Hancock Whitney, a name synonymous with solid, dependable banking in the Southeast, has just released its Q1 2024 earnings transcript. At first glance, it's a story familiar to many regional banks: modest loan growth, normalizing credit metrics, and a cautious eye on the economic horizon. But beneath the surface, a subtle shift in strategy is emerging, one that could give Hancock Whitney a significant edge in the coming years.

While most analysts are focused on Hancock Whitney's anticipated loan growth in the latter half of 2024, driven by potential rate cuts, a closer examination of the transcript reveals a more profound transformation. John Hairston, the bank's CEO, has laid out a clear vision: becoming the bank for privately-owned businesses in the Southeast. This isn't just a marketing slogan, it's a strategic realignment with potentially game-changing implications.

The key to this strategy lies in Hancock Whitney's deliberate pivot away from large, credit-only relationships, often manifested in Shared National Credits (SNCs). While the bank acknowledges utilizing SNCs to deploy excess liquidity in the past, the tide is turning. Hairston emphasizes replacing those relationships with granular, full-relationship loans, specifically targeting privately-owned businesses.

Why is this shift so significant?

Consider these numbers:

SNC reduction: Hairston projects reducing SNC balances by another $300-400 million in the first half of 2024, continuing the trend from Q4 2023, where nearly $200 million in SNC balances were replaced with core relationships. Revenue potential: By shifting from credit-only to full-relationship loans, Hancock Whitney unlocks significant fee income opportunities. The bank's Q4 2023 record performance in SBA and annuity income, now nearly a third of total fee income, demonstrates this potential.

The implication is clear: by focusing on privately-owned businesses, Hancock Whitney is tapping into a vast, often underserved market. These businesses crave personalized service and comprehensive financial solutions, areas where larger national banks often fall short. By offering granular loans alongside treasury management, wealth management, and other fee-generating services, Hancock Whitney is positioning itself as a one-stop shop, creating lasting, profitable relationships.

This strategy isn't without its challenges. It requires building a robust pipeline of granular loans and attracting talent to serve these discerning clients. Hairston acknowledges this, hinting at potential investments in new bankers and facilities, particularly in high-growth markets like Dallas, Texas.

Hypothetical Scenario: Aggressive SNC Reduction

Here's where the hypothesis gets interesting. What if Hancock Whitney's SNC reduction is more aggressive than projected? What if, instead of a couple of hundred basis points as expressed by Hairston, the bank sheds a larger chunk of its SNC portfolio over the next few years, say 500 basis points annually? This would free up significant liquidity to deploy into granular loans, potentially accelerating the growth of their privately-owned business segment.

The impact on revenue could be substantial. Let's assume that Hancock Whitney replaces $500 million in SNC balances annually with full-relationship loans, generating an average of 100 basis points in additional fee income per loan. That's an extra $5 million in annual revenue, with the potential to grow significantly as the strategy matures.

Projected Revenue Impact of SNC Reduction

The chart below illustrates the potential revenue impact of this aggressive SNC reduction strategy.

This "Hancock Whitney Whisper" - the subtle shift towards privately-owned businesses - could be the secret weapon that propels the bank to outperform its peers in the coming years. It's a bold, yet calculated move, one that aligns with Hancock Whitney's legacy of serving local communities and its commitment to fostering long-term prosperity. And while the market may not have caught on just yet, the whispers are getting louder.

"Fun Fact: Did you know Hancock Whitney is the official bank of the New Orleans Saints? Talk about a "touchdown" strategy for building brand loyalty and community engagement!"