Hancock Whitney Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
October 14, 2025

Key Takeaways

  • Positive Sentiment: ROA increased to 1.46% in Q3 from 1.32% a year ago, and the efficiency ratio improved to 54.1%, underscoring ongoing profitability gains.
  • Positive Sentiment: Fee income reached a record $106 million, up 8% quarter-over-quarter, led by strong investment, insurance, and annuity revenues.
  • Negative Sentiment: Loan growth was constrained at 2% annualized as $114 million of large credit payoffs and reduced line utilization weighed on net growth.
  • Neutral Sentiment: Net interest margin remained stable at 3.49%, with modest NII growth expected to be balanced by upcoming rate cuts and securities reinvestments.
  • Positive Sentiment: Capital ratios strengthened—Common Equity Tier 1 rose to 14.08% and TCE to 10.01%—while the bank repurchased 662,000 shares, reflecting disciplined capital return.
AI Generated. May Contain Errors.
Earnings Conference Call
Hancock Whitney Q3 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Kathryn Mistich, Investor Relations Manager. You may begin.

Kathryn Mistich
Kathryn Mistich
Investor Relations Manager at Hancock Whitney

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.

Kathryn Mistich
Kathryn Mistich
Investor Relations Manager at Hancock Whitney

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.

Kathryn Mistich
Kathryn Mistich
Investor Relations Manager at Hancock Whitney

I will now turn the call over to John Hairston.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Good afternoon, and thank you all for joining us today. The third quarter of 2025 was a remarkably strong quarter. With an ROA of 1.46% versus 1.32% a year ago, our results reflect continued profitability improvement, reduction in our efficiency ratio, and progress on our organic growth plan. Net interest income continued to expand as our average earning assets grew at higher yields, and we continued to reduce deposit costs, down one basis point this quarter. For the third quarter in a row, fee income grew, totaling $106 million, an increase of 8% from prior quarter. Investment, insurance, and annuity fees led this increase, hitting a record high for the organization. Expenses remain well controlled. Compared to prior quarter's adjusted net interest expense, we were up less than $3 million, or 1%, from prior quarter.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Much of this increase was in personnel expenses due to our investment in revenue producers, along with higher incentive income from a strong quarter of loan production and really terrific fee income. Loans grew $135 million, or 2% annualized. As shown on slide 27 of our investor deck, our production was quite strong, increasing 6% quarter over quarter and 46% from the same quarter last year. The net growth number was impacted by higher payoffs of larger credits, including SNCS, which were down $114 million and ended the quarter at 8.9% of total loans. We likewise encountered a larger than expected reduction in line utilization among industrial contractors, as favorable project completion dates led to earlier payments on very large projects. We remain focused on more granular full relationship loans with the goal of achieving more favorable loan yields and relationship revenue.

John Hairston
John Hairston
President and CEO at Hancock Whitney

We expect low single-digit growth in 2025 and perhaps low single-digit net growth for the fourth quarter as paydowns persist. Deposits were down $387 million, largely driven by seasonal activity in public fund DDA and interest-bearing accounts, which decreased $269 million. Our interest-bearing transaction balances were up and retail time deposits and DDA balances down, reflecting promotional pricing changes inside the quarter. DDA mix ended the quarter at a strong 36%. Earnings contributed to growth in all of our capital ratios while we continued to return capital to investors by repurchasing 662,000 shares of common stock. We ended the quarter with TCE of 10.01% and common equity tier one ratio of 14.08%. This quarter, we continue to make progress on our organic growth plan. We've hired 20 net new bankers from the same quarter last year, a 9% run rate.

