Earnings Call Transcript - TRMK Q4 2022

Operator, Operator

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Fourth 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. Joey Rein, Director of Corporate Strategy at Trustmark.

Joey Rein, Director of Corporate Strategy

Good morning. I'd like to remind everyone that a copy of our fourth quarter earnings release, as well as the slide presentation that we will discuss 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 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, I'd like to introduce Duane Dewey, President and CEO of Trustmark.

Duane Dewey, President and CEO

Thank you, Joey, and good morning, everyone. Thank you for joining us. 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. Trustmark had a solid fourth quarter, as reflected by record loan growth, expansion of the net interest margin, solid performance in our insurance and wealth management businesses, and strong credit quality. As we previously disclosed, Trustmark agreed to a settlement that, pending court approval, will resolve all current and potential future claims relating to litigation involving the Stanford Financial Group that began in 2009. In the fourth quarter, Trustmark recognized litigation settlement expense of $100.75 million. With this charge, Trustmark reported a fourth quarter net loss of $34.1 million or $0.56 per diluted share. The settlement reduced fourth quarter net income by $75.6 million or $1.24 per diluted share. For the full year, Trustmark’s net income totaled $71.9 million, representing diluted earnings per share of $1.17. We believe the settlement is in the best interest of Trustmark and our shareholders as it eliminates risk, ongoing expense, and uncertainty. With this issue behind us, we're focused on the future and the opportunities ahead. Excluding the litigation settlement expense, Trustmark's net income in the fourth quarter totaled $41.5 million, or $0.68 per diluted share, and $147.5 million for the full year 2022, representing diluted earnings per share of $2.40. Now, let's look at our financial highlights in a little more detail by turning to Slide 3. At December 31, loans held for investment totaled $12.2 billion, an increase of $618 million linked-quarter, and $2 billion or 19.1% from the prior year. Deposits totaled $14.4 billion, an increase of $12.5 million from the prior quarter, and a decrease of $650 million or 4.3% year-over-year. Revenue in the fourth quarter totaled $191.8 million, up 1.6% linked-quarter. For the year 2022, revenue totaled $700 million, an increase of $60 million or 9.3% from the prior year. Net interest income totaled $150 million in the fourth quarter, an increase of $11 million or 7.9% linked-quarter. Non-interest income totaled $45.2 million and represented 23.6% of total revenue in the fourth quarter. Non-interest expense in the fourth quarter, excluding the litigation settlement, totaled $130.5 million or a 3% increase linked-quarter. For the year, non-interest expense, excluding the litigation settlement, totaled $502.5 million, a 2.7% increase from the prior year. Credit quality remains solid this quarter as net charge-offs represented six basis points of average loans. The allowance for credit losses for loans held for investment represented nearly 400% of total non-accrual loans, excluding individually evaluated loans. Non-accrual loans declined 2.9% in the fourth quarter, and total non-performing assets declined 4.1%. Including the impact of the settlement, we continue to maintain strong capital levels, with a common tier one capital ratio of 9.74%, and a total risk-based capital ratio of 11.91%. The board declared a quarterly cash dividend of $0.23 per share, payable March 15th to shareholders of record on March 1st. At this time, I'd like to ask Barry to provide color on loan growth and credit quality.

