Q1 2024 Hancock Whitney Corporation Earnings Call

Operator: Good day, ladies and gentlemen. Welcome to Hancock Whitney Corporation's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and Instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Catherine Mistich, Investor Relations Manager. You may begin.

Good day, ladies and gentlemen, welcome to Hancock Whitney Corporation's first quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.

Later, we will conduct a question and answer session.

And instructions will follow at that time as a reminder, this call may be recorded I would now like to introduce your host for today's conference Kathryn Mr. Investor Relations manager you may begin.

Catherine Fitzhugh Summerson Mealor: Thank you, and good afternoon. During today's call, we may make four viewing 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.

Kathryn: Thank you and good afternoon during.

Kathryn: 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.

Kathryn: 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.

Kathryn: As everyone understands the current economic environment is rapidly evolving and changing.

Catherine Fitzhugh Summerson Mealor: 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.

Kathryn: 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.

Kathryn: Our results.

Kathryn: And our actual results and performance could differ materially from those set forth in our forward looking statements.

Kathryn: 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.

Catherine Fitzhugh Summerson Mealor: Some of the comments 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 Hairston, President and CEO; Mike Achary, CFO, and Chris Ziluca, Chief Credit Officer. I will now turn the call over to John Hairston.

Kathryn: Some of our remarks contain non-GAAP financial measures you can find reconciliations to the most comparable GAAP measures in our earnings release and financial tables. The presentation slides included in our 8-K are also posted with the conference call webcast link on the Investor Relations website.

Kathryn: We will reference some of these slides in today's call.

Kathryn: Participating in today's call are John Harrison, President and CEO, Mike <unk>, CFO, and Chris <unk>, Chief Credit Officer, I will now turn the call over to John Harrison.

John M. Hairston: Thank you, Catherine, and thanks, everyone, for joining us. We are pleased to report a solid start to 2024, which marks our 125th anniversary of helping people achieve their dreams under a charter our founders established in 1899. The first quarter results reflect our efforts to continue to grow capital and to reposition our balance sheet, all while maintaining solid profitability and earnings. Fee income and expenses were both flat this quarter, demonstrating our ability to take advantage of fee income opportunities and, at the same time, control expenses. Net interest income was down slightly this quarter, driven by lower average earning assets due to the impact of a portfolio restructure.

John M. Hairston: Thank you Catherine and thanks to everyone for joining US today. We are pleased to report a solid start to 2024, which marks our 125th anniversary of helping people achieve their dreams under a charter our founders established an 18 99, the first quarter results reflect our efforts to continue to grow capital and to reposition our balance sheet.

John M. Hairston: All while maintaining solid profitability and earnings fee income and expenses were both flat this quarter, demonstrating our ability to take advantage of fee income opportunities and at the same time control expenses net interest income was down slightly this quarter driven by lower average, earning assets due to the impact of our portfolio restructure the decrease was.

John M. Hairston: The decrease was partially offset by a more attractive mix of earning assets, stabilization in deposit costs, and lower short-term borrowings. We ended the quarter with no wholesale borrowings except for the remaining brokered CD. Our continued focus on repositioning our balance sheet and prudent pricing efforts has led to NIM expansion. We are delighted with these results and believe we are well positioned to take advantage of future rate decreases should they happen this year. Loan growth was modest this quarter and in line with what we expected for the first half of the year. We continued our focus on more granular, full-relationship loans and are de-emphasizing large loan-only relationships.

John M. Hairston: Partially offset by a more attractive mix of earning assets stabilization in deposit costs and lower short term borrowings. We ended the quarter with no wholesale borrowings except the remaining brokerage Cds are continued focus on repositioning our balance sheet and prudent pricing efforts has led to NIM expansion. We are delighted with these results and believe we are.

John M. Hairston: We're well positioned to take advantage of future rate decreases should they happen this year.

John M. Hairston: Loan growth was modest this quarter and in line with what we expected for the first half of the year. We continued our focus on more granular full relationship loans and are deemphasizing large loan only relationships. The team was successful at producing the loan volumes necessary to overcome or more select credit appetite and achieved overall growth with mortgage <unk>.

John M. Hairston: The team was successful at producing the loan volumes necessary to overcome our more select credit appetite and achieved overall growth, with mortgage driving the growth this quarter. Loan pricing remains a top priority, and we believe focusing on more granular credit deals will drive improved pricing on new loans. As expected, our credit quality metrics continued to normalize during the quarter, and net charge-offs were modest. Despite the uptick in criticized commercial and non-accrual loans, we remain in the top quartile of our peers. Our loan portfolio is diverse, and we still see no significant weakening in any specific portfolio sectors or geography. We remain proactive in monitoring portfolio risk and are mindful of potential macroeconomic environments.

John M. Hairston: Giving the growth this quarter loan pricing remains a top priority and we believe focusing on more granular credit deals will drive improved pricing on new loans as expected our credit quality metrics continued to normalize during the quarter and net charge offs were modest despite the uptick in criticized commercial and non accrual loans, we remain in the top core.

John M. Hairston: All of our peers, our loan portfolio is diverse and we still see no significant weakening in any specific portfolio of sectors or geography, we remain proactive in monitoring portfolio risk and are mindful of potential macroeconomic environments. We continue to maintain a solid reserve of 142% up slightly from the prior quarter.

John M. Hairston: We continue to maintain a solid reserve of 1.42 percent, up slightly from the prior quarter. We are pleased with our deposit growth during the quarter of 86 million, which included the maturity of 195 million in broker deposits. Excluding the impact of broker deposits, client deposits were up $281 million this quarter. We saw growth in money markets and in CDs due to promotional pricing we offered on both of these account types. The DDA remix continued, but the overall pace continued to slow.

John M. Hairston: We're pleased with our deposit growth during the quarter of 86 million, which included the maturity of $195 million in broker deposits. Excluding the impact of broker deposits client deposits were up $281 million. This quarter, we saw growth in money markets and Cds due to promotional pricing we offered on both of these.

John M. Hairston: Types. The DDA remix continued but overall pace continues to slow we ended the quarter with 36% of our deposits and Dth. We're also proud to report continued improvement in all of our capital ratios. Our TCE grew to $8 six 2% and our common equity tier one ratio ended the quarter at $12 67.

John M. Hairston: We ended the quarter with 36 percent of our deposits in DDAs. We are also proud to report continued improvement in all of our capital ratios. Our TCE grew to 8.62 percent, and our common equity tier one ratio ended the quarter at 12.67 percent. Our capital metrics continue to be supported by our solid earnings. We remain well capitalized, inclusive of all AOCI and unrealized losses. A quick note on guidance. We did not make any updates to our guidance this quarter, which Mike will further address in his commentary next. As we look forward to celebrating our 125th year and beyond, we believe we continue to position ourselves to effectively navigate any operating environment. With that in mind, I'll invite Mike to add additional color.

John M. Hairston: Percent, our capital metrics continue to be supported by our solid earnings we remain well capitalized inclusive of all a OCI and unrealized losses. A quick note on guidance, we did not make any updates to our guidance this quarter, which Mike will further address in his commentary next as we look forward to celebrating our 125th year and beyond.

John M. Hairston: We believe we continue to position ourselves to effectively navigate any operating environment with that I'll invite mark to add additional color.

Michael M. Achary: Thanks, John. Good afternoon, everyone. First quarter's reported net income was $109 million, or $1.24 per share. We did accrue an additional net charge of $3.8 million, or 4 cents per share, for the FDIC special assessment this quarter. Excluding this item, net income would have been $112 million, or $1.28 per share.

Mark: Thanks, John and good afternoon, everyone first quarter's reported net income was $109 million or $1 24 per share. We did accrue an additional net charge of $3 8 million or <unk> <unk> per share with the FDIC special assessment this quarter.

<unk>. This item net income would have been $112 million or $1 28 per share.

Michael M. Achary: Adjusted PTNR was $153 million, down about $3 million from the prior quarter, but in line with expectations. Our NIM did expand five basis points this quarter, but NII was down mostly due to a smaller average earning asset base. Fees and expenses were in line and flat with last quarter. As mentioned, we saw NIM expansion this quarter with NIM of 3.32 percent, up five basis points from the prior quarter. As shown on slide 15 of the Investor Deck, our NIM performance was driven by higher securities yields following our bond portfolio restructuring last quarter, a slower rate of deposit cost increases and NIB remix, improved funding mix, and then finally higher loan. NII was down primarily due to lower average earning asset, following the bond portfolio restructuring, but the decline was partially offset by improved earning asset mix and lower levels of wholesale funding. In fact, we ended the quarter with zero After the brokerage CD maturity of $195 million this quarter, we only have $395 million remaining. Those mature in May.

Mark: Adjusted <unk> was $153 million down about $3 million from the prior quarter, but in line with expectation.

Mark: Our NIM did expand five basis points this quarter, but NII was down mostly due to a smaller average earning asset base.

<unk> expenses were in line and flat with last quarter.

Mark: As mentioned, we saw NIM expansion this quarter with NIM of 332% up five basis points from the prior quarter.

Mark: On slide 15 of the Investor deck, our NIM performance was driven by higher securities yields following our bond portfolio restructuring last quarter.

Mark: Slower rate of deposit cost increases in niv rig mix improved funding mix and finally higher loan yields.

Mark: <unk> was down primarily due to lower average earning assets.

Mark: The bond portfolio restructuring, but the decline was partially offset by improved earning asset mix and lower levels of wholesale funding. In fact, we ended the quarter with zero FH Lv advances.

Mark: After the brokered CD maturity of 195 million this quarter, we only have $395 million or made.

Mark: Those mature in May our intent as of now would be to not renew the knight brokerage CD maturities.

Michael M. Achary: Our intent as of now would be to not renew the May brokered CD maturity. Deposit costs were up 8 basis points to 2.01% from 1.93% in the fourth quarter. The month of March actually came in a bit lower at 2%, an indicator that we have reached a peak this quarter and deposit costs may begin to turn over. The moderation in deposit costs was driven by slower DDA deposit remains. Higher Growth and Lower Cost Interest Bearing Transaction Accounts, and the Broker Seeding Maturity

Mark: Deposit costs were up eight basis points or 2.0% to 1% from 193% in the fourth quarter. The month of March actually came in a bit lower at 2% an indicator that we have reached the peak this quarter and deposit costs may begin to turnover.

Mark: The modulation in deposit costs was driven by slow with DDA deposit remix higher growth and lower cost interest bearing transaction accounts and the broker CD maturity. Our total deposit beta remains at 37% cycle to date.

Michael M. Achary: Our total deposit data remains at 37% of cycle to date. The most significant driver of deposit costs going forward will be repricing activity on CDs. On the earning asset side, our securities yield was up nine basis points to 2.56 percent, primarily due to the full quarter realization of the bond portfolio restructuring transaction. The yield in the month of March was 2.58%, and we expect to see further yield improvement with portfolio reinvestments this year. We expect just under $600 million in principal cash flow from the bond portfolio over the next three quarters.

Mark: The most significant driver of deposit costs going forward will be repricing activity on Cds.

Mark: On the earning asset side, our securities yield was up nine basis points to five 6% primarily due to the full quarter's realization of the bond portfolio restructuring transaction.

Mark: The yield in the month of March was $2 five 8% and we expect to see further yield improvement with portfolio Reinvestments. This year.

Mark: We expect just under $600 million in principal cash flow from the bond portfolio over the next three quarters those cash flows will come off at around two 9%.

Michael M. Achary: Those cash flows will come off at around 2.9% and could get reinvested at yields of around 200 basis points higher. Our loan yield improved to 6.16% this quarter, up five basis points last quarter. However, the rate of yield growth on loans has slowed as much of the impact of 2023's rate hikes was fully priced in during the fourth quarter. However, we remain focused on maximizing loan pricing.

