JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $24.9 million in the first quarter of 2013, which resulted in diluted earnings per share of $0.38. Included in first quarter results were non-routine merger costs that reduced after-tax net income by $5.8 million, or approximately $0.08 per diluted share. Excluding these non-routine merger costs, net income available to common shareholders totaled $30.6 million, or $0.46 per diluted share, in the first quarter of 2013. Trustmark’s performance during the first three months of 2013 produced a return on average tangible common equity of 10.82%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable June 15, 2013, to shareholders of record on June 1, 2013.
Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50615704&lang=en
On February 15, 2013, Trustmark completed its previously announced merger with BancTrust Financial Group, Inc. (“BancTrust”), headquartered in Mobile, Alabama. The results of the merger are reflected in Trustmark’s financial information from the date of acquisition. As of March 31, 2013, acquired loans and deposits from BancTrust totaled $929.1 million and $1.7 billion, respectively. During the first quarter of 2013, revenue attributable to BancTrust totaled $9.4 million while net income, excluding non-routine merger charges, totaled $2.0 million.
Gerard R. Host, President and CEO, stated, “Trustmark experienced a great start to the year as indicated by our solid financial results in the first quarter and the successful completion of the largest merger in our history. During the first quarter, total revenue increased 6.6% to $133.3 million due to the continued strong performance of our banking, mortgage banking, wealth management, and insurance businesses while credit quality continued to experience significant improvements, as evidenced by reduced net charge-offs and provisioning.”
“During the quarter, we welcomed the customers and associates of BancTrust to the Trustmark family. With the completion of the merger, the Trustmark franchise expanded to attractive Alabama markets, including Mobile, Montgomery and Selma, as well as increased in scale within our existing Florida markets. This merger, which is meaningfully accretive to earnings per share, provides significant opportunity to generate additional revenue by delivering Trustmark’s full suite of banking, mortgage, wealth management and insurance services to these new markets. We have successfully completed operational conversion of all banking systems and are able to provide our customers the convenience and service they expect through 220 offices across our five-state franchise. Thanks to our dedicated associates, solid profitability and strong capital base, we are well-positioned to continue providing value for our customers and shareholders,” said Host.
Credit Quality
- Significant reduction in classified and criticized loan balances
- Excluding other real estate acquired from BancTrust, nonperforming assets declined to lowest level in 17 quarters
- Improved credit quality reflected in reduced net charge-offs and provisioning
Nonperforming loans totaled $83.3 million at March 31, 2013, an increase of 1.2% from the prior quarter and a decline of 21.2% from the prior year. Foreclosed other real estate increased $40.2 million, or 51.4% from the prior quarter, and $42.7 million, or 56.3% from the prior year, to total $118.4 million, of which $41.2 million was attributable to the BancTrust merger. Excluding other real estate from the BancTrust merger, other real estate declined $951 thousand, or 1.2%, from the prior quarter. Collectively, nonperforming assets totaled $201.7 million at March 31, 2013, an increase of 25.6% from prior quarter and 11.1% from levels one year earlier.
During the first quarter, recoveries exceeded charge-offs, resulting in a net recovery of $1.1 million, which represented -0.08% of average loans, excluding acquired loans. This compares to net charge-offs of $4.3 million, or 0.29% of average loans, in the prior quarter and $1.9 million, or 0.13% of average loans, one year earlier. During the first quarter of 2013, Trustmark’s provision for loan losses for loans held for investment was a negative $3.0 million as a result of the net recovery position and improved credit quality. During the first quarter, Trustmark experienced a decline of $19.7 million, or 7.8%, in classified loans and a decline of $15.0 million, or 4.6%, in criticized loans relative to the prior quarter. Relative to figures one year earlier, classified loan balances decreased $76.9 million, or 24.7%, while criticized loan balances decreased $86.2 million, or 21.6%.
Allocation of Trustmark’s $76.9 million allowance for loan losses represented 1.56% of commercial loans and 0.98% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.40% at March 31, 2013, which represents a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 145.8% of nonperforming loans, excluding impaired loans.
All of the above credit metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.
Balance Sheet Management
- Average earning assets increased $736.6 million to $9.4 billion
- Net interest income (FTE) totaled $92.6 million, resulting in 3.98% NIM
During the first quarter total loans, including held for investment and acquired loans, increased $798.8 million to total $6.5 billion; this growth included acquired loans from BancTrust. Loans held for investment totaled $5.5 billion, down $118.4 million from the prior quarter due to the planned runoff of $124.6 million in the 1-4 family mortgage portfolio. As previously indicated, Trustmark elected to sell the majority of these lower-rate, longer-term mortgages in the secondary market rather than replace runoff in this portfolio.
Commercial and industrial loans increased $37.3 million during the quarter, reflecting growth in Trustmark’s Texas, Tennessee and Alabama markets of $15.7 million, $15.0 million and $6.2 million, respectively. Construction and land development loans increased $16.4 million during the quarter, reflecting growth in Trustmark’s Alabama, Mississippi, Tennessee and Texas markets.
Deposits totaled $9.9 billion at March 31, 2013, an increase of $2.0 billion from the prior quarter. Approximately $1.7 billion of this growth was attributable to the BancTrust merger with the balance in growth occurring across Trustmark’s legacy franchise. At March 31, 2013, noninterest-bearing deposits totaled $2.5 billion to represent 25.6% of deposits.
During the first quarter of 2013, average earning assets increased $736.6 million to $9.4 billion, driven by growth in both the loan and investment portfolios. Average total loans increased $346.7 million to $6.3 billion while average investment securities expanded $388.5 million to $3.1 billion. Average deposits increased $1.0 billion from the prior quarter to total $8.8 billion.
Net interest income (FTE) in the first quarter totaled $92.6 million, resulting in a four basis point expansion of the net interest margin to 3.98%. This increase from the prior quarter was attributable to the addition of higher yielding acquired loans from the BancTrust merger. The net interest margin excluding acquired loans was 3.66%, a decline of 11 basis points from the prior quarter. This reduction in margin was primarily attributable to a decline in yield on securities that was partially offset by a modest reduction in the cost of interest-bearing deposits.
Capital Strength
- Maintained strong capital base upon completion of BancTrust merger
- Tangible common equity to tangible assets ratio of 8.20%
- Total risk-based capital ratio of 14.52%
Trustmark’s total common equity was $1.35 billion at March 31, 2013, up $65.6 million from December 31, 2012. This increase included the issuance of 2.24 million common shares valued at $53.5 million as consideration in the BancTrust merger. During the quarter, goodwill and identifiable intangible assets increased $107.3 million principally due to the acquisition; as a result, tangible common equity totaled $937.2 million at March 31, 2013.
At March 31, 2013, Trustmark’s tangible common equity to tangible assets ratio was 8.20% while the total risk-based capital ratio was 14.52%, significantly exceeding the 10.00% benchmark to be classified as “well-capitalized.” Trustmark’s solid capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.
Noninterest Income
- Noninterest income expanded to $44.3 million, represented 33.3% of total revenue in first quarter
- Mortgage banking, wealth management and insurance revenue increased
- BancTrust merger contributed approximately $2.0 million to noninterest income
Trustmark continued to achieve solid financial results from its diversified financial services businesses. Mortgage loan production in the first quarter totaled $392.1 million, down 20.8% from the prior quarter and 5.5% from levels one year earlier, due principally to the decline in refinancing activity following an extended low interest rate environment. Despite a decline from record mortgage production levels, the profitability of Trustmark’s mortgage banking unit increased 2.2% from the prior quarter to $11.6 million. This level of performance reflected stable mortgage servicing income, significant secondary marketing gains and effective mortgage servicing hedging strategies.
Insurance revenue totaled $7.2 million, an increase of 5.2% from the prior quarter and 9.6% relative to figures one year earlier due to expanded business development efforts as well as the continued firming of insurance rates. Wealth Management income totaled $6.9 million in the first quarter, an increase of $694 thousand, or 11.2%, from the prior quarter; BancTrust contributed approximately $576 thousand of the increase during the quarter.
Service charges on deposit accounts totaled $11.7 million in the first quarter, reflecting a seasonal decline from the prior quarter, and included a $498 thousand contribution from BancTrust. Bank card and other fees totaled $7.9 million in the first quarter and included contributions from BancTrust of approximately $461 thousand. Excluding the contributions of BancTrust, bank card and other fees declined $495 thousand reflecting a seasonal decline from the previous quarter. Other income totaled a negative $1.2 million compared to a negative $2.0 million for the prior quarter and can be attributed to a reduction in the amortization of partnership interest for tax credits during the quarter of $1.1 million.
Noninterest Expense
- Noninterest expense, excluding merger-related expenses of $9.4 million, totaled $92.8 million
- Merger-related efficiencies will continue to be realized throughout 2013
Noninterest expense in the first quarter totaled $102.1 million and included non-routine merger- related expense of $9.4 million as well as operating expenses for BancTrust of approximately $6.7 million. Excluding these two items, noninterest expense totaled $86.1 million, a decline of $1.2 million from the prior quarter. Further adjustment to exclude ORE and foreclosure expense result in noninterest expense of $82.6 million in the first quarter, a decline of $1.5 million from comparable figures in the prior quarter.
Salaries and employee benefits expense totaled $53.6 million in the first quarter, including BancTrust-related expense of $4.9 million (including severance and change in control payments of $1.4 million). Excluding BancTrust-related expense, salaries and employee benefits expense totaled $48.7 million in the first quarter of 2013, down $1.0 million, or 2.1%, from the prior quarter. Other expense totaled $18.1 million and included merger-related expense of $7.9 million, as well as other operating expense of $917 thousand related to BancTrust. Excluding these merger-related expenses, other expense declined $1.2 million, or 11.9%, relative to the prior quarter due to reductions in mortgage loan-related expense.
