Trustmark Corp (TRMK) Q2 2021 Earnings Call Transcript

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Trustmark Corp (TRMK 6.57%)
Q2 2021 Earnings Call
Jul 28, 2021, 9:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning ladies and gentlemen and welcome to the Trustmark Corporation's Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein Director of Investor Relations at Trustmark.

Joey Rein -- Investor Relations

Good morning. I would like to remind everyone that a copy of our second 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 want 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'd like to introduce Duane Dewey, President and CEO of Trustmark Corporation.

Duane A. Dewey -- President and Chief Executive Officer

Thank you, Joey and good morning everyone. Thank you for joining us. With me this morning are Tom Owens, our Chief Financial Officer; Barry Harvey, our Chief Credit and Operations Officer; and Tom Chambers, our Chief Accounting Officer. For the second quarter of 2021, Trustmark is pleased to report net income of $48 million or $0.76 per share. We'll review the second quarter financial highlights starting on slide three. Loans held for investment increased $169.2 million or 1.7% from the prior quarter and $493.1 million or 5.1% year-over-year. During the quarter, Trustmark sold $354.2 million in PPP loans that were originated in 2021. That accelerated the recognition of unamortized PPP loan origination fees of approximately $18.6 million. Pre-provision net revenue totaled $57.2 million for the second quarter, a 38.2% increase linked quarter. Net interest income increased $17.2 million from the prior quarter and non-interest income totaled $56.4 million at June 30th. Adjusted non-interest expense totaled $116.3 million in the second quarter, a 3.3% decrease from the prior quarter. Our efficiency ratio improved to 64.3% for the quarter. Credit quality remained solid as non-performing assets declined 17.9% from the prior quarter. Net charge-offs totaled $1.2 million in the second quarter. We maintained strong capital levels with common equity Tier one capital of 11.8% and a total risk-based capital of 14.1%. During the second quarter Trustmark repurchased $20.8 million or approximately 630,000 shares of common stock. As of June 30th, we maintained $75 million in remaining authority under our repurchase program that will expire December 31st of 2021. The Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15 to shareholders of record on September 1. At this time, I'd like to ask Barry Harvey to provide some color on loan growth and credit quality.

Barry Harvey -- Chief Credit and Operations Officer

I'll be glad to Duane. Looking on to slide four our loans held for investments totaled $10.2 billion as of June 30th, an increase of $169 million from the prior quarter and $493 million year-over-year. The loan growth during the quarter was centered in public finance and mortgages. As anticipated, our CRE payoffs slightly outpaced our fundings in that book. The loan portfolio remains well diversified both by product type as well as geography. On slide five, you can see Trustmark's CRE portfolio is approximately 65% existing and 34% -- or 35% construction land development. Our construction land development book is 80% construction or vertical. The bank's owner-occupied portfolio has a good mix between real estate types or categories as well as industries. Looking on to slide six, the bank's commercial loan portfolio is well diversified across all industries and with no single category exceeding 10%. Typically, these loans are well secured governed by formulated borrowing bases coveted to protect both the income statement and the balance sheet. On slide seven, we have a minimum exposure as you can see to restaurants and energy and Trustmark has never been in the high-risk C&I lending business and currently we only have one customer for roughly $10 million in that category. The bank's portfolios and the highest impact of COVID-19 industries have held up extremely well. The bank has always underwritten both hotels and retail, CRE in a very conservative manner.

Moving on to slide eight, we conducted an analysis as we have in the previous quarters of our COVID-19 portfolio of those that we have seen have either a COVID concession or fit into one of the categories that's been highly impacted. And we look during the quarter at those in specific categories, mainly retail and hotel, but we looked at those that were watched or worse that have received a concession during the COVID downturn and those credits specifically that were over a $1 million. Collectively, we reviewed roughly $482 million in the balances. We reviewed 99% of our hotel book and 69% of our restaurant portfolio. As a result of this review, we're pleased to indicate that we had about $4.5 million in downgrades into the criticized category. But on the other side, we had about $14.5 million that was moved from to pass from the classified or criticized category. Looking at slide nine, our allowance for credit losses decreased $5 million from the previous quarter. Our reserve calculation included decreases in individually analyzed credits and the qualitative changes were due to the reduction in the impact of COVID-19 on our portfolio. The quantitative portion of the reserve was impacted by improvements in the macroeconomic forecast which resulted in releases of reserves, but we also implemented a probability default and loss given default floors inside of specific portfolios which actually resulted in provisioning. On June 30, 2021 the allowance for credit losses on loans held for investment totaled $104 million. On slide 10 we continue to post solid credit quality metrics. On June 30 our allowance for credit losses represented 537% of nonperforming loans excluding those that were individually analyzed. Net charge-offs totaled $1.2 million in the second quarter and recoveries have exceeded charge-offs by the same $1.2 million year-to-date. Nonaccruals declined $12 million in the second quarter and $1.5 million from this time last year.

