Trustmark Corporation (NASDAQ:TRMK) reported net income of $36.3 million in the third quarter of 2018, representing diluted earnings per share of $0.54, an increase of 5.9% year-over-year. This level of earnings resulted in a return on average tangible equity of 12.26% and a return on average assets of 1.07%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2018, to shareholders of record on December 1, 2018.
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Third Quarter Highlights
- Revenue, excluding interest and fees on acquired loans, increased 1.7% linked-quarter and 5.8% year-over-year to total $150.0 million
- The net interest margin (FTE), excluding acquired loans, was 3.50% in the third quarter, up 4 basis points from the prior quarter and 16 basis points year-over-year
- Core noninterest expense, which excludes other real estate expense and intangible amortization, totaled $102.8 million, up 0.2% from the prior quarter and 2.1% year-over-year
Gerard R. Host, President and CEO, stated, “Our third quarter performance continues to reflect our strategic priorities of profitable revenue generation, process improvement and disciplined expense management. During the quarter, we continued to expand banking relationships as well as attract new insurance and wealth management clients. We are privileged to have a #1 deposit share ranking in not only the Jackson metropolitan area, but also the state of Mississippi and, across the franchise, a top-four deposit share ranking in 68% of counties served. Trustmark remains well positioned to continue meeting the needs of our customers and creating long-term value for our shareholders.”
Balance Sheet Management
- Loan growth moderated during the quarter
- Improved composition of average earnings assets as loans replaced maturing investment securities
- Average loans represented 81.8% of average deposits in the third quarter
Loans held for investment totaled $8.7 billion at September 30, 2018, reflecting an increase of $68.0 million, or 0.8%, linked-quarter and $339.7 million, or 4.0%, from the prior year. During the quarter, growth in residential loans ($58.5 million), other real estate loans ($56.1 million), consumer loans ($7.4 million) and other political subdivision loans ($3.7 million) was offset in part by declines in loans secured by nonfarm, nonresidential properties ($27.4 million), other loans ($16.3 million), construction, land development and other land loans ($7.3 million) and commercial and industrial loans ($6.8 million).
Deposits totaled $11.0 billion at September 30, 2018, down $115.5 million, or 1.0%, from the prior quarter and up $725.2 million, or 7.1%, from one year earlier. The linked-quarter decline is attributable primarily to a seasonal decline in public funds.
Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At September 30, 2018, Trustmark’s tangible equity to tangible assets ratio was 9.26%, while the total risk-based capital ratio was 13.61%. During the first nine months of 2018, Trustmark repurchased $7.9 million of its common shares. At September 30, 2018, Trustmark had $91.4 million in remaining authority under its existing stock repurchase program, which expires March 31, 2019.
Credit Quality
- Nonperforming assets increased 3.2% from the prior quarter and declined 11.3% year-over-year
- Other real estate declined 8.0% from the prior quarter and 24.6% year-over-year
- Allowance for loan losses represented 339.79% of nonperforming loans, excluding specifically reviewed impaired loans
Nonperforming loans totaled $67.8 million at September 30, 2018, up $6.5 million from the prior quarter and down $1.5 million year-over-year. The linked-quarter increase in nonperforming loans is due to two specific credits, one, a shared national credit in the limited-service restaurant industry and the other a credit in the healthcare industry. Other real estate totaled $36.5 million, declining $3.2 million from the prior quarter and $11.9 million from the same period one year earlier. Collectively, nonperforming assets totaled $104.3 million, reflecting a linked-quarter increase of 3.2% and year-over-year decrease of 11.3%. Net charge-offs increased $2.5 million in the third quarter primarily due to a write-down on one credit for which reserves had previously been established.
The provision for loan losses totaled $8.7 million in the third quarter and was driven entirely by specific reserves on two impaired loans, one of which is the shared national credit in the limited-service restaurant industry referenced above. The remainder of the provision was attributable to a previously impaired loan to an industrial parts distributor.
Allocation of Trustmark's $88.9 million allowance for loan losses represented 1.13% of commercial loans and 0.63% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.02% at September 30, 2018, representing a level management considers commensurate with the inherent risk in the loan portfolio. Collectively, the allowance for both held for investment and acquired loan losses represented 1.02% of total loans, which includes held for investment and acquired loans.
Unless otherwise noted, all of the above credit quality metrics exclude acquired loans.
Revenue Generation
- Net interest margin (FTE), excluding acquired loans, was 3.50%, reflecting its fourth consecutive quarter of expansion
- Maturing investment securities run-off continues to drive accretion to the net interest margin
- Noninterest income totaled $47.1 million, down 0.6% linked-quarter and up 5.9% year-over-year
Net interest income (FTE) in the third quarter totaled $110.1 million, resulting in a net interest margin (FTE) of 3.59%, up 2 basis points from the prior quarter. Relative to the prior quarter, net interest income (FTE) increased $1.8 million, reflecting a $4.5 million increase in interest income (FTE) and a $2.7 million increase in interest expense. During the third quarter of 2018, the yield on acquired loans totaled 10.82% and included $1.6 million in recoveries from the settlement of debt, which represented approximately 4.40% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin (FTE) totaled 3.50% for the third quarter of 2018, an increase of 4 basis points when compared to the second quarter of 2018, which was principally due to growth in the yield on the loans held for investment and held for sale portfolio, run-off of maturing investment securities and favorable funding mix offset by higher costs of interest-bearing deposits.
Noninterest income in the third quarter totaled $47.1 million. Insurance revenue totaled $10.8 million in the third quarter, unchanged from the prior quarter and up 3.5% year-over-year; this performance reflects growth in the property and casualty lines of business. Mortgage banking revenue totaled $8.6 million in the third quarter, down 4.4% from the prior quarter and up 95.4% year-over-year, primarily due to our hedging strategy. The linked-quarter change reflects a decline in the value of loans held for sale partially offset by an increase in gains on sales of loans, net. Mortgage loan production in the third quarter totaled $397.7 million, down 3.1% from the prior quarter and up 16.5% year-over-year. Wealth management revenue in the third quarter totaled $7.8 million, up 4.2% from the prior quarter and 3.4% year-over-year, respectively. The linked-quarter performance is primarily attributable to increased revenue from investment services fee income. Bank card and other fees increased 5.5% from the prior quarter and 4.3% year-over-year primarily due to increased customer derivative revenue. Service charges on deposit accounts increased 4.0% compared to the prior quarter and declined 1.3% year-over-year.
Noninterest Expense
- Total noninterest expense increased 1.4% linked-quarter and 2.1% year-over-year to $105.2 million
- Core noninterest expense, which excludes other real estate expense and intangible amortization, totaled $102.8 million, up 0.2% from the prior quarter and 2.1% year-over-year
Diligent expense management continues to be a priority for Trustmark. Salaries and employee benefits increased $872 thousand, or 1.5%, from the prior quarter to total $60.8 million, due in part to higher brokerage and mortgage commissions as a result of continued growth in both business lines. Services and fees remained relatively flat as increases in data processing were offset by reductions in outside services and fees. Other real estate expense, net was $1.2 million for the quarter while net occupancy-premises expense totaled $6.9 million, up 5.5% from the prior quarter due to increases in routine office occupancy expense. Other expense totaled $11.7 million, a decline of $611 thousand, or 5.0%, on a linked-quarter basis.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 24, 2018 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, November 7, 2018, in archived format at the same web address or by calling (877) 344-7529, passcode 10124583.
Trustmark is a financial services company providing banking and financial solutions through 198 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 | ||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||
| Linked Quarter | Year over Year | |||||||||||||||||||||||||||||||||
| QUARTERLY AVERAGE BALANCES | 9/30/2018 | 6/30/2018 | 9/30/2017 | $ Change | % Change | $ Change | % Change | |||||||||||||||||||||||||||
| Securities AFS-taxable | $ | 1,937,807 | $ | 2,038,759 | $ | 2,349,736 | $ | (100,952 | ) | -5.0 | % | $ | (411,929 | ) | -17.5 | % | ||||||||||||||||||
| Securities AFS-nontaxable | 41,889 | 50,035 | 67,994 | (8,146 | ) | -16.3 | % | (26,105 | ) | -38.4 | % | |||||||||||||||||||||||
