EX-99.1 2 ex991.htm ex991.htm
 
 
News Release
 
 
Trustmark Corporation Announces Third Quarter 2014 Financial Results
 
JACKSON, Miss. – October 28, 2014 – Trustmark Corporation (NASDAQ:TRMK) reported net income of $33.6 million in the third quarter of 2014, which represented diluted earnings per share of $0.50, an increase of 2.0% from both the prior quarter and third quarter of 2013.  Trustmark’s performance during the third quarter of 2014 produced a return on average tangible equity of 13.70% and a return on average assets of 1.10%.  During the first nine months of 2014, Trustmark’s net income totaled $95.5 million, which represented diluted earnings per share of $1.41, an increase of 6.0% from the prior year.  Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2014, to shareholders of record on December 1, 2014.

Gerard R. Host, President and CEO, stated, “Trustmark continued to achieve solid financial results in the third quarter, including the sixth consecutive quarter of growth in our legacy loan portfolio, significant  growth in our insurance and wealth management businesses, and improvement in our efficiency ratio.  Thanks to our associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue meeting the needs of our customers and creating value for our shareholders.”

Balance Sheet Management
·  
Loans held for investment increased at an annualized rate of 9.6% in the third quarter
·  
Average noninterest-bearing deposits increased $97.8 million from the prior quarter to represent 28.6% of average total deposits

Loans held for investment totaled $6.3 billion at September 30, 2014, an increase of $146.7 million, or 2.4%, from the prior quarter and $637.0 million, or 11.2%, from one year earlier.  Construction, land development and other land loans increased $49.1 million during the quarter; this growth was driven entirely by commercial and residential construction primarily in Trustmark’s Texas, Mississippi and Alabama markets.  The single-family mortgage portfolio increased $43.6 million primarily as a result of growth in Trustmark’s Mississippi and Alabama markets.  Loans secured by nonfarm and nonresidential real estate increased $16.4 million as growth in owner occupied real estate in Trustmark’s Mississippi and Alabama markets was offset in part by declines in Texas, Florida and Tennessee.  Other real estate secured loans, which include multifamily projects, declined $10.6 million reflecting reductions primarily in Trustmark’s Mississippi and Tennessee markets.  Commercial and industrial loans remained relatively stable as growth in Alabama and Tennessee was offset by reductions in Texas and Mississippi.  Consumer loans expanded $3.4 million due principally to growth in Trustmark’s Mississippi market.  Other loans, which include lending to states and municipalities, nonprofits and REITS, increased $48.0 million during the third quarter due to growth in Trustmark’s Mississippi, Alabama and Tennessee markets.

Acquired loans totaled $592.1 million at September 30, 2014, down $54.4 million from the prior quarter.  Collectively, loans held for investment and acquired loans totaled $6.9 billion at September 30, 2014, up $92.3 million, or 5.6% annualized, from the prior quarter.

Average earning assets during the third quarter increased $149.9 million relative to the prior quarter principally due to increased balances of loans held for investment.  Average deposits in the third quarter declined $204.5 million as the $97.8 million increase in average noninterest-bearing deposits was more than offset by a decline in average interest-bearing deposits of $302.3 million.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses.  At September 30, 2014, Trustmark’s tangible equity to tangible assets ratio was 8.67%, up 16 basis points from the prior quarter, while the total risk-based capital ratio expanded 16 basis points to 14.70%.  Trustmark’s solid capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.

 
 

 
 
Credit Quality
·  
Other real estate declined 9.3% and 16.6% from the prior quarter and year, respectively
·  
Allowance for loan losses represented 178.81% of nonperforming loans, excluding impaired loans

Nonperforming loans totaled $88.3 million at September 30, 2014, an increase of $17.2 million from the prior quarter and $14.9 million from one year earlier.  The increase in nonperforming loans was primarily the result of two substandard credit relationships totaling $16.0 million migrating to nonaccrual status. Other real estate totaled $97.0 million, a decrease of $9.9 million, or 9.3%, from the prior quarter.  Relative to levels one year earlier, other real estate decreased $19.3 million, or 16.6%.  Collectively, nonperforming assets totaled $185.4 million, an increase of $7.3 million from the prior quarter and a decrease of $4.4 million from one year earlier.

Trustmark’s net recovery position during the third quarter of 2014 totaled $428 thousand and represented -0.03% of average loans.  This compares favorably to net charge-offs in the prior quarter of $1.2 million, or 0.08% of average loans, and to net charge-offs in the third quarter of the prior year of $569 thousand, or 0.04% of average loans.  During the third quarter of 2014, the provision for loan losses for loans held for investment totaled $3.1 million, which represented specific reserves related to the aforementioned credit relationships that migrated to nonaccrual status.

Allocation of Trustmark’s $70.1 million allowance for loan losses represented 1.26% of commercial loans and 0.69% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.11% at September 30, 2014, which represents a level management considers commensurate with the inherent risk in the loan portfolio.  The allowance for loan losses represented 178.81% of nonperforming loans, excluding impaired loans.

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

Revenue Generation
·  
Total revenue remained stable at $149.1 million despite the mandated reduction in interchange income
·  
Insurance and wealth management revenue expanded 11.3% and 4.3%, respectively, from the prior quarter

Net interest income (FTE) in the third quarter totaled $110.1 million, resulting in a net interest margin of 4.14%.  Relative to the prior quarter, interest income (FTE) increased $662 thousand due principally to additional interest and fees on loans held for investment.  The yield on acquired loans totaled 14.98% and included recoveries from settlement of debt of $8.7 million, which represented approximately 5.64% of the total acquired annualized loan yield in the third quarter.  Excluding acquired loans, the net interest margin in the third quarter totaled 3.47%, down eight basis points from the prior quarter, reflecting declining yields on loans held for investment and loans held for sale.

Noninterest income totaled $42.9 million in the third quarter, down $1.2 million from the prior quarter. Bank card and other fees totaled $7.3 million, a decline of $2.6 million, or 26.4%, from the prior quarter, which reflected the impact of decreased interchange income as a result of Trustmark becoming subject to debit card interchange fee standards effective July 1, 2014.  Service charges on deposit accounts totaled $12.7 million in the third quarter, an increase of $897 thousand, or 7.6%, from the prior quarter driven principally by seasonal factors.

 
 

 
As a result of increased property and casualty business, insurance revenue in the third quarter totaled $9.2 million, an increase of 11.3% from the prior quarter.  Wealth management revenue totaled $8.0 million, up 4.3% from the prior quarter, due principally to increased brokerage activity.

Mortgage loan production in the third quarter totaled $345.4 million, an increase of 7.2% from the prior quarter, due in part to seasonal factors as well as lower mortgage rates and expanded originations in Trustmark’s Alabama markets.  During the third quarter, mortgage banking revenue totaled $5.8 million, reflecting increased mortgage servicing income, expanded secondary marketing gains, and stable mortgage servicing hedge ineffectiveness, which was offset in part by a decline in the fair value of mortgage loans held for sale.

Noninterest Expense
·  
Routine noninterest expense remained well-controlled
·  
Efficiency ratio improved to 62.80%

Noninterest expense in the third quarter declined $2.6 million, or 2.5%, from the prior quarter to total $100.2 million.  Excluding ORE and intangible amortization of $3.1 million, noninterest expense during the third quarter remained stable at $97.1 million.  Salaries and benefits expense remained well-controlled and totaled $56.7 million in the third quarter, up $541 thousand, or 1.0%, from the prior quarter. Services and fees remained stable at $14.5 million while ORE and foreclosure expense declined $2.9 million from the prior quarter to total $930 thousand.  Equipment expense declined $461 thousand, or 7.5%, from the prior quarter to $5.7 million.  Net occupancy expense increased $404 thousand to $6.8 million during the quarter while other expense declined $267 thousand to $13.0 million.

Appointment of Chief Administrative Officer
During the third quarter, James M. Outlaw was named Executive Vice President and Chief Administrative Officer of Trustmark National Bank.  In this newly created position, Outlaw is responsible for coordinating resources within the organization that support the revenue generating activities of various lines of business and overseeing the Risk Management, Technology, Operations, Human Resources and Corporate Facilities areas of the organization.  In his 18-year tenure with Trustmark, Outlaw served as Chief Information Officer prior to serving as President and Chief Operating Officer of Trustmark’s banking operations in Texas.  Host commented, “I am delighted that Jim has returned to Jackson as Chief Administrative Officer, overseeing all operational and administrative functions across our organization.  His proven leadership and broad experience, both on the front line and in the back room, will support our efforts to streamline processes to improve efficiency and profitability across the organization.”

Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 29, 2014, at 10:00 a.m. Central Time to discuss the Corporation’s financial results.  Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call.  A replay of the conference call will also be available through Wednesday, November 12, 2014, in archived format at the same web address or by calling (877) 344-7529, passcode 10008303.

Trustmark Corporation is a financial services company providing banking and financial solutions through 207 offices in Alabama, Florida, Mississippi, Tennessee and Texas.
 
