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Edited Transcript of TRMK earnings conference call or presentation 24-Jan-19 2:30pm GMT

Q4 2018 Trustmark Corp Earnings Call

JACKSON Jan 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Trustmark Corp earnings conference call or presentation Thursday, January 24, 2019 at 2:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Duane Arthur Dewey

Trustmark National Bank - COO

* F. Joseph Rein

Trustmark Corporation - Senior VP & Assistant Secretary

* Gerard R. Host

Trustmark Corporation - President, CEO & Director

* Louis E. Greer

Trustmark Corporation - Treasurer & Principal Financial Officer

* Robert Barry Harvey

Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank

* Thomas C. Owens

Trustmark Corporation - Executive VP & Bank Treasurer of Trustmark National Bank

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Conference Call Participants

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* Bradley Jason Milsaps

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research

* Brandon James Steverson

Stephens Inc., Research Division - Research Associate

* Catherine Fitzhugh Summerson Mealor

Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP

* Daniel Raymond Mannix

Raymond James & Associates, Inc., Research Division - Senior Research Associate

* Jennifer Haskew Demba

SunTrust Robinson Humphrey, Inc., Research Division - MD

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Fourth Quarter Earnings Conference Call. (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.

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F. Joseph Rein, Trustmark Corporation - Senior VP & Assistant Secretary [2]

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Good morning. I'd like to remind everyone that a copy of our fourth quarter earnings release as well as the slide presentation that will be discussed on our call 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'll turn the call over to Jerry Host, President and CEO of Trustmark.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [3]

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

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Duane Arthur Dewey, Trustmark National Bank - COO [4]

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Thank you. Thanks, Jerry, and good morning. It's good to be with you. Trustmark has a deep history and culture. We have an extremely strong leadership team that I've been a part of now for 15 years. I've managed the CRE, corporate banking, noninterest income areas as well as our Houston market. In the role of COO, I will assume all the remaining revenue-generating areas of the bank and its supporting operations. My main focus going forward will be growth initiatives and efficiencies across all business lines. This is a tremendous opportunity to build on the legacy and work with this leadership team to meet our objectives. I look forward to meeting all of you in the coming months. Thanks, Jerry.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [5]

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Duane, we are excited about you in your new role, and we thank you for your contributions for the 15 years that you've been with us.

Let me begin by saying that Trustmark finished the year in a very strong position. We reported net income of $36.7 million or $0.55 per diluted share in the fourth quarter. For the full year, Trustmark's net income totaled $149.6 million, which represented diluted earnings per share of $2.21. I'd like to briefly provide you with an update on our financial results, which are on Page 3 of the presentation.

Loans held for investment increased $88.8 million or 1% in the prior quarter and $265.9 million or 3.1% year-over-year. Revenue, excluding interests and fees on acquired loans, totaled $587.1 million for 2018, a 3.4% increase from the prior year. Net interest income totaled $415.1 million in 2018, reflecting a $12.2 million increase from the previous year.

Expense management continues to be a priority for us as core noninterest expenses, excluding ORE and intangible amortization, remained flat in the fourth quarter compared to the third quarter. Credit quality continued to remain solid as nonperforming assets declined 7.7% in the fourth quarter and 13.1% year-over-year. During the fourth quarter, we repurchased $54.5 million of our common stock. For the year, as a whole, we repurchased $62.4 million shares -- excuse me, of our common shares.

At this time, I'd like to ask Barry Harvey to provide some color to both loan growth and credit quality. Barry?

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Robert Barry Harvey, Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank [6]

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I would like to, Jerry. Just looking on Page 4, a couple of highlights. The loan growth for the quarter was $89 million year-over-year. Year-to-date, we've grown $266 million. The growth continues to be coming out of our CRE book as well as we had some good growth in our mortgage company, and then we've had some growth recently in the public finance side of it. So we continue to see good solid growth. I think we had guided previously to the low single digits and that's kind of where we ended the year, about 3.1% growth during 2018.

