Market Overview

Trustmark Corporation Announces Second Quarter 2018 Financial Results

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Loan growth, margin expansion and strong credit quality reflected
in performance

Trustmark Corporation (NASDAQ:TRMK) reported net income of $39.8 million
in the second quarter of 2018, representing diluted earnings per share
of $0.59. Diluted earnings per share in the second quarter of 2018
increased 9.3% when compared to reported earnings in the previous
quarter and 25.5% when compared to core earnings (reported net income
excluding non-routine transactions) the same period in the prior year.
This level of earnings resulted in a return on average tangible equity
of 13.77% and a return on average assets of 1.19%. Trustmark's Board of
Directors declared a quarterly cash dividend of $0.23 per share payable
September 15, 2018, to shareholders of record on September 1, 2018.

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Second Quarter Highlights

  • Revenue, excluding interest and fees on acquired loans, increased 2.4%
    linked quarter to total $147.5 million
  • The net interest margin (FTE), excluding acquired loans, was 3.46% in
    the second quarter, up 9 basis points from the prior quarter
  • Sustained strong credit performance reflected in reduced nonperforming
    assets
  • Efficiency ratio improved to 64.90%

Gerard R. Host, President and CEO, stated, "The second quarter showed
the value of the diverse Trustmark franchise, with solid loan growth
across our five state footprint. We continued to focus on our strategic
initiatives of balance sheet optimization, capital deployment through
additional share repurchases and disciplined expense management. We also
continued to maintain and expand customer relationships in our other
lines of businesses, as evidenced by strength in insurance commissions
and mortgage loan production volumes. This past quarter – as part of the
J.D. Power 2018 U.S. Retail Banking Satisfaction Study – Trustmark was
recognized as having the ‘Highest Customer Satisfaction with Retail
Banking in the South Central Region'*. We appreciate this recognition
from our customers and thank our associates for their commitment to
excellent customer service. Thanks to our talented associates, solid
profitability and strong capital base, Trustmark remains well positioned
to continue meeting the needs of our customers and creating long-term
value for our shareholders."

Balance Sheet Management

  • Loans held for investment expanded $165.0 million, or 1.9%, from the
    prior quarter and $382.9 million, or 4.6%, from the prior year
  • Continued balance sheet and capital optimization through maturing
    investment securities run-off and share repurchases
  • Noninterest-bearing deposits represent 26.7% of total deposits

Loans held for investment totaled $8.7 billion at June 30, 2018,
reflecting an increase of $165.0 million, or 1.9%, linked quarter and
$382.9 million, or 4.6%, from the prior year. Loans secured by nonfarm,
nonresidential properties increased $63.8 million during the quarter,
driven by growth in Alabama, Tennessee and Florida. Construction and
land development loans increased $52.6 million as growth in construction
lending in Texas, Mississippi, Florida and Tennessee were offset by a
decline in Alabama. Residential loans grew $43.6 million driven by
strong growth in Mississippi. Other loans, which include loans to
finance companies, mortgage warehousing and REITs, increased $26.1
million, driven by strength in Mississippi and Alabama. Commercial and
industrial loans grew $10.8 million, as growth in Texas and Tennessee
more than offset declines in Alabama and Florida.

Deposits totaled $11.1 billion at June 30, 2018, up $96.6 million from
the prior quarter. Trustmark continues to maintain an attractive,
low-cost deposit base with approximately 60% of deposit balances in
checking accounts. Interest-bearing deposit costs increased 11 basis
point linked-quarter driven in part by growth in public fund deposits as
well as a rising interest rate environment.

Trustmark's capital position remained solid, reflecting the consistent
profitability of its diversified financial services businesses. During
the second quarter, Trustmark repurchased $5.4 million of its common
shares in open market transactions; at June 30, 2018, Trustmark had
$91.4 million in remaining authority under its existing stock repurchase
program, which expires March 31, 2019. At June 30, 2018, Trustmark's
tangible equity to tangible assets ratio was 9.07%, while the total
risk-based capital ratio was 13.39%.

Credit Quality

  • Nonperforming loans decreased 10.7% and 17.2% from the prior quarter
    and year-over-year, respectively
  • Other real estate remained flat from the prior quarter and decreased
    20.6% year-over-year
  • Allowance for loan losses represented 345.87% of nonperforming loans,
    excluding specifically reviewed impaired loans

Nonperforming loans totaled $61.4 million at June 30, 2018, down $7.3
million from the prior quarter and $12.8 million year-over-year. Other
real estate totaled $39.7 million, remaining flat from the prior quarter
and declining $10.3 million from the same period one year earlier.
Collectively, nonperforming assets totaled $101.0 million, reflecting a
linked-quarter decrease of 6.7% and year-over-year decrease of 18.6%.

Allocation of Trustmark's $83.6 million allowance for loan losses
represented 1.05% of commercial loans and 0.63% of consumer and home
mortgage loans, resulting in an allowance to total loans held for
investment of 0.96% at June 30, 2018, representing a level management
considers commensurate with the inherent risk in the loan portfolio.
Collectively, the allowance for both held for investment and acquired
loan losses represented 0.98% of total loans, which includes held for
investment and acquired loans.

Unless otherwise noted, all of the above credit quality metrics exclude
acquired loans.

Revenue Generation

  • Net interest margin, excluding acquired loans, was 3.46%, an increase
    of 9 basis points from the prior quarter
  • Maturing investment securities run-off is accretive to the net
    interest margin
  • Deposit costs remain well controlled
  • Noninterest income totaled $47.4 million, up 1.3% linked quarter

Net interest income (FTE) in the second quarter totaled $108.4 million,
resulting in a net interest margin of 3.57%, up 11 basis points from the
prior quarter. Relative to the prior quarter, net interest income (FTE)
increased $3.1 million, reflecting a $4.6 million increase in interest
income and a $1.6 million increase in interest expense. During the
second quarter of 2018, the yield on acquired loans totaled 9.96% and
included $1.6 million in recoveries from the settlement of debt, which
represented approximately 3.20% of the annualized total acquired loan
yield. Excluding acquired loans, the net interest margin totaled 3.46%
for the second quarter of 2018, an increase of 9 basis points when
compared to the first quarter of 2018, which was principally due to
growth in the yield on the loans held for investment and held for sale
portfolio, runoff of maturing investment securities, and favorable
funding mix offset by higher costs of interest-bearing deposits.

