Hancock Whitney Corp
NASDAQ:HWC
Hancock Whitney Corp
In the vibrant financial landscape of the American Gulf Coast, Hancock Whitney Corp. stands as a testament to regional banking success, weaving a narrative that began in the late 19th century. Established in 1899, Hancock Whitney roots itself deeply in communities across the coastal states, primarily operating within Mississippi, Texas, Alabama, Louisiana, and Florida. The company has managed to sustain a robust business model through its extensive network of branches, offering a comprehensive suite of banking services. From basic retail banking services catering to individuals with checking and savings accounts, to more complex services like mortgages and personal loans, Hancock Whitney excels in meeting the financial needs of its diverse client base. Its lending practices, particularly focusing on commercial real estate, construction loans, and small business lending, are key cogs in its profit machinery.
Driving the company forward is its adept integration of technology with traditional banking practices, a crucial adaptation in modern finance. Hancock Whitney leverages digital banking platforms to enrich customer experience, broadening its appeal beyond physical branch visits. Alongside commercial banking, the corporation dips its toes in wealth management services, offering investment guidance and portfolio management to clients, thus creating an additional revenue stream. The bank's historical resilience, supported by strategic mergers and a keen understanding of regional economic conditions, enables it to maintain steady growth. By fostering deep community ties and embracing innovation, Hancock Whitney Corp. not only persists in a competitive industry but thrives as a trusted banking institution in the Gulf South region.
Earnings Calls
Hancock Whitney's first quarter performance revealed a net income of $120 million, slightly down from the previous quarter. However, year-over-year earnings increased by 10%. The company anticipates modest loan growth in 2025, projected at low single digits, primarily in the second half. They expect fee income to rise between 9-10% following the Sabal acquisition, while expenses will grow at a modest 4-5%. With three rate cuts anticipated this year, NIM should continue to expand, supporting a forecasted NII growth of 3-4% in 2025. The firm remains committed to returning capital through share repurchases and dividends, which have increased 50% year-over-year.
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Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's First Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, 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 thanks, everyone, for joining us this afternoon. We are pleased to report another quarter of high-performing profitability and continued capital growth, a very strong start to 2025. We achieved an impressive 1.41% ROA, grew fee income, enjoyed continued NIM expansion and ended the quarter with total risk-based capital of 16.39%. 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. Expenses remained well controlled with only a 1% increase this quarter. We've updated our guidance to reflect the impact of the Sabal Trust transaction and now anticipate fee income to be up between 9% and 10% year-over-year. Our expectations for expense growth remain unchanged between 4% and 5% higher year-over-year.
Loans were down $201 million due to higher payoffs on large health care and commercial non-real estate loans offsetting strong production. We have updated our guidance this quarter and expect loans will grow low single digits in 2025 with most of the growth coming in the second half of the year. The change in guidance accounts for uncertainty reflected in current client sentiment.
We remain focused on more granular full relationship loans with the goal of achieving more favorable loan yields and relationship revenue. Deposits were down $298 million, driven primarily by the seasonal public funds outflows. For the second quarter in a row, our DDA balance has actually increased, and our DDA mix is stable at 36%. Interest-bearing transaction accounts increased due to our competitive product offerings and retail CDs declined due to the reduction of promo rates, which helped control deposit costs.
We continue to return capital to investors by repurchasing 350,000 shares of common stock this quarter. We also increased our common stock dividend of $0.45 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 1 ratio of 14.51% and tangible common equity ratio of 10.01%. Last quarter on our call, we shared our plan to pivot to growth, both organically and inorganically through the acquisition of Sabal Trust Company.
We continue to execute hiring plans with 4 additional bankers and have selected 4 new locations of 5 planned in the northern area of the Dallas MSA. The Sabal transaction is expected to close on May 2. We look forward to welcoming Sabal clients and associates to Hancock Whitney and for the opportunity to expand our best-in-class regional banking services in the Greater Tampa and Orlando areas.
Despite current market volatility, we remain optimistic for our growth prospects, particularly in the second half of the year. We are closely monitoring macroeconomic trends and indicators, including both nationally and within our own footprint. While the environment remains dynamic, our ample liquidity, solid allowance for credit losses of 1.49% and strong capital keep us well positioned to navigate challenges and support our clients in any economy.
