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Hancock Whitney reports first quarter 2019 EPS of $.91

Results include $10.1 million, or $.09 per share after tax, impact from provision on alleged fraud

GULFPORT, Miss., April 16, 2019 (GLOBE NEWSWIRE) -- Hancock Whitney Corporation (Nasdaq: HWC) today announced its financial results for the first quarter of 2019. Net income for the first quarter of 2019 was $79.2 million, or $.91 per diluted common share (EPS), compared to $96.2 million, or $1.10 EPS, in the fourth quarter of 2018 and $72.5 million, or $.83 EPS, in the first quarter of 2018. The first quarter of 2019 included a $10.1 million ($.09 per share after-tax impact) provision for loan losses related to the previously disclosed alleged fraud related to DC Solar. The fourth quarter of 2018 included $1.9 million ($.02 per share impact) of nonoperating items and the first quarter of 2018 included $7.0 million ($.07 per share impact) of nonoperating items.

Highlights of the company’s first quarter 2019 results (compared to fourth quarter 2018):

  • Net income of $79.2 million, or $.91 per diluted share, down $17.1 million, or $.19 per share
  • Linked-quarter changes impacted by provision/chargeoff related to alleged fraud on equipment finance lease with DC Solar ($.09) in 1Q19 and benefits from tax reform-related initiatives ($.11) in 4Q18
  • NIM expansion of 7 basis points (bps) to 3.46%
  • Criticized commercial loans declined $41 million, or 7% ($15 million energy, $26 million nonenergy)
  • TCE ratio up 34 bps to 8.36%
  • Improved mix in energy portfolio

“We were pleased with improvement in 2 key focus areas for the quarter - NIM and asset quality,” said John M. Hairston, President and CEO. “We are relentlessly focused on returning these metrics to peer averages or better, and will work diligently to continue the progress towards achieving these goals, and our CSOs, despite recent headwinds from paydowns and the rate environment.”

Loans
Total loans at March 31, 2019 were $20.1 billion, up approximately $86 million, or less than 1%, linked-quarter. Net loan growth during the quarter continues to be diversified across our regions with many regions reporting strong growth. Net loan growth was lower than guidance primarily related to the impact from unanticipated paydowns, loan charge-offs, and sale of mortgage loans.

Average loans totaled $20.1 billion for the first quarter of 2019, up $309 million, or 2%, linked-quarter.

At March 31, 2019, loans to the energy industry totaled $1.1 billion, or 5.3% of total loans. The energy portfolio was virtually unchanged linked-quarter, and is comprised of credits to both the exploration and production (E&P) subsector and the support services subsector. We continue our focus on shifting the mix between subsectors to deemphasize the support services subsector. As of March 31, 2019, the energy portfolio was comprised of 54% RBL and midstream credits and 46% support services credits compared to 44% RBL and midstream and 56% support services credits at year-end 2014.

Deposits
Total deposits at March 31, 2019 were $23.4 billion, up $230 million, or 1%, from December 31, 2018. Average deposits for the first quarter of 2019 were $23.1 billion, up $616 million, or 3%, linked-quarter.

Noninterest-bearing demand deposits (DDAs) totaled $8.2 billion at March 31, 2019, down $340 million, or 4%, from December 31, 2018. The decrease in DDAs is mainly related to typical seasonal outflows. DDAs comprised 35% of total period-end deposits at March 31, 2019.

Interest-bearing transaction and savings deposits totaled $8.2 billion at the end of the first quarter of 2019, up $224 million, or 3%, from December 31, 2018. Time deposits of $3.8 billion were up $123 million, or 3%, while interest-bearing public fund deposits increased $223 million, or 7%, to $3.2 billion. The net increase in time deposits reflects an increase in brokered CDs of $21 million and an increase of $102 million in retail CDs.

Asset Quality
Nonperforming assets (NPAs) totaled $349.6 million at March 31, 2019, down $3.0 million, or 1%, from December 31, 2018. During the first quarter of 2019, total nonperforming loans decreased approximately $3.9 million, while foreclosed and surplus real estate (ORE) and other foreclosed assets increased approximately $0.9 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 1.74% at March 31, 2019, down 2 bps from December 31, 2018.

The total allowance for loan and lease losses (ALLL) was $194.7 million at March 31, 2019, virtually unchanged from December 31, 2018. The allowance for credits in the energy portfolio totaled $31.5 million, or 3.0% of energy loans, at March 31, 2019, down $1.7 million from $33.2 million, or 3.1% of energy loans, at December 31, 2018. The allowance for credits in the nonenergy portfolio totaled $163.2 million, or 0.86% of nonenergy loans, at March 31, 2019, up $1.9 million from $161.3 million, or 0.85% of nonenergy loans, at December 31, 2018. The ratio of the ALLL to period-end loans was 0.97% at March 31, 2019, unchanged from December 31, 2018.

