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Trustmark Corporation Announces Second Quarter 2019 Financial Results

Trustmark Corporation (NASDAQ:TRMK) reported net income of $42.1 million in the second quarter of 2019, representing diluted earnings per share of $0.65. Diluted earnings per share in the second quarter of 2019 increased 27.5% when compared to the previous quarter and 10.2% when compared to the same period in the prior year. This level of earnings resulted in a return on average tangible equity of 14.14% and a return on average assets of 1.24%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2019, to shareholders of record on September 1, 2019.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190723005864/en/

Printer friendly version of earnings release with consolidated financial statements and notes: https://www.businesswire.com/news/home/52016691/en

Second Quarter Highlights

  • Revenue, excluding interest and fees on acquired loans, increased 7.6% linked quarter and 5.3% year-over-year to total $155.4 million
  • The net interest margin (FTE), excluding acquired loans, was 3.60% in the second quarter, unchanged from the prior quarter and up 14 basis points year-over-year
  • Sustained strong credit performance reflected in reduced nonperforming assets and net charge-offs
  • Efficiency ratio improved to 64.55%

Gerard R. Host, President and CEO, stated, “Our second quarter performance continued to illustrate the value of Trustmark’s diverse franchise. We continued to focus upon strategic initiatives of profitable revenue growth, capital deployment through additional share repurchases and disciplined expense management. We also continued to maintain and expand customer relationships as evidenced by strength in our banking, mortgage, insurance and wealth management businesses. 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 1.4% from the prior quarter and 5.0% when compared to the same period in the prior year
  • Continued balance sheet and capital optimization through maturing investment securities run-off and share repurchases
  • Noninterest-bearing deposits represented 25.2% of total deposits at June 30, 2019

Loans held for investment totaled $9.1 billion at June 30, 2019, reflecting an increase of $121.7 million, or 1.4%, linked-quarter and $437.8 million, or 5.0%, from the prior year. Acquired loans totaled $87.9 million at June 30, 2019, down $5.3 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $9.2 billion at the end of the second quarter of 2019, up $116.4 million, or 1.3% from the prior quarter and $352.6 million, or 4.0%, year-over-year.

Deposits totaled $11.6 billion at June 30, 2019, up $31.8 million from the prior quarter and $494.2 million year-over-year. Interest-bearing deposit costs totaled 0.99% in the second quarter, an increase of 6 basis points linked-quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 57% of deposit balances in checking accounts.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. During the second quarter, Trustmark repurchased $13.0 million, or approximately 398 thousand of its common shares in open market transactions. At June 30, 2019, Trustmark had $87.0 million in remaining authority under its existing stock repurchase program, which expires March 31, 2020. At June 30, 2019, Trustmark’s tangible equity to tangible assets ratio was 9.34%, while the total risk-based capital ratio was 13.07%.

Credit Quality

  • Nonperforming loans decreased 6.3% and 13.8% from the prior quarter and year-over-year, respectively
  • Other real estate declined 2.8% from the prior quarter and 21.2% year-over-year
  • Net charge-offs represented 0.05% of average loans in the second quarter

Nonperforming loans totaled $52.9 million at June 30, 2019, down $3.5 million from the prior quarter and $8.5 million year-over-year. Other real estate totaled $31.2 million, down $896 thousand from the prior quarter and $8.4 million from the same period one year earlier. Collectively, nonperforming assets totaled $84.1 million, reflecting a linked-quarter decrease of 5.0% and year-over-year decrease of 16.7%.

Allocation of Trustmark's $80.4 million allowance for loan losses represented 0.96% of commercial loans and 0.60% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.88% at June 30, 2019, representing a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 383.19% of nonperforming loans, excluding specifically reviewed impaired loans.

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

Revenue Generation

  • Total revenue in the second quarter was $157.4 million, up 7.6% linked-quarter and 3.2% year-over-year
  • Net interest income (FTE) totaled $111.0 million in the second quarter, up 2.7% linked-quarter and 2.4% year-over-year
  • Noninterest income totaled $49.6 million in the second quarter, up 19.6% linked-quarter and 4.7% year-over-year

Net interest income (FTE) in the second quarter totaled $111.0 million, resulting in a net interest margin of 3.64%, up 1 basis point from the prior quarter. Relative to the prior quarter, net interest income (FTE) increased $2.9 million, reflecting a $4.7 million increase in interest income and a $1.7 million increase in interest expense. During the second quarter of 2019, the yield on acquired loans totaled 8.84% and included $583 thousand in recoveries from the settlement of debt, which represented approximately 2.56% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.60% for the second quarter of 2019, unchanged from the prior quarter as growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix were offset by higher costs of interest-bearing deposits.

Noninterest income in the second quarter totaled $49.6 million, an increase of $8.1 million from the prior quarter and $2.2 million when compared to the same period in the prior year. Mortgage banking revenue totaled $10.3 million in the second quarter, up $6.9 million from the prior quarter and $1.2 million year-over-year. The linked-quarter change reflects reduced negative net mortgage hedge ineffectiveness as well as an increase in gains on sales of loans. Mortgage loan production in the second quarter totaled $414.1 million, up 46.1% from the prior quarter and 0.9% year-over-year.

Insurance revenue totaled $11.1 million in the second quarter, up 2.0% from the prior quarter and 3.3% year-over-year due principally to growth in property and casualty commissions. Wealth management revenue in the second quarter totaled $7.7 million, an increase of 3.5% from the prior quarter and year-over-year. This performance is primarily attributable to increased trust and investment management fees. Bank card and other fees increased $813 thousand from the prior quarter primarily due to a seasonal increase in interchange income as well as growth in customer derivative revenue.

Noninterest Expense

  • Total noninterest expense totaled $106.1 million in the second quarter, up 0.1% from the prior quarter and 2.2% year-over-year
  • Core noninterest expense, which excludes other real estate expense and intangible amortization, totaled $105.0 million, up 1.8% from the prior quarter and 2.3% year-over-year

Salaries and employee benefits increased $995 thousand from the prior quarter to total $61.9 million, primarily due to higher insurance and mortgage commissions as a result of continued growth in both business lines. Services and fees rose 6.1%, or $1.0 million, linked-quarter primarily due to professional fees as well as new software investments designed to improve efficiency and customer experience. Other real estate expense, net declined $1.6 million linked-quarter while other expense declined $397 thousand, or 3.3%, linked-quarter to total $11.8 million.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 24, 2019 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 7, 2019, in archived format at the same web address or by calling (877) 344-7529, passcode 10132843.

