Operator: 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, Ashley Wilshire, head of investor relations. You may begin.
Ashley Wilshire: 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. Thank you for joining us. Thank you for joining us. 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 Achary, CFO, Chris Ziluca, Chief Credit Officer, and Shane Loper, Chief Operating Officer. I will now turn the call over to John Hairston.
John Hairston: Thank you, Ashley, 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. Focusing on the second quarter, on a linked quarter annualized basis, loans grew 10% and deposits 8%. As shown on slide 9 of our investor deck, loan production was strong and line utilization improved. Growth was spread across every line of business excepting 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 Merritt 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 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 26, 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.
Mike Achary: 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. Express has a return on average assets that continues to be a solid 1.99%. Net interest income increased 3% this quarter. Our fee income business continues to perform remarkably well, and expenses were up but remained 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. Thank you for joining us. Expenses remained well controlled, up 2% from the prior quarter, and were 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 and 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, but 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. But 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, so down from prior quarters 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, in 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 OFV, 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 Welp 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.
John Hairston: Thank you, Mike. Let's open the call for questions.
Operator: 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.
spk04: Hey, good afternoon, everyone. Thanks for taking my questions. Just wanted to start on loan growth. Obviously a very solid quarter, but 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.
John Hairston: Shane, would you like to take that question?
Shane Loper: Sure. And 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, you know, broadly stable. Majority of them are indicating, you know, kind of generally stable performance or steady performance with an outlook that's optimistic. But they're being really cautious. So, you know, right now there's a lot of credit supply for a limited demand and, you know, that's really where the competition is kind of creeping in. We feel like 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 and really had strength in all of our segments, business banking, commercial, middle market. Consumer performed well and CRE is continuing to perform well. You know, a lot of net growth supported with new originations. Line fundings were up slightly this quarter. And then we saw normalized paydown and payoff activity. So, you know, I really look at our growth for the quarter as really high quality, spread across all of our segments and geographies. You know, pricing, I know you'll probably ask about pricing. Pricing continues to be highly competitive. We're focused and disciplined in our pricing, but really just trying to step up and match off against the competition without giving too much so we can continue to grow the balance sheet.
John Hairston: 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. and 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 closed in early Q2. Hence the average balance increases for second quarter a little bit better than they have in some quarters where we just ended real well. So 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. But 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, so we want to be realistic in our guide to admit singles for the year.
Operator: Your next question comes from the line of Kathryn.
John Hairston: Michael, did you have a follow up?
Operator: Apologies, we can bring Michael back.
John Hairston: Did you have a follow up, Michael?
Operator: Please hold one moment. Michael, your line is open. Please go ahead.
spk04: All right. Sorry about that. I couldn't get off mute. Maybe just as a follow-up, Mike, maybe if you can talk about some of the you know, deposit competition and what you're seeing there. I know Shane touched on the loan side. You know, it looks like the NID mix did, you know, tick down, you know, 60 or 70 basis points, queue on queue. Can you just talk about, you know, the ongoing ability to fund loan growth and just competitive trends in and around your markets? Thanks.
Mike Achary: Sure, I'd be glad to, Michael. So I think the best way to describe the deposit pricing environment is absolutely as competitive, but at least in our markets, it's also pretty rational. And by that, I mean, you know, we're in an environment now where, you know, 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. So I think you're seeing, you know, the elevation in deposit costs that have been talked about, you know, for the past couple of months, really the past couple of quarters. So it's certainly here now. And 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 were able to fund that growth really dollar for dollar with deposits. So that really is what we're trying to achieve. And as we think about the second half of the year, the plan is to continue to do that. 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. So I think where EOC has landed 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. So hopefully that was helpful.
spk04: Yep, very helpful. I'll step back now. Thanks for taking my questions. Thanks, Michael.
Operator: Your next question comes from the line of Kathryn Mueller from KBW. Please go ahead.
spk01: 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 and and as we grow your interest-bearing transaction accounts, where do you, you know, outside of any rate, changes in rates, where do you think that trends to with those promotional deposits coming in there?
