July 26, 2016 - 9:25 AM EDT
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Trustmark Corporation Announces Second Quarter 2016 Financial Results

Trustmark Corporation (NASDAQ:TRMK) reported net income of $21.5 million in the second quarter of 2016, representing diluted earnings per share of $0.32. Excluding a one-time charge related to a voluntary early retirement program, net income totaled $27.2 million, which represented $0.40 in diluted earnings per share. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2016, to shareholders of record on September 1, 2016.

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Second Quarter Highlights

  • Loans held for investment increased $137.2 million, or 7.6% annualized, from the prior quarter and $958.1 million, or 14.9%, year-over-year
  • Continued solid credit quality, reflecting reductions in nonperforming assets
  • Revenue excluding income on acquired loans increased 1.2% linked quarter, or 4.8% annualized, and 2.0% year-over-year to total $132.6 million in the second quarter
  • Voluntary early retirement program resulted in one-time, pre-tax charge of $9.3 million in the second quarter; expected pre-tax savings of approximately $4.2 million for the remainder of 2016 and $8.5 million in 2017
  • Routine noninterest expense – which excludes ORE, intangible amortization and the one-time voluntary early retirement charge – remained well controlled at $98.0 million

Gerard R. Host, President and CEO, stated, “Trustmark achieved another quarter of solid financial results. We continued to maintain and expand customer relationships by growing loans across our five-state franchise, while maintaining solid credit quality. Our other lines of business continued to perform well, reflecting strength in insurance commissions, wealth management revenue and mortgage loan-production volume. Routine noninterest expense remained well controlled. Furthermore, this past quarter – as part of the J.D. Power 2016 U.S. Retail Banking Satisfaction Study – Trustmark was recognized as having the 'Highest Customer Satisfaction with Retail Banking in the South Central Region'*. We appreciate this recognition from our customers and thank our associates for their commitment to excellent customer service. Thanks to our associates, solid profitability and strong capital base, Trustmark remains well positioned to continue meeting the needs of our customers and creating long-term value for our shareholders.”

Balance Sheet Management

  • Continued diversified legacy loan growth demonstrates the value of Trustmark’s five-state franchise
  • Noninterest-bearing deposits represented 30.3% of total average deposits, contributing to a total cost of deposits of 0.13%
  • Solid capital base continues to provide flexibility in pursuing growth opportunities

Loans held for investment totaled $7.4 billion at June 30, 2016, reflecting an increase of 1.9% from the prior quarter and 14.9% year-over-year. Relative to the prior quarter, commercial and industrial loans expanded $98.0 million, driven primarily by growth in Tennessee, Mississippi and Alabama. Other real estate secured loans, which include multifamily projects, increased $50.0 million as growth in Mississippi, Tennessee, Texas and Alabama more than offset a marginal reduction in Florida. Construction, land development and other land loans increased $20.9 million, primarily reflecting funding of existing construction loans in Texas, Alabama, Florida and Mississippi. Loans to state and other political subdivisions increased $18.4 million, principally driven by growth in Mississippi. During the quarter, Trustmark sold the vast majority of lower-rate, longer-term home mortgages in the secondary market, rather than replacing the runoff in its single-family loan portfolio; as a result, the single-family mortgage portfolio decreased by $20.0 million.

Acquired loans totaled $339.0 million at June 30, 2016, down $25.7 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $7.7 billion at June 30, 2016, up $111.4 million, or 6.0% annualized, from the prior quarter.

Deposits totaled $9.5 billion at June 30, 2016, decreasing 1.1% from the prior quarter. Trustmark continues to maintain an attractive, low-cost deposit base with a total cost of deposits of 0.13%. The favorable mix of interest-bearing liabilities yielded a total cost of funds of 0.29% for the second quarter of 2016.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. During the second quarter, Trustmark repurchased approximately 34 thousand of its common shares. The repurchase program, which is subject to market conditions and management discretion, will continue to be implemented through open market repurchases or privately negotiated transactions. At June 30, 2016, Trustmark’s tangible equity to tangible assets ratio was 8.97%, while its total risk-based capital ratio was 13.82%. Tangible book value per share was $16.76 at June 30, 2016, up 7.6% year-over-year.

Credit Quality

  • Nonperforming loans and other real estate decreased 7.9% and 3.2%, respectively, from the prior quarter
  • Net charge-offs were negligible, representing approximately 0.03% of average loans for the second quarter
  • Allowance for loan losses represented 231.13% of nonperforming loans, excluding specifically reviewed impaired loans
  • Allowance for held for investment and acquired loans represented 1.09% of total held for investment and acquired loans

Criticized and classified loans declined during the second quarter, reflecting continued solid credit quality. Compared to the prior quarter, criticized and classified loan balances decreased 3.7% and 3.3%, respectively. Compared to balances one year earlier, criticized and classified loan balances decreased 10.4% and 5.4%, respectively.

At June 30, 2016, nonperforming loans totaled $65.1 million, down 7.9% linked quarter and 4.8% year-over-year. Other real estate totaled $69.5 million, reflecting a decline of 3.2% from the prior quarter and 23.4% from the same period one year earlier.

Allocation of Trustmark's $71.8 million allowance for loan losses represented 1.05% of commercial loans and 0.70% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.97% at June 30, 2016, representing a level management considers commensurate with the inherent risk in the loan portfolio. Collectively, the allowance for both held for investment and acquired loan losses represented 1.09% 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 income on acquired loans totaled $92.9 million in the second quarter, remaining stable from the prior quarter and up 5.1% year-over-year
  • Insurance and wealth management revenue demonstrated solid growth, increasing 12.2% and 8.1%, respectively, from the prior quarter as well as 2.5% and 3.2%, respectively, year-over-year
  • Mortgage loan-production volume increased 31.4% linked-quarter and decreased 3.1% from the same period one year earlier

Net interest income (FTE) in the second quarter totaled $100.9 million, which resulted in a net interest margin of 3.56%. Compared to the prior quarter, net interest income (FTE) increased $1.7 million, which reflects continued growth in interest income from both the held for sale and held for investment loan portfolios, in addition to a higher level of recoveries from the acquired loan portfolio. The yield on acquired loans in the second quarter totaled 9.26% and included recoveries from settlement of debt of $2.9 million; this compares to $1.2 million in recoveries from settlement of debt in the prior quarter. The net interest margin (FTE) excluding both acquired loans and yield maintenance payments totaled 3.38% in the second quarter, remaining unchanged from the prior quarter.

Noninterest income totaled $44.2 million in the second quarter, increasing 2.2% linked quarter. Relative to the prior quarter, service charges on deposit accounts remained stable, while bank card and other fees increased 7.5%. Other, net increased 54.5%, or $484 thousand, from the prior quarter primarily because of growth in other miscellaneous income.

Insurance revenue totaled $9.6 million in the second quarter, representing an increase of 12.2% from the prior quarter and 2.5% from the same period one year earlier. The performance this quarter was primarily driven by the commercial property and casualty line of business. Wealth management revenue in the second quarter totaled $8.0 million, up 8.1% and 3.2% from the prior quarter and year-over-year, respectively. The linked-quarter increase reflects growth in both the trust management business and annuity income.

Mortgage banking revenue in the second quarter totaled $6.7 million, down $2.0 million from the prior quarter and $2.8 million year-over-year. The linked-quarter change primarily reflects expanded secondary marketing gains that were more than offset by an unfavorable mortgage servicing hedge ineffectiveness and a lower level of mark-to-market gains on mortgage loans held for sale. Mortgage loan production in the second quarter totaled $404.0 million, up 31.4% from the prior quarter and down 3.1% year-over-year.