John Hairston
John Hairston
President and CEO at Hancock Whitney

We're well underway in our plan to open five new locations in the Dallas market. These branches will open either in late 2025 or early 2026. While too early in the year for 2026 guidance, we do anticipate an increase in the pace of hiring to solidify our target compounded annual balance sheet growth rate. We remain optimistic about closing out 2025 with continued growth and profitability. As we look back over the past several years, we hope investors are pleased to see the combination of a fortress capital stack, solid allowance for credit losses, superior profitability, ample liquidity, benign asset quality, and a new emerging trend of balance sheet growth. Despite the current somewhat dynamic macroeconomic environment, we are confident in the company's ability to navigate any challenges before us, support our clients, and continue running a very successful playbook. With that, I'll invite Mike to add additional comments.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Thanks, John. Good afternoon. As John mentioned, we're very pleased with the company's strong performance this quarter. Our adjusted net income for the quarter was nearly $128 million, or $1.49 per share, compared to adjusted net income of $118 million, or $1.37 per share in the second quarter. Second quarter results included $6 million of supplemental disclosure items related to our acquisition of Sable Trust Company. PPNR for the company was up $8 million, or 5% from the prior quarter. Our NIM was stable at 3.49%, and NII was up $3 million, or 1%. Fee income was up $7 million, or 8% from the prior quarter, and expenses remain well controlled, up just $3 million, or 1% from the prior quarter's adjusted expense. Our efficiency ratio continued to improve, reaching 54.1% this quarter compared to 54.91% last quarter.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Our efficiency ratio year to date of 54.73% is nearly 100 basis points lower than last year's 55.67%. The quarter's stable NIM was driven by a better earning asset mix, higher average loans, and a higher securities yield, which was offset partially by higher other borrowings, volumes, and rates, as shown on slide 15 of our investor deck. The yield on the bond portfolio was up 6 basis points to 2.92%. We had $135 million of principal cash flow at 3.08%, and we reinvested $200 million back into the bond portfolio at 4.61%. Next quarter, we expect about $207 million of principal cash flow at 3.53% that will be reinvested at higher yields. We expect the portfolio yield should increase with continued reinvestment at higher rates for the remainder of 2025. Our loan yield for the quarter was up 1 basis point to 5.87%.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yields on fixed-rate loans were up 7 basis points to 5.24%, while the yield on variable-rate loans was down 6 basis points. The yield on new loans was flat at 6.78%. With two rate cuts expected in the fourth quarter of 2025, we expect the overall loan yield will be down accordingly. Our overall cost of funds was up 2 basis points to 1.59% due to higher average other borrowing volumes and rates, partially offset by lower deposit costs. The downward trend in our cost of deposits continued, albeit at a slower pace, with a decrease of 1 basis point to 1.64% in the third quarter. The drivers were CD maturities and renewals at lower rates and lower rates on public fund deposits. We expect deposit costs will be down in the fourth quarter following expected rate cuts in October and December.

Mike Achary
Mike Achary
CFO at Hancock Whitney

For the quarter, we had $2.4 billion of CD maturities at 3.69% that were repriced at 3.58% with a strong 88% renewal rate. CDs will continue to reprice lower in the fourth quarter, given maturity volumes and anticipated rate cuts. As shown on slide 11, EOP deposits were down $387 million, mostly reflecting $269 million in seasonal reductions of public fund balances. DDA balances were down $334 million, including an $83 million reduction in public fund DDAs. Retail time deposits were down $145 million, but interest-bearing transaction deposits were up $278 million. Our updated guidance is included on slide 20 and, as mentioned, includes two rate cuts of 25 basis points in October and December. For the third consecutive quarter, our criticized commercial loans improved, decreasing $20 million to $549 million. Non-accrual loans increased modestly to $114 million.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Net charge-offs were down this quarter and came in at 19 basis points. Our loan portfolio is diverse, and we see no significant weakening in any specific portfolio sectors or geography. Our loan reserves are solid at 1.45% of loans, consistent with last quarter. We expect net charge-offs to average loans will come in at between 15 and 25 basis points for the full year 2025. Lastly, a comment on capital. Our capital ratios remain remarkably strong with growth this quarter due to our higher earnings levels. We bought back about $40 million of shares, consistent with prior quarter. We expect share repurchases will continue at this quarter's level in the fourth quarter of 2025. Changes in the growth dynamics of our balance sheet, economic conditions, and share valuation could impact that view. I will now turn the call back to John.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Thanks, Mike. Let's open the call for questions.

Operator

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We'll take our first question from Michael Rose at Raymond James.

Michael Rose
Michael Rose
Managing Director of Equity Research at Raymond James

Hey, good afternoon, everyone. Thanks for taking my questions. Maybe we can just start on loan growth. I think last quarter you guys had talked about a mid-single digit or 5% growth in the back half of the year. Certainly understand there's been some ongoing paydowns. Just wanted to get a better sense of, I know SNCS are at 8.9%. You've talked about 9%-10% on a go-forward basis. We're at the low end there. It looks like healthcare has had two down quarters in a row. Can you just give some context on, are we near or nearing the end of payoffs? How should we think in light of relatively solid production, assuming those paydowns would have slowed, what initial 2026 growth could look like? The underlying production has been pretty solid. Thanks.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Sure, Michael, thanks for the question. This is John. I'll try to put all that together. Certainly you have a chance to redirect if I miss any of the points. First, just talking about loan production. I think I mentioned in the prepared comments that loan production was up 6% over prior quarter and a healthy 46% over the same quarter a year ago. Really, all of the production level that we're getting is in line with our expectations. In fact, it was stronger than last quarter when we had a little bit higher end-of-period growth. When you look a little under the covers, the average loan growth numbers are quite consistent from Q3-Q2. I'll call it about $180 million for each of those two quarters. They just had different end-of-period numbers.

John Hairston
John Hairston
President and CEO at Hancock Whitney

That said, there are several different categories that you mentioned that are either growing as well or better than expected, and some underperforming. For the quarter, and we talked about this at the same call a quarter ago, we'd like to see a little different mix in the growth categories that would command a little better yield as we go into the end of all the deposit repricing benefit that, you know, may be back with rate decreasing. First, owner-occupied real estate was an area of interest that grew about $144 million. Investor CRE also grew about $135 million. That enabled equipment finance to come in a bit lighter at $50 million. As you remember, we get a better yield on the first two categories than the third. Really good production, very solid production in the areas that we wanted to see with good deal flow.