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

Forward-Looking Statements

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

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including 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.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2019
($ in thousands)
(unaudited)
Linked QuarterYear over Year
QUARTERLY AVERAGE BALANCES6/30/20193/31/20196/30/2018$ Change% Change$ Change% Change
Securities AFS-taxable

$

1,661,464

$

1,753,268

$

2,038,759

$

(91,804

)

-5.2

%

$

(377,295

)

-18.5

%

Securities AFS-nontaxable

31,474

40,159

50,035

(8,685

)

-21.6

%

(18,561

)

-37.1

%

Securities HTM-taxable

821,357

866,665

972,571

(45,308

)

-5.2

%

(151,214

)

-15.5

%

Securities HTM-nontaxable

27,035

28,710

30,337

(1,675

)

-5.8

%

(3,302

)

-10.9

%

Total securities

2,541,330

2,688,802

3,091,702

(147,472

)

-5.5

%

(550,372

)

-17.8

%

Loans (including loans held for sale)

9,260,028

9,038,204

8,707,466

221,824

2.5

%

552,562

6.3

%

Acquired loans

91,217

104,316

202,140

(13,099

)

-12.6

%

(110,923

)

-54.9

%

Fed funds sold and rev repos

34,057

277

1,063

33,780

n/m

32,994

n/m

Other earning assets

316,604

243,493

186,224

73,111

30.0

%

130,380

70.0

%

Total earning assets

12,243,236

12,075,092

12,188,595

168,144

1.4

%

54,641

0.4

%

Allowance for loan losses

(81,996

)

(82,227

)

(86,315

)

231

0.3

%

4,319

5.0

%

Cash and due from banks

478,384

423,749

319,075

54,635

12.9

%

159,309

49.9

%

Other assets

989,078

1,023,862

1,042,156

(34,784

)

-3.4

%

(53,078

)

-5.1

%

Total assets

$

13,628,702

$

13,440,476

$

13,463,511

$

188,226

1.4

%

$

165,191

1.2

%

 
Interest-bearing demand deposits

$

3,048,876

$

2,899,467

$

2,439,777

$

149,409

5.2

%

$

609,099

25.0

%

Savings deposits

3,801,187

3,786,835

3,860,096

14,352

0.4

%

(58,909

)

-1.5

%

Time deposits

1,840,065

1,881,556

1,798,855

(41,491

)

-2.2

%

41,210

2.3

%

Total interest-bearing deposits

8,690,128

8,567,858

8,098,728

122,270

1.4

%

591,400

7.3

%

Fed funds purchased and repos

51,264

84,352

352,256

(33,088

)

-39.2

%

(300,992

)

-85.4

%

Other borrowings

81,352

90,804

249,853

(9,452

)

-10.4

%

(168,501

)

-67.4

%

Junior subordinated debt securities

61,856

61,856

61,856

0.0

%

0.0

%

Total interest-bearing liabilities

8,884,600

8,804,870

8,762,693

79,730

0.9

%

121,907

1.4

%

Noninterest-bearing deposits

2,898,266

2,824,220

2,930,726

74,046

2.6

%

(32,460

)

-1.1

%

Other liabilities

240,091

221,199

188,186

18,892

8.5

%

51,905

27.6

%

Total liabilities

12,022,957

11,850,289

11,881,605

172,668

1.5

%

141,352

1.2

%

Shareholders' equity

1,605,745

1,590,187

1,581,906

15,558

1.0

%

23,839

1.5

%

Total liabilities and equity

$

13,628,702

$

13,440,476

$

13,463,511

$

188,226

1.4

%

$

165,191

1.2

%

 

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, 2019
($ in thousands)
(unaudited)Linked QuarterYear over Year
PERIOD END BALANCES6/30/20193/31/20196/30/2018$ Change% Change$ Change% Change
Cash and due from banks

$

404,413

$

454,047

$

387,119

$

(49,634

)

-10.9

%

$

17,294

4.5

%

Fed funds sold and rev repos

75,499

75,499

n/m

75,499

n/m

Securities available for sale

1,643,725

1,723,445

1,974,675

(79,720

)

-4.6

%

(330,950

)

-16.8

%

Securities held to maturity

825,536

884,319

985,845

(58,783

)

-6.6

%

(160,309

)

-16.3

%

Loans held for sale (LHFS)

240,380

172,683

196,217

67,697

39.2

%

44,163

22.5

%

Loans held for investment (LHFI)

9,116,759

8,995,014

8,678,983

121,745

1.4

%

437,776

5.0

%

Allowance for loan losses, LHFI

(80,399

)

(79,005

)

(83,566

)

(1,394

)

-1.8

%

3,167

3.8

%

Net LHFI

9,036,360

8,916,009

8,595,417

120,351

1.3

%

440,943

5.1

%

Acquired loans

87,884

93,201

173,107

(5,317

)

-5.7

%

(85,223

)

-49.2

%

Allowance for loan losses, acquired loans

(1,398

)

(1,297

)

(3,046

)

(101

)

-7.8

%

1,648

54.1

%

Net acquired loans

86,486

91,904

170,061

(5,418

)

-5.9

%

(83,575

)

-49.1

%

Net LHFI and acquired loans

9,122,846

9,007,913

8,765,478

114,933

1.3

%

357,368

4.1

%

Premises and equipment, net

189,820

189,743

177,686

77

0.0

%

12,134

6.8

%

Mortgage servicing rights

79,283

86,842

97,411

(7,559

)

-8.7

%

(18,128

)

-18.6

%

Goodwill

379,627

379,627

379,627

0.0

%

0.0

%

Identifiable intangible assets

9,101

10,092

13,677

(991

)

-9.8

%

(4,576

)

-33.5

%

Other real estate

31,243

32,139

39,667

(896

)

-2.8

%

(8,424

)

-21.2

%

Operating lease right-of-use assets

32,762

33,861

(1,099

)

-3.2

%

32,762

n/m

Other assets

514,723

503,306

507,863

11,417

2.3

%

6,860

1.4

%

Total assets

$

13,548,958

$

13,478,017

$

13,525,265

$

70,941

0.5

%

$

23,693

0.2

%

 
Deposits:
Noninterest-bearing

$

2,909,141

$

2,867,778

$

2,958,354

$

41,363

1.4

%

$

(49,213

)

-1.7

%

Interest-bearing

8,657,488

8,667,037

8,114,081

(9,549

)

-0.1

%

543,407

6.7

%

Total deposits

11,566,629

11,534,815

11,072,435

31,814

0.3

%

494,194

4.5

%

Fed funds purchased and repos

51,800

46,867

477,891

4,933

10.5

%

(426,091

)

-89.2

%

Other borrowings

79,012

83,265

187,560

(4,253

)

-5.1

%

(108,548

)

-57.9

%

Junior subordinated debt securities

61,856

61,856

61,856

0.0

%

0.0

%

Operating lease liabilities

33,878

34,921

(1,043

)

-3.0

%

33,878

n/m

Other liabilities

137,233

129,265

141,451

7,968

6.2

%

(4,218

)

-3.0

%

Total liabilities

11,930,408

11,890,989

11,941,193

39,419

0.3

%

(10,785

)

-0.1

%

Common stock

13,418

13,499

14,089

(81

)

-0.6

%

(671

)

-4.8

%

Capital surplus

260,619

272,268

361,715

(11,649

)

-4.3

%

(101,096

)

-27.9

%

Retained earnings

1,369,329

1,342,176

1,282,007

27,153

2.0

%

87,322

6.8

%

Accum other comprehensive loss, net of tax

(24,816

)

(40,915

)

(73,739

)

16,099

39.3

%

48,923

66.3

%

Total shareholders' equity

1,618,550

1,587,028

1,584,072

31,522

2.0

%

34,478

2.2

%

Total liabilities and equity

$

13,548,958

$

13,478,017

$

13,525,265

$

70,941

0.5

%

$

23,693

0.2

%

 

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, 2019
($ in thousands except per share data)
(unaudited)
 