On June 30, nonperforming assets had declined $13 million from the prior quarter and $7 million from the previous year. On slide 11 we can take a quick look at our PPP program, during the second quarter as Duane indicated we sold $354 million of our PPP loans originated in 2021. This sale of loans accelerated the recognition of unamortized PPP loan origination fees by $18.6 million net of cost. On June 30, 2021 our PPP loans totaled $166 million net of deferred loan fees and cost of $2.1 million. Duane?

Duane A. Dewey -- President and Chief Executive Officer

Thank you, Barry. Now turning to the liability side of the balance sheet. I'd like to ask Tom Owens to discuss our deposit base net interest margin and noninterest income.

Tom Owens -- Chief Financial Officer

Thanks Duane and good morning everyone. Looking at slide 12, deposits totaled $14.6 billion at June 30 a $249 million increase linked quarter and $1.1 billion increase year-over-year. Growth during the quarter was driven primarily by public fund balances, while personal and nonpersonal balances were both relatively flat. So perhaps we're beginning to see long anticipated inflection point where balances begin to roll over as the economy continues to recover and consumer spending continues to normalize. Our cost of interest-bearing deposits declined three basis points from the prior quarter to total 19 basis points and we continue to maintain a favorable deposit mix with 30% of balances in noninterest bearing. Turning to slide 13, net interest income FTE totaled $122.4 million in the quarter, resulting in a net interest margin of 3.16% and representing a linked-quarter increase of $17.2 million. Interest and fees on PPP loans totaled $25.6 million, which was an increase of $16.3 million linked quarter and is varied in the way referred to the $18.6 million in origination fees, which were accelerated by the sale of the PPP loans. Core net interest income FTE was $96.8 million, which was an increase of $800,000 linked quarter, driven primarily by ongoing decline in deposit cost while earning asset growth basically offset ongoing declines in loan and security yields. Core net interest margin was 2.94%, a decline of five basis points linked quarter. Turning to slide 14, noninterest income for the second quarter totaled $56.4 million, a $4.2 million linked quarter decrease and a $13.1 million decrease year-over-year.

The linked quarter and year-over-year decreases are primarily attributable to lower mortgage banking revenue. For the quarter, noninterest income represented 32.1% of Trustmark's revenue continuing to demonstrate a well-diversified revenue stream. On slide 15, mortgage banking revenue in the second quarter totaled $17.3 million, a $3.5 million decrease linked quarter and a $16.4 million decrease year-over-year. Mortgage loan production remained strong but declined 3.9% linked quarter and 13.7% year-over-year from historically high levels. For the second quarter retail production remained strong, representing 77% of volume or $571 million. We've added a trailing quarterly chart to the slide, illustrating gain on sale margin as well as the mix of loans sold versus retained on balance sheet. You can see the gain on sale margin declined about 20% linked quarter, dropping from 391 basis points in the first quarter to 315 basis points in the second quarter. And origination volume declined about 4% linked quarter, dropping from $767 million to $737 million. We hope the addition of this chart will help the reader understand the dynamics of the mortgage banking gain on sale. And now I'll turn it over to Tom Chambers, who will cover noninterest expense on slide 16.Thanks Duane and good morning everyone. Looking at slide 12, deposits totaled $14.6 billion at June 30 a $249 million increase linked quarter and $1.1 billion increase year-over-year. Growth during the quarter was driven primarily by public fund balances, while personal and nonpersonal balances were both relatively flat. So perhaps we're beginning to see long anticipated inflection point where balances begin to roll over as the economy continues to recover and consumer spending continues to normalize.

Our cost of interest-bearing deposits declined three basis points from the prior quarter to total 19 basis points and we continue to maintain a favorable deposit mix with 30% of balances in noninterest bearing. Turning to slide 13, net interest income FTE totaled $122.4 million in the quarter, resulting in a net interest margin of 3.16% and representing a linked-quarter increase of $17.2 million. Interest and fees on PPP loans totaled $25.6 million, which was an increase of $16.3 million linked quarter and is varied in the way referred to the $18.6 million in origination fees, which were accelerated by the sale of the PPP loans. Core net interest income FTE was $96.8 million, which was an increase of $800,000 linked quarter, driven primarily by ongoing decline in deposit cost while earning asset growth basically offset ongoing declines in loan and security yields. Core net interest margin was 2.94%, a decline of five basis points linked quarter. Turning to slide 14, noninterest income for the second quarter totaled $56.4 million, a $4.2 million linked quarter decrease and a $13.1 million decrease year-over-year. The linked quarter and year-over-year decreases are primarily attributable to lower mortgage banking revenue. For the quarter, noninterest income represented 32.1% of Trustmark's revenue continuing to demonstrate a well-diversified revenue stream. On slide 15, mortgage banking revenue in the second quarter totaled $17.3 million, a $3.5 million decrease linked quarter and a $16.4 million decrease year-over-year. Mortgage loan production remained strong but declined 3.9% linked quarter and 13.7% year-over-year from historically high levels. For the second quarter retail production remained strong, representing 77% of volume or $571 million. We've added a trailing quarterly chart to the slide, illustrating gain on sale margin as well as the mix of loans sold versus retained on balance sheet.

