Q1 2025 Hancock Whitney Corp Earnings Call
Please standby.
Speaker Change: Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's first quarter 2025 earnings Conference call.
Speaker Change: 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.
Speaker Change: As a reminder, this call maybe recorded.
Speaker Change: I would now like to introduce your host for today's conference Kathryn Miss sketch Investor Relations manager you may begin.
Speaker Change: Thank you and good afternoon.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: As everyone understands the current economic environment is rapidly evolving and changing.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: And our actual results and performance could differ materially from those set forth in our forward looking statements.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: We will reference some of these slides in today's call.
Speaker Change: Participating in today's call are John Harrison, President and CEO, Mike Agri, CFO and Crystal they've got a chief credit Officer, I will now turn the call over to John Harrison.
Speaker Change: Thank you Catherine and thanks, everyone for joining us. This afternoon. We were pleased to report another quarter of high performing profitability and continued capital growth a very strong start to 2025, we achieved an impressive 141% ROA grew fee income enjoyed continued NIM expansion and ended the quarter with total risk.
Speaker Change: <unk> capital of $16, three 9% NIM expanded as we were able to control funding cost and mix that more than offset the impact of lower loan yields and lower average, earning assets. We had another quarter of strong fee income with growth across most categories.
Speaker Change: <unk> remained well controlled with only a 1% increase this quarter, we've updated our guidance to reflect the impact of the Sable Trust transaction and now anticipate fee income to be up between nine and 10% year over year, our expectations for expense growth remain unchanged between 4% and 5% higher year over year.
Speaker Change: Those were down 201 million due to higher payoffs on large healthcare and commercial non real estate loans offsetting strong production.
Speaker Change: Updated our guidance this quarter and expect loans will grow low single digits in 2025 with most of the growth coming in the second half of the year.
Speaker Change: Change in guidance accounts for uncertainty reflected in current client sentiment, we remain focused on more granular full relationship lows with the goal of achieving more favorable loan yields and relationship revenue deposits were down $298 million driven primarily by the seasonal public funds outflows for the second quarter in a row, our DDA balances.
Speaker Change: Actually increased in our DDA mix is stable at 36% interest bearing transaction accounts increased due to our competitive product offerings and retail Cds declined due to the reduction of promo rates, which helped control deposit costs. We continued to return capital to investors by repurchasing 350000 shares of common stock.
Speaker Change: This quarter, we also increased our common stock dividend of <unk> 45 per share a cumulative increase of 50% from this time last year, even after returning capital we had strong growth in all of our regulatory capital metrics due to excellent profitability ending the quarter with a common equity tier one ratio of $14 five 1%.
Speaker Change: And tangible common equity ratio of 10 points of 1% last quarter on our call. We shared our plan to pivot to growth both organically and Inorganically through the acquisition of Sable Trust company, we continued to execute hiring plans with four additional bankers and if selected for new locations or five planned in the northern <unk>.
Speaker Change: Are you of the Dallas MSA disabled transaction is expected to close all made a second we look forward to welcoming sable clients and associates to Hancock Whitney and for the opportunity to expand our best in class regional banking services, and the greater Tampa and Orlando areas. Despite current market volatility we remain optimistic for our growth.
Speaker Change: <unk>, particularly in the second half of the year, we are closely monitoring macroeconomic trends and indicators, including both nationally and within our own footprint, while the environment remains dynamic our ample liquidity solid allowance for credit losses of 1.49% and strong capital and keep us well positioned to navigate challenge.
Speaker Change: And support our clients in any economy with that I'll invite mark to add additional comments.
Mark: Thanks, John Good afternoon, as John said at the onset the Companys performance in the first quarter was outstanding our net income for the quarter was $120 million or $1 38 per share compared to $122 million or $1 40 per share in the fourth quarter.
Mark: Earnings were up 10% compared to the same quarter a year ago, while EPS was up 11%.
Mark: <unk> was down slightly from last quarter to $162 4 million, but up $9 5 million or 6% compared to the first quarter of last year.
Mark: Our NIM expanded two basis points to 343%, but NII was down due to two fewer accrual days and a lower level of average earning assets.
Mark: And as mentioned our fee income businesses had another outstanding quarter and expenses continued to be well controlled.
Mark: The NIM expansion was driven by lower deposit costs higher yields on the bond portfolio and a favorable mix of borrowed funds, partly offset by lower loan yields as shown on slide 16 of the investor deck.
Mark: Our overall cost of funds was down 14 basis points to 159% due to a lower cost of deposits and a better funding mix as we ended the quarter with no home loan borrowings.
Mark: The downward trend in our cost of deposits continued this quarter with a decrease of 15 basis points to 170% in the first quarter.
Mark: The drivers here, where CD maturities and renewals at lower rates and a reduction of pricing on interest bearing transaction accounts.
Mark: For the quarter, we had $2 7 billion of CD maturities, which repriced from $4 three 3% to 372% with an 86% renewal rate. Additionally, we ended the quarter with no brokered deposits in our DDA balances increased $18 million.
Mark: <unk> mix was stable at 36%.
Mark: Cds will continue to reprice lower throughout 2025, given maturity volumes and three anticipated rate cuts over the remainder of 2025.
Mark: Total E O P deposits were down $298 million, but that includes 320 million of seasonal public fund runoff.
Bond yields for the company were up seven basis points to seven 8%. We had 165 million of principal cash flow at 3.05% that was reinvested at 5.04%. Additionally, $164 million of our fair value hedges.
Mark: The effective and contributed four basis points to the overall yield pickup of seven basis points.
Mark: Next quarter, we expect about $236 million of principal cash flow at 319% that will be reinvested at higher yields for the remainder of 2025 and an additional 85 million of our fair value hedges will become effective providing additional yield.
Mark: Our loan yield for the quarter was down 18 basis points to 584% and was impacted by lower average loan balances and lower yields on our variable rate loan portfolio.
Mark: We updated our guidance this quarter to reflect disabled transaction and our updated expectations for loan growth as well as a few other items.
Mark: We believe we can continue to achieve modest NIM expansion and NII growth of between three and 4%.
Mark: In 2025, driven primarily by the impact of lower deposit rates low single digit loan growth and continued repricing of cash flows from both the bond and fixed rate loan portfolios.
Mark: Our guidance assumes three rate cuts of 25 basis points each in June July and October.
Mark: Our updated P. P. N. Our guide is we expect to be up between six and 7% from 2020 Four's adjusted levels and our efficiency ratio will fall somewhere between 54 and 56% in 2025.
Mark: As John mentioned, we did receive regulatory approval for Sable and expect that transaction to close on may 2nd.
Mark: So, including Sable, we expect noninterest income will be up between nine and 10% from 2024.
Mark: Our expense guidance did not change as we continue to expect expenses will be up between four and 5% for the year, not including any onetime costs associated with disabled transaction.
Mark: Our criticized.
Mark: Commercial loans decreased during the quarter and non accrual loans increased albeit at a slower pace than in the prior quarter.
Mark: Net charge offs were down this quarter and came in at 18 basis points.
Mark: Our loan portfolio is diverse and we see no significant weakening in any specific portfolio sectors or geography.
Mark: Our loan reserves are solid at 1.49% of loans up two basis points from last quarter.
Mark: We continue to expect modest charge offs and provisioning levels for 2025.
Mark: Lastly, a comment on capital our capital ratios remained remarkably strong we increased our quarterly common dividend and modestly increased our share repurchases in the quarter.
Mark: We expect share repurchases will continue at this level or a bit higher throughout 2025.
Mark: Changes in the growth dynamics of our balance sheet economic conditions and share valuation could impact that view I will now turn the call back to John.
John: Thanks, Mike, Let's open the call for questions.
Speaker Change: Thank you, Sir and everyone. If he would like to ask a question. Please press star one on your telephone keypad again that is star one to ask a question. We will go first to Michael Rose Raymond James.
Michael Rose: Hey, good morning, guys, sorry, good afternoon, everyone.
Speaker Change: Mike.
Speaker Change: So we're going to get worse.
Speaker Change: Thanks for reporting early.
Speaker Change: Yes, so just on that last comment around the buyback just given the capital accretion this quarter and a slower kind of loan.
Speaker Change: Loan growth outlook, as we move forward, which I totally understand why why not lean in a little bit more.
Into the buyback just given where the stock trades the earn back on the buyback.
Speaker Change: And what I see is that fair.
Speaker Change: Fairly robust.
Speaker Change: For positive operating all the good stuff you guys, who work so hard to achieve why why not lean in a little bit harder here. Thanks.
Speaker Change: Hey, Michael its Mike and absolutely I think we're doing that so the comment was around at least the same level that we did last quarter and potentially a bit higher and that is a pretty healthy increase compared to last quarter I know just.
Speaker Change: Just described it is modest but it probably is a little bit better than modest and certainly if you look at the level. We bought back all of last year, if we buyback at current levels and a little bit higher consistently through the year, that's a pretty nice increase year over year.
Speaker Change: So I think one of the caveat certainly is the external environment.
Speaker Change: Dislocation of of share prices and just what happens in that external environment, but all things equal. The intent is that we will buy back again at current levels, if not a bit higher consistently through the year. So hopefully that makes sense.
Speaker Change: Yes, it does really appreciate it.
Speaker Change: Just as a follow up certainly understand.
Speaker Change: How credit has performed so well you guys have done really good job, bringing down the snick balances, but I think it's probably too early to completely understand what's going to happen with tariffs, but I know you guys have made a bigger inroads into small business in your markets.
Speaker Change: An area of concern I think for investors the longer this situation takes to play out what are you guys working on currently to kind of better assess what the credit impacts could be assuming tariffs go through at some sort of elevated level. Thanks.
Chris Luca: Yeah highest Chris Luca.
Chris Luca: We've done our best to just basically understand all the different sectors that could be impacted our reality is you don't know what really will be the outcome of what target areas.
Chris Luca: The duration of all of those actions.
