Trustmark Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2023

There are 8 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Third Quarter 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. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr.

Operator

Joey Raine, Director of Corporate Strategy at Trustmark. Please go ahead.

Speaker 1

Good morning. I'd like

Speaker 2

to remind everyone that a copy of our 3rd quarter earnings release As well as the slide presentation that will be discussed on our call this morning is available on 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. 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 other filings with the Securities and Exchange Commission.

Speaker 3

At this time, I'd like

Speaker 2

to introduce Duane Dooley, President and CEO of Trustmark.

Speaker 4

Thank Joey and good morning everyone. Thank you for joining us today. With me this morning are Tom Owens, our Chief Financial Officer Barry Harvey, our Chief Credit and Operations Officer and Tom Chambers, our Chief Accounting Officer. SossMark had a solid 3rd quarter with continued loan and deposit growth, stable net interest income, strong performance in our insurance business And solid credit quality. As previously disclosed, Trustmark recognized a litigation settlement expense of 6 $500,000 in the 3rd quarter.

Speaker 4

With this charge, Trustmark reported a 3rd quarter net income of $34,000,000 Representing diluted earnings per share of $0.56 Excluding this litigation settlement expense, Trustmark's 3rd quarter net income totaled 38,900,000 or $0.64 per diluted share. During the 1st 9 months of 2023, Trustmark's net income totaled 129 $400,000 which represented diluted earnings of $2.11 per share, an increase of 22.7 In a little more detail by turning to Slide 3. Loans held for investment increased $196,300,000 or 1.6 Deposits during the quarter grew $188,000,000 or 1.3 percent linked quarter and $676,700,000 or 4.7 percent year over year. Net interest income totaled $141,900,000 resulting in a net interest margin of 3.29 percent down 4 basis points linked quarter. Non interest income decreased 2.5% linked quarter to $52,200,000 representing 27.4 Non interest expense in the 3rd quarter totaled 140,900,000 Excluding the litigation settlement expense of $6,500,000 non interest expense was $134,400,000 up $2,200,000 or 1.7 percent linked quarter.

Speaker 4

Net charge offs during the quarter totaled 3.6 $1,000,000 and represented 11 basis points of average loans. The provision for credit losses for loans held for investment was $8,300,000 in the 3rd quarter. Credit quality remained solid during the quarter as the allowance for credit losses represented 1.05% of total loans held for investment 273.6 percent of non accrual loans excluding individually evaluated loans at September 30th. We continue to maintain strong capital levels with common equity Tier 1 of 9.89 percent and a total risk based capital ratio of 12.11 percent. The Board declared a quarterly cash dividend of $0.23 per share payable on December 15 to shareholders of record as of December 1.

Speaker 4

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

Speaker 3

I'll be glad to, Duane, and thank you. Turning to Slide 4, loans held for investments totaled $12,800,000,000 as of September 30. That's an increase, as Dwight mentioned, of $194,000,000 for the quarter. Loan growth during Q3 came from CRE, equipment finance and our mortgage line of business. We do expect continued solid loan growth throughout the remainder of 2023, resulting in mid single digit loan growth for the year.

Speaker 3

Our loan portfolio, as you can see, is well diversified, both by product type as well as by geography. Looking at slide 5, Trustmark's CRE portfolio is 94% vertical with 68% in the existing category And 32% in construction land development. Our construction land development portfolio is 80% construction. Trustmark's office portfolio, as you can see, is very modest at $288,000,000 outstanding, which represents only 2% of our overall loan book. The portfolio is comprised of credits with high quality tenants, low lease turnover, Strong occupancy levels and low leverage.

