Trustmark Corporation

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's first quarter earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. 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.

Good morning. I'd like to remind everyone that our first 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 forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release and our other filings with the Securities and Exchange Commission. At this time, I'd like to introduce Joanne 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. Trustmark reported solid performance in the first quarter building upon our momentum for 2024. As you may have seen, we experienced continued loan growth, stable credit quality, expanded fee income, and lower non-interest expense in the first quarter. I would like to note that we're adjusting our presentation format this quarter. I will first provide a summary of our performance, discuss our forward guidance, and then move to questions. This will reduce the time spent on our comments and allow more time for your questions. We understand this is a popular day in the earnings release cycle and we want to allow as much time as possible to address questions you may have after reviewing our release and related deck. Now turning to slide three, the financial highlights slide. Please note all information presented here is for continuing operations. From the balance sheet perspective, loans held for investment increased $151 million, or 1.2% linked quarter. Our growth was diversified and reflected increases in CRE, other commercial loans and leases, and one to four family mortgage loans. Our deposit base remained stable. During the quarter, our cost of total deposits decreased 15 basis points to 1.83%. Trustmark reported net income in the first quarter of $53.6 million, representing fully diluted ETFs of 88 cents per share. This level of earnings resulted in a return on average assets of 1.19% and a return on average tangible equity of 13.13%. This performance reflects solid net interest income of $155 million, which produced a net interest margin of 3.75%. Non-interest income totaled approximately $43 million, up 4% linked quarter, as growth in mortgage banking, wealth management, and other income was offset in part by seasonal declines in bank card and other fees and service charges on deposit accounts. We're very pleased with our continued expense management efforts. Non-interest expense declined $419,000 linked quarter, which follows a full-year decline in 2024. Salaries and employee benefits, service and fees, and other expenses were all lower linked quarter. Credit quality remained stable. Net charge-offs totaled $1.4 million, representing four basis points of average loans in the first quarter. The net provision for credit losses was $5.3 million, and the allowance for credit losses expanded four basis points to 1.2% of loans held for investment. Again, a very solid credit profile. From a capital management perspective, each of our capital ratios increased during the quarter. the CET-1 ratio expanded to 11.63%, while our risk-based capital ratio increased 13 basis points to 14.1%. During the quarter, we repurchased $15 million of Trustmark common stock and a remaining repurchase authority of 85 million for the remainder of this year. This program continues to be subject to market conditions and management discretion. Tangible book value per share was $27.78 at March 31, up 4.1% during the quarter and 26.1% year over year. The board also declared a quarterly cash dividend of 24 cents per share payable June 15 to shareholders of record on June 1. Now let's focus on our forward-looking guidance for the year, which is on page 15 of the deck. As you can see, we are affirming our previously provided full-year 2025 expectations across the board. Although we are intently monitoring the impact of tariffs and other administrative policies on our customer base, interest rates, and credit-related issues, we feel it is early in the process and we've not yet seen an immediate impact. We expect loans held for investments to increase low single digits for the full year 2025 and deposits, excluding broker deposits, to increase low single digits as well. Securities balances are expected to remain stable as we continue to reinvest cash flows. We anticipate the net interest margin will be in the range of 375 to 385 for the full year while we expect net interest income to increase mid to high single digits in 2025. From a credit perspective, the provision for credit losses including unfunded commitments is expected to remain stable. Non-interest income from adjusted continuing operations for the full year 25 is expected to increase mid single digits while non-interest expense from adjusted continuing operations is expected to increase mid single digits as well. We will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion, M&A, or other general corporate purposes depending on market conditions. As noted earlier, we do have remaining availability in our board authorized share repurchase program that we will consider opportunistically. So with that, I would like to now open the floor up to questions.