Hancock Whitney Corporation (HWC) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial metrics, such as increased bond portfolio yield, stable credit performance, and strategic share buybacks. The Q&A section highlights positive growth expectations, including loan and deposit growth, as well as NIM expansion. While management's vague responses on M&A and fee income variability could raise concerns, the overall outlook is positive, supported by organic growth and strategic hiring. With a market cap of $4 billion, the stock is likely to experience a moderate positive reaction, estimated between 2% to 8%.
Key Financial Performance
EPS (Earnings Per Share) Improved by 8% year-over-year. This improvement was attributed to strong financial performance and operational efficiency.
PPNR (Pre-Provision Net Revenue) Grew by 6% year-over-year. The growth was driven by increased net interest income and well-managed expenses.
Tangible Book Value Per Share Increased by 12% year-over-year. This was due to strong earnings and effective capital management.
ROA (Return on Assets) Achieved 1.41% for the quarter. This reflects solid earnings performance.
Efficiency Ratio Improved to 54.9% for the quarter and 54.8% for the year, down 58 basis points from 2024's 55.4%. This improvement was driven by net interest income growth, strong fee income performance, and controlled expenses.
Net Interest Income (NII) Increased by 1% for the quarter, driven by favorable volume and mix for both average earning assets and interest-bearing liabilities, partly offset by a slightly lower NIM.
Net Interest Margin (NIM) Decreased by 1 basis point for the quarter due to lower loan yields, partially offset by higher bond yields and lower cost of funds.
Loan Growth Loans grew by $362 million or 6% annualized. This growth was driven by strong production that offset prepayments.
Deposit Growth Deposits increased by $620 million or 9% annualized, largely driven by seasonal activity in public fund DDA and interest-bearing accounts.
Fee Income Grew to $107 million in the fourth quarter, with solid performance across all categories and higher specialty income.
Cost of Funds Decreased by 7 basis points to 1.52% for the quarter, driven by lower cost of deposits and better funding rates and mix.
Cost of Deposits Decreased by 7 basis points to 1.57% for the quarter, with further reductions expected as CDs mature and renew at lower rates.
Bond Portfolio Yield Increased by 6 basis points to 2.98%, driven by reinvestment in higher-yielding bonds and a bond swap with a yield pickup of 45 basis points.
Nonaccrual Loans Decreased by $7 million to $107 million, reflecting improved credit quality.
Net Charge-Offs Came in at 22 basis points, indicating stable credit performance.
Loan Loss Reserves Maintained at 1.43% of loans, ensuring solid coverage for potential losses.
Share Buyback $147 million of shares repurchased in the fourth quarter, impacting capital ratios but supported by strong capital levels.
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Operating Highlights
Bond portfolio restructuring: Completed restructuring expected to benefit NIM by 7 basis points and EPS by $0.23 per share annually.
Loan growth: Loans grew $362 million or 6% annualized in Q4 2025. Mid-single-digit loan growth expected in 2026.
Deposit growth: Deposits increased $620 million or 9% annualized in Q4 2025. Low single-digit growth expected in 2026.
Efficiency ratio: Improved to 54.9% in Q4 2025, reflecting controlled expenses and income growth.
Cost of funds: Reduced by 7 basis points to 1.52% in Q4 2025, driven by lower deposit costs and better funding mix.
Revenue-generating investments: Plan to hire up to 50 additional revenue-generating associates in 2026 to support growth and profitability.
Share buyback plan: New 5% share repurchase plan authorized for 2026, following full exhaustion of the previous plan in 2025.
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Risk or Challenges
Economic Environment: The rapidly evolving and changing economic environment poses challenges to accurately project results or predict the effects of future plans or strategies.
Net Interest Margin (NIM): NIM was relatively flat, with a decline in loan yield outpacing higher security yields and lower cost of funds. This could impact profitability if the trend continues.
Loan Yields: Lower loan yields on both new fixed and variable rate loans and existing variable rate loans following rate cuts could pressure net interest income.
Seasonal Deposit Outflows: Seasonal public fund outflows in the first quarter could impact deposit levels and liquidity.
Cost of Deposits: While the cost of deposits decreased, there is a reliance on CDs maturing and renewing at lower rates to support improvement, which may not materialize as expected.
