Trustmark Corporation (NASDAQ:TRMK) reported net income of $32.9 million in the second quarter of 2014, which represented diluted earnings per share of $0.49, an increase of 14.0% from the prior quarter and 6.5% from the prior year. Trustmark’s performance during the second quarter of 2014 produced a return on average tangible equity of 13.90% and a return on average assets of 1.10%. During the first six months of 2014, Trustmark’s net income totaled $61.9 million, which represented diluted earnings per share of $0.92, an increase of 9.5% from the prior year. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2014, to shareholders of record on September 1, 2014.
Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50909392&lang=en.
Gerard R. Host, President and CEO, stated, “Trustmark continued to achieve solid financial results in the second quarter, reflecting a 7.5% increase in total revenue as well as the fifth consecutive quarter of growth in our legacy loan portfolio. Thanks to our associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue meeting the needs of our customers and creating value for our shareholders.”
Balance Sheet Management
- Loans held for investment increased at an annualized rate of 17.6% in the second quarter
- Total loans (including acquired and held for investment) expanded at an annualized rate of 9.8%
- Average noninterest-bearing deposits increased $46.1 million to represent 27.0% of total average deposits
Loans held for investment totaled $6.2 billion at June 30, 2014, an increase of $263.2 million, or 4.4%, from the prior quarter and $609.6 million, or 10.9%, from one year earlier. Real estate secured loans increased $126.8 million during the second quarter. Specifically, commercial real estate loans increased $82.6 million, reflecting growth in Trustmark’s Texas, Alabama, Mississippi and Florida markets. The single-family mortgage portfolio increased $48.1 million led by growth in the Mississippi, Alabama and Tennessee markets. Other real estate secured loans, which include multifamily projects, expanded $57.2 million, and reflected growth in Trustmark’s Mississippi, Texas and Alabama markets. Construction and development loans declined $61.0 million from the prior quarter, reflecting in part transition to the non-owner occupied category.
Other loans, which include lending to states and municipalities, increased $88.4 million during the second quarter due to growth in Trustmark’s Mississippi, Texas, Florida and Alabama markets. Commercial and industrial loans increased $42.8 million as growth in Alabama, Tennessee and Texas more than offset reductions in Mississippi and Florida. The consumer lending portfolio expanded $5.2 million during the quarter due to growth in Trustmark’s Mississippi and Alabama markets.
Acquired loans totaled $646.5 million at June 30, 2014, down $99.8 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $6.8 billion at June 30, 2014, up $163.5 million, or 2.5%, from the prior quarter.
Average earning assets during the second quarter increased $185.4 million relative to the prior quarter principally due to increased loan and investment security balances. Average deposits in the second quarter declined $51.6 million as the $46.1 million increase in noninterest-bearing deposits was offset by a decline in interest-bearing deposits of $97.7 million.
Trustmark’s solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At June 30, 2014, Trustmark’s tangible equity to tangible assets ratio was 8.51% while the total risk-based capital ratio was 14.54%, significantly exceeding the 10.00% benchmark to be classified as “well-capitalized.” Trustmark’s solid capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.
Credit Quality
- Continued reduction in classified and criticized loan balances
- Foreclosed other real estate declined 4.1% from the prior quarter
- Allowance for loan losses represented 159.71% of nonperforming loans, excluding impaired loans
Nonperforming loans totaled $71.1 million at June 30, 2014, an increase of 11.1% from the prior quarter and a decline of 4.3% from one year earlier. The increase in nonperforming loans was primarily the result of one substandard credit migrating to nonaccrual status. Foreclosed other real estate totaled $107.0 million, a decrease of $4.6 million, or 4.1%, from the prior quarter. Relative to levels one year earlier, other real estate decreased $10.7 million. Collectively, nonperforming assets totaled $178.1 million, an increase of $2.6 million from the prior quarter and a decrease of $13.9 million from one year earlier.
Net charge-offs during the second quarter of 2014 totaled $1.2 million and represented 0.08% of average loans. This compares to net recoveries in the prior quarter of $1.9 million, or -0.13% of average loans, and to net recoveries in the second quarter of the prior year of $771 thousand, or -0.05% of average loans. The provision for loan losses for loans held for investment was $351 thousand in the second quarter of 2014.
During the second quarter, Trustmark experienced a decline of $10.4 million, or 4.9%, in classified loan balances and a decline of $5.5 million, or 2.2%, in criticized loans relative to the prior quarter. Relative to levels one year earlier, classified loan balances decreased $37.8 million, or 15.7%, while criticized loan balances decreased $43.7 million, or 15.2%.
Allocation of Trustmark’s $66.6 million allowance for loan losses represented 1.20% of commercial loans and 0.75% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.08% at June 30, 2014, which represents a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 159.71% of nonperforming loans, excluding impaired loans.
All of the above credit metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.
Revenue Generation
- Revenue totaled $149.4 million in the second quarter, an increase of 7.5% from the prior quarter
- Net interest income (FTE) expanded 10.7% from the prior quarter to $109.2 million
- Bank card and other fees totaled $9.9 million, up 9.0% from the prior quarter
Net interest income (FTE) in the second quarter totaled $109.2 million, resulting in a net interest margin of 4.21%. Relative to the prior quarter, interest income (FTE) increased $10.2 million due in part to increased loan balances as well as a $5.1 million increase in recoveries on acquired loans. The yield on acquired loans totaled 13.40% and included recoveries from settlement of debt of $8.9 million, which represented approximately 5.15% of the total acquired annualized loan yield in the second quarter. Excluding acquired loans, the net interest margin in the second quarter totaled 3.55%, up three basis points from the prior quarter reflecting increased loan yields and balances.
Noninterest income remained stable at $44.1 million in the second quarter. Service charges on deposit accounts totaled $11.8 million in the second quarter, an increase of $278 thousand, or 2.4%, from the prior quarter. Bank card and other fees totaled $9.9 million in the second quarter, up $813 thousand from the prior quarter, reflecting increased interchange income.
Mortgage loan production in the second quarter totaled $322.2 million, an increase of 39.9% from the prior quarter, due in part to seasonal factors, lower mortgage rates, and expanded originations in Trustmark’s Alabama markets. Mortgage banking revenue totaled $6.2 million in the second quarter, down $638 thousand due principally to decreased positive mortgage servicing hedge ineffectiveness.
As a result of increased property and casualty business, insurance revenue in the second quarter totaled $8.3 million, an increase of 2.5% from the prior quarter. Wealth management revenue totaled $7.7 million, down $425 thousand from the prior quarter, due principally to reduced annuity income.
Noninterest Expense
- Routine noninterest expense remained well-controlled
- Continued to make prudent investments and reallocate resources to promote revenue growth
- Efficiency ratio improved to 64.31%
Noninterest expense totaled $102.8 million in the second quarter; excluding ORE and intangible amortization of $6.0 million, noninterest expense during the second quarter totaled $96.7 million, an increase of $725 thousand from comparable expenses in the prior quarter. Salaries and benefits expense remained well-controlled and totaled $56.1 million in the second quarter, down $592 thousand, or 1.0%, from the prior quarter. Services and fees increased $1.4 million principally due to higher legal and professional service fees.
Trustmark continued to make prudent investments and reallocate resources to support revenue growth and profitability. During the second quarter, Trustmark opened new banking centers and regional administrative offices in Memphis, Tennessee as well as in Montgomery, Alabama. Two banking centers with limited growth opportunities were consolidated into other offices during the quarter. Trustmark is committed to investments to support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 23, 2014, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877)317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call. A replay of the conference call will also be available through Wednesday, August 13, 2014, in archived format at the same web address or by calling (877) 344-7529, passcode 10008303.
Trustmark Corporation is a financial services company providing banking and financial solutions through 207 offices in Alabama, Florida, Mississippi, Tennessee and Texas.
Forward-Looking Statements
Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.
Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of the European financial crisis on the U.S. economy and the markets we serve, and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||
| June 30, 2014 | |||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||
| Linked Quarter | Year over Year | ||||||||||||||||||||||||||
