8-K
TRUSTMARK CORP (TRMK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 28, 2020
Date of Report (Date of earliest event reported)
TRUSTMARK CORPORATION
(Exact name of registrant as specified in its charter)
| Mississippi | 000-03683 | 64-0471500 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission<br><br><br>File Number) | (IRS Employer<br><br><br>Identification No.) |
| 248 East Capitol Street, Jackson, Mississippi | 39201 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: | (601) 208-5111 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, no par value | TRMK | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 28, 2020, Trustmark Corporation issued a press release announcing its financial results for the period ended March 31, 2020. A copy of this press release and the accompanying financial statements and slide presentation are attached hereto as Exhibits 99.1 and 99.2 to this report and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description of Exhibits |
|---|---|
| 99.1 | Press release announcing financial results for the period ended March 31, 2020 |
| 99.2 | Investor slide presentation for the period ended March 31, 2020 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TRUSTMARK CORPORATION
| BY: | /s/ Louis E. Greer |
|---|---|
| Louis E. Greer | |
| Treasurer and Principal Financial Officer | |
| DATE: | April 28, 2020 |
trmk-ex991_7.htm
Exhibit 99.1
| News Release |
|---|
Trustmark Corporation Announces First Quarter 2020 Financial Results
Position of strength and stability allows for proactive response
to COVID-19 pandemic
JACKSON, Miss. – April 28, 2020 – Trustmark Corporation (Nasdaq:TRMK) reported net income of $22.2 million in the first quarter of 2020, representing diluted earnings per share of $0.35. During the first quarter, the provision and expense for credit losses totaled $27.4 million, primarily due to the impact of the COVID-19 pandemic on expected credit losses. This increased provision and expense for credit losses reduced after-tax net income by approximately $0.32 per diluted share. First quarter results also include a one-time, pre-tax charge of $4.4 million related to a voluntary early retirement program which reduced earnings by $0.05 per diluted share. In addition, Trustmark reported positive net mortgage servicing hedge ineffectiveness of $9.9 million in the first quarter which increased earnings by $0.12 per diluted share.
COVID-19 Response
Gerard R. Host, President and CEO, stated, “Trustmark has been proactive in responding to the COVID-19 pandemic, and we are taking comprehensive action to support customers, associates and the communities we serve. We remain committed to serving customers as our branches continue to offer drive-thru service, our ATM and ITM network remains accessible and our robust digital and mobile banking options provide additional convenience for our customers. Approximately 45% of Trustmark associates are working remotely, and essential employees in our offices are taking additional precautions to stay safe and healthy. We are working with customers to provide flexibility in these uncertain circumstances, and we are serving our local economies by participating in the SBA’s Paycheck Protection Program. SBA commitments were secured for approximately 6,000 requests totaling over $800 million with an average loan size of $137 thousand, and we continue to assist customers in completing applications for the Paycheck Protection Program. We are committed to doing everything in our power to ensure the safety of our customers and associates and support our local economies through these challenging times.”
First Quarter Highlights
| • | Maintained strong capital position with CET1 ratio of 11.35% and total risk-based capital ratio of 12.78% |
|---|---|
| • | Reported solid growth in fee businesses with linked quarter increases of 61.2% in mortgage banking revenue (before hedge ineffectiveness), 23.3% in insurance commissions and 10.0% in wealth management revenue |
| --- | --- |
| • | Pre-tax, pre-provision income totaled $56.6 million, a linked-quarter increase of 31.1% and year-over-year increase of 40.4% |
| --- | --- |
Mr. Host stated, “For over 130 years, we have been committed to meeting the banking and financial needs of our customers and communities. During the COVID-19 pandemic, we remain focused on providing support, advice and solutions to meet our customers’ unique needs. Trustmark entered this crisis from a position of strength and stability with a solid capital base and ample liquidity. During the first quarter, we experienced strong growth in our fee businesses and posted increases in both loan and deposit balances. I would like to thank our dedicated associates for working diligently in these unprecedented circumstances to serve our customers. Trustmark has weathered many storms over the years, and we remain well-positioned to continue serving customers and creating long-term value for shareholders.”
Balance Sheet Management
| • | Loans held for investment (excluding loans reclassified from acquired loans) increased 1.7% linked-quarter and total deposits increased 2.9% from the prior quarter |
|---|---|
| • | Maintained strong capital position significantly above regulatory levels necessary to be considered “well-capitalized” |
| --- | --- |
| • | Suspended share repurchase program on March 9, 2020, to maintain flexibility through the COVID-19 pandemic |
| --- | --- |
Loans held for investment totaled $9.6 billion at March 31, 2020, reflecting an increase of 2.5% linked-quarter and 6.4% year-over-year. During the first quarter of 2020, Trustmark reclassified $72.6 million of acquired loans to loans held for investment with the adoption of FASB ASC Topic 326, “Financial Instruments – Credit Losses.” Excluding this reclassification, loans held for investment increased $159.7 million, or 1.7%, from the prior quarter and $500.3 million, or 5.6%, from the comparable period one year earlier.
The linked-quarter growth reflects increases in other real estate secured loans and loans secured by nonfarm, nonresidential properties, which were principally the result of the migration of construction loans as projects were completed. Trustmark’s loan portfolio is diversified by loan type and geography.
Deposits totaled $11.6 billion at March 31, 2020, up $330.2 million, or 2.9%, from the prior quarter. Trustmark maintains a strong liquidity position as loans held for investment represented 82.7% of total deposits at March 31, 2020. Interest-bearing deposit costs totaled 0.71% for the first quarter, a decrease of 14 basis points linked-quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 59% of deposit balances in checking accounts. The total cost of interest-bearing liabilities was 0.75% for the first quarter of 2020, a decrease of 13 basis points from the prior quarter.
During the first quarter, Trustmark repurchased $27.5 million, or approximately 887 thousand of its common shares in open market transactions. On March 9, 2020, Trustmark suspended its share repurchase program to ensure ample capital to support customers during the COVID-19 pandemic. Trustmark’s capital position remained solid, reflecting the strength and diversity of its financial services businesses. At March 31, 2020, Trustmark’s tangible equity to tangible assets ratio was 9.27%, while the total risk-based capital ratio was 12.78%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable June 15, 2020, to shareholders of record on June 1, 2020.
Credit Quality
| • | Adopted current expected credit loss (CECL) methodology for estimating credit losses effective January 1, 2020 |
|---|---|
| • | Allowance for credit losses (ACL) represented 468.8% of nonperforming loans, excluding individually evaluated loans |
| --- | --- |
| • | Nonperforming assets declined 5.6% from the prior quarter and 12.1% year-over-year, reflecting decreases in both nonperforming loans and other real estate |
| --- | --- |
Effective January 1, 2020, Trustmark adopted the CECL methodology for estimating credit losses, which resulted in a net $26.6 million increase for credit losses primarily due to the creation of reserves for unfunded commitments. This one-time cumulative adjustment resulted in an after-tax decrease of $19.9 million in retained earnings. Primarily due to economic uncertainties related to the COVID-19 pandemic, Trustmark increased its provision for credit losses by $20.6 million and its credit loss expense related to off-balance sheet credit exposures by $6.8 million, resulting in total credit loss expenses of $27.4 million in the quarter.
Allocation of Trustmark's $100.6 million allowance for credit losses on loans held for investment represented 0.97% of commercial loans and 1.35% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.05% at March 31, 2020, representing a level management considers commensurate with the present risk in the loan portfolio.
Nonperforming loans totaled $53.0 million at March 31, 2020, down $234 thousand from the prior quarter and $3.4 million year-over-year. Other real estate totaled $24.8 million, reflecting a $4.4 million decrease from the prior quarter and down $7.3 million from the prior year. Collectively, nonperforming assets totaled $77.8 million, reflecting a linked-quarter decrease of $4.6 million and a year-over-year decrease of $10.7 million.
Revenue Generation
| • | Revenue in the first quarter totaled $169.2 million, up 10.5% from the prior quarter |
|---|---|
| • | Mortgage banking revenue before hedge ineffectiveness was $17.6 million in the first quarter, a linked-quarter increase of 61.2% |
| --- | --- |
| • | Insurance commissions increased 23.3% from the prior quarter, and wealth management revenue rose 10.0% over the same period |
| --- | --- |
Revenue in the first quarter totaled $169.2 million, up 10.5% from the prior quarter and up 15.7% from the same quarter in the prior year. The linked-quarter and year-over-year increases primarily reflect higher mortgage banking revenue as well as higher insurance commissions and wealth management revenue. Net interest income (FTE) in the first quarter totaled $107.1 million, resulting in a net interest margin of 3.52%, down 4 basis points from the prior quarter. Relative to the prior quarter, net interest income (FTE) decreased $1.7 million as a $4.3 million reduction in interest income more than offset a $2.6 million reduction in interest expense.
Noninterest income in the first quarter totaled $65.3 million, an increase of $17.7 million from the prior quarter and an increase of $23.8 million year-over-year. The linked-quarter change primarily reflects a $19.6 million increase in mortgage banking revenue. Mortgage banking revenue in the first quarter included $9.9 million in positive net hedge ineffectiveness. Mortgage loan production in the first quarter totaled $457.2 million, down 8.3% linked-quarter and up 61.3% year-over-year. Gain on sale of loans, net totaled $14.3 million in the first quarter, up $6.4 million from the prior quarter. Mortgage banking revenue totaled $27.5 million in the first quarter.
Insurance revenue totaled $11.6 million in the first quarter, up 23.3%, or $2.2 million, from the fourth quarter of 2019 and 6.2%, or $679 thousand, year-over-year. The linked-quarter and year-over-year increases primarily reflect growth in property and casualty commissions. Wealth management revenue in the first quarter totaled $8.5 million, an increase of $774 thousand, or 10.0%, from the prior quarter. The growth reflects both higher trust management fees and brokerage and investment services revenue.
Bank card and other fees decreased $2.8 million, or 34.6%, from the prior quarter and $1.8 million, or 25.5%, year-over-year, reflecting lower customer derivative revenue. Service charges on deposit accounts experienced a seasonal decrease of $862 thousand, or 7.9%, from the prior quarter and $233 thousand, or 2.3%, year-over-year.
Noninterest Expense
| • | Core noninterest expense totaled $110.2 million in the first quarter of 2020, an increase of 2.5% from the prior quarter |
|---|---|
| • | Completed voluntary early retirement program |
| --- | --- |
| • | Continued to realign delivery channels to reflect changing customer preferences |
| --- | --- |
During the first quarter, Trustmark completed a voluntary early retirement program. Of those eligible for the program, 107 associates, or 3.8% of the workforce, retired by March 31, 2020. A one-time, pre-tax charge of $4.4 million related to this program was incurred during the first quarter, reflecting $4.3 million in salaries and employee benefits and $102 thousand in other expense. The result of this program is expected to produce pre-tax savings of approximately $2.9 million for the remainder of 2020 and $4.0 million for 2021.
Salaries and employee benefits – excluding $4.3 million of the voluntary early retirement charge – totaled $64.9 million, an increase of 4.1% from the prior quarter. The increase primarily reflects higher insurance commissions and a seasonal increase in payroll taxes. Services and fees rose $430 thousand linked-quarter, and other real estate expense, net decreased $197 thousand linked-quarter.
Trustmark remains focused on optimizing its delivery channels and reallocating resources to reflect changing customer preferences. In the first quarter of 2020, Trustmark closed five branches as customers continued to migrate to mobile and digital banking channels and embraced the convenience of remote options. Trustmark remains committed to investments that promote profitable revenue growth, reengineering processes to enhance operational efficiency, realigning delivery channels to support changing customer preferences and managing the franchise for the long-term.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, April 29, 2020 at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, May 13, 2020, in archived format at the same web address or by calling (877) 344-7529, passcode 10142197.
Trustmark is a financial services company providing banking and financial solutions through 188 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,” “project,” “potential,” “seek,” “continue,” “could,” “would,” “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 any or all of our business, results of operations financial condition and liquidity. 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. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the novel coronavirus (COVID-19) pandemic, and also by the effectiveness of varying governmental responses in ameliorating the impact of the pandemic on our customers and the economies where they operate.
