Form 8-K HANCOCK WHITNEY CORP For: Jul 20

 

Exhibit 99.1

For more information

Trisha Voltz Carlson, EVP, Investor Relations Manager

504.299.5208 or [email protected]

 

 

Hancock Whitney reports second quarter 2021 EPS of $1.00

Results include $42.2 million net, or $.37 per share after tax, of nonoperating items

 

GULFPORT, Miss. (July 20, 2021) — Hancock Whitney Corporation (Nasdaq: HWC) today announced its financial results for the second quarter of 2021. Net income for the second quarter of 2021 was $88.7 million, or $1.00 per diluted common share (EPS), compared to $107.2 million, or $1.21 per diluted common share, in the first quarter of 2021. The company reported a net loss for the second quarter of 2020 of $117.1 million, or ($1.36) per diluted common share resulting from a COVID-19 reserve build and the sale of $497 million of energy loans. The second quarter of 2021 included $42.2 million, or $0.37 per share after-tax, of net nonoperating items. The items include the previously announced branch closures (20), subordinated debt redemption and Voluntary Early Retirement Program (VERP), plus the cost associated with an additional 18 branch closures and a 200-position reduction in force. These costs were partially offset by a gain on the sale of Mastercard class B common stock (Mastercard stock). The first quarter of 2021 and second quarter of 2020 did not include any nonoperating items.

 

Second Quarter 2021 Highlights

 

“I am very pleased to report a continuation of improving performance as solid second quarter operating results either met or exceeded expectations for the quarter,” said John M. Hairston,

 

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President and CEO. “Growth in core loans (excluding PPP) exceeded expectations as our bankers and support teams worked diligently to close business, with our full workforce returning to the office. Elevated levels of excess liquidity continue to compress our margin, however, net interest income remained flat given our ongoing efforts to minimize the impact of today’s rate environment. As our markets have re-opened, economic activity has picked up as evidenced by the growth in fee income. Further, we completed most of our expense and efficiency initiatives during the quarter, leading to a linked-quarter increase in pre-provision, net revenue (PPNR) of $6 million, or 4%. We reported another modest reserve release and negative provision for credit losses as our credit metrics improved once again this quarter. Our capital remains solid, and with materially all expense initiatives announced, and one-time expenses accounted for, we are looking toward the future with a relentless focus and determination designed to improve performance and value.”

 

Loans

Loans totaled $21.1 billion at June 30, 2021, down $516.3 million, or 2%, linked-quarter. During the quarter, $1.033 billion in PPP loans were forgiven and $104.9 million in new PPP loans were originated under the extended CARES Act program. Core loans increased $411.8 million related to loan production in the eastern and western regions within our geographic footprint, growth in equipment finance and healthcare, fewer than expected payoffs, and a stabilization of line utilization rates. Indirect and energy loans continue to runoff, with no new production planned, and residential mortgage payoffs continued in low rate environment.

 

Average loans totaled $21.4 billion for the second quarter of 2021, down $356.5 million, or 2%, linked-quarter.

 

Management expects core loans to be up $200 to $300 million in the third quarter of 2021, and to double to $400 to $600 million in the fourth quarter of 2021, as opportunities for growth are anticipated to improve.

 

Deposits

Total deposits at June 30, 2021 were $29.3 billion, up $62.6 million, or less than 1%, from March 31, 2021. Excess liquidity related to stimulus and other pandemic-related client funds contributed to the second quarter of 2021’s level of deposits.  

 

DDAs totaled $13.4 billion at June 30, 2021, up $231.5 million, or 2%, from March 31, 2021 and comprised 46% of total period-end deposits at June 30, 2021. Interest-bearing transaction and savings deposits totaled $11.3 billion at the end of the second quarter of 2021, up $108.3 million, or 1%, linked-quarter. Compared to March 31, 2021, time deposits of $1.4 billion were down $285.5 million, or 17%. Interest-bearing public fund deposits, remained relatively flat linked-quarter at $3.2 billion.

 

Average deposits for the second quarter of 2021 were $29.2 billion, up $1.1 billion, or 4%, linked-quarter.

 

Asset Quality

The total allowance for credit losses (ACL) was $429.2 million at June 30, 2021, down $27.7 million from March 31, 2021. During the second quarter of 2021, the company recorded a negative

 

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provision for credit losses of $17.2 million, compared to a negative provision of $4.9 million in the first quarter of 2021. Net charge-offs totaled $10.5 million in the second quarter of 2021, or 0.20% of average total loans on an annualized basis, down from $18.3 million, or 0.34% of average total loans in the first quarter of 2021. The ratio of ACL to period-end loans was 2.03% (2.17% excluding PPP loans) at June 30, 2021, compared to 2.11% (2.35% excluding PPP loans) at March 31, 2021.

