Shareholders' Equity

9 Months Ended

Sep. 30, 2019

Note 16 – Shareholders’ Equity

Regulatory Capital

Trustmark and TNB are subject to minimum risk-based capital and leverage capital requirements, as described in the section captioned “Capital Adequacy” included in Part I. Item 1. – Business of Trustmark’s 2018 Annual Report, which are administered by the federal bank regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Trustmark’s and TNB’s minimum risk-based capital requirements include a capital conservation buffer of 2.500% at September 30, 2019 and 1.875% at December 31, 2018. Accumulated other comprehensive loss, net of tax, is not included in computing regulatory capital. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB and limit Trustmark’s and TNB’s ability to pay dividends. As of September 30, 2019, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at September 30, 2019. To be categorized in this manner, Trustmark and TNB maintained minimum common equity Tier 1 risk-based capital, Tier 1 risk-based capital, total risk-based capital and Tier 1 leverage ratios as set forth in the accompanying table, and were not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by their primary federal regulators to meet and maintain a specific capital level for any capital measures. There are no significant conditions or events that have occurred since September 30, 2019, which Management believes have affected Trustmark’s or TNB’s present classification.

The following table provides Trustmark’s and TNB’s actual regulatory capital amounts and ratios under regulatory capital standards in effect at September 30, 2019 and December 31, 2018 ($ in thousands):

	Actual
	Regulatory Capital					Minimum			To Be Well
	Amount		Ratio			Requirement			Capitalized
At September 30, 2019:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,293,808		11.83	%		7.000	%	n/a
Trustmark National Bank		1,333,692		12.20	%		7.000	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,353,808		12.38	%		8.500	%	n/a
Trustmark National Bank		1,333,692		12.20	%		8.500	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,438,283		13.15	%		10.500	%	n/a
Trustmark National Bank		1,418,167		12.97	%		10.500	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,353,808		10.34	%		4.00	%	n/a
Trustmark National Bank		1,333,692		10.21	%		4.00	%		5.00	%

At December 31, 2018:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,271,538		11.77	%		6.375	%	n/a
Trustmark National Bank		1,311,548		12.14	%		6.375	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,331,538		12.33	%		7.875	%	n/a
Trustmark National Bank		1,311,548		12.14	%		7.875	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,412,059		13.07	%		9.875	%	n/a
Trustmark National Bank		1,392,069		12.89	%		9.875	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,331,538		10.26	%		4.00	%	n/a
Trustmark National Bank		1,311,548		10.13	%		4.00	%		5.00	%

Stock Repurchase Program

On March 11, 2016, the Board of Directors of Trustmark authorized a stock repurchase program under which $100.0 million of Trustmark’s outstanding common stock may be acquired through March 31, 2019. Trustmark repurchased approximately 1.2 million shares of its common stock valued at $36.9 million during the three months ended March 31, 2019. Under this authority, Trustmark repurchased approximately 3.2 million shares valued at $100.0 million.

The Board of Directors of Trustmark authorized a new stock repurchase program effective April 1, 2019 under which $100.0 million of Trustmark’s outstanding common stock may be acquired through March 31, 2020. The adoption of this new stock repurchase program followed the receipt of non-objection from the FRB. The shares may be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Under this authority, Trustmark repurchased approximately 537 thousand shares of its common stock valued at $17.5 million between April 1, 2019 and September 30, 2019.

Together, with the repurchases under the previous program, Trustmark purchased approximately 1.7 million shares of its common stock valued at $54.4 million during the nine months ended September 30, 2019, compared to 243 thousand shares valued at $7.9 million repurchased during the nine months ended September 30, 2018.

Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

The following tables present the net change in the components of accumulated other comprehensive loss and the related tax effects allocated to each component for the periods presented ($ in thousands). The amortization of prior service cost, recognized net loss due to lump sum settlements and change in net actuarial loss are included in the computation of net periodic benefit cost (see Note 11 – Defined Benefit and Other Postretirement Benefits for additional details). Reclassification adjustments related to pension and other postretirement benefit plans are included in salaries and employee benefits and other expense in the accompanying consolidated statements of income. Reclassification adjustments related to the cash flow hedge derivative are included in other interest expense in the accompanying consolidated statements of income.

	Three Months Ended September 30, 2019									Three Months Ended September 30, 2018
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount

Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	4,154		$	(1,038	)	$	3,116		$	(9,660	)	$	2,414		$	(7,246	)
Change in net unrealized holding loss on securities transferred to held to maturity		849			(212	)		637			973			(243	)		730
Total securities available for sale and transferred securities		5,003			(1,250	)		3,753			(8,687	)		2,171			(6,516	)
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		62			(16	)		46			63			(16	)		47
Recognized net loss due to lump sum settlements		47			(13	)		34			41			(10	)		31
Change in net actuarial loss		247			(61	)		186			361			(90	)		271
Total pension and other postretirement benefit plans		356			(90	)		266			465			(116	)		349
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		19			(5	)		14			52			(13	)		39
Reclassification adjustment for (gain) loss realized in net income		(101	)		26			(75	)		(104	)		25			(79	)
Total cash flow hedge derivatives		(82	)		21			(61	)		(52	)		12			(40	)
Total other comprehensive income (loss)	$	5,277		$	(1,319	)	$	3,958		$	(8,274	)	$	2,067		$	(6,207	)

	Nine Months Ended September 30, 2019									Nine Months Ended September 30, 2018
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	43,057		$	(10,764	)	$	32,293		$	(46,974	)	$	11,743		$	(35,231	)
Change in net unrealized holding loss on securities transferred to held to maturity		2,852			(713	)		2,139			2,909			(727	)		2,182
Total securities available for sale and transferred securities		45,909			(11,477	)		34,432			(44,065	)		11,016			(33,049	)
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		187			(47	)		140			188			(48	)		140
Recognized net loss due to lump sum settlements		141			(36	)		105			121			(29	)		92
Change in net actuarial loss		749			(187	)		562			1,092			(273	)		819
Total pension and other postretirement benefit plans		1,077			(270	)		807			1,401			(350	)		1,051
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		(145	)		36			(109	)		611			(153	)		458
Reclassification adjustment for (gain) loss realized in net income		(413	)		104			(309	)		(209	)		52			(157	)
Total cash flow hedge derivatives		(558	)		140			(418	)		402			(101	)		301
Total other comprehensive income (loss)	$	46,428		$	(11,607	)	$	34,821		$	(42,262	)	$	10,565		$	(31,697	)

The following table presents the changes in the balances of each component of accumulated other comprehensive loss for the periods presented ($ in thousands). All amounts are presented net of tax.

	Securities Available for Sale and Transferred Securities			Defined Benefit Pension Items			Cash Flow Hedge Derivatives			Total
Balance at January 1, 2019	$	(43,824	)	$	(12,324	)	$	469		$	(55,679	)
Other comprehensive income (loss) before reclassification		34,432			—			(109	)		34,323
Amounts reclassified from accumulated other comprehensive loss		—			807			(309	)		498
Net other comprehensive income (loss)		34,432			807			(418	)		34,821
Balance at September 30, 2019	$	(9,392	)	$	(11,517	)	$	51		$	(20,858	)

Balance at January 1, 2018	$	(26,535	)	$	(13,468	)	$	278		$	(39,725	)
Other comprehensive income (loss) before reclassification		(33,049	)		—			458			(32,591	)
Amounts reclassified from accumulated other comprehensive loss		—			1,051			(157	)		894
Net other comprehensive income (loss)		(33,049	)		1,051			301			(31,697	)
Reclassification of certain income tax effects related to the change in the federal statutory income tax rate under the Tax Reform Act		(5,694	)		(2,890	)		60			(8,524	)
Balance at September 30, 2018	$	(65,278	)	$	(15,307	)	$	639		$	(79,946	)