Barry Harvey, Chief Credit and Operations Officer

I'll be glad to, Duane, and thank you. Turning to slide four, loans held for investment totaled $12.2 billion as of 12/31, an increase, as Duane mentioned, of $618 million linked-quarter, or 5.3%, and $2 billion or 19.1% for the prior year. We're extremely excited about the Q4 loan growth that occurred in almost every category. We do expect to continue solid loan growth through 2023. Our loan portfolio continues to be well diversified based on both product type, as well as geography. Looking at slide five, Trustmark’s CRE portfolio is 93% vertical, with 61% existing and 39% construction land development. Our construction land development portfolio is 81% construction. The bank's owner-occupied portfolio has a nice mix between real estate types, as well as industries. Turning to Slide 6, the bank's commercial portfolio is well diversified, as you can see across numerous industry segments, with no single category exceeding 12%. Moving now to slide seven, our provision for credit losses for loans held for investment was $6.9 million in the fourth quarter, primarily attributed both to loan growth and the weakening in the macroeconomic forecast. The provision for credit losses for off-balance sheet credit exposure was $5.2 million in the fourth quarter, primarily driven by increases in unfunded commitments and the macroeconomic forecast. At 12/31/2022, the allowance for credit losses on loans held for investments totaled $120.2 million. Looking at slide eight, we continue to post solid credit quality metrics. The allowance for credit losses represents 0.99% of loans held for investment and nearly 400% of non-accrual loans, excluding those that are individually analyzed. In the fourth quarter, net charge-offs totaled $1.7 million or 0.06 of average loans. Net charge-offs for the entire year totaled only $920,000, or 0.01%. Both non-accruals and non-performing assets remain near historically low levels.

Duane Dewey, President and CEO

Thank you, Barry. Now turning to the liability side of the balance sheet, I'd like to ask Tom Owens to discuss our deposit base and net interest margin.

Tom Owens, Chief Financial Officer

Thanks, Duane, and good morning, everyone. Looking at deposits on Slide 9, deposits totaled $14.4 billion at December 31, a $12.5 million increase linked-quarter, and a $650 million decrease year-over-year. The linked-quarter increase was driven by an increase in public fund balances, more than offset by a decline in non-personal balances, while personal deposit balances were essentially flat. The year-over-year decrease was driven primarily by decreases in non-personal and public fund balances, with only about 10% of the decrease driven by personal deposit balances. So, the granularity of our deposit base remains strong. Our cost of interest-bearing deposits increased by 51 basis points from the prior quarter to 71 basis points. We continue to maintain a favorable deposit mix, with 28% of our balances in non-interest-bearing deposits and 64% in checking accounts. Turning our attention to revenue on slide 10, net interest income FTE increased by $11 million linked-quarter, totaling $150 million, which resulted in a net interest margin of 366, representing a linked-quarter increase of 16 basis points. Higher loan balances and yields contributed about $24 million and $6.2 million, respectively, of lift linked-quarter. That was partially offset by a $13.3 million increase in deposit costs and a $6.6 million increase in net borrowing expense. Drivers of the continued expansion during the quarter in net interest margin included continuing lags in realized deposit betas, ongoing Fed rate increases, and a continued shift in earning asset mix. Turning to slide 11, the balance sheet remains well-positioned for higher interest rates, with substantial asset sensitivity driven by loan portfolio mix, with 49% variable rate coupon. During the fourth quarter, we continued implementation of the cash flow hedging program to manage our asset sensitivity by adding up $150 million notional of interest rate swaps, with a weighted average maturity of 4.1 years, and a weighted average receive fixed rate of 3.64%, which brought the portfolio notional at year-end to $825 million, with a weighted average maturity of 3.4 years, and a weighted average received fixed rate of 3.10. The year one increase in net interest income to immediate interest rate shocks remains asset-sensitive at about 2% for a 100 basis-point shock, about 3% for a 200 basis-point shock, and about 5% for a 300 basis-point shock, with the benefit in years two and beyond increasing as the balance sheet continues to reprice. Turning to slide 12, non-interest income for the fourth quarter totaled $45.2 million, a $7.4 million linked-quarter decrease and a $16.8 million decrease for the full year. The linked-quarter and full-year changes are principally due to lower mortgage banking revenue, which was substantially offset by increases in other line items for the full year. Service charges on deposit accounts totaled $11.2 million in the fourth quarter, a linked-quarter decrease of $156,000, while increasing $8.9 million or 26.8% for the full year. Bank card and other fees totaled $8.2 million in the fourth quarter, a linked-quarter decrease of $1.1 million, while increasing $1.4 million or 4.2% for the full year. And insurance revenue totaled $12 million in the fourth quarter. That's a normal seasonal decline of $1.9 million, while increasing $5.2 million or 10.7% for the full year. For the fourth quarter, non-interest income represented 23.6% of total revenue, continuing to demonstrate a well-diversified revenue stream. Now, looking at slide 13, mortgage banking. Mortgage banking revenue totaled $3.4 million in the fourth quarter. That’s a $3.5 million decrease linked-quarter, driven by a $1.3 million decrease in gain on sale, and a $1 million increase in negative hedge ineffectiveness, which brought negative hedge ineffectiveness for the quarter to $3.6 million. For the year, mortgage banking declined by $35.4 million, driven by reduced gain on sale. Mortgage loan production totaled $391 million in the fourth quarter, a decrease of 23% linked-quarter. Reduction for the full year totaled $2.1 billion, a decrease of 24% year-over-year. Retail production remained strong in the fourth quarter, representing 83% of volume or about $325 million. Loans sold in the secondary market represented 46% of production, while loans held on balance sheet represented 54%. The majority of loans going into the portfolio consist of 15-year and hybrid arms, while we've continued to sell, rather than retain our conforming 30-year loan originations. Gain on sale margin increased by about 8% linked-quarter from 181 basis points in the third quarter to 196 basis points in the fourth quarter. And now, I’ll ask Tom Chambers to cover non-interest expense and capital management.