| Securities HTM-taxable | 933,294 | 972,571 | 1,086,773 | (39,277 | ) | -4.0 | % | (153,479 | ) | -14.1 | % | |||||||||||||||||||||||
| Securities HTM-nontaxable | 29,183 | 30,337 | 32,829 | (1,154 | ) | -3.8 | % | (3,646 | ) | -11.1 | % | |||||||||||||||||||||||
| Total securities | 2,942,173 | 3,091,702 | 3,537,332 | (149,529 | ) | -4.8 | % | (595,159 | ) | -16.8 | % | |||||||||||||||||||||||
| Loans (including loans held for sale) | 8,907,588 | 8,707,466 | 8,532,523 | 200,122 | 2.3 | % | 375,065 | 4.4 | % | |||||||||||||||||||||||||
| Acquired loans | 147,811 | 202,140 | 299,221 | (54,329 | ) | -26.9 | % | (151,410 | ) | -50.6 | % | |||||||||||||||||||||||
| Fed funds sold and rev repos | 477 | 1,063 | 3,582 | (586 | ) | -55.1 | % | (3,105 | ) | -86.7 | % | |||||||||||||||||||||||
| Other earning assets | 189,471 | 186,224 | 84,320 | 3,247 | 1.7 | % | 105,151 | n/m | ||||||||||||||||||||||||||
| Total earning assets | 12,187,520 | 12,188,595 | 12,456,978 | (1,075 | ) | 0.0 | % | (269,458 | ) | -2.2 | % | |||||||||||||||||||||||
| Allowance for loan losses | (86,496 | ) | (86,315 | ) | (85,363 | ) | (181 | ) | -0.2 | % | (1,133 | ) | -1.3 | % | ||||||||||||||||||||
| Cash and due from banks | 330,949 | 319,075 | 312,409 | 11,874 | 3.7 | % | 18,540 | 5.9 | % | |||||||||||||||||||||||||
| Other assets | 1,035,327 | 1,042,156 | 1,202,766 | (6,829 | ) | -0.7 | % | (167,439 | ) | -13.9 | % | |||||||||||||||||||||||
| Total assets | $ | 13,467,300 | $ | 13,463,511 | $ | 13,886,790 | $ | 3,789 | 0.0 | % | $ | (419,490 | ) | -3.0 | % | |||||||||||||||||||
| Interest-bearing demand deposits | $ | 2,602,658 | $ | 2,439,777 | $ | 2,192,064 | $ | 162,881 | 6.7 | % | $ | 410,594 | 18.7 | % | ||||||||||||||||||||
| Savings deposits | 3,722,533 | 3,860,096 | 3,284,323 | (137,563 | ) | -3.6 | % | 438,210 | 13.3 | % | ||||||||||||||||||||||||
| Time deposits | 1,851,866 | 1,798,855 | 1,736,683 | 53,011 | 2.9 | % | 115,183 | 6.6 | % | |||||||||||||||||||||||||
| Total interest-bearing deposits | 8,177,057 | 8,098,728 | 7,213,070 | 78,329 | 1.0 | % | 963,987 | 13.4 | % | |||||||||||||||||||||||||
| Fed funds purchased and repos | 347,489 | 352,256 | 547,863 | (4,767 | ) | -1.4 | % | (200,374 | ) | -36.6 | % | |||||||||||||||||||||||
| Short-term borrowings | 186,293 | 248,932 | 1,335,476 | (62,639 | ) | -25.2 | % | (1,149,183 | ) | -86.1 | % | |||||||||||||||||||||||
| Long-term FHLB advances | 903 | 921 | 970 | (18 | ) | -2.0 | % | (67 | ) | -6.9 | % | |||||||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | — | 0.0 | % | — | 0.0 | % | |||||||||||||||||||||||||
| Total interest-bearing liabilities | 8,773,598 | 8,762,693 | 9,159,235 | 10,905 | 0.1 | % | (385,637 | ) | -4.2 | % | ||||||||||||||||||||||||
| Noninterest-bearing deposits | 2,894,061 | 2,930,726 | 3,003,763 | (36,665 | ) | -1.3 | % | (109,702 | ) | -3.7 | % | |||||||||||||||||||||||
| Other liabilities | 202,053 | 188,186 | 145,925 | 13,867 | 7.4 | % | 56,128 | 38.5 | % | |||||||||||||||||||||||||
| Total liabilities | 11,869,712 | 11,881,605 | 12,308,923 | (11,893 | ) | -0.1 | % | (439,211 | ) | -3.6 | % | |||||||||||||||||||||||
| Shareholders' equity | 1,597,588 | 1,581,906 | 1,577,867 | 15,682 | 1.0 | % | 19,721 | 1.2 | % | |||||||||||||||||||||||||
| Total liabilities and equity | $ | 13,467,300 | $ | 13,463,511 | $ | 13,886,790 | $ | 3,789 | 0.0 | % | $ | (419,490 | ) | -3.0 | % | |||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | ||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||
| Linked Quarter | Year over Year | |||||||||||||||||||||||||||||||||
PERIOD END BALANCES | 9/30/2018 | 6/30/2018 | 9/30/2017 | $ Change | % Change | $ Change | % Change | |||||||||||||||||||||||||||
| Cash and due from banks | $ | 432,471 | $ | 387,119 | $ | 350,123 | $ | 45,352 | 11.7 | % | $ | 82,348 | 23.5 | % | ||||||||||||||||||||
| Fed funds sold and rev repos | 1,000 | — | 3,215 | 1,000 | n/m | (2,215 | ) | -68.9 | % | |||||||||||||||||||||||||
| Securities available for sale | 1,864,633 | 1,974,675 | 2,369,089 | (110,042 | ) | -5.6 | % | (504,456 | ) | -21.3 | % | |||||||||||||||||||||||
| Securities held to maturity | 943,883 | 985,845 | 1,102,283 | (41,962 | ) | -4.3 | % | (158,400 | ) | -14.4 | % | |||||||||||||||||||||||
| Loans held for sale (LHFS) | 182,664 | 196,217 | 204,157 | (13,553 | ) | -6.9 | % | (21,493 | ) | -10.5 | % | |||||||||||||||||||||||
| Loans held for investment (LHFI) | 8,747,030 | 8,678,983 | 8,407,341 | 68,047 | 0.8 | % | 339,689 | 4.0 | % | |||||||||||||||||||||||||
| Allowance for loan losses, LHFI | (88,874 | ) | (83,566 | ) | (80,332 | ) | (5,308 | ) | -6.4 | % | (8,542 | ) | -10.6 | % | ||||||||||||||||||||
| Net LHFI | 8,658,156 | 8,595,417 | 8,327,009 | 62,739 | 0.7 | % | 331,147 | 4.0 | % | |||||||||||||||||||||||||
| Acquired loans | 132,615 | 173,107 | 283,757 | (40,492 | ) | -23.4 | % | (151,142 | ) | -53.3 | % | |||||||||||||||||||||||
| Allowance for loan losses, acquired loans | (1,714 | ) | (3,046 | ) | (5,768 | ) | 1,332 | 43.7 | % | 4,054 | 70.3 | % | ||||||||||||||||||||||
| Net acquired loans | 130,901 | 170,061 | 277,989 | (39,160 | ) | -23.0 | % | (147,088 | ) | -52.9 | % | |||||||||||||||||||||||
Net LHFI and acquired loans | 8,789,057 | 8,765,478 | 8,604,998 | 23,579 | 0.3 | % | 184,059 | 2.1 | % | |||||||||||||||||||||||||
| Premises and equipment, net | 178,739 | 177,686 | 181,312 | 1,053 | 0.6 | % | (2,573 | ) | -1.4 | % | ||||||||||||||||||||||||
| Mortgage servicing rights | 101,374 | 97,411 | 81,477 | 3,963 | 4.1 | % | 19,897 | 24.4 | % | |||||||||||||||||||||||||
| Goodwill | 379,627 | 379,627 | 379,627 | — | 0.0 | % | — | 0.0 | % | |||||||||||||||||||||||||
| Identifiable intangible assets | 12,391 | 13,677 | 17,883 | (1,286 | ) | -9.4 | % | (5,492 | ) | -30.7 | % | |||||||||||||||||||||||
| Other real estate | 36,475 | 39,667 | 48,356 | (3,192 | ) | -8.0 | % | (11,881 | ) | -24.6 | % | |||||||||||||||||||||||
| Other assets | 517,498 | 507,863 | 542,135 | 9,635 | 1.9 | % | (24,637 | ) | -4.5 | % | ||||||||||||||||||||||||
| Total assets | $ | 13,439,812 | $ | 13,525,265 | $ | 13,884,655 | $ | (85,453 | ) | -0.6 | % | $ | (444,843 | ) | -3.2 | % | ||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||||||||||
| Noninterest-bearing | $ | 2,786,539 | $ | 2,958,354 | $ | 2,998,013 | $ | (171,815 | ) | -5.8 | % | $ | (211,474 | ) | -7.1 | % | ||||||||||||||||||
| Interest-bearing | 8,170,371 | 8,114,081 | 7,233,729 | 56,290 | 0.7 | % | 936,642 | 12.9 | % | |||||||||||||||||||||||||
| Total deposits | 10,956,910 | 11,072,435 | 10,231,742 | (115,525 | ) | -1.0 | % | 725,168 | 7.1 | % | ||||||||||||||||||||||||
| Fed funds purchased and repos | 486,865 | 477,891 | 545,603 | 8,974 | 1.9 | % | (58,738 | ) | -10.8 | % | ||||||||||||||||||||||||
| Short-term borrowings | 190,023 | 186,647 | 1,322,159 | 3,376 | 1.8 | % | (1,132,136 | ) | -85.6 | % | ||||||||||||||||||||||||
| Long-term FHLB advances | 896 | 913 | 962 | (17 | ) | -1.9 | % | (66 | ) | -6.9 | % | |||||||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | — | 0.0 | % | — | 0.0 | % | |||||||||||||||||||||||||
| Other liabilities | 143,658 | 141,451 | 139,798 | 2,207 | 1.6 | % | 3,860 | 2.8 | % | |||||||||||||||||||||||||
| Total liabilities | 11,840,208 | 11,941,193 | 12,302,120 | (100,985 | ) | -0.8 | % | (461,912 | ) | -3.8 | % | |||||||||||||||||||||||
| Common stock | 14,089 | 14,089 | 14,114 | — | 0.0 | % | (25 | ) | -0.2 | % | ||||||||||||||||||||||||
| Capital surplus | 362,868 | 361,715 | 368,131 | 1,153 | 0.3 | % | (5,263 | ) | -1.4 | % | ||||||||||||||||||||||||
| Retained earnings | 1,302,593 | 1,282,007 | 1,228,115 | 20,586 | 1.6 | % | 74,478 | 6.1 | % | |||||||||||||||||||||||||
| Accum other comprehensive loss, net of tax | (79,946 | ) | (73,739 | ) | (27,825 | ) | (6,207 | ) | -8.4 | % | (52,121 | ) | n/m | |||||||||||||||||||||
| Total shareholders' equity | 1,599,604 | 1,584,072 | 1,582,535 | 15,532 | 1.0 | % | 17,069 | 1.1 | % | |||||||||||||||||||||||||
| Total liabilities and equity | $ | 13,439,812 | $ | 13,525,265 | $ | 13,884,655 | $ | (85,453 | ) | -0.6 | % | $ | (444,843 | ) | -3.2 | % | ||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | ||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||
| ($ in thousands except per share data) | ||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | ||||||||||||||||||||||||||||||||
INCOME STATEMENTS | 9/30/2018 | 6/30/2018 | 9/30/2017 | $ Change | % Change | $ Change | % Change | |||||||||||||||||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 105,993 | $ | 99,761 | $ | 93,703 | $ | 6,232 | 6.2 | % | $ | 12,290 | 13.1 | % | ||||||||||||||||||||
| Interest and fees on acquired loans | 4,033 | 5,022 | 6,625 | (989 | ) | -19.7 | % | (2,592 | ) | -39.1 | % | |||||||||||||||||||||||
| Interest on securities-taxable | 16,186 | 16,894 | 19,291 | (708 | ) | -4.2 | % | (3,105 | ) | -16.1 | % | |||||||||||||||||||||||
| Interest on securities-tax exempt-FTE | 656 | 733 | 1,104 | (77 | ) | -10.5 | % | (448 | ) | -40.6 | % | |||||||||||||||||||||||
| Interest on fed funds sold and rev repos | 3 | 5 | 14 | (2 | ) | -40.0 | % | (11 | ) | -78.6 | % | |||||||||||||||||||||||
| Other interest income | 1,050 | 1,054 | 355 | (4 | ) | -0.4 | % | 695 | n/m | |||||||||||||||||||||||||
| Total interest income-FTE | 127,921 | 123,469 | 121,092 | 4,452 | 3.6 | % | 6,829 | 5.6 | % | |||||||||||||||||||||||||
| Interest on deposits | 14,972 | 12,139 | 6,381 | 2,833 | 23.3 | % | 8,591 | n/m | ||||||||||||||||||||||||||
| Interest on fed funds pch and repos | 1,348 | 1,250 | 1,301 | 98 | 7.8 | % | 47 | 3.6 | % | |||||||||||||||||||||||||
| Other interest expense | 1,467 | 1,713 | 4,520 | (246 | ) | -14.4 | % | (3,053 | ) | -67.5 | % | |||||||||||||||||||||||
