TRMK - Earnings call 4 2023 | Trustmark Corporation

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Operator

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Fourth Quarter Earnings Conference Call. [Operator Instructions].

As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Corporate Strategy at Trustmark.

F. Joseph Rein

morning. Good call remind as copy presentation section well be on to quarter our that of that available discussed release are trustmark.com. earnings as our our everyone website like Investor of a fourth will on at I'd the morning Relations this the slide

due outlined to may introduce to management these the this as of like our materially a which number Act statements At of of risks Trustmark. like differ We with in well make would Duane with forward-looking and uncertainties, Dewey, filings Securities Securities the are results Commission. During I'd release the may Private and Reform course meaning President Exchange our caution Litigation and that earnings you to time, statements our of call, as CEO actual the forward-looking of the from XXXX.

Duane Dewey

net $XX.X fact, income regard. a Trustmark's deposit net share of Trustmark after environment. diluted challenging as as loan quality year well quarter are good and a Credit $X.XX. pleased you With Financial Thank everyone. full reported representing at Chief our me fourth you, very of in continued production Officer; Accounting in Trustmark our Officer. are year Tom growth? operating We our Chief very joining solid earnings strong tax, morning. Officer; Owens, record a in are Which morning, Joey, quarter our Chief year performance and performance a that reflected Tom fourth and income us million, tumultuous Harvey, this in and Chambers, per with and Thank Operations Barry and for credit

which income earnings net represented diluted $X.XX. share For the per full year Trustmark's totaled of $XXX.X XXXX, million,

X.X% highlights more Loans quarter turning in year-over-year. linked financial Slide or and increased investment detail our X. by $XXX.X million $XXX.X X.X% little million review or Let's held for to a

the or interest $XXX.X fourth quarter, totaled $XXX fourth the grew year-over-year. in Net and million margin deposits resulted net of in income or a billion quarter X.X% X.X% interest million quarter, linked which During $X.X X.XX%.

$XXX.X totaled X.XX%, up increase a prior XX XX.X% quarter net and For income year the margin year. of an basis resulted year-over-year. points from $XX.X prior the totaled million, the fourth XX.X% million, up in income of net year, in from the Noninterest interest interest

year increase For for and fourth XX.X% quarter of million. year. totaled the $XXX million, noninterest Revenue $XX.X XXXX, in expense of an Adjusted the represented from ended year $XXX.X income million X.X% revenue. totaled the noninterest total prior totaled the

year. totaled adjusted year, million, an $XXX.X from increase the noninterest the For expense prior of X.X%

basis remains million, fourth credit quarter during solid. loans. $X.X Net the representing Our average quality totaled charge-offs X points of

For The XXXX, $X.X for quarter average for basis was and $X.X loans. loans net for provision of $XX.X XXXX full year million. for the the was million charge-offs points held and investment X represented million in credit losses fourth totaled

to provide some X. like maintain this of levels capital We The common to on a loan credit strong XX.XX%. dividend ask and per share continue equity cash record X color payable Board total risk-based XX quality. with ratio to of a quarterly Tier of on At capital Barry shareholders and declared time, as our XX.XX% ratio $X.XX growth I'd of to March Harvey March of

Robert Harvey

quarter. mentioned, secured our $XX and like investments would from our finance of Loans of for came to Duane QX real loans. business, line commercial well growth increase, to estate as of billion Slide an held turn as million Loan I That's lending $XXX Duane. you, as X. totaled XX/XX. the during Thank as equipment for

growth loan during expect of digits We mid-single XXXX.

geography. see type can you as our loan remains product well portfolio well as diversified, As both by by

in category category. and being the XX% with construction Trustmark XX% X. development and XX% Slide vertical land to on is Looking portfolio in the existing CRE

very Trustmark's million with high-quality modest office land X% credits portfolio remain construction portfolio outstanding, of represents development of comprised turnover, portfolio and the tenants, see, which construction. metrics lease credit extremely on leverage. The strong. loan is XX% this at is overall as $XXX book. can low is Our strong The portfolio, low only levels you occupancy

forecast. macroeconomic commercial Slide million. was credit on exposure is was portfolio net diversified, for X, for for was across loan can to XX%. attributable exceeding X. single with loans off-balance you for for quarter, losses qualitative during sheet loan quarter. loans Looking negative no loan The changes At industries in factors adjustments XX/XX, a million $XXX,XXX investment growth, the held and for to On credit which The bank's for allowance well the see, the during for losses as held the the Slide provision our credit provision fourth $XXX category numerous and was investment losses $X.X

