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 October 27, 2015 - 4:30 PM EDT
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Trustmark Corporation Announces Third Quarter 2015 Financial Results

Trustmark Corporation (NASDAQ:TRMK) reported net income of $28.4 million in the third quarter of 2015, which represented diluted earnings per share of $0.42. Trustmark’s performance during the third quarter of 2015 produced a return on average tangible equity of 10.96% and a return on average assets of 0.92%. During the first nine months of 2015, Trustmark’s net income totaled $88.2 million, which represented diluted earnings per share of $1.30. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2015, to shareholders of record on December 1, 2015.

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Third Quarter Highlights

  • Loans held for investment increased $344.6 million, or 5.3%, from the prior quarter and $458.0 million, or 7.2%, from the comparable period one year earlier
  • Credit quality remained solid; continued reduction in nonperforming assets
  • Revenue remained stable from the prior quarter at $143.6 million; growth in earning assets partially offset pressures of low interest rate environment
  • Noninterest income totaled $46.0 million for the third quarter; insurance commissions up 5.4% and 7.2% linked quarter and year-over-year, respectively

Gerard R. Host, President and CEO, stated, “Reflecting the strength of our diverse five-state franchise, legacy loan growth in the third quarter totaled approximately $345 million, a 5.3% increase from the prior quarter. We also continued to maintain and expand customer relationships in our other lines of business, as evidenced by strength in insurance commissions and mortgage loan production volumes. Routine noninterest expense remained well controlled and credit quality remained solid. Earlier this year, we launched our new consumer mobile banking service, myTrustmark℠, which has been very well received. We remained excited about the opportunities this platform, in addition to others, may present for our franchise. Thanks to our associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue meeting the needs of our customers and creating long-term value for our shareholders.”

Balance Sheet Management

  • Solid legacy loan growth in Mississippi, Alabama, Texas and Tennessee during the third quarter
  • Total loans (acquired and held for investment) expanded $297.3 million, or 4.3%, from the prior quarter; average earning assets increased $209.1 million, or 2.0%, linked quarter
  • Capital base provides opportunity to support additional growth

Loans held for investment totaled $6.8 billion at September 30, 2015, an increase of 5.3% from the prior quarter and 7.2% from the same period one year earlier. Relative to the prior quarter, loans to state and other political subdivisions increased $103.3 million, led by growth in Mississippi and Texas. Construction, land development and other land loans increased $103.0 million, driven by growth in construction loans. Other loans, which include loans to nonprofits and real estate investment trusts, increased $59.8 million, as growth in Mississippi, Texas and Alabama, more than offset declines in Florida and Tennessee. Commercial and industrial loans increased $50.6 million, primarily reflecting growth in Tennessee and Florida, while loans secured by nonfarm, nonresidential real estate increased $37.4 million, principally because of growth in Alabama.

Acquired loans totaled $419.2 million at September 30, 2015, down $47.2 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $7.2 billion at September 30, 2015, up $297.3 million, or 4.3%, from the prior quarter.

End of period deposits totaled $9.4 billion, a linked-quarter decrease of $379.8 million that primarily reflects a seasonal reduction in public fund balances. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 60.0% of deposits in checking accounts and a total cost of deposits of 0.13%. The favorable mix of interest-bearing liabilities yielded a total cost of funds of 0.26% for the third quarter of 2015.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At September 30, 2015, Trustmark’s tangible equity to tangible assets ratio was 9.01%, while its total risk-based capital ratio was 14.66%. Tangible book value per share was $16.00 at September 30, 2015, up 6.4% year-over-year.

Credit Quality

  • Continued improvement in criticized and classified loan balances
  • Nonperforming assets declined 8.9% linked quarter and 21.7% year-over-year
  • Allowance for loan losses represented 206.72% of nonperforming loans, excluding impaired loans

Levels of criticized and classified loan balances continued to reflect steady improvement. Relative to the prior quarter, criticized and classified loan balances declined by 1.5% and 9.9%, respectively. Compared to levels one year earlier, criticized and classified loan balances declined 22.0% and 20.3%, respectively.

At September 30, 2015, nonperforming loans totaled $61.1 million, a decline of 10.7% from the prior quarter and 30.8% from the prior year. Other real estate totaled $84.0 million, down 7.5% linked quarter and 13.5% year-over-year. Collectively, nonperforming assets totaled $145.1 million, a decrease of $14.1 million, or 8.9%, from the prior quarter and $40.3 million, or 21.7%, from levels one year earlier.

Allocation of Trustmark's $65.6 million allowance for loan losses represented 1.07% of commercial loans and 0.67% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.97% at September 30, 2015, representing a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 206.72% of nonperforming loans, excluding impaired loans at September 30, 2015.

All of the above credit quality metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.

Revenue Generation

  • Net interest income (FTE) remained stable relative to the prior quarter at $101.7 million
  • Noninterest income increased 0.9% from the prior quarter and 7.2% from levels one year earlier
  • Mortgage loan production volumes continued to remain strong at $420.4 million, up 0.8% linked quarter and 21.7% year-over-year

Revenue in the third quarter totaled $143.6 million and remained stable from the prior quarter. Net interest income (FTE) in the third quarter totaled $101.7 million, reflecting a net interest margin of 3.72%. Relative to the prior quarter, decreased interest income on the acquired loan portfolio was more than offset by increased interest income on the loans held for investment and held for sale portfolios, as well as the securities portfolio. The yield on acquired loans in the third quarter totaled 10.46% and included recoveries from settlement of debt of $4.8 million, which represented approximately 4.29% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin in the third quarter totaled 3.43%, down from 3.49% in the prior quarter.

Noninterest income totaled $46.0 million in the third quarter, an increase of 0.9% from the prior quarter and 7.2% from levels one year earlier. Service charges on deposit accounts increased 4.0% linked quarter, while bank card and other fees decreased 6.1% from the prior quarter, reflecting lower fees on interest rate swaps for commercial loan customers. Other income, net improved $1.9 million linked quarter, driven primarily by FDIC indemnification asset write-downs that occurred during the second quarter of 2015.

Insurance revenue in the third quarter totaled $9.9 million, an increase of 5.4% from the prior quarter and 7.2% from levels one year earlier. The solid performance this quarter was due to continued growth in the commercial property and casualty line of business as well as seasonal factors. Wealth management revenue remained stable relative to the prior quarter at $7.8 million, reflecting expanded trust management and annuity income, but partially offset by lower brokerage activity.

Mortgage banking revenue in the third quarter totaled $7.4 million, down from the prior quarter, but up from levels one year earlier. The decrease in mortgage revenue from the prior quarter primarily reflects a decreased benefit from the mortgage servicing hedge ineffectiveness as well as tightening secondary marketing spreads. Mortgage loan production in the third quarter remained solid at $420.4 million, up 0.8% from the prior quarter and 21.7% from levels one year earlier.

Noninterest Expense

  • Routine noninterest expense remained well controlled at $98.2 million, up 0.9% from the prior quarter
  • Continued optimization of retail delivery channels with successful adoption of new consumer mobile banking platform, myTrustmark℠, and realignment of branch network

Excluding ORE expense and intangible amortization of $5.3 million, routine noninterest expense totaled $98.2 million, an increase of $847 thousand, or 0.9%, from comparable expenses in the prior quarter. Salaries and benefits totaled $58.3 million in the third quarter, up 1.5% on a linked-quarter basis; the quarter-over-quarter increase primarily reflects increased commissions from seasonal insurance renewals and expanded mortgage loan production. Services and fees decreased 2.1% from the prior quarter, primarily because of lower data processing expense and third-party consulting fees. ORE and foreclosure expense increased $2.5 million from both the prior quarter and the same quarter one year earlier. Other expense increased marginally relative to the prior quarter principally because of higher loan expense.

