July 24, 2018 - 4:30 PM EDT
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Trustmark Corporation Announces Second Quarter 2018 Financial Results

JACKSON, Miss.

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

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

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Second Quarter Highlights

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

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

Balance Sheet Management

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

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

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

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

Credit Quality

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

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

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

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

Revenue Generation

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

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

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

Noninterest Expense

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

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

Additional Information

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

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

Forward-Looking Statements

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

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

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

*Disclaimer

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

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

Shareholders’ equity

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

See Notes to Consolidated Financials

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

PERIOD END BALANCES

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

Total shareholders’ equity

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

See Notes to Consolidated Financials

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

INCOME STATEMENTS

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

See Notes to Consolidated Financials

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

NONPERFORMING ASSETS (1)

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

LOANS PAST DUE OVER 90 DAYS (1)

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

ALLOWANCE FOR LOAN LOSSES (1)

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

PROVISION FOR LOAN LOSSES (1)

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

NET CHARGE-OFFS (RECOVERIES) (1)

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

(1)

 

-

 

Excludes acquired loans.

(2)

-

Mississippi includes Central and Southern Mississippi Regions.

(3)

-

Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.

(4)

-

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

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

 

n/m

-

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

 

See Notes to Consolidated Financials

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

AVERAGE BALANCES

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

Shareholders’ equity

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

See Notes to Consolidated Financials

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

PERIOD END BALANCES

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

Total shareholders’ equity

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

See Notes to Consolidated Financials

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

INCOME STATEMENTS

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

See Notes to Consolidated Financials

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

NONPERFORMING ASSETS (1)

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

LOANS PAST DUE OVER 90 DAYS (1)

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

ALLOWANCE FOR LOAN LOSSES (1)

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

782

 

 

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

PROVISION FOR LOAN LOSSES (1)

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

NET CHARGE-OFFS (RECOVERIES) (1)

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

(1)

 

-

 

Excludes acquired loans.

(2)

-

Mississippi includes Central and Southern Mississippi Regions.

(3)

-

Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.

(4)

-

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

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

 

See Notes to Consolidated Financials

 
             
TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

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

FINANCIAL RATIOS AND OTHER DATA

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

CREDIT QUALITY RATIOS (2)

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

CAPITAL RATIOS

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

STOCK PERFORMANCE

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

(1)

 

-

 

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

(2)

-

Excludes acquired loans.

(3)

-

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

 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

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

Note 1 – Business Combinations

On April 7, 2017, Trustmark Corporation completed its merger with RB Bancorporation (Reliance), the holding company for Reliance Bank, which had seven offices serving the Huntsville, Alabama metropolitan service area (MSA). Reliance Bank was merged into Trustmark National Bank simultaneously with the merger of Trustmark and RB Bancorporation. Under the terms of the Merger Agreement dated November 14, 2016, Trustmark paid $22.00 in cash for each share of Reliance common stock outstanding, which represented total consideration for Reliance common shareholders of approximately $23.7 million. In addition, Trustmark paid off Reliance Preferred Stock of $1.1 million bringing the total consideration paid to $24.8 million.

This merger was accounted for in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations.” Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the merger date.

The excess of the consideration paid over the estimated fair value of the net assets acquired was $13.5 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the merger date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately ten years.

Loans acquired from Reliance were evaluated under a fair value process. Loans with evidence of deterioration in credit quality and for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments are referred to as acquired impaired loans and accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

The operations of Reliance are included in Trustmark’s operating results from April 7, 2017 and did not have a material impact on Trustmark’s results of operations. During the second quarter of 2017, Trustmark included non-routine merger transaction expenses in other noninterest expense totaling $3.2 million (change in control expense of $1.3 million; professional fees, contract termination and other expenses of $1.9 million).