 

The company’s overall asset quality metrics continued to improve with commercial criticized and total nonperforming loans down 5% and 24%, respectively, linked-quarter. Nonperforming assets (NPAs) totaled $97.6 million at June 30, 2021, down $26.6 million, or 21%, from March 31, 2021. During the second quarter of 2021, total nonperforming loans decreased $27.4 million, or 24%, while ORE and foreclosed assets were virtually flat linked-quarter. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 0.46% at June 30, 2021, down 11 bps from March 31, 2021.

 

Net Interest Income and Net Interest Margin (NIM)

Net interest income (TE) for the second quarter of 2021 was $237.5 million, virtually unchanged from the first quarter of 2021.

 

The net interest margin (NIM) was 2.96% in the second quarter of 2021, a decline of 13 bps linked-quarter. Factors driving NIM compression include a change in earning asset mix and yield (-11 bps), a change in net interest recoveries on nonaccrual loans (-3 bps), and lower purchase accounting accretion (-3 bps), partially offset by the net impact of lower deposit costs (+4 bps).

 

Average earning assets were $32.2 billion for the second quarter of 2021, up $1.2 billion, or 4%, from the first quarter of 2021.

 

Management expects continued NIM compression in the third quarter of 2021, however, net interest income should remain relatively stable.

 

Noninterest Income

Noninterest income totaled $94.3 million for the second quarter of 2021, up $7.2 million, or 8%, from the first quarter of 2021. Improvement was noted in many fee categories as local economic activity continues to rebound and consumer spending increases. Nonoperating income of $2.8 million related to the sale of Mastercard stock is included in total noninterest income. Adjusting for this item, noninterest income totaled $91.5 million, up $4.4 million, or 5%, linked-quarter.

 

Service charges on deposits were up $0.2 million, or 1%, from the first quarter of 2021, related to the impact of increased activity, while bankcard and ATM fees were up $2.4 million, or 13%, from the first quarter of 2021, mainly due to an additional day in the second quarter and improving economic activity.

 

Investment and annuity income and insurance fees were down $0.1 million, or 2%, linked-quarter. Trust fees were up $1.3 million, or 9% linked-quarter, primarily from annual tax preparation fees and increased activity.

 

 

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Fees from secondary mortgage operations totaled $12.6 million for the second quarter of 2021, up $0.8 million, or 7%, linked-quarter, mainly from the impact of a diversification in delivery methods.  

 

Other noninterest income totaled $18.2 million, up $2.6 million, or 16%, from the first quarter of 2021. The increase in other noninterest income is primarily due to the gain on the sale of Mastercard stock, noted above.

 

Noninterest Expense & Taxes

Noninterest expense totaled $236.8 million, up $43.7 million, or 23% linked-quarter. As noted last quarter, our focus on expense control in light of the current environment was enhanced, with initiatives put in place to improve overall efficiency. These initiatives included closing financial centers, offering an early retirement package to a select group of employees and reducing headcount via attrition. Also included in nonoperating expenses are the impact of the planned October 2021 closure of an additional 18 financial centers and the elimination of 200 positions companywide (reduction in force). Excluding these items, operating expense was down $1.3 million, or 1%, linked-quarter.

 

Personnel expense totaled $142.7 million in the second quarter of 2021, up $23.0 million, or 19%, from the first quarter of 2021. This total includes $25.3 million in nonoperating items associated with expense initiatives noted above. Excluding the nonoperating items, personnel expense was down $2.3 million, or 2%, linked-quarter. mainly related to the savings associated with the voluntary early retirement program.

 

Occupancy and equipment expense totaled $17.3 million in the second quarter of 2021, down $0.3 million, or 2%, from the first quarter of 2021. Amortization of intangibles totaled $4.2 million for the second quarter of 2021, down $0.2 million, or 4%, linked-quarter.

 

Gains on sales of ORE and other foreclosed assets exceeded expenses by $0.1 million in the second quarter of 2021, compared to an expense of virtually zero in the first quarter of 2021.

 

Other expense totaled $72.6 million in the second quarter of 2021, up $21.3 million, or 41%, linked-quarter. Included in the total was $19.6 million of nonoperating items, mostly related to the efficiency initiative expenses noted above.

 

The effective income tax rate for second quarter 2021 was 19%. The effective income tax rate continues to be less than the statutory rate due primarily to tax-exempt income and tax credits.

 

Capital

Common stockholders’ equity at June 30, 2021 totaled $3.6 billion, up $146 million, or 4%, from March 31, 2021. The tangible common equity (TCE) ratio was 7.70%, up 44 bps from March 31, 2021, mainly the result of earnings and increased OCI, partially offset by dividends. The company remains well capitalized, with both bank and holding company capital levels in excess of required regulatory minimums. The company’s CET1 ratio is estimated to be 10.98% at June 30, 2021.

