Hancock Whitney Corporation

Investor Relations 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 AK 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 thanks everyone for joining us this afternoon. We 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 NEM expansion, and ended the quarter with total risk-based capital of 16.39%. NEM expanded as we were able to control funding costs and mix that more than offset the impact of lower loan yields and lower average earning assets. We 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 9% and 10% year over year. Our expectations for expense growth remain unchanged between 4% and 5% higher year over year. Loans were down $201 million due to higher payoffs on large health care and commercial non-real estate loans offsetting strong production. We have 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 million, driven primarily by the seasonal public funds outflows. For the second quarter in a row, our DDA balance has 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 continued to return capital to investors by repurchasing 350,000 shares of common stock this quarter. We also increased our common stock dividend to 45 cents 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, we 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 in the northern area of the Dallas MSA. The Sable transaction is expected to close on May 2nd. 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 and 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 million or $1.38 per share compared to $122 million or $1.40 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 $162.4 million, but up $9.5 million, 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. and 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 percent. due to a lower cost of deposits and a better funding mix, as we ended the quarter with no home loan borrowings. The downward trend in our cost of deposits continued this quarter, with a decrease of 15 basis points to 1.70% 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 2.7 billion of CD maturities, which repriced from 4.33 percent to 3.72 percent, with an 86 percent renewal rate. Additionally, we ended the quarter with no broker deposits, and our DDA balances increased 18 million. Our NIB mix was stable at 36 percent. 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 million, but that includes 320 million of seasonal public fund runoff. Bond yields for the company were up seven basis points to 2.78 percent. We had 165 million of principal cash flow at 3.05 percent that was reinvested at 5.04 percent. Additionally, $164 million of our fair value hedges became effective and contributed four basis points for the overall yield pickup of seven basis points. Next quarter, we expect about $236 million of principal cash flow at 3.19 percent that will be reinvested at higher yields. For the remainder of 2025, and an additional $85 million of our fair value hedges will become effective, providing additional yield. Our loan yield for the quarter was down 18 basis points to 5.84 percent 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 a stable 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 3 and 4 percent in 2025, driven primarily by the impact of lower deposit rates, lower 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 6 and 7 percent from 2024's adjusted levels, and our efficiency ratio will fall somewhere between 54 and 56 percent in 2025. As John mentioned, we did receive regulatory approval for Sable and expect that transaction to close on May 2nd. So, including Sable, we expect non-interest income will be up between 9% and 10% from 2024. Our expense guidance did not change, as we continue to expect expenses will be up between 4% and 5% for the year, not including any one-time costs associated with the Sable transactions. 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 percent 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. And everyone, if you would like to ask a question, please press star 1 on your telephone keypad. Again, that is star 1 to ask a question. We'll go first to Michael Rose, Raymond James.

Hey, good morning, guys, or good afternoon, everyone. Thanks for taking my question.

Been a long day, Michael.

It's only going to get worse. Thanks for reporting early. Yeah, so just on that last comment around the buyback, just given the capital accretion this quarter and a slower kind of loan growth outlook as we move forward, which I totally understand, why not lean in a little bit more into the buyback, just given where the stock trades, the earn back on the buyback? And what I see is a fairly robust 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, you know, 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 is performed so well. You guys have done a really good job bringing down the SNCC balances. But I think it's probably too early to completely understand what's going to happen with tariffs. But I know you guys have made bigger inroads into small business in your markets, and that's you know, an area of concern, I think, for investors, the longer this situation takes to play out. You know, what are you guys working on currently to kind of better assess what the credit impacts could be, assuming, you know, tariffs go through at some sort of elevated level? Thanks.