In March 2013, BancTrust’s operating systems were successfully converted to Trustmark’s banking platform. Additional consolidation and cost reduction opportunities will be realized during the course of the year in a manner designed to preserve customer relationships and maintain customer service.
Trustmark continued realignment of its branch network to enhance productivity and efficiency. As previously announced, two of Trustmark’s Houston offices were consolidated into a new administrative office on April 1. In addition, five overlapping offices in the Florida Panhandle will be consolidated in early May as a result of the BancTrust merger; following these consolidations, Trustmark will have 17 convenient locations in the Bay, Okaloosa and Walton County area. Trustmark also announced plans to expand in the Oxford, Mississippi market with the purchase of two branch offices and the assumption of selected deposit accounts of approximately $11.8 million from SOUTHBank, F.S.B. This transaction, which is subject to regulatory approval and customary closing conditions, is expected to be completed during the summer of 2013. Trustmark is committed to investments to support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, April 24, 2013, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-6789, passcode 10008303, or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, May 8, 2013, in archived format at the same web address or by calling (877) 344-7529, passcode 10008303.
Trustmark Corporation is a financial services company providing banking and financial solutions through approximately 220 offices in Alabama, Florida, Mississippi, Tennessee and Texas.
Forward-Looking Statements
Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.
Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of the European financial crisis on the U.S. economy and the markets we serve, and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the business and realize cost savings and any other synergies from the BancTrust merger as well as the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect, 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 | ||||||||||||||||||||||||||
| March 31, 2013 | ||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Linked Quarter | Year over Year | |||||||||||||||||||||||||
|
QUARTERLY AVERAGE BALANCES |
3/31/2013 | 12/31/2012 | 3/31/2012 | $ | Change | % Change | $ | Change | % Change | |||||||||||||||||
| Securities AFS-taxable | $ | 2,836,051 | $ | 2,466,738 | $ | 2,327,572 | $ | 369,313 | 15.0 | % | $ | 508,479 | 21.8 | % | ||||||||||||
| Securities AFS-nontaxable | 167,773 | 169,906 | 160,870 | (2,133 | ) | -1.3 | % | 6,903 | 4.3 | % | ||||||||||||||||
| Securities HTM-taxable | 48,632 | 26,510 | 33,270 | 22,122 | 83.4 | % | 15,362 | 46.2 | % | |||||||||||||||||
| Securities HTM-nontaxable | 16,648 | 17,443 | 21,598 | (795 | ) | -4.6 | % | (4,950 | ) | -22.9 | % | |||||||||||||||
| Total securities | 3,069,104 | 2,680,597 | 2,543,310 | 388,507 | 14.5 | % | 525,794 | 20.7 | % | |||||||||||||||||
| Loans (including loans held for sale) | 5,741,340 | 5,834,525 | 6,014,133 | (93,185 | ) | -1.6 | % | (272,793 | ) | -4.5 | % | |||||||||||||||
| Acquired loans: | ||||||||||||||||||||||||||
| Noncovered loans | 530,643 | 82,317 | 19,931 | 448,326 | n/m | 510,712 | n/m | |||||||||||||||||||
| Covered loans | 49,815 | 58,272 | 75,612 | (8,457 | ) | -14.5 | % | (25,797 | ) | -34.1 | % | |||||||||||||||
| Fed funds sold and rev repos | 6,618 | 8,747 | 9,568 | (2,129 | ) | -24.3 | % | (2,950 | ) | -30.8 | % | |||||||||||||||
| Other earning assets | 34,661 | 31,168 | 34,102 | 3,493 | 11.2 | % | 559 | 1.6 | % | |||||||||||||||||
| Total earning assets | 9,432,181 | 8,695,626 | 8,696,656 | 736,555 | 8.5 | % | 735,525 | 8.5 | % | |||||||||||||||||
| Allowance for loan losses | (86,447 | ) | (88,715 | ) | (92,062 | ) | 2,268 | -2.6 | % | 5,615 | -6.1 | % | ||||||||||||||
| Cash and due from banks | 270,740 | 238,976 | 232,139 | 31,764 | 13.3 | % | 38,601 | 16.6 | % | |||||||||||||||||
| Other assets | 1,183,493 | 972,748 | 918,273 | 210,745 | 21.7 | % | 265,220 | 28.9 | % | |||||||||||||||||
| Total assets | $ | 10,799,967 | $ | 9,818,635 | $ | 9,755,006 | $ | 981,332 | 10.0 | % | $ | 1,044,961 | 10.7 | % | ||||||||||||
| Interest-bearing demand deposits | $ | 1,703,336 | $ | 1,545,967 | $ | 1,545,045 | $ | 157,369 | 10.2 | % | $ | 158,291 | 10.2 | % | ||||||||||||
| Savings deposits | 2,767,747 | 2,275,569 | 2,339,166 | 492,178 | 21.6 | % | 428,581 | 18.3 | % | |||||||||||||||||
| Time deposits less than $100,000 | 1,268,619 | 1,120,735 | 1,190,888 | 147,884 | 13.2 | % | 77,731 | 6.5 | % | |||||||||||||||||
| Time deposits of $100,000 or more | 893,104 | 760,363 | 825,214 | 132,741 | 17.5 | % | 67,890 | 8.2 | % | |||||||||||||||||
| Total interest-bearing deposits | 6,632,806 | 5,702,634 | 5,900,313 | 930,172 | 16.3 | % | 732,493 | 12.4 | % | |||||||||||||||||
| Fed funds purchased and repos | 266,958 | 388,007 | 437,270 | (121,049 | ) | -31.2 | % | (170,312 | ) | -38.9 | % | |||||||||||||||
| Short-term borrowings | 66,999 | 85,313 | 84,797 | (18,314 | ) | -21.5 | % | (17,798 | ) | -21.0 | % | |||||||||||||||
| Long-term FHLB advances | 4,580 | - | - | 4,580 | n/m | 4,580 | n/m | |||||||||||||||||||
| Subordinated notes | 49,874 | 49,866 | 49,842 | 8 | 0.0 | % | 32 | 0.1 | % | |||||||||||||||||
| Junior subordinated debt securities | 77,989 | 61,856 | 61,856 | 16,133 | 26.1 | % | 16,133 | 26.1 | % | |||||||||||||||||
| Total interest-bearing liabilities | 7,099,206 | 6,287,676 | 6,534,078 | 811,530 | 12.9 | % | 565,128 | 8.6 | % | |||||||||||||||||
| Noninterest-bearing deposits | 2,199,043 | 2,115,784 | 1,869,758 | 83,259 | 3.9 | % | 329,285 | 17.6 | % | |||||||||||||||||
| Other liabilities | 176,210 | 126,953 | 122,668 | 49,257 | 38.8 | % | 53,542 | 43.6 | % | |||||||||||||||||
| Total liabilities | 9,474,459 | 8,530,413 | 8,526,504 | 944,046 | 11.1 | % | 947,955 | 11.1 | % | |||||||||||||||||
| Shareholders' equity | 1,325,508 | 1,288,222 | 1,228,502 | 37,286 | 2.9 | % | 97,006 | 7.9 | % | |||||||||||||||||
| Total liabilities and equity | $ | 10,799,967 | $ | 9,818,635 | $ | 9,755,006 | $ | 981,332 | 10.0 | % | $ | 1,044,961 | 10.7 | % | ||||||||||||
| Linked Quarter | Year over Year | |||||||||||||||||||||||||
|
PERIOD END BALANCES |
3/31/2013 | 12/31/2012 | 3/31/2012 | $ | Change | % Change | $ | Change | % Change | |||||||||||||||||
| Cash and due from banks | $ | 242,896 | $ | 231,489 | $ | 213,500 | $ | 11,407 | 4.9 | % | $ | 29,396 | 13.8 | % | ||||||||||||
| Fed funds sold and rev repos | 5,926 | 7,046 | 6,301 | (1,120 | ) | -15.9 | % | (375 | ) | -6.0 | % | |||||||||||||||
| Securities available for sale | 3,546,083 | 2,657,745 | 2,595,664 | 888,338 | 33.4 | % | 950,419 | 36.6 | % | |||||||||||||||||
| Securities held to maturity | 73,666 | 42,188 | 52,010 | 31,478 | 74.6 | % | 21,656 | 41.6 | % | |||||||||||||||||
| Loans held for sale (LHFS) | 207,758 | 257,986 | 227,449 | (50,228 | ) | -19.5 | % | (19,691 | ) | -8.7 | % | |||||||||||||||
