Trustmark Corporation (NASDAQ: TRMK) reported net income of $15.8 million in the fourth quarter of 2017, which represented diluted earnings per share of $0.23. Included in the fourth quarter financial results were one-time charges resulting from the re-measurement of Trustmark's net deferred tax assets due to the enactment of the Tax Cuts and Jobs Act of 2017 (Tax Reform Act) and the elimination of a deferred tax valuation allowance related to a prior merger, which collectively reduced net income by $17.0 million, or $0.25 per diluted share. Adjusting for these items, net income in the fourth quarter totaled $32.7 million, representing diluted earnings per share of $0.48, an increase of 11.6% when compared to the same period in the prior year.

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For the full year, Trustmark's net income totaled $105.6 million, which represented diluted earnings per share of $1.56. Excluding the one-time charges referenced above as well as the non-routine items related to the termination of Trustmark's defined benefit pension plan ($10.9 million), the RB Bancorporation merger ($2.0 million) and the non-taxable proceeds related to life insurance ($4.9 million), diluted earnings per share were $1.92 in 2017. Excluding non-routine items, diluted earnings per share were $1.70 in 2016.

Trustmark's Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2018, to shareholders of record on March 1, 2018.

2017 Highlights
  • Loans held for investment increased $718.8 million, or 9.2%, during the year
  • Credit quality remained solid as net charge-offs represented 11 basis points of average loans
  • Deposits increased $521.5 million, or 5.2%
  • Expanded presence in attractive Huntsville, Alabama MSA with the merger of RB Bancorporation
  • Revenue totaled $592.2 million, an increase of $30.7 million, or 5.5%

Gerard R. Host, President and CEO, stated, "Trustmark made significant accomplishments in 2017. We continued to provide customers with the products and services they desired as evidenced by our fourth consecutive year of robust loan growth and solid performance across our financial services businesses. Our Mortgage Banking, Insurance Services and Wealth Management businesses posted another year of solid results. We expanded our digital banking platform with the introduction of myTrustmark ® Business, which was well received by our customers. We also made investments to enhance our customer contact center as well as to replace legacy-banking systems. In addition, we continued to realign delivery channels in response to changing customer preferences and embraced opportunities to enhance efficiency and profitability. Trustmark is well-positioned to meet the needs of our customers and create long-term value for our shareholders."

Balance Sheet Management
  • Continued balance sheet optimization as maturing investment securities were replaced with organic loan growth
  • Deposit costs remained well controlled

Loans held for investment totaled $8.6 billion at December 31, 2017, an increase of 1.9% from the prior quarter and 9.2% from the same period one year earlier. Compared to the prior quarter, construction, land development and other land loans expanded $37.5 million, driven by growth in construction loans in Alabama. Other real estate secured loans increased by $35.8 million over the prior quarter, as growth in Mississippi and Alabama offset a minimal decrease in Tennessee. Loans secured by 1-4 family residential properties grew $26.6 million quarter over quarter, principally due to growth in Mississippi and Alabama. Other loans, which include loans to nonprofits and financial intermediaries, increased $25.4 million as growth in Mississippi, Texas and Tennessee more than offset declines in Alabama and Florida.

Acquired loans totaled $261.5 million at December 31, 2017, down $22.2 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $8.8 billion at December 31, 2017, up 1.6% from the prior quarter and 8.7% from the prior year.

Deposits totaled $10.6 billion at December 31, 2017, an increase of $345.8 million, or 3.4%, from the previous quarter and $521.5 million, or 5.2%, year-over-year. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 59% of deposits in checking accounts and a total cost of deposits of 0.28%. The total cost of interest-bearing liabilities was 0.56% for the fourth quarter of 2017.

Trustmark's capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At December 31, 2017, Trustmark's tangible equity to tangible assets ratio was 8.77%, while its total risk-based capital ratio was 13.10%. Tangible book value per share was $17.35 at December 31, 2017, up 3.5% year-over-year.

Credit Quality
  • Allowance for loan losses represented 320.8% of nonperforming loans, excluding specifically reviewed impaired loans
  • Other real estate declined $5.1 million in the fourth quarter and $18.8 million year-over-year

Nonperforming loans totaled $67.6 million at December 31, 2017, down 2.5% from the prior quarter and up 37.3% year-over-year. Other real estate totaled $43.2 million, reflecting a 10.6% linked-quarter decrease and a 30.3% year-over-year reduction. Collectively, nonperforming assets totaled $110.8 million, reflecting a linked-quarter and year-over-year decrease of 5.8% and 0.4%, respectively.

Allocation of Trustmark's $76.7 million allowance for loan losses represented 0.95% of commercial loans and 0.68% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.90% at December 31, 2017. This represents a level management considers commensurate with the inherent risk in the loan portfolio. In aggregate, the allowance for both held for investment and acquired loan losses represented 0.92% of total loans held for investment and acquired loans.

Net charge-offs totaled $9.3 million in the fourth quarter resulting from two impaired loans being written-down to collateral value. One of the credits was impaired and reserved earlier in the year, while the other was an existing substandard credit that was impaired, provisioned and written-down during the fourth quarter.

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

Revenue Generation
  • Net interest income (FTE) excluding acquired loans in 2017 totaled $402.9 million, up 7.2% from the prior year
  • Noninterest income in 2017 totaled $184.7 million, up 6.2% from the prior year

Revenue in the fourth quarter totaled $148.0 million, down 0.3% from the prior quarter, reflecting in part a seasonal reduction in noninterest income. Net interest income (FTE) in the fourth quarter totaled $109.1 million, resulting in a net interest margin of 3.48%. Compared to the prior quarter, net interest income (FTE) increased $214 thousand primarily due to growth in interest income (FTE) from the held for sale and held for investment loan portfolios, which was offset in part by decreased yields on the securities portfolio. During the fourth quarter of 2017, the yield on acquired loans totaled 9.27% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 1.63% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the fourth quarter of 2017 remained stable compared to the third quarter of 2017, as increased yields on the loans held for investment and held for sale portfolio were offset by decreased yields on the securities portfolio and higher costs of interest-bearing deposits and other borrowings. Net interest income (FTE) in 2017 totaled $427.3 million, resulting in a net interest margin (FTE) of 3.48%; excluding acquired loans, the net interest margin (FTE) was 3.36%.

Noninterest income totaled $44.0 million in the fourth quarter, down from the prior quarter primarily because of seasonally lower insurance commissions. In the fourth quarter, bank card and other fees totaled $7.3 million, an increase of 1.6% from the prior quarter, while service charges on deposit accounts totaled $11.2 million, down 0.3% from the prior quarter. Other income, net decreased $1.1 million linked quarter, primarily due to a decline in other miscellaneous income.

Insurance revenue in the fourth quarter totaled $8.8 million, reflecting a seasonal decrease of 15.2% from the prior quarter and an increase of 4.2% compared to one year earlier. Insurance revenue in 2017 totaled $38.2 million, up $1.4 million relative to the prior year. The solid performance in 2017 reflects increased business development efforts and initiatives that supported enhanced productivity.

Wealth management revenue totaled $7.7 million in the fourth quarter, an increase of 2.6% when compared to the prior quarter and 2.9% from levels one year earlier. The year-over-year increase is primarily attributable to higher retail brokerage income. Wealth management revenue in 2017 totaled $30.3 million, in-line with the prior year. Trustmark remained focused on servicing clients and realigned processes to enhance productivity.

Mortgage banking revenue in the fourth quarter totaled $6.3 million, up $1.9 million from the prior quarter. The linked-quarter increase is primarily attributable to reduced net negative hedge ineffectiveness. Mortgage loan production in the fourth quarter totaled $337.5 million, a seasonal decrease of 1.2% from the prior quarter and a 17.0% decrease year-over-year, primarily due to lower refinancing activity and rising interest rates.

In 2017, mortgage banking revenue totaled $29.9 million, up 6.0% from the prior year as a net positive mortgage servicing hedge ineffectiveness and increased mortgage servicing income were offset in part by lower secondary marketing gains. Mortgage loan production totaled $1.4 billion in 2017, down 15.6% from the prior year primarily due to an extremely competitive third party origination environment.

Noninterest Expense and Taxes

  • Core noninterest expense in 2017 totaled $399.5 million
  • Continued realignment of retail delivery channel
  • Trustmark estimates its annual effective income tax rate will decrease to approximately 12% to 14% beginning in 2018 primarily as a result of the Tax Cuts and Jobs Act of 2017

Core noninterest expense, which excludes other real estate expense ($666 thousand), intangible amortization ($1.5 million) and non-recurring items, totaled $100.8 million in the fourth quarter, an increase of $80 thousand on a comparable basis from the prior quarter and $3.6 million from the prior year.

Salaries and benefits totaled $59.8 million in the fourth quarter, up 1.6% linked quarter primarily due to increased expense related to incentive compensation programs. Services and fees increased 1.9% from the prior quarter, reflecting higher spending on outside services and fees and advertising. Other real estate expense totaled $666 thousand during the fourth quarter, representing a 22.9% decrease compared to the prior quarter.

