管理層發言
Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. This call may be recorded. I would now like to introduce your host for today's conference, Kathryn 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 and in the company's most recent 10-K and 10-Q, including the risks and uncertainties identified therein. You should keep in mind that any forward-looking statements made by Hancock Whitney speak only as of the date on which they were made. As everyone understands, the current economic environment is rapidly evolving and changing. Hancock Whitney's ability to accurately project results or predict the effects of future plans or strategies or predict market or economic developments is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions but are not guarantees of performance or results, and our actual results and performance could differ materially from those set forth in our forward-looking statements.
Hancock Whitney undertakes no obligation to update or revise any forward-looking statements and you are cautioned not to place undue reliance on such forward-looking statements. Some of the remarks contain non-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in our earnings release and financial tables. The presentation slides included in our 8-K are also posted with the conference call webcast link on the Investor Relations website. We will reference some of these slides in today's call. Participating in today's call are John Hairston, President and CEO; Mike Achary, CFO; and Chris Ziluca, Chief Credit Officer. I will now turn the call over to John Hairston.
Thank you, Kathryn, and Happy New Year, everyone. We thank you all for joining us today for the call. We are pleased with our fourth quarter results which reflect another quarter of improving profitability. We achieved an ROA of a notable 1.40%. We enjoy continued NIM expansion and ramped the quarter with total risk-based capital of nearly 16%. The quarter was a strong finish to a strong year of improving profitability, building capital and celebrating our 125th anniversary. Last quarter on this call, we shared our expectations for a pivot to growth and smartly deploying capital to create opportunity and value. On that note, we announced this morning our acquisition of Sabal Trust Company based in St. Petersburg, Florida. We are very proud to welcome Sabal's outstanding leadership team and clients to Hancock Whitney. Following the close, Florida will become our largest wealth management fee stake and the Tampa-St. Pete MSA will become our largest individual wealth management fee market.
The transaction matches perfectly our stated strategy to develop greater market share in the higher growth areas around our geographic footprint. Further details may be found on Slide 7 of the Investor Day. We are also pleased to announce a multiyear organic growth plan, which will include both hiring additional revenue generating associates throughout 2025, and expanding our footprint in Florida and Texas through opening this year, five additional financial center locations in North Dallas. We expect to announce additional locations in Florida as we near the completion of the Sabal transaction. We added seven new bankers in the fourth quarter, which aligns with our anticipated run rate for 2025 and likely the foreseeable future. As I said earlier, this is a multiyear plan, and we will share more over the next several quarters. We updated our guidance to give our latest expectations for 2025.
This guidance reflects the organic growth plan but does not include any impacts from the acquisition of Sabal Trust Company. Just a few more notes from Q4 before turning the call over to Mike. Net interest income and NIM increased as we were able to control funding costs and more than offset the impact of lower rates and changes in new loan production mix. Fee income was modestly off due to lower secondary mortgage volume due entirely to higher rates and a little less specialty income after record numbers in Q3. And finally, we were happy to post a modest reduction in operating expense for the quarter. Loans were down $156 million due to higher payoffs on commercial real estate loans, offsetting otherwise strong production. With our organic growth plan, we expect total loans will grow mid-single digits in 2025 tilting toward the second half of the year. We remain focused on more granular full relationship loans with the goal of achieving more favorable yields and relationship revenue.
Deposits were up $510 million despite the maturity of $183 million in broker deposits. This quarter, we had a very welcome increase in DDA balances, and our DDA mix is consistent at 36%. We experienced normal seasonal increases in interest-bearing transaction and public funds deposit accounts and retail CDs declined due to the reduction of our promotional CD rates. We expect deposits to grow in low single digits in 2025. During the quarter, we continued to return capital to investors by repurchasing 150,000 shares of common stock. Even after returning capital, we had strong growth in all of our regulatory capital metrics due to excellent profitability, ending the quarter with a common equity Tier 1 ratio of 14.14%. TCE declined slightly due to the impact of treasury yields on AOCI but ended the quarter at a strong 9.47%. We are enthusiastic for the opportunities in the coming year and believe we are very well positioned for a successful 2025. With that, I'll invite Mike to add additional comments.
