Hancock Whitney Corp (HWC) 2014 Q2 法說會逐字稿

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  • Operator

  • Good morning and welcome to the Hancock Holding Company's second-quarter 2014 earnings conference call. Participating in today's call are Carl Chaney, President and CEO; Mike Achary, CFO; Sam Kendricks, Chief Credit Officer; and Trisha Carlson, Investor Relations Manager. As a reminder, this call is being recorded. I would now like to turn the call over to Trisha Carlson. You may begin.

  • Trisha Carlson - Manager, IR

  • Thank you and good morning. During today's call, we may make forward-looking statements. We would like to remind everyone to review the Safe Harbor language that was published with yesterday's release and presentation and in the Company's most recent 10-K and 10-Q. Hancock's ability to accurately project results or predict the effects of future plans or strategies is inherently limited.

  • We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions, but actual results and performance could differ materially from those set forth in the forward-looking statements. Hancock undertakes no obligation to update or revise any forward-looking statements and you are cautioned not to place undue reliance on such forward-looking statements. The presentation slides included in our 8-K are also posted with the conference call webcast link on the Investor Relations website. We will reference some of those slides in today's call. I will now turn the call over to Carl Chaney.

  • Carl Chaney - President & CEO

  • Thank you, Trisha and good morning and thank you for joining us today. Yesterday, we reported first-quarter earnings of nearly $50 million, or $0.59 per share and an ROA of 1.04%. These results reflect our continued growth in core earnings. We were able to further reduce operating expenses below our stated goal and coupled with double-digit loan growth, increases in core revenue and improvements in asset quality metrics, we once again reported solid results.

  • As you well know, our main strategy these past several quarters has been to replace purchase accounting income with improving core earnings. We have been able to accomplish that over the past several quarters and the second quarter was no exception. A good illustration of this improvement is noted on slide 4 of our earnings deck.

  • Both EPS and ROA show a narrowing of the gap between our reported and core results while maintaining solid results. The $0.22 gap in EPS from the first quarter of 2013 has narrowed to $0.13 and the ROA gap has narrowed from 41 basis points to 22 basis points. We obviously are not finished closing this gap, but the results are promising and we remain focused on executing our strategies.

  • Now let's take a quick look at some highlights from the second quarter. Core net interest income was up $700,000 linked quarter with the core net interest margin relatively stable. Core noninterest income was up about $1 million linked quarter. Operating expenses declined $2.3 million linked quarter. The efficiency ratio improved to just under 62% and we are continuing to work on our goal of lowering it to below 60%.

  • Our loan growth was strong again with approximately $383 million in linked quarter net loan growth, or 13% annualized. We reported improvement once again in our overall asset quality metrics with the provision down over $1 million linked quarter. Given our projections for continued strong loan growth, we may see this increase somewhat as we build the reserve for future loan growth.

  • And finally, based on these solid results and improving trends, our Board of Directors recently authorized a new 5% common stock buyback program. Our strong capital position, coupled with the confidence our Board has in our results and our strategies for enhancing shareholder value, are all reflected in this decision. At this time, I will turn the call over to our CFO, Mike Achary, who will review some of the quarter's results in more detail.

  • Mike Achary - CFO

  • Thanks, Carl and good morning, everyone. As Carl just noted, the results for the second quarter were solid with another quarter of replacing the diminishing impact from purchase accounting with core earnings. So just a few additional comments related to the quarter.

  • Total loans for the Company were $12.9 billion, up about $350 million from last quarter. Excluding the covered loan portfolio, total loans increased $383 million, or 13% linked quarter annualized. We outperformed our own guidance for upper single-digit growth and so for the year, we now expect 2014 EOP loan growth to be in the range of 8% to 11%.

