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Trustmark Corp. to up the pace of branch reductions

As Trustmark Corp. continues to put significant investment into its automated service delivery channels, the company expects to keep or exceed the pace of its branch reductions this year compared to 2016.

Based on a transcript of the company's Jan. 25 earnings call, President and CEO Gerard Host said that Trustmark recently launched a new virtual teller product called My Teller, which is expected to allow "additional flexibility in helping to reduce staffing, or actually close some branches and replace it with this [My Teller], to open up in some new channels that we haven't been into before."

Management said that in 2016, the company consolidated a total of nine branch offices, located across Alabama, Florida and Mississippi while only opening one branch in Tuscaloosa, Ala., and a loan production office in Pensacola, Fla.

"We've already spent a lot of the money on automation of new delivery channels," Host stated, adding, "So the pace that you've seen over the last couple of years in closures, we would anticipate would increase."

Meanwhile, Chief Credit Officer Barry Harvey said that Trustmark also anticipates additional downgrades over time in its energy portfolio due to the time it is taking for higher commodity prices to translate into putting more assets to work at higher day rates. Eventually, he said, that would transfer or pass its way through the company's financials.

"So it is going to take a little time with the customer base that we have, which is more oil field services related, for it all to flow-through. And for us and for them and us to be able to benefit from the higher commodity prices," Harvey said.

Trustmark reported that as of Dec. 31, 2016, its total energy exposure stood at $476 million, with outstanding balances of $272 million, which represents 3.5% of the held for investment loan portfolio. Nonaccrual energy loans represented 4% of the energy-related loans, and 15 basis points of the outstanding held for investment portfolio.

The Jackson, Miss.-based company also provided some guidance on its net interest margin, expecting 4 to 5 basis points decline in 2017. In addition, according to Treasurer Tom Owens, with core earning asset growth, management expects core net interest income to see a mid single digit increase year-over-year.

Trustmark Corp. reported net income of $28.9 million in the fourth quarter of 2016, or 43 cents per share, compared to $31.0 million, or 46 cents per share for the linked period and $27.9 million or 41 cents per share for the fourth quarter of 2015.

For the full year 2016, the company reported net income of $108.4 million, or $1.60 per share, compared to 2015 full-year net income of $116.0 million, or $1.71 per share.