Trustmark Corporation Announces First Quarter 2017 Financial Results

Download

Trustmark Corporation Announces First Quarter 2017 Financial Results

???pagination.previous??? ???pagination.next???

JACKSON, Miss.--()--Trustmark Corporation (NASDAQ: TRMK) reported net income of $31.2 million in the first quarter of 2017, representing diluted earnings per share of $0.46. Diluted earnings per share in the first quarter of 2017 increased 7.0% when compared to the previous quarter and 15.0% when compared to the same period in the prior year. This level of earnings resulted in a return on average tangible common equity of 11.39% and a return on average assets of 0.95%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable June 15, 2017, to shareholders of record on June 1, 2017.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=51546000&lang=en.

First Quarter Highlights

  • Revenue excluding interest and fees on acquired loans increased 4.6% linked quarter and 5.7% year-over-year to total $138.4 million
  • Routine noninterest expense, which excludes ORE and intangible amortization, totaled $98.7 million, remaining well-controlled from both the prior quarter and year-over-year
  • Sustained strong credit performance

Gerard R. Host, President and CEO, stated, “The first quarter marked a great start to 2017 for Trustmark. We maintained and expanded customer relationships by growing loans across our franchise while continuing to maintain solid credit quality. Our low-cost, core deposit base remains a significant strength of the organization. The strong performance of our mortgage and insurance businesses was reflected in solid noninterest income growth. While we continued to make investments to enhance the customer experience, we maintained our focus on disciplined expense management. We recently welcomed the associates and customers of Reliance Bank to the Trustmark family with the completion of our previously announced merger on April 7. We are delighted to serve the greater Huntsville, Alabama, market and look forward to their contributions going forward. Thanks to our talented associates, solid profitability and strong capital base, Trustmark remains well positioned to continue meeting the needs of our customers and creating long-term value for our shareholders.”

Balance Sheet Management

  • Diversified loan growth demonstrates value of Trustmark’s five-state footprint
  • Noninterest-bearing deposits represent 31.8% of total deposits
  • Capital base continues to provide flexibility in pursuing growth opportunities

Loans held for investment totaled $8.0 billion at March 31, 2017, an increase of 2.0% from the prior quarter and 10.1% from the comparable period one year earlier. During the first quarter of 2017, Trustmark reclassified $36.7 million of acquired loans to loans held for investment due to the discount on these loans being fully amortized. Excluding this reclassification, loans held for investment increased $116.7 million, or 1.5% from the prior quarter and 9.6% from the comparable period one year earlier.

The following discussion of loan growth excludes the aforementioned reclassified acquired loans. Other real estate secured loans, which include multifamily projects, expanded $79.8 million, which was a result of the migration of construction loans as projects were completed. Construction and land development loans grew $28.0 million, primarily due to increased construction in Alabama. Nonfarm-nonresidential loans increased $26.2 million, primarily due to strength in Alabama and Florida. Other loans, which include loans to nonprofits and real estate investment trusts, increased $11.4 million, driven principally by growth in Alabama, Texas and Mississippi. Single-family home loans decreased $14.2 million as growth in Alabama and Florida was more than offset by declines in Mississippi and Tennessee. State and other political loans decreased $7.0 million as growth in Texas and Alabama was more than offset by declines in Mississippi and Tennessee.

Acquired loans totaled $218.2 million at March 31, 2017, down $54.0 million from the prior quarter, primarily due to the previously mentioned reclassification of $36.7 million of acquired loans to loans held for investment. Collectively, loans held for investment and acquired loans totaled $8.2 billion at March 31, 2017, up $99.4 million, or 1.2%, from the prior quarter.

Deposits totaled $10.1 billion at March 31, 2017, remaining stable from the prior quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 60% of deposit balances in checking accounts and a total cost of deposits of 0.16%. The cost of interest-bearing liabilities was 0.34% for the first quarter of 2017.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At March 31, 2017, Trustmark’s tangible equity to tangible assets ratio was 8.80%, while the total risk-based capital ratio was 13.61%.

Credit Quality

  • Other real estate decreased 9.8% and 22.1% from the prior quarter and year-over-year, respectively
  • Net charge-offs represented 0.08% of average loans
  • Allowance for loan losses represented 263.73% of nonperforming loans, excluding specifically reviewed impaired loans

Nonperforming loans totaled $61.3 million at March 31, 2017, up 24.5% from the prior quarter and down 13.3% year-over-year; the linked-quarter increase was primarily a result of one substandard energy- related credit migrating to nonaccrual status. Other real estate totaled $56.0 million, reflecting a decline of 9.8% from the previous quarter and 22.1% from the same period one year earlier. Collectively, nonperforming assets totaled $117.3 million, reflecting a linked-quarter increase of 5.4% and year-over-year decrease of 17.7%.

Allocation of Trustmark's $72.4 million allowance for loan losses represented 0.97% of commercial loans and 0.67% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.91% at March 31, 2017, 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 1.00% of total loans, which include held for investment and acquired loans.

Unless noted otherwise, all of the above credit quality metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.

Revenue Generation

  • Net interest income (FTE) excluding acquired loans totaled $97.2 million in the first quarter, an increase of 2.0% from the prior quarter and 5.5% year-over-year
  • Net interest margin excluding acquired loans was 3.38%, an increase of 7 basis points from the prior quarter
  • Noninterest income totaled $46.0 million, up 10.3% linked quarter and 6.4% year-over-year

Net interest income (FTE) in the first quarter totaled $102.4 million, resulting in a net interest margin of 3.49%, down 3 basis points from the prior quarter. Relative to the prior quarter, net interest income (FTE) decreased $1.1 million as growth in interest income from both the held for sale and held for investment loan portfolios was more than offset by decreased interest income from the acquired loan portfolio as well as increased total interest expense. The yield on acquired loans in the first quarter totaled 8.40% and included recoveries from settlement of debt of $1.2 million; this compares to $3.8 million in recoveries from settlement of debt in the prior quarter. Excluding acquired loans, the net interest margin in the first quarter totaled 3.38%, an increase of 7 basis points when compared to the fourth quarter of 2016. The increase was primarily due to growth in the yields on the securities portfolio and the loans held for investment and held for sale portfolios.

Noninterest income in the first quarter increased 10.3% from the prior quarter to total $46.0 million, as higher mortgage banking revenues and insurance commissions more than offset seasonal reductions in various fee-income categories. Mortgage banking revenue totaled $10.2 million in the first quarter, up $4.8 million from the prior quarter and $1.5 million year-over-year. The linked-quarter change reflects a net positive mortgage valuation adjustment and a net positive mortgage servicing hedge ineffectiveness that more than offset decreased secondary marketing gains. Mortgage loan production totaled $303.5 million, down 25.4% from the prior quarter and 1.3% year-over-year. Insurance revenue totaled $9.2 million in the first quarter, up 8.9% from the prior quarter and 7.2% year-over-year; this performance primarily reflects growth in the group health insurance and property and casualty businesses.

Wealth management revenue in the first quarter totaled $7.4 million, down 1.2% and up 0.1% from the prior quarter and year-over-year, respectively. The linked-quarter decline is primarily attributable to decreased commission-based transactions within investment services. Bank card and other fees declined $296 thousand from the prior quarter due to seasonal reductions in interchange income and lower revenue on interest rate swaps for commercial loan customers. Service charges on deposit accounts declined $612 thousand from the prior quarter, reflecting seasonal reductions in NSF and overdraft fees.

