Hancock Whitney Corporation (HWC) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights several positive factors: a strategic acquisition, expected fee income growth, stable financial guidance, and proactive measures to manage expenses and deposit costs. The Q&A section further supports a positive outlook with plans for share buybacks, deposit growth, and a stable loan book. While there are some uncertainties, such as spread compression and potential M&A, the overall sentiment is optimistic, particularly with strong CRE loan growth and a focus on organic expansion. Given the company's market cap, a positive stock price movement of 2% to 8% is anticipated.
Key Financial Performance
Net Income Adjusted net income for the quarter was $118 million or $1.37 per share, compared to $120 million or $1.38 per share in the first quarter. The slight decrease was due to $6 million of supplemental disclosure items related to the acquisition of Sabal Trust Company.
Loans Loans grew $364 million or 6% annualized due to stronger demand, increased line utilization, and lower payoffs.
Deposits Deposits were down $148 million, reflecting a decrease in CDs due to maturity concentration and promotional rate reductions, along with a decrease in public funds. However, interest-bearing transaction balances and DDA balances were up, with DDA mix increasing to 37%.
Net Interest Margin (NIM) NIM expanded by 6 basis points, driven by higher average earning asset volumes and yields, and lower deposit costs.
Fee Income Fee income increased by $4 million or 4%, primarily driven by trust fees from the acquisition of Sabal Trust Company.
Efficiency Ratio The efficiency ratio improved to 54.91% this quarter compared to 55.22% last quarter, reflecting controlled expenses and investments in new revenue producers and technology.
Capital Ratios TCE was 9.84% and common equity Tier 1 ratio was 14.03%, reflecting strong capital deployment through share repurchases and the acquisition of Sabal Trust Company.
Loan Reserves Loan reserves were at 1.45% of loans, down 4 basis points from last quarter, with net charge-offs at 31 basis points.
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Operating Highlights
Acquisition of Sabal Trust Company: The acquisition was completed on May 7, 2025, contributing to fee income growth and operational expansion.
Expansion in Dallas market: Five new financial center locations have been solidified, with three expected to open in late 2025 and two in early 2026.
Loan Growth: Loans grew by $364 million or 6% annualized, driven by stronger demand and increased line utilization.
Deposit Management: Deposits decreased by $148 million due to CD maturity and promotional rate reductions, but DDA balances increased to 37%.
Efficiency Improvements: Efficiency ratio improved to 54.91% from 55.22% last quarter, supported by controlled expenses and technology investments.
Capital Deployment: Capital was deployed through the acquisition of Sabal Trust and repurchase of 750,000 shares of common stock.
Organic Growth Plan: Ten new bankers were added, and plans for new financial centers in Dallas were advanced.
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Risk or Challenges
Loan Growth: Guidance on loan growth remains low single-digit for 2025, with mid-single-digit growth expected in the second half of the year. However, this is contingent on stronger demand and lower payoffs, which could be impacted by economic uncertainties.
Deposit Trends: Deposits were down $148 million due to CD maturity concentration and promotional rate reductions. This decline could pose challenges to liquidity management and funding costs.
Cost of Funds: The overall cost of funds decreased by 2 basis points, but an unfavorable borrowing mix and reliance on other borrowings could pressure margins if market conditions change.
Net Charge-Offs: Net charge-offs increased to 31 basis points this quarter, which could indicate potential credit quality issues in the loan portfolio.
Macroeconomic Environment: The dynamic macroeconomic environment poses risks to the company's ability to navigate challenges and support clients effectively.
Natural Disasters: Devastating floods in Texas could impact the company's operations and client base in the affected regions.
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Guidance & Outlook
Loan Growth: Guidance on loan growth remains unchanged, with expectations of low single-digit growth for the year 2025, implying mid-single-digit growth for the second half of 2025.
Deposit Costs: The cost of deposits is expected to decrease marginally in the third quarter and further in the fourth quarter, assuming the Federal Reserve cuts rates in September.
Net Interest Margin (NIM): Modest NIM expansion is expected in the second half of 2025, with net interest income (NII) growth projected at 3% to 4% for the year.