Mark: We'd get reinvested at yields of around 200 basis points higher.

Mark: Our loan yield improved to 616% this quarter up five basis points linked quarter the rate of yield growth on loans has slowed as much of the impact of 2020 Three's rate heights were fully priced in during the fourth quarter. However, we remain focused on maximizing loan pricing.

Michael M. Achary: As we think about our NIM in 2024, our guidance remains unchanged and includes three rate cuts at 25 basis points each in June, September, and December this year. We continue to expect modest NIM expansion across the next three quarters. Edwins includes some level of continuing deposit remit, which has slowed, but we do expect that any rate cuts will be a tailwind as we are able to reprice seeding maturities lower in the second half of the year.

Mark: As we think about entering in 2024, our guidance remains unchanged and includes three rate cuts of 25 basis points. Each in June September and December. This year, we continue to expect modest NIM expansion across the next three quarters.

Mark: Headwinds include some level of continuing deposit remix.

Mark: Which has slowed but we do expect that any rate cuts will be a tailwind as we are able to reprice CD maturities lower in the second half of the year.

Michael M. Achary: The income was flat this quarter as we benefited from strong activity and investment in annuity income. However, expenses, excluding the special FDIC assessment, were up less than 1% this quarter, reflecting our focus on controlling costs throughout the company.

Mark: Fee income was flat this quarter as we benefited from strong activity and investment in annuity income.

Mark: Expenses, excluding the special FDIC assessment were up less than 1% this quarter, reflecting our focus on controlling costs throughout the company.

Michael M. Achary: As noted, we have not changed our forward guidance this quarter, which is summarized on slide 22 of the investment. However, we have included disclosure around what we believe the impact on PPNR will be if there are no rate cuts this year. Lastly, a quick comment on Capitol Hill. As John mentioned, our capital ratios remain remarkably strong and continue to grow. In our efforts to manage capital in the best interest of our company and our shareholders, we may pivot to looking at our common dividend and the potential resumption of buybacks under our current authority at some point later this year. I will now turn the call back to John. Thanks, Mike. Let's open the call for

Mark: As noted we have not changed our forward guidance this quarter, which is summarized on slide 22 of the investor deck. However, we have included a disclosure around what we believe the impact on P. PNR will be if there were no rate cuts this year.

Mark: Lastly, a quick comment on capital.

Mark: As John mentioned, our capital ratios remained remarkably strong and continue to grow.

In our efforts to manage capital in the best interest of our company and our shareholders, we make pivots to looking at our common dividend and the potential resumption of buybacks under our current authority at some point later this year.

Mark: I will now turn the call back to John.

John M. Hairston: Thanks, Mike, Let's open the call for questions.

John M. Hairston: Thanks, Mike. Let's open the call for questions.

John M. Hairston: Thank you Bill.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star on your time to raise your hand and join the discussion. If you would like to withdraw your question, simply press 1 again. For podcast listeners and those listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Please ask one question and one follow-up. Your first question comes from Catherine Mealor from KBW. Please go ahead. Thanks.

Speaker Change: We will now begin question and answer session, if you'd like to ask a question. Please press star on your time.

Tom: Sure Tom.

Speaker Change: Japan and join the queue.

Speaker Change: If you would like to withdraw your question simply.

Tom: I just wanted to ask.

Tom: For the project.

Tom: And our listening via loud speakers.

Tom: Please pickup your handset and ensure that your that your phone is not on mute when asking your question.

Tom: Please ask one question and one follow up.

Tom: Your first question comes from Catherine Mealor from K B W. Please go ahead.

Catherine Fitzhugh Summerson Mealor: Thanks. Good afternoon. I want to start on credit. I'm just going to see if you could give us some more color on the increase in non-performing loans and criticize the assets that you show in the slide deck.

Catherine Fitzhugh Summerson Mealor: Thanks, Good afternoon.

Catherine Fitzhugh Summerson Mealor: Hi, Catherine.

Catherine Fitzhugh Summerson Mealor: Let me start on credit just wanted to see if you could give us.

Catherine Fitzhugh Summerson Mealor: Or color on the increase in non performers and criticized assets.

Catherine Fitzhugh Summerson Mealor: Show in the slide deck.

Christopher S. Ziluca: Yeah, thanks, Catherine. It's Chris Ziluca.

Catherine Fitzhugh Summerson Mealor: Yeah. Thanks, Thanks, Katherine question Luca.

Christopher S. Ziluca: One of the things that we want to, I wanted to point out is that we continue to really operate at historically low levels, both in criticized and not a tool loans. And I also wanted to point out that we also have a pretty low level of modified loans. We're at about 16 basis points of modified loans. But we did see, as you noted, and the slide deck points out on page 12, that we did have an increase in criticized loan movement, net movement during the quarter. You know, we spent some time kind of looking at the various categories and geographies and really couldn't find any, any continued common factor between any of them.

Catherine Fitzhugh Summerson Mealor: One of the things that we want to I wanted to point out is we continue to really operate at historically low levels of criticized and and.

Catherine Fitzhugh Summerson Mealor: Non accrual loans.

Speaker Change: And also wanted to point out that we also have a pretty low level of modified loans worried about 16 basis points of modified loans, but we did see as you noted.

Speaker Change: In the slide deck points out on page 12.

Speaker Change: We did have an increase in criticized loans movement net movement and during the quarter. We spent some time kind of looking at the various categories and geographies and really couldnt find any any continued common factor between any of them and I guess, what I would say is.

Christopher S. Ziluca: And I guess what I would say is, from my perspective, I think a lot of companies, you know, in general, have been enjoying historically the high level of liquidity, which has kind of burned down. And with the current economic environment and the higher interest rates, I think operating costs are a little bit higher for some. And so there are probably some challenges in general. And I guess I would say that that's probably mostly the common theme that I would be seeing in the movement to criticize, but I don't really see anything substantial, you know, that's within even those movements.

Speaker Change: From my perspective, I think.

Speaker Change: A lot of companies in general have been enjoying historically the high level of liquidity, which has kind of burned down and with the current economic environment and the higher interest rates I think operating costs are a little bit higher for some.

Speaker Change: And so there is probably some challenges in general.

Speaker Change: I would say that thats, probably mostly the common theme that I would be seeing in the movement to criticize but I don't really see anything substantial.

Speaker Change: Substantial.

Speaker Change: That's within even those movements in a matter of fact, I believe that over time, they'll probably resolve themselves.

Christopher S. Ziluca: And as a matter of fact, you know, I believe that over time, they'll probably resolve themselves. And similarly, with non-accruals during the quarter, you know, really were driven by, you know, a single commercial credit. We appropriately charged that credit down to a point where we felt confident in its ongoing success after the charge down.

Speaker Change: And similarly with non accruals during the quarter really was driven by a single commercial credit.

Speaker Change: We appropriately.

Speaker Change: Charge to that credit down to a point, where we feel confident in it.

Speaker Change: Ongoing success after the charge down.

Speaker Change: Okay great.

Christopher S. Ziluca: And would you say that number four, which moved most of the charge off the square, was related to that one credit?

Speaker Change: And would you say that number format.

Speaker Change: Most of the charge offs this quarter were related to that one credit.

Christopher S. Ziluca: Uh, yes, they were.

Speaker Change: Yes, they were.

Speaker Change: Okay.

Christopher S. Ziluca: And then in the I think criticized, it looks like it's about a 66 million increase. Are there any larger credits within there, or is it mostly just smaller credits? To your point, it wasn't a real trend. But just curious if there are any kind of lumpy credits within there. It's probably

Speaker Change: And then I think criticize it looks like it's about a $66 million increase are there any larger credits within there or is it mostly just smaller credits to your point. It was no real trend, but just curious is there any kind of lumpy credits within there.

Christopher S. Ziluca: It's probably a mix. I mean, I think there are some, you know, I guess, medium-sized credits, I would call them, that are in there. But, you know, I think a lot of, I mean, even when I look at some of the larger credits, the really medium-sized, I would call them, I see them as kind of a transitory situation for those larger ones where they've maybe had a little bit of a revenue challenge that needs to be dealt with through the right sizing of their operating expense load.

Speaker Change: Yes, it's probably a mix I mean, I think there are some I guess medium sized credits I would call them that are in there but.

Speaker Change: I think a lot of I mean, even when I look at some of the larger credits and they're really medium size I would call them.

Speaker Change: I see them as kind of a transitory situation for those larger ones, where they maybe had a little bit of a revenue challenge that needs to be dealt with through the right sizing of their operating expense expense load.

Catherine Fitzhugh Summerson Mealor: And you've talked a lot in the past couple of quarters about just your desire to lower your reliance on kind of non-relationship credits and move towards a more granular loan portfolio. As we think about your shared national credit portfolio, that's, I think, about 11 percent of loans. Is there a level to which you think that could move over time? And I'm just trying to kind of frame the size of the headwind that is to you getting the growth spigot to turn back on once we get to maybe a little bit more stabilization in the industry.

Speaker Change: Okay.

Speaker Change: Okay great.

Speaker Change: You talked a lot the past couple of quarters about just your.

Speaker Change: Okay.

Speaker Change: The lower your reliance on kind of.

Speaker Change: Non relationship credits.

Speaker Change: And move towards a more granular loan portfolio.

Speaker Change: As we think about your shared national credit portfolio, I think about 11% of loans.

Speaker Change: Is there a level to where you think that could move to over time and I'm just trying to kind of frame. This.

Speaker Change: Size of a headwind that is to you.

Speaker Change: Getting the gross ticket to turn back on once we get to maybe a little bit more stabilization in the industry.

John M. Hairston: Okay, Catherine, this is John. I'll take that one.

Speaker Change: Okay. Catherine this is John I'll take that one thanks for the question good to hear voice. So in terms of the comparative to peers and as you know not everybody reports. So when we look to see how we compare to others. Occasionally we've noted on notes were redeemed has been a little heavy in that category.

John M. Hairston: Thanks for the question. It's good to hear your voice. So in terms of comparing to peers, I mean, as you know, not everybody reports. So when we look to see how we compare to others, and occasionally we've noted on notes where we're deemed as being a little heavy in that category, which, you know, it's always bothersome to be considered heavy in anything that may be considered something less than good. Our reliance on syndications was never intended to be because we couldn't produce enough.

Speaker Change: Which is always bothersome to be considered having anything that maybe consider something less than good.

John M. Hairston: Our our reliance on syndications is never intended to be because we couldn't produce enough otherwise it was because we had so much excess liquidity during the aftermath of the PPP credits that are desired to get something better than zero at the fed overnight, we did a little bit more liquidity to follow the development because we had.

John M. Hairston: Otherwise, it was because we had so much excess liquidity during the aftermath of the PPP credits that our desire to get something better than zero with the Fed overnight; we did a little bit more liquidity deployment development because we had a little more liquidity to deploy. So that's now coming down. And I think over the course of the next couple of years, it should moderate something in the neighborhood of what we see as reported peer levels, which is a couple of hundred basis points expressed as a percentage of loans.

John M. Hairston: A little more liquidity to deploy.

That's now coming down and I think over the course of the next couple of years. It should moderate something in the neighborhood of what we see is reporting peer levels, which is a couple of hundred basis points as expressed as a percentage of <unk>. So if you apply dollars to that it's about $250 million per year.

John M. Hairston: So if you apply dollars to that, it's about 250 million per year for a couple of years if you put it in that context. So that's not a size that we're concerned about our production being able to replace. And we have the ability to moderate that up or moderate that down, just as we participate and renew and look at new relationships, if that makes sense. So not insurmountable, but it's out there as a counter-argument, but if we can redeploy credit-only money into full relationship money, ultimately, we're ahead in overall revenue.

