Hancock Whitney (HWC) Q2 2026 earnings call transcript

Thank you, and good afternoon. During today's call, we may make forward-looking statements. We would like to remind everyone to carefully review the safe harbor language that was published with the earnings release and presentation, and in the company's most recent 10K and 10Q, including the risks and uncertainties identified therein. You should keep in mind that any forward looking statements made by Hancock Whitney speak only as of the date on which they were made. As everyone understands, the current economic environment is rapidly evolving and changing.

Hancock Whitney's ability to accurately project results or predict the effects of future plans or strategies or predict market or economic developments is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions, but are not guarantees of performance or results, and our actual results and performance could differ materially from those set forth in our forward-looking statements. Hancock Whitney undertakes no obligation to update or revise any forward-looking statements, and you are cautioned not to place undue reliance on such forward-looking statements. Some of the remarks contain non-GAP financial measures. You could find reconciliations to the most comparable GAP measures in our earnings release and the financial tables. The presentation slides included in our 8K are also posted with the conference call webcastling on the investor relations website.

We will reference some of these slides in today's call. Participating in today's call are John Hirston, President and CEO, Mike Akery, CFO, Chris Saluca, Chief Credit Officer, and Shane Leiber, Chief Operating Officer. I will now turn the call over to John Hirston.

Thank you, Ashley, and thanks everyone for joining us today. The second quarter of 2026 was another strong quarter of profitability, efficiency, and return of capital to shareholders. We were pleased to add solid balance sheet growth on both sides of the ledger to an already excellent quarter. Compared to the same period a year ago, we were pleased to see EPS improvement of 13 percent, PP&R growth of 6 percent, a sixth straight quarter of improved commercial criticized loans, 5 percent growth in loans, and 2 percent growth in total deposits.

We were pleased to welcome another 15 net new bankers in the second quarter, bringing our total for the year to 42 against our annual goal of 50. Focusing on the second quarter, on a linked quarter annualized basis, loans grew 10 percent and deposits 8 percent. As shown on slide 9 of our investor deck, loan production was strong and line utilization improved. Growth was spread across every line of business accepting mortgage.

Our guidance for the full year remains unchanged at mid to single digit growth. For deposits, the 8 percent annualized growth was related to an increase in interest bearing money market accounts of 786 million, partially offset by slight decline in CD balances from securities in the quarter. We've updated our guidance for deposits from low single to mid single digit growth for the year. Profitability, efficiency, and returns continue to perform very well with a 1.42 percent ROA, efficiency ratio of 55.3 percent, and ROTCE of 14.9 percent.

Top line revenue continued to cover significant offensive reinvestment and that interest margin improved modestly while substantially funding loan growth with core deposits. Expenses were well managed as nearly all our expense growth was due to the full quarter impact of robust banker additions in Q1 and merit increases to our overall team in April. We were pleased to secure regulatory and shareholder approval in July for the 1 Florida bank transaction with an expected closing date of August the 1st. Michael had additional comments and his remarks, but I will note we have updated our guidance on page 20 to provide fiscal year 2026 outlook both excluding and including 1 Florida. In both cases, the second half of 26, guidance reflects a continuation of high profitability, strong capital, and continuing growth.

Regarding capital deployment, our stated priorities remain in capitalizing a growing balance sheet, supporting dividends, and completing the current 5 percent authorization by the end of this year. We are very pleased here at halftime of 2026 to see very solid performance and growth in alignment with our goals. We are very excited to welcome our new colleagues and clients from 1 Florida in only 10 days, augmenting our profitability and growth story.

With that, I'll invite Mike to add additional comments.

Thanks, John. Good afternoon, everyone. As John said at the onset, the company's performance in the second quarter was excellent. Net income for the quarter was $127 million or $1.55 per share compared to adjusted net income of $125 million or $1.52 per share in the first quarter. PPNR for the company was up 3 percent from the prior quarter to $178 million.