 
Quarter EndedLinked QuarterYear over Year
INCOME STATEMENTS6/30/20193/31/20196/30/2018$ Change% Change$ Change% Change
Interest and fees on LHFS & LHFI-FTE

$

114,873

$

109,890

$

99,761

$

4,983

4.5

%

$

15,112

15.1

%

Interest and fees on acquired loans

2,010

1,916

5,022

94

4.9

%

(3,012

)

-60.0

%

Interest on securities-taxable

13,916

14,665

16,894

(749

)

-5.1

%

(2,978

)

-17.6

%

Interest on securities-tax exempt-FTE

551

646

733

(95

)

-14.7

%

(182

)

-24.8

%

Interest on fed funds sold and rev repos

214

2

5

212

n/m

209

n/m

Other interest income

1,820

1,603

1,054

217

13.5

%

766

72.7

%

Total interest income-FTE

133,384

128,722

123,469

4,662

3.6

%

9,915

8.0

%

Interest on deposits

21,500

19,570

12,139

1,930

9.9

%

9,361

77.1

%

Interest on fed funds pch and repos

81

288

1,250

(207

)

-71.9

%

(1,169

)

-93.5

%

Other interest expense

831

825

1,713

6

0.7

%

(882

)

-51.5

%

Total interest expense

22,412

20,683

15,102

1,729

8.4

%

7,310

48.4

%

Net interest income-FTE

110,972

108,039

108,367

2,933

2.7

%

2,605

2.4

%

Provision for loan losses, LHFI

2,486

1,611

3,167

875

54.3

%

(681

)

-21.5

%

Provision for loan losses, acquired loans

106

78

(441

)

28

35.9

%

547

n/m

Net interest income after provision-FTE

108,380

106,350

105,641

2,030

1.9

%

2,739

2.6

%

Service charges on deposit accounts

10,379

10,265

10,647

114

1.1

%

(268

)

-2.5

%

Bank card and other fees

8,004

7,191

7,070

813

11.3

%

934

13.2

%

Mortgage banking, net

10,295

3,442

9,046

6,853

n/m

1,249

13.8

%

Insurance commissions

11,089

10,871

10,735

218

2.0

%

354

3.3

%

Wealth management

7,742

7,483

7,478

259

3.5

%

264

3.5

%

Other, net

2,130

2,239

2,415

(109

)

-4.9

%

(285

)

-11.8

%

Nonint inc-excl sec gains (losses), net

49,639

41,491

47,391

8,148

19.6

%

2,248

4.7

%

Security gains (losses), net

n/m

n/m

Total noninterest income

49,639

41,491

47,391

8,148

19.6

%

2,248

4.7

%

Salaries and employee benefits

61,949

60,954

59,975

995

1.6

%

1,974

3.3

%

Services and fees

18,009

16,968

16,322

1,041

6.1

%

1,687

10.3

%

Net occupancy-premises

6,403

6,454

6,550

(51

)

-0.8

%

(147

)

-2.2

%

Equipment expense

5,958

5,924

6,202

34

0.6

%

(244

)

-3.9

%

Other real estate expense, net

132

1,752

(93

)

(1,620

)

-92.5

%

225

n/m

FDIC assessment expense

1,836

1,758

2,538

78

4.4

%

(702

)

-27.7

%

Other expense

11,814

12,211

12,306

(397

)

-3.3

%

(492

)

-4.0

%

Total noninterest expense

106,101

106,021

103,800

80

0.1

%

2,301

2.2

%

Income before income taxes and tax eq adj

51,918

41,820

49,232

10,098

24.1

%

2,686

5.5

%

Tax equivalent adjustment

3,248

3,231

3,203

17

0.5

%

45

1.4

%

Income before income taxes

48,670

38,589

46,029

10,081

26.1

%

2,641

5.7

%

Income taxes

6,530

5,250

6,216

1,280

24.4

%

314

5.1

%

Net income

$

42,140

$

33,339

$

39,813

$

8,801

26.4

%

$

2,327

5.8

%

 
Per share data
Earnings per share - basic

$

0.65

$

0.51

$

0.59

$

0.14

27.5

%

$

0.06

10.2

%

 
Earnings per share - diluted

$

0.65

$

0.51

$

0.59

$

0.14

27.5

%

$

0.06

10.2

%

 
Dividends per share

$

0.23

$

0.23

$

0.23

0.0

%

0.0

%

 
Weighted average shares outstanding
Basic

64,677,889

65,239,470

67,758,097

 
Diluted

64,815,029

65,378,500

67,907,267

 
Period end shares outstanding

64,398,846

64,789,943

67,621,111

 

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, 2019
($ in thousands)
(unaudited)
Quarter EndedLinked QuarterYear over Year
NONPERFORMING ASSETS (1)6/30/20193/31/20196/30/2018$ Change% Change$ Change% Change
Nonaccrual loans
Alabama

$

2,327

$

2,971

$

3,685

$

(644

)

-21.7

%

$

(1,358

)

-36.9

%

Florida

330

408

2,978

(78

)

-19.1

%

(2,648

)

-88.9

%

Mississippi (2)

39,373

41,145

39,006

(1,772

)

-4.3

%

367

0.9

%

Tennessee (3)

8,455

8,806

5,338

(351

)

-4.0

%

3,117

58.4

%

Texas

2,403

3,093

10,356

(690

)

-22.3

%

(7,953

)

-76.8

%

Total nonaccrual loans

52,888

56,423

61,363

(3,535

)

-6.3

%

(8,475

)

-13.8

%

Other real estate
Alabama

6,451

6,878

8,290

(427

)

-6.2

%

(1,839

)

-22.2

%

Florida

7,826

8,120

9,789

(294

)

-3.6

%

(1,963

)

-20.1

%

Mississippi (2)

15,511

15,421

19,358

90

0.6

%

(3,847

)

-19.9

%

Tennessee (3)

815

994

1,486

(179

)

-18.0

%

(671

)

-45.2

%

Texas

640

726

744

(86

)

-11.8

%

(104

)

-14.0

%

Total other real estate

31,243

32,139

39,667

(896

)

-2.8

%

(8,424

)

-21.2

%

Total nonperforming assets

$

84,131

$

88,562

$

101,030

$

(4,431

)

-5.0

%

$

(16,899

)

-16.7

%

 
LOANS PAST DUE OVER 90 DAYS (1)
LHFI

$

1,245

$

670

$

529

$

575

85.8

%

$

716

n/m

 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)

$

38,355

$

40,793

$

34,693

$

(2,438

)

-6.0

%

$

3,662

10.6

%

 
Quarter EndedLinked QuarterYear over Year
ALLOWANCE FOR LOAN LOSSES (1)6/30/20193/31/20196/30/2018$ Change% Change$ Change% Change
Beginning Balance

$

79,005

$

79,290

$

81,235

$

(285

)

-0.4

%

$

(2,230

)

-2.7

%

Transfers (4)

782

n/m

(782

)

-100.0

%

Provision for loan losses

2,486

1,611

3,167

875

54.3

%

(681

)

-21.5

%

Charge-offs

(2,937

)

(4,033

)

(3,421

)

1,096

27.2

%

484

14.1

%

Recoveries

1,845

2,137

1,803

(292

)

-13.7

%

42

2.3

%

Net (charge-offs) recoveries

(1,092

)

(1,896

)

(1,618

)