Tom Chambers, Chief Accounting Officer

Thank you, Tom. Turning to Slide 14, you'll see a detail of our non-interest expense broken out between adjusted, other, and total. Adjusted non-interest expense was $129.8 million in the fourth quarter, a linked-quarter increase of $4.3 million or 3.4%. We had non-recurring expenses during the fourth quarter totaling $3 million related to severance from the FIT2GROW organizational restructuring initiative, early lease termination expense related to closed branch offices, and legal fees. Excluding these non-recurring expenses, non-interest expense increased $1.2 million or 1% linked-quarter. As noted on slide 15, Trustmark remains well-positioned from a capital perspective. At December 31, our capital ratios remain solid, with a common equity tier one ratio of 9.74%, and a total risk-based capital ratio of 11.91%. Trustmark did not repurchase any of its common shares during the fourth quarter. During 2022, Trustmark repurchased $24.6 million or approximately 789,000 shares of its common stock. The Board of Directors previously authorized a new stock repurchase program, under which up to $50 million of its outstanding common shares may be acquired through December 31, 2023. This authorization replaces the prior stock repurchase program, which expired on December 31, 2022. While our capital ratios declined linked-quarter, driven by the combination of robust loan growth and the Stanford litigation settlement, our capital ratios remain substantially above well-capitalized, and our capital position is ample to implement our corporate priorities and initiatives. Although we maintain $50 million of authority during 2023 under our board-authorized stock repurchase program, we are unlikely to engage in stock repurchase in a meaningful way. For the time being, our priority for capital deployment is through organic lending. Back to you, Duane.

Duane Dewey, President and CEO

Great. Thank you, Tom. Turning to Slide 16, let's review our outlook. Let's look first at the balance sheet. We're expecting loans held for investment to grow mid to high single digits for the year. Note, our Atlanta office is now staffed with a very solid production team, including our equipment finance organization, which will start to contribute in the coming quarters. Security balances are expected to decline by high single digits based on the non-reinvestment of portfolio cash flows. Deposit balances are expected to grow mid-single digits full year, driven by promotional campaign activity. Moving on to the income statement, we're expecting net interest income to grow low to mid-single digits, reflecting flat full-year net interest margin based on current market-implied forward rates. The provision for credit losses, including unfunded commitments, is dependent upon future loan growth and current macroeconomic forecasts, and is expected to be above 2022 levels. Net charge-offs that require additional reserving are expected to be nominal, based on the current outlook and portfolio. From a non-interest income perspective, we expect service charges and bank card fees to remain stable, reflecting the elimination of consumer NSF fees and the implementation of a transactional de minimis level on consumer checking accounts as we previously announced, as well as by reduced customer derivative activity. Mortgage banking revenue is expected to stabilize at the prior year level. Insurance revenue is expected to increase high single digits full year, with wealth management expected to increase mid-single digits. Non-interest expense is expected to increase mid-single digits for the year. This reflects general inflationary pressures and is subject to the impact of commissions in mortgage insurance and wealth management. We remain intently focused on our FIT2GROW initiatives, as discussed throughout 2022. As noted, we've expanded our team of talented production staff, added a significant new line of business, expanded in growth markets, all of which will begin to contribute in 2023. Additionally, we've invested in technology across the franchise to better serve customers and become more efficient. We've continued to optimize our retail franchise with the closing of 12 offices and the deployment of new ATM and ITM technology. We believe this focus and investment positions Trustmark to provide profitable growth into the future. Finally, we will continue a disciplined approach to capital deployment, with a preference for organic loan growth, potential M&A, and opportunistic share repurchases. With that overview of our fourth quarter financial results and outlook commentary, we'd like to open the floor for questions.