Speaker 3

The credit metrics on this portfolio remain extremely strong. Looking at Slide 6, the bank's commercial loan portfolio is well diversified as you can see across numerous industries with no single category exceeding 13%. Looking to Slide 7, our provision for credit losses for loans held for investment was $8,300,000 during the quarter, which was attributable to reserving for 1 individually evaluated credit, A weakening macroeconomic forecast, funding of our funding provision For the loan growth that we achieved during the quarter and net adjustments to our qualitative factors, the provision for credit losses Our off balance sheet credit exposure was $104,000 for the Q3. On September 30, the allowance for loan losses for loans held for investment were $134,000,000 Looking to Slide 8, we continue to post solid credit quality metrics. The allowance for credit losses represents 1.05 percent of loans held for investment and 2 74% of non accruals, Excluding those loans that are individually analyzed, in the 3rd quarter, net charge offs totaled 3,600,000 Or 0.11 percent of average loans, both non accruals and non performing assets remain at reasonable levels.

Speaker 3

Duane?

Speaker 4

Okay. Thank you, Barry. I'd like to ask Tom Owens now to focus on deposits and income statement.

Speaker 1

Thanks, Duane, and good morning, everyone. Turning to deposits on Slide 9. We had another good quarter with our deposit base continuing to show its Strength amid an environment that remains exceptionally competitive. As Duane said, deposits totaled $15,100,000,000 in September 30, was a linked quarter increase of $188,000,000 or 1.3 percent and a year over year increase of $677,000,000 or 4.7%. A linked quarter increase was driven by strong fundamentals with growth in personal balances of $288,000,000 Non personal balances of $148,000,000 and brokered balances of 125,000,000 That growth was offset somewhat by a decline in public fund balances of $373,000,000 due to seasonal and other factors.

Speaker 1

Regarding mix, time deposits continued to increase linked quarter with promotional CDs up 344,000,000 And brokered CDs up $113,000,000 As of September 30, our promotional time deposit book totaled $1,230,000,000 with a weighted average rate paid of 4.65 percent and a weighted average remaining term of about 6 months. Our broker deposit book totaled $728,000,000 with an all in weighted average rate paid of about 5.42 percent and weighted average remaining term of about 5 months as of September 30. Also regarding mix, the rate of decline Non interest bearing DDA slowed meaningfully during the Q3, down linked quarter by $141,000,000 or 4.1%. Non interest bearing DDA represented 22% of the deposit base as of September 30. Our cost of interest bearing deposits increased by 43 basis points from the quarter to 2.39%.

Speaker 1

Turning to Slide 10, Trustmark continues to maintain a stable granular and low exposure deposit base. During the quarter, we had an average About 464,000 personal and non personal deposit accounts excluding collateralized public fund accounts With an average balance per account of about $26,000 Average accounts for the quarter increased by about $3,000 or in an annualized rate of about 3%. As of September 30, 65% of our deposits were insured And 12% were collateralized, meaning that our mix of deposits that are uninsured and uncollateralized was essentially unchanged linked quarter at 22%. We maintained substantial secured borrowing capacity, which stood at $5,700,000,000 at September 30, representing 170 percent coverage of uninsured and uncollateralized deposits. Our 3rd quarter total deposit cost of 1.84 percent represented a linked quarter increase of 36 basis points and a cumulative beta cycle debates of 33%.

Speaker 1

Forecast for the 4th quarter is for an increase in deposit cost to 2.12%, which would represent a cycle to date beta of 39%. Forecast reflects market implied forward interest rates with Fed remaining on hold for the remainder of the year with the top of the target range for the Fed funds rate at 5.5%. Turning our attention to revenue on Slide 11. As Duane said, net interest income FTE decreased $1,400,000 linked quarter, totaling $141,900,000 which resulted in a net interest margin of 3.29%. Net interest margin decreased by 4 basis points linked quarter as changes in asset rate and volume substantially offset changes in liability rate and volume.

Speaker 1

Turning to Slide 12. Our interest rate risk profile remained essentially unchanged as of September 30, with substantial asset sensitivity driven by loan portfolio mix with 49% variable coupon. During the Q3, the weighted average maturity of the cash flow hedge portfolio shortened slightly to 2.9 years And the weighted average received fixed rate increased to 3.16%. We entered into $25,000,000 notional of forward starting swaps, which brought Portfolio notional at quarter end to $975,000,000 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 3rd quarter totaled $52,200,000 a $1,300,000 linked quarter decrease and a $382,000 decrease year over year.