John Hairston
John Hairston
President and CEO at Hancock Whitney

It made its difference in the yield of all the new business. The contrast, I'll kind of run through them to give you better flavor. First, line utilization was down about 90 basis points. That was about $50 million. That was almost entirely due to large industrial projects that got done a little faster than expected. I mean, those projects fund up and then get paid down. The combination of really good weather throughout the last several months and just good engineering led those projects to finish a little faster. Those paydowns came a little bit quicker than expected. The bigger component was we had a number of large client, you know, core client sales to larger organizations upstream that occurred during the quarter. Those happened every quarter, but it was a little bit higher than normal.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Our old friend, private credit and private equity, did take down a few of the healthcare deals that I would have expected to be closer to flat this quarter. It's sort of a tale of ins and outs. The production level was exactly where we expected through the organic growth plan, maybe a little better. The paydowns were likewise heavier. That brings us to what to expect. Obviously, a mid-single is where we want to be. We think we can fund that with very high-quality deposits that are lower in cost. At that rate, we're a little over 3% right now at the growth pace we're at. It needs to be closer to mid-singles. I want to be really realistic about the paydown environment. In your question, you said, when do we think that's over?

John Hairston
John Hairston
President and CEO at Hancock Whitney

I don't think paydowns are ever going to diminish when we have this good of an environment and this many players interested in the southeastern part of the country. That means we'll have to continue running the playbook, which is a lot of hustle, but also additional offensive players deployed to take that production level up another couple of hundred million a quarter. Right now, we're running about $1.8 billion per quarter. It needs to be about $2 billion, maybe a little north of that to generate a really consistent and dependable quarter-over-quarter, 5% annualized growth rate. I certainly think paydowns could go down, but if we think about money rates burning down or going down, and then all these occupancy improvements that we're seeing across the multifamily space, I think it's unrealistic to think they're going to just go away.

John Hairston
John Hairston
President and CEO at Hancock Whitney

They may temper a little bit, but we're going to assume as we go into 2026 that paydowns remain high and boost production to cover it, running the same discipline playbook. When I refer to that, I mean pricing discipline, credit discipline, concentration discipline, and continue running the playbook that's led us to have superior profitability. If I missed any of your points, please redirect me.

Michael Rose
Michael Rose
Managing Director of Equity Research at Raymond James

No, John, that was a lot of color. I really, really appreciate it. Maybe just one follow-up for me. I did want to kind of address the capital question. I know you guys have talked about, over time, running CET1 11%-11.5%. You've talked about the buybacks this quarter, about $40 million, continuing at this pace at least for the next quarter. Capital, CET1 was still up a tick. I know there's some AOCI recovery in there too. I guess can you talk about the ability to maybe do more on the repurchase front? I know you have the outstanding program, but if you were to get through that over the next quarter or two or maybe three quarters, would you look to re-up that? I think there's a pervasive view out there that you guys are looking at a deal, potentially a larger one.

Michael Rose
Michael Rose
Managing Director of Equity Research at Raymond James

Can you just address your thoughts around M&A and now, given the environment that we're in? Thanks.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah, hey Michael, this is Mike. I'll address that question. The last part first around M&A. Our stance on M&A hasn't changed, you know, despite what you may be hearing out there. We're not really focused on that right now at all. We have talked about being opportunistic, you know, as kind of time goes by and opportunities present themselves. Aside from that, nothing's changed. That's first and foremost. As far as continuing to look at capital priorities and the way we think about being proactive in terms of deploying capital, again, not a lot has changed really in the last quarter or so. I know this notion maybe exists that we, and we've asked the question around where we feel comfortable operating the company, and the answer is, you know, for common tier one to be, you know, in the range of 11%-11.5%.

Mike Achary
Mike Achary
CFO at Hancock Whitney

That does not mean there's an active program to reduce our capital to those levels. Instead, we would like to deploy it in what we would describe as meaningful ways. The first priority, you know, as it's been for many quarters now, continues to be to deploy capital in terms of organically growing the balance sheet. We have not been able to grow loans, as John mentioned, you know, this year as much as we would have liked to. Having said that, as we move into 2026, the effort is going to be there to deploy that capital in terms of organic growth. We do have the five branches that we're going to open in the Dallas region late this year, early next year. The potential certainly exists for us to deploy capital in that manner in other markets.

Mike Achary
Mike Achary
CFO at Hancock Whitney

As far as returning capital to shareholders, that's a great point that you make around the buybacks. Certainly, something we could look at in coming quarters is to incrementally increase the level of buybacks. For now, for the fourth quarter, I would assume that we would buy back pretty much the same level we have in the second and third quarter in terms of how much capital we actually buy back in terms of dollars. Certainly, as we've talked about many times in the first quarter in January, feel pretty certain that we'll have a discussion with the board around looking at the dividend. All of those means of deploying capital and being proactive in terms of how we manage it are still top of mind and things that we'll continue to do going forward. Hopefully that made sense.

