TRMK - Earnings call transcript Q2 2024

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Operator

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's second 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. Please go ahead sir.

F. Joseph Rein

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

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

Duane Dewey

morning this joining good Chambers, and Owens, you you, our our Barry Tom are Officer; Accounting Joey, morning. me Chief Credit Officer. everyone. us Financial our Officer; Tom Chief Chief Harvey, and for Thank Operations With and Thank

The and second quarter was Trustmark. quarter for productive a very active

we to So fronts. on share this morning have with multiple you lot a

we risk completed reduce earnings, our on increase enhance significant as X X. to non-routine actions profile, outlined Slide quarter, flexibility. We items strengthen profitability significant capital and the had During

previously on First, recognized revenue announced Fisher completed Insurance, gain of on capitalizing after-tax an the we XXx net Bottrell million. $XXX.X attractive Brown X.Xx of We multiples sale and income. sale of

purchased million. in average additional process then profitability provide boost June. with throughout margin, securities an of Second, our Tom profile. Owens that X.XX%, late We a billion color net much and this securities AFS of some $X.X interest an of average yield on significantly will May restructuring we our $XXX.X of took of billion sold place X.XX%, which generating will of enhance yield loss with $X.X AFS

X-X portfolio. Third, mortgage we profile the family of our reduced risk proactively

an resulted loans. in During The this a and loans $XX.X million, selection, loan $XX.X sale after-tax nonaccrual and payments we million delinquent million. totaling sold that sale mortgage time non-performing or reduction more quarter, the loss mortgage in of X or were at drove of the $XX.X

Finally, Class quarter. With The we during quarter quarter, a of X resulted B-X the the after-tax Visa we the during for moving details. shares stock. shares additional Class common in parts to shares C the and our the gain exchange all Class $X developed strength and exchanged B-X illustrate Slide provide million C of

next reported earnings of reflects column million recognized $XX.X $X.XX the of $XXX.X we the sale that diluted first quarter the on $X.XX earnings or The agency. The million share second column in per of diluted or reflects share. per

the the During the months from $X.XX $X.X earnings per the we diluted the in was in operations AFS the mortgage and of quarter quarter, adjusted Visa securities $XX.X million sale, loan income. Backing portfolio, share share. the owned agency, exchange, of the X associated operations the discontinued the with million agency, second net restructuring continuing we out recognize or

performance chart. Our compares favorably the during the the net of We've on also quarter, in is discussed non-grouping operations quarter. side right shown continuing prior to the income from in the which transactions second quarter

expense strong focus of to X% operations during be noninterest from the of million the contributor net accomplishments the growth significant exceeded X.XX%. Deposit increased the $XX $XXX interest and represented and X.X% or continues net management income, operations XX of million linked-quarter, linked-quarter. Loans the from net year-over-year. X.X% continuing quarter for to increased continuing to declined increasing mortgage recap The from a total organization was held million expense growth expanded million in fundamental $XXX linked-quarter, the in investment linked-quarter for year. A $XXX our basis X and linked-quarter, prior $X a loan Revenue and the million. margin which Slide increased interest XX.X% to noninterest to of turn revenue. Diligent sale, the quarter points during income let's growth, Now, quarter. $XXX million performance

points loans X expanded net X.XX% allowance include credit XX.XX%. basis loans, loan average ratio XXX takeaways excluding us for while points XX% of declining loans. and $X Given XX.XX%, risk-based for June individually and tangible capital representing capital and XX. Trustmark's loans nonaccrual at analyzed as CETX basis to million, assets during points tangible represented key charge-offs, to for basis the of XX loan loans expanded expanded losses excluding sale, points investment increased XX ratios to The quarter the XXX% meaningfully mortgage nonaccrual equity held X.XX%, sales, total the totaled basis of mortgage to

the and strong, fundamentally was profile profitability during forward. designed quarter to the taken were actions second quarter The going enhance our

year to based we digits cash continuing in X.X% for approximately in to X, Securities the stable are interest grow deposits growth, flows. loans reflecting anticipate XXXX as Slide stabilizing resulting reinvest forward and single for expected increase repositioning, of sheet XXXX. balance year investment XXXX, on market low-single implied to interest to expect net full margin we rates. full asset digits accretion remain costs Turning net in interest balances from held the income deposit We