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, an increase in unemployment levels and slowdowns in economic growth, the effects of the COVID-19 pandemic on the domestic and global economy, as well as the effectiveness of actions of federal, state and local governments and agencies (including the Board of Governors of the Federal Reserve Board (FRB) to mitigate its spread and economic impact, local, state and national economic and market conditions, conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets, levels of and volatility in crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of
unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of issues related to the European financial system and monetary and other governmental actions designed to address credit, securities, and/or commodity markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, particularly with respect to the COVID-19 pandemic, changes in our ability to control expenses, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, pandemics or other health crises, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission (SEC).
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
| Trustmark Investor Contacts: | Trustmark Media Contact: |
|---|---|
| Louis E. Greer | Melanie A. Morgan |
| Treasurer and | Senior Vice President |
| Principal Financial Officer | 601-208-2979 |
| 601-208-2310 |
F. Joseph Rein, Jr.
Senior Vice President
601-208-6898
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||
| March 31, 2020 | |||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Linked Quarter | Year over Year | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| QUARTERLY AVERAGE BALANCES | 3/31/2020 | 12/31/2019 | 3/31/2019 | Change | % Change | Change | % Change | ||||||||||||
| Securities AFS-taxable | $ | 1,620,422 | $ | 1,551,358 | $ | 1,753,268 | 4.5 | % | ) | -7.6 | % | ||||||||
| Securities AFS-nontaxable | 22,056 | 23,300 | 40,159 | ) | -5.3 | % | ) | -45.1 | % | ||||||||||
| Securities HTM-taxable | 694,740 | 734,474 | 866,665 | ) | -5.4 | % | ) | -19.8 | % | ||||||||||
| Securities HTM-nontaxable | 25,673 | 25,703 | 28,710 | ) | -0.1 | % | ) | -10.6 | % | ||||||||||
| Total securities | 2,362,891 | 2,334,835 | 2,688,802 | 1.2 | % | ) | -12.1 | % | |||||||||||
| Loans (including loans held for sale) (1) | 9,678,174 | 9,467,437 | 9,038,204 | 2.2 | % | 7.1 | % | ||||||||||||
| Acquired loans (1) | — | 77,797 | 104,316 | ) | -100.0 | % | ) | -100.0 | % | ||||||||||
| Fed funds sold and rev repos | 164 | 184 | 277 | ) | -10.9 | % | ) | -40.8 | % | ||||||||||
| Other earning assets | 187,327 | 227,116 | 243,493 | ) | -17.5 | % | ) | -23.1 | % | ||||||||||
| Total earning assets | 12,228,556 | 12,107,369 | 12,075,092 | 1.0 | % | 1.3 | % | ||||||||||||
| Allowance for credit losses (ACL), loans held<br><br><br>for investment (LHFI) (1) | (85,015 | ) | (86,211 | ) | (82,227 | ) | 1.4 | % | ) | -3.4 | % | ||||||||
| Other assets | 1,498,725 | 1,445,075 | 1,447,611 | 3.7 | % | 3.5 | % | ||||||||||||
| Total assets | $ | 13,642,266 | $ | 13,466,233 | $ | 13,440,476 | 1.3 | % | 1.5 | % | |||||||||
| Interest-bearing demand deposits | $ | 3,184,134 | $ | 3,167,256 | $ | 2,899,467 | 0.5 | % | 9.8 | % | |||||||||
| Savings deposits | 3,646,936 | 3,448,899 | 3,786,835 | 5.7 | % | ) | -3.7 | % | |||||||||||
| Time deposits | 1,617,307 | 1,663,741 | 1,881,556 | ) | -2.8 | % | ) | -14.0 | % | ||||||||||
| Total interest-bearing deposits | 8,448,377 | 8,279,896 | 8,567,858 | 2.0 | % | ) | -1.4 | % | |||||||||||
| Fed funds purchased and repos | 247,513 | 164,754 | 84,352 | 50.2 | % | n/m | |||||||||||||
| Other borrowings | 85,279 | 79,512 | 90,804 | 7.3 | % | ) | -6.1 | % | |||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 0.0 | % | 0.0 | % | ||||||||||||
| Total interest-bearing liabilities | 8,843,025 | 8,586,018 | 8,804,870 | 3.0 | % | 0.4 | % | ||||||||||||
| Noninterest-bearing deposits | 2,910,951 | 3,017,824 | 2,824,220 | ) | -3.5 | % | 3.1 | % | |||||||||||
| Other liabilities | 248,220 | 205,786 | 221,199 | 20.6 | % | 12.2 | % | ||||||||||||
| Total liabilities | 12,002,196 | 11,809,628 | 11,850,289 | 1.6 | % | 1.3 | % | ||||||||||||
| Shareholders' equity | 1,640,070 | 1,656,605 | 1,590,187 | ) | -1.0 | % | 3.1 | % | |||||||||||
| Total liabilities and equity | $ | 13,642,266 | $ | 13,466,233 | $ | 13,440,476 | 1.3 | % | 1.5 | % | |||||||||
| (1) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. | |||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||
| March 31, 2020 | |||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Linked Quarter | Year over Year | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| PERIOD END BALANCES | 3/31/2020 | 12/31/2019 | 3/31/2019 | Change | % Change | Change | % Change | ||||||||||||
| Cash and due from banks | $ | 404,341 | $ | 358,916 | $ | 454,047 | 12.7 | % | ) | -10.9 | % | ||||||||
| Fed funds sold and rev repos | 2,000 | — | — | n/m | n/m | ||||||||||||||
| Securities available for sale | 1,833,779 | 1,602,404 | 1,723,445 | 14.4 | % | 6.4 | % | ||||||||||||
| Securities held to maturity | 704,276 | 738,099 | 884,319 | ) | -4.6 | % | ) | -20.4 | % | ||||||||||
| Loans held for sale (LHFS) | 325,389 | 226,347 | 172,683 | 43.8 | % | 88.4 | % | ||||||||||||
| Loans held for investment (LHFI) (1) | 9,567,920 | 9,335,628 | 8,995,014 | 2.5 | % | 6.4 | % | ||||||||||||
| ACL LHFI (1) | (100,564 | ) | (84,277 | ) | (79,005 | ) | ) | -19.3 | % | ) | -27.3 | % | |||||||
| Net LHFI | 9,467,356 | 9,251,351 | 8,916,009 | 2.3 | % | 6.2 | % | ||||||||||||
| Acquired loans (1) | — | 72,601 | 93,201 | ) | -100.0 | % | ) | -100.0 | % | ||||||||||
| Allowance for loan losses, acquired loans (1) | — | (815 | ) | (1,297 | ) | 100.0 | % | 100.0 | % | ||||||||||
| Net acquired loans | — | 71,786 | 91,904 | ) | -100.0 | % | ) | -100.0 | % | ||||||||||
| Net LHFI and acquired loans | 9,467,356 | 9,323,137 | 9,007,913 | 1.5 | % | 5.1 | % | ||||||||||||
| Premises and equipment, net | 190,179 | 189,791 | 189,743 | 0.2 | % | 0.2 | % | ||||||||||||
| Mortgage servicing rights | 56,437 | 79,394 | 86,842 | ) | -28.9 | % | ) | -35.0 | % | ||||||||||
| Goodwill | 381,717 | 379,627 | 379,627 | 0.6 | % | 0.6 | % | ||||||||||||
| Identifiable intangible assets | 7,537 | 7,343 | 10,092 | 2.6 | % | ) | -25.3 | % | |||||||||||
| Other real estate | 24,847 | 29,248 | 32,139 | ) | -15.0 | % | ) | -22.7 | % | ||||||||||
| Operating lease right-of-use assets | 30,839 | 31,182 | 33,861 | ) | -1.1 | % | ) | -8.9 | % | ||||||||||
| Other assets | 591,132 | 532,389 | 503,306 | 11.0 | % | 17.4 | % | ||||||||||||
| Total assets | $ | 14,019,829 | $ | 13,497,877 | $ | 13,478,017 | 3.9 | % | 4.0 | % | |||||||||
| Deposits: | |||||||||||||||||||
| Noninterest-bearing | $ | 2,977,058 | $ | 2,891,215 | $ | 2,867,778 | 3.0 | % | 3.8 | % | |||||||||
| Interest-bearing | 8,598,706 | 8,354,342 | 8,667,037 | 2.9 | % | ) | -0.8 | % | |||||||||||
| Total deposits | 11,575,764 | 11,245,557 | 11,534,815 | 2.9 | % | 0.4 | % | ||||||||||||
| Fed funds purchased and repos | 421,821 | 256,020 | 46,867 | 64.8 | % | n/m | |||||||||||||
| Other borrowings | 84,230 | 85,396 | 83,265 | ) | -1.4 | % | 1.2 | % | |||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 0.0 | % | 0.0 | % | ||||||||||||
| ACL on off-balance sheet credit exposures (1) | 36,421 | — | — | n/m | n/m | ||||||||||||||
| Operating lease liabilities | 32,055 | 32,354 | 34,921 | ) | -0.9 | % | ) | -8.2 | % | ||||||||||
| Other liabilities | 155,283 | 155,992 | 129,265 | ) | -0.5 | % | 20.1 | % | |||||||||||
| Total liabilities | 12,367,430 | 11,837,175 | 11,890,989 | 4.5 | % | 4.0 | % | ||||||||||||
| Common stock | 13,209 | 13,376 | 13,499 | ) | -1.2 | % | ) | -2.1 | % | ||||||||||
| Capital surplus | 229,403 | 256,400 | 272,268 | ) | -10.5 | % | ) | -15.7 | % | ||||||||||
| Retained earnings | 1,402,089 | 1,414,526 | 1,342,176 | ) | -0.9 | % | 4.5 | % | |||||||||||
| Accum other comprehensive income (loss), net of<br><br><br>tax | 7,698 | (23,600 | ) | (40,915 | ) | n/m | n/m | ||||||||||||
| Total shareholders' equity | 1,652,399 | 1,660,702 | 1,587,028 | ) | -0.5 | % | 4.1 | % | |||||||||||
| Total liabilities and equity | $ | 14,019,829 | $ | 13,497,877 | $ | 13,478,017 | 3.9 | % | 4.0 | % | |||||||||
| (1) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. | |||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||
| March 31, 2020 | |||||||||||||||||
| ($ in thousands except per share data) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| INCOME STATEMENTS | 3/31/2020 | 12/31/2019 | 3/31/2019 | Change | % Change | Change | % Change | ||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 109,357 | $ | 111,383 | $ | 109,890 | ) | -1.8 | % | ) | -0.5 | % | |||||
| Interest and fees on acquired loans (1) | — | 2,138 | 1,916 | ) | -100.0 | % | ) | -100.0 | % | ||||||||
| Interest on securities-taxable | 12,948 | 12,884 | 14,665 | 0.5 | % | ) | -11.7 | % | |||||||||
| Interest on securities-tax exempt-FTE | 457 | 484 | 646 | ) | -5.6 | % | ) | -29.3 | % | ||||||||
| Interest on fed funds sold and rev repos | — | 1 | 2 | ) | -100.0 | % | ) | -100.0 | % | ||||||||
| Other interest income | 740 | 896 | 1,603 | ) | -17.4 | % | ) | -53.8 | % | ||||||||
| Total interest income-FTE | 123,502 | 127,786 | 128,722 | ) | -3.4 | % | ) | -4.1 | % | ||||||||
| Interest on deposits | 14,957 | 17,716 | 19,570 | ) | -15.6 | % | ) | -23.6 | % | ||||||||
| Interest on fed funds pch and repos | 625 | 504 | 288 | 24.0 | % | n/m | |||||||||||