 
 

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

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, 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, and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
 
 
Trustmark Investor Contacts:                                                                                                
Louis E. Greer                                                                                                           
Treasurer and
Principal Financial Officer                                                                                                            
601-208-2310
 
F. Joseph Rein, Jr.
Senior Vice President
601-208-6898
 
Trustmark Media Contact:
Melanie A. Morgan
Senior Vice President
601-208-2979

 
 

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)
 
                     
Linked Quarter
   
Year over Year
 
QUARTERLY AVERAGE BALANCES
 
9/30/2014
   
6/30/2014
   
9/30/2013
   
$ Change
   
% Change
   
$ Change
   
% Change
 
Securities AFS-taxable
  $ 2,202,020     $ 2,205,352     $ 3,279,606     $ (3,332 )     -0.2 %   $ (1,077,586 )     -32.9 %
Securities AFS-nontaxable
    131,305       135,956       172,055       (4,651 )     -3.4 %     (40,750 )     -23.7 %
Securities HTM-taxable
    1,126,309       1,120,448       59,168       5,861       0.5 %     1,067,141       n/m  
Securities HTM-nontaxable
    43,114       43,551       11,024       (437 )     -1.0 %     32,090       n/m  
     Total securities
    3,502,748       3,505,307       3,521,853       (2,559 )     -0.1 %     (19,105 )     -0.5 %
Loans (including loans held for sale)
    6,387,251       6,160,781       5,784,170       226,470       3.7 %     603,081       10.4 %
Acquired loans:
                                                       
Noncovered loans
    585,675       664,733       888,883       (79,058 )     -11.9 %     (303,208 )     -34.1 %
Covered loans
    28,971       31,122       39,561       (2,151 )     -6.9 %     (10,590 )     -26.8 %
Fed funds sold and rev repos
    4,228       2,648       8,978       1,580       59.7 %     (4,750 )     -52.9 %
Other earning assets
    41,871       36,259       38,226       5,612       15.5 %     3,645       9.5 %
     Total earning assets
    10,550,744       10,400,850       10,281,671       149,894       1.4 %     269,073       2.6 %
Allowance for loan losses
    (78,227 )     (77,652 )     (79,696 )     (575 )     0.7 %     1,469       -1.8 %
Cash and due from banks
    272,925       304,441       272,320       (31,516 )     -10.4 %     605       0.2 %
Other assets
    1,345,771       1,343,384       1,284,813       2,387       0.2 %     60,958       4.7 %
     Total assets
  $ 12,091,213     $ 11,971,023     $ 11,759,108     $ 120,190       1.0 %   $ 332,105       2.8 %
                                                         
Interest-bearing demand deposits
  $ 1,808,710     $ 1,826,019     $ 1,842,379     $ (17,309 )     -0.9 %   $ (33,669 )     -1.8 %
Savings deposits
    3,050,743       3,260,634       2,995,110       (209,891 )     -6.4 %     55,633       1.9 %
Time deposits less than $100,000
    1,187,794       1,225,706       1,380,954       (37,912 )     -3.1 %     (193,160 )     -14.0 %
Time deposits of $100,000 or more
    874,333       911,531       993,948       (37,198 )     -4.1 %     (119,615 )     -12.0 %
     Total interest-bearing deposits
    6,921,580       7,223,890       7,212,391       (302,310 )     -4.2 %     (290,811 )     -4.0 %
Fed funds purchased and repos
    540,870       387,289       364,446       153,581       39.7 %     176,424       48.4 %
Short-term borrowings
    181,114       59,465       59,324       121,649       n/m       121,790       n/m  
Long-term FHLB advances
    8,050       8,291       8,620       (241 )     -2.9 %     (570 )     -6.6 %
Subordinated notes
    49,923       49,915       49,890       8       0.0 %     33       0.1 %
Junior subordinated debt securities
    61,856       61,856       61,856       -       0.0 %     -       0.0 %
     Total interest-bearing liabilities
    7,763,393       7,790,706       7,756,527       (27,313 )     -0.4 %     6,866       0.1 %
Noninterest-bearing deposits
    2,774,745       2,676,907       2,479,082       97,838       3.7 %     295,663       11.9 %
Other liabilities
    140,218       111,170       190,143       29,048       26.1 %     (49,925 )     -26.3 %
     Total liabilities
    10,678,356       10,578,783       10,425,752       99,573       0.9 %     252,604       2.4 %
Shareholders' equity
    1,412,857       1,392,240       1,333,356       20,617       1.5 %     79,501       6.0 %
    Total liabilities and equity
  $ 12,091,213     $ 11,971,023     $ 11,759,108     $ 120,190       1.0 %   $ 332,105       2.8 %
                                                         
                           
Linked Quarter
   
Year over Year
 
PERIOD END BALANCES
 
9/30/2014
   
6/30/2014
   
9/30/2013
   
$ Change
   
% Change
   
$ Change
   
% Change
 
Cash and due from banks
  $ 237,497     $ 322,960     $ 335,695     $ (85,463 )     -26.5 %   $ (98,198 )     -29.3 %
Fed funds sold and rev repos
    4,013       5,000       7,867       (987 )     -19.7 %     (3,854 )     -49.0 %
Securities available for sale
    2,363,895       2,376,431       3,372,101       (12,536 )     -0.5 %     (1,008,206 )     -29.9 %
Securities held to maturity
    1,169,640       1,156,790       69,980       12,850       1.1 %     1,099,660       n/m  
Loans held for sale (LHFS)
    135,562       142,103       119,986       (6,541 )     -4.6 %     15,576       13.0 %
Loans held for investment (LHFI)
    6,333,651       6,187,000       5,696,641       146,651       2.4 %     637,010       11.2 %
Allowance for loan losses
    (70,134 )     (66,648 )     (68,632 )     (3,486 )     5.2 %     (1,502 )     2.2 %
Net LHFI
    6,263,517       6,120,352       5,628,009       143,165       2.3 %     635,508       11.3 %
Acquired loans:
                                                       
Noncovered loans
    564,542       616,911       837,875       (52,369 )     -8.5 %     (273,333 )     -32.6 %
Covered loans
    27,607       29,628       37,250       (2,021 )     -6.8 %     (9,643 )     -25.9 %
Allowance for loan losses, acquired loans
    (11,949 )     (11,179 )     (5,333 )     (770 )     6.9 %     (6,616 )     n/m  
Net acquired loans
    580,200       635,360       869,792       (55,160 )     -8.7 %     (289,592 )     -33.3 %
Net LHFI and acquired loans
    6,843,717       6,755,712       6,497,801       88,005       1.3 %     345,916       5.3 %
Premises and equipment, net
    200,474       201,639       208,837       (1,165 )     -0.6 %     (8,363 )     -4.0 %
Mortgage servicing rights
    67,090       65,049       63,150       2,041       3.1 %     3,940       6.2 %
Goodwill
    365,500       365,500       372,463       -       0.0 %     (6,963 )     -1.9 %
Identifiable intangible assets
    35,357       37,506       44,424       (2,149 )     -5.7 %     (9,067 )     -20.4 %
Other real estate, excluding covered other real estate
    97,037       106,970       116,329       (9,933 )     -9.3 %     (19,292 )     -16.6 %
Covered other real estate
    4,146       3,872       5,092       274       7.1 %     (946 )     -18.6 %
FDIC indemnification asset
    8,154       10,866       17,085       (2,712 )     -25.0 %     (8,931 )     -52.3 %
Other assets
    564,234       569,598       574,387       (5,364 )     -0.9 %     (10,153 )     -1.8 %
     Total assets
  $ 12,096,316     $ 12,119,996     $ 11,805,197     $ (23,680 )     -0.2 %   $ 291,119       2.5 %
                                                         
Deposits:
                                                       
Noninterest-bearing
  $ 2,723,480     $ 2,729,199     $ 2,643,612     $ (5,719 )     -0.2 %   $ 79,868       3.0 %
Interest-bearing
    6,789,745       7,131,167       7,143,622       (341,422 )     -4.8 %     (353,877 )     -5.0 %
Total deposits
    9,513,225       9,860,366       9,787,234       (347,141 )     -3.5 %     (274,009 )     -2.8 %
Fed funds purchased and repos
    607,851       559,316       342,465       48,535       8.7 %     265,386       77.5 %
Short-term borrowings
    316,666       61,227       60,698       255,439       n/m       255,968       n/m  
Long-term FHLB advances
    8,003       8,236       8,562       (233 )     -2.8 %     (559 )     -6.5 %
Subordinated notes
    49,928       49,920       49,896       8       0.0 %     32       0.1 %
Junior subordinated debt securities
    61,856       61,856       61,856       -       0.0 %     -       0.0 %
Other liabilities
    123,689       119,184       164,972       4,505       3.8 %     (41,283 )     -25.0 %
     Total liabilities
    10,681,218       10,720,105       10,475,683       (38,887 )     -0.4 %     205,535       2.0 %
Common stock
    14,051       14,051       13,998       -       0.0 %     53       0.4 %
Capital surplus
    354,251       353,196       343,759       1,055       0.3 %     10,492       3.1 %
Retained earnings
    1,081,161       1,063,201       1,023,983       17,960       1.7 %     57,178       5.6 %
Accum other comprehensive
                                                       
    loss, net of tax
    (34,365 )     (30,557 )     (52,226 )     (3,808 )     12.5 %     17,861       -34.2 %
     Total shareholders' equity
    1,415,098       1,399,891       1,329,514       15,207       1.1 %     85,584       6.4 %
     Total liabilities and equity
  $ 12,096,316     $ 12,119,996     $ 11,805,197     $ (23,680 )     -0.2 %   $ 291,119       2.5 %
                                                         
n/m - percentage changes greater than +/- 100% are considered not meaningful
                                 
                                   
See Notes to Consolidated Financials                                  

 
 