Speaker 1

The linked quarter decrease was driven primarily by a decrease in bank card and other fees of $700,000 and by a decrease of in other net of $1,300,000 which was essentially normalization from an elevated level in the 2nd quarter that was driven by nonrecurring income recognition. Those linked quarter decreases were offset somewhat by increases in service charges on deposit accounts $379,000 and insurance commissions of $539,000 For the quarter, non interest income represented 27.4 Now looking at Slide 14, mortgage banking revenue totaled $6,500,000 in the 3rd quarter, a $142,000 decrease linked quarter, driven by a $493,000 increase in amortization of the mortgage servicing asset, which was substantially by a $152,000 increase in servicing income and a $338,000 reduction in negative net hedge ineffectiveness. Year over year, mortgage banking declined by $418,000 driven primarily by reduced gain on sale. Mortgage loan production totaled $390,000,000 in the 3rd quarter, a decrease of 9.6% linked quarter and a decrease of 23.3 percent year over year. Retail production mix remained strong in the 3rd Gain on sale margin decreased by 3 basis points linked quarter to 1.21%.

Speaker 1

And now I'll ask Tom Chambers to cover non interest Thanks and capital management.

Speaker 2

Thank you, Tom. Turning to slide 15, you'll see a detail of our total non interest expense. Adjusted non interest expense was $134,000,000 during the 3rd quarter, a linked quarter increase of $2,400,000 or 1.9%, mainly driven by an increase in salary and employee benefits of $726,000 as a result of higher salary expense. Other expense increased by $1,400,000 resulting from an increase of FDIC assessment expense of $1,200,000 In addition, services and fees decreased $382,000 due to lower professional and consulting fees during the quarter. As noted on Slide 16, Trustmark remains well positioned from a capital perspective.

Speaker 2

As Duane previously mentioned, Our capital ratios remain solid with a common equity Tier 1 ratio of 9.89% And a total risk based capital ratio of 12.11 percent. Trustmark did not repurchase any of its common shares during the Q2 during the Q3, Although we have a $50,000,000 authority for the remainder of 2023 under our board authorized stock repurchase program, We are unlikely to engage in stock repurchase in a meaningful way. Our priority for capital deployment continues to be organic lending. Back to you, Dwayne.

Speaker 4

Well, thank you, Tom. Turning to Slide 17, let's look at our outlook. First, let's look at the balance sheet. We're expecting loans and deposits to continue to grow mid single digits for the year. Security balances are expected to decline in high single digits for the year as cash flow runoff of the portfolio is not reinvested, which of course is subject to the Impact of changes in market interest rates.

Speaker 4

Moving on to the income statement, we're expecting net interest income to grow high single digits full year 23, which is driven by earning asset growth and reflects a full year net interest margin in the high 320s Based on the current market implied forward interest rates, the total provision for credit losses including unfunded commitments It's dependent upon future loan growth, the current macroeconomic forecast and the credit quality trends. Net charge offs requiring additional reserving are expected to be nominal based on the current economic outlook. From a non interest income perspective, insurance revenue is expected to increase high single digits full year with Wealth Management We're expecting service charges and bank card fees to increase low single digits, which is offset somewhat by lower customer derivative fees. Mortgage banking revenue is expected to decline low single digits for the year. Adjusted non interest expense is expected to increase mid single digits for the year.

Speaker 4

This reflects general inflationary pressures, added talent throughout our system as well, but is also subject The impact of commissions in the various lines of business. We remain intently focused on our Throughout 20222023, our Atlanta based equipment finance division continues to gain traction Its portfolio has grown to $191,000,000 as of ninethirty. We have implemented numerous technology advancements which will continue into 2024 and 2025 all of which are designed to improve efficiencies. Moving into Q4, we're intently focused on cost saving initiatives that will reduce the rate of expense growth in coming quarters. In addition, work continued on the design of our sales through service process, which will be implemented across the retail branch network in 2024.