| Other interest expense | 860 | 826 | 825 | 4.1 | % | 4.2 | % | ||||||||||
| Total interest expense | 16,442 | 19,046 | 20,683 | ) | -13.7 | % | ) | -20.5 | % | ||||||||
| Net interest income-FTE | 107,060 | 108,740 | 108,039 | ) | -1.5 | % | ) | -0.9 | % | ||||||||
| Provision for credit losses, LHFI (1) | 20,581 | 3,661 | 1,611 | n/m | n/m | ||||||||||||
| Provision for loan losses, acquired loans (1) | — | (2 | ) | 78 | 100.0 | % | ) | -100.0 | % | ||||||||
| Net interest income after provision-FTE | 86,479 | 105,081 | 106,350 | ) | -17.7 | % | ) | -18.7 | % | ||||||||
| Service charges on deposit accounts | 10,032 | 10,894 | 10,265 | ) | -7.9 | % | ) | -2.3 | % | ||||||||
| Bank card and other fees | 5,355 | 8,192 | 7,191 | ) | -34.6 | % | ) | -25.5 | % | ||||||||
| Mortgage banking, net | 27,483 | 7,914 | 3,442 | n/m | n/m | ||||||||||||
| Insurance commissions | 11,550 | 9,364 | 10,871 | 23.3 | % | 6.2 | % | ||||||||||
| Wealth management | 8,537 | 7,763 | 7,483 | 10.0 | % | 14.1 | % | ||||||||||
| Other, net | 2,307 | 3,451 | 2,239 | ) | -33.1 | % | 3.0 | % | |||||||||
| Nonint inc-excl sec gains (losses), net | 65,264 | 47,578 | 41,491 | 37.2 | % | 57.3 | % | ||||||||||
| Security gains (losses), net | — | — | — | n/m | n/m | ||||||||||||
| Total noninterest income | 65,264 | 47,578 | 41,491 | 37.2 | % | 57.3 | % | ||||||||||
| Salaries and employee benefits | 69,148 | 62,319 | 60,954 | 11.0 | % | 13.4 | % | ||||||||||
| Services and fees | 19,930 | 19,500 | 16,968 | 2.2 | % | 17.5 | % | ||||||||||
| Net occupancy-premises | 6,286 | 6,461 | 6,454 | ) | -2.7 | % | ) | -2.6 | % | ||||||||
| Equipment expense | 5,616 | 5,880 | 5,924 | ) | -4.5 | % | ) | -5.2 | % | ||||||||
| Other real estate expense, net | 1,294 | 1,491 | 1,752 | ) | -13.2 | % | ) | -26.1 | % | ||||||||
| Credit loss expense related to off-balance sheet<br><br><br>credit exposures (1) | 6,783 | — | — | n/m | n/m | ||||||||||||
| Other expense | 14,753 | 14,376 | 13,969 | 2.6 | % | 5.6 | % | ||||||||||
| Total noninterest expense | 123,810 | 110,027 | 106,021 | 12.5 | % | 16.8 | % | ||||||||||
| Income before income taxes and tax eq adj | 27,933 | 42,632 | 41,820 | ) | -34.5 | % | ) | -33.2 | % | ||||||||
| Tax equivalent adjustment | 3,108 | 3,149 | 3,231 | ) | -1.3 | % | ) | -3.8 | % | ||||||||
| Income before income taxes | 24,825 | 39,483 | 38,589 | ) | -37.1 | % | ) | -35.7 | % | ||||||||
| Income taxes | 2,607 | 5,537 | 5,250 | ) | -52.9 | % | ) | -50.3 | % | ||||||||
| Net income | $ | 22,218 | $ | 33,946 | $ | 33,339 | ) | -34.5 | % | ) | -33.4 | % | |||||
| Per share data | |||||||||||||||||
| Earnings per share - basic | $ | 0.35 | $ | 0.53 | $ | 0.51 | ) | -34.0 | % | ) | -31.4 | % | |||||
| Earnings per share - diluted | $ | 0.35 | $ | 0.53 | $ | 0.51 | ) | -34.0 | % | ) | -31.4 | % | |||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | 0.0 | % | 0.0 | % | |||||||
| Weighted average shares outstanding | |||||||||||||||||
| Basic | 63,756,629 | 64,255,716 | 65,239,470 | ||||||||||||||
| Diluted | 63,913,603 | 64,435,276 | 65,378,500 | ||||||||||||||
| Period end shares outstanding | 63,396,912 | 64,200,111 | 64,789,943 | ||||||||||||||
| (1) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. | |||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||
| March 31, 2020 | |||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| NONPERFORMING ASSETS (1) | 3/31/2020 | 12/31/2019 | 3/31/2019 | Change | % Change | Change | % Change | ||||||||||||
| Nonaccrual loans | |||||||||||||||||||
| Alabama | $ | 4,769 | $ | 1,870 | $ | 2,971 | n/m | 60.5 | % | ||||||||||
| Florida | 254 | 267 | 408 | ) | -4.9 | % | ) | -37.7 | % | ||||||||||
| Mississippi (2) | 40,815 | 41,493 | 41,145 | ) | -1.6 | % | ) | -0.8 | % | ||||||||||
| Tennessee (3) | 6,153 | 8,980 | 8,806 | ) | -31.5 | % | ) | -30.1 | % | ||||||||||
| Texas | 1,001 | 616 | 3,093 | 62.5 | % | ) | -67.6 | % | |||||||||||
| Total nonaccrual loans | 52,992 | 53,226 | 56,423 | ) | -0.4 | % | ) | -6.1 | % | ||||||||||
| Other real estate | |||||||||||||||||||
| Alabama | 6,229 | 8,133 | 6,878 | ) | -23.4 | % | ) | -9.4 | % | ||||||||||
| Florida | 4,835 | 5,877 | 8,120 | ) | -17.7 | % | ) | -40.5 | % | ||||||||||
| Mississippi (2) | 13,296 | 14,919 | 15,421 | ) | -10.9 | % | ) | -13.8 | % | ||||||||||
| Tennessee (3) | 487 | 319 | 994 | 52.7 | % | ) | -51.0 | % | |||||||||||
| Texas | — | — | 726 | n/m | ) | -100.0 | % | ||||||||||||
| Total other real estate | 24,847 | 29,248 | 32,139 | ) | -15.0 | % | ) | -22.7 | % | ||||||||||
| Total nonperforming assets | $ | 77,839 | $ | 82,474 | $ | 88,562 | ) | -5.6 | % | ) | -12.1 | % | |||||||
| LOANS PAST DUE OVER 90 DAYS (1) | |||||||||||||||||||
| LHFI | $ | 708 | $ | 642 | $ | 670 | 10.3 | % | 5.7 | % | |||||||||
| LHFS-Guaranteed GNMA serviced loans | |||||||||||||||||||
| (no obligation to repurchase) | $ | 43,564 | $ | 41,648 | $ | 40,793 | 4.6 | % | 6.8 | % | |||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||
| ACL LHFI (1)(4) | 3/31/2020 | 12/31/2019 | 3/31/2019 | Change | % Change | Change | % Change | ||||||||||||
| Beginning Balance | $ | 84,277 | $ | 83,226 | $ | 79,290 | 1.3 | % | 6.3 | % | |||||||||
| CECL adoption adjustments: | |||||||||||||||||||
| LHFI | (3,039 | ) | — | — | ) | n/m | ) | n/m | |||||||||||
| Acquired loan transfers | 1,822 | — | — | n/m | n/m | ||||||||||||||
| Provision for credit losses | 20,581 | 3,661 | 1,611 | n/m | n/m | ||||||||||||||
| Charge-offs | (5,545 | ) | (4,619 | ) | (4,033 | ) | ) | -20.0 | % | ) | -37.5 | % | |||||||
| Recoveries | 2,468 | 2,009 | 2,137 | 22.8 | % | 15.5 | % | ||||||||||||
| Net (charge-offs) recoveries | (3,077 | ) | (2,610 | ) | (1,896 | ) | ) | -17.9 | % | ) | -62.3 | % | |||||||
| Ending Balance | $ | 100,564 | $ | 84,277 | $ | 79,005 | 19.3 | % | 27.3 | % | |||||||||
| NET (CHARGE-OFFS) RECOVERIES (1) | |||||||||||||||||||
| Alabama | $ | (1,080 | ) | $ | (132 | ) | $ | (15 | ) | ) | n/m | ) | n/m | ||||||
| Florida | 64 | 357 | 227 | ) | -82.1 | % | ) | -71.8 | % | ||||||||||
| Mississippi (2) | 126 | (1,792 | ) | (2,130 | ) | n/m | n/m | ||||||||||||
| Tennessee (3) | (2,186 | ) | (131 | ) | (50 | ) | ) | n/m | ) | n/m | |||||||||
| Texas | (1 | ) | (912 | ) | 72 | 99.9 | % | ) | n/m | ||||||||||
| Total net (charge-offs) recoveries | $ | (3,077 | ) | $ | (2,610 | ) | $ | (1,896 | ) | ) | -17.9 | % | ) | -62.3 | % | ||||
| (1) Excludes acquired loans. | |||||||||||||||||||
| (2) Mississippi includes Central and Southern Mississippi Regions. | |||||||||||||||||||
| (3) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. | |||||||||||||||||||
| (4) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. | |||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||
| March 31, 2020 | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Quarter Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| AVERAGE BALANCES | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Securities AFS-taxable | $ | 1,620,422 | $ | 1,551,358 | $ | 1,570,803 | $ | 1,661,464 | $ | 1,753,268 | |||||
| Securities AFS-nontaxable | 22,056 | 23,300 | 25,096 | 31,474 | 40,159 | ||||||||||
| Securities HTM-taxable | 694,740 | 734,474 | 778,098 | 821,357 | 866,665 | ||||||||||
| Securities HTM-nontaxable | 25,673 | 25,703 | 26,088 | 27,035 | 28,710 | ||||||||||
| Total securities | 2,362,891 | 2,334,835 | 2,400,085 | 2,541,330 | 2,688,802 | ||||||||||
| Loans (including loans held for sale) (1) | 9,678,174 | 9,467,437 | 9,436,287 | 9,260,028 | 9,038,204 | ||||||||||
| Acquired loans (1) | — | 77,797 | 82,641 | 91,217 | 104,316 | ||||||||||
| Fed funds sold and rev repos | 164 | 184 | 3,662 | 34,057 | 277 | ||||||||||
| Other earning assets | 187,327 | 227,116 | 176,163 | 316,604 | 243,493 | ||||||||||
| Total earning assets | 12,228,556 | 12,107,369 | 12,098,838 | 12,243,236 | 12,075,092 | ||||||||||
| ACL LHFI (1) | (85,015 | ) | (86,211 | ) | (83,756 | ) | (81,996 | ) | (82,227 | ) | |||||
| Other assets | 1,498,725 | 1,445,075 | 1,447,977 | 1,467,462 | 1,447,611 | ||||||||||
| Total assets | $ | 13,642,266 | $ | 13,466,233 | $ | 13,463,059 | $ | 13,628,702 | $ | 13,440,476 | |||||
| Interest-bearing demand deposits | $ | 3,184,134 | $ | 3,167,256 | $ | 3,085,758 | $ | 3,048,876 | $ | 2,899,467 | |||||
| Savings deposits | 3,646,936 | 3,448,899 | 3,568,403 | 3,801,187 | 3,786,835 | ||||||||||
| Time deposits | 1,617,307 | 1,663,741 | 1,753,083 | 1,840,065 | 1,881,556 | ||||||||||
| Total interest-bearing deposits | 8,448,377 | 8,279,896 | 8,407,244 | 8,690,128 | 8,567,858 | ||||||||||
| Fed funds purchased and repos | 247,513 | 164,754 | 142,064 | 51,264 | 84,352 | ||||||||||
| Other borrowings | 85,279 | 79,512 | 78,404 | 81,352 | 90,804 | ||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | ||||||||||
| Total interest-bearing liabilities | 8,843,025 | 8,586,018 | 8,689,568 | 8,884,600 | 8,804,870 | ||||||||||
| Noninterest-bearing deposits | 2,910,951 | 3,017,824 | 2,932,754 | 2,898,266 | 2,824,220 | ||||||||||
| Other liabilities | 248,220 | 205,786 | 206,091 | 240,091 | 221,199 | ||||||||||
| Total liabilities | 12,002,196 | 11,809,628 | 11,828,413 | 12,022,957 | 11,850,289 | ||||||||||
| Shareholders' equity | 1,640,070 | 1,656,605 | 1,634,646 | 1,605,745 | 1,590,187 | ||||||||||
| Total liabilities and equity | $ | 13,642,266 | $ | 13,466,233 | $ | 13,463,059 | $ | 13,628,702 | $ | 13,440,476 | |||||
| (1) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||
