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Hancock Whitney Corporation (NASDAQ:HWC)
Q3 2021 Earnings Call
Oct 19, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to introduce your host for today's conference, Trisha Carlson, Investor Relations Manager. You may begin.

Trisha Voltz Carlson -- Executive Vice President, Investor Relations Manager

Thank you and good afternoon. During today's call, we may make forward-looking statements. We would like to remind everyone to carefully review the Safe Harbor language that was published with the earnings release and presentation and in the company's most recent 10-K and 10-Q, including the risk and uncertainties identified therein. You should keep in mind that any forward-looking statements made by Hancock Whitney speak only as of the date on which they were made. As everyone understands, the current economic environment is rapidly evolving and changing.

Hancock Whitney's ability to accurately project results or predict the effects of future plans or strategies, or predict market or economic developments is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions but are not guarantees of performance or results, and our actual results and performance could differ materially from those set forth in our forward-looking statements. Hancock Whitney 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.

Some of the remarks contain non-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in our earnings release and financial tables. The presentation slides included in our 8-K are also posted with a conference call webcast link on the Investor Relations website. We will reference some of these slides in today's call. Participating in today's call are John Hairston, President and CEO; Mike Achary, CFO; and Chris Ziluca, Chief Credit Officer.

I will now turn the call over to John Hairston.

John M. Hairston -- President & Chief Executive Officer

Good afternoon, everyone, and thank you for joining us. We're pleased to report another solid quarter despite the impact from the COVID-19 Delta surge and Hurricane Ida. Net income of $130 million or $1.46 per share, was up $41 million or $0.46 linked quarter. After adjusting for non-operating items in both the second and third quarters results, EPS for the third quarter was $1.45, up $0.08 linked quarter. The primary driver of the quarterly increase was a $27 million negative provision in the third quarter, compared to a negative provision of $17 million in the second quarter substantially due to less than $2 million of net charge-offs.

Our asset quality metrics have continued to improve and are now among the best in midcap group. Criticized and nonperforming loans continue to improve and are down 29% and 65% respectively, from one year ago. Our ACL coverage remains strong at just under 2% of total loans. With outperforming asset quality ratios and certainly an adequate loan loss reserve, we're positioned well on credit. At this point, we do not anticipate any significant pressure on credit from Hurricane Ida or the remnant Delta surge. Stimulus funding and other programs designed to help businesses navigate the pandemic have worked and the recent storm was mostly an insured event, thankfully much different than Hurricane Katrina 16 years ago.

I should mention my appreciation for the incredible efforts of our team during the Ida recovery as we reopened locations in storm impacted areas on a very rapid basis, while simultaneously feeding nearly 40,000 people in our impacted communities that only happens with commitment and with teamwork, both of which were strongly exhibited by my colleagues at Hancock Whitney. Before I turn the call over to Mike, I'd like to note that this quarter results and our near-term guidance are the building blocks for our plans in 2022. Slide 17 and 18 in the investor deck provide a good background for our path to a 55% efficiency ratio.

Today, we reported another good quarter of organic loan growth in line with guidance and expect another quarter of solid growth in the year. We kept expenses flat linked quarter despite inflationary pressure and are committed to hitting the $187 million target for the fourth quarter, as well as the $750 million target for 2022. Deployment of excess liquidity into loans and then modestly into securities as rates begin to rise is key to our continuing success. We expect to harvest additional efficiencies to be a strategic procurement and operational effectiveness gains due to technology deployment and as a means to offset wage inflation and the addition of new bankers.

As shown in the top right quadrant of slide 18, we are hiring bankers in new and in growth markets across our footprint and have recently added 15 new bankers in those markets with more to come in 2022. And finally, we are able to execute from a position of strength, with TCE projected back to 8% or better by year-end, a de-risked balance sheet, successful results from efficiency efforts and hopefully with economic and biological challenges in the rearview mirror.

I will now turn the call over to Mike Achary for further comments.

Michael M. Achary -- Chief Financial Officer

Thanks, John. Good afternoon, everyone. Third quarter results were in line with our guidance and in some areas exceeded consensus expectations. Core loan growth continued in both our markets and specialty lines across the footprint, with net growth in the central and western regions, as well as continued increases in equipment finance and healthcare. In total, core EOP loans grew $220 million, partly offsetting $482 million in PPP forgiveness during the quarter. As a result, total reported loans were down $262 million and ended the quarter at just under $21 billion.