Net charge-offs were $17.9 million, or 0.36% of average total loans on an annualized basis in the first quarter of 2019, down from $28.1 million, or 0.56% of average total loans in the fourth quarter of 2018. There were no energy charge-offs in the first quarter of 2019. During the first quarter of 2019, the company recorded a total provision for loan losses of $18.0 million, up from $8.1 million in the fourth quarter of 2018. Approximately $10.1 million of net charge-offs was related to the DC Solar credit.

Net Interest Income and Net Interest Margin (NIM)
Net interest income (TE) for the first quarter of 2019 was $223.1 million, up $1.6 million from the fourth quarter of 2018. The net interest margin (TE) was 3.46% for the first quarter of 2019, up 7 bps from the fourth quarter of 2018. Drivers for both the net interest income and net interest margin improvements were a shift in the mix of earning assets coupled with the full quarter impact of the portfolio restructuring and the December 2018 rate hike.

Average earning assets were $26.0 billion for the first quarter of 2019, up $9.3 million, or less than 1%, from the fourth quarter of 2018.

Noninterest Income
Noninterest income totaled $70.5 million for the first quarter of 2019, down $4.0 million, or 5%, from the fourth quarter of 2018. There was a $0.6 million net gain related to the portfolio restructuring in the fourth quarter of 2018.

Service charges on deposits totaled $20.4 million for the first quarter of 2019, down $1.1 million, or 5%, from the fourth quarter of 2018. Bank card and ATM fees totaled $15.3 million, down $0.4 million, or 2%, from the fourth quarter of 2018. The decrease from the fourth quarter is primarily due to seasonality.

Trust fees totaled $15.1 million, down $0.6 million, or 4% linked-quarter. The net decline from the fourth quarter is mainly related to early first quarter of 2019 market conditions and its impact on managed asset values.

Investment and annuity income and insurance fees totaled $6.5 million, up $0.2 million, or 4%, linked-quarter. Fees from secondary mortgage operations totaled $3.7 million for the first quarter of 2019, down $0.2 million, or 5%, linked-quarter. Other noninterest income totaled $9.5 million, down $1.3 million, or 12%, from the fourth quarter of 2018.

Noninterest Expense & Taxes
Noninterest expense for the first quarter of 2019 totaled $175.7 million, down $3.7 million, or 2%, from the fourth quarter of 2018. There were $2.5 million of nonoperating expenses included in the fourth quarter total and no nonoperating expenses in the first quarter of 2019.  

Total personnel expense was $103.7 million in the first quarter of 2019, down $1.2 million, or 1%, from the fourth quarter of 2018. This decrease is mainly related to fewer days in the quarter.

Occupancy and equipment expense totaled $16.7 million in the first quarter of 2019, up $0.7 million, or 4%, from the fourth quarter of 2018.

Amortization of intangibles totaled $5.1 million for the first quarter of 2019, down $0.3 million or 6% linked-quarter.

Gains on ORE dispositions exceeded ORE expense by $1.0 million in the first quarter of 2019, compared to ORE gains exceeding expenses by $2.9 million in the fourth quarter of 2018.

Other operating expense totaled $51.2 million in the first quarter of 2019, down $2.3 million, or 4%, from the fourth quarter of 2018. The decrease is primarily from reduced regulatory fees, professional services, advertising, and miscellaneous expenses.

The effective income tax rate for the first quarter of 2019 was 18%. Management expects the tax rate in the second quarter of 2019 to approximate 17-19%. The effective income tax rate continues to be less than the statutory rate due primarily to tax-exempt income and tax credits.

Capital
Common shareholders’ equity at March 31, 2019 totaled $3.2 billion, up $109 million, or 4%, from year-end 2018. The tangible common equity (TCE) ratio was 8.36%, up 34 bps from December 31, 2018. Additional capital ratios are included in the financial tables.

Conference Call and Slide Presentation
Management will host a conference call for analysts and investors at 8:30 a.m. Central Time on Wednesday, April 17, 2019 to review the results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock Whitney’s website at www.hancockwhitney.com/investors. A link to the release with additional financial tables, and a link to a slide presentation related to first quarter results are also posted as part of the webcast link. To participate in the Q&A portion of the call, dial (877) 564-1219 or (973) 638-3429.  An audio archive of the conference call will be available under the Investor Relations section of our website. A replay of the call will also be available through April 24, 2019 by dialing (855) 859-2056 or (404) 537-3406, passcode 8128847. 

