HANCOCK WHITNEY CORPORATION FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with theSEC include, but are not limited to, the following:
• the negative impacts and disruptions resulting from the outbreak of the
novel coronavirus, or COVID-19 (and the variants thereof), on the economies
and communities we serve, which has had and may continue to have an adverse
impact on our business operations and performance, and has and may continue
to have a negative impact on our credit portfolio, stock price, borrowers
and the economy as a whole both globally and domestically;
• government or regulatory responses to the COVID-19 pandemic, including the
risk of inflation and interest rate increases resulting from monetary and
fiscal stimulus response, which may have unanticipated adverse effects on
our customers, and our financial condition and results of operations;
• balance sheet and revenue growth expectations may differ from actual results;
• the risk that our provision for credit losses may be inadequate or may be
negatively affected by credit risk exposure;
• loan growth expectations;
• the impact of Paycheck Protection Program (PPP) loans on our results;
• management's predictions about charge-offs;
• the risk that our enterprise risk management framework may not identify or
address risks adequately, which may result in unexpected losses;
• the impact of future business combinations upon our performance and
financial condition including our ability to successfully integrate the
businesses;
• deposit trends;
• credit quality trends;
• changes in interest rates;
• the impact of reference rate reform;
• net interest margin trends;
• future expense levels;
• improvements in expense to revenue (efficiency ratio);
• success of revenue-generating and cost reduction initiatives;
• the effectiveness of derivative financial instruments and hedging activities
to manage risks;
• risks related to our reliance on third parties to provide key components of
our business infrastructure, including the risks related to disruptions in
services or financial difficulties of a third-party vendor;
• risks related to the ability of our operational framework to manage risks
associated with our business such as credit risk and operation risk,
including third-party vendors and other service providers, which could among
other things, result in a breach of operating or security systems as a
result of a cyber-attack or similar act;
• projected tax rates;
• future profitability;
• purchase accounting impacts, such as accretion levels;
• our ability to identify and address potential cybersecurity risks,
heightened by the increased use of our virtual private network platform,
including data security breaches, credential stuffing, malware,
"denial-of-service" attacks, "hacking" and identity theft, a failure of
which could disrupt our business and result in the disclosure of and/or
misuse or misappropriation of confidential or proprietary information,
disruption or damage to our systems, increased costs, losses, or adverse
effects to our reputation;
• our ability to receive dividends from
liquidity, including our ability to pay dividends or take other capital
actions;
• a material decrease in net income or a net loss over several quarters could
result in a decrease in, or the elimination of, our quarterly cash dividend;
• the impact on our financial results, reputation, and business if we are
unable to comply with all applicable federal and state regulations or other
supervisory actions or directives and any necessary capital initiatives;
• our ability to effectively compete with other traditional and
non-traditional financial services companies, some of whom possess greater
financial resources than we do or are subject to different regulatory
standards than we are;
• our ability to maintain adequate internal controls over financial reporting;
• potential claims, damages, penalties, fines and reputational damage
resulting from pending or future litigation, regulatory proceedings and
enforcement actions, including costs and effects of litigation related to
our participation in stimulus programs associated with the government's
response to the COVID-19 pandemic;
• the financial impact of future tax legislation;
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• the effects of war or other conflicts, acts of terrorism, natural disasters
such as hurricanes, freezes, flooding and other man-made disasters, such as
oil spills in the
pandemics, or other catastrophic events that may affect general economic
conditions; and
• changes in laws and regulations affecting our businesses, includinggovernmental monetary and fiscal policies, legislation and regulations
relating to bank products and services, as well as changes in the
enforcement and interpretation of such laws and regulations by applicable
governmental and self-regulatory agencies, which could require us to change
certain business practices, increase compliance risk, reduce our revenue,
impose additional costs on us, or otherwise negatively affect our
businesses.
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 endedDecember 31, 2020 and in other periodic reports that we file with theSEC . You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law. OVERVIEW Non-GAAP Financial Measures Management's Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP. A reconciliation of those measures to GAAP measures are provided within the Selected Financial Data section that appears later in this item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful. Consistent with the provisions of subpart 229.1400 of theSecurities and Exchange Commission's Regulation S-K, "Disclosures by Bank and Savings and Loan Registrants," we present 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 statutory federal tax rate of 21% to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources. We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company's performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. These non-GAAP measures may reference the concept "operating." We use the term "operating" to describe a financial measure that excludes income or expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in our business. We define Operating Pre-Provision Net Revenue as total revenue (te) less noninterest expense, excluding nonoperating items. Management believes that operating 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. 39
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Table of Contents Current Economic Environment Economic recovery continued during the third quarter of 2021, albeit at a slower pace in some respects when compared to the previous quarter. The rate of unemployment again declined, falling to 4.8% inSeptember 2021 from 5.9% inJune 2021 . Gross Domestic Product displayed 2% growth, slightly short of consensus and smaller than the growth experienced in the preceding four fiscal quarters. Supply chain interruption, labor shortages and wage and pricing pressures intensified during the period, largely the result of the surge in COVID-19 infections caused by the Delta variant of the virus. While there were no widespread or pervasive restrictions on movement or business instituted in response to the surge, the rapid increase in the rate of infection and serious illness created strain on healthcare delivery in many areas in the US and prompted certain localized mandated mitigation measures and other voluntary responses, such as leisure and business event cancellations. These cancellations, continued restrictions on international travel and lagging/limited large-scale convention and other events continue to impact our markets, particularly in the central region. Parts of our footprint were further affected by Hurricane Ida, a major hurricane that made landfall in late August inSoutheast Louisiana . Along with personal and commercial property damage in some hard-hit areas, extensive damage to the region's energy grid resulted in extended power outages for a portion of our market. The effects of the storm prompted temporary evacuation for many residents and unplanned closures of businesses, schools, and other essential services. As a result, supply chain and labor constraints already present were exacerbated, and many events that foster leisure and business tourism were canceled or postponed. Certain of our fee income categories, such as ATM fees and secondary mortgage market operations, were temporarily impacted by Hurricane Ida's disruption, but those conditions are not expected to persist. Our