Speaker 4

We believe these actions will enhance Trustmark's performance and build long term value for our shareholders. Finally, we will continue a disciplined approach Capital deployment with a preference for organic loan growth and potential M and A, we will continue to maintain a strong capital base and implement With that, at this time, I'd like to open the floor up to questions.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from Graham Duk with Piper Sandler. Please go ahead.

Speaker 5

Hey, good morning guys.

Speaker 4

Good morning.

Speaker 1

Good morning. So

Speaker 5

I just wanted to start quickly on the margin, and specifically with loan yields. They saw some really nice expansion this quarter. Just And 4Q and maybe even as we look into 1Q, 2023.

Speaker 3

And Graham, this is Barry on the credit side. I'll start there and then maybe others who want Contribute, but our weighted average yield for the book is 6.2% and for the quarter, What we put on the books was 7.9%. So we are still seeing a nice increase in the of the new bookings Versus the makeup of the book itself and that's predominantly because a lot of our new opportunities are CRE related, Slower production than we saw in 'twenty one, clearly much slower production we saw in 'twenty three excuse me, In 'twenty two. But having said that, we definitely are seeing some good fee income on those particular opportunities as well as Spreads to 1 month sulfur. So for that reason, I think we continue to see a nice Yield in our new production relative to the overall book.

Speaker 5

Okay, that's helpful. And then I guess just on the deposit side, I know it's only a minor difference, but you guys did outperform your deposit guidance a little bit this quarter. Can you just talk through what you're seeing on the funding cost side as you start to look ahead into 2024? And when you if you have an idea of when you think that might peak out and the lag will be fully into the deposit cost picture?

Speaker 1

Hey, Graham, this is Tom Owens. So yes, we did come in just slightly favorable to our guidance for the 3rd quarter. And as a result, we slightly lowered our guidance on deposit costs for the 4th quarter. Internally, we're continuing to model, as we've discussed on prior calls, Which is ultimately to a cumulative deposit beta mid-twenty 24 in the mid-40s. So I think what you will see is decline in linked quarter increase In deposit cost over the next several quarters, right?

Speaker 1

So the pace of increase will continue to decline, And I would not expect that you'll get to flattish deposit cost until second half next year. We've got the Fed. We're using market implied forwards. So the Fed's on hold Through, I believe, July of next year, which is about the same time we've got that cycle to date data topping out And where we have deposit costs topping up. Hey, Graham,

Speaker 4

this is Duane DeHayes. Let me just add real quickly to that, Just to compliment Tom and the treasury team as well as our retail banking team here at Trustmark, I think as the year has gone on, we have Become more focused and targeted in some of our campaigning on the deposit side and really Honed in on where we have opportunity, where we have opportunity to price better, etcetera. So I think we in addition to The market pressures that we're facing, I also think the organization has advanced in its targeted marketing campaigns across the Okay. Which has helped manage the cost.

Speaker 5

Yes, definitely. And then I guess, so you're taking those two pieces together and then looking at the margin this quarter, which was held in pretty well. Are you thinking that the asset repricing from here can maybe just at least offset deposit cost increases Until we see that flatter, I guess, deposit cost trajectory in the back half of twenty twenty four?

Speaker 1

I think Graham, this is Tom Owens again. I think you'll continue to see some linked quarter compression in net interest margin for the next Couple of quarters. And then as you get into, call it, mid-twenty 4, 2nd and third quarter Is where you're likely to see that stabilize and even out.

Speaker 5

Okay. Okay, great. And then lastly, if I could just get one more in. Yesterday, we saw another bank and a competitor, a peer of yours, announce the sale of its insurance business. And they're planning to use the capital to pay down some borrowings and restructure part of the bond portfolio.

Speaker 5

How do you guys view this transaction? Would you ever consider anything like it? Because if I look at the multiple on that business, it looks like your all's insurance business would be implied about $300,000,000 And value based on the revenue multiple that was used yesterday?

