JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) reported net income of $34.6 million in the third quarter of 2017, representing diluted earnings per share of $0.51. This level of earnings resulted in a return on average tangible common equity of 11.95% and a return on average assets of 0.99%. Included in the third quarter financial results was a specific reserve for loan losses related to Hurricane Harvey that reduced net income by $687 thousand, or $0.01 per share. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2017, to shareholders of record on December 1, 2017.
Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=51703832&lang=en
Gerard R. Host, President and CEO, stated, “Trustmark continued to gain momentum in the third quarter as reflected by its solid financial results. We continued to experience loan growth across our franchise while maintaining strong credit quality as evidenced by declining levels of nonperforming assets and historically low net charge-offs. Our low-cost, core deposit base remains a significant strength of the organization. Our mortgage, insurance and wealth management businesses continued to provide complementary revenue sources to our traditional banking business. While we continue to make investments to enhance the customer experience, we remain focused on disciplined expense management. Thanks to our 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
- Continued diversified loan growth
- Attractive core deposit base
Loans held for investment totaled $8.4 billion at September 30, 2017, reflecting an increase of $111.3 million, or 1.3%, from the prior quarter and $908.1 million, or 12.1%, from the prior year. Loans secured by nonfarm, nonresidential properties increased $63.5 million during the quarter, driven by growth in Mississippi, Florida, Alabama and Texas. Other real estate secured loans increased $50.0 million due to growth in Texas, Mississippi, Alabama and Tennessee. Construction, land development and other land loans increased $28.1 million as growth in construction lending in Alabama and Texas were offset in part by declines in Tennessee and Mississippi. Other loans, which include finance companies, mortgage warehousing and REITs, increased $41.4 million, driven by growth in Mississippi, Alabama and Tennessee. Commercial and industrial loans fell $66.4 million, as growth in Tennessee was more than offset by declines in Mississippi, Texas and Alabama.
Acquired loans totaled $283.8 million at September 30, 2017, a decrease of $31.2 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $8.7 billion at September 30, 2017, up $80.1 million from the prior quarter.
Securities available for sale and held to maturity declined $116.1 million in the third quarter as part of Trustmark’s interest rate risk management strategy and in accordance with Trustmark’s focus on enhancing the composition of its earning assets profile. At September 30, 2017, the balance of securities available for sale and held to maturity totaled $3.5 billion.
Deposits totaled $10.2 billion at September 30, 2017, a decrease of $191.6 million, or 1.8%, from the prior quarter as growth in consumer deposits was more than offset by a seasonal decline in public funds. Trustmark continues to maintain an attractive, low-cost deposit base with a total cost of deposits of 0.25%. The favorable mix of interest-bearing liabilities yielded a total cost of funds of 0.53% for the third quarter of 2017.
Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At September 30, 2017, Trustmark’s tangible equity to tangible assets ratio was 8.79%, while its total risk-based capital ratio was 13.19%. Tangible book value per share was $17.49 at September 30, 2017, up 4.4% year to date.
Credit Quality
- Specific reserve for loan losses related to Hurricane Harvey
- Recoveries exceeded charge-offs
In the aftermath of Hurricane Harvey, which made landfall in the Texas Gulf Coast region on August 25, 2017, Trustmark initiated a process to assess the storm’s impact on the company and its customers. Fortunately, none of Trustmark’s Houston area facilities sustained damage and reopened as soon as practical following the storm. Trustmark identified all loans where the collateral, project or mailing addresses were located within FEMA designated disaster zip codes and proactively surveyed customers to determine the extent of any damages. Trustmark achieved coverage of approximately 97% of the $1.3 billion of outstanding loans within the designated disaster area. Potential loss exposure was calculated based upon customer responses as to the extent of damage suffered and applicable insurance coverage. Actual results were extrapolated to the remainder of the population. As a result, management increased its allowance for loan losses due to the storm by $1.1 million, which reduced third quarter net income by $687 thousand, or $0.01 per share.
At September 30, 2017, nonperforming loans totaled $69.3 million while other real estate totaled $48.4 million. Collectively, nonperforming assets decreased $6.5 million, or 5.2%, linked quarter and $1.8 million, or 1.5%, year-over-year. Recoveries exceeded charge-offs by $476 thousand during the third quarter.
Allocation of Trustmark's $80.3 million allowance for loan losses represented 1.02% of commercial loans and 0.73% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.96% at September 30, 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 0.99% of total held for investment and acquired loans. Allowance for loan losses represented 301.50% of nonperforming loans, excluding specifically reviewed impaired loans.
Unless noted otherwise, all of the above credit quality metrics exclude acquired loans.
Revenue Generation
- Continued growth in net interest income
- Insurance revenue increases
Net interest income (FTE) in the third quarter totaled $108.9 million, which resulted in a net interest margin of 3.47%. Compared to the prior quarter, net interest income (FTE) increased $2.0 million, which reflects continued growth in interest income from the held for sale and held for investment loan portfolios as well as growth in interest and fees on acquired loans. During the third quarter of 2017, the yield on acquired loans totaled 8.78% and included $1.3 million in recoveries from the settlement of debt, which represented approximately 1.78% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the third quarter of 2017 totaled 3.34%, a decline of 3 basis points compared to the second quarter of 2017, primarily due to higher costs of interest-bearing deposits.
Noninterest income totaled $44.5 million in the third quarter, a decline of $5.7 million, or 11.4%, compared to the prior quarter and $236 thousand, or 0.5%, compared to the same period in the previous year. Excluding non-routine, non-taxable proceeds from life insurance acquired as part of a previous acquisition of $4.9 million in the second quarter of 2017, noninterest income declined $816 thousand linked quarter.
Service charges on deposit accounts totaled $11.2 million for the third quarter of 2017, an increase of $468 thousand, or 4.4%, from the prior quarter and a decline of $454 thousand, or 3.9%, year-over-year. The linked quarter change was attributable to a seasonal increase in occurrences of consumer overdrafts while the year-over-year decline reflects a decrease in consumer and business service charges and occurrences of overdrafts. Bank card and other fees totaled $7.2 million in the third quarter, a decline of $220 thousand, or 3.0%, linked quarter and an increase of $394 thousand, or 5.8%, year-over-year. The linked quarter decline reflected a seasonal reduction in interchange income as well as reduced revenue from customer derivatives while increased interchange income and other fees drove the increase year-over-year.
Mortgage banking revenue in the third quarter totaled $4.4 million, down $4.6 million from the prior quarter and $2.9 million year-over-year. The linked quarter decline was primarily due to the net negative mortgage hedge ineffectiveness and a negative mortgage valuation adjustment. Mortgage loan-production volume for the third quarter totaled $341.5 million. Insurance revenue totaled $10.4 million in the third quarter, representing an increase of $653 thousand, or 6.7%, from the prior quarter and $324 thousand, or 3.2%, from the same period one year earlier. These increases were primarily driven by growth in the commercial property and casualty lines of business. Wealth management revenue in the third quarter totaled $7.5 million, down $144 thousand, or 1.9%, from the prior quarter and $41 thousand, or 0.5%, year-over-year. The linked quarter decline was attributable to lower trust fees and brokerage commissions.
Other income, net totaled $3.7 million during the third quarter and included $2.7 million of non-taxable proceeds from bank-owned life insurance, compared to $5.6 million in the previous quarter, which included $4.9 million of non-taxable proceeds from life insurance acquired as part of a previous acquisition.
Expense Management
- Core expense remains well-controlled
- Salary and benefit expense declined linked quarter
Noninterest expense totaled $103.1 million during the third quarter, a decline of $19.0 million, or 15.6%, from the prior quarter. Excluding the non-routine charges related to the termination of Trustmark’s defined benefit pension plan of $17.6 million as well as charges related to the RB Bancorporation merger of $3.2 million in the second quarter, noninterest expense increased $1.9 million. Excluding other real estate expense ($864 thousand) and intangible amortization ($1.5 million), core noninterest expense in the third quarter totaled $100.7 million. Salaries and benefits expense totaled $58.8 million, a marginal decrease from the prior quarter when excluding the aforementioned non-routine pension plan termination charge.
Trustmark remains committed to investments that promote 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, October 25, 2017 at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, November 8, 2017, in archived format at the same web address or by calling (877) 344-7529, passcode 10112612.
Trustmark Corporation is a financial services company providing banking and financial solutions through 198 offices in Alabama, Florida, Mississippi, Tennessee and Texas.
Forward-Looking Statements
Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.
Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including 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, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
Linked Quarter | Year over Year | ||||||||||||||||||||||||||||
QUARTERLY AVERAGE BALANCES |
9/30/2017 | 6/30/2017 | 9/30/2016 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||||
Securities AFS-taxable | $ | 2,349,736 | $ | 2,334,600 | $ | 2,249,109 | $ | 15,136 | 0.6 | % | $ | 100,627 | 4.5 | % | |||||||||||||||
Securities AFS-nontaxable | 67,994 | 75,640 | 95,233 | (7,646 | ) | -10.1 | % | (27,239 | ) | -28.6 | % | ||||||||||||||||||
Securities HTM-taxable | 1,086,773 | 1,108,158 | 1,115,053 | (21,385 | ) | -1.9 | % | (28,280 | ) | -2.5 | % | ||||||||||||||||||
Securities HTM-nontaxable | 32,829 | 32,878 | 34,179 | (49 | ) | -0.1 | % | (1,350 | ) | -3.9 | % | ||||||||||||||||||
Total securities | 3,537,332 | 3,551,276 | 3,493,574 | (13,944 | ) | -0.4 | % | 43,758 | 1.3 | % | |||||||||||||||||||
Loans (including loans held for sale) | 8,532,523 | 8,348,758 | 7,658,089 | 183,765 | 2.2 | % | 874,434 | 11.4 | % | ||||||||||||||||||||
Acquired loans | 299,221 | 315,558 | 317,273 | (16,337 | ) | -5.2 | % | (18,052 | ) | -5.7 | % | ||||||||||||||||||
Fed funds sold and rev repos | 3,582 | 3,184 | 1,352 | 398 | 12.5 | % | 2,230 | n/m | |||||||||||||||||||||
Other earning assets | 84,320 | 77,770 | 68,706 | 6,550 | 8.4 | % | 15,614 | 22.7 | % | ||||||||||||||||||||
Total earning assets | 12,456,978 | 12,296,546 | 11,538,994 | 160,432 | 1.3 | % | 917,984 | 8.0 | % | ||||||||||||||||||||
Allowance for loan losses | (85,363 | ) | (83,328 | ) | (82,301 | ) | (2,035 | ) | -2.4 | % | (3,062 | ) | -3.7 | % | |||||||||||||||
Cash and due from banks | 312,409 | 307,966 | 299,670 | 4,443 | 1.4 | % | 12,739 | 4.3 | % | ||||||||||||||||||||
Other assets | 1,202,766 | 1,229,981 | 1,243,854 | (27,215 | ) | -2.2 | % | (41,088 | ) | -3.3 | % | ||||||||||||||||||
Total assets | $ | 13,886,790 | $ | 13,751,165 | $ | 13,000,217 | $ | 135,625 | 1.0 | % | $ | 886,573 | 6.8 | % | |||||||||||||||
Interest-bearing demand deposits | $ | 2,192,064 | $ | 2,035,491 | $ | 1,848,084 | $ | 156,573 | 7.7 | % | $ | 343,980 | 18.6 | % | |||||||||||||||
Savings deposits | 3,284,323 | 3,337,374 | 3,101,161 | (53,051 | ) | -1.6 | % | 183,162 | 5.9 | % | |||||||||||||||||||
Time deposits | 1,736,683 | 1,777,529 | 1,667,345 | (40,846 | ) | -2.3 | % | 69,338 | 4.2 | % | |||||||||||||||||||
Total interest-bearing deposits | 7,213,070 | 7,150,394 | 6,616,590 | 62,676 | 0.9 | % | 596,480 | 9.0 | % | ||||||||||||||||||||
Fed funds purchased and repos | 547,863 | 525,523 | 481,071 | 22,340 | 4.3 | % | 66,792 | 13.9 | % | ||||||||||||||||||||
Short-term borrowings | 1,335,476 | 1,047,107 | 311,473 | 288,369 | 27.5 | % | 1,024,003 | n/m | |||||||||||||||||||||
Long-term FHLB advances | 970 | 141,097 | 751,095 | (140,127 | ) | -99.3 | % | (750,125 | ) | -99.9 | % | ||||||||||||||||||
Subordinated notes | — | — | 49,988 | — | n/m | (49,988 | ) | -100.0 | % | ||||||||||||||||||||
Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | — | 0.0 | % | — | 0.0 | % | ||||||||||||||||||||
Total interest-bearing liabilities | 9,159,235 | 8,925,977 | 8,272,073 | 233,258 | 2.6 | % | 887,162 | 10.7 | % | ||||||||||||||||||||
Noninterest-bearing deposits | 3,003,763 | 3,110,125 | 3,060,331 | (106,362 | ) | -3.4 | % | (56,568 | ) | -1.8 | % | ||||||||||||||||||
Other liabilities | 145,925 | 162,823 | 136,971 | (16,898 | ) | -10.4 | % | 8,954 | 6.5 | % | |||||||||||||||||||
Total liabilities | 12,308,923 | 12,198,925 | 11,469,375 | 109,998 | 0.9 | % | 839,548 | 7.3 | % | ||||||||||||||||||||
Shareholders' equity | 1,577,867 | 1,552,240 | 1,530,842 | 25,627 | 1.7 | % | 47,025 | 3.1 | % | ||||||||||||||||||||
Total liabilities and equity | $ | 13,886,790 | $ | 13,751,165 | $ | 13,000,217 | $ | 135,625 | 1.0 | % | $ | 886,573 | 6.8 | % | |||||||||||||||
n/m - percentage changes greater than +/- 100% are considered not meaningful | |||||||||||||||||||||||||||||
See Notes to Consolidated Financials |
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TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||||||||
(unaudited) |
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Linked Quarter | Year over Year | ||||||||||||||||||||||||||||
PERIOD END BALANCES |
9/30/2017 | 6/30/2017 | 9/30/2016 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||||
Cash and due from banks | $ | 350,123 | $ | 318,329 | $ | 383,945 | $ | 31,794 | 10.0 | % | $ | (33,822 | ) | -8.8 | % | ||||||||||||||
Fed funds sold and rev repos | 3,215 | 6,900 | 500 | (3,685 | ) | -53.4 | % | 2,715 | n/m | ||||||||||||||||||||
Securities available for sale | 2,369,089 | 2,447,688 | 2,410,947 | (78,599 | ) | -3.2 | % | (41,858 | ) | -1.7 | % | ||||||||||||||||||
Securities held to maturity | 1,102,283 | 1,139,754 | 1,143,234 | (37,471 | ) | -3.3 | % | (40,951 | ) | -3.6 | % | ||||||||||||||||||
Loans held for sale (LHFS) | 204,157 | 203,652 | 242,097 | 505 | 0.2 | % | (37,940 | ) | -15.7 | % | |||||||||||||||||||
Loans held for investment (LHFI) | 8,407,341 | 8,296,045 | 7,499,204 | 111,296 | 1.3 | % | 908,137 | 12.1 | % | ||||||||||||||||||||
Allowance for loan losses | (80,332 | ) | (76,184 | ) | (70,871 | ) | (4,148 | ) | -5.4 | % | (9,461 | ) | -13.3 | % | |||||||||||||||
Net LHFI | 8,327,009 | 8,219,861 | 7,428,333 | 107,148 | 1.3 | % | 898,676 | 12.1 | % | ||||||||||||||||||||
Acquired loans | 283,757 | 314,910 | 295,737 | (31,153 | ) | -9.9 | % | (11,980 | ) | -4.1 | % | ||||||||||||||||||
Allowance for loan losses, acquired loans | (5,768 | ) | (7,423 | ) | (11,380 | ) | 1,655 | 22.3 | % | 5,612 | 49.3 | % | |||||||||||||||||
Net acquired loans | 277,989 | 307,487 | 284,357 | (29,498 | ) | -9.6 | % | (6,368 | ) | -2.2 | % | ||||||||||||||||||
Net LHFI and acquired loans | 8,604,998 | 8,527,348 | 7,712,690 | 77,650 | 0.9 | % | 892,308 | 11.6 | % | ||||||||||||||||||||
Premises and equipment, net | 181,312 | 182,315 | 190,930 | (1,003 | ) | -0.6 | % | (9,618 | ) | -5.0 | % | ||||||||||||||||||
Mortgage servicing rights | 81,477 | 82,628 | 65,514 | (1,151 | ) | -1.4 | % | 15,963 | 24.4 | % | |||||||||||||||||||
Goodwill | 379,627 | 379,627 | 366,156 | — | 0.0 | % | 13,471 | 3.7 | % | ||||||||||||||||||||
Identifiable intangible assets | 17,883 | 19,422 | 22,366 | (1,539 | ) | -7.9 | % | (4,483 | ) | -20.0 | % | ||||||||||||||||||
Other real estate | 48,356 | 49,958 | 64,993 | (1,602 | ) | -3.2 | % | (16,637 | ) | -25.6 | % | ||||||||||||||||||
Other assets | 542,135 | 551,517 | 558,166 | (9,382 | ) | -1.7 | % | (16,031 | ) | -2.9 | % | ||||||||||||||||||
Total assets | $ | 13,884,655 | $ | 13,909,138 | $ | 13,161,538 | $ | (24,483 | ) | -0.2 | % | $ | 723,117 | 5.5 | % | ||||||||||||||
Deposits: | |||||||||||||||||||||||||||||
Noninterest-bearing | $ | 2,998,013 | $ | 3,092,915 | $ | 3,111,603 | $ | (94,902 | ) | -3.1 | % | $ | (113,590 | ) | -3.7 | % | |||||||||||||
Interest-bearing | 7,233,729 | 7,330,476 | 6,574,098 | (96,747 | ) | -1.3 | % | 659,631 | 10.0 | % | |||||||||||||||||||
Total deposits | 10,231,742 | 10,423,391 | 9,685,701 | (191,649 | ) | -1.8 | % | 546,041 | 5.6 | % | |||||||||||||||||||
Fed funds purchased and repos | 545,603 | 508,068 | 514,918 | 37,535 | 7.4 | % | 30,685 | 6.0 | % | ||||||||||||||||||||
Short-term borrowings | 1,322,159 | 1,222,592 | 412,792 | 99,567 | 8.1 | % | 909,367 | n/m | |||||||||||||||||||||
Long-term FHLB advances | 962 | 978 | 751,075 | (16 | ) | -1.6 | % | (750,113 | ) | -99.9 | % | ||||||||||||||||||
Subordinated notes | — | — | 49,993 | — | n/m | (49,993 | ) | -100.0 | % | ||||||||||||||||||||
Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | — | 0.0 | % | — | 0.0 | % | ||||||||||||||||||||
Other liabilities | 139,798 | 130,335 | 150,442 | 9,463 | 7.3 | % | (10,644 | ) | -7.1 | % | |||||||||||||||||||
Total liabilities | 12,302,120 | 12,347,220 | 11,626,777 | (45,100 | ) | -0.4 | % | 675,343 | 5.8 | % | |||||||||||||||||||
Common stock | 14,114 | 14,114 | 14,090 | — | 0.0 | % | 24 | 0.2 | % | ||||||||||||||||||||
Capital surplus | 368,131 | 367,075 | 365,553 | 1,056 | 0.3 | % | 2,578 | 0.7 | % | ||||||||||||||||||||
Retained earnings | 1,228,115 | 1,209,238 | 1,172,193 | 18,877 | 1.6 | % | 55,922 | 4.8 | % | ||||||||||||||||||||
Accum other comprehensive loss, net of tax | (27,825 | ) | (28,509 | ) | (17,075 | ) | 684 | 2.4 | % | (10,750 | ) | -63.0 | % | ||||||||||||||||
Total shareholders' equity | 1,582,535 | 1,561,918 | 1,534,761 | 20,617 | 1.3 | % | 47,774 | 3.1 | % | ||||||||||||||||||||
Total liabilities and equity | $ | 13,884,655 | $ | 13,909,138 | $ | 13,161,538 | $ | (24,483 | ) | -0.2 | % | $ | 723,117 | 5.5 | % | ||||||||||||||
n/m - percentage changes greater than +/- 100% are considered not meaningful | |||||||||||||||||||||||||||||
See Notes to Consolidated Financials |
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TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||||||||
($ in thousands except per share data) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||||||||||||
INCOME STATEMENTS |
9/30/2017 | 6/30/2017 | 9/30/2016 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||||
Interest and fees on LHFS & LHFI-FTE | $ | 93,703 | $ | 89,486 | $ | 80,649 | $ | 4,217 | 4.7 | % | $ | 13,054 | 16.2 | % | |||||||||||||||