Looking to Slide X.

quarter, X.XX% We or of credit $X.X loans continue In totaled loans, credit Duane? both remain excluding metrics. quality The post for the levels. and and nonaccruals assets represents XXX% nonaccruals, allowance losses million net loans of of investment charge-offs fourth reasonable solid to for nonperforming held that analyzed. are X.XX% the average individually at those

Duane Dewey

Tom focus like I'd on to in the now Barry. ask Owens you, to statement. deposits Thank outlook

Thomas Owens

Good morning, everyone. Duane. Thanks,

a quarter an excluding during pretty the third million billion X.X% linked million X. deposits deposits with quarter. $XXX declined competitive. $XXX fund X.X% up Deposits a or $XXX the increase environment or million balances, and was $XX.X strong, after which and million the $XXX reversal that or year million of X.X% a Slide billion by X.X% to having show of the and With quarter Deposit public or up year-over-year grew year-over-year. strong to We quarter another during of of by deposit strength which continued also linked $X.X brokered at our fourth finished growth, base, increase totaled remains Turning good year-end, on quarter, amid exceptionally $XXX

million, brokered of balances $XXX good had and nonpersonal offsetting also million linked were $XXX quarter, of decreases We growth in up balances in $XXX balances personal million. which

brokered CDs mix, down $XXX and million million by nonbrokered $XX Regarding time declined $XXX quarter CDs million. with deposits linked of

months. quarter, deposit of million about weighted a paid As by rate to with billion X promotional totaling continued of time year-end, remaining average weighted our and book the $X.X shorten linked X.XX% average $XX declined to term

quarter, book regarding of noninterest-bearing of $XXX represented deposit as term XX. of million totaling million X.XX%. million weighted to declined linked of X.X% DDA an balances all-in by DDA the months broker linked rate December also XX% mix, Also as with remaining about average about noninterest-bearing declined shortened Our weighted And $XXX X quarter deposit about paid the or base average $XXX December XX. and

increased third the quarter. down during prior points to quarter increase the X.XX%. cost quarter XX quarter linked interest-bearing Our of deposits was from of from by points the basis increase basis prior That XX

maintain Slide to and low Turning exposure Trustmark a stable continues granular base. deposit XX. to

with During average about the collateralized balance and nonpersonal about $XX,XXX. XXX,XXX had deposit of an fourth we quarter, excluding fund average accounts, accounts, public of an personal

essentially December uninsured of deposits XX% was and XX, of billion of of which uncollateralized at mix maintained that at were coverage representing linked As deposits. capacity, XX%. deposits insured our XXX% uncollateralized stood uninsured and XX, our borrowing December We substantial at are that quarter were XX% meaning unchanged $X.X collateralized, secured and

quarter cycle basis a of cost Our XX%. XX date of fourth beta to quarter total X.XX% represented increase of cumulative points and a deposit linked

day cost deposit a the is for cycling beta an forecast X.XX%, of in first increase would which XX%. to quarter Our for represent

decreased interest XX, XX, On to of volume to Slide essentially basis which asset X.XX%. variable dilution rate interest December sensitivity, resulted of And of was portfolio more linked revenue than X margin margin due XX to with XX substantial by liability $X.X and in with XX. the rate million, the raised quarter income risk linked above Net rate $XXX Slide driven accretion FTE a interest offset Net our by as decreased as loan basis on totaling due [indiscernible]. mix profile net Turning points points by remained basis points million quarter, asset interest XX% coupon. unchanged

end During $X.XX rate swap entered $XX starting million a swaps, the portfolio at of fixed fourth weighted average years which weighted the X.XX%. billion, quarter, maturity we received notional quarter of notional forward a and of with into average X.X to brought

to floor program reduces in weighted of million of X maturity at our entered We a to into $XX $XX floors, asset flow adverse the hedging a with The starting also potential interest notional years rates. shock which sensitivity notional rate SOFR average average million quarter cash portfolio brought weighted downward substantially end X.XX%. and forward of

