TRMK - Earnings call transcript Q3 2018

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Operator

Good morning, ladies and gentlemen, and welcome to the Trustmark Corporation's Third Quarter Earnings Conference Call. At this time, all participants are in listen-only mode.

Following the presentation this morning, there will be a question-and-answer session. [Operator Instructions].

As a reminder, this call is being recorded. pleasure Mr. my now is to introduce It Joey of Investor Trustmark. Relations at Rein, Director go Please ahead.

Joseph Rein

remind a of slide everyone third to the call like I’d that available is site release be on on well at this will morning quarter Relations copy as as Web that the section presentation Investor discussed our our earnings our of trustmark.com.

would of Act turn course make a that statements release forward-looking call Host, the due We Gerry uncertainties, and and meaning and which over may Securities of you our CEO of filings Reform statements Litigation management President the to call, earnings of Securities of these other During may I’ll our the the with from in Private caution At the to our differ like Commission. XXXX. number and to are actual risks within forward-looking materially Trustmark. Exchange outlined time, this results

Gerard Host

X and for Officer; this morning, and Good Credit million Trustmark With the Louis with Tom Chief diluted Joey reported me along Owens, morning per of Bank share thanks CFO; Harvey, or XX.X income are Treasurer. everyone, Greer, Barry quarter, net period joining our to a when $X.XX us. of an represents to the of presentation. on our I’d compared update brief are same in increase Page provide which third in the on year. which prior with the X.X% like you results, financial

year-over-year. X.X% balance the X% advancements growth, investment control. regarding sheet make XXX XX held We loan and million prior increased from and to or management, for continue Loans quarter million or expense

asset fourth margin, and interest X.X% fees effort its million, increased Barry interest up in improve ORE in acquired to on run-off million. acquired growth was to consecutive X.X% the XXX and quarter X.X% and both better ask totaled linked focus some FTE expenses like to amortization mix. credit and year-over-year quarter excluding linked as which income optimize quarter total manage to X.X% core from quarter to securities and continue increased quality Credit reflecting to We $XXX processes to net a of earnings and color X.X% $XXX our Net loans, investment evident year-over-year. excluding Revenue, be million. loans, an X.X% previous quarter Barry? Efforts to would expansion. I intangible exclude Harvey for Trustmark, expenses add the and to quality. continues were expense total loan maturing

Barry Harvey

Gerry. Thank I’d you. to, be glad

number the X, growth you Just that and looking year-over-year had $XXX or million. we quarter to see, going is can million $XX as Page roughly during loan of

have some get solid we the and I So we’ll continue to know steady of talk questions, the about loan the growth we around loan details growth itself. to when

X, as measures our you see credit can Page onto quality we’ve Looking there. got

of this about measures look and On classified the We us at maybe credit quarter up a criticized, on that and the proud during we’re outside pleased in I’m NPLs, all historical levels Q&A. and but very bit low talk detail flat we’re moving We’re specifics sure, year-over-year. results. I’m quality later all little of direction event some loans, trends; ticked we’ll in dues, the about for right our talk we’ll sure those very some with one when you past

we moving glad in proud perspective. loans we NPLs outstanding well. million a so $XX we’re occur. from that which going book making ORE were actually that were were up The many we and to on category, those assets, nonperforming Those a and see we bit glad are out down see be energy move an the that’s little more even of that did as and out is On to classified went by some that ticked we of down a though of result profit to

talk we’ll The be million Obviously, little X, a the a Gerry? during was of a yield acquired the of quarter. some drop roughly roughly Moving of about between yield is X.X%. that off X.X% expect is basis, on On $XX We go-forward recoveries. that the X.X% we bit in Slide saw about by recoveries, of XX%. balances and book. to used to

Gerard Host

interest the Thank Great. guess deposit now turning I and And Barry. you, you the side, the base please to Tom would liability discuss net margin.

Tom Owens

Happy to Gerry.

XXX reflecting to declined the year. X.X% from Page deposits during public quarter Total X, X% deposits total the deposit normal So prior XXX increased or million million seasonality. fund turning or

Our rate basis a Fed’s cycle-to-date points representing XX% the relative of and cost of to XX rose deposits hike. quarter the interest-bearing beta XX% for

Page to net our the a interest which third from an X.XX%, FTE in the of up of X.X% quarter, interest X, totaled points quarter, the income net in margin resulted Turning increase revenue on basis from X quarter. prior attention XXX.X million prior

our loans, acquired X and driven X.XX%, the update continued And optimization quarter provide sheet prior the basis interest up from will now Excluding points from the income. margin by prior year, was net balance up an on Louis noninterest basis initiatives. points primarily XX

Louis Greer

Thanks, Tom.

all card income just a income total, XX.X% total decrease strong linked mortgage fees Looking an third of adjustment of acquired linked-quarter can fair Linked-quarter noninterest and When million mortgage, our revenues the excluding about see on income of quarter sale the including noninterest about value $XXX,XXX. for held at basis quarter on remains and about slightly the you loans you down had to mortgage at quarter. for a the management, you with revenues, really for quarter $XX and strong volumes lines totaled represents mortgage. look look up good total of there which over due million. interest quarter, When to so can for represents see that In charges, table, loans. were income most in were at noninterest service XXX for you a wealth bank slight

under expenses, XXX well little controlled Page a million. excludes to again intangible with noninterest looking amortization expense and core which remain Turning totaled X they and ORE noninterest

little main driver investments as were at revenues increased The mortgage and million. with increase over the commissions last the similar associated of I think in was to our guidance increased technology. business quarter well brokerage $XXX as quarter previous in right a

with pleased the were will we expense on remain focused management. we to-date, While progress

We branches, line and expect the will customers. to realign expenses in channels core enhance to to our delivery remain fourth we’d quarter. our And make third continue with investments quarter

perspective quarter fourth that XX. tax we Next, We when I’ll under the return, mention for little our to our XXXX in normal our effective well tax capital true-up less file rate was rate than fourth due you annual our noted on XX.X% remain I’ll a quarter, XX%. which tax tell expect XX.X% Page the a remain to as from positioned to we range. effective

organic ample most on including have our support and program. focused growth deployment, of to We capital are Gerry? repurchase the capital attractive methods share

Gerard Host

of this found you, financials I Thank you’ve our third Louis. helpful. hope quarter discussion

October go on I’d and questions, On Slide Trustmark we XX. Michael on Florida this briefly XXth, Before damages. struck to touch like on to hurricane significant the Panhandle is recent Hurricane impact the the the of causing

first and say our needed. most have and me associates food are XX all County been with safe provide and and and Bay as of we them shelter contacted important, worked helped Let to have

assistance which was XX XXth, and with all exposure As Trustmark million areas Georgia. uninsured risk adequately reasonable as include Florida September a damage this estimates $XXX in now counties as counties designated potential to $XXX well of disaster are the and to assess of contact million, in to bank. ongoing of loans XX in and balance to and the offer FEMA X,XXX had Efforts establish borrowers to the these of

Six the and not with County the and our telephonic structural. have have. our remained mobile, as the eight was any storm banking that customers. two is our business for retail this reopen bank we operation, Bay the address throughout expect be majority branches cosmetic ensuing we of process Regarding and soon recovery branches remaining happy the Bay for power following will and all as online all branches ATMs questions damage to restored. open County you At time, storm the to would Trustmark and reopened of

Operator

now will the question-and-answer [Operator We Instructions]. begin session.

from Brad. comes with Sandler Brad ahead, question Go Milsaps first O’Neill. Our

Brad Milsaps

Good morning. Hi.

Gerard Host

Good morning, Brad.

Brad Milsaps

up are say? feel the the pressure XX deposit first also Tom beta you or it so linked there. about goal that go to next over beta there question the my outlook Are quarters? What XX% so points more to securities basis quarter, deposit for your up down Maybe your relates Interest-bearing costs roughly might how the it is NIM. starting you how does were looks And like from assets. XX% thinking to about or on you’re several or competitors earnings close getting as

any Just see if to to alteration wanted that? there’s

Tom Owens

for the you Thank questions. Tom. is This Brad. Hi,

would consistent what with first been say is betas modeling thinking. all, acceleration pretty I of that deposit in continued and So we’ve the

the in That second beta the pointed first and you out in quarter. was my from XX% and up we in essentially had As in talking was XX% I quarter. third XX% the indicate, quarter points the as

the XX%. get are as fourth modeling for And quarter. into we’re Our current projections modeling then actually XXXX, XX% we’re you

in more XX%. year-end one to in then interest-bearing 'XX Fed deposit cycle-to-date that in funds two hikes X% that and projecting the rate 'XX; by in and take to about would June one December, We’re take in one would here our beta hike December Fed 'XX

that past, Your yes, to optimization, other sheet intend end. in do we question as it balance through as we’ve discussed relates to year the

we’re in We’ve not about I to at think there a or target quarter, talked continue at seen. lower. remains if end the year you about to average third Whether trend XX%. on looked were be XX%; we by of

possibility the or that But continuing to at into of of that first XX%. to be second about optimization considering initiative point. seen target arrive the of We quarter remains at are year next maybe this that

basis quarter played of much we’ve discussed, as X that pretty So lift, that as been the per and guiding X expected. lift points out to to from we’ve has initiative

points the NIM, from about sheet in XX is the that optimization. balance of points basis And is of from you the look at at about linked basis increase X points year-over-year basis NIM core optimization. lift X in if of basis look you core points, XX sheet that quarter balance If

been or XX% it’s So so.