QUARTERLY AVERAGE BALANCES | 6/30/2014 | 3/31/2014 | 6/30/2013 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||
| Securities AFS-taxable | $ | 2,205,352 | $ | 2,136,392 | $ | 3,259,086 | $ | 68,960 | 3.2 | % | $ | (1,053,734 | ) | -32.3 | % | ||||||||||||
| Securities AFS-nontaxable | 135,956 | 149,744 | 171,974 | (13,788 | ) | -9.2 | % | (36,018 | ) | -20.9 | % | ||||||||||||||||
| Securities HTM-taxable | 1,120,448 | 1,118,747 | 59,678 | 1,701 | 0.2 | % | 1,060,770 | n/m | |||||||||||||||||||
| Securities HTM-nontaxable | 43,551 | 31,039 | 11,520 | 12,512 | 40.3 | % | 32,031 | n/m | |||||||||||||||||||
| Total securities | 3,505,307 | 3,435,922 | 3,502,258 | 69,385 | 2.0 | % | 3,049 | 0.1 | % | ||||||||||||||||||
| Loans (including loans held for sale) | 6,160,781 | 5,950,720 | 5,735,296 | 210,061 | 3.5 | % | 425,485 | 7.4 | % | ||||||||||||||||||
| Acquired loans: | |||||||||||||||||||||||||||
| Noncovered loans | 664,733 | 751,723 | 949,367 | (86,990 | ) | -11.6 | % | (284,634 | ) | -30.0 | % | ||||||||||||||||
| Covered loans | 31,122 | 33,805 | 43,425 | (2,683 | ) | -7.9 | % | (12,303 | ) | -28.3 | % | ||||||||||||||||
| Fed funds sold and rev repos | 2,648 | 6,460 | 6,808 | (3,812 | ) | -59.0 | % | (4,160 | ) | -61.1 | % | ||||||||||||||||
| Other earning assets | 36,259 | 36,820 | 34,752 | (561 | ) | -1.5 | % | 1,507 | 4.3 | % | |||||||||||||||||
| Total earning assets | 10,400,850 | 10,215,450 | 10,271,906 | 185,400 | 1.8 | % | 128,944 | 1.3 | % | ||||||||||||||||||
| Allowance for loan losses | (77,652 | ) | (79,736 | ) | (84,574 | ) | 2,084 | -2.6 | % | 6,922 | -8.2 | % | |||||||||||||||
| Cash and due from banks | 304,441 | 407,078 | 284,056 | (102,637 | ) | -25.2 | % | 20,385 | 7.2 | % | |||||||||||||||||
| Other assets | 1,343,384 | 1,376,024 | 1,311,262 | (32,640 | ) | -2.4 | % | 32,122 | 2.4 | % | |||||||||||||||||
| Total assets | $ | 11,971,023 | $ | 11,918,816 | $ | 11,782,650 | $ | 52,207 | 0.4 | % | $ | 188,373 | 1.6 | % | |||||||||||||
| Interest-bearing demand deposits | $ | 1,826,019 | $ | 1,900,504 | $ | 1,811,402 | $ | (74,485 | ) | -3.9 | % | $ | 14,617 | 0.8 | % | ||||||||||||
| Savings deposits | 3,260,634 | 3,193,098 | 3,060,437 | 67,536 | 2.1 | % | 200,197 | 6.5 | % | ||||||||||||||||||
| Time deposits less than $100,000 | 1,225,706 | 1,280,513 | 1,419,381 | (54,807 | ) | -4.3 | % | (193,675 | ) | -13.6 | % | ||||||||||||||||
| Time deposits of $100,000 or more | 911,531 | 947,509 | 1,029,498 | (35,978 | ) | -3.8 | % | (117,967 | ) | -11.5 | % | ||||||||||||||||
| Total interest-bearing deposits | 7,223,890 | 7,321,624 | 7,320,718 | (97,734 | ) | -1.3 | % | (96,828 | ) | -1.3 | % | ||||||||||||||||
| Fed funds purchased and repos | 387,289 | 282,816 | 312,865 | 104,473 | 36.9 | % | 74,424 | 23.8 | % | ||||||||||||||||||
| Short-term borrowings | 59,465 | 65,010 | 51,718 | (5,545 | ) | -8.5 | % | 7,747 | 15.0 | % | |||||||||||||||||
| Long-term FHLB advances | 8,291 | 8,406 | 9,575 | (115 | ) | -1.4 | % | (1,284 | ) | -13.4 | % | ||||||||||||||||
| Subordinated notes | 49,915 | 49,907 | 49,882 | 8 | 0.0 | % | 33 | 0.1 | % | ||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 82,460 | - | 0.0 | % | (20,604 | ) | -25.0 | % | |||||||||||||||||
| Total interest-bearing liabilities | 7,790,706 | 7,789,619 | 7,827,218 | 1,087 | 0.0 | % | (36,512 | ) | -0.5 | % | |||||||||||||||||
| Noninterest-bearing deposits | 2,676,907 | 2,630,785 | 2,451,547 | 46,122 | 1.8 | % | 225,360 | 9.2 | % | ||||||||||||||||||
| Other liabilities | 111,170 | 130,749 | 159,525 | (19,579 | ) | -15.0 | % | (48,355 | ) | -30.3 | % | ||||||||||||||||
| Total liabilities | 10,578,783 | 10,551,153 | 10,438,290 | 27,630 | 0.3 | % | 140,493 | 1.3 | % | ||||||||||||||||||
| Shareholders' equity | 1,392,240 | 1,367,663 | 1,344,360 | 24,577 | 1.8 | % | 47,880 | 3.6 | % | ||||||||||||||||||
| Total liabilities and equity | $ | 11,971,023 | $ | 11,918,816 | $ | 11,782,650 | $ | 52,207 | 0.4 | % | $ | 188,373 | 1.6 | % | |||||||||||||
| Linked Quarter | Year over Year | ||||||||||||||||||||||||||
PERIOD END BALANCES | 6/30/2014 | 3/31/2014 | 6/30/2013 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||
| Cash and due from banks | $ | 322,960 | $ | 423,819 | $ | 301,532 | $ | (100,859 | ) | -23.8 | % | $ | 21,428 | 7.1 | % | ||||||||||||
| Fed funds sold and rev repos | 5,000 | - | 7,869 | 5,000 | n/m | (2,869 | ) | -36.5 | % | ||||||||||||||||||
| Securities available for sale | 2,376,431 | 2,382,441 | 3,511,683 | (6,010 | ) | -0.3 | % | (1,135,252 | ) | -32.3 | % | ||||||||||||||||
| Securities held to maturity | 1,156,790 | 1,155,569 | 70,338 | 1,221 | 0.1 | % | 1,086,452 | n/m | |||||||||||||||||||
| Loans held for sale (LHFS) | 142,103 | 120,446 | 202,699 | 21,657 | 18.0 | % | (60,596 | ) | -29.9 | % | |||||||||||||||||
| Loans held for investment (LHFI) | 6,187,000 | 5,923,766 | 5,577,382 | 263,234 | 4.4 | % | 609,618 | 10.9 | % | ||||||||||||||||||
| Allowance for loan losses | (66,648 | ) | (67,518 | ) | (72,825 | ) | 870 | -1.3 | % | 6,177 | -8.5 | % | |||||||||||||||
| Net LHFI | 6,120,352 | 5,856,248 | 5,504,557 | 264,104 | 4.5 | % | 615,795 | 11.2 | % | ||||||||||||||||||
| Acquired loans: | |||||||||||||||||||||||||||
| Noncovered loans | 616,911 | 713,647 | 922,453 | (96,736 | ) | -13.6 | % | (305,542 | ) | -33.1 | % | ||||||||||||||||
| Covered loans | 29,628 | 32,670 | 40,820 | (3,042 | ) | -9.3 | % | (11,192 | ) | -27.4 | % | ||||||||||||||||
| Allowance for loan losses, acquired loans | (11,179 | ) | (10,540 | ) | (2,690 | ) | (639 | ) | 6.1 | % | (8,489 | ) | n/m | ||||||||||||||
| Net acquired loans | 635,360 | 735,777 | 960,583 | (100,417 | ) | -13.6 | % | (325,223 | ) | -33.9 | % | ||||||||||||||||
| Net LHFI and acquired loans | 6,755,712 | 6,592,025 | 6,465,140 | 163,687 | 2.5 | % | 290,572 | 4.5 | % | ||||||||||||||||||
| Premises and equipment, net | 201,639 | 203,771 | 210,845 | (2,132 | ) | -1.0 | % | (9,206 | ) | -4.4 | % | ||||||||||||||||
| Mortgage servicing rights | 65,049 | 67,614 | 60,380 | (2,565 | ) | -3.8 | % | 4,669 | 7.7 | % | |||||||||||||||||
| Goodwill | 365,500 | 365,500 | 368,315 | - | 0.0 | % | (2,815 | ) | -0.8 | % | |||||||||||||||||
| Identifiable intangible assets | 37,506 | 39,697 | 46,889 | (2,191 | ) | -5.5 | % | (9,383 | ) | -20.0 | % | ||||||||||||||||
| Other real estate, excluding covered other real estate | 106,970 | 111,536 | 117,712 | (4,566 | ) | -4.1 | % | (10,742 | ) | -9.1 | % | ||||||||||||||||
| Covered other real estate | 3,872 | 4,759 | 5,147 | (887 | ) | -18.6 | % | (1,275 | ) | -24.8 | % | ||||||||||||||||
| FDIC indemnification asset | 10,866 | 13,487 | 17,342 | (2,621 | ) | -19.4 | % | (6,476 | ) | -37.3 | % | ||||||||||||||||
| Other assets | 569,598 | 576,390 | 477,421 | (6,792 | ) | -1.2 | % | 92,177 | 19.3 | % | |||||||||||||||||
| Total assets | $ | 12,119,996 | $ | 12,057,054 | $ | 11,863,312 | $ | 62,942 | 0.5 | % | $ | 256,684 | 2.2 | % | |||||||||||||
| Deposits: | |||||||||||||||||||||||||||
| Noninterest-bearing | $ | 2,729,199 | $ | 2,879,341 | $ | 2,520,895 | $ | (150,142 | ) | -5.2 | % | $ | 208,304 | 8.3 | % | ||||||||||||
| Interest-bearing | 7,131,167 | 7,242,778 | 7,296,697 | (111,611 | ) | -1.5 | % | (165,530 | ) | -2.3 | % | ||||||||||||||||
| Total deposits | 9,860,366 | 10,122,119 | 9,817,592 | (261,753 | ) | -2.6 | % | 42,774 | 0.4 | % | |||||||||||||||||
| Fed funds purchased and repos | 559,316 | 259,341 | 374,021 | 299,975 | n/m | 185,295 | 49.5 | % | |||||||||||||||||||
| Short-term borrowings | 61,227 | 59,671 | 56,645 | 1,556 | 2.6 | % | 4,582 | 8.1 | % | ||||||||||||||||||
| Long-term FHLB advances | 8,236 | 8,341 | 8,679 | (105 | ) | -1.3 | % | (443 | ) | -5.1 | % | ||||||||||||||||
| Subordinated notes | 49,920 | 49,912 | 49,888 | 8 | 0.0 | % | 32 | 0.1 | % | ||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | - | 0.0 | % | - | 0.0 | % | ||||||||||||||||||
| Other liabilities | 119,184 | 121,919 | 167,812 | (2,735 | ) | -2.2 | % | (48,628 | ) | -29.0 | % | ||||||||||||||||
| Total liabilities | 10,720,105 | 10,683,159 | 10,536,493 | 36,946 | 0.3 | % | 183,612 | 1.7 | % | ||||||||||||||||||
| Common stock | 14,051 | 14,051 | 13,994 | - | 0.0 | % | 57 | 0.4 | % | ||||||||||||||||||
| Capital surplus | 353,196 | 352,402 | 342,359 | 794 | 0.2 | % | 10,837 | 3.2 | % | ||||||||||||||||||
| Retained earnings | 1,063,201 | 1,045,939 | 1,006,554 | 17,262 | 1.7 | % | 56,647 | 5.6 | % | ||||||||||||||||||
Accum other comprehensive loss, net of tax | (30,557 | ) | (38,497 | ) | (36,088 | ) | 7,940 | -20.6 | % | 5,531 | -15.3 | % | |||||||||||||||
Total shareholders' equity | 1,399,891 | 1,373,895 | 1,326,819 | 25,996 | 1.9 | % | 73,072 | 5.5 | % | ||||||||||||||||||
| Total liabilities and equity | $ | 12,119,996 | $ | 12,057,054 | $ | 11,863,312 | $ | 62,942 | 0.5 | % | $ | 256,684 | 2.2 | % | |||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | |||||||||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||
| June 30, 2014 | |||||||||||||||||||||||||||
| ($ in thousands except per share data) | |||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||||||||||
INCOME STATEMENTS | 6/30/2014 | 3/31/2014 | 6/30/2013 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 69,618 | $ | 66,185 | $ | 67,750 | $ | 3,433 | 5.2 | % | $ | 1,868 | 2.8 | % | |||||||||||||
| Interest and fees on acquired loans | 23,250 | 16,786 | 20,987 | 6,464 | 38.5 | % | 2,263 | 10.8 | % | ||||||||||||||||||
| Interest on securities-taxable | 19,522 | 19,220 | 18,547 | 302 | 1.6 | % | 975 | 5.3 | % | ||||||||||||||||||
| Interest on securities-tax exempt-FTE | 1,912 | 1,920 | 1,974 | (8 | ) | -0.4 | % | (62 | ) | -3.1 | % | ||||||||||||||||
| Interest on fed funds sold and rev repos | 6 | 5 | 5 | 1 | 20.0 | % | 1 | 20.0 | % | ||||||||||||||||||
| Other interest income | 379 | 375 | 372 | 4 | 1.1 | % | 7 | 1.9 | % | ||||||||||||||||||
| Total interest income-FTE | 114,687 | 104,491 | 109,635 | 10,196 | 9.8 | % | 5,052 | 4.6 | % | ||||||||||||||||||
