Trustmark Corporation Q2 FY2025 earnings call

• Balance sheet: Loan growth was diversified with 1-4 family mortgage loans, other loans/leases, and commercial/industrial loans leading the way. Deposit base grew with personal and commercial deposits increasing.
• Profitability: Net income and EPS increased, with net interest margin improving. Return on average assets was 1.21% and return on average tangible equity was 13.13%.
• Expense management: Disciplined expense management with noninterest expense up slightly but following prior year declines.
• Credit quality: Solid with nonperforming assets declining and net charge-offs at 12 basis points of average loans.
• Capital management: Capital ratios increased, with $11 million of stock repurchased during the quarter.

From the balance sheet, loans held for investment increased $223 million (1.7% linked quarter) and $374.8 million (2.9% year-to-date). The deposit base grew $35 million during the quarter, with personal and commercial deposits totaling $13 billion at June 30, an increase of $103.8 million from the prior quarter. Trustmark reported net income of $55.8 million in the second quarter, with net interest income expanding 4.3% to $161.4 million and a net interest margin of 3.81%. Noninterest income was $39.9 million. Noninterest expense increased $1.1 million. Credit quality remained solid with nonperforming assets declining $5 million. Capital ratios increased, with CET1 at 11.7% and total risk-based capital at 14.15%. Tangible book value per share was $28.74.

• Loans: Expected to increase mid-single digits for the full year (revised upward from low single-digit growth).
• Deposits: Low single-digit growth excluding brokered deposits for the full year.
• NIM: Tightened range to 3.77%-3.83% for the full year from prior 3.75%-3.85%.
• NII: Expected to increase high-single digits in 2025 (revised from mid- to high-single digits).
• Credit: Provision for credit losses expected to trend lower compared to 2024.
• Noninterest income/expense: Unchanged for the full year 2025.
• Capital deployment: Prefer organic loan growth, potential market expansion, M&A, or repurchase opportunistically.

• Impact of tariffs and other administrative policies on customer base, interest rates, and credit-related issues, with the situation evolving but no significant impact seen yet.

Q: Can you talk about what's driving the increase in loan growth guide to mid-single digit?

A: It's a combination of good production in non-CRE categories, solid CRE production, and scheduled maturities in CRE book pushing out. Non-CRE categories are seeing good growth.

Q: Any thoughts on goals for profitability going forward?

A: There's upside with continuing operating leverage, balance sheet growth, potential NIM expansion. Capital management will impact ROTCE, with strategic decisions ahead on capital deployment.

Q: Any rate cut assumptions underlying NIM guidance?

A: Baseline forecast reflects Fed rate cuts in September and December, but it's market implied. We're slightly asset-sensitive, and ongoing repricing of fixed rate loans and securities helps NIM.

Q: Thoughts on M&A strategy in terms of size, geography?

A: Contiguous markets to Southeast U.S. (Mississippi, Alabama, etc.) are attractive. Size range is $1 billion to $5 billion, opportunistic on other additive situations.