Q3 2020 Trustmark Corp Earnings Call
[music] good morning, and welcome to the Trustmark Corporation third quarter 2020, <unk> earnings Conference call.
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Please note this event is being recorded.
I'd now like to turn the conference over to Joey Rein director of Investor Relations at Trustmark. Please go ahead.
Good morning.
For every one that a copy of our third quarter earnings release.
<unk> presentation that will be discussed on our call. This morning.
Only investor Relations section of our website at <unk> Dot com during the course of our call. This morning.
Forward looking statements within the meaning of the private Securities Litigation Reform Act of 19.
We would like to caution you that these forward looking statements may differ materially from act.
Actual results due to a number of risks and uncertainties, which are outlined in our earnings release and other filings with the Securities and Exchange Commission.
Just talking about you introduce Jerry host chairman and CEO of Trustmark.
Good morning, everyone and thanks for joining us.
With me this morning are Duane.
Then chief operating officer.
Greer, our CFO, Barry Harvey, our Chief Credit Officer, and Tom Owens, Our bank Treasurer.
During the third quarter, we remain focused on ensuring the safety of our customers and associates and supporting our local economy.
We continue serving customers both remotely through our branches.
[music] meaningful increases in the adoption of our mobile banking solutions.
We remain engaged with our customers actively discussing challenges in solutions and providing concessions as appropriate.
We continue to follow best practices for health and safety of our associates.
I'm extremely proud of our associates dedication to providing advice and solutions to meet our customers' unique needs in this challenging environment.
Moving to page three lets review some highlights from the quarter.
Our results reflect the value of our diversified financial services businesses.
Noninterest income increased 6% linked quarter and represented 41% of revenue in the third quarter.
Our results reflect a lower provision expense for credit losses due to improvement in the macro economic factors used to compute reserves under our seasonal model.
BPP loans totaled 970 million at September Thirtyth.
Or deferred fees.
Cost of 25.7 million.
Loans held for investment, excluding PPP loans increased to 188 million or 1.9% from the prior quarter.
624 million.
Or 6.8% year over year.
Our pretax pre provision net income totaled 62.9 million up 1.4% linked quarter and 26% year over year.
Adjusted non interest expense totaled a 115 million in the third quarter.
3.2% from the prior quarter.
Our allowance for credit losses represented 1.24% of loans held for investment.
September Thirtyth 2020.
We maintain strong capital levels with a common equity tier one capital ratio.
11.36%.
Total risk based capital ratio of 12.88%.
The board of directors declared a quarterly cash dividend of 23 cents per share payable December 15 to shareholders of record on December the first.
This time I'd like to ask Barry Harvey to provide some color on loan growth and credit quality very glad to Jerry.
Turning to page four you can see that loans held for investment excluding pay pay loans totaled $9.8 billion as of now already that's up $198 million or 1.9% linked quarter and that puts us up 624 million or 6.8% year.
Over here.
Loan growth reflects continued funding on our commercial real estate construction loans.
The loan portfolio remains well diversified baseball product type and geography looking on the page five.
So you're a portfolio its 63% existing.
37% construction land development, Oh got construction land development, 82% it's construction.
The bank or owner occupied portfolio.
The nocs mix between both type and industrial.
Looking on page six.
Hi, its commercial loan portfolio is well diversified if you can say across numerous and recycling.
Typically these loans are well secured governed by a formulaic barn bites its probably to protect both the income statement and the balance sheet.
Looking on the page seven.
We have a minimum exposure as you can see two restaurants and energy.
Trustmark has never been and the higher rent, saying lending business and currently we just have the same one customer what about $11 million outstanding.
There's always underwritten hotels and retail at a very conservative manner.
Currently we have about 90% of the hotel book at 6% of the retail CRT book, that's under construction plan.
Moving on to page eight.
We conducted a review during a commercial borrowers.
Potentially impacted by cold at night paying during Q3.
These were borrowers who were saved waterborne paint concessions.
Well bores and industries that significantly impacted back overnight chain approach.
Approximately 80% of the borrowers receiving.
Session more and more concessions were viewed.
