TRUSTMARK CORP Q4 FY2024 earnings call

• 2024 was a transformational year for Trustmark with significant actions enhancing financial performance, including sale of insurance agency, balance sheet restructuring, and expanded sales/service initiatives.
• Fourth quarter net income was $56.3 million, diluted EPS $0.92 per share, with linked-quarter increases in net income ($5 million, 9.7%) and diluted EPS ($0.08).
• Return on tangible common equity was 13.68% and return on average assets was 1.23% in the fourth quarter.
• Balance sheet: Loans held for investment $13.1B, deposits $15.1B; intentional reduction in broker deposits of $150M during the quarter.
• Revenue: Fourth quarter revenue $196.8M, up 2.4% QoQ; full year 2024 total revenue from adjusted continuing operations $740.5M, up 5.6% from prior year.
• Credit quality: Net charge-offs $4.6M in Q4, allowance for credit losses 1.22% of loans held for investment.
• Dividend and share repurchase: Board increased quarterly cash dividend and resumed share repurchase program, with authorization to repurchase up to $100M of shares in 2025.

Loans held for investment totaled $13.1 billion at 12/31, down $10 million linked-quarter and up $139.4 million year-over-year. Deposits totaled $15.1 billion at year-end, down $132.8 million linked-quarter. Fourth quarter revenue totaled $196.8 million, up 2.4% linked quarter. For the full year 2024, net income from adjusted continuing operations totaled $186.3 million, or $3.04 per diluted share, representing a 17% increase from the prior year. Net interest income in the fourth quarter was $158.4 million, producing a net interest margin of 3.76%, up 7 basis points linked quarter. Noninterest income in the fourth quarter was $41 million, up 9% linked quarter.

• Loans held for investment expected to increase low-single-digits in 2025.
• Deposits excluding brokered deposits expected to increase low-single-digits in 2025.
• Net interest margin expected to be in the range of 3.75% to 3.85% for full year 2025.
• Net interest income expected to increase in the mid to high-single-digits in 2025.
• Non-interest income from adjusted continuing operations expected to increase mid-single-digits in 2025.
• Non-interest expense from adjusted continuing operations expected to increase mid-single-digits in 2025.
• Focus on organic lending as priority for capital deployment in 2025, with consideration of M&A and other corporate purposes.

• Market uncertainties and interest rate changes could impact financial performance.
• Credit risks associated with loan portfolios, including potential charge-offs from CRE or C&I loans if market conditions deteriorate.
• Dependence on successful execution of strategic initiatives and ability to manage deposit costs effectively.

Q: Catherine Mealor asked about loan pricing and growth guidance.

A: Tom Owens and Barry Harvey discussed loan pricing dynamics, tailwinds from fixed rate loans, CRE spread levels, and loan growth expectations including low single-digit growth with consideration of extension options and production personnel additions.

Q: Christopher Marinac inquired about net charge-offs and deposit accounts.

A: Barry Harvey commented on credit risk management and alignment with competitors, while Tom Owens addressed deposit accounts and their relation to expenses.

Q: Gary Tenner asked about stock repurchase and C&I production.

A: Duane Dewey and Tom Owens discussed the $100M share repurchase authorization, capital deployment considerations, and improved C&I production with new personnel additions.

Q: Eric Spector questioned credit quality and deposit reception.

A: Barry Harvey discussed credit monitoring and expected upgrades, while Tom Owens noted positive client reception to deposit pricing actions and continued focus on funding balance sheet growth cost-effectively.

Q: Andrew Gorczyca asked about capital priorities and growth regions.

A: Duane Dewey mentioned organic lending priority and growth opportunities in existing markets like Birmingham, Atlanta, and equipment finance areas.

Q: Unidentified Analyst asked about hedging strategy and deposit repricing.

A: Tom Owens explained the cash flow hedge portfolio's impact on net interest income and deposit repricing guidance based on time deposit portfolio dynamics and market implied rate cuts.