 

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands except per share data)
(unaudited)
 
                                           
   
Quarter Ended
   
Linked Quarter
   
Year over Year
 
INCOME STATEMENTS
 
9/30/2014
   
6/30/2014
   
9/30/2013
   
$ Change
   
% Change
   
$ Change
   
% Change
 
Interest and fees on LHFS & LHFI-FTE
  $ 70,197     $ 69,618     $ 68,417     $ 579       0.8 %   $ 1,780       2.6 %
Interest and fees on acquired loans
    23,200       23,250       19,183       (50 )     -0.2 %     4,017       20.9 %
Interest on securities-taxable
    19,712       19,522       18,654       190       1.0 %     1,058       5.7 %
Interest on securities-tax exempt-FTE
    1,845       1,912       1,960       (67 )     -3.5 %     (115 )     -5.9 %
Interest on fed funds sold and rev repos
    9       6       8       3       50.0 %     1       12.5 %
Other interest income
    386       379       372       7       1.8 %     14       3.8 %
     Total interest income-FTE
    115,349       114,687       108,594       662       0.6 %     6,755       6.2 %
Interest on deposits
    3,606       3,970       4,970       (364 )     -9.2 %     (1,364 )     -27.4 %
Interest on fed funds pch and repos
    180       110       106       70       63.6 %     74       69.8 %
Other interest expense
    1,425       1,375       1,389       50       3.6 %     36       2.6 %
     Total interest expense
    5,211       5,455       6,465       (244 )     -4.5 %     (1,254 )     -19.4 %
     Net interest income-FTE
    110,138       109,232       102,129       906       0.8 %     8,009       7.8 %
Provision for loan losses, LHFI
    3,058       351       (3,624 )     2,707       n/m       6,682       n/m  
Provision for loan losses, acquired loans
    1,145       3,784       3,292       (2,639 )     -69.7 %     (2,147 )     -65.2 %
     Net interest income after provision-FTE
    105,935       105,097       102,461       838       0.8 %     3,474       3.4 %
Service charges on deposit accounts
    12,743       11,846       13,852       897       7.6 %     (1,109 )     -8.0 %
Insurance commissions
    9,240       8,300       8,227       940       11.3 %     1,013       12.3 %
Wealth management
    8,038       7,710       7,520       328       4.3 %     518       6.9 %
Bank card and other fees
    7,279       9,894       8,929       (2,615 )     -26.4 %     (1,650 )     -18.5 %
Mortgage banking, net
    5,842       6,191       8,440       (349 )     -5.6 %     (2,598 )     -30.8 %
Other, net
    (160 )     199       165       (359 )     n/m       (325 )     n/m  
     Nonint inc-excl sec gains (losses), net
    42,982       44,140       47,133       (1,158 )     -2.6 %     (4,151 )     -8.8 %
Security gains (losses), net
    (89 )     -       -       (89 )     n/m       (89 )     n/m  
     Total noninterest income
    42,893       44,140       47,133       (1,247 )     -2.8 %     (4,240 )     -9.0 %
Salaries and employee benefits
    56,675       56,134       56,043       541       1.0 %     632       1.1 %
Services and fees
    14,489       14,543       13,580       (54 )     -0.4 %     909       6.7 %
Net occupancy-premises
    6,817       6,413       6,644       404       6.3 %     173       2.6 %
Equipment expense
    5,675       6,136       6,271       (461 )     -7.5 %     (596 )     -9.5 %
FDIC assessment expense
    2,644       2,468       2,376       176       7.1 %     268       11.3 %
ORE/Foreclosure expense
    930       3,836       3,079       (2,906 )     -75.8 %     (2,149 )     -69.8 %
Other expense
    12,964       13,231       13,531       (267 )     -2.0 %     (567 )     -4.2 %
     Total noninterest expense
    100,194       102,761       101,524       (2,567 )     -2.5 %     (1,330 )     -1.3 %
Income before income taxes and tax eq adj
    48,634       46,476       48,070       2,158       4.6 %     564       1.2 %
Tax equivalent adjustment
    3,909       3,944       3,700       (35 )     -0.9 %     209       5.6 %
Income before income taxes
    44,725       42,532       44,370       2,193       5.2 %     355       0.8 %
Income taxes
    11,136       9,635       11,336       1,501       15.6 %     (200 )     -1.8 %
Net income
  $ 33,589     $ 32,897     $ 33,034     $ 692       2.1 %   $ 555       1.7 %
                                                         
Per share data
                                                       
     Earnings per share - basic
  $ 0.50     $ 0.49     $ 0.49     $ 0.01       2.0 %   $ 0.01       2.0 %
                                                         
     Earnings per share - diluted
  $ 0.50     $ 0.49     $ 0.49     $ 0.01       2.0 %   $ 0.01       2.0 %
                                                         
     Dividends per share
  $ 0.23     $ 0.23     $ 0.23     $ -       0.0 %   $ -       0.0 %
                                                         
Weighted average shares outstanding
                                                       
     Basic
    67,439,788       67,439,659       67,177,013                                  
                                                         
     Diluted
    67,608,612       67,582,714       67,382,478                                  
                                                         
Period end shares outstanding
    67,439,788       67,439,788       67,181,694                                  
                                                         
OTHER FINANCIAL DATA
                                                       
Return on equity
    9.43 %     9.48 %     9.83 %                                
Return on average tangible equity
    13.70 %     13.90 %     14.92 %                                
Return on assets
    1.10 %     1.10 %     1.11 %                                
Interest margin - Yield - FTE
    4.34 %     4.42 %     4.19 %                                
Interest margin - Cost
    0.20 %     0.21 %     0.25 %                                
Net interest margin - FTE
    4.14 %     4.21 %     3.94 %                                
Efficiency ratio (1)
    62.80 %     64.31 %     65.32 %                                
Full-time equivalent employees
    3,067       3,095       3,110                                  
                                                         
STOCK PERFORMANCE
                                                       
Market value-Close
  $ 23.04     $ 24.69     $ 25.60                                  
Book value
  $ 20.98     $ 20.76     $ 19.79                                  
Tangible book value
  $ 15.04     $ 14.78     $ 13.58                                  
                                                         
(1) - The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of
 
partnership tax credits, amortization of purchased intangibles, and nonroutine income and expense items.
                 
                                                         
n/m - percentage changes greater than +/- 100% are considered not meaningful
                                 
                                   
See Notes to Consolidated Financials                                  

 
 

 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)
 
   
Quarter Ended
   
Linked Quarter
   
Year over Year
 
NONPERFORMING ASSETS (1)
 
9/30/2014
   
6/30/2014
   
9/30/2013
   
$ Change
   
% Change
   
$ Change
   
% Change
 
Nonaccrual loans
                                         
  Alabama
  $ 852     $ 80     $ 81     $ 772       n/m     $ 771       n/m  
  Florida
    10,986       11,041       14,619       (55 )     -0.5 %     (3,633 )     -24.9 %
  Mississippi (2)
    65,751       49,430       43,132       16,321       33.0 %     22,619       52.4 %
  Tennessee (3)
    5,901       4,244       5,596       1,657       39.0 %     305       5.5 %
  Texas
    4,824       6,323       9,953       (1,499 )     -23.7 %     (5,129 )     -51.5 %
     Total nonaccrual loans
    88,314       71,118       73,381       17,196       24.2 %     14,933       20.3 %
Other real estate
                                                       
  Alabama
    24,256       24,541       25,308       (285 )     -1.2 %     (1,052 )     -4.2 %
  Florida
    36,608       43,207       39,198       (6,599 )     -15.3 %     (2,590 )     -6.6 %
  Mississippi (2)
    16,419       18,723       25,439       (2,304 )     -12.3 %     (9,020 )     -35.5 %
  Tennessee (3)
    11,347       12,073       14,615       (726 )     -6.0 %     (3,268 )     -22.4 %
  Texas
    8,407       8,426       11,769       (19 )     -0.2 %     (3,362 )     -28.6 %
     Total other real estate
    97,037       106,970       116,329       (9,933 )     -9.3 %     (19,292 )     -16.6 %
        Total nonperforming assets
  $ 185,351     $ 178,088     $ 189,710     $ 7,263       4.1 %   $ (4,359 )     -2.3 %
                                                         
LOANS PAST DUE OVER 90 DAYS (4)
                                                       
LHFI
  $ 3,839     $ 1,936     $ 2,344     $ 1,903       98.3 %   $ 1,495       63.8 %
                                                         
LHFS-Guaranteed GNMA serviced loans
                                                       
(no obligation to repurchase)
  $ 24,979     $ 21,810     $ 18,432     $ 3,169       14.5 %   $ 6,547       35.5 %
                                                         
   
Quarter Ended
   
Linked Quarter
   
Year over Year
 
ALLOWANCE FOR LOAN LOSSES (4)
 
