Hancock Whitney Corporation (NASDAQ: HWC) Q4 2025 Earnings Call dated Jan. 20, 2026
Corporate Participants:
John M. Hairston — President and Chief Executive officer
Michael M. Achary — Chief Financial Officer
Shane Loper — Chief Operating Officer at Hancock Whitney Corporation
Christopher S. Ziluca — Chief Credit Officer
Analysts:
Michael Rose — Analyst
Catherine Mealor — Analyst
Casey Haire — Analyst
Brett Rabatin — Analyst
Ben Gurlinger — Analyst
Gary Tenner — Analyst
Christopher Marinac — Analyst
Presentation:
John M. Hairston — President and Chief Executive officer
[Starts Abruptly] Esther Deck on an annual basis, we expect the restructuring exercise to benefit NIM by 7 basis points and EPS will improve 23 cents per share. Mike will give more details on the restructuring in his remarks. We provided guidance on page 22 for what we believe will be a very successful new year. This guidance reflects our organic growth benefits as well as impact from the bond portfolio restructuring. Now for a few notes. On the fourth quarter we had another quarter of very solid earnings with an ROA of 1.41% and an efficiency ratio under 55% fee. Income growth again continued this quarter and expenses remained well managed including thoughtful investments supporting revenue generating activities.
Net interest income continued to grow as we reduced the cost of funds and enjoyed higher security yields. NIM was relatively flat down one basis point from prior quarter as a decline in loan yield outpaced our higher yield on securities and and lower cost of funds. Loans grew 362 million or 6% annualized as shown on slide 11 of the Investor Deck. Our production was quite strong. Our increase in production this quarter more than offset an increase in prepayments which produced a net growth of mid single digits. With the investments we’re making into new revenue producers, we expect this trend to continue and loan growth in 26 will be mid single digits compared to the previous year.
End deposits were up 620 million or 9% annualized, largely driven by seasonal activity in public fund DDA and interest bearing accounts which increased 417 million. As a reminder, we usually experience seasonal public fund outflows in the first quarter of each year. Our interest bearing transaction balances were up 223 million with higher balances driven by competitive products and pricing. Retail time deposits decreased 90 million due to maturities during the quarter and DDDA balances were up 70 million inclusive of a $191 million increase in public fund DDAs. DDA mix ended the quarter at a strong 35%. We expect our investments in financial centers and revenue producers will support our guidance for deposits which we anticipate will increase low single digits from 2025 levels.
John M. Hairston — President and Chief Executive officer
As previously announced, we fully exhausted our share buyback authority last quarter which impacted capital ratios despite enhanced repurchase volume. We ended the quarter with TCE a little over 10% and a common equity tier 1 ratio of 13.66%. Our board approved a new 5% buyback plan that will be effective through the end of 26. We are very optimistic as we look forward to the coming year. Our work over the past several years has resulted in solid capital levels, a robust allowance for credit losses, superior profitability, ample liquidity, benign asset quality and now positive trends in balance sheet growth.
We are excited for the opportunities in the coming year and believe we are positioned well for a successful and growing 2026. Lastly, I would like to introduce you all to President of Hancock Whitney bank and Chief Operating Officer Shane Loper. He will be joining us on our earnings calls going forward with that. I’ll invite Mike to add additional comments.
Michael M. Achary — Chief Financial Officer
Thanks John Good afternoon everyone. Fourth quarter’s earnings were 126 million or $1.49 per share compared to 127 million or again $1.49 per share in the third quarter. PPNR for the company was down slightly from the prior quarter to 174 million, expressed as a return on average assets that continues to be a solid 1.96%. NII increased 1% this quarter driven by favorable volume and mix for both average earning assets and interest bearing liabilities, partly offset by a slightly lower NIM which decreased or narrowed one basis point this quarter. As John mentioned, our fee income business had a solid quarter and expenses were up due to continued investments in revenue generating activities.
Our efficiency ratio was 54.9 for the quarter and 54.8 for the year. That was down 58 basis points from 2024’s 55.4% reflecting our net interest income growth, strong fee income performance and well controlled expenses. Fee income grew in each of the four quarters this year totaling 107 million in the fourth quarter. We enjoyed solid performance across each category with the increase this quarter driven by higher specialty income. We expect fee income will be up between 4 and 5% in 2026 with a continued focus on core deposit account growth that often delivers multiple categories of fees.