hurricane impacted markets generally experience increased economic activity as the communities rebuild and recover from the damage. Despite the disruption to portions of our market, we continued to experience growth in our core loan portfolio, which excludes theSmall Business Administration's (SBA) Paycheck Protection Program (PPP) loans that continue to be paid down through debt forgiveness. Although loan pricing pressure continues, particularly on shorter-duration facilities, core loan growth continued across most regions and in our equipment finance and healthcare specialty business lines. Similar to last quarter, improvement in economic activity across our footprint led to an increased loan pipeline with a higher pull-through rate and a slight uptick in credit line utilization. These factors, coupled with fewer payoffs, resulted in 4% linked quarter annualized growth. Excess liquidity from PPP loan forgiveness, elevated deposit levels, and the low interest rate environment continue to pressure net interest margin. Economic Outlook We utilize economic forecasts produced byMoody's Analytics (Moody's) that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes theSeptember 2021 Moody's forecast, the most current available atSeptember 30, 2021 . The forecasts are anchored on a baseline forecast scenario, which Moody's defines as the "most likely outcome" of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario. In theSeptember 2021 baseline forecast, the near-term economic recovery was assumed to be somewhat slower in the short term compared to the assumptions included in the June forecast, largely due to the surge in cases of theCOVID-19 Delta variant and scaled back expectations regarding proposed fiscal stimulus. Following a slowdown in late 2021, Moody's expects growth will be strong in 2022. Key assumptions underlying the baseline forecast are that (1) coronavirus herd resiliency was achieved in lateAugust 2021 , with infection abatement pushed toNovember 2021 due to the Delta variant; (2) no new widespread economic shutdowns will occur in response to virus outbreaks; (3) the unemployment rate continues to decline, with fourth quarter 2021 averaging 4.5%, and full year 2021, 2022 and 2023 rates averaging 5.5%, 3.6% and 3.5%, respectively, reaching full employment by the end of 2022; (4) gross domestic product will increase an average of 6.0% in 2021, 4.3% in 2022 and 2.3% in 2023; (5) the Build Back Better infrastructure and social legislation package, forecasted to be passed in late 2021 at$2.5 trillion , will spur additional economic activity; and (6) theFederal Reserve will continue to respond to the economic impact of COVID-19 by maintaining rates at or near zero until the first quarter of 2023. The alternative Moody's forecast scenarios have varying degrees of positive and negative severity of the outcome of the economic downturn, as well as varying shapes and length of recovery. Management determined that assumptions provided for in the downside slower near-term growth (S-2) were as reasonably possible as the baseline scenario, particularly within our footprint; as such, the S-2 scenario was given equal consideration through probability weighting in our allowance for credit losses calculation atSeptember 30, 2021 . The S-2 slower near-term growth assumptions (compared to baseline) include a delay in infection abatement untilJanuary 2022 , continued supply chain disruptions, a smaller or less impactful stimulus package and a near-term rise in unemployment, resulting in a smaller increase in real consumer spending that impedes growth in late 2021 and in 2022. Uncertainty over some of the assumptions underlying the baseline forecast has increased since the second quarter due to the emergence of and resulting effects of the Delta variant of COVID-19 and the disruption caused by Hurricane Ida. These emerging risks lead to a higher weighting of the S-2 slower growth scenario in theSeptember 30, 2021 calculation of the allowance as compared toJune 30, 2021 . However, our credit loss outlook has not changed materially, and continued optimism inherent in the forecasted scenarios, coupled with improvements in our asset quality metrics allowed for a modest release of reserves during the period. 40
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Table of Contents Excess liquidity from Paycheck Protection Program (PPP) loan forgiveness and elevated customer deposit levels, coupled with the low interest rate environment are expected to continue to pressure net interest margin in the near term. We continue to focus on effectively managing our asset/liability mix to maximize those resources, and to gain efficiency within our organization. The timing of the return to pre-pandemic conditions in our footprint remains uncertain. Forward-looking information based on management's expectation of near-term performance is provided in the sections that follow. Given the economic volatility that has stemmed from the pandemic, including supply chain constraints, labor shortages and the potential for future impacts that may result from mitigation measures intended to combat variants of the virus, it is not possible to accurately predict the extent, severity or duration of these conditions or when typical operating conditions will fully resume. The continued success of government initiatives in stimulating economic activity, societal response to virus containment measures and the efficacy of vaccines and/or treatments that will control the rate of serious illness are critical to the resolution of the crisis. We continuously seek to monitor and anticipate developments, but cannot predict all of the various adverse effects COVID-19 will have on our business, financial condition, liquidity and results of operations.
Highlights of the Third Quarter 2021
We reported net income for the third quarter of 2021 of$129.6 million , or$1.46 per diluted common share (EPS), compared to$88.7 million , or$1.00 EPS in the second quarter of 2021 and$79.4 million , or$.90 EPS, in the third quarter of 2020. The third quarter of 2021 included net nonoperating income of$1.4 million (pre-tax), or$0.01 EPS (after tax), including a gain of$4.6 million from the sale of the remaining Hancock Horizon funds and a severance expense reversal of$1.9 million , partially offset by Hurricane Ida expenses of$5.1 million . The second quarter of 2021 included net nonoperating expense of$42.2 million (pre-tax), or$0.37 EPS (after tax), including costs associated with the planned closure of 18 financial centers, the Voluntary Early Retirement Incentive Program (VERIP), a reduction in force, and the redemption of subordinated notes, partially offset by a gain on the sale of Mastercard Class B common stock (Mastercard stock).
Third quarter 2021 results compared to second quarter 2021:
• Net income of
million, or
items, earnings per diluted share was up
• Operating pre-provision net revenue (PPNR) totaled
• Total loans of
loans down
loan (excluding PPP) growth of
• Total deposits of
bearing deposits of
• Negative provision for credit losses of
• Allowance for credit losses coverage remains strong at 1.92% of total
loans, or 2.00% excluding PPP loans
• Improved asset quality, with declines of 27% in nonperforming loans and
11% in criticized commercial loans
• Net interest margin was down 2 basis points (bps) to 2.94%, mainly from
the continued impact of excess liquidity as a result of PPP loan
forgiveness
• Tangible common equity (TCE) ratio of 7.85%, up 15 bps
We achieved solid third quarter performance despite the impact of Hurricane Ida
and the COVID-19 Delta surge. Net income was up, with operating results driven
largely by a $27 million negative provision, reflecting continued improved
economic conditions and asset quality. Despite a 2 bp compression in the net
interest margin, net interest income (te) was virtually unchanged
linked-quarter. Fee income declined, partly as a result of Hurricane Ida
disruptions; however, our operating expense was essentially flat as efficiency
initiatives announced earlier in the year are maturing and reflected in our
results. Our balance sheet remained strong with continued core loan growth and
an increase in noninterest-bearing deposits. Capital remained solid, with TCE
improving 15 bps to 7.85%.
As an organization, we are proud to have aided in hurricane relief efforts and
provided recovery assistance to our impacted communities by maintaining business
continuity and through the distribution of meals, ice and fuel to those in need.
