Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's Third Quarter 2025 Earnings Conference Call. At this time, 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.

Thank you. 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-Ks and 10-Qs, 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. 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-Ks 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.

Good afternoon, and thank you all for joining us today. The third quarter of 2025 was remarkably strong. With an ROA of 1.46% versus 1.32% a year ago, our results reflect continued profitability improvement, a 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 continue 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 the prior quarter. Investment in insurance and annuity fees led this increase, hitting a record high for the organization. Expenses remain well controlled. Compared to prior quarters, adjusted net interest expense was up less than $3 million or 1% from the prior quarter. Much of this increase was in personnel expenses due to our investment in revenue producers along with higher incentive income from a strong quarter of loan production and really terrific fee income. Loans grew $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. Likewise, we 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. 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 decreased by $269 million. Our interest-bearing transaction balances were up, while retail time deposits and DDA balances were down, reflecting promotional pricing changes during the quarter. DDA mix ended the quarter at a strong 36%. Earnings contributed to growth in all of our capital while we continue to return capital to investors by repurchasing 662,000 shares of common stock. We ended the quarter with TCE of 10.01% and a 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. 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.

Thanks, John, and good afternoon. As John mentioned, we're very pleased with the company's strong performance this quarter. Our adjusted net income for the quarter was nearly $128 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. 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 six 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 a higher yield. 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 one basis point to 5.87%. Yields on fixed-rate loans were up seven basis points to 5.24%, while the yield on variable-rate loans was down six basis points. The yield on new loans was flat at 6.78%. With two rate cuts expected in 2025, we expect the overall loan yield will be down accordingly. Our overall cost of funds was up two 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 one basis point to 1.64% in the third quarter. The drivers were CD maturities and renewals at lower rates and lower rates on public bond deposits. We expect deposit costs will be down in the fourth quarter following expected rate cuts in October and December. For the quarter, we had $2.4 billion of CD maturities at 3.69% that 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 mentions 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. 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 fifteen and twenty-five 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 the prior quarter. We expect share repurchases will continue at this quarter's level in 2025. Changes in the growth dynamics of our balance sheet, economic conditions, and share valuation could impact that view. I will now turn the call back to John.

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

Thank you. We will now begin the question and answer session. We'll take our first question from Michael Rose 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%-ish growth in the back half of the year. Certainly understand there's been some ongoing paydowns. I just wanted to get a better sense of I know SNCs are at 8.9%. You've talked about 9% to 10% on a go-forward basis. So 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? And then how should we think in light of relatively solid production, assuming those paydowns would slow? What initial 2026 growth could look like because the underlying production has been pretty solid. Thanks.

Sure, Michael. Thanks for the question. This is John. I'll try to put all that together, and certainly, you have a chance to redirect if I'm missing the points. But first, just talking about loan production. I think I mentioned in the prepared comments that loan production was up 6% over the prior quarter and a healthy 46% over the same quarter a year ago. So really, all of the production level that we're getting is in line with our expectations, and in fact, it was stronger than last quarter when we had a little bit higher end of period growth. So when you look a little under the covers, the average loan growth numbers are quite consistent from Q3 to Q2. It was about $180 million for each of those two quarters, just had different end of period numbers. 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 on 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 may be back with rate decreasing. So first, owner-occupied real estate was an area of interest that grew about $144 million. Investors CRE also grew about $135 million. That enabled equipment finance to come in a bit lighter at $50 million. And as you remember, we get a better yield on the first two categories than the third. So really good production, very solid production in the areas that we wanted to see. With good deal flow and it made its difference in the yield of all the new business. So the contrast I'll kind of run through them to give you a better flavor. First line utilization was down about 90 bps. It 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, and a combination of really good weather throughout the last several months and good engineering led those projects to finish a little faster. So those paydowns came a little bit quicker than expected. But then the bigger component was we had a number of large client sales to larger organizations upstream. That occurred during the quarter. Those happened every quarter, but it was a little bit higher than normal. And then our old friend, private credit and private equity did take down a few of the healthcare deals that I would have expected to be closer to flat this quarter. So 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 pay downs were likewise heavier. So that brings us to what to expect. I mean, 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. And I don't I want to be really realistic about the pay down environment. You know, in your question, you said when do we think that's over. I don't think pay downs are ever gonna diminish when we have this good of an environment and this many players interested in the Southeastern part of the country. So what that means is we'll have to continue running a playbook, which is a lot of hustle but also additional offensive players deployed to take that production level up another couple of hundred million dollars a quarter. Right now, we're running about 1 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. So certainly pay downs 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 gonna just go away. They may temper a little bit, but we're gonna assume as we go into 2026 that pay downs remain high. And we'll boost production to cover it, running the same disciplined playbook. And when I discipline I refer to that is I mean pricing discipline, credit discipline, concentration discipline, continue running a playbook that's led us to have superior profitability. If I missed any of your points, please redirect me.