| Total interest expense | 17,787 | 15,102 | 12,202 | 2,685 | 17.8 | % | 5,585 | 45.8 | % | |||||||||||||||||||||||||
| Net interest income-FTE | 110,134 | 108,367 | 108,890 | 1,767 | 1.6 | % | 1,244 | 1.1 | % | |||||||||||||||||||||||||
| Provision for loan losses, LHFI | 8,673 | 3,167 | 3,672 | 5,506 | n/m | 5,001 | n/m | |||||||||||||||||||||||||||
| Provision for loan losses, acquired loans | (467 | ) | (441 | ) | (1,653 | ) | (26 | ) | -5.9 | % | 1,186 | 71.7 | % | |||||||||||||||||||||
| Net interest income after provision-FTE | 101,928 | 105,641 | 106,871 | (3,713 | ) | -3.5 | % | (4,943 | ) | -4.6 | % | |||||||||||||||||||||||
| Service charges on deposit accounts | 11,075 | 10,647 | 11,223 | 428 | 4.0 | % | (148 | ) | -1.3 | % | ||||||||||||||||||||||||
| Bank card and other fees | 7,459 | 7,070 | 7,150 | 389 | 5.5 | % | 309 | 4.3 | % | |||||||||||||||||||||||||
| Mortgage banking, net | 8,647 | 9,046 | 4,425 | (399 | ) | -4.4 | % | 4,222 | 95.4 | % | ||||||||||||||||||||||||
| Insurance commissions | 10,765 | 10,735 | 10,398 | 30 | 0.3 | % | 367 | 3.5 | % | |||||||||||||||||||||||||
| Wealth management | 7,789 | 7,478 | 7,530 | 311 | 4.2 | % | 259 | 3.4 | % | |||||||||||||||||||||||||
| Other, net | 1,358 | 2,415 | 3,740 | (1,057 | ) | -43.8 | % | (2,382 | ) | -63.7 | % | |||||||||||||||||||||||
| Nonint inc-excl sec gains (losses), net | 47,093 | 47,391 | 44,466 | (298 | ) | -0.6 | % | 2,627 | 5.9 | % | ||||||||||||||||||||||||
| Security gains (losses), net | — | — | 14 | — | n/m | (14 | ) | -100.0 | % | |||||||||||||||||||||||||
| Total noninterest income | 47,093 | 47,391 | 44,480 | (298 | ) | -0.6 | % | 2,613 | 5.9 | % | ||||||||||||||||||||||||
| Salaries and employee benefits | 60,847 | 59,975 | 57,871 | 872 | 1.5 | % | 2,976 | 5.1 | % | |||||||||||||||||||||||||
| Defined benefit plan termination | — | — | — | — | n/m | — | n/m | |||||||||||||||||||||||||||
| Services and fees | 16,404 | 16,322 | 15,133 | 82 | 0.5 | % | 1,271 | 8.4 | % | |||||||||||||||||||||||||
| Net occupancy-premises | 6,910 | 6,550 | 6,702 | 360 | 5.5 | % | 208 | 3.1 | % | |||||||||||||||||||||||||
| Equipment expense | 6,200 | 6,202 | 6,297 | (2 | ) | 0.0 | % | (97 | ) | -1.5 | % | |||||||||||||||||||||||
| Other real estate expense, net | 1,168 | (93 | ) | 864 | 1,261 | n/m | 304 | 35.2 | % | |||||||||||||||||||||||||
| FDIC assessment expense | 1,999 | 2,538 | 2,816 | (539 | ) | -21.2 | % | (817 | ) | -29.0 | % | |||||||||||||||||||||||
| Other expense | 11,695 | 12,306 | 13,403 | (611 | ) | -5.0 | % | (1,708 | ) | -12.7 | % | |||||||||||||||||||||||
| Total noninterest expense | 105,223 | 103,800 | 103,086 | 1,423 | 1.4 | % | 2,137 | 2.1 | % | |||||||||||||||||||||||||
| Income before income taxes and tax eq adj | 43,798 | 49,232 | 48,265 | (5,434 | ) | -11.0 | % | (4,467 | ) | -9.3 | % | |||||||||||||||||||||||
| Tax equivalent adjustment | 3,151 | 3,203 | 4,978 | (52 | ) | -1.6 | % | (1,827 | ) | -36.7 | % | |||||||||||||||||||||||
| Income before income taxes | 40,647 | 46,029 | 43,287 | (5,382 | ) | -11.7 | % | (2,640 | ) | -6.1 | % | |||||||||||||||||||||||
| Income taxes | 4,394 | 6,216 | 8,708 | (1,822 | ) | -29.3 | % | (4,314 | ) | -49.5 | % | |||||||||||||||||||||||
| Net income | $ | 36,253 | $ | 39,813 | $ | 34,579 | $ | (3,560 | ) | -8.9 | % | $ | 1,674 | 4.8 | % | |||||||||||||||||||
| Per share data | ||||||||||||||||||||||||||||||||||
| Earnings per share - basic | $ | 0.54 | $ | 0.59 | $ | 0.51 | $ | (0.05 | ) | -8.5 | % | $ | 0.03 | 5.9 | % | |||||||||||||||||||
| Earnings per share - diluted | $ | 0.54 | $ | 0.59 | $ | 0.51 | $ | (0.05 | ) | -8.5 | % | $ | 0.03 | 5.9 | % | |||||||||||||||||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | — | 0.0 | % | — | 0.0 | % | ||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||||
| Basic | 67,621,345 | 67,758,097 | 67,741,655 | |||||||||||||||||||||||||||||||
| Diluted | 67,796,346 | 67,907,267 | 67,916,418 | |||||||||||||||||||||||||||||||
| Period end shares outstanding | 67,621,369 | 67,621,111 | 67,742,135 | |||||||||||||||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | ||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | ||||||||||||||||||||||||||||||||
NONPERFORMING ASSETS (1) | 9/30/2018 | 6/30/2018 | 9/30/2017 | $ Change | % Change | $ Change | % Change | |||||||||||||||||||||||||||
| Nonaccrual loans | ||||||||||||||||||||||||||||||||||
| Alabama | $ | 3,953 | $ | 3,685 | $ | 1,629 | $ | 268 | 7.3 | % | $ | 2,324 | n/m | |||||||||||||||||||||
| Florida | 1,180 | 2,978 | 3,242 | (1,798 | ) | -60.4 | % | (2,062 | ) | -63.6 | % | |||||||||||||||||||||||
| Mississippi (2) | 41,351 | 39,006 | 59,483 | 2,345 | 6.0 | % | (18,132 | ) | -30.5 | % | ||||||||||||||||||||||||
| Tennessee (3) | 13,195 | 5,338 | 4,589 | 7,857 | n/m | 8,606 | n/m | |||||||||||||||||||||||||||
| Texas | 8,157 | 10,356 | 346 | (2,199 | ) | -21.2 | % | 7,811 | n/m | |||||||||||||||||||||||||
| Total nonaccrual loans | 67,836 | 61,363 | 69,289 | 6,473 | 10.5 | % | (1,453 | ) | -2.1 | % | ||||||||||||||||||||||||
| Other real estate | ||||||||||||||||||||||||||||||||||
| Alabama | 7,526 | 8,290 | 12,726 | (764 | ) | -9.2 | % | (5,200 | ) | -40.9 | % | |||||||||||||||||||||||
| Florida | 8,931 | 9,789 | 16,100 | (858 | ) | -8.8 | % | (7,169 | ) | -44.5 | % | |||||||||||||||||||||||
| Mississippi (2) | 18,191 | 19,358 | 15,319 | (1,167 | ) | -6.0 | % | 2,872 | 18.7 | % | ||||||||||||||||||||||||
| Tennessee (3) | 1,083 | 1,486 | 2,671 | (403 | ) | -27.1 | % | (1,588 | ) | -59.5 | % | |||||||||||||||||||||||
| Texas | 744 | 744 | 1,540 | — | 0.0 | % | (796 | ) | -51.7 | % | ||||||||||||||||||||||||
| Total other real estate | 36,475 | 39,667 | 48,356 | (3,192 | ) | -8.0 | % | (11,881 | ) | -24.6 | % | |||||||||||||||||||||||
| Total nonperforming assets | $ | 104,311 | $ | 101,030 | $ | 117,645 | $ | 3,281 | 3.2 | % | $ | (13,334 | ) | -11.3 | % | |||||||||||||||||||
LOANS PAST DUE OVER 90 DAYS (1) | ||||||||||||||||||||||||||||||||||
| LHFI | $ | 726 | $ | 529 | $ | 2,244 | $ | 197 | 37.2 | % | $ | (1,518 | ) | -67.6 | % | |||||||||||||||||||
| LHFS-Guaranteed GNMA serviced loans | ||||||||||||||||||||||||||||||||||
| (no obligation to repurchase) | $ | 34,115 | $ | 34,693 | $ | 32,332 | $ | (578 | ) | -1.7 | % | $ | 1,783 | 5.5 | % | |||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | ||||||||||||||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES (1) | 9/30/2018 | 6/30/2018 | 9/30/2017 | $ Change | % Change | $ Change | % Change | |||||||||||||||||||||||||||
| Beginning Balance | $ | 83,566 | $ | 81,235 | $ | 76,184 | $ | 2,331 | 2.9 | % | $ | 7,382 | 9.7 | % | ||||||||||||||||||||
| Transfers (4) | 772 | 782 | — | (10 | ) | -1.3 | % | 772 | n/m | |||||||||||||||||||||||||
| Provision for loan losses | 8,673 | 3,167 | 3,672 | 5,506 | n/m | 5,001 | n/m | |||||||||||||||||||||||||||
| Charge-offs | (7,017 | ) | (3,421 | ) | (2,752 | ) | (3,596 | ) | n/m | (4,265 | ) | n/m | ||||||||||||||||||||||
| Recoveries | 2,880 | 1,803 | 3,228 | 1,077 | 59.7 | % | (348 | ) | -10.8 | % | ||||||||||||||||||||||||
| Net (charge-offs) recoveries | (4,137 | ) | (1,618 | ) | 476 | (2,519 | ) | n/m | (4,613 | ) | n/m | |||||||||||||||||||||||
| Ending Balance | $ | 88,874 | $ | 83,566 | $ | 80,332 | $ | 5,308 | 6.4 | % | $ | 8,542 | 10.6 | % | ||||||||||||||||||||
PROVISION FOR LOAN LOSSES (1) | ||||||||||||||||||||||||||||||||||
| Alabama | $ | 593 | $ | 434 | $ | 1,218 | $ | 159 | 36.6 | % | $ | (625 | ) | -51.3 | % | |||||||||||||||||||
| Florida | (431 | ) | (811 | ) | (744 | ) | 380 | 46.9 | % | 313 | 42.1 | % | ||||||||||||||||||||||
| Mississippi (2) | (1,630 | ) | 2,768 | 1,860 | (4,398 | ) | n/m | (3,490 | ) | n/m | ||||||||||||||||||||||||
| Tennessee (3) | 8,100 | 82 | (72 | ) | 8,018 | n/m | 8,172 | n/m | ||||||||||||||||||||||||||
| Texas | 2,041 | 694 | 1,410 | 1,347 | n/m | 631 | 44.8 | % | ||||||||||||||||||||||||||
| Total provision for loan losses | $ | 8,673 | $ | 3,167 | $ | 3,672 | $ | 5,506 | n/m | $ | 5,001 | n/m | ||||||||||||||||||||||
NET CHARGE-OFFS (RECOVERIES) (1) | ||||||||||||||||||||||||||||||||||
| Alabama | $ | 198 | $ | 112 | $ | 314 | $ | 86 | 76.8 | % | $ | (116 | ) | -36.9 | % | |||||||||||||||||||
| Florida | (586 | ) | (122 | ) | (796 | ) | (464 | ) | n/m | 210 | 26.4 | % | ||||||||||||||||||||||
| Mississippi (2) | 4,677 | 1,705 | (11 | ) | 2,972 | n/m | 4,688 | n/m | ||||||||||||||||||||||||||
| Tennessee (3) | (96 | ) | 70 | 85 | (166 | ) | n/m | (181 | ) | n/m | ||||||||||||||||||||||||
| Texas | (56 | ) | (147 | ) | (68 | ) | 91 | 61.9 | % | 12 | 17.6 | % | ||||||||||||||||||||||
| Total net charge-offs (recoveries) | $ | 4,137 | $ | 1,618 | $ | (476 | ) | $ | 2,519 | n/m | $ | 4,613 | n/m | |||||||||||||||||||||
(1) | - | Excludes acquired loans. | ||
(2) | - | Mississippi includes Central and Southern Mississippi Regions. | ||
(3) | - | Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. | ||
(4) | - | The allowance for loan losses balance related to the remaining loans acquired in the Bay Bank merger, which were transferred from acquired impaired loans to LHFI during the second quarter of 2018, and the remaining loans acquired in the Heritage acquisition and the Reliance merger, which were transferred from acquired impaired loans to LHFI during the third quarter of 2018. | ||
n/m | - | percentage changes greater than +/- 100% are considered not meaningful | ||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
AVERAGE BALANCES | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | |||||||||||||||||||||||||||||
| Securities AFS-taxable | $ | 1,937,807 | $ | 2,038,759 | $ | 2,141,144 | $ | 2,247,247 | $ | 2,349,736 | $ | 2,038,492 | $ | 2,312,523 | ||||||||||||||||||||||
