Good morning, ladies and gentlemen, and welcome to Trustmark Corporation Third Quarter Earnings Conference Call. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Corporate Strategy at Trustmark.

Good morning. I'd like to remind everyone that a copy of our third quarter earnings release and the presentation that will be discussed on our 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, and 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 our other filings with the Securities and Exchange Commission. At this time, it's my pleasure to introduce Duane Dewey, President and CEO of Trustmark.

Thank you, Joey, and good morning, everyone. Thank you for joining us again this morning. With me are Tom Owens, our Chief Financial Officer; Barry Harvey, our Chief Credit and Operations Officer; and Tom Chambers, our Chief Accounting Officer. Trustmark's momentum continued to build in the third quarter. Our performance reflected diversified loan growth and stable credit quality, along with cost-effective core deposit growth. During the quarter, we continued to implement organic growth initiatives and added established customer relationship managers and production talent in key markets across our franchise. These investments are designed to further enhance financial performance and shareholder value. Today, in our presentation, I will provide a summary of our performance in the quarter and discuss our forward guidance before moving to your questions. Now turning to Slide 3, the financial highlights. From the balance sheet perspective, loans held for investment increased $83 million or 0.6% linked quarter and $448 million or 3.4% year-over-year. Our linked quarter growth was diversified and led by C&I, other loans and leases, municipal loans and other real estate secured loans. Our deposit base grew $550 million or 3.4% linked quarter. Noninterest-bearing deposits grew at a faster clip of 5.9% linked quarter or by $186 million. The total cost of deposits in the quarter was up 1.84% or 4 basis points linked quarter, very effective cost-effective growth, very cost-effective growth in core deposits. Trustmark reported net income in the third quarter of $56.8 million, representing fully diluted EPS of $0.94 a share, up 2.2% from the prior quarter and 11.9% from the prior year. This level of earnings resulted in a return on average assets of 1.21% and a return on average tangible equity of 12.84% in the quarter. Net interest income expanded 2.4% to $165.2 million, which produced a net interest margin of 3.83%, an increase of 2 basis points from the prior quarter. Noninterest income totaled $39.9 million, up 0.1% linked quarter and 6.3% year-over-year. Noninterest expense increased $5.8 million or 4.7% linked quarter and included approximately $2.3 million in nonroutine items, including the establishment of a $1.4 million reserve for a single property in ORE and $900,000 in professional fees related to the conversion to a state banking charter and other corporate strategic initiatives. Salaries and employee benefits increased $3.2 million linked quarter, principally due to annual salary merit increases effective July 1, increased annual incentive accruals and the cost of additional customer relationship managers and production talent associated with our organic growth strategies. Credit quality remains solid. Net charge-offs were $4.4 million and included one individually analyzed loan totaling $3.1 million, which was reserved for in prior periods. Net charge-offs represented 13 basis points of average loans in the third quarter. Net provision for credit losses was $1.7 million, and the allowance for credit losses represents 1.2% of loans held for investment. Again, very solid credit performance. From a capital management perspective, each of our capital ratios increased during the quarter. The CET1 ratio expanded 18 basis points to 11.88%, while our total risk-based capital ratio increased 18 basis points to 14.33%. During the quarter, we repurchased $11 million of Trustmark common stock. In the first 9 months of the year, we repurchased $37 million of stock. We have $63 million in repurchase authority for the remainder of this year. This program continues to be subject to market conditions and management discretion. Tangible book value per share was $29.60 at September 30, up 3% linked quarter and 10.1% year-over-year. The Board also declared a quarterly cash dividend of $0.24 per share payable December 15 to shareholders of record on December 1. Now let's focus on our forward-looking guidance for the year, which is on Page 15 of the deck. As you can see, we're tightening the range of our guidance for net interest margin and affirming all other previously provided guidance for the full year. We affirm our guidance and expect loans held for investment to increase mid-single digits for the full year '25. Similarly, we affirm our guidance of low single-digit growth in deposits, excluding brokered deposits for the full year '25. There is no change in guidance regarding securities as they are expected to remain stable as we continue to reinvest cash flows. We've tightened the anticipated range of the net interest margin for the full year. The range is now 3.78% to 3.82% for the year compared to our prior of 3.77% to 3.83%. We have affirmed our expectations for net interest income to increase in the high single digits for 2025. From a credit perspective, the provision for credit losses, including unfunded commitments is expected to continue to trend lower when compared to full year '24. This is, of course, an affirmation of the prior guidance. There is no change in our noninterest income and noninterest expense guidance. Noninterest income from adjusted continuing operations for the full year '25 is expected to increase mid-single digits, while noninterest expense is expected to increase mid-single digits as well. We will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion, M&A and other general corporate purposes depending on market conditions. As noted earlier, we do have remaining availability in our Board-authorized share repurchase program that we will consider opportunistically. You may have noticed the addition of 2 new slides in our deck on Pages 17 and 18. I encourage you to take a look at the progress we've made in improving our financial performance over the last several years. We're very committed to maintaining that momentum here moving forward. With that, I'd like to open the floor to questions.