Michael Rose
Michael Rose
Managing Director of Equity Research at Raymond James

It did. Thank you guys so much for taking my questions. I'll step back.

Mike Achary
Mike Achary
CFO at Hancock Whitney

You bet.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Thanks, Mike.

Operator

We'll move next to Ben Gerlinger at Citi.

Ben Gerlinger
Ben Gerlinger
VP of Equity Research at Citi

Hi, good afternoon, guys.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Hey, Ben.

Ben Gerlinger
Ben Gerlinger
VP of Equity Research at Citi

I know you don't want to give a 2026 guide, but on slide seven, you kind of lay out the investment opportunities for further growth at branches and just the future for Hancock Whitney down the road. When you guys think about the numbers that you put on those bullet points, so $8.5 million for revenue and then $6.2 million for facility expansion, is that kind of implying that basically roughly $15 million or so spot to spot expense growth of $25 million, or 4Q 2025 into 2026, or how should we layer in expansion and investment down the road? I'll obviously be opportunistic on hires, especially with the disruption from M&A in the Southeast, but just kind of what you have in front of you. How do you guys think about that?

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah, so Ben, when we look at slide seven and talk about the numbers you just mentioned, those are kind of annualized numbers of what we expect to spend this year on things like expenses related to hiring new revenue producers and in the new facilities in Dallas. Those are kind of annual run rate numbers. The point is well taken, as I mentioned, I think on the previous question, when we look at 2026 and beyond, we fully intend to continue to make these kinds of investments in other markets. When we talk again in the mid-part of January after fourth quarter earnings, we'll talk about our guidance for 2026 in the same level of detail that we always do, and we'll talk about some of these investments that we're planning for next year.

Ben Gerlinger
Ben Gerlinger
VP of Equity Research at Citi

Gotcha. Yeah, that's good, you probably want to save it for January, but worth a shot. Just wanted to clarify on the forward guide for, even though we only have one quarter remaining, there's no change across the board except for PPNR. It seems like it basically kind of implies lower end of revenue, higher end of expenses to get to that new range. Am I missing something beyond that?

Mike Achary
Mike Achary
CFO at Hancock Whitney

No, that's right. You get to the point where there's one quarter to go. When you're talking about annual guidance, it's not very difficult to kind of solve for that one quarter. I think if you look at our numbers for the third quarter, two of the areas that we really outperformed was the income growth, as John kind of mentioned in his prepared comments, and then also controlling expenses. I think as we think about the fourth quarter, what you can expect to see is in terms of fees, probably not the same level of growth in the fourth quarter that we had in the third quarter. For operating expenses, the same thing kind of applies, but in the other direction. I think the expense growth in the fourth quarter will be a little bit more than what we saw in the third quarter.

Mike Achary
Mike Achary
CFO at Hancock Whitney

If you put all that together, it does lead you to conclude that the PPNR growth will probably be in the 5%-6% range and probably a little bit of a bias toward the upper end of that 5%-6%.

Ben Gerlinger
Ben Gerlinger
VP of Equity Research at Citi

Gotcha. I appreciate the time. Thank you.

Mike Achary
Mike Achary
CFO at Hancock Whitney

You bet.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Yeah. Ben, this is John. Just a little bit more detail on that topic. In terms of next year, we'll wait till January, but since it was worth a shot, I'll give you this. I mentioned this in the prepared remarks. The paydown environment this year has been higher than we anticipated. Our production has been better than we anticipated. As we go into next year, any expense growth that you see will be heavily weighted towards the addition of more offensive players to ensure that we get to, I mean, I don't want to be at the end of every quarter, you know, sitting on pins and needles looking at that loan growth number. I'd like to kind of have it in the bag when we start the quarter. That's going to happen because we have more players out there, hustling business.

John Hairston
John Hairston
President and CEO at Hancock Whitney

I like the hustle of our current team. We just need more players. I think when we get to next year, we're going to talk about a more aggressive run rate of bankers than the, we're on an annualized 8.6% run rate now. It needs to be well north of 10% to have that surety and growth. Also, in terms of branch locations, a couple of quarters ago, this isn't new news, but a couple of quarters ago, Mike answered one of those questions around about the same plan for additional offices per year, until we need to let them catch up. That would imply that you may see some of the same general comments around new office locations for 2026 as we talked about in 2025. That's not new news. It's just been a while since we talked about it.