Yeah, hi, this is Chris Luca. You know, we've done our best to just basically understand all the different sectors that could be impacted. The reality is you don't know what really will be the outcome, what target areas, the duration of all of those actions. Certainly because of even the noise that's going on, it is creating a little bit of consternation 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 the ones that are much more organized are assessing where the risks might lie and making kind of plans for like a plan A and a plan B and a plan C in the event that it's more significant or longer duration type of an impact. But 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's 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 longer. We typically will see a lot of line draws occur during that time as people pad the balance sheet with excess liquidity, securing whatever forms of capital they have 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 into 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, you know, the shock at all 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 2nd. I don't know if that's helpful, but that would be, I guess, my added contribution.

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

Yeah, great question, Michael. And I think that if you look at the change that 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 Sable. 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.

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

The next question today is from Catherine Maylor, KBW.

Thanks. Good afternoon.

Hi, Catherine.

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

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 be bothered by it. First, on the hiring, I think we shared the deck that we've added four in Q1. We added seven, I believe, in Q4. Our run rate for the year should be around, let's call it 20 to 30. I think 24 was the number that we actually shared on the call back in January. for the year, and I would expect to hit that. Q1 is typically a little easier time to move folks, but our friends on the other side aren't giving up 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 and 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 South Texas coming on very strong in Q1 and North Texas has been strong for really the better part of several years. 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 in 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 and the cycle to add business from a new hire in equipment finance is a little shorter. So we're showing good progress there. I look forward to that being replicated throughout some of the other loan generation sectors. And talking about sort of the guidance we gave a quarter ago for the year, typically we're giving loan guidance on an annual basis, right? We don't get into quarters, but now that the first quarter's behind us, I really expected a push in total loans for Q1. Headed into the end of the quarter, looked like we very much may get there and then had the payoffs that occurred both in healthcare and even though the CRE number is up, it would have been up a good bit more had we not had some payoffs toward the end of the quarter as the 10-year note began to subside and we saw a pretty big mismatch between revolving rates and perm rates. So we had some unplanned payoffs right there at the end. So as we go into the second quarter, Catherine, the production levels are good. The pipelines look better than it looked a quarter ago. I think the only potential interruption is if the somewhat pause that we're seeing from larger organizations and medium-sized organizations due to the tariff concerns lasts all through the quarter, that could push some of the production we're planning to Q3. But at this point in time, we're really not seeing any deals come out of the pipeline. We're just seeing the closing debt shift back a matter of days or weeks. So we remain hopeful to be able to present. And I would be disappointed if we don't show growth in 2Q.

Great.

Is that helpful?

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

Yeah, Catherine, thanks for that. I think you pretty much answered the question. That's really how we think about it now. And You know, I'll keep it simple. I mean, for right now, M&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, you know, return capital to shareholders via dividend increases. And then more recently, you know, an uptick in our buyback. So I certainly think that, you know, 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&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 Steven Scouten, Piper Sandler.

Yeah, good afternoon, everyone. I just wanted to follow back around a little bit on the upside in the PPNR. And Mike, I know you gave some color on Michael's question about Sable and the benefit there. But I think the detail we have in the deck was that in 24, they added like 22, they had about 22 million 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.

Yeah, we, Steven, we haven't disclosed that specifically, 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 two cents per share. Certainly the revenue side of that is, you know, somewhere around 14, 15 million, somewhere in that neighborhood. And once we get Sable 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 eight to 10 cents per share for 27. And then certainly we'll build on that in future years. So that's the disclosures we're getting today on Sable. And again, Once we get the transaction closed, I think we'll share a little bit more detail.