As mentioned, expenses remain well controlled up only 2% from the prior quarter. Much of this increase was from investments that we believe will enhance our revenue generating capabilities. In 2026 we expect expenses will be up between 5 and 6% including an impact of about 185 basis points points from the execution of our organic growth plan and a full year of expenses related to our acquisition of Stable Trust Company. Expense growth year over year was well controlled at only 3.6% inclusive of ample reinvestments. The 1 basis point contraction in our NIM was driven by lower loan yields on both new fixed and variable rate loans and existing variable rate loans following the two rate cuts this quarter.
Michael M. Achary — Chief Financial Officer
Partially offsetting this was higher bond yields, lower cost of deposits and a favorable mix and rates for other borrowings. Our overall cost of funds was down 7 basis points to 1.52% due to a lower cost of deposits and better funding rates and NICs. As we ended the quarter with lower FHLB advances, our cost of deposits was down 7 basis points to 1.57% for the quarter with the cost of deposits down to 1.53% in the month of December. Following the rate cuts in October and December, we reduced promotional rate pricing on our interest bearing transaction accounts and retail CDs.
In 2026, we expect CDS will continue to mature and renew at lower rates which will support improvement in our cost of deposits. The yield on the bond portfolio was up 6 basis points to 2.98% due to cash flows of 213 million rolling off at 3.55% and reinvestment in $290 million of bonds had a yield of 4.45%. In addition, we had a $0 loss bond swap of two hundred and thirty million with a yield pickup of 45 basis points. As John mentioned, we completed a bond portfolio restructuring in the first two weeks of January 2026. We sold 1.5 million of bonds at a yield of 2.49% and reinvested the proceeds in bonds carrying a yield of 4.35%.
We’re expecting the annual impact will support our NII and NIM growth in 2026. NBA contribute 7 basis points to our NIM 24 million to NII and about $0.23 to earnings per share. Our forward guidance for 2026 is on Slide 22 of the earnings Dec and includes the expected impact of the bond portfolio restructuring but excluding the Pre tax charge of 99 million. We are assuming two 25 basis point rate cuts in April and July of 2026. We expect NII will be up between 5 and 6% from 2025 with modest NIM expansion and our PPNR guide is to be up between 4.5 and 5.5%.
Michael M. Achary — Chief Financial Officer
Our efficiency ratio is expected to fall in the range of 54 and 55% in 2026. For the fourth consecutive quarter our criticized commercial loans improved decreasing 14 million to 535 million. Non accrual loans decreased 7 million to 107 million. Net charge offs came in at 22 basis points. Our loan loss reserves are solid at 1.43% of loans. We expect net charge offs to average loans will come in at between 15 and 25 basis points for the full year 2026. Lastly, a comment on capital Our capital ratios remain remarkably strong even with the Full exhaustion of our share repurchase plan where we bought back about 147 million of shares in the fourth quarter of 2025.
Our board reauthorized a new 5% repurchase plan in 2026. And we expect share repurchases will occur at a more even pace across 2026. Changes in the growth dynamics of our balance sheet, economic conditions and share valuation could impact that view. I will now turn the call back to John.
John M. Hairston — President and Chief Executive officer
Thanks, Mike. Let’s open the call for questions.
Questions and Answers:
operator
Thank you. And everyone, if you would like to ask a question, please press star1 on your telephone keypad. Once again, that is star1 to ask a question. The first question is from Michael Rose. Raymond James.
Michael Rose
Hey, good afternoon, guys. Thanks for taking my questions. Notice that the fourth quarter loan production was up about 7.5%, Q on Q. But paydowns were also up. You know, maybe Mike or John, if you can just talk about, you know, what your expectations are for, you know, kind of, you know, gross production versus expected paydowns as we, as we move through the year, inclusive of those two cuts. Thanks.
John M. Hairston
Thanks, Michael. I’m going to ask Shane to start with that answer. Go ahead, Shane.
Michael M. Achary
Okay, thanks, John. And really what I’ll do is I’ll try to cover, you know, just kind of where the production came from and then tie out with what we see, you know, into the future. But first I’d just like to say thanks to the entire team for delivering a good year of operating results and, you know, just thanks for that contribution to success. You know, I think it’s important to note that loan production increased for the third consecutive quarter with nearly a billion sicks of production in the fourth quarter. You know, typically we’ll see 35% of all that production funded and then grow to about around about 40% in the fourth quarter.
The team produced an additional 260 million in production over the third quarter, which contributed pretty, pretty significantly to that 6% growth that we’re talking about. Geographically, the banking teams delivered growth across all of our core markets in Texas, Louisiana and Florida. And this is also important because as we intentionally improve our commercial and middle market segment mix, that’s going to deliver higher spread relationships that may offset some of the thinner spreads in the specialty segment segments. Commercial real estate continues to deliver consistent production which will fund up once that initial equity burns off in those deals.