Well ever be 96% of the hotel or probably up 86% of the restaurant portfolio, 94% of the retail Siri book.
That's true that's review resulted in a coverage of $1.8 billion and resulted in US Downgrading 130, Dod committee, yet or 7.7% Oh the portfolio reviewed to the criticized category during the quarter [noise].
Turning on to page nine our allowance for loan losses was relatively unchanged from the prior quarter.
Reserve calculation included an increase in.
<unk> loan growth.
And the qualitative changes due to the cold the portfolio review with the board. It also reflected a decrease in our quantitative portion of our reserve based on improvements in our economic forecast that's.
That's up September thirtyth, the allowance for loan losses.
Loans held for investments totaled $123 million.
Looking on page 10.
We continue to post solid.
Asset quality metrics, our allowance for loan losses represented 1.24%.
Oh bar held for investments, which resulted in high almost a 600% coverage of nonperforming loans, excluding those that are individually evaluated.
We were we recorded a net we were never covered for the quarter by $1.1 billion.
Oh, the real estate declined by 11% from the previous quarter and it's required it's declined 49% year over year turning.
Turning on to page 11.
The bank actively participated as you know and a paycheck protection program.
It's absolutely assisted a significant number of businesses.
[noise] that had been negatively impacted by October 19 pandemic.
Our PDP loans totaled 944 million as of September Thirtyth. This was net of the deferred loan fees and costs associated with the program of 26 million.
We're currently taking forgiveness applications from borrowers with loan about 50000 and above.
And have completed reviews are approximately 230 million or 24% of RPP pay portfolio and have submitted those to the to the regulatory to them you have to be a four for concurrence with the recommendation we've we've made.
Sure Great. Thank you Barry now turning to the liability side of the balance sheet I'd like to ask Tom If you would discuss our deposit base and the net interest margin Tom. Thank you Gerry.
So.
Turning to page 12 deposits totaled 13.2 billion at September Thirtyth.
Which was down 283 million from prior quarter.
However, average balances were up $277 million linked quarter and up 2.2 billion year over year.
Merrily for reflecting additional customer liquidity associated with P.P.P. loan program and government stimulus payments.
[noise] linked quarter average balance growth was driven primarily by commercial balances, which were up 9% while growth in consumer balances of 2%.
Centrally offset declines in public fund balances of 7%, which reflects normal seasonality of public funds.
Our cost of interest bearing deposits declined six basis points from the prior quarter totaled 31 basis points, driven primarily by the continued downward repricing of the time deposit.
We continue to maintain a favorable deposit mix as non interest bearing deposits rose to 30% of deposits at September 30.
Wow, 62% up deposits were in checking account.
Our liquidity remains strong with loan to deposit ratio of 82% September Thirtyth and.
Reliance on wholesale funding of less than 3% of assets [noise].
Turning our attention to revenue on page 13.
Net interest income F. T E totaled 109.2 billion in the third quarter, representing a linked quarter increase of 1.2 billion.
Interest and fees on P.P.P. loans totaled 6.7, well.
Well 102.4 million was core.
[noise] the core with a decline of 516000 from the prior quarter as a reduction to 2 million in core interest income more than offset a decline of one and a half million dollars interest expense.
Net interest margin in the third quarter.
3.03% declined by nine basis points from the second quarter as core as did the core NIM X P P loans, which declined to 305.
Other earning assets remained elevated during the quarter as commercial and consumer deposit balances continued to increase and public fund balances remained elevated despite the normal seasonal decline during the quarter.
We continue to anticipate a reversal of the significant increase in public fund balances, which occurred during the second quarter, although the full impact on net may.
May not be felt until first quarter of 21.
And how Dwayne will provide an update on noninterest income.
Thank you Tom.
As shown on page 14, our fee businesses posted strong performance in the third quarter noninterest income totaled 73.7 million up 6% linked quarter and 52.5% year over year for the quarter non interest income represented 41% of Trustmarks revenue demonstrating that.
Well diversified revenue stream.
Our mortgage banking group continued to report solid results and we will discuss it in more detail in a moment.