Reinforced with technological and structural enhancements we have implemented
since Hurricane Katrina, our corporate headquarters in Gulfport, Mississippi ,
and technology and operations centers opened without storm damage. While we had
damage to facilities, we do not expect a financial impact other than the $5.1
million reflected in our third quarter results, including no significant
provision for credit loss.
We believe our third quarter results and near term guidance are the building
blocks for our path to an efficiency ratio target of 55% by fourth quarter of
2022. Our path to this target considers continued momentum in core loan growth,
maintaining our target level of expenses with additional efficiency initiatives,
including strategic procurement, and deployment of excess liquidity into loans
and modest investment in the bond portfolio. Additional information related to
our expectations is included in the discussions that follow.
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Table of Contents RESULTS OF OPERATIONS Net Interest Income
Net interest income (te) for the third quarter of 2021 was
The relatively flat net interest income (te) compared to the second quarter of 2021 was due to increases from an additional accrual day and reduction in cost of funds, offset by a$1.3 million decrease in interest recoveries and an unfavorable change in the earning asset mix. The reduction in cost of funds reflects a favorable change in the deposit mix that includes increased noninterest-bearing and lower-cost interest-bearing transaction deposits, while higher-cost time deposits and interest bearing public fund deposits were down, as well as lower borrowing costs from the redemption of$150 million in subordinated notes late in the second quarter. The unfavorable change in average earning assets was a result of a net decrease in loans, largely due to the forgiveness of PPP loans offset by increases in lower-yielding short-term investments and securities from investments made late in the prior quarter. The net interest margin for the third quarter of 2021 was 2.94%, down 2 bps from 2.96% in the second quarter of 2021. The compression compared to the prior quarter was driven by declines of 6 bps attributable to a change in earning asset mix and 1 bp from lower interest recoveries, partially offset by an increase of 3 bps attributable to lower deposit costs, due in part to strategic pricing and an improving mix and 2 bps due to the full quarter impact of the subordinated note redemption. The$0.9 million decrease in net interest income (te) compared to the third quarter of 2020 was attributable to the impact of the low interest rate environment on average earning assets combined with an unfavorable change in earning asset mix, a$0.8 million increase in securities premium amortization, and a$1.6 million decrease in purchase accounting accretion, partially offset by the impact of a$2.7 billion increase in average earning assets, a$3.5 million increase in interest recoveries, and an 18 bp decrease in funding costs as a result of a combination of the interest rate environment, strategic deposit pricing and a favorable change in deposit mix. Average earning asset growth compared to the same quarter last year of$2.7 billion , or 9%, was driven by excess liquidity from a$2.5 billion increase in average deposits. The increase in average earning assets reflects an unfavorable change in mix, with a$2.2 billion increase in short-term investments, a$2.0 billion increase in securities, and a$1.5 billion decrease in loans. The net interest margin was down 29 bps compared to the third quarter of 2020 as a result of the low interest rate environment and a less favorable average earning asset mix, partially offset by a favorable change in the funding mix. Compared to the third quarter of 2020, the yield on earning assets was down 47 bps, while the cost of funds decreased 18 bps to 0.12% from 0.30%, as we strategically priced downward interest-bearing transaction and time deposits by reducing promotional rates and used excess liquidity to reduce the balance of higher costing brokered deposits. The cost of long-term debt was 5.08%, down 52 bps from 5.60% in the third quarter of 2020 due to theJune 2021 redemption of subordinated notes. Net interest income (te) for the nine months endedSeptember 30, 2021 was$712.5 million , down$1.6 million , or less than 1%, from the same period in 2020, due in part to one fewer accrual day. The impacts of changes in volume/mix and rates within earning assets and interest-bearing liabilities largely offset, as illustrated in the table that follows this discussion. The net interest margin was 3.00% for the nine months endedSeptember 30, 2021 , down 29 bps from the same period in 2020. We anticipate that the net interest margin could compress an additional 4 bps in the fourth quarter of 2021, primarily due to elevated levels of excess liquidity as a result of PPP loan forgiveness, absent opportunities to deploy liquidity. We currently expect the net interest margin to be down 30 bps for the full year of 2021 versus the 2020 net interest margin of 3.27%. Net interest income (te) is expected to be slightly down linked-quarter and to be down approximately 1% for the full year 2021 as compared to 2020. 42
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The following tables detail the components of our net interest income (te) and
net interest margin.
Three Months Ended
September 30, 2021 June 30, 2021 September 30, 2020
(dollars in millions) Volume Interest (d) Rate Volume Interest (d) Rate Volume Interest (d)
Rate
Average earning assets Commercial & real estate loans (te) (a)$ 16,918.4 $ 150.3 3.52
%
2,376.5 21.5 3.63 % 2,443.0 23.9 3.92 % 2,807.5 27.5 3.92 %
Consumer loans 1,646.3 20.4 4.90 % 1,712.7 21.0 4.92 % 1,993.1 24.0 4.79 %
Loan fees & late charges - 13.5 0.00 % - 16.5 0.00 % - 15.2 0.00 %
Total loans (te) (b) 20,941.2 205.7 3.90 % 21,388.8 210.7 3.95 % 22,407.8 222.3 3.95 %
Loans held for sale 82.6 0.6 3.06 % 89.6 0.6 2.90 % 112.2 0.8 2.96 %
US Treasury and government
agency securities 395.6 1.6 1.59 % 291.0 1.2 1.67 % 165.6 0.8 1.99 %
Mortgage-backed securities and
collateralized mortgage
obligations 7,033.7 31.4 1.79 % 6,961.4 31.0 1.78 % 5,326.2 29.4 2.21 %
Municipals (te) 925.0 6.8 2.93 % 930.1 6.8 2.94 % 889.5 6.7 3.01 %
Other securities 14.5 0.1 3.56 % 12.3 0.1 3.64 % 8.0 0.1 4.33 %
Total securities (te) (c) 8,368.8 39.9 1.91 % 8,194.8 39.1 1.91 % 6,389.3 37.0 2.31 %
Total short-term investments 2,704.8 1.0 0.15 % 2,522.3 0.7 0.11 % 503.0 0.1 0.10 %
Total earning assets (te) $ 32,097.4 $ 247.2 3.06 % $ 32,195.5 $ 251.1 3.13 % $ 29,412.3 $ 260.2 3.53 %
Average interest-bearing
liabilities
Interest-bearing transaction
and savings deposits $ 11,341.0 $ 1.7 0.06 % $ 11,315.8 $ 2.7 0.10 % $ 9,806.8 $ 4.2 0.17 %
Time deposits 1,274.9 1.0 0.32 % 1,466.5 1.7 0.47 % 2,174.6 6.0 1.09 %
Public funds 3,085.4 2.3 0.30 % 3,208.7 2.6 0.33 % 3,196.8 4.6 0.57 %
Total interest-bearing deposits 15,701.3 5.0 0.13 % 15,991.0 7.0 0.18 % 15,178.2 14.8 0.39 %
Repurchase agreements 509.0 0.1 0.08 % 556.1 0.2 0.15 % 627.9 0.3 0.19 %
Other short-term borrowings 1,103.3 1.4 0.49 % 1,104.9 1.4 0.49 % 1,105.4 1.3 0.50 %
Long-term debt 248.0 3.2 5.08 % 371.9 5.0 5.42 % 386.0 5.4 5.60 %
Total borrowings 1,860.3 4.7 0.99 % 2,032.9 6.6 1.30 % 2,119.3 7.0 1.33 %
Total interest-bearing
liabilities 17,561.6 9.7 0.22 % 18,023.9 13.6 0.30 % 17,297.5 21.8 0.50 %
Net interest-free funding
sources 14,535.8 14,171.6 12,114.8
Total cost of funds $ 32,097.4 $ 9.7 0.12 % $ 32,195.5 $ 13.6 0.17 % $ 29,412.3 $ 21.8 0.30 %
Net interest spread (te) $ 237.5 2.84 % $ 237.5 2.82 % $ 238.4 3.02 %
Net interest margin $ 32,097.4 $ 237.5 2.94 % $ 32,195.5 $ 237.5 2.96 % $ 29,412.3 $ 238.4 3.23 %
(a) Taxable equivalent (te) amounts were calculated using a federal income tax
rate of 21%.
