Hancock Whitney (US:HWC)2023-08-04 21:06Part I. Financial Information This section presents the company's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Financial Statements This section presents Hancock Whitney Corporation's unaudited consolidated financial statements for Q2 2023, including balance sheets, income statements, and notes Consolidated Balance Sheets Total assets increased to $36.2 billion at June 30, 2023, driven by loan growth, with total liabilities and equity also rising Consolidated Balance Sheets (in millions) | (in millions) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $36,210.15 | $35,183.83 | | Loans, net | $23,475.39 | $22,806.26 | | Securities (AFS & HTM) | $8,195.68 | $8,408.54 | | Total Liabilities | $32,655.67 | $31,841.20 | | Total deposits | $30,043.50 | $29,070.35 | | Short-term borrowings | $1,629.54 | $1,871.27 | | Total Stockholders' Equity | $3,554.48 | $3,342.63 | Consolidated Statements of Income Q2 2023 net income was $117.8 million, a slight decrease year-over-year, reflecting increased interest income and expense Consolidated Statements of Income (in millions, except per share data) | (in millions, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $273.91 | $245.73 | $558.91 | $474.20 | | Provision for credit losses | $7.63 | $(9.76) | $13.65 | $(32.29) | | Noninterest income | $83.23 | $85.65 | $163.56 | $169.09 | | Noninterest expense | $202.14 | $187.10 | $403.02 | $367.04 | | Net income | $117.79 | $121.44 | $244.26 | $244.91 | | Earnings per share-diluted | $1.35 | $1.38 | $2.80 | $2.78 | Notes to Consolidated Financial Statements Detailed disclosures cover accounting policies, loan portfolios, credit losses, and the adoption of ASU 2022-02 on troubled debt restructurings - Effective January 1, 2023, the Company adopted ASU 2022-02, which eliminated accounting guidance for Troubled Debt Restructurings (TDRs) and introduced new disclosure requirements for modifications to loans for borrowers experiencing financial difficulty (MEFDs)30 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 and H1 2023 financial condition, covering economic outlook, net interest income, credit losses, and balance sheet Overview and Economic Outlook The U.S. economy shows resilience, but management weights a mild recession scenario at 60% for credit loss allowance calculations - The company reported net income of $117.8 million, or $1.35 per diluted share, for Q2 2023, down from $126.5 million in Q1 2023, with key challenges including a compressing net interest margin (3.30% vs 3.55% in Q1) due to a shift to higher-cost deposits194195 - For the allowance for credit losses calculation at June 30, 2023, management applied a 40% weighting to Moody's baseline economic forecast and a 60% weighting to the S-2 mild recessionary scenario, which assumes a three-quarter recession starting in Q3 2023189191 Results of Operations Q2 2023 net interest income decreased 4% to $276.7 million due to margin compression, while noninterest income rose 4% - Net interest income (tax-equivalent) for Q2 2023 was $276.7 million, a 4% decrease from Q1 2023, primarily due to the net interest margin compressing by 25 bps to 3.30%, driven by a shift in funding mix to higher-cost deposits and increased short-term borrowings201202203 - The provision for credit losses was $7.6 million in Q2 2023, reflecting a $4.2 million reserve build and $3.4 million in net charge-offs, compared to a $6.0 million provision in Q1 2023213 - Noninterest income increased by $2.9 million (4%) from Q1 2023, driven by higher service charges and trust fees, while noninterest expense rose by $1.3 million (1%), mainly due to increased data processing, occupancy, and regulatory fees217230 Liquidity and Capital Resources Strong liquidity of $18.5 billion exceeds uninsured deposits, and all capital ratios remain well above regulatory minimums - Total available liquidity sources amounted to $18.5 billion as of June 30, 2023, which significantly exceeds the estimated $10.3 billion of uninsured, noncollateralized deposits249250 Capital Ratios | Ratio | June 30, 2023 | Well-Capitalized Minimum | | :--- | :--- | :--- | | Total capital (to risk weighted assets) | 13.44% | 10.00% | | Tier 1 common equity capital (CET1) | 11.83% | 6.50% | | Tier 1 leverage capital | 9.64% | 5.00% | - On January 26, 2023, the board authorized a new stock repurchase program for up to 4.3 million shares, expiring December 31, 2024, with no shares repurchased under this program to date265 Balance Sheet Analysis Total loans grew 2% to $23.8 billion, deposits increased 1% to $30.0 billion with a mix shift, and ACL was $345.7 million - Total loans increased by $385.4 million (2%) from Q1 2023 to $23.8 billion, with growth led by residential mortgages and commercial & industrial loans274 - Total deposits grew by $430.4 million (1%) to $30.0 billion, including a $688 million decline in noninterest-bearing deposits and a $917 million increase in retail time deposits, reflecting a mix shift toward higher-cost funding295296298 - The allowance for credit losses (ACL) was $345.7 million, or 1.45% of total loans, at June 30, 2023, with criticized commercial loans remaining relatively stable at $302.2 million282284 Quantitative and Qualitative Disclosures About Market Risk The company is asset-sensitive, with a simulated +100 bps rate increase boosting net interest income by 3.03% in year one, and successfully transitioned from LIBOR Estimated Net Interest Income Change | Change in Interest Rates (bps) | Estimated NII Change (Year 1) | Estimated NII Change (Year 2) | | :--- | :--- | :--- | | -100 | -2.90% | -4.46% | | +100 | 3.03% | 4.22% | | +200 | 5.70% | 8.18% | - The company has completed its transition from LIBOR, with all remaining LIBOR-based instruments transitioned to alternative benchmarks like SOFR effective July 3, 2023, with no material financial impact322323 Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2023, the Company's disclosure controls and procedures were effective324 - No changes in internal control over financial reporting occurred during the second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, internal controls325 Part II. Other Information This section provides other required information, including legal proceedings, risk factors, equity sales, and exhibits Legal Proceedings The company is involved in various legal proceedings, but management expects no material adverse effect on financial position or liquidity - The Company states that it does not believe any pending legal proceedings will have a material adverse effect on its consolidated financial position or liquidity328 Risk Factors No material changes to previously disclosed risk factors were reported during the quarter - No material changes to the risk factors disclosed in the 2022 Form 10-K or the Q1 2023 Form 10-Q were reported for the period330 Unregistered Sales of Equity Securities and Use of Proceeds A stock repurchase program for up to 4.3 million shares is authorized, but no shares were repurchased in Q2 2023 Stock Repurchase Program Activity | Period | Total Shares Purchased | Average Price Paid | Shares Remaining in Program (in millions) | | :--- | :--- | :--- | :--- | | April 2023 | 0 | $0.00 | 4.30 | | May 2023 | 0 | $0.00 | 4.30 | | June 2023 | 0 | $0.00 | 4.30 | Other Information No directors or executive officers adopted, terminated, or modified Rule 10b5-1 trading arrangements during Q2 2023 - No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the three months ended June 30, 2023333 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents