Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's First Quarter 2019 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, Tricia Carlson, Investor Relations Manager. You may begin.
Thank you and good morning. During today's call, we may make forward looking statements. We would like to remind everyone to review the Safe Harbor language that was published with yesterday's release and presentation and in the company's most recent 10 ks, including the risks and uncertainties identified therein. 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 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. In addition, some of the remarks this morning 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 Acree, CFO and Chris DeLuca, Chief Credit Officer. I will now turn the call over to John Hairston.
Thanks, Tricia, and thanks everyone for joining us today. As noted in yesterday's press release, we are pleased with results for the Q1. And what can typically be a seasonally low quarter, our bottom line was only slightly down from the 4th quarter after taking into consideration unusual items in both periods. On a reported basis, EPS for Q1 was $0.91 down $0.19 compared to $1.10 in Q4. The majority of that $0.19 difference was due to the $0.11 favorable impact of certain tax reform strategies we executed last quarter.
Then in the next quarter, we added $10,000,000 or $0.09 per share to the provision for loan losses for the alleged fraud associated with the DC Solar Lease. January, we communicated our updated corporate strategic objectives or CSOs and have been discussing how we plan to achieve those goals. We've noted 2 key areas of focus for 2019, narrowing the gap to peers on net interest margin and improving asset quality metrics specifically criticized loan and NPL ratios at least to peer levels. During Q1, we made progress on both fronts. Criticized commercial loans declined $41,000,000 or 7% linked quarter with a $15,000,000 reduction in energy criticized and a $26,000,000 reduction in non energy criticized credits.
While we won't have 1Q 'nineteen peer results for a few weeks, the gap has narrowed significantly as shown on Slide 9. We are nearing the Q4 peer average for commercial criticized as a percent of commercial loans and remain focused on narrowing the gap further. Non performing loans were also down in
the quarter
about 4,000,000 dollars Productions of $15,000,000 in energy NPLs was partially offset by an $11,000,000 increase in non energy NPLs comprised of 1 credit downgraded as part of a recent SNC exam. On Slide 11, you can see that approximately 1 third of our NPLs are accruing TDRs with most of them energy credits that endured challenges during the energy cycle. Today we are working hard to reduce this level of performing non performers. The balance sheet was relatively stable in Q1 with a small shift in the mix of earning assets out of securities and into loans. Net loans grew $86,000,000 in the 1st quarter lower than our initial guidance of between $200,000,000 $250,000,000 Higher than anticipated payoffs and paydowns, loan charge offs and a sale of mortgage loans were primary drivers of the shortfall.
On a year over year basis, however, it may be important to note that total loan production for the Q1 was up 7% compared to the same quarter a year ago with an improved pipeline up 19% for the same periods. We are guiding for net growth of between $75,000,000 $125,000,000 for Q2 as we remain diligently focused in the near term on peer relative NIM improvement at a slightly higher priority than net growth. Our guidance for the year on average remains at mid single digit improvement. Last quarter we indicated the energy cycle was for the most part behind us. We did continue efforts to change the mix within the portfolio while keeping the concentration level at around 5% of total loans.
If you note Slide 7, you will see today a different mix of credits compared to the end of 2014 when the cycle began. We were then at 44% RBL and midstream compared to 56% energy services. Today we are just the opposite, 54% RBL in midstream and 46% services with an ultimate goal of attaining and remaining at about sixty-forty. The second focus point for 2019 is NIM. For Q1 NIM is up 7 basis points to 3.46 percent.
While a portion of the increase was related to the restructuring last quarter, we also saw core improvement in yields and remain focused on adding more granular credits at a higher yield to continue narrowing the NIM gap to peers. Today, new loans are being booked approximately 100 basis points higher than 1 year ago with loans renewing approximately 70 basis points higher. We are relentlessly focused on returning NIM and asset quality metrics to at least peer averages and we'll work vigorously to continue progress towards achieving these goals and our CSOs despite recent headwinds such as the aforementioned payoffs and an inverted yield curve. I'll now turn the call over to Mike for a few additional comments and details.
