GULFPORT, Miss.--(BUSINESS WIRE)--Hancock Whitney Corporation (Nasdaq: HWC) today announced its financial results for the first quarter of 2023. Net income for the first quarter of 2023 totaled $126.5 million, or $1.45 per diluted common share (EPS), compared to $143.8 million, or $1.65 per diluted common share, in the fourth quarter of 2022. The company reported net income for the first quarter of 2022 of $123.5 million, or $1.40 per diluted common share.
First Quarter 2023 Highlights
- Pre-provision net revenue (PPNR) totaled $167.0 million, compared to $185.0 million at 4Q22
- Deposits increased $542.7 million, or 7% LQA
- Total loan growth of $290.5 million, or 5% LQA
- Criticized commercial loans and nonaccrual loans relatively stable, linked-quarter
- ACL coverage remained strong at 1.46%
- NIM decreased 13 basis points (bps) to 3.55%
- CET1 ratio estimated at 11.61%, up 20 bps; TCE ratio 7.16%, up 7 bps
- Efficiency ratio remains below 55% target at 53.76%
"The first quarter of 2023 was a solid start to the year, despite challenges to our industry following recent bank failures," said John M. Hairston, President & CEO. "We continue to operate with strong liquidity, solid capital, and a stable, seasoned deposit base that is well-diversified among consumer, commercial, and wealth clients. Results for the quarter reflect both core client deposit and loan growth, relatively stable asset quality metrics, and a solid allowance for credit losses. We also ended the quarter with strong liquidity and improved capital ratios. Continued rate hikes and the current banking environment have led to increased deposit costs, in turn, compressing NIM and impacting our efficiency ratio. However, our goal of maintaining an efficiency ratio at or below 55% remains, and we will continue to proactively manage expenses and seek opportunities to enhance revenue in order to meet our CSOs."
Loans
Total loans were $23.4 billion at March 31, 2023, up $290.5 million, or 1%, from December 31, 2022. One-time close products drove the increase in mortgage loans, while growth in commercial real estate-income producing (CRE-income producing) loans was driven by movement of construction and land development loans (C&D) to permanent financing at construction completion.
Average loans totaled $23.1 billion for the first quarter of 2023, up $363.3 million, or 2%, linked-quarter. Management expects 2023 period-end loan growth to be in the range of low- to mid-single digits compared to year-end 2022.
Deposits
Total deposits at March 31, 2023 were $29.6 billion, up $542.7 million, or 2%, from December 31, 2022. The growth in deposits is primarily due to an increase in core client deposits and brokered deposits, partly offset by typical seasonal runoff in public funds deposits. Competitive rates on certain time deposit (CD) products led to a shift from no and low cost deposits, including both demand deposit accounts (DDA) and interest-bearing priority checking and savings accounts, to higher-rate CD products. Following the bank failures in middle March and out of an abundance of caution, $568 million of brokered deposits were issued during the quarter to increase liquidity.
DDAs totaled $12.9 billion at March 31, 2023, down $785.1 million, or 6%, from December 31, 2022 and comprised 43% of total period-end deposits. Interest-bearing transaction and savings deposits totaled $10.7 billion at the end of the first quarter of 2023, a decrease of $66.3 million, or less than 1%, linked-quarter. Compared to December 31, 2022, time deposits of $2.4 billion were up $984.1 million, or 68%, and brokered deposits were up $568 million. Interest-bearing public fund deposits decreased $158.0 million, or 5%, linked-quarter, ending March 31, 2023 at $3.1 billion.
Average deposits for the first quarter of 2023 were $28.8 billion, virtually unchanged linked-quarter. Management expects 2023 period-end deposit level growth to be flat to low single digits compared to year-end 2022.
Asset Quality
The total allowance for credit losses (ACL) was $341.4 million at March 31, 2023, unchanged from December 31, 2022. During the first quarter of 2023, the company recorded a provision for credit losses of $6.0 million, compared to a provision of $2.5 million in the fourth quarter of 2022. There were $5.7 million of net charge-offs in the first quarter of 2023, or 0.10% of average total loans on an annualized basis, compared to net charge-offs of $1.0 million, or 0.02% of average total loans in the fourth quarter of 2022. The ratio of ACL to period-end loans was 1.46% at March 31, 2023, down slightly from 1.48% at December 31, 2022.
The company's overall asset quality metrics were relatively stable linked-quarter, with criticized commercial loans slightly down and nonaccrual loans up slightly, linked-quarter. Criticized commercial loans totaled $295.5 million, or 1.59% of total commercial loans, at March 31, 2023, compared to $301.9 million, or 1.64% of total commercial loans at December 31, 2022. Nonaccrual loans totaled $54.3 million, or 0.23% of total loans, at March 31, 2023, compared to $39.0 million, or 0.17% of total loans, at December 31, 2022. ORE and foreclosed assets were $2.0 million, unchanged linked-quarter.
