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01/10 15:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed sentiment. Strong financial performance is offset by concerns about margins and income pressures. Loan and deposit growth are positive, but interest rate sensitivity and non-interest income headwinds are concerning. The dividend announcement is positive, but lack of share repurchase in 2023 is a negative. The market cap suggests moderate volatility, leading to a neutral stock price prediction.
Net Income (Q4 2023) $36.1 million, representing diluted earnings per share of $0.59. This reflects strong performance despite a challenging environment.
Net Income (Full Year 2023) $165.5 million, representing diluted earnings per share of $2.70. This was a record year for net income after tax.
Loans Held-for-Investment Increased $140.3 million (1.1%) linked quarter and $746.5 million (6.1%) year-over-year. Growth was driven by commercial lending, equipment finance, and real estate secured loans.
Deposits Grew $467.8 million (3.1%) linked quarter and $1.1 billion (7.8%) year-over-year. Growth was supported by public fund balances and personal balances.
Net Interest Income (Q4 2023) $140 million, resulting in a net interest margin of 3.25%. This reflects a decrease of $1.9 million linked quarter due to liability rate and volume pressures.
Net Interest Income (Full Year 2023) $566.3 million, up 11.7% from the prior year, with a net interest margin of 3.32% (up 15 basis points year-over-year). Growth was driven by asset rate and volume accretion.
Non-Interest Income (Q4 2023) $49.8 million, an increase of 10.3% year-over-year. Growth was driven by insurance commissions and service charges on deposit accounts.
Non-Interest Income (Full Year 2023) $207 million, representing 27.2% of total revenue. Growth was driven by insurance commissions and service charges, offset by declines in bank card fees and mortgage banking.
Revenue (Full Year 2023) $759.8 million, an increase of 8.6% from the prior year. Growth was driven by net interest income and non-interest income.
Adjusted Non-Interest Expense (Q4 2023) $134.8 million, a linked quarter increase of $700,000 (0.5%), driven by an increase in FDIC assessment expense.
Adjusted Non-Interest Expense (Full Year 2023) $527.9 million, an increase of 5.9% from the prior year, reflecting investments in growth initiatives and technology.
Net Charge-Offs (Q4 2023) $2.2 million, representing 7 basis points of average loans. Credit quality remains solid.
Net Charge-Offs (Full Year 2023) $8.2 million, representing 6 basis points of average loans. Credit quality remains strong.
Provision for Credit Losses (Q4 2023) $7.6 million, driven by loan growth, adjustments to qualitative factors, and macroeconomic forecasts.
Provision for Credit Losses (Full Year 2023) $27.3 million, reflecting loan growth and macroeconomic conditions.
Common Equity Tier 1 Ratio 10.04%, a linked quarter increase of 15 basis points, reflecting strong capital levels.
Total Risk-Based Capital Ratio 12.29%, a linked quarter increase of 18 basis points, reflecting strong capital levels.
Net Income: Trustmark reported a record net income of $165.5 million for 2023, with $36.1 million in Q4.
Loan Growth: Loans held-for-investment increased by $140.3 million (1.1%) quarter-over-quarter and $746.5 million (6.1%) year-over-year.
Deposit Growth: Deposits grew by $467.8 million (3.1%) quarter-over-quarter and $1.1 billion (7.8%) year-over-year.
Net Interest Income: Net interest income for 2023 totaled $566.3 million, up 11.7% from the prior year, with a net interest margin of 3.32%.
Non-Interest Income: Non-interest income for 2023 was $207 million, representing 27.2% of total revenue, with a 10.3% year-over-year increase in Q4.
Credit Quality: Net charge-offs for 2023 totaled $8.2 million, representing 6 basis points of average loans. The allowance for loan losses was $139 million.
Capital Ratios: Common equity Tier 1 ratio was 10.04%, and total risk-based capital ratio was 12.29%.
Capital Deployment: Trustmark prioritized organic loan growth and potential M&A, with a $50 million share repurchase program authorized for 2024.
Operational Efficiencies: The company expects to see efficiencies from growth initiatives and cost containment in 2024, with adjusted non-interest expense projected to increase by low-single digits.
Net Interest Margin (NIM): The company anticipates continued pressure on net interest margin due to competitive deposit environment and potential Federal Reserve rate cuts. This could lead to a decline in net interest income, especially in the first quarter of 2024.