Note 2 - Securities Available for Sale and Held to Maturity

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

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

SECURITIES AVAILABLE FOR SALE

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

SECURITIES HELD TO MATURITY

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

NOTES TO CONSOLIDATED FINANCIALS

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

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

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

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

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)

  6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Loans secured by real estate:
Construction, land development and other land loans $ 1,038,745 $ 986,188 $ 987,624 $ 950,144 $ 922,029
Secured by 1-4 family residential properties 1,742,496 1,698,885 1,675,311 1,648,733 1,655,968
Secured by nonfarm, nonresidential properties 2,321,734 2,257,899 2,193,823 2,172,885 2,109,367
Other real estate secured 397,538 425,664 517,956 482,163 432,208
Commercial and industrial loans 1,572,764 1,561,967 1,570,345 1,568,588 1,635,000
Consumer loans 175,261 168,469 171,918 173,061 170,858
State and other political subdivision loans 925,452 936,014 952,483 936,614 936,860
Other loans   504,993   478,899   500,507   475,153   433,755
LHFI 8,678,983 8,513,985 8,569,967 8,407,341 8,296,045
Allowance for loan losses   (83,566 )   (81,235 )   (76,733 )   (80,332 )   (76,184 )
Net LHFI $ 8,595,417 $ 8,432,750 $ 8,493,234 $ 8,327,009 $ 8,219,861
ACQUIRED LOANS BY TYPE   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Loans secured by real estate:
Construction, land development and other land loans $ 11,900 $ 17,575 $ 23,586 $ 29,384 $ 35,054
Secured by 1-4 family residential properties 36,419 49,289 61,751 65,746 74,313
Secured by nonfarm, nonresidential properties 85,117 100,285 114,694 122,200 132,663
Other real estate secured 9,862 14,581 16,746 18,431 19,553
Commercial and industrial loans 20,485 21,808 31,506 34,124 34,375
Consumer loans 1,700 1,920 2,600 2,749 2,833
Other loans   7,624   10,018   10,634   11,123   16,119
Acquired loans 173,107 215,476 261,517 283,757 314,910
Allowance for loan losses, acquired loans   (3,046 )   (4,294 )   (4,079 )   (5,768 )   (7,423 )
Net acquired loans $ 170,061 $ 211,182 $ 257,438 $ 277,989 $ 307,487
TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

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

Note 3 – Loan Composition (continued)

  June 30, 2018

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 $ 1,038,745 $ 338,286 $ 67,056 $ 306,078 $ 22,089 $ 305,236
Secured by 1-4 family residential properties 1,742,496 112,472 47,643 1,478,209 87,299 16,873
Secured by nonfarm, nonresidential properties 2,321,734 485,588 240,787 907,939 159,890 527,530
Other real estate secured 397,538 74,362 3,701 216,478 11,662 91,335
Commercial and industrial loans 1,572,764 205,704 8,832 788,659 352,345 217,224
Consumer loans 175,261 22,702 4,978 125,690 18,879 3,012
State and other political subdivision loans 925,452 81,002 27,370 603,044 23,986 190,050
Other loans   504,993   74,914   16,788   331,733   47,097   34,461
Loans $ 8,678,983 $ 1,395,030 $ 417,155 $ 4,757,830 $ 723,247 $ 1,385,721
 

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

Lots $ 63,811 $ 18,054 $ 19,386 $ 21,610 $ 1,538 $ 3,223
Development 61,053 5,568 5,888 30,437 532 18,628
Unimproved land 89,458 11,540 15,950 30,459 13,559 17,950
1-4 family construction 200,018 72,175 8,352 83,219 2,396 33,876
Other construction   624,405   230,949   17,480   140,353   4,064   231,559
Construction, land development and other land loans $ 1,038,745 $ 338,286 $ 67,056 $ 306,078 $ 22,089 $ 305,236
 