Trustmark's fourth quarter and year ended effective income tax rate equaled 61.4% and 31.6%, respectively. Excluding the impact of the re-measurement of net deferred tax assets of $25.6 million related to the Tax Reform Act and the elimination of the deferred tax valuation allowance of $8.7 million during the fourth quarter, Trustmark's fourth quarter and year ended effective tax rate would have been 19.9% and 20.6%, respectively. Beginning in 2018, Trustmark estimates its annual effective income tax rate will be approximately 12% to 14% primarily as a result of the Tax Reform Act. Trustmark's effective income tax rate continues to be less than the statutory rate primarily due to various tax-exempt income items and its utilization of income tax credit programs.

Trustmark is committed to developing and maintaining relationships, supporting investments that promote profitable revenue growth and realigning retail delivery channels to support changing customer preferences. During 2017, Trustmark consolidated three branch offices and reallocated a portion of those resources to opening a new banking center. Over the last five years, Trustmark has consolidated 38 branch offices with limited growth potential and established 10 banking centers in attractive growth markets. In addition, Trustmark is piloting myTeller¿, an interactive video teller service provided through a centralized teller center which delivers most functions provided by traditional tellers. The potential applications for this technology include deployment beyond the traditional branch network and expanded service hours, further enhancing customer convenience and improving operational efficiency. Trustmark also introduced myTrustmark ® Business, an enhanced and robust digital banking service for commercial customers to meet growing mobile and online demand. Trustmark remains committed to investments that promote profitable revenue growth as well as reengineering and efficiency opportunities that enhance long-term shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 24, 2018, 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, February 7, 2018, in archived format at the same web address or by calling (877) 344-7529, passcode 10115328.

Trustmark Corporation is a financial services company providing banking and financial solutions through 198 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

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

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including potential market impacts of efforts by the Federal Reserve Board to reduce the size of its balance sheet and conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets as well as crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.

 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
 
                  Linked Quarter     Year over Year

QUARTERLY AVERAGE BALANCES
  12/31/2017     9/30/2017     12/31/2016  

$ Change
    % Change

$ Change
    % Change
Securities AFS-taxable $ 2,247,247 $ 2,349,736 $ 2,271,503 $ (102,489 ) -4.4 % $ (24,256 ) -1.1 %
Securities AFS-nontaxable 61,691 67,994 91,495 (6,303 ) -9.3 % (29,804 ) -32.6 %
Securities HTM-taxable 1,045,723 1,086,773 1,101,382 (41,050 ) -3.8 % (55,659 ) -5.1 %
Securities HTM-nontaxable   32,781     32,829     33,675     (48 ) -0.1 %   (894 ) -2.7 %
Total securities   3,387,442     3,537,332     3,498,055     (149,890 ) -4.2 %   (110,613 ) -3.2 %
Loans (including loans held for sale) 8,686,916 8,532,523 7,855,444 154,393 1.8 % 831,472 10.6 %
Acquired loans 273,918 299,221 282,197 (25,303 ) -8.5 % (8,279 ) -2.9 %
Fed funds sold and rev repos 1,724 3,582 1,418 (1,858 ) -51.9 % 306 21.6 %
Other earning assets   80,218     84,320     80,608     (4,102 ) -4.9 %   (390 ) -0.5 %
Total earning assets   12,430,218     12,456,978     11,717,722     (26,760 ) -0.2 %   712,496   6.1 %
Allowance for loan losses (86,704 ) (85,363 ) (82,604 ) (1,341 ) -1.6 % (4,100 ) -5.0 %
Cash and due from banks 315,586 312,409 314,420 3,177 1.0 % 1,166 0.4 %
Other assets   1,192,464     1,202,766     1,238,029     (10,302 ) -0.9 %   (45,565 ) -3.7 %
Total assets $ 13,851,564   $ 13,886,790   $ 13,187,567   $ (35,226 ) -0.3 % $ 663,997   5.0 %
 
Interest-bearing demand deposits $ 2,244,625 $ 2,192,064 $ 1,920,273 $ 52,561 2.4 % $ 324,352 16.9 %
Savings deposits 3,291,407 3,284,323 3,049,733 7,084 0.2 % 241,674 7.9 %
Time deposits   1,756,576     1,736,683     1,638,853     19,893   1.1 %   117,723   7.2 %
Total interest-bearing deposits 7,292,608 7,213,070 6,608,859 79,538 1.1 % 683,749 10.3 %
Fed funds purchased and repos 475,850 547,863 494,193 (72,013 ) -13.1 % (18,343 ) -3.7 %
Short-term borrowings 1,276,543 1,335,476 435,576 (58,933 ) -4.4 % 840,967 n/m
Long-term FHLB advances 954 970 685,844 (16 ) -1.6 % (684,890 ) -99.9 %
Subordinated notes 40,757 n/m (40,757 ) -100.0 %
Junior subordinated debt securities   61,856     61,856     61,856       0.0 %     0.0 %
Total interest-bearing liabilities 9,107,811 9,159,235 8,327,085 (51,424 ) -0.6 % 780,726 9.4 %
Noninterest-bearing deposits 2,994,292 3,003,763 3,160,959 (9,471 ) -0.3 % (166,667 ) -5.3 %
Other liabilities   169,828     145,925     166,379     23,903   16.4 %   3,449   2.1 %
Total liabilities 12,271,931 12,308,923 11,654,423 (36,992 ) -0.3 % 617,508 5.3 %
Shareholders' equity   1,579,633     1,577,867     1,533,144     1,766   0.1 %   46,489   3.0 %
Total liabilities and equity $ 13,851,564   $ 13,886,790   $ 13,187,567   $ (35,226 ) -0.3 % $ 663,997   5.0 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
Linked Quarter Year over Year

PERIOD END BALANCES
  12/31/2017     9/30/2017     12/31/2016  

$ Change
% Change

$ Change
% Change
Cash and due from banks $ 335,768 $ 350,123 $ 327,706 $ (14,355 ) -4.1 % $ 8,062 2.5 %
Fed funds sold and rev repos 615 3,215 500 (2,600 ) -80.9 % 115

23.0

%
Securities available for sale 2,238,635 2,369,089 2,356,682 (130,454 ) -5.5 % (118,047 ) -5.0 %
Securities held to maturity 1,056,486 1,102,283 1,158,643 (45,797 ) -4.2 % (102,157 ) -8.8 %
Loans held for sale (LHFS) 180,512 204,157 175,927 (23,645 ) -11.6 % 4,585 2.6 %
Loans held for investment (LHFI) 8,569,967 8,407,341 7,851,213 162,626 1.9 % 718,754 9.2 %
Allowance for loan losses   (76,733 )   (80,332 )   (71,265 )   3,599   4.5 %   (5,468 ) -7.7 %
Net LHFI 8,493,234 8,327,009 7,779,948 166,225 2.0 % 713,286 9.2 %
Acquired loans 261,517 283,757 272,247 (22,240 ) -7.8 % (10,730 ) -3.9 %
Allowance for loan losses, acquired loans   (4,079 )   (5,768 )   (11,397 )   1,689   29.3 %   7,318   64.2 %
Net acquired loans   257,438     277,989     260,850     (20,551 ) -7.4 %   (3,412 ) -1.3 %
Net LHFI and acquired loans 8,750,672 8,604,998 8,040,798 145,674 1.7 % 709,874 8.8 %
Premises and equipment, net 179,339 181,312 184,987 (1,973 ) -1.1 % (5,648 ) -3.1 %
Mortgage servicing rights 84,269 81,477 80,239 2,792 3.4 % 4,030 5.0 %
Goodwill 379,627 379,627 366,156 0.0 % 13,471 3.7 %
Identifiable intangible assets 16,360 17,883 20,680 (1,523 ) -8.5 % (4,320 ) -20.9 %
Other real estate 43,228 48,356 62,051 (5,128 ) -10.6 % (18,823 ) -30.3 %
Other assets   532,442     542,135     577,964     (9,693 ) -1.8 %   (45,522 ) -7.9 %
Total assets $ 13,797,953   $ 13,884,655   $ 13,352,333   $ (86,702 ) -0.6 % $ 445,620   3.3 %
 