9/30/2014
   
6/30/2014
   
9/30/2013
   
$ Change
   
% Change
   
$ Change
   
% Change
 
Beginning Balance
  $ 66,648     $ 67,518     $ 72,825     $ (870 )     -1.3 %   $ (6,177 )     -8.5 %
Provision for loan losses
    3,058       351       (3,624 )     2,707       n/m       6,682       n/m  
Charge-offs
    (3,216 )     (3,820 )     (3,817 )     604       -15.8 %     601       -15.7 %
Recoveries
    3,644       2,599       3,248       1,045       40.2 %     396       12.2 %
Net recoveries (charge-offs)
    428       (1,221 )     (569 )     1,649       n/m       997       n/m  
Ending Balance
  $ 70,134     $ 66,648     $ 68,632     $ 3,486       5.2 %   $ 1,502       2.2 %
                                                         
PROVISION FOR LOAN LOSSES (4)
                                                       
Alabama
  $ 1,093     $ 696     $ 550     $ 397       57.0 %   $ 543       98.7 %
Florida
    (147 )     (2,014 )     (2,642 )     1,867       -92.7 %     2,495       -94.4 %
Mississippi (2)
    4,679       2,877       (1,051 )     1,802       62.6 %     5,730       n/m  
Tennessee (3)
    244       (277 )     (150 )     521       n/m       394       n/m  
Texas
    (2,811 )     (931 )     (331 )     (1,880 )     n/m       (2,480 )     n/m  
     Total provision for loan losses
  $ 3,058     $ 351     $ (3,624 )   $ 2,707       n/m     $ 6,682       n/m  
                                                         
NET CHARGE-OFFS (4)
                                                       
Alabama
  $ 172     $ 84     $ 132     $ 88       n/m     $ 40       30.3 %
Florida
    (89 )     (525 )     (138 )     436       -83.0 %     49       -35.5 %
Mississippi (2)
    462       1,518       375       (1,056 )     -69.6 %     87       23.2 %
Tennessee (3)
    48       87       (153 )     (39 )     -44.8 %     201       n/m  
Texas
    (1,021 )     57       353       (1,078 )     n/m       (1,374 )     n/m  
     Total net (recoveries) charge-offs
  $ (428 )   $ 1,221     $ 569     $ (1,649 )     n/m     $ (997 )     n/m  
                                                         
CREDIT QUALITY RATIOS (1)
                                                       
Net charge offs/average loans
    -0.03 %     0.08 %     0.04 %                                
Provision for loan losses/average loans
    0.19 %     0.02 %     -0.25 %                                
Nonperforming loans/total loans (incl LHFS)
    1.37 %     1.12 %     1.26 %                                
Nonperforming assets/total loans (incl LHFS)
    2.87 %     2.81 %     3.26 %                                
Nonperforming assets/total loans (incl LHFS) +ORE
    2.82 %     2.77 %     3.20 %                                
ALL/total loans (excl LHFS)
    1.11 %     1.08 %     1.20 %                                
ALL-commercial/total commercial loans
    1.26 %     1.20 %     1.39 %                                
ALL-consumer/total consumer and home mortgage loans
    0.69 %     0.75 %     0.73 %                                
ALL/nonperforming loans
    79.41 %     93.71 %     93.53 %                                
ALL/nonperforming loans -
                                                       
   (excl impaired loans)
    178.81 %     159.71 %     161.96 %                                
                                                         
CAPITAL RATIOS
                                                       
Total equity/total assets
    11.70 %     11.55 %     11.26 %                                
Tangible equity/tangible assets
    8.67 %     8.51 %     8.01 %                                
Tangible equity/risk-weighted assets
    12.24 %     12.19 %     11.66 %                                
Tier 1 leverage ratio
    9.54 %     9.43 %     8.78 %                                
Tier 1 common risk-based capital ratio
    12.74 %     12.61 %     11.92 %                                
Tier 1 risk-based capital ratio
    13.47 %     13.34 %     12.69 %                                
Total risk-based capital ratio
    14.70 %     14.54 %     14.02 %                                
                                                         
(1) - Excludes Acquired Loans and Covered Other Real Estate
                                                 
(2) - Mississippi includes Central and Southern Mississippi Regions
                                         
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
                                 
(4) - Excludes Acquired Loans
                                                       
                                                         
n/m - percentage changes greater than +/- 100% are considered not meaningful
                                 
                                   
See Notes to Consolidated Financials                                  

 
 

 

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)
 
   
Quarter Ended
   
Nine Months Ended
 
AVERAGE BALANCES
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
Securities AFS-taxable
  $ 2,202,020     $ 2,205,352     $ 2,136,392     $ 3,026,186     $ 3,279,606     $ 2,181,495     $ 3,126,539  
Securities AFS-nontaxable
    131,305       135,956       149,744       160,989       172,055       138,934       170,616  
Securities HTM-taxable
    1,126,309       1,120,448       1,118,747       265,792       59,168       1,121,862       55,865  
Securities HTM-nontaxable
    43,114       43,551       31,039       21,172       11,024       39,279       13,043  
     Total securities
    3,502,748       3,505,307       3,435,922       3,474,139       3,521,853       3,481,570       3,366,063  
Loans (including loans held for sale)
    6,387,251       6,160,781       5,950,720       5,847,557       5,784,170       6,167,850       5,753,759  
Acquired loans:
                                                       
Noncovered loans
    585,675       664,733       751,723       812,426       888,883       666,769       790,943  
Covered loans
    28,971       31,122       33,805       34,640       39,561       31,282       44,229  
Fed funds sold and rev repos
    4,228       2,648       6,460       11,094       8,978       4,437       7,477  
Other earning assets
    41,871       36,259       36,820       32,118       38,226       38,335       35,893  
     Total earning assets
    10,550,744       10,400,850       10,215,450       10,211,974       10,281,671       10,390,243       9,998,364  
Allowance for loan losses
    (78,227 )     (77,652 )     (79,736 )     (78,742 )     (79,696 )     (78,533 )     (83,547 )
Cash and due from banks
    272,925       304,441       407,078       275,051       272,320       327,657       275,711  
Other assets
    1,345,771       1,343,384       1,376,024       1,360,712       1,284,813       1,354,948       1,260,227  
     Total assets
  $ 12,091,213     $ 11,971,023     $ 11,918,816     $ 11,768,995     $ 11,759,108     $ 11,994,315     $ 11,450,755  
                                                         
Interest-bearing demand deposits
  $ 1,808,710     $ 1,826,019     $ 1,900,504     $ 1,803,956     $ 1,842,379     $ 1,844,741     $ 1,786,215  
Savings deposits
    3,050,743       3,260,634       3,193,098       2,952,472       2,995,110       3,167,637       2,941,931  
Time deposits less than $100,000
    1,187,794       1,225,706       1,280,513       1,344,488       1,380,954       1,230,997       1,356,729  
Time deposits of $100,000 or more
    874,333       911,531       947,509       961,075       993,948       910,857       972,553  
     Total interest-bearing deposits
    6,921,580       7,223,890       7,321,624       7,061,991       7,212,391       7,154,232       7,057,428  
Fed funds purchased and repos
    540,870       387,289       282,816       361,758       364,446       404,604       315,113  
Short-term borrowings
    181,114       59,465       65,010       63,531       59,324       102,288       59,319  
Long-term FHLB advances
    8,050       8,291       8,406       8,507       8,620       8,248       7,606  
Subordinated notes
    49,923       49,915       49,907       49,898       49,890       49,915       49,882  
Junior subordinated debt securities
    61,856       61,856       61,856       61,856       61,856       61,856       74,043  
     Total interest-bearing liabilities
    7,763,393       7,790,706       7,789,619       7,607,541       7,756,527       7,781,143       7,563,391  
Noninterest-bearing deposits
    2,774,745       2,676,907       2,630,785       2,611,209       2,479,082       2,694,673       2,377,583  
Other liabilities
    140,218       111,170       130,749       203,270       190,143       127,414       175,344  
     Total liabilities
    10,678,356       10,578,783       10,551,153       10,422,020       10,425,752       10,603,230       10,116,318  
Shareholders' equity
    1,412,857       1,392,240       1,367,663       1,346,975       1,333,356       1,391,085       1,334,437  
    Total liabilities and equity
  $ 12,091,213     $ 11,971,023     $ 11,918,816     $ 11,768,995     $ 11,759,108     $ 11,994,315     $ 11,450,755  
                                                         
PERIOD END BALANCES
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
                 
Cash and due from banks
  $ 237,497     $ 322,960     $ 423,819     $ 345,761     $ 335,695                  
Fed funds sold and rev repos
    4,013       5,000       -       7,253       7,867                  
Securities available for sale
    2,363,895       2,376,431       2,382,441       2,194,154       3,372,101                  
Securities held to maturity
    1,169,640       1,156,790       1,155,569       1,168,728       69,980                  
Loans held for sale (LHFS)
    135,562       142,103       120,446       149,169       119,986                  
Loans held for investment (LHFI)
    6,333,651       6,187,000       5,923,766       5,798,881       5,696,641                  
Allowance for loan losses
    (70,134 )     (66,648 )     (67,518 )     (66,448 )     (68,632 )                
Net LHFI
    6,263,517       6,120,352       5,856,248       5,732,433       5,628,009                  
Acquired loans:
                                                       