804

42.4

%

526

-32.5

%

Ending Balance

$

80,399

$

79,005

$

83,566

$

1,394

1.8

%

$

(3,167

)

-3.8

%

 
PROVISION FOR LOAN LOSSES (1)
Alabama

$

1,187

$

791

$

434

$

396

50.1

%

$

753

n/m

Florida

48

(595

)

(811

)

643

n/m

859

n/m

Mississippi (2)

1,970

119

2,768

1,851

n/m

(798

)

-28.8

%

Tennessee (3)

514

(234

)

82

748

n/m

432

n/m

Texas

(1,233

)

1,530

694

(2,763

)

n/m

(1,927

)

n/m

Total provision for loan losses

$

2,486

$

1,611

$

3,167

$

875

54.3

%

$

(681

)

-21.5

%

 
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama

$

278

$

15

$

112

$

263

n/m

$

166

n/m

Florida

(130

)

(227

)

(122

)

97

42.7

%

(8

)

-6.6

%

Mississippi (2)

907

2,130

1,705

(1,223

)

-57.4

%

(798

)

-46.8

%

Tennessee (3)

44

50

70

(6

)

-12.0

%

(26

)

-37.1

%

Texas

(7

)

(72

)

(147

)

65

90.3

%

140

95.2

%

Total net charge-offs (recoveries)

$

1,092

$

1,896

$

1,618

$

(804

)

-42.4

%

$

(526

)

-32.5

%

(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 merger, which were transferred from acquired impaired 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, 2019
($ in thousands)
(unaudited)
Quarter EndedSix Months Ended
AVERAGE BALANCES6/30/20193/31/201912/31/20189/30/20186/30/20186/30/20196/30/2018
Securities AFS-taxable

$

1,661,464

$

1,753,268

$

1,847,421

$

1,937,807

$

2,038,759

$

1,707,112

$

2,089,669

Securities AFS-nontaxable

31,474

40,159

38,821

41,889

50,035

35,793

53,982

Securities HTM-taxable

821,357

866,665

893,186

933,294

972,571

843,886

989,054

Securities HTM-nontaxable

27,035

28,710

29,143

29,183

30,337

27,868

31,529

Total securities

2,541,330

2,688,802

2,808,571

2,942,173

3,091,702

2,614,659

3,164,234

Loans (including loans held for sale)

9,260,028

9,038,204

8,933,501

8,907,588

8,707,466

9,149,729

8,672,411

Acquired loans

91,217

104,316

127,747

147,811

202,140

97,730

222,533

Fed funds sold and rev repos

34,057

277

843

477

1,063

17,260

772

Other earning assets

316,604

243,493

200,282

189,471

186,224

280,250

200,028

Total earning assets

12,243,236

12,075,092

12,070,944

12,187,520

12,188,595

12,159,628

12,259,978

Allowance for loan losses

(81,996

)

(82,227

)

(85,842

)

(86,496

)

(86,315

)

(82,111

)

(84,321

)

Cash and due from banks

478,384

423,749

339,605

330,949

319,075

451,217

327,810

Other assets

989,078

1,023,862

1,023,226

1,035,327

1,042,156

1,006,375

1,036,478

Total assets

$

13,628,702

$

13,440,476

$

13,347,933

$

13,467,300

$

13,463,511

$

13,535,109

$

13,539,945

 
Interest-bearing demand deposits

$

3,048,876

$

2,899,467

$

2,722,841

$

2,602,658

$

2,439,777

$

2,974,584

$

2,422,200

Savings deposits

3,801,187

3,786,835

3,565,682

3,722,533

3,860,096

3,794,051

3,799,140

Time deposits

1,840,065

1,881,556

1,892,983

1,851,866

1,798,855

1,860,696

1,773,889

Total interest-bearing deposits

8,690,128

8,567,858

8,181,506

8,177,057

8,098,728

8,629,331

7,995,229

Fed funds purchased and repos

51,264

84,352

340,094

347,489

352,256

67,717

315,272

Other borrowings

81,352

90,804

90,252

187,196

249,853

86,052

499,617

Junior subordinated debt securities

61,856

61,856

61,856

61,856

61,856

61,856

61,856

Total interest-bearing liabilities

8,884,600

8,804,870

8,673,708

8,773,598

8,762,693

8,844,956

8,871,974

Noninterest-bearing deposits

2,898,266

2,824,220

2,862,161

2,894,061

2,930,726

2,861,448

2,906,186

Other liabilities

240,091

221,199

216,932

202,053

188,186

230,696

184,549

Total liabilities

12,022,957

11,850,289

11,752,801

11,869,712

11,881,605

11,937,100

11,962,709

Shareholders' equity

1,605,745

1,590,187

1,595,132

1,597,588

1,581,906

1,598,009

1,577,236

Total liabilities and equity

$

13,628,702

$

13,440,476

$

13,347,933

$

13,467,300

$

13,463,511

$

13,535,109

$

13,539,945

 

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2019
($ in thousands)
(unaudited)
 
PERIOD END BALANCES6/30/20193/31/201912/31/20189/30/20186/30/2018
Cash and due from banks

$

404,413

$

454,047

$

349,561

$

432,471

$

387,119

Fed funds sold and rev repos

75,499

830

1,000

Securities available for sale

1,643,725

1,723,445

1,811,813

1,864,633

1,974,675

Securities held to maturity

825,536

884,319

909,643

943,883

985,845

Loans held for sale (LHFS)

240,380

172,683

153,799

182,664

196,217

Loans held for investment (LHFI)

9,116,759

8,995,014

8,835,868

8,747,030

8,678,983

Allowance for loan losses, LHFI

(80,399

)

(79,005

)

(79,290

)

(88,874

)

(83,566

)

Net LHFI

9,036,360

8,916,009

8,756,578

8,658,156

8,595,417

Acquired loans

87,884

93,201

106,932

132,615

173,107

Allowance for loan losses, acquired loans

(1,398

)

(1,297

)

(1,231

)

(1,714

)

(3,046

)

Net acquired loans

86,486

91,904

105,701

130,901

170,061

Net LHFI and acquired loans

9,122,846

9,007,913

8,862,279

8,789,057

8,765,478

Premises and equipment, net

189,820

189,743

178,668

178,739

177,686

Mortgage servicing rights

79,283

86,842

95,596

101,374

97,411

Goodwill

379,627

379,627

379,627

379,627

379,627

Identifiable intangible assets

9,101

10,092

11,112

12,391

13,677

Other real estate

31,243

32,139

34,668

36,475

39,667

Operating lease right-of-use assets

32,762

33,861

Other assets

514,723

503,306

498,864

517,498

507,863

Total assets

$

13,548,958

$

13,478,017

$

13,286,460

$

13,439,812

$

13,525,265

 
Deposits:
Noninterest-bearing

$

2,909,141

$

2,867,778

$

2,937,594

$

2,786,539

$

2,958,354

Interest-bearing

8,657,488

8,667,037

8,426,817

8,170,371

8,114,081

Total deposits

11,566,629

11,534,815

11,364,411

10,956,910

11,072,435

Fed funds purchased and repos

51,800

46,867

50,471

486,865

477,891

Other borrowings

79,012

83,265

79,885

190,919

187,560

Junior subordinated debt securities

61,856

61,856

61,856

61,856

61,856

Operating lease liabilities

33,878

34,921

Other liabilities

137,233

129,265

138,384

143,658

141,451

Total liabilities

11,930,408

11,890,989

11,695,007

11,840,208

11,941,193

Common stock

13,418

13,499

13,717

14,089

14,089

Capital surplus

260,619

272,268

309,545

362,868

361,715

Retained earnings

1,369,329

1,342,176

1,323,870

1,302,593

1,282,007

Accum other comprehensive loss, net of tax

(24,816

)