Deposits:
Noninterest-bearing $ 2,978,074 $ 2,998,013 $ 2,973,238 $ (19,939 ) -0.7 % $ 4,836 0.2 %
Interest-bearing   7,599,438     7,233,729     7,082,774     365,709   5.1 %   516,664   7.3 %
Total deposits 10,577,512 10,231,742 10,056,012 345,770 3.4 % 521,500 5.2 %
Fed funds purchased and repos 469,827 545,603 539,817 (75,776 ) -13.9 % (69,990 ) -13.0 %
Short-term borrowings 971,049 1,322,159 769,778 (351,110 ) -26.6 % 201,271 26.1 %
Long-term FHLB advances 946 962 251,049 (16 ) -1.7 % (250,103 ) -99.6 %
Subordinated notes n/m n/m
Junior subordinated debt securities 61,856 61,856 61,856 0.0 % 0.0 %
Other liabilities   145,062     139,798     153,613     5,264   3.8 %   (8,551 ) -5.6 %
Total liabilities   12,226,252     12,302,120     11,832,125     (75,868 ) -0.6 %   394,127   3.3 %
Common stock 14,115 14,114 14,091 1 0.0 % 24 0.2 %
Capital surplus 369,124 368,131 366,563 993 0.3 % 2,561 0.7 %
Retained earnings 1,228,187 1,228,115 1,185,352 72 0.0 % 42,835 3.6 %
Accum other comprehensive loss, net of tax   (39,725 )   (27,825 )   (45,798 )   (11,900 ) -42.8 %   6,073   13.3 %
Total shareholders' equity   1,571,701     1,582,535     1,520,208     (10,834 ) -0.7 %   51,493   3.4 %
Total liabilities and equity $ 13,797,953   $ 13,884,655   $ 13,352,333   $ (86,702 ) -0.6 % $ 445,620   3.3 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands except per share data)
(unaudited)
 
Quarter Ended Linked Quarter Year over Year

INCOME STATEMENTS
  12/31/2017     9/30/2017     12/31/2016  

$ Change
% Change

$ Change
% Change
Interest and fees on LHFS & LHFI-FTE $ 95,816 $ 93,703 $ 81,346 $ 2,113 2.3 % $ 14,470 17.8 %
Interest and fees on acquired loans 6,401 6,625 8,290 (224 ) -3.4 % (1,889 ) -22.8 %
Interest on securities-taxable 18,327 19,291 18,775 (964 ) -5.0 % (448 ) -2.4 %
Interest on securities-tax exempt-FTE 1,035 1,104 1,340 (69 ) -6.3 % (305 ) -22.8 %
Interest on fed funds sold and rev repos 7 14 4 (7 ) -50.0 % 3 75.0 %
Other interest income   473     355     335     118   33.2 %   138   41.2 %
Total interest income-FTE   122,059     121,092     110,090     967   0.8 %   11,969   10.9 %
Interest on deposits 7,284 6,381 3,380 903 14.2 % 3,904 n/m
Interest on fed funds pch and repos 1,116 1,301 471 (185 ) -14.2 % 645 n/m
Other interest expense   4,555     4,520     2,662     35   0.8 %   1,893   71.1 %
Total interest expense   12,955     12,202     6,513     753   6.2 %   6,442   98.9 %
Net interest income-FTE 109,104 108,890 103,577 214 0.2 % 5,527 5.3 %
Provision for loan losses, LHFI 5,739 3,672 1,834 2,067 56.3 % 3,905 n/m
Provision for loan losses, acquired loans   (1,573 )   (1,653 )   1,150     80   4.8 %   (2,723 ) n/m
Net interest income after provision-FTE   104,938     106,871     100,593     (1,933 ) -1.8 %   4,345   4.3 %
Service charges on deposit accounts 11,193 11,223 11,444 (30 ) -0.3 % (251 ) -2.2 %
Bank card and other fees 7,266 7,150 6,796 116 1.6 % 470 6.9 %
Mortgage banking, net 6,284 4,425 5,428 1,859 42.0 % 856 15.8 %
Insurance commissions 8,813 10,398 8,459 (1,585 ) -15.2 % 354 4.2 %
Wealth management 7,723 7,530 7,505 193 2.6 % 218 2.9 %
Other, net   2,681     3,740     2,092     (1,059 ) -28.3 %   589   28.2 %
Nonint inc-excl sec gains (losses), net 43,960 44,466 41,724 (506 ) -1.1 % 2,236 5.4 %
Security gains (losses), net       14         (14 )

-100.0

%
    n/m
Total noninterest income   43,960     44,480     41,724     (520 ) -1.2 %   2,236   5.4 %
Salaries and employee benefits 59,788 58,837 58,168 951 1.6 % 1,620 2.8 %
Defined benefit plan termination n/m n/m
Services and fees 15,419 15,133 14,751 286 1.9 % 668 4.5 %
Net occupancy-premises 6,617 6,702 6,426 (85 ) -1.3 % 191 3.0 %
Equipment expense 5,996 6,297 6,172 (301 ) -4.8 % (176 ) -2.9 %
Other real estate expense 666 864 525 (198 ) -22.9 % 141 26.9 %
FDIC assessment expense 2,868 2,816 2,562 52 1.8 % 306 11.9 %
Other expense   11,597     12,437     11,663     (840 ) -6.8 %   (66 ) -0.6 %
Total noninterest expense   102,951     103,086     100,267     (135 ) -0.1 %   2,684   2.7 %
Income before income taxes and tax eq adj 45,947 48,265 42,050 (2,318 ) -4.8 % 3,897 9.3 %
Tax equivalent adjustment   5,060     4,978     4,725     82   1.6 %   335   7.1 %
Income before income taxes 40,887 43,287 37,325 (2,400 ) -5.5 % 3,562 9.5 %
Income taxes   25,119     8,708     8,402     16,411   n/m   16,717   n/m
Net income $ 15,768   $ 34,579   $ 28,923   $ (18,811 ) -54.4 % $ (13,155 ) -45.5 %
 
Per share data
Earnings per share - basic $ 0.23   $ 0.51   $ 0.43   $ (0.28 ) -54.9 % $ (0.20 ) -46.5 %
 
Earnings per share - diluted $ 0.23   $ 0.51   $ 0.43   $ (0.28 ) -54.9 % $ (0.20 ) -46.5 %
 
Dividends per share $ 0.23   $ 0.23   $ 0.23       0.0 %     0.0 %
 
Weighted average shares outstanding
Basic   67,742,792     67,741,655     67,627,496  
 
Diluted   67,938,986     67,916,418     67,817,770  
 
Period end shares outstanding   67,746,094     67,742,135     67,628,618  
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
                             
Quarter Ended Linked Quarter Year over Year

NONPERFORMING ASSETS (1)
  12/31/2017     9/30/2017     12/31/2016  

$ Change
% Change

$ Change
% Change
Nonaccrual loans
Alabama $ 3,083 $ 1,629 $ 665 $ 1,454 89.3 % $ 2,418 n/m
Florida 3,034 3,242 3,644 (208 ) -6.4 % (610 ) -16.7 %
Mississippi (2) 49,129 59,483 37,771 (10,354 ) -17.4 % 11,358 30.1 %
Tennessee (3) 4,436 4,589 6,213 (153 ) -3.3 % (1,777 ) -28.6 %
Texas   7,893     346     941     7,547   n/m   6,952   n/m
Total nonaccrual loans 67,575 69,289 49,234 (1,714 ) -2.5 % 18,341 37.3 %
Other real estate
Alabama 11,714 12,726 15,989 (1,012 ) -8.0 % (4,275 ) -26.7 %
Florida 13,937 16,100 22,582 (2,163 ) -13.4 % (8,645 ) -38.3 %
Mississippi (2) 14,260 15,319 15,646 (1,059 ) -6.9 % (1,386 ) -8.9 %
Tennessee (3) 2,535 2,671 6,183 (136 ) -5.1 % (3,648 ) -59.0 %
Texas   782     1,540     1,651     (758 ) -49.2 %   (869 ) -52.6 %
Total other real estate   43,228     48,356     62,051     (5,128 ) -10.6 %   (18,823 ) -30.3 %
Total nonperforming assets $ 110,803   $ 117,645   $ 111,285   $ (6,842 ) -5.8 % $ (482 ) -0.4 %
 

LOANS PAST DUE OVER 90 DAYS (1)
LHFI $ 2,171   $ 2,244   $ 1,832   $ (73 ) -3.3 % $ 339   18.5 %
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 35,544   $ 32,332   $ 28,345   $ 3,212   9.9 % $ 7,199   25.4 %
 
 
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES (1)
  12/31/2017     9/30/2017     12/31/2016   $ Change % Change   $ Change % Change
Beginning Balance $ 80,332 $ 76,184 $ 70,871 $ 4,148 5.4 % $ 9,461 13.3 %
Provision for loan losses 5,739 3,672 1,834 2,067 56.3 % 3,905 n/m
Charge-offs (12,075 ) (2,752 ) (4,037 ) (9,323 ) n/m (8,038 ) n/m
Recoveries   2,737     3,228     2,597     (491 ) -15.2 %   140   5.4 %
Net (charge-offs) recoveries   (9,338 )   476     (1,440 )   (9,814 ) n/m   (7,898 ) n/m
Ending Balance $ 76,733   $ 80,332   $ 71,265   $ (3,599 ) -4.5 % $ 5,468   7.7 %
 

PROVISION FOR LOAN LOSSES (1)
Alabama $ 559 $ 1,218 $ 763 $ (659 ) -54.1 % $ (204 ) -26.7 %
Florida (1,235 ) (744 ) (655 ) (491 ) -66.0 % (580 ) -88.5 %
Mississippi (2) 2,779 1,860 1,873 919 49.4 % 906 48.4 %
Tennessee (3) (439 ) (72 ) (118 ) (367 ) n/m (321 ) n/m
Texas   4,075     1,410     (29 )   2,665   n/m   4,104   n/m
Total provision for loan losses $ 5,739   $ 3,672   $ 1,834   $ 2,067   56.3 % $ 3,905   n/m
 

