Trustmark Corporation Announces Second Quarter 2014 Financial Results

JACKSON, Miss.--()--Trustmark Corporation (NASDAQ:TRMK) reported net income of $32.9 million in the second quarter of 2014, which represented diluted earnings per share of $0.49, an increase of 14.0% from the prior quarter and 6.5% from the prior year. Trustmark’s performance during the second quarter of 2014 produced a return on average tangible equity of 13.90% and a return on average assets of 1.10%. During the first six months of 2014, Trustmark’s net income totaled $61.9 million, which represented diluted earnings per share of $0.92, an increase of 9.5% from the prior year. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2014, to shareholders of record on September 1, 2014.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50909392&lang=en.

Gerard R. Host, President and CEO, stated, “Trustmark continued to achieve solid financial results in the second quarter, reflecting a 7.5% increase in total revenue as well as the fifth consecutive quarter of growth in our legacy loan portfolio. Thanks to our associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue meeting the needs of our customers and creating value for our shareholders.”

Balance Sheet Management

  • Loans held for investment increased at an annualized rate of 17.6% in the second quarter
  • Total loans (including acquired and held for investment) expanded at an annualized rate of 9.8%
  • Average noninterest-bearing deposits increased $46.1 million to represent 27.0% of total average deposits

Loans held for investment totaled $6.2 billion at June 30, 2014, an increase of $263.2 million, or 4.4%, from the prior quarter and $609.6 million, or 10.9%, from one year earlier. Real estate secured loans increased $126.8 million during the second quarter. Specifically, commercial real estate loans increased $82.6 million, reflecting growth in Trustmark’s Texas, Alabama, Mississippi and Florida markets. The single-family mortgage portfolio increased $48.1 million led by growth in the Mississippi, Alabama and Tennessee markets. Other real estate secured loans, which include multifamily projects, expanded $57.2 million, and reflected growth in Trustmark’s Mississippi, Texas and Alabama markets. Construction and development loans declined $61.0 million from the prior quarter, reflecting in part transition to the non-owner occupied category.

Other loans, which include lending to states and municipalities, increased $88.4 million during the second quarter due to growth in Trustmark’s Mississippi, Texas, Florida and Alabama markets. Commercial and industrial loans increased $42.8 million as growth in Alabama, Tennessee and Texas more than offset reductions in Mississippi and Florida. The consumer lending portfolio expanded $5.2 million during the quarter due to growth in Trustmark’s Mississippi and Alabama markets.

Acquired loans totaled $646.5 million at June 30, 2014, down $99.8 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $6.8 billion at June 30, 2014, up $163.5 million, or 2.5%, from the prior quarter.

Average earning assets during the second quarter increased $185.4 million relative to the prior quarter principally due to increased loan and investment security balances. Average deposits in the second quarter declined $51.6 million as the $46.1 million increase in noninterest-bearing deposits was offset by a decline in interest-bearing deposits of $97.7 million.

Trustmark’s solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At June 30, 2014, Trustmark’s tangible equity to tangible assets ratio was 8.51% while the total risk-based capital ratio was 14.54%, significantly exceeding the 10.00% benchmark to be classified as “well-capitalized.” Trustmark’s solid capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.

Credit Quality

  • Continued reduction in classified and criticized loan balances
  • Foreclosed other real estate declined 4.1% from the prior quarter
  • Allowance for loan losses represented 159.71% of nonperforming loans, excluding impaired loans

Nonperforming loans totaled $71.1 million at June 30, 2014, an increase of 11.1% from the prior quarter and a decline of 4.3% from one year earlier. The increase in nonperforming loans was primarily the result of one substandard credit migrating to nonaccrual status. Foreclosed other real estate totaled $107.0 million, a decrease of $4.6 million, or 4.1%, from the prior quarter. Relative to levels one year earlier, other real estate decreased $10.7 million. Collectively, nonperforming assets totaled $178.1 million, an increase of $2.6 million from the prior quarter and a decrease of $13.9 million from one year earlier.

Net charge-offs during the second quarter of 2014 totaled $1.2 million and represented 0.08% of average loans. This compares to net recoveries in the prior quarter of $1.9 million, or -0.13% of average loans, and to net recoveries in the second quarter of the prior year of $771 thousand, or -0.05% of average loans. The provision for loan losses for loans held for investment was $351 thousand in the second quarter of 2014.

During the second quarter, Trustmark experienced a decline of $10.4 million, or 4.9%, in classified loan balances and a decline of $5.5 million, or 2.2%, in criticized loans relative to the prior quarter. Relative to levels one year earlier, classified loan balances decreased $37.8 million, or 15.7%, while criticized loan balances decreased $43.7 million, or 15.2%.

Allocation of Trustmark’s $66.6 million allowance for loan losses represented 1.20% of commercial loans and 0.75% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.08% at June 30, 2014, which represents a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 159.71% of nonperforming loans, excluding impaired loans.

All of the above credit metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.

Revenue Generation

  • Revenue totaled $149.4 million in the second quarter, an increase of 7.5% from the prior quarter
  • Net interest income (FTE) expanded 10.7% from the prior quarter to $109.2 million
  • Bank card and other fees totaled $9.9 million, up 9.0% from the prior quarter

Net interest income (FTE) in the second quarter totaled $109.2 million, resulting in a net interest margin of 4.21%. Relative to the prior quarter, interest income (FTE) increased $10.2 million due in part to increased loan balances as well as a $5.1 million increase in recoveries on acquired loans. The yield on acquired loans totaled 13.40% and included recoveries from settlement of debt of $8.9 million, which represented approximately 5.15% of the total acquired annualized loan yield in the second quarter. Excluding acquired loans, the net interest margin in the second quarter totaled 3.55%, up three basis points from the prior quarter reflecting increased loan yields and balances.

Noninterest income remained stable at $44.1 million in the second quarter. Service charges on deposit accounts totaled $11.8 million in the second quarter, an increase of $278 thousand, or 2.4%, from the prior quarter. Bank card and other fees totaled $9.9 million in the second quarter, up $813 thousand from the prior quarter, reflecting increased interchange income.

Mortgage loan production in the second quarter totaled $322.2 million, an increase of 39.9% from the prior quarter, due in part to seasonal factors, lower mortgage rates, and expanded originations in Trustmark’s Alabama markets. Mortgage banking revenue totaled $6.2 million in the second quarter, down $638 thousand due principally to decreased positive mortgage servicing hedge ineffectiveness.

As a result of increased property and casualty business, insurance revenue in the second quarter totaled $8.3 million, an increase of 2.5% from the prior quarter. Wealth management revenue totaled $7.7 million, down $425 thousand from the prior quarter, due principally to reduced annuity income.

Noninterest Expense

  • Routine noninterest expense remained well-controlled
  • Continued to make prudent investments and reallocate resources to promote revenue growth
  • Efficiency ratio improved to 64.31%

Noninterest expense totaled $102.8 million in the second quarter; excluding ORE and intangible amortization of $6.0 million, noninterest expense during the second quarter totaled $96.7 million, an increase of $725 thousand from comparable expenses in the prior quarter. Salaries and benefits expense remained well-controlled and totaled $56.1 million in the second quarter, down $592 thousand, or 1.0%, from the prior quarter. Services and fees increased $1.4 million principally due to higher legal and professional service fees.

Trustmark continued to make prudent investments and reallocate resources to support revenue growth and profitability. During the second quarter, Trustmark opened new banking centers and regional administrative offices in Memphis, Tennessee as well as in Montgomery, Alabama. Two banking centers with limited growth opportunities were consolidated into other offices during the quarter. Trustmark is committed to investments to support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 23, 2014, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877)317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call. A replay of the conference call will also be available through Wednesday, August 13, 2014, in archived format at the same web address or by calling (877) 344-7529, passcode 10008303.

Trustmark Corporation is a financial services company providing banking and financial solutions through 207 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, 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 the European financial crisis on the U.S. economy and the markets we serve, and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.