And we expect to experience sustained fundings that really have occurred with production over the last 18 to 24 months throughout the year. In 2026, with expected and Planned paydowns as a headwind to CRE growth and and I don’t think that’s anything new that we’re talking about there. A lot of those pay downs will get to lease up CO and go maybe to the permanent market. CRE production for 2026 looks to continue to be steady as the 2025 production funds up. Looking at health care, that team continues to deliver growth with current and new banker adds.
Michael M. Achary
The production delivers good nii but that’s one of those slightly thinner spreads than the commercial and middle market segments. And I expect healthcare to continue to deliver as we’ve shifted our focus more to healthcare real estate and a selective focus on senior care sponsor operators, commercial finance which is our equipment finance and ABL teams. They also continue to deliver strong production and balanced growth. We’re experiencing good deal flow there so that we can screen credit and are considering and executing on capital those companies that are considering and executing on capital investments. As I said about health care, these balances produce positive NII but are at a little bit lower spread.
We saw some consumer loan growth for one of the first times and it grew about 5 million in the quarter led by HELOC production. Fourth quarter 25 was our first HELOC growth quarter in 25. About 15 million and a three year high of applications in the quarter. So we believe HELOCS will continue to be a solid consumer product into 26 and we get about 40% line utilization there. And finally kind of wrapping up on growth. I’d like to call out our business banking team. They produced a strong 36 million in growth this quarter at our highest spreads.
We recently recruited an accomplished executive from the super regional bank to lead our business banking segment and have high expectations of that team concerning loan and deposit growth throughout 2026. Our goal is to be the best bank for privately owned businesses in the country and we’re committed to delivering on that aspirational goal with quick credit execution, market leading, deposit products and sophisticated wealth management for both businesses and business owners. So if I Look forward to 2026 I believe our team is calling on the right clients and prospects to deliver on a better segment mix and deliver on our mid single digit growth guidance.
So kind of wrapping up when you look at pay downs, I think we can expect pay downs in cre. I think we can still expect some entrant of private credit and other lending opportunities like that with some of our clients. But right now we feel like we’ve got a fairly stable base to work from and you know, it’s all about generating business going forward. Michael, any, any follow up?
Michael Rose
It’s a very detailed response, so I appreciate all the color maybe just as my follow up question. So looks like the ROA target has been moved a little bit higher from, from last year, but the TCE ratio is also higher. Please walk us through some of the other assumptions that kind of underlie, you know, meeting some of those targets for your CSOs. I know you have the fed funds rate at 3.2, but we’d just love some other colors around kind of the base case expectations. Thanks.
Michael M. Achary
Sure. Michael, this is Mike. I can add some color to that in a few comments. I think the biggest thing is this notion of consistent balance sheet growth, organic balance sheet growth over the next three years. Our guidance for loans has stepped up this year to the mid single digits from what we achieved last year, which was akin to more low single digits. So kind of continuing, you know, this notion of consistent balance sheet growth over the next couple of years is really important. You know, you called out the rate environment. We’re assuming, you know, just to keep the assumptions, you know, straightforward.
Fed funds at three and a quarter, which is where we expect fed funds to end at the end of this year. We’ll continue to reinvest back in the company. So I would expect expense growth to be something on par with what we’re guiding for this year, which if you kind of strip away the investments that we’re kind of calling out in the guidance and the annualized impact of Sable is still a pretty reasonable run rate of somewhere around 3.5 to 4%. So that kind of continuing for the next couple of years. And then look, we’ve been tremendously successful in terms of kind of upscaling our fee income businesses.
The guidance for next year is in the 4 to 5% range, you know, so to kind of continue that going forward is equally important. You know, we’ll grow the deposit side of the balance sheet, you know, somewhere over the next couple of years, I think in low to mid single digits. And then, you know, the NIM expansion will follow along with NII growth. So those are the main things now in terms of, you know, the TCE guide of nine to nine and a half percent, you know, we’re well north of that now at just over 10%.
You know, you can assume that we’ll continue buybacks at the levels we’ve done, you know, both in 25 and again what we’re guiding for 26. So I think the combination of continuing, you know, a pretty Robust buyback program along with addressing the dividend and organically growing the balance sheet should help us get our TCE down to those levels. So those are, those are kind of the main assumptions.
John M. Hairston
Michael, this is John just to, I’ll add very little to it but I think if we kind of step back to or step up to 60,000ft and you take what Mike and Shane both shared, the ROA guidance being a little bit steeper than where we are today doesn’t seem like a tall task if we weren’t reinvesting back in future years revenue like we are today and what we got it to. But you know, our goal is not to just become a very or be a very high profitability organization. It’s also to deliver on pretty reliable balance sheet growth year in and year out.
