Q3 2025 Hancock Whitney Corp Earnings Call
Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's third quarter 2025 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.
Today's conference: Katherine Mistich, Investor Relations Manager. You may begin.
Thank you and good afternoon.
During today's call, we may make forward-looking statements. We would like to remind everyone to carefully review the Safe Harbor language that was published with the earnings release and presentation, as well as in the company's most recent 10-K and 10-Q, including the risks and uncertainties identified therein.
You should keep in mind that any forward-looking statements made by Hancock Whitney speak only as of the date on which they were made.
As everyone understands, the current economic environment is rapidly evolving and changing.
Hancock Whitney's ability to accurately project results or predict the effects of future plans or strategies, or predict market or economic developments, is inherently limited.
We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions but are not guarantees of performance or results.
And our actual results and performance could differ materially from those set forth in our forward-looking statements.
Hancock Whitney undertakes no obligation to update or revise any forward-looking statements, and you are cautioned not to place undue reliance on such forward-looking statements.
Some of the remarks contain non-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in our earnings release and financial tables. The presentation slides included in our AK are also posted with the conference call webcast link on the Investor Relations website.
We will reference some of these slides in today's call.
Participating in today's call are John Hairston, President and CEO; Mike Aerie, CFO; and Chris Luca, Chief Credit Officer. I will now turn the call over to John Hairston.
Good afternoon and thank you all for joining us today. The third quarter of 2025 was a remarkably strong quarter with an ROA of 1.46% versus 1.32% a year ago. Our results reflect continued profitability improvement, reduction in our efficiency ratio, and progress on our organic growth plan. Net interest income continued to expand as our average earning assets grew at higher yields, and we continued to reduce deposit costs, down 1 basis point this quarter.
For the third quarter in a row, fee income totaled $106 million, an increase of 8% from the prior quarter. Investment, insurance, and annuity fees led this increase, heading to a record high for the organization.
Expenses remain well controlled compared to prior quarters, adjusted for interest expense. We were up less than $3 million, or 1%, from the prior quarter. Much of this increase was in personnel expenses due to our investment in revenue producers, along with higher incentive income from a strong quarter of loan production and really terrific fee income.
Loans grew to $135 million, or 2% annualized, as shown on slide 27 of our investor deck. Our production was quite strong, increasing 6% quarter-over-quarter and 46% from the same quarter last year. The net growth number was impacted by higher payoffs of larger credits, including snags, which were down $114 million and ended the quarter at 8.9% of total loans. We likewise encountered a larger-than-expected reduction in line utilization among industrial contractors, as favorable project completion dates led to earlier payments on very large projects.
We remain focused on a more granular, full relationship in loans, with the goal of achieving more favorable loan yields and relationship revenue. We expect low single-digit growth in 2025 and perhaps low single-digit net growth for the fourth quarter, as paydowns persist. Deposits were down $387 million, largely driven by seasonal activity in public fund DDA and interest-bearing accounts, which decreased $269 million. Our interest-bearing transaction balances were up, while retail time deposits and DDA balances were down.
To solidify our target, compounded annual balance sheet growth rate.
We remain optimistic about closing out 2025 with continued growth and profitability. As we look back over the past several years, we hope investors are pleased to see the combination of a fortress capital stack, solid allowance for credit losses, superior profitability, ample liquidity, and asset quality, along with a new emerging trend of balance sheet growth despite the current somewhat dynamic microeconomic environment. We are confident in the company's ability to navigate any challenges before us, support our clients, and continue running a very successful playbook. With that, I'll invite Mike to add additional comments.
Thanks John and good afternoon.
As John mentioned, we're very pleased with the company's strong performance. This quarter, our adjusted net income for the quarter was nearly 128.49% or a dollar of 37 per share in the second quarter.
Second quarter results included $6 million of supplemental disclosure items related to our acquisition of Sabal Trust Company.
PNR for the company was up $8 million or 5% from the prior quarter. Our NIM was stable at 3.49%, and NII was up $3 million or 1%.
The income was up $7 million or 8% from the prior quarter, and expenses remain well-controlled, up just $3 million or 1% from the prior quarters. Adjusted expenses.
Our efficiency ratio continued to improve, reaching 54.1% this quarter compared to 54.91% last quarter. Our efficiency ratio year-to-date of 54.73% is nearly 100 basis points lower than last year's 55.67%.
