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Trustmark Corporation Announces Second Quarter 2019 Financial Results

JACKSON, Miss.--(BUSINESS WIRE)--

Loan growth, fee income expansion, disciplined expense management and strong credit quality reflected in performance

Trustmark Corporation (TRMK) reported net income of $42.1 million in the second quarter of 2019, representing diluted earnings per share of $0.65. Diluted earnings per share in the second quarter of 2019 increased 27.5% when compared to the previous quarter and 10.2% when compared to the same period in the prior year. This level of earnings resulted in a return on average tangible equity of 14.14% and a return on average assets of 1.24%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2019, to shareholders of record on September 1, 2019.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190723005864/en/

Printer friendly version of earnings release with consolidated financial statements and notes: https://www.businesswire.com/news/home/52016691/en

Second Quarter Highlights

  • Revenue, excluding interest and fees on acquired loans, increased 7.6% linked quarter and 5.3% year-over-year to total $155.4 million
  • The net interest margin (FTE), excluding acquired loans, was 3.60% in the second quarter, unchanged from the prior quarter and up 14 basis points year-over-year
  • Sustained strong credit performance reflected in reduced nonperforming assets and net charge-offs
  • Efficiency ratio improved to 64.55%

Gerard R. Host, President and CEO, stated, “Our second quarter performance continued to illustrate the value of Trustmark’s diverse franchise. We continued to focus upon strategic initiatives of profitable revenue growth, capital deployment through additional share repurchases and disciplined expense management. We also continued to maintain and expand customer relationships as evidenced by strength in our banking, mortgage, insurance and wealth management businesses. Thanks to our talented associates, solid profitability and strong capital base, Trustmark remains well positioned to continue meeting the needs of our customers and creating long-term value for our shareholders.”

Balance Sheet Management

  • Loans held for investment expanded 1.4% from the prior quarter and 5.0% when compared to the same period in the prior year
  • Continued balance sheet and capital optimization through maturing investment securities run-off and share repurchases
  • Noninterest-bearing deposits represented 25.2% of total deposits at June 30, 2019

Loans held for investment totaled $9.1 billion at June 30, 2019, reflecting an increase of $121.7 million, or 1.4%, linked-quarter and $437.8 million, or 5.0%, from the prior year. Acquired loans totaled $87.9 million at June 30, 2019, down $5.3 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $9.2 billion at the end of the second quarter of 2019, up $116.4 million, or 1.3% from the prior quarter and $352.6 million, or 4.0%, year-over-year.

Deposits totaled $11.6 billion at June 30, 2019, up $31.8 million from the prior quarter and $494.2 million year-over-year. Interest-bearing deposit costs totaled 0.99% in the second quarter, an increase of 6 basis points linked-quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 57% of deposit balances in checking accounts.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. During the second quarter, Trustmark repurchased $13.0 million, or approximately 398 thousand of its common shares in open market transactions. At June 30, 2019, Trustmark had $87.0 million in remaining authority under its existing stock repurchase program, which expires March 31, 2020. At June 30, 2019, Trustmark’s tangible equity to tangible assets ratio was 9.34%, while the total risk-based capital ratio was 13.07%.

Credit Quality

  • Nonperforming loans decreased 6.3% and 13.8% from the prior quarter and year-over-year, respectively
  • Other real estate declined 2.8% from the prior quarter and 21.2% year-over-year
  • Net charge-offs represented 0.05% of average loans in the second quarter

Nonperforming loans totaled $52.9 million at June 30, 2019, down $3.5 million from the prior quarter and $8.5 million year-over-year. Other real estate totaled $31.2 million, down $896 thousand from the prior quarter and $8.4 million from the same period one year earlier. Collectively, nonperforming assets totaled $84.1 million, reflecting a linked-quarter decrease of 5.0% and year-over-year decrease of 16.7%.

Allocation of Trustmark's $80.4 million allowance for loan losses represented 0.96% of commercial loans and 0.60% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.88% at June 30, 2019, representing a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 383.19% of nonperforming loans, excluding specifically reviewed impaired loans.

Unless otherwise noted, all of the above credit quality metrics exclude acquired loans.