NET CHARGE-OFFS (RECOVERIES) (1)
Alabama $ 196 $ 314 $ 368 $ (118 ) -37.6 % $ (172 ) -46.7 %
Florida (946 ) (796 ) (502 ) (150 ) -18.8 % (444 ) -88.4 %
Mississippi (2) 5,574 (11 ) 1,591 5,585 n/m 3,983 n/m
Tennessee (3) 79 85 (8 ) (6 ) -7.1 % 87 n/m
Texas   4,435     (68 )   (9 )   4,503   n/m   4,444   n/m
Total net charge-offs (recoveries) $ 9,338   $ (476 ) $ 1,440   $ 9,814   n/m $ 7,898   n/m
 
(1) - Excludes acquired loans.
(2) - Mississippi includes Central and Southern Mississippi Regions.
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
 
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
 
      Quarter Ended     Year Ended

AVERAGE BALANCES
  12/31/2017         9/30/2017         6/30/2017         3/31/2017         12/31/2016     12/31/2017         12/31/2016  
Securities AFS-taxable $ 2,247,247 $ 2,349,736 $ 2,334,600 $ 2,252,162 $ 2,271,503 $ 2,296,070 $ 2,236,663
Securities AFS-nontaxable 61,691 67,994 75,640 88,522 91,495 73,373 97,942
Securities HTM-taxable 1,045,723 1,086,773 1,108,158 1,124,692 1,101,382 1,091,108 1,120,267
Securities HTM-nontaxable   32,781     32,829     32,878     33,009     33,675     32,874     34,616  
Total securities   3,387,442     3,537,332     3,551,276     3,498,385     3,498,055     3,493,425     3,489,488  
Loans (including loans held for sale) 8,686,916 8,532,523 8,348,758 8,074,449 7,855,444 8,412,673 7,592,223
Acquired loans 273,918 299,221 315,558 250,482 282,197 284,898 331,736
Fed funds sold and rev repos 1,724 3,582 3,184 397 1,418 2,229 1,105
Other earning assets   80,218     84,320     77,770     79,515     80,608     80,468     70,029  
Total earning assets   12,430,218     12,456,978     12,296,546     11,903,228     11,717,722     12,273,693     11,484,581  
Allowance for loan losses (86,704 ) (85,363 ) (83,328 ) (83,394 ) (82,604 ) (84,708 ) (82,414 )
Cash and due from banks 315,586 312,409 307,966 310,542 314,420 311,642 291,868
Other assets   1,192,464     1,202,766     1,229,981     1,235,469     1,238,029     1,215,019     1,243,985  
Total assets $ 13,851,564   $ 13,886,790   $ 13,751,165   $ 13,365,845   $ 13,187,567   $ 13,715,646   $ 12,938,020  
 
Interest-bearing demand deposits $ 2,244,625 $ 2,192,064 $ 2,035,491 $ 1,981,982 $ 1,920,273 $ 2,114,475 $ 1,866,225
Savings deposits 3,291,407 3,284,323 3,337,374 3,319,572 3,049,733 3,308,027 3,140,060
Time deposits   1,756,576     1,736,683     1,777,529     1,650,251     1,638,853     1,730,569     1,665,516  
Total interest-bearing deposits 7,292,608 7,213,070 7,150,394 6,951,805 6,608,859 7,153,071 6,671,801
Fed funds purchased and repos 475,850 547,863 525,523 498,963 494,193 512,085 495,197
Short-term borrowings 1,276,543 1,335,476 1,047,107 887,848 435,576 1,138,353 370,008
Long-term FHLB advances 954 970 141,097 251,033 685,844 97,561 634,300
Subordinated notes 40,757 47,662
Junior subordinated debt securities   61,856     61,856     61,856     61,856     61,856     61,856     61,856  
Total interest-bearing liabilities 9,107,811 9,159,235 8,925,977 8,651,505 8,327,085 8,962,926 8,280,824
Noninterest-bearing deposits 2,994,292 3,003,763 3,110,125 3,008,176 3,160,959 3,028,982 2,996,886
Other liabilities   169,828     145,925     162,823     173,066     166,379     162,854     142,355  
Total liabilities 12,271,931 12,308,923 12,198,925 11,832,747 11,654,423 12,154,762 11,420,065
Shareholders' equity   1,579,633     1,577,867     1,552,240     1,533,098     1,533,144     1,560,884     1,517,955  
Total liabilities and equity $ 13,851,564   $ 13,886,790   $ 13,751,165   $ 13,365,845   $ 13,187,567   $ 13,715,646   $ 12,938,020  
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
 

PERIOD END BALANCES
  12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016  
Cash and due from banks $ 335,768 $ 350,123 $ 318,329 $ 379,590 $ 327,706
Fed funds sold and rev repos 615 3,215 6,900 500 500
Securities available for sale 2,238,635 2,369,089 2,447,688 2,365,554 2,356,682
Securities held to maturity 1,056,486 1,102,283 1,139,754 1,156,067 1,158,643
Loans held for sale (LHFS) 180,512 204,157 203,652 174,090 175,927
Loans held for investment (LHFI) 8,569,967 8,407,341 8,296,045 8,004,657 7,851,213
Allowance for loan losses   (76,733 )   (80,332 )   (76,184 )   (72,445 )   (71,265 )
Net LHFI 8,493,234 8,327,009 8,219,861 7,932,212 7,779,948
Acquired loans 261,517 283,757 314,910 218,242 272,247
Allowance for loan losses, acquired loans   (4,079 )   (5,768 )   (7,423 )   (10,006 )   (11,397 )
Net acquired loans   257,438     277,989     307,487     208,236     260,850  
Net LHFI and acquired loans 8,750,672 8,604,998 8,527,348 8,140,448 8,040,798
Premises and equipment, net 179,339 181,312 182,315 183,311 184,987
Mortgage servicing rights 84,269 81,477 82,628 82,758 80,239
Goodwill 379,627 379,627 379,627 366,156 366,156
Identifiable intangible assets 16,360 17,883 19,422 19,117 20,680
Other real estate 43,228 48,356 49,958 55,968 62,051
Other assets   532,442     542,135     551,517     566,802     577,964  
Total assets $ 13,797,953   $ 13,884,655   $ 13,909,138   $ 13,490,361   $ 13,352,333  
 
Deposits:
Noninterest-bearing $ 2,978,074 $ 2,998,013 $ 3,092,915 $ 3,209,727 $ 2,973,238
Interest-bearing   7,599,438     7,233,729     7,330,476     6,894,745     7,082,774  
Total deposits 10,577,512 10,231,742 10,423,391 10,104,472 10,056,012
Fed funds purchased and repos 469,827 545,603 508,068 524,335 539,817
Short-term borrowings 971,049 1,322,159 1,222,592 864,690 769,778
Long-term FHLB advances 946 962 978 250,994 251,049
Subordinated notes
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
Other liabilities   145,062     139,798     130,335     146,053     153,613  
Total liabilities   12,226,252     12,302,120     12,347,220     11,952,400     11,832,125  
Common stock 14,115 14,114 14,114 14,112 14,091
Capital surplus 369,124 368,131 367,075 365,951 366,563
Retained earnings 1,228,187 1,228,115 1,209,238 1,200,903 1,185,352
Accum other comprehensive loss, net of tax   (39,725 )   (27,825 )   (28,509 )   (43,005 )   (45,798 )
Total shareholders' equity   1,571,701     1,582,535     1,561,918     1,537,961     1,520,208  
Total liabilities and equity $ 13,797,953   $ 13,884,655   $ 13,909,138   $ 13,490,361   $ 13,352,333  
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands except per share data)
(unaudited)
 