  • Markets contributing most of the net growth were Houston and South Louisiana with Central Florida also continuing to report positive results. Our mix of loans improved with consumer, mortgage and construction lending adding to the overall growth. This helped bring the average rate on new loans to about 4%, up 15 basis points from last quarter's new loan activity. However, given the rate of loans maturing and renewing, we did see 5 basis points of compression in the core loan yield.

  • Asset quality remains strong and improved in the quarter. Net charge-offs were flat at 13 basis points and the provision declined $1.3 million. While our ALLL remained virtually unchanged from last quarter, we did build the reserve for noncovered loans by about $3 million.

  • Nonperforming assets were down $22 million with about half of the decline in nonperforming loans and half from reduced ORE levels. Of the remaining ORE portfolio, about 40% is from loss share properties and another 30% from closed branches. As Carl noted earlier, with continued strong loan growth expectations and the continued migration of acquired loans to the originated portfolio, we do expect to build the allowance on the noncovered loan portfolio in the near term.

  • Total deposits for the Company were $15.2 billion, virtually unchanged from the end of the first quarter. While the overall level of deposits were stable, we did see an increase in DDA of about $110 million offset by a decline in time and public funds of about $101 million. Growing deposits is now a focus point for the Company as our bond portfolio has reached the floor of about $3.7 billion. Initiatives are in place to grow core deposits to help fund our strong levels of loan growth.

  • Turning to the income statement, net interest income was down less than $1 million linked quarter. However, after adjusting for the decline in purchase accounting, core net interest income was up almost $1 million reflecting an additional accrual day in the quarter. Average earning assets were stable.

  • The Company's reported margin did decline 7 basis points while the core margin remained relatively stable with only 2 basis points of compression. That was driven mostly by a 5 basis point decline in the core loan yield.

  • Noninterest income totaled $56.4 million, down slightly from last quarter. In April, we announced the completion of the sale of certain insurance business lines. That sale led to a loss of about $1.8 million of fee income in the second quarter.

  • Amortization of the indemnification asset further reduced noninterest income by $3.3 million in the second quarter compared to about $3.9 million last quarter. If you adjust for this purchase accounting item and normalize for the insurance sale, noninterest income was actually up about $1 million from last quarter.

  • Operating expense for the quarter was down $2.3 million totaling $145 million. The main driver of the lower expense level was timing differences related to investments in revenue-generating initiatives and also a nonsustainable level of reduced ORE expense from net gains on sales.

  • Reported noninterest expense includes $12.1 million of nonoperating items, which are detailed on slide 14 of our presentation deck. After adjusting for these nonoperating items, personnel costs were down almost $2 million linked quarter with occupancy and equipment down $600,000. ORE expense declined $1.8 million from last quarter to nearly zero and as noted earlier is not expected to be sustainable. A more normalized level of ORE expense is about $1 million to $2 million per quarter.

  • And finally, a quick note on the share buyback Carl noted earlier. We have been authorized to buy back shares in the open market or in privately negotiated transactions from time to time. The authorization is effective through the end of 2015. We will, of course, update investors quarterly on the results of the repurchase program. I will now turn the call back over to Carl.

  • Carl Chaney - President & CEO

  • Thanks, Mike. Before I open the call for questions, I would like to provide a quick update regarding some of our revenue initiatives detailed on slide 16. We have discussed previously our business strategy for markets like Houston and Tampa and the concept of BFCs, our business financial centers.

  • During the second quarter, we opened our first BFC in Jacksonville, Florida and currently expect our Houston BFC to open in the Woodlands soon. These facilities are designed toward servicing businesses and their owners and we will continue to open new centers as we enhance our branch network. Late in the second quarter, we hired three new middle-market lenders in Houston and have plans to hire additional teams of bankers in markets like Houston and Tampa.

  • In wealth management, we are seeing growth in many areas, including our trust business and the continued success in the external distribution of our managed mutual funds complex, Hancock Horizon Funds. And in our treasury management area, we have seen double-digit growth in cards and fees with investments being made to continue growth in this business.

