whitney

Hancock Whitney Corporation (Nasdaq: HWC) has announced its financial results for the third quarter of 2021. Net income for the third quarter of 2021 was $129.6 million, or $1.46 per diluted common share (EPS), compared to $88.7 million, or $1.00 per diluted common share, in the second quarter of 2021. The company reported net income for the third quarter of 2020 of $79.4 million, or $0.90 per diluted common share. The third quarter of 2021 included ($1.4) million, or ($0.01) per share after-tax, of net nonoperating income items. These items included Hurricane Ida expenses of $5.1 million and severance reversal ($1.9) million, offset by the gain of $4.6 million from the sale of the remaining Hancock Horizon Funds. 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.

THIRD QUARTER 2021 HIGHLIGHTS

Pre-provision net revenue (PPNR) totaled $134.8 million, down $2.4 million, or 2%, linked-quarter

Core loan growth of $219.7 million, offset by the impact of $482.2 million in PPP loan forgiveness leading to an overall decline in total loans of $262.5 million

Deposits decreased $65.0 million linked-quarter; noninterest-bearing demand deposits increased $247.0 million

$28.8 million reserve release and $1.8 million in net charge-offs led to a negative provision for credit losses of $27.0 million

ACL coverage remained strong at 1.92% (2.00% excluding PPP loans)

Both nonperforming loans and criticized commercial loans declined 27% and 11%, respectively.

The continued impact of excess liquidity, driven mainly by PPP loan forgiveness, led to a 2 bps compression in reported NIM TCE ratio 7.85%, up 15 bps

“We are pleased to report another quarter of solid results, despite the impacts of Hurricane Ida and the COVID-19 Delta surge,“ said John M. Hairston, President and CEO. “Our balance sheet remained strong as core loan growth momentum continued and DDA deposits increased during the quarter. Despite a slight compression in the NIM, net interest income was steady in the quarter, as was operating expense. Fees were lower linked-quarter, mainly the result of secondary mortgage volume reductions, as well as the result of waivers and activity related to Hurricane Ida disruption. Our asset quality metrics continue to improve and are now among the best in the mid-cap group. We do not anticipate any significant credit impact post-hurricane. Capital is strong and we expect to achieve an 8% TCE, or better, by year-end 2021. We view third quarter of 2021 and near term guidance as continued momentum toward 2022 and our path to a 55% efficiency ratio.”

LOANS

Loan growth momentum is continuing in both markets and specialty lines. Growth in the western and central regions, in addition to equipment finance and healthcare, was partly offset by PPP loan forgiveness and amortizing portfolios of indirect and energy. Core loans increased $219.7 million, related to fewer payoffs and paydowns, a slight increase in line utilizations rates and increased loan pipeline pull-through rate. During the quarter, $482.2 million in PPP loans were forgiven. Loans totaled $20.9 billion at September 30, 2021, down $262.5 million, or 1%, linked-quarter.

Average loans totaled $20.9 billion for the third quarter of 2021, down $447.6 million, or 2%, linked-quarter. Management expects year-end loans to total approximately $20.4 billion, or a 3%, increase year-over-year.

DEPOSITS

Excess liquidity related to stimulus and other pandemic-related client funds contributed to the third quarter of 2021’s elevated level of deposits. Total deposits at September 30, 2021 were $29.2 billion, down $65.0 million, or less than 1%, from June 30, 2021.

DDAs totaled $13.7 billion at September 30, 2021, up $247.0 million, or 2%, from June 30, 2021 and comprised 47% of total period-end deposits. Interest-bearing transaction and savings deposits totaled $11.3 billion at the end of the third quarter of 2021, flat linked-quarter. Compared to June 30, 2021, time deposits of $1.2 billion were down $143.7 million, or 11%. Interest-bearing public fund deposits decreased $151.4 million, or 5%, linked-quarter, ending September at $3.1 billion.

Average deposits for the third quarter of 2021 were $29.2 billion, virtually unchanged linked-quarter.

ASSET QUALITY

The total allowance for credit losses (ACL) was $400.5 million at September 30, 2021, down $28.8 million from June 30, 2021. During the third quarter of 2021, the company recorded a negative provision for credit losses of $27.0 million, compared to a negative provision of $17.2 million in the second quarter of 2021. Net charge-offs totaled $1.8 million in the third quarter of 2021, or 0.03% of average total loans on an annualized basis, down from $10.5 million, or 0.20% of average total loans in the second quarter of 2021. The ratio of ACL to period-end loans was 1.92% (2.00% excluding PPP loans) at September 30, 2021, compared to 2.03% (2.17% excluding PPP loans) at June 30, 2021.

