Trustmark Corporation Announces 2013 Financial Results

Business Wire

JACKSON, Miss.--(BUSINESS WIRE)--

Trustmark Corporation (TRMK) reported net income available to common shareholders of $28.0 million in the fourth quarter of 2013, which represented diluted earnings per common share of $0.42. For the full year 2013, net income available to common shareholders totaled $117.1 million, resulting in diluted earnings per share of $1.75. Excluding non-routine merger costs and litigation expense that reduced after-tax net income by $8.3 million, or approximately $0.12 per diluted share, Trustmark’s net income available to common shareholders in 2013 totaled $125.3 million, or $1.87 per diluted share. Trustmark’s performance during 2013 produced a return on average tangible common equity of 13.09% and a return on average assets of 1.02%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable March 15, 2014, to shareholders of record on March 1, 2014. Since inception, Trustmark has consistently paid quarterly cash dividends to its shareholders. These dividends have grown over time – and have never decreased – due to the quality and sustainability of earnings.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50791299&lang=en

Gerard R. Host, President and CEO, stated, “Trustmark’s achievements in 2013 were significant. We continued to build upon and expand customer relationships, as reflected by growth in our banking, wealth management and insurance businesses. Over the course of the year, revenue increased 8.9% to a record level of $562.3 million. Credit quality continued to improve and was an important contributor to our financial success. During the year, we successfully completed the largest acquisition in our history, entering a number of new markets throughout Alabama as well as enhancing our position in the Florida panhandle. We also continued investing in technology to increase revenue and improve efficiency. 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 as we enter our 125th year.”

Balance Sheet Management

  • Loans held for investment increased $102.2 million in fourth quarter, $206.1 million in 2013
  • Net interest income (FTE) totaled $105.6 million in fourth quarter, resulting in 4.10% net interest margin

Loans held for investment totaled $5.8 billion at December 31, 2013, an increase of $102.2 million, or 1.8% (7.2% annualized), from the prior quarter and $206.1 million, or 3.7%, from one year earlier. From a geographic perspective, loans in Trustmark’s Alabama, Mississippi, Texas and Tennessee markets expanded $44.2 million, $42.2 million, $12.8 million, and $7.4 million, from the prior quarter respectively, while loans in the Florida market declined $4.5 million.

Growth was also diversified by loan type. During the fourth quarter, increased lending to medical facilities and public entities in Mississippi, Alabama, and Tennessee was reflected in Other loan growth of $49.5 million. Construction lending expanded $24.8 million due to growth in Trustmark’s Texas, Alabama, Tennessee and Mississippi markets. Commercial and industrial loans increased $24.8 million principally due to growth in Trustmark’s Texas and Alabama markets. Commercial real estate loans increased $6.8 million as growth in Mississippi and Alabama was offset in part by declines in Texas and Tennessee. Trustmark’s single-family mortgage portfolio increased $2.6 million as growth in Alabama and Tennessee was offset in part by declines in Mississippi and Florida. Trustmark’s consumer lending portfolio was relatively flat while other real estate secured loans decreased $7.0 million.

Acquired loans totaled $804.2 million at December 31, 2013, down $70.9 million from the prior quarter but up $670.6 million from one year earlier. Collectively, loans held for investment and acquired loans totaled $6.6 billion at year-end 2013, up $31.3 million from the prior quarter and $876.8 million from the prior year.

During the fourth quarter of 2013, average earning assets totaled $10.2 billion; while average deposits were stable at $9.7 billion, average noninterest bearing deposits increased to 27.0% of average total deposits.

Net interest income (FTE) in the fourth quarter totaled $105.6 million, an increase of $3.5 million from the prior quarter, and resulted in a 16 basis point expansion of the net interest margin to 4.10%, principally attributable to increased recoveries on acquired loans. The yield on acquired loans totaled 10.95% and included recoveries on loan pay-offs of $9.3 million, which represented approximately 4.35% of the total acquired annualized loan yield in the fourth quarter. Excluding acquired loans, the net interest margin in the fourth quarter totaled 3.48% compared to 3.52% in the prior quarter.

Trustmark’s solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At December 31, 2013, Trustmark’s tangible common equity to tangible assets ratio was 8.26% while the total risk-based capital ratio was 14.18%, significantly exceeding the 10.00% benchmark to be classified as “well-capitalized.” 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

  • Significant reduction in classified and criticized loan balances
  • Nonperforming loans declined 20.8% during the year
  • Improved credit quality reflected in net recoveries and negative provisioning in 2013

Nonperforming loans totaled $65.2 million at December 31, 2013, a decline of 11.1% from the prior quarter and 20.8% from the prior year. Foreclosed other real estate totaled $106.5 million, a decline of $9.8 million, or 8.4%, from the prior quarter. Relative to levels one-year earlier, other real estate increased $28.4 million; excluding the acquisition-related increase of $44.3 million attributable to BancTrust, other real estate declined $16.0 million, or 20.4%.

Net charge-offs during the fourth quarter of 2013 totaled $201 thousand and represented 0.01% of average loans. During 2013, recoveries exceeded charge-offs, resulting in a net recovery of $1.1 million, which represented a negative 0.02% of average loans. This compares favorably to net charge-offs in 2012 of $17.5 million, or 0.30% of average loans. The provision for loan losses for loans held for investment was a negative $2.0 million in the fourth quarter of 2013, reflecting the net recovery position and improved credit quality. For the year ended December 31, 2013, the provision for loan losses for loans held for investment was a negative $13.4 million; during 2012, the provision for loan losses for loans held for investment was a positive $6.8 million.

During the fourth quarter, Trustmark experienced a decline of $22.6 million, or 9.28%, in classified loans and a decline of $23.9 million, or 8.49%, in criticized loans relative to the prior quarter. Relative to the prior year, classified loan balances decreased $32.9 million, or 12.95%, while criticized loan balances decreased $71.1 million, or 21.63%.

Allocation of Trustmark’s $66.4 million allowance for loan losses represented 1.30% of commercial loans and 0.75% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.15% at December 31, 2013, which represents a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 190.70% of nonperforming loans, excluding impaired loans.

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

Noninterest Income

  • Noninterest income totaled $173.9 million in 2013
  • Wealth management revenue achieved record level in 2013
  • Tax credit investments reduced effective tax rate to 23.99% in 2013

Noninterest income totaled $38.7 million in the fourth quarter, a decrease of $8.5 million from the prior quarter. This decline resulted in part from an increase in partnership amortization of $3.3 million related to additional tax credit investments that reduced the Corporation’s effective tax rate during the fourth quarter as well as a $2.6 million reduction in the FDIC indemnification asset resulting from the re-estimation of cash flows and loan pay-offs. Each of these items was included in other noninterest income.

Mortgage banking revenue in the fourth quarter totaled $5.2 million, a decline of $3.3 million from the prior quarter due principally to lower secondary marketing gains resulting from tightening mortgage spreads and reduced volume during the quarter and lower positive mortgage servicing hedge ineffectiveness. Mortgage loan production in the fourth quarter totaled $276.0 million, down 22.9% from the prior quarter and 44.2% from levels one year earlier, reflecting the decline in refinance activity following an extended low interest rate environment. Mortgage loan production in 2013 totaled $1.45 billion, a decline of 23.3% from levels in 2012, while mortgage banking revenue declined 18.2% to $33.5 million.

Insurance revenue in the fourth quarter totaled $7.3 million, reflecting a seasonal decrease of 10.7% relative to the prior quarter and an increase of 6.6% from levels one year earlier. Improved performance year-over-year resulted from increased business development efforts as well as increasing insurance premium levels. During the fourth quarter, new insurance offices opened in Oxford, MS and Nashville, TN. Insurance revenue in 2013 totaled $30.8 million, an increase of 9.3% relative to the prior year.

Wealth management revenue totaled $8.1 million during the fourth quarter, an increase of 8.3% from the prior quarter and 31.8% from the comparable period one year earlier. This growth is attributable to increased sales within investment services resulting from improved market conditions as well as improved profitability within the trust management business and reflects the merger with BancTrust. Wealth management revenue in 2013 totaled $29.5 million, an increase of 27.9% relative to the prior year.

Bank card and other fees totaled $9.6 million in the fourth quarter, an increase of 7.3% from the prior quarter and 20.1% from the comparable period one year earlier. This growth was due in part to increased interchange income from debit cards. Service charges on deposit accounts totaled $13.1 million, a decrease of 5.3% from the prior quarter primarily resulting from a reduction in NSF and overdraft fees; relative to the fourth quarter of 2012, service charges increased 5.8%.

Noninterest Expense

  • Routine noninterest expense remained well-controlled
  • Continued realignment of branch network to enhance efficiency and revenue growth

Noninterest expense totaled $104.9 million in the fourth quarter. Excluding ORE and intangible amortization of $5.5 million, noninterest expense during the fourth quarter totaled $99.4 million, an increase of $3.4 million from comparable expenses in the prior quarter. The increase during the quarter was primarily reflected in salaries and benefits, services and fees and other expenses. Salaries and benefits reflected an increase of $644 thousand, which included an additional year-end incentive accrual of $1.2 million and additional medical expenses of $200 thousand offset by reductions in salaries and commissions of $802 thousand. Services and fees increased by $896 thousand principally due to additional advertising during the fourth quarter of approximately $384 thousand and increased professional service fees of approximately $450 thousand. Other expense increased by $1.9 million, which was primarily attributed to additional reserves for potential mortgage loan repurchases of $615 thousand and increased mortgage foreclosure expenses of $454 thousand.

Trustmark continued realignment of its branch network to enhance productivity and efficiency as well as promote additional revenue growth. As previously announced, Trustmark consolidated six banking centers during the fourth quarter – two each in Alabama, Mississippi, and Houston, Texas. Over the course of 2013, Trustmark consolidated 14 banking centers and opened three new offices – one each in Houston, Jackson and Memphis. Trustmark is committed to investments to support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 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) 317-6789, passcode 10008303, or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, February 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 208 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, a material decline in, or changes in our ability to measure the fair value of assets in our portfolio (including loans and investment securities), 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, acceleration of significantly extended deterioration in loan performance and default levels, a significant increase in foreclosure activity, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of the European financial crisis on the U.S. economy and the markets we serve, 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 CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION    
December 31, 2013  
($ in thousands)
(unaudited)
Linked Quarter Year over Year

QUARTERLY AVERAGE BALANCES

  12/31/2013     9/30/2013     12/31/2012   $ Change % Change   $ Change % Change  
Securities AFS-taxable $ 3,026,186 $ 3,279,606 $ 2,466,738 $ (253,420 ) -7.7 % $ 559,448 22.7 %
Securities AFS-nontaxable 160,989 172,055 169,906 (11,066 ) -6.4 % (8,917 ) -5.2 %
Securities HTM-taxable 265,792 59,168 26,510 206,624 n/m 239,282 n/m
Securities HTM-nontaxable   21,172     11,024     17,443     10,148   92.1 %   3,729   21.4 %
Total securities   3,474,139     3,521,853     2,680,597     (47,714 ) -1.4 %   793,542   29.6 %
Loans (including loans held for sale) 5,847,557 5,784,170 5,834,525 63,387 1.1 % 13,032 0.2 %
Acquired loans:
Noncovered loans 812,426 888,883 82,317 (76,457 ) -8.6 % 730,109 n/m
Covered loans 34,640 39,561 58,272 (4,921 ) -12.4 % (23,632 ) -40.6 %
Fed funds sold and rev repos 11,094 8,978 8,747 2,116 23.6 % 2,347 26.8 %
Other earning assets   32,118     38,226     31,168     (6,108 ) -16.0 %   950   3.0 %
Total earning assets   10,211,974     10,281,671     8,695,626     (69,697 ) -0.7 %   1,516,348   17.4 %
Allowance for loan losses (78,742 ) (79,696 ) (88,715 ) 954 -1.2 % 9,973 -11.2 %
Cash and due from banks 275,051 272,320 238,976 2,731 1.0 % 36,075 15.1 %
Other assets   1,360,712     1,284,813     972,748     75,899   5.9 %   387,964   39.9 %
Total assets $ 11,768,995   $ 11,759,108   $ 9,818,635   $ 9,887   0.1 % $ 1,950,360   19.9 %
 
Interest-bearing demand deposits $ 1,803,956 $ 1,842,379 $ 1,545,967 $ (38,423 ) -2.1 % $ 257,989 16.7 %
Savings deposits 2,952,472 2,995,110 2,275,569 (42,638 ) -1.4 % 676,903 29.7 %
Time deposits less than $100,000 1,344,488 1,380,954 1,120,735 (36,466 ) -2.6 % 223,753 20.0 %
Time deposits of $100,000 or more   961,075     993,948     760,363     (32,873 ) -3.3 %   200,712   26.4 %
Total interest-bearing deposits 7,061,991 7,212,391 5,702,634 (150,400 ) -2.1 % 1,359,357 23.8 %
Fed funds purchased and repos 361,758 364,446 388,007 (2,688 ) -0.7 % (26,249 ) -6.8 %
Short-term borrowings 63,531 59,324 85,313 4,207 7.1 % (21,782 ) -25.5 %
Long-term FHLB advances 8,507 8,620 - (113 ) -1.3 % 8,507 n/m
Subordinated notes 49,898 49,890 49,866 8 0.0 % 32 0.1 %
Junior subordinated debt securities   61,856     61,856     61,856     -   0.0 %   -   0.0 %
Total interest-bearing liabilities 7,607,541 7,756,527 6,287,676 (148,986 ) -1.9 % 1,319,865 21.0 %
Noninterest-bearing deposits 2,611,209 2,479,082 2,115,784 132,127 5.3 % 495,425 23.4 %
Other liabilities   203,270     190,143     126,953     13,127   6.9 %   76,317   60.1 %
Total liabilities 10,422,020 10,425,752 8,530,413 (3,732 ) 0.0 % 1,891,607 22.2 %
Shareholders' equity   1,346,975     1,333,356     1,288,222     13,619   1.0 %   58,753   4.6 %

Total liabilities and equity

$ 11,768,995   $ 11,759,108   $ 9,818,635   $ 9,887   0.1 % $ 1,950,360   19.9 %
 
Linked Quarter Year over Year  

PERIOD END BALANCES

  12/31/2013     9/30/2013     12/31/2012   $ Change % Change   $ Change % Change  
Cash and due from banks $ 345,761 $ 335,695 $ 231,489 $ 10,066 3.0 % $ 114,272 49.4 %
Fed funds sold and rev repos 7,253 7,867 7,046 (614 ) -7.8 % 207 2.9 %
Securities available for sale 2,194,154 3,372,101 2,657,745 (1,177,947 ) -34.9 % (463,591 ) -17.4 %
Securities held to maturity 1,168,728 69,980 42,188 1,098,748 n/m 1,126,540 n/m
Loans held for sale (LHFS) 149,169 119,986 257,986 29,183 24.3 % (108,817 ) -42.2 %
Loans held for investment (LHFI) 5,798,881 5,696,641 5,592,754 102,240 1.8 % 206,127 3.7 %
Allowance for loan losses   (66,448 )   (68,632 )   (78,738 )   2,184   -3.2 %   12,290   -15.6 %
Net LHFI 5,732,433 5,628,009 5,514,016 104,424 1.9 % 218,417 4.0 %
Acquired loans:
Noncovered loans 769,990 837,875 81,523 (67,885 ) -8.1 % 688,467 n/m
Covered loans 34,216 37,250 52,041 (3,034 ) -8.1 % (17,825 ) -34.3 %
Allowance for loan losses, acquired loans   (9,636 )   (5,333 )   (6,075 )   (4,303 ) 80.7 %   (3,561 ) 58.6 %
Net acquired loans   794,570     869,792     127,489     (75,222 ) -8.6 %   667,081   n/m
Net LHFI and acquired loans 6,527,003 6,497,801 5,641,505 29,202 0.4 % 885,498 15.7 %
Premises and equipment, net 207,283 208,837 154,841 (1,554 ) -0.7 % 52,442 33.9 %
Mortgage servicing rights 67,834 63,150 47,341 4,684 7.4 % 20,493 43.3 %
Goodwill 372,851 372,463 291,104 388 0.1 % 81,747 28.1 %
Identifiable intangible assets 41,990 44,424 17,306 (2,434 ) -5.5 % 24,684 n/m
Other real estate, excluding covered other real estate 106,539 116,329 78,189 (9,790 ) -8.4 % 28,350 36.3 %
Covered other real estate 5,108 5,092 5,741 16 0.3 % (633 ) -11.0 %
FDIC indemnification asset 14,347 17,085 21,774 (2,738 ) -16.0 % (7,427 ) -34.1 %
Other assets   582,363     574,387     374,412     7,976   1.4 %   207,951   55.5 %
Total assets $ 11,790,383   $ 11,805,197   $ 9,828,667   $ (14,814 ) -0.1 % $ 1,961,716   20.0 %
 
Deposits:
Noninterest-bearing $ 2,663,503 $ 2,643,612 $ 2,254,211 $ 19,891 0.8 % $ 409,292 18.2 %
Interest-bearing   7,196,399     7,143,622     5,642,306     52,777   0.7 %   1,554,093   27.5 %
Total deposits 9,859,902 9,787,234 7,896,517 72,668 0.7 % 1,963,385 24.9 %
Fed funds purchased and repos 251,587 342,465 288,829 (90,878 ) -26.5 % (37,242 ) -12.9 %
Short-term borrowings 66,385 60,698 86,920 5,687 9.4 % (20,535 ) -23.6 %
Long-term FHLB advances 8,458 8,562 - (104 ) -1.2 % 8,458 n/m
Subordinated notes 49,904 49,896 49,871 8 0.0 % 33 0.1 %
Junior subordinated debt securities 61,856 61,856 61,856 - 0.0 % - 0.0 %
Other liabilities   137,338     164,972     157,305     (27,634 ) -16.8 %   (19,967 ) -12.7 %
Total liabilities   10,435,430     10,475,683     8,541,298     (40,253 ) -0.4 %   1,894,132   22.2 %
Common stock 14,038 13,998 13,506 40 0.3 % 532 3.9 %
Capital surplus 349,680 343,759 285,905 5,921 1.7 % 63,775 22.3 %
Retained earnings 1,034,966 1,023,983 984,563 10,983 1.1 % 50,403 5.1 %
Accum other comprehensive
(loss) income, net of tax   (43,731 )   (52,226 )   3,395     8,495   -16.3 %   (47,126 ) n/m
Total shareholders' equity   1,354,953     1,329,514     1,287,369     25,439   1.9 %   67,584   5.2 %
Total liabilities and equity $ 11,790,383   $ 11,805,197   $ 9,828,667   $ (14,814 ) -0.1 % $ 1,961,716   20.0 %
 

