Hancock Whitney Corporation Price & Performance (HWC)

Day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Catherine Mistich, Investor Relations Manager. You may begin.

Thank you.

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 ks and 10 Q including the risks 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 eight ks are also posted with the 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 Ackery, CFO and Chris DeLuca, Chief Credit Officer. I will now turn the call over to John Hairston.

Thank you, Catherine, and thanks, everyone, for joining us this afternoon. Are pleased to report another quarter of high performing profitability and continued capital growth a very strong start to 2025. We achieved an impressive 1.41% ROA, grew fee income, enjoyed continued NIM expansion and into the quarter with total risk based capital of 16.39%. NIM expanded as we were able to control funding cost and mix that more than offset the impact of lower loan yields and lower average earning assets. Had another quarter of strong fee income with growth across most categories. Expenses remained well controlled with only a 1% increase this quarter. We've updated our guidance to reflect the impact of the Sable Trust transaction and now anticipate fee income to be up between 910% year over year. Our expectations for expense growth remain unchanged. Between 45% higher year over year. Loans were down $2.00 $1,000,000 due to higher payoffs on large healthcare and commercial non real estate loans offsetting strong production. We've updated our guidance this quarter and expect loans will grow low single digits in 2025 with most of the growth coming in the second half of the year. The change in guidance accounts for uncertainty reflected in current client sentiment.

We remain focused on more granular full relationship loans, with the goal of achieving more favorable loan yields and relationship revenue. Deposits were down $298,000,000 driven primarily by the seasonal public funds outflows. For the second quarter in a row, our DDA balances actually increased. And our DDA mix is stable at 36%. Interest bearing transaction accounts increased due to our competitive product offerings and retail CDs declined due to the reduction of promo rates which helped control deposit costs. We continue to return capital to investors by repurchasing 350,000 shares of common stock this quarter. We also increased our common stock dividend to $0.45 per share a cumulative increase of 50% from this time last year. Even after returning capital, we had strong growth in all of our regulatory capital metrics due to excellent profitability. Ending the quarter with a common equity Tier one ratio of 14.51% and tangible common equity ratio of 10.01%. Last quarter on our call, shared our plan to pivot to growth both organically and inorganically through the acquisition of Sable Trust Company. We continue to execute hiring plans with four additional bankers and have selected four new locations of five planned the northern area of the Dallas MSA.

The Sable transaction is expected to close on May. We look forward to welcoming Sable clients and associates to Hancock Whitney and for the opportunity to expand our best in class regional banking services in the Greater Tampa and Orlando areas. Despite current market volatility, we remain optimistic for our growth prospects particularly in the second half of the year. We are closely monitoring macroeconomic trends and indicators including both nationally within our own footprint. While the environment remains dynamic, our ample liquidity, solid allowance for credit losses of 1.49% and strong capital keep us well positioned to navigate challenges and support our clients in any economy. With that, I'll invite Mike to add additional comments. Thanks, John. Good afternoon. As John said at the onset, the company's performance in the first quarter was outstanding. Our net income for the quarter was 120,000,000 or $1.38 per share. Compared to $122,000,000 or $1.4 per share in the fourth quarter.

Earnings were up 10% compared to the same quarter a year ago while EPS was up 11%. PPNR was down slightly from last quarter to 162,400,000.0 but up $9,500,000 or 6% compared to the first quarter of last year. Our NIM expanded two basis points to 3.43% but NII was down due to two fewer accrual days and a lower level of average earning assets. Anne has mentioned our fee income businesses had another outstanding quarter and expenses continue to be well controlled. The NIM expansion was driven by lower deposit costs higher yields on the bond portfolio, and a favorable mix of borrowed funds. Partly offset by lower loan yields as shown on Slide 16 of the investor deck. Our overall cost of funds was down 14 basis points to 1.59% due to a lower cost of deposits and a better funding mix. As we ended the quarter with no home loan borrowing. The downward trend in our cost of deposits continued this quarter with a decrease of 15 basis points to 1.7% in the first quarter. The drivers here were CD maturities and renewals at lower rates and a reduction of pricing on interest bearing transaction accounts. For the quarter, we had $2,700,000,000 of CD maturities which repriced from 4.33% to 3.72% with an 86% renewal rate.

