Operator
Good day, ladies and gentlemen, and welcome to Hancock-Kwitney Corporation's second 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 the As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Catherine Mistich, Investor Relations Manager. You may begin.
Thank you and good afternoon. During today's call, we may make forward-looking statements. We would like to remind everyone to carefully review the Safe Harbor language that was published with the earnings release and presentation and in the company's most recent 10K and 10Q, including the risks and uncertainties identified therein. You should keep in mind that any forward-looking statements made by Hancock-Whitney speak only as of the date on which they were made. As everyone understands, the current economic environment is rapidly evolving and changing. Hancock-Whitney's ability to accurately project results or predict the effects of future plans or strategies or predict market or economic developments is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions but are not guarantees of performance or results, and our actual results and performance could differ materially from those set forth in our forward-looking statements. Hancock-Whitney undertakes no obligation to update or revise any forward-looking statements, and you are cautioned not to place undue reliance on such forward-looking statements. Some of the remarks contain non-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in our earnings release and financial tables. The presentation slides included in our 8K 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 Ackery, CFO, and Chris DeLuca, Chief Credit Officer. I will now turn the call over to John Hairston.
Thank you all for joining us on a busy reporting day, the second quarter of 2025 was another strong quarter. The results reflect our continued focus on profitability, efficiency, and meaningful progress in our multi-year growth plan. Our NIM expanded six basis points, and we achieved an ROA of 1.37% after adjusting for expenses related to our transaction with Sable Trust Company, which closed on May 2nd. As expected, loans grew $364 million or six percent annualized due to stronger demand increased line utilization and lower payoffs we remain focused on more granular full relationship loans with the goal of achieving more favorable loan yields and relationship revenue our guidance on loan growth remains unchanged we expect low single digit growth for the year 2025 which infers mid single digit growth for the second half of 2025. deposits were down 148 million reflecting a decrease in cds due to maturity concentration and promotional rate reductions in the quarter, along with a decrease in public funds. However, interest-bearing transaction balances and DDA balances were up in the quarter, and DDA mix actually increased to 37%. NEM continued to expand as our average earning assets grew at higher yields, and we continued to reduce deposit costs. Our fee income grew again this year, with trust fees driving most of the growth thanks to the initial team and client book from Sable. Expenses remain controlled and in line with our expectations, reflecting investments we are making in new revenue producers and technology efforts to improve efficiency and client experience. During the quarter, we continued to return capital to investors by repurchasing 750,000 shares of Common. We also deployed capital through the execution of our acquisition of Sable Trust. Our capital ratios, despite all that, remain very solid with TCE of 9.84% and common equity tier one ratio of 14.03%. We made meaningful progress on our organic growth plan this quarter. We added 10 net new bankers to the team during the quarter and has solidified the location of five new financial center locations for the Dallas market. We expect three of these financial centers to open in the back half of 25 and the remaining two will open in the first half of 26. We will provide additional guidance on new offices and bankers on the January call. We remain very optimistic for our growth prospects for the rest of the year. The macroeconomic environment remains dynamic, but our ample liquidity, solid allowance for credit losses at 1.45 percent, and strong capital keep us well positioned to navigate challenges and support our clients in any economy. Before we continue the call, I want to take a moment to acknowledge the devastating floods that have impacted communities across Texas. Our thoughts with all those affected. We are no strangers to the hardships that natural disasters can bring, and we're committed to supporting recovery efforts across the region. As always, we stand ready to serve our communities with the same strength and resilience that define both our company and the people we are proud to serve. With that, I'll invite Mike to add additional comments.