Revenue Generation

  • Total revenue in the second quarter was $157.4 million, up 7.6% linked-quarter and 3.2% year-over-year
  • Net interest income (FTE) totaled $111.0 million in the second quarter, up 2.7% linked-quarter and 2.4% year-over-year
  • Noninterest income totaled $49.6 million in the second quarter, up 19.6% linked-quarter and 4.7% year-over-year

Net interest income (FTE) in the second quarter totaled $111.0 million, resulting in a net interest margin of 3.64%, up 1 basis point from the prior quarter. Relative to the prior quarter, net interest income (FTE) increased $2.9 million, reflecting a $4.7 million increase in interest income and a $1.7 million increase in interest expense. During the second quarter of 2019, the yield on acquired loans totaled 8.84% and included $583 thousand in recoveries from the settlement of debt, which represented approximately 2.56% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.60% for the second quarter of 2019, unchanged from the prior quarter as growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix were offset by higher costs of interest-bearing deposits.

Noninterest income in the second quarter totaled $49.6 million, an increase of $8.1 million from the prior quarter and $2.2 million when compared to the same period in the prior year. Mortgage banking revenue totaled $10.3 million in the second quarter, up $6.9 million from the prior quarter and $1.2 million year-over-year. The linked-quarter change reflects reduced negative net mortgage hedge ineffectiveness as well as an increase in gains on sales of loans. Mortgage loan production in the second quarter totaled $414.1 million, up 46.1% from the prior quarter and 0.9% year-over-year.

Insurance revenue totaled $11.1 million in the second quarter, up 2.0% from the prior quarter and 3.3% year-over-year due principally to growth in property and casualty commissions. Wealth management revenue in the second quarter totaled $7.7 million, an increase of 3.5% from the prior quarter and year-over-year. This performance is primarily attributable to increased trust and investment management fees. Bank card and other fees increased $813 thousand from the prior quarter primarily due to a seasonal increase in interchange income as well as growth in customer derivative revenue.

Noninterest Expense

  • Total noninterest expense totaled $106.1 million in the second quarter, up 0.1% from the prior quarter and 2.2% year-over-year
  • Core noninterest expense, which excludes other real estate expense and intangible amortization, totaled $105.0 million, up 1.8% from the prior quarter and 2.3% year-over-year

Salaries and employee benefits increased $995 thousand from the prior quarter to total $61.9 million, primarily due to higher insurance and mortgage commissions as a result of continued growth in both business lines. Services and fees rose 6.1%, or $1.0 million, linked-quarter primarily due to professional fees as well as new software investments designed to improve efficiency and customer experience. Other real estate expense, net declined $1.6 million linked-quarter while other expense declined $397 thousand, or 3.3%, linked-quarter to total $11.8 million.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 24, 2019 at 8:30 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. A replay of the conference call will also be available through Wednesday, August 7, 2019, in archived format at the same web address or by calling (877) 344-7529, passcode 10132843.

Trustmark is a financial services company providing banking and financial solutions through 193 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 potential market impacts of efforts by the Federal Reserve Board to reduce the size of its balance sheet, conditions in the housing and real estate markets in the regions in which Trustmark operates and 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 credit, securities, and/or commodity 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, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, 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 CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2019
($ in thousands)
(unaudited)
Linked Quarter Year over Year
QUARTERLY AVERAGE BALANCES 6/30/2019 3/31/2019 6/30/2018 $ Change % Change $ Change % Change
Securities AFS-taxable

$

1,661,464

 

$

1,753,268

 

$

2,038,759

 

$

(91,804

)

-5.2

%

$

(377,295

)

-18.5

%

Securities AFS-nontaxable

 

31,474

 

 

40,159

 

 

50,035

 

 

(8,685

)

-21.6

%

 

(18,561

)

-37.1

%

Securities HTM-taxable

 

821,357

 

 

866,665

 

 

972,571

 

 

(45,308

)

-5.2

%

 

(151,214

)

-15.5

%

Securities HTM-nontaxable

 

27,035

 

 

28,710

 

 

30,337

 

 

(1,675

)

-5.8

%

 

(3,302

)

-10.9

%

Total securities

 

2,541,330

 

 

2,688,802

 

 

3,091,702

 

 

(147,472

)

-5.5

%

 

(550,372

)

-17.8

%

Loans (including loans held for sale)

 

9,260,028

 