Additionally, we ended the quarter with no brokered deposits and our DDA balances increased $18,000,000 Our NIB mix was stable at 36%. CDs will continue to reprice lower throughout 2025 given maturity volumes and three anticipated rate cuts over the remainder of 2025. Total EOP deposits were down $298,000,000 but that includes $320,000,000 of seasonal public fund runoff. Bond yields for the company were up seven basis points to 2.78%. We had $165,000,000 of principal cash flow at 3.05% that was reinvested at 5.04%. Additionally, 164,000,000 of our fair value hedges became effective and contributed four basis points to the overall yield pickup of seven basis points.

Next quarter, we expect about $236,000,000 of principal cash flow at 3.19% that will be reinvested at higher yields. For the remainder of 2025, an additional 85,000,000 of our fair value hedges will become effective providing additional yield. Our loan yield for the quarter was down 18 points to 5.84%. And was impacted by lower average loan balances and lower yields on our variable rate loan portfolio. We updated our guidance this quarter to reflect the Sable transaction and our updated expectations for loan growth as well as a few other items. We believe we can continue to achieve modest NIM expansion and NII growth of between 34% in 2025. Driven primarily by the impact of lower deposit rates low single digit loan growth and continued repricing of cash flows from both the bond and fixed rate loan portfolios. Our guidance assumes three rate cuts of 25 basis points each in June, July and October. Our updated PPNR guide is we expect to be up between 67% from twenty twenty four's adjusted levels. And our efficiency ratio will fall somewhere between 5456% in 2025. As John mentioned, we did receive regulatory approval for Sable and expect that transaction to close on May 2.

So including Sable, we expect non interest income will be up between 910% from 2024. Our expense guidance did not change. As we continue to expect expenses will be up between 45% for the year. Not including any one time cost associated with the Sable transaction. Our criticized commercial loans decreased during the quarter and non accrual loans increased. Albeit at a slower pace than in the prior quarter. Net charge offs were down this quarter and came in at 18 basis points. Our loan portfolio is diverse and we see no significant weakening in any specific portfolio sectors or geography. Our loan reserves are solid at 1.49% of loans, up two basis points from last quarter. We continue to expect modest charge offs and provisioning levels for 2025. Lastly, a comment on capital. Our capital ratios remain remarkably strong. We increased our quarterly common dividend and modestly increased our share repurchases in the quarter. We expect share repurchases will continue at this level or a bit higher throughout 2025. Changes in the growth dynamics of our balance sheet, economic conditions and share valuation could impact that view. I will now turn the call back to John.

Thanks, Mike. Let's open the call for questions.

Thank you, sir. We'll go first to Michael Rose, Raymond James.

Hey, good morning guys or good afternoon everyone. Thanks for taking my Good day, Michael.

It's only going get worse. For reporting early. Yes. So just on that last comment around the buyback, just given the the capital accretion this quarter and a slower kind of loan, loan growth outlook as we move forward, which I totally understand. Why not lean in a little bit more you know, into the buyback just just given where the stock trades the earn back on the buyback. And what I see is a, you know, fairly robust you know, case for positive operating. All the good stuff that you guys have worked so hard to achieve, why not lean in a little bit harder here?

Thanks.

Hey, Michael. It's Mike. And, absolutely, I think we're doing that. So the comment was around at least the same level that we did last quarter and potentially a bit higher. And that is a pretty healthy increase compared to last quarter. I know I just described that as modest, but it probably is a little bit better than modest. And certainly if you look at the level we bought back all of last year, if we buy back at current levels and a little bit higher, consistently through the year that's a pretty nice increase year over year. So I think one of the caveats certainly is the external environment. The dislocation of share prices and just what happens. In that external environment. But all things equal, the intent is that we'll buy back again at current levels, if not a bit higher. Consistently through the year. So hopefully that makes sense.

Yeah. It does. Really appreciate it. Just as a follow-up, certainly understand how credit has performed, you know, so well. You guys have done a really good job bringing down SNC balances. But, yeah, I think, it's probably too early to completely understand what's going to happen with tariffs. But yeah, I know you guys have have made bigger inroads into small business. In your markets, that's, you know, an area of concern, I think, for investors the longer this situation takes to play out.

What are you guys working on currently to kind of better assess what the credit impacts could be assuming tariffs go through at some sort of elevated level? Thanks.

Yeah. Hi. This is Chris Luka.

