Trustmark(TRMK) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for Q4 2025 totaled $57.9 million, with diluted EPS of $0.97, reflecting a 3.2% increase linked-quarter and a 5.4% increase year-over-year [4] - Full year net income reached a record $224.1 million, with diluted EPS of $3.70, and adjusted continuing operations net income increased by $37.8 million, or 20.3% in 2025 [4] - Return on average assets was 1.21% and return on average tangible equity was 12.97% [4] - Loans held for investment increased by $126 million, or 0.9% linked-quarter, and $584 million, or 4.5% year-over-year [4] Business Line Data and Key Metrics Changes - The traditional banking business drove continued loan and deposit growth, with a strong net interest margin of 3.81% in Q4 [6] - Mortgage banking business saw increased production and significant improvement in profitability, while wealth management revenue reached an all-time high [3] - Non-interest income for Q4 totaled $41 million, up 3.3% linked-quarter, and for the full year, it totaled $164 million, representing 20.5% of total revenue [7] Market Data and Key Metrics Changes - Deposit base declined by $131 million, or 0.8% linked-quarter, primarily due to a decrease in public fund deposits [5] - Year-over-year, deposits increased by $392 million, or 2.6%, driven by growth in commercial and personal balances [5] - The cost of total deposits in Q4 was 1.72%, a decrease of 12 basis points linked-quarter [5] Company Strategy and Development Direction - The company plans to continue its disciplined approach to capital deployment, focusing on organic loan growth, potential market expansion, and M&A opportunities depending on market conditions [12] - The company aims to maintain momentum into 2026, with guidance for loans and deposits to increase mid-single digits [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong credit performance, with net charge-offs for 2025 at 13 basis points of average loans, and expects normalization of credit costs [20] - The company anticipates net interest margin to be in the range of 3.8%-3.85% for 2026, with net interest income expected to increase mid-single digits [11] Other Important Information - The board announced a 4.2% increase in the quarterly dividend to $0.25 per share, bringing the full year dividend to $1 per share [10] - The company repurchased $80 million of common stock during the year, including $43 million in Q4 [6] Q&A Session Summary Question: How many new hires were made in Q4 and how does M&A activity affect talent acquisition? - In Q4, the company made approximately 13 new production hires across various markets, continuing to focus on organic expansion and talent acquisition [16] - M&A activity creates opportunities for recruitment and the company is monitoring market disruptions closely [17] Question: Can you provide context on the normalization of credit costs? - Management expects net charge-offs to stabilize around 13-15 basis points of average loans, with significant improvements in credit quality noted in 2025 [20] Question: What are the key levers impacting guidance for 2026? - Loan growth is identified as a key driver, with capital deployment interrelated to supporting solid loan growth and share repurchase [27] Question: What is the expected cadence of expense growth throughout the year? - Expense growth is expected to be steady, with merit increases typically occurring in the second half of the year [38] Question: Is there a scenario where the company may not pursue M&A due to market disruptions? - Management acknowledged that market disruptions could lead to a focus on organic growth rather than M&A, depending on the opportunities available [50]