Thanks, Sean, and good morning, everyone. Operating income totaled $87,000,000 for the quarter, down $10,600,000 from last quarter. Operating EPS was $1 compared to $1.12 in the 4th quarter. As we noted in the release, we took a $10,100,000 charge through the provision for the previously disclosed alleged fraud on the DC Solar equipment lease. We have that noted in our tables as a non operating item for the quarter.
The quarter over quarter reduction in operating results was related to the $10,000,000 or $0.11 per share benefit of certain tax reform strategies implemented in the 4th quarter. PPNR of $118,000,000 was down just $600,000 on a linked quarter basis. John concluded his comments on NIM, so let me start there. The chart on the bottom right of slide 13 details the drivers of our 7 basis point increase from last quarter in our NIM. The margin expansion was mostly related to the full quarter impact of the portfolio restructuring we executed late in Q4.
We have said the restructuring would add 7 basis points to our NIM spread over 2 quarters, so 2 basis points last quarter and 5 basis points this quarter. In addition to the restructuring, the December rate hike helped increase the overall NIM by approximately 3 basis points with 9 basis points of loan yield improvement offset by about 6 basis points of higher funding costs. A change in the funding mix compressed the NIM 2 basis points, while the change in the mix of earning assets, John noted earlier, helped improve the NIM by 1 basis point. We expect our NIM to be flat to slightly down in the Q2 as headwinds from the recent yield curve shift and the potential seasonal change in our deposit mix offset the positives related to our ongoing efforts to improve our loan yield through focus and pricing discipline. Deposits were up $230,000,000 in the quarter with increases in interest bearing transaction, time deposits and public funds.
These increases were related to new and enhanced business relationships with some normal movement out of DDA to interest bearing deposits. These changes along with last quarter's rate hike drove most of the increase of 11 basis points in our cost of deposits. We've already talked about the non operating item in the provision this quarter and as we noted in the slide deck, there is a potential for some amount of recovery on that credit. Outside of that noise, the provision and allowance were stable quarter to quarter with the reduction in the overall energy allowance funding an increase in the non energy component of the reserve. Our expectation for 2nd quarter provision is unchanged at $8,000,000 to $9,000,000 First quarter seasonality and market conditions are the primary drivers of a lower level of fee income this quarter.
Seasonality and fewer days impacted service charges and bank card ATM fees, while trust fees are still being impacted by overall market volatility. The decline in other is related to a variety of items with the largest linked quarter change at $400,000 Our guidance for the year remains unchanged and we expect fees in the second quarter to remain flat with growth in the back half of twenty nineteen. We were very happy to report a decline in operating expense in the Q1. The typical Q1 seasonality impacts from personnel resets were offset by a shorter quarter. The move of our regional headquarters in New Orleans impacted occupancy expense.
Regulatory fees, professional services, advertising and other miscellaneous items positively impacted total expense for the Q1. Our guidance for 2019 expense levels remains unchanged and we expect to see a higher level of expense in the Q2 due to annual merit increases. The second half of twenty nineteen will see some increased expense levels related to new technology projects currently underway. Last quarter, we crossed the 8% mark on TCE. Internal capital generation and a change in OCI helped drive a 34 basis point increase in TCE from $802,000,000 at year end to $836,000,000 at March 31.
Our priorities for deploying any excess capital remain unchanged and we'll be opportunistic on buybacks and M and A. Overall, it was a stable quarter without a lot of noise. We do have some challenges facing us today, but we remain focused on opportunities to improve upon these results with the ultimate goal of meeting our CSOs. I'll now turn the call back to John for Q and A. Thanks Mike.
And with those comments, let's open the call for questions.
Thank you. You. Our first question comes from Michael Rose with Raymond James. Your line is open.
Hey, guys. Good morning. How are you? Hi. Good morning, Michael.