We've we've done our best to just basically understand all the different sectors that could be impacted. The reality is you know, you don't know what really will be the outcome of what target areas. The duration of all of those actions. You know, certainly because of even the noise going on, it is creating a little bit of consternation. You know, in in in the markets. And in the individual customers. But I think most of them are really taking a position of a little bit of wait and see. I think they're you know, the the ones that are, you know, much more, organized are are assessing where the risk might lie and making, you know, kind of plans, for, like, a plan a and a plan b and a plan c. In the event that it's, you know, more significant or longer duration, type of an impact. You know, we've certainly looked at the various NAICS codes, that, are likely subject areas. And done some evaluation on, the risk profiles so that we can prepare to kind of engage with the customers as needed when it becomes more certain.

Michael, this is John. I'll add to that. It wasn't exactly your question, but I think it's somewhat tangential to Chris' answer. At this point in time, client sentiment while it shows some of the apprehension that Chris mentioned, the customer behavior doesn't really line up with a very near and present fear of an impending recession, particularly one that might be worse than moderate and and longer. We typically will see a lot of line draws occur during that time as people pad the balance with excess liquidity, securing whatever forms of capital they to for a near term amount of pressure, and we really aren't seeing that. And I mean, that kind of comment goes through yesterday. So in the second quarter. So I think the mindset of our clients somewhat mirrors the mindset of the banks, not just ours, but others. Where the general sentiment is a little too early to tell. And hopefully, the shock and awe of the first week of the quarter will give way to individual skirmishes with particular countries or sectors and the overall impact will be a lot less pronounced than maybe we all feared, on April the second. I don't know if that's helpful, but that would be, I guess, my added confidence.

No. I I appreciate it. Maybe I could just squeeze one more in. Just on the the increase in the PPNR guide, certainly understand that includes Sable Trust. How much of the increase in the PPNR guide is related to that versus core? Because right? Because guys did better on expenses than I think, you know, most of us were anticipating.

Thanks.

Yeah. Great question, Michael. And I think that if you look at the change that we we made in fees up 9% to 10% that's a bit more than certainly Sable is expected to bring for this calendar year. So I think we can certainly count on some continued growth in our various fee income lines of businesses. That's been an extreme strength of the company. The last couple of years and we anticipate those businesses to continue contributing to the bottom line. So I think that as well as on the expense side, you'll note that we actually kept the guidance the same so up to 4% to 5% But certainly that includes SABL. So that infers that we're saving expenses elsewhere throughout the company for the balance of the year. So I think those two combined the better performance in terms of fees the addition of Sable, and then continued expense control really account for the entirety of the increase in guidance around PPNR.

Thanks for taking my questions. I'll step back. Thank you, Mark.

The next question today is from Catherine Mealor, KBW. Thanks. Good afternoon.

Hi, Kevin.

You just give us an update on the hiring process and, kind of the number of lenders and revenue producers that hired so far and kind of your plans for the next couple of quarters. And just how that translates into your growth outlook seems like you're you know, growth feels like it's a little bit slower and then it pushed back to the back half of the year, although I know you've always said it's more back end loaded. But just kind of curious as we think about like, how successful the hiring process has been or if this volatility has delayed any of that as well? Thanks.

Sure. Thanks for the questions. I'll try to answer both at the same time. But if you need to give me a second question to make sure I'm clear.

Don't don't be bothered by it. First, on the hiring, I think we shared the deck that we've added [indiscernible] In q one. We added seven, I believe, in q four. Our run rate for the year should be around, let's call it, 20 to 30 think 24 was the number that we actually shared on the call back in January. For the year, and and I would expect to hit that. You know, q one is typically a little easier time to move folks, but you know, our our our friends on the other side aren't aren't giving up, you good talented bankers very easily. So our pull through rate for offers is running about 50%. For the type of talent we're trying to attract, I think that's a pretty good number. So the volatility in the macro does not affect our desire to add offensive players and add offices in growth markets that are highly successful. And if we look back over our Texas performance, the last five year compounded annual growth rates somewhere in the neighborhood of around 16% with the with South Texas coming on very strong in Q1 and North Texas has been strong for really the better part of several years.