| Securities AFS-nontaxable | 41,889 | 50,035 | 57,972 | 61,691 | 67,994 | 49,906 | 77,310 | |||||||||||||||||||||||||||||
| Securities HTM-taxable | 933,294 | 972,571 | 1,005,721 | 1,045,723 | 1,086,773 | 970,263 | 1,106,402 | |||||||||||||||||||||||||||||
| Securities HTM-nontaxable | 29,183 | 30,337 | 32,734 | 32,781 | 32,829 | 30,738 | 32,905 | |||||||||||||||||||||||||||||
| Total securities | 2,942,173 | 3,091,702 | 3,237,571 | 3,387,442 | 3,537,332 | 3,089,399 | 3,529,140 | |||||||||||||||||||||||||||||
| Loans (including loans held for sale) | 8,907,588 | 8,707,466 | 8,636,967 | 8,686,916 | 8,532,523 | 8,751,665 | 8,320,255 | |||||||||||||||||||||||||||||
| Acquired loans | 147,811 | 202,140 | 243,152 | 273,918 | 299,221 | 197,352 | 288,599 | |||||||||||||||||||||||||||||
| Fed funds sold and rev repos | 477 | 1,063 | 478 | 1,724 | 3,582 | 673 | 2,399 | |||||||||||||||||||||||||||||
| Other earning assets | 189,471 | 186,224 | 213,985 | 80,218 | 84,320 | 196,470 | 80,553 | |||||||||||||||||||||||||||||
| Total earning assets | 12,187,520 | 12,188,595 | 12,332,153 | 12,430,218 | 12,456,978 | 12,235,559 | 12,220,946 | |||||||||||||||||||||||||||||
| Allowance for loan losses | (86,496 | ) | (86,315 | ) | (82,304 | ) | (86,704 | ) | (85,363 | ) | (85,054 | ) | (84,036 | ) | ||||||||||||||||||||||
| Cash and due from banks | 330,949 | 319,075 | 336,642 | 315,586 | 312,409 | 328,868 | 310,313 | |||||||||||||||||||||||||||||
| Other assets | 1,035,327 | 1,042,156 | 1,030,738 | 1,192,464 | 1,202,766 | 1,036,091 | 1,222,619 | |||||||||||||||||||||||||||||
| Total assets | $ | 13,467,300 | $ | 13,463,511 | $ | 13,617,229 | $ | 13,851,564 | $ | 13,886,790 | $ | 13,515,464 | $ | 13,669,842 | ||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 2,602,658 | $ | 2,439,777 | $ | 2,404,428 | $ | 2,244,625 | $ | 2,192,064 | $ | 2,483,014 | $ | 2,070,615 | ||||||||||||||||||||||
| Savings deposits | 3,722,533 | 3,860,096 | 3,737,507 | 3,291,407 | 3,284,323 | 3,773,324 | 3,313,627 | |||||||||||||||||||||||||||||
| Time deposits | 1,851,866 | 1,798,855 | 1,748,645 | 1,756,576 | 1,736,683 | 1,800,167 | 1,721,804 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 8,177,057 | 8,098,728 | 7,890,580 | 7,292,608 | 7,213,070 | 8,056,505 | 7,106,046 | |||||||||||||||||||||||||||||
| Fed funds purchased and repos | 347,489 | 352,256 | 277,877 | 475,850 | 547,863 | 326,129 | 524,295 | |||||||||||||||||||||||||||||
| Short-term borrowings | 186,293 | 248,932 | 751,219 | 1,276,543 | 1,335,476 | 393,412 | 1,091,783 | |||||||||||||||||||||||||||||
| Long-term FHLB advances | 903 | 921 | 938 | 954 | 970 | 921 | 130,117 | |||||||||||||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 8,773,598 | 8,762,693 | 8,982,470 | 9,107,811 | 9,159,235 | 8,838,823 | 8,914,097 | |||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 2,894,061 | 2,930,726 | 2,881,374 | 2,994,292 | 3,003,763 | 2,902,100 | 3,040,672 | |||||||||||||||||||||||||||||
| Other liabilities | 202,053 | 188,186 | 180,871 | 169,828 | 145,925 | 190,446 | 160,507 | |||||||||||||||||||||||||||||
| Total liabilities | 11,869,712 | 11,881,605 | 12,044,715 | 12,271,931 | 12,308,923 | 11,931,369 | 12,115,276 | |||||||||||||||||||||||||||||
| Shareholders' equity | 1,597,588 | 1,581,906 | 1,572,514 | 1,579,633 | 1,577,867 | 1,584,095 | 1,554,566 | |||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 13,467,300 | $ | 13,463,511 | $ | 13,617,229 | $ | 13,851,564 | $ | 13,886,790 | $ | 13,515,464 | $ | 13,669,842 | ||||||||||||||||||||||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
PERIOD END BALANCES | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | |||||||||||||||||||||
| Cash and due from banks | $ | 432,471 | $ | 387,119 | $ | 315,276 | $ | 335,768 | $ | 350,123 | ||||||||||||||||
Fed funds sold and rev repos | 1,000 | — | 112 | 615 | 3,215 | |||||||||||||||||||||
| Securities available for sale | 1,864,633 | 1,974,675 | 2,097,497 | 2,238,635 | 2,369,089 | |||||||||||||||||||||
| Securities held to maturity | 943,883 | 985,845 | 1,023,975 | 1,056,486 | 1,102,283 | |||||||||||||||||||||
| Loans held for sale (LHFS) | 182,664 | 196,217 | 163,882 | 180,512 | 204,157 | |||||||||||||||||||||
| Loans held for investment (LHFI) | 8,747,030 | 8,678,983 | 8,513,985 | 8,569,967 | 8,407,341 | |||||||||||||||||||||
| Allowance for loan losses, LHFI | (88,874 | ) | (83,566 | ) | (81,235 | ) | (76,733 | ) | (80,332 | ) | ||||||||||||||||
| Net LHFI | 8,658,156 | 8,595,417 | 8,432,750 | 8,493,234 | 8,327,009 | |||||||||||||||||||||
| Acquired loans | 132,615 | 173,107 | 215,476 | 261,517 | 283,757 | |||||||||||||||||||||
| Allowance for loan losses, acquired loans | (1,714 | ) | (3,046 | ) | (4,294 | ) | (4,079 | ) | (5,768 | ) | ||||||||||||||||
| Net acquired loans | 130,901 | 170,061 | 211,182 | 257,438 | 277,989 | |||||||||||||||||||||
| Net LHFI and acquired loans | 8,789,057 | 8,765,478 | 8,643,932 | 8,750,672 | 8,604,998 | |||||||||||||||||||||
| Premises and equipment, net | 178,739 | 177,686 | 178,584 | 179,339 | 181,312 | |||||||||||||||||||||
| Mortgage servicing rights | 101,374 | 97,411 | 94,850 | 84,269 | 81,477 | |||||||||||||||||||||
| Goodwill | 379,627 | 379,627 | 379,627 | 379,627 | 379,627 | |||||||||||||||||||||
| Identifiable intangible assets | 12,391 | 13,677 | 14,963 | 16,360 | 17,883 | |||||||||||||||||||||
| Other real estate | 36,475 | 39,667 | 39,554 | 43,228 | 48,356 | |||||||||||||||||||||
| Other assets | 517,498 | 507,863 | 511,187 | 532,442 | 542,135 | |||||||||||||||||||||
| Total assets | $ | 13,439,812 | $ | 13,525,265 | $ | 13,463,439 | $ | 13,797,953 | $ | 13,884,655 | ||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||
| Noninterest-bearing | $ | 2,786,539 | $ | 2,958,354 | $ | 3,004,442 | $ | 2,978,074 | $ | 2,998,013 | ||||||||||||||||
| Interest-bearing | 8,170,371 | 8,114,081 | 7,971,359 | 7,599,438 | 7,233,729 | |||||||||||||||||||||
| Total deposits | 10,956,910 | 11,072,435 | 10,975,801 | 10,577,512 | 10,231,742 | |||||||||||||||||||||
| Fed funds purchased and repos | 486,865 | 477,891 | 274,833 | 469,827 | 545,603 | |||||||||||||||||||||
| Short-term borrowings | 190,023 | 186,647 | 442,689 | 971,049 | 1,322,159 | |||||||||||||||||||||
| Long-term FHLB advances | 896 | 913 | 929 | 946 | 962 | |||||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||||||||||
| Other liabilities | 143,658 | 141,451 | 137,194 | 145,062 | 139,798 | |||||||||||||||||||||
| Total liabilities | 11,840,208 | 11,941,193 | 11,893,302 | 12,226,252 | 12,302,120 | |||||||||||||||||||||
| Common stock | 14,089 | 14,089 | 14,121 | 14,115 | 14,114 | |||||||||||||||||||||
| Capital surplus | 362,868 | 361,715 | 366,021 | 369,124 | 368,131 | |||||||||||||||||||||
| Retained earnings | 1,302,593 | 1,282,007 | 1,257,881 | 1,228,187 | 1,228,115 | |||||||||||||||||||||
| Accum other comprehensive loss, net of tax | (79,946 | ) | (73,739 | ) | (67,886 | ) | (39,725 | ) | (27,825 | ) | ||||||||||||||||
| Total shareholders' equity | 1,599,604 | 1,584,072 | 1,570,137 | 1,571,701 | 1,582,535 | |||||||||||||||||||||
| Total liabilities and equity | $ | 13,439,812 | $ | 13,525,265 | $ | 13,463,439 | $ | 13,797,953 | $ | 13,884,655 | ||||||||||||||||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||||
| September 30, 2018 | |||||||||||||||||||||||||||||||||||
| ($ in thousands except per share data) | |||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
INCOME STATEMENTS | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | ||||||||||||||||||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 105,993 | $ | 99,761 | $ | 94,712 | $ | 95,816 | $ | 93,703 | $ | 300,466 | $ | 266,979 | |||||||||||||||||||||
| Interest and fees on acquired loans | 4,033 | 5,022 | 4,877 | 6,401 | 6,625 | 13,932 | 18,077 | ||||||||||||||||||||||||||||
| Interest on securities-taxable | 16,186 | 16,894 | 17,506 | 18,327 | 19,291 | 50,586 | 57,865 | ||||||||||||||||||||||||||||
| Interest on securities-tax exempt-FTE | 656 | 733 | 824 | 1,035 | 1,104 | 2,213 | 3,582 | ||||||||||||||||||||||||||||
| Interest on fed funds sold and rev repos | 3 | 5 | 2 | 7 | 14 | 10 | 26 | ||||||||||||||||||||||||||||
| Other interest income | 1,050 | 1,054 | 934 | 473 | 355 | 3,038 | 993 | ||||||||||||||||||||||||||||
| Total interest income-FTE | 127,921 | 123,469 | 118,855 | 122,059 | 121,092 | 370,245 | 347,522 | ||||||||||||||||||||||||||||
| Interest on deposits | 14,972 | 12,139 | 9,491 | 7,284 | 6,381 | 36,602 | 15,433 | ||||||||||||||||||||||||||||
| Interest on fed funds pch and repos | 1,348 | 1,250 | 662 | 1,116 | 1,301 | 3,260 | 3,036 | ||||||||||||||||||||||||||||
| Other interest expense | 1,467 | 1,713 | 3,394 | 4,555 | 4,520 | 6,574 | 10,821 | ||||||||||||||||||||||||||||
| Total interest expense | 17,787 | 15,102 | 13,547 | 12,955 | 12,202 | 46,436 | 29,290 | ||||||||||||||||||||||||||||
| Net interest income-FTE | 110,134 | 108,367 | 105,308 | 109,104 | 108,890 | 323,809 | 318,232 | ||||||||||||||||||||||||||||
| Provision for loan losses, LHFI | 8,673 | 3,167 | 3,961 | 5,739 | 3,672 | 15,801 | 9,355 | ||||||||||||||||||||||||||||
| Provision for loan losses, acquired loans | (467 | ) | (441 | ) | 150 | (1,573 | ) | (1,653 | ) | (758 | ) | (5,822 | ) | ||||||||||||||||||||||
| Net interest income after provision-FTE | 101,928 | 105,641 | 101,197 | 104,938 | 106,871 | 308,766 | 314,699 | ||||||||||||||||||||||||||||
| Service charges on deposit accounts | 11,075 | 10,647 | 10,857 | 11,193 | 11,223 | 32,579 | 32,810 | ||||||||||||||||||||||||||||
| Bank card and other fees | 7,459 | 7,070 | 6,626 | 7,266 | 7,150 | 21,155 | 21,020 | ||||||||||||||||||||||||||||
