Hancock Whitney (HWC) Q3 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 web castling 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 third quarter of 2026 was another solid quarter of profitability, efficiency, and balance sheet growth. Adjusting for expenses related to the acquisition, EPS improved 17% and PP&R grew 8% both compared to same quarter previous year. We were also pleased to welcome new colleagues and clients through the transaction with One Florida Bank, which closed on August 1st. Excluding loans acquired from One Florida, loan growth met expectations at 4% annualized and continued to be funded by growth in core deposits.

As shown on slide 8 of our investor deck, loan production was strong and line utilization remained consistent with prior quarter. Growth was driven primarily by Lyft in commercial real estate across multiple products and continued growth in equipment finance. Our guidance for the full year remains unchanged at low double-digit growth. Excluding deposits acquired from One Florida, deposit growth was strong at 9% annualized.

This growth was led by an increase in interest-bearing transactions resulting from attractive products, pricing, and strong clients. Our guidance for the full year remains unchanged at low double-digit growth for the year. Criticized loan levels improved for the 7th straight quarter while non-acrual loans modestly increased, and our ACL coverage remains solid at 1.42%. We view overall asset quality as stable and continue to be well-reserved.

Profitability efficiency in returns continued to perform very well with an adjusted 1.41% ROA, efficiency ratio of 54.46%, and an ROTCE of 16.4%. Top-line revenue continued to cover significant offensive reinvestment and expenses continued to be well-managed. Michael had additional comments in his remarks, but I will note we have updated our guidance on page 19 to provide both fourth quarter and full year 2026 outlook.

It's shown on slide 18 of the investor deck, our capital ratios remain strong and reflect capital deployed for both inorganic and organic growth, return to shareholders, and the impact of the rising rate environment. We maintain confidence in our strategy to grow the balance sheet and enhance our operational efficiency, and we remain optimistic about closing out 2026 with continued growth and profitability.

Lastly, before we continue the call, I want to take a moment to acknowledge the individuals, businesses, and communities across the Florida Panhandle who were impacted by the recent hurricane. Throughout the storm and afterward, our teams worked diligently to support our clients and ensure they had access to the services and resources they needed. We remain a dedicated partner as recovery efforts continue, backed by the commitment of our team and the resilience of the clients and communities we are very privileged to serve.

With that, I will invite Mike to make additional comments.

Thanks, John. Good afternoon, everyone. As John mentioned, the company's performance in the third quarter was strong. Our adjusted net income was 134 million or a dollar 66 per share compared to net income of 127 million or a dollar 55 per share in the second quarter. Adjusted for expenses related to the OFB acquisition, PPNR for the company was up 6% from the prior quarter to 189 million.

Express has a return on average assets. This continues to be a solid 2%. Net interest income increased 7% this quarter. Our fee income businesses continued to perform well and expenses adjusted for costs associated with OFB were up but remained well controlled. The third quarter results reflect all expected one-time expenses related to the OFB acquisition.

As expected, our net interest margin was up this quarter with a five basis point increase from 3.56% to 3.61%. Four basis points of the net increase resulted from the purchase accounting accretion related to the acquisition. The remaining increase was due to higher earning asset yields of 12 basis points overall. With the higher earning asset yield, we benefited from a higher yield on the bond portfolio and higher average earning asset levels as well as higher loan yields. As expected, the yield on the bond portfolio was up 11 basis points to 3.46% related to the reinvestment of principal cash flows during the quarter.

Loan yields were up 11 basis points with a 10 basis point quarter over quarter increase in new loan rates and a healthy increase in average loans of 1.4 billion, link quarter or 299 million, excluding OFB. The company's cost of deposits was up 12 basis points to 1.55% for the quarter due mostly to increases in promotional rate pricing on our interest-bearing transaction deposits and certain CD maturity buckets which drove an increase in our balances on those deposits.

In turn, the cost of funds was up 8 basis points with lower average other borrowings driving the difference to the cost of deposits.