  • I am proud of our results and the hard work of our associates is reflected in those results. As I said last quarter, we are not finished, but we have made great progress and continue to remain focused on our strategies designed to further enhance shareholder value. We will now open the call for questions.

  • Operator

  • (Operator Instructions). Jennifer Demba, SunTrust.

  • Jennifer Demba - Analyst

  • Thank you, good morning. How much of the expense improvement in the second quarter came from the insurance operations sale?

  • Mike Achary - CFO

  • Yes, hi, Jen. This is Mike Achary. Similar to the revenue decline of about $1.8 million, the decline in expenses related to that sale was probably a little bit less than that $1.8 million.

  • Jennifer Demba - Analyst

  • Okay. And Mike, I'm sorry, could you elaborate -- you said the reason for -- the primary reason for the decline in expenses this quarter was related to a timing issue?

  • Mike Achary - CFO

  • Well, some of it. Some of it was related to timing issues in terms of the deployment of some of our revenue-generating initiatives. Certainly that wasn't the whole reason, but last quarter, if you recall, we had kind of talked about the expectation of a little bit higher level of expenses this quarter and certainly that was one of the reasons we thought expenses might increase in the second quarter. All those initiatives are in the process of being executed, so we are on course now to get those in place and to begin to see the fruits of those labors sometime later this year or in 2015.

  • Jennifer Demba - Analyst

  • And I think in your slide deck or in the press release, it says that you guys expect operating earnings to be flat to down over the near term. I think your previous press release said you expected them to be flat. So what sort of caused more of the downside risk over the near term?

  • Mike Achary - CFO

  • The biggest thing by far, of course, is the diminishment of the impacts of purchase accounting that we've talked a lot about that we absolutely expect to see in the second half of 2014. So that is about $4 million or so between second and third quarter and then a little bit under $5 million or so between third quarter and fourth quarter.

  • And you might also re-reference to slide 11 of our presentation deck where we give, for the first time, really kind of a quarterly projection of when we think the impacts of purchase accounting will run off and again, I stress that that is a projection subject to change as we move through time. Does that make sense, Jennifer?

  • Jennifer Demba - Analyst

  • It does. It does and that addition of that graph helps. Thank you very much.

  • Mike Achary - CFO

  • So one other item I might add is, of course, while the level of reported operating earnings could potentially be down a little bit as we go through the second half of the year, we are still obviously working very hard to improve our core earnings.

  • Jennifer Demba - Analyst

  • So Carl, I am going to ask one more question -- I'm sorry -- on that front. If you look at your efforts over the last year or so to make up the decline in purchase accounting, what do you think has gone well, what are you still struggling on that maybe has come in below plan?

  • Carl Chaney - President & CEO

  • I think we've done an excellent job of continuing to grow our loan portfolio and of course then growing net interest income. And as far as things have been disappointing, I can't put a finger on anything that has really been a disappointment.

  • The only thing that has been maybe a bit different has been timing issues and that's really the only thing because I can't say that there is anything that is really a disappointment. As Mike alluded to, we have a number of initiatives that are well underway and will indeed provide significant growth in revenue. But it is just the timing of those expenses that relate to that before the revenue starts to show.

  • Jennifer Demba - Analyst

  • Thank you.

  • Operator

  • Ebrahim Poonawala, Bank of America Merrill Lynch.

  • Ebrahim Poonawala - Analyst

  • Good morning, guys.

  • Carl Chaney - President & CEO

  • Good morning.

  • Ebrahim Poonawala - Analyst

  • Just following up on the expense question, I guess looking out, Carl, you talked about you're hiring lenders and I'm assuming that is part of the investments you guys talk about in the slide deck, which will probably put some upward pressure on expenses. But I guess if you can give any color around how to think about the expense run rate in terms of -- in dollar terms for the back half of the year and from an efficiency ratio standpoint, that would be helpful.