| Loans held for investment (LHFI) | 5,474,396 | 5,592,754 | 5,774,753 | (118,358 | ) | -2.1 | % | (300,357 | ) | -5.2 | % | |||||||||||||||
| Allowance for loan losses | (76,900 | ) | (78,738 | ) | (90,879 | ) | 1,838 | -2.3 | % | 13,979 | -15.4 | % | ||||||||||||||
| Net LHFI | 5,397,496 | 5,514,016 | 5,683,874 | (116,520 | ) | -2.1 | % | (286,378 | ) | -5.0 | % | |||||||||||||||
| Acquired loans: | ||||||||||||||||||||||||||
| Noncovered loans | 1,003,127 | 81,523 | 100,669 | 921,604 | n/m | 902,458 | n/m | |||||||||||||||||||
| Covered loans | 47,589 | 52,041 | 74,419 | (4,452 | ) | -8.6 | % | (26,830 | ) | -36.1 | % | |||||||||||||||
| Allowance for loan losses, acquired loans | (6,458 | ) | (6,075 | ) | (773 | ) | (383 | ) | 6.3 | % | (5,685 | ) | n/m | |||||||||||||
| Net acquired loans | 1,044,258 | 127,489 | 174,315 | 916,769 | n/m | 869,943 | n/m | |||||||||||||||||||
| Net LHFI and acquired loans | 6,441,754 | 5,641,505 | 5,858,189 | 800,249 | 14.2 | % | 583,565 | 10.0 | % | |||||||||||||||||
| Premises and equipment, net | 210,789 | 154,841 | 156,158 | 55,948 | 36.1 | % | 54,631 | 35.0 | % | |||||||||||||||||
| Mortgage servicing rights | 51,529 | 47,341 | 45,893 | 4,188 | 8.8 | % | 5,636 | 12.3 | % | |||||||||||||||||
| Goodwill | 366,366 | 291,104 | 291,104 | 75,262 | 25.9 | % | 75,262 | 25.9 | % | |||||||||||||||||
| Identifiable intangible assets | 49,361 | 17,306 | 18,821 | 32,055 | n/m | 30,540 | n/m | |||||||||||||||||||
| Other real estate, excluding covered other real estate | 118,406 | 78,189 | 75,742 | 40,217 | 51.4 | % | 42,664 | 56.3 | % | |||||||||||||||||
| Covered other real estate | 5,879 | 5,741 | 5,824 | 138 | 2.4 | % | 55 | 0.9 | % | |||||||||||||||||
| FDIC indemnification asset | 20,198 | 21,774 | 28,260 | (1,576 | ) | -7.2 | % | (8,062 | ) | -28.5 | % | |||||||||||||||
| Other assets | 509,904 | 374,412 | 356,678 | 135,492 | 36.2 | % | 153,226 | 43.0 | % | |||||||||||||||||
| Total assets | $ | 11,850,515 | $ | 9,828,667 | $ | 9,931,593 | $ | 2,021,848 | 20.6 | % | $ | 1,918,922 | 19.3 | % | ||||||||||||
| Deposits: | ||||||||||||||||||||||||||
| Noninterest-bearing | $ | 2,534,287 | $ | 2,254,211 | $ | 2,024,290 | $ | 280,076 | 12.4 | % | $ | 509,997 | 25.2 | % | ||||||||||||
| Interest-bearing | 7,375,144 | 5,642,306 | 6,066,456 | 1,732,838 | 30.7 | % | 1,308,688 | 21.6 | % | |||||||||||||||||
| Total deposits | 9,909,431 | 7,896,517 | 8,090,746 | 2,012,914 | 25.5 | % | 1,818,685 | 22.5 | % | |||||||||||||||||
| Fed funds purchased and repos | 219,769 | 288,829 | 254,878 | (69,060 | ) | -23.9 | % | (35,109 | ) | -13.8 | % | |||||||||||||||
| Short-term borrowings | 46,325 | 86,920 | 82,023 | (40,595 | ) | -46.7 | % | (35,698 | ) | -43.5 | % | |||||||||||||||
| Long-term FHLB advances | 10,969 | - | - | 10,969 | n/m | 10,969 | n/m | |||||||||||||||||||
| Subordinated notes | 49,879 | 49,871 | 49,847 | 8 | 0.0 | % | 32 | 0.1 | % | |||||||||||||||||
| Junior subordinated debt securities | 94,856 | 61,856 | 61,856 | 33,000 | 53.3 | % | 33,000 | 53.3 | % | |||||||||||||||||
| Other liabilities | 166,340 | 157,305 | 150,723 | 9,035 | 5.7 | % | 15,617 | 10.4 | % | |||||||||||||||||
| Total liabilities | 10,497,569 | 8,541,298 | 8,690,073 | 1,956,271 | 22.9 | % | 1,807,496 | 20.8 | % | |||||||||||||||||
| Common stock | 13,992 | 13,506 | 13,494 | 486 | 3.6 | % | 498 | 3.7 | % | |||||||||||||||||
| Capital surplus | 342,233 | 285,905 | 282,388 | 56,328 | 19.7 | % | 59,845 | 21.2 | % | |||||||||||||||||
