Hancock Whitney Corporation — Q1 2024 Form 10-Q
Business context and period: The company is a bank holding company operating through Hancock Whitney Bank, with lending and deposit markets across the Gulf South and selected other regions. This unaudited filing covers the three months ended March 31, 2024; comparisons are primarily with Q1 2023 and, where noted, Q4 2023. Dollar amounts below are in millions unless stated otherwise.
Financial results and key metrics
| Metric | Q1 2024 | Comparable period / change |
|---|---|---|
| Net income; diluted EPS | $108.6; $1.24 | Q1 2023: $126.5; $1.45 |
| Net interest income (taxable-equivalent) | $269.0 | Down $18.6, or 6%, year over year; down $3.3 from Q4 2023 |
| Net interest margin (taxable-equivalent) | 3.32% | 3.55% in Q1 2023; 3.27% in Q4 2023 |
| Noninterest income | $87.9 | Up 9% year over year; Q4 2023 included a securities restructuring loss and a property-sale gain |
| Noninterest expense | $207.7 | Up 3% year over year; includes $3.8 FDIC special assessment expense |
| Efficiency ratio | 56.44% | 53.76% in Q1 2023; 55.58% in Q4 2023 |
| Loans; deposits, period end | $24.0 billion; $29.8 billion | Loans up $49 million and deposits up $85.8 million from December 31, 2023 |
| Allowance for credit losses | $340.8; 1.42% of loans | $336.8 at December 31, 2023 |
| Annualized net charge-offs | 0.15% of average loans | 0.10% in Q1 2023; 0.27% in Q4 2023 |
| Operating cash flow | $166.7 | $85.9 in Q1 2023 |
| Capital | CET1 12.65%; tangible common equity ratio 8.61% | CET1 was 11.60% and tangible common equity 7.16% in Q1 2023 |
Higher loan income and loan growth increased interest income year over year, but deposit repricing and migration to higher-cost deposit products drove interest expense up $67.9 million, more than offsetting that increase. The average rate on interest-bearing deposits was 3.14%, versus 1.65% in Q1 2023. Net income included a $3.8 million pre-tax FDIC assessment revision (about $0.04 per diluted share after tax); management says results were relatively flat versus Q4 2023 after excluding supplemental items.
Total assets were $35.2 billion, down from $35.6 billion at year-end 2023. Stockholders’ equity was $3.85 billion. Cash and due from banks ended the quarter at $414.3 million; cash flow from financing was a $433.4 million use, including repayment of borrowings, while investing activities provided $119.8 million. These cash flow figures reflect banking balance-sheet movements and should not be read as conventional corporate free cash flow.
Deposits totaled $29.8 billion, including $10.8 billion of noninterest-bearing deposits, down from $11.0 billion at year-end. Short-term borrowings were $667.8 million, down $487.1 million from year-end, mainly after repaying $700 million of FHLB advances. Long-term debt was $236.4 million, including $172.5 million of 6.25% subordinated notes due in 2060. Available liquidity was reported at $19.2 billion, compared with approximately $10.5 billion of uninsured, noncollateralized deposits. The bank had approximately $6.3 billion of unused FHLB capacity and $3.4 billion of unused Federal Reserve discount-window capacity.
Material changes and credit trends
- Loans grew less than 1% from year-end; residential mortgages increased $97.2 million, while consumer loans declined $50.2 million. Noninterest-bearing deposits continued to shift toward interest-bearing products.
- Nonaccrual loans rose to $82.1 million, or 0.34% of loans, from $59.0 million, or 0.25%, at year-end. The increase included a commercial real estate income-producing loan balance of $24.1 million on nonaccrual, versus $0.5 million at year-end.
- Criticized commercial loans increased to $339.9 million from $273.7 million at year-end; pass-watch loans increased to $471.0 million. Management characterized credit metrics as normalizing from unusually benign levels and said it had seen no broad-based weakening in a portfolio or geographic segment.
- Q1 net charge-offs included an $8.8 million charge-off on one commercial real estate income-producing credit and an $11.8 million recovery on a single legacy energy credit. The allowance reflects a 40% baseline and 60% mild-recession scenario weighting.
- Available-for-sale securities had $634.8 million of gross unrealized losses at quarter-end; held-to-maturity securities had $217.9 million. Management attributed the losses principally to market rates, reported no material credit-loss event, and said it did not expect to need to sell the securities before recovery of amortized cost.
- Accumulated other comprehensive loss widened to $653.5 million from $621.1 million at year-end, largely reflecting fair-value changes in available-for-sale securities and cash flow hedges.
Outlook, risks, and unusual items
- Management expects low-single-digit loan growth and low-single-digit deposit growth for full-year 2024. It expects modest NIM expansion, assuming three 25-basis-point Federal Reserve rate cuts and continued, but slower, deposit remixing.
- Management expects noninterest income and noninterest expense each to increase 3%–4% in 2024 from their respective 2023 adjusted bases. It expects the 2024 effective tax rate to be 20%–21%, absent tax-law changes, and low-to-modest charge-offs and credit-loss provision.
- The economic outlook remains uncertain. Management cites persistent inflation, higher-for-longer rates, potential recession, deposit competition, commercial real estate stress, insurance costs, geopolitical conflict, and possible government shutdown. Its allowance scenario includes a mild recession beginning in Q2 2024 and lasting three quarters.
- The FDIC revised estimated losses related to the failures of Silicon Valley Bank and Signature Bank, prompting the $3.8 million Q1 assessment expense. The company’s final assessment exposure remains uncertain and may be revised following updated FDIC estimates and resolution of related matters.
- The board approved an increase in the quarterly common dividend from $0.30 to $0.40 per share on April 25, 2024, payable June 14, 2024. No shares were repurchased under the board-authorized buyback program during Q1; reported Q1 share purchases were primarily for employee tax withholding.
- Management said pending ordinary-course legal proceedings are not expected to materially affect consolidated financial position or liquidity. It reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether deposit costs stabilize and the forecast modest NIM expansion materializes; monitor deposit mix, pricing, and noninterest-bearing balances.
- Whether nonaccrual and criticized commercial loans—particularly the newly nonaccrual CRE exposure—continue to rise, and whether the allowance remains adequate under weaker economic scenarios.
- How much of Q1 charge-offs and recoveries reflects one-off credits, and the trend in underlying portfolio-level credit performance.
- The timing and final amount of FDIC special assessments, and the sensitivity of reported earnings to other nonrecurring items.
- Liquidity relative to uninsured deposits, securities pledging and unrealized securities losses, and the company’s ability to maintain capital and dividends if market or credit conditions deteriorate.
- Whether guidance assumptions on rates, loan and deposit growth, expenses, fee income, and taxes remain current; these are management expectations, not guarantees.