No, John. That was a lot of color. I 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% to 11.5%. You talked about the buybacks this quarter about $40 million continuing at this pace at least for the next quarter. The CET1 was still up a tick. I know there's some AOCI recovery in there too, but 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 that you guys are looking at a deal, potentially a larger one. Can you just address your thoughts around M&A and now given the environment that we're in? Thanks.

Yeah. Hey, Michael, this is Mike. I'll address that question, and the last part first around M&A. So our stance on M&A hasn't changed. 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 as time goes by. Opportunities present themselves. But aside from that, nothing's changed. So that's first and foremost. As far as continuing to look at capital priorities in a way we think about being proactive in terms of deploying capital. Again, a lot has not changed really in the last quarter or so. I know this notion maybe exists that we've asked the question around where we feel comfortable operating the company. The answer is for common Tier one to be in the range of 11% to 11.5%. But that does not mean there's an active program to reduce our capital to those levels. Instead, we would like to deploy it in what we would describe as meaningful ways. The first priority, 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 this year, as much as we would have liked to. And 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. As far as returning capital to shareholders, I mean that's a great point that you make around the buybacks and certainly something we could look at in coming quarters is to incrementally increase the level of buybacks. But 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. And then 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. So all of those means of deploying capital and being proactive in how we manage it are still top of mind and things that we'll continue to do going forward. So hopefully that made sense.

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

You bet, man. Thanks a lot.

We'll move next to Ben Gerlinger at Citi.

Hi, good afternoon, guys.

Hey, man.

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 of branches and just the future for Hancock down the road. So when you think about the numbers that you put on those bullet points of eight and a half for revenue and then 6.2 for facility expansion, is that kind of implying that, roughly $15 million or so spot to spot expense growth of 25 or 4Q 2025 into '26? Or how should we layer in expansion and investment down the road? 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?

Yes. 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. So again, are kind of the annual run rate numbers. But the point is well as I mentioned, I think on the question the previous question is when we look at 2026 and beyond, we fully intend to continue to make these kinds of investments in other markets. So again, when we talk again in January, after fourth quarter earnings, we'll talk about our guidance for 2026 and 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.

Got you. Yes. That's good. You probably want to save it for January, but worth a shot. Just wanted to clarify on the forward guide. For, you can 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. Did I miss something beyond that?

No. That's right. And, you get to the point where there's one more to go. And when you're talking about annual guidance, it's not very difficult to kind of solve for that one quarter. But I think if you look at our numbers for the third quarter, 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. So 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. And then for operating expenses, the same thing kind of applies but in the other direction. So I think the expense growth in the fourth quarter will be a little bit more than what we saw in the third quarter. So if you put all that together, it does lead you to conclude that the PPNR growth will probably be in the 5% to 6% range, and probably a little bit of a bias toward the upper end of that 5% to 6%.

Got you. Appreciate the time. Thank you.

You bet. Yeah. Ben, this is John. Just a little bit more detail on it. In terms of next year, we will wait till January. But since it was worth a shot, I'll give you this. The pay down environment this year has been higher than we anticipated. Our production has been better than we anticipated. So 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 want to be at the end of every quarter, 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. I like the hustle of our current team. We just need more players. And so I think when we get to next year, we're gonna talk about a more aggressive run rate of bankers than we're on a lot of annualized 8.6% run rate now. It needs to be well north of ten. To have that surety and growth. And, and then also in terms of branch locations, know, a couple of quarters ago, this isn't new news, but a couple of quarters ago Mike answered one of those questions around about the same plan for additional offices per year until, you know, we need to let them catch up. And so that would imply that you may see some of the same general comments around new office locations for '26 as we talked about in '25. Now that's not new news. It's just been a while since we talked about it. 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 anymore in case somebody else wants to ask questions about fees other than this. But the chunk of our fees that are more transaction related, you know, around specialty fees 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. So we really only get about a half a quarter solid run rate for transactional fees versus the full quarter. And so that's the so the annuitized fees are going to come in for Q4 probably just like they did in Q3, we may see a little lesser run rate on the transaction-related fees because of the holidays. Does that make sense?

Yep. Thank you so much, guys.

Okay. You bet. Thank you.