Bond Portfolio Restructuring: The restructuring involves risks, including reliance on reinvestment yields to achieve projected benefits to NIM and earnings.
Share Buyback Impact: The full exhaustion of the share buyback authority impacted capital ratios, and future buybacks could further affect capital levels.
Regulatory and Economic Assumptions: Forward guidance assumes specific rate cuts and economic conditions, which, if not realized, could impact financial performance.
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Guidance & Outlook
Balance Sheet Growth: The company remains focused on growing its balance sheet and improving profitability in 2026. Investments in new revenue-generating associates and financial centers are expected to support this growth.
Loan Growth: Loan growth is expected to continue at mid-single digits in 2026 compared to the previous year-end, supported by strong production and investments in new revenue producers.
Deposit Growth: Deposits are anticipated to increase at low single digits from 2025 levels, supported by investments in financial centers and revenue producers.
Net Interest Margin (NIM) and Net Interest Income (NII): The bond portfolio restructuring is expected to contribute 7 basis points to NIM and $24 million to NII in 2026. Overall, NII is projected to grow between 5% and 6% from 2025, with modest NIM expansion.
Fee Income: Fee income is expected to grow between 4% and 5% in 2026, driven by a focus on core deposit account growth and multiple fee categories.
Expenses: Expenses are projected to increase between 5% and 6% in 2026, including impacts from the organic growth plan and the acquisition of Stable Trust Company.
Efficiency Ratio: The efficiency ratio is expected to range between 54% and 55% in 2026.
Net Charge-Offs: Net charge-offs are expected to average between 15 and 25 basis points for the full year 2026.
Capital Management: A new 5% share repurchase plan has been authorized for 2026, with repurchases expected to occur at a more even pace throughout the year.
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Shareholder Return Plan
Share Buyback Program: The company fully exhausted its previous share buyback authority in the last quarter of 2025, repurchasing approximately $147 million worth of shares. The Board has approved a new 5% share repurchase plan, effective through the end of 2026. Share repurchases in 2026 are expected to occur at a more even pace throughout the year. Changes in balance sheet growth, economic conditions, and share valuation could impact the execution of this plan.
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Key Q&A
Q:What are the expectations for gross loan production versus paydowns in the upcoming year?
A:Loan production increased for the third consecutive quarter, with $1.6 billion in production in Q4. Paydowns are expected in CRE as projects reach lease-up and go to the permanent market. Sustained fundings from production over the last 18-24 months are expected to continue. The team is targeting mid-single-digit growth guidance for 2026.
Q:What are the assumptions underlying the ROA target and TCE ratio?
A:The ROA target has been raised, supported by consistent organic balance sheet growth over the next three years. Loan growth is guided to mid-single digits, with Fed funds assumed at 3.25%. Expense growth is expected to be 3.5%-4%, and fee income is guided at 4%-5%. TCE ratio is expected to decrease to 9%-9.5% through buybacks and organic growth.
Q:What is the outlook for NIM expansion in 2026?
A:NIM expansion is expected to be 12-15 basis points, with 7 basis points coming from a bond restructure. Loan growth of 4%-5%, securities yield improvement, and reduced cost of deposits are key drivers. Headwinds include a slight decline in loan yields due to expected rate cuts.
Q:What are the plans for hiring new bankers in 2026?
A:The company plans to hire 50 bankers in 2026, up from 22 in the previous year. The focus is on a 60% business banker and 40% commercial banker split. The hiring process has been enhanced, and the goal is to improve portfolio mix and generate better risk-adjusted revenue.
Q:What is the fee income guidance for 2026?
A:Fee income is guided to grow 4%-5% in 2026. Growth is expected from consumer and business service charges, card fees, merchant services, mortgage fees, and wealth management. Specialty lines like SBA fees and derivatives are less predictable but contribute to overall growth.
Q:What is the company's stance on M&A?
A:The company describes its M&A stance as opportunistic, with no active focus on deals. They are aware of market opportunities but emphasize organic growth and maintaining a 3-year earnback threshold for any potential deals.
Q:What were the details of the $1.4 billion securities purchase in Q4?
A:The securities purchased were primarily commercial mortgage-backed securities. The effective duration of the portfolio remained unchanged, and the purchase aimed to improve yield and enhance NII and NIM.