So it makes no sense whatsoever to let the current volatility get in the way of that plan. So we'll continue, if not enhance it to make sure that we come out whatever the other side of this dust up and tariffs is with a good strong hand. The sectors that we grew in in Q1 were driven a good bit by the new hires. So, particularly in equipment finance. So that's, I guess, the earlier hires in the the cycle to add business from a new hire in equipment finance is a little shorter. So we're showing good progress there and I look forward to that being replicated throughout some of the other loan generation sectors. And when and talking about sort of the guidance we gave a quarter ago for the year, I mean, typically, we're giving loan guidance on an annual basis, right? We don't get into quarters, but but now that the first quarter is behind us, really expected a push in total loans for Q1 headed into the end of the quarter it looks like we very much may get there and then had the payoffs that occurred both in health care and and even though the CRE number is up, it would have been up a good bit more had we not had some payoffs towards the end of the quarter.

As the ten year note began to subside and we saw a pretty good pretty big mismatch between revolving rates and perm rates. So we had some unplanned, payoffs right there at the end. So, as we go to go into the second quarter, Catherine, the production levels are good. The pipelines look better than they looked a quarter ago. I think the only potential interruption is if, if if the somewhat pause that we're seeing from larger organizations and medium sized organizations due to the tariff concerns last all through the quarter. That could push some of the production we're planning to Q3. But at this point in time, really not seeing any deals come out of the pipeline. We're just seeing the closing that shift back a matter of days or weeks. So we remain hopeful be able to present. And I would be disappointed if we don't show growth in 2Q.

Great. Is that helpful?

And then yes, that's that's great. Yeah. That's pipeline was actually my next question, so that you answered that, which was great. And then maybe my follow-up, then I'll move over to M and A. I know you've talked in previous calls about wanting to participate in M and A. But of course, your stock price is is back to evaluation that makes that more challenging. So just kind of curious your updated thoughts on M and A versus organic growth versus I know you talked about buybacks earlier as well. Is this just a period where we see more buybacks from you and then a push for organic growth and and and then maybe comes at a later date once, the stock rebounds.

Yeah, Catherine. Thanks for that. And I think you pretty much the question. That's really how we think about it now. And I'll keep it simple. I mean for right now M and A is just not something that we're focused on. And certainly the disruption in the external environment and the impact on our valuation are factors. So that may change. Or will change at some point down the road. But I think right now in terms of capital priorities, it really is what we've done more recently and that is return capital to shareholders via dividend increases. And then more recently an uptick in our buyback. So I certainly think that we'll continue to lean into those two ways of managing capital. And focus on our organic growth plan. As we continue to do so. And M and A I think is something simply for another day down the road.

Makes sense. Great. Thank you.

You bet. Thanks for the questions. Next, we'll take a question from Stephen Scouten, Piper Sandler.

I just wanted to follow back around a little bit on the in the PPNR. And Mike, I know you gave some color on Michael's question about stable and the benefit there. But think the detail we have in the deck was in '24. They added, like, '22 they had about 22,000,000 in revenue. What's kind of the expense base of that business that's coming over just trying to think about where the you know, where the other reductions are kind of within that overall guide.

Yes. We Steven, we haven't disclosed that and I think we'll hold on to that right now until after we get past the actual closing. And have a quarter to kind of under our belts. But we have kind of disclosed that we believe the impact of Sable as a whole on this year will be about $02 per share. Certainly, the revenue side of that is somewhere around $14,000,000 $15,000,000 somewhere in that neighborhood. And once we get SABL completely converted along with another conversion that we have going on to our legacy trust business, We're really looking for '27 to see the full impact of the acquisition and we're kind of calling that out at about $08 to $0.10 per share. For '27 then certainly we'll build on that in future years. So [indiscernible] that's the disclosures we're giving today on SABL. And again, once we get the transaction closed, think we'll share a little bit more detail.

Yeah. That makes sense. And then I know your NIM guide, I think you said it assumes those three cuts June, July, October. Can you give us some color on maybe sensitizing that one way or the other [indiscernible] I mean, expectations seemingly change daily if we were to get zero cuts, kinda what you would think about, or if we got more than three, just kinda how we would think about the the directional shifts with with other scenarios.