You can see the gain on sale margin declined about 20% linked quarter, dropping from 391 basis points in the first quarter to 315 basis points in the second quarter. And origination volume declined about 4% linked quarter, dropping from $767 million to $737 million. We hope the addition of this chart will help the reader understand the dynamics of the mortgage banking gain on sale. And now I'll turn it over to Tom Chambers, who will cover noninterest expense on slide 16.Thanks Duane and good morning everyone. Looking at slide 12, deposits totaled $14.6 billion at June 30 a $249 million increase linked quarter and $1.1 billion increase year-over-year. Growth during the quarter was driven primarily by public fund balances, while personal and nonpersonal balances were both relatively flat. So perhaps we're beginning to see long anticipated inflection point where balances begin to roll over as the economy continues to recover and consumer spending continues to normalize. Our cost of interest-bearing deposits declined three basis points from the prior quarter to total 19 basis points and we continue to maintain a favorable deposit mix with 30% of balances in noninterest bearing. Turning to slide 13, net interest income FTE totaled $122.4 million in the quarter, resulting in a net interest margin of 3.16% and representing a linked-quarter increase of $17.2 million. Interest and fees on PPP loans totaled $25.6 million, which was an increase of $16.3 million linked quarter and is varied in the way referred to the $18.6 million in origination fees, which were accelerated by the sale of the PPP loans. Core net interest income FTE was $96.8 million, which was an increase of $800,000 linked quarter, driven primarily by ongoing decline in deposit cost while earning asset growth basically offset ongoing declines in loan and security yields.

Core net interest margin was 2.94%, a decline of five basis points linked quarter. Turning to slide 14, noninterest income for the second quarter totaled $56.4 million, a $4.2 million linked quarter decrease and a $13.1 million decrease year-over-year. The linked quarter and year-over-year decreases are primarily attributable to lower mortgage banking revenue. For the quarter, noninterest income represented 32.1% of Trustmark's revenue continuing to demonstrate a well-diversified revenue stream. On slide 15, mortgage banking revenue in the second quarter totaled $17.3 million, a $3.5 million decrease linked quarter and a $16.4 million decrease year-over-year. Mortgage loan production remained strong but declined 3.9% linked quarter and 13.7% year-over-year from historically high levels. For the second quarter retail production remained strong, representing 77% of volume or $571 million. We've added a trailing quarterly chart to the slide, illustrating gain on sale margin as well as the mix of loans sold versus retained on balance sheet. You can see the gain on sale margin declined about 20% linked quarter, dropping from 391 basis points in the first quarter to 315 basis points in the second quarter. And origination volume declined about 4% linked quarter, dropping from $767 million to $737 million. We hope the addition of this chart will help the reader understand the dynamics of the mortgage banking gain on sale. And now I'll turn it over to Tom Chambers, who will cover noninterest expense on slide 16.Thanks Duane and good morning everyone.

Looking at slide 12, deposits totaled $14.6 billion at June 30 a $249 million increase linked quarter and $1.1 billion increase year-over-year. Growth during the quarter was driven primarily by public fund balances, while personal and nonpersonal balances were both relatively flat. So perhaps we're beginning to see long anticipated inflection point where balances begin to roll over as the economy continues to recover and consumer spending continues to normalize. Our cost of interest-bearing deposits declined three basis points from the prior quarter to total 19 basis points and we continue to maintain a favorable deposit mix with 30% of balances in noninterest bearing. Turning to slide 13, net interest income FTE totaled $122.4 million in the quarter, resulting in a net interest margin of 3.16% and representing a linked-quarter increase of $17.2 million. Interest and fees on PPP loans totaled $25.6 million, which was an increase of $16.3 million linked quarter and is varied in the way referred to the $18.6 million in origination fees, which were accelerated by the sale of the PPP loans. Core net interest income FTE was $96.8 million, which was an increase of $800,000 linked quarter, driven primarily by ongoing decline in deposit cost while earning asset growth basically offset ongoing declines in loan and security yields. Core net interest margin was 2.94%, a decline of five basis points linked quarter. Turning to slide 14, noninterest income for the second quarter totaled $56.4 million, a $4.2 million linked quarter decrease and a $13.1 million decrease year-over-year. The linked quarter and year-over-year decreases are primarily attributable to lower mortgage banking revenue. For the quarter, noninterest income represented 32.1% of Trustmark's revenue continuing to demonstrate a well-diversified revenue stream.