Noninterest Expense

  • Routine noninterest expense, which excludes ORE and intangible amortization, totaled $98.7 million, remaining stable from both the prior quarter and year-over-year
  • Total noninterest expense increased 1.8% linked quarter and 3.1% year-over-year to $102.1 million
  • Full-time equivalent employees totaled 2,799 at the end of the first quarter, a decrease of 147 or 5.0% when compared to levels one year earlier

Salaries and benefits decreased $866 thousand from the prior quarter to total $57.3 million. Services and fees increased 3.9%, or $581 thousand, linked quarter primarily due to additional advertising and outside services expense. ORE and foreclosure expense totaled $1.8 million, up from the prior quarter, while net occupancy-premises expense totaled $6.2 million, down 2.9% from the prior quarter. Other expense totaled $12.8 million, up $1.1 million on a linked-quarter basis, primarily due to a property valuation adjustment associated with a branch closure and other miscellaneous expenses.

Trustmark remains committed to diligent expense management. As previously announced, Trustmark terminated its defined benefit pension plan as of December 31, 2016. In order to terminate the plan, Trustmark is required to fully fund the plan on a termination basis and will contribute the additional assets necessary to do so. The final distributions will be made from current plan assets and a one-time pension settlement expense of approximately $17.5 million (pre-tax) will be recognized when paid by Trustmark during the second quarter of 2017. After the distribution of plan assets during the second quarter of 2017, Trustmark estimates that the annual pension expense will be reduced by $3.0 million to $4.0 million.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, April 26, 2017, 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, May 10, 2017, in archived format at the same web address or by calling (877) 344-7529, passcode 10103777.

Trustmark Corporation is a financial services company providing banking and financial solutions through 200 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 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 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, including those associated with the planned termination of our noncontributory tax-qualified defined benefit pension plan, 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

March 31, 2017
($ in thousands)
(unaudited)
 
                  Linked Quarter     Year over Year

QUARTERLY AVERAGE BALANCES

  3/31/2017     12/31/2016     3/31/2016  

$ Change

    % Change

$ Change

    % Change
Securities AFS-taxable $ 2,252,162 $ 2,271,503 $ 2,211,479 $ (19,341 ) -0.9 % $ 40,683 1.8 %
Securities AFS-nontaxable 88,522 91,495 105,844 (2,973 ) -3.2 % (17,322 ) -16.4 %
Securities HTM-taxable 1,124,692 1,101,382 1,142,434 23,310 2.1 % (17,742 ) -1.6 %
Securities HTM-nontaxable   33,009     33,675     35,841     (666 ) -2.0 %   (2,832 ) -7.9 %
Total securities   3,498,385     3,498,055     3,495,598     330   0.0 %   2,787   0.1 %
Loans (including loans held for sale) 8,074,449 7,855,444 7,346,333 219,005 2.8 % 728,116 9.9 %
Acquired loans 250,482 282,197 378,435 (31,715 ) -11.2 % (127,953 ) -33.8 %
Fed funds sold and rev repos 397 1,418 382 (1,021 ) -72.0 % 15 3.9 %
Other earning assets   79,515     80,608     66,702     (1,093 ) -1.4 %   12,813   19.2 %
Total earning assets   11,903,228     11,717,722     11,287,450     185,506   1.6 %   615,778   5.5 %
Allowance for loan losses (83,394 ) (82,604 ) (81,138 ) (790 ) 1.0 % (2,256 ) 2.8 %
Cash and due from banks 310,542 314,420 281,912 (3,878 ) -1.2 % 28,630 10.2 %
Other assets   1,235,469     1,238,029     1,253,282     (2,560 ) -0.2 %   (17,813 ) -1.4 %
Total assets $ 13,365,845   $ 13,187,567   $ 12,741,506   $ 178,278   1.4 % $ 624,339   4.9 %
 
Interest-bearing demand deposits $ 1,981,982 $ 1,920,273 $ 1,866,043 $ 61,709 3.2 % $ 115,939 6.2 %
Savings deposits 3,319,572 3,049,733 3,188,916 269,839 8.8 % 130,656 4.1 %
Time deposits   1,650,251     1,638,853     1,677,576     11,398   0.7 %   (27,325 ) -1.6 %
Total interest-bearing deposits 6,951,805 6,608,859 6,732,535 342,946 5.2 % 219,270 3.3 %
Fed funds purchased and repos 498,963 494,193 517,180 4,770 1.0 % (18,217 ) -3.5 %
Short-term borrowings 887,848 435,576 413,616 452,272 n/m 474,232 n/m
Long-term FHLB advances 251,033 685,844 501,144 (434,811 ) -63.4 % (250,111 ) -49.9 %
Subordinated notes 40,757 49,972 (40,757 ) -100.0 % (49,972 ) -100.0 %
Junior subordinated debt securities   61,856     61,856     61,856       0.0 %     0.0 %
Total interest-bearing liabilities 8,651,505 8,327,085 8,276,303 324,420 3.9 % 375,202 4.5 %
Noninterest-bearing deposits 3,008,176 3,160,959 2,836,283 (152,783 ) -4.8 % 171,893 6.1 %
Other liabilities   173,066     166,379     134,236     6,687   4.0 %   38,830   28.9 %
Total liabilities 11,832,747 11,654,423 11,246,822 178,324 1.5 % 585,925 5.2 %
Shareholders' equity   1,533,098     1,533,144     1,494,684     (46 ) 0.0 %   38,414   2.6 %
Total liabilities and equity $ 13,365,845   $ 13,187,567   $ 12,741,506   $ 178,278   1.4 % $ 624,339   4.9 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
($ in thousands)
(unaudited)
                           
Linked Quarter Year over Year

PERIOD END BALANCES

  3/31/2017     12/31/2016     3/31/2016  

$ Change

% Change

$ Change

% Change
Cash and due from banks $ 379,590 $ 327,706 $ 228,498 $ 51,884 15.8 % $ 151,092 66.1 %
Fed funds sold and rev repos 500 500 0.0 % 500 n/m
Securities available for sale 2,365,554 2,356,682 2,368,120 8,872 0.4 % (2,566 ) -0.1 %
Securities held to maturity 1,156,067 1,158,643 1,168,203 (2,576 ) -0.2 % (12,136 ) -1.0 %
Loans held for sale (LHFS) 174,090 175,927 191,028 (1,837 ) -1.0 % (16,938 ) -8.9 %
Loans held for investment (LHFI) 8,004,657 7,851,213 7,268,022 153,444 2.0 % 736,635 10.1 %
Allowance for loan losses   (72,445 )   (71,265 )   (69,668 )   (1,180 ) 1.7 %   (2,777 ) 4.0 %
Net LHFI 7,932,212 7,779,948 7,198,354 152,264 2.0 % 733,858 10.2 %
Acquired loans 218,242 272,247 364,755 (54,005 ) -19.8 % (146,513 ) -40.2 %
Allowance for loan losses, acquired loans   (10,006 )   (11,397 )   (13,535 )   1,391   -12.2 %   3,529   -26.1 %
Net acquired loans   208,236     260,850     351,220     (52,614 ) -20.2 %   (142,984 ) -40.7 %
Net LHFI and acquired loans 8,140,448 8,040,798 7,549,574 99,650 1.2 % 590,874 7.8 %
Premises and equipment, net 183,311 184,987 194,453 (1,676 ) -0.9 % (11,142 ) -5.7 %
Mortgage servicing rights 82,758 80,239 68,208 2,519 3.1 % 14,550 21.3 %
Goodwill 366,156 366,156 366,156 0.0 % 0.0 %
Identifiable intangible assets 19,117 20,680 25,751 (1,563 ) -7.6 % (6,634 ) -25.8 %
Other real estate 55,968 62,051 72,302 (6,083 ) -9.8 % (16,334 ) -22.6 %
Other assets   566,802     577,964     542,903     (11,162 ) -1.9 %   23,899   4.4 %
Total assets $ 13,490,361   $ 13,352,333   $ 12,775,196   $ 138,028   1.0 % $ 715,165   5.6 %
 