 

9,038,204

 

 

8,707,466

 

 

221,824

 

2.5

%

 

552,562

 

6.3

%

Acquired loans

 

91,217

 

 

104,316

 

 

202,140

 

 

(13,099

)

-12.6

%

 

(110,923

)

-54.9

%

Fed funds sold and rev repos

 

34,057

 

 

277

 

 

1,063

 

 

33,780

 

n/m

 

 

32,994

 

n/m

 

Other earning assets

 

316,604

 

 

243,493

 

 

186,224

 

 

73,111

 

30.0

%

 

130,380

 

70.0

%

Total earning assets

 

12,243,236

 

 

12,075,092

 

 

12,188,595

 

 

168,144

 

1.4

%

 

54,641

 

0.4

%

Allowance for loan losses

 

(81,996

)

 

(82,227

)

 

(86,315

)

 

231

 

0.3

%

 

4,319

 

5.0

%

Cash and due from banks

 

478,384

 

 

423,749

 

 

319,075

 

 

54,635

 

12.9

%

 

159,309

 

49.9

%

Other assets

 

989,078

 

 

1,023,862

 

 

1,042,156

 

 

(34,784

)

-3.4

%

 

(53,078

)

-5.1

%

Total assets

$

13,628,702

 

$

13,440,476

 

$

13,463,511

 

$

188,226

 

1.4

%

$

165,191

 

1.2

%

 
Interest-bearing demand deposits

$

3,048,876

 

$

2,899,467

 

$

2,439,777

 

$

149,409

 

5.2

%

$

609,099

 

25.0

%

Savings deposits

 

3,801,187

 

 

3,786,835

 

 

3,860,096

 

 

14,352

 

0.4

%

 

(58,909

)

-1.5

%

Time deposits

 

1,840,065

 

 

1,881,556

 

 

1,798,855

 

 

(41,491

)

-2.2

%

 

41,210

 

2.3

%

Total interest-bearing deposits

 

8,690,128

 

 

8,567,858

 

 

8,098,728

 

 

122,270

 

1.4

%

 

591,400

 

7.3

%

Fed funds purchased and repos

 

51,264

 

 

84,352

 

 

352,256

 

 

(33,088

)

-39.2

%

 

(300,992

)

-85.4

%

Other borrowings

 

81,352

 

 

90,804

 

 

249,853

 

 

(9,452

)

-10.4

%

 

(168,501

)

-67.4

%

Junior subordinated debt securities

 

61,856

 

 

61,856

 

 

61,856

 

0.0

%

0.0

%

Total interest-bearing liabilities

 

8,884,600

 

 

8,804,870

 

 

8,762,693

 

 

79,730

 

0.9

%

 

121,907

 

1.4

%

Noninterest-bearing deposits

 

2,898,266

 

 

2,824,220

 

 

2,930,726

 

 

74,046

 

2.6

%

 

(32,460

)

-1.1

%

Other liabilities

 

240,091

 

 

221,199

 

 

188,186

 

 

18,892

 

8.5

%

 

51,905

 

27.6

%

Total liabilities

 

12,022,957

 

 

11,850,289

 

 

11,881,605

 

 

172,668

 

1.5

%

 

141,352

 

1.2

%

Shareholders' equity

 

1,605,745

 

 

1,590,187

 

 

1,581,906

 

 

15,558

 

1.0

%

 

23,839

 

1.5

%

Total liabilities and equity

$

13,628,702

 

$

13,440,476

 

$

13,463,511

 

$

188,226

 

1.4

%

$

165,191

 

1.2

%

 

n/m - percentage changes greater than +/- 100% are considered not meaningful

 

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2019
($ in thousands)
(unaudited) Linked Quarter Year over Year
PERIOD END BALANCES 6/30/2019 3/31/2019 6/30/2018 $ Change % Change $ Change % Change
Cash and due from banks

$

404,413

 

$

454,047

 

$

387,119

 

$

(49,634

)

-10.9

%

$

17,294

 

4.5

%

Fed funds sold and rev repos

 

75,499

 

 

75,499

 

n/m

 

 

75,499

 

n/m

 

Securities available for sale

 

1,643,725

 

 

1,723,445

 

 

1,974,675

 

 

(79,720

)

-4.6

%

 