The quarter stable net interest margin was driven by better earning asset mix, higher average loans, and a higher securities yield, which was offset partially by higher other borrowings volumes and rates, as shown on slide 15 of our investor deck.
The yield on the bond portfolio was up 6 basis points to 2.92%.
We had $135 million of principal cash flow at 3.08%, and we reinvested $200 million back into the bond portfolio at 4.61%.
Next quarter, we expect about $207 million of principal cash flow at 3.53%. That will be reinvested at higher yields.
We expect the portfolio yield to increase with continued reinvestment at higher rates for the remainder of 2025.
Our loan used for the quarter was up 1 basis point to 5.87%.
Yields on fixed-rate loans were up 7 basis points to 5.24%. Meanwhile, the yield on variable-rate loans was down 6 basis points.
The yield on new loans was flat at 6.78%.
With two rate cuts expected, in the fourth quarter of '25, we expect the overall loan yield will be down accordingly.
Our overall cost of funds was up 2 basis points to 1.59% due to higher average other borrowing volumes and rates, partially offset by lower deposit costs.
Now we're trained in our cost of deposits continued, albeit at a slower pace, with a decrease of 1 basis point to 1.64% in the third quarter.
The drivers were CD maturities, renewals at lower rates, and lower rates on public fund deposits.
We expect deposit costs will be down in the fourth quarter, following expected rate cuts in October and December.
For the quarter, we had $2.4 billion of CD maturities at 3.69%. That would be priced at 3.58% with a strong 88% renewal rate.
CDs will continue to reprice lower in the fourth quarter, given maturity volumes and anticipated rate cuts.
As shown on slide 11, EOP deposits were down $387 million, mostly reflecting $269 million in seasonal reductions of public fund balances.
DDA balances were down $3,344 million, including an $83 million reduction in public fund DDAs.
We're up 278 million.
Our updated guidance is included on slide 20 and mentions two rate cuts of 25 basis points in October and December.
For the third consecutive quarter, criticized commercial loans improved, decreasing from $20 million to $549 million.
Non-AC cruel loans increased modestly to $114 million.
Net charge-offs were down this quarter and came in at 19 basis points. Our loan portfolio is diverse, and we see no significant weakening in any specific portfolio, sectors, or geography.
Our loan reserves are solid at 1.45% of loans, consistent with last quarter.
We expect net charge-offs to average. Loans will come in at between 15 and 25 basis points for the full year 2025.
Lastly, a comment on capital: our capital ratios remained remarkably strong with growth this quarter due to our higher earning levels.
We bought back about $40 million of shares, consistent with the prior quarter.
We expect share repurchases will continue at this quarter's level in the fourth quarter of 2025. Changes in the growth dynamics of our balance sheet, economic conditions, and share valuation could impact that view. I will now turn the call back to John.
Thanks, Mike. Let's open the call for questions.
Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press *1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press *1 again.
We'll take our first question from Michael Rose at Raymond James.
Hey, good afternoon, everyone. Thanks for uh, taking my questions. Um, maybe we can just start on loan growth. I think last quarter you guys have talked about a, a mid single digit or or 5% ish growth in the back, half of the Year, certainly understand. You know, there's been some ongoing pay Downs, um, and just wanted to get a better sense of, you know, I know Snicker at 8.9%, you've talked about 9 to 10% on a go forward basis. So we're at the low end there looks like healthcare has had 2 down quarters in a row. Can you just give some context on on? Are we near or nearing the end of of payoffs? And then, you know, how should we think in light of, you know, relatively solid production. Um, assuming those paid owns would have slowed what uh you know, initial 2026 growth could could look like because the underlying, you know, um, production has been pretty solid. Thanks.
Michael, thanks for the question. This is John. I'll try to put all that together. Uh,
and uh,
Certainly, you have a chance to redirect if I miss any of the points. But, uh, first just talking about Loan Production, I think I mentioned their prepared comments that.
