January 24, 2017 - 4:30 PM EST
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Trustmark Corporation Announces 2016 Financial Results

Trustmark Corporation (NASDAQ:TRMK) reported net income of $28.9 million in the fourth quarter of 2016, which represented diluted earnings per share of $0.43. Diluted earnings per share in the fourth quarter of 2016 increased 4.9% when compared to the same period in the prior year. For the full year, Trustmark’s net income totaled $108.4 million, which represented diluted earnings per share of $1.60, and produced a return on average tangible equity of 9.99% and a return on average assets of 0.84%. Excluding charges related to a voluntary early retirement program (ERP) and expense related to reducing the risk profile of the assets of the Corporation’s defined benefits plan prior to termination, diluted earnings per share in 2016 were $1.70, compared to $1.71 in 2015. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2017, to shareholders of record on March 1, 2017.

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Fourth Quarter Highlights

  • Loans held for investment increased $352.0 million, or 4.7%, from the prior quarter and $759.8 million, or 10.7%, from the comparable period one year earlier
  • Credit quality remained solid; nonperforming assets declined 6.8% and 16.0% from the prior quarter and year-over-year, respectively
  • Core noninterest expense remained well controlled at $97.1 million in the fourth quarter

Gerard R. Host, President and CEO, stated, “2016 was another year of significant achievement for Trustmark. We continued to provide customers with the products and services they desired as evidenced by our third consecutive year of double-digit loan growth and solid performance across our financial services businesses. We made investments in technology designed to enhance our customers’ experience and strengthen security. In addition, we continued to realign delivery channels in response to changing customer preferences and embraced opportunities to enhance efficiency and profitability. As we look forward in 2017, we will continue to manage the franchise for the long term by expanding and building sustainable relationships. 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

  • Diversified loan growth reflects the value of the Trustmark franchise
  • Average noninterest-bearing deposits in 2016 increased 7.7% and represented 31.0% of average total deposits; cost of deposits remained steady
  • Solid capital base continues to provide flexibility in pursuing growth opportunities

Loans held for investment totaled $7.9 billion at December 31, 2016, an increase of 4.7% from the prior quarter and 10.7% from the same period one year earlier. Compared to the prior quarter, loans secured by nonfarm, nonresidential real estate expanded $118.0 million, reflecting growth across Trustmark’s franchise. Commercial and industrial loans increased $107.1 million as growth in Mississippi and Tennessee more than offset declines in Alabama, Florida and Texas. Single-family mortgage loans grew $67.6 million principally due to growth in Mississippi, Alabama and Florida. Construction, land development and other land loans expanded $64.7 million, driven primarily by growth in construction loans in Mississippi and Alabama. Loans to state and other political subdivisions increased $41.5 million, led principally by growth in Texas and Mississippi. Other loans, which include loans to nonprofits and real estate investment trusts, declined $47.9 million as growth in Texas was more than offset by declines in Mississippi and Tennessee.

Acquired loans totaled $272.2 million at December 31, 2016, down $23.5 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $8.1 billion at December 31, 2016, up 4.2% from the prior quarter and 8.6% from the prior year.

Deposits totaled $10.1 billion at December 31, 2016, an increase of $370.3 million from the prior quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 60% of deposits in checking accounts and a total cost of deposits of 0.14%. The total cost of interest-bearing liabilities was 0.31% for the fourth quarter of 2016.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At December 31, 2016, Trustmark’s tangible equity to tangible assets ratio was 8.74%, while its total risk-based capital ratio was 13.59%. Tangible book value per share was $16.76 at December 31, 2016, up 4.9% year-over-year.

Credit Quality

  • Nonperforming loans and other real estate decreased 11.0% and 19.6%, respectively, in 2016
  • Allowance for loan losses represented 267.40% of nonperforming loans, excluding specifically reviewed impaired loans
  • Net charge-offs represented 10 basis points of average loans in 2016

Nonperforming loans totaled $49.2 million at December 31, 2016, down 9.5% from the prior quarter and 11.0% year-over-year. Other real estate totaled $62.1 million, reflecting a 4.5% linked-quarter decrease and a 19.6% year-over-year reduction. Collectively, nonperforming assets totaled $111.3 million, reflecting a linked-quarter and year-over-year decrease of 6.8% and 16.0%, respectively.

Allocation of Trustmark's $71.3 million allowance for loan losses represented 0.97% of commercial loans and 0.68% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.91% at December 31, 2016, representing a level management considers commensurate with the inherent risk in the loan portfolio. In aggregate, the allowance for both held for investment and acquired loan losses represented 1.02% of total loans, which include held for investment and acquired loans.

Unless noted otherwise, 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) excluding acquired loans in 2016 totaled $375.7 million, up 5.2% from the prior year
  • Noninterest income in 2016 totaled $173.9 million, up 0.5% from the prior year
  • Mortgage loan production volume in 2016 totaled $1.6 billion, up 8.4% from the prior year

Revenue in the fourth quarter totaled $140.6 million, down 1.2% from the prior quarter, reflecting in part a seasonal reduction in noninterest income. Net interest income (FTE) in the fourth quarter totaled $103.6 million, resulting in a net interest margin of 3.52%. Compared to the prior quarter, net interest income (FTE) increased $1.4 million primarily due to growth in interest income (FTE) from the held for sale and held for investment loan portfolios and the acquired loan portfolio, which were offset in part by decreased yields on the securities portfolio. The yield on acquired loans in the fourth quarter totaled 11.69% and included recoveries from settlement of debt of $3.8 million, which represented approximately 5.40% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin in the fourth quarter was 3.31%, down 7 basis points from the prior quarter. The contraction in the net interest margin is attributable to a reduction in the yield on the securities portfolio and the loans held for investment and held for sale portfolios. Net interest income (FTE) in 2016 totaled $405.9 million, resulting in a net interest margin (FTE) of 3.53%; excluding acquired loans, the net interest margin (FTE) was 3.37%.

Noninterest income totaled $41.7 million in the fourth quarter, down from the prior quarter primarily as a result of seasonally lower mortgage banking revenues and insurance commissions. In the fourth quarter, bank card and other fees totaled $6.8 million, unchanged from the prior quarter, while service charges on deposit accounts totaled $11.4 million, down 2.0% from the prior quarter. Other income, net increased $818 thousand linked quarter, reflecting an increase in other miscellaneous income as well as a gain on the disposition of a closed branch facility. Noninterest income for 2016 totaled $173.9 million and remained stable when compared to the prior year.

Insurance revenue in the fourth quarter totaled $8.5 million, reflecting a seasonal decrease of 16.0% from the prior quarter and in line with levels one year earlier. For the year, insurance revenue totaled $36.8 million, up $340 thousand relative to the prior year. The solid performance in 2016 reflects increased business development efforts and initiatives that supported enhanced productivity.

Wealth management revenue totaled $7.5 million in the fourth quarter, remaining stable relative to the prior quarter and down 4.2% from levels one year earlier. The year-over-year decline is primarily attributable to reduced annuity and trust management income. Wealth management revenue in 2016 totaled $30.5 million, down 2.8% relative to the prior year. Trustmark remained focused on servicing clients and realigned processes to enhance productivity.

Mortgage banking revenue in the fourth quarter totaled $5.4 million, down $1.9 million from the prior quarter. The linked-quarter decline is primarily attributable to a $2.6 million decline in fair value of mortgage loans held for sale, which was offset in part by reduced negative hedge ineffectiveness of $976 thousand. Mortgage loan production in the fourth quarter totaled $406.6 million, a seasonal decrease of 16.7% from the prior quarter and an increase of 19.6% year-over-year.

In 2016, mortgage banking revenue totaled $28.2 million, down 6.5% from the prior year; increased secondary marketing gains and mortgage servicing income were more than offset by negative mortgage servicing hedge ineffectiveness. Excluding mortgage servicing hedge ineffectiveness, mortgage banking revenue increased $2.8 million, or 9.8%, during the year. Mortgage loan production in 2016 totaled $1.6 billion, up 8.4% from the prior year.