| March 31, 2020 | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| PERIOD END BALANCES | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Cash and due from banks | $ | 404,341 | $ | 358,916 | $ | 486,263 | $ | 404,413 | $ | 454,047 | |||||
| Fed funds sold and rev repos | 2,000 | — | — | 75,499 | — | ||||||||||
| Securities available for sale | 1,833,779 | 1,602,404 | 1,553,705 | 1,643,725 | 1,723,445 | ||||||||||
| Securities held to maturity | 704,276 | 738,099 | 785,422 | 825,536 | 884,319 | ||||||||||
| Loans held for sale (LHFS) | 325,389 | 226,347 | 292,800 | 240,380 | 172,683 | ||||||||||
| Loans held for investment (LHFI) (1) | 9,567,920 | 9,335,628 | 9,223,668 | 9,116,759 | 8,995,014 | ||||||||||
| ACL LHFI (1) | (100,564 | ) | (84,277 | ) | (83,226 | ) | (80,399 | ) | (79,005 | ) | |||||
| Net LHFI | 9,467,356 | 9,251,351 | 9,140,442 | 9,036,360 | 8,916,009 | ||||||||||
| Acquired loans (1) | — | 72,601 | 81,004 | 87,884 | 93,201 | ||||||||||
| Allowance for loan losses, acquired loans (1) | — | (815 | ) | (1,249 | ) | (1,398 | ) | (1,297 | ) | ||||||
| Net acquired loans | — | 71,786 | 79,755 | 86,486 | 91,904 | ||||||||||
| Net LHFI and acquired loans | 9,467,356 | 9,323,137 | 9,220,197 | 9,122,846 | 9,007,913 | ||||||||||
| Premises and equipment, net | 190,179 | 189,791 | 188,423 | 189,820 | 189,743 | ||||||||||
| Mortgage servicing rights | 56,437 | 79,394 | 73,016 | 79,283 | 86,842 | ||||||||||
| Goodwill | 381,717 | 379,627 | 379,627 | 379,627 | 379,627 | ||||||||||
| Identifiable intangible assets | 7,537 | 7,343 | 8,345 | 9,101 | 10,092 | ||||||||||
| Other real estate | 24,847 | 29,248 | 31,974 | 31,243 | 32,139 | ||||||||||
| Operating lease right-of-use assets | 30,839 | 31,182 | 33,180 | 32,762 | 33,861 | ||||||||||
| Other assets | 591,132 | 532,389 | 531,834 | 514,723 | 503,306 | ||||||||||
| Total assets | $ | 14,019,829 | $ | 13,497,877 | $ | 13,584,786 | $ | 13,548,958 | $ | 13,478,017 | |||||
| Deposits: | |||||||||||||||
| Noninterest-bearing | $ | 2,977,058 | $ | 2,891,215 | $ | 3,064,127 | $ | 2,909,141 | $ | 2,867,778 | |||||
| Interest-bearing | 8,598,706 | 8,354,342 | 8,190,056 | 8,657,488 | 8,667,037 | ||||||||||
| Total deposits | 11,575,764 | 11,245,557 | 11,254,183 | 11,566,629 | 11,534,815 | ||||||||||
| Fed funds purchased and repos | 421,821 | 256,020 | 376,712 | 51,800 | 46,867 | ||||||||||
| Other borrowings | 84,230 | 85,396 | 76,685 | 79,012 | 83,265 | ||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | ||||||||||
| ACL on off-balance sheet credit exposures (1) | 36,421 | — | — | — | — | ||||||||||
| Operating lease liabilities | 32,055 | 32,354 | 34,319 | 33,878 | 34,921 | ||||||||||
| Other liabilities | 155,283 | 155,992 | 135,669 | 137,233 | 129,265 | ||||||||||
| Total liabilities | 12,367,430 | 11,837,175 | 11,939,424 | 11,930,408 | 11,890,989 | ||||||||||
| Common stock | 13,209 | 13,376 | 13,390 | 13,418 | 13,499 | ||||||||||
| Capital surplus | 229,403 | 256,400 | 257,370 | 260,619 | 272,268 | ||||||||||
| Retained earnings | 1,402,089 | 1,414,526 | 1,395,460 | 1,369,329 | 1,342,176 | ||||||||||
| Accum other comprehensive income (loss), net of tax | 7,698 | (23,600 | ) | (20,858 | ) | (24,816 | ) | (40,915 | ) | ||||||
| Total shareholders' equity | 1,652,399 | 1,660,702 | 1,645,362 | 1,618,550 | 1,587,028 | ||||||||||
| Total liabilities and equity | $ | 14,019,829 | $ | 13,497,877 | $ | 13,584,786 | $ | 13,548,958 | $ | 13,478,017 | |||||
| (1) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||
| March 31, 2020 | ||||||||||||
| ($ in thousands except per share data) | ||||||||||||
| (unaudited) | ||||||||||||
| Quarter Ended | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| INCOME STATEMENTS | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 109,357 | $ | 111,383 | $ | 116,432 | $ | 114,873 | $ | 109,890 | ||
| Interest and fees on acquired loans (1) | — | 2,138 | 2,309 | 2,010 | 1,916 | |||||||
| Interest on securities-taxable | 12,948 | 12,884 | 13,184 | 13,916 | 14,665 | |||||||
| Interest on securities-tax exempt-FTE | 457 | 484 | 485 | 551 | 646 | |||||||
| Interest on fed funds sold and rev repos | — | 1 | 23 | 214 | 2 | |||||||
| Other interest income | 740 | 896 | 1,044 | 1,820 | 1,603 | |||||||
| Total interest income-FTE | 123,502 | 127,786 | 133,477 | 133,384 | 128,722 | |||||||
| Interest on deposits | 14,957 | 17,716 | 20,385 | 21,500 | 19,570 | |||||||
| Interest on fed funds pch and repos | 625 | 504 | 547 | 81 | 288 | |||||||
| Other interest expense | 860 | 826 | 830 | 831 | 825 | |||||||
| Total interest expense | 16,442 | 19,046 | 21,762 | 22,412 | 20,683 | |||||||
| Net interest income-FTE | 107,060 | 108,740 | 111,715 | 110,972 | 108,039 | |||||||
| Provision for credit losses, LHFI (1) | 20,581 | 3,661 | 3,039 | 2,486 | 1,611 | |||||||
| Provision for loan losses, acquired loans (1) | — | (2 | ) | (140 | ) | 106 | 78 | |||||
| Net interest income after provision-FTE | 86,479 | 105,081 | 108,816 | 108,380 | 106,350 | |||||||
| Service charges on deposit accounts | 10,032 | 10,894 | 11,065 | 10,379 | 10,265 | |||||||
| Bank card and other fees | 5,355 | 8,192 | 8,349 | 8,004 | 7,191 | |||||||
| Mortgage banking, net | 27,483 | 7,914 | 8,171 | 10,295 | 3,442 | |||||||
| Insurance commissions | 11,550 | 9,364 | 11,072 | 11,089 | 10,871 | |||||||
| Wealth management | 8,537 | 7,763 | 7,691 | 7,742 | 7,483 | |||||||
| Other, net | 2,307 | 3,451 | 1,989 | 2,130 | 2,239 | |||||||
| Nonint inc-excl sec gains (losses), net | 65,264 | 47,578 | 48,337 | 49,639 | 41,491 | |||||||
| Security gains (losses), net | — | — | — | — | — | |||||||
| Total noninterest income | 65,264 | 47,578 | 48,337 | 49,639 | 41,491 | |||||||
| Salaries and employee benefits | 69,148 | 62,319 | 62,495 | 61,949 | 60,954 | |||||||
| Services and fees | 19,930 | 19,500 | 18,838 | 18,009 | 16,968 | |||||||
| Net occupancy-premises | 6,286 | 6,461 | 6,831 | 6,403 | 6,454 | |||||||
| Equipment expense | 5,616 | 5,880 | 5,971 | 5,958 | 5,924 | |||||||
| Other real estate expense, net | 1,294 | 1,491 | 531 | 132 | 1,752 | |||||||
| Credit loss expense related to off-balance sheet credit exposures (1) | 6,783 | — | — | — | — | |||||||
| Other expense | 14,753 | 14,376 | 12,187 | 13,650 | 13,969 | |||||||
| Total noninterest expense | 123,810 | 110,027 | 106,853 | 106,101 | 106,021 | |||||||
| Income before income taxes and tax eq adj | 27,933 | 42,632 | 50,300 | 51,918 | 41,820 | |||||||
| Tax equivalent adjustment | 3,108 | 3,149 | 3,249 | 3,248 | 3,231 | |||||||
| Income before income taxes | 24,825 | 39,483 | 47,051 | 48,670 | 38,589 | |||||||
| Income taxes | 2,607 | 5,537 | 6,016 | 6,530 | 5,250 | |||||||
| Net income | $ | 22,218 | $ | 33,946 | $ | 41,035 | $ | 42,140 | $ | 33,339 | ||
| Per share data | ||||||||||||
| Earnings per share - basic | $ | 0.35 | $ | 0.53 | $ | 0.64 | $ | 0.65 | $ | 0.51 | ||
| Earnings per share - diluted | $ | 0.35 | $ | 0.53 | $ | 0.64 | $ | 0.65 | $ | 0.51 | ||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | ||
| Weighted average shares outstanding | ||||||||||||
| Basic | 63,756,629 | 64,255,716 | 64,358,540 | 64,677,889 | 65,239,470 | |||||||
| Diluted | 63,913,603 | 64,435,276 | 64,514,605 | 64,815,029 | 65,378,500 | |||||||
| Period end shares outstanding | 63,396,912 | 64,200,111 | 64,262,779 | 64,398,846 | 64,789,943 | |||||||
| (1) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||
| March 31, 2020 | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Quarter Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| NONPERFORMING ASSETS (1) | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Nonaccrual loans | |||||||||||||||
| Alabama | $ | 4,769 | $ | 1,870 | $ | 2,936 | $ | 2,327 | $ | 2,971 | |||||
| Florida | 254 | 267 | 311 | 330 | 408 | ||||||||||
| Mississippi (2) | 40,815 | 41,493 | 43,895 | 39,373 | 41,145 | ||||||||||
| Tennessee (3) | 6,153 | 8,980 | 10,193 | 8,455 | 8,806 | ||||||||||
| Texas | 1,001 | 616 | 1,695 | 2,403 | 3,093 | ||||||||||
| Total nonaccrual loans | 52,992 | 53,226 | 59,030 | 52,888 | 56,423 | ||||||||||
| Other real estate | |||||||||||||||
| Alabama | 6,229 | 8,133 | 6,501 | 6,451 | 6,878 | ||||||||||
| Florida | 4,835 | 5,877 | 6,983 | 7,826 | 8,120 | ||||||||||
| Mississippi (2) | 13,296 | 14,919 | 17,646 | 15,511 | 15,421 | ||||||||||
| Tennessee (3) | 487 | 319 | 844 | 815 | 994 | ||||||||||
| Texas | — | — | — | 640 | 726 | ||||||||||
| Total other real estate | 24,847 | 29,248 | 31,974 | 31,243 | 32,139 | ||||||||||
| Total nonperforming assets | $ | 77,839 | $ | 82,474 | $ | 91,004 | $ | 84,131 | $ | 88,562 | |||||
| LOANS PAST DUE OVER 90 DAYS (1) | |||||||||||||||
| LHFI | $ | 708 | $ | 642 | $ | 878 | $ | 1,245 | $ | 670 | |||||
| LHFS-Guaranteed GNMA serviced loans | |||||||||||||||
| (no obligation to repurchase) | $ | 43,564 | $ | 41,648 | $ | 36,445 | $ | 38,355 | $ | 40,793 | |||||
| Quarter Ended | |||||||||||||||
| ACL LHFI (1)(4) | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Beginning Balance | $ | 84,277 | $ | 83,226 | $ | 80,399 | $ | 79,005 | $ | 79,290 | |||||
| CECL adoption adjustments: | |||||||||||||||
| LHFI | (3,039 | ) | — | — | — | — | |||||||||
| Acquired loan transfers | 1,822 | — | — | — | — | ||||||||||
| Provision for credit losses | 20,581 | 3,661 | 3,039 | 2,486 | 1,611 | ||||||||||
| Charge-offs | (5,545 | ) | (4,619 | ) | (2,892 | ) | (2,937 | ) | (4,033 | ) | |||||
| Recoveries | 2,468 | 2,009 | 2,680 | 1,845 | 2,137 | ||||||||||
| Net (charge-offs) recoveries | (3,077 | ) | (2,610 | ) | (212 | ) | (1,092 | ) | (1,896 | ) | |||||