Similar to last quarter, improvement in economic activity across our operating regions led to increased loan pipeline pull through rates and coupled with fewer pay offs and a slight uptick in line utilization rates resulted in 4% linked quarter annualized growth for the quarter. As we move into the fourth quarter, we have maintained our guidance for core loan growth of $400 million to $500 million and PPP forgiveness of up to $500 million. We are calling out a risk of higher than normal CRE payoffs in the fourth quarter, but otherwise our guidance is unchanged.

We beat expectations in our NIM guidance with only 2 basis points of compression in the quarter and flat net interest income. A full quarter's impact from the June redemption of our 2015 sub-debt and the impact from a lower cost of deposits added 5 basis points to the NIM, but a continued shift in the overall earning asset mix and yield plus a net change in the quarterly level of net interest recoveries compressed the NIM 7 basis points. The aforementioned all combined to result in the NIM down 2 basis points. Moving forward, we expect the impact from continued levels of liquidity and lower rates to pressure our margin.

We will work hard to offset those headwinds by continuing to deploy excess liquidity into loans, modestly invest in the bond portfolio as rates rise and monitor our hedge positions to improve interest rate sensitivity. We currently expect an additional 4 basis points of compression in the fourth quarter with net interest income down slightly on a linked quarter basis. The details of fees and expenses are pretty self-explanatory so I'll just hit a few highlights. Hurricane Ida and the resulting evacuation, which resulted in waivers and loss of activity in certain markets did impact overall fees in the quarter.

We expect those levels to return to normal year end seasonal levels in the fourth quarter. Secondary mortgage fees were the biggest driver of the linked quarter decline in fees. Both the storm and the second quarter's change in delivery methods were the primary drivers for the decline. Overall, we expect mortgage fees to slow as the boom in refi business begins to subside. Operating expenses were flat linked quarter, as efficiency initiatives announced earlier this year are maturing and are reflected in our results. We are maintaining our guidance for a fourth quarter expense level of $187 million and are committed to that run rate for 2022.

As a reminder, both fees and expenses had non-operating items this quarter and are detailed on slide 24. One note for the quarter on capital, we did buy back a modest amount of stock in the third quarter and repurchased just over 56,000 shares of common stock at an average price of $44.49 per share. In closing, I'd like to call out a few slides in the deck for additional information. Slide 13 has details on our interest rate sensitivity and hedge positions. Slide 17 notes our current near term guidance and slide 18 helps detail strategies for our path to a 55% efficiency ratio.

With that, I'll turn the call back to John.

John M. Hairston -- President & Chief Executive Officer

Okay, thanks, Mike. Let's open the call for questions.

Questions and Answers:

Operator

Certainly. [Operator Instructions] The first question is from Michael Rose with Raymond James. Please proceed.

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Hey. Good afternoon. Thanks for taking my questions. I just wanted to start on the efficiency -- hey. How are you? Just wanted to start on the efficiency ratio target. I think what I've heard, since the release, and it's good to see that you guys are committed to it. But I think people are trying to parse out the revenue side because there is a pretty big delta between where consensus is in the fourth quarter next year and what the guidance would imply in terms of revenue? So I was just wondering if you could give us a little bit more color on maybe the expectations for fee and then NII growth? Thanks.

Michael M. Achary -- Chief Financial Officer

Yeah, Michael. This is Mike. So, we haven't given any guidance per se for the four quarters of '22 yet. So what I would do is direct you to slide 18 in the deck where I think we provided some color around what we're thinking in terms of the kind of loan growth to expect, not only for the fourth quarter of this year, but also into '22. And then in terms of how we're thinking about managing the balance sheet, certainly we've disclosed in a couple of places, both in the introductory comments as well as the deck, this notion of beginning to go back to reinvesting cash flows and maturities back into the bond portfolio and then also this notion of modestly increasing the size of the bond portfolio over the next five quarters.

So there isn't an exact amount per se that we're going to increase the bond portfolio by but certainly if you use a number like $1 billion or maybe a little bit north of a billion as kind of a placeholder that would imply $200 million plus in the next five quarters. I think the exact amount that we redeploy liquidity into the bond portfolio will really depend on what happens with rates next year, as well as what happens with our ability to continue the momentum in terms of adding loans to the balance sheet. So I think the recipe for us in the revenue side really boils down to being able to deploy the lion's share of the excess liquidity that we have on the balance sheet into a combination of loans and bonds over the course of next year.

