Hancock Whitney's Q2 Earnings: A Litmus Test for Regional Banking Resilience

As regional banks face the dual pressures of Fed rate cuts and a softening economic landscape, Hancock Whitney (NASDAQ: HWC) will provide critical insights into the sector's adaptability when it reports Q2 2025 earnings on July 15. For investors, this quarter serves as a barometer of how regional lenders navigate loan growth headwinds, deposit stability challenges, and evolving net interest margin (NIM) dynamics. Let's dissect the key metrics and strategic moves that will define HWC's resilience—and its investment appeal.

Loan Growth: A Mixed Q1, but Hopes for a Q2 Turnaround

Hancock Whitney's Q1 2025 results revealed a $201 million decline in total loans, driven by paydowns in healthcare and commercial non-real estate sectors. Management attributed this to “sector-specific softness” and cautious client behavior amid lingering economic uncertainty. However, the silver lining was equipment finance loan growth, fueled by demand from businesses upgrading machinery or tech.

Q2 Outlook: Analysts project low-single-digit annual loan growth, with management pinning hopes on strategic hires and geographic expansion. The bank plans to add 24–30 revenue producers by year-end and open five new financial centers in Texas, a high-growth market. The $201 million decline in Q1 may reverse in Q2 if client confidence stabilizes.

Deposit Stability: Cost Management Trumps Volume

While deposits dipped $298 million in Q1 due to seasonal public fund outflows, the cost of funds dropped 14 basis points to 1.59%, a win for NIM preservation. This was achieved by reducing promotional rates on retail CDs and refinancing $2.7 billion in maturing CDs at lower rates. The DDA (demand deposit account) mix held steady at 36%, a sign of sticky retail relationships.

Q2 Risks: Rising nonperforming loans (NPLs) to $106.46 million (up 23% YoY) could strain credit quality. However, management remains confident in the 1.49% allowance for credit losses, which covers over 10x the $18 million in net charge-offs recorded in Q1.

NIM Trends: Modest Expansion Amid Fed Rate Cuts

Hancock Whitney's NIM expanded 2 basis points to 3.43% in Q1, despite loan yield compression. This was driven by:
- Lower deposit costs (down 15 bps to 1.70%).
- Bond portfolio yield improvements (+7 bps to 2.78%) from reinvesting $165 million in principal cash flows at higher rates.

Q2 Guidance: NIM is expected to remain resilient, with management forecasting 3–4% growth in net interest income (NII). Key tailwinds include:
- Three 25-bps Fed rate cuts (projected for June, July, and October 得罪), which will accelerate deposit rate declines.
- $236 million in additional bond cash flows to be reinvested at higher yields.

Strategic Moves to Watch

1. Sabal Trust Acquisition: Closing in May 2025, this Florida-based wealth management firm will boost fee income (projected 9–10% YoY growth) and deepen HWC's presence in a key growth market.
2. Capital Returns: A 50% dividend hike to $0.45/share (yielding 2.96%) and $350K in Q1 buybacks signal confidence in capital strength (CET1 ratio: 14.51%). Look for continued repurchases if NIM trends hold.

Risks and Challenges

• Economic Softness: Management cited “tariffs and geopolitical tensions” as risks to loan demand. If recession fears materialize, loan growth could stall further.
• Competitive Pressure: Regional banks face margin squeeze as borrowers refinance loans at lower rates, while deposit costs remain sticky in a low-rate environment.

Investment Thesis: Hold with a Bias to Buy on Earnings

At a $60.77 share price (vs. a $63.29 consensus target), HWC trades at 11.2x forward earnings—a discount to its 5-year average. While rising NPLs and loan softness warrant caution, the bank's deposit cost discipline, strategic M&A, and robust capital make it a safer play than peers.

Recommendation:
- Hold ahead of earnings, targeting a buy on dips below $60 if Q2 NIM and NII beat expectations.
- Avoid if loan growth falters further or credit metrics worsen.

Final Thoughts

Hancock Whitney's Q2 results will test whether its regional focus and operational agility can offset macroeconomic headwinds. Investors should watch for signs of loan stabilization, NIM resilience, and fee growth from the Sabal Trust deal. For now, this is a “buy the dip” story—a resilient regional bank with a path to outperform in a slowing economy.

Stay tuned for the July 15 earnings call—management's commentary on loan pipelines and credit quality will be critical.