| Interest on deposits | 3,970 | 4,365 | 5,071 | (395 | ) | -9.0 | % | (1,101 | ) | -21.7 | % | ||||||||||||||||
| Interest on fed funds pch and repos | 110 | 76 | 88 | 34 | 44.7 | % | 22 | 25.0 | % | ||||||||||||||||||
| Other interest expense | 1,375 | 1,363 | 1,513 | 12 | 0.9 | % | (138 | ) | -9.1 | % | |||||||||||||||||
| Total interest expense | 5,455 | 5,804 | 6,672 | (349 | ) | -6.0 | % | (1,217 | ) | -18.2 | % | ||||||||||||||||
| Net interest income-FTE | 109,232 | 98,687 | 102,963 | 10,545 | 10.7 | % | 6,269 | 6.1 | % | ||||||||||||||||||
| Provision for loan losses, LHFI | 351 | (805 | ) | (4,846 | ) | 1,156 | n/m | 5,197 | n/m | ||||||||||||||||||
| Provision for loan losses, acquired loans | 3,784 | 63 | (1,552 | ) | 3,721 | n/m | 5,336 | n/m | |||||||||||||||||||
| Net interest income after provision-FTE | 105,097 | 99,429 | 109,361 | 5,668 | 5.7 | % | (4,264 | ) | -3.9 | % | |||||||||||||||||
| Service charges on deposit accounts | 11,846 | 11,568 | 12,929 | 278 | 2.4 | % | (1,083 | ) | -8.4 | % | |||||||||||||||||
| Insurance commissions | 8,300 | 8,097 | 8,014 | 203 | 2.5 | % | 286 | 3.6 | % | ||||||||||||||||||
| Wealth management | 7,710 | 8,135 | 6,940 | (425 | ) | -5.2 | % | 770 | 11.1 | % | |||||||||||||||||
| Bank card and other fees | 9,894 | 9,081 | 9,507 | 813 | 9.0 | % | 387 | 4.1 | % | ||||||||||||||||||
| Mortgage banking, net | 6,191 | 6,829 | 8,295 | (638 | ) | -9.3 | % | (2,104 | ) | -25.4 | % | ||||||||||||||||
| Other, net | 199 | (21 | ) | (2,145 | ) | 220 | n/m | 2,344 | n/m | ||||||||||||||||||
| Nonint inc-excl sec gains (losses), net | 44,140 | 43,689 | 43,540 | 451 | 1.0 | % | 600 | 1.4 | % | ||||||||||||||||||
| Security gains (losses), net | - | 389 | 174 | (389 | ) | -100.0 | % | (174 | ) | -100.0 | % | ||||||||||||||||
| Total noninterest income | 44,140 | 44,078 | 43,714 | 62 | 0.1 | % | 426 | 1.0 | % | ||||||||||||||||||
| Salaries and employee benefits | 56,134 | 56,726 | 55,405 | (592 | ) | -1.0 | % | 729 | 1.3 | % | |||||||||||||||||
| Services and fees | 14,543 | 13,165 | 12,816 | 1,378 | 10.5 | % | 1,727 | 13.5 | % | ||||||||||||||||||
| Net occupancy-premises | 6,413 | 6,606 | 6,703 | (193 | ) | -2.9 | % | (290 | ) | -4.3 | % | ||||||||||||||||
| Equipment expense | 6,136 | 6,138 | 6,193 | (2 | ) | 0.0 | % | (57 | ) | -0.9 | % | ||||||||||||||||
| FDIC assessment expense | 2,468 | 2,416 | 2,376 | 52 | 2.2 | % | 92 | 3.9 | % | ||||||||||||||||||
| ORE/Foreclosure expense | 3,836 | 3,315 | 5,131 | 521 | 15.7 | % | (1,295 | ) | -25.2 | % | |||||||||||||||||
| Other expense | 13,231 | 13,252 | 18,571 | (21 | ) | -0.2 | % | (5,340 | ) | -28.8 | % | ||||||||||||||||
| Total noninterest expense | 102,761 | 101,618 | 107,195 | 1,143 | 1.1 | % | (4,434 | ) | -4.1 | % | |||||||||||||||||
| Income before income taxes and tax eq adj | 46,476 | 41,889 | 45,880 | 4,587 | 11.0 | % | 596 | 1.3 | % | ||||||||||||||||||
| Tax equivalent adjustment | 3,944 | 3,783 | 3,735 | 161 | 4.3 | % | 209 | 5.6 | % | ||||||||||||||||||
| Income before income taxes | 42,532 | 38,106 | 42,145 | 4,426 | 11.6 | % | 387 | 0.9 | % | ||||||||||||||||||
| Income taxes | 9,635 | 9,103 | 11,024 | 532 | 5.8 | % | (1,389 | ) | -12.6 | % | |||||||||||||||||
| Net income | $ | 32,897 | $ | 29,003 | $ | 31,121 | $ | 3,894 | 13.4 | % | $ | 1,776 | 5.7 | % | |||||||||||||
| Per share data | |||||||||||||||||||||||||||
| Earnings per share - basic | $ | 0.49 | $ | 0.43 | $ | 0.46 | $ | 0.06 | 14.0 | % | $ | 0.03 | 6.5 | % | |||||||||||||
| Earnings per share - diluted | $ | 0.49 | $ | 0.43 | $ | 0.46 | $ | 0.06 | 14.0 | % | $ | 0.03 | 6.5 | % | |||||||||||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | - | 0.0 | % | $ | - | 0.0 | % | |||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||||||
| Basic | 67,439,659 | 67,410,147 | 67,162,530 | ||||||||||||||||||||||||
| Diluted | 67,582,714 | 67,550,483 | 67,344,117 | ||||||||||||||||||||||||
| Period end shares outstanding | 67,439,788 | 67,439,562 | 67,163,195 | ||||||||||||||||||||||||
OTHER FINANCIAL DATA | |||||||||||||||||||||||||||
| Return on equity | 9.48 | % | 8.60 | % | 9.29 | % | |||||||||||||||||||||
| Return on average tangible equity | 13.90 | % | 12.93 | % | 14.09 | % | |||||||||||||||||||||
| Return on assets | 1.10 | % | 0.99 | % | 1.06 | % | |||||||||||||||||||||
| Interest margin - Yield - FTE | 4.42 | % | 4.15 | % | 4.28 | % | |||||||||||||||||||||
| Interest margin - Cost | 0.21 | % | 0.23 | % | 0.26 | % | |||||||||||||||||||||
| Net interest margin - FTE | 4.21 | % | 3.92 | % | 4.02 | % | |||||||||||||||||||||
| Efficiency ratio (1) | 64.31 | % | 68.32 | % | 67.72 | % | |||||||||||||||||||||
| Full-time equivalent employees | 3,095 | 3,114 | 3,119 | ||||||||||||||||||||||||
STOCK PERFORMANCE | |||||||||||||||||||||||||||
| Market value-Close | $ | 24.69 | $ | 25.35 | $ | 24.58 | |||||||||||||||||||||
| Book value | $ | 20.76 | $ | 20.37 | $ | 19.76 | |||||||||||||||||||||
| Tangible book value | $ | 14.78 | $ | 14.36 | $ | 13.57 | |||||||||||||||||||||
| (1) - The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of partnership tax credits, amortization of purchased intangibles, and nonroutine income and expense items. | |||||||||||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | |||||||||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||
| June 30, 2014 | |||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||||||||||
NONPERFORMING ASSETS (1) | 6/30/2014 | 3/31/2014 | 6/30/2013 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||
| Nonaccrual loans | |||||||||||||||||||||||||||
| Alabama | $ | 80 | $ | 96 | $ | 73 | $ | (16 | ) | -16.7 | % | $ | 7 | 9.6 | % | ||||||||||||
| Florida | 11,041 | 9,956 | 15,916 | 1,085 | 10.9 | % | (4,875 | ) | -30.6 | % | |||||||||||||||||
| Mississippi (2) | 49,430 | 44,168 | 41,761 | 5,262 | 11.9 | % | 7,669 | 18.4 | % | ||||||||||||||||||
| Tennessee (3) | 4,244 | 5,206 | 4,482 | (962 | ) | -18.5 | % | (238 | ) | -5.3 | % | ||||||||||||||||
| Texas | 6,323 | 4,572 | 12,086 | 1,751 | 38.3 | % | (5,763 | ) | -47.7 | % | |||||||||||||||||
| Total nonaccrual loans | 71,118 | 63,998 | 74,318 | 7,120 | 11.1 | % | (3,200 | ) | -4.3 | % | |||||||||||||||||
| Other real estate | |||||||||||||||||||||||||||
| Alabama | 24,541 | 24,103 | 27,245 | 438 | 1.8 | % | (2,704 | ) | -9.9 | % | |||||||||||||||||
| Florida | 43,207 | 42,013 | 35,025 | 1,194 | 2.8 | % | 8,182 | 23.4 | % | ||||||||||||||||||
| Mississippi (2) | 18,723 | 22,287 | 26,843 | (3,564 | ) | -16.0 | % | (8,120 | ) | -30.2 | % | ||||||||||||||||
| Tennessee (3) | 12,073 | 13,000 | 15,811 | (927 | ) | -7.1 | % | (3,738 | ) | -23.6 | % | ||||||||||||||||
| Texas | 8,426 | 10,133 | 12,788 | (1,707 | ) | -16.8 | % | (4,362 | ) | -34.1 | % | ||||||||||||||||
| Total other real estate | 106,970 | 111,536 | 117,712 | (4,566 | ) | -4.1 | % | (10,742 | ) | -9.1 | % | ||||||||||||||||
| Total nonperforming assets | $ | 178,088 | $ | 175,534 | $ | 192,030 | $ | 2,554 | 1.5 | % | $ | (13,942 | ) | -7.3 | % | ||||||||||||
LOANS PAST DUE OVER 90 DAYS (4) | |||||||||||||||||||||||||||
| LHFI | $ | 1,936 | $ | 1,870 | $ | 4,194 | $ | 66 | 3.5 | % | $ | (2,258 | ) | -53.8 | % | ||||||||||||
LHFS-Guaranteed GNMA serviced loans | $ | 21,810 | $ | 20,109 | $ | 14,003 | $ | 1,701 | 8.5 | % | $ | 7,807 | 55.8 | % | |||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES (4) | 6/30/2014 | 3/31/2014 | 6/30/2013 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||
| Beginning Balance | $ | 67,518 | $ | 66,448 | $ | 76,900 | $ | 1,070 | 1.6 | % | $ | (9,382 | ) | -12.2 | % | ||||||||||||
| Provision for loan losses | 351 | (805 | ) | (4,846 | ) | 1,156 | n/m | 5,197 | n/m | ||||||||||||||||||
| Charge-offs | (3,820 | ) | (3,016 | ) | (3,031 | ) | (804 | ) | 26.7 | % | (789 | ) | 26.0 | % | |||||||||||||
| Recoveries | 2,599 | 4,891 | 3,802 | (2,292 | ) | -46.9 | % | (1,203 | ) | -31.6 | % | ||||||||||||||||
| Net (charge-offs) recoveries | (1,221 | ) | 1,875 | 771 | (3,096 | ) | n/m | (1,992 | ) | n/m | |||||||||||||||||
| Ending Balance | $ | 66,648 | $ | 67,518 | $ | 72,825 | $ | (870 | ) | -1.3 | % | $ | (6,177 | ) | -8.5 | % | |||||||||||
PROVISION FOR LOAN LOSSES (4) | |||||||||||||||||||||||||||
| Alabama | $ | 696 | $ | 472 | $ | 232 | $ | 224 | 47.5 | % | $ | 464 | n/m | ||||||||||||||
| Florida | (2,014 | ) | (3,499 | ) | (3,425 | ) | 1,485 | -42.4 | % | 1,411 | -41.2 | % | |||||||||||||||
| Mississippi (2) | 2,877 | 1,983 | (520 | ) | 894 | 45.1 | % | 3,397 | n/m | ||||||||||||||||||
| Tennessee (3) | (277 | ) | (915 | ) | (335 | ) | 638 | -69.7 | % | 58 | -17.3 | % | |||||||||||||||
| Texas | (931 | ) | 1,154 | (798 | ) | (2,085 | ) | n/m | (133 | ) | 16.7 | % | |||||||||||||||
| Total provision for loan losses | $ | 351 | $ | (805 | ) | $ | (4,846 | ) | $ | 1,156 | n/m | $ | 5,197 | n/m | |||||||||||||
NET CHARGE-OFFS (4) | |||||||||||||||||||||||||||
| Alabama | $ | 84 | $ | 55 | $ | 67 | $ | 29 | 52.7 | % | $ | 17 | 25.4 | % | |||||||||||||
| Florida | (525 | ) | (2,524 | ) | (1,426 | ) | 1,999 | -79.2 | % | 901 | -63.2 | % | |||||||||||||||
| Mississippi (2) | 1,518 | 676 | 291 | 842 | n/m | 1,227 | n/m | ||||||||||||||||||||
| Tennessee (3) | 87 | (1 | ) | 103 | 88 | n/m | (16 | ) | -15.5 | % | |||||||||||||||||
| Texas | 57 | (81 | ) | 194 | 138 | n/m | (137 | ) | -70.6 | % | |||||||||||||||||
| Total net charge-offs (recoveries) | $ | 1,221 | $ | (1,875 | ) | $ | (771 | ) | $ | 3,096 | n/m | $ | 1,992 | n/m | |||||||||||||
CREDIT QUALITY RATIOS (1) | |||||||||||||||||||||||||||
| Net charge offs/average loans | 0.08 | % | -0.13 | % | -0.05 | % | |||||||||||||||||||||
| Provision for loan losses/average loans | 0.02 | % | -0.05 | % | -0.34 | % | |||||||||||||||||||||
| Nonperforming loans/total loans (incl LHFS) | 1.12 | % | 1.06 | % | 1.29 | % | |||||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) | 2.81 | % | 2.90 | % | 3.32 | % | |||||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) +ORE | 2.77 | % | 2.85 | % | 3.26 | % | |||||||||||||||||||||