Operator, Operator

We will now begin the question-and-answer session. The first question will be from Catherine Mealor from KBW. Please go ahead.

Catherine Mealor, Analyst

Thanks. Good morning. I wanted to see if we could first just dive into the lower net interest income guide. If you could just provide a little bit of commentary on how you're thinking about cumulative deposit betas and maybe the trajectory of the margin over the course of the year to get to that lower net interest income guide. Thanks.

Tom Owens, Chief Financial Officer

Sure. So, good morning, Catherine. This is Tom Owens, and thank you for the question. So, as I think we indicated on last quarter's call - well, let me say it this way. With respect to our plan for deposit growth for ’23, we're approaching it. We've built that plan from the bottom up based on the team here internally. As we said on last quarter's call, we continue - our forecast is based on market-implied forwards, which continued at the Fed Funds Rate topping out about 5% here by the end of the first quarter, and basically staying there for the remainder of the year. We're continuing to model a full cycle beta by the time we get into late third, early fourth quarter of 2023, of about 50%. And so, that means our interest-bearing deposit costs that we're modeling for later in the year rises to about 2.5%. And as I said, we've built that from the bottom up, the plan. When I look at it from the top down, it is consistent with our historical actual experience. I mean, it's been a long time now since the Fed Funds Rate was at 5%. But when I look at the historical experience for our company, as well as the broader industry, the results make sense. The other aspect of it is we had very robust loan growth in 2022. We anticipate continued follow-through momentum per the guide that Duane gave. Our loan to deposit ratio in the quarter rose to 85%. So, we're really focused on maintaining strong liquidity. We really would rather that loan to deposit ratio not go above 90%. And with the trajectory of loan growth relative to deposit growth, we're really focused on beginning to accelerate deposit growth. We essentially were flat for the quarter. We would like to accelerate deposit growth as we come here into ‘23. The other thing I'll say, I'll state the obvious, which is, it's really an unprecedented environment in terms of you look at the headwinds facing the industry in terms of if you look at the Fed H8 report and you see continuing month-over-month declines in the aggregate deposit base in the United States, it is a challenging environment as the Fed continues to reduce accommodation and withdraw liquidity from the system. So, there's a lot of uncertainty obviously in the forecast. The other thing I'll say is here in the first quarter is when we're really beginning to launch promotional deposit campaigns in earnest. We started to do that a bit in December, and that was a contributor, the promotional activity to us being able to maintain essentially flat personal deposits during the quarter, which we're very encouraged by. And so, when you look at the competitive landscape right now for deposits, liquidity is obviously top of mind in the industry. This is our best estimate at this time in terms of those increases in interest-bearing deposit costs, and thereby the pressure on net interest margin. Obviously what it implies is, you think about the pattern of linked-quarter increases in net interest margin in 2022, what our forecast implies, the guide implies is that we're going to experience linked-quarter declines in net interest margin here in ‘23.

Catherine Mealor, Analyst

And as you think back to - I feel like the perception, or at least looking at the margin trajectory for our estimates and consensus, still had not a lot of expansion from here, but still a fairly stable margin, which assuming you were more asset-sensitive then, it seems like you are. What do you think is the biggest surprise or the biggest change to this net interest margin trajectory versus maybe where you were last quarter? And is there - begs the question, is there anything else besides just the funding costs coming in higher? Is there anything else just to kind of think about as you've changed your perception of asset sensitivity?