Speaker 4

Graham, Dwayne, this is Dwayne. We're well aware obviously of what's happening in the bank owned insurance space I guess There's been a couple of deals announced. To that end, however, we like the business. We've been in the business 25 years. It's been a steady, stable, consistent grower, especially over the last 10 to 12 years.

Speaker 4

It's a very high return on tangible Common Equity business. We have a great team, great management structure there, etcetera. So we very much like we like the diversification also that Also that insurance revenue brings, Tom noted the 27 plus percent of Non interest income, we like that balance as well. Now all that said, we are aware of what's going on around us. We know valuations and Understand what impact that's having on others from a financial perspective.

Speaker 4

So we continue to monitor and evaluate, but At this point in time, we really like the insurance business.

Speaker 5

Okay, great. Thanks guys.

Operator

Our next question comes from Kevin Petzemas with D. A. Davidson. Please go ahead.

Speaker 1

Hey, good morning, guys. Good morning, Kevin. Kevin.

Speaker 3

Just shifting gears to credit,

Speaker 6

We saw roughly a $20,000,000 increase, I believe, in NPAs. I know we're kind of coming off a very low point here. And I saw you mentioned reserving for this newly evaluated non accrual loan. It looked like Non accruals went up in the state of Alabama and Mississippi. So maybe just any color you can provide on How many loans, what kind of business they're in, and if there's any Concerned that there'll be others coming.

Speaker 6

Thanks.

Speaker 3

Hey, Kevin, this is Barry. I guess starting with One aspect of that question, really during the quarter, there was 2 credits that drove our increase and Non accruals and one of them was CRE and one of them was C and I. Both of them were substandard accruing, as of 6.30 and then we, during the quarter, 3rd quarter, we decided to move them to non accrual and specifically evaluate them To determine if a reserve was required or not, don't see that as anything systemic at this point. I think it's just normal course of business. When you mentioned Mississippi and Alabama, one of the the C and I loan was that I've mentioned was Originated out of Alabama.

Speaker 3

The customer is not in Alabama, but it was originated out of Alabama and that's the way it's shown on our Distribution and then within Mississippi, the increase that you saw there was driven by our mortgage company. We had some we continue like everybody does, I think to see some increase in non accruals coming out of our mortgage book, which is, so that's Hopefully, that gives you a little bit of color on that aspect of it, but we continue to monitor our portfolios very, very carefully. We're looking at a lot of the credits on a quarterly basis. We're looking at them and specifically from a CRE perspective, We're taking the pro form a and then we're looking at today's interest rates and determining what the debt service coverage looks like, what the debt yield looks like And evaluating them based upon today's interest rate environment regardless of what the environment was Time of underwriting. So we continue to assess it and then as we need to adjust grades, we're doing so In a very timely manner, well before we end up with a breach or maturity.

Speaker 6

That's helpful, Barry. While we're on the subject of credit, Two kind of side questions. A number of your large Southeast Bank peers were involved in A bankrupt syndicated credit. Can you remind us what kind of exposure you have to SNCs? And then equipment finance, I know you guys are just Kind of in the infancy stage there of that business and it's ramping up.

Speaker 6

But with the economy slowing in the mid higher rates, is there any Concern about that book, I know Dwayne, when we've talked about this before, you really emphasized how you're really being Careful and methodical in building that business, so I would assume you feel okay credit wise there.

Speaker 3

Sure. And Kevin, I'll start with the SNC question and we'll move to equipment finance. For our Shared National Credits, our percent of the total book It's going to be for outstandings, it's going to be 8.6%. And I think there's a few things To comment beyond that is we don't have any concentrations from an industry standpoint based upon the regulatory definition of concentrations. I would also like to mention kind of how we why we kind of monitor SNCs within Trustmark.