Switching to asset quality, our criticized commercial loans improved for the seventh consecutive quarter, decreasing 7 million to 485 million. Non-accrual loans did increase 19 million to 133 million. Net charge-offs came in at 16 basis points, so flat from the prior quarter. Our loan loss reserves remained solid at 1.42% of loans. We continue to expect net charge-offs to average loans will come at between 15 and 25 basis points for the full year 2026.

Finally, on slide 19 of the earnings deck, you'll see our forward guidance for both fourth quarter and full year 2026. We have included one rate hike of 25 basis points in December but with minimum impact on our expectations.

For the full year, we continue to expect loan and deposits to be up low double digits. We revise our guidance on net interest income to be up between 9 and 9.5%. The income up between 5.5% and 6% and both operating expenses and PPNR up between eight and eight and a half percent.

Lastly, a comment on capital, TCE was 8.05% down 173 basis points from the prior quarter. The largest drivers of that decrease resulted from the cash acquisition of OFB, third quarter share repurchases and a decrease in OCI. We did repurchase 1 million shares in the third quarter and have another 1 million shares remaining in this year's authority. Coming into the quarter, the intention was to exhaust that authority during the fourth quarter.

However, with the 10-year treasury at elevated levels and with an unprecedented 82 basis point increase over the course of the third quarter and with our TCE coming out of the quarter at 8.05% will likely be on the sidelines with additional repurchases until there's a little more. As far as 2027 is concerned, we'll address that with our board in December.

But I'd say it's very likely that we'll have some authority in place for next year. I will now turn the call back to John.

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

Sure thing, Mike. We'll be glad to. So first off, as far as any rate hikes in the fourth quarter, what we're assuming at this point is the Fed increases 25 in December. So any impact or any increase that late in the quarter really will have a minimum impact, I think on our numbers for the fourth quarter. Having said that, you know, you guys know that we're modestly asset sensitive and certainly would benefit or will benefit from any increase in rates going forward.

You know, having said that, I think the big drivers as we come out of the third quarter into the fourth quarter is first and foremost, you know, our continued ability to organically grow our balance sheet. You know, certainly the third quarter results were a little noisy, inclusive of OFD. But aside from that, we were able to continue to organically grow the balance sheet. The loans grew 4%, link quarter annualized deposits, the better part of 9%, link quarter annualized, both of those numbers, excluding the impact of OFD.

So we would expect that kind of organic balance sheet growth at least to continue into the fourth quarter. So we're having really good success in growing, especially our deposit base, certainly bringing in new customers and have, you know, kind of a nice roster of promotional rates out there that I think have been well received by folks. So we have promotional rates, both with CDs as well as money market accounts.

And again, as I mentioned, those have been pretty successful and I think have driven the growth that we were able to show in the third quarter and what we're expecting in the fourth quarter. So that's first and foremost. So we're looking at at least 300 million dollars of principal cash flow coming out of the bond portfolio. At these levels, you know, we were able to reprice at a pretty nice margin. So for example, in the third quarter, we're looking at at least 300 million dollars of principal cash flow coming off at well below 4% and the assumption is that we'll be able to reinvest that north of 5.5%. So that's certainly a big driver.

So we certainly do have higher deposit costs. You know, we were up in the third quarter compared to the second quarter and for the fourth quarter, we're assuming, you know, probably a similar increase all things equal. And again, a lot of that is pointed at the promotional rates that I just mentioned. So all those factors combined put us in a position, again, where we're able to grow our average earning assets and produce the levels of nim expansion and NI that we're looking at for the fourth quarter. So, you know, for us, modest nim expansion is, you know, probably somewhere between three, four, five basis points and then NI growing accordingly.

So hopefully that was helpful.

Yeah. Thanks, Michael. This is John. I'll take a swing at that when I first, I mean, there are puts and takes even from great increases and as the tenure moves up on the good front, it does mean we see less payoffs, particularly in commercial real estate. So while there is certainly a downside that appetite for new projects could have, if rates go up, you know, just to say something more significant, like 50 to 100 basis points over the next couple of quarters, we'll see a dramatic pullback and payoff. So the net benefit from being asset sensitive should overcome, it could be a little lesser production.

