Q2 2026 Trustmark Corp Earnings Call

July 29, 2026

Speaker #1: Good morning, ladies and gentlemen, and welcome to the Trustmark Corporation's second quarter earnings conference call. At this time, all participants are in a listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the Trustmark Corporation's Q2 Earnings Conference call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question and answer session. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Jerry Rain, Director of Corporate Strategy at Trustmark. Please go ahead, sir.

Speaker #1: Following the presentation this morning, there will be a question-and-answer session. To ask a question, you may press star, then 1 on your touch-tone phone.

Speaker #1: To withdraw your question, please press star then 2. And as a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Jerry Rein, Director of Corporate Strategy at Trustmark.

Speaker #1: Please go ahead, sir.

Speaker #2: Good morning. I'd like to remind everyone that our second quarter earnings release and the presentation that we'll be discussing on the call this morning are available on the Investor Relations section of our website at trustmark.com.

Jerry Rain: Good morning. I'd like to remind everyone that our Q2 earnings release and the presentation that will be discussed on the call this morning are available on the investor relations section of our website at trustmark.com. During our call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release and in our other filings with the Securities and Exchange Commission. At this time, I'd like to introduce Duane Dewey, President and CEO of Trustmark.

Speaker #2: During our call, management may make forward-looking statements within the meaning of the private securities litigation reform act of 1995. We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties which are outlined in our earnings release and in our other filings with securities and exchange commission.

Speaker #2: At this time, I'd like to introduce Duane Dewey, President and CEO of Trustmark.

Speaker #3: Thank you, Joey, and good morning, everyone. Thank you for joining us this morning. As you know, our longtime CFO, Tom Owens, was named Chief Operating Officer during the second quarter.

Duane A. Dewey: Thank you, Jerry. Good morning, everyone. Thank you for joining us this morning. As you know, our longtime CFO, Tom Owens, was named Chief Operating Officer during the Q2. Joe Bond joined us as Chief Financial Officer. Both are with me this morning. Also with me are Barry Harvey, our Chief Credit and Operations Officer. Tom Chambers, our Chief Accounting Officer. Our presentation this morning will provide a summary of our performance and discuss forward guidance before moving to your questions. We continued to make significant progress in accomplishing our strategic initiatives in the Q2. Loan production remained solid. Deposit growth continued at attractive rates, which was reflected in our expanded net interest margin.

Duane Dewey: Thank you, Jerry. Good morning, everyone. Thank you for joining us this morning. As you know, our longtime CFO, Tom Owens, was named Chief Operating Officer during the Q2. Joe Bond joined us as Chief Financial Officer. Both are with me this morning. Also with me are Barry Harvey, our Chief Credit and Operations Officer. Tom Chambers, our Chief Accounting Officer. Our presentation this morning will provide a summary of our performance and discuss forward guidance before moving to your questions. We continued to make significant progress in accomplishing our strategic initiatives in the Q2. Loan production remained solid. Deposit growth continued at attractive rates, which was reflected in our expanded net interest margin.

Speaker #3: And Joe Bond joined us as Chief Financial Officer; both are with me this morning. Also with me are Barry Harvey, our Chief Credit and Operations Officer, and Tom Chambers, our Chief Accounting Officer.

Speaker #3: Our presentation this morning will provide a summary of our performance and discuss forward guidance before moving to your questions. We continue to make significant progress in accomplishing our strategic initiatives in the second quarter.

Speaker #3: Loan production remains solid, and deposit growth continued at attractive rates which was reflected in our expanded net interest margin. Years of planning culminated in the second quarter with a successful conversion of our core deposit and related systems to state-of-the-art platforms which will allow us to enhance the customer experience and operate more efficiently.

Duane A. Dewey: Years of planning culminated in Q2 with the successful conversion of our core deposit and related systems to state-of-the-art platforms, which will allow us to enhance the customer experience and operate more efficiently. This was a tremendous effort, and I'm extremely pleased with the commitment and dedication of our associates to make this transition as seamless as possible for our customers. Now turning to slide three, financial highlights. Our Q2 results reflect continued momentum across the organization with strong financial performance supported by loan and deposit growth, expanded net interest income, improved credit quality, and continued investment in technology. Reported net income totaled $63.5 million, representing diluted earnings per share of $1.08. Results in the quarter included two non-routine transactions that collectively increased net income by $6.9 million, or $0.11 per diluted share.

Duane Dewey: Years of planning culminated in Q2 with the successful conversion of our core deposit and related systems to state-of-the-art platforms, which will allow us to enhance the customer experience and operate more efficiently. This was a tremendous effort, and I'm extremely pleased with the commitment and dedication of our associates to make this transition as seamless as possible for our customers. Now turning to slide three, financial highlights. Our Q2 results reflect continued momentum across the organization with strong financial performance supported by loan and deposit growth, expanded net interest income, improved credit quality, and continued investment in technology. Reported net income totaled $63.5 million, representing diluted earnings per share of $1.08. Results in the quarter included two non-routine transactions that collectively increased net income by $6.9 million, or $0.11 per diluted share.

Speaker #3: This was a tremendous effort, and I'm extremely pleased with the commitment and dedication of our associates to make this transition as seamless as possible for our customers.

Speaker #3: Now turning to slide 3, Financial Highlights. Our second quarter results reflect continued momentum across the organization and strong financial performance supported by loan and deposit growth, expanded net interest income, improved credit quality, and continued investment in technology.

Speaker #3: Reported net income totaled $63.5 million, representing diluted earnings per share of $1.08, resulting the quarter included two non-routine transactions that collectively increased net income by 6.9 million dollars or 11 cents per diluted share.

Speaker #3: During the quarter, we sold a portfolio of mortgage loans that were primarily three payments delinquent and/or non-accrual totaling $73.8 million. The reserve on the portfolio exceeded the credit discount, which resulted in an increase in net income of 3.2 million.

Duane A. Dewey: During the quarter, we sold a portfolio of mortgage loans that were primarily three payments delinquent and/or non-accrual, totaling $73.8 million. The reserve on the portfolio exceeded the credit discount, which resulted in an increase in net income of $3.2 million. The sale drove $47.1 million overall reduction in non-performing loans and reduced the risk profile of our one to four family portfolio. We also exchanged Visa shares during the quarter, resulting in a gain of $3.7 million net of taxes. Excluding these two non-routine transactions, operating net income totaled $56.7 million, representing diluted earnings per share of $0.97. From a balance sheet perspective, loans held for investment increased $35.1 million, or 0.3% during the quarter, and $448.2 million or 3.3% year over year. Excluding the mortgage loan sale, loans held for investment increased to $108.9 million, or 0.8% linked quarter, and $522 million or 3.9% year over year.

Duane Dewey: During the quarter, we sold a portfolio of mortgage loans that were primarily three payments delinquent and/or non-accrual, totaling $73.8 million. The reserve on the portfolio exceeded the credit discount, which resulted in an increase in net income of $3.2 million. The sale drove $47.1 million overall reduction in non-performing loans and reduced the risk profile of our one to four family portfolio. We also exchanged Visa shares during the quarter, resulting in a gain of $3.7 million net of taxes. Excluding these two non-routine transactions, operating net income totaled $56.7 million, representing diluted earnings per share of $0.97. From a balance sheet perspective, loans held for investment increased $35.1 million, or 0.3% during the quarter, and $448.2 million or 3.3% year over year. Excluding the mortgage loan sale, loans held for investment increased to $108.9 million, or 0.8% linked quarter, and $522 million or 3.9% year over year.

Speaker #3: The sale drove a $47.1 million overall reduction in non-performing loans and reduced the risk profile of our one-to-four family portfolio. We also exchanged Visa shares during the quarter, resulting in a gain of $3.7 million, net of taxes.

Speaker #3: Excluding these two non-routine transactions, operating net income totaled $56.7 million representing diluted earnings per share of $97 cents. From a balance sheet perspective, loans held for investment increased 35.1 million, or 0.3 percent during the quarter, and $448.2 million, or 3.3 percent year over year.

Speaker #3: Excluding the mortgage loan sale, loans held for investment increased $108.9 million, or 0.8 percent linked quarter, and $552.2 million, or 3.9 percent year over year.

Speaker #3: Barry will elaborate as needed, but I want to mention we had 643 million dollars of new originations in the second quarter, and 456 million in line draws.

Duane A. Dewey: Barry will elaborate as needed, but I want to mention we had $643 million of new originations in Q2 and $456 million in line draws. This strong production was offset in part by $318 million in CRE prepayments and $334 million in payoffs. Deposits expanded $358.7 million or 2.3% linked quarter and $955.4 million or 6.3% year over year. The cost of total deposits declined four basis points linked quarter to 1.59%, reflecting the continued strength of our attractive low-cost deposit base. Revenue generation remained solid during the quarter. Total revenue expanded $5.3 million, or 2.6% linked quarter to $208.2 million. Net interest income on a fully tax equivalent basis increased $5 million or 3.1% linked quarter, producing a net interest margin of 3.84%, up three basis points from the prior quarter.

Duane Dewey: Barry will elaborate as needed, but I want to mention we had $643 million of new originations in Q2 and $456 million in line draws. This strong production was offset in part by $318 million in CRE prepayments and $334 million in payoffs. Deposits expanded $358.7 million or 2.3% linked quarter and $955.4 million or 6.3% year over year. The cost of total deposits declined four basis points linked quarter to 1.59%, reflecting the continued strength of our attractive low-cost deposit base. Revenue generation remained solid during the quarter. Total revenue expanded $5.3 million, or 2.6% linked quarter to $208.2 million. Net interest income on a fully tax equivalent basis increased $5 million or 3.1% linked quarter, producing a net interest margin of 3.84%, up three basis points from the prior quarter.

Speaker #3: This strong production was offset in part by 318 million in CRE prepayments and 334 million in payoffs. Deposits expanded 358.7 million or 2.3 percent linked quarter, and 955.4 million or 6.3 percent year over year.

Speaker #3: The cost of total deposits declined four basis points linked quarter to 1.59 percent, reflecting the continued strength of our attractive low-cost deposit base. Revenue generation remained solid during the quarter.

Speaker #3: Total revenue expanded 5.3 million dollars or 2.6 percent linked quarter, to 208.2 million. Net interest income on a fully tax equivalent basis increased 5 million or 3.1 percent linked quarter, producing a net interest margin of 3.84 percent, up three basis points from the prior quarter.

Speaker #3: Expense management continues to be a focus of the organization. Non-interest expense increased $1.5 million, or 1.2 percent linked-quarter, to $133.7 million. Salaries and employee benefits expense declined $1.3 million, or 1.7 percent linked-quarter, while services and fees increased $1.8 million, or 6.5 percent linked-quarter, primarily reflecting data processing fees related to the core deposit conversion and data center migration.

Duane A. Dewey: Expense management continues to be a focus of the organization. Non-interest expense increased to $1.5 million or 1.2% linked quarter to $133.7 million. Salaries and employee benefits expense declined $1.3 million or 1.7% linked quarter, while services and fees increased $1.8 million or 6.5% linked quarter, primarily reflecting data processing expense and professional fees related to the core deposit conversion and data center migration. From a credit perspective, credit quality improved meaningfully during the quarter. Non-performing assets declined 47.3% to represent 0.39% of the loans held for investment. Net charge-offs totaled $7.5 million for Q2, excluding the mortgage loan sale net charge-offs totaled $1.2 million and represented 0.03% of average loans. The net provision for credit losses was $6 million in Q2, excluding the $9.2 million release in the provision related to the mortgage sale.

Duane Dewey: Expense management continues to be a focus of the organization. Non-interest expense increased to $1.5 million or 1.2% linked quarter to $133.7 million. Salaries and employee benefits expense declined $1.3 million or 1.7% linked quarter, while services and fees increased $1.8 million or 6.5% linked quarter, primarily reflecting data processing expense and professional fees related to the core deposit conversion and data center migration. From a credit perspective, credit quality improved meaningfully during the quarter. Non-performing assets declined 47.3% to represent 0.39% of the loans held for investment. Net charge-offs totaled $7.5 million for Q2, excluding the mortgage loan sale net charge-offs totaled $1.2 million and represented 0.03% of average loans. The net provision for credit losses was $6 million in Q2, excluding the $9.2 million release in the provision related to the mortgage sale.

Speaker #3: From a credit perspective, credit quality improved meaningfully during the quarter. Non-performing assets declined 47.3 percent to represent 0.39 percent of loans held for investment.

Speaker #3: Net charge-offs totaled 7.5 million for the second quarter, excluding the mortgage loans held net charge-offs totaled 1.2 million dollars and represented 0.03 percent of average loans.

Speaker #3: The net provision for credit losses was $6 million in the second quarter, excluding the $9.2 million release in the provision related to the mortgage sale.

Speaker #3: Capital levels remained strong, and we continue to execute our share repurchase program. During the first six months of '26, we repurchased 40.9 million or approximately $952,000 shares of common stock.

Duane A. Dewey: Capital levels remained strong, and we continued to execute our share repurchase program. During H1 2026, we repurchased $40.9 million or approximately 952,000 shares of common stock, including $21.1 million or approximately 475,000 shares in Q2. The board also declared a quarterly cash dividend of $0.25 per share payable 15 September to shareholders of record on 1 September 2026. Let's focus on our 2026 full year expectations, which are shown on slide 15. As we look ahead, we are affirming our previously provided guidance for all full year 2026 categories. We continue to expect loans held for investment to increase in the mid-single digits, and deposits, excluding brokered deposits, to increase in the mid-single digits as well. Securities balances are expected to remain stable.

Duane Dewey: Capital levels remained strong, and we continued to execute our share repurchase program. During H1 2026, we repurchased $40.9 million or approximately 952,000 shares of common stock, including $21.1 million or approximately 475,000 shares in Q2. The board also declared a quarterly cash dividend of $0.25 per share payable 15 September to shareholders of record on 1 September 2026. Let's focus on our 2026 full year expectations, which are shown on slide 15. As we look ahead, we are affirming our previously provided guidance for all full year 2026 categories. We continue to expect loans held for investment to increase in the mid-single digits, and deposits, excluding brokered deposits, to increase in the mid-single digits as well. Securities balances are expected to remain stable.

Speaker #3: Including 21.1 million or approximately $475,000 shares in the second quarter. The board also declared a quarterly cash dividend of $25 cents per share, payable September 15th to shareholders of record on September 1st, '26.

Speaker #3: Now let's focus on our '26 full-year expectations, which are shown on slide 15. As we look ahead, we are affirming our previously provided guidance for all full-year '26 categories.

Speaker #3: We continue to expect loans held for investment to increase in the mid-single digits, and deposits, excluding brokered deposits, to increase in the mid-single digits as well.

Speaker #3: Securities balances are expected to remain stable. From a net interest income perspective, we continue to expect net interest margin to be in the range of 3.80% to 3.85% for the full year '26.

Duane A. Dewey: From a net interest income perspective, we continue to expect the net interest margin to be in the range of 380 to 385 for the full year 2026. Net interest income is expected to increase in the mid-single digits compared to 2025. From a credit perspective, we expect total provision for credit losses, including off-balance sheet credit exposure, to normalize, probably more in line with Q1 than Q2. This expectation is consistent with our continued focus on disciplined credit risk management and the improvement in asset quality metrics we reported in Q2. Non-interest income is expected to increase in the mid-single digits for the full year 2026. Non-interest expense is also expected to increase mid-single digits, reflecting continued investment in the business while maintaining our focus on expense discipline.

Duane Dewey: From a net interest income perspective, we continue to expect the net interest margin to be in the range of 380 to 385 for the full year 2026. Net interest income is expected to increase in the mid-single digits compared to 2025. From a credit perspective, we expect total provision for credit losses, including off-balance sheet credit exposure, to normalize, probably more in line with Q1 than Q2. This expectation is consistent with our continued focus on disciplined credit risk management and the improvement in asset quality metrics we reported in Q2. Non-interest income is expected to increase in the mid-single digits for the full year 2026. Non-interest expense is also expected to increase mid-single digits, reflecting continued investment in the business while maintaining our focus on expense discipline.

Speaker #3: Net interest income is expected to increase in the mid-single digits compared to '25. From a credit perspective, we expect total provision for credit losses, including off-balance sheet credit exposure, to normalize.

Speaker #3: Probably more in line with the first quarter than the second quarter. This expectation is consistent with our continued focus on disciplined credit risk management and the improvement in asset quality metrics we've reported in the second quarter.

Speaker #3: Non-interest income is expected to increase in the mid-single digits for the full year '26. Non-interest expense is also expected to increase mid-single digits, reflecting continued investment in the business while maintaining our focus on expense discipline.

Speaker #3: Consistent with our prior messaging, we will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion, M&A, or other general corporate purposes depending on market conditions.

Duane A. Dewey: Consistent with our prior messaging, we will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion, M&A, or other general corporate purposes, depending on market conditions. With that, we'll now move to questions.

Duane Dewey: Consistent with our prior messaging, we will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion, M&A, or other general corporate purposes, depending on market conditions. With that, we'll now move to questions.

Speaker #3: So with that, we'll now move to questions.

Speaker #1: And, ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, you may press *1 on your touchtone phone.

Operator 2: Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question today will come from Michael Rose with Raymond James. Please go ahead.

Operator: Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question today will come from Michael Rose with Raymond James. Please go ahead.

Speaker #1: If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press *2. At this time, we will pause momentarily to assemble our roster.

Speaker #1: And our first question today will come from Michael Rose with Raymond James. Please go ahead.

Speaker #2: Hey, good morning, guys. Thanks for taking my questions. Wanted to start on the loan growth side. Obviously, really good production this quarter, but still a bunch of paydowns.

Michael Rose: Hey, good morning, guys. Thanks for taking my questions. Wanted to start on the loan growth side. Obviously, really good production this quarter, but still a bunch of paydowns as well. If I exclude the loan sale, it looks like you guys were kind of tracking below the guide for the year. I guess if you can just walk us through the comfort level of what would appear to be a kind of ramp in net loan growth in the back half of the year. Does that assume production continues to increase, or does it assume that payoffs slow, or is it a combination of both? Thanks.

Speaker #2: As well, if I exclude the loan sale, it looks like you guys were kind of tracking below the guide for the year. So I guess, if you can just walk us through the comfort level of what would appear to be a kind of ramp in net loan growth in the back half of the year.

Speaker #2: Does that assume production continues to increase, or does it assume that payoff slow, or is it a combination of both? Thanks.

Speaker #4: And Michael, this is Barry. And one piece of context as it relates to Q2 as well. As you mentioned, we've reported 35 million dollars' worth of growth, had back in the mortgage sale.

Barry Harvey: Hey, Michael, this is Barry. One piece of context as it relates to Q2 as well, as you mentioned, we've reported $35 million worth of growth, add back in the mortgage sale, that puts us at $108. We also had $71 million worth of substandard credits that we pushed out of the bank. From my perspective, I like to think of those three credits getting pushed out of the bank as part of something that is not necessarily reoccurring, desired, but not necessarily reoccurring. That puts us at starting off about $179 million worth of growth for Q2. When you're looking into Q3 and Q4, we still see very strong pipelines. Production has been real steady for us from quarter to quarter. The payoffs, that's always the tricky part.

Speaker #4: That puts us at 108. We also had $71 million worth of substandard credits that we pushed out of the bank. And so, from my perspective, I kind of like to think of those three credits getting pushed out of the bank as part of something that is not necessarily recurring—desired, but not necessarily recurring.

Speaker #4: So that puts us at starting off about $179 million worth of growth for the quarter, Q2. And then when you look into Q3 and Q4, we still see a very strong pipeline. Production has been real steady for us.

Speaker #4: And from quarter to quarter, and of the payoffs, that's always the tricky part. We're seeing fewer payoffs than we have maturities each quarter from that CRE book, but also, we are seeing unexpected payoffs unrelated to what is scheduled to mature and leave us.

Barry Harvey: We're seeing less payoffs than we have maturities each quarter from that CRE book. We are seeing unexpected payoffs unrelated to what is scheduled to mature and leave us, and the two kind of balance themselves out. We do expect to meet the obligation of the mid-single digit loan growth

Speaker #4: And the two kind of balance themselves out. So, we do expect to see—to meet the obligation of mid-single-digit loan growth for the year.

Barry Harvey: For the year, we do expect to, hopefully, Q3 and Q4 will be a little less bumpy without the mortgage sale, et cetera. We do expect to be at that mid-single digit level for loan growth. Like I said, we do have $71 million worth of three substandard payoffs that happened this quarter that we don't expect to see those every quarter. We'd love to see substandard leave the bank, but we don't get that normally every quarter. With that in mind, I do think the quarter looks a little better than just $35 plus the mortgage sale getting you to $108. I think we're probably closer to $179, $180.

Speaker #4: We do expect that, hopefully, Q3 and Q4 will be a little less bumpy—without the mortgage sale, et cetera. But we do expect to be at that mid-single-digit level for loan growth.

Speaker #4: And like I said, we do have $71 million worth of three substandard payoffs that happened this quarter. We don't expect to see those every quarter.

Speaker #4: We'd love to see substandard to leave the bank, but we don't get that normally every quarter. So with that in mind, I do think the quarter looks a little better than just 35 plus the 35 plus the mortgage sale getting to 108.

Speaker #4: I think we're probably close to 179 or 180.

Speaker #2: That's very helpful context, Barry. I appreciate it. And that leads into the kind of the margin question. Was there any prepayment fees or anything like that that impacted this quarter's margin?

Michael Rose: That's very helpful context, Barry. I appreciate it. That leads into the margin question. Was there any prepayment fees or anything like that impacted this quarter's margin? At 384, you guys are kind of bumping up against the high end of the target. Just trying to balance the puts and takes as we think about the margin over the next couple of quarters. Thanks.

Speaker #2: Because of the 384, you guys are kind of bumping up against the high end of the target. So just trying to balance the puts and takes as we think about the margin over the next couple of quarters.

Speaker #2: Thanks.

Speaker #4: So Michael, this is

Thomas C. Owens: Michael, this is Tom Owens. I'll start and then I'll turn it over to Joe regarding guidance on the margin. To your question directly, is there any impact from accelerated prepayment fees or anything like that? I don't believe there's a material impact from that. Although, you want to weigh in, Joe?

Tom Owens: Michael, this is Tom Owens. I'll start and then I'll turn it over to Joe regarding guidance on the margin. To your question directly, is there any impact from accelerated prepayment fees or anything like that? I don't believe there's a material impact from that. Although, you want to weigh in, Joe?

Speaker #5: Tom Owens: I'll start, and then I'll turn it over to Joe regarding guidance on the margin. To your question directly—is there any impact from accelerated prepayment fees or anything like that?

Speaker #5: I don't believe there's a material impact from that, although—do you want to weigh in, Joe?

Speaker #6: Thanks, Tom. Yeah. So we're reaffirming our guidance, 380 to 385 margin is 384. We do expect near-term margin pressure from deposit funding decisions. We were, as previously announced, in market with some promotional campaigns.

Joseph E. Bond: Thanks, Tom. We're reaffirming our guidance, 380 to 385. Margin is 384. We do expect near-term margin pressure from deposit funding decisions. We were, as previously announced, in market with some promotional campaigns, and that has increased deposit costs. We've also seen strong pricing competition within our markets, and we have responded accordingly. With the margin, we're expecting repricing of fixed-rate loans and investment securities to partially offset some of that margin pressure. Using the forward curve that we have, there is a rate increase, and that will flow through the margin more so in Q4 of the year. Initially, we're expecting margin pressure in this quarter, and then subsequently, we expect that to reverse, which will put us in our mid-guidance range that we have communicated.

Joe Bond: Thanks, Tom. We're reaffirming our guidance, 380 to 385. Margin is 384. We do expect near-term margin pressure from deposit funding decisions. We were, as previously announced, in market with some promotional campaigns, and that has increased deposit costs. We've also seen strong pricing competition within our markets, and we have responded accordingly. With the margin, we're expecting repricing of fixed-rate loans and investment securities to partially offset some of that margin pressure. Using the forward curve that we have, there is a rate increase, and that will flow through the margin more so in Q4 of the year. Initially, we're expecting margin pressure in this quarter, and then subsequently, we expect that to reverse, which will put us in our mid-guidance range that we have communicated.

Speaker #6: And that has increased deposit costs. We've also seen strong pricing competition within our markets, and we have responded accordingly. With the margin, we're expecting repricing of fixed-rate loans and investment securities to partially offset some of that margin pressure. Using the forward curve that we have, there is a rate increase, and that will flow through the margin more so in the last quarter of the year.

Speaker #6: So initially, we're expecting margin pressure, and subsequently, we expect that to reverse. This will put us in our mid-guidance range that we have communicated.

Speaker #5: So, sticking with the 380 to 385, Michael.

Duane A. Dewey: Sticking with the 380 to 385, Michael.

Duane Dewey: Sticking with the 380 to 385, Michael.

Speaker #2: Okay, helpful. And then maybe just one follow-up to that. If I assume you're assuming a rate hike in December, so there wouldn't be much Q4 benefit or full year benefit if we didn't get it, correct?

Michael Rose: Okay, helpful. Maybe just one follow-up to that. I assume you're assuming a rate hike in December, so there wouldn't be much Q4 benefit or full-year benefit if we didn't get it, correct?

Speaker #6: No. Actually, our forward curve has a rate increase in the month of September, so there will be more of a benefit in the fourth quarter versus the third quarter.

Joseph E. Bond: No. Actually, our forward curve has a rate increase in the month of September, so there would be more of a benefit in Q4 versus Q3.

Joe Bond: No. Actually, our forward curve has a rate increase in the month of September, so there would be more of a benefit in Q4 versus Q3.

Speaker #2: Okay. Any idea what that benefit might be, just roughly?

Michael Rose: Okay. Any idea on what that benefit might be, just roughly?

Speaker #6: We're talking in terms of margin. We're looking at a couple of basis points of margin pressure in the third quarter due to the deposit pricing, and then we expect a couple of basis points of margin improvement, pulling us pretty close to the levels that we are right now.

Joseph E. Bond: We're talking in terms of margin. We're looking at a few, a couple basis points of margin pressure in Q3 due to the deposit pricing. We expect a couple basis points of margin improvement pulling us pretty close to the levels that we are right now.

Joe Bond: We're talking in terms of margin. We're looking at a few, a couple basis points of margin pressure in Q3 due to the deposit pricing. We expect a couple basis points of margin improvement pulling us pretty close to the levels that we are right now.

Speaker #2: Okay. I'll step back. Thanks for all the color.

Michael Rose: Okay, I'll step back. Thanks for all the color.

Speaker #5: Thanks, Michael.

Duane A. Dewey: Thanks, Michael.

Duane Dewey: Thanks, Michael.

Speaker #1: And our next question will come from Gary Tenner with D.A. Davidson. Please go ahead.

Operator 2: Our next question will come from Gary Tenner with D.A. Davidson. Please go ahead.

Operator: Our next question will come from Gary Tenner with D.A. Davidson. Please go ahead.

Speaker #7: Thanks. Good morning.

Gary Tenner: Thanks. Good morning.

Speaker #5: Good morning, Gary.

Duane A. Dewey: Morning, Gary.

Duane Dewey: Morning, Gary.

Speaker #7: Can you just hey, could you remind us that 643 million of new production just had that comparison to the first quarter production?

Gary Tenner: Hey, could you remind us that $643 million of new production, just how that compares to the Q1 production?

Speaker #4: And this is Barry. And it's very similar. We're pretty much in line with that, as well as the additional funding on the revolvers, which is very much in line with the first quarter as well.

Barry Harvey: This is Barry. It's very similar. We're pretty much in line with that, as well as the additional funding on the revolvers is very much in line with the Q1 as well. We are very pleased to see some upticks, at least from year-end, in the utilization. The bank as a whole, with all revolvers, that would be including HELOCs on the consumer side, are right at 40% utilization. I will say on the C&I side, the revolvers, the utilization has moved up from 32% at the year-end, moved to 37%. Now we're at 38% as of the end of the Q2. We are very pleased to see that utilization. A lot of activity going on in quite a few of our markets. I think a lot of our customers, especially on the construction side, are benefiting from that additional business.

Speaker #4: We are very pleased to see some upticks, at least from year-end, in the utilization the bank as a whole with all revolvers, that would be including HELOCs on the consumer side, are right at 40% utilization.

Speaker #4: But I will say, on the C&I side, the revolvers' utilization has moved up from 32% at year-end, to 37%, and now we're at 38% as of the end of the second quarter.

Speaker #4: So we are very pleased to see that utilization. A lot of activity going on in quite a few of our markets, and I think a lot of our customers, especially on the construction side, are benefiting from that additional business.

Speaker #1: Appreciate that. And then as it relates to kind of back half of the year, obviously, a positive outlook for loan growth and you talked about kind of an adjusted second quarter number, if you will.

Gary Tenner: Appreciate that. As it relates to kind of H2, obviously, a positive outlook for loan growth. You talked about kind of an adjusted Q2 number, if you will. A lot of banks have had a really strong Q2 quarters but have been more cautious, it seems like, for the H2. It doesn't feel like that's where you guys are.

Speaker #1: A lot of banks have had really strong second quarters, but have been more cautious, it seems, for the back half of the year.

Speaker #1: Doesn't feel like that's where you guys are.

Speaker #4: Yeah. A lot of ours, as I mentioned, it's not so much about production and because the pipelines are very good today for us. And our production has been steady from quarter to quarter.

Barry Harvey: A lot of ours is, as I mentioned, it's not so much about production because the pipelines are very good today for us. Our production has been steady from quarter to quarter. It's more about the payoffs and what we see in terms of the scheduled payoffs extending out. How much do we see of unanticipated payoffs coming, both of which are coming from the CRE book specifically. That phenomena will play itself out. We'll just have to wait and see. It's not about the engine and the engine working and running hard. That's happening. It's about whether or not we have some more departures than we expect based upon the percent of the maturities that have been leaving us. Then, of course, what we can't see, which is the unexpected. We'll see some of those leave as we do each quarter.

Speaker #4: It's more about the payoffs and what we see in terms of the scheduled payoffs, extending out, and then how much do we see of unanticipated payoffs coming both of which are coming from the CRE book specifically.

Speaker #4: And so that phenomenon will play itself out. We'll just have to wait and see, but it's not about the engine—and the engine working and running hard.

Speaker #4: That's happening. It's about whether or not we have more departures than we expect, based upon the percent of the maturities that have been leaving us.

Speaker #4: And then, of course, what we can't see—which is the unexpected—we'll see some of those leave as we do each quarter. That's going to generate or result in our growth being strong or weak, more so than the production.

Barry Harvey: That's going to generate or result in our growth, strong or weak, more so than the production. The production's there and very predictable.

Speaker #4: The production is there, and very predictable.

Speaker #1: Got it. I appreciate that color. And then, just vis-à-vis the buyback, I think last quarter you talked about $70 million as kind of being the low end of what you'd expect for the year.

Gary Tenner: Got it. I appreciate that color. Just vis-a-vis the buyback, I think last quarter you had talked about $70 million of being the low end of what you'd expect for the year. Any changes to the back half of your outlook on the buyback?

Speaker #1: Any changes to the kind of back half of the year outlook on the buyback?

Duane A. Dewey: I would say probably closer to in line with where we've been the first two quarters. That's been right around $20 million per quarter. We continue to see that into the future. Again, it depends a little bit on what's going on in the market or any other activities that we have. I would expect that up to equal to where we've been the first two quarters.

Duane Dewey: I would say probably closer to in line with where we've been the first two quarters. That's been right around $20 million per quarter. We continue to see that into the future. Again, it depends a little bit on what's going on in the market or any other activities that we have. I would expect that up to equal to where we've been the first two quarters.

Speaker #5: I would say probably closer to in line with where we've been the first two quarters. We've been right around $20 million per quarter. We continue to see that into the future.

Speaker #5: But again, it depends a little bit on what's going on in the market or any other activities that we have. But I would expect that up to equal to where we've been the first two quarters.

Speaker #1: Okay, great. Thank you. And our next question will come from Catherine Maylor with KBW. Please go ahead.

Gary Tenner: Okay, great. Thank you.

Operator 2: Our next question will come from Catherine Mealor with KBW. Please go ahead.

Operator: Our next question will come from Catherine Mealor with KBW. Please go ahead.

Speaker #8: Thanks. Good morning.

Catherine Mealor: Thanks. Good morning.

Speaker #5: Good morning, Catherine.

Duane A. Dewey: Morning, Catherine.

Duane Dewey: Morning, Catherine.

Speaker #8: So you're now past your big conversion, which I know is a big lift. I just wanted to see if you could give us an update on some efficiencies or benefits that you're going to have now that that's behind you.

Catherine Mealor: You're now past your big conversion, which I know is a big lift. Just wanted to see if you could give us an update on some efficiencies or benefits that you're going to have now that that's behind you. Any upcoming tech or AI investments that you're making and what impact any of that may have on the expense outlook. Thanks.

Speaker #8: Any upcoming tech or AI investments that you're making and what impact any of that may have on the expense outlook. Thanks.

Speaker #4: And Catherine, this is Barry. I'll start, and Duane may want to chime in as well. From the standpoint of the conversion, I think moving to a supported environment, as opposed to a self-supported environment, is going to allow us over time to reposition a lot of the jobs that supported our previous deposit system, as it did with our previous loan system.

Barry Harvey: Catherine, this is Barry. I'll start, Duane may want to chime in as well. From the standpoint of the conversion, I think moving to a supported environment as opposed to a self-supported environment is going to allow us over time to reposition a lot of the jobs that supported our previous deposit system as it did with our previous loan system. We're going to be shifting some of those jobs into different roles. Then there may be an opportunity to, over time, not have some of the positions. The application type positions where we were actually doing all the maintenance to the system previously, now that we're running an FIS solution on payment deposits, teller, sales platform, and image system. From that standpoint, we're going to need to determine what our needs are once we're fully settled in, which we will be later this year.

Speaker #4: And we're going to be shifting some of those jobs into different roles, and then there may be an opportunity to, over time, not have some of the positions—so the application-type positions where we were actually doing all the maintenance to the system previously.

Speaker #4: Now that we're running an FIS solution on name it deposits, teller, sales platform, image system. From that standpoint, we're going to need to determine what our needs are once we're fully settled in, which we will be later this year.

Speaker #4: And the same is going to be true on the front line side. We did staff up during the second quarter to make sure first quarter and second quarter to make sure we had as many people manning the station, if you will, waiting on customers, making sure that we were able to do everything we needed to do during the conversion window.

Barry Harvey: The same is going to be true on the front line side. We did staff up during Q1 and Q2 to make sure we had as many people manning the station, if you will, waiting on customers, making sure that we were able to do everything we needed to do during the conversion window. Those things match. There's a lot of attrition in that area of the bank already. If we see that we don't need quite what we staffed up to make sure we had more than adequate number of resources in the branches, if that begins to move down, which it can, because like I said, it's a lot of turnover in those positions, then we may be able to decide that we don't need quite as much as we staffed up to. That would be an efficiency gain as well.

Speaker #4: Those things there's a lot of attrition in that area of the bank already. So if we see that we've don't need quite what we staffed up to to make sure we had more than adequate number of resources in the branches, if that begins to move down, which it can because, like I said, it's a lot of turnover in those positions, then we may be able to decide that we don't need quite as much as we staffed up to.

Speaker #4: That would be an efficiency gain as well. And then as far as being able to go in and make adjustments to the system, do things we need to do to probably to drive more business, there's definitely opportunity for us to go into and establish a different pricing mechanisms, whether it be on the deposit side, to possibly have some offer some products and offer some services that we've not been able to previously.

Barry Harvey: Then as far as being able to go in and make adjustments to the system, do things we need to do to drive more business, there's definitely opportunity for us to go into and establish different pricing mechanisms, whether it be on the deposit side to possibly offer some products and offer some services that we've not been able to previously. Hard to quantify the value of that today, but we do definitely know that we've been holding off on making some changes on our deposit system that we felt like would be advantageous for us, whether it be getting more customers or getting at a better price. We'll be able to do that now that we have moved to a vendor-supported solution. We're very excited about that. Duane, is there any comments you want to add to that?

Speaker #4: It's kind of hard to quantify the value of that today, but we definitely know that we've been holding off on making some changes to our deposit system that we felt would be advantageous for us—whether it be getting more customers or getting deposits at a better price.

Speaker #4: We'll be able to do that now that we have moved to a vendor-supported solution. So we're very excited about that. Duane, is there any comments you want to add to that?

Speaker #5: Yeah, I would. Yeah, I'd like to add—we can't overemphasize how significant that core conversion is for us. And we talked to many of the analysts out there.

Duane A. Dewey: Yeah, I'd like to add. We can't overemphasize how significant that core conversion is for us. We've talked to many of the analysts out there. That was a 45-year-old core that we were operating that for the last 20 plus years were self-supported. It was a major lift. It was pretty much all hands on deck across the organization. Every depository customer, every commercial customer, every consumer was impacted by the change. Therefore, our staffs were entirely focused on the process of conversion, post-conversion interaction with comp clients and all that. To have a solid overall financial quarter in the midst of that, we're extremely pleased. Like I said, really couldn't be prouder of our associates for dealing with that process. We can't underemphasize that or overemphasize that.

Duane Dewey: Yeah, I'd like to add. We can't overemphasize how significant that core conversion is for us. We've talked to many of the analysts out there. That was a 45-year-old core that we were operating that for the last 20 plus years were self-supported. It was a major lift. It was pretty much all hands on deck across the organization. Every depository customer, every commercial customer, every consumer was impacted by the change. Therefore, our staffs were entirely focused on the process of conversion, post-conversion interaction with comp clients and all that. To have a solid overall financial quarter in the midst of that, we're extremely pleased. Like I said, really couldn't be prouder of our associates for dealing with that process. We can't underemphasize that or overemphasize that.

Speaker #5: That was a 45-year-old core that we were operating that for the last 20-plus years were self-supported. It was a major lift. It was pretty much all hands on deck across the organization.

Speaker #5: Every depository customer, every commercial customer, every consumer was impacted by the change therefore our staffs were entirely focused on the process of conversion post-conversion interaction with clients and all that.

Speaker #5: So to have a solid overall financial quarter in the midst of that were extremely pleased. And like I said, really, really couldn't be prouder of our associates for dealing with that process.

Speaker #5: So we can't underemphasize that or overemphasize that. To put some meat on the bone, we added roughly 50 to 55 new associates throughout our retail system to handle and fully staff our branch locations for customer interaction.

Duane A. Dewey: To put some meat on the bone, we added roughly 50 to 55 new associates throughout our retail system to handle and fully staff our branch locations for customer interaction. That was an increase in FTEs for the quarter. Now over time, that will trend back downward. I think at the end of the day, maybe anywhere from 10 to 15 would be permanent. We'll see some reduction right off the bat in that regard across the system. Secondly, post-core conversion, there's a three-month or we're right now normalized or pretty much normalized throughout our company. There's been, as Barry mentioned, a settling in since then of the whole process and new ways of doing business. Now we have settled in. We made a comprehensive presentation to our board yesterday on our AI efforts.

Duane Dewey: To put some meat on the bone, we added roughly 50 to 55 new associates throughout our retail system to handle and fully staff our branch locations for customer interaction. That was an increase in FTEs for the quarter. Now over time, that will trend back downward. I think at the end of the day, maybe anywhere from 10 to 15 would be permanent. We'll see some reduction right off the bat in that regard across the system. Secondly, post-core conversion, there's a three-month or we're right now normalized or pretty much normalized throughout our company. There's been, as Barry mentioned, a settling in since then of the whole process and new ways of doing business. Now we have settled in. We made a comprehensive presentation to our board yesterday on our AI efforts.

Speaker #5: That was an increase in FTEs for the quarter. So, now over time, that will trend back downward. And I think at the end of the day, maybe anywhere from 10 to 15 would be permanent.

Speaker #5: So we'll see some reduction right off the bat in that regard across the system. Then, secondly, post-core conversion, there's three months where we're right now normalized, or pretty much normalized, throughout our company.

Speaker #5: So there's been a settling as Barry mentioned a settling in since then of the whole process and new ways of doing business. So now we have settled in.

Speaker #5: We made a comprehensive presentation to our Board yesterday on our AI efforts. Our Chief Information Officer, Chris Davidson, made an outstanding presentation. We have plans that we see will create efficiencies in the future.

Duane A. Dewey: Our Chief Information Officer, Chris Davidson, made an outstanding presentation. We have plans that we see will create efficiencies in the future. It's a little early to start to pin numbers and give forecasts in terms of real positive impact of that. We do see tremendous impact across the organization. Now with that transition and conversion behind us can really turn our attention to those efficiency gains, Catherine, that you're hoping to see.

Duane Dewey: Our Chief Information Officer, Chris Davidson, made an outstanding presentation. We have plans that we see will create efficiencies in the future. It's a little early to start to pin numbers and give forecasts in terms of real positive impact of that. We do see tremendous impact across the organization. Now with that transition and conversion behind us can really turn our attention to those efficiency gains, Catherine, that you're hoping to see.

Speaker #5: It's a little early to start to pin numbers and give forecasts in terms of real positive impact of that. But we do see tremendous impact across the organization, and now, with that transition and conversion behind us, we can really turn our attention to those efficiency gains, Catherine, that you're hoping to see.

Speaker #2: Yeah, that's great. Okay, awesome. Thank you for all of that. I know that was a really big deal for you all, so I'm glad you gave us some of your time.

Catherine Mealor: Yeah, that's great. Okay, awesome. Thank you for all of that. I know that was a really big deal for you all, so I'm glad you gave us some of your time. My follow-up was maybe just on that, now that you've got the conversion behind you. I know M&A has been something that you've been thinking about. Any kind of update on that? Especially now that the conversion's behind you, I assume that M&A outlook is maybe an easier lift. Kind of curious how you're thinking about M&A. Thank you.

Speaker #2: And then my follow-up would maybe just on that now that you've got the conversion behind you. I know M&A has been something that you've been thinking about.

Speaker #2: Any kind of update on that, and especially now that the conversion is behind you? I assume that the M&A outlook is maybe an easier lift.

Speaker #2: But I'm kind of curious how you're thinking about M&A. Thank you.

Speaker #5: Yeah, I think—I mean, it's fairly similar to what we've got, but we've had some trepidation in the past, yes, with the conversion upcoming and some of the other things we've dealt with.

Duane A. Dewey: Yeah, I think it's fairly similar to what we've guided, we've had some trepidation in the past, yes, with the conversion upcoming and some of the other things we've dealt with. We are now fully considering options there. We do feel we have a lot of options. I would say from our perspective, we're seeing increased discussion and interest, and it is all size ranges across the board. There's a lot of discussion going on, and we would love to participate in M&A but remain disciplined and focused on doing good things that add to our company and make our company better. I'll emphasize small, medium, large. There are a lot of different things under consideration across the industry, and we're no different. We're looking at every opportunity to make our company better.

Duane Dewey: Yeah, I think it's fairly similar to what we've guided, we've had some trepidation in the past, yes, with the conversion upcoming and some of the other things we've dealt with. We are now fully considering options there. We do feel we have a lot of options. I would say from our perspective, we're seeing increased discussion and interest, and it is all size ranges across the board. There's a lot of discussion going on, and we would love to participate in M&A but remain disciplined and focused on doing good things that add to our company and make our company better. I'll emphasize small, medium, large. There are a lot of different things under consideration across the industry, and we're no different. We're looking at every opportunity to make our company better.

Speaker #5: So we are now fully considering options there. We do feel we have a lot of options, and I would say from our perspective, we're seeing increased discussion and interest—and it is all size ranges.

Speaker #5: Across the board, there's a lot of discussion going on, and we would love to participate in M&A, but we remain disciplined and focused on doing good things that add to our company and make our company better.

Speaker #5: And so, I'll emphasize small, medium, large. There are a lot of different things under consideration across the industry, and we're no different. And so we're looking at every opportunity to make our company better.

Speaker #2: Great. Thank you.

Catherine Mealor: Great. Thank you.

Speaker #1: And our next question will come from Fedi Strickland with Hofde Group. Please go ahead.

Operator 2: Our next question will come from Feddie Strickland with Hovde Group. Please go ahead.

Operator: Our next question will come from Feddie Strickland with Hovde Group. Please go ahead.

Speaker #6: Hey, good morning, gentlemen. Just wanted to touch on deposit growth. I mean, do we see that step down a little bit in the back half of the year just given the affirmation of the guide and the really strong room rate this quarter?

Feddie Strickland: Hey, good morning, gentlemen. Just wanted to touch on deposit growth. Do we see that step down a little bit in the back half of the year, just given the affirmation of the guide and the really strong run rate this quarter? Or could we maybe just see the higher end of what could be considered mid-single digit growth for the year?

Speaker #6: Or could we maybe just see the higher end of what can be considered mid-single-digit growth for the year?

Speaker #7: Hi, Fedi. This is Joe Bond. Thank you for the question. We're managing the deposit growth in relation to the loan growth activity aligning the two.

Joseph E. Bond: Hi, Feddie. This is Joe Bond. Thank you for the question. We're managing the deposit growth in relation to the loan growth activity, aligning the two. We do have deposit campaigns in place right now. We're not trying to achieve a much higher pace of growth, so we're maintaining the guidance in mid-single digits. That's what we expect in the remainder of this part of the year. I would like to just touch on a little bit, too, in terms of the competition and pricing being much higher than what we've expected. It may be the case that we will increase our deposit costs and as a result, also improve the margin at the bottom line, which will help our margin outlook as well.

Joe Bond: Hi, Feddie. This is Joe Bond. Thank you for the question. We're managing the deposit growth in relation to the loan growth activity, aligning the two. We do have deposit campaigns in place right now. We're not trying to achieve a much higher pace of growth, so we're maintaining the guidance in mid-single digits. That's what we expect in the remainder of this part of the year. I would like to just touch on a little bit, too, in terms of the competition and pricing being much higher than what we've expected. It may be the case that we will increase our deposit costs and as a result, also improve the margin at the bottom line, which will help our margin outlook as well.

Speaker #7: And we do have deposit campaigns in place right now. We're not trying to achieve a much higher pace of growth. So we're maintaining the guidance in mid-single digits.

Speaker #7: And that's what we expect in the remainder of this part of the year. I would also like to touch a little bit on the fact that competition and pricing have been much higher than what we expected.

Speaker #7: It may be the case that we will increase our deposit costs and, as a result, also improve the margin at the bottom line, which will help our margin outlook as well.

Speaker #7: So we're looking at both managing the appropriate growth of our deposits and the associated costs and the impact on the margin on the bottom line.

Joseph E. Bond: We're looking at both managing the appropriate growth of our deposits and the associated costs and the impact on the margin on the bottom line.

Joe Bond: We're looking at both managing the appropriate growth of our deposits and the associated costs and the impact on the margin on the bottom line.

Speaker #6: Understood. That's really helpful. I just wanted to ask about credit. I mean, obviously, it's great to see NPAs down by nearly half following the loan sale here.

Feddie Strickland: Understood. That's really helpful. Just wanted to ask on credit, obviously great to see NPAs down by nearly half following the loan sale here. Does that impact at all forward expectations for charge-offs? Is maybe something in the mid-teens rather than the low 20s maybe more appropriate going forward, just given the step down in non-accruals?

Speaker #6: Does that impact at all Ford expectations for charge-offs, and is maybe something in the mid-teens rather than the low 20s maybe more appropriate going forward, just given the step-down and nonaccruals?

Speaker #4: This is Barry, and I would say, to answer that, yes, I do think that the reduction in NPAs and NPLs definitely has the potential to reduce the actual losses we experience going forward.

Barry Harvey: This is Barry, I would say the answer to that is yes. I do think that the reduction in NPAs, NPLs definitely has the potential to reduce the actual losses we experience going forward. I think that's probably as simple as. I think from the standpoint of provisioning, Duane mentioned earlier that we were thinking for the H2 of the year, it'd be more like somewhere in between the Q1 and the Q2 when you exclude the mortgage sale. I think that's probably where we would be there as it relates to the provision. As far as the charge-offs go, I do think that the lower non-accruals and that we have, the less charge-offs we're going to have going forward, although our charge-offs have been pretty muted already. I would think that that is a fair assumption.

Speaker #4: And I think that's probably as simple as but I think from the standpoint of provisioning, Dwayne mentioned earlier, that we were thinking for the second half of the year it'd be more like some blend between the first quarter and the second quarter when you exclude the mortgage sale.

Speaker #4: I think that's probably where we— that's probably where we would be there as it relates to the provision. But as far as the charge-offs go, I do think that the lower non-accruals that we have, the less charge-offs we're going to have going forward.

Speaker #4: Although our charge-offs have been pretty muted, already, but I would think that that is a fair assumption.

Speaker #6: Okay, great. And just one last one, if I could—just from a big picture economic growth perspective, it seems like this is a good bit of new investment across the Gulf South.

Feddie Strickland: Okay, great. Just one last one, if I could. Just from a big picture economic growth perspective, seems like there's a good bit of new investments across the Gulf South. Can you talk about maybe what you're seeing on the ground and maybe what your expectations are or what you're hearing in terms of potential household income and just economic growth potential there?

Speaker #6: Can you talk about what you're seeing on the ground and what your expectations are, or what you're hearing in terms of potential household income and economic growth potential there?

Speaker #5: Yeah, Fedi, I would say economic activity in—so we're most familiar with the state of Mississippi—is off the charts relative to historic levels within our state.

Duane A. Dewey: Yeah. Teddy, I would say economic activity so what we're most familiar with the state of Mississippi is off the charts relative to historic levels within our state. It does relate partially to the data center builds that are occurring, and there are multiple data center builds across the state. Along with that, there's other manufacturing in support of everything from battery generation to our we have a Nissan plant, a Toyota plant. We have timber. On the coast, we have shipping. We have multiple different areas of economic investment and activity across the state that are at levels never seen before in Mississippi. I would suggest that that spills definitely over into Louisiana and spills over into Alabama, both of which are markets. Although we don't have the physical presence in Louisiana, we do bank numerous commercial relationships in that state.

Duane Dewey: Yeah. Teddy, I would say economic activity so what we're most familiar with the state of Mississippi is off the charts relative to historic levels within our state. It does relate partially to the data center builds that are occurring, and there are multiple data center builds across the state. Along with that, there's other manufacturing in support of everything from battery generation to our we have a Nissan plant, a Toyota plant. We have timber. On the coast, we have shipping. We have multiple different areas of economic investment and activity across the state that are at levels never seen before in Mississippi. I would suggest that that spills definitely over into Louisiana and spills over into Alabama, both of which are markets. Although we don't have the physical presence in Louisiana, we do bank numerous commercial relationships in that state.

Speaker #5: And it does relate partially to the data center builds that are occurring and there are multiple data center builds across the state. But along with that, there's other manufacturing in support of everything from battery generation to our we have a Nissan plan, a Toyota plant.

Speaker #5: We have timber. On the coast, we have shipping. We have multiple different areas of economic investment and activity across the state that are at levels never seen before in Mississippi.

Speaker #5: I would suggest that that spills definitely over into Louisiana and spills over into Alabama, both of which our markets, although we don't have the physical presence in Louisiana, we do bank numerous commercial relationships in that state.

Speaker #5: So all of that, plus Alabama, is really, really positive for economic activity. As it impacts, I've been to a couple of different presentations where we've had different leadership across both governmental and private sectors, etc., talking about ongoing and past data center construction.

Duane A. Dewey: All of that, plus Alabama, is really positive for economic activity. As it impacts, I've been to a couple different presentations where we've had different leadership across both governmental, private sector, et cetera, talking about ongoing past data center construction. All of that still looks really positive. I would say from a Trustmark perspective, we're as positive about the Southeastern US economic activity as we've been in a very long time, if ever before. It's just really dynamic right now.

Duane Dewey: All of that, plus Alabama, is really positive for economic activity. As it impacts, I've been to a couple different presentations where we've had different leadership across both governmental, private sector, et cetera, talking about ongoing past data center construction. All of that still looks really positive. I would say from a Trustmark perspective, we're as positive about the Southeastern US economic activity as we've been in a very long time, if ever before. It's just really dynamic right now.

Speaker #5: All of that still looks really, really positive. So I would say from a Trustmark perspective, we're as positive about the southeastern US economic activity as we've been in a very long time, if ever before.

Speaker #5: It's just really dynamic right now.

Speaker #4: Yeah, I would say Dwayne, that also is reflective in our line utilization that we've seen. Especially on the revolving CNI side. And then we are seeing more activity from the municipality side as well as these projects have to be funded.

Barry Harvey: Yeah, I would say, Duane, that also is reflected in our line utilization that we've seen, especially on the revolving C&I side. We are seeing more activity from the municipality side as well as these projects have to be funded. We are seeing some good activity there as well.

Speaker #4: And so we are seeing some good activity there as well.

Speaker #6: Understood. Really helpful perspective. I appreciate it. I'll step back.

Feddie Strickland: Understood. Really helpful perspective. I appreciate it. I'll step back.

Speaker #5: Thank you.

Duane A. Dewey: Thank you.

Duane Dewey: Thank you.

Speaker #1: And our next question will come from Steven Skeldon with Piper Sandler. Please go ahead.

Operator 2: Our next question will come from Stephen Scouten with Piper Sandler. Please go ahead.

Operator: Our next question will come from Stephen Scouten with Piper Sandler. Please go ahead.

Speaker #8: Yeah, thanks. Good morning. A couple of quick follow-ups for me maybe. In terms of the NIM conversation there, it sounded like thought maybe could expand the NIM even with some deposit cost increases.

Stephen Scouten: Yeah, thanks. Good morning. Couple quick follow-ups from me maybe. In terms of the NIM conversation there, it sounded like thought maybe could expand the NIM even with some deposit cost increases. Would the implication be there that loan yields would trend higher from here, maybe a couple basis points a quarter on new production? Maybe within that, what were you seeing this quarter in terms of new production yields?

Speaker #8: So, the implication would be that loan yields would trend higher from here, maybe a couple of basis points per quarter. On new production—maybe within that—what were you seeing this quarter in terms of new production yields?

Speaker #7: Okay. So Steven, thank you for the question. This is Joe. In terms of NIM and my comment about deposit costs increasing and the benefit to margin, it is pulling deposits on balance sheet that may have associated fee income with them and changing the geography of that where the cost would be higher.

Joseph E. Bond: Okay. Stephen, thank you for the question. This is Joe. In terms of NIM and my comment about deposit costs increasing and the benefit to margin, it is pulling deposits on balance sheet that may have associated fee income with them and changing the geography of that where the cost would be higher. However, it is lower than other sources of funding, therefore improving the margin in the bottom line. That is one factor that we're evaluating.

Joe Bond: Okay. Stephen, thank you for the question. This is Joe. In terms of NIM and my comment about deposit costs increasing and the benefit to margin, it is pulling deposits on balance sheet that may have associated fee income with them and changing the geography of that where the cost would be higher. However, it is lower than other sources of funding, therefore improving the margin in the bottom line. That is one factor that we're evaluating.

Speaker #7: However, it is lower than other sources of funding, therefore improving the margin in the bottom line. And so, that is one factor that we're evaluating.

Speaker #4: Yeah. The other part of the question dealt with the weighted average booking for the quarter. And that was going to be about 6.28%. And that's about 55 basis points better than the average for the portfolio as a whole.

Barry Harvey: The other part of the question dealt with the weighted average booking for the quarter, that was going to be about 6.28%. That's about 55 basis points better than the average for the portfolio as a whole. That's still a positive story from when you're comparing just new bookings to the average for the portfolio as a whole.