As it relates to our energy book, it remains in check there. Our exposure is $375 million; outstanding, $172 million, about 2% of our book. So we'll continue to work through that portfolio and it's continued to be challenged by lower commodity prices, which tends to be fairly fluid from period-over-period.

Looking on the page to Slide 5, the credit quality metrics. Trustmark's credit quality metrics continue to improve, whether you're looking at past dues, criticized, classified. Obviously, we've -- here, we're showing nonaccruals are down for the quarter. We continue to work those hard. Nonperforming assets continues to work those down to acceptable levels to us and that's a continuous function. Of course, nonaccruals as well as continue to move out our ORE, which we've been successful quarter after quarter of moving that out without sustaining any additional losses.

Looking onto Slide 6, dealing with our acquired loan portfolio. The acquired loan portfolio decreased about $26 million during the quarter, about $155 million during the year-over-year. The yield on that portfolio during the quarter was 9.9%. Part of that yield came from the recoveries, which represented about 3.5% of that yield. And then on a go-forward basis, not being able to predict the recoveries from quarter-to-quarter, just looking strictly at what we expect to see from the cash flows, we expect to see about a 6% to a 7% return on that portfolio.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [7]

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

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Thomas C. Owens, Trustmark Corporation - Executive VP & Bank Treasurer of Trustmark National Bank [8]

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Sure, Jerry. Turning to Page 7. Total deposits increased $407 million or 3.7% during the quarter, reflecting both personal deposit growth and normal public fund deposit seasonality. Total deposits increased $787 million or 7.4% from the prior year. We continue to maintain a favorable mix of deposits with 26% in noninterest bearing and 58% of deposits are in checking accounts. Our cost of interest-bearing deposits rose 11 basis points, representing a beta of 44% for the quarter and 33% cycle-to-date relative to the Fed's rate hikes.

Turning to revenue on Page 8. Net interest income FTE totaled $108.4 million in the fourth quarter, down 1.6% from the prior quarter, which resulted in a net interest margin of 3.56%, a decrease of 3 basis points from the prior quarter. Excluding acquired loans, the net interest margin was 3.50%, unchanged from the prior quarter and up 15 basis points from the prior year, driven primarily by our continued balance sheet optimization initiatives.

And now Louis will provide an update on noninterest income.

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [9]

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Thanks, Tom. Also reflected on Page 8, noninterest income totaled about $44 million in the fourth quarter and totaled about $185 million for the full year of '18, which represents approximately 31% of total revenues. As you can see for the linked quarter, noninterest income was slightly down due to seasonally lower insurance commissions and mortgage banking revenues. I'll also mention that for the year, both insurance and mortgage hit high watermarks for noninterest revenues totaling $41 million and about $35 million, respectively. Also, mortgage production for the year hit a high watermark of about $1.4 billion, which is an increase of about 3.5% over the prior year.

Now turning to Page 9. You will see that our core expenses, which exclude ORE and intangible amortization for the fourth quarter, remained well controlled, totaling about $102.5 (sic) [$102.6] million and in line with our previous estimates. For the first quarter in 2019, we would expect the core expenses would increase approximately 1% to 2% due to cost of living adjustment for our associates, payroll taxes resetting in January as well as adjustments for commission for seasonal revenues. We will -- we remain well positioned from a capital perspective as noted on Page 10 and briefly stated by Jerry. And during 2018, we repurchased approximately $62.4 million or 2 million shares of our outstanding stock and it included $55 million in the fourth quarter. As of December 31, we had approximately $37 million remaining on the authority under our existing stock repurchase plan. Jerry?

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [10]

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Catherine Mealor of KBW.