And as you did mention, we do have the additional resource coming from a pretty goodly number of net new bikers and also the resources that came with very fine organization, Orlando. So I think our tailwinds that way, the headwinds just a bit. But since you mentioned sentiment and just kind of how clients feel, I think we've covered before, Shane's mentioned a couple of times on this call, but we do survey our clients sentiment, particularly on the business side pretty frequently, particularly when the macro seems to have headlines that are changing every week or so.

And right now, the sentiment suggests both resilience and a tone of cautious optimism simply because the economy is still going quite well. Over the last few weeks, you could see even though sentiment is cautiously optimistic toward growth, those clients are focusing a little more on the cost of energy, its impact on overall inflation and the Fed's response to that.

And so I think it'd be fair to characterize our book is still being cautiously optimistic but a growing focus on those factors. So if a quarter every couple of three months is probably not going to be that big a deal, in fact, may be a little helpful to the bottom line. But obviously there's always some point where you kind of reach the proverbial squeal point where people begin to pull in their horns and I think we're a little ways away from that and don't see that happening in Q4.

Was that what you needed or you need to redirect one more time?

You bet. Thanks, Mark, for the question.

Hi, Ben.

Yeah, great question, Dan. And I'll start, John, can certainly add some color, but I mean, obviously, we're very proud and think it's a huge benefit to our balance sheet to have the generous mix of non-interest bearing deposits that we have. And it has fallen off a little bit in the last quarter. So, you know, we're at the range that you decide, and certainly some of that is related to OFP coming on. I think their deposit mix was around 22% or so. Well, their concentration of NIBs is around 22% or so, so that will bring us down a little bit. But we do have certain seasonality impacts that impact that part of our deposit portfolio and especially during the third quarter.

So, we were down about 200 million in the period in DDA deposits. About a third of that was, I think, related to OFP in terms of their money kind of being namely into money market accounts, probably taking advantage of the rates that we had there on a promotional basis. The rest of the decline really was seasonal. Another third really related to our commercial and consumer customers and we normally do see a seasonal impact, you know, in the third quarter, and then certainly public funds, our public fund deposit book, you know, around $3 billion.

Mostly interest-bearing transactions, but a healthy amount of NIBs, and again, I think you do see kind of those seasonal impacts in the third quarter, so we would expect a fair amount of the DDA's that we lost in the third quarter to come back to us in the fourth quarter. Again, in the fourth quarter, you know, we typically have a seasonal uptick, you know, both on the public fund side and the non-public fund side.

So, John, you may want to chat a little bit about our efforts to grow DDA though overall.

Sure, I'll be glad to be on it if we don't cover the detail you're looking for, feel free to ask Ken, but generally speaking, we've been very proud of the componentry of the DDA book. We recognize that as we grow loans at a faster organic pace than we have the last several years, our desire to have funding puts a little pressure on the mix simply because these times, our clients are more focused on rate because it's available to them. So, there's been a natural bit of flow out of DDA's into IBTs on our book. It's not a loss of deposits, it's really as my call to redirect to IBTs. That said, among the cadre of offensive players we're adding, there's a pretty keen focus on adding treasury service folks.

We are also in the hunt to create positions that are specifically focused on deposit only, gathering to offer white glove treatment at onboarding operating accounts from a small and medium-sized businesses. So, a little early to tell how successful that's going to be, but while we're adding folks, it's a good time I think to add those people that are focused more on deposits. Having said that, we look at Q3 with a 4% loan growth rate, 9% was more than we needed, we're always glad to have it.

Q4 is likely to outpace into deposit growth versus loans again. So, we'll enter the year 2027 with a very healthy amount of liquidity to loan. So, we'll keep the foot on the gas with DDA growth and then press a little harder growing loans as we enter into Q1, 2027.

It's in addition to, and I know this is maybe too much shop talk, but when we add bankers, those bankers are typically our best reference to the folks who really get it done on the treasury side. So, after a year and a half, I'm pretty acute focus in adding bankers. I think we have a little bit better potential to add treasury folks that know those folks and know the ones that work well with them. And so, we're in the business of identifying those folks and hopefully getting them to join the team as we move in the next year. We've added a few, but not as many as would like to, and so that'll be part of the effort.