| ALL/total loans (excl LHFS) | 1.08 | % | 1.14 | % | 1.31 | % | |||||||||||||||||||||
| ALL-commercial/total commercial loans | 1.20 | % | 1.33 | % | 1.48 | % | |||||||||||||||||||||
| ALL-consumer/total consumer and home mortgage loans | 0.75 | % | 0.65 | % | 0.84 | % | |||||||||||||||||||||
| ALL/nonperforming loans | 93.71 | % | 105.50 | % | 97.99 | % | |||||||||||||||||||||
ALL/nonperforming loans - (excl impaired loans) | 159.71 | % | 180.86 | % | 158.75 | % | |||||||||||||||||||||
CAPITAL RATIOS | |||||||||||||||||||||||||||
| Total equity/total assets | 11.55 | % | 11.39 | % | 11.18 | % | |||||||||||||||||||||
| Tangible equity/tangible assets | 8.51 | % | 8.31 | % | 7.96 | % | |||||||||||||||||||||
| Tangible equity/risk-weighted assets | 12.19 | % | 12.08 | % | 11.57 | % | |||||||||||||||||||||
| Tier 1 leverage ratio | 9.43 | % | 9.14 | % | 8.71 | % | |||||||||||||||||||||
| Tier 1 common risk-based capital ratio | 12.61 | % | 12.37 | % | 11.79 | % | |||||||||||||||||||||
| Tier 1 risk-based capital ratio | 13.34 | % | 13.11 | % | 12.55 | % | |||||||||||||||||||||
| Total risk-based capital ratio | 14.54 | % | 14.34 | % | 13.89 | % | |||||||||||||||||||||
| (1) - Excludes Acquired Loans and Covered Other Real Estate | |||||||||||||||||||||||||||
| (2) - Mississippi includes Central and Southern Mississippi Regions | |||||||||||||||||||||||||||
| (3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions | |||||||||||||||||||||||||||
| (4) - Excludes Acquired Loans | |||||||||||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | |||||||||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||||
| June 30, 2014 | ||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
AVERAGE BALANCES | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | |||||||||||||||||||||
| Securities AFS-taxable | $ | 2,205,352 | $ | 2,136,392 | $ | 3,026,186 | $ | 3,279,606 | $ | 3,259,086 | $ | 2,171,062 | $ | 3,048,737 | ||||||||||||||
| Securities AFS-nontaxable | 135,956 | 149,744 | 160,989 | 172,055 | 171,974 | 142,812 | 169,885 | |||||||||||||||||||||
| Securities HTM-taxable | 1,120,448 | 1,118,747 | 265,792 | 59,168 | 59,678 | 1,119,602 | 54,186 | |||||||||||||||||||||
| Securities HTM-nontaxable | 43,551 | 31,039 | 21,172 | 11,024 | 11,520 | 37,330 | 14,070 | |||||||||||||||||||||
| Total securities | 3,505,307 | 3,435,922 | 3,474,139 | 3,521,853 | 3,502,258 | 3,470,806 | 3,286,878 | |||||||||||||||||||||
| Loans (including loans held for sale) | 6,160,781 | 5,950,720 | 5,847,557 | 5,784,170 | 5,735,296 | 6,056,331 | 5,738,301 | |||||||||||||||||||||
| Acquired loans: | ||||||||||||||||||||||||||||
| Noncovered loans | 664,733 | 751,723 | 812,426 | 888,883 | 949,367 | 707,988 | 741,162 | |||||||||||||||||||||
| Covered loans | 31,122 | 33,805 | 34,640 | 39,561 | 43,425 | 32,456 | 46,602 | |||||||||||||||||||||
| Fed funds sold and rev repos | 2,648 | 6,460 | 11,094 | 8,978 | 6,808 | 4,543 | 6,714 | |||||||||||||||||||||
| Other earning assets | 36,259 | 36,820 | 32,118 | 38,226 | 34,752 | 36,538 | 34,707 | |||||||||||||||||||||
| Total earning assets | 10,400,850 | 10,215,450 | 10,211,974 | 10,281,671 | 10,271,906 | 10,308,662 | 9,854,364 | |||||||||||||||||||||
| Allowance for loan losses | (77,652 | ) | (79,736 | ) | (78,742 | ) | (79,696 | ) | (84,574 | ) | (78,688 | ) | (85,505 | ) | ||||||||||||||
| Cash and due from banks | 304,441 | 407,078 | 275,051 | 272,320 | 284,056 | 355,476 | 277,435 | |||||||||||||||||||||
| Other assets | 1,343,384 | 1,376,024 | 1,360,712 | 1,284,813 | 1,311,262 | 1,359,614 | 1,247,729 | |||||||||||||||||||||
| Total assets | $ | 11,971,023 | $ | 11,918,816 | $ | 11,768,995 | $ | 11,759,108 | $ | 11,782,650 | $ | 11,945,064 | $ | 11,294,023 | ||||||||||||||
| Interest-bearing demand deposits | $ | 1,826,019 | $ | 1,900,504 | $ | 1,803,956 | $ | 1,842,379 | $ | 1,811,402 | $ | 1,863,056 | $ | 1,757,668 | ||||||||||||||
| Savings deposits | 3,260,634 | 3,193,098 | 2,952,472 | 2,995,110 | 3,060,437 | 3,227,053 | 2,914,901 | |||||||||||||||||||||
| Time deposits less than $100,000 | 1,225,706 | 1,280,513 | 1,344,488 | 1,380,954 | 1,419,381 | 1,252,958 | 1,344,416 | |||||||||||||||||||||
| Time deposits of $100,000 or more | 911,531 | 947,509 | 961,075 | 993,948 | 1,029,498 | 929,421 | 961,678 | |||||||||||||||||||||
| Total interest-bearing deposits | 7,223,890 | 7,321,624 | 7,061,991 | 7,212,391 | 7,320,718 | 7,272,488 | 6,978,663 | |||||||||||||||||||||
| Fed funds purchased and repos | 387,289 | 282,816 | 361,758 | 364,446 | 312,865 | 335,341 | 290,038 | |||||||||||||||||||||
| Short-term borrowings | 59,465 | 65,010 | 63,531 | 59,324 | 51,718 | 62,222 | 59,316 | |||||||||||||||||||||
| Long-term FHLB advances | 8,291 | 8,406 | 8,507 | 8,620 | 9,575 | 8,348 | 7,091 | |||||||||||||||||||||
| Subordinated notes | 49,915 | 49,907 | 49,898 | 49,890 | 49,882 | 49,911 | 49,878 | |||||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 82,460 | 61,856 | 80,237 | |||||||||||||||||||||
| Total interest-bearing liabilities | 7,790,706 | 7,789,619 | 7,607,541 | 7,756,527 | 7,827,218 | 7,790,166 | 7,465,223 | |||||||||||||||||||||
| Noninterest-bearing deposits | 2,676,907 | 2,630,785 | 2,611,209 | 2,479,082 | 2,451,547 | 2,653,973 | 2,325,993 | |||||||||||||||||||||
| Other liabilities | 111,170 | 130,749 | 203,270 | 190,143 | 159,525 | 120,906 | 167,821 | |||||||||||||||||||||
| Total liabilities | 10,578,783 | 10,551,153 | 10,422,020 | 10,425,752 | 10,438,290 | 10,565,045 | 9,959,037 | |||||||||||||||||||||
| Shareholders' equity | 1,392,240 | 1,367,663 | 1,346,975 | 1,333,356 | 1,344,360 | 1,380,019 | 1,334,986 | |||||||||||||||||||||
| Total liabilities and equity | $ | 11,971,023 | $ | 11,918,816 | $ | 11,768,995 | $ | 11,759,108 | $ | 11,782,650 | $ | 11,945,064 | $ | 11,294,023 | ||||||||||||||
PERIOD END BALANCES | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | |||||||||||||||||||||||
| Cash and due from banks | $ | 322,960 | $ | 423,819 | $ | 345,761 | $ | 335,695 | $ | 301,532 | ||||||||||||||||||
| Fed funds sold and rev repos | 5,000 | - | 7,253 | 7,867 | 7,869 | |||||||||||||||||||||||
| Securities available for sale | 2,376,431 | 2,382,441 | 2,194,154 | 3,372,101 | 3,511,683 | |||||||||||||||||||||||
| Securities held to maturity | 1,156,790 | 1,155,569 | 1,168,728 | 69,980 | 70,338 | |||||||||||||||||||||||
| Loans held for sale (LHFS) | 142,103 | 120,446 | 149,169 | 119,986 | 202,699 | |||||||||||||||||||||||
| Loans held for investment (LHFI) | 6,187,000 | 5,923,766 | 5,798,881 | 5,696,641 | 5,577,382 | |||||||||||||||||||||||
| Allowance for loan losses | (66,648 | ) | (67,518 | ) | (66,448 | ) | (68,632 | ) | (72,825 | ) | ||||||||||||||||||
| Net LHFI | 6,120,352 | 5,856,248 | 5,732,433 | 5,628,009 | 5,504,557 | |||||||||||||||||||||||
| Acquired loans: | ||||||||||||||||||||||||||||
| Noncovered loans | 616,911 | 713,647 | 769,990 | 837,875 | 922,453 | |||||||||||||||||||||||
| Covered loans | 29,628 | 32,670 | 34,216 | 37,250 | 40,820 | |||||||||||||||||||||||
| Allowance for loan losses, acquired loans | (11,179 | ) | (10,540 | ) | (9,636 | ) | (5,333 | ) | (2,690 | ) | ||||||||||||||||||
| Net acquired loans | 635,360 | 735,777 | 794,570 | 869,792 | 960,583 | |||||||||||||||||||||||
| Net LHFI and acquired loans | 6,755,712 | 6,592,025 | 6,527,003 | 6,497,801 | 6,465,140 | |||||||||||||||||||||||
| Premises and equipment, net | 201,639 | 203,771 | 207,283 | 208,837 | 210,845 | |||||||||||||||||||||||
| Mortgage servicing rights | 65,049 | 67,614 | 67,834 | 63,150 | 60,380 | |||||||||||||||||||||||
| Goodwill | 365,500 | 365,500 | 372,851 | 372,463 | 368,315 | |||||||||||||||||||||||
| Identifiable intangible assets | 37,506 | 39,697 | 41,990 | 44,424 | 46,889 | |||||||||||||||||||||||
| Other real estate, excluding covered other real estate | 106,970 | 111,536 | 106,539 | 116,329 | 117,712 | |||||||||||||||||||||||
| Covered other real estate | 3,872 | 4,759 | 5,108 | 5,092 | 5,147 | |||||||||||||||||||||||
| FDIC indemnification asset | 10,866 | 13,487 | 14,347 | 17,085 | 17,342 | |||||||||||||||||||||||
| Other assets | 569,598 | 576,390 | 582,363 | 574,387 | 477,421 | |||||||||||||||||||||||
| Total assets | $ | 12,119,996 | $ | 12,057,054 | $ | 11,790,383 | $ | 11,805,197 | $ | 11,863,312 | ||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||||
| Noninterest-bearing | $ | 2,729,199 | $ | 2,879,341 | $ | 2,663,503 | $ | 2,643,612 | $ | 2,520,895 | ||||||||||||||||||
| Interest-bearing | 7,131,167 | 7,242,778 | 7,196,399 | 7,143,622 | 7,296,697 | |||||||||||||||||||||||
Total deposits | 9,860,366 | 10,122,119 | 9,859,902 | 9,787,234 | 9,817,592 | |||||||||||||||||||||||
| Fed funds purchased and repos | 559,316 | 259,341 | 251,587 | 342,465 | 374,021 | |||||||||||||||||||||||
| Short-term borrowings | 61,227 | 59,671 | 66,385 | 60,698 | 56,645 | |||||||||||||||||||||||
| Long-term FHLB advances | 8,236 | 8,341 | 8,458 | 8,562 | 8,679 | |||||||||||||||||||||||
| Subordinated notes | 49,920 | 49,912 | 49,904 | 49,896 | 49,888 | |||||||||||||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||||||||||||
| Other liabilities | 119,184 | 121,919 | 137,338 | 164,972 | 167,812 | |||||||||||||||||||||||
| Total liabilities | 10,720,105 | 10,683,159 | 10,435,430 | 10,475,683 | 10,536,493 | |||||||||||||||||||||||
| Common stock | 14,051 | 14,051 | 14,038 | 13,998 | 13,994 | |||||||||||||||||||||||
| Capital surplus | 353,196 | 352,402 | 349,680 | 343,759 | 342,359 | |||||||||||||||||||||||
| Retained earnings | 1,063,201 | 1,045,939 | 1,034,966 | 1,023,983 | 1,006,554 | |||||||||||||||||||||||
Accum other comprehensive loss, net of tax | (30,557 | ) | (38,497 | ) | (43,731 | ) | (52,226 | ) | (36,088 | ) | ||||||||||||||||||
Total shareholders' equity | 1,399,891 | 1,373,895 | 1,354,953 | 1,329,514 | 1,326,819 | |||||||||||||||||||||||
| Total liabilities and equity | $ | 12,119,996 | $ | 12,057,054 | $ | 11,790,383 | $ | 11,805,197 | $ | 11,863,312 | ||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||||