John M. Hairston: For a couple of years, if you put it in that context so.

John M. Hairston: It's not a SaaS.

John M. Hairston: Concern now.

John M. Hairston: Not a SaaS that were concerned about our production being able to replace.

John M. Hairston: And we have the ability to moderate that up or moderate that down just as we participate in review and look at our new relationships if that makes sense, so not insurmountable, but it's out there as a contra but.

John M. Hairston: If we can redeploy credit only money into full relationship money. Ultimately we're ahead in overall revenue that makes sense.

Catherine Fitzhugh Summerson Mealor: It does. Great, great. Was that specific enough for what you were looking for? Yes. The $250 million was exactly what I was looking for.

Speaker Change: It does thats great question.

Was that specific enough for what you would look at that yes, 50 million is exactly what I was looking for thank you.

Speaker Change: You bet. Thank you.

Michael Edward Rose: Your next question comes from the line of Michael Rose from Raymond James. Please go ahead.

Speaker Change: Your next question comes from the line of Michael Rose from Raymond James. Please go ahead.

Michael Edward Rose: Hey, good afternoon, everyone. Thanks for taking my questions. I just wanted to follow up on the SNCC commentary. It looks like it kind of accounted for kind of all this quarter's loan growth. And I think the balances were about two point six billion, you know, last quarter.

Michael Edward Rose: Hey, good afternoon, everyone and thanks for taking my questions just wanted to follow up on the spec commentary it looks like it kind of accounted for kind of all of this quarter's loan growth I think the balances were about $2 6 billion last quarter and you've talked about.

Michael Edward Rose: And you've talked about, you know, reiterated again, kind of acceleration in the back half of the year on loan growth. But, you know, I think there are growing signs that the economy is slowing. What gives you confidence that you will see that acceleration?

Michael Edward Rose: Our reiterated again kind of acceleration in the back half of the year on loan growth, but I think there's growing signs that the economy is slowing just just what gives you confidence that.

Michael Edward Rose: Yes, you will see that acceleration is it something in the pipelines is it what youre hearing from your customers and what could be the puts and takes that outfit and then what should we think contemplate snack growth.

Michael Edward Rose: Is it something in the pipelines? Is it, you know, what you're hearing from your customers? And, you know, who could be the person that takes that outfit?

Michael Edward Rose: And then, you know, what should we think or contemplate, you know, SNCC growth as part of that guidance? Thanks. Sure. Sure, Michael.

Speaker Change: As part of that guidance. Thanks.

Speaker Change: Sure Michael.

John M. Hairston: And to be clear, the net growth you show quarter over quarter shows a good bit of apprentices moving into the category that are not new. So, as you know, it's somewhat of a technical designation. So if, even under a common exposure, the outstanding balances creep above the line of demarcation where it's considered a SNCC, or if there are a couple of three banks and then they add another bank that pushes the SNCC over, then we have to classify it.

Speaker Change: Be clear of the net growth to show quarter over quarter.

Speaker Change: There's a good bit of credits just moving into the category that are not new so as you know its somewhat of a technical designation so F. Ter.

Speaker Change: If even under a common exposure if the outstanding balances creep above a lot of demarcation, where it's considered a snack or if there is a couple of three banks and then they add a bank that pushes over into snacks, and we have to classify as a snack because that makes sense. So that's not the vast majority of what you see is the increase is not new money.

John M. Hairston: Does that make sense? So the vast majority of what you see as the increase is not new money. It's simply a class change into the SNCC category. Does that make sense? Yep, totally, totally get it. So at this point in time, we are in the position of, on a net basis, quarter over quarter, decreasing the large credit-only relationship. They're not that big, but it's higher than we'd like it to be. And frankly, we need the liquidity to put into other things that we think are better and more valuable to investors over the course of time. Did that answer your question, Michael?

Speaker Change: It's simply class change into the snack category that makes sense.

Speaker Change: Yes totally totally got it.

Speaker Change: So at this point in time, we are in the posture.

Speaker Change: On a net basis quarter over quarter decreasing the large credit only realized they're not that big but it is higher than we'd like it today and frankly waiting to liquidity to put into other things that we think are better and more valuable to investors over a course of time.

Speaker Change: The delay answering your question Michael.

Speaker Change: Yes, and then just the puts and the takes to kind of the back half.

Michael Edward Rose: You know, kind of the back half, acceleration and growth, just given some of the macro headwinds. Oh, sure.

Speaker Change: Acceleration in growth just given some of the macro headwinds.

Speaker Change: Sure well if you look at it overall and it's when you get into puts and takes I could talk probably with more detail than you want to hear but I'll try to summarize it at this point in time. There is a number of tail winds that are helpful and the ones that I'll call out for the first quarter, which we haven't talked about a lot lately as we get to enjoy a modest amount of line.

John M. Hairston: Well, if you look at it overall, and it's, you know, when you get into puts and takes, I could talk about it in more detail than you want to hear, but I'll try to summarize it. At this point in time, there are a number of tailwinds that are helpful. And the ones that I'll call out for the first quarter, which we haven't talked about a lot lately, is that we did enjoy a modest amount of line utilization improvement. And you see that on page 8.

Speaker Change: <unk> improvement you can see that on page eight I think it's been five quarters. Since we saw line utilization improve and so one data point isn't a trend and I would be early and premature to say that that's a sustainable trend, but we anticipated.

John M. Hairston: I think it's been five quarters since we saw line utilization improve, and so one data point isn't a trend. And I would be early and premature to say that that's a sustainable trend. But we anticipated, you know, way back when, that as deposits on average per account began to moderate back toward pre-pandemic levels, call it 2019 levels, that logically, we should see line utilization begin to creep back up a little bit.

Speaker Change: In a way back when that is deposits on average per account again to moderate back towards pre pandemic levels call. It 2019 levels that logically we should see line utilization begin to creep back up a little bit to the good and that's pretty much exactly what's happening whether that continues or not I.

John M. Hairston: And that's pretty much exactly what's happening. Whether that continues or not, I wouldn't want to bet one way or the other, but we did expect utilization to go up when we normalized deposit account sizes. And that happens to be, you know, now. And so it wasn't a surprise. And we weren't, but it was welcome. So that's a pretty good tailwind. And it really didn't cost us anything to get that additional income.

Speaker Change: I wouldn't want to bet, one way or the other but we did expect utilization to go up when we normalize deposit account sizes and that happens to be now and so it wasn't a surprise.

Speaker Change: But it was welcomed so.

Speaker Change: A pretty good tailwind and it really doesn't cost us anything.

Speaker Change: To get that additional income.

John M. Hairston: Secondly, given the rate environment, we're seeing paydowns that are unexpected in nature, very, very minimal. There are very few operating company divestitures happening, at least in our book of business. And so we don't see much, you know, wiring in to pay off a loan because a business has been sold.

Speaker Change: Secondly, given the rate environment, we're seeing pay downs that are unexpected and nature are very very much minimal.

Speaker Change: We're very few operating company divestitures happening at least in our book of business and so we don't see much wire and to pay off alone because our business has been sold certainly not as much as we saw in 2022 in the first half of 'twenty three so that's been pretty close to zero as we get to the back half of the year.

John M. Hairston: Certainly not as much as we saw in 2022 in the first half of 23. So that's been pretty close to zero. As we get to the back half of the year, there will be two drivers for an increase, and it will be across most of our categories of lending. One would be if the rate environment does finally begin to moderate some, and those people who have been on the fence are waiting for a better deal time, I think they'll probably take action.

Speaker Change: There'll be two drivers for increase and it will be across most of our categories of lending one would be if the rate environment does finally began to moderate.

Speaker Change: That those people who have been on the fence or waiting for a better deal time, I think they will probably take action.

John M. Hairston: Secondly, even if the rate environment doesn't go down, I would anticipate there is enough pent-up demand to do things as a business owner that they'll simply say, I really don't want to wait any longer because there may not be a better deal a quarter or two down the road. And we'll go ahead and pull that trigger now.

Speaker Change: Secondly, even if the rate environment doesn't go down that I'll anticipate there's enough pent up demand to go do things as a business owner that they will simply say I really don't want to wait any longer because there may not be a better deal a quarter or two down the road and we will go ahead and pull that trigger now so I would think it would be a better environment for growth if rates go down.

John M. Hairston: So I would think it'd be a better environment for growth if rates go down. But even if they don't go down, I think the more likely question will be, how much are we willing to concede on rates to get the business to grow its balance sheet? And it's a little early for us to be able to tell that at this point in time.

Speaker Change: But even if they don't go down I think the more likely question will be how much are we willing to concede on rate to get the business to grow the balance sheet and Thats a little early for us to be able to tell at this point in time right now we're still focused on.

Speaker Change: Good rate given that that the cost of deposits is what it is today.

Speaker Change: Okay.

Speaker Change: That's great color John.

Michael Edward Rose: Maybe one for Mike, before I step back, appreciate the color on PP&R X rate cuts. Looks like consensus is already within that range, implying that you would do better with rate cuts. Is that the way to read it in any sense of what PP&R can look like? Kind of, well, I guess you said it, you know, down one to 2%, you know, just sort of any broad strokes on what the puts and takes are to that outlook with, with no cuts, because obviously, there'd be other pieces that move. You know, if we don't get any cuts, so like, would there be some offsets in fee income or things like that?

Speaker Change: Maybe one for Mike before I step back I appreciate the color on <unk>.

Speaker Change: Rate cuts it looks like consensus is already within that range, implying that you would do better with rate cuts is that the way to read it in any sense of what <unk> could look like.

Speaker Change: Well I guess you said it.

Speaker Change: Down 1% to 2%.

Speaker Change: Just sort of any just broad.

Speaker Change: Strokes on what.

Speaker Change: The puts and takes are to that to that outlook with with no cuts because obviously there'll be other pieces that move.

Speaker Change: If we don't get any cuts so like would there be some offsets in fee income or things like that.

Speaker Change: Yes.

Michael Edward Rose: Yeah, thank you, Michael. I appreciate the question. And we did add that disclosure this quarter around what we view PPNR doing with zero rate cuts versus the three that really are embedded in the original guidance. And, you know, the difference isn't big. It amounts to about $7 million or so of NII for the last three quarters of the year. So, again, it's not a really big difference.

Speaker Change: Yeah. Thank you Michael I appreciate the question and.

Speaker Change: We did add that disclosure this quarter around what we view.

Speaker Change: <unk> two with zero rate cuts versus the three that really is embedded in the original guidance and the.

Speaker Change: But the difference isn't big it amounts to about $7 million or so of NII for.

Speaker Change: For the last three quarters of the year. So again, it's not a real big difference.

Speaker Change: And most of that difference would be weighted really toward the second half of the year and to be honest with you a lot of it really is in the fourth quarter. So the way, we think about our NIM going forward really in the second quarter I think we expect pretty modest two.

Michael Edward Rose: And most of that difference would be weighted, really, in the end. And so from there, you'll see a little bit in the way of modest NIM expansion. But if we don't get the right cuts, then, again, after a handful of basis points in the second quarter, we're likely to be flat through the rest of the year. So that really is what drives that difference in guidance.

Speaker Change: A handful of basis points expansion and then if we do get the rate cuts we have the tailwind that helps us with the CD repricing in the back half of the year and so from there you will see a little bit in a way of modest NIM expansion. If we don't get the rate cuts then again after a handful of basis.

Speaker Change: In the second quarter will likely be flat through the rest of the year. So that really is what drives that difference in guidance.

Michael Edward Rose: The other things, though, that are certainly helpful as we kind of go through the year that aren't really impacted by whether there will be a difference in rate cuts or not are really the repricing of the bond portfolio as well as the repricing that continues to occur in our fixed rate loan portfolio. So we gave some information about the bond portfolio. We have about $600 million or so of bonds that will reprice from around 290 weighted average to probably right around 5%.