Certainly because of even the noise that's going on it is creating a little bit of consternation.
Chris Luca: In the markets and in individual customers, but I think most of them are really taking a position of a little bit of wait and see.
Chris Luca: I think there the <unk>.
Chris Luca: Ones that are much more org.
Chris Luca: Organized are assessing where the risks might lie in making.
Chris Luca: Plans for like a plan a and a plan B plan C. In.
Chris Luca: In the event that it's.
Chris Luca: More significant or longer duration type.
Chris Luca: Have an impact, but we certainly have looked at the various <unk> codes.
Chris Luca: That are likely subject areas and done to the valuation on the risk profiles.
Chris Luca: So that we can prepare to kind of engage with the customers.
Chris Luca: When it becomes more certain.
John: Yes, Michael this is John I'll add to that it wasn't exactly your question, but I think it's somewhat tangential to chris's answer.
Chris Luca: At this point in time client sentiment.
Chris Luca: <unk> wallet shows some of the apprehension that Chris mentioned and the customer behavior doesn't really line up with a very near and present fear of an impending recession, particularly one that might be worst in moderate and longer.
Chris Luca: Typically we will see a lot of line draws occur during that time as people pad the balance sheet with excess liquidity.
Chris Luca: Secure and whatever forms of capital they have two important near term amount of pressure and we really aren't seeing that I mean that kind of comment goes through yesterday, so into second quarter. So I think the mindset of our clients somewhat mirrors the mindset of the banks not just ours, but others, where the general sentiment is a little too early to tell.
Chris Luca: <unk>.
Chris Luca: And hopefully the shock at all of the first week of the quarter, we will give way to individuals' skirmishes with particular countries or sectors and the overall impact will be a lot less pronounced than maybe we all fear on April seven.
Chris Luca: Thats helpful, but that would be my guess my added contribution.
Chris Luca: No I appreciate it and maybe I could just squeeze one more in just on the increase in the PPA in our guide certainly understands that include Sable Trust how much of the increase in the PPA in our guidance related to that versus core because right. Because you guys did better on expenses, but I think.
Speaker Change: Most of US were anticipating thanks, Yeah, Great question, Michael and I think that if you look at the change that we.
We made in fees up 9% to 10% that's a bit more than certainly sable is expected to bring for this calendar year. So.
Speaker Change: I think we can certainly count on from continued growth in our various fee income lines of businesses. That's been an extreme strength of the company. The last couple of years and we anticipate those businesses to continue contributing to the bottom line. So I think that as well as on the expense side you'll note.
We actually kept the guidance the same so up to 4% to 5%, but certainly that includes stable so that infers that.
Speaker Change: We're saving expenses elsewhere throughout the company for for the balance of the year.
Speaker Change: Those two combined.
Speaker Change: The better performance in terms of fees. The addition of Sable and then continued expense control really account for.
Speaker Change: The entirety of the increase in guidance around PNR.
Speaker Change: Great. Thanks for taking my questions I'll step back.
Michael Rose: Thank you Michael.
Speaker Change: The next question today is from Catherine Mealor, K B W.
Catherine Mealor: Thanks, Good afternoon.
Speaker Change: Hi, Kevin.
Speaker Change: Can you just give us an update on the hiring process and kind of the number of lenders in revenue producers that you hired so far and kind of your plans for the next couple of quarters and then and then just how that translates into the your growth outlook. It seems like you're.
Speaker Change: It feels like it's a little bit slower and then it pushed back.
Speaker Change: To the back half of the year, although I know you've always said, it's more backend loaded, but just kind of curious you know as we.
Speaker Change: As we think about it.
Speaker Change: Like how successful the hiring process has been or if this volatility has delayed any of that as well. Thanks.
Speaker Change: Sure. Thanks, Thanks for the questions I'll try to answer both at the same time, but if you need it.
Speaker Change: Give me a second.
Speaker Change: Question to make sure I'm clear.
Speaker Change: Don't be bothered by.
Speaker Change: First on the hiring I think we shared in the deck that we have added four in Q1, we added seven I believe in Q4, a run rate for the year should be around let's call. It 20 to 30 I think 24 was the number that we actually shared on the call back in January for the year and I would expect to hit that.
Speaker Change: Q1 is typically a little easier time to move folks but.
Speaker Change: Our friends on the other side arent, giving up good talented bankers very easily so our pull through rate for offers is running about 50%.
Speaker Change: For the type of talent, we're trying to attract I think thats a pretty good number.
Speaker Change: The volatility in the macro does not affect our desire to add offensive players and add office is in growth markets that are highly successful and if we look back over our Texas performance.
Speaker Change: The last five year.
Speaker Change: Compounded annual growth rate somewhere in the neighborhood of around 16% with the.
Speaker Change: With South Texas coming on very strong in Q1 in North Texas is been strong for really the better part of several years. So.
Speaker Change: Makes no sense whatsoever to let the current volatility we get in the way of that plant. So we will continue if not enhance it to make sure that we come out whatever the other side of this desktop and tariffs is with a strong hand.