And obviously, I think the guidance around our plans for expenses is pretty self-explanatory. It's the $187 million for the fourth quarter of this year and then this notion of that being a run rate as we move into 2022. So I think also certainly the new banker hires that we've kind of called out, I think it's been extremely helpful to our ability to kind of continue the momentum in terms of growing loans and certainly to increase it as we go into '22. So that's kind of how we think about the efficiency ratio goal and I think also the pathway. So, John, anything else you want to add?

John M. Hairston -- President & Chief Executive Officer

No, I think you gave completed guidance.

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Yeah, that's great color, Michael. No, that was great. Thank you. Just one follow-up. Just -- credit, another positive quarter, criticized, classified down, NPAs down, big -- not that big but I guess negative provision again this quarter. Any reason to think that -- assuming credit remains benign. And you continue to cure some credits that we would see, the reserve level come down and we likely to see negative provisions for at least the next couple quarters? Thanks.

Michael M. Achary -- Chief Financial Officer

Yeah. I think certainly if you go back to the guidance slide, we are calling out the fact that at least on a go forward basis through the fourth quarter to look for reserve releases in the magnitude of what we've done in the last couple of quarters, so call it $27 million, $28 million or so. And I think certainly we have some potential to continue that into 2022. So that there's no endpoint out there that we have in mind right now in terms of a level to bring the ACL down to.

But just for context, if you go back and look at our day one ACL percentage, it was about 128 basis points. And if you back out the energy portfolio that we largely sold last year, that brings it down to just under 1%. And I mention those numbers not as a target for us to reduce our ACL to, but just for context. So the actual end point, I think will depend on a lot of things including how we grow our loan book and then certainly also how the pandemic finally ends. And we see our economies, our local economies restored to where they were before.

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

That's great. I appreciate you taking my questions.

Michael M. Achary -- Chief Financial Officer

Sure.

John M. Hairston -- President & Chief Executive Officer

You bet.

Operator

Thank you, Mr. Rose. The next question is from Brett Rabatin with Hovde Group. Please proceed.

Brett Rabatin -- Hovde Group LLC -- Analyst

Hey. Good afternoon, everyone.

John M. Hairston -- President & Chief Executive Officer

Hey, Brett. How are you?

Brett Rabatin -- Hovde Group LLC -- Analyst

Good. Wanted to first ask on the fee income guidance. Could we just talk about that for a second in terms of expecting flattish trends in the fourth quarter following some disruption in 3Q? Obviously mortgage volumes are somewhat difficult to predict. Seasonality is obviously going to be an impact in 4Q, but you obviously have lower numbers this quarter. Can you just talk about how much mortgage plays into that fourth quarter guidance around fee income and other things that might be affecting seasonality in terms of the fourth quarter versus a rebound in activity given the lack of the hurricane this quarter?

John M. Hairston -- President & Chief Executive Officer

Yeah, sure Brad. This is John. I'll start and Mike can add color on. I mean, obviously the second year mortgage pay reduction was the heavy detractor from fee income for the quarter. And then Ida, I think Mike shared in the prepared comments around a $1.2 million estimate of impacts. So outside of that, the quarter actually had pretty much every category as an improved net of the Ida damage to it. So for example, service charge fees were sharply up both for business and for consumer, which was a first material increase of the year. All the liquidity that was out there. And I think that number is around $3 million up from the same quarter previous year so a healthy increase.

Card fees, which were one of the more heavier fee impacts from Ida just given the transactions happening due to power shortfalls were relatively flat quarter-to-quarter. So on a net basis were a push, trust and investments were similar given the closures and some of the pushed off transaction work that would have normally happened in September that didn't. Plus the second quarter has the tax prep fees and trust that are pretty good. So push was a win there. So really every category is firming up and doing better to the point that I think as we go into 2022, we have some confidence that outside of secondary mortgage fees we should see some year-over-year improvement.

Michael M. Achary -- Chief Financial Officer

Yeah, Brad. The other items I would kind to add to that in a way of just a little bit additional color is if we think about the impact that the storm had on our third quarter fees, we're roughly estimating that to be between $1 million and about $1.2 million. Certainly unsure around how much of that we'll kind of recapture in the fourth quarter. I think safe to say, certainly some of that, I think could be recaptured. How much of it though is really uncertain.

I think the other thing to look to for the fourth quarter is our specialty line so things like [Indecipherable] and venture capital income and some lines similar to that. We can already have a little bit of a line of sight to seeing some increases that we'll be able to show in the fourth quarter related to again that aggregation of different lines of business that we call specialty lines. So certainly, I think if you look at headwinds, mortgage fees, I think is going to be a headwind. But there are also some tailwinds that we think will pick up the slack and offset the further decline in mortgage fees.