Noninterest Expense

  • Core noninterest expense in 2016 remained well controlled and totaled $388.7 million
  • Results of the previously announced ERP produced savings of $2.1 million during the fourth quarter and $4.4 million during second half of 2016

Core noninterest expense, which excludes ORE expense ($525 thousand), intangible amortization ($1.7 million), expense related to reducing the risk profile of the assets of the Corporation’s defined benefit plan prior to termination ($664 thousand) and additional pension expense related to the ERP ($268 thousand), totaled $97.1 million in the fourth quarter, an increase of $496 thousand on a comparable basis from the prior quarter.

Salaries and benefits totaled $58.2 million in the fourth quarter, up 1.6% linked quarter due to increased expense related to incentive compensation programs. Services and fees declined 1.3% from the prior quarter, reflecting in part a reduction in communications expense and professional fees. ORE and foreclosure expense totaled $525 thousand during the fourth quarter, which compares to a gain on sale of ORE of $1.3 million in the prior quarter. Relative to 2015, core noninterest expense remained stable at $388.7 million.

Trustmark continued the optimization of its retail delivery channels to enhance productivity and efficiency as well as promote additional growth. During the fourth quarter, Trustmark opened a loan production office in Pensacola, Florida, and consolidated two banking centers. For the year, Trustmark consolidated nine branch offices across Alabama, Mississippi and Florida, and reallocated a portion of those resources into a new banking center in Tuscaloosa, Alabama, and a new loan production office in Pensacola, Florida. Overall, these collective efforts resulted in the consolidation of 36 branch offices and the establishment of nine banking centers over the past four years. 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, January 25, 2017, 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, February 8, 2017, in archived format at the same web address or by calling (877) 344-7529, passcode 10098633.

Trustmark Corporation is a financial services company providing banking and financial solutions through 193 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

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

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

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

 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands)
(unaudited)
                  Linked Quarter     Year over Year

QUARTERLY AVERAGE BALANCES

12/31/2016 9/30/2016 12/31/2015

$ Change

    % Change

$ Change

    % Change
Securities AFS-taxable $ 2,271,503 $ 2,249,109 $ 2,209,801 $ 22,394 1.0 % $ 61,702 2.8 %
Securities AFS-nontaxable 91,495 95,233 110,290 (3,738 ) -3.9 % (18,795 ) -17.0 %
Securities HTM-taxable 1,101,382 1,115,053 1,145,397 (13,671 ) -1.2 % (44,015 ) -3.8 %
Securities HTM-nontaxable   33,675     34,179     35,755     (504 ) -1.5 %   (2,080 ) -5.8 %
Total securities   3,498,055     3,493,574     3,501,243     4,481   0.1 %   (3,188 ) -0.1 %
Loans (including loans held for sale) 7,855,444 7,658,089 7,089,672 197,355 2.6 % 765,772 10.8 %
Acquired loans:
Noncovered loans 278,460 306,809 384,306 (28,349 ) -9.2 % (105,846 ) -27.5 %
Covered loans 3,737 10,464 18,341 (6,727 ) -64.3 % (14,604 ) -79.6 %
Fed funds sold and rev repos 1,418 1,352 1,384 66 4.9 % 34 2.5 %
Other earning assets   80,608     68,706     68,016     11,902   17.3 %   12,592   18.5 %
Total earning assets   11,717,722     11,538,994     11,062,962     178,728   1.5 %   654,760   5.9 %
Allowance for loan losses (82,604 ) (82,301 ) (78,652 ) (303 ) 0.4 % (3,952 ) 5.0 %
Cash and due from banks 314,420 299,670 272,562 14,750 4.9 % 41,858 15.4 %
Other assets   1,238,029     1,243,854     1,266,712     (5,825 ) -0.5 %   (28,683 ) -2.3 %
Total assets $ 13,187,567   $ 13,000,217   $ 12,523,584   $ 187,350   1.4 % $ 663,983   5.3 %
 
Interest-bearing demand deposits $ 1,920,273 $ 1,848,084 $ 1,917,598 $ 72,189 3.9 % $ 2,675 0.1 %
Savings deposits 3,049,733 3,101,161 2,963,318 (51,428 ) -1.7 % 86,415 2.9 %
Time deposits less than $100,000 945,649 961,641 1,033,233 (15,992 ) -1.7 % (87,584 ) -8.5 %
Time deposits of $100,000 or more   693,204     705,704     687,635     (12,500 ) -1.8 %   5,569   0.8 %
Total interest-bearing deposits 6,608,859 6,616,590 6,601,784 (7,731 ) -0.1 % 7,075 0.1 %
Fed funds purchased and repos 494,193 481,071 563,424 13,122 2.7 % (69,231 ) -12.3 %
Short-term borrowings 435,576 311,473 733,365 124,103 39.8 % (297,789 ) -40.6 %
Long-term FHLB advances 685,844 751,095 50,078 (65,251 ) -8.7 % 635,766 n/m
Subordinated notes 40,757 49,988 49,964 (9,231 ) -18.5 % (9,207 ) -18.4 %
Junior subordinated debt securities   61,856     61,856     61,856       0.0 %     0.0 %
Total interest-bearing liabilities 8,327,085 8,272,073 8,060,471 55,012 0.7 % 266,614 3.3 %
Noninterest-bearing deposits 3,160,959 3,060,331 2,839,894 100,628 3.3 % 321,065 11.3 %
Other liabilities   166,379     136,971     141,925     29,408   21.5 %   24,454   17.2 %
Total liabilities 11,654,423 11,469,375 11,042,290 185,048 1.6 % 612,133 5.5 %
Shareholders' equity   1,533,144     1,530,842     1,481,294     2,302   0.2 %   51,850   3.5 %
Total liabilities and equity $ 13,187,567   $ 13,000,217   $ 12,523,584   $ 187,350   1.4 % $ 663,983   5.3 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 

See Notes to Consolidated Financials

 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands)
(unaudited)

 
                 

Linked Quarter

   

Year over Year

PERIOD END BALANCES

12/31/2016 9/30/2016 12/31/2015

$ Change

    % Change

$ Change

    % Change
Cash and due from banks $ 327,706 $ 383,945 $ 277,751 $ (56,239 ) -14.6 % $ 49,955 18.0 %
Fed funds sold and rev repos 500 500 250 0.0 % 250 100.0 %
Securities available for sale 2,356,682 2,410,947 2,345,422 (54,265 ) -2.3 % 11,260 0.5 %
Securities held to maturity 1,158,643 1,143,234 1,187,818 15,409 1.3 % (29,175 ) -2.5 %
Loans held for sale (LHFS) 175,927 242,097 160,189 (66,170 ) -27.3 % 15,738 9.8 %
Loans held for investment (LHFI) 7,851,213 7,499,204 7,091,385 352,009 4.7 % 759,828 10.7 %
Allowance for loan losses   (71,265 )   (70,871 )   (67,619 )   (394 ) 0.6 %   (3,646 ) 5.4 %
Net LHFI 7,779,948 7,428,333 7,023,766 351,615 4.7 % 756,182 10.8 %
Acquired loans:
Noncovered loans 268,633 291,825 372,711 (23,192 ) -7.9 % (104,078 ) -27.9 %
Covered loans 3,614 3,912 17,700 (298 ) -7.6 % (14,086 ) -79.6 %
Allowance for loan losses, acquired loans   (11,397 )   (11,380 )   (11,992 )   (17 ) 0.1 %   595   -5.0 %
Net acquired loans   260,850     284,357     378,419     (23,507 ) -8.3 %   (117,569 ) -31.1 %
Net LHFI and acquired loans 8,040,798 7,712,690 7,402,185 328,108 4.3 % 638,613 8.6 %
Premises and equipment, net 184,987 190,930 195,656 (5,943 ) -3.1 % (10,669 ) -5.5 %
Mortgage servicing rights 80,239 65,514 74,007 14,725 22.5 % 6,232 8.4 %
Goodwill 366,156 366,156 366,156 0.0 % 0.0 %
Identifiable intangible assets 20,680 22,366 27,546 (1,686 ) -7.5 % (6,866 ) -24.9 %
Other real estate, excluding covered other real estate 62,051 64,993 77,177 (2,942 ) -4.5 % (15,126 ) -19.6 %
Covered other real estate 1,651 n/m (1,651 ) -100.0 %
FDIC indemnification asset 738 n/m (738 ) -100.0 %
Other assets   577,964     558,166     562,350     19,798   3.5 %   15,614   2.8 %
Total assets $ 13,352,333   $ 13,161,538   $ 12,678,896   $ 190,795   1.4 % $ 673,437   5.3 %
 
