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1/21/2025
Manager, you may begin.
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 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 8K 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 Harriston, President and CEO, Mike Ackery, CFO, and Chris Saluca, Chief Credit Officer. I will now turn the call over to John Harriston.
Thank you, Kathryn, and Happy New Year, everyone. We thank you all for joining us today for the call. We are pleased with our fourth quarter results, which reflect another quarter of improving profitability. We achieved an ROA of a notable 1.40 percent. We enjoyed continued NIM expansion and wrapped the quarter with total risk-based capital of nearly 16 percent. The quarter was a strong finish to a strong year of improving profitability, building capital, and celebrating our 125th anniversary. Last quarter on this call, we shared our expectations for a pivot to growth and smartly deploying capital to create opportunity and value. On that note, we announced this morning our acquisition of Sable Trust Company based in St. Petersburg, Florida. We are very proud to welcome Sable's outstanding leadership team and clients to Hancock Whitney. Following the close, Florida will become our largest wealth management fee state and the Tampa St. Pete MSA will become our largest individual wealth management fee market. The transaction matches perfectly our stated strategy to develop greater market share in the higher growth areas around our geographic footprint. Further details may be found on slide seven of the investor deck. We are also pleased to announce a multi-year organic growth plan, which will include both hiring additional revenue generating associates throughout 2025 and expanding our footprint in Florida and Texas through opening this year five additional financial center locations in North Dallas. We expect to announce additional locations in Florida as we near the completion of a stable transaction. We added seven new bankers in the fourth quarter, which aligns with our anticipated run rate for 2025 and likely the foreseeable future. As I said earlier, this is a multi-year plan and we will share more over the next several quarters. We updated our guidance to give our latest expectations for 2025. This guidance reflects the organic growth plan, but does not include any impacts from the acquisition of Sable Trust Company. Just a few more notes from Q4 before turning the call over to Mike. Net interest income and NEM increased as we were able to control funding costs and more than offset the impact of lower rates and changes in new loan production mix. Fee income was modestly off due to lower secondary mortgage volume due entirely to higher rates and a little less specialty income after record numbers in Q3. And finally, we were happy to post a modest reduction in operating expense for the quarter. Loans were down $156 million due to higher payoffs on commercial real estate loans, offsetting otherwise strong production. With our organic growth plan, we expect total loans will grow mid-single digits in 2025, tilting toward the second half of the year. We remain focused on more granular, full-relationship loans with the goal of achieving more favorable yields and relationship revenue. Deposits were up $510 million despite the maturity of $183 million in broker deposits. This quarter, we had a very welcome increase in DDA balances, and our DDA mix is consistent at 36%. We experienced normal seasonal increases in interest-bearing transaction and public funds deposit accounts, and retail CDs declined due to the reduction of our promotional CD rates. We expect deposits to grow in low single digits in 2025. During the quarter, we continued to return capital to investors by repurchasing 150,000 shares of common stock. 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 1 ratio of 14.14%. TCE declined slightly due to the impact of Treasury yields on AOCI, but ended the quarter at a strong 9.47%. We're enthusiastic for the opportunities in the coming year and believe we are very well positioned for a successful 2025. With that, I'll invite Mike to add additional comments.
Thanks, John, and good afternoon, everyone. Fourth quarter's net income was $122 million, or $1.40 per share, so up $6 million and 7 cents per share from last quarter. PPNR was down slightly, less than 1%, to $165.2 million, expressed as a return on average assets that continues to be a peer-leading 1.89%. Our NIM expanded two basis points to 3.41%, driving modest growth in NII. Anne has mentioned our fee-income businesses at an outstanding quarter and year, and expenses were down again this quarter, so now two consecutive quarters of lower expense levels. The NIM expansion was driven by lower deposit costs a higher yield on the bond portfolio, and a favorable mix of borrowed funds, partly offset by lower loan yields as shown on slide 17 of the investor deck. Our overall cost of funds was down 21 basis points to 1.73% due to a lower cost of deposits and a better funding mix as we ended the quarter with no home loan borrowing. Our cost of deposits was down 17 basis points to 1.85%, reflecting CD maturities and renewals at lower rates and a reduction of pricing on interest-bearing