Sure. I'd be glad to. So we've kept our treasury and financial planning teams busy modeling different rate scenarios. So our profit plan for this year started off with the three rate cuts and that became part of our guidance. And then we've taken a couple of twists and turns over the past couple of weeks as you might expect and it landed pretty much back where we started with the three rate cuts really centered over the summer and then one into the fall. So the other disclosure that we provided in the earnings deck and it really was a piggyback off the same disclosure we did in the first quarter And that's this notion that really any way you cut it where we have three three rate cuts, two, one or or none, it really isn't going to have an appreciable impact on our NII for this year. It's certainly going to move the numbers around a couple of million in either direction. But certainly nothing that would be considered material or significant. The big things that really move it would be loan growth. And certainly we have the updated guidance around low single digit loan growth and that's impacted the numbers on NII a bit and that resulted in us reducing that guidance a little bit to reflect the reality of loan growth maybe being a little bit less than we had thought it would be at the onset of the year.

But if you look at our NIM and NII growth components as we think about the next three quarters, it really is the things that have driven that in the past couple of quarters. And we've been able to kind of expand our NIM by around two or three basis points pretty consistently quarter over quarter and really we think under almost any scenario, we'll be able to continue to do that. For the balance of this year. We continue to have opportunities to reprice CDs. We continue to have opportunities to reprice cash flow coming off the bond portfolio. As well as opportunities to reprice our fixed rate loan portfolio. So those have really been the three main drivers And then certainly our ability to maintain our NIB mix at current levels potentially grow that a bit by year end. Those are the things that really is the recipe for us to be able to produce the kind of NII levels that's part of the guidance as well as the potential NIM expansion over the course of the year. So I know that was probably a lot, but hopefully that was helpful. That's extremely helpful, Mike. Appreciate that.

And then maybe last thing for me. I mean, obviously, the stock continues to trade at at kind of a discounted multiple to peers, and the profitability is phenomenal. The excess capital is attractive. Deposits are great. I mean, it feels like loan growth continues to be the only maybe piece of the puzzle that's not that's not hitting where you'd want it to be. And obviously, the uncertainty and I know you mentioned some health care credits and other things that were impeding growth this quarter, but but lowering that guide down, what really needs to happen apart from maybe the environment getting better and getting these hires on board? To to be able to hit on all cylinders on growth and maybe surprise to the upside. As opposed to having to revise down at some point along the way?

That's a terrific question. This is John. I'll take it. Mayor, the new hires to come in and be in the markets, we're trying to grow in. Because our growth rate in those markets is also terrific. But it has to offset some slower growth areas that we have some concentration in. So the upside surprise will come from the ten year staying up in the low to mid fours, just not below four. At that point in time, we begin to see a lot more payoffs. So if the ten year will stay up, long enough to get the new hires in place and if we can pull forward some of the hires planned for the fourth quarter into the second, third quarter. Then that would drive us towards an upside So we haven't given up on the initial guidance. We're trying to be prudent and transparent that in the environment we're in and, in the March when rumors of pretty significant tariffs began to chill. Some of the sentiment. We're trying to be respectful of of not overpromising and be honest about what those headwinds could be. So the lowering of the guide wasn't because of a lack of appetite for growth or any lack of expected success in hiring where we want to hire.

But it's kind of hard to outrun the fact that there's so many people looking to deploy credit and and there's not enough demand to satisfy every So the deal is getting one right now on price structure turnaround time on decisions and certainty of execution. We can compete well in all those areas. We just need more offensive players in markets that there's more deals to take.

That's fantastic color. Thank you guys for all the time. Appreciate it.

You bet. Thanks for the great question.

Brett Rabatin of Hovde Group has the next question.

Hey, good afternoon, everyone. Wanted to go back wanted to go back to fee income for a second and just with the increase in the guidance, it seems like a lot of that is stable.

Are there other pieces that would be you think, repeatable from here or that would drive some of the growth, derivative income, syndication fees, SBA, mortgage banking? Is there anything in particular that's helping that guide for the year? Yes.

So I'll get started, Brett. And as we kind of mentioned before, if you look at what the new guidance kind of translates into in terms of dollars, really about two thirds of that is the introduction of SABL into the company's financials. And the other one third or so is increases that we're expecting in other fee income lines of business.

And you kind of hit already on kind of our specialty lines which have really I think over contributed in the last couple of quarters we expect that to continue to do so. So that things those examples of that are BOLI fees, you mentioned that. Our SBIC fees have been real strong of late. We expect some of that to continue at certain levels. SBA fees is another category.