Deposits:
Noninterest-bearing $ 2,973,238 $ 3,111,603 $ 2,998,694 $ (138,365 ) -4.4 % $ (25,456 ) -0.8 %
Interest-bearing   7,082,774     6,574,098     6,589,536     508,676   7.7 %   493,238   7.5 %
Total deposits 10,056,012 9,685,701 9,588,230 370,311 3.8 % 467,782 4.9 %
Fed funds purchased and repos 539,817 514,918 441,042 24,899 4.8 % 98,775 22.4 %
Short-term borrowings 769,778 412,792 412,617 356,986 86.5 % 357,161 86.6 %
Long-term FHLB advances 251,049 751,075 501,155 (500,026 ) -66.6 % (250,106 ) -49.9 %
Subordinated notes 49,993 49,969 (49,993 ) -100.0 % (49,969 ) -100.0 %
Junior subordinated debt securities 61,856 61,856 61,856 0.0 % 0.0 %
Other liabilities   153,613     150,442     150,970     3,171   2.1 %   2,643   1.8 %
Total liabilities   11,832,125     11,626,777     11,205,839     205,348   1.8 %   626,286   5.6 %
Common stock 14,091 14,090 14,076 1 0.0 % 15 0.1 %
Capital surplus 366,563 365,553 361,467 1,010 0.3 % 5,096 1.4 %
Retained earnings 1,185,352 1,172,193 1,142,908 13,159 1.1 % 42,444 3.7 %
Accum other comprehensive loss, net of tax   (45,798 )   (17,075 )   (45,394 )   (28,723 ) n/m   (404 ) 0.9 %
Total shareholders' equity   1,520,208     1,534,761     1,473,057     (14,553 ) -0.9 %   47,151   3.2 %
Total liabilities and equity $ 13,352,333   $ 13,161,538   $ 12,678,896   $ 190,795   1.4 % $ 673,437   5.3 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 

See Notes to Consolidated Financials

 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2016

($ in thousands except per share data)

(unaudited)

 
      Quarter Ended     Linked Quarter     Year over Year

INCOME STATEMENTS

12/31/2016     9/30/2016     12/31/2015

$ Change

    % Change

$ Change

    % Change
Interest and fees on LHFS & LHFI-FTE $ 81,346 $ 80,649 $ 74,383 $ 697 0.9 % $ 6,963 9.4 %
Interest and fees on acquired loans 8,290 6,781 11,910 1,509 22.3 % (3,620 ) -30.4 %
Interest on securities-taxable 18,775 19,351 21,149 (576 ) -3.0 % (2,374 ) -11.2 %
Interest on securities-tax exempt-FTE 1,340 1,388 1,565 (48 ) -3.5 % (225 ) -14.4 %
Interest on fed funds sold and rev repos 4 5 4 (1 ) -20.0 % 0.0 %
Other interest income   335   223     402     112   50.2 %   (67 ) -16.7 %
Total interest income-FTE   110,090   108,397     109,413     1,693   1.6 %   677   0.6 %
Interest on deposits 3,380 3,208 3,000 172 5.4 % 380 12.7 %
Interest on fed funds pch and repos 471 411 274 60 14.6 % 197 71.9 %
Other interest expense   2,662   2,603     1,987     59   2.3 %   675   34.0 %
Total interest expense   6,513   6,222     5,261     291   4.7 %   1,252   23.8 %
Net interest income-FTE 103,577 102,175 104,152 1,402 1.4 % (575 ) -0.6 %
Provision for loan losses, LHFI 1,834 4,284 3,043 (2,450 ) -57.2 % (1,209 ) -39.7 %
Provision for loan losses, acquired loans   1,150   691     997     459   66.4 %   153   15.3 %
Net interest income after provision-FTE   100,593   97,200     100,112     3,393   3.5 %   481   0.5 %
Service charges on deposit accounts 11,444 11,677 11,961 (233 ) -2.0 % (517 ) -4.3 %
Bank card and other fees 6,796 6,756 7,156 40 0.6 % (360 ) -5.0 %
Mortgage banking, net 5,428 7,364 4,287 (1,936 ) -26.3 % 1,141 26.6 %
Insurance commissions 8,459 10,074 8,501 (1,615 ) -16.0 % (42 ) -0.5 %
Wealth management 7,505 7,571 7,831 (66 ) -0.9 % (326 ) -4.2 %
Other, net   2,092   1,274     (466 )   818   64.2 %   2,558   n/m
Nonint inc-excl sec gains (losses), net 41,724 44,716 39,270 (2,992 ) -6.7 % 2,454 6.2 %
Security gains (losses), net               n/m     n/m
Total noninterest income   41,724   44,716     39,270     (2,992 ) -6.7 %   2,454   6.2 %
Salaries and employee benefits 58,168 57,250 57,366 918 1.6 % 802 1.4 %
Services and fees 14,751 14,947 13,717 (196 ) -1.3 % 1,034 7.5 %
Net occupancy-premises 6,426 6,440 6,304 (14 ) -0.2 % 122 1.9 %
Equipment expense 6,172 6,063 6,105 109 1.8 % 67 1.1 %
Other real estate expense 525 (1,313 ) (518 ) 1,838 n/m 1,043 n/m
FDIC assessment expense 2,562 2,911 2,614 (349 ) -12.0 % (52 ) -2.0 %
Other expense   11,663   11,610     13,032     53   0.5 %   (1,369 ) -10.5 %
Total noninterest expense   100,267   97,908     98,620     2,359   2.4 %   1,647   1.7 %
Income before income taxes and tax eq adj 42,050 44,008 40,762 (1,958 ) -4.4 % 1,288 3.2 %
Tax equivalent adjustment   4,725   4,611     4,334     114   2.5 %   391   9.0 %
Income before income taxes 37,325 39,397 36,428 (2,072 ) -5.3 % 897 2.5 %
Income taxes   8,402   8,415     8,570     (13 ) -0.2 %   (168 ) -2.0 %
Net income $ 28,923 $ 30,982   $ 27,858   $ (2,059 ) -6.6 % $ 1,065   3.8 %
 
Per share data
Earnings per share - basic $ 0.43 $ 0.46   $ 0.41   $ (0.03 ) -6.5 % $ 0.02   4.9 %
 
Earnings per share - diluted $ 0.43 $ 0.46   $ 0.41   $ (0.03 ) -6.5 % $ 0.02   4.9 %
 
Dividends per share $ 0.23 $ 0.23   $ 0.23       0.0 %     0.0 %
 
Weighted average shares outstanding
Basic   67,627,496   67,625,085     67,557,991  
 
Diluted   67,817,770   67,793,203     67,734,109  
 
Period end shares outstanding   67,628,618   67,626,939     67,559,128  
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 

See Notes to Consolidated Financials

 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2016

($ in thousands)

(unaudited)

 
      Quarter Ended     Linked Quarter     Year over Year

NONPERFORMING ASSETS (1)