 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2014
($ in thousands)
(unaudited)
 
          Linked Quarter   Year over Year

QUARTERLY AVERAGE BALANCES

6/30/2014 3/31/2014 6/30/2013

$ Change

  % Change

$ Change

  % Change
Securities AFS-taxable $ 2,205,352 $ 2,136,392 $ 3,259,086 $ 68,960 3.2 % $ (1,053,734 ) -32.3 %
Securities AFS-nontaxable 135,956 149,744 171,974 (13,788 ) -9.2 % (36,018 ) -20.9 %
Securities HTM-taxable 1,120,448 1,118,747 59,678 1,701 0.2 % 1,060,770 n/m
Securities HTM-nontaxable   43,551     31,039     11,520     12,512   40.3 %   32,031   n/m
Total securities   3,505,307     3,435,922     3,502,258     69,385   2.0 %   3,049   0.1 %
Loans (including loans held for sale) 6,160,781 5,950,720 5,735,296 210,061 3.5 % 425,485 7.4 %
Acquired loans:
Noncovered loans 664,733 751,723 949,367 (86,990 ) -11.6 % (284,634 ) -30.0 %
Covered loans 31,122 33,805 43,425 (2,683 ) -7.9 % (12,303 ) -28.3 %
Fed funds sold and rev repos 2,648 6,460 6,808 (3,812 ) -59.0 % (4,160 ) -61.1 %
Other earning assets   36,259     36,820     34,752     (561 ) -1.5 %   1,507   4.3 %
Total earning assets   10,400,850     10,215,450     10,271,906     185,400   1.8 %   128,944   1.3 %
Allowance for loan losses (77,652 ) (79,736 ) (84,574 ) 2,084 -2.6 % 6,922 -8.2 %
Cash and due from banks 304,441 407,078 284,056 (102,637 ) -25.2 % 20,385 7.2 %
Other assets   1,343,384     1,376,024     1,311,262     (32,640 ) -2.4 %   32,122   2.4 %
Total assets $ 11,971,023   $ 11,918,816   $ 11,782,650   $ 52,207   0.4 % $ 188,373   1.6 %
 
Interest-bearing demand deposits $ 1,826,019 $ 1,900,504 $ 1,811,402 $ (74,485 ) -3.9 % $ 14,617 0.8 %
Savings deposits 3,260,634 3,193,098 3,060,437 67,536 2.1 % 200,197 6.5 %
Time deposits less than $100,000 1,225,706 1,280,513 1,419,381 (54,807 ) -4.3 % (193,675 ) -13.6 %
Time deposits of $100,000 or more   911,531     947,509     1,029,498     (35,978 ) -3.8 %   (117,967 ) -11.5 %
Total interest-bearing deposits 7,223,890 7,321,624 7,320,718 (97,734 ) -1.3 % (96,828 ) -1.3 %
Fed funds purchased and repos 387,289 282,816 312,865 104,473 36.9 % 74,424 23.8 %
Short-term borrowings 59,465 65,010 51,718 (5,545 ) -8.5 % 7,747 15.0 %
Long-term FHLB advances 8,291 8,406 9,575 (115 ) -1.4 % (1,284 ) -13.4 %
Subordinated notes 49,915 49,907 49,882 8 0.0 % 33 0.1 %
Junior subordinated debt securities   61,856     61,856     82,460     -   0.0 %   (20,604 ) -25.0 %
Total interest-bearing liabilities 7,790,706 7,789,619 7,827,218 1,087 0.0 % (36,512 ) -0.5 %
Noninterest-bearing deposits 2,676,907 2,630,785 2,451,547 46,122 1.8 % 225,360 9.2 %
Other liabilities   111,170     130,749     159,525     (19,579 ) -15.0 %   (48,355 ) -30.3 %
Total liabilities 10,578,783 10,551,153 10,438,290 27,630 0.3 % 140,493 1.3 %
Shareholders' equity   1,392,240     1,367,663     1,344,360     24,577   1.8 %   47,880   3.6 %
Total liabilities and equity $ 11,971,023   $ 11,918,816   $ 11,782,650   $ 52,207   0.4 % $ 188,373   1.6 %
 
 
Linked Quarter Year over Year

PERIOD END BALANCES

6/30/2014 3/31/2014 6/30/2013

$ Change

% Change

$ Change

% Change
Cash and due from banks $ 322,960 $ 423,819 $ 301,532 $ (100,859 ) -23.8 % $ 21,428 7.1 %
Fed funds sold and rev repos 5,000 - 7,869 5,000 n/m (2,869 ) -36.5 %
Securities available for sale 2,376,431 2,382,441 3,511,683 (6,010 ) -0.3 % (1,135,252 ) -32.3 %
Securities held to maturity 1,156,790 1,155,569 70,338 1,221 0.1 % 1,086,452 n/m
Loans held for sale (LHFS) 142,103 120,446 202,699 21,657 18.0 % (60,596 ) -29.9 %
Loans held for investment (LHFI) 6,187,000 5,923,766 5,577,382 263,234 4.4 % 609,618 10.9 %
Allowance for loan losses   (66,648 )   (67,518 )   (72,825 )   870   -1.3 %   6,177   -8.5 %
Net LHFI 6,120,352 5,856,248 5,504,557 264,104 4.5 % 615,795 11.2 %
Acquired loans:
Noncovered loans 616,911 713,647 922,453 (96,736 ) -13.6 % (305,542 ) -33.1 %
Covered loans 29,628 32,670 40,820 (3,042 ) -9.3 % (11,192 ) -27.4 %
Allowance for loan losses, acquired loans   (11,179 )   (10,540 )   (2,690 )   (639 ) 6.1 %   (8,489 ) n/m
Net acquired loans   635,360     735,777     960,583     (100,417 ) -13.6 %   (325,223 ) -33.9 %
Net LHFI and acquired loans 6,755,712 6,592,025 6,465,140 163,687 2.5 % 290,572 4.5 %
Premises and equipment, net 201,639 203,771 210,845 (2,132 ) -1.0 % (9,206 ) -4.4 %
Mortgage servicing rights 65,049 67,614 60,380 (2,565 ) -3.8 % 4,669 7.7 %
Goodwill 365,500 365,500 368,315 - 0.0 % (2,815 ) -0.8 %
Identifiable intangible assets 37,506 39,697 46,889 (2,191 ) -5.5 % (9,383 ) -20.0 %
Other real estate, excluding covered other real estate 106,970 111,536 117,712 (4,566 ) -4.1 % (10,742 ) -9.1 %
Covered other real estate 3,872 4,759 5,147 (887 ) -18.6 % (1,275 ) -24.8 %
FDIC indemnification asset 10,866 13,487 17,342 (2,621 ) -19.4 % (6,476 ) -37.3 %
Other assets   569,598     576,390     477,421     (6,792 ) -1.2 %   92,177   19.3 %
Total assets $ 12,119,996   $ 12,057,054   $ 11,863,312   $ 62,942   0.5 % $ 256,684   2.2 %
 
Deposits:
Noninterest-bearing $ 2,729,199 $ 2,879,341 $ 2,520,895 $ (150,142 ) -5.2 % $ 208,304 8.3 %
Interest-bearing   7,131,167     7,242,778     7,296,697     (111,611 ) -1.5 %   (165,530 ) -2.3 %
Total deposits 9,860,366 10,122,119 9,817,592 (261,753 ) -2.6 % 42,774 0.4 %
Fed funds purchased and repos 559,316 259,341 374,021 299,975 n/m 185,295 49.5 %
Short-term borrowings 61,227 59,671 56,645 1,556 2.6 % 4,582 8.1 %
Long-term FHLB advances 8,236 8,341 8,679 (105 ) -1.3 % (443 ) -5.1 %
Subordinated notes 49,920 49,912 49,888 8 0.0 % 32 0.1 %
Junior subordinated debt securities 61,856 61,856 61,856 - 0.0 % - 0.0 %
Other liabilities   119,184     121,919     167,812     (2,735 ) -2.2 %   (48,628 ) -29.0 %
Total liabilities   10,720,105     10,683,159     10,536,493     36,946   0.3 %   183,612   1.7 %
Common stock 14,051 14,051 13,994 - 0.0 % 57 0.4 %
Capital surplus 353,196 352,402 342,359 794 0.2 % 10,837 3.2 %
Retained earnings 1,063,201 1,045,939 1,006,554 17,262 1.7 % 56,647 5.6 %

Accum other comprehensive loss, net of tax

  (30,557 )   (38,497 )   (36,088 )   7,940   -20.6 %   5,531   -15.3 %

Total shareholders' equity

  1,399,891     1,373,895     1,326,819     25,996   1.9 %   73,072   5.5 %
Total liabilities and equity $ 12,119,996   $ 12,057,054   $ 11,863,312   $ 62,942   0.5 % $ 256,684   2.2 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 
 
 

 

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2014
($ in thousands except per share data)
(unaudited)
 