On slide 15, mortgage banking revenue in the second quarter totaled $17.3 million, a $3.5 million decrease linked quarter and a $16.4 million decrease year-over-year. Mortgage loan production remained strong but declined 3.9% linked quarter and 13.7% year-over-year from historically high levels. For the second quarter retail production remained strong, representing 77% of volume or $571 million. We've added a trailing quarterly chart to the slide, illustrating gain on sale margin as well as the mix of loans sold versus retained on balance sheet. You can see the gain on sale margin declined about 20% linked quarter, dropping from 391 basis points in the first quarter to 315 basis points in the second quarter. And origination volume declined about 4% linked quarter, dropping from $767 million to $737 million. We hope the addition of this chart will help the reader understand the dynamics of the mortgage banking gain on sale. And now I'll turn it over to Tom Chambers, who will cover noninterest expense on slide 16.Thanks Duane and good morning everyone. Looking at slide 12, deposits totaled $14.6 billion at June 30 a $249 million increase linked quarter and $1.1 billion increase year-over-year. Growth during the quarter was driven primarily by public fund balances, while personal and nonpersonal balances were both relatively flat. So perhaps we're beginning to see long anticipated inflection point where balances begin to roll over as the economy continues to recover and consumer spending continues to normalize. Our cost of interest-bearing deposits declined three basis points from the prior quarter to total 19 basis points and we continue to maintain a favorable deposit mix with 30% of balances in noninterest bearing. Turning to slide 13, net interest income FTE totaled $122.4 million in the quarter, resulting in a net interest margin of 3.16% and representing a linked-quarter increase of $17.2 million.

Interest and fees on PPP loans totaled $25.6 million, which was an increase of $16.3 million linked quarter and is varied in the way referred to the $18.6 million in origination fees, which were accelerated by the sale of the PPP loans. Core net interest income FTE was $96.8 million, which was an increase of $800,000 linked quarter, driven primarily by ongoing decline in deposit cost while earning asset growth basically offset ongoing declines in loan and security yields. Core net interest margin was 2.94%, a decline of five basis points linked quarter. Turning to slide 14, noninterest income for the second quarter totaled $56.4 million, a $4.2 million linked quarter decrease and a $13.1 million decrease year-over-year. The linked quarter and year-over-year decreases are primarily attributable to lower mortgage banking revenue. For the quarter, noninterest income represented 32.1% of Trustmark's revenue continuing to demonstrate a well-diversified revenue stream. On slide 15, mortgage banking revenue in the second quarter totaled $17.3 million, a $3.5 million decrease linked quarter and a $16.4 million decrease year-over-year. Mortgage loan production remained strong but declined 3.9% linked quarter and 13.7% year-over-year from historically high levels. For the second quarter retail production remained strong, representing 77% of volume or $571 million. We've added a trailing quarterly chart to the slide, illustrating gain on sale margin as well as the mix of loans sold versus retained on balance sheet. You can see the gain on sale margin declined about 20% linked quarter, dropping from 391 basis points in the first quarter to 315 basis points in the second quarter. And origination volume declined about 4% linked quarter, dropping from $767 million to $737 million.

We hope the addition of this chart will help the reader understand the dynamics of the mortgage banking gain on sale. And now I'll turn it over to Tom Chambers, who will cover noninterest expense on slide 16.Thanks Duane and good morning everyone. Looking at slide 12, deposits totaled $14.6 billion at June 30 a $249 million increase linked quarter and $1.1 billion increase year-over-year. Growth during the quarter was driven primarily by public fund balances, while personal and nonpersonal balances were both relatively flat. So perhaps we're beginning to see long anticipated inflection point where balances begin to roll over as the economy continues to recover and consumer spending continues to normalize. Our cost of interest-bearing deposits declined three basis points from the prior quarter to total 19 basis points and we continue to maintain a favorable deposit mix with 30% of balances in noninterest bearing. Turning to slide 13, net interest income FTE totaled $122.4 million in the quarter, resulting in a net interest margin of 3.16% and representing a linked-quarter increase of $17.2 million. Interest and fees on PPP loans totaled $25.6 million, which was an increase of $16.3 million linked quarter and is varied in the way referred to the $18.6 million in origination fees, which were accelerated by the sale of the PPP loans. Core net interest income FTE was $96.8 million, which was an increase of $800,000 linked quarter, driven primarily by ongoing decline in deposit cost while earning asset growth basically offset ongoing declines in loan and security yields. Core net interest margin was 2.94%, a decline of five basis points linked quarter.