Brad Milsaps

kind most just couple came of allude we had loans on this but parts? like then if in a the of just That’s could get color reversal you a it a you helpful. of provisioning quarter you parts, your a curious out but moving your Tennessee follow of And kind alluded could of little of just the region, Mississippi provision more Mississippi, moving remarks if looked on your Also curious in Perfect. those us in charge-offs give kind out just to to color it release. times with came Barry, to few most so little very the problem you

Barry Harvey

be glad I’d Sure. to Brad.

On side, those we credits were credits non-acquired provisions to had $X.X alluded you’ve the two as loans. let for that million provisioning us worth $X.X million the for made by reality the two of to, provision we that In themselves.

So obviously two would not those we credits, had quarter. a of provision the have outside for

specific how of is sense a to you credits. gives it that think those I So

One fully for of specific it previously additional which about required. And through, those out couple the and expect sizable. we credits that Tennessee to And Texas those quarter that hopefully as during the is for Texas nonaccruals a had that’s we that no well. then had originated And and well. gone company a came so we was but will question, be Tennessee. operates reserve the through be resolved impaired be credit our one that through will a that resolved loan fully one talked those couple provisioning during will a be credit were Tennessee was The to resolved used additional of also and of a QX be market loan quarter as during has of through as fully for that’s in states fourth the made of we where expect you indicated which we’ve our it reserves bankruptcy, that on established and most was liquidation, that new the then provisioning that other gone credit in quarter and

the to charge-off the been able reserved again and That off. did were as impaired a for get net side was X.X. bit ago were on that credit remaining to we was had a several charged but that loan. loan over charge-offs have to one worth of then it, charge-off for And there. we charge-offs $X.X portion which little relates historically. resolution we’ve million paydown, able was were where of it was energy quarter we an quarters get there about we As Obviously, up We the an our

quarter credit, energy any one we charged we for not would that the have commercial without off, credit had So well. that charge-offs as

Brad Milsaps

Okay. Thanks, Barry.

that I’m X.X clear, correctly? two the much and so million understand the provision quarter those two loans. a it was required Just – credits all I this provision against totaled Did pretty

Barry Harvey

as bank a provision was and was provision for whole The X.X non-acquired. so our and with X.X dealing the [ph],

related both the So intention some those you those full can sense those credits resolved for is that be two our during plus credits to QX. of and to all provision

we forward be dealing going So with those. won’t

Brad Milsaps

I’ll in Thanks. back the queue. Okay, great. hop

Operator

Mannix next with Go Our Daniel. question comes from James. Daniel Raymond ahead,

Daniel Mannix

morning. Good guys. Hi,

Gerard Host

Good morning, Daniel.

Daniel Mannix

to Just the quarter. the layers the in off growth start by want back loan on slight peeling in moderation

So like due the Also was healthy could how be it much to of pretty looks would elevated year. say I and C&I positive that growth, looking you at it exclude actually for energy if was paydowns?

talked You’ve about the loans. past C&I in unattractiveness of relative the

can you’re So potential you opportunities? seeing about and far of as talk what as there Thanks. pockets pricing

Barry Harvey

Barry. and of glad off starting to. this be Daniel, about the growth I’d there. with in waterfront general guess is loan talking I just kind cover

million. it’s see, $XX you As

where perspective, GAAP as on X/XX. see see We you’re is where at when side strong that where have where focus we the look to are you growth balances is the going categories a really also you from categories. occurs continue growth have What growth. CRE other And into and some of to – some on why migration that the obviously in you it matters

that residential and is commercial homebuilders loan strong. in we’re mind, with growth So seeing in that the very

side growth have loan still growth from were perspective. family we those of growth a categories homebuilder on and one-to-four commercial $XXX we have strong between the the two construction up So side. million strong We

a Now we as as into growing attractive where have they’re that complete the commercial construction standpoint grew, residential from we buckets. in construction existing But way CO, the they move with both obviously down homebuilders. well we’re in of still projects and very

We Those multifamily, at going one-to-four stabilized projects stabilizing solid have financing you There portfolio moving look other mortgage see loan our coming as good growth you of portfolio. this or mortgage to When sold. real to that solid $XX are our that expected market when also you’re family growth. again saw there and are unanticipated. our and are which at in occupied predominately but out million projects worth saw estate those or We real again and decreases in growth is was look non-owner other estates’ not company. permanent permanent the in that being of

it’s basis. be way going so go-forward that we expect fully work to And the to on a

see the are bucket. out move You’re on more commercial construction negative going then continue from categories more numbers some as one-to-four you’re and both down going family growth to see in and the side likely existing construction to actually moved projects than the than

C&I to As we’re at it to in you’re C&I, other see relates decrease that $XX did there loans a a When going decrease. we you look combination C&I, looking about million. plus see at and both of

decrease during moved All over of XX%. made up actually quarter energy from sizable two came which loans out $XX – over two substandard the that credits million. Those

some in going be It’s those competitive competitive, from plus very aggressive. it C&I type growth category. without Typically banks it’s extremely The those. LIBOR XXX, pricing very had to to would So seeing aggressive. structures we is pursuing maybe aggressive in plus are still have the of still pricing. LIBOR our The extremely the But number of of standpoint is reasonable those opportunities. on XXX terms of

Daniel Mannix

to And you helpful. really saying the segment loans? are it, estate there, that multifamily just other real secured Got is clarify

Barry Harvey

Yes, multifamily REITs are that be going and to bucket. in

Daniel Mannix

Got it.

Barry Harvey

category. certificate point the be will of and don’t and whether your you’re have moving we occupancy paying from of going into see down to they’ll either apartments that multifamily projects REITs, P&I so or existing – category they’ve them to student a it got in the way point – And going have at the be that we’re at it’s begin much that construction housing

Daniel Mannix

book growth It just expectation with the continuing like growth little at really be looking runoff a even we might then earnings to year? mid-single asset Are the And quickly great. to low securities for here. digit on the Okay, that difficult. looks

Barry Harvey

we’ve what for portfolio the quarter guided mid-single been once Yes, go to guiding the I for we digits. passed 'XX low loan think first to we’ve was

book, the we’ve is got rolling 'XX was that deals for in we’ve And within growth meaning end obviously off public couple going got low-single we’ve see being to and cover we’ve clear, expectation our 'XX do overhead things to got see than 'XX that And to are we’ve reasons to just our going 'XX. less than for we’re finance in remain less expect we one I obviously think where book got of for think those then we really a in 'XX flat. 'XX. of more public seen – as during off roll I what we’re did digits up remainder to our to that

expect in 'XX. on quarter. decent cover first unexpected then second business difficult. to less did and 'XX C&I the do And to to which payoffs in we than And we of side, improvement obtain ability in very see during amount see have into occurred we CRE we So the that a an is our did then quarter the

think comfortable unanticipated baked I out. think we’re our scheduled with also that we projections We’ve not what some only payoffs. move to in more got know I

for feel comfortable have that the I we’re pickup from to see reason amount So what we that 'XX. 'XX growth in of think more we experienced we going in

Daniel Mannix

All in guys. helpful. the hop queue. right, I’ll very Thanks, back

Gerard Host

Thank you.

Operator

from Our Go comes next Demba SunTrust. question Jennifer. with ahead, Jennifer

Jennifer Demba

you. Thank morning. Good

Gerard Host

morning. Good

Jennifer Demba

question. Two

point your about your And going industries. the restaurant also parts share curious to forward. loans service and appetite curious about exposure repurchases distributor in limited for other at Just this

Gerard Host

the why Barry, the question loan and share take repurchase. don’t you I’ll take

Barry Harvey

group. Jennifer, Okay. exposure limited restaurant have I’ll the be to very Gerry. to, glad limited we service

includes heavily also We’ve during double that our that million is the that finish limited. reserved we check we’re up majority my number question But there and credit of think the have the in going for to very credits that very the quarter. about number may before I I exposure there. two $XX got I’m question.

have anything lot as or -- exposure any a problem limited we our we not that have that we business restaurant for where systemic if is service nonetheless So from a of want to don’t reasons variety That’s you of standpoint Gerry, a that somewhere it relates concerns I limited think of there. do nature business. but