 

Conference Call and Slide Presentation

 

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Management will host a conference call for analysts and investors at 4:00 p.m. Central Time on Tuesday, July 20, 2021 to review the 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 second quarter results are also posted as part of the webcast link. To participate in the Q&A portion of the call, dial 866-270-1533 or 412-317-0797.  

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 July 25, 2021 by dialing 877-344-7529 or 412-317-0088, access code 10157723.  

 

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; certain insurance services; and mortgage services. The company also operates a loan production office in Nashville, Tennessee. BauerFinancial, Inc., the nation’s leading independent bank rating and analysis firm, consistently recommends Hancock Whitney as one of America’s most financially sound banks. 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.” The company uses 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 the company’s business.

 

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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, loan growth expectations, management’s predictions about charge-offs for loans, the impact of the COVID-19 pandemic on the economy and our operations, the adequacy of our enterprise risk management framework, the impact of future business combinations on our performance and financial condition, including our ability to successfully integrate the businesses, success of revenue-generating 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 referenced rate reform, deposit trends, credit quality trends, the impact of PPP loans and forgiveness on our results, changes in interest rates, inflation, net interest margin trends, future expense levels (including the impact of the Voluntary Employee Retirement Program), future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts, accretion levels and expected returns.

 

Given the many unknowns and risks being heavily weighted to the downside, our forward-looking statements are subject to the risk that conditions will be substantially different than we are currently expecting. If efforts to contain and inoculate our population against COVID-19, and other variants thereof, are unsuccessful and restrictions on movement are imposed, the economic impact could continue to be substantial. The COVID-19 outbreak and its consequences, including responsive measures to manage it, have had and are likely to continue to have an adverse effect, possibly materially, on our business and financial performance by adversely affecting, possibly materially, the demand and profitability of our products and services, the valuation of assets and our ability to meet the needs of our customers.

 

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, 2020 and in other periodic reports that we file with the SEC.

 

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(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.

 

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(e) The allowance for credit losses includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

 

 

(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.

 

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(e) The allowance for credit losses includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

 

 

(f) Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%.

 

 

 

 

 

 

 

 

 

 

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(f) Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%.

 

 

 

 

 

 

 

 

 

 

 

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HANCOCK WHITNEY CORPORATION

PERIOD-END BALANCE SHEET

(Unaudited)

 

 

(g) Estimated for most recent period-end. Regulatory capital ratios reflect the election to use the five-year transition rules for the adoption of ASC 326, commonly referred to as Current Expected Credit Loss, or CECL.

 

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HANCOCK WHITNEY CORPORATION

AVERAGE BALANCE SHEET

(Unaudited)

 

 

(h) Average securities does not include unrealized holding gains/losses on available for sale securities.

 

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HANCOCK WHITNEY CORPORATION

AVERAGE BALANCE AND NET INTEREST MARGIN SUMMARY

(Unaudited)

 

 

(i) Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%.

(j) Includes nonaccrual loans.

(k) Included in interest income is net purchase accounting accretion of $1.6 million, $3.5 million and $3.7 million for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

(l) Average securities does not include unrealized holding gains/losses on available for sale securities.

 

 

 

 

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(i) Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%.

(j) Includes nonaccrual loans.

(k) Included in interest income is net purchase accounting accretion of $5.1 million and $9.9 million for the six months ended June 30, 2021 and 2020, respectively.

(l) Average securities does not include unrealized holding gains/losses on available for sale securities.

 

 

 

 

 

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HANCOCK WHITNEY CORPORATION

ASSET QUALITY INFORMATION

(Unaudited)

 

 

(m) Included in nonaccrual loans are nonaccruing restructured loans totaling $6.8 million, $7.2 million and $55.2 million at 6/30/2021, 3/31/2021 and 6/30/2020, respectively.

(n) Excludes 90+ accruing loan troubled debt restructured loans already reflected in total nonperforming loans of $1.8 million at 3/31/2021.

(o) Represents the increase in the allowance upon the 1/1/20 adoption of ASC 326, commonly referred to as Current Expected Credit Losses, or CECL.

 

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HANCOCK WHITNEY CORPORATION

ASSET QUALITY INFORMATION

(Unaudited)

 

 

(m) Included in nonaccrual loans are nonaccruing restructured loans totaling $6.8 million, $7.2 million, $21.6 million, $39.9 million and $55.2 million at 6/30/2021, 3/31/2021, 12/31/2020, 9/30/2020 and 6/30/2020, respectively.

(n) Excludes 90+ accruing loan troubled debt restructured loans already reflected in total nonperforming loans of $1.8 million at 3/31/2021.

 

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HANCOCK WHITNEY CORPORATION

Appendix A to the Earnings Release

Reconciliation of Non-GAAP Measures

 

TOTAL REVENUE (TE) AND PRE-PROVISION NET REVENUE (TE)

 

 

(p) Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%.

 

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