Thanks, John, and good afternoon, everyone. Our net income for the fourth quarter was $122 million, or $1.40 per share, which is an increase of $6 million and $0.07 per share from the previous quarter. PPNR decreased slightly by less than 1% to $165.2 million. This results in a return on average assets that remains strong at 1.89%. Our net interest margin expanded by 2 basis points to 3.41%, contributing to modest growth in net interest income. Anne has noted that our fee income businesses had an excellent quarter and year, and expenses again declined this quarter, marking two consecutive quarters of reduced expenses. The net interest margin growth was driven by lower deposit costs, a higher yield on the bond portfolio, and a favorable mix of borrowed funds, which was partly offset by lower loan yields, as detailed on Slide 17 of the investor presentation. Our overall cost of funds fell by 21 basis points to 1.73% due to reduced deposit costs and an improved funding mix, finishing the quarter with no home loan borrowings.
The cost of deposits decreased by 17 basis points to 1.85%, reflecting the maturity and renewal of CDs at lower rates along with adjusted pricing on interest-bearing transaction accounts. We had $3.4 billion of CDs mature at an average rate of 4.84% and renewed them at 4.04%. Additionally, as John mentioned, most of our brokered deposits matured during the quarter and were not renewed. Our demand deposit account balances increased this quarter for the first time in nearly two years. CDs are expected to continue repricing lower throughout 2025, influenced by maturity volumes and three anticipated rate cuts in the latter half of 2025. Bond yields increased by 5 basis points to 2.71%, attributed to our ongoing reinvestment of cash flows into the bond portfolio. In the fourth quarter, around $200 million in bonds were removed from our balance sheet with a yield of 3.45% and reinvested at 4.64%.
For the next quarter, we anticipate approximately $160 million in cash flows at around 3.09%, which should be reinvested at about 5%. Our loan yield fell by 25 basis points to 6.02%. The yield on fixed-rate loans increased by 7 basis points as we continue to reprice that segment, but the yield on our variable-rate loans decreased by 49 basis points. Overall, we believe modest net interest margin expansion and net interest income growth between 3.5% and 4.5% is feasible in 2025, driven mainly by mid-single-digit loan growth, lower deposit rates, and continued repricing of cash flows from both the bond portfolio and fixed-rate loans. However, these factors will be countered by decreased loan yields on variable-rate loans. We have factored in three rate cuts in the latter half of 2025 and also evaluated the implications of one and no rate cuts in 2025, which provided slightly favorable outcomes.
As mentioned, fee income was lower this quarter due to a decline in specialty income, which had been elevated in the prior quarter. We expect non-interest income for 2025 to increase between 3.5% and 4.5% from 2024, without including any contributions from our acquisition of Sabal Trust Company. Expenses decreased by 1% this quarter as we maintain our focus on cost control across the company. We project non-interest expenses for 2025 to rise by 4% to 5% compared to the adjusted non-interest expense levels of 2024, incorporating our organic growth strategy but excluding any costs associated with the Sabal acquisition. Our PPNR guidance indicates an increase of 3% to 4% from the adjusted levels of 2024, and we expect the efficiency ratio to be between 55% and 56% in 2025. Our credit quality metrics are normalizing, with an uptick in non-accrual and criticized commercial loans, but net charge-offs have decreased this quarter.
Our loan portfolio is diverse, and we see no significant weaknesses in any specific sector or geographical area. We maintain a solid reserve of 147 basis points, slightly up from the previous quarter, and anticipate modest charge-offs and provisions for 2025. Lastly, regarding capital, our capital ratios remain robust even after returning capital through ongoing share repurchases and the effects of AOCI. Even with the Sabal acquisition and planned organic balance sheet expansion, we expect to continue our share repurchases in 2025. However, shifts in the growth dynamics of our balance sheet and share valuation could affect this outlook. I will now hand the call back to John.
Thanks, Mike. Let's open the call for questions.
分析師問答
Thank you. The floor is now open for questions. Your first question comes from the line of Michael Rose of Raymond James. Your line is open.
Hi, good afternoon everyone. I hope you're enjoying the snow in New Orleans. Mike, could you start by discussing the buybacks you mentioned earlier? I appreciate the CSOs. The only significant change since last January is that the ROA range has been tightened to 1.40% to 1.50%. I understand you have some concerns about your trading position compared to peers. I'm trying to get a sense of how aggressive you plan to be with the buyback, especially since the earn-back remains relatively attractive. Thank you.
Sure, Michael. Thanks for the question. Look, as far as buybacks are concerned, we did step down a little bit in the fourth quarter from the levels that we had been at for both the second and third quarter. And I think that simply just had to do with the fact that the stock had pushed up quite a bit post-election. And then we began working in earnest on the Sabal transaction. And when we get to that point with the potential transaction, we've really put ourselves kind of then blackout. So the way we view buybacks going forward is, at the very least, we will revert back to the same levels that you saw us buy shares in the second and third quarter. So call it around 300,000 shares per quarter. And look, there are a lot of things that could change that particular appetite, probably more so for the upside. But that's how we kind of view it right now. So hopefully, that was helpful.