12/31/2016     9/30/2016     12/31/2015

$ Change

    % Change

$ Change

    % Change
Nonaccrual loans
Alabama $ 665 $ 1,403 $ 1,776 $ (738 ) -52.6 % $ (1,111 ) -62.6 %
Florida 3,644 3,719 5,180 (75 ) -2.0 % (1,536 ) -29.7 %
Mississippi (2) 37,771 41,968 40,754 (4,197 ) -10.0 % (2,983 ) -7.3 %
Tennessee (3) 6,213 6,620 5,106 (407 ) -6.1 % 1,107 21.7 %
Texas   941     700     2,496     241   34.4 %   (1,555 ) -62.3 %
Total nonaccrual loans 49,234 54,410 55,312 (5,176 ) -9.5 % (6,078 ) -11.0 %
Other real estate
Alabama 15,989 15,574 21,578 415 2.7 % (5,589 ) -25.9 %
Florida 22,582 25,147 29,579 (2,565 ) -10.2 % (6,997 ) -23.7 %
Mississippi (2) 15,646 16,659 14,312 (1,013 ) -6.1 % 1,334 9.3 %
Tennessee (3) 6,183 6,061 9,974 122 2.0 % (3,791 ) -38.0 %
Texas   1,651     1,552     1,734     99   6.4 %   (83 ) -4.8 %
Total other real estate   62,051     64,993     77,177     (2,942 ) -4.5 %   (15,126 ) -19.6 %
Total nonperforming assets $ 111,285   $ 119,403   $ 132,489   $ (8,118 ) -6.8 % $ (21,204 ) -16.0 %
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 1,832   $ 953   $ 2,300   $ 879   92.2 % $ (468 ) -20.3 %
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 28,345   $ 25,570   $ 21,812   $ 2,775   10.9 % $ 6,533   30.0 %
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (4)

12/31/2016 9/30/2016 12/31/2015

$ Change

% Change

$ Change

% Change
Beginning Balance $ 70,871 $ 71,796 $ 65,607 $ (925 ) -1.3 % $ 5,264 8.0 %
Provision for loan losses 1,834 4,284 3,043 (2,450 ) -57.2 % (1,209 ) -39.7 %
Charge-offs (4,037 ) (8,279 ) (3,781 ) 4,242 -51.2 % (256 ) 6.8 %
Recoveries   2,597     3,070     2,750     (473 ) -15.4 %   (153 ) -5.6 %
Net charge-offs   (1,440 )   (5,209 )   (1,031 )   3,769   -72.4 %   (409 ) 39.7 %
Ending Balance $ 71,265   $ 70,871   $ 67,619   $ 394   0.6 % $ 3,646   5.4 %
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 763 $ 132 $ 1,453 $ 631 n/m $ (690 ) -47.5 %
Florida (655 ) 31 (1,357 ) (686 ) n/m 702 -51.7 %
Mississippi (2) 1,873 703 1,842 1,170 n/m 31 1.7 %
Tennessee (3) (118 ) 151 182 (269 ) n/m (300 ) n/m
Texas   (29 )   3,267     923     (3,296 ) n/m   (952 ) n/m
Total provision for loan losses $ 1,834   $ 4,284   $ 3,043   $ (2,450 ) -57.2 % $ (1,209 ) -39.7 %
 

NET CHARGE-OFFS (4)

Alabama $ 368 $ 38 $ 422 $ 330 n/m $ (54 ) -12.8 %
Florida (502 ) (169 ) (389 ) (333 ) n/m (113 ) 29.0 %
Mississippi (2) 1,591 2,484 925 (893 ) -36.0 % 666 72.0 %
Tennessee (3) (8 ) 74 188 (82 ) n/m (196 ) n/m
Texas   (9 )   2,782     (115 )   (2,791 ) n/m   106   -92.2 %
Total net charge-offs $ 1,440   $ 5,209   $ 1,031   $ (3,769 ) -72.4 % $ 409   39.7 %
 
(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
December 31, 2016
($ in thousands)
(unaudited)
      Quarter Ended     Year Ended

AVERAGE BALANCES

12/31/2016     9/30/2016     6/30/2016     3/31/2016     12/31/2015 12/31/2016     12/31/2015
Securities AFS-taxable $ 2,271,503 $ 2,249,109 $ 2,214,040 $ 2,211,479 $ 2,209,801 $ 2,236,663 $ 2,231,507
Securities AFS-nontaxable 91,495 95,233 99,296 105,844 110,290 97,942 118,579
Securities HTM-taxable 1,101,382 1,115,053 1,122,463 1,142,434 1,145,397 1,120,267 1,140,182
Securities HTM-nontaxable   33,675     34,179     34,785     35,841     35,755     34,616     37,883  
Total securities   3,498,055     3,493,574     3,470,584     3,495,598     3,501,243     3,489,488     3,528,151  
Loans (including loans held for sale) 7,855,444 7,658,089 7,505,409 7,346,333 7,089,672 7,592,223 6,745,970
Acquired loans:
Noncovered loans 278,460 306,809 335,012 361,772 384,306 320,361 442,248
Covered loans 3,737 10,464 14,728 16,663 18,341 11,375 20,354
Fed funds sold and rev repos 1,418 1,352 1,263 382 1,384 1,105 835
Other earning assets   80,608     68,706     64,000     66,702     68,016     70,029     53,613  
Total earning assets   11,717,722     11,538,994     11,390,996     11,287,450     11,062,962     11,484,581     10,791,171  
Allowance for loan losses (82,604 ) (82,301 ) (83,614 ) (81,138 ) (78,652 ) (82,414 ) (82,361 )
Cash and due from banks 314,420 299,670 271,135 281,912 272,562 291,868 275,246
Other assets   1,238,029     1,243,854     1,240,846     1,253,282     1,266,712     1,243,985     1,286,139  
Total assets $ 13,187,567   $ 13,000,217   $ 12,819,363   $ 12,741,506   $ 12,523,584   $ 12,938,020   $ 12,270,195  
 
Interest-bearing demand deposits $ 1,920,273 $ 1,848,084 $ 1,830,107 $ 1,866,043 $ 1,917,598 $ 1,866,225 $ 1,901,478
Savings deposits 3,049,733 3,101,161 3,221,850 3,188,916 2,963,318 3,140,060 3,124,393
Time deposits less than $100,000 945,649 961,641 978,678 994,406 1,033,233 970,003 1,086,417
Time deposits of $100,000 or more   693,204     705,704     699,886     683,170     687,635     695,513     734,020  
Total interest-bearing deposits 6,608,859 6,616,590 6,730,521 6,732,535 6,601,784 6,671,801 6,846,308
Fed funds purchased and repos 494,193 481,071 488,512 517,180 563,424 495,197 503,077
Short-term borrowings 435,576 311,473 319,288 413,616 733,365 370,008 415,081
Long-term FHLB advances 685,844 751,095 597,269 501,144 50,078 634,300 13,533
Subordinated notes 40,757 49,988 49,980 49,972 49,964 47,662 49,951
Junior subordinated debt securities   61,856     61,856     61,856     61,856     61,856     61,856     61,856  
Total interest-bearing liabilities 8,327,085 8,272,073 8,247,426 8,276,303 8,060,471 8,280,824 7,889,806
Noninterest-bearing deposits 3,160,959 3,060,331 2,927,469 2,836,283 2,839,894 2,996,886 2,781,682
Other liabilities   166,379     136,971     131,627     134,236     141,925     142,355     138,057  
Total liabilities 11,654,423 11,469,375 11,306,522 11,246,822 11,042,290 11,420,065 10,809,545
Shareholders' equity   1,533,144     1,530,842     1,512,841     1,494,684     1,481,294     1,517,955     1,460,650  
Total liabilities and equity $ 13,187,567   $ 13,000,217   $ 12,819,363   $ 12,741,506   $ 12,523,584   $ 12,938,020   $ 12,270,195  
 
 
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2016

($ in thousands)

(unaudited)

 