Noncovered loans
    564,542       616,911       713,647       769,990       837,875                  
Covered loans
    27,607       29,628       32,670       34,216       37,250                  
Allowance for loan losses, acquired loans
    (11,949 )     (11,179 )     (10,540 )     (9,636 )     (5,333 )                
Net acquired loans
    580,200       635,360       735,777       794,570       869,792                  
Net LHFI and acquired loans
    6,843,717       6,755,712       6,592,025       6,527,003       6,497,801                  
Premises and equipment, net
    200,474       201,639       203,771       207,283       208,837                  
Mortgage servicing rights
    67,090       65,049       67,614       67,834       63,150                  
Goodwill
    365,500       365,500       365,500       372,851       372,463                  
Identifiable intangible assets
    35,357       37,506       39,697       41,990       44,424                  
Other real estate, excluding covered other real estate
    97,037       106,970       111,536       106,539       116,329                  
Covered other real estate
    4,146       3,872       4,759       5,108       5,092                  
FDIC indemnification asset
    8,154       10,866       13,487       14,347       17,085                  
Other assets
    564,234       569,598       576,390       582,363       574,387                  
     Total assets
  $ 12,096,316     $ 12,119,996     $ 12,057,054     $ 11,790,383     $ 11,805,197                  
                                                         
Deposits:
                                                       
Noninterest-bearing
  $ 2,723,480     $ 2,729,199     $ 2,879,341     $ 2,663,503     $ 2,643,612                  
Interest-bearing
    6,789,745       7,131,167       7,242,778       7,196,399       7,143,622                  
Total deposits
    9,513,225       9,860,366       10,122,119       9,859,902       9,787,234                  
Fed funds purchased and repos
    607,851       559,316       259,341       251,587       342,465                  
Short-term borrowings
    316,666       61,227       59,671       66,385       60,698                  
Long-term FHLB advances
    8,003       8,236       8,341       8,458       8,562                  
Subordinated notes
    49,928       49,920       49,912       49,904       49,896                  
Junior subordinated debt securities
    61,856       61,856       61,856       61,856       61,856                  
Other liabilities
    123,689       119,184       121,919       137,338       164,972                  
     Total liabilities
    10,681,218       10,720,105       10,683,159       10,435,430       10,475,683                  
Common stock
    14,051       14,051       14,051       14,038       13,998                  
Capital surplus
    354,251       353,196       352,402       349,680       343,759                  
Retained earnings
    1,081,161       1,063,201       1,045,939       1,034,966       1,023,983                  
Accum other comprehensive
                                                       
    loss, net of tax
    (34,365 )     (30,557 )     (38,497 )     (43,731 )     (52,226 )                
     Total shareholders' equity
    1,415,098       1,399,891       1,373,895       1,354,953       1,329,514                  
     Total liabilities and equity
  $ 12,096,316     $ 12,119,996     $ 12,057,054     $ 11,790,383     $ 11,805,197                  
                                                         
See Notes to Consolidated Financials                             

 
 

 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands except per share data)
(unaudited)
 
   
Quarter Ended
   
Nine Months Ended
 
INCOME STATEMENTS
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
Interest and fees on LHFS & LHFI-FTE
  $ 70,197     $ 69,618     $ 66,185     $ 67,038     $ 68,417     $ 206,000     $ 203,579  
Interest and fees on acquired loans
    23,200       23,250       16,786       23,384       19,183       63,236       52,952  
Interest on securities-taxable
    19,712       19,522       19,220       19,078       18,654       58,454       53,740  
Interest on securities-tax exempt-FTE
    1,845       1,912       1,920       1,963       1,960       5,677       5,952  
Interest on fed funds sold and rev repos
    9       6       5       14       8       20       17  
Other interest income
    386       379       375       367       372       1,140       1,099  
     Total interest income-FTE
    115,349       114,687       104,491       111,844       108,594       334,527       317,339  
Interest on deposits
    3,606       3,970       4,365       4,768       4,970       11,941       14,950  
Interest on fed funds pch and repos
    180       110       76       104       106       366       275  
Other interest expense
    1,425       1,375       1,363       1,370       1,389       4,163       4,392  
     Total interest expense
    5,211       5,455       5,804       6,242       6,465       16,470       19,617  
     Net interest income-FTE
    110,138       109,232       98,687       105,602       102,129       318,057       297,722  
Provision for loan losses, LHFI
    3,058       351       (805 )     (1,983 )     (3,624 )     2,604       (11,438 )
Provision for loan losses, acquired loans
    1,145       3,784       63       4,169       3,292       4,992       1,870  
     Net interest income after provision-FTE
    105,935       105,097       99,429       103,416       102,461       310,461       307,290  
Service charges on deposit accounts
    12,743       11,846       11,568       13,114       13,852       36,157       38,462  
Insurance commissions
    9,240       8,300       8,097       7,343       8,227       25,637       23,483  
Wealth management
    8,038       7,710       8,135       8,145       7,520       23,883       21,335  
Bank card and other fees
    7,279       9,894       9,081       9,580       8,929       26,254       26,381  
Mortgage banking, net
    5,842       6,191       6,829       5,186       8,440       18,862       28,318  
Other, net
    (160 )     199       (21 )     (4,802 )     165       18       (3,171 )
     Nonint inc-excl sec gains (losses), net
    42,982       44,140       43,689       38,566       47,133       130,811       134,808  
Security gains (losses), net
    (89 )     -       389       107       -       300       378  
     Total noninterest income
    42,893       44,140       44,078       38,673       47,133       131,111       135,186  
Salaries and employee benefits
    56,675       56,134       56,726       56,687       56,043       169,535       165,040  
Services and fees
    14,489       14,543       13,165       14,476       13,580       42,197       39,428  
Net occupancy-premises
    6,817       6,413       6,606       6,659       6,644       19,836       19,302  
Equipment expense
    5,675       6,136       6,138       6,400       6,271       17,949       18,138  
FDIC assessment expense
    2,644       2,468       2,416       2,228       2,376       7,528       6,773  
ORE/Foreclosure expense
    930       3,836       3,315       3,009       3,079       8,081       12,030  
Other expense
    12,964       13,231       13,252       15,408       13,531       39,447       50,153  
     Total noninterest expense
    100,194       102,761       101,618       104,867       101,524       304,573       310,864  
Income before income taxes and tax eq adj
    48,634       46,476       41,889       37,222       48,070       136,999       131,612  
Tax equivalent adjustment
    3,909       3,944       3,783       3,747       3,700       11,636       11,090  
Income before income taxes
    44,725       42,532       38,106       33,475       44,370       125,363       120,522  
Income taxes
    11,136       9,635       9,103       5,436       11,336       29,874       31,501  
Net income
  $ 33,589     $ 32,897     $ 29,003     $ 28,039     $ 33,034     $ 95,489     $ 89,021  
                                                         
Per share data
                                                       
     Earnings per share - basic
  $ 0.50     $ 0.49     $ 0.43     $ 0.42     $ 0.49     $ 1.42     $ 1.33  
                                                         
     Earnings per share - diluted
  $ 0.50     $ 0.49     $ 0.43     $ 0.42     $ 0.49     $ 1.41     $ 1.33  
                                                         
     Dividends per share
  $ 0.23     $ 0.23     $ 0.23     $ 0.23     $ 0.23     $ 0.69     $ 0.69  
                                                         
Weighted average shares outstanding
                                                       
     Basic
    67,439,788       67,439,659       67,410,147       67,249,877       67,177,013       67,429,973       66,778,622  
                                                         
     Diluted
    67,608,612       67,582,714       67,550,483       67,449,778       67,382,478       67,580,209       66,962,534  
                                                         
Period end shares outstanding
    67,439,788       67,439,788       67,439,562       67,372,980       67,181,694       67,439,788       67,181,694  
                                                         
                                                         
OTHER FINANCIAL DATA
                                                       
Return on equity
    9.43 %     9.48 %     8.60 %     8.26 %     9.83 %     9.18 %     8.92 %
Return on average tangible equity
    13.70 %     13.90 %     12.93 %     12.59 %     14.92 %     13.52 %     13.25 %
Return on assets
    1.10 %     1.10 %     0.99 %     0.95 %     1.11 %     1.06 %     1.04 %
Interest margin - Yield - FTE
    4.34 %     4.42 %     4.15 %     4.35 %     4.19 %     4.30 %     4.24 %
Interest margin - Cost
    0.20 %     0.21 %     0.23 %     0.24 %     0.25 %     0.21 %     0.26 %
Net interest margin - FTE
    4.14 %     4.21 %     3.92 %     4.10 %     3.94 %     4.09 %     3.98 %
Efficiency ratio (1)
    62.80 %     64.31 %     68.32 %     68.38 %     65.32 %     65.07 %     66.28 %
Full-time equivalent employees
    3,067       3,095       3,114       3,110       3,110                  
                                                         
                                                         
STOCK PERFORMANCE
                                                       
Market value-Close
  $ 23.04     $ 24.69     $ 25.35     $ 26.84     $ 25.60                  
Book value
  $ 20.98     $ 20.76     $ 20.37     $ 20.11     $ 19.79                  
Tangible book value
  $ 15.04     $ 14.78     $ 14.36     $ 13.95     $ 13.58                  
                                                         
(1) - The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of
           
partnership tax credits, amortization of purchased intangibles, and nonroutine income and expense items.
                   