(40,915

)

(55,679

)

(79,946

)

(73,739

)

Total shareholders' equity

1,618,550

1,587,028

1,591,453

1,599,604

1,584,072

Total liabilities and equity

$

13,548,958

$

13,478,017

$

13,286,460

$

13,439,812

$

13,525,265

 

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2019
($ in thousands except per share data)
(unaudited)
 
Quarter EndedSix Months Ended
INCOME STATEMENTS6/30/20193/31/201912/31/20189/30/20186/30/20186/30/20196/30/2018
Interest and fees on LHFS & LHFI-FTE

$

114,873

$

109,890

$

107,709

$

105,993

$

99,761

$

224,763

$

194,473

Interest and fees on acquired loans

2,010

1,916

3,183

4,033

5,022

3,926

9,899

Interest on securities-taxable

13,916

14,665

15,496

16,186

16,894

28,581

34,400

Interest on securities-tax exempt-FTE

551

646

617

656

733

1,197

1,557

Interest on fed funds sold and rev repos

214

2

4

3

5

216

7

Other interest income

1,820

1,603

1,158

1,050

1,054

3,423

1,988

Total interest income-FTE

133,384

128,722

128,167

127,921

123,469

262,106

242,324

Interest on deposits

21,500

19,570

17,334

14,972

12,139

41,070

21,630

Interest on fed funds pch and repos

81

288

1,528

1,348

1,250

369

1,912

Other interest expense

831

825

894

1,467

1,713

1,656

5,107

Total interest expense

22,412

20,683

19,756

17,787

15,102

43,095

28,649

Net interest income-FTE

110,972

108,039

108,411

110,134

108,367

219,011

213,675

Provision for loan losses, LHFI

2,486

1,611

2,192

8,673

3,167

4,097

7,128

Provision for loan losses, acquired loans

106

78

(247

)

(467

)

(441

)

184

(291

)

Net interest income after provision-FTE

108,380

106,350

106,466

101,928

105,641

214,730

206,838

Service charges on deposit accounts

10,379

10,265

11,123

11,075

10,647

20,644

21,504

Bank card and other fees

8,004

7,191

7,750

7,459

7,070

15,195

13,696

Mortgage banking, net

10,295

3,442

5,716

8,647

9,046

13,737

20,311

Insurance commissions

11,089

10,871

9,562

10,765

10,735

21,960

20,154

Wealth management

7,742

7,483

7,504

7,789

7,478

15,225

15,045

Other, net

2,130

2,239

1,904

1,358

2,415

4,369

3,474

Nonint inc-excl sec gains (losses), net

49,639

41,491

43,559

47,093

47,391

91,130

94,184

Security gains (losses), net

Total noninterest income

49,639

41,491

43,559

47,093

47,391

91,130

94,184

Salaries and employee benefits

61,949

60,954

58,736

60,847

59,975

122,903

118,450

Services and fees

18,009

16,968

17,910

16,404

16,322

34,977

32,068

Net occupancy-premises

6,403

6,454

6,741

6,910

6,550

12,857

13,052

Equipment expense

5,958

5,924

6,329

6,200

6,202

11,882

12,301

Other real estate expense, net

132

1,752

61

1,168

(93

)

1,884

773

FDIC assessment expense

1,836

1,758

1,897

1,999

2,538

3,594

5,533

Other expense

11,814

12,211

12,253

11,695

12,306

24,025

24,088

Total noninterest expense

106,101

106,021

103,927

105,223

103,800

212,122

206,265

Income before income taxes and tax eq adj

51,918

41,820

46,098

43,798

49,232

93,738

94,757

Tax equivalent adjustment

3,248

3,231

3,231

3,151

3,203

6,479

6,418

Income before income taxes

48,670

38,589

42,867

40,647

46,029

87,259

88,339

Income taxes

6,530

5,250

6,179

4,394

6,216

11,780

11,696

Net income

$

42,140

$

33,339

$

36,688

$

36,253

$

39,813

$

75,479

$

76,643

 
Per share data
Earnings per share - basic

$

0.65

$

0.51

$

0.55

$

0.54

$

0.59

$

1.16

$

1.13

 
Earnings per share - diluted

$

0.65

$

0.51

$

0.55

$

0.54

$

0.59

$

1.16

$

1.13

 
Dividends per share

$

0.23

$

0.23

$

0.23

$

0.23

$

0.23

$

0.46

$

0.46

 
Weighted average shares outstanding
Basic

64,677,889

65,239,470

66,839,504

67,621,345

67,758,097

64,957,128

67,783,524

 
Diluted

64,815,029

65,378,500

67,028,978

67,796,346

67,907,267

65,088,908

67,928,829

 
Period end shares outstanding

64,398,846

64,789,943

65,834,395

67,621,369

67,621,111

64,398,846

67,621,111

 

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2019
($ in thousands)
(unaudited)
 
 
Quarter Ended
NONPERFORMING ASSETS (1)6/30/20193/31/201912/31/20189/30/20186/30/2018
Nonaccrual loans
Alabama

$

2,327

$

2,971

$

3,361

$

3,953

$

3,685

Florida

330

408

1,175

1,180

2,978

Mississippi (2)

39,373

41,145

44,331

41,351

39,006

Tennessee (3)

8,455

8,806

8,696

13,195

5,338

Texas

2,403

3,093

4,061

8,157

10,356

Total nonaccrual loans

52,888

56,423

61,624

67,836

61,363

Other real estate
Alabama

6,451

6,878

6,873

7,526

8,290

Florida

7,826

8,120

8,771

8,931

9,789

Mississippi (2)

15,511

15,421

17,255

18,191

19,358

Tennessee (3)

815

994

1,025

1,083

1,486

Texas

640

726

744

744

744

Total other real estate

31,243

32,139

34,668

36,475

39,667

Total nonperforming assets

$

84,131

$

88,562

$

96,292

$

104,311

$

101,030

 
LOANS PAST DUE OVER 90 DAYS (1)
LHFI

$

1,245

$

670

$

856

$

726

$

529

 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)

$

38,355

$

40,793

$

37,384

$

34,115

$

34,693

 
 
Quarter EndedSix Months Ended
ALLOWANCE FOR LOAN LOSSES (1)6/30/20193/31/201912/31/20189/30/20186/30/20186/30/20196/30/2018
Beginning Balance

$

79,005

$

79,290

$

88,874

$

83,566

$

81,235

$

79,290

$

76,733

Transfers (4)

772

782

782

Provision for loan losses

2,486

1,611

2,192

8,673

3,167

4,097

7,128

Charge-offs

(2,937

)

(4,033

)

(16,509

)

(7,017

)

(3,421

)

(6,970

)

(5,963

)

Recoveries

1,845

2,137

4,733

2,880

1,803

3,982

4,886

Net (charge-offs) recoveries

(1,092

)

(1,896

)