So investors see PPNR continues to grow but still maintain a pretty profitable book. And that’s a hat trick to pull all that off at the same time and just for a bonus maintain excellent to very solid credit quality. If we slowed the expense growth down some through reinvesting less then our profitability guide would have been higher. But our goal is to add bankers and add offices perhaps the latter part of the year next year and continue growing a bigger balance sheet and higher growth markets so that on an overall basis investors going to see that value build over time.
So I hope that helps you kind of bring all those pieces together.
Michael Rose
Yeah, it’s all very helpful. I appreciate all the color. I’ll sit back. Thanks for taking my questions. Thanks a lot. Happy New Year.
operator
The next question comes from Katherine Mueller from kbw. Thanks Good afternoon.
Catherine Mealor
Hey, happy to hear. Katherine, a question on just on the margin. You talked about seeing modest nim expansion in 26 but we’re getting seven basis points immediately up front from the bond restructure. Kind of walk us through kind of what you’re thinking about the margin kind of outside of that one time event, do you kind of still see a core margin having upside or is it or is really that modest expansion coming from the bond restructure and outside of that we’re kind of stable once we hit that new rate.
Michael M. Achary
Sure, I’d be glad to. Kathryn. So I think the main underpinnings of what we’re referring to in terms of our ability to widen the margin and grow NII next year is really around the balance sheet. So we’ve got the loan growth pegged at mid single digits. So you know if you assume that somewhere between 4 and 5%, you know that should add a healthy amount of volume to our balance sheet, you know, and certainly coming with that will be, you know, an intended increase of average earning assets. So I think first and foremost it’s organically expanding the balance sheet.
Then you called out the bond portfolio restructure. So, you know, that’ll contribute, you know, 32 basis points in terms of the bond Yield and about 7 basis points points on the NIM. But related to the bond portfolio, we also have about a billion 150 of cash flow, principal cash flow coming back to us next year. That will be coming back at about 375 and going back on the balance sheet, call it between four and a quarter and 4.5%, depending where rates are. So that’s a significant improvement on top of, you know, the 32 basis points related to the bond restructure.
So that could be as much as, you know, somewhere between 45 and 50 basis points of bond yield improvement from 4Q25 to 4Q26. So that’s, that’s significant. Then in terms of our cost of deposits, you know, we’re assuming the two rate cuts next year, one in April and one in July. So given that, you know, we’ve got anywhere from about 25 to 30 basis points improvement in our cost of deposits, you know, from fourth quarter to fourth quarter. A lot of that’s coming from, you know, our continued ability to reprice CD maturities. We’ve got about 8 billion of CD maturities next year.
Those will come off at about 3:34. The assumption is that they’ll go back on at about 280 or so. That is inclusive of about an 81% renewal rate. So the organic growth of the balance sheet, the securities yield improvement, our ability to continue to reduce our cost of deposits, those are the main tailwinds, if you will, toward NIM improvement next year. Probably one of the headwinds would be, you know, we do expect with a couple of rate cuts next year, our loan yield will continue to decline a bit next year, I think at a slower pace than what you saw over the course of the fourth quarter.
I think you put all that together and, you know, our NIM improvement, you know, call it somewhere between, you know, 12 and 15 basis points, maybe a little bit north of that, you know, again with seven coming from the bond restructure. So that’s how we’re kind of thinking about the NIM and NI next year.
John M. Hairston
By next year you mean 26. 26, yes. I’m sorry, this is a fourth quarter call.
Catherine Mealor
I understand that was really helpful. Mike, thank you so much. Then maybe just as a follow up back to the revenue producer and hiring plans that you have, you know, you hired, I think you said, 22 new bankers third quarter, 24 through fourth quarter, 25. So over the past year and we’re now going to do 50 in 26. So we’re doubling the amount of bankers that we’re hiring. I know part of kind of gained momentum in that plan, I know throughout the course of the year, but maybe just walk us through kind of what gives you confidence and be able to hire that many more bankers this upcoming year versus last year and maybe kind of the pace that we should expect that to come on board as we move through the year.
Shane Loper
Sure. Kathryn, this is Shane. Thanks for that. We’re confident in it. However, hiring is competitive as every bank is looking to hire from a limited pool of bankers. And the reason we’re confident is we’ve significantly enhanced our banker hiring discipline to really look just like our client acquisition process. Our goals are to hire probably a split of 60% business bankers, 40% commercial bankers, of that up to 50 and 26. And those folks, you know, really are targeted to intentionally generate a better portfolio mix a little more granular business. The enhanced recruiting process is yielding expected results.