Interest and fees on acquired loans | 6,625 | 6,263 | 6,781 | 362 | 5.8 | % | (156 | ) | -2.3 | % | |||||||||||||||||||
Interest on securities-taxable | 19,291 | 19,377 | 19,351 | (86 | ) | -0.4 | % | (60 | ) | -0.3 | % | ||||||||||||||||||
Interest on securities-tax exempt-FTE | 1,104 | 1,178 | 1,388 | (74 | ) | -6.3 | % | (284 | ) | -20.5 | % | ||||||||||||||||||
Interest on fed funds sold and rev repos | 14 | 11 | 5 | 3 | 27.3 | % | 9 | n/m | |||||||||||||||||||||
Other interest income | 355 | 371 | 223 | (16 | ) | -4.3 | % | 132 | 59.2 | % | |||||||||||||||||||
Total interest income-FTE | 121,092 | 116,686 | 108,397 | 4,406 | 3.8 | % | 12,695 | 11.7 | % | ||||||||||||||||||||
Interest on deposits | 6,381 | 5,107 | 3,208 | 1,274 | 24.9 | % | 3,173 | 98.9 | % | ||||||||||||||||||||
Interest on fed funds pch and repos | 1,301 | 1,037 | 411 | 264 | 25.5 | % | 890 | n/m | |||||||||||||||||||||
Other interest expense | 4,520 | 3,628 | 2,603 | 892 | 24.6 | % | 1,917 | 73.6 | % | ||||||||||||||||||||
Total interest expense | 12,202 | 9,772 | 6,222 | 2,430 | 24.9 | % | 5,980 | 96.1 | % | ||||||||||||||||||||
Net interest income-FTE | 108,890 | 106,914 | 102,175 | 1,976 | 1.8 | % | 6,715 | 6.6 | % | ||||||||||||||||||||
Provision for loan losses, LHFI | 3,672 | 2,921 | 4,284 | 751 | 25.7 | % | (612 | ) | -14.3 | % | |||||||||||||||||||
Provision for loan losses, acquired loans | (1,653 | ) | (2,564 | ) | 691 | 911 | 35.5 | % | (2,344 | ) | n/m | ||||||||||||||||||
Net interest income after provision-FTE | 106,871 | 106,557 | 97,200 | 314 | 0.3 | % | 9,671 | 9.9 | % | ||||||||||||||||||||
Service charges on deposit accounts | 11,223 | 10,755 | 11,677 | 468 | 4.4 | % | (454 | ) | -3.9 | % | |||||||||||||||||||
Bank card and other fees | 7,150 | 7,370 | 6,756 | (220 | ) | -3.0 | % | 394 | 5.8 | % | |||||||||||||||||||
Mortgage banking, net | 4,425 | 9,008 | 7,364 | (4,583 | ) | -50.9 | % | (2,939 | ) | -39.9 | % | ||||||||||||||||||
Insurance commissions | 10,398 | 9,745 | 10,074 | 653 | 6.7 | % | 324 | 3.2 | % | ||||||||||||||||||||
Wealth management | 7,530 | 7,674 | 7,571 | (144 | ) | -1.9 | % | (41 | ) | -0.5 | % | ||||||||||||||||||
Other, net | 3,740 | 5,637 | 1,274 | (1,897 | ) | -33.7 | % | 2,466 | n/m | ||||||||||||||||||||
Nonint inc-excl sec gains (losses), net | 44,466 | 50,189 | 44,716 | (5,723 | ) | -11.4 | % | (250 | ) | -0.6 | % | ||||||||||||||||||
Security gains (losses), net | 14 | 1 | — | 13 | n/m | 14 | n/m | ||||||||||||||||||||||
Total noninterest income | 44,480 | 50,190 | 44,716 | (5,710 | ) | -11.4 | % | (236 | ) | -0.5 | % | ||||||||||||||||||
Salaries and employee benefits | 58,837 | 59,060 | 57,250 | (223 | ) | -0.4 | % | 1,587 | 2.8 | % | |||||||||||||||||||
Defined benefit plan termination | — | 17,644 | — | (17,644 | ) | n/m | — | n/m | |||||||||||||||||||||
Services and fees | 15,133 | 15,009 | 14,947 | 124 | 0.8 | % | 186 | 1.2 | % | ||||||||||||||||||||
Net occupancy-premises | 6,702 | 6,210 | 6,440 | 492 | 7.9 | % | 262 | 4.1 | % | ||||||||||||||||||||
Equipment expense | 6,297 | 6,162 | 6,063 | 135 | 2.2 | % | 234 | 3.9 | % | ||||||||||||||||||||
Other real estate expense | 864 | 383 | (1,313 | ) | 481 | n/m | 2,177 | n/m | |||||||||||||||||||||
FDIC assessment expense | 2,816 | 2,686 | 2,911 | 130 | 4.8 | % | (95 | ) | -3.3 | % | |||||||||||||||||||
Other expense | 12,437 | 14,921 | 11,610 | (2,484 | ) | -16.6 | % | 827 | 7.1 | % | |||||||||||||||||||
Total noninterest expense | 103,086 | 122,075 | 97,908 | (18,989 | ) | -15.6 | % | 5,178 | 5.3 | % | |||||||||||||||||||
Income before income taxes and tax eq adj | 48,265 | 34,672 | 44,008 | 13,593 | 39.2 | % | 4,257 | 9.7 | % | ||||||||||||||||||||
Tax equivalent adjustment | 4,978 | 4,910 | 4,611 | 68 | 1.4 | % | 367 | 8.0 | % | ||||||||||||||||||||
Income before income taxes | 43,287 | 29,762 | 39,397 | 13,525 | 45.4 | % | 3,890 | 9.9 | % | ||||||||||||||||||||
Income taxes | 8,708 | 5,727 | 8,415 | 2,981 | 52.1 | % | 293 | 3.5 | % | ||||||||||||||||||||
Net income | $ | 34,579 | $ | 24,035 | $ | 30,982 | $ | 10,544 | 43.9 | % | $ | 3,597 | 11.6 | % | |||||||||||||||
Per share data | |||||||||||||||||||||||||||||
Earnings per share - basic | $ | 0.51 | $ | 0.35 | $ | 0.46 | $ | 0.16 | 45.7 | % | $ | 0.05 | 10.9 | % | |||||||||||||||
Earnings per share - diluted | $ | 0.51 | $ | 0.35 | $ | 0.46 | $ | 0.16 | 45.7 | % | $ | 0.05 | 10.9 | % | |||||||||||||||
Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | — | 0.0 | % | — | 0.0 | % | |||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||||||||||
Basic | 67,741,655 | 67,736,298 | 67,625,085 | ||||||||||||||||||||||||||
Diluted | 67,916,418 | 67,892,532 | 67,793,203 | ||||||||||||||||||||||||||
Period end shares outstanding | 67,742,135 | 67,740,901 | 67,626,939 | ||||||||||||||||||||||||||
n/m - percentage changes greater than +/- 100% are considered not meaningful | |||||||||||||||||||||||||||||
See Notes to Consolidated Financials |
|||||||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||||||||||||
NONPERFORMING ASSETS (1) |
9/30/2017 | 6/30/2017 | 9/30/2016 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||||
Nonaccrual loans | |||||||||||||||||||||||||||||
Alabama | $ | 1,629 | $ | 1,723 | $ | 1,403 | $ | (94 | ) | -5.5 | % | $ | 226 | 16.1 | % | ||||||||||||||
Florida | 3,242 | 3,174 | 3,719 | 68 | 2.1 | % | (477 | ) | -12.8 | % | |||||||||||||||||||
Mississippi (2) | 59,483 | 63,889 | 41,968 | (4,406 | ) | -6.9 | % | 17,515 | 41.7 | % | |||||||||||||||||||
Tennessee (3) | 4,589 | 4,975 | 6,620 | (386 | ) | -7.8 | % | (2,031 | ) | -30.7 | % | ||||||||||||||||||
Texas | 346 | 383 | 700 | (37 | ) | -9.7 | % | (354 | ) | -50.6 | % | ||||||||||||||||||
Total nonaccrual loans | 69,289 | 74,144 | 54,410 | (4,855 | ) | -6.5 | % | 14,879 | 27.3 | % | |||||||||||||||||||
Other real estate | |||||||||||||||||||||||||||||
Alabama | 12,726 | 13,301 | 15,574 | (575 | ) | -4.3 | % | (2,848 | ) | -18.3 | % | ||||||||||||||||||
Florida | 16,100 | 17,377 | 25,147 | (1,277 | ) | -7.3 | % | (9,047 | ) | -36.0 | % | ||||||||||||||||||
Mississippi (2) | 15,319 | 14,377 | 16,659 | 942 | 6.6 | % | (1,340 | ) | -8.0 | % | |||||||||||||||||||
Tennessee (3) | 2,671 | 3,363 | 6,061 | (692 | ) | -20.6 | % | (3,390 | ) | -55.9 | % | ||||||||||||||||||
Texas | 1,540 | 1,540 | 1,552 | — | 0.0 | % | (12 | ) | -0.8 | % | |||||||||||||||||||
Total other real estate | 48,356 | 49,958 | 64,993 | (1,602 | ) | -3.2 | % | (16,637 | ) | -25.6 | % | ||||||||||||||||||
Total nonperforming assets | $ | 117,645 | $ | 124,102 | $ | 119,403 | $ | (6,457 | ) | -5.2 | % | $ | (1,758 | ) | -1.5 | % | |||||||||||||
LOANS PAST DUE OVER 90 DAYS (1) |
|||||||||||||||||||||||||||||
LHFI | $ | 2,244 | $ | 1,216 | $ | 953 | $ | 1,028 | 84.5 | % | $ | 1,291 | n/m | ||||||||||||||||
LHFS-Guaranteed GNMA serviced loans | |||||||||||||||||||||||||||||
(no obligation to repurchase) | $ | 32,332 | $ | 29,906 | $ | 25,570 | $ | 2,426 | 8.1 | % | $ | 6,762 | 26.4 | % | |||||||||||||||
Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES (1) |
9/30/2017 | 6/30/2017 | 9/30/2016 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||||
Beginning Balance | $ | 76,184 | $ | 72,445 | $ | 71,796 | $ | 3,739 | 5.2 | % | $ | 4,388 | 6.1 | % | |||||||||||||||
Provision for loan losses | 3,672 | 2,921 | 4,284 | 751 | 25.7 | % | (612 | ) | -14.3 | % | |||||||||||||||||||
Charge-offs | (2,752 | ) | (2,118 | ) | (8,279 | ) | (634 | ) | -29.9 | % | 5,527 | 66.8 | % | ||||||||||||||||
Recoveries | 3,228 | 2,936 | 3,070 | 292 | 9.9 | % | 158 | 5.1 | % | ||||||||||||||||||||
Net recoveries (charge-offs) | 476 | 818 | (5,209 | ) | (342 | ) | -41.8 | % | 5,685 | n/m | |||||||||||||||||||
Ending Balance | $ | 80,332 | $ | 76,184 | $ | 70,871 | $ | 4,148 | 5.4 | % | $ | 9,461 | 13.3 | % | |||||||||||||||
PROVISION FOR LOAN LOSSES (1) |
|||||||||||||||||||||||||||||
Alabama | $ | 1,218 | $ | 866 | $ | 132 | $ | 352 | 40.6 | % | $ | 1,086 | n/m | ||||||||||||||||
Florida | (744 | ) | (975 | ) | 31 | 231 | -23.7 | % | (775 | ) | n/m | ||||||||||||||||||
Mississippi (2) | 1,860 | 2,268 | 703 | (408 | ) | -18.0 | % | 1,157 | n/m | ||||||||||||||||||||
Tennessee (3) | (72 | ) | 322 | 151 | (394 | ) | n/m | (223 | ) | n/m | |||||||||||||||||||
Texas | 1,410 | 440 | 3,267 | 970 | n/m | (1,857 | ) | -56.8 | % | ||||||||||||||||||||
Total provision for loan losses | $ | 3,672 | $ | 2,921 | $ | 4,284 | $ | 751 | 25.7 | % | $ | (612 | ) | -14.3 | % | ||||||||||||||
NET (RECOVERIES) CHARGE-OFFS (1) |
|||||||||||||||||||||||||||||
Alabama | $ | 314 | $ | (29 | ) | $ | 38 | $ | 343 | n/m | $ | 276 | n/m | ||||||||||||||||
Florida | (796 | ) | (973 | ) | (169 | ) | 177 | 18.2 | % | (627 | ) | n/m | |||||||||||||||||
Mississippi (2) | (11 | ) | 33 | 2,484 | (44 | ) | n/m | (2,495 | ) | n/m | |||||||||||||||||||
Tennessee (3) | 85 | 146 | 74 | (61 | ) | -41.8 | % | 11 | 14.9 | % | |||||||||||||||||||
Texas | (68 | ) | 5 | 2,782 | (73 | ) | n/m | (2,850 | ) | n/m | |||||||||||||||||||
Total net (recoveries) charge-offs | $ | (476 | ) | $ | (818 | ) | $ | 5,209 | $ | 342 | 41.8 | % | $ | (5,685 | ) | n/m | |||||||||||||
(1) - Excludes acquired loans. | |||||||||||||||||||||||||||||
(2) - Mississippi includes Central and Southern Mississippi Regions. | |||||||||||||||||||||||||||||
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. | |||||||||||||||||||||||||||||
n/m - percentage changes greater than +/- 100% are considered not meaningful | |||||||||||||||||||||||||||||
