GULFPORT, Miss., April 18, 2017 (GLOBE NEWSWIRE) -- Hancock Holding Company (Nasdaq:HBHC) today announced its financial results for the first quarter of 2017. Net income for the first quarter of 2017 was $49.0 million, or $.57 per diluted common share (EPS), compared to $51.8 million, or $.64 EPS in the fourth quarter of 2016 and $3.8 million, or $.05 EPS, in the first quarter of 2016. The first quarter of 2017 includes a full quarter impact of the 6.325 million shares issued in the mid-December 2016 common stock offering ($.04 per share impact), $6.5 million of acquisition costs related to the First NBC Bank (FNBC) transaction ($.05 per share) that was completed in the first quarter, partially offset by a $4.4 million gain from the sale of selected Hancock Horizon funds ($.03 per share). The first quarter of 2016 included a $60.0 million ($.49 per share) provision for credit losses related to the recent energy cycle.
Highlights of the company’s first quarter 2017 results (compared to fourth quarter 2016):
- Includes a partial quarter impact from the acquisition of selected assets and liabilities of FNBC totaling $2.9 million, or $.03 per share, excluding the acquisition costs noted above
- Acquired 9 branches from FNBC on March 10, 2017; operational conversion expected in mid-May 2017 with the simultaneous closure of 10 overlapping branches
- Total loans up $1.5 billion; includes $1.2 billion from the FNBC transaction (net of the fair value discount or “loan mark”)
- Energy loans comprise 7.1% of total loans, down from 8.4%; allowance for the energy portfolio totals $83.7 million, or 6.5% of energy loans
- Total deposits up $498 million; includes $398 million from the FNBC transaction
- Purchased $604 million of FHLB advances from FNBC
- Core pre-provision net revenue (PPNR) of $93.3 million, up $6.1 million or 7%
- Net interest margin (NIM) of 3.37% up 11 basis points (bps); core NIM up 10 bps to 3.29%
- Tangible common equity (TCE) ratio down 70 bps to 7.94%; reflects partial use of capital raised in December 2016
“This quarter reflects the continuation of our strategy designed to enhance long-term shareholder value,” said President and CEO John M. Hairston. “Late last year we successfully raised capital that was quickly deployed in a transaction that is already demonstrating financially compelling returns on investment. Our core PPNR improved just over $6 million, or 7%, linked-quarter, the core NIM increased 10 bps and our capital remains solid at just under 8%. We brought our energy concentration down to 7% and our reserve for energy credits remains strong at 6.5%. I am proud of our team’s accomplishments and look forward to building on the momentum carried forward from 2016.”
Loans
Total loans at March 31, 2017 were $18.2 billion, up approximately $1.5 billion, or 9%, linked-quarter. The increase includes approximately $1.2 billion from the FNBC transaction (net of the loan mark). Excluding the impact of FNBC, loans grew $267 million, or 2% linked-quarter. Loans to energy-related companies decreased $123 million during the first quarter.
There was growth throughout the markets across our footprint and in our mortgage and equipment finance lines of business.
Average loans totaled $17.3 billion for the first quarter of 2017, up $979 million, or 6%, linked-quarter.
Energy
At March 31, 2017, loans to the energy industry totaled just under $1.3 billion, or 7.1% of total loans. As noted earlier, the energy portfolio was down $123 million, or 9% linked-quarter, and is comprised of credits to both the exploration and production (E&P) sector and the support and services sectors. Payoffs and paydowns of approximately $160 million, plus charge-offs of approximately $23 million, were partially offset by approximately $60 million in net increases.
The impact and severity of future risk rating migration, as well as any associated provisions or net charge-offs, will depend on overall oil prices and the duration of the energy cycle, that began in November 2014. As previously noted, even with improving oil prices, management still expects a continued lag in the recovery of energy service and support credits. Reserve-based lending credits are showing signs of improvement given the stabilization in oil prices, and we expect improvement in land-based services, and non-drilling services in the Gulf of Mexico to follow. During the first quarter of 2017 there were a few reserve-based lending credits upgraded as part of the recent shared national credit (SNC) exam.