Net Interest Income and Net Interest Margin (NIM)
Net interest income (TE) for the first quarter of 2023 was $287.6 million, a decrease of $10.5 million, or 4%, from the fourth quarter of 2022. The net interest margin (NIM) (TE) was 3.55% in the first quarter of 2023, down 13 bps linked-quarter. A shift in the mix of earning assets led to a 33 basis point improvement in the NIM that was offset by the impact of deposit remix (-35 bps) and short-term borrowing costs (-11 bps). Additional NIM detail and guidance is included in the first quarter of 2023 earnings investor deck.
Average earning assets were $32.8 billion for the first quarter of 2023, up $509.1 million, or 2%, from the fourth quarter of 2022. The increase reflects the loan and short-term investments growth experienced during the quarter.
Noninterest Income
Noninterest income totaled $80.3 million for the first quarter of 2023, up $3.3 million, or 4%, from the fourth quarter of 2022.
Service charges on deposits were down $1.6 million, or 7%, from the fourth quarter of 2022. The decline was primarily related to the elimination of certain consumer nonsufficient funds (NSF) and overdraft (OD) fees effective December 1, 2022.
Bankcard and ATM fees were down $0.2 million, or less than 1%, from the fourth quarter of 2022. Investment and annuity income and insurance fees were up $2.0 million, or 30%, linked-quarter, related to the current rate environment and corporate underwriting fees. Trust fees were up $0.2 million, or 1% linked-quarter.
Fees from secondary mortgage operations totaled $2.2 million for the first quarter of 2023, up $0.7 million, or 44%, linked-quarter. The increase in secondary mortgage fees is due to higher activity driven by the lower mortgage rate environment plus more loans sold in the secondary market.
Other noninterest income totaled $11.2 million, up $2.1 million, or 23%, from the fourth quarter of 2022. The increase in other noninterest income is primarily related to a higher level of specialty fees (i.e., derivatives and SBIC income), compared to the fourth quarter of 2022.
Noninterest Expense & Taxes
Noninterest expense totaled $200.9 million, up $10.7 million, or 6% linked-quarter.
Personnel expense totaled $115.3 million in the first quarter of 2023, down $3.8 million, or 3% linked-quarter. The decline was primarily related to lower incentive pay, partly offset by higher payroll taxes. Net occupancy and equipment expense totaled $16.9 million in the first quarter of 2023, virtually unchanged from the fourth quarter of 2022. Amortization of intangibles totaled $3.1 million for the first quarter of 2023, down $0.2 million, or 5%, linked-quarter.
ORE and other foreclosed assets expense totaled $0.2 million in the first quarter of 2023. In the fourth quarter of 2022, gains exceeded expenses by $0.8 million.
Other operating expense totaled $65.4 million in the first quarter of 2023, up $13.8 million, or 27%, linked-quarter. The increase in other expenses is primarily due to higher regulatory fees (FDIC Assessment), an increase in pension expense, an increase in data processing expense, and an increase in ad valorem taxes. Additionally, the fourth quarter of 2022 included storm-related benefit.
The effective income tax rate for first quarter 2023 was 20.2%.
Capital
Common stockholders' equity at March 31, 2023 totaled $3.5 billion, up $188.6 million, or 6%, from December 31, 2022. The tangible common equity (TCE) ratio was 7.16%, up 7 bps from December 31, 2022. The company's CET1 ratio is estimated to be 11.61% at March 31, 2023, up 20 bps linked-quarter. The company's share buyback authorization was renewed by the Board of Directors as of January 26, 2023; under this new authorization, the company may purchase up to 4,297,000 shares of its outstanding common stock, replacing the previous stock buyback program that expired on December 31, 2022. No shares were repurchased in the first quarter of 2023.
Conference Call and Slide Presentation
Management will host a conference call for analysts and investors at 4:00 p.m. Central Time on Tuesday, April 18, 2023 to review first quarter 2023 results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock Whitney's website at investors.hancockwhitney.com. A link to the release with additional financial tables, and a link to a slide presentation related to first quarter results are also posted as part of the webcast link. To participate in the Q&A portion of the call, dial 888-210-2654 or 646-960-0278, access code 6914431.
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 April 25, 2023 by dialing 800-770-2030 or 647-362-9199, access code 6914431.
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; and mortgage services. The company also operates loan production offices in Nashville, Tennessee and the greater metropolitan area of Atlanta, Georgia. 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. These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently. The reconciliations of those measures to GAAP measures are provided either in the financial tables or in Appendix A thereto.