Quarter Ended Year Ended

INCOME STATEMENTS
  12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016     12/31/2017     12/31/2016  
Interest and fees on LHFS & LHFI-FTE $ 95,816 $ 93,703 $ 89,486 $ 83,790 $ 81,346 $ 362,795 $ 316,007
Interest and fees on acquired loans 6,401 6,625 6,263 5,189 8,290 24,478 30,144
Interest on securities-taxable 18,327 19,291 19,377 19,197 18,775 76,192 77,614
Interest on securities-tax exempt-FTE 1,035 1,104 1,178 1,300 1,340 4,617 5,654
Interest on fed funds sold and rev repos 7 14 11 1 4 33 14
Other interest income   473     355     371     267     335     1,466     988  
Total interest income-FTE   122,059     121,092     116,686     109,744     110,090     469,581     430,421  
Interest on deposits 7,284 6,381 5,107 3,945 3,380 22,717 12,748
Interest on fed funds pch and repos 1,116 1,301 1,037 698 471 4,152 1,717
Other interest expense   4,555     4,520     3,628     2,673     2,662     15,376     10,082  
Total interest expense   12,955     12,202     9,772     7,316     6,513     42,245     24,547  
Net interest income-FTE 109,104 108,890 106,914 102,428 103,577 427,336 405,874
Provision for loan losses, LHFI 5,739 3,672 2,921 2,762 1,834 15,094 10,957
Provision for loan losses, acquired loans   (1,573 )   (1,653 )   (2,564 )   (1,605 )   1,150     (7,395 )   3,757  
Net interest income after provision-FTE   104,938     106,871     106,557     101,271     100,593     419,637     391,160  
Service charges on deposit accounts 11,193 11,223 10,755 10,832 11,444 44,003 45,253
Bank card and other fees 7,266 7,150 7,370 6,500 6,796 28,286 27,906
Mortgage banking, net 6,284 4,425 9,008 10,185 5,428 29,902 28,212
Insurance commissions 8,813 10,398 9,745 9,212 8,459 38,168 36,764
Wealth management 7,723 7,530 7,674 7,413 7,505 30,340 30,492
Other, net   2,681     3,740     5,637     1,891     2,092     13,949     5,626  
Nonint inc-excl sec gains (losses), net 43,960 44,466 50,189 46,033 41,724 184,648 174,253
Security gains (losses), net       14     1             15     (310 )
Total noninterest income   43,960     44,480     50,190     46,033     41,724     184,663     173,943  
Salaries and employee benefits 59,788 58,837 59,060 57,302 58,168 234,987 239,637
Defined benefit plan termination 17,644 17,644
Services and fees 15,419 15,133 15,009 15,332 14,751 60,893 58,695
Net occupancy-premises 6,617 6,702 6,210 6,238 6,426 25,767 24,982
Equipment expense 5,996 6,297 6,162 5,998 6,172 24,453 24,225
Other real estate expense 666 864 383 1,759 525 3,672 586
FDIC assessment expense 2,868 2,816 2,686 2,640 2,562 11,010 11,243
Other expense   11,597     12,437     14,921     12,788     11,663     51,743     47,930  
Total noninterest expense   102,951     103,086     122,075     102,057     100,267     430,169     407,298  
Income before income taxes and tax eq adj 45,947 48,265 34,672 45,247 42,050 174,131 157,805
Tax equivalent adjustment   5,060     4,978     4,910     4,838     4,725     19,786     18,341  
Income before income taxes 40,887 43,287 29,762 40,409 37,325 154,345 139,464
Income taxes   25,119     8,708     5,727     9,161     8,402     48,715     31,053  
Net income $ 15,768   $ 34,579   $ 24,035   $ 31,248   $ 28,923   $ 105,630   $ 108,411  
 
Per share data
Earnings per share - basic $ 0.23   $ 0.51   $ 0.35   $ 0.46   $ 0.43   $ 1.56   $ 1.60  
 
Earnings per share - diluted $ 0.23   $ 0.51   $ 0.35   $ 0.46   $ 0.43   $ 1.56   $ 1.60  
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.92   $ 0.92  
 
Weighted average shares outstanding
Basic   67,742,792     67,741,655     67,736,298     67,687,365     67,627,496     67,727,219     67,620,485  
 
Diluted   67,938,986     67,916,418     67,892,532     67,845,785     67,817,770     67,886,805     67,784,464  
 
Period end shares outstanding   67,746,094     67,742,135     67,740,901     67,729,434     67,628,618     67,746,094     67,628,618  
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
 
  Quarter Ended    

NONPERFORMING ASSETS (1)
  12/31/2017       9/30/2017       6/30/2017       3/31/2017       12/31/2016  
Nonaccrual loans
Alabama $ 3,083 $ 1,629 $ 1,723 $ 1,649 $ 665
Florida 3,034 3,242 3,174 3,559 3,644
Mississippi (2) 49,129 59,483 63,889 49,349 37,771
Tennessee (3) 4,436 4,589 4,975 5,185 6,213
Texas   7,893     346     383     1,565     941  
Total nonaccrual loans 67,575 69,289 74,144 61,307 49,234
Other real estate
Alabama 11,714 12,726 13,301 13,953 15,989
Florida 13,937 16,100 17,377 21,577 22,582
Mississippi (2) 14,260 15,319 14,377 14,974 15,646
Tennessee (3) 2,535 2,671 3,363 4,706 6,183
Texas   782     1,540     1,540     758     1,651  
Total other real estate   43,228     48,356     49,958     55,968     62,051  
Total nonperforming assets $ 110,803   $ 117,645   $ 124,102   $ 117,275   $ 111,285  
 

LOANS PAST DUE OVER 90 DAYS (1)
LHFI $ 2,171   $ 2,244   $ 1,216   $ 1,307   $ 1,832  
 
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 35,544   $ 32,332   $ 29,906   $ 31,147   $ 28,345  
 
 
Quarter Ended Year Ended

ALLOWANCE FOR LOAN LOSSES (1)
  12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016     12/31/2017     12/31/2016  
Beginning Balance $ 80,332 $ 76,184 $ 72,445 $ 71,265 $ 70,871 $ 71,265 $ 67,619
Provision for loan losses 5,739 3,672 2,921 2,762 1,834 15,094 10,957
Charge-offs (12,075 ) (2,752 ) (2,118 ) (4,202 ) (4,037 ) (21,147 ) (18,930 )
Recoveries   2,737     3,228     2,936     2,620     2,597     11,521     11,619  
Net (charge-offs) recoveries   (9,338 )   476     818     (1,582 )   (1,440 )   (9,626 )   (7,311 )
Ending Balance $ 76,733   $ 80,332   $ 76,184   $ 72,445   $ 71,265   $ 76,733   $ 71,265  
 

PROVISION FOR LOAN LOSSES (1)
Alabama $ 559 $ 1,218 $ 866 $ 1,189 $ 763 $ 3,832 $ 2,624
Florida (1,235 ) (744 ) (975 ) 3 (655 ) (2,951 ) (1,806 )
Mississippi (2) 2,779 1,860 2,268 1,826 1,873 8,733 3,591
Tennessee (3) (439 ) (72 ) 322 208 (118 ) 19 897
Texas   4,075     1,410     440     (464 )   (29 )   5,461     5,651  
Total provision for loan losses $ 5,739   $ 3,672   $ 2,921   $ 2,762   $ 1,834   $ 15,094   $ 10,957  
 

NET CHARGE-OFFS (RECOVERIES) (1)
Alabama $ 196 $ 314 $ (29 ) $ 66 $ 368 $ 547 $ 905
Florida (946 ) (796 ) (973 ) (155 ) (502 ) (2,870 ) (1,940 )
Mississippi (2) 5,574 (11 ) 33 1,759 1,591 7,355 3,764
Tennessee (3) 79 85 146 83 (8 ) 393 326
Texas   4,435     (68 )   5     (171 )   (9 )   4,201     4,256  
Total net charge-offs (recoveries) $ 9,338   $ (476 ) $ (818 ) $ 1,582   $ 1,440   $ 9,626   $ 7,311  
 
(1) - Excludes acquired loans.
(2) - Mississippi includes Central and Southern Mississippi Regions.
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
(unaudited)
 
Quarter Ended Year Ended

FINANCIAL RATIOS AND OTHER DATA
  12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016     12/31/2017     12/31/2016  
Return on equity 3.96 % 8.69 % 6.21 % 8.27 % 7.51 % 6.77 % 7.14 %
Return on average tangible equity 5.60 % 11.95 % 8.68 % 11.39 % 10.41 % 9.39 % 9.99 %
Return on assets 0.45 % 0.99 % 0.70 % 0.95 % 0.87 % 0.77 % 0.84 %
Interest margin - Yield - FTE 3.90 % 3.86 % 3.81 % 3.74 % 3.74 % 3.83 % 3.75 %
Interest margin - Cost 0.41 % 0.39 % 0.32 % 0.25 % 0.22 % 0.34 % 0.21 %
Net interest margin - FTE 3.48 % 3.47 % 3.49 % 3.49 % 3.52 % 3.48 % 3.53 %
Efficiency ratio (1) 65.21 % 65.14 % 64.50 % 66.67 % 66.08 % 65.37 % 65.98 %
Full-time equivalent employees 2,893 2,878 2,858 2,799 2,788
 

CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans 0.43 % -0.02 % -0.04 % 0.08 % 0.07 % 0.11 % 0.10 %
Provision for loan losses/average loans 0.26 % 0.17 % 0.14 % 0.14 % 0.09 % 0.18 % 0.14 %
Nonperforming loans/total loans (incl LHFS) 0.77 % 0.80 % 0.87 % 0.75 % 0.61 %
Nonperforming assets/total loans (incl LHFS) 1.27 % 1.37 % 1.46 % 1.43 % 1.39 %
Nonperforming assets/total loans (incl LHFS) +ORE 1.26 % 1.36 % 1.45 % 1.42 % 1.38 %
ALL/total loans (excl LHFS) 0.90 % 0.96 % 0.92 % 0.91 % 0.91 %
ALL-commercial/total commercial loans 0.95 % 1.02 % 0.99 % 0.97 % 0.97 %
ALL-consumer/total consumer and home mortgage loans 0.68 % 0.73 % 0.67 % 0.67 % 0.68 %
ALL/nonperforming loans 113.55 % 115.94 % 102.75 % 118.17 % 144.75 %
ALL/nonperforming loans (excl specifically reviewed impaired loans) 320.84 % 301.50 % 277.42 % 263.73 % 267.40 %
 