(330,950

)

-16.8

%

Securities held to maturity

 

825,536

 

 

884,319

 

 

985,845

 

 

(58,783

)

-6.6

%

 

(160,309

)

-16.3

%

Loans held for sale (LHFS)

 

240,380

 

 

172,683

 

 

196,217

 

 

67,697

 

39.2

%

 

44,163

 

22.5

%

Loans held for investment (LHFI)

 

9,116,759

 

 

8,995,014

 

 

8,678,983

 

 

121,745

 

1.4

%

 

437,776

 

5.0

%

Allowance for loan losses, LHFI

 

(80,399

)

 

(79,005

)

 

(83,566

)

 

(1,394

)

-1.8

%

 

3,167

 

3.8

%

Net LHFI

 

9,036,360

 

 

8,916,009

 

 

8,595,417

 

 

120,351

 

1.3

%

 

440,943

 

5.1

%

Acquired loans

 

87,884

 

 

93,201

 

 

173,107

 

 

(5,317

)

-5.7

%

 

(85,223

)

-49.2

%

Allowance for loan losses, acquired loans

 

(1,398

)

 

(1,297

)

 

(3,046

)

 

(101

)

-7.8

%

 

1,648

 

54.1

%

Net acquired loans

 

86,486

 

 

91,904

 

 

170,061

 

 

(5,418

)

-5.9

%

 

(83,575

)

-49.1

%

Net LHFI and acquired loans

 

9,122,846

 

 

9,007,913

 

 

8,765,478

 

 

114,933

 

1.3

%

 

357,368

 

4.1

%

Premises and equipment, net

 

189,820

 

 

189,743

 

 

177,686

 

 

77

 

0.0

%

 

12,134

 

6.8

%

Mortgage servicing rights

 

79,283

 

 

86,842

 

 

97,411

 

 

(7,559

)

-8.7

%

 

(18,128

)

-18.6

%

Goodwill

 

379,627

 

 

379,627

 

 

379,627

 

 

0.0

%

 

0.0

%

Identifiable intangible assets

 

9,101

 

 

10,092

 

 

13,677

 

 

(991

)

-9.8

%

 

(4,576

)

-33.5

%

Other real estate

 

31,243

 

 

32,139

 

 

39,667

 

 

(896

)

-2.8

%

 

(8,424

)

-21.2

%

Operating lease right-of-use assets

 

32,762

 

 

33,861

 

 

 

(1,099

)

-3.2

%

 

32,762

 

n/m

 

Other assets

 

514,723

 

 

503,306

 

 

507,863

 

 

11,417

 

2.3

%

 

6,860

 

1.4

%

Total assets

$

13,548,958

 

$

13,478,017

 

$

13,525,265

 

$

70,941

 

0.5

%

$

23,693

 

0.2

%

 
Deposits:
Noninterest-bearing

$

2,909,141

 

$

2,867,778

 

$

2,958,354

 

$

41,363

 

1.4

%

$

(49,213

)

-1.7

%

Interest-bearing

 

8,657,488

 

 

8,667,037

 

 

8,114,081

 

 

(9,549

)

-0.1

%

 

543,407

 

6.7

%

Total deposits

 

11,566,629

 

 

11,534,815

 

 

11,072,435

 

 

31,814

 

0.3

%

 

494,194

 

4.5

%

Fed funds purchased and repos

 

51,800

 

 

46,867

 

 

477,891

 

 

4,933

 

10.5

%

 

(426,091

)

-89.2

%

Other borrowings

 

79,012

 

 

83,265

 

 

187,560

 

 

(4,253

)

-5.1

%

 

(108,548

)

-57.9

%

Junior subordinated debt securities

 

61,856

 

 

61,856

 

 

61,856

 

 

0.0

%

 

0.0

%

Operating lease liabilities

 

33,878

 

 

34,921

 

 

 

(1,043

)

-3.0

%

 

33,878

 

n/m

 

Other liabilities

 

137,233

 

 

129,265

 

 

141,451

 

 

7,968

 

6.2

%

 

(4,218

)

-3.0

%

Total liabilities

 

11,930,408

 

 

11,890,989

 

 

11,941,193

 

 

39,419

 

0.3

%

 

(10,785

)

-0.1

%

Common stock null