Mike Achary: Yeah, sure. I'd be glad to, Kathryn. So, you know, again, if you look at the second quarter, you know, a little bit of an unusual situation where, you know, most of the deposit growth was really back-ended toward the end of the second quarter. So, you know, we had at 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. 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. So 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. So we have an 11 month CD at 385 that we had been offering in Florida and Texas that we decided to expand that to kind of the core of the franchise. So Louisiana, Mississippi and Alabama. And 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 or new customers. So in addition to that, we're offering a promotional CD in Orlando related to OFB. So those are the promotional deposit pricing offerings that we have in place. And 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.
spk01: 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, and so that'll just start to increase as we move into the back half of the year?
Mike Achary: Yeah, I think so. I think as we look at the second half of the year, you'll see NII continue to grow. It 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. So in the second half of the year, our cost of deposits could be up around 10 basis points or so. And 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. And then certainly the biggest tailwind will be the continuation of organic balance sheet growth in the second half of the year. So loans growing at mid-single digits along with deposits.
spk01: 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 length quarter. And your new loan yields are coming in, it looks like 604. It's still higher than that 560 average, but that's come down. a lot over the past couple of quarters. So do you still think we're in an environment where we can move that 560 higher over the back half of the year?
Mike Achary: Yeah, I think with respect to the loan yield, what you'll see is, you know, some modest increase. We got a nice head start in July with SOFR being up about four basis points coming into the month. So that'll certainly be a little bit of a tail. But 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, you know, four to five basis points, maybe.
spk01: Okay, great. Very helpful. Thank you.
Mike Achary: Okay.
Operator: Your next question comes from the line of Freddie Strickland from Hobd Group. Your line is open. Please go ahead.
spk05: Hey, good afternoon. I wanted to follow along Kathryn's line of questioning on the loan yields. Specifically, I wanted to ask about middle market CNI, maybe whether there's been any kind of abatement in competition in that space, or is it still pretty tight?
Shane Loper: 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. So 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, but 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. But 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.
spk05: Got it. Appreciate that. And just switching gears, non-interest income, it looks like you revised the guide up a bit. Is there a particular component driving the 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.
Shane Loper: 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 Sable deal from last year, but overall, the penetration into the current client book and new business one 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 Thank you for joining us today. and capabilities.
spk05: Understood. That's helpful. Thanks for taking my questions.
John Hairston: You bet. Thanks for asking.
Operator: Your next question comes from the line of Steven Skoudin from Piper Sandler. Please go ahead.
spk03: 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 and what kind of precipitated that? If that was some of Moody's just worsening the scenarios overall or what kind of drove that change?
Mike Achary: Yes, Steven, this is Mike. I'll start and certainly Chris can offer some color if he'd like to. But really what we saw with these 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. So 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. So we went from, you know, 40-60 to 50-50. It was really just as simple as that. Got it. Very helpful.
spk03: Okay, and 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?
Shane Loper: Hey, this is Shane. Thanks for the question. This is a bright spot. I mean, we have had great success this year. We're at 42 against our 50 overall. We feel very confident in the 50. And 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. So, you know, really beginning to see the momentum take place. Very proud of the leadership team that's been executing this recruiting. You know, that started back in the fourth quarter of 25, really working on, you know, bringing new bankers to the company. So feel good about the 50 and we'll look forward to opportunities that present themselves.
spk03: Okay, and just, I mean, do you think there's, I mean, is there an impediment to going much beyond that just from an expense perspective? Would you want to space it out kind of more erratably or just opportunistic irrespective of the timing if good people come in?
Shane Loper: 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, you know, that it takes for them to get accretive and we feel like we've got room to add, you know, the ones that we need to add.
Mike Achary: And Stephen, you'll note that we did increase the guidance around operating expenses, excluding OFB. And I think some of that was a little bit of a nod to the potential that we could add a few more people potentially.
spk03: Great.
Mike Achary: This is John. Appreciate that.