Gerard Host

ahead to and go free and you up. going ahead feel go and jump Yes, to I’m share look that in. repurchase the answer Tom

process anticipated we talked plan, probably overall that with as that of recall at the about dividend And good $XXX ongoing March growth, use capital that’s million organization repurchase. of We organic our through before an year. then the we’ve next capital have M&A and have needs, management looks you in authorization

any didn’t might stock we through but fourth of end vision view or quarter the see you’ve quarter. the think at that repurchase the third relative for anticipate can I how we stock, our with overall to movement the what activity look And conjunction You looking see at outlook be the obviously in and our long-term in seen that we you market.

with four we’re the those all are and basis advantage very So in aspects to on of opportunities whenever of the backup of a at take obviously utilization can. we capital looked regular market, going

Barry Harvey

our Gerry, probably just include fully QX. which question million. to circle million, that $XX more resolved And to category in that limited after credit which down is the it back gets we around, $XX to not us that during exposure be million does total in is service expect remaining Jennifer, credit XX

up. itself. number the company make – we’re those specific it We’ve as of really it’s the very the is credits credit problem handful to as at industry so is a it with as if I’m sure that looked to not all much is and them. So comfortable of that

Jennifer Demba

you. Thank

Operator

Instructions]. [Operator

next comes Matt. Olney Matt question with Stephens. Go from Our ahead,

Brandon Steverson

on morning, guys. Brandon Good Matt. is Steverson Thanks. This for

Gerard Host

Brandon. Hi,

Brandon Steverson

in you I little And X.X% be on us that line I reasonable that forward the expenses appreciate or spending number XXXX. as the expected expense think expectation expenses. to lower? well million saw to to that doing a quick in growth Is the just could I a make about to XXX core commentary we’ve the this a math, back quarter year-over-year puts of go that fourth pullback a there for that going Hi. seen XXXX we IT kind for is quarter. that looking just in with earlier be gave wanted

Gerard Host

spending, last a of upgrading about. you as variety company far six, demands a of seven, though IT spent years think world that I over your the the all, in as live eight significant with stay systems have we talked current we in that cybersecurity. with systems First we’ve amount The

can on any see And we leveling perspective may -- that to I don’t see expenses. from comment in so significant And you Louis a want but projected pullback IT

Louis Greer

just ready give Gerry, I we’re to yet. certainly I’ll think on 'XX comment any don’t guidance

But as on We’re expense it in at planning and quarters you still see process see Page you XXX. second five up core we number XXX about X, process. the on million strategic to for our and can came about that maintained quarter budgeting that

was about XXX. Third quarter

don’t planning maintain as offer that in process So through And quarter. want today. again the we 'XX anything to fourth do expect to our for we’re

Brandon Steverson

then you last much for shared how book loan And national exposure remind Understood. one of to credits? is your us just Can me.

Barry Harvey

going glad to we outstanding look Sure. we’re of XXX from This is that’s X.X going and exposure When at be million to Barry. an an what we’ve to. about X/XX. billion, standpoint we’re I’d credits, our standpoint from as be be got national shared about

Brandon Steverson

all That’s Thanks, me. guys. Great. for

Gerard Host

Thank you.

Operator

with comes next Our from ahead, Catherine KBW. Catherine. Go question Mealor

Catherine Mealor

Thanks. Good morning.

Gerard Host

morning. Good

Catherine Mealor

calls. been And of I I off and apologize; jumping in have

loan-to-deposit wanted should efforts? balance versus to XXs. So Thanks. ratio if be I you go your Any been ask [ph] time your thoughts in just as remix balance trending peers your that in being transcript. back But is the this about over similar asked how can to the to low sheet then as already

Tom Owens

expect the to prepared public that would success Mentioned comments – We’ve growth in at fund that attracting in to the year-over-year. Catherine, I substantially in rates deposits pretty this is early deposits that higher. good Tom. accretive to about trend on had are ratio earnings. talking

seen increase have ratio. the loan-to-deposit more would in you that absent a think I really so And gradual

to expect a Hopefully higher. that helpful trend forward would the case continue going would it I answer. that’s be So to that

Catherine Mealor

Yes, that’s great.

and my much. you asked all think other questions Thank very were I answered.

Gerard Host

Okay.

Operator

this question At time, [Operator Instructions]. the are no queue. there in further questions

Gerard Host

thank to third fourth to over look of quarter in forward January all And and our joining again, day. quarter with thank this morning call. you and visiting year-end operator, on go and you, our results. Thank for you you Great. a much have great We us

Operator

Thank conference today’s now attending disconnect. The now you you for has may concluded. presentation. And

Trustmark (TRMK) 24 Oct 182018 Q3 Earnings call transcript