Brett Rabatin -- Hovde Group LLC -- Analyst

Okay. And then the other big thing I wanted just to make sure I covered was just around the margin. And I know there's a lot of -- it's difficult to parse all the things that might impact that. But as I think about the four basis points of pressure in 4Q, there's definitely a better tailwind with the yield curve, possibly. Do you think you're getting close to the bottom on the margin and you think it bumps along here if you can deploy some liquidity? Obviously, you mentioned the $1 billion in securities, but it seemed like there could be some opportunity for it to improve over the next few quarters and just want to see if you might take a stab at that maybe some thoughts around that?

Michael M. Achary -- Chief Financial Officer

Yeah, I think that's absolutely the case, I mean, we're guiding to the 4 basis points of compression in the fourth quarter, and that really is centered around as much as anything else, the drag on the NIM related to the cash we have on the balance sheet. So to the extent that we're able to deploy more of that cash into a combination of loans and bonds, certainly that helps up the NIM and alleviate some of that pressure. We're also kind of projecting a continuation of our ability to reduce our cost of deposits by around a basis point over the course of the fourth quarter. So certainly if we're able to do that, I think that'll be helpful. But kind of on a go forward basis given the pathway to the efficiency ratio that we kind of talked about earlier, we certainly would expect our NIM to bottom out and potentially be increasing as we go through 2022.

John M. Hairston -- President & Chief Executive Officer

Yeah and this is John and while its -- it may be more of a net interest income point than simply with NIM, the bleed we're experiencing now at PPP forgiveness, if you just presume $400 million or $500 million or so that for the fourth quarter and guidance around $400 million or $500 million in organic growth, we're nearing the point to where the impact of the runoff gets a little closer to a push. So, on a net interest income basis, as we reach and pass the inflection point to where the runoff gets overcome by the growth, then that'll help us on [Indecipherable] moving forward.

Brett Rabatin -- Hovde Group LLC -- Analyst

Okay, great. Appreciate all the color.

John M. Hairston -- President & Chief Executive Officer

You bet. Thank you.

Operator

Thank you, Mr. Rabatin. The next question is from Brad Milsaps with Piper Sandler. Please proceed.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Hey, good afternoon.

John M. Hairston -- President & Chief Executive Officer

Hi, Brad.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Mike, just I wanted to follow-up kind of on the balance sheet management question again. I appreciate all the color. Just kind of thinking about sort of that mid-single digit loan growth target would imply maybe a $1 billion or so $1.2 billion of growth over the next 12 months, which essentially kind of replaces a lot of the PPP loans that you have left. You still have upwards -- close to $3 billion of cash. It sounds like you might put a $1 billion to work in the bond book, but that still leaves you with quite a bit of funding assuming deposits don't go higher. Can you kind of talk through kind of what how you're thinking about sort of the remainder of the cash, excess liquidity that you have on the balance sheet and sort of thoughts around sort of putting that to work as well?

Michael M. Achary -- Chief Financial Officer

Yeah, glad to Brad. So again, our goal as we think about the next five quarters and kind of marching toward that 55% efficiency ratio, is really to deploy as much of that cash as we can again over the next five quarters. And the $1 billion or so that I mentioned related to how we might deploy some of that into the bond portfolio again is really kind of a placeholder. So I think we're prepared to think about that number as kind of a minimum over the next five quarters and certainly could deploy more into bonds. And I think it's also very dependent on rate environment. So if the rate environment next year cooperates, we're looking at better reinvestment yields related to our new bond purchases then I think we could certainly deploy more into that particular asset category. And again the loan growth number for '22 is really a jump off point for where we'll end this year. So again our guidance for the fourth quarter is $400 million to $500 million and in the mid-single digits would be off that number.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

That's helpful. Thank you. And then just as a follow-up, I appreciate all the detail on slide 13 regarding interest rate sensitivity. It looks like that table is up quite a bit from -- some from the second quarter disclosure. Just kind of curious what deposit betas you guys are assuming to drive some of those numbers on slide 13?

Michael M. Achary -- Chief Financial Officer

Sure. So in the way of deposit betas what I'll share with you is really just kind of what we experienced the last time rates were up and then the last time rates were down. And ironically, both numbers are in the 28%, 29% range both in an up-rate environment as well as in a down-rate environment. And then on the loan side in an up-rate environment, it's really close to about 50% down-rate is about 40%.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Great, Mike. Thank you very much.