As banking continues to evolve as something customers will do, not necessarily some place they will go, Trustmark has made investments in mobile banking products to ensure it continues to meet the evolving wants and needs of its customers. In the second quarter of 2015, Trustmark successfully introduced its new consumer mobile banking service, myTrustmark℠, which currently features account monitoring, funds transfer and bill pay capabilities. These capabilities, in addition to planned additions, aim to enhance the Trustmark banking experience, allowing customers to bank when and where they want.

During the third quarter, Trustmark continued the optimization of its retail delivery channels, consolidating two offices in Florida and Texas, and reallocating a portion of those resources into a new office in Gulfport, Mississippi. Year-to-date, Trustmark has consolidated eight offices and opened three new offices. Trustmark is committed to developing and maintaining relationships, while supporting investments that promote profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 28, 2015, 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, November 11, 2015, in archived format at the same web address or by calling (877) 344-7529, passcode 10072410.

Trustmark Corporation is a financial services company providing banking and financial solutions through 200 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

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

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

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

                 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2015
($ in thousands)
(unaudited)
            Linked Quarter Year over Year

QUARTERLY AVERAGE BALANCES

  9/30/2015     6/30/2015     9/30/2014   $ Change % Change   $ Change % Change  
Securities AFS-taxable $ 2,269,763 $ 2,255,485 $ 2,202,020 $ 14,278 0.6 % $ 67,743 3.1 %
Securities AFS-nontaxable 116,290 120,330 131,305 (4,040 ) -3.4 % (15,015 ) -11.4 %
Securities HTM-taxable 1,151,673 1,143,273 1,126,309 8,400 0.7 % 25,364 2.3 %
Securities HTM-nontaxable   36,278     38,173     43,114     (1,895 ) -5.0 %   (6,836 ) -15.9 %
Total securities   3,574,004     3,557,261     3,502,748     16,743   0.5 %   71,256   2.0 %
Loans (including loans held for sale) 6,771,947 6,554,739 6,387,251 217,208 3.3 % 384,696 6.0 %
Acquired loans:
Noncovered loans 421,262 462,418 585,675 (41,156 ) -8.9 % (164,413 ) -28.1 %
Covered loans 18,982 20,574 28,971 (1,592 ) -7.7 % (9,989 ) -34.5 %
Fed funds sold and rev repos 1,167 557 4,228 610 n/m (3,061 ) -72.4 %
Other earning assets   58,534     41,242     41,871     17,292   41.9 %   16,663   39.8 %
Total earning assets   10,845,896     10,636,791     10,550,744     209,105   2.0 %   295,152   2.8 %
Allowance for loan losses (84,482 ) (84,331 ) (78,227 ) (151 ) 0.2 % (6,255 ) 8.0 %
Cash and due from banks 266,174 272,292 272,925 (6,118 ) -2.2 % (6,751 ) -2.5 %
Other assets   1,286,189     1,288,507     1,345,771     (2,318 ) -0.2 %   (59,582 ) -4.4 %
Total assets $ 12,313,777   $ 12,113,259   $ 12,091,213   $ 200,518   1.7 % $ 222,564   1.8 %
 
Interest-bearing demand deposits $ 1,915,567 $ 1,924,447 $ 1,808,710 $ (8,880 ) -0.5 % $ 106,857 5.9 %
Savings deposits 3,059,183 3,226,380 3,050,743 (167,197 ) -5.2 % 8,440 0.3 %
Time deposits less than $100,000 1,072,373 1,101,477 1,187,794 (29,104 ) -2.6 % (115,421 ) -9.7 %
Time deposits of $100,000 or more   712,910     751,129     874,333     (38,219 ) -5.1 %   (161,423 ) -18.5 %
Total interest-bearing deposits 6,760,033 7,003,433 6,921,580 (243,400 ) -3.5 % (161,547 ) -2.3 %
Fed funds purchased and repos 528,232 497,606 540,870 30,626 6.2 % (12,638 ) -2.3 %
Short-term borrowings 534,931 128,761 181,114 406,170 n/m 353,817 n/m
Long-term FHLB advances 1,195 1,213 8,050 (18 ) -1.5 % (6,855 ) -85.2 %
Subordinated notes 49,955 49,947 49,923 8 0.0 % 32 0.1 %
Junior subordinated debt securities   61,856     61,856     61,856     -   0.0 %   -   0.0 %
Total interest-bearing liabilities 7,936,202 7,742,816 7,763,393 193,386 2.5 % 172,809 2.2 %
Noninterest-bearing deposits 2,771,186 2,772,741 2,774,745 (1,555 ) -0.1 % (3,559 ) -0.1 %
Other liabilities   137,134     143,201     140,218     (6,067 ) -4.2 %   (3,084 ) -2.2 %
Total liabilities 10,844,522 10,658,758 10,678,356 185,764 1.7 % 166,166 1.6 %
Shareholders' equity   1,469,255     1,454,501     1,412,857     14,754   1.0 %   56,398   4.0 %
Total liabilities and equity $ 12,313,777   $ 12,113,259   $ 12,091,213   $ 200,518   1.7 % $ 222,564   1.8 %
 
Linked Quarter Year over Year

PERIOD END BALANCES

  9/30/2015     6/30/2015     9/30/2014   $ Change % Change   $ Change % Change  
Cash and due from banks $ 220,052 $ 255,050 $ 237,497 $ (34,998 ) -13.7 % $ (17,445 ) -7.3 %
Fed funds sold and rev repos - - 4,013 - n/m (4,013 ) -100.0 %
Securities available for sale 2,382,822 2,446,383 2,363,895 (63,561 ) -2.6 % 18,927 0.8 %
Securities held to maturity 1,178,440 1,190,161 1,169,640 (11,721 ) -1.0 % 8,800 0.8 %
Loans held for sale (LHFS) 173,679 147,539 135,562 26,140 17.7 % 38,117 28.1 %
Loans held for investment (LHFI) 6,791,643 6,447,073 6,333,651 344,570 5.3 % 457,992 7.2 %
Allowance for loan losses   (65,607 )   (71,166 )   (70,134 )   5,559   -7.8 %   4,527   -6.5 %
Net LHFI 6,726,036 6,375,907 6,263,517 350,129 5.5 % 462,519 7.4 %
Acquired loans:
Noncovered loans 400,528 447,160 564,542 (46,632 ) -10.4 % (164,014 ) -29.1 %
Covered loans 18,645 19,239 27,607 (594 ) -3.1 % (8,962 ) -32.5 %
Allowance for loan losses, acquired loans   (12,185 )   (12,629 )   (11,949 )   444   -3.5 %   (236 ) 2.0 %
Net acquired loans   406,988     453,770     580,200     (46,782 ) -10.3 %   (173,212 ) -29.9 %
Net LHFI and acquired loans 7,133,024 6,829,677 6,843,717 303,347 4.4 % 289,307 4.2 %
Premises and equipment, net 196,558 196,220 200,474 338 0.2 % (3,916 ) -2.0 %
Mortgage servicing rights 69,809 71,422 67,090 (1,613 ) -2.3 % 2,719 4.1 %
Goodwill 365,500 365,500 365,500 - 0.0 % - 0.0 %
Identifiable intangible assets 30,129 32,042 35,357 (1,913 ) -6.0 % (5,228 ) -14.8 %
Other real estate, excluding covered other real estate 83,955 90,748 97,037 (6,793 ) -7.5 % (13,082 ) -13.5 %
Covered other real estate 2,865 3,755 4,146 (890 ) -23.7 % (1,281 ) -30.9 %
FDIC indemnification asset 1,749 2,632 8,154 (883 ) -33.5 % (6,405 ) -78.6 %
Other assets   551,694     551,319     564,234     375   0.1 %   (12,540 ) -2.2 %
Total assets $ 12,390,276   $ 12,182,448   $ 12,096,316   $ 207,828   1.7 % $ 293,960   2.4 %
 