See Notes to Consolidated Financials |
|||||||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
AVERAGE BALANCES |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | |||||||||||||||||||||
Securities AFS-taxable | $ | 2,349,736 | $ | 2,334,600 | $ | 2,252,162 | $ | 2,271,503 | $ | 2,249,109 | $ | 2,312,523 | $ | 2,224,964 | ||||||||||||||
Securities AFS-nontaxable | 67,994 | 75,640 | 88,522 | 91,495 | 95,233 | 77,310 | 100,106 | |||||||||||||||||||||
Securities HTM-taxable | 1,086,773 | 1,108,158 | 1,124,692 | 1,101,382 | 1,115,053 | 1,106,402 | 1,126,608 | |||||||||||||||||||||
Securities HTM-nontaxable | 32,829 | 32,878 | 33,009 | 33,675 | 34,179 | 32,905 | 34,932 | |||||||||||||||||||||
Total securities | 3,537,332 | 3,551,276 | 3,498,385 | 3,498,055 | 3,493,574 | 3,529,140 | 3,486,610 | |||||||||||||||||||||
Loans (including loans held for sale) | 8,532,523 | 8,348,758 | 8,074,449 | 7,855,444 | 7,658,089 | 8,320,255 | 7,503,842 | |||||||||||||||||||||
Acquired loans | 299,221 | 315,558 | 250,482 | 282,197 | 317,273 | 288,599 | 348,369 | |||||||||||||||||||||
Fed funds sold and rev repos | 3,582 | 3,184 | 397 | 1,418 | 1,352 | 2,399 | 1,000 | |||||||||||||||||||||
Other earning assets | 84,320 | 77,770 | 79,515 | 80,608 | 68,706 | 80,553 | 66,477 | |||||||||||||||||||||
Total earning assets | 12,456,978 | 12,296,546 | 11,903,228 | 11,717,722 | 11,538,994 | 12,220,946 | 11,406,298 | |||||||||||||||||||||
Allowance for loan losses | (85,363 | ) | (83,328 | ) | (83,394 | ) | (82,604 | ) | (82,301 | ) | (84,036 | ) | (82,351 | ) | ||||||||||||||
Cash and due from banks | 312,409 | 307,966 | 310,542 | 314,420 | 299,670 | 310,313 | 284,295 | |||||||||||||||||||||
Other assets | 1,202,766 | 1,229,981 | 1,235,469 | 1,238,029 | 1,243,854 | 1,222,619 | 1,245,988 | |||||||||||||||||||||
Total assets | $ | 13,886,790 | $ | 13,751,165 | $ | 13,365,845 | $ | 13,187,567 | $ | 13,000,217 | $ | 13,669,842 | $ | 12,854,230 | ||||||||||||||
Interest-bearing demand deposits | $ | 2,192,064 | $ | 2,035,491 | $ | 1,981,982 | $ | 1,920,273 | $ | 1,848,084 | $ | 2,070,615 | $ | 1,848,078 | ||||||||||||||
Savings deposits | 3,284,323 | 3,337,374 | 3,319,572 | 3,049,733 | 3,101,161 | 3,313,627 | 3,170,389 | |||||||||||||||||||||
Time deposits | 1,736,683 | 1,777,529 | 1,650,251 | 1,638,853 | 1,667,345 | 1,721,804 | 1,674,469 | |||||||||||||||||||||
Total interest-bearing deposits | 7,213,070 | 7,150,394 | 6,951,805 | 6,608,859 | 6,616,590 | 7,106,046 | 6,692,936 | |||||||||||||||||||||
Fed funds purchased and repos | 547,863 | 525,523 | 498,963 | 494,193 | 481,071 | 524,295 | 495,535 | |||||||||||||||||||||
Short-term borrowings | 1,335,476 | 1,047,107 | 887,848 | 435,576 | 311,473 | 1,091,783 | 347,992 | |||||||||||||||||||||
Long-term FHLB advances | 970 | 141,097 | 251,033 | 685,844 | 751,095 | 130,117 | 616,994 | |||||||||||||||||||||
Subordinated notes | — | — | — | 40,757 | 49,988 | — | 49,980 | |||||||||||||||||||||
Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||||||||||
Total interest-bearing liabilities | 9,159,235 | 8,925,977 | 8,651,505 | 8,327,085 | 8,272,073 | 8,914,097 | 8,265,293 | |||||||||||||||||||||
Noninterest-bearing deposits | 3,003,763 | 3,110,125 | 3,008,176 | 3,160,959 | 3,060,331 | 3,040,672 | 2,941,795 | |||||||||||||||||||||
Other liabilities | 145,925 | 162,823 | 173,066 | 166,379 | 136,971 | 160,507 | 134,287 | |||||||||||||||||||||
Total liabilities | 12,308,923 | 12,198,925 | 11,832,747 | 11,654,423 | 11,469,375 | 12,115,276 | 11,341,375 | |||||||||||||||||||||
Shareholders' equity | 1,577,867 | 1,552,240 | 1,533,098 | 1,533,144 | 1,530,842 | 1,554,566 | 1,512,855 | |||||||||||||||||||||
Total liabilities and equity | $ | 13,886,790 | $ | 13,751,165 | $ | 13,365,845 | $ | 13,187,567 | $ | 13,000,217 | $ | 13,669,842 | $ | 12,854,230 | ||||||||||||||
See Notes to Consolidated Financials |
||||||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
PERIOD END BALANCES |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | |||||||||||||||
Cash and due from banks | $ | 350,123 | $ | 318,329 | $ | 379,590 | $ | 327,706 | $ | 383,945 | ||||||||||
Fed funds sold and rev repos | 3,215 | 6,900 | 500 | 500 | 500 | |||||||||||||||
Securities available for sale | 2,369,089 | 2,447,688 | 2,365,554 | 2,356,682 | 2,410,947 | |||||||||||||||
Securities held to maturity | 1,102,283 | 1,139,754 | 1,156,067 | 1,158,643 | 1,143,234 | |||||||||||||||
Loans held for sale (LHFS) | 204,157 | 203,652 | 174,090 | 175,927 | 242,097 | |||||||||||||||
Loans held for investment (LHFI) | 8,407,341 | 8,296,045 | 8,004,657 | 7,851,213 | 7,499,204 | |||||||||||||||
Allowance for loan losses | (80,332 | ) | (76,184 | ) | (72,445 | ) | (71,265 | ) | (70,871 | ) | ||||||||||
Net LHFI | 8,327,009 | 8,219,861 | 7,932,212 | 7,779,948 | 7,428,333 | |||||||||||||||
Acquired loans | 283,757 | 314,910 | 218,242 | 272,247 | 295,737 | |||||||||||||||
Allowance for loan losses, acquired loans | (5,768 | ) | (7,423 | ) | (10,006 | ) | (11,397 | ) | (11,380 | ) | ||||||||||
Net acquired loans | 277,989 | 307,487 | 208,236 | 260,850 | 284,357 | |||||||||||||||
Net LHFI and acquired loans | 8,604,998 | 8,527,348 | 8,140,448 | 8,040,798 | 7,712,690 | |||||||||||||||
Premises and equipment, net | 181,312 | 182,315 | 183,311 | 184,987 | 190,930 | |||||||||||||||
Mortgage servicing rights | 81,477 | 82,628 | 82,758 | 80,239 | 65,514 | |||||||||||||||
Goodwill | 379,627 | 379,627 | 366,156 | 366,156 | 366,156 | |||||||||||||||
Identifiable intangible assets | 17,883 | 19,422 | 19,117 | 20,680 | 22,366 | |||||||||||||||
Other real estate | 48,356 | 49,958 | 55,968 | 62,051 | 64,993 | |||||||||||||||
Other assets | 542,135 | 551,517 | 566,802 | 577,964 | 558,166 | |||||||||||||||
Total assets | $ | 13,884,655 | $ | 13,909,138 | $ | 13,490,361 | $ | 13,352,333 | $ | 13,161,538 | ||||||||||
Deposits: | ||||||||||||||||||||
Noninterest-bearing | $ | 2,998,013 | $ | 3,092,915 | $ | 3,209,727 | $ | 2,973,238 | $ | 3,111,603 | ||||||||||
Interest-bearing | 7,233,729 | 7,330,476 | 6,894,745 | 7,082,774 | 6,574,098 | |||||||||||||||
Total deposits | 10,231,742 | 10,423,391 | 10,104,472 | 10,056,012 | 9,685,701 | |||||||||||||||
Fed funds purchased and repos | 545,603 | 508,068 | 524,335 | 539,817 | 514,918 | |||||||||||||||
Short-term borrowings | 1,322,159 | 1,222,592 | 864,690 | 769,778 | 412,792 | |||||||||||||||
Long-term FHLB advances | 962 | 978 | 250,994 | 251,049 | 751,075 | |||||||||||||||
Subordinated notes | — | — | — | — | 49,993 | |||||||||||||||
Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||||
Other liabilities | 139,798 | 130,335 | 146,053 | 153,613 | 150,442 | |||||||||||||||
Total liabilities | 12,302,120 | 12,347,220 | 11,952,400 | 11,832,125 | 11,626,777 | |||||||||||||||
Common stock | 14,114 | 14,114 | 14,112 | 14,091 | 14,090 | |||||||||||||||
Capital surplus | 368,131 | 367,075 | 365,951 | 366,563 | 365,553 | |||||||||||||||
Retained earnings | 1,228,115 | 1,209,238 | 1,200,903 | 1,185,352 | 1,172,193 | |||||||||||||||
Accum other comprehensive loss, net of tax | (27,825 | ) | (28,509 | ) | (43,005 | ) | (45,798 | ) | (17,075 | ) | ||||||||||
Total shareholders' equity | 1,582,535 | 1,561,918 | 1,537,961 | 1,520,208 | 1,534,761 | |||||||||||||||
Total liabilities and equity | $ | 13,884,655 | $ | 13,909,138 | $ | 13,490,361 | $ | 13,352,333 | $ | 13,161,538 | ||||||||||
See Notes to Consolidated Financials |
||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||
September 30, 2017 | |||||||||||||||||||||||||||
($ in thousands except per share data) | |||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||
INCOME STATEMENTS |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | ||||||||||||||||||||
Interest and fees on LHFS & LHFI-FTE | $ | 93,703 | $ | 89,486 | $ | 83,790 | $ | 81,346 | $ | 80,649 | $ | 266,979 | $ | 234,661 | |||||||||||||
Interest and fees on acquired loans | 6,625 | 6,263 | 5,189 | 8,290 | 6,781 | 18,077 | 21,854 | ||||||||||||||||||||
Interest on securities-taxable | 19,291 | 19,377 | 19,197 | 18,775 | 19,351 | 57,865 | 58,839 | ||||||||||||||||||||
Interest on securities-tax exempt-FTE | 1,104 | 1,178 | 1,300 | 1,340 | 1,388 | 3,582 | 4,314 | ||||||||||||||||||||
Interest on fed funds sold and rev repos | 14 | 11 | 1 | 4 | 5 | 26 | 10 | ||||||||||||||||||||
Other interest income | 355 | 371 | 267 | 335 | 223 | 993 | 653 | ||||||||||||||||||||
Total interest income-FTE | 121,092 | 116,686 | 109,744 | 110,090 | 108,397 | 347,522 | 320,331 | ||||||||||||||||||||
Interest on deposits | 6,381 | 5,107 | 3,945 | 3,380 | 3,208 | 15,433 | 9,368 | ||||||||||||||||||||
Interest on fed funds pch and repos | 1,301 | 1,037 | 698 | 471 | 411 | 3,036 | 1,246 | ||||||||||||||||||||
Other interest expense | 4,520 | 3,628 | 2,673 | 2,662 | 2,603 | 10,821 | 7,420 | ||||||||||||||||||||
Total interest expense | 12,202 | 9,772 | 7,316 | 6,513 | 6,222 | 29,290 | 18,034 | ||||||||||||||||||||
Net interest income-FTE | 108,890 | 106,914 | 102,428 | 103,577 | 102,175 | 318,232 | 302,297 | ||||||||||||||||||||
Provision for loan losses, LHFI | 3,672 | 2,921 | 2,762 | 1,834 | 4,284 | 9,355 | 9,123 | ||||||||||||||||||||
Provision for loan losses, acquired loans | (1,653 | ) | (2,564 | ) | (1,605 | ) | 1,150 | 691 | (5,822 | ) | 2,607 | ||||||||||||||||