Noninterest Expense

  • Authorized the termination of a frozen noncontributory tax-qualified defined benefit pension plan, effective as of December 31, 2016
  • Delivery channel optimization: closed the previously announced six branch offices across Alabama, Mississippi and Florida

Trustmark continued proactive measures to manage noninterest expense. During the second quarter, Trustmark announced the results of its voluntary early retirement program. Of those eligible for the program, 188 associates, or 6.38% of the workforce, retired by June 30, 2016. As previously mentioned, a one-time, pre-tax charge of $9.3 million related to this program was incurred during the second quarter. The result of this program is expected to produce pre-tax savings of approximately $4.2 million for the remainder of 2016 and $8.5 million for full year 2017.

Excluding ORE expense and intangible amortization of $2.9 million and the one-time voluntary early retirement charge of $9.3 million, routine noninterest expense in the second quarter totaled $98.0 million. Salaries and benefits expense – excluding $9.1 million of the one-time voluntary early retirement charge – was $58.0 million, which increased marginally from the prior quarter as a result of higher mortgage-production commissions. Services and fees remained stable from the prior quarter, while ORE and foreclosure expense increased $1.0 million. Other expense – excluding the remaining $230 thousand of the one-time voluntary early retirement charge – totaled $12.4 million, up $439 thousand on a comparable basis from the prior quarter.

On July 26, 2016, Trustmark’s Board of Directors authorized the termination of a frozen noncontributory tax-qualified defined benefit pension plan (the “Plan”), which will be effective December 31, 2016. A one-time, pre-tax pension settlement expense of approximately $12.0 million will be recognized when paid by Trustmark during the second quarter of 2017. Additionally, Trustmark elected to de-risk the Plan’s investment portfolio, thus reducing the expected rate of return on the Plan’s investment assets. As a result, Trustmark estimates that the periodic benefit cost will increase by $1.2 million in the second half of 2016. The expected net pre-tax savings, once completed, from the termination of the Plan are estimated to total between $3.0 to $4.0 million annually. Trustmark remains committed to investments that promote profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 27, 2016, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call. A replay of the conference call will also be available through Wednesday, August 10, 2016, in archived format at the same web address or by calling (877) 344-7529, passcode 10088419.

Trustmark Corporation is a financial services company providing banking and financial solutions through 194 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

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

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

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

*Disclaimer

Trustmark National Bank received the highest numerical score among 15 retail banks in the South Central region in the J.D. Power 2016 Retail Banking Satisfaction Study, based on 76,233 total responses, measuring opinions of consumers with their primary banking provider, surveyed April 2015-February 2016. Your experiences may vary. Visit jdpower.com.

 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2016
($ in thousands)
(unaudited)
 
                  Linked Quarter     Year over Year

QUARTERLY AVERAGE BALANCES

  6/30/2016     3/31/2016     6/30/2015  

$ Change

    % Change  

$ Change

  % Change
Securities AFS-taxable $ 2,214,040 $ 2,211,479 $ 2,255,485 $ 2,561 0.1 % $ (41,445 ) -1.8 %
Securities AFS-nontaxable 99,296 105,844 120,330 (6,548 ) -6.2 % (21,034 ) -17.5 %
Securities HTM-taxable 1,122,463 1,142,434 1,143,273 (19,971 ) -1.7 % (20,810 ) -1.8 %
Securities HTM-nontaxable   34,785     35,841     38,173     (1,056 ) -2.9 %   (3,388 ) -8.9 %
Total securities   3,470,584     3,495,598     3,557,261     (25,014 ) -0.7 %   (86,677 ) -2.4 %
Loans (including loans held for sale) 7,505,409 7,346,333 6,554,739 159,076 2.2 % 950,670 14.5 %
Acquired loans:
Noncovered loans 335,012 361,772 462,418 (26,760 ) -7.4 % (127,406 ) -27.6 %
Covered loans 14,728 16,663 20,574 (1,935 ) -11.6 % (5,846 ) -28.4 %
Fed funds sold and rev repos 1,263 382 557 881 n/m 706 n/m
Other earning assets   64,000     66,702     41,242     (2,702 ) -4.1 %   22,758   55.2 %
Total earning assets   11,390,996     11,287,450     10,636,791     103,546   0.9 %   754,205   7.1 %
Allowance for loan losses (83,614 ) (81,138 ) (84,331 ) (2,476 ) 3.1 % 717 -0.9 %
Cash and due from banks 271,135 281,912 272,292 (10,777 ) -3.8 % (1,157 ) -0.4 %
Other assets   1,240,846     1,253,282     1,288,507     (12,436 ) -1.0 %   (47,661 ) -3.7 %
Total assets $ 12,819,363   $ 12,741,506   $ 12,113,259   $ 77,857   0.6 % $ 706,104   5.8 %
 
Interest-bearing demand deposits $ 1,830,107 $ 1,866,043 $ 1,924,447 $ (35,936 ) -1.9 % $ (94,340 ) -4.9 %
Savings deposits 3,221,850 3,188,916 3,226,380 32,934 1.0 % (4,530 ) -0.1 %
Time deposits less than $100,000 978,678 994,406 1,101,477 (15,728 ) -1.6 % (122,799 ) -11.1 %
Time deposits of $100,000 or more   699,886     683,170     751,129     16,716   2.4 %   (51,243 ) -6.8 %
Total interest-bearing deposits 6,730,521 6,732,535 7,003,433 (2,014 ) 0.0 % (272,912 ) -3.9 %
Fed funds purchased and repos 488,512 517,180 497,606 (28,668 ) -5.5 % (9,094 ) -1.8 %
Short-term borrowings 319,288 413,616 128,761 (94,328 ) -22.8 % 190,527 n/m
Long-term FHLB advances 597,269 501,144 1,213 96,125 19.2 % 596,056 n/m
Subordinated notes 49,980 49,972 49,947 8 0.0 % 33 0.1 %
Junior subordinated debt securities   61,856     61,856     61,856       0.0 %     0.0 %
Total interest-bearing liabilities 8,247,426 8,276,303 7,742,816 (28,877 ) -0.3 % 504,610 6.5 %
Noninterest-bearing deposits 2,927,469 2,836,283 2,772,741 91,186 3.2 % 154,728 5.6 %
Other liabilities   131,627     134,236     143,201     (2,609 ) -1.9 %   (11,574 ) -8.1 %
Total liabilities 11,306,522 11,246,822 10,658,758 59,700 0.5 % 647,764 6.1 %
Shareholders' equity   1,512,841     1,494,684     1,454,501     18,157   1.2 %   58,340   4.0 %
Total liabilities and equity $ 12,819,363   $ 12,741,506   $ 12,113,259   $ 77,857   0.6 % $ 706,104   5.8 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 

See Notes to Consolidated Financials

 
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION
June 30, 2016
($ in thousands)
(unaudited)
 