be expected the future in commitments second of charge-offs low-single We current year range on remain the expected half credit from expected below low-single to the of operations increase the continuing continued is the 'XX. quality second Net for half including losses, half loan credit X.XX% in from forecast dependent to are the second a outlook. Noninterest to XXXX. increase expect from growth. credit current to of economic Likewise, 'XX compared compared half is noninterest when net X.XX% is the provision the to first industry based in and expense the the half of perspective, of income trends, digits digits operations unfunded in macroeconomic interest first continuing average the of XXXX. From also to margin operations to upon

market purposes our for market organic general with on conditions. expansion, preference growth, other continue to depending loan approach capital will We or deployment disciplined a potential M&A corporate

XXXX this time, going and on our dictate. At and credit sheet color is Board to Harvey provide the continue some Barry assess share approved also market program to We quality. of portfolio balance Directors as loan the repurchase

Robert Harvey

to. glad Thank you, I'll Duane. be

$XX.X X, mentioned, for Slide growth commercial the billion of $XX investments an came line and totaled XX. That's held to as during real June Loan estate of quarter. loans finance QX equipment Turning the of million from Duane for increase, as business.

We expect loan of growth low-single for XXXX. digits

well As remains our product both as diversified, you can loan see, standpoint a portfolio from geography. a as

XX% portfolio vertical Looking Slide land X, the XX% Trustmark's development. with XX% onto and construction category CRE existing in in is

low construction. Trustmark's can was comprised see, our of represents development The you land construction portfolio $XXX only outstanding, loan book. is no high-quality is of strong bank's portfolio across levels turnover, well category occupancy million XX%. low and you Slide X% industries, with X, portfolio, with lease as Our tenants, which the numerous office exceeding single XX% at see very modest credits diversified, can as is leverage. Onto commercial overall portfolio

for held million Slide for $XX.X investment credit quarter. XX, the provision losses was at our for second during loans Looking

loan million. for a unfunded a XX, X Excluding credit for well migration. The $XX.X one, risk the resulted was allowance losses parts: driven loan negative credit June $XXX loans million, losses provision for commitments. held million, for off-balance was in for was CRE growth exposure which $X.X the mortgage sale, as the investment held sheet losses At by credit decline primarily provision which for loans investment for from as for rate credit was

The loans XX, Looking continue represents credit quality to the excluding of losses for totaled nonaccruals, credit X.XX% allowance of are investment metrics. million. post solid held quarter, net and those individually for we charge-offs onto that analyzed. In Slide XXX% second $XX.X

the basis as points quarter or result X referenced sale, of charge-offs totaled net sale. Duane? previously of assets mortgage loan Both million loans. $X the the Excluding significantly nonperforming loan nonaccruals during mortgage and decreased average a

Duane Dewey

Okay. Thanks, Barry.

Owens will income. noninterest and Tom cover margin interest Now deposits, net

Thomas Owens

Thanks, Duane, and everyone. good morning,

was and to the increase by and Deposits Slide quarter, totaled of June strength of of at $XXX deposits $XX increased which million or Turning of increase another $XX deposit year-over-year a of X.X%. The by base. of noninterest-bearing increase billion XX, growth CDs. balances, linked-quarter, $XXX million continued $XXX XX. driven driven in a Time to $XX.X show base. our remained had in also deposits million or million linked-quarter growth our on $XX CDs million million personal XX% which linked-quarter at of good DDA We in growth brokered deposit X.X%, by

of XX, time weighted deposit about a with X months. of price and X.XX% average our term book exception a rate and totaled promotional $X.X billion paid As weighted of June average remaining

XX. deposit and book totaled paid rate an $XXX brokered million weighted the remains June all-in at Our X.XX% term weighted average months about of at remained as remaining at about X average which

basis of Our basis X by X.XX%, increased prior quarter. to second in point quarter interest-bearing linked-quarter X point from increase the down cost the from deposits the