| Mortgage banking, net | 8,647 | 9,046 | 11,265 | 6,284 | 4,425 | 28,958 | 23,618 | ||||||||||||||||||||||||||||
| Insurance commissions | 10,765 | 10,735 | 9,419 | 8,813 | 10,398 | 30,919 | 29,355 | ||||||||||||||||||||||||||||
| Wealth management | 7,789 | 7,478 | 7,567 | 7,723 | 7,530 | 22,834 | 22,617 | ||||||||||||||||||||||||||||
| Other, net | 1,358 | 2,415 | 1,059 | 2,681 | 3,740 | 4,832 | 11,268 | ||||||||||||||||||||||||||||
| Nonint inc-excl sec gains (losses), net | 47,093 | 47,391 | 46,793 | 43,960 | 44,466 | 141,277 | 140,688 | ||||||||||||||||||||||||||||
| Security gains (losses), net | — | — | — | — | 14 | — | 15 | ||||||||||||||||||||||||||||
| Total noninterest income | 47,093 | 47,391 | 46,793 | 43,960 | 44,480 | 141,277 | 140,703 | ||||||||||||||||||||||||||||
| Salaries and employee benefits | 60,847 | 59,975 | 58,475 | 58,820 | 57,871 | 179,297 | 170,445 | ||||||||||||||||||||||||||||
| Defined benefit plan termination | — | — | — | — | — | — | 17,644 | ||||||||||||||||||||||||||||
| Services and fees | 16,404 | 16,322 | 15,746 | 15,419 | 15,133 | 48,472 | 45,474 | ||||||||||||||||||||||||||||
| Net occupancy-premises | 6,910 | 6,550 | 6,502 | 6,617 | 6,702 | 19,962 | 19,150 | ||||||||||||||||||||||||||||
| Equipment expense | 6,200 | 6,202 | 6,099 | 5,996 | 6,297 | 18,501 | 18,457 | ||||||||||||||||||||||||||||
| Other real estate expense, net | 1,168 | (93 | ) | 866 | 666 | 864 | 1,941 | 3,006 | |||||||||||||||||||||||||||
| FDIC assessment expense | 1,999 | 2,538 | 2,995 | 2,868 | 2,816 | 7,532 | 8,142 | ||||||||||||||||||||||||||||
| Other expense | 11,695 | 12,306 | 11,782 | 12,565 | 13,403 | 35,783 | 44,900 | ||||||||||||||||||||||||||||
| Total noninterest expense | 105,223 | 103,800 | 102,465 | 102,951 | 103,086 | 311,488 | 327,218 | ||||||||||||||||||||||||||||
| Income before income taxes and tax eq adj | 43,798 | 49,232 | 45,525 | 45,947 | 48,265 | 138,555 | 128,184 | ||||||||||||||||||||||||||||
| Tax equivalent adjustment | 3,151 | 3,203 | 3,215 | 5,060 | 4,978 | 9,569 | 14,726 | ||||||||||||||||||||||||||||
| Income before income taxes | 40,647 | 46,029 | 42,310 | 40,887 | 43,287 | 128,986 | 113,458 | ||||||||||||||||||||||||||||
| Income taxes | 4,394 | 6,216 | 5,480 | 25,119 | 8,708 | 16,090 | 23,596 | ||||||||||||||||||||||||||||
| Net income | $ | 36,253 | $ | 39,813 | $ | 36,830 | $ | 15,768 | $ | 34,579 | $ | 112,896 | $ | 89,862 | |||||||||||||||||||||
| Per share data | |||||||||||||||||||||||||||||||||||
| Earnings per share - basic | $ | 0.54 | $ | 0.59 | $ | 0.54 | $ | 0.23 | $ | 0.51 | $ | 1.67 | $ | 1.33 | |||||||||||||||||||||
| Earnings per share - diluted | $ | 0.54 | $ | 0.59 | $ | 0.54 | $ | 0.23 | $ | 0.51 | $ | 1.67 | $ | 1.32 | |||||||||||||||||||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.69 | $ | 0.69 | |||||||||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||||||||||||||
| Basic | 67,621,345 | 67,758,097 | 67,809,234 | 67,742,792 | 67,741,655 | 67,728,871 | 67,721,971 | ||||||||||||||||||||||||||||
| Diluted | 67,796,346 | 67,907,267 | 67,960,583 | 67,938,986 | 67,916,418 | 67,875,925 | 67,876,295 | ||||||||||||||||||||||||||||
| Period end shares outstanding | 67,621,369 | 67,621,111 | 67,775,068 | 67,746,094 | 67,742,135 | 67,621,369 | 67,742,135 | ||||||||||||||||||||||||||||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||||||
NONPERFORMING ASSETS (1) | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | |||||||||||||||||||||||||||||||
| Nonaccrual loans | ||||||||||||||||||||||||||||||||||||
| Alabama | $ | 3,953 | $ | 3,685 | $ | 3,121 | $ | 3,083 | $ | 1,629 | ||||||||||||||||||||||||||
| Florida | 1,180 | 2,978 | 2,116 | 3,034 | 3,242 | |||||||||||||||||||||||||||||||
| Mississippi (2) | 41,351 | 39,006 | 48,600 | 49,129 | 59,483 | |||||||||||||||||||||||||||||||
| Tennessee (3) | 13,195 | 5,338 | 5,530 | 4,436 | 4,589 | |||||||||||||||||||||||||||||||
| Texas | 8,157 | 10,356 | 9,329 | 7,893 | 346 | |||||||||||||||||||||||||||||||
| Total nonaccrual loans | 67,836 | 61,363 | 68,696 | 67,575 | 69,289 | |||||||||||||||||||||||||||||||
| Other real estate | ||||||||||||||||||||||||||||||||||||
| Alabama | 7,526 | 8,290 | 8,962 | 11,714 | 12,726 | |||||||||||||||||||||||||||||||
| Florida | 8,931 | 9,789 | 12,550 | 13,937 | 16,100 | |||||||||||||||||||||||||||||||
| Mississippi (2) | 18,191 | 19,358 | 15,737 | 14,260 | 15,319 | |||||||||||||||||||||||||||||||
| Tennessee (3) | 1,083 | 1,486 | 1,523 | 2,535 | 2,671 | |||||||||||||||||||||||||||||||
| Texas | 744 | 744 | 782 | 782 | 1,540 | |||||||||||||||||||||||||||||||
| Total other real estate | 36,475 | 39,667 | 39,554 | 43,228 | 48,356 | |||||||||||||||||||||||||||||||
| Total nonperforming assets | $ | 104,311 | $ | 101,030 | $ | 108,250 | $ | 110,803 | $ | 117,645 | ||||||||||||||||||||||||||
LOANS PAST DUE OVER 90 DAYS (1) | ||||||||||||||||||||||||||||||||||||
| LHFI | $ | 726 | $ | 529 | $ | 1,419 | $ | 2,171 | $ | 2,244 | ||||||||||||||||||||||||||
| LHFS-Guaranteed GNMA serviced loans | ||||||||||||||||||||||||||||||||||||
| (no obligation to repurchase) | $ | 34,115 | $ | 34,693 | $ | 34,826 | $ | 35,544 | $ | 32,332 | ||||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES (1) | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | |||||||||||||||||||||||||||||
| Beginning Balance | $ | 83,566 | $ | 81,235 | $ | 76,733 | $ | 80,332 | $ | 76,184 | $ | 76,733 | $ | 71,265 | ||||||||||||||||||||||
| Transfers (4) | 772 | 782 | — | — | — | 1,554 | — | |||||||||||||||||||||||||||||
| Provision for loan losses | 8,673 | 3,167 | 3,961 | 5,739 | 3,672 | 15,801 | 9,355 | |||||||||||||||||||||||||||||
| Charge-offs | (7,017 | ) | (3,421 | ) | (2,542 | ) | (12,075 | ) | (2,752 | ) | (12,980 | ) | (9,072 | ) | ||||||||||||||||||||||
| Recoveries | 2,880 | 1,803 | 3,083 | 2,737 | 3,228 | 7,766 | 8,784 | |||||||||||||||||||||||||||||
| Net (charge-offs) recoveries | (4,137 | ) | (1,618 | ) | 541 | (9,338 | ) | 476 | (5,214 | ) | (288 | ) | ||||||||||||||||||||||||
| Ending Balance | $ | 88,874 | $ | 83,566 | $ | 81,235 | $ | 76,733 | $ | 80,332 | $ | 88,874 | $ | 80,332 | ||||||||||||||||||||||
PROVISION FOR LOAN LOSSES (1) | ||||||||||||||||||||||||||||||||||||
| Alabama | $ | 593 | $ | 434 | $ | 618 | $ | 559 | $ | 1,218 | $ | 1,645 | $ | 3,273 | ||||||||||||||||||||||
| Florida | (431 | ) | (811 | ) | (863 | ) | (1,235 | ) | (744 | ) | (2,105 | ) | (1,716 | ) | ||||||||||||||||||||||
| Mississippi (2) | (1,630 | ) | 2,768 | 2,664 | 2,779 | 1,860 | 3,802 | 5,954 | ||||||||||||||||||||||||||||
| Tennessee (3) | 8,100 | 82 | (268 | ) | (439 | ) | (72 | ) | 7,914 | 458 | ||||||||||||||||||||||||||
| Texas | 2,041 | 694 | 1,810 | 4,075 | 1,410 | 4,545 | 1,386 | |||||||||||||||||||||||||||||
| Total provision for loan losses | $ | 8,673 | $ | 3,167 | $ | 3,961 | $ | 5,739 | $ | 3,672 | $ | 15,801 | $ | 9,355 | ||||||||||||||||||||||
NET CHARGE-OFFS (RECOVERIES) (1) | ||||||||||||||||||||||||||||||||||||
| Alabama | $ | 198 | $ | 112 | $ | 84 | $ | 196 | $ | 314 | $ | 394 | $ | 351 | ||||||||||||||||||||||
| Florida | (586 | ) | (122 | ) | (960 | ) | (946 | ) | (796 | ) | (1,668 | ) | (1,924 | ) | ||||||||||||||||||||||
| Mississippi (2) | 4,677 | 1,705 | 267 | 5,574 | (11 | ) | 6,649 | 1,781 | ||||||||||||||||||||||||||||
| Tennessee (3) | (96 | ) | 70 | 109 | 79 | 85 | 83 | 314 | ||||||||||||||||||||||||||||
| Texas | (56 | ) | (147 | ) | (41 | ) | 4,435 | (68 | ) | (244 | ) | (234 | ) | |||||||||||||||||||||||
| Total net charge-offs (recoveries) | $ | 4,137 | $ | 1,618 | $ | (541 | ) | $ | 9,338 | $ | (476 | ) | $ | 5,214 | $ | 288 | ||||||||||||||||||||
(1) | - | Excludes acquired loans. | ||
(2) | - | Mississippi includes Central and Southern Mississippi Regions. | ||
(3) | - | Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. | ||
(4) | - | The allowance for loan losses balance related to the remaining loans acquired in the Bay Bank merger, which were transferred from acquired impaired loans to LHFI during the second quarter of 2018, and the remaining loans acquired in the Heritage acquisition and the Reliance merger, which were transferred from acquired impaired loans to LHFI during the third quarter of 2018. | ||
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||
FINANCIAL RATIOS AND OTHER DATA | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | |||||||||||||||||||||||||||
| Return on equity | 9.00 | % | 10.09 | % | 9.50 | % | 3.96 | % | 8.69 | % | 9.53 | % | 7.73 | % | ||||||||||||||||||||
| Return on average tangible equity | 12.26 | % | 13.77 | % | 13.05 | % | 5.60 | % | 11.95 | % | 13.02 | % | 10.68 | % | ||||||||||||||||||||
| Return on assets | 1.07 | % | 1.19 | % | 1.10 | % | 0.45 | % | 0.99 | % | 1.12 | % | 0.88 | % | ||||||||||||||||||||
| Interest margin - Yield - FTE | 4.16 | % | 4.06 | % | 3.91 | % | 3.90 | % | 3.86 | % | 4.05 | % | 3.80 | % | ||||||||||||||||||||
| Interest margin - Cost | 0.58 | % | 0.50 | % | 0.45 | % | 0.41 | % | 0.39 | % | 0.51 | % | 0.32 | % | ||||||||||||||||||||
| Net interest margin - FTE | 3.59 | % | 3.57 | % | 3.46 | % | 3.48 | % | 3.47 | % | 3.54 | % | 3.48 | % | ||||||||||||||||||||
| Efficiency ratio (1) | 65.19 | % | 64.90 | % | 65.50 | % | 65.21 | % | 65.14 | % | 65.20 | % | 65.43 | % | ||||||||||||||||||||
| Full-time equivalent employees | 2,889 | 2,890 | 2,905 | 2,893 | 2,878 | |||||||||||||||||||||||||||||
CREDIT QUALITY RATIOS (2) | ||||||||||||||||||||||||||||||||||
| Net charge-offs/average loans | 0.18 | % | 0.07 | % | -0.03 | % | 0.43 | % | -0.02 | % | 0.08 | % | 0.00 | % | ||||||||||||||||||||
| Provision for loan losses/average loans | 0.39 | % | 0.15 | % | 0.19 | % | 0.26 | % | 0.17 | % | 0.24 | % | 0.15 | % | ||||||||||||||||||||