Wealth management outside of Sable And then we've also had some pretty nice increases in our ability to originate and sell some mortgage loans. So those are all [indiscernible] will kind of pick up that difference. In addition to what Sable will bring.

John, I don't if there's anything you wanna add. Sure. I'll add to that. Mike shared the Sable contribution, but but, you know, that shows up in the wealth management forecast. But but even net of Sable, we had a really great quarter. And it's been a long time since did not have a really great quarter with Wealth Management. Fees. That's in trust, it's in investment management, in annuity production out of the retail shop. It shows up in wealth management, but the retail folks are retaining a great deal of it. All those teams really do hit on all eight cylinders. And and we had another great quarter.

The the other area that is, I'll use your word, is repeatable, is our density in our business accounts for operating accounts that we offer treasury services That density continues to improve in terms of wallet share. Some of the new hires we've talked about are on the treasury side. Ensure that that density continues to improve. And that's real money, on the fee income side. And so that's improving and it has a bit of a tailwind just as balance has normalized from the pandemic. You mentioned mortgage and with rates going up, I think they were credited 7% yesterday. It's kind of hard to believe we'll see application improvement. That generates a lot of fee income. But our share of the all the mortgages that do happen should continue to improve as we deploy our direct channel origination sources through the rest of the year. So I don't know that mortgage secondary fees is gonna light the board up for everybody. But for us, given our relative performance and our relative attractiveness, as originator is going to continue to improve, we might out plunge our weight a bit in terms of improvement there. And then finally, the specialty phase that Mike mentioned, The syndication phase related to that is sort of a stated desire I've talked about it on several calls.

We're our participation as a smaller player in very large transactions has been is is getting replaced by leading smaller transactions that we can very well perform in, and then we get a bigger slice of that fee. That allows us to create both more granular portfolio get more operating deposits and get a fee contribution that otherwise would just be getting rewarded as a piece of somebody else's credit relationship. So we we won't, you know, certainly get out of the SNC business at all, but think we pulled it down about 300 basis points in the last seven or eight quarters and replacing all that is been I think the secret sauce to seeing some of the benefit on both the DDA side. And the fee income side. Is is that the clarity you were looking for?

Yeah. That's that's really helpful from, from both of you. And you just you just mentioned [indiscernible] The other question I had was just around, you know, that that bucket continues to atrophy a little bit this quarter. And then you talked about the the payoffs in health care and and other potential credits just based on rates, etcetera. How much of of the revised guidance or does the revised guidance kind of assume that those trends continue? How should we think about the headwinds that you faced relative to the revised '25? Outlook?

I think if I kind of draw a box around health care, that may be the most digestible way to answer it. The diminishment we saw this quarter were from three, syndicated well, two were syndications two were leveraged, and one was a syndication. That we had a share in that were recast in the quarter. A little bit ahead of when the suggested or the maturity would have suggested than to be recast. That we opted out of to use that liquidity for other purposes specifically loan growth in the back half of the year. So that contributed nearly all of the diminishment in the SNC density. I think we reported 9.4%. It was in the mid-9s. I'm trying to bring [indiscernible] And and we I don't think we will get north of 10. But we we don't really we're not really intentionally running it down. It's really just more of a replacement of participations and other credits with with leading our own that are smaller.

But I didn't expect that to be as big a headwind in q one as it was because we expect see those payoffs. But but I'm I'm not I'm not gonna cry over over having that happen because I have confidence we'll redeploy that toward the back half of the year. I think I think that was the entire impact on SNCs other than people just doing pay downs on their line.

Okay. Great. That's really helpful. Appreciate the call, guys. You bet. Thank you.

Next up, we'll hear from Casey Haire, Autonomous Research.

Thanks. Good afternoon, everyone.

Follow-up on capital, two parter. So first, stable what kind of CET one impact will will that transaction have? And then two, any thoughts to I know you guys did a bond book restructuring in maybe '23 or so, but just wondering if that's another way to to use some of the excess capital given, you know, the the bond book yield is is still a little light?

