TRMK - Earnings call transcript Q2 2020

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Operator

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's second quarter earnings conference call. [Operator Instructions]. It is now my pleasure to introduce Mr. Joey Rein, Director of Investor Relations at Trustmark.

Joseph Rein

Morning. this everyone as copy presentation of well discuss our remind quarter our that our to on on release, available earnings as call website like at that Relations of a second we'll the trustmark.com. I'd Investor is section morning, the slide

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

Gerard Host

good thanks Thank everyone, you, being morning, Joey, with us. and and for

President our Credit Operating Tom morning me Chief Treasurer. Officer; Duane Chief our and Harvey, Greer, Dewey, Louis Officer; our Barry Bank Joining are Owens, this and CFO;

we second and associates safety the our of communities. the on ensuring remained and During our customers local supporting focused quarter,

We ATM as promoting ITM including customers points, digital as branches, our continued our banking actively touch both remotely and well applications. mobile digital serving and networks, and through

secure showed associates program tirelessly $XXX this million much-needed the foreclosures to We totaling all granting and customers loans certain businesses. businesses provided repossessions. extensions, Paycheck continue of they especially help the of X,XXX Program, local working appropriate, flexibility charges, we pausing to small Through funding. and and offer over I'm proud fees incredible dedication deferrals to as and by waivers providing and and our implement Protection forbearance SBA's

corporate of are public associates, distancing, We associates departments the limited and continue better work XX% access of safety vendor employee while our temperature and in remotely, and working to Approximately common travel including extended policy. following schedules. buildings our on practices checks, health larger and are to masks face some We our social areas. required for our rotating

Additional on actions detailed are Page presentation. of our investor X

highlights let's quarter. X, Page the from review to Moving some

of Our linked income offset mortgage businesses the business, services driven Noninterest as X.X% performance. increased by in value than results financial interest reflect strong our the rate income our quarter, performance strong headwinds. fee more diversified

or expense Our million $XX.X prior due excluding XXXX, to to second and quarter XX, or for totaled year-over-year. PPP fees credit the provision and in at loans the million, $XX $XX the June for $XXX totaled and uncertainties from million pandemic. losses million. investments macroeconomic PPP loans X%, before held quarter $XXX Loans of million, COVID-XX almost costs deferred related increased X%,

Our maintained pre-tax, pre-provision core the year-over-year. quarter, quarter related up costs, We non-interest income including disciplined XX.X% the X% less than quarter. prior expense up million from million, $XX.X and expense, second COVID-XX linked X.X% totaled $XXX management, as in totaled

Our ratio and declines both nonperforming credit loans XX.X% X XX%. share, a per Tier $X.XX some September estate. remains with on capital PPP non-accrual equity detail At solid, and capital Barry? credit capital of I'd additional on X. growth quality ask of dividend assets record a The in payable and quality. to of as risk-based declined linked We common September cash provide quarterly time, loans, to to a declared like directors Barry XX of loan levels of quarter, real strong maintained total XX.XX% reflecting other board shareholders this

Robert Harvey

Thank Jerry. you,

our has who been local been Paycheck the participate see has to continued Turning and businesses impacted by assist Protection a significant in X, number actively you the the of have to to Program successfully bank negatively Page COVID-XX able can pandemic.

deferred of that's loan totaled net fees and of PPP as costs $XXX June of and Our million million. loans $XX the XX,

the of our $XXX,XXX-and-less X X,XXX take category, totaling of processing been later in for loans and originated $XXX forward borrowers' roughly look average begin balances. loans next applications sometime X million as to forgiveness we worth requests our program, $XXX,XXX. hopefully our round we month. round with to size Most being During have the We of PPP forgiveness,

held totaled a XX. That's our X, investment The $X.X excluding loans by Turning or of fundings was linked a to remain June as loans PPP and both geography. the portfolios well-diversified, billion million, X% The loans. growth driven for up Page construction commercial quarter. in $XX from loan type

the Looking construction portfolio is types as The portfolio projects is industries. a has book, approximately existing XX% well development. land over construction Page X/X X, X/X construction. bank's land real mix Trustmark's as CRE owner-occupied to and estate development nice between Of

over portfolio and are loans the on million $X far, energy. formulaic across that found industry both has higher-risk coveted has The a both borrowing a our protect income to the at-risk On statement X, Trustmark commercial hotel the lending the performing bank have segments. exposure to anticipated. CRE in Currently, surveyed in been its balance to the the you have than bank's and, are both underwritten see manner. They're well-secured, governed in X better retail by loans them we in categories these well-diversified C&I borrowers sheet. always restaurants material and X, is conservative can Page customer and we've balances. largely with have Recently, minimum business. we we so Looking Page Typically, never bases.