With that, I'll invite Mike to add additional comments.
Thanks, John. Good afternoon. As John said at the onset, the company's performance in the first quarter was outstanding. Our net income for the quarter was $120 million or $1.38 per share, compared to $122 million or $1.40 per share in the fourth quarter. Earnings were up 10% compared to the same quarter a year ago, while EPS was up 11%. PPNR was down slightly from last quarter to $162.4 million, but up $9.5 million or 6% compared to the first quarter of last year.
Our NIM expanded 2 basis points to 3.43%, but NII was down due to 2 fewer accrual days and a lower level of average earning assets. And as mentioned, our fee income businesses had another outstanding quarter and expenses continue to be well controlled. The NIM expansion was driven by lower deposit costs, higher yields on the bond portfolio, and a favorable mix of borrowed funds, partly offset by lower loan yields as shown on Slide 16 of the investor deck.
Our overall cost of funds was down 14 basis points to 1.59% due to a lower cost of deposits and a better funding mix as we ended the quarter with no home loan borrowings. The downward trend in our cost of deposits continued this quarter with a decrease of 15 basis points to 1.70% in the first quarter. The drivers here were CD maturities and renewals at lower rates and a reduction of pricing on interest-bearing transaction accounts. For the quarter, we had $2.7 billion of CD maturities, which repriced from 4.33% to 3.72% with an 86% renewal rate.
Additionally, we ended the quarter with no brokered deposits and our DDA balances increased $18 million. Our NIB mix was stable at 36%. CDs will continue to reprice lower throughout 2025, given maturity volumes and 3 anticipated rate cuts over the remainder of 2025. Total EOP deposits were down $298 million, but that includes $320 million of seasonal public fund runoff. Bond yields for the company were up 7 basis points to 2.78%. 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 became effective and contributed 4 basis points to the overall yield pickup of 7 basis points.
Next quarter, we expect about $236 million of principal cash flow at 3.19% that will be reinvested at higher yields. For the remainder of 2025, an additional $85 million of our fair value hedges will become effective, providing additional yield. Our loan yield for the quarter was down 18 basis points to 5.84% and was impacted by lower average loan balances and lower yields on our variable rate loan portfolio. We updated our guidance this quarter to reflect the Sabal transaction and our updated expectations for loan growth as well as a few other items.
We believe we can continue to achieve modest NIM expansion and NII growth of between 3% and 4% 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. Our guidance assumes 3 rate cuts of 25 basis points each in June, July and October.
Our updated PPNR guide is we expect to be up between 6% and 7% from 2024s adjusted levels, and our efficiency ratio will fall somewhere between 54% and 56% in 2025. As John mentioned, we did receive regulatory approval for Sabal and expect that transaction to close on May 2. So including Sabal, we expect noninterest income will be up between 9% and 10% from 2024. Our expense guidance did not change as we continue to expect expenses will be up between 4% and 5% for the year, not including any onetime costs associated with the Sabal transaction.
Our criticized commercial loans decreased during the quarter and nonaccrual loans increased albeit at a slower pace than in the prior quarter. Net charge-offs were down this quarter and came in at 18 basis points. Our loan portfolio is diverse, and we see no significant weakening in any specific portfolio sectors or geography. Our loan reserves are solid at 1.49% of loans, up 2 basis points from last quarter. We continue to expect modest charge-offs and provisioning levels for 2025.
Lastly, a comment on capital. Our capital ratios remain remarkably strong. We increased our quarterly common dividend and modestly increased our share repurchases in the quarter. We expect share repurchases will continue at this level or a bit higher throughout 2025. Changes in the growth dynamics of our balance sheet, economic conditions and share valuation could impact that view.
I will now turn the call back to John.
Thanks, Mike. Let's open the call for questions.
[Operator Instructions]. We'll go first to Michael Rose, Raymond James.
It's only going to get worse. Thanks for reporting early. Yes. So just on that last comment around the buyback, just given the capital accretion this quarter and a slower kind of loan growth outlook as we move forward, which I totally understand, why not lean in a little bit more into the buyback, just given where the stock trades, the earn-back on the buyback. And what I see is a fairly robust case for positive operating -- all the goods stuff that you guys have worked so hard to achieve. Why not lean in a little bit harder here?