| June 30, 2014 | |||||||||||||||||||||||||||||
| ($ in thousands except per share data) | |||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||
INCOME STATEMENTS | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | ||||||||||||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 69,618 | $ | 66,185 | $ | 67,038 | $ | 68,417 | $ | 67,750 | $ | 135,803 | $ | 135,162 | |||||||||||||||
| Interest and fees on acquired loans | 23,250 | 16,786 | 23,384 | 19,183 | 20,987 | 40,036 | 33,769 | ||||||||||||||||||||||
| Interest on securities-taxable | 19,522 | 19,220 | 19,078 | 18,654 | 18,547 | 38,742 | 35,086 | ||||||||||||||||||||||
| Interest on securities-tax exempt-FTE | 1,912 | 1,920 | 1,963 | 1,960 | 1,974 | 3,832 | 3,992 | ||||||||||||||||||||||
| Interest on fed funds sold and rev repos | 6 | 5 | 14 | 8 | 5 | 11 | 9 | ||||||||||||||||||||||
| Other interest income | 379 | 375 | 367 | 372 | 372 | 754 | 727 | ||||||||||||||||||||||
| Total interest income-FTE | 114,687 | 104,491 | 111,844 | 108,594 | 109,635 | 219,178 | 208,745 | ||||||||||||||||||||||
| Interest on deposits | 3,970 | 4,365 | 4,768 | 4,970 | 5,071 | 8,335 | 9,980 | ||||||||||||||||||||||
| Interest on fed funds pch and repos | 110 | 76 | 104 | 106 | 88 | 186 | 169 | ||||||||||||||||||||||
| Other interest expense | 1,375 | 1,363 | 1,370 | 1,389 | 1,513 | 2,738 | 3,003 | ||||||||||||||||||||||
| Total interest expense | 5,455 | 5,804 | 6,242 | 6,465 | 6,672 | 11,259 | 13,152 | ||||||||||||||||||||||
| Net interest income-FTE | 109,232 | 98,687 | 105,602 | 102,129 | 102,963 | 207,919 | 195,593 | ||||||||||||||||||||||
| Provision for loan losses, LHFI | 351 | (805 | ) | (1,983 | ) | (3,624 | ) | (4,846 | ) | (454 | ) | (7,814 | ) | ||||||||||||||||
| Provision for loan losses, acquired loans | 3,784 | 63 | 4,169 | 3,292 | (1,552 | ) | 3,847 | (1,422 | ) | ||||||||||||||||||||
| Net interest income after provision-FTE | 105,097 | 99,429 | 103,416 | 102,461 | 109,361 | 204,526 | 204,829 | ||||||||||||||||||||||
| Service charges on deposit accounts | 11,846 | 11,568 | 13,114 | 13,852 | 12,929 | 23,414 | 24,610 | ||||||||||||||||||||||
| Insurance commissions | 8,300 | 8,097 | 7,343 | 8,227 | 8,014 | 16,397 | 15,256 | ||||||||||||||||||||||
| Wealth management | 7,710 | 8,135 | 8,145 | 7,520 | 6,940 | 15,845 | 13,815 | ||||||||||||||||||||||
| Bank card and other fees | 9,894 | 9,081 | 9,580 | 8,929 | 9,507 | 18,975 | 17,452 | ||||||||||||||||||||||
| Mortgage banking, net | 6,191 | 6,829 | 5,186 | 8,440 | 8,295 | 13,020 | 19,878 | ||||||||||||||||||||||
| Other, net | 199 | (21 | ) | (4,802 | ) | 165 | (2,145 | ) | 178 | (3,336 | ) | ||||||||||||||||||
| Nonint inc-excl sec gains (losses), net | 44,140 | 43,689 | 38,566 | 47,133 | 43,540 | 87,829 | 87,675 | ||||||||||||||||||||||
| Security gains (losses), net | - | 389 | 107 | - | 174 | 389 | 378 | ||||||||||||||||||||||
| Total noninterest income | 44,140 | 44,078 | 38,673 | 47,133 | 43,714 | 88,218 | 88,053 | ||||||||||||||||||||||
| Salaries and employee benefits | 56,134 | 56,726 | 56,687 | 56,043 | 55,405 | 112,860 | 108,997 | ||||||||||||||||||||||
| Services and fees | 14,543 | 13,165 | 14,476 | 13,580 | 12,816 | 27,708 | 25,848 | ||||||||||||||||||||||
| Net occupancy-premises | 6,413 | 6,606 | 6,659 | 6,644 | 6,703 | 13,019 | 12,658 | ||||||||||||||||||||||
| Equipment expense | 6,136 | 6,138 | 6,400 | 6,271 | 6,193 | 12,274 | 11,867 | ||||||||||||||||||||||
| FDIC assessment expense | 2,468 | 2,416 | 2,228 | 2,376 | 2,376 | 4,884 | 4,397 | ||||||||||||||||||||||
| ORE/Foreclosure expense | 3,836 | 3,315 | 3,009 | 3,079 | 5,131 | 7,151 | 8,951 | ||||||||||||||||||||||
| Other expense | 13,231 | 13,252 | 15,408 | 13,531 | 18,571 | 26,483 | 36,622 | ||||||||||||||||||||||
| Total noninterest expense | 102,761 | 101,618 | 104,867 | 101,524 | 107,195 | 204,379 | 209,340 | ||||||||||||||||||||||
| Income before income taxes and tax eq adj | 46,476 | 41,889 | 37,222 | 48,070 | 45,880 | 88,365 | 83,542 | ||||||||||||||||||||||
| Tax equivalent adjustment | 3,944 | 3,783 | 3,747 | 3,700 | 3,735 | 7,727 | 7,390 | ||||||||||||||||||||||
| Income before income taxes | 42,532 | 38,106 | 33,475 | 44,370 | 42,145 | 80,638 | 76,152 | ||||||||||||||||||||||
| Income taxes | 9,635 | 9,103 | 5,436 | 11,336 | 11,024 | 18,738 | 20,165 | ||||||||||||||||||||||
| Net income | $ | 32,897 | $ | 29,003 | $ | 28,039 | $ | 33,034 | $ | 31,121 | $ | 61,900 | $ | 55,987 | |||||||||||||||
| Per share data | |||||||||||||||||||||||||||||
| Earnings per share - basic | $ | 0.49 | $ | 0.43 | $ | 0.42 | $ | 0.49 | $ | 0.46 | $ | 0.92 | $ | 0.84 | |||||||||||||||
| Earnings per share - diluted | $ | 0.49 | $ | 0.43 | $ | 0.42 | $ | 0.49 | $ | 0.46 | $ | 0.92 | $ | 0.84 | |||||||||||||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.46 | $ | 0.46 | |||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||||||||
| Basic | 67,439,659 | 67,410,147 | 67,249,877 | 67,177,013 | 67,162,530 | 67,424,984 | 66,576,125 | ||||||||||||||||||||||
| Diluted | 67,582,714 | 67,550,483 | 67,449,778 | 67,382,478 | 67,344,117 | 67,566,640 | 66,748,713 | ||||||||||||||||||||||
| Period end shares outstanding | 67,439,788 | 67,439,562 | 67,372,980 | 67,181,694 | 67,163,195 | 67,439,788 | 67,163,195 | ||||||||||||||||||||||
OTHER FINANCIAL DATA | |||||||||||||||||||||||||||||
| Return on equity | 9.48 | % | 8.60 | % | 8.26 | % | 9.83 | % | 9.29 | % | 9.05 | % | 8.46 | % | |||||||||||||||
| Return on average tangible equity | 13.90 | % | 12.93 | % | 12.59 | % | 14.92 | % | 14.09 | % | 13.43 | % | 12.43 | % | |||||||||||||||
| Return on assets | 1.10 | % | 0.99 | % | 0.95 | % | 1.11 | % | 1.06 | % | 1.05 | % | 1.00 | % | |||||||||||||||
| Interest margin - Yield - FTE | 4.42 | % | 4.15 | % | 4.35 | % | 4.19 | % | 4.28 | % | 4.29 | % | 4.27 | % | |||||||||||||||
| Interest margin - Cost | 0.21 | % | 0.23 | % | 0.24 | % | 0.25 | % | 0.26 | % | 0.22 | % | 0.27 | % | |||||||||||||||
| Net interest margin - FTE | 4.21 | % | 3.92 | % | 4.10 | % | 3.94 | % | 4.02 | % | 4.07 | % | 4.00 | % | |||||||||||||||
| Efficiency ratio (1) | 64.31 | % | 68.32 | % | 68.38 | % | 65.32 | % | 67.72 | % | 66.24 | % | 66.78 | % | |||||||||||||||
| Full-time equivalent employees | 3,095 | 3,114 | 3,110 | 3,110 | 3,119 | ||||||||||||||||||||||||
STOCK PERFORMANCE | |||||||||||||||||||||||||||||
| Market value-Close | $ | 24.69 | $ | 25.35 | $ | 26.84 | $ | 25.60 | $ | 24.58 | |||||||||||||||||||
| Book value | $ | 20.76 | $ | 20.37 | $ | 20.11 | $ | 19.79 | $ | 19.76 | |||||||||||||||||||
| Tangible book value | $ | 14.78 | $ | 14.36 | $ | 13.95 | $ | 13.58 | $ | 13.57 | |||||||||||||||||||
| (1) - The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of partnership tax credits, amortization of purchased intangibles, and nonroutine income and expense items. | |||||||||||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||||||||||
| June 30, 2014 | |||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||||||||
NONPERFORMING ASSETS (1) | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | ||||||||||||||||||||||||
| Nonaccrual loans | |||||||||||||||||||||||||||||
| Alabama | $ | 80 | $ | 96 | $ | 14 | $ | 81 | $ | 73 | |||||||||||||||||||
| Florida | 11,041 | 9,956 | 12,278 | 14,619 | 15,916 | ||||||||||||||||||||||||
| Mississippi (2) | 49,430 | 44,168 | 42,307 | 43,132 | 41,761 | ||||||||||||||||||||||||
| Tennessee (3) | 4,244 | 5,206 | 4,390 | 5,596 | 4,482 | ||||||||||||||||||||||||
| Texas | 6,323 | 4,572 | 6,249 | 9,953 | 12,086 | ||||||||||||||||||||||||
| Total nonaccrual loans | 71,118 | 63,998 | 65,238 | 73,381 | 74,318 | ||||||||||||||||||||||||
| Other real estate | |||||||||||||||||||||||||||||
| Alabama | 24,541 | 24,103 | 25,912 | 25,308 | 27,245 | ||||||||||||||||||||||||
| Florida | 43,207 | 42,013 | 34,480 | 39,198 | 35,025 | ||||||||||||||||||||||||
| Mississippi (2) | 18,723 | 22,287 | 22,766 | 25,439 | 26,843 | ||||||||||||||||||||||||
| Tennessee (3) | 12,073 | 13,000 | 12,892 | 14,615 | 15,811 | ||||||||||||||||||||||||
| Texas | 8,426 | 10,133 | 10,489 | 11,769 | 12,788 | ||||||||||||||||||||||||
| Total other real estate | 106,970 | 111,536 | 106,539 | 116,329 | 117,712 | ||||||||||||||||||||||||
| Total nonperforming assets | $ | 178,088 | $ | 175,534 | $ | 171,777 | $ | 189,710 | $ | 192,030 | |||||||||||||||||||
LOANS PAST DUE OVER 90 DAYS (4) | |||||||||||||||||||||||||||||
| LHFI | $ | 1,936 | $ | 1,870 | $ | 3,298 | $ | 2,344 | $ | 4,194 | |||||||||||||||||||
LHFS-Guaranteed GNMA serviced loans | $ | 21,810 | $ | 20,109 | $ | 21,540 | $ | 18,432 | $ | 14,003 | |||||||||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES (4) | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | ||||||||||||||||||||||
| Beginning Balance | $ | 67,518 | $ | 66,448 | $ | 68,632 | $ | 72,825 | $ | 76,900 | $ | 66,448 | $ | 78,738 | |||||||||||||||
| Provision for loan losses | 351 | (805 | ) | (1,983 | ) | (3,624 | ) | (4,846 | ) | (454 | ) | (7,814 | ) | ||||||||||||||||
| Charge-offs | (3,820 | ) | (3,016 | ) | (3,305 | ) | (3,817 | ) | (3,031 | ) | (6,836 | ) | (6,356 | ) | |||||||||||||||
| Recoveries | 2,599 | 4,891 | 3,104 | 3,248 | 3,802 | 7,490 | 8,257 | ||||||||||||||||||||||
| Net (charge-offs) recoveries | (1,221 | ) | 1,875 | (201 | ) | (569 | ) | 771 | 654 | 1,901 | |||||||||||||||||||
| Ending Balance | $ | 66,648 | $ | 67,518 | $ | 66,448 | $ | 68,632 | $ | 72,825 | $ | 66,648 | $ | 72,825 | |||||||||||||||
PROVISION FOR LOAN LOSSES (4) | |||||||||||||||||||||||||||||
| Alabama | $ | 696 | $ | 472 | $ | 332 | $ | 550 | $ | 232 | $ | 1,168 | $ | 908 | |||||||||||||||
| Florida | (2,014 | ) | (3,499 | ) | (2,350 | ) | (2,642 | ) | (3,425 | ) | (5,513 | ) | (7,100 | ) | |||||||||||||||
| Mississippi (2) | 2,877 | 1,983 | 3,336 | (1,051 | ) | (520 | ) | 4,860 | (2,440 | ) | |||||||||||||||||||
| Tennessee (3) | (277 | ) | (915 | ) | (117 | ) | (150 | ) | (335 | ) | (1,192 | ) | (713 | ) | |||||||||||||||