PERIOD END BALANCES

12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Cash and due from banks $ 327,706 $ 383,945 $ 322,049 $ 228,498 $ 277,751
Fed funds sold and rev repos 500 500 3,198 250
Securities available for sale 2,356,682 2,410,947 2,388,306 2,368,120 2,345,422
Securities held to maturity 1,158,643 1,143,234 1,173,204 1,168,203 1,187,818
Loans held for sale (LHFS) 175,927 242,097 213,546 191,028 160,189
Loans held for investment (LHFI) 7,851,213 7,499,204 7,405,181 7,268,022 7,091,385
Allowance for loan losses   (71,265 )   (70,871 )   (71,796 )   (69,668 )   (67,619 )
Net LHFI 7,779,948 7,428,333 7,333,385 7,198,354 7,023,766
Acquired loans:
Noncovered loans 268,633 291,825 325,196 349,781 372,711
Covered loans 3,614 3,912 13,839 14,974 17,700
Allowance for loan losses, acquired loans   (11,397 )   (11,380 )   (12,480 )   (13,535 )   (11,992 )
Net acquired loans   260,850     284,357     326,555     351,220     378,419  
Net LHFI and acquired loans 8,040,798 7,712,690 7,659,940 7,549,574 7,402,185
Premises and equipment, net 184,987 190,930 192,732 194,453 195,656
Mortgage servicing rights 80,239 65,514 62,814 68,208 74,007
Goodwill 366,156 366,156 366,156 366,156 366,156
Identifiable intangible assets 20,680 22,366 24,058 25,751 27,546
Other real estate, excluding covered other real estate 62,051 64,993 69,502 71,806 77,177
Covered other real estate 388 496 1,651
FDIC indemnification asset 506 738
Other assets   577,964     558,166     554,456     542,397     562,350  
Total assets $ 13,352,333   $ 13,161,538   $ 13,030,349   $ 12,775,196   $ 12,678,896  
 
Deposits:
Noninterest-bearing $ 2,973,238 $ 3,111,603 $ 2,921,016 $ 2,874,306 $ 2,998,694
Interest-bearing   7,082,774     6,574,098     6,610,508     6,759,337     6,589,536  
Total deposits 10,056,012 9,685,701 9,531,524 9,633,643 9,588,230
Fed funds purchased and repos 539,817 514,918 606,336 466,436 441,042
Short-term borrowings 769,778 412,792 360,434 411,385 412,617
Long-term FHLB advances 251,049 751,075 751,106 501,124 501,155
Subordinated notes 49,993 49,985 49,977 49,969
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
Other liabilities   153,613     150,442     145,641     142,519     150,970  
Total liabilities   11,832,125     11,626,777     11,506,882     11,266,940     11,205,839  
Common stock 14,091 14,090 14,090 14,093 14,076
Capital surplus 366,563 365,553 364,516 363,979 361,467
Retained earnings 1,185,352 1,172,193 1,157,025 1,151,757 1,142,908
Accum other comprehensive loss, net of tax   (45,798 )   (17,075 )   (12,164 )   (21,573 )   (45,394 )
Total shareholders' equity   1,520,208     1,534,761     1,523,467     1,508,256     1,473,057  
Total liabilities and equity $ 13,352,333   $ 13,161,538   $ 13,030,349   $ 12,775,196   $ 12,678,896  
 
 
 

See Notes to Consolidated Financials

 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands except per share data)
(unaudited)
 
      Quarter Ended     Year Ended

INCOME STATEMENTS

12/31/2016     9/30/2016     6/30/2016     3/31/2016     12/31/2015 12/31/2016     12/31/2015
Interest and fees on LHFS & LHFI-FTE $ 81,346 $ 80,649 $ 77,777 $ 76,235 $ 74,383 $ 316,007 $ 288,538
Interest and fees on acquired loans 8,290 6,781 8,051 7,022 11,910 30,144 51,152
Interest on securities-taxable 18,775 19,351 19,402 20,086 21,149 77,614 80,730
Interest on securities-tax exempt-FTE 1,340 1,388 1,429 1,497 1,565 5,654 6,651
Interest on fed funds sold and rev repos 4 5 4 1 4 14 8
Other interest income   335   223     200   230     402     988     1,579  
Total interest income-FTE   110,090   108,397     106,863   105,071     109,413     430,421     428,658  
Interest on deposits 3,380 3,208 3,122 3,038 3,000 12,748 12,598
Interest on fed funds pch and repos 471 411 404 431 274 1,717 801
Other interest expense   2,662   2,603     2,428   2,389     1,987     10,082     7,061  
Total interest expense   6,513   6,222     5,954   5,858     5,261     24,547     20,460  
Net interest income-FTE 103,577 102,175 100,909 99,213 104,152 405,874 408,198
Provision for loan losses, LHFI 1,834 4,284 2,596 2,243 3,043 10,957 8,375
Provision for loan losses, acquired loans   1,150   691     607   1,309     997     3,757     3,425  
Net interest income after provision-FTE   100,593   97,200     97,706   95,661     100,112     391,160     396,398  
Service charges on deposit accounts 11,444 11,677 11,051 11,081 11,961 45,253 47,366
Bank card and other fees 6,796 6,756 7,436 6,918 7,156 27,906 28,298
Mortgage banking, net 5,428 7,364 6,721 8,699 4,287 28,212 30,176
Insurance commissions 8,459 10,074 9,638 8,593 8,501 36,764 36,424
Wealth management 7,505 7,571 8,009 7,407 7,831 30,492 31,369
Other, net   2,092   1,274     1,372   888     (466 )   5,626     (484 )
Nonint inc-excl sec gains (losses), net 41,724 44,716 44,227 43,586 39,270 174,253 173,149
Security gains (losses), net           (310 )       (310 )    
Total noninterest income   41,724   44,716     44,227   43,276     39,270     173,943     173,149  
Salaries and employee benefits 58,168 57,250 67,018 57,201 57,366 239,637 230,198
Services and fees 14,751 14,947 14,522 14,475 13,717 58,695 57,534
Net occupancy-premises 6,426 6,440 5,928 6,188 6,304 24,982 25,318
Equipment expense 6,172 6,063 5,896 6,094 6,105 24,225 23,859
Other real estate expense 525 (1,313 ) 1,193 181 (518 ) 586 4,903
FDIC assessment expense 2,562 2,911 2,959 2,811 2,614 11,243 10,728
Other expense   11,663   11,610     12,663   11,994     13,032     47,930     49,122  
Total noninterest expense   100,267   97,908     110,179   98,944     98,620     407,298     401,662  
Income before income taxes and tax eq adj 42,050 44,008 31,754 39,993 40,762 157,805 167,885
Tax equivalent adjustment   4,725   4,611     4,532   4,473     4,334     18,341     16,433  
Income before income taxes 37,325 39,397 27,222 35,520 36,428 139,464 151,452
Income taxes   8,402   8,415     5,719   8,517     8,570     31,053     35,414  
Net income $ 28,923 $ 30,982   $ 21,503 $ 27,003   $ 27,858   $ 108,411   $ 116,038  
 
Per share data
Earnings per share - basic $ 0.43 $ 0.46   $ 0.32 $ 0.40   $ 0.41   $ 1.60   $ 1.72  
 
Earnings per share - diluted $ 0.43 $ 0.46   $ 0.32 $ 0.40   $ 0.41   $ 1.60   $ 1.71  
 
Dividends per share $ 0.23 $ 0.23   $ 0.23 $ 0.23   $ 0.23   $ 0.92   $ 0.92  
 
Weighted average shares outstanding
Basic   67,627,496   67,625,085     67,619,571   67,609,662     67,557,991     67,620,485     67,549,611  
 
Diluted   67,817,770   67,793,203     67,770,174   67,746,592     67,734,109     67,784,464     67,691,821  
 
Period end shares outstanding   67,628,618   67,626,939     67,623,601   67,639,832     67,559,128     67,628,618     67,559,128  

 

 
 

See Notes to Consolidated Financials

 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands)
(unaudited)
                             
