TRMK - Earnings call transcript Q4 2018

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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 [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Investor Relations at Trustmark.

Joey Rein

morning. Good call remind as copy presentation section well be on to quarter our that of that available discussed release, is trustmark.com. earnings as our our everyone website like Investor of a fourth will on at I'd the morning Relations this the slide

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

Gerard Host

good Officer; Duane for morning Officer; Thank everyone. new call Credit Chief are you, you. is Owens, in we'd this Also on welcome morning Chief Greer, the our joining us. this Barry our like Louis morning, Joey; and Chief Financial Duane, our Bank Officer and With to our me Operating Treasurer. Dewey, and Thanks Tom Harvey, joining

Duane Dewey

Banking, meet to on and across Thanks, objectives. all business focus Jerry. I in going good Thanks, for XX assume have history forward years. tremendous meeting I've of a to the and initiatives lines. to you the COO, Thank morning. main income This look work I coming a all our leadership forward role market. of My and the the a is now remaining as of the non-interest growth leadership Corporate revenue-generating In been Bank of this team legacy areas, months. build our operations. part extremely Houston will with good Jerry, team has you. areas will strong and you. Trustmark and to the with a well all be be we It's the deep culture, that efficiencies supporting as CRE, I've managed opportunity

Gerard Host

in thank years Duane, role, you've your about we new the XX us. been contributions with we're you and that excited for your you for

begin income We million Trustmark per the that $XX.X year or strong net diluted saying reported me finished fourth in a of position. share $X.XX very Let by quarter. in the

Revenue ORE For $XXX.X the increased on Loans diluted the the quarter and non-performing and intangible X.X% fourth increase as management the continue which with on held totaled like to increase as quarter. remain of X.X% or quarter, XX.X% million a to a or expenses, per year-over-year. and core declined assets solid provide million amortization I'd quality remained fees $XX.X XXXX, net on results, loans million page which Trustmark's for Credit acquired million in Expense from full-year, prior X% the the excluding of to are X.X% you year. interest in income $XXX.X $XX.X million for XXXX, the income be three represented year. million, non-interest reflecting excluding $X.XX. priority a quarter, continues previous third presentation. earnings $XXX.X investments interest prior totaled fourth in to year-over-year. our Net an $XXX.X and briefly from from share compared for flat the update financial totaled us

$XX.X the stock. During of common we fourth repurchased quarter, our million

At growth shares. to loan both repurchased some color Barry to we whole, a as provide year $XX.X credit this quality. ask of like time, the Harvey I'd million Barry? For our and common to

Barry Harvey

I'd be glad to, Jerry.

recently in of as to we've in good be loan company as coming the of growth The growth four, couple mortgage growth of public some CRE page for we year-over-year The then $XXX was book, million. million, it. the on growth $XX finance our and quarter year-to-date, well we looking a our out -- highlights. Just had grew side have some continues

So we solid to continue see growth. good

we the X.X% previously where think, kind that's guided of digits we to about had low-single growth year, the during and ended I XXXX.

As it remains relates to there. in energy book, our it check

outstanding book. $XXX is million, X% is $XXX of our about Our million, exposure

continue it's continued prices lower to period-over-period. through and to from work fairly commodity that we'll be So, portfolio by to fluid be tends challenged which

to function. that's looking hard, the on are those classified. down whether a assets, metrics continuous dues, the to Looking showing continues non-performing non-accruals to here and we're to us the Trustmark's levels -- continue Page criticized, down credit the Slide quality quarter, improve, Obviously, metrics. X, credit we're quality work past continuing those work acceptable to you're for at

ORE continuing as well as that moving any our sustaining without been non-accruals successful to out we've additional move course, which Of out quarter-after-quarter of losses.

loan the represented not Looking quarter was million X.X%, portfolio. acquired about The that which about acquired the dealing The of then, at to from $XXX $XX return able on during X, portfolio. the that Jerry? the to decreased portfolio portfolio Slide of to the basis, X% a the year-over-year. to expect cash our from strictly expect on during quarter looking million with the X.X% yield during we being flows, yield came recoveries see on quarter, from just to that loan And on part or that we X% quarter, yield. go-forward about recoveries see what predict about