Noninterest income in the second quarter increased 1.3% from the prior
quarter to total $47.4 million. Insurance revenue totaled $10.7 million
in the second quarter, up 14.0% from the prior quarter and 10.2%
year-over-year; this performance reflects growth in the property and
casualty lines as well as seasonal factors. Mortgage banking revenue
totaled $9.0 million in the second quarter, down $2.2 million from the
prior quarter and flat year-over-year. The linked-quarter change
reflects reduced net positive mortgage hedge ineffectiveness which more
than offset an increase in gain on sale of loans. Mortgage loan
production in the second quarter totaled $410.5 million, up 42.0% from
the prior quarter and 10.2% year-over-year. Wealth management revenue in
the second quarter totaled $7.5 million, down 1.2% and 2.6% from the
prior quarter and year-over-year, respectively. The linked-quarter
performance is primarily attributable to decreased trust management fees
which more than offset strength in fee income from investment services.
Bank card and other fees increased $444 thousand from the prior quarter
primarily due to increased interchange income and customer derivative
revenue. Service charges on deposit accounts remained stable when
compared to both linked quarter and year-over-year.

Noninterest Expense

  • Total noninterest expense increased 1.3% linked quarter and decreased
    15.0% year-over-year to $103.8 million
  • Core noninterest expense, which excludes other real estate expense and
    intangible amortization, totaled $102.6 million, up 2.4% from the
    prior quarter and 3.4% year-over-year

Salaries and employee benefits increased $1.5 million from the prior
quarter to total $60.0 million, primarily due to higher insurance and
mortgage commissions as a result of continued growth in both business
lines. Services and fees rose 3.7%, or $576 thousand, linked-quarter
primarily due to new software investments designed to improve efficiency
and customer experience. Other real estate expense declined $959
thousand linked quarter while net occupancy-premises expense totaled
$6.6 million, flat from the prior quarter. Other expense totaled $12.3
million, an increase of $524 thousand, or 4.4%, on a linked-quarter
basis.

Additional Information

As previously announced, Trustmark will conduct a conference call with
analysts on Wednesday, July 25, 2018 at 8:30 a.m. Central Time to
discuss the Corporation's financial results. Interested parties may
listen to the conference call by dialing (877) 317-3051 or by clicking
on the link provided under the Investor Relations section of our website
at www.trustmark.com.
A replay of the conference call will also be available through
Wednesday, August 8, 2018, in archived format at the same web address or
by calling (877) 344-7529, passcode 10121520.

Trustmark is a financial services company providing banking and
financial solutions through 198 offices in Alabama, Florida,
Mississippi, Tennessee and Texas.

Forward-Looking Statements

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

Risks that could cause actual results to differ materially from current
expectations of Management include, but are not limited to, changes in
the level of nonperforming assets and charge-offs, local, state and
national economic and market conditions, including potential market
impacts of efforts by the Federal Reserve Board to reduce the size of
its balance sheet, conditions in the housing and real estate markets in
the regions in which Trustmark operates and the extent and duration of
the current volatility in the credit and financial markets as well as
crude oil prices, changes in our ability to measure the fair value of
assets in our portfolio, material changes in the level and/or volatility
of market interest rates, the performance and demand for the products
and services we offer, including the level and timing of withdrawals
from our deposit accounts, the costs and effects of litigation and of
unexpected or adverse outcomes in such litigation, our ability to
attract noninterest-bearing deposits and other low cost funds,
competition in loan and deposit pricing, as well as the entry of new
competitors into our markets through de novo expansion and acquisitions,
economic conditions, including the potential impact of issues relating
to the European financial system and monetary and other governmental
actions designed to address credit, securities, and/or commodity
markets, the enactment of legislation and changes in existing
regulations or enforcement practices or the adoption of new regulations,
changes in accounting standards and practices, including changes in the
interpretation of existing standards, that affect our consolidated
financial statements, changes in consumer spending, borrowings and
savings habits, technological changes, changes in the financial
performance or condition of our borrowers, changes in our ability to
control expenses, greater than expected costs or difficulties related to
the integration of acquisitions or new products and lines of business,
cyber-attacks and other breaches which could affect our information
system security, natural disasters, environmental disasters, acts of war
or terrorism, and other risks described in our filings with the
Securities and Exchange Commission.

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

*Disclaimer

Trustmark National Bank received the highest score in the South Central
region in the J.D. Power 2016 and 2018 U.S. Retail Banking Satisfaction
Studies of customers' satisfaction with their retail bank. Visit
jdpower.com/awards

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
        Linked Quarter   Year over Year
QUARTERLY AVERAGE BALANCES   6/30/2018     3/31/2018     6/30/2017   $ Change   % Change $ Change   % Change  
Securities AFS-taxable $ 2,038,759 $ 2,141,144 $ 2,334,600 $ (102,385 ) -4.8 % $ (295,841 ) -12.7 %
Securities AFS-nontaxable 50,035 57,972 75,640 (7,937 ) -13.7 % (25,605 ) -33.9 %
Securities HTM-taxable 972,571 1,005,721 1,108,158 (33,150 ) -3.3 % (135,587 ) -12.2 %
Securities HTM-nontaxable   30,337     32,734     32,878     (2,397 ) -7.3 %   (2,541 ) -7.7 %
Total securities   3,091,702     3,237,571     3,551,276     (145,869 ) -4.5 %   (459,574 ) -12.9 %
Loans (including loans held for sale) 8,707,466 8,636,967 8,348,758 70,499 0.8 % 358,708 4.3 %
Acquired loans 202,140 243,152 315,558 (41,012 ) -16.9 % (113,418 ) -35.9 %
Fed funds sold and rev repos 1,063 478 3,184 585 n/m (2,121 ) -66.6 %
Other earning assets   186,224     213,985     77,770     (27,761 ) -13.0 %   108,454   n/m
Total earning assets   12,188,595     12,332,153     12,296,546     (143,558 ) -1.2 %   (107,951 ) -0.9 %
Allowance for loan losses (86,315 ) (82,304 ) (83,328 ) (4,011 ) -4.9 % (2,987 ) -3.6 %
Cash and due from banks 319,075 336,642 307,966 (17,567 ) -5.2 % 11,109 3.6 %
Other assets   1,042,156     1,030,738     1,229,981     11,418   1.1 %   (187,825 ) -15.3 %
Total assets $ 13,463,511   $ 13,617,229   $ 13,751,165   $ (153,718 ) -1.1 % $ (287,654 ) -2.1 %
 
