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What changed in HANCOCK WHITNEY CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HANCOCK WHITNEY CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+558 added−549 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-27)

Top changes in HANCOCK WHITNEY CORP's 2023 10-K

558 paragraphs added · 549 removed · 381 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

145 edited+31 added−38 removed367 unchanged
Biggest changeThe Company rewards 12 Table of Contents associates for individual performance through merit-based compensation increases and provides additional opportunities for financial advancement through promotions and various incentive opportunities. We promote a pay-for-performance philosophy and motivate a majority of our associate population with incentive compensation designed to drive strategies, behaviors and business goals while effectively balancing risk and reward.
Biggest changeWe promote a pay-for-performance philosophy and motivate a majority of our associate population with incentive compensation designed to drive strategies, behaviors and business goals while effectively balancing risk and reward. We also use long-term incentive compensation to attract and retain top talent while keeping associates focused on long-term company performance, significant milestone achievements and creation of shareholder value.
The diversity of our associates makes us a stronger and more resilient company, one that fosters a culture of inclusion and belonging and one that supports our associates, clients, communities and shareholders in achieving their goals and dreams. We promise our associates an inclusive environment where they can grow, they have a voice, and they are important.
The diversity of our associates makes us a stronger and more resilient company, one that fosters a culture of inclusion and belonging and one that supports our associates, clients, communities and shareholders in achieving their goals and dreams. We promise our associates an inclusive environment where they can grow, have a voice, and are important.
To be well-capitalized, the Bank must maintain at least the following capital ratios: · 5.0% leverage ratio. · 6.5% CET1 to risk-weighted assets; · 8.0% Tier 1 capital to risk-weighted assets; · 10.0% Total capital to risk-weighted assets; and The Federal Reserve has different requirements than those imposed under the current capital rules applicable to banks.
To be well-capitalized, the Bank must maintain at least the following capital ratios: · 5.0% leverage ratio. · 6.5% CET1 to risk-weighted assets; · 8.0% Tier 1 capital to risk-weighted assets; and · 10.0% Total capital to risk-weighted assets; The Federal Reserve has different requirements than those imposed under the current capital rules applicable to banks.
Underscoring our ongoing commitment to championing a culture of inclusion and belonging, the Company established a DEI Council sponsored by the President and CEO in 2018, which consists of associates from a variety of locations, business segments, genders, races, ethnicities, tenures and experiences who work together as thought leaders to promote and foster an inclusive workplace culture that appreciates differences and values all perspectives.
Underscoring our ongoing commitment to a culture of inclusion and belonging, the Company established a DEI Council sponsored by the President and CEO in 2018, which consists of associates from a variety of locations, business segments, genders, races, ethnicities, tenures and experiences who work together as thought leaders to promote and foster an inclusive workplace culture that appreciates differences and values all perspectives.
We could also face the following risks in connection with the following events: • market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit facilities; • the processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable.
We could also face the following risks with the following events: • market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit facilities; • the processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable.
Changes in monetary policy, including changes in interest rates, could influence (i) the amount of interest we receive on loans and securities, (ii) the amount of interest we pay on deposits and borrowings, (iii) our ability to originate loans and obtain deposits, (iv) the fair value of our assets and liabilities, and (v) the reinvestment risk associated with changes in the duration of our mortgage-backed securities portfolio.
Changes in monetary policy, including changes in interest rates, influence (i) the amount of interest we receive on loans and securities, (ii) the amount of interest we pay on deposits and borrowings, (iii) our ability to originate loans and obtain deposits, (iv) the fair value of our assets and liabilities, and (v) the reinvestment risk associated with changes in the duration of our mortgage-backed securities portfolio.
We routinely execute transactions with counterparties in the financial industry, including brokers and dealers, commercial banks and other institutional clients. As a result, defaults by, and even rumors regarding, other financial institutions, or the financial services industry generally, could impair our ability to effect such transactions and could lead to losses or defaults by us.
We routinely execute transactions with counterparties in the financial industry, including brokers and dealers, commercial banks and other institutional clients. As a result, defaults by, and even rumors regarding, other financial institutions, regional banks, or the financial services industry generally, could impair our ability to effect such transactions and could lead to losses or defaults by us.
If we are not able to hire, adequately compensate, or retain these key individuals, we may be unable to execute our business strategies and may suffer adverse consequences to our business, financial condition and results of operations. Recent labor shortages have and may continue to restrict our ability to attract and retain personnel and increase related costs.
If we are not able to hire, adequately compensate, or retain these key individuals, we may be unable to execute our business strategies and may suffer adverse consequences to our business, financial condition and results of operations. Labor shortages have and may continue to restrict our ability to attract and retain personnel and increase related costs.
Additionally, the Company also supports the use of external resources such as professional conferences, specialized seminars, banking schools and other development and leadership programs to supplement associates’ professional development and provides a tuition assistance program for those seeking to deepen their education at undergraduate and graduate levels.
Additionally, the Company supports the use of external resources such as professional conferences, specialized seminars, banking schools and other development and leadership programs to supplement associates’ professional development, and provides a tuition assistance program for those seeking to deepen their education at undergraduate and graduate levels.
We operate primarily in the Gulf South region of the U.S., comprised of southern and central Mississippi; southern and central Alabama; southern, central and northwest Louisiana; the northern, central, and panhandle regions of Florida; and certain areas of east and northeast Texas, including the Houston, Beaumont, Dallas, and San Antonio areas, among others.
We operate primarily in the Gulf South region of the U.S., comprised of southern and central Mississippi; southern and central Alabama; southern, central and northwest Louisiana; the northern, central, and panhandle regions of Florida; and certain areas of east and northeast Texas, including the Houston, Beaumont, Dallas, Austin and San Antonio areas, among others.
We have recently and plan to continue to make investments in new technologies for sales and service, including mobile and online banking, as well as teller, customer service and loan origination platforms. These new technologies and/or operational changes may lead to increased operational risk.
We have recently and plan to continue to make investments in technologies for sales and service, including mobile and online banking, as well as teller, customer service and loan origination platforms. These technologies and/or operational changes may lead to increased operational risk.
Such estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be rendered inaccurate and/or no longer subject to accurate forecasting; 25 Table of Contents • our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to select, manage, and underwrite loans become less predictive of future charge-offs; • regulatory scrutiny of the industry could increase, leading to increased regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or fines; • ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition; • further erosion in the fiscal condition of the U.S.
Such estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be rendered inaccurate and/or no longer subject to accurate forecasting; • our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to select, manage, and underwrite loans become less predictive of future charge-offs; • regulatory scrutiny of the industry could increase, leading to increased regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or fines; • ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition; • further erosion in the fiscal condition of the U.S.
Our benefits and programs are designed around five key pillars of well-being: • Physical: Maintaining a healthy and safe lifestyle • Emotional: Reaching greater balance in mind and spirit • Financial: Achieving financial goals and dreams • Social: Connecting with others and community • Career: Growing and developing a meaningful career Supplementing our various benefit plans and programs, the Hancock Whitney Associate Assistance Fund provides assistance for associates with personal and financial needs during time of unexpected or unavoidable emergencies or disasters.
Our benefits and programs are designed around five key pillars of well-being: • Physical: Maintaining a healthy and safe lifestyle • Emotional: Reaching greater balance in mind and spirit • Financial: Achieving financial goals and dreams • Social: Connecting with others and community • Career: Growing and developing a meaningful career Supplementing our various benefit plans and programs, the Hancock Whitney Associate Assistance Fund provides assistance for associates with personal and financial needs during times of unexpected or unavoidable emergencies or disasters.
Supervision, regulation, and examination of the Company, the Bank, and our respective subsidiaries by the appropriate regulatory agencies, as described herein, are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund (“DIF”) of the FDIC, and the U.S. banking and financial system, rather than holders of our capital stock. 15 Table of Contents Bank Holding Company Regulation The Company is subject to extensive supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”).
Supervision, regulation, and examination of the Company, the Bank, and our respective subsidiaries by the appropriate regulatory agencies, as described herein, are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund (“DIF”) of the FDIC, and the U.S. banking and financial system, rather than holders of our capital stock. 14 Table of Contents Bank Holding Company Regulation The Company is subject to extensive supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”).
These laws and regulations include, among numerous other things, provisions that: • limit the interest and other charges collected or contracted for by the Bank, including rules respecting the terms of credit cards and of debit card overdrafts; 22 Table of Contents • govern the Bank’s disclosures of credit terms to consumer borrowers; • require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the communities it serves; • prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to extend credit; • govern the manner in which the Bank may collect consumer debts; and • prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services.
These laws and regulations include, among numerous other things, provisions that: • limit the interest and other charges collected or contracted for by the Bank, including rules respecting the terms of credit cards and of debit card overdrafts; • govern the Bank’s disclosures of credit terms to consumer borrowers; • require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the communities it serves; • prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to extend credit; • govern the manner in which the Bank may collect consumer debts; and • prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services.
In particular, if we experience an outflow of deposits as a result of our customers desiring to do business with our competitors, we may be forced to rely more heavily on borrowings and other sources of funding to operate our business and meet withdrawal demands, thereby adversely affecting our net interest margin. 33 Table of Contents The implementation of new lines of business or new products and services may subject us to additional risk.
In particular, if we experience an outflow of deposits as a result of our customers desiring to do business with our competitors, we may be forced to rely more heavily on borrowings and other sources of funding to operate our business and meet withdrawal demands, thereby adversely affecting our net interest margin. 31 Table of Contents The implementation of new lines of business or new products and services may subject us to additional risk.
On January 1, 2021, Congress passed federal legislation that made sweeping changes to federal anti-money laundering laws, subject to pending implementation by regulatory rulemaking. Most recently, on June 30, 2021, FinCEN published the first set of “national AML priorities,” as required by the Bank Secrecy Act, which include, but are not limited to, cybercrime, terrorist financing, fraud, and drug/human trafficking.
On January 1, 2021, Congress passed federal legislation that made sweeping changes to federal anti-money laundering laws, subject to pending implementation by regulatory rulemaking. On June 30, 2021, FinCEN published the first set of “national AML priorities,” as required by the Bank Secrecy Act, which include, but are not limited to, cybercrime, terrorist financing, fraud, and drug/human trafficking.
For additional information regarding laws and regulations to which our business is subject, see “Supervision and Regulation.” 35 Table of Contents Any of the laws or regulations to which we are subject, including tax laws, regulations or their interpretations, may be modified or changed from time to time, and we cannot be assured that such modifications or changes will not adversely affect us.
For additional information regarding laws and regulations to which our business is subject, see “Supervision and Regulation.” 33 Table of Contents Any of the laws or regulations to which we are subject, including tax laws, regulations or their interpretations, may be modified or changed from time to time, and we cannot be assured that such modifications or changes will not adversely affect us.
If these requirements are not satisfied, we may be unable to pay dividends on our common stock. 36 Table of Contents We may also decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for use in our business, which could adversely affect the market value of our common stock.
If these requirements are not satisfied, we may be unable to pay dividends on our common stock. 34 Table of Contents We may also decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for use in our business, which could adversely affect the market value of our common stock.
The assessments of our financial reporting controls as of December 31, 2022 are included in this report under Item 9A. “Controls and Procedures.” Our failure to comply with these internal control rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the value of our securities.
The assessments of our financial reporting controls as of December 31, 2023 are included in this report under Item 9A. “Controls and Procedures.” Our failure to comply with these internal control rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the value of our securities.
Our insurance may not be adequate to compensate us for all resulting losses, and the cost to obtain adequate coverage may increase for us or the industry.
Our insurance may not be adequate to compensate us for all resulting losses, and the cost to obtain adequate coverage may continue to increase for us or the industry.
We provide associates with resources to prepare and respond including the American Red Cross, Employee Assistance Program, and Hancock Whitney Associate Assistance Fund. We periodically prompt associates to review and update contact information and emergency contact information in our HR system to ensure that they receive Company communications and outreach during emergency situations.
We provide associates with resources to prepare for and respond to emergencies, including the American Red Cross, Employee Assistance Program, and Hancock Whitney Associate Assistance Fund. We periodically prompt associates to review and update contact information and emergency contact information in our HR system to ensure that they receive Company communications and outreach during emergency situations.
We believe it is paramount to provide relief and recovery resources to help associates and their families remain safe and recover quickly when a storm hits. Throughout the year, especially during hurricane season, we encourage associates to prepare for inclement weather and natural 13 Table of Contents disasters.
We believe it is paramount to provide relief and recovery resources to help associates and their families remain safe and recover quickly when a storm 12 Table of Contents hits. Throughout the year, especially during hurricane season, we encourage associates to prepare for inclement weather and natural disasters.
The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels. 17 Table of Contents The Company and the Bank are subject to the following risk-based capital ratios: a common equity Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels. 16 Table of Contents The Company and the Bank are subject to the following risk-based capital ratios: a common equity Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
The investment portfolio is tested monthly under multiple stressed interest rate scenarios, the results of which are used to manage our interest rate risk position. The rate scenarios include regulatory and management agreed upon instantaneous and ramped rate movements that may be up to plus 500 basis points.
The investment portfolio is tested monthly under multiple stressed interest rate scenarios, the results of which are used to manage our interest rate risk position. The rate scenarios include regulatory and management agreed upon instantaneous and ramped rate movements that may be up to plus or minus 500 basis points.
All associates are strongly encouraged to report ethical concerns related to matters such as accounting, internal controls, auditing, discrimination, and harassment and/or violations or suspected violations of laws or regulations, the Code of Conduct, or other Company policies and procedures by clients, associates, or vendors.
All associates are strongly encouraged to report ethical concerns related to matters such as accounting, internal controls, auditing, discrimination, and harassment and/or violations or suspected violations of laws or regulations, our Code of Conduct, or other Company policies and procedures by clients, associates, or vendors.
COMPETITION The financial services industry is highly competitive and may become more competitive as a result of recent and ongoing legislative, regulatory, and technological changes, as well as continued consolidation within the financial services industry and the addition of nontraditional competitors into our markets, including financial technology (fintech) companies.
COMPETITION The financial services industry is highly competitive and may become more competitive as a result of recent and ongoing legislative, regulatory, and technological changes, as well as continued consolidation within the financial services industry and the addition of nontraditional competitors into our markets, including financial technology companies ("fintechs").
The continuing consolidation within the financial services industry is leading to larger, better capitalized and geographically diverse institutions with enhanced product and technology capabilities. Additionally, competition from fintechs is increasing. In addition to fintechs, certain technology companies are working to provide financial services directly to their customers.
The continuing consolidation within the financial services industry is leading to larger, better capitalized and geographically diverse institutions with enhanced product and technology capabilities. In addition to competition from fintechs, certain technology companies are working to provide financial services directly to their customers.
Throughout 2022, the Company’s and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer requirements. Based on current estimates, we believe that the Company and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2023.
Throughout 2023, the Company’s and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer requirements. Based on current estimates, we believe that the Company and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2024.
The sale of fixed-rate mortgage loans allows the Bank to manage the interest rate risks related to such lending operations. 9 Table of Contents Consumer Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans.
The sale of fixed-rate mortgage loans allows the Bank to manage the interest rate risks related to such lending operations. 8 Table of Contents Consumer Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans.
If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to the Bank, the Company’s capital ratios as of December 31, 2022 would exceed such revised well-capitalized standard.
If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to the Bank, the Company’s capital ratios as of December 31, 2023 would exceed such revised well-capitalized standard.
Furthermore, the actions of the U.S. government and other governments may result in currency fluctuations, exchange controls, market disruption, material decreases in the values of certain of our financial assets and other adverse effects. Interest rate changes are dependent on the Federal Reserve’s assessment of economic data as it becomes available.
Furthermore, the actions of the U.S. government and other governments have resulted, and in the future may result in currency fluctuations, exchange controls, market disruption, material decreases in the values of certain of our financial assets and other adverse effects. Interest rate changes are dependent on the Federal Reserve’s assessment of economic data as it becomes available.
In view of changing conditions in the national economy and in the money markets, we cannot predict the potential impact of future changes in interest rates, deposit levels, and loan demand on our business and earnings.
In view of changing conditions in the national economy and in the money markets, we cannot predict the potential impact of future changes in interest rates, deposit levels, and loan demand on our business and earnings with certainty.
Failure of a financial institution to comply with the USA PATRIOT Act’s 21 Table of Contents requirements could have serious legal and reputational consequences for the institution. The Bank has augmented its systems and procedures to meet the requirements of these regulations and will continue to revise and update its policies, procedures and controls to reflect changes required by law.
Failure of a financial institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for the institution. The Bank has augmented its systems and procedures to meet the requirements of these regulations and will continue to revise and update its policies, procedures and controls to reflect changes required by law.
Trade restrictions on products include export and import restrictions recently levied against Russia. 27 Table of Contents In addition, to the extent changes in the political environment have a negative impact on the Company or on the markets in which the Company operates its business, its results of operations and financial condition could be materially and adversely impacted.
Trade restrictions on products include export and import restrictions recently levied against Russia. In addition, to the extent changes in the political environment have a negative impact on the Company or on the markets in which the Company operates its business, its results of operations and financial condition could be materially and adversely impacted.
Our operating results may also be negatively impacted by the value of our securities portfolio, if liquidity and/or business strategy necessitate the sales of securities in a loss position, and/or access to select sources of liquidity could be limited should unrealized losses continue to grow to exceed certain levels.