                  Linked Quarter     Year over Year

PERIOD END BALANCES

  6/30/2016     3/31/2016     6/30/2015  

$ Change

    % Change

$ Change

    % Change
Cash and due from banks $ 322,049 $ 228,498 $ 255,050 $ 93,551 40.9 % $ 66,999 26.3 %
Fed funds sold and rev repos 3,198 3,198 n/m 3,198 n/m
Securities available for sale 2,388,306 2,368,120 2,446,383 20,186 0.9 % (58,077 ) -2.4 %
Securities held to maturity 1,173,204 1,168,203 1,190,161 5,001 0.4 % (16,957 ) -1.4 %
Loans held for sale (LHFS) 213,546 191,028 147,539 22,518 11.8 % 66,007 44.7 %
Loans held for investment (LHFI) 7,405,181 7,268,022 6,447,073 137,159 1.9 % 958,108 14.9 %
Allowance for loan losses   (71,796 )   (69,668 )   (71,166 )   (2,128 ) 3.1 %   (630 ) 0.9 %
Net LHFI 7,333,385 7,198,354 6,375,907 135,031 1.9 % 957,478 15.0 %
Acquired loans:
Noncovered loans 325,196 349,781 447,160 (24,585 ) -7.0 % (121,964 ) -27.3 %
Covered loans 13,839 14,974 19,239 (1,135 ) -7.6 % (5,400 ) -28.1 %
Allowance for loan losses, acquired loans   (12,480 )   (13,535 )   (12,629 )   1,055   -7.8 %   149   -1.2 %
Net acquired loans   326,555     351,220     453,770     (24,665 ) -7.0 %   (127,215 ) -28.0 %
Net LHFI and acquired loans 7,659,940 7,549,574 6,829,677 110,366 1.5 % 830,263 12.2 %
Premises and equipment, net 192,732 194,453 196,220 (1,721 ) -0.9 % (3,488 ) -1.8 %
Mortgage servicing rights 62,814 68,208 71,422 (5,394 ) -7.9 % (8,608 ) -12.1 %
Goodwill 366,156 366,156 365,500 0.0 % 656 0.2 %
Identifiable intangible assets 24,058 25,751 32,042 (1,693 ) -6.6 % (7,984 ) -24.9 %
Other real estate, excluding covered other real estate 69,502 71,806 90,748 (2,304 ) -3.2 % (21,246 ) -23.4 %
Covered other real estate 388 496 3,755 (108 ) -21.8 % (3,367 ) -89.7 %
FDIC indemnification asset 506 2,632 (506 ) -100.0 % (2,632 ) -100.0 %
Other assets   554,456     542,397     551,319     12,059   2.2 %   3,137   0.6 %
Total assets $ 13,030,349   $ 12,775,196   $ 12,182,448   $ 255,153   2.0 % $ 847,901   7.0 %
 
Deposits:
Noninterest-bearing $ 2,921,016 $ 2,874,306 $ 2,819,171 $ 46,710 1.6 % $ 101,845 3.6 %
Interest-bearing   6,610,508     6,759,337     6,973,003     (148,829 ) -2.2 %   (362,495 ) -5.2 %
Total deposits 9,531,524 9,633,643 9,792,174 (102,119 ) -1.1 % (260,650 ) -2.7 %
Fed funds purchased and repos 606,336 466,436 477,462 139,900 30.0 % 128,874 27.0 %
Short-term borrowings 360,434 411,385 201,744 (50,951 ) -12.4 % 158,690 78.7 %
Long-term FHLB advances 751,106 501,124 1,204 249,982 49.9 % 749,902 n/m
Subordinated notes 49,985 49,977 49,953 8 0.0 % 32 0.1 %
Junior subordinated debt securities 61,856 61,856 61,856 0.0 % 0.0 %
Other liabilities   145,641     142,519     147,646     3,122   2.2 %   (2,005 ) -1.4 %
Total liabilities   11,506,882     11,266,940     10,732,039     239,942   2.1 %   774,843   7.2 %
Common stock 14,090 14,093 14,076 (3 ) 0.0 % 14 0.1 %
Capital surplus 364,516 363,979 359,533 537 0.1 % 4,983 1.4 %
Retained earnings 1,157,025 1,151,757 1,117,993 5,268 0.5 % 39,032 3.5 %
Accum other comprehensive loss, net of tax   (12,164 )   (21,573 )   (41,193 )   9,409   -43.6 %   29,029   -70.5 %
Total shareholders' equity   1,523,467     1,508,256     1,450,409     15,211   1.0 %   73,058   5.0 %
Total liabilities and equity $ 13,030,349   $ 12,775,196   $ 12,182,448   $ 255,153   2.0 % $ 847,901   7.0 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 

See Notes to Consolidated Financials

 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION
June 30, 2016
($ in thousands except per share data)
(unaudited)
                             
Quarter Ended Linked Quarter Year over Year

INCOME STATEMENTS

  6/30/2016   3/31/2016     6/30/2015  

$ Change

% Change

$ Change

% Change
Interest and fees on LHFS & LHFI-FTE $ 77,777 $ 76,235 $ 71,546 $ 1,542 2.0 % $ 6,231 8.7 %
Interest and fees on acquired loans 8,051 7,022 12,557 1,029 14.7 % (4,506 ) -35.9 %
Interest on securities-taxable 19,402 20,086 19,731 (684 ) -3.4 % (329 ) -1.7 %
Interest on securities-tax exempt-FTE 1,429 1,497 1,688 (68 ) -4.5 % (259 ) -15.3 %
Interest on fed funds sold and rev repos 4 1 2 3 n/m 2 100.0 %
Other interest income   200   230     392     (30 ) -13.0 %   (192 ) -49.0 %
Total interest income-FTE   106,863   105,071     105,916     1,792   1.7 %   947   0.9 %
Interest on deposits 3,122 3,038 3,204 84 2.8 % (82 ) -2.6 %
Interest on fed funds pch and repos 404 431 179 (27 ) -6.3 % 225 n/m
Other interest expense   2,428   2,389     1,614     39   1.6 %   814   50.4 %
Total interest expense   5,954   5,858     4,997     96   1.6 %   957   19.2 %
Net interest income-FTE 100,909 99,213 100,919 1,696 1.7 % (10 ) 0.0 %
Provision for loan losses, LHFI 2,596 2,243 1,033 353 15.7 % 1,563 n/m
Provision for loan losses, acquired loans   607   1,309     825     (702 ) -53.6 %   (218 ) -26.4 %
Net interest income after provision-FTE   97,706   95,661     99,061     2,045   2.1 %   (1,355 ) -1.4 %
Service charges on deposit accounts 11,051 11,081 11,920 (30 ) -0.3 % (869 ) -7.3 %
Insurance commissions 9,638 8,593 9,401 1,045 12.2 % 237 2.5 %
Wealth management 8,009 7,407 7,758 602 8.1 % 251 3.2 %
Bank card and other fees 7,436 6,918 7,416 518 7.5 % 20 0.3 %
Mortgage banking, net 6,721 8,699 9,481 (1,978 ) -22.7 % (2,760 ) -29.1 %
Other, net   1,372   888     (433 )   484   54.5 %   1,805   n/m
Nonint inc-excl sec gains (losses), net 44,227 43,586 45,543 641 1.5 % (1,316 ) -2.9 %
Security gains (losses), net   -   (310 )       310   -100.0 %   -   n/m
Total noninterest income   44,227   43,276     45,543     951   2.2 %   (1,316 ) -2.9 %
Salaries and employee benefits 67,018 57,201 57,393 9,817 17.2 % 9,625 16.8 %
Services and fees 14,522 14,475 15,005 47 0.3 % (483 ) -3.2 %
Net occupancy-premises 5,928 6,188 6,243 (260 ) -4.2 % (315 ) -5.0 %
Equipment expense 5,896 6,094 5,903 (198 ) -3.2 % (7 ) -0.1 %
FDIC assessment expense 2,959 2,811 2,615 148 5.3 % 344 13.2 %
ORE/Foreclosure expense 1,193 181 921 1,012 n/m 272 29.5 %
Other expense   12,663   11,994     12,186     669   5.6 %   477   3.9 %
Total noninterest expense   110,179   98,944     100,266     11,235   11.4 %   9,913   9.9 %
Income before income taxes and tax eq adj 31,754 39,993 44,338 (8,239 ) -20.6 % (12,584 ) -28.4 %
Tax equivalent adjustment   4,532   4,473     3,970     59   1.3 %   562   14.2 %
Income before income taxes 27,222 35,520 40,368 (8,298 ) -23.4 % (13,146 ) -32.6 %
Income taxes   5,719   8,517     9,766     (2,798 ) -32.9 %   (4,047 ) -41.4 %
Net income $ 21,503 $ 27,003   $ 30,602   $ (5,500 ) -20.4 % $ (9,099 ) -29.7 %
 
Per share data
Earnings per share - basic $ 0.32 $ 0.40   $ 0.45   $ (0.08 ) -20.0 % $ (0.13 ) -28.9 %
 
Earnings per share - diluted $ 0.32 $ 0.40   $ 0.45   $ (0.08 ) -20.0 % $ (0.13 ) -28.9 %
 
Dividends per share $ 0.23 $ 0.23   $ 0.23       0.0 %     0.0 %
 
Weighted average shares outstanding
Basic   67,619,571   67,609,662     67,556,825  
 