Speaker Change: The other things, though that are certainly helpful.

Speaker Change: As we kind of go through the year, there aren't really impacted by.

Speaker Change: Whether there'll be a difference in rate cuts are not Israeli the repricing of the bond portfolio as well as the repricing that continues to occur.

Speaker Change: Fixed rate loan portfolio. So we gave some information about the bond portfolio, we have about $600 million of so of bonds that will reprice.

Speaker Change: From around $2 90 weighted average to probably right around 5% now if we don't get the rate cuts in the treasury yields increase then that reinvestment rate will likely be a little bit better on the fixed rate loan side.

Michael Edward Rose: Now, if we don't get the rate cuts and the Treasury yields increase, then that reinvestment rate will likely be a little bit better. On the fixed-rate loan side, you know, we continue to enjoy the benefits of repricing that portfolio. So for the balance of the year, we're probably talking about $550 million or so in fixed-rate loans that are going to reprice from, call it $475 or so, to probably about 7.5%.

Speaker Change: <unk> continues to enjoy the benefits of repricing net portfolio. So for the balance of the year, we're probably talking about $550 million or so in fixed rate loans that are going to reprice from call. It $4 75, or so to probably about seven 5%.

Michael Edward Rose: So it's pretty important and a pretty good tailwind to have that repricing of both the bond portfolio as well as the fixed rate loan portfolio. And then the CDs, the benefit there really comes from the potential for rate cuts. And again, if those rate cuts don't happen, we'll have that difference that I mentioned. So hopefully, that's helpful. Yeah, very, very helpful.

Speaker Change: So it's pretty important in a pretty good tailwind to have debt repricing of both the bond portfolio as well as the fixed rate loan portfolio and then the Cds the benefit there it really comes from.

Speaker Change: The potential for rate cuts and again, if those rate cuts don't happen, we will have that difference that I mentioned.

Speaker Change: So hopefully that's helpful. Yes, very very helpful. Mike. Thanks for you guys for taking my questions I appreciate it.

Michael Edward Rose: Yeah, very, very helpful, Mike. Thanks for guys for taking my questions. I appreciate it.

Speaker Change: Thank you Mark.

Casey Haire: Your next question comes from the line of Casey Haire from Jeffries. Please go ahead.

Speaker Change: Your next.

Speaker Change: Question comes from the line of Casey Haire from Jefferies. Please go ahead.

Casey Haire: Great, thanks. Good afternoon, everyone.

Casey Haire: Great. Thanks, good afternoon, everyone.

Michael M. Achary: Mike, wanted to follow up on the CD repricing. You guys mentioned that as a major factor in the NIM. I think last quarter, and you might have said in the prepared remarks, but 900 million comes due this quarter, I believe it was a 477 rate. What is the expectation that that rolls over? We've been hearing that CD repricing, CD prices have come in a little. Yeah, they definitely have.

Casey Haire: Mike wanted to follow up on the on the CD repricing you guys mentioned that is.

Casey Haire: A major factor on the NIM.

Casey Haire: I think last quarter and you might have said in the prepared remarks, but $900 million comes due this quarter I believe it was a $4 77 right.

Casey Haire: What is your expectation that that rolls over we've been hearing that CD repricing CD prices have come in a little.

Speaker Change: Yes, they definitely come in and.

Michael M. Achary: Yeah, they definitely come in, and our best promo rate is 5% for 5 months, and so that continues to be, you know, probably our best-selling CDs. We also have a 9-month at $4.75, and an 11-month at $4.25. But as far as the CD maturities go, those numbers are constantly moving around depending on the reinvestment or the renewal rates going forward. So what the numbers look like now is that for the second quarter, we actually have about $2 billion of CDs maturing.

Speaker Change: Our best promo rate is 5% four five months and so that continues to be.

Speaker Change: Probably our best selling Cds, we also have a nine month at four.

Speaker Change: 75% and 11 months at four in a quarter, but as far as the CD maturities those numbers are constantly moving around depending on the reinvestment of the renewal rates going forward. So what the numbers look like now is for the second quarter. We actually have about 2 billion of Cds maturing those are coming off at 488.

Michael M. Achary: Those are coming off at $4.88. In the third quarter, that goes down to about $1.3 billion, coming off at $5.11, and in the fourth quarter, about $900 million, coming off at about $4.69. So the way we're looking at the renewals of those CDs, the second quarter, there'll be some benefit, but it'll be pretty minor for the most part. So for the third and fourth quarters, those benefits do become a little bit more significant, especially in an environment where we do have one or more rate cuts during that time period.

Speaker Change: Third quarter that goes down to about $1 three coming off at 511 and in the fourth quarter about $900 million coming off at about $4 69.

Speaker Change: So.

Speaker Change: The way, we're looking at the renewals of those Cds are second quarter there'll be some benefit but it will be pretty minor for the most part so for the third and fourth quarter those benefits to become a little bit more significant especially in an environment, where we do have one more rate cuts.

Casey Haire: Very good. So, in other words, it's still a little bit of a headwind, but obviously diminishing, and then at some point, you're pretty much at market levels.

Speaker Change: During that time period.

Speaker Change: Okay.

Speaker Change: Very good so in other words, it's still a little bit of a headwind, but obviously diminishing and then at some point.

Speaker Change: Good.

Speaker Change: Yes.

Michael M. Achary: Yeah, I think so. I think that's right.

Speaker Change: <unk>.

Speaker Change: You're pretty much at market levels.

Casey Haire: Okay. All right. And then just your comments on capital. You know, I'm just wondering what the timing is around the back half of the year. Is that, I mean, your capital ratios are in great shape. You're tracking to your guide. I know it's an election year, but what is so special about the back half of the year to turn on the buyback?

Speaker Change: Yes, I think so I think that's right.

Speaker Change: Okay, Alright, and then just your comments on capital.

Speaker Change: I'm just wondering what is so what is.

Speaker Change: The timing around the back half of the year or is that I mean, your capital ratios are in great shape.

Speaker Change: You're you're tracking to your guide.

Speaker Change: Just I know, it's an election year, but what is so special about the back half of the year.

Speaker Change: On the buyback.

Speaker Change: <unk>.

Michael M. Achary: Yeah, I don't know that it's necessarily the back half of the year. So I think that's something that, you know, will be considered as we go through the next quarter or so. So, obviously, on the dividend and any change there, that's a board decision. And related to the buybacks, I think it's a pretty good option that we would probably resume buybacks at some level at some point in the next quarter or so. So I don't think that's necessarily constrained or going to be delayed to the back half of the year. And some of those things could start to occur as early as this year.

Speaker Change: Yes, yes, I don't I don't know thats necessarily the back half of the year. So I think that's something that.

Speaker Change: Will be considered as we even go through the next quarter or so.

Speaker Change: Obviously on the dividend and any change there that's a board decision.

Speaker Change: And related to the buybacks I think it is.

Speaker Change: Pretty a pretty good option that we would probably resume buybacks at some level at some point in the next quarter or so so I don't think thats necessarily constrained or going to be delayed to the back half of the year and some of those things could start to occur as early as this quarter.

Casey Haire: Oh, all right, great. Okay, and just last one for me, on the fee, the fee guide, still, you held that flat. If I run rate the first quarter result here, you're kind of right at the high end of the range. You guys did pretty well on other things. I'm just wondering, is that just conservative, or do you expect a little bit of a pullback?

Speaker Change: Alright, great.

Speaker Change: Okay, and then just last one for me.

Speaker Change: The fee the fee guide.

Speaker Change: Phil.

Speaker Change: You held that flat if I run rate. The first quarter results here you are kind of right at the high end of the.

Speaker Change: Yes.

Speaker Change: High end of the range.

Speaker Change: You guys did pretty well in other I'm. Just wondering is that just conservative or do you do you expect a little bit of a.

Michael M. Achary: No, I think it's conservative. So we didn't change the guidance on fees or expenses, but I would suggest, especially on fees, that there's probably a bias toward the upper end of that range. And even on expenses, a little bit of a bias toward the lower end of the range without changing the range itself, if that makes sense.

Speaker Change: Pull back.

Speaker Change: Yes, I think it's conservative so we didn't change the guidance on fees or expenses.

Speaker Change: Would suggest especially on fees that there's probably a bias toward the upper end of that range and EBIT on expenses, a little bit of a bias toward the bottom end of the range without changing the range itself that makes sense.

Casey Haire: Yes. All right, great. Thanks, guys.

Speaker Change: Yes, alright, great. Thanks, guys.

John M. Hairston: Yeah, Casey, this is John. I'll just add one other point that may be interesting if not helpful, and that is the components of the first quarter fee income included a couple of categories that are the best we've ever had. SBA continues to set records pretty much every quarter, and at the pace that that fee income bucket is improving, that pushes some of the guide high. And then, secondly, our wealth management area now makes up a full third of our fee income.

Speaker Change: Casey This is John I'll, just add one other point that just maybe.

John M. Hairston: Interesting if not helpful and that is the components of the first quarter fee income included a couple of categories that are the best we've ever had.

John M. Hairston: SBA continues to set records pretty much every quarter.

John M. Hairston: At the pace that that fee income bucket is improving.

John M. Hairston: That pushes some of the guide high and then secondly, our wealth management area now makes up a full third of our fee income I mean, it was probably less than 10% to seven or eight years ago and now it's almost a third of that included these record sales and annuities. This quarter. After a record sales of annuities last quarter or so.

John M. Hairston: I mean, it was probably less than 10% just seven or eight years ago, and now it's almost a third. That includes record sales and annuities this quarter after record sales and annuities last quarter. And so you kind of hate to increase the guidance above the top end of the range on record performance after record performance two quarters in a row, particularly given the interest rate environment could curtail some of that, and you get the benefit on the net interest income side, right? So we probably are being a little conservative by leaving the guide alone, but we'd like to see more about what the rate environment looks like before we would consider changing it. Hopefully, that's helpful.

John M. Hairston: You kind of hate to have to increase the guidance above the top end of the range.

John M. Hairston: On record performance after our record performance two quarters in a row, particularly given the interest rate environment could curtail some of that and you get the benefit on the net interest income side right. So so we're probably we're being a little conservative by leaving the guide alone, but we'd like to see more about what the rate environment looks like before we would evaluate.

John M. Hairston: <unk> changed.

Hopefully that's helpful.

Stephen Kendall Scouten: Your next question comes from the line of Stephen Scouten from Piper Sandler. Please go ahead.

John M. Hairston: Okay.

John M. Hairston: Your next question comes from the line of Stephen Scouten from Piper Sandler. Please go ahead.

Stephen Kendall Scouten: Hey guys, thanks for the time here. I guess I'm curious about the movement.

Stephen Kendall Scouten: Hey, guys. Thanks for the time here.

Stephen Kendall Scouten: I guess I'm curious about the movements in noninterest bearing deposits you guys talked about the.

Stephen Kendall Scouten: I'm curious how you're thinking about the ultimate level of projected noninspiring deposits as a percentage of deposits today versus maybe the previous quarter.

Stephen Kendall Scouten: The pace of decline there is slowing I guess I'm curious, how you're thinking about the ultimate level of projected noninterest bearing deposits as a percentage of deposits today versus maybe previous quarter.

Stephen Kendall Scouten: versus maybe the previous quarter or

Michael M. Achary: Yes, Stephen, this is Mike. I'm happy to chat about that for a minute or two. So our DDA remix definitely is slowing down. There's no doubt that that's happening. And his support for that, I mean, obviously, you can see the numbers, but our percentage of deposits at a DDA moved from 37% last quarter to 36% this quarter, but the rate of decline was really less than half of the previous quarter. So in the fourth quarter, we were down about $600 million. This quarter, we were down only about $230 million or so.

