Hancock Whitney Corporation 6.25% Subordinated Notes due 2060 Q2 2026 Earnings Call

Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Ashleigh Wilshire, Head of Investor Relations. You may begin. 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 10-K and 10-Q, 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-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in our earnings release in the financial tables. The presentation slides included in our 8-K are also posted with the conference call webcast link on the investor relations website. We will reference some of these slides in today's call. Participating in today's call are John Hairston, President and CEO, Mike Acri, CFO, Chris Ziluca, Chief Credit Officer, and Shane Loper, Chief Operating Officer.

I will now turn the call over to John Hairston.

Thank you, Ashleigh, 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%, PPNR growth of 6%, a sixth straight quarter of improved commercial criticized loans, 5% growth in loans, and 2% 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% and deposits 8%. As shown on slide nine 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-single digit growth. For deposits, the 8% annualized growth was related to an increase in interest-bearing money market accounts of $786 million, partially offset by a slight decline in CD balances from maturities 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 continued to perform very well with a 1.42% ROA, efficiency ratio of 55.3%, and ROTCE of 14.9%. Top-line revenue continued to cover significant offensive reinvestment, and net 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 One Florida Bank transaction, with an expected closing date of August the 1st. Mike will add additional comments in his remarks, but I will note we have updated our guidance on page 20 to provide fiscal year 2026 outlook, both excluding and including One Florida. In both cases, the second half of 2026 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% 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 One 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% from the prior quarter to $178 million. Expressed as a return on average assets, this continues to be a solid 1.99%. Net interest income increased 3% this quarter. Our fee income business continues to perform remarkably well. Expenses were up but remain well controlled. Fee income for the company was up $2.3 million or 2%, 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 remained well controlled, up 2% from the prior quarter, 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%. Our earning asset yield was up two basis points. 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 the higher earning asset yield, we benefited from a higher yield on 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. As expected, the yield on the bond portfolio was up 12 basis points to 3.35%, related to a full quarter's impact of the first quarter restructuring transaction, 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. This was partially offset by a healthy increase in average loans of $374 million linked quarter. Our cost of deposits was down four basis points to 1.43% for the quarter, due mostly to a lower rate on maturing CDs. We did increase promotional rate pricing on our interest-bearing transaction deposits in 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 repricing 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. Non-accrual loans increased $1 million to $114 million. Net charge-offs came in at 16 basis points, down from prior quarter's 19 basis points. Our loan loss reserves are solid at 1.42% 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, on 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%, fee income up between 6% and 7%, operating expenses up between 7.5% and 8.5%, and finally, PPNR up between 7% and 8%. 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 as 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 disciplined execution positions us well to deliver on our 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.

We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Rose from Raymond James. Please hold. Your line is open. Please go ahead. Hey, good afternoon, everyone.

Thanks for taking my questions. Just wanted to start on loan growth. Obviously a very solid quarter, I think what struck me was the almost 20% increase in quarter-over-quarter production, yet you kind of reiterated the standalone outlook for the year, which would imply maybe a bit of a slowdown to some degree. Is that just conservatism or is it competition where you're maybe seeing a little bit more pressure? Just looking to get a little more color on the puts and takes. Thanks. Shane, would you like to take that question?

Sure. 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. They're being really cautious. 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. Loan growth was $588 million. We produced $1.5 billion in loans. That's up from $1.2 billion in the first quarter, really had strength in all of our segments: business banking, commercial, middle market, consumer performed well, and CRE is continuing to perform well. A lot of net growth supported with new originations. Line fundings were up slightly this quarter. Then we saw normalized pay down and payoff activity. I really look at our growth for the quarter as really high quality spread across all of our segments and geographies. Pricing, I know you'll probably ask about pricing. Pricing continues to be highly competitive.

We're focused and disciplined on our pricing, really just trying to step up and match off against the competition without giving too much, we can continue to grow the balance sheet.

Yeah. 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 as another body of work. While the numbers for Q2 certainly were outstanding and 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 balances increases for second quarter a little bit better than they have in some quarters where we just didn't do real well. 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.

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, we want to be realistic in our guide to mid-singles for the year.

Your next question- Sorry about that comes from the line of Catherine Michael, do you have a follow-up?

Apologies. We can bring Michael back.

Did you have a follow-up, Michael?

Please hold one moment. Michael, your line is open. Please go ahead. All right.

Sorry about that. I couldn't get off mute.

Okay. Maybe just as a follow-up, Mike, maybe if you can talk about some of the deposit competition and what you're seeing there.

I know Shane touched on the loan side. It looks like the NIB mix did tick down 60 or 70 basis points Q on Q. Can you just talk about the ongoing ability to fund loan growth and just competitive trends in and around your markets? Thanks. Sure. Be glad to, Michael.

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. By that I mean, we're in an environment now where there are banks that are experiencing more demand for loans, and so people certainly like to fund their loan growth with deposit growth, and we're no different. I think you're seeing the elevation in deposit costs that have been talked about for the past couple of months, really the past couple of quarters. It's certainly here now. For us, one of the things that we're most pleased with about the quarter was not only the arrival of pretty significant organic balance sheet growth, but the fact that we're able to fund that growth really dollar for dollar with deposits.