                                                   
See Notes to Consolidated Financials                                                  

 
 

 

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)
 
   
Quarter Ended
             
NONPERFORMING ASSETS (1)
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
             
Nonaccrual loans
                                         
  Alabama
  $ 852     $ 80     $ 96     $ 14     $ 81              
  Florida
    10,986       11,041       9,956       12,278       14,619              
  Mississippi (2)
    65,751       49,430       44,168       42,307       43,132              
  Tennessee (3)
    5,901       4,244       5,206       4,390       5,596              
  Texas
    4,824       6,323       4,572       6,249       9,953              
     Total nonaccrual loans
    88,314       71,118       63,998       65,238       73,381              
Other real estate
                                                   
  Alabama
    24,256       24,541       24,103       25,912       25,308              
  Florida
    36,608       43,207       42,013       34,480       39,198              
  Mississippi (2)
    16,419       18,723       22,287       22,766       25,439              
  Tennessee (3)
    11,347       12,073       13,000       12,892       14,615              
  Texas
    8,407       8,426       10,133       10,489       11,769              
     Total other real estate
    97,037       106,970       111,536       106,539       116,329              
        Total nonperforming assets
  $ 185,351     $ 178,088     $ 175,534     $ 171,777     $ 189,710              
                                                     
LOANS PAST DUE OVER 90 DAYS (4)
                                                   
LHFI
  $ 3,839     $ 1,936     $ 1,870     $ 3,298     $ 2,344              
                                                     
LHFS-Guaranteed GNMA serviced loans
                                                   
(no obligation to repurchase)
  $ 24,979     $ 21,810     $ 20,109     $ 21,540     $ 18,432              
                                                     
                                                     
   
Quarter Ended
   
Nine Months Ended
 
ALLOWANCE FOR LOAN LOSSES (4)
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
Beginning Balance
  $ 66,648     $ 67,518     $ 66,448     $ 68,632     $ 72,825     $ 66,448     $ 78,738  
Provision for loan losses
    3,058       351       (805 )     (1,983 )     (3,624 )     2,604       (11,438 )
Charge-offs
    (3,216 )     (3,820 )     (3,016 )     (3,305 )     (3,817 )     (10,052 )     (10,173 )
Recoveries
    3,644       2,599       4,891       3,104       3,248       11,134       11,505  
Net recoveries (charge-offs)
    428       (1,221 )     1,875       (201 )     (569 )     1,082       1,332  
Ending Balance
  $ 70,134     $ 66,648     $ 67,518     $ 66,448     $ 68,632     $ 70,134     $ 68,632  
                                                         
PROVISION FOR LOAN LOSSES (4)
                                                       
Alabama
  $ 1,093     $ 696     $ 472     $ 332     $ 550     $ 2,261     $ 1,458  
Florida
    (147 )     (2,014 )     (3,499 )     (2,350 )     (2,642 )     (5,660 )     (9,742 )
Mississippi (2)
    4,679       2,877       1,983       3,336       (1,051 )     9,539       (3,491 )
Tennessee (3)
    244       (277 )     (915 )     (117 )     (150 )     (948 )     (863 )
Texas
    (2,811 )     (931 )     1,154       (3,184 )     (331 )     (2,588 )     1,200  
     Total provision for loan losses
  $ 3,058     $ 351     $ (805 )   $ (1,983 )   $ (3,624 )   $ 2,604     $ (11,438 )
                                                         
NET CHARGE-OFFS (4)
                                                       
Alabama
  $ 172     $ 84     $ 55     $ 74     $ 132     $ 311     $ 210  
Florida
    (89 )     (525 )     (2,524 )     (634 )     (138 )     (3,138 )     (2,413 )
Mississippi (2)
    462       1,518       676       393       375       2,656       376  
Tennessee (3)
    48       87       (1 )     506       (153 )     134       199  
Texas
    (1,021 )     57       (81 )     (138 )     353       (1,045 )     296  
     Total net (recoveries) charge-offs
  $ (428 )   $ 1,221     $ (1,875 )   $ 201     $ 569     $ (1,082 )   $ (1,332 )
                                                         
CREDIT QUALITY RATIOS (1)
                                                       
Net charge offs/average loans
    -0.03 %     0.08 %     -0.13 %     0.01 %     0.04 %     -0.02 %     -0.03 %
Provision for loan losses/average loans
    0.19 %     0.02 %     -0.05 %     -0.13 %     -0.25 %     0.06 %     -0.27 %
Nonperforming loans/total loans (incl LHFS)
    1.37 %     1.12 %     1.06 %     1.10 %     1.26 %                
Nonperforming assets/total loans (incl LHFS)
    2.87 %     2.81 %     2.90 %     2.89 %     3.26 %                
Nonperforming assets/total loans (incl LHFS) +ORE
    2.82 %     2.77 %     2.85 %     2.84 %     3.20 %                
ALL/total loans (excl LHFS)
    1.11 %     1.08 %     1.14 %     1.15 %     1.20 %                
ALL-commercial/total commercial loans
    1.26 %     1.20 %     1.33 %     1.30 %     1.39 %                
ALL-consumer/total consumer and home mortgage loans
    0.69 %     0.75 %     0.65 %     0.75 %     0.73 %                
ALL/nonperforming loans
    79.41 %     93.71 %     105.50 %     101.86 %     93.53 %                
ALL/nonperforming loans -
                                                       
   (excl impaired loans)
    178.81 %     159.71 %     180.86 %     190.70 %     161.96 %                
                                                         
CAPITAL RATIOS
                                                       
Total equity/total assets
    11.70 %     11.55 %     11.39 %     11.49 %     11.26 %                
Tangible equity/tangible assets
    8.67 %     8.51 %     8.31 %     8.26 %     8.01 %                
Tangible equity/risk-weighted assets
    12.24 %     12.19 %     12.08 %     11.88 %     11.66 %                
Tier 1 leverage ratio
    9.54 %     9.43 %     9.14 %     9.06 %     8.78 %                
Tier 1 common risk-based capital ratio
    12.74 %     12.61 %     12.37 %     12.21 %     11.92 %                
Tier 1 risk-based capital ratio
    13.47 %     13.34 %     13.11 %     12.97 %     12.69 %                
Total risk-based capital ratio
    14.70 %     14.54 %     14.34 %     14.18 %     14.02 %                
                                                         
                                                         
(1) - Excludes Acquired Loans and Covered Other Real Estate
                           
(2) - Mississippi includes Central and Southern Mississippi Regions
                           
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
                           
(4) - Excludes Acquired Loans
                           
                     
See Notes to Consolidated Financials                                    

 
 

 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)
 
Note 1 – Business Combinations

Oxford, Mississippi Branches

On July 26, 2013, Trustmark National Bank (TNB), a subsidiary of Trustmark Corporation (Trustmark), completed its acquisition of two branches of SOUTHBank, F.S.B. (SOUTHBank), located in Oxford, Mississippi.  As a result of this acquisition, TNB assumed deposit accounts of approximately $11.7 million in addition to purchasing the two physical branch offices.  The transaction was not material to Trustmark’s consolidated financial statements and was not considered a business combination in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations.”

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):
 
   
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
 
SECURITIES AVAILABLE FOR SALE
                             
U.S. Treasury securities
  $ 100     $ 100     $ 100     $ 502     $ 503  
U.S. Government agency obligations
                                       
     Issued by U.S. Government agencies
    83,011       117,489       123,368       129,293       133,013  
     Issued by U.S. Government sponsored agencies
    30,779       40,848       40,601       40,179       132,425  
Obligations of states and political subdivisions
    165,463       171,229       172,437       171,738       212,991  
Mortgage-backed securities
                                       
  Residential mortgage pass-through securities
                                       
     Guaranteed by GNMA
    12,828       13,492       14,263       14,474       48,240  
     Issued by FNMA and FHLMC
    213,420       225,229       232,488       241,118       214,795  
  Other residential mortgage-backed securities
                                       
     Issued or guaranteed by FNMA, FHLMC, or GNMA
    1,603,138       1,543,619       1,530,068       1,290,741       2,048,275  
  Commercial mortgage-backed securities
                                       
     Issued or guaranteed by FNMA, FHLMC, or GNMA
    221,641       229,283       232,072       242,172       354,131  
Asset-backed securities and structured financial products
    33,515       35,142       37,044       63,937       227,728  
       Total securities available for sale
  $ 2,363,895     $ 2,376,431     $ 2,382,441     $ 2,194,154     $ 3,372,101  
                                         
SECURITIES HELD TO MATURITY
                                       
U.S. Government agency obligations
                                       
     Issued by U.S. Government sponsored agencies
  $ 100,767     $ 100,563     $ 100,361     $ 100,159     $ -  
Obligations of states and political subdivisions
    64,538       65,193       65,757       65,987       30,229  
Mortgage-backed securities
                                       
  Residential mortgage pass-through securities
                                       
     Guaranteed by GNMA
    13,368       13,959       12,177       9,433       2,420  
     Issued by FNMA and FHLMC
    11,816       12,165       12,395       12,724       564  
  Other residential mortgage-backed securities
                                       
     Issued or guaranteed by FNMA, FHLMC, or GNMA
    836,966       822,444       822,135       837,393       -  
  Commercial mortgage-backed securities
                                       
     Issued or guaranteed by FNMA, FHLMC, or GNMA
    142,185       142,466       142,744       143,032       36,767  
       Total securities held to maturity
  $ 1,169,640     $ 1,156,790     $ 1,155,569     $ 1,168,728     $ 69,980  
 
During the fourth quarter of 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $46.6 million ($28.8 million, net of tax). The net unrealized holding loss is amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer.  At September 30, 2014, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive (loss) income in the accompanying balance sheet totaled approximately $41.9 million ($25.9 million, net of tax).