Tom Owens, Chief Financial Officer

Well, it's a good question, and I don't know that we have changed our perception of asset sensitivity. So, for example, if you look at our loan yield beta, which continues to be in the neighborhood of 50%, and when you look at the numbers that we publish and that we file in the call report in terms of our net interest income at risk, those numbers reflect the kind of betas that we're talking about here as our baseline scenario. So, Catherine, there really hasn't been a change in perception internally. I would say the change fundamentally, again, in the industry, I mean, if you look at the broader industry, I go back to the H8, what you see there is, the run rate is for double-digit growth in loans in the industry. We are part of that and experiencing very robust loan growth. You have seen a flatlining and now an outright decline in the deposit base in the industry. To me, the difference, if there's a difference in perception externally about Trustmark, the difference is us really wanting to be proactive as we come into ‘23 here to make sure that we have a trajectory on deposits that can keep pace with loan growth and maintain strong liquidity.

Duane Dewey, President and CEO

Yes, Catherine, I would add in - this is Duane. I would add in just what Tom's last comment is. I do think that loan growth that continued in the latter half, or really accelerated in the latter half of 2022, and what we look out into 2023, still have expectations, and like noted earlier, with some of the investments we made in new talent and new business line, we think we have still solid expectations on the loan growth side, which I think then that emphasizes the need to keep pace on the deposit side. It's an extremely tight - it's a tightening liquidity and a competitive environment for deposits. I don't know that I would term that necessarily a surprise, but we're certainly monitoring, and that's what we're expecting as we move into 2023.

Tom Owens, Chief Financial Officer

Yes. The last point I'd make, Catherine, again, I would just reemphasize how challenging the environment is and the uncertainty, right? I mean, it's just that - it's that confluence of unprecedented set of circumstances really. So, we're like a lot of our peers in the broader industry, kind of figuring out a tactically, as well as strategically on the deposit side as we go.

Catherine Mealor, Analyst

And you could argue last cycle, if you looked at your last cycle beta of the proxy, you didn't have this level of growth last cycle. And so, that intuitively makes sense that your beta is higher, just given your growth outlook is higher as well.

Tom Owens, Chief Financial Officer

Yes, and I think I've said this before, and I'll make this point again. I think it's really important. I talked about the last time the Fed Funds Rate was at 5% in ‘06. I mean, I can argue both sides of it, right? If you look back then when the Fed Funds Rate was 5%, it was a much longer cycle, and it took longer to get to 5%. And so, when you think about it this way, this is a much shorter cycle. You could certainly argue that, well, hey, don't you think your effective beta is going to be less? And I think that's a legitimate argument. The flip side is, the what now 16 years that have passed since the last time the Fed Funds Rate was at 5%, and the changes in technology that we all hold in the palm of our hands, and the ability to frictionlessly and you could do it quickly, you could do it cost effectively, essentially moving your funds around in search of higher yield, and when I think about that, that argues for a higher realized beta. To me, you put those two things together, and I think that our estimates are reasonable. But again, I'd emphasize, those are our best estimates at this point in time.

Catherine Mealor, Analyst

Got it. That's all really helpful. And then maybe just one other question on service charges. I was surprised that your guidance for service charges is to be stable year-over-year. I was expecting more of a decline just with the NSF fee changes. Any - so I just want to clarify that kind of stable over the full year 2022 level of service charges.

Duane Dewey, President and CEO

No, I think you accurately reflected the NSF changes and de minimis change, reflects about 3-ish million, maybe a little more than that. What we're seeing, if you'd note in the fourth quarter, we were stable to down slightly, but feel with increased activities and what we're seeing economically, we’re still fairly positive on a stable outlook, Catherine.