Diluted   67,770,174   67,746,592     67,685,449  
 
Period end shares outstanding   67,623,601   67,639,832     67,557,395  
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 

See Notes to Consolidated Financials

 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2016
($ in thousands)
(unaudited)
 
      Quarter Ended     Linked Quarter     Year over Year

NONPERFORMING ASSETS (1)

  6/30/2016         3/31/2016         6/30/2015  

$ Change

    % Change

$ Change

    % Change
Nonaccrual loans
Alabama $ 1,379 $ 1,788 $ 713 $ (409 ) -22.9 % $ 666 93.4 %
Florida 1,806 4,952 7,892 (3,146 ) -63.5 % (6,086 ) -77.1 %
Mississippi (2) 54,543 56,590 52,051 (2,047 ) -3.6 % 2,492 4.8 %
Tennessee (3) 5,345 5,849 5,468 (504 ) -8.6 % (123 ) -2.2 %
Texas   2,055     1,515     2,314     540   35.6 %   (259 ) -11.2 %
Total nonaccrual loans 65,128 70,694 68,438 (5,566 ) -7.9 % (3,310 ) -4.8 %
Other real estate
Alabama 18,031 19,137 21,849 (1,106 ) -5.8 % (3,818 ) -17.5 %
Florida 28,052 27,907 31,059 145 0.5 % (3,007 ) -9.7 %
Mississippi (2) 14,435 14,511 14,094 (76 ) -0.5 % 341 2.4 %
Tennessee (3) 7,432 8,699 9,707 (1,267 ) -14.6 % (2,275 ) -23.4 %
Texas   1,552     1,552     14,039     -   0.0 %   (12,487 ) -88.9 %
Total other real estate   69,502     71,806     90,748     (2,304 ) -3.2 %   (21,246 ) -23.4 %
Total nonperforming assets $ 134,630   $ 142,500   $ 159,186   $ (7,870 ) -5.5 % $ (24,556 ) -15.4 %
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 3,382   $ 611   $ 1,771   $ 2,771   n/m $ 1,611   91.0 %
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 23,473   $ 24,110   $ 11,987   $ (637 ) -2.6 % $ 11,486   95.8 %
 
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (4)

  6/30/2016     3/31/2016     6/30/2015  

$ Change

% Change

$ Change

% Change
Beginning Balance $ 69,668 $ 67,619 $ 71,321 $ 2,049 3.0 % $ (1,653 ) -2.3 %
Provision for loan losses 2,596 2,243 1,033 353 15.7 % 1,563 n/m
Charge-offs (3,251 ) (3,363 ) (4,278 ) 112 -3.3 % 1,027 -24.0 %
Recoveries   2,783     3,169     3,090     (386 ) -12.2 %   (307 ) -9.9 %
Net (charge-offs) recoveries   (468 )   (194 )   (1,188 )   (274 ) n/m   720   -60.6 %
Ending Balance $ 71,796   $ 69,668   $ 71,166   $ 2,128   3.1 % $ 630   0.9 %
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 1,189 $ 540 $ 623 $ 649 n/m $ 566 90.9 %
Florida (364 ) (818 ) (1,168 ) 454 -55.5 % 804 -68.8 %
Mississippi (2) (833 ) 1,848 2,046 (2,681 ) n/m (2,879 ) n/m
Tennessee (3) 726 138 (483 ) 588 n/m 1,209 n/m
Texas   1,878     535     15     1,343   n/m   1,863   n/m
Total provision for loan losses $ 2,596   $ 2,243   $ 1,033   $ 353   15.7 % $ 1,563   n/m
 

NET CHARGE-OFFS (4)

Alabama $ 436 $ 63 $ 216 $ 373 n/m $ 220 n/m
Florida (595 ) (674 ) 539 79 -11.7 % (1,134 ) n/m
Mississippi (2) (237 ) (74 ) 1,028 (163 ) n/m (1,265 ) n/m
Tennessee (3) 252 8 105 244 n/m 147 n/m
Texas   612     871     (700 )   (259 ) -29.7 %   1,312   n/m
Total net charge-offs (recoveries) $ 468   $ 194   $ 1,188   $ 274   n/m $ (720 ) -60.6 %
 
(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
June 30, 2016
($ in thousands)
(unaudited)
 
      Quarter Ended     Six Months Ended

AVERAGE BALANCES

  6/30/2016         3/31/2016         12/31/2015         9/30/2015         6/30/2015     6/30/2016         6/30/2015  
Securities AFS-taxable $ 2,214,040 $ 2,211,479 $ 2,209,801 $ 2,269,763 $ 2,255,485 $ 2,212,760 $ 2,223,094
Securities AFS-nontaxable 99,296 105,844 110,290 116,290 120,330 102,570 123,956
Securities HTM-taxable 1,122,463 1,142,434 1,145,397 1,151,673 1,143,273 1,132,449 1,131,690
Securities HTM-nontaxable   34,785     35,841     35,755     36,278     38,173     35,313     39,780  
Total securities   3,470,584     3,495,598     3,501,243     3,574,004     3,557,261     3,483,092     3,518,520  
Loans (including loans held for sale) 7,505,409 7,346,333 7,089,672 6,771,947 6,554,739 7,425,871 6,558,066
Acquired loans:
Noncovered loans 335,012 361,772 384,306 421,262 462,418 348,392 482,365
Covered loans 14,728 16,663 18,341 18,982 20,574 15,696 22,075
Fed funds sold and rev repos 1,263 382 1,384 1,167 557 823 388
Other earning assets   64,000     66,702     68,016     58,534     41,242     65,351     43,791  
Total earning assets   11,390,996     11,287,450     11,062,962     10,845,896     10,636,791     11,339,225     10,625,205  
Allowance for loan losses (83,614 ) (81,138 ) (78,652 ) (84,482 ) (84,331 ) (82,376 ) (83,168 )
Cash and due from banks 271,135 281,912 272,562 266,174 272,292 276,524 281,222
Other assets   1,240,846     1,253,282     1,266,712     1,286,189     1,288,507     1,247,062     1,295,989  
Total assets $ 12,819,363   $ 12,741,506   $ 12,523,584   $ 12,313,777   $ 12,113,259   $ 12,780,435   $ 12,119,248  
 
Interest-bearing demand deposits $ 1,830,107 $ 1,866,043 $ 1,917,598 $ 1,915,567 $ 1,924,447 $ 1,848,075 $ 1,886,123
Savings deposits 3,221,850 3,188,916 2,963,318 3,059,183 3,226,380 3,205,383 3,239,411
Time deposits less than $100,000 978,678 994,406 1,033,233 1,072,373 1,101,477 986,542 1,120,588
Time deposits of $100,000 or more   699,886     683,170     687,635     712,910     751,129     691,528     768,326  
Total interest-bearing deposits 6,730,521 6,732,535 6,601,784 6,760,033 7,003,433 6,731,528 7,014,448
Fed funds purchased and repos 488,512 517,180 563,424 528,232 497,606 502,846 459,617
Short-term borrowings 319,288 413,616 733,365 534,931 128,761 366,452 192,384
Long-term FHLB advances 597,269 501,144 50,078 1,195 1,213 549,207 1,228
Subordinated notes 49,980 49,972 49,964 49,955 49,947 49,976 49,943
Junior subordinated debt securities   61,856     61,856     61,856     61,856     61,856     61,856     61,856  
Total interest-bearing liabilities 8,247,426 8,276,303 8,060,471 7,936,202 7,742,816 8,261,865 7,779,476
Noninterest-bearing deposits 2,927,469 2,836,283 2,839,894 2,771,186 2,772,741 2,881,876 2,757,428
Other liabilities   131,627     134,236     141,925     137,134     143,201     132,931     136,561  
Total liabilities 11,306,522 11,246,822 11,042,290 10,844,522 10,658,758 11,276,672 10,673,465
Shareholders' equity   1,512,841     1,494,684     1,481,294     1,469,255     1,454,501     1,503,763     1,445,783  
Total liabilities and equity $ 12,819,363   $ 12,741,506   $ 12,523,584   $ 12,313,777   $ 12,113,259   $ 12,780,435   $ 12,119,248  
 