Service charges on deposit accounts increased 1.2 million linked quarter as customers gradually return to more normal pre pandemic activity level.
Bank card and other fees.
1.1 million from the prior quarter due to higher customer derivative revenue in interchange income.
Insurance revenue was down seasonally but up year over year and wealth management revenue was in line with the prior quarter as increases in brokerage and investment services were offset by a decline in trust management fee.
Turning to page 15, our mortgage banking group had another outstanding quarter as loan production totaled 886 million, an increase of 3.8% from the prior quarter and 56.5% year over here.
[noise] retail production represented 70.2% of ball young or 622 million in the third quarter.
On sales of loans for the quarter totaled 34.5 million, which is an increase of 394000 on a linked quarter basis.
Overall mortgage banking revenue in the third quarter totaled 36.4 million up 2.7 million from the prior quarter.
Other very strong quarter in the mortgage business.
Yes, well now cover non interest expense and capital management Lewis.
Either way.
You can see on page 16, you see a detail of our non interest expenses broken out between adjusted and total.
Adjusted noninterest expenses, which excludes amortization of intangible or ia expense and credit loss for off balance sheet credit exposures totaled about 114.6 million in the third quarter, an increase of about 3.6 million or 3.2% salary and employee benefits were up 1.2 million due to.
Increases in salaries commissions related to the mortgage company and accruals for performance based incentives services and fees increase related to continued investment in technology.
Our adjusted non interest expenses rose 1.5 million, principally due to loan expenses related to loan volumes and a non cash charge for a realignment of branch offices of approximately 900000 as we put the branches up for sale. We show those assets for sale were we fair value, though so that's on that Jeff.
Before fair value of 900000 for two facilities that were trying to sell credit loss expense related to off balance sheet credit exposure was a negative 3 million a decline of 9.2 million from the prior quarter, primarily reflecting an improvement of macro economic factors used to determine the necessary reserve for off balance sheet exposure.
This was partially offset by a 932000 dollar increase in Oh are you expenses, which is due to write downs during the third quarter in the fourth quarter, we expect that adjusted expenses as previously defined to be approximately 113 million dependent on mortgage production for the fourth quarter of 22.
Morning, as Jerry mentioned earlier, we remain well capitalized and as with the total common tier one ratio of 11 36 total risk base at 12 88 at September the Thirtyth and as Gerry mentioned the board of directors declared a 23 cents dividend payable to shareholders of a.
Some of the 15 2020 Jerry.
Great. Thank you both.
If you look I think we're putting up slide 18.
Which is the announced succession plans.
I'd first like to begin by congratulating Duane and Tom on their new upcoming World. We are extremely excited about these two gentlemen, moving into a into the CEO and CFO, respectively over the next six months or so.
You saw the announcement yesterday afternoon.
Variety of changes taking place I thought I'd take just a minute and go through them.
The process for this obsession of both the CEO role and the CFO role as but then one that has been in place for over two years now our board is taking tank I'm very thoughtful and deliberate.
Process and making this happen a they have used the council of Ah outside.
Expertise both from a legal and from the perspective of leadership consultant to help make that decision.
It is as I mentioned on a very thoughtful and deliberate process.
I will tell you that over the next several months Dwayne and I will be transitioning the remaining responsibilities as the CEO role.
[music] include risk and finance.
Between now and the year end and I will tell you that I plan to stay.
Very active in the company, but in a very different way, we have a very engaged board of directors and I plan to to be very involved in board governance.
I'll stay very involved in the strategic planning process, M&A and Investor relations, but Dwayne will be running the company make no doubt.
That.
And he is well prepared to do that he's been here for over 17 years, and it's had a lot of prior experience in both large and small are organizations over the banking career. So I'm really excited about way moving into this role and what he's going to bring to this company.
In addition.
Back in January the first we're going to make some changes around our administrative process Granville take new.
Many of you have not many of you know that.
But some of you on this call have not had the opportunity.
To listen to two grams will talk about the company is currently our general counsel and Chief risk Officer.
We plan on having gravel.
Take on the additional responsibilities of chief administrative officer.