Express has a return on average access. This continues to be a solid 1.99 percent. Net interest income increased 3 percent this quarter. Our fee income business continues to perform remarkably well and expenses were up but remain well controlled. The income for the company was up 2.3 million or 2 percent adjusted for the net loss on the bond portfolio restructuring last quarter. The increase was driven by higher activity in our investment and annuity income and insurance as well as our trust business. These increases were offset by a decrease in our syndication fees and SBIC income which can be somewhat unpredictable from quarter to quarter.

Expenses remain well controlled up 2 percent from the prior quarter and were primarily related to our annual merit increases and the impact of our new hires during the first half of 2026.

As expected, our net interest margin was up this quarter, albeit at a slightly slower pace with a one basis point increase from 3.55 to 3.56 percent. Our earning asset yield was up two basis points and our cost of funds was up one basis point. In addition, our level of average earning assets were up 507 million from last quarter. Within higher earning asset yield, we benefited from a higher yield in the bond portfolio and higher average earning asset levels, partially offset by lower loan yields. Within our total cost of funds, unfavorable other borrowing balances and rates were partially offset by a lower cost of deposits.

Has expected the yield on the bond portfolio was up 12 basis points to 3.35 percent related to a full quarter's impact of the first quarter restructuring transaction but also due to reinvestment of principal cash flows during the quarter.

Loan yields were down two basis points, mostly due to the impact of a 12 basis point quarter over quarter drop in new loan rates. But this was partially offset by a healthy increase in average loans of 374 million link quarter. Our cost of deposits was down four basis points to 1.43 percent for the quarter due mostly to a lower rate on maturing CDs. We did increase promotional rate pricing on our interest-bearing transaction deposits and certain CD maturity buckets which drove an increase in our end-of-period balances on those deposits.

For the second half of 2026, we do expect the benefit from re-pricing maturing CDs will largely come to an end as new CD rates will likely be higher. Turning to asset quality, our criticized commercial loans improved for the sixth consecutive quarter, decreasing 30 million to 492 million. Not accrual loans increased 1 million to 114 million. Net charge offs came in at 16 basis points so down from prior quarters 19 basis points. Our loan loss reserves are solid at 1.42 percent of loans. We continue to expect net charge offs to average loans will come in at between 15 and 25 basis points for the full year 2026. Finally in slide 20 of the earnings deck, you'll see our forward guidance for the remainder of 2026.

For guidance excluding OFB, you will see a number of revisions to our guidance mostly moving to the upper end of our previous ranges. For guidance including OFB, we expect loans and deposits to be up low double digits, net interest income up between 8 and 9 percent, fee income up between 6 and 7 percent, operating expenses up between 7 and a half and 8 and a half percent, and finally PPNR up between 7 and 8 percent. These expectations do not include any meaningful revenue synergies from the acquisition, such as expanding wealth products and services to OFB clients. Also the cost savings will be fully realized by the time we enter 2027 and has mentioned we anticipate a closing date of August 1st.

As we look forward to the second half of this year, we remain encouraged by the momentum across our franchise while the operating environment continues to present challenges, our solid balance sheet, strong customer relationships and discipline execution positions us well to deliver on objectives for remainder of this year and going forward. I will now turn the call back to John.

Thank you Mike. Let's open the call for questions.

Shane, would you like to take that question?

Sure. And Michael, maybe give you a little bit broader context. When we think about our clients, they're still looking at the way that they're approaching their business as broadly stable. Majority of them are indicating kind of generally stable performance or steady performance with an outlook that's optimistic. But they're being really cautious. So right now, there's a lot of credit supply for a limited demand. And that's really where the competition is kind of creeping in. We feel like that we did a great job with production this quarter. You know, Longgrove was 588 million. We produced a billion five in loans. That's up from a billion two in the first quarter. And you know, really had strength in all of our segments, business banking, commercial, middle market, consumer performed well, and CRE has continued to perform well.

You know, a lot of net growth supported with new originations, line fundings were up slightly this quarter. And then we saw normalize pay down and pay off activities. So, you know, I really look at our growth for the quarter is really high quality spread across all of our segments and geographies. You know, pricing, I know you'll probably ask about pricing, pricing continues to be highly competitive. We're focused and disciplined on our pricing. But really, you know, just trying to step up and match off against the competition without giving too much so we can continue to grow the balance sheet.