| Ending Balance | $ | 100,564 | $ | 84,277 | $ | 83,226 | $ | 80,399 | $ | 79,005 | |||||
| NET (CHARGE-OFFS) RECOVERIES (1) | |||||||||||||||
| Alabama | $ | (1,080 | ) | $ | (132 | ) | $ | (329 | ) | $ | (278 | ) | $ | (15 | ) |
| Florida | 64 | 357 | 136 | 130 | 227 | ||||||||||
| Mississippi (2) | 126 | (1,792 | ) | 391 | (907 | ) | (2,130 | ) | |||||||
| Tennessee (3) | (2,186 | ) | (131 | ) | (483 | ) | (44 | ) | (50 | ) | |||||
| Texas | (1 | ) | (912 | ) | 73 | 7 | 72 | ||||||||
| Total net (charge-offs) recoveries | $ | (3,077 | ) | $ | (2,610 | ) | $ | (212 | ) | $ | (1,092 | ) | $ | (1,896 | ) |
| (1) Excludes acquired loans. | |||||||||||||||
| (2) Mississippi includes Central and Southern Mississippi Regions. | |||||||||||||||
| (3) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. | |||||||||||||||
| (4) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||
| March 31, 2020 | |||||||||||||||
| (unaudited) | |||||||||||||||
| Quarter Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| FINANCIAL RATIOS AND OTHER DATA | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
| Return on equity | 5.45 | % | 8.13 | % | 9.96 | % | 10.53 | % | 8.50 | % | |||||
| Return on average tangible equity | 7.34 | % | 10.85 | % | 13.31 | % | 14.14 | % | 11.55 | % | |||||
| Return on assets | 0.66 | % | 1.00 | % | 1.21 | % | 1.24 | % | 1.01 | % | |||||
| Interest margin - Yield - FTE | 4.06 | % | 4.19 | % | 4.38 | % | 4.37 | % | 4.32 | % | |||||
| Interest margin - Cost | 0.54 | % | 0.62 | % | 0.71 | % | 0.73 | % | 0.69 | % | |||||
| Net interest margin - FTE | 3.52 | % | 3.56 | % | 3.66 | % | 3.64 | % | 3.63 | % | |||||
| Efficiency ratio (1) | 63.50 | % | 68.08 | % | 64.98 | % | 64.55 | % | 68.08 | % | |||||
| Full-time equivalent employees | 2,761 | 2,844 | 2,835 | 2,819 | 2,839 | ||||||||||
| CREDIT QUALITY RATIOS (2) | |||||||||||||||
| Net charge-offs/average loans | 0.13 | % | 0.11 | % | 0.01 | % | 0.05 | % | 0.09 | % | |||||
| Provision for credit losses/average loans (3) | 0.86 | % | 0.15 | % | 0.13 | % | 0.11 | % | 0.07 | % | |||||
| Nonperforming loans/total loans (incl LHFS) | 0.54 | % | 0.56 | % | 0.62 | % | 0.57 | % | 0.62 | % | |||||
| Nonperforming assets/total loans (incl LHFS) | 0.79 | % | 0.86 | % | 0.96 | % | 0.90 | % | 0.97 | % | |||||
| Nonperforming assets/total loans (incl LHFS) +ORE | 0.78 | % | 0.86 | % | 0.95 | % | 0.90 | % | 0.96 | % | |||||
| ACL LHFI/total loans (excl LHFS) (3) | 1.05 | % | 0.90 | % | 0.90 | % | 0.88 | % | 0.88 | % | |||||
| ACL LHFI-commercial/total commercial loans (3) | 0.97 | % | 0.98 | % | 0.98 | % | 0.96 | % | 0.96 | % | |||||
| ACL LHFI-consumer/total consumer and home mortgage loans (3) | 1.35 | % | 0.61 | % | 0.61 | % | 0.60 | % | 0.57 | % | |||||
| ACL LHFI/nonperforming loans (3) | 189.77 | % | 158.34 | % | 140.99 | % | 152.02 | % | 140.02 | % | |||||
| ACL LHFI/nonperforming loans (excl individually evaluated loans) (3) | 468.84 | % | 410.52 | % | 357.15 | % | 383.19 | % | 342.97 | % | |||||
| CAPITAL RATIOS (3) | |||||||||||||||
| Total equity/total assets | 11.79 | % | 12.30 | % | 12.11 | % | 11.95 | % | 11.77 | % | |||||
| Tangible equity/tangible assets | 9.27 | % | 9.72 | % | 9.53 | % | 9.34 | % | 9.15 | % | |||||
| Tangible equity/risk-weighted assets | 11.05 | % | 11.58 | % | 11.50 | % | 11.39 | % | 11.35 | % | |||||
| Tier 1 leverage ratio | 10.21 | % | 10.48 | % | 10.34 | % | 10.03 | % | 10.05 | % | |||||
| Common equity tier 1 capital ratio | 11.35 | % | 11.93 | % | 11.83 | % | 11.76 | % | 11.88 | % | |||||
| Tier 1 risk-based capital ratio | 11.88 | % | 12.48 | % | 12.38 | % | 12.31 | % | 12.45 | % | |||||
| Total risk-based capital ratio | 12.78 | % | 13.25 | % | 13.15 | % | 13.07 | % | 13.21 | % | |||||
| STOCK PERFORMANCE | |||||||||||||||
| Market value-Close | $ | 23.30 | $ | 34.51 | $ | 34.11 | $ | 33.25 | $ | 33.63 | |||||
| Book value | $ | 26.06 | $ | 25.87 | $ | 25.60 | $ | 25.13 | $ | 24.49 | |||||
| Tangible book value | $ | 19.92 | $ | 19.84 | $ | 19.57 | $ | 19.10 | $ | 18.48 | |||||
| (1) See Note 8 – Non-GAAP Financial Measures in the Notes to Consolidated Financials for Trustmark’s efficiency ratio calculation. | |||||||||||||||
| (2) Excludes acquired loans. | |||||||||||||||
| (3) See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| March 31, 2020 |
| ($ in thousands) |
| (unaudited) |
Note 1 – Recently Effective Accounting Pronouncements
ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” was adopted by Trustmark on January 1, 2020. At the date of adoption, Trustmark recorded a decrease to its ACL, LHFI of $3.0 million and an increase to its ACL on off-balance sheet credit exposures of $29.6 million resulting in a one-time cumulative effect adjustment of $26.6 million ($19.9 million, net of tax) through retained earnings.
In accordance with the amendments of ASU 2016-13, Trustmark estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts including the COVID-19 pandemic effects. Trustmark uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool. The qualitative portion of the ACL is based on general economic conditions and other internal and external factors affecting Trustmark as a whole as well as specific LHFI. The total quantitative and qualitative portions of the ACL reflect Management’s expectations of future conditions based on reasonable and supportable forecasts.
During the first quarter of 2020, based upon the factors discussed above, Trustmark recorded a provision for credit losses of $20.6 million and a credit loss expense related to off-balance sheet credit exposures of $6.8 million.
Upon adoption of FASB ASC Topic 326, Trustmark elected to account for its existing acquired loans as purchased credit deteriorated loans included within the LHFI portfolio. As a result, acquired loans of $72.6 million, as well as the necessary calculated allowance of $1.8 million, were transferred during the first quarter of 2020. The acquired loans and related allowance transferred were acquired in the BancTrust Financial Group, Inc. merger on February 13, 2013. LHFI presented in prior periods exclude acquired loans and thus may not be comparable to the current period presentation.
In accordance with FASB ASC Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost,” Trustmark has developed an allowance for credit losses methodology effective January 1, 2020, which replaces its previous allowance for loan losses methodology. The ACL for LHFI is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries. Prior periods present the allowance for loan losses and provision for loan losses methodology under the incurred loss model and thus may not be comparable to the current period presentation.
Trustmark’s estimated allowance for credit losses on securities available for sale and held to maturity under ASU 2016-13 was deemed immaterial due to the composition of these portfolios. Both portfolios consist primarily of U.S. government agency guaranteed mortgage-backed securities for which the risk of loss is minimal. Therefore, Trustmark did not recognize a cumulative effect adjustment through retained earnings related to the available for sale or held to maturity securities.
Trustmark has elected the five-year phase-in transition period related to adopting the CECL methodology for its regulatory capital.
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:
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SECURITIES AVAILABLE FOR SALE | ||||||||||
| U.S. Government agency obligations | $ | 21,190 | $ | 22,327 | $ | 24,697 | $ | 26,646 | $ | 28,008 |
| Obligations of states and political subdivisions | 23,572 | 25,465 | 35,001 | 38,698 | 50,954 | |||||
| Mortgage-backed securities | ||||||||||
| Residential mortgage pass-through securities | ||||||||||
| Guaranteed by GNMA | 71,971 | 69,252 | 63,391 | 65,716 | 66,176 | |||||
| Issued by FNMA and FHLMC | 967,329 | 713,356 | 589,962 | 624,364 | 645,958 | |||||
| Other residential mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 634,075 | 658,226 | 705,601 | 751,371 | 784,566 | |||||
| Commercial mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 115,642 | 113,778 | 135,053 | 136,930 | 147,783 | |||||
| Total securities available for sale | $ | 1,833,779 | $ | 1,602,404 | $ | 1,553,705 | $ | 1,643,725 | $ | 1,723,445 |
| SECURITIES HELD TO MATURITY | ||||||||||
| U.S. Government agency obligations | $ | — | $ | 3,781 | $ | 3,770 | $ | 3,758 | $ | 3,747 |
| Obligations of states and political subdivisions | 31,758 | 31,781 | 31,806 | 32,860 | 35,352 | |||||
| Mortgage-backed securities | ||||||||||
| Residential mortgage pass-through securities | ||||||||||
| Guaranteed by GNMA | 10,492 | 10,820 | 10,994 | 11,184 | 11,710 | |||||
| Issued by FNMA and FHLMC | 91,971 | 96,631 | 102,048 | 106,755 | 111,962 | |||||
| Other residential mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 463,175 | 485,324 | 510,770 | 536,166 | 559,690 | |||||
| Commercial mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 106,880 | 109,762 | 126,034 | 134,813 | 161,858 | |||||
| Total securities held to maturity | $ | 704,276 | $ | 738,099 | $ | 785,422 | $ | 825,536 | $ | 884,319 |
At March 31, 2020, the net unamortized, unrealized loss included in accumulated other comprehensive income (loss) in the accompanying balance sheet for securities held to maturity previously transferred from securities available for sale totaled approximately $11.2 million ($8.4 million, net of tax).