Interest-bearing demand deposits $ 2,439,777 $ 2,404,428 $ 2,035,491 $ 35,349 1.5 % $ 404,286 19.9 %
Savings deposits 3,860,096 3,737,507 3,337,374 122,589 3.3 % 522,722 15.7 %
Time deposits   1,798,855     1,748,645     1,777,529     50,210   2.9 %   21,326   1.2 %
Total interest-bearing deposits 8,098,728 7,890,580 7,150,394 208,148 2.6 % 948,334 13.3 %
Fed funds purchased and repos 352,256 277,877 525,523 74,379 26.8 % (173,267 ) -33.0 %
Short-term borrowings 248,932 751,219 1,047,107 (502,287 ) -66.9 % (798,175 ) -76.2 %
Long-term FHLB advances 921 938 141,097 (17 ) -1.8 % (140,176 ) -99.3 %
Junior subordinated debt securities   61,856     61,856     61,856       0.0 %     0.0 %
Total interest-bearing liabilities 8,762,693 8,982,470 8,925,977 (219,777 ) -2.4 % (163,284 ) -1.8 %
Noninterest-bearing deposits 2,930,726 2,881,374 3,110,125 49,352 1.7 % (179,399 ) -5.8 %
Other liabilities   188,186     180,871     162,823     7,315   4.0 %   25,363   15.6 %
Total liabilities 11,881,605 12,044,715 12,198,925 (163,110 ) -1.4 % (317,320 ) -2.6 %

Shareholders' equity

  1,581,906     1,572,514     1,552,240     9,392   0.6 %   29,666   1.9 %
Total liabilities and equity $ 13,463,511   $ 13,617,229   $ 13,751,165   $ (153,718 ) -1.1 % $ (287,654 ) -2.1 %
 
n/m - percentage changes greater than +/- 100% are considered not
meaningful
 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
        Linked Quarter   Year over Year

PERIOD END BALANCES

  6/30/2018     3/31/2018     6/30/2017   $ Change   % Change $ Change   % Change  
Cash and due from banks $ 387,119 $ 315,276 $ 318,329 $ 71,843 22.8 % $ 68,790 21.6 %
Fed funds sold and rev repos 112 6,900 (112 ) -100.0 % (6,900 ) -100.0 %
Securities available for sale 1,974,675 2,097,497 2,447,688 (122,822 ) -5.9 % (473,013 ) -19.3 %
Securities held to maturity 985,845 1,023,975 1,139,754 (38,130 ) -3.7 % (153,909 ) -13.5 %
Loans held for sale (LHFS) 196,217 163,882 203,652 32,335 19.7 % (7,435 ) -3.7 %
Loans held for investment (LHFI) 8,678,983 8,513,985 8,296,045 164,998 1.9 % 382,938 4.6 %
Allowance for loan losses, LHFI   (83,566 )   (81,235 )   (76,184 )   (2,331 ) -2.9 %   (7,382 ) -9.7 %
Net LHFI 8,595,417 8,432,750 8,219,861 162,667 1.9 % 375,556 4.6 %
Acquired loans 173,107 215,476 314,910 (42,369 ) -19.7 % (141,803 ) -45.0 %
Allowance for loan losses, acquired loans   (3,046 )   (4,294 )   (7,423 )   1,248   29.1 %   4,377   59.0 %
Net acquired loans   170,061     211,182     307,487     (41,121 ) -19.5 %   (137,426 ) -44.7 %
Net LHFI and acquired loans 8,765,478 8,643,932 8,527,348 121,546 1.4 % 238,130 2.8 %
Premises and equipment, net 177,686 178,584 182,315 (898 ) -0.5 % (4,629 ) -2.5 %
Mortgage servicing rights 97,411 94,850 82,628 2,561 2.7 % 14,783 17.9 %
Goodwill 379,627 379,627 379,627 0.0 % 0.0 %
Identifiable intangible assets 13,677 14,963 19,422 (1,286 ) -8.6 % (5,745 ) -29.6 %
Other real estate 39,667 39,554 49,958 113 0.3 % (10,291 ) -20.6 %
Other assets   507,863     511,187     551,517     (3,324 ) -0.7 %   (43,654 ) -7.9 %
Total assets $ 13,525,265   $ 13,463,439   $ 13,909,138   $ 61,826   0.5 % $ (383,873 ) -2.8 %
 
Deposits:
Noninterest-bearing $ 2,958,354 $ 3,004,442 $ 3,092,915 $ (46,088 ) -1.5 % $ (134,561 ) -4.4 %
Interest-bearing   8,114,081     7,971,359     7,330,476     142,722   1.8 %   783,605   10.7 %
Total deposits 11,072,435 10,975,801 10,423,391 96,634 0.9 % 649,044 6.2 %
Fed funds purchased and repos 477,891 274,833 508,068 203,058 73.9 % (30,177 ) -5.9 %
Short-term borrowings 186,647 442,689 1,222,592 (256,042 ) -57.8 % (1,035,945 ) -84.7 %
Long-term FHLB advances 913 929 978 (16 ) -1.7 % (65 ) -6.6 %
Junior subordinated debt securities 61,856 61,856 61,856 0.0 % 0.0 %
Other liabilities   141,451     137,194     130,335     4,257   3.1 %   11,116   8.5 %
Total liabilities   11,941,193     11,893,302     12,347,220     47,891   0.4 %   (406,027 ) -3.3 %
Common stock 14,089 14,121 14,114 (32 ) -0.2 % (25 ) -0.2 %
Capital surplus 361,715 366,021 367,075 (4,306 ) -1.2 % (5,360 ) -1.5 %
Retained earnings 1,282,007 1,257,881 1,209,238 24,126 1.9 % 72,769 6.0 %
Accum other comprehensive loss, net of tax   (73,739 )   (67,886 )   (28,509 )   (5,853 ) -8.6 %   (45,230 ) n/m

Total shareholders' equity

  1,584,072     1,570,137     1,561,918     13,935   0.9 %   22,154   1.4 %
Total liabilities and equity $ 13,525,265   $ 13,463,439   $ 13,909,138   $ 61,826   0.5 % $ (383,873 ) -2.8 %
 
n/m - percentage changes greater than +/- 100% are considered not
meaningful
 

See Notes to Consolidated Financials

 
       
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands except per share data)
(unaudited)
     