Our operating results may also be negatively impacted by the value of our securities portfolio, if liquidity and/or business strategy necessitate the sales of securities in a loss position, and/or access to select sources of liquidity could be limited should 27 Table of Contents unrealized losses continue to grow to exceed certain levels.
Our credit risk with respect to our real estate and construction loan portfolio relates principally to the creditworthiness of our corporate borrowers and the value of the real estate pledged as security for the repayment of loans.
Our credit risk with respect to our real estate and construction loan portfolios relates principally to the creditworthiness of our corporate borrowers and the value of the real estate pledged as security for the repayment of loans.
Our dependence on our employees and automated 30 Table of Contents systems, including the automated systems used by acquired entities and third parties, to record and process transactions may further increase the risk that technical failures or tampering of those systems will result in losses that are difficult to detect.
Our dependence on our employees and automated systems, including the automated systems used by acquired entities and third parties, to record and process transactions may further increase the risk that technical failures or tampering of those systems will result in losses that are difficult to detect.
Banks that sponsor the securitization of asset-backed securities are generally required to retain not less than 5% of the credit risk of any loan they securitize, except for residential mortgages that meet certain low-risk standards. Privacy, Credit Reporting and Cybersecurity .
Banks that sponsor the securitization of asset-backed securities are generally required to retain not less than 5% of the credit risk of any loan they securitize, except for residential mortgages that meet certain low-risk standards. 21 Table of Contents Privacy, Credit Reporting and Cybersecurity .
In October of 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate by 2 basis points, applicable to all insured depository institutions, which will begin with the first quarterly assessment period in 2023 and will remain in effect until the level of the DIF reserve ratios to insured deposits meets the FDIC's long-term goals.
In October of 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate by two basis points, applicable to all insured depository institutions, which began with the first quarterly assessment period in 2023 and will remain in effect until the level of the DIF reserve ratios to insured deposits meets the FDIC's long-term goals.
On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to address references to LIBOR in contracts that (i) are governed by U.S. law; (ii) will not mature before June 30, 2023; and (iii) lack 23 Table of Contents fallback provisions providing for a clearly defined and practicable replacement for LIBOR.
On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to address references to LIBOR in contracts that (i) are governed by U.S. law; (ii) will not mature before June 30, 2023; and (iii) lack fallback provisions providing for a clearly defined and practicable replacement for LIBOR.
Unexpected and/or significant 26 Table of Contents movement in interest rates markedly changing the slope of the current yield curve could cause our and our customers’ net interest margins to decrease, subsequently reducing net interest income. In addition, such changes could adversely affect the valuation of our assets and liabilities.
Unexpected and/or significant movement in interest rates markedly changing the slope of the current yield curve could cause our and our customers’ net interest margins to decrease, subsequently reducing net interest income. In addition, such changes could adversely affect the valuation of our assets and liabilities.
Further, U.S. financial institutions and financial services companies will continue to face breaches in security of their websites or other systems, including attempts to shut down access to their networks and systems in an attempt to extract compensation from them to regain control.
Further, U.S. financial institutions and financial services companies will continue to face breaches 29 Table of Contents in security of their websites or other systems, including attempts to shut down access to their networks and systems in an attempt to extract compensation from them to regain control.
While an impairment charge does not impact regulatory capital, it could have a material adverse effect on our results of operations. 32 Table of Contents Risks Related to Our Business Strategy We are subject to industry competition which may have an impact upon our success.
While an impairment charge does not impact regulatory capital, it could have a material adverse effect on our results of operations. Risks Related to Our Business Strategy We are subject to industry competition which may have an impact upon our success.
We also compete through the efficiency, quality and range of services and products we provide, as well as the convenience provided by an extensive 14 Table of Contents network of customer access channels including local branch offices, ATMs, online and mobile banking, and telebanking centers.
We also compete through the efficiency, quality and range of services and products we provide, as well as the convenience provided by an extensive network of customer access channels including local branch offices, ATMs, online and mobile banking, and telebanking centers.
If market rates of interest increase, it would increase debt service requirements for some of our borrowers; adversely affect those borrowers’ ability to pay us as contractually obligated; potentially reduce loan demand or result in additional delinquencies or charge-offs; and increase the cost of our deposits, which are a primary source of funding.
Continued heightened market rates of interest rates would increase debt service requirements for some of our borrowers; adversely affect those borrowers’ ability to pay us as contractually obligated; potentially reduce loan demand or result in additional delinquencies or charge-offs; and increase the cost of our deposits, which are a primary source of funding.
This wider range of influence and diverse thought allows us to better serve the people and communities depending on us. Our commitment to DEI starts at the top of our organization, supported through oversight by the Compensation Committee of the Hancock Whitney Corporation Board of Directors.
This wider range of influence and diverse thought allows us to better serve the people and communities depending on us. Our commitment to DEI starts at the top of our organization, supported through oversight by the Compensation Committee of our Board of Directors.
Shane Loper 57 Senior Executive Vice President since 2017; Executive Vice President from 2008 to 2016; Chief Operating Officer since 2014; Chief Administrative Officer from 2013 to 2014; Chief Risk Officer from 2012 to 2013; Chief Risk and Administrative Officer from 2010 to 2012.
Shane Loper 58 Senior Executive Vice President since 2017; Executive Vice President from 2008 to 2016; Chief Operating Officer since 2014; Chief Administrative Officer from 2013 to 2014; Chief Risk Officer from 2012 to 2013; Chief Risk and Administrative Officer from 2010 to 2012.
These changes are beyond our control, can be difficult 38 Table of Contents to predict, may require extraordinary efforts or additional costs to implement and could materially impact how we report our financial condition and results of operations.
These changes are beyond our control, can be difficult to predict, may require extraordinary efforts or additional costs to implement and could materially impact how we report our financial condition and results of operations.
Additionally, we may be required to apply a new or revised standard retrospectively, resulting in the restatement of prior period financial statements in material amounts. ITEM 1B. UNRES OLVED STAFF COMMENTS None.
Additionally, we may be required to apply a new or revised standard retrospectively, resulting in the restatement of prior period financial statements in material amounts. 36 Table of Contents ITEM 1B. UNRES OLVED STAFF COMMENTS None.
Public funds are only one of many possible sources of liquidity that the Bank has available to draw upon as part of its liquidity funding strategy as set by ALCO. Brokered deposits, including time deposits and money market accounts, totaled $5 million at December 31, 2022.
Public funds are only one of many possible sources of liquidity that the Bank has available to draw upon as part of its liquidity funding strategy as set by ALCO. Brokered deposits, including time deposits and money market accounts, totaled $590 million at December 31, 2023.
We risk damage to our brand and reputation in certain sectors if we fail to act in response to ESG concerns, such as diversity, equity and inclusion, environmental stewardship, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.
We risk damage to our brand and reputation in certain sectors if we fail to act in response to ESG concerns, such as 35 Table of Contents diversity, equity and inclusion, environmental stewardship, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.
These resources are used to objectively evaluate our compensation and benefits packages and benchmark them against industry peers and similarly situated organizations on an annual basis. Our compensation philosophy is a performance-based strategy which aligns our programs with our business goals and objectives.
These resources are used to objectively evaluate our compensation and benefits packages and benchmark them against industry peers and similarly situated organizations on an annual basis. 11 Table of Contents Our compensation philosophy is a performance-based strategy which aligns our programs with our business goals and objectives.
We promote a workplace focused on gratitude and appreciation through our Value of You recognition program, Community Connection volunteer program as well as other associate campaigns throughout the year. We periodically conduct associate engagement surveys to measure our associates' connection and commitment to the Company and its goals.
We promote a workplace focused on gratitude and appreciation through our Value of You recognition program, Community Connection volunteer program as well as other associate campaigns throughout the year. We generally conduct associate engagement surveys on a biennial basis to measure our associates' connection and commitment to the Company and its goals.
The FDIC has adopted the Federal Financial Institutions Examination Council’s (“FFIEC”) rating system and assigns each financial institution a confidential composite rating based on an evaluation and rating of six essential components of an institution’s financial condition and operations, including Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and Sensitivity to Market Risk (“CAMELS”), as well as the quality of risk management practices. 20 Table of Contents Consumer Protection.
The FDIC has adopted the Federal Financial Institutions Examination Council’s (“FFIEC”) rating system and assigns each financial institution a confidential composite rating based on an evaluation and rating of six essential components of an institution’s financial condition and operations, including Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and Sensitivity to Market Risk (“CAMELS”), as well as the quality of risk management practices.
If we find a name on any transaction, account or wire transfer that is on an OFAC list, we must undertake certain specified activities, which could include blocking or freezing the account or transaction requested, and we must notify the appropriate authorities. Concentrations in Lending.
If we find a name on any transaction, account or wire transfer that is on an OFAC list, we must undertake certain specified activities, which could include blocking or freezing the account or transaction requested, and we must notify the appropriate authorities. 20 Table of Contents Concentrations in Lending.
Our access to deposits may also be affected by the liquidity needs of our depositors and the loss of deposits to alternative investments.
Our access to deposits may also be affected by the liquidity needs of our depositors and the loss of deposits to alternative institutions or investments.
Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral.
Like commercial non-real estate, these loans 7 Table of Contents are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral.
As further described below, the Company and the Bank are each well-capitalized under applicable regulatory standards as of December 31, 2022, and the Bank has a rating of “Satisfactory” in its most recent CRA evaluation. 16 Table of Contents Source of Strength Obligations .
As further described below, the Company and the Bank are each well-capitalized under applicable regulatory standards as of December 31, 2023, and the Bank has a rating of “Satisfactory” in its most recent CRA evaluation. 15 Table of Contents Source of Strength Obligations .
In attracting deposits and in our lending activities, we generally compete with other commercial banks, savings associations, credit unions, mortgage banking firms, securities brokerage firms, mutual funds and insurance companies, and other financial and non-financial institutions offering similar products.
In attracting deposits and in our lending activities, we generally compete with other commercial banks, savings associations, credit 13 Table of Contents unions, mortgage banking firms, securities brokerage firms, mutual funds and insurance companies, and other financial and non-financial institutions offering similar products.
In addition, the legislation prohibits card issuers and networks from entering into arrangements requiring that debit card transactions be processed on a single network or only two affiliated networks, and allows merchants to determine transaction routing. Interest rates based on LIBOR.
In addition, the legislation prohibits card issuers and networks from entering into arrangements requiring that debit card transactions be processed on a single network or only two affiliated networks, and allows merchants to determine transaction routing.
The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for Safety and Soundness to implement these required standards.
The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines 18 Table of Contents Establishing Standards for Safety and Soundness to implement these required standards.
The Bank was well capitalized at December 31, 2022, and brokered deposits are not restricted.
The Bank was well capitalized at December 31, 2023, and brokered deposits are not restricted.
Credit risk is inherent in our business and any material 29 Table of Contents level of credit failure could have a material adverse effect on our operating results.
Credit risk is inherent in our business and any material level of credit failure could have a material adverse effect on our operating results.
In 2022, the Company enhanced its diversity-learning opportunities with new platforms designed to listen and learn directly from the voices and experiences of our associates including Living Room Conversations, Cultural Tasting Series, Understanding Cultural Bias Training, and Associate Spotlights featuring New Associates, Women of Excellence, Random Acts of Kindness, and Living Our Core Values to help drive inclusive behaviors and inspire a growth mindset.
The Company continues to enhance its diversity-learning opportunities with programs designed to listen and learn directly from the voices and experiences of our associates including Living Room Conversations, Cultural Tasting Series, Understanding Cultural Bias Training, and Associate Spotlights featuring New Associates, Women of Excellence, Random Acts of Kindness, and Living Our Core Values to help drive inclusive behaviors and inspire a growth mindset.
Due to the exposure in these concentrations, disruptions in markets, economic conditions, including those resulting from the global response to COVID-19, inflation, supply chain disruptions, changes in laws or regulations or other events could significantly impact the ability of our borrowers to repay their loans and may have a material adverse effect on our business, financial condition and results of operations.
Due to the exposure in these concentrations, disruptions in markets, economic conditions, including those resulting from heightened interest rates, inflation, supply chain disruptions, changes in laws or regulations or other events could significantly impact the ability of our borrowers to repay their loans and may have a material adverse effect on our business, financial condition and results of operations.
Transactions with Affiliates and Insiders. The Bank is subject to restrictions on extensions of credit and certain other transactions between the Bank and the Company or any nonbank affiliate.
The Bank is subject to restrictions on extensions of credit and certain other transactions between the Bank and the Company or any nonbank affiliate.
In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company.
In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company. 19 Table of Contents Transactions with Affiliates and Insiders.
Interchange fees are fees that merchants pay to credit card companies and card-issuing banks such as the Bank for processing electronic payment transactions on their behalf.
"Cybersecurity" for further discussion. Debit Interchange Fees. Interchange fees are fees that merchants pay to credit card companies and card-issuing banks such as the Bank for processing electronic payment transactions on their behalf.
We revitalized the corporate internship program providing an inclusive experience that uniquely incorporates mentorship, financial literacy, community connection, and diversity learning opportunities across the organization and footprint. We proudly hosted the 2022 class of interns consisting of 56% females and 56% people of color, expanding our diverse pool of future talent and campus advocates.
Our recently revitalized corporate internship program continued to provide an inclusive experience that uniquely incorporates mentorship, financial literacy, community connection, and diversity learning opportunities across the organization and footprint. We proudly hosted the 2023 class of interns consisting of 56% females and 56% people of color, expanding our diverse pool of future talent and campus advocates.
If we are required to make any indemnity payments or repurchases and do not have a remedy available to us against a solvent counterparty to the loan or loans, we may not be able to recover our losses resulting from these indemnity payments and repurchases. Consequently, our results of operations may be adversely affected.
If we are required to make any indemnity payments or repurchases and do not have a remedy available to us against a solvent counterparty to the loan or loans, we may not be able to recover our losses resulting from these indemnity payments and repurchases.
The Company has adopted and implemented an Information Security Program to comply with the regulatory cybersecurity guidance. Effective April 1, 2022, the federal banking agencies implemented a new rule that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” Debit Interchange Fees.
The Company has adopted and implemented an Information Security Program to comply with the regulatory cybersecurity guidance. Effective April 1, 2022, the federal banking agencies implemented a new rule that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” Refer to Part I, Item 1C.
Although management believes it has implemented an effective asset and liability management strategy to manage the potential effects of changes in interest rates, including the use of adjustable rate and/or short-term assets, and FHLB advances or longer term repurchase agreements, any substantial, unexpected change in market interest rates could have a material adverse effect on our financial condition and results of our operation and our strategies may not always be successful in managing the risks associated with changes in interest rates.
Although management believes it has implemented an effective asset and liability management strategy to manage the potential effects of changes in interest rates, including the use of adjustable rate and/or short-term assets, and FHLB advances or longer term repurchase agreements, any substantial, unexpected change in market interest rates could have a material adverse effect on our financial condition and results of our operation and our strategies may not always be successful in managing the risks associated with changes in interest rates. 25 Table of Contents Changes in the policies of monetary authorities and other government action could adversely affect our profitability.
Management believes that the rates that it offers on deposit accounts are generally competitive with other financial institutions in the Bank’s market areas. Client deposits are attractive sources of funding because of their stability and low relative cost.
Management believes that the rates that it offers on deposit accounts are generally competitive with other financial institutions in the Bank’s market areas. Client deposits are attractive sources of funding because of their stability and low relative cost. Deposits are regarded as an important part of the overall client relationship.
Talent Acquisition, Development and Retention The Company is dedicated to attracting, developing and retaining exceptional talent and strives to keep associates motivated, rewarded and appreciated through our commitment to DEI, competitive total rewards packages and career development. Of the approximately 1,437 requisitions filled in 2022, 40% were filled by internal associates.
Talent Acquisition, Development and Retention The Company is dedicated to attracting, developing and retaining exceptional talent and strives to keep associates motivated, rewarded and appreciated through our commitment to DEI, competitive total rewards packages and career development. Of the approximately 850 job requisitions filled in 2023, 33% were filled by internal associates.
We are subject to lending concentration risk. Our loan portfolio contains several industry, collateral and other concentrations including, but not limited to, commercial and residential real estate, healthcare, hospitality, shared national credits, and leveraged loans.
Our loan portfolio contains several industry, collateral and other concentrations including, but not limited to, commercial and residential real estate, healthcare, hospitality, shared national credits, and leveraged loans.
Our common stock trades on the Nasdaq Global Select Market under the ticker symbol “HWC.” At December 31, 2022, our balance sheet totaled $35.2 billion, with loans of $23.1 billion and deposits of $29.1 billion.
Our common stock trades on the Nasdaq Global Select Market under the ticker symbol “HWC.” At December 31, 2023, our balance sheet totaled $35.6 billion, with loans of $23.9 billion and deposits of $29.7 billion.
Additional risks and uncertainties not presently known to us, or that we currently do not consider significant, could also potentially impair, and have a material adverse effect on our business, results of operations, and financial condition.
Also, the risks and uncertainties described below are not the only ones that we may face. Additional risks and uncertainties not presently known to us, or that we currently do not consider significant, could also potentially impair, and have a material adverse effect on our business, results of operations, and financial condition.