transaction accounts. We had 3.4 billion of CD maturities that came off at 4.84% and renewed at 4.04%. Additionally, as John mentioned, most of our broker deposits matured during the quarter and were not replaced. And our DDA balances increased this quarter for the first time in almost two years. CDs will continue to reprice lower throughout 2025, given maturity volumes and three anticipated rate cuts in the second half of 2025. Bond yields were up by basis points to 2.71% due to our continued reinvestment of cash flows back into the bond portfolio. In the fourth quarter, about $200 million of bonds came off the balance sheet at a yield of 3.45% and were reinvested at 4.64%. Next quarter, we expect about $160 million of cash flows coming off at about 3.09% that should reinvest at around 5%. Our loan yield was down 25 basis points to 6.02%. Our yield on fixed-rate loans was up 7 basis points as we continued to reprice that book, but the yield on our variable-rate loans was down 49 basis points. Putting this all together, we believe we can achieve modest NIM expansion and NII growth of between 3.5% and 4.5% in 2025, driven primarily by the impact of mid-single-digit loan growth, lower deposit rates, and continued repricing of cash flows from the bond portfolio and fixed-rate loan portfolio. Offsetting these drivers will be lower loan yields on variable-rate loans. We assumed three rate cuts in the second half of 2025. We did model the impact of one and zero rate cuts in 2025, with results that were modestly favorable. As mentioned, V-income was lower this quarter due to lower specialty incomes. which was elevated in the prior quarter. We expect non-interest income for 2025 will be up between 3.5% and 4.5% from 2024, with nothing yet assumed from our acquisition of Sable Trust Company. Expenses were down 1% this quarter as we continue to focus on controlling costs throughout the company. We expect non-interest expense for 2025 will be up between 4% and 5% from 2024's adjusted non-interest expense level, inclusive of our organic growth plan, but excluding any costs related to the stable acquisition. Our PPNR guide is to be up between 3% and 4% from 2024's adjusted levels, and our efficiency ratio is expected to fall between 55% and 56% in 2025. Our credit quality metrics continue to normalize. with an increase in non-accrual and criticized commercial loans. Net charge-offs, however, were down this quarter. Our loan portfolio is diverse, and we still see no significant weakening in any specific portfolio sectors or geography. We continue to enjoy a solid reserve of 147 basis points, up slightly from the prior quarter. We expect modest charge-offs and provision levels for 2025. Lastly, a quick comment on capital. Our capital ratios remain remarkably strong, even after returning capital through continued share repurchases and the impact of AOCI. Even with the Sable acquisition and planned organic balance sheet growth, we expect to continue our share repurchases in 2025. As always, changes in the growth dynamics of our balance sheet 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. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Michael Rose of Raymond James. Your line is open.
Hey, good afternoon, guys. Hope you're enjoying the snow down in New Orleans. Maybe, Mike, we could just start with just on what you'd mentioned last on the buybacks. You know, certainly appreciate the CSOs. I think the only thing that's really changed since last January is the ROA range has been tightened to 140 to 150. You know, I know you guys have expressed some, maybe some displeasure with, you know, where you guys trade versus, you know, peers. Just trying to get a sense of how aggressive you might be with the buyback, you know, given that the earned back is still relatively attractive here. Thanks.
Sure, Michael. Thanks for the question. Look, as far as buybacks are concerned, we did step down a little bit quarter from the levels. that we had been at for both the second and third quarter. And I think that simply just had to do with the fact that, you know, the stock had pushed up quite a bit post-election. And then, you know, we began working in earnest on the Sable transaction. And when we get to that point with the potential transaction, we've really put ourselves kind of in blackout. So the way we view buybacks going forward is, I think at the very least, we'll revert back to the same levels that you saw us by shares in the second and third quarter so call it you know around 300 000 shares per quarter and look there's a lot of things that could change that particular appetite uh probably more so for the upside um but that's that's how we kind of view it right now so hopefully that was uh helpful very helpful um and then maybe just separately just on the on the loan growth outlook i think that was
You know, definitely better than I think what I was looking for and where consensus is, but just wanted to get a sense for, you know, what the drivers are. I know, obviously, one of the benefits will be not having the stick portfolio, you know, pay down now that you're kind of at normalized levels. But if you can just give us some color around, you know, what the drivers would be and how confident are you in the back half of the year pickup. Thanks.