Gerard Host

please side, base talk margin. the the the And now if liability little and you deposit turning a interest net bit about Barry. you, would, Thank Tom, to

Tom Owens

deposit to during $XXX or seasonality. X.X% increased Returning normal public seven. X.X% quarter, deposit deposits the Total personal both Gerry. fun from the deposits increased prior $XXX million Total page growth or reflecting and year. Sure, million

XX% in We of a maintain continue deposits in to are deposits XX% favorable and of mix with accounts. checking non-interest-bearing

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

Net net quarter, page which a X.X% on of from the Turning decrease in prior quarter. points X to $XXX.X prior down million X.XX%, quarter, eight. in income margin FTE revenue interest from of a interest the resulted basis the totaled fourth

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

Louis Greer

the totaled about full non-interesting $XXX total XX% of $XX reflected approximately fourth of income Also revenues. year the in totaled represents million Tom. on about XXXX, for million which and X, Page quarter, Thanks

about year $X.X million is year. non-interest $XX As slightly seasonally the a income mortgage an down linked-quarter, with over you the non-interest and and Also can for insurance was mentioned revenues, banking the mortgage for increase about for a see watermark also that, totaling production and billion, commissions for prior $XX about watermark hit lower both the high of I'll insurance mortgage X.X% hit high revenues. of year, million respectively. which

million to our amortization in ORE our expenses quarter you for that see X, totaling Page which turning will controlled, fourth estimates. Now previous exclude with about $XXX.X the core well line and and remained intangible

well shares million and capital on that in during and for the cost quarter Page perspective X% the adjustment quarter. For of noted million to We living commission X% as $XX.X resetting as due seasonal outstanding it would stated Federal of for in XXXX, expect repurchased first for our core or we to adjustments a positioned XX X well stock January, included XXXX, million remain approximately of $XX from approximately briefly we taxes fourth increase the would associates, revenues. expenses as by Jerry,

our As stock existing authority of had approximately we purchase December $XX plan. the XXst, million under Jerry? remaining

Gerard Host

been And glad this of this would we answer you, discussion We fourth helpful. our financials trust that Louis. quarter that at Thank any time, you to Great. questions have. has be

Operator

our And from Instructions] KBW. [Operator Please first question Mealor Catherine of comes go ahead.

Catherine Mealor

the maybe outlook size remix and as are through start we thinking your you on for you as a the first that are we've year; targeting you've loan sheet for year? the and previously? balance about we that of outlook how size to Thank is percentage book, this of wanted see. your Maybe And first what think as the still what growth just on the securities continued you. to indicated move I then, loans, about assets,

Gerard Host

Right. borrowings It's for he's relative a could, projected to growth like relative doing to a balance maybe balance little the Catherine. and and and to deposits. to on then team bit address I side loan year talk securities other Barry the what optimizing about I'd If sheet the sheet, the effort of Tom

Barry Harvey

Barry. Catherine, Glad to, this Jerry. is

that hard area And to loan growth should in we have we as some but I than modest what than others, a and been -- for then, has rely, some are from things that. you we grow continue a expect are, on stretch that to we today, be probably think to sheet is we'll for be think we'll is majority it's the goals few work expect to to historically, that do of mid-single-digits realistic our more to But that CRE it come I areas in all where the The to As mainly finance. expect have, mid-single-digits and growth the know, XXXX, public extremely mortgage side, and balance most we our some grow while. is for where that far of relates as see think would larger because CapEx opportunities we they and believe has own expectation realistic companies, growth think it their any that we in CRE, of competitive nature. on fund or will I between,

consumers most in are there So, rate hard growth is we'll a hard do of same where But so and the work side true there, to have they're we on consumer work looking at products then interest are but that rate, less to And the continue continue we'll grow environment, the expectations. desirable. can. to the we variable rising

Tom Owens

Thanks, Barry.

anticipate continuing about target year earning XXXX. of the half in about is So of through Tom. about XX%. run first at XX% securities past We of Catherine, the off We've ended range portfolio the We this assets. do talked to a the

projections, will growth to running get end we us Given first-half off quarter. the XX% our that the about portfolio at of loan the second through about think the