(b) Includes nonaccrual loans.
(c) Average securities do not include unrealized holding gains/losses on
available for sale securities.
(d) Included in interest income is net purchase accounting accretion of
million,
30, 2021, June 30, 2021 , and September 30, 2020 , respectively.
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Nine Months Ended
September 30, 2021 September 30, 2020
(dollars in millions) Volume Interest (d) Rate Volume Interest (d) Rate
Average earning assets
Commercial & real estate loans
(te) (a) $ 17,160.4 $ 455.4 3.55 % $ 17,217.5 $ 503.5 3.91 %
Residential mortgage loans 2,472.5 70.1 3.78 % 2,899.6 85.4 3.93 %
Consumer loans 1,722.6 62.7 4.87 % 2,083.3 78.7 5.05 %
Loan fees & late charges - 43.4 0.00 % - 26.4 0.00 %
Total loans (te) (b) 21,355.5 631.6 3.95 % 22,200.4 694.0 4.17 %
Loans held for sale 94.6 2.0 2.76 % 80.9 2.1 3.47 %
US Treasury and government
agency securities 301.0 3.7 1.66 % 139.2 2.3 2.20 %
Mortgage-backed securities and
collateralized mortgage obligations 6,770.4 91.8 1.81 % 5,198.4 91.1 2.34 % Municipals (te) 929.8 20.4 2.93 % 877.7 20.0 3.05 % Other securities 12.8 0.4 3.73 % 8.0 0.3 4.31 % Total securities (te) (c) 8,014.0 116.3 1.94 % 6,223.3 113.7 2.44 % Total short-term investments 2,309.4 2.1 0.12 % 515.7 0.8 0.21 % Total earning assets (te)$ 31,773.5 $ 752.0 3.16 %$ 29,020.3 $ 810.6 3.73 % Average interest-bearing liabilities Interest-bearing transaction and savings deposits$ 11,152.9 $ 7.8 0.09 %$ 9,332.6 $ 21.4 0.31 % Time deposits 1,497.8 5.7 0.51 % 2,895.0 33.3 1.54 % Public funds 3,168.0 7.8 0.33 % 3,256.2 21.6 0.89 % Total interest-bearing deposits 15,818.7 21.3 0.18 % 15,483.8 76.3 0.66 % Repurchase agreements 549.3 0.5 0.12 % 574.6 1.2 0.27 % Other short-term borrowings 1,104.3 4.1 0.49 % 1,470.3 7.2 0.66 % Long-term debt 338.4 13.6 5.37 % 298.5 11.8 5.25 % Total borrowings 1,992.0 18.2 1.22 % 2,343.4 20.2 1.15 % Total interest-bearing liabilities 17,810.7 39.5 0.30 % 17,827.2 96.5 0.72 % Net interest-free funding sources 13,962.8 11,193.1 Total cost of funds$ 31,773.5 $ 39.5 0.17 %$ 29,020.3 $ 96.5 0.44 % Net interest spread (te)$ 712.5 2.87 %$ 714.1 3.01 % Net interest margin$ 31,773.5 $ 712.5 3.00 %$ 29,020.3 $ 714.1 3.29 %
(a) Taxable equivalent (te) amounts were calculated using a federal income tax
rate of 21%.
(b) Includes nonaccrual loans.
(c) Average securities do not include unrealized holding gains/losses on
available for sale securities.
(d) Included in interest income is net purchase accounting accretion of
million and
2020, respectively.
Provision for Credit Losses
During the third quarter of 2021, we recorded a negative provision for credit losses of$27.0 million , compared to a negative provision for credit losses of$17.2 million in the second quarter of 2021, and a$25.0 million provision for credit losses expense in the third quarter of 2020. The third quarter of 2021 negative provision included net charge-offs of$1.8 million and a reserve release of$28.8 million . The second quarter of 2021 negative provision included net charge-offs of$10.5 million and a reserve release of$27.7 million . The negative provision for credit losses recorded in the third and second quarters of 2021 reflect improvements in macroeconomic forecasts and in our asset quality metrics. The third quarter of 2020 provision for credit loss expense included net charge-offs of$24.0 million and a reserve build of$1.0 million . For the nine months endedSeptember 30, 2021 , we recorded a negative provision for credit losses of$49.1 million , compared to a provision for credit loss expense of$578.7 million for same period in 2020. As noted above, reserve releases made in 2021 reflect continued improvement in macroeconomic forecasts and asset quality metrics. The provision for credit losses expense recorded in the nine months endedSeptember 30, 2020 was driven by economic deterioration brought on by the widespread economic shutdown in response to the COVID-19 pandemic and the loss on the sale of a portion of our energy loan portfolio inJuly 2020 . Net charge-offs in the third quarter of 2021 were$1.8 million , or 0.03% of average total loans on an annualized basis, compared to$10.5 million , or 0.20% in the second quarter of 2021, and$24.0 million , or 0.43% in the third quarter of 2020. The third quarter of 2021 included$0.5 million of commercial net charge-offs,$0.4 million of residential mortgage net recoveries and$1.7 million of consumer net charge-offs. The second quarter of 2021 included$9.3 million of commercial net charge-offs,$0.1 million of residential 44
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mortgage net recoveries and
The discussion of Allowance for Credit Losses and Asset Quality later in this Item provides additional information on these changes and on general credit quality, including our near-term outlook.