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

 

See Notes to Consolidated Financials

 
...
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2013
($ in thousands except per share data)
(unaudited)
               
 
Quarter Ended     Linked Quarter Year over Year

INCOME STATEMENTS

  12/31/2013     9/30/2013     12/31/2012   $ Change % Change   $ Change % Change  
Interest and fees on LHFS & LHFI-FTE $ 67,038 $ 68,417 $ 69,989 $ (1,379 ) -2.0 % $ (2,951 ) -4.2 %
Interest and fees on acquired loans 23,384 19,183 4,859 4,201 21.9 % 18,525 n/m
Interest on securities-taxable 19,078 18,654 15,305 424 2.3 % 3,773 24.7 %
Interest on securities-tax exempt-FTE 1,963 1,960 2,066 3 0.2 % (103 ) -5.0 %
Interest on fed funds sold and rev repos 14 8 9 6 75.0 % 5 55.6 %
Other interest income   367     372     337     (5 ) -1.3 %   30   8.9 %
Total interest income-FTE   111,844     108,594     92,565     3,250   3.0 %   19,279   20.8 %
Interest on deposits 4,768 4,970 5,061 (202 ) -4.1 % (293 ) -5.8 %
Interest on fed funds pch and repos 104 106 140 (2 ) -1.9 % (36 ) -25.7 %
Other interest expense   1,370     1,389     1,346     (19 ) -1.4 %   24   1.8 %
Total interest expense   6,242     6,465     6,547     (223 ) -3.4 %   (305 ) -4.7 %
Net interest income-FTE 105,602 102,129 86,018 3,473 3.4 % 19,584 22.8 %
Provision for loan losses, LHFI (1,983 ) (3,624 ) (535 ) 1,641 -45.3 % (1,448 ) n/m
Provision for loan losses, acquired loans   4,169     3,292     1,945     877   26.6 %   2,224   n/m
Net interest income after provision-FTE   103,416     102,461     84,608     955   0.9 %   18,808   22.2 %
Service charges on deposit accounts 13,114 13,852 12,391 (738 ) -5.3 % 723 5.8 %
Insurance commissions 7,343 8,227 6,887 (884 ) -10.7 % 456 6.6 %
Wealth management 8,145 7,520 6,181 625 8.3 % 1,964 31.8 %
Bank card and other fees 9,580 8,929 7,978 651 7.3 % 1,602 20.1 %
Mortgage banking, net 5,186 8,440 11,331 (3,254 ) -38.6 % (6,145 ) -54.2 %
Other, net   (4,802 )   165     (2,007 )   (4,967 ) n/m   (2,795 ) n/m
Nonint inc-excl sec gains (losses), net 38,566 47,133 42,761 (8,567 ) -18.2 % (4,195 ) -9.8 %
Security gains (losses), net   107     -     18     107   n/m   89   n/m
Total noninterest income   38,673     47,133     42,779     (8,460 ) -17.9 %   (4,106 ) -9.6 %
Salaries and employee benefits 56,687 56,043 49,724 644 1.1 % 6,963 14.0 %
Services and fees 14,476 13,580 12,572 896 6.6 % 1,904 15.1 %
Net occupancy-premises 6,659 6,644 5,023 15 0.2 % 1,636 32.6 %
Equipment expense 6,400 6,271 5,288 129 2.1 % 1,112 21.0 %
FDIC assessment expense 2,228 2,376 1,075 (148 ) -6.2 % 1,153 n/m
ORE/Foreclosure expense 3,009 3,079 3,173 (70 ) -2.3 % (164 ) -5.2 %
Other expense   15,408     13,531     10,454     1,877   13.9 %   4,954   47.4 %
Total noninterest expense   104,867     101,524     87,309     3,343   3.3 %   17,558   20.1 %
Income before income taxes and tax eq adj 37,222 48,070 40,078 (10,848 ) -22.6 % (2,856 ) -7.1 %
Tax equivalent adjustment   3,747     3,700     3,699     47   1.3 %   48   1.3 %
Income before income taxes 33,475 44,370 36,379 (10,895 ) -24.6 % (2,904 ) -8.0 %
Income taxes   5,436     11,336     8,669     (5,900 ) -52.0 %   (3,233 ) -37.3 %
Net income available to common shareholders $ 28,039   $ 33,034   $ 27,710   $ (4,995 ) -15.1 % $ 329   1.2 %
 
 
Per common share data
Earnings per share - basic $ 0.42   $ 0.49   $ 0.43   $ (0.07 ) -14.3 % $ (0.01 ) -2.3 %
 
Earnings per share - diluted $ 0.42   $ 0.49   $ 0.43   $ (0.07 ) -14.3 % $ (0.01 ) -2.3 %
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ -   0.0 % $ -   0.0 %
 
Weighted average common shares outstanding
Basic   67,249,877     67,177,013     64,785,457  
 
Diluted   67,449,778     67,382,478     65,007,281  
 
Period end common shares outstanding   67,372,980     67,181,694     64,820,414  
 

OTHER FINANCIAL DATA

Return on common equity 8.26 % 9.83 % 8.56 %
Return on average tangible common equity 12.59 % 14.92 % 11.51 %
Return on assets 0.95 % 1.11 % 1.12 %
Interest margin - Yield - FTE 4.35 % 4.19 % 4.23 %
Interest margin - Cost 0.24 % 0.25 % 0.30 %
Net interest margin - FTE 4.10 % 3.94 % 3.94 %
Efficiency ratio (1) 72.74 % 68.02 % 67.80 %
Full-time equivalent employees 3,110 3,110 2,666
 

COMMON STOCK PERFORMANCE

Market value-Close $ 26.84 $ 25.60 $ 22.46
Common book value $ 20.11 $ 19.79 $ 19.86
Tangible common book value $ 13.95 $ 13.58 $ 15.10
 
 
(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and non-routine acquisition related transaction expenses.
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2013
($ in thousands)
(unaudited)
Quarter Ended       Linked Quarter   Year over Year

NONPERFORMING ASSETS (1)

  12/31/2013       9/30/2013       12/31/2012   $ Change   % Change   $ Change   % Change  
Nonaccrual loans
Alabama $ 14 $ 81 $ - $ (67 ) -82.7 % $ 14 n/m
Florida 12,278 14,619 19,314 (2,341 ) -16.0 % (7,036 ) -36.4 %
Mississippi (2) 42,307 43,132 38,960 (825 ) -1.9 % 3,347 8.6 %
Tennessee (3) 4,390 5,596 8,401 (1,206 ) -21.6 % (4,011 ) -47.7 %
Texas   6,249     9,953     15,688     (3,704 ) -37.2 %   (9,439 ) -60.2 %
Total nonaccrual loans 65,238 73,381 82,363 (8,143 ) -11.1 % (17,125 ) -20.8 %
Other real estate
Alabama 25,912 25,308 - 604 2.4 % 25,912 n/m
Florida 34,480 39,198 18,569 (4,718 ) -12.0 % 15,911 85.7 %
Mississippi (2) 22,766 25,439 27,771 (2,673 ) -10.5 % (5,005 ) -18.0 %
Tennessee (3) 12,892 14,615 17,589 (1,723 ) -11.8 % (4,697 ) -26.7 %
Texas   10,489     11,769     14,260     (1,280 ) -10.9 %   (3,771 ) -26.4 %
Total other real estate   106,539     116,329     78,189     (9,790 ) -8.4 %   28,350   36.3 %
Total nonperforming assets $ 171,777   $ 189,710   $ 160,552   $ (17,933 ) -9.5 % $ 11,225   7.0 %
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 3,298   $ 2,344   $ 6,378   $ 954   40.7 % $ (3,080 ) -48.3 %
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 21,540   $ 18,432   $ 43,073   $ 3,108   16.9 % $ (21,533 ) -50.0 %
 
Quarter Ended     Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (4)

  12/31/2013     9/30/2013     12/31/2012   $ Change % Change   $ Change % Change  
Beginning Balance $ 68,632 $ 72,825 $ 83,526 $ (4,193 ) -5.8 % $ (14,894 ) -17.8 %
Provision for loan losses (1,983 ) (3,624 ) (535 ) 1,641 -45.3 % (1,448 ) n/m
Charge-offs (3,305 ) (3,817 ) (8,829 ) 512 -13.4 % 5,524 -62.6 %
Recoveries   3,104     3,248     4,576     (144 ) -4.4 %   (1,472 ) -32.2 %
Net (charge-offs) recoveries   (201 )   (569 )   (4,253 )   368   -64.7 %   4,052   -95.3 %
Ending Balance $ 66,448   $ 68,632   $ 78,738   $ (2,184 ) -3.2 % $ (12,290 ) -15.6 %
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 332 $ 550 $ - $ (218 ) -39.6 % $ 332 n/m
Florida (2,350 ) (2,642 ) (706 ) 292 -11.1 % (1,644 ) n/m
Mississippi (2) 3,336 (1,051 ) 2,031 4,387 n/m 1,305 64.3 %
Tennessee (3) (117 ) (150 ) (1,037 ) 33 -22.0 % 920 -88.7 %
Texas   (3,184 )   (331 )   (823 )   (2,853 ) n/m   (2,361 ) n/m
Total provision for loan losses $ (1,983 ) $ (3,624 ) $ (535 ) $ 1,641   -45.3 % $ (1,448 ) n/m
 