Deposits:
Noninterest-bearing $ 3,209,727 $ 2,973,238 $ 2,874,306 $ 236,489 8.0 % $ 335,421 11.7 %
Interest-bearing   6,894,745     7,082,774     6,759,337     (188,029 ) -2.7 %   135,408   2.0 %
Total deposits 10,104,472 10,056,012 9,633,643 48,460 0.5 % 470,829 4.9 %
Fed funds purchased and repos 524,335 539,817 466,436 (15,482 ) -2.9 % 57,899 12.4 %
Short-term borrowings 864,690 769,778 411,385 94,912 12.3 % 453,305 n/m
Long-term FHLB advances 250,994 251,049 501,124 (55 ) 0.0 % (250,130 ) -49.9 %
Subordinated notes 49,977 n/m (49,977 ) -100.0 %
Junior subordinated debt securities 61,856 61,856 61,856 0.0 % 0.0 %
Other liabilities   146,053     153,613     142,519     (7,560 ) -4.9 %   3,534   2.5 %
Total liabilities   11,952,400     11,832,125     11,266,940     120,275   1.0 %   685,460   6.1 %
Common stock 14,112 14,091 14,093 21 0.1 % 19 0.1 %
Capital surplus 365,951 366,563 363,979 (612 ) -0.2 % 1,972 0.5 %
Retained earnings 1,200,903 1,185,352 1,151,757 15,551 1.3 % 49,146 4.3 %
Accum other comprehensive loss, net of tax   (43,005 )   (45,798 )   (21,573 )   2,793   -6.1 %   (21,432 ) 99.3 %
Total shareholders' equity   1,537,961     1,520,208     1,508,256     17,753   1.2 %   29,705   2.0 %
Total liabilities and equity $ 13,490,361   $ 13,352,333   $ 12,775,196   $ 138,028   1.0 % $ 715,165   5.6 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
($ in thousands except per share data)
(unaudited)
                             
 
Quarter Ended Linked Quarter Year over Year

INCOME STATEMENTS

3/31/2017 12/31/2016 3/31/2016

$ Change

% Change

$ Change

% Change
Interest and fees on LHFS & LHFI-FTE $ 83,790 $ 81,346 $ 76,235 $ 2,444 3.0 % $ 7,555 9.9 %
Interest and fees on acquired loans 5,189 8,290 7,022 (3,101 ) -37.4 % (1,833 ) -26.1 %
Interest on securities-taxable 19,197 18,775 20,086 422 2.2 % (889 ) -4.4 %
Interest on securities-tax exempt-FTE 1,300 1,340 1,497 (40 ) -3.0 % (197 ) -13.2 %
Interest on fed funds sold and rev repos 1 4 1 (3 ) -75.0 % 0.0 %
Other interest income   267     335   230     (68 ) -20.3 %   37   16.1 %
Total interest income-FTE   109,744     110,090   105,071     (346 ) -0.3 %   4,673   4.4 %
Interest on deposits 3,945 3,380 3,038 565 16.7 % 907 29.9 %
Interest on fed funds pch and repos 698 471 431 227 48.2 % 267 61.9 %
Other interest expense   2,673     2,662   2,389     11   0.4 %   284   11.9 %
Total interest expense   7,316     6,513   5,858     803   12.3 %   1,458   24.9 %
Net interest income-FTE 102,428 103,577 99,213 (1,149 ) -1.1 % 3,215 3.2 %
Provision for loan losses, LHFI 2,762 1,834 2,243 928 50.6 % 519 23.1 %
Provision for loan losses, acquired loans   (1,605 )   1,150   1,309     (2,755 ) n/m   (2,914 ) n/m
Net interest income after provision-FTE   101,271     100,593   95,661     678   0.7 %   5,610   5.9 %
Service charges on deposit accounts 10,832 11,444 11,081 (612 ) -5.3 % (249 ) -2.2 %
Bank card and other fees 6,500 6,796 6,918 (296 ) -4.4 % (418 ) -6.0 %
Mortgage banking, net 10,185 5,428 8,699 4,757 87.6 % 1,486 17.1 %
Insurance commissions 9,212 8,459 8,593 753 8.9 % 619 7.2 %
Wealth management 7,413 7,505 7,407 (92 ) -1.2 % 6 0.1 %
Other, net   1,891     2,092   888     (201 ) -9.6 %   1,003   n/m
Nonint inc-excl sec gains (losses), net 46,033 41,724 43,586 4,309 10.3 % 2,447 5.6 %
Security gains (losses), net         (310 )     n/m   310   -100.0 %
Total noninterest income   46,033     41,724   43,276     4,309   10.3 %   2,757   6.4 %
Salaries and employee benefits 57,302 58,168 57,201 (866 ) -1.5 % 101 0.2 %
Services and fees 15,332 14,751 14,475 581 3.9 % 857 5.9 %
Net occupancy-premises 6,238 6,426 6,188 (188 ) -2.9 % 50 0.8 %
Equipment expense 5,998 6,172 6,094 (174 ) -2.8 % (96 ) -1.6 %
Other real estate expense 1,759 525 181 1,234 n/m 1,578 n/m
FDIC assessment expense 2,640 2,562 2,811 78 3.0 % (171 ) -6.1 %
Other expense   12,788     11,663   11,994     1,125   9.6 %   794   6.6 %
Total noninterest expense   102,057     100,267   98,944     1,790   1.8 %   3,113   3.1 %
Income before income taxes and tax eq adj 45,247 42,050 39,993 3,197 7.6 % 5,254 13.1 %
Tax equivalent adjustment   4,838     4,725   4,473     113   2.4 %   365   8.2 %
Income before income taxes 40,409 37,325 35,520 3,084 8.3 % 4,889 13.8 %
Income taxes   9,161     8,402   8,517     759   9.0 %   644   7.6 %
Net income $ 31,248   $ 28,923 $ 27,003   $ 2,325   8.0 % $ 4,245   15.7 %
 
Per share data
Earnings per share - basic $ 0.46   $ 0.43 $ 0.40   $ 0.03   7.0 % $ 0.06   15.0 %
 
Earnings per share - diluted $ 0.46   $ 0.43 $ 0.40   $ 0.03   7.0 % $ 0.06   15.0 %
 
Dividends per share $ 0.23   $ 0.23 $ 0.23       0.0 %     0.0 %
 
Weighted average shares outstanding
Basic   67,687,365     67,627,496   67,609,662  
 
Diluted   67,845,785     67,817,770   67,746,592  
 
Period end shares outstanding   67,729,434     67,628,618   67,639,832  
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
($ in thousands)
(unaudited)
 
                             
Quarter Ended Linked Quarter Year over Year

NONPERFORMING ASSETS (1)