Deposits:
Noninterest-bearing $ 2,787,454 $ 2,819,171 $ 2,723,480 $ (31,717 ) -1.1 % $ 63,974 2.3 %
Interest-bearing   6,624,950     6,973,003     6,789,745     (348,053 ) -5.0 %   (164,795 ) -2.4 %
Total deposits 9,412,404 9,792,174 9,513,225 (379,770 ) -3.9 % (100,821 ) -1.1 %
Fed funds purchased and repos 534,204 477,462 607,851 56,742 11.9 % (73,647 ) -12.1 %
Short-term borrowings 709,845 201,744 316,666 508,101 n/m 393,179 n/m
Long-term FHLB advances 1,173 1,204 8,003 (31 ) -2.6 % (6,830 ) -85.3 %
Subordinated notes 49,961 49,953 49,928 8 0.0 % 33 0.1 %
Junior subordinated debt securities 61,856 61,856 61,856 - 0.0 % - 0.0 %
Other liabilities   144,077     147,646     123,689     (3,569 ) -2.4 %   20,388   16.5 %
Total liabilities   10,913,520     10,732,039     10,681,218     181,481   1.7 %   232,302   2.2 %
Common stock 14,076 14,076 14,051 - 0.0 % 25 0.2 %
Capital surplus 360,494 359,533 354,251 961 0.3 % 6,243 1.8 %
Retained earnings 1,130,766 1,117,993 1,081,161 12,773 1.1 % 49,605 4.6 %
Accum other comprehensive
loss, net of tax   (28,580 )   (41,193 )   (34,365 )   12,613   -30.6 %   5,785   -16.8 %
Total shareholders' equity   1,476,756     1,450,409     1,415,098     26,347   1.8 %   61,658   4.4 %
Total liabilities and equity $ 12,390,276   $ 12,182,448   $ 12,096,316   $ 207,828   1.7 % $ 293,960   2.4 %
 

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

 

See Notes to Consolidated Financials

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION  
September 30, 2015
($ in thousands except per share data)    
(unaudited)                  
 
 
Quarter Ended Linked Quarter Year over Year

INCOME STATEMENTS

  9/30/2015     6/30/2015     9/30/2014   $ Change % Change   $ Change % Change  
Interest and fees on LHFS & LHFI-FTE $ 72,951 $ 71,546 $ 70,197 $ 1,405 2.0 % $ 2,754 3.9 %
Interest and fees on acquired loans 11,607 12,557 23,200 (950 ) -7.6 % (11,593 ) -50.0 %
Interest on securities-taxable 20,264 19,731 19,712 533 2.7 % 552 2.8 %
Interest on securities-tax exempt-FTE 1,609 1,688 1,845 (79 ) -4.7 % (236 ) -12.8 %
Interest on fed funds sold and rev repos 2 2 9 - 0.0 % (7 ) -77.8 %
Other interest income   392     392     386     -   0.0 %   6   1.6 %
Total interest income-FTE   106,825     105,916     115,349     909   0.9 %   (8,524 ) -7.4 %
Interest on deposits 3,147 3,204 3,606 (57 ) -1.8 % (459 ) -12.7 %
Interest on fed funds pch and repos 205 179 180 26 14.5 % 25 13.9 %
Other interest expense   1,811     1,614     1,425     197   12.2 %   386   27.1 %
Total interest expense   5,163     4,997     5,211     166   3.3 %   (48 ) -0.9 %
Net interest income-FTE 101,662 100,919 110,138 743 0.7 % (8,476 ) -7.7 %
Provision for loan losses, LHFI 2,514 1,033 3,058 1,481 n/m (544 ) -17.8 %
Provision for loan losses, acquired loans   1,256     825     1,145     431   52.2 %   111   9.7 %
Net interest income after provision-FTE   97,892     99,061     105,935     (1,169 ) -1.2 %   (8,043 ) -7.6 %
Service charges on deposit accounts 12,400 11,920 12,743 480 4.0 % (343 ) -2.7 %
Insurance commissions 9,906 9,401 9,240 505 5.4 % 666 7.2 %
Wealth management 7,790 7,758 8,038 32 0.4 % (248 ) -3.1 %
Bank card and other fees 6,964 7,416 7,279 (452 ) -6.1 % (315 ) -4.3 %
Mortgage banking, net 7,443 9,481 5,842 (2,038 ) -21.5 % 1,601 27.4 %
Other, net   1,470     (433 )   (160 )   1,903   n/m   1,630   n/m
Nonint inc-excl sec gains (losses), net 45,973 45,543 42,982 430 0.9 % 2,991 7.0 %
Security gains (losses), net   -     -     (89 )   -   n/m   89   -100.0 %
Total noninterest income   45,973     45,543     42,893     430   0.9 %   3,080   7.2 %
Salaries and employee benefits 58,270 57,393 56,675 877 1.5 % 1,595 2.8 %
Services and fees 14,691 15,005 14,489 (314 ) -2.1 % 202 1.4 %
Net occupancy-premises 6,580 6,243 6,817 337 5.4 % (237 ) -3.5 %
Equipment expense 5,877 5,903 5,675 (26 ) -0.4 % 202 3.6 %
FDIC assessment expense 2,559 2,615 2,644 (56 ) -2.1 % (85 ) -3.2 %
ORE/Foreclosure expense 3,385 921 930 2,464 n/m 2,455 n/m
Other expense   12,198     12,186     12,964     12   0.1 %   (766 ) -5.9 %
Total noninterest expense   103,560     100,266     100,194     3,294   3.3 %   3,366   3.4 %
Income before income taxes and tax eq adj 40,305 44,338 48,634 (4,033 ) -9.1 % (8,329 ) -17.1 %
Tax equivalent adjustment   4,056     3,970     3,909     86   2.2 %   147   3.8 %
Income before income taxes 36,249 40,368 44,725 (4,119 ) -10.2 % (8,476 ) -19.0 %
Income taxes   7,819     9,766     11,136     (1,947 ) -19.9 %   (3,317 ) -29.8 %
Net income $ 28,430   $ 30,602   $ 33,589   $ (2,172 ) -7.1 % $ (5,159 ) -15.4 %
 
Per share data
Earnings per share - basic $ 0.42   $ 0.45   $ 0.50   $ (0.03 ) -6.7 % $ (0.08 ) -16.0 %
 
Earnings per share - diluted $ 0.42   $ 0.45   $ 0.50   $ (0.03 ) -6.7 % $ (0.08 ) -16.0 %
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ -   0.0 % $ -   0.0 %
 
Weighted average shares outstanding
Basic   67,557,395     67,556,825     67,439,788  
 
Diluted   67,707,456     67,685,449     67,608,612  
 
Period end shares outstanding   67,557,395     67,557,395     67,439,788  
 

OTHER FINANCIAL DATA

Return on equity 7.68 % 8.44 % 9.43 %
Return on average tangible equity 10.96 % 12.05 % 13.70 %
Return on assets 0.92 % 1.01 % 1.10 %
Interest margin - Yield - FTE 3.91 % 3.99 % 4.34 %
Interest margin - Cost 0.19 % 0.19 % 0.20 %
Net interest margin - FTE 3.72 % 3.81 % 4.14 %
Efficiency ratio (1) 67.87 % 66.00 % 62.80 %
Full-time equivalent employees 2,963 2,989 3,067
 