In 2022, approximately 74% of our new hires self-identified as female and approximately 45% of new hires self-identified as people of color. Diversity, Equity and Inclusion Diversity, Equity and Inclusion (DEI) are fundamental to our purpose and essential to executing our mission.
In 2023, approximately 71% of our new hires self-identified as female and approximately 43% of new hires self-identified as people of color. Diversity, Equity and Inclusion Diversity, Equity and Inclusion (DEI) are fundamental to our purpose and essential to executing our mission.
We have instituted measures to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles—that incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance.
As of December 31, 2023, these rules had not been implemented. We have instituted measures to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles—that incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed1 unchanged
Biggest changeWe ensure that all properties, whether owned or leased, are maintained in suitable condition. We also evaluate our banking facilities on an ongoing basis to identify possible under-utilization and to determine the need for functional improvements, relocations, closures or possible sales. The Bank and its subsidiaries hold a variety of property interests acquired in settlement of loans.
Biggest changeWe ensure that all properties, whether owned or leased, are maintained in suitable condition. We also evaluate our banking 38 Table of Contents facilities on an ongoing basis to identify possible under-utilization and to determine the need for functional improvements, relocations, closures or possible sales.
The Company operates 177 full service banking and financial services offices and 226 automated teller machines across our market, primarily in the Gulf south corridor, including southern and central Mississippi; southern and central Alabama; southern, central and northwest Louisiana; the northern, central, and panhandle regions of Florida; and certain areas of east Texas, including Houston, Beaumont, Dallas and San Antonio, among others.
The Company operates 182 full-service banking and financial services offices and 225 automated teller machines across our market, primarily in the Gulf south corridor, including southern and central Mississippi; southern and central Alabama; southern, central and northwest Louisiana; the northern, central, and panhandle regions of Florida; and certain areas of east and northeast Texas, including Houston, Beaumont, Dallas, Austin, and San Antonio, among others.
Additionally, the Company operates loan production offices in Nashville, Tennessee and the metropolitan area of Atlanta, Georgia, and a trust and asset management office in Marshall, Texas. The Company owns approximately 72% of these facilities, and the remaining banking facilities are subject to leases, each of which we consider reasonable and appropriate for its location.
Additionally, the Company operates combined loan and deposit production offices in the metropolitan areas of Nashville, Tennessee and Atlanta, Georgia. The Company owns approximately 70% of these facilities, and the remaining banking facilities are subject to leases, each of which we consider reasonable and appropriate for its location.
Some of these properties were acquired in transactions before 1979 and are carried at nominal amounts on our balance sheet and reflected income of $0.1 million in our 2022 operating results.
The Bank and its subsidiaries hold a variety of property interests acquired in settlement of loans. Some of these properties were acquired in transactions before 1979 and are carried at nominal amounts on our balance sheet and reflected income of $0.1 million in our 2023 operating results.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

44 edited+39 added−33 removed12 unchanged
Biggest changeConsolidated Financial Results ( in thousands, except per share data ) 2022 2021 2020 Income Statement: Interest income (a) $ 1,137,063 $ 982,258 $ 1,057,981 Interest income (te) (b) 1,147,411 993,437 1,070,981 Interest expense 87,060 49,023 115,458 Net interest income (te) 1,060,351 944,414 955,523 Provision for credit losses (28,399 ) (77,494 ) 602,904 Noninterest income 331,486 364,334 324,428 Noninterest expense 750,692 807,007 788,792 Income (loss) before income taxes 659,196 568,056 (124,745 ) Income tax expense (benefit) 135,107 104,841 (79,571 ) Net income (loss) $ 524,089 $ 463,215 $ (45,174 ) For informational purposes - included above, pre-tax: Nonoperating item included in noninterest income: Gain on sale of Hancock Horizon Funds $ — $ 4,576 $ — Gain on sale of MasterCard Class B common stock — 2,800 — Gain on hurricane-related insurance settlement — 3,600 — Nonoperating items included in noninterest expense: Efficiency initiatives — 38,296 — Hurricane related expenses — 4,412 — Loss on redemption of subordinated notes — 4,165 — Provision for credit loss associated with energy loan sale — — 160,101 Balance Sheet Data: Period end balance sheet data Loans $ 23,114,046 $ 21,134,282 $ 21,789,931 Earning assets 31,873,027 33,610,435 30,616,277 Total assets 35,183,825 36,531,205 33,638,602 Noninterest-bearing deposits 13,645,113 14,392,808 12,199,750 Total deposits 29,070,349 30,465,897 27,697,877 Stockholders' equity 3,342,628 3,670,352 3,439,025 Average balance sheet data Loans $ 21,915,393 $ 21,207,942 $ 22,166,523 Earning assets 32,498,213 32,060,863 29,235,313 Total assets 35,059,178 35,075,392 32,390,967 Noninterest-bearing deposits 14,298,022 13,323,978 10,779,570 Total deposits 29,497,470 29,093,709 26,212,317 Stockholders' equity 3,405,206 3,545,255 3,433,099 Common Shares Data: Earnings (loss) per share - basic $ 6.00 $ 5.23 $ (0.54 ) Earnings (loss) per share - diluted 5.98 5.22 (0.54 ) Cash dividends per common share 1.08 1.08 1.08 Book value per share (period end) 38.89 42.31 39.65 Tangible book value per share (period end) 28.29 31.64 28.79 Weighted average number of shares - diluted 86,394 87,027 86,533 Period end number of shares 85,941 86,749 86,728 45 Table of Contents ($ in thousands ) 2022 2021 2020 Performance and other data: Return on average assets 1.49 % 1.32 % -0.14 % Return on average common equity 15.39 % 13.07 % -1.32 % Return on average tangible common equity 21.07 % 17.74 % -1.82 % Tangible common equity (c) 7.09 % 7.71 % 7.64 % Tier 1 common equity 11.41 % 11.09 % 10.61 % Net interest margin (te) 3.26 % 2.95 % 3.27 % Noninterest income as a percentage of total revenue (te) 23.82 % 27.84 % 25.35 % Efficiency ratio (d) 52.93 % 57.29 % 60.07 % Allowance for loan loss as a percentage of total loans 1.33 % 1.62 % 2.07 % Allowance for credit loss as a percentage of total loans 1.48 % 1.76 % 2.20 % Annualized net charge-offs to average loans 0.01 % 0.15 % 1.78 % Nonperforming assets as a percentage of loans, ORE and foreclosed assets 0.19 % 0.32 % 0.71 % FTE headcount 3,627 3,486 3,986 Reconciliation of operating revenue and pre-provision net revenue (te) (non-GAAP measures) (e) Net interest income $ 1,050,003 $ 933,235 $ 942,523 Noninterest income 331,486 364,334 324,428 Total revenue 1,381,489 1,297,569 1,266,951 Taxable equivalent adjustment 10,348 11,179 13,000 Nonoperating revenue — (10,976 ) — Total operating revenue (te) 1,391,837 1,297,772 1,279,951 Noninterest expense (750,692 ) (807,007 ) (788,792 ) Nonoperating expense — 46,873 — Operating pre-provision net revenue (te) $ 641,145 $ 537,638 $ 491,159 (a) Interest income includes the net impact of discount accretion and premium amortization arising from business combinations totaling $4.7 million, $8.6 million, and $15.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Biggest changeConsolidated Financial Results ( in thousands, except per share data ) 2023 2022 2021 Income Statement: Interest income (a) $ 1,620,497 $ 1,137,063 $ 982,258 Interest income (te) (b) 1,631,604 1,147,411 993,437 Interest expense 522,898 87,060 49,023 Net interest income (te) 1,108,706 1,060,351 944,414 Provision for credit losses 59,103 (28,399 ) (77,494 ) Noninterest income 288,480 331,486 364,334 Noninterest expense 836,848 750,692 807,007 Income before income taxes 490,128 659,196 568,056 Income tax expense 97,526 135,107 104,841 Net income $ 392,602 $ 524,089 $ 463,215 Supplemental disclosure items - included above, pre-tax Included in noninterest income: Loss on securities portfolio restructure $ (65,380 ) $ — $ — Gain on sale of parking facility 16,126 — — Gain on sale of Hancock Horizon Funds — — 4,576 Gain on sale of MasterCard Class B common stock — — 2,800 Gain on hurricane-related insurance settlement — — 3,600 Included in noninterest expense: FDIC special assessment 26,123 — — Efficiency initiatives — — 38,296 Hurricane related expenses — — 4,412 Loss on redemption of subordinated notes — — 4,165 Balance Sheet Data: Period end balance sheet data Loans $ 23,921,917 $ 23,114,046 $ 21,134,282 Earning assets 32,175,097 31,873,027 33,610,435 Total assets 35,578,573 35,183,825 36,531,205 Noninterest-bearing deposits 11,030,515 13,645,113 14,392,808 Total deposits 29,690,059 29,070,349 30,465,897 Stockholders' equity 3,803,661 3,342,628 3,670,352 Average balance sheet data Loans $ 23,594,579 $ 21,915,393 $ 21,207,942 Earning assets 33,160,791 32,498,213 32,060,863 Total assets 35,633,442 35,059,178 35,075,392 Noninterest-bearing deposits 11,919,234 14,298,022 13,323,978 Total deposits 29,478,481 29,497,470 29,093,709 Stockholders' equity 3,528,911 3,405,206 3,545,255 Common Shares Data: Earnings per share - basic $ 4.51 $ 6.00 $ 5.23 Earnings per share - diluted 4.50 5.98 5.22 Cash dividends per common share 1.20 1.08 1.08 Book value per share (period end) 44.05 38.89 42.31 Tangible book value per share (period end) 33.63 28.29 31.64 Weighted average number of shares - diluted 86,423 86,394 87,027 Period end number of shares 86,345 85,941 86,749 Performance and other data: Return on average assets 1.10 % 1.49 % 1.32 % Return on average common equity 11.13 % 15.39 % 13.07 % Return on average tangible common equity 14.97 % 21.07 % 17.74 % Tangible common equity (c) 8.37 % 7.09 % 7.71 % Tier 1 common equity 12.33 % 11.41 % 11.09 % Net interest margin (te) 3.34 % 3.26 % 2.95 % Noninterest income as a percentage of total revenue (te) 20.65 % 23.82 % 27.84 % Efficiency ratio (d) 55.25 % 52.93 % 57.29 % Allowance for loan loss as a percentage of total loans 1.29 % 1.33 % 1.62 % Allowance for credit loss as a percentage of total loans 1.41 % 1.48 % 1.76 % Annualized net charge-offs to average loans 0.27 % 0.01 % 0.15 % Nonaccrual assets as a percentage of loans, ORE and foreclosed assets 0.26 % 0.18 % 0.32 % FTE headcount 3,591 3,627 3,486 45 Table of Contents ($ in thousands ) 2023 2022 2021 Reconciliation of pre-provision net revenue (te) and adjusted pre-provision net revenue (te) (non-GAAP measures) (e) Net income (GAAP) $ 392,602 $ 524,089 $ 463,215 Provision for credit losses 59,103 (28,399 ) (77,494 ) Income tax expense 97,526 135,107 104,841 Pre-provision net revenue 549,231 630,797 490,562 Taxable equivalent adjustment 11,107 10,348 11,179 Pre-provision net revenue (te) 560,338 641,145 501,741 Adjustments from supplemental disclosure items Loss on securities portfolio restructure 65,380 — — Gain on sale of parking facility (16,126 ) — — Gain on sale of Hancock Horizon Funds — — (4,576 ) Gain on sale of MasterCard Class B common stock — — (2,800 ) Gain on hurricane-related insurance settlement — — (3,600 ) FDIC special assessment 26,123 — — Efficiency initiatives — — 38,296 Hurricane related expenses — — 4,412 Loss on redemption of subordinated notes — — 4,165 Adjusted pre-provision net revenue (te) $ 635,715 $ 641,145 $ 537,638 Reconciliation of revenue (te), adjusted revenue (te) and efficiency ratio (non-GAAP measures) (e) Net interest income $ 1,097,599 $ 1,050,003 $ 933,235 Noninterest income 288,480 331,486 364,334 Total GAAP revenue 1,386,079 1,381,489 1,297,569 Taxable equivalent adjustment 11,107 10,348 11,179 Total revenue (te) 1,397,186 1,391,837 1,308,748 Adjustments from supplemental disclosure items Loss on securities portfolio restructure 65,380 — — Gain on sale of parking facility (16,126 ) — — Gain on sale of Hancock Horizon Funds — — (4,576 ) Gain on sale of MasterCard Class B common stock — — (2,800 ) Gain on hurricane-related insurance settlement — — (3,600 ) Adjusted revenue 1,446,440 1,391,837 1,297,772 GAAP noninterest expense 836,848 750,692 807,007 Amortization of intangibles (11,556 ) (14,033 ) (16,665 ) Adjustments from supplemental disclosure items FDIC special assessment (26,123 ) — — Efficiency initiatives — — (38,296 ) Hurricane related expenses — — (4,412 ) Loss on redemption of subordinated notes — — (4,165 ) Adjusted noninterest expense $ 799,169 $ 736,659 $ 743,469 Efficiency ratio (d) 55.25 % 52.93 % 57.29 % (a) Interest income includes the net impact of discount accretion and premium amortization arising from business combinations totaling $2.4 million, $4.7 million, and $8.6 million for the years ended December 31, 2023, 2022 and 2021, respectively .
A reconciliation of those measures to GAAP measures are provided in Table 1 “Consolidated Financial Results” and Table 29 “Quarterly Consolidated Financial Results” of this section. The following is an overview of the non-GAAP measures used and the reasons why management believes they are useful and important in understanding the Company’s financial condition and results of operations included below.
A reconciliation of those measures to GAAP measures are provided in Table 1 “Consolidated Financial Results” and Table 31 “Quarterly Consolidated Financial Results” of this section. The following is an overview of the non-GAAP measures used and the reasons why management believes they are useful and important in understanding the Company’s financial condition and results of operations included below.
The performance graph compares the cumulative five-year shareholder return on the Company’s common stock, assuming an investment of $100 on December 31, 2017 and the reinvestment of dividends thereafter, to that of the common stocks of United States companies reported in the Nasdaq Total Return Index and the common stocks of the KBW Regional Banks Total Return Index.
The performance graph compares the cumulative five-year shareholder return on the Company’s common stock, assuming an investment of $100 on December 31, 2018 and the reinvestment of dividends thereafter, to that of the common stocks of United States companies reported in the Nasdaq Total Return Index and the common stocks of the KBW Regional Banks Total Return Index.
This outlook discussion utilizes the December 2022 Moody’s forecast, the most current available at December 31, 2022. 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.
This outlook discussion utilizes the December 2023 Moody’s forecast, the most current available at December 31, 2023. 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.
The KBW Regional Banks Total Return Index is a proprietary stock index of Keefe, Bruyette & Woods, Inc., that tracks the returns of 50 regional banking companies throughout the United States. 40 Table of Contents Equity Compensation Plan Information The following table provides information as of December 31, 2022 with respect to shares of common stock that may be issued under the Company’s equity compensation plans.
The KBW Regional Banks Total Return Index is a proprietary stock index of Keefe, Bruyette & Woods, Inc., that tracks the returns of approximately 50 regional banking companies throughout the United States. 40 Table of Contents Equity Compensation Plan Information The following table provides information as of December 31, 2023 with respect to shares of common stock that may be issued under the Company’s equity compensation plans.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and subsidiaries during the year ended December 31, 2022 and selected prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and its subsidiaries during the year ended December 31, 2023 and selected prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources.
The program allowed the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or otherwise, in one or more transactions.
The program allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or otherwise, in one or more transactions.
(b) Includes nonaccrual loans. (c) Average securities do not include unrealized holding gains or losses on available for sale securities. (d) Included in interest income is net purchase accounting accretion of $4.7 million, $8.6 million and $15.4 million for the years December 31, 2022, 2021, and 2020, respectively. 48 Table of Contents TABLE 3.
(b) Includes nonaccrual loans. (c) Average securities do not include unrealized holding gains or losses on available for sale securities. (d) Included in interest income is net purchase accounting accretion of $2.4 million, $4.7 million and $8.6 million for the years December 31, 2023, 2022, and 2021, respectively. 48 Table of Contents TABLE 3.
The yield on investment securities increased 19 bps in 2022 to 2.11% as new investments were made at higher yields amid the rising interest rate environment, along with yield enhancements from the termination of certain fair value hedges on available for sale securities.
The yield on investment securities increased 28 bps in 2023 to 2.39% as new investments were made at higher yields amid the rising interest rate environment, along with yield enhancements from the termination of certain fair value hedges on available for sale securities.
Common stock repurchase activity during the fourth quarter of 2022 was as follows: Total Number of Shares of Units Purchased Average Price Paid Per Share Total Number of Shares Purchased as a Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs Oct 1, 2022 - Oct 31, 2022 — $ — — 2,645,756 Nov 1, 2022 - Nov 30, 2022 — $ — — 2,645,756 Dec 1, 2022 - Dec 31, 2022 — $ — — — Total — $ — — — ITEM 6.
Common stock repurchase activity during the fourth quarter of 2023 was as follows: Total Number of Shares of Units Purchased Average Price Paid Per Share Total Number of Shares Purchased as a Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs Oct 1, 2023 - Oct 31, 2023 — $ — — 4,297,000 Nov 1, 2023 - Nov 30, 2023 — $ — — 4,297,000 Dec 1, 2023 - Dec 31, 2023 — $ — — 4,297,000 Total — $ — — 4,297,000 ITEM 6.