CAPITAL RATIOS
Total equity/total assets 11.39 % 11.40 % 11.23 % 11.40 % 11.39 %
Tangible equity/tangible assets 8.77 % 8.79 % 8.61 % 8.80 % 8.74 %
Tangible equity/risk-weighted assets 11.13 % 11.29 % 11.19 % 11.49 % 11.39 %
Tier 1 leverage ratio (3) 9.67 % 9.61 % 9.56 % 9.86 % 9.90 %
Common equity tier 1 capital ratio (3) 11.77 % 11.80 % 11.73 % 12.19 % 12.16 %
Tier 1 risk-based capital ratio (3) 12.33 % 12.37 % 12.30 % 12.79 % 12.76 %
Total risk-based capital ratio (3) 13.10 % 13.19 % 13.11 % 13.61 % 13.59 %
 

STOCK PERFORMANCE
Market value-Close $ 31.86 $ 33.12 $ 32.16 $ 31.79 $ 35.65
Book value $ 23.20 $ 23.36 $ 23.06 $ 22.71 $ 22.48
Tangible book value $ 17.35 $ 17.49 $ 17.17 $ 17.02 $ 16.76
 
(1) - The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of partnership tax credits, amortization of purchased intangibles, and significant non-routine income and expense items as disclosed in Note 9.
(2) - Excludes acquired loans.

(3) - The regulatory capital ratios for December 31, 2017 contain a reclassification adjustment of $8.5 million from AOCI to retained earnings as allowed by regulatory agencies in an interagency statement released January 18, 2018 to address disproportionate tax effect in AOCI resulting from the recent enactment of the Tax Cuts and Jobs Act of 2017 and the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes.
 
 

See Notes to Consolidated Financials
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2017
($ in thousands)
(unaudited)

Note 1 - Business Combinations

On April 7, 2017, Trustmark Corporation completed its merger with RB Bancorporation (Reliance), the holding company for Reliance Bank, which had seven offices serving the Huntsville, Alabama metropolitan service area (MSA). Reliance Bank was merged into Trustmark National Bank simultaneously with the merger of Trustmark and RB Bancorporation. Under the terms of the Merger Agreement dated November 14, 2016, Trustmark paid $22.00 in cash for each share of Reliance common stock outstanding, which represented total consideration for Reliance common shareholders of approximately $23.7 million.

The merger with Reliance was consistent with Trustmark's strategic plan to selectively expand the Trustmark franchise and enhance the Trustmark franchise in north Alabama.

This merger was accounted for in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, "Business Combinations." Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the merger date. The fair values of the assets acquired and liabilities assumed are subject to adjustment if additional information relative to the closing date fair values becomes available through the measurement period, which is not to exceed one year from the merger date of April 7, 2017.

The statement of assets purchased and liabilities assumed in the Reliance merger is presented below at their estimated fair values as of the merger date of April 7, 2017 ($ in thousands):
Assets:            
Cash and due from banks $ 5,013
Federal funds sold and securities purchased under reverse repurchase agreements 6,900
Securities 54,843
Acquired loans 117,447
Premises and equipment, net 3,700
Identifiable intangible assets 1,850
Other real estate 475
Other assets   6,037
Total assets 196,265
 
Liabilities:
Deposits 166,158
Other borrowings 17,469
Other liabilities   1,322
Total liabilities 184,949
 
Net identifiable assets acquired at fair value 11,316
Goodwill   13,472
Net assets acquired at fair value $ 24,788
 

The excess of the consideration paid over the estimated fair value of the net assets acquired was $13.5 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the merger date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately ten years.

Loans acquired from Reliance were evaluated under a fair value process. Loans with evidence of deterioration in credit quality and for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments are referred to as acquired impaired loans and accounted for in accordance with FASB ASC Topic 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality."

The operations of Reliance are included in Trustmark's operating results from April 7, 2017 and did not have a material impact on Trustmark's results of operations. During the second quarter of 2017, Trustmark included non-routine merger transaction expenses in other noninterest expense totaling $3.2 million (change in control expense of $1.3 million; professional fees, contract termination and other expenses of $1.9 million).
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2017
($ in thousands)
(unaudited)

Note 2 - Securities Available for Sale and Held to Maturity

The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):
      12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016

SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies $ 45,018 $ 49,723 $ 51,277 $ 53,247 $ 55,763
Issued by U.S. Government sponsored agencies 267 271 272 274 276
Obligations of states and political subdivisions 79,229 89,144 96,514 109,895 115,373
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 65,746 60,902 58,422 42,667 42,786
Issued by FNMA and FHLMC 814,450 860,131 860,571 733,214 631,084
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,016,790 1,087,169 1,157,241 1,202,719 1,267,951
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   217,135   221,749   223,391   223,538   243,449
Total securities available for sale $ 2,238,635 $ 2,369,089 $ 2,447,688 $ 2,365,554 $ 2,356,682
 

SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies $ 3,692 $ 3,680 $ 3,669 $ 3,658 $ 3,647
Obligations of states and political subdivisions 46,039 46,069 46,098 46,273 46,303
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 13,539 14,191 14,399 14,977 15,478
Issued by FNMA and FHLMC 133,975 139,172 144,282 118,733 81,299
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 678,926 708,715 740,042 771,296 803,474
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   180,315   190,456   191,264   201,130   208,442
Total securities held to maturity $ 1,056,486 $ 1,102,283 $ 1,139,754 $ 1,156,067 $ 1,158,643
 

At December 31, 2017, the net unamortized, unrealized loss included in accumulated other comprehensive loss in the accompanying balance sheet for securities held to maturity previously transferred from securities available for sale totaled approximately $19.5 million ($12.0 million, net of tax).

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 96% 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
December 31, 2017
($ in thousands)
(unaudited)

Note 3 - Loan Composition

LHFI BY TYPE (excluding acquired loans)
      12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016
Loans secured by real estate:
Construction, land development and other land loans $ 987,624 $ 950,144 $ 922,029 $ 859,927 $ 831,437
Secured by 1-4 family residential properties 1,675,311 1,648,733 1,655,968 1,656,837 1,660,043
Secured by nonfarm, nonresidential properties 2,193,823 2,172,885 2,109,367 2,064,352 2,034,176
Other real estate secured 517,956 482,163 432,208 399,636 318,148
Commercial and industrial loans 1,570,345 1,568,588 1,635,000 1,540,783 1,528,434
Consumer loans 171,918 173,061 170,858 166,314 170,562
State and other political subdivision loans 952,483 936,614 936,860 910,493 917,515
Other loans   500,507   475,153   433,755   406,315   390,898
LHFI 8,569,967 8,407,341 8,296,045 8,004,657 7,851,213
Allowance for loan losses   (76,733)   (80,332)   (76,184)   (72,445)   (71,265)
Net LHFI $ 8,493,234 $ 8,327,009 $ 8,219,861 $ 7,932,212 $ 7,779,948
 

During the third quarter of 2017, Trustmark increased its allowance for loan losses by $1.1 million due to the potential loss exposure caused by Hurricane Harvey.
 
 

ACQUIRED LOANS BY TYPE (1)
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Loans secured by real estate:
Construction, land development and other land loans $ 23,586 $ 29,384 $ 35,054 $ 17,651 $ 20,850
Secured by 1-4 family residential properties 61,751 65,746 74,313 54,721 69,540
Secured by nonfarm, nonresidential properties 114,694 122,200 132,663 92,075 103,820
Other real estate secured 16,746 18,431 19,553 16,275 19,010
Commercial and industrial loans 31,506 34,124 34,375 20,691 36,896
Consumer loans 2,600 2,749 2,833 2,664 3,365
Other loans   10,634   11,123   16,119   14,165   18,766
Acquired loans 261,517 283,757 314,910 218,242 272,247
Allowance for loan losses, acquired loans   (4,079)   (5,768)   (7,423)   (10,006)   (11,397)
Net acquired loans $ 257,438 $ 277,989 $ 307,487 $ 208,236 $ 260,850
 

(1) Trustmark revised the presentation of acquired loans by eliminating the segmentation of acquired noncovered loans and acquired covered loans due to the significantly reduced size of the acquired covered loan portfolio.