Very helpful. I wanted to discuss the loan growth outlook, which exceeded my expectations and the consensus. Could you provide insight into the drivers behind this growth? I understand that one factor is the lack of pay down in the SNIC portfolio now that you're at normalized levels. Could you elaborate on other contributing factors? Also, how confident are you about a pickup in the latter half of the year? Thanks.
Yes, Michael, this is John. Thanks for the question. I'll start, and if Mike and Chris want to add more detail, they're welcome to. You pointed out that a major boost to our confidence comes from not having to take down $600 million anymore, as we've reduced the SNIC concentration to 10% or below. That's all accomplished. So initially, you see some impact on net growth numbers due to the lack of the contract. Moving forward, our focus will really be on core conventional growth. Our mortgage business may be a bit of a setback as we shift towards secondary fee income. However, as rates rise for mortgages, we continue to assess our balance sheet needs beyond just fee income. If rates become attractive enough for high-quality paper, we might keep a bit more mortgage on our books, more than the 12% we retained last quarter. We sold 88% and held onto 12% in dollars. Our business banking and small business pipeline remains very strong, with client sentiment in that sector extremely positive.
It seems we'll be successful in adding capacity through more business bankers in 2025, as we had good success there in Q4. This should generate net growth for the year. After several quarters of stagnation, we're moving up to a higher asset class, which we call commercial banking. This segment has been stable for the past few quarters, but the pipeline has improved and payoffs have decreased. We're expecting growth in this area as we progress through 2025, possibly starting with a 25% growth in Q1, which hasn't happened in a few years. Demand in middle market and corporate banking is decent to good. The primary growth driver here is the reduction in paydowns we've imposed on ourselves this year. In the health care portfolio and the commercial real estate specialty business, despite some payoff pressures in CRE, production was strong in Q4, and we anticipate further increases in 2025, making CRE a growth driver later in the year.
Lastly, equipment finance is showing strong growth with reduced pressure from paydowns. The only downside, Michael, is likely the competition from peers. We're not compromising on credit term expectations. However, in fields like equipment finance and commercial real estate, increased competition from nonbank players might put some pressure on the yields of new business, which we noticed in Q4. Overall, our confidence is quite high regarding achieving this level of growth throughout the year. Even though we lean towards expecting stronger growth in the latter half of the year, we anticipate some growth in Q1 and Q2, which should help clarify our path to reaching mid-single-digit growth. If there's more disruption around us, it could create opportunities to hire bankers more quickly, which would be beneficial. Any further clarity?
No, certainly appreciate the color. Maybe just last one for me on the Sabal acquisition just quickly. Can you give us a sense for maybe what the expense levels are with the efficiency ratio was last year? I appreciate what the revenues were, but just trying to get a sense for what the net bottom-line impact would be as we think about 2025? Thanks.
Yes, I appreciate that question, Michael. But again, as we kind of indicated in the deck itself, we are going to update our guidance to be inclusive of Sabal probably after the first quarter. So if you would mind saving that question until we get to that point. By then, we'll certainly, I think, have a little bit more certainty as to the exact closing date. But suffice to say, as we indicated in the release and in the slide, it certainly is accretive day one in terms of EPS and exceeds all of our return threshold. So I think, when we get around to talking about the results and the returns, it will be something that people will appreciate.
Perfect. Thanks for taking all my questions.
You bet. Thanks, Michael.
Your next question comes from the line of Matt Olney of Stephens. Your line is open.
Hi, thanks guys. Good afternoon. We'd love to hear more about the Wealth Management segment there at the company and with the Sabal Trust acquisition, just appreciate help us appreciate why is now the time to build out that business? And then I guess the other part of that is, do you think there is additional opportunities in wealth management with respect to M&A? Or is the Sabal deal more of a one-off?
I will start with the core wealth management questions, and then Mike can address the M&A part. First, we have been in the trust business for a century, so it is not a new venture for us. Over the last decade, we have increased our focus on this area significantly, which has not been a recent development. We have been eager to expand that sector for about ten years. Back in 2018, we announced the Capital One asset management transaction, which increased our overall wealth book by around 50% or 60%. We brought in a lot of talented individuals both from that deal and afterward. This move helped us gain visibility and scale to target larger, more profitable clients, creating additional fee opportunities in other business lines that positively impacted our bottom line. The partnership with Sotera further broadened our exposure to investment platforms and advisers nationwide, enhancing our competitive standing, especially in larger markets in Texas and Florida.
