Hancock Whitney as one of America’s most financially sound banks. More information is available at www.hancockwhitney.com.

Non-GAAP Financial Measures

This news release includes non-GAAP financial measures to describe Hancock Whitney’s performance. The reconciliations of those measures to GAAP measures are provided either in the financial tables or in Appendix A thereto.

Consistent with Securities and Exchange Commission Industry Guide 3, the company presents net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“TE”) basis. The TE basis adjusts for the tax-favored status of net interest income from certain loans and investments using the statutory federal tax rate to increase tax-exempt interest income to a taxable equivalent basis. The company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.

The company presents certain additional non-GAAP financial measures to assist the reader with a better understanding of the company’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. These non-GAAP measures may reference the concepts “core” or “operating.” The company uses the term “core” to describe a financial measure that excludes income or expense arising from accretion or amortization of fair value adjustments recorded as part of purchase accounting. The company uses the term “operating” to describe a financial measure that excludes income or expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in the company’s business.

We define Core Net Interest Income as net interest income (TE) excluding net purchase accounting accretion and amortization. We define Core Net Interest Margin as core net interest income expressed as a percentage of average earning assets. A reconciliation of reported net interest income to core net interest income and reported net interest margin to core net interest margin is included in Appendix A.

We define Operating Revenue as net interest income (TE) and noninterest income less nonoperating revenue.  We define Operating Pre-Provision Net Revenue as operating revenue (TE) less noninterest expense, excluding nonoperating items. Management believes that operating pre-provision net revenue is a useful financial measure because it enables investors and others to assess the company’s ability to generate capital to cover credit losses through a credit cycle. A reconciliation of reported net interest income to operating pre-provision net revenue is included in Appendix A.

We define Operating Earnings as reported net income excluding nonoperating items net of income tax.  We define Operating Earnings per Share as operating earnings expressed as an amount available to each common shareholder on a diluted basis. A reconciliation of reported net income to operating earnings is presented in the Income Statement table and a reconciliation of reported earnings per share – diluted to operating earnings per share – diluted is presented in Appendix A.

Important Cautionary Statement About Forward-Looking Statements

This news release contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that we may make include statements regarding balance sheet and revenue growth, the provision for loans losses, loan growth expectations, management’s predictions about charge-offs for loans, including energy-related credits, the impact of changes in oil and gas prices on our energy portfolio, and the downstream impact on businesses that support the energy sector, especially in the Gulf Coast region, the impact of the sale of HFC on our performance and financial condition, the impact of the transactions with First NBC and Capital One on our performance and financial condition, including our ability to successfully integrate the businesses, deposit trends, credit quality trends, net interest margin trends, future expense levels, success of revenue-generating initiatives, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, and the financial impact of regulatory requirements and tax reform legislation. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook”, or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Any forward-looking statement made in this release is subject to the safe harbor protections set forth in the Private Securities Litigation Reform Act of 1995. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 and in other periodic reports that we file with the SEC.

 

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