Stephen Kendall Scouten: Sure.

Stephen Kendall Scouten: Yes, Stephen this is Mike.

Mike: Happy to.

Mike: To chat about that for a minute or two so.

Mike: Our DDA remix definitely a slowing there's no doubt that that's occurring.

Mike: His support for that I mean, obviously, you can see the numbers, but our percentage of deposits out of DDA.

Mike: <unk> from 37% last quarter to 36% this quarter, but the rate of decline was really less than half of the previous quarter. So in the fourth quarter were down about $600 million. This quarter, we were down only about $230 million or so so on a percentage basis that went from 5% to about two.

Michael M. Achary: So on a percentage basis, that went from 5% to about 2%. So on last quarter's call, we had talked about, you know, looking at the end of the year and suggesting that maybe that DDA percentage would be somewhere around 33 percent. Obviously, with the way that the remix is slowing, we would look at that number as being probably something closer to 35 percent or so as of now. And, you know, one additional point that certainly was a significant item, we think, is that in the month of March, we really saw our first increase in DDA deposits on an average basis in really almost two years. So I think that's further evidence that the remix is absolutely slowing down and could be turning over at some point.

Mike: Percent so on last quarter's call we had talked about.

Mike: Looking at the end of the year, and suggesting that maybe that DDA percentage would be somewhere around 33%.

Mike: Really with the way that the remix is slowing.

Mike: We would look at that number has been probably something closer to 35% or so as of now.

Mike: One additional point that certainly was.

Mike: A significant item. We think is in the month of March we really saw our first increase in DDA deposits on an average basis and really almost two years. So I think that's further evidence that remix is absolutely slowing and could be turning over at some point.

Stephen Kendall Scouten: Okay, that's really helpful. And I guess, with that 35%, would that be kind of within the context of assuming three rate cuts?

Speaker Change: Okay, that's really helpful and I guess with that 35% would that be kind of within the context of assuming three rate cuts and do you think that would get maybe marginally worse. If we were to get no cuts for whatever reason.

Michael M. Achary: I'm sorry, what was the question again? Yeah. We had three rate cuts. And do you think that would get maybe marginally worse if we were to get no cuts for whatever reason?

Michael M. Achary: I don't know that right now whether we get three rate cuts or zero rate cuts is going to have a real big impact on that number. I think that we see some things in motion again around the slowing of that remix, and those numbers beginning to move a little bit in the opposite direction, obviously in an environment where there are no rate cuts, which is today.

Speaker Change: I don't know that right now, whether we get three rate cuts or zero rate cuts is going to have a real big impact on that number I think that we see some things in motion again around the slowing of that remix and those numbers beginning to move a little bit in the opposite direction, obviously in an environment, where there are no right.

Speaker Change: Cuts, which is today.

Stephen Kendall Scouten: Okay, and then on going back to credit briefly, you guys have talked even in your release about credit metrics normalizing, but I guess I'm just kind of curious what that looks like for you because you still only had 15 basis points in that charge-offs, and you know some of these numbers are still historically low, so what do you feel like that normalization level really looks like for you all?

Okay, and then on the going back to credit briefly you guys had talked even in your in your release you talk about credit metrics normalizing, but I guess I'm just kind of curious what that looks like for you because you're still let me had 15 basis points of net charge offs in some of these numbers are still historically low so what do you feel like that normalization level really it.

Christopher S. Ziluca: Yeah, thanks for the questions, Chris Luca. It really is a good question.

Speaker Change: Looks like for you all.

Speaker Change: Yes, thanks for the questions Chris Luca.

Speaker Change: It really is a good question I think I guess, what I would say is is that because we have been operating at such historically low levels for both us and also compared to our peer set that even normalization would probably be just getting towards maybe peer average and I think we have a long way to go before we go.

Christopher S. Ziluca: I think, I guess what I would say is that because we've been operating at such historically low levels, for both us and also compared to our peer set, that, you know, even normalization would probably be just getting towards maybe the peer average. And, and I think we have a long way to go before we get there, from my perspective, but, but, you know, I think we've been very successful. And very lucky in many respects with all of the liquidity that's been pumped into the system to allow us to get to the level that we're at. And so it wouldn't surprise me that we would continue to see some level of migration.

Speaker Change: Get there from my perspective, but but I think we've been very successful and very lucky in many respects with all of the liquidity that's been pumped into the system to allow us to get to the level that we're at and and so it wouldn't surprise me that we would continue to see.

Speaker Change: See some level of migration, yes, now the reality is is that the wildcard is how to peers perform also and so if we're kind of performing in tandem with them then that maybe we don't get to peer average. So it really is just a matter of we.

Christopher S. Ziluca: And now, the reality is that the wildcard is how the peers perform also. And so, you know, if we're kind of performing in tandem with them, then maybe we don't get to the peer average. So it really is just a matter of, you know, we've had such a low level, and we continue to try to strive for that, that any sort of movement would probably be considered kind of a normalization.

Speaker Change: We've had such a low level and we continue to try to strive for that that any sort of movement would probably be considered kind of a normalization.

John M. Hairston: Stephen, this is John. I'll just add to that. Just internally, the way we look at this is more outrunning the other hunters versus the bear, if you know what I mean. So what we consider successful through this cycle is remaining in the top quartile, in terms of low levels of criticized and NPO credit, and anything below the peer median would be a deep surprise and disappointment. So if you kind of look at it that way, that's sort of the bookends of what our expectations are, somewhere between the first and second quartiles, but obviously, the top quartile is what we deem a success.

Speaker Change: Stephen This is John I'll just add.

John M. Hairston: I'll just add to that Jim.

John M. Hairston: Internally the way we look at this as more outrunning the other hunters versus the Bayer do you know what I mean.

John M. Hairston: So what we consider successful through this cycle is remaining in the top quartile in terms of low levels of criticized and NPL credit and anything below peer median would be a surprise and disappointment. So if you kind of look at it that way that's sort of the bookends of what our expectations are.

John M. Hairston: Somewhere between the first and second quartile, but obviously top $4, what we deem it a success.

Stephen Kendall Scouten: Got it. That's really helpful, and if I could squeeze in one more, maybe I was just curious.

Speaker Change: Got it.

Speaker Change: Really helpful and if I could squeeze in one more maybe I was just curious what drove it if anything specific the decline in new loan yields quarter over quarter and it kind of been trending up at a fairly ratable pace.

Stephen Kendall Scouten: What drove, if anything specific, the decline in new loans?

Stephen Kendall Scouten: new loan yields quarter of a quarter, and it kind of has been trending up at a fairly ratable pace, and looks like this quarter fell down to 791 versus 815, so I'm wondering if that

Speaker Change: Like this quarter fell down to 791 versus <unk> 15, So I'm wondering if that's like a mix issue maybe more of the single closed mortgages that you mentioned or what kind of drove that that decline.

Stephen Kendall Scouten: A mixed issue, maybe more of these single-closed mortgages that you mentioned, or what kind of drove that decision?

John M. Hairston: and drove that that decline. A great question. This is John; I'll take a wing at it.

Speaker Change: Yeah. Great question. This is John I'll take a wing at it.

John M. Hairston: I think the answer is about half mix, just differences in Q1. And Q1 does typically have a slightly different mix than the other quarters of the year. And then secondly, and this is, I think, going to be the same with our competitors as well, is that right now, in a rate environment where the news media is talking every day about Wimble rates beginning to go down. That's a pretty stark change from a year ago when they were talking about how far they would go up.

John M. Hairston: I think the answer is about half mix just differences in Q1.

John M. Hairston: Q1 does typically have a little bit different mix than the other quarters of the year and then secondly.

Speaker Change: This is I think going to be the same with our competitors as well as it is right now with.

Speaker Change: With the rate environment at the news media is talking to every day about when will rates begin to go down that's a pretty stark change from a year ago. When they were talking about how far will they go up some of them are negotiated terms are specifically right terms with with clients.

John M. Hairston: So when we're negotiating terms, or specifically rate terms, with clients, it really is a tailwind to getting better pricing when there's a thought that rates are going to be flat or higher. In this environment, rates are expected to go down. So that's creating a little bit more pushback on rates upon renewal and new deals. And frankly, the competition is also just as interested in getting new business they can to at least hold the loan book flat.

Speaker Change: It really is a tailwind to getting better pricing. When there is a thought that rates are going to be flat or higher.

Speaker Change: In this environment right you expect it to go down so that's creating a little bit more pushback on rates upon renewal and new deals and frankly. The competition is also just as interested in getting new business I can at least hold the loan book flat and so I think competition is higher awareness of what rate direction.

John M. Hairston: And so I think competition is higher, and awareness of what rate direction is happening in the market is a little higher. And I think both of those are driving that down a little bit. But our posture right now, to be clear, is that we still want to get as good a rate as we can possibly get. And we're giving up a little volume in order to get a higher rate. As we get later in the year, if rates do indeed stay flat, or the belief is that they'll still go down, then I think we may see some rate concession across the bank environment, particularly the midsize bank environment, to show growth.

Speaker Change: What's happening in the market is a little higher.

Speaker Change: And I think both of those are driving that down a little bit but.

Speaker Change: Our posture right now to be clear is we still want to get as good a rate as we can possibly get and we can we're giving up a little volume in order to get a higher rate.

Speaker Change: As we get later in the year.

Speaker Change: <unk> date stay flat or the belief is that they will still go down that I think we may see some rent concessions across the banks.

Speaker Change: Environment, particularly midsized mid SaaS bank environment to show growth, it's hard to really tell at this point in time, but if you go back through history. When people begin to expect a rate, it's harder and harder to get.

John M. Hairston: It's hard to really tell at this point in time, but if you go back through history, when people begin to expect a rate cut, it's harder and harder to get new deal rates at the level that you may want. And I think we saw a little bit of that in Q1. But again, about half of it or a little more was mixed.

Speaker Change: New deal rates at the level that you may want and I think we saw a little bit of that in Q1, but again about half of it a little more was mix.

John M. Hairston: Really helpful, Culler. Thanks for the time, y'all. You bet.

Speaker Change: Really helpful color. Thanks for the time.

Speaker Change: You bet. Thank you for the question.

John M. Hairston: You bet. Thank you. No question.

Benjamin Tyson Gerlinger: Your next question comes from the line of Ben Gerlinger from Citi. Please go ahead. Good afternoon, everyone.

Speaker Change: Your next question comes from the line of Ben Garlinger from Citi. Please go ahead.

Ben Garlinger: Hey, good afternoon, everyone.

Ben Garlinger: Hi, Ben.

Benjamin Tyson Gerlinger: I was curious, I know you gave a little bit of a tilt in your hand here on guidance on the lower end for expenses, but even if you just take this quarter and annualize it, there's about a $20 million gap.

Ben Garlinger: I was curious I know you gave a little bit of a tilting your hand here on guidance on the lower end of where expenses, but even if you just take this quarter annualize that that's about it.

$20 million gap.

Benjamin Tyson Gerlinger: Like around 816 and then 836. So I was just kind of curious. I get that the expenses are probably closer to the lower end, but do you think there'd be a little bit of a ramp from here?

Ben Garlinger: We talked a little bit around 816 eight.

Ben Garlinger: 836, so I'm just kind of curious I guess that the expenses are probably closer to lower it.

Ben Garlinger: But do you think there'll be a little bit of a ramp from here or where should we see that.

Michael M. Achary: Or where should we see that build? Is it technology, is it... Unknown Executive, Casey Haire, Kathryn Mistich, Hancock Holding Co.

Ben Garlinger: The technology is it.