card for bank in were decline the driven or of driven faced full increases to other million for fourth decrease quarter XX. million revenue deposit or from year $X.X interest year X% in derivative commissions by accounts. and million, $XX.X the rate Slide million a a decreases $X.X The $X.X in full totaled The seasonal of Noninterest by income was decline was X.X% million in decline year. banking million; normal $X.X and both and totaled the primarily in increase a which headwinds on linked insurance fees, quarter charges service million increases quarter significant the prior as million Turning $X.X environment. $XXX.X primarily by $X.X decrease of somewhat offset increase Those from million a insurance was mortgage commissions. customer in $X.X increase businesses linked and

noninterest of demonstrate strength. well-diversified For represented revenue, revenue the XX.X% income quarter, total to continuing

which fourth Revenue decline from quarter, increased effectiveness XX. of net to $X.X $X.X resulting hedging Banking prevailed a XXXX. was the year is The by million full million $XX.X totaled million, difficult on driven which during Mortgage year environment, hedging in bringing to Turning million. full $X.X Slide the decline negative revenue of

production, While remained XX XX.X% XX% about in ask quarter, of gain fourth in production points market $X.X fourth points. Chambers XX% expense basis and loan full to billion assets noninterest I'll represented sale quarter, the on on year decreasing the increases pressure And XX%. decrease cover runoff servicing the now $XXX in basis from the quarter production held decline under to income prior while servicing represented Loans Tom volume from offset by Gain loans changing fair of loans. Mortgage money. remained year. in capital on XXX secondary the margin Retail of mortgage in sold of sheet balance in representing of a mix value and million. or the strong XXXX, totaled sale

George Chambers

Thank Tom. you,

noninterest XX, detail we'll of our total Slide expense. to see Turning a

FDIC other relatively line During million, in of fourth quarter, adjusted basis. which by a is increase $X.X All unchanged $XXX,XXX expense of included in remain driven mainly linked-quarter linked a the increase items million, expense expense. assessment quarter $XXX.X expense an noninterest on other X.X%, noninterest or totaled

As noted from Trustmark positioned Slide a on well capital XX, perspective. remains

quarter a equity XX.XX%, XXXX. Tier mentioned, ratio points XX.XX% XX solid As Duane ratios our of risk-based points. capital common linked basis a not any ratio of of linked remain a its of total and quarter during increase previously with shares Trustmark did capital basis XX repurchase a increase of X common and

of million of Trustmark's authorized $XX Board be XXXX, through a Trustmark's XX, repurchase shares X, stock announced, may January outstanding under previously XXXX, effective As Directors acquired. program December which

Although deployment organic to in a place, our you, have share for we priority lending. repurchase be Back through program continue to Duane. capital continues to

Duane Dewey

Tom. you, Thank

commentary a commentary look our on slide for XX. take Let's Slide at outlook now

look decline in are expected digits let's market while high of balance We're grow mid-single loans the deposits at based of Securities low flows, interest digits. to balances on First, portfolio XXXX, course, to expecting mid-single to expected are in which, are sheet. subject nonreinvestment digits changes grow single cash rates. to by to

costs, to net the approximately digits stabilizing forward full on growth net income year based X.X% income interest rates. single deposit to of expecting margin on interest implied reflecting decline resulting continued statement. 'XX, earning in Moving interest asset market low We're and in

loan commitments outlook. unfunded For growth, continued current nominal including mortgage, improvement perspective, expected trends. a and modest From credit, for Net reserving to noninterest some the is provision business. grow is requiring expected future some are the improvement income additional dependent current growth losses, the charge-offs the digits, income mid-single wealth reflects based macroeconomic total be to quality in management and on insurance in which noninterest economic forecast in upon credit credit

and the as both For from couple the other is as adjusted our to additional efficiencies commissions heightened see the talked of impact technology noninterest full to XXXX. FITXGrow our areas years, of along cost begin containment is initiatives initiatives, production always the expense those will we efforts, about company have This company. year key other To that in in in we've initiatives well single low invested commission-based so with end, to we XXXX, subject businesses. in talent which digits across that of increase growth expected last in in mostly

growth and continue we'll with approach a disciplined loan preference capital deployment to a M&A. Finally, organic for potential

continue base a will at to implement to to We this open up to questions. and corporate the priorities maintain I'd strong now time, initiatives. floor capital like

