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Hancock confident that deposit costs will stabilize absent rate increases

Hancock Holding Co.'s deposit costs creeped up in the third quarter but the company's executives seem hopeful that the metric could stabilize during the remainder of the year.

In the third quarter, Hancock reported that the cost of its interest-bearing deposits rose 8 basis points from 0.56% in the second quarter. Hancock CFO Michael Achary said on a conference call to discuss third-quarter results that rate hikes by the Federal Reserve in March and June as well as higher cost deposits acquired through its First NBC transactions were responsible for the increases.

In two First NBC transactions, Hancock picked up close to 40 branches and nearly $2.6 billion in assets and $2.0 billion in deposits. Many of the First NBC deposits were more expensive than funds at Hancock. The company noted that close to $1.6 billion in First NBC deposits carried a rate "just under 1%."

Achary believes Hancock has a "big opportunity" to keep its deposit costs fairly stable going forward, unless the Fed raises rates again in December. If that occurs, the executive expects the company's deposit betas, or what percentage of changes in rates it has to pass on to customers, to rise to "more normal" levels. Absent further rate increases this year, Achary sees the company's net interest margin holding close to flat in the fourth quarter.

Hancock President and CEO John Hairston said the market for deposits remains competitive but the company has managed some of its strongest growth it has ever recorded over the last four quarters. He further noted that the company's gap in its digital banking offerings will be closed this quarter as the franchise converts to a new platform.

"That should assist us with account retention," Hairston said, adding that the company will do whatever it needs to do to meet clients' service needs.