Hey, just wanted to dig into the fees
a little bit. I understand that you're going to be expecting a big pickup in the back half of the year. I assume a lot of that's going to come in the trust business given the acquisition. But if you could just give us some color on where you expect to really see the ramp? I mean, is it kind of across the board?
Just want to get comfort with the guidance that you guys reiterated? Thanks.
Yes, Michael, I'll go ahead and get started. So as you know, we're expecting for the full year 5% to 7% growth year over year and that year over year guidance hasn't changed. For the Q2, we think it will be flattish. So, certainly a ramp for the second half of the year. And you're right, we will be converting the Capital One trust and asset management acquisition at the end of May.
So that will certainly be helpful in the back half. But really when we look at the areas that we're counting on, certainly wealth management, I think, hard fees are the areas that we're looking to kind of help carry that load in the second half of the year.
Okay. That's helpful. And then I'll let somebody ask the loan growth question. Maybe if we just switch to capital. So you guys have talked about potentially getting back into buybacks in the back half of the year once capital rebuild, obviously a nice build this quarter.
It looks like it should continue to build from here. Can you just remind us again of your capital priorities and if they've changed in light of the BB and T SunTrust deal in terms of potentially looking at deals or new organic growth opportunities? Thanks.
No change at all in the way we think about deploying capital. And at the end of the quarter TCE did get up to 8.36. So that was up 34 basis points. Obviously, we're very pleased with that level of capital build. But in terms of our priorities, having capital ready to deploy to help us with organic growth is number 1 really by far.
And then looking at potentially to continue to be opportunistic with buybacks, strategic focus around buybacks maybe in the second half of this year and then also potentially looking at the dividend. So really no change in how we think about deploying capital or those priorities.
Okay.
And then I guess as a follow-up to that, I think your share buyback expires at the end of the year. I think it equates to somewhere around 4,000,000 shares, if I remember correctly. Any thoughts on I know it's hard to predict out, but would you expect given where your stock is, would you expect to use just about all that before it expires? Thanks.
Again, that's something we'll consider in the back half. And when we talk about strategic buybacks, it would be in the realm of potentially using up that authority. But again, we're not here to signal that that's something that's in the cards for the second half of the year. The buyback does expire at the end of the year. And all things equal, I would expect us to renew it and always have a buyback of some sort in place.
Our next question comes from Catherine Mealor with KBW.
I want to
I want to talk a little bit about the
margin and really as we think about that in your path to the CSO goals. So can you help us kind of walk through what other levers you may have within your profitability outlook where you could still reach that one 4% CACCO by the end of next year even if the margin remains kind of flat? Or do you feel like you have to have margin expansion really to be able to achieve that goal?
Thanks. Kevin, this is John. To hit that ROA target, margin expansion is a big part of that goal. The yield curve shape that it's in right now and the amount of pressure that puts on us from a LIBOR perspective is not something we anticipate hanging around in that shape for another 6 or 7 quarters. We don't have any better of a crystal ball than anyone else does.
So it's hard to predict. But the all of the pressure or a substantive portion of the pressure on our NIM guidance for Q2 is really coming from that LIBOR pressure and its impact on our variable book. We don't think that's going to stay that way, at least we hope it doesn't. And as that repairs itself, the ability to take the granular improvements in the loan portfolio with dampening some of the more skinnier portions of loan portfolio simultaneously should lead to some healthy expansion. Obviously, the 2nd quarter guidance is not something we're excited about, but that's just simply the shape of the curve's impact on the LIBOR book.
Just in terms of that granular production, without getting too far into the weeds and just some portions that may be encouraging. If we just look at the same quarter of the previous year, 1Q 2018 to 2019, the granular loan production improvement is real and is tangible. Our micro business banking group production is up 22% over the same period, small business banking up 8%, commercial banking up 13%. And while those numbers can be overwhelmed by the exits of very large paydowns, particularly in energy, they add up over the time as you go hopefully would lead to that expansion.
Mike, do you have anything
else you want to add to that?
