First-quarter profits at Hancock Holding in Gulfport, Miss., fell 5% from the previous quarter to $49 million on acquisition costs and lower fee income.
Meanwhile, though the company seems to be putting its energy-lending woes behind it, executives warned that they remain on guard.
“Even with improving oil prices, management still expects a continued lag in the recovery of energy service and support credits,” Hancock said in a news release Tuesday.
Year-over-year comparisons of financial results were difficult to make because Hancock bought part of the operations of First NBC Bank in New Orleans during the quarter, and because it made a $60 million provision for energy credit losses in the first quarter of 2016.
Hancock’s Whitney Bank unit purchased nine of First NBC’s branches along with $1.3 billion of loans, $600 million of Federal Home Loan Bank borrowings and $500 million worth of deposits. The company booked $6.5 million of acquisition costs in the first quarter as a result, contributing to a 5% linked-quarter increase in noninterest expenses.
Meanwhile, noninterest income fell by almost 4% to $63.5 million because of lower fee income from secondary mortgage operations; accounting changes tied to past failed-bank acquisitions; and special factors that inflated fourth-quarter fee income.
However, net interest income at Hancock Holding increased by 8% to $181.7 million. Loans rose by almost 9% to $18.2 billion thanks largely to the addition of the First NBC loans, while the net interest margin expanded by 11 basis points to 3.37%.
Hancock continued its de-risking on the energy side. Its energy portfolio shrunk by $123 million, or 9%, from the fourth quarter. And its percentage of energy loans of total loans fell to 7.1% from 8.4% the previous quarter, the release said.
Hancock has taken $65 million of energy-related chargeoffs since the crisis began in late 2014, including $23 million in the first quarter of 2017, and could take as much as $30 million more over the duration of the current cycle, the release said.
“While we expect additional chargeoffs in the portfolio, we continue to believe the impact of the energy cycle on our loan portfolio will be manageable, our reserve is adequate and our capital will remain solid,” the release said.
The company’s provision for loan losses was $16 million in the quarter, up from $14.5 million in the fourth quarter but considerably lower than the $60 million figure a year earlier.
Earnings per share were 57 cents, in line with the average estimate of analysts compiled by FactSet Research Systems. They were 7 cents lower than in the fourth quarter partly because Hancock issued more than 6 million shares of common stock last year.