You know, we get into bankers. I mean, the contribution from the hiring plan so far has been pretty strong. And we talk on the call about net new bankers, but obviously there's also a fair amount of trading bankers going on. So, when we look at the overall contribution of the new bankers we've added since the beginning of last year, their contribution is a whopping 55% of year to date, and a lot of growth in 2026 and 77% of Q3.

So, with a very efficient portfolio in terms of average carry for each of our bankers, adding those new folks that have some capacity is very meaningful. On the deposit front, that's 19% year to date and 15% for Q3. So, the mix of recipe that creates really good profitability and a great balance, once you have the next couple of years inclusive of DDA's live squarely in the quality of the people that were adding both on the net basis and where we're simply making trades.

So I'll start. Mike and Chris may want to jump in there too, but, uh, you know, the notion of consistency or set a different way to lack a volatility really extended to everything. We wanted to have, you know, to reduce volatility and earnings, volatility and provision, uh, volatility and growth, and get to a pretty steady upward momentum, both on both sides of the balance sheet, uh, in NII income and in overall credit. And so, uh, and that was a lot of years of, uh, of doing a bit of de-risking in the loan portfolio, um, of, uh, adding concentration in markets that were more dependable for organic growth and, and, uh, making sure that we added players to our team that, that fit our culture.

And so the reason our credit folks are involved in the hiring process is to ensure that we have as, uh, as good a percentage of folks that join the company that match up with our credit risk appetite and with our target operating models for portfolio, um, so that we don't both end up disappointed, us and the perspective, uh, associates. So a lot of discipline around hiring, I think the second big part that was helpful there, um, is, uh, is treating a recruiting of, uh, of, uh, of our sales force just like recruiting a client. So there is a pipeline for new associates. Uh, there are biweekly calls over who's the best talent we're running to in the markets that we're competing in.

Um, and, and the best people we know to know who our best bankers are across the proverbial street are our bankers that are doing battle and hand in combat every weekend account. And so I think identifying those was actually, uh, very careful. So around the, uh, the bankers, uh, there's a, there's a coin phrase called the one bank concept. Um, that one bank concept, uh, is the, uh, collegial operating agreements and then the practice of having that collegial operating style across all of our lines of business and credit. And so whether a person is focused on wealth, on credit, on commercial, on retail, any of those different sectors, um, while we do follow a line of business architecture, um, those folks all understand they're on one team.

Uh, they do a lot of calling efforts together. They prospect together. They review client opportunities together. And so as a result, um, our competition focus is really more externally pointed, not internally focused when it comes for competition for revenue and for clients. So that concept has, uh, has worked very well so far. Um, we see that growing and getting more effective and efficient over time. And as we add team members to the bank, the word we hear from them is typically refreshing. So when they join the company, they feel as if no matter what area they come into, they're welcome to a very broad team that's, uh, bigger than just their one area of focus in that particular line of business.

Sure. I'd be glad to. So the, uh, the promotional rate, uh, programs, especially on the money market side, we're really putting the place toward the end of the second quarter. So if you go back and look at the cadence of growth of the second quarter, you'll know that we really had pretty significant end of period growth. And that was because, again, those campaigns were put in place later in the quarter. So the growth over the third quarter has been a little bit more consistent because we've had those programs in place, you know, really from the get go of the quarter. And, um, you know, certainly when you look at our deposit costs and the, um, you know, kind of the expected date as we have in the materials on uh, slide 15, you know, you can see probably a little bit more of an increase in deposit costs than maybe people are used to seeing from us in an upright cycle.

And I think, you know, that's completely pointed at the, the commentary that John shared earlier, you know, around building liquidity to support loan growth. So the quarter that we're in, but for two, three quarters down the road and building that customer loyalty and that that stickiness of the deposits. So it is a little bit of a shift, I think, a little bit of philosophy around how we look at the deposit costs. And I think it's been pretty successful so far.