Yes. Just to kind of reiterate and when we think about the CSOs going forward and kind of our plan or the pathway to hit those targets, certainly, as John indicated, NIM is a big part of that. And we achieve that through the NIM by growing loans in the segments that offer us the biggest yield pickup or potential. We also will control our deposit costs going forward. So those two parts of our plan or pathway really do focus kind of on the NIM.
But it's just not completely about NIM. We also are counting on kind of outsized fee income growth, again in areas like wealth management and cards. And as always, we'll do our diligent best to control expenses. And I think you saw a little bit of that in what we were able to do in the Q1. So, we'll continue to control expenses, but at the same time, invest in additional digital capabilities.
So, those are really kind of the things that constitute our plan or pathway to hit those CSOs.
That's really helpful. And one follow-up on the deposit side. How much of the DDA outflows this quarter were just seasonal versus kind of a change in customer behavior? And how should we can you remind us kind of the seasonality of that and what we should expect in terms of DDA balances for the rest of the year? Sure.
I'd be glad to ask you, Catherine. So again, typically when we think about deposits, Q4 of each calendar year is usually the quarter where we see kind of seasonal inflows of DDA deposits and then also the seasonal inflows of public fund deposits as well. And when we get to the Q1, you begin to see the DDA deposits really kind of move out a little bit. There's usually another outflow in the Q2 primarily related to tax payments that occurs. So, we do expect to see some additional outflow of DDAs in the 2nd quarter for that reason.
I don't know that a lot of it was really related to folks moving money out of non interest bearing and into interest bearing certainly that there was probably some of that occurring, but I would not consider that to be a big factor. The other thing that was, I think, a little bit unique and different about the Q1 is that on the public fund front, you actually saw us increase our public fund deposits instead of beginning to see those trail off. And that was related to a couple of new relationships that we brought into the bank that enabled us to actually grow that category of deposits. So that's something certainly that we're excited about.
Great. All right. Thank you.
Thank you. Our next question comes from Ebrahim Poonawala with Bank of America Merrill Lynch. Your line is open.
Good morning, guys.
Good morning, Ebrahim.
I just had a question, John, with the CSOs and targets to improve the margin higher. I mean, I'm sure you've been asked this before and apologize if you had to repeat this. But could you just talk through the logic of trying to get higher yielding loans right now? Like why are we not like should we be, as investors be worried about the credit risk that you're taking on when you are pursuing these higher yield loans, especially given where we are in the economic cycle? Just talk to us in terms of why higher margins, higher yields don't translate into higher credit risk?
Good question. And inside the loan balance sheet, the shift in overall loan yield is not coming from enhanced credit risk appetite. It's coming from a mix change as well as perhaps a little bit better discipline and technology to follow the methodology of our pricing, both on renewal and for the business. So there's no credit risk change built into those yield expectations. It's being a little bit more effective in terms of pricing our deals upon renewal and new business coming in the bank, coupled with a healthy dose of mix change.
And the portfolio production improvements that I mentioned in my earlier answer, I shared that just to provide some tangible numbers around the improvement there. So essentially, a larger, skinnier transactions being replaced by more granular credits that we really don't expect to have any corresponding decay in asset quality. And keep in mind, the bulk, the vast bulk, a very, very high percentage of both our criticized and our non loan book are in those very same large skinnier, not necessarily skinnier now, but energy credits. So as that goes down and the asset quality overall improves, at the same time, we're having growing yields. So it produces for a year or 2 the interesting phenomena of improving asset quality, but higher yields.
So I know that isn't normal and it's not something that will be around forever. But as we improve the overall mix of the book that will happen the next year or 2.
And just tied to that, you mentioned I think 70 basis points between origination versus what's running off in terms of the loan book to them. Do you expect that 70 basis points to kind of hold in a world where rates are not going higher if we remain in kind of a static rate environment over the next few quarters? Or do you see that 70 basis points compressing? Just thought process around that.