| Retained earnings | 991,012 | 984,563 | 944,101 | 6,449 | 0.7 | % | 46,911 | 5.0 | % | |||||||||||||||||
| Accum other comprehensive | ||||||||||||||||||||||||||
| income, net of tax | 5,709 | 3,395 | 1,537 | 2,314 | 68.2 | % | 4,172 | n/m | ||||||||||||||||||
| Total shareholders' equity | 1,352,946 | 1,287,369 | 1,241,520 | 65,577 | 5.1 | % | 111,426 | 9.0 | % | |||||||||||||||||
| Total liabilities and equity | $ | 11,850,515 | $ | 9,828,667 | $ | 9,931,593 | $ | 2,021,848 | 20.6 | % | $ | 1,918,922 | 19.3 | % | ||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | ||||||||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||
| March 31, 2013 | ||||||||||||||||||||||||||
| ($ in thousands except per share data) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | ||||||||||||||||||||||||
|
INCOME STATEMENTS |
3/31/2013 | 12/31/2012 | 3/31/2012 | $ | Change | % Change | $ | Change | % Change | |||||||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 67,412 | $ | 69,989 | $ | 75,781 | $ | (2,577 | ) | -3.7 | % | $ | (8,369 | ) | -11.0 | % | ||||||||||
| Interest and fees on acquired loans | 12,782 | 4,859 | 2,937 | 7,923 | n/m | 9,845 | n/m | |||||||||||||||||||
| Interest on securities-taxable | 16,539 | 15,305 | 18,384 | 1,234 | 8.1 | % | (1,845 | ) | -10.0 | % | ||||||||||||||||
| Interest on securities-tax exempt-FTE | 2,018 | 2,066 | 2,102 | (48 | ) | -2.3 | % | (84 | ) | -4.0 | % | |||||||||||||||
| Interest on fed funds sold and rev repos | 4 | 9 | 6 | (5 | ) | -55.6 | % | (2 | ) | -33.3 | % | |||||||||||||||
| Other interest income | 355 | 337 | 330 | 18 | 5.3 | % | 25 | 7.6 | % | |||||||||||||||||
| Total interest income-FTE | 99,110 | 92,565 | 99,540 | 6,545 | 7.1 | % | (430 | ) | -0.4 | % | ||||||||||||||||
| Interest on deposits | 4,909 | 5,061 | 7,353 | (152 | ) | -3.0 | % | (2,444 | ) | -33.2 | % | |||||||||||||||
| Interest on fed funds pch and repos | 81 | 140 | 171 | (59 | ) | -42.1 | % | (90 | ) | -52.6 | % | |||||||||||||||
| Other interest expense | 1,490 | 1,346 | 1,414 | 144 | 10.7 | % | 76 | 5.4 | % | |||||||||||||||||
| Total interest expense | 6,480 | 6,547 | 8,938 | (67 | ) | -1.0 | % | (2,458 | ) | -27.5 | % | |||||||||||||||
| Net interest income-FTE | 92,630 | 86,018 | 90,602 | 6,612 | 7.7 | % | 2,028 | 2.2 | % | |||||||||||||||||
| Provision for loan losses, LHFI | (2,968 | ) | (535 | ) | 3,293 | (2,433 | ) | n/m | (6,261 | ) | n/m | |||||||||||||||
| Provision for loan losses, acquired loans | 130 | 1,945 | (194 | ) | (1,815 | ) | -93.3 | % | 324 | n/m | ||||||||||||||||
| Net interest income after provision-FTE | 95,468 | 84,608 | 87,503 | 10,860 | 12.8 | % | 7,965 | 9.1 | % | |||||||||||||||||
| Service charges on deposit accounts | 11,681 | 12,391 | 12,211 | (710 | ) | -5.7 | % | (530 | ) | -4.3 | % | |||||||||||||||
| Insurance commissions | 7,242 | 6,887 | 6,606 | 355 | 5.2 | % | 636 | 9.6 | % | |||||||||||||||||
| Wealth management | 6,875 | 6,181 | 5,501 | 694 | 11.2 | % | 1,374 | 25.0 | % | |||||||||||||||||
| Bank card and other fees | 7,945 | 7,978 | 7,364 | (33 | ) | -0.4 | % | 581 | 7.9 | % | ||||||||||||||||
| Mortgage banking, net | 11,583 | 11,331 | 7,295 | 252 | 2.2 | % | 4,288 | 58.8 | % | |||||||||||||||||
| Other, net | (1,191 | ) | (2,007 | ) | 3,758 | 816 | -40.7 | % | (4,949 | ) | n/m | |||||||||||||||
| Nonint inc-excl sec gains (losses), net | 44,135 | 42,761 | 42,735 | 1,374 | 3.2 | % | 1,400 | 3.3 | % | |||||||||||||||||
| Security gains (losses), net | 204 | 18 | 1,050 | 186 | n/m | (846 | ) | -80.6 | % | |||||||||||||||||