We’re out of the gate strong in the first quarter. We began this early fourth quarter. And it’s a process that is really pretty tight in terms of, you know, ongoing meetings, pipeline review of potential hires and where they are and what their skill sets are. And we’re following up on that on a very regular basis. So I think the strength of that process has been greatly enhanced. You know, and as I’ve said before, and we’ve said before, this organic hiring plan is designed to be, you know, like a flywheel with bankers hired in previous years and quarters ramping up production as those current year bankers are oriented to our sales and credit processes.
So we’re getting the production from those folks that the 22 that we’ve hired last year as we’re hiring up to the 50 this year. And really to date, the bankers hired are performing as expected and contributing to our growth. And we monitor that performance on a ongoing basis to ensure that we’re getting what we expect. We’re also going to continue to be opportunistic in hiring bankers in our specialty segments, so cre, Health care, equipment, finance and abl. So at this point, given the enhanced processes and the work that’s going on the pipeline, if you will, of potential candidates to bring into the company is good.
I feel very good about getting that up to 50 and 26.
Catherine Mealor
Great. Very helpful. Thank you. Great quarter, guys, and great year.
Shane Loper
Thank you.
operator
Up next, we’ll take a question from Casey Hare from Autonomous Research.
Casey Haire
Yeah, great, thanks. Good afternoon, everyone. So I wanted to touch on fees, the fee guide. I know 4 to 5% seems like a lot, but you didn’t have Sable, which closed in the middle of the year. And it just doesn’t, it feels a little conservative because if I run rate this fourth quarter here, you’re already at that 425 level. So I’m just wondering if there’s, if we’re missing something or if it’s just a little conservative. Thanks.
Shane Loper
Thanks. This is Shane. I’ll take that one too. So fee income across all of our banking segments and products, as you just articulated, continues to deliver in the fourth quarter. We’ve grown consumer DDAs in the fourth quarter and throughout the year. That’s contributing to service charges, which will contribute even more as a full year of those accounts are on the books. Mobile openings have increased by 20% year over year as well as 80% of our new checking accounts are digitally active. So that really makes them very sticky and kind of primary accounts. You know, business service charges continue to perform and those are reflective of the book that we have in our strong treasury service products and services.
And as we improve our overall execution in business banking, as I mentioned before, I would expect those deposits and deposits deposit fees to follow along that improvement curve. Card fees right now are generally holding flattish in a trajectory quarter over quarter. But I think there’s an opportunity there to grow in 2026 through our purchasing card and business card growth. Merchant is another area where we have solid opportunity to grow as that business banking execution improves and our product bundling strategy gains momentum there. Mortgage fees again continue to perform and we’re ready for anything that may happen in the mortgage market with our direct to consumer digital offering that we have there.
You mentioned the Sable trust fees. Wealth management continues to contribute in their strong execution with the Sable team to retain clients and grow the base there. You know, annuity sales are a little softer in the fourth quarter but have remained historically strong for us, you know, with our managed money contributing, you know, recurring fees at about, you know, about 15.6 billion of AUM. So given those things and our focus on growing core deposit accounts continuing to deepen wealth management, I think the fee income target of 4 to 5% is solid and we should be able to chin that bar.
Michael M. Achary
So Casey, this is, Mike, one item just for consideration. You know, certainly, you know, the 4.5 or 4 to 5% might look a little anemic compared to what we were able to do this year. 25. But certainly you have the impact of Sable year over year, which kind of distorted the 25 numbers a bit. And certainly 25 was an absolutely outstanding year for something like annuity fees, which is just hard to imagine it that’s going to repeat at that same level in 26. The other reminder, I think, is, you know, we have a pretty healthy specialty series of specialty lines of business in our fee income book.
Those things are very unpredictable. Quarter to quarter and even year to year, you know, things like boli, SBA fees, derivatives, very dependent upon the rate environment, syndication fees, SBIC fees. So if you dig into the quarter, one of the things that really drove the quarter, the fourth quarter, was we had a really healthy quarter in terms of SBIC fees, which again, is one of those things that’s really hard to predict and really hard to count on year to year. So I think overall we feel pretty good about the 4 to 5%. And certainly, you know, we’ll look at adjusting that if necessary as we go through the year.