Speaker Change: The sectors that we grew in dollars in Q1 were driven a good bit by the new hires so, particularly on equipment finance. So that's I guess the the earlier hires in the cycle to add business from a new hire in equipment finance is a little shorter.
Speaker Change: So we showed good progress there and I look forward to that being replicated throughout some of the other loan generation sectors and when talking about sort of the guidance, we gave a quarter ago for the year and typically where given loan guidance on an annual basis right, we don't get into quarters, but but now that the first quarters behind us I really.
Speaker Change: Expected, a push and total loans for Q1 headed into the end of the quarter. It looks like we very much may get there and that had the payoffs that occurred.
Speaker Change: Both in healthcare and and even though the CRA number is up.
It would have been up a good bit more had we not had some payoffs towards the end of the quarter as the 10 year note began to subside and we saw pretty big pretty big mismatch between revolving rates and perm rates. So we had some unplanned.
Speaker Change: Payoffs were out there at the end so as we go into the second quarter.
Catherine Mealor: Catherine the production levels are good the pipelines look better than they looked a quarter ago.
Catherine Mealor: I think the only potential interruption as if if the somewhat pause that we're seeing from larger organizations and medium size organizations due to the tariff concerns last all through the quarter that could push of some of the production. We're planning to Q3, but at this point in time, we're really not seeing.
Catherine Mealor: Any deals come out of the pipeline, we're just seeing the closing that shift back a matter of days or weeks. So we remain hopeful to be able to present and I would be disappointed if we don't show growth into Q.
Speaker Change: Okay. Great is that helpful. Yes, that's great Yeah pipeline with thanks My next question.
Speaker Change: You answered that which was great and then maybe my follow up then I'll move over to M&A I know you've talked in previous calls about wanting to participate in M&A.
Speaker Change: Of course sure that price is back to evaluation that makes that more challenging. So just kind of curious your updated thoughts on M&A versus organic growth first is I know you talked about buybacks earlier as well is this just a period, where we see more buyback from you and then a push for organic growth and M&A maybe comes at a later date once Zachary.
Speaker Change:
Speaker Change: Yes, Catherine Thanks for that and I think you pretty much answered. The question that's really how we think about it now and.
Speaker Change: I'll keep it simple I mean for right now M&A is just not something that we're focused on.
And certainly the disruption in the external environment and the impact on our evaluation of factors. So that may change or will change at some point down the road, but I think right now in terms of capital priorities. It really is.
Speaker Change: What we've done more recently and that is.
Speaker Change: Returning capital to shareholders via dividend increases and then more recently an uptick in our buyback. So I certainly think that we'll continue to lean into those two ways of managing capital.
Focus on our organic growth plan as we continue to do so and M&A I think is something simply for another day down the road.
Speaker Change: Makes sense great. Thank you.
Speaker Change: You bet thanks for the questions.
Speaker Change: Next we'll take a question from Stephen Scouten of Piper Sandler.
Stephen Scouten: Yes. Good afternoon, everyone I just wanted to follow back around a little bit on the upside in the <unk> and Mike I know you gave some color on Michael's question about.
Stephen Scouten: Stable and the benefit there, but I think the detail we have in the deck was in 24. They added like 'twenty two they had about $22 million in revenue, what's kind of the expense base.
Stephen Scouten: That business Thats coming over just trying to think about where the.
Stephen Scouten: Were there other reductions are kind of within that overall guidance.
Speaker Change: Yes, Stephen we haven't disclosed that specifically and I think we'll hold on to that right now until after we get past the actual closing and have a quarter or two kind of under our belt, but we have kind of disclose that we believe the impact of stable as a whole on this year will be about <unk> <unk> per share.
Stephen Scouten: Certainly the revenue side of that is.
Stephen Scouten: Somewhere around $14 15 million somewhere in that neighborhood and once we get stable completely converted.
Stephen Scouten: Along with another conversion that we have going onto our legacy Trust business.
Stephen Scouten: We're really looking for 27% to see the full impact of the acquisition and we're kind of calling that out at about $8 10 per share for 2007, and then certainly we'll build on that in future years. So that's that.
Stephen Scouten: The disclosures, we're giving today on Sable and again, okay. We.
Stephen Scouten: We get the transaction closed I think we'll share a little bit more detail.
Speaker Change: Yes that makes sense that makes sense and then I know your NIM Guide I think you said it assumes those three cuts June July October, but can you give us some color on.
Speaker Change: Maybe sensitizing that one way or the other if these expectations seemingly change daily if we were to get zero cuts kind of what you would think about it if we got more than three just kind of how we would think about.
Speaker Change: The directional shifts with other scenarios.
Speaker Change: Sure be glad to so we've kept our treasury and financial planning teams busy modeling different rate scenarios. So our profit plan for this year started off with the three rate cuts and that became part of our guidance and we've taken a couple of twists and turns over the past couple of weeks as you might expect in Atlanta.
Speaker Change: And it pretty much back where we started with the three rate cuts.