Q:What are the expectations for deposit growth in 2026?
A:Deposit growth is guided to low single digits (1%-3%). Growth is expected from new hires, improved business banking execution, and investments in treasury services. Seasonal factors and pricing strategies for CDs will also influence growth.
Q:What is the expected timeline for new bankers to become profitable?
A:New bankers typically reach breakeven in 24-26 months. Bankers hired in 2025 are halfway to breakeven, and those hired in 2026 are expected to perform well by the end of 2027.
Q:What is the company's approach to risk-adjusted revenue and portfolio management?
A:The company uses a sophisticated model to assess risk-adjusted revenue, including deposits, fees, and loans. Bankers are expected to manage balanced portfolios and contribute to overall profitability through full-service relationships.
Q:What is the outlook for credit quality and reserves?
A:Credit quality remains resilient, with reduced nonaccruals and criticized loans. Charge-offs in Q4 were situational and industry-specific. The reserve ratio is high at 143 basis points, with potential to decrease slightly but not below 125-130 basis points.
Q:What are the expectations for pricing and loan yields in 2026?
A:The company aims to improve pricing and loan yields through better execution and calibration of pricing models. Despite potential rate cuts, risk-adjusted spreads are expected to remain stable.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing concerns about M&A appetite, providing vague assurances about being 'opportunistic' without clear commitments. Additionally, while discussing fee income guidance, they acknowledged unpredictability in specialty lines but did not provide detailed strategies to mitigate this variability.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank Chief
CDs rate
Chief Officer
Expense reinvestments
FHLB advance
Happy New
Manager ability
NII NIM
NII share
NII volume
NIM basis
NIM loan
New today
Officer Happy
Officer call
PPNR book
PPNR return
Page benefit
President Bank
ROA efficiency
Slide investor
Stable
bond yield
focus
improvement
income fee
income investment
interest income
investment activity
loan charge
loan rate
plan share
point cost
portfolio restructuring
production increase
repurchase plan
restructuring week
security
HWC Transcript
Hancock Whitney Corporation (HWC) Q4 2025 Earnings Call Transcript
Positive1-20
The earnings call reveals strong financial metrics, such as increased bond portfolio yield, stable credit performance, and strategic share buybacks. The Q&A section highlights positive growth expectations, including loan and deposit growth, as well as NIM expansion. While management's vague responses on M&A and fee income variability could raise concerns, the overall outlook is positive, supported by organic growth and strategic hiring. With a market cap of $4 billion, the stock is likely to experience a moderate positive reaction, estimated between 2% to 8%.
Hancock Whitney Corporation (HWC) Q3 2025 Earnings Call Transcript
Positive10-14
The company's earnings call shows solid financial performance with improved net income and efficiency ratios. Loan growth is strong, and the company plans to expand in key markets. While deposit costs are expected to decrease, capital ratios remain healthy. Share repurchases continue, and management is optimistic about future growth. Despite some unclear responses in the Q&A, the overall sentiment is positive, especially with plans for expansion and hiring, which should drive further growth. Given the market cap, a 2% to 8% positive movement is likely.
Hancock Whitney Corporation (HWC) Q2 2025 Earnings Call Transcript
Positive7-15
The earnings call highlights several positive factors: a strategic acquisition, expected fee income growth, stable financial guidance, and proactive measures to manage expenses and deposit costs. The Q&A section further supports a positive outlook with plans for share buybacks, deposit growth, and a stable loan book. While there are some uncertainties, such as spread compression and potential M&A, the overall sentiment is optimistic, particularly with strong CRE loan growth and a focus on organic expansion. Given the company's market cap, a positive stock price movement of 2% to 8% is anticipated.
Hancock Whitney Corporation (NASDAQ:HWC) Q1 2025 Earnings Call Transcript
Positive4-17
The earnings call reflects strong financial performance with EPS growth, NIM expansion, and a solid ROA. The guidance indicates continued fee income growth and controlled expenses. A $50 million share repurchase plan adds to shareholder value. Despite economic and regulatory risks, the management's strategic initiatives and positive outlook on loan growth and capital ratios post-Sable acquisition suggest a positive sentiment. The market cap indicates a moderate reaction, aligning with a positive stock price movement prediction of 2% to 8% over the next two weeks.
HWC Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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