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News Release |
Trustmark Corporation Announces Second Quarter 2015 Financial Results
JACKSON, Miss. – July 28, 2015 – Trustmark Corporation (NASDAQ:TRMK) reported net income of $30.6 million in the second quarter of 2015, which represented diluted earnings per share of $0.45. Trustmark’s performance during the second quarter of 2015 produced a return on average tangible equity of 12.05% and a return on average assets of 1.01%. During the first six months of 2015, Trustmark’s net income totaled $59.8 million, which represented diluted earnings per share of $0.88. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2015, to shareholders of record on September 1, 2015.
Second Quarter Highlights
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Revenue totaled $142.5 million, a 7.8% annualized increase from the prior quarter; efficiency ratio improved linked quarter to 66.00%
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Net interest income (FTE) totaled $100.9 million; net interest margin excluding acquired loans expanded from the prior quarter to 3.49%
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Noninterest income increased 7.5% from the prior quarter, reflecting diversified growth across Trustmark’s fee-income businesses
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Continued solid credit performance; nonaccrual loans declined 11.1% from the prior quarter
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Gerard R. Host, President and CEO, stated, “Trustmark’s financial performance reflects the value of our diversified financial services businesses. We experienced solid loan growth in our Alabama and Texas markets. Noninterest income increased 7.5% linked quarter, resulting from strong growth across our fee-income businesses. During the quarter, we expanded our mortgage-production capabilities with the addition of ten mortgage producers in Mobile and Florence, Alabama, as well as Pensacola and Destin, Florida. Noninterest expense remained well-controlled and credit quality remained strong, both of which continued to be important contributors to our financial success. Thanks to our associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue to add value to the customers, clients, communities and shareholders we serve.”
Balance Sheet Management
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Legacy loan growth in Alabama and Texas markets of $66.3 million, offset in part by reductions in Mississippi, Florida and Tennessee markets of $33.1 million
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Average earning assets and deposits remained stable at $10.6 billion and $9.8 billion, respectively
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Capital base provides opportunity to support additional growth
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Loans held for investment totaled $6.4 billion at June 30, 2015, an increase of $33.2 million, or 0.5%, from the prior quarter and an increase of $260.1 million, or 4.2%, from one year earlier. Loans secured by nonfarm, nonresidential real estate increased by $50.1 million linked quarter as growth in Texas, Alabama and Mississippi was partially offset by declines in Florida and Tennessee. The single-family mortgage portfolio expanded by $23.9 million due principally to growth in the Mississippi and Alabama markets. Other loans, which include loans to nonprofits and real estate investment trusts, increased $7.1 million, reflecting growth in Texas, Alabama, Florida and Tennessee. Commercial and industrial loans declined $9.1 million as growth in Tennessee, Alabama and Florida was more than offset by paydowns in the Mississippi market. Loans to states and other political subdivisions decreased by $40.1 million, while construction, land development and other land loans decreased $9.2 million, reflecting in part migration of balances to loans secured by nonfarm, nonresidential real estate and other loans secured by real estate.
Acquired loans totaled $466.4 million at June 30, 2015, down $32.0 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $6.9 billion at June 30, 2015, up $1.2 million from the prior quarter.
Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At June 30, 2015, Trustmark’s tangible equity to tangible assets ratio was 8.93%, while its total risk-based capital ratio was 15.07%. Tangible book value per share was $15.58 at June 30, 2015, up 5.4% from the prior year.
Credit Quality
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Continued improvement in classified loan balances
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Nonperforming assets declined 4.8% linked quarter and 10.6% year-over-year
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Annualized net charge-offs totaled seven basis points of average loans in the second quarter
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Classified loans continued to reflect steady improvement. Relative to the prior quarter, Trustmark's classified loan balances declined 1.8%; when compared to the prior year, classified loan balances declined 11.0%.
Nonperforming assets declined $8.0 million, or 4.8%, from the prior quarter and $18.9 million, or 10.6%, from the comparable period one year earlier. The decline during the quarter was attributable to a reduction in nonaccrual loans, while the year-over-year decline was attributable to both a reduction in nonaccrual loans and other real estate.
Allocation of Trustmark's $71.2 million allowance for loan losses represented 1.30% of commercial loans and 0.59% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.10% at June 30, 2015, representing a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 192.6% of nonperforming loans, excluding impaired loans at June 30, 2015.
All of the above credit quality metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.