Quarter Ended Linked Quarter Year over Year

INCOME STATEMENTS

  6/30/2018     3/31/2018   6/30/2017   $ Change % Change $ Change % Change  
Interest and fees on LHFS & LHFI-FTE $ 99,761 $ 94,712 $ 89,486 $ 5,049 5.3 % $ 10,275 11.5 %
Interest and fees on acquired loans 5,022 4,877 6,263 145 3.0 % (1,241 ) -19.8 %
Interest on securities-taxable 16,894 17,506 19,377 (612 ) -3.5 % (2,483 ) -12.8 %
Interest on securities-tax exempt-FTE 733 824 1,178 (91 ) -11.0 % (445 ) -37.8 %
Interest on fed funds sold and rev repos 5 2 11 3 n/m (6 ) -54.5 %
Other interest income   1,054     934   371     120   12.8 %   683   n/m
Total interest income-FTE   123,469     118,855   116,686     4,614   3.9 %   6,783   5.8 %
Interest on deposits 12,139 9,491 5,107 2,648 27.9 % 7,032 n/m
Interest on fed funds pch and repos 1,250 662 1,037 588 88.8 % 213 20.5 %
Other interest expense   1,713     3,394   3,628     (1,681 ) -49.5 %   (1,915 ) -52.8 %
Total interest expense   15,102     13,547   9,772     1,555   11.5 %   5,330   54.5 %
Net interest income-FTE 108,367 105,308 106,914 3,059 2.9 % 1,453 1.4 %
Provision for loan losses, LHFI 3,167 3,961 2,921 (794 ) -20.0 % 246 8.4 %
Provision for loan losses, acquired loans   (441 )   150   (2,564 )   (591 ) n/m   2,123   82.8 %
Net interest income after provision-FTE   105,641     101,197   106,557     4,444   4.4 %   (916 ) -0.9 %
Service charges on deposit accounts 10,647 10,857 10,755 (210 ) -1.9 % (108 ) -1.0 %
Bank card and other fees 7,070 6,626 7,370 444 6.7 % (300 ) -4.1 %
Mortgage banking, net 9,046 11,265 9,008 (2,219 ) -19.7 % 38 0.4 %
Insurance commissions 10,735 9,419 9,745 1,316 14.0 % 990 10.2 %
Wealth management 7,478 7,567 7,674 (89 ) -1.2 % (196 ) -2.6 %
Other, net   2,415     1,059   5,637     1,356   n/m   (3,222 ) -57.2 %
Nonint inc-excl sec gains (losses), net 47,391 46,793 50,189 598 1.3 % (2,798 ) -5.6 %
Security gains (losses), net         1       n/m   (1 ) -100.0 %
Total noninterest income   47,391     46,793   50,190     598   1.3 %   (2,799 ) -5.6 %
Salaries and employee benefits 59,975 58,475 57,185 1,500 2.6 % 2,790 4.9 %
Defined benefit plan termination 17,644 n/m (17,644 ) -100.0 %
Services and fees 16,322 15,746 15,009 576 3.7 % 1,313 8.7 %
Net occupancy-premises 6,550 6,502 6,210 48 0.7 % 340 5.5 %
Equipment expense 6,202 6,099 6,162 103 1.7 % 40 0.6 %
Other real estate expense, net (93 ) 866 383 (959 ) n/m (476 ) n/m
FDIC assessment expense 2,538 2,995 2,686 (457 ) -15.3 % (148 ) -5.5 %
Other expense   12,306     11,782   16,796     524   4.4 %   (4,490 ) -26.7 %
Total noninterest expense   103,800     102,465   122,075     1,335   1.3 %   (18,275 ) -15.0 %
Income before income taxes and tax eq adj 49,232 45,525 34,672 3,707 8.1 % 14,560 42.0 %
Tax equivalent adjustment   3,203     3,215   4,910     (12 ) -0.4 %   (1,707 ) -34.8 %
Income before income taxes 46,029 42,310 29,762 3,719 8.8 % 16,267 54.7 %
Income taxes   6,216     5,480   5,727     736   13.4 %   489   8.5 %
Net income $ 39,813   $ 36,830 $ 24,035   $ 2,983   8.1 % $ 15,778   65.6 %
 
Per share data
Earnings per share - basic $ 0.59   $ 0.54 $ 0.35   $ 0.05   9.3 % $ 0.24   68.6 %
 
Earnings per share - diluted $ 0.59   $ 0.54 $ 0.35   $ 0.05   9.3 % $ 0.24   68.6 %
 
Dividends per share $ 0.23   $ 0.23 $ 0.23       0.0 %     0.0 %
 
Weighted average shares outstanding
Basic   67,758,097     67,809,234   67,736,298  
 
Diluted   67,907,267     67,960,583   67,892,532  
 
Period end shares outstanding   67,621,111     67,775,068   67,740,901  
 
n/m - percentage changes greater than +/- 100% are considered not
meaningful
 

See Notes to Consolidated Financials

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
             
Quarter Ended Linked Quarter Year over Year

NONPERFORMING ASSETS (1)

  6/30/2018     3/31/2018     6/30/2017   $ Change % Change $ Change % Change  
Nonaccrual loans
Alabama $ 3,685 $ 3,121 $ 1,723 $ 564 18.1 % $ 1,962 n/m
Florida 2,978 2,116 3,174 862 40.7 % (196 ) -6.2 %
Mississippi (2) 39,006 48,600 63,889 (9,594 ) -19.7 % (24,883 ) -38.9 %
Tennessee (3) 5,338 5,530 4,975 (192 ) -3.5 % 363 7.3 %
Texas   10,356     9,329     383     1,027   11.0 %   9,973   n/m
Total nonaccrual loans 61,363 68,696 74,144 (7,333 ) -10.7 % (12,781 ) -17.2 %
Other real estate
Alabama 8,290 8,962 13,301 (672 ) -7.5 % (5,011 ) -37.7 %
Florida 9,789 12,550 17,377 (2,761 ) -22.0 % (7,588 ) -43.7 %
Mississippi (2) 19,358 15,737 14,377 3,621 23.0 % 4,981 34.6 %
Tennessee (3) 1,486 1,523 3,363 (37 ) -2.4 % (1,877 ) -55.8 %
Texas   744     782     1,540     (38 ) -4.9 %   (796 ) -51.7 %
Total other real estate   39,667     39,554     49,958     113   0.3 %   (10,291 ) -20.6 %
Total nonperforming assets $ 101,030   $ 108,250   $ 124,102   $ (7,220 ) -6.7 % $ (23,072 ) -18.6 %
 

