Hancock Whitney's (HWC) Q4 Earnings Beat, Revenues Rise Y/Y

Hancock Whitney Corporation’s (NASDAQ:HWC) fourth-quarter 2019 adjusted earnings per share of $1.06 beat the Zacks Consensus Estimate of $1.04. However, the bottom line fell 5.4% from the year-ago quarter’s reported figure.

Results excluded certain non-operating expenses related to the MidSouth Bancorp, Inc. acquisition completed in September. After considering these charges, net income came in at $92.1 million or $1.03 per share, down from the $96.2 million or $1.10 per share in the prior-year quarter.

For 2019, earnings of $3.72 per share matched the prior year’s figure, but missed the consensus estimate by 34 cents. Net income grew 1.1% to $327.4 million.

Higher net revenues, decent loan growth, expanding margins and the MidSouth Bancorp acquisition drove the results. Also, improved capital ratios aided the performance. However, higher expenses and fall in deposits acted as headwinds.

Revenues Up, Expenses Rise

Net revenues were $316.1 million, up 8.3% year over year. The figure surpassed the Zacks Consensus Estimate of $315.3 million.

For 2019, net revenues were $1.21 billion, up 6.8%. Also, the top line matched the consensus estimate.

Net interest income on tax equivalent basis grew 6.9% year over year to $236.7 million. Net interest margin (NIM), on a tax-equivalent basis, came in at 3.43%, up 4 basis points.

Non-interest income totaled $82.9 million, indicating 11.3% improvement from the year-ago quarter. Increase in all fee income components except trust fees led to this upside.

Total operating expenses jumped 10.3% year over year to $197.9 million. This upswing resulted from rise in almost all the cost components.

As of Dec 31, 2019, total loans were $21.2 billion, up nearly 1% from the prior-quarter end. However, total deposits declined 1.6% from the previous quarter to $23.8 billion.

Credit Quality Improves

Net charge-offs from the non-covered loan portfolio was 0.18% of average total loans, declining from 0.56% in the year-ago quarter. Also, provision for loan losses declined 36% to $5.2 million. Additionally, total non-performing assets decreased 4.3% year over year to $337.5 million.

Profitability Ratios Decline, Capital Ratios Improve

Return on average assets was 1.20% at the end of the reported quarter, down from the 1.35% recorded in the prior-year quarter. In addition, return on average common equity was 10.52% as of Dec 31, 2019 compared with the 12.76% recorded on Dec 31, 2018.

As of Dec 31, 2019, Tier 1 leverage ratio was 8.76%, up from the 8.67% recorded at the end of the year-earlier quarter. Tier 1 risk-based capital ratio was 10.54%, up from 10.48%.

2020 Outlook

Loan growth is expected to be in the mid-single digits range.

NIM is projected to decline, given the gradual runoff of accretion and reclassification of discount to allowance for credit losses. However, core NIM is likely to remain relatively stable.

Non-interest income is expected to increase 2-3% on a year-over-year basis.

Operating expenses are expected to increase 6-7% from the prior year. This includes the impact of the MidSouth Bancorp acquisition, technology investments and market disruption opportunities.

Our Viewpoint

Backed by improving loan balance, Hancock Whitney is likely to register further top-line growth in the near future. In addition, the MidSouth Bancorp acquisition is projected to be accretive to earnings in 2020. Nevertheless, rising expenses, mainly due to the company's inorganic growth strategy, might partly impede bottom-line growth.

Zacks Rank

Currently, Hancock Whitney carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Peers

Associated Banc-Corp (NYSE:ASB) and BankUnited, Inc. (NYSE:BKU) are scheduled to announce fourth-quarter 2019 results on Jan 23, while Prosperity Bancshares, Inc. (NYSE:PB) is slated to report on Jan 29.

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