Additionally, the Sabal acquisition enables us to incorporate about 30 years of experience into our overall book. Sabal developed a strong organization over nearly three decades, and acquiring it in one move to establish our largest wealth management state in Florida is a substantial achievement. This aligns with our goal of making wealth management income at least one-third of our total fees, which we have already reached. Sabal will likely increase that figure even more. Regarding our future growth plans, we have announced an ambitious strategy for adding talent, with some of those new hires intended to be wealth management advisers, making this segment a crucial part of our organization going forward, whether through organic growth or acquisitions. Mike, would you like to address the inorganic side?
Yes. And just a couple of thoughts, Matt. So First off, we couldn't be more pleased with the transaction. We are thrilled for the addition and eager to get moving with the new addition to our company. But it really does check a lot of boxes for us. So the first one is, John really hit on that when he talked about kind of the companion acquisition to what we did with Capital One back in 2018. With the Capital One transaction, we acquired a lot of infrastructure, a lot of expertise, laid a really good foundation to grow that business from that point on. With Sabal, it is a tremendous acquisition of a neighborhood of over 50 revenue producers on the trust side and a great base of our customers. So it really is, I think, an ideal revenue play on top of what we did with Capital One. I think it also gives us some strategic growth in an area of the company that we would like to be bigger in. So in terms of Central Florida, that's one of the areas of our geographic footprint that we've kind of earmarked for additional growth.
So John mentioned on the opening comments, the potential to add banking locations that will be companions to Sabal’s locations. So I think that's another important box to check. It's an all-cash deal. So it kind of checks that box in terms of helping us proactively manage capital. So we are thrilled with that. And it really does kind of put a little bit of an exclamation point on this notion of 2025 being a pivot year for the company to grow both organic growth, as well as now inorganic growth. And then finally, it really is kind of a signal that I think the company is open to inorganic growth opportunities, whether it be on the banking side or even the non-banking side. So we are open to all sorts of opportunities. I wouldn't say that strictly non-bank or trust. Certainly, we are open to depository institutions going forward as well.
Okay. Appreciate the commentary on that topic. And then on that organic growth strategy, you gave us the map there on Slide 8, as far as the footprint and kind of the planned hires. I see several green stars in Texas and planned hires in the states also mentioned of the new financial centers in Dallas in 2025. Just update us on your current footings in Dallas or in Texas and leadership. And I guess, just remind us kind of what the growth strategy is. Is it going to be more middle market C&I or will it be something else within the state?
That's a great question, Matt. Earlier, I mentioned our goal of adding wealth advisers, which is an ambitious target. We aim to become the best bank in the southern U.S. for privately owned businesses, and we believe a strong wealth management offering is essential to reach that goal. This approach enables us to serve both the businesses and their owners, especially during succession or liquidity events. Over the past ten years, we have invested significantly in these complementary areas. In terms of hiring, we didn't provide specific numbers last quarter because we wanted to focus on our overall organic strategy. In Q4, we brought in seven new bankers, achieving our target, which was somewhat surprising since the fourth quarter is typically challenging for adding business purpose bankers due to incentive structures that lead to annual settlements in Q1. However, we were successful in attracting talent because candidates saw a strong alignment with our credit risk appetite and organizational culture.
I expect to maintain this hiring pace throughout the year, aiming for around 35 hires over the next five quarters. While we won't discuss 2026 in detail today, barring any significant macro changes, I anticipate this hiring trend will continue. These bankers will not be limited to high-growth markets. In Texas, we are working on opening five new financial centers in the northern Dallas area, where we already have office locations and leadership in place. These centers are not yet operational, but I hope to see them launched by the end of this year. Mike mentioned the potential for new offices in Florida as we approach the close of the Sabal deal. If that occurs in the second quarter, we can provide more detailed information about our plans in Florida during the next call. While I've focused on Texas and Florida, we are open to acquiring talent throughout our entire footprint. If opportunities arise elsewhere, we are ready to welcome teams or individuals who prefer to join us. So, I encourage potential partners or colleagues to reach out, and we'll see if we can collaborate. Do you have any follow-up questions on that, Matt?
No, that's great. Appreciate the commentary.
You bet. Thank you.
Your next question comes from the line of Catherine Mealor of KBW. Your line is open.
Thanks, good afternoon. Everyone.
Hi, Catherine.
