HANCOCK WHITNEY CORP Q3 FY2024 earnings call

• Improved profitability with ROA of 1.32% and NIM expansion. - Fee income growth and well-controlled operating expenses. - Balance sheet: Loans down $450 million with purposeful decrease in SNC exposure, higher pay-offs in CRE portfolios, and completion of large industrial projects. Deposits down but DDA outflow moderated. - Capital ratios among top quartile peers. - Strategic investments in fee income lines yielding impressive returns. - Responded to recent hurricanes by delivering aid in impacted areas.

Net interest income was up due to higher yields on loans and securities and flat cost of funds. Fee income continued to outperform. Operating expenses were down quarter-over-quarter. ROA was 1.32%. Net income was $116 million or $1.33 per share, up from last quarter. PPNR growth was $10.1 million or 10% to $167 million. NIM expanded 2 basis points to 3.39. Loan yield was up 3 basis points to 6.27%, bond yields up 6 basis points to 2.66%. Deposit DDA outflow moderated with a stable mix at around 36%.

• Expect NIM expansion in fourth quarter despite rate cuts, driven by lower deposit rates, higher bond yields, partially offset by lower loan yields. - Non-interest income for 2024 expected up 6%-7% from 2023. - Expenses expected to grow 1%-2% year-over-year. - Hiring bankers to support balance sheet growth in 2025, details to be shared in January. - Cost of deposits expected to be down significantly in fourth quarter due to rate cuts.

• Credit risks with criticized loans increasing, though geographically and industrially spread, and no immediate material issues identified. - Economic environment uncertainty impacting ability to accurately project results. - Fraud risks on consumer and small business deposits, with ongoing efforts to detect and prevent losses.

Q: Talked about uptick in criticized commercial loans and prospects with lower rates.

A: Chris Ziluca explained criticized loans geographically and industrially spread, no specific sectors driving, and potential benefit from rate easing but issues not just interest rates.

Q: How to think about loan growth from here?

A: John Hairston said SNC self-induced headwind nearly over, demand tepid but green shoots, commercial banking pipelines building.

Q: Color on fee income, especially derivative, SBIC, BOLI, SBA in 3Q?

A: Mike Achary said third quarter fee income strong, specialty fee income lines contributed to growth, fourth quarter expected modest drop.

Q: Thoughts on capital accumulation and growth?

A: Mike Achary said capital levels give optionality, plan for organic balance sheet growth, M&A not planned but considered if opportunities arise.

Q: Criticized loans and future color?

A: Chris Ziluca said credit classified appropriately, interest rates impact customers, modifications term related.

Q: PPNR guide change and recruiting?

A: Mike Achary said PPNR likely lower in fourth quarter due to balance sheet and fees, John Hairston said recruiting efforts ongoing, details in January.

Q: Deposit pricing and fraud?

A: Mike Achary talked about deposit betas, John Hairston discussed fraud losses less this year with investments in detection.

Q: Risk adjusted returns and fraud?

A: Chris Ziluca talked about risk adjusted returns rationalizing with broader demand, John Hairston discussed fraud on small business deposits.