 
 

See Notes to Consolidated Financials

 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2016
($ in thousands)
(unaudited)
 
                     

PERIOD END BALANCES

  6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015  
Cash and due from banks $ 322,049 $ 228,498 $ 277,751 $ 220,052 $ 255,050
Fed funds sold and rev repos 3,198 250
Securities available for sale 2,388,306 2,368,120 2,345,422 2,382,822 2,446,383
Securities held to maturity 1,173,204 1,168,203 1,187,818 1,178,440 1,190,161
Loans held for sale (LHFS) 213,546 191,028 160,189 173,679 147,539
Loans held for investment (LHFI) 7,405,181 7,268,022 7,091,385 6,791,643 6,447,073
Allowance for loan losses   (71,796 )   (69,668 )   (67,619 )   (65,607 )   (71,166 )
Net LHFI 7,333,385 7,198,354 7,023,766 6,726,036 6,375,907
Acquired loans:
Noncovered loans 325,196 349,781 372,711 400,528 447,160
Covered loans 13,839 14,974 17,700 18,645 19,239
Allowance for loan losses, acquired loans   (12,480 )   (13,535 )   (11,992 )   (12,185 )   (12,629 )
Net acquired loans   326,555     351,220     378,419     406,988     453,770  
Net LHFI and acquired loans 7,659,940 7,549,574 7,402,185 7,133,024 6,829,677
Premises and equipment, net 192,732 194,453 195,656 196,558 196,220
Mortgage servicing rights 62,814 68,208 74,007 69,809 71,422
Goodwill 366,156 366,156 366,156 365,500 365,500
Identifiable intangible assets 24,058 25,751 27,546 30,129 32,042
Other real estate, excluding covered other real estate 69,502 71,806 77,177 83,955 90,748
Covered other real estate 388 496 1,651 2,865 3,755
FDIC indemnification asset - 506 738 1,749 2,632
Other assets   554,456     542,397     562,350     551,694     551,319  
Total assets $ 13,030,349   $ 12,775,196   $ 12,678,896   $ 12,390,276   $ 12,182,448  
 
Deposits:
Noninterest-bearing $ 2,921,016 $ 2,874,306 $ 2,998,694 $ 2,787,454 $ 2,819,171
Interest-bearing   6,610,508     6,759,337     6,589,536     6,624,950     6,973,003  
Total deposits 9,531,524 9,633,643 9,588,230 9,412,404 9,792,174
Fed funds purchased and repos 606,336 466,436 441,042 534,204 477,462
Short-term borrowings 360,434 411,385 412,617 709,845 201,744
Long-term FHLB advances 751,106 501,124 501,155 1,173 1,204
Subordinated notes 49,985 49,977 49,969 49,961 49,953
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
Other liabilities   145,641     142,519     150,970     144,077     147,646  
Total liabilities   11,506,882     11,266,940     11,205,839     10,913,520     10,732,039  
Common stock 14,090 14,093 14,076 14,076 14,076
Capital surplus 364,516 363,979 361,467 360,494 359,533
Retained earnings 1,157,025 1,151,757 1,142,908 1,130,766 1,117,993
Accum other comprehensive loss, net of tax   (12,164 )   (21,573 )   (45,394 )   (28,580 )   (41,193 )
Total shareholders' equity   1,523,467     1,508,256     1,473,057     1,476,756     1,450,409  
Total liabilities and equity $ 13,030,349   $ 12,775,196   $ 12,678,896   $ 12,390,276   $ 12,182,448  
 
 
 

See Notes to Consolidated Financials

 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2016
($ in thousands except per share data)
(unaudited)
                             
Quarter Ended Six Months Ended

INCOME STATEMENTS

  6/30/2016   3/31/2016     12/31/2015     9/30/2015   6/30/2015     6/30/2016     6/30/2015  
Interest and fees on LHFS & LHFI-FTE $ 77,777 $ 76,235 $ 74,383 $ 72,951 $ 71,546 $ 154,012 $ 141,204
Interest and fees on acquired loans 8,051 7,022 11,910 11,607 12,557 15,073 27,635
Interest on securities-taxable 19,402 20,086 21,149 20,264 19,731 39,488 39,317
Interest on securities-tax exempt-FTE 1,429 1,497 1,565 1,609 1,688 2,926 3,477
Interest on fed funds sold and rev repos 4 1 4 2 2 5 2
Other interest income   200   230     402     392   392     430     785  
Total interest income-FTE   106,863   105,071     109,413     106,825   105,916     211,934     212,420  
Interest on deposits 3,122 3,038 3,000 3,147 3,204 6,160 6,451
Interest on fed funds pch and repos 404 431 274 205 179 835 322
Other interest expense   2,428   2,389     1,987     1,811   1,614     4,817     3,263  
Total interest expense   5,954   5,858     5,261     5,163   4,997     11,812     10,036  
Net interest income-FTE 100,909 99,213 104,152 101,662 100,919 200,122 202,384
Provision for loan losses, LHFI 2,596 2,243 3,043 2,514 1,033 4,839 2,818
Provision for loan losses, acquired loans   607   1,309     997     1,256   825     1,916     1,172  
Net interest income after provision-FTE   97,706   95,661     100,112     97,892   99,061     193,367     198,394  
Service charges on deposit accounts 11,051 11,081 11,961 12,400 11,920 22,132 23,005
Insurance commissions 9,638 8,593 8,501 9,906 9,401 18,231 18,017
Wealth management 8,009 7,407 7,831 7,790 7,758 15,416 15,748
Bank card and other fees 7,436 6,918 7,156 6,964 7,416 14,354 14,178
Mortgage banking, net 6,721 8,699 4,287 7,443 9,481 15,420 18,446
Other, net   1,372   888     (466 )   1,470   (433 )   2,260     (1,488 )
Nonint inc-excl sec gains (losses), net 44,227 43,586 39,270 45,973 45,543 87,813 87,906
Security gains (losses), net     (310 )             (310 )    
Total noninterest income   44,227   43,276     39,270     45,973   45,543     87,503     87,906  
Salaries and employee benefits 67,018 57,201 57,366 58,270 57,393 124,219 114,562
Services and fees 14,522 14,475 13,717 14,691 15,005 28,997 29,126
Net occupancy-premises 5,928 6,188 6,304 6,580 6,243 12,116 12,434
Equipment expense 5,896 6,094 6,105 5,877 5,903 11,990 11,877
FDIC assessment expense 2,959 2,811 2,614 2,559 2,615 5,770 5,555
ORE/Foreclosure expense 1,193 181 (518 ) 3,385 921 1,374 2,036
Other expense   12,663   11,994     13,032     12,198   12,186     24,657     23,892  
Total noninterest expense   110,179   98,944     98,620     103,560   100,266     209,123     199,482  
Income before income taxes and tax eq adj 31,754 39,993 40,762 40,305 44,338 71,747 86,818
Tax equivalent adjustment   4,532   4,473     4,334     4,056   3,970     9,005     8,043  
Income before income taxes 27,222 35,520 36,428 36,249 40,368 62,742 78,775
Income taxes   5,719   8,517     8,570     7,819   9,766     14,236     19,025  
Net income $ 21,503 $ 27,003   $ 27,858   $ 28,430 $ 30,602   $ 48,506   $ 59,750  
 
Per share data
Earnings per share - basic $ 0.32 $ 0.40   $ 0.41   $ 0.42 $ 0.45   $ 0.72   $ 0.88  
 
Earnings per share - diluted $ 0.32 $ 0.40   $ 0.41   $ 0.42 $ 0.45   $ 0.72   $ 0.88  
 