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 97.7% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| March 31, 2020 |
| ($ in thousands) |
| (unaudited) |
Note 3 – Loan Composition
LHFI consisted of the following during the periods presented:
| LHFI BY TYPE (1) | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans secured by real estate: | |||||||||||||||
| Construction, land development and other land loans | $ | 1,136,389 | $ | 1,162,791 | $ | 1,135,999 | $ | 1,111,297 | $ | 1,209,761 | |||||
| Secured by 1-4 family residential properties | 1,852,065 | 1,855,913 | 1,820,455 | 1,818,126 | 1,810,872 | ||||||||||
| Secured by nonfarm, nonresidential properties | 2,575,422 | 2,475,245 | 2,442,308 | 2,326,312 | 2,241,072 | ||||||||||
| Other real estate secured | 838,573 | 724,480 | 668,667 | 635,839 | 528,032 | ||||||||||
| Commercial and industrial loans | 1,476,777 | 1,477,896 | 1,491,367 | 1,533,318 | 1,558,057 | ||||||||||
| Consumer loans | 170,678 | 175,738 | 176,894 | 176,133 | 176,619 | ||||||||||
| State and other political subdivision loans | 938,637 | 967,944 | 978,456 | 982,187 | 982,626 | ||||||||||
| Other loans | 579,379 | 495,621 | 509,522 | 533,547 | 487,975 | ||||||||||
| LHFI | 9,567,920 | 9,335,628 | 9,223,668 | 9,116,759 | 8,995,014 | ||||||||||
| ACL LHFI | (100,564 | ) | (84,277 | ) | (83,226 | ) | (80,399 | ) | (79,005 | ) | |||||
| Net LHFI | $ | 9,467,356 | $ | 9,251,351 | $ | 9,140,442 | $ | 9,036,360 | $ | 8,916,009 | |||||
| (1) | See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. | ||||||||||||||
| --- | --- |
The following table presents the LHFI composition by region at March 31, 2020 and reflects each region’s diversified mix of loans:
| March 31, 2020 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LHFI - COMPOSITION BY REGION | Total | Alabama | Florida | Mississippi<br><br><br>(Central and<br><br><br>Southern<br><br><br>Regions) | Tennessee<br><br><br>(Memphis, TN and<br><br><br>Northern MS<br><br><br>Regions) | Texas | ||||||
| Loans secured by real estate: | ||||||||||||
| Construction, land development and other land loans | $ | 1,136,389 | $ | 358,297 | $ | 89,884 | $ | 308,049 | $ | 23,554 | $ | 356,605 |
| Secured by 1-4 family residential properties | 1,852,065 | 131,161 | 40,346 | 1,584,995 | 82,329 | 13,234 | ||||||
| Secured by nonfarm, nonresidential properties | 2,575,422 | 658,690 | 280,670 | 961,998 | 167,424 | 506,640 | ||||||
| Other real estate secured | 838,573 | 251,741 | 25,144 | 341,864 | 9,276 | 210,548 | ||||||
| Commercial and industrial loans | 1,476,777 | 214,041 | 20,612 | 699,930 | 315,542 | 226,652 | ||||||
| Consumer loans | 170,678 | 23,787 | 6,393 | 118,257 | 19,954 | 2,287 | ||||||
| State and other political subdivision loans | 938,637 | 109,422 | 38,763 | 582,098 | 26,717 | 181,637 | ||||||
| Other loans | 579,379 | 81,214 | 15,561 | 368,269 | 84,000 | 30,335 | ||||||
| Loans | $ | 9,567,920 | $ | 1,828,353 | $ | 517,373 | $ | 4,965,460 | $ | 728,796 | $ | 1,527,938 |
| CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION | ||||||||||||
| Lots | $ | 74,865 | $ | 18,309 | $ | 23,768 | $ | 25,757 | $ | 1,647 | $ | 5,384 |
| Development | 63,640 | 14,326 | 7,505 | 29,130 | 4,938 | 7,741 | ||||||
| Unimproved land | 106,812 | 28,543 | 16,678 | 29,752 | 11,323 | 20,516 | ||||||
| 1-4 family construction | 240,948 | 98,982 | 20,878 | 85,674 | 4,335 | 31,079 | ||||||
| Other construction | 650,124 | 198,137 | 21,055 | 137,736 | 1,311 | 291,885 | ||||||
| Construction, land development and other land loans | $ | 1,136,389 | $ | 358,297 | $ | 89,884 | $ | 308,049 | $ | 23,554 | $ | 356,605 |
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||
| --- | ||||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | ||||||||||||
| March 31, 2020 | ||||||||||||
| ($ in thousands) | ||||||||||||
| (unaudited) |
Note 3 – Loan Composition (continued)
| March 31, 2020 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | Alabama | Florida | Mississippi<br><br><br>(Central and<br><br><br>Southern<br><br><br>Regions) | Tennessee<br><br><br>(Memphis, TN and<br><br><br>Northern MS<br><br><br>Regions) | Texas | |||||||
| LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION | ||||||||||||
| Non-owner occupied: | ||||||||||||
| Retail | $ | 443,057 | $ | 162,375 | $ | 41,536 | $ | 137,615 | $ | 27,531 | $ | 74,000 |
| Office | 210,317 | 45,026 | 34,397 | 59,339 | 12,686 | 58,869 | ||||||
| Hotel/motel | 353,666 | 136,120 | 100,735 | 65,604 | 40,207 | 11,000 | ||||||
| Mini-storage | 109,009 | 12,112 | 3,520 | 49,479 | 420 | 43,478 | ||||||
| Industrial | 188,403 | 63,245 | 13,418 | 38,613 | 2,243 | 70,884 | ||||||
| Health care | 42,520 | 15,414 | 4,535 | 18,815 | — | 3,756 | ||||||
| Convenience stores | 27,116 | 3,496 | — | 11,243 | 410 | 11,967 | ||||||
| Nursing homes/senior living | 57,123 | 18,696 | — | 19,856 | — | 18,571 | ||||||
| Other | 66,085 | 5,238 | 6,892 | 11,120 | 5,959 | 36,876 | ||||||
| Total non-owner occupied loans | 1,497,296 | 461,722 | 205,033 | 411,684 | 89,456 | 329,401 | ||||||
| Owner-occupied: | ||||||||||||
| Office | 166,804 | 38,751 | 38,062 | 53,284 | 10,763 | 25,944 | ||||||
| Churches | 103,009 | 24,506 | 6,250 | 46,790 | 11,201 | 14,262 | ||||||
| Industrial warehouses | 152,128 | 12,425 | 3,517 | 49,776 | 16,829 | 69,581 | ||||||
| Health care | 129,995 | 15,391 | 6,006 | 93,260 | 2,515 | 12,823 | ||||||
| Convenience stores | 104,925 | 13,026 | 8,071 | 62,871 | 640 | 20,317 | ||||||
| Retail | 68,057 | 17,945 | 6,636 | 24,610 | 2,707 | 16,159 | ||||||
| Restaurants | 59,617 | 4,200 | 1,833 | 36,612 | 15,497 | 1,475 | ||||||
| Auto dealerships | 31,366 | 7,947 | 295 | 12,883 | 10,241 | — | ||||||
| Nursing homes/senior living | 179,065 | 58,271 | — | 115,015 | 5,779 | — | ||||||
| Other | 83,160 | 4,506 | 4,967 | 55,213 | 1,796 | 16,678 | ||||||
| Total owner-occupied loans | 1,078,126 | 196,968 | 75,637 | 550,314 | 77,968 | 177,239 | ||||||
| Loans secured by nonfarm, nonresidential properties | $ | 2,575,422 | $ | 658,690 | $ | 280,670 | $ | 961,998 | $ | 167,424 | $ | 506,640 |
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||
| --- | ||||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | ||||||||||||
| March 31, 2020 | ||||||||||||
| ($ 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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||
| Securities – taxable | 2.25 | % | 2.24 | % | 2.23 | % | 2.25 | % | 2.27 | % | |||||
| Securities – nontaxable | 3.85 | % | 3.92 | % | 3.76 | % | 3.78 | % | 3.80 | % | |||||
| Securities – total | 2.28 | % | 2.27 | % | 2.26 | % | 2.28 | % | 2.31 | % | |||||
| Loans - LHFI & LHFS | 4.54 | % | 4.67 | % | 4.90 | % | 4.98 | % | 4.93 | % | |||||
| Acquired loans | — | 10.90 | % | 11.08 | % | 8.84 | % | 7.45 | % | ||||||
| Loans - total | 4.54 | % | 4.72 | % | 4.95 | % | 5.01 | % | 4.96 | % | |||||
| FF sold & rev repo | — | 2.16 | % | 2.49 | % | 2.52 | % | 2.93 | % | ||||||
| Other earning assets | 1.59 | % | 1.57 | % | 2.35 | % | 2.31 | % | 2.67 | % | |||||
| Total earning assets | 4.06 | % | 4.19 | % | 4.38 | % | 4.37 | % | 4.32 | % | |||||
| Interest-bearing deposits | 0.71 | % | 0.85 | % | 0.96 | % | 0.99 | % | 0.93 | % | |||||
| FF pch & repo | 1.02 | % | 1.21 | % | 1.53 | % | 0.63 | % | 1.38 | % | |||||
| Other borrowings | 2.35 | % | 2.32 | % | 2.35 | % | 2.33 | % | 2.19 | % | |||||
| Total interest-bearing liabilities | 0.75 | % | 0.88 | % | 0.99 | % | 1.01 | % | 0.95 | % | |||||
| Net interest margin | 3.52 | % | 3.56 | % | 3.66 | % | 3.64 | % | 3.63 | % | |||||
| Net interest margin excluding acquired loans | 3.52 | % | 3.52 | % | 3.61 | % | 3.60 | % | 3.60 | % |
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 excluding acquired loans remained flat at 3.52% for the first quarter of 2020 when compared to the fourth quarter of 2019, as the decline in the yield on the loans held for investment and held for sale portfolio was offset by lower costs of interest-bearing deposits.
Note 5 – Mortgage Banking
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net positive ineffectiveness of $9.9 million primarily due to widening spreads between mortgage and ten-year Treasury rates during the first quarter of 2020.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
| Quarter Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||
| Mortgage servicing income, net | $ | 5,819 | $ | 5,854 | $ | 5,688 | $ | 5,734 | $ | 5,607 | |||||
| Change in fair value-MSR from runoff | (2,607 | ) | (2,950 | ) | (3,569 | ) | (2,918 | ) | (2,398 | ) | |||||
| Gain on sales of loans, net | 14,339 | 7,984 | 9,799 | 7,532 | 4,981 | ||||||||||
| Mortgage banking income before hedge ineffectiveness | 17,551 | 10,888 | 11,918 | 10,348 | 8,190 | ||||||||||
| Change in fair value-MSR from market changes | (23,999 | ) | 4,048 | (8,054 | ) | (8,209 | ) | (8,863 | ) | ||||||
| Change in fair value of derivatives | 33,931 | (7,022 | ) | 4,307 | 8,156 | 4,115 | |||||||||
| Net positive (negative) hedge ineffectiveness | 9,932 | (2,974 | ) | (3,747 | ) | (53 | ) | (4,748 | ) | ||||||
| Mortgage banking, net | $ | 27,483 | $ | 7,914 | $ | 8,171 | $ | 10,295 | $ | 3,442 | |||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||
| --- | |||||||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | |||||||||||||||
| March 31, 2020 | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) |
Note 6 – Salaries and Employee Benefit Plans
Early Retirement Program
In January 2020, Trustmark announced a voluntary early retirement program for associates age 60 and above with five or more years of continuous service. The cost of this program is reflected in a one-time, pre-tax charge of approximately $4.4 million (salaries and benefits of $4.3 million and other miscellaneous expense of $102 thousand; or $0.05 per basic share net of tax) in Trustmark’s first quarter 2020 earnings. The pre-tax salary and employee benefits expense savings resulting from the implementation of the early retirement program are expected to total approximately $2.9 million ($0.03 per basic share net of tax) and $4.0 million ($0.05 per basic share net of tax) for the remainder of 2020 and for the year ended 2021, respectively.
Note 7 – Other Noninterest Income and Expense
Other noninterest income consisted of the following for the periods presented:
| Quarter Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||
| Partnership amortization for tax credit purposes | $ | (1,161 | ) | $ | (1,630 | ) | $ | (1,994 | ) | $ | (2,010 | ) | $ | (2,010 | ) |
| Increase in life insurance cash surrender value | 1,722 | 1,802 | 1,814 | 1,803 | 1,783 | ||||||||||
| Other miscellaneous income | 1,746 | 3,279 | 2,169 | 2,337 | 2,466 | ||||||||||
| Total other, net | $ | 2,307 | $ | 3,451 | $ | 1,989 | $ | 2,130 | $ | 2,239 |
Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.