Operator

[Operator Instructions].

from from Piper The first question Dick Sandler. Graham comes today

Graham Dick

you NIM. most the are decline to through So peers a implying that you loans. guys Fed be wanted how overcome fixed outlook on NII this? XXXX, I which know hear what who say amount from and a fair might on have NIM now. thoughts to your start different other Can guess saying interested just is any than other of from I I to right differ the pressures asset there bit rates. enough rate of to your just will walk your guidance is repricing your floating just throughout banks lower I'm out

Thomas Owens

margin. come X interest this Graham, And an net so with I continuing by quarter you start Owens. just that back-to-back far in is agreement saying net We've points compression great of of commentary cited. a I'm here off disagree to margin. declines with basis I'd Tom the your that what linked somewhat extent, interest interpretation in

those I think before quarter basis was X the points. X

with continued reasonable to But we given the first decline has increase think that are linked we see for what the order of in another a been. guidance I going assume we've that terms magnitude so quarter, the it's of anticipate anticipating. rate similar the run that quarter costs, you And you're deposit to in

asked I of terms inflection income. call, in about point quarter's net interest net and last think on margin when the interest

quarter then gave third we guidance point, in this it quarter. come the I think to at And second a I was quarter. might second the to think

to similar comments, agree point market in the rate Who are you've in fixed getting that do? based But environment and to decline the seen we income first margin of the an accrete on enough do assets forwards. the is a we the last interest in all to think modeling we competitive implied said, generally is quarter are sheet as several in and if on So remains my stabilize, -- with guidance And accretion what I Our linked deposits. I margin. a modestly. inflection being interest some repricing the to net quarters. interest obviously, Fed over said going that is commentary prepared then knows for net modest that quarter it actually to terms And not balance what net time of

answer. probably in get the in net accretion. modest long-winded and here we is is first a answer The that's some And think we of some do trough the interest short terms there then So margin. quarter stabilization

Graham Dick

the of look you few the a you did then know into have thinking at XQ, in of I curve day right you I So built what changes accretion, about -- past I said when rate What the maybe obviously was forward all wondering this full but which then for as the guidance, end XXX you're say guess [indiscernible] But baked out guys just -- out that stabilization, year. basis now. points guidance you the of sort

Thomas Owens

forward. the question, some been I'd because market in ask to like Graham, there's implied volatility

of has although it come out did yes, So cuts when a the still And does, our our it probability largely we're together. bit. forecast, which quite fixed March the it, in have putting plan the cut

target not, repricing ending again, the comes with whether at of the the the X Fed just of cuts rate that ongoing say will the assets, I top X%. the But was let's say range year on on the pass hold. to So or fixed year,

what Let's here, income. we've hold say reprice back I net of half the of rate still that the see because and to are platforms wrong on talked assets and of you you interest start the for remainder margin the the think year, of marketing that Fed lift is net to some fixed the continuing and the get to interest into the dynamic year. completely just about

competition and think of the terms Fed reason the looks competition of really yield to the then landscape the ends in that, what pressure deposits stands of is It the the some really like what obviously I deposit competitive wildcard as So doing bring declines. that's going deposits. up that for available to down for

you're book. how in so deposit at to pretty And your need terms reactive be point, that you of repricing

reiterate in our X at like book this point, the books, the give months. those the time is deposit just our of billion about together average remaining deposit I'll you which is promotional and commentary, weighted One details term on broker on the something reasons time is to point, prepared book my $X.X

think out if does. the I that well whatever whether to skepticism right, deposit and and forwards we industry react promotional clearly, Fed not. or to down the in out begins And the cost be opportunity the So time really a turn do we're cut turn proper there's the to the implied to think I to positioned if Fed market think going But to that's right, in of books. amount fair the deposits to reprice be to pressure March provide take they as off

Graham Dick

So sounds cuts Fed that year that for just to like understand it the make I this would way correct? saying I'm be I hearing the margin Fed correctly. the than hold. on Is it, better want sure

Thomas Owens

No.