STOCK PERFORMANCE

Market value-Close $ 23.17 $ 24.98 $ 23.04
Book value $ 21.86 $ 21.47 $ 20.98
Tangible book value $ 16.00 $ 15.58 $ 15.04
 

(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
 

See Notes to Consolidated Financials

 
                         
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2015
($ in thousands)
(unaudited)
Quarter Ended Linked Quarter Year over Year

NONPERFORMING ASSETS (1)

  9/30/2015     6/30/2015     9/30/2014   $ Change % Change   $ Change % Change  
Nonaccrual loans
Alabama $ 1,306 $ 713 $ 852 $ 593 83.2 % $ 454 53.3 %
Florida 7,444 7,892 10,986 (448 ) -5.7 % (3,542 ) -32.2 %
Mississippi (2) 44,955 52,051 65,751 (7,096 ) -13.6 % (20,796 ) -31.6 %
Tennessee (3) 4,911 5,468 5,901 (557 ) -10.2 % (990 ) -16.8 %
Texas   2,515     2,314     4,824     201   8.7 %   (2,309 ) -47.9 %
Total nonaccrual loans 61,131 68,438 88,314 (7,307 ) -10.7 % (27,183 ) -30.8 %
Other real estate
Alabama 23,822 21,849 24,256 1,973 9.0 % (434 ) -1.8 %
Florida 30,374 31,059 36,608 (685 ) -2.2 % (6,234 ) -17.0 %
Mississippi (2) 13,180 14,094 16,419 (914 ) -6.5 % (3,239 ) -19.7 %
Tennessee (3) 9,840 9,707 11,347 133 1.4 % (1,507 ) -13.3 %
Texas   6,739     14,039     8,407     (7,300 ) -52.0 %   (1,668 ) -19.8 %
Total other real estate   83,955     90,748     97,037     (6,793 ) -7.5 %   (13,082 ) -13.5 %
Total nonperforming assets $ 145,086   $ 159,186   $ 185,351   $ (14,100 ) -8.9 % $ (40,265 ) -21.7 %
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 9,224   $ 1,771   $ 3,839   $ 7,453   n/m $ 5,385   n/m
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 15,165   $ 11,987   $ 24,979   $ 3,178   26.5 % $ (9,814 ) -39.3 %
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (4)

  9/30/2015     6/30/2015     9/30/2014   $ Change % Change   $ Change % Change  
Beginning Balance $ 71,166 $ 71,321 $ 66,648 $ (155 ) -0.2 % $ 4,518 6.8 %
Provision for loan losses 2,514 1,033 3,058 1,481 n/m (544 ) -17.8 %
Charge-offs (11,406 ) (4,278 ) (3,216 ) (7,128 ) n/m (8,190 ) n/m
Recoveries   3,333     3,090     3,644     243   7.9 %   (311 ) -8.5 %
Net (charge-offs) recoveries   (8,073 )   (1,188 )   428     (6,885 ) n/m   (8,501 ) n/m
Ending Balance $ 65,607   $ 71,166   $ 70,134   $ (5,559 ) -7.8 % $ (4,527 ) -6.5 %
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ (70 ) $ 623 $ 1,093 $ (693 ) n/m $ (1,163 ) n/m
Florida (1,430 ) (1,168 ) (147 ) (262 ) 22.4 % (1,283 ) n/m
Mississippi (2) 4,221 2,046 4,679 2,175 n/m (458 ) -9.8 %
Tennessee (3) (1,050 ) (483 ) 244 (567 ) n/m (1,294 ) n/m
Texas   843     15     (2,811 )   828   n/m   3,654   n/m
Total provision for loan losses $ 2,514   $ 1,033   $ 3,058   $ 1,481   n/m $ (544 ) -17.8 %
 

NET CHARGE-OFFS (4)

Alabama $ 163 $ 216 $ 172 $ (53 ) -24.5 % $ (9 ) -5.2 %
Florida (1,090 ) 539 (89 ) (1,629 ) n/m (1,001 ) n/m
Mississippi (2) 7,391 1,028 462 6,363 n/m 6,929 n/m
Tennessee (3) 448 105 48 343 n/m 400 n/m
Texas   1,161     (700 )   (1,021 )   1,861   n/m   2,182   n/m
Total net charge-offs (recoveries) $ 8,073   $ 1,188   $ (428 ) $ 6,885   n/m $ 8,501   n/m
 

CREDIT QUALITY RATIOS (1)

Net charge-offs/average loans 0.47 % 0.07 % -0.03 %
Provision for loan losses/average loans 0.15 % 0.06 % 0.19 %
Nonperforming loans/total loans (incl LHFS) 0.88 % 1.04 % 1.37 %
Nonperforming assets/total loans (incl LHFS) 2.08 % 2.41 % 2.87 %
Nonperforming assets/total loans (incl LHFS) +ORE 2.06 % 2.38 % 2.82 %
ALL/total loans (excl LHFS) 0.97 % 1.10 % 1.11 %
ALL-commercial/total commercial loans 1.07 % 1.30 % 1.26 %
ALL-consumer/total consumer and home mortgage loans 0.67 % 0.59 % 0.69 %
ALL/nonperforming loans 107.32 % 103.99 % 79.41 %
ALL/nonperforming loans -
(excl impaired loans) 206.72 % 192.60 % 178.81 %
 

CAPITAL RATIOS

Total equity/total assets 11.92 % 11.91 % 11.70 %
Tangible equity/tangible assets 9.01 % 8.93 % 8.67 %
Tangible equity/risk-weighted assets 12.24 % 12.34 % 12.24 %
Tier 1 leverage ratio 10.09 % 10.14 % 9.54 %
Tier 1 common risk-based capital ratio - BASEL I - - 12.74 %
Common equity tier 1 capital ratio - BASEL III 13.00 % 13.28 % -
Tier 1 risk-based capital ratio 13.66 % 13.97 % 13.47 %
Total risk-based capital ratio 14.66 % 15.07 % 14.70 %
 
(1) - Excludes acquired loans and covered other real estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes acquired loans
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 

See Notes to Consolidated Financials

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2015
($ in thousands)
(unaudited)
    Quarter Ended   Nine Months Ended

AVERAGE BALANCES

  9/30/2015         6/30/2015         3/31/2015         12/31/2014         9/30/2014     9/30/2015       9/30/2014  
Securities AFS-taxable $ 2,269,763 $ 2,255,485 $ 2,190,344 $ 2,204,361 $ 2,202,020 $ 2,238,822 $ 2,181,495
Securities AFS-nontaxable 116,290 120,330 127,623 129,403 131,305 121,373 138,934
Securities HTM-taxable 1,151,673 1,143,273 1,119,979 1,117,989 1,126,309 1,138,424 1,121,862
Securities HTM-nontaxable   36,278     38,173     41,405     42,040     43,114     38,600     39,279  
Total securities   3,574,004     3,557,261     3,479,351     3,493,793     3,502,748     3,537,219     3,481,570  
Loans (including loans held for sale) 6,771,947 6,554,739 6,561,430 6,494,369 6,387,251 6,630,143 6,167,850
Acquired loans:
Noncovered loans 421,262 462,418 502,534 544,260 585,675 461,774 666,769
Covered loans 18,982 20,574 23,593 27,039 28,971 21,033 31,282
Fed funds sold and rev repos 1,167 557 217 1,269 4,228 650 4,437
Other earning assets   58,534     41,242     46,368     48,224     41,871     48,759     38,335  
Total earning assets   10,845,896     10,636,791     10,613,493     10,608,954     10,550,744     10,699,578     10,390,243  
Allowance for loan losses (84,482 ) (84,331 ) (81,993 ) (82,851 ) (78,227 ) (83,611 ) (78,533 )
Cash and due from banks 266,174 272,292 290,251 284,754 272,925 276,151 327,657
Other assets   1,286,189     1,288,507     1,303,552     1,317,217     1,345,771     1,292,685     1,354,948  
Total assets $ 12,313,777   $ 12,113,259   $ 12,125,303   $ 12,128,074   $ 12,091,213   $ 12,184,803   $ 11,994,315  
 