Michael, it's 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 I just described that as modest, but it probably is a little bit better than modest.
And certainly, if you look at the level we bought back all of last year, if we buy back at current levels and a little bit higher, consistently through the year. That's a pretty nice increase year-over-year. So I think one of the caveats certainly is the external environment, the dislocation of share prices and just what happens in that external environment. But all things equal, the intent is that we'll buy back, again, at current levels, if not a bit higher consistently through the year. So hopefully, that makes sense.
Yes, it does. Really appreciate it. Just as a follow-up, certainly understand how credit has performed so well. You guys have done a really good job bringing down the SNC balances. But I think it's probably too early to completely understand what's going to happen with tariffs. But I know you guys have made bigger inroads into small business in your markets, and that's an area of concern, I think, for investors, the longer the 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?
Yes. This is Chris Ziluca. We've done our best to just basically understand all the different sectors that could be impacted. The reality is you don't know what really will be the outcome of what target areas, the duration of all of those actions. Certainly, because of even the noise that's going on, it is creating a little bit of consternation in the markets and in the individual customers. But I think most of them are really taking a position of a little bit of wait and see.
I think the ones that are much more organized are assessing where the risks might lie and making kind of plans for like a Plan A and a Plan B and a Plan C in the event that it's more significant or longer duration type of an impact. But we've certainly looked at the various SNC codes that are likely subject areas and done some evaluation on the risk profiles so that we can prepare to kind of engage with the customers as needed when it becomes more certain.
Michael, this is John. I'll add to that. It wasn't exactly your question, but I think it's somewhat tangential to Chris's answer. At this point in time, client sentiment, while it shows some of the apprehension that Chris mentioned, the customer behavior doesn't really line up with a very near and present fear of an impending recession, particularly one that might be worse than moderate and longer. We typically will see a lot of line draws occur during that time as people pad the balance sheet with excess liquidity, securing whatever forms of capital they have to for near term amount of pressure. And we really aren't seeing that.
And I mean that kind of comment goes through yesterday, so into second quarter. So I think the mindset of our clients somewhat mirrors the mindset of the banks, not just ours, but others where the general sentiment is a little too early to tell. And hopefully, the shock at all of the first week of the quarter will give way to individual skirmishes with particular countries or sectors. And the overall impact will be a lot less pronounced than maybe we all fear on April 2. I don't know if that's helpful, but that would be, I guess, may add.
No, I appreciate it. Maybe I could just squeeze 1 more in. Just on the increase in the PPNR guide certainly understand that includes Sabal Trust. How much of the increase in the PPNR guide is related to that versus core because right? Because you guys did better on expenses than I think most of us were anticipating.
Yes, great question, Michael. And I think that if you look at the change that we made in fees, up 9% to 10%, that's a bit more than certainly Sabal is expected to bring for this calendar year. So I think we can certainly count on some continued growth in our various fee income lines of businesses. That's been an extreme strength of the company. The last couple of years, and we anticipate those businesses to continue contributing to the bottom line.
So I think that as well as on the expense side, you'll note that we actually kept the guidance the same so up to 4% to 5%. But certainly, that includes Sabal. So that infers that we're saving expenses elsewhere throughout the company for the balance of the year. So I think those 2 combined, the better performance in terms of fees, the addition of Sabal and then continued expense control really account for the entirety of the increase in guidance around PPNR.
The next question today is from Catherine Mealor, KBW.
Can you just give us an update on the hiring process and kind of the number of under the revenue producers that you've hired so far and kind of your plans for the next couple of quarters? And then just how that translates into the -- your growth outlook, it seems like your growth feels like it's a little bit slower and then it pushed back to the back half of the year, although I know you've always said it's more back-end loaded. But just kind of curious, as we think about how successful the hiring process has been or if this volatility has delayed any of that as well?
Sure. Thanks for the questions. I'll try to answer both at the same time. But if you need to give me a second question to make sure I'm clear, don't be bothered by it.