LOANS PAST DUE OVER 90 DAYS (1)

LHFI $ 529   $ 1,419   $ 1,216   $ (890 ) -62.7 % $ (687 ) -56.5 %
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 34,693   $ 34,826   $ 29,906   $ (133 ) -0.4 % $ 4,787   16.0 %
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (1)

  6/30/2018     3/31/2018     6/30/2017   $ Change % Change $ Change % Change  
Beginning Balance $ 81,235 $ 76,733 $ 72,445 $ 4,502 5.9 % $ 8,790 12.1 %
Transfers (4) 782 782 n/m 782 n/m
Provision for loan losses 3,167 3,961 2,921 (794 ) -20.0 % 246 8.4 %
Charge-offs (3,421 ) (2,542 ) (2,118 ) (879 ) -34.6 % (1,303 ) -61.5 %
Recoveries   1,803     3,083     2,936     (1,280 ) -41.5 %   (1,133 ) -38.6 %
Net (charge-offs) recoveries   (1,618 )   541     818     (2,159 ) n/m   (2,436 ) n/m
Ending Balance $ 83,566   $ 81,235   $ 76,184   $ 2,331   2.9 % $ 7,382   9.7 %
 

PROVISION FOR LOAN LOSSES (1)

Alabama $ 434 $ 618 $ 866 $ (184 ) -29.8 % $ (432 ) -49.9 %
Florida (811 ) (863 ) (975 ) 52 6.0 % 164 16.8 %
Mississippi (2) 2,768 2,664 2,268 104 3.9 % 500 22.0 %
Tennessee (3) 82 (268 ) 322 350 n/m (240 ) -74.5 %
Texas   694     1,810     440     (1,116 ) -61.7 %   254   57.7 %
Total provision for loan losses $ 3,167   $ 3,961   $ 2,921   $ (794 ) -20.0 % $ 246   8.4 %
 

NET CHARGE-OFFS (RECOVERIES)
(1)

Alabama $ 112 $ 84 $ (29 ) $ 28 33.3 % $ 141 n/m
Florida (122 ) (960 ) (973 ) 838 87.3 % 851 87.5 %
Mississippi (2) 1,705 267 33 1,438 n/m 1,672 n/m
Tennessee (3) 70 109 146 (39 ) -35.8 % (76 ) -52.1 %
Texas   (147 )   (41 )   5     (106 ) n/m   (152 ) n/m
Total net charge-offs (recoveries) $ 1,618   $ (541 ) $ (818 ) $ 2,159   n/m $ 2,436   n/m
 

(1)

 

-

 

Excludes acquired loans.

(2)

-

Mississippi includes Central and Southern Mississippi Regions.

(3)

-

Tennessee includes Memphis, Tennessee and Northern Mississippi
Regions.

(4)

-

The allowance for loan losses balance related to the remaining
loans acquired in the Bay Bank & Trust Company merger on March 16,
2012.

Total loans of $14.6 million were reclassified from acquired
loans to LHFI during the second quarter of 2018.

 

n/m

-

percentage changes greater than +/- 100% are considered not
meaningful

 

See Notes to Consolidated Financials

 
           
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)  
Quarter Ended Six Months Ended

AVERAGE BALANCES

  6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017     6/30/2018     6/30/2017  
Securities AFS-taxable $ 2,038,759 $ 2,141,144 $ 2,247,247 $ 2,349,736 $ 2,334,600 $ 2,089,669 $ 2,293,609
Securities AFS-nontaxable 50,035 57,972 61,691 67,994 75,640 53,982 82,045
Securities HTM-taxable 972,571 1,005,721 1,045,723 1,086,773 1,108,158 989,054 1,116,379
Securities HTM-nontaxable   30,337     32,734     32,781     32,829     32,878     31,529     32,943  
Total securities   3,091,702     3,237,571     3,387,442     3,537,332     3,551,276     3,164,234     3,524,976  
Loans (including loans held for sale) 8,707,466 8,636,967 8,686,916 8,532,523 8,348,758 8,672,411 8,212,361
Acquired loans 202,140 243,152 273,918 299,221 315,558 222,533 283,200
Fed funds sold and rev repos 1,063 478 1,724 3,582 3,184 772 1,798
Other earning assets   186,224     213,985     80,218     84,320     77,770     200,028     78,638  
Total earning assets   12,188,595     12,332,153     12,430,218     12,456,978     12,296,546     12,259,978     12,100,973  
Allowance for loan losses (86,315 ) (82,304 ) (86,704 ) (85,363 ) (83,328 ) (84,321 ) (83,361 )
Cash and due from banks 319,075 336,642 315,586 312,409 307,966 327,810 309,247
Other assets   1,042,156     1,030,738     1,192,464     1,202,766     1,229,981     1,036,478     1,232,710  
Total assets $ 13,463,511   $ 13,617,229   $ 13,851,564   $ 13,886,790   $ 13,751,165   $ 13,539,945   $ 13,559,569  
 
Interest-bearing demand deposits $ 2,439,777 $ 2,404,428 $ 2,244,625 $ 2,192,064 $ 2,035,491 $ 2,422,200 $ 2,008,884
Savings deposits 3,860,096 3,737,507 3,291,407 3,284,323 3,337,374 3,799,140 3,328,522
Time deposits   1,798,855     1,748,645     1,756,576     1,736,683     1,777,529     1,773,889     1,714,242  
Total interest-bearing deposits 8,098,728 7,890,580 7,292,608 7,213,070 7,150,394 7,995,229 7,051,648
Fed funds purchased and repos 352,256 277,877 475,850 547,863 525,523 315,272 512,316
Short-term borrowings 248,932 751,219 1,276,543 1,335,476 1,047,107 498,688 967,917
Long-term FHLB advances 921 938 954 970 141,097 929 195,761
Junior subordinated debt securities   61,856     61,856     61,856     61,856     61,856     61,856     61,856  
Total interest-bearing liabilities 8,762,693 8,982,470 9,107,811 9,159,235 8,925,977 8,871,974 8,789,498
Noninterest-bearing deposits 2,930,726 2,881,374 2,994,292 3,003,763 3,110,125 2,906,186 3,059,432
Other liabilities   188,186     180,871     169,828     145,925     162,823     184,549     167,917  
Total liabilities 11,881,605 12,044,715 12,271,931 12,308,923 12,198,925 11,962,709 12,016,847