I wanted to ask about the increase in your credit size commercial loans. Can you just give us any color as to what type of loans these are the size, just any kind of commentary about the potential risk in that increase this quarter? Thanks.
Hi, Catherine, it's Chris Ziluca. Thank you for your question. I want to emphasize that we are very proud of our asset quality performance. We started from a low point, and we have certainly improved over the past year. When comparing ourselves to our peers, our increases are generally in line with theirs. Although we don't have Q4 data yet, we expect mixed results in that area. In the past quarter, we observed some improvement among customers already classified as criticized, indicating some hopeful signs of stabilization and resolution of their issues. This quarter, we noticed certain sectors, including consumer discretionary, building products and services, hotels, and healthcare, contributing modestly to the criticized migration. The reasons for downgrading these customers vary; some are facing individual challenges that they need to manage, while others are experiencing decreased demand or higher operating costs. Although several factors are involved, we have carefully examined all our lower-rated credits, not just those in lower categories, to understand their impacts and potential migration. At this stage, we haven't identified anything significant, although the future is uncertain. Currently, we feel confident about our criticized book and note that we continue to perform better than the peer average across all our asset quality metrics, including charge-offs.
Catherine, this is John. I appreciate the question, and I will add this. And what you are directing towards is, is there, I think, a sizable concentration of any particular sector or geography, in those numbers. And I'd like to maybe direct the answer specifically to that. A few years ago, we found ourselves with a larger criticized percentage, and it was a significant concentration in one sector and in one geography. And this is not a repeat of that. This is not a return to those days at all. And I would be obviously very disappointed that, we built a very healthy loan loss reserve. We've got a war chest of capital and I would anticipate using that offensively not to cover outsized NCOs. So I hope that answers your question. Glad to answer in more detail when you’re asking.
No, it does. And I think a follow-on that, I mean you say in your 2025 guidance that you expect modest charge-offs and provision for '25. And so maybe that echoes kind of what you're saying, John. But can you give us a range or kind of any more disclosure on what you mean by modest? I mean I feel like in the past, you've talked about modest charge-offs and showed us have kind of covered around 20 basis points or so. Is that a fair assumption for what we should expect for '25?
Yes, Catherine. This is Mike. And yes, I think that's right. So modest doesn't have a specific definition. But I think we consider that somewhere in the upper teens to the low 20s in terms of basis points of average loans. So I think that's a good barometer to use.
Catherine, it's difficult to capture the perfect point. I apologize for interrupting you, please continue.
No, go ahead.
Sure. I was just going to add, picking the perfect word sometimes is hard and sometimes we spend more time trying to figure out the perfect word than to give a range, because it is hard to do that too. But when we say modest, you could say modest, you could say moderate, use whatever word you like that basically suggests in-line with peers. Inside our NCO losses we actually have very little commercial real estate loss through the last several years, maybe a decade in our NCOs. I mean, we really are a C&I bank. And our CRE portfolio, while it's a smaller portion of our loans than most other mid-cap sized banks, it typically performs from a stellar perspective or a seller level in terms of NCOs. On the C&I side, we will, like any other C&I bank, have aberration quarters where we have a really low NCO number because we had a recovery or we had a larger NCO number because we had a charge. But as you look year-in and year-out, we would anticipate those numbers being relatively in-line with peers, and we'd be disappointed if they weren't. Even though, we keep a large loan loss reserve in the event that the macro environment changes just like it has the last several years versus the pandemic.
Great. Very helpful. Thank you.
Okay. Thank you. Did you have another question?
No, good. I will step out of the queue.
Thanks, Catherine.
Your next question comes from the line of Ben Gerlinger of Citi. Your line is open.
Hi, good afternoon everyone. I understand that you have set ambitious goals not only for hiring but also for expanding financial centers and branches in your area. John, as you mentioned, you're currently on track with 25 bankers, which seems quite robust when considering potential deals. This suggests you might have the capacity for organic growth, potentially placing you at a higher multiple compared to your peers. If you're contemplating mergers and acquisitions, would this mainly focus on deposits, or would it also include supplementary strategies alongside an improving growth outlook? I'm curious why there might be a shift away from the original organic hiring plan.