During the fourth quarter of 2013, Trustmark sold $135.6 million of Collateralized Loan Obligations (CLO) generating a net gain of $1.3 million. These securities were identified as available for sale and had been carried in the asset-backed securities and structured financial products line item in the table shown above. This sale left Trustmark with a CLO balance of $25.9 million at December 31, 2013, which was subsequently sold in its entirety for a gain of $389 thousand in January 2014.

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 93% 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 FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)

Note 3 – Loan Composition
 
LHFI BY TYPE (excluding acquired loans)
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
 
Loans secured by real estate:
                             
   Construction, land development and other land loans
  $ 580,794     $ 531,651     $ 592,658     $ 596,889     $ 572,057  
   Secured by 1-4 family residential properties
    1,625,480       1,581,859       1,533,781       1,485,564       1,482,963  
   Secured by nonfarm, nonresidential properties
    1,560,901       1,544,516       1,461,947       1,415,139       1,408,342  
   Other real estate secured
    239,819       250,383       193,221       189,362       196,328  
Commercial and industrial loans
    1,246,753       1,250,146       1,207,367       1,157,614       1,132,863  
Consumer loans
    168,813       165,372       160,153       165,308       164,612  
Other loans
    911,091       863,073       774,639       789,005       739,476  
    LHFI
    6,333,651       6,187,000       5,923,766       5,798,881       5,696,641  
    Allowance for loan losses
    (70,134 )     (66,648 )     (67,518 )     (66,448 )     (68,632 )
        Net LHFI
  $ 6,263,517     $ 6,120,352     $ 5,856,248     $ 5,732,433     $ 5,628,009  
 
ACQUIRED NONCOVERED LOANS BY TYPE
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
 
Loans secured by real estate:
                             
   Construction, land development and other land loans
  $ 64,808     $ 75,353     $ 88,683     $ 98,928     $ 106,655  
   Secured by 1-4 family residential properties
    120,366       133,191       145,213       157,914       168,573  
   Secured by nonfarm, nonresidential properties
    214,806       226,967       271,696       287,136       301,686  
   Other real estate secured
    28,036       30,918       34,787       33,948       35,051  
Commercial and industrial loans
    103,185       114,212       135,114       149,495       186,649  
Consumer loans
    11,236       14,733       15,024       18,428       22,251  
Other loans
    22,105       21,537       23,130       24,141       17,010  
    Noncovered loans
    564,542       616,911       713,647       769,990       837,875  
    Allowance for loan losses
    (11,136 )     (9,770 )     (9,952 )     (7,249 )     (3,007 )
        Net noncovered loans
  $ 553,406     $ 607,141     $ 703,695     $ 762,741     $ 834,868  
 
ACQUIRED COVERED LOANS BY TYPE
 
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
 
Loans secured by real estate:
                             
   Construction, land development and other land loans
  $ 1,721     $ 2,130     $ 2,239     $ 2,363     $ 2,585  
   Secured by 1-4 family residential properties
    14,114       14,565       15,572       16,416       17,785  
   Secured by nonfarm, nonresidential properties
    8,270       8,831       10,629       10,945       12,120  
   Other real estate secured
    2,949       2,376       2,470       2,644       2,817  
Commercial and industrial loans
    327       336       361       394       478  
Consumer loans
    -       -       49       119       151  
Other loans
    226       1,390       1,350       1,335       1,314  
    Covered loans
    27,607       29,628       32,670       34,216       37,250  
    Allowance for loan losses
    (813 )     (1,409 )     (588 )     (2,387 )     (2,326 )
        Net covered loans
  $ 26,794     $ 28,219     $ 32,082     $ 31,829     $ 34,924  
 
 
 

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)

Note 3 – Loan Composition (continued)
                                   
   
September 30, 2014
 
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
  $ 580,794     $ 56,496     $ 59,822     $ 251,931     $ 36,868     $ 175,677  
Secured by 1-4 family residential properties
    1,625,480       34,915       50,888       1,392,033       128,966       18,678  
Secured by nonfarm, nonresidential properties
    1,560,901       81,220       169,716       796,158       145,197       368,610  
Other real estate secured
    239,819       7,236       4,527       155,652       27,064       45,340  
Commercial and industrial loans
    1,246,753       78,335       10,269       797,307       96,445       264,397  
Consumer loans
    168,813       16,028       2,804       130,710       16,512       2,759  
Other loans
    911,091       51,840       46,230       665,139       58,723       89,159  
Loans
  $ 6,333,651     $ 326,070     $ 344,256     $ 4,188,930     $ 509,775     $ 964,620  
                                                 
                                                 
                                                 
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
             
Lots
  $ 51,089     $ 4,319     $ 26,551     $ 14,983     $ 1,154     $ 4,082  
Development
    58,350       836       6,924       31,889       956       17,745  
Unimproved land
    121,841       6,529       21,474       60,039       23,518       10,281  
1-4 family construction
    120,747       21,721       4,724       59,896       2,836       31,570  
Other construction
    228,767       23,091       149       85,124       8,404       111,999  
    Construction, land development and other land loans
  $ 580,794     $ 56,496     $ 59,822     $ 251,931     $ 36,868     $ 175,677  
                                                 
                                                 
                                                 
                                                 
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
                   
Income producing:
                                               
   Retail
  $ 186,564     $ 18,070     $ 38,968     $ 63,805     $ 16,490     $ 49,231  
   Office
    205,957       9,897       44,271       83,556       8,010       60,223  
   Nursing homes/assisted living
    111,338       -       -       92,345       5,848       13,145  
   Hotel/motel
    107,720       11,853       16,067       46,106       23,744       9,950  
   Industrial
    68,183       4,262       6,086       32,871       141       24,823  
   Health care
    29,204       5,147       -       24,014       43       -  
   Convenience stores
    9,225       248       -       5,782       1,266       1,929  
   Other
    144,033       4,677       20,756       68,070       4,327       46,203  
        Total income producing loans
    862,224       54,154       126,148       416,549       59,869       205,504  
                                                 
Owner-occupied:
                                               
   Office
    116,451       5,965       15,652       54,700       8,285       31,849  
   Churches
    90,977       2,895       3,345       41,791       32,092       10,854  
   Industrial warehouses
    115,273       332       4,115       61,568       7,830       41,428  
   Health care
    120,906       11,122       8,666       66,029       16,469       18,620  
   Convenience stores
    53,291       522       1,572       32,919       2,818       15,460  
   Retail
    30,268       1,333       3,906       18,532       3,080       3,417  
   Restaurants
    35,077       241       2,062       27,657       4,076       1,041  
   Auto dealerships
    8,123       -       160       6,367       1,569       27  
   Other
    128,311       4,656       4,090       70,046       9,109       40,410  
        Total owner-occupied loans
    698,677       27,066       43,568       379,609       85,328       163,106  
                                                 
   Loans secured by nonfarm, nonresidential properties
  $ 1,560,901     $ 81,220     $ 169,716     $ 796,158     $ 145,197     $ 368,610  
                                                 
(1) Excludes acquired loans.                                                

 
 

 

 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ 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
   
Nine Months Ended
 
   
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
Securities – taxable
    2.35 %     2.35 %     2.39 %     2.30 %     2.22 %     2.37 %     2.26 %
Securities – nontaxable
    4.20 %     4.27 %     4.31 %     4.28 %     4.25 %     4.26 %     4.33 %
Securities – total
    2.44 %     2.45 %     2.50 %     2.40 %     2.32 %     2.46 %     2.37 %
Loans - LHFI & LHFS
    4.36 %     4.53 %     4.51 %     4.55 %     4.69 %     4.47 %     4.73 %
Acquired loans
    14.98 %     13.40 %     8.67 %     10.95 %     8.20 %     12.11 %     8.48 %
Loans - total
    5.29 %     5.43 %     5.00 %     5.36 %     5.18 %     5.24 %     5.21 %
FF sold & rev repo
    0.84 %     0.91 %     0.31 %     0.50 %     0.35 %     0.60 %     0.30 %
Other earning assets
    3.66 %     4.19 %     4.13 %     4.53 %     3.86 %     3.98 %     4.09 %
     Total earning assets
    4.34 %     4.42 %     4.15 %     4.35 %     4.19 %     4.30 %     4.24 %
                                                         
Interest-bearing deposits
    0.21 %     0.22 %     0.24 %     0.27 %     0.27 %     0.22 %     0.28 %
FF pch & repo
    0.13 %     0.11 %     0.11 %     0.11 %     0.12 %     0.12 %     0.12 %
Other borrowings
    1.88 %     3.07 %     2.99 %     2.96 %     3.07 %     2.50 %     3.08 %
     Total interest-bearing liabilities
    0.27 %     0.28 %     0.30 %     0.33 %     0.33 %     0.28 %     0.35 %
                                                         
Net interest margin
    4.14 %     4.21 %     3.92 %     4.10 %     3.94 %     4.09 %     3.98 %
Net interest margin excluding acquired loans
    3.47 %     3.55 %     3.52 %     3.48 %     3.52 %     3.52 %     3.57 %
 
Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets.  In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans.  The net interest margin decreased 7 basis points during the third quarter of 2014 primarily due to declining yields on loans held for investment and loans held for sale.

