Q4 2023 Trustmark Corporation Earnings Call

January 24, 2024

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's fourth quarter earnings Conference call.

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's fourth quarter earnings conference.

At this time all participants are in a listen only mode.

At this time, all participants are in a listen-only mode.

Following the presentation. This morning, there will be a question and answer session.

Following the presentation this morning, there will be a question and answer session.

To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2.

To ask a question you May press Star then one on a touchtone phone.

Draw. Your question. Please press Star then two.

As a reminder, this call is being recorded.

As a reminder, this call is being recorded it.

It is now my pleasure to introduce Mr. Joey Rain, Director of Corporate Strategy at Trusted.

It is now my pleasure to introduce Mr. Joey Rein director of corporate strategy at Trustmark.

Joey Rein: Good morning, I'd like to remind everyone that a copy of our fourth quarter earnings release as well as the slide presentation that will be discussed on our call. This morning are available on the Investor Relations section of our website at Trustmark Dot com.

Joey Rain: Good morning. I'd like to remind everyone that a copy of our fourth quarter earnings release, as well as the slide presentation that will be discussed on our call this morning, are available on the investor relations section of our website at Trustmark.com. During the course of our call, management may make forward-looking statements with 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 the actual results due to a number of risks and uncertainties, which are outlined in our earnings release, as well as our filings with the Securities and Exchange Commission. At this time, I'd like to introduce Duane Dewey, President and CEO of Trustmark.

Joey Rein: In the course of our call management may make forward looking statements.

Joey Rein: Private Securities Litigation Reform Act.

Joey Rein: We would like to caution you that these forward looking statements may differ materially from the actual results due to a number of risks and uncertainties, which are outlined in our earnings release as well as our filings with Securities and Exchange Commission.

Speaker Change: This time I'd like to introduce Duane Dewey President and CEO of Trustmark.

Duane A. Dewey: 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.

Duane A. Dewey: Thank you Joey and good morning, everyone and thank you for joining US. This morning with me are Tom I want as our Chief Financial Officer, Barry Harvey, Our Chief credit and operations Officer, and Tom Chambers, Our Chief Accounting Officer.

Duane A. Dewey: We at Trustmark are very pleased with our full year and fourth quarter performance in a tumultuous and challenging operating environment.

Duane A. Dewey: We at Trustmark are very pointed us towards our full year and fourth quarter performance and a tumultuous and challenging operating environment.

Duane A. Dewey: Trustmark's performance reflected a very strong year in net income after tax, in fact a record year in that regard.

Duane A. Dewey: Trustmark performance reflected a very strong year and net income after tax in fact, a record year in that regard.

Duane A. Dewey: We showed solid loan production and credit quality as well as continued deposit growth.

Duane A. Dewey: When Ken solid loan production and credit quality as well as continued deposit growth.

Duane A. Dewey: Trustmark reported a fourth quarter net income of $36 1 million representing diluted earnings per share of 59 cents.

Duane A. Dewey: Trustmark reported a fourth quarter net income of $36.1 million, representing diluted earnings per share of 59 cents. For the full year 2023, Trustmark's net income totaled $165.5 million, which represented diluted earnings per share of $2.70.

Duane A. Dewey: Whole year 2023 Trust marks net income totaled $165 5 million, which represented diluted earnings per share of $2.70.

Duane A. Dewey: Let's review our financial highlights in a little more detail by turning to slide three.

Duane A. Dewey: Let's review our financial highlights in a little more detail by turning to slide three. Bonds held for investment increased $140.3 million

Duane A. Dewey: Loans held for investment increased 143 million.

Duane A. Dewey: or 1.1% link order and $746.5 million or 6.1% year-over-year.

Duane A. Dewey: One, 1% linked quarter, and $746 5 million or six 1% year over year.

Duane A. Dewey: During the fourth quarter, deposits grew 467.8 million, or 3.1% link quarter, and 1.1 billion, or 7.8% year-over-year.

Duane A. Dewey: During the fourth quarter deposits grew $467 8 million or three 1% linked quarter and $1 1 billion or seven 8% year over year.

Duane A. Dewey: Net interest income totaled $140 million in the fourth quarter, which resulted in a net interest margin of $3 two 5%.

Duane A. Dewey: Net interest income totaled $140 million in the fourth quarter, which resulted in a net interest margin of 3.25%.

Duane A. Dewey: For the year, net interest income totaled $566.3 million, up 11.7% from the prior year, and resulted in a net interest margin of 3.32%, up 15 basis points from the prior year.

Duane A. Dewey: For the year net interest income totaled $566 3 million up 11, 7% from the prior year and resulted in a net interest margin of 332% up 15 basis points from the prior year.

Duane A. Dewey: Non interest income in the fourth quarter totaled $49 8 million, an increase of 10, 3% year over year.

Duane A. Dewey: Non-inclusive income in the fourth quarter totaled $49.8 million, an increase of 10.3% year-over-year.

Duane A. Dewey: For the year ended 2023, non-interest income totaled $207 million and represented 27.2% of total revenue.

Duane A. Dewey: For the year ended 2023, non interest income totaled 207 million and represented 27, 2% of total revenue.

Duane A. Dewey: Revenue for the year totaled $759.8 million, an increase of 8.6% from the prior year.

Duane A. Dewey: Revenue for the year totaled $759 8 million, an increase of eight 6% from the prior year.

Adjusted noninterest expense in the fourth quarter, our total of $134 8 million for the year adjusted noninterest expense totaled $527 9 million an increase of five 9% from the prior year.

Duane A. Dewey: Adjusted non-interest expense in the fourth quarter totaled $134.8 million. For the year, adjusted non-interest expense totaled $527.9 million, an increase of 5.9% from the prior year.

Duane A. Dewey: Our credit quality remains solid. Net charge-offs during the fourth quarter totaled $2.2 million, representing seven basis points of average loan.

Duane A. Dewey: Our credit quality remained solid with net charge offs during the fourth quarter totaled $2 2 million, representing seven basis points of average loans for.

Duane A. Dewey: For 2023, net charge-offs totaled $8.2 million and represented six basis points of average loan.

Duane A. Dewey: For 2023, net charge offs totaled $8 6 million and represented six basis points of average loans.

Duane A. Dewey: The provision for credit losses for loans held for investment was $7.6 million in the fourth quarter and for the full year 2023 was $27.3 million.

Duane A. Dewey: The provision for credit losses for loans held for investment was $7 6 million in the fourth quarter and for the full year 2023 was $27 3 million.

Duane A. Dewey: We continue to maintain strong capital levels with common equity Tier 1 ratio of 10.04% and a total risk-based capital ratio of 12.29%.

Duane A. Dewey: We continue to maintain strong capital levels with common equity tier one ratio of 10.04% and a total risk based capital ratio of 12 two 9%.

Duane A. Dewey: The Board declared a quarterly cash dividend of 23 cents per share payable on March 15 to shareholders who record as of March 1.

Duane A. Dewey: The board declared a quarterly cash dividend of <unk> 23 per share payable on March 15 to shareholders of record as of March 1st.

Speaker Change: At this time I'd like to ask Barry Harvey to provide some color on our loan growth and credit quality.

Speaker Change: At this time, I'd like to ask Barry Harvey to provide some color on our loan growth and credit quality.

Robert B. Harvey: Thank you, Duane, and I'll be glad to. Turning to slide four, loans held for investments totaled $13 billion as of 12-31.

Robert B. Harvey: Thank you Duane I'll be glad to turning to slide four loans held for investments totaled $13 billion.

Robert B. Harvey: 12 31.

Robert B. Harvey: That's an increase, as Duane mentioned, of $140 million for the quarter. Loan growth during Q4 came from commercial lending and the equipment finance line of business, as well as our real estate secured loans.

Speaker Change: That's an increase as Dwayne mentioned of 140 million for the quarter.

Speaker Change: Loan growth during Q4 came from commercial lending.

Speaker Change: In the equipment finance corporate finance, a lot of business as well as our real estate secured laws.

Robert B. Harvey: We expect loan growth.

Speaker Change: We expect loan growth.

Robert B. Harvey: of Midsingle Digits during 2024.

Speaker Change: Mid single digits during 2024.

Robert B. Harvey: As you can see, our loan portfolio remains well diversified, both by product type as well as by geography.

Speaker Change: As you can see our loan portfolio remains well diversified both by product type as well as by geography.

Robert B. Harvey: Looking on to slide five.

Speaker Change: Looking onto slide five.

Robert B. Harvey: Trustmark's CRE portfolio is 94% vertical with 70% being in the existing category and 30% in the construction land and development category.

Speaker Change: Trustmark CRE portfolio is 94% vertical with 70% being in the existing category and 30% in the construction land and development category.

Robert B. Harvey: Our construction land development portfolio is 79% construction.

Speaker Change: Our construction land development portfolio is 79% construction.

Robert B. Harvey: Trustmark's office portfolio, as you can see, is very modest at $298 million outstanding, which represents only 2% of the overall loan book.

Speaker Change: Trustmark office portfolio as you can see it's very modest at 298 million outstanding which represents only 2% of the overall loan book.

Robert B. Harvey: The portfolio is comprised of credits with high-quality tenants, low lease turnover, strong occupancy levels, and low leverage.

Speaker Change: The portfolio is comprised of credits with high quality tenants.

Speaker Change: Low lease turnover strong occupancy levels.

Speaker Change: And low leverage.

Robert B. Harvey: The credit metrics on this portfolio remain extremely strong.

Speaker Change: The credit metrics on this portfolio remain extremely strong.

Robert B. Harvey: Looking on the slide six.

Speaker Change: Looking on slide six.

Robert B. Harvey: The bank's commercial loan portfolio is well diversified, as you can see, across numerous industries with no single category exceeding 13%.

Speaker Change: <unk> commercial loan portfolio is well diversified as you can see across numerous industries with no single category exceeding 13%.

On slide seven.

Robert B. Harvey: On slide seven.

Robert B. Harvey: Our provision for credit losses for loans held for investment was $7.6 million during the fourth quarter, which was attributable to loan growth, net adjustments to the qualitative factors,

Speaker Change: Provision for credit losses for loans held for investments was $7 6 million during the fourth quarter, which was attributable to loan growth net adjustments to the qualitative factors.

Robert B. Harvey: and changes in the macroeconomic forecast.

Speaker Change: And changes in the macroeconomic forecast.

Robert B. Harvey: The provision for credit losses for off-balance sheet credit exposure was a negative $888,000 during the quarter.

Speaker Change: The provision for credit losses for off balance sheet credit exposure was a negative 888000 during the quarter.

Robert B. Harvey: At 1231, the allowance for loan losses for loans held for investment was $139 billion.

Speaker Change: At 12 31, the allowance for loan losses for loans held for investment was $139 million.

Robert B. Harvey: look into slide eight and continue to post solid credit quality metrics.

Speaker Change: Looking to slide eight.

Speaker Change: To post solid credit quality metrics.

Speaker Change: The allowance for credit losses represents 1.08%.

Robert B. Harvey: The allowance for credit losses represents 1.08 percent The allowance for credit losses represents 1.08 percent

Robert B. Harvey: of the Loans Held for Investment.

Speaker Change: Of the loans held for investment.

Speaker Change: At 294, 249%.

Robert B. Harvey: and 249% of non-accruals, excluding those loans that are individually analyzed.

Speaker Change: Non accruals, excluding those loans that are individually analogs.

Speaker Change: In the fourth quarter net charge offs totaled $2.2 million or point or 7% of average loans, both non accruals and nonperforming assets remained at very small levels Dwight.

Robert B. Harvey: In the fourth quarter, net charge-offs total $2.2 million, or 0.07% of average loans. Both non-accruals and non-performing assets remain at reasonable levels. Duane?

Duane A. Dewey: Thank you Barry. I'd like to ask Tom Owens to now focus on deposits and the income statement.

Dwight: Thank you Barry I'd like to ask Tom Owens to now focus on deposits in the income statement.

Thomas C. Owens: Thanks, Dwayne and good morning, everyone turning to deposits on slide nine.

Thomas C. Owens: Thanks Duane, good morning everyone. Turning to deposits on slide nine.

Thomas C. Owens: We finished up the year with another good quarter, which continued to show the strength of our deposit base.

Thomas C. Owens: I'm in an environment that remains exceptionally competitive.

Thomas C. Owens: The environment.

Thomas C. Owens: Remains exceptionally competitive.

Thomas C. Owens: Supposites totaled $15.6 billion at year end, a linked quarter increase of $468 million, or 3.1%, and a year-over-year increase of $1.1 billion, or 7.8%.

Thomas C. Owens: Deposits totaled $15 6 billion at yearend, a linked quarter increase of 468 million or three 1% in a year.

Thomas C. Owens: Year over year increase of $1 1 billion or seven 8%.

Thomas C. Owens: Deposit growth excluding brokered deposits was also strong up.