Management currently estimates that charge-offs from energy-related credits could approximate $65-$95 million over the duration of the cycle, of which approximately $65 million has been taken to-date ($23 million in the first quarter of 2017). While we expect additional charge-offs in the portfolio, we continue to believe the impact of the energy cycle on our loan portfolio will be manageable, our reserve is adequate and our capital will remain solid.
Deposits
Total deposits at March 31, 2017 were $19.9 billion, up $498 million, or 3%, from December 31, 2016. The increase includes $398 million assumed in the FNBC transaction. Average deposits for the first quarter of 2017 were $19.2 billion, up $336 million, or 2%, linked-quarter.
Noninterest-bearing demand deposits (DDAs) totaled $7.7 billion at March 31, 2017, up $64 million, or 1%, from December 31, 2016. DDAs comprised 39% of total period-end deposits at March 31, 2017.
Interest-bearing transaction and savings deposits totaled $7.2 billion at the end of the first quarter of 2017, up $252 million, or 4%, from December 31, 2016. Time deposits of $2.4 billion were up $150 million, or 7%, while interest-bearing public fund deposits increased $32 million, or 1%, to $2.6 billion at March 31, 2017.
Asset Quality
Nonperforming assets (NPAs) totaled $327 million at March 31, 2017, down $50 million from December 31, 2016. During the first quarter of 2017, total nonperforming loans decreased approximately $48 million, while foreclosed and surplus real estate (ORE) and other foreclosed assets decreased approximately $2 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 1.79% at March 31, 2017, down 46 bps from December 31, 2016.
The total allowance for loan losses (ALLL) was $213.6 million at March 31, 2017, down $15.9 million from December 31, 2016. The ratio of the allowance for loan losses to period-end loans was 1.17% at March 31, 2017, down from 1.37% at December 31, 2016. There is no allowance for loan losses on the loans purchased from FNBC; however, a 4% loan mark has been applied to those loans. The allowance for credits in the energy portfolio totaled $83.7 million, or 6.5% of energy loans, at March 31, 2017, down from $106.5 million, or 7.5% of energy loans, at December 31, 2016.
Net charge-offs from the non-purchased credit impaired (PCI) loan portfolio were $29.9 million, or 0.70% of average total loans on an annualized basis in the first quarter of 2017, up from $20.4 million, or 0.50% of average total loans in the fourth quarter of 2016. Included in the first quarter’s total are approximately $23.0 million in charge-offs related to energy credits. Energy charge-offs were approximately $12.0 million in the fourth quarter of 2016.
During the first quarter of 2017, Hancock recorded a total provision for loan losses of $16.0 million, up from $14.5 million in the fourth quarter of 2016.
Net Interest Income and Net Interest Margin
Net interest income (TE) for the first quarter of 2017 was $190.0 million, up $15 million from the fourth quarter of 2016. During the first quarter, the impact on net interest income from purchase accounting adjustments (PAAs) increased $0.8 million to $4.6 million. Excluding the impact from purchase accounting items, core net interest income increased $14 million linked-quarter. The increase is due to both the increase in volume during the quarter in addition to a change in balance sheet mix. Average earning assets were $22.8 billion for the first quarter of 2017, up $1.3 billion, or 6%, from the fourth quarter of 2016.
The reported net interest margin (TE) was 3.37% for the first quarter of 2017, up 11 bps from the fourth quarter of 2016. The core net interest margin (reported net interest income (TE) excluding total net purchase accounting adjustments, annualized, as a percent of average earning assets) increased 10 bps to 3.29% during the first quarter of 2017. The main drivers of the expansion were a change in the mix of earning assets during the quarter coupled with an increase in the yields on both the loan and bond portfolios, partially offset by a slight increase in the cost of funds. The increase in the loan yield was mainly related to the purchase of FNBC loans at a 5%+ yield, and the increase in the securities portfolio yield was mainly related to a change in rates and a decrease in premium amortization.
Noninterest Income
Noninterest income totaled $63.5 million for the first quarter of 2017, down $2.4 million, or 4%, from the fourth quarter of 2016. Included in the total is amortization of $1.1 million related to the FDIC indemnification asset, down from $1.2 million in the fourth quarter of 2016. Also included in the total is a $4.4 million gain on the sale of selected Hancock Horizon funds. Excluding the impact of these items, noninterest income totaled $60.2 million, down $6.9 million, or 10%, linked-quarter.