Yeah, that makes sense. That makes sense. And then I know your NIM guide, I think you said it assumes those three cuts, June, July, October. Like, can you give us some color on, you know, maybe sensitizing that one way or the other? I mean, these expectations seemingly change daily. If we were to get zero cuts, kind of what you would think about, or if we got more than three, just kind of how we would think about the directional shifts 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, whether we have three rate cuts, two, one, 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, you know, 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, you know, kind of expand our NIM by around two or three basins 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 NID 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 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 hitting where you'd want it to be. And obviously the uncertainty, and I know you mentioned some healthcare credits and other things that were impeding growth this quarter, but lowering that guide down, what really needs to happen apart from maybe the environment getting better and getting these hires on board 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. The new hires to come in and be in the markets that we're trying to grow in, because our growth rate in those markets is terrific, but it has to offset some slower growth areas that we have some concentration in. So the upside surprise will come from the 10 years staying up in the, even 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 tenure 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 and third quarter, then that would drive us towards an upside. So we haven't given up on the initial guidance, but we're trying to be prudent and transparent that in the environment we're in, and in the last week of March when rumors pretty significant tariffs began to chill some of the sentiment. We're trying to be respectful of not over-promising 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 just not enough demand to satisfy everyone. So the deal's getting won 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, Culler. Thank you guys for all the time. Appreciate it.

You bet. Thanks for the great question.

Brett Rabitin of Hovde Group has the next question.

Hey, good afternoon, everyone. I wanted to go back. I wanted to go back to fee income for a second and just, you know, 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?

Yeah, so I'll get started, Brett. And as we kind of mentioned before, if you look at you know, what the new guidance kind of translates into in terms of dollars. Really about two-thirds of that is the introduction of Sable 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, and we expect that to continue to do so. So those examples of that are BOLI syndication 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 categories. that'll kind of pick up that difference in addition to what Sable will bring. John, I don't know if there's anything you want to add.

Sure, I'll add to that. Mike shared the Sable contribution, but that shows up in the wealth management forecast. But even net of Sable, we had a really great quarter. And it's been a long time since we did not have a really great quarter with wealth management fees. That's in trust. It's in investment management. It's in annuity production out of the retail shop. It shows up in wealth management, but the retail folks are reaching a great deal of it. All those teams really do hit on all eight cylinders, and we had another great quarter. 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. to 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 credit at 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 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 going to light the board up for everybody, but for us, given our relative performance and our relative attractiveness as an originator is going to continue to improve. We might outpunch our weight a bit in terms of improvement there. And then finally, the specialty fees that Mike mentioned The syndication fees related to that is sort of a stated desire. I've talked about it on several calls. Our participation as a smaller player in very large transactions 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 we would just be getting rewarded as a piece of somebody else's credit relationship. So we won't certainly get out of the stink business at all, but I think we pulled it down about 300 basis points in the last seven or eight quarters, and replacing all that has been, I think, the secret sauce to seeing some of the benefit on both the DDA side and the fee income side. Is that the clarity you were looking for?

Yeah, that's really helpful from both of you. And you just mentioned shared national credits. The other question I had was just around, you know, that bucket continues to atrophy a little bit this quarter. And then you talked about the payoffs in health care and other potential credits just based on rates, et cetera. How much of the revised guidance or does the revised guidance kind of assume that those trends continue? Or how should we think about the headwinds that you've 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 maturity would have suggested them to be recast. that we opted out of to use that liquidity for other purposes, specifically long growth in the back half of the year. So that contributed nearly all of the diminishment in the SNCC density. I think we reported 9.4. It was in the mid-nines. I'll try to bring that back to my memory. And I don't think we will get north of 10, but 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 leading our own that are smaller. But I didn't expect that to be as big a headwind in Q1 as it was because we didn't expect to see those payoffs. But I'm not going to cry over having that happen because I have confidence we'll redeploy that toward the back half of the year. I think that was the entire impact on SNCCs other than people just doing paydowns on their lines.

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

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

Thanks. Good afternoon, everyone. Follow-up on capital, two-parter. So, first, stable, what kind of CT1 impact 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 use some of the excess capital given the bond book yield is still a little light.

Yeah, thanks, Casey. This is Mike. And related to Sable, again, 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. So it's not going to be a huge dent there by any stretch. And then your other question related to a restructuring, I mean, look, that's something that we consider really every quarter. I mean, we model those kinds of things on a pretty regular basis, and 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 of confidence that the bond markets will remain stable if they get there. So hopefully we 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.