  Quarter Ended   Linked Quarter   Year over Year

INCOME STATEMENTS

6/30/2014   3/31/2014   6/30/2013

$ Change

  % Change

$ Change

  % Change
Interest and fees on LHFS & LHFI-FTE $ 69,618 $ 66,185 $ 67,750 $ 3,433 5.2 % $ 1,868 2.8 %
Interest and fees on acquired loans 23,250 16,786 20,987 6,464 38.5 % 2,263 10.8 %
Interest on securities-taxable 19,522 19,220 18,547 302 1.6 % 975 5.3 %
Interest on securities-tax exempt-FTE 1,912 1,920 1,974 (8 ) -0.4 % (62 ) -3.1 %
Interest on fed funds sold and rev repos 6 5 5 1 20.0 % 1 20.0 %
Other interest income   379     375     372     4   1.1 %   7   1.9 %
Total interest income-FTE   114,687     104,491     109,635     10,196   9.8 %   5,052   4.6 %
Interest on deposits 3,970 4,365 5,071 (395 ) -9.0 % (1,101 ) -21.7 %
Interest on fed funds pch and repos 110 76 88 34 44.7 % 22 25.0 %
Other interest expense   1,375     1,363     1,513     12   0.9 %   (138 ) -9.1 %
Total interest expense   5,455     5,804     6,672     (349 ) -6.0 %   (1,217 ) -18.2 %
Net interest income-FTE 109,232 98,687 102,963 10,545 10.7 % 6,269 6.1 %
Provision for loan losses, LHFI 351 (805 ) (4,846 ) 1,156 n/m 5,197 n/m
Provision for loan losses, acquired loans   3,784     63     (1,552 )   3,721   n/m   5,336   n/m
Net interest income after provision-FTE   105,097     99,429     109,361     5,668   5.7 %   (4,264 ) -3.9 %
Service charges on deposit accounts 11,846 11,568 12,929 278 2.4 % (1,083 ) -8.4 %
Insurance commissions 8,300 8,097 8,014 203 2.5 % 286 3.6 %
Wealth management 7,710 8,135 6,940 (425 ) -5.2 % 770 11.1 %
Bank card and other fees 9,894 9,081 9,507 813 9.0 % 387 4.1 %
Mortgage banking, net 6,191 6,829 8,295 (638 ) -9.3 % (2,104 ) -25.4 %
Other, net   199     (21 )   (2,145 )   220   n/m   2,344   n/m
Nonint inc-excl sec gains (losses), net 44,140 43,689 43,540 451 1.0 % 600 1.4 %
Security gains (losses), net   -     389     174     (389 ) -100.0 %   (174 ) -100.0 %
Total noninterest income   44,140     44,078     43,714     62   0.1 %   426   1.0 %
Salaries and employee benefits 56,134 56,726 55,405 (592 ) -1.0 % 729 1.3 %
Services and fees 14,543 13,165 12,816 1,378 10.5 % 1,727 13.5 %
Net occupancy-premises 6,413 6,606 6,703 (193 ) -2.9 % (290 ) -4.3 %
Equipment expense 6,136 6,138 6,193 (2 ) 0.0 % (57 ) -0.9 %
FDIC assessment expense 2,468 2,416 2,376 52 2.2 % 92 3.9 %
ORE/Foreclosure expense 3,836 3,315 5,131 521 15.7 % (1,295 ) -25.2 %
Other expense   13,231     13,252     18,571     (21 ) -0.2 %   (5,340 ) -28.8 %
Total noninterest expense   102,761     101,618     107,195     1,143   1.1 %   (4,434 ) -4.1 %
Income before income taxes and tax eq adj 46,476 41,889 45,880 4,587 11.0 % 596 1.3 %
Tax equivalent adjustment   3,944     3,783     3,735     161   4.3 %   209   5.6 %
Income before income taxes 42,532 38,106 42,145 4,426 11.6 % 387 0.9 %
Income taxes   9,635     9,103     11,024     532   5.8 %   (1,389 ) -12.6 %
Net income $ 32,897   $ 29,003   $ 31,121   $ 3,894   13.4 % $ 1,776   5.7 %
 
Per share data
Earnings per share - basic $ 0.49   $ 0.43   $ 0.46   $ 0.06   14.0 % $ 0.03   6.5 %
 
Earnings per share - diluted $ 0.49   $ 0.43   $ 0.46   $ 0.06   14.0 % $ 0.03   6.5 %
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ -   0.0 % $ -   0.0 %
 
Weighted average shares outstanding
Basic   67,439,659     67,410,147     67,162,530  
 
Diluted   67,582,714     67,550,483     67,344,117  
 
Period end shares outstanding   67,439,788     67,439,562     67,163,195  
 

OTHER FINANCIAL DATA

Return on equity 9.48 % 8.60 % 9.29 %
Return on average tangible equity 13.90 % 12.93 % 14.09 %
Return on assets 1.10 % 0.99 % 1.06 %
Interest margin - Yield - FTE 4.42 % 4.15 % 4.28 %
Interest margin - Cost 0.21 % 0.23 % 0.26 %
Net interest margin - FTE 4.21 % 3.92 % 4.02 %
Efficiency ratio (1) 64.31 % 68.32 % 67.72 %
Full-time equivalent employees 3,095 3,114 3,119
 

STOCK PERFORMANCE

Market value-Close $ 24.69 $ 25.35 $ 24.58
Book value $ 20.76 $ 20.37 $ 19.76
Tangible book value $ 14.78 $ 14.36 $ 13.57
 
(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 nonroutine income and expense items.
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2014
($ in thousands)
(unaudited)
 
    Quarter Ended   Linked Quarter   Year over Year

NONPERFORMING ASSETS (1)

6/30/2014   3/31/2014   6/30/2013

$ Change

  % Change

$ Change

  % Change
Nonaccrual loans
Alabama $ 80 $ 96 $ 73 $ (16 ) -16.7 % $ 7 9.6 %
Florida 11,041 9,956 15,916 1,085 10.9 % (4,875 ) -30.6 %
Mississippi (2) 49,430 44,168 41,761 5,262 11.9 % 7,669 18.4 %
Tennessee (3) 4,244 5,206 4,482 (962 ) -18.5 % (238 ) -5.3 %
Texas   6,323     4,572     12,086     1,751   38.3 %   (5,763 ) -47.7 %
Total nonaccrual loans 71,118 63,998 74,318 7,120 11.1 % (3,200 ) -4.3 %
Other real estate
Alabama 24,541 24,103 27,245 438 1.8 % (2,704 ) -9.9 %
Florida 43,207 42,013 35,025 1,194 2.8 % 8,182 23.4 %
Mississippi (2) 18,723 22,287 26,843 (3,564 ) -16.0 % (8,120 ) -30.2 %
Tennessee (3) 12,073 13,000 15,811 (927 ) -7.1 % (3,738 ) -23.6 %
Texas   8,426     10,133     12,788     (1,707 ) -16.8 %   (4,362 ) -34.1 %
Total other real estate   106,970     111,536     117,712     (4,566 ) -4.1 %   (10,742 ) -9.1 %
Total nonperforming assets $ 178,088   $ 175,534   $ 192,030   $ 2,554   1.5 % $ (13,942 ) -7.3 %
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 1,936   $ 1,870   $ 4,194   $ 66   3.5 % $ (2,258 ) -53.8 %
 

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)

$ 21,810   $ 20,109   $ 14,003   $ 1,701   8.5 % $ 7,807   55.8 %
 
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (4)

6/30/2014 3/31/2014 6/30/2013

$ Change

% Change

$ Change

% Change
Beginning Balance $ 67,518 $ 66,448 $ 76,900 $ 1,070 1.6 % $ (9,382 ) -12.2 %
Provision for loan losses 351 (805 ) (4,846 ) 1,156 n/m 5,197 n/m
Charge-offs (3,820 ) (3,016 ) (3,031 ) (804 ) 26.7 % (789 ) 26.0 %
Recoveries   2,599     4,891     3,802     (2,292 ) -46.9 %   (1,203 ) -31.6 %
Net (charge-offs) recoveries   (1,221 )   1,875     771     (3,096 ) n/m   (1,992 ) n/m
Ending Balance $ 66,648   $ 67,518   $ 72,825   $ (870 ) -1.3 % $ (6,177 ) -8.5 %
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 696 $ 472 $ 232 $ 224 47.5 % $ 464 n/m
Florida (2,014 ) (3,499 ) (3,425 ) 1,485 -42.4 % 1,411 -41.2 %
Mississippi (2) 2,877 1,983 (520 ) 894 45.1 % 3,397 n/m
Tennessee (3) (277 ) (915 ) (335 ) 638 -69.7 % 58 -17.3 %
Texas   (931 )   1,154     (798 )   (2,085 ) n/m   (133 ) 16.7 %
Total provision for loan losses $ 351   $ (805 ) $ (4,846 ) $ 1,156   n/m $ 5,197   n/m
 