NET CHARGE-OFFS (4)

Alabama $ 74 $ 132 $ - $ (58 ) -43.9 % $ 74 n/m
Florida (634 ) (138 ) (237 ) (496 ) n/m (397 ) n/m
Mississippi (2) 393 375 874 18 4.8 % (481 ) -55.0 %
Tennessee (3) 506 (153 ) (43 ) 659 n/m 549 n/m
Texas   (138 )   353     3,659     (491 ) n/m   (3,797 ) n/m
Total net charge-offs (recoveries) $ 201   $ 569   $ 4,253   $ (368 ) -64.7 % $ (4,052 ) -95.3 %
 

CREDIT QUALITY RATIOS (1)

Net charge offs/average loans 0.01 % 0.04 % 0.29 %
Provision for loan losses/average loans -0.13 % -0.25 % -0.04 %
Nonperforming loans/total loans (incl LHFS) 1.10 % 1.26 % 1.41 %
Nonperforming assets/total loans (incl LHFS) 2.89 % 3.26 % 2.74 %
Nonperforming assets/total loans (incl LHFS) +ORE 2.84 % 3.20 % 2.71 %
ALL/total loans (excl LHFS) 1.15 % 1.20 % 1.41 %
ALL-commercial/total commercial loans 1.30 % 1.39 % 1.59 %
ALL-consumer/total consumer and home mortgage loans 0.75 % 0.73 % 0.97 %
ALL/nonperforming loans 101.86 % 93.53 % 95.60 %
ALL/nonperforming loans -
(excl impaired loans) 190.70 % 161.96 % 174.46 %
 

CAPITAL RATIOS

Common equity/total assets 11.49 % 11.26 % 13.10 %
Tangible common equity/tangible assets 8.26 % 8.01 % 10.28 %
Tangible common equity/risk-weighted assets 11.88 % 11.66 % 14.56 %
Tier 1 leverage ratio 9.06 % 8.78 % 10.97 %
Tier 1 common risk-based capital ratio 12.21 % 11.92 % 14.63 %
Tier 1 risk-based capital ratio 12.97 % 12.69 % 15.53 %
Total risk-based capital ratio 14.18 % 14.02 % 17.22 %
 
(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
December 31, 2013
($ in thousands)
(unaudited)
  Quarter Ended   Year Ended

AVERAGE BALANCES

  12/31/2013       9/30/2013       6/30/2013       3/31/2013       12/31/2012     12/31/2013       12/31/2012  
Securities AFS-taxable $ 3,026,186 $ 3,279,606 $ 3,259,086 $ 2,836,051 $ 2,466,738 $ 3,101,245 $ 2,386,552
Securities AFS-nontaxable 160,989 172,055 171,974 167,773 169,906 168,190 166,790
Securities HTM-taxable 265,792 59,168 59,678 48,632 26,510 108,778 29,551
Securities HTM-nontaxable   21,172     11,024     11,520     16,648     17,443     15,092     19,188  
Total securities   3,474,139     3,521,853     3,502,258     3,069,104     2,680,597     3,393,305     2,602,081  
Loans (including loans held for sale) 5,847,557 5,784,170 5,735,296 5,741,340 5,834,525 5,777,401 5,918,002
Acquired loans:
Noncovered loans 812,426 888,883 949,367 530,643 82,317 796,358 72,111
Covered loans 34,640 39,561 43,425 49,815 58,272 41,812 67,310
Fed funds sold and rev repos 11,094 8,978 6,808 6,618 8,747 8,388 7,552
Other earning assets   32,118     38,226     34,752     34,661     31,168     34,941     31,669  
Total earning assets   10,211,974     10,281,671     10,271,906     9,432,181     8,695,626     10,052,205     8,698,725  
Allowance for loan losses (78,742 ) (79,696 ) (84,574 ) (86,447 ) (88,715 ) (82,336 ) (89,954 )
Cash and due from banks 275,051 272,320 284,056 270,740 238,976 275,545 244,952
Other assets   1,360,712     1,284,813     1,311,262     1,183,493     972,748     1,285,555     949,328  
Total assets $ 11,768,995   $ 11,759,108   $ 11,782,650   $ 10,799,967   $ 9,818,635   $ 11,530,969   $ 9,803,051  
 
Interest-bearing demand deposits $ 1,803,956 $ 1,842,379 $ 1,811,402 $ 1,703,336 $ 1,545,967 $ 1,790,687 $ 1,542,601
Savings deposits 2,952,472 2,995,110 3,060,437 2,767,747 2,275,569 2,944,588 2,357,424
Time deposits less than $100,000 1,344,488 1,380,954 1,419,381 1,268,619 1,120,735 1,353,643 1,157,822
Time deposits of $100,000 or more   961,075     993,948     1,029,498     893,104     760,363     969,660     795,126  
Total interest-bearing deposits 7,061,991 7,212,391 7,320,718 6,632,806 5,702,634 7,058,578 5,852,973
Fed funds purchased and repos 361,758 364,446 312,865 266,958 388,007 326,870 370,283
Short-term borrowings 63,531 59,324 51,718 66,999 85,313 60,381 83,042
Long-term FHLB advances 8,507 8,620 9,575 4,580 - 7,833 -
Subordinated notes 49,898 49,890 49,882 49,874 49,866 49,886 49,854
Junior subordinated debt securities   61,856     61,856     82,460     77,989     61,856     70,971     61,856  
Total interest-bearing liabilities 7,607,541 7,756,527 7,827,218 7,099,206 6,287,676 7,574,519 6,418,008
Noninterest-bearing deposits 2,611,209 2,479,082 2,451,547 2,199,043 2,115,784 2,436,470 2,006,230
Other liabilities   203,270     190,143     159,525     176,210     126,953     182,383     117,196  
Total liabilities 10,422,020 10,425,752 10,438,290 9,474,459 8,530,413 10,193,372 8,541,434
Shareholders' equity   1,346,975     1,333,356     1,344,360     1,325,508     1,288,222     1,337,597     1,261,617  
Total liabilities and equity $ 11,768,995   $ 11,759,108   $ 11,782,650   $ 10,799,967   $ 9,818,635   $ 11,530,969   $ 9,803,051  
 

PERIOD END BALANCES

  12/31/2013     9/30/2013     6/30/2013     3/31/2013     12/31/2012  
Cash and due from banks $ 345,761 $ 335,695 $ 301,532 $ 242,896 $ 231,489
Fed funds sold and rev repos 7,253 7,867 7,869 5,926 7,046
Securities available for sale 2,194,154 3,372,101 3,511,683 3,546,083 2,657,745
Securities held to maturity 1,168,728 69,980 70,338 73,666 42,188
Loans held for sale (LHFS) 149,169 119,986 202,699 207,758 257,986
Loans held for investment (LHFI) 5,798,881 5,696,641 5,577,382 5,531,788 5,592,754
Allowance for loan losses   (66,448 )   (68,632 )   (72,825 )   (76,900 )   (78,738 )
Net LHFI 5,732,433 5,628,009 5,504,557 5,454,888 5,514,016
Acquired loans:
Noncovered loans 769,990 837,875 922,453 1,003,127 81,523
Covered loans 34,216 37,250 40,820 47,589 52,041
Allowance for loan losses, acquired loans   (9,636 )   (5,333 )   (2,690 )   (6,458 )   (6,075 )
Net acquired loans   794,570     869,792     960,583     1,044,258     127,489  
Net LHFI and acquired loans 6,527,003 6,497,801 6,465,140 6,499,146 5,641,505
Premises and equipment, net 207,283 208,837 210,845 210,789 154,841
Mortgage servicing rights 67,834 63,150 60,380 51,529 47,341
Goodwill 372,851 372,463 368,315 366,366 291,104
Identifiable intangible assets 41,990 44,424 46,889 49,361 17,306
Other real estate, excluding covered other real estate 106,539 116,329 117,712 118,406 78,189
Covered other real estate 5,108 5,092 5,147 5,879 5,741
FDIC indemnification asset 14,347 17,085 17,342 20,198 21,774
Other assets   582,363     574,387     477,421     452,512     374,412  
Total assets $ 11,790,383   $ 11,805,197   $ 11,863,312   $ 11,850,515   $ 9,828,667  
 
Deposits:
Noninterest-bearing $ 2,663,503 $ 2,643,612 $ 2,520,895 $ 2,534,287 $ 2,254,211
Interest-bearing   7,196,399     7,143,622     7,296,697     7,375,144     5,642,306  
Total deposits 9,859,902 9,787,234 9,817,592 9,909,431 7,896,517
Fed funds purchased and repos 251,587 342,465 374,021 219,769 288,829
Short-term borrowings 66,385 60,698 56,645 46,325 86,920
Long-term FHLB advances 8,458 8,562 8,679 10,969 -
Subordinated notes 49,904 49,896 49,888 49,879 49,871
Junior subordinated debt securities 61,856 61,856 61,856 94,856 61,856
Other liabilities   137,338     164,972     167,812     166,340     157,305  
Total liabilities   10,435,430     10,475,683     10,536,493     10,497,569     8,541,298  
Common stock 14,038 13,998 13,994 13,992 13,506
Capital surplus 349,680 343,759 342,359 342,233 285,905
Retained earnings 1,034,966 1,023,983 1,006,554 991,012 984,563
Accum other comprehensive
(loss) income, net of tax   (43,731 )   (52,226 )   (36,088 )   5,709     3,395  
Total shareholders' equity   1,354,953     1,329,514     1,326,819     1,352,946     1,287,369  
Total liabilities and equity $ 11,790,383 $ 11,805,197 $ 11,863,312 $ 11,850,515 $ 9,828,667
 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2013
($ in thousands except per share data)
(unaudited)
               