Speaker 3

The credit quality For Shared National Credits, given what they are, it's going to be near and oftentimes investment grade. So high quality companies, And as a general statement, I mean, obviously, with high quality companies, you typically have less collateral. As a general rule, because of the quality of the earnings, the strength of the earnings, the size of the earnings, the predictability of the earnings, All those things lead you to a credit process that the credit criteria and structure Reflects the strength of the borrower that you're lending to. We typically are careful with taking a modest hold as we approach Shared National Credits, the credit itself was extremely strong, but they are we're always going to be buying into these credits. We don't lead any Shared national credits, so as we buy into them, they're take or leave.

Speaker 3

So really the only way to protect yourself from our perspective Just to be modest with the size of the opportunity we pursue and put on our books. We've also established limits As it relates to shared national credits or concentration limit, if you would, we've had that in place for many, many years. We displayed that to our enterprise risk committee of the Board who looks at everything credit From a Board perspective, we share that with them on a quarterly basis. And so we do in fact, we are conscious of Shared National Credits, maybe for a different reason than you're asking the question for. We just want to we know that it's purchased business And has limited opportunity for future ancillary business.

Speaker 3

So we're focused on making sure that we're doing as much direct business as we can And getting as much of a wallet share from a customer as possible. So we're focused on those credits to make sure that we're not doing those in lieu of The direct business that we want to be doing every day. So shifting over to the equipment finance side, I mean, we've got an extremely experienced, talented Team, they understand clearly that we're looking to be down the middle of the fairway on all the deals we're looking at. The credit structure, the credit quality is 1st and foremost. The pricing is important to us, but it's always secondary To the ball, we understand in a new line of business, we don't want to stumble, we don't want to have problems.

Speaker 3

So that is our focus And we'll continue to be our focus for the foreseeable future. And I do I can't overemphasize the experience level, the knowledge of the people we have In that line of business, including the credit resources that we were able to obtain that had been in that line of business for many, many years with some really large institutions. So from that standpoint, I'm very comfortable as we evaluate credits, which we will later this morning for opportunities That we're looking at a good solid credit risk down the fairway in terms Of deal quality and making sure that's our focus and price is secondary, but we do want to make sure we get a reasonable yield Given the credit quality being presented.

Speaker 4

One just final note on the equipment finance, Kevin, is It's mid to large ticket. So it is we are not focused on small ticket or small business type It's really mid to large and most of the credit in that portfolio is close to what Barry described from a SNC perspective, very Top line credit quality. So, yes, we feel pretty good about where we are at this point in that business.

Speaker 6

Okay, great. And I'm going to sneak one last one in here. Dline,

Speaker 3

I just want to point out not

Speaker 6

to be Just that your comment about liking the insurance business, I recall Cadence CEO saying that same thing on last quarter's call. But putting that aside, like say there's no transaction there, would you look at doing on its own a securities Restructuring transaction just to accelerate some of that redeployment or reinvestment on the securities portfolio.

Speaker 4

Yes. I'll start quickly and let Tom address the securities portfolio. But again, I mean, we've been in the business 25 years. Can't comment much on what cadence thought process is, but Staying abreast, staying aware of what's going on and looking at what's best for Trustmark shareholders moving forward, that's what we're focused on and It's been a great business for us and continue to monitor the situation. But at this point in time, That's where we stand.

Speaker 4

So I'll let Tom address the securities.

Speaker 1

Kevin, this is Tom Owens. So I would probably echo Duane's comments in terms of being aware and monitoring What our competitors and what our peers are doing, certainly, we're aware of the restructuring, the investment portfolio restructuring Activity that's been going on. So we're aware of it. We look at it. We are not At this point, seriously contemplating doing that, I guess, is

Speaker 4

the way I would say

Speaker 3

Okay. That's great. Thanks guys. Appreciate it.

Operator

Our next question comes from Bill Jones with KBW. Please go ahead.

Speaker 7

Hey, great. Good morning, guys. This is Will. How is it going?

Speaker 4

Good morning. Thank you. Hey.