And that should help support Duane.
As it relates to a lot of the other activities that are involved in running the organization. Both of those changes will be effective January the first of 2021 [noise].
In addition on March 31st and this is so that we can get through the a year end got through the K getting through the preparation of the proxy and a lot of other things.
Lewis Oh has provided us with isn't Chan Letterman Jan.
To retire from the company.
As of March the first 2021, most is remaining onto a us is oh.
Oh ones and ER and working up through the year end process and all the financial reporting associated with that.
So Louis will retire then Tom Owens will step into the Chief financial Officer role.
In addition to.
Shane Chambers, who is.
He served as our controller or will.
He will become our principal accounting officer for incorporation and he will become our chief accounting officer for the bank and will assist Tom and ER and the financial reporting issues that the company.
And then the the last change we want to we want to communicate to you is that several months ago Maria Sue Guy or we call arena.
<unk> has joined the company. She came in initially is kind of a treasure, but in the back of our mind, we felt like if if all of these transition plans played out or that beginning in March 1st of.
Next year re oh, well be ready to move into the treasurer role I'm, taking Toms place.
So a number of significant changes in the company all well thought out.
We believe all with a very competent group of people that are going to bring I think a new dimension, a new perspective tenant company.
They all got tremendous energy and are ready to go.
Once once we get out of this.
Calvin Funk, I guess is what I might call it.
We were excited about it as I said I'm looking forward to it.
And and with that let me.
Let me suggest that operator, we open it up for calls on either the yard.
New York changes or all the financials.
[noise], we will now begin the question and answer session to begin to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to.
To withdraw your question. Please press Star then two or at this time, we will pause momentarily to assemble our roster.
Our first question comes from Jennifer Demba with Truest Securities. Please go ahead.
Thank you good morning.
Good morning, Jennifer.
Well congratulations on a on every call I hope.
That's true.
I'm just wondering what the strategic.
Identical petsmart comfortable not well I see my feeling is going down there.
No that's Abba.
One thing like light.
And the next.
[noise], Jennifer we have Ben and the process as we prepared for these changes have duane being very involved and engaged and our focal points given the changes here and knowing that there's a change in.
How the customers want to bank with us, how we must bank or the challenges of a.
This low entry.
Interest rate environment, with a flat yield curve and the challenges that brings and I think you can see our financials reflect.
The fact that we have other businesses that are helping to provide a fee income, but we do have very much a focus going forward and you know what asset Dwayne maybe talk.
Talk about Oh, those areas of focus.
Yes, Jennifer good morning.
So as we start to focus on in 2021 and beyond we basically are categorizing and five I marry categories deficiencies span at the top of the list that is taken advantage of some of the technology advancements in and projects we have under way on on the.
Persistency side as well as really examining the branch system and how we deliver products and services to the consumer across a across the franchise.
Secondly, we're focused on you know growth being both organic opportunities.
Opportunities to grow things that we do currently and do it in a more extensively across the system et cetera, but oh organically really focus on growth as well as opportunities that may present themselves as we come out of it is from a M&A side or any other type of.
Expansion opportunity I sent some efficiency growth, we are constantly focused on innovation and how we how we process data how we analyze data.
We interact with customers et cetera, So innovation would be the third we want to do this all in a way in which we're very cognizant that our risk and managing our risk.
Focus and making sure we maintain a proper balance between growth and risk management and finally, we feel strongly about the company's culture and how we go about how we go about expanding and building out all the things I just mentioned, while maintaining the Wifi.
Oh unique culture of our company, that's focused on our customers and our communities and our associated said.
So as we build our strategic plan that was the frothy five primary tenets that we are focusing on [laughter].
Great. Thank you very much a one more question you talked about your hotel land, having a reasonably high hurdle right.
And any thoughts heads of loan sales and these more stress categories. If you could get a pretty favorable price.
Jennifer This is Barry I would say that's not something that we're considering it goes.
I think we're very pleased with how our portfolios are performing including our hotel portfolio. As we've mentioned previously about 40% of that exposure in that book or and coastal resort areas. They had a very nice summer. This year I'm very much in line with what they experienced in 29 train.