Thomas C. Owens: Deposit growth excluding brokered deposits was also strong, up $616 million or 4.3% linked quarter and $556 million or 3.8% year-over-year.

616 million or four 3% linked quarter, and 556 million or three 8% year over year.

Thomas C. Owens: We had a pretty strong reversal of public fund balances, which grew by 463 billion.

Thomas C. Owens: with a pretty strong reversal of public fund balances which grew by $463 million during the fourth quarter after having declined by $373 million during the third quarter.

Thomas C. Owens: During the fourth quarter after having declined by 373 million.

Thomas C. Owens: The third quarter.

Thomas C. Owens: We also had good growth in personal balances linked quarter, which were up $276 million, offsetting decreases in non-personal balances of $121 million and brokered balances of $151 million.

Thomas C. Owens: We also had good growth in personal balances linked quarter, which were up 276 million offsetting decreases in non personal balances of $121 million.

Thomas C. Owens: Brokered balances of $151 million.

Thomas C. Owens: Okay.

Thomas C. Owens: Regarding MIX, time deposits declined by 22 million linked quarter with non-brokered CDs up 128 million and brokered CDs down 149 million.

Regarding mix time deposits declined by $22 million linked quarter with non brokered Cds up $128 million and brokered Cds down $149 million.

Thomas C. Owens: As of year end, our promotional time deposit book declined by $44 million linked quarter.

Thomas C. Owens: As of year end, our promotional time deposit book declined by 44 million linked quarter.

Thomas C. Owens: totaling $1.2 billion with a weighted average rate paid of 4.75% and the weighted average remaining term continued to shorten to about three months.

Thomas C. Owens: Totaling $1 2 billion with a weighted average rate paid of 475% and a weighted average remaining term continue to shorten shorten to about three months.

Thomas C. Owens: Our broker deposit book declined by $149 million linked quarter, totaling $579 million with an all-in weighted average rate paid of about 546, 5.46%.

Thomas C. Owens: Our broker deposit book declined by 140.

Thomas C. Owens: I'm, calling in dollars linked quarter totaling 579 million with an all in weighted average rate base of about $5 46, 546%.

Thomas C. Owens: And the weighted average remaining term also shortened to about three months.

Thomas C. Owens: and the weighted average remaining term also shortened to about three months as of December 31st.

Thomas C. Owens: December 31st.

Thomas C. Owens: Also regarding mix non interest bearing DDA balances declined $123 million linked quarter or three 7% and noninterest bearing DDA represented about 21% of the deposit base as of December 31st.

Thomas C. Owens: Also regarding MIPS, non-interest-bearing DBA balances declined $123 million linked quarter, or 3.7%, and non-interest-bearing DBA represented about 21% of the deposit base as of December 31st.

Thomas C. Owens: Our cost of interest-bearing deposits increased by 28 basis points from the prior quarter to 2.67%.

Thomas C. Owens: Our cost of interest bearing deposits increased by 28 basis points from the prior quarter to $2 six 7%.

Thomas C. Owens: That linked quarter increase was down from the prior quarter increase of 43 basis points during the third quarter.

Thomas C. Owens: Turning to slide 10, Trustmark continues to maintain a stable, granular, and low exposure deposit base.

Thomas C. Owens: Turning to slide 10, Trustmark continues to maintain a stable granular and low exposure deposit base. During the fourth quarter. We had an average of about 465000 personal and non personal deposit accounts, excluding collateralized public funds accounts with an average balance of about 27000.

Thomas C. Owens: During the fourth quarter, we had an average of about 465,000 personal and non-personal deposit accounts.

Thomas C. Owens: including collateralized public fund accounts with an average balance of about $27,000.

Thomas C. Owens: All lines.

As of December 31, 64% of our deposits were insured and 14% were collateralized, meaning that our mix of deposits that are uninsured and uncollateralized was essentially unchanged linked quarter and 22%.

Thomas C. Owens: We maintained substantial secured borrowing capacity, which stood at $6.2 billion at December 31st.

Thomas C. Owens: We maintain substantial secured borrowing capacity, which stood at $6 $2 billion at December 31st.

Thomas C. Owens: representing 181% coverage of uninsured and uncollateralized deposits.

Thomas C. Owens: Representing 181% coverage of uninsured collateralized deposits.

Our fourth corner talk deposit cost of $2. One zero percent represented a linked quarter increase of 26 basis points and accumulative beta cycle to date of 38%.

Thomas C. Owens: Our fourth quarter total deposit cost of 2.10% represented a linked quarter increase of 26 basis points and a cumulative beta cycle to date of 38%.

Thomas C. Owens: Our forecast for the first quarter is for an increase in deposit constitute one 9%, which would represent a cycle would be paid a 42%.

Thomas C. Owens: Our forecast for the first quarter is for an increase in deposit cost to 2.19%, which would represent a cycle of date beta of 42%.

Speaker Change: Thank you.

Thomas C. Owens: Turning to revenue on slide 11, net interest income at a key E decreased $1 $9 million linked quarter totaling $140 million, which resulted in a net interest margin above 3.25%.

Speaker Change: Turning to revenue on slide 11, net interest income, FTE, decreased $1.9 million linked quarter, totaling $140 million, which resulted in a net interest margin of 3.25%.

Speaker Change: Net interest margin decreased by four basis points linked quarter as the 10 basis points of accretion due to asset rate and volume was more than offset by the 14 basis points of dilution due to liability rate and loss.

Thomas C. Owens: Net interest margin decreased by four basis points linked quarter as the 10 basis points of accretion due to asset rate volume was more than offset by the 14 basis points of dilution due to liability rate environment.

Thomas C. Owens: On slide 12, our interest rate risk profile remained essentially unchanged as of December 31st with substantial asset sensitive driven by loan portfolio mix with 50% variable rate coupon.

Speaker Change: On slide 12, our interest rate risk profile remained essentially unchanged as of December 31st.

Speaker Change: Substantial asset sensitivity driven by loan portfolio mix with 50% variable rate coupon.

Thomas C. Owens: During the fourth quarter, we entered into a 75 million notional of forward, starting swaps, which brought the swap portfolio notional at quarter end to $1.0 billion to $5 billion with a weighted average maturity of two eight years and a weighted average received fixed rate of 318%.

Speaker Change: During the fourth quarter, we entered into $75 million notional of forward starting swaps, which brought the swap portfolio notional at quarter end to $1.05 billion, with a weighted average maturity of 2.8 years and a weighted average received fixed rate of 3.18%.

Speaker Change: We also entered into $50 million notional of forward starting floors, which brought the floor portfolio notional at quarter end to $75 million with a weighted average maturity of four years and a weighted average SOFR rate of 3.58%.

Thomas C. Owens: We also entered into a 50 million notional of forward starting floors, which brought the floor for portfolio notional at quarter end to $75 million.

Thomas C. Owens: The weighted average maturity of four years and a weighted average so for rate of 3.58%.

Speaker Change: The cash flow hedging program substantially reduces our adverse asset sensitivity to a potential downward shock in interest rates.

Thomas C. Owens: Our cash flow hedging program substantially reduces our adverse asset sensitivity to potential downward shock in interest rates.

Thomas C. Owens: Turning to slide 13, noninterest income for the fourth quarter totaled $49 $8 million or $2 $4 million linked quarter decrease and for the full year totaled $206 $9 million or $1 $8 million increase from the prior year.

Speaker Change: Turning to slide 13, non-interest income for the fourth quarter totaled $49.8 million, a $2.4 million linked quarter decrease, and for the full year totaled $206.9 million, a $1.8 million increase from the prior year.

Thomas C. Owens: The linked quarter decrease was driven primarily by a normal seasonal decline of $2 $1 million in insurance commissions.

Speaker Change: The linked quarter decrease was driven primarily by a normal seasonal decline of $2.1 million in insurance commissions.

Thomas C. Owens: The full year increase was driven by increases of $3 8 million or seven 2% in insurance commissions and $1.3 million or 3% increase.

Speaker Change: The full year increase was driven by increases of $3.8 million, or 7.2% in insurance commissions, and $1.3 million, or 3% increase in service charges on deposit accounts.

Thomas C. Owens: Increase in service charges on deposit accounts.

Thomas C. Owens: Those increases were offset somewhat by decreases of $2 7 million and bank card and other fees, which was primarily a decline in customer derivative revenue and <unk>.

Speaker Change: Those increases were offset somewhat by decreases of $2.7 million in bank card and other fees, which was primarily a decline in customer derivative revenue and $2.1 million decline in mortgage banking, as both businesses faced significant headwinds from the interest rate environment. For the quarter, non-interest income represented 26.7% of total revenue, continuing to demonstrate a well-diversified revenue strand.

Thomas C. Owens: $2 1 million dollar decline in mortgage banking.

As both businesses face significant headwinds from the interest rate environment.

Thomas C. Owens: For the quarter noninterest income represented 26, 7% of total revenue continuing to demonstrate a well diversified revenue stream.

Speaker Change: Turning to mortgage banking on slide 14, revenue totaled $5.5 million in the fourth quarter, bringing full-year revenue to $26.2 million, which is a decline of $2.1 million.

Thomas C. Owens: Turning to mortgage banking on slide 14 revenue totaled $5 5 million in the fourth quarter, bringing full year revenue to $26 2 million, which is a decline of $2 $1 million.

Thomas C. Owens: The full year decline was driven by increased negative.

Speaker Change: The four-year decline was driven by increased negative net hedging effectiveness of $2.2 million, resulting from the difficult hedging environment which prevailed during 2023.

Thomas C. Owens: Net hedging effectiveness of $2.2 million, resulting from the difficult hedging environment, which prevailed during 2023.

Operator: transcript Emily Beynon Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's fourth quarter earnings conference. At this time, all participants are in a listen-only mode.

Speaker Change: while full-year increases in mortgage servicing income and changing fair value of servicing assets from runoff offset the decline in gain-on-sale loans.

Thomas C. Owens: While full year increases in mortgage servicing income and change in fair value of the servicing asset write off offset the decline in gain on sale of loans.

Operator: Following the presentation this morning, there will be a question and answer session. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rain, Director of Corporate Strategy at Trusted. Good morning.

Speaker Change: Mortgage loan production totaled $1.5 billion in 2023, a decrease of 31.6% from the prior year.

Thomas C. Owens: Mortgage loan production totaled $1 5 billion in 2023, a decrease of 31, 6% from the prior year.

Speaker Change: Retail production mix remained strong in the fourth quarter, representing 75% of volume, or about $204 million. Loans sold in the secondary market represented 85% of production, while loans held on balance sheet represented 15%.

Thomas C. Owens: Retail production mix remained strong in the fourth quarter, representing 75% of volume or about $204 million loans sold in the secondary market represented 85% of production while loans held on balance sheet represented 15%.

I'd like to remind everyone that a copy of our fourth-quarter earnings release, as well as the slide presentation that will be discussed on our call this morning, is available in the investor relations section of our website at Trustmark.com. During the course of 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 the actual results due to a number of risks and uncertainties, which are outlined in our earnings release, as well as in our filings with the Securities and Exchange Commission. At this time, I'd like to introduce Duane Dewey, President and CEO of Trustmark. Thank you, Joey, and good morning everyone.

Speaker Change: Gain on sale margin remained under pressure in the fourth quarter, decreasing by 11 basis points to 110 basis points.

Thomas C. Owens: Gain on sale margin remained under pressure in the fourth quarter decreasing by 11 basis points linked quarter to 110 basis points.

Speaker Change: And now I will ask Tom Chambers to cover noninterest expense and capital management.

Speaker Change: and I will ask Tom Chambers to cover non-interest expense and capital management.

Speaker Change: Thank you, Tom. Turning to slide 15, you'll see a detail of our total non-interest expense. During the fourth quarter, adjusted non-interest expense totaled $134.7 million, a link quarter increase of $700,000, or 0.5%, mainly driven by an increase in FDIC assessment expense of $1.1 million, which is included in other expense.

Tom Chambers: Thank you Tom turning to slide 15, you'll see a detail of our total non interest expense.

Tom Chambers: During the fourth quarter, adjusted noninterest expense totaled $134 $7 million linked quarter increase of $700000 or 5%, mainly driven by an increase in FDIC assessment expense of $1 $1 billion, which is included in other expense.

Duane A. Dewey: 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 at Trustmark are very pleased with our full year and fourth quarter performance in a tumultuous and challenging operating environment. Trustmark's performance reflected a very strong year in net income after tax, in fact, a record year in that regard. We showed solid loan production and credit quality as well as continued deposit growth. Trustmark reported a fourth quarter net income of $36.1 million, representing diluted earnings per share of 59 cents.

Speaker Change: All other non-interest expense line items remain relatively unchained on a link quarter basis.

Tom Chambers: All other noninterest expense line items remain relatively unchanged on a linked quarter basis.