Other noninterest expense consisted of the following for the periods presented:
| Quarter Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||
| Loan expense | $ | 2,799 | $ | 2,968 | $ | 2,886 | $ | 3,003 | $ | 2,697 |
| Amortization of intangibles | 812 | 1,002 | 1,021 | 992 | 1,101 | |||||
| FDIC assessment expense | 1,590 | 1,450 | 1,400 | 1,836 | 1,758 | |||||
| Other miscellaneous expense | 9,552 | 8,956 | 6,880 | 7,819 | 8,413 | |||||
| Total other expense | $ | 14,753 | $ | 14,376 | $ | 12,187 | $ | 13,650 | $ | 13,969 |
Note 8 – Non-GAAP Financial Measures
In addition to capital ratios defined by U.S. generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.
Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other tangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.
These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| March 31, 2020 |
| ($ in thousands except per share data) |
| (unaudited) |
Note 8 – Non-GAAP Financial Measures (continued)
| Quarter Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | ||||||||||||
| TANGIBLE EQUITY | ||||||||||||||||
| AVERAGE BALANCES | ||||||||||||||||
| Total shareholders' equity | $ | 1,640,070 | $ | 1,656,605 | $ | 1,634,646 | $ | 1,605,745 | $ | 1,590,187 | ||||||
| Less: Goodwill | (380,671 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | ||||||
| Identifiable intangible assets | (8,049 | ) | (7,882 | ) | (8,706 | ) | (9,631 | ) | (10,666 | ) | ||||||
| Total average tangible equity | $ | 1,251,350 | $ | 1,269,096 | $ | 1,246,313 | $ | 1,216,487 | $ | 1,199,894 | ||||||
| PERIOD END BALANCES | ||||||||||||||||
| Total shareholders' equity | $ | 1,652,399 | $ | 1,660,702 | $ | 1,645,362 | $ | 1,618,550 | $ | 1,587,028 | ||||||
| Less: Goodwill | (381,717 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | ||||||
| Identifiable intangible assets | (7,537 | ) | (7,343 | ) | (8,345 | ) | (9,101 | ) | (10,092 | ) | ||||||
| Total tangible equity | (a) | $ | 1,263,145 | $ | 1,273,732 | $ | 1,257,390 | $ | 1,229,822 | $ | 1,197,309 | |||||
| TANGIBLE ASSETS | ||||||||||||||||
| Total assets | $ | 14,019,829 | $ | 13,497,877 | $ | 13,584,786 | $ | 13,548,958 | $ | 13,478,017 | ||||||
| Less: Goodwill | (381,717 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | (379,627 | ) | ||||||
| Identifiable intangible assets | (7,537 | ) | (7,343 | ) | (8,345 | ) | (9,101 | ) | (10,092 | ) | ||||||
| Total tangible assets | (b) | $ | 13,630,575 | $ | 13,110,907 | $ | 13,196,814 | $ | 13,160,230 | $ | 13,088,298 | |||||
| Risk-weighted assets | (c) | $ | 11,427,297 | $ | 11,002,877 | $ | 10,935,018 | $ | 10,796,903 | $ | 10,548,472 | |||||
| NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION | ||||||||||||||||
| Net income | $ | 22,218 | $ | 33,946 | $ | 41,035 | $ | 42,140 | $ | 33,339 | ||||||
| Plus: Intangible amortization net of tax | 609 | 752 | 766 | 744 | 826 | |||||||||||
| Net income adjusted for intangible amortization | $ | 22,827 | $ | 34,698 | $ | 41,801 | $ | 42,884 | $ | 34,165 | ||||||
| Period end common shares outstanding | (d) | 63,396,912 | 64,200,111 | 64,262,779 | 64,398,846 | 64,789,943 | ||||||||||
| TANGIBLE COMMON EQUITY MEASUREMENTS | ||||||||||||||||
| Return on average tangible equity (1) | 7.34 | % | 10.85 | % | 13.31 | % | 14.14 | % | 11.55 | % | ||||||
| Tangible equity/tangible assets | (a)/(b) | 9.27 | % | 9.72 | % | 9.53 | % | 9.34 | % | 9.15 | % | |||||
| Tangible equity/risk-weighted assets | (a)/(c) | 11.05 | % | 11.58 | % | 11.50 | % | 11.39 | % | 11.35 | % | |||||
| Tangible book value | (a)/(d)*1,000 | $ | 19.92 | $ | 19.84 | $ | 19.57 | $ | 19.10 | $ | 18.48 | |||||
| COMMON EQUITY TIER 1 CAPITAL (CET1) | ||||||||||||||||
| Total shareholders' equity | $ | 1,652,399 | $ | 1,660,702 | $ | 1,645,362 | $ | 1,618,550 | $ | 1,587,028 | ||||||
| CECL transition adjustment (3) | 26,476 | — | — | — | — | |||||||||||
| AOCI-related adjustments | (7,698 | ) | 23,600 | 20,858 | 24,816 | 40,915 | ||||||||||
| CET1 adjustments and deductions: | ||||||||||||||||
| Goodwill net of associated deferred tax liabilities (DTLs) | (367,825 | ) | (365,738 | ) | (365,741 | ) | (365,745 | ) | (365,748 | ) | ||||||
| Other adjustments and deductions for CET1 (2) | (6,269 | ) | (5,896 | ) | (6,671 | ) | (8,268 | ) | (9,099 | ) | ||||||
| CET1 capital | (e) | 1,297,083 | 1,312,668 | 1,293,808 | 1,269,353 | 1,253,096 | ||||||||||
| Additional tier 1 capital instruments plus related surplus | 60,000 | 60,000 | 60,000 | 60,000 | 60,000 | |||||||||||
| Tier 1 capital | $ | 1,357,083 | $ | 1,372,668 | $ | 1,353,808 | $ | 1,329,353 | $ | 1,313,096 | ||||||
| Common equity tier 1 capital ratio | (e)/(c) | 11.35 | % | 11.93 | % | 11.83 | % | 11.76 | % | 11.88 | % | |||||
| (1) | Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity. | |||||||||||||||
| --- | --- | |||||||||||||||
| (2) | Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAs), threshold deductions and transition adjustments, as applicable. | |||||||||||||||
| --- | --- | |||||||||||||||
| (3) | See Note 1 – Recently Effective Accounting Pronouncements in the Notes to Consolidated Financials for additional details. | |||||||||||||||
| --- | --- | |||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||
| --- | ||||||||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | ||||||||||||||||
| March 31, 2020 | ||||||||||||||||
| ($ in thousands except per share data) | ||||||||||||||||
| (unaudited) |
Note 8 – Non-GAAP Financial Measures (continued)
Trustmark discloses certain non-GAAP financial measures because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views these as measures of our core operating business, which exclude the impact of the items detailed below, as these items are generally not operational in nature. These non-GAAP financial measures also provide another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.
The following table presents pre-tax pre-provision income during the periods presented:
| Quarter Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||
| Net interest income (GAAP) | $ | 103,952 | $ | 105,591 | $ | 108,466 | $ | 107,724 | $ | 104,808 | |||
| Noninterest income (GAAP) | 65,264 | 47,578 | 48,337 | 49,639 | 41,491 | ||||||||
| Pre-tax pre-provision revenue | (a) | $ | 169,216 | $ | 153,169 | $ | 156,803 | $ | 157,363 | $ | 146,299 | ||
| Noninterest expense (GAAP) | $ | 123,810 | $ | 110,027 | $ | 106,853 | $ | 106,101 | $ | 106,021 | |||
| Less: | Voluntary early retirement program | (4,375 | ) | — | — | — | — | ||||||
| Credit loss expense related to off-balance sheet credit exposures | (6,783 | ) | — | — | — | — | |||||||
| Adjusted noninterest expense (Non-GAAP) | (b) | $ | 112,652 | $ | 110,027 | $ | 106,853 | $ | 106,101 | $ | 106,021 | ||
| Pre-tax pre-provision income (Non-GAAP) | (a)-(b) | $ | 56,564 | $ | 43,142 | $ | 49,950 | $ | 51,262 | $ | 40,278 |
The following table presents adjustments to net income and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented:
| Quarter Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 3/31/2019 | ||||||||||
| Amount | Diluted EPS | Amount | Diluted EPS | ||||||||
| Net Income (GAAP) | $ | 22,218 | $ | 0.35 | $ | 33,339 | $ | 0.51 | |||
| Significant non-routine transactions (net of taxes): | |||||||||||
| Voluntary early retirement program | 3,281 | 0.05 | — | — | |||||||
| Net Income adjusted for significant | |||||||||||
| non-routine transactions (Non-GAAP) | $ | 25,499 | $ | 0.40 | $ | 33,339 | $ | 0.51 | |||
| Reported | Adjusted | Reported | Adjusted | ||||||||
| (GAAP) | (Non-GAAP) | (GAAP) | (Non-GAAP) | ||||||||
| Return on equity | 5.45 | % | 6.25 | % | 8.50 | % | n/a | ||||
| Return on average tangible equity | 7.34 | % | 8.39 | % | 11.55 | % | n/a | ||||
| Return on assets | 0.66 | % | 0.75 | % | 1.01 | % | n/a | ||||
| n/a - not applicable | |||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||
| --- | |||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | |||||||||||
| March 31, 2020 | |||||||||||
| ($ in thousands) | |||||||||||
| (unaudited) |
Note 8 – Non-GAAP Financial Measures (continued)
The following table presents Trustmark’s calculation of its efficiency ratio for the periods presented:
| Quarter Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | |||||||||||||
| Total noninterest expense (GAAP) | $ | 123,810 | $ | 110,027 | $ | 106,853 | $ | 106,101 | $ | 106,021 | |||||||
| Less: | Other real estate expense, net | (1,294 | ) | (1,491 | ) | (531 | ) | (132 | ) | (1,752 | ) | ||||||
| Amortization of intangibles | (812 | ) | (1,002 | ) | (1,021 | ) | (992 | ) | (1,101 | ) | |||||||
| Voluntary early retirement program | (4,375 | ) | — | — | — | — | |||||||||||
| Credit loss expense related to off-balance sheet exposures | (6,783 | ) | — | — | — | — | |||||||||||
| Charitable contributions resulting in state tax credits | (375 | ) | — | — | — | — | |||||||||||
| Adjusted noninterest expense (Non-GAAP) | (c) | $ | 110,171 | $ | 107,534 | $ | 105,301 | $ | 104,977 | $ | 103,168 | ||||||
| Net interest income (GAAP) | $ | 103,952 | $ | 105,591 | $ | 108,466 | $ | 107,724 | $ | 104,808 | |||||||
| Add: | Tax equivalent adjustment | 3,108 | 3,149 | 3,249 | 3,248 | 3,231 | |||||||||||
| Net interest income-FTE (Non-GAAP) | (a) | $ | 107,060 | $ | 108,740 | $ | 111,715 | $ | 110,972 | $ | 108,039 | ||||||
| Noninterest income (GAAP) | $ | 65,264 | $ | 47,578 | $ | 48,337 | $ | 49,639 | $ | 41,491 | |||||||
| Add: | Partnership amortization for tax credit purposes | 1,161 | 1,630 | 1,994 | 2,010 | 2,010 | |||||||||||
| Adjusted noninterest income (Non-GAAP) | (b) | $ | 66,425 | $ | 49,208 | $ | 50,331 | $ | 51,649 | $ | 43,501 | ||||||
| Adjusted revenue (Non-GAAP) | (a)+(b) | $ | 173,485 | $ | 157,948 | $ | 162,046 | $ | 162,621 | $ | 151,540 | ||||||
| Efficiency ratio (Non-GAAP) | (c)/((a)+(b)) | 63.50 | % | 68.08 | % | 64.98 | % | 64.55 | % | 68.08 | % |
trmk-ex992_567.pptx.htm
First Quarter 2020 Financial Results Exhibit 99.2
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,” “project,” “potential,” “seek,” “continue,” “could,” “would,” “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 any or all of our business, results of operations financial condition and liquidity. 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. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the novel coronavirus (COVID-19) pandemic, and also by the effectiveness of varying governmental responses in ameliorating the impact of the pandemic on our customers and the economies where they operate. 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, an increase in unemployment levels and slowdowns in economic growth, the effects of the COVID-19 pandemic on the domestic and global economy, as well as the effectiveness of actions of federal, state and local governments and agencies (including the Board of Governors of the Federal Reserve Board (FRB) to mitigate its spread and economic impact, local, state and national economic and market conditions, conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets, levels of and volatility in crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of issues related to the European financial system and monetary and other governmental actions designed to address credit, securities, and/or commodity markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, particularly with respect to the COVID-19 pandemic, changes in our ability to control expenses, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, pandemics or other health crises, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission (SEC). 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. Forward–Looking Statements