  • Mike Achary - CFO

  • Hi, Ebrahim. It's Mike Achary. Sure. Again, very hard because we are dealing with certain timing impacts, but certainly safe to say that from where expenses are right now, we would expect to see probably in the neighborhood of maybe a $2 million to $3 million increase in expenses as we go into the third and fourth quarter of this year. Again, one big variable, of course, is the nonsustainable level of our ORE expense. We had talked about again a more normalized level between $1 million and $2 million. So we do expect that category, all things equal, to come off of zero and potentially be up as much as about $1 million as we go into the third quarter.

  • Ebrahim Poonawala - Analyst

  • Got it. And should I expect the efficiency ratio to improve?

  • Mike Achary - CFO

  • As we go through the second half of the year and as we achieve success in terms of our revenue-generating initiatives, that is when we look for real improvement in the efficiency ratio. So you could see the efficiency ratio go up a little bit related to the timing related to the execution of these certain initiatives, but when the benefits begin to accrue again later this year or at some point next year is really when we would look forward to some kind of permanent improvement in the efficiency ratio.

  • Ebrahim Poonawala - Analyst

  • Got it. And I guess just a second question if I can ask I guess for Carl. It's interesting, you mentioned you announced your buyback, new program last night. Over the last few days, we've seen a bunch of banks talk about a pickup in sort of M&A discussions, both inbound/outbound activity with potential sellers. I am just wondering your thoughts on where we are? I know you've talked about sort of beginning to start looking at deals as you move through and if you feel the same way?

  • Carl Chaney - President & CEO

  • Absolutely. We are continuing to look at books now as we speak and we see that the number of opportunities seems to be increasing. And so, while we felt like it was very prudent to go ahead and authorize a stock buyback, everyone I think appreciates the fact that those types of transactions are all subject to M&A that may present itself. So we are indeed in the market and feel confident that we will have some opportunities to act on.

  • Ebrahim Poonawala - Analyst

  • Understood. Thank you very much.

  • Carl Chaney - President & CEO

  • All right. Thank you.

  • Operator

  • Jon Arfstrom, RBC Capital Markets.

  • Jon Arfstrom - Analyst

  • Thanks. Good morning, guys. Good morning, Trisha.

  • Trisha Carlson - Manager, IR

  • Good morning.

  • Carl Chaney - President & CEO

  • Good morning, Jon.

  • Jon Arfstrom - Analyst

  • Just a couple of questions that are probably follow-ups, but Mike, that slide 11 table helps a lot and I guess the question is, when you step back and you think about the purchase accounting accretion running off, what point in time with the growth that you have in the pipeline, at what point in time to you think you reach an inflection point on being able to offset the purchase accounting headwinds and actually put up higher net interest income sequentially?

  • Mike Achary - CFO

  • Great question. And the way we are looking at it, Jon, that's probably something that would occur -- I would say just to anticipate that in the second half of 2015, very beginning of 2016. And of course, that is all part of the timeline we have in place related to our efficiency ratio goals of below 60% for 2016.

  • Jon Arfstrom - Analyst

  • Okay, good. That helps. And then the follow-up on expenses, just to make sure I am clear, what you are talking about this quarter versus what you said last quarter, I don't think it is a big deal, but my sense is you are saying that some of these revenue initiatives that you are spending money on may push the ability to get the efficiency ratio back down to the goal that you talked about hitting at the year-end last quarter. It might push a little bit into early 2015. Is that the way to look at it?

  • Mike Achary - CFO

  • That's correct. Absolutely correct.

  • Jon Arfstrom - Analyst

  • Okay, good. That is helpful as well. And then I guess the other question on the buyback, I personally think it is a good time for you to buy back stock given some of the revenue and expense items you are talking about, but just curious your level of aggressiveness and do you think your stock is attractive here based on what you are seeing or is this something that you think you are going to kind of take it as it comes and be a little more cautious on the buyback?