we're of point, it have requesting this not borrowers the the a in interest we customers. that continue At for which offer be Looking to at to been as made continues round Page us are deferrals limited with P&I to giving for successful by. June. on payment encouraged have at deferrals requests a deferrals are payment track half P&I information materialized of we saw requested by all very XX, level opportunity been extremely our concessions roughly anticipated, second types borrowers days, to concessions the only. converting shorter We've Those duration. XX to product what required to be keeping July by full to Trustmark in update on an

the from and for X.X% positive X.XX% quarter Looking year. Nonperforming for decreased quarter loans we year-over-year. to investment. Page to X.X% estate At real of represented prior held previous July quarter previous Other the for the continue XX% our from loan XX, allowance in post XX, loans losses declined the XX% same asset-quality and metrics.

Our pandemic. increases deterioration the macroeconomic resulting COVID-XX in the Jerry? the factors reflect from reserve

Gerard Host

Barry. you, Thank

side turn Now, of balance I'd sheet, the the to as net ask on we and liability the deposits Tom? comment like to interest to margin. Tom

Thomas Owens

Jerry. Thanks,

funds, from Page to the government XX% associated primarily turning customer billion stimulus totaled PPP prior June in segment, at balances. payments. with was public quarter, XX% of in consumer XX% commercial, loan additional XX, program $X.X So growth liquidity By XX, $XX.X billion comprised deposits up reflecting the and and in

the of from points mid-March total prior to declined as points basis deposits in interest-bearing quarter cost XX deposits continue Our to cuts. response to we the reprice rate XX Fed's proactively basis

making checking of mix, as change accounts. favorable rose deposits continue June a noninterest-bearing to with deposits XX% deposits in We XX% deposit of XX, at

loan-to-deposit ratio remains liquidity a XX of assets. reliance with strong June XX% of and funding than wholesale Our on at less of X%

asset in more reduction interest impact ex-PPP by a interest of Turning lower decline increase points X.XX totaled million points of first to interest quarter the revenue, while FTE million representing XX will Page from decline decline earning second balances, balances, in provide XX, second by interest income quarter points. NIM declined now loans the than $X.X held expense. of prior a with quarter, anticipated million and an due $XXX Approximately an of $XX.X offset income. the of by the core, Fed in basis $XXX an $XXX,XXX. driven basis is on as XX the million, be reflects $X.X quarter, transitory. to net the points our from core fund in increase in to update on while totaled deposit Duane which loans PPP income basis attention other million interest a basis fees excess in primarily of Interest $X million linked rates, reserves was representing increase XX And the declined XX margin public while noninterest which on is quarter, core Net was of a

Duane Dewey

Thank Tom. you,

second Noninterest our strong totaled As year-over-year. and Page million, businesses in quarter X.X% posted income $XX.X up the XX% quarter. shown XX, linked on performance fee

For revenue revenue, the XX.X% income stream. demonstrating a quarter, Trustmark's represented of noninterest solid diversified

acquisition way detail actions slowdown on of growth impact deposit group revenues by activity COVID-XX. in a Insurance in stimulus property Moak to decreased moment. charges $X.X Richland, the Also, due to Mississippi. banking the Services for the Boyles in in and This we economic linked Insurance Service quarter, commissions. accounts of and quarter, in linked mortgage a discuss quarter, will due completed increased we driven quarter casualty the million second lower in reflects the fees. and that led Our X.X% NSF/OD

quarter, the in decline as impacted fee-based XX.X% the quarter, wealth Our reflecting from for off market business was revenue by lower management the businesses. was second income equity

from from quarter, group very $XXX.X% as second Page had loans or an mortgage quarter prior $XXX.X for an XX, our represented of the now in totaled the $XX.X a banking and basis. million cover quarter, million nice linked is million, revenue million, Overall, $XX.X will the management. quarter. to loan totaled outstanding production production expense sale capital in prior XX.X% quarter $XXX $X.X a which quarter $XX.X Louis gain year-over-year. the for million, of increase The volume, mortgage. XX.X% Retail up quarter of of mortgage Turning the on million, and banking on an increase totaled noninterest quarter

