Hancock Whitney Corporation

Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Catherine Mistich, Investor Relations Manager.

Please go ahead. Thank you, and good afternoon. During today's call, we may make forward-looking statements. We would like to remind everyone to carefully review the Safe Harbor language that was published with the earnings release and presentation and in the company's most recent 10-K and 10-Q, including the risks and uncertainties identified therein. You should keep in mind that any forward-looking statements made by Hancock Whitney speak only as of the date on which they were made. As everyone understands, the current economic environment is rapidly evolving and changing. Hancock-Whitney's ability to accurately project results or predict the effects of future plans or strategies or predict market or economic developments is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions but are not guarantees of performance or results. and our actual results and performance could differ materially from those set forth in our forward-looking statements. Hancock-Whitney undertakes no obligation to update or revise any forward-looking statements, and you are cautioned not to place undue reliance on such forward-looking statements. Some of the remarks contain non-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in our earnings release and financial tables. The presentation slides included in our 8K are also posted with the conference call webcast link on the Investor Relations website. We will reference some of these slides in today's call. Participating in today's call are John Harrison, President and CEO, Mike Ackery, CFO, and Chris Aluca, Chief Credit Officer. I will now turn the call over to John Harrison.

Thank you, Catherine, and good afternoon to everyone. The second quarter of 2023 exhibited the continued benefits and challenges of the current operating environment. Our balance sheet remains solid with loan growth funded by both client deposit growth and cash flow from the securities portfolio. The precautionary liquidity added in March was eliminated in May as planned, so by June 30 we were back to normal levels of liquidity. As expected, loan growth moderated somewhat this quarter. Total loans were up $384 million, primarily driven by project draws in multifamily real estate, small to medium ticket business lending, and mortgage. As a note, about 60% of the volume we show as mortgage growth on slide 8 is in reality reclassification to mortgage from construction as residential projects are completed. Our indirect auto portfolio continues to amortize but has now reached generally immaterial levels. As of mid-year, demand continues to soften in new construction, middle market, and corporate banking as disciplined pricing, more conservative terms, inflationary pressure, and debt costs sideline clients waiting for a more advantageous borrowing moment. Interestingly, demand in small and medium business ticket items is more resilient as economic activity in that space remains brisk. The net effect is a slowing of net loan growth, but becoming more granular with better yields and in more self-funding sectors. So we would say at this point, the efforts of the Federal Reserve Bank to slow economic activity down a bit seem to be taking hold, and thankfully without creating any significant recessionary pressures. Looking forward, we expect further moderation in our loan growth will be driven by selective appetite in CRE, a focus on full relationship banking, and disciplined loan pricing and terms. Within investor CRE, growth in second quarter was 90% multifamily and 10% industrial, which we expect to continue in the short run. We maintained our guidance for the year with loan growth expected to finish the year in low to mid-single digits. We continue to maintain a seasoned, stable, and diversified deposit base. As shown on slide six of the investor deck, consumer and wealth deposits make up 49% of the deposit base, while the remainder is comprised of 11% public funds, 35% commercial and small business, and only 5% brokered CDs. Uninsured deposits are 34%. The ICS product, which is available to clients as a way to ensure deposits above FDIC limits, has stabilized after an initial and brief surge following the March bank failures. We remain pleased with the quality of our book of deposits. However, growth remains a challenge in today's environment. While we reported deposit growth of $430 million this quarter, it is important to note that growth was influenced by a couple of factors. During the quarter, we issued broker deposits of $590 million to support lending activities. Late in the quarter, we received approximately $250 million in temporary trust deposits. These deposits were invested by our clients shortly after quarter end. DDA Remix continued this quarter given the current banking environment drives promotional CD pricing. Clients are highly rate sensitive, and we don't expect that will go away anytime soon, especially if we see another rate hike this month. Where CDs reprice in second half 23 is a meaningful part of the NIM story going forward, which Mike will address further in his comments. Our guidance for deposit growth in 2023 remains unchanged. However, given the continued pressure on gathering DDAs, ongoing mixed shifts, and increasing betas, we have updated our guidance for PPNR for the year and now expect PPNR to decline 1% to 3% from 2022. Earnings and a lower level of tangible assets contributed to improving capital levels. TCE was up 34 basis points to 7.5%, and Tier 1 at 11.83% improved 23 basis points. We have been and continue to be cognizant of the current macroeconomic environment that is impacting our industry. We've maintained a robust ACL. We have solid capital and multiple sources of liquidity, which will help us manage through any continuing volatility. We remain confident in our ability to remain strong and stable, as we have for 124 years. With that, I'll turn to Mike for further comments.