Hancock Whitney (US:HWC)2022-04-20 01:45Financial Data and Key Metrics Changes - First-quarter net income totaled $123.5 million, down $14.3 million from the previous quarter but up over 15% from the same quarter a year ago [13] - Earnings per share (EPS) for the first quarter was $1.40, down $0.15 from the last quarter but up $0.19 from the first quarter of last year [13] - Core loan growth was 8% linked-quarter annualized, with an increase of $385 million in core loans linked-quarter [6][13] - Total deposits were virtually unchanged linked-quarter, with a shift in mix towards non-interest-bearing deposits [17] Business Line Data and Key Metrics Changes - Core loan growth of $385 million was driven by increasing economic activity and line utilization across various markets and business lines [6][7] - The bond portfolio grew by $318 million, aligning with liquidity deployment plans [13] - The net interest margin (NIM) for the first quarter was 2.81%, an increase of one basis point from the previous quarter [18] Market Data and Key Metrics Changes - New Orleans experienced a resurgence in tourism and hospitality, contributing positively to economic recovery [8][9] - The commercial criticized loan ratio improved to 1.7% of total commercial loans, marking the sixth consecutive quarter of improvement [9] - Non-performing loans (NPLs) decreased to 0.22% of total loans, continuing a trend of improvement over nine quarters [9] Company Strategy and Development Direction - The company announced a strategic decision to eliminate consumer NSF and certain overdraft fees by the end of 2022, estimating an annual impact of $10 million to $11 million in fee income [11][12] - The focus on expanding digital channels and launching new retail products is expected to improve consumer account acquisition rates in 2023 [12] - The company aims to achieve a 55% efficiency ratio target by the end of the year, with ongoing efficiency initiatives helping to manage expense levels [16][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position despite uncertainties in the economic and geopolitical environments [16] - The expectation of continued loan and earning asset growth, along with higher rates, is anticipated to result in higher revenue [13][16] - Management noted that the impact of PPP forgiveness is expected to become less significant in future quarters, allowing for more robust loan growth [7][78] Other Important Information - The total capital levels remain solid, with a Tier one ratio of 11.12%, up three basis points linked-quarter [10] - The unrealized pretax loss in the available-for-sale bond portfolio was $387 million as of March 31, reflecting the impact of rising rates [18] - The company repurchased 350,000 shares at an average price of $52.79 during the quarter [10] Q&A Session Summary Question: Update on hires and expense guidance - Management noted a successful quarter with significant new hires, which are expected to positively impact the loan pipeline [26][28] Question: Margin expectations and balance sheet management - Management confirmed that the guidance on margin reflects a static balance sheet, with expectations for continued deployment of excess liquidity [30][32] Question: Deposit beta assumptions - Management indicated that deposit beta is expected to mirror historical experiences, around 25% on total deposits [38] Question: Vulnerabilities in the loan portfolio - Management identified floating rate loans as potentially more vulnerable, particularly in commercial real estate, but expressed confidence in the portfolio's resilience [67] Question: Guidance on provisioning - Management clarified that reserve releases are expected to taper off, with a potential return to near-zero levels in a few quarters [73][74] Question: Impact of NSF fee changes - Management indicated that changes to NSF fees are expected to be implemented by the end of the year, with a gradual impact on revenue [93] Question: Strategy in Texas market - Management explained the strategy of expanding into Texas markets to diversify risk and capitalize on higher growth rates [97][99]