Shareholders' equity

  1,581,906     1,572,514     1,579,633     1,577,867     1,552,240     1,577,236     1,542,722  
Total liabilities and equity $ 13,463,511   $ 13,617,229   $ 13,851,564   $ 13,886,790   $ 13,751,165   $ 13,539,945   $ 13,559,569  
 

See Notes to Consolidated Financials

 
       
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
 

PERIOD END BALANCES

  6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017  
Cash and due from banks $ 387,119 $ 315,276 $ 335,768 $ 350,123 $ 318,329
Fed funds sold and rev repos 112 615 3,215 6,900
Securities available for sale 1,974,675 2,097,497 2,238,635 2,369,089 2,447,688
Securities held to maturity 985,845 1,023,975 1,056,486 1,102,283 1,139,754
Loans held for sale (LHFS) 196,217 163,882 180,512 204,157 203,652
Loans held for investment (LHFI) 8,678,983 8,513,985 8,569,967 8,407,341 8,296,045
Allowance for loan losses, LHFI   (83,566 )   (81,235 )   (76,733 )   (80,332 )   (76,184 )
Net LHFI 8,595,417 8,432,750 8,493,234 8,327,009 8,219,861
Acquired loans 173,107 215,476 261,517 283,757 314,910
Allowance for loan losses, acquired loans   (3,046 )   (4,294 )   (4,079 )   (5,768 )   (7,423 )
Net acquired loans   170,061     211,182     257,438     277,989     307,487  
Net LHFI and acquired loans 8,765,478 8,643,932 8,750,672 8,604,998 8,527,348
Premises and equipment, net 177,686 178,584 179,339 181,312 182,315
Mortgage servicing rights 97,411 94,850 84,269 81,477 82,628
Goodwill 379,627 379,627 379,627 379,627 379,627
Identifiable intangible assets 13,677 14,963 16,360 17,883 19,422
Other real estate 39,667 39,554 43,228 48,356 49,958
Other assets   507,863     511,187     532,442     542,135     551,517  
Total assets $ 13,525,265   $ 13,463,439   $ 13,797,953   $ 13,884,655   $ 13,909,138  
 
Deposits:
Noninterest-bearing $ 2,958,354 $ 3,004,442 $ 2,978,074 $ 2,998,013 $ 3,092,915
Interest-bearing   8,114,081     7,971,359     7,599,438     7,233,729     7,330,476  
Total deposits 11,072,435 10,975,801 10,577,512 10,231,742 10,423,391
Fed funds purchased and repos 477,891 274,833 469,827 545,603 508,068
Short-term borrowings 186,647 442,689 971,049 1,322,159 1,222,592
Long-term FHLB advances 913 929 946 962 978
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
Other liabilities   141,451     137,194     145,062     139,798     130,335  
Total liabilities   11,941,193     11,893,302     12,226,252     12,302,120     12,347,220  
Common stock 14,089 14,121 14,115 14,114 14,114
Capital surplus 361,715 366,021 369,124 368,131 367,075
Retained earnings 1,282,007 1,257,881 1,228,187 1,228,115 1,209,238
Accum other comprehensive loss, net of tax   (73,739 )   (67,886 )   (39,725 )   (27,825 )   (28,509 )

Total shareholders' equity

  1,584,072     1,570,137     1,571,701     1,582,535     1,561,918  
Total liabilities and equity $ 13,525,265   $ 13,463,439   $ 13,797,953   $ 13,884,655   $ 13,909,138  
 

See Notes to Consolidated Financials

 
           
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands except per share data)
(unaudited)  
 
Quarter Ended Six Months Ended

INCOME STATEMENTS

  6/30/2018     3/31/2018   12/31/2017     9/30/2017     6/30/2017     6/30/2018     6/30/2017  
Interest and fees on LHFS & LHFI-FTE $ 99,761 $ 94,712 $ 95,816 $ 93,703 $ 89,486 $ 194,473 $ 173,276
Interest and fees on acquired loans 5,022 4,877 6,401 6,625 6,263 9,899 11,452
Interest on securities-taxable 16,894 17,506 18,327 19,291 19,377 34,400 38,574
Interest on securities-tax exempt-FTE 733 824 1,035 1,104 1,178 1,557 2,478
Interest on fed funds sold and rev repos 5 2 7 14 11 7 12
Other interest income   1,054     934   473     355     371     1,988     638  
Total interest income-FTE   123,469     118,855   122,059     121,092     116,686     242,324     226,430  
Interest on deposits 12,139 9,491 7,284 6,381 5,107 21,630 9,052
Interest on fed funds pch and repos 1,250 662 1,116 1,301 1,037 1,912 1,735
Other interest expense   1,713     3,394   4,555     4,520     3,628     5,107     6,301  
Total interest expense   15,102     13,547   12,955     12,202     9,772     28,649     17,088  
Net interest income-FTE 108,367 105,308 109,104 108,890 106,914 213,675 209,342
Provision for loan losses, LHFI 3,167 3,961 5,739 3,672 2,921 7,128 5,683
Provision for loan losses, acquired loans   (441 )   150   (1,573 )   (1,653 )   (2,564 )   (291 )   (4,169 )
Net interest income after provision-FTE   105,641     101,197   104,938     106,871     106,557     206,838     207,828  
Service charges on deposit accounts 10,647 10,857 11,193 11,223 10,755 21,504 21,587
Bank card and other fees 7,070 6,626 7,266 7,150 7,370 13,696 13,870
Mortgage banking, net 9,046 11,265 6,284 4,425 9,008 20,311 19,193
Insurance commissions 10,735 9,419 8,813 10,398 9,745 20,154 18,957
Wealth management 7,478 7,567 7,723 7,530 7,674 15,045 15,087
Other, net   2,415     1,059   2,681     3,740     5,637     3,474     7,528  
Nonint inc-excl sec gains (losses), net 47,391 46,793 43,960 44,466 50,189 94,184 96,222
Security gains (losses), net             14     1         1  
Total noninterest income   47,391     46,793   43,960     44,480     50,190     94,184     96,223  
Salaries and employee benefits 59,975 58,475 58,820 57,871 57,185 118,450 112,574
Defined benefit plan termination 17,644 17,644
Services and fees 16,322 15,746 15,419 15,133 15,009 32,068 30,341
Net occupancy-premises 6,550 6,502 6,617 6,702 6,210 13,052 12,448
Equipment expense 6,202 6,099 5,996 6,297 6,162 12,301 12,160
Other real estate expense, net (93 ) 866 666 864 383 773 2,142
FDIC assessment expense 2,538 2,995 2,868 2,816 2,686 5,533 5,326
Other expense   12,306     11,782   12,565     13,403     16,796     24,088     31,497  
Total noninterest expense   103,800     102,465   102,951     103,086     122,075     206,265     224,132  
Income before income taxes and tax eq adj 49,232 45,525 45,947 48,265 34,672 94,757 79,919
Tax equivalent adjustment   3,203     3,215   5,060     4,978     4,910     6,418     9,748  
Income before income taxes 46,029 42,310 40,887 43,287 29,762 88,339 70,171
Income taxes   6,216     5,480   25,119     8,708     5,727     11,696     14,888  
Net income $ 39,813   $ 36,830 $ 15,768   $ 34,579   $ 24,035   $ 76,643   $ 55,283  
 