Loan Production was up 6% over prior quarter and healthy 46% over the same quarter a year ago. So really all of the production level that we're getting is uh in line with our expectations uh and and in fact was stronger than last quarter. When we had a little bit higher end of period growth. So when you look a little under the covers, the average loan, growth numbers are quite consistent from Q3 to Q2. Um, I called about 180 million between the, uh, or for each of those 2 quarters. They just had different in the period numbers. Um, that said there are several different categories that you mentioned that are either growing, uh, as well or better than expected in some other performing. So for the quarter and we talked about this at the same call a quarter ago, we'd like to see a little different mix in the growth categories, that would command a little better yield as we go into the end of all the deposit repricing benefits that
With rate decreasing. So first owner occupied real estate was uh an area of Interest That Grew about 144 million. Um investor CRA also grew about 135 million.
So, let's pay Downs. It came a little bit, uh, quicker than expected. But then the bigger component was, uh, we had a number of large client, you know, core client sales to larger organizations upstream that occurred during the quarter. Those happened every quarter, but it was a little bit higher than normal. And then our old friend, private credit and private equity, did take down a few of the healthcare deals, uh, that I would have expected to be closer to flat this quarter. So, um, you know, it's kind of a tale of.
Of of ins and outs the production level, uh, was exactly where we expected through the organic growth plan, maybe a little better. Um, the pay Downs were likewise heavier and so that brings us to what to expect. I mean, obviously a mid single is where we want to be. Um, we think we can fund that with, with very high quality deposits that are lower in cost. Um, at that rate. Um, we're a little over 3% right now at the growth Pace, we're at needs to be closer to Mid singles. Um, and the, uh, I don't, I want to be really realistic about the pay down environment, you know, in your, in your question you said, when do we think that's over? Um, I don't think pay Downs are ever are going to diminish. When we have this good of an environment and this many players interested in the Southeastern part of the country. So what that means is we'll have to continue running the Playbook uh which is a lot of Hustle but also additional offensive players deployed to take that production level up another couple of hundred million a quarter. Right now, we're running about a big billion
8 for the quarter needs to be about 2, um, maybe a little north of that to generate a really consistent and dependable quarter of a quarter 5% annualized growth rate. So, um, I certainly pay Downs could go down.
But if we think about money rates, burning down, or going down, and then, uh, all these occupancy improvements that we're seeing across the multifamily space, I think it's unrealistic to think they're going to just go away. They may temporarily a little bit, but we're going to assume as we go into 2026 that pay down will remain high and boost production to cover it, right? In the same disciplined playbook. And what I mean by discipline—when I refer to that—I mean pricing discipline, credit discipline, concentration discipline, and continuing to run the playbook that's led us to have superior profitability. If I missed any of your points, uh, please redirect me.
No, John that was a a lot of caller. I really, really appreciate it. Maybe just 1 follow-up for me. I did want to kind of address the the capital question. You know, I know you guys have talked about, you know, over time, running tet1 11 to 11 and a half percent. You talked about the the BuyBacks this quarter about 40 million continuing with this space at least for the next quarter. But capitals, you know, C1 was still up the tech. Um, and I know there's some may I aoci recovery in there too. But um, you know, I, I guess. Can you talk about the ability to maybe do more on the repurchase front? I know you have the outstanding program but, you know, if you were to get through that over the next quarter or 2 or
3 quarters. You know, would you look to re-up that? And then I think there's a pervasive view out there that you guys are looking at a deal. Potentially a larger 1, can you just address your thoughts around m&a and and now you know giving the environment that we're in thanks.
Yeah, hey Michael, this is Mike. I'll uh I'll address that question and um the last part first around m&a. So our stance on m&a hasn't changed, you know, despite what you may be hearing out there, um, you know, we're not really focused on that right now. Um, at all we have talked about being opportunistic, you know, as kind of time goes by and opportunities present themselves, but, uh, but aside from that nothing's changed, uh, so that's first and foremost.
As far as, uh, continuing to, um, look at Capital priorities and the way we think about bringing being proactive in terms of deploying Capital. Again, A lot has not a lot, has changed really in the last quarter or so, um, I I know this this notion maybe exists that we and we've asked the question around where we feel comfortable operating the company. And the answer is, you know, for common Tier 1 to be, you know, in the range of 11, to 11 and a half percent, but that does not mean there's an active program to reduce our Capital to those levels. Instead, we would like to deploy it in, what we would describe as meaningful ways in the first priority. You know, as it's been for many quarters.
The Dallas region, uh, late this year, early next year, and the potential certainly exists for us to deploy capital in that manner in other markets.