Yeah, Michael, this is John. Thanks for the question. I'll start it. If Mike and Chris want to add any more detail, they're welcome to. You correctly pointed out that one of the biggest tailwinds to the confidence is the fact that we no longer have to take down $600 million out the back door as we right-size the stink concentration down to 10% or below. So that's all achieved. So out of the gate, you sort of get the lack of a contract, so to speak, impacted the net growth numbers. Beyond that, it's really all about core conventional growth. Our mortgage business will be a bit of a contra as we pivot to secondary fee income. That said, as rates move up for mortgage, certainly we continue to look at the balance sheet needs more than just the fee income piece. And so if the rates begin to get attractive enough for very high quality paper, we might consider keeping a little bit more mortgage on the books than the 12% that we did the last quarter. We sold 88, we kept 12% in dollars. Our business banking and small business pipeline continues to be very strong. Sentiment among that sector of clients is extremely high. And it appears that we'll be successful adding firepower through additional business bankers through the course of 2025. We had good success there in Q4. So I think that's a net growth generator for the quarter. for the year after several quarters of going sideways as we just move up the asset class to the next sector we call commercial banking. So it's less the middle market, but higher than small business. That book has been largely sideways for several quarters. The pipeline's improved. Payoffs there have lessened. And so our expectation is that that bucket will also grow as we go through 2025. And in fact, I think we'll see growth there in the first quarter. of 25, which hadn't happened for a couple of years. Middle market and corporate banking demand is from decent to good there. The primary growth engine there is the lack of the pay downs that we applied to ourselves this year. But even so, in the health care portfolio, in the commercial real estate specialty business, while we've had payoff pressure in CRE, the production level actually was quite strong in Q4. And we expect that to increase as we go through 2025 so that CRE becomes a net growth engine toward the back half of the year. And then finally, equipment finance is exhibiting strong growth and less pressure for pay downs. The only negative in all that, Michael, is probably competition's fierce. So we're not compromising at all in the credit term expectations for any of those growth numbers. But as we get into areas like equipment finance and commercial real estate, there's so many non-bank players to compete with these days that we may see a little pressure on yields of new business. And indeed, we saw that at Q4 in that same sort of environment. So our confidence is actually pretty good. I'd say very high to attain those level of growth through the year. Obviously, even though we're leaning or tilting towards the back half of the year for net growth, the expectation is that we see some growth in Q1 and in Q2. And I think directionally, that'll help us understand the pathway to attaining that mid-single-digit level. If there's more disruption around us, Michael, that may afford opportunities to hire bankers at a faster clip, and that certainly wouldn't hurt either. Any more clarity?
No, I certainly appreciate the caller. Maybe just last one for me on the stable acquisition, just quickly. Can you give us a sense for maybe what the expense levels are, what the efficiency ratio was last year? Appreciate what the revenues were, but just trying to get a sense for what the net bottom line impact would be as we think about 2025. Thanks.
Yeah, I appreciate that question, Michael. But again, as we kind of indicated in the deck itself is, you know, we're going to update our guidance to be inclusive of Sable probably after the first quarter. So if you wouldn't mind saving that question until we get to that point. By then, we'll certainly, I think, have a little bit more certainty as to the exact closing date. But suffice to say, as we indicated in the release and in the slide, It certainly is a creative day one in terms of EPS and exceeds all of our return thresholds. So I think when we get around to talking about the results and the returns, it'll be something that people will appreciate.
Perfect. Thanks for taking all my questions. You bet. Thanks, Michael.
Your next question comes from the line of Matt Olney of Stevens. Your line is open.
Hey, thanks, guys. Good afternoon. We'd love to hear more about the wealth management segment there at the company and with the Sable Trust acquisition. Just appreciate, you know, help us appreciate why is now the time to build out that business? And then I guess the other part of that is, do you think there's additional opportunities in wealth management with respect to M&A, or is the Sable deal more of a one-off?
I'll start with that on the core wealth management questions, and then Mike can handle the M&A part that you addressed at the tail of the question. First off, we've been in the trust business for 100 years, so it's not a new business to us. The last 10, we've certainly focused a great deal more on it. That focus isn't recent. Really, we've been eager to grow that sector for about a decade. If you remember back in 2018, we announced the Capital One asset management transaction, which grew by 50 or 60% our overall wealth book. We hired a lot of good talent, both in that deal and after it. I think it may have put us a bit more on the map in terms of having scale to go after larger, more profitable clients that actually had ancillary fee opportunities and other business lines that were very creative to the bottom line. Then we did the partnership with Cetera, which exposed us to a lot more investment platforms and advisors across the country. So we began to be more notable in terms of being able to compete, particularly in the larger opportunities in Texas and Florida. And then finally, Sable allows us to cheat about 30 years of work onto the overall book. I mean, Sable built a very fine organization over a little less than three decades. I mean, it takes hard work to do that. So to be able to pick it up at one time and turn that into our largest wealth management state in Florida, I think that's a pretty good accomplishment. It strategically fits our desire to create wealth management income as at least a third of our overall fee income. So we're there now. It's already about a third of our fee income. Sable will help that number go up a good bit more. In terms of what our appetite is moving forward, organically, we've announced a fairly aggressive growth plan in terms of adding talent. Several of those players are intended to be wealth management advisors that we'll organically hire. So it's an important part of our organization moving forward. whether it's organic or inorganic. So, Mike, you want to panel the inorganic part of that?