| Texas | (931 | ) | 1,154 | (3,184 | ) | (331 | ) | (798 | ) | 223 | 1,531 | ||||||||||||||||||
| Total provision for loan losses | $ | 351 | $ | (805 | ) | $ | (1,983 | ) | $ | (3,624 | ) | $ | (4,846 | ) | $ | (454 | ) | $ | (7,814 | ) | |||||||||
NET CHARGE-OFFS (4) | |||||||||||||||||||||||||||||
| Alabama | $ | 84 | $ | 55 | $ | 74 | $ | 132 | $ | 67 | $ | 139 | $ | 78 | |||||||||||||||
| Florida | (525 | ) | (2,524 | ) | (634 | ) | (138 | ) | (1,426 | ) | (3,049 | ) | (2,275 | ) | |||||||||||||||
| Mississippi (2) | 1,518 | 676 | 393 | 375 | 291 | 2,194 | 1 | ||||||||||||||||||||||
| Tennessee (3) | 87 | (1 | ) | 506 | (153 | ) | 103 | 86 | 352 | ||||||||||||||||||||
| Texas | 57 | (81 | ) | (138 | ) | 353 | 194 | (24 | ) | (57 | ) | ||||||||||||||||||
| Total net charge-offs (recoveries) | $ | 1,221 | $ | (1,875 | ) | $ | 201 | $ | 569 | $ | (771 | ) | $ | (654 | ) | $ | (1,901 | ) | |||||||||||
CREDIT QUALITY RATIOS (1) | |||||||||||||||||||||||||||||
| Net charge offs/average loans | 0.08 | % | -0.13 | % | 0.01 | % | 0.04 | % | -0.05 | % | -0.02 | % | -0.07 | % | |||||||||||||||
| Provision for loan losses/average loans | 0.02 | % | -0.05 | % | -0.13 | % | -0.25 | % | -0.34 | % | -0.02 | % | -0.27 | % | |||||||||||||||
| Nonperforming loans/total loans (incl LHFS) | 1.12 | % | 1.06 | % | 1.10 | % | 1.26 | % | 1.29 | % | |||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) | 2.81 | % | 2.90 | % | 2.89 | % | 3.26 | % | 3.32 | % | |||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) +ORE | 2.77 | % | 2.85 | % | 2.84 | % | 3.20 | % | 3.26 | % | |||||||||||||||||||
| ALL/total loans (excl LHFS) | 1.08 | % | 1.14 | % | 1.15 | % | 1.20 | % | 1.31 | % | |||||||||||||||||||
| ALL-commercial/total commercial loans | 1.20 | % | 1.33 | % | 1.30 | % | 1.39 | % | 1.48 | % | |||||||||||||||||||
| ALL-consumer/total consumer and home mortgage loans | 0.75 | % | 0.65 | % | 0.75 | % | 0.73 | % | 0.84 | % | |||||||||||||||||||
| ALL/nonperforming loans | 93.71 | % | 105.50 | % | 101.86 | % | 93.53 | % | 97.99 | % | |||||||||||||||||||
ALL/nonperforming loans - (excl impaired loans) | 159.71 | % | 180.86 | % | 190.70 | % | 161.96 | % | 158.75 | % | |||||||||||||||||||
CAPITAL RATIOS | |||||||||||||||||||||||||||||
| Total equity/total assets | 11.55 | % | 11.39 | % | 11.49 | % | 11.26 | % | 11.18 | % | |||||||||||||||||||
| Tangible equity/tangible assets | 8.51 | % | 8.31 | % | 8.26 | % | 8.01 | % | 7.96 | % | |||||||||||||||||||
| Tangible equity/risk-weighted assets | 12.19 | % | 12.08 | % | 11.88 | % | 11.66 | % | 11.57 | % | |||||||||||||||||||
| Tier 1 leverage ratio | 9.43 | % | 9.14 | % | 9.06 | % | 8.78 | % | 8.71 | % | |||||||||||||||||||
| Tier 1 common risk-based capital ratio | 12.61 | % | 12.37 | % | 12.21 | % | 11.92 | % | 11.79 | % | |||||||||||||||||||
| Tier 1 risk-based capital ratio | 13.34 | % | 13.11 | % | 12.97 | % | 12.69 | % | 12.55 | % | |||||||||||||||||||
| Total risk-based capital ratio | 14.54 | % | 14.34 | % | 14.18 | % | 14.02 | % | 13.89 | % | |||||||||||||||||||
| (1) - Excludes Acquired Loans and Covered Other Real Estate | |||||||||||||||||||||||||||||
| (2) - Mississippi includes Central and Southern Mississippi Regions | |||||||||||||||||||||||||||||
| (3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions | |||||||||||||||||||||||||||||
| (4) - Excludes Acquired Loans | |||||||||||||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIALS
June 30, 2014
($
in thousands)
(unaudited)
Note 1 – Business Combinations
Oxford, Mississippi Branches
On July 26, 2013, Trustmark National Bank (TNB), a subsidiary of Trustmark Corporation (Trustmark), completed its acquisition of two branches of SOUTHBank, F.S.B. (SOUTHBank), located in Oxford, Mississippi. As a result of this acquisition, TNB assumed deposit accounts of approximately $11.7 million in addition to purchasing the two physical branch offices. The transaction was not material to Trustmark’s consolidated financial statements and was not considered a business combination in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations.”
BancTrust Financial Group, Inc.
On February 15, 2013, Trustmark completed its merger with BancTrust Financial Group, Inc. (BancTrust), a 26-year-old bank holding company headquartered in Mobile, Alabama. In accordance with the terms of the definitive agreement, the holders of BancTrust common stock received 0.125 of a share of Trustmark common stock for each share of BancTrust common stock in a tax-free exchange. Trustmark issued approximately 2.24 million shares of its common stock for all issued and outstanding shares of BancTrust common stock. The total value of the 2.24 million shares of Trustmark common stock issued to the BancTrust shareholders on the acquisition date was approximately $53.5 million, based on a closing stock price of $23.83 per share of Trustmark common stock on February 15, 2013. At closing, Trustmark repurchased the $50.0 million of BancTrust preferred stock and associated warrant issued to the U.S. Department of Treasury under the Capital Purchase Program for approximately $52.6 million.
This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. The purchase price allocation was finalized in the first quarter of 2014.
The statement of assets purchased and liabilities assumed in the BancTrust acquisition is presented below at their adjusted estimated fair values as of the acquisition date of February 15, 2013 ($ in thousands):
| Assets | ||||||
| Cash and due from banks | $ | 141,616 | ||||
| Securities | 528,016 | |||||
| Loans held for sale | 1,050 | |||||
| Acquired noncovered loans | 944,235 | |||||
| Premises and equipment, net | 54,952 | |||||
| Identifiable intangible assets | 33,498 | |||||
| Other real estate | 40,103 | |||||
| Other assets | 109,423 | |||||
| Total Assets | 1,852,893 | |||||
| Liabilities | ||||||
| Deposits | 1,740,254 | |||||
| Other borrowings | 64,051 | |||||
| Other liabilities | 16,761 | |||||
| Total Liabilities | 1,821,066 | |||||
| Net identified assets acquired at fair value | 31,827 | |||||
| Goodwill | 74,247 | |||||
| Net assets acquired at fair value | $ | 106,074 | ||||
The excess of the consideration paid over the estimated fair value of the net assets acquired was $74.2 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the acquisition date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years.
Loans, excluding loans held for sale (LHFS), acquired from BancTrust were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements and leases, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIALS
June 30, 2014
($
in thousands)
(unaudited)
Note 2 - Securities Available for Sale and Held to Maturity
The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):
| 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | |||||||||||
SECURITIES AVAILABLE FOR SALE | |||||||||||||||
| U.S. Treasury securities | $ | 100 | $ | 100 | $ | 502 | $ | 503 | $ | 505 | |||||
| U.S. Government agency obligations | |||||||||||||||
| Issued by U.S. Government agencies | 117,489 | 123,368 | 129,293 | 133,013 | 139,066 | ||||||||||
| Issued by U.S. Government sponsored agencies | 40,848 | 40,601 | 40,179 | 132,425 | 133,791 | ||||||||||
| Obligations of states and political subdivisions | 171,229 | 172,437 | 171,738 | 212,991 | 212,204 | ||||||||||
| Mortgage-backed securities | |||||||||||||||
| Residential mortgage pass-through securities | |||||||||||||||
| Guaranteed by GNMA | 13,492 | 14,263 | 14,474 | 48,240 | 46,330 | ||||||||||
| Issued by FNMA and FHLMC | 225,229 | 232,488 | 241,118 | 214,795 | 227,927 | ||||||||||
| Other residential mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 1,543,619 | 1,530,068 | 1,290,741 | 2,048,275 | 2,156,320 | ||||||||||
| Commercial mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 229,283 | 232,072 | 242,172 | 354,131 | 361,575 | ||||||||||
| Asset-backed securities and structured financial products | 35,142 | 37,044 | 63,937 | 227,728 | 233,965 | ||||||||||
| Total securities available for sale | $ | 2,376,431 | $ | 2,382,441 | $ | 2,194,154 | $ | 3,372,101 | $ | 3,511,683 | |||||
SECURITIES HELD TO MATURITY | |||||||||||||||
| U.S. Government agency obligations | |||||||||||||||
| Issued by U.S. Government sponsored agencies | $ | 100,563 | $ | 100,361 | $ | 100,159 | $ | - | $ | - | |||||
| Obligations of states and political subdivisions | 65,193 | 65,757 | 65,987 | 30,229 | 30,295 | ||||||||||
| Mortgage-backed securities | |||||||||||||||
| Residential mortgage pass-through securities | |||||||||||||||
| Guaranteed by GNMA | 13,959 | 12,177 | 9,433 | 2,420 | 2,547 | ||||||||||
| Issued by FNMA and FHLMC | 12,165 | 12,395 | 12,724 | 564 | 567 | ||||||||||
| Other residential mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 822,444 | 822,135 | 837,393 | - | - | ||||||||||
| Commercial mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 142,466 | 142,744 | 143,032 | 36,767 | 36,929 | ||||||||||
| Total securities held to maturity | $ | 1,156,790 | $ | 1,155,569 | $ | 1,168,728 | $ | 69,980 | $ | 70,338 | |||||
During the fourth quarter of 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $46.6 million ($28.8 million, net of tax). The net unrealized holding loss is amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. At June 30, 2014, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive (loss) income in the accompanying balance sheet totaled approximately $43.6 million ($26.9 million, net of tax).
During the fourth quarter of 2013, Trustmark sold $135.6 million of Collateralized Loan Obligations (CLO) generating a net gain of $1.3 million. These securities were identified as available for sale and had been carried in the asset-backed securities and structured financial products line item in the table shown above. This sale left Trustmark with a CLO balance of $25.9 million at December 31, 2013, which was subsequently sold in its entirety for a gain of $389 thousand in January 2014.
