Why Hancock Whitney Corp (NASDAQ: HWC) stock is under pressure

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Hancock Whitney Corp (NASDAQ: HWC) stock lost over 2.8% in the pre-market session of July 22nd, 2020 (Source: Google finance). The firm reported a loss of $117 million, or $1.36 per share during the second quarter of 2020 hurt by $160 million special provision for the energy loan sale, and $147 million provision related to updated COVID-19 forecast and modeling. The Loans rose $1.1 billion from March 31. Fee income balances fell in most areas, but Secondary mortgage income is offsetting some of those declines. Tangible common equity fell below 8% to 7.33% as of June 30.

Meanwhile, the firm’s Deposits rose $2.3 billion, as PPP funding remain, for the most part, in customer DDA accounts. The group also pumped balance sheet with liquidity with over $760 million at quarter-end and $17 billion in untapped sources of funding. Margin fell 18 basis points linked quarter, on the back of the Fed rate moves at the end of March. The group forecasts to rebuild to levels closer to 8% by year-end. Margins fell 36 basis points against last quarter due to the loan sale with another 56 basis points on the back of the impact on TCE of the $2.3 billion in PPP funding. Non-interest expense fell $7 million on the back of equity write-offs of energy-related credits in the first quarter.

The firm has been decreasing its energy portfolio since 2014 and now have a healthy reserve in the remaining portfolio at 5.7% of energy loans and the transaction and accounts 1.7% of total loans, excluding PPP. They made agreement with Oaktree Capital Management to sell over half the energy portfolio as of March 31, including the entire RBL book and a substantial majority of the larger relationships in midstream and energy services. The rest of the energy concentration is a portfolio of mostly granular support service credits with an average outstanding balance of approximately $670,000. To finish this transaction, they booked a special provision of $160 million, or $1.47 per diluted share in the second quarter. Apart from this the special provision for the loan sale, booked a provision of $147 million, or $1.34 per diluted share. The group’s ACL to loans now stands at 2.3%, excluding PPP.

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