 
Quarter Ended

NONPERFORMING ASSETS (1)

12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Nonaccrual loans

Alabama

$ 665 $ 1,403 $ 1,379 $ 1,788 $ 1,776
Florida 3,644 3,719 1,806 4,952 5,180
Mississippi (2) 37,771 41,968 54,543 56,590 40,754
Tennessee (3) 6,213 6,620 5,345 5,849 5,106
Texas   941     700     2,055     1,515     2,496  
Total nonaccrual loans 49,234 54,410 65,128 70,694 55,312
Other real estate
Alabama 15,989 15,574 18,031 19,137 21,578
Florida 22,582 25,147 28,052 27,907 29,579
Mississippi (2) 15,646 16,659 14,435 14,511 14,312
Tennessee (3) 6,183 6,061 7,432 8,699 9,974
Texas   1,651     1,552     1,552     1,552     1,734  
Total other real estate   62,051     64,993     69,502     71,806     77,177  
Total nonperforming assets $ 111,285   $ 119,403   $ 134,630   $ 142,500   $ 132,489  
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 1,832   $ 953   $ 3,382   $ 611   $ 2,300  
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 28,345   $ 25,570   $ 23,473   $ 24,110   $ 21,812  
 
 
Quarter Ended Year Ended

ALLOWANCE FOR LOAN LOSSES (4)

12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015 12/31/2016 12/31/2015
Beginning Balance $ 70,871 $ 71,796 $ 69,668 $ 67,619 $ 65,607 $ 67,619 $ 69,616
Provision for loan losses 1,834 4,284 2,596 2,243 3,043 10,957 8,375
Charge-offs (4,037 ) (8,279 ) (3,251 ) (3,363 ) (3,781 ) (18,930 ) (22,469 )
Recoveries   2,597     3,070     2,783     3,169     2,750     11,619     12,097  
Net charge-offs   (1,440 )   (5,209 )   (468 )   (194 )   (1,031 )   (7,311 )   (10,372 )
Ending Balance $ 71,265   $ 70,871   $ 71,796   $ 69,668   $ 67,619   $ 71,265   $ 67,619  
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 763 $ 132 $ 1,189 $ 540 $ 1,453 $ 2,624 $ 2,767
Florida (655 ) 31 (364 ) (818 ) (1,357 ) (1,806 ) (2,122 )
Mississippi (2) 1,873 703 (833 ) 1,848 1,842 3,591 5,380
Tennessee (3) (118 ) 151 726 138 182 897 81
Texas   (29 )   3,267     1,878     535     923     5,651     2,269  
Total provision for loan losses $ 1,834   $ 4,284   $ 2,596   $ 2,243   $ 3,043   $ 10,957   $ 8,375  
 

NET CHARGE-OFFS (4)

Alabama $ 368 $ 38 $ 436 $ 63 $ 422 $ 905 $ 945
Florida (502 ) (169 ) (595 ) (674 ) (389 ) (1,940 ) (968 )
Mississippi (2) 1,591 2,484 (237 ) (74 ) 925 3,764 9,487
Tennessee (3) (8 ) 74 252 8 188 326 525
Texas   (9 )   2,782     612     871     (115 )   4,256     383  
Total net charge-offs $ 1,440   $ 5,209   $ 468   $ 194   $ 1,031   $ 7,311   $ 10,372  
 
(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

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2016

(unaudited)

 
      Quarter Ended     Year Ended

FINANCIAL RATIOS AND OTHER DATA

12/31/2016       9/30/2016     6/30/2016     3/31/2016     12/31/2015 12/31/2016     12/31/2015
Return on equity 7.51 %   8.05 % 5.72 % 7.27 % 7.46 % 7.14 % 7.94 %
Return on average tangible equity 10.41 % 11.16 % 8.08 % 10.26 % 10.61 % 9.99 % 11.36 %
Return on assets 0.87 % 0.95 % 0.67 % 0.85 % 0.88 % 0.84 % 0.95 %
Interest margin - Yield - FTE 3.74 % 3.74 % 3.77 % 3.74 % 3.92 % 3.75 % 3.97 %
Interest margin - Cost 0.22 % 0.21 % 0.21 % 0.21 % 0.19 % 0.21 % 0.19 %
Net interest margin - FTE 3.52 % 3.52 % 3.56 % 3.54 % 3.74 % 3.53 % 3.78 %
Efficiency ratio (1) 66.08 % 63.81 % 67.20 % 66.87 % 66.03 % 65.98 % 66.60 %
Full-time equivalent employees 2,788 2,787 2,818 2,946 2,941
 

CREDIT QUALITY RATIOS (2)

Net charge-offs/average loans 0.07 % 0.27 % 0.03 % 0.01 % 0.06 % 0.10 % 0.15 %
Provision for loan losses/average loans 0.09 % 0.22 % 0.14 % 0.12 % 0.17 % 0.14 % 0.12 %
Nonperforming loans/total loans (incl LHFS) 0.61 % 0.70 % 0.85 % 0.95 % 0.76 %
Nonperforming assets/total loans (incl LHFS) 1.39 % 1.54 % 1.77 % 1.91 % 1.83 %
Nonperforming assets/total loans (incl LHFS) +ORE 1.38 % 1.53 % 1.75 % 1.89 % 1.81 %
ALL/total loans (excl LHFS) 0.91 % 0.95 % 0.97 % 0.96 % 0.95 %
ALL-commercial/total commercial loans 0.97 % 1.02 % 1.05 % 1.06 % 1.05 %
ALL-consumer/total consumer and home mortgage loans 0.68 % 0.68 % 0.70 % 0.65 % 0.66 %
ALL/nonperforming loans 144.75 % 130.25 % 110.24 % 98.55 % 122.25 %
ALL/nonperforming loans (excl specifically reviewed impaired loans) 267.40 % 256.56 % 231.13 % 203.24 % 210.32 %
 

CAPITAL RATIOS

Total equity/total assets

11.39

% 11.66 % 11.69 % 11.81 % 11.62 %
Tangible equity/tangible assets 8.74 % 8.97 % 8.97 % 9.01 % 8.79 %
Tangible equity/risk-weighted assets

11.39 %

 

 

11.85 % 11.85 % 11.84 % 11.68 %
Tier 1 leverage ratio 9.90 % 9.92 % 9.93 % 9.93 % 10.03 %
Common equity tier 1 capital ratio 12.16 % 12.35 % 12.32 % 12.41 % 12.57 %
Tier 1 risk-based capital ratio 12.76 % 12.97 % 12.94 % 13.04 % 13.21 %
Total risk-based capital ratio 13.59 % 13.82 % 13.82 % 13.92 % 14.07 %
 

STOCK PERFORMANCE

Market value-Close $ 35.65 $ 27.56 $ 24.85 $ 23.03 $ 23.04
Book value $ 22.48 $ 22.69 $ 22.53 $ 22.30 $ 21.80
Tangible book value $ 16.76 $ 16.95 $ 16.76 $ 16.50 $ 15.98
 

(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.

(2) - Excludes acquired loans and covered other real estate
 
 
 

See Notes to Consolidated Financials

 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2016
($ in thousands)
(unaudited)

Note 1 – Business Combinations

On November 14, 2016, Trustmark and RB Bancorporation announced the signing of a definitive agreement pursuant to which RB Bancorporation would merge into Trustmark. RB Bancorporation, with assets of $210.0 million as of September 30, 2016, is the holding company for Reliance Bank, which has seven offices serving the Huntsville, Alabama MSA.

Under the terms of the definitive agreement, which has been approved unanimously by the Boards of Directors of both companies, holders of RB Bancorporation common stock will receive $22.00 in cash for each share of RB Bancorporation; the aggregate value of the transaction is approximately $25.6 million. The transaction, which is subject to satisfaction of customary closing conditions, including the approval of RB Bancorporation shareholders and regulatory authorities, is expected to be completed in the first half of 2017. RB Bancorporation’s bank subsidiary, Reliance Bank, will merge into TNB simultaneously with the merger of the respective parent companies.