Interest-bearing demand deposits $ 1,915,567 $ 1,924,447 $ 1,847,374 $ 1,815,999 $ 1,808,710 $ 1,896,046 $ 1,844,741
Savings deposits 3,059,183 3,226,380 3,252,586 2,963,771 3,050,743 3,178,675 3,167,637
Time deposits less than $100,000 1,072,373 1,101,477 1,139,912 1,152,622 1,187,794 1,104,339 1,230,997
Time deposits of $100,000 or more   712,910     751,129     785,715     838,309     874,333     749,651     910,857  
Total interest-bearing deposits 6,760,033 7,003,433 7,025,587 6,770,701 6,921,580 6,928,711 7,154,232
Fed funds purchased and repos 528,232 497,606 421,206 526,482 540,870 482,740 404,604
Short-term borrowings 534,931 128,761 256,714 385,841 181,114 307,821 102,288
Long-term FHLB advances 1,195 1,213 1,243 2,652 8,050 1,217 8,248
Subordinated notes 49,955 49,947 49,939 49,931 49,923 49,947 49,915
Junior subordinated debt securities   61,856     61,856     61,856     61,856     61,856     61,856     61,856  
Total interest-bearing liabilities 7,936,202 7,742,816 7,816,545 7,797,463 7,763,393 7,832,292 7,781,143
Noninterest-bearing deposits 2,771,186 2,772,741 2,741,945 2,762,332 2,774,745 2,762,064 2,694,673
Other liabilities   137,134     143,201     129,844     146,011     140,218     136,754     127,414  
Total liabilities 10,844,522 10,658,758 10,688,334 10,705,806 10,678,356 10,731,110 10,603,230
Shareholders' equity   1,469,255     1,454,501     1,436,969     1,422,268     1,412,857     1,453,693     1,391,085  
Total liabilities and equity $ 12,313,777   $ 12,113,259   $ 12,125,303   $ 12,128,074   $ 12,091,213   $ 12,184,803   $ 11,994,315  
 

PERIOD END BALANCES

  9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014  
Cash and due from banks $ 220,052 $ 255,050 $ 335,244 $ 315,973 $ 237,497
Fed funds sold and rev repos - - - 1,885 4,013
Securities available for sale 2,382,822 2,446,383 2,381,459 2,374,567 2,363,895
Securities held to maturity 1,178,440 1,190,161 1,184,554 1,170,685 1,169,640
Loans held for sale (LHFS) 173,679 147,539 150,365 132,196 135,562
Loans held for investment (LHFI) 6,791,643 6,447,073 6,413,876 6,449,469 6,333,651
Allowance for loan losses   (65,607 )   (71,166 )   (71,321 )   (69,616 )   (70,134 )
Net LHFI 6,726,036 6,375,907 6,342,555 6,379,853 6,263,517
Acquired loans:
Noncovered loans 400,528 447,160 478,172 525,783 564,542
Covered loans 18,645 19,239 20,271 23,626 27,607
Allowance for loan losses, acquired loans   (12,185 )   (12,629 )   (11,837 )   (12,059 )   (11,949 )
Net acquired loans   406,988     453,770     486,606     537,350     580,200  
Net LHFI and acquired loans 7,133,024 6,829,677 6,829,161 6,917,203 6,843,717
Premises and equipment, net 196,558 196,220 198,039 200,781 200,474
Mortgage servicing rights 69,809 71,422 62,903 64,358 67,090
Goodwill 365,500 365,500 365,500 365,500 365,500
Identifiable intangible assets 30,129 32,042 31,250 33,234 35,357
Other real estate, excluding covered other real estate 83,955 90,748 90,175 92,509 97,037
Covered other real estate 2,865 3,755 4,794 6,060 4,146
FDIC indemnification asset 1,749 2,632 4,743 6,997 8,154
Other assets   551,694     551,319     540,977     568,685     564,234  
Total assets $ 12,390,276   $ 12,182,448   $ 12,179,164   $ 12,250,633   $ 12,096,316  
 
Deposits:
Noninterest-bearing $ 2,787,454 $ 2,819,171 $ 2,936,875 $ 2,748,635 $ 2,723,480
Interest-bearing   6,624,950     6,973,003     6,970,115     6,949,723     6,789,745  
Total deposits 9,412,404 9,792,174 9,906,990 9,698,358 9,513,225
Fed funds purchased and repos 534,204 477,462 523,187 443,543 607,851
Short-term borrowings 709,845 201,744 50,570 425,077 316,666
Long-term FHLB advances 1,173 1,204 1,222 1,253 8,003
Subordinated notes 49,961 49,953 49,944 49,936 49,928
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
Other liabilities   144,077     147,646     139,311     150,670     123,689  
Total liabilities   10,913,520     10,732,039     10,733,080     10,830,693     10,681,218  
Common stock 14,076 14,076 14,076 14,060 14,051
Capital surplus 360,494 359,533 358,583 356,244 354,251
Retained earnings 1,130,766 1,117,993 1,103,077 1,092,120 1,081,161
Accum other comprehensive
loss, net of tax   (28,580 )   (41,193 )   (29,652 )   (42,484 )   (34,365 )
Total shareholders' equity   1,476,756     1,450,409     1,446,084     1,419,940     1,415,098  
Total liabilities and equity $ 12,390,276   $ 12,182,448   $ 12,179,164   $ 12,250,633   $ 12,096,316  
 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2015
($ in thousands except per share data)
(unaudited)
                           
 
Quarter Ended Nine Months Ended

INCOME STATEMENTS

  9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014     9/30/2015     9/30/2014  
Interest and fees on LHFS & LHFI-FTE $ 72,951 $ 71,546 $ 69,658 $ 70,775 $ 70,197 $ 214,155 $ 206,000
Interest and fees on acquired loans 11,607 12,557 15,078 13,500 23,200 39,242 63,236
Interest on securities-taxable 20,264 19,731 19,586 21,694 19,712 59,581 58,454
Interest on securities-tax exempt-FTE 1,609 1,688 1,789 1,814 1,845 5,086 5,677
Interest on fed funds sold and rev repos 2 2 - 3 9 4 20
Other interest income   392     392     393     384     386     1,177     1,140  
Total interest income-FTE   106,825     105,916     106,504     108,170     115,349     319,245     334,527  
Interest on deposits 3,147 3,204 3,247 3,382 3,606 9,598 11,941
Interest on fed funds pch and repos 205 179 143 184 180 527 366
Other interest expense   1,811     1,614     1,649     1,510     1,425     5,074     4,163  
Total interest expense   5,163     4,997     5,039     5,076     5,211     15,199     16,470  
Net interest income-FTE 101,662 100,919 101,465 103,094 110,138 304,046 318,057
Provision for loan losses, LHFI 2,514 1,033 1,785 (1,393 ) 3,058 5,332 2,604
Provision for loan losses, acquired loans   1,256     825     347     1,179     1,145     2,428     4,992  
Net interest income after provision-FTE   97,892     99,061     99,333     103,308     105,935     296,286     310,461  
Service charges on deposit accounts 12,400 11,920 11,085 12,514 12,743 35,405 36,157
Insurance commissions 9,906 9,401 8,616 7,831 9,240 27,923 25,637
Wealth management 7,790 7,758 7,990 8,460 8,038 23,538 23,883
Bank card and other fees 6,964 7,416 6,762 6,712 7,279 21,142 26,254
Mortgage banking, net 7,443 9,481 8,965 5,918 5,842 25,889 18,862
Other, net   1,470     (433 )   (1,055 )   596     (160 )   (18 )   18  
Nonint inc-excl sec gains (losses), net 45,973 45,543 42,363 42,031 42,982 133,879 130,811
Security gains (losses), net   -     -     -     -     (89 )   -     300  
Total noninterest income   45,973     45,543     42,363     42,031     42,893     133,879     131,111  
Salaries and employee benefits 58,270 57,393 57,169 57,159 56,675 172,832 169,535
Services and fees 14,691 15,005 14,121 14,401 14,489 43,817 42,197
Net occupancy-premises 6,580 6,243 6,191 6,632 6,817 19,014 19,836
Equipment expense 5,877 5,903 5,974 5,911 5,675 17,754 17,949
FDIC assessment expense 2,559 2,615 2,940 2,669 2,644 8,114 7,528
ORE/Foreclosure expense 3,385 921 1,115 3,240 930 5,421 8,081
Other expense   12,198     12,186     11,706     14,420     12,964     36,090     39,447  
Total noninterest expense   103,560     100,266     99,216     104,432     100,194     303,042     304,573  
Income before income taxes and tax eq adj 40,305 44,338 42,480 40,907 48,634 127,123 136,999
Tax equivalent adjustment   4,056     3,970     4,073     4,179     3,909     12,099     11,636  
Income before income taxes 36,249 40,368 38,407 36,728 44,725 115,024 125,363
Income taxes   7,819     9,766     9,259     8,655     11,136     26,844     29,874  
Net income $ 28,430   $ 30,602   $ 29,148   $ 28,073   $ 33,589   $ 88,180   $ 95,489  
 