Really centered over the summer and then went into the fall. So the other disclosure that we provided in the earnings deck and it really was a piggyback off the same disclosure we did in the first quarter and that's this notion that really any way you cut it where we have three three rate cuts two one or not.
Speaker Change: It really isn't going to have an appreciable impact on our NII for this year.
Speaker Change: It's certainly going to move the numbers around a couple of million dollars in either direction, but certainly nothing that would be considered a material or significant.
Speaker Change: The big things that really move it would be.
Speaker Change: Loan growth and certainly we have the updated guidance around low single digit loan growth and thats impacted the numbers on NII, a bit and that resulted in us reducing that guidance a little bit to reflect.
Speaker Change: The reality of loan growth, maybe being a little bit less than we had thought it would be at the onset of the year, but if you look at our NIM and NII growth components as we think about the next three quarters. It really is a things that have driven that in the past couple of quarters and we've been able to.
Speaker Change: Kind of expand our NIM by around two to three basis points pretty consistently quarter over quarter and really we think under almost any scenario, we will be able to continue to do that for the balance of this year. We continue to have opportunities to reprice Cds, we continue to have opportunities to re price cash flow coming.
Speaker Change: The bond portfolio as well as opportunities to reprice, our fixed rate loan portfolio. So those have really been the three main drivers in and certainly our ability to maintain our niv mix at current levels potentially grow that a bit by year end.
Speaker Change: Those are the things that really is the recipe for us to be able to produce the kind of NII levels thats part of the guidance as well as the potential NIM expansion over the course of the year. So.
Speaker Change: I think that was probably a lot, but hopefully that was helpful.
Speaker Change: It's extremely helpful. Mike I appreciate that and then maybe last thing for me I mean, obviously the stock continues to trade at kind of a discounted multiple to peers and the profitability is phenomenal the excess capital is attractive deposits are great and it feels like loan growth continues to be the only maybe piece of the puzzle that's not that's not hit.
Speaker Change: And where you would want it to be and obviously the uncertainty and I know you mentioned some healthcare.
Speaker Change: Credits and other things, they're RMP in growth this quarter, but lower in that guide now what what really needs to happen.
Speaker Change: For me the environment getting better in getting these hires onboard.
To be able to hit on all cylinders on growth and maybe surprise to the upside as opposed to having to revise down at some point along the way.
Speaker Change: That's a terrific question. This is John I'll take it.
Speaker Change: We need the higher the new hires to come in and be in the markets that we're trying to grow in.
Because our growth rate in those markets are terrific, but it has to offset some slower growth areas that we have some concentration in so the upside surprise will come from.
Speaker Change: The 10 year staying up in the low to mid fours just not below four.
Speaker Change: At that point in time, we begin to see a lot more payoffs. So if the 10 year will stay up.
Speaker Change: Long enough to get the new hires in place and if we can pull forward some of the hires planned for the fourth quarter ended the second and third quarter, then that would drive us towards an upside. So we haven't given up on the initial guidance, but we're trying to be prudent and transparent that in the environment. We're in and in the last week of March when rumors.
Speaker Change: Pretty significant tariffs began and chill some of the sentiment we're trying to be respectful of of not over promising and be honest about what those headwinds to be a lowering of the guide wasn't because of a lack of appetite for growth or any lack of.
Speaker Change: Of expected success in hiring where we want to hire.
Speaker Change: But it's kind of hard to outrun.
Speaker Change: The fact that there's so many people looking to deploy credit and it's just not enough demand to satisfy everyone. So the deals getting one right now on price structure, our turnaround time organizations and certainty of execution, we can compete well and all of those areas. We just need more offense players in markets that theres more deals to take.
Speaker Change: That's fantastic color. Thank you guys for all the time I appreciate it.
Speaker Change: You bet. Thanks for the Great question.
Speaker Change: Brett Robertson of Husky group has the next question.
Hey, good afternoon, everyone.
Speaker Change: Wanted to go back I wanted to go back to fee income for a second and just.
Speaker Change: With the increase in the guidance it seems like a lot of that is stable.
Speaker Change: Are there other pieces that would be you think repeatable from here or that would drive.
Speaker Change: Some of the growth derivative income syndication fees SBA mortgage banking is there anything in particular, that's helping that guide for the year.
Speaker Change: Yes, so I'll get started and as we kind of mentioned before if you look at.
Speaker Change: What the new guidance translates into in terms of dollars really about two thirds of that is the introduction of stable into the company's financials.
Speaker Change: And the other one third or so.
Speaker Change: As the increases that we're expecting in other fee income lines of business.
Speaker Change: You kind of hit already on kind of our specialty lines, which have really I think over contributed in the last couple of quarters and we expect that to continue to do so so that things those from examples of that or or boldly syndication fees you mentioned that.
Speaker Change: Our SBA IC fees have been real strong of late we expect some of that to continue at certain levels.
Speaker Change: SBA fees is another category well.
Speaker Change: Wealth management outside of Sable and then we've also had some pretty nice increases in our ability to.
Speaker Change: Origination and sell some mortgage loans. So those are all cash.
Speaker Change: What kind of pick up that difference.