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

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

XX, of deposits June our of XX%. mix XX% and XX% that and essentially uninsured deposits insured uncollateralized was our are were As at unchanged meaning linked-quarter were that of collateralized,

capacity, uncollateralized and at maintain deposits. XX, We secured continue to uninsured stood $X.X XXX% billion of at representing which coverage substantial June borrowing

guidance actions which quarter quarter, which to the The to was deposit as pricing unchanged in guide running bring would which to by month gave second we've total continued XX%. July. cost reference linked-quarter Our has, cost cumulative prior the X.XX% to of to and date quarter, cycle toward third a start driven cost represent beta monthly variance a cost a during in first deposit second was beta the however, lower date favorable XX%. continues the taken increase X.XX% X.XX%, the approximately quarter. Deposit is at for in Deposit a to to us cycle to frame of

drop increased X Net Slide resulted of net $X.X fees driven XX restructuring. With yields from Turning trend the loan FTE interest by quarter. from XX the accretion, unusual we normalized quarter totaling continue million which in quarter. points digit our Absent accretion the basis margin by to accretion X.XX%. linked-quarter of loan from on points in basis each higher of during $XXX.X income first points second attention rate basis during loan margin linked-quarter, the securities interest interest basis to loan and a the fees, and loan respect volume linked-quarter, the revenue, portfolio net rate mid-single volatility experienced increased by to points XX, million,

during up extending June, execution of the half second which and increase was to environment, changes going improving X.X% challenging approximately also XXX of As while achieve net X.XX% ladder resulting the pleased approximately the anticipated in about restructuring we picking forward. We margin restructuring, duration the about X.X between and anticipate effective what of of portfolio restructuring interest of in securities to flows more securities portfolio securities of completed to of adjusted securities over securities were of with achieve XXXX, portfolio from a interest the points stability sold. mix years. We driven an our time, in interest by Duane yield purchased with X.XX% was indicated, with basis the we yield did consistent to the X.X flows objectives years rates, cash in while cash rate

Turning essentially to Slide risk unchanged profile interest remained our XX, at June XX. rate

variable driven XX% have to by continue portfolio rate substantial We with coupon. mix loan asset sensitivity

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

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

discount Slide to linked-quarter approximately quarter, hedge which second and increase the $X.X $XXX,XXX million was flows to XX, a cash million a in methodology. servicing decrease operations net increase. The negative $X.X Turning applied ineffectiveness, decrease higher $XX.X by assumed mortgage a asset noninterest continuing adjusted from was by totaled the driven in valuation driven and year-over-year income linked-quarter million rate

Tom linked-quarter increase X.X%, Chambers net year-over-year to Excluding management. would capital million the in been cover have I'll increase or now and noninterest and the been negative expense or have X.X%. And effectiveness, million total in would increase ask $X.X hedging $X.X noninterest income

George Chambers

you, Tom. Thank

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

During or the and decline quarter, second million expense for totaled million $XXX.X a noninterest linked-quarter of $X.X to X.X%. continued decrease

resulting seasonal mainly and compensation from increased decline decrease expense by commission salary increased This taxes, $XXX,XXX, reduced revenue. driven a by during and payroll quarter. by driven expense decreased in $XXX,XXX, Other in losses of in a the was operational expense, offset resulting decline benefits lower by

to well perspective. a XX, Turning Trustmark Slide positioned remains from capital

total increase our of As points. solid XX.XX%, risk-based Duane of with and capital commit a Tier ratios previously a mentioned, increase XX linked-quarter points, capital X ratio XX.XX%, linked-quarter a XX basis ratio equity a remain basis of of

capital focused organic program have lending. continues in $XX million we be priority for repurchase share to deployment place, our a Although currently on

the Duane to capital As will indicated, the market repurchase you, evaluate and our to share Duane. as continue program we dictate. Back levels

Duane Dewey

Tom. quarter here. us busy Thanks, very very, Great. for A

floor So questions we'll that for now open you up the have. may

Operator

will the from come Catherine Mealor KBW. [Operator Instructions] first question And with