The Company was not obligated to purchase any shares under this program, and the board of directors had the ability to terminate or amend the program at any time prior to the expiration date.
The Company is not obligated to purchase any shares under this program, and the board of directors has the ability to terminate or amend the program at any time prior to the expiration date. To date, the Company has not repurchased shares under this program.
The full extent of the impact of the Federal Reserve’s actions to date to reduce inflation and the potential scope of additional Federal Reserve actions are uncertain and may have a significant negative impact on the U.S. economy, including the possibility of an economic recession in the near or midterm.
The full extent of the impact of the Federal Reserve’s 43 Table of Contents actions to reduce inflation and the timing and scope of further Federal Reserve actions are uncertain and may have a significant negative impact on the U.S. economy, including the possibility of an economic recession in the near or midterm.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “HWC.” There were 7,448 active holders of record of the Company’s common stock at January 31, 2023 and 85,983,593 shares outstanding.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “HWC.” There were 7,176 active holders of record of the Company’s common stock at January 31, 2024 and 86,347,503 shares outstanding.
The effects of inflation and the Federal Reserve's actions to counter those effects in the form of further interest rate increases and quantitative tightening have and are likely to continue to reduce economic growth in the near term.
The effects of inflation and the Federal Reserve's actions to counter those effects in the form of interest rate increases and quantitative tightening have in the past and could in the near term reduce economic growth.
The increase was mainly attributable to the impact of the rising interest rate environment upon the loan and investment portfolios, and a favorable change in the mix of average earning assets, with loans up $707 million, investment securities up $907 million, and short-term investments down $1.1 billion.
The yield increase was mainly attributable to the impact of the rising interest rate environment on the loan and, to a lesser extent, investment portfolios, and the favorable change in the mix of average earning assets, with loans up $1.7 billion, investment securities down $112 million, and short-term investments down $888 million.
Managing funding costs will be a key element in our future performance. Discussions of Asset/Liability Management and Net Interest Income at Risk later in this item provide additional information regarding our management of interest rate risk and the potential impact from changes in interest rates, respectively. 47 Table of Contents TABLE 2.
Discussions of Asset/Liability Management and Net Interest Income at Risk later in this item provide additional information regarding our management of interest rate risk and the potential impact from changes in interest rates, respectively. 47 Table of Contents TABLE 2.
Issuer Purchases of Equity Securities On April 22, 2021, the Company’s board of directors approved a stock buyback program whereby the Company was authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022.
Issuer Purchases of Equity Securities On January 26, 2023, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to repurchase up to approximately 4.3 million shares of its common stock through the program’s expiration date of December 31, 2024.
(d) Average securities do not include unrealized holding gains or losses on available for sale securities. Provision for Credit Losses During the twelve months ended December 31, 2022, we recorded a negative provision for credit losses of $28.4 million, compared to a negative provision for credit loss of $77.5 million in 2021.
(d) Average securities do not include unrealized holding gains or losses on available for sale securities. Provision for Credit Losses During the year ended December 31, 2023, we recorded a provision for credit losses of $59.1 million compared to a negative provision for credit losses of $28.4 million for the year ended December 31, 2022.
Summary of Average Balances, Interest and Rates (te) (a) Years Ended December 31, 2022 2021 2020 ($ in millions) Average Balance Interest (d) Rate Average Balance Interest (d) Rate Average Balance Interest (d) Rate Assets Interest-Earnings Assets: Commercial & real estate loans (te) (a) $ 17,682.3 $ 759.9 4.30 % $ 17,070.3 $ 606.1 3.55 % $ 17,270.9 $ 660.5 3.82 % Residential mortgage loans 2,666.1 90.3 3.39 2,445.6 90.6 3.70 2,857.6 112.1 3.92 Consumer loans 1,567.0 88.4 5.64 1,692.1 81.6 4.82 2,038.0 101.5 4.98 Loan fees & late charges — 7.4 — — 53.7 0.0 — 41.0 0.0 Loans (te) (b) 21,915.4 946.0 4.32 21,208.0 832.0 3.92 22,166.5 915.1 4.13 Loans held for sale 43.0 1.8 4.22 90.2 2.5 2.82 86.8 2.6 3.02 Investment securities: U.S.
Summary of Average Balances, Interest and Rates (te) (a) Years Ended December 31, 2023 2022 2021 ($ in millions) Average Balance Interest (d) Rate Average Balance Interest (d) Rate Average Balance Interest (d) Rate Assets Interest-Earnings Assets: Commercial & real estate loans (te) (a) $ 18,556.2 $ 1,131.8 6.10 % $ 17,682.3 $ 759.9 4.30 % $ 17,070.3 $ 606.1 3.55 % Residential mortgage loans 3,541.2 128.3 3.62 2,666.1 90.3 3.39 2,445.6 90.6 3.70 Consumer loans 1,497.2 124.0 8.28 1,567.0 88.4 5.64 1,692.1 81.6 4.82 Loan fees & late charges — 1.3 — — 7.4 — — 53.7 0.0 Loans (te) (b) 23,594.6 1,385.4 5.87 21,915.4 946.0 4.32 21,208.0 832.0 3.92 Loans held for sale 26.0 1.7 6.63 43.0 1.8 4.22 90.2 2.5 2.82 Investment securities: U.S.
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 951,691 (1) $ N/A (2) 2,602,985 Equity compensation plans not approved by security holders 1,476 (3) 53.73 (3) — Total 953,167 2,602,985 (1) Includes 63,126 shares potentially issuable upon the vesting of outstanding restricted share units and 81,548 shares potentially issuable upon the vesting of outstanding performance share units that represent awards deferred into the Company’s Nonqualified Deferred Compensation Plan.
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 1,390,639 (1) $ N/A 1,993,867 Equity compensation plans not approved by security holders — — — Total 1,390,639 1,993,867 (1) Includes 87,623 shares potentially issuable upon the vesting of outstanding restricted share units and 92,792 shares potentially issuable upon the vesting of outstanding performance share units that represent awards deferred into the Company’s Nonqualified Deferred Compensation Plan.
The increase in interest income is largely attributable to the impact that the series of Federal Reserve interest rate increases during the year had upon new and repricing earning assets, a favorable change in the mix of earning assets, and, to a lesser extent, a $14.8 million decrease in net premium/discount amortization on the securities portfolio.
The increase in interest income (te) is largely attributable to the impact of the series of Federal Reserve interest rate increases, a favorable change in the mix of earning assets, and, to a lesser extent, a $19.0 million decrease in net premium amortization on the securities portfolio.
Management has deemed the assumptions provided for in the S-2 scenario to be more likely than the baseline scenario, and as such, the baseline scenario and the S-2 scenario were given probability weightings of 25% and 75%, respectively, in the calculation of our allowance for credit losses calculation at December 31, 2022.
Management has deemed certain assumptions underlying the S-2 scenario to be somewhat more likely to occur in the near term than those underlying the baseline scenario, and as such, the baseline scenario and the S-2 scenario were given probability weightings of 40% and 60%, respectively, in the calculation of our allowance for credit losses calculation at December 31, 2023.
Treasury and government agency securities 426.7 8.3 1.95 330.6 5.4 1.64 153.5 3.2 2.09 Mortgage-backed securities and collateralized mortgage obligations 7,652.1 154.5 2.02 6,833.1 122.3 1.79 5,345.0 121.8 2.28 Municipals (te) 912.0 27.0 2.96 928.4 27.2 2.93 891.9 26.9 3.02 Other securities 22.3 0.8 3.42 13.7 0.5 3.66 8.4 0.4 4.28 Total investment securities (te) (c) 9,013.1 190.6 2.11 8,105.8 155.4 1.92 6,398.8 152.3 2.38 Short-term investments 1,526.7 9.0 0.59 2,656.9 3.5 0.13 583.2 1.0 0.17 Total earning assets (te) 32,498.2 1,147.4 3.53 % 32,060.9 993.4 3.10 % 29,235.3 1,071.0 3.66 % Nonearning assets: Other assets 2,878.4 3,420.6 3,547.4 Allowance for loan losses (317.4 ) (406.1 ) (391.7 ) Total assets $ 35,059.2 $ 35,075.4 $ 32,391.0 Liabilities and Stockholders' Equity Interest-bearing Liabilities: Interest-bearing transaction and savings deposits $ 11,201.1 $ 21.2 0.19 % $ 11,216.5 $ 9.1 0.08 % $ 9,558.1 $ 25.6 0.27 % Time deposits 1,056.4 4.7 0.44 1,413.0 6.5 0.46 2,642.5 37.1 1.40 Public funds 2,941.9 32.5 1.10 3,140.2 10.6 0.34 3,232.1 25.6 0.79 Total interest-bearing deposits 15,199.4 58.4 0.38 15,769.7 26.2 0.17 15,432.7 88.3 0.57 Repurchase agreements 536.7 1.1 0.21 559.4 0.6 0.10 600.2 1.4 0.24 Other short-term borrowings 822.0 15.1 1.83 1,103.8 5.4 0.49 1,378.0 8.6 0.62 Long-term debt 239.3 12.4 5.19 314.9 16.8 5.32 320.3 17.2 5.36 Total interest-bearing liabilities 16,797.4 87.0 0.52 % 17,747.8 49.0 0.28 % 17,731.2 115.5 0.65 % Noninterest-bearing: Noninterest-bearing deposits 14,298.0 13,324.0 10,779.6 Other liabilities 558.6 458.3 447.1 Stockholders' equity 3,405.2 3,545.3 3,433.1 Total liabilities and stockholders' equity $ 35,059.2 $ 35,075.4 $ 32,391.0 Net interest income (te) and margin $ 1,060.4 3.26 $ 944.4 2.95 $ 955.5 3.27 Net earning assets and spread $ 15,700.8 3.01 $ 14,313.1 2.82 $ 11,504.1 3.01 Interest cost of funding earning assets 0.27 % 0.15 % 0.39 % (a) Taxable equivalent (te) amounts are calculated using federal income tax rate of 21%.
Treasury and government agency securities 567.2 15.3 2.70 426.7 8.3 1.95 330.6 5.4 1.64 Mortgage-backed securities and collateralized mortgage obligations 7,423.9 170.4 2.30 7,652.1 154.5 2.02 6,833.1 122.3 1.79 Municipals (te) 887.0 26.5 2.98 912.0 27.0 2.96 928.4 27.2 2.93 Other securities 23.5 0.8 3.51 22.3 0.8 3.42 13.7 0.5 3.66 Total investment securities (te) (c) 8,901.6 213.0 2.39 9,013.1 190.6 2.11 8,105.8 155.4 1.92 Short-term investments 638.6 31.5 4.93 1,526.7 9.0 0.59 2,656.9 3.5 0.13 Total earning assets (te) 33,160.8 1,631.6 4.92 % 32,498.2 1,147.4 3.53 % 32,060.9 993.4 3.10 % Nonearning assets: Other assets 2,783.5 2,878.4 3,420.6 Allowance for loan losses (310.9 ) (317.4 ) (406.1 ) Total assets $ 35,633.4 $ 35,059.2 $ 35,075.4 Liabilities and Stockholders' Equity Interest-bearing Liabilities: Interest-bearing transaction and savings deposits $ 10,598.6 $ 176.9 1.67 % $ 11,201.1 $ 21.2 0.19 % $ 11,216.5 $ 9.1 0.08 % Time deposits 3,989.1 166.5 4.17 1,056.4 4.7 0.44 1,413.0 6.5 0.46 Public funds 2,971.6 100.5 3.38 2,941.9 32.5 1.10 3,140.2 10.6 0.34 Total interest-bearing deposits 17,559.3 443.9 2.53 15,199.4 58.4 0.38 15,769.7 26.2 0.17 Repurchase agreements 513.3 7.0 1.36 536.7 1.1 0.21 559.4 0.6 0.10 Other short-term borrowings 1,180.1 59.7 5.06 822.0 15.1 1.83 1,103.8 5.4 0.49 Long-term debt 239.1 12.3 5.15 239.3 12.4 5.19 314.9 16.8 5.32 Total interest-bearing liabilities 19,491.8 522.9 2.68 % 16,797.4 87.0 0.52 % 17,747.8 49.0 0.28 % Noninterest-bearing: Noninterest-bearing deposits 11,919.2 14,298.0 13,324.0 Other liabilities 693.5 558.6 458.3 Stockholders' equity 3,528.9 3,405.2 3,545.3 Total liabilities and stockholders' equity $ 35,633.4 $ 35,059.2 $ 35,075.4 Net interest income (te) and margin $ 1,108.7 3.34 $ 1,060.4 3.26 $ 944.4 2.95 Net earning assets and spread $ 13,669.0 2.24 $ 15,700.8 3.01 $ 14,313.1 2.82 Interest cost of funding earning assets 1.58 % 0.27 % 0.15 % (a) Taxable equivalent (te) amounts are calculated using federal income tax rate of 21%.
Net Interest Income Net interest income was $1.1 billion, up $116.8 million, or 13%, from $933.2 million in 2021. Net interest income is the primary component of our earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets.
Net interest income is the primary component of our earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the interest expense related to funding those assets.
We believe that we remain well-positioned should a recessionary period begin. 44 Table of Contents Additional information related to our results and outlook are included in the discussions that follow. Table 1.
The table that follows presents our consolidated financial results. Additional information related to our results and outlook are included in the discussions that follow. 44 Table of Contents Table 1.
The negative provision for credit losses recorded in 2022 included a $34.3 million release of allowance for funded loan losses, partially offset by a $4.0 million build in the reserve for unfunded lending commitments and net charge-offs of $1.9 million, or 0.01% of average loans outstanding.
The provision for credit losses recorded in 2023 included net charge-offs of $63.4 million, partially offset by a $4.3 million reserve release. The negative provision for credit losses recorded in 2022 included a $30.3 million reserve release, partially offset by net charge-offs of $1.9 million.
Summary of Changes in Net Interest Income (te) (a) (b) 2022 Compared to 2021 2021 Compared to 2020 Due to Total Due to Total Change in Increase Change in Increase ($ in thousands ) Volume Rate (Decrease) Volume Rate (Decrease) Interest Income (te) Commercial & real estate loans (te) (a) $ 22,399 $ 131,363 $ 153,762 $ (7,579 ) $ (46,849 ) $ (54,428 ) Residential mortgage loans 7,809 (8,049 ) (240 ) (15,509 ) (6,007 ) (21,516 ) Consumer loans (6,180 ) 12,940 6,760 (16,849 ) (2,991 ) (19,840 ) Loan fees & late charges — (46,301 ) (46,301 ) — 12,660 12,660 Loans (te) (c) 24,028 89,953 113,981 (39,937 ) (43,187 ) (83,124 ) Loans held for sale (1,672 ) 944 (728 ) 100 (179 ) (79 ) Investment securities: U.S.
Summary of Changes in Net Interest Income (te) (a) (b) 2023 Compared to 2022 2022 Compared to 2021 Due to Total Due to Total Change in Increase Change in Increase ($ in thousands ) Volume Rate (Decrease) Volume Rate (Decrease) Interest Income (te) Commercial & real estate loans (te) (a) $ 39,213 $ 332,722 $ 371,935 $ 22,399 $ 131,363 $ 153,762 Residential mortgage loans 31,345 6,620 37,965 7,809 (8,049 ) (240 ) Consumer loans (3,297 ) 38,928 35,631 (6,180 ) 12,940 6,760 Loan fees & late charges — (6,089 ) (6,089 ) — (46,301 ) (46,301 ) Loans (te) (c) 67,261 372,181 439,442 24,028 89,953 113,981 Loans held for sale (886 ) 795 (91 ) (1,672 ) 944 (728 ) Investment securities: U.S.
RESULTS OF OPERATIONS The following is a discussion of results from operations for the year ended December 31, 2022 compared to the year ended December 31, 2021. Refer to previously filed Annual Reports on Form 10-K Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of prior year variances.
Refer to previously filed Annual Reports on Form 10-K Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of prior year variances. Net Interest Income Net interest income was $1.1 billion, up $47.6 million from 2022.
Net interest income (te) was $1.1 billion in 2022, up $115.9 million, or 12%, from $944.4 million in 2021, and included an increase in interest income (te) of $154.0 million partially offset by an increase of $38.0 million in interest expense.
Net interest income (te) was $1.1 billion in 2023, up $48.4 million, or 5%, from 2022, and included an increase in interest income (te) of $484.2 million largely offset by an increase of $435.8 million in interest expense.
(d) The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and nonoperating items. (e) See non-GAAP financial measures section of this analysis for a discussion of these measures.
(d) The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items.