The first question comes from Stephen Scouten with Piper Sandler.

You mentioned some expense growth related to new hires in your release. Can you provide more details about your year-to-date hiring, what you observed in the recent quarter, and your plans for future hiring, especially in Houston, Birmingham, and Atlanta, as you have discussed before?

Right. Great question. And I'll start, Stephen. We hired approximately 29 new associates in the third quarter alone. 21 of those 29 new associates are production related, either direct producers or direct support of production. And those across all business units from commercial real estate, equipment finance, corporate banking, commercial banking and the markets you noted are absolutely the markets of focus. Houston, Birmingham, Huntsville, Alabama, the Panhandle of Florida, South Alabama and Atlanta. And the 21 are included in each one of those markets. So we consider that a major focus for the organization here moving forward. I don't know that we'll hit those levels in every quarter. We likely fourth quarter will not reach that level of new associates. But moving into the coming year or two, we're very focused on that organic strategy in those key markets.

Okay. And would you expect to see some incremental expense build in the fourth quarter kind of related to the recent hiring levels? It seems as though to get to the increase in mid-single digits year-over-year, there needs to be a little bit of an uptick in the expense base from this quarter, but I want to make sure I'm thinking about that right.

Stephen, this is Tom Chambers. Yes, that's true. What hit us in the third quarter for the additional new hires was about $400,000. And of course, that's because we're hiring throughout the quarter, fully loaded, we would expect that to increase during the fourth quarter.

I will add to that, Stephen. There are some, we'll call them, nonroutine parts of that expense because there are recruiting fees. There's onetime signing bonuses and things like that, that are mixed into that. So at a run rate level, Tom noted the amount, but I would say there were some nonroutine things that would be included in that total. Additionally, as you know, I mean, the expectation is we're adding the talent to produce revenue as well. And so we will factor that into coming revenue projections.

Sure. That makes sense. And then lastly for me, just around the share repurchase. I think you said previously maybe $10 million to $15 million a quarter is the right way to think about that. But just kind of curious, given how bank stocks have been trading and just how rapidly you're building capital, if you would think about upsizing that range potentially and kind of how you think about that earnback on the repurchase versus potential M&A?

Stephen, this is Tom Owens. I'll start. So yes, we've been very pleased at our ability to continue to deploy capital via repurchase while supporting loan growth and continuing to drive nice accretion to our regulatory capital ratios. I think we're up 18 basis points linked quarter. Certainly, as you suggest, as our capital levels continue to build, it may well be the case that as we enter '26 that we'd probably lean more proactively into share repurchase depending on how loan growth plays out. I think for the fourth quarter, it's reasonable to assume that we'll remain on the pace that we've been, which is about $50 million for this year.

The next question comes from Michael Rose with Raymond James.

There's clearly been some mergers and acquisitions within some of the markets you operate in. I was wondering if you could discuss some of the opportunities, particularly regarding hiring as we move forward. Do you think a mid-single-digit growth rate for next year is something we should consider, given the opportunities ahead and the new hires you've made?

