Trustmark Corporation

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's second quarter earnings conference call. At this time, all participants are in listen-only mode. Following the presentation this morning, there will be a question and answer session. 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.

Good morning. I'd like to remind everyone that a copy of our second quarter earnings release and the slide presentation that we'll be discussing this morning is 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. We would 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 Dwayne Hughes, 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. We continue to build momentum in the second quarter as Trustmark's profitability metrics expanded, fueled by loan and deposit growth, solid credit quality, diversified fee income, and disciplined expense management. In our presentation this morning, I will 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. Now turning to slide three, the financial highlights. From the balance sheet perspective, loans held for investment increased $223 million, or 1.7% linked quarter, and 374.8 million or 2.9% year to date. Our linked quarter growth is diversified with one to four family mortgage loans, other loans and leases, and commercial and industrial loans leading the way. Our deposit base grew 35 million during the quarter as growth in non-interest bearing deposits was offset in part by a decline in interest bearing deposits. Personal and commercial deposits totaled $13 billion at June 30th, an increase of 103.8 million, or 0.8% from the prior quarter. Our cost of total deposits in the second quarter was 1.8%, a decline of three basis points length quarter. Trustmark reported net income in the second quarter of $55.8 million, representing fully diluted EPS of 92 cents a share, up 4.5% from the prior quarter. This level of earnings resulted in a return on average assets of 1.21% and a return on average tangible equity of 13.13% in the second quarter. Net interest income expanded 4.3% to $161.4 million, which produced a net interest margin of 3.81%, an increase of six basis points from the prior quarter. Non-interest income totaled $39.9 million, excluding the gain on a sale of a bank facility in the first quarter and a net loss on the sale of bank facilities in the second quarter, Non-interest income was unchanged linked quarter. Disciplined expense management continues to be a priority. Non-interest expense increased $1.1 million, or 0.9% linked quarter, which follows a full-year decline in 2024, as well as a decline in the first quarter of 2025. Salaries and employee benefits and equipment expense were lower linked quarter while services and fees increased reflecting higher professional fees. Credit quality remained solid with some improvement. Non-performing assets declined $5 million or 5.3% linked quarter. Net charge-offs were $4.1 million including three individually analyzed credits totaling $2.7 million which were reserved for in prior periods. Net charge-offs represented 12 basis points of average loans in the second quarter. The net provision for credit losses was $4.7 million, and the allowance for credit losses represented 1.25 percent of loans held for investment. Again, very solid performance. From a capital management perspective, each of our capital ratios increased during the quarter. The CEG-1 ratio expanded seven basis points to 11.7%, while our total risk-based capital ratio increased five basis points to 14.15%. During the quarter, we repurchased $11 million of Trustmark common stock. In the first six months of the year, we have repurchased $26 million of common stock. We have a remaining $74 million in repurchase authority for the year. This program continues to be subject to market conditions and management discretion. Tangible book value per share was $28.74 at June 30, up 3.5% link quarter and 13.9% year-over-year. The Board also declared a quarterly cash dividend of 24 cents per share payable September 15 to shareholders of record on September 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 making positive revisions and affirming our previously provided full-year 2025 expectations in all other areas. Although we are monitoring the impact of tariffs and other administrative policies on our customer base, interest rates, and credit-related issues, The situation continues to evolve, and we've not seen a significant impact at this point. We expect loans held for investment to increase mid-single digits for the full year. This is revised upward from our previous guidance of low single-digit growth. We affirm our guidance of low single-digit growth in deposits, excluding brokered deposits, for the full year 25. There is no change in guidance regarding securities as they are expected to remain stable as we continue to reinvest cash flows. We've tightened our anticipated range of net interest margin for full year 2025. The range is now 3.77% to 3.83% for the full year compared to our prior guidance of 3.75% to 3.85%. We've revised our expectations for net interest income to increase high single digits in 2025. Our previous guidance was an increase of mid to high single digits. From a credit perspective, the provision for credit losses, including unfunded commitments, is expected to continue to trend lower when compared to full year 24. This is a positive revision from our previous guidance for the provision to remain stable. There is no change in our non-interest income and non-interest expense guidance for the full year 2025. We will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion and 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'll consider opportunistically. So with that summary and overview, I'd like to open the floor up to questions.