Ben Garlinger: Joe staffing or anything you could do to have it be at the lower end does the range sorry below the low end of the range.

Michael M. Achary: Yeah, Ben, this is Mike. I think the way the trajectory of that will likely work as we kind of go through the year. You know, recall that, like many banks, we award raises on April 1. So you will see a pretty healthy increase in expenses quarter over quarter related to those raises. So you'll have a full quarter's impact of that in the second quarter. And then from there, I would expect to see, you know, kind of modest increases.

Ben Garlinger: Yes, Ben this is Mike I think the way the trajectory of that we'll likely work as we kind of go through the year.

Mike: Recall that.

Mike: Like many banks.

Mike: We reward raises on April one.

Mike: So you will see a pretty healthy increase in expenses quarter over quarter related to those raises so youll have a full quarter's impact of that.

Mike: In the second quarter, and then from there I would expect to see.

Mike: Kind of modest increases as we go into the third and fourth quarter and again that should put us.

Michael M. Achary: As we go into the third and fourth quarters, and again, that should put us really at the bottom end of the range of three to 4%, and maybe a hair even below that 3%. So that's how we're kind of thinking about it.

Mike: Really at the bottom end of the range of 3% to 4% and maybe a hair even below that 3%. So that's how we're kind of thinking about it.

John M. Hairston: Ben, this is John. I'll add this to it. Right now, we're having some really good and impressive success in some areas of the granular deployment balance sheet and loans, particularly in Texas and surrounding areas, and particularly Dallas. And so there's a bit of a notion that as we get to the back of the year, depending on what the economic environment looks like, we may very well increase our deployment and add new bankers and a small amount of new facility to continue that momentum because it simply has been so

Mike: Dan This is John I'll add this to it.

John M. Hairston: Right now, we're having some really good and impressive success in some areas of the granular.

John M. Hairston: The current balance sheet and loans.

John M. Hairston: Particularly in Texas, and areas, and particularly Dallas and so there's a.

John M. Hairston: A bit of a notion that as we get to the back of the year, depending on what the economic environment looks like.

John M. Hairston: We've made very well increase our deployment and adding new bankers and.

John M. Hairston: And so there's a little bit of cushion built in that guidance as we sit now in the event that we do make those investments, and we want to be very transparent about it. It might not happen, given how the economy could change on us, but right now, we feel really, really good about the progress on the granular side of our loan balance sheet. And we believe that there's some good talent out there in different places that may be a disruption by the back half of the year, and we'd like to avail ourselves of their assistance.

John M. Hairston: A small amount of new facility.

John M. Hairston: Well continue that momentum because it simply has been so good.

John M. Hairston: And so there's a little bit of cushion built in.

John M. Hairston: That guidance as we sit now in the event that we do make those investments and we want to be very transparent about it might not happen given how the economy.

John M. Hairston: Could change on us, but right now we feel really really good about the progress.

John M. Hairston: And the granular side of our loan balance sheet and.

Michael M. Achary: And Ben, if we take the route that John just kind of articulated, obviously, we'll be transparent and modify the guidance accordingly. Yeah, that's not a signal that we're going to do it. It's a signal that that explains some of the reason for the reduction.

John M. Hairston: We believe that there is some good talent out there in different places that might be a disruption by the back half of the year that wed like to avail ourselves of their systems.

John M. Hairston: And then if we take the route that John just kind of articulated obviously will will.

John M. Hairston: We will be transparent and modify the guidance accordingly.

Benjamin Tyson Gerlinger: Yeah, that's not a signal we're gonna do it. It's a signal that that explains some of the reasons for the right. Yeah, okay, that makes a lot of sense.

John M. Hairston: On a signal we're going to do and it's a signal that that explains some of the reason for the range.

Speaker Change: Yes, Okay that makes a lot of sense.

Benjamin Tyson Gerlinger: If you just kind of look at your crystal ball here, it seems like growth is a little bit, back half of the year weighted. I mean, pricing looks to be pretty healthy. The mixed shift on deposits is really kind of the only incremental headwind at this point because the cost deposits are working pretty flat month over month when you gave that cadence for the first quarter. I'm just kind of curious, when you think about an exit for the year... And I get you might not answer this directly, but is 340 achievable at the margin?

Speaker Change: Could you just kind of look to your crystal ball here. It seems like growth is a little bit.

Speaker Change: Back half of the year weighted pricing looks to be pretty healthy mix shifts on deposits is really kind of the only.

Incremental headwind at this point because the cost of deposits are working pretty flat month over month. When you gave that cadence for the first quarter.

Speaker Change: Just kind of curious when you think about exited the year.

Speaker Change: I guess you might not answer this directly but there's three fourty achievable on the margin.

Benjamin Tyson Gerlinger: Yeah, that's a great question. And as we kind of think about our NIM, and if you kind of go back to my earlier comments, you know, under the scenario where there are a couple of rate cuts, that's certainly, I think, a possibility. If the zero rate cut scenario happens, then, you know, the 340 NIM might be a little bit of a reach. That's the way I would kind of think about that.

Speaker Change: Yes, that's a great question and.

Speaker Change: As we kind of think about our NIM and if you kind of go back to my earlier comments.

Speaker Change: Under the scenario, where there is a couple of rate cuts that certainly I think a possibility.

Speaker Change: If the.

Speaker Change: If the zero rate cut scenario happens then the $3 40, NIM might be a little bit of a reach is the way I would kind of think about that.

Benjamin Tyson Gerlinger: Gotcha. That's helpful. I'll step back. I appreciate the time.

Speaker Change: Got you that's helpful I'll step back I appreciate the time.

Brandon Thomas King: Your next question comes from the line of Brandon King from Truist Securities. Please go ahead.

Speaker Change: Okay. Thank you.

Speaker Change: Your next question comes from the line of Brandon Cheng from <unk> Securities. Please go ahead.

Brandon Thomas King: Thank you. Good afternoon. Hi Brandon. So just a question on the expectation for loan yields, the pace of increase slowed in the quarter to around six basis points. And I was wondering, just given your expectations for fixed rate loan pricing going forward and the commentary around new loan yields, is that a good sort of run rate to expect maybe in the next couple of quarters and particularly if those rates hold from here?

Brandon Thomas King: Thank you good afternoon.

Brandon Thomas King: Hi, Brian.

Brandon Thomas King: Okay. So just a question on the expectation for loan yields.

Brandon Thomas King: The pace of increase slowed in the quarter.

Brandon Thomas King: Around six basis points and was wondering just given your expectations for fixed rate loan pricing going forward and the commentary around new loan yields.

Brian: Is that a good sort of run rate to expect maybe in the next couple of quarters, and particularly of kind of rates hold from here.

Michael M. Achary: Yeah, Brandon, this is Mike. And I do think it is, especially if there aren't any rate cuts from this point forward, you know, that we should see some stability on the variable side. But we should still see, as I mentioned earlier, some yield improvement on the fixed rate side as we continue to have those loans repriced as we go through the year.

Brian: Yes, Brandon this is Mike and I do think it is especially if there arent any rate cuts from this point forward.

Mike: That we should see some stability on the variable side, but we should still see as I mentioned earlier.

Mike: Yield improvement on the fixed rate side as we continue to have those loans re price as we go through the year.

Michael M. Achary: Okay, and as far as the fixed rate repricing, is that sort of rateable through the year, or do you have sort of, you know, chunkier repricing impacts in certain quarters?

Speaker Change: Okay, and then as far as the fixed rate repricing is that sort of ratable through the year or do you have sort of chunkier.

Speaker Change: The pricing impacts.

Michael M. Achary: Yes, right. The way we're looking at it now, it is pretty pro-rata across the remaining quarters of the year. And if you look at the last couple of quarters, it's been amazingly consistent around 12 basis points or so per quarter. It did narrow a little bit in the first quarter to about 9 basis points, but still pretty strong on the size of that portfolio.

Speaker Change: Certain quarters right. The way we're looking at it now it is it is pretty pro rata across the remaining quarters of the year and if you look at the last couple of quarters, it's been amazingly consistent around 12 basis points or so per quarter.

Speaker Change: Narrow a little bit in the first quarter to about nine basis points.

Speaker Change: But still pretty strong on the size of that portfolio.

Michael M. Achary: Okay, and then I recognize the head went to CDB pricing, but just how are you thinking about the total cost of deposits? Looks like you're on the page to potentially hold that stable in the second quarter. But if we are in kind of this stable rate environment, do you think you can keep that pretty stable in the back half of the year? Yeah.

Speaker Change: Okay.

Speaker Change: Then.

Speaker Change: I recognize the headwind to CD repricing, but just how are you thinking about the total cost of deposits it looks like you're on.

Speaker Change: As to potentially hold that stable in the second quarter, but if we are in kind of this stable rate environment. Do you think you would continue to keep that pretty stable in the back half of the year.

Michael M. Achary: Yeah, absolutely. So again, if you look at the first quarter, we came in at 201, but the month of March came in at an even 2%. And again, as we think about the second quarter, we're looking at somewhere near that same 2% for the second quarter's total cost of deposits. And then from there, it really depends on whether we get rate cuts or not. So in an environment where we do get rate cuts, similar to the impact on NIM, you'll see that the cost of deposits continue to fall in the third and fourth quarters.

Speaker Change: Yes, absolutely. So again, if you look at the first quarter, we came in at 201, but the month of March came.

Speaker Change: Came in at an even 2% and again as we think about the second quarter. We're looking at somewhere near that same 2% for the second quarters total cost of deposits and then from there it really kind of depends on whether we get rate cuts or not so in an environment, where we do get rate cuts are similar.

Two the impact on the NIM.

Speaker Change: Youll see that cost of deposits continued to fall in the third and fourth quarter. If we don't get rate cuts then it's going to probably be.

Michael M. Achary: If we don't get rate cuts, then it's going to probably be flattish to maybe down just a bit as we go through the rest of the year. So again, very similar to kind of the trajectory that we described earlier around the NIM.

Speaker Change: Flattish to maybe down just a bit as we go through the rest of the year.

Speaker Change: So again very similar to kind of the trajectory that we described earlier around the NIM.

Brandon Thomas King: Very helpful. That answers my question.

Speaker Change: Okay.

Speaker Change: Very helpful that answers my questions.

Speaker Change: Okay. Thank you.

Brett D. Rabatin: Your next question comes from the line of Brett Rabatin from Hooved Group. Please go ahead.

Speaker Change: Your next question comes from the line of Brett Robertson from Hovde Group. Please go ahead.

Brett D. Rabatin: Hey, good afternoon.

Speaker Change: Okay.

Brett Robertson: Hey, good afternoon wanted to ask we have seen a few office towers reprice, our change hands at lower levels.

Brett D. Rabatin: We've seen a few office towers reprice or change hands at lower levels than where they were last transacted. And on slide 10, you show that you have 88% of the portfolio and

Brett Robertson: They were last transacted and on Slide 10, you show that.

Brett Robertson: <unk> got 88% of the portfolio and office with $5 million or less of exposure and at the office buildings tend to be more mid rise I was curious how much of the office book would be bigger than 20 or $25 million from a from a loan count perspective.

Brett D. Rabatin: office with 5 million or less of exposure, and that office buildings tend to be more

Christopher S. Ziluca: I was curious how much of the office book would be bigger than 20 or 25 million from a loan count perspective?

Christopher S. Ziluca: Yeah. Thanks for the question, Brett. This is Chris Lucas. You know, we only have 14 credits that are over $10 million, and none of them are over $25 million in exposure. So I think that pretty much answers the question around, are we participating in or doing larger office tower transactions?

Speaker Change: Yes, yes.

Speaker Change: Yes, thanks for the question Brett.

Christopher William Marinac: This is Chris Lucas.