NET CHARGE-OFFS (4)

Alabama $ 84 $ 55 $ 67 $ 29 52.7 % $ 17 25.4 %
Florida (525 ) (2,524 ) (1,426 ) 1,999 -79.2 % 901 -63.2 %
Mississippi (2) 1,518 676 291 842 n/m 1,227 n/m
Tennessee (3) 87 (1 ) 103 88 n/m (16 ) -15.5 %
Texas   57     (81 )   194     138   n/m   (137 ) -70.6 %
Total net charge-offs (recoveries) $ 1,221   $ (1,875 ) $ (771 ) $ 3,096   n/m $ 1,992   n/m
 

CREDIT QUALITY RATIOS (1)

Net charge offs/average loans 0.08 % -0.13 % -0.05 %
Provision for loan losses/average loans 0.02 % -0.05 % -0.34 %
Nonperforming loans/total loans (incl LHFS) 1.12 % 1.06 % 1.29 %
Nonperforming assets/total loans (incl LHFS) 2.81 % 2.90 % 3.32 %
Nonperforming assets/total loans (incl LHFS) +ORE 2.77 % 2.85 % 3.26 %
ALL/total loans (excl LHFS) 1.08 % 1.14 % 1.31 %
ALL-commercial/total commercial loans 1.20 % 1.33 % 1.48 %
ALL-consumer/total consumer and home mortgage loans 0.75 % 0.65 % 0.84 %
ALL/nonperforming loans 93.71 % 105.50 % 97.99 %

ALL/nonperforming loans - (excl impaired loans)

159.71 % 180.86 % 158.75 %
 

CAPITAL RATIOS

Total equity/total assets 11.55 % 11.39 % 11.18 %
Tangible equity/tangible assets 8.51 % 8.31 % 7.96 %
Tangible equity/risk-weighted assets 12.19 % 12.08 % 11.57 %
Tier 1 leverage ratio 9.43 % 9.14 % 8.71 %
Tier 1 common risk-based capital ratio 12.61 % 12.37 % 11.79 %
Tier 1 risk-based capital ratio 13.34 % 13.11 % 12.55 %
Total risk-based capital ratio 14.54 % 14.34 % 13.89 %
 
(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2014
($ in thousands)
(unaudited)
 
  Quarter Ended   Six Months Ended

AVERAGE BALANCES

6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013 6/30/2014   6/30/2013
Securities AFS-taxable $ 2,205,352 $ 2,136,392 $ 3,026,186 $ 3,279,606 $ 3,259,086 $ 2,171,062 $ 3,048,737
Securities AFS-nontaxable 135,956 149,744 160,989 172,055 171,974 142,812 169,885
Securities HTM-taxable 1,120,448 1,118,747 265,792 59,168 59,678 1,119,602 54,186
Securities HTM-nontaxable   43,551     31,039     21,172     11,024     11,520     37,330     14,070  
Total securities   3,505,307     3,435,922     3,474,139     3,521,853     3,502,258     3,470,806     3,286,878  
Loans (including loans held for sale) 6,160,781 5,950,720 5,847,557 5,784,170 5,735,296 6,056,331 5,738,301
Acquired loans:
Noncovered loans 664,733 751,723 812,426 888,883 949,367 707,988 741,162
Covered loans 31,122 33,805 34,640 39,561 43,425 32,456 46,602
Fed funds sold and rev repos 2,648 6,460 11,094 8,978 6,808 4,543 6,714
Other earning assets   36,259     36,820     32,118     38,226     34,752     36,538     34,707  
Total earning assets   10,400,850     10,215,450     10,211,974     10,281,671     10,271,906     10,308,662     9,854,364  
Allowance for loan losses (77,652 ) (79,736 ) (78,742 ) (79,696 ) (84,574 ) (78,688 ) (85,505 )
Cash and due from banks 304,441 407,078 275,051 272,320 284,056 355,476 277,435
Other assets   1,343,384     1,376,024     1,360,712     1,284,813     1,311,262     1,359,614     1,247,729  
Total assets $ 11,971,023   $ 11,918,816   $ 11,768,995   $ 11,759,108   $ 11,782,650   $ 11,945,064   $ 11,294,023  
 
Interest-bearing demand deposits $ 1,826,019 $ 1,900,504 $ 1,803,956 $ 1,842,379 $ 1,811,402 $ 1,863,056 $ 1,757,668
Savings deposits 3,260,634 3,193,098 2,952,472 2,995,110 3,060,437 3,227,053 2,914,901
Time deposits less than $100,000 1,225,706 1,280,513 1,344,488 1,380,954 1,419,381 1,252,958 1,344,416
Time deposits of $100,000 or more   911,531     947,509     961,075     993,948     1,029,498     929,421     961,678  
Total interest-bearing deposits 7,223,890 7,321,624 7,061,991 7,212,391 7,320,718 7,272,488 6,978,663
Fed funds purchased and repos 387,289 282,816 361,758 364,446 312,865 335,341 290,038
Short-term borrowings 59,465 65,010 63,531 59,324 51,718 62,222 59,316
Long-term FHLB advances 8,291 8,406 8,507 8,620 9,575 8,348 7,091
Subordinated notes 49,915 49,907 49,898 49,890 49,882 49,911 49,878
Junior subordinated debt securities   61,856     61,856     61,856     61,856     82,460     61,856     80,237  
Total interest-bearing liabilities 7,790,706 7,789,619 7,607,541 7,756,527 7,827,218 7,790,166 7,465,223
Noninterest-bearing deposits 2,676,907 2,630,785 2,611,209 2,479,082 2,451,547 2,653,973 2,325,993
Other liabilities   111,170     130,749     203,270     190,143     159,525     120,906     167,821  
Total liabilities 10,578,783 10,551,153 10,422,020 10,425,752 10,438,290 10,565,045 9,959,037
Shareholders' equity   1,392,240     1,367,663     1,346,975     1,333,356     1,344,360     1,380,019     1,334,986  
Total liabilities and equity $ 11,971,023   $ 11,918,816   $ 11,768,995   $ 11,759,108   $ 11,782,650   $ 11,945,064   $ 11,294,023  
 

PERIOD END BALANCES

  6/30/2014     3/31/2014     12/31/2013     9/30/2013     6/30/2013  
Cash and due from banks $ 322,960 $ 423,819 $ 345,761 $ 335,695 $ 301,532
Fed funds sold and rev repos 5,000 - 7,253 7,867 7,869
Securities available for sale 2,376,431 2,382,441 2,194,154 3,372,101 3,511,683
Securities held to maturity 1,156,790 1,155,569 1,168,728 69,980 70,338
Loans held for sale (LHFS) 142,103 120,446 149,169 119,986 202,699
Loans held for investment (LHFI) 6,187,000 5,923,766 5,798,881 5,696,641 5,577,382
Allowance for loan losses   (66,648 )   (67,518 )   (66,448 )   (68,632 )   (72,825 )
Net LHFI 6,120,352 5,856,248 5,732,433 5,628,009 5,504,557
Acquired loans:
Noncovered loans 616,911 713,647 769,990 837,875 922,453
Covered loans 29,628 32,670 34,216 37,250 40,820
Allowance for loan losses, acquired loans   (11,179 )   (10,540 )   (9,636 )   (5,333 )   (2,690 )
Net acquired loans   635,360     735,777     794,570     869,792     960,583  
Net LHFI and acquired loans 6,755,712 6,592,025 6,527,003 6,497,801 6,465,140
Premises and equipment, net 201,639 203,771 207,283 208,837 210,845
Mortgage servicing rights 65,049 67,614 67,834 63,150 60,380
Goodwill 365,500 365,500 372,851 372,463 368,315
Identifiable intangible assets 37,506 39,697 41,990 44,424 46,889
Other real estate, excluding covered other real estate 106,970 111,536 106,539 116,329 117,712
Covered other real estate 3,872 4,759 5,108 5,092 5,147
FDIC indemnification asset 10,866 13,487 14,347 17,085 17,342
Other assets   569,598     576,390     582,363     574,387     477,421  
Total assets $ 12,119,996   $ 12,057,054   $ 11,790,383   $ 11,805,197   $ 11,863,312  
 
Deposits:
Noninterest-bearing $ 2,729,199 $ 2,879,341 $ 2,663,503 $ 2,643,612 $ 2,520,895
Interest-bearing   7,131,167     7,242,778     7,196,399     7,143,622     7,296,697  