  3/31/2017     12/31/2016     3/31/2016  

$ Change

% Change

$ Change

% Change
Nonaccrual loans
Alabama $ 1,649 $ 665 $ 1,788 $ 984 n/m $ (139 ) -7.8 %
Florida 3,559 3,644 4,952 (85 ) -2.3 % (1,393 ) -28.1 %
Mississippi (2) 49,349 37,771 56,590 11,578 30.7 % (7,241 ) -12.8 %
Tennessee (3) 5,185 6,213 5,849 (1,028 ) -16.5 % (664 ) -11.4 %
Texas   1,565     941     1,515     624   66.3 %   50   3.3 %
Total nonaccrual loans 61,307 49,234 70,694 12,073 24.5 % (9,387 ) -13.3 %
Other real estate
Alabama 13,953 15,989 19,137 (2,036 ) -12.7 % (5,184 ) -27.1 %
Florida 21,577 22,582 27,907 (1,005 ) -4.5 % (6,330 ) -22.7 %
Mississippi (2) 14,974 15,646 14,511 (672 ) -4.3 % 463 3.2 %
Tennessee (3) 4,706 6,183 8,699 (1,477 ) -23.9 % (3,993 ) -45.9 %
Texas   758     1,651     1,552     (893 ) -54.1 %   (794 ) -51.2 %
Total other real estate   55,968     62,051     71,806     (6,083 ) -9.8 %   (15,838 ) -22.1 %
Total nonperforming assets $ 117,275   $ 111,285   $ 142,500   $ 5,990   5.4 % $ (25,225 ) -17.7 %
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 1,307   $ 1,832   $ 611   $ (525 ) -28.7 % $ 696   n/m
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 31,147   $ 28,345   $ 24,110   $ 2,802   9.9 % $ 7,037   29.2 %
 
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (4)

  3/31/2017     12/31/2016     3/31/2016  

$ Change

% Change

$ Change

% Change
Beginning Balance $ 71,265 $ 70,871 $ 67,619 $ 394 0.6 % $ 3,646 5.4 %
Provision for loan losses 2,762 1,834 2,243 928 50.6 % 519 23.1 %
Charge-offs (4,202 ) (4,037 ) (3,363 ) (165 ) 4.1 % (839 ) 24.9 %
Recoveries   2,620     2,597     3,169     23   0.9 %   (549 ) -17.3 %
Net charge-offs   (1,582 )   (1,440 )   (194 )   (142 ) 9.9 %   (1,388 ) n/m
Ending Balance $ 72,445   $ 71,265   $ 69,668   $ 1,180   1.7 % $ 2,777   4.0 %
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 1,189 $ 763 $ 540 $ 426 55.8 % $ 649 n/m
Florida 3 (655 ) (818 ) 658 n/m 821 n/m
Mississippi (2) 1,826 1,873 1,848 (47 ) -2.5 % (22 ) -1.2 %
Tennessee (3) 208 (118 ) 138 326 n/m 70 50.7 %
Texas   (464 )   (29 )   535     (435 ) n/m   (999 ) n/m
Total provision for loan losses $ 2,762   $ 1,834   $ 2,243   $ 928   50.6 % $ 519   23.1 %
 

NET CHARGE-OFFS (4)

Alabama $ 66 $ 368 $ 63 $ (302 ) -82.1 % $ 3 4.8 %
Florida (155 ) (502 ) (674 ) 347 -69.1 % 519 -77.0 %
Mississippi (2) 1,759 1,591 (74 ) 168 10.6 % 1,833 n/m
Tennessee (3) 83 (8 ) 8 91 n/m 75 n/m
Texas   (171 )   (9 )   871     (162 ) n/m   (1,042 ) n/m
Total net charge-offs $ 1,582   $ 1,440   $ 194   $ 142   9.9 % $ 1,388   n/m
 
(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
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
($ in thousands)
(unaudited)
 
      Quarter Ended

AVERAGE BALANCES

  3/31/2017         12/31/2016         9/30/2016         6/30/2016         3/31/2016  
Securities AFS-taxable $ 2,252,162 $ 2,271,503 $ 2,249,109 $ 2,214,040 $ 2,211,479
Securities AFS-nontaxable 88,522 91,495 95,233 99,296 105,844
Securities HTM-taxable 1,124,692 1,101,382 1,115,053 1,122,463 1,142,434
Securities HTM-nontaxable   33,009     33,675     34,179     34,785     35,841  
Total securities   3,498,385     3,498,055     3,493,574     3,470,584     3,495,598  
Loans (including loans held for sale) 8,074,449 7,855,444 7,658,089 7,505,409 7,346,333
Acquired loans 250,482 282,197 317,273 349,740 378,435
Fed funds sold and rev repos 397 1,418 1,352 1,263 382
Other earning assets   79,515     80,608     68,706     64,000     66,702  
Total earning assets   11,903,228     11,717,722     11,538,994     11,390,996     11,287,450  
Allowance for loan losses (83,394 ) (82,604 ) (82,301 ) (83,614 ) (81,138 )
Cash and due from banks 310,542 314,420 299,670 271,135 281,912
Other assets   1,235,469     1,238,029     1,243,854     1,240,846     1,253,282  
Total assets $ 13,365,845   $ 13,187,567   $ 13,000,217   $ 12,819,363   $ 12,741,506  
 
Interest-bearing demand deposits $ 1,981,982 $ 1,920,273 $ 1,848,084 $ 1,830,107 $ 1,866,043
Savings deposits 3,319,572 3,049,733 3,101,161 3,221,850 3,188,916
Time deposits   1,650,251     1,638,853     1,667,345     1,678,564     1,677,576  
Total interest-bearing deposits 6,951,805 6,608,859 6,616,590 6,730,521 6,732,535
Fed funds purchased and repos 498,963 494,193 481,071 488,512 517,180
Short-term borrowings 887,848 435,576 311,473 319,288 413,616
Long-term FHLB advances 251,033 685,844 751,095 597,269 501,144
Subordinated notes 40,757 49,988 49,980 49,972
Junior subordinated debt securities   61,856     61,856     61,856     61,856     61,856  
Total interest-bearing liabilities 8,651,505 8,327,085 8,272,073 8,247,426 8,276,303
Noninterest-bearing deposits 3,008,176 3,160,959 3,060,331 2,927,469 2,836,283
Other liabilities   173,066     166,379     136,971     131,627     134,236  
Total liabilities 11,832,747 11,654,423 11,469,375 11,306,522 11,246,822
Shareholders' equity   1,533,098     1,533,144     1,530,842     1,512,841     1,494,684  
Total liabilities and equity $ 13,365,845   $ 13,187,567   $ 13,000,217   $ 12,819,363   $ 12,741,506  
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
($ in thousands)
(unaudited)
                     
 

PERIOD END BALANCES

  3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016  
Cash and due from banks $ 379,590 $ 327,706 $ 383,945 $ 322,049 $ 228,498
Fed funds sold and rev repos 500 500 500 3,198
Securities available for sale 2,365,554 2,356,682 2,410,947 2,388,306 2,368,120
Securities held to maturity 1,156,067 1,158,643 1,143,234 1,173,204 1,168,203
Loans held for sale (LHFS) 174,090 175,927 242,097 213,546 191,028
Loans held for investment (LHFI) 8,004,657 7,851,213 7,499,204 7,405,181 7,268,022
Allowance for loan losses   (72,445 )   (71,265 )   (70,871 )   (71,796 )   (69,668 )
Net LHFI 7,932,212 7,779,948 7,428,333 7,333,385 7,198,354
Acquired loans 218,242 272,247 295,737 339,035 364,755
Allowance for loan losses, acquired loans   (10,006 )   (11,397 )   (11,380 )   (12,480 )   (13,535 )
Net acquired loans   208,236     260,850     284,357     326,555     351,220  