| Total noninterest income | 44,339 | 42,779 | 43,785 | 1,560 | 3.6 | % | 554 | 1.3 | % | |||||||||||||||||
| Salaries and employee benefits | 53,592 | 49,724 | 46,432 | 3,868 | 7.8 | % | 7,160 | 15.4 | % | |||||||||||||||||
| Services and fees | 13,032 | 12,572 | 10,747 | 460 | 3.7 | % | 2,285 | 21.3 | % | |||||||||||||||||
| Net occupancy-premises | 5,955 | 5,023 | 4,938 | 932 | 18.6 | % | 1,017 | 20.6 | % | |||||||||||||||||
| Equipment expense | 5,674 | 5,288 | 4,912 | 386 | 7.3 | % | 762 | 15.5 | % | |||||||||||||||||
| FDIC assessment expense | 2,021 | 1,075 | 1,775 | 946 | 88.0 | % | 246 | 13.9 | % | |||||||||||||||||
| ORE/Foreclosure expense | 3,820 | 3,173 | 3,902 | 647 | 20.4 | % | (82 | ) | -2.1 | % | ||||||||||||||||
| Other expense | 18,051 | 10,454 | 13,068 | 7,597 | 72.7 | % | 4,983 | 38.1 | % | |||||||||||||||||
| Total noninterest expense | 102,145 | 87,309 | 85,774 | 14,836 | 17.0 | % | 16,371 | 19.1 | % | |||||||||||||||||
| Income before income taxes and tax eq adj | 37,662 | 40,078 | 45,514 | (2,416 | ) | -6.0 | % | (7,852 | ) | -17.3 | % | |||||||||||||||
| Tax equivalent adjustment | 3,655 | 3,699 | 3,658 | (44 | ) | -1.2 | % | (3 | ) | -0.1 | % | |||||||||||||||
| Income before income taxes | 34,007 | 36,379 | 41,856 | (2,372 | ) | -6.5 | % | (7,849 | ) | -18.8 | % | |||||||||||||||
| Income taxes | 9,141 | 8,669 | 11,536 | 472 | 5.4 | % | (2,395 | ) | -20.8 | % | ||||||||||||||||
| Net income available to common shareholders | $ | 24,866 | $ | 27,710 | $ | 30,320 | $ | (2,844 | ) | -10.3 | % | $ | (5,454 | ) | -18.0 | % | ||||||||||
| Per common share data | ||||||||||||||||||||||||||
| Earnings per share - basic | $ | 0.38 | $ | 0.43 | $ | 0.47 | $ | (0.05 | ) | -11.6 | % | $ | (0.09 | ) | -19.1 | % | ||||||||||
| Earnings per share - diluted | $ | 0.38 | $ | 0.43 | $ | 0.47 | $ | (0.05 | ) | -11.6 | % | $ | (0.09 | ) | -19.1 | % | ||||||||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | - | 0.0 | % | $ | - | 0.0 | % | ||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||||
| Basic | 65,983,204 | 64,785,457 | 64,297,038 | |||||||||||||||||||||||
| Diluted | 66,149,656 | 65,007,281 | 64,477,277 | |||||||||||||||||||||||
| Period end common shares outstanding | 67,151,087 | 64,820,414 | 64,765,581 | |||||||||||||||||||||||
|
OTHER FINANCIAL DATA |
||||||||||||||||||||||||||
| Return on common equity | 7.61 | % | 8.56 | % | 9.93 | % | ||||||||||||||||||||
| Return on average tangible common equity | 10.82 | % | 11.51 | % | 13.41 | % | ||||||||||||||||||||
| Return on assets | 0.93 | % | 1.12 | % | 1.25 | % | ||||||||||||||||||||
| Interest margin - Yield - FTE | 4.26 | % | 4.23 | % | 4.60 | % | ||||||||||||||||||||
| Interest margin - Cost | 0.28 | % | 0.30 | % | 0.41 | % | ||||||||||||||||||||
| Net interest margin - FTE | 3.98 | % | 3.94 | % | 4.19 | % | ||||||||||||||||||||
| Efficiency ratio (1) | 67.84 | % | 67.80 | % | 63.70 | % | ||||||||||||||||||||
| Full-time equivalent employees | 3,164 | 2,666 | 2,611 | |||||||||||||||||||||||
|
COMMON STOCK PERFORMANCE |
||||||||||||||||||||||||||
| Market value-Close | $ | 25.01 | $ | 22.46 | $ | 24.98 | ||||||||||||||||||||
| Common book value | $ | 20.15 | $ | 19.86 | $ | 19.17 | ||||||||||||||||||||
| Tangible common book value | $ | 13.96 | $ | 15.10 | $ | 14.38 | ||||||||||||||||||||
| (1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and non-routine acquisition related transaction expenses. | ||||||||||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | ||||||||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||||||||