Treasury and government agency securities 1,739 1,153 2,892 2,708 (499 ) 2,209 Mortgage-backed securities and collateralized mortgage obligations 15,284 16,952 32,236 29,730 (29,220 ) 510 Municipals (485 ) 275 (210 ) 1,084 (801 ) 283 Other securities 297 (34 ) 263 200 (58 ) 142 Total investment in securities (te) (d) 16,835 18,346 35,181 33,722 (30,578 ) 3,144 Short-term investments (1,976 ) 7,516 5,540 2,762 (246 ) 2,516 Total earning assets (te) 37,215 116,759 153,974 (3,353 ) (74,190 ) (77,543 ) Interest-bearing transaction and savings deposits 13 (12,163 ) (12,150 ) (3,813 ) 20,268 16,455 Time deposits 1,589 262 1,851 12,499 18,070 30,569 Public funds 710 (22,604 ) (21,894 ) 706 14,285 14,991 Total interest-bearing deposits 2,312 (34,505 ) (32,193 ) 9,392 52,623 62,015 Repurchase agreements 25 (577 ) (552 ) 92 777 869 Other short-term borrowings 1,669 (11,293 ) (9,624 ) 1,541 1,617 3,158 Long-term debt 3,938 394 4,332 287 106 393 Total interest expense 7,944 (45,981 ) (38,037 ) 11,312 55,123 66,435 Net interest income (te) variance $ 45,159 $ 70,778 $ 115,937 $ 7,959 $ (19,067 ) $ (11,108 ) (a) Taxable equivalent (te) amounts are calculated using a federal income tax rate of 21%.
Treasury and government agency securities 3,129 3,859 6,988 1,739 1,153 2,892 Mortgage-backed securities and collateralized mortgage obligations (4,779 ) 20,678 15,899 15,284 16,952 32,236 Municipals (743 ) 181 (562 ) (485 ) 275 (210 ) Other securities 43 18 61 297 (34 ) 263 Total investment in securities (te) (d) (2,350 ) 24,736 22,386 16,835 18,346 35,181 Short-term investments (8,066 ) 30,522 22,456 (1,976 ) 7,516 5,540 Total earning assets (te) 55,959 428,234 484,193 37,215 116,759 153,974 Interest-bearing transaction and savings deposits 1,205 (156,819 ) (155,614 ) 13 (12,163 ) (12,150 ) Time deposits (40,103 ) (121,719 ) (161,822 ) 1,589 262 1,851 Public funds (331 ) (67,718 ) (68,049 ) 710 (22,604 ) (21,894 ) Total interest-bearing deposits (39,229 ) (346,256 ) (385,485 ) 2,312 (34,505 ) (32,193 ) Repurchase agreements 52 (5,871 ) (5,819 ) 25 (577 ) (552 ) Other short-term borrowings (8,771 ) (35,876 ) (44,647 ) 1,669 (11,293 ) (9,624 ) Long-term debt 7 106 113 3,938 394 4,332 Total interest expense (47,941 ) (387,897 ) (435,838 ) 7,944 (45,981 ) (38,037 ) Net interest income (te) variance $ 8,018 $ 40,337 $ 48,355 $ 45,159 $ 70,778 $ 115,937 (a) Taxable equivalent (te) amounts are calculated using a federal income tax rate of 21%.
Also includes 395,838 performance share awards. Performance share awards and units are stated in amounts that would be issuable if the highest level of performance conditions is met. (2) Represents securities to be issued upon the exercise of options that were assumed by the Company in the acquisition of MidSouth Bancorp, Inc.
Also includes 463,072 performance share awards. Performance share awards and units are stated in amounts that would be issuable if the highest level of performance conditions is met.
The macroeconomic variables underlying the December 2022 economic scenarios differ in certain respects from the comparable forecasts available at December 31, 2021, given the shift in economic circumstances and risks.
The macroeconomic variables underlying the December 2023 economic scenarios differ in certain respects from the comparable forecasts available at December 31, 2022, given the shift in economic circumstances and risks. The December 2023 baseline forecast continues to incorporate the belief that the Federal Reserve will accomplish its goal of bringing inflation to or below its target without precipitating a recession.
The loan yield was up 40 bps to 4.32%, reflecting the impact of the rise in interest rates on new and repricing loans. During 2022, the proportion of our loan portfolio tied to variable rates, including hybrid adjustable rate mortgages (ARMs), averaged approximately 57%.
The loan yield was up 155 bps to 5.87%, reflecting the impact of the rise in interest rates on new and repricing loans.
Management believes that operating revenue and pre-provision net revenue are useful financial measures because they enable investors and others to assess the Company’s performance period over period and management’s success in executing its strategic initiatives, as well as measuring the ability to generate capital to cover credit losses through a credit cycle.
Management believes that adjusted 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. We define Adjusted Revenue as net interest income (te) and noninterest income less supplemental disclosure items.
The following is an overview of financial results for the year ended December 31, 2022: • Net income of $524.1 million, or $5.98 per diluted common share • Operating pre-provision net revenue of $641.1 million, up $103.5 million, or 19%, from 2021 • Negative provision for credit losses of $28.4 million in 2022 reflective of a reserve release of $30.3 million and net charge-offs of $1.9 million, compared to a negative provision of $77.5 million in 2021 that reflected a reserve release of $108.7 million and net charge-offs of $31.2 million • Core loan growth of $2.5 billion, or 12%, and a $492 million reduction of PPP loans due to forgiveness resulted in an overall increase in total loans of $2.0 billion, or 9%, in 2022 • Deposits of $29.1 billion at December 31, 2022 decreased $1.4 billion, or 5%; noninterest-bearing deposits comprised 47% of total deposits at both December 31, 2022 and 2021 • Common equity tier 1 capital ratio of 11.41%, up 32 basis points (bps) from December 31, 2021 • Criticized commercial loans and nonperforming loans remained near historically low levels throughout 2022 • Net interest margin increased 31 bps to 3.26% during 2022, driven by rising interest rates and a favorable change in the earning asset mix • Efficiency ratio improved to 52.93% during 2022, down from 57.29% in 2021 The results of the year ended December 31, 2022 were one of the best in our Company’s history.
The following is an overview of financial results for the year ended December 31, 2023 compared to December 31, 2022: • Net income of $392.6 million, or $4.50 per diluted common share • Adjusted pre-provision net revenue (a non-GAAP measure) totaled $635.7 million, down $5.4 million • Provision for credit losses of $59.1 million in 2023, compared to a negative provision of $28.4 million in 2022; allowance for credit loss to total loans at 1.41% at December 31, 2023 • Loan growth of $807.9 million, or 3%, to $23.9 billion • Deposits of $29.7 billion at December 31, 2023, up $619.7 million, or 2% • Common equity tier 1 capital ratio of 12.33%, up 92 basis points (bps) from December 31, 2022; tangible common equity ratio of 8.37%, up 128 bps • Criticized commercial loans and nonperforming loans remained relatively stable at low levels throughout 2023 • Net interest margin increased 8 bps to 3.34% • Efficiency ratio (a non-GAAP measure) of 55.25%, up from 52.93% in 2022 The year ended December 31, 2023 brought many challenges on both a macroeconomic level and within the financial services industry.
Increased cost of living amid inflationary conditions, and heightened competition for deposits in the rising interest rate environment has put pressure on our deposit base, which decreased 5% from the same time last year. Economic Outlook We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook.
Despite the increased pressure on funding costs, interest rates on new, renewed and repricing variable rate loans drove an expanded net interest margin in 2023. Economic Outlook We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook.
As noted above, 2022 net charge-offs totaled $1.9 million, a decrease of $29.3 million from 2021. Net charge-offs in 2022 included $7.4 million of consumer net charge-offs, partially offset by net recoveries of $3.9 million in the commercial portfolio and $1.6 million in the residential mortgage portfolio.
Net charge-offs for the year ended December 31, 2023 totaled $63.4 million, or 0.27% of average loans outstanding, comprised of net charge-offs of $52.8 million in the commercial portfolio (inclusive of the $29.7 million single borrower charge-off described above) and $11.8 million in the consumer portfolio, partially offset by net recoveries of $1.2 million in the residential mortgage portfolio.
Following the significant reserve build in 2020 in response to the economic impact of the COVID-19 pandemic, improvement in overall credit performance and in economic indicators within our footprint in 2021 and 2022 allowed for the gradual release of certain of those reserves.
The negative provision for credit losses for the same period in 2022 reflects the gradual release of certain reserves built in 2020 in response to the economic disruption brought on by the pandemic, as overall credit performance and economic conditions in our markets continued to improve.
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 the Company’s business.
These adjusted ratios provide management and the reader with a measure that may be more indicative of forward-looking trends in our business, as well as demonstrates the effects of significant gains or losses and changes.
Loan growth, portfolio composition, credit quality metrics and assumptions in economic forecasts will drive the level of credit loss reserves. At present, we expect low to modest charge-offs and provision in the first quarter of 2023. 49 Table of Contents
Net charge-offs for the year ended December 31, 2022 totaled $1.9 million, or 0.01% of average loans outstanding, comprised of net charge-offs of $7.4 million in the consumer portfolio, partially offset by net recoveries of $3.9 million in the commercial portfolio and $1.6 million in the residential mortgage portfolio. 49 Table of Contents Loan growth, portfolio composition, credit quality metrics and assumptions in economic forecasts will drive the level of credit loss reserves.
Other short-term borrowing costs, which consist largely of Federal Home Loan Bank advances, increased to 1.83% in 2022 from 0.49% in 2021, as $1.1 billion of low fixed-rate Federal Home Loan Bank advances entered into in late 2019 and early 2020 were called in mid-2022 and subsequently replaced with borrowings at current market rates.
As such, the cost of funds increased 131 bps to 1.58% in 2023 from 0.27% in 2022, with average interest-bearing deposit costs increasing 215 bps to 2.53% from 0.38% and other short-term borrowing costs, which consist largely of Federal Home Loan Bank advances, increasing 323 bps to 5.06% in 2023 from 1.83% in 2022.
In turn, the Federal Reserve responds by raising the target interest rate more than what is assumed in the baseline and the U.S. falls into a recession in first quarter 2023 that spans three quarters.
Despite the weakening economy, the Federal Reserve does not begin rate cuts sooner than what is assumed in the baseline. As a result of these pressures, the U.S. falls into a mild recession beginning in the first quarter of 2024 that lasts for three quarters, with the stock market contracting 20% and a peak-to-trough decline in GDP of 1%.
While uncertainty over the consequences of these actions remains, we expect that the current interest rate environment will continue to contribute favorably to our net interest income, net interest margin and overall operating results in the near term, although not at the pace experienced in 2022, and will be dependent on our ability to manage funding costs. 43 Table of Contents Highlights of 2022 Financial Results Net income for the year ended December 31, 2022 was $524.1 million, or $5.98 per diluted common share, compared to $463.2 million, or $5.22 per diluted common share in 2021.
Highlights of 2023 Financial Results Net income for the year ended December 31, 2023 was $392.6 million, or $4.50 per diluted common share, compared to $524.1 million, or $5.98 per diluted common share in 2022.
Removed
During the year ended December 31, 2022, the Company repurchased 1,204,368 shares of its common stock at an average cost of $48.90 per share, inclusive of commissions. Total shares purchased under this program were 1,654,244 at an average cost of $48.77 per share, inclusive of commissions. This program expired on December 31, 2022.
Added
The Company highlights certain significant items that are outside of our principal business and/or are not indicative of forward-looking trends in supplemental disclosure items below our GAAP financial data and presents certain “Adjusted” ratios that exclude these disclosed items.
Removed
However, these non-GAAP financial measures have inherent limitations and should not be considered in isolation or as a substitute for analysis of results or capital position under U.S. GAAP. We define Operating Revenue as net interest income (te) and noninterest income less nonoperating revenue. We define Operating Pre-Provision Net Revenue as operating revenue (te) less noninterest expense, excluding nonoperating items.
Added
We define Adjusted Pre-Provision Net Revenue as net income excluding provision expense and income tax expense, plus the taxable equivalent adjustment (as defined above), less supplemental disclosure items (as defined above).
Removed
As of January 1, 2022, the Company has determined that it will no longer include any immaterial results from storm-related expenses and income in nonoperating items. EXECUTIVE OVERVIEW We are pleased to report that 2022 was another outstanding year for our company.
Added
We define Adjusted Noninterest Expense as noninterest expense less supplemental disclosure items. We define our Efficiency Ratio as noninterest expense to total net interest income (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items, if applicable.
Removed
The financial results reflect not only progress made during the year, but also the culmination of decisions made during the last several years to better position the company for today’s rapidly changing economic environment. The following financial review provides a discussion of our financial condition, changes in financial condition and results of operations.
Added
Management believes adjusted revenue, adjusted noninterest expense and the efficiency ratio are useful measures as they provide a greater understanding of ongoing operations and enhance comparability with prior periods.
Removed
Current Economic Environment During the year ended December 31, 2022, economic conditions were greatly influenced by a persistent high level of inflation and the Federal Reserve's actions to curb it. Early COVID-19 pandemic response measures in the form of virus containment measures and various forms of government stimulus created pervasive, lingering supply chain and labor market disruptions.
Added
EXECUTIVE OVERVIEW The discussions and analyses that follow provide insight into the impact of macroeconomic and industry trends on our performance in the most recent fiscal year, and our outlook for the near term. Current Economic Environment U.S. economic activity remains resilient nearly two years into the Federal Reserve's aggressive campaign to tame inflation.
Removed
Consumers shifted spending towards goods and away from services, further placing stress on supply chains, and the supply of goods could not meet consumer demands, resulting in price increases.
Added
Thus far, the Federal Reserve has seen some success in slowing economic growth without precipitating a recession. The December 31, 2023 headline and core (less food and energy) inflation have receded considerably from 40-year highs in 2022, though at 3.4% and 3.9%, respectively, both remain well above the Federal Reserve's target rate of 2%.
Removed
These stresses have been exacerbated by the impact of recent geopolitical conflict upon commodity supply, all of which have led to a steadily rising rate of inflation that reached a 40-year high in June 2022.
Added
Real Gross domestic product (GDP) increased 2.5% for the full year 2023, reflecting growth in each of the four fiscal quarters. Despite some softening, the labor market remains strong at near full-employment, with the unemployment rate at 3.7% in December 2023.
Removed
In response to escalating inflation, the Federal Reserve began quantitative tightening and has undertaken an aggressive approach in setting the target Federal Funds Rate through the issuance of a series of seven interest rate increases between March 2022 and December 2022 totaling 425 basis points. 42 Table of Contents Thus far, there have been mixed indications of whether the Federal Reserve's monetary policy has begun to effect change.
Added
The Federal Reserve issued four 25-basis point interest rate increases between February and July 2023, but has held the rate steady since, indicating the possibility that the target rate has reached its terminal value in the rate hiking cycle.
Removed
The rate of inflation remains elevated, but had declined to 6.5% on an annualized basis in December 2022, down from its peak of 9.1% in June. However, Real Gross Domestic Product (“GDP”) increased 2.1% in 2022 (inclusive of growth of 3.2% and 2.9% in the third and fourth quarters, respectively).
Added
While the continued strong pace of consumer spending and the strength of the labor market may help prevent or reduce the severity of a potential recession, the possibility that rates will remain higher for longer may 42 Table of Contents result in below-trend economic growth.
Removed
Further, the U.S. economy reached a full-employment level in July 2022, defined as an unemployment rate of 3.5% or lower and a prime-age employment-to-population ratio of 80%, and remained near that mark at year end.
Added
Economic trends may be further influenced by factors outside of inflation, such as a potential shutdown of the U.S. government and expanding geopolitical conflict. Within the financial services industry, particularly in the regional bank space, institutions continue to deal with macroeconomic and industry-specific headwinds.
Removed
Additional changes in interest rates are expected in the near-term; the extent of which, and the favorable or unfavorable impact of these actions upon equity markets and economic conditions remains uncertain. Despite persistent inflationary pressures, the market areas we serve continued to show indications of economic health during the year.
Added
The heightened interest rate environment has fostered a continued shift within deposit composition toward higher cost products, although the pace of movement slowed somewhat towards the end of 2023.
Removed
We experienced full-year core loan growth (excluding PPP) of approximately 12%, and our credit quality indicators remain strong. The growth in the loan portfolio, largely funded by the remaining excess liquidity on our balance sheet, was across our geographic footprint and diverse across most business lines.
Added
High-profile bank failures in the first half of 2023 have prompted increased regulatory scrutiny of banks' liquidity and the stability of their deposit bases, which has intensified competition for deposits and, in turn, placed further pressure on borrowing costs. The interest rate environment has also steadily affected the affordability of credit to consumers and businesses that has tempered loan demand.
Removed
This shift in earning assets from excess liquidity into higher-yielding loans, along with the net impact of the seven interest rate increases, contributed to a 31 basis point expansion of our net interest margin compared to the prior year.
Added
At the same time, economic uncertainty and industry turmoil has prompted many institutions to tighten credit standards. We experienced loan growth of 3% during the year ended December 31, 2023, though the majority of the growth occurred in the first half of the year.
Removed
The December 2022 baseline forecast maintains a generally optimistic outlook in its assumptions surrounding the drivers of economic growth, including its expectations of the effectiveness of the Federal Reserve's monetary policy in easing inflationary conditions.
Added
In the fourth quarter, we experienced a $61.8 million net decline in loans as demand continued to slow in response to heightened interest rates and, in many of the markets we serve, increased insurance costs. Further, we are continuing to narrow our credit appetite in certain sectors and shift our focus toward full-service relationships.
Removed
The baseline scenario assumes the Federal Reserve will continue quantitative tightening measures by means of runoff at a rate of $100 billion in securities per month, and that it will issue 25-basis point interest rate increases at each of the January and March meetings, with the expectation that interest rate cuts will begin in late 2023 and occur through 2024.