Net interest income after provision-FTE | 106,871 | 106,557 | 101,271 | 100,593 | 97,200 | 314,699 | 290,567 | ||||||||||||||||||||
Service charges on deposit accounts | 11,223 | 10,755 | 10,832 | 11,444 | 11,677 | 32,810 | 33,809 | ||||||||||||||||||||
Bank card and other fees | 7,150 | 7,370 | 6,500 | 6,796 | 6,756 | 21,020 | 21,110 | ||||||||||||||||||||
Mortgage banking, net | 4,425 | 9,008 | 10,185 | 5,428 | 7,364 | 23,618 | 22,784 | ||||||||||||||||||||
Insurance commissions | 10,398 | 9,745 | 9,212 | 8,459 | 10,074 | 29,355 | 28,305 | ||||||||||||||||||||
Wealth management | 7,530 | 7,674 | 7,413 | 7,505 | 7,571 | 22,617 | 22,987 | ||||||||||||||||||||
Other, net | 3,740 | 5,637 | 1,891 | 2,092 | 1,274 | 11,268 | 3,534 | ||||||||||||||||||||
Nonint inc-excl sec gains (losses), net | 44,466 | 50,189 | 46,033 | 41,724 | 44,716 | 140,688 | 132,529 | ||||||||||||||||||||
Security gains (losses), net | 14 | 1 | — | — | — | 15 | (310 | ) | |||||||||||||||||||
Total noninterest income | 44,480 | 50,190 | 46,033 | 41,724 | 44,716 | 140,703 | 132,219 | ||||||||||||||||||||
Salaries and employee benefits | 58,837 | 59,060 | 57,302 | 58,168 | 57,250 | 175,199 | 181,469 | ||||||||||||||||||||
Defined benefit plan termination | — | 17,644 | — | — | — | 17,644 | — | ||||||||||||||||||||
Services and fees | 15,133 | 15,009 | 15,332 | 14,751 | 14,947 | 45,474 | 43,944 | ||||||||||||||||||||
Net occupancy-premises | 6,702 | 6,210 | 6,238 | 6,426 | 6,440 | 19,150 | 18,556 | ||||||||||||||||||||
Equipment expense | 6,297 | 6,162 | 5,998 | 6,172 | 6,063 | 18,457 | 18,053 | ||||||||||||||||||||
Other real estate expense | 864 | 383 | 1,759 | 525 | (1,313 | ) | 3,006 | 61 | |||||||||||||||||||
FDIC assessment expense | 2,816 | 2,686 | 2,640 | 2,562 | 2,911 | 8,142 | 8,681 | ||||||||||||||||||||
Other expense | 12,437 | 14,921 | 12,788 | 11,663 | 11,610 | 40,146 | 36,267 | ||||||||||||||||||||
Total noninterest expense | 103,086 | 122,075 | 102,057 | 100,267 | 97,908 | 327,218 | 307,031 | ||||||||||||||||||||
Income before income taxes and tax eq adj | 48,265 | 34,672 | 45,247 | 42,050 | 44,008 | 128,184 | 115,755 | ||||||||||||||||||||
Tax equivalent adjustment | 4,978 | 4,910 | 4,838 | 4,725 | 4,611 | 14,726 | 13,616 | ||||||||||||||||||||
Income before income taxes | 43,287 | 29,762 | 40,409 | 37,325 | 39,397 | 113,458 | 102,139 | ||||||||||||||||||||
Income taxes | 8,708 | 5,727 | 9,161 | 8,402 | 8,415 | 23,596 | 22,651 | ||||||||||||||||||||
Net income | $ | 34,579 | $ | 24,035 | $ | 31,248 | $ | 28,923 | $ | 30,982 | $ | 89,862 | $ | 79,488 | |||||||||||||
Per share data | |||||||||||||||||||||||||||
Earnings per share - basic | $ | 0.51 | $ | 0.35 | $ | 0.46 | $ | 0.43 | $ | 0.46 | $ | 1.33 | $ | 1.18 | |||||||||||||
Earnings per share - diluted | $ | 0.51 | $ | 0.35 | $ | 0.46 | $ | 0.43 | $ | 0.46 | $ | 1.32 | $ | 1.17 | |||||||||||||
Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.69 | $ | 0.69 | |||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||||||||
Basic | 67,741,655 | 67,736,298 | 67,687,365 | 67,627,496 | 67,625,085 | 67,721,971 | 67,618,131 | ||||||||||||||||||||
Diluted | 67,916,418 | 67,892,532 | 67,845,785 | 67,817,770 | 67,793,203 | 67,876,295 | 67,771,125 | ||||||||||||||||||||
Period end shares outstanding | 67,742,135 | 67,740,901 | 67,729,434 | 67,628,618 | 67,626,939 | 67,742,135 | 67,626,939 | ||||||||||||||||||||
See Notes to Consolidated Financials |
|||||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||||||||||
NONPERFORMING ASSETS (1) |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | |||||||||||||||||||||||
Nonaccrual loans | ||||||||||||||||||||||||||||
Alabama | $ | 1,629 | $ | 1,723 | $ | 1,649 | $ | 665 | $ | 1,403 | ||||||||||||||||||
Florida | 3,242 | 3,174 | 3,559 | 3,644 | 3,719 | |||||||||||||||||||||||
Mississippi (2) | 59,483 | 63,889 | 49,349 | 37,771 | 41,968 | |||||||||||||||||||||||
Tennessee (3) | 4,589 | 4,975 | 5,185 | 6,213 | 6,620 | |||||||||||||||||||||||
Texas | 346 | 383 | 1,565 | 941 | 700 | |||||||||||||||||||||||
Total nonaccrual loans | 69,289 | 74,144 | 61,307 | 49,234 | 54,410 | |||||||||||||||||||||||
Other real estate | ||||||||||||||||||||||||||||
Alabama | 12,726 | 13,301 | 13,953 | 15,989 | 15,574 | |||||||||||||||||||||||
Florida | 16,100 | 17,377 | 21,577 | 22,582 | 25,147 | |||||||||||||||||||||||
Mississippi (2) | 15,319 | 14,377 | 14,974 | 15,646 | 16,659 | |||||||||||||||||||||||
Tennessee (3) | 2,671 | 3,363 | 4,706 | 6,183 | 6,061 | |||||||||||||||||||||||
Texas | 1,540 | 1,540 | 758 | 1,651 | 1,552 | |||||||||||||||||||||||
Total other real estate | 48,356 | 49,958 | 55,968 | 62,051 | 64,993 | |||||||||||||||||||||||
Total nonperforming assets | $ | 117,645 | $ | 124,102 | $ | 117,275 | $ | 111,285 | $ | 119,403 | ||||||||||||||||||
LOANS PAST DUE OVER 90 DAYS (1) |
||||||||||||||||||||||||||||
LHFI | $ | 2,244 | $ | 1,216 | $ | 1,307 | $ | 1,832 | $ | 953 | ||||||||||||||||||
LHFS-Guaranteed GNMA serviced loans | ||||||||||||||||||||||||||||
(no obligation to repurchase) | $ | 32,332 | $ | 29,906 | $ | 31,147 | $ | 28,345 | $ | 25,570 | ||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES (1) |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | |||||||||||||||||||||
Beginning Balance | $ | 76,184 | $ | 72,445 | $ | 71,265 | $ | 70,871 | $ | 71,796 | $ | 71,265 | $ | 67,619 | ||||||||||||||
Provision for loan losses | 3,672 | 2,921 | 2,762 | 1,834 | 4,284 | 9,355 | 9,123 | |||||||||||||||||||||
Charge-offs | (2,752 | ) | (2,118 | ) | (4,202 | ) | (4,037 | ) | (8,279 | ) | (9,072 | ) | (14,893 | ) | ||||||||||||||
Recoveries | 3,228 | 2,936 | 2,620 | 2,597 | 3,070 | 8,784 | 9,022 | |||||||||||||||||||||
Net recoveries (charge-offs) | 476 | 818 | (1,582 | ) | (1,440 | ) | (5,209 | ) | (288 | ) | (5,871 | ) | ||||||||||||||||
Ending Balance | $ | 80,332 | $ | 76,184 | $ | 72,445 | $ | 71,265 | $ | 70,871 | $ | 80,332 | $ | 70,871 | ||||||||||||||
PROVISION FOR LOAN LOSSES (1) |
||||||||||||||||||||||||||||
Alabama | $ | 1,218 | $ | 866 | $ | 1,189 | $ | 763 | $ | 132 | $ | 3,273 | $ | 1,861 | ||||||||||||||
Florida | (744 | ) | (975 | ) | 3 | (655 | ) | 31 | (1,716 | ) | (1,151 | ) | ||||||||||||||||
Mississippi (2) | 1,860 | 2,268 | 1,826 | 1,873 | 703 | 5,954 | 1,718 | |||||||||||||||||||||
Tennessee (3) | (72 | ) | 322 | 208 | (118 | ) | 151 | 458 | 1,015 | |||||||||||||||||||
Texas | 1,410 | 440 | (464 | ) | (29 | ) | 3,267 | 1,386 | 5,680 | |||||||||||||||||||
Total provision for loan losses | $ | 3,672 | $ | 2,921 | $ | 2,762 | $ | 1,834 | $ | 4,284 | $ | 9,355 | $ | 9,123 | ||||||||||||||
NET (RECOVERIES) CHARGE-OFFS (1) |
||||||||||||||||||||||||||||
Alabama | $ | 314 | $ | (29 | ) | $ | 66 | $ | 368 | $ | 38 | $ | 351 | $ | 537 | |||||||||||||
Florida | (796 | ) | (973 | ) | (155 | ) | (502 | ) | (169 | ) | (1,924 | ) | (1,438 | ) | ||||||||||||||
Mississippi (2) | (11 | ) | 33 | 1,759 | 1,591 | 2,484 | 1,781 | 2,173 | ||||||||||||||||||||
Tennessee (3) | 85 | 146 | 83 | (8 | ) | 74 | 314 | 334 | ||||||||||||||||||||
Texas | (68 | ) | 5 | (171 | ) | (9 | ) | 2,782 | (234 | ) | 4,265 | |||||||||||||||||
Total net (recoveries) charge-offs | $ | (476 | ) | $ | (818 | ) | $ | 1,582 | $ | 1,440 | $ | 5,209 | $ | 288 | $ | 5,871 | ||||||||||||
(1) - Excludes acquired loans. | ||||||||||||||||||||||||||||
(2) - Mississippi includes Central and Southern Mississippi Regions. | ||||||||||||||||||||||||||||
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. | ||||||||||||||||||||||||||||
See Notes to Consolidated Financials |
||||||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||
CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||
FINANCIAL RATIOS AND OTHER DATA |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | |||||||||||||||||||
Return on equity | 8.69 | % | 6.21 | % | 8.27 | % | 7.51 | % | 8.05 | % | 7.73 | % | 7.02 | % | ||||||||||||
Return on average tangible equity | 11.95 | % | 8.68 | % | 11.39 | % | 10.41 | % | 11.16 | % | 10.68 | % | 9.85 | % | ||||||||||||
Return on assets | 0.99 | % | 0.70 | % | 0.95 | % | 0.87 | % | 0.95 | % | 0.88 | % | 0.83 | % | ||||||||||||
Interest margin - Yield - FTE | 3.86 | % | 3.81 | % | 3.74 | % | 3.74 | % | 3.74 | % | 3.80 | % | 3.75 | % | ||||||||||||
Interest margin - Cost | 0.39 | % | 0.32 | % | 0.25 | % | 0.22 | % | 0.21 | % | 0.32 | % | 0.21 | % | ||||||||||||
Net interest margin - FTE | 3.47 | % | 3.49 | % | 3.49 | % | 3.52 | % | 3.52 | % | 3.48 | % | 3.54 | % | ||||||||||||
Efficiency ratio (1) | 65.14 | % | 64.50 | % | 66.67 | % | 66.08 | % | 63.81 | % | 65.43 | % | 65.95 | % | ||||||||||||
Full-time equivalent employees | 2,878 | 2,858 | 2,799 | 2,788 | 2,787 | |||||||||||||||||||||
CREDIT QUALITY RATIOS (2) |
||||||||||||||||||||||||||
Net charge-offs/average loans | -0.02 | % | -0.04 | % | 0.08 | % | 0.07 | % | 0.27 | % | 0.00 | % | 0.10 | % | ||||||||||||
Provision for loan losses/average loans | 0.17 | % | 0.14 | % | 0.14 | % | 0.09 | % | 0.22 | % | 0.15 | % | 0.16 | % | ||||||||||||
Nonperforming loans/total loans (incl LHFS) | 0.80 | % | 0.87 | % | 0.75 | % | 0.61 | % | 0.70 | % | ||||||||||||||||
Nonperforming assets/total loans (incl LHFS) | 1.37 | % | 1.46 | % | 1.43 | % | 1.39 | % | 1.54 | % | ||||||||||||||||
Nonperforming assets/total loans (incl LHFS) +ORE | 1.36 | % | 1.45 | % | 1.42 | % | 1.38 | % | 1.53 | % | ||||||||||||||||
ALL/total loans (excl LHFS) | 0.96 | % | 0.92 | % | 0.91 | % | 0.91 | % | 0.95 | % | ||||||||||||||||