About Hancock Whitney
Since the late 1800s, Hancock Whitney has embodied core values of Honor & Integrity, Strength & Stability, Commitment to Service, Teamwork, and Personal Responsibility. Hancock Whitney offices and financial centers in Mississippi, Alabama, Florida, Louisiana, and Texas offer comprehensive financial products and services, including traditional and online banking; commercial and small business banking; private banking; trust and investment services; healthcare banking; certain insurance services; and mortgage services. The company also operates a loan production office in Nashville, Tennessee, as well as trust and asset management offices in New Jersey and New York. BauerFinancial, Inc., the nation’s leading independent bank rating and analysis firm, consistently recommends Hancock Whitney as one of America’s most financially sound banks. More information is available at www.hancockwhitney.com.

Non-GAAP Financial Measures
This news release includes non-GAAP financial measures to describe Hancock Whitney’s performance. These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements, and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently. The reconciliations of those measures to GAAP measures are provided either in the financial tables or in Appendix A thereto.

Consistent with Securities and Exchange Commission Industry Guide 3, the company presents net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“TE”) basis. The TE basis adjusts for the tax-favored status of net interest income from certain loans and investments using the statutory federal tax rate to increase tax-exempt interest income to a taxable equivalent basis. The company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.

The company presents certain additional non-GAAP financial measures to assist the reader with a better understanding of the company’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. These non-GAAP measures may reference the concepts “core” or “operating.” The company uses the term “core” to describe a financial measure that excludes income or expense arising from accretion or amortization of fair value adjustments recorded as part of purchase accounting. The company uses the term “operating” to describe a financial measure that excludes income or expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in the company’s business.

We define Operating Revenue as net interest income (TE) and noninterest income less nonoperating revenue.  We define Operating Pre-Provision Net Revenue as operating revenue (TE) less noninterest expense, excluding nonoperating items. Management believes that operating pre-provision net revenue is a useful financial measure because it enables investors and others to assess the company’s ability to generate capital to cover credit losses through a credit cycle. A reconciliation of reported net interest income to operating pre-provision net revenue is included in Appendix A.

We define Operating Earnings as reported net income excluding nonoperating items net of income tax.  We define Operating Earnings per Share as operating earnings expressed as an amount available to each common shareholder on a diluted basis. A reconciliation of reported net income to operating earnings is presented in the Income Statement table and a reconciliation of reported earnings per share – diluted to operating earnings per share – diluted is presented in Appendix A. 

Important Cautionary Statement About Forward-Looking Statements
This news release contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that we may make include statements regarding balance sheet and revenue growth, the provision for loans losses, loan growth expectations, management’s predictions about charge-offs for loans, including energy-related credits, the impact of changes in oil and gas prices on our energy portfolio, the adequacy of our enterprise risk management framework, the impact of the transaction with Capital One or future business combinations on our performance and financial condition, including our ability to successfully integrate the business, deposit trends, credit quality trends, changes in interest rates, net interest margin trends, future expense levels, success of revenue-generating initiatives, the effectiveness of derivative financial instruments and hedging activities to manage risks, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, increased cybersecurity risks, including potential business disruptions or financial losses, the adequacy of our internal controls over financial reporting, and the financial impact of regulatory requirements and tax reform legislation. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook", or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Any forward-looking statement made in this release is subject to the safe harbor protections set forth in the Private Securities Litigation Reform Act of 1995. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and in other periodic reports that we file with the SEC.


 
HANCOCK WHITNEY CORPORATION
QUARTERLY FINANCIAL HIGHLIGHTS
(Unaudited)
                     