Per share data
Earnings per share - basic $ 0.42   $ 0.45   $ 0.43   $ 0.42   $ 0.50   $ 1.31   $ 1.42  
 
Earnings per share - diluted $ 0.42   $ 0.45   $ 0.43   $ 0.42   $ 0.50   $ 1.30   $ 1.41  
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.69   $ 0.69  
 
Weighted average shares outstanding
Basic   67,557,395     67,556,825     67,525,791     67,445,721     67,439,788     67,546,786     67,429,973  
 
Diluted   67,707,456     67,685,449     67,639,326     67,633,637     67,608,612     67,677,206     67,580,209  
 
Period end shares outstanding   67,557,395     67,557,395     67,556,591     67,481,992     67,439,788     67,557,395     67,439,788  
 
 

OTHER FINANCIAL DATA

Return on equity 7.68 % 8.44 % 8.23 % 7.83 % 9.43 % 8.11 % 9.18 %
Return on average tangible equity 10.96 % 12.05 % 11.86 % 11.40 % 13.70 % 11.62 % 13.52 %
Return on assets 0.92 % 1.01 % 0.97 % 0.92 % 1.10 % 0.97 % 1.06 %
Interest margin - Yield - FTE 3.91 % 3.99 % 4.07 % 4.05 % 4.34 % 3.99 % 4.30 %
Interest margin - Cost 0.19 % 0.19 % 0.19 % 0.19 % 0.20 % 0.19 % 0.21 %
Net interest margin - FTE 3.72 % 3.81 % 3.88 % 3.86 % 4.14 % 3.80 % 4.09 %
Efficiency ratio (1) 67.87 % 66.00 % 66.46 % 69.16 % 62.80 % 66.78 % 65.07 %
Full-time equivalent employees 2,963 2,989 3,038 3,060 3,067
 
 

STOCK PERFORMANCE

Market value-Close $ 23.17 $ 24.98 $ 24.28 $ 24.54 $ 23.04
Book value $ 21.86 $ 21.47 $ 21.41 $ 21.04 $ 20.98
Tangible book value $ 16.00 $ 15.58 $ 15.53 $ 15.13 $ 15.04
 
(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.
 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2015
($ in thousands)
(unaudited)
                           
Quarter Ended

NONPERFORMING ASSETS (1)

  9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014  
Nonaccrual loans
Alabama $ 1,306 $ 713 $ 902 $ 852 $ 852
Florida 7,444 7,892 8,179 11,091 10,986
Mississippi (2) 44,955 52,051 52,145 57,129 65,751
Tennessee (3) 4,911 5,468 4,197 5,819 5,901
Texas   2,515     2,314     11,585     4,452     4,824  
Total nonaccrual loans 61,131 68,438 77,008 79,343 88,314
Other real estate
Alabama 23,822 21,849 21,795 21,196 24,256
Florida 30,374 31,059 34,746 35,324 36,608
Mississippi (2) 13,180 14,094 15,143 17,397 16,419
Tennessee (3) 9,840 9,707 10,072 10,292 11,347
Texas   6,739     14,039     8,419     8,300     8,407  
Total other real estate   83,955     90,748     90,175     92,509     97,037  
Total nonperforming assets $ 145,086   $ 159,186   $ 167,183   $ 171,852   $ 185,351  
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 9,224   $ 1,771   $ 1,413   $ 2,764   $ 3,839  
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 15,165   $ 11,987   $ 7,584   $ 25,943   $ 24,979  
 
 
Quarter Ended Nine Months Ended

ALLOWANCE FOR LOAN LOSSES (4)

  9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014     9/30/2015     9/30/2014  
Beginning Balance $ 71,166 $ 71,321 $ 69,616 $ 70,134 $ 66,648 $ 69,616 $ 66,448
Provision for loan losses 2,514 1,033 1,785 (1,393 ) 3,058 5,332 2,604
Charge-offs (11,406 ) (4,278 ) (3,004 ) (3,174 ) (3,216 ) (18,688 ) (10,052 )
Recoveries   3,333     3,090     2,924     4,049     3,644     9,347     11,134  
Net (charge-offs) recoveries   (8,073 )   (1,188 )   (80 )   875     428     (9,341 )   1,082  
Ending Balance $ 65,607   $ 71,166   $ 71,321   $ 69,616   $ 70,134   $ 65,607   $ 70,134  
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ (70 ) $ 623 $ 761 $ 283 $ 1,093 $ 1,314 $ 2,261
Florida (1,430 ) (1,168 ) 1,833 (66 ) (147 ) (765 ) (5,660 )
Mississippi (2) 4,221 2,046 (2,729 ) (3,065 ) 4,679 3,538 9,539
Tennessee (3) (1,050 ) (483 ) 1,432 1,993 244 (101 ) (948 )
Texas   843     15     488     (538 )   (2,811 )   1,346     (2,588 )
Total provision for loan losses $ 2,514   $ 1,033   $ 1,785   $ (1,393 ) $ 3,058   $ 5,332   $ 2,604  
 

NET CHARGE-OFFS (4)

Alabama $ 163 $ 216 $ 144 $ 92 $ 172 $ 523 $ 311
Florida (1,090 ) 539 (28 ) (226 ) (89 ) (579 ) (3,138 )
Mississippi (2) 7,391 1,028 143 (880 ) 462 8,562 2,656
Tennessee (3) 448 105 (216 ) 325 48 337 134
Texas   1,161     (700 )   37     (186 )   (1,021 )   498     (1,045 )
Total net charge-offs (recoveries) $ 8,073   $ 1,188   $ 80   $ (875 ) $ (428 ) $ 9,341   $ (1,082 )
 

CREDIT QUALITY RATIOS (1)