Um, as far as returning capital to shareholders, I mean, that's a great point that you make around the buybacks. And certainly, you know, something we could look at in upcoming quarters is to incrementally increase the level of buybacks. But for now, for the fourth quarter, I would assume that, you know, we would buy back, you know, pretty much the same level we have in the second and third quarters in terms of how much capital we actually buy back in terms of dollars. And then certainly, as we've talked about many times in the first quarter in January, you know, I feel pretty certain that, you know, we'll have a discussion with the board around looking at the dividend. So all of those means of deploying capital and being proactive in terms of how we manage it, you know, are still, you know, top of mind and things that we will continue to do going forward.
So hopefully, that made sense.
It did. Um, thank you guys so much for taking my questions. I'll step back.
Thanks. Bye.
We'll move next to Band Girl, at City.
Hi. Good afternoon, guys.
uh,
I know you don't want to give a detailed guide, but on Slide 7, you kind of lay out the investment opportunities for further growth and branches, and just a few for Hancock down the road. So, when you guys think about the numbers that you put on those bullet points—so $8.5 million for revenue and then $6.2 million for facility expansion—is that kind of implying that, like, basically roughly $15 million or so spots to spot expense growth of $25 million in Q4 2025 into 2026? How should we layer that?
In expansion and investment down the road, like, obviously the opportunistic on hires, especially with the disruption from M&A in the Southeast, but just kind of what you have in front of you. How do you guys think about that?
Yeah, so Dan, when we look at slide 7 and talk about the numbers, you just mentioned. Those are kind of annualized numbers of what we expect to spend this year, on things like, um, expenses related to hiring new Revenue producers and then the new facilities in Dallas. Um, so again, those are kind of the annual run rate numbers but the point is well taken. As I mentioned, I think on the question of the previous question is, you know, when we look at 26 and Beyond, you know, we we fully intend to continue.
These kinds of investments in other markets. So again, uh, when, uh, when we talk again, in in the mid part of January, after fourth quarter earnings, you know, we'll talk about our guidance for 26 and, you know, the same level of detail that we always do. And, you know, we'll talk about some of these Investments that we're planning for next year.
Gotcha. Yeah. And I figured you probably want to save it for January but worth a shot. Um just wanted to clarify on the on the forward guide for even though we have 1 quarter remaining you there's no change across the board except for ppnr as soon. Like it's basically kind of implies lower under Revenue, higher end of expenses to get that new Range. Am I missing something beyond that?
No, that's right. And again, you get to the point where there's one quarter to go, and when you're talking about annual guidance, it's not very difficult to kind of solve for that one quarter. But I think if you look at our numbers for the third quarter,
You know, to the areas that we really outperformed was the income growth as John kind of mentioned in his prepared comments and then also controlling expenses. So I think, as we think about the fourth quarter, which we can expect to see, is in terms of fees, probably not the same level of growth. In the fourth quarter that we had in the third quarter, and then for operating expenses, the same thing kind of applies, but in the, in the other direction. So I I think the expense growth in the fourth quarter.
Will be a little bit more than what we saw in the third quarter. So if you put all that together, you know, it does lead you to conclude that the ppnr growth, you know, will probably be in the 5 to 6% range and uh probably a little bit of a bias toward uh the upper end of that 5 to 6.
Gotcha. I appreciate your time. Thank you.
You bet? Yeah. And Ben, this is John. Just a little bit more detail on that topic. Um,
Than we anticipated. Our production has been better than we anticipated. So, as we go into next year, um, any expense growth that you see?
heavily weighted towards the addition of more offensive players.
To ensure that we get, I mean, I want to be at the end of every quarter, you know, sitting on pins and needles looking at that loan growth number. I'd like to kind of have it in the bag when we start the quarter, and that's going to happen because we have more players out there, um, hustling business. I like the hustle of our current team. We just need more players. And so, uh, I think when we get to next year, we're going to talk about a more aggressive, um, run rate of bankers than we are on. We're a lot of annualized 8.6% run rate right now needs to be well north of 10, um, to have that shy and growth. And, uh, then also in terms of branch locations, you know, a couple of quarters ago, this isn't new news, but a couple of quarters ago, Mike answered one of those questions around about the same plan for additional offices per year until, you know, we need to let them catch up. And so that would imply that you may see some of the same general comments around new office locations for 2026 as we talked about in 2025.