Quarter Ended Year Ended

INCOME STATEMENTS

  12/31/2013     9/30/2013     6/30/2013     3/31/2013     12/31/2012     12/31/2013     12/31/2012  
Interest and fees on LHFS & LHFI-FTE $ 67,038 $ 68,417 $ 67,750 $ 67,412 $ 69,989 $ 270,617 $ 291,273
Interest and fees on acquired loans 23,384 19,183 20,987 12,782 4,859 76,336 18,122
Interest on securities-taxable 19,078 18,654 18,547 16,539 15,305 72,818 66,950
Interest on securities-tax exempt-FTE 1,963 1,960 1,974 2,018 2,066 7,915 8,343
Interest on fed funds sold and rev repos 14 8 5 4 9 31 26
Other interest income   367     372     372     355     337     1,466     1,342  
Total interest income-FTE   111,844     108,594     109,635     99,110     92,565     429,183     386,056  
Interest on deposits 4,768 4,970 5,071 4,909 5,061 19,718 24,604
Interest on fed funds pch and repos 104 106 88 81 140 379 588
Other interest expense   1,370     1,389     1,513     1,490     1,346     5,762     5,477  
Total interest expense   6,242     6,465     6,672     6,480     6,547     25,859     30,669  
Net interest income-FTE 105,602 102,129 102,963 92,630 86,018 403,324 355,387
Provision for loan losses, LHFI (1,983 ) (3,624 ) (4,846 ) (2,968 ) (535 ) (13,421 ) 6,766
Provision for loan losses, acquired loans   4,169     3,292     (1,552 )   130     1,945     6,039     5,528  
Net interest income after provision-FTE   103,416     102,461     109,361     95,468     84,608     410,706     343,093  
Service charges on deposit accounts 13,114 13,852 12,929 11,681 12,391 51,576 50,351
Insurance commissions 7,343 8,227 8,014 7,242 6,887 30,826 28,205
Wealth management 8,145 7,520 6,940 6,875 6,181 29,480 23,056
Bank card and other fees 9,580 8,929 9,507 7,945 7,978 35,961 30,445
Mortgage banking, net 5,186 8,440 8,295 11,583 11,331 33,504 40,960
Other, net   (4,802 )   165     (2,145 )   (1,191 )   (2,007 )   (7,973 )   1,113  
Nonint inc-excl sec gains (losses), net 38,566 47,133 43,540 44,135 42,761 173,374 174,130
Security gains (losses), net   107     -     174     204     18     485     1,059  
Total noninterest income   38,673     47,133     43,714     44,339     42,779     173,859     175,189  
Salaries and employee benefits 56,687 56,043 55,405 53,592 49,724 221,727 190,519
Services and fees 14,476 13,580 12,816 13,032 12,572 53,904 46,751
Net occupancy-premises 6,659 6,644 6,703 5,955 5,023 25,961 20,267
Equipment expense 6,400 6,271 6,193 5,674 5,288 24,538 20,478
FDIC assessment expense 2,228 2,376 2,376 2,021 1,075 9,001 6,502
ORE/Foreclosure expense 3,009 3,079 5,131 3,820 3,173 15,039 11,165
Other expense   15,408     13,531     18,571     18,051     10,454     65,561     48,820  
Total noninterest expense   104,867     101,524     107,195     102,145     87,309     415,731     344,502  
Income before income taxes and tax eq adj 37,222 48,070 45,880 37,662 40,078 168,834 173,780
Tax equivalent adjustment   3,747     3,700     3,735     3,655     3,699     14,837     14,397  
Income before income taxes 33,475 44,370 42,145 34,007 36,379 153,997 159,383
Income taxes   5,436     11,336     11,024     9,141     8,669     36,937     42,100  
Net income available to common shareholders $ 28,039   $ 33,034   $ 31,121   $ 24,866   $ 27,710   $ 117,060   $ 117,283  
 
Per common share data
Earnings per share - basic $ 0.42   $ 0.49   $ 0.46   $ 0.38   $ 0.43   $ 1.75   $ 1.81  
 
Earnings per share - diluted $ 0.42   $ 0.49   $ 0.46   $ 0.38   $ 0.43   $ 1.75   $ 1.81  
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.92   $ 0.92  
 
Weighted average common shares outstanding
Basic   67,249,877     67,177,013     67,162,530     65,983,204     64,785,457     66,897,404     64,658,765  
 
Diluted   67,449,778     67,382,478     67,344,117     66,149,656     65,007,281     67,073,072     64,850,550  
 
Period end common shares outstanding   67,372,980     67,181,694     67,163,195     67,151,087     64,820,414     67,372,980     64,820,414  
 
 

OTHER FINANCIAL DATA

Return on common equity 8.26 % 9.83 % 9.29 % 7.61 % 8.56 % 8.75 % 9.30 %
Return on average tangible common equity 12.59 % 14.92 % 14.09 % 10.82 % 11.51 % 13.09 % 12.55 %
Return on assets 0.95 % 1.11 % 1.06 % 0.93 % 1.12 % 1.02 % 1.20 %
Interest margin - Yield - FTE 4.35 % 4.19 % 4.28 % 4.26 % 4.23 % 4.27 % 4.44 %
Interest margin - Cost 0.24 % 0.25 % 0.26 % 0.28 % 0.30 % 0.26 % 0.35 %
Net interest margin - FTE 4.10 % 3.94 % 4.02 % 3.98 % 3.94 % 4.01 % 4.09 %
Efficiency ratio (1) 72.74 % 68.02 % 70.44 % 67.84 % 67.80 % 69.77 % 65.02 %
Full-time equivalent employees 3,110 3,110 3,119 3,164 2,666
 
 

COMMON STOCK PERFORMANCE

Market value-Close $ 26.84 $ 25.60 $ 24.58 $ 25.01 $ 22.46
Common book value $ 20.11 $ 19.79 $ 19.76 $ 20.15 $ 19.86
Tangible common book value $ 13.95 $ 13.58 $ 13.57 $ 13.96 $ 15.10
 
 
(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and non-routine acquisition related transaction expenses.
 

See Notes to Consolidated Financials

 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2013
($ in thousands)
(unaudited)
               
Quarter Ended

NONPERFORMING ASSETS (1)

  12/31/2013     9/30/2013     6/30/2013     3/31/2013     12/31/2012  
Nonaccrual loans
Alabama $ 14 $ 81 $ 73 $ - $ -
Florida 12,278 14,619 15,916 14,046 19,314
Mississippi (2) 42,307 43,132 41,761 46,697 38,960
Tennessee (3) 4,390 5,596 4,482 4,877 8,401
Texas   6,249     9,953     12,086     17,702     15,688  
Total nonaccrual loans 65,238 73,381 74,318 83,322 82,363
Other real estate
Alabama 25,912 25,308 27,245 28,870 -
Florida 34,480 39,198 35,025 30,662 18,569
Mississippi (2) 22,766 25,439 26,843 26,457 27,771
Tennessee (3) 12,892 14,615 15,811 18,339 17,589
Texas   10,489     11,769     12,788     14,078     14,260  
Total other real estate   106,539     116,329     117,712     118,406     78,189  
Total nonperforming assets $ 171,777   $ 189,710   $ 192,030   $ 201,728   $ 160,552  
 

LOANS PAST DUE OVER 90 DAYS (4)

LHFI $ 3,298   $ 2,344   $ 4,194   $ 2,772   $ 6,378  
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 21,540   $ 18,432   $ 14,003   $ 4,469   $ 43,073  
 
 
Quarter Ended Year Ended

ALLOWANCE FOR LOAN LOSSES (4)

  12/31/2013     9/30/2013     6/30/2013     3/31/2013     12/31/2012     12/31/2013     12/31/2012  
Beginning Balance $ 68,632 $ 72,825 $ 76,900 $ 78,738 $ 83,526 $ 78,738 $ 89,518
Provision for loan losses (1,983 ) (3,624 ) (4,846 ) (2,968 ) (535 ) (13,421 ) 6,766
Charge-offs (3,305 ) (3,817 ) (3,031 ) (3,325 ) (8,829 ) (13,478 ) (31,376 )
Recoveries   3,104     3,248     3,802     4,455     4,576     14,609     13,830  
Net (charge-offs) recoveries   (201 )   (569 )   771     1,130     (4,253 )   1,131     (17,546 )
Ending Balance $ 66,448   $ 68,632   $ 72,825   $ 76,900   $ 78,738   $ 66,448   $ 78,738  
 

PROVISION FOR LOAN LOSSES (4)

Alabama $ 332 $ 550 $ 232 $ 676 $ - $ 1,790 $ -
Florida (2,350 ) (2,642 ) (3,425 ) (3,675 ) (706 ) (12,092 ) (730 )
Mississippi (2) 3,336 (1,051 ) (520 ) (1,920 ) 2,031 (155 ) 7,790
Tennessee (3) (117 ) (150 ) (335 ) (378 ) (1,037 ) (980 ) 460
Texas   (3,184 )   (331 )   (798 )   2,329     (823 )   (1,984 )   (754 )
Total provision for loan losses $ (1,983 ) $ (3,624 ) $ (4,846 ) $ (2,968 ) $ (535 ) $ (13,421 ) $ 6,766  
 