Now, I mean, you know, during the quarter, if you look at TCE and, you know, certainly that, that, that plays down to a tangible book share. You know, the bigger inputs really was the cash price tag for, uh, OFB, uh, the buybacks that we did during the quarter and then the OCI impact. So that was 59 basis points on TCE 111 for OFB and about 22 in terms of the buyback. So I think it was huge. It was just one of those quarters where, you know, a lot of those things just kind of aggregated up together.

Um, you know, in drove our TCE down to the 805 and then go ahead the same impact on tangible book value for sure.

Yeah, this is John. I'll answer it. I mean, it's a consistent push for talent. And I mean, right now, I think as of today, pending anything that happened today, we're at 42 right now. So any given, you know, a couple of weeks span, it may go up or down a few folks as we just go through the normal churn, but that number is 42 right now. That's what's in the materials. But our expectation is that we still wrap the year at around 50.

And just as a reminder, that excludes the 20 bankers that were added as part of the one Florida gig on August 1st. So if we can finish the year at or right there around 70 inclusive of one Florida, I think we'll be, we'll be pleased with the, with the net growth for the year, particularly given the contribution of folks.

Sure. So yeah, you're absolutely reading that correctly. So our cost of deposits, I'll focus on that was up 12 basis points quarter over quarter. And for the fourth quarter, we're expecting something in that neighborhood, maybe a basis point or two more. And again, that's really a carry forward for the promotional rate programs that I mentioned earlier. And as far as our bait is a concern, you know, again, we have that information in the deck and those are, you know, expectations and approximate ranges. But, you know, we would expect to hit those or come pretty close, you know, given kind of a normal rate increase cycle.

And right now, again, we've got the 125 basis point bumped in December. And at this point, I mean, who knows who next year in terms of 27 is concerned, but, you know, overall, we'll benefit from rate increases. You know, we'll see our NII levels, you know, continue to modestly increase based on that component as well as our ability to consistently grow the balance sheet organically, as we kind of mentioned earlier.

Yeah, it is the question about what our posture is on energy growth. Did I hear you right?

No, it's, I mean, look, it's a great business to be in after we exited the RBL and the streaming services principally several years ago. We really haven't had an appetite to get back in. You know, never say never, but at this point in time, that total concentration is well below 1%. And it'll probably, it'll stay below 1%. So in terms of actually throwing the loan book, what would participate the biggest contributors for or for quarter to be would be commercial real estate. Pretty good bounce back at the B and D. I'm giving a new payoffs and a lot of new projects coming on.

Health care. And I think we're likely to see a pretty good chunk of C and I come in. A little too early to fail, but not to start off as expected. But I think we'll finish at the single level.

Sure. I'm glad this is still John. One Florida. It's good observation. As a relatively new bank, they had done a really terrific job building out of treasury function primarily because they had to. They're in a hot market. Organic loan growth is terrific. And at the compound annual growth rate they had, getting a 22% free money component and their deposit book with a bank that was actually quite impressive. And so when we look at sort of the core philosophy they have on the treasury offering, very similar to ours. So there really weren't a lot of differences.

There's technical platforms a little different just given that they chose. We don't really anticipate any meaningful difference. And finally, the only thing was really a principal difference is they have given their given where they operate, had a pretty mature homeowner association banking facility that we have adopted and will expand to those markets across our footprint that have.

I'm happy. So we are adopting that and he converted that process.

This is John. Thanks for the regional observation. That's a good free commercial for the call. It is a game changer. I think it's, you know, we're seeing organic growth rates in Mississippi and Louisiana that clearly have ticked upward a good bit. A lot of that work, which is industrial contracting and subcontracting related, has been awarded to local and local-ish players.

So it's been very beneficial. I've certainly hoped that we saw a lot more line of credit related business out of that. But the hyperscalers are very friendly in terms of terms for payment. They typically prepay a pretty good chunk upfront on what's expected. And so that's being passed all the way down from the industrial master providers to the subcontractors. And so as a result, everybody's getting paid pretty timely. And so we're seeing more of an impact on the depository basis than we are the loan basis right now. Now as those projects begin to come into fruition and go into just care and feeding, that'll probably reverse itself. And we see more borrowing opportunities. But the infrastructure ads that are coming along with those projects are clearly a plus up.