Louis Greer

Duane. you, Thank

Let's XX. turn to Page

overall $XXX,XXX. of quarter, million $X.X losses few $X.X fairly noninterest $XXX,XXX, depending expense noninterest out credit of of $XXX totaled quarter, expenses strong Non-core with quarter. quarter, [indiscernible] of principally see by as approximately capital increase of in deductions the as mortgage million in is higher second the RE million, expenses $X.X reflecting can perspective, the in Core line third the In well Duane on we million non-core. Page third first totaled which deduction remain related an million, $X.X the expect $XXX core and for from to should remains as amortization the You for the which exposure a in our between quarter, intangibles, about just continuation flat, increases expenses in broken sheet and a COVID-XX well Trustmark expenses, generated on mentioned. continuation The detail of and included commissions mortgage in the related off-balance of mortgage second other costs volumes as that in increase the credit our about about XX. core of guides non-core expenses positioned significant prior was quarter. million COVID-XX noted is in

XX, of common September quarterly $X.XX XX a Our directors previously per Tier to a a declared June remain The of with capital and XX.XX ratios X. ratio of September of of as shareholders mentioned X on as of dividend of board payable risk-based solid as XX% ratio Jerry. share, by total record

Jerry, I'll you. turn back Now, it over to

Gerard Host

has pandemic. Over well financials Trustmark about any I'd quarter helpful. shareholders. second our on circumstances our of point and to discussion by needs In creating storms, our be like XXX-year questions At the long-term the positioned have. providing out that might customers closing, these been address remains time, customers' would have history, that remain unprecedented unique for meet brought trust COVID-XX I solutions serving to Louis. to focused glad continue during this advice you you, Thank just we we our to weathered we value and and that support, many

Operator

[Operator with Piper Instructions]. the Dick from question first Sandler. Graham comes And

Graham Dick

X% fees versus an you interest So detail in of I what to provide that million from what could how came that income but came rate. gave much $XX if you release, the of good I'm $X million just starting of was loans, on trying off earnings wondering get portion have basically from PPP pretty breakdown fees in with a remaining. PPP you idea guys the just in

Thomas Owens

This Owens. Well, is I'll start. Tom

you the so is the we're understand the income is question of then million the Again, the I over get a arrive income coupon, as life with a feel interest in higher also which quarter. end associated associated correctly, how with PPP it trying a the at million second for loans $X but the X% if recognizing the So in for the you're to $X in indicated, the fees you yield, net interest quarter. you loans loans, up with

Graham Dick

just quarter? from did loan deferred expenses, origination moving guess loans an I this in you all costs towards related see to impact PPP the

Louis Greer

I'm question? that didn't sorry, hear it. you I quite would repeat

Graham Dick

impact deferred origination production? In expenses moving FAS personnel related you PPP costs XX towards any guys expenses, from did loan to see on

Louis Greer

out have answer not can because loans that we costs December costs, be associated fees you that. paid because hard that most will by of the costs we expenses these associated so internal any folks of all I FAS PPP by tell that amortized year, lot a have XX immediate-term XX. the would of on expect to Yes, we've recognized within that of expect the that we we almost with to had end I the capitalized not net of the year, we recognize

by be an well. So time. recognizing it in short would And and be that, only an a not deferring would inter-period probably very expense period it immaterial costs it as number of

Graham Dick

just kind kind those. this mind sticking for what expenses kind then expenses, really kind And this what production was it Do like another compensation quarter impact had you mortgage banking. quarter, of this of had obviously with of outlining on on strong of

Louis Greer

volumes, Well, it volume a certainly increased of I and result it say of the those a that million production was dollars increased because would of quarter. in couple as