John Hairston
John Hairston
President and CEO at Hancock Whitney

In terms of that fee income category Mike mentioned, just as a pointer, we've got a really great book of fees. I love talking about it. I won't share any more in case somebody else wants to ask questions about fees other than this. The chunk of our fees that are more transaction-related, you know, around specialty fees and syndication fees, derivative fees, some of the SBA fees, as well as some of the fees we enjoy on the wealth management side, about the time we get to Thanksgiving, that environment pretty much pulls back for the holidays. We really only get about a half a quarter solid run rate for transactional fees versus the full quarter. The annuitized fees are going to come in for Q4 probably just like they did Q3. We may see a little lesser run rate on the transaction-related fees because of the holidays.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Does that make sense?

Ben Gerlinger
Ben Gerlinger
VP of Equity Research at Citi

Thank you so much, guys.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Okay, you bet. Thank you.

Operator

We'll move next to Casey Haire at Autonomous Research.

Casey Haire
Senior Analyst at Autonomous Research

Great, thanks. Good afternoon, everyone. I wanted to follow up on the previous question just about the guide. I know it's only one quarter, but if the NII guide, I mean, for all the line items, NII, fees, expenses imply some pretty sizable moves. I guess just starting with the NII, if I'm reading this right, you have it going from the low $280 million to almost $300 million or $297 million. I'm just wondering, like it doesn't sound like I know NIM is up, but what is the driver behind what's a pretty significant move quarter to quarter?

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah, I don't know that we're going to see an increase quite that high, Casey. We have something I think a little bit more modest. The guide year-over-year is to come in at 3%-4%. I think that the bias will be definitely toward the lower end of that range. We do expect to have a pretty good quarter in terms of, you know, potential NIM expansion. When I say a pretty good quarter, I'm talking about a handful of basis points expansion. Of course, the third quarter we were flat. I don't know that I see the kind of increase in NII that you're referring to.

Casey Haire
Senior Analyst at Autonomous Research

All right. The paydown pressure that you guys are seeing, where are you guys, I mean, I'm hearing private credit a lot. I know it's difficult to kind of quantify or size, but is it, you know, how much of private credit pressure is coming on the paydown side? Is it all of it? Is it some of it, or is it, you know, just trying to quantify that pressure?

John Hairston
John Hairston
President and CEO at Hancock Whitney

Yeah, Casey, this is John. I'll tackle that one. You know, in the list of contras I mentioned before, the private credit, private equity takedowns were about in line with what we've been experiencing. That really wasn't a real, it was higher, but it wasn't the lion's share of it. The primary drivers were the $50 million reduction in line utilization through the industrial contractor paydowns. Those are not lost clients. They're just projects completing a quarter earlier than anticipated. The number of organizations that we bank fully that sold to upstream organizations, not private credit, was the highest we've had in several quarters, maybe the last couple of years. There was a driver well in excess of $100 million in reductions from that alone that really made the difference between about a 5%, 5.5% end-of-period growth rate and the numbers that we actually announced. Does that answer your question?

Casey Haire
Senior Analyst at Autonomous Research

Yes, thank you.

John Hairston
John Hairston
President and CEO at Hancock Whitney

I would anticipate the private credit run rate to be about the same depending on the macro environment. I would certainly expect the amount of paydowns from industry consolidation to decline. In my comments earlier, I said I don't want to bank on that. I don't want to bet on that as we go into 2026. The adding of additional players to generate loans to offset that potential is part of the recipe as we move into next year. Hopefully, that makes sense.

Casey Haire
Senior Analyst at Autonomous Research

Yes, thank you.

Operator

We'll go next to Catherine Mealor at KBW.

Catherine Mealor
Catherine Mealor
Managing Director at KBW

Thanks. Good evening.

Casey Haire
Senior Analyst at Autonomous Research

Hey there.

Catherine Mealor
Catherine Mealor
Managing Director at KBW

I want to give another question on the margin. You've given us the cycle-to-date betas on deposits. Is there any reason to believe the next, let's just say, 100 basis points deposit, and maybe even we'll talk about loans too, but the betas will be very different than what we've seen in the past 100 basis points of declines?

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah. Hey, Catherine, this is Mike. Short answer is no. We expect to be pretty proactive, or at least as proactive as we've been in the past in reducing deposit costs. No big change, and you know, we'd fully expect to come in and hit the numbers that we've kind of talked about as far as what we expect to do on a cumulative basis.

Catherine Mealor
Catherine Mealor
Managing Director at KBW

I know we've only had a few weeks since the last cut, but can you give any kind of color around what you saw with that last 25 basis points cut?

Mike Achary
Mike Achary
CFO at Hancock Whitney

The most recent cut?

Catherine Mealor
Catherine Mealor
Managing Director at KBW

Yes.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah, I mean, it came in. We were able to reduce deposit costs accordingly, and that's what we'll continue to do going forward. If you look at our promotional rates, the most current ones right now, you know, our best rate is 3.85% for five months. We have 3.15% for eight and 11. We have reduced our money market proactive rate to 3.75%. All of those have been reduced accordingly. Assuming we get two additional rate cuts, which is built into our guidance, we expect to be able to continue to reduce rates. We have a bit more in terms of CD repricing in the fourth quarter of about $1.7 billion coming off at about 3.89%. That'll go back on at about 3.59%. We assume about an 86% renewal. Those are the dynamics that we're looking at.