Christopher William Marinac: We only have 14 credits that are over $10 million.

Christopher William Marinac: And none of them are over $25 million.

Sure.

Speaker Change: I think that pretty much answers. The question around are we participating in are doing larger office tower.

Brett D. Rabatin: Okay, that's helpful. And then the other question I wanted to ask.

Speaker Change: In transit.

Okay, that's helpful and.

Brett D. Rabatin: Another question I wanted to ask was, you know, one of the pushbacks I get is, you know, if we did have a recession, it doesn't seem like, you know, a lot of folks are thinking maybe no recession now, but if we did have one. You know, some of the Gulf South economies, you know, might

Speaker Change: And then the other the other question I wanted to ask was just one of the pushback I get is if we did have a recession it doesn't seem like.

Speaker Change: Lot of folks were thinking maybe no recession now, but if we did have one.

Speaker Change: And then maybe some of the Gulf South economies Mike.

Brett D. Rabatin: underperform relative to the Texas and Florida pieces of your franchise. Any thoughts on what you guys are seeing in the core Louisiana or Mississippi markets and just how you think that those markets might, might

Speaker Change: Underperformance relative to the Texas.

Florida pieces of your franchise any any thoughts on what you guys are seeing.

Speaker Change: And the core.

Speaker Change: Louisiana, Mississippi markets and just how you think that those markets Mike.

Brett D. Rabatin: might react if the economy gets softened.

Speaker Change: It might react if the economy does soften.

John M. Hairston: Yeah, I'll start, and admittedly it's a crystal ball look, but typically, Mississippi and Louisiana are not high-growth markets, which means valuations don't just spike up, and they may spike up elsewhere. So the handicap there is they don't grow as quickly as some of our other markets.

Mike: Yes, I'll start and admittedly, it's a crystal ball, but the <unk>.

Mike: Typically Mississippi, and Louisiana are not high growth markets, which means valuations don't just spike up when they may spike up elsewhere. So.

Mike: For a handicap the areas that don't grow as quickly as some of our other markets on the other side. They typically don't bounce down very harshly in periods of recession. So we can just use the last financial recession. As an example, we had very very little loss in Mississippi, Louisiana, Alabama.

John M. Hairston: On the other hand, they typically don't bounce back very harshly in periods of recession. So we can just use the last financial recession as an example. We had very, very few losses in Mississippi, Louisiana, or Alabama during that period of time. And in fact, were it not for energy, our losses would have been better than peer by good measure. So with energy certainly very de-emphasized in our book, and now I think we're well below 1% of loans in that sector, I would expect those markets to perform very well and have a recessive period. Okay. Okay, that's helpful, and I'm sorry, just one last one back on this next question.

Mike: During that period of time and in fact were it not for energy our losses would have been better than peer Bob good measure. So with energy is certainly very de emphasized in our book and now I think we're well below 1% of loans in that sector.

Mike: I would I would expect those markets to perform very well.

Mike: And a recessive period okay.

Mike: Yes.

Speaker Change: Okay. That's helpful and then just.

Speaker Change: I'm sorry, just one last one back on the snack question.

Brett D. Rabatin: It sounds like a lot of that portfolio is actually very customer-oriented. How much of that portfolio?

Speaker Change: It sounds it sounds like a lot of that portfolio is actually very customer oriented.

Brett D. Rabatin: How much of that portfolio would you have a primary deposit relationship on or, kind of, you're one of the lead?

Speaker Change: How much of that portfolio would you have a primary deposit relationship or.

Speaker Change: You're one of the lead.

Brett D. Rabatin: leads on the on the credit.

Speaker Change: Leads on the on the credit.

John M. Hairston: A good portion of it. The primary purpose of syndications for us is to lay off credit with organizations we've had for a while when the total amount of hold is just bigger than we want to hold by ourselves. We do lead a chunk of syndications, but the core book is still pretty granular. In terms of what we have that is credit only, and I'm going to take out specialties like commercial real estate, because there are some credits that are syndications there that typically don't live on the books very long before the project's completed and then go off to the perm market somewhere else.

Speaker Change: A goodly portion of it.

Speaker Change: Mary purpose of.

Speaker Change: Syndications for US is to is to lay off credit with organizations, we've had for a while but the total amount of hull was just bigger than we want to help ourselves.

Speaker Change: We do lead a chunk of syndications, but.

Speaker Change: The core book is still pretty granular in terms of what we have that as credit only and I'm going to take our specialties like commercial real estate because there are some credits that are syndications. There that typically don't live on the books very long before the projects completed and then go after the power market somewhere else, but we do have a health care group that participates.

John M. Hairston: But we do have a healthcare group that participates a little more heavily in syndications, and those balances and exposure have been declining as we didn't need to deploy the liquidity. But I want to be clear in saying our concern about syndications is not as much about fear of credit as it is that the liquidity can be repurposed to other things that we're particularly good at. Internally, we talk about our corporate strategic objectives and CSOs, and we publicly share those, but we don't talk about some of the other types of things that we seek and aspire to get to.

Speaker Change: Little more heavily in syndications, and those balances and exposure have been declining as we didn't need to deploy the liquidity.

Speaker Change: But I want to be clear is saying our concern about syndications or not as much about fear of credit is it is that the liquidity can be repurposed to other things that we're particularly good at.

Speaker Change: Internally, we talk about our <unk>, our corporate strategic objectives, CSO with publicly share those but we don't talk about some of the other types of things that we see and aspire to get to a one of those things as I'd like US I think our team is dedicated to being the best bank in the southeast for privately owned businesses and to do that we need to have liquidity available.

John M. Hairston: One of those things is I'd like us, and I think our team is dedicated to being the best bank in the southeast for privately owned businesses. And to do that, we need to have liquidity available to very competitively bring those types of organizations on board, and we're having that kind of result in some of the bookend markets I spoke about earlier. So the rebalancing away from SNICs is not because they're SNICs. The only rebalancing is that we're trying to get away from credit-only relationships to more core. Because ultimately, we're really good at the fee business, but we can't get the fees if we don't have a core relationship.

Speaker Change: To very competitively bring those types of organizations on.

Speaker Change: And we're having that kind of resolved in some of the book end markets I spoke about earlier, so they rebalancing away from snacks is not because they are snacks. The only rebalancing as we're trying to get away from credit only relationships to more core because ultimately we're really good at the fee business, but we can't get to face if we aren't we don't have a co.

John M. Hairston: So that's the driver for that change and thoughts moving forward. Did I help you, or do you want to repeat? Yeah, yeah, that's really helpful. Thanks so much, guys.

Speaker Change: Our relationship and so that's the driver for that.

Speaker Change: That change in thoughts moving forward.

Speaker Change: Helping up or do you want to yes, yes, that's really that's really helpful. Thanks, So much guys.

Matthew Covington Olney: Your next question comes from the line of Matt Olien from Stevens Incorporated. Please go ahead.

Speaker Change: Okay you bet.

Speaker Change: Your next question comes from the line of Matt Olney from Stephens incorporated. Please go ahead.

Matthew Covington Olney: Hey, thanks. Mike, you went through some of your promotional rates on time deposits earlier in the call, and I appreciate you disclosing that. Can you help us appreciate any changes that you've made to these promotional rates more recently? Are those rates you gave us? from a few months ago, or those after some recent changes you've made?

Matthew Covington Olney: Hey, thanks.

Matthew Covington Olney: Mike you went through some of your promotional rates on time deposits earlier on the call and I. Appreciate you disclosing that can you help us appreciate any any changes that you've made to these promotional rates more recently are those are those rates you gave us.

Matthew Covington Olney: From a few months ago or would those after some recent changes you've made.

Michael M. Achary: Now, those are the current rates, Matt, and just to give you some context of kind of where we've come from. If you go back to the end of last year, our best CD rate was 5.4% for nine months. So we had actually shortened that in the first quarter to 5% for three months and then recently introduced the 5% at five months. So we've kind of obviously lowered the overall rate and shortened the maturity, and then lengthened it a little bit. And those variations are really related to what we're seeing in the market in terms of what customers and consumers kind of prefer.

Mike: No those are the current rates, Matt and just to give you some context of kind of where we've come from.

Mike: You go back to the end of last year, our best CD rate was five 4%.

Mike: For nine months, so we had actually shorten that in the first quarter two 5% for three months and then recently introduced the 5% at five months.

Mike: So we've kind of.

Mike: Obviously lowered the overall rate and shortened the maturity and then Linkedin did a little bit and.

Mike: Those those.

Mike: Its variations are really related to what we're seeing in the market in terms of what.

Mike: Customers and consumers kind of prefer but it's obviously also an effort on our part to try to choreograph these maturities such that they occur.

Matthew Covington Olney: But it's obviously also an effort on our part to try to choreograph these maturities such that they occur in an environment where, hopefully, rates are a little bit lower. And even without rate cuts, I mean, we're seeing that contraction in rates overall in the market. So, certainly, rate cuts will help, you know, in the second half of the year when these maturities occur, but if they don't, we don't have rate cuts; it's not necessarily the end of the world. I mean, we'll still benefit somewhat from CD repricing. It's just not at the same level as if we had rate cuts.

Mike: In an environment, where hopefully rates are a little bit lower.

Even without rate cuts I mean, we are seeing that contraction.

Mike: And rates overall in the market.

Mike: So certainly rate cuts will help.

Mike: In the second half of the year when these maturities occur, but if they don't we don't have rate cuts, it's not necessarily the end of the world will still benefit somewhat from CD repricing. It's just not at the same level as if we had rate cuts.

Mike: Okay.

Michael M. Achary: So, it sounds like you moved your deposit or your promotional pricing down a little bit short of the maturities. Would you consider moving down the promotional pricing again before the Fed were to cut? Or do you think it's now moved down to a point where it's comfortable, and we have to see that the Fed start to cut before you would move again?

Mike: So it sounds like you move your deposit of your promotional pricing down a little bit.

Mike: Jordan, the maturities, which you consider moving down at the promotional pricing down again before the fed were to cut or do you think it is.

Jordan: Now move down to a point, where it's comfortable and we have to see the fed start to cut before you would move again.

Matthew Covington Olney: Well, my opinion is, you know, there's a little bit of a line of demarcation, it seems like, at 5% for short CDs, but we'll pay close attention, as we always do, to the market and the things that are going on, you know, both the headwinds and tailwinds. Personally, I could certainly see a scenario where we would probably want to breach that 5% at some point.

Mike: Well.

Jordan: My opinion is.

Jordan: There's a little bit of a line of demarcation it seems like at 5% or for short Cds.

Speaker Change: But we will pay close attention as we always do to the market.

Speaker Change: The things that are going on both the headwinds and tailwind.

Speaker Change: Personally I could certainly see a scenario, where we would probably want to breach that 5% at some point.

John M. Hairston: Matt, this is John. Just to add a little more color that may be helpful, Mike described before that we managed to cover more than one hundred percent of the broker's CD departure in Q1 with client deposits at the rates that we mentioned. We have another slug and a final slug of broker CDs coming up in May. And so, part of maintaining the current posture is to try to eliminate as much of those as we can.

Speaker Change: Matt This is John just to add a little more color that may be helpful.

Speaker Change: Mike described before that we managed to cover more than a 100% of the brokers seeking departure in Q1 with with client deposits at the rates that we mentioned we have another slug of the final slug of broker Cds coming up in May.

Speaker Change: So part of maintaining the current posture is to try to two.

Speaker Change: To eliminate as much of those as we can we're not really ready to say that will definitely happen, but that's our desire.

John M. Hairston: We're not really ready to say that'll definitely happen, but that's our desire, because getting rid of that takes us to 100% core money, if that makes sense. And so, it's a little early to try to get too aggressive on taking them down until we get past Q2. Hopefully, that's helpful.