Dividends per share $ 0.23 $ 0.23   $ 0.23   $ 0.23 $ 0.23   $ 0.46   $ 0.46  
 
Weighted average shares outstanding
Basic   67,619,571   67,609,662     67,557,991     67,557,395   67,556,825     67,614,616     67,541,394  
 
Diluted   67,770,174   67,746,592     67,734,109     67,707,456   67,685,449     67,761,315     67,662,757  
 
Period end shares outstanding   67,623,601   67,639,832     67,559,128     67,557,395   67,557,395     67,623,601     67,557,395  
 
 
 

See Notes to Consolidated Financials

 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2016
($ in thousands)
(unaudited)
             
Quarter Ended

NONPERFORMING ASSETS (1)

  6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015  
Nonaccrual loans
Alabama $ 1,379 $ 1,788 $ 1,776 $ 1,306 $ 713
Florida 1,806 4,952 5,180 7,444 7,892
Mississippi (2) 54,543 56,590 40,754 44,955 52,051
Tennessee (3) 5,345 5,849 5,106 4,911 5,468
Texas   2,055     1,515     2,496     2,515     2,314  
Total nonaccrual loans 65,128 70,694 55,312 61,131 68,438
Other real estate
Alabama 18,031 19,137 21,578 23,822 21,849
Florida 28,052 27,907 29,579 30,374 31,059
Mississippi (2) 14,435 14,511 14,312 13,180 14,094
Tennessee (3) 7,432 8,699 9,974 9,840 9,707
Texas   1,552     1,552     1,734     6,739     14,039  
Total other real estate   69,502     71,806     77,177     83,955     90,748  

Total nonperforming assets

$ 134,630   $ 142,500   $ 132,489   $ 145,086   $ 159,186  
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 3,382   $ 611   $ 2,300   $ 9,224   $ 1,771  
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 23,473   $ 24,110   $ 21,812   $ 15,165   $ 11,987  
 
 
Quarter Ended Six Months Ended

ALLOWANCE FOR LOAN LOSSES (4)

  6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015     6/30/2016     6/30/2015  
Beginning Balance $ 69,668 $ 67,619 $ 65,607 $ 71,166 $ 71,321 $ 67,619 $ 69,616
Provision for loan losses 2,596 2,243 3,043 2,514 1,033 4,839 2,818
Charge-offs (3,251 ) (3,363 ) (3,781 ) (11,406 ) (4,278 ) (6,614 ) (7,282 )
Recoveries   2,783     3,169     2,750     3,333     3,090     5,952     6,014  
Net charge-offs   (468 )   (194 )   (1,031 )   (8,073 )   (1,188 )   (662 )   (1,268 )
Ending Balance $ 71,796   $ 69,668   $ 67,619   $ 65,607   $ 71,166   $ 71,796   $ 71,166  
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 1,189 $ 540 $ 1,453 $ (70 ) $ 623 $ 1,729 $ 1,384
Florida (364 ) (818 ) (1,357 ) (1,430 ) (1,168 ) (1,182 ) 665
Mississippi (2) (833 ) 1,848 1,842 4,221 2,046 1,015 (683 )
Tennessee (3) 726 138 182 (1,050 ) (483 ) 864 949
Texas   1,878     535     923     843     15     2,413     503  
Total provision for loan losses $ 2,596   $ 2,243   $ 3,043   $ 2,514   $ 1,033   $ 4,839   $ 2,818  
 

NET CHARGE-OFFS (4)

Alabama $ 436 $ 63 $ 422 $ 163 $ 216 $ 499 $ 360
Florida (595 ) (674 ) (389 ) (1,090 ) 539 (1,269 ) 511
Mississippi (2) (237 ) (74 ) 925 7,391 1,028 (311 ) 1,171
Tennessee (3) 252 8 188 448 105 260 (111 )
Texas   612     871     (115 )   1,161     (700 )   1,483     (663 )
Total net charge-offs $ 468   $ 194   $ 1,031   $ 8,073   $ 1,188   $ 662   $ 1,268  
 
(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
June 30, 2016
(unaudited)
                             
Quarter Ended Six Months Ended

FINANCIAL RATIOS AND OTHER DATA

  6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015   6/30/2016   6/30/2015  
Return on equity 5.72 % 7.27 % 7.46 % 7.68 % 8.44 % 6.49 % 8.33 %
Return on average tangible equity 8.08 % 10.26 % 10.61 % 10.96 % 12.05 % 9.16 % 11.96 %
Return on assets 0.67 % 0.85 % 0.88 % 0.92 % 1.01 % 0.76 % 0.99 %
Interest margin - Yield - FTE 3.77 % 3.74 % 3.92 % 3.91 % 3.99 % 3.76 % 4.03 %
Interest margin - Cost 0.21 % 0.21 % 0.19 % 0.19 % 0.19 % 0.21 % 0.19 %
Net interest margin - FTE 3.56 % 3.54 % 3.74 % 3.72 % 3.81 % 3.55 % 3.84 %
Efficiency ratio (1) 67.20 % 66.87 % 66.03 % 67.87 % 66.00 % 67.04 % 66.23 %
Full-time equivalent employees 2,818 2,946 2,941 2,963 2,989
 

CREDIT QUALITY RATIOS (2)

Net charge-offs/average loans 0.03 % 0.01 % 0.06 % 0.47 % 0.07 % 0.02 % 0.04 %
Provision for loan losses/average loans 0.14 % 0.12 % 0.17 % 0.15 % 0.06 % 0.13 % 0.09 %
Nonperforming loans/total loans (incl LHFS) 0.85 % 0.95 % 0.76 % 0.88 % 1.04 %
Nonperforming assets/total loans (incl LHFS) 1.77 % 1.91 % 1.83 % 2.08 % 2.41 %
Nonperforming assets/total loans (incl LHFS) +ORE 1.75 % 1.89 % 1.81 % 2.06 % 2.38 %
ALL/total loans (excl LHFS) 0.97 % 0.96 % 0.95 % 0.97 % 1.10 %
ALL-commercial/total commercial loans 1.05 % 1.06 % 1.05 % 1.07 % 1.30 %
ALL-consumer/total consumer and home mortgage loans 0.70 % 0.65 % 0.66 % 0.67 % 0.59 %
ALL/nonperforming loans 110.24 % 98.55 % 122.25 % 107.32 % 103.99 %
ALL/nonperforming loans (excl specifically reviewed impaired loans) 231.13 % 203.24 % 210.32 % 206.72 % 192.60 %
 

CAPITAL RATIOS

Total equity/total assets 11.69 % 11.81 % 11.62 % 11.92 % 11.91 %
Tangible equity/tangible assets 8.97 % 9.01 % 8.79 % 9.01 % 8.93 %
Tangible equity/risk-weighted assets 11.85 % 11.84 % 11.68 % 12.24 % 12.34 %
Tier 1 leverage ratio 9.93 % 9.93 % 10.03 % 10.09 % 10.14 %
Common equity tier 1 capital ratio 12.32 % 12.41 % 12.57 % 13.00 % 13.28 %
Tier 1 risk-based capital ratio 12.94 % 13.04 % 13.21 % 13.66 % 13.97 %
Total risk-based capital ratio 13.82 % 13.92 % 14.07 % 14.66 % 15.07 %
 

STOCK PERFORMANCE

Market value-Close $ 24.85 $ 23.03 $ 23.04 $ 23.17 $ 24.98
Book value $ 22.53 $ 22.30 $ 21.80 $ 21.86 $ 21.47
Tangible book value $ 16.76 $ 16.50 $ 15.98 $ 16.00 $ 15.58
 

(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
June 30, 2016
($ 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):