Per share data
Earnings per share - basic $ 0.59   $ 0.54 $ 0.23   $ 0.51   $ 0.35   $ 1.13   $ 0.82  
 
Earnings per share - diluted $ 0.59   $ 0.54 $ 0.23   $ 0.51   $ 0.35   $ 1.13   $ 0.81  
 
Dividends per share $ 0.23   $ 0.23 $ 0.23   $ 0.23   $ 0.23   $ 0.46   $ 0.46  
 
Weighted average shares outstanding
Basic   67,758,097     67,809,234   67,742,792     67,741,655     67,736,298     67,783,524     67,711,966  
 
Diluted   67,907,267     67,960,583   67,938,986     67,916,418     67,892,532     67,928,829     67,864,414  
 
Period end shares outstanding   67,621,111     67,775,068   67,746,094   67,742,135     67,740,901     67,621,111     67,740,901  
 

See Notes to Consolidated Financials

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
             
Quarter Ended

NONPERFORMING ASSETS (1)

  6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017  
Nonaccrual loans
Alabama $ 3,685 $ 3,121 $ 3,083 $ 1,629 $ 1,723
Florida 2,978 2,116 3,034 3,242 3,174
Mississippi (2) 39,006 48,600 49,129 59,483 63,889
Tennessee (3) 5,338 5,530 4,436 4,589 4,975
Texas   10,356     9,329     7,893     346     383  
Total nonaccrual loans 61,363 68,696 67,575 69,289 74,144
Other real estate
Alabama 8,290 8,962 11,714 12,726 13,301
Florida 9,789 12,550 13,937 16,100 17,377
Mississippi (2) 19,358 15,737 14,260 15,319 14,377
Tennessee (3) 1,486 1,523 2,535 2,671 3,363
Texas   744     782     782     1,540     1,540  
Total other real estate   39,667     39,554     43,228     48,356     49,958  
Total nonperforming assets $ 101,030   $ 108,250   $ 110,803   $ 117,645   $ 124,102  
 

LOANS PAST DUE OVER 90 DAYS (1)

LHFI $ 529   $ 1,419   $ 2,171   $ 2,244   $ 1,216  
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 34,693   $ 34,826   $ 35,544   $ 32,332   $ 29,906  
 
 
Quarter Ended Six Months Ended

ALLOWANCE FOR LOAN LOSSES (1)

  6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017     6/30/2018     6/30/2017  
Beginning Balance $ 81,235 $ 76,733 $ 80,332 $ 76,184 $ 72,445 $ 76,733 $ 71,265
Transfers (4) 782

782

 

 

Provision for loan losses 3,167 3,961 5,739 3,672 2,921 7,128 5,683
Charge-offs (3,421 ) (2,542 ) (12,075 ) (2,752 ) (2,118 ) (5,963 ) (6,320 )
Recoveries   1,803     3,083     2,737     3,228     2,936     4,886     5,556  
Net (charge-offs) recoveries   (1,618 )   541     (9,338 )   476     818     (1,077 )   (764 )
Ending Balance $ 83,566   $ 81,235   $ 76,733   $ 80,332   $ 76,184   $ 83,566   $ 76,184  
 

PROVISION FOR LOAN LOSSES (1)

Alabama $ 434 $ 618 $ 559 $ 1,218 $ 866 $ 1,052 $ 2,055
Florida (811 ) (863 ) (1,235 ) (744 ) (975 ) (1,674 ) (972 )
Mississippi (2) 2,768 2,664 2,779 1,860 2,268 5,432 4,094
Tennessee (3) 82 (268 ) (439 ) (72 ) 322 (186 ) 530
Texas   694     1,810     4,075     1,410     440     2,504     (24 )
Total provision for loan losses $ 3,167   $ 3,961   $ 5,739   $ 3,672   $ 2,921   $ 7,128   $ 5,683  
 

NET CHARGE-OFFS (RECOVERIES) (1)

Alabama $ 112 $ 84 $ 196 $ 314 $ (29 ) $ 196 $ 37
Florida (122 ) (960 ) (946 ) (796 ) (973 ) (1,082 ) (1,128 )
Mississippi (2) 1,705 267 5,574 (11 ) 33 1,972 1,792
Tennessee (3) 70 109 79 85 146 179 229
Texas   (147 )   (41 )   4,435     (68 )   5     (188 )   (166 )
Total net charge-offs (recoveries) $ 1,618   $ (541 ) $ 9,338   $ (476 ) $ (818 ) $ 1,077   $ 764  
 

(1)

 

-

 

Excludes acquired loans.

(2)

-

Mississippi includes Central and Southern Mississippi Regions.

(3)

-

Tennessee includes Memphis, Tennessee and Northern Mississippi
Regions.

(4)

-

The allowance for loan losses balance related to the remaining
loans acquired in the Bay Bank & Trust Company merger on March 16,
2012.

Total loans of $14.6 million were reclassified from acquired
loans to LHFI during the second quarter of 2018.