That's not new news; it's just been a while since we talked about it. Um,
In terms of that fee income category, I might mention just as a pointer, you know, we've got a really great book of fees. I love talking about it; I won't share any more in case somebody else wants to ask questions about fees other than this. But the chunk of our fees that are more transaction-related, you know, around specialty fees, syndication fees, derivative fees, some of the SBA fees as well, and some of the fees we enjoy on the wealth management side. About the time we get to Thanksgiving, that environment pretty much pulls back for the holidays. So we really only get about a half a quarter solid run rate for transactional fees versus the full quarter. And so that's the reason the annuitized fees are going to come in for Q4 probably just like they did in Q3. We may see a little lesser run rate on the transaction-related fees because of the holidays. Does that make sense?
Yes, thank you so much, guys.
Okay, you back. Thank you.
We'll move next to Casey Hair at Autonomous Research.
Great, thanks. Good afternoon everyone. Uh, just I want to follow up on the previous question. Just about the, the guide I know, it's only 1 quarter but if the the knee guide, I mean, all the for the all the line items and III fees expenses, imply, some pretty uh, sizable moves. Um, I guess just starting with the knee if I'm reading this, right?
You have it going from $2 million, the low $280 million range, to almost $300 million or $297 million. I'm just wondering, like, it doesn't sound like—I know Nim is up, but like, what?
What is the driver behind what's a pretty significant move quarter to quarter?
Yeah, I don't know that we're going to see an increase quite that high, uh, Casey. We have something I think a little bit more modest.
So, again, the guide for the year will be a range of 3% to 4%, and I think that the buyers will be definitely toward the lower end of that range.
We we do expect to have a pretty good quarter in terms of, you know, potential, Nim expansion. When I say a pretty good quarter. I'm talking about a handful of basis points expansion. Uh and of course the third quarter, we were flat. Um but I I don't know that I see the kind of increase in knee that that you're referring to.
Okay.
Um, all right. And then just the pay-down pressure that you guys are seeing.
What is, uh, where are you guys? I mean that, like, I'm hearing private credit a lot. Um, I know it's difficult to kind of quantify our size but like, is it, you know, how much of of private credit pressure? I I is coming on the, on the pay down side, is it all of it? Is it some of it or is it, you know, just trying to
Quantify that, that pressure.
Yeah, in case of this is John, I'll I'll tackle that when um you know in the the list of uh of countries I mentioned before the the the private credit, you know, private Equity takedowns.
Completing a quarter earlier than anticipated. Um and then uh the number of uh, of of organizations that we Bank fully that sold to Upstream organizations. Not private credit was the highest we've had, you know, really in several quarters. Maybe maybe the last couple of years. So there was a uh a driver well in excess of 100 million in reductions from that alone. That really made the difference between about a a 5 5 and a half percent um in a period growth rate and the uh the numbers that we actually announced does that answer your question?
Yes.
Thank you. So I would anticipate the, the, the, the private credit run rate to be about the same depending on the macro environment. Um, I would certainly expect the amount of pay downs from, uh, from, uh, industry consolidation to decline. But in my comments earlier I said, I don't want to bank on that, I don't want to bet on that. Is it going to 26? So the adding of additional players to generate loans to offset that potential is part of the recipe as we move into next year.
Hopefully, that makes sense.
Yes, thank you.
We'll go next to Katherine Mueller at KBW.
Thanks. Good evening.
This is another question on the margin.
And you've given us the cycles to date bettas on deposits. Is there any reason to believe the next, let's just say, 100 basis points deposit and maybe even have loans too, but the betas will be very different than what we've seen? The past 100 basis points of declines.
Yeah. Hey Captain this is my short answer is no. We we expect to we expect to be pretty Proactive or at least has proactive as we've been in the past and reducing deposit costs. So no big change and, you know, would fully expect to come in and hit the numbers that we've kind of talked about as far as what we expect to do on a cumulative basis.
And I know I've only had a few weeks since the last cut, but can you give any kind of color around what you saw with that last 25? It's cut.
The most recent cut.
Yes.
Yeah, I mean, it came in, uh, we were able to reduce deposit costs accordingly. Um,
And that's what we'll continue to do going forward. If you look at our promotional rates, the most current ones right now.