Yeah.

And Michael, this is John. I'll add to Shane's comments. It's probably good to look at the first half of the year as a body of work and the second half is another body of work. And while the numbers for two, two, certainly were outstanding in one of our better quarters, we've had in several years, a lot of that work did happen in Q1 and close in early Q2. Hence, the average balance is increased as per second quarter a little bit better than to have in some quarters where we descend really well. So, I think if you look at the second half of the year, I wouldn't say we're being conservative. I think what Shane's telling you is exactly what we expect.

But we do have to remember in the face of potential rate increases and inflation that while it may be well behaved, certainly there are macro conditions that could cause it up. We could see some dampening of appetite. So, we want to be realistic in our guide to a mid-signals for the year.

Sure. Be glad to, Michael. So, I think the best way to describe the deposit pricing environment is absolutely it's competitive, but at least in our markets, it's also pretty rational. And by that, I mean, you know, we're in an environment now where, you know, there are banks that are experiencing more demand for loans. And so, people certainly like to fund their loan growth and deposit growth and we're no different. So, I think you're seeing, you know, the elevation and deposit costs that have been talked about, you know, for the past couple of months, really the past couple of orders. So, it's certainly here now. And for us, you know, one of the things that we're most pleased with about the quarter was not only, you know, the arrival of pretty significant organic balance sheet growth, the fact that we were able to fund that growth really dollar for dollar with deposits, you know.

So, that's really is what we're trying to achieve. And as we think about the second half of the year, you know, the plan is to continue to do that. So, while, you know, you alluded to a little bit of a step down maybe in the level of loan growth for the second half of the year, you probably should also note that it's a little bit of a step up in deposit growth for the second half of the year. So, I think you'll see us land at the end of the year is with loan growth pretty much matched off dollar for dollar with deposit growth. That is exactly the way we'd like to manage up to balance sheet now, you know, as well as going forward.

So, hopefully that was helpful.

Yeah, sure. I'll be glad to Katherine. So, again, if you look at the the second quarter, you know, a little bit of an unusual situation where, you know, most of the deposit growth was really back-ended toward the end of the second quarter. So, you know, we had an increase in end-of-period deposits of about $550 million, but the average of the quarter was actually down about $50 million or so. So, I think going forward in the second half of the year, you know, you'll see that end-of-period growth pretty match pretty good, the average growth, you know, in the third quarter of the quarter.

So, what we did in the second quarter is we began to really focus on bringing in deposits, and there were a couple of promotional things that we did. So, we have an 11-month CD at 385 that we had been offering in Florida and Texas that we decided to expand that to kind of the core of the franchise, so Louisiana, Mississippi, and Alabama. And that did prove to be pretty successful. We also have a money market offering at 375, you know, for some existing customers, and then a 4% money market offering or new customers. So, in addition to that, we're offering a promotional CD in Orlando related to OFB. So, those are the promotional deposit pricing offerings that we have in place.

And again, those were all pretty successful in the second half of the second quarter, and we think they'll be pretty successful going forward as well.

And so, it's here to say is that you get the full impact of that. Boom. It's here to say we're at a bottom for deposit cost, and so that'll start to increase as soon as the back half of the year.

Yeah, I think so. I think as we look at the second half of the year, yeah, I think as we look at the second half of the year, you'll see NII continue to grow. May not grow as much as it did in the second quarter, but it certainly will grow in the second half of the year. I think our NIMM will be flat to slightly up. And, you know, certainly, you know, we'll see an increase in deposit costs as well as our cost of funds. So, in the second half of the year, our cost of deposits could be up around 10 basis points or so, you know, and that's from the second quarter through the fourth quarter.

You know, we'll continue to reprice bonds and fix rate loans higher. You know, that's a big obvious tailwind that we have. And then, certainly, the biggest tailwind will be the continuation of organic balance sheet growth in the second half of the year. So, loans throwing at mid-single digits along with deposits.