Turning to slide 14, noninterest income for the second quarter totaled $56.4 million, a $4.2 million linked quarter decrease and a $13.1 million decrease year-over-year. The linked quarter and year-over-year decreases are primarily attributable to lower mortgage banking revenue. For the quarter, noninterest income represented 32.1% of Trustmark's revenue continuing to demonstrate a well-diversified revenue stream. On slide 15, mortgage banking revenue in the second quarter totaled $17.3 million, a $3.5 million decrease linked quarter and a $16.4 million decrease year-over-year. Mortgage loan production remained strong but declined 3.9% linked quarter and 13.7% year-over-year from historically high levels. For the second quarter retail production remained strong, representing 77% of volume or $571 million. We've added a trailing quarterly chart to the slide, illustrating gain on sale margin as well as the mix of loans sold versus retained on balance sheet. You can see the gain on sale margin declined about 20% linked quarter, dropping from 391 basis points in the first quarter to 315 basis points in the second quarter. And origination volume declined about 4% linked quarter, dropping from $767 million to $737 million. We hope the addition of this chart will help the reader understand the dynamics of the mortgage banking gain on sale. And now I'll turn it over to Tom Chambers, who will cover noninterest expense on slide 16.

Tom Chambers -- Chief Accounting Officer

I'll be glad to Tom. Turning to slide 16, you see the detail of our noninterest expenses broken out between adjusted, other and total. Adjusted noninterest expense totaled $116.3 million in the second quarter, a $3.9 million decrease from the prior quarter. Salaries and employee benefits decreased $1 million linked quarter principally due to the seasonality of payroll taxes from the prior quarter. Additionally services and fees decreased $715,000 and equipment expense decreased $677,000 on a linked-quarter basis. Turning to slide 17, Trustmark remains well-positioned from a capital perspective with our common equity Tier one capital ratio of 11.76% and a total risk-based capital ratio of 14.10% as of June 30, 2021. For the first six months of 2021, we repurchased approximately 775,000 common shares, totaling $25 million. At June 30, we had $75 million under our existing stock repurchase plan, which expires December 31, 2021. At this time, I'll turn it back over to Duane, who will now cover our outlook commentary on slide 18.

Duane A. Dewey -- President and Chief Executive Officer

Thank you Tom. And again this is a new add to our deck to give you some insight into our outlook. Looking at the balance sheet, we are expecting loans held for investment to grow low to mid single-digits for the year with potential headwind in the second half of 2021 from accelerated repayment activity in the commercial real estate book. Our security balances are targeted at 20% of earning assets and growth in deposits is expected to flatten in the second half of the year. We're expecting the net interest margin to remain under pressure from the low interest rate environment and excess balance sheet liquidity. Our core net interest income is expected to stabilize during the second half of the year, as core earning asset growth offset continued modest linked quarter compression in the core net interest margin. Based on the current outlook, the total provision for credit losses including unfunded commitments is expected to remain in line with the second quarter results for the remainder of the year. Net charge-offs are expected to be muted for the remainder of 2021, based upon the current economic outlook and the overall portfolio. Noninterest income category, we expect service charges and bank card fees to rebound modestly from depressed levels, as the economy emerges from the COVID crisis. Mortgage banking is expected to continue trending lower in production and to a lower gain on sale margin. Wealth management and insurance are both expected to grow by mid single-digits for the year.

For expenses, our adjusted noninterest expense is expected to increase by low single-digits for the year, subject to the impact of commissions in mortgage insurance and wealth management businesses. We will continue to work on initiatives like the voluntary early retirement program and market op for opportunities to improve efficiencies and workflow. We'll also continue a disciplined approach to capital deployment with a preference for organic loan growth potential M&A and opportunistic share repurchase. We will continue to maintain a strong capital position to implement corporate priorities and initiatives. With that, I trust this second quarter discussion has been helpful and the financial results and outlook commentary has been insightful. At this time, I'd like to open the floor for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Graham Dick with Piper Sandler. Please go ahead.

Graham Dick -- Piper Sandler -- Analyst

Hey. Good morning, everybody.

Duane A. Dewey -- President and Chief Executive Officer

Good morning.

Tom Owens -- Chief Financial Officer

Good morning.

Graham Dick -- Piper Sandler -- Analyst

So you just mentioned taking securities to 20% of earning assets from today's levels. I'm just wondering, I guess, what your plan would be for the remainder of whatever liquidity might be there after you reach that 20% threshold? And maybe if you're expecting, I guess, a large chunk of that to flow out of the bank. Just kind of trying to get an idea of what the overall balance sheet might look like in a few quarters.

Tom Owens -- Chief Financial Officer

Graham, good morning. This is Tom Owens. Thank you for the question. So, yeah, we do continue to target 20% of earning assets for the securities portfolio, came up a little bit short of that in the second quarter. Our deposit growth in the second quarter was sort of back-loaded. And then, as we got toward the end of the second quarter, we had quite a rally in bond market and investment alternatives were less appealing at that point. So some of it is tactical. I think you should expect us to continue to target at least 20% of earning assets. And as we've discussed in the past, there's really two big considerations there. One, as you alluded to, is the uncertainty around the effective duration of the deposits, the deposit growth that we've experienced here over the last five quarters or so.