I wouldn't venture, I guess, much further than a quarter or 2. It's just hard to tell given the shape of the curve. And as I mentioned before, we don't think we'll be sitting on an inverted curve forever. But in the near term, I would expect that pricing improvement to continue in the near term.
Understood. Thanks for taking my questions.
Thank you.
Thanks for asking.
Thank you. Our next question comes from Brad Milsaps with Sandler O'Neill. Your line is open.
Hey, good morning.
Good morning.
John, I was going to see if you can maybe just add any more color. I think I heard you mentioned a larger SNC credit that was added. Yes, a lot of pluses and minuses in non accrual, but just any color on that one, if there was any specific industry or otherwise that you can give us additional color on?
Chris, would you like to handle that question?
Yes. No, we already had the account in a classified loan status. So, it was really more of the SNC exam process viewing prospects of that credit maybe a little bit more conservatively during this period. It was not in an area that we typically do a lot of business in and it certainly wasn't in the energy sector. Okay, great.
And I know it's not like an explicit part of your guidance, but just curious if you guys had any sort of loose goals on kind of where you wanted to see the NPL, TDR numbers end by the end of 2019? I know there's a lot of moving parts, but just kind of curious kind of what you guys were thinking in that regard?
Well, obviously, the right answer is down, improving to continue to improve each quarter. I think we're at 4 or 5 straight quarters of improving criticized commercial credits. And I'd be disappointed that it continued throughout the remainder of this year. If you just do and I don't want to get into quarter by quarter guidance on that type of a number, but directionally, if you plot the rate of improvement and the size of the
book and you look
at Page 9 of the investor deck, the shape of that curve would indicate intersection somewhere around the end of the year or first half of 'twenty. Obviously, it becomes somewhat asymptotic as you approach the meeting of the peer group and become somewhat irrelevant as a gap. So, I'd love to say it will happen every quarter and that's what we expect to see. But it should approach our peer levels if you just extrapolate that curve here in about a year. If there's anything we can do to accelerate that, obviously,
we're good.
Great. That's helpful. And Mike, just to kind of follow-up the housekeeping question on fee revenues. With your trust business, are those typically invoiced based on sort of beginning of quarter equity values or is it kind of invoiced throughout the quarter? Just trying to get a sense of how the movement in the equity market ultimately reflects revenues.
In other words, do you have a little bit of a head start going into the 2nd quarter given the kind of the market up at the end of the quarter?
Yes, Brad. It's mostly based on averages. So obviously, there was a bit of a hit from the volatility that took place in the Q4 of last year. And certainly, some of that's continuing into this year. But assuming that the equity markets continue to recover and we have less volatility then those results should improve accordingly.
Great. Thank you, guys. Okay.
Thank you. Our next question comes from Jennifer Demboe with SunTrust. Your line is open.
Thank you. Good morning.
Good morning, Jennifer.
Question on the technology investments you mentioned you're making this year mostly in the second half. Could you just give us some details on those investments and what kind of dollar amount we're talking about? And are there any expense reduction levers that can help pay for those?
Thank you. Good question. And I think I've mentioned on several calls or webcast when we've been on the road that we've been making some pretty sizable investments in technology for some time now. The ones we talk the most about are the digital ones simply because that's where the primary interest has been and that will continue. The lion's share of that investment in digital has heretofore been and servicing, which was essentially an account retention activity.
This year, that begins to convert over more towards account acquisition and eventually end market credit acquisition just to make more competitive our value proposition for this more granular credit, specifically consumer. So that probably the big story in technology for remainder of this year will be automation and improvement and effectiveness improvement in the more granular credit areas of the company coupled with digital account offerings. And then the expense reductions that offset portions of that cost will be more inside next year. The expense guidance that we've given for this year and the CSOs for next year encapsulate all of that investment.
Okay. Thank you very much.
Thank you.
Thank you. Our next question comes from Matt Olney with Stephens. Your line is open.
Hey, great. Thanks. Good morning, guys.
Hey, Matt.