You know, our best rate is uh, 385 for 5 months. Then we have 315 for 8 and 11 and then we've reduced our money market, um proactive rate to 3.75. So all of those have been, you know, reduced accordingly and assuming we get 2 additional rate Cuts, uh, which is built into our guidance. You know, we expect to be able to continue to reduce rates. We have a a bit more in terms of CD repricing uh in the fourth quarter of about 1.7 billion coming off at about 389. That'll go back on at about 3:59. We assume about a 86% renewal. So those are those are the Dynamics that we're looking at.
Okay, great. And maybe just within the same question. If you look at your variable rates, um, Colonial States, they've already started to come down a little bit, from 3.58 to 3.52 quarter over quarter. Um, was that just from an impact from the most recent cut and kind of just a few weeks of that? Or was there any other mixed change kind of already happening at play that we should just be aware of and think about?
Look at our our new loan rates on the variable side, we're actually up 1 basis point from 687 to 688. So I think the dynamic that you're seeing again is mostly related to to mix and just, you know, the uh the the pricing that we we have to face like every other bank does out there in terms of, you know, customer impact and you know how competitive it is
Great. All right, thanks for the call. I appreciate it.
Okay, thank you.
We'll take our next question from Gary Tanner at D.A. Davidson.
Uh, thanks. Good afternoon.
Mike, I appreciate the thoughts you just provided on the deposit data side of things. Can you just maybe provide the spot rate as of September 30th to give us a jumping-off point going into the fourth quarter?
Uh, in terms of our cost of deposits. Yes,
3, uh, at the end of September and for the third quarter, we were at $164.
And our cost of funds in September is flat with the quarter at 1.59.
Okay, appreciate that. Um,
And then, just as it relates to the increase in non-performing assets quarter over quarter, uh, anything in there just of note? Uh, you know, is that a single credit of size or...?
For a collection of multiple, uh,
damage.
Hey Gary. It's Chris Luca. Thanks for the question. I was feeling a little lonely over here. Um, yeah, I mean it was really a mix of transactions that were in there, all of them in the...
The cni space for the most part. If you look at our, our Consumer loans, for instance, we've been held holding pretty steady from a non across standpoint, um, despite some of the challenges that households and, uh, uh, and and individuals are experiencing as it relates to kind of higher operate, you know, costs for household costs. So we feel, we feel pretty good about where we are on the consumer side and I think really on the cni side, uh, not really on Cree. Um, you know, it's just really where we are in the cycle. I mean, there's there are higher operating costs for these companies. They are starting to, uh, kind of normalize in their performance and some of them are having issues and, you know, we take them through the, uh, the approval non-accrual process and Reserve accordingly, and we feel pretty good about where we have them.
That standpoint as well.
Thank you.
You're welcome.
Thanks for the question.
We'll go next to Matt, only at Stevens Inc.
Hey guys, good afternoon.
Hey, just on that last. Uh, question on the credit, front on the criticized commercial loans, I think we we continue to move lower on that front. Um, just looking for some color going forward here. Uh, just trying to appreciate if you if you're confident that we'll see. Chris its commercial loans, continue to move lower um or or set another way, what was the confidence level that we've seen? The peak in criticized commercial loans a few quarters ago. Thanks
Yeah. Uh, thanks for the question. Um, you know, I think a lot of what we saw in the way of a buildup in criticized loans earlier, um, you know, in the last year, uh, was really kind of a function of how low we had gotten from a criticized loan perspective. I mean, if you look at our historical performance criticized, you know, off the back of the pandemic. Now, 5 years ago, um, you know, we were able to really kind of hold steady um through the next couple of years before uh, things started to kind of percolate from the standpoint of supply chain, higher operating costs, wage pressure, things like that, which started to kind of create a little bit of a migration just in general.
General. Uh, but also then specifically in the criticized loan area,
And in earlier uh calls, you know, I kind of indicated that it does take uh, somewhere in the neighborhood of 4 to 5 quarters for uh, companies to kind of perform in a way that, you know, they could justify uh, Rehabilitation back to, you know, a pass rating or something better than where they are or seek alternate financing, uh, or position themselves in a way that they can see all the different financing. So I think we're seeing a little bit of that activity. Uh, come to fruition and I think it's a mix of both. I think we're seeing companies able to refinance away.