As I said in my prepared comments, we really started to see that flatten out with respect to personal and non-personal in the second quarter. And so, if we're at a point here, where we've stabilized and we start to see some attrition that looks more consistent with the back book. I think that will increase our confidence in terms of the amount of liquidity that we have to deploy. The second part of that, as we've discussed in the past is the desire to maintain a competitive level of asset sensitivity in terms of our interest rate risk profile. As of the first quarter, our peer median securities to earning assets was about 25%. I think you should expect us to stay below that. So -- but that would be the range 20% to 25%. And I sort of dimensioning your question there as you said over the next few quarters or so, I would think that we'll be more toward the lower end of that range.

Graham Dick -- Piper Sandler -- Analyst

Okay. Awesome. That was very helpful. And I guess just turning to securities. I know you said that probably have more color on the impact of the voluntary retirement program with 3Q 2021 earnings. But I was just wondering if you guys maybe have any early idea of how many people might be planning to participate in that or even just a rough estimate of how it might impact or reduce salaries at the point of its implementation?

Duane A. Dewey -- President and Chief Executive Officer

Yes. This is Duane. No, we're not in a position really to comment on the overall program at this point in time. It closes here before too long. And we'll be disclosing the full results at the end of the third quarter. If you recall, we had a early retirement program in 2020, early 2020, right, as COVID was starting to take shape. And so, this program is in somewhat following that as COVID now has started to lessen and the markets are improved and other things that have happened during that 18-month period. So really don't have a lot more color at this point. We'll give you full details at the end of the third quarter.

Graham Dick -- Piper Sandler -- Analyst

Okay. That's understandable. And then I guess just a quick one here on expenses. I was wondering salaries are lower quarter-over-quarter. How much of a benefit did you guys see from the lower mortgage-related comp versus last quarter?

Duane A. Dewey -- President and Chief Executive Officer

That's -- we're flipping pages here to get the exact answer to that question. As volume declines, commissions decline, I don't know that -- Tom, do you have that.

Tom Owens -- Chief Financial Officer

Mortgage commissions actually increased by about $700,000 this quarter, second quarter versus first

Barry Harvey -- Chief Credit and Operations Officer

Because.

Tom Owens -- Chief Financial Officer

Because we have a lag. We have a month in arrears payment for the third month of the quarter.

Barry Harvey -- Chief Credit and Operations Officer

But we do expect that the trend lower over time as volumes is fine.

Tom Owens -- Chief Financial Officer

Yeah. Is coming down in the last half of the year.

Duane A. Dewey -- President and Chief Executive Officer

Yeah. I mean it's a good question and you would expect with decreases in origination volume decrease in commission expense Graham. And I think in this case it's just a question of timing. As is the case with a lot of the mortgage banking business, right? But as we said, it's projecting forward lower origination volume certainly would lead to lower commission expense.

Graham Dick -- Piper Sandler -- Analyst

Hey, awesome. That's it for me. Thanks guys.

Duane A. Dewey -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Jennifer Demba with Truist Securities. Please go ahead. Pardon me, Jennifer, you line might be muted.

Brandon King -- Truist Securities -- Analyst

Hey. This is Brandon King on for Jennifer. How are you doing?

Duane A. Dewey -- President and Chief Executive Officer

I am sorry. could you say your name again?

Brandon King -- Truist Securities -- Analyst

Hey. This is Brandon King on for Jennifer Demba. How is everyone doing?

Duane A. Dewey -- President and Chief Executive Officer

We are doing well. Good morning.

Brandon King -- Truist Securities -- Analyst

Good morning, good morning. So yeah, could you please talk about what you're seeing in CRE with pay downs and I know you expect that because headwinds going into the second half of the year, so could you see that abating somewhat as we get into 2022?

Barry Harvey -- Chief Credit and Operations Officer

Brandon, this is Barry. I would glad to address your question. What we are seeing as -- when we -- just after we've got past the end of second quarter, we've reassessed of course what we think the second half of the year will look like and as we move into 2022 that you referenced. One thing we are seeing within our CRE book, we are seeing some shifting of scheduled payoffs, either later into this year some -- we didn't see some that we expected to see in Q2. We saw a shift of some of that into the second quarter excuse me, third quarter and fourth quarter of this year. We also saw a meaningful portion of it shift into 2022. So I think from a loan growth perspective if that's where you're heading is we're probably a little more comfortable thinking about mid single-digits for 2021 than we were at the first of the year. And it's mainly because we're seeing some of those scheduled payoffs getting pushed back into either later this year which really doesn't have a big impact on 2021, but we are seeing a meaningful amount pushing into 2022.