Kevin Fitzsimmons, Analyst

Hey, good morning, everyone. I was hoping to - on the expense guide for mid-single digit growth, I was hoping, number one, to just clarify what the base for that is. Is it - would I look at this adjusted non-interest expense for full year ‘22 of about $498 million? And then digging into a little bit, because it sounds like other than the $100 million settlement, it seems like there was some lumpiness this quarter, which maybe we don't pull out and flag when we're talking about core, but maybe is not going to be run rate going forward. So, I'm just trying to look at expenses from both of those angles. Thanks.

Tom Chambers, Chief Accounting Officer

So, Kevin, this is Tom Chambers. If you look at what we're expecting going forward, yes, you're right, we had had a little lumpiness in the fourth quarter. Our core or our adjusted non-interest expense, we typically pull out significant non-recurring, non-routine items, which obviously was the litigation settlement this quarter and ORE and some amortization of intangibles. What we feel next year is mid-single digits with continued investment in technology and salary and benefits. That we have a competitive environment with, and those types of line items going forward.

Duane Dewey, President and CEO

And, Kevin, I'd add a little bit to the fourth quarter, and as we noted in our comments, there were some things that cumulatively are significant, but individually, like legal expenses and some severance costs, some branch closure costs and that sort of thing, that individually are probably not material, but cumulatively did impact the fourth quarter. As we look into the start of 2023, we feel that those are non-recurring items. And then the flip of that is general inflationary kinds of things that we've commented on and everybody seems to be commenting on, higher employee costs and other general inflationary things. So, it kind of takes us to that mid-ish, lowish to mid-ish single digit kind of increases for the full year 2023.

Kevin Fitzsimmons, Analyst

Okay. Thanks, Duane. And just to clarify, is that - is the base for that, that $498.4 million roughly for full year? If you don't have it handy, that's fine.

Duane Dewey, President and CEO

Hold on one sec. I think that's accurate though.

Tom Owens, Chief Financial Officer

I think that's right as well.

Duane Dewey, President and CEO

$498.4. Yes, correct.

Kevin Fitzsimmons, Analyst

Good. Okay. And then just one follow up for - we had a lengthy conversation a few minutes ago about net interest income and how you're being proactive on deposits and you don't want to take the loan to deposit ratio over 90%. It's an unprecedented environment, and I totally recognize all that. Can I - have you all looked at the alternative of maybe dialing - like dialing back the loan growth a bit so that you don't have to chase as aggressively for the deposit and still keep the loan to deposit ratio where you're at? I recognize that you're not seeing a lot of credit stress right now, but you've acknowledged that it's a pretty uncertain economy and environment. When we look at loan growth outcomes for next year, there's obviously a demand issue, but we've also heard some banks just saying, hey, we’re stepping away from areas like commercial real estate or certain sectors. So, I know that's a lot to throw at you, but I'm just - how did that conversation go among yourselves about, hey, we want to grow net interest income, but one way to do it is the marginal of our stable and just grow loans less aggressively?

Tom Owens, Chief Financial Officer

Thanks. Yes, so great question, Kevin. This is Tom. I'll start and then I'll ask Barry to weigh in a little bit. We have absolutely had that discussion internally. We have absolutely looked at that. I'll let Barry speak to the lending side, but it's an environment that creates opportunity, as you just said, where you have some of our peers, some of our competitors pulling back a bit. And so, of course, we're evaluating each of those loans, loan by loan, on a return basis. Of course, we're thinking about our marginal cost of funds and the potential of repricing the deposit base to a certain extent as we really lean in here to try and accelerate deposit growth. Yes, we have discussed that. We have thought about that. We continue to think about that. One of the things that we're doing is, there's always going to be loans at the margin. When you look at the return on them, they are truly marginal, right? And in this kind of environment, we're absolutely being disciplined. And what that means is that some of that marginal growth is not going to happen, right? But for us, it creates opportunity. The other thing Barry will talk about too is probably relationship continuity. In this environment where we have existing relationships or prospective relationships where their current bank or banks that they work with are pulling back, creates opportunities for us. So, I'll just let Barry kind of pick up from there.