Total deposits

9,860,366 10,122,119 9,859,902 9,787,234 9,817,592
Fed funds purchased and repos 559,316 259,341 251,587 342,465 374,021
Short-term borrowings 61,227 59,671 66,385 60,698 56,645
Long-term FHLB advances 8,236 8,341 8,458 8,562 8,679
Subordinated notes 49,920 49,912 49,904 49,896 49,888
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
Other liabilities   119,184     121,919     137,338     164,972     167,812  
Total liabilities   10,720,105     10,683,159     10,435,430     10,475,683     10,536,493  
Common stock 14,051 14,051 14,038 13,998 13,994
Capital surplus 353,196 352,402 349,680 343,759 342,359
Retained earnings 1,063,201 1,045,939 1,034,966 1,023,983 1,006,554

Accum other comprehensive loss, net of tax

  (30,557 )   (38,497 )   (43,731 )   (52,226 )   (36,088 )

Total shareholders' equity

  1,399,891     1,373,895     1,354,953     1,329,514     1,326,819  
Total liabilities and equity $ 12,119,996   $ 12,057,054   $ 11,790,383   $ 11,805,197   $ 11,863,312  
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2014
($ in thousands except per share data)
(unaudited)
               
Quarter Ended Six Months Ended

INCOME STATEMENTS

6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013 6/30/2014 6/30/2013
Interest and fees on LHFS & LHFI-FTE $ 69,618 $ 66,185 $ 67,038 $ 68,417 $ 67,750 $ 135,803 $ 135,162
Interest and fees on acquired loans 23,250 16,786 23,384 19,183 20,987 40,036 33,769
Interest on securities-taxable 19,522 19,220 19,078 18,654 18,547 38,742 35,086
Interest on securities-tax exempt-FTE 1,912 1,920 1,963 1,960 1,974 3,832 3,992
Interest on fed funds sold and rev repos 6 5 14 8 5 11 9
Other interest income   379     375     367     372     372     754     727  
Total interest income-FTE   114,687     104,491     111,844     108,594     109,635     219,178     208,745  
Interest on deposits 3,970 4,365 4,768 4,970 5,071 8,335 9,980
Interest on fed funds pch and repos 110 76 104 106 88 186 169
Other interest expense   1,375     1,363     1,370     1,389     1,513     2,738     3,003  
Total interest expense   5,455     5,804     6,242     6,465     6,672     11,259     13,152  
Net interest income-FTE 109,232 98,687 105,602 102,129 102,963 207,919 195,593
Provision for loan losses, LHFI 351 (805 ) (1,983 ) (3,624 ) (4,846 ) (454 ) (7,814 )
Provision for loan losses, acquired loans   3,784     63     4,169     3,292     (1,552 )   3,847     (1,422 )
Net interest income after provision-FTE   105,097     99,429     103,416     102,461     109,361     204,526     204,829  
Service charges on deposit accounts 11,846 11,568 13,114 13,852 12,929 23,414 24,610
Insurance commissions 8,300 8,097 7,343 8,227 8,014 16,397 15,256
Wealth management 7,710 8,135 8,145 7,520 6,940 15,845 13,815
Bank card and other fees 9,894 9,081 9,580 8,929 9,507 18,975 17,452
Mortgage banking, net 6,191 6,829 5,186 8,440 8,295 13,020 19,878
Other, net   199     (21 )   (4,802 )   165     (2,145 )   178     (3,336 )
Nonint inc-excl sec gains (losses), net 44,140 43,689 38,566 47,133 43,540 87,829 87,675
Security gains (losses), net   -     389     107     -     174     389     378  
Total noninterest income   44,140     44,078     38,673     47,133     43,714     88,218     88,053  
Salaries and employee benefits 56,134 56,726 56,687 56,043 55,405 112,860 108,997
Services and fees 14,543 13,165 14,476 13,580 12,816 27,708 25,848
Net occupancy-premises 6,413 6,606 6,659 6,644 6,703 13,019 12,658
Equipment expense 6,136 6,138 6,400 6,271 6,193 12,274 11,867
FDIC assessment expense 2,468 2,416 2,228 2,376 2,376 4,884 4,397
ORE/Foreclosure expense 3,836 3,315 3,009 3,079 5,131 7,151 8,951
Other expense   13,231     13,252     15,408     13,531     18,571     26,483     36,622  
Total noninterest expense   102,761     101,618     104,867     101,524     107,195     204,379     209,340  
Income before income taxes and tax eq adj 46,476 41,889 37,222 48,070 45,880 88,365 83,542
Tax equivalent adjustment   3,944     3,783     3,747     3,700     3,735     7,727     7,390  
Income before income taxes 42,532 38,106 33,475 44,370 42,145 80,638 76,152
Income taxes   9,635     9,103     5,436     11,336     11,024     18,738     20,165  
Net income $ 32,897   $ 29,003   $ 28,039   $ 33,034   $ 31,121   $ 61,900   $ 55,987  
 
Per share data
Earnings per share - basic $ 0.49   $ 0.43   $ 0.42   $ 0.49   $ 0.46   $ 0.92   $ 0.84  
 
Earnings per share - diluted $ 0.49   $ 0.43   $ 0.42   $ 0.49   $ 0.46   $ 0.92   $ 0.84  
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.46   $ 0.46  
 
Weighted average shares outstanding
Basic   67,439,659     67,410,147     67,249,877     67,177,013     67,162,530     67,424,984     66,576,125  
 
Diluted   67,582,714     67,550,483     67,449,778     67,382,478     67,344,117     67,566,640     66,748,713  
 
Period end shares outstanding   67,439,788     67,439,562     67,372,980     67,181,694     67,163,195     67,439,788     67,163,195  
 
 

OTHER FINANCIAL DATA

Return on equity 9.48 % 8.60 % 8.26 % 9.83 % 9.29 % 9.05 % 8.46 %
Return on average tangible equity 13.90 % 12.93 % 12.59 % 14.92 % 14.09 % 13.43 % 12.43 %
Return on assets 1.10 % 0.99 % 0.95 % 1.11 % 1.06 % 1.05 % 1.00 %
Interest margin - Yield - FTE 4.42 % 4.15 % 4.35 % 4.19 % 4.28 % 4.29 % 4.27 %
Interest margin - Cost 0.21 % 0.23 % 0.24 % 0.25 % 0.26 % 0.22 % 0.27 %
Net interest margin - FTE 4.21 % 3.92 % 4.10 % 3.94 % 4.02 % 4.07 % 4.00 %
Efficiency ratio (1) 64.31 % 68.32 % 68.38 % 65.32 % 67.72 % 66.24 % 66.78 %
Full-time equivalent employees 3,095 3,114 3,110 3,110 3,119
 
 

STOCK PERFORMANCE

Market value-Close $ 24.69 $ 25.35 $ 26.84 $ 25.60 $ 24.58
Book value $ 20.76 $ 20.37 $ 20.11 $ 19.79 $ 19.76
Tangible book value $ 14.78 $ 14.36 $ 13.95 $ 13.58 $ 13.57
 
(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 nonroutine income and expense items.
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2014
($ in thousands)
(unaudited)
               
Quarter Ended

NONPERFORMING ASSETS (1)

6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Nonaccrual loans
Alabama $ 80 $ 96 $ 14 $ 81 $ 73
Florida 11,041 9,956 12,278 14,619 15,916
Mississippi (2) 49,430 44,168 42,307 43,132 41,761
Tennessee (3) 4,244 5,206 4,390 5,596 4,482
Texas   6,323     4,572     6,249     9,953     12,086  
Total nonaccrual loans 71,118 63,998 65,238 73,381 74,318
Other real estate
Alabama 24,541 24,103 25,912 25,308 27,245
Florida 43,207 42,013 34,480 39,198 35,025
Mississippi (2) 18,723 22,287 22,766 25,439 26,843
Tennessee (3) 12,073 13,000 12,892 14,615 15,811
Texas   8,426     10,133     10,489     11,769     12,788  
Total other real estate   106,970     111,536     106,539     116,329     117,712  
Total nonperforming assets $ 178,088   $ 175,534   $ 171,777   $ 189,710   $ 192,030  
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 1,936   $ 1,870   $ 3,298   $ 2,344   $ 4,194  
 

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)

$ 21,810   $ 20,109   $ 21,540   $ 18,432   $ 14,003  
 
 
Quarter Ended Six Months Ended

ALLOWANCE FOR LOAN LOSSES (4)

