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 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. Please go ahead.

Good morning. I'd like to remind everyone that our first quarter earnings release and the 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 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 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, and Barry Harvey, our Chief Credit and Operations Officer. We continue to build upon a strong momentum from our earnings in 2025 and are pleased with our strong performance in the first quarter of 2026. Our results reflect continued loan growth, stable credit quality, and an attractive core deposit base. In addition, we experienced continued growth in non-interest income while non-interest expense remained unchanged, reflecting our continued focus on expense management. In our presentation this morning, I will provide a summary of our performance and discuss forward guidance before moving to your questions. Now turning to slide three, financial highlights. Our first quarter results reflect continued significant progress across the organization. Net income totaled $56.1 million, representing diluted EPS of 95 cents a share. This level of earnings resulted in a return on average assets of 1.2% and a return on average tangible equity of 12.58%. From the balance sheet perspective, loans held for investment increased $203.7 million, or 1.5% linked quarter, and $636.5 million, or 4.8% year-over-year. Our loan portfolio remains well diversified by loan type and geography. Our deposit base expanded $212.7 million, or 1.4% linked quarter, driven by seasonal increases in public deposits. Year-over-year deposits increased $631.8 million, or 4.2%, driven by growth in personal and commercial deposits. The cost of our total deposits in the first quarter was 1.63%, a decrease of nine basis points from the prior quarter. Our strong, cost-effective core deposit base is a continuing strength of Trust Marks. During the first quarter, we repurchased 19.8 million, or approximately 477,000 shares of stock, which represent 0.8% of shares outstanding at year-end 2025. As previously announced, we have authorization to repurchase up to $100 million of Trustmark common shares during 2026. This program continues to be subject to market conditions and management discretion. Revenue in the first quarter totaled $203 million, a seasonal decrease of 0.6% from the prior quarter and an increase of 4.2% from the same quarter in the prior year. Net interest income, fully tax equivalent in the first quarter, totaled $163.5 million, which produced a net interest margin of 3.81%, which is unchanged from the prior quarter. Non-interest income in the first quarter totaled $42.3 million, up 2.7% from the prior quarter, and represents 20.9% of total revenue. Non-interest expense in the first quarter totaled $132.2 million unchanged from the prior quarter and up $8.1 million year-over-year. Diligent expense management continues to be a focus for the organization. From a credit perspective, net charge-offs in the first quarter were $1.3 million, representing four basis points of average loans in the first quarter. The net provision for credit losses in the first quarter totaled $2.7 million. At the end of the first quarter, the allowance for credit losses represented 1.16% of loans held for investment. Again, very solid credit performance. We have maintained our strong capital position as reflected by our CET-1 ratio of 11.7% and our total risk-based capital ratio of 14.37% at March 31, 2026. The board declared a regular quarterly dividend of 25 cents per share payable June 15th of 2026 to shareholders who record on June 1st. Now let's focus on our forwarding guidance, which is on page 15 of the deck. In January, we provided full year guidance for 2026, as well as 2025 benchmarks upon which the guidance is based. This morning, we are affirming the guidance previously provided. We expect loans out for investment to increase single digits for the full year 2026 and deposits, excluding broker deposits, to increase mid-single digits as well. Security balances are expected to remain stable as we continue to reinvest cash flows. We anticipate the net interest margin to be in the range of 380 to 385 for the full year, while we expect net interest income to increase mid-single digits. From a credit perspective, the total provision for credit losses, including off-balance sheet credit exposure, is expected to normalize. While non-interest income for the full year 2026 is expected to increase mid-single digits, as is non-interest expense. 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. At this time, that will open the floor up for questions.