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Catherine Fitzhugh Summerson Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [2]

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

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [3]

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

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Robert Barry Harvey, Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank [4]

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I'd be glad to, Jerry. Catherine, this is Barry. As it relates to the loan growth for 2019, where we believe that mid-single digits should be as a realistic expectation that we have, I think we'll probably have some stretch goals that will be larger than that. But I think from what we think is realistic today, mid-single digits is where we are. I think we would expect for the majority of that growth to come in CRE as it has historically, but we do expect all of our areas to grow some more modest than others, and we expect to see growth on our mortgage area in public finance, and then we'll continue to work hard to grow on the C&I side. As you know, it's extremely competitive and has been for a while. The opportunities are few and far between, mainly because that they rely, some or most companies, on their own balance sheet to fund any CapEx and things of that nature. So -- but we'll continue to work hard there to grow where we can. And then the same is true on the consumer side in a rising interest rate environment. Most of the products that the consumers are looking at are variable rate, so they're less desirable. But we'll continue to work hard there and we do have growth expectations.

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Thomas C. Owens, Trustmark Corporation - Executive VP & Bank Treasurer of Trustmark National Bank [5]

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Thanks, Barry. So Catherine, this is Tom. We do anticipate continuing to run off the securities portfolio through the first half of '19. We've talked in the past about a target range of about 21% of earning assets. We ended the year at about 23%. Given our loan growth projections, we think that running off the portfolio through the first half will get us to about 21%, at about the end of the second quarter. So you take those 2 things into consideration, our loan growth projections and our running off the securities portfolio. Our current guidance is that we're probably looking at a range of 1% to 2% to growth in core earning assets year-over-year when you take the growth and loan portfolio net down the runoff of the securities portfolio. Anticipating other questions we're likely to get here, I'll speak just briefly to core net interest margin. There, again, our projection is growth of 1% to 2% for the full year over full year. And so given that full year '18 was 3.46%, we're probably looking at a margin in the low 3.50s. The range would be, say, 3.49% to 3.53%, something like that. So if you take those things together sort of the midpoint of all that, you get to basically about 3% growth in core noninterest income, which is about the amount of lift we got in core noninterest income in 2018.

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Catherine Fitzhugh Summerson Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [6]

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That's good. What rate assumptions are you assuming in that guide? And how does it -- and how maybe would that change? If the Fed pauses, or we getting another couple of rate hikes?

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Thomas C. Owens, Trustmark Corporation - Executive VP & Bank Treasurer of Trustmark National Bank [7]

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Yes, that's a great question. Thank you for asking it. So our current forecast incorporates market-implied forwards. As you know, the market at this point has basically priced out any further Fed tightening. And as a result of that, rates have come down. The yield curve has come down and it has flattened. So that creates a bit of headwind to margin expansion as well. So you take the majority of the lift that we've got and probably 75% to 80% of the lift we've got in core net interest margin year-over-year has been from balance sheet optimization, runoff of the securities portfolio. Where we currently only anticipate doing that through the first half of '19, you combine that with no further Fed rate hikes, lower rates, flatter yield curve, it just creates a headwind to core net interest margin expansion. So we do believe we will have some expansion yet here in 2019.

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Catherine Fitzhugh Summerson Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [8]

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Okay, that's great. And maybe one follow-up, just back on the loan growth, Barry. As you think about the growth that we saw this past year, it was more in the 3% range. And so it feels like your guidance for next year in the mid-single digit is a little bit higher. Is -- I guess, what are the pulls and takes there? Are you feeling better about less pay-downs and that's what's giving you more confidence in growth being better this year? Or is it more of a better origination outlook that's giving you that higher growth goal?