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):

                     
12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015

SECURITIES AVAILABLE FOR SALE

U.S. Government agency obligations
Issued by U.S. Government agencies $ 55,763 $ 58,234 $ 61,359 $ 63,814 $ 68,135
Issued by U.S. Government sponsored agencies 276 283 286 286 281
Obligations of states and political subdivisions 115,373 124,641 129,285 135,655 138,609
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 42,786 36,788 29,282 25,081 25,812
Issued by FNMA and FHLMC 631,084 561,989 428,542 330,558 225,542
Other residential mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

1,267,951 1,374,399 1,474,357 1,540,541 1,582,860
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 243,449 254,613 265,195 272,185 279,226
Asset-backed securities and structured financial products           24,957
Total securities available for sale $ 2,356,682 $ 2,410,947 $ 2,388,306 $ 2,368,120 $ 2,345,422
 

SECURITIES HELD TO MATURITY

U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 3,647 $ 3,636 $ 31,142 $ 63,085 $ 101,782
Obligations of states and political subdivisions 46,303 52,937 53,473 54,278 55,892
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 15,478 16,183 16,415 16,590 17,363
Issued by FNMA and FHLMC 81,299 39,989 42,267 9,871 10,368
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 803,474 831,662 824,175 818,201 820,012
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   208,442   198,827   205,732   206,178   182,401
Total securities held to maturity $ 1,158,643 $ 1,143,234 $ 1,173,204 $ 1,168,203 $ 1,187,818
 

During 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 December 31, 2016, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive loss in the accompanying balance sheet totaled approximately $24.2 million ($14.9 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 95% 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

December 31, 2016

($ in thousands)

(unaudited)

 

Note 3 – Loan Composition

             
 
LHFI BY TYPE (excluding acquired loans) 12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Loans secured by real estate:
Construction, land development and other land loans $ 831,437 $ 766,685 $ 718,438 $ 697,500 $ 824,723
Secured by 1-4 family residential properties 1,660,043 1,592,453 1,620,013 1,640,015 1,649,501
Secured by nonfarm, nonresidential properties 2,034,176 1,916,153 1,900,784 1,893,240 1,736,476
Other real estate secured 318,148 317,680 323,734 273,752 211,228
Commercial and industrial loans 1,528,434 1,421,382 1,466,511 1,368,464 1,343,211
Consumer loans 170,562 170,073 166,436 164,544 169,135
State and other political subdivision loans 917,515 875,973 805,401 787,049 734,615
Other loans   390,898   438,805   403,864   443,458   422,496
LHFI 7,851,213 7,499,204 7,405,181 7,268,022 7,091,385
Allowance for loan losses   (71,265 )   (70,871 )   (71,796 )   (69,668 )   (67,619 )
Net LHFI $ 7,779,948 $ 7,428,333 $ 7,333,385 $ 7,198,354 $ 7,023,766
 
             

ACQUIRED NONCOVERED LOANS BY TYPE

12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Loans secured by real estate:
Construction, land development and other land loans $ 20,850 $ 25,040 $ 37,682 $ 41,097 $ 41,623
Secured by 1-4 family residential properties 65,926 72,689 73,313 81,314 86,950
Secured by nonfarm, nonresidential properties 103,820 110,606 115,989 126,177 135,626
Other real estate secured 19,010 20,903 24,015 24,374 23,860
Commercial and industrial loans 36,896 39,519 49,639 51,663 55,075
Consumer loans 3,365 3,878 4,295 5,027 5,641
Other loans   18,766   19,190   20,263   20,129   23,936
Noncovered loans 268,633 291,825 325,196 349,781 372,711
Allowance for loan losses   (11,312 )   (11,330 )   (12,218 )   (13,212 )   (11,259 )
Net noncovered loans $ 257,321 $ 280,495 $ 312,978 $ 336,569 $ 361,452
 
                     

ACQUIRED COVERED LOANS BY TYPE (1)

12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Loans secured by real estate:
Construction, land development and other land loans $ $ $ 334 $ 387 $ 1,021
Secured by 1-4 family residential properties 3,614 3,912 8,363 8,564 10,058
Secured by nonfarm, nonresidential properties 3,709 3,679 4,638
Other real estate secured 1,257 1,132 1,286
Commercial and industrial loans 121 1,143 624
Consumer loans
Other loans       55   69   73
Covered loans 3,614 3,912 13,839 14,974 17,700
Allowance for loan losses   (85 )   (50 )   (262 )   (323 )   (733 )
Net covered loans $ 3,529 $ 3,862 $ 13,577 $ 14,651 $ 16,967
 

(1) Trustmark’s loss share agreement with the FDIC covering the acquired covered loans other than loans secured by 1-4 family residential properties expired on June 30, 2016. Trustmark’s loss share agreement with the FDIC covering the acquired covered loans secured by 1-4 family residential properties will expire in 2021. Effective July 1, 2016, all acquired covered loans excluding the acquired covered loans secured by 1-4 family residential properties were reclassified to acquired noncovered loans.

 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2016

($ in thousands)

(unaudited)

 

Note 3 – Loan Composition (continued)

 
      December 31, 2016

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 $ 831,437 $ 167,886 $ 57,780 $ 316,518 $ 52,747 $ 236,506
Secured by 1-4 family residential properties 1,660,043 79,087 49,393 1,412,078 102,076 17,409
Secured by nonfarm, nonresidential properties 2,034,176 283,756 177,455 908,591 169,499 494,875
Other real estate secured 318,148 28,866 3,511 159,369 17,688 108,714
Commercial and industrial loans 1,528,434 129,621 15,194 795,311 308,380 279,928
Consumer loans 170,562 20,811 3,683 126,711 17,180 2,177
State and other political subdivision loans 917,515 76,228 29,450 564,707 32,714 214,416
Other loans   390,898   37,394   19,140   261,612   38,946   33,806
Loans $ 7,851,213 $ 823,649 $ 355,606 $ 4,544,897 $ 739,230 $ 1,387,831
 

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

Lots $ 60,820 $ 14,045 $ 18,952 $ 23,405 $ 2,564 $ 1,854
Development 52,669 6,763 5,534 21,421 615 18,336
Unimproved land 111,418 15,436 16,240 45,451 16,011 18,280
1-4 family construction 174,344 41,324 9,058 82,576 2,964 38,422
Other construction   432,186   90,318   7,996   143,665   30,593   159,614
Construction, land development and other land loans $ 831,437 $ 167,886 $ 57,780 $ 316,518 $ 52,747 $ 236,506
 

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

Income producing:
Retail $ 279,040 $ 74,393 $ 36,196 $ 96,009 $ 21,850 $ 50,592
Office 220,750 31,966 30,479 76,745 9,259 72,301
Nursing homes/assisted living 116,307 109,579 6,728
Hotel/motel 227,088 46,007 31,121 62,395 41,794 45,771
Mini-storage 145,456 9,963 5,300 58,430 13,999 57,764
Industrial 121,906 10,159 10,210 20,983 5,467 75,087
Health care 25,937 2,050 826 22,002 1,059
Convenience stores 19,624 1,554 10,905 993 6,172
Other   73,364   8,031   10,519   25,269   2,804   26,741
Total income producing loans 1,229,472 184,123 124,651 482,317 102,894 335,487
 
Owner-occupied:
Office 146,004 17,886 23,697 74,816 7,041 22,564
Churches 87,031 10,379 2,098 44,962 22,730 6,862
Industrial warehouses 127,544 6,414 3,517 64,274 10,082 43,257
Health care 116,585 22,859 6,830 62,925 4,661 19,310
Convenience stores 94,618 7,732 7,088 54,080 1,168 24,550
Retail 38,173 4,746 5,012 20,720 1,995 5,700
Restaurants 34,741 3,530 912 24,781 3,474 2,044
Auto dealerships 14,909 9,144 41 4,600 1,124
Other   145,099   16,943   3,609   75,116   14,330   35,101
Total owner-occupied loans   804,704   99,633   52,804   426,274   66,605   159,388

Loans secured by nonfarm, nonresidential properties

$ 2,034,176 $ 283,756 $ 177,455 $ 908,591 $ 169,499 $ 494,875
 

(1) Excludes acquired loans.