ALL-commercial/total commercial loans | 1.02 | % | 0.99 | % | 0.97 | % | 0.97 | % | 1.02 | % | ||||||||||||||||
ALL-consumer/total consumer and home mortgage loans | 0.73 | % | 0.67 | % | 0.67 | % | 0.68 | % | 0.68 | % | ||||||||||||||||
ALL/nonperforming loans | 115.94 | % | 102.75 | % | 118.17 | % | 144.75 | % | 130.25 | % | ||||||||||||||||
ALL/nonperforming loans (excl specifically reviewed impaired loans) | 301.50 | % | 277.42 | % | 263.73 | % | 267.40 | % | 256.56 | % | ||||||||||||||||
CAPITAL RATIOS |
||||||||||||||||||||||||||
Total equity/total assets | 11.40 | % | 11.23 | % | 11.40 | % | 11.39 | % | 11.66 | % | ||||||||||||||||
Tangible equity/tangible assets | 8.79 | % | 8.61 | % | 8.80 | % | 8.74 | % | 8.97 | % | ||||||||||||||||
Tangible equity/risk-weighted assets | 11.29 | % | 11.19 | % | 11.49 | % | 11.39 | % | 11.85 | % | ||||||||||||||||
Tier 1 leverage ratio | 9.61 | % | 9.56 | % | 9.86 | % | 9.90 | % | 9.92 | % | ||||||||||||||||
Common equity tier 1 capital ratio | 11.80 | % | 11.73 | % | 12.19 | % | 12.16 | % | 12.35 | % | ||||||||||||||||
Tier 1 risk-based capital ratio | 12.37 | % | 12.30 | % | 12.79 | % | 12.76 | % | 12.97 | % | ||||||||||||||||
Total risk-based capital ratio | 13.19 | % | 13.11 | % | 13.61 | % | 13.59 | % | 13.82 | % | ||||||||||||||||
STOCK PERFORMANCE |
||||||||||||||||||||||||||
Market value-Close | $ | 33.12 | $ | 32.16 | $ | 31.79 | $ | 35.65 | $ | 27.56 | ||||||||||||||||
Book value | $ | 23.36 | $ | 23.06 | $ | 22.71 | $ | 22.48 | $ | 22.69 | ||||||||||||||||
Tangible book value | $ | 17.49 | $ | 17.17 | $ | 17.02 | $ | 16.76 | $ | 16.95 | ||||||||||||||||
(1) - The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of partnership tax credits, amortization of purchased intangibles, and significant non-routine income and expense items as disclosed in Note 8. |
||||||||||||||||||||||||||
(2) - Excludes acquired loans. | ||||||||||||||||||||||||||
See Notes to Consolidated Financials |
||||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2017 |
($ in thousands) |
(unaudited) |
Note 1 – Business Combinations
On April 7, 2017, Trustmark Corporation completed its merger with RB Bancorporation (Reliance), the holding company for Reliance Bank, which had seven offices serving the Huntsville, Alabama metropolitan service area (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 Reliance common stock outstanding, which represented total consideration for Reliance common shareholders of approximately $23.7 million.
The merger with Reliance was consistent with Trustmark’s strategic plan to selectively expand the Trustmark franchise and enhance the Trustmark franchise in north Alabama.
This merger was accounted for in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations.” Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the merger date. The fair values of the assets acquired and liabilities assumed are subject to adjustment if additional information relative to the closing date fair values becomes available through the measurement period, which is not to exceed one year from the merger date of April 7, 2017.
The statement of assets purchased and liabilities assumed in the Reliance merger is presented below at their estimated fair values as of the merger date of April 7, 2017 ($ in thousands):
Assets: | |||
Cash and due from banks | $ | 5,013 | |
Federal funds sold and securities purchased under reverse repurchase agreements | 6,900 | ||
Securities | 54,843 | ||
Acquired loans | 117,447 | ||
Premises and equipment, net | 3,700 | ||
Identifiable intangible assets | 1,850 | ||
Other real estate | 475 | ||
Other assets | 6,037 | ||
Total assets | 196,265 | ||
Liabilities: | |||
Deposits | 166,158 | ||
Other borrowings | 17,469 | ||
Other liabilities | 1,322 | ||
Total liabilities | 184,949 | ||
Net identifiable assets acquired at fair value | 11,316 | ||
Goodwill | 13,472 | ||
Net assets acquired at fair value | $ | 24,788 | |
The excess of the consideration paid over the estimated fair value of the net assets acquired was $13.5 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 merger date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately ten years.
Loans acquired from Reliance were evaluated under a fair value process. Loans with evidence of deterioration in credit quality and for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments are referred to as acquired impaired loans and accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”
The operations of Reliance are included in Trustmark’s operating results from April 7, 2017 and did not have a material impact on Trustmark’s results of operations. During the second quarter of 2017, Trustmark included non-routine merger transaction expenses in other noninterest expense totaling $3.2 million (change in control expense of $1.3 million; professional fees, contract termination and other expenses of $1.9 million).
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2017 |
($ 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):
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | ||||||||||||||||
SECURITIES AVAILABLE FOR SALE |
||||||||||||||||||||
U.S. Government agency obligations | ||||||||||||||||||||
Issued by U.S. Government agencies | $ | 49,723 | $ | 51,277 | $ | 53,247 | $ | 55,763 | $ | 58,234 | ||||||||||
Issued by U.S. Government sponsored agencies | 271 | 272 | 274 | 276 | 283 | |||||||||||||||
Obligations of states and political subdivisions | 89,144 | 96,514 | 109,895 | 115,373 | 124,641 | |||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Residential mortgage pass-through securities | ||||||||||||||||||||
Guaranteed by GNMA | 60,902 | 58,422 | 42,667 | 42,786 | 36,788 | |||||||||||||||
Issued by FNMA and FHLMC | 860,131 | 860,571 | 733,214 | 631,084 | 561,989 | |||||||||||||||
Other residential mortgage-backed securities | ||||||||||||||||||||
Issued or guaranteed by FNMA, FHLMC, or GNMA | 1,087,169 | 1,157,241 | 1,202,719 | 1,267,951 | 1,374,399 | |||||||||||||||
Commercial mortgage-backed securities | ||||||||||||||||||||
Issued or guaranteed by FNMA, FHLMC, or GNMA | 221,749 | 223,391 | 223,538 | 243,449 | 254,613 | |||||||||||||||
Total securities available for sale | $ | 2,369,089 | $ | 2,447,688 | $ | 2,365,554 | $ | 2,356,682 | $ | 2,410,947 | ||||||||||
SECURITIES HELD TO MATURITY |
||||||||||||||||||||
U.S. Government agency obligations | ||||||||||||||||||||
Issued by U.S. Government sponsored agencies | $ | 3,680 | $ | 3,669 | $ | 3,658 | $ | 3,647 | $ | 3,636 | ||||||||||
Obligations of states and political subdivisions | 46,069 | 46,098 | 46,273 | 46,303 | 52,937 | |||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Residential mortgage pass-through securities | ||||||||||||||||||||
Guaranteed by GNMA | 14,191 | 14,399 | 14,977 | 15,478 | 16,183 | |||||||||||||||
Issued by FNMA and FHLMC | 139,172 | 144,282 | 118,733 | 81,299 | 39,989 | |||||||||||||||
Other residential mortgage-backed securities | ||||||||||||||||||||
Issued or guaranteed by FNMA, FHLMC, or GNMA | 708,715 | 740,042 | 771,296 | 803,474 | 831,662 | |||||||||||||||
Commercial mortgage-backed securities | ||||||||||||||||||||
Issued or guaranteed by FNMA, FHLMC, or GNMA | 190,456 | 191,264 | 201,130 | 208,442 | 198,827 | |||||||||||||||
Total securities held to maturity | $ | 1,102,283 | $ | 1,139,754 | $ | 1,156,067 | $ | 1,158,643 | $ | 1,143,234 | ||||||||||
At September 30, 2017, the net unamortized, unrealized loss included in accumulated other comprehensive loss in the accompanying balance sheet for securities held to maturity previously transferred from securities available for sale totaled approximately $20.6 million ($12.7 million, net of tax).
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 96% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2017 |
($ in thousands) |
(unaudited) |
Note 3 – Loan Composition
LHFI BY TYPE (excluding acquired loans) |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | |||||||||||||||
Loans secured by real estate: | ||||||||||||||||||||
Construction, land development and other land loans | $ | 950,144 | $ | 922,029 | $ | 859,927 | $ | 831,437 | $ | 766,685 | ||||||||||
Secured by 1-4 family residential properties | 1,648,733 | 1,655,968 | 1,656,837 | 1,660,043 | 1,592,453 | |||||||||||||||
Secured by nonfarm, nonresidential properties | 2,172,885 | 2,109,367 | 2,064,352 | 2,034,176 | 1,916,153 | |||||||||||||||
Other real estate secured | 482,163 | 432,208 | 399,636 | 318,148 | 317,680 | |||||||||||||||
Commercial and industrial loans | 1,568,588 | 1,635,000 | 1,540,783 | 1,528,434 | 1,421,382 | |||||||||||||||
Consumer loans | 173,061 | 170,858 | 166,314 | 170,562 | 170,073 | |||||||||||||||
State and other political subdivision loans | 936,614 | 936,860 | 910,493 | 917,515 | 875,973 | |||||||||||||||
Other loans | 475,153 | 433,755 | 406,315 | 390,898 | 438,805 | |||||||||||||||
LHFI | 8,407,341 | 8,296,045 | 8,004,657 | 7,851,213 | 7,499,204 | |||||||||||||||
Allowance for loan losses | (80,332 | ) | (76,184 | ) | (72,445 | ) | (71,265 | ) | (70,871 | ) | ||||||||||
Net LHFI | $ | 8,327,009 | $ | 8,219,861 | $ | 7,932,212 | $ | 7,779,948 | $ | 7,428,333 | ||||||||||
During the third quarter of 2017, Trustmark increased its allowance for loan losses by $1.1 million due to the potential loss exposure caused by Hurricane Harvey.