6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013 6/30/2014 6/30/2013
Beginning Balance $ 67,518 $ 66,448 $ 68,632 $ 72,825 $ 76,900 $ 66,448 $ 78,738
Provision for loan losses 351 (805 ) (1,983 ) (3,624 ) (4,846 ) (454 ) (7,814 )
Charge-offs (3,820 ) (3,016 ) (3,305 ) (3,817 ) (3,031 ) (6,836 ) (6,356 )
Recoveries   2,599     4,891     3,104     3,248     3,802     7,490     8,257  
Net (charge-offs) recoveries   (1,221 )   1,875     (201 )   (569 )   771     654     1,901  
Ending Balance $ 66,648   $ 67,518   $ 66,448   $ 68,632   $ 72,825   $ 66,648   $ 72,825  
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 696 $ 472 $ 332 $ 550 $ 232 $ 1,168 $ 908
Florida (2,014 ) (3,499 ) (2,350 ) (2,642 ) (3,425 ) (5,513 ) (7,100 )
Mississippi (2) 2,877 1,983 3,336 (1,051 ) (520 ) 4,860 (2,440 )
Tennessee (3) (277 ) (915 ) (117 ) (150 ) (335 ) (1,192 ) (713 )
Texas   (931 )   1,154     (3,184 )   (331 )   (798 )   223     1,531  
Total provision for loan losses $ 351   $ (805 ) $ (1,983 ) $ (3,624 ) $ (4,846 ) $ (454 ) $ (7,814 )
 

NET CHARGE-OFFS (4)

Alabama $ 84 $ 55 $ 74 $ 132 $ 67 $ 139 $ 78
Florida (525 ) (2,524 ) (634 ) (138 ) (1,426 ) (3,049 ) (2,275 )
Mississippi (2) 1,518 676 393 375 291 2,194 1
Tennessee (3) 87 (1 ) 506 (153 ) 103 86 352
Texas   57     (81 )   (138 )   353     194     (24 )   (57 )
Total net charge-offs (recoveries) $ 1,221   $ (1,875 ) $ 201   $ 569   $ (771 ) $ (654 ) $ (1,901 )
 

CREDIT QUALITY RATIOS (1)

Net charge offs/average loans 0.08 % -0.13 % 0.01 % 0.04 % -0.05 % -0.02 % -0.07 %
Provision for loan losses/average loans 0.02 % -0.05 % -0.13 % -0.25 % -0.34 % -0.02 % -0.27 %
Nonperforming loans/total loans (incl LHFS) 1.12 % 1.06 % 1.10 % 1.26 % 1.29 %
Nonperforming assets/total loans (incl LHFS) 2.81 % 2.90 % 2.89 % 3.26 % 3.32 %
Nonperforming assets/total loans (incl LHFS) +ORE 2.77 % 2.85 % 2.84 % 3.20 % 3.26 %
ALL/total loans (excl LHFS) 1.08 % 1.14 % 1.15 % 1.20 % 1.31 %
ALL-commercial/total commercial loans 1.20 % 1.33 % 1.30 % 1.39 % 1.48 %
ALL-consumer/total consumer and home mortgage loans 0.75 % 0.65 % 0.75 % 0.73 % 0.84 %
ALL/nonperforming loans 93.71 % 105.50 % 101.86 % 93.53 % 97.99 %

ALL/nonperforming loans - (excl impaired loans)

159.71 % 180.86 % 190.70 % 161.96 % 158.75 %
 

CAPITAL RATIOS

Total equity/total assets 11.55 % 11.39 % 11.49 % 11.26 % 11.18 %
Tangible equity/tangible assets 8.51 % 8.31 % 8.26 % 8.01 % 7.96 %
Tangible equity/risk-weighted assets 12.19 % 12.08 % 11.88 % 11.66 % 11.57 %
Tier 1 leverage ratio 9.43 % 9.14 % 9.06 % 8.78 % 8.71 %
Tier 1 common risk-based capital ratio 12.61 % 12.37 % 12.21 % 11.92 % 11.79 %
Tier 1 risk-based capital ratio 13.34 % 13.11 % 12.97 % 12.69 % 12.55 %
Total risk-based capital ratio 14.54 % 14.34 % 14.18 % 14.02 % 13.89 %
 
 
(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2014
($ in thousands)
(unaudited)

Note 1 – Business Combinations

Oxford, Mississippi Branches

On July 26, 2013, Trustmark National Bank (TNB), a subsidiary of Trustmark Corporation (Trustmark), completed its acquisition of two branches of SOUTHBank, F.S.B. (SOUTHBank), located in Oxford, Mississippi. As a result of this acquisition, TNB assumed deposit accounts of approximately $11.7 million in addition to purchasing the two physical branch offices. The transaction was not material to Trustmark’s consolidated financial statements and was not considered a business combination in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations.”

BancTrust Financial Group, Inc.

On February 15, 2013, Trustmark completed its merger with BancTrust Financial Group, Inc. (BancTrust), a 26-year-old bank holding company headquartered in Mobile, Alabama. In accordance with the terms of the definitive agreement, the holders of BancTrust common stock received 0.125 of a share of Trustmark common stock for each share of BancTrust common stock in a tax-free exchange. Trustmark issued approximately 2.24 million shares of its common stock for all issued and outstanding shares of BancTrust common stock. The total value of the 2.24 million shares of Trustmark common stock issued to the BancTrust shareholders on the acquisition date was approximately $53.5 million, based on a closing stock price of $23.83 per share of Trustmark common stock on February 15, 2013. At closing, Trustmark repurchased the $50.0 million of BancTrust preferred stock and associated warrant issued to the U.S. Department of Treasury under the Capital Purchase Program for approximately $52.6 million.

This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. The purchase price allocation was finalized in the first quarter of 2014.

The statement of assets purchased and liabilities assumed in the BancTrust acquisition is presented below at their adjusted estimated fair values as of the acquisition date of February 15, 2013 ($ in thousands):

 
Assets        
Cash and due from banks $ 141,616
Securities 528,016
Loans held for sale 1,050
Acquired noncovered loans 944,235
Premises and equipment, net 54,952
Identifiable intangible assets 33,498
Other real estate 40,103
Other assets   109,423
Total Assets   1,852,893
 
Liabilities
Deposits 1,740,254
Other borrowings 64,051
Other liabilities   16,761
Total Liabilities   1,821,066
 
Net identified assets acquired at fair value 31,827
Goodwill   74,247
Net assets acquired at fair value $ 106,074
 

The excess of the consideration paid over the estimated fair value of the net assets acquired was $74.2 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the acquisition date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years.

Loans, excluding loans held for sale (LHFS), acquired from BancTrust were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements and leases, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

 

 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2014
($ in thousands)
(unaudited)

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):

  6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013

SECURITIES AVAILABLE FOR SALE

U.S. Treasury securities $ 100 $ 100 $ 502 $ 503 $ 505
U.S. Government agency obligations
Issued by U.S. Government agencies 117,489 123,368 129,293 133,013 139,066
Issued by U.S. Government sponsored agencies 40,848 40,601 40,179 132,425 133,791
Obligations of states and political subdivisions 171,229 172,437 171,738 212,991 212,204
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 13,492 14,263 14,474 48,240 46,330
Issued by FNMA and FHLMC 225,229 232,488 241,118 214,795 227,927
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,543,619 1,530,068 1,290,741 2,048,275 2,156,320
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 229,283 232,072 242,172 354,131 361,575
Asset-backed securities and structured financial products   35,142   37,044   63,937   227,728   233,965
Total securities available for sale $ 2,376,431 $ 2,382,441 $ 2,194,154 $ 3,372,101 $ 3,511,683
 

SECURITIES HELD TO MATURITY

U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 100,563 $ 100,361 $ 100,159 $ - $ -
Obligations of states and political subdivisions 65,193 65,757 65,987 30,229 30,295
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 13,959 12,177 9,433 2,420 2,547
Issued by FNMA and FHLMC 12,165 12,395 12,724 564 567
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 822,444 822,135 837,393 - -
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   142,466   142,744   143,032   36,767   36,929
Total securities held to maturity $ 1,156,790 $ 1,155,569 $ 1,168,728 $ 69,980 $ 70,338
 

During the fourth quarter of 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $46.6 million ($28.8 million, net of tax). The net unrealized holding loss is amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. At June 30, 2014, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive (loss) income in the accompanying balance sheet totaled approximately $43.6 million ($26.9 million, net of tax).

During the fourth quarter of 2013, Trustmark sold $135.6 million of Collateralized Loan Obligations (CLO) generating a net gain of $1.3 million. These securities were identified as available for sale and had been carried in the asset-backed securities and structured financial products line item in the table shown above. This sale left Trustmark with a CLO balance of $25.9 million at December 31, 2013, which was subsequently sold in its entirety for a gain of $389 thousand in January 2014.