Catherine Mealor
Catherine Mealor
Managing Director at KBW

Okay, great. Maybe just within the same question, if you look at your variable rates, loan yields, they've already started to come down a little bit, 3.58%-3.52% quarter-over-quarter. Was that just from an impact from the most recent cut and kind of just a few weeks of that, or was there any other mix change kind of already happening at play that we should just kind of be aware of and think about?

Mike Achary
Mike Achary
CFO at Hancock Whitney

When we look at our new loan rates on the variable side, we're actually up one basis point from 6.87%-6.88%. I think the dynamic that you're seeing, again, is mostly related to mix and just the pricing that we have to face like every other bank does out there in terms of customer impact and how competitive it is.

Catherine Mealor
Catherine Mealor
Managing Director at KBW

Great. All right. Thanks for the call. I appreciate it.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Okay, thank you.

Operator

We'll take our next question from Gary Tenner at D.A. Davidson.

Gary Tenner
Gary Tenner
Senior Research Analyst at D.A. Davidson

Thanks. Good afternoon. Mike, I appreciate the thoughts you just provided on the deposit beta side of things. Can you just maybe provide the spot rate as of September 30 on the deposit just to give us a jumping-off point going to the fourth quarter?

Mike Achary
Mike Achary
CFO at Hancock Whitney

In terms of our cost of deposits?

Gary Tenner
Gary Tenner
Senior Research Analyst at D.A. Davidson

Yes.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah, it's 1.63% at the end of September, and for the third quarter, we were at 1.64%. Our cost of funds in September is flat with the quarter at 1.59%.

Gary Tenner
Gary Tenner
Senior Research Analyst at D.A. Davidson

Okay. Appreciate that. Just as it relates to the increase in non-accruals quarter over quarter, anything in there just of note? You know, is that a single credit of size or a collection of multiple downgrades?

Chris Ziluca
Chris Ziluca
Chief Credit Officer at Hancock Whitney

Hey, Gary. It's Chris Ziluca. Thanks for the question. I was feeling a little lonely over here. Yeah, I mean, it was really a mix of transactions that were in there, all of them in the CNI space for the most part. If you look at our consumer loans, for instance, we've been holding pretty steady from a non-accrual standpoint, despite some of the challenges that households and individuals are experiencing as it relates to kind of higher costs for household costs. We feel pretty good about where we are on the consumer side. I think really on the CNI side, not really on CRI, you know, it's just really where we are in the cycle. There are higher operating costs for these companies. They are starting to kind of normalize in their performance, and some of them are having issues.

Chris Ziluca
Chris Ziluca
Chief Credit Officer at Hancock Whitney

You know, we take them through the accrual and non-accrual process and reserve accordingly. We feel pretty good about where we have them from that standpoint as well.

Casey Haire
Senior Analyst at Autonomous Research

Thank you.

Chris Ziluca
Chris Ziluca
Chief Credit Officer at Hancock Whitney

You're welcome.

Casey Haire
Senior Analyst at Autonomous Research

Thanks for the question.

Operator

We'll go next to Matt Olney at Stephens, Inc.

Matt Olney
Matt Olney
Equity Research Analyst at Stephens

Hey guys, good afternoon.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Hey Matt.

Chris Ziluca
Chris Ziluca
Chief Credit Officer at Hancock Whitney

Hey, just on that last question on the credit front, on the criticized commercial loans, I think we continue to move lower on that front. Just looking for some color going forward here. Just trying to appreciate if you're confident that we'll see criticized commercial loans continue to move lower, or set another way. What's the confidence level that we've seen the peak in criticized commercial loans a few quarters ago? Thanks.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah, thanks for the question. You know, I think a lot of what we saw in the way of a build-up in criticized loans earlier, in the last year, was really kind of a function of how low we had gotten from a criticized loan perspective.

Mike Achary
Mike Achary
CFO at Hancock Whitney

I mean, if you look at our historical performance criticized, off the back of the pandemic now five years ago, we were able to really kind of hold steady through the next couple of years before things started to kind of percolate from the standpoint of supply chain, higher operating costs, wage pressure, things like that, which started to kind of create a little bit of a migration just in general, but also then specifically in the criticized loan area. In earlier calls, I kind of indicated that it does take somewhere in the neighborhood of four to five quarters for companies to kind of perform in a way that they could justify rehabilitation back to a past rating or something better than where they are, or seek alternate financing, or position themselves in a way that they can seek alternate financing.

Mike Achary
Mike Achary
CFO at Hancock Whitney

I think we're seeing a little bit of that activity come to fruition. I think it's a mix of both. I think we're seeing companies able to refinance away, and then we're also in a position where some of our customers are performing a little bit better off of some of the challenges they may have had earlier. We're seeing that. No crystal ball in the future, but we feel pretty good about a nice return to moderation in criticized loans.