The company’s overall asset quality metrics continued to improve with commercial criticized and total nonperforming loans down 11% and 27%, respectively, linked-quarter. Nonperforming assets (NPAs) totaled $71.9 million at September 30, 2021, down $25.7 million, or 26%, from June 30, 2021. During the third quarter of 2021, total nonperforming loans decreased $24.0 million, or 27%, while ORE and foreclosed assets were down $1.8 million, or 17% linked-quarter. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 0.34% at September 30, 2021, down 12 bps from June 30, 2021.

NET INTEREST INCOME AND NET INTEREST MARGIN

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

The net interest margin (NIM) was 2.94% in the third quarter of 2021, a decline of 2 bps linked-quarter. Factors driving the change in NIM include a full quarter’s impact from the sub-debt redemption in June 2021 (+2 bps) and the impact of lower deposit costs (+3 bps), offset by a change in earning asset mix (-6 bps) and the net impact of interest recoveries (-1 bp).

Average earning assets were $32.1 billion for the third quarter of 2021, down $98.1 million, or less than 1%, from the second quarter of 2021.

Management expects continued NIM compression in the fourth quarter of 2021 with net interest income down slightly linked-quarter.

NONINTEREST INCOME

Noninterest income totaled $93.4 million for the third quarter of 2021, down $0.9 million, or 1%, from the second quarter of 2021. Included in noninterest income was a $4.6 million gain from the sale of the remaining Hancock Horizon Funds. In the second quarter of 2021, noninterest income included $2.8 million related to the sale of Mastercard class B common stock. Adjusting for these items, noninterest income totaled $88.8 million in the third quarter, down $2.7 million, or 3%, linked-quarter.

Service charges on deposits were up $1.8 million, or 9%, from the second quarter of 2021, driven by an additional posting day, lower earnings credit rates, seasonality and higher customer activity. Bankcard and ATM fees were down $0.6 million, or 3%, from the second quarter of 2021, mainly impacted by Hurricane Ida evacuation, branch and ATM closures and fee waivers.

Investment and annuity income and insurance fees were down $0.2 million, or 2%, linked-quarter. Trust fees were down $0.3 million, or 2% linked-quarter, reflecting second quarter seasonality in tax prep fees and a third quarter impact of Hurricane Ida.

Fees from secondary mortgage operations totaled $7.0 million for the third quarter of 2021, down $5.6 million, or 44%, linked-quarter, mainly from the impact of Hurricane Ida and a diversification in delivery methods in the second quarter of 2021.

Other noninterest income totaled $22.2 million, up $4.0 million, or 22%, from the second quarter of 2021. The increase is primarily due to the gain on sale of Hancock Horizon Funds noted above.

NONINTEREST EXPENSE

Noninterest expense totaled $194.7 million, down $42.1 million, or 18% linked-quarter. Included in the total was $3.2 million of net nonoperating expenses related primarily to Hurricane Ida, which were partly offset by a reversal of severance. In the second quarter of 2021, noninterest expense included $45.0 million related to previously announced efficiency initiatives. Excluding these items, operating expense was down $0.3 million, or less than 1%, linked-quarter.

Personnel expense (operating) totaled $113.8 million in the third quarter of 2021, down $3.5 million, or 3%, linked-quarter. The decrease is mainly related to the savings associated with efficiency initiatives noted last quarter.

Occupancy and equipment expense totaled $16.9 million in the third quarter of 2021, down $0.5 million, or 3%, from the second quarter of 2021. Amortization of intangibles totaled $4.1 million for the third quarter of 2021, down $0.2 million, or 4%, linked-quarter.

Gains on sales of ORE and other foreclosed assets exceeded expenses by $0.4 million in the third quarter of 2021, compared to an expense of $0.1 million in the second quarter of 2021.

Other operating expense totaled $61.1 million in the third quarter of 2021, up $3.9 million, or 7%, linked-quarter. The linked-quarter change is primarily due to increased advertising expense and other miscellaneous items.

The effective income tax rate for third quarter 2021 was 19.2%. The effective income tax rate continues to be less than the statutory rate due primarily to tax-exempt income and tax credits.

Recommended for you

comments powered by Disqus