Yes, Ben, this is Mike. And I think you hit the nail on the head when you alluded to this being complementary. We absolutely view the organic growth plan and kind of what we've laid out in our markets to be complementary of anything that we do on the inorganic side. So obviously, with the transaction we just announced with Sabal, that's a nod toward non-bank M&A that will certainly complement our wealth management line of business. Any depository M&A, I think, will be an absolute complementary way of growing that would be consistent with the organic growth plan and the new bankers that we are hiring. So nothing is certain in banking going forward. While I think we are signaling an openness to bank M&A, certainly with a preference towards growth markets like Texas, Florida as well as places like Tennessee, there is certainly no certainty that the right opportunity that fits the criteria that we hold near and dear to our hearts will come to pass. So I think we've got to be able to approach this from a diverse point of view in terms of looking at opportunities to grow organically, as well as inorganically. So hopefully, that makes sense.
Makes sense. Is there nothing to dig too deep into it? I know banks are sold not bought. But is there like a relative size of balance sheet you're looking to partner with?
Yes. While nothing is guaranteed, we believe that an opportunity around one-third of our current size could be possible. That said, if a smaller opportunity arises that aligns with our goals, we would certainly consider it. However, we can say that pursuing something similar to an MOE is unlikely.
All right. That's helpful color. Thank you.
Thank you.
Your next question comes from the line of Brett Rabatin of Hovde Group. Your line is open.
Hi good afternoon everyone.
Hi, Brett.
I wanted to discuss the expense guidance. Expenses were somewhat lower in '24. Can you explain how much of the growth in '25 will be a return to previous levels, or related to the incentive plan normalizing, compared to '24? Additionally, what are your thoughts on incentive compensation in '24 versus '25 in relation to the expense increase?
Yes, great question, Brett. And the way that I'll approach that is to just kind of remind you of the guidance that we are giving for '25 for expenses. So we're looking at this range of between 4% to 5%. So obviously, that's a step-up from, let's call it, basically the flat level that we experienced in '24 versus '23. If we look at the component of that guidance, that really relates to this notion of an organic growth plan, that's probably around 100 basis points or so. So if we didn't have the organic growth plan, the expense guidance, I think, would be in the neighborhood of 3% to 4%. So I hesitate to put an exact number on the incentive comp piece just because it is something that is earned and certainly could be a lower number if we don't achieve our growth levels but it certainly could be a higher number if we exceed those growth levels. So hopefully, what I've laid out gives you a little context around how we are thinking about the expense levels for next year.
Okay. That's helpful. I initially mentioned a bit lower, but you noted it was a bit higher. I wanted to discuss the betas in relation to the cycle and the expectations on Slide 19, particularly regarding the total deposit betas and loan betas. Are you observing anything surprising in terms of loans or deposits compared to the current rates? Would you say the market is behaving as expected in relation to these rates? It seemed that in the early decline, some were attempting to shift market share. What are your thoughts on the beta speed moving forward in both categories?
Yes. So on Slide 19, I think probably the most important part of that little table at the bottom is the guidance that we are giving around our expectations really for the entire cumulative cycle. So that's really how we kind of think about that. And quarter-by-quarter, I think a focus on the specific betas that happened in the quarter can be a little bit misleading, especially when you have rates that maybe move faster or slower than folks had anticipated. But to answer your direct question, no, there is nothing, I think, going on in our markets and our geographic footprint that really is a surprise to us or something that was beyond what we expected. I think the level of competition is what it is. It certainly is, I think, I'll call it well behaved. And it is certainly something that we find conducive actually to our strategy around what we are trying to do with deposit pricing. And that strategy really is centered around repricing our maturing CDs kind of keeping that balance of maturing CDs relatively short.
So $3.4 billion in the fourth quarter, I mean that is the better part of our entire CD book. And as we look into 2025, we see that book potentially turning over maybe twice over the course of the year. So depending on what happens with rates, that certainly could be a big driver of our continued efforts to reduce our cost of deposits. And I would certainly be remiss, if I also did mention our DDA balances. So for the first time in two years, we were actually able to increase those balances, we ended the year at 36%. And as far as next year is concerned, we see an opportunity to grow that to maybe the 38% level or so. So certainly, when we think about our margin expansion opportunities in '25, balance sheet growth is a big component of that, but continued repricing and continued attention on the deposit book is certainly a big component as well. So that was probably a little bit more of an expansive answer than the question you asked, but hopefully, it was helpful.
No, that was very helpful. I appreciate it. Thanks so much Mike.
Your next question comes from the line of Gary Tenner of D.A. Davidson. Your line is open.
Hi, good afternoon. I wanted to follow up about the CD repricing. Could you remind us, Mike, what the CD maturities are in the first quarter and what the rate and expected renewal rate might look like today?