Service charges on deposits totaled $19.2 million for the first quarter of 2017, up $0.5 million, or 3%, from the fourth quarter of 2016. Bank card and ATM fees totaled $12.5 million, up $0.2 million, or 1%, from the fourth quarter of 2016.
Trust fees totaled $11.2 million, down $0.6 million, or 5% linked-quarter. Investment and annuity income and insurance fees totaled $5.3 million, up $0.2 million, or 4% linked-quarter.
Fees from secondary mortgage operations totaled $3.6 million for the first quarter of 2017, down $0.7 million, or 17% linked-quarter.
Other noninterest income (excluding the amortization of the FDIC indemnification asset and gain on sale noted above) totaled $8.5 million, down $6.2 million, or 42%, from the fourth quarter of 2016. The main drivers of the linked-quarter decrease were a $3.3 million gain on the sale of property and $3.0 million of higher derivative income in the fourth quarter of 2016.
Noninterest Expense & Taxes
Noninterest expense for the first quarter of 2017 totaled $163.5 million, up $7.3 million, or 5%, from the fourth quarter of 2016. Included in the total is $6.5 million of acquisition costs associated with the FNBC transaction. Excluding this item, operating expense totaled $157.1 million, up $0.8 million, or less than 1%, linked-quarter. The discussion below excludes the impact of acquisition costs.
Total personnel expense was $89.0 million in the first quarter of 2017, up $1.5 million, or 2%, from the fourth quarter of 2016.The increase is mainly related to the reset of personnel taxes in the first quarter of each year.
Occupancy and equipment expense totaled $14.5 million in the first quarter of 2017, up $0.5 million, or 4%, from the fourth quarter of 2016.
Amortization of intangibles totaled $4.7 million for the first quarter of 2017, down slightly linked-quarter.
Net gains on ORE dispositions exceeded ORE expense by $13 thousand compared to $0.6 million of net expense in the fourth quarter of 2016. Management does not expect this level of ORE expense to be sustainable in future quarters.
Other operating expense (excluding ORE) totaled $48.9 million in the first quarter of 2017, down $0.5 million, or 1%, from the fourth quarter of 2016.
The effective income tax rate for the first quarter of 2017 was 25%. The rate was at the lower end of the guidance range due to a change in accounting treatment for stock compensation. Management expects an effective tax rate of 25-27% for the remainder of 2017, excluding any changes in the tax code. The effective income tax rate continues to be less than the statutory rate of 35% due primarily to tax-exempt income and tax credits.
Capital
Common shareholders’ equity at March 31, 2017 totaled $2.8 billion. The tangible common equity (TCE) ratio was 7.94%, down 70 bps from December 31, 2016. On December 16, 2016 the company issued $259 million, or 6.325 million shares, of its common stock. On December 30, 2016 the company announced it would deploy a portion of the net proceeds from its common stock offering to purchase certain assets and liabilities, including 9 branches, from First NBC Bank. The transaction closed on March 10, 2017. Additional capital ratios are included in the financial tables.
Conference Call and Slide Presentation
Management will host a conference call for analysts and investors at 9:00 a.m. Central Time on Wednesday, April 19, 2017 to review the results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock’s website at www.hancockwhitney.com/investors. A link to the release with additional financial tables, and a link to a slide presentation related to first quarter results are also posted as part of the webcast link. To participate in the Q&A portion of the call, dial (877) 564-1219 or (973) 638-3429. An audio archive of the conference call will be available under the Investor Relations section of our website. A replay of the call will also be available through April 26, 2017 by dialing (855) 859-2056 or (404) 537-3406, passcode 97320912.
About Hancock Holding Company
Hancock Holding Company is a financial services company with regional business headquarters and locations across the Gulf South. The company’s banking subsidiary provides comprehensive financial products and services through Hancock Bank locations in Mississippi, Alabama, and Florida and Whitney Bank locations in Louisiana and Texas, including traditional, online, and mobile banking; commercial and small business banking; private banking; trust and investment services; certain insurance services; and mortgage services. More information is available at www.hancockwhitney.com.
Non-GAAP Financial Measures
This news release includes non-GAAP financial measures to describe Hancock’s performance. The reconciliations of those measures to GAAP measures are provided within Appendix A on page 14 of the additional financial tables.