Net charge-offs/average loans 0.47 % 0.07 % 0.00 % -0.05 % -0.03 % 0.19 % -0.02 %
Provision for loan losses/average loans 0.15 % 0.06 % 0.11 % -0.09 % 0.19 % 0.11 % 0.06 %
Nonperforming loans/total loans (incl LHFS) 0.88 % 1.04 % 1.17 % 1.21 % 1.37 %
Nonperforming assets/total loans (incl LHFS) 2.08 % 2.41 % 2.55 % 2.61 % 2.87 %
Nonperforming assets/total loans (incl LHFS) +ORE 2.06 % 2.38 % 2.51 % 2.57 % 2.82 %
ALL/total loans (excl LHFS) 0.97 % 1.10 % 1.11 % 1.08 % 1.11 %
ALL-commercial/total commercial loans 1.07 % 1.30 % 1.30 % 1.23 % 1.26 %
ALL-consumer/total consumer and home mortgage loans 0.67 % 0.59 % 0.61 % 0.67 % 0.69 %
ALL/nonperforming loans 107.32 % 103.99 % 92.62 % 87.74 % 79.41 %
ALL/nonperforming loans -
(excl impaired loans) 206.72 % 192.60 % 205.52 % 180.95 % 178.81 %
 

CAPITAL RATIOS

Total equity/total assets 11.92 % 11.91 % 11.87 % 11.59 % 11.70 %
Tangible equity/tangible assets 9.01 % 8.93 % 8.91 % 8.62 % 8.67 %
Tangible equity/risk-weighted assets 12.24 % 12.34 % 12.34 % 12.17 % 12.24 %
Tier 1 leverage ratio 10.09 % 10.14 % 9.99 % 9.63 % 9.54 %
Tier 1 common risk-based capital ratio - BASEL I - - - 12.75 % 12.74 %
Common equity tier 1 capital ratio - BASEL III 13.00 % 13.28 % 13.14 % - -
Tier 1 risk-based capital ratio 13.66 % 13.97 % 13.83 % 13.47 % 13.47 %
Total risk-based capital ratio 14.66 % 15.07 % 14.92 % 14.56 % 14.70 %
 
 
(1) - Excludes acquired loans and covered other real estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes acquired loans
 

See Notes to Consolidated Financials

 
                   

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2015

($ in thousands)

(unaudited)

 

Note 1 - Securities Available for Sale and Held to Maturity

 
The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):
 
  9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014

SECURITIES AVAILABLE FOR SALE

U.S. Treasury securities $ - $ - $ - $ 100 $ 100
U.S. Government agency obligations
Issued by U.S. Government agencies 71,282 74,409 78,115 79,656 83,011
Issued by U.S. Government sponsored agencies 23,016 33,009 33,076 32,818 30,779

Obligations of states and political subdivisions

147,794 151,322 160,154 162,258 165,463
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 26,651 20,651 12,010 12,427 12,828
Issued by FNMA and FHLMC 177,411 185,651 195,470 204,441 213,420
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,630,402 1,662,476 1,646,710 1,661,833 1,603,138
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 279,609 290,398 225,826 189,334 221,641
Asset-backed securities and structured financial products   26,657   28,467   30,098   31,700   33,515
Total securities available for sale $ 2,382,822 $ 2,446,383 $ 2,381,459 $ 2,374,567 $ 2,363,895
 

SECURITIES HELD TO MATURITY

U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 101,578 $ 101,374 $ 101,171 $ 100,971 $ 100,767
Obligations of states and political subdivisions 56,661 56,978 62,928 63,505 64,538
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 17,783 18,265 18,861 19,115 13,368
Issued by FNMA and FHLMC 10,669 10,965 11,341 11,437 11,816
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 808,763 838,989 842,827 834,176 836,966
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   182,986   163,590   147,426   141,481   142,185
Total securities held to maturity $ 1,178,440 $ 1,190,161 $ 1,184,554 $ 1,170,685 $ 1,169,640
 

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 September 30, 2015, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive (loss) income in the accompanying balance sheet totaled approximately $35.6 million ($22.0 million, net of tax).

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 94% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.

           

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2015

($ in thousands)

(unaudited)

 

Note 2 – Loan Composition

 

LHFI BY TYPE (excluding acquired loans)

    9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014  
Loans secured by real estate:
Construction, land development and other land loans $ 785,472 $ 682,444 $ 691,657 $ 619,877 $ 580,794
Secured by 1-4 family residential properties 1,638,639 1,637,933 1,613,993 1,634,397 1,625,480
Secured by nonfarm, nonresidential properties 1,604,453 1,567,035 1,516,895 1,553,193 1,560,901
Other real estate secured 225,523 240,056 233,322 253,787 239,819
Commercial and industrial loans 1,270,277 1,219,684 1,228,788 1,270,350 1,246,753
Consumer loans 169,509 165,215 161,535 167,964 168,813
State and other political subdivision loans 677,539 574,265 614,330 602,727 585,382
Other loans   420,231     360,441     353,356     347,174     325,709  
LHFI 6,791,643 6,447,073 6,413,876 6,449,469 6,333,651
Allowance for loan losses   (65,607 )   (71,166 )   (71,321 )   (69,616 )   (70,134 )
Net LHFI $ 6,726,036   $ 6,375,907   $ 6,342,555   $ 6,379,853   $ 6,263,517  
         

ACQUIRED NONCOVERED LOANS BY TYPE

    9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014  
Loans secured by real estate:
Construction, land development and other land loans $ 45,299 $ 50,867 $ 51,363 $ 58,309 $ 64,808
Secured by 1-4 family residential properties 96,870 101,027 111,830 116,920 120,366
Secured by nonfarm, nonresidential properties 146,614 168,698 177,210 202,323 214,806
Other real estate secured 23,816 25,666 26,819 27,813 28,036
Commercial and industrial loans 57,748 73,732 81,261 88,256 103,185
Consumer loans 6,295 7,273 8,494 9,772 11,236
Other loans   23,886     19,897     21,195     22,390     22,105  
Noncovered loans 400,528 447,160 478,172 525,783 564,542
Allowance for loan losses   (11,417 )   (11,927 )   (11,106 )   (10,541 )   (11,136 )
Net noncovered loans $ 389,111   $ 435,233   $ 467,066   $ 515,242   $ 553,406  
         
 

ACQUIRED COVERED LOANS BY TYPE

  9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014  
Loans secured by real estate:
Construction, land development and other land loans $ 966 $ 904 $ 1,447 $ 1,197 $ 1,721
Secured by 1-4 family residential properties 10,546 11,080 11,200 13,180 14,114
Secured by nonfarm, nonresidential properties 5,363 5,206 5,844 7,672 8,270
Other real estate secured 1,511 1,622 1,469 1,096 2,949
Commercial and industrial loans 205 371 255 277 327
Consumer loans - - - - -
Other loans   54     56     56     204     226  
Covered loans 18,645 19,239 20,271 23,626 27,607
Allowance for loan losses   (768 )   (702 )   (731 )   (1,518 )   (813 )
Net covered loans $ 17,877   $ 18,537   $ 19,540   $ 22,108   $ 26,794  
             

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2015

($ in thousands)

(unaudited)

 
Note 2 – Loan Composition (continued)
September 30, 2015

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 $ 785,472 $ 113,462 $ 47,977 $ 285,193 $ 59,210 $ 279,630
Secured by 1-4 family residential properties 1,638,639 54,393 50,026 1,402,256 114,594 17,370
Secured by nonfarm, nonresidential properties 1,604,453 173,525 160,976 779,426 150,353 340,173
Other real estate secured 225,523 16,369 6,045 127,938 18,854 56,317
Commercial and industrial loans 1,270,277 84,285 23,601 743,301 174,987 244,103
Consumer loans 169,509 17,945 2,786 128,754 17,300 2,724
State and other political subdivision loans 677,539 45,794 26,537 485,911 22,760 96,537
Other loans   420,231   26,479   18,422   280,586   37,920   56,824
Loans $ 6,791,643 $ 532,252 $ 336,370 $ 4,233,365 $ 595,978 $ 1,093,678
 