(11,776

)

(4,137

)

(1,618

)

(2,988

)

(1,077

)

Ending Balance

$

80,399

$

79,005

$

79,290

$

88,874

$

83,566

$

80,399

$

83,566

 
PROVISION FOR LOAN LOSSES (1)
Alabama

$

1,187

$

791

$

(346

)

$

593

$

434

$

1,978

$

1,052

Florida

48

(595

)

(160

)

(431

)

(811

)

(547

)

(1,674

)

Mississippi (2)

1,970

119

(3,594

)

(1,630

)

2,768

2,089

5,432

Tennessee (3)

514

(234

)

3,039

8,100

82

280

(186

)

Texas

(1,233

)

1,530

3,253

2,041

694

297

2,504

Total provision for loan losses

$

2,486

$

1,611

$

2,192

$

8,673

$

3,167

$

4,097

$

7,128

 
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama

$

278

$

15

$

203

$

198

$

112

$

293

$

196

Florida

(130

)

(227

)

(238

)

(586

)

(122

)

(357

)

(1,082

)

Mississippi (2)

907

2,130

(1,873

)

4,677

1,705

3,037

1,972

Tennessee (3)

44

50

7,875

(96

)

70

94

179

Texas

(7

)

(72

)

5,809

(56

)

(147

)

(79

)

(188

)

Total net charge-offs (recoveries)

$

1,092

$

1,896

$

11,776

$

4,137

$

1,618

$

2,988

$

1,077

 

(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 merger, which were transferred from acquired impaired loans to LHFI during the second quarter of 2018, and the remaining loans acquired in the Heritage acquisition and the Reliance merger, which were transferred from acquired impaired loans to LHFI during the third quarter of 2018.
 
 

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION
June 30, 2019
(unaudited)
 
Quarter EndedSix Months Ended
FINANCIAL RATIOS AND OTHER DATA6/30/20193/31/201912/31/20189/30/20186/30/20186/30/20196/30/2018
Return on equity

10.53

%

8.50

%

9.12

%

9.00

%

10.09

%

9.52

%

9.80

%

Return on average tangible equity

14.14

%

11.55

%

12.41

%

12.26

%

13.77

%

12.86

%

13.41

%

Return on assets

1.24

%

1.01

%

1.09

%

1.07

%

1.19

%

1.12

%

1.14

%

Interest margin - Yield - FTE

4.37

%

4.32

%

4.21

%

4.16

%

4.06

%

4.35

%

3.99

%

Interest margin - Cost

0.73

%

0.69

%

0.65

%

0.58

%

0.50

%

0.71

%

0.47

%

Net interest margin - FTE

3.64

%

3.63

%

3.56

%

3.59

%

3.57

%

3.63

%

3.51

%

Efficiency ratio (1)

64.55

%

68.08

%

66.58

%

64.46

%

64.96

%

66.25

%

64.95

%

Full-time equivalent employees

2,819

2,839

2,856

2,889

2,890

 
CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans

0.05

%

0.09

%

0.52

%

0.18

%

0.07

%

0.07

%

0.03

%

Provision for loan losses/average loans

0.11

%

0.07

%

0.10

%

0.39

%

0.15

%

0.09

%

0.17

%

Nonperforming loans/total loans (incl LHFS)

0.57

%

0.62

%

0.69

%

0.76

%

0.69

%

Nonperforming assets/total loans (incl LHFS)

0.90

%

0.97

%

1.07

%

1.17

%

1.14

%

Nonperforming assets/total loans (incl LHFS) +ORE

0.90

%

0.96

%

1.07

%

1.16

%

1.13

%

ALL/total loans (excl LHFS)

0.88

%

0.88

%

0.90

%

1.02

%

0.96

%

ALL-commercial/total commercial loans

0.96

%

0.96

%

0.99

%

1.13

%

1.05

%

ALL-consumer/total consumer and home mortgage loans

0.60

%

0.57

%

0.57

%

0.63

%

0.63

%

ALL/nonperforming loans

152.02

%

140.02

%

128.67

%

131.01

%

136.18

%

ALL/nonperforming loans (excl specifically reviewed impaired loans)

383.19

%

342.97

%

350.77

%

339.79

%

345.87

%

 
CAPITAL RATIOS
Total equity/total assets

11.95

%

11.77

%

11.98

%

11.90

%

11.71

%

Tangible equity/tangible assets

9.34

%

9.15

%

9.31

%

9.26

%

9.07

%

Tangible equity/risk-weighted assets

11.39

%

11.35

%

11.11

%

11.31

%

11.20

%

Tier 1 leverage ratio

10.03

%

10.05

%

10.26

%

10.41

%

10.22

%

Common equity tier 1 capital ratio

11.76

%

11.88

%

11.77

%

12.20

%

12.01

%

Tier 1 risk-based capital ratio

12.31

%

12.45

%

12.33

%

12.76

%

12.58

%

Total risk-based capital ratio

13.07

%

13.21

%

13.07

%

13.61

%

13.39

%

 
STOCK PERFORMANCE
Market value-Close

$

33.25

$

33.63

$

28.43

$

33.65

$

32.63

Book value

$

25.13

$

24.49

$

24.17

$

23.66

$

23.43

Tangible book value

$

19.10

$

18.48

$

18.24

$

17.86

$

17.61

(1)

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

(2)

Excludes acquired loans.
 
 

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2019

($ in thousands)

(unaudited)

Note 1 – Leases

ASU 2016-02, “Leases (Topic 842)” became effective for Trustmark on January 1, 2019. As a result, during the first quarter of 2019, Trustmark recorded operating lease right-of-use assets and operating lease liabilities of $33.9 million and $34.9 million, respectively, in its consolidated balance sheet. In addition, Trustmark recorded finance lease right-of-use assets, net of accumulated depreciation of $11.2 million in premises and equipment, net and finance lease liabilities of $11.2 million in other borrowings. The effect on Trustmark’s consolidated income statement is considered immaterial.

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):

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

SECURITIES AVAILABLE FOR SALE

U.S. Government agency obligations

$

26,646

$

28,008

$

30,335

$

32,371

$

36,414

Obligations of states and political subdivisions

38,698

50,954

50,676

57,264

65,348

Mortgage-backed securities

Residential mortgage pass-through securities

Guaranteed by GNMA

65,716

66,176

67,494

65,847

60,245

Issued by FNMA and FHLMC

624,364

645,958

666,684

684,474

727,433

Other residential mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

751,371

784,566

811,601

840,073

897,652

Commercial mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

136,930

147,783

185,023

184,604

187,583

Total securities available for sale

$

1,643,725

$

1,723,445

$

1,811,813

$

1,864,633

$

1,974,675

SECURITIES HELD TO MATURITY

U.S. Government agency obligations

$

3,758

$

3,747

$

3,736

$

3,725

$

3,714

Obligations of states and political subdivisions

32,860

35,352

35,783

42,623

42,458

Mortgage-backed securities

Residential mortgage pass-through securities

Guaranteed by GNMA

11,184

11,710

12,090

12,316

12,756

Issued by FNMA and FHLMC

106,755

111,962

115,133

119,040

123,377

Other residential mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

536,166

559,690

578,827

600,635

627,470

Commercial mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

134,813

161,858

164,074

165,544

176,070

Total securities held to maturity

$

825,536

$

884,319

$

909,643

$

943,883

$

985,845

At June 30, 2019, 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 $13.7 million ($10.3 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 97% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2019