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

SECURITIES AVAILABLE FOR SALE

U.S. Government agency obligations
Issued by U.S. Government agencies $ 61,359 $ 63,814 $ 68,135 $ 71,282 $ 74,409
Issued by U.S. Government sponsored agencies 286 286 281 23,016 33,009
Obligations of states and political subdivisions 129,285 135,655 138,609 147,794 151,322
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 29,282 25,081 25,812 26,651 20,651
Issued by FNMA and FHLMC 428,542 330,558 225,542 177,411 185,651
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,474,357 1,540,541 1,582,860 1,630,402 1,662,476
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 265,195 272,185 279,226 279,609 290,398
Asset-backed securities and structured financial products       24,957   26,657   28,467
Total securities available for sale $ 2,388,306 $ 2,368,120 $ 2,345,422 $ 2,382,822 $ 2,446,383
 

SECURITIES HELD TO MATURITY

U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 31,142 $ 63,085 $ 101,782 $ 101,578 $ 101,374
Obligations of states and political subdivisions 53,473 54,278 55,892 56,661 56,978
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 16,415 16,590 17,363 17,783 18,265
Issued by FNMA and FHLMC 42,267 9,871 10,368 10,669 10,965
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 824,175 818,201 820,012 808,763 838,989
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   205,732   206,178   182,401   182,986   163,590
Total securities held to maturity $ 1,173,204 $ 1,168,203 $ 1,187,818 $ 1,178,440 $ 1,190,161
 
 

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 June 30, 2016, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive (loss) income in the accompanying balance sheet totaled approximately $28.3 million ($17.5 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.

Note 2 – Loan Composition

LHFI BY TYPE (excluding acquired loans)

      6/30/2016   3/31/2016   12/31/2015   9/30/2015   6/30/2015
Loans secured by real estate:
Construction, land development and other land loans $ 718,438 $ 697,500 $ 824,723 $ 785,472 $ 682,444
Secured by 1-4 family residential properties 1,620,013 1,640,015 1,649,501 1,638,639 1,637,933
Secured by nonfarm, nonresidential properties 1,900,784 1,893,240 1,736,476 1,604,453 1,567,035
Other real estate secured 323,734 273,752 211,228 225,523 240,056
Commercial and industrial loans 1,466,511 1,368,464 1,343,211 1,270,277 1,219,684
Consumer loans 166,436 164,544 169,135 169,509 165,215
State and other political subdivision loans 805,401 787,049 734,615 677,539 574,265
Other loans   403,864   443,458   422,496   420,231   360,441
LHFI 7,405,181 7,268,022 7,091,385 6,791,643 6,447,073
Allowance for loan losses   (71,796 )   (69,668 )   (67,619 )   (65,607 )   (71,166 )
Net LHFI $ 7,333,385 $ 7,198,354 $ 7,023,766 $ 6,726,036 $ 6,375,907
 
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2016
($ in thousands)
(unaudited)

 

ACQUIRED NONCOVERED LOANS BY TYPE

    6/30/2016       3/31/2016       12/31/2015       9/30/2015       6/30/2015  
Loans secured by real estate:
Construction, land development and other land loans $ 37,682 $ 41,097 $ 41,623 $ 45,299 $ 50,867
Secured by 1-4 family residential properties 73,313 81,314 86,950 96,870 101,027
Secured by nonfarm, nonresidential properties 115,989 126,177 135,626 146,614 168,698
Other real estate secured 24,015 24,374 23,860 23,816 25,666
Commercial and industrial loans 49,639 51,663 55,075 57,748 73,732
Consumer loans 4,295 5,027 5,641 6,295 7,273
Other loans   20,263     20,129     23,936     23,886     19,897  
Noncovered loans 325,196 349,781 372,711 400,528 447,160
Allowance for loan losses   (12,218 )   (13,212 )   (11,259 )   (11,417 )   (11,927 )
Net noncovered loans $ 312,978   $ 336,569   $ 361,452   $ 389,111   $ 435,233  
 
 

ACQUIRED COVERED LOANS BY TYPE

  6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015  
Loans secured by real estate:
Construction, land development and other land loans $ 334 $ 387 $ 1,021 $ 966 $ 904
Secured by 1-4 family residential properties 8,363 8,564 10,058 10,546 11,080
Secured by nonfarm, nonresidential properties 3,709 3,679 4,638 5,363 5,206
Other real estate secured 1,257 1,132 1,286 1,511 1,622
Commercial and industrial loans 121 1,143 624 205 371
Consumer loans
Other loans   55     69     73     54     56  
Covered loans 13,839 14,974 17,700 18,645 19,239
Allowance for loan losses   (262 )   (323 )   (733 )   (768 )   (702 )
Net covered loans $ 13,577   $ 14,651   $ 16,967   $ 17,877   $ 18,537  
 
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2016
($ in thousands)
(unaudited)

 

Note 2 – Loan Composition (continued)

      June 30, 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 $ 718,438 $ 135,760 $ 60,555 $ 263,590 $ 39,429 $ 219,104
Secured by 1-4 family residential properties 1,620,013 66,770 48,831 1,379,746 106,845 17,821
Secured by nonfarm, nonresidential properties 1,900,784 268,607 161,025 878,342 137,101 455,709
Other real estate secured 323,734 19,172 4,285 144,120 33,028 123,129
Commercial and industrial loans 1,466,511 132,295 16,788 746,681 274,851 295,896
Consumer loans 166,436 19,229 3,175 123,956 17,807 2,269
State and other political subdivision loans 805,401 62,656 29,902 537,269 30,265 145,309
Other loans   403,864   37,703   19,402   264,620   40,707   41,432
Loans $ 7,405,181 $ 742,192 $ 343,963 $ 4,338,324 $ 680,033 $ 1,300,669
 

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

Lots $ 56,331 $ 11,135 $ 19,657 $ 18,974 $ 3,420 $ 3,145
Development 58,621 6,908 6,084 26,007 681 18,941
Unimproved land 113,354 15,635 17,240 44,565 17,441 18,473
1-4 family construction 169,967 39,818 9,888 71,814 2,117 46,330
Other construction   320,165   62,264   7,686   102,230   15,770   132,215
Construction, land development and other land loans $ 718,438 $ 135,760 $ 60,555 $ 263,590 $ 39,429 $ 219,104
 

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

Income producing:
Retail $ 291,267 $ 83,170 $ 36,264 $ 98,482 $ 20,141 $ 53,210
Office 220,773 30,879 29,886 80,288 6,507 73,213
Nursing homes/assisted living 108,982 103,691 5,291
Hotel/motel 181,738 37,641 19,481 44,432 31,788 48,396
Mini-storage 110,733 5,259 5,574 52,453 548 46,899
Industrial 86,429 18,173 9,365 16,447 4,357 38,087
Health care 26,461 2,222 849 23,390
Convenience stores 17,817 227 10,192 1,060 6,338
Other   74,425   6,188   11,059   24,706   3,072   29,400
Total income producing loans 1,118,625 183,759 112,478 454,081 72,764 295,543
 
Owner-occupied:
Office 143,101 14,698 22,726 77,502 8,208 19,967
Churches 89,589 8,907 2,157 45,630 24,262 8,633
Industrial warehouses 127,959 6,508 3,838 60,985 10,826 45,802
Health care 117,189 20,453 6,311 62,472 8,179 19,774
Convenience stores 81,780 7,197 2,425 48,219 1,308 22,631
Retail 34,116 3,976 5,735 18,470 2,128 3,807
Restaurants 35,019 3,656 1,677 23,948 3,582 2,156
Auto dealerships 13,676 7,926 44 4,536 1,170
Other   139,730   11,527   3,634   82,499   4,674   37,396
Total owner-occupied loans   782,159   84,848   48,547   424,261   64,337   160,166
Loans secured by nonfarm, nonresidential properties $ 1,900,784 $ 268,607 $ 161,025 $ 878,342 $ 137,101 $ 455,709
 

(1) Excludes acquired loans.