| Nonperforming loans/total loans (incl LHFS) | 0.76 | % | 0.69 | % | 0.79 | % | 0.77 | % | 0.80 | % | ||||||||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) | 1.17 | % | 1.14 | % | 1.25 | % | 1.27 | % | 1.37 | % | ||||||||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) +ORE | 1.16 | % | 1.13 | % | 1.24 | % | 1.26 | % | 1.36 | % | ||||||||||||||||||||||||
| ALL/total loans (excl LHFS) | 1.02 | % | 0.96 | % | 0.95 | % | 0.90 | % | 0.96 | % | ||||||||||||||||||||||||
| ALL-commercial/total commercial loans | 1.13 | % | 1.05 | % | 1.04 | % | 0.95 | % | 1.02 | % | ||||||||||||||||||||||||
| ALL-consumer/total consumer and home mortgage loans | 0.63 | % | 0.63 | % | 0.64 | % | 0.68 | % | 0.73 | % | ||||||||||||||||||||||||
| ALL/nonperforming loans | 131.01 | % | 136.18 | % | 118.25 | % | 113.55 | % | 115.94 | % | ||||||||||||||||||||||||
| ALL/nonperforming loans (excl specifically reviewed impaired loans) | 339.79 | % | 345.87 | % | 314.28 | % | 320.84 | % | 301.50 | % | ||||||||||||||||||||||||
CAPITAL RATIOS | ||||||||||||||||||||||||||||||||||
| Total equity/total assets | 11.90 | % | 11.71 | % | 11.66 | % | 11.39 | % | 11.40 | % | ||||||||||||||||||||||||
| Tangible equity/tangible assets | 9.26 | % | 9.07 | % | 9.00 | % | 8.77 | % | 8.79 | % | ||||||||||||||||||||||||
| Tangible equity/risk-weighted assets | 11.31 | % | 11.20 | % | 11.25 | % | 11.13 | % | 11.29 | % | ||||||||||||||||||||||||
| Tier 1 leverage ratio (3) | 10.41 | % | 10.22 | % | 9.96 | % | 9.67 | % | 9.61 | % | ||||||||||||||||||||||||
| Common equity tier 1 capital ratio (3) | 12.20 | % | 12.01 | % | 12.05 | % | 11.77 | % | 11.80 | % | ||||||||||||||||||||||||
| Tier 1 risk-based capital ratio (3) | 12.76 | % | 12.58 | % | 12.62 | % | 12.33 | % | 12.37 | % | ||||||||||||||||||||||||
| Total risk-based capital ratio (3) | 13.61 | % | 13.39 | % | 13.44 | % | 13.10 | % | 13.19 | % | ||||||||||||||||||||||||
STOCK PERFORMANCE | ||||||||||||||||||||||||||||||||||
| Market value-Close | $ | 33.65 | $ | 32.63 | $ | 31.16 | $ | 31.86 | $ | 33.12 | ||||||||||||||||||||||||
| Book value | $ | 23.66 | $ | 23.43 | $ | 23.17 | $ | 23.20 | $ | 23.36 | ||||||||||||||||||||||||
| Tangible book value | $ | 17.86 | $ | 17.61 | $ | 17.34 | $ | 17.35 | $ | 17.49 | ||||||||||||||||||||||||
(1) | - | The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of partnership tax credits, amortization of purchased intangibles, and significant non-routine income and expense items. | ||
(2) | - | Excludes acquired loans. | ||
(3) | - | The regulatory capital ratios for December 31, 2017 contain a reclassification adjustment of $8.5 million from AOCI to retained earnings as allowed by regulatory agencies in an interagency statement released January 18, 2018 to address disproportionate tax effect in AOCI resulting from the recent enactment of the Tax Cuts and Jobs Act of 2017 and the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes. | ||
TRUSTMARK CORPORATION AND SUBSIDIARIES |
| NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2018 |
| ($ in thousands) |
| (unaudited) |
Note 1 – Subsequent Events
On October 10, 2018, Hurricane Michael struck the Florida Panhandle causing significant damages. As of September 30, 2018, Trustmark had 1,786 loans with a balance of $239.5 million and exposure of $281.5 million in the Federal Emergency Management Agency (FEMA) designated disaster areas which includes 12 counties in Florida and 13 counties in Georgia. Immediately following the storm, Trustmark initiated a process to identify all customers in the FEMA disaster areas. Efforts are now ongoing to contact those borrowers to offer assistance as well as to establish reasonable estimates of uninsured damage and to adequately assess potential risk to the bank. As of the date of this earnings release, Management continues to evaluate the impact of Hurricane Michael and is unable to provide a reasonable estimate of the financial impact on Trustmark’s consolidated financial statements.
Note 2 - Securities Available for Sale and Held to Maturity
The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):
| 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | |||||||||||||||||
SECURITIES AVAILABLE FOR SALE | |||||||||||||||||||||
| U.S. Government agency obligations | |||||||||||||||||||||
| Issued by U.S. Government agencies | $ | 32,371 | $ | 36,414 | $ | 40,381 | $ | 45,285 | $ | 49,994 | |||||||||||
| Obligations of states and political subdivisions | 57,264 | 65,348 | 75,013 | 79,229 | 89,144 | ||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||||||
| Residential mortgage pass-through securities | |||||||||||||||||||||
| Guaranteed by GNMA | 65,847 | 60,245 | 62,457 | 65,746 | 60,902 | ||||||||||||||||
| Issued by FNMA and FHLMC | 684,474 | 727,433 | 767,676 | 814,450 | 860,131 | ||||||||||||||||
| Other residential mortgage-backed securities | |||||||||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 840,073 | 897,652 | 954,537 | 1,016,790 | 1,087,169 | ||||||||||||||||
| Commercial mortgage-backed securities | |||||||||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 184,604 | 187,583 | 197,433 | 217,135 | 221,749 | ||||||||||||||||
| Total securities available for sale | $ | 1,864,633 | $ | 1,974,675 | $ | 2,097,497 | $ | 2,238,635 | $ | 2,369,089 | |||||||||||
SECURITIES HELD TO MATURITY | |||||||||||||||||||||
| U.S. Government agency obligations | |||||||||||||||||||||
| Issued by U.S. Government sponsored agencies | $ | 3,725 | $ | 3,714 | $ | 3,703 | $ | 3,692 | $ | 3,680 | |||||||||||
| Obligations of states and political subdivisions | 42,623 | 42,458 | 46,011 | 46,039 | 46,069 | ||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||||||
| Residential mortgage pass-through securities | |||||||||||||||||||||
| Guaranteed by GNMA | 12,316 | 12,756 | 12,974 | 13,539 | 14,191 | ||||||||||||||||
| Issued by FNMA and FHLMC | 119,040 | 123,377 | 128,517 | 133,975 | 139,172 | ||||||||||||||||
| Other residential mortgage-backed securities | |||||||||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 600,635 | 627,470 | 653,325 | 678,926 | 708,715 | ||||||||||||||||
| Commercial mortgage-backed securities | |||||||||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 165,544 | 176,070 | 179,445 | 180,315 | 190,456 | ||||||||||||||||
| Total securities held to maturity | $ | 943,883 | $ | 985,845 | $ | 1,023,975 | $ | 1,056,486 | $ | 1,102,283 | |||||||||||
At September 30, 2018, the net unamortized, unrealized loss included in accumulated other comprehensive loss in the accompanying balance sheet for securities held to maturity previously transferred from securities available for sale totaled approximately $16.6 million ($12.4 million, net of tax).
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 96% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2018 |
($ in thousands) |
(unaudited) |
Note 3 – Loan Composition
LHFI BY TYPE (excluding acquired loans) | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | ||||||||||||||||||||||
| Loans secured by real estate: | |||||||||||||||||||||||||||
| Construction, land development and other land loans | $ | 1,031,491 | $ | 1,038,745 | $ | 986,188 | $ | 987,624 | $ | 950,144 | |||||||||||||||||
| Secured by 1-4 family residential properties | 1,801,029 | 1,742,496 | 1,698,885 | 1,675,311 | 1,648,733 | ||||||||||||||||||||||
| Secured by nonfarm, nonresidential properties | 2,294,289 | 2,321,734 | 2,257,899 | 2,193,823 | 2,172,885 | ||||||||||||||||||||||
| Other real estate secured | 453,687 | 397,538 | 425,664 | 517,956 | 482,163 | ||||||||||||||||||||||
| Commercial and industrial loans | 1,565,922 | 1,572,764 | 1,561,967 | 1,570,345 | 1,568,588 | ||||||||||||||||||||||
| Consumer loans | 182,709 | 175,261 | 168,469 | 171,918 | 173,061 | ||||||||||||||||||||||
| State and other political subdivision loans | 929,178 | 925,452 | 936,014 | 952,483 | 936,614 | ||||||||||||||||||||||
| Other loans | 488,725 | 504,993 | 478,899 | 500,507 | 475,153 | ||||||||||||||||||||||
| LHFI | 8,747,030 | 8,678,983 | 8,513,985 | 8,569,967 | 8,407,341 | ||||||||||||||||||||||
| Allowance for loan losses | (88,874 | ) | (83,566 | ) | (81,235 | ) | (76,733 | ) | (80,332 | ) | |||||||||||||||||
| Net LHFI | $ | 8,658,156 | $ | 8,595,417 | $ | 8,432,750 | $ | 8,493,234 | $ | 8,327,009 | |||||||||||||||||
ACQUIRED LOANS BY TYPE | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | ||||||||||||||||||||||
| Loans secured by real estate: | |||||||||||||||||||||||||||
| Construction, land development and other land loans | $ | 6,657 | $ | 11,900 | $ | 17,575 | $ | 23,586 | $ | 29,384 | |||||||||||||||||
| Secured by 1-4 family residential properties | 25,274 | 36,419 | 49,289 | 61,751 | 65,746 | ||||||||||||||||||||||
| Secured by nonfarm, nonresidential properties | 66,865 | 85,117 | 100,285 | 114,694 | 122,200 | ||||||||||||||||||||||
| Other real estate secured | 8,507 | 9,862 | 14,581 | 16,746 | 18,431 | ||||||||||||||||||||||
| Commercial and industrial loans | 16,610 | 20,485 | 21,808 | 31,506 | 34,124 | ||||||||||||||||||||||
| Consumer loans | 1,514 | 1,700 | 1,920 | 2,600 | 2,749 | ||||||||||||||||||||||
| Other loans | 7,188 | 7,624 | 10,018 | 10,634 | 11,123 | ||||||||||||||||||||||
| Acquired loans | 132,615 | 173,107 | 215,476 | 261,517 | 283,757 | ||||||||||||||||||||||
| Allowance for loan losses, acquired loans | (1,714 | ) | (3,046 | ) | (4,294 | ) | (4,079 | ) | (5,768 | ) | |||||||||||||||||
| Net acquired loans | $ | 130,901 | $ | 170,061 | $ | 211,182 | $ | 257,438 | $ | 277,989 | |||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2018 |
($ in thousands) |
(unaudited) |