Yeah, and just a couple of thoughts, Matt. So, you know, first off, we couldn't be more pleased with the transaction. We're thrilled for the addition and eager to get moving with the new addition to our company. But it really does check a lot of boxes for us. So the first one is John really hit on that when he talked about kind of the companion acquisition to what we did with Capital One back in 2018. With the Capital One transaction, we acquired a lot of infrastructure, a lot of expertise, laid a really good foundation to grow that business from that point on. With Sable, Sable is the perfect add-on to that. It is a tremendous acquisition of a neighborhood of over 50 revenue producers on the trust side and a great base of customers. So it really is, I think, an ideal revenue play on top of what we did with Capital One. I think it also gives us some strategic growth in an area of the company that we would like to be bigger in. So in terms of central Florida, you know, that's one of the areas of our geographic footprint, you know, that we've kind of earmarked for additional growth. So John mentioned on the opening comments the potential to add banking locations that will be companions to Sable's locations. So I think that's another important box to check. It's an all-cash deal, so it kind of checks that box in terms of helping us proactively manage capital. So we're thrilled with that. And it really does kind of put a little bit of an exclamation point on this notion of 2025 being a pivot year for the company to grow, both organic growth as well as now inorganic growth. And then finally, it really is kind of a signal that I think the company is open to inorganic growth opportunities, whether it be on the banking side or even the non-banking side. So we're open to all sorts of opportunities. I wouldn't say that strictly non-bank or trust. Certainly we're open to depository institutions going forward as well.
Okay.
Appreciate the commentary on that topic. And then On that organic growth strategy, you give us the map there on slide eight as far as the footprint and kind of the planned hires. I see several green stars in Texas and planned hires in the state. Also mentions of the new financial centers in Dallas in 25. Just update us on your current footings in Dallas and Texas and leadership and I guess just Remind us kind of what the growth strategy is. Is it going to be more middle market C&I or will it be something else within the state?
It's a great question, Matt. I mentioned adding wealth advisors earlier. Our stated goal, and this is a lofty and aspirational goal, but we are moving smartly towards it, is to become the best bank in the southern part of the U.S. for privately owned businesses. And we don't feel as if we can attain that goal without a strong wealth management offering That way we can bank the business and we can bank the owners of the business and be prepared to assist them when they go through succession or liquidity moments. And so as a result, those are really companion offensive plays that we've invested a lot of time and money into the past 10 years or so. So when we look at the hires, we didn't really give numbers last quarter because we wanted to come out of the the gate this year with the overall organic strategy. We hired seven net new bankers in Q4. That was the run rate that we set as a goal. We actually hit it. And frankly, it kind of surprised me because fourth quarter is typically the hardest time to add business purpose bankers because the way the incentive teams are structured. Typically, there's a big annual settlement that occurs in Q1 for the prior year. And so it's tough to add people during that time, but we were able to. And I think we did it because the people interviewing with our folks saw a very aligned, a top line and credit risk appetite match. They interviewed both credit and a lot of business leadership and found that they felt this would be a very comfortable place for them to spend their careers. And so we got those seven in Q4 and I would expect to be on that same run rate through the rest of this year. So around 35 over the five quarter period. We're not really planning to talk much about 2026 today, but unless the macro changes or something else changes, I would expect that run rate potentially to continue into 26. Just depends on how the world looks when we get another two or three quarters under our belt. Those bankers will not be limited to the high growth markets. I mean, I appreciate you calling out the points in Texas, We are busily working towards adding five new financial centers, and that's the northern areas of the Dallas MSA, which are complemented to where we have offices and leadership already deployed. So those five, they're not open yet, but we're working hard to get them done, and I would be disappointed if we don't physically open the offices before the end of this year. Mike mentioned potentially offering new offices in Florida as we get closer to the Sable close, let's just say that's second quarter or so, then maybe on this call a quarter from now, we can draw a little bit more detail around what the Florida plans are. I'm talking a lot about Texas and Florida, but I don't want to mislead anyone. We'll take good talent in all of our footprint. And if disruption occurs a place other than where we are in Texas and Florida, then certainly we would be deeply interested in moving teams or individual players that may would prefer to be with us to go through what they may go through elsewhere. So I think at this point in time, our signal to potential partners or potential colleagues would be to don't be bashful about making the phone call and we'll see if we can work it out. Any redirect you want on that, Matt?
No, that's great. Appreciate the commentary.
You bet. Thank you. Your next question comes from the line of Catherine Melor of KBW. Your line is open.
Thanks. Good afternoon, everyone.
Hi, Katherine.
I wanted to ask about the increase in your criticized commercial loans. Can you just give us any color as to what type of loans these are, the size, just any kind of commentary about the potential risk in that increase this quarter? Thanks.