On the flip side of that, we're seeing a higher than anticipated unexpected payoff those that we didn't have slated to come out in 2021. That's occurring at a pretty rapid pace. They do seem to be offsetting each other to an extent. So we're feeling like from a CRE perspective for the year. We're going to end up being around flat at this -- based on what we know today. We are pleasantly not surprised, but encouraged by the fact that we're seeing growth in both our public finance line of businesses as well as in our mortgage business. Those loans were choosing the portfolio. So we are seeing growth during Q2 from a couple of areas that we've previously not had meaningful growth and we do expect with the real estate the CRE portion of our book to not be too much of a drag on our loan growth for the year. So we are more comfortable now thinking in terms of mid single-digit growth as opposed to low single-digit growth as we move out through the rest of 2021.

Brandon King -- Truist Securities -- Analyst

Okay. Thanks for the color on that. And then for -- you mentioned as far as higher activity in your markets and how that will eventually benefit service and bank card fees. Is there a certain level that you're targeting when it comes to the level of fee income in those areas in relation to pre-pandemic levels?

Duane A. Dewey -- President and Chief Executive Officer

This is Duane. I will take this Tom. Not really we're not targeting anything specific. It's been a little hard to forecast. Again based on deposit -- the deposit conversation, the amount of liquidity out there in the marketplace we do expect the overall economic activity to pick up, which means more service charges more activity. However, it's just so hard to forecast how quickly now with the -- maybe the second wave of COVID-related stuff we don't really have a target to give you at this point in time.

Brandon King -- Truist Securities -- Analyst

Okay. And finally I know your preference is for organic loan growth, but with all these mergers being announced has it changed the calculus for you guys to use some of that capital from M&A? And if so what are your thoughts there as far as potential pull bank acquisitions versus non-bank acquisitions for certain business events?

Duane A. Dewey -- President and Chief Executive Officer

Again, this is Duane. As you know, Tom it's a very active market out there. We are hearing and seeing a lot of different opportunities. And so we continue to stay focused on the things that will improve and impact Trustmark moving forward. As we stated in our outlook commentary, organic loan growth continues to be a priority. It's the most efficient use of capital. M&A is something that we are monitoring and are evaluating on a continuous basis. And as you know Tom there is increased thought and discussion in some of the non-bank categories that could be of interest. And then the third use of capital is the opportunistic buyback. So high volume on the M&A side, but we're staying disciplined and focused and are going to be opportunistic and really haven't changed our view on that from prior guidance.

Brandon King -- Truist Securities -- Analyst

Okay. Thanks for the answers.

Operator

[Operator Instructions] Our next question will come from Michael Rose with Raymond James. Please go ahead.

Carl Doirin -- Raymond James -- Analyst

Good morning. This is Carl Doirin for Michael Rose. Thank you for taking my question. Just to piggyback of the expense question. Basically a while back you have talked about certain initiatives on top of growth and innovation, which includes improving efficiency. With the efficiency ratio currently running in the mid-60s, do you perhaps have a target for where you would want that to be eventually?

Duane A. Dewey -- President and Chief Executive Officer

Well, you kind of went in and out. We missed a portion of that question, I apologize. Could you Carl repeat?

Carl Doirin -- Raymond James -- Analyst

No problem. Are you hearing me clear now?

Duane A. Dewey -- President and Chief Executive Officer

Yeah, little bit muffled.

Carl Doirin -- Raymond James -- Analyst

So basically you had talked about the improving efficiency as part of your initiatives a while back. Just wanted to know with the voluntary retirement program and the closing of branches, do you happen to have perhaps a target for where you would want the efficiency ratio to eventually be at? It's currently -- given it's currently running in the mid-60s right now?

Duane A. Dewey -- President and Chief Executive Officer

The answer is no. I mean, we don't have a target efficiency ratio. As I've stated in prior calls, we are laser-focused on efficiencies. That includes things like the voluntary retirement programs to reduce headcount. But along with that, that means back office efficiencies, process improvement, and the entire leadership management team is laser-focused on those topics. We have a number of technology initiatives, we completed so far this year. A couple more that will begin or are completed in the latter part of the year that we think over time will create continued efficiency improvements and opportunities to reduce expenses across the board. But we don't really disclose a target for efficiency ratio at this point.

Tom Owens -- Chief Financial Officer

This is Tom Owens. I would add that as Duane said, we're focused -- we're keenly focused on the numerator in the efficiency ratio, but let's not loose the site of the denominator either. Clearly, the Fed emergency rate cuts and super accommodative monetary policy have had quite an impact on our net interest margin and our net interest income. We do believe that we are well positioned relative to peers in terms of our interest rate risk profile. And we do believe that as the economy continues to recover and as the Fed eventually normalizes monetary policy that we should outperform the peer group. Its part of why you hear me each call talk about the desire to maintain a competitively asset sensitive interest rate risk profile.