Speaker 7

So I just wanted to start out on the margin. I know and understand that we may take a step down here in the next quarter, and I really appreciate the guidance of A little bit of further compression until we moderate into the middle half of next year. But just taking that into account and appreciating the fact that You still plan to grow earning assets. Do you feel like you can grow NII again in 2024? Or does it really feel like more of a leveling out in NII and maybe just trying to protect the margin?

Speaker 1

So certainly, Will, this is Tom. So certainly, earning asset growth will drive an increase year over year in net interest income, but that But the headwind from compression in net interest margin, we're not going to be

Speaker 6

able to overcome. No, I

Speaker 1

mean, I think when you look at the dynamic in the industry, right, I mean, That's the challenge for the industry heading into 'twenty four is the compression that we've experienced and that we're facing in terms of net interest margin. Mathematically, you can't get there. You're going to be off year over year in a meaningful way in terms of net interest income. If I heard your question correctly, I hope I answered it. And if not, please follow-up.

Speaker 7

That was helpful. But it just it feels like it'd be a challenge to maybe see that high single digit growth again in 2024, not trying to Hash 20 24 guidance out now or anything, but I guess that was really more the precedent of the question of if we keep seeing more margin compression, but You'll still be growing the earning asset base as well. But no, that was helpful. But I guess just to lead into it, Assuming maybe the revenue environment stays somewhat more challenged next year, do you have offsets maybe on the expense With the understanding that you guys are fairly active with your Fit to Grow initiative, how do you feel or what is the outlook For where you feel expenses could go in the next year or so?

Speaker 4

I don't know if I can give you a full year. I can tell you We are very intensely focused on expenses. We, as noted in the Fit to Grow initiatives, I mean, we've invested in technology. We've invested In technology, we've invested somewhat in talent and people like equipment finance and Atlanta office, etcetera. So We have done some things that we think over time really enhance shareholder value that have and there has been some other factors in there, some of The legal resolution that we completed here this quarter, etcetera, that we think there are definite opportunities for Cost savings moving into 2024.

Speaker 4

And you could one off things like we changed Disaster recovery sites, that's $1,000,000 savings. We renegotiated some big vendor contracts that are additional savings and the like. So those things combined with some third party spends and then we have some employee initiatives that we're working on as we Speak today that we also think will help that combined with some of the efficiencies of technology That have been implemented. We definitely moving into 2024 feel the cost saving side is a big opportunity for us And we are in position to take advantage of that and we'll likely at our Q4 call give A real thorough guidance on where we think we'll be for the year 2024.

Speaker 7

Okay. That's great. That's helpful. And Tom, I just wanted to clarify, did you mention earlier that you expect total deposit cost next quarter in the 2.12% range And a 39% total beta? I just wanted to clarify.

Speaker 3

That's correct.

Speaker 1

That's correct, Will.

Speaker 7

Okay. Great. Okay. Thanks for pointing that out. And lastly, I know you guys mentioned buybacks are fairly unlikely in near term.

Speaker 7

Although just with where the stock trades at today and capital remaining in a healthy manner, just Curious what the thought process is on maybe not taking a more serious consideration or look at it, it just feels like it could be an opportunity for you guys right now.

Speaker 1

Yes. Well, as we've said consistently in the past, I mean, our highest priority in terms of capital Deployment is supporting lending growth. And as we've demonstrated, we've continued to have opportunities in that area. And so I think that will be the case. I mean, I think we've given pretty strong guidance in the last couple of earnings calls that in all likelihood, we would not be engaging in repurchase activity for the remainder of 23, and

Speaker 4

I think that's still the case.

Speaker 7

Okay. That's fair enough. Thank you, guys.

Speaker 4

Thank you. Thanks, Will.

Operator

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

Speaker 4

Thank you again for joining us for today's Q3 call. We look forward to catching up at the end of the 4th Quarter in January and appreciate your interest in Trustmark. Have a great week.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.

Powered by Quartr
Earnings Conference Call
Trustmark Q3 2023
00:00 / 00:00