I'll start. Michael, absolutely. We believe that every M&A deal in the markets we operate in presents opportunities. This applies both to hiring and customer acquisition. We view it this way. It's a competitive environment. The deal announced recently has significant overlap in our markets, and we are already competitors. We've been competing for a long time, so it comes with the territory. I don't expect any substantial change from a competitive standpoint, but we do see it as an opportunity for us. This applies across almost all the markets we serve today. So, I believe there are good opportunities ahead.

Okay. Helpful. And then maybe just stepping back, I do appreciate the new slide you put in. Obviously, there's been some real good progress due in part somewhat to the sale of the insurance business and the restructure a couple of years ago. What's kind of the next evolution here, I guess, is what I'm trying to ask. Where do you think some of those numbers could go? And maybe if you can discuss some of the puts and takes of kind of getting to whatever the new numbers as we move over the next few years might be? Like what are some of the opportunities you guys see? And then what are some of the headwinds you guys think you're going to face?

So Michael, this is Tom Owens. I'll start. First and foremost, when you look at those slides, I believe the fourth quarter will likely continue those trends. Regarding the longer term and the next evolution, we are focused on driving competitive growth in PPNR, which we think mid-single digits is reasonable. As we head into 2026, based on our strong run rate profitability, the deployment of capital will be assessed, particularly as loan growth develops, which is our preferred way to deploy capital. With our CET1 approaching 12%, we can likely deploy capital at a more proactive rate in 2026. This year, we are on track to retire about 2% of our outstanding shares. If we combine mid-single-digit growth in PPNR with a low single-digit decline in EPS outstanding, we can expect high single-digit growth in EPS as a baseline. I'll let Duane and possibly Barry discuss what opportunities may arise from there.

Well, I would add to that. And as we already discussed in the prior question, it allows better financial performance, all in all, allows us to invest in that organic strategy. And so we're very focused. We're very focused on key growth markets. We believe we operate already in very significant growth markets in our footprint. And we're focused in all business lines really at expanding in those key markets. And the improved financial performance allows us the ability to do that a little more aggressively than we had in prior years. So we're very optimistic there. A market like Huntsville, Alabama, that would be considered one of the top growth markets in the country, we hired a fantastic group of new bankers in that market. Very, very excited about them joining Trustmark. We've added teams across a couple of the other markets I already mentioned, Atlanta, Birmingham and so on. So the improved financial performance allows us to invest in that organic strategy. And then the last comment I'd say, of course, there's a lot of activity right now. We're very aware of what's going on on the M&A front around us. There are discussions across the board up and down. So we're staying in tune with that. In a lot of cases, that creates additional opportunities. So we're on it. We like the organic strategy, though, at this point.

The next question comes from Feddie Strickland with Hovde Group.

Just wanted to kick it off with a clarification question on expenses. It sounded like you might be guiding towards a little higher expenses in the fourth quarter. Is that the case? Because I thought you might have that $900,000 of nonroutine professional fees and maybe the ORE expense come down a little bit.

This is Tom Chambers. Yes, we expect, obviously, those nonrecurring items should fall off, but we're still guiding to mid-single-digit growth year-over-year in expenses. So if you look at our fourth quarter, we will have a slight increase in expense or expected expense without nonrecurring items.

Got it. And then just shifting gear to the margin. Just given the asset-sensitive balance sheet, is it fair to assume we see a little bit of compression from here or near term and maybe a little bit of recovery just as deposits catch up down the road?

This is Tom Owens. I'll take that. It's sort of a yes and no on that. First of all, you saw we printed a 2 basis point linked quarter increase in net interest margin for the quarter from 3.81% to 3.83%. We've talked in the past about the ongoing repricing of the back book fixed rate loans for both loans and securities providing a bit of a tailwind. And I think that's what you saw with the 2 basis point increase in loan yield quarter-over-quarter. We are slightly asset sensitive. And so when the Fed cuts, we have to be pretty proactive in terms of cutting deposit rates to maintain net interest margin on a linked-quarter basis. And clearly, that is our intention. We anticipate that the Fed will cut tomorrow or later today and then again in December. And then I think we have 3 cuts penciled in for 2026, ending the year at about 3% at the top end of the range. So yes, in the short term, there can be some headwind. It just depends on how depositors and competitors in the market react to those cuts that we make in deposit rates. But we are optimistic about maintaining NIM in this general area of 3.80% to 3.83%. When I look at analyst estimates for the fourth quarter, I think I see something like 3.83%, which is the number we just presented. And then when I look at full year estimates for '26, I think I see a median estimate there of 3.82%. And so I think those are reasonable numbers. I think that there might be some choppiness quarter-to-quarter, as you suggest. But as we manage our way through it, on average, I think we would see net interest margin continuing to be in about this range where we are now. And I'll make the point, we're at about 3.80% year-to-date. And so I think we're stabilizing here, but it might be choppy quarter-to-quarter.