In this news release, consistent with Securities and Exchange Commission Industry Guide 3, the company presents net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“TE”) basis. The TE basis adjusts for the tax-favored status of net interest income from certain loans and investments using a federal tax rate of 35% to increase tax-exempt interest income to a taxable-equivalent basis. The company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.
Over the past several quarters we have disclosed our focus on strategic initiatives that were designed to replace declining levels of purchase accounting income from acquisitions with improvement in core income, which the company defines as income excluding net purchase accounting income. The company presents core income non-GAAP measures including core net interest income and core net interest margin, core revenue and core pre-provision net revenue. These measures are provided to assist the reader with a better understanding of the company’s performance period over period as well as providing investors with assistance in understanding the success management has experienced in executing its strategic initiatives.
We define Core Net Interest Income as net interest income (TE) excluding net purchase accounting accretion resulting from the fair market value adjustments related to acquired operations. We define Core Net Interest Margin as reported core net interest income expressed as a percentage of average earning assets. A reconciliation of reported net interest income to core net interest income and reported net interest margin to core net interest margin is included in Appendix A.
We define Core Revenue as core net interest income and noninterest income less the amortization of the FDIC loss share receivable related to loans acquired in an FDIC assisted transaction and other nonoperating revenue. A reconciliation of total revenue to core revenue is included in Appendix A.
We define Core Pre-Provision Net Revenue as core revenue less noninterest expense, excluding nonoperating items and intangible asset amortization. Management believes that core pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. A reconciliation of net income to core pre-provision net revenue is included in Appendix A.
Important Cautionary Statement About Forward-Looking Statements
This news release contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements that we may make include statements regarding balance sheet and revenue growth, the provision for loans losses, loan growth expectations, management’s predictions about charge-offs for loans, including energy-related credits, the impact of changes in oil and gas prices on our energy portfolio, and the downstream impact on businesses that support the energy sector, especially in the Gulf Coast region, the impact of the First NBC transaction on our performance and financial condition, including our ability to successfully integrate the business, deposit trends, credit quality trends, net interest margin trends, future expense levels, success of revenue-generating initiatives, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, and the financial impact of regulatory requirements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.
Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 and in other periodic reports that we file with the SEC.
| HANCOCK HOLDING COMPANY | ||||||||||
| QUARTERLY HIGHLIGHTS | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended | ||||||||||
| (dollars in thousands, except per share data) | 3/31/2017 | 12/31/2016 | 9/30/2016 | 6/30/2016 | 3/31/2016 | |||||
| INCOME STATEMENT DATA | ||||||||||
| Net interest income | $181,691 | $167,798 | $163,513 | $164,969 | $162,836 | |||||
| Net interest income (TE) (a) | 189,989 | 175,314 | 170,297 | 171,165 | 168,179 | |||||
| Provision for loan losses | 15,991 | 14,455 | 18,972 | 17,196 | 60,036 | |||||
| Noninterest income | 63,491 | 65,893 | 63,008 | 63,694 | 58,186 | |||||
| Noninterest expense | 163,542 | 156,283 | 149,058 | 150,942 | 156,032 | |||||