Anticipating probably those our year-over-year, portfolio, margin. the take net consideration, running over into So, growth our portfolio, current looking for two run-off X% securities get to of and is to our you securities assets growth of in loan likely guidance I'll here, X% the is of the off portfolio. just full-year we're to growth net we're X% full-year. the interest speak our core you when projection questions to a core down things and X% again, other earning briefly the projections of There range take that growth at loan the

given at say, would that And that. X.XX% X.XX%, something we're The low-X.XXs. was X.XX%, a like full-year to so, the looking margin probably in range be, XXXX

together, that, net sort interest you in things income, income of lift if basically in interest net to got about core we amount which growth midpoint core those the of all is XXXX. So about at take the get in X% you

Catherine Mealor

or pauses assuming of we get assumptions And and would does that you in change And the rate are maybe guide? -- how how what Fed couple that hikes? another are rate if it

Tom Owens

Yes, great Thank asking that's for question. it. you a

our market So, forecast forwards. current incorporates implied

you As of basically point is yield Fed the know, as the any flattened. have come and at And priced that, rates out result this down, has it has market down curve come tightening. a further

to So, that creates well. bit a as headwind margin of expansion

you lift run-off the got XX% take of that currently that of we the lift of optimization, XX% -- has we've the portfolio, only through anticipate XXXX. half from probably got interest to securities first core year-over-year majority doing we've margin the sheet So of net the where the and been balance in

just expansion do fed XXXX. But in rate net hikes, will with some yield flattered a we yet core lower curve, that headwind combine believe have expansion. to it we no margin further here rates, interest You creates

Catherine Mealor

Again, one follow-up, the then Barry. loan back maybe just on growth,

this about year, range. think growth you the it was saw more X% that in past we If the

being are a so puts takes bit there? Are is growth year digit the it higher what's the you your that's a next I And better and in goals? given pay-downs better origination in it growth you more and less for feeling outlook what better more Thanks. about feels confidence or is little giving guess, higher. that's guidance you year of mid-single this like that

Barry Harvey

I think Sure, the more Catherine. it's And former.

unexpected way what I in we unforecasted payoffs think XXXX. little a we than saw expecting less of or in the are

rate traditionally especially including strong and believe we've see our on hold baked paper in in been mortgage terms better there, number would - amount think that be numbers, or in for our grow that quarter we side. are be less success side. we the so strong of production, CRE and also a can to book Fourth book reasonable improvement to I little a activity of terms to a reasonable that think seeing fair the in of We I short-term, do public finance improvement quarter bookings, some good into that we that opportunity was of in fundings there. a baking XX-year we little of I has we the to we unforeseen And us the and do payoffs, bit continues manner. a in have continue a on got that believe we continue will think our

So, public into three categories, I course, in saw of see I to then, finance think, I And little we see less XXXX, of in in and have are think to less good of But that early payoffs more the XXXX. again side expect think that think going between we striving half opportunity. optimistic little that be C&I successful of then those we and in well. a optimistic we're I XXXX, little more the we we'll we’re a bit first in a consumer as here the

Operator

Please go from question James. next ahead. Our Daniel Raymond of Mannix comes

Daniel Mannix

dig little more. to into a bit NIM wanted I the

between shrunk So, XXXX? the about scheduled you for and talk bit Can reported a accretion gap quarter. core this

Louis Greer

that you repeat Could again? please

Gerard Host

Daniel think of question that the sort differential. I just asking the is,

I about we and loan differential terms XXXX, projecting think portfolio he in accretion, -- What the of fact XXXX's. accretion is lower that the are than acquired was asking XXXX's

Louis Greer

think I to million. by continues on about $XX million are to and runoff, I'd as disclosed, a Barry like to $XX X% to expecting we it runoff between as yield X% schedule that somewhere quarter Well,

to And pays that down as on X% so, it we throughout yield a X% expect steady XXXX. portfolio

Gerard Host

question does Daniel or answer So, that no? your

Daniel Mannix

Thank helps. that Yes, you.

Louis Greer

over well last Barry three I portfolio predict down mature to this at point been can't has really time, pretty indicated, in because the worked years. that think and we was recoveries

Gerard Host

to $XXX so Down relatively it's immaterial. million,

Louis Greer

acquired by investments, time that just We we'd would into immaterial loans be well. portfolio because year-end hope this of held merge XXXX, for will it at as

Daniel Mannix

you're for NIM what in And can that me core betas tell assuming deposit you guidance?