During the third quarter of 2014, the yield on average acquired loans includes approximately $8.7 million in recoveries, or an annualized 5.64% of the average acquired loan balance.  Excluding the recoveries on acquired loans, the yield on average acquired loans totaled 9.34%.

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 positive ineffectiveness of $583 thousand and $1.3 million for the quarters ended September 30, 2014 and 2013, respectively.

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
 
   
Quarter Ended
   
Nine Months Ended
 
   
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
Mortgage servicing income, net
  $ 4,674     $ 4,592     $ 4,539     $ 4,688     $ 4,552     $ 13,805     $ 13,204  
Change in fair value-MSR from runoff
    (2,364 )     (2,391 )     (1,812 )     (2,182 )     (2,407 )     (6,567 )     (7,623 )
Gain on sales of loans, net
    3,272       2,749       1,839       2,202       6,465       7,860       24,227  
Other, net
    (323 )     695       400       (533 )     (1,485 )     772       (4,186 )
   Mortgage banking income before hedge ineffectiveness
    5,259       5,645       4,966       4,175       7,125       15,870       25,622  
Change in fair value-MSR from market changes
    700       (3,038 )     (723 )     3,937       287       (3,061 )     7,881  
Change in fair value of derivatives
    (117 )     3,584       2,586       (2,926 )     1,028       6,053       (5,185 )
   Net positive hedge ineffectiveness
    583       546       1,863       1,011       1,315       2,992       2,696  
    Mortgage banking, net
  $ 5,842     $ 6,191     $ 6,829     $ 5,186     $ 8,440     $ 18,862     $ 28,318  

 
 

 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
September 30, 2014
($ 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
   
Nine Months Ended
 
   
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
Partnership amortization for tax credit purposes
  $ (3,006 )   $ (3,006 )   $ (3,006 )   $ (5,642 )   $ (2,388 )   $ (9,018 )   $ (6,726 )
(Decrease) increase in FDIC indemnification asset
    (452 )     (999 )     (688 )     (2,429 )     211       (2,139 )     (3,471 )
Other miscellaneous income
    3,298       4,204       3,673       3,269       2,342       11,175       7,026  
  Total other, net
  $ (160 )   $ 199     $ (21 )   $ (4,802 )   $ 165     $ 18     $ (3,171 )
 
Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits or historical tax credits).  These investments are recorded based on the equity method of accounting, which requires the equity in partnership losses to be recognized when incurred and are recorded as a reduction in other income.  The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.

During the third quarter of 2014, other noninterest income included a write-down of the FDIC indemnification asset of $452 thousand on acquired covered loans obtained from Heritage as a result of loan pay-offs, improved cash flow projections and lower loss expectations for loan pools.

Other noninterest expense consisted of the following for the periods presented ($ in thousands):
 
   
Quarter Ended
   
Nine Months Ended
 
   
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
Loan expense
  $ 3,070     $ 3,107     $ 3,464     $ 4,419     $ 3,390     $ 9,641     $ 10,652  
Non-routine transaction expenses on acquisitions
    -       -       -       -       -       -       7,920  
Amortization of intangibles
    2,150       2,190       2,293       2,434       2,466       6,633       6,380  
Other miscellaneous expense
    7,744       7,934       7,495       8,555       7,675       23,173       25,201  
  Total other expense
  $ 12,964     $ 13,231     $ 13,252     $ 15,408     $ 13,531     $ 39,447     $ 50,153  
 
Note 7 – Non-GAAP Financial Measures

In addition to capital ratios defined by 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.
 
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 FINANCIAL INFORMATION
September 30, 2014
($ in thousands)
(unaudited)
 
Note 7 - Non-GAAP Financial Measures (continued)
                                         
       
Quarter Ended
   
Nine Months Ended
 
       
9/30/2014
   
6/30/2014
   
3/31/2014
   
12/31/2013
   
9/30/2013
   
9/30/2014
   
9/30/2013
 
TANGIBLE EQUITY
                                           
AVERAGE BALANCES
                                           
Total shareholders' equity
    $ 1,412,857     $ 1,392,240     $ 1,367,663     $ 1,346,975     $ 1,333,356     $ 1,391,085     $ 1,334,437  
Less:
Goodwill
      (365,500 )     (365,500 )     (372,720 )     (372,468 )     (368,482 )     (367,880 )     (353,485 )
 
Identifiable intangible assets
      (36,553 )     (38,711 )     (41,015 )     (43,532 )     (45,988 )     (38,743 )     (43,232 )
  Total average tangible equity
    $ 1,010,804     $ 988,029     $ 953,928     $ 930,975     $ 918,886     $ 984,462     $ 937,720  
                                                             
PERIOD END BALANCES
                                                         
Total shareholders' equity
    $ 1,415,098     $ 1,399,891     $ 1,373,895     $ 1,354,953     $ 1,329,514                  
Less:
Goodwill
      (365,500 )     (365,500 )     (365,500 )     (372,851 )     (372,463 )                
 
Identifiable intangible assets
      (35,357 )     (37,506 )     (39,697 )     (41,990 )     (44,424 )                
  Total tangible equity
(a)
  $ 1,014,241     $ 996,885     $ 968,698     $ 940,112     $ 912,627                  
                                                             
TANGIBLE ASSETS
                                                         
Total assets
    $ 12,096,316     $ 12,119,996     $ 12,057,054     $ 11,790,383     $ 11,805,197                  
Less:
Goodwill
      (365,500 )     (365,500 )     (365,500 )     (372,851 )     (372,463 )                
 
Identifiable intangible assets
      (35,357 )     (37,506 )     (39,697 )     (41,990 )     (44,424 )                
  Total tangible assets
(b)
  $ 11,695,459     $ 11,716,990     $ 11,651,857     $ 11,375,542     $ 11,388,310                  
                                                             
Risk-weighted assets
(c)
  $ 8,287,608     $ 8,175,622     $ 8,016,482     $ 7,916,378     $ 7,825,839                  
                                                             
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
                                                       
Net income
    $ 33,589     $ 32,897     $ 29,003     $ 28,039     $ 33,034     $ 95,489     $ 89,021  
Plus:
Intangible amortization net of tax
      1,328       1,353       1,417       1,503       1,523       4,098       3,939  
  Net income adjusted for intangible amortization
  $ 34,917     $ 34,250     $ 30,420     $ 29,542     $ 34,557     $ 99,587     $ 92,960  
                                                             
Period end common shares outstanding
(d)
    67,439,788       67,439,788       67,439,562       67,372,980       67,181,694                  
                                                             
TANGIBLE COMMON EQUITY MEASUREMENTS
                                                       
Return on average tangible equity 1
      13.70 %     13.90 %     12.93 %     12.59 %     14.92 %     13.52 %     13.25 %
Tangible equity/tangible assets
(a)/(b)
    8.67 %     8.51 %     8.31 %     8.26 %     8.01 %                
Tangible equity/risk-weighted assets
(a)/(c)
    12.24 %     12.19 %     12.08 %     11.88 %     11.66 %                
Tangible book value
(a)/(d)*1,000
  $ 15.04     $ 14.78     $ 14.36     $ 13.95     $ 13.58                  
                                                             
TIER 1 COMMON RISK-BASED CAPITAL
                                                       
Total shareholders' equity
    $ 1,415,098     $ 1,399,891     $ 1,373,895     $ 1,354,953     $ 1,329,514                  
Eliminate qualifying AOCI
      34,365       30,557       38,497       43,731       52,226                  
Qualifying tier 1 capital
      60,000       60,000       60,000       60,000       60,000                  
Disallowed goodwill
      (365,500 )     (365,500 )     (365,500 )     (372,851 )     (372,463 )                
Adj to goodwill allowed for deferred taxes
    15,503       15,150       14,798       14,445       14,093                  
Other disallowed intangibles
      (35,357 )     (37,506 )     (39,697 )     (41,990 )     (44,424 )                
Disallowed servicing intangible
      (6,709 )     (6,505 )     (6,761 )     (6,783 )     (6,315 )                
Disallowed deferred taxes
      (1,234 )     (5,134 )     (23,969 )     (24,647 )     (39,476 )                
Total tier 1 capital
      1,116,166       1,090,953       1,051,263       1,026,858       993,155                  
Less:
Qualifying tier 1 capital
      (60,000 )     (60,000 )     (60,000 )     (60,000 )     (60,000 )                
Total tier 1 common capital
(e)
  $ 1,056,166     $ 1,030,953     $ 991,263     $ 966,858     $ 933,155                  
                                                             
Tier 1 common risk-based capital ratio
(e)/(c)
    12.74 %     12.61 %     12.37 %     12.21 %     11.92 %                
                                                             
1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity