Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Trustmark Corp (TRMK, Financial) reported solid loan growth with an increase of $151 million or 1.2% linked quarter.
- The company experienced a decrease in the cost of total deposits by 15 basis points to 1.83%.
- Net income for the first quarter was $53.6 million, with a return on average assets of 1.19% and a return on average tangible equity of 13.13%.
- Non-interest income increased by 4% linked quarter, driven by growth in mortgage banking, wealth management, and other income.
- Trustmark Corp (TRMK) successfully managed expenses, with non-interest expense declining by $419,000 linked quarter.
Negative Points
- There is uncertainty in the market due to tariffs and administrative policies, which could impact client behavior and loan growth.
- The company anticipates meaningful maturing CRE loans during 2025, which could affect future loan growth.
- There is potential for a slowdown in new origination volume due to market volatility and client uncertainty.
- The net provision for credit losses was $5.3 million, indicating some concerns about credit quality.
- The company faces competitive pressure in loan pricing, which could impact profitability.
Q & A Highlights
Q: Can you discuss the loan growth trends observed this quarter and the impact of tariffs and uncertainty on client behavior?
A: Barry Harvey, Executive Vice President, Chief Credit and Operations Officer, explained that while they expect maturing CRE loans in 2025, many clients are opting for extensions due to interest rate uncertainties. Duane Dewey, President and CEO, added that pipelines remain strong, but there is some client hesitation post-April 2 due to market volatility.
Q: How does the current interest rate environment affect your net interest margin (NIM) guidance?
A: Thomas Owens, CFO, noted that despite a seasonal decline in loan fees, the NIM is expected to increase slightly due to ongoing repricing of fixed-rate loans and securities. The forecast includes three Fed rate cuts, and they aim to maintain a cumulative beta in the mid-30s to support NIM growth.
Q: What factors contributed to the increase in the allowance for credit losses (ACL) this quarter?
A: Barry Harvey explained that the ACL increase was driven by loan growth and adjustments in risk ratings. They also transitioned to using their own probability defaults, which impacted the qualitative portion of the provision.
Q: Can you provide insights into your expense management and expectations for the year?
A: Duane Dewey highlighted a focus on expense control, with first-quarter declines in salaries and benefits due to slower hiring and lower commissions. They anticipate mid-single-digit expense growth for the year, factoring in core system conversion costs and other contractual increases.
Q: What is your approach to share repurchases and capital deployment moving forward?
A: Duane Dewey stated that share repurchase pace will depend on market conditions and loan growth. They are focused on strategic growth in key markets and remain open to M&A opportunities, with flexibility to adjust capital deployment based on evolving conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