Deposit Costs: Deposit costs are expected to increase in the first quarter of 2024, driven by competitive pressures. The ability to reprice deposits downward in response to potential rate cuts may lag, impacting profitability.
Loan Repricing: Approximately $600 million of fixed-rate loans are expected to reprice in 2024, with rates lower than current levels, potentially reducing interest income.
Credit Quality: Non-accrual loans have increased slightly, and while reserves are deemed adequate, there is a potential need for additional provisioning if credit quality deteriorates.
Mortgage Banking Revenue: Mortgage banking revenue has declined due to a challenging interest rate environment, including a 31.6% drop in mortgage loan production in 2023. This trend may continue to pressure non-interest income.
Securities Portfolio: The securities portfolio is expected to decline by high-single digits in 2024 due to non-reinvestment of portfolio cash flows, which could impact overall asset yields.
Economic and Market Uncertainty: The macroeconomic forecast and potential Federal Reserve rate cuts introduce uncertainty, which could affect loan growth, deposit costs, and overall financial performance.
Loan Growth: Trustmark expects loan growth of mid-single digits during 2024.
Deposit Growth: Deposits are expected to grow low to mid-single digits in 2024.
Securities Balances: Securities balances are expected to decline by high-single digits based on non-reinvestment of portfolio cash flows, subject to changes in market interest rates.
Net Interest Income: Net interest income is expected to decline low-single digits in 2024, reflecting continued earning asset growth and stabilizing deposit costs, resulting in a full-year net interest margin of approximately 3.2% based on market implied forward interest rates.
Provision for Credit Losses: The total provision for credit losses, including unfunded commitments, is dependent upon future loan growth, the current macroeconomic forecast, and credit quality trends. Net charge-offs requiring additional reserving are expected to be nominal based on the current economic outlook.
Non-Interest Income: Non-interest income is expected to grow mid-single digits, reflecting modest improvement in mortgage, continued growth in insurance, and some improvement in the wealth management business.
Non-Interest Expense: Adjusted non-interest expense is expected to increase low-single digits for the full year 2024, subject to the impact of commissions in commission-based businesses.
Capital Deployment: Trustmark will continue a disciplined approach to capital deployment with a preference for organic loan growth and potential M&A, while maintaining a strong capital base to implement corporate priorities and initiatives.
Quarterly Cash Dividend: The board declared a quarterly cash dividend of $0.23 per share, payable on March 15 to shareholders for record as of March 1.
Stock Repurchase Program: Trustmark's Board of Directors authorized a stock repurchase program effective January 1, 2024 through December 31, 2024, under which $50 million of Trustmark’s outstanding shares may be acquired. However, the company did not repurchase any of its common shares during 2023.
The earnings call reveals strong financial metrics, such as increased net interest margin and reduced criticized loans, alongside optimistic guidance on loan growth and deposit costs. The company plans to maintain its share repurchase program and sees M&A as a growth opportunity. However, increased expenses due to hiring and lack of specific guidance on share repurchases are minor concerns. Given the company's small-cap status, these factors suggest a positive stock price movement of 2% to 8% over the next two weeks.
The earnings call presents a mixed sentiment. Strong financial performance is offset by concerns about margins and income pressures. Loan and deposit growth are positive, but interest rate sensitivity and non-interest income headwinds are concerning. The dividend announcement is positive, but lack of share repurchase in 2023 is a negative. The market cap suggests moderate volatility, leading to a neutral stock price prediction.
The earnings call showed strong financial performance with an increase in net income and net interest income, a rise in tangible book value, and positive capital ratios. The guidance was optimistic, with growth driven by non-CRE categories and a focus on high-growth markets. The Q&A revealed confidence in profitability and NIM expansion, despite some uncertainty regarding Fed rate cuts. The shareholder return plan includes consistent share repurchases, adding to positive sentiment. Given the market cap, the stock is likely to have a positive reaction, falling in the 2% to 8% range.
The earnings call presents a mixed picture: positive financial performance with increased net income and EPS, stable credit quality, and a solid dividend. However, concerns about competitive pressures, regulatory issues, and interest rate volatility introduce uncertainties. The Q&A highlighted management's vague responses to critical questions, suggesting potential risks. The share repurchase program and dividend increase are positive, but not enough to offset the uncertainties. Given the mid-sized market cap, the stock is likely to experience a neutral movement, with minimal impact over the next two weeks.
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