Net LHFI and acquired loans

8,140,448 8,040,798 7,712,690 7,659,940 7,549,574
Premises and equipment, net 183,311 184,987 190,930 192,732 194,453
Mortgage servicing rights 82,758 80,239 65,514 62,814 68,208
Goodwill 366,156 366,156 366,156 366,156 366,156
Identifiable intangible assets 19,117 20,680 22,366 24,058 25,751
Other real estate 55,968 62,051 64,993 69,890 72,302
Other assets   566,802     577,964     558,166     554,456     542,903  
Total assets $ 13,490,361   $ 13,352,333   $ 13,161,538   $ 13,030,349   $ 12,775,196  
 
Deposits:
Noninterest-bearing $ 3,209,727 $ 2,973,238 $ 3,111,603 $ 2,921,016 $ 2,874,306
Interest-bearing   6,894,745     7,082,774     6,574,098     6,610,508     6,759,337  
Total deposits 10,104,472 10,056,012 9,685,701 9,531,524 9,633,643
Fed funds purchased and repos 524,335 539,817 514,918 606,336 466,436
Short-term borrowings 864,690 769,778 412,792 360,434 411,385
Long-term FHLB advances 250,994 251,049 751,075 751,106 501,124
Subordinated notes 49,993 49,985 49,977
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
Other liabilities   146,053     153,613     150,442     145,641     142,519  
Total liabilities   11,952,400     11,832,125     11,626,777     11,506,882     11,266,940  
Common stock 14,112 14,091 14,090 14,090 14,093
Capital surplus 365,951 366,563 365,553 364,516 363,979
Retained earnings 1,200,903 1,185,352 1,172,193 1,157,025 1,151,757
Accum other comprehensive loss, net of tax   (43,005 )   (45,798 )   (17,075 )   (12,164 )   (21,573 )
Total shareholders' equity   1,537,961     1,520,208     1,534,761     1,523,467     1,508,256  
Total liabilities and equity $ 13,490,361   $ 13,352,333   $ 13,161,538   $ 13,030,349   $ 12,775,196  
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
($ in thousands except per share data)
(unaudited)
 
      Quarter Ended

INCOME STATEMENTS

  3/31/2017         12/31/2016       9/30/2016         6/30/2016       3/31/2016  
Interest and fees on LHFS & LHFI-FTE $ 83,790 $ 81,346 $ 80,649 $ 77,777 $ 76,235
Interest and fees on acquired loans 5,189 8,290 6,781 8,051 7,022
Interest on securities-taxable 19,197 18,775 19,351 19,402 20,086
Interest on securities-tax exempt-FTE 1,300 1,340 1,388 1,429 1,497
Interest on fed funds sold and rev repos 1 4 5 4 1
Other interest income   267     335   223     200   230  
Total interest income-FTE   109,744     110,090   108,397     106,863   105,071  
Interest on deposits 3,945 3,380 3,208 3,122 3,038
Interest on fed funds pch and repos 698 471 411 404 431
Other interest expense   2,673     2,662   2,603     2,428   2,389  
Total interest expense   7,316     6,513   6,222     5,954   5,858  
Net interest income-FTE 102,428 103,577 102,175 100,909 99,213
Provision for loan losses, LHFI 2,762 1,834 4,284 2,596 2,243
Provision for loan losses, acquired loans   (1,605 )   1,150   691     607   1,309  
Net interest income after provision-FTE   101,271     100,593   97,200     97,706   95,661  
Service charges on deposit accounts 10,832 11,444 11,677 11,051 11,081
Bank card and other fees 6,500 6,796 6,756 7,436 6,918
Mortgage banking, net 10,185 5,428 7,364 6,721 8,699
Insurance commissions 9,212 8,459 10,074 9,638 8,593
Wealth management 7,413 7,505 7,571 8,009 7,407
Other, net   1,891     2,092   1,274     1,372   888  
Nonint inc-excl sec gains (losses), net 46,033 41,724 44,716 44,227 43,586
Security gains (losses), net               (310 )
Total noninterest income   46,033     41,724   44,716     44,227   43,276  
Salaries and employee benefits 57,302 58,168 57,250 67,018 57,201
Services and fees 15,332 14,751 14,947 14,522 14,475
Net occupancy-premises 6,238 6,426 6,440 5,928 6,188
Equipment expense 5,998 6,172 6,063 5,896 6,094
Other real estate expense 1,759 525 (1,313 ) 1,193 181
FDIC assessment expense 2,640 2,562 2,911 2,959 2,811
Other expense   12,788     11,663   11,610     12,663   11,994  
Total noninterest expense   102,057     100,267   97,908     110,179   98,944  
Income before income taxes and tax eq adj 45,247 42,050 44,008 31,754 39,993
Tax equivalent adjustment   4,838     4,725   4,611     4,532   4,473  
Income before income taxes 40,409 37,325 39,397 27,222 35,520
Income taxes   9,161     8,402   8,415     5,719   8,517  
Net income $ 31,248   $ 28,923 $ 30,982   $ 21,503 $ 27,003  
 
Per share data
Earnings per share - basic $ 0.46   $ 0.43 $ 0.46   $ 0.32 $ 0.40  
 
Earnings per share - diluted $ 0.46   $ 0.43 $ 0.46   $ 0.32 $ 0.40  
 
Dividends per share $ 0.23   $ 0.23 $ 0.23   $ 0.23 $ 0.23  
 
Weighted average shares outstanding
Basic   67,687,365     67,627,496   67,625,085     67,619,571   67,609,662  
 
Diluted   67,845,785     67,817,770   67,793,203     67,770,174   67,746,592  
 
Period end shares outstanding   67,729,434     67,628,618   67,626,939     67,623,601   67,639,832  
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
($ in thousands)
(unaudited)
 
      Quarter Ended

NONPERFORMING ASSETS (1)

  3/31/2017         12/31/2016         9/30/2016         6/30/2016         3/31/2016  
Nonaccrual loans
Alabama $ 1,649 $ 665 $ 1,403 $ 1,379 $ 1,788
Florida 3,559 3,644 3,719 1,806 4,952
Mississippi (2) 49,349 37,771 41,968 54,543 56,590
Tennessee (3) 5,185 6,213 6,620 5,345 5,849
Texas   1,565     941     700     2,055     1,515  
Total nonaccrual loans 61,307 49,234 54,410 65,128 70,694
Other real estate
Alabama 13,953 15,989 15,574 18,031 19,137
Florida 21,577 22,582 25,147 28,052 27,907
Mississippi (2) 14,974 15,646 16,659 14,435 14,511
Tennessee (3) 4,706 6,183 6,061 7,432 8,699
Texas   758     1,651     1,552     1,552     1,552  
Total other real estate   55,968     62,051     64,993     69,502     71,806  
Total nonperforming assets $ 117,275   $ 111,285   $ 119,403   $ 134,630   $ 142,500  
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 1,307   $ 1,832   $ 953   $ 3,382   $ 611  
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 31,147   $ 28,345   $ 25,570   $ 23,473   $ 24,110  
 
 
Quarter Ended

ALLOWANCE FOR LOAN LOSSES (4)