Consistent with the provisions of subpart 229.1400 of the Securities and Exchange Commission's Regulation S-K, "Disclosures by Bank and Savings and Loan Registrants," 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 concept "operating." We use 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 our business.
We define Operating Pre-Provision Net Revenue as total 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.
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 our expectations of our performance and financial condition, balance sheet and revenue growth, the provision for credit losses, capital levels, deposits (including growth, pricing and betas), investment portfolio, other sources of liquidity, loan growth expectations, management's predictions about charge-offs for loans, any ongoing impact of the COVID-19 pandemic on the economy and our operations, the impacts related to Russia's military action in Ukraine, Federal Reserve action with respect to interest rates, the adequacy of our enterprise risk management framework, potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions, as well as the impact of recent negative developments affecting the banking industry and the resulting media coverage; the potential impact of future business combinations on our performance and financial condition, including our ability to successfully integrate the businesses, success of revenue-generating and cost reduction initiatives, the effectiveness of derivative financial instruments and hedging activities to manage risks, projected tax rates, increased cybersecurity risks, including potential business disruptions or financial losses, the adequacy of our internal controls over financial reporting, the financial impact of regulatory requirements and tax reform legislation, the impact of the change in the reference rate reform, deposit trends, credit quality trends, the impact of natural or man-made disasters, the impact of current and future economic conditions, including the effects of declines in the real estate market, high unemployment, inflationary pressures, elevated interest rates and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing, net interest margin trends, future expense levels, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts, accretion levels and expected returns.
In addition, 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, 2022 and in other periodic reports that we file with the SEC.
| HANCOCK WHITNEY CORPORATION | ||||||||||||||||||||
| QUARTERLY FINANCIAL HIGHLIGHTS | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| (dollars and common share data in thousands, except per share amounts) | 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | |||||||||||||||
| NET INCOME | ||||||||||||||||||||
| Net interest income | $ | 284,994 | $ | 295,501 | $ | 280,307 | $ | 245,732 | $ | 228,463 | ||||||||||
| Net interest income (TE) (a) | 287,578 | 298,116 | 282,910 | 248,317 | 231,008 | |||||||||||||||
| Provision for credit losses | 6,020 | 2,487 | 1,402 | (9,761 | ) | (22,527 | ) | |||||||||||||
| Noninterest income | 80,330 | 77,064 | 85,337 | 85,653 | 83,432 | |||||||||||||||
| Noninterest expense | 200,884 | 190,154 | 193,502 | 187,097 | 179,939 | |||||||||||||||
| Income tax expense | 31,953 | 36,137 | 35,351 | 32,614 | 31,005 | |||||||||||||||
| Net income | $ | 126,467 | $ | 143,787 | $ | 135,389 | $ | 121,435 | $ | 123,478 | ||||||||||
| PERIOD-END BALANCE SHEET DATA | ||||||||||||||||||||
| Loans | $ | 23,404,523 | $ | 23,114,046 | $ | 22,585,585 | $ | 21,846,068 | $ | 21,323,341 | ||||||||||
| Securities | 8,390,684 | 8,408,536 | 8,333,191 | 8,531,393 | 8,481,095 | |||||||||||||||
| Earning assets | 34,106,792 | 31,873,027 | 31,213,449 | 31,292,910 | 32,997,323 | |||||||||||||||
| Total assets | 37,547,083 | 35,183,825 | 34,567,242 | 34,637,525 | 36,317,291 | |||||||||||||||
| Noninterest-bearing deposits | 12,860,027 | 13,645,113 | 14,290,817 | 14,676,342 | 14,976,670 | |||||||||||||||
| Total deposits | 29,613,070 | 29,070,349 | 28,951,274 | 29,866,432 | 30,499,709 | |||||||||||||||
| Common stockholders' equity | 3,531,232 | 3,342,628 | 3,180,439 | 3,349,723 | 3,450,951 | |||||||||||||||