Tom Chambers: As noted on slide 16, Trustmark remains well positioned from a capital perspective.

Speaker Change: As noted on slide 16, the trust market remains well-positioned from a capital perspective. As Duane previously mentioned, our capital ratios remain solid with a common equity Tier 1 ratio of 10.04%, a link quarter increase of 15 basis points, and a total risk-based capital ratio of 12.29%, a link quarter increase of 18 basis points.

Tom Chambers: <unk> previously mentioned, our capital ratios remain solid with common equity tier one ratio of 10.04% linked quarter increase of 15 basis points.

Tom Chambers: Risk based capital ratio of 12, 29% linked quarter increase of 18 basis points.

Speaker Change: TrustMart does not repurchase any of its common shares during 2023.

Tom Chambers: Trustmark did not repurchase any of its common shares during 2023.

Speaker Change: As previously announced, Trustmark's Board of Directors authorized a stock repurchase program effective January 1, 2024 through December 31, 2024, under which $50 million of Trustmark's outstanding shares may be acquired.

Tom Chambers: As previously announced Trustmark board of directors authorized a stock repurchase program effective January one 2024 through December 31st 2024, under which $50 million of Trustmark outstanding shares may be acquired.

Duane A. Dewey: For the full year 2023, Trustmark's net income totaled $165.5 million, which represented diluted earnings per share of $2.70. Now, let's review our financial highlights in a little more detail by turning to slide three. Bonds held for investment increased $140.3 million, or 1.1% of the link order and $746.5 million, or 6.1% year-over-year. During the fourth quarter, deposits grew 467.8 million, or 3.1% of the link quarter, and 1.1 billion, or 7.8% year-over-year. Net interest income totaled $140 million in the fourth quarter, which resulted in a net interest margin of 3.25%. For the year, net interest income totaled $566.3 million, up 11.7% from the prior year, and resulted in a net interest margin of 3.32%, up 15 basis points from the prior year. Non-inclusive income in the fourth quarter totaled $49.8 million, an increase of 10.3% year-over-year.

Speaker Change: Although we continue to have a share repurchase program in place, our priority for capital deployment continues to be through organic lending.

Tom Chambers: Although we continue to have a share repurchase program in place.

Our priority for capital deployment continues to be through organic Linda.

Speaker Change: Back to you, Duane.

Speaker Change: But could you go ahead.

Linda: Thank you Kathy let's take a look now at our commentary our outlook for commentary slide on Slide 17, first let's look at the balance sheet, we're expecting that allows us to grow mid single digits in 2024, while deposits are expected to grow low to mid single digits.

Duane A. Dewey: Thank you, Tom. Let's take a look now at our commentary outlook for commentary slide on slide 17. First, let's look at the balance sheet. We're expecting loans to grow mid-single digits in 2024, while deposits are expected to grow low to mid-single digits.

Duane A. Dewey: Securities balances are expected to decline by high single digits based on non-reinvestment of portfolio cash flows, which of course are subject to changes in market interest rates.

Kathy: Securities balances are expected to decline by high single digits based on non reinvestment of portfolio of cash flows which of course are subject to changes in market interest rates.

Kathy: Moving on to the income statement, we're expecting net interest income to decline low single digits in 'twenty, four reflecting continued earning asset growth and stabilizing deposit costs, resulting in full year net interest margin of approximately three 2%.

Duane A. Dewey: Moving on to the income statement, we're expecting net interest income to decline low single units in 24, reflecting continued earning asset growth and stabilizing deposit costs, resulting in full year net interest margin of approximately 3.2% based on market implied forward interest rate.

Kathy: Based on market implied forward interest rates.

Duane A. Dewey: For credit, the total provision for credit losses, including unfunded commitments, is dependent upon future loan growth, the current macroeconomic forecast, and credit quality trends.

Kathy: For credit the total provision for credit losses, including unfunded commitments is dependent upon future loan growth.

Duane A. Dewey: For the year ended 2023, non-interest income totaled $207 million and represented 27.2% of total revenue. Total revenue for the year totaled $759.8 million, an increase of 8.6% from the prior year. Adjusted non-interest expense for the fourth quarter totaled $134.8 million. For the year, adjusted non-interest expense totaled $527.9 million, an increase of 5.9% from the prior year. Our credit quality remains solid. Net charge-offs during the fourth quarter totaled $2.2 million, representing seven basis points of average loan. For 2023, net charge-offs totaled $8.2 million and represented six basis points of average loan. The provision for credit losses for loans held for investment was $7.6 million in the fourth quarter and for the full year 2023 was $27.3 million. We continue to maintain strong capital levels with a common equity Tier 1 ratio of 10.04% and a total risk-based capital ratio of 12.29%. The Board declared a quarterly cash dividend of 23 cents per share payable on March 15 to shareholders who record as of March 1. At this time, I'd like to ask Barry Harvey to provide some color on our loan growth and credit quality. Thank you, Duane, and I'll be glad to.

Kathy: Current macroeconomic forecast and credit quality trends.

Duane A. Dewey: Net charge-offs requiring additional reserving are expected to be nominal based on the current economic outlook.

Kathy: Net charge offs, requiring additional reserving are expected to be nominal based on the current economic outlook.

Duane A. Dewey: From a non-interest income perspective, non-interest income is expected to grow mid-single digits, which reflects some modest improvement in mortgage, continued growth in insurance, and some improvement in the wealth management business.

Kathy: Non interest income perspective, noninterest income is expected to grow mid single digits, which reflects a modest improvement in mortgage continued growth in insurance and some improvement in the wealth management business.

Duane A. Dewey: For the last couple years, we've talked about our Fit to Grow initiatives across the company, in which we've invested in both growth initiatives, mostly in additional production talent, as well as in technology and other key areas of the company.

Kathy: For the last couple of years, we've talked about our fit to grow initiatives across the company in which we've invested in both growth initiatives, mostly in additional production talent as well as in technology and other key areas of the company.

Duane A. Dewey: To that end, in 2024, we will begin to see efficiencies from those efforts, along with other heightened cost containment initiatives.

Kathy: To that end in 2024, we will begin to see efficiencies from those efforts along with other heightened cost containment initiatives.

Duane A. Dewey: So that adjusted non-interest expense is expected to increase low single digits full year 2024. This is always subject to the impact of commissions in our commission-based businesses.

Kathy: Adjusted non interest expense is expected to increase low single digits full year 2024. This is always subject to the impact of commissions in our commission based businesses.

Kathy: Finally, well continue a disciplined approach to capital deployment with a preference for organic loan growth and potential M&A. We will continue to maintain a strong capital base to implement corporate priorities and initiatives.

Speaker Change: I'd like to now at this time open the floor up to questions.

Speaker Change: We will now begin the question and answer session.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.

Robert B. Harvey: Turning to slide four, loans held for investments totaled $13 billion as of 12-31. That's an increase, as Duane mentioned, of $140 million for the quarter. Loan growth during Q4 came from commercial lending and the equipment finance line of business, as well as our real estate secured loans. We expect loan growth of Midsingle Digits during 2024. As you can see, our loan portfolio remains well diversified, both by product type as well as by geography. Moving on to slide five.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star, then delete.

Speaker Change: Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two at.

Speaker Change: At this time, we will pause momentarily to assemble our rock.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Yes.

Speaker Change: The first question today comes from Graham Dick from Piper Sandler. Please go ahead.

Speaker Change: The first question today comes from Graham <expletive> from Piper Sandler. Please go ahead.

Graham: Hey, good morning, everyone.

Graham Dick: Hey, good morning everyone.

Graham Dick: Morning, Graham. Graham.

Speaker Change: Good morning, Graeme Graeme.

Graham Dick: So I just wanted to start on NII and the NIM. I guess your guidance is implying

So I just wanted to start on a N.

NII and NIM I guess your guidance is implying the NIM to decline kind of throughout 2024.

Robert B. Harvey: Trustmark's CRE portfolio is 94% vertical, with 70% being in the existing category and 30% in the construction, land, and development category. Our construction land development portfolio is 79% construction. Trustmark's office portfolio, as you can see, is very modest at $298 million outstanding, which represents only 2% of the overall loan book. The portfolio is comprised of loans with high-quality tenants, low lease turnover, strong occupancy levels, and low leverage. The credit metrics on this portfolio remain extremely strong, looking at slide six.

Graham Dick: to decline kind of throughout 2024.

Graham Dick: which is a bit different than what most other of your peers are saying right now. Can you just walk through your thoughts on this? I know you guys have a fair amount of floating rate loans, but just interested to hear how your outlook might differ from other banks out there who say that fixed asset repricing will be enough to overcome any pressures from lower Fed.

Speaker Change: Which is a bit different than what most other of your peers are saying right. Now can you just walk through your thoughts on this I know you guys have a fair amount of floating rate loans, but just interested to hear how your outlook might differ from you know our other banks out there, who say that fixed asset repricing won't be enough to overcome any pressures from lower fed rates.

Speaker Change: Thanks.

Graham Dick: Yeah, Graham, this is Tom Owens, and I'd start by saying that, you know, to a great extent I'm in agreement with the commentary that you just cited, and I disagree somewhat with your interpretation so far of continuing compression in net interest margin.

Speaker Change: Yeah Graham this is Tom Owens.

And I'd start by saying that.

Speaker Change: Yeah.

Thomas C. Owens: To a great extent I'm in agreement with the commentary that you just cited.

Thomas C. Owens: And I disagree somewhat with your interpretation so far.

Thomas C. Owens: Continuing compression in net interest margin.

Robert B. Harvey: The bank's commercial loan portfolio is well diversified, as you can see, across numerous industries with no single category exceeding 13%. On slide seven. Our provision for credit losses for loans held for investment was $7.6 million during the fourth quarter, which was attributable to loan growth, net adjustments to qualitative factors, and changes in the macroeconomic forecast. The provision for credit losses for off-balance sheet credit exposure was a negative $888,000 during the quarter. At 1231, the allowance for loan losses for loans held for investment was $139 billion, look at slide eight, and continue to post solid credit quality metrics. The allowance for credit losses represents 1.08 percent of the Loans Held for Investment and 249% of non-accruals, excluding those loans that are individually analyzed. In the fourth quarter, net charge-offs totaled $2.2 million, or 0.07% of average loans. Both non-accruals and non-performing assets remain at reasonable levels. Duane?

Thomas C. Owens: <unk>.

Thomas C. Owens: You know, we've come off here, what, back-to-back linked quarter declines of four basis points in net interest margin. I think the quarter before those two was six basis points. And so I think with the continued increase that we anticipate in deposit costs, the guidance that we've given you for the first quarter, it's reasonable to assume that you're going to see another linked quarter decline in terms of, you know, a similar order of magnitude to what the run rate has been. But we are anticipating, you know, I think on last quarter's call, when asked about the inflection point in terms of net interest margin and net interest income, I think the guidance we gave then was second to third quarter. And I think at this point, you know, it might come in a quarter to the second quarter. So we think that, you know, and obviously, as I said in my prepared comments, it remains a competitive environment for deposits. Who knows what the Fed's going to actually... Our guidance is based on market-implied forwards. But all that being said, we are modeling a similar linked quarter decline in the first quarter to what you've seen the last several quarters. And then we are getting to an inflection point in terms of some modest accretion to net interest income and net interest margin. And I do agree with the commentary that repricing of the fixed-rate assets on the balance sheet, over time, is enough to generally stabilize, if not accrete, net interest margin modestly. So that's a long-winded answer. The short answer is, you know, we think the trough is probably in the first quarter here in terms of net interest margin. And then we do get some stabilization there and some modest accretion.

Thomas C. Owens: You know we've come off here, what back to back linked quarter declines of four basis points in net interest margin I think the quarter before those two was six basis points and so I think with the continued increase and we anticipate in deposit costs. The guidance that we've given you for the first quarter, it's reasonable too.

Assume that youre going to see.

Thomas C. Owens: See another linked quarter decline in terms of a similar order of magnitude what the run rate has been.

Thomas C. Owens: But we are anticipating you know I think on last quarter's call when.

Thomas C. Owens: When asked about the inflection point in terms of net interest margin and net interest income I think the guidance. We gave that was second to third quarter.

Thomas C. Owens: And I think at this point you know it might come in a quarter to the second quarter. So we think that you.

Thomas C. Owens: Obviously as I said in my prepared comments it remains a competitive environment for deposits.

Thomas C. Owens: Who knows what the fed is going to actually do our guidance is based on market implied forwards.

Thomas C. Owens: But all that being said we are modeling a similar linked quarter decline in the first quarter to what you've seen the last several quarters and then we are getting to an inflection point.

Thomas C. Owens: In terms of some modest accretion to net interest income and net interest margin and I do agree with the commentary.

Duane A. Dewey: Thank you Barry. I'd like to ask Tom Owens to now focus on deposits and the income statement. Thanks Duane, good morning everyone.

Thomas C. Owens: That re pricing of the fixed rate assets on the balance sheet over time.

Thomas C. Owens: Turning to deposits on slide nine, we finished up the year with another good quarter, which continued to show the strength of our deposit base. I'm in an environment that remains exceptionally competitive.

Thomas C. Owens: It is enough to generally stabilize if not accrete net interest margin.

Thomas C. Owens: Modestly so that's a long winded answer the short answer is we think the trough is probably it.

Thomas C. Owens: Supposites totaled $15.6 billion at year end, a linked quarter increase of $468 million, or 3.1%, and a year-over-year increase of $1.1 billion, or 7.8%. Deposit growth excluding brokered deposits was also strong, up $616 million, or 4.3%, linked quarter and $556 million, or 3.8%, year-over-year, with a pretty strong reversal of public fund balances, which We also had good growth in personal balances linked quarter, which were up $276 million, offsetting decreases in non-personal balances of $121 million and brokered balances of $151 million. Regarding MIX, time deposits declined by 22 million linked quarter, with non-brokered CDs up 128 million and brokered CDs down 149 million.

Thomas C. Owens: In the first quarter here in terms of net interest margin and then we do get some stabilization there and some modest accretion.

Speaker Change: Okay, that's very helpful.

Speaker Change: Okay, that's very helpful. So then I guess as you look out past 1Q, then you're thinking, you know, stabilization, maybe a few basis points of accretion, but all in, you know, about 320 at the end of the day for the full year. What sort of rate, I know you said you have the forward curve, I guess, baked into the guidance right now, but what did that say, I guess, when you guys built out this guidance?

Speaker Change: So then I guess as you look out past <unk>, then you're thinking your stabilization and maybe a few basis points of accretion by all and about $3 20 at the end of the day for the full year.

Speaker Change: What sort of rate I know you said you have the forward curve I guess baked into the guidance right now, but what did that say I guess when you guys built out this guidance because you know obviously changes.

Speaker Change: Yeah, I'm just wondering.

Speaker Change: Yeah.

Speaker Change: Wondering alright.

Speaker Change: Yeah, I like the way you asked the question, Bram, because there's been some volatility in market and fly forward. So, yes, when we were putting our plan together and our forecast, it did have the six cuts in it, which it still largely does, although the probability of the March cut has come out quite a bit. So six cuts on the year, ending the year with the top of the target range at 4%. But I will say again, you know, whether that comes to pass or not,

Speaker Change: Yeah I like the way you asked the question because there's been some volatility in market implied forwards. So yes, when we were putting our plans together and are our forecast. It did have the fixed cuts at which it's still largely does although the profitability of the March cut has come up quite a bit.

Speaker Change: So fixed cuts on the year ending the year with the top of the target range at 4%, but I will say again.

Speaker Change: Whether that comes to pass or not.

Speaker Change: You know, the ongoing repricing of the fixed rate assets, let's say the Fed was just on hold, let's say the market implied forwards are completely wrong.

Speaker Change: The ongoing repricing of the fixed rate assets, let's say the fed was just don't hold let's say the market implied forwards are completely wrong.

Thomas C. Owens: As of year end, our promotional time deposit book declined by $44 million linked quarter, totaling $1.2 billion with a weighted average rate paid of 4.75%, and the weighted average remaining term continued to shorten to about three months. Our broker deposit book declined by $149 million in the linked quarter, totaling $579 million with an all-in weighted average rate paid of about 546, 5.46%, and the weighted average remaining term also shortened to about three months as of December 31st. Also regarding MIPS, non-interest-bearing DBA balances declined $123 million in the linked quarter, or 3.7%, and non-interest-bearing DBAs represented about 21% of the deposit base as of December 31st. Our cost of interest-bearing deposits increased by 28 basis points from the prior quarter to 2.67%. That linked quarter increase was down from the prior quarter increase of 43 basis points during the third quarter. Turning to slide 10, Trustmark continues to maintain a stable, granular, and low exposure deposit base. During the fourth quarter, we had an average of about 465,000 personal and non-personal deposit accounts, including collateralized public fund accounts with an average balance of about $27,000.

Speaker Change: and the Fed's just on hold for the remainder of the year. I still think that because of what we've talked about here, the dynamic of the fixed rate assets continuing to reprice, that you get into the back half of the year and you start to see some lift to net interest margin and net interest income.

Speaker Change: And defense just on hold for the remainder of the year I still think that because of what we've talked about here the dynamic of the fixed rate assets continuing to reprice that you get into the back half of the year and you start to see some lift to net interest margin and net interest income.

Speaker Change: So I really think that the wild card is obviously what the Fed ends up doing, and then what the competitive landscape looks like in terms of deposits. I mean, it stands to reason that that's really going to bring some of the pressure for deposit competition down as the competition for deposits, the available yield, declines. And so, you know, at that point, you need to be pretty reactive in terms of how you're repricing your deposit book. You know, one of the reasons in my prepared commentary I give you the details on our broker time deposit book and our promotional time deposit book is just to reiterate the point. You know, at this point, the weighted average remaining term on those books, which together are something like $1.8 billion, is about three months. So we think we're well positioned to react to that. Whatever the Fed does, and I think that if the market applied forwards turn out to be right, and clearly there's a fair amount of skepticism in the industry as to whether the Fed begins to cut in March or not, but if they do turn out to be right, I really think that's going to take pressure off the cost deposits and provide the opportunity to reprice down the promotional and broker time deposit book.

Speaker Change: So I really I really think that you know the wildcard is obviously.

Speaker Change: What the fed ends up doing and then you know what the competitive landscape looks like in terms of deposits I mean, it stands to reason.

Speaker Change: But that's really going to bring some of the pressure for deposits.

Speaker Change: Competition down if the competition for deposits.

Speaker Change: Ill be available yield declines and so you know at that point, you need to be pretty reactive in terms of how you're repricing. Your deposit book you know one of the reasons in my prepared commentary I'd give you the details on our broker time deposit book and our promotional time deposit book.

Speaker Change: Just to reiterate the point is that.

Speaker Change: At this point the weighted average remaining term on those books, which together are something like $1 8 billion in about three months. So we think we're well positioned to react to whatever the fed does and I think that.

Speaker Change: If the market implied forwards turned out to be right I mean, clearly theres a fair amount of skepticism in the industry as to whether the fed begins to cut in March or not but if they do turn out to be right I really think that's going to take pressure off the cost deposits.

Speaker Change: Provide the opportunity to reprice down the promotional and broker time deposit books.

Thomas C. Owens: As of December 31st, 64% of our deposits were insured and 14% were collateralized, meaning that our mix of deposits that are uninsured and uncollateralized was essentially unchanged from the previous quarter at 22%. We maintained substantial secured lending capacity, which stood at $6.2 billion at December 31st, representing 181% coverage of uninsured and uncollateralized deposits. Our fourth quarter total deposit cost of 2.10% represented a linked quarter increase of 26 basis points and a cumulative beta cycle to date of 38%. Our forecast for the first quarter is for an increase in deposit cost to 2.19%, which would represent a cycle of date beta of 42%. Thank you.

Speaker Change: Okay. So the way I'm hearing is it sounds like it sounds like a fed cuts would be better for the margin I guess this year than than the fed Zhang on hold is that correct just want make sure I understand that correctly.

Speaker Change: Okay, so the way I'm hearing it, it sounds like Fed cuts would be better for the margin, I guess, this year than the Fed staying on hold. Is that correct? I just want to make sure I understand that correctly.

Speaker Change: No, I'll say it a different way.

Speaker Change: It's pretty so.

Speaker Change: Say it a different way.

Speaker Change: the you know

Yeah why.

Speaker Change: When I look at where analysts were in terms of expectations for 'twenty four right. When I look at the range of analysts' estimates when I look at the median analyst estimate in terms of net interest income and net interest margin for full year 'twenty four.

Speaker Change: When I look at where analysts were in terms of expectations for 24, when I look at the range of analyst estimates, when I look at the median analyst estimate in terms of net interest income and net interest margin for full year 24,

Speaker Change: That's essentially where we were right 90 days ago before before the idea that hey, the fed's done here and Theyre going to start to cut and maybe they've got a cut six times in 2024, we were already our internal modeling was already very similar to analysts' estimates both on NII and net interest margin.

Speaker Change: That's essentially where we were, right, 90 days ago, before the idea that, hey, the Fed's done here and they're going to start to cut, and maybe they're going to cut six times in 2024. We were already, our internal modeling was already very similar to analyst estimates both on NII and net interest margin, and so the guidance that we're giving you today just essentially reiterates that. I mean, we're slightly asset sensitive, right, and so there's no question when you look at about half the book is floating rate, right, so there's no question that the Fed beginning to ease creates a headwind to net interest income. The question is how quickly you can react and reprice down your deposit book starting with promotional and broker deposits, but, you know, we've been increasing rack rates that we pay on various products along the way as well, so we think we have the opportunity however it turns out in terms of the ultimate path of monetary policy this year. to be in the range we're giving you in terms of net interest margin and net interest income.

Thomas C. Owens: Turning to revenue on slide 11, net interest income, FTE, decreased $1.9 million linked quarter, totaling $140 million, which resulted in a net interest margin of 3.25%. Net interest margin decreased by four basis points linked quarter as the 10 basis points of accretion due to asset rate and volume were more than offset by the 14 basis points of dilution due to liability rate and loss. On slide 12, our interest rate risk profile remained essentially unchanged as of December 31st.

Speaker Change: And so the guidance that we're giving you today just essentially we're reiterating that.

Speaker Change: We're slightly asset sensitive right and so there's no question. When you look at about half. The book is floating rate right. So there's no. There's no question that the fed beginning to ease creates a headwind to net interest income. The question is how quickly you can react and reprice down your deposit book starting with.

Speaker Change: Ocean on broker deposits, but you know we've been increasing our rack rates that we pay on various products along the way as well. So we think we have the opportunity. However, it turns out in terms of the ultimate path monetary policy this year to.

Thomas C. Owens: Substantial asset sensitivity driven by loan portfolio mix with 50% variable rate coupon. During the fourth quarter, we entered into $75 million notional of forward starting swaps, which brought the swap portfolio notional at quarter end to $1.05 billion, with a weighted average maturity of 2.8 years and a weighted average received fixed rate of 3.18%. We also entered into $50 million notional of forward starting floors, which brought the floor portfolio notional at quarter end to $75 million with a weighted average maturity of four years and a weighted average SOFR rate of 3.58%. The cash flow hedging program substantially reduces our adverse asset sensitivity to a potential downward shock in interest rates. Turning to slide 13, non-interest income for the fourth quarter totaled $49.8 million, a $2.4 million linked quarter decrease, and for the full year totaled $206.9 million, a $1.8 million increase from the prior year. The linked quarter decrease was driven primarily by a normal seasonal decline of $2.1 million in insurance commissions.

Speaker Change: Be in the range, we're giving you in terms of net interest margin and net interest income.

Speaker Change: Okay, got it. That's really helpful. And I guess just one quick question on credit. Non-accruals are up just a little bit again this quarter. Just wondering if you're comfortable with where the reserve is today relative to what you see on the non-performing side. Like that's at about one and a quarter coverage for the ratio of reserve to non-performers. So just wondering.

Speaker Change: Okay got it that's really helpful and I guess, just just one quick question on the on the on credit non accruals are up just a little bit again. This quarter, just wondering if you're comfortable with where the reserve is today relative to what you see on the nonperforming side like that's at about one and a quarter coverage.

Speaker Change: The ratio of reserve to nonperforming so I'm just wondering.

Speaker Change: If there's potential for maybe some...

Speaker Change: Yeah, if there's potential for maybe some some reserve build in the future. If we feel good where it is right now.

Speaker Change: are building the future if you feel good where it is.

Speaker Change: And Graham this is Barry and I do feel good for the reserve yesterday, maybe looking at it another way I would say of the 100 million of non accruals, we have $18 $2 million worth of reserve. When you include those that are individually analyzed or 18, 2%. So I do feel like that the reserve we have.

Speaker Change: Thank you, Graham. This is Barry. And I do feel good where the reserve is today. Maybe looking at it another way, I would say of the $100 million of non-accruals, we have $18.2 million worth of reserve when you include those that are individually analyzed or 18.2%. So I do feel like that the reserve we have on the non-accruals or non-performing assets is solid, even though if you count it from the standpoint of 1.2 times, that feels a little different. But if you think about it in terms of 18.2% reserve on the non-accruals, then that makes me feel good about where we are in that respect. A decent number of those are going to have larger credit sequestration. Of course, they're going to be individually analyzed, and they're very precise in terms of what we know today in terms of the actual calculation.

Speaker Change: On the non accruals are nonperforming assets is the solid even though if you couch it from the standpoint of of one two times.