Barry Harvey, Chief Credit and Operations Officer

Yes, and Kevin, I'll just echo some of the thoughts that Tom referenced. Every day, when we're looking at deals, we are scrutinizing those deals, not only from a credit standpoint, but probably more closely than ever from the standpoint of from a return on investment and from an ROE perspective. We are passing on deals that are lower on the pricing spectrum that were maybe acceptable 12 months ago. In our environment today for what we're challenged with trying to raise deposits and a little bit of uncertainty, by knowing what it's going to take to get there and how quickly the deposit growth can keep up with loan growth, we’re trying to be very selective in terms of the profitability of the transaction standpoint. Obviously, always the credit aspect of it is first and foremost. We don't expect to grow as we've been, and Duane indicated, we don't expect to grow as fast in loan growth in 2023 as we did in 2022 for a variety of reasons. Being more selective on pricing is definitely one of those. We do have categories that we've been avoiding. Those are the same categories that we've been avoiding for quite a few years, just because of some uncertainty around those. On the flip side of those situations, there's a little bit lessening of competition in some categories of lending. Pricing is getting better. Structure has definitely gotten better. Those things are all positive. We view this somewhat similar to what we saw in the middle of 2020, where there was lessening of competition. Because of that, the deal structure itself improved greatly and the pricing improved, and we see that going on today. We want - for the right customers, we want to make sure we take full advantage of that. Also, as has been alluded to, we do have a new line of business equipment finance out of our Atlanta office, along with some additional CRE and C&I lending staff that we've added there that are doing a great job. There are going to be some additional opportunities coming our way that we'll need to manage. So, there's a combination of things. One, we're trying to be more selective from a ROE or return on investment standpoint, with every deal we look at. We do expect to have good solid loan growth as we've guided, and then - but we're trying to be as selective as we can be, making sure that the pricing is in line with what we're paying for those deposits to fund it with.

Tom Owens, Chief Financial Officer

And Kevin, I would just add one other point, again, and I just - I'm going to try and reemphasize this point. In this environment, it is such an unprecedented environment, we have a team internally that we meet every morning at eight o'clock, and we're looking at reports on yesterday's activity in terms of deposits and how we're doing in terms of our promotional deposit activity, both in terms of volume and cost, and the extent to which we're attracting new funds versus repricing the back book. Today is January 25th. We're obviously early in the quarter. We’re early in the year. We’re going to continue to evaluate and recalibrate as we go. And I just want to bring it back to the point that Barry just made, right? We're considering the marginal cost of growing the deposit base versus the returns of continuing to grow the loan book at a robust pace. We're evaluating that in real time and will adjust, and I'll just reemphasize, the guidance that we're giving you today reflects our best estimates today. What I emphasize to that team every morning is the need to be nimble and to recalibrate accordingly. So, I just want to make that point again.

Kevin Fitzsimmons, Analyst

All that's great and very appreciated. Thanks very much, guys.

Operator, Operator

The next question is from Dave Bishop from Hovde Group. Please go ahead.

Dave Bishop, Analyst

Hey, good morning, gentlemen. Turning to credit for the guidance there, just curious, I know a lot of it is data-dependent in terms of the macroeconomic forecast, but when we talk about the - or you talk about the provision for loan losses, should we think about that just in terms of as it relates to loans held for investment, or inclusive of trends in terms of unfunded commitments? Just some clarification in terms of how that guidance, what that incorporates.

Barry Harvey, Chief Credit and Operations Officer

And Dave, this is Barry. Yes, definitely both, because this quarter's a good example. We had a lot of good production on our CRE side. Within that commercial construction bucket, there's a variety of obviously types of projects we have there. But nonetheless, within that commercial construction bucket, as we put on those new opportunities, we do reserve for them fully based upon the eventual - based upon exposure. So, with that in mind, there is an impact immediately to those projects going on the books. As we are able to continue with a nice solid level of production, we'll continue to have both a need for reserving, obviously, on the funded, as well as the unfunded aspect of it. I mentioned earlier loan growth, the macroeconomic environment, portfolio mix in terms of the types of credits we're putting on the books, the level of unfunded commitments, and the length of maturities. As the speeds diminish or pick up, obviously that has an impact on the provisioning as well. So, all those different aspects will, in fact, impact not only the provisioning for the funded book, but for the unfunded book as well.