way. it range look 'XX, analyst terms of interest I analysts estimates, So When in for income when analyst expectations were at where I'll of the look say terms the in interest margin before and full XX they're of that, look net I when at ago cut net a estimate I they're median and at going 'XX, going done to maybe the where were Fed the and to days for we year XXXX. here cut Xx to essentially start in idea hey, is different that's

net analyst internal very was Our on margin. NII estimates, modeling and already both similar interest to

you half the that. is We're there's that you asset we're rate. today question book so reiterates so no floating guidance and essentially look about when the giving slightly And sensitive just at

can you along rates deposits. But well. the down promotional that creates to we deposit pay and way we've react Fed income. increasing been with question starting as RAC that various products interest and net on a quickly headwind how to question book ease no there's your is broker beginning So The the reprice

So however, path interest have range giving think interest the the of we're in you we net it and to year in be we of turns monetary out margin opportunity, the income. ultimate of this policy terms terms in net

Graham Dick

a And are quarter. just up on just Nonaccruals quick credit. again bit this question one little

the you're if coverage the relative Like wondering about reserve on reserve to comfortable with Just you that's where of today see the nonperforming for side. X.XX at is what nonperformers. to ratio

wondering potential future some feel you for it now? So in maybe if if the right just reserve good where there's is build

Robert Harvey

good of where I worth nonaccruals, way, Maybe analyzed would Graham, $XX.X include reserve feel of XX.X%. it $XXX million the this that or is say, we today. is have individually Barry. And the are reserve looking I another you do when of at million those

I even A do respect. good we feel different. today solid me terms and So individually the nonaccruals, little standpoint feel of from nonperforming think you that about are our reserve on number But of that like go though actual we capture in terms calculation. in it reserve XX.X% that of nonaccruals, going that the are makes of on if terms feels course, credits, you precise what if in the larger is about of assets a have then the a we X.Xx, those test very analyzed where are of going in be know to they're to the

Operator

with question The D.A. comes from Gary next Tenner Davidson.

Gary Tenner

able is you similar the repricing that, what assuming I'm down? it's you're of lag see do until quarter. deposit you follow-up ask about of beta; to beyond Do the do first you side? type just outlook. into way bit pretty you the wanted brokered. terms think lag got -- But talked you What on deposit in guidance kind what there of a I are on beta? think the you the think a the you a promotional curious, in on deposits And the of

Thomas Owens

is Tom this Owens. Gary,

it, about to is simple So beta, the And reference X.X%. answer is that deposit the the start quarter starting our and on currently $XXX first, assuming first you got Fed are of let's you Iâ€™ll where costs which let's to they -- at give that so starting is answer of that's range the point about the pass. XX% with comes the top guidance the point point, the assume say I way would

by the basis basis time does quarter, much about which would fourth cost turn means what And so -- said, the be, points. the that basis how decline And XX to do to points? the XXX get in you if say, by round think XX% out deposit I the right, between we in about then you well, is relationship XXX the points of and year-end, numbers? of XX%, beta XXX what's

the off first I think it, wind model or going points be XX up, from so, to that's $XXX which quarter, you're probably XXX call is it in So you take that, about, reasonable to would and the of basis where million. XXXX

the that's quarter that If super And beta you points with and well, to constant use. I'll and in a want then we're quarter from platforms XXX be to pretty moves constant -- of beta In we the those other to and first in like XX, of relative fourth the XXX it's market XXX modeling word the quarter, XX XX% linear pretty something to to go pass. Fed keep first a those think it's next round, each pretty it's relative XX the about get next to basis able XX%. come that cuts, words, is then if the we'll

Gary Tenner

you with could if just me this then. wonder I square

deposit book. beta rate factor the rate and of on beta a repricing loans less in at variable deposit If but overall you're still, course, XX% that's loan between the you gap decent the but repricing XX% your that a variable pretty looking hedges, if than and

Thomas Owens

fly, that floating much base to a fly, mathematically, Xx as head do my have as the do multiple, is but in I'd Yes. in head but a the answer. on deposit on rate book. X.X which it's is the that's difficult Hard all loan the to little my the to

Gary Tenner

follow-up. ask quick can a I you If

they you assume brokered of additional time? deposit low to does over do growth in any mid course paydown Just that those up? the the year, as or come renew in the Or mid-single-digit terms for you think of just