NET CHARGE-OFFS (4)

Alabama $ 74 $ 132 $ 67 $ 11 $ - $ 284 $ -
Florida (634 ) (138 ) (1,426 ) (849 ) (237 ) (3,047 ) 5,261
Mississippi (2) 393 375 291 (290 ) 874 769 7,602
Tennessee (3) 506 (153 ) 103 249 (43 ) 705 1,154
Texas   (138 )   353     194     (251 )   3,659     158     3,529  
Total net charge-offs (recoveries) $ 201   $ 569   $ (771 ) $ (1,130 ) $ 4,253   $ (1,131 ) $ 17,546  
 

CREDIT QUALITY RATIOS (1)

Net charge offs/average loans 0.01 % 0.04 % -0.05 % -0.08 % 0.29 % -0.02 % 0.30 %
Provision for loan losses/average loans -0.13 % -0.25 % -0.34 % -0.21 % -0.04 % -0.23 % 0.11 %
Nonperforming loans/total loans (incl LHFS) 1.10 % 1.26 % 1.29 % 1.45 % 1.41 %
Nonperforming assets/total loans (incl LHFS) 2.89 % 3.26 % 3.32 % 3.51 % 2.74 %
Nonperforming assets/total loans (incl LHFS) +ORE 2.84 % 3.20 % 3.26 % 3.44 % 2.71 %
ALL/total loans (excl LHFS) 1.15 % 1.20 % 1.31 % 1.39 % 1.41 %
ALL-commercial/total commercial loans 1.30 % 1.39 % 1.48 % 1.56 % 1.59 %
ALL-consumer/total consumer and home mortgage loans 0.75 % 0.73 % 0.84 % 0.94 % 0.97 %
ALL/nonperforming loans 101.86 % 93.53 % 97.99 % 92.29 % 95.60 %
ALL/nonperforming loans -
(excl impaired loans) 190.70 % 161.96 % 158.75 % 145.83 % 174.46 %
 

CAPITAL RATIOS

Common equity/total assets 11.49 % 11.26 % 11.18 % 11.42 % 13.10 %
Tangible common equity/tangible assets 8.26 % 8.01 % 7.96 % 8.20 % 10.28 %
Tangible common equity/risk-weighted assets 11.88 % 11.66 % 11.57 % 11.92 % 14.56 %
Tier 1 leverage ratio 9.06 % 8.78 % 8.71 % 9.83 % 10.97 %
Tier 1 common risk-based capital ratio 12.21 % 11.92 % 11.79 % 11.79 % 14.63 %
Tier 1 risk-based capital ratio 12.97 % 12.69 % 12.55 % 12.97 % 15.53 %
Total risk-based capital ratio 14.18 % 14.02 % 13.89 % 14.42 % 17.22 %
 
 
(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 FINANCIALS
December 31, 2013
($ 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.”

BancTrust Financial Group, Inc.

On February 15, 2013, Trustmark completed its merger with BancTrust Financial Group, Inc. (BancTrust), a 26-year-old bank holding company headquartered in Mobile, Alabama. In accordance with the terms of the definitive agreement, the holders of BancTrust common stock received 0.125 of a share of Trustmark common stock for each share of BancTrust common stock in a tax-free exchange. Trustmark issued approximately 2.24 million shares of its common stock for all issued and outstanding shares of BancTrust common stock. The total value of the 2.24 million shares of Trustmark common stock issued to the BancTrust shareholders on the acquisition date was approximately $53.5 million, based on a closing stock price of $23.83 per share of Trustmark common stock on February 15, 2013. At closing, Trustmark repurchased the $50.0 million of BancTrust preferred stock and associated warrant issued to the U.S. Department of Treasury under the Capital Purchase Program for approximately $52.6 million.

The acquisition of BancTrust is consistent with Trustmark’s strategic plan to selectively expand the Trustmark franchise. The acquisition of BancTrust provided Trustmark entry into more than 15 markets in Alabama and enhanced the Trustmark franchise in the Florida Panhandle.

This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. The fair values of assets acquired and liabilities assumed are subject to adjustment if additional information becomes available to indicate a more accurate or appropriate value for an asset or liability during the measurement period, which is not to exceed one year from the acquisition date of February 15, 2013. Assets that are particularly susceptible to adjustment include certain loans, other real estate and certain premises and equipment.

Since the end of the first quarter of 2013, Trustmark has recorded an additional $6.3 million in goodwill based on changes to the estimated fair value of certain acquired loans, other real estate and premises and equipment, net. These measurement period adjustments have been presented on a retrospective basis, consistent with applicable accounting guidance. The estimated fair values were considered preliminary as of December 31, 2013 and are subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period. The statement of assets purchased and liabilities assumed in the BancTrust acquisition is presented below at their adjusted estimated fair values as of the acquisition date of February 15, 2013 ($ in thousands):

  Assets    
Cash and due from banks $ 141,616
Securities 528,016
Loans held for sale 1,050
Acquired noncovered loans 944,235
Premises and equipment, net 54,952
Identifiable intangible assets 33,498
Other real estate 40,103
Other assets   102,073
Total Assets   1,845,543
 
Liabilities
Deposits 1,740,254
Other borrowings 64,051
Other liabilities   16,761
Total Liabilities   1,821,066
 
Net identified assets acquired at fair value 24,477
Goodwill   81,597
Net assets acquired at fair value $ 106,074
 

The excess of the consideration paid over the estimated fair value of the net assets acquired was $81.6 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the acquisition date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years.

Loans, excluding loans held for sale (LHFS), acquired from BancTrust were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements and leases, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2013
($ in thousands)
(unaudited)

Note 1 – Business Combinations (continued)

The operations of BancTrust are included in Trustmark’s operating results from February 15, 2013, and added revenue of $21.4 million and net income available to common shareholders of $3.7 million for the fourth quarter of 2013. Included in Trustmark’s noninterest expense during the first quarter of 2013 are non-routine BancTrust transaction expenses totaling approximately $9.4 million (change in control and severance expense of $1.4 million included in salaries and benefits; professional fees, contract termination and other expenses of $7.9 million included in other expense).

Bay Bank & Trust Company

On March 16, 2012, Trustmark completed its merger with Bay Bank & Trust Co. (Bay Bank), a 76-year old financial institution headquartered in Panama City, Florida. Trustmark acquired all outstanding common stock of Bay Bank for approximately $22 million in cash and stock, comprised of $10 million in cash and the issuance of approximately 510 thousand shares of Trustmark common stock valued at $12 million. This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, are recorded at their estimated fair values as of the acquisition date. The purchase price allocation was deemed preliminary as of March 31, 2012 and was finalized in the second quarter of 2012.

The statement of assets purchased and liabilities assumed in the Bay Bank acquisition is presented below at their estimated fair values as of the acquisition date of March 16, 2012 ($ in thousands):

  Assets    
Cash and due from banks $ 88,154
Securities available for sale 26,369
Acquired noncovered loans 97,914
Premises and equipment, net 9,466
Identifiable intangible assets 7,017
Other real estate 2,569
Other assets   3,471
Total Assets   234,960
 
Liabilities
Deposits 208,796
Other liabilities   526
Total Liabilities   209,322
 
Net assets acquired at fair value 25,638
Consideration paid to Bay Bank   22,003
 
Bargain purchase gain 3,635
Income taxes   -
Bargain purchase gain, net of taxes $ 3,635
 

The bargain purchase gain represents the excess of the net of the estimated fair value of the assets acquired and liabilities assumed over the consideration paid to Bay Bank. Initially, Trustmark recognized a bargain purchase gain of $2.8 million during the first quarter of 2012 and subsequently increased the bargain purchase gain by $881 thousand during the second quarter of 2012 as the fair values associated with the Bay Bank acquisition were finalized. The gain of $3.6 million recognized by Trustmark is considered a gain from a bargain purchase under FASB ASC Topic 805 and is included in other noninterest income. Included in noninterest expense during the first quarter of 2012 are non-routine Bay Bank transaction expenses totaling approximately $2.6 million (change in control and severance expense of $672 thousand included in salaries and benefits; contract termination and other expenses of $1.9 million included in other expense).

Loans acquired from Bay Bank were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2013
($ in thousands)
(unaudited)

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):

    12/31/2013     9/30/2013     6/30/2013     3/31/2013     12/31/2012

SECURITIES AVAILABLE FOR SALE

U.S. Treasury securities $ 502 $ 503 $ 505 $ 506 $ -
U.S. Government agency obligations
Issued by U.S. Government agencies 129,293 133,013 139,066 141,226 10
Issued by U.S. Government sponsored agencies 40,179 132,425 133,791 186,293 105,735
Obligations of states and political subdivisions 171,738 212,991 212,204 218,467 215,761
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 14,474 48,240 46,330 51,138 19,902
Issued by FNMA and FHLMC 241,118 214,795 227,927 241,365 208,564
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,290,741 2,048,275 2,156,320 2,090,516 1,466,366
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 242,172 354,131 361,575 377,070 399,780
Asset-backed securities and structured financial products   63,937   227,728   233,965   239,502   241,627
Total securities available for sale $ 2,194,154 $ 3,372,101 $ 3,511,683 $ 3,546,083 $ 2,657,745
 

SECURITIES HELD TO MATURITY

U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 100,159 $ - $ - $ - $ -
Obligations of states and political subdivisions 65,987 30,229 30,295 33,071 36,206
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 9,433 2,420 2,547 2,932 3,245
Issued by FNMA and FHLMC 12,724 564 567 569 572
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 837,393 - - - -
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   143,032   36,767   36,929   37,094   2,165
Total securities held to maturity $ 1,168,728 $ 69,980 $ 70,338 $ 73,666 $ 42,188

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). These unrealized holding losses are amortized over the remaining life of the security 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 December 31, 2013, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive (loss) income in the accompanying balance sheet totaled approximately $46.4 million ($28.6 million, net of tax).