Noninterest Income
Noninterest income totaled$93.4 million for the third quarter of 2021, down$0.9 million , or 1%, from the second quarter of 2021, and up$9.6 million , or 11%, from the third quarter of 2020. Noninterest income includes nonoperating income of$4.6 million from the sale of the remaining Hancock Horizon Funds in the third quarter of 2021 and$2.8 million related to the sale of Mastercard stock in the second quarter of 2021. Excluding these items, operating noninterest income decreased$2.7 million , or 3%, linked quarter which was largely attributable to lower secondary mortgage market operations income, with limited impact from Hurricane Ida. The increase compared to the third quarter of 2020 was attributable to most fee categories as economic conditions have improved and consumer activity rebounded, and the previously mentioned nonoperating items, partially offset by the decline in secondary mortgage market operations income and a lower level of bank owned life insurance gains. The components of noninterest income are presented in the following table for the indicated periods. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (in thousands) 2021 2021 2020 2021 2020
Service charges on deposit accounts
18,440 $ 59,686 $ 56,795
Trust fees 16,041 16,307 14,424 47,351 43,390
Bank card and ATM fees 19,833 20,483 17,222 58,436 50,541
Investment and annuity fees and
insurance commissions 7,167 7,331 5,988 21,956 18,504
Secondary mortgage market
operations 6,972 12,556 12,875 31,238 28,736
Income from bank-owned life
insurance 3,907 3,347 6,628 14,535 14,211
Credit related fees 2,568 2,971 2,911 8,383 8,585
Income from customer and other
derivatives 2,970 3,750 1,739 11,755 9,718
Securities transactions, net - 333 376 333 488
Gain on sale of Mastercard Class B
common stock - 2,800 - 2,800 -
Gain on sale of Hancock Horizon
Funds 4,576 - - 4,576 -
Other miscellaneous 8,168 5,013 3,145 13,673 11,110
Total noninterest income $ 93,361 $ 94,272 $
83,748
Service charges are composed of overdraft and insufficient funds fees, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled$21.2 million for the third quarter of 2021, up$1.8 million , or 9%, from the second quarter of 2021, and up$2.7 million , or 15%, from the third quarter of 2020. The increase from the second quarter of 2021 is primarily attributable to an additional processing day, increased account activity and a lower earnings credit rate applied to excess deposit balances. The increase from the third quarter of 2020 was largely due to both increased activity related fees and higher overdraft revenue, which continues to rebound as consumer spending activity returns, although fees remain lower than pre-pandemic levels due in part to higher checking account balances. Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees decreased$0.3 million , or 2%, from the prior quarter and increased$1.6 million , or 11%, compared to the same quarter a year ago. The decrease compared to the prior quarter is primarily due to seasonal tax preparation fees recorded in the second quarter. The increase from the same quarter a year ago was largely due to the continued rebound from the volatility in the markets in 2020 and a new fee structure introduced in the second quarter of 2021. Trust assets under management totaled$9.5 billion atSeptember 30, 2021 , compared to$10.1 billion atJune 30, 2021 , and$9.0 billion atSeptember 30, 2020 . Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled$19.8 million for the third quarter of 2021, down$0.7 million , or 3%, from the second quarter of 2021 and up$2.6 million , or 15%, from the same quarter last year. The decrease from the prior quarter was largely due to branch and ATM closures and fee waivers related to Hurricane Ida. The increase from the same quarter last year reflects higher levels of activity as economic conditions continue to improve. 45
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Investment and annuity fees and insurance commissions decreased$0.2 million , or 2%, compared to the second quarter 2021 and were up$1.2 million , or 20%, compared to the same quarter a year ago. The decline from the prior quarter was primarily due to lower underwriting activity, annuity sales and insurance commissions, partially offset by higher investment activity fees. The increase from the same quarter of the prior year was attributable to an increase in investment commissions and annuity sales activity as the lower interest rate environment slowed bond trading activity in 2020. Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed rate loans while retaining the majority of adjustable rate loans, as well as loans generated through programs to support customer relationships. Income from secondary mortgage market operations was$7.0 million in the third quarter of 2021, down$5.6 million , or 44%, from the second quarter of 2021 and down$5.9 million , or 46%, from the third quarter of 2020. The decrease in income compared to the prior quarter was due largely to the diversification of delivery methods in the second quarter of 2021, which resulted in a one-time acceleration of income recognition in the prior quarter, as well as slowed production in the third quarter due in part to disruption caused by Hurricane Ida in a portion of our market. Third quarter 2021 mortgage applications were down approximately 15% when compared to the second quarter of 2021. Secondary mortgage market operations income will vary based on application volume and pull through rates. We expect mortgage fees to decline in time as the demand for mortgage loans and refinancing slows. Income from bank-owned life insurance (BOLI) is typically generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from bank-owned life insurance was$3.9 million for the third quarter of 2021, up$0.6 million , or 17%, from the second quarter of 2021, and down$2.7 million , or 41%, from the third quarter of 2020. The linked-quarter increase is attributable to benefit proceeds recorded in third quarter of 2021, and the decrease from the prior year is attributable to benefit proceeds of$3.4 million recorded in the third quarter of 2020. Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit related fees were$2.6 million for the third quarter of 2021, down$0.4 million , or 14%, from the second quarter of 2021 and down$0.3 million , or 12%, from the third quarter of 2020. The linked quarter decrease is primarily attributable to a decline in loan commitment fees, as credit line utilization increased during the period. The decrease from the third quarter of 2020 is primarily attributable to a decrease in letters of credit fees. Income from customer and other derivatives is largely from our customer interest rate derivative program and totaled$3.0 million for the third quarter of 2021 compared to$3.8 million in the second quarter of 2021 and$1.7 million for the third quarter of 2020. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales activity and market value adjustments due to market interest rate movement. Other miscellaneous income is comprised of various items, including income from small business investment companies (SBIC), FHLB stock dividends, and syndication fees. Other miscellaneous income (excluding nonoperating items) totaled$8.2 million , up$3.2 million compared to the second quarter of 2021 and up$5.0 million compared to the third quarter of 2020. The increase compared to the prior period was largely driven by net gains on sales of other assets, partially offset by decreases in syndication fees and SBIC income. The increase compared to the prior year reflects increased net gains on sales of other assets and higher teller fees, partially offset by a gain on a lease buyout recorded in the third quarter of 2020. Noninterest income for the first nine months of 2021 was$274.7 million , up$32.6 million , or 13% from the first nine months of 2020, and includes the$7.4 million of nonoperating income, as noted above. Excluding the nonoperating items, operating noninterest income was up$25.3 million , or 10%. The increase in fee income for the first nine months of 2021 compared to 2020 includes increases in almost all fee categories and is primarily attributable to the economic rebound from the recessionary market conditions present in much of the first nine months of 2020. Card fees were up$7.9 million , or 16%, related to increased activity. Trust fees were up$4.0 million , or 9%, primarily in personal trust with improved market conditions and a higher level of assets under management. Insurance, investment and annuity fees were up$3.5 million , or 19%, with increased annuity and investment fees. Secondary mortgage fees were up$2.5 million , or 9%, related to the low interest rate environment. Other miscellaneous income, excluding nonoperating items, was up$2.6 million , or 23%.