 

See Notes to Consolidated Financials

 
             
TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2018
(unaudited)
 
Quarter Ended Six Months Ended

FINANCIAL RATIOS AND OTHER DATA

  6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017   6/30/2018   6/30/2017  
Return on equity 10.09 % 9.50 % 3.96 % 8.69 % 6.21 % 9.80 % 7.23 %
Return on average tangible equity 13.77 % 13.05 % 5.60 % 11.95 % 8.68 % 13.41 % 10.02 %
Return on assets 1.19 % 1.10 % 0.45 % 0.99 % 0.70 % 1.14 % 0.82 %
Interest margin - Yield - FTE 4.06 % 3.91 % 3.90 % 3.86 % 3.81 % 3.99 % 3.77 %
Interest margin - Cost 0.50 % 0.45 % 0.41 % 0.39 % 0.32 % 0.47 % 0.28 %
Net interest margin - FTE 3.57 % 3.46 % 3.48 % 3.47 % 3.49 % 3.51 % 3.49 %
Efficiency ratio (1) 64.90 % 65.50 % 65.21 % 65.14 % 64.50 % 65.20 % 65.57 %
Full-time equivalent employees 2,890 2,905 2,893 2,878 2,858
 

CREDIT QUALITY RATIOS (2)

Net charge-offs/average loans 0.07 % -0.03 % 0.43 % -0.02 % -0.04 % 0.03 % 0.02 %
Provision for loan losses/average loans 0.15 % 0.19 % 0.26 % 0.17 % 0.14 % 0.17 % 0.14 %
Nonperforming loans/total loans (incl LHFS) 0.69 % 0.79 % 0.77 % 0.80 % 0.87 %
Nonperforming assets/total loans (incl LHFS) 1.14 % 1.25 % 1.27 % 1.37 % 1.46 %
Nonperforming assets/total loans (incl LHFS) +ORE 1.13 % 1.24 % 1.26 % 1.36 % 1.45 %
ALL/total loans (excl LHFS) 0.96 % 0.95 % 0.90 % 0.96 % 0.92 %
ALL-commercial/total commercial loans 1.05 % 1.04 % 0.95 % 1.02 % 0.99 %
ALL-consumer/total consumer and home mortgage loans 0.63 % 0.64 % 0.68 % 0.73 % 0.67 %
ALL/nonperforming loans 136.18 % 118.25 % 113.55 % 115.94 % 102.75 %
ALL/nonperforming loans (excl specifically reviewed impaired loans) 345.87 % 314.28 % 320.84 % 301.50 % 277.42 %
 

CAPITAL RATIOS

Total equity/total assets 11.71 % 11.66 % 11.39 % 11.40 % 11.23 %
Tangible equity/tangible assets 9.07 % 9.00 % 8.77 % 8.79 % 8.61 %
Tangible equity/risk-weighted assets 11.20 % 11.25 % 11.13 % 11.29 % 11.19 %
Tier 1 leverage ratio (3) 10.22 % 9.96 % 9.67 % 9.61 % 9.56 %
Common equity tier 1 capital ratio (3) 12.01 % 12.05 % 11.77 % 11.80 % 11.73 %
Tier 1 risk-based capital ratio (3) 12.58 % 12.62 % 12.33 % 12.37 % 12.30 %
Total risk-based capital ratio (3) 13.39 % 13.44 % 13.10 % 13.19 % 13.11 %
 

STOCK PERFORMANCE

Market value-Close $ 32.63 $ 31.16 $ 31.86 $ 33.12 $ 32.16
Book value $ 23.43 $ 23.17 $ 23.20 $ 23.36 $ 23.06
Tangible book value $ 17.61 $ 17.34 $ 17.35 $ 17.49 $ 17.17
 

(1)

 

-

 

The efficiency ratio is noninterest expense to total net
interest income (FTE) and noninterest income, excluding security
gains (losses), amortization of partnership tax credits,
amortization of purchased intangibles, and significant non-routine
income and expense items.

(2)

-

Excludes acquired loans.

(3)

-

The regulatory capital ratios for December 31, 2017 contain a
reclassification adjustment of $8.5 million from AOCI to retained
earnings as allowed by regulatory agencies in an interagency
statement released January 18, 2018 to address disproportionate
tax effect in AOCI resulting from the recent enactment of the Tax
Cuts and Jobs Act of 2017 and the application of Financial
Accounting Standards Board Accounting Standards Codification Topic
740, Income Taxes.

 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018
($ 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. In addition, Trustmark paid off Reliance
Preferred Stock of $1.1 million bringing the total consideration paid to
$24.8 million.

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 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).

Note 2 - Securities Available for Sale and Held to Maturity

The following table is a summary of the estimated fair value of
securities available for sale and the amortized cost of securities held
to maturity ($ in thousands):

  6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017

SECURITIES AVAILABLE FOR SALE

U.S. Government agency obligations
Issued by U.S. Government agencies $ 36,414 $ 40,381 $ 45,285 $ 49,994 $ 51,549
Obligations of states and political subdivisions 65,348 75,013 79,229 89,144 96,514
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 60,245 62,457 65,746 60,902 58,422
Issued by FNMA and FHLMC 727,433 767,676 814,450 860,131 860,571
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 897,652 954,537 1,016,790 1,087,169 1,157,241
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   187,583   197,433   217,135   221,749   223,391
Total securities available for sale $ 1,974,675 $ 2,097,497 $ 2,238,635 $ 2,369,089 $ 2,447,688
 

SECURITIES HELD TO MATURITY

U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 3,714 $ 3,703 $ 3,692 $ 3,680 $ 3,669
Obligations of states and political subdivisions 42,458 46,011 46,039 46,069 46,098
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 12,756 12,974 13,539 14,191 14,399
Issued by FNMA and FHLMC 123,377 128,517 133,975 139,172 144,282
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 627,470 653,325 678,926 708,715 740,042
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   176,070   179,445   180,315   190,456   191,264
Total securities held to maturity $ 985,845 $ 1,023,975 $ 1,056,486 $ 1,102,283 $ 1,139,754
TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018
($ in thousands)
(unaudited)

Note 2 - Securities Available for Sale and Held to Maturity
(continued)

At March 31, 2018, the net unamortized, unrealized loss included in
accumulated other comprehensive loss in the accompanying balance sheet
for securities held to maturity previously transferred from securities
available for sale totaled approximately $17.5 million ($13.2 million,
net of tax).

Management continues to focus on asset quality as one of the strategic
goals of the securities portfolio, which is evidenced by the investment
of approximately 96% of the portfolio in GSE-backed obligations and
other Aaa rated securities as determined by Moody's. None of the
securities owned by Trustmark are collateralized by assets which are
considered sub-prime. Furthermore, outside of stock ownership in the
Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and
Federal Reserve Bank, Trustmark does not hold any other equity
investment in a GSE.

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)

  6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Loans secured by real estate:
Construction, land development and other land loans $ 1,038,745 $ 986,188 $ 987,624 $ 950,144 $ 922,029
Secured by 1-4 family residential properties 1,742,496 1,698,885 1,675,311 1,648,733 1,655,968
Secured by nonfarm, nonresidential properties