Casey Haire
All right, great. That’s. That, that’s. That’s super detailed. Okay. And then just want to finish up on. On the M and a question. You guys are doing all the right things and, you know, upping the buyback this. This quarter and, and pulling up your TCE ratio and, you know, clearly making a lot of hires and, you know, committed to the organic strategy. You know, but when you talk to investors that there’s, for whatever reason, there’s just a lot of concern that, that you guys are still in the M and A market and, and, you know, open to a deal, even though you’re saying, you know, if you’re not focused on it.
So I guess just what would you. What would you say to that, to that. That concern regarding ma appetite?
Michael M. Achary
Well, I think the most important thing for us to say is really consistency with what we’ve been saying the last couple of quarters, which is really what you just kind of repeated in terms of, you know, not something we’re particularly focused on. And I think the best way to describe our stance is really opportunistic. And I don’t know what else to say about it other than to describe it that way. You know, again, as we’ve mentioned before, we’re aware of the things that are going on around us. We’re not sticking our head in the sand.
So we pay attention to those things and talk to folks just as an effort to get to know folks and let them get to know us. But at the end of the day, opportunistic is really, I think the best way we can describe how we look at that. Hopefully that helps.
Casey Haire
It does. I just, you know, when you say opportunistic, is there is, you know, an opportunity above a three year earn back? Is that something that’s not an opportunity for Hancock or is that something that you guys would consider?
Michael M. Achary
I mean, look, in today’s world, I think that this threshold of, you know, not exceeding a three year earn back is something that if we were to go that route, we would not cross that line. But look, that comment does not mean we’re doing anything other than just approaching this from an opportunistic point of view. It doesn’t mean we have something out there ready to reveal that makes sense.
Casey Haire
Understood? Yep. Understood. Thank you.
Michael M. Achary
Thanks Cassie.
operator
The next question comes from Brett Rabitin from Hove Day Group.
Brett Rabatin
Hey guys. Good afternoon. Wanted to start on the purchases of securities during the quarter and the 1.4 billion at 435. Can you talk maybe about what kind of securities those were? And then will that change the effective duration of 3.9 that you had at the end of the year?
Michael M. Achary
It will not. First off, Brett, and in terms of the securities that we bought and sold in the bond restructure that we announced, those were almost entirely commercial mortgage backed securities. The vast majority of the bonds that we sold, as you can imagine, were bought, you know, kind of in the 2020 and 2021 vintage, you know, some in 2019, but almost exclusively commercial mortgage backed securities. In terms of the no loss bond swap that we did during the quarter, that was also entirely commercial mortgage backed securities. In terms of the bonds that we bought during the quarter, it was a variety of commercial mortgage backs, some residential, some sba.
Brett Rabatin
Okay, so you effectively didn’t change the duration of the portfolio. It was more just an opportunity. You felt like with capital to improve the yield.
Michael M. Achary
Yeah, certainly we have the capital to invest in something like this. So we decided to pull the trigger on the 100 million. It felt like the right time. The markets at the time were behaving. I’m sure glad we did that when we did it instead of commencing that in the current environment. So we’re very fortunate in terms of that timing. But yeah, I think so. It was just an opportunity to enhance our nii, enhance our nim, you know, and improve the yield on our Bond portfolio.
Brett Rabatin
Okay. And then the other question I had was just around deposits, you know, and obviously solid flows in the fourth quarter, some of that somewhat seasonal. You know, if you look at last year, deposits didn’t grow. They were, they were down slightly. And it sounds like from the comments you’ve made so far, you’re expecting to price down CDs and be fairly aggressive with managing funding costs in 26. I’m just curious how you guys think you’re going to grow the deposits. Will there be categories where you’re more aggressive or is there anything in particular that would drive deposit growth relative to what we saw last year?
Michael M. Achary
I’ll start just real briefly, but again the guidance for next year or for 26 related deposits is low single digits. That means 1 to 3%, I guess. But in terms of how we get that, I let Shane, you know, answer that question. But I think it has all to do with the new hires that we’re planning for next year.
Shane Loper
Yeah, Brad, it has, has some to do with new hires. It has to do with our business banking segment really getting traction in 26. We believe that, you know, quick credit execution there brings a multiple of those credit balances and deposits. You know, you heard me talk a lot about the growth that we’re experiencing in our geographies. That’s core business in new relationships as we bring new bankers on and are calling on, you know, different types of clients that bring enhanced deposits. So you know, we are adding, we talked about investments, we’re adding new capabilities in terms of treasury services which will also be attractive to clients to bring additional deposits to us.
So I think it’s a combination of new bankers, good calling efforts in our core markets and additional investments that will be attractive to clients to bring additional deposits to us.
Brett Rabatin
Okay, great. That’s great call. Appreciate it, appreciate it.