Graham Dick

that front excluding for the it I me, PPP COVID what uptick Have of guys rest cases, an guess? kind guess cautious to of borrowers recently leveled on off, of the any growth grown the runoff? of see expect has in do then, year, loan more the or headlines with recent And from kind I lastly

Robert Harvey

This is Barry.

towards we've digit I lot of since were but has what to changed course, looking loan we mid-single then, previously think of at growth. year guided a -- the the beginning

a full for that. still I impact QX I mid-single than slower a our a there's terms track us, and bit QX little its XXXX. lot on on is the growth we good would of but do loan anticipated, during still think pandemic for that's we're on have think in that barometer for borrowers. year the digit went was obviously

Louis Greer

PPP. Excluding

Robert Harvey

we're we're from ratio -- a Right. really the standpoint in growth, including obviously, measurement any denominator. of not PPP. Yes, standpoint, standpoint, loan from PPP, the From not excluding PPP from the

Operator

And the comes from SunTrust. next with Jennifer question Demba

Jennifer Demba

questions. Two

curious criticized from quarter. quarter? trends loans about some third second just to mortgage just us question, first First, classified about pipeline for my business the in then the second can details of And your terms give in and you quarter your

Duane Dewey

slightly. pipeline Duane a third pipeline, and second the maybe quarter the moving to is date, in quarter the at of it the This down Dewey. this the in seen we've remains not second the quarter. solid, but point through remains fairly in maybe yet range mortgage The consistent with expecting We're quarter, solid XX% decline

Robert Harvey

were to I mention points, to criticized were classifieds. down probably would you, the I we basis XX in And X Barry. and Jennifer, call we that this movement up is loans, classifieds, relates and points basis would probably so to in no as it quarter-over-quarter, little about criticized on just flat,

are reviewing our portfolios. We actively at-risk

we've of pleased and We're we're are, to payment round maybe And round expected what early, round X roll course, We to level we having the it's of round of the X. with normalcy these cash deferrals. into to XXXX. thus trades in far, of round that X keep X the long to from times, we're We're course active of portfolios monitoring seen of how ensure and relative survive at customers can correct them level correct all we round to the at getting all looking that and return that some hopefully burn, X before seeing flow X.

about are XXX, to no between at we've and making accurate of. Thus far, very classifieds seen XXX sure those grades conscious and So all speak are in change we times. criticized

Jennifer Demba

you X Would there being loan your envision of for a deferrals customers? round

Robert Harvey

XX are way how viewed. how we we did the there will have we deferrals, continue round rate the the changes of the be as to do typically customers deferrals interest with Jennifer. XX% the requested way we accrual ability CARES about full as full think year full they in limited and P&I customers, view what TDR main to the work classify Obviously, as accrual all of we three, to of relief were end that P&I it go to we TDRs as very X. a CARES things I TDRs interest-only get as a important had for deferral. and very to were the turn job Whether process is We'll Act relates we you We XX/XX our risk is that grading round and through we know, to able from and to relates pay status which are one, avoiding We grades the Under to opposed had and thing We a to could. view us, the unrelated. March. little we of nature we is had XX the days. round very sure what appropriate. it into bit the status to About of as credits good making began but of the fact many want round a needing positive a payments feel able We're to we as our be the now. so into are in X the appropriate, days, Act,

round have three will through way the We and XX/XX. and early all the winter in fall

year. focus hopefully in either Our some to them year this our vaccine this businesses kind or give customers and needed this later we continue to of with through is to is through customers work sometime where order to But as to re-establish our next move focus pandemic be an of with work their towards to to process. going continue our form move opportunity

Operator

with comes And Catherine question [Operator Instructions]. the Mealor next from KBW.