Sure, I'd be glad to, Gary. So for the first quarter, we have about $2.5 billion of CDs maturing. Those are coming off at 4.34%, and we think that they will be renewed at about 3.74%. We are stepping down just a little bit, the renewal rate from what it's been the last couple of quarters in the mid-80s to probably something in the mid-70s to upper 70s. Now for the year as a whole, I had mentioned that we see the CD book potentially turning over twice. So we have the better part of $8 billion of CD maturities in 2025, that book as a whole for the year will come off at about 3.79%, and we're anticipating putting that back on at about 3.10%. And certainly, that is very dependent upon the interest rate environment and what happens or not with the Fed resuming rate cuts at some point next year. So that's kind of how we're looking at the CD book next year.
Thank you for that. Regarding the bankers, could you provide some context about the seven bankers in the fourth quarter and the 28 you plan to hire in 2025? Specifically, how does this increase compare to the production banker numbers as of September 30?
That's a good question. I mean, it depends on the type of banker certainly. Maybe the helpful color is, given the pace of bankers, the time it takes to build a pipeline the time for them to get to an accretive level. Generally speaking, you would anticipate the difference that the team makes would be more impactful to 2026 than 2025. So largely, the guidance that Mike shared earlier, is really driven by the team that's already in place. Now, if we are fortunate enough to pick up a few commercial real estate bankers that could change because they typically pull through a higher percentage of deals very quickly. They're at 90 days or 120 days, and they can become accretive. Normally, it’s going to take about 12 months to get accretive about 18 months to reach what Shane Loper, the President of Bank and the Head of Revenue, calls the flywheel level, where every day they're continuing to harvest more business and the expense levels don't really go up. So I think I would suggest that the '26 impact will be bigger, and we can quantify that for you as we get to the '26 guidance is what's coming from the team that we actually have hired. Is that helpful?
It is. I guess maybe I didn't ask it very clearly, but 35 adds would be what percentage increase in bankers for Hancock?
About, let's see. In the business banking space, that would be probably about a 15% increase in the total workforce over it. And I’m adding to '26 plan into that number to give it. So about 15% to 20% more business bankers by the end of 2026, about 10% wealth advisers and about 10% commercial bankers.
Thank you very much.
You bet. So when you think about it, all rolled together, it's about the size of a decent-sized acquisition without having to issue any shares if they all hit plan. And typically, we have about an 80% success rate from the bankers that we hire.
Your next question comes from the line of Stephen Scouten of Piper Sandler. Your line is open.
Yeah. Thanks, good afternoon. Just kind of follow up along that kind of discussion around the new hires. How much of the kind of mid-single-digit loan growth expectation will be predicated on hitting that pace of new hires? And how much would be kind of more no longer the headwind in the SNIC portfolio and other dynamics that might precipitate growth?
Yes, very modest impact in the guidance that we gave for 2025. It would be important that we get to that level of hiring and have at least an 80% success rate for the hires to attain the CSO levels at the upper end of the boundaries that we gave by the end of 2026. Does that you follow me?
Yes, that makes perfect sense.
Yes. So CSOs are two years. So we've got them baked into that guidance on the upper end. The guidance we are giving for this year really has all the negative of the expense carry and very little of the positive because it will take a little while for them to get their books up to target operating model level.
Got it. And can you speak to any kind of green shoots even if it’s anecdotal kind of around what you're seeing so far that gives you confidence around this kind of loan growth trend reversal versus what we've seen kind of over the last five quarters?
Sure. I think we talked earlier about the challenges and opportunities we are facing. The biggest factor contributing to our growth is certainly the lack of a major SNIC runoff. Our production this past year was decent, though we did have some issues due to the $600 million reduction from SNICs. Additionally, there were significant payoffs from commercial real estate transactions, mainly from new entrants in the market. While I don't expect these CRE payoffs to disappear, I believe our current production levels and the size of our pipeline indicate that we can manage those payoffs as we progress through this year. If I had to highlight sectors showing promise, I would point to commercial real estate, health care, equipment finance, and commercial banking, particularly in the below middle market. I'm also seeing a strong rebound in small business and business banking. The only area that remains weak is the end-consumer segment, where we're seeing progress in deposit accounts, but not in loan volume, especially in mortgages, which are very sensitive to interest rates.
Got it. Extremely helpful. And then I think someone made the comment, maybe it was Michael Rose, that you guys recognize that your stock has been maybe underappreciated over the last few years, traded at a discount. What do you think the market looks at the Hancock Whitney story? What do you think that's maybe underappreciated about the bank or the trajectory of the bank if you were to try to toot your own horn a little bit?
