Hancock Whitney Corporation (NASDAQ:HWC) Q2 2019 Earnings Conference Call - Final Transcript
Jul 17, 2019 • 09:30 am ET
Yes, sir. Thank you. [Operator Instructions] And our first question will come from Catherine Mealor with KBW. Your line is now open.
Thanks. Good morning.
John M. Hairston
Good morning, Catherine.
I'm going to start with the margin. And I appreciate that it's hard to really think about guidance if rates are cut. But could you kind of dig into that just a little bit more, Mike, and maybe talk through some of the strategies that you think you may have at your fingertips to try to keep the NIM more stable, and prevent the margin from moving lower if rates are in fact, cut? Maybe talk about new loan to deposit ratio and how quickly you think you can actually lower deposits, if we really do get into that environment? Thanks.
Michael M. Achary
Sure, Catherine, I'll be glad to. So certainly, if the Fed does cut rates by, say, 25 basis points later this month, we do have a bit of a headwind, obviously to overcome on a full quarter's impact. That's probably about 2 to 4 basis points or so. And certainly that comes from our concentration primarily in LIBOR based loans. So we have about 31% of our loan book that's explicitly tied to that index. So our game plan really involves mitigating as much of that 2 to 4 basis points as possible, by barely -- bye being fairly aggressive in cutting deposit costs.
As a reminder, we have a relatively low loan to deposit ratio at around 86%, 87%. And so we think that gives us a great deal of flexibility to be pretty aggressive in cutting rates. Also, as a reminder, we have a $3 billion public fund book that has nearly a 100% deposit beta, and then certainly we have about $1 billion, $1.2 billion, or so in wholesale funding sources that have high betas, obviously, as well.
So that's how we're kind of thinking about a Fed rate cut potentially later this month. And really, those are our strategies to kind of deal with that. That makes sense?
That -- it does, very helpful. Thank you. And then one follow-up just on the expense growth. So you talked about how the back half of the year is going to be higher expenses because of the tax spend and that you carry through next year. As we think about expense growth rate, as we move through next year, would it be fair to assume that the growth rate could flow next year versus this year, just as some of those costs are already embedded in your expense base, so that the growth rate could actually did soften a little bit, which may help you hit some of those CSO goals?
Michael M. Achary
Well, kind of think about the little bit of a change in guidance that we gave for the back half of '19 around expenses. And you really kind of go through the math of kind of backing out the non-permanent expenses we had in the second quarter as well