Carl Chaney's departure from Hancock Holding may have had nothing to do with efficiency goals, but it certainly presents an opportunity for the company to save some money.
The Gulfport, Miss., company surprised followers on Friday announcing that Chaney, 53, had immediately relinquished his title as Hancock's president and would vacate his co-chief executive and director posts on Dec. 31. John Hairston, who has shared the chief executive position with Chaney since 2006, took over as president and will be the $19 billion-asset Hancock's sole CEO.
Hairston often returned to the same point in an interview Friday: Chaney's departure was a personal decision and was not instigated by the company. Still, Hancock, which has historically had co-CEOs, is using the departure to move away from a dual leadership tradition and move closer to its expense goals.
"It was his call, but it does present the opportunity to achieve some of the efficiencies we had planned and go with a single, more-conventional CEO structure," he said. "In today's banking environment, nimble decision-making translates into earnings per share, and we intend to take full advantage of that."
Attempts to reach Chaney were unsuccessful. He made $3.1 million last year, including a $707,000 salary. Hancock is targeting having an efficiency ratio lower than 60% by 2016. The ratio stood at 61.84% at Sept. 30.
Several analysts said the news stunned them, given Chaney's relatively young age and his comfort in serving as the face of the company.
"My initial reaction was surprise," said Michael Rose, an analyst at Raymond James. Chaney "is walking away from something where he is drawing a good salary. Given the momentum of the bank, I think him stepping away is very interesting."
Kevin Fitzsimmons, an analyst at Hovde Group, wrote in a research note that he initially viewed Chaney's personal goal of early retirement as "less credible." He added that he became more comfortable with that explanation following a conversation with Hancock's management, which has "always been very straight with us."
Still, Fitzsimmons wrote that Chaney's departure could have been aided by Hancock's desire to move away from a co-CEO structure and the underperformance of the company's stock. "While this structure may have made sense when Hancock was a much smaller company, we suspect that [management] concluded that, at the company's now much larger size, it made more sense to shift to a more streamlined, conventional senior" management structure, he added.
Hancock's underperforming stock could be tied to choppy earnings. In 2011, Hancock, which had $8.3 billion assets at the time, bought the $11.5 billion-asset Whitney Holding in New Orleans for $1.5 billion.
The deal gave Hancock the breadth to be a major player in the Southeast, but it also created a significant accretable yield, an accounting treatment based on the difference between actual cash flows and loan values at the time of acquisition. While a boon to earnings initially, accretable yield declines over time as legacy portfolios pay off. Such run-off clouds organic strides, making it difficult for outsiders to distinguish between overall earnings and core earnings. It is particularly significant for Hancock, given Whitney's size.
"We suspect that Mr. Chaney shouldered much of the blame and a resulting credibility hit with investors," Fitzsimmons said. "We think that a move to put a new face and voice in front of investors may have been viewed as beneficial for Hancock as it could lead some investors to give [its] shares a fresh look."
Hancock had been making progress battling the accretable yield issue. In the third quarter, for instance, Fitzsimmons pegged its core earnings at 59 cents a share, a penny above Wall Street estimates. Total loans rose 4% from June 30 and the efficiency ratio showed significant improvement from a year earlier.
"The company is in a good place to hit the strategic goals we laid out in 2013," Hairston said, adding that Chaney "doesn't feel like he is leaving in a bad spot."
Chaney made similar comments in October, during Hancock's conference call to discuss its quarterly earnings. "I'd like to start today's call by saying how pleased I am with our third-quarter results and how proud I am of our associates," he said at the time.
"Their hard work has helped us successfully execute the updated strategic plan we announced back in April of 2013," Chaney added. "Since then, each quarter we have made progress and checked the box towards meeting the goals we set, all designed to help replace purchase accounting income while growing quality core earnings."
The big question now is what Chaney will do next. His retirement agreement includes a noncompete clause barring him from joining or advising a competing business in Mississippi or Louisiana through the end of 2016.
Prior to Hancock, Chaney was an M&A lawyer in Mississippi, and some analysts questioned if he could possibly return to advising banks on deals. Others said his departure could change Hancock's appetite for acquisition, though Hairston said that isn't the case.
"Acquisitions have been team decisions," Hairston said. "The board's appetite for M&A is unchanged. It is growing, we are very interested."
Rod Taylor, chief executive of executive search firm Taylor & Co., said he'd be surprised if Chaney doesn't reenter banking eventually. "We can only speculate that there is another story we might hear about his future," Taylor said.
Chaney "accomplished so much in such a short time that it would be hard to imagine he would stay retired, even if he is in a financial place to do so," Taylor added. "He has the exact combination of skill sets to be in the next generation of great CEOs in commercial banking."