Release Date: October 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hancock Whitney Corp (HWC, Financial) reported improved profitability with a return on assets (ROA) of 1.32% and net interest margin (NIM) expansion.
- The company achieved strong earnings, facilitating growth in capital ratios, now among top quartile peers.
- Fee income outperformed expectations, and operating expenses were well-controlled, decreasing quarter-over-quarter.
- HWC successfully reduced its Shared National Credit (SNC) exposure, reaching peer levels a year ahead of schedule.
- The company maintained a solid reserve of 1.46% and continued to return capital to investors through share repurchases.
Negative Points
- Loans decreased by $450 million, with significant reductions in the CRE multifamily and industrial portfolios.
- Deposits were down for the quarter, with a noted decrease in demand deposit account (DDA) outflows.
- There was an increase in criticized loans, reflecting results from the recent SNC exam.
- Net charge-offs increased quarter-over-quarter, although no significant weakening was observed in specific portfolio sectors.
- The company anticipates modest NIM expansion in the fourth quarter, but balance sheet growth remains limited.
Q & A Highlights
Q: Can you explain the increase in criticized commercial loans this quarter and how lower rates might impact these loans?
A: Christopher Ziluca, Chief Credit Officer, explained that the increase in criticized loans was anticipated and mostly occurred in the C&I book, not the commercial real estate book. The migration was geographically spread, with some impact from the SNC exam. Lower rates could benefit some customers, but issues like softening demand and higher operating costs also play a role.
Q: How should we think about loan growth moving forward, especially with the SNC portfolio nearing target levels?
A: John Hairston, CEO, noted that the SNC portfolio's reduction was planned and is now at peer levels, removing a growth headwind. While demand is tepid, pipelines are building, particularly in business purpose lending and SBA. Growth is expected to improve in 2025, with new bankers being recruited.
Q: What are your expectations for the net interest margin (NIM) as we move into next year?
A: Michael Achary, CFO, stated that NIM expansion is expected to continue into 2025, driven by bond portfolio repricing and CD book turnover. However, balance sheet growth is crucial for sustained NIM and NII expansion in a down-rate environment.
Q: How are you approaching capital management given your strong capital ratios?
A: Michael Achary, CFO, emphasized that strong capital levels provide optionality. The priority is to support organic balance sheet growth, but if growth isn't as expected, they could increase buybacks or dividends.
Q: Can you provide more details on the increase in commercial loan charge-offs this quarter?
A: Christopher Ziluca, Chief Credit Officer, mentioned that the increase was due to a couple of C&I credits that were charged down as part of ongoing management, with the rest being smaller, run-rate oriented.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