Thanks, John. Good afternoon, everyone. As John mentioned, our results reflect another quarter of outstanding performance. Our adjusted net income for the quarter was $118 million, or $1.37 per share, compared to $120 million, or $1.38 per share, in the first quarter. Second quarter results included $6 million of supplemental disclosure items related to our acquisition of Stable Trust Company in May of this year. PPNR was up $5 million, or 3 percent, from last quarter and was a peer-leading 1.95 percent of assets. Our NIM again expanded this quarter, but by six basis points, and NII was up 7 million, or 2 percent. Fee income was up 4 million, or 4 percent, and expenses adjusted for one-time items remained well controlled and were up 5 million, or just 2%. Our efficiency ratio improved to 54.91% this quarter compared to 55.22% last quarter. The NIM expansion was driven by higher average earning asset volumes and yields and lower deposit costs, which were only partially offset by an unfavorable mix related to other borrowed funds. That's all shown on slide 15 of the investor deck. Bond yields were up eight basis points to 2.86%. We had $233 million of principal cash flow at 3.15%, while we reinvested $359 million into the bond portfolio at 4.71%. Additionally, another $40 million of our fair value hedges became effective this quarter and contributed three basis points to the overall yield pickup. Next quarter, we expect about $152 million of principal cash flow at 3.11% that will be reinvested at higher yields. We expect the portfolio yield should continue to increase as we reinvest principal cash flows at higher rates. Our loan yield for the quarter was up two basis points to 5.86%. Yields on fixed rate loans were up 13 basis points to 5.17%, while yields on variable rate loans were down only two basis points. With no rate cuts expected in the third quarter of 2025, we expect the overall loan yield to again be largely flat. Our overall cost of funds was down two basis points to 1.57% due to a lower cost of deposits and less favorable borrowing mix as other borrowings increased compared to the prior quarter. The downward trend in our cost of deposits continued with a decrease of five basis points to 1.65% in the second quarter. The drivers here were seeding maturities and renewals at lower rates. We expect the cost of deposits will be down marginally in the third quarter with an additional reduction in the fourth quarter, assuming the Fed cuts rates in September. For the quarter, we had $2.5 billion of seeding maturities that matured at 3.85% and were repriced at 3.59% with a strong 86% renewal rate. Additionally, our DDA balances increased again this quarter up $24 million. Our NIB mix was also up this quarter to 37%. CDs will continue to reprice lower for the rest of 2025, given maturity volume and anticipated rate cuts. Total end-of-period deposits were down $148 million, mostly reflecting the impact of this quarter's CD repricing and other aspects of seasonality. We updated our guidance to reflect our current assumption of two rate cuts of 25 basis points in September and December, but with minimal impact. We expect modest NIM expansion in the second half of 25 and NII growth of between 3% and 4% for the year. There's no change to our PPNR or efficiency ratio guidance. Our criticized commercial loans decreased 4% to $594 million, and nonaccrual loans decreased 9% to $95 million. Net charge-offs were up this quarter and came in at 31 basis points. Our loan portfolio is diverse, and we see no significant weakening in any specific portfolio sector or geography. Our loan reserves are solid, again, at 1.45% of loans, down four basis points from 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. We deployed capital this quarter through our acquisition of Sable Trust Company and a higher level of share repurchases. We more than doubled the buyback this quarter and bought back 750,000 shares. We expect share repurchases will continue at this level for the foreseeable future. Changes in the growth dynamics of our balance sheet, economic conditions, and share valuation could impact that view. I will now turn the call back to John.
Thanks, Mike. Let's open the call for questions.
Operator
At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Michael Rose with Raymond James. Your line is open.
Hey, good afternoon, everyone. Thanks for taking my call, my questions. So maybe we can just start on the last topic on buybacks. Mike, just given some of the deregulatory efforts that we've seen here recently, I know you mentioned that buybacks would kind of continue at this pace. But do you have a target CET1 ratio that you think you can kind of operate on through the cycle, just assuming some of the deregulatory efforts and the fact that they're likely to come downhill over time?
Yeah, Michael, great question. And as we think about capital, the two ratios, obviously, that we probably pay a little bit more attention to is TCE, and that's down a little bit because of Sable, but still, you know, very close to 10%. And in the Tier 1 common, that still exceeds 14% even with the acquisition of Sable. So if we think about where those capital levels or where the company is kind of comfortable operating at, I would suggest it's somewhere between 11 and 11.5 for Tier 1 Common. And then certainly anyone who knows our company knows that for TCE, it's in the neighborhood of 8%.