Capital Deployment: Share repurchases are expected to continue at the current level for the foreseeable future, subject to changes in balance sheet growth dynamics, economic conditions, and share valuation.
Financial Centers Expansion: Three new financial centers in the Dallas market are expected to open in the back half of 2025, with two additional centers planned for the first half of 2026.
Loan Yields: Overall loan yields are expected to remain largely flat in the third quarter of 2025, with no rate cuts anticipated during this period.
CD Repricing: Certificates of Deposit (CDs) will continue to reprice lower for the rest of 2025, driven by maturity volume and anticipated rate cuts.
Net Charge-Offs: Net charge-offs to average loans are expected to range between 15 and 25 basis points for the full year 2025.
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Shareholder Return Plan
Share Repurchase: During the quarter, the company repurchased 750,000 shares of common stock. The company expects share repurchases to continue at this level for the foreseeable future, subject to changes in growth dynamics, economic conditions, and share valuation.
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Key Q&A
Q:Do you have a target CET1 ratio to operate through the cycle, considering recent deregulatory efforts?
A:The company is comfortable operating at a Tier 1 common ratio of 11% to 11.5% and a TCE ratio in the neighborhood of 8%. These are not hard lines and could vary depending on circumstances.
Q:Should we use the TCE ratio of around 8% as a guide for buybacks beyond this year and into 2026 and 2027?
A:Yes, the TCE ratio of around 8% can be used as a guide, but these levels are not hard lines and could vary depending on circumstances.
Q:Can you provide an update on the health of borrowers and the drivers for loan growth in the near term?
A:Borrowers are becoming less sensitive to headlines and are relying more on facts for decision-making. The main driver for loan growth is net new loans to net new clients, with line utilization increasing marginally. The construction development book is expected to grow sustainably by the back half of Q1 2026 or the following quarter.
Q:Can you provide more color on your NIM outlook and sensitivity to rate cuts in the back half of the year?
A:The company expects a stable DDA mix and a slight reduction in the cost of deposits. NIM is expected to expand by a couple of basis points each quarter in the second half of the year, even with two anticipated rate cuts of 25 basis points each. Loan growth and repricing of CDs and fixed-rate loans will also contribute to NIM expansion.
Q:What is the impact of the Sabal acquisition on expenses, and how will it affect the expense base in the third quarter?
A:The Sabal acquisition added about $2.5 million to expenses in the second quarter. With one additional month of Sabal in the third quarter, expenses are expected to increase slightly, but the overall expense growth guidance remains unchanged at 4% to 5%.
Q:What is driving strong CRE loan growth despite weak demand in the sector?
A:The strong CRE loan growth is driven by reduced payoffs, a successful owner-occupied real estate campaign, and attractive bridge financing numbers from the investor CRE group.
Q:What is the current stance on M&A, and what factors could lead to a change in focus?
A:The company is currently focused on organic growth and returning capital to shareholders. M&A is not a priority but could be considered opportunistically in the future.
Q:Are shared national credits (SNCs) at a floor, or should we expect further runoff?
A:SNCs are expected to remain between 9% and 10% of the loan book, with no significant runoff anticipated.
Q:How will the company manage deposit pricing flexibility if the Fed cuts rates by 25 basis points?
A:The company expects cumulative deposit betas to increase slightly, with proactive measures to reduce deposit costs, particularly through repricing CDs. The focus will be on maintaining a balance between loan repricing and funding cost reductions.
Q:What caused the spread compression on new loan originations in the second quarter?
A:The spread compression is due to competitive pricing and a focus on full-service relationships, which include low-cost deposits. The overall yield on the loan book remains strong at 5.86%.
Q:What is driving the 9% to 10% fee income growth guidance?
A:The growth is driven by trust fees, including contributions from the Sabal acquisition, as well as strong performance in treasury products, card revenue, and secondary mortgage activities.
Q:What is the outlook for buybacks in the short term?
A:The company plans to spend around $40 million on buybacks each quarter, with the number of shares repurchased depending on market conditions and stock price.
Q:What is the outlook for deposit growth in the back half of the year?