Michael M. Achary -- Chief Financial Officer

Okay.

Operator

Thank you, Mr. Milsaps. The next question is from Catherine Mealor with KBW. Please proceed.

Catherine Mealor -- Keefe Bruyette & Woods Inc. -- Analyst

Thanks. Just one off on the margin conversation. First on the PPP, we've got $17.6 million left in on amortize fees. How much of that do you think comes in next quarter versus trickle -- to trickle in next year? And then a secondary on the margin is how much premium are you assuming for next quarter as well versus the $12 million that you indicate in 510 for this quarter?

Michael M. Achary -- Chief Financial Officer

Okay, great question, Catherine. So you're right. Unamortized fees at the end of the third quarter was just under $18 million and really just kind of all things equal we think in the fourth quarter and certainly this depends a bit on the level of forgiveness that the level of fees that we'll amortize in the coming quarters is somewhere around $8 million or so. And related to your question about premium amortization in the third quarter, that was down about $900,000 or so and we were kind of thinking about the fourth quarter.

If we look at pre-payments, certainly the first month of the fourth quarter they remain elevated, but we could certainly see that moderating a bit in the remaining months of the quarter, especially if we're considering a little bit of a higher rate environment. So I think the conservative assumption around premium amortization is that it would largely be at about the same level as it was in the third quarter, but potentially down a little bit.

Catherine Mealor -- Keefe Bruyette & Woods Inc. -- Analyst

Okay, great. So then if we've got $8 million in PPP fees coming in next quarter then -- versus $15 million this quarter, then really most of that 4 bps of compression is coming from just PPP running off and it feels like your [Indecipherable] is really stabilizing probably next quarter.

Michael M. Achary -- Chief Financial Officer

Yeah, I think that's right.

Catherine Mealor -- Keefe Bruyette & Woods Inc. -- Analyst

Maybe even up a little bit depending on liquidity.

Michael M. Achary -- Chief Financial Officer

Right. I think that's right. And as I mentioned before, obviously the amount of cash that we're able to deploy will influence that number a good bit. But you're correct to point out that certainly the run off of the PPP loans is having an impact as well. So at the end of the third quarter, our PPP loans stood at about $935 million. Based on the level of forgiveness that we see in the fourth quarter we think that will be down to something like $400 million, maybe $450 million by the end of the year. And then really by the end of the second quarter, I think the forgiveness game will be largely played out. So at that point, I would imagine we probably have less than $50 million or so.

Catherine Mealor -- Keefe Bruyette & Woods Inc. -- Analyst

Okay, great. And then one follow-up on fees. If we look back at service charges pre-COVID you were around the annual run rate of you call it $86 million, if I look back at 2019. And as so part of the path toward this higher efficiency ratio -- excuse me, lower efficiency ratio, does it factor in a rebound in service charges and some other fees?

John M. Hairston -- President & Chief Executive Officer

It partially does, Catherine, this is John, and some of that is simply because the offset to service charges, there is some of the analysis work with -- analysis fees that are because of so much of a large balance per account relative to normal. We expect that to begin to bleed off next year as well. So that somewhat the stickiness of the deposit size per account will affect how much of a fee increase we actually see in service charges. Now, obviously, that all changes if we add more accounts, right? So the pace of adding deposit accounts that render fees next year should pick up as digital solutions are rolled out in Q2. So that would also help for '22 as well.

Catherine Mealor -- Keefe Bruyette & Woods Inc. -- Analyst

Great. Thank you so much. Great quarter.

John M. Hairston -- President & Chief Executive Officer

Okay, thank you.

Operator

Thank you, Ms. Mealor. The next question is from Jennifer Demba with Truist Securities. Please proceed.

Jennifer Demba -- Truist Securities, Inc. -- Analyst

Thank you. Good afternoon. A question on loan pricing pressure, I'm just wondering how much loan pricing pressure you guys have seen in the last few months? And are you running any or considering running any promotions in the coming months? Thanks.

John M. Hairston -- President & Chief Executive Officer

It's a good question. Thanks for asking. Obviously, every bank that we compete with is rather aggressive right now in pricing, particularly in the call it 36 month duration and down space. So that would include all the revolving credit as well as shorter duration fixed, and so it's very competitive on price. If Chris wants to add anything about structure competition, then he can do that one. But in terms of price, it is rather aggressive. So I would say that given our liquidity position, we are meeting that competition at price level with 36 month duration business and down.