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Robert Barry Harvey, Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank [9]

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Sure, Catherine. And I think it's more the former. I think we're expecting a little less in the way of unexpected or unforecasted payoffs than what we saw in '18. I think we've got that baked in a little better into our numbers. And including baking in a reasonable amount of unforeseen payoffs, I think we believe our activity it has been strong, continues to be strong in terms of production. And the fundings, we believe, will be there, especially on the CRE side. We do also see a little bit of improvement in our success rate on the public finance side. Fourth quarter was a good quarter for us in terms of bookings. So we are seeing some improvement there. And I do think that we have the opportunity to continue to book a fair number of short-term 15-year or less mortgage paper that we would -- that we traditionally hold, that we can continue to grow that book in a reasonable manner. So I think between those 3 categories, we see a good bit of opportunity. And then, of course, we're here again striving to be successful in the consumer and the C&I side as well. But I think we're a little more optimistic in public finance going into '19. And then I think we're more optimistic that we'll have a little less in other payoffs that we saw in the first half of 2018. I think we expect to see a little less of that in 2019.

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Operator [10]

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Our next question comes from Daniel Mannix of Raymond James.

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Daniel Raymond Mannix, Raymond James & Associates, Inc., Research Division - Senior Research Associate [11]

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Duane, congrats on the new role.

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Duane Arthur Dewey, Trustmark National Bank - COO [12]

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Thank you.

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Daniel Raymond Mannix, Raymond James & Associates, Inc., Research Division - Senior Research Associate [13]

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I appreciate all the color so far. It's been great. I wanted to dig into the NIM a little bit more. So the gap between reported and core shrunk a bit this quarter. Can you talk about scheduled accretion for 2019?

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [14]

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Could you repeat that, please, the gap?

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [15]

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So I think the question that Daniel is asking is just sort of the differential. I think he's asking about the acquired loan portfolio accretion and the fact that '18's accretion was lower than '17. What are we protecting in terms of '19? The differential is...

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Duane Arthur Dewey, Trustmark National Bank - COO [16]

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Well, it's very disclosed. I think we're expecting about a 6% or 7% yield on that as it continues to run off. And I think the scheduled runoff by quarter is somewhere between $10 million and $20 million. So we expect a steady 6% to 7% yield on that portfolio as it paves down throughout 2019.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [17]

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So does that answer your question, Daniel, or no?

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Daniel Raymond Mannix, Raymond James & Associates, Inc., Research Division - Senior Research Associate [18]

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Yes, yes, that helps.

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [19]

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And I think Barry indicated we really can't predict recovery at this point in time because that portfolio is pretty mature and has been well worked down through over the last 3 years.

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Robert Barry Harvey, Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank [20]

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Down to $107 million, so it's relatively immaterial.

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [21]

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We hope by year of 2019, we've merged this acquired portfolio with loans held for investments just because it will be immaterial at that time as well.

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Daniel Raymond Mannix, Raymond James & Associates, Inc., Research Division - Senior Research Associate [22]

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

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Thomas C. Owens, Trustmark Corporation - Executive VP & Bank Treasurer of Trustmark National Bank [23]

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Sure. So this is Tom. Again, just generally speaking, as it relates to deposit betas, I'll say that fourth quarter actually came in below what we were projecting, which is obviously favorable. So you combine that with the current market interest rate environment where basically expectations for further Fed tightening have been priced out at this point. We are -- so as I said in the prepared comments, a beta of 44% on interest-bearing deposits in the fourth quarter cycle-to-date, 33%. We are anticipating that in 2019, there will be some further upward repricing of deposits, as you can imagine. Just because the Fed isn't tightening anymore doesn't mean that rates aren't generally higher, particularly as it relates to the CD book. So there will be some further repricing. We're currently projecting that by the time we get to year-end '19, that, that cycle-to-date beta will have increased from 33% at year-end '18 to 38% at year-end '19.

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Daniel Raymond Mannix, Raymond James & Associates, Inc., Research Division - Senior Research Associate [24]

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That's helpful. And wanted to just finish up with capital. So high share repurchase activity in fourth quarter. Is it likely that you guys would finish up, that you would max out the current authorization this quarter? And how is the board looking at it going forward after exploration of potential program after that?