Okay. So as I think about your CSOs going out to the end of 2027, you know, it looks like the TCE would be around 8%. So, would that kind of, you know, should we use that as a guide, basically, as we're thinking about buybacks, you know, beyond this year and into 26 and into 27? Is that fair?
Yeah, yeah, I think so. And certainly, you know, those levels, again, reiterate that those are levels we feel comfortable operating the company at. Our board feels comfortable, but they're not necessarily hard lines. And so just depending on circumstances, we certainly could go below those levels or operate the company above those levels, you know, as we're doing now.
Understood. And maybe just as one follow-up question, just as it relates to loan growth and kind of the outlook, can you just give us a general update on kind of the health of borrowers? You know, it does seem, you know, if you listen to some of the larger guys today that I think we're at a point where even though there's still some uncertainty around tariffs and things like that, i think there's just a comfort level and borrowers are starting to move off the sidelines a little bit so i understand your guidance um but would just you know like to appreciate more you know what the drivers could be in the near term you know i know utilization rates take a little bit higher so maybe that's a trend that could continue but what's kind of the upper you know what would drive you to the the upper end versus the lower end of your of your guidance thanks sure yeah michael good question this is john uh if uh chris or mike want to weigh in they can generally speaking we're really not relying on line utilization to drive the upper end of the
range. Certainly it would help if utilization continues to increase and it's only going up marginally each quarter so we're glad to have it. The bigger driver is simply going to be net new loans to net new clients and we've had a really good quarter and I would expect that we'll continue to have in good quarters in the foreseeable future barring any kind of macroeconomic changes that would cause clients to become more chill. I will suggest, you know, a quarter ago when we had this call, Michael, you know, there was clearly a disturbance in the force, if you will, people not really knowing how to make a sense of Liberation Day and how it may impact their own business. I think over the last three months, people, at least in our market areas from Texas to Florida and up in Tennessee, have largely become desensitized to those headlines. And I don't know if I would call it coming off the sidelines as much as I think they're just not as sensitive to the headline of the day. And they're back to relying more on whatever the facts may be that they're going to use to make a decision of what to buy, expand, enter new markets, build a building, what have you. So I think that's important to note. Since you asked the question about the upper range, I guess I would also call out, you know, the only sector that we didn't enjoy growth. This quarter was in the construction development book and if you note in the deck on I think that's page nine everything's in the green. Healthcare is a little bit of a push and C&D was down a little under 100 million. The year-to-date commitments in that sector are actually up a little under 200 million but as we've talked about in prior calls it takes a few quarters for a client to burn through their equity in the project before they get to our line of credit. So we would anticipate a sustainable growing C&D book to be somewhere towards the back half of the first quarter of 26 or the following quarter sustainably. So that headwind will dissipate as we move through the year. And if it does, that would eventually lead more to um to the upper end of the range all of the things being equal great so flexing point that you guys are talking about all right thanks guys for all the color i'll step back you bet thanks michael for the question our next question comes from the line of catherine miller with kbw your line is open thanks good afternoon hi catherine um could you give us a little bit more of a color around your NIMM outlook.
I know you've continued to say that you think there's kind of upward NIMM trajectory in the back half of the year, really, I guess, regardless of what rates do. But we've pushed back rate cuts. We now only have two in your numbers. And so just kind of help us think through where you think kind of NIMM can go for a stable rate environment and then sensitivity to those cuts in the back half of the year.