During the 4th 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 leaves Trustmark with a CLO balance of $25.8 million at December 31, 2013, which was subsequently sold 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 membership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any equity investment in any GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2013
($ in thousands)
(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)

  12/31/2013   9/30/2013   6/30/2013   3/31/2013   12/31/2012
Loans secured by real estate:
Construction, land development and other land loans $ 596,889 $ 572,057 $ 519,263 $ 485,419 $ 468,975
Secured by 1-4 family residential properties (1) 1,485,564 1,482,963 1,414,871 1,430,293 1,497,480
Secured by nonfarm, nonresidential properties 1,415,139 1,408,342 1,406,930 1,385,669 1,410,264
Other real estate secured 189,362 196,328 192,568 174,680 189,949
Commercial and industrial loans 1,157,614 1,132,863 1,169,327 1,206,851 1,169,513
Consumer loans 165,308 164,612 160,318 160,253 171,660
Other loans   789,005     739,476     714,105     688,623     684,913  
LHFI 5,798,881 5,696,641 5,577,382 5,531,788 5,592,754
Allowance for loan losses   (66,448 )   (68,632 )   (72,825 )   (76,900 )   (78,738 )
Net LHFI $ 5,732,433   $ 5,628,009   $ 5,504,557   $ 5,454,888   $ 5,514,016  
 

(1) Previously reported 3/31/2013 balance was increased by $57.4 million due to the misclassification of the proceeds received from the GNMA delinquent loan sale, which should have decreased Other Assets.

 

ACQUIRED NONCOVERED LOANS BY TYPE 12/31/2013   9/30/2013   6/30/2013   3/31/2013   12/31/2012
Loans secured by real estate:
Construction, land development and other land loans $ 98,928 $ 106,655 $ 132,116 $ 138,442 $ 10,056
Secured by 1-4 family residential properties 157,914 168,573 184,928 209,658 19,404
Secured by nonfarm, nonresidential properties 287,136 301,686 318,603 339,953 45,649
Other real estate secured 33,948 35,051 34,869 32,208 669
Commercial and industrial loans 149,495 186,649 206,338 235,286 3,035
Consumer loans 18,428 22,251 27,420 32,694 2,610
Other loans 24,141 17,010 18,179 14,886 100
Noncovered loans 769,990 837,875 922,453 1,003,127 81,523
Allowance for loan losses (7,249) (3,007) (112) (1,961) (1,885)
Net noncovered loans $ 762,741 $ 834,868 $ 922,341 $ 1,001,166 $ 79,638
ACQUIRED COVERED LOANS BY TYPE 12/31/2013   9/30/2013   6/30/2013   3/31/2013   12/31/2012
Loans secured by real estate:
Construction, land development and other land loans $ 2,363 $ 2,585 $ 3,662 $ 3,875 $ 3,924
Secured by 1-4 family residential properties 16,416 17,785 18,899 20,980 23,990
Secured by nonfarm, nonresidential properties 10,945 12,120 13,341 17,355 18,407
Other real estate secured 2,644 2,817 2,929 3,365 3,567
Commercial and industrial loans 394 478 543 648 747
Consumer loans 119 151 173 179 177
Other loans 1,335 1,314 1,273 1,187 1,229
Covered loans 34,216 37,250 40,820 47,589 52,041
Allowance for loan losses (2,387) (2,326) (2,578) (4,497) (4,190)
Net covered loans $ 31,829 $ 34,924 $ 38,242 $ 43,092 $ 47,851

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2013

($ in thousands)

(unaudited)

           
Note 3 – Loan Composition (continued)
December 31, 2013

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 $ 596,889 $ 19,996 $ 76,240 $ 289,112 $ 44,066 $ 167,475
Secured by 1-4 family residential properties 1,485,564 15,041 47,462 1,263,409 137,133 22,519
Secured by nonfarm, nonresidential properties 1,415,139 24,628 148,350 756,457 148,372 337,332
Other real estate secured 189,362 3,441 4,873 132,925 22,092 26,031
Commercial and industrial loans 1,157,614 26,147 12,182 760,366 85,615 273,304
Consumer loans 165,308 12,934 2,617 128,922 18,443 2,392
Other loans   789,005   20,496   24,458   630,116   51,302   62,633
Loans $ 5,798,881 $ 122,683 $ 316,182 $ 3,961,307 $ 507,023 $ 891,686
 
 
 

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

Lots $ 47,605 $ 885 $ 29,155 $ 13,461 $ 1,539 $ 2,565
Development 95,672 766 25,252 41,399 3,601 24,654
Unimproved land 112,758 1,467 18,997 61,926 14,338 16,030
1-4 family construction 96,518 9,419 2,214 58,020 3,060 23,805
Other construction   244,336   7,459   622   114,306   21,528   100,421
Construction, land development and other land loans $ 596,889 $ 19,996 $ 76,240 $ 289,112 $ 44,066 $ 167,475
 
 
 
 

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

Income producing:
Retail $ 160,086 $ 2,930 $ 40,720 $ 63,776 $ 17,000 $ 35,660
Office 168,741 3,868 34,578 85,385 6,801 38,109
Nursing homes/assisted living 101,771 - - 93,542 4,280 3,949
Hotel/motel 68,339 - 367 34,307 24,500 9,165
Industrial 68,173 693 6,018 26,458 152 34,852
Health care 13,908 3,100 - 10,711 97 -
Convenience stores 10,806 256 - 6,652 706 3,192
Other   154,761   5,264   19,950   75,792   3,818   49,937
Total income producing loans 746,585 16,111 101,633 396,623 57,354 174,864
 
Owner-occupied:
Office 104,576 1,550 14,910 60,003 4,458 23,655
Churches 81,312 2,008 2,983 40,363 25,342 10,616
Industrial warehouses 97,403 928 3,142 42,143 7,358 43,832
Health care 101,187 - 14,169 56,948 14,917 15,153
Convenience stores 56,026 - 1,649 31,496 3,277 19,604
Retail 28,374 464 3,665 17,003 3,258 3,984
Restaurants 34,714 - 1,830 28,400 3,330 1,154
Auto dealerships 12,056 - 246 10,077 1,692 41
Other   152,906   3,567   4,123   73,401   27,386   44,429
Total owner-occupied loans 668,554 8,517 46,717 359,834 91,018 162,468
           
Loans secured by nonfarm, nonresidential properties $ 1,415,139 $ 24,628 $ 148,350 $ 756,457 $ 148,372 $ 337,332
 
(1) Excludes acquired loans.
 

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2013
($ 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   Year Ended
12/31/2013   9/30/2013   6/30/2013   3/31/2013   12/31/2012 12/31/2013   12/31/2012
Securities – taxable 2.30% 2.22% 2.24% 2.33% 2.44% 2.27% 2.77%
Securities – nontaxable 4.28% 4.25% 4.31% 4.44% 4.39% 4.32% 4.49%
Securities – total 2.40% 2.32% 2.35% 2.45% 2.58% 2.38% 2.89%
Loans - LHFI & LHFS 4.55% 4.69% 4.74% 4.76% 4.77% 4.68% 4.92%
Acquired loans 10.95% 8.20% 8.48% 8.93% 13.75% 9.11% 13.00%
Loans - total 5.36% 5.18% 5.29% 5.14% 4.98% 5.24% 5.11%
FF sold & rev repo 0.50% 0.35% 0.29% 0.25% 0.41% 0.37% 0.34%
Other earning assets 4.53% 3.86% 4.29% 4.15% 4.30% 4.20% 4.24%
Total earning assets 4.35% 4.19% 4.28% 4.26% 4.23% 4.27% 4.44%
 
Interest-bearing deposits 0.27% 0.27% 0.28% 0.30% 0.35% 0.28% 0.42%
FF pch & repo 0.11% 0.12% 0.11% 0.12% 0.14% 0.12% 0.16%
Other borrowings 2.96% 3.07% 3.13% 3.03% 2.72% 3.05% 2.81%
Total interest-bearing liabilities 0.33% 0.33% 0.34% 0.37% 0.41% 0.34% 0.48%
 
Net interest margin 4.10% 3.94% 4.02% 3.98% 3.94% 4.01% 4.09%
Net interest margin excluding acquired loans 3.48% 3.52% 3.55% 3.66% 3.77% 3.55% 3.94%

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 improved 16 basis points during the fourth quarter of 2013 primarily due to an increase in interest and fees on acquired loans, which was the result of increased acquired loan recoveries during the quarter.

During the fourth quarter of 2013, the yield on average acquired loans includes approximately $9.3 million in recoveries, or an annualized 4.35% of the average acquired loan balance. Excluding the recoveries on acquired loans, the yield on average acquired loans totaled 6.60%.

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 $1.0 million for the quarter ended December 31, 2013 compared to a net negative ineffectiveness of $724 thousand for the quarter ended December 31, 2012.