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [25]

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This is Jerry, Daniel. First of all, process wise, we have a capital management team that meets every month to review our position and review various types of capital deployment, whether it's a buyback program, organic growth or what we might have on the table in the way of opportunities for M&A. Look, we have approximately $30, what, million left in the original...

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [26]

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Approximately $37 million.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [27]

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Yes, $37 million in the original authorization.

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [28]

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That expires in March.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [29]

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It expires at the end of March. We continue on the same path we've been on during the fourth quarter, that we would use the allowable amount by the end of March. Market conditions in need for capital will dictate that. As far as going forward and looking at a new authorization, it would come only after thorough analysis of need for capital as well as the work that Barry Harvey and his team are doing relative to CECL. We are a long ways down the line on working on CECL and have a good sense for capital needs once that's implemented. So all that's being taken into consideration. It's a little early to be specific about the -- about a new authorization. However, we had our board meeting yesterday and we'll tell you there was a lot of discussion relative to capital as a whole, where we are and where we think we need to be in the future. I think that the positive thing now is we still remain very well capitalized as an organization, but if you look at where we were at the end of last year, it's about 13...

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [30]

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We're basically flat.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [31]

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Just above 13% where we ended '18. Just above 13% on a total risk-based capital basis. And also, on a Tier 1 capital, the slide that's up right now, shows 11.77% versus 11.77%. So all in all, we were able to deploy the earnings this year in -- both through dividend and through buyback and kept very strong capital ratios.

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Daniel Raymond Mannix, Raymond James & Associates, Inc., Research Division - Senior Research Associate [32]

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Yes, that's really helpful. Just if I could sneak one in there on the other side of the coin there. You talked about the dividend. Do you have a target payout ratio?

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Louis E. Greer, Trustmark Corporation - Treasurer & Principal Financial Officer [33]

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We monitor our payout ratio. And as you might imagine, over the last 8 or 9 years, that ratio has been relatively high with the tax cuts and the earnings for this last year. It's come within a more normalized range of low 40s. We do watch that. We don't have a specific targeted payout ratio, but it's one of those things: dividends, buyback, acquisitions and organic growth that we all look at on a very regular basis to determine our actions relative to any of those 4 things.

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Operator [34]

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Our next question comes from Jennifer Demba of SunTrust.

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Jennifer Haskew Demba, SunTrust Robinson Humphrey, Inc., Research Division - MD [35]

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Your credit quality has been excellent. We've seen an issue from another bank this week for C&I leveraged loans. Just curious if you have any significant balances in that area.

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Robert Barry Harvey, Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank [36]

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Jennifer, this is Barry. And that is an area that we have intentionally avoided over the years. We -- there's some carve-out language within the guidance that allows you to do a little bit without doing a lot of reporting on it, and that's where we kind of live. Our exposure as it's reported on the call, is around -- its outstanding is around $47 million. Exposure is $56 million, basically nothing. That's 3 or 4 credits. And that's where we consistently are in that range. We try to accommodate existing customers as they have some transitions in the business ownership, but that's very rare that we have that need, so therefore we have little or no exposure to that particular category. And that was a choice we made and a decision we made to kind of stick a little more with what we understood and what we were comfortable with and not get in a situation where we were -- had a lot of exposure to air balls that may or may not work out over time.

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Jennifer Haskew Demba, SunTrust Robinson Humphrey, Inc., Research Division - MD [37]

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Are those loans performing right now, Barry?

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Robert Barry Harvey, Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank [38]

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They are. They are.

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Operator [39]

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

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [40]

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Louis, I wanted to ask maybe about fees. As you think about 2019, you touched a little bit on the mortgage. Obviously, I think in '18, you were helped a little bit about -- with some hedging. Mortgage markets, a little more challenged with rates where they are. Just kind of curious kind of how you guys are thinking about fee revenue as you move through the year.