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

Income producing:
Retail $ 366,464 $ 117,397 $ 53,814 $ 105,967 $ 23,984 $ 65,302
Office 215,773 68,265 20,850 69,322 4,347 52,989
Nursing homes/senior living 192,350 32,524 153,568 6,258
Hotel/motel 289,365 74,937 58,642 55,133 34,286 66,367
Mini-storage 131,473 12,834 5,775 42,694 616 69,554
Industrial 72,122 11,844 9,300 8,989 1,120 40,869
Health care 35,182 16,611 759 14,975 2,837
Convenience stores 30,375 2,818 122 17,223 798 9,414
Other   97,349   14,332   18,929   16,928   11,487   35,673
Total income producing loans 1,430,453 351,562 168,191 484,799 82,896 343,005
 
Owner-occupied:
Office 149,465 25,115 27,535 58,077 3,901 34,837
Churches 92,316 17,459 6,327 46,324 17,197 5,009
Industrial warehouses 147,855 11,414 3,109 58,071 14,704 60,557
Health care 107,106 21,089 6,624 64,475 946 13,972
Convenience stores 99,966 12,492 12,247 50,537 1,252 23,438
Retail 51,725 15,998 7,645 19,580 1,773 6,729
Restaurants 51,179 2,829 788 28,372 17,329 1,861
Auto dealerships 30,640 8,430 152 12,736 9,322
Other   161,029   19,200   8,169   84,968   10,570   38,122
Total owner-occupied loans   891,281   134,026   72,596   423,140   76,994   184,525
Loans secured by nonfarm, nonresidential properties $ 2,321,734 $ 485,588 $ 240,787 $ 907,939 $ 159,890 $ 527,530
 

(1) Excludes acquired loans.

 
TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018
($ 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   Six Months Ended
6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017 6/30/2018   6/30/2017
Securities – taxable   2.25 %   2.26 %   2.21 %   2.23 %   2.26 %   2.25 %   2.28 %
Securities – nontaxable 3.66 % 3.68 % 4.35 % 4.34 % 4.35 % 3.67 % 4.35 %
Securities – total 2.29 % 2.30 % 2.27 % 2.29 % 2.32 % 2.29 % 2.35 %
Loans - LHFI & LHFS 4.60 % 4.45 % 4.38 % 4.36 % 4.30 % 4.52 % 4.25 %
Acquired loans 9.96 % 8.13 % 9.27 % 8.78 % 7.96 % 8.97 % 8.15 %
Loans - total 4.72 % 4.55 % 4.53 % 4.51 % 4.43 % 4.63 % 4.38 %
FF sold & rev repo 1.89 % 1.70 % 1.61 % 1.55 % 1.39 % 1.83 % 1.35 %
Other earning assets 2.27 % 1.77 % 2.34 % 1.67 % 1.91 % 2.00 % 1.64 %
Total earning assets 4.06 % 3.91 % 3.90 % 3.86 % 3.81 % 3.99 % 3.77 %
 
Interest-bearing deposits 0.60 % 0.49 % 0.40 % 0.35 % 0.29 % 0.55 % 0.26 %
FF pch & repo 1.42 % 0.97 % 0.93 % 0.94 % 0.79 % 1.22 % 0.68 %
Other borrowings 2.20 % 1.69 % 1.35 % 1.28 % 1.16 % 1.83 % 1.04 %
Total interest-bearing liabilities 0.69 % 0.61 % 0.56 % 0.53 % 0.44 % 0.65 % 0.39 %
 
Net interest margin 3.57 % 3.46 % 3.48 % 3.47 % 3.49 % 3.51 % 3.49 %
Net interest margin excluding acquired loans 3.46 % 3.37 % 3.35 % 3.34 % 3.37 % 3.41 % 3.38 %

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 second quarter of 2018, the yield on acquired loans totaled 9.96% and included $1.6 million in recoveries from the settlement of debt, which represented approximately 3.20% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.46% for the second quarter of 2018, an increase of 9 basis points when compared to the first quarter of 2018, which was principally due to growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix offset by higher costs of interest-bearing deposits.