Yeah, fair enough. Okay. Just on the expense guide, I appreciate you guys are not going to lay out what the Sable impact is. So, I guess what, where did you, where did you find these cost saves to keep the expense guide flat, given that Sable will be additive, obviously, to the expense base? Like, where are the costs coming from?

Sure. I'll provide some color on that. So, part of it, you know, admittedly is, We think our incentive comp load 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 uncertainty and issues with the potential trade war and everything related to that, You know, 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 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. Gotcha. Thank you. Okay.

The next question is from Gary Tenner, DA Davidson.

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

Yeah. So I'll start off with what that benefit is for the year. So we look to have about 5.5 billion of CD maturities over the next three quarters. Those CDs will come off at about 3.7, 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 Mike SanClements, 2.3 billion of CD maturities coming off at 388 going back on at around 350 or a bit lower with about a 78% renewal So those are the numbers for the year, as well as the second quarter.

Mike SanClements, Okay, great and then I guess maybe it's just a follow up to that Mike in terms of the end of period deposit. Mike SanClements, expectation to be upload single digits over the course of the year, then does that. kind of that's net of some amount of CVS that will not renew. So that should shift a little bit.

Yeah, it'll continue to shift as we kind of described and you know, no changes in that guidance around the outlook for deposits to come in at low single digits. So you know that certainly accounts for the seasonal inflows and outflows of our public fund books. So again, for this past quarter deposits were actually down right, about $300 million. 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 to $25 million. So all of those factors are considered and part of the guidance.

Thank you. Appreciate it.

OK.

The next question is Matt Olney-Stevens.

Hi, Matt. Hey, guys. Good afternoon. Going back to the commentary around loan growth being stronger in the back half of the 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.

Yeah, 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.

Yeah, Matt, this is John. The percentage has changed a bit depending on which of the new hires 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 time to decision and book alone, particularly the capital market side of equipment finance, is a good bit more rapid than, say, a commercial banker adding that's going to take you know, 120, 150 days to really begin to get their pipeline fleshed out once they get comfortable and kind of understand the tech, the policies, and the people. So the more of the middle market equipment finance and CRE hires and healthcare hires we can get loaded to the front of the gear, the more of an impact above the 15 it can be. So that's our goal, but we didn't, you know, build that into a plan to make it maybe open and it's kind of 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 comment you made, I think that you're targeting between 20 and 30 new producer hires this year. Is there a target mix you have of the 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 the 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, planned for financial advisors and the wealth management group to help augment our new investment in Florida and central Florida via Sable. 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 in the plan is 24. but if we could get 30 or more, that would be 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 Gerlinger, Citi.

Hey, good afternoon.

Hey, there.

I just want to follow up quickly on kind of the M&A conversation. Mike, you said there's really not a lot of appetite. Is that in relation to depositories, i.e. loans and deposits, or is that like all M&A? So that would also include like not interested in fee income generated business.

Yes, great question, Ben, and great clarification. So the question was really directed, I think, at depositories. Certainly, we're in the midst of closing on Sable, 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 asking and answering. Thanks, Chris. You bet.

Our last question today comes from Christopher Marinak, Jenny 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 any more color there?

Yeah, good question. Really, it's just the change in our outlook for fundings, likely that There's going to be potentially more funding just converting over from unfunded to funded, and so therefore it'll just kind of move over from that perspective.

Okay, and as some of the factors 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?

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

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

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 many of the mid-cap banks, we're split between the baseline scenario as well as the slower growth scenario. And the baseline scenario that we're using does not have the impact of a recession, 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 you know, 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 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 I want to just kind of 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 um you know a higher recession risk okay great that's that's good uh background thank you both i appreciate it 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

Thanks, Lisa. Thanks for moderating the day, and thanks, everyone, for attending the late call. Look 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.