Hancock Whitney's Loan Growth Momentum: A Beacon for Regional Bank Valuations?

The regional banking sector has faced persistent headwinds in recent years, from inverted yield curves to elevated deposit volatility. Yet Hancock Whitney Corp (HWC) has emerged as a standout performer, with its Q2 2025 earnings highlighting a compelling blend of loan growth resilience, disciplined credit management, and strategic reinvestment. For investors evaluating the sustainability of regional bank valuations, HWC's results offer a roadmap for distinguishing companies with durable growth profiles from those overly reliant on transient macro factors.

Loan Growth: Relationship-Driven and Diversified

HWC's 6% annualized loan growth in Q2, driven by new client relationships and improved line utilization, underscores its focus on relationship banking—a strategy that prioritizes long-term revenue streams over short-term volume. Management emphasized that net new loans to new clients now account for the majority of growth, a shift from the industry's historical reliance on refinancing cycles. This is critical: relationship loans typically carry higher yields and fee income, creating a virtuous cycle of margin expansion.

The breakdown by sector reveals both opportunities and caution. Strong performance in commercial real estate (CRE)—bolstered by owner-occupied deals and bridge financing—contrasts with softness in construction and development (C&D), where clients are burning through equity. However, management's view that C&D will rebound by early 2026 suggests this is a cyclical rather than structural issue. Meanwhile, the healthcare sector's stagnation remains a minor drag but is not signaling broader weakness.

NIM and Deposit Cost Management: A Shield Against Rate Cuts

HWC's net interest margin (NIM) expanded by 6 bps in Q2, with management guiding for further modest growth in 2025 despite potential Federal Reserve rate cuts. This resilience stems from two factors:
1. Deposit repricing: A $3.6 billion CD maturity wave in the second half will reprice at lower rates, reducing deposit costs. The cost of deposits fell to 1.65%, and the DDA (demand deposit account) mix rose to 37%, further lowering funding costs.
2. Rate sensitivity: Management estimates that even with two Fed rate cuts, NIM would decline by just 1 bps—a negligible impact compared to peers more exposed to short-term rate fluctuations.

Credit Quality: A Foundation of Prudent Underwriting

While net charge-offs rose to 31 bps in Q2—above the full-year guidance of 15-25 bps—the increase was driven by isolated non-C&D exposures, with no sector or geographic concentration. Criticized loans and nonaccrual loans both declined, reflecting disciplined risk management. The allowance for credit losses (ACL) remains robust at 1.45% of loans, suggesting minimal surprises ahead. This contrasts with some regional peers facing CRE-driven provisions, positioning HWC as a safer bet in a risk-averse environment.

Strategic Leverage: Talent, Geography, and Share Buybacks

HWC is investing in organic growth through banker additions and geographic expansion. Five new financial centers in Dallas—opening late 2025 and early 2026—are part of a broader strategy to deepen relationships in high-growth markets. Management's target of a 10% annual increase in bankers signals confidence in scalability. Meanwhile, $750,000 in share repurchases in Q2, alongside a capital structure well within regulatory comfort zones (TCE at 9.84%, CET1 at 14.03%), leaves room for further shareholder returns without compromising liquidity.

Valuation Implications: A Case for Multiple Expansion

Regional bank valuations have languished as investors focus on macro risks like loan demand slowdowns and margin compression. HWC's results, however, suggest it is de-risking its growth model:
- Loan growth is relationship-driven, less reliant on rate cycles.
- NIM resilience reduces sensitivity to Fed policy uncertainty.
- Credit quality stability avoids the provision headwinds plaguing some peers.

This combination positions HWC to outperform in a sector where multiples are tied to growth consistency and balance sheet strength. If the market begins to price in select regional banks with these attributes, HWC's current valuation—trading at ~1.8x 2025 tangible book value versus peers averaging 1.5x—could expand further.

Investment Takeaway

HWC's Q2 results are a masterclass in executing a balanced strategy: growing loans through relationship banking, managing costs through deposit repricing, and preserving capital flexibility for reinvestment. For investors, the stock offers a rare blend of defensive credit metrics and offensive growth drivers, making it a compelling candidate for portfolios seeking exposure to regional banks without excessive risk. With a robust capital cushion and a management team focused on disciplined expansion, HWC's valuation multiple deserves to trade closer to the upper end of its peer group.

Action: Consider initiating or adding to a position in HWC, particularly if regional bank valuations stabilize. Monitor NIM trends and C&D sector recovery as key catalysts.