| March 31, 2013 | ||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | ||||||||||||||||||||||||
|
NONPERFORMING ASSETS (1) |
3/31/2013 | 12/31/2012 | 3/31/2012 | $ | Change | % Change | $ | Change | % Change | |||||||||||||||||
| Nonaccrual loans | ||||||||||||||||||||||||||
| Alabama | $ | - | $ | - | $ | - | $ | - | n/m | $ | - | n/m | ||||||||||||||
| Florida | 14,046 | 19,314 | 22,174 | (5,268 | ) | -27.3 | % | (8,128 | ) | -36.7 | % | |||||||||||||||
| Mississippi (2) | 46,697 | 38,960 | 48,648 | 7,737 | 19.9 | % | (1,951 | ) | -4.0 | % | ||||||||||||||||
| Tennessee (3) | 4,877 | 8,401 | 13,972 | (3,524 | ) | -41.9 | % | (9,095 | ) | -65.1 | % | |||||||||||||||
| Texas | 17,702 | 15,688 | 20,979 | 2,014 | 12.8 | % | (3,277 | ) | -15.6 | % | ||||||||||||||||
| Total nonaccrual loans | 83,322 | 82,363 | 105,773 | 959 | 1.2 | % | (22,451 | ) | -21.2 | % | ||||||||||||||||
| Other real estate | ||||||||||||||||||||||||||
| Alabama | 28,870 | - | - | 28,870 | n/m | 28,870 | n/m | |||||||||||||||||||
| Florida | 30,662 | 18,569 | 26,226 | 12,093 | 65.1 | % | 4,436 | 16.9 | % | |||||||||||||||||
| Mississippi (2) | 26,457 | 27,771 | 19,240 | (1,314 | ) | -4.7 | % | 7,217 | 37.5 | % | ||||||||||||||||
| Tennessee (3) | 18,339 | 17,589 | 17,665 | 750 | 4.3 | % | 674 | 3.8 | % | |||||||||||||||||
| Texas | 14,078 | 14,260 | 12,611 | (182 | ) | -1.3 | % | 1,467 | 11.6 | % | ||||||||||||||||
| Total other real estate | 118,406 | 78,189 | 75,742 | 40,217 | 51.4 | % | 42,664 | 56.3 | % | |||||||||||||||||
| Total nonperforming assets | $ | 201,728 | $ | 160,552 | $ | 181,515 | $ | 41,176 | 25.6 | % | $ | 20,213 | 11.1 | % | ||||||||||||
|
LOANS PAST DUE OVER 90 DAYS (4) |
||||||||||||||||||||||||||
| LHFI | $ | 2,772 | $ | 6,378 | $ | 1,553 | $ | (3,606 | ) | -56.5 | % | $ | 1,219 | 78.5 | % | |||||||||||
| LHFS-Guaranteed GNMA serviced loans | ||||||||||||||||||||||||||
| (no obligation to repurchase) | $ | 4,469 | $ | 43,073 | $ | 39,496 | $ | (38,604 | ) | -89.6 | % | $ | (35,027 | ) | -88.7 | % | ||||||||||
| Quarter Ended | Linked Quarter | Year over Year | ||||||||||||||||||||||||
|
ALLOWANCE FOR LOAN LOSSES (4) |
3/31/2013 | 12/31/2012 | 3/31/2012 | $ | Change | % Change | $ | Change | % Change | |||||||||||||||||
| Beginning Balance | $ | 78,738 | $ | 83,526 | $ | 89,518 | $ | (4,788 | ) | -5.7 | % | $ | (10,780 | ) | -12.0 | % | ||||||||||
| Provision for loan losses | (2,968 | ) | (535 | ) | 3,293 | (2,433 | ) | n/m | (6,261 | ) | n/m | |||||||||||||||
| Charge-offs | (3,325 | ) | (8,829 | ) | (5,376 | ) | 5,504 | -62.3 | % | 2,051 | -38.2 | % | ||||||||||||||
| Recoveries | 4,455 | 4,576 | 3,444 | (121 | ) | -2.6 | % | 1,011 | 29.4 | % | ||||||||||||||||
| Net recoveries (charge-offs) | 1,130 | (4,253 | ) | (1,932 | ) | 5,383 | n/m | 3,062 | n/m | |||||||||||||||||
| Ending Balance | $ | 76,900 | $ | 78,738 | $ | 90,879 | $ | (1,838 | ) | -2.3 | % | $ | (13,979 | ) | -15.4 | % | ||||||||||
|
PROVISION FOR LOAN LOSSES (4) |
||||||||||||||||||||||||||
| Alabama | $ | 676 | $ | - | $ | - | $ | 676 | n/m | $ | 676 | n/m | ||||||||||||||
| Florida | (3,675 | ) | (706 | ) | 739 | (2,969 | ) | n/m | (4,414 | ) | n/m | |||||||||||||||
| Mississippi (2) | (1,920 | ) | 2,031 | 4,152 | (3,951 | ) | n/m | (6,072 | ) | n/m | ||||||||||||||||
| Tennessee (3) | (378 | ) | (1,037 | ) | (29 | ) | 659 | -63.5 | % | (349 | ) | n/m | ||||||||||||||
| Texas | 2,329 | (823 | ) | (1,569 | ) | 3,152 | n/m | 3,898 | n/m | |||||||||||||||||
| Total