Michael M. Achary
Thanks, Brett.
operator
Ben Gerlinger from Citi has the next question.
Brett Rabatin
Good afternoon everyone. I just wanted to touch, I know we talked through the hires quite a bit in the notable step up on 26 expectations. I was kind of curious, did you have any sort of thing mandates, but when a new banker kind of signs with a dotted line, do they expect you to have a loan within X amount of time frame or be profitable in certain time frame? Because I think 50 bankers is great for 26. But in reality, is it fair to think that that actually sets up a much stronger 27 and 28 for growth expectations?
Michael M. Achary
Go ahead, John.
John M. Hairston
I was gonna say, Ben, your question’s about like time to break even, time to get the target Operating model, Is that the question? Exactly, yes.
Shane Loper
Yes. Yeah. Ben, this is Shane. You know all new bankers, whether they’re business, banking, commercial or middle market, we measure their effectiveness by risk adjusted revenue. And we look at that from a total managed and self originated perspective and I think it’s been said on previous calls, typically we’ll see, you know, kind of median break even at that 24 to 26 month range. So when you look at new bankers hired last year, a lot of those folks are approaching halfway through where their break even point is. And then this year of that 50, I would think by the end of 27 they would be producing very well on a risk adjusted revenue basis.
And we measure that typically in you know, multiples of the, of the cost of that banker.
Ben Gurlinger
Gotcha. That’s helpful. And then is there any kind of mandates on whether it be the legacy core team you have today or new bankers being added on a deposit gathering efforts specifically given the new kind of rate environment or how do you think about both sides of the balance sheet when you hire somebody in.
John M. Hairston
Questions around kind of our expectations on deposits versus loans, Correct? Is that right, Ben? Having a little trouble hearing, I’m sorry to ask you to repeat. You want to tackle that one, Shane. Deposit expectations versus loans.
Shane Loper
Yeah, I think it’s, you know, for all of these bankers, you know, we’re expecting a blended portfolio. You know, we’re not interested in, you know, bringing on bankers that are just going to generate, you know, loan balances. I mean that’s great, but we need the full relationship because with the full relationship, when I talk about that risk adjusted revenue, you know, you get the credit for the deposits, you get the additional fee income that comes through treasury and card and other activities like that. So you know, when you think about, you know, how we are asking our folks to go to market, it’s obviously you’re going to have to have a credit relationship.
It’s some point maybe to get into a new relationship. But we are expecting a full service to include treasury card and all the other fee products to include our sophisticated wealth management products for those business owners that I spoke about.
John M. Hairston
Ben, this is John. I’ll add some color which I think may be helpful in what you’re looking for. We’ve invested a tremendous amount of money and time over the last decade with tools that help our bankers understand what the implications are of their own portfolio balance sheet. So for example, if they’re in a specialty line that generates credit but really doesn’t have the capacity to generate deposits, then their Portfolio under their view is transfer priced and on the lending side risk adjusted for credit and credit degradation or improvement. So they really sort of are the balance sheet management manager for their portfolio and their conversations with leadership around their goals look almost like an overall corporate balance sheet discussion and our outcome meeting, it’s a very sophisticated model that took us a long time to put together and that really was the secret sauce to the improvement.
We had an overall cost of funds while pivoting to loan growth the last year and what we’re expecting in 26. So it’s a very balanced. So I wouldn’t call it as much a mandate as it is an overall risk adjusted revenue target for the year. And based on their tenure with the company, if that’s a building revenue set over time, then the core folks really have to produce the liquidity to keep up the funding requirement for the new folks if they’re credit focused. But ultimately their time to generate fee and deposit income will have to have to continue.
So when we say risk adjusted revenue, that’s literally as Shane said, that’s deposits, fees and loans offset by the risk. Does that make sense?
Brett Rabatin
Absolutely. That’s helpful. Thank you.
John M. Hairston
Okay, you bet. Thanks for the question.
operator
We’ll take the next question today from Gary Tenner from DA Davidson.
Gary Tenner
Thanks. Good afternoon. Have two quick follow up questions. I guess the first, Mike, on your comment about nim improvement, that 12 to 15 basis points you mentioned, just wanted to clarify. To me that sounded more like a 4Q to 4Q number. Not necessarily not full year over full year. Is that the right way to think about it?
Michael M. Achary
Yeah, that’s exactly right. 4Q25. 4Q26.
Gary Tenner
Okay. And then the second, just in terms of the buyback, I don’t want to put words in your mouth based on what you were talking about, you know, being on a more level basis over the course of the year, subject to maybe leaning in if there were to be some kind of sell off. Doesn’t sound like there maybe is a great deal of price sensitivity at this point. It’s more about working down the capital ratios a little bit. Is that also fair?