So, do you still think we're in an environment where we can move that 560 higher over the Yeah, I think with respect to the loan yield, what you'll see is, you know, some modest increase. We got a nice head start in July with so for being up about four basis points coming into the month. So, that'll certainly be a little bit of a tail. But if we look at our loan yield over the second half of the year, I do think we'll see a little bit of an increase call it, you know, four to five basis points maybe.

Hey, Shane, it's very tight. You know, as I was talking with Michael, you know, the clasps are really, you know, managing pretty well through the uncertainty. There is a pretty fair amount of loan demand, but there's a much, much higher level of supply. So, you know, to get those quality deals and grow responsibly, it is very tough right now in terms of pricing. We've improved our pricing model and are talking with each one of our bankers, ensuring that, you know, we're getting the best pricing that we can get.

But we're also trying to win the deals to make sure that we're growing the balance sheet, and we're doing it in a high quality manner. But it's very tough right now. Bankers are doing a great job calling and saving deals that we currently already have on the books and bringing on new deals.

Yeah, we, you know, we continue to be very proud of the wealth management execution and progress that they're making, you know, both in the broker dealer and across the trust platforms. You know, we do have a little bit of tailwind from the Sable deal from last year. But overall, the penetration into the current client book and new business one is performing very well and really have to give kudos to the to the wealth management team. You know, card and merchant services has always been a pretty strong suit for us. And that continues to perform well. And, you know, when we look at secondary mortgage, it's pretty much in line with expectations. Like to see more syndication fees as we move forward.

And I know that team's working on that hard as we go forward. But, you know, the wealth management is really performing. And I think that's a result of the investments we've made really over the last five to eight years and just skills and process and tools and capabilities.

You bet. Thanks for asking.

Yes, even this is this is my golf start and certainly Chris can offer some color if he'd like to. But really what we saw with these scenarios was the baseline becoming more conservative than it was before. I think we can go back a quarter. So it was pretty apparent that the baseline scenario probably didn't fully include maybe the impact of what's going on in the Middle East. Certainly now it does. So we felt it was appropriate to go ahead and add a little bit more emphasis to the baseline and to round things out obviously to the slow growth scenario. So we went from 40, 60 to 50, 50, but it's really just as simple as that.

Hey, this is Shane. Thanks for the question. This is a bright spot. I think we have had great success this year. We're at 42 against our 50 overall. We feel very confident in the 50. And I think, you know, as we look forward, we will continue to be focused on, you know, opportunities that come up. You know, our bankers are performing as we expected that momentum and flywheel is beginning to build. We're seeing really good production. I think 26% of the growth for the quarter was out of new bankers that we've hired. So, you know, really beginning to see the momentum take place. Very proud of the leadership team that's been executing this recruiting. You know, that started back in the fourth quarter, 25 really working on, you know, bringing new bankers to the company.

So feel good about 50 and we'll look forward to opportunities that present themselves.

Yeah, I don't think we have a specific number, but we know what it costs to bring on a new banker in the time, you know, that it takes for them to get a creative and we feel like we've got room to add, you know, the ones that we need to add.

And Stephen, you'll note that we did increase the the guidance around operating expenses, excluding OFB. And I think some of that was a little bit of a nod to the potential that we could add a few more people potentially.

This is John. Appreciate that.

Yeah, thanks for the question. This is John. I'll start the team conjupine there if they want to add more color. But obviously the initial focus with August 1 close is in welcoming that new book of clients and those new team members getting them comfortable over the course of the next several months as we've focused on integration. And that'll be the year in terms of the expanded market in Orlando is about acclimating the team and getting people comfortable. And then as we move into 27, you know, we'll talk a little bit more about what expectations are in Orlando moving forward. A number of the team members there are quite familiar with surrounding markets. We've obviously shared I think on a call or two past our desire to build up a bigger book in Jacksonville.