Speaker #4: So that's still a positive story. When you're comparing just new bookings to the average for the portfolio as a whole.

Speaker #8: Got it. Very helpful. Perfect. And then just last thing for me, just curious on any updated numbers on hiring that was done during the quarter.

Stephen Scouten: Got it. Very helpful. Perfect. Then just last thing for me, just curious on any updated numbers on hiring that was done during the quarter. I know that's been somewhat active over the last 2 or 3 quarters. Curious if there was any more meaningful activity on the hiring front from a production standpoint.

Speaker #8: I know that's been somewhat active over the last two or three quarters. Curious if there was any more meaningful activity on the hiring front from a production standpoint.

Speaker #5: Yeah, I will take that one quickly. And as I mentioned, one of the prior questions, I mean, second quarter, we were focused on our core.

Duane A. Dewey: Yeah. I'll take that one quickly. As I mentioned in one of the prior questions, Q2, we were focused on our core, that really was focused on transitioning, on adding the personnel we needed in the branch system for the most part, that was 50 some new associates out there, which what we have referred to prior in terms of new production talent out across the system, it slowed in Q2 was really not a focus. We are ramping back up now as we speak into the H2 of the year really focused on building again back to the commercial and some of the other production categories, mortgage and other areas where we see opportunities. When you look at the Q2, it was really all hands on deck focused on getting our company converted.

Duane Dewey: Yeah. I'll take that one quickly. As I mentioned in one of the prior questions, Q2, we were focused on our core, that really was focused on transitioning, on adding the personnel we needed in the branch system for the most part, that was 50 some new associates out there, which what we have referred to prior in terms of new production talent out across the system, it slowed in Q2 was really not a focus. We are ramping back up now as we speak into the H2 of the year really focused on building again back to the commercial and some of the other production categories, mortgage and other areas where we see opportunities. When you look at the Q2, it was really all hands on deck focused on getting our company converted.

Speaker #5: And that really was focused on transitioning on adding the personnel we needed in the branch system for the most part. And that was 50-some new associates out there, which then the what we have referred to prior in terms of new production talent out across the system that slowed in the second quarter.

Speaker #5: And it was really not a focus. So we are ramping back up now, as we speak, into the second half of the year. And really focused on building again back to the commercial and some of the other production categories—mortgage and other areas where we see opportunities.

Speaker #5: So but when you look at the second quarter, it was really all hands on deck focused on getting our company converted.

Speaker #8: That makes sense. Great. Thanks for the color. I appreciate it.

Stephen Scouten: That makes sense. Great. Thanks for the color. I appreciate it.

Speaker #5: Thank you.

Duane A. Dewey: Thank you.

Duane Dewey: Thank you.

Speaker #1: And our next question will come from Christopher Marinak with Brienne Capital. Please go ahead.

Operator 2: Our next question will come from Christopher Marinac with Brean Capital. Please go ahead.

Operator: Our next question will come from Christopher Marinac with Brean Capital. Please go ahead.

Speaker #8: Hey, thanks. Good morning. I had a similar question that you already answered about the net charge-offs changing. So, Barry, I'm curious if the CSOL rules allow you to revisit kind of lifetime losses, or was that already done in the release we had this quarter?

Christopher Marinac: Hey, thanks. Good morning. I had a similar question that you already answered about the net charge-offs changing. Barry, I'm curious if the CECL rules allow you to revisit kind of lifetime losses, or was that already done in the release we had this quarter?

Speaker #4: Right. That's correct. Christopher, every quarter, we're updating our historical averages to recalibrate our probability of default loss given default. So as we do encounter lower charge-offs as we move forward, that will in fact result in potentially in a little bit lower provisioning to make sure I'm catching your question correctly there.

Barry Harvey: That's correct, Christopher. Every quarter, we're updating our historical averages to recalibrate our probability of default, loss given default. As we do encounter lower charge-off as we move forward, that will in fact result in potentially a little bit lower provisioning. Make sure I'm catching your question correctly there.

Speaker #8: Yes, that's correct. So it's an ongoing process, and we may see some further relief as these quarters occur.

Christopher Marinac: Yes, that's correct. It's an ongoing process, and we may see some further relief as quarters-

Speaker #4: We should. We should. Now, the loss we took on the mortgage sale obviously flows in and impacts the mortgage book itself. But the reality of it is, the discount we took two years ago, same quarter, on the mortgage sale was $0.29.

Barry Harvey: We should. Now, the loss we took on the mortgage sale obviously flows in and impacts the mortgage book itself. The reality of it is, the discount we took two years ago, same quarter on the mortgage sale was $0.29. The discount we took this time, same criteria for the loans in which mortgages which we sold, the discount was $0.19. While maybe we're provisioning around $0.23, that's the portion of the $0.29 previously that was credit related. Now that same portion that's credit related of the $0.19 is $0.13. For these mortgages that meet this criteria that we just sold, we were provisioning $0.23. Now we're provisioning $0.13 on a go-forward basis. That more than anything else will help us on our provisioning for those loans that meet the criteria we just sold in the future.

Speaker #4: The discount we took this time same criteria for the loans in which mortgages which we sold, the discount was 19 cents. So while we maybe will provisioning around 23 cents, that's the portion of the 29 previously that was credit related.

Speaker #4: Now that same portion that's credit related of the 19 is 13. So for these mortgages that meet this criteria that we just sold, we were provisioning 23 cents.

Speaker #4: Now we're provisioning 13 cents on the go forward basis. So that more than anything else will help us on our provisioning for those loans that meet the criteria we just sold in the future.

Speaker #8: Great, Barry. Thanks for that. And just a question on deposits. I mean, the success you had in deposits this quarter, is there any sort of lower bound on the loan to deposit ratio where you don't want it to get the lowest certain level?

Christopher Marinac: Great, Barry, thanks for that. Just a question on deposits. The success you had in deposits this quarter, is there any sort of lower bound on the loan to deposit ratio where you don't want it to get below a certain level?

Thomas C. Owens: I'll start. Chris, this is Tom Owens. Historically, 85% has probably been the bottom end. You've heard us talk for any number of quarters now on being intent on maintaining the loan to deposit ratio below 90%. We're kind of midway between 85 and 90 now, so I would say 85 is a practical matter.

Tom Owens: I'll start. Chris, this is Tom Owens. Historically, 85% has probably been the bottom end. You've heard us talk for any number of quarters now on being intent on maintaining the loan to deposit ratio below 90%. We're kind of midway between 85 and 90 now, so I would say 85 is a practical matter.

Speaker #5: I'll start, Chris. This is Tom Owens. I mean, historically, 85% has probably been the bottom end. You've heard us talk for any number of quarters now about being intent on maintaining the loan-to-deposit ratio below 90%.

Speaker #5: We're kind of midway between 85 and 90 now. So I would say 85 is a practical matter.

Speaker #8: Sounds good, Tom. Thanks for sharing that, and thanks for hosting us all this morning.

Christopher Marinac: Sounds good, Tom. Thanks for sharing that and thanks for hosting us all this morning.

Speaker #5: Thank you.

Thomas C. Owens: Thank you.

Tom Owens: Thank you.

Speaker #1: And this will conclude our question and answer session. I'd like to turn the conference back over to Mr. Duane Dewey for any closing remarks.

Operator 2: This will conclude our question and answer session. I'd like to turn the conference back over to Mr. Duane Dewey for any closing remarks.

Operator: This will conclude our question-and-answer session. I'd like to turn the conference back over to Mr. Duane Dewey for any closing remarks.

Speaker #5: Thank you again for joining us on our second quarter call. And we look forward to connecting again after the third quarter. Hope everybody has a great rest of the week.

Duane A. Dewey: Thank you again for joining us on our Q2 call. We look forward to connecting again after Q3. Hope everybody has a great rest of the week, and we will talk to you then.

Duane Dewey: Thank you again for joining us on our Q2 call. We look forward to connecting again after Q3. Hope everybody has a great rest of the week, and we will talk to you then.

Speaker #5: And we'll talk to you then.

Operator 2: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

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