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

Loans secured by real estate:

Construction, land development and other land loans

$

1,111,297

$

1,209,761

$

1,056,601

$

1,031,491

$

1,038,745

Secured by 1-4 family residential properties

1,818,126

1,810,872

1,825,492

1,801,029

1,742,496

Secured by nonfarm, nonresidential properties

2,326,312

2,241,072

2,220,914

2,294,289

2,321,734

Other real estate secured

635,839

528,032

543,820

453,687

397,538

Commercial and industrial loans

1,533,318

1,558,057

1,538,715

1,565,922

1,572,764

Consumer loans

176,133

176,619

182,448

182,709

175,261

State and other political subdivision loans

982,187

982,626

973,818

929,178

925,452

Other loans

533,547

487,975

494,060

488,725

504,993

LHFI

9,116,759

8,995,014

8,835,868

8,747,030

8,678,983

Allowance for loan losses 

(80,399

)

(79,005

)

(79,290

)

(88,874

)

(83,566

)

Net LHFI

$

9,036,360

$

8,916,009

$

8,756,578

$

8,658,156

$

8,595,417

ACQUIRED LOANS BY TYPE

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

Loans secured by real estate:

Construction, land development and other land loans

$

5,705

$

5,728

$

5,878

$

6,657

$

11,900

Secured by 1-4 family residential properties

19,967

21,441

22,556

25,274

36,419

Secured by nonfarm, nonresidential properties

43,444

46,492

47,979

66,865

85,117

Other real estate secured

7,416

8,026

8,253

8,507

9,862

Commercial and industrial loans

6,193

6,359

15,267

16,610

20,485

Consumer loans

852

1,033

1,356

1,514

1,700

Other loans

4,307

4,122

5,643

7,188

7,624

Acquired loans

87,884

93,201

106,932

132,615

173,107

Allowance for loan losses, acquired loans

(1,398

)

(1,297

)

(1,231

)

(1,714

)

(3,046

)

Net acquired loans

$

86,486

$

91,904

$

105,701

$

130,901

$

170,061

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2019

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)

June 30, 2019

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

$

1,111,297

$

393,466

$

78,135

$

309,533

$

22,219

$

307,944

Secured by 1-4 family residential properties

1,818,126

117,564

43,874

1,559,348

84,045

13,295

Secured by nonfarm, nonresidential properties

2,326,312

613,170

245,085

882,457

151,108

434,492

Other real estate secured

635,839

186,048

11,466

275,374

10,035

152,916

Commercial and industrial loans

1,533,318

214,487

21,102

743,969

383,781

169,979

Consumer loans

176,133

24,721

4,798

125,420

18,945

2,249

State and other political subdivision loans

982,187

92,069

40,968

612,021

27,283

209,846

Other loans

533,547

78,854

18,390

355,468

37,084

43,751

Loans

$

9,116,759

$

1,720,379

$

463,818

$

4,863,590

$

734,500

$

1,334,472

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

Lots

$

60,421

$

13,394

$

17,909

$

22,643

$

1,228

$

5,247

Development

70,285

12,384

7,064

28,523

2,090

20,224

Unimproved land

105,318

20,528

16,002

35,467

12,721

20,600

1-4 family construction

228,702

107,017

14,960

78,906

2,821

24,998

Other construction

646,571

240,143

22,200

143,994

3,359

236,875

Construction, land development and other land loans

$

1,111,297

$

393,466

$

78,135

$

309,533

$

22,219

$

307,944

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

Non-owner occupied:

Retail

$

401,042

$

177,183

$

48,539

$

97,283

$

24,928

$

53,109

Office

190,039

46,500

17,813

62,097

7,683

55,946

Nursing homes/senior living

226,943

79,605

141,341

5,997

Hotel/motel

302,574

111,673

90,315

53,697

35,806

11,083

Mini-storage

106,474

11,602

5,757

41,123

582

47,410

Industrial

121,559

29,912

6,567

26,757

2,353

55,970

Health care

45,230

11,627

3,295

26,458

3,850

Convenience stores

21,533

3,237

7,456

675

10,165

Other

55,602

4,409

7,554

9,446

6,604

27,589

Total non-owner occupied loans

1,470,996

475,748

179,840

465,658

84,628

265,122

Owner-occupied:

Office

146,501

35,970

27,697

53,173

4,559

25,102

Churches

101,947

19,695

6,537

45,935

14,674

15,106

Industrial warehouses

152,020

12,445

3,617

66,798

12,771

56,389

Health care

106,113

22,876

6,474

60,880

2,594

13,289

Convenience stores

108,487

13,376

6,599

65,411

1,159

21,942

Retail

74,396

17,107

7,603

28,457

4,511

16,718

Restaurants

57,243

3,850

1,371

33,309

16,875

1,838

Auto dealerships

30,462

7,729

310

13,786

8,637

Other

78,147

4,374

5,037

49,050

700

18,986

Total owner-occupied loans

855,316

137,422

65,245

416,799

66,480

169,370

Loans secured by nonfarm, nonresidential properties

$

2,326,312

$

613,170

$

245,085

$

882,457

$

151,108

$

434,492

(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2019

($ 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

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

6/30/2019

6/30/2018

Securities – taxable

2.25

%

2.27

%

2.24

%

2.24

%

2.25

%

2.26

%

2.25

%

Securities – nontaxable

3.78

%

3.80

%

3.60

%

3.66

%

3.66

%

3.79

%

3.67

%

Securities – total

2.28

%

2.31

%

2.28

%

2.27

%

2.29

%

2.30

%

2.29

%

Loans - LHFI & LHFS

4.98

%

4.93

%

4.78

%

4.72

%

4.60

%

4.95

%

4.52

%

Acquired loans

8.84

%

7.45

%

9.89

%

10.82

%

9.96

%

8.10

%

8.97

%

Loans - total

5.01

%

4.96

%

4.86

%

4.82

%

4.72

%

4.99

%

4.63

%

FF sold & rev repo

2.52

%

2.93

%

1.88

%

2.50

%

1.89

%

2.52

%

1.83

%

Other earning assets

2.31

%

2.67

%

2.29

%

2.20

%

2.27

%

2.46

%

2.00

%

Total earning assets

4.37

%

4.32

%

4.21

%

4.16

%

4.06

%

4.35

%

3.99

%

Interest-bearing deposits

0.99

%

0.93

%

0.84

%

0.73

%

0.60

%

0.96

%

0.55

%

FF pch & repo

0.63

%

1.38

%

1.78

%

1.54

%

1.42

%

1.10

%

1.22

%

Other borrowings

2.33

%

2.19

%

2.33

%

2.34

%

2.20

%

2.26

%

1.83

%

Total interest-bearing liabilities

1.01

%

0.95

%

0.90

%

0.80

%

0.69

%

0.98

%

0.65

%

Net interest margin

3.64

%

3.63

%

3.56

%

3.59

%

3.57

%

3.63

%

3.51

%

Net interest margin excluding acquired loans

3.60

%

3.60

%

3.50

%

3.50

%

3.46

%

3.60

%

3.41

%

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 2019, the yield on acquired loans totaled 8.84% and included $583 thousand in recoveries from the settlement of debt, which represented approximately 2.56% of the annualized total acquired loan yield. During the first quarter of 2019, the yield on acquired loans totaled 7.45% and included $243 thousand in recoveries from the settlement of debt, which represented approximately 0.95% of the annualized total acquired loan yield.