Revenue Generation
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Net interest income (FTE) remained stable compared to the prior quarter; net interest margin excluding acquired loans expanded linked quarter to 3.49%
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Noninterest income increased 7.5% from the prior quarter; insurance commissions and service charges on deposit accounts increased 9.1% and 7.5%, respectively, from the prior quarter
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Revenue in the second quarter increased 2.0%, or 7.8% annualized, from the prior quarter to $142.5 million, continuing to reflect Trustmark’s diversified business model. Net interest income (FTE) in the second quarter totaled $100.9 million, resulting in a net interest margin of 3.81%. Compared to results in the prior quarter, interest income (FTE) benefited from increased income on both the held for investment and held for sale loan portfolio as well as the securities portfolio, but was offset by lower interest and fees on acquired loans. The yield on acquired loans in the second quarter totaled 10.43% and included recoveries from settlement of debt of $3.6 million, which represented approximately 2.97% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin in the second quarter totaled 3.49%, up from 3.47% in the prior quarter.
Noninterest income totaled $45.5 million in the second quarter, an increase of 7.5% from the prior quarter and an increase of 3.2% from levels one year earlier. Service charges on deposit accounts increased 7.5% linked quarter, rebounding from a seasonal reduction in fees in the prior quarter. Bank card and other fees increased 9.7% from the prior quarter as a result of increased interchange income and fees on interest rate swaps for commercial loan customers. Other income, net improved $622 thousand linked quarter due to gains associated with bank-owned life insurance in the second quarter and a previously disclosed loss on the disposition of a branch location in the prior quarter. The improvements in other income, net were partially offset by FDIC indemnification asset write-downs due to continued improvement in credit quality of acquired covered loans and dispositions of covered other real estate.
Insurance revenue in the second quarter totaled $9.4 million, an increase of 9.1% from the prior quarter and 13.3% from levels one year earlier. The solid performance this quarter was primarily due to growth in the commercial property and casualty line of business, resulting from both a continued focus on new business and development of new production staff. Wealth management revenue totaled $7.8 million, down $232 thousand, or 2.9%, due in part to lower income from brokerage commissions and retirement plan services.
Mortgage banking revenue in the second quarter totaled $9.5 million, up 5.8% and 53.1% from levels in the prior quarter and year, respectively. The increase in mortgage revenue from the prior quarter primarily reflects favorable mortgage servicing hedge ineffectiveness and expanded secondary marketing gains. Mortgage loan production in the second quarter totaled $416.9 million, up 36.9% from the prior quarter and 29.4% from levels one year earlier.
Noninterest Expense
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Noninterest expense totaled $100.3 million, up 1.1% from the prior quarter and down 2.4% from the prior year
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Efficiency ratio improved linked quarter to 66.00%
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During the first six months of the year, Trustmark closed or consolidated six banking offices and opened two new banking offices in markets with higher growth opportunities
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Excluding ORE expense and intangible amortization of $2.9 million, noninterest expense totaled $97.4 million, an increase of $1.3 million, or 1.3%, from comparable expenses in the prior quarter. Salaries and benefits totaled $57.4 million in the second quarter, up 0.4% on a linked quarter basis due primarily to increased commissions from higher mortgage production; in contrast, headcount, on a full-time equivalent basis, decreased by 49 and 106 from the prior quarter and year, respectively. Services and fees increased $884 thousand from the prior quarter, reflecting additional legal and data processing expense. ORE and foreclosure expense declined $194 thousand and $2.9 million from the prior quarter and year, respectively. Other expense increased $480 thousand relative to the prior quarter due principally to higher loan expense.
Trustmark also continued the optimization of its retail delivery channels to enhance productivity and efficiency as well as promote additional revenue growth. During the second quarter, Trustmark completed the previously announced consolidation of five banking offices and announced plans to consolidate two additional offices in the third quarter of 2015. Separately, Trustmark expanded its mortgage-banking platform with the addition of a new mortgage loan-production office in Florence, Alabama, while opening new banking offices in Spanish Fort and Inverness, Alabama. In July, Trustmark opened a mortgage loan-production office in Pensacola, Florida. Trustmark is committed to investments that support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 29, 2015, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call. A replay of the conference call will also be available through Wednesday, August 12, 2015, in archived format at the same web address or by calling (877) 344-7529, passcode 10068030.
Trustmark Corporation is a financial services company providing banking and financial solutions through 201 offices in Alabama, Florida, Mississippi, Tennessee and Texas.
Forward-Looking Statements
Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.
Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets as well as crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of issues relating to the European financial system, and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
Trustmark Investor Contacts:
Louis E. Greer
Treasurer and
Principal Financial Officer
601-208-2310
F. Joseph Rein, Jr.
Senior Vice President
601-208-6898
Trustmark Media Contact:
Melanie A. Morgan
Senior Vice President
601-208-2979