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

  Quarter Ended   Six Months Ended
6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017 6/30/2018   6/30/2017
Mortgage servicing income, net $ 5,502 $ 5,588 $ 5,471 $ 5,295 $ 5,439 $ 11,090 $ 10,897
Change in fair value-MSR from runoff (3,334 ) (2,507 ) (2,605 ) (2,892 ) (2,896 ) (5,841 ) (5,283 )
Gain on sales of loans, net 5,414 4,585 5,300 5,083 5,001 9,999 8,551
Other, net   1,365   295   (1,120 )   (450 )   629   1,660   1,401
Mortgage banking income before hedge ineffectiveness   8,947   7,961   7,046   7,036   8,173   16,908   15,566
Change in fair value-MSR from market changes 1,743 9,521 1,168 (2,393 ) (1,291 ) 11,264 175
Change in fair value of derivatives   (1,644 )   (6,217 )   (1,930 )   (218 )   2,126   (7,861 )   3,452
Net positive (negative) hedge ineffectiveness   99   3,304   (762 )   (2,611 )   835   3,403   3,627
Mortgage banking, net $ 9,046 $ 11,265 $ 6,284 $ 4,425 $ 9,008 $ 20,311 $ 19,193
TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018

($ in thousands)

(unaudited)

Note 6 – Salaries and Employee Benefit Plans

Defined Benefit Pension Plan

Prior to 2017, Trustmark maintained 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 participated. As previously reported, 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 was required to fully fund the Plan on a termination basis and contributed the additional assets necessary to do so. The final distributions were made from current plan assets and a one-time pension settlement expense of $17.6 million was recognized when paid by Trustmark during the second quarter of 2017.

Note 7 – Other Noninterest Income and Expense

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

  Quarter Ended   Six Months Ended
6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017 6/30/2018   6/30/2017
Partnership amortization for tax credit purposes $ (2,202 ) $ (2,202 ) $ (2,478 ) $ (2,521 ) $ (2,287 ) $ (4,404 ) $ (4,561 )
Increase in life insurance cash surrender value 1,770 1,738 1,816 1,813 1,782 3,508 3,496
Other miscellaneous income   2,847   1,523   3,343   4,448   6,142   4,370   8,593
Total other, net $ 2,415 $ 1,059 $ 2,681 $ 3,740 $ 5,637 $ 3,474 $ 7,528

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.

Trustmark received $1.2 million of nontaxable proceeds related to bank-owned life insurance during the second quarter of 2018 compared to none received during the first quarter of 2018. Trustmark received nontaxable proceeds related to bank-owned life insurance of $1.7 million and $2.7 million during the fourth and third quarters of 2017, respectively, and $4.9 million related to life insurance acquired as part of a previous acquisition during the second quarter of 2017. These proceeds were recorded in other miscellaneous income in the table above.

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

  Quarter Ended     Six Months Ended
6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017 6/30/2018     6/30/2017
Loan expense $ 3,046 $ 2,791 $ 2,276 $ 3,013 $ 2,827 $ 5,837 $ 5,619
Amortization of intangibles 1,286 1,397 1,522 1,539 1,544 2,683 3,108
Defined benefit plans non-service cost reclass from salaries and employee benefits 885 885 968 966 1,875 1,770 3,788
Other miscellaneous expense   7,089   6,709   7,799   7,885   10,550   13,798   18,982
Total other expense $ 12,306 $ 11,782 $ 12,565 $ 13,403 $ 16,796 $ 24,088 $ 31,497

Trustmark adopted ASU 2017-07, “Compensation-Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” effective January 1, 2018 and was required to reclassify the defined benefit plans non-service cost from salaries and employee benefits to other expense on the consolidated statements of income for each period presented.