Hey, Katherine. It's Chris Luka. Thanks for the question. First of all, I just want to remind folks that we really do continue to be very proud about our asset quality performance. We started at a low base, and we certainly have gone up over the past year. But kind of looking back and comparing it to our peers, for the most part, our increases are largely in line with peers. And obviously, we don't have Q4 data right now, but we suspect that there will be a mixed bag in that regard. Over the past quarter, we did see some improvement in some of our customers that were already in the criticized category. So we're seeing some hopeful signs that the customers that are already in criticized are stabilizing and resolving their issues. This particular quarter, we saw some customers in our consumer discretionary industries in our building products and services categories. some modest amount in hotel and in the healthcare and related sectors. So those were some of the areas that probably gave a little bit away in the criticized migration during the quarter. But, you know, looking at the circumstances that really gave rise to us making the decision to downgrade them into those categories, you know, the feeling is that it's really kind of transitory in many respects. TAB, Mark McIntyre, On in some situations it's really a situation that's affecting you know individual borrower that they just have to kind of work through and others it's really more of a softening of demand on a revenue side. TAB, Mark McIntyre, And in other areas it's really just kind of the higher operating costs and being able to kind of rationalize expenses so so there's a variety of different factors at play, but. You know, through the process, we did spend a lot of time looking at all of our lower rated credits, not even the ones that are in the criticized and lower categories and really, you know, understand exactly what's impacting them and what the possible migration could be. And at this point in time, we don't feel that there's anything significant that we've identified. Obviously, what happens in the future is hard to know, but at this point in time, we feel pretty confident in what makes up our criticized book and keeping in mind that we continue to operate at better than peer average in all of our AQ, even in the charge-off area.
Catherine, this is John. I appreciate the question, and I'll add this, and what you were directing towards is, is there a I think, a sizable concentration of any particular sector or geography in those numbers, and I'd like to maybe direct an answer specifically to that. You know, a few years ago, we found ourselves with a larger criticized percentage, and it was a significant concentration in one sector and in one geography, and this is not a repeat of that. This is not a return to those days at all, and I would be obviously very disappointed that We built a very, you know, healthy loan loss reserve. We've got a war chest of capital. And I would anticipate using that offensively not to cover, you know, outsized NCOs. So I hope that answers your question. Glad to answer in more detail when you want to ask it.
No, it does. And I think, and it's all about, I mean, you say in your 25 guidance that you expect modest charge-offs and provision for 25. And so maybe that echoes kind of what you're saying, John. But can you give us, a range or kind of any more disclosure on what you mean by modest? I mean, I feel like in the past you've talked about modest charge-offs and charge-offs have kind of hovered around 20 basis points or so. Is that a fair assumption for what we should expect for 25?
Yeah, Catherine, this is Mike. And yeah, I think that's right. So, you know, modest doesn't have a specific definition, but I think we consider that, you know, somewhere in the upper teens to the low 20s in terms of basis points of average loans. So I think that's a good barometer to use.
You know, Katherine, it's hard to pick the perfect. Sorry, I stepped on Katherine. I'm sorry. Go ahead.
No, go ahead. You're good.
Sure. I was just going to add, you know, picking the perfect word sometimes is hard. Sometimes we spend more time trying to figure out the perfect word than to give a range because it's hard to do that, too. But when we say modest, you know, you could say modest, you could say moderate, use whatever word you like that basically suggests in line with peers. Inside our NCO losses, we actually have very little commercial real estate loss through the last, you know, several years, maybe a decade in our NCOs. I mean, we really are a CNI bank. And our CRE portfolio, while it's a smaller portion of our loans than most other mid-cap-sized banks, it typically performs from a stellar perspective or a stellar level in terms of NCOs. On the CNI side, we will, like any other CNI bank, have aberration quarters where we have a really low NCO number because we had a recovery or we had a larger NCO number because we had a charge. But as you look year in, year out, we would anticipate those numbers being relatively in line with peers, and we'd be disappointed if they weren't, even though we keep a large loan loss reserve in the event that the macro environment changes, and just like it has the last several years versus the pandemic.
Great. Very helpful. Thank you.
Okay. Thank you. Did you have another question?
No, I'm all good. I'll step out of the queue.
Thanks, Kathleen. Your next question comes from the line of Ben Gerlinger of city. Your line is open.
I know you guys laid out a pretty expansive goal for not only just hirings, but adding some financial centers and branches across your footprint. I mean, I think John, as he said, like roughly 25 bankers at a run rate is that's pretty solid. I mean, when you think about deals, You have the force power or you theoretically would have the horsepower of organic growth that I think peers have the higher multiple. So what would it be if you're really looking at kind of an M&A? Is it more so just deposits or would you add that be supplemental in addition to an improvement growth outlook? I'm just kind of curious why deviate from the organic hiring plan?
Yeah, Ben, this is Mike, and I think you hit the nail on the head when you alluded to this being complementary. We absolutely view the organic growth plan and kind of what we've laid out in our markets to be complementary of anything that we do on the inorganic side. So obviously with the transaction we just announced with Sable, that's a nod toward non-bank M&A. That will certainly complement our wealth management line of business. Any depository M&A, I think, will be an absolute complementary way of growing that would be consistent with the organic growth plan and the new bankers that we're hiring. So nothing is certain in banking going forward. While I think we are signaling an openness to bank M&A, certainly with a preference toward growth markets like Texas, Florida, as well as places like Tennessee, There's certainly no certainty that the right opportunity that fits the criteria that we hold near and dear to our hearts will come to pass. So I think we've got to be able to approach this from a diverse point of view in terms of looking at opportunities to grow organically as well as inorganically. So hopefully that makes sense.