Matt Olney
Matt Olney
Equity Research Analyst at Stephens

Okay. Thanks for the color on that. I guess switching gears, John, you mentioned trying to outrun the heavier loan paydowns with hiring some new loan producers. Can you just talk more about the opportunities you're seeing for the new hires so far this year? I guess since we talked last time, we've seen a few more banks with pending sales in some of your growth markets. Just curious about the opportunities as you move into next year.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Sure. Thanks for the question. That's a fun topic. I mean, you know, everybody wants good bankers and everybody wants experienced bankers. The landscape is certainly competitive. We have a couple of benefits that are maybe a little unusual. One of those is the fact that being a pretty heavy C&D bank as part of SNCS and having managed that overall number pretty low throughout the pandemic, we're one of the lower SNCS concentration banks out there. For organizations that may find themselves a bit full, that may not be as aggressive at hiring out of disruption than we can be, we're actively looking for folks that meet our experience and credit risk acumen to join. All of that is really in emerging markets. Texas, Florida, Tennessee, maybe even Georgia and the Carolinas are all places that our client sponsors do projects that we have the capacity to grow in.

John Hairston
John Hairston
President and CEO at Hancock Whitney

I would expect to have a good story there as we move into next year. Production for SNCS is way up over last year. It takes a little while in construction to get to our borrowings from the buyers or the owners' equity, but we'll begin to see that as we get into next year. The other area is just conventional bankers that are business purpose from business banking all the way up to middle market, and that's primarily going to be where we already have branch coverage, but we don't have high market share. That pretty much means Central Florida and really all things Texas. I think the opportunities are certainly there. As we get toward the beginning of the year and sort of the restart of how people feel about how their year is going to look, those in disrupted organizations have their antenna up.

John Hairston
John Hairston
President and CEO at Hancock Whitney

You have to have the earnings firepower, which we have, to take people out of agreements that maybe they have to leave a little money on the table to jump ship earlier than when the final assimilation of the two organizations has occurred. That same thing would just apply to banks that maybe don't have disruption, but bankers may be looking for a place where certainty of deal closure may be a little bit better. We plan to be aggressive in terms of adding that firepower. Hopefully, hope is not a plan, but if I'm a little bit too cautious on the competitiveness and the paydown environment next year, then that would bode well for net growth maybe above what we're contemplating. I don't want to take that risk and not hire aggressively while the disruption is out there.

John Hairston
John Hairston
President and CEO at Hancock Whitney

I think I said earlier, we ran an 8.6% net banker growth number for the previous 12 months, and that's, you know, we wanted 10%. We didn't meet what our expectations were for the past 12 months, and that's going to have to get a good bit bigger between now and this time next year to have surety in that mid-singles growth, quarter over quarter over quarter throughout next year. We've got a little bit of hiring work to do there. I feel confident in it. We've learned an awful lot this year about who's easier to pick on and those that are harder to pick on, and we'll deploy that knowledge as we move into next year.

Matt Olney
Matt Olney
Equity Research Analyst at Stephens

Thank you.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Glad to answer another question about it if I didn't give you enough detail.

Matt Olney
Matt Olney
Equity Research Analyst at Stephens

No, that's perfect. Thank you.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Thank you. Thanks for the question.

Operator

We'll go next to Brett Rabatin at Hovde Group.

Brett Rabatin
Brett Rabatin
Head of Equity Research at Hovde Group

Hey, good afternoon, everyone. I wanted to go back to deposits for a second. If you look at the guidance, you know, the low single digit are up from end of year in 2024. That implies pretty strong growth in the fourth quarter. I know there was some seasonality in 3Q related to municipal deposits and other things, but any color on the growth in the fourth quarter expectations? John or Mike, I was just hoping to get, you've given a lot of color on deposit trends, but was just hoping to get maybe how you think about the competitive landscape and just if that's gotten tougher, easier, the same. I know deposit competition is always pretty robust.

Mike Achary
Mike Achary
CFO at Hancock Whitney

Yeah, Brett, I'll start with the deposit question. The fourth quarter seasonally is usually a pretty good quarter for us in terms of deposit growth.

Mike Achary
Mike Achary
CFO at Hancock Whitney

We're usually able to grow the public fund book somewhere between $200 million and $300 million. No reason to expect that that wouldn't be the case this year. That growth tends to be weighted a little bit more toward the end of the quarter. On DDAs, again, the fourth quarter seasonally is usually a pretty good quarter for DDA growth. We expect that to be probably in the $200 million range. If you put those two together, you're getting close to the $400 million-$500 million range in terms of deposit growth. That should put us around somewhere between 3% and 3.5% year-over-year. Again, probably low single digits. Related to the question about competitive pressures on deposits and deposit pricing, honestly, no real change from our perspective in the last quarter.