I want to circle back on the fee income discussion. And Mike, you mentioned that card fees and wealth management could ramp the second half of the year and are also a big part of achieving the CSOs in 2020. On the other hand, it also looks like the service charges are under pressure, I think you're down about 5% year over year. Any more details you can give us as far as service charges? Do you expect these to recover as well in the back half of the year?
I think there'll be some recovery around service charges. But again, some of the dynamics that impacted us in the Q1, 1st and foremost, you have kind of the normal seasonality and then you have the shorter quarter. So for us, that resulted in about 4 fewer processing days. So that absolutely makes an impact. And that part of the dynamic that drives growth certainly will improve in the second quarter a bit.
We did experience in the Q1 and have begun to experience some migration of customers moving to accounts that do offer us a little bit of a less chance of securing service charges. So we do have that dynamic. But again, we have good retention of customers and good growth. So putting customers in the right account is something that's good for everyone, both our customers as well as us.
There was also this is John. If you look at Q1 2018 versus 2019, the deposit picture on the volume of deposits in commercial accounts that yield earnings credit service charges and that's where that accounts in the P and L. And there were more larger balances this time than last quarter and that did erode some of the earnings credit fee income that we get. It wasn't a big piece of it, it was just something unusual, but added to the
processing date. And I think
we'll see a better fee income
Okay. Very, very helpful, guys. And then going to deposit pricing, I'm curious how the deposit pricing pressure progressed during the Q1. Did you see any signs of that pricing pressure easing over the course of 1Q or was it pretty steady throughout? And then secondly, I guess, on that same token, I think you paid down some borrowings in the Q1.
How much of that was seasonal versus a strategic move?
Yes. So some of the borrowings that were paid down, if you look at the averages, our advances on average were down about 700,000,000 dollars And part of that map is related to the restructuring that we did in the 4th quarter. Also our public fund I'm sorry, our brokered CD balances were pretty much flat quarter over quarter. So in terms of reliance on wholesale funds, all things equal, again down about $700,000,000 or so. And as far as competitive pressure on deposit pricing, I think what we're seeing in our markets and I think you're hearing kind of the same narrative from most banks is really kind of the lag effect on deposits from the tightening campaign that the Fed just completed.
So, we do expect to see some lessening of that impact as we move into the second half of the year. I think toward the end of the first quarter, certainly, we began to see a little bit in terms of the lessening of those competitive pressures. But they're still out there. But all things equal, again, I think we'll see that lag effect lessen as we move into the second half of the year.
Thank you.
Okay.
Thank you. Our next question comes from Casey Haire with
Jefferies. Just wanted to touch on the loan growth. It looks like it's going to be weighted towards the back half of the year. Just curious, what's giving you the what's the what visibility do you have that's giving you comfort that it will ramp, especially given that the pay down seem to be a bit of a headwind here in the near term?
Well, this is John. Good question. The first half of the year was a, I'd say, the Q1 and our anticipated Q2, I'll call that first half in total, is a little unusual in that we have 2 things happening that we don't expect to happen in the second half of the year. One of those are sales in the jumbo mortgage portfolio, which is related entirely to our desire to deploy liquidity into higher yielding instruments. And the interest income proposition from that jumbo product is not as attractive as we'd like it to be in order to close out the MGAAP.
So, we have been opportunistically selling chunks of that portfolio and I think that number was $41,000,000 $42,000,000 in Q1. And if the market is right, we'll anticipate a similar amount, maybe just a little bit bigger in the 2nd quarter. That is part of that loan growth guidance for Q2. The second driver for first half versus second half is CRE pay downs. And if we go way back to the 4Q conversation, we gave guidance for loan growth for the 4th quarter handily outperformed it and some of that outperformance was the absence of the CRE pay downs that we did anticipate toward the end of Q4.
Those pay downs are happening or at least they may happen in the first half of this year. A portion happened in the first quarter and we expect another portion a little larger to happen in the Q2. That number is about $150,000,000 So when you couple the jumbo portfolio sales, which are NIM accretive and the CRE pay downs that are anticipated but not definite, then that leads to the somewhat muted first half loan growth guidance. And I've made no secret in our efforts to be transparent that I'm a little bit more interested in NIM as a priority and necessary to develop growth for the time being. That posture won't stay forever as we begin to see tangible progress toward closing that gap.