Just one other quick question. I was just wondering if you could talk about trends in classified and criticized loans. The provision was a little lower this quarter. So I was kind of curious if either of those were flat or maybe even went down a little bit.

Sure. Frank, this is Barry. I was just going to mention that we did have a nice trend down of about $49 million in criticized loans this quarter. That gives us a trend down of about $123 million for the first 3 quarters of this year. So very encouraged by that, especially given the fact that we kind of were flat in the first quarter. So that $123 million has really come in the last 2 quarters. And so we're very encouraged by that positive trend. Like most of our peer banks, we trended up all during 2024, criticized, classified. And then we flattened out in the first quarter, felt like that was an inflection point. It turned out to be. And then we've been moving down at a nice pace, both Q2 and Q3 of this year. So we're very encouraged by that.

The next question comes from the line of Catherine Mealor with KBW.

Just one follow-up on the margin. Just if we can kind of look at some of the components, it was interesting to see deposit costs increase a little bit this quarter. And I know we've got the cut and maybe another one today coming. But can you talk a little bit about where you're seeing deposit cost trends and maybe how you're thinking about the beta over this next round of cuts relative to what we've seen over the past round of cuts? And as kind of growth improves and maybe competition picks up, if it's fair to model maybe a little bit more conservative beta moving forward.

Sure, Catherine. This is Tom Owens. The increase in net interest margin from the previous quarter builds on what I mentioned earlier regarding our asset sensitivity. We have a strong deposit base, which helps us navigate interest rate cycles. Since we're somewhat asset sensitive, we proactively adjust deposit pricing to sustain net interest margins, which requires careful balancing. We aim to lower deposit rates without pushing away profitable customers. In the third quarter, we experienced some pushback from depositors as we cut rates. We have a system in place to accommodate our most profitable customers when they push back against rate reductions. That primarily influenced the increase seen this quarter. We also ran a proactive promotional campaign for deposits, which helped manage our loan-to-deposit ratio down from 89% to a more desirable level. However, the deposit growth in our sector didn't quite keep pace with overall loan growth, creating a competitive atmosphere. As mentioned in my previous answer, we anticipate a drop in fourth-quarter deposit costs from 1.84% to 1.72% reflecting our planned deposit rate cuts due to recent Fed actions. The degree to which this is accepted depends on our depositors and the competitive landscape. Therefore, it's possible that results may vary from quarter to quarter. Nevertheless, I believe we can maintain an average net interest margin of around 3.80% in the coming quarters. Regarding deposit betas, I expect costs could drop to about 1.25%, indicating a beta of around 40%, consistent with past cycles when the Fed was raising rates.

Very helpful color and perspective. And then maybe the other side of it, on just loan yields, can you talk about where incremental new loan pricing is coming on today?

Catherine, this is Barry. The situation varies across different categories. Excluding commercial real estate, things have remained quite stable, with little change noted. However, competition within the commercial real estate sector has intensified compared to earlier this year and last year. The positive aspect is that there’s significantly more deal flow now. When comparing our production over the last four quarters to the previous ones, the fourth quarter of '24 and the first three quarters of this year show a substantial increase in production on the commercial real estate side. Nevertheless, pricing has become more competitive. This includes aspects like spreads and origination fees, which have been under pressure for quite some time. The competitive landscape is also shifting, with more participants re-entering the market, which has been the case all year. There are many more opportunities now, and we have been involved in more deal pitches. While we have secured a few more deals than in the last four quarters, it's not as significant considering the volume of opportunities available. The deals we are securing do have tighter spreads and fees within the commercial real estate sector, while other categories remain largely consistent in terms of competition and the rates we can yield.