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

Great. Thanks. Good afternoon, everyone. Just wanted to follow up on the previous about the guide. I know it's only one quarter, but if the NII guide, I mean, 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 280s to almost $300 million or $297 million, just wondering, like, it doesn't sound like I know NIM is up, but like, what is the driver behind what's the significant move quarter to quarter?

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. So again, the guide year-over-year is to come in at 3% to 4%. And 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 potential NIM expansion. When I say a pretty good quarter, I'm talking about a handful of basis points expansion. And of course, the third quarter we were flat. But I don't know that I see the kind of increase in NII that you're referring to.

Okay. Alright. And then just the pay down pressure that you guys are seeing, where are you guys? I mean, like, I'm hearing private credit a lot. I know it's difficult to quantify our size, but, like, is it you know, how much of private credit pressure is coming on the pay down side? Is it all of it? Is some of it? Or is it you know, I'm just trying to quantify that pressure.

Yeah. Casey, this is John. I'll tackle that one. In the list of contra's I mentioned before, the private credit, you know, slash 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 pay downs. Not lost clients are just projects completing a quarter earlier than anticipated. And then the number of organizations that we bank fully that's sold to upstream organizations, not private credit, was the highest we've had, you know, really in several quarters, maybe last couple of years. So 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?

Yes. Thank you. So 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 pay downs from industry consolidation to decline. But in my comments earlier, I said I don't wanna bank on that. I don't wanna bet on that. As we go into '26. So the adding of additional players to generate loans to offset that potential is part of the recipe as we move into next year. Hopefully, that makes sense.

We'll go next to Catherine Mealor at KBW.

Thanks. Good evening.

Hey, Drew.

Was gonna get just another question on the margin. And 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 deposits and maybe even with term loans too, but the betas will be very different than what we've seen in the past 100 basis points of declines?

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. So no big change, and we fully expect to come in and hit the numbers that we've talked about as far as what we expect to do on a cumulative basis.

I know I've only had a few weeks since the last cut, but you give any kind of color around what you saw with that last 25 bps cut? The most recent cut? Yes.

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, our best rate is 3.85% for five months. Then we have three fifteen for eight and eleven. And then we reduced our money market proactive rate to 3.75%. So all of those have been reduced accordingly. And 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 will go back on at about 3.59%. We assume about 86% renewal. So those are the dynamics that we're looking at.

Okay. Great. Maybe just within the same question, if you look at your variable rate loan yields, Dave, it's already started to come down a little bit. $3.58 to three fifty two quarter-over-quarter. Was that just from an impact from the most recent cut and 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?

Well, when we look at our new loan rates on the variable side, we're actually up one basis point from six eighty seven to six eighty eight. So 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.

Great. Alright. Thanks for the color. Appreciate it.

Okay. Thank you.

We'll take our next question from Gary Tenner 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? In terms of our cost of deposits. Yes.

Yes. It's $163 million in September, and the third quarter we were up 164. And our cost of funds in September is flat with the quarter at 159.

Okay. Appreciate that. And then just as it relates to the increase in non-accruals quarter-over-quarter, anything in there just of note? Is that single credit of size? Or a collection of multiple, direct?

Hey, Gary, it's Chris Ziluca. Thanks for the question. I was feeling a little lonely over here. Yes. I mean, it was really a mix of transactions that were in there. Well, all of them in the C&I 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 operating costs for households. We feel pretty good about where we are on the consumer side. And I think really on the C&I side, not really on CRE. You know, it's just really where we are in the cycle. I mean, there are higher operating costs for these companies. They are starting to normalize in their performance, and some of them are having issues. We take them through the accrual non-accrual process and reserve accordingly, and we feel pretty good about where we have them from that standpoint as well.

Thank you.

You're welcome. Thanks for the question.

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

Hey, guys. Good afternoon. 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 said in other words, what's the confidence level that we've seen the peak in criticized commercial loans a few quarters ago? Thanks.

Yes. Thanks for the question. I think a lot of what we saw in the way of a buildup 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. I mean, if you look at our historical performance, criticized off the back of the pandemic now five years ago, you know, 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. And in earlier calls, you know, 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 you know, they could justify rehabilitation back to, you know, a past rating or something better than they are or seek alternate financing or position themselves in a way that they can seek alternate financing. So I think we're seeing a little bit of that activity come to fruition. And I think it's a mix of both. I think we're seeing companies able to refinance away. And then we're also in a position where some of our customers are performing a little bit better off of some of the challenges they may have had earlier, so we're seeing that, you know, no crystal ball in the future, but we feel pretty good about a nice return to moderation in criticized loans.