A:Deposit growth is expected to be low single digits, driven by stable CD renewal rates (around 81%) and seasonal inflows from public funds and corporate deposits in the fourth quarter.
Q:What caused the higher charge-offs in the second quarter, and what is the outlook for the back half of the year?
A:The higher charge-offs were due to the resolution of some lingering credits. The company expects charge-offs to normalize in the back half of the year, with no systemic issues in the portfolio.
Q:What is the outlook for criticized commercial loans in the back half of the year?
A:Criticized loans are expected to continue improving, with more resolutions and fewer inflows anticipated.
Q:What is the hiring strategy for the rest of 2025, and could it change due to market opportunities?
A:The company plans to hire 14 more bankers in 2025, with flexibility to increase this number if market opportunities arise. The focus is on adding seasoned bankers who align with the company's client and credit strategies.
Q:What opportunities are created by new entrants in the Texas market?
A:Disruption from new entrants could create hiring opportunities for the company, which is actively seeking talent across its footprint.
Q:Are there opportunities in lending to non-depository borrowers, and how does the company approach this?
A:The company is opportunistic in lending to non-depository borrowers, focusing on long-term relationships and understanding the client before committing.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on potential M&A opportunities, stating that it would be considered opportunistically without elaborating on criteria or timing.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accounting Officer
Achary Senior
Associates Inc
Benjamin Tyson
Bruyette Woods
CD maturity
CD repricing
CDs maturity
CEO Director
CFO Principal
Chief reporting
Citigroup Inc
Co Research
Conference Instructions
DDA balance
Inc Research
LLC Research
Research Division
Sabal Trust
Senior EVP
acquisition Sabal
balance DDA
capital acquisition
center
community
digit
efficiency ratio
loan basis
maturity renewal
point yield
progress plan
renewal rate
yield deposit
HWC Transcript
Hancock Whitney Corporation (HWC) Q4 2025 Earnings Call Transcript
Positive1-20
The earnings call reveals strong financial metrics, such as increased bond portfolio yield, stable credit performance, and strategic share buybacks. The Q&A section highlights positive growth expectations, including loan and deposit growth, as well as NIM expansion. While management's vague responses on M&A and fee income variability could raise concerns, the overall outlook is positive, supported by organic growth and strategic hiring. With a market cap of $4 billion, the stock is likely to experience a moderate positive reaction, estimated between 2% to 8%.
Hancock Whitney Corporation (HWC) Q3 2025 Earnings Call Transcript
Positive10-14
The company's earnings call shows solid financial performance with improved net income and efficiency ratios. Loan growth is strong, and the company plans to expand in key markets. While deposit costs are expected to decrease, capital ratios remain healthy. Share repurchases continue, and management is optimistic about future growth. Despite some unclear responses in the Q&A, the overall sentiment is positive, especially with plans for expansion and hiring, which should drive further growth. Given the market cap, a 2% to 8% positive movement is likely.
Hancock Whitney Corporation (HWC) Q2 2025 Earnings Call Transcript
Positive7-15
The earnings call highlights several positive factors: a strategic acquisition, expected fee income growth, stable financial guidance, and proactive measures to manage expenses and deposit costs. The Q&A section further supports a positive outlook with plans for share buybacks, deposit growth, and a stable loan book. While there are some uncertainties, such as spread compression and potential M&A, the overall sentiment is optimistic, particularly with strong CRE loan growth and a focus on organic expansion. Given the company's market cap, a positive stock price movement of 2% to 8% is anticipated.
Hancock Whitney Corporation (NASDAQ:HWC) Q1 2025 Earnings Call Transcript
Positive4-17
The earnings call reflects strong financial performance with EPS growth, NIM expansion, and a solid ROA. The guidance indicates continued fee income growth and controlled expenses. A $50 million share repurchase plan adds to shareholder value. Despite economic and regulatory risks, the management's strategic initiatives and positive outlook on loan growth and capital ratios post-Sable acquisition suggest a positive sentiment. The market cap indicates a moderate reaction, aligning with a positive stock price movement prediction of 2% to 8% over the next two weeks.
HWC Report
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