It does. Not to dig too deep into it, but I know banks are sold, not bought, but is there like a relative size of balance sheet you're looking to partner with?
Yeah, look, nothing is certain, but I think if we think about size parameters, you know, something along the range of maybe a third of our current size would be what we think opportune. But however... Having said that, if a smaller opportunity comes up that fits what we're looking to do, that's something certainly we would consider. I think the one thing that we probably can say that's off the table would be, you know, something along the lines of an MOE.
All right. Thank you.
Okay. Thank you. Your next question comes from the line of Brett Rabadon of Hove Day Group. Your line is open.
Hey, good afternoon, everyone. Hey, Brett. Wanted to touch on the expense guidance. And, you know, obviously expenses were slightly lower in 24. Can you talk about how much of the growth in 25 would be a reversion to or the incentive plan, you know, getting back to normal as opposed to 24 maybe? Or any thoughts on incentive comp in 24 versus 25 relative to the expense increase?
Yeah, great question, Brett. And the way that I'll approach that is to just kind of remind you of the guidance that we're giving for 25 for expenses. So we're looking at, you know, this range of between 4 to 5%. So obviously, that's a step up from what's called basically the flat level that we experienced in 24 versus 23. If we look at the component of that guidance that really relates to this notion of an organic growth plan. That's probably around 100 basis points or so. So if we didn't have the organic growth plan, the expense guidance I think would be in the neighborhood of 3 to 4%. So I hesitate to put an exact number on the incentive comp piece just because, you know, it is something that is earned and certainly could be a lower number if we don't achieve our growth levels, but it certainly could be a higher number if we exceed. those growth levels. So hopefully what I've laid out gives you a little context around how we're thinking about the expense levels for next year.
Okay. No, that's helpful. And I said a little bit lower. Actually, like you said, a little bit higher. Yeah. Okay. And then I wanted just to talk about the betas so far relative to the cycle and the expectations. And on slide 19, when you look at the The total deposit betas and then the loan betas, are you guys seeing anything that's either surprising you on either loans or deposits relative to rates where they are? Or would you kind of describe the market as behaving like it's supposed to relative to the rates? It seemed like on the first part of the way down, there were people who were maybe trying to move market share. Just any thoughts on beta speed from here on either of those buckets?
Yeah, so on slide 19, I think probably the most important part of that little table at the bottom is the guidance that we're giving around our expectations really for the entire cumulative cycle. So that's really how we kind of think about that. And quarter by quarter, I think a focus on the specific betas that happen in a quarter can be a little bit misleading, especially when you have rates that maybe move faster or slower than folks had anticipated. But to answer your direct question, no, there's nothing, I think, going on in our markets and our geographic footprint that really is a surprise to us or something that was beyond what we expected. I think the level of competition is what it is. It certainly is, I think, I'll call it well-behaved. And it's certainly something that we find conducive, actually, to our strategy around what we're trying to do with deposit pricing. And that strategy really is centered around repricing our maturing CDs, kind of keeping that balance of maturing CDs relatively short. So 3.4 billion in the fourth quarter, I mean, that's the better part of our entire CD book. And as we look into 25, we see that book potentially turning over maybe twice over the course of the year. So depending on what happens with rates, you know, that certainly could be a big driver of our continued efforts to reduce our cost of deposits. And I'd certainly be remiss if I also didn't mention our DDA balances. So, you know, for the first time in two years, we were actually able to increase those balances. We ended the year at 36%, and as far as next year is concerned, we see an opportunity to grow that to maybe the 38% level or so. So certainly, when we think about our margin expansion opportunities in 25, balance sheet growth is a big component of that. But continued repricing and continued attention of the deposit book is certainly a big component as well. So that was probably a little bit more of an expansive answer than the question you asked, but hopefully it was helpful.
No, that was very helpful. I appreciate it. Thanks so much, Mike.
Your next question comes from the line of Jerry Tenner of DA Davidson. Your line is open.
Hey, good afternoon. I wanted to ask a bit of a follow-up in terms just of the CD repricing. Can you remind us, Mike, what the CD maturities are in the first quarter and kind of what that, you know, the rate and then expected original rate might look like today?
Sure. Be glad to, Gary. Okay. So for the first quarter, we have about 2.5 billion of CDs maturing. Those are coming off at 434, and we think that they will go on at about 374 or so. We are stepping down just a little bit, the renewal rate, from what it's been the last couple of quarters in the mid-'80s to probably something in the mid-'70s to upper-'70s. Now, for the year as a whole, I had mentioned that we see the CD book potentially turning over twice. So we have the better part of $8 billion of CD maturities in 2025. That book as a whole for the year will come off at about 379, and we're anticipating putting that back on at about 310 or so. And certainly that is very dependent upon the interest rate environment and what happens or not with the Fed resuming rate cuts at some point next year. So that's kind of how we're looking at the CD book next year.