We've been very aggressive in the consumer space and actually, even though the consumer whole number shows down, Jennifer, that's really because of the continued runoff in the indirect portfolio and the HELOC portfolio, the HELOC portfolio being totally due to continued pressure on mortgage. So that's beginning to wane as rates are going up, and we're actually seeing some good healthy growth in the unsecured revolving consumer book. And that's partly because of the price aggressiveness that we've had in terms of deploying new credit. And that's been an offset with some of the larger credits that are not quite as impressive in yield like healthcare and equipment finance.

Jennifer Demba -- Truist Securities, Inc. -- Analyst

Thank you.

John M. Hairston -- President & Chief Executive Officer

Yes, ma'am. Thank you.

Operator

Thank you, Miss Demba. The next question is from Matt Olney with Stephens. Please proceed.

Matt Olney -- Stephens, Inc. -- Analyst

Hey, thanks, guys. How are you?

John M. Hairston -- President & Chief Executive Officer

Good. Thank you, Matt.

Matt Olney -- Stephens, Inc. -- Analyst

Going back to the potential to build out the investment securities portfolio. Help us appreciate just how large this could be as a percent of earning assets? Are there any policies you have internally or any guidelines you're working through with that.

Michael M. Achary -- Chief Financial Officer

Yeah, thanks. Thanks, Matt. So right now, and by right now, I mean, the end of the third quarter the bond book is at about $8.2 billion, so that's roughly about 25.6% of earnings assets. If you keep the level of earning assets static and we grow it by say $1 billion inclusive of reinvesting cash flows and maturities, then that percentage would increase to about 28.5%. So while we don't have any hard and fast policies or HELCO policies around the size of the bond book I think certainly once you get to around 30% that's a level that becomes pretty large for a bank our size in terms of the mix of our earning assets. But again one of the implicit assumptions that I'm making is really just kind of keeping a level of earning assets static. So if you apply a little bit of a growth rate to a level of earning assets, then I think we'll stay below the 30% level. Hopefully that makes sense.

Matt Olney -- Stephens, Inc. -- Analyst

Yeah, that's helpful Mike. And then going back to the loan growth discussion and I kind of I guess Jenny's question as well. Any more color or any numbers you can give us behind the loan yields on the more recent production just trying to appreciate just what's coming on the book at this point? How much slippages there could be on the overall loan yields? Thanks.

Michael M. Achary -- Chief Financial Officer

Yeah. So certainly as John mentioned, I mean I think we in many banks are feeling certainly some pressure around our loan yields. And if we look at the third quarter our production levels was really good. In fact they were up a little bit more than 8% quarter-over-quarter. And then when we look at the yields of new loans to the balance sheet, they did drop some this quarter. They were down about 15 basis points to 18 basis points or so somewhere in the 315 range. So certainly there's some pressure on our overall loan yields and that was built into the guidance that we gave around the fourth quarter NIM.

Matt Olney -- Stephens, Inc. -- Analyst

Okay. And just lastly, for me, I think you mentioned in the -- some of the materials anticipate TCE ratio approaching that 8% level by year end. I'm curious kind of what that means for the bank and specifically, does that unlock any ability to get more aggressive on the share repurchase plan? Thanks.

Michael M. Achary -- Chief Financial Officer

Not, not specifically. But I think those that know our company know that the 8% threshold is always something that we've kind of looked at as a target, if you will, for our TCE. And there's nothing magical. I think that happens once we get to that level or exceed it. And by that, I mean, the way we think about capital, the way we manage capital really is unchanged I think once we get to 8%.

Matt Olney -- Stephens, Inc. -- Analyst

Thank you.

Michael M. Achary -- Chief Financial Officer

You're welcome.

Operator

Thank you, Mr. Olney. There are no additional questions waiting at this time. I would now pass the conference back to John Harrison for closing remarks.

John M. Hairston -- President & Chief Executive Officer

Okay. Thank you and thanks for moderating. Thanks, everyone for your interest and we look forward to visiting you on the road in the next few weeks. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 35 minutes

Call participants:

Trisha Voltz Carlson -- Executive Vice President, Investor Relations Manager

John M. Hairston -- President & Chief Executive Officer

Michael M. Achary -- Chief Financial Officer

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Brett Rabatin -- Hovde Group LLC -- Analyst

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Catherine Mealor -- Keefe Bruyette & Woods Inc. -- Analyst

Jennifer Demba -- Truist Securities, Inc. -- Analyst

Matt Olney -- Stephens, Inc. -- Analyst

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