Thomas C. Owens: The full-year increase was driven by increases of $3.8 million, or 7.2%, in insurance commissions and $1.3 million, or 3%, increase in service charges on deposit accounts. Those increases were offset somewhat by decreases of $2.7 million in bank card and other fees, which was primarily a decline in customer derivative revenue and $2.1 million decline in mortgage banking, as both businesses faced significant headwinds from the interest rate environment. For the quarter, non-interest income represented 26.7% of total revenue, continuing to demonstrate a well-diversified revenue stream.

Speaker Change: That feels a little different but if you think about it in terms of 18, 2% reserve all the non accruals than that makes that makes me feel good about where we are in that respect a decent number of those are going to go larger credits of course, we're gonna be individually analyzed and Wednesday.

Speaker Change: And Theyre very precise in terms of what we know today in terms of the actual calculation.

Speaker Change: Got it that's helpful.

Speaker Change: That's helpful. Thanks, guys.

Speaker Change: Hey, guys.

Speaker Change: Thank you. You're welcome.

Speaker Change: Thank you Youre welcome.

Speaker Change: The next question comes from Gary Tenner of D. A Davidson. Please go ahead.

Speaker Change: The next question comes from Gary Tenner with D.A. Davidson. Please go ahead.

Gary Tenner: Thanks. Good morning.

Gary Tenner: Thanks, Good morning.

Gary Tenner: Morning guys, I'm Gary.

Gary Tenner: Good morning, Jack Mcgarry PE.

Gary Tenner: I wanted to ask a bit of a follow-up just on the deposit outlook. I'm curious, in terms of the deposit data, you kind of get the guide into the first quarter. What are you assuming on the way down? Do you think it's a pretty similar beta, and what kind of lag do you think there is until you're able – I mean, you talked about the promotional deposits and brokerage, but beyond that, what type of lag do you think you see on the repricing?

Gary Tenner: Wanted to ask a bit of a follow up just on the.

Gary Tenner: How does that outlook I'm curious in terms of that.

Thomas C. Owens: Turning to mortgage banking on slide 14, revenue totaled $5.5 million in the fourth quarter, bringing full-year revenue to $26.2 million, which is a decline of $2.1 million. The four-year decline was driven by increased negative net hedging effectiveness of $2.2 million, resulting from the difficult hedging environment which prevailed during 2023, while full-year increases in mortgage servicing income and changing fair value of servicing assets from runoff offset the decline Mortgage loan production totaled $1.5 billion in 2023, a decrease of 31.6% from the prior year. However, retail production mix remained strong in the fourth quarter, representing 75% of volume, or about $204 million.

Gary Tenner: Is it data.

Gary Tenner: Get the guide into the first quarter, what are you assuming on the way down do you think it's a pretty similar beta and what kind of lag do you think there is until you're able I mean, you talked about the promotional.

Gary Tenner: It's a broker but beyond that you know what.

Gary Tenner: What type of lag do you think you see on the repricing side.

Gary Tenner: So Gary this is Tom Owens. Thanks for the question so.

Gary Tenner: So Gary, this is Tom Owens. Thanks for the question. So the way I would answer it, I give you the simple answer first, which is about 20% beta, assuming that

Thomas C. Owens: The way I would answer I gave you the simple answer first which is about 20% beta.

Thomas C. Owens: Assuming.

Thomas C. Owens: You have to start with the reference point right, so let's assume that.

Thomas C. Owens: You have to start with the reference point, right? So let's assume that...

Thomas C. Owens: Our guidance on first quarter deposit costs of about 219 comes to pass.

Thomas C. Owens: Our guidance on first quarter deposit costs of about $2 19 comes to pass.

Thomas C. Owens: And let's say that's the starting point.

Thomas C. Owens: And let's say that's the starting point and that the starting point is the Fed where they are currently at the top of the range is five and a half percent.

Tom Chambers: Loans sold in the secondary market represented 85% of production, while loans held on the balance sheet represented 15%. Gain on sale margin remained under pressure in the fourth quarter, decreasing by 11 basis points to 110 basis points, and I will ask Tom Chambers to cover non-interest expense and capital management. Thank you, Tom.

Thomas C. Owens: And at the starting point is the fed where they are currently at the top of the range is five 5%.

Thomas C. Owens: Right? And so then if you said, well, by year end, by the time we get to the fourth quarter,

Thomas C. Owens: And so then as you said well by year end by the time, we get to the fourth quarter.

Speaker Change: Thank you very much.

Speaker Change: How much of the 150 basis points

Thomas C. Owens: How much of the 150 basis points.

Speaker Change: Do you think

Speaker Change: Do you think.

Speaker Change: What's the relationship between the decline in deposit costs, and 150 basis points and what does that data turned out to be in round numbers I would say about 20% right, which means 20% of 150 is about 30 basis points. So I think it would be reasonable to model from the $2 19 in the first.

Speaker Change: What's the relationship between the decline in deposit cost and the 150 basis points, and what does that data turn out to be? In round numbers, I would say about 20%, which means 20% of 150 is about 30 basis points. So I think it would be reasonable to model from the 219 in the first quarter, you take 30 basis points off of that, and that's probably where you're going to wind up, which is, what, 189 or so. Call it 190.

Tom Chambers: Turning to slide 15, you'll see a detail of our total non-interest expense. During the fourth quarter, adjusted non-interest expense totaled $134.7 million, a link quarter increase of $700,000, or 0.5%, mainly driven by an increase in FDIC assessment expense of $1.1 million, which is included in other expense. All other non-interest expense line items remain relatively unchained on a link quarter basis.

Speaker Change: Quarter, you take 30 basis points off of that and that's probably where you're going to wind up which is what 189 or so about call. It 190 keep.

Speaker Change: If you want to keep it super round, go from 220 in the first quarter to 190 in the fourth quarter, and relative to 150 basis points of Fed cuts, that's a beta of about 20%. And we're modeling that it's pretty linear, or, well, it's pretty constant is the word I'll use. In other words, you know, the first 75 and then the next 50 and then the next 25, we think it's pretty constant that we'll be able to get something like a 20% beta relative to those moves each quarter if those market-applied forwards come to pass.

Speaker Change: If you want to keep it Super round go from $2 20 in the first quarter to $1 90 in the fourth quarter and relative to 150 basis points of fed cuts. That's a beta of about of about 20% and we're modeling that it's pretty linear.

Tom Chambers: As noted on slide 16, the trust market remains well-positioned from a capital perspective. As Duane previously mentioned, our capital ratios remain solid with a common equity Tier 1 ratio of 10.04%, a link quarter increase of 15 basis points, and a total risk-based capital ratio of 12.29%, a link quarter increase of 18 basis points. TrustMart does not repurchase any of its common shares during 2023.

Speaker Change: Well, it's pretty constant is the word I'll use in other words the.

Speaker Change: First 75, and then the next 50 and then the next 25, we think it's pretty constant that we'll be able to get something like a 20% beta relative relative to those moves each quarter, if those market implied forwards come to pass.

Speaker Change: So I appreciate the answer I Wonder if you could just kind of square. This with me then if if youre looking at a 20% deposit repricing beta.

Speaker Change: So I appreciate the answer. I wonder if you could just kind of square this with me then. If you're looking at a 20% deposit repricing beta, but you're 50% variable rate loans and less than that if you factor in the hedges, of course, but still that's a pretty decent repricing gap between.

Tom Chambers: As previously announced, Trustmark's Board of Directors authorized a stock repurchase program effective January 1, 2024 through December 31, 2024, under which $50 million of Trustmark's outstanding shares may be acquired. Although we continue to have a share repurchase program in place, our priority for capital deployment continues to be through organic lending. Back to you, Duane. Thank you, Tom.

Speaker Change: Your 50% variable rate loans and less than that if you factor in the hedges of course, but still that's a pretty decent repricing gap between.

Speaker Change: The Deposit Beta

Speaker Change: The deposit beta.

Speaker Change: and the variable rate loan books.

Speaker Change: On the variable rate as well.

Speaker Change: The loan book so.

Speaker Change: Yeah, I mean,

Speaker Change: Yeah, I mean I'd have to do that all in my head right, which is a little difficult on the fly but the deposit base is a multiple it's two and a half to three times as much as the floating rate loan book.

Speaker Change: I'd have to do that all in my head, right, which is a little difficult on the fly, but the deposit base is a multiple. It's two and a half to three times as much as the floating rate loan book.

Duane A. Dewey: Let's take a look now at our commentary outlook for the commentary slide on slide 17. First, let's look at the balance sheet. We're expecting loans to grow mid-single digits in 2024, while deposits are expected to grow low to mid-single digits. However, securities balances are expected to decline by high single digits based on non-reinvestment of portfolio cash flows, which of course are subject to changes in market interest rates. Moving on to the income statement, we're expecting net interest income to decline low single units in 24, reflecting continued earnings asset growth and stabilizing deposit costs, resulting in a full year net interest margin of approximately 3.2% based on the market implied forward interest rate. For credit, the total provision for credit losses, including unfunded commitments, is dependent upon future loan growth, the current macroeconomic forecast, and credit quality trends.

Speaker Change: Um, so,

Speaker Change: So.

Speaker Change: Yeah.

Speaker Change: Hard to do with my head on the slide, but mathematically, that's the answer.

Speaker Change: Hard to do in my head on the fly but that that's the that's the mathematically that's the answer.

Speaker Change: Okay I appreciate it a quick follow up.

Speaker Change: Okay, I appreciate that, and quick follow-up.

Speaker Change: If I can ask you a quick follow-up, just in terms of the mid-signal digit deposit growth or low to mid for the year, does that assume any...

Speaker Change: If I could ask a quick follow up just in terms of the mid single digit deposit growth or low to mid for the year.

Speaker Change: Does that assume any additional.

Speaker Change: additional pay down and brokered over the course of time or do you think you just kind of renew those as they come up?

Speaker Change: Additional pay down in brokered over the course of time or do you think you just to kind of renew those as they come up.

Speaker Change: You know, I think that'll be flat down slightly, as I said in my prepared comments, we have really good growth in personal deposits in the fourth quarter. You know, we had solid growth when you think about it.

Speaker Change: You know I think that would be flat to down slightly as I said in my prepared comments, we have really good growth in personal deposits in the fourth quarter.

Speaker Change: We had solid growth when you think about it.

Speaker Change: X the Brokered, having growth of, for the full year,

Speaker Change: Ask the brokered.

Speaker Change: Having growth of for the full year.

Speaker Change: Yes.

Speaker Change: of

Oh.

Speaker Change: The three 8% full year in a in an environment, where bank deposits have been declining we feel really good about that and especially having been able to raise those deposits.

Speaker Change: 3.8% full year in an environment where bank deposits have been declining. We feel really good about that, and especially having been able to raise those deposits at a competitive cost. And so, yeah, I think flat to down is the answer on that. Certainly, we do not view broker deposits as a permanent feature of our balance sheet. You know, it was more utilization of broker deposits in 2023 was more to manage the repricing of the deposit book, you know, with 500 basis points of Fed rate hikes. So, certainly, we're going to try and be opportunistic over time to continue to have the broker deposit book of trade.

Duane A. Dewey: Net charge-offs requiring additional reserving are expected to be nominal based on the current economic outlook. From a non-interest income perspective, non-interest income is expected to grow mid-single digits, which reflects some modest improvement in mortgage, continued growth in insurance, and some improvement in the wealth management business. For the last couple years, we've talked about our Fit to Grow initiatives across the company, in which we've invested in both growth initiatives, mostly in additional production talent, as well as in technology and other key areas of the company. To that end, in 2024, we will begin to see efficiencies from those efforts, along with other heightened cost containment initiatives. So that adjusted non-interest expense is expected to increase by low single digits for the full year 2024. This is always subject to the impact of commissions in our commission-based businesses.

Speaker Change: Competitive cost and so yeah.

Speaker Change: Yeah, I think flat to down is the answer on that certainly certainly we do not view broker deposits as a permanent feature of our balance sheet. You know it was more of a utilization of broker deposits in 2023 was more to manage the repricing.

Speaker Change: Repricing of the deposit book, you know with 500 basis points of fed rate hikes. So certainly we're going to try and be offered in an opportunistic over time to continue to pay.

Speaker Change: The broker deposit book and tried.

Speaker Change: Thanks very much.

Speaker Change: As a reminder to ask a question. Please press star one to enter the question queue.

Speaker Change: As a reminder, to ask a question, please press star then 1 to enter the question queue.

Speaker Change: The next question comes from Catherine Mealor with <unk>. Please go ahead.

Speaker Change: The next question comes from Catherine Mealor with KBW. Please go ahead.

Duane A. Dewey: Finally, we'll continue a disciplined approach to capital deployment with a preference for organic loan growth and potential M&A. We will continue to maintain a strong capital base to implement corporate priorities and initiatives. I'd like to now, at this time, open the floor to questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Catherine Mealor: Thanks. Good morning, just one more follow up on the margin is do you have what percentage or the amount of fixed rate loans that can reprice. This year and then similarly, you have an amount of.