 
 

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

Lots $ 48,258 $ 6,169 $ 21,204 $ 14,662 $ 2,275 $ 3,948
Development 56,720 9,600 5,256 29,696 767 11,401
Unimproved land 98,485 9,034 10,774 43,899 19,675 15,103
1-4 family construction 145,319 25,036 9,466 67,776 2,087 40,954
Other construction   436,690   63,623   1,277   129,160   34,406   208,224
Construction, land development and other land loans $ 785,472 $ 113,462 $ 47,977 $ 285,193 $ 59,210 $ 279,630
 
 
 
 

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

Income producing:
Retail $ 211,804 $ 41,172 $ 33,401 $ 79,163 $ 19,533 $ 38,535
Office 212,280 21,798 37,129 76,683 7,614 69,056
Nursing homes/assisted living 72,690 - - 67,156 5,534 -
Hotel/motel 131,105 33,651 17,632 36,681 33,047 10,094
Industrial 45,719 6,942 5,182 11,060 4,019 18,516
Health care 25,650 2,156 633 22,850 11 -
Convenience stores 11,692 236 - 5,673 1,150 4,633
Other   169,471   8,765   19,451   79,492   3,652   58,111
Total income producing loans 880,411 114,720 113,428 378,758 74,560 198,945
 
Owner-occupied:
Office 115,817 8,810 17,631 58,575 8,961 21,840
Churches 92,300 4,298 2,744 46,011 29,513 9,734
Industrial warehouses 124,076 4,405 2,604 63,637 10,988 42,442
Health care 115,284 13,139 8,048 64,783 9,870 19,444
Convenience stores 71,276 5,302 3,966 47,006 2,859 12,143
Retail 35,182 2,419 5,706 20,415 3,619 3,023
Restaurants 63,194 1,910 1,853 23,412 3,417 32,602
Auto dealerships 12,653 8,272 117 2,988 1,276 -
Other   94,260   10,250   4,879   73,841   5,290   -
Total owner-occupied loans   724,042   58,805   47,548   400,668   75,793   141,228
Loans secured by nonfarm, nonresidential properties $ 1,604,453 $ 173,525 $ 160,976 $ 779,426 $ 150,353 $ 340,173
 
(1) Excludes acquired loans.
                       

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2015

($ in thousands)

(unaudited)

 

Note 3 – Yields on Earning Assets and Interest-Bearing Liabilities

 

The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:

Quarter Ended Nine Months Ended
9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014   9/30/2015       9/30/2014  
Securities – taxable 2.35 % 2.33 % 2.40 % 2.59 % 2.35 % 2.36 % 2.37 %
Securities – nontaxable 4.18 % 4.27 % 4.29 % 4.20 % 4.20 % 4.25 % 4.26 %
Securities – total 2.43 % 2.42 % 2.49 % 2.67 % 2.44 % 2.44 % 2.46 %
Loans - LHFI & LHFS 4.27 % 4.38 % 4.31 % 4.32 % 4.36 % 4.32 % 4.47 %
Acquired loans 10.46 % 10.43 % 11.62 % 9.38 % 14.98 % 10.87 % 12.11 %
Loans - total 4.65 % 4.79 % 4.85 % 4.73 % 5.29 % 4.76 % 5.24 %
FF sold & rev repo 0.68 % 1.44 % 0.00 % 0.94 % 0.84 % 0.82 % 0.60 %
Other earning assets 2.66 % 3.81 % 3.44 % 3.16 % 3.66 % 3.23 % 3.98 %
Total earning assets 3.91 % 3.99 % 4.07 % 4.05 % 4.34 % 3.99 % 4.30 %
 
Interest-bearing deposits 0.18 % 0.18 % 0.19 % 0.20 % 0.21 % 0.19 % 0.22 %
FF pch & repo 0.15 % 0.14 % 0.14 % 0.14 % 0.13 % 0.15 % 0.12 %
Other borrowings 1.11 % 2.68 % 1.81 % 1.20 % 1.88 % 1.61 % 2.50 %
Total interest-bearing liabilities 0.26 % 0.26 % 0.26 % 0.26 % 0.27 % 0.26 % 0.28 %
 
Net interest margin 3.72 % 3.81 % 3.88 % 3.86 % 4.14 % 3.80 % 4.09 %
Net interest margin excluding acquired loans 3.43 % 3.49 % 3.47 % 3.54 % 3.47 % 3.47 % 3.52 %
 

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 excluding acquired loans decreased 6 basis points during the third quarter of 2015 primarily due to declining yields on loans held for investment and loans held for sale.

Note 4 – 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 $479 thousand and $583 thousand for the quarters ended September 30, 2015 and 2014, respectively.

                       

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

 
Quarter Ended Nine Months Ended
  9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014     9/30/2015         9/30/2014  
Mortgage servicing income, net $ 4,906 $ 4,696 $ 4,897 $ 4,814 $ 4,674 $ 14,499 $ 13,805
Change in fair value-MSR from runoff (2,636 ) (2,587 ) (2,213 ) (1,999 ) (2,364 ) (7,436 ) (6,567 )
Gain on sales of loans, net 4,479 5,114 3,716 2,910 3,272 13,309 7,860
Other, net   215     206     1,245     132     (323 )   1,666     772  
Mortgage banking income before hedge ineffectiveness   6,964     7,429     7,645     5,857     5,259     22,038     15,870  
Change in fair value-MSR from market changes (4,141 ) 6,076 (2,368 ) (4,142 ) 700 (433 ) (3,061 )
Change in fair value of derivatives   4,620     (4,024 )   3,688     4,203     (117 )   4,284     6,053  
Net positive hedge ineffectiveness   479     2,052     1,320     61     583     3,851     2,992  
Mortgage banking, net $ 7,443   $ 9,481   $ 8,965   $ 5,918   $ 5,842   $ 25,889   $ 18,862  
 

During the first quarter of 2015, Trustmark exercised its option to repurchase approximately $28.5 million of delinquent loans serviced for GNMA. These loans were subsequently sold to a third party under different repurchase provisions. Trustmark retained the servicing for these loans, which are subject to guarantees by FHA/VA. As a result of this repurchase and sale, the loans are no longer carried as "LHFS-Guaranteed GNMA serviced loans" (see pages 3 and 6). The transaction resulted in a gain of $304 thousand, which was recorded during the first quarter of 2015 and is included in the table above as "Gain on sales of loans, net.”

                       

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2015

($ in thousands)

(unaudited)

 
Note 5 – Other Noninterest Income and Expense
 

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

 
Quarter Ended Nine Months Ended
  9/30/2015     6/30/2015     3/31/2015     12/31/2014     9/30/2014     9/30/2015         9/30/2014  
Partnership amortization for tax credit purposes $ (2,083 ) $ (2,480 ) $ (2,472 ) $ (2,806 ) $ (3,006 ) $ (7,035 ) $ (9,018 )
Increase (decrease) in FDIC indemnification asset 82 (1,798 ) (970 ) (735 ) (452 ) (2,686 ) (2,139 )
Increase in life insurance cash surrender value 1,687 1,673 1,675 1,693 1,702 5,035 5,647
Other miscellaneous income   1,784     2,172     712     2,444     1,596     4,668     5,528  
Total other, net $ 1,470   $ (433 ) $ (1,055 ) $ 596   $ (160 ) $ (18 ) $ 18  
 

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 third quarter of 2015, other noninterest income included a net upward adjustment of the FDIC indemnification asset of $82 thousand on acquired covered loans and covered other real estate obtained from the Heritage Banking Group as a result of declines in loan pay-offs and real estate sales as well as an increase in writedowns of other real estate when compared to the second quarter of 2015.

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