Management expects fee income, excluding nonoperating items, to remain relatively flat for the fourth quarter of 2021, and to grow approximately 9% on a full year basis with increases expected in most fee categories.
Noninterest Expense
Noninterest expense for the third quarter of 2021 was$194.7 million , down$42.1 million , or 18%, from the second quarter of 2021, and down$1.1 million , or 1%, from the third quarter of 2020. The third quarter of 2021 included$3.2 million in net nonoperating expenses which included a$1.9 million severance reversal for certain employees with positions eliminated in the prior quarter that were internally placed and$5.1 million in expenses related to Hurricane Ida, which includes damage to facilities, recovery cost, charitable contributions to organizations providing recovery assistance, temporary housing, distribution of meals, ice and fuel, among 46
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other things. The second quarter of 2021 included$45.0 million of nonoperating expenses, with$40.8 million related to initiatives put in place to improve overall efficiency and operating performance and$4.2 million related to the redemption of$150 million of subordinated notes. There were no nonoperating expenses in the third quarter of 2020. Excluding these items, operating expense was down$0.3 million , or less than 1%, linked quarter, and down$4.3 million , or 2%, from the same quarter a year ago. The decrease in operating expense from the prior quarter was largely driven by lower salaries and benefits and lower occupancy as a result of initiatives put in place during the second quarter of 2021, and lower professional services expense, partially offset by higher business development costs, regulatory expense and data processing expense, as card activity increased. Compared to the same quarter last year, the decrease was largely attributable to personnel expense savings as a result of reduced headcount, lower occupancy expense resulting from branch closures, lowerFDIC assessment and corporate value tax, and a decrease in professional services expense, partially offset by an increase in data processing expense as a result of higher level of card activity. The components of noninterest expense for the periods indicated are presented in the following tables. Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (in thousands) 2021 2021 2020 2021 2020 Compensation expense$ 92,601 $ 100,587 $ 97,095 $ 289,034 $ 286,922 Employee benefits 19,377 42,067 20,761 85,213 64,892 Personnel expense 111,978 142,654 117,856 374,247 351,814 Net occupancy expense 11,974 12,955 13,191 37,839 39,272 Equipment expense 4,894 4,392 5,355 14,067 14,724 Data processing expense 24,766 23,885 21,888 71,598 65,185 Professional services expense 12,748 13,473 14,372 37,472 35,098 Amortization of intangible assets 4,082 4,245 4,788 12,746 15,302 Deposit insurance and regulatory fees 3,680 2,967 4,108 10,042 15,039 Other real estate and foreclosed asset expense (376 ) (86 ) (482 ) (456 ) 9,188 Advertising 3,638 2,276 3,159 8,400 10,089 Corporate value, franchise and other non-income taxes 3,414 3,422 4,872 11,300 13,649 Telecommunications and postage 3,087 3,163 4,043 9,568 11,483 Entertainment and contributions 2,280 1,486 1,315 5,214 7,146 Travel expense 765 667 309 1,789 1,816 Printing and supplies 914 941 1,271 2,833 4,006 Tax credit investment amortization 1,112 1,113 961 3,337 2,882 Other retirement expense (7,294 ) (6,806 ) (6,337 ) (20,645 ) (18,796 ) Loss on extinguishment of debt - 4,165 - 4,165 - Loss on facilities and equipment from consolidation - 15,462 - 15,462 929 Other miscellaneous 13,041 6,396 5,105 25,567 16,822 Total noninterest expense$ 194,703 $ 236,770 $ 195,774 $ 624,545 $ 595,648
Nonoperating Expenses (included above)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
(in thousands) 2021 2021 2020 2021 2020
Nonoperating expense
Compensation expense $ (1,862 ) $ 5,161 $ - $ 3,299 $ -
Employee benefits 3 20,189 - 20,192 -
Personnel expense (1,859 ) 25,350 - 23,491 -
Net occupancy expense 2 - - 2 -
Equipment expense 2 - - 2 -
Advertising 2 - - 2 -
Entertainment and contributions 174 - - 174 -
Travel expense 5 - - 5 -
Printing and supplies 22 - - 22 -
Loss on extinguishment of debt - 4,165 - 4,165 -
Loss on facilities and
equipment from consolidation - 15,462 - 15,462 -
Other miscellaneous 4,877 - - 4,877 -
Total nonoperating expenses $ 3,225 $ 44,977 $ - $ 48,202 $ -
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Table of Contents Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability. Personnel expense totaled$112.0 million for the third quarter of 2021, down$30.7 million , or 22%, compared to the prior quarter and down$5.9 million , or 5%, compared to the same quarter last year. The third quarter of 2021 includes a$1.9 million credit of nonoperating expense, primarily related to the reversal of severance, as noted above. The second quarter of 2021 includes$25.4 million of nonoperating expenses related to efficiency initiatives, including the VERIP ($20.2 million ) and reduction in force ($5.1 million ). Excluding the nonoperating expenses, personnel expense was down$3.5 million , or 3%, from the prior quarter, and down$4.0 million , or 3%, from the same quarter last year. The decrease from the prior quarter is primarily attributable to a decrease of 197 full-time equivalent employees (FTEs), primarily the result of the reduction in force at the end of the second quarter. The decrease from the same quarter last year is attributable to a decrease of 629 FTEs as a result of the VERIP, the closure of 20 financial centers and the second quarter reduction in force, partially offset by annual merit raises and higher bonus and incentive accruals. Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Occupancy and equipment expenses totaled$16.9 million in the third quarter of 2021, down$0.5 million , or 3%, from the second quarter of 2021 and$1.7 million , or 9%, from the third quarter of 2020. The linked-quarter decrease was largely related to a decrease in occupancy expense due in part to branch closures, partially offset by an increase in equipment expense related to equipment purchases. The decrease from the same quarter last year is related to decreases in both occupancy expense and equipment expense, largely attributable to the eight financial centers that were closed inApril 2021 . Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions. Data processing expense was$24.8 million for the third quarter of 2021, up$0.9 million , or 4%, compared to the second quarter of 2021, and up$2.9 million , or 13%, compared to the third quarter of 2020. The increase over the second quarter of 2021 is largely due to the increase in card activity. The increase from third quarter of 2020 is largely due to expense associated with investments in new technology, along with processing expense related to the increase in bank card activity. Professional services expense for the third quarter of 2021 totaled$12.7 million , down$0.7 million , or 5%, compared to the previous quarter and$1.6 million , or 11%, from the third quarter of 2020. The decrease from the second quarter of 2021 and the same quarter last year is primarily attributable to lower levels of expense related to PPP consulting support and legal fees. Deposit insurance and regulatory fees totaled$3.7 million , up$0.7 million , or 24%, from the second quarter of 2021 and down$0.4 million , or 10%, from the third quarter of 2020. The increase from the prior period is due in part to the impact of declining PPP loans and a change in the treatment of certain CECL transition provisions on the risk based assessment. The decrease from the same quarter last year is largely due to the favorable effect that excess liquidity and continued asset quality improvement has on the risk-based assessment. We expect our deposit assessment fee to return to a more typical level as our excess liquidity declines. Corporate value, franchise and other non-income tax expense for the third quarter of 2021 totaled$3.4 million , virtually unchanged from the prior quarter and down$1.5 million , or 30%, compared to the same quarter last year. The decrease from the third quarter of 2020 reflects a decrease in bank share tax as a result of the net loss recorded in 2020. Business development-related expenses (including advertising, travel, entertainment and contributions) totaled$6.7 million for the third quarter of 2021, up$2.3 million , or 51%, from the second quarter of 2021, and$1.9 million , or 40%, from the third quarter of 2020. The linked-quarter increase was largely due to an increase in advertising and charitable contributions and the increase over last year was largely due to entertainment and contributions, advertising and travel expense. All other expenses, excluding amortization of intangibles and nonoperating items, totaled$5.6 million for the third quarter of 2021, an increase of$0.9 million from the second quarter of 2021, and an increase of$1.0 million from the third quarter of 2020. The variance compared to both periods is the result of approximately$1.0 million in contract cancellation costs in the third quarter of 2021. Noninterest expense totaled$624.5 million for the first nine months of 2021, up$28.9 million , or 5%, from the first nine months of 2020. Excluding the nonoperating expenses described above, operating expense was down$19.3 million , or 3%. Other real estate and foreclosed assets expense was down$9.6 million , as 2020 included a$9.8 million write-down of equity interests received in energy-related bankruptcy restructurings. Deposit insurance and regulatory expense was down$5.0 million , or 33%, due to the favorable impact of higher liquidity and improved asset quality upon the risk-based assessment. Operating business development expense was down$3.8 million , or 20%, attributable to expense control initiatives put in place in the current year. The nine months endedSeptember 30, 2020 also includes$2.5 million of pandemic relief contributions in theGulf Coast region. Operating personnel expense was down$1.1 million or less than 1%, with lower salary expense related to the efficiency initiatives referred to above, partially offset by higher bonus and incentives in connection with improved Company performance. Occupancy and equipment expense was down$2.1 million , or 4% related to expense control measures and branch closures. These decreases were partially offset by increases of$6.4 million , or 10% in data processing expense attributable to investments in new technology and increased card activity, and$2.4 million , or 7%, in professional services as a result of consulting and support related to PPP loan origination and forgiveness. Management expects fourth quarter 2021 operating noninterest expense to total$187 million , and to be down approximately 3% for the full year of 2021 compared to 2020. The forecasted fourth quarter 2021 expense level of approximately$187 million is the expected quarterly run rate for 2022 operating expense. 48
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Income Taxes
The effective income tax rate for the third quarter of 2021 was approximately
19.2% compared to 18.9% in the second quarter of 2021 and 19.2% in the third
quarter of 2020. The nominal increase in the third quarter 2021 effective income
tax rate is due to a slight decrease in expected tax credits due to revised
estimates.
Many factors impact the effective income tax rate including, but not limited to,
the level of pre-tax income and relative impact of net tax benefits related to
tax credit investments, tax-exempt interest income, bank-owned life insurance,
and nondeductible expenses. Based on the current forecast, management expects
the effective income tax rate for 2021 will be in the 19%-20% range, absent any
changes in tax law.
Our effective tax rate has historically varied from the federal statutory rate
primarily because of tax-exempt income and tax credits. Interest income on bonds
issued by or loans to state and municipal governments and authorities, and
earnings from the bank-owned life insurance program are the major components of
tax-exempt income. The main source of tax credits has been investments in
tax-advantaged securities and tax credit projects. These investments are made
primarily in the markets we serve and are directed at tax credits issued under
the Federal and State New Market Tax Credit ("NMTC") programs, Low-Income
Housing Tax Credit ("LIHTC") programs, as well as pre-2018 Qualified Zone
Academy Bonds ("QZAB") and Qualified School Construction Bonds ("QSCB"). These
investments generate tax credits, which reduce current and future taxes and are
recognized when earned as a benefit in the provision for income taxes.
We have invested in NMTC projects through investments in our own Community
Development Entities ("CDE"), as well as other unrelated CDEs. Federal tax
credits from NMTC investments are recognized over a seven-year period, while
recognition of the benefits from state tax credits varies from three to five
years. We have also invested in affordable housing projects that generate
federal LIHTC tax credits that are recognized over a ten-year period, beginning
in the year the rental activity begins. The amortization of the LIHTC investment
cost is recognized as a component of income tax expense in proportion to the tax
credits recognized over the ten-year credit period.
Based on tax credit investments that have been made to date in 2021, we expect
to realize benefits from federal and state tax credits over the next three years
totaling $10.1 million , $10.0 million and $10.1 million in 2022, 2023, and 2024,
respectively. We intend to continue making investments in tax credit projects.
However, our ability to access new credits will depend upon, among other
factors, federal and state tax policies and the level of competition for such
credits.
Selected Financial Data
The following tables contain selected financial data as of the dates and for the
periods indicated.
