Hancock Whitney Corporation (NASDAQ:HWC) Q4 2018 Earnings Conference Call - Final Transcript

Jan 17, 2019 • 09:30 am ET


Hancock Whitney Corporation (NASDAQ:HWC) Q4 2018 Earnings Conference Call - Final Transcript


Loading Event

Loading Transcript

John Hairston

eight that the growth was spread evenly across our footprint with each region exceeding $100 million in net growth. Another driver of the quarter's growth was related to our efforts to rebalance the energy portfolio. As discussed in previous quarters, we intend to maintain an approximate 5% concentration in total energy loans, but with a targeted shift in our energy portfolio that emphasizes the upstream and midstream business sectors. Our goal is to shift our energy portfolio, so it is approximately one-third energy services and two-thirds upstream and midstream business sectors.

This quarter marks the first time that energy services is less than one half of our overall energy portfolio, falling to 47% of the total. We expect our overall energy balances to remain at 5% of total loans or thereabouts. We'll continue to shift the mix throughout 2019. The chart on slide nine details progress related to energy portfolio mix thus far.

Criticized and non-performing loans improved again this quarter. Criticized commercial loans were down just over $200 million or 25% linked quarter and non-performing loans were down just under $40 million or 10% from September 30.

We would be disappointed if improvement in asset quality metrics failed to continue and we expect to approach peer levels over the next several quarters. We did have one large energy services-related charge-off this quarter at $16 million, which was previously reserved for. While we certainly don't want to see losses in any level, we believe we have addressed the last sizable issue in the portfolio of credits we stressed at the beginning of the cycle and are pleased that our estimates proved to be generally reliable.

We would be disappointed if any additional energy charge-offs resulted in a material impact on provision. That doesn't mean there is any guarantee of zero charge-offs or zero recoveries. It means we believe we have reached the normal course of business due to the waning energy cycle. For the time being, we will maintain our current ample energy reserve until remaining criticized energy credit percentages normalize. The remaining $12 million in charge-offs were unremarkable with a $5 million loss on a single non-energy C&I credit, which like the energy services credit was previously reserved for. This charge does not represent anything systemic and was a unique event. The EPS, ROA and ROTCE results allowed us to achieve our important 2019 corporate strategic objectives a year early and we adopted new objectives for fourth quarter 2020 that are detailed on slide 20. These updated CSOs reflect our expectations of continued performance and profitability improvement in the future.

I will now turn the call over to Mike for a few additional comments and details.

Mike Achary

Thanks, John; and good morning to everyone. As John said, it was a solid quarter. Fourth quarter EPS was $1.10 with net income up 15% from last quarter. On an operating basis, EPS was $1.12, so up $0.11 per share from last quarter. Non-operating expense items for the quarter totaled $2.5 million and