Note 3 – Loan Composition (continued)
| September 30, 2018 | |||||||||||||||||||||||||
LHFI - COMPOSITION BY REGION (1) | Total | Alabama | Florida | Mississippi | Tennessee | Texas | |||||||||||||||||||
| Loans secured by real estate: | |||||||||||||||||||||||||
| Construction, land development and other land loans | $ | 1,031,491 | $ | 335,338 | $ | 79,432 | $ | 333,614 | $ | 19,974 | $ | 263,133 | |||||||||||||
| Secured by 1-4 family residential properties | 1,801,029 | 113,369 | 48,527 | 1,539,417 | 86,379 | 13,337 | |||||||||||||||||||
| Secured by nonfarm, nonresidential properties | 2,294,289 | 517,795 | 222,194 | 913,676 | 157,188 | 483,436 | |||||||||||||||||||
| Other real estate secured | 453,687 | 70,306 | 11,603 | 215,792 | 11,070 | 144,916 | |||||||||||||||||||
| Commercial and industrial loans | 1,565,922 | 197,278 | 17,065 | 783,217 | 378,433 | 189,929 | |||||||||||||||||||
| Consumer loans | 182,709 | 23,823 | 5,473 | 130,527 | 20,095 | 2,791 | |||||||||||||||||||
| State and other political subdivision loans | 929,178 | 87,807 | 42,144 | 586,996 | 28,355 | 183,876 | |||||||||||||||||||
| Other loans | 488,725 | 77,492 | 16,291 | 318,691 | 38,273 | 37,978 | |||||||||||||||||||
| Loans | $ | 8,747,030 | $ | 1,423,208 | $ | 442,729 | $ | 4,821,930 | $ | 739,767 | $ | 1,319,396 | |||||||||||||
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1) | |||||||||||||||||||||||||
| Lots | $ | 62,886 | $ | 14,899 | $ | 19,168 | $ | 23,758 | $ | 1,508 | $ | 3,553 | |||||||||||||
| Development | 58,520 | 7,621 | 7,663 | 29,243 | 680 | 13,313 | |||||||||||||||||||
| Unimproved land | 88,965 | 13,869 | 15,305 | 28,918 | 13,297 | 17,576 | |||||||||||||||||||
| 1-4 family construction | 211,270 | 81,997 | 12,567 | 82,019 | 2,024 | 32,663 | |||||||||||||||||||
| Other construction | 609,850 | 216,952 | 24,729 | 169,676 | 2,465 | 196,028 | |||||||||||||||||||
| Construction, land development and other land loans | $ | 1,031,491 | $ | 335,338 | $ | 79,432 | $ | 333,614 | $ | 19,974 | $ | 263,133 | |||||||||||||
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1) | |||||||||||||||||||||||||
| Non-owner occupied: | |||||||||||||||||||||||||
| Retail | $ | 391,342 | $ | 139,168 | $ | 54,539 | $ | 100,954 | $ | 24,585 | $ | 72,096 | |||||||||||||
| Office | 142,098 | 70,872 | 21,027 | — | 7,988 | 42,211 | |||||||||||||||||||
| Nursing homes/senior living | 205,700 | 33,075 | — | 166,435 | 6,190 | — | |||||||||||||||||||
| Hotel/motel | 255,710 | 74,450 | 51,916 | 53,097 | 34,156 | 42,091 | |||||||||||||||||||
| Mini-storage | 121,764 | 12,665 | 6,198 | 36,264 | 615 | 66,022 | |||||||||||||||||||
| Industrial | 102,793 | 20,577 | 7,081 | 17,630 | 2,259 | 55,246 | |||||||||||||||||||
| Health care | 52,464 | 22,594 | 748 | 26,310 | — | 2,812 | |||||||||||||||||||
| Convenience stores | 31,322 | 2,766 | 116 | 17,028 | 764 | 10,648 | |||||||||||||||||||
| Other | 149,606 | 5,297 | 8,530 | 87,415 | 22,425 | 25,939 | |||||||||||||||||||
| Total non-owner occupied loans | 1,452,799 | 381,464 | 150,155 | 505,133 | 98,982 | 317,065 | |||||||||||||||||||
| Owner-occupied: | |||||||||||||||||||||||||
| Office | 164,111 | 29,926 | 28,039 | 60,073 | 6,588 | 39,485 | |||||||||||||||||||
| Churches | 92,797 | 19,036 | 6,656 | 45,949 | 16,262 | 4,894 | |||||||||||||||||||
| Industrial warehouses | 140,636 | 11,390 | 3,337 | 54,987 | 14,559 | 56,363 | |||||||||||||||||||
| Health care | 109,006 | 21,652 | 6,465 | 63,265 | 2,827 | 14,797 | |||||||||||||||||||
| Convenience stores | 115,278 | 14,613 | 12,956 | 63,379 | 1,229 | 23,101 | |||||||||||||||||||
| Retail | 86,833 | 24,035 | 7,746 | 33,231 | 3,686 | 18,135 | |||||||||||||||||||
| Restaurants | 35,360 | 2,712 | 1,529 | 27,224 | 1,832 | 2,063 | |||||||||||||||||||
| Auto dealerships | 31,240 | 8,480 | 149 | 13,600 | 9,011 | — | |||||||||||||||||||
| Other | 66,229 | 4,487 | 5,162 | 46,835 | 2,212 | 7,533 | |||||||||||||||||||
| Total owner-occupied loans | 841,490 | 136,331 | 72,039 | 408,543 | 58,206 | 166,371 | |||||||||||||||||||
| Loans secured by nonfarm, nonresidential properties | $ | 2,294,289 | $ | 517,795 | $ | 222,194 | $ | 913,676 | $ | 157,188 | $ | 483,436 | |||||||||||||
(1) Excludes acquired loans. | |||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2018 |
($ in thousands) |
(unaudited) |
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities
The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:
| Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | |||||||||||||||||||||||
| Securities – taxable | 2.24 | % | 2.25 | % | 2.26 | % | 2.21 | % | 2.23 | % | 2.25 | % | 2.26 | % | |||||||||||||||
| Securities – nontaxable | 3.66 | % | 3.66 | % | 3.68 | % | 4.35 | % | 4.34 | % | 3.67 | % | 4.35 | % | |||||||||||||||
| Securities – total | 2.27 | % | 2.29 | % | 2.30 | % | 2.27 | % | 2.29 | % | 2.28 | % | 2.33 | % | |||||||||||||||
| Loans - LHFI & LHFS | 4.72 | % | 4.60 | % | 4.45 | % | 4.38 | % | 4.36 | % | 4.59 | % | 4.29 | % | |||||||||||||||
| Acquired loans | 10.82 | % | 9.96 | % | 8.13 | % | 9.27 | % | 8.78 | % | 9.44 | % | 8.37 | % | |||||||||||||||
| Loans - total | 4.82 | % | 4.72 | % | 4.55 | % | 4.53 | % | 4.51 | % | 4.70 | % | 4.43 | % | |||||||||||||||
| FF sold & rev repo | 2.50 | % | 1.89 | % | 1.70 | % | 1.61 | % | 1.55 | % | 1.99 | % | 1.45 | % | |||||||||||||||
| Other earning assets | 2.20 | % | 2.27 | % | 1.77 | % | 2.34 | % | 1.67 | % | 2.07 | % | 1.65 | % | |||||||||||||||
| Total earning assets | 4.16 | % | 4.06 | % | 3.91 | % | 3.90 | % | 3.86 | % | 4.05 | % | 3.80 | % | |||||||||||||||
| Interest-bearing deposits | 0.73 | % | 0.60 | % | 0.49 | % | 0.40 | % | 0.35 | % | 0.61 | % | 0.29 | % | |||||||||||||||
| FF pch & repo | 1.54 | % | 1.42 | % | 0.97 | % | 0.93 | % | 0.94 | % | 1.34 | % | 0.77 | % | |||||||||||||||
| Other borrowings | 2.34 | % | 2.20 | % | 1.69 | % | 1.35 | % | 1.28 | % | 1.93 | % | 1.13 | % | |||||||||||||||
| Total interest-bearing liabilities | 0.80 | % | 0.69 | % | 0.61 | % | 0.56 | % | 0.53 | % | 0.70 | % | 0.44 | % | |||||||||||||||
| Net interest margin | 3.59 | % | 3.57 | % | 3.46 | % | 3.48 | % | 3.47 | % | 3.54 | % | 3.48 | % | |||||||||||||||
| Net interest margin excluding acquired loans | 3.50 | % | 3.46 | % | 3.37 | % | 3.35 | % | 3.34 | % | 3.44 | % | 3.36 | % | |||||||||||||||
Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans.
During the third quarter of 2018, the yield on acquired loans totaled 10.82% and included $1.6 million in recoveries from the settlement of debt, which represented approximately 4.40% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.50% for the third quarter of 2018, an increase of 4 basis points when compared to the second quarter of 2018, which was principally due to growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix offset by higher costs of interest-bearing deposits.
Note 5 – Mortgage Banking
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
| 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | ||||||||||||||||||||||||||||||
| Mortgage servicing income, net | $ | 5,428 | $ | 5,502 | $ | 5,588 | $ | 5,471 | $ | 5,295 | $ | 16,518 | $ | 16,192 | ||||||||||||||||||||||
| Change in fair value-MSR from runoff | (3,181 | ) | (3,334 | ) | (2,507 | ) | (2,605 | ) | (2,892 | ) | (9,022 | ) | (8,175 | ) | ||||||||||||||||||||||
| Gain on sales of loans, net | 6,411 | 5,414 | 4,585 | 5,300 | 5,083 | 16,410 | 13,634 | |||||||||||||||||||||||||||||
| Other, net | (83 | ) | 1,365 | 295 | (1,120 | ) | (450 | ) | 1,577 | 951 | ||||||||||||||||||||||||||
| Mortgage banking income before hedge ineffectiveness | 8,575 | 8,947 | 7,961 | 7,046 | 7,036 | 25,483 | 22,602 | |||||||||||||||||||||||||||||
| Change in fair value-MSR from market changes | 2,615 | 1,743 | 9,521 | 1,168 | (2,393 | ) | 13,879 | (2,218 | ) | |||||||||||||||||||||||||||
| Change in fair value of derivatives | (2,543 | ) | (1,644 | ) | (6,217 | ) | (1,930 | ) | (218 | ) | (10,404 | ) | 3,234 | |||||||||||||||||||||||
| Net positive (negative) hedge ineffectiveness | 72 | 99 | 3,304 | (762 | ) | (2,611 | ) | 3,475 | 1,016 | |||||||||||||||||||||||||||
| Mortgage banking, net | $ | 8,647 | $ | 9,046 | $ | 11,265 | $ | 6,284 | $ | 4,425 | $ | 28,958 | $ | 23,618 | ||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2018 |
($ in thousands) |
(unaudited) |
Note 6 – Other Noninterest Income and Expense
Other noninterest income consisted of the following for the periods presented ($ in thousands):
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
| 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | ||||||||||||||||||||||||||||||
| Partnership amortization for tax credit purposes | $ | (2,202 | ) | $ | (2,202 | ) | $ | (2,202 | ) | $ | (2,478 | ) | $ | (2,521 | ) | $ | (6,606 | ) | $ | (7,082 | ) | |||||||||||||||
| Increase in life insurance cash surrender value | 1,805 | 1,770 | 1,738 | 1,816 | 1,813 | 5,313 | 5,309 | |||||||||||||||||||||||||||||
| Other miscellaneous income | 1,755 | 2,847 | 1,523 | 3,343 | 4,448 | 6,125 | 13,041 | |||||||||||||||||||||||||||||
| Total other, net | $ | 1,358 | $ | 2,415 | $ | 1,059 | $ | 2,681 | $ | 3,740 | $ | 4,832 | $ | 11,268 | ||||||||||||||||||||||
Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.
Trustmark received $13 thousand of nontaxable proceeds related to bank-owned life insurance during the third quarter of 2018 compared to $1.2 million received during the second quarter of 2018. Trustmark received no nontaxable proceeds related to bank-owned life insurance during the first quarter of 2018 compared to $1.7 million and $2.7 million during the fourth and third quarters of 2017, respectively. These proceeds were recorded in other miscellaneous income in the table above.