Excluding acquired loans, the net interest margin remained flat at 3.60% for the second quarter of 2019 when compared to the first quarter of 2019, as growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix were 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 impact of this strategy resulted in a net negative ineffectiveness of $53 thousand with mortgage spreads widening offsetting losses from market volatility and lower rates during the second quarter of 2019.

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

Quarter Ended

Six Months Ended

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

6/30/2019

6/30/2018

Mortgage servicing income, net

$

5,734

$

5,607

$

5,730

$

5,428

$

5,502

$

11,341

$

11,090

Change in fair value-MSR from runoff

(2,918

)

(2,398

)

(2,752

)

(3,181

)

(3,334

)

(5,316

)

(5,841

)

Gain on sales of loans, net

5,522

3,576

5,206

6,411

5,414

9,098

9,999

Other, net

2,010

1,405

(1,393

)

(83

)

1,365

3,415

1,660

Mortgage banking income before hedge ineffectiveness

10,348

8,190

6,791

8,575

8,947

18,538

16,908

Change in fair value-MSR from market changes

(8,209

)

(8,863

)

(6,537

)

2,615

1,743

(17,072

)

11,264

Change in fair value of derivatives

8,156

4,115

5,462

(2,543

)

(1,644

)

12,271

(7,861

)

Net positive (negative) hedge ineffectiveness

(53

)

(4,748

)

(1,075

)

72

99

(4,801

)

3,403

Mortgage banking, net

$

10,295

$

3,442

$

5,716

$

8,647

$

9,046

$

13,737

$

20,311

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2019

($ in thousands)

(unaudited)

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

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

6/30/2019

6/30/2018

Partnership amortization for tax credit purposes

$

(2,010

)

$

(2,010

)

$

(2,101

)

$

(2,202

)

$

(2,202

)

$

(4,020

)

$

(4,404

)

Increase in life insurance cash surrender value

1,803

1,783

1,808

1,805

1,770

3,586

3,508

Other miscellaneous income

2,337

2,466

2,197

1,755

2,847

4,803

4,370

Total other, net

$

2,130

$

2,239

$

1,904

$

1,358

$

2,415

$

4,369

$

3,474

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

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

6/30/2019

6/30/2018

Loan expense

$

3,003

$

2,697

$

2,425

$

2,824

$

3,046

$

5,700

$

5,837

Amortization of intangibles

992

1,101

1,279

1,286

1,286

2,093

2,683

Other miscellaneous expense

7,819

8,413

8,549

7,585

7,974

16,232

15,568

Total other expense

$

11,814

$

12,211

$

12,253

$

11,695

$

12,306

$

24,025

$

24,088

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, 2019

($ in thousands except per share data)

(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

Quarter Ended

Six Months Ended

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

6/30/2019

6/30/2018

TANGIBLE EQUITY

AVERAGE BALANCES

Total shareholders' equity

$

1,605,745

$

1,590,187

$

1,595,132

$

1,597,588

$

1,581,906

$

1,598,009

$

1,577,236

Less: Goodwill

(379,627

)

(379,627

)

(379,627

)

(379,627

)

(379,627

)

(379,627

)

(379,627

)

Identifiable intangible assets

(9,631

)

(10,666

)

(11,811

)

(13,083

)

(14,380

)

(10,146

)

(15,077

)

Total average tangible equity

$

1,216,487

$

1,199,894

$

1,203,694

$

1,204,878

$

1,187,899

$

1,208,236

$

1,182,532

PERIOD END BALANCES

Total shareholders' equity

$

1,618,550

$

1,587,028

$

1,591,453

$

1,599,604

$

1,584,072

Less: Goodwill

(379,627

)

(379,627

)

(379,627

)

(379,627

)

(379,627

)

Identifiable intangible assets

(9,101

)

(10,092

)

(11,112

)

(12,391

)

(13,677

)

Total tangible equity

(a)

$

1,229,822

$

1,197,309

$

1,200,714

$

1,207,586

$

1,190,768

TANGIBLE ASSETS

Total assets

$

13,548,958

$

13,478,017

$

13,286,460

$

13,439,812

$

13,525,265

Less: Goodwill

(379,627

)

(379,627

)

(379,627

)

(379,627

)

(379,627

)

Identifiable intangible assets

(9,101

)

(10,092

)

(11,112

)

(12,391

)

(13,677

)

Total tangible assets

(b)

$

13,160,230

$

13,088,298

$

12,895,721

$

13,047,794

$

13,131,961

Risk-weighted assets

(c)

$

10,796,903

$

10,548,472

$

10,803,313

$

10,681,621

$

10,633,646

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION

Net income

$

42,140

$

33,339

$

36,688

$

36,253

$

39,813

$

75,479

$

76,643

Plus: Intangible amortization net of tax

744

826

959

965

965

1,570

2,014

Net income adjusted for intangible amortization

$

42,884

$

34,165

$

37,647

$

37,218

$

40,778

$

77,049

$

78,657

Period end common shares outstanding

(d)

64,398,846

64,789,943

65,834,395

67,621,369

67,621,111

TANGIBLE COMMON EQUITY MEASUREMENTS

Return on average tangible equity (1)

14.14

%

11.55

%

12.41

%

12.26

%

13.77

%

12.86

%

13.41

%

Tangible equity/tangible assets

(a)/(b)

9.34

%

9.15

%

9.31

%

9.26

%

9.07

%

Tangible equity/risk-weighted assets

(a)/(c)

11.39

%

11.35

%

11.11

%

11.31

%

11.20

%

Tangible book value

(a)/(d)*1,000

$

19.10

$

18.48

$

18.24

$

17.86

$

17.61

COMMON EQUITY TIER 1 CAPITAL (CET1)

Total shareholders' equity

$

1,618,550

$

1,587,028

$

1,591,453

$

1,599,604

$

1,584,072

AOCI-related adjustments

24,816

40,915

55,679

79,946

73,739

CET1 adjustments and deductions:

Goodwill net of associated deferred tax liabilities (DTLs)

(365,745

)

(365,748

)

(365,779

)

(365,823

)

(366,036

)

Other adjustments and deductions for CET1 (2)

(8,268

)

(9,099

)

(9,815

)

(10,868

)

(14,204

)

CET1 capital

(e)

1,269,353

1,253,096

1,271,538

1,302,859

1,277,571

Additional tier 1 capital instruments plus related surplus

60,000

60,000

60,000

60,000

60,000

Less: additional tier 1 capital deductions

Additional tier 1 capital

60,000

60,000

60,000

60,000

60,000

Tier 1 capital

$

1,329,353

$

1,313,096

$

1,331,538

$

1,362,859

$

1,337,571

Common equity tier 1 capital ratio

(e)/(c)

11.76

%

11.88

%

11.77

%

12.20

%

12.01

%

(1) Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity.

(2) Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAs), threshold deductions and transition adjustments, as applicable.

Contacts:

Trustmark Investor Contacts:
Louis E. Greer
Treasurer and
Principal Financial Officer
601-208-2310

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