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [41]

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Brad, I'll take that one. This is Jerry. In terms of outlook in the mortgage company, I think we have been through, I think, a significant transition in the last 3 years, where we have moved the company from about a 50-50 wholesale retail to about 75% retail. We've hired mortgage originators throughout our footprint. We have been working with our retail banking people and our private banking people to help generate leads and opportunities. We feel as though the profitability per loan is much better on -- in that retail distribution channel and continue to grow that and look for new opportunities there. The real unknown is what happens with interest rates and housing prices and how that might affect our volumes. But I think the good news is, is that we can adjust accordingly. At this point, we feel good about having a very strong 2018 and feel like we can carry that momentum forward in '19. A lot of unknowns. What do you do? We've had $133 million at the end of every quarter in the impact. The hedging activity is very much a function of the 30-year mortgage MBS versus the 10-year treasury. So all those things affect our mortgage operation. I think we've done an excellent job in the past in managing those interest rate risks as well as those volume risks. And we feel good about where -- how we're positioned for '19.

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [42]

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Great. That's helpful. And just sort of bigger picture, Jerry or Tom. You guys have been crystal clear on the earning asset mix shift. I completely understand you're trying to protect the NIM. But kind of listening to kind of your guidance, a couple percent NII growth, a couple percent expense growth, it seems like you're going to need some dollar earnings in addition to protecting that NIM. Just kind of curious, when you get to your 20% or 21% bond book as a percent of earning assets, what's the next move? Are you just sort of setting yourself up in hopes of a better yield curve at that point in time and maybe you can lever back up to generate some earnings? Just kind of curious what the plan is kind of once you get to the end of this plan because you get paid in dollars, not NIM. Just kind of curious what you're thinking about going forward.

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Thomas C. Owens, Trustmark Corporation - Executive VP & Bank Treasurer of Trustmark National Bank [43]

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So thanks for the question. This is Tom. I think it goes back to, as Jerry was alluding to earlier, we're continually in the business of evaluating different forms of capital deployment and the returns available. I'd say particularly -- I mean, my views are so much uncertainty right now between now and the end of the second quarter in terms of what may happen with interest rates, what may happen with the yield curve. The economic data that we continue to get continues to be reasonably strong. I would not be surprised if the market gradually begins to price back in further Fed tightening. I wouldn't be surprised if we do get Fed tightening, further tightening in '19. That may steepen the curve a bit. And it may present us better opportunities to deploy capital through securities reinvestment. But as it currently stands, the curve is very flat. There is not a lot of opportunity there. So that's a decision that we're going to have to -- an evaluation we're going to have to make at that point in time as we move forward, and that's about as much guidance as I could give you at this point.

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Operator [44]

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(Operator Instructions) And our next question comes from Matt Olney of Stephens Inc.

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Brandon James Steverson, Stephens Inc., Research Division - Research Associate [45]

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This is Brandon Steverson on for Matt this morning. I just wanted to clarify on the charge-offs that you noted in the release related to the resolution of 2 problem credits. I just want to clarify, is that the same 2 credits that drove the higher provision last quarter? I think one was a restaurant SNC and the other was an industrial parts distributor?

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Robert Barry Harvey, Trustmark Corporation - Executive VP & Chief Credit Officer of Trustmark National Bank [46]

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Brandon, this is Barry. That is correct. I think we've guided last quarter that while we made the provisions during Q3, you were likely to see full resolution of both those credits during Q4 and as it relates to charge-offs and that is what you saw. I think one credit is fully charged off. The other credit has about $275,000 worth of outstanding balance that is cash collateralized. And so that's what you saw, was the flowing through of the actual resolution on those 2 credits that we discussed last quarter during Q4.

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Operator [47]

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

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Gerard R. Host, Trustmark Corporation - President, CEO & Director [48]

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Great. Thank you, operator. And let me thank all of you who's been on the call today. We look forward to discussing our first quarter 2019 results in late April, and we appreciate your interest in Trustmark. This ends our fourth quarter call, and thank you for joining us.

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Operator [49]

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