Hancock Whitney (US:HWC)2025-05-08 21:36Part I. Financial Information This section presents the company's financial statements, management's discussion and analysis, market risk disclosures, and internal controls Financial Statements The company's Q1 2025 financial statements reflect increased net income, a slight decrease in total assets, and growth in stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Loans, net | $22,780,027 | $22,980,565 | | Total Assets | $34,750,680 | $35,081,785 | | Total Deposits | $29,194,733 | $29,492,851 | | Total Liabilities | $30,472,008 | $30,954,149 | | Total Stockholders' Equity | $4,278,672 | $4,127,636 | Consolidated Income Statement Highlights (in thousands) | Account | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net Interest Income | $269,905 | $266,171 | | Provision for Credit Losses | $10,462 | $12,968 | | Total Noninterest Income | $94,791 | $87,851 | | Total Noninterest Expense | $205,059 | $207,722 | | Net Income | $119,504 | $108,612 | | Diluted EPS | $1.38 | $1.24 | - Comprehensive income was $210.6 million for Q1 2025, a significant increase from $76.2 million in Q1 2024, primarily driven by a $91.1 million positive change in other comprehensive income, net of tax, compared to a $32.4 million loss in the prior-year period17 - Cash flow from operating activities was $104.2 million, a decrease from $166.7 million in Q1 2024. Net cash from investing activities was $291.2 million, while financing activities used $460.0 million, largely due to a net decrease in deposits and common stock repurchases23 Notes to Consolidated Financial Statements The notes provide detailed insights into accounting policies, securities portfolio, loan quality, derivative usage, share repurchases, and regulatory assessments - The company's securities portfolio is primarily investment grade. As of March 31, 2025, securities available for sale (AFS) had a fair value of $5.33 billion with gross unrealized losses of $524.7 million. Securities held to maturity (HTM) had an amortized cost of $2.36 billion with gross unrealized losses of $166.1 million. No allowance for credit loss was recorded for securities as losses were deemed non-credit related323344 Allowance for Credit Losses (ACL) Activity - Q1 2025 (in thousands) | ACL Component | Beginning Balance (Dec 31, 2024, in thousands) | Provision (in thousands) | Net Charge-offs (in thousands) | Ending Balance (Mar 31, 2025, in thousands) | | :--- | :--- | :--- | :--- | :--- | | Allowance for Loan Losses | $318,882 | $9,484 | ($10,247) | $318,119 | | Reserve for Unfunded Commitments | $24,053 | $978 | N/A | $25,031 | | Total ACL | $342,935 | $10,462 | ($10,247) | $343,150 | - Nonaccrual loans increased to $104.2 million at March 31, 2025, from $97.3 million at December 31, 2024. Total reportable modified loans to borrowers experiencing financial difficulty (MEFDs) were $95.6 million63 - The company uses various derivative instruments for hedging and customer purposes, with a total notional amount of $7.27 billion at March 31, 2025. This includes $1.5 billion in cash flow hedges and $477.5 million in fair value hedges86 - The company repurchased 350,000 shares of its common stock at an average cost of $59.28 per share during Q1 2025 under a new buyback program authorized for up to 4.3 million shares through December 2026110 - To date, the company has expensed $29.7 million related to the FDIC special assessment to recover losses from the 2023 bank failures. The final exposure remains unknown until the FDIC terminates the receiverships140141 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting net income, expanded net interest margin, stable credit quality, improved capital ratios, and updated full-year guidance - The economic outlook is influenced by the new administration's tariff policies, creating cost pressures and uncertainty. The March 2025 Moody's baseline forecast assumes modest GDP growth and two 25 bp rate cuts in late 2025. Management has weighted the more pessimistic S-2 mild recession scenario at 60% for its ACL calculation184187189 Q1 2025 Key Performance Metrics | Metric | Q1 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income (millions) | $119.5 | $122.1 | ($2.6) | | Diluted EPS | $1.38 | $1.40 | ($0.02) | | Net Interest Margin (te) | 3.43% | 3.41% | +2 bps | | ACL / Total Loans | 1.49% | 1.47% | +2 bps | | CET1 Ratio | 14.48% | 14.14% | +34 bps | | Efficiency Ratio (non-GAAP) | 55.22% | 54.46% | +76 bps | - Full-year 2025 guidance was updated: Net interest income (te) is expected to be up 3% to 4% compared to 2024. Noninterest income is expected to be up 9% to 10%, including the impact of the Sabal Trust Company acquisition. Adjusted noninterest expense is expected to be up 4% to 5%203224237 Results of Operations Q1 2025 results show stable net interest income, a lower provision for credit losses, growth in noninterest income, and a slight increase in noninterest expense - Net interest margin (NIM) increased to 3.43% in Q1 2025, up 2 bps from Q4 2024 and 11 bps from Q1 2024. The improvement was driven by lower deposit costs and a more favorable funding mix, which offset lower loan yields201202 - The provision for credit losses was $10.5 million, a decrease from $11.9 million in Q4 2024. Annualized net charge-offs were 0.18% of average loans, down from 