  • Carl Chaney - President & CEO

  • Well, clearly, our Board feels that it is appropriate to step up another authorization of an additional 5% and so we will be opportunistic and take advantage of opportunities when they present themselves while at the same time simultaneously continuing to execute our other strategies, which includes deploying our capital base, which would include M&A.

  • Jon Arfstrom - Analyst

  • Mike, just one quick follow-up on net interest income. I didn't ask this, but I am assuming the inflection point, you are just assuming consistent rates the way the curve sits today?

  • Mike Achary - CFO

  • That's correct.

  • Jon Arfstrom - Analyst

  • Okay, great. Thanks.

  • Operator

  • Michael Rose, Raymond James.

  • Michael Rose - Analyst

  • Hey, guys, sorry about before.

  • Carl Chaney - President & CEO

  • No problem. Good morning.

  • Michael Rose - Analyst

  • Good morning. Just had a couple of quick questions. First, what was the actual dollar amount on the gain of sale of the OREO this quarter because you obviously had mentioned that you wouldn't expect this low level of expenses to continue going forward?

  • Carl Chaney - President & CEO

  • I think the way to answer that question, and I will defer to Sam as well, based on the current ORE portfolio, we probably have about $300,000 to $400,000 of base ORE expense. So absent any gains, that is about the level of expense we would expect to see.

  • Michael Rose - Analyst

  • Okay, that's helpful. And then I think you might have mentioned this before, but as it relates to the loan growth, particularly in some of your core markets, have you hired any new producers that has helped drive any of that incremental growth and maybe if you can just talk about your hiring plans as we move forward on the lending side? Thanks.

  • Carl Chaney - President & CEO

  • Yes, this is Carl. We certainly have hired a number of middle-market lenders who have hit the ground running and are actually seeing some nice production. We also have in the works a couple of other significant hires that unfortunately I'm not able to talk about on this call, but we plan to shortly. So we are continuing -- that is certainly a significant piece of our future growth is not only true organic, but also picking up additional lenders in these various markets, which -- particularly those markets that are doing extremely well from an economic standpoint.

  • Michael Rose - Analyst

  • Okay. And then just one final one if I could. What was the SNC balances in the quarter and how much of a sequential growth did that drive? Thanks.

  • Sam Kendricks - CFO

  • Hey, Michael, this is Sam Kendricks. In terms of our overall SNC portfolio, of our overall growth, about a third of that was in SNCs. So it was a portion of the contributor for our overall loan growth, but it was about a third of the overall loan growth. Was that your question?

  • Michael Rose - Analyst

  • Yes, thanks for taking my questions, guys.

  • Carl Chaney - President & CEO

  • Okay, thank you, Michael.

  • Operator

  • Dave Bishop, Drexel Hamilton.

  • Dave Bishop - Analyst

  • Hey, good morning, guys. Mike, I think you alluded to -- I sort of jumped in late, if I heard you say that new loan production, maybe it bumped up 15 basis points. Just curious what you are seeing there in terms of that improvement in loan pricing?

  • Mike Achary - CFO

  • Yes, for the second quarter, Dave, we saw the yield, that new loans came onto the balance sheet right at about 4%, so that was up about 15% compared to last quarter. Our production levels quarter to quarter were pretty stable at about $1.2 billion, so we are thrilled with that level of production. And I might ask Sam to comment maybe a little bit on what he sees in terms of loan pricing in the market.

  • Sam Kendricks - CFO

  • Sure. We obviously are working very hard to have a balanced growth strategy in terms of the balance sheet. We saw good growth in terms of contribution from the consumer segment, as well as CRE. So that balance helps give us a little better yield. So we are starting to pick up some yield both on the consumer side, as well as some CRE transactions. Obviously, the larger C&I are high quality, but pricing can sometimes be a challenge in that space as well. So we are trying to balance out the overall growth strategy for the portfolio.

