Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Trustmark Corp (TRMK, Financial) reported a significant increase in net income for the fourth quarter, totaling $56.3 million, with a 9.7% increase from the previous quarter.
- The company achieved a return on tangible common equity of 13.68% and a return on average assets of 1.23% for the quarter.
- Trustmark Corp (TRMK) increased its quarterly cash dividend by 4.3% to $0.24 per share, reflecting improved financial performance.
- Non-interest income saw a 9% increase in the fourth quarter, driven by broad-based growth across fee-based businesses.
- The company resumed its share repurchase program, buying back approximately 203,000 shares, with authorization to repurchase up to $100 million in 2025.
Negative Points
- Loans held for investment decreased by $10 million from the previous quarter, indicating a slight decline in loan growth.
- Deposits decreased by $132.8 million in the fourth quarter, with a significant reduction in broker deposits.
- Non-interest expense increased by $1.2 million, or 0.9%, in the fourth quarter, driven by higher salary and benefits costs.
- Net charge-offs totaled $4.6 million in the fourth quarter, representing 0.14% of average loans, indicating some credit quality concerns.
- Non-accruals and non-performing assets increased slightly during the quarter, although they have declined year-over-year.
Q & A Highlights
Q: Can you discuss your expectations for loan pricing and betas over the next few quarters?
A: Thomas Owens, CFO, explained that about half of the loan book is floating rate, and they anticipate two Fed rate cuts in 2025. He noted that the tailwind from fixed-rate loans might be slightly reduced due to higher interest rates. The primary driver for the margin will be deposit costs, with time deposits expected to reprice downwards significantly in the first quarter.
Q: What are your expectations for loan growth in 2025, and how do origination volumes look?
A: Robert Harvey, Chief Credit and Operations Officer, stated that they expect low single-digit loan growth in 2025. He noted an increase in CRE production in late 2024, which is expected to continue. There is optimism about customers exercising extension options on loans, which could impact growth positively.
Q: How do you view net charge-offs and the potential for higher loss rates to drive growth?
A: Robert Harvey mentioned that Trustmark is aligned with peers in terms of credit risk and is focused on maintaining high credit quality. He noted that the market's improvement could provide more opportunities, and the recent rate cuts have made more CRE deals viable.
Q: Can you provide insights into your expense guidance and the investments planned for 2025?
A: Duane Dewey, CEO, highlighted investments in technology, including a core conversion and digital enhancements. There is also a focus on risk infrastructure and adding production staff across various markets to support growth.
Q: How have your deposit pricing actions been received by clients, and what is the outlook for deposit growth?
A: Thomas Owens reported that the pricing actions have not led to noticeable attrition. Core deposits grew over 2% in 2024, and Trustmark expects to continue funding balance sheet growth cost-effectively. The bank has managed to widen the spread between its deposit costs and the industry median.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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