Sure, Catherine. This is Mike, and I'm happy to share some thoughts and color around that. So I think first off, and we did disclose this, I believe, on slide 15 of the deck, for us, for the second half of the year, there really is not anywhere near a material difference between the impact on NII or our NIM. If we look at zero rate cuts or two rate cuts in the back half of the year the difference is less than a million dollars on NII and it's about one basis point on NIM so certainly the dynamics are a little bit different in terms of how we get there but what we do have baked into our guidance is the two cuts the one at the midpoint of September and then one in December both 25 basis points so assuming those two cuts do occur the things that I think are really going to be the drivers of our ability to continue to expand our NIM in the second half of the year are going to be largely the things that we experienced in the first half of the year with the addition of obviously loan growth. So we're looking at a stable DDA mix. We're at 37% now. We're guiding for that mix to be between 37 and 38% by the end of this year. I feel really good about our ability to grow that mix to those levels, especially given where we are We'll continue to reduce our cost of deposits, but certainly if you, again, if you go back to slide 15, you can see that over the course of the second quarter, our cost of deposits did begin to level out, and we certainly expect that leveling out to kind of continue in the second half of the year. We do think that we can reduce our cost of deposits by, let's say, a couple of basis points in the third quarter, and then probably a little bit more than that in the fourth quarter. And again, that's really on the heels of an expected rate cut in September. So that is really very dependent upon our ability to continue to reprice our CDs lower. And so, again, we've done a pretty good job of that, I think, through this cycle. And even with our cost of deposits kind of leveling out, you know, we think we'll be able to do that in the second half of the year. So in the second half of the year, we have about $3.6 billion of CDs coming off at about $3.62. Those we think will reprice at about 3.5% or so. So no change in any of our promotional rates right now. Probably our best-selling CD promotional rate is our eighth month at $385. So that continues. Certainly, we also have the loan growth for the second half of the year. We're extremely proud of our ability to grow loans in the second quarter, the 6% link quarter annualized. You can see in the guidance that we're expecting to kind of continue at more or less that level for the second half of the year. And on an end-of-period basis, loans should come in again at that low single-digit level year over year. And then finally, we still have a pretty good ability to reprice cash flows coming off the bond book as well as repricing fixed rate loans and are maturing in the second half of the year. So again, back to the NIM, we expanded our NIM by about 10 basis points the first half of the year. The expansion in the second half of the year won't be at that level. It could be at something close to half that level. But still, we believe firmly that we can expand our NIM by a couple of basis points each in the next couple of quarters. So hopefully that answered your question. Anything else I can help you with?
It does. No, that was very helpful. A lot of great data there. And then maybe one follow-up just on the expense side. I know your expense guide is unchanged at the 4% to 5%, and that includes SABL coming in this quarter. Is there – now that None of that deal is closed. Is there any kind of additional insight you can give us into how much of the expense base came from that just so we can kind of think about what one more, I guess, one additional month of that deal in third quarter kind of could mean versus where the expense growth is coming from some of your hires and all of that.
Just kind of think about trying to think about the cadence of the expense base over the two quarters in the back half of the year. look at the uh the second quarter and again you know we closed that deal at the end i'm sorry the very beginning of may so we had two months the increase in our expenses in the second quarter related disabled was about two and a half million or so okay great thank you greg where you bet thank you our next question comes from the line of casey here with autonomous research your line is open Great.
Thanks. Good afternoon, everyone. I wanted to follow up, I guess, on the loan growth. Again, the CRE showed very strong for you guys. We've been hearing that that's been tough, tough slotting, just given weak demand and just a little more color as to what you're seeing to drive such strong results.
It was a little muddle, you said, on the CRE sector. Casey, is that right? Yeah, commercial real estate. Yeah, the difference quarter to quarter there was a little less payoffs. Very successful owner-occupied real estate campaign in the business and commercial banking sectors. And then we ended up with some bridge financing numbers that were pretty attractive out of the investor CRE group. That shows up in CRE, not CND.
Does that answer your question or do you want a little more detail? no that's great that's great sounds like uh yeah payoffs um slowing down um okay uh and then just switching to uh mna i know you guys sound very organic and heads down here um you did enter the year as you know looking to you know be acquisitive just wondering is what is the mna market like in your markets and, you know, is active? And what would draw you back into, you know, looking to be acquisitive?
So, Casey, this is Mike. And I guess first off, the narrative around M&A for us is completely unchanged with the narrative that we talked about on the first quarter call, so back in April. And back then, we said that right now M&A is just not something we're focused on. But we did caveat that by saying, you know, that may change or could change at some point down the road. If we look at our capital priorities, first and foremost, is to support organic balance sheet growth and more specifically, our organic growth plan. Second is return of capital to shareholders through dividends and buybacks. And then third is M&A opportunities, you know, that may or may not surface down the road so i i don't know that i want to be any more specific about that other than to maybe add you know the way we think about m&a down the road i think is opportunistic and um you know it's hard to put really a hard label on what that is or is it you know until those circumstances arrive so okay great thank you yep you bet our next question comes from the line of Ben Gerlinger with Citi.