    Three Months Ended
(dollars and common share data in thousands, except per share amounts)   3/31/2019   12/31/2018   9/30/2018   6/30/2018   3/31/2018
NET INCOME                    
Net interest income   $    219,254     $   217,433     $   214,194     $   211,547     $   205,664  
Net interest income (TE) (a)       223,078         221,471         218,289         215,628         209,627  
Provision for loan losses       18,043         8,100         6,872         8,891         12,253  
Noninterest income       70,503         74,538         75,518         68,832         66,252  
Noninterest expense       175,700         179,366         181,187         184,402         170,791  
Income tax expense       16,850         8,265         17,775         15,909         16,397  
Net income   $    79,164     $    96,240     $    83,878     $    71,177     $    72,475  
Earnings excluding nonoperating items                    
Net income   $    79,164     $   96,240     $   83,878     $   71,177     $   72,475  
Nonoperating items, net of income tax benefit       7,966         1,465         3,813         12,486         5,782  
Operating earnings   $    87,130     $   97,705     $   87,691     $   83,663     $   78,257  
PERIOD-END BALANCE SHEET DATA                    
Loans   $    20,112,838     $   20,026,411     $   19,543,717     $   19,370,917     $   19,092,504  
Securities       5,577,522         5,670,584         5,987,447         6,113,873         5,930,076  
Earning assets       25,881,559         25,836,239         25,668,281         25,625,047         25,105,948  
Total assets       28,490,231         28,235,907         28,098,175         27,925,447         27,297,337  
Noninterest-bearing deposits       8,158,658         8,499,027         8,140,530         8,165,796         8,230,060  
Total deposits       23,380,294         23,150,185         22,417,807         22,235,338         22,485,722  
Common stockholders' equity       3,190,575         3,081,340         2,978,878         2,929,555         2,896,038  
AVERAGE BALANCE SHEET DATA                    
Loans   $    20,126,948     $   19,817,729     $   19,464,639     $   19,193,234     $   19,028,490  
Securities (b)       5,656,689         5,965,461         6,186,410         6,032,058         5,897,290  
Earning assets       26,020,447         26,011,183         25,832,372         25,391,025         25,106,283  
Total assets       28,451,548         28,259,963         28,026,923         27,485,052         27,237,077  
Noninterest-bearing deposits       8,227,698         8,260,487         8,017,353         8,149,521         7,951,121  
Total deposits       23,114,139         22,498,145         22,021,559         22,101,474         22,043,419  
Common stockholders' equity       3,118,051         2,993,265         2,952,431         2,908,997         2,872,813  
COMMON SHARE DATA                    
Earnings per share - diluted   $    0.91     $   1.10     $   0.96     $   0.82     $   0.83  
Cash dividends per share       0.27         0.27         0.27         0.24         0.24  
Book value per share (period-end)       37.23         35.98         34.90         34.33         33.96  
Tangible book value per share (period-end)       26.92         25.62         24.44         24.66         24.22  
Weighted average number of shares - diluted       85,800         85,677         85,539         85,483         85,423  
Period-end number of shares       85,710         85,643         85,364         85,335         85,285  
Market data                    
High sales price   $    44.34     $   49.22     $   53.00     $   55.00     $   56.40  
Low sales price       34.11         32.59         46.05         45.76         49.48  
Period-end closing price       40.40         34.77         47.55         46.65         51.70  
Trading volume       28,124         33,269         28,332         35,705         35,370  
PERFORMANCE RATIOS                    
Return on average assets     1.13 %     1.35 %     1.19 %     1.04 %     1.08 %
Return on average common equity     10.30 %     12.76 %     11.27 %     9.81 %     10.23 %
Return on average tangible common equity     14.38 %     18.15 %     16.11 %     13.72 %     14.41 %
Tangible common equity ratio (c)     8.36 %     8.02 %     7.67 %     7.76 %     7.80 %
Net interest margin (TE)      3.46 %     3.39 %     3.36 %     3.40 %     3.37 %
Average loan/deposit ratio     87.08 %     88.09 %     88.39 %     86.84 %     86.32 %
Allowance for loan losses as a percent of period-end loans     0.97 %     0.97 %     1.10 %     1.11 %     1.10 %
Annualized net charge-offs to average loans     0.36 %     0.56 %     0.14 %     0.11 %     0.26 %
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due     56.81 %     58.60 %     55.25 %     53.35 %     46.37 %
Select performance measures excluding nonoperating items                    
Operating earnings per share - diluted (d)   $    1.00     $   1.12     $   1.01     $   0.96     $   0.90  
Return on average assets - operating     1.24 %     1.37 %     1.24 %     1.22 %     1.17 %
Return on average common equity - operating     11.33 %     12.95 %     11.78 %     11.54 %     11.05 %
Return on average tangible common equity - operating     15.83 %     18.43 %     16.84 %     16.12 %     15.56 %
Efficiency ratio (e)     58.10 %     58.03 %     58.11 %     57.40 %     57.51 %
Noninterest income as a percent of total revenue (TE) - operating     24.01 %     25.03 %     25.70 %     24.20 %     24.33 %
FTE headcount       3,885         3,933         3,858         3,780         3,775  
                     

/EIN News/ -- (a) Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%.
(b) Average securities does not include unrealized holding gains/losses on available for sale securities
(c) The tangible common equity ratio is common shareholders' equity less intangible assets divided by total assets less intangible assets.
(d) Refer to Appendix A for reconciliation of this non-GAAP measure.
(e) The efficiency ratio is noninterest expense to total net interest income (TE) and noninterest income, excluding amortization of purchased intangibles and nonoperating items.

For more information
Trisha Voltz Carlson, EVP, Investor Relations Manager
504.299.5208 or trisha.carlson@hancockwhitney.com

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