As previously discussed in Note 1 – Business Combinations, non-routine Reliance merger transaction expenses totaled $3.2 million and were included in other miscellaneous expense during the second quarter of 2017.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2018
($ in thousands)
(unaudited)

Note 8 – Income Taxes

The income tax provision consisted of the following for the periods presented ($ in thousands):

Quarter Ended     Six Months Ended
6/30/2018     3/31/2018     12/31/2017   9/30/2017     6/30/2017 6/30/2018     6/30/2017
Current $ 5,516 $ 2,180 $ 3,850 $ 8,108 $ 5,427 $ 7,696 $ 10,688
Deferred 700 3,300 4,300 600 300 4,000 4,200
Elimination of deferred tax valuation allowance       (8,650 )        
Income tax provision before re-measurement 6,216 5,480 (500 ) 8,708 5,727 11,696 14,888
Re-measurement of net deferred tax assets           25,619                
Income tax provision $ 6,216   $ 5,480   $ 25,119   $ 8,708   $ 5,727   $ 11,696   $ 14,888

During 2013, a deferred tax valuation allowance was created as a result of Trustmark’s merger with BancTrust Financial Group, Inc. and was established to reduce deferred tax assets to the amount that was more likely than not to be realized in future years. Trustmark has continually evaluated this allowance since inception and, based on the weight of the available evidence, has determined that the deferred tax assets will not be subject to the limitations on the deductibility of built-in losses (Internal Revenue Service Code, Section 382) in future years. Therefore, during the fourth quarter of 2017, the valuation allowance was eliminated creating a decrease in deferred income tax expense of $8.7 million.

Following the recent enactment of the Tax Reform Act which resulted in the reduction of the corporate federal income tax rate, Trustmark re-measured its net deferred tax assets and recorded an increase in deferred income tax expense of $25.6 million during the fourth quarter of 2017.

Note 9 – 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, 2018

($ in thousands except per share data)

(unaudited)

Note 9 – Non-GAAP Financial Measures (continued)

    Quarter Ended   Six Months Ended
6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017 6/30/2018   6/30/2017

TANGIBLE EQUITY

AVERAGE BALANCES

Total shareholders’ equity

$ 1,581,906 $ 1,572,514 $ 1,579,633 $ 1,577,867 $ 1,552,240 $ 1,577,236 $ 1,542,722
Less: Goodwill (379,627 ) (379,627 ) (379,627 ) (379,627 ) (378,191 ) (379,627 ) (372,207 )
Identifiable intangible assets   (14,380 )   (15,782 )   (17,196 )   (18,714 )   (19,713 )   (15,077 )   (19,831 )
Total average tangible equity $ 1,187,899 $ 1,177,105 $ 1,182,810 $ 1,179,526 $ 1,154,336 $ 1,182,532 $ 1,150,684
 
PERIOD END BALANCES

Total shareholders’ equity

$ 1,584,072 $ 1,570,137 $ 1,571,701 $ 1,582,535 $ 1,561,918
Less: Goodwill (379,627 ) (379,627 ) (379,627 ) (379,627 ) (379,627 )
Identifiable intangible assets   (13,677 )   (14,963 )   (16,360 )   (17,883 )   (19,422 )
Total tangible equity (a) $ 1,190,768 $ 1,175,547 $ 1,175,714 $ 1,185,025 $ 1,162,869
 

TANGIBLE ASSETS

Total assets $ 13,525,265 $ 13,463,439 $ 13,797,953 $ 13,884,655 $ 13,909,138
Less: Goodwill (379,627 ) (379,627 ) (379,627 ) (379,627 ) (379,627 )
Identifiable intangible assets   (13,677 )   (14,963 )   (16,360 )   (17,883 )   (19,422 )
Total tangible assets (b) $ 13,131,961 $ 13,068,849 $ 13,401,966 $ 13,487,145 $ 13,510,089
Risk-weighted assets (c) $ 10,633,646 $ 10,449,352 $ 10,566,818 $ 10,498,582 $ 10,391,912
 

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION

Net income $ 39,813 $ 36,830 $ 15,768 $ 34,579 $ 24,035 $ 76,643 $ 55,283
Plus: Intangible amortization net of tax   965   1,049   940   950   954   2,014   1,920
Net income adjusted for intangible amortization $ 40,778 $ 37,879 $ 16,708 $ 35,529 $ 24,989 $ 78,657 $ 57,203
Period end common shares outstanding (d)   67,621,111   67,775,068   67,746,094