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

  Quarter Ended   Year Ended
  12/31/2013       9/30/2013       6/30/2013       3/31/2013       12/31/2012     12/31/2013       12/31/2012  
Mortgage servicing income, net $ 4,688 $ 4,552 $ 4,385 $ 4,267 $ 4,441 $ 17,892 $ 16,202
Change in fair value-MSR from runoff (2,182 ) (2,407 ) (2,756 ) (2,460 ) (2,631 ) (9,805 ) (9,808 )
Gain on sales of loans, net 2,202 6,465 7,597 10,165 12,034 26,429 33,919
Other, net   (533 )   (1,485 )   (1,052 )   (1,649 )   (1,789 )   (4,719 )   4,022  
Mortgage banking income before hedge ineffectiveness   4,175     7,125     8,174     10,323     12,055     29,797     44,335  
Change in fair value-MSR from market changes 3,937 287 6,467 1,127 (418 ) 11,818 (9,378 )
Change in fair value of derivatives   (2,926 )   1,028     (6,346 )   133     (306 )   (8,111 )   6,003  
Net positive (negative) hedge ineffectiveness   1,011     1,315     121     1,260     (724 )   3,707     (3,375 )
Mortgage banking, net $ 5,186   $ 8,440   $ 8,295   $ 11,583   $ 11,331   $ 33,504   $ 40,960  

During the first quarter of 2013, Trustmark exercised its option to repurchase delinquent loans serviced for GNMA. These loans were subsequently sold to a third party under different repurchase provisions. Trustmark retained the servicing for these loans, which are fully guaranteed by FHA/VA. As a result of this repurchase and sale, the loans are no longer carried as "LHFS-Guaranteed GNMA serviced loans" (see pages 3 and 6). The transaction resulted in a gain of $534 thousand, which was recorded during the first quarter of 2013 and is included in the table above as "Gain on sales of loans, net.”

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2013
($ 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   Year Ended
  12/31/2013       9/30/2013       6/30/2013       3/31/2013       12/31/2012     12/31/2013       12/31/2012  
Partnership amortization for tax credit purposes $ (5,642 ) $ (2,388 ) $ (2,221 ) $ (2,117 ) $ (3,202 ) $ (12,368 ) $ (8,417 )
Bargain purchase gain on Bay Bank acquisition - - - - - - 3,635
(Decrease) increase in FDIC indemnification asset (2,429 ) 211 (2,317 ) (1,365 ) (743 ) (5,900 ) (3,722 )
Other miscellaneous income   3,269     2,342     2,393     2,291     1,938     10,295     9,617  
Total other, net $ (4,802 ) $ 165   $ (2,145 ) $ (1,191 ) $ (2,007 ) $ (7,973 ) $ 1,113  

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 fourth quarter of 2013, other noninterest income included a write-down of the FDIC indemnification asset of $2.4 million 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   Year Ended
  12/31/2013     9/30/2013     6/30/2013     3/31/2013     12/31/2012   12/31/2013     12/31/2012
Loan expense $ 4,419 $ 3,390 $ 4,267 $ 2,995 $ 3,274 $ 15,071 $ 20,248
Non-routine transaction expenses on acquisitions - - - 7,920 - 7,920 1,917
Amortization of intangibles 2,434 2,466 2,472 1,442 1,022 8,814 3,788
Other miscellaneous expense   8,555   7,675   11,832   5,694   6,158   33,756   22,867
Total other expense $ 15,408 $ 13,531 $ 18,571 $ 18,051 $ 10,454 $ 65,561 $ 48,820
 

Other miscellaneous expense increased during the second quarter of 2013 due to a non-routine litigation expense of $4.0 million related to a proposed settlement on Trustmark’s overdraft fees for insufficient funds on debit card purchases and ATM withdrawals as previously disclosed in the Form 8-K filed on June 26, 2013. During the third quarter of 2013, the United States District Court for the Southern District of Mississippi preliminarily approved the settlement. The court will hold a hearing on March 25, 2014 to determine whether to issue final approval of the settlement.

As previously mentioned in Note 1 – Business Combinations, during the first quarter of 2013, Trustmark incurred $7.9 million of non-routine BancTrust transaction expenses in other noninterest expense. These non-routine transaction expenses include $2.2 million of professional fees and $5.7 million of contract termination and other expenses.

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 FINANCIALS
December 31, 2013
($ in thousands)
(unaudited)

 
Note 7 - Non-GAAP Financial Measures (continued)
      Quarter Ended   Year Ended
  12/31/2013       9/30/2013       6/30/2013       3/31/2013       12/31/2012     12/31/2013       12/31/2012  

TANGIBLE COMMON EQUITY

AVERAGE BALANCES
Total shareholders' common equity $ 1,346,975 $ 1,333,356 $ 1,344,360 $ 1,325,508 $ 1,288,222 $ 1,337,597 $ 1,261,617
Less:Goodwill (372,468 ) (368,482 ) (366,592 ) (324,902 ) (291,104 ) (358,270 ) (291,104 )
Identifiable intangible assets   (43,532 )   (45,988 )   (48,402 )   (35,187 )   (17,933 )   (43,308 )   (17,348 )
Total average tangible common equity $ 930,975   $ 918,886   $ 929,366   $ 965,419   $ 979,185   $ 936,020   $ 953,165  
 
PERIOD END BALANCES
Total shareholders' common equity $ 1,354,953 $ 1,329,514 $ 1,326,819 $ 1,352,946 $ 1,287,369

Less: Goodwill

(372,851 ) (372,463 ) (368,315 ) (366,366 ) (291,104 )
Identifiable intangible assets   (41,990 )   (44,424 )   (46,889 )   (49,361 )   (17,306 )

Total tangible common equity

(a)

$ 940,112   $ 912,627   $ 911,615   $ 937,219   $ 978,959  
 

TANGIBLE ASSETS

Total assets $ 11,790,383 $ 11,805,197 $ 11,863,312 $ 11,850,515 $ 9,828,667

Less: Goodwill

(372,851 ) (372,463 ) (368,315 ) (366,366 ) (291,104 )
Identifiable intangible assets   (41,990 )   (44,424 )   (46,889 )   (49,361 )   (17,306 )

Total tangible assets

(b)

$ 11,375,542   $ 11,388,310   $ 11,448,108   $ 11,434,788   $ 9,520,257  
 

Risk-weighted assets

(c)

$ 7,916,378   $ 7,825,839   $ 7,878,281   $ 7,862,884   $ 6,723,259  
 

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION

Net income available to common shareholders $ 28,039 $ 33,034 $ 31,121 $ 24,866 $ 27,710 $ 117,060 $ 117,283
Plus: Intangible amortization net of tax   1,503     1,523     1,526     890     631     5,442     2,339  
Net income adjusted for intangible amortization $ 29,542   $ 34,557   $ 32,647   $ 25,756   $ 28,341   $ 122,502   $ 119,622  
 

Period end common shares outstanding

(d)

  67,372,980     67,181,694     67,163,195     67,151,087     64,820,414  
 

TANGIBLE COMMON EQUITY MEASUREMENTS

Return on average tangible common equity 1 12.59 % 14.92 % 14.09 % 10.82 % 11.51 % 13.09 % 12.55 %

Tangible common equity/tangible assets

(a)/(b)

8.26 % 8.01 % 7.96 % 8.20 % 10.28 %

Tangible common equity/risk-weighted assets

(a)/(c)

11.88 % 11.66 % 11.57 % 11.92 % 14.56 %

Tangible common book value

(a)/(d)*1,000

$ 13.95 $ 13.58 $ 13.57 $ 13.96 $ 15.10
 

TIER 1 COMMON RISK-BASED CAPITAL

Total shareholders' equity $ 1,354,953 $ 1,329,514 $ 1,326,819 $ 1,352,946 $ 1,287,369
Eliminate qualifying AOCI 43,731 52,226 36,088 (5,709 ) (3,395 )
Qualifying tier 1 capital 60,000 60,000 60,000 93,000 60,000
Disallowed goodwill (372,851 ) (372,463 ) (368,315 ) (366,366 ) (291,104 )
Adj to goodwill allowed for deferred taxes 14,445 14,093 13,740 13,388 13,035
Other disallowed intangibles (41,990 ) (44,424 ) (46,889 ) (49,361 ) (17,306 )
Disallowed servicing intangible (6,783 ) (6,315 ) (6,038 ) (5,153 ) (4,734 )
Disallowed deferred taxes   (24,647 )   (39,476 )   (26,411 )   (12,575 )   -  
Total tier 1 capital 1,026,858 993,155 988,994 1,020,170 1,043,865
Less: Qualifying tier 1 capital   (60,000 )   (60,000 )   (60,000 )   (93,000 )   (60,000 )

Total tier 1 common capital

(e)

$ 966,858   $ 933,155   $ 928,994   $ 927,170   $ 983,865  
 

Tier 1 common risk-based capital ratio

(e)/(c)

12.21 % 11.92 % 11.79 % 11.79 % 14.63 %
 
1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity

MULTIMEDIA AVAILABLE:http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50791299&lang=en

Contact:
Trustmark Investor Contacts:
Louis E. Greer, 601-208-2310
Treasurer and
Principal Financial Officer
or
F. Joseph Rein, Jr., 601-208-6898
Senior Vice President
or
Trustmark Media Contact:
Melanie A. Morgan, 601-208-2979
Senior Vice President

Rates

View Comments (0)