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 93% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
Note 3 – Loan Composition | ||||||||||||||||||||
LHFI BY TYPE (excluding acquired loans) | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | |||||||||||||||
| Loans secured by real estate: | ||||||||||||||||||||
| Construction, land development and other land loans | $ | 531,651 | $ | 592,658 | $ | 596,889 | $ | 572,057 | $ | 519,263 | ||||||||||
| Secured by 1-4 family residential properties | 1,581,859 | 1,533,781 | 1,485,564 | 1,482,963 | 1,414,871 | |||||||||||||||
| Secured by nonfarm, nonresidential properties | 1,544,516 | 1,461,947 | 1,415,139 | 1,408,342 | 1,406,930 | |||||||||||||||
| Other real estate secured | 250,383 | 193,221 | 189,362 | 196,328 | 192,568 | |||||||||||||||
| Commercial and industrial loans | 1,250,146 | 1,207,367 | 1,157,614 | 1,132,863 | 1,169,327 | |||||||||||||||
| Consumer loans | 165,372 | 160,153 | 165,308 | 164,612 | 160,318 | |||||||||||||||
| Other loans | 863,073 | 774,639 | 789,005 | 739,476 | 714,105 | |||||||||||||||
| LHFI | 6,187,000 | 5,923,766 | 5,798,881 | 5,696,641 | 5,577,382 | |||||||||||||||
| Allowance for loan losses | (66,648 | ) | (67,518 | ) | (66,448 | ) | (68,632 | ) | (72,825 | ) | ||||||||||
| Net LHFI | $ | 6,120,352 | $ | 5,856,248 | $ | 5,732,433 | $ | 5,628,009 | $ | 5,504,557 | ||||||||||
ACQUIRED NONCOVERED LOANS BY TYPE | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | |||||||||||||||
| Loans secured by real estate: | ||||||||||||||||||||
| Construction, land development and other land loans | $ | 75,353 | $ | 88,683 | $ | 98,928 | $ | 106,655 | $ | 132,116 | ||||||||||
| Secured by 1-4 family residential properties | 133,191 | 145,213 | 157,914 | 168,573 | 184,928 | |||||||||||||||
| Secured by nonfarm, nonresidential properties | 226,967 | 271,696 | 287,136 | 301,686 | 318,603 | |||||||||||||||
| Other real estate secured | 30,918 | 34,787 | 33,948 | 35,051 | 34,869 | |||||||||||||||
| Commercial and industrial loans | 114,212 | 135,114 | 149,495 | 186,649 | 206,338 | |||||||||||||||
| Consumer loans | 14,733 | 15,024 | 18,428 | 22,251 | 27,420 | |||||||||||||||
| Other loans | 21,537 | 23,130 | 24,141 | 17,010 | 18,179 | |||||||||||||||
| Noncovered loans | 616,911 | 713,647 | 769,990 | 837,875 | 922,453 | |||||||||||||||
| Allowance for loan losses | (9,770 | ) | (9,952 | ) | (7,249 | ) | (3,007 | ) | (112 | ) | ||||||||||
| Net noncovered loans | $ | 607,141 | $ | 703,695 | $ | 762,741 | $ | 834,868 | $ | 922,341 | ||||||||||
ACQUIRED COVERED LOANS BY TYPE | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | |||||||||||||||
| Loans secured by real estate: | ||||||||||||||||||||
| Construction, land development and other land loans | $ | 2,130 | $ | 2,239 | $ | 2,363 | $ | 2,585 | $ | 3,662 | ||||||||||
| Secured by 1-4 family residential properties | 14,565 | 15,572 | 16,416 | 17,785 | 18,899 | |||||||||||||||
| Secured by nonfarm, nonresidential properties | 8,831 | 10,629 | 10,945 | 12,120 | 13,341 | |||||||||||||||
| Other real estate secured | 2,376 | 2,470 | 2,644 | 2,817 | 2,929 | |||||||||||||||
| Commercial and industrial loans | 336 | 361 | 394 | 478 | 543 | |||||||||||||||
| Consumer loans | - | 49 | 119 | 151 | 173 | |||||||||||||||
| Other loans | 1,390 | 1,350 | 1,335 | 1,314 | 1,273 | |||||||||||||||
| Covered loans | 29,628 | 32,670 | 34,216 | 37,250 | 40,820 | |||||||||||||||
| Allowance for loan losses | (1,409 | ) | (588 | ) | (2,387 | ) | (2,326 | ) | (2,578 | ) | ||||||||||
| Net covered loans | $ | 28,219 | $ | 32,082 | $ | 31,829 | $ | 34,924 | $ | 38,242 | ||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
| Note 3 – Loan Composition (continued) | ||||||||||||||||||
| June 30, 2014 | ||||||||||||||||||
LHFI - COMPOSITION BY REGION (1) | Total | Alabama | Florida | Mississippi (Central and Southern Regions) | Tennessee (Memphis, TN and Northern MS Regions) | Texas | ||||||||||||
| Loans secured by real estate: | ||||||||||||||||||
| Construction, land development and other land loans | $ | 531,651 | $ | 45,142 | $ | 57,914 | $ | 250,057 | $ | 35,059 | $ | 143,479 | ||||||
| Secured by 1-4 family residential properties | 1,581,859 | 28,518 | 50,499 | 1,354,515 | 130,032 | 18,295 | ||||||||||||
| Secured by nonfarm, nonresidential properties | 1,544,516 | 58,766 | 160,095 | 796,797 | 149,227 | 379,631 | ||||||||||||
| Other real estate secured | 250,383 | 7,569 | 4,424 | 164,209 | 28,192 | 45,989 | ||||||||||||
| Commercial and industrial loans | 1,250,146 | 67,052 | 10,712 | 805,120 | 91,810 | 275,452 | ||||||||||||
| Consumer loans | 165,372 | 15,514 | 2,898 | 127,699 | 16,538 | 2,723 | ||||||||||||
| Other loans | 863,073 | 39,044 | 46,233 | 638,622 | 47,941 | 91,233 | ||||||||||||
| Loans | $ | 6,187,000 | $ | 261,605 | $ | 332,775 | $ | 4,137,019 | $ | 498,799 | $ | 956,802 | ||||||
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1) | ||||||||||||||||||
| Lots | $ | 49,616 | $ | 1,846 | $ | 27,679 | $ | 15,566 | $ | 1,160 | $ | 3,365 | ||||||
| Development | 62,201 | 777 | 7,573 | 34,470 | 1,392 | 17,989 | ||||||||||||
| Unimproved land | 132,639 | 5,402 | 18,504 | 63,305 | 23,574 | 21,854 | ||||||||||||
| 1-4 family construction | 114,509 | 20,746 | 3,507 | 62,146 | 2,672 | 25,438 | ||||||||||||
| Other construction | 172,686 | 16,371 | 651 | 74,570 | 6,261 | 74,833 | ||||||||||||
| Construction, land development and other land loans | $ | 531,651 | $ | 45,142 | $ | 57,914 | $ | 250,057 | $ | 35,059 | $ | 143,479 | ||||||
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1) | ||||||||||||||||||
| Income producing: | ||||||||||||||||||
| Retail | $ | 184,843 | $ | 14,702 | $ | 39,709 | $ | 68,149 | $ | 18,433 | $ | 43,850 | ||||||
| Office | 207,620 | 8,912 | 32,816 | 85,103 | 8,219 | 72,570 | ||||||||||||
| Nursing homes/assisted living | 125,911 | - | - | 102,912 | 5,925 | 17,074 | ||||||||||||
| Hotel/motel | 99,120 | 12,076 | 16,350 | 46,667 | 24,027 | - | ||||||||||||
| Industrial | 79,698 | 4,312 | 7,286 | 35,661 | 149 | 32,290 | ||||||||||||
| Health care | 28,937 | 3,539 | - | 25,348 | 50 | - | ||||||||||||
| Convenience stores | 10,086 | 251 | - | 5,958 | 1,294 | 2,583 | ||||||||||||
| Other | 153,966 | 2,389 | 19,562 | 82,531 | 5,023 | 44,461 | ||||||||||||
| Total income producing loans | 890,181 | 46,181 | 115,723 | 452,329 | 63,120 | 212,828 | ||||||||||||
| Owner-occupied: | ||||||||||||||||||
| Office | 126,379 | 3,933 | 17,191 | 63,465 | 10,645 | 31,145 | ||||||||||||
| Churches | 93,738 | 2,314 | 2,926 | 44,225 | 33,082 | 11,191 | ||||||||||||
| Industrial warehouses | 82,111 | 1,051 | 3,050 | 28,708 | 8,038 | 41,264 | ||||||||||||
| Health care | 97,851 | 257 | 8,807 | 55,485 | 14,206 | 19,096 | ||||||||||||
| Convenience stores | 56,751 | 479 | 1,598 | 33,304 | 2,868 | 18,502 | ||||||||||||
| Retail | 28,983 | 539 | 3,787 | 18,061 | 3,125 | 3,471 | ||||||||||||
| Restaurants | 35,090 | - | 2,615 | 27,096 | 4,296 | 1,083 | ||||||||||||
| Auto dealerships | 8,457 | - | 176 | 6,639 | 1,610 | 32 | ||||||||||||
| Other | 124,975 | 4,012 | 4,222 | 67,485 | 8,237 | 41,019 | ||||||||||||
| Total owner-occupied loans | 654,335 | 12,585 | 44,372 | 344,468 | 86,107 | 166,803 | ||||||||||||
| Loans secured by nonfarm, nonresidential properties | $ | 1,544,516 | $ | 58,766 | $ | 160,095 | $ | 796,797 | $ | 149,227 | $ | 379,631 | ||||||
| (1) Excludes acquired loans. | ||||||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities | |||||||||||||||||||||
The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis: | |||||||||||||||||||||
| Quarter Ended | Six Months Ended | ||||||||||||||||||||
| 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | |||||||||||||||
| Securities – taxable | 2.35 | % | 2.39 | % | 2.30 | % | 2.22 | % | 2.24 | % | 2.37 | % | 2.28 | % | |||||||
| Securities – nontaxable | 4.27 | % | 4.31 | % | 4.28 | % | 4.25 | % | 4.31 | % | 4.29 | % | 4.38 | % | |||||||
| Securities – total | 2.45 | % | 2.50 | % | 2.40 | % | 2.32 | % | 2.35 | % | 2.47 | % | 2.40 | % | |||||||
| Loans - LHFI & LHFS | 4.53 | % | 4.51 | % | 4.55 | % | 4.69 | % | 4.74 | % | 4.52 | % | 4.75 | % | |||||||
| Acquired loans | 13.40 | % | 8.67 | % | 10.95 | % | 8.20 | % | 8.48 | % | 10.90 | % | 8.64 | % | |||||||
| Loans - total | 5.43 | % | 5.00 | % | 5.36 | % | 5.18 | % | 5.29 | % | 5.22 | % | 5.22 | % | |||||||
| FF sold & rev repo | 0.91 | % | 0.31 | % | 0.50 | % | 0.35 | % | 0.29 | % | 0.49 | % | 0.27 | % | |||||||
| Other earning assets | 4.19 | % | 4.13 | % | 4.53 | % | 3.86 | % | 4.29 | % | 4.16 | % | 4.22 | % | |||||||
| Total earning assets | 4.42 | % | 4.15 | % | 4.35 | % | 4.19 | % | 4.28 | % | 4.29 | % | 4.27 | % | |||||||
| Interest-bearing deposits | 0.22 | % | 0.24 | % | 0.27 | % | 0.27 | % | 0.28 | % | 0.23 | % | 0.29 | % | |||||||
| FF pch & repo | 0.11 | % | 0.11 | % | 0.11 | % | 0.12 | % | 0.11 | % | 0.11 | % | 0.12 | % | |||||||
| Other borrowings | 3.07 | % | 2.99 | % | 2.96 | % | 3.07 | % | 3.13 | % | 3.03 | % | 3.08 | % | |||||||
| Total interest-bearing liabilities | 0.28 | % | 0.30 | % | 0.33 | % | 0.33 | % | 0.34 | % | 0.29 | % | 0.36 | % | |||||||
| Net interest margin | 4.21 | % | 3.92 | % | 4.10 | % | 3.94 | % | 4.02 | % | 4.07 | % | 4.00 | % | |||||||
| Net interest margin excluding acquired loans | 3.55 | % | 3.52 | % | 3.48 | % | 3.52 | % | 3.55 | % | 3.54 | % | 3.60 | % | |||||||
Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans. The net interest margin increased 29 basis points during the second quarter of 2014 primarily due to an increase in interest and fees on acquired loans, which was the result of increased acquired loan recoveries during the quarter.