Catherine Mealor

some on kind growth I just provided, then back continuing on wanted is start year. it really you of the that the the a to helpful of at of half to rate look and which to operations guidance

thank you with for how begin you So that out. I'll laid expenses.

then around half. in of I the of that's want run half what thinking getting million that growth the a is half $XXX back $XXX coming digit make grow some from. If where quarter, first that, and higher a kind you that is low-single you're at rate first the million, pace, little and the year sure take of a kind around just to bit I'm a than which of year of the

Duane Dewey

on. Chambers I Catherine, occurred second the quarter not things half I'll start. and Tom, quarter in will can in some yes, of think of into second that the first general, But continue continue year. the the

in a Tom? I do Tom first the of is think elaborate right But comparing little we growth the little about we'll to half, a and you're half range. think more. yes, So numbers. digit with second can very get your low-single bit it

George Chambers

merit We is believe our hit thank to increase structure. during this have driver and we second to changed Duane, year the the the of half in March July. year, of Yes. the increases of I used increase hit delayed that you. biggest in the merit year we

of in of half have first half the merit our not the will. So the did second year increases and salaries year the

will So biggest. that the be

Duane Dewey

still keeps digit it But -- that in low-single it range. low very

George Chambers

sir. Yes,

Catherine Mealor

sense. quarter. ask not was this going margin Everything question made perfect to -- I'm Okay. else actually a

the hook off built Tom, quarter that of then and you I'm it So looks reserve the you the second me. My -- CRE NPAs question your It you're put like this lot on sold in CRE. going is to from reserve. the like looks that a

just drove negative that Just any that? your within or real conservatism? Or commercial that's portfolio migration special curious estate if pure mentioned there classified from in was

Robert Harvey

speak Catherine, to this those. Barry. is And to I'll both of try

it'd The -- that nonaccrual it in gets XX-year from time and high kind as prepayments first it those category -- thought it that's NPLs room some most and more, environment, process book relates the and to ourselves while roll additional all down it's ahead rate of still that's did to to selling of of sticky And the a hard and remove. And a -- good today's and attractive, to paper. as that NPAs. are we go we relates once it's mortgage it's there's be give was thought into

ours CRE on And that the are of because in all the side to been put all relates the more of we all provisioning, of migrations part the increases lowest all migration the question there's going some are functioning substandard. We risk a is your But that to it's we're to I'm variable not is environment. And predominantly it the this in now don't and course, it see the rate functioning that's relates to mention. like stage correct. that than you As going population coming because referencing rate really banks flowing some second this was some at mean made that half be driving most all to rate challenged I as anything of rate special the -- occasionally, on second higher of it regarding functioning other out see environment. rate always your is rate through. if beginning then then cycle be it's is when just 'XX we of of was 'XX, what the 'XX, is really of books have have, of and risk

stabilize. who those Trustmark CO, also finish of are was So just time seldom reach need on that to beginning but of bit many very borrowers There there for that and to is type projects CRE in anybody support loans to beginning a time. window continue now cases the stress by is category the of to not them to more lending during booking those for give to the by fully a quite of function a little the by on guarantors, order stabilize. It's construction do most in sponsor, the time projects while, they more

So months, X months. more they XX that's need little to stabilize that's and sometimes fully a time sometimes

we're would it we're that call often appropriately them times. I times factors lead to in the to credits, make all that ACL as much are you our that as staying at which So believe times, going all is to sure making as at would sure are sure focused making we grades top I conservatism. wouldn't accurate right as sure it's at looking those all book of making just the the all on on of at grading we're very well. we're say can

Catherine Mealor

Do have or Okay. classified? of increase criticized balances the in you

Robert Harvey

We -- don't report. our will those That will they in be report call be the in course, traditionally. earnings of

Catherine Mealor

wait Okay. that. That's can great. for We

So like you're needs arguably these to migrating the but delay? of just the content be if project because to is on special more it support projects, seems perhaps loss there guarantor the low from just them mentioned, still