 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2016

($ in thousands)

(unaudited)

 

Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities

 

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

 
      Quarter Ended     Year Ended
12/31/2016     9/30/2016     6/30/2016     3/31/2016     12/31/2015 12/31/2016     12/31/2015
Securities – taxable 2.21 % 2.29 % 2.34 % 2.41 % 2.50 % 2.31 % 2.39 %
Securities – nontaxable 4.26 % 4.27 % 4.29 % 4.25 % 4.25 % 4.27 % 4.25 %
Securities – total 2.29 % 2.36 % 2.41 % 2.48 % 2.57 % 2.39 % 2.48 %
Loans - LHFI & LHFS 4.12 % 4.19 % 4.17 % 4.17 % 4.16 % 4.16 % 4.28 %
Acquired loans 11.69 % 8.50 % 9.26 % 7.46 % 11.74 % 9.09 % 11.06 %
Loans - total 4.38 % 4.36 % 4.39 % 4.33 % 4.57 % 4.37 % 4.71 %
FF sold & rev repo 1.12 % 1.47 % 1.27 % 1.05 % 1.15 % 1.27 % 0.96 %
Other earning assets 1.65 % 1.29 % 1.26 % 1.39 % 2.34 % 1.41 % 2.95 %
Total earning assets 3.74 % 3.74 % 3.77 % 3.74 % 3.92 % 3.75 % 3.97 %
 
Interest-bearing deposits 0.20 % 0.19 % 0.19 % 0.18 % 0.18 % 0.19 % 0.18 %
FF pch & repo 0.38 % 0.34 % 0.33 % 0.34 % 0.19 % 0.35 % 0.16 %
Other borrowings 0.87 % 0.88 % 0.95 % 0.94 % 0.88 % 0.91 % 1.31 %
Total interest-bearing liabilities 0.31 % 0.30 % 0.29 % 0.28 % 0.26 % 0.30 % 0.26 %
 
Net interest margin 3.52 % 3.52 % 3.56 % 3.54 % 3.74 % 3.53 % 3.78 %
Net interest margin excluding acquired loans 3.31 % 3.38 % 3.38 % 3.40 % 3.43 % 3.37 % 3.46 %
 

Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans.

During the fourth quarter of 2016, the yield on acquired loans totaled 11.69% and included $3.8 million in recoveries from the settlement of debt, which represented approximately 5.40% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.31% for the fourth quarter of 2016, a decrease of 7 basis points when compared to the third quarter of 2016. This decline was primarily due to a reduction in the yield on the securities portfolio and the loans held for investment and held for sale portfolio.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net negative ineffectiveness of $180 thousand and $2.0 million for the quarters ended December 31, 2016 and 2015, respectively.

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

         
Quarter Ended Year Ended
12/31/2016     9/30/2016     6/30/2016     3/31/2016     12/31/2015 12/31/2016     12/31/2015
Mortgage servicing income, net $ 5,218 $ 5,271 $ 5,177 $ 5,058 $ 5,126 $ 20,724 $ 19,625
Change in fair value-MSR from runoff (2,739 ) (2,862 ) (2,500 ) (2,005 ) (2,091 ) (10,106 ) (9,527 )
Gain on sales of loans, net 6,054 6,410 5,480 2,591 4,656 20,535 17,965
Other, net   (2,925 )   (299 )   498   2,642   (1,433 )   (84 )   233
Mortgage banking income before hedge ineffectiveness   5,608   8,520   8,655   8,286   6,258   31,069   28,296
Change in fair value-MSR from market changes 13,112 381 (7,033 ) (6,866 ) 2,010 (406 ) 1,577
Change in fair value of derivatives   (13,292 )   (1,537 )   5,099   7,279   (3,981 )   (2,451 )   303
Net (negative) positive hedge ineffectiveness   (180 )   (1,156 )   (1,934 )   413   (1,971 )   (2,857 )   1,880
Mortgage banking, net $ 5,428 $ 7,364 $ 6,721 $ 8,699 $ 4,287 $ 28,212 $ 30,176
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2016
($ in thousands)
(unaudited)

Note 6 – Salaries and Employee Benefit Plans

Early Retirement Program
In April 2016, Trustmark announced a voluntary early retirement program (ERP) for associates age 60 and above with five or more years of service. The cost of this program is reflected in a one-time, pre-tax charge of approximately $9.3 million (salaries and employee benefits expense of $9.1 million and other miscellaneous expense of $230 thousand), or $0.085 per basic share net of tax, in Trustmark’s second quarter 2016 earnings.

As a result of the ERP, during the third and fourth quarters of 2016, Trustmark incurred additional expense of $236 thousand and $268 thousand, respectively, which primarily resulted from additional settlements from pension lump sum elections.

Defined Benefit Pension Plan
Trustmark maintains a noncontributory tax-qualified defined benefit pension plan (Trustmark Capital Accumulation Plan, the “Plan”), in which substantially all associates who began employment prior to 2007 participate. The Plan provides retirement benefits that are based on the length of credited service and final average compensation, as defined in the Plan, and vest upon three years of service. Benefit accruals under the plan have been frozen since 2009, with the exception of certain associates covered through plans obtained in acquisitions that were subsequently merged into the Plan. Other than the associates covered through these acquired plans that were merged into the Plan, associates have not earned additional benefits, except for interest as required by law, since the Plan was frozen. Current and former associates who participate in the Plan retain their right to receive benefits that accrued before the Plan was frozen.

On July 26, 2016, the Board of Directors of Trustmark authorized the termination of the Plan, effective as of December 31, 2016. To satisfy commitments made by Trustmark to associates (collectively, the “Continuing Associates”) covered through acquired plans that were merged into the Plan, the Board also approved the spin-off of the portion of the Plan associated with the accrued benefits of the Continuing Associates into a new plan titled the Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions (the “Spin-Off Plan”), effective as of December 31, 2016, immediately prior to the termination of the Plan.

In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, Trustmark is required to fully fund the Plan on a termination basis and will contribute the additional assets necessary to do so. The final distributions will be made from current plan assets and a one-time pension settlement expense of approximately $17.5 million will be recognized when paid by Trustmark during the second quarter of 2017. Further, as a result of Trustmark’s de-risking investment strategy for the Plan as of June 30, 2016, the expected rate of return on plan assets during the second half of 2016 will decrease from 6.0% to 2.5%. Accordingly, Trustmark's increased periodic benefit costs for the Plan during the fourth quarter of 2016 was $664 thousand and totaled $1.3 million during the second half of 2016. Participants in the Plan will have a choice of receiving a lump sum cash payment or annuity payments under a group annuity contract purchased from an insurance carrier, subject to certain exceptions. As a result of the termination of the Plan, each participant will become fully vested in his or her accrued benefits under the Plan. After the distribution of Plan assets during the second quarter of 2017, Trustmark estimates that the annual pension expense will be reduced by $3.0 million to $4.0 million.

The Board reserved the right to defer or revoke the termination of the Plan if circumstances change such that deferral or revocation would be warranted, but has no intent to do so at this time.

Note 7 – Other Noninterest Income and Expense

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

         
Quarter Ended Year Ended
12/31/2016     9/30/2016     6/30/2016     3/31/2016     12/31/2015 12/31/2016     12/31/2015
Partnership amortization for tax credit purposes $ (2,479 ) $ (2,479 ) $ (2,479 ) $ (2,479 ) $ (3,015 ) $ (9,916 ) $ (10,050 )
Decrease in FDIC indemnification asset (80 ) (72 ) (118 ) (99 ) (827 ) (369 )