First, on the hiring, I think we shared the deck that we've added 4 in Q1. We added 7, I believe, in Q4, our run rate for the year should be around -- let's call it 20 to 30. I think 24 was the number that we actually shared on the call back in January for the year, and I would expect to hit that. Q1 is typically a little easier time to move folks. But our friends on the other side aren't giving up good talent to bankers very easily. So our pull-through rate for offers is running about 50% for the type of talent we're trying to attract. I think that's a pretty good number.
So the volatility in the macro does not affect our desire to add offensive players and add offices and growth markets that are highly successful. And if we look back over our Texas performance, the last 5-year compounded annual growth rate, somewhere in the neighborhood of around 16% with South Texas coming on very strong in Q1, and North Texas has been strong for really the better part of several years. So makes no sense whatsoever to let the current volatility get in the way of that plan. So we'll continue. If not, enhance it to make sure that we come out, whatever the other side of this dust up in tariffs is with a good strong hand.
The sectors that we grew in, in Q1 were driven a good bit by the new hires. So particularly in equipment finance. So that's, I guess, the earlier hires and the cycle to add business from a new hire in equipment finance is a little shorter. So we're showing good progress there. And I look forward to that being replicated throughout some of the other loan generation sectors and when we were talking about sort of the guidance we gave a quarter ago for the year. And typically, we're giving loan guidance on an annual basis, right? We don't get into quarters, but now that the first quarter is behind us, I really expected a push in total loans for Q1.
Headed into the end of the quarter, it looks like we very much may get there and then had the payoffs that occurred both in health care and even though the CRE number is up, it would have been up a good bit more. Have we not had some payoffs toward the end of the quarter as the 10-year note began to subside, and we saw pretty big mismatch between revolving rates and perm rates. So we had some unplanned payoffs right there at the end. So as we go into the second quarter, Catherine, the production levels are good. The pipelines look better than they looked a quarter ago.
I think the only potential interruption is if the somewhat pause that we're seeing from larger organizations and medium-sized organizations due to the tariff concerns last all through the quarter. That could push some of the production we're planning to Q3. But at this point in time, we're really not seeing any deals come out of the pipeline. We're just seeing the closing of 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 in 2Q. Is that helpful?
Great -- Yes, that's great. Yes, the pipeline was actually my next question that you answered that, which was great. And then maybe my follow-up, then I'll move over to M&A. I know you've talked in previous calls about wanting to participate in M&A. But of course, your stock price is back to a valuation that makes that more challenging.
So just kind of curious, your updated thoughts on M&A versus organic growth versus -- I know you talked about buybacks earlier as well. Is this just a period where we see more buyback from you and then a push for organic growth and M&A maybe comes at a later date once the stock rebound.
Yes, Catherine, thanks for that. I think you pretty much answered the question. That's really how we think about it now. And I'll keep it simple. I mean, for right now, M&A is just not something that we're focused on. and certainly, the disruption in the external environment and the impact on our valuation or factors. So that may change or will change at some point down the road. But I think right now, in terms of capital priorities, it really is what we've done more recently, and that is return 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 2 ways of managing capital and focus on our organic growth plan as we continue to do so. And M&A, I think, is something simply for another day down the road.
Great.
You bet. Thanks for the question.
Next, we'll take a question from Stephen Scouten, Piper Sandler.
I just wanted to follow back around a little bit on the upside in the PPNR. And Mike, I know you gave some color on Michael's question about Sabal and the benefit there. But I think the detail we have in the deck was that in '24, they added like 22 -- they had about $22 million in revenue. What's kind of the expense base of that business that's coming over? Just trying to think about where the -- where the other reductions are kind of within that overall guide?
Yes. We -- 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 2 kind of under our belts. But we have kind of disclosed that we believe the impact of Sabal as a whole on this year will be about $0.02 per share.
Certainly, the revenue side of that is somewhere around $14 million, $15 million, somewhere in that neighborhood. And once we get Sabal completely converted along with another conversion that we have going on to our legacy trust business, we're really looking for '27 to see the full impact of the acquisition and we're kind of calling that out at about $0.08 to $0.10 per share for '27. And then certainly, we'll build on that in future years. So that's the disclosures we're giving today on Sabal. And again, once we get the transaction closed, I think we'll share a little bit more detail.