Carl Doirin -- Raymond James -- Analyst

Got it, got it. Thank you. And on capital, I know you have talked about buybacks previously. With the share price, I guess a bit down from where it's traded at during last quarter. I'm assuming, it's I guess more attractive for you guys and I assume you're still buying shares.

Tom Owens -- Chief Financial Officer

So again, we're pretty consistent with how we go about capital management. We have a disciplined process, a disciplined framework in place for evaluating the returns available from various forms of capital deployment. Yes, we were active in the second quarter as the opportunity presented itself. We had a good quarter in that regard. If you think about the amount of balance sheet growth that we achieved in the second quarter, if you think about the amount of capital we deployed via share repurchase, and yet our capital ratio still increased linked quarter a very good quarter in that regard. Each of our regulatory capital ratios continues to remain above the top of our operating target ranges for the ratios. And as Duane indicated in his comments, we continue to have $75 million of authorization remaining between now and year-end. And so yes, I would think that you should expect us to consider -- continue to manage capital consistent with the way we've done so in the past.

Carl Doirin -- Raymond James -- Analyst

Absolutely right. Thank you for taking my questions.

Operator

Our next question will come from Catherine Mealor with KBW. Please go ahead.

Catherine Mealor -- KBW -- Analyst

Thanks. Good morning.

Duane A. Dewey -- President and Chief Executive Officer

Good morning, Catherine.

Tom Owens -- Chief Financial Officer

Good morning.

Catherine Mealor -- KBW -- Analyst

Wanted to just circle back on the PPP sale. Can you remind us what your remaining unamortized fees are that to come into the rest of the year?

Tom Owens -- Chief Financial Officer

So, Catherine. This is Tom Owens. It is approximately $2 million in unamortized origination fees that would be recognized, as you know sort of straight line amortization over the life of the loans, but we would be accelerated as we continue to experience for getting this on the loans.

Catherine Mealor -- KBW -- Analyst

Okay, great. And then, back on the mortgage conversation, your slide was really helpful that showed the gain on sale margins. As we look at the gain on sale margin for the quarter, is there any sense as to what that margin looked like toward the end of the quarter that may give us a sense as to where that margin may be heading in the back half of the year?

Tom Owens -- Chief Financial Officer

So Catherine, this is Tom. I don't know that we can slice it quite that finely. Yeah, we're hoping. This is obviously a hot topic and it's one of the primary reasons we added that chart to slide 15. We do want to try and be as transparent as we can and give you as much guidance as we can with respect to the key drivers of the mortgage banking business and the revenues generated from that business. So again, we saw about a 20% linked quarter decline in the gain on sale of margin. It remains as you know at high levels, historically speaking. I mean just in very round numbers probably double, what was considered normal sort of pre-pandemic. So, we can't slice it that finely, but I think in general, we think that we expect continued pressure, both on the gain on sale margin, as well as origination volume. And we're hoping that chart can kind of give you a visual in terms of what that trend is looked like.

Catherine Mealor -- KBW -- Analyst

And then, it looks like you've kept more on balance sheet as well. Should we expect to see that trend continue as gain on sale margins continue to come down, so that puts more pressure on the mortgage revenue, but in theory instead, you've got better loan growth as a result?

Duane A. Dewey -- President and Chief Executive Officer

The answer to that Catherine is, yes. We would expect to hold more on balance sheet.

Catherine Mealor -- KBW -- Analyst

Okay. And is that reflected in your increased mid to single-digit guidance that you've already put out or that be additive to that do you think?

Duane A. Dewey -- President and Chief Executive Officer

It is reflected.

Tom Owens -- Chief Financial Officer

It's reflective. And Catherine, that's going to be typically going to be your some 10-year type jumbo and predominantly, it's going to be 15-year type of zero. So, it's going to be a fairly short duration and as far as what's being added to the book on a quarterly basis.

Catherine Mealor -- KBW -- Analyst

Great. Great, very helpful. Thank you, so much.

Tom Owens -- Chief Financial Officer

Thank you, Catherine.

Operator

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

Duane A. Dewey -- President and Chief Executive Officer

Well, thank you for participating on our call this morning. We hope the information presented is helpful and useful. We look forward to getting back together at the end of the third quarter and we will talk to you in October. Thank you.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Joey Rein -- Investor Relations

Duane A. Dewey -- President and Chief Executive Officer

Barry Harvey -- Chief Credit and Operations Officer

Tom Owens -- Chief Financial Officer

Tom Chambers -- Chief Accounting Officer

Graham Dick -- Piper Sandler -- Analyst

Brandon King -- Truist Securities -- Analyst

Carl Doirin -- Raymond James -- Analyst

Catherine Mealor -- KBW -- Analyst

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