ACQUIRED LOANS BY TYPE (1) |
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | |||||||||||||||
Loans secured by real estate: | ||||||||||||||||||||
Construction, land development and other land loans | $ | 29,384 | $ | 35,054 | $ | 17,651 | $ | 20,850 | $ | 25,040 | ||||||||||
Secured by 1-4 family residential properties | 65,746 | 74,313 | 54,721 | 69,540 | 76,601 | |||||||||||||||
Secured by nonfarm, nonresidential properties | 122,200 | 132,663 | 92,075 | 103,820 | 110,606 | |||||||||||||||
Other real estate secured | 18,431 | 19,553 | 16,275 | 19,010 | 20,903 | |||||||||||||||
Commercial and industrial loans | 34,124 | 34,375 | 20,691 | 36,896 | 39,519 | |||||||||||||||
Consumer loans | 2,749 | 2,833 | 2,664 | 3,365 | 3,878 | |||||||||||||||
Other loans | 11,123 | 16,119 | 14,165 | 18,766 | 19,190 | |||||||||||||||
Acquired loans | 283,757 | 314,910 | 218,242 | 272,247 | 295,737 | |||||||||||||||
Allowance for loan losses, acquired loans | (5,768 | ) | (7,423 | ) | (10,006 | ) | (11,397 | ) | (11,380 | ) | ||||||||||
Net acquired loans | $ | 277,989 | $ | 307,487 | $ | 208,236 | $ | 260,850 | $ | 284,357 | ||||||||||
(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 $36.7 million.
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2017 |
($ in thousands) |
(unaudited) |
Note 3 – Loan Composition (continued)
September 30, 2017 | |||||||||||||||||||||||
LHFI - COMPOSITION BY REGION (1) |
Total | Alabama | Florida |
Mississippi |
Tennessee |
Texas | |||||||||||||||||
Loans secured by real estate: | |||||||||||||||||||||||
Construction, land development and other land loans | $ | 950,144 | $ | 297,262 | $ | 49,515 | $ | 297,979 | $ | 21,869 | $ | 283,519 | |||||||||||
Secured by 1-4 family residential properties | 1,648,733 | 102,412 | 46,613 | 1,388,912 | 94,344 | 16,452 | |||||||||||||||||
Secured by nonfarm, nonresidential properties | 2,172,885 | 367,466 | 221,513 | 922,241 | 146,668 | 514,997 | |||||||||||||||||
Other real estate secured | 482,163 | 70,826 | 2,684 | 209,436 | 47,050 | 152,167 | |||||||||||||||||
Commercial and industrial loans | 1,568,588 | 165,419 | 22,554 | 786,143 | 354,968 | 239,504 | |||||||||||||||||
Consumer loans | 173,061 | 23,023 | 4,104 | 125,951 | 17,703 | 2,280 | |||||||||||||||||
State and other political subdivision loans | 936,614 | 83,580 | 28,357 | 604,219 | 28,499 | 191,959 | |||||||||||||||||
Other loans | 475,153 | 63,557 | 17,796 | 308,787 | 45,815 | 39,198 | |||||||||||||||||
Loans | $ | 8,407,341 | $ | 1,173,545 | $ | 393,136 | $ | 4,643,668 | $ | 756,916 | $ | 1,440,076 | |||||||||||
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1) |
|||||||||||||||||||||||
Lots | $ | 55,527 | $ | 11,380 | $ | 16,436 | $ | 22,777 | $ | 2,344 | $ | 2,590 | |||||||||||
Development | 44,984 | 5,256 | 4,665 | 15,822 | 444 | 18,797 | |||||||||||||||||
Unimproved land | 98,740 | 13,974 | 15,136 | 37,977 | 14,750 | 16,903 | |||||||||||||||||
1-4 family construction | 191,035 | 57,999 | 10,467 | 79,394 | 2,666 | 40,509 | |||||||||||||||||
Other construction | 559,858 | 208,653 | 2,811 | 142,009 | 1,665 | 204,720 | |||||||||||||||||
Construction, land development and other land loans | $ | 950,144 | $ | 297,262 | $ | 49,515 | $ | 297,979 | $ | 21,869 | $ | 283,519 | |||||||||||
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1) |
|||||||||||||||||||||||
Income producing: | |||||||||||||||||||||||
Retail | $ | 315,249 | $ | 101,683 | $ | 46,634 | $ | 96,599 | $ | 17,289 | $ | 53,044 | |||||||||||
Office | 221,939 | 45,521 | 21,813 | 72,333 | 6,072 | 76,200 | |||||||||||||||||
Nursing homes/senior living | 166,118 | 8,527 | — | 151,106 | 6,485 | — | |||||||||||||||||
Hotel/motel | 265,690 | 55,195 | 64,114 | 68,970 | 35,466 | 41,945 | |||||||||||||||||
Mini-storage | 132,839 | 12,695 | 6,563 | 43,716 | 567 | 69,298 | |||||||||||||||||
Industrial | 100,906 | 11,205 | 9,779 | 23,193 | 6,395 | 50,334 | |||||||||||||||||
Health care | 32,306 | 4,425 | 793 | 25,659 | — | 1,429 | |||||||||||||||||
Convenience stores | 20,962 | 1,375 | — | 8,889 | 897 | 9,801 | |||||||||||||||||
Other | 94,586 | 15,807 | 14,853 | 15,154 | 7,877 | 40,895 | |||||||||||||||||
Total income producing loans | 1,350,595 | 256,433 | 164,549 | 505,619 | 81,048 | 342,946 | |||||||||||||||||
Owner-occupied: | |||||||||||||||||||||||
Office | 139,640 | 22,271 | 20,949 | 68,063 | 6,382 | 21,975 | |||||||||||||||||
Churches | 89,217 | 12,635 | 678 | 47,163 | 20,729 | 8,012 | |||||||||||||||||
Industrial warehouses | 137,277 | 9,096 | 3,565 | 54,179 | 11,027 | 59,410 | |||||||||||||||||
Health care | 117,445 | 23,151 | 4,102 | 71,032 | 4,410 | 14,750 | |||||||||||||||||
Convenience stores | 103,603 | 9,870 | 12,811 | 54,913 | 1,320 | 24,689 | |||||||||||||||||
Retail | 43,698 | 5,799 | 6,749 | 22,683 | 1,892 | 6,575 | |||||||||||||||||
Restaurants | 33,297 | 2,909 | 777 | 25,669 | 1,966 | 1,976 | |||||||||||||||||
Auto dealerships | 22,403 | 8,972 | 36 | 8,557 | 4,838 | — | |||||||||||||||||
Other | 135,710 | 16,330 | 7,297 | 64,363 | 13,056 | 34,664 | |||||||||||||||||
Total owner-occupied loans | 822,290 | 111,033 | 56,964 | 416,622 | 65,620 | 172,051 | |||||||||||||||||
Loans secured by nonfarm, nonresidential properties | $ | 2,172,885 | $ | 367,466 | $ | 221,513 | $ | 922,241 | $ | 146,668 | $ | 514,997 | |||||||||||
(1) Excludes acquired loans. |
|||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 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 | Nine Months Ended | ||||||||||||||||||||||||||||
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | |||||||||||||||||||||||
Securities – taxable | 2.23 | % | 2.26 | % | 2.31 | % | 2.21 | % | 2.29 | % | 2.26 | % | 2.35 | % | |||||||||||||||
Securities – nontaxable | 4.34 | % | 4.35 | % | 4.34 | % | 4.26 | % | 4.27 | % | 4.35 | % | 4.27 | % | |||||||||||||||
Securities – total | 2.29 | % | 2.32 | % | 2.38 | % | 2.29 | % | 2.36 | % | 2.33 | % | 2.42 | % | |||||||||||||||
Loans - LHFI & LHFS | 4.36 | % | 4.30 | % | 4.21 | % | 4.12 | % | 4.19 | % | 4.29 | % | 4.18 | % | |||||||||||||||
Acquired loans | 8.78 | % | 7.96 | % | 8.40 | % | 11.69 | % | 8.50 | % | 8.37 | % | 8.38 | % | |||||||||||||||
Loans - total | 4.51 | % | 4.43 | % | 4.33 | % | 4.38 | % | 4.36 | % | 4.43 | % | 4.36 | % | |||||||||||||||
FF sold & rev repo | 1.55 | % | 1.39 | % | 1.02 | % | 1.12 | % | 1.47 | % | 1.45 | % | 1.34 | % | |||||||||||||||
Other earning assets | 1.67 | % | 1.91 | % | 1.36 | % | 1.65 | % | 1.29 | % | 1.65 | % | 1.31 | % | |||||||||||||||
Total earning assets | 3.86 | % | 3.81 | % | 3.74 | % | 3.74 | % | 3.74 | % | 3.80 | % | 3.75 | % | |||||||||||||||
Interest-bearing deposits | 0.35 | % | 0.29 | % | 0.23 | % | 0.20 | % | 0.19 | % | 0.29 | % | 0.19 | % | |||||||||||||||
FF pch & repo | 0.94 | % | 0.79 | % | 0.57 | % | 0.38 | % | 0.34 | % | 0.77 | % | 0.34 | % | |||||||||||||||
Other borrowings | 1.28 | % | 1.16 | % | 0.90 | % | 0.87 | % | 0.88 | % | 1.13 | % | 0.92 | % | |||||||||||||||
Total interest-bearing liabilities | 0.53 | % | 0.44 | % | 0.34 | % | 0.31 | % | 0.30 | % | 0.44 | % | 0.29 | % | |||||||||||||||
Net interest margin | 3.47 | % | 3.49 | % | 3.49 | % | 3.52 | % | 3.52 | % | 3.48 | % | 3.54 | % | |||||||||||||||
Net interest margin excluding acquired loans | 3.34 | % | 3.37 | % | 3.38 | % | 3.31 | % | 3.38 | % | 3.36 | % | 3.39 | % | |||||||||||||||
Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans.
During the third quarter of 2017, the yield on acquired loans totaled 8.78% and included $1.3 million in recoveries from the settlement of debt, which represented approximately 1.78% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the third quarter of 2017 totaled 3.34%, a decline of 3 basis points compared to the second quarter of 2017, primarily due to higher costs of interest-bearing deposits and other borrowings.
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 negative ineffectiveness of $2.6 million and a net positive ineffectiveness of $835 thousand for the quarters ended September 30, 2017 and June 30, 2017, respectively.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | ||||||||||||||||||||||
Mortgage servicing income, net | $ | 5,295 | $ | 5,439 | $ | 5,458 | $ | 5,218 | $ | 5,271 | $ | 16,192 | $ | 15,506 | ||||||||||||||
Change in fair value-MSR from runoff | (2,892 | ) | (2,896 | ) | (2,387 | ) | (2,739 | ) | (2,862 | ) | (8,175 | ) | (7,367 | ) | ||||||||||||||
Gain on sales of loans, net | 5,083 | 5,001 | 3,550 | 6,054 | 6,410 | 13,634 | 14,481 | |||||||||||||||||||||
Other, net | (450 | ) | 629 | 772 | (2,925 | ) | (299 | ) | 951 | 2,841 | ||||||||||||||||||
Mortgage banking income before hedge ineffectiveness | 7,036 | 8,173 | 7,393 | 5,608 | 8,520 | 22,602 | 25,461 | |||||||||||||||||||||
Change in fair value-MSR from market changes | (2,393 | ) | (1,291 | ) | 1,466 | 13,112 | 381 | (2,218 | ) | (13,518 | ) | |||||||||||||||||
Change in fair value of derivatives | (218 | ) | 2,126 | 1,326 | (13,292 | ) | (1,537 | ) | 3,234 | 10,841 | ||||||||||||||||||
Net (negative) positive hedge ineffectiveness | (2,611 | ) | 835 | 2,792 | (180 | ) | (1,156 | ) | 1,016 | (2,677 | ) | |||||||||||||||||
Mortgage banking, net | $ | 4,425 | $ | 9,008 | $ | 10,185 | $ | 5,428 | $ | 7,364 | $ | 23,618 | $ | 22,784 | ||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 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 maintained 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 participated. The Plan provided for retirement benefits based on the length of credited service and final average compensation, as defined in the Plan, which vested upon three years of service. Benefit accruals under the plan were frozen in 2009, with the exception of certain associates covered through plans obtained in acquisitions that were subsequently merged into the Plan. As previously reported, 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 was required to fully fund the Plan on a termination basis and contributed the additional assets necessary to do so. The final distributions were made from current plan assets and a one-time pension settlement expense of $17.6 million was 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 | Nine Months Ended | |||||||||||||||||||||||||||
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | ||||||||||||||||||||||
Partnership amortization for tax credit purposes | $ | (2,521 | ) | $ | (2,287 | ) | $ | (2,274 | ) | $ | (2,479 | ) | $ | (2,479 | ) | $ | (7,082 | ) | $ | (7,437 | ) | |||||||
Increase in life insurance cash surrender value | 1,813 | 1,782 | 1,714 | 1,751 | 1,746 | 5,309 | 5,140 | |||||||||||||||||||||
Other miscellaneous income | 4,448 | 6,142 | 2,451 | 2,820 | 2,007 | 13,041 | 5,831 | |||||||||||||||||||||
Total other, net | $ | 3,740 | $ | 5,637 | $ | 1,891 | $ | 2,092 | $ | 1,274 | $ | 11,268 | $ | 3,534 | ||||||||||||||
Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.