That makes sense. And then I know your NIM guide, I think you said it assumes those 3 cuts, June, July, October. Mike, can you give us some color on maybe sensitizing that one way or the other? I mean these expectations seemingly change daily if we were to get 0 cuts kind of what you would think about or if we got more than 3, just kind of how we would think about the directional shifts with other scenarios?
Sure, I'd be glad to. So we've kept our treasury and financial planning teams busy modeling different rate scenarios. So our profit plan for this year started off with the 3 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, and have landed pretty much back where we started with the 3 rate cuts really centered over the summer and then one into the fall.
So the other disclosure that we provided in the earnings deck, and it really was a piggyback off the same disclosure we did in the first quarter. And that's this notion that really any way you cut it, where we have 3 rate cuts, 2, 1 or none. It really isn't going to have an appreciable impact on our NII for this year. it's certainly going to move the numbers around a couple of million in either direction. But certainly nothing that would be considered material or significant.
The big things that really move it would be loan growth. And certainly, we have the updated guidance around low single-digit loan growth, and that's impacted the numbers on NII a bit and that resulted in us reducing that guidance a little bit to reflect the reality of loan growth maybe being a little bit less than we had thought it would be at the onset of the year. But if you look at our NIM and NII growth components as we think about the next 3 quarters, it really is the things that have driven that in the past couple of quarters. And we've been able to kind of expand our NIM by around 2 or 3 basis points pretty consistently quarter-over-quarter.
And really, we think under almost any scenario, we'll be able to continue to do that for the balance of this year. We continue to have opportunities to reprice CDs. We continue to have opportunities to reprice cash flow coming off the bond portfolio, as well as opportunities to reprice our fixed rate loan portfolio. So those have really been the 3 main drivers.
And then certainly, our ability to maintain our NIB mix at current levels potentially grow that a bit by year-end. Those are the things that really is the recipe for us to be able to produce the kind of NII levels that's part of the guidance as well as the potential NIM expansion over the course of the year. So I know that was probably a lot, but hopefully, that was helpful.
That's extremely helpful, Mike. 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. I mean it feels like loan growth continues to be the only maybe piece of the puzzle that's not hitting where you'd want it to be.
And obviously, the uncertainty and I know you mentioned some health care credits and other things that were impeding growth this quarter, but lowering that guide down, what really needs to happen apart from maybe the environment getting better and getting these hires on board to be able to hit on all cylinders on growth and maybe surprise to the upside as opposed to having to revise down at some point in one way.
That's a terrific question. This is John. I'll take it. [indiscernible] hired the new hires to come in and be in the markets that we're trying to grow in because our growth rate in those markets is terrific, but it has to offset some slower growth areas that we have some concentration in. So the upside surprise will come from the 10-year staying up in the -- even the low to mid-4 is just not below 4, at that point in time, we begin to see a lot more payoffs.
So if the 10-year will stay up long enough to get the new hires in place. And if we can pull forward some of the hires planned for the fourth quarter into the second and third quarter, then that would drive us towards an upside. So we haven't given up on the initial guidance, but we're trying to be prudent and transparent that in the environment we're in the last week of March when rumors pretty significant tariffs begin to chill some of the sentiment we're trying to be respectful of not overpromising and be honest about what those headwinds could be.
So the lowering of the guide wasn't because of a lack of appetite for growth or any lack of expected success in hiring where we want to hire. But it's kind of hard to outrun the fact that there's so many people looking to deploy credit and there's not enough demand to satisfy everyone. So the deal is getting on right now are on price structure, turnaround time on decisions and certainty of execution, we can compete well in all those areas. We just need more offensive players in markets that there's more deals to take.
That's fantastic color. Appreciate it.
You bet, great question.
Brett Rabatin of Hovde Group has the next question.
I wanted to go back to fee income for a second and just with the increase in the guidance, it seems like a lot of that is Sabal. Are there other pieces that would be, you think, repeatable from here or that would drive some of the growth, derivative income, syndication fees, SBA, mortgage banking? Is there anything in particular that's helping that guide for the year?
Yes. So I'll get started, Brett. And as we kind of mentioned before, if you look at what the new guidance kind of translates into in terms of dollars. Really about 2/3 of that is the introduction of Sabal into the company's financials and the other 1/3 or so is increase that we're expecting in other fee income lines of business. And you kind of hit already on kind of our specialty lines, which have really, I think, over contributed in the last couple of quarters, and we expect that they continue to do so. So that things -- those examples of that are BOLI syndication fees. You mentioned that.