  3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016  
Beginning Balance $ 71,265 $ 70,871 $ 71,796 $ 69,668 $ 67,619
Provision for loan losses 2,762 1,834 4,284 2,596 2,243
Charge-offs (4,202 ) (4,037 ) (8,279 ) (3,251 ) (3,363 )
Recoveries   2,620     2,597     3,070     2,783     3,169  
Net charge-offs   (1,582 )   (1,440 )   (5,209 )   (468 )   (194 )
Ending Balance $ 72,445   $ 71,265   $ 70,871   $ 71,796   $ 69,668  
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 1,189 $ 763 $ 132 $ 1,189 $ 540
Florida 3 (655 ) 31 (364 ) (818 )
Mississippi (2) 1,826 1,873 703 (833 ) 1,848
Tennessee (3) 208 (118 ) 151 726 138
Texas   (464 )   (29 )   3,267     1,878     535  
Total provision for loan losses $ 2,762   $ 1,834   $ 4,284   $ 2,596   $ 2,243  
 

NET CHARGE-OFFS (4)

Alabama $ 66 $ 368 $ 38 $ 436 $ 63
Florida (155 ) (502 ) (169 ) (595 ) (674 )
Mississippi (2) 1,759 1,591 2,484 (237 ) (74 )
Tennessee (3) 83 (8 ) 74 252 8
Texas   (171 )   (9 )   2,782     612     871  
Total net charge-offs $ 1,582   $ 1,440   $ 5,209   $ 468   $ 194  
 
(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
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2017
(unaudited)
                     
Quarter Ended

FINANCIAL RATIOS AND OTHER DATA

  3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016  
Return on equity 8.27 % 7.51 % 8.05 % 5.72 % 7.27 %
Return on average tangible equity 11.39 % 10.41 % 11.16 % 8.08 % 10.26 %
Return on assets 0.95 % 0.87 % 0.95 % 0.67 % 0.85 %
Interest margin - Yield - FTE 3.74 % 3.74 % 3.74 % 3.77 % 3.74 %
Interest margin - Cost 0.25 % 0.22 % 0.21 % 0.21 % 0.21 %
Net interest margin - FTE 3.49 % 3.52 % 3.52 % 3.56 % 3.54 %
Efficiency ratio (1) 66.67 % 66.08 % 63.81 % 67.20 % 66.87 %
Full-time equivalent employees 2,799 2,788 2,787 2,818 2,946
 

CREDIT QUALITY RATIOS (2)

Net charge-offs/average loans 0.08 % 0.07 % 0.27 % 0.03 % 0.01 %
Provision for loan losses/average loans 0.14 % 0.09 % 0.22 % 0.14 % 0.12 %
Nonperforming loans/total loans (incl LHFS) 0.75 % 0.61 % 0.70 % 0.85 % 0.95 %
Nonperforming assets/total loans (incl LHFS) 1.43 % 1.39 % 1.54 % 1.77 % 1.91 %
Nonperforming assets/total loans (incl LHFS) +ORE 1.42 % 1.38 % 1.53 % 1.75 % 1.89 %
ALL/total loans (excl LHFS) 0.91 % 0.91 % 0.95 % 0.97 % 0.96 %
ALL-commercial/total commercial loans 0.97 % 0.97 % 1.02 % 1.05 % 1.06 %
ALL-consumer/total consumer and home mortgage loans 0.67 % 0.68 % 0.68 % 0.70 % 0.65 %
ALL/nonperforming loans 118.17 % 144.75 % 130.25 % 110.24 % 98.55 %
ALL/nonperforming loans (excl specifically reviewed impaired loans) 263.73 % 267.40 % 256.56 % 231.13 % 203.24 %
 

CAPITAL RATIOS

Total equity/total assets 11.40 % 11.39 % 11.66 % 11.69 % 11.81 %
Tangible equity/tangible assets 8.80 % 8.74 % 8.97 % 8.97 % 9.01 %
Tangible equity/risk-weighted assets 11.49 % 11.39 % 11.85 % 11.85 % 11.84 %
Tier 1 leverage ratio 9.86 % 9.90 % 9.92 % 9.93 % 9.93 %
Common equity tier 1 capital ratio 12.19 % 12.16 % 12.35 % 12.32 % 12.41 %
Tier 1 risk-based capital ratio 12.79 % 12.76 % 12.97 % 12.94 % 13.04 %
Total risk-based capital ratio 13.61 % 13.59 % 13.82 % 13.82 % 13.92 %
 

STOCK PERFORMANCE

Market value-Close $ 31.79 $ 35.65 $ 27.56 $ 24.85 $ 23.03
Book value $ 22.71 $ 22.48 $ 22.69 $ 22.53 $ 22.30
Tangible book value $ 17.02 $ 16.76 $ 16.95 $ 16.76 $ 16.50
 
(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.
(2) - Excludes acquired loans and covered other real estate
 

See Notes to Consolidated Financials

 

 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
March 31, 2017
($ in thousands)
(unaudited)

Note 1 – Business Combinations

On April 7, 2017, Trustmark Corporation (Trustmark) completed its merger with RB Bancorporation. RB Bancorporation, with assets of $201.2 million as of March 31, 2017, is the holding company for Reliance Bank, which had seven offices serving the Huntsville, Alabama MSA. Reliance Bank was merged into Trustmark National Bank simultaneously with the merger of Trustmark and RB Bancorporation. Under the terms of the Merger Agreement dated November 14, 2016, Trustmark paid $22.00 in cash for each share of RB Bancorporation common stock outstanding, which represents total consideration for common shareholders of approximately $23.7 million.

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):

      3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016

SECURITIES AVAILABLE FOR SALE

U.S. Government agency obligations
Issued by U.S. Government agencies $ 53,247 $ 55,763 $ 58,234 $ 61,359 $ 63,814
Issued by U.S. Government sponsored agencies 274 276 283 286 286
Obligations of states and political subdivisions 109,895 115,373 124,641 129,285 135,655
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 42,667 42,786 36,788 29,282 25,081
Issued by FNMA and FHLMC 733,214 631,084 561,989 428,542 330,558
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,202,719 1,267,951 1,374,399 1,474,357 1,540,541
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   223,538   243,449   254,613   265,195   272,185
Total securities available for sale $ 2,365,554 $ 2,356,682 $ 2,410,947 $ 2,388,306 $ 2,368,120
 

SECURITIES HELD TO MATURITY

U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 3,658 $ 3,647 $ 3,636 $ 31,142 $ 63,085
Obligations of states and political subdivisions 46,273 46,303 52,937 53,473 54,278
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 14,977 15,478 16,183 16,415 16,590
Issued by FNMA and FHLMC 118,733 81,299 39,989 42,267 9,871
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 771,296 803,474 831,662 824,175 818,201
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   201,130   208,442   198,827   205,732   206,178
Total securities held to maturity $ 1,156,067 $ 1,158,643 $ 1,143,234 $ 1,173,204 $ 1,168,203
 

During 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 March 31, 2017, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive loss in the accompanying balance sheet totaled approximately $23.0 million ($14.2 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
March 31, 2017
($ in thousands)
(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)

      3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016
Loans secured by real estate:
Construction, land development and other land loans $ 859,927 $ 831,437 $ 766,685 $ 718,438 $ 697,500
Secured by 1-4 family residential properties 1,656,837 1,660,043 1,592,453 1,620,013 1,640,015
Secured by nonfarm, nonresidential properties 2,064,352 2,034,176 1,916,153 1,900,784 1,893,240
Other real estate secured 399,636 318,148 317,680 323,734 273,752
Commercial and industrial loans 1,540,783 1,528,434 1,421,382 1,466,511 1,368,464
Consumer loans 166,314 170,562 170,073 166,436 164,544
State and other political subdivision loans 910,493 917,515 875,973 805,401 787,049
Other loans   406,315     390,898     438,805     403,864     443,458  
LHFI 8,004,657 7,851,213 7,499,204 7,405,181 7,268,022
Allowance for loan losses   (72,445 )   (71,265 )   (70,871 )   (71,796 )   (69,668 )
Net LHFI $ 7,932,212   $ 7,779,948   $ 7,428,333   $ 7,333,385   $ 7,198,354  
                     