Operator
Your line is open.
Hi, good afternoon. I don't know hi uh sorry I didn't know if you guys said it in the prepared remarks but I know that this snicks are below 10 percent and you guys have good core organic growth is is it fair to think that the shared national credits are at a floor on a dollar percentage or dollar rather than percentage or is it you two we still expect some runoff no it's a it's about a push if you look at the the numbers on what's the slide number for this next slide yeah yeah we're running about nine and a half percent and I think between nine and ten is about where that's going to stay and so the book on an absolute
magnitude basis probably grows as loans grows as we maybe feel good about one particular sector. But at the end of the day, that percentage will not get above 10 percent. The question was, should you expect any big runoff? The answer to that is probably also no. I think where it is right now is where we're comfortable.
Got it. Okay. Yeah, that helps. And then whoever wants to field it either. But when you think about rate cuts, I know that when they first started cutting rates, it kind of seemed And we're almost predetermined that we're going to get 50 or potentially 100. And obviously, we ended up with 100 basis points for the first wave. It gave you some flexibility on deposit pricing. But if it ends up being like a Fed only moves 25 bps or so, when you think about the flexibility, should we expect kind of the same relative beta despite it being like 25 bps? or is it something a little bit more muted considering the first hundred is the easiest hundred on pricing on the right-hand side?
Yeah, Ben, this is Mike, and that's a really good question. And I would suggest that if the Fed does move, let's say 25 in September, 25 in December, that we would achieve something pretty close to where we think our cumulative deposit data is going to end up for the cycle. So for total deposit data, that's 37 to 38. We're sitting at 35 now. So I think that would creep up closer to that expected level. And then on interest-bearing deposits, we expect for the cycle to be at 57, 58. We're sitting at 55 now. So similar to the total, you would see the interest-bearing deposit data start to kind of creep up. You know, we'll be very proactive in reducing our deposit costs if and when the Fed does move as we've been so far this cycle. You know, we have 70%, 72% of our loans are variable, so those will price, will reprice down. And so we have to be very cognizant of that fact and then also reduce our funding costs accordingly. And I think we've done a real good job of that during this cycle and have done that mostly through, you know, repricing our CDs and it's worked out pretty well.
Gotcha. I appreciate the color. Thanks, guys.
Operator
Our next question comes from the line of Brad for Batten with the Hove Day Group. Your line is open.
Hey, good afternoon, everyone. I wanted to ask about, going back to the loan growth one more time, I wanted to ask, if we look at slide 27, it shows the new loan rates impacted by the rate environment and i noticed that 2q in particular kind of what appeared to be some spread compression um on both variable and fixed rate loan originations and so just wanted to get some color on if that's you know spread compression spread compression competitively or if you guys were being more aggressive and that was you know kind of the the outcome being loan growth their loan growth for the quarter just any color on the new loan originations would be helpful yeah i can I can start.
And I would suggest that there really is probably a combination of both those things. Certainly the environment out there is super competitive when it comes to, you know, not only securing new credits from customers, but then also pricing that credit. And I think overall we've done a tremendous job of really restarting that growth engine as evidenced by the, you know, the 6% link quarter annualized growth in the quarter. So the overall rate on the new loans to the balance sheet did compress by about 28 basis points. And I would suggest most of that is really related to pricing. However, it's also important to understand that the overall yield in our loan book is 586. So certainly our ability to, again, reprice mostly fixed rate loans higher is one of the things that will certainly help us continue to expand our NIMM in the second half of the year. John, any color you want to add?