Thomas Owens

I prepared comments. I down flat think to as that slightly, in be my said will

We we personal When deposits have quarter. in those good for about in cost. bank solid a having the able where environment especially declining, having growth feel ex year an really year growth. competitive in of the the think been growth it, at good you really X.X%, brokered that fourth deposits raise about and of to full had been full have We deposits

answer And do view that. broker deposits our in I flat feature to the repricing more we XXX manage so basis XXXX Certainly, the yes, not on a broker of balance the is of book was as think points deposit deposits Utilization down permanent with to of sheet. of Fed rate hikes.

going over So be the try to continue attrite. to book certainly, we're and deposit opportunistic broker time have to

Operator

Catherine [Operator KBW. Instructions]. The Mealor from next question with comes

Catherine Mealor

Just margin. and indexed one And are the year? it the a that reprice percentage that that the will you an loans expect brokered fixed maybe of you Do more on what follow-up do this of then to you amount that have out have or deposits rate reprice immediately just similarly, promotional lower. amount will

deposit Just to on side? lower the thinking immediate starting repricing lower the be rates month about

Robert Harvey

part. rate the we loans months. first Barry. this months. of and next fixed then the start loans expect million be I'll million be rate around But the little fixed with the in of second less And repriced that, than maybe XX $XXX to is Tom to a over next repriced Catherine, XX bit XX do one take will to $XXX

Catherine Mealor

up coming and rate the on that's average to? And repricing what's

Robert Harvey

were rate that to X.XX. to XX repricing XX next X.XX%. the months, then The ones average those out, repriced is months are is the that XX in average going the And rate be

Thomas Owens

can probably of portion the public -- little treasury have can large some so feel And going to a I'm range and and color throw balances down on services I that repriced you not public I fund corporate $XXX have somewhere on huge hands we are reluctant have I those the piece. $X then of answer more categories. portion a down call I corporate we're have I solid indexed. we deposits number up and we public, little some a if now, But a try on but did on that balances the my also get million more it's are balances a number, immediately. did numbers don't not And hands to a in out give call, that you get because reprices I gave can on we X between are the think that indexed. that really front fund Catherine, me while CTS right about that see good I'll the billion. what my that just and on add I'm

Catherine Mealor

And then other -- high do talking bond doing any off running just do something we I thoughts book? on about that? some the how companies restructures, the all more year, about any throughout at thoughts single-digit immediate around you're books bond think a know you see pace the bond on but

Thomas Owens

percentage our the portfolio of securities we look to the is the small pretty certainly we've obviously, done X we sensitivity. steps value there in have bit me. securities asset extent talked I'll other and thing at it. it, understandably you're to that in you portfolio adding gotten And But on borrowing with fits we've is of truly prepared flow that or not question to time looked cash little tell are One a spread every my basis rein a your you, on Catherine, which to have basis. â€“ we've economic quarter every that a spread that in at portfolio and that fund the comments, there's there about parts portfolio are and profile. the hedge a not, opportunity I in whether struggle continued I the always the And to that

sensitivity. data, and made a the naturally Fed feel there we're the policy. our as of But we pack well We that middle asset uncertainty of are call be we're can to respect with the sensitive. facing path like asset very decision from And the as best tell of in terms to there we is with report monetary

the well restructuring we is hedge securities portfolio calculus flow as do as of And cash part portfolio. so the of that potential what with

look say we continue at it. I'd So to

Catherine Mealor

curious that. just you don't any And how sale? you're insurance the about if potential question thinking on that any know updated I But where quarter. get in thoughts changes every

Duane Dewey

Catherine. No, I a thing been Trustmark. quarters, in say prior the the business said good would I've for same That's

really think in us. a business that record at of change what I is this on year what prior and aware It's where point, valuations year from good to opportunities there. the XXth guided of this the going business. been for We're revenue aware consecutive of and That But was said there's profitability calls. weâ€™re around we've well well in us. no

Operator

closing conference back would This I question-and-answer Instructions]. over [Operator session. like turn the to to for remarks. concludes Dewey any our Duane

Duane Dewey

say our again to back end together the April. We of look at you. to for call. the full We great fourth Thank end quarter thank of morning getting year for want of the forward all and the with all have you towards just and earnings a again joining of week. rest this you I quarter us first

Operator

Thank The conference you attending presentation. for concluded. has now today's

You may now disconnect.

Trustmark (TRMK) 24 Jan 242023 Q4 Earnings call transcript