And then we're also in a position where some of our customers are performing a little bit better, uh, off of some of the challenges they may have had earlier. And so we're seeing that um, you know, it no crystal ball in the future, but we feel pretty good about a, a, a nice, uh, return to uh, moderation and criticize loans.
Okay.
Thanks for the color on that. And then I guess what you can gear up for, John, you mentioned trying to outrun the heavier loan paydowns with.
Hiring some new new loan producers. Can you just talk more about the the opportunities you're seeing for the new hires so far this year? And I guess since we talked last time, we've seen a few more banks with pending sales and some of your some of your growth markets. Uh just curious about the opportunities as you as you move into next year.
And having managed that overall, number pretty low throughout the pandemic. Um, we're 1 of the lower Siri concentration Banks out there. So our organization is, the may find themselves a bit full, um, that may not be as aggressive at hiring uh, out of disruption. Then we can be. Uh, we're actively looking for uh folks that meet our experience and credit risk Acumen uh to join. And and all of that is really an emerging markets. And so uh, Texas, Florida, Tennessee, uh, maybe even Georgia. And the Carolinas are all places that our, our our, our clients sponsors do projects that we have the capacity to grow in. And so I would expect to have a good story there as moving to next year and production for C is way up over last year. But, you know, it takes a little while in construction, uh, to get to, uh, to our borrowings from the, the buyers or the owner's equity. But, uh, we'll begin to see that as we get into next year. Um,
The other area.
Or just conventional Bankers that are business purpose from business bank and all the way up to Middle Market. And that's primarily going to be where we already have Branch coverage. Um, but we don't have high market share, and, and that pretty much means Central Florida and um, and really all things Texas. Uh, I think the opportunities are certainly there. And as we get toward the beginning of the year, and sort of the restart of how people feel about, um, how they're their year is going to look,
Those interrupted organizations, uh, have their antennae up. Uh, and you have to have the, the earnings Firepower, which we have uh to uh to take people out of agreements that maybe um, they have to leave a little money on the table to jump ship earlier than when. Uh, the final assimilation of the 2 organizations has occurred, um, and that same thing, we just applied A banks that maybe don't have disruption, but Bankers, may be looking for a place to where certainty of deal closure. May be a little bit better. So um, we plan to be aggressive and uh, in terms of adding that Firepower um, uh and you know hopefully you know, hope is not a plan, but if I'm a little bit uh too cautious on the competitiveness and the pay down environment next year, then that would bode well for net growth, maybe above what we, what we're contemplating but um
But I don't want to take that risk and not hire aggressively while the disruption is out there. So, um, I think I said earlier, we ran a 8.6% net Banker growth number for the previous 12 months. And um, and that that's, you know, we wanted 10%. So we didn't meet what our expectations were for the past 12 months, and that's going to have to get a good bit bigger between now. And this time next year to have Surety in that mid singles, growth, you know, quarter over quarter over quarter throughout next year. So, um, so we got a little bit of hiring work to do there. Um, feel confident in it, we've learned an awful lot this this year.
Hear about, uh, who's easier to pick on and those who are harder to pick on, and so we'll deploy that knowledge as we move into next year.
Thank you. Last time I answered the question about it, if I didn't give you enough detail.
No, that's perfect. Thank you.
Thank you. Thanks for the question.
And we'll go next to Brett Rabbitin at
Hey, good afternoon everyone. I wanted to go back to deposits for a second and just, if you look at the guidance, you know the low single digits are up from the end of year 2024, that implies pretty strong growth in the fourth quarter. And I know there were some seasonality in Q3 related to municipal deposits and other things. But any color on the growth in the fourth quarter expectations? And then John or Mike, I was just hoping to get you… you've given a lot of color on deposits.
Um, trends. But I was just hoping to get maybe how you think about the competitive landscape and just if that's gotten tougher, easier, or stayed the same. I know deposit competition is always pretty robust.
Yeah, Brad. I’ll start with the deposit question. So, uh, the fourth quarter is usually seasonally a pretty good quarter for us in terms of deposit growth. You know, we’re usually able to grow the public fund books somewhere between $200 million and $300 million. There’s no reason to expect that that wouldn’t be the case this year. That growth tends to be weighted.
Between 3% and 3.5% year-over-year.
So again, probably low single digits.