Speaker Change: In addition to what Sable will bring John out there's anything you want to assure all I'll add to that Mike shared that stable contribution but but.
Speaker Change: That shows up in the wealth management forecast, but but even net of Sable, we had a really great quarter and it's been a long time since we did not have a fairly great quarter with wealth management fees.
Speaker Change: That's in trust and investment management, it's an annuity production out of the retail shop.
Speaker Change: It shows up in wealth management, but the retail folks originating great deal of it all of those teams really do hit on all eight cylinders.
Speaker Change: And we had another great quarter.
Speaker Change: The other area that is I'll use your word is repeatable is our density and our business accounts for operating accounts that we offer treasury services that density continues to improve in terms of wallet share.
Speaker Change: Some of the new hires we've talked about on the treasury side to ensure that that density continues to improve and that's real money on the fee income side and so that's improving and.
Speaker Change: And it has a bit of a tailwind just as balanced as normalized from the pandemic.
Speaker Change: You mentioned mortgage and with rates going up I think they were <unk>, 7% yesterday, it's kind of hard to believe we will see application improvement that generates a lot of fee income but.
Speaker Change: Our share of the all the mortgages that do happen should continue to improve as we deploy our direct channel origination sources through the rest of the year. So I don't know that mortgage secondary phase, it's going to like the board up for everybody, but for us given our relative performance on a relative attractiveness as an originator is going to.
Michael Rose: <unk> improve we might out punch or wait a bit in terms of improvement there and then finally, the specialty face that Mike mentioned.
Michael Rose: The syndication fees related to that as sort of a stated desire I've talked about it on several calls where our participation as a smaller player in very large transactions has been is getting replaced by a leading <unk>.
Michael Rose: Smaller transactions that we can very well performing and then we get a bigger slice of that fee.
Michael Rose: That allows us to create both more granular portfolio get more operating deposits and get a fee contribution that otherwise we would just be getting rewarded as a piece of somebody else's credit relationship. So.
Michael Rose: We will certainly get out of the state business at all but I think we pulled it down about 300 basis points in the last seven or eight quarters and replacing all of that.
Michael Rose: It's been I think the secret sauce to seeing some of that benefit on both the DDA side and the fee income side.
Michael Rose: Is that the clarity you were looking for.
Speaker Change: Yes, that's really helpful from both of you.
Speaker Change: And you just you just mentioned.
Speaker Change: Shared national credits. The other question I had was just around.
Speaker Change: That that bucket continued atrophy, a little bit this quarter.
Speaker Change: And then you talked about the payoffs and healthcare.
Speaker Change: Other potential credits just based on rates et cetera, how much of the.
Speaker Change: Revised guidance or does the revised guidance kind of assume that those trends continue or how should we think about the headwinds that you faced relative to the revised revised 25 outlook.
Speaker Change: I think you kind of draw a box around healthcare that may be the most digestible way to answer it.
Speaker Change: The diminishment, we saw this quarter were from three syndicated kill tumor syndications to where leverage and one was a syndication.
Speaker Change: We had a share and that were recast in the quarter a little bit ahead of when the suggested or the maturity would have suggested that it would be recast that we opted out of to use that liquidity for other purposes, specifically loan growth in the back half of the year.
Speaker Change: So that contributed nearly all of the diminishment in the Snick density I think we reported $9 four.
Speaker Change: It was in the mid <unk> up and try to frame.
Speaker Change: And I'll go back in my memory.
Speaker Change: And I don't think we will get north of 10.
Speaker Change: But we don't really we're not really intentionally running it down.
Speaker Change: Really just more of a replacement of participations and other credits with with leading our own that are smaller.
Speaker Change: But I didn't expect that to be as big a headwind in Q1 as it was because we didn't expect to see those payoffs, but I'm not I'm not going to crowd or having that happened because I have confidence, we'll redeploy that towards the back half of the year.
Speaker Change: As I think I think that was the entire impact on snakes other than people just due to paydowns on their lives.
Speaker Change: Okay.
Speaker Change: Great. That's really helpful. Appreciate all the color guys.
Speaker Change: You bet. Thank you.
Speaker Change: Sure.
Speaker Change: Next up we'll hear from Casey Haire Autonomous research.
Speaker Change: Yes.
Speaker Change: Thanks, Good afternoon, everyone.
Speaker Change: Follow up on capital.
Speaker Change: Partner, So first stable what kind of CET, one impact will will that transaction have.
Speaker Change: Then too.
Any thoughts I know you guys did a bond book restructuring in.
Speaker Change: Maybe two three years or so but just wondering if that's another way to use some of the excess capital given the bond book yield is still a little light.
Michael Rose: Yes. Thanks, Casey this is Mike and related to Sable again, we're not disclosing.
Mike: The purchase price for that entity, but I will share that the impact on common tier one is going to be modest so it's not going to get huge.
A huge dent there by any stretch and then your other question related to a restructuring I mean look that's something that we consider really every quarter I mean, we model those kinds of things pretty on a pretty regular basis, and we'll continue to do so, but I think to actually pull the trigger on something like that.