Mike Achary
Mike Achary
CFO at Hancock Whitney

This cycle, for whatever reason, seems to be a little bit better behaved compared to prior cycles. I think some of that has to do with, in our markets, maybe the absence of some irrational players that are no longer with us. For whatever reason, the credit unions seem to be behaving a little bit less irrational. I think that's contributed to the overall basically non-big issue deposit pricing quarter. No reason from right now we expect that to change with two rate cuts on the horizon and maybe another two in the first half of next year.

Brett Rabatin
Brett Rabatin
Head of Equity Research at Hovde Group

Okay, that's helpful. The other question was just around the organic growth plan, particularly the Dallas operation. You're obviously pushing pretty hard with some new openings of facilities, etc. Can you give us any idea of the goals you might have for that market over the next few years? It sounds like you might also be thinking about doing a similar approach in some other MSAs. Any color on that would be helpful.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Sure. I'll take that. If Mike wants to add some color, he certainly can jump in. The number of offices that we have in the Dallas MSA today is about the same. Today, it'll more than double over the next several months. That number of offices is about the same number as we got from the old Mid-South transaction back, right before the pandemic. However, the book has completely turned over and is today very much driven toward business purpose clients, on both sides of the balance sheet, and has been growing at north of a 40% CAGR throughout the pandemic.

John Hairston
John Hairston
President and CEO at Hancock Whitney

I would anticipate that growth percentage to go up, even though the denominator is larger, by virtue of not as much just the branches, but also the staffing complement in those locations, which is slated to be a combination of both financial advisors out of wealth, where we have a terrific track record in penetration of fee income into customer relationships, and also adding business and commercial bankers in and around those locations. Where those locations are provides a little bit more access to clients feeling more local. There's a lot of disruption going on in Dallas today, and it'll be better next year for us in terms of that disruption manifesting into opportunities.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Not quite ready to talk about additional locations and where they would be, but we have four different MSAs right now that we are debating in terms of mid to late next year, laying down a number of additional locations, additional financial services operations. We really want to see what disruption may get announced here in the next couple of months before finalizing that plan. I'm sure by January, we'll be able to talk about that with a little bit more definition. I think you read the tea leaves correctly, Brett. Dallas, and particularly North Dallas, is a very important market to us, not just because of the growth rate, but the quality of the business. One of our aspirational goals that is becoming more in focus as the quarters go by is becoming the best bank in the Southeast for privately owned business. That's a big goal to have.

John Hairston
John Hairston
President and CEO at Hancock Whitney

It's quite aspirational. I think we're one of the best banks today, but not the best, and we aspire to get there. In markets like that, where you have a lot, a lot of middle-sized to smaller business, being able to be really good and fast, have low amounts of error and not waste people's time is really a big sales point for moving relationships and talent. I think that'll be a good play. You didn't specifically mention the fee income piece, but since you brought up the competitive issues before, I'll mention it in that, you know, we set out a number of years ago, and we talked about investing in fee-generating business on just about every call, it seems like, for about a year and a half. We see all that benefit this year.

John Hairston
John Hairston
President and CEO at Hancock Whitney

In fact, just in the area of investments, annuities, and insurance, which was a pretty meager producer back four or five years ago, seven of the last eight quarters, that's thrown off $10 million in top-line revenue. In the one quarter we missed it, we only missed it by $200,000. I think that's been established as a core competency. We have just begun to tap those types of categories in the Texas area through adding FAs this year, and we'll add more next year. Between that and the treasury advisors, that will be the secret sauce to growing deposits and fee income as we move into 2026. Did I give you what you needed there, or did I miss anything?

Brett Rabatin
Brett Rabatin
Head of Equity Research at Hovde Group

Yeah, no, that's very helpful, John. The annuity fees have certainly been a star for the fee income bucket. Appreciate all the color, guys. Thanks.

Mike Achary
Mike Achary
CFO at Hancock Whitney

You bet. Thank you.

Operator

That concludes our Q&A session. I will now turn the conference back over to John Hairston for closing remarks.

John Hairston
John Hairston
President and CEO at Hancock Whitney

Thanks, everyone, for your attention. Thanks, Audra, for moderating the call. We look forward to seeing you on the road very soon.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Executives
    • Kathryn Mistich
      Kathryn Mistich
      Investor Relations Manager
    • Chris Ziluca
      Chris Ziluca
      Chief Credit Officer
    • Mike Achary
      Mike Achary
      CFO
    • John Hairston
      John Hairston
      President and CEO
Analysts
    • Matt Olney
      Equity Research Analyst at Stephens
    • Catherine Mealor
      Managing Director at KBW
    • Gary Tenner
      Senior Research Analyst at D.A. Davidson
    • Casey Haire
      Senior Analyst at Autonomous Research
    • Brett Rabatin
      Head of Equity Research at Hovde Group
    • Michael Rose
      Managing Director of Equity Research at Raymond James
    • Ben Gerlinger
      VP of Equity Research at Citi
Powered by Quartr