Michael M. Achary
Well, I think it’s fair to say that we’re cognizant of the price sensitivity. So that’s something we’ll certainly consider as we execute that program over the year. The comment was really meant that you will not see a big aggregation or be unlikely to see a big aggregation of buybacks in one quarter like we did in 25. I think it will be all things equal A little bit more spread evenly across the year. We have to be literally evenly close.
Gary Tenner
Got it. Makes sense. Thanks, Mac.
Michael M. Achary
Okay, thank you.
operator
Up next, we’ll take question from Christopher Marinak, from Janny Montgomery Scott.
Christopher Marinac
Hey, thanks. Good afternoon. Just want to dig a little bit into credit quality and just was curious if there’s anything on the commercial charge offs in Q4 that would sort of be more just temporary from year end cleanup or would you see perhaps a slightly higher Trend Going into 26?
John M. Hairston
Thanks, Chris, for the question. We’ll wake up Zaluka to answer that.
Christopher S. Ziluca
Thanks for the question. Appreciate it. Yeah. So from a credit quality perspective, actually we really are quite pleased pleased with what we see as kind of a very resilient portfolio. Over the past really couple of years. We’ve fine tuned our underwriting portfolio management processes. So we feel that that’s helping us kind of navigate any sort of specific issues. As you can see, with both non accruals and criticized going down in the quarter, we saw a lot less inflows in in general this quarter, which kind of helped with that situation. And then on the charge off side of things, you know, if I look at, you know, for instance, like the top four charge offs in the quarter, they’re really in many different, you know, different industries.
There’s not a single industry in there that is similar to the other. So they really are very situationally specific. And in many instances we had, you know, some reserves in place, some specific reserves in place on those matters that were already in our criticized and non accrual book. And so that’s one of the reasons why you see, you know, if you go into the more details, specific reserves actually did come down a little bit this quarter because, you know, we made a decision to charge those off.
Christopher Marinac
Great. So I guess the question I think is, is there room for you to let the reserve kind of run down over this next year? I mean, you’re still having low losses relative to a three or three and a half year maturity for the whole book. I’m just curious if you’ve got cover to kind of gradually lower that over time.
Michael M. Achary
Yeah. Chris, this is Mike. I mean, admittedly we’re fairly high where we are at 143 basis points. So I think the short answer is yeah, there’s probably a little bit of an opportunity. But you know, we’re very cognizant of not letting that ratio get too low. So I don’t know that you would see us, you know, below 125 or 130 basis points and Again, by making that comment doesn’t mean that we’re trying to get to that level. It just means, you know, all things equal, I don’t think we would go below that threshold.
Christopher Marinac
Great. And then as this year plays out, depending on how many we do or don’t get in terms of Fed rate cuts, how does that impact just kind of risk adjusted pricing as you think about it? I know the nominal returns are coming down or nominal yields are coming down, but is the risk adjusted, you think going to be stable? Or maybe that’s more internal than you share with us. But just curious how you think about it, Chair Powell.
Shane Loper
Yeah, I think it would be at least stable compared to where we are now, even with a couple of rate cuts. You know, again from Shane’s comments, and I’ll let him add some color if he’d like to, but we’re very deliberate in terms of the kind of new loan growth we’re trying to add to the balance sheet. Very deliberate in terms of the credit quality that we consider. So the risk adjusted spreads should not all things equal compress considerably.
Shane Loper
I think we can get better at our pricing in, you know, overall deal execution to improve the overall loan yield. And I know you’re asking about risk adjusted spread, but I think the better we can execute, the better we can price. And you know, one of our strategic initiatives for 2026 is to, you know, calibrate how we actually price and our pricing models to win business and to put some. And pressure on current clients. So I feel like, you know, we have an opportunity to put that positive pressure in. And Emory Mayfield, who’s our new Chief Banking Officer, will be leading that strategic initiative as we go into the year.
Christopher Marinac
Great. Thank you for your feedback today. I appreciate it. You bet. Thank you for the call.
operator
And a final reminder everyone, it is Star One. If you have a question, we’ll pause for just a moment and everyone at this time there are no further questions. I’ll hand the conference back to Mr. John Harrison for any additional or closing remarks.
John M. Hairston
Thanks Lisa, for moderating the call. Thanks everyone for your attention. Have a wonderful new year and we look forward to seeing you on the road.
operator
Once again. This does conclude today’s conference. We would like to thank you all for your participation today. You may now disconnect. Sa. Sa.