Added
Our core client deposits, defined as total deposits excluding public funds and brokered deposits, were up slightly year-over-year. We were able to maintain our diversified deposit base through competitive pricing, as much of our client base remains interest rate sensitive.
Removed
The baseline scenario also estimates a weaker pace of job growth in 2023 (as compared to 2022), which will lead to an increase in the unemployment rate to 4.2% by the first quarter of 2024, declining to 4.0% by the end of 2024. Further, GDP growth is estimated to be 1.9% in 2022, 0.9% in 2023, and 2.0% in 2024.
Added
Key assumptions within the December 2023 baseline forecast include the following: (1) the Federal Funds rate has reached its terminal value in the rate hiking cycle, with rate cuts of 25 basis points per quarter to begin in June 2024 until reaching 3% in late 2026, and 2.5% by 2030; (2) the U.S. government will avoid the recently-feared shutdown; (3) while the labor market remains strong, there are indications of softening, and the unemployment rate will rise from its current rate of 3.7% to 4.0% in 2024 and 4.1% in 2025, then improve slightly to 4.0% for 2026; (4) GDP will display modest annual growth of 1.7% in both 2024 and 2025 and 2.2% in 2026; and, (5) the 10-year U.S.
Removed
The macroeconomic variables underlying the downside scenario (S-2) are less optimistic compared to those underlying the baseline. Supply-chain issues worsen and increasing shortages of affected goods keep the inflation elevated longer than expected in the baseline scenario. Additionally, higher wage increases than those forecasted in the baseline scenario further contribute to inflationary pressures.
Added
Treasury yield reached its recent high at nearly 5% in the third quarter of 2023, but will remain above 4% through the end of the decade. The S-2 scenario presents a downside alternative to the baseline.
Removed
The S-2 forecast assumes unemployment rates of 5.7% and 5.4% in 2023 and 2024, respectively, and a 0.5% contraction of GDP in 2023, before returning to a positive rate of 1.3% in 2024.
Added
The S-2 scenario assumes an increased likelihood of a U.S. government shutdown, longer and farther-reaching disturbance from geopolitical conflict, and continued disruption in the financial services industry leading to further tightening of credit standards. Further, the scenario assumes the unemployment rate will increase considerably to 5.7% in 2024 before improving to 5.3% in 2025 and 4.0% in 2026.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

187 edited+107 added−97 removed65 unchanged
Biggest changeNonperforming Assets December 31, ($ in thousands) 2022 2021 Loans accounted for on a nonaccrual basis: Commercial non-real estate loans $ 3,078 $ 4,058 Commercial non-real estate loans - restructured 942 2,915 Total commercial non-real estate loans 4,020 6,973 Commercial real estate - owner occupied 1,233 3,104 Commercial real estate - owner occupied - restructured 228 1,817 Total commercial real estate - owner occupied loans 1,461 4,921 Commercial real estate - income producing loans 1,174 5,377 Commercial real estate - income producing loans - restructured 66 81 Total commercial real estate - income producing loans 1,240 5,458 Construction and land development loans 306 837 Construction and land development loans - restructured 3 7 Total construction and land development loans 309 844 Residential mortgage loans 23,946 23,483 Residential mortgage loans - restructured 1,323 1,956 Total residential mortgage loans 25,269 25,439 Consumer loans 6,646 11,888 Consumer loans -restructured 46 — Total consumer loans 6,692 11,888 Total nonaccrual loans $ 38,991 $ 55,523 Restructured loans - still accruing: Commercial non-real estate loans $ 307 $ 515 Commercial real estate loans - owner occupied — — Commercial real estate loans - income producing — — Construction and land development loans 113 118 Residential mortgage loans 1,018 2,169 Consumer loans 469 986 Total restructured loans - still accruing $ 1,907 $ 3,788 Total nonperforming loans $ 40,898 $ 59,311 ORE and foreclosed assets 2,017 7,533 Total nonperforming assets $ 42,915 $ 66,844 Loans 90 days past due still accruing $ 4,585 $ 5,524 Total restructured loans $ 4,515 $ 10,564 Ratios: Nonaccrual loans to total loans 0.17 % 0.26 % Nonperforming assets to loans plus ORE and foreclosed assets 0.19 % 0.32 % Allowance for loan losses to nonaccrual loans 789.38 % 616.08 % Allowance for loan losses to nonperforming loans and accruing loans 90 days past due 676.71 % 527.59 % Loans 90 days past due still accruing to total loans 0.02 % 0.03 % Nonperforming assets were $42.9 million at December 31, 2022, a decrease of $23.9 million, or 36%, compared to $66.8 million at December 31, 2021.
Biggest changeNonaccrual loans, loans modified or restructured, and ORE and foreclosed assets December 31, ($ in thousands) 2023 2022 Loans accounted for on a nonaccrual basis: Commercial non-real estate $ 20,840 $ 3,078 Commercial non-real estate - modified/restructured (a) — 942 Total commercial non-real estate 20,840 4,020 Commercial real estate - owner occupied 2,228 1,233 Commercial real estate - owner-occupied - modified/restructured (a) — 228 Total commercial real estate - owner-occupied 2,228 1,461 Commercial real estate - income producing 461 1,174 Commercial real estate - income producing - modified/restructured (a) — 66 Total commercial real estate - income producing 461 1,240 Construction and land development 815 306 Construction and land development - modified/restructured (a) — 3 Total construction and land development 815 309 Residential mortgage 26,039 23,946 Residential mortgage - modified/restructured (a) 98 1,323 Total residential mortgage 26,137 25,269 Consumer 8,555 6,646 Consumer - modified/restructured (a) — 46 Total consumer 8,555 6,692 Total nonaccrual loans $ 59,036 $ 38,991 ORE and foreclosed assets 3,628 2,017 Total nonaccrual loans and ORE and foreclosed assets $ 62,664 $ 41,008 Modified/Restructured loans - still accruing (a): Commercial non-real estate $ 21,956 $ 307 Commercial real estate - owner occupied 1,774 — Commercial real estate - income producing — — Construction and land development 85 113 Residential mortgage 359 1,018 Consumer 274 469 Total Modified/restructured loans - still accruing (a) $ 24,448 $ 1,907 Total reportable modified loans (a) $ 24,546 $ — Total troubled debt restructured loans (a) $ — $ 4,515 Loans 90 days past due still accruing $ 9,609 $ 4,585 Ratios: Nonaccrual loans to total loans 0.25 % 0.17 % Nonaccrual loans plus ORE and foreclosed assets to loans plus ORE and foreclosed assets 0.26 % 0.18 % Allowance for loan losses to nonaccrual loans 521.56 % 789.38 % Allowance for loan losses to nonaccrual loans and accruing loans 90 days past due 448.55 % 706.33 % Loans 90 days past due still accruing to loans 0.04 % 0.02 % (a) Loans presented in the December 31, 2023 column represent reportable modified loans to borrowers experiencing financial difficulties, and those presented in the December 31, 2022 column represent loans modified in a troubled debt restructuring.
Other committees of the Board of the Directors oversee certain risks that overlap with the Board Risk Committee's enterprise risk management oversight, including the Compensation Committee, which evaluates and manages any risk posed by compensation and benefits programs and oversees diversity, equity and inclusion efforts, and the Corporate Governance and Nominating Committee, which oversees all ESG related activities. • Governance committees.
Other committees of the Board of Directors oversee certain risks that overlap with the Board Risk Committee's enterprise risk management oversight, including the Compensation Committee, which evaluates and manages any risk posed by compensation and benefits programs and oversees diversity, equity and inclusion efforts, and the Corporate Governance and Nominating Committee, which oversees all ESG related activities. • Governance committees.
Accordingly, the Company’s interest rate sensitivity and liquidity are monitored on an ongoing basis by its ALCO, which oversees market risk management and establishes risk measures, limits and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital.
Accordingly, the Company’s interest rate sensitivity and liquidity are monitored on an ongoing basis by ALCO, which oversees market risk management and establishes risk measures, limits and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital.
Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities to be 20% or greater.
Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities of 20% or greater.
Included in the IRA are provisions for the creation of a 15% corporate alternative minimum tax (CAMT) that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement income in excess of $1 billion.
Included in the IRA of 2022 are provisions for the creation of a 15% corporate alternative minimum tax (CAMT) that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement income in excess of $1 billion.
Oversight responsibility for these categories is assigned within our risk committee governance structure: • Credit risk arises from the potential that a borrower or counterparty will fail to perform on an obligation. • Market risk is a financial institution’s condition resulting from adverse movements in market rates or prices, such as interest rates, foreign exchange rates, or equity prices. • Liquidity risk is the potential that an institution will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding (referred to as “funding liquidity risk”) or that it cannot easily 68 Table of Contents unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions (“market liquidity risk”). • Operational risk is the potential that inadequate information systems, operational problems, breaches in internal controls, breaches in customer data, fraud, or unforeseen catastrophes will result in unexpected losses.
Oversight responsibility for these categories is assigned within our risk committee governance structure: • Credit risk arises from the potential that a borrower or counterparty will fail to perform on an obligation. • Market risk is a financial institution’s condition resulting from adverse movements in market rates or prices, such as interest rates, foreign exchange rates, or equity prices. • Liquidity risk is the potential that an institution will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding (referred to as “funding liquidity risk”) or that it cannot easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions (“market liquidity risk”). • Operational risk is the potential that inadequate information systems, operational problems, breaches in internal controls, breaches in customer data, fraud, or unforeseen catastrophes will result in unexpected losses.
These agreements are offered mainly to commercial customers to assist them with their ongoing cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time will vary. TABLE 22.
These agreements are offered mainly to commercial customers to assist them with their ongoing cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time will vary. TABLE 23.
The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately four quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected share repurchase or early extinguishment of debt.
The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately six quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected share repurchase or early extinguishment of debt.
STOCK REPURCHASE PROGRAM Prior to its expiration on December 31, 2022, we had in place a stock repurchase program that was authorized by the Company's board of directors in April 2021 whereby the Company was authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date.
Prior to its expiration on December 31, 2022, the Company had in place a stock repurchase program that was authorized by the Company's board of directors in April 2021 whereby the Company was authorized to repurchase up to approximately 4.3 million shares of its common stock through the program’s expiration date.
Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled. TABLE 24.
Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled. TABLE 25.
The Federal Reserve Board’s final rule implementing the Basel III regulatory capital framework and related changes per the Dodd-Frank Act established the Basel III minimum regulatory capital requirements for all organizations for Total, Tier 1 and Common Equity Tier 1 risk-based capital ratios equal to 8.00%, 6.00%, and 4.5%, respectively, as well as set a conservation buffer of 75 Table of Contents 2.5% and a Leverage ratio of 4.0%.
The Federal Reserve Board’s final rule implementing the Basel III regulatory capital framework and related changes per the Dodd-Frank Act established the Basel III minimum regulatory capital requirements for all organizations for Total, Tier 1 and Common Equity Tier 1 risk-based capital ratios equal to 8.00%, 6.00%, and 4.5%, respectively, as well as set a conservation buffer of 2.5% and a Leverage ratio of 4.0%.
Based on capital ratios as of December 31, 2022 using Basel III definitions, the Company and the Bank exceeded all capital requirements of the rule. The Company and the Bank have established internal target ranges for Total, Tier 1 and Common Equity Tier 1 risk-based capital ratios and the leverage ratio.
Based on capital ratios as of December 31, 2023 using Basel III definitions, the Company and the Bank exceeded all capital requirements of the rule. The Company and the Bank have established internal target ranges for Total, Tier 1 and Common Equity Tier 1 risk-based capital ratios and the leverage ratio.
Based on our assessments, expected credit loss was negligible for all reporting periods in 2022 and 2021, and therefore no allowance for credit loss was recorded. There were no investments in securities of a single issuer, other than U.S.
Based on our assessments, expected credit loss was negligible for all reporting periods in 2023 and 2022, and therefore no allowance for credit loss was recorded. There were no investments in securities of a single issuer, other than U.S.
ALCO is responsible for maintaining levels of IRR within limits approved by the Board of Directors through a risk management policy that is designed to promote a stable net interest margin in periods of interest rate fluctuation.
ALCO is responsible for maintaining levels of IRR within limits approved by the Board of Directors by adhering to a risk management policy that is designed to promote a stable net interest margin in periods of interest rate fluctuation.
The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at December 31, 2022.
The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at December 31, 2023.
Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -200 through +300 basis points presented in Table 24. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors.
Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -300 through +300 basis points presented in Table 25. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors.
Basis risk refers to the potential for changes in the underlying relationship between market rates and indices, which subsequently result in changes to the profit spread on an earning asset or liability.
Basis risk refers to the potential for changes in the underlying relationship between market rates and indices, which subsequently results in changes to the profit spread on an earning asset or liability.
During the year ended December 31, 2022, the Company repurchased 1,204,368 shares of its common stock at an average cost of $48.90 per share, inclusive of commissions. In total, the Company repurchased 1.7 million of the 4.3 million authorized shares under the buyback program at an average cost of $48.77 per share.
During the year ended December 31, 2022, the Company repurchased 1.2 million shares of its common stock at an average cost of $48.90 per share, inclusive of commissions. In total, the Company repurchased 1.7 million of the 4.3 million authorized shares under the buyback program at an average cost of $48.77 per share.
Subsequent to year-end, in January 2023, the Company’s board of directors authorized a stock repurchase program pursuant to which the Company may, from time to time, purchase up to 4.3 million shares of its outstanding common stock (approximately 5% of the shares of common stock outstanding as of December 31, 2022).
STOCK REPURCHASE PROGRAM In January 2023, the Company's board of directors authorized a stock repurchase program pursuant to which the Company may, from time to time, purchase up to approximately 4.3 million shares of its outstanding common stock (approximately 5% of the shares of common stock outstanding as of December 31, 2022).
For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis 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.
For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis 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 supplemental disclosure items.
Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to adjustment or cancellation if the borrower’s credit quality 67 Table of Contents deteriorates.
Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to adjustment or cancellation if the borrower’s credit quality deteriorates.
The yield calculation does not include adjustments to amortized cost of available for sale securities for active fair value hedges. 56 Table of Contents TABLE 9.
The yield calculation does not include adjustments to amortized cost of available for sale securities for active fair value hedges. 56 Table of Contents TABLE 10.
CAPCO drives business strategy development and execution, provides corporate financial oversight, and is responsible for portfolio risk committee oversight. CAPCO provides oversight of the portfolio risk/reward committees to ensure tactics to address business strategy changes are properly vetted and adopted, and protect the Company’s reputation. • Portfolio committees.
CAPCO drives business strategy development and execution, provides corporate financial oversight, and is responsible for portfolio risk committee oversight. CAPCO provides oversight of the portfolio risk/reward committees to ensure tactics to address business strategy changes are properly vetted and adopted, and protect the Company’s reputation. 68 Table of Contents • Portfolio committees.
Reprice risk results from differences in the maturity or repricing of asset and liability portfolios. Option risk arises from “embedded options” present in many financial instruments such as loan prepayment options, deposit early withdrawal options and interest rate options.
Reprice risk results from differences in the maturity or repricing of asset and liability portfolios. Option risk arises from “embedded options” present in many 69 Table of Contents financial instruments such as loan prepayment options, deposit early withdrawal options, and interest rate options.
The following table shows average loans by category, the effective taxable equivalent yield and the percentage of total loans for each of the preceding three years: TABLE 13.
The following table shows average loans by category, the effective taxable equivalent yield and the percentage of total loans for each of the preceding three years: TABLE 14.
The principal objective of asset/liability management is to maximize net interest income while operating within acceptable risk limits established for interest rate risk and maintaining adequate levels of liquidity. Our net earnings are materially dependent on our net interest income. IRR on the Company’s balance sheet consists of reprice, option, yield curve, and basis risks.
The principal objective of asset/liability management is to maximize net interest income while operating within acceptable interest rate risk limits and maintaining adequate levels of liquidity. Our net earnings are materially dependent on our net interest income. IRR inherent in the Company’s balance sheet consists of reprice, option, yield curve, and basis risks.
Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans.
Such instruments are not reflected in the accompanying consolidated financial statements 66 Table of Contents until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans.
The base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income.
The base scenario assumes that balance sheet composition and the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income.
At December 31, 2022, each of these capital ratios fell within, or above, their respective target range. At December 31, 2022, our regulatory capital ratios were well in excess of current regulatory minimum requirements, including the conservatism buffers, by at least $540 million. Additionally, both the Company and the Bank were considered “well capitalized” by regulatory agencies.
At December 31, 2023, each of these capital ratios fell within, or above, their respective target range. At December 31, 2023, our regulatory capital ratios were well in excess of current regulatory minimum requirements, including the conservatism buffers, by at least $737 million. Additionally, both the Company and the Bank were considered “well capitalized” by regulatory agencies.
The functional areas reporting to the Chief Risk Officer are the enterprise risk management program office, operational risk management, model validation, data governance, regulatory relations, corporate insurance, credit review (administrative only) and the enterprise-wide compliance program.
The functional areas reporting to the Chief Risk Officer are the enterprise risk management program office, operational risk management, model validation, data governance, regulatory relations, corporate insurance, credit review (administrative only), Bank Secrecy Act compliance, and the enterprise-wide compliance program.
A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent our future cash requirements. Letters of credit totaled $401 million at December 31, 2022.