Yes, Stephen. This is John. I promise Mike, I would stop worrying about the stock price not matching the performance of the company. So I'll defer him – I’ll defer the question to Mike.
Well, instead of worrying about what maybe the market isn't getting, I think the best way maybe to have that discussion is to think about what we've accomplished, let's say, over the last four or five years. So we are fond of kind of reminding folks that back in 2020, we established four pretty important strategic focus points and not to belabor these, but they included derisking the balance sheet and derisking the loan book and building reserves, vowing to become more profitable and more efficient banking company, vowing to become a more efficient banking company, and then finally grow our capital levels. I think by the time we got to last year, we had demonstrated, I think, pretty significant progress and excellence on all four of those fronts. And '25 becomes a year, as we've talked about many times, where the pivot is to growing our balance sheet and considering organic balance sheet growth, as well as inorganic balance sheet growth.
And then also this notion of kind of proactively managing the capital levels that we've worked so hard to build the last four or five years. On that front, we've increased the dividend last year. Certainly, that's something I think we'll look at again this year. We've demonstrated our commitment to potentially growing inorganically through the Sabal transaction. We've put together, I think, an ambitious organic growth plan. And doing all of that at the same time while maintaining pretty good asset quality numbers. Certainly, there has been some normalization, but they're still extremely good from our perspective. And then producing results in the neighborhood of an ROA of 140 basis points and keeping our efficiency ratio below 55%. So to us, that seems like a pretty good banking company and one that certainly, I think, is worth consideration. John, anything to add that?
Yeah, no. You did it well.
Appreciate that, guys. Thanks so much.
You bet. Thanks for the question.
Your last question comes from the line of Christopher Marinac of Janney Montgomery Scott. Your line is open.
Thanks. Good evening. Wanted to ask Chris a question about C&I utilization. I'm just curious if you see either net new C&I lines gaining steam this year, as well as the existing line? Can that sort of very stable 41%, 42% number kind of break out this year?
Yes, I'll start and then John can add his thoughts if he has any. We've discussed our Commercial Real Estate (CRE) and Commercial and Industrial (C&I) portfolios extensively. From the C&I standpoint, there seems to be increased clarity regarding how companies are perceiving future challenges, particularly in terms of investment intentions. On the CRE front, customers appear eager to proceed with project developments. We have projects nearing completion and new ones set to begin, and we are actively involved in the decision-making process alongside our clients. This should lead to more opportunities in both sectors, C&I and CRE.
Chris, this is John. I wish the answer was as straightforward as the question. Chris mentioned the impact of commercial real estate on line utilization, and it's essential to understand the context. Last year, we completed several hundred million dollars' worth of new CRE construction projects that currently have almost zero utilization. This artificially lowers the reported line utilization because many projects were completed and sold off relative to new bookings that haven't yet utilized their equity. As we move into the second and third quarter, the volume booked last year will reach the end of their funding and begin to draw from their lines, which will naturally increase CRE line utilization and, consequently, overall loan book utilization, which is positive. Additionally, the commercial and industrial utilization levels have been stable. While we would like to see them rise, which primarily impacts our cost of liquidity, increasing line utilization indicates the strength of the C&I book as clients have sufficient liquidity not to fully utilize their lines.
There is some seasonal line utilization from a few operations, but overall, the book remains healthy and stable, although it is about 700 basis points below pre-pandemic utilization due to excess liquidity. This situation presents both challenges and opportunities. We expect some of the borrowing from last year's commitments to start appearing on the balance sheet in late Q2 and through the second half of the year. Was that the detail you needed?
No, it was great. I appreciate you both take a stab at that. I guess just one related question. I mean, seeing interest rates kind of bounce around week to week. I mean would that new loan rate that we see in the deck every quarter, would that actually maybe stabilize if demand is getting stronger and the treasury markets backed up just a little bit this month?
You mean on the new money spreads?
Correct. Yes.
Yes, I think it would, Chris. Absolutely.
Very well. Thanks for the additional color. And we appreciate you hosting the call.
You bet. Thank you.
This concludes our Q&A session. I will now turn the conference back over to John Hairston for closing remarks.
Thanks, Jay, for moderating the call. And I guess the only parting statement I want have after a long call with good questions is – this is – we’ve announced deals before, and we’ve announced great earnings quarters before, but we’ve never announced a deal, great earnings in the middle of a snowbound wind blowing sideways out of our window in New Orleans. So it is certainly been an interesting day. Thank you all for hanging in the call, and we look forward to seeing you on the road over the next several months.
This concludes today's conference call. You may now disconnect.