The rest of the book, we fully expect for it to cycle down as you would and as you would envision but even the non resort areas for our hotels, they're mostly dropped destinations. So its not like theres somebody's going to get on a plane to get there may be reluctant to do so so for that reason they tend to know that there are.
All forgetting to do a little better as everybody adjusts to this new process that we're operating in our.
Yeah, and so therefore, we do expect to see though the portfolio cycled through I'd come back out the other side and so at this point, we don't have any interest in looking at potential sales. Although obviously, we get phone calls every day in that regard.
Thank you.
Thank you that out to the.
The next question is from Catherine Mealor with KBW. Please go ahead.
Thanks, Good morning.
Good morning, Jeff.
I mean first off congrats on all the management changes also wanted to start my question's on loan growth your loan growth has.
Then really probably one of the best growth rate. That's seen this quarter, you talked a little bit about a little bit about how much of that's coming from new originations versus you know the construction funding and.
What your outlook is for growth moving forward. Thanks.
Catherine This is Barry.
The great are there already and one of the great majority of our loan growth continues to be funding on our existing CRT projects and we would expect that to continue through the remainder of this year. One thing that we have identified for 2021 that will impact us we do have a larger number of our projects.
I have we'll have fully funded that will be leaving us are slated to leave us during 2021 versus what we're experiencing at 2020. So as you know we were every quarter were surveying all of our CRD professionals getting a clear understanding of what they know about the projects how long that.
Stay with us versus what the maturity date might say and so therefore, we're constantly updating what we believed to be the forecast of loans that we know we're going to leave us during a given period of time and of course, we do experience like all banks unanticipated payoffs, where they they develop or does it.
Certainly no there in the market to sell something but also it may get a spike in a really strong offer and they go anything except that it moves away from us So what we do see in 2021.
As more payoffs coming from our existing stabilized CRM projects that we're experiencing in 2020. So there is we do have a little bit more of a headwind going into 2021 than we have than we experienced in 2020.
Great. That's helpful said, how is it fair to assume a lower growth rate for line does it in 21 person it looks like maybe ex TPP, you'll be kind of 6% to 7%. This year. So fair to assume it's a slower growth rate for that from that dynamic in 2021.
Yeah, we're continuing to evaluate what we think 2020 one's going to look like but I, but purely from the fact that we do have a larger number of CRH payoffs coming our way and 2021 that we have a high level of certainty around versus 2020 that we would expect to have slower growth and 20, 21%.
2020.
Great got it.
How does that impact the margin and that's some of these or what do you. When you look at some of these projects is having higher yield and is there.
Making a large impact to the margin that we should be aware of it the projects roll off.
Catherine This is Tom no I don't think there'd be any material impact to the margin.
From the the rate at which those new loans go on and fund up.
I would add to what Tom Tom's comment what we've experienced during the.
This nine months of this year, especially the seven months since coated.
Kinda, but came by a factor.
We did we have experienced much better pricing I'm Catherine during this period of time of course those loans are not funded at this point it wont find until 2021. So we have seen better the origination pace and we have seen some materially better pricing and we've been able to establish floors.
On a lot of the projects that we have approved hearing that from pretty much from February to now so from that standpoint, I think we are encouraged that when those projects do begin funding and 2021, we will see a little better spread on Bose on boats that we booked during this seven month period.
Okay. That's great maybe that that really isn't kids. It's the margin outlook question for you Tom eat a little bit of description on what you expect to see from the public funds funds, but can you just give us some thoughts on how you what your outlook for the margin.
Sure happy.
Happy to Catherine this is Tom so to start with we need to bear in mind that it's a complicated answer.
I guess I'd start by using our guidance from last quarter as a reference point.
Which was essentially kind of averaging over the next handful of quarters linked quarter declines in earning asset yields of mid single digit basis points.
And then on the deposit side interest bearing deposit costs linked quarter declines.
In the low single digits.
Number of basis points, which gives you some run rate some modest run rate compression.
However, here's where it gets complicated when you think about.