| Net income | 49,014 | 51,831 | 46,719 | 46,907 | 3,839 | |||||
| Nonoperating expense, net - pre-tax (for informational purposes only) | 2,111 | - | - | - | 4,978 | |||||
| PERIOD-END BALANCE SHEET DATA | ||||||||||
| Loans | $18,204,868 | $16,752,151 | $16,070,821 | $16,035,796 | $15,978,124 | |||||
| Securities | 5,001,273 | 5,017,128 | 4,843,112 | 4,806,370 | 4,667,837 | |||||
| Earning assets | 23,278,297 | 21,881,520 | 21,085,398 | 21,037,622 | 20,821,513 | |||||
| Total assets | 25,485,026 | 23,975,302 | 23,108,730 | 23,063,790 | 22,809,370 | |||||
| Noninterest-bearing deposits | 7,722,279 | 7,658,203 | 7,543,041 | 7,151,416 | 7,108,598 | |||||
| Total deposits | 19,922,020 | 19,424,266 | 18,885,477 | 18,816,869 | 18,656,150 | |||||
| Common shareholders' equity | 2,763,622 | 2,719,768 | 2,489,127 | 2,463,365 | 2,421,040 | |||||
| AVERAGE BALANCE SHEET DATA | ||||||||||
| Loans | $17,303,044 | $16,323,897 | $16,023,458 | $16,059,846 | $15,848,770 | |||||
| Securities (b) | 5,037,286 | 4,939,240 | 4,707,224 | 4,648,807 | 4,528,090 | |||||
| Earning assets | 22,770,001 | 21,462,188 | 21,197,406 | 21,147,029 | 20,910,668 | |||||
| Total assets | 24,756,506 | 23,437,530 | 23,202,790 | 23,138,591 | 22,932,515 | |||||
| Noninterest-bearing deposits | 7,462,258 | 7,534,392 | 7,277,568 | 7,079,426 | 7,033,680 | |||||
| Total deposits | 19,247,858 | 18,912,155 | 18,710,236 | 18,717,755 | 18,281,754 | |||||
| Common shareholders' equity | 2,733,089 | 2,517,418 | 2,472,398 | 2,430,005 | 2,431,747 | |||||
| COMMON SHARE DATA | ||||||||||
| Earnings per share - diluted | $0.57 | $0.64 | $0.59 | $0.59 | $0.05 | |||||
| Cash dividends per share | 0.24 | 0.24 | 0.24 | 0.24 | 0.24 | |||||
| Book value per share (period-end) | 32.70 | 32.29 | 32.09 | 31.77 | 31.24 | |||||
| Tangible book value per share (period-end) | 23.19 | 23.87 | 22.89 | 22.50 | 21.90 | |||||
| Weighted average number of shares - diluted | 84,624 | 79,067 | 77,677 | 77,680 | 77,672 | |||||
| Period-end number of shares | 84,517 | 84,235 | 77,571 | 77,538 | 77,508 | |||||
| Market data | ||||||||||
| High sales price | $49.50 | $45.50 | $32.94 | $27.84 | $25.84 | |||||
| Low sales price | 41.71 | 31.73 | 24.49 | 21.93 | 20.01 | |||||
| Period-end closing price | 45.55 | 43.10 | 32.43 | 26.11 | 22.96 | |||||
| Trading volume | 45,119 | 43,664 | 42,809 | 41,668 | 56,319 | |||||
| PERFORMANCE RATIOS | ||||||||||
| Return on average assets | 0.80% | 0.88% | 0.80% | 0.82% | 0.07% | |||||
| Return on average common equity | 7.27% | 8.19% | 7.52% | 7.76% | 0.64% | |||||
| Return on average tangible common equity | 9.92% | 11.42% | 10.58% | 11.04% | 0.91% | |||||
| Tangible common equity ratio (c) | 7.94% | 8.64% | 7.93% | 7.81% | 7.69% | |||||
| Net interest margin (TE) (a) | 3.37% | 3.26% | 3.20% | 3.25% | 3.23% | |||||
| Average loan/deposit ratio | 89.90% | 86.31% | 85.64% | 85.80% | 86.69% | |||||
| Efficiency ratio (d) | 61.16% | 62.82% | 61.80% | 62.14% | 64.47% | |||||
| Allowance for loan losses as a percent of period-end loans | 1.17% | 1.37% | 1.47% | 1.41% | 1.36% | |||||
| Annualized net non-FDIC acquired charge-offs to average loans | 0.70% | 0.50% | 0.24% | 0.20% | 0.54% | |||||
| Allowance for loan losses to non-performing loans + accruing loans 90 days past due | 68.77% | 63.58% | 74.75% | 73.01% | 74.55% | |||||
| Noninterest income as a percent of total revenue (TE) (a) | 25.05% | 27.32% | 27.01% | 27.12% | 25.70% | |||||
| FTE headcount | 3,819 | 3,724 | 3,747 | 3,723 | 3,819 | |||||
(a) Tax-equivalent (TE) amounts are calculated using a federal income tax rate of 35%.
(b) Average securities does not include unrealized holding gains/losses on available for sale securities.
(c) The tangible common equity ratio is common shareholders' equity less intangible assets divided by total assets less intangible assets.
(d) The efficiency ratio is noninterest expense to total net interest income (TE) and noninterest income, excluding amortization of purchased intangibles, and nonoperating items.