No, I think that was very good. The only points I'd add is, I mean, you'll note the mix is a good bit different in 2Q25 than it was a year ago. And the size of the fixed rate new loan book has been tied a great deal to the degree of aggressive calling campaigns that we've had on specifically the owner-occupied real estate opportunities that come with partially or fully compensated deposit balances. So we've talked to them on the last several calls about our very aggressive desire to have full service relationships and so while the loan yield may suffer a little bit on the overall the benefit we're getting is on the low-cost deposits on the other side and that and that drives the NIM to a better view that makes sense okay yeah no that's helpful and then you know you've got I think you know next one to three years two billion repricing at 517 so that's helpful too the other question i had was just around the fee income guidance um and it you know with the trust fees
continue or trustees likely to head higher just wanted to see that you know the nine to ten percent growth is that based on continued strength and trust or do you expect some of the other businesses that have done pretty well to continue to do so well it's a great question in fact thanks for the way you finish it because uh i was going to try to slip that good news in too but generally speaking the trust quarter was actually good even without SABL.
The SABL chunk of the 4.7 million increase in trust fees was only 3.6 million for the partial quarter. Now, I'll remind you, trust fees are not particularly level month to month inside the quarter. Some accounts are skewed to the first month, some to the last month of the quarter. So you can generally prorate that to see what the number will be but it won't be exact but the bottom line is trust did well and then the 3.6 million from Sable goose the number on up to nearly 5 million up and we would expect to see the full benefit of the Sable team and that client book when we get into Q3. Aside from that the business and consumer service deposit account charges via the Treasury products also performed very well for the second quarter. And generally speaking, we can expect those fee increases to continue with the size and number of accounts added inside the book of consumer and business. So we think the second half is going to continue seeing growth on the fee income side from those sectors. Besides those, our fee categories like card revenue, treasury accounts, and merchant are also doing quite well, and secondary mortgage will be driven by, number one, our completing the pivot to secondary loans as a predominant source of fee income, and then if rates do decline, we should see a nice benefit from fee income on the secondary side. Does that answer your question?
Yeah, Candice, that's very helpful. Thanks, John.
Operator
Our next question comes from the line of Gary Tenner with D.A. Davidson. Your line is open.
Good afternoon. I had a couple of questions. First, to go back to the buyback for a minute, I know, Mike, in your prepared remarks, you suggested that the buyback continues at the same level, but then I think in a follow-up, you kind of said it depends on the pricing.
So, you know, you purchased a lot more shares this quarter at $52 versus what you bought in the first quarter around 59 we're a lot closer to 59 right now so just wanted to make sure i understood kind of the moving parts of your of your comment there in terms of what to expect at least in the short term yeah great great uh great way to distinguish that gary appreciate that and um i think the way to think about it is if you look at the dollar amount of shares that we repurchased during the quarter it was just a little bit under 40 million and so the intent would be to return at least that much in terms of money to shareholders via buybacks and certainly the number of shares that we're able to buy back with that 40 million certainly will change a little bit from quarter to quarter depending on market conditions and where our stock price is but I think the controlling variable there would be the 40 million or so that we'll spend. Okay.
Appreciate it. And then just trying to think through the dynamics of deposit growth in the back half of the year, getting to that kind of low single digit expectation. I guess two parts of that. One, since the CDs are projected to reprice lower by just a small amount, do you expect the retention of the CDs to be higher in the back half of the year than they were in the first half of the year? And then how much of the total growth for the year would you suggest is kind of driven by public funds in the fourth quarter?
Again, good question. So if we think about CDs and the renewal rate, I mean, again, that's been one of the things that really has been kind of the star of the show, if you will, around our ability to retain that money and reprice it lower. So it was something like 86% in the second quarter. And the assumption for the back half of the year is that it'll be at least 81%, if not a little bit better. So, the other thing that I would suggest when we look at not only the guidance for deposits, but also the levels that we think will come in, is because of the C&I nature of our book, you know, there's a lot of seasonality built into it. You mentioned the public funds, and certainly that does drive the numbers with a public fund book of around $3 billion or so. So typically in the second quarter, we see really the last couple of months of the outflows related to public funds, and we also see outflows related to tax payments, both corporate as well as individual. Typically in the third quarter, those deposit levels begin to stabilize, if not grow a little bit. And then on a seasonal basis, the fourth quarter tends to be our best quarter. Again, they're typically inflows related to corporate and middle market deposits. And then you have the arrival of the public fund inflows. And those can range between, you know, as much as $200 to $300 million, just depending on primarily the sales tax collections and property tax collections that typically happen in the fourth quarter.