Catherine Mealor: Thanks. Good morning. Just one more follow-up on the margin. Do you have what percentage or the amount of fixed rate loans that you expect to reprice this year? And then similarly, do you have an amount of deposits that are indexed that will, outside of kind of the promotional maybe and brokered, just that it will immediately reprice lower? Just kind of thinking about the immediate repricing lower once rates start moving lower on the deposit side. Thanks.

Catherine Mealor: Posit that are index that well out there kind of a promotional maybe in and broker.

Catherine Mealor: Is that it will immediately reprice lower just kind of thinking that immediate repricing lower wentworth rates starting to de lever hotspots.

Operator: If you are using a speakerphone, please pick up your handset before pressing the. If at any time your question has been addressed and you would like to withdraw your question, please press star, then delete. At this time, we will pause momentarily to assemble our rock. The first question today comes from Graham Dick from Piper Sandler. Please go ahead. Hey, good morning everyone. Morning, Graham.

Catherine Mealor: Catherine This is Barry I'll start with the core Pharmfilm looks like the second bar, but we do expect around $600 million.

Catherine Mealor: And Catherine, this is Barry. I'll start with the first part, and Tom will take the second part. But we do expect around 600 million fixed rate loans to be repriced in the next 12 months.

Catherine Mealor: Hum fixed rate loans to be repriced in the next 12 months.

Catherine Mealor: And then a little bit less than that maybe $550 million of fixed rate loans to be repriced over the next 12 to 24 months.

Tom: and then a little bit less than that, maybe $550 million of fixed rate loans to be repriced over the next 12 to 24 months.

Catherine Mealor: Okay.

Speaker Change: And what's the rate on average that's coming up and repricing to you?

Graham Dick: So I just wanted to start on NII and the NIM. I guess your guidance is implying that it will decline kind of throughout 2024, which is a bit different than what most other of your peers are saying right now. Can you just walk through your thoughts on this?

Catherine Mealor: On average that's coming up and replacing two.

Speaker Change: Sure. The ones they're going to be repricing in the next 12 months, the average rate is 5.14%.

Catherine Mealor: Sure.

Catherine Mealor:

Catherine Mealor: But once they're gonna be repricing in the next 12 months, the average ready to stop or one 4%.

Speaker Change: and then those who were prized 12 to 24 months out, the average rate is 4.07.

Catherine Mealor: And then those who will reprise 12 to 24 months out the average wages for porno seven.

Thomas C. Owens: I know you guys have a fair amount of floating rate loans, but I'm just interested to hear how your outlook might differ from other banks out there who say that fixed asset repricing will be enough to overcome any pressures from a lower Fed. Yeah, Graham, this is Tom Owens, and I'd start by saying that, to a great extent, I'm in agreement with the commentary that you just cited, and I disagree somewhat with your interpretation so far of continuing compression in the net interest margin. You know, we've come off here with, what, back-to-back linked quarter declines of four basis points in net interest margin. I think the quarter before those two was six basis points.

Speaker Change: Okay, great. Thank you, Barry.

Speaker Change: Okay, great. Thank you Barry.

Robert B. Harvey: Thank you.

Speaker Change: So first.

Speaker Change: So, Catherine, first of all, I appreciate Barry taking some of the load here this morning. I feel like y'all are wearing me out here out of the gate. But we do not have a large portion. You know, we have some public fund balances. And I'm a little reluctant to throw out a number because I don't have the numbers in front of me right now. But it's not a huge portion that reprices down immediately. You know, I can think of some public fund balances that probably add up somewhere between $500 million and $1 billion. And then we also have some corporate, what we call CTS, corporate treasury services balances that reprice down that are indexed. And while we're on the call, I'm going to try and get my hands on that number so I can give you a little more color on that piece. But those are. Those are really the two categories. I feel good about that range I just gave you on the public. And I'll see if I can get my hands on a more solid answer on the corporate deposits that are indexed.

Speaker Change: First of all I appreciate very taken some of the load here, it's more as you all know.

Speaker Change: Wearing out.

Speaker Change: Out of the game, but we.

Speaker Change: We did not have a large portion.

You know, we have some public fund balances and I'm, a little reluctant to throw out a number because I don't have the numbers in front of me right now, but it's not a it's not a huge portion that reprice down immediately.

Speaker Change: You know I can think of some public.

Speaker Change: Public fund balances, they probably add up between somewhere between 500 million and $1 billion and then we also have some.

Speaker Change: Corporate.

Thomas C. Owens: And so I think with the continued increase that we anticipate in deposit costs, and the guidance that we've given you for the first quarter, it's reasonable to assume that you're going to see another linked quarter decline of a similar order of magnitude to what the run rate has been. But we are anticipating, you know, I think on last quarter's call, when asked about the inflection point in terms of net interest margin and net interest income, I think the guidance we gave then was second to third quarter. And I think at this point, you know, it might come in a quarter to the second quarter.

Speaker Change: We would call Cts corporate Treasury services balances that reprice down there that are indexed and while we're on the call I'm going to try and get my hands on that number. So I can give you a little more color on that piece, but those are those are really the two categories I feel good about that range I just gave you on the public.

Speaker Change: And I'll see if I can get my hands on.

Speaker Change: On a more solid answer on the corporate deposits that are indexed.

Speaker Change: Okay, that's great right.

Catherine Mealor: Okay, that's great. And then any thoughts on, which of these other companies do bond restructures? How do you all think about that? I know you're talking about just the bond books running off at a high single-digit pace throughout the year, but any thoughts around doing something, you know, more immediate on the bond books?

Speaker Change: Any thoughts on where she spent a company's Gabon restructures how're you all think about that and then if you're talking about just the bond book running off at a high single digit pace throughout the year, but any thoughts around getting something in a more immediate on the bonds.

Thomas C. Owens: So we think that, you know, and obviously, as I said in my prepared comments, it remains a competitive environment for deposits. Who knows what the Fed's going to do? Our guidance is based on market-implied forwards. But all that being said, we are modeling a similar linked quarter decline in the first quarter to what you've seen the last several quarters, and then we are getting to an inflection point in terms of some modest accretion to net interest income and net interest margin. And I do agree with the commentary that repricing of the fixed-rate assets on the balance sheet, over time, is enough to generally stabilize, if not accrete, the net interest margin modestly. So that's a long-winded answer.

Speaker Change: You know Kathryn that we've gotten that question every quarter and understandably. So I mean every time we've looked at it.

Catherine Mealor: Um

Speaker Change: You know, Catherine, we've gotten that question every quarter, and understandably so. I mean, every time we've looked at it...

Speaker Change: You know the opportunity you know I always struggle a little bit with.

Speaker Change: You know, the opportunity, you know, I always struggle a little bit with

Speaker Change: Whether you're truly adding economic value there or not,

Speaker Change: Whether you are truly adding economic value there or not.

Speaker Change: And there's two parts of that to me. One is the extent to which you are borrowing on a spread basis to fund securities in your portfolio that are not on a spread basis. And we have a pretty small percentage of the portfolio in the securities portfolio that fits that profile. But we certainly have continued to look at it. And I'll tell you, I mean, the other thing is, obviously, you know, in my prepared comments, I talk about the cash flow hedge portfolio and the steps that we've done there to rein in our asset sensitivity. We are very naturally asset sensitive. And as best we can tell from call report data, we feel like we're middle of the pack in terms of our asset sensitivity. But, you know, there is a decision to be made there as well, right? I mean, with the uncertainty that we're facing.

Speaker Change: And there's two parts of that to me one is the extent to which you are borrowing on a spread basis to fund securities in your portfolio that are not on a spread basis, and we have a pretty small percentage of the portfolio.

Speaker Change: In the securities portfolio that fits that profile, but we certainly have continued to look at it and I'll tell you I mean, the other thing is.

Graham Dick: The short answer is, you know, we think the trough is probably in the first quarter here in terms of net interest margin, and then we do get some stabilization there and some modest accretion. Okay, that's very helpful.

Speaker Change: Obviously, you know in my prepared comments I talked about the cash flow hedge portfolio.

Speaker Change: And the steps that we've done there to rein in our asset sensitivity, we are very naturally asset sensitive.

Speaker Change: The best we can tell from call report data, we feel like were middle of the pack in terms of our asset sensitivity.

Thomas C. Owens: So then I guess as you look out past 1Q, then you're thinking, you know, stabilization, maybe a few basis points of accretion, but all in all, about 320 at the end of the day for the full year. What sort of rate, I know you said you have the forward curve, I guess, baked into the guidance right now, but what did that say, I guess, when you guys built out this guidance? Yeah, I'm just wondering.

Speaker Change: But you know there is a decision to be made there as well right I mean with the <unk>.

Speaker Change: The uncertainty that we're facing.

Speaker Change: With respect to the path of the Fed and monetary policy, and so potential restructuring of the securities portfolio is part of that calculus, as well as what we do with the cash flow hedge portfolio. So I'd say we continue to look at it.

Speaker Change: With respect to the path of the fed and monetary policy and so potential restructuring of the securities portfolio is part of that calculus as well as what we do with the cash flow hedge portfolio. So I'd say, we continue to look at it.

Graham Dick: Yeah, I like the way you asked the question, Bram, because there's been some volatility in the market and fly forward. So, yes, when we were putting our plan together and our forecast, it did have the six cuts in it, which it still largely does, although the probability of the March cut has come out quite a bit. So six cuts in the year, ending the year with the top of the target range at 4%. But I will say again, you know, whether that comes to pass or not, the ongoing repricing of the fixed rate assets, let's say the Fed was just on hold, let's say the market implied forwards are completely wrong, and the Fed's just on hold for the remainder of the year.

Speaker Change: Great.

Speaker Change: Great. And any updated thoughts on the potential insurance sale? I know you get that question every quarter too, but just curious of any kind of changes and how you're thinking about that.

Speaker Change: Any updated thoughts on the potential insurance sale.

Speaker Change: When you get that question every quarter, but just curious if any kind of changes in how you're thinking about that.

Speaker Change: No, I would say the same thing I've said in the prior quarters, Catherine. You know, that's been a good business for Trustmark. I think this year was the 13th consecutive year of record revenue and profitability in that business. It's been a good business for us. You know, that said, we're well aware of what is going on around us. We're well aware of valuations and, you know, the opportunities there. But at this point, there's really no change from what we've got into in prior calls.

Speaker Change: No I would say the same thing I've said in the prior quarters Catherine.

Catherine Mealor: That's been a good business for Trustmark I think this year was the 13th consecutive year of record revenue and profitability in that business. It's a it's a been a good business for US you know that.

Catherine Mealor: That said, we're well aware of what is going on around us, we're well aware of valuations and you know the opportunities there, but at this point, where it's really no change from what we've got into the prior prior calls.

Graham Dick: I still think that because of what we've talked about here, the dynamic of the fixed-rate assets continuing to reprice, you get into the back half of the year, and you start to see some lift in net interest margin and net interest income. So I really think that the wild card is obviously what the Fed ends up doing, and then what the competitive landscape looks like in terms of deposits.

Speaker Change: Great, thank you

Speaker Change: Okay, great. Thank you.

Speaker Change: As a reminder, if you would like to ask a question. Please press Star then one to enter the question queue.

Speaker Change: As a reminder, if you would like to ask a question, please press star then 1 to enter the question queue.

Thomas C. Owens: I mean, it stands to reason that that's really going to bring some of the pressure on deposit competition down as the competition for deposits, the available yield, declines. And so, you know, at that point, you need to be pretty reactive in terms of how you're repricing your deposit book. You know, one of the reasons in my prepared commentary I give you the details on our broker time deposit book and our promotional time deposit book is just to reiterate the point. At this point, the weighted average remaining term on those books, which together are something like $1.8 billion, is about three months.

Speaker Change: That's star then one to enter the question queue.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Duane Dewey for any closing remarks.

Duane A. Dewey: I just wanted to say thank you again for joining us this morning for our full year and fourth quarter earnings call. We look forward to getting back together with all of you again at the end of the first quarter and toward the end of April you all have a great rest of the week. Thank you.

Duane A. Dewey: I just want to say thank you again for joining us this morning for our full year and fourth quarter earnings call. We look forward to getting back together with all of you again at the end of the first quarter and toward the end of April. Y'all have a great rest of the week. Thank you.

Duane A. Dewey: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duane A. Dewey: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Thomas C. Owens: So we think we're well positioned to react to that. Whatever the Fed does, and I think that if the market applied forwards turn out to be right, and clearly there's a fair amount of skepticism in the industry as to whether the Fed begins to cut in March or not, but if they do turn out to be right, I really think that's going to take pressure off the cost deposits and provide the opportunity to reprice down the promotional and broker time deposit book. Okay, so the way I'm hearing it, it sounds like Fed cuts would be better for the margin, I guess, this year than the Fed staying on hold. Is that correct? I just want to make sure I understand that correctly.