Yeah. Thanks, Casey. This is Mike. And related to Sable, again, we're we're not disclosing the purchase price for that entity, but I will share that the impact on common Tier one is going to be modest. It's not going to be a huge a huge dent there. By any stretch. And then your other question related to a restructuring, mean, look, that's something that we consider really every quarter. I mean, we model those kinds of things on a pretty regular basis. We'll continue to do so. But I think to actually pull the trigger on something like that, we'll need a little bit more stability especially in the bond markets. Or a little bit confidence that the bond markets will remain stable if they get there. So hopefully, have that kind of confidence and stability and we'll be able to consider those kinds of things. But I think right now, there's probably just a little bit too much going on to on a practical basis consider a bond restructuring right now.

Yes. Fair enough. Okay. And then just on the the expense side, I appreciate you guys are not gonna lay out what the the stable impact is. But [indiscernible] where did you where did you find these cost saves to keep the expense guide flat given that the table will be additive, obviously, to the expense base. Like, where where are the cost of this coming from?

Sure. I'll I'll provide some color on that. So so part of it, you know, made admittedly is we think our incentive comp low this year will probably be a little bit lighter than what we thought coming into the year. So there's some savings there. And really the rest of it is really kind of across the board and continues to be centered on our ability to control costs. And again thinking about the way that this year has really begun with so much [indiscernible] Issues with the potential trade war and everything related to that. We're cognizant of what we need to do to continue to control costs and save costs. So I think it's just a little bit more a heads down effort to to make sure that we're spending money the way we need to and saving where we need to as well. So that's put us in a position, I think, to be able to handle the onloading of the stable expense base without changing the guidance.

Got you. Thank you.

Okay.

The next question is from Gary Tenner, D. A. Davidson.

Thanks. Good afternoon. Most of my questions were answered including that follow-up on the expenses. But I wonder if you could just give us the expected CD maturities and kind of expected rate benefit or pickup in the second quarter?

Yes. So I'll start off with that benefit is for the year. So we look to have a about $5,500,000,000 of CD maturities over the next three quarters. Those CDs will come off at about $3,700,000,000 and we think they'll be repriced at somewhere near 3%. And again, that's for the remaining three quarters of the year. So that assumes a 75% renewal. So that's kind of the headline story. By quarter, you asked about the second quarter. So we're looking at about $2,300,000,000 of CD maturities coming off at $3.88 going back on at around 3.5% or a bit lower. With about a 78% renewal. So those are the numbers for the year. As well as the second quarter.

Okay, great. And then I guess maybe just a follow-up to that. Mike. In terms of the end of period deposit expectation to be up low single digits over the course of the year then, does that kind of that's net of some amount of CDs that will not renew?

So that makes it should shift a little bit.

Yeah.

It'll continue to shift as we kinda described. And no changes in that guidance around the outlook for deposits to come in at low single digits. So that certainly accounts for the seasonal inflows and outflows of our public fund book. So again for this past quarter deposits were actually down right about 300,000,000 But if you back out the impact of the public fund outflows, which of course are seasonal, we actually would have grown deposits by about 20,000,000 to 25,000,000 So all of those factors are considered and part of the guide.

Thank you. Appreciate it. Okay. The next question is Matt Olney, Stephens.

Hi, Matt. Hey, guys. Good afternoon.

Going back to the commentary around loan growth being stronger in back half of year, Just remind us how much of this growth would be from new hires that you made over the last year or so? And then secondly, just any color you can give us as far as loan pipelines that can just get us more comfortable with the loan growth in the back half of the year?

Sure. I'll go ahead. Yes. I'll start, Matt, with the first question. So if you look at the overall loan growth that we're expecting for the year, it's somewhere around 15% that we're expecting from new revenue hires. And those would have been primarily folks that we would have hired let's say in the fourth quarter of last year, maybe a little bit into the first quarter of this year. And then on the expense number, the impact of the new hires on our expense guidance is about 100 basis points or so. So those numbers are largely unchanged. From the disclosures that I think we gave last quarter.

Matt, this is John. The percentage has changed a bit. Depending on which of the new hires are are loaded in a little earlier. So I gave the example in equipment finance to where a single new hire in that group can make a pretty big difference pretty rapidly because the, the the time to decision and book alone, particularly in the capital markets side of equipment finance, is a good bit more rapid than say a commercial banker adding that's going to take one hundred and twenty, one hundred and fifty days to really begin to get their pipeline flushed out. Once they get comfortable and kind of understand the tech, the policies, the the people. So, the more of the middle market equipment finance and CRE hires and health care hires we can get loaded to the front of the gear, the more of an impact above the 15 it could be. So that's our goal, but we didn't we didn't know, build that in the plan to to make it maybe open to it. But it's kinda balanced out based on what our past has been. That said, one of the earlier questions around the importance of an upside to loan growth on our valuation, certainly we're motivated to do that if we can find the talent.