Very much. Thanks for the caller.
Operator
Our next question comes from the line of Matt Olney with Stevens. Your line is open.
Hey, thanks, guys. I want to ask about credit and the charge-offs in the second quarter were a little bit heavier than we were expecting, but it sounds like you feel really good about charge-offs, the back half of the year moving lower. Can you just kind of flush this out for us? Did you get some resolutions of some lingering credits in 2Q or any color you can give us as far as the charge-offs in 2Q and the outlook?
Hey, Matt. Chris Aluga. Thanks for the question. Good question as well. Yeah, we feel pretty good about the guidance that we've given around the charge-off range. I mean, as we've said, kind of going into this year and even last year, you know, we expect normalization of net charge-offs um kind of as the cycle winds through and and we really aren't seeing any any sort of specific um systemic issues in the portfolio which really gives us comfort as to kind of the forward view around uh the remainder of the year yes we did have some accounts that were kind of in in our uh line of sight for resolution uh during the quarter and we decided We had some reserves in place, specific reserves in place on one of them in particular that we decided that we would take down and just kind of resolve that to the best that we could. So that way we're kind of looking forward in a little bit more of a positive view.
Okay. Appreciate that. And then just as a follow-up to that, we've seen consecutive quarters of improving criticized commercial loans now. So we'd love to just get your feel for criticized loans as we look at the back half of the year and what your visibility is there.
Yeah, so again, a good follow-up question. From our visibility, what we're seeing is a little bit more resolution and therefore outflows than we are seeing inflows. Normally we would expect to see in this quarter a little bit more potential inflows, But, you know, we were pleasantly surprised that we were seeing less inflows and a little bit more resolution of outflows related to some of our longer standing credits. As I mentioned, I think in one of the earlier calls, it usually takes three to four quarters before kind of a criticized loan can get either rehabilitated or resolved or paid off, you know, what have you, you know, the whole portfolio management workout process. So with the lesser number of inflows, we feel pretty good about where we sit, not to say that as the quarters go through that there aren't things that kind of, you know, catch us a little off guard, but we feel like we have a pretty robust portfolio management and workout process to deal with those.
Thank you. our next question comes from the line of steven scouting with piper center your line is open yeah good afternoon thanks guys um i know mike you gave some commentary around m&a saying it's largely unchanged outlook there but i'm kind of curious as to how you think about the future path i mean to me what the only thing that's maybe been lacking from from y'all's story has been organic loan growth and we're seeing great signs of that already this quarter so should we think Think about, you know, you guys letting that story play out, profitability and efficiency continue to play out. And then, you know, if your shares warrant the valuation, I'm sure you feel they should, then that's when M&A might be pursued down the line. Is that a decent way to think about it?
Yeah, that's a very plausible path. And, you know, again, we're thrilled about our ability to restart organic loan growth. We have a very well-thought-through organic growth plan that we're executing on right now. You know, we've talked a lot about our earnings efficiency being extremely high right now, or high, and the only thing missing had been, you know, organic loan growth.
And so, you know, we're thrilled with where we are, and we're very anxious to, you know, to continue to improve our earnings efficiency and overall profitability going forward. and that really is the focus of what we're trying to do yeah i think that's fantastic and then as it pertains to um the plans you guys have laid out for hiring i think it was what another 14 people give or take plated for the rest of 2025 with an uptick in m&a kind of in and around your markets um would there be potential you know upside to those numbers if if you could be more opportunistic given M&A in your markets? Or do you kind of want to manage the expense build and the personnel build throughout the rest of the year? How should we think about the potential for upsizing to that?