Duane A. Dewey: Yeah.

Duane A. Dewey: Okay.

Duane A. Dewey: [music].

Duane A. Dewey: Yeah.

Duane A. Dewey: Yes.

Duane A. Dewey: Yeah.

Duane A. Dewey: [music].

Graham Dick: No, I'll say it a different way. When I look at where analysts were in terms of expectations for 24, when I look at the range of analyst estimates, when I look at the median analyst estimate in terms of net interest income and net interest margin for full year 24, That's essentially where we were, right, 90 days ago, before the idea that, hey, the Fed's done here, and they're going to start to cut, and maybe they We were already, our internal modeling was already very similar to analyst estimates both on NII and net interest margin, and so the guidance that we're giving you today just essentially reiterates that. I mean, we're slightly asset sensitive, right, and so there's no question when you look at about half the book is floating rate, right? So there's no question that the Fed beginning to ease creates a headwind for net interest income.

Graham Dick: The question is how quickly you can react and reprice down your deposit book starting with promotional and broker deposits, but, you know, we've been increasing the rack rates that we pay on various products along the way as well, so we think we have the opportunity, however it turns out in terms of the ultimate path of monetary policy this year. to be in the range we're giving you in terms of net interest margin and net interest income. Okay, I got it.

Graham Dick: That's really helpful. And I guess just one quick question on credit. Non-accruals are up just a little bit again this quarter. Just wondering if you're comfortable with where the reserve is today relative to what you see on the non-performing side. Like, that's at about one and a quarter coverage for the ratio of reserve to non-performers. So just wondering.

Graham Dick: If there's potential for maybe some... building the future if you feel good where it is. Thank you, Graham. This is Barry.

Robert B. Harvey: And I do feel good where the reserve is today. Maybe looking at it another way, I would say of the $100 million of non-accruals, we have $18.2 million worth of reserve when you include those that are individually analyzed, or 18.2%. So I do feel that the reserve we have on the non-accruals or non-performing assets is solid, even though if you count it from the standpoint of 1.2 times, that feels a little different. But if you think about it in terms of 18.2% of the non-accruals, then that makes me feel good about where we are in that respect. A decent number of those are going to have larger credit sequestration. Of course, they're going to be individually analyzed, and they're very precise in terms of what we know today in terms of the actual calculation.

Graham Dick: That's helpful. Thanks, guys. Thank you. You're welcome. The next question comes from Gary Tenner with D.A. Davidson.

Gary Tenner: Please go ahead. Thanks. Good morning. Morning guys, I'm Gary.

Gary Tenner: I wanted to ask a bit of a follow-up just on the deposit outlook. I'm curious, in terms of the deposit data, you kind of get the guide into the first quarter. What are you assuming on the way down? Do you think it's a pretty similar beta, and what kind of lag do you think there is until you're able to – I mean, you talked about the promotional deposits and brokerage, but beyond that, what type of lag do you think you see on the repricing? So Gary, this is Tom Owens.

Duane A. Dewey: resulting from the difficult hedging environment which prevailed during 2023, while full-year increases in mortgage servicing income and change in fair value of servicing assets from runoff offset the decline in gain on sale of loans. Mortgage loan production exceeded $1.5 billion in 2023, a decrease of 31.6% from the prior year. Retail production mix remained strong in the fourth quarter, representing 75% of volume, or about $204 million.

Thomas C. Owens: Thanks for the question. So the way I would answer it, I give you the simple answer first, which is about 20% beta, assuming that you have to start with the reference point, right? So let's assume that our guidance on first quarter deposit costs of about 219 comes to pass. And let's say that's the starting point and that the starting point is the Fed, where they are currently at the top of the range at five and a half percent. Right?

Unnamed Speaker: Loans sold in the secondary market represented 85% of production, while loans held on the balance sheet represented 15%. Gain on sale margin remained under pressure in the fourth quarter, decreasing by 11 basis points to 110 basis points. And now we'll ask Tom Chambers to cover non-interest expense and capital management. Thank you, Tom.

Thomas C. Owens: And so then if you said, well, by year end, by the time we get to the fourth quarter, Thank you very much. How much of the 150 basis points do you think? What's the relationship between the decline in deposit cost and the 150 basis points, and what does that data turn out to be? In round numbers, I would say about 20%, which means 20% of 150 is about 30 basis points. So I think it would be reasonable to model from the 219 in the first quarter, you take 30 basis points off of that, and that's probably where you're going to wind up, which is, what, 189 or so. Call it 190.

Tom Chambers: Turning to slide 15, we'll see a detail of our total non-interest expense. During the fourth quarter, adjusted non-interest expense totaled $134.7 million, a link quarter increase of $700,000 or 0.5%, mainly driven by an increase in FDIC assessment expense of $1.1 million, which is included in other expenses. All other non-interest expense line items remain relatively unchanged on a link quarter basis.

Thomas C. Owens: If you want to keep it super round, go from 220 in the first quarter to 190 in the fourth quarter, and relative to 150 basis points of Fed cuts, that's a beta of about 20%. And we're modeling that it's pretty linear, or, well, pretty constant is the word I'll use. In other words, you know, the first 75 and then the next 50 and then the next 25, we think it's pretty constant that we'll be able to get something like a 20% beta relative to those moves each quarter if those market-applied forwards come to pass. So I appreciate the answer. I wonder if you could just kind of square this with me then?

Duane A. Dewey: As noted on slide 16, TrustMark remains well-positioned from a capital perspective. As Duane previously mentioned, our capital ratios remain solid with a common equity tier one ratio of 10.04 percent, a link order increase of 15 basis points, and a total risk-based capital ratio of 12.29 percent, a link order increase of 18 basis points. TrustMark did not repurchase any of its common shares during 2023.

Tom Chambers: As previously announced, TrustMark's Board of Directors authorized a stock repurchase program effective January 1st, 2024 through December 31st, 2024, under which $50 million of TrustMark's outstanding shares may be acquired. Although we continue to have a share repurchase program in place, our priority for capital deployment continues to be through organic lending. Back to you, Duane. Thank you, Tom.

Gary Tenner: If you're looking at a 20% deposit repricing beta, but you're 50% variable rate loans and less than that if you factor in the hedges, of course, but still, that's a pretty decent repricing gap between the Deposit Beta and the variable rate loan books. Yeah, I mean, I'd have to do that all in my head, right, which is a little difficult on the fly, but the deposit base is a multiple. It's two and a half to three times as much as the floating rate loan book. Um, so, hard to do with my head on the slide, but mathematically, that's the answer.

Duane A. Dewey: Let's take a look now at our commentary. The outlook for commentary slides on 517. First, let's look at the balance sheet. We're expecting loans to grow by mid-single digits in 2024, while deposits are expected to grow low to mid-single digits. Securities balances are expected to decline by high single digits based on non-reinvestment of portfolio cash flows, which of course are subject to changes in market interest rates. Moving on to the income statement, we're expecting net interest income to decline by low single digits in 2024, reflecting continued earnings asset growth and stabilizing deposit costs, resulting in a full year net interest margin of approximately 3.2% based on the market implied forward interest rate. For credit, the total provision for credit losses, including unfunded commitments, is dependent upon future loan growth, the current macroeconomic forecast, and credit quality trends.

Thomas C. Owens: Okay, I appreciate that, and a quick follow-up. If I can ask you a quick follow-up, just in terms of the mid-signal digit deposit growth or low to mid for the year, does that assume any additional pay down and brokered over the course of time, or do you think you just kind of renew those as they come up? You know, I think that'll be flat down slightly, as I said in my prepared comments. We had really good growth in personal deposits in the fourth quarter. You know, we had solid growth when you think about it.

Thomas C. Owens: X the Brokered, having growth of, for the full year, of 3.8% full year in an environment where bank deposits have been declining. We feel really good about that, and especially having been able to raise those deposits at a competitive cost. And so, yeah, I think flat to down is the answer on that.

Duane A. Dewey: Net charge-offs requiring additional reserving are expected to be nominal based on the current economic outlook. From a non-interest income perspective, non-interest income is expected to grow mid-single digits, which reflects a modest improvement in mortgage, continued growth in insurance, and some improvement in the wealth management business. For the last couple of years, we've talked about our fit-to-grow initiatives across the company, in which we've invested in both growth initiatives, mostly in additional production talent, as well as in technology and other key areas of the company. To that end, in 2024, we will begin to see efficiencies from those efforts, along with other heightened cost containment initiatives.

Thomas C. Owens: Certainly, we do not view broker deposits as a permanent feature of our balance sheet. You know, the more utilization of broker deposits in 2023 was more to manage the repricing of the deposit book, you know, with 500 basis points of Fed rate hikes. So, certainly, we're going to try and be opportunistic over time to continue to have the broker deposit book of trade. Thanks very much.

Duane A. Dewey: So that adjusted non-interest expense is expected to increase by low single digits for the full year 2024. This is always subject to the impact of commissions in our commission-based business. Finally, we'll continue a disciplined approach to capital deployment with a preference for organic loan growth and potential M&A. We will continue to maintain a strong capital base to implement corporate priorities and initiatives.

Gary Tenner: As a reminder, to ask a question, please press star then 1 to enter the question queue. The next question comes from Catherine Mealor with KBW. Please go ahead. Thanks. Good morning.

Catherine Mealor: Just one more follow-up on the margin. Do you have what percentage or amount of fixed-rate loans that you expect to reprice this year? And then similarly, do you have an amount of deposits that are indexed that will, outside of kind of the promotional maybe and brokered, just that it will immediately reprice lower? Just kind of thinking about the immediate repricing lower once rates start moving lower on the deposit side. Thanks. And Catherine, this is Barry.

Operator: I'd like to now, at this time, open the floor to questions. Thank you. Thank you. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone.

Operator: If you are using a speakerphone, please pick up your handset before pressing the. If at any time your question has been addressed and you would like to withdraw your question, please press star, then down. At this time, we will pause momentarily to assemble our rocket. The first question today comes from Graham Dick from Piper Sandler. Please go ahead. Hey, good morning, everyone.

Robert B. Harvey: I'll start with the first part, and Tom will take the second part. But we do expect around 600 million fixed-rate loans to be repriced in the next 12 months, and then a little bit less than that, maybe $550 million of fixed-rate loans to be repriced over the next 12 to 24 months. And what's the rate on average that's coming up and repricing to you? Sure. The ones they're going to be repricing in the next 12 months, the average rate is 5.14%, and then those who were priced 12 to 24 months out, the average rate is 4.07.

Graham Dick: Good morning, Graham. So I just wanted to start on NII and the NIM, and I guess your guidance is implying... and to decline kind of throughout 2024, which is a bit different than what most other of your peers are saying right now. Can you just walk through your thoughts on this? I know you guys have a fair amount of floating rate loans, but just interested to hear how your outlook might differ from other banks out there who say that fixed asset repricing will be enough to overcome any pressures from a lower Fed. Yeah, Graham, this is Tom Owens, and I'd start by saying that, to a great extent, I'm in agreement with the commentary that you just cited, and I disagree somewhat with your interpretation so far of continuing compression in net interest margins. You know, we've come off here with back-to-back linked quarter declines of four basis points in net interest margin. I think the quarter before those two was six basis points.

Robert B. Harvey: Okay, great. Thank you, Barry. Thank you. So, Catherine, first of all, I appreciate Barry taking some of the load here this morning. I feel like y'all are wearing me out here right out of the gate.

Thomas C. Owens: But we do not have a large portion. You know, we have some public fund balances. And I'm a little reluctant to throw out a number because I don't have the numbers in front of me right now. But it's not a huge portion that will go prices down immediately.

Thomas C. Owens: You know, I can think of some public fund balances that probably add up somewhere between $500 million and $1 billion. And then we also have some corporate, what we call CTS, corporate treasury services balances that reprice down that are indexed. And while we're on the call, I'm going to try and get my hands on that number so I can give you a little more color on that piece. But those are.

Thomas C. Owens: Those are really the two categories. I feel good about that range I just gave you for the public. And I'll see if I can get my hands on a more solid answer on the corporate deposits that are indexed. Okay, that's great. And then any thoughts on which of these other companies do bond restructures? How do you all think about that? I know you're talking about just the bond books running off at a high single-digit pace throughout the year, but any thoughts around doing something, you know, more immediate on the bond books?

Thomas C. Owens: So we think that, you know, and obviously, as I said in my prepared comments, it remains a competitive environment for deposits. Who knows what the Fed's going to actually do? Our guidance is based on market implied forwards. But all that being said, we are modeling a similar linked quarter decline in the first quarter to what you've seen the last several quarters, and then we are getting to an inflection point in terms of some modest accretion to net interest income and net interest margin. And I do agree with the commentary that repricing of the fixed rate assets on the balance sheet over time is enough to generally stabilize, if not accrete, the net interest margin modestly. So that's a long-winded answer.