Our SBIC fees have been real strong of late. We expect some of that to continue at certain levels. SBA fees is another category, Wealth Management outside of Sabal and then we've also had some pretty nice increases in our ability to originate and sell some mortgage loans. So those are all categories that will kind of pick up that difference in addition to what Sabal will bring. John, I don't know if there's anything you want to add?
Sure. I'll add to that. Mike shared the Sabal contribution, but that shows up in the wealth management forecast, but even net of Sabal, we had a really great quarter. And it's been a long time since we did not have a really great quarter with wealth management fees. That's in trust. It's in investment management. It's an annuity production out of the retail shop. It shows up in wealth management, but the retail folks are retaining a great deal of it. All those teams really do hit on all 8 cylinders, and we had another great quarter.
The other area that is -- I'll use your word is repeatable, is our density in our business accounts for operating accounts that we offer treasury services that density continues to improve in terms of wallet share. Some of the new hires we've talked about are on the treasury side to ensure that, that density continues to improve, and that's real money on the fee income side.
And so that's improving and it has a bit of a tailwind just as balance has normalized from the pandemic. You mentioned mortgage. And with rates going up, I think they were [indiscernible] 7% yesterday. It's kind of hard to believe we'll see application improvement that generates a lot of fee income, but our share of all the mortgages that do happen should continue to improve as we deploy our direct channel origination sources through the rest of the year.
So I don't know that mortgage secondary fees is going to light the board up for everybody. But for us, given our relative performance -- our relative attractiveness as originator is going to continue to improve, we might outpunch our weight a bit in terms of improvement there.
And then finally, the specialty fees that Mike mentioned, the syndication fees related to that is sort of a stated desire. I've talked about it on several calls, where our participation as a smaller player in very large transactions is been -- is getting replaced by leading smaller transactions that we can very well perform in, and then we get a bigger slice of that fee. That allows us to create both more granular portfolio, get more operating deposits and get a fee contribution that otherwise we would just be getting rewarded as a piece of somebody else's credit relationship.
So we won't certainly get out of the SNC business at all, but I think we pulled it down about 300 basis points in the last 7 or 8 quarters and replacing all that has been, I think, the secret sauce of seeing some of the benefit on both the DDA side and the fee income side. Is that the clarity you were looking for?
Yes, that's really helpful from both of you. And you just mentioned certain national credits. The other question I had was just around that bucket continued to atrophy a little bit this quarter. And then you talked about the payoffs in health care and other potential credits just based on rates, et cetera. How much of the revised guidance or does the revised guidance kind of assume that those trends continue? Or how should we think about the headwinds that you faced relative to the revised '25 outlook?
I think if I kind of draw a box around health care, that may be the most adjustable way to answer it. The diminishment we saw this quarter were from 3 syndicated -- well, 2 were syndications -- 2 were leveraged and 1 was a syndication that we had a share in that were recast in the quarter a little bit ahead of when the suggested -- or the maturity would have suggested then to be recast that we opted out of to use that liquidity for other purposes specifically loan growth in the back half of the year. So that contributed nearly all of the diminishment in the SNC density.
I think we reported 9.4%. I'm trying to bring the number back to my memory and I don't think we will get north of 10%, but we don't really -- we're not really intentionally running it down. It's really just more of a replacement of participations and other credits with leading our own that are smaller. But I didn't expect that to be as big a headwind in Q1 as it was because we didn't expect to see us pay off. But I'm not going to cry over having that happen because I have confidence we'll redeploy that towards the back half of the year. I think that was the entire impact on SNCs other than people just doing paydowns on their lines.
Okay. Great. That's really helpful. Appreciate the color.
You bet. Thank you.
Next up, we'll hear from Casey Haire, Autonomous Research.
Follow-up on capital, 2 parter. So first, Sabal, what kind of CET1 impacts will that transaction have -- and then two, any thoughts -- I know you guys did a bond book restructuring in maybe 23% or so, but just wondering if that's another way to use some of the excess capital given the bond book yield is still a little light.