Got it. Thank you for that. And then in terms of the bankers, if you think of the seven in the fourth quarter and the 28 that you're planning on hiring in 2025, can you put that in context of kind of what the production banker numbers were at September 30? In other words, what kind of increase is that relative to your existing production side of the business?
It's a good question. I mean, it depends on the type of banker, certainly. Maybe the helpful color is given the pace of bankers, the time it takes to build a pipeline, the time for them to get to an accretive level. Generally speaking, you would anticipate the difference that the team makes would be more impactful to 2026 than 2025. So largely, the guidance that Mike shared earlier is really driven by the team that's already in place. Now, if we are fortunate enough to pick up a few commercial real estate bankers, that could change because they typically pull through a higher percentage of deals very quickly, 90, 120 days, and they can become accretive. Normally, it's gonna take about 12 months to get accretive, about 18 months to reach what Shane Loper, the president of the bank and head of revenue, caused the flywheel level where every day they're continuing to harvest more business and the expense levels don't really go up. So I think I would suggest that the 26 impact will be bigger and we can quantify that for you as we get to the 26 guidance is what's coming from the team that we actually have hired. Is that helpful?
It is. I guess maybe I didn't ask it very clearly, but 35 as would be what percentage increase in bankers for Hancock?
Oh, oh, about let's see. In the business banking space, that would be probably about a 15% increase in the total workforce over it. And I'm adding a 26 plan into that number to give it. So about 15% to 20% more business bankers by the end of 26, about 10% wealth advisors. and about 10% commercial bankers.
Thank you very much.
You bet. So if you think about it, all rolled together, it's about the size of a decent-sized acquisition without having to issue any shares if they all hit plan. And typically, we have about an 80% success rate from the bankers that we hire.
Your next question comes from the line of Steven Skouten of Piper Sandler. Your line is open.
Yeah, thanks. Good afternoon. Just kind of following up along that line of discussion around the new hires, how much of the kind of mid-single-digit loan growth expectation would be predicated on hitting that pace of new hires, and how much would be kind of more, you know, no longer the headwind of the SNCC portfolio and other dynamics that might precipitate growth?
Yeah, very modest impact in the guidance that we gave for 2025. It would be important that we get to that level of hiring and have at least an 80% success rate for the hires to attain the CSO levels at the upper end of the boundaries that we gave by the end of 2026. Does that, you follow me? Yeah, that makes perfect sense. Yeah, so CSOs are two years, so we've got them baked into that guidance on the upper end. The guidance we're giving for this year really has all the negative of the expense carry and very little of the positive because it'll take a little while for them to get their books up to target operating model level.
Got it. And can you speak to any kind of green shoes, even if it's anecdotal, kind of around what you're seeing so far that gives you confidence around this kind of loan growth trend reversal? versus what we've seen kind of over the last five quarters?
Sure. Yeah, well, you know, I think we got a question earlier about the headwinds and tailwinds. And, I mean, certainly the absence of a big SNCC runoff is the single biggest advantage to hitting the growth. I mean, production this past year was certainly not bad. We just had a bit of a leaky backdoor because we had the takedown in SNCCs going on to a team of about 600 million. And then we had a fairly sizable amount of commercial real estate transaction payoffs, predominantly from non-bank new entrants to that space. So I don't think CRE payoffs are going to go away, but I do believe our production levels that we're seeing right now on the scale of the pipeline would point to the ability to overcome that payoff level as we go through this year. So the green shoots, if I had to pick sectors, I would say the green shoots are in commercial real estate, they're in healthcare, they're in equipment finance, they're in the commercial banking, which is the below middle market and the way we name our sectors, and then a dark green, you know, vivid green shoot in small business and business banking. The only area that's soft that we haven't seen to make, we're making headway on deposit accounts but not in loan volume is really in consumer which is highly sensitive to rates, especially mortgage.
Got it. Extremely helpful. And then I think someone made the comment, maybe it was Michael Rose, that you guys kind of recognize that your stock has been maybe underappreciated over the last few years, traded at a discount. What do you think, as the market looks at the Hancock-Whitney story, what do you think that's maybe underappreciated about the bank or the trajectory of the bank, if you were to try to toot your own horn a little bit?
Yes, Steve, this is John. I promised Mike I would stop whining about the stock price not matching the performance of the company, so I'll defer the question to Mike.