But really it's a little early to share kind of what that plan may be. And frankly, as soon as we get the integration done and in time for the January call, I think we'll be able to address that more. What I can share is that, you know, several years ago as we talked about, I guess several big two years ago, we talked about the pivot to growth. It was a very deliberate intent to hire talent in core markets where it became available to us to find good experienced team members to add. And we've been successful doing that. But to really double down adding folks in markets that we didn't have as big a presence, but had a very high organic growth rate expectation.

And that's really where the focus in Texas and Florida came from. And so as we move into the next couple of years, I think we'll be in position to talk a little bit more around what the macro looks like and how we might be able to do a little better over time. But at this point in time, you know, we're really trying to sell or share the mid single digit expected compounded annual growth rate kind of as our target. And then if the flywheel chain mentions you'll something better than that, you know, we'll talk about that when we get there. But our focus right now is acclimating our new team and our clients covering lung growth back after this year with deposits, turning DDAs into a little bit better growth trajectory with time because we know we're going to be adding IPTs and ensuring that the team mates we've already added get as productive as they can as quickly as they can.

Yeah, Brett, this is Mike. So the intent right now is to exhaust the buyback authority. So we have the 5% in place for this year. We have the 2 million shares remaining. So again, the thought is now that we'll exhaust that authority, you know, over the course of the second half of the year, probably on kind of a parrata basis between the third and fourth quarter. And then as far as next year, you know, we'll kind of cross that bridge when we come to it. Certainly, I think it's likely that we'll have some authority in place next year. That's certainly up to the board. The level is something we'll talk about when we get there though.

Well, the the the guy excluding OFB, which is again for flat to slightly up, you know, obviously doesn't include any of the purchase accounting related to OFB, you know, and honestly, Casey, I mean, it's not a significant number. So it really didn't get her move the needle very much at all the guidance, including OFB would be really the same.

Yeah. So obviously you can see where our capital ratios are at 630. And we also this you know, where we think they'll be once we fold in OFB in August. So our TCE will be down about 120 points common to one. We'll be down around 170 or so. Really for the back half of the year, those ratios probably won't change a whole lot. That's inclusive of the organic balance sheet growth referred to. That's part of our guidance. And it also includes the buybacks. So this notion of kind of quote unquote rebuilding capital, actually not so much rebuilding capital. It's really just kind of disclosing that would take us about eight quarters, all things equal for our capital ratios to kind of get back to pre deal levels.

It doesn't mean that that's the intent of what we plan on doing. And that was really just a data point, if you will. You know, we feel very comfortable with, you know, TCE in the nine percent range common tier one, you know, somewhere around the 12 percent range. So if we didn't do the buybacks in the second half of this year, we'd essentially be at those data points that I just mentioned. So going forward again, not to make this overly complex, but going forward, we're planning on exhausting the buyback authority. And then in 27, again, as I mentioned a little bit earlier, that's something we'll disclose when we get there.

I don't think we were surprised by how quickly it happened. I mean, that's pretty much the pace that transactions have been approved by the regulatory bodies that we necessarily in the approval from of late. And we expected a pretty rapid approval. So I think we were on pretty much the timeline we expected and guided to, I don't know if we talked about in the initial disclosure of what our expectations were on integration, but that looks like it's going to be mid to maybe later part of Q4. So a pretty rapid integration as well. So I think it's fair to say, Mike, would you agree with pretty much the timelines exactly what we thought and expected it to be?

Yeah, very much so. I think in this environment where the regulatory focus seems to be more certainly not surprised that we were able to do this pretty quickly. It was an extremely clean transaction, rather small deal. So again, the quick approval and timeline to integration was something that we certainly planned for. So no surprises there.

And Mike, just to reiterate what you said earlier, I think that you will have the cost takeouts out by the end of the fourth quarter. So you start 27 with those behind you.

That's correct. So when we start the new year, the cost saves will be fully reflected.

Okay, I bet.

Okay. Thank you, Jay, for moderating the call. Thanks everyone for your attention and time. And we look forward to seeing you on the road very soon. This concludes today's call.

Thank you all for attending. You may now disconnect.