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 93% 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
June 30, 2014
($ in thousands)
(unaudited)

 

Note 3 – Loan Composition

 

LHFI BY TYPE (excluding acquired loans)

  6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013
Loans secured by real estate:
Construction, land development and other land loans $ 531,651 $ 592,658 $ 596,889 $ 572,057 $ 519,263
Secured by 1-4 family residential properties 1,581,859 1,533,781 1,485,564 1,482,963 1,414,871
Secured by nonfarm, nonresidential properties 1,544,516 1,461,947 1,415,139 1,408,342 1,406,930
Other real estate secured 250,383 193,221 189,362 196,328 192,568
Commercial and industrial loans 1,250,146 1,207,367 1,157,614 1,132,863 1,169,327
Consumer loans 165,372 160,153 165,308 164,612 160,318
Other loans   863,073     774,639     789,005     739,476     714,105  
LHFI 6,187,000 5,923,766 5,798,881 5,696,641 5,577,382
Allowance for loan losses   (66,648 )   (67,518 )   (66,448 )   (68,632 )   (72,825 )
Net LHFI $ 6,120,352   $ 5,856,248   $ 5,732,433   $ 5,628,009   $ 5,504,557  
         

ACQUIRED NONCOVERED LOANS BY TYPE

6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Loans secured by real estate:
Construction, land development and other land loans $ 75,353 $ 88,683 $ 98,928 $ 106,655 $ 132,116
Secured by 1-4 family residential properties 133,191 145,213 157,914 168,573 184,928
Secured by nonfarm, nonresidential properties 226,967 271,696 287,136 301,686 318,603
Other real estate secured 30,918 34,787 33,948 35,051 34,869
Commercial and industrial loans 114,212 135,114 149,495 186,649 206,338
Consumer loans 14,733 15,024 18,428 22,251 27,420
Other loans   21,537     23,130     24,141     17,010     18,179  
Noncovered loans 616,911 713,647 769,990 837,875 922,453
Allowance for loan losses   (9,770 )   (9,952 )   (7,249 )   (3,007 )   (112 )
Net noncovered loans $ 607,141   $ 703,695   $ 762,741   $ 834,868   $ 922,341  
         

ACQUIRED COVERED LOANS BY TYPE

6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
Loans secured by real estate:
Construction, land development and other land loans $ 2,130 $ 2,239 $ 2,363 $ 2,585 $ 3,662
Secured by 1-4 family residential properties 14,565 15,572 16,416 17,785 18,899
Secured by nonfarm, nonresidential properties 8,831 10,629 10,945 12,120 13,341
Other real estate secured 2,376 2,470 2,644 2,817 2,929
Commercial and industrial loans 336 361 394 478 543
Consumer loans - 49 119 151 173
Other loans   1,390     1,350     1,335     1,314     1,273  
Covered loans 29,628 32,670 34,216 37,250 40,820
Allowance for loan losses   (1,409 )   (588 )   (2,387 )   (2,326 )   (2,578 )
Net covered loans $ 28,219   $ 32,082   $ 31,829   $ 34,924   $ 38,242  
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2014
($ in thousands)
(unaudited)

 
Note 3 – Loan Composition (continued)
  June 30, 2014

LHFI - COMPOSITION BY REGION (1)

Total   Alabama   Florida  

Mississippi

(Central and

Southern

Regions)

 

Tennessee

(Memphis, TN

and Northern

MS Regions)

  Texas
Loans secured by real estate:
Construction, land development and other land loans $ 531,651 $ 45,142 $ 57,914 $ 250,057 $ 35,059 $ 143,479
Secured by 1-4 family residential properties 1,581,859 28,518 50,499 1,354,515 130,032 18,295
Secured by nonfarm, nonresidential properties 1,544,516 58,766 160,095 796,797 149,227 379,631
Other real estate secured 250,383 7,569 4,424 164,209 28,192 45,989
Commercial and industrial loans 1,250,146 67,052 10,712 805,120 91,810 275,452
Consumer loans 165,372 15,514 2,898 127,699 16,538 2,723
Other loans   863,073   39,044   46,233   638,622   47,941   91,233
Loans $ 6,187,000 $ 261,605 $ 332,775 $ 4,137,019 $ 498,799 $ 956,802
 
 
 

CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)

Lots $ 49,616 $ 1,846 $ 27,679 $ 15,566 $ 1,160 $ 3,365
Development 62,201 777 7,573 34,470 1,392 17,989
Unimproved land 132,639 5,402 18,504 63,305 23,574 21,854
1-4 family construction 114,509 20,746 3,507 62,146 2,672 25,438
Other construction   172,686   16,371   651   74,570   6,261   74,833
Construction, land development and other land loans $ 531,651 $ 45,142 $ 57,914 $ 250,057 $ 35,059 $ 143,479
 
 
 
 

LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)

Income producing:
Retail $ 184,843 $ 14,702 $ 39,709 $ 68,149 $ 18,433 $ 43,850
Office 207,620 8,912 32,816 85,103 8,219 72,570
Nursing homes/assisted living 125,911 - - 102,912 5,925 17,074
Hotel/motel 99,120 12,076 16,350 46,667 24,027 -
Industrial 79,698 4,312 7,286 35,661 149 32,290
Health care 28,937 3,539 - 25,348 50 -
Convenience stores 10,086 251 - 5,958 1,294 2,583
Other   153,966   2,389   19,562   82,531   5,023   44,461
Total income producing loans 890,181 46,181 115,723 452,329 63,120 212,828
 
Owner-occupied:
Office 126,379 3,933 17,191 63,465 10,645 31,145
Churches 93,738 2,314 2,926 44,225 33,082 11,191
Industrial warehouses 82,111 1,051 3,050 28,708 8,038 41,264
Health care 97,851 257 8,807 55,485 14,206 19,096
Convenience stores 56,751 479 1,598 33,304 2,868 18,502
Retail 28,983 539 3,787 18,061 3,125 3,471
Restaurants 35,090 - 2,615 27,096 4,296 1,083
Auto dealerships 8,457 - 176 6,639 1,610 32
Other   124,975   4,012   4,222   67,485   8,237   41,019
Total owner-occupied loans 654,335 12,585 44,372 344,468 86,107 166,803
           
Loans secured by nonfarm, nonresidential properties $ 1,544,516 $ 58,766 $ 160,095 $ 796,797 $ 149,227 $ 379,631
 
(1) Excludes acquired loans.
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2014
($ 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   Six Months Ended
6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013 6/30/2014   6/30/2013
Securities – taxable 2.35 % 2.39 % 2.30 % 2.22 % 2.24 % 2.37 % 2.28 %
Securities – nontaxable 4.27 % 4.31 % 4.28 % 4.25 % 4.31 % 4.29 % 4.38 %
Securities – total 2.45 % 2.50 % 2.40 % 2.32 % 2.35 % 2.47 % 2.40 %
Loans - LHFI & LHFS 4.53 % 4.51 % 4.55 % 4.69 % 4.74 % 4.52 % 4.75 %
Acquired loans 13.40 % 8.67 % 10.95 % 8.20 % 8.48 % 10.90 % 8.64 %
Loans - total 5.43 % 5.00 % 5.36 % 5.18 % 5.29 % 5.22 % 5.22 %
FF sold & rev repo 0.91 % 0.31 % 0.50 % 0.35 % 0.29 % 0.49 % 0.27 %
Other earning assets 4.19 % 4.13 % 4.53 % 3.86 % 4.29 % 4.16 % 4.22 %
Total earning assets 4.42 % 4.15 % 4.35 % 4.19 % 4.28 % 4.29 % 4.27 %
 
Interest-bearing deposits 0.22 % 0.24 % 0.27 % 0.27 % 0.28 % 0.23 % 0.29 %
FF pch & repo 0.11 % 0.11 % 0.11 % 0.12 % 0.11 % 0.11 % 0.12 %
Other borrowings 3.07 % 2.99 % 2.96 % 3.07 % 3.13 % 3.03 % 3.08 %
Total interest-bearing liabilities 0.28 % 0.30 % 0.33 % 0.33 % 0.34 % 0.29 % 0.36 %
 
Net interest margin 4.21 % 3.92 % 4.10 % 3.94 % 4.02 % 4.07 % 4.00 %
Net interest margin excluding acquired loans 3.55 % 3.52 % 3.48 % 3.52 % 3.55 % 3.54 % 3.60 %

 

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. The net interest margin increased 29 basis points during the second quarter of 2014 primarily due to an increase in interest and fees on acquired loans, which was the result of increased acquired loan recoveries during the quarter.