0.20% in the prior quarter207208 - Noninterest income rose to $94.8 million, up 4% QoQ, with notable increases in secondary mortgage market operations (+$0.9M) and other miscellaneous income (+$0.7M)210217222 - Noninterest expense increased to $205.1 million, up 1% QoQ. The increase was driven by a $2.6 million swing in ORE expense (from gain to loss) and a $1.2 million increase in deposit insurance fees, partially offset by lower personnel-related costs225227 Balance Sheet Analysis Balance sheet analysis reveals a decrease in total loans and deposits, an increase in the securities portfolio, and stable noninterest-bearing deposits - Total loans decreased by 1% QoQ to $23.1 billion. The decline was led by a $251.0 million (2%) drop in Commercial & Industrial loans due to increased payoffs. Management forecasts low single-digit loan growth for the full year 2025268271276 - Total deposits decreased by 1% QoQ to $29.2 billion. The decline was driven by a $208.2 million decrease in interest-bearing public funds and a $192.1 million decrease in retail time deposits. Management expects low single-digit deposit growth for the full year 2025293295299 - The securities portfolio increased by $97.8 million to $7.7 billion, primarily due to a $102.1 million favorable fair value adjustment on the AFS portfolio. The portfolio's effective duration is 4.04 years264265 Allowance for Credit Losses and Asset Quality The ACL ratio slightly increased, while criticized commercial loans decreased and nonaccrual loans remained low, indicating stable asset quality - The ACL to total loans ratio increased slightly to 1.49% from 1.47% at year-end 2024, reflecting continued caution given the economic outlook277280 - Criticized commercial loans fell by 5% QoQ to $594.1 million, representing 3.35% of the commercial portfolio, down from 3.47%281 - Nonaccrual loans plus ORE and foreclosed assets increased to $130.9 million from $125.1 million in the prior quarter. The ratio of nonaccrual loans to total loans remains low at 0.45%287 Liquidity and Capital Resources The company maintains robust liquidity and capital, with strong regulatory ratios, increased dividends, and ongoing share repurchases Available Liquidity as of March 31, 2025 (in billions) | Source | Net Availability (in billions) | | :--- | :--- | | Free securities | $4.5 | | Federal Home Loan Bank | $5.2 | | Federal Reserve Bank | $3.4 | | Brokered deposits | $4.4 | | Other | $1.2 | | Cash and equivalents | $1.4 | | Total Liquidity | $20.0 | Key Capital Ratios | Ratio | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | CET1 Ratio | 14.48% | 14.14% | | Tier 1 Leverage Ratio | 11.55% | 11.29% | | Tangible Common Equity (TCE) Ratio | 10.01% | 9.47% | - The board of directors increased the quarterly common stock dividend by 13% to $0.45 per share260 - During Q1 2025, the company repurchased 350,000 shares at an average price of $59.28 per share under its new 4.3 million share repurchase authorization261 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate sensitivity, with NII and EVE impacted by rate changes, mitigated through various management strategies Net Interest Income (NII) Sensitivity at March 31, 2025 | Rate Change (bps) | Estimated Change in Year 1 NII | Estimated Change in Year 2 NII | | :--- | :--- | :--- | | -200 | -4.64% | -10.19% | | -100 | -2.15% | -4.81% | | +100 | 2.02% | 4.35% | | +200 | 3.88% | 8.40% | Economic Value of Equity (EVE) Sensitivity at March 31, 2025 | Rate Change (bps) | Estimated Change in EVE | | :--- | :--- | | -100 | 2.00% | | +100 | -2.57% | | +200 | -5.41% | Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective322 - No changes in internal control over financial reporting occurred during the first quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal controls323 Part II. Other Information This section covers legal proceedings, risk factors, equity sales, other disclosures, and exhibits Legal Proceedings The company is involved in ordinary course legal proceedings, with no expected material adverse effects on financial position or liquidity - The company is party to various legal proceedings arising in the ordinary course of business, but management does not believe any loss contingencies will have a material adverse effect on the company's financial position or liquidity326 Risk Factors No material changes occurred to the risk factors previously disclosed in the company's 2024 Form 10-K - There were no material changes during the period to the risk factors previously disclosed in the 2024 Form 10-K328 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 350,000 shares under its board-approved stock buyback program during Q1 2025 Common Share Repurchases - Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased Under Program | Remaining Authorization | | :--- | :--- | :--- | :--- | :--- | | Jan 2025 | 345 | $55.14 | 0 | 4,306,000 | | Feb 2025 | 456,278 | $59.39 | 350,000 | 3,956,000 | | Mar 2025 | 26 | $57.13 | 0 | 3,956,000 | | Total Q1 | 456,649 | $59.38 | 350,000 | 3,956,000 | Other Information No directors or executive officers adopted, terminated, or modified trading arrangements during Q1 2025 - No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2025333 Exhibits This section lists exhibits filed with the Form 10-Q, including certifications and Inline XBRL data