During the second quarter of 2014, the yield on average acquired loans includes approximately $8.9 million in recoveries, or an annualized 5.15% of the average acquired loan balance. Excluding the recoveries on acquired loans, the yield on average acquired loans totaled 8.25%.
Note 5 – Mortgage Banking
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net positive ineffectiveness of $546 thousand and $121 thousand for the quarters ended June 30, 2014 and 2013, respectively.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
| 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | ||||||||||||||||||||||
| Mortgage servicing income, net | $ | 4,592 | $ | 4,539 | $ | 4,688 | $ | 4,552 | $ | 4,385 | $ | 9,131 | $ | 8,652 | ||||||||||||||
| Change in fair value-MSR from runoff | (2,391 | ) | (1,812 | ) | (2,182 | ) | (2,407 | ) | (2,756 | ) | (4,203 | ) | (5,216 | ) | ||||||||||||||
| Gain on sales of loans, net | 2,749 | 1,839 | 2,202 | 6,465 | 7,597 | 4,588 | 17,762 | |||||||||||||||||||||
| Other, net | 695 | 400 | (533 | ) | (1,485 | ) | (1,052 | ) | 1,095 | (2,701 | ) | |||||||||||||||||
| Mortgage banking income before hedge ineffectiveness | 5,645 | 4,966 | 4,175 | 7,125 | 8,174 | 10,611 | 18,497 | |||||||||||||||||||||
| Change in fair value-MSR from market changes | (3,038 | ) | (723 | ) | 3,937 | 287 | 6,467 | (3,761 | ) | 7,594 | ||||||||||||||||||
| Change in fair value of derivatives | 3,584 | 2,586 | (2,926 | ) | 1,028 | (6,346 | ) | 6,170 | (6,213 | ) | ||||||||||||||||||
| Net positive hedge ineffectiveness | 546 | 1,863 | 1,011 | 1,315 | 121 | 2,409 | 1,381 | |||||||||||||||||||||
| Mortgage banking, net | $ | 6,191 | $ | 6,829 | $ | 5,186 | $ | 8,440 | $ | 8,295 | $ | 13,020 | $ | 19,878 | ||||||||||||||
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||
Note 6 – Other Noninterest Income and Expense | ||||||||||||||||||||||||||||
Other noninterest income consisted of the following for the periods presented ($ in thousands): | ||||||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
| 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | ||||||||||||||||||||||
| Partnership amortization for tax credit purposes | $ | (3,006 | ) | $ | (3,006 | ) | $ | (5,642 | ) | $ | (2,388 | ) | $ | (2,221 | ) | $ | (6,012 | ) | $ | (4,338 | ) | |||||||
| (Decrease) increase in FDIC indemnification asset | (999 | ) | (688 | ) | (2,429 | ) | 211 | (2,317 | ) | (1,687 | ) | (3,682 | ) | |||||||||||||||
| Other miscellaneous income | 4,204 | 3,673 | 3,269 | 2,342 | 2,393 | 7,877 | 4,684 | |||||||||||||||||||||
| Total other, net | $ | 199 | $ | (21 | ) | $ | (4,802 | ) | $ | 165 | $ | (2,145 | ) | $ | 178 | $ | (3,336 | ) | ||||||||||
Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits or historical tax credits). These investments are recorded based on the equity method of accounting, which requires the equity in partnership losses to be recognized when incurred and are recorded as a reduction in other income. The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.
During the second quarter of 2014, other noninterest income included a write-down of the FDIC indemnification asset of $999 thousand on acquired covered loans obtained from Heritage as a result of loan pay-offs, improved cash flow projections and lower loss expectations for loan pools.
Other noninterest expense consisted of the following for the periods presented ($ in thousands):
| Quarter Ended | Six Months Ended | ||||||||||||||||||||
| 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | |||||||||||||||
| Loan expense | $ | 3,107 | $ | 3,464 | $ | 4,419 | $ | 3,390 | $ | 4,267 | $ | 6,571 | $ | 7,262 | |||||||
| Non-routine transaction expenses on acquisitions | - | - | - | - | - | - | 7,920 | ||||||||||||||
| Amortization of intangibles | 2,190 | 2,293 | 2,434 | 2,466 | 2,472 | 4,483 | 3,914 | ||||||||||||||
| Other miscellaneous expense | 7,934 | 7,495 | 8,555 | 7,675 | 11,832 | 15,429 | 17,526 | ||||||||||||||
| Total other expense | $ | 13,231 | $ | 13,252 | $ | 15,408 | $ | 13,531 | $ | 18,571 | $ | 26,483 | $ | 36,622 | |||||||
Other miscellaneous expense increased during the second quarter of 2013 due to a non-routine litigation expense of $4.0 million related to a proposed settlement on Trustmark’s overdraft fees for insufficient funds on debit card purchases and ATM withdrawals as previously disclosed in the Form 8-K filed on June 26, 2013. During the first quarter of 2014, the United States District Court for the Southern District of Mississippi issued a final judgment approving the settlement.
Note 7 – Non-GAAP Financial Measures
In addition to capital ratios defined by GAAP and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.
Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations.
These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.
TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
| Note 7 - Non-GAAP Financial Measures (continued) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 6/30/2013 | 6/30/2014 | 6/30/2013 | ||||||||||||||||||||||||||
TANGIBLE EQUITY | ||||||||||||||||||||||||||||||||
| AVERAGE BALANCES | ||||||||||||||||||||||||||||||||
| Total shareholders' equity | $ | 1,392,240 | $ | 1,367,663 | $ | 1,346,975 | $ | 1,333,356 | $ | 1,344,360 | $ | 1,380,019 | $ | 1,334,986 | ||||||||||||||||||
| Less: | Goodwill | (365,500 | ) | (372,720 | ) | (372,468 | ) | (368,482 | ) | (366,592 | ) | (369,090 | ) | (345,862 | ) | |||||||||||||||||
| Identifiable intangible assets | (38,711 | ) | (41,015 | ) | (43,532 | ) | (45,988 | ) | (48,402 | ) | (39,857 | ) | (41,831 | ) | ||||||||||||||||||
| Total average tangible equity | $ | 988,029 | $ | 953,928 | $ | 930,975 | $ | 918,886 | $ | 929,366 | $ | 971,072 | $ | 947,293 | ||||||||||||||||||
| PERIOD END BALANCES | ||||||||||||||||||||||||||||||||
| Total shareholders' equity | $ | 1,399,891 | $ | 1,373,895 | $ | 1,354,953 | $ | 1,329,514 | $ | 1,326,819 | ||||||||||||||||||||||
| Less: | Goodwill | (365,500 | ) | (365,500 | ) | (372,851 | ) | (372,463 | ) | (368,315 | ) | |||||||||||||||||||||
| Identifiable intangible assets | (37,506 | ) | (39,697 | ) | (41,990 | ) | (44,424 | ) | (46,889 | ) | ||||||||||||||||||||||
| Total tangible equity | (a) | $ | 996,885 | $ | 968,698 | $ | 940,112 | $ | 912,627 | $ | 911,615 | |||||||||||||||||||||
TANGIBLE ASSETS | ||||||||||||||||||||||||||||||||
| Total assets | $ | 12,119,996 | $ | 12,057,054 | $ | 11,790,383 | $ | 11,805,197 | $ | 11,863,312 | ||||||||||||||||||||||
| Less: | Goodwill | (365,500 | ) | (365,500 | ) | (372,851 | ) | (372,463 | ) | (368,315 | ) | |||||||||||||||||||||
| Identifiable intangible assets | (37,506 | ) | (39,697 | ) | (41,990 | ) | (44,424 | ) | (46,889 | ) | ||||||||||||||||||||||
| Total tangible assets | (b) | $ | 11,716,990 | $ | 11,651,857 | $ | 11,375,542 | $ | 11,388,310 | $ | 11,448,108 | |||||||||||||||||||||
| Risk-weighted assets | (c) | $ | 8,175,622 | $ | 8,016,482 | $ | 7,916,378 | $ | 7,825,839 | $ | 7,878,281 | |||||||||||||||||||||
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION | ||||||||||||||||||||||||||||||||
| Net income | $ | 32,897 | $ | 29,003 | $ | 28,039 | $ | 33,034 | $ | 31,121 | $ | 61,900 | $ | 55,987 | ||||||||||||||||||
| Plus: | Intangible amortization net of tax | 1,353 | 1,417 | 1,503 | 1,523 | 1,526 | 2,770 | 2,416 | ||||||||||||||||||||||||
| Net income adjusted for intangible amortization | $ | 34,250 | $ | 30,420 | $ | 29,542 | $ | 34,557 | $ | 32,647 | $ | 64,670 | $ | 58,403 | ||||||||||||||||||
| Period end common shares outstanding | (d) | 67,439,788 | 67,439,562 | 67,372,980 | 67,181,694 | 67,163,195 | ||||||||||||||||||||||||||
TANGIBLE COMMON EQUITY MEASUREMENTS | ||||||||||||||||||||||||||||||||
| Return on average tangible equity 1 | 13.90 | % | 12.93 | % | 12.59 | % | 14.92 | % | 14.09 | % | 13.43 | % | 12.43 | % | ||||||||||||||||||
| Tangible equity/tangible assets | (a)/(b) | 8.51 | % | 8.31 | % | 8.26 | % | 8.01 | % | 7.96 | % | |||||||||||||||||||||
| Tangible equity/risk-weighted assets | (a)/(c) | 12.19 | % | 12.08 | % | 11.88 | % | 11.66 | % | 11.57 | % | |||||||||||||||||||||
| Tangible book value | (a)/(d)*1,000 | $ | 14.78 | $ | 14.36 | $ | 13.95 | $ | 13.58 | $ | 13.57 | |||||||||||||||||||||
TIER 1 COMMON RISK-BASED CAPITAL | ||||||||||||||||||||||||||||||||
| Total shareholders' equity | $ | 1,399,891 | $ | 1,373,895 | $ | 1,354,953 | $ | 1,329,514 | $ | 1,326,819 | ||||||||||||||||||||||
| Eliminate qualifying AOCI | 30,557 | 38,497 | 43,731 | 52,226 | 36,088 | |||||||||||||||||||||||||||
| Qualifying tier 1 capital | 60,000 | 60,000 | 60,000 | 60,000 | 60,000 | |||||||||||||||||||||||||||
| Disallowed goodwill | (365,500 | ) | (365,500 | ) | (372,851 | ) | (372,463 | ) | (368,315 | ) | ||||||||||||||||||||||
| Adj to goodwill allowed for deferred taxes | 15,150 | 14,798 | 14,445 | 14,093 | 13,740 | |||||||||||||||||||||||||||
| Other disallowed intangibles | (37,506 | ) | (39,697 | ) | (41,990 | ) | (44,424 | ) | (46,889 | ) | ||||||||||||||||||||||
| Disallowed servicing intangible | (6,505 | ) | (6,761 | ) | (6,783 | ) | (6,315 | ) | (6,038 | ) | ||||||||||||||||||||||
| Disallowed deferred taxes | (5,134 | ) | (23,969 | ) | (24,647 | ) | (39,476 | ) | (26,411 | ) | ||||||||||||||||||||||
| Total tier 1 capital | 1,090,953 | 1,051,263 | 1,026,858 | 993,155 | 988,994 | |||||||||||||||||||||||||||
| Less: | Qualifying tier 1 capital | (60,000 | ) | (60,000 | ) | (60,000 | ) | (60,000 | ) | (60,000 | ) | |||||||||||||||||||||
| Total tier 1 common capital | (e) | $ | 1,030,953 | $ | 991,263 | $ | 966,858 | $ | 933,155 | $ | 928,994 | |||||||||||||||||||||
| Tier 1 common risk-based capital ratio | (e)/(c) | 12.61 | % | 12.37 | % | 12.21 | % | 11.92 | % | 11.79 | % | |||||||||||||||||||||
| 1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity | ||||||||||||||||||||||||||||||||
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Contacts:
Investor Contacts:
Louis
E. Greer, 601-208-2310
Treasurer and Principal Financial Officer
or
F.
Joseph Rein, Jr., 601-208-6898
Senior Vice President
or
Media
Contact:
Melanie A. Morgan, 601-208-2979
Senior Vice
President