ACQUIRED LOANS BY TYPE (1)

3/31/2017 12/31/2016 9/30/2016 6/30/2016 3/31/2016
Loans secured by real estate:
Construction, land development and other land loans $ 17,651 $ 20,850 $ 25,040 $ 38,016 $ 41,484
Secured by 1-4 family residential properties 54,721 69,540 76,601 81,676 89,878
Secured by nonfarm, nonresidential properties 92,075 103,820 110,606 119,698 129,856
Other real estate secured 16,275 19,010 20,903 25,272 25,506
Commercial and industrial loans 20,691 36,896 39,519 49,760 52,806
Consumer loans 2,664 3,365 3,878 4,295 5,027
Other loans   14,165     18,766     19,190     20,318     20,198  
Acquired loans 218,242 272,247 295,737 339,035 364,755
Allowance for loan losses, acquired loans   (10,006 )   (11,397 )   (11,380 )   (12,480 )   (13,535 )
Net acquired loans $ 208,236   $ 260,850   $ 284,357   $ 326,555   $ 351,220  
 

(1) Trustmark revised the presentation of acquired loans by eliminating the segmentation of acquired noncovered loans and acquired covered loans due to the significantly reduced size of the acquired covered loan portfolio.

During the first quarter of 2017, Trustmark transferred the remaining balance of the acquired loans not accounted for under FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” to LHFI due to the discount on these loans being fully amortized. The balance of these transferred loans totaled $36.7 million.




TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
March 31, 2017
($ in thousands)
(unaudited)

Note 3 – Loan Composition (continued)

      March 31, 2017

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 $ 859,927 $ 226,553 $ 58,778 $ 307,859 $ 36,848 $ 229,889
Secured by 1-4 family residential properties 1,656,837 91,536 51,476 1,397,976 98,906 16,943
Secured by nonfarm, nonresidential properties 2,064,352 310,000 191,923 909,040 167,572 485,817
Other real estate secured 399,636 34,944 3,324 194,715 38,153 128,500
Commercial and industrial loans 1,540,783 128,705 22,970 793,558 333,052 262,498
Consumer loans 166,314 21,676 3,684 122,046 16,776 2,132
State and other political subdivision loans 910,493 79,393 29,450 548,224 31,595 221,831
Other loans   406,315   55,457   18,214   263,337   32,627   36,680
Loans $ 8,004,657 $ 948,264 $ 379,819 $ 4,536,755 $ 755,529 $ 1,384,290
 

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

Lots $ 61,643 $ 12,769 $ 17,776 $ 24,734 $ 2,263 $ 4,101
Development 52,501 7,682 6,033 19,110 612 19,064
Unimproved land 108,177 16,203 15,721 41,533 15,947 18,773
1-4 family construction 185,213 47,561 10,675 86,919 2,277 37,781
Other construction   452,393   142,338   8,573   135,563   15,749   150,170
Construction, land development and other land loans $ 859,927 $ 226,553 $ 58,778 $ 307,859 $ 36,848 $ 229,889
 

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

Income producing:
Retail $ 276,475 $ 82,560 $ 35,717 $ 94,736 $ 18,056 $ 45,406
Office 218,611 31,346 30,096 74,722 6,853 75,594
Nursing homes/assisted living 128,578 121,935 6,643
Hotel/motel 232,458 53,118 29,329 64,244 41,322 44,445
Mini-storage 152,285 12,390 7,346 57,869 14,163 60,517
Industrial 121,092 10,640 10,073 21,802 5,066 73,511
Health care 31,347 2,126 815 27,373 1,033
Convenience stores 17,179 258 9,830 962 6,129
Other   95,059   15,486   24,534   24,493   2,229   28,317
Total income producing loans 1,273,084 207,924 137,910 497,004 95,294 334,952
 
Owner-occupied:
Office 140,556 18,537 23,312 68,778 7,226 22,703
Churches 87,616 12,751 2,074 44,235 21,746 6,810
Industrial warehouses 128,630 6,325 3,541 64,960 13,242 40,562
Health care 117,865 22,541 6,688 68,678 4,530 15,428
Convenience stores 93,577 9,599 6,983 52,864 1,135 22,996
Retail 44,329 4,428 7,012 21,421 5,826 5,642
Restaurants 33,653 3,593 885 23,768 3,424 1,983
Auto dealerships 18,849 8,817 39 8,902 1,091
Other   126,193   15,485   3,479   58,430   14,058   34,741
Total owner-occupied loans   791,268   102,076   54,013   412,036   72,278   150,865
Loans secured by nonfarm, nonresidential properties $ 2,064,352 $ 310,000 $ 191,923 $ 909,040 $ 167,572 $ 485,817

(1) Excludes acquired loans.




TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
March 31, 2017
($ 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
3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016
Securities – taxable   2.31 %   2.21 %   2.29 %   2.34 %   2.41 %
Securities – nontaxable 4.34 % 4.26 % 4.27 % 4.29 % 4.25 %
Securities – total 2.38 % 2.29 % 2.36 % 2.41 % 2.48 %
Loans - LHFI & LHFS 4.21 % 4.12 % 4.19 % 4.17 % 4.17 %
Acquired loans 8.40 % 11.69 % 8.50 % 9.26 % 7.46 %
Loans - total 4.33 % 4.38 % 4.36 % 4.39 % 4.33 %
FF sold & rev repo 1.02 % 1.12 % 1.47 % 1.27 % 1.05 %
Other earning assets 1.36 % 1.65 % 1.29 % 1.26 % 1.39 %
Total earning assets 3.74 % 3.74 % 3.74 % 3.77 % 3.74 %
 
Interest-bearing deposits 0.23 % 0.20 % 0.19 % 0.19 % 0.18 %
FF pch & repo 0.57 % 0.38 % 0.34 % 0.33 % 0.34 %
Other borrowings 0.90 % 0.87 % 0.88 % 0.95 % 0.94 %
Total interest-bearing liabilities 0.34 % 0.31 % 0.30 % 0.29 % 0.28 %
 
Net interest margin 3.49 % 3.52 % 3.52 % 3.56 % 3.54 %
Net interest margin excluding acquired loans 3.38 % 3.31 % 3.38 % 3.38 % 3.40 %
 

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 first quarter of 2017, the yield on acquired loans totaled 8.40% and included $1.2 million in recoveries from the settlement of debt, which represented approximately 2.02% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.38% for the first quarter of 2017, an increase of 7 basis points when compared to the fourth quarter of 2016. This increase was primarily due to growth in the yields on the securities portfolio and the loans held for investment and held for sale portfolio.

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 $2.8 million and $413 thousand for the quarters ended March 31, 2017 and 2016, respectively.

