Trustmark Corporation Announces Third Quarter 2017 Financial Results

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Trustmark Corporation Announces Third Quarter 2017 Financial Results

JACKSON, Miss.--()--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

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands)

(unaudited)

             
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

 
 
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
(Central and
Southern
Regions)

   

Tennessee
(Memphis,
TN and
Northern MS
Regions)

    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

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)

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