  • Dave Bishop - Analyst

  • Great. And as it relates to the BFCs you are opening in Jacksonville and Tampa, obviously decent markets from a C&I basis. In terms of the volume and the pricing dynamics there, do you see that I guess shifting the overall loan yields in pricing relative to sort of the core portfolio? Just any sort of pricing pressure there, the types of loans you are going after?

  • Mike Achary - CFO

  • One of the things that we are doing across the Company, and we have talked a lot about this, is balancing the mix of loans that we bring onto the balance sheet. And so we've made continued progress in that regard over the past three, really four quarters.

  • And so where we stand now, and this is something certainly that has contributed to our ability to stabilize our core margin, is a little bit more in the way of higher-yielding type loan categories coming onto the balance sheet. That includes things like CRE, as well as some of our consumer loan categories, which showed actually pretty darn good progress this past quarter.

  • So going forward, while the BFCs and the kind of business that we are most interested in markets like Houston, Tampa and Jacksonville does tend to be a little bit more toward the C&I side of things, we really don't see that really kind of disturbing that balance, if you will, going forward.

  • Dave Bishop - Analyst

  • Got you. One final question related to the funding side, I guess the focus on the core deposit growth. Any expectations of some deposit promotion initiatives there to bolster that or jumpstart the growth?

  • Mike Achary - CFO

  • Yes, we have several initiatives that we are executing on right now and some of that does involve what might prove to be a little bit in the way of higher deposit costs in the next quarter or so. So the short answer is yes.

  • Dave Bishop - Analyst

  • Great, thanks for the color.

  • Operator

  • Matt Olney, Stephens.

  • Matt Olney - Analyst

  • Hey, thanks. Good morning, guys. Hey, that was some pretty positive commentary as far as the recent loan pricing. It looks like the core loan yields were down again second quarter. Help me understand the dynamic there of loan pricing and the core loan yields.

  • Mike Achary - CFO

  • Yes, Matt, we still have loans that are coming off the balance sheet at a little bit higher yield and then certainly some of the pricing that we are doing related to our renewals is also impacting the overall core loan yield. And so for the quarter, the dynamics of all that math drove that number down a little bit.

  • I think as Sam alluded to a little bit earlier, one of the things, and this is part of our initiatives that we are working on very diligently, is looking at ways for us to improve our overall core loan yield. So there's a lot of activity in that regard around that particular initiative and that is one of the things that we are looking to, to really help us drive additional levels of revenue, specifically spread income in future quarters. So again, that coupled with a continuation of the loan volumes really is our recipe to achieve our targets.

  • Matt Olney - Analyst

  • Okay. And then also in prepared remarks, I think there was a discussion about building the allowance for noncovered loan portfolio. Can you talk more about this and how we should be thinking about forecasting that provision in the future?

  • Mike Achary - CFO

  • Sure, glad to. Just real simply, related to the loan growth that we've enjoyed over the course of the past year or so and certainly a strong desire to continue that level of momentum, we do expect to have potential sequential increases in our provision that are kind of allocated toward taking care of that additional loan growth. So, all things equal, that could imply a little bit higher level of provision in the near term.

  • But, again, our ALLL is so complicated with covered assets and acquired assets and everything that goes with it that the ultimate level of ALLL in provision is really hard to forecast at this point. Although, again, all things equal, look for the noncovered part of it to potentially increase a little bit.

  • Matt Olney - Analyst

  • Okay, thank you.

  • Operator

  • Mikhail Goberman, Portales Partners.

  • Mikhail Goberman - Analyst

  • Thank you. Good morning. I had a quick question about your originated loan portfolio. It seems like this quarter there was really strong growth of over 7%. I am just wondering if you guys think that this is a sustainable pace or if Q2 was sort of an outsized quarter of loan growth or maybe talk about that a little bit.