That really is what we're trying to achieve. As we think about the second half of the year, the plan is to continue to do that. While 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. I think where 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 our balance sheet now, as well as going forward. Hopefully that was helpful. Yep, very helpful.

I'll step back now. Thanks for taking my questions.

Thanks, Michael. Your next question comes from the line of Catherine Mealor from KBW.

Please go ahead. Thanks. Just want to follow up on just deposit pricing.

You talked about an increase in deposit growth at the end of the quarter just from some promotional interest-bearing transactions. Can you talk about the cost around what that looks like? As we grow your interest-bearing transaction accounts, outside of any changes in rates, where do you think that trends to with those promotional deposits coming in there?

Yeah, sure. Sure, be glad to, Catherine. Again, if you look at the second quarter, a little bit of an unusual situation where most of the deposit growth was really backended toward the end of the second quarter. We had the increase in end of period deposits of about $550 million, but the average for the quarter was actually down about $50 million or so. I think going forward in the second half of the year, you'll see that end of period growth should match pretty good the average growth in the third quarter and the fourth quarter. 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.

We have an 11-month CD at 385 that we had been offering in Florida and Texas that we decided to expand that to the core of the franchise. Louisiana, Mississippi, and Alabama. That did prove to be pretty successful. We also have a money market offering at 375 for some existing customers, and then a 4% money market offering for new customers. In addition to that, we're offering a promotional CD in Orlando related to OFB. Those are the promotional deposit pricing offerings that we have in place. 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.

Right. It's fair to say is that you get the full impact of that. Is it fair to say we're at a bottom for deposit costs, that'll just start to increase as we move through the back half of the year?

Yeah, I think so. 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 NIM will be flat to slightly up and certainly we'll see an increase in deposit costs as well as our cost of funds. In the second half of the year, our cost of deposits could be up around 10 basis points or so. That's from the second quarter through the fourth quarter. We'll continue to reprice bonds and fixed rate loans higher. That's a big obvious tailwind that we have. Certainly the biggest tailwind will be the continuation of organic balance sheet growth in the second half of the year.

Loans growing at mid-single digits along with deposits.

If I might just one more thing on the margin, just to tie it together. If I look at loan yields, those were flat or actually down a few basis points linked quarter.

Right. In your new loan yields are coming in, it looks like 604 is still higher than that 560 average, but that's come down a lot over the past couple of quarters.

Do you still think we're in an environment where we can move that 560 higher over the back half of the year?

Yeah. I think with respect to the loan yield, what you'll see is some modest increase. We got a nice head start in July with SOFR being up about four basis points coming into the month. That'll certainly be a little bit of a tail. 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 four to five basis points maybe.

Okay, great. Very helpful. Thank you.

Okay. Your next question comes from the line of Feddie Strickland from Hovde Group.

Your line is open. Please go ahead.

Hey, good afternoon. Just wanted to follow along Catherine's line of questioning on the loan yields. Specifically, I wanted to ask about middle market C&I, maybe whether there's been any kind of abatement in competition in that space, or is it still pretty tight?

Hey, this is Shane. It's very tight. As I was talking with Michael, the clients are really 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. 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 we're getting the best pricing that we can get. 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. 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.

Got it. Appreciate that. Just switching gears, non-interest income, it looks like you revised the guide up a bit. Is there a particular component driving better expectations there, whether it's trust or the investment annuity insurance line, or is it just kind of what you've seen so far this year? Just curious maybe what you're seeing that led you to increase that a little bit.

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

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 in just skills and process and tools and capabilities.

Understood. That's helpful. Thanks for taking my questions.

You bet. Thanks for asking.

Your next question comes from the line of Stephen Scouten from Piper Sandler. Please go ahead. Yeah, good afternoon.

Thanks for the time here. I'm curious briefly, the changes in the CECL methodology you mentioned in the presentation, can you give us any additional color there on what kind of precipitated that? If that was some of Moody's just worsening the scenarios overall, or what kind of drove that change?

Yeah, Steven. This is Mike. I'll start, and certainly Chris can offer some color if he'd like to. Really what we saw with the new scenarios was the baseline becoming more conservative than it was before. I think if you go back a quarter or 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. 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. We went from 40/60 to 50/50. It's really just as simple as that.

Got it. Very helpful. Okay. Just on the pace of hiring, obviously, you're getting very close to that 50 person goal already here halfway through the year, what have you. What sort of upside to that number could there be, and would you extend much further beyond that 50 person headcount if it was available, even if it meant maybe the efficiency ratio going a tick higher in the near term? How would we think about the push-pull there on investment timing?

Hey, this is Shane. Thanks for the question. This is a bright spot. We have had great success. This year we're at 42 against our 50 overall. We feel very confident in the 50. I think, as we look forward, we will continue to be focused on opportunities that come up. 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. Really beginning to see the momentum take place. Very proud of the leadership team that's been executing this recruiting. That started back in the fourth quarter of 2025, really working on bringing new bankers to the company. Feel good about the 50, and we'll look forward to opportunities that present themselves.