Good question, Stephen. This is John. I think our appetite for good talent that is seasoned, knows the market, knows the type of clients that we would like to add. We really don't have a ceiling in how many bankers we would add over a given term. We've set the goal at 30 to be communicated externally just to help investors understand our degree of interest in growing loans not just this year but have that growth pattern flywheel up over the next several years and get back to that 85 to maybe higher 80s loan deposit ratio which is really our sweetest spot in terms of earnings capabilities so the 30 number was essentially a 10 percent compounded annual number, and we would anticipate being at about 10% next year as well. Now, certainly if opportunities came up for that number to be higher, we would gladly take it. Our rate of people that don't survive over the long term once added is actually quite low, primarily because we try to screen very well and have potential bankers meet with people both in the line of business and in credit to assure that their appetite for clients matches up with us, so their potential for success is very high. I'm sure there is a maximum somewhere where Mike will get nervous about the expense, but so far, our attitude is we would gladly take on that problem and be happy to explain that to investors because we have more offensive players on the field. Well, there's no max to the revenue, right? There's no max. Yes, right. That's the question is, when should we expect the compensating revenue? And so far, you know, the expectation for this year was about 15% of our total loan growth would be coming from new hires, and I think we're on track to hit that. And, in fact, the business bankers we've added are probably going to exceed that for the year, but that's really too early to call. I wouldn't want to commit to it just yet.
Got it. Thanks. That's a really great caller, and congrats on a great quarter.
Thank you very much, Stephen.
Operator
Our next question comes from the line of Christopher Morinick with Janney Montgomery. Scott, your line is open.
Good afternoon. John, it seems like history is repeating itself with some new entrants coming to Texas. I was curious on your thoughts about opportunities that could create for Hancock in the future quarters ahead.
I'll start and Mike can add color if he likes. Disruption is usually good for us. I think we're viewed as a safe haven for people who, for whatever reason, would like to maybe raise their hand where otherwise they might not have. But that disruption happens, you know, all around the footprint. We really never know how to size it. But certainly the phone lines and email inboxes are open to inbound calls. And there's no secret across our footprint that we are indeed looking for good talent. And we're a great place for people to land. who want to build a book rapidly with great partnership with their credit folks across the line. So, you know, thanks for asking the question. It gives me a chance for a free commercial, but we're definitely hiring really in every place. I mean, if you saw from page, I think it's page seven. Is that right, Catherine, in the deck? You know, you see the green markets. That's where we actually have open roles that we're actively searching for now. So not every market is highlighted right there, primarily because some of those markets we added people in last year. And so we didn't, you know, make the circles bigger or smaller to denote how many people were in those different areas. But it does show that we're not piling everybody into one market, although I would allow that the largest concentration of people are in markets that we consider higher growth for obvious benefit. But it would not surprise me to see most of the called out markets in that sheet populated with new hires by the time we get to the end of next year. And note, this is a net document, not an absolute document.
Good, John. Thanks for that. And then just a follow-up for Chris, Chris, are you seeing opportunities for some of the non-depository borrowers who are not banks but looking for credit from your side as a company? Is that an opportunity in the commercial book?
I mean, we do definitely see that as potential opportunities for us, but it's not something that we're specifically targeting.
Could those loans have a depository element to them over time?
Yeah, I mean, they can. I mean, obviously, as they kind of, you know, grow and kind of rehabilitate out of just being, you know, part of that non-depository lending environment to, you know, a traditional banking environment, you know, I know that I've seen that before.
You know, the hit rate's always a little bit lower than you hope, but it certainly is an opportunity, you know, for us, and we certainly hope that some of them spin off into uh into opportunities for direct relationships yeah chris this is john that's the only thing i'd add it's not that we're necessarily averse to it but i think i would i would use the word opportunistic uh just like mike did earlier that if it makes a lot of sense for us and the client then we certainly would explore it but we're not designated a group of new hires to target that that's something we would rather have a longer relationship and understand the client before we we jumped in too far got it thank you all for uh for taking my questions we appreciate it thank you thank you for hanging in there on a busy day i will turn the call back over to john harrison for closing remarks thanks kate for uh for moderating the call thanks to everyone for for your attention and interest and we look forward to seeing you on the road over the next quarter ladies and gentlemen that concludes today's call Thank you all for joining.
Operator
You may not disconnect.