  • Sam Kendricks - CFO

  • This is Sam. We were very pleased with our overall progress there, but I think the guidance we included in the release was for the year roughly an 8% to 11% range. Obviously, we are impacted from time to time with occasional payoffs where some of our clients are able to either sell off divisions or have some other event. And so we had the opportunity to participate with them as they make acquisitions and likewise there are occasions where they are selling off divisions or portions of their Company. So all in all, we are very pleased with the second-quarter results. The pipeline looks very good, but the guidance I think we have given is an 8% to 11% range for the year. Is that consistent, Carl, with --?

  • Carl Chaney - President & CEO

  • Yes, no, that is. Obviously we feel good about the future ability to continue to grow loans, hence the increase in our guidance for loan growth for the balance of the year.

  • Mike Achary - CFO

  • And certainly one thing I would add is we have to be mindful of the impacts of seasonality and how that impacts our quarterly growth. If you look back over the last couple of years, we have had some seasonally high paydowns that have impacted us primarily in the third quarter, but then additional line utilizations that tend to occur in the fourth quarter. So we just caution folks to be mindful of those kinds of impacts going forward.

  • Mikhail Goberman - Analyst

  • Okay. And that 8% to 11% loan growth guidance, that is for total period-end loan growth, right, including acquired and covered and originated?

  • Mike Achary - CFO

  • That's correct, yes.

  • Mikhail Goberman - Analyst

  • And on another subject, as you guys think about asset liability management, I know you talked a little bit about deposits, growing deposits. Do you have an internal target of a loan to deposit ratio that you are sort of thinking about?

  • Carl Chaney - President & CEO

  • Well, it's in the mid-80s now and we watch that closely. Our Board is very attuned to loan to deposit ratios because that is part of our conservative nature that has allowed us to be around for nearly 115 years, but we are comfortable taking that loan to deposit ratio up close to 90%. To say that we would go and exceed 90%, I don't think that is probably in the cards. But we have a unique ability in the markets that we operate in with the marketshare that we have to be able to grow deposits fairly easy. And so loan/deposit ratio is not a concern or at least the ability to generate deposits to continue to fund future loan growth is not a concern of ours.

  • Mikhail Goberman - Analyst

  • Got it, got it. Thank you. And just one final one, if I could. How is the sort of inbound chatter from small banks regarding potential M&A? Has it increased, decreased, stayed the same?

  • Carl Chaney - President & CEO

  • I think it has certainly increased and there are several drivers that are behind that. One is the continued regulatory scrutiny and burden is continuing to drive Boards to the decision or at least the openness to look at alternatives, as well as the sustained low interest rate environment is continuing to dampen the ability to generate earnings. And so those are two primary drivers that have clearly resulted in an increase in M&A activity. Let me just say M&A discussions.

  • Mikhail Goberman - Analyst

  • All right. Thank you very much.

  • Carl Chaney - President & CEO

  • Sure, thank you.

  • Operator

  • Christopher Marinac, FIG Partners.

  • Christopher Marinac - Analyst

  • Thanks, good morning. Carl, Mike, I echo the thanks and appreciation for the additional disclosure once again this quarter. I guess this leads a question to me as you look at M&A opportunities, even if it is something of a modest or moderate size, how do you think about how the transaction works and how you price it given the fact that we are going to break out this information on the purchase accounting and almost sort of kind of dissect it from day one?

  • Mike Achary - CFO

  • Yes, that is certainly something that we will vow to do going forward and continue to be as transparent as possible with respect to those kinds of impacts. But in terms of any other M&A opportunities down the road, we certainly are very, very mindful and pay a lot of attention, utmost attention really to what the core impacts would be of any M&A opportunity and certainly accept and will deal with the purchase accounting as we have done in the past. And that is to be very transparent in terms of the impact. But it is the core results that any new M&A opportunity bring to us that is the most important aspect.

  • Christopher Marinac - Analyst

  • Okay. I guess I was just curious if that is all a type of hindrance to potential transactions that you may look at?