During the first quarter of 2017, Trustmark transferred the remaining balance of the acquired loans not accounted for under FASB ASC Topic 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality" to LHFI due to the discount on these loans being fully amortized. The balance of these transferred loans totaled $36.7 million.
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2017
($ in thousands)
(unaudited)

Note 3 - Loan Composition (continued)
      December 31, 2017

LHFI - COMPOSITION BY REGION (1)
Total     Alabama     Florida    

Mississippi

(Central and

Southern

Regions)
   

Tennessee

(Memphis,

TN and

Northern MS

Regions)
    Texas
Loans secured by real estate:
Construction, land development and other land loans $ 987,624 $ 373,107 $ 47,592 $ 274,415 $ 21,741 $ 270,769
Secured by 1-4 family residential properties 1,675,311 105,281 47,500 1,411,503 93,625 17,402
Secured by nonfarm, nonresidential properties 2,193,823 368,337 213,404 947,708 151,526 512,848
Other real estate secured 517,956 84,973 2,801 231,750 46,414 152,018
Commercial and industrial loans 1,570,345 206,677 20,897 800,297 331,536 210,938
Consumer loans 171,918 22,274 4,231 125,980 17,229 2,204
State and other political subdivision loans 952,483 83,300 28,185 626,119 28,410 186,469
Other loans   500,507   55,740   17,431   324,295   50,272   52,769
Loans $ 8,569,967 $ 1,299,689 $ 382,041 $ 4,742,067 $ 740,753 $ 1,405,417
 

CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots $ 57,616 $ 13,100 $ 14,795 $ 23,193 $ 2,249 $ 4,279
Development 47,050 5,382 4,711 21,484 255 15,218
Unimproved land 95,856 12,336 14,682 35,395 14,860 18,583
1-4 family construction 188,561 61,709 10,352 80,511 2,406 33,583
Other construction   598,541   280,580   3,052   113,832   1,971   199,106
Construction, land development and other land loans $ 987,624 $ 373,107 $ 47,592 $ 274,415 $ 21,741 $ 270,769
 

LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail $ 308,452 $ 89,530 $ 44,797 $ 101,584 $ 16,900 $ 55,641
Office 213,049 36,678 20,741 72,605 5,909 77,116
Nursing homes/senior living 191,845 18,507 166,932 6,406
Hotel/motel 263,768 54,658 60,968 58,575 35,014 54,553
Mini-storage 126,117 14,539 6,403 43,632 560 60,983
Industrial 93,481 11,467 9,613 19,903 4,553 47,945
Health care 32,442 11,303 782 19,138 1,219
Convenience stores 25,101 1,353 13,207 865 9,676
Other   87,729   10,773   14,823   14,772   7,750   39,611
Total income producing loans 1,341,984 248,808 158,127 510,348 77,957 346,744
 
Owner-occupied:
Office 145,072 24,329 19,805 74,663 6,136 20,139
Churches 92,059 17,082 658 46,753 19,883 7,683
Industrial warehouses 138,536 8,932 3,557 56,904 13,785 55,358
Health care 113,702 23,372 4,019 67,488 4,373 14,450
Convenience stores 104,740 10,200 12,623 54,222 1,298 26,397
Retail 43,132 5,877 6,756 22,040 1,830 6,629
Restaurants 33,908 2,848 702 26,484 1,922 1,952
Auto dealerships 31,486 8,949 34 12,828 9,675
Other   149,204   17,940   7,123   75,978   14,667   33,496
Total owner-occupied loans   851,839   119,529   55,277   437,360   73,569   166,104
Loans secured by nonfarm, nonresidential properties $ 2,193,823 $ 368,337 $ 213,404 $ 947,708 $ 151,526 $ 512,848
 

(1) Excludes acquired loans.
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2017
($ in thousands)
(unaudited)

Note 4 - Yields on Earning Assets and Interest-Bearing Liabilities

The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:
      Quarter Ended     Year Ended
12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016 12/31/2017     12/31/2016
Securities - taxable   2.21 %   2.23 %   2.26 %   2.31 %   2.21 %   2.25 %   2.31 %
Securities - nontaxable 4.35 % 4.34 % 4.35 % 4.34 % 4.26 % 4.35 % 4.27 %
Securities - total 2.27 % 2.29 % 2.32 % 2.38 % 2.29 % 2.31 % 2.39 %
Loans - LHFI & LHFS 4.38 % 4.36 % 4.30 % 4.21 % 4.12 % 4.31 % 4.16 %
Acquired loans 9.27 % 8.78 % 7.96 % 8.40 % 11.69 % 8.59 % 9.09 %
Loans - total 4.53 % 4.51 % 4.43 % 4.33 % 4.38 % 4.45 % 4.37 %
FF sold & rev repo 1.61 % 1.55 % 1.39 % 1.02 % 1.12 % 1.48 % 1.27 %
Other earning assets 2.34 % 1.67 % 1.91 % 1.36 % 1.65 % 1.82 % 1.41 %
Total earning assets 3.90 % 3.86 % 3.81 % 3.74 % 3.74 % 3.83 % 3.75 %
 
Interest-bearing deposits 0.40 % 0.35 % 0.29 % 0.23 % 0.20 % 0.32 % 0.19 %
FF pch & repo 0.93 % 0.94 % 0.79 % 0.57 % 0.38 % 0.81 % 0.35 %
Other borrowings 1.35 % 1.28 % 1.16 % 0.90 % 0.87 % 1.18 % 0.91 %
Total interest-bearing liabilities 0.56 % 0.53 % 0.44 % 0.34 % 0.31 % 0.47 % 0.30 %
 
Net interest margin 3.48 % 3.47 % 3.49 % 3.49 % 3.52 % 3.48 % 3.53 %
Net interest margin excluding acquired loans 3.35 % 3.34 % 3.37 % 3.38 % 3.31 % 3.36 % 3.37 %
 

Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans.

During the fourth quarter of 2017, the yield on acquired loans totaled 9.27% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 1.63% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the fourth quarter of 2017 remained relatively flat compared to the third quarter of 2017, as increased yields on the loans held for investment and held for sale portfolio were offset by decreased yields on the securities portfolio and higher costs of interest-bearing deposits and other borrowings.

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 following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
      Quarter Ended     Year Ended
12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016 12/31/2017     12/31/2016
Mortgage servicing income, net $ 5,471 $ 5,295 $ 5,439 $ 5,458 $ 5,218 $ 21,663 $ 20,724
Change in fair value-MSR from runoff (2,605 ) (2,892 ) (2,896 ) (2,387 ) (2,739 ) (10,780 ) (10,106 )
Gain on sales of loans, net 5,300 5,083 5,001 3,550 6,054 18,934 20,535
Other, net   (1,120 )   (450 )   629     772     (2,925 )   (169 )   (84 )
Mortgage banking income before hedge ineffectiveness   7,046     7,036     8,173     7,393     5,608     29,648     31,069  
Change in fair value-MSR from market changes 1,168 (2,393 ) (1,291 ) 1,466 13,112 (1,050 ) (406 )
Change in fair value of derivatives   (1,930 )   (218 )   2,126     1,326     (13,292 )   1,304     (2,451 )
Net (negative) positive hedge ineffectiveness   (762 )   (2,611 )   835     2,792     (180 )   254     (2,857 )
Mortgage banking, net $ 6,284   $ 4,425   $ 9,008   $ 10,185   $ 5,428   $ 29,902   $ 28,212  
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2017
($ in thousands)
(unaudited)

Note 6 - Salaries and Employee Benefit Plans

Early Retirement Program

During the second quarter of 2016, Trustmark announced a voluntary early retirement program (ERP) for associates age 60 and above with five or more years of service. The cost of this program is reflected in a one-time, pre-tax charge of approximately $9.3 million (salaries and employee benefits expense of $9.1 million and other miscellaneous expense of $230 thousand), or $0.085 per basic share net of tax, in Trustmark's second quarter 2016 earnings. As a result of the ERP, during the third and fourth quarters of 2016, Trustmark incurred additional expense of $236 thousand and $268 thousand, respectively, which primarily resulted from additional settlements from pension lump sum elections.

Defined Benefit Pension Plan

Trustmark maintained a noncontributory tax-qualified defined benefit pension plan (Trustmark Capital Accumulation Plan, the "Plan"), in which substantially all associates who began employment prior to 2007 participated. The Plan provided for retirement benefits based on the length of credited service and final average compensation, as defined in the Plan, which vested upon three years of service. Benefit accruals under the plan were frozen in 2009, with the exception of certain associates covered through plans obtained in acquisitions that were subsequently merged into the Plan. As previously reported, on July 26, 2016, the Board of Directors of Trustmark authorized the termination of the Plan, effective as of December 31, 2016. To satisfy commitments made by Trustmark to associates (collectively, the "Continuing Associates") covered through acquired plans that were merged into the Plan, the Board also approved the spin-off of the portion of the Plan associated with the accrued benefits of the Continuing Associates into a new plan titled the Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions (the "Spin-Off Plan"), effective as of December 31, 2016, immediately prior to the termination of the Plan. In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, Trustmark was required to fully fund the Plan on a termination basis and contributed the additional assets necessary to do so. The final distributions were made from current plan assets and a one-time pension settlement expense of $17.6 million was recognized when paid by Trustmark during the second quarter of 2017. After the distribution of Plan assets during the second quarter of 2017, Trustmark estimates that the annual pension expense will be reduced by $3.0 million to $4.0 million.