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

      Quarter Ended
3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016
Mortgage servicing income, net $ 5,458 $ 5,218 $ 5,271 $ 5,177 $ 5,058
Change in fair value-MSR from runoff (2,387 ) (2,739 ) (2,862 ) (2,500 ) (2,005 )
Gain on sales of loans, net 3,550 6,054 6,410 5,480 2,591
Other, net   772     (2,925 )   (299 )   498     2,642  
Mortgage banking income before hedge ineffectiveness   7,393     5,608     8,520     8,655     8,286  
Change in fair value-MSR from market changes 1,466 13,112 381 (7,033 ) (6,866 )
Change in fair value of derivatives   1,326     (13,292 )   (1,537 )   5,099     7,279  
Net positive (negative) hedge ineffectiveness   2,792     (180 )   (1,156 )   (1,934 )   413  
Mortgage banking, net $ 10,185   $ 5,428   $ 7,364   $ 6,721   $ 8,699  
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
March 31, 2017
($ in thousands)
(unaudited)

Note 6 – Salaries and Employee Benefit Plans

Early Retirement Program

During the second quarter of 2016, Trustmark announced a voluntary early retirement program (ERP) for associates age 60 and above with five or more years of service. The cost of this program is reflected in a one-time, pre-tax charge of approximately $9.3 million (salaries and employee benefits expense of $9.1 million and other miscellaneous expense of $230 thousand), or $0.085 per basic share net of tax, in Trustmark’s second quarter 2016 earnings. As a result of the ERP, during the third and fourth quarters of 2016, Trustmark incurred additional expense of $236 thousand and $268 thousand, respectively, which primarily resulted from additional settlements from pension lump sum elections.

Defined Benefit Pension Plan

Trustmark maintains a noncontributory tax-qualified defined benefit pension plan (Trustmark Capital Accumulation Plan, the “Plan”), in which substantially all associates who began employment prior to 2007 participate. The Plan provides retirement benefits that are based on the length of credited service and final average compensation, as defined in the Plan, and vest upon three years of service. Benefit accruals under the plan have been frozen since 2009, with the exception of certain associates covered through plans obtained in acquisitions that were subsequently merged into the Plan. On July 26, 2016, the Board of Directors of Trustmark authorized the termination of the Plan, effective as of December 31, 2016. To satisfy commitments made by Trustmark to associates (collectively, the “Continuing Associates”) covered through acquired plans that were merged into the Plan, the Board also approved the spin-off of the portion of the Plan associated with the accrued benefits of the Continuing Associates into a new plan titled the Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions (the “Spin-Off Plan”), effective as of December 31, 2016, immediately prior to the termination of the Plan. In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, Trustmark is required to fully fund the Plan on a termination basis and will contribute the additional assets necessary to do so. The final distributions will be made from current plan assets and a one-time pension settlement expense of approximately $17.5 million will be recognized when paid by Trustmark during the second quarter of 2017. After the distribution of Plan assets during the second quarter of 2017, Trustmark estimates that the annual pension expense will be reduced by $3.0 million to $4.0 million.

Note 7 – Other Noninterest Income and Expense

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

      Quarter Ended
3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016
Partnership amortization for tax credit purposes $ (2,274 ) $ (2,479 ) $ (2,479 ) $ (2,479 ) $ (2,479 )
Increase in life insurance cash surrender value 1,714 1,751 1,746 1,702 1,692
Other miscellaneous income   2,451     2,820     2,007     2,149     1,675  
Total other, net $ 1,891   $ 2,092   $ 1,274   $ 1,372   $ 888  

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.

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

          Quarter Ended
3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016
Loan expense $ 2,792 $ 2,823 $ 3,336 $ 3,024 $ 3,043
Amortization of intangibles 1,564 1,686 1,692 1,692 1,796
Other miscellaneous expense   8,432   7,154   6,582   7,947   7,155
Total other expense $ 12,788 $ 11,663 $ 11,610 $ 12,663 $ 11,994
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
March 31, 2017
($ in thousands)
(unaudited)

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.

 
          Quarter Ended
3/31/2017     12/31/2016     9/30/2016     6/30/2016     3/31/2016

TANGIBLE EQUITY

AVERAGE BALANCES
Total shareholders' equity $ 1,533,098 $ 1,533,144 $ 1,530,842 $ 1,512,841 $ 1,494,684
Less: Goodwill (366,156 ) (366,156 ) (366,156 ) (366,156 ) (366,156 )
Identifiable intangible assets   (19,950 )   (21,585 )   (23,311 )   (24,961 )   (26,709 )
Total average tangible equity $ 1,146,992   $ 1,145,403   $ 1,141,375   $ 1,121,724   $ 1,101,819  
 
PERIOD END BALANCES
Total shareholders' equity $ 1,537,961 $ 1,520,208 $ 1,534,761 $ 1,523,467 $ 1,508,256
Less: Goodwill (366,156 ) (366,156 ) (366,156 ) (366,156 ) (366,156 )
Identifiable intangible assets   (19,117 )   (20,680 )   (22,366 )   (24,058 )   (25,751 )
Total tangible equity (a) $ 1,152,688   $ 1,133,372   $ 1,146,239   $ 1,133,253   $ 1,116,349  
 

TANGIBLE ASSETS

Total assets $ 13,490,361 $ 13,352,333 $ 13,161,538 $ 13,030,349 $ 12,775,196
Less: Goodwill (366,156 ) (366,156 ) (366,156 ) (366,156 ) (366,156 )
Identifiable intangible assets   (19,117 )   (20,680 )   (22,366 )   (24,058 )   (25,751 )
Total tangible assets (b) $ 13,105,088   $ 12,965,497   $ 12,773,016   $ 12,640,135   $ 12,383,289  
Risk-weighted assets (c) $ 10,031,410   $ 9,952,123   $ 9,670,302   $ 9,559,816   $ 9,431,021  
 

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION

Net income $ 31,248 $ 28,923 $ 30,982 $ 21,503 $ 27,003
Plus: Intangible amortization net of tax   966     1,041     1,045     1,045     1,109  
Net income adjusted for intangible amortization $ 32,214   $ 29,964   $ 32,027   $ 22,548   $ 28,112  
Period end common shares outstanding (d)   67,729,434     67,628,618     67,626,939     67,623,601     67,639,832  
 

TANGIBLE COMMON EQUITY MEASUREMENTS

Return on average tangible equity (1) 11.39 % 10.41 % 11.16 % 8.08 % 10.26 %
Tangible equity/tangible assets (a)/(b) 8.80 % 8.74 % 8.97 % 8.97 % 9.01 %
Tangible equity/risk-weighted assets (a)/(c) 11.49 % 11.39 % 11.85 % 11.85 % 11.84 %
Tangible book value (a)/(d)*1,000 $ 17.02 $ 16.76 $ 16.95 $ 16.76 $ 16.50
 

COMMON EQUITY TIER 1 CAPITAL (CET1)

Total shareholders' equity $ 1,537,961 $ 1,520,208 $ 1,534,761 $ 1,523,467 $ 1,508,256
AOCI-related adjustments 43,005 45,798 17,075 12,164 21,573
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs) (347,085 ) (347,442 ) (347,800 ) (348,158 ) (348,515 )
Other adjustments and deductions for CET1 (2)   (10,803 )   (8,637 )   (9,307 )   (10,042 )   (10,861 )
CET1 capital (e) 1,223,078 1,209,927 1,194,729 1,177,431 1,170,453
Additional tier 1 capital instruments plus related surplus 60,000 60,000 60,000 60,000 60,000
Less: additional tier 1 capital deductions   (159 )   (267 )   (276 )   (328 )   (434 )
Additional tier 1 capital   59,841     59,733     59,724     59,672     59,566  
Tier 1 capital $ 1,282,919   $ 1,269,660   $ 1,254,453   $ 1,237,103   $ 1,230,019  
 
Common equity tier 1 capital ratio (e)/(c) 12.19 % 12.16 % 12.35 % 12.32 % 12.41 %
 

(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.

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

Release Summary

Trustmark Corporation Announces First Quarter 2017 Financial Results

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