  • Mike Achary - CFO

  • No, I don't --

  • Carl Chaney - President & CEO

  • No, I don't think so.

  • Mike Achary - CFO

  • -- see it to be a hindrance.

  • Carl Chaney - President & CEO

  • I don't see it being a hindrance at all.

  • Mike Achary - CFO

  • Over the last three years, we've gotten a good deal of experience in dealing with purchase accounting. So it doesn't frighten us.

  • Carl Chaney - President & CEO

  • I think what made the current situation unique is just because of the sheer size of the acquisition and hence, the materiality of the purchase accounting to our numbers compared to a more typical M&A transaction. So if anything, we will -- we certainly won't have any learning curve on purchase accounting.

  • Christopher Marinac - Analyst

  • Great. I guess just a related topic, this has to do with sellers' expectations. Do you think there has been any material shift in terms of what you think sellers want as this year has unfolded?

  • Carl Chaney - President & CEO

  • I think as we go through the year, I think sellers are starting to understand and perhaps appreciate a bit better the actual pricing demand that is out there and of course, that does vary from geographic market to market, particularly when you look at our five-state footprint. But I think overall I think expectations are starting to come a little closer in line. Obviously, the more transactions are announced, the better feel everyone has as to what the real market may well settle out to be.

  • Christopher Marinac - Analyst

  • Great. Thanks, guys, for the color.

  • Carl Chaney - President & CEO

  • Thank you.

  • Operator

  • Kevin Fitzsimmons, Hovde Group.

  • Kevin Fitzsimmons - Analyst

  • Hey, everyone, good morning.

  • Carl Chaney - President & CEO

  • Good morning, Kevin.

  • Kevin Fitzsimmons - Analyst

  • Just a quick question. We haven't gone into it too much today, but a lot of talk about accretion income and the reported margin. On the core margin, if we go out a few quarters or even a year, I'm sure there will be much more focus on higher rates and what the impact will be to banks. Can you just remind us where you see your positioning for higher rates and if you can characterize it relative to some of your bank peers, not specific by name, but just generally? Thanks.

  • Mike Achary - CFO

  • Sure, Kevin. And the way that we think about asset sensitivity is really in terms of looking at the impact from a 200 basis point increase in rates. And in that regard, our asset sensitivity is a little bit less than about 4%. And as best we can tell from comparing that number to most other banks, that is probably right around average, maybe slightly below average if we compare ourselves maybe to the universe of other banks.

  • Kevin Fitzsimmons - Analyst

  • But I guess, Mike, what strikes me is that I am surprised you are not better than average and do you think that is just a difference in how some of the peers are measuring it versus how you are? Just with Whitney's deposit base, it just surprises me?

  • Mike Achary - CFO

  • It certainly could be, Kevin. A big thing in our favor obviously is our DDA deposit base, which is now about 38% of total deposits. And how that will perform in a rising rate environment is a little bit of a wildcard in these days of being able to pay interest, potentially pay interest on corporate deposits. So we may be measuring that in a way that is slightly conservative or maybe a little bit conservative, but that's really kind of the way we look at it right now, what we are planning for.

  • Kevin Fitzsimmons - Analyst

  • Okay, great. Thank you, guys.

  • Carl Chaney - President & CEO

  • Thank you.

  • Operator

  • Thank you. I am showing no further questions at this time. I would now like to turn the call back to Carl Chaney for any further remarks.

  • Carl Chaney - President & CEO

  • Okay, well, thank you all for joining us this morning. Also, I would like to just note that when you look at the top metrics across the board, there have been significant improvement literally across the board in every metric and that is something we are very, very proud of and as we continue to narrow the gap between reported and core. But, as you can see on that one particular slide, significant increase in our core earnings and that will continue and we are very proud of the results. And thank you again for joining us today on our earnings call. Have a good day.

  • Operator

  • Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day, everyone.