Operator: Your next question comes from the line of Brett Rabaton from Stone X Group. Please go ahead.
spk13: Hey, good afternoon, everyone. Thanks for the questions. I 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 and 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 percent with some of the recent hires in Texas and Florida or just any thoughts on how you guys do yourself as as uh in terms of a growth company going forward yeah thanks for the question this is John I'll start the uh the team can jump in there if they want to add more color but obviously the initial focus uh with the August 1 close is in welcoming
John Hairston: 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. And that'll be mid to late Q4 to get that integration completely wrapped up. So really the back half of the year in terms of the expanded market in Orlando is about acclimating the team and getting people comfortable. And then as we move into 27, we'll 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. But really, it's a little early to share kind of what that plan may be. And 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 we've been successful doing that but 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 and that's really where the focus in Texas and Florida came from and 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. But 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. And then if the flywheel Shane mentions yields something better than that, we'll talk about that when we get there. But 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 and ensuring that the teammates we've already added get as productive as they can as quickly as they can.
spk13: Okay, that's helpful, John. And 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?
Mike Achary: Yeah, Brett, this is Mike. So 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. So again, the thought is now that we'll exhaust that authority. You know, over the course of the second half of the year, probably on kind of a pro rata basis between the third and fourth quarter. And then as far as next year, you know, 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.
spk13: Okay, great. Appreciate the call, guys.
John Hairston: You bet. Thank you for the questions.
Operator: Your next question comes from the line of Casey Hare from Autonomous. Please go ahead.
spk07: Yeah, great. Thanks. Good afternoon, guys. So one more on NIMH. Apologies. But just wondering how much purchase accounting is in this guide here?
Mike Achary: Well, the guy excluding OFB, which is again for flat to slightly up, obviously doesn't include any of the purchase accounting related to OFB. And honestly, Casey, I mean, it's not a significant number, so it really isn't going to move the needle very much at all. The guidance, including OFB, would be really the same.
spk07: Okay. All right. So not, I mean, okay. Gotcha.
Mike Achary: All right.
spk07: And then just, yeah. Okay. And then just touching on capital management. So it 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, you know, the timeline around that and what that means for share buybacks in 27 and yeah, the share buybacks appetite post 26.
Mike Achary: yeah so obviously you can see where our capital ratios are at 630 and we also disclose you know where we think they'll be once we fold in OFB and in August so our TCE will be down about 120 basis points common tier one 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 refer to that's part of our guidance, and it also includes the buybacks. So 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 eight 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. So 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. So going forward again, and not to make this overly complex, but going forward, we're planning on exhausting the buyback authority. And then in 27, again, as I mentioned a little bit earlier, That's something we'll disclose when we get there. Thank you. Okay. You're welcome.
Operator: A reminder, if you would like to ask a question, to please press star 1 on your telephone keypad. Your next question comes from the line of Christopher Maranek from Breein Capital. Please go ahead.
spk02: approval from One Florida. Does that make it interesting to consider additional M&A, or were you not surprised by how quickly this happened?
John Hairston: I don't think we were surprised by how quickly it happened. I mean, that's pretty much the pace that transactions have been approved by the regulatory bodies that we necessarily need approval from of late. and we expected a pretty rapid approval. So 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 gonna be mid to maybe later part of Q4, so a pretty rapid integration as well. So 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.
Mike Achary: Yeah, very much so. I think in this environment where, you know, the regulatory focus seems to be more accommodative to these types of transactions, you know, certainly not surprised that we were able to do this pretty quickly. It was an extremely, you know, clean transaction, rather small deal. So again, the quick approval and timeline to integration was something that we, you know, certainly planned for. So no surprises there.
spk02: And 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 27 with those behind you.
Mike Achary: That's correct. So when we start the new year, the cost saves will be fully reflected.
spk02: Great. Good deal. Thanks for hosting us today. I appreciate it. Okay. Thank you for the questions.
Operator: At this time, there are no further questions. I would like to now pass the call back to Mr. John Harrison for closing remarks.
John Hairston: Okay, thank you, Jay, for moderating the call. Thanks, everyone, for your attention and time, and we look forward to seeing you on the road very soon.
Operator: This concludes today's call. Thank you all for attending. You may now disconnect.