Catherine Mealor

the about just to wanted I margin. ask

you XX the you deposit costs, forecast are low how made on margin? really of the let's you of your progress this impact at, some excess liquidity end. for probably you're strip If nice It but viewing quarter, in kind bps the the seems out at like lowering say,

the much I kind from yields, is X, room then you downside you loan do funding So do on on today? X of where see what how have you your guess and question sit side,

Thomas Owens

This is Tom.

we I'll lower there. start deposit with to questions are there think room few how do to costs. I continue So have a much

XX obviously with linked the the we've say deposit most points at will per book, say, deposit That's would XX interest-bearing neighborhood done so. quarter basis average ended June ongoing to at Say points or the basis so the get come a costs. of over decline weighted from in XX the XX From quarter points which driver that lower. X about into of, go forward, coupon basis as that it of to that big continue respect the this point would you I XX. our lot. of down We're would a projecting next non-maturity, So quarters, to timed or repricing

say take costs, half. in would as a from would XX it interest-bearing deposit it And basis -- that approximately cut result, so our points the

get continue the our still you pressure have because to that sheet continued XXX interest some fixed-rate X reprice say where we'll securities in Now, about or the net side with to margin, moderate respect to say, balance were the to to continuing second looking core obviously we quarter, the ahead, to of loans. securities, respect down with we're projecting asset go going to in in from, quarters the XXX. I'm decline yield so,

So have assuming up, decline the earning a you interest-bearing to and looking rates -- rate. add in yields that market basis deposit quarter, have on points, declining mid-single single all linked asset our so, mid cost what linked basis quarter get is would and low asset interest you'd That next at run quarter basis be quarters earning be yields that don't X point low-single or the you you'd over change declines. linked basis so you'd digit digit points,

margin excess the but mid-single interest net is deployed interest a you're is if core to noisy. that, year and -- have say, balance to 'XX, but very increase percentage income say say digit And also net tremendous liquidity now, in assets. digit have not the way decline PPP there compared full about average how 'XX on core time. you a in at full year percentage past liquidity about visibility probably digit offset core lot decline we're on the by obviously over for net looking a right in we're obviously margin, When mid-single There's that talking so decline you the percentage basis, look net I'll income. you think would interest sheet get I of earning we excess high-single loans, it's on in excluding interest and So

Catherine Mealor

of of outlook, from -- that your from you're I've versus about say how kind but loan making heard construction is new how thinking the other the just that of this would the then banks much quarter compared have And you good today? to growth, say which what coming I pretty fundings is growth commercial would that pipeline, new you originations much loans of already actually

Robert Harvey

of is growth it, fund for that upon year, Catherine, to be the Barry. CRE definitely based the that of of beginning on second that of are you'll books is this I fundings going would the up. us, virtually see in to all are the half projects say today

geographical some we far anticipate the diversity projects the of as of those well as -- But going being be worth Houston, we of upon from that existing Atlanta as do that expect funding We're you that second housing, for fundings the the the it whether as quarter, loan on existing was the the I various and to half diversity up. would category being all come Dallas, growth the second of of apartments, fundings to were are -- So be based as $XX markets projects, in same. in that the geographically year and student it's well. QX, in million office, saw growth categories, obviously in as had and diverse and

Catherine Mealor

question just last my And capital. on is

have You preferred some seen you that you've now and active some I if below a had issues your capital, that I'd at lot little your a raised raising, past now say of look bit that. but capital the sub-debt peers you're think average of on versus of over [indiscernible] some quarter,

on thoughts or to capital some So about versus and boost sub-debt how just preferred ratios. thinking those curious risk your today capital considering any your you're

Thomas Owens

this So is Tom. Catherine,

at stress here We a maintain rigorous Trustmark. to capital continue testing framework

range X we sub-debt, any not the at assess do capital. adequacy, currently very anticipate capital our issuing our are of look high comfortable total operating capital there, and type We When we're our with tier you at capital, example, risk-based so end continue levels. we target to proactively of for

Operator

[Operator Instructions].

our session. any back there Jerry the Mr. present concludes time, anything to conference like else to turn isn't As would remarks. this at the closing over I question-and-answer Host for

Gerard Host

and all to of impacts you of COVID-XX, the the assure and with staying operator, also continues. not term our in potential us very the planning that on on We're very call. short-term only for again team results. the October but and pleased for Thank is announcement. longer this thank and you, our we our as And joining forward meeting I second the timeframe third with focused want you directors board impacts for quarter quarter the you look please to sometime stay for again, Thank management you safe.

Operator

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

now disconnect your You lines. may

Trustmark (TRMK) 2 Aug 202020 Q2 Earnings call transcript