Trustmark has been proactive in its response to the COVID-19 pandemic and is taking comprehensive action to support customers, associates and communities COVID-19 Response Customers Branches remaining open with drive-thru service, and lobby access by appointment ATM and ITM network remain accessible, as well as robust digital and mobile banking options Proactive outreach with customers to discuss challenges and solutions Providing waivers of certain fees and charges, including penalties on early CD withdrawals Granting extensions, deferrals and forbearance as appropriate Paused all foreclosures and repossessions No negative credit bureau reporting for previously up-to-date customers Providing support to small business owners through SBA’s Paycheck Protection Program; Approximately 6,000 applications approved with proceeds in excess of $800 million as of April 23, 2020 Implemented social distancing, heightened focus on hygiene, additional cleaning and protection measures implemented in compliance with CDC guidelines Approximately 45% of associates working remotely; other departments working on rotating schedules Encouraged at-risk associates to work remotely or self-quarantine Provided temporary compensation adjustments and one-time payment to front line associates Provided all associates with additional paid sick leave Special contributions to area food banks and others supporting at-risk individuals and families Provide meals to Healthcare Heroes and school lunch programs Hosted blood drives Supported distribution of hand sanitizer Expanded outreach efforts to promote overview of available stimulus opportunities Associates Communities
Q1-20 Financial Highlights Maintained position of strength and stability LHFI (excl. acquired loan reclassification) increased $159.7 million, or 1.7%, from the prior quarter and $500.3 million, or 5.6%, Y-o-Y Pre-tax, pre-provision (PTPP) income totaled $56.6 million, up 31.1% LQ and 40.4% Y-o-Y Core noninterest expense totaled $110.2 million in the first quarter of 2020, an increase of 2.5% from the prior quarter Voluntary early retirement program expected to produce pre-tax savings of approximately $2.9 million for the remainder of 2020 and $4.0 million in 2021 Adopted current expected credit losses (CECL) methodology for estimating allowance for credit losses Nonperforming assets declined 5.6% from the prior quarter and 12.1% year-over-year Credit Quality Capital Management Maintained strong capital levels with CET1 ratio of 11.35% and total risk-based capital ratio of 12.78% Suspended share repurchase program on March 9, 2020 Source: Company reports At March 31, 2020 Total Assets $14.0 billion Loans Held for Investment $9.6 billion Total Deposits $11.6 billion Banking Centers 188 Q1-20 Q4-19 Q1-19 Net Income $22.2 million $33.9 million $33.3 million EPS – Diluted $0.35 $0.53 $0.51 PTPP Income $56.6 million $43.1 million $40.3 million ROAA 0.66% 1.00% 1.01% ROATCE 7.34% 10.85% 11.55% Dividends / Share $0.23 $0.23 $0.23 TCE/TA 9.27% 9.72% 9.15% Provision and expense for credit losses totaled $27.4 million, primarily due to the impact of the COVID-19 pandemic on expected credit losses; reduced after-tax net income by $0.32 per diluted share First quarter results include a pre-tax charge of $4.4 million related to a voluntary early retirement program which reduced earnings by $0.05 per diluted share Positive net mortgage servicing hedge ineffectiveness of $9.9 million in the first quarter increased earnings by $0.12 per diluted share Expense Management Profitable Revenue Generation Earnings Drivers
Loans Held for Investment (LHFI) Portfolio Focus on profitable, credit-disciplined loan growth continued Source: Company reports (1) During the first quarter of 2020, Trustmark reclassified $72.6 million of acquired loans to loans held for investment with the adoption of FASB ASC Topic 326. Reflects change excluding acquired loan reclass. Trustmark has no loan exposure in which the source of repayment or the underlying security of such exposure is tied to the realization of value from energy reserves Total energy-related sector exposure of $359.6 million with outstanding balances of $131.7 million – representing 1.4% of total LHFI – at March 31, 2020 At March 31, 2020, nonaccrual energy-related loans represented 8.4% of outstanding energy-related loans and 12 basis points of outstanding LHFI Dollar Change: $122 $107 $112 $160(1)
Loan Portfolio Detail Source: Company reports (1) Multi-Family is included in Other Real Estate Secured Loans in Financials Focus on vertical construction with limited exposure to unimproved land and development Well diversified product and geographical mix Balanced between non-owner and owner occupied portfolios Virtually no REIT outstandings ($40 million)
Loan Portfolio Detail Source: Company reports Portfolio includes commercial, financial intermediaries, agriculture production and non-profits Well diversified portfolio with no single category exceeding 12% Small energy book and has never been an area of focused growth Virtually no regulatory defined higher risk commercial and industrial outstandings ($3 million)
Loan Portfolio Detail COVID-19 Impacted Industries at March 31, 2020 Restaurants $116 million Outstanding 1.21% of Portfolio Outstandings Hotels $366 million Outstanding 3.83% of Portfolio Outstandings Retail (CRE) $505 million Outstanding 5.28% of Portfolio Outstandings Energy $132 million Outstanding 1.38% of Portfolio Outstandings 23% of book- stand-alone buildings with strong essential services tenants Limited-Service Restaurants – 24% Carryout Restaurants – 19% Other – 2% No loans where repayment or underlying security tied to realization of value from energy reserves 344 Loans 95 Loans 359 Loans 134 Loans 91% operate under a flag 81% operate under Marriott, Hilton, IHG & Hyatt Flags 74% Real Estate Secured Full-Service Restaurants - 55% Additional 3% of book- national grocery store anchored Additional 14% of book-investment grade anchored centers Higher Risk C&I $3 million Outstanding 1 Borrower Pre COVID-19 loan to value was 54% Pre COVID-19 debt service coverage was 1.8x Mall exposure in only one borrower-$5 million outstanding Experienced operators & carries secondary guarantor support $124 million Exposure $451 million Exposure $635 million Exposure $360 million Exposure $14 million Exposure 99% Real Estate Secured
Loan Customer Assistance Programs Loan Concessions Provided As a Result of COVID-19 April 23, 2020 (1) Commercial concessions are primarily either interest only for 90 days or full payment deferrals for 90 days. (2) Consumer concessions are 90-day full payment deferrals. Paycheck Protection Program Results Through April 23, 2020 Trustmark is actively participating in the Paycheck Protection Program administered by the Small Business Administration. The bank began taking customer applications on Saturday, April 4 and began funding loans on Monday, April 13. Small Business Administration commitments were secured for approximately 6,000 requests totaling more than $800 million with an average size of $137 thousand. ($ in Thousands) Categories Number of Loans Balances CRE (1) 287 $ 612,691 Commercial (1) 768 276,632 1-4 Family (2) 498 82,056 Consumer (non 1-4 Family) (2) 425 4,836 Total Concessions 1,978 $ 976,215
Credit Risk Management Solid asset quality metrics Adopted current expected credit loss (CECL) methodology for estimating credit losses effective January 1, 2020 Nonperforming loans decreased 0.4% and 6.1% from the prior quarter and year-over-year, respectively Other real estate declined 15.0% from the prior quarter and 22.7% year-over-year Allowance for credit losses represented 468.8% of nonperforming loans, excluding individually evaluated loans Source: Company reports Note: Unless noted otherwise, credit metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement (1) NPLs excludes individually evaluated loans
Drivers of Change Under CECL Allowance for Credit Losses- Loans and Leases and Off-Balance Sheet Credit Exposures ALLL 12/31/19 Day 1 Adjustment Portfolio Changes Economic Factors ACL 03/31/20(1) CECL Day 1 transition adjustment Includes ACL for loans and leases and off-balance sheet credit exposures Net loan growth Changes in credit quality Charge-offs and recoveries Changes to macro-economic variables Source: Company reports (1) Includes allowance for credit losses for LHFI and off-balance sheet credit exposures ($ in millions)
Attractive, Low-Cost Deposit Base Deposits totaled $11.6 billion at March 31, 2020, up $330.2 million, or 2.9%, from the prior quarter and up $40.9 million, or 0.4%, year-over-year Cost of interest bearing deposits in the first quarter totaled 0.71%, down 14 basis points from the prior quarter Source: Company reports (1) Percentages may not sum to 100% due to rounding
Income Statement Highlights – Net Interest Income Net interest income (FTE) totaled $107.1 million in the first quarter, resulting in a net interest margin of 3.52%. Net interest income (FTE) decreased $1.7 million relative to the prior quarter, as a $4.3 million reduction in interest income more than offset a $2.6 million reduction in interest expense Source: Company reports (1) Totals may not foot due to rounding (2) Loan Yield and NIM exclude acquired loans
Income Statement Highlights – Noninterest Income Source: Company reports Noninterest income totaled $65.3 million, up 37.2% linked-quarter and up 57.3% year-over-year Mortgage loan production in the first quarter totaled $457.2 million, a decline of 8.3% from the prior quarter and a 61.3% increase year-over-year. Mortgage banking revenue totaled $27.5 million in the first quarter, including $9.9 million of positive net mortgage servicing hedge ineffectiveness Gain on sales of loans, net totaled $14.3 million in the first quarter, up $6.4 million from the prior quarter Insurance revenue increased 23.3% linked-quarter, and wealth management revenue increased 10.0% from the prior quarter NII = 38.6% of Quarterly Revenue
Income Statement Highlights – Noninterest Expense Source: Company reports (1) Totals may not foot due to rounding Core Expenses – increased modestly in the first quarter, up 2.5% from the prior quarter Salaries and employee benefits – excluding a one-time charge related to the early retirement program – totaled $64.9 million, an increase of 4.1% linked-quarter due to a seasonal increase in payroll taxes and higher insurance commissions Services and fees increased $430 thousand due to increased professional fees Non-Core Expenses – increased significantly due to the adoption of CECL methodology related to the increase in the allowance for credit losses for off-balance sheet credit exposures and the one-time charge for early retirement
Capital Management Solid capital position reflects consistent profitability of diversified financial services businesses During the first quarter, Trustmark repurchased approximately $27.5 million, or 887 thousand shares of its outstanding common stock. Trustmark suspended its share repurchase program on March 9, 2020, to ensure ample capital to support customers during the COVID-19 pandemic. Source: Company reports (1) Trustmark has elected the five-year phase-in transition period related to adopting the CECL methodology for its regulatory capital.
Trustmark Corporation Who We Are Diversified financial services company headquartered in Jackson, MS, offering banking, wealth management, and risk management solutions throughout the Southeast U.S. Our vision is to be a premier financial services provider in our marketplace. Our mission is to achieve outstanding customer satisfaction by providing banking, wealth management, and risk management solutions through superior sales and service, utilizing excellent people, teamwork, and diversity, while meeting our corporate financial goals. Our Footprint Strategic Priorities to Enhance Shareholder Value Profitable Revenue Generation Organic growth across banking, mortgage, insurance and wealth management businesses Expansion into growth markets across the Southeast via mergers and acquisitions Leverage Technology Investments Enhance the customers’ experience Continuously improve productivity and efficiency Credit Quality Maintain disciplined underwriting and pricing Effective Risk Management and Compliance Enhance understanding and management of risk across the enterprise Ensure regulatory compliance