The anticipated pay offs, but think about my prepared comments and the continuing elevated deposit balances deposit balances have continued to grow they have not yet begun to trite.
And then you combine that with the anticipated.
Reimbursements on the PPP loans.
Some of which we anticipate will happen in the fourth quarter more with me anticipate what happened in the first quarter.
You're going to see very significant drag.
To net interest margin, including core net interest margin from the increase in.
In excess reserves, so while you've got that sort of truly fundamental run rate of low to mid single digit quarter over quarter compression in core net interest margin. You also have this what I'll call exhaustion factors suddenly a ball the incremental additional.
Quit a day coming from PPP loan reimbursements so.
And what that will do cosmetically is that will drive down our reported net interest margin and core net interest margin. So I want to I want to be very clear in terms of our guidance that in my view. There is a difference between the fundamentals in terms of ongoing compression between earning asset yield.
And funding costs, there's a difference there between what I'll just describe that possibly sticker shock that you would see in terms of the impact of that excess liquidity, which in round numbers.
Could be about 20 basis points.
So another way of saying that is once you get past the pay off of the P.P.P. loans the reimbursement of those loans.
All of the things equal that you already had in your model you should expect to see a 20 basis point drop in our run rate and that you could in terms of net interest margin, but that is not driven by fundamentals that's driven by the excess liquidity from a modeling perspective, we're taking a pretty conservative approach, we think which is deciding where we are.
Not currently modeling significant attrition of that liquidity, nor are we modeling significant redeployment of that liquidity.
And that's obviously part of the part of our ongoing analysis and a strategic.
Strategic thinking as we think about 21, what the effective duration of that liquidity might be and what the possible forms of redeployment might be.
Great. That's very very helpful. If it did basically you're assuming that the PPP as they see PDP forgiveness to liquidity actually continues to fill that into next year, which is whats driving that 20 that I'm like.
Ration.
Correct, Great. That's very helpful. Thank you. Thank you so much.
Again, if you have a question. Please press Star then one.
The next question is from Joe yet showed us with Raymond James. Please go ahead.
Hi, there I appreciate you taking my question.
So as it shifts to the expense outlook and I guess in the near term, where do you think that will settle and.
How should we think about your branch count how that'll end say 12 months out.
[noise] Oh. This is Louis I will tell you that.
I think our expenses I gave you a.
A a a view of the fourth quarter, where we think that those core expenses are just expenses, we call without some of the noise, Oh, sorry, and amortization will settle in about 130 million I can tell you. We're we're in the process for.
A strategic planning and our budgeting process right now right now I think we plan to close at least six branches and 21 so.
[noise] Oh, great [laughter], how is that is that the question I heard you want to know how many of the branch count I think we're continuing to consolidate branches and Oh.
So we're looking at six additional branches in 2021.
Understood I appreciate it and I was hoping to ask about M&A. So I guess it relates to potential M&A. What are some of the characteristics that you would look for to dance partner.
This is Jerry I'll answer that question.
We typically are first of all our geographic focus is a is the southeastern United States.
And in that we we would draw I am.
Texas.
Even though technically they're not in the southeastern United States. They are currently part of a of our footprint and if opportunities arise we gladly.
Expand further in Texas markets.
Primarily the southeast we're looking and feel like we can easily manage organizations between from 300 million to 5 billion in size.
At our focus there in terms of characteristics we.
We are we do well and.
Both the second secondary size markets the markets like a Jackson immobile.
Birmingham Huntsville.
We do a significant business in the larger markets like Atlanta like Dallas.
Through our commercial real estate group and in some ways, our RC and I grew so, but we don't necessarily have to have the footprint. There. So our focus there is in terms of ER in terms of strategy.
Fine those organizations that would complement what we already have so that we can be a more dominant player in markets, we're in as well as the <unk> too.
To find opportunities that allow us to consolidate some cost. So those are some of the characteristics about our M&A activity.
All right I appreciate it and congratulations [noise].
The next question is from Graham deck with Piper Sandler. Please go ahead.
Hey, guys good morning.
Good morning.
Alright, so after completing the cobot impacted portfolio review this quarter. So you guys allocated about 18 million to the reserve as a result.