| AVERAGE BALANCE SHEET DATA | ||||||||||||||||||||
| Loans | $ | 23,086,529 | $ | 22,723,248 | $ | 22,138,709 | $ | 21,657,528 | $ | 21,122,038 | ||||||||||
| Securities (b) | 9,137,034 | 9,200,511 | 9,177,460 | 8,979,364 | 8,687,758 | |||||||||||||||
| Earning assets | 32,753,781 | 32,244,681 | 31,783,801 | 32,780,813 | 33,201,926 | |||||||||||||||
| Total assets | 35,159,050 | 34,498,915 | 34,377,773 | 35,380,247 | 36,003,803 | |||||||||||||||
| Noninterest-bearing deposits | 12,963,133 | 13,854,625 | 14,323,646 | 14,655,800 | 14,363,324 | |||||||||||||||
| Total deposits | 28,792,851 | 28,816,338 | 29,180,626 | 29,979,940 | 30,029,793 | |||||||||||||||
| Common stockholders' equity | 3,412,813 | 3,228,667 | 3,405,463 | 3,383,789 | 3,607,061 | |||||||||||||||
| COMMON SHARE DATA | ||||||||||||||||||||
| Earnings per share - diluted | $ | 1.45 | $ | 1.65 | $ | 1.55 | $ | 1.38 | $ | 1.40 | ||||||||||
| Cash dividends per share | 0.30 | 0.27 | 0.27 | 0.27 | 0.27 | |||||||||||||||
| Book value per share (period-end) | 41.03 | 38.89 | 37.12 | 39.08 | 39.91 | |||||||||||||||
| Tangible book value per share (period-end) | 30.47 | 28.29 | 26.44 | 28.37 | 29.25 | |||||||||||||||
| Weighted average number of shares - diluted | 86,282 | 86,249 | 86,020 | 86,354 | 86,936 | |||||||||||||||
| Period-end number of shares | 86,066 | 85,941 | 85,686 | 85,714 | 86,460 | |||||||||||||||
| Market data | ||||||||||||||||||||
| High sales price | $ | 54.38 | $ | 57.00 | $ | 52.65 | $ | 53.15 | $ | 59.82 | ||||||||||
| Low sales price | 34.42 | 45.64 | 41.62 | 42.61 | 50.25 | |||||||||||||||
| Period-end closing price | 36.40 | 48.39 | 45.81 | 44.33 | 52.15 | |||||||||||||||
| Trading volume | 39,030 | 29,996 | 24,976 | 27,493 | 29,005 | |||||||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||||||
| Return on average assets | 1.46 | % | 1.65 | % | 1.56 | % | 1.38 | % | 1.39 | % | ||||||||||
| Return on average common equity | 15.03 | % | 17.67 | % | 15.77 | % | 14.39 | % | 13.88 | % | ||||||||||
| Return on average tangible common equity | 20.49 | % | 24.64 | % | 21.58 | % | 19.77 | % | 18.66 | % | ||||||||||
| Tangible common equity ratio (c) | 7.16 | % | 7.09 | % | 6.73 | % | 7.21 | % | 7.15 | % | ||||||||||
| Net interest margin (TE) | 3.55 | % | 3.68 | % | 3.54 | % | 3.04 | % | 2.81 | % | ||||||||||
| Noninterest income as a percentage of total revenue (TE) | 21.83 | % | 20.54 | % | 23.17 | % | 25.65 | % | 26.53 | % | ||||||||||
| Efficiency ratio (d) | 53.76 | % | 49.81 | % | 51.62 | % | 54.95 | % | 56.03 | % | ||||||||||
| Average loan/deposit ratio | 80.18 | % | 78.86 | % | 75.87 | % | 72.24 | % | 70.34 | % | ||||||||||
| Allowance for loan losses as a percentage of period-end loans | 1.32 | % | 1.33 | % | 1.36 | % | 1.41 | % | 1.49 | % | ||||||||||
| Allowance for credit losses as a percentage of period-end loans (e) | 1.46 | % | 1.48 | % | 1.50 | % | 1.55 | % | 1.63 | % | ||||||||||
| Annualized net charge-offs to average loans | 0.10 | % | 0.02 | % | 0.02 | % | (0.01 | )% | 0.01 | % | ||||||||||
| Allowance for loan losses as a % of nonaccrual loans | 569.31 | % | 789.38 | % | 769.00 | % | 809.58 | % | 748.94 | % | ||||||||||
| FTE headcount | 3,679 | 3,627 | 3,607 | 3,594 | 3,543 | |||||||||||||||
| (a) Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%. | ||||||||||||||||||||
| (b) Average securities does not include unrealized holding gains/losses on available for sale securities. | ||||||||||||||||||||
| (c) The tangible common equity ratio is common shareholders' equity less intangible assets divided by total assets less intangible assets. | ||||||||||||||||||||
| (d) The efficiency ratio is noninterest expense to total net interest income (TE) and noninterest income, excluding amortization of purchased intangibles and nonoperating items. | ||||||||||||||||||||
| (e) The allowance for credit losses includes the allowance for loan and lease losses and the reserve for unfunded lending commitments. | ||||||||||||||||||||
Contacts
Kathryn Shrout Mistich, VP, Investor Relations Manager
504.539.7836 or kathryn.mistich@hancockwhitney.com