Robert Harvey

this That's quarter. that's a time, obviously were Catherine. correct. million quarter, sale, assessment, last charge-offs That's the We mortgage you $X one correct is see which when -- versus $X don't our million exclude

obviously, our of concern, developing want like that's on in welcome or some relief sure -- of the second of those see half be in any of ratio those don't make of rate the year and would We there NPAs year, correct in we grading concerned. of don't would cycle, really we type if NPLs do is credits. And meet service a all to those got we've terms developing we see our trend or this we trying to So next reductions any expect requirements. but debt trend a coverage to especially

Operator

Instructions] Our Gary question come [Operator with next Tenner Davidson. will D.A. from

Gary Tenner

I I'm -- guidance given front to cost costs the about guide quarter in a it's increases wanted the moderated second and just noninterest-bearing quarter. on overall. guess, the that success the the on surprised higher, ask generally third deposit the deposit I much is industry moderating for in little that the --

yourselves rates. outlook. set quarter third lower alluded took you some for impact curious better to on had that's what kind So having the to you actions up of I'm

Thomas Owens

this Owens. Yes. Tom is Gary,

So products. And good rates some all Coming actions But don't and this banks we think right? began XXXX, point I we -- deposit as try first our to found costs, it try into the opportunities to that question. deposit CDs early some particularly on on non-maturity rationalize to are as in what as rationalize and well take I say want and quarter, their base are maturing related cost. focused experimental, promotional to the what was at to

And did the some we so quarter. more would were driving than we found try liked. deposit in and is And mix have we what disintermediation deposit more first of change we that

got into of mid-March, approximately away we and so And from we that. really sort pivoted

forward, so the And I towards to us taken on would good speak, a put for guide had start, quarter, had what which we running actions quarter. the that's by mean beating the set first we've time, going what there up continue in so higher we march those the the knowing that and deposit that's costs But that seen. at for out second to same

a of of it's in I really deposit a digit in mid-single basis increase We And normalized had in so second analysts cost, loan loan talking we're That in on the is quarter, a seemingly guide in yield costs the yield what a was terms quarter, deposit terms our a an in decrease or in disproportionately on and loan second first for terms right? in result whether yield normalization. And We're a unusual a linked-quarter you sort terms basis, encourage and the of of is quarter at in the of basis you fees. in third think point in loan on terms the basis saw on about in that our investors of of deposit was large relative think increase increases basis. -- equilibrium sort for and also here increase versus of loan normalized yields this So month-over-month the on normalization. to a us linked-quarter which quarter costs. in linked-quarter hiccup the

Gary Tenner

skipped it it deposit third that kind over if the to re-pricing on quarter has second that what cost a perspective, is of is been almost guess, wasâ€¦ to boil down quarter basically were and normalized I I -- of thinking from the outlook kind

Thomas Owens

Absolutely, July And in the reference costs prepared exactly I point Gary. of right, my why in comments, that's month-to-date that's gave deposit X.XX%. you and here of

Gary Tenner

organic et just And that. are you then about ask any of I appreciate on and could really growth, footprint wonder talked M&A of follow-up conversations kind XX% of CETX perspective, capital been in an conversations? things But pushing I if could priorities ratio, talk in a about you've in I an your terms Okay. if activity from cetera. kind sort capital, levels? the more increase of where Has of there

Duane Dewey

Others add they start. need can to. I'll if

to As presented first are things all, we're opportunities, activity there there I are more about it M&A, relates us cetera. a little et -- to of that hearing and there, as being is things out yes, more mean,

little lot at do space the XXXX, think M&A activity or across processes seeing the then of and the least the minds, is with believe quarter going of I focus and about and deals thinking there are a at some I our more of discussions noise little like. a wanted these in marketplace. end our and we a increased different more this thought of But on all the day, more there. In really activity get let we activity moving kind a different So into settle, one-time through lot and to dust

Operator

back question-and-answer Dewey to the go turn sir. closing ahead, This for session. remarks. to concludes like Please over any Duane our conference I Mr. would

Duane Dewey

of and to in us, call for look the XXXX. again you our morning. Thank us third And excited forward quarter quarter joining we're this October. about busy half we very second very for Very,

then. Thank you. to forward look catching up So

Operator

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

Trustmark (TRMK) 24 Jul 242024 Q2 Earnings call transcript