Mike: We'll need a little bit more stability, especially in the bond markets.
Mike: A little bit confidence that the bond markets will remain.
Mike: Stable if they get there. So so hopefully we have that kind of confidence and stability.
Mike: We will be able to consider those kinds of things, but I think right now, there's probably just a little bit too much going on too.
Mike: On a practical basis consider a bond restructuring right now.
Mike: Yes fair enough.
Mike: Okay, and then just on the expense got it approved.
Mike: I. Appreciate you guys are not going to lay out what the disable impact is.
Mike: I guess, what where did you where did you find these cost saves to keep the expense guide flat.
Mike: Flat given the table will be additive obviously to the expense base like we're aware of the call.
Mike: Sure.
Mike: Provide some color on that so so part of it admittedly is.
Mike: Our incentive comp load this year will probably be a little bit lighter than than what we thought coming into the year. So there's some savings there and really the rest of it is really kind of across the board and continues to be.
Mike: Centered on our ability to control costs and.
Mike: Again thinking about the way this year has really begun with so much uncertainty in.
Mike: Issues with the potential trade war and everything related to that.
Mike: We're cognizant of what we need to do to continue to control costs and save cost. So I think it's just a little bit more of a heads down effort to make sure that we're spending money the way, we need to and savings where we need to as well.
Mike: So that has put us in a position I think to be able to be able to handle.
Mike: The on loading of the stable expense base without change in the guidance.
Speaker Change: Got you. Thank you.
Mike: Okay.
Mike: The next question is from Gary Tenner D. A davidson.
Gary Tenner: Thanks, Good afternoon.
Gary Tenner: My questions were answered, including that follow up on the expenses, but Mike I Wonder if you could just give us the expected CD maturities and kind of expected rate benefit or pick up in the second quarter.
Gary Tenner: Yes, so I'll start off with what that benefit is for the year. So.
Gary Tenner: We look to have about.
Gary Tenner: $5 5 billion of CD maturities over the next three quarters those Cds will come off at about three seven and we think there'll be repriced at somewhere near 3% and again that's for the remaining three quarters of the year. So that assumes a 75.
Gary Tenner: Percent renewal.
Gary Tenner: So that's kind of the headline story.
Gary Tenner: Quarter, you asked about the second quarter. So we're looking at about $2 $3 billion of CD maturities coming off at 388 going back on at around $3 50, or a bit lower with about a 78% renewals. So those are the numbers for the year as well as the second quarter.
Speaker Change: Okay, Great and then I guess, maybe just a follow up to that Mike in terms of the end of period deposit.
Speaker Change: Our expectation to be up low single digits over the course of the year then does that.
Speaker Change: That's net of.
Speaker Change: Some amount of Cds that will not renew.
Speaker Change: So yes it.
Speaker Change: Should shift a little bit yes.
Speaker Change: Yes, it will continue to shift as we kind of described and.
Speaker Change: No changes in that guidance around.
Speaker Change: The outlook for deposits to come in at low single digits. So.
Speaker Change: That's certainly accounts for the seasonal inflows and outflows of our public fund book So.
Speaker Change: Again for this past quarter deposits were actually down right about $300 million, but if you back out the impact of the public fund outflows, which of course are seasonal we actually would have grown deposits by about 20% to $25 million. So all of those factors are considered in part of the guidance.
Speaker Change: Thank you I appreciate it okay.
Matt Olney: The next question is Matt Olney Stephens.
Speaker Change: Hi, Matt.
Matt Olney: Hey, guys good afternoon.
Speaker Change: Going back to the commentary around loan growth being stronger in the back half of the year.
Speaker Change: Just remind us how much of this growth would be from new hires that you've made over the last year or so and then secondly, just any color you can give us as far as loan pipelines that can just get us more comfortable with the loan growth in the back half of the year.
Speaker Change: Sure.
Speaker Change: Yes, I'll start now with the first question. So if you look at the overall loan growth that we're expecting for the year, it's somewhere around 15% that we're expecting from new revenue hires and those would have been primarily folks that we would have hired let's say in the fourth quarter of last year, maybe a little bit into the first quarter of this year and then.
Speaker Change: On the expense number the impact of the new hires on our expense guidance is about 100 basis points or so so those numbers are largely unchanged from the disclosures that I think we gave last quarter.
Matt Olney: Yes, Matt.
Speaker Change: This is John the percentages change a bit depending on which of the new hires.
Speaker Change: Our loaded in a little earlier, so I gave the example in equipment finance to where a single new hire in that group can make a pretty big difference pretty rapidly because.
Speaker Change: The time to decision and book.
Speaker Change: One, particularly the capital market side of equipment finance is a good bit more rapid than say, a commercial banker, adding thats going to take 102150 days to really begin to get their pipeline flushed out.
Speaker Change: They get comfortable with kind of understand the tax policies and the people. So the more of the middle market equipment finance and CRE hires in healthcare hires we can get loaded to the front of the year the more of an impact above the <unk>. So that's our goal, but we didn't we didn't build that into the plan too.