And John to follow-up on the the comments you made, I think that your target between what twenty and thirty new producer hires this year. Is there a target mix you have of type of producer, whether it's real estate or commercial or capital markets? Just any color on the mix?

Sure. There's I think to average it out, there's a couple in each of specialty lines. We'd like to add CRE folks in Florida in Texas and specifically in Nashville. We'd like to add additional equipment finance folks They'll be based out of New Orleans, but it'll be focused on areas around our footprint. Probably half the numbers in business are commercial bankers. There's four, I think, for financial advisers in the wealth management group. To help augment our new investment in Florida and Central Florida. Via Sable. And then and to be honest, if talent or teams come available to us because of disruption around us, we would not hesitate to add more than the 20 to 30 that I outlined. Like I said, the number you know, in the plan is 24. But if we could get 30 or more, that would be just just fine with me.

So wherever there's talent in markets we're trying to grow in particularly, high annual organic growth rate options Those are very much in demand to us.

Okay. Great. Thank you, guys.

You bet. Thank you.

Next we'll take a question from Ben Gurlinger, Citi.

Hey there. I just wanna follow-up quickly on the kind of the m and a conversation. Mike, you said there's really not a lot of appetite And that in relation to depositories, I. E, loans and deposits, or is that, like, all m and a? So that was ex also include, like, not interested in fee income. Generated business?

Yes. Great question, Ben, and great So the question was really directed I think at depositories. Certainly, we're in the midst of closing on Fables. So we'd like to get that one closed and get some good work done on getting that integrated. But probably would be a little bit more open to those kinds of transactions and depositories. In the current environment. So thanks for that clarification.

I appreciate everything else you've been asked and answered. Thanks, guys. You bet.

Our last question today comes from Chris Christopher Marinac, Janney Montgomery Scott.

Hey, good afternoon. I wanted to ask Chris about the growth in the unfunded commitment reserve. Was that related to just volume there or risk or or any more color there?

Yes. Good question. Really, it's just, you know, the the change in our outlook or or fundings likely that, there's gonna be potentially more fundings just converting over to from unfunded to funded. And so therefore, it'll just kind of move over you know, from that perspective.

Okay. And as some of the factors you know, qualitatively in your modeling for reserves in general, do you have any visibility that that would lead to any significant reserve build in the second or third quarter? Or was it simply too early to comment?

It's probably too early to comment, but you know, the the qualitative factors are there because of how we built our models, and they don't always take into consideration all of variables that are going on at the loan level. So the qualitative factors are there to kind of have enhanced that in many respects.

So the idea of having a higher recession scenario, is that already in numbers that you had as a year end or as of March 31?

Yes. So Chris, this is Mike. So if we look at the scenarios that we're using, and of course, we use Moody's like like many of the mid cap banks, we're We're split between the baseline scenario as well as the the slower growth scenario. And the baseline scenario that we're using does not have the impact of a [indiscernible] But certainly the slower growth one does. And there's a third scenario out there that includes a moderate recession that as we go through this year and the next quarter or two we'll make judgment calls around how we might change or alter the mix of the scenarios that we're using. But certainly where we are today it's too soon to make a call as to where we'll be really at the end of this quarter given the potential for changes in the external environment.

And I might also add I might also add that, you know, the scenarios in general have gotten a little bit more pessimistic in many respects, even the baseline you know, tends to move. So just kinda keep in mind the fact that the baseline ultimately if it's working correctly, will kind of follow where we are in the cycle. And so from last quarter to this quarter, there's more components within there that kind of sound like, know, higher recession risk.

Okay, great. That's good background. Thank you both. I appreciate You bet. Thanks for the question.

And everyone that does conclude our question and answer session. I would like to hand the call back to Mr. John Hairston for any additional or closing remarks.

Yes. Thanks, Lisa. Thanks for moderating today, and thanks, everyone, for attending a late call. Forward to seeing you on the road soon.

Once again, everyone, that does conclude today's conference. Thank you for your participation. You may now disconnect.