Tom Owens

Sure.

actual Tom. obviously to this fourth we is it as say So, what below were is which came deposit just favorable. betas, quarter in Again, generally I'll relates projecting, that speaking,

priced the So point. further Fed you tightening combine this that been with expectations interest for rate environment, have market current where basically at out

are I anticipating are upward XXXX, in repricing deposits. that quarter the -- of deposits there said of some will a XX% in so be beta We interest-bearing as anticipating we XX%, prepared the on fourth comments, in further cycle-to-date

that the Fed isn't particularly can generally CD mean anymore, because relates As you just it imagine, tightening it aren't to rates the as doesn't book. higher,

XX% get XXXX year-end have will projecting to XXXX that there by We're XXXX. time So cycle-to-date at repricing. will that year-end be to at the some that further currently year-end beta we XX% increased from

Daniel Mannix

that wanted to out likely finish that? looking so potential Board after after at capital, how's this up repurchase going on And and guys the just with authorization higher finish the you program that share activity would max it expiration, up, fourth forward a current quarter. would you quarter, Is

Gerard Host

This is Jerry, Daniel.

M&A. we various opportunities for buyback our approximately a of capital month in in deployment, way have team left review of the original? million Look, what meets management First process-wise, review capital that to we every the or it's position and table we a organic growth $XX-what whether on types might the all, of have have program,

Louis Greer

Jerry, in March. expires and it $XX million, Approximately

Gerard Host

the end It during Yes, the amount use and original capital of the dictate of authorization. market fourth that If we that. by quarter, conditions March, end need in been same on $XX path the the continue would at the we expires on March. allowable will we've million

thorough a capital, that authorization, only are work forward team going and new As at Harvey looking far as after the analysis doing would CECL. come it well as relative for need his a as to and of Barry

and sense a have the implemented. needs We and that's once long ways good on line for CECL down are working capital a

to about authorization. about into the -- consideration, So a a little all specific taken it's be new early that's being

you, and and lot capital we'll be a a relative tell discussion to had in are to and there was our need we we Board whole, of where we we yesterday, However, future. as meeting where think the

shows it's of positive the very above remain look X that's if XX.XX%. thing the where as versus total organization. ended we at XX.XX% also basis. we I last right slide think on just well on But a end XX% capital, Tier an XX%, were risk-based just year, And capital still -- above the we up is, you now XX% now, where a at about XX%, capitalized

able this year capital kept in and ratios. So, were through all dividend to both very strong through we all, and the in earnings buyback deploy

Daniel Mannix

Just in talk on if a you there I coin, other the there, about of could do sneak the one you have payout ratio? side dividend, targeted

Gerard Host

our cuts range normalized with last monitor has ratio, payout have for been a we the organic the regular a things, as it's imagine, or last more come those We payout things. that four this at ratio. might ratio high you within And of and it's nine determine to years, look acquisitions any earnings but that, watch tax the and very that low-XXs. over relatively growth We don't those year, buyback, we of on of relative targeted all our to specific dividends, basis do actions one eight a

Operator

from Demba go Our next Please question of ahead. comes SunTrust. Jennifer

Jennifer Demba

Your from leverage credit for has C&I loans. this been another week bank We've an seen issue quality excellent.

Just curious any you in that have if area? balances significant

Barry Harvey

Barry. is the little live. without a we that avoided a this some language carved-out of an on you where that's guidance is reporting Jennifer, There's of over have kind doing area it, And do intentionally we that bit within and allows years. to lot the that

exposure transitions four credits. the -- as to in consistently range. are is business we three very that's they where accommodate some had but have it's outstanding is in rare $XX million, call, as that's that's exposure, reported is need. we that that customers basically on existing And try nothing, million, Our around ownership, that We the $XX around or

decision a getting of little was balls more lot we in of choice category. made that a no have may what or where and and time. we made little that with to work situation we therefore, had not what were to kind understood exposure a or over a not we're a and that to may we comfortable So with, particular air we And out stick exposure

Jennifer Demba

those Are loans performing now, right Barry?