Speaker Change: To make it may be open and it's kind of balanced out based on what our fastest band that said one of the earlier questions around the importance of an upside to loan growth on our valuation certainly were motivated to do that if we can find the talent.
Speaker Change: Sure.
Speaker Change: And John to follow up on the comments you made.
Speaker Change: I think you were targeting between what 20 to 30, new producer hires.
Speaker Change: This year is there a target mix you have the type of producer whether it's.
Speaker Change: Real estate or commercial or capital mortgage just any color on the mix.
Speaker Change: Sure. There is there is I think that to average it out theres a couple of in each of the specialty lines.
Speaker Change: Wed like to add CRE folks and in Florida, and Texas and specifically in Nashville.
Speaker Change: I would like to add additional equipment finance folks that will be based out of new Orleans, but it'll be focused on areas around our footprint.
Speaker Change: Probably have the numbers in business our commercial bankers. There is for I think plan for financial advisers in the wealth management group to help augment our new investment in Florida, and Central Florida via cycle.
Speaker Change: And then to be honest, if talent or teams come available to us because of disruption around us we will not hesitate to add more than the 20 to 30 that are outlined like I said the number in the.
Speaker Change: <unk> 24, but if we could get 30 or more that would be just fine with me. So wherever there is talent and markets. We're trying to grow in particularly high annual organic growth rate options. Those are very much in demand to us.
Speaker Change: Okay, great. Thank you guys.
Speaker Change: You bet. Thank you.
Speaker Change: Next we'll take a question from Garlinger City.
Speaker Change: Thanks, and good afternoon.
Speaker Change: Hi, there.
Speaker Change: Just wanted to follow up quickly.
Speaker Change: M&A conversations might be so theres really not a lot of the pipe.
Speaker Change: And that's in relation to department stores.
Speaker Change: Or is that like all M&A so.
Speaker Change: Also included interest in fee income.
Speaker Change: Yes, great Great question, Ben and Great clarification. So the question was really directed I think at depository.
Speaker Change: Certainly we're in the midst of closing on Sable, so we'd like to get that one closed and get some good work done on getting that integrated but.
Speaker Change: <unk> would be a little bit more open to to those kinds of transactions and deposit stories in the current environment. So so thanks for that clarification.
Speaker Change: I appreciate everything else, we were asked and answered thanks guys.
Speaker Change: You bet.
Christopher: Our last question today comes from Christopher <unk> with Janney Montgomery Scott.
Christopher: Hey, good afternoon wanted to ask Chris about the growth in the unfunded commitment reserve was that related to just volume there or risk or any more color there.
Christopher: Okay.
Christopher: Yes, good question.
Christopher: Really it's just.
Christopher: The change in our outlook or for fundings likely that.
Christopher: There's going to be potentially more fundings, just converting over from unfunded to funded and so therefore, it will just kind of move over.
Christopher: From that perspective.
Christopher: Okay and as some of the factors.
Christopher: Qualitatively in your modeling for reserves in general.
Christopher: Do you have any visibility that that would lead to any any.
Christopher: Significant reserve build.
Christopher: And then second or third quarter or was it simply too early to comment.
Christopher: It's probably too early to comment but.
Christopher: The qualitative factors are there because of.
Christopher: How we built our models and they don't always take into consideration all of the variables that are.
Christopher: Going on at the loan level. So the qualitative factors are there to kind of enhance that in many respects.
Christopher: So the idea of having a higher recession scenario is that already in the numbers that you had as of year end, our four as of March 31.
Christopher: Yeah. So Chris this is Mike so if we look at the scenarios that we're using and of course, we use Moody's like like many of the mid cap banks, where we are.
Christopher: We're split between the baseline scenario as well as the <unk>.
Christopher: The slower growth scenario and the baseline scenario that we're using does not have the impact of a recession, but certainly the slower growth one does.
Christopher: There is a third scenario out there that includes a moderate recession.
Christopher: That as we go through this year and the next quarter or two.
Christopher: We'll make judgment calls around how we might change or alter the mix of the scenarios that we're using but certainly where we are today.
Christopher: Too soon to make a call as to where it will be really at the end of this quarter given the potential for changes in the external environment.
Christopher: And I might also add.
Christopher: I'd also add that the scenarios in general have gotten a little bit more pessimistic in many respects in the baseline tends to move so wanted to just kind of keep in mind. The fact that the baseline ultimately if it's working correctly will kind of follow where we are in the cycle and sell from last quarter to this quarter.
Christopher: Theres more components within there that kind of sound like.
Christopher: Higher recession risk.
Christopher: Okay, great that's good.
Christopher: Ground. Thank you both I appreciate it.
Christopher: You bet. Thanks for the question.
Speaker Change: And everyone that does conclude our question and answer session I would now like to hand, the call back to Mr. John Hairston for any additional or closing remarks, yes. Thanks.
Speaker Change: Thanks, Lisa Thanks for moderating today and thanks, everyone for attending a light call look forward to seeing you on the road soon.
Speaker Change: Once again, everyone that does conclude today's conference. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Yes.