A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent our future cash requirements. Letters of credit totaled $482 million at December 31, 2023.
The Company utilizes an asset/liability model as the primary quantitative tool in measuring the amount of IRR associated with changing market rates. The model is used to perform net interest income, economic value of equity, Monte Carlo, and gap analyses.
The Company utilizes an asset/liability model as the primary quantitative tool in measuring the amount of IRR associated with changing market rates. The model is used to perform net interest income, economic value of equity (EVE), stochastic, and gap analyses.
We lend mainly to middle-market and smaller commercial entities, although we do participate in larger shared-credit loan facilities generally with businesses/sponsors operating in our market areas that are well known to the relationship officers.
We lend mainly to middle-market and smaller 57 Table of Contents commercial entities, although we do participate in larger shared-credit loan facilities generally with businesses/sponsors operating in our market areas that are well known to the relationship officers.
For example, holding all other assumptions constant, the slower growth S-2 scenario produced expected credit losses 44% higher than utilization of the baseline scenario at December 31, 2022. In contrast, for the year ended December 31, 2021, the slower growth S-2 scenario produced results 21% greater than the baseline scenario.
For example, holding all other assumptions constant, the slower growth S-2 scenario produced expected credit losses 34% higher than utilization of the baseline scenario at December 31, 2023. In contrast, for the year ended December 31, 2022, the slower growth S-2 scenario produced results 44% greater than the baseline scenario.
Basis risk is also present in administered rate liabilities, such as savings accounts, negotiable order of withdrawal accounts, and money market accounts where historical pricing relationships to market rates may change due to the level or directional change in market interest rates. 70 Table of Contents ALCO manages our IRR exposures through pro-active measurement, monitoring, and management actions.
Basis risk is also present in administered rate liabilities, such as savings accounts, negotiable order of withdrawal accounts, and money market accounts where historical pricing relationships to market rates may change due to the level or directional change in market interest rates. ALCO manages our IRR exposures through proactive measurement, monitoring, and management actions.
Loans past due 90 days or more and still accruing are also disclosed. TABLE 16.
Loans past due 90 days or more and still accruing are also disclosed. TABLE 17.
Unrealized holding gains (losses) on available for sale securities are excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive income, a separate component of stockholders’ equity. 55 Table of Contents The following table presents debt securities at amortized cost by type at December 31, 2022 and 2021: TABLE 8.
Unrealized holding gains (losses) on available for sale securities are excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive income, a separate component of stockholders’ equity. The following table presents debt securities at amortized cost by type at December 31, 2023 and 2022: TABLE 9.
The Chief Risk Officer provides overall vision, direction and leadership regarding our enterprise risk management program. The Chief Risk Officer exercises independent judgment and reporting of risk through a direct working relationship with the Board Risk Committee, and the Chief Credit Officer has the same role with the Credit Risk Management Subcommittee.
The Chief Risk Officer, who reports directly to the CEO, provides overall vision, direction and leadership regarding our enterprise risk management program. The Chief Risk Officer exercises independent judgment and reporting of risk through a direct working relationship with the Board Risk Committee, and the Chief Credit Officer has the same role with the Credit Risk Management Subcommittee.
The Bank undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At December 31, 2022, the Company had a reserve for unfunded lending commitments of $33.3 million.
The Bank undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At December 31, 2023, the Company had a reserve for unfunded lending commitments of $28.9 million.
Commitments to extend credit totaled $10.2 billion at December 31, 2022 and include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the acquisition and development of construction of real property or equipment, and credit card and personal credit lines.
Commitments to extend credit totaled $9.9 billion at December 31, 2023 and include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the acquisition and development of construction of real property or equipment, and credit card and personal credit lines.
For example, although 71 Table of Contents certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.
For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.
The Chief Risk Officer also works closely with the Chief Internal Auditor to provide assurance to the Board and senior management regarding risk management controls and their effectiveness. The Chief Internal Auditor reports to the Board’s Audit Committee to assure independence of the internal audit function.
The Chief Risk Officer also works closely with the Chief Internal Auditor to provide assurance to the Board and senior management regarding risk management controls and their effectiveness. The Chief Internal Auditor reports to the Board’s Audit Committee to assure independence of the internal audit function. Another risk management function reporting to the CEO is the Chief Credit Officer.
Collateral on impaired loans may include, but is not limited to, commercial and residential real estate, accounts receivable and other corporate assets. Values for impaired credits are highly subjective and based on information available at the time of valuation and the current resolution strategy. These values are difficult to assess and have heightened uncertainty resulting from current market conditions.
Collateral supporting loans individually evaluated for credit loss may include, but is not limited to, commercial and residential real estate, accounts receivable and other corporate assets. Valuations are highly subjective and based on information available at the time of valuation and the current resolution strategy. These values are difficult to assess and have heightened uncertainty resulting from current market conditions.
As of December 31, 2022, we had approximately $716 million in notional amount of forward-starting fixed payer swaps that convert the latter portion of the term of these available for sale securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate risk.
As of December 31, 2023, we had approximately $478 million in notional amount of forward-starting fixed payer swaps that convert the latter portion of the term of these available for sale securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate 55 Table of Contents risk.
The Company has adequate liquidity and, therefore, does not plan to and, more likely than not, will not be required to sell available for sale securities before the recovery of the losses reflected in other comprehensive loss.
The Company has adequate liquidity and, therefore, does not plan to sell additional available for sale securities in the near term and, more likely than not, will not be required to do so before the recovery of the losses reflected in accumulated other comprehensive loss.
Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee (ARRC)) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate (SOFR) as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments.
Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee (ARRC)) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for 71 Table of Contents certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate (SOFR)), and proposed implementations of the recommended alternatives in floating rate instruments.
Nonoperating Expense ($ in thousands ) 2022 2021 2020 Compensation expense $ — $ 4,248 $ — Employee benefits — 20,192 — Personnel expense — 24,440 — Net occupancy expense — 2 — Equipment expense — 5 — Advertising — 16 — Printing and supplies — 22 — Entertainment and contributions — 174 — Travel expenses — 5 — Loss on facilities and equipment from consolidation — 13,863 — Loss on extinguishment of debt — 4,165 — Other miscellaneous expense — 4,181 — Total nonoperating expense $ — $ 46,873 $ — 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 insurance.
Supplemental Disclosure Items Included in Noninterest Expense ($ in thousands ) 2023 2022 2021 Compensation expense $ — $ — $ 4,248 Employee benefits — — 20,192 Personnel expense — — 24,440 Net occupancy expense — — 2 Equipment expense — — 5 Deposit insurance and regulatory fees 26,123 — — Advertising — — 16 Printing and supplies — — 22 Entertainment and contributions — — 174 Travel expenses — — 5 Loss on facilities and equipment from consolidation — — 13,863 Loss on extinguishment of debt — — 4,165 Other miscellaneous expense — — 4,181 Total supplemental disclosure items included in noninterest expense $ 26,123 $ — $ 46,873 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 insurance.
At December 31, 2022, the amortized cost of securities available for sale totaled $6.3 billion and securities held to maturity totaled $2.9 billion, compared to $7.0 billion and $1.6 billion, respectively, at December 31, 2021.
At December 31, 2023, the amortized cost of securities available for sale totaled $5.5 billion and securities held to maturity totaled $2.7 billion, compared to $6.3 billion and $2.9 billion, respectively, at December 31, 2022.
The effective income tax rate continues to be less than the statutory rate primarily due to tax-exempt income and income tax credits. 79 Table of Contents The following table provides selected comparative financial information for the five quarters ending with December 31, 2022. TABLE 29.
The effective income tax rate continues to be less than the statutory rate primarily due to tax-exempt income and income tax credits. The following table provides selected comparative financial information for the five quarters ending with December 31, 2023. TABLE 31.
As operational risk remains elevated and as customer and regulatory expectations regarding information security have increased, the Company continues to enhance its controls, processes and systems in order to protect the Company’s networks, computers, software and data from attack, damage or unauthorized access.
As operational risk remains elevated and as customer and regulatory expectations regarding information security have increased, the Company continues to enhance its controls, processes and systems in order to protect the Company’s networks, computers, software and data from attack, damage or unauthorized access. The Board Risk Committee has primary responsibility for the oversight of operational risk.
The following table shows the commitments to extend credit and letters of credit at December 31, 2022 and 2021 according to expiration date. TABLE 23.
The following table shows the commitments to extend credit and letters of credit at December 31, 2023 and 2022 according to expiration date. TABLE 24.
The significant accounting principles and practices we follow are described in Note 1 to the consolidated financial statements. These principles and practices require 80 Table of Contents management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes.
The significant accounting principles and practices we follow are described in Note 1 to the consolidated financial statements, included in Item 8 of this document. These principles and practices require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes.
Our shared national credit industry concentration at December 31, 2022 includes approximately $509 million of health care-related facilities, $513 million in finance and insurance and $426 million in real estate, rental and leasing, with the remaining to various other industries.
Our shared national credit industry concentration at December 31, 2023 includes approximately $431 million of health care-related facilities, $419 million in finance and insurance and $394 million in real estate, rental and leasing, with the remaining to various other industries.
As shown in Table 26 above, our ratios of free securities to total securities were 41.59% and 53.95%, respectively, at December 31, 2022 and 2021. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements.
As shown in Table 28 above, our ratios of free securities to total securities were 38.80% and 41.59% at December 31, 2023 and 2022, respectively. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements.
Based only on tax credit investments that have been made through 2022, we expect to realize benefits from federal and state tax credits over the next three years totaling $11.6 million, $11.7 million and $9.1 million for 2023, 2024 and 2025, respectively. We intend to continue making investments in tax credit projects.
Based only on tax credit investments that have been made through 2023, we expect to realize benefits from federal and state tax credits over the next three years totaling $12.4 million, $9.8 million and $8.2 million for 2024, 2025 and 2026, respectively. We intend to continue making investments in tax credit projects.
In addition, the Company has established a Sustainability Committee, which is a management committee that develops, monitors and assesses the strategies related to the environment, social responsibility and sustainable growth. 69 Table of Contents Risk Leadership and Organization The risk management function of the Company, which includes the Chief Risk Officer, is led by the President of Hancock Whitney Bank.
In addition, the Company has established a Sustainability Committee, which is a management committee that develops, monitors and assesses the strategies related to the environment, social responsibility and sustainable growth. Risk Leadership and Organization The risk management function of the Company is led by our Chief Risk Officer.
The downside recessionary S-2 scenario (anchored on the baseline) was weighted more heavily at 75% and the baseline scenario was weighted 25% as management deemed the forecasted economic circumstances and outcomes included the S-2 scenario to be more likely to occur in the near term.
The downside mild recessionary S-2 scenario (anchored on the baseline) was weighted more heavily at 60% and the baseline scenario was weighted 40%, as management deemed certain of the forecasted economic circumstances and outcomes included the S-2 scenario to be somewhat more likely to occur in the near term.
Shared national credits funded at December 31, 2022 totaled approximately $2.7 billion, or 12% of total loans, compared to $2.1 million, or 10% of total loans at December 31, 2021.
Shared national credits funded at December 31, 2023 totaled approximately $2.6 billion, or 11% of total loans, compared to $2.7 million, or 12% of total loans at December 31, 2022.
Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Allowance for Credit Losses” provides additional information on changes in the allowance for credit losses and general credit quality. Noninterest Income Noninterest income for the twelve months ended December 31, 2022 totaled $331.5 million, a $32.8 million, or 9%, decrease from 2021.
Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Allowance for Credit Losses” provides additional information on changes in the allowance for credit losses and general credit quality. Noninterest Income Noninterest income for the year ended December 31, 2023 totaled $288.5 million, a $43.0 million, or 13%, decrease from 2022.
Wholesale funds totaled $2.1 billion at December 31, 2022, an increase of $178.8 million from December 31, 2021. The increase was primarily due to an increase in FHLB borrowings, partially offset by decrease in customer repo agreements. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.
Wholesale funds totaled $2.0 billion at December 31, 2023, a decrease of $137.4 million from December 31, 2022. The decrease was primarily due to a decrease in FHLB borrowings, partially offset by the increase in brokered deposits. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.
The change in expected maturity, effective duration, and nominal weighted-average yield is attributable to reinvestment of securities portfolio cash flow, portfolio growth, and the impact of cash flows from the termination of 25 fair value hedge instruments during the year. We have in place last-of-layer swaps on certain fixed-rate commercial mortgage backed securities.
The change in expected maturity, effective duration, and nominal weighted-average yield is attributable to the fourth quarter 2023 strategic portfolio restructure, reinvestment activity of securities portfolio and the impact of cash flows from the termination of four fair value hedge instruments during the year. We have in place fair value hedges on certain fixed-rate commercial mortgage backed securities.
At December 31, 2022, the average expected maturity of the portfolio was 6.02 years with an effective duration of 4.87 years and a nominal weighted-average yield of 2.27%. Under an immediate, parallel rate shock of 100 bps and 200 bps, the effective duration would be 4.83 years and 4.77 years, respectively.
At December 31, 2023, the average expected maturity of the portfolio was 6.22 years with an effective duration of 4.60 years and a nominal weighted-average yield of 2.48%. Under an immediate, parallel rate shock of 100 bps and 200 bps, the effective duration would be 4.58 years and 4.55 years, respectively.
Trust assets under management decreased to $9.1 billion at December 31, 2022, compared to $9.8 billion at December 31, 2021. 50 Table of Contents Bank card and ATM fees include income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions.
Trust assets under management increased to $9.7 billion at December 31, 2023, compared to $9.1 billion at December 31, 2022. Bank card and ATM fees include income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions.
While we may complete transactions subject to the new excise tax, we do not expect a material impact to our statement of condition or result of operations. 77 Table of Contents FOURTH QUARTER RESULTS Net income for the fourth quarter of 2022 was $143.8 million, or $1.65 per diluted common share, compared to $135.4 million, or $1.55 per diluted common share, in the third quarter of 2022 and $137.7 million, or $1.55 per diluted common share, in the fourth quarter of 2021.
While we may complete transactions subject to the excise tax in the future, we do not expect a material impact to our statement of condition or results of operations. 76 Table of Contents FOURTH QUARTER RESULTS Net income for the fourth quarter of 2023 was $50.6 million, or $0.58 per diluted common share, compared to $97.7 million, or $1.12 per diluted common share, in the third quarter of 2023 and $143.8 million, or $1.65 per diluted common share, in the fourth quarter of 2022.
Income Taxes ($ in thousands ) 2022 2021 2020 Taxes computed at statutory rate $ 138,431 $ 119,292 $ (26,196 ) Tax credits: QZAB/QSCB (1,391 ) (1,633 ) (2,289 ) NMTC - Federal and State (5,745 ) (5,487 ) (5,033 ) LIHTC and other tax credits (4,232 ) (1,936 ) (750 ) LIHTC amortization 3,329 1,167 — Total tax credits (8,039 ) (7,889 ) (8,072 ) State income taxes, net of federal income tax benefit 13,272 9,048 (1,269 ) Tax-exempt interest (8,612 ) (9,100 ) (10,444 ) Life insurance contracts (1,812 ) (2,653 ) (4,857 ) Employee share-based compensation (2,084 ) (1,671 ) 1,351 FDIC assessment disallowance 1,836 1,609 2,094 NOL carryback under CARES Act 238 (4,948 ) (30,167 ) Other, net 1,877 1,153 (2,011 ) Income tax expense (benefit) $ 135,107 $ 104,841 $ (79,571 ) The main source of tax credits has been investments in tax-advantage securities and tax credit projects.
Income Taxes ($ in thousands ) 2023 2022 2021 Taxes computed at statutory rate $ 102,927 $ 138,431 $ 119,292 Tax credits: QZAB/QSCB (1,114 ) (1,391 ) (1,633 ) NMTC - Federal and State (7,177 ) (5,745 ) (5,487 ) LIHTC and other tax credits (4,884 ) (4,232 ) (1,936 ) LIHTC amortization 3,732 3,329 1,167 Total tax credits (9,443 ) (8,039 ) (7,889 ) State income taxes, net of federal income tax benefit 10,323 13,272 9,048 Tax-exempt interest (8,755 ) (8,612 ) (9,100 ) Life insurance contracts (4,020 ) (1,812 ) (2,653 ) Employee share-based compensation (505 ) (2,084 ) (1,671 ) FDIC assessment disallowance 2,893 1,836 1,609 Net operating loss carryback under CARES Act — 238 (4,948 ) Other, net 4,106 1,877 1,153 Income tax expense $ 97,526 $ 135,107 $ 104,841 The main source of tax credits has been investments in tax-advantage securities and tax credit projects.
Net Interest Income at Risk Our primary market risk is interest rate risk that stems from uncertainty with respect to the absolute and relative levels of future market interest rates that affect our financial products and services.
Other interest rate-related risks such as prepayment, basis, and option risk are also considered. Net Interest Income at Risk Our primary market risk is interest rate risk that stems from uncertainty with respect to the absolute and relative levels of future market interest rates that affect our financial products and services.
This debt qualifies as tier 2 capital in the calculation of certain regulatory capital ratios. LOAN COMMITMENTS AND LETTERS OF CREDIT In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers.
LOAN COMMITMENTS AND LETTERS OF CREDIT In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers.
These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet. The impact of interest rate derivatives, such as interest rate swaps, caps and floors, is also included in the model. Other interest rate-related risks such as prepayment, basis and option risk are also considered.
