Hancock Whitney Corporation — 2023 Form 10-K
Business context and reporting period. Hancock Whitney is a regional bank holding company operating primarily across the Gulf South. This annual filing covers the fiscal year ended December 31, 2023; it also reports fourth-quarter results. At year-end, the company had $35.6 billion in assets, $23.9 billion in loans and $29.7 billion in deposits.
Financial performance and condition
| Metric | 2023 | 2022 |
|---|---|---|
| Net interest income (taxable-equivalent) | $1.109 billion | $1.060 billion |
| Net interest margin (taxable-equivalent) | 3.34% | 3.26% |
| Net income | $392.6 million | $524.1 million |
| Diluted earnings per share | $4.50 | $5.98 |
| Net interest income plus noninterest income (GAAP revenue) | $1.386 billion | $1.381 billion |
| Provision for credit losses | $59.1 million | $(28.4) million |
| Operating cash flow | $495.2 million | $842.0 million |
| Period-end loans | $23.9 billion | $23.1 billion |
| Period-end deposits | $29.7 billion | $29.1 billion |
| Common equity Tier 1 ratio | 12.33% | 11.41% |
Net interest income increased as higher rates lifted loan yields, but funding costs rose sharply: total interest expense climbed to $522.9 million from $87.1 million, and the average cost of funds rose to 1.58% from 0.27%. The efficiency ratio was 55.25%, versus 52.93%. Return on average assets was 1.10%, down from 1.49%.
Year-end short-term borrowings were $1.15 billion and long-term debt was $236.3 million. Total stockholders’ equity was $3.80 billion; tangible common equity to assets was 8.37%. The company reported $18.0 billion in total liquidity, including available borrowing capacity, compared with approximately $10.2 billion in uninsured, noncollateralized deposits. Net cash from investing activities was a use of $295.2 million; financing activities used $203.3 million.
Credit metrics remained relatively low but weakened from 2022: nonaccrual loans were $59.0 million, or 0.25% of loans, compared with $39.0 million, or 0.17%. Net charge-offs were $63.4 million, or 0.27% of average loans, versus $1.9 million, or 0.01%. A $29.7 million charge-off related to one shared national credit borrower. The allowance for credit losses, including unfunded commitments, was $336.8 million, or 1.41% of loans.
Material changes and unusual items
- Net income declined 25% year over year, while GAAP revenue was broadly stable. Higher funding costs, increased credit-loss provision and higher expenses weighed on earnings.
- Noninterest income fell 13% to $288.5 million, including a $65.4 million securities restructuring loss and a $16.1 million gain on sale of a parking facility. Adjusted noninterest income rose 2% to $337.7 million.
- Noninterest expense rose 11% to $836.8 million, including a $26.1 million FDIC special assessment. Adjusted expense was $810.7 million, up 8%.
- The company sold $1.04 billion of lower-yielding available-for-sale securities in November, reinvested about half the proceeds in higher-yielding securities and used the remainder to repay short-term borrowings. The securities loss reduced current-period earnings; management estimates an approximately 30-month payback.
- Deposits rose 2%, but noninterest-bearing deposits fell 19% to $11.0 billion and declined to 37% of deposits from 47%. Retail time deposits and brokered deposits increased substantially; brokered deposits were $589.8 million at year-end.
- Commercial real estate income-producing loans increased 12% to $4.0 billion. Multifamily exposure within income-producing and construction CRE loans rose to 23% of that combined portfolio.
Fourth-quarter results and outlook
Fourth-quarter net income was $50.6 million, or $0.58 per diluted share, including the securities loss, FDIC assessment and property-sale gain. Net interest margin was 3.27%, unchanged from the prior quarter. Deposits declined $630.3 million in the quarter, largely because $567.5 million of brokered deposits matured; loans declined $61.8 million.
Management expected 2024 loan and deposit growth in the low single digits, with loan growth weighted toward the second half. It forecast modest net interest margin expansion, noninterest income growth of 3%–4% from adjusted 2023 levels, and noninterest expense growth of 3%–4% from adjusted 2023 levels. The forecast assumed three 25-basis-point Federal Reserve rate cuts beginning in June 2024. Management expected modest charge-offs and provision expense. Its year-end credit-loss forecast weighted a mild-recession scenario at 60% and baseline at 40%.
Management cited persistent uncertainty from elevated rates, deposit pricing competition, inflation, higher property-insurance costs, softer loan demand and commercial real estate conditions. It also identified regional-bank confidence and liquidity, credit deterioration, interest-rate and securities-value exposure, cyber and third-party risks, regulatory changes, severe weather and Gulf South economic conditions as material risks. Management reported that liquidity exceeded estimated uninsured, noncollateralized deposits. No material adverse effect from pending litigation was expected. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Important facts for investors to verify
- Whether the securities restructuring delivers the projected 2024 income and margin benefits, and how its loss affects reported versus adjusted results.
- Deposit retention, mix and pricing; maturities of brokered deposits; and continued access to the reported liquidity facilities.
- Credit trends, particularly the single-borrower charge-off, nonaccrual growth, consumer losses and CRE performance as rates and insurance costs affect borrowers.
- Whether 2024 growth, margin, revenue and expense outlook assumptions are achieved; these are management forecasts, not guarantees.
- Reconcile reported non-GAAP adjusted measures with GAAP results and review the securities portfolio’s unrealized losses and potential liquidity implications.