 
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2016
($ 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     Six Months Ended
6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015 6/30/2016     6/30/2015
Securities – taxable 2.34 % 2.41 % 2.50 % 2.35 % 2.33 % 2.37 % 2.36 %
Securities – nontaxable 4.29 % 4.25 % 4.25 % 4.18 % 4.27 % 4.27 % 4.28 %
Securities – total 2.41 % 2.48 % 2.57 % 2.43 % 2.42 % 2.45 % 2.45 %
Loans - LHFI & LHFS 4.17 % 4.17 % 4.16 % 4.27 % 4.38 % 4.17 % 4.34 %
Acquired loans 9.26 % 7.46 % 11.74 % 10.46 % 10.43 % 8.33 % 11.05 %
Loans - total 4.39 % 4.33 % 4.57 % 4.65 % 4.79 % 4.36 % 4.82 %
FF sold & rev repo 1.27 % 1.05 % 1.15 % 0.68 % 1.44 % 1.22 % 1.04 %
Other earning assets 1.26 % 1.39 % 2.34 % 2.66 % 3.81 % 1.32 % 3.61 %
Total earning assets 3.77 % 3.74 % 3.92 % 3.91 % 3.99 % 3.76 % 4.03 %
 
Interest-bearing deposits 0.19 % 0.18 % 0.18 % 0.18 % 0.18 % 0.18 % 0.19 %
FF pch & repo 0.33 % 0.34 % 0.19 % 0.15 % 0.14 % 0.33 % 0.14 %
Other borrowings 0.95 % 0.94 % 0.88 % 1.11 % 2.68 % 0.94 % 2.15 %
Total interest-bearing liabilities 0.29 % 0.28 % 0.26 % 0.26 % 0.26 % 0.29 % 0.26 %
 
Net interest margin 3.56 % 3.54 % 3.74 % 3.72 % 3.81 % 3.55 % 3.84 %
Net interest margin excluding acquired loans 3.38 % 3.40 % 3.43 % 3.43 % 3.49 % 3.39 % 3.48 %
 
 

Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans. The net interest margin increased 2 basis points during the second quarter of 2016. This increase was primarily due to an increase in recoveries on acquired loans of $1.6 million during the second quarter of 2016 compared to the first quarter of 2016.

The net interest margin included yield maintenance payments on prepaid securities of $33 thousand during the second quarter of 2016 compared to $389 thousand during the first quarter of 2016. Excluding the yield maintenance payments on prepaid securities, the net interest margin excluding acquired loans was not impacted during the second quarter of 2016 and totaled 3.38% during the first quarter of 2016.

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 negative ineffectiveness of $1.9 million for the quarter ended June 30, 2016 compared to a net positive ineffectiveness of $2.1 million for the quarter ended June 30, 2015.

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

      Quarter Ended     Six Months Ended
6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015 6/30/2016     6/30/2015
Mortgage servicing income, net $ 5,177 $ 5,058 $ 5,126 $ 4,906 $ 4,696 $ 10,235 $ 9,593
Change in fair value-MSR from runoff (2,500 ) (2,005 ) (2,091 ) (2,636 ) (2,587 ) (4,505 ) (4,800 )
Gain on sales of loans, net 5,480 2,591 4,656 4,479 5,114 8,071 8,830
Other, net   498     2,642     (1,433 )   215     206     3,140     1,451  
Mortgage banking income before hedge ineffectiveness   8,655     8,286     6,258     6,964     7,429     16,941     15,074  
Change in fair value-MSR from market changes (7,033 ) (6,866 ) 2,010 (4,141 ) 6,076 (13,899 ) 3,708
Change in fair value of derivatives   5,099     7,279     (3,981 )   4,620     (4,024 )   12,378     (336 )
Net (negative) positive hedge ineffectiveness   (1,934 )   413     (1,971 )   479     2,052     (1,521 )   3,372  
Mortgage banking, net $ 6,721   $ 8,699   $ 4,287   $ 7,443   $ 9,481   $ 15,420   $ 18,446  
 
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2016
($ in thousands)
(unaudited)

Note 5 – Salaries and Employee Benefit Plans

Early Retirement Program

In April 2016, Trustmark announced a voluntary early retirement program 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 benefits 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. During the second half of 2016, pre-tax salary and employee benefits expense savings resulting from the implementation of the early retirement program are expected to total $4.2 million, or $0.039 per basic share net of tax. In 2017, these pre-tax salary and employee benefits expense savings are expected to total approximately $8.5 million, or $0.077 per basic share net of tax.

Defined Benefit Pension Plan

Trustmark maintains a noncontributory tax-qualified defined benefit pension 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 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 (approximately $67 million after giving effect to the necessary transfer of Plan assets to the Spin-Off Plan) and will contribute the additional assets necessary to do so. The final distributions will be made from current plan assets of approximately $55 million and a one-time pension settlement expense of approximately $12 million (pre-tax) 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 be decreased from 6% to 2.5%. Accordingly, Trustmark anticipates that its periodic benefit cost for the Plan for this period will increase by approximately $1.2 million (pre-tax). 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 its projected benefit obligation and annual pension expense related to the Spin-Off Plan will be approximately $10 million and $900 thousand (pre-tax), respectively, and these actions will reduce annual pension expense by approximately $3-$4 million (pre-tax).

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 6 – Other Noninterest Income and Expense

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

      Quarter Ended     Six Months Ended
6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015 6/30/2016     6/30/2015
Partnership amortization for tax credit purposes $ (2,479 ) $ (2,479 ) $ (3,015 ) $ (2,083 ) $ (2,480 ) $ (4,958 ) $ (4,952 )
(Decrease) increase in FDIC indemnification asset (118 ) (99 ) (827 ) 82 (1,798 ) (217 ) (2,768 )
Increase in life insurance cash surrender value 1,702 1,692 1,667 1,687 1,673 3,394 3,348
Other miscellaneous income   2,267     1,774     1,709     1,784     2,172     4,041     2,884  
Total other, net $ 1,372   $ 888   $ (466 ) $ 1,470   $ (433 ) $ 2,260   $ (1,488 )
 

Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.

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

      Quarter Ended     Six Months Ended
6/30/2016     3/31/2016     12/31/2015     9/30/2015     6/30/2015 6/30/2016     6/30/2015
Loan expense $ 3,024 $ 3,043 $ 3,356 $ 3,416 $ 3,342 $ 6,067 $ 6,063
Amortization of intangibles 1,692 1,796 1,927 1,942 1,959 3,488 3,950
Other miscellaneous expense   7,947   7,155   7,749   6,840   6,885   15,102   13,879
Total other expense $ 12,663 $ 11,994 $ 13,032 $ 12,198 $ 12,186 $ 24,657 $ 23,892
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2016
($ in thousands)
(unaudited)

Note 7 – Non-GAAP Financial Measures

In addition to capital ratios defined by U.S. generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.

Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other tangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.

These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.

           
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2016
($ in thousands)
(unaudited)

 

Note 7 – Non-GAAP Financial Measures (continued)

 
Quarter Ended Six Months Ended
  6/30/2016         3/31/2016         12/31/2015         9/30/2015         6/30/2015     6/30/2016         6/30/2015  

TANGIBLE EQUITY

AVERAGE BALANCES
Total shareholders' equity $ 1,512,841 $ 1,494,684 $ 1,481,294 $ 1,469,255 $ 1,454,501 $ 1,503,763 $ 1,445,783
Less: Goodwill (366,156 ) (366,156 ) (365,945 ) (365,500 ) (365,500 ) (366,156 ) (365,500 )
Identifiable intangible assets   (24,961 )   (26,709 )   (28,851 )   (31,144 )   (30,385 )   (25,835 )   (31,386 )
Total average tangible equity $ 1,121,724   $ 1,101,819   $ 1,086,498   $ 1,072,611   $ 1,058,616   $ 1,111,772   $ 1,048,897  
 
PERIOD END BALANCES
Total shareholders' equity $ 1,523,467 $ 1,508,256 $ 1,473,057 $ 1,476,756 $ 1,450,409
Less: Goodwill (366,156 ) (366,156 ) (366,156 ) (365,500 ) (365,500 )
Identifiable intangible assets   (24,058 )   (25,751 )