Tom Owens, Chief Financial Officer

So, this is Tom. So, the portfolio is throwing off about $25 million to $30 million per month. So, let's call it 20 to 25. So, you're between $360 million to $400 million or so. I would say a $300 million decline in the book value. Of course, you get some twinges in the carrying value because of changes in AOCI for the FS portfolio. Given the loan growth that we've had, our intention at this point is to run off the portfolios through year-end to generate liquidity to pay down wholesale borrowings. We had grown the securities portfolio substantially during ‘20 and ’21 with our abundant excess liquidity. Now, obviously, with the very robust loan growth we've had, we'll continue to run that off for the time being.

Operator, Operator

The next question will be from Carl Doirin from Raymond James. Please go ahead.

Carl Doirin, Analyst

Hi, good morning. Thank you for taking my questions. Most of them have already been asked, but I'll ask a couple of follow-ups. Just in terms of either guidance or margin, do you have maybe an embedded assumption for the non-interest-bearing concentration, or how low that could get? I noticed it was down this quarter, probably almost a couple of hundred basis points.

Tom Owens, Chief Financial Officer

Yes, it was down - this is Tom Owens. It was down this quarter, and we’re projecting modest continued decline there. As I said, one of the big wild cards this year, and again, not just for Trustmark, but for the industry, is the extent to which we experienced that mix change from non-interest-bearing into time deposits. Historically, by the time you get up to a Fed Funds Rate of 5% historically in the industry and here at Trustmark, you end up with your deposit mix being somewhere in the range of 40% time deposits. We came into the year high single digits. I would think it will easily double that, if not more, over the course of the year. It remains to be seen how much of that comes out of non-interest-bearing. The other thing about it, Carl, is, as I said in my prepared comments, most of the decline in deposits in 2022 was a function of non-personal or business accounts. We saw a tremendous increase in just businesses holding liquidity. It seems like a fair amount of that has run its course now in terms of reversal, and that was certainly part of what you saw in the fourth quarter. So, it remains to be seen how that plays out as well. It seems to be stabilizing a bit.

Barry Harvey, Chief Credit and Operations Officer

Carl, this is Barry. I'll be glad to, and you're exactly correct. We did give that guidance. That is what we've been experiencing. When we got into the first part of December, obviously credit and treasury were having many conversations about whether it was going to manifest itself or not, because it hadn't at that point to the degree we anticipated and how we had kind of thought Q4 would work in terms of actual loan growth, specifically in CRE. We had about - just in round numbers, we had about $250 million worth of projects that when we resurveyed the lenders in the middle of December, they indicated there was a little bit of delay, and they would be leaving us not in Q4 of 2022, but during 2023 for the most part. There may have been one project that was going to be extended out a little farther. Those projects are all going to leave us and bake into our loan growth assumptions for 2023, but they did slide a quarter or two into 2023. So, that resulted in a much stronger fourth quarter than we anticipated, but it really didn't change our outlook for 2023 because they are going to resolve themselves and leave us during 2023 based upon the last information from the ballroom.

Carl Doirin, Analyst

All right, perfect. Thank you. And then maybe one last thing for me, just, I think, obviously, you paused share repurchase activity in 4Q, and I'm assuming it's due to the settlement. Just how active do you plan to be going forward?

Tom Owens, Chief Financial Officer

So, Carl, this is Tom Owens. As Tom Chambers said in his prepared comments, it's really unlikely given the present circumstances as best we can foresee that we'll be engaging in meaningful share repurchase activity. The robust loan growth that we're experiencing is really our preferred form of capital deployment.

Carl Doirin, Analyst

All right. Okay. Thank you. That's all for me.

Operator, Operator

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

Duane Dewey, President and CEO

Well, thank you again for joining us this morning. We hope this information has been helpful, and we look forward to connecting again at the end of the first quarter, and are very excited to move into 2023 and tackle the challenges ahead. So, we'll talk to you again at the end of the first quarter.

Operator, Operator

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