Trustmark received nontaxable proceeds of $2.7 million related to bank-owned life insurance and $4.9 million related to life insurance acquired as part of a previous acquisition during the third and second quarters of 2017, respectively, which were recorded in other miscellaneous income in the table above.
Other noninterest expense consisted of the following for the periods presented ($ in thousands):
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | |||||||||||||||||||||
Loan expense | $ | 3,013 | $ | 2,827 | $ | 2,792 | $ | 2,823 | $ | 3,336 | $ | 8,632 | $ | 9,403 | |||||||||||||
Amortization of intangibles | 1,539 | 1,544 | 1,564 | 1,686 | 1,692 | 4,647 | 5,180 | ||||||||||||||||||||
Other miscellaneous expense | 7,885 | 10,550 | 8,432 | 7,154 | 6,582 | 26,867 | 21,684 | ||||||||||||||||||||
Total other expense | $ | 12,437 | $ | 14,921 | $ | 12,788 | $ | 11,663 | $ | 11,610 | $ | 40,146 | $ | 36,267 | |||||||||||||
As previously discussed in Note 1 – Business Combinations, non-routine Reliance merger transaction expenses totaled $3.2 million and were included in other miscellaneous expense during the second quarter of 2017.
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2017 |
($ 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.
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2017 |
($ in thousands) |
(unaudited) |
Note 8 – Non-GAAP Financial Measures (continued)
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||
9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 9/30/2017 | 9/30/2016 | ||||||||||||||||||||||||
TANGIBLE EQUITY |
||||||||||||||||||||||||||||||
AVERAGE BALANCES | ||||||||||||||||||||||||||||||
Total shareholders' equity | $ | 1,577,867 | $ | 1,552,240 | $ | 1,533,098 | $ | 1,533,144 | $ | 1,530,842 | $ | 1,554,566 | $ | 1,512,855 | ||||||||||||||||
Less: Goodwill |
(379,627 | ) | (378,191 | ) | (366,156 | ) | (366,156 | ) | (366,156 | ) | (374,707 | ) | (366,156 | ) | ||||||||||||||||
Identifiable intangible assets | (18,714 | ) | (19,713 | ) | (19,950 | ) | (21,585 | ) | (23,311 | ) | (19,454 | ) | (24,988 | ) | ||||||||||||||||
Total average tangible equity |
$ | 1,179,526 | $ | 1,154,336 | $ | 1,146,992 | $ | 1,145,403 | $ | 1,141,375 | $ | 1,160,405 | $ | 1,121,711 | ||||||||||||||||
PERIOD END BALANCES | ||||||||||||||||||||||||||||||
Total shareholders' equity | $ | 1,582,535 | $ | 1,561,918 | $ | 1,537,961 | $ | 1,520,208 | $ | 1,534,761 | ||||||||||||||||||||
Less: Goodwill |
(379,627 | ) | (379,627 | ) | (366,156 | ) | (366,156 | ) | (366,156 | ) | ||||||||||||||||||||
Identifiable intangible assets | (17,883 | ) | (19,422 | ) | (19,117 | ) | (20,680 | ) | (22,366 | ) | ||||||||||||||||||||
Total tangible equity |
(a) | $ | 1,185,025 | $ | 1,162,869 | $ | 1,152,688 | $ | 1,133,372 | $ | 1,146,239 | |||||||||||||||||||
TANGIBLE ASSETS |
||||||||||||||||||||||||||||||
Total assets | $ | 13,884,655 | $ | 13,909,138 | $ | 13,490,361 | $ | 13,352,333 | $ | 13,161,538 | ||||||||||||||||||||
Less: Goodwill |
(379,627 | ) | (379,627 | ) | (366,156 | ) | (366,156 | ) | (366,156 | ) | ||||||||||||||||||||
Identifiable intangible assets | (17,883 | ) | (19,422 | ) | (19,117 | ) | (20,680 | ) | (22,366 | ) | ||||||||||||||||||||
Total tangible assets |
(b) | $ | 13,487,145 | $ | 13,510,089 | $ | 13,105,088 | $ | 12,965,497 | $ | 12,773,016 | |||||||||||||||||||
Risk-weighted assets | (c) | $ | 10,498,582 | $ | 10,391,912 | $ | 10,031,410 | $ | 9,952,123 | $ | 9,670,302 | |||||||||||||||||||
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION |
||||||||||||||||||||||||||||||
Net income | $ | 34,579 | $ | 24,035 | $ | 31,248 | $ | 28,923 | $ | 30,982 | $ | 89,862 | $ | 79,488 | ||||||||||||||||
Plus: Intangible amortization net of tax | 950 | 954 | 966 | 1,041 | 1,045 | 2,870 | 3,199 | |||||||||||||||||||||||
Net income adjusted for intangible amortization |
$ | 35,529 | $ | 24,989 | $ | 32,214 | $ | 29,964 | $ | 32,027 | $ | 92,732 | $ | 82,687 | ||||||||||||||||
Period end common shares outstanding | (d) | 67,742,135 | 67,740,901 | 67,729,434 | 67,628,618 | 67,626,939 | ||||||||||||||||||||||||
TANGIBLE COMMON EQUITY MEASUREMENTS |
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Return on average tangible equity (1) | 11.95 | % | 8.68 | % | 11.39 | % | 10.41 | % | 11.16 | % | 10.68 | % | 9.85 | % | ||||||||||||||||
Tangible equity/tangible assets | (a)/(b) | 8.79 | % | 8.61 | % | 8.80 | % | 8.74 | % | 8.97 | % | |||||||||||||||||||
Tangible equity/risk-weighted assets | (a)/(c) | 11.29 | % | 11.19 | % | 11.49 | % | 11.39 | % | 11.85 | % | |||||||||||||||||||
Tangible book value | (a)/(d)*1,000 | $ | 17.49 | $ | 17.17 | $ | 17.02 | $ | 16.76 | $ | 16.95 | |||||||||||||||||||
COMMON EQUITY TIER 1 CAPITAL (CET1) |
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Total shareholders' equity | $ | 1,582,535 | $ | 1,561,918 | $ | 1,537,961 | $ | 1,520,208 | $ | 1,534,761 | ||||||||||||||||||||
AOCI-related adjustments | 27,825 | 28,509 | 43,005 | 45,798 | 17,075 | |||||||||||||||||||||||||
CET1 adjustments and deductions: | ||||||||||||||||||||||||||||||
Goodwill net of associated deferred tax liabilities (DTLs) | (359,841 | ) | (360,198 | ) | (347,085 | ) | (347,442 | ) | (347,800 | ) | ||||||||||||||||||||
Other adjustments and deductions for CET1 (2) | (11,359 | ) | (11,267 | ) | (10,803 | ) | (8,637 | ) | (9,307 | ) | ||||||||||||||||||||
CET1 capital | (e) | 1,239,160 | 1,218,962 | 1,223,078 | 1,209,927 | 1,194,729 | ||||||||||||||||||||||||
Additional tier 1 capital instruments plus related surplus | 60,000 | 60,000 | 60,000 | 60,000 | 60,000 | |||||||||||||||||||||||||
Less: additional tier 1 capital deductions | (471 | ) | (247 | ) | (159 | ) | (267 | ) | (276 | ) | ||||||||||||||||||||
Additional tier 1 capital | 59,529 | 59,753 | 59,841 | 59,733 | 59,724 | |||||||||||||||||||||||||
Tier 1 capital | $ | 1,298,689 | $ | 1,278,715 | $ | 1,282,919 | $ | 1,269,660 | $ | 1,254,453 | ||||||||||||||||||||
Common equity tier 1 capital ratio | (e)/(c) | 11.80 | % | 11.73 | % | 12.19 | % | 12.16 | % | 12.35 | % | |||||||||||||||||||
(1) Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity |
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(2) Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAS), threshold deductions and transition adjustments, as applicable. |
TRUSTMARK CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED FINANCIALS |
September 30, 2017 |
($ in thousands) |
(unaudited) |
Note 8 – Non-GAAP Financial Measures (continued)
Trustmark discloses certain non-GAAP financial measures, including net income adjusted for significant non-routine transactions, because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views net income adjusted for significant non-routine transactions as a measure of our core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. This non-GAAP measure also provides another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.
The following table presents adjustments to net income and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented ($ in thousands, except per share data):
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
9/30/2017 | 9/30/2016 | 9/30/2017 | 9/30/2016 | |||||||||||||||||||||||||||||||||
Amount | Diluted EPS | Amount | Diluted EPS | Amount | Diluted EPS | Amount | Diluted EPS | |||||||||||||||||||||||||||||
Net Income (GAAP) | $ | 34,579 | $ | 0.509 | $ | 30,982 | $ | 0.457 | $ | 89,862 | $ | 1.324 | $ | 79,488 | $ | 1.173 | ||||||||||||||||||||
Significant non-routine transactions (net of taxes): | ||||||||||||||||||||||||||||||||||||
Defined benefit plan termination | — | — | — | — | 10,895 | 0.161 | — | — | ||||||||||||||||||||||||||||
Reliance merger transaction expenses | — | — | — | — | 1,999 | 0.029 | — | — | ||||||||||||||||||||||||||||
Gain on life insurance proceeds | — | — | — | — | (4,894 | ) | (0.072 | ) | — | — | ||||||||||||||||||||||||||
Early retirement program expense | — | — | 146 | 0.002 | — | — | 5,884 | 0.087 | ||||||||||||||||||||||||||||
Pension expense due to de-risking strategy in Plan Assets Portfolio |
— | — | 410 | 0.006 | — | — | 410 | 0.006 | ||||||||||||||||||||||||||||
Net Income adjusted for significant non- routine transactions (Non-GAAP) |
$ | 34,579 | $ | 0.509 | $ | 31,538 | $ | 0.465 | $ | 97,862 | $ | 1.442 | $ | 85,782 | $ | 1.266 | ||||||||||||||||||||
Reported | Adjusted | Reported | Adjusted | Reported | Adjusted | Reported | Adjusted | |||||||||||||||||||||||||||||
(GAAP) | (Non-GAAP) | (GAAP) | (Non-GAAP) | (GAAP) | (Non-GAAP) | (GAAP) | (Non-GAAP) | |||||||||||||||||||||||||||||
Return on equity | 8.69 | % | n/a | 8.05 | % | 8.20 | % | 7.73 | % | 8.42 | % | 7.02 | % | 7.57 | % | |||||||||||||||||||||
Return on average tangible equity | 11.95 | % | n/a | 11.16 | % | 11.36 | % | 10.68 | % | 11.61 | % | 9.85 | % | 10.60 | % | |||||||||||||||||||||
Return on assets | 0.99 | % | n/a | 0.95 | % | 0.97 | % | 0.88 | % | 0.96 | % | 0.83 | % | 0.89 | % | |||||||||||||||||||||
n/a - not applicable | ||||||||||||||||||||||||||||||||||||