Note 7 - Other Noninterest Income and Expense

Other noninterest income consisted of the following for the periods presented ($ in thousands):
      Quarter Ended     Year Ended
12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016 12/31/2017     12/31/2016
Partnership amortization for tax credit purposes $ (2,478 ) $ (2,521 ) $ (2,287 ) $ (2,274 ) $ (2,479 ) $ (9,560 ) $ (9,916 )
Increase in life insurance cash surrender value 1,816 1,813 1,782 1,714 1,751 7,125 6,891
Other miscellaneous income   3,343     4,448     6,142     2,451     2,820     16,384     8,651  
Total other, net $ 2,681   $ 3,740   $ 5,637   $ 1,891   $ 2,092   $ 13,949   $ 5,626  
 

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.

Trustmark received nontaxable proceeds of $1.7 million and $2.7 million related to bank-owned life insurance during the fourth and third quarters of 2017, respectively, and $4.9 million related to life insurance acquired as part of a previous acquisition during the second quarter of 2017, which were recorded in other miscellaneous income in the table above.

Other noninterest expense consisted of the following for the periods presented ($ in thousands):
      Quarter Ended     Year Ended
12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016 12/31/2017     12/31/2016
Loan expense $ 2,276 $ 3,013 $ 2,827 $ 2,792 $ 2,823 $ 10,908 $ 12,226
Amortization of intangibles 1,522 1,539 1,544 1,564 1,686 6,169 6,866
Other miscellaneous expense   7,799   7,885   10,550   8,432   7,154   34,666   28,838
Total other expense $ 11,597 $ 12,437 $ 14,921 $ 12,788 $ 11,663 $ 51,743 $ 47,930
 

As previously discussed in Note 1 - Business Combinations, non-routine Reliance merger transaction expenses totaled $3.2 million and were included in other miscellaneous expense during the second quarter of 2017.
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2017
($ in thousands)
(unaudited)

Note 8 - Income Taxes

The income tax provision consisted of the following for the periods presented ($ in thousands):
      Quarter Ended     Year Ended
12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016 12/31/2017     12/31/2016
Current $ 3,850 $ 8,108 $ 5,427 $ 5,261 $ 3,302 $ 22,646 $ 13,053
Deferred 4,300 600 300 3,900 5,100 9,100 18,000
Elimination of deferred tax valuation allowance   (8,650 )           (8,650 )  
Income tax provision before re-measurement (500 ) 8,708 5,727 9,161 8,402 23,096 31,053
Re-measurement of net deferred tax assets   25,619                       25,619      
Income tax provision $ 25,119   $ 8,708 $ 5,727 $ 9,161 $ 8,402 $ 48,715   $ 31,053
 

During 2013, a deferred tax valuation allowance was created as a result of Trustmark's merger with BancTrust Financial Group, Inc. and was established to reduce deferred tax assets to the amount that was more likely than not to be realized in future years. Trustmark has continually evaluated this allowance since inception and, based on the weight of the available evidence, has determined that the deferred tax assets will not be subject to the limitations on the deductibility of built-in losses (Internal Revenue Service Code, Section 382) in future years. Therefore, during the fourth quarter of 2017, the valuation allowance was eliminated creating a decrease in deferred income tax expense of $8.7 million.

Following the recent enactment of the Tax Cuts and Jobs Act of 2017 (Tax Reform Act) which resulted in the reduction of the corporate federal income tax rate, Trustmark re-measured its net deferred tax assets and recorded an increase in deferred income tax expense of $25.6 million during the fourth quarter of 2017. In addition, Trustmark estimates its effective income tax rate to decrease from approximately 21% (excluding the elimination of the deferred tax valuation allowance and the re-measurement of net deferred tax assets) in 2017 to approximately 12% to 14% beginning in 2018, primarily as a result of the Tax Reform Act. Trustmark's effective tax rate continues to be less than the statutory rate primarily due to various tax-exempt income items and its utilization of income tax credit programs.

Note 9 - 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
December 31, 2017
($ in thousands)
(unaudited)

Note 9 - Non-GAAP Financial Measures (continued)
        Quarter Ended     Year Ended
12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016 12/31/2017     12/31/2016

TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity $ 1,579,633 $ 1,577,867 $ 1,552,240 $ 1,533,098 $ 1,533,144 $ 1,560,884 $ 1,517,955
Less: Goodwill (379,627 ) (379,627 ) (378,191 ) (366,156 ) (366,156 ) (375,947 ) (366,156 )
Identifiable intangible assets   (17,196 )   (18,714 )   (19,713 )   (19,950 )   (21,585 )   (18,885 )   (24,132 )
Total average tangible equity $ 1,182,810   $ 1,179,526   $ 1,154,336   $ 1,146,992   $ 1,145,403   $ 1,166,052   $ 1,127,667  
 
PERIOD END BALANCES
Total shareholders' equity $ 1,571,701 $ 1,582,535 $ 1,561,918 $ 1,537,961 $ 1,520,208
Less: Goodwill (379,627 ) (379,627 ) (379,627 ) (366,156 ) (366,156 )
Identifiable intangible assets   (16,360 )   (17,883 )   (19,422 )   (19,117 )   (20,680 )
Total tangible equity (a) $ 1,175,714   $ 1,185,025   $ 1,162,869   $ 1,152,688   $ 1,133,372  
 

TANGIBLE ASSETS
Total assets $ 13,797,953 $ 13,884,655 $ 13,909,138 $ 13,490,361 $ 13,352,333
Less: Goodwill (379,627 ) (379,627 ) (379,627 ) (366,156 ) (366,156 )
Identifiable intangible assets   (16,360 )   (17,883 )   (19,422 )   (19,117 )   (20,680 )
Total tangible assets (b) $ 13,401,966   $ 13,487,145   $ 13,510,089   $ 13,105,088   $ 12,965,497  
Risk-weighted assets (c) $ 10,566,818   $ 10,498,582   $ 10,391,912   $ 10,031,410   $ 9,952,123  
 

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income $ 15,768 $ 34,579 $ 24,035 $ 31,248 $ 28,923 $ 105,630 $ 108,411
Plus: Intangible amortization net of tax   940     950     954     966     1,041     3,810     4,240  
Net income adjusted for intangible amortization $ 16,708   $ 35,529   $ 24,989   $ 32,214   $ 29,964   $ 109,440   $ 112,651  
Period end common shares outstanding (d)   67,746,094     67,742,135     67,740,901     67,729,434     67,628,618  
 

TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1) 5.60 % 11.95 % 8.68 % 11.39 % 10.41 % 9.39 % 9.99 %
Tangible equity/tangible assets (a)/(b) 8.77 % 8.79 % 8.61 % 8.80 % 8.74 %
Tangible equity/risk-weighted assets (a)/(c) 11.13 % 11.29 % 11.19 % 11.49 % 11.39 %
Tangible book value (a)/(d)*1,000 $ 17.35 $ 17.49 $ 17.17 $ 17.02 $ 16.76
 

COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity $ 1,571,701 $ 1,582,535 $ 1,561,918 $ 1,537,961 $ 1,520,208
AOCI-related adjustments (3) 48,248 27,825 28,509 43,005 45,798
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs) (366,461 ) (359,841 ) (360,198 ) (347,085 ) (347,442 )
Other adjustments and deductions for CET1 (2)   (10,248 )   (11,359 )   (11,267 )   (10,803 )   (8,637 )
CET1 capital (e) 1,243,240 1,239,160 1,218,962 1,223,078 1,209,927
Additional tier 1 capital instruments plus related surplus 60,000 60,000 60,000 60,000 60,000
Less: additional tier 1 capital deductions   (2 )   (471 )   (247 )   (159 )   (267 )
Additional tier 1 capital   59,998     59,529     59,753     59,841     59,733  
Tier 1 capital $ 1,303,238   $ 1,298,689   $ 1,278,715   $ 1,282,919   $ 1,269,660  
 
Common equity tier 1 capital ratio (e)/(c) 11.77 % 11.80 % 11.73 % 12.19 % 12.16 %
 

(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) The December 31, 2017 amount contains a reclassification adjustment of $8.5 million from AOCI to retained earnings as allowed by regulatory agencies in an interagency statement released January 18, 2018 to address disproportionate tax effect in AOCI resulting from the recent enactment of the Tax Cuts and Jobs Act of 2017 and the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes.
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2017
($ in thousands except per share data)
(unaudited)

Note 9 - Non-GAAP Financial Measures (continued)

Trustmark discloses certain non-GAAP financial measures, including net income adjusted for significant non-routine transactions, 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 net income adjusted for significant non-routine transactions as a measure of our core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. This non-GAAP measure also provides 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 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 ($ in thousands, except per share data):

      Quarter Ended     Year Ended
12/31/2017     12/31/2016 12/31/2017     12/31/2016
Amount   Diluted EPS Amount   Diluted EPS Amount   Diluted EPS Amount