Barry Harvey

are. They

Operator

Our Brad Milsaps question Sandler comes from go O'Neill. ahead. next of Please

Brad Milsaps

wanted about Louis, ask fees. I maybe to

think Obviously about with more challenged hedging, little touched little markets you are. with -- you on mortgage. were where a a I they in XXXX, some helped the mortgage rates As about bit think you bit little XXXX,

about curious kind move you the are Just revenue year? of how you through of thinking as guys kind fee

Gerard Host

Brad, I'll This is one. take Jerry. that

have a company we about the moved think our outlook I In XX-XX We've the I three transition through wholesale in we mortgage footprint. from terms years, last in about throughout of where have originators retail think company, mortgage retail. been a XX% the to significant hired

the of that, feel year Lot XXXX. feel about that is XX adjust volumes, have working momentum versus mortgage good We carry distribution people we opportunities. our hedging much can XX loan XXXX unknowns. retail XX in with and and very to a is profitability point, MBS help very people Treasury. private them channel, and We feel grow but what you activity I there. how with a retail the affect might generate for better and The impact. having opportunities the interest of and function and accordingly. banking unknown FAS mortgage forward we year the XXX in though can like as quarter every news housing leads that the our happens new banking do per with -- at good much this that continue is, prices think the The end our real and and look strong to of rates that is we At year What

affect So our operation. things all those mortgage

interest feel as about we've in risks, in -- and the think we're for job past we how volume risks well XXXX. done those an managing as excellent position good where those rate I

Brad Milsaps

bigger picture, or And Jerry just a Tom. for

need in expense of trying shift. clear to You It addition NII NIM. percent earning sees to asset kind guys you're the in growth, understand, But of percent crystal mix protecting a to I a $XX the protect earnings your NIM. of that you're like listening of kind been completely going on guidance to couple growth.

setting to Are to of get at XX% What's of when as some lever kind book next time. can generate up the a Just curve in backup sort better of move? you earnings. assets. yield your yourself you of XX% just percent you that hopes a in earning or curious, up-- point setting And bond maybe

just end kind paid the of this what not of kind were going of is Just curious to kind curious thinking forward? of get plan, you get the once you're in what you because about plan dollars NIM,

Tom Owens

This is Tom.

so evaluating the better opportunities back the know, may in reasonably that gradually be I and present curve do to tightening capital in Fed You as tightening. to surprised available. as it the if different -- curve of there Fed the be we're in to goes and of it I quarter I The Jerry to continues happen second now a alluding not a capital and we further earlier, would there. not now through interest -- the securities think would my the if is begins reinvestment. may very continue yield surprised get market currently But rates, continually end with of for is us terms back stands, I there's deploy get was the opportunity view, between flat, of mean, particularly, be say lot returns data tightening forms in strong. business in price deployment may the steepen wouldn't XXXX, that may I to curve. right it what bit uncertainty of much with what the happen we to economic

have So this and much at make decision you at move as point evaluation point. that as to that's I time forward, give a that's going as an we're to -- guidance have in we're to could to that going we about

Operator

next [Operator question from And our ahead. Matt go Please comes of Stephens Olney Instructions] Inc.

Brandon Steverson

just other problem the is credits. wanted was industrial higher distributor. one last to in you off the that think clarify to related credits same quarter? and the release that clarify noted want I two drove that an just the the was I parts Brandon a provision I resolution two SNC charge restaurant the this for is to on This Matt, Steverson morning. on of

Barry Harvey

correct. That Barry. is This is

to last full relates we made I that QX as saw. during - the were that provisions see and during what both offs of got those think the likely charge you and while you of did is to QX, credits resolution we quarter it

think one fully is credit a I off. charged

has that two collateralized, through the that's other balance, during credit what was outstanding QX. saw and resolution is that actual worth about The those we credits discussed so on flowing last of cash you $XXX,XXX the quarter

Operator

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

Gerard Host

Great. call our Thank you, we our joining let of appreciate Trustmark. been you quarter us. We call the in your first who've today. all for This fourth thank on Operator, And and XXXX me late look discussing April. forward you to in ends and interest results thank quarter

Operator

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

disconnect. now may You

Trustmark (TRMK) 24 Jan 192018 Q4 Earnings call transcript