8-K: Hancock Whitney Reports Mixed Fourth Quarter Results Amid Strategic Restructuring

Hancock Whitney Corporation announced fourth quarter 2023 earnings that were impacted by significant one-time charges, but showed underlying strength in adjusted profitability and capital ratios.

Summary

• Hancock Whitney Corporation reported a net income of $50.6 million, or $0.58 per diluted share, for the fourth quarter of 2023, a decrease from $97.7 million, or $1.12 per diluted share, in the previous quarter.
• The fourth quarter results included a net charge of $75.4 million, or $0.68 per diluted share after-tax, due to supplemental disclosure items such as a loss on securities portfolio restructuring, sale of a parking facility, and an FDIC special assessment.
• Excluding these items, the adjusted EPS would have been $1.26, up $0.14 linked-quarter.
• Adjusted pre-provision net revenue (PPNR) totaled $157.5 million, a 3% increase linked-quarter.
• Loans decreased by $61.8 million, or 1% linked-quarter, while deposits decreased by $630.3 million, or 8% linked-quarter, primarily due to the maturity of $567.5 million in brokered deposits.
• The net interest margin (NIM) remained stable at 3.27%, and the efficiency ratio improved to 55.58%.
• The company's CET1 ratio is estimated at 12.39%, up 33 bps linked-quarter, and the TCE ratio is 8.37%, up 103 bps linked-quarter.
• Management expects low single-digit loan and deposit growth for 2024, with most loan growth occurring in the second half of the year.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there are positives such as improved capital ratios and strategic actions, the significant one-time charges and declines in key metrics like net income and deposits temper the overall sentiment. The forward guidance is cautiously optimistic, but the company faces challenges in the current economic environment.

Positives

• Adjusted pre-provision net revenue increased by 3% linked-quarter.
• The efficiency ratio improved to 55.58%.
• The net interest margin was stable at 3.27%.
• The company's CET1 and TCE ratios improved, indicating a stronger capital position.
• The bond portfolio restructure is expected to positively impact TCE, NIM, and EPS in the future.
• Criticized commercial loans and nonaccrual loans remain at low levels.
• The company maintained a robust ACL to loans of 1.41%.

Negatives

• Net income decreased significantly compared to the previous quarter and the same quarter last year.
• The company incurred a net charge of $75.4 million due to supplemental disclosure items.
• Total loans decreased by 1% linked-quarter.
• Total deposits decreased by 8% linked-quarter, primarily due to brokered deposit maturities.
• Noninterest income decreased by 55% linked-quarter, although adjusted noninterest income increased by 3%.

Risks

• The company faces headwinds to future loan growth, including a select appetite in CRE and potential economic slowdown.
• Continued deposit remix could negatively impact the net interest margin.
• The company is exposed to potential risks from economic conditions, including declines in the real estate market and inflationary pressures.
• The company is exposed to potential risks from the impacts related to Russia's military action in Ukraine and the effects of the Israel-Hamas war.
• The company is exposed to increased cybersecurity risks, including potential business disruptions or financial losses.

Future Outlook

Management expects low single-digit loan and deposit growth for 2024, with most loan growth occurring in the second half of the year. They also anticipate a modest expansion in NIM and expect the efficiency ratio to be in the range of 56-58% for 2024. The company assumes three rate cuts of 25 bps each beginning in June 2024.

Management Comments

• Fourth quarters results reflect a strong finish to 2023, said John M. Hairston, President & CEO.
• We are pleased to report that our adjusted PPNR increased 3% linked-quarter, our efficiency ratio improved to 55.58%, and our NIM was flat with prior quarter.
• Excluding the supplemental disclosure items, we achieved fee income growth while reducing expenses.
• As we previously disclosed, our charge-offs have begun to normalize, but we do not see any broad signs of weakening and our problem credit metrics remain at, or near, historically low levels.
• We maintained a robust ACL to loans of 1.41% and we continued to grow capital this quarter.
• We ended the quarter with TCE above 8% and total risk-based capital at 14%; we remain well-capitalized, including all unrealized losses in our portfolio.
• We are looking forward to carrying the momentum from the strong year-end finish into 2024, not only for our company, but for our clients, associates, and communities we serve.

Industry Context

The results reflect a challenging environment for regional banks, with pressures on net interest margins and deposit balances. The company's strategic actions, such as the bond portfolio restructure, are aimed at improving profitability and managing risk in this environment. The company is also navigating the impact of rising interest rates and a competitive deposit market.

Comparison to Industry Standards

• Hancock Whitney's efficiency ratio of 55.58% is comparable to other regional banks, but there is room for improvement to reach the best-in-class levels.
• The company's CET1 ratio of 12.39% is above the regulatory minimum, indicating a strong capital position, similar to other well-capitalized banks.
• The net interest margin of 3.27% is within the range of other regional banks, but the company is working to improve this through strategic balance sheet management.
• The company's loan growth of -1% linked-quarter is below the industry average, but this is due to a strategic decision to reduce exposure to certain sectors.
• The deposit decline of 8% linked-quarter is higher than some peers, but this is largely due to the maturity of brokered deposits, which is a common strategy for managing funding costs.

Stakeholder Impact

• Shareholders will be impacted by the lower net income and EPS, but the company's strategic actions and improved capital ratios are aimed at long-term value creation.
• Employees may be impacted by ongoing efficiency initiatives, but the company is committed to its associates.
• Customers will benefit from the company's continued focus on service and technology improvements.
• Creditors will be impacted by the company's strong capital position and liquidity.

Next Steps

• The company will continue to manage capital in the best interests of the Company and our shareholders.
• The company will focus on organic growth, dividends, buybacks, and M&A.
• The company will continue to execute on efficiency initiatives.
• The company will monitor economic conditions and adjust its strategy as needed.

Key Dates

Keywords

financial results, net income, EPS, PPNR, loans, deposits, NIM, efficiency ratio, CET1 ratio, TCE ratio, bond portfolio, FDIC assessment, credit quality, capital, restructuring