Would you guys expect the Youre about done building the reserve barring any unforeseen developments in the economy and that future provisioning will mostly be driven by loan growth and any credit migration if it occurs.
Hi, Grant this is Barry we did grow the loan the funded loan reserve by $1.8 million during the quarter and.
I think that's going to all depend upon you know they what happens going forward. The drivers. This quarter of course were really were two drivers of the macroeconomic forecast improved and that resulted in a release calculated above about 14.1 million they own the quantitative side, but on the qualitative side.
Based upon the Oh, good night pain population, we identified and reviewed downgraded and adding reserves to that resulted in about a 17.1 million dollar provisioning. So those two pretty much offset each other from a qualitative quantitative perspective during Q3, I think going forward what.
You're going to see that's going to impact our.
Preserving its going to be obviously, the the macroeconomic forecast if it continues to improve its going to continue to generate a release, we're going to continue to review this 1.8 billion dollar.
Kobe not attain portfolio, we've identified probably add some credits to it overtime as we as we come across them. So that will be a a quarterly update that we'll be doing as we get up new financial information from the borrowers and the guarantors so that will be an opportunity for some additional the downgrading of maybe what we moved to special mention Mike.
Substandard when they asked for Newt special mention and substandard. So that will that will be ongoing through 2021. Those two are probably the biggest two factors that are going to determine whether we have additional reserving or a release of reserves. The other factors of course that genetic factor to consider is going to be portfolio mix.
Along with the levels of unfunded commitments long growth. It is a factor we had nice loan growth this quarter of $198 million. We did obviously fully reserve for that and then if for some reason the maturity lags began to lengthen out or shorten obviously this quarter. We did have a release that related to the our speeds picking up.
We updated our discounted cash flows and that was a result of our maturities shortening so as our maturity shorten our length and that's going to obviously require additional reserve. We are released from reserves. So all those factors are going to come into play I think the biggest to being our our forecast our macroeconomic forecasts going forward. It back and then some proved that will be released.
If we continue to find credits a need to be downgraded as a result to covert not change that will be a you said there was this quarter it was pretty much a wash.
Great. That's that's really helpful sales.
I guess moving on to mortgage it's obviously been really strong over the last few quarters. How are you guys thinking about how production might turn around 2021, I know, it's it's super tough to pinpoint, but we're just like some color on how you guys are approaching the new year.
This is dwayne.
As you as you say mortgage has been tremendously strong it remains strong as we go into the fourth quarter.
There is seasonality of course, and we do expect a lower.
Lower production numbers in the fourth quarter, but still historically, a very strong fourth quarter is our expectation coming off 20, or 25%, while still being very very strong gotta historical level moving into 21 is you know still everybodys best yes.
I believe as long as rates stay low and you know there there's a good balance of purchase and refinance type business out in the marketplace. We still are looking at 21 has been a strong mortgage here and there.
There are a lot of dynamics in that business as you know primary secondary spreads and different things like that but you know as things go were still expecting solid production and then last comment on that is.
A number of years ago, we did begin to shift to retail production and our retail production staff out in the field is doing a tremendous job in generating new opportunities and that that is a big factor in the improved results that we've seen this year and hope that that continues into 2000.
One.
Great. Thank you guys. That's all from me and congrats on the succession plans.
Thank you so much.
This concludes our question and answer session I would like to turn the conference back over to Jerry host for any closing remarks.
Thank you so much operator I'd like to thank you all for joining us I'm excited about our record quarterly financial results. They reflect the contribution of all areas of the company and show our strength I think more importantly, though I.
Very excited about how we got there and that was through the dedication of.
Our associates and their commitment to our customers, both retail and commercial and I think that really shows and that's what we believe helps differentiate us.
And then finally again congratulations.
Duane and Tom and Granville.
Tom Chambers and Ria in these upcoming reassignments EM.
I'm very excited about the future of this company and where we're headed under their leadership. We appreciate all of your interest in Trustmark and we look forward to a to being with you again.
When you were in our fourth quarter and year end call. Thank you so much.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.
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