Yes. Thanks, Casey. This is Mike. And related to Sabal, again, we're not disclosing the purchase price for that entity, but I will share that the impact on common Tier 1 is going to be modest. So it's not going to be a huge dent there by any stretch.
And then your other question related to restructuring. I mean look, that's something that we consider really every quarter. I mean we model those kinds of things on a pretty regular basis, and we'll continue to do so. But I think, to actually pull the trigger on something like that, we'll need a little bit more stability, especially in the bond markets or a little bit confidence that the bond markets will remain stable if they get there. So hopefully, we have that kind of confidence and stability and we'll be able to consider those kinds of things. But I think right now, there's probably just a little bit too much going on to on a practical basis, consider a bond restructuring right now.
Yes. Fair enough. Okay. And then -- just on the expense guide. I appreciate you guys are not going to lay out what the Sabal impact is. So I guess what -- where did you find these cost saves to keep the expense guide flat given that Sabal will be additive, obviously, to the expense base? Like where the cost is coming from?
Sure. I'll provide some color on that. So part of it admittedly is -- we think our incentive comps low this year will probably be a little bit lighter than what we thought coming into the year, so there's some savings there. And really, the rest of it is really kind of across the board and continues to be centered on our ability to control costs.
And again, thinking about the way that this year has really begun with so much uncertainty. And issues with the potential trade war and everything related to that. We're cognizant of what we need to do to continue to control costs and save costs. So I think it's just a little bit more -- a heads-down effort to make sure that we're spending money the way we need to and saving where we need to as well. So that's put us in a position, I think, to be able to handle the onloading of the Sabal expense base without changing the guidance.
The next question is from Gary Tenner, D.A. Davidson.
Most of my questions were answered in that follow-up on the expenses. But Mike, I wonder if you could just give us the expected CD maturities and kind of expect the rate benefit or pick up in the second quarter?
Yes. So I'll start off with what that benefit is for the year. So we look to have about $5.5 billion of CD maturities over the next 3 quarters. Those CDs will come off at about 3.7%, and we think they'll be repriced at somewhere near 3%. And again, that's for the remaining 3 quarters of the year. So that assumes a 75% renewal. So that's kind of the headline story. By quarter, you asked about the second quarter. So we're looking at about 2.3 billion of CD maturities coming off at $388 million going back on at around $350 million or a bit lower with about a 78% renewal. So those are the numbers for the year as well as the second quarter.
Okay. Great. And then I guess, maybe just a follow-up to that, Mike. In terms of the end-of-period deposit expectation to be up low single digits over the course of the year, then does that kind of -- that's net of some amount of CDs that will not renew. So that mix should shift a little bit.
Yes, it will continue to shift as we kind of described and no changes in that guidance around the outlook for deposits to come in at low single digits. So that certainly accounts for the seasonal inflows and outflows of our public fund book. So again, for this past quarter, deposits were actually down right about $300 million, but if you back out the impact of the public fund outflows, which, of course, are seasonal, we actually would have grown deposits by about $20 million to $25 million. So all of those factors are considered in part of the guidance.
The next question is Matt Olney, Stephens.
Going back to the commentary around loan growth being stronger in the back half of the year. Just remind us how much of this growth would be from new hires that you made over the last year or so?
And then secondly, just any color you can give us as far as loan pipelines that can just get us more comfortable with the loan growth in the back half of the year?
Yes, I'll start, Matt, with the first question. So if you look at the overall loan growth that we're expecting for the year, it's somewhere around 15% that we're expecting from new revenue hires -- and those would have been primarily folks that we would have hired, let's say, in the fourth quarter of last year, maybe a little bit into the first quarter of this year.
And then on the expense number, the impact of the new hires on our expense guidance is about 100 basis points or so. So those numbers are largely unchanged from the disclosures that I think we gave out last quarter.
Matt, this is John. The percentage has changed a bit, depending on which of the new hires are loaded in a little earlier. So I gave the example in equipment finance to where a single new hire in that group can make a pretty big difference pretty rapidly because the time to decision and book loan, particularly in the capital markets side of equipment finance is a good bit more rapid than, say, a commercial banker adding that's going to take 120, 150 days to really begin to get their pipeline flushed out. once they get comfortable and kind of understand the tech, the policies and the people.
