Trustmark Corporation

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's third quarter earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, there will be a question and answer session. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rain, Director of Corporate Strategy at Trustmark. Please go ahead, sir.

Thank you. Good morning. I'd like to remind everyone that our third quarter earnings release and the slide presentation that will be discussed on our call this morning are available on the investor relations section of our website at Trustmark.com. During our call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and we'd like to caution you that these poor-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release as well as our other filings with the Securities and Exchange Commission. At this time, I'll turn the call over to Duane Dewey, President and CEO of Trustmark.

Thank you, Joey, and good morning, everyone. Thank you for joining us this morning. With me are Tom Owens, our Chief Financial Officer, Barry Harvey, our Chief Credit and Operations Officer, and Tom Chambers, our Chief Accounting Officer. The third quarter was a very active and productive quarter for Trustmark. Our third quarter results reflect significant progress across the organization. Net income totaled $51.3 million, representing the looted earnings per share of 84 cents. Profitability meaningfully increased as evidenced by 26.7% growth in net income from adjusted continuing operations and a 282 basis point improvement in the efficiency ratio. The restructuring of the investment securities portfolio was a major contributor to the 9.5% increase in net interest income in the third quarter. These accomplishments are the result of focused efforts to enhance Trustmark's long-term performance. Now let's turn to slide three for a recap of the strong fundamental accomplishments during the quarter. Loans held for investment were relatively flat, decreasing 55 million linked quarter and increasing 290 million year-over-year. Deposits declined 222 million linked quarter Excluding targeted reductions in public and broker deposits of approximately $530 million, deposits increased over $300 million linked quarter. A significant contributor to our performance in the quarter was the growth in net interest income, which increased $13.7 million or 9.5% linked quarter to $158 million. The net interest margin expanded 31 basis points during the quarter to 3.69%. Tom Owens will provide some additional color in his remarks here in a minute. Non-interest income from adjusted continuing operations in the third quarter totaled 37.6 million, a decrease of 0.7 million link quarter, and an increase of 0.6 million year-over-year. From an expense perspective, non-interest expense increased $4.9 million during the quarter. There are three primary drivers of this increase. First, our annual salary merit increases were effective July 1. Second, annual incentive accruals and commissions increased due to strong operating performance. And third, we had an increase in ORE expense related to the establishment of a reserve for a single property that is under contract to sell and scheduled to close in the fourth quarter. Year-over-year expenses from adjusted continuing operations actually declined 500,000. Diligent expense management continues to be a focus of the organization here moving forward. Trustmark's capital ratios expanded meaningfully during the quarter, as tangible equity to tangible assets increased 55 basis points to 9.07%, while the CET1 ratio expanded 38 basis points to 11.3%, and the total risk-based capital ratio expanded 42 basis points to 13.71%. Tangible book value per share was $26.88, at September 30th, 2024, an increase of 6.5% from the prior quarter and 32.9% from the prior year. The Board declared a 23-cent dividend payable on December 15th to shareholders of record on December 1st. From a credit quality perspective, net charge-offs sold 4.7 million during the quarter, representing 0.14% of average loans. The allowance for credit losses represented 1.21% of loans held for investment and nearly 500% of non-accrual loans, excluding individually analyzed loans. At this time, Barry Harbor will provide an overview of our loan portfolio and credit quality.