Speaker Change: Okay.

Speaker Change: Getting rid of that takes us to a 100% core market if that makes sense and so it's a little early to try to get too aggressive on taken them down until we get pass Q2.

Hopefully thats helpful.

Matthew Covington Olney: And then, I guess switching gears, Chris, on credit, I think you answered all my questions around the criticized loan bucket, and I think you know that the charge-outs were mostly from a single credit. But I was surprised to see that the recoveries were quite a bit higher in the first quarter. I think it was around $14 million, but it had been trending well below that in recent quarters. Any color on the more sizable recovery you got this quarter? Yeah, I mean, we have a certain amount of flow recovery.

Speaker Change: Yes that is helpful. Thanks for clarifying that.

Speaker Change: And then I guess switching gears.

Speaker Change: Chris on credit I think you answered all my questions around the criticized loan bucket and I think you noted that the charge offs are were mostly from a single credit, but I was surprised to see that the recoveries were quite a bit higher in the first quarter I think was around $14 million.

Speaker Change: It had been trending well below that in recent quarters, just any color on the more sizable recovery you got this quarter.

Christopher S. Ziluca: Yeah, I mean, we have a certain amount of flow recoveries, but we did have an opportunity this quarter to kind of relook at an existing previously charged off account and kind of resolve that matter, you know, maybe more permanently. And so that helped us to get probably what is going to be somewhat of an abnormal level of recovery, but certainly fortuitous for the quarter.

Christopher S. Ziluca: Yes, I mean, we have a certain amount of flow recoveries, but we did have an opportunity to us.

Christopher S. Ziluca: To kind of re look at an existing lease previously charged off accounts and kind of resolve that matter, maybe more permanently and so that helped us to get problems.

Christopher S. Ziluca: Probably what is going to be somewhat of an abnormal level of recovery.

Christopher S. Ziluca: But certainly fortuitous for the quarter.

Speaker Change: Okay. Thank you.

Christopher William Marinac: Your next question comes from the line of Christopher Marinac from Janney Montgomery Scott. Please go ahead.

Speaker Change: Thanks, Matt.

Speaker Change: Yes.

Speaker Change: Your next question comes from the line of Christopher Mariana from Janney Montgomery Scott. Please go ahead.

Christopher William Marinac: Hey, thanks. Good afternoon.

Christopher S. Ziluca: Chris, I wanted to ask you one more credit question. When we go back to the quarterly and annual disclosures, you mentioned a past watch category. Would that have gone down at the end of March, which would therefore compensate for the increase in the criticized?

Christopher William Marinac: Hey, Thanks, good afternoon.

Chris I wanted to ask you one more credit question when do we go back to the quarterly and annual disclosures you've mentioned a pass watch category would that have gone down at the end of March, which therefore would compensated for the increase in the criticized.

Christopher S. Ziluca: Not necessarily. I mean, we certainly have things that flow through the PassWatch category, but, you know, some, you know, skip over that because of just the credit metrics that drive our risk rating models. So not necessarily all just from that category, although certainly a substantial portion and count-wise came from that category.

Not.

Christopher S. Ziluca: Necessarily I mean, we certainly have things that flow through the past watch category, but.

Christopher S. Ziluca: Some.

Speaker Change: Skip over that.

Speaker Change: Cause of just the credit metrics that drive our risk rating models. So so not necessarily all just from that category, Although certainly a substantial portion in count wise came from that category.

Speaker Change: Okay and does the past watch drive at all provision levels, so or rather the reserves as you go forward.

Christopher S. Ziluca: Okay, and does the pass watch drive at all provision levels or rather the reserve as you go forward?

Christopher S. Ziluca: It has a component to it. I mean, we, our models don't specifically tie at this juncture to risk ratings, but we factor in, you know, migration into a lot of the qualitative component to our reserving methodology.

Speaker Change: It has a component to it I mean, we are.

Speaker Change: Our models don't specifically tie at this juncture to risk ratings, but we factor in.

Speaker Change: Migration in a lot of the qualitative component to our reserving methodology.

Christopher William Marinac: Okay, great. And then my last question for you just goes back to kind of the PPNR guide for this year. If we think about the guide for 24, would the future years in 25 and 26 kind of be higher from this year? Or is there, do you see a scenario where the PPNR would shrink further in the next year?

Speaker Change: Okay great.

Speaker Change: Then last question from me just goes back to kind of the PPE and our guide for this year. If we think about the guide for 'twenty four with the.

Speaker Change: The future years, and 25% and 26 kind of be high.

Speaker Change: Higher from this year or is there do you see a scenario where the <unk> would shrink further in the next year.

Michael M. Achary: Chris, this is Mike. That's a great question and involves, at this point, I think a lot of crystal ball viewing, you know, kind of viewing. But at this point, I don't know that we're ready to really talk about guidance for 25. But I would suggest that if we think about 25 and think about that being a year where we're potentially able to grow the balance sheet more than just the low single digits, then that certainly, I think, bodes well for our ability to expand PPNR into next year. Gotcha.

Speaker Change: Chris This is Mike Thats, a great question and involves at this point I think a lot of Crystal ball.

Mike: Viewing but.

Mike: At this point I don't know that were ready to really talk about guidance for 'twenty five.

Mike: But I would suggest that if we think about 25 and we think about.

Mike: That being a year, where potentially we were able to grow the balance sheet more than just the low single digits and that's certainly I think bodes well for our ability to expand <unk> into next year.

Christopher William Marinac: Gotcha. That's helpful. Thanks for thinking out loud about that, Mike. I appreciate it. You're welcome.

Speaker Change: Got you that's helpful. Thanks for thinking out loud on that Mike I appreciate it.

Speaker Change: Youre welcome.

Gary Peter Tenner: Your next question comes from the line of Gary Tenner from D.A. Davidson. Please go ahead.

Speaker Change: Your next question comes from the line of Gary Tenner from D. A Davidson. Please go ahead.

Gary Peter Tenner: I wanted to ask a follow-up just on the loan growth guide, which sounds like a low single-digit hold in your mind, you know, with or without rates, even though I think a lot of folks think of a second half inflection for the group overall as being

Gary Tenner: Thanks, Good afternoon.

Gary Tenner: I wanted to ask a follow up just on the loan growth guide it sounds like the low single digit holds in your mind with or without rates you, even though I think a lot of folks think of second half inflection for the for the group overall as being a little more reliant.

John M. Hairston: on rate cuts. Are your lenders kind of hearing pretty clearly from borrowers that, you know, look, we're being patient on rates, but we feel good enough about our business and opportunities that we're going to pull the trigger in the back half of the year, even if we don't get Some moderation in rates. I think the first part of your, and this is John, the first part of your answer, yes, we're hearing pretty clearly we think the environment may be a little better for us back half of the year, and some of that is because I think organizations are looking at their debt service, and from their perspective, they have more room to spend if they're spending less on debt service, and so it just invigorates them to maybe tackle a little bit more in terms of re-upping equipment, expanding buildings, doing things that businesses do to grow their top-line revenue, so I think that that's really more the driver.

Gary Tenner: On rate cuts.

Gary Tenner: Or are your lenders kind of hear them pretty clearly from borrowers that look we're being patient on rates, but we feel good enough about our business and opportunities that we're going to pull the trigger in the back half of the year, even if we don't get.

Gary Tenner: Some moderation and rich.

Gary Tenner: I think the first part of your <unk>. This is John the first part of your answer yes, we're here.

Gary Tenner: Sharon.

Gary Tenner: Pretty clearly we think the environment, maybe a little better for us back.

Gary Tenner: Back half of the year.

Speaker Change: And some of that is because I think organizations are looking at their debt service and from their perspective, they have more room to spend.

John M. Hairston: They are spending less on debt service and so it just invigorate them to maybe tackle a little bit more in terms of re up an equipment spanning buildings and doing things that businesses do to grow their top line revenue.

John M. Hairston: I think that that's really more of a driver I don't think its more.

John M. Hairston: I don't think it's more, I mean, 75 basis points doesn't light up the world, right, so it doesn't make all of a sudden math get a lot better. It more signals that we have successfully navigated a safe landing economically, and we can kind of think a little bit more positively about the next couple, three years, and that spurs people to begin taking a little bit more risk in terms of spreading their wings and investing, so, but as you know, at some point in time, you can't just not spend money, so my thought is that by the time we get into the latter parts of this year, if the environment looks, you know, we go from higher for longer to higher for much longer, it's still going to cause people to go ahead and moving forward with some decisions simply because they need to, and they've got to manage their operating expenses accordingly to afford that higher level of debt service.

John M. Hairston: On the 75 basis points doesn't light up the world right. So it.

John M. Hairston: It doesn't make all of a sudden masking a lot better and more signals that we have successfully navigated a safe landing economically and we can kind of think a little bit more positively about the next couple of three years and Thats first people to take it a little bit more risk in terms of spreading our wings and invest them so but.

John M. Hairston: As you know I mean at some point in time, you can't just not spend money.

John M. Hairston: So.

John M. Hairston: My thought is that by the time, we get into the latter parts of this year, if the environment looks like.

John M. Hairston: We go from from us higher for longer to hire for much longer.

John M. Hairston: Still going to cause people to go ahead and moving forward with some decision simply because they need to and I've got to manage our operating expenses accordingly to afford that higher level of debt service.

Gary Peter Tenner: Thanks; I appreciate your thoughts on that. And then,

Speaker Change: Thanks, I appreciate the thoughts on that and then.

Gary Peter Tenner: Kind of a quasi-related follow-up in terms of the PP&R guide with and without rates is that, you know, figure..., with no rate cuts, purely the math on kind of the yield and rate impact of cuts and no

Speaker Change: Kind of a quasi related follow up in terms of the PPE and our guide with and without rates is that.

Speaker Change: Figure.

Speaker Change: With no rate cuts purely the math on.

The yield in rate impact of cuts and no change in mix of the balance sheet in that scenario.

Gary Peter Tenner: change in the mix of the balance sheet.

Michael M. Achary: of the balance sheet in that scenario. Unknown Speaker.

Speaker Change: Yes.

Michael M. Achary: Gary, this is Mike. It's a little bit of both. It's not just pure math of what happens and what doesn't happen in terms of rates and repricing. I mean, you know, we're modifying the mix a bit to account for what we think is going to happen or not happen. But I would suggest, though, it's not a big, big impact or a big change, certainly in the size of the balance sheet for the second half of the year, cuts versus no cuts. And that's why we didn't change our guidance, either on the loan or deposit side, at least not yet.

Speaker Change: Gary This is Mike it's a little bit of both it's not just the pure math of what happens and what doesn't happen in terms of rates and re pricing. We are modifying the mix a bit to account for what we think is going to happen or not happen, but I would suggest though it's not a big big impact or a big change certainly in the.

Mike: The size of the balance sheet for the second half of the year cuts versus no cuts.

Mike: And Thats why we Didnt change our guidance, both on the loan or deposit side.

Speaker Change: At least not as of yet.

Operator: That concludes our question and answer session. I will now turn the conference over to John Harrison for his closing remarks.

Speaker Change: Got it okay I appreciate it.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: That concludes our question and answer session I will now turn the conference over to John Harrison for closing remarks.

John M. Hairston: Thank you, Christa, for managing the call. Thanks to everyone for your interest. Looks like a good year is shaping up, and we're glad to share more with you when we see you on the road. We'll see you all very soon.

John M. Hairston: Thank you Christophe will manage in a call. Thanks to everyone for your interest it looks like a good year shaping up and we're glad to share more with you when we see on the road, we will see you all very soon.

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Operator: Please wait; the conference will begin shortly.

Speaker Change: Please wait the conference begin shortly.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].