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
2021 2021 2020 2021 2020
Common Share Data
Earnings (loss) per share:
Basic $ 1.46 $ 1.00 $ 0.90 $ 3.67 $ (1.73 )
Diluted $ 1.46 $ 1.00 $ 0.90 $ 3.67 $ (1.73 )
Cash dividends paid $ 0.27 $ 0.27 $ 0.27 $ 0.81 $ 0.81
Book value per share (period-end) $ 41.81 $ 41.03 $ 39.07 $ 41.81 $ 39.07
Tangible book value per share
(period-end) $ 31.10 $ 30.27 $ 28.11 $ 31.10 $ 28.11
Weighted average number of shares
(000s):
Basic 86,834 86,814 86,358 86,800 86,614
Diluted 87,006 86,990 86,400 86,951 86,614
Period-end number of shares (000s) 86,823 86,847 86,400 86,823 86,400
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Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
(in thousands) 2021 2021 2020 2021 2020
Income Statement:
Interest income $ 244,417 $ 248,300 $ 257,043 $ 743,502 $ 800,728
Interest income (te) (a) 247,185 251,154 260,232 752,046 810,613
Interest expense 9,708 13,657 21,860 39,563 96,491
Net interest income (te) 237,477 237,497 238,372 712,483 714,122
Provision for credit losses (26,955 ) (17,229 ) 24,999 (49,095 ) 578,690
Noninterest income 93,361 94,272 83,748 274,722 242,078
Noninterest expense (excluding
amortization of intangibles) 190,621 232,525 190,986 611,799 580,346
Amortization of intangibles 4,082 4,245 4,788 12,746 15,302
Income (loss) before income
taxes 160,322 109,374 98,158 403,211 (228,023 )
Income tax expense (benefit) 30,740 20,656 18,802 77,739 (79,274 )
Net income (loss) $ 129,582 $ 88,718 $ 79,356 $ 325,472 $ (148,749 )
For informational purposes -
included above, pre-tax
Nonoperating item included in
noninterest income:
Gain on sale of Hancock Horizon
Funds $ 4,576 $ - $ - $ 4,576 $ -
Gain on sale of Mastercard
Class B common stock - 2,800 - 2,800 -
Nonoperating items included in
noninterest expense:
Efficiency initiatives (1,867 ) 40,812 - 38,945 -
Hurricane related expenses 5,092 - - 5,092 -
Loss on redemption of
subordinated notes - 4,165 - 4,165 -
Provision for credit loss
associated with energy loan sale - - - - 160,101
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
2021 2021 2020 2021 2020
Performance Ratios
Return on average assets 1.46 % 1.01 % 0.97 % 1.25 % (0.62 )%
Return on average common
equity 14.26 % 10.20 % 9.42 % 12.39 % (5.77 )%
Return on average tangible
common equity 19.22 % 13.94 % 13.14 % 16.89 % (7.99 )%
Earning asset yield (te)
(a) 3.06 % 3.13 % 3.53 % 3.16 % 3.73 %
Total cost of funds 0.12 % 0.17 % 0.30 % 0.17 % 0.44 %
Net Interest Margin (te) 2.94 % 2.96 % 3.23 % 3.00 % 3.29 %
Noninterest income to total
revenue (te) 28.22 % 28.41 % 26.00 % 27.83 % 25.32 %
Efficiency ratio (b) 57.44 % 57.01 % 59.29 % 57.52 % 60.69 %
Average loan/deposit ratio 71.62 % 73.18 % 83.72 % 73.97 % 85.61 %
FTE employees (period-end) 3,429 3,626 4,058 3,429 4,058
Capital Ratios
Common stockholders' equity
to total assets 10.28 % 10.15 % 10.17 % 10.28 % 10.17 %
Tangible common equity
ratio (c) 7.85 % 7.70 % 7.53 % 7.85 % 7.53 %
(a) Taxable equivalent (te) amounts were calculated using a federal income tax
rate of 21%.
(b) The efficiency ratio is noninterest expense to total net interest (te) and
noninterest income, excluding amortization of purchased intangibles and
nonoperating items.
(c) The tangible common equity ratio is common stockholders' equity less
intangible assets divided by total assets less intangible assets.
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Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
($ in thousands) 2021 2021 2020 2021 2020
Asset Quality Information
Nonaccrual loans (a) $ 60,357 $ 83,551 $ 171,462 $ 60,357 $ 171,462
Restructured loans - still
accruing 3,071 3,830 9,115 3,071 9,115
Total nonperforming loans 63,428 87,381 180,577 63,428 180,577
ORE and foreclosed assets 8,423 10,201 11,640 8,423 11,640
Total nonperforming assets $ 71,851 $ 97,582 $ 192,217 $ 71,851 $ 192,217
Accruing loans 90 days past due
(b) $ 9,970 $ 8,925 $ 10,439 $ 9,970 $ 10,439
Net charge-offs 1,770 10,498 24,008 30,522 370,456
Allowance for loan losses $ 371,521 $ 399,668 $ 448,674 $ 371,521 $ 448,674
Reserve for unfunded lending
commitments 28,946 29,524 31,526 28,946 31,526
Allowance for credit losses $ 400,467 $ 429,192 $ 480,200 $ 400,467 $ 480,200
Total provision for credit
losses $ (26,955 ) $ (17,229 ) $ 24,999 $ (49,095 ) $ 578,690
Ratios:
Nonperforming assets to loans,
ORE and foreclosed assets 0.34 % 0.46 % 0.86 % 0.34 % 0.86 %
Accruing loans 90 days past due
to loans 0.05 % 0.04 % 0.05 % 0.05 % 0.05 %
Nonperforming assets + accruing
loans 90 days past due to loans,
ORE and foreclosed assets 0.39 % 0.50 % 0.91 % 0.39 % 0.91 %
Net charge-offs to average loans 0.03 % 0.20 % 0.43 % 0.19 % 2.23 %
Allowance for loan losses to
period-end loans 1.78 % 1.89 % 2.02 % 1.78 % 2.02 %
Allowance for credit losses to
period-end loans 1.92 % 2.03 % 2.16 % 1.92 % 2.16 %
Allowance for loan losses to
nonperforming loans + accruing
loans 90 days past due 506.17 % 415.00 % 234.89 % 506.17 % 234.89 %
For informational purposes -
included above
Provision for credit loss
associated with energy loan sale $ - $ - $
- $ -
Charge-offs associated with energy loan sale - - - - 242,628
(a) Included in nonaccrual loans are nonaccruing restructured loans totaling
million,
respectively.
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