And uh, related to the question about competitive pressures on deposits and deposit pricing. Honestly, no real change from our perspective, you know, in the last quarter. So, you know, this cycle, for whatever reason seems to be a little bit better behaved compared to Prior Cycles. I think some of that has to do with, you know, in our markets, maybe the absence of some, um, some irrational players that are no longer with us, um, for whatever reason, the, uh, Credit Unions seem to be behaving, you know, a little bit, uh, less irrational. I think that's contributed to the overall, um, you know, you know, basically, you know, non non big issued, uh, deposit pricing quarter and, uh, no reason from right now we expect that to change, you know, with 2 rate cuts on the horizon. And you know, maybe another 2 in the first half of next year.
Okay, um, that's helpful. And then the other question was just around the organic growth plan, particularly the Dallas operation. You're obviously pushing pretty hard with some new openings of facilities, etc. Can you give us any idea of the goals you might have for that market, you know, over the next few years? And then it sounds like you might also be thinking about doing...
A similar approach in some other MSAs, just any color on? That would be helpful.
Sure, I I'll take that and then if Mike wants to add some, some some color he certainly can jump in, um, you know, the number of offices that we have in the Dallas. MSA today is, uh, is about the same. I mean today, it'll it'll, it'll more than double over the next several months, but that number of offices is about the same number as we got from the old Midsouth, transaction back uh, right before the pandemic.
Um, however, the book has completely turned over and is today, uh, very much driven toward business purpose clients both on on both sides of the balance sheet and has been growing at north of a 40 percent kagar, uh, throughout the pandemic. Um, I would anticipate that growth percentage to go up even though the denominator is larger by virtue of not as much just the branches, but also the Staffing complement in those locations, which is slated to be a combination of both financial advisors out of wealth, where we have a terrific track record in uh penetration of fee income uh into uh customer relationships. And then also adding business and Commercial Bankers uh in and around those locations. So the uh, where those locations are
Provides a little bit more of a of access to client, feeling more local. Um, there's a lot of disruption going on in Dallas today and it'll be worse in. Well, it'll be better next year for us in terms of that disruption manifesting into opportunities. Um, so not not quite ready to talk about additional locations, uh, and where they would be, but we have 4 different msas right now that we are debating, uh, in terms of mid to late next year laying down a number of additional locations additional Financial Services, uh, operations. But we really want to see kind of what disruption may get announced here in the next couple of months before finalizing that plan. But I'm sure by January, we'll be able to talk about that with a little bit more definition. So uh you know, but but I think you read the tea leaves, uh, correctly, Brett Dallas.
And particularly North Dallas is a very important uh, Market to us. Uh, not just because the growth rate, but the quality of the business and, you know, 1 of our aspirational goals that is becoming more in Focus as the quarters go. By is becoming the best bank in the Southeast for privately owned business. And that's a big goal to have it's quite aspirational. I think we're 1 of the best banks today, but not not the best, and we aspire to get there and in markets like that where you have a lot, a lot of middle-sized to a smaller business, being able to be really good and fast, uh,
Have low amounts of air and not waste people's time. Um, is really a big sales point for moving relationships and talent.
So, I think that'll be a good play. Um,
You didn't specifically mention the the fee income piece, but since you brought up the competitive issues before, I'll mention it in that uh, you know, we set out a number of years ago and we talked about investing in fee generating business on, just about every call, it seems like for about a year and a half.
Ities and insurance, um, which was a pretty bigger producer back 4 or 5 years ago. Uh, 7 of the last 8 quarters that thrown off $10 million in topline revenue, and the 1 quarter we missed it, we only missed it by $200,000. So I think that's been established as a core competency, and we have just begun to tap those types of categories, um, in the Texas area through adding FAS this year, and we'll add more next year. So between that and the treasury advisors, that will be the secret sauce to grow and deposits and fee income as we move into 2026.
Did I give you what you needed there, or did I miss? You know that.
Yeah, no. That's very helpful, John. And yeah, for sure the annuity fees have certainly been a star for the fee income bucket.
Appreciate all the color, guys. Thanks.
You bet. Thank you.
And that concludes our Q&A session. I will now turn the conference back over to John Harrison for closing remarks.
Uh, thanks everyone for your attention. Thanks, Audra, for moderating the call. We look forward to seeing you on the road very soon.
And this concludes today's conference call. Thank you for your participation. You may now disconnect.