Okay. Thanks for the color on that. And then I guess switching gears, John, you mentioned trying to outrun the heavier loan pay downs 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? And 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.

Sure. Thanks for the question. That's a fun topic. I mean, that everybody wants good bankers and experienced bankers. And so, you know, the landscape is certainly competitive. And, you know, 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 ICREE and having managed that overall number pretty low throughout the pandemic, we're one of the lower CRE concentration banks out there. So for organizations that may find themselves a bit full and 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, and all of that is really an emerging market. And so Texas, Florida, Tennessee, maybe even Georgia and the Carolinas are all places that our client sponsors do projects in. We have the capacity to grow in. And so I would expect to have a good story there as we move into next year. And production for ICREE is way up over last year. But, you know, 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 gonna be where we already have branch coverage. But we don't have high market share, and that pretty much means Central Florida and really all things Texas. I think the opportunities are certainly there. And as we get toward the beginning of the year and sort of the restart of how people feel about how their year is gonna look, those in disrupted organizations have their antenna up and 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. And that same thing would just apply to banks that maybe don't have disruption, but bankers may be looking for a place to where certainty of deal closure may be a little bit better. So we plan to be aggressive. And in terms of adding that firepower. And, you know, hopefully, you know, hope there's not a plan, but if I'm a little bit too cautious on the competitiveness and the pay down environment next year, then that would bode well for net growth may be above what we're contemplating. But I don't wanna take that risk and not hire aggressively while the disruption's out there. So I think I said earlier, we ran at an 8.6% net banker growth number for the previous twelve months. And that's, you know, we wanted 10%, so we didn't meet what our expectations were for the past twelve months, and that's gonna have to get a good bit bigger between now and this time next year to have surety in that mid-singles growth, you know, quarter-over-quarter throughout next year. So, so we 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 so we'll deploy that knowledge as we move into next year.

Thank you. Last answer on the question about it if I didn't give enough detail.

No. That's perfect. Thank you. Thank you. Thanks for the question.

And we'll go next to Brett Rabatin at Hovde Group.

Hey, good afternoon, everyone. Wanted to go back to deposits for a second. And just if you look at the guidance, you know, the low single-digit are up from end of year in '24. 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? And then John or Mike, I was just hoping to get you've given a lot of color on deposit trends, I 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.

Yes, Brett. I'll start with the deposit question. So yes, the fourth quarter seasonally is usually a pretty good quarter for us in terms of deposit growth. We're usually able to grow the public fund book somewhere between $203 million and $100 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. And then 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. So if you put those two together, you're getting close to the $400 to $500 million range in terms of deposit growth. And that should put us around somewhere between 3% and 5% year-over-year. So again, low single digits. And related to the question about competitive pressures on deposits and deposit pricing, honestly, no real change from our perspective in the last quarter or so. 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. And 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.

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

Sure. I'll take that, and then if Mike wants to add some color, he certainly can jump in. You know, the number of offices that we have in the Dallas MSA today is about the same. I mean, today. It'll more than double over the next several months. But that number of offices is about the same number as we got from the old 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. I would anticipate that growth percentage to go up even though the denominator is larger by virtue of not as much as 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 then also adding business and commercial bankers in and around those locations. So the where those locations are provides a little bit more of access to client feeling more local. There's a lot of disruption going on in Dallas today, and it will be worse in terms of better next year for us in terms of that disruption manifesting in the opportunities. So 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 location, additional financial services operations. But we really want to see kind of what disruption may get announced here in the next couple of months before finalizing that plan. But I'm sure by January, we'll be able to talk about that with a little bit more definition. So, you know? But 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. And, you know, 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 businesses. And that's a big goal to have. It's quite aspirational. I think we're one of the best banks today, but not the best, and we aspire to get there. And in markets like that where you have a lot of middle-sized to smaller businesses, being able to be really good and fast have low amounts of air and not waste people's time is really a big sales point for moving relationships and talent. And so 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. We set out a number of years ago and we talked about investing in fee-generating business on just about every call, seems like, for about a year and a half. And, you know, we see all that benefit this year. And 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. The one quarter we missed it, we only missed it about $200,000. So I think that's been established as a core competency, and we have just begun to tap those types of categories in the Texas area through adding FAs this year; we'll add more next year. So 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?

Yeah. No. That's very helpful, John. And, yeah, for sure, the annuity fees have certainly been a star for the fee income bucket. Appreciate all the color, guys. Thanks.

You bet. Thank you.

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

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

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