Catherine Mealor: Um, Catherine, we've gotten that question every quarter, and understandably so. I mean, every time we've looked at it... The opportunity, you know, I always struggle a little bit with whether you're truly adding economic value there or not. And there are two parts to that for me. One is the extent to which you are borrowing on a spread basis to fund securities in your portfolio that are not on a spread basis.

Thomas C. Owens: And we have a pretty small percentage of the portfolio in the securities portfolio that fits that profile, but we certainly have continued to look at it. And I'll tell you, I mean, the other thing is, obviously, you know, in my prepared comments, I talk about the cash flow hedge portfolio and the steps that we've taken there to rein in our asset sensitivity. We are very naturally asset sensitive. And as best we can tell from call report data, we feel like we're in the middle of the pack in terms of our asset sensitivity. But, you know, there is a decision to be made there as well, right? I mean, with the uncertainty that we're facing with respect to the path of the Fed and monetary policy, and so potential restructuring of the securities portfolio is part of that calculus, as well as what we do with the cash flow hedge portfolio.

Thomas C. Owens: The short answer is, you know, we think the trough is probably in the first quarter here in terms of net interest margin, and then we do get some stabilization there and some modest accretion. Okay, that's very helpful.

Graham Dick: So then I guess as you look out past 1Q, then you're thinking stabilization, maybe a few basis points of accretion, but all in about 320 at the end of the day for the full year. What sort of rate, I know you said you have the forward curve, I guess, baked into the guidance right now, but what did that say, I guess, when you guys built out this guidance? Yeah, I'm just wondering. Yeah, I like the way you asked the question, Graham, because there's been some volatility in Marks and Applied Forwards. So yes, when we were putting our plan together and our forecast, it did have the six cuts in it, which it still largely does, although the probability of the March cut has come out quite a bit.

Thomas C. Owens: So I'd say we continue to look at it. Great. And any updated thoughts on the potential insurance sale? I know you get that question every quarter too, but just curious about any kind of changes and how you're thinking about that.

Thomas C. Owens: So six cuts in the year, ending the year with the top of the target range at 4%. But I will say again, whether that comes to pass or not, you know, the ongoing repricing of the fixed-rate assets. Let's say the Fed was just on hold. Let's say the market-implied forwards are completely wrong.

Thomas C. Owens: No, I would say the same thing I've said in the prior quarters, Catherine. You know, that's been a good business for Trustmark. I think this year was the 13th consecutive year of record revenue and profitability in that business. It's been a good business for us. You know, that said, we're well aware of what is going on around us. We're well aware of valuations and, you know, the opportunities there. But at this point, there's really no change from what we've got into on prior calls. Great, thank you. As a reminder, if you would like to ask a question, please press star then 1 to enter the question queue. That's the star then one to enter the question queue.

Thomas C. Owens: And the Fed's just on hold for the remainder of the year. But I still think, because of what we've talked about here, the dynamic of the fixed-rate assets continuing to reprice, that you get into the back half of the year, and you start to see some lift in net interest margin and net interest income. So I really think that, you know, the wild card is obviously what the Fed ends up doing and then, you know, what the competitive landscape looks like in terms of deposits. I mean, it stands to reason that that's really going to bring some of the pressure on deposit competition down as the competition for deposits, you know, the available yield declines. And so, you know, at that point, you need to be pretty reactive in terms of how you're repricing your deposit book.

Duane A. Dewey: This concludes our question and answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks. I just want to say thank you again for joining us this morning for our full year and fourth quarter earnings call. We look forward to getting back together with all of you again at the end of the first quarter and toward the end of April. Y'all have a great rest of the week. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Transcript Emily Beynon, BF-WATCH TV 2021 BF-WATCH TV 2021

Thomas C. Owens: You know, one of the reasons in my prepared commentary I give you the details on our broker time deposit book and our promotional time deposit book is just to reiterate the point that, at this point, the weighted average remaining term on those books, which together are something like $1.8 billion, is about three months. So we think we're well positioned to react to whatever the Fed does. And I think that if the market applied forwards turn out to be right, I mean, clearly, there's a fair amount of skepticism in the industry as to whether the Fed begins to cut in March or not. But if they do turn out to be right, I really think that's going to take pressure off the class deposits and provide the opportunity to reprice down the promotional and broker time deposit books. Okay, so the way I'm hearing it, it sounds like Fed cuts would be better for the margin this year than the Fed staying on hold. Is that correct? I just want to make sure I understand that correctly. So, I'll say it another way.

Thomas C. Owens: And, you know, when I look at where analysts were in terms of expectations for 24, right, when I look at the range of analyst estimates, when I look at the median analyst estimate in terms of net interest income and net interest margin for full year 24, That's essentially where we were, right, 90 days ago, before the idea that, hey, the Fed's done here, and they're going to start to cut, and maybe they're going to cut six times in 2024. We were already, our internal modeling was already very similar to analyst estimates, both on NII and net interest margin. And so the guidance that we're giving you today just essentially reiterates that. I mean, we're slightly asset sensitive, right?

Graham Dick: And so there's no question when you look at about half the book is floating rate, right? So there's no question that the Fed, which is beginning to ease, creates a headwind for net interest income. The question is how quickly you can react and reprice down your deposit book, starting with promotional and broker deposits. But, you know, we've been increasing the rack rates that we pay on various products along the way as well. So we think we have the opportunity, however it turns out, in terms of the ultimate path of monetary policy this year, to be in the range we're giving you in terms of net interest margin and net interest income. Okay, got it. That's a really helpful one.

Graham Dick: I guess just one quick question on credit. Non-accruals are up just a little bit again this quarter. Just wondering if you're comfortable with where the reserve is today relative to what you see on the non-performing side. Like, that's at about one and a quarter coverage for the ratio of reserve to non-performers. So just wondering.

Barry: Yeah, if there's potential for that, maybe. You deserve to Build in the Future if you feel good where it is. Hey Graham, this is Barry, and I do feel good with what the reserve is today. Maybe looking at it another way, I would say of the $100 million of non-accruals, we have $18.2 million worth of reserve when you include those that are individually analyzed, or 18.2%. So I do feel that the reserve we have on the non-accruals or non-performing assets is solid, even though if you count it from the standpoint of 1.2 times, that feels a little different. But if you think about it in terms of 18.2% of the non-accruals, then that makes me feel good about where we are in that respect. At least a number of those are going to, of the larger credit supports, are going to be individually analyzed, and they're very precise in terms of what we know today in terms of the actual calculation.

Graham Dick: Alright, that's helpful. Thanks guys. Thank you. You're welcome. The next question comes from Gary Tenner with D.A. Davidson.

Gary Tenner: Please go ahead. Thanks. Good morning. Morning, guys. I'm Gary.

Gary Tenner: I mean, you talked about promotional deposits and brokerage, but beyond that, you know, what type of lag do you think you see on the repricing? So Gary, this is Tom Owens, thanks for the question. So, the way I would answer, I would give you the simple answer first, which is about 20% beta, assuming that you have to start with the reference point, right?

Thomas C. Owens: So let's assume that, um... Our guidance on first quarter deposit costs of about $219 comes to pass. And let's say that's the starting point and that the starting point is the Fed, where they are currently. The top of the range is 5.5%. Correct. And so then if you said, well, by year end, by the time we get to the fourth quarter, how much of the 150 basis points do the youth think? What's the relationship between the decline in deposit cost and the 150 basis points, and what does that data turn out to be? In round numbers, I would say about 20%, right, which means 20% of 150 is about 30 basis points.

Thomas C. Owens: So I think it would be reasonable to model from the 219 in the first quarter; you take 30 basis points off of that, and that's probably where you're going to wind up, which is, what, 189 or so, about, call it 190. If you want to keep it super round, go from 220 in the first quarter to 190 in the fourth quarter, and relative to 150 basis points of Fed cuts, that's a beta of about 20%. And we're modeling that it's pretty linear or, well, it's pretty constant is the word I'll use. In other words, you know, the first 75 and then the next 50 and then the next 25, we think it's pretty constant that we'll be able to get something like a 20% beta relative to those moves each quarter if those market-applied forwards come to pass.

Thomas C. Owens: So I appreciate the answer. I wonder if you could just kind of square this with me then if you're looking at a 20% deposit repricing beta, but your 50% variable rate loans and less than that if you factor in the hedges, of course, but still that's a pretty decent repricing gap between, for Deposit Beta, and those at a variable rate, both with overall loan books. Yeah, I mean...

Thomas C. Owens: I'd have to do that all in my head, right, which is a little difficult on the fly, but the deposit base is a multiple. It's two and a half to three times as much as the floating rate loan book. So... Hard to do in my head on the slide, but mathematically, that's the answer.

Thomas C. Owens: Okay, I appreciate that and a quick follow-up. I think that's a quick follow-up. Just in terms of the mid-single-digit deposit growth or low-to-mid for the year, does that assume any additional pay down in brokered over the course of time, or do you think you just kind of renew those as they come up? You know, I think that would be flat down slightly, as I said in my prepared comments.

Thomas C. Owens: We had really good growth in personal deposits in the fourth quarter. You know, we had solid growth when you think about it, ex-brokered, having growth for the full year of 3.8%. We're 3.8% full year growth in an environment where bank deposits have been declining. We feel really good about that, and especially having been able to raise those deposits at a competitive cost. And so, yeah, I think flat to down is the answer on that.

Catherine Mealor: Certainly, we do not view broker deposits as a permanent feature of our balance sheet. You know, it was more the utilization of broker deposits in 2023 to manage the repricing of the deposit book, you know, with 500 basis points of Fed rate hikes. So, certainly, we're going to try and be opportunistic over time to continue to have the broker deposit book attract. Thanks very much. As a reminder, to ask a question, please press star then 1 to enter the question queue. The next question comes from Catherine Mealor with KBW. Please go ahead. Thanks. Good morning.

Catherine Mealor: Just one more follow-up on the margin. Do you have what percentage or the amount of loan, of fixed-rate loans that you expect to reprice this year? And then similarly, do you have an amount of deposits that are indexed that will, outside of kind of the promotional maybe and brokered, just that they will immediately reprice lower?

Catherine Mealor: Just kind of thinking about the immediate repricing lower once rates start moving lower on the deposit side. Thanks. And Catherine, this is Barry.

Barry: I'll start with the first part, and Tom will take the second part. But we do expect around 600 million fixed-rate loans to be repriced in the next 12 months, and then a little bit less than that, maybe $550 million of fixed-rate loans to be repriced over the next 12 to 24 months. And what's the rate on average that's coming up and repricing to you? Sure. The ones they're going to be repricing in the next 12 months, the average rate is 5.14%, and then those who were repriced 12 to 24 months out, the average rate is 4.07.

Barry: Okay, great. Thank you, Barry. Thank you. And then any thoughts on which of these other companies do bond restructures? How do you think about that? I know you're talking about just the bond books running off at a high single-digit pace throughout the year, but any thoughts around doing something, you know, more immediate on the bond book?

Catherine Mealor: You know Catherine, we've gotten that question every quarter and understandably so. I mean, every time we've looked at it. You know, the opportunity, I always struggle a little bit with whether you're truly adding economic value there or not. And there are two parts to that for me. One is the extent to which you are borrowing on a spread basis to fund securities in your portfolio that are not on a spread basis.

Thomas C. Owens: And as best we can tell from call report data, we feel like we're middle of the pack in terms of our asset sensitivity. But, you know, there is a decision to be made there as well, right? I mean, with the uncertainty that we're facing with respect to the path of the Fed and monetary policy.

Thomas C. Owens: And so potential restructuring of the securities portfolio is part of that calculus, as well as what we do with the cash flow hedge portfolio. So I'd say we continue to look at it. Great. And any updated thoughts on the potential insurance sale? I know you get that question every quarter too, but just curious if there are any kind of changes and how you're thinking about that. No, I would say the same thing I've said in the prior quarters, Catherine, you know, that's been a good business for TrustMark. I think this year was the 13th consecutive year of record revenue and profitability in that business. It's been a good business for us. You know, that said, we're well aware of what is going on around us.

Thomas C. Owens: We're well aware of valuations and, you know, the opportunities there, but at this point, there's really no change from what we've gotten to on prior calls. Okay, great. Thank you. As a reminder, if you would like to ask a question, please press star then 1 to enter the question queue. That's star and one to enter the question queue.

Duane A. Dewey: This concludes our question and answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks. I just want to say thank you again for joining us this morning for our full year and fourth quarter earnings call. We look forward to getting back together with all of you again at the end of the first quarter and toward the end of April. Y'all have a great rest of the week. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thanks for watching, and I'm out!

Q4 2023 Trustmark Corporation Earnings Call

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