Okay. Is there an impediment to going much beyond that, just from an expense perspective? Would you want to space it out more ratably or just opportunistic irrespective of the timing if good people come available?

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

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

Great. This is John. Yep, appreciate that.

Your next question comes from the line of Brett Rabatin from StoneX Group. Please go ahead. Hey, good afternoon, everyone.

Thanks for the questions. Wanted just to talk about the franchise kind of post the One Florida deal and just see if there were thoughts for maybe additional expansion in Florida. Then post you bulking up in Orlando, is the way to think about the organic growth level of the franchise from here, have we moved that up several % with some of the recent hires in Texas and Florida? Just any thoughts on how you guys view yourself in terms of a growth company going forward?

Yeah. Thanks for the question. This is John. I'll start. The team can jump in there if they want to add more color. Obviously the initial focus with the 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 focus on integration. That'll be mid to late Q4 to get that integration completely wrapped up. Really the back half of the year in terms of the expanded market in Orlando is about acclimating the team and getting people comfortable. Then as we move into 2027, we'll be able to 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. Really, it's a little early to share what that plan may be. 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 several years ago, as we talked about, I guess several being 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 that we've been successful doing that. To really double down on adding folks in markets that we didn't have as big a presence, but had a very high organic growth rate expectation.

That's really where the focus in Texas and Florida came from. 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. At this point in time, we're really trying to sell or share the mid-single digit expected compounded annual growth rate kind of as our target. Then if the flywheel Shane mentions yields something better than that, we'll talk about that when we get there. Our focus right now is acclimating our new team and our clients, covering loan growth the back half of this year with deposits, turning DDAs into a little bit better growth trajectory with time, because we know we're going to be adding IBTs.

Ensuring that the teammates we've already added get as productive as they can, as quickly as they can.

Okay. That's helpful, John. Then the other question I had was just around capital, and I think you bought back a little over 700,000 shares this quarter. With the existing 2 million share remaining, would you expect to be as active in the back half of the year as you were in the second quarter?

Brett, this is Mike. 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. Again, the thought is now that we'll exhaust that authority over the course of the second half of the year. Probably on kind of a pro rata basis between the third and fourth quarter. As far as next year, 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.

Okay, great. Appreciate the call, guys.

You bet. Thank you for the questions.

Your next question comes from the line of Casey Haire from Autonomous. Please go ahead. Yeah, great.

Thanks. Good afternoon, guys. One more on NIM. Apologies, just wondering how much purchase accounting is in this guide here.

The guide excluding OFB, which is again, four flat to slightly up, obviously doesn't include any of the purchase accounting related to OFB. Honestly, Casey, it's not a significant number, it really isn't going to move the needle very much at all. The guidance, including OFB, would be really the same.

Okay. All right. Okay. Got you.

Yeah. All right. Just touching on capital management.

Sounds like you guys are going to execute on the authorization this year. I think you guys talked about rebuilding capital to pre-OFB levels. Just wondering the timeline around that, what that means for share buybacks in 2027, just share buybacks appetite post-2026.

Yeah. Obviously you can see where our capital ratios are at 630, and we also disclose where we think they'll be once we fold in OFB in August. Our TCE will be down about 120 basis points. Common Tier 1 will 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 that we referred to. That's part of our guidance, and it also includes the buybacks. This notion of kind of, quote unquote, "rebuilding capital," it's really not so much rebuilding capital. It's really just kind of disclosing that it would take us about 8 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.

That was really just a data point, if you will. We feel very comfortable with TCE in the 9% range, common tier one somewhere around the 12% range. 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. Going forward, again, and not to make this overly complex, but going forward, we're planning on exhausting the buyback authority. Then in 2027, again, as I mentioned a little bit earlier, that's something we'll disclose when we get there.

Thank you. Okay. You're welcome.

A reminder, if you would like to ask a question, to please press star one on your telephone keypad. Your next question comes from the line of Christopher Marinac from Brean Capital. Please go ahead. Good afternoon, John.

The sort of seemingly fast approval from One Florida, does that make it interesting to consider additional M&A, or were you not surprised by how quickly this happened?

I don't think we were surprised by how quickly it happened. That's pretty much the pace that transactions have been approved by the regulatory bodies that we necessarily need approval from of late. We expected a pretty rapid approval. 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 what our expectations were on integration, but that looks like it's going to be mid to maybe later part of Q4. A pretty rapid integration as well. I think it's fair to say, Mike, would you agree, pretty much the timeline's 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 accommodative to these types of transactions, certainly not surprised that we were able to do this pretty quickly.

It was an extremely clean transaction, a rather small deal. Again, the quick approval and timeline to integration was something that we certainly planned for. No surprises there. 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 2027 with those behind you?

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

Great. Good deal. Thanks for hosting us today. I appreciate it. Okay. You bet.

Thank you for the questions.

At this time, there are no further questions. I would like to now pass the call back to Mr. John M. Hairston for closing remarks.

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

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