Q1 was a really good month, at least we'll wait and see what the earnings season yields, but we anticipate that we'll see some gap closure from our Q1 efforts. Q2 is a little hard to predict just given the shape of the curve and how much variance in sensitivity each bank may have. But we'll see our hand after Q1 and when all the different earnings releases are out and then we'll talk more about that GAAP closure after the second quarter is done. So in short, our confidence in the second half is we expect production, which is already better than this quarter previous year ago to continue to improve, moderation and pay downs, the lack of large pressure on energy balance sheet reductions, giving way to remix the energy portfolio versus outright reductions. And that should, all things being equal yield, to a little bit more exciting second half number.
So that's the way the math works out for
the guidance. Got it. Thanks. So and then just switching to capital management front, the opportunistic infill M and A, is that a robust opportunity for you guys right now? And how do you weigh that with the SunTrust BB and T merger, obviously, in your footprint and there could be some opportunities off of that?
So how do you I mean, is the bar for M and A that much higher given the potential disruption benefits coming from a big transaction in your footprint?
Casey, this is Mike. So when we think about the SunTrust BB and T deal, again, in the markets that we're in, we don't have a whole lot of overlap. We do have some opportunity in some of our Florida markets and then maybe along the Florida Panhandle as well and into Southern Alabama. But that's not a big opportunity for us in terms of taking advantage of that potential disruption. As far as our overall M and A strategy, really nothing has changed from our perspective.
We really have no interest in large bank or strategic deals right now, certainly nothing transformational. We are open to this notion of opportunistic in fill deals. So that's something that's out there. As far as the potential for those kinds of transactions, there's not a lot of those kinds of opportunities. But certainly, there potentially is a few out there.
Got it. Thank you. And just last one for me. The purchase accounting, how much was it in that quarter? I didn't see it in the release.
Yes.
So for the quarter, we had accretion at right at about $5,000,000 and that was virtually unchanged from last quarter. Great. Thank you.
Thank you. Our next question comes from Christopher Marinac with FIG Partners. Your line is open.
Thanks. Good morning. I may have missed it if you had mentioned it earlier, but when you take out the charge off for DC Solar look at the kind of core charge offs, how does this quarter correspond with kind of where you think the CSOs for charge offs specifically will kind of unfold the next year or 2?
So when we take out D. C. Solar, Chris, the charge offs for the quarter were right at about $7,900,000 dollars and that's roughly the amount that we provided. So we covered those charge offs. But in terms of going forward and hitting the CSOs, that's probably a good run rate for us to use or for our folks to use in terms of the assumptions related to credit.
We've given forward guidance around our provision to remain kind of in that $7,000,000 to $9,000,000 range. So that's the way we look we're looking at it right now.
Okay, great. Just want to reinforce the charge offs themselves. And I know you about DDAs with an earlier question, but with the Fed pausing, to what extent does that impact kind of how DDAs play out? I mean, when you take the seasonality out of it, just kind
of look at it in general, I
mean, will you still have that big chunk of DDAs to help kind of offset deposit costs and kind of
percentage of our total deposits, DDA still standing at 35%, 36%. And that's been a mix that has really done extremely well through kind of this notion of a rapidly rising interest rate environment. So certainly, we have no reason to believe that that would change in any real way shape or form with the Fed on the sidelines now.
Okay. I was just curious if
that would absolutely help you retain a bigger number over time than you otherwise would if rates were rising.
Thanks, guys, for the questions.
Okay. Thank you.
Thank you. And I'm showing no further questions at this time. I'd like
to turn
the call back over to John Hairston for closing remarks.
Thank you, Shannon, and thanks to everyone for your interest in Hancock Whitney. Have a great day, and we look forward to visiting with you soon.
Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.