During the second quarter of 2014, the yield on average acquired loans includes approximately $8.9 million in recoveries, or an annualized 5.15% of the average acquired loan balance. Excluding the recoveries on acquired loans, the yield on average acquired loans totaled 8.25%.

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 impact of this strategy resulted in a net positive ineffectiveness of $546 thousand and $121 thousand for the quarters ended June 30, 2014 and 2013, respectively.

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:

  Quarter Ended   Six Months Ended
6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013 6/30/2014   6/30/2013
Mortgage servicing income, net $ 4,592 $ 4,539 $ 4,688 $ 4,552 $ 4,385 $ 9,131 $ 8,652
Change in fair value-MSR from runoff (2,391 ) (1,812 ) (2,182 ) (2,407 ) (2,756 ) (4,203 ) (5,216 )
Gain on sales of loans, net 2,749 1,839 2,202 6,465 7,597 4,588 17,762
Other, net   695     400     (533 )   (1,485 )   (1,052 )   1,095     (2,701 )
Mortgage banking income before hedge ineffectiveness   5,645     4,966     4,175     7,125     8,174     10,611     18,497  
Change in fair value-MSR from market changes (3,038 ) (723 ) 3,937 287 6,467 (3,761 ) 7,594
Change in fair value of derivatives   3,584     2,586     (2,926 )   1,028     (6,346 )   6,170     (6,213 )
Net positive hedge ineffectiveness   546     1,863     1,011     1,315     121     2,409     1,381  
Mortgage banking, net $ 6,191   $ 6,829   $ 5,186   $ 8,440   $ 8,295   $ 13,020   $ 19,878  
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2014
($ 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   Six Months Ended
6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013 6/30/2014   6/30/2013
Partnership amortization for tax credit purposes $ (3,006 ) $ (3,006 ) $ (5,642 ) $ (2,388 ) $ (2,221 ) $ (6,012 ) $ (4,338 )
(Decrease) increase in FDIC indemnification asset (999 ) (688 ) (2,429 ) 211 (2,317 ) (1,687 ) (3,682 )
Other miscellaneous income   4,204     3,673     3,269     2,342     2,393     7,877     4,684  
Total other, net $ 199   $ (21 ) $ (4,802 ) $ 165   $ (2,145 ) $ 178   $ (3,336 )
 

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 or historical tax credits). These investments are recorded based on the equity method of accounting, which requires the equity in partnership losses to be recognized when incurred and are recorded as a reduction in other income. 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.

During the second quarter of 2014, other noninterest income included a write-down of the FDIC indemnification asset of $999 thousand on acquired covered loans obtained from Heritage as a result of loan pay-offs, improved cash flow projections and lower loss expectations for loan pools.

Other noninterest expense consisted of the following for the periods presented ($ in thousands):

  Quarter Ended   Six Months Ended
6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013 6/30/2014   6/30/2013
Loan expense $ 3,107 $ 3,464 $ 4,419 $ 3,390 $ 4,267 $ 6,571 $ 7,262
Non-routine transaction expenses on acquisitions - - - - - - 7,920
Amortization of intangibles 2,190 2,293 2,434 2,466 2,472 4,483 3,914
Other miscellaneous expense   7,934   7,495   8,555   7,675   11,832   15,429   17,526
Total other expense $ 13,231 $ 13,252 $ 15,408 $ 13,531 $ 18,571 $ 26,483 $ 36,622
 

Other miscellaneous expense increased during the second quarter of 2013 due to a non-routine litigation expense of $4.0 million related to a proposed settlement on Trustmark’s overdraft fees for insufficient funds on debit card purchases and ATM withdrawals as previously disclosed in the Form 8-K filed on June 26, 2013. During the first quarter of 2014, the United States District Court for the Southern District of Mississippi issued a final judgment approving the settlement.

Note 7 – Non-GAAP Financial Measures

In addition to capital ratios defined by 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.

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
June 30, 2014
($ in thousands)
(unaudited)

 
Note 7 - Non-GAAP Financial Measures (continued)
 
      Quarter Ended   Six Months Ended
6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013 6/30/2014   6/30/2013

TANGIBLE EQUITY

AVERAGE BALANCES
Total shareholders' equity $ 1,392,240 $ 1,367,663 $ 1,346,975 $ 1,333,356 $ 1,344,360 $ 1,380,019 $ 1,334,986
Less: Goodwill (365,500 ) (372,720 ) (372,468 ) (368,482 ) (366,592 ) (369,090 ) (345,862 )
Identifiable intangible assets   (38,711 )   (41,015 )   (43,532 )   (45,988 )   (48,402 )   (39,857 )   (41,831 )
Total average tangible equity $ 988,029   $ 953,928   $ 930,975   $ 918,886   $ 929,366   $ 971,072   $ 947,293  
 
PERIOD END BALANCES
Total shareholders' equity $ 1,399,891 $ 1,373,895 $ 1,354,953 $ 1,329,514 $ 1,326,819
Less: Goodwill (365,500 ) (365,500 ) (372,851 ) (372,463 ) (368,315 )
Identifiable intangible assets   (37,506 )   (39,697 )   (41,990 )   (44,424 )   (46,889 )
Total tangible equity (a) $ 996,885   $ 968,698   $ 940,112   $ 912,627   $ 911,615  
 

TANGIBLE ASSETS

Total assets $ 12,119,996 $ 12,057,054 $ 11,790,383 $ 11,805,197 $ 11,863,312
Less: Goodwill (365,500 ) (365,500 ) (372,851 ) (372,463 ) (368,315 )
Identifiable intangible assets   (37,506 )   (39,697 )   (41,990 )   (44,424 )   (46,889 )
Total tangible assets (b) $ 11,716,990   $ 11,651,857   $ 11,375,542   $ 11,388,310   $ 11,448,108  
 
Risk-weighted assets (c) $ 8,175,622   $ 8,016,482   $ 7,916,378   $ 7,825,839   $ 7,878,281  
 

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION

Net income $ 32,897 $ 29,003 $ 28,039 $ 33,034 $ 31,121 $ 61,900 $ 55,987
Plus: Intangible amortization net of tax   1,353     1,417     1,503     1,523     1,526     2,770     2,416  
Net income adjusted for intangible amortization $ 34,250   $ 30,420   $ 29,542   $ 34,557   $ 32,647   $ 64,670   $ 58,403  
 
Period end common shares outstanding (d)   67,439,788     67,439,562     67,372,980     67,181,694     67,163,195  
 

TANGIBLE COMMON EQUITY MEASUREMENTS

Return on average tangible equity 1 13.90 % 12.93 % 12.59 % 14.92 % 14.09 % 13.43 % 12.43 %
Tangible equity/tangible assets (a)/(b) 8.51 % 8.31 % 8.26 % 8.01 % 7.96 %
Tangible equity/risk-weighted assets (a)/(c) 12.19 % 12.08 % 11.88 % 11.66 % 11.57 %
Tangible book value (a)/(d)*1,000 $ 14.78 $ 14.36 $ 13.95 $ 13.58 $ 13.57
 

TIER 1 COMMON RISK-BASED CAPITAL

Total shareholders' equity $ 1,399,891 $ 1,373,895 $ 1,354,953 $ 1,329,514 $ 1,326,819
Eliminate qualifying AOCI 30,557 38,497 43,731 52,226 36,088
Qualifying tier 1 capital 60,000 60,000 60,000 60,000 60,000
Disallowed goodwill (365,500 ) (365,500 ) (372,851 ) (372,463 ) (368,315 )
Adj to goodwill allowed for deferred taxes 15,150 14,798 14,445 14,093 13,740
Other disallowed intangibles (37,506 ) (39,697 ) (41,990 ) (44,424 ) (46,889 )
Disallowed servicing intangible (6,505 ) (6,761 ) (6,783 ) (6,315 ) (6,038 )
Disallowed deferred taxes   (5,134 )   (23,969 )   (24,647 )   (39,476 )   (26,411 )
Total tier 1 capital 1,090,953 1,051,263 1,026,858 993,155 988,994
Less: Qualifying tier 1 capital   (60,000 )   (60,000 )   (60,000 )   (60,000 )   (60,000 )
Total tier 1 common capital (e) $ 1,030,953   $ 991,263   $ 966,858   $ 933,155   $ 928,994  
 
Tier 1 common risk-based capital ratio (e)/(c) 12.61 % 12.37 % 12.21 % 11.92 % 11.79 %
 
1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity
 
 
 

Contacts

Trustmark Corporation
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

Trustmark Corporation Announces Second Quarter 2014 Financial Results

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Release Summary

Trustmark Corporation Announces Second Quarter 2014 Financial Results

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Contacts

Trustmark Corporation
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