Other noninterest expense consisted of the following for the periods presented ($ in thousands):
| Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | |||||||||||||||||||||||
| Loan expense | $ | 2,824 | $ | 3,046 | $ | 2,791 | $ | 2,276 | $ | 3,013 | $ | 8,661 | $ | 8,632 | |||||||||||||||
| Amortization of intangibles | 1,286 | 1,286 | 1,397 | 1,522 | 1,539 | 3,969 | 4,647 | ||||||||||||||||||||||
| Defined benefit plans non-service cost reclass from salaries and employee benefits | 885 | 885 | 885 | 968 | 966 | 2,655 | 4,754 | ||||||||||||||||||||||
| Other miscellaneous expense | 6,700 | 7,089 | 6,709 | 7,799 | 7,885 | 20,498 | 26,867 | ||||||||||||||||||||||
| Total other expense | $ | 11,695 | $ | 12,306 | $ | 11,782 | $ | 12,565 | $ | 13,403 | $ | 35,783 | $ | 44,900 | |||||||||||||||
Trustmark adopted ASU 2017-07, “Compensation-Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” effective January 1, 2018 and was required to reclassify the defined benefit plans non-service cost from salaries and employee benefits to other expense on the consolidated statements of income for each period presented.
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2018 |
($ in thousands) |
(unaudited) |
Note 7 – Income Taxes
The income tax provision consisted of the following for the periods presented ($ in thousands):
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | ||||||||||||||||||||||||
| Current | $ | 2,782 | $ | 5,516 | $ | 2,180 | $ | 3,850 | $ | 8,108 | $ | 10,478 | $ | 18,796 | ||||||||||||||||
| Deferred | 1,612 | 700 | 3,300 | 4,300 | 600 | 5,612 | 4,800 | |||||||||||||||||||||||
| Elimination of deferred tax valuation allowance | — | — | — | (8,650 | ) | — | — | — | ||||||||||||||||||||||
| Income tax provision before re-measurement | 4,394 | 6,216 | 5,480 | (500 | ) | 8,708 | 16,090 | 23,596 | ||||||||||||||||||||||
| Re-measurement of net deferred tax assets | — | — | — | 25,619 | — | — | — | |||||||||||||||||||||||
| Income tax provision | $ | 4,394 | $ | 6,216 | $ | 5,480 | $ | 25,119 | $ | 8,708 | $ | 16,090 | $ | 23,596 | ||||||||||||||||
During 2013, a deferred tax valuation allowance was created as a result of Trustmark’s merger with BancTrust Financial Group, Inc. and was established to reduce deferred tax assets to the amount that was more likely than not to be realized in future years. Trustmark has continually evaluated this allowance since inception and, based on the weight of the available evidence, has determined that the deferred tax assets will not be subject to the limitations on the deductibility of built-in losses (Internal Revenue Service Code, Section 382) in future years. Therefore, during the fourth quarter of 2017, the valuation allowance was eliminated creating a decrease in deferred income tax expense of $8.7 million.
Following the recent enactment of the Tax Reform Act which resulted in the reduction of the corporate federal income tax rate, Trustmark re-measured its net deferred tax assets and recorded an increase in deferred income tax expense of $25.6 million during the fourth quarter of 2017.
Note 8 – Non-GAAP Financial Measures
In addition to capital ratios defined by U.S. generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.
Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other tangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.
These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.
TRUSTMARK CORPORATION AND SUBSIDIARIES |
| NOTES TO CONSOLIDATED FINANCIALS |
| September 30, 2018 |
| ($ in thousands except per share data) |
| (unaudited) |
Note 8 – Non-GAAP Financial Measures (continued)
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
| 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | 9/30/2017 | 9/30/2018 | 9/30/2017 | ||||||||||||||||||||||||||||||||
TANGIBLE EQUITY | ||||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCES | ||||||||||||||||||||||||||||||||||||||
| Total shareholders' equity | $ | 1,597,588 | $ | 1,581,906 | $ | 1,572,514 | $ | 1,579,633 | $ | 1,577,867 | $ | 1,584,095 | $ | 1,554,566 | ||||||||||||||||||||||||
| Less: Goodwill | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (374,707 | ) | ||||||||||||||||||||||||
| Identifiable intangible assets | (13,083 | ) | (14,380 | ) | (15,782 | ) | (17,196 | ) | (18,714 | ) | (14,405 | ) | (19,454 | ) | ||||||||||||||||||||||||
| Total average tangible equity | $ | 1,204,878 | $ | 1,187,899 | $ | 1,177,105 | $ | 1,182,810 | $ | 1,179,526 | $ | 1,190,063 | $ | 1,160,405 | ||||||||||||||||||||||||
| PERIOD END BALANCES | ||||||||||||||||||||||||||||||||||||||
| Total shareholders' equity | $ | 1,599,604 | $ | 1,584,072 | $ | 1,570,137 | $ | 1,571,701 | $ | 1,582,535 | ||||||||||||||||||||||||||||
| Less: Goodwill | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | ||||||||||||||||||||||||||||
| Identifiable intangible assets | (12,391 | ) | (13,677 | ) | (14,963 | ) | (16,360 | ) | (17,883 | ) | ||||||||||||||||||||||||||||
| Total tangible equity | (a) | $ | 1,207,586 | $ | 1,190,768 | $ | 1,175,547 | $ | 1,175,714 | $ | 1,185,025 | |||||||||||||||||||||||||||
TANGIBLE ASSETS | ||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 13,439,812 | $ | 13,525,265 | $ | 13,463,439 | $ | 13,797,953 | $ | 13,884,655 | ||||||||||||||||||||||||||||
| Less: Goodwill | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | ||||||||||||||||||||||||||||
| Identifiable intangible assets | (12,391 | ) | (13,677 | ) | (14,963 | ) | (16,360 | ) | (17,883 | ) | ||||||||||||||||||||||||||||
| Total tangible assets | (b) | $ | 13,047,794 | $ | 13,131,961 | $ | 13,068,849 | $ | 13,401,966 | $ | 13,487,145 | |||||||||||||||||||||||||||
| Risk-weighted assets | (c) | $ | 10,681,621 | $ | 10,633,646 | $ | 10,449,352 | $ | 10,566,818 | $ | 10,498,582 | |||||||||||||||||||||||||||
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION | ||||||||||||||||||||||||||||||||||||||
| Net income | $ | 36,253 | $ | 39,813 | $ | 36,830 | $ | 15,768 | $ | 34,579 | $ | 112,896 | $ | 89,862 | ||||||||||||||||||||||||
| Plus: Intangible amortization net of tax | 965 | 965 | 1,049 | 940 | 950 | 2,979 | 2,870 | |||||||||||||||||||||||||||||||
| Net income adjusted for intangible amortization | $ | 37,218 | $ | 40,778 | $ | 37,879 | $ | 16,708 | $ | 35,529 | $ | 115,875 | $ | 92,732 | ||||||||||||||||||||||||
| Period end common shares outstanding | (d) | 67,621,369 | 67,621,111 | 67,775,068 | 67,746,094 | 67,742,135 | ||||||||||||||||||||||||||||||||
TANGIBLE COMMON EQUITY MEASUREMENTS | ||||||||||||||||||||||||||||||||||||||
| Return on average tangible equity (1) | 12.26 | % | 13.77 | % | 13.05 | % | 5.60 | % | 11.95 | % | 13.02 | % | 10.68 | % | ||||||||||||||||||||||||
| Tangible equity/tangible assets | (a)/(b) | 9.26 | % | 9.07 | % | 9.00 | % | 8.77 | % | 8.79 | % | |||||||||||||||||||||||||||
| Tangible equity/risk-weighted assets | (a)/(c) | 11.31 | % | 11.20 | % | 11.25 | % | 11.13 | % | 11.29 | % | |||||||||||||||||||||||||||
| Tangible book value | (a)/(d)*1,000 | $ | 17.86 | $ | 17.61 | $ | 17.34 | $ | 17.35 | $ | 17.49 | |||||||||||||||||||||||||||
COMMON EQUITY TIER 1 CAPITAL (CET1) | ||||||||||||||||||||||||||||||||||||||
| Total shareholders' equity | $ | 1,599,604 | $ | 1,584,072 | $ | 1,570,137 | $ | 1,571,701 | $ | 1,582,535 | ||||||||||||||||||||||||||||
| AOCI-related adjustments (3) | 79,946 | 73,739 | 67,886 | 48,248 | 27,825 | |||||||||||||||||||||||||||||||||
| CET1 adjustments and deductions: | ||||||||||||||||||||||||||||||||||||||
| Goodwill net of associated deferred tax liabilities (DTLs) | (365,823 | ) | (366,036 | ) | (366,248 | ) | (366,461 | ) | (359,841 | ) | ||||||||||||||||||||||||||||
| Other adjustments and deductions for CET1 (2) | (10,868 | ) | (14,204 | ) | (12,233 | ) | (10,248 | ) | (11,359 | ) | ||||||||||||||||||||||||||||
| CET1 capital | (e) | 1,302,859 | 1,277,571 | 1,259,542 | 1,243,240 | 1,239,160 | ||||||||||||||||||||||||||||||||
| Additional tier 1 capital instruments plus related surplus | 60,000 | 60,000 | 60,000 | 60,000 | 60,000 | |||||||||||||||||||||||||||||||||
| Less: additional tier 1 capital deductions | — | — | (714 | ) | (2 | ) | (471 | ) | ||||||||||||||||||||||||||||||
| Additional tier 1 capital | 60,000 | 60,000 | 59,286 | 59,998 | 59,529 | |||||||||||||||||||||||||||||||||
| Tier 1 capital | $ | 1,362,859 | $ | 1,337,571 | $ | 1,318,828 | $ | 1,303,238 | $ | 1,298,689 | ||||||||||||||||||||||||||||
| Common equity tier 1 capital ratio | (e)/(c) | 12.20 | % | 12.01 | % | 12.05 | % | 11.77 | % | 11.80 | % | |||||||||||||||||||||||||||
(1) | Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity | |
(2) | Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAS), threshold deductions and transition adjustments, as applicable. | |
(3) | The December 31, 2017 amount contains a reclassification adjustment of $8.5 million from AOCI to retained earnings as allowed by regulatory agencies in an interagency statement released January 18, 2018 to address disproportionate tax effect in AOCI resulting from the recent enactment of the Tax Cuts and Jobs Act of 2017 and the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes. | |
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2018 |
($ in thousands except per share data) |
(unaudited) |
Note 8 – Non-GAAP Financial Measures (continued)
Trustmark discloses certain non-GAAP financial measures, including net income adjusted for significant non-routine transactions, because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views net income adjusted for significant non-routine transactions as a measure of our core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. This non-GAAP measure also provides another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.
The following table presents adjustments to net income and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented ($ in thousands, except per share data):
| Nine Months Ended | |||||||||||||||||||||
| 9/30/2018 | 9/30/2017 | ||||||||||||||||||||
| Amount | Diluted EPS | Amount | Diluted EPS | ||||||||||||||||||
| Net Income (GAAP) | $ | 112,896 | $ | 1.668 | $ | 89,862 | $ | 1.324 | |||||||||||||
| Significant non-routine transactions (net of taxes): | |||||||||||||||||||||
| Defined benefit plan termination | — | — | 10,895 | 0.161 | |||||||||||||||||
| Reliance merger transaction expenses | — | — | 1,999 | 0.029 | |||||||||||||||||
| Gain on life insurance proceeds | — | — | (4,894 | ) | (0.072 | ) | |||||||||||||||
Net Income adjusted for significant non-routine transactions (Non-GAAP) | $ | 112,896 | $ | 1.668 | $ | 97,862 | $ | 1.442 | |||||||||||||
| Reported | Adjusted | Reported | Adjusted | ||||||||||||||||||
| (GAAP) | (Non-GAAP) | (GAAP) | (Non-GAAP) | ||||||||||||||||||
| Return on equity | 9.53 | % | n/a | 7.73 | % | 8.42 | % | ||||||||||||||
| Return on average tangible equity | 13.02 | % | n/a | 10.68 | % | 11.61 | % | ||||||||||||||
| Return on assets | 1.12 | % | n/a | 0.88 | % | 0.96 | % | ||||||||||||||
| n/a - not applicable | |||||||||||||||||||||
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Contacts:
Investor Contacts:
Louis E.
Greer, 601-208-2310
Treasurer and Principal Financial Officer
or
F.
Joseph Rein, Jr., 601-208-6898
Senior Vice President
or
Media
Contact:
Melanie A. Morgan, 601-208-2979
Senior Vice
President