So the more of the middle market equipment finance and CRE hires and health care hires, we can get loaded to the front of the year, the more of an impact above the 15% it could be. So that's our goal. But we didn't build that in to plan to make it may be open and it's kind of balanced out based on what our past has been. That said, one of the earlier questions around the importance of an upside to loan growth on our valuation. Certainly, we're motivated to do that if we find the talent.
And John, to follow up on the comments you made, I think you're targeting between, what, 20 and 30 new producer hires this year. Is there a target mix you have of the type of producer, whether it's real estate or commercial or capital markets? Just any color on the mix?
Sure. There's -- I think, to average it out, there's a couple in each of the specialty lines. We'd like to add CRE folks in Florida, in Texas and specifically in Nashville. Would like to add additional equipment finance folks. They'll be based on in New Orleans, but it will be focused on areas around our footprint. Probably half the numbers in business are commercial bankers. There's 4, I think, planned for financial advisers and the wealth management group to help augment our new investment in Florida and Central Florida via Sabal.
And then -- and to be honest, if talent or teams become available to us because of disruption around us, we would not hesitate to add more than the 20 to 30 -- like I said, the number in the plan is 24. But if we could get 30 or more, that would be just fine with me. So wherever there's talent in markets we're trying to grow in particularly high annual organic growth rate options, those are very much in demand to us.
Next, we'll take a question from Ben Gerlinger, Citi.
I just want to follow up quickly on the M&A conversation. Mike, you said there's really not a lot of appetite. Is that in relation to depositories, i.e. loans and deposits? Or is that like all M&A. So that would also include like not interested in fee income, generating business and...
Great question, Ben, and great clarification. So the question was really directed I think to depositories. Certainly, we're in the midst of closing on Sabal. So we'd like to get that 1 closed and get some good work done on getting that integrated, but probably would be a little bit more open to those kinds of transactions and depositories in the current environment. So thanks for that clarification.
I appreciate everything [indiscernible].
You bet.
Our last question today comes from Christopher Marinac, Janney Montgomery Scott.
I wanted to ask Chris about the growth in the unfunded commitment reserve. Was that related to just volume there or risk or any more color there?
Yes, good question. Really, it's just the change in our outlook for fundings likely that there's going to be potentially more funding just converting over to -- from unfunded to funded. And so therefore, it will just kind of move over from that perspective.
Okay. And as some of the factors qualitatively in your modeling for reserves in general, do you have any visibility that, that would lead to any significant reserve build in the second or third quarter? Or is it simply too early to comment?
It's probably too early to comment, but the qualitative factors are there because of how we built our models and they don't always take into consideration all of the variables that are going on at the loan level. So the qualitative factors are there to kind of enhance that in many respects.
So the idea of having a higher recession scenario, is that already in the numbers that you had as a year-end or as of March 31?
Yes. So Chris, this is Mike. So if we look at the scenarios that we're using, and of course, we use Moody's like many of the mid-cap banks. We're split between the baseline scenario as well as the slower growth scenario. And the baseline scenario that we're using does not have the impact of a recession, but certainly, the slower growth 1 does. And there's a third scenario out there that includes a moderate recession that as we go through this year and the next quarter or 2, we'll make judgment calls around how we might change or alter the mix of the scenarios that we're using.
But certainly, where we are today, it's too soon to make a call as to where we'll be really at the end of this quarter, given the potential for changes in the external environment.
I might also add that the scenarios in general have gotten a little bit more pessimistic in many respects, even the baseline tends to move. So want to just kind of keep in mind the fact that the baseline ultimately, if it's working correctly, we'll kind of follow where we are in the cycle. And so from last quarter to this quarter, there is more components within there, that kind of sound like higher recession risk.
Okay. Great. That's good background. I appreciate it.
You bet. Thanks for the question.
That does conclude our question-and-answer session. I would like to hand the call back to Mr. John Hairston for any additional or closing remarks.
Yes. Thanks, Lisa. Thanks for moderating today, and thanks, everyone, for attending a late call. Look forward to seeing you on the road soon.
Once again, everyone, that does conclude today's conference. Thank you for your participation. You may now disconnect.