The next question comes from the line of Gary Tenner with D.A. Davidson.

A lot of my questions have been asked. But I wanted to just follow up on your comments around the recruiting in the quarter. As you think of the kind of producer or producer supporting hires, any kind of particular segment that you're leaning into? I think you talked that it's pretty varied geographically. But from a segment perspective, anything you're particularly leaning into or anything you're particularly focused on the deposit side in terms of the hires you made.

In general, we are focused on specific geographic markets that offer the best growth opportunities. I've mentioned markets such as Houston, Atlanta, Birmingham, Huntsville, the Panhandle, and South Alabama, as well as Jackson, Mississippi. In these areas, we are concentrating our business lines. So far, we've had notable success in the equipment finance sector, where we've added producers and experienced good growth, which we are pleased about. Our team has built a strong strategy in this area. Among the 21 new hires, we have spread them evenly across commercial real estate, corporate banking, and commercial banking. Despite the challenging market, we have also found opportunities in mortgages by adding a few mortgage producers in regions where we previously lacked presence. Overall, our approach is quite diversified across all business lines while maintaining a focus on specific growth markets.

I appreciate the comments there. And then just on the deposit side, given the guide you gave for the fourth quarter, in terms of the public funds deposits, which are 13%, 14% of your total deposits, what's the repricing timing of that segment?

This is Tom. So with respect to the public fund balances, by and large, those are administered rates or floating rates, even indexed down. It's a really small percentage of those that are bid on some fixed rate for any extended period of time.

The next question comes from the line of Christopher Marinac with Janney Montgomery Scott.

Tom, you had touched a little bit on funding in some of the earlier questions, but I kind of wanted to ask at large. I mean, what is your thought about initiatives to fund the balance sheet the next couple of years? Should we expect to see the loan-to-deposit ratio around the sort of high 80s? Do you think it can trend differently? And I guess just is M&A a part of that funding strategy in the big picture?

There’s a lot to unpack here, Chris. It’s a great question. To start, loan growth has outpaced deposit growth earlier in the year, leading our loan-to-deposit ratio to rise to 89%. We aim to keep that ratio in the mid-80s and would prefer not to see it increase into the 90s. Therefore, you can expect us to maintain our liquidity. We were pleased with how our promotional money market program performed in the third quarter. We ran a similar campaign in the third quarter of 2024, but from the fourth quarter of 2024 through the second quarter of 2025, we were less aggressive with promotional deposit campaigns. In terms of balancing deposit growth with loan growth, we’re confident in our abilities to achieve that. I'm considering a more consistent promotional approach for our next campaign, and we have several proactive techniques we can implement. The strategies we’ve used so far have been conservative and cost-effective for acquiring new balances. We believe we can fund loan growth efficiently. Now, I’ll turn it over to Duane to discuss how this ties into our perspective on acquisition opportunities.

Yes. I want to mention a couple of points. One aspect I did not address when responding to Gary's question is that our production team has also focused on treasury management. We have enhanced our treasury management expertise and all of our relationship managers now have deposit growth targets. Tom, you might have the figures for commercial growth in the third quarter, but we've seen strong commercial deposit growth, which aligns with our strategy. Our organic strategy is concentrated on building full relationships, including those related to deposits. In the third quarter, we are quite satisfied with the progress made in this area. Additionally, as we onboard new talent, both loan growth and deposit growth remain central to our strategy. Regarding mergers and acquisitions, yes, deposits, core deposits, and core funding are all vital to the equation. As I mentioned earlier, there is considerable discussion happening in the market. We are committed to executing our organic strategy in a focused and disciplined manner while also remaining alert for the right partnership opportunities as they arise. I would emphasize that deposits are a key consideration in this context.

And I would just follow up then, Chris, to Duane's point. You look at the $370 million of deposit growth we had in the third quarter, it was pretty evenly balanced between personal and commercial. Commercial was something like $180 million or so. And then of the personal, that was pretty evenly mixed between the promotional campaign that I mentioned and then just fundamental organic growth.

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

Thank you again for the questions, and thank you for being on the call. We look forward to getting back together at the end of the fourth quarter, and hope you have a great rest of the week. Thank you.

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