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

Jan 17, 2019 • 09:30 am ET

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

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Presentation
Executive
Mike Achary

were partially offset by a $600,000 net gain on the sale of securities related to a portfolio restructuring we executed in the fourth quarter. So in late fourth quarter, we sold 192,000 shares of our VISA-B stock for a net gain of $33.2 million. That gain offset losses totaling $32.7 million associated with the sale of $481 million of lower yielding bonds at 1.97% and $116 million of lower yielding municipal loans at 2.02%.

Proceeds from the sales were used to purchase $260 million of higher yielding bonds at 3.59% and to pay down $346 million of advances at 2.37%. The VISA-B trade and related restructuring improves the Company's yields on investment securities and loans, while also improving our funding mix in 2019. We expect our net interest margin to benefit by a total of 7 basis points as a result of these trades and to boost EPS by $0.05 per share, annualized. Please see a summary of the restructuring transactions on slide seven of our earnings deck.

Last quarter we talked about opportunities to expand our NIM going forward. So for the fourth quarter, we were able to expand our NIM by 3 basis points to 3.39%. The chart on the bottom right of slide 13 shows the drivers of that expansion. There were no net interest recoveries or reversals in the fourth quarter, compared to 2 basis points of net recoveries in the third quarter. That brought the start point for the fourth quarter NIM down to 3.34%. So overall, we were able to expand our NIM by 5 basis points this quarter.

The portfolio restructuring, I mentioned earlier, was completed late in the quarter, but did add 2 basis points of NIM improvement in the fourth quarter, with an additional 5 basis points expected in the first quarter of next year. Favorable changes in our funding mix, due to seasonal deposit growth, added 2 basis points, as did the favorable earning asset mix from run off of bonds to fund loan growth. As we move into the first quarter '19, we expect the NIM will expand by approximately 4 basis points to 6 basis points. How our funding mix performance in the first quarter will likely determine what end of that range the NIM comes in at.

Fourth quarter seasonality drove a nice increase in deposits, which resulted in a favorable funding mix for the quarter and helped us report a bit lower deposit beta. Total deposits were up $732 million linked quarter with most of that growth in DDA and public funds. In addition, there was a shift from brokered to retail CDs. A reminder that the growth related to public funds is seasonal and therefore, we do expect a portion will begin to run off in the first quarter. This will change our funding mix once again and could lead to a higher cost of funds in the first quarter.

Seasonality also positively impacted bank card and ATM fees this quarter, while both trust fees