The tax revenue to the educational system and quality of life provision for the parishes and counties that those data centers are near or in is a windfall for those market areas. And so as a result, we couldn't be happier to see that type of development within our footprint. I hope to take more advantage of it in future.

Yeah, I think that the cautionary part is really just how many of these hyperscalers actually win the race. So we pay close attention to that. I think that's the reason the industrial folks have negotiated good payment terms is to ensure that we don't see the types of issues that happen when, you know, when solar, when battery plants were running wide open and suddenly there was a political change.

And that stopped quickly. Some of those folks got hung out with problems and that lesson got learned on the hype on the data center construction. So I think they're approaching that much more conservatively and appropriately. So I think the downside looks pretty low. You didn't mention SpaceX, but obviously in Louisiana, that's a big project in an area that is that is not received a whole lot of good data.

So that'll be very impactful to to that part of Louisiana. We welcome that project as well.

Well, certainly this is my certainly the focus continues to be organic balance sheet growth. And again, we're thrilled with the success that we've been able to enjoy those far. And certainly the effort and the intensity will continue along that front. As far as M&A is concerned, I mean, we just closed OFB and we have the conversion coming up soon. So those are the things we're focused on M&A wise right now. And aside from that, you know, it's something that we'll continue to look at really through more of an opportunistic lens, I think, more than anything else.

Yeah, great question, Gary. So short answer is no, nothing's changed. Coming out of OFB, the intent was, as I mentioned in the prepared comments, was to exhaust the authority of the second half of the year. You know, we bought back the million shares in the third quarter and the intent coming into the fourth quarter was to do that once again.

And the step back is really just related to where longer term rates have gone. And, you know, certainly cognizant of where our TC is at 8.05. And all things equal, the preference would be not to let that go below 8%. That's kind of our cultural threshold, if you will. But certainly when we look at common tier one where, you know, the OCI is not impactful, you know, we're strong at 11.53. Our comfort zone there is probably closer to 12, maybe 12.5. And we should be pretty much knocking on the door of a 12% common tier one by the end of the year.

As far as TCE is concerned, we think we'll be able to grow that, you know, 25, 30 basis points across the third quarter, excluding any buybacks.

You know, but again, we're going to be very cognizant and very vigilant in terms of rates and will also be opportunistic. So, you know, certainly that's something we'll pay very, very close attention to.

Yeah. Thanks for the question. This is John. Great observation. They stand about 8.6%. I think for the end of the quarter, it's about $100 million in outstanding slider than the prior quarter. So the big driver in the percentage step down was really just the addition of the denominator coming from one Florida's August 1st close. So I think it's fair to characterize that as a little bit of a tailwind and that we could grow it inside our self-imposed 10% line of demarcation.

That being said, we're not going to run out and try to do a few hundred million dollars just because we can. I think right now we're selecting the credits that we feel like match up our yield expectations and our credit risk appetite. I think it's more a matter of we would not curtail this indications business because of the threshold because we're so far from it. But at the same time, it's not going to change our credit risk appetite in terms of the premium desires to grow relationship business. But with a pretty strong syndication set up, we would not mind enhancing our fee intake from handling some of those over the next several quarters. So yes, a little bit more of a tailwind, but I wouldn't look for a whole self-change in our posture.

Yeah, so excellent question. So we use our cash flow hedges along with the fair value hedges to kind of control and mitigate some of our asset sensitivity and try not to let that get to. So our policies call for certain levels of hedges. And I think what you thought saw this quarter in terms of us adding a couple hundred million just kind of right sizing that to levels that we view to be appropriate for what we're trying to accomplish with the policy and program.

Thank you, Jay, for moderating the call. Thanks, everyone, for attending on a busy, busy release day. We look forward to seeing you on the road the next several weeks.

This concludes today's call. Thank you for attending.