Well, instead of whining about what maybe the market isn't getting, I think the best way maybe to have that discussion is to think about what we've accomplished, let's say, over the last four or five years. So we're fond of kind of reminding folks that back in 2020, we established four pretty important strategic focus points, and not to belabor these, but they included de-risking the balance sheet or de-risking the loan book and building reserves, vowing to become more profitable, a more profitable banking company, vowing to become a more efficient banking company, and then finally grow our capital levels. And then I think by the time we got to last year, we had demonstrated, I think, pretty significant progress and excellence on all four of those fronts. And 25 becomes a year, as we've talked about many times, where the pivot is to growing our balance sheet and considering organic balance sheet growth as well as inorganic balance sheet growth. And then also this notion of kind of proactively managing the capital levels that we've worked so hard to build the last four or five years. And on that front, we've increased the dividend last year. You know, certainly that's something I think we'll look at again this year. We've demonstrated our commitment to, you know, potentially growing inorganically through the Sable transaction. We've put together, I think, an ambitious organic growth plan. And doing all of that at the same time while maintaining pretty good asset quality numbers. Certainly there's been some normalization, but they're still extremely good from our perspective. And then, you know, producing results in a neighborhood of a ROA of 140 basis points and keeping our efficiency ratio below 55%. So to us, you know, that seems like a pretty good banking company and one that certainly I think is worth consideration. John, anything to add to that?
Yeah.
Nope. You did it well.
Great. Appreciate that, guys. Thanks so much. Thanks for the question.
Your last question comes from the line of Christopher of Janie Montgomery Scott. Your line is open.
Thanks. Good evening. I wanted to ask Chris a question about CNI utilization. I'm just curious if you see either net new CNI lines gaining steam this year as well as the existing line. Can that sort of you know, very stable 41, 42% number kind of breakout this year.
Yeah, I'll take a quick run at it. It's Chris Luca. And then John can follow if he has any additional commentary. We spent a lot of time, obviously, talking about our CRE book and our CNI book. And, you know, from a CNI perspective, you know, I think that maybe a little bit more certainty around how companies feel forward headwinds are, at least certainty around where they want to invest and the like. On the CRE side of things, I think that customers are getting to the point now where they want to continue to develop projects. So we have projects that are rolling off, obviously reaching completion, and then we have new projects that are looking to break ground into and we are certainly part of that decision process on a regular basis with clients. So I think a lot of it has to do with just the combination of the higher interest rates that people were maybe a little bit cautious about in 2024, but also probably the uncertainty around how the election process was going to play through. And whoever you know, got to the finish line probably didn't matter as much as getting to the finish line and then knowing where they were comfortable investing or not. And so I think that will create a little bit more of an opportunity in both sectors, C&I and CRE.
Chris, this is John. I'll add to that. You know, I wish that the answer was as simple as the question. It's a very straightforward question. But Chris introduced the concept of the CRE impact on line utilization, and it's important to kind of understand the backdrop of that. Last year, we produced several hundred million dollars worth of new CRE construction projects that, in terms of commitment, that are today carrying virtually a zero utilization rate. And so that somewhat artificially stimulates the reported line utilization down because so many projects completed and sold off relative to the projects that were new bookings that haven't yet burned through their equity before they get to ours. So as we get to 2Q and 3Q, that volume that was booked last year will have gotten to the end of their money and start borrowing into their lines. And so that will naturally push the CRE line utilization numbers upward. and therefore the overall line utilizations for the loan book upward. And that'll be a good thing. The second thing to note is that on the CNI utilization level, as you pointed out, they've been very stable. And, you know, while we would love to see them go higher because it's essentially all it really costs us is the cost of liquidity. For that to happen, it's quite profitable to see line utilization go up. It also is somewhat of an endorsement of the quality of the CNI book. because the clients have enough liquidity on their own to not call on those lines as deeply as they normally would. And so there's some seasonal line utilization in the book from a few sugarcane operators, some timbering people who seasonally will go up and then pay it down. But largely, it's been a very healthy, very stable book that is unfortunately about 700 basis points below utilization compared to pre-pandemic, just based on the amount of liquidity we have. So it's kind of a good thing and a bad thing at the same time. So part of the support for the loan growth numbers is we would anticipate some of the pull through to borrowing from the commitments that were issued last year to begin and come on the balance sheet in late second quarter and through the back half of the year. Was that the detail you were looking for?
No, it was great. I appreciate you both taking a stab at that. I guess just one related question. I mean, you know, seeing interest rates kind of bounce around week to week, I mean, would that new loan rate that we see in the deck every quarter, would that actually maybe stabilize if demand is getting stronger and the treasury market's backed up just a little bit this month?
You mean on the new money rights?
Correct. Yeah. Do you want to stab at that?
Yeah, I think it would, Chris. Absolutely. Okay.
Very well. Thanks for the additional color, and we appreciate you hosting the call.
You bet. Thank you. That concludes our Q&A session. I will now turn the conference back over to John Hairston for closing remarks.
Thanks, JL, for moderating the call. And I guess the only parting statement I would have after a long call with good questions is, you know, this is – we've announced deals before and we've announced great earnings quarters before, but we've never announced a deal, great earnings, in the middle of a snowbound wind blowing sideways out of our window in New Orleans. So it's certainly been an interesting day. Thank you all for hanging in the call, and we look forward to seeing you on the road over the next several months.
This concludes today's conference call. You may now disconnect.