Net interest income simulations incorporate assumptions regarding balance sheet growth and mix as well as the pricing, repricing, and maturity characteristics of the existing and projected balance sheet. The impact of interest rate derivatives, such as interest rate swaps, caps and floors, is also included in the model.
Noninterest Expense ( $ in thousands ) 2022 % Change 2021 % Change 2020 Compensation expense $ 378,482 (0 ) % $ 378,589 (0 ) % $ 379,727 Employee benefits 82,153 (21 ) 103,786 23 84,332 Personnel expense 460,635 (5 ) 482,375 4 464,059 Net occupancy expense 48,767 (2 ) 49,786 (5 ) 52,589 Equipment expense 18,573 2 18,167 (5 ) 19,212 Data processing expense 103,942 7 96,755 10 87,823 Professional services expense 36,065 (26 ) 48,678 (2 ) 49,529 Amortization of intangibles 14,033 (16 ) 16,665 (16 ) 19,916 Deposit insurance and regulatory fees 14,889 10 13,582 (28 ) 18,804 Other real estate and foreclosed assets expense (income) (4,407 ) n/m (210 ) n/m 9,555 Advertising 13,783 11 12,441 (4 ) 13,011 Corporate value, franchise taxes, and other non-income taxes 16,744 16 14,478 (13 ) 16,578 Telecommunications and postage 11,870 (6 ) 12,646 (16 ) 14,991 Entertainment and contributions 10,336 31 7,867 (20 ) 9,865 Printing and supplies 3,795 2 3,728 (26 ) 5,063 Travel expenses 4,336 61 2,697 17 2,297 Tax credit investment amortization 4,768 7 4,436 15 3,843 Other retirement expense (29,693 ) 6 (27,941 ) 11 (25,133 ) Loss on facilities and equipment from consolidation — n/m 13,863 360 3,012 Loss on extinguishment of debt — n/m 4,165 100 — Other miscellaneous expense 22,256 (32 ) 32,829 38 23,778 Total noninterest expense $ 750,692 (7 ) % $ 807,007 2 % $ 788,792 n/m - not meaningful TABLE 6.
Noninterest Expense ( $ in thousands ) 2023 % Change 2022 % Change 2021 Compensation expense $ 376,055 (1 ) % $ 378,482 (0 ) % $ 378,589 Employee benefits 84,740 3 82,153 (21 ) 103,786 Personnel expense 460,795 0 460,635 (5 ) 482,375 Net occupancy expense 51,573 6 48,767 (2 ) 49,786 Equipment expense 18,852 2 18,573 2 18,167 Data processing expense 117,694 13 103,942 7 96,755 Professional services expense 38,331 6 36,065 (26 ) 48,678 Amortization of intangibles 11,556 (18 ) 14,033 (16 ) 16,665 Deposit insurance and regulatory fees 49,979 236 14,889 10 13,582 Other real estate and foreclosed assets income (624 ) (86 ) (4,407 ) n/m (210 ) Corporate value, franchise taxes, and other non-income taxes 20,355 22 16,744 16 14,478 Advertising 13,454 (2 ) 13,783 11 12,441 Telecommunications and postage 10,773 (9 ) 11,870 (6 ) 12,646 Entertainment and contributions 10,664 3 10,336 31 7,867 Tax credit investment amortization 5,791 21 4,768 7 4,436 Travel expenses 5,469 26 4,336 61 2,697 Printing and supplies 4,073 7 3,795 2 3,728 Other retirement expense (13,460 ) (55 ) (29,693 ) 6 (27,941 ) Loss on facilities and equipment from consolidation — n/m — n/m 13,863 Loss on extinguishment of debt — n/m — n/m 4,165 Other miscellaneous expense 31,573 42 22,256 (32 ) 32,829 Total noninterest expense $ 836,848 11 % $ 750,692 (7 ) % $ 807,007 n/m - not meaningful 52 Table of Contents TABLE 7.
The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exceptions of energy, which is based on the borrower’s source of revenue (i.e. manufacturer whose income is derived from energy-related business is reported as energy), and PPP loans, as those are expected to be 100% SBA guaranteed and therefore have limited credit risk.
The following table provides detail of the end of period balances of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exceptions of energy, which is based on the borrower’s source of revenue (i.e. manufacturer whose income is derived from energy-related business is reported as energy).
Allowance for Credit Losses At December 31, 2022, the allowance for credit losses was $341.1 million, comprised of $307.8 million in allowance for loan losses and $33.3 million in the reserve for unfunded lending commitments.
Allowance for Credit Losses At December 31, 2023, the allowance for credit losses was $336.8 million, comprised of $307.9 million in allowance for loan losses and $28.9 million in the reserve for unfunded lending commitments.
Average Deposits 2022 2021 2020 ($ in millions) Balance Rate Mix Balance Rate Mix Balance Rate Mix Interest-bearing deposits: Interest-bearing transaction deposits $ 2,630.3 0.15 % 8.9 % $ 2,425.2 0.09 % 8.3 % $ 2,166.4 0.20 % 8.3 % Money market deposits 5,679.8 0.30 19.3 6,212.0 0.11 21.4 5,311.0 0.39 20.3 Savings deposits 2,917.4 0.01 9.9 2,598.2 0.01 8.9 2,092.4 0.02 8.0 Time deposits 1,030.1 0.45 3.5 1,394.1 0.47 4.8 2,630.8 1.41 10.0 Public Funds 2,941.9 1.10 10.0 3,140.2 0.34 10.8 3,232.1 0.79 12.3 Total interest-bearing deposits 15,199.5 0.38 % 51.6 15,769.7 0.17 % 54.2 15,432.7 0.57 % 58.9 Noninterest bearing demand deposits 14,298.0 48.4 13,324.0 45.8 10,779.6 41.1 Total deposits $ 29,497.5 100.0 % $ 29,093.7 100.0 % $ 26,212.3 100.0 % TABLE 21.
Average Deposits 2023 2022 2021 ($ in millions) Balance Rate Mix Balance Rate Mix Balance Rate Mix Interest-bearing deposits: Interest-bearing transaction deposits $ 2,429.5 0.93 % 8.2 % $ 2,630.3 0.15 % 8.9 % $ 2,425.2 0.09 % 8.3 % Money market deposits 5,762.9 2.67 % 19.6 % 5,679.8 0.30 % 19.3 % 6,212.0 0.11 % 21.4 % Savings deposits 2,424.9 0.02 % 8.2 % 2,917.4 0.01 % 9.9 % 2,598.2 0.01 % 8.9 % Time deposits 3,970.4 4.17 % 13.5 % 1,030.1 0.45 % 3.5 % 1,394.1 0.47 % 4.8 % Public Funds 2,971.6 3.38 % 10.1 % 2,941.9 1.10 % 10.0 % 3,140.2 0.34 % 10.8 % Total interest-bearing deposits 17,559.3 2.53 % 59.6 % 15,199.5 0.38 % 51.6 % 15,769.7 0.17 % 54.2 % Noninterest bearing demand deposits 11,919.2 40.4 % 14,298.0 48.4 % 13,324.0 45.8 % Total deposits $ 29,478.5 100.0 % $ 29,497.5 100.0 % $ 29,093.7 100.0 % TABLE 22.
Short-term borrowings consist of federal funds purchased, securities sold under agreements to repurchase and borrowings from the FHLB. Customer repurchase agreements are a source of customer funding.
Table 23 sets forth balances of short-term borrowings for each of the past three years. Short-term borrowings consist of federal funds purchased, securities sold under agreements to repurchase and borrowings from the FHLB. Customer repurchase agreements are a source of customer funding.
Other real estate and foreclosed assets expense reflected net gains of $4.4 million in 2022, compared to net gains of $0.2 million in 2021. The twelve months ended December 31, 2022 includes a $1.8 million gain on the sale of stock in a former borrower received in satisfaction of debt.
Net gains on sales of other real estate and foreclosed assets exceeded expense by $0.6 million in 2023, compared to $4.4 million in 2022. The net gain recorded in the year ended December 31, 2022 includes a $1.8 million gain on the sale of stock in a former 53 Table of Contents borrower received in satisfaction of debt.
Summary of Activity in the Allowance for Credit Losses December 31, ($ in thousands) 2022 2021 2020 Provision and Allowance for Credit Losses Allowance for Loan Losses: Allowance for loan losses at beginning of period $ 342,065 $ 450,177 $ 191,251 Loans charged-off: Commercial non real estate 7,637 33,523 387,172 Commercial real estate - owner occupied 948 3,179 1,828 Total commercial & industrial 8,585 36,702 389,000 Commercial real estate - income producing 1,073 425 2,512 Construction and land development 3 274 400 Total Commercial 9,661 37,401 391,912 Residential mortgages 137 713 326 Consumer 12,792 12,722 17,219 Total charge-offs 22,590 50,836 409,457 Recoveries of loans previously charged-off: Commercial non real estate 11,812 8,985 6,032 Commercial real estate - owner occupied 733 642 763 Total commercial & industrial 12,545 9,627 6,795 Commercial real estate - income producing 878 105 46 Construction and land development 134 2,172 846 Total commercial 13,557 11,904 7,687 Residential mortgages 1,749 1,459 1,400 Consumer 5,382 6,282 5,584 Total recoveries 20,688 19,645 14,671 Total net charge-offs 1,902 31,191 394,786 Provision for loan losses (32,374 ) (76,921 ) 604,301 Cumulative effect of change in accounting principle — — 49,411 Allowance for loan losses at end of period $ 307,789 $ 342,065 $ 450,177 Reserve for Unfunded Lending Commitments: Reserve for unfunded lending commitments at beginning of period 29,334 29,907 3,974 Cumulative effect of change in accounting principle — — 27,330 Provision for losses on unfunded lending commitments 3,975 (573 ) (1,397 ) Reserve for unfunded lending commitments at end of period $ 33,309 $ 29,334 $ 29,907 Total Allowance for Credit Losses $ 341,098 $ 371,399 $ 480,084 Total Provision for Credit Losses $ (28,399 ) $ (77,494 ) $ 602,904 Coverage ratios: Allowance for loan losses to period end loans 1.33 % 1.62 % 2.07 % Allowance for credit loss to period end loans 1.48 % 1.76 % 2.20 % Charge-offs ratios Gross charge-offs to average loans 0.10 % 0.24 % 1.85 % Recoveries to average loans 0.09 % 0.09 % 0.07 % Net charge-offs to average loans 0.01 % 0.15 % 1.78 % Net Charge-offs to average loans by portfolio: Commercial non real estate (0.04 )% 0.25 % 3.77 % Commercial real estate - owner occupied 0.01 % 0.09 % 0.04 % Total commercial & industrial (0.03 )% 0.22 % 2.97 % Commercial real estate - income producing 0.01 % 0.01 % 0.08 % Construction and land development (0.01 )% (0.16 )% (0.04 )% Total Commercial (0.02 )% 0.15 % 2.22 % Residential mortgages (0.06 )% (0.03 )% (0.04 )% Consumer 0.47 % 0.38 % 0.57 % 64 Table of Contents An allocation of the loan loss allowance by major loan category is set forth in the following table for the periods indicated.
Summary of Activity in the Allowance for Credit Losses December 31, ($ in thousands) 2023 2022 2021 Provision and Allowance for Credit Losses Allowance for Loan Losses: Allowance for loan losses at beginning of period $ 307,789 $ 342,065 $ 450,177 Loans charged-off: Commercial non real estate 59,830 7,637 33,523 Commercial real estate - owner occupied — 948 3,179 Total commercial & industrial 59,830 8,585 36,702 Commercial real estate - income producing 73 1,073 425 Construction and land development 72 3 274 Total Commercial 59,975 9,661 37,401 Residential mortgages 55 137 713 Consumer 15,393 12,792 12,722 Total charge-offs 75,423 22,590 50,836 Recoveries of loans previously charged-off: Commercial non real estate 6,152 11,812 8,985 Commercial real estate - owner occupied 957 733 642 Total commercial & industrial 7,109 12,545 9,627 Commercial real estate - income producing 14 878 105 Construction and land development 11 134 2,172 Total commercial 7,134 13,557 11,904 Residential mortgages 1,278 1,749 1,459 Consumer 3,611 5,382 6,282 Total recoveries 12,023 20,688 19,645 Total net charge-offs 63,400 1,902 31,191 Provision for loan losses 63,518 (32,374 ) (76,921 ) Allowance for loan losses at end of period $ 307,907 $ 307,789 $ 342,065 Reserve for Unfunded Lending Commitments: Reserve for unfunded lending commitments at beginning of period 33,309 29,334 29,907 Provision for losses on unfunded lending commitments (4,415 ) 3,975 (573 ) Reserve for unfunded lending commitments at end of period $ 28,894 $ 33,309 $ 29,334 Total Allowance for Credit Losses $ 336,801 $ 341,098 $ 371,399 Total Provision for Credit Losses $ 59,103 $ (28,399 ) $ (77,494 ) Coverage ratios: Allowance for loan losses to period end loans 1.29 % 1.33 % 1.62 % Allowance for credit loss to period end loans 1.41 % 1.48 % 1.76 % Charge-offs ratios Gross charge-offs to average loans 0.32 % 0.10 % 0.24 % Recoveries to average loans 0.05 % 0.09 % 0.09 % Net charge-offs to average loans 0.27 % 0.01 % 0.15 % Net Charge-offs to average loans by portfolio: Commercial non real estate 0.54 % (0.04 )% 0.25 % Commercial real estate - owner occupied (0.03 )% 0.01 % 0.09 % Total commercial & industrial 0.40 % (0.03 )% 0.22 % Commercial real estate - income producing 0.00 % 0.01 % 0.01 % Construction and land development 0.00 % (0.01 )% (0.16 )% Total Commercial 0.28 % (0.02 )% 0.15 % Residential mortgages (0.03 )% (0.06 )% (0.03 )% Consumer 0.79 % 0.47 % 0.38 % 63 Table of Contents An allocation of the loan loss allowance by major loan category is set forth in the following table for the periods indicated.
At December 31, 2021, the average expected maturity of the portfolio was 5.80 years with an effective duration of 4.25 years and a nominal weighted-average yield of 1.87%.
At December 31, 2022, the average expected maturity of the portfolio was 6.02 years with an effective duration of 4.87 years and a nominal weighted-average yield of 2.27%.
Average Loans 2022 2021 2020 Yield Pct of Yield Pct of Yield Pct of ( $ in thousands ) Balance (te) Total Balance (te) Total Balance (te) Total Total loans: Commercial & real estate loans $ 17,682,332 4.30 % 81 % $ 17,070,252 3.55 % 80 % $ 17,270,894 3.82 % 78 % Residential mortgages 2,666,134 3.39 12 2,445,602 3.70 12 2,857,584 3.92 13 Consumer 1,566,927 5.64 7 1,692,088 4.82 8 2,038,045 4.98 9 Total loans $ 21,915,393 4.32 % 100 % $ 21,207,942 3.92 % 100 % $ 22,166,523 4.13 % 100 % The following table sets forth the contractual maturity by portfolio segment at December 31, 2022.
Average Loans 2023 2022 2021 Yield Pct of Yield Pct of Yield Pct of ( $ in thousands ) Balance (te) Total Balance (te) Total Balance (te) Total Commercial & real estate loans $ 18,556,175 6.10 % 79 % $ 17,682,332 4.30 % 81 % $ 17,070,252 3.55 % 80 % Residential mortgages 3,541,245 3.62 % 15 % 2,666,134 3.39 % 12 % 2,445,602 3.70 % 12 % Consumer 1,497,159 8.28 % 6 % 1,566,927 5.64 % 7 % 1,692,088 4.82 % 8 % Total loans $ 23,594,579 5.87 % 100 % $ 21,915,393 4.32 % 100 % $ 21,207,942 3.92 % 100 % The following table sets forth the contractual maturity by portfolio segment at December 31, 2023.
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 and mortgage loans generated through programs to support customer relationships. Income from secondary mortgage market operations totaled $11.5 million in 2022, a decrease of $25.2 million, or 69%, from 2021.
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 and mortgage loans generated through programs to support customer relationships.
The Company probability-weighted two Moody’s macroeconomic scenarios in the calculation of our collectively evaluated allowance for credit losses.
The modest release reflects our relatively stable economic outlook and credit metrics. The Company probability-weighted two Moody’s macroeconomic scenarios in the calculation of our collectively evaluated allowance for credit losses.
Managing collateral is also an essential component of managing the Bank’s real estate-and non-real estate related credit risk exposure. For real estate-secured loans, third party valuations are obtained at the time of origination, and updated if it is determined that the collateral value has deteriorated or if the loan is deemed to be a problem loan.
For real estate-secured loans, third party valuations are obtained at the time of origination, and updated if it is determined that the collateral value has deteriorated or if the loan is deemed to be a problem loan. Property valuations are ordered through, and reviewed by, the Bank’s appraisal department.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK The information required for this item is included in the sections entitled “Asset/Liability Management” and “Net Interest Income at Risk” that appear in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated here by reference. 82 Table of Contents
Biggest changeITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK The information required for this item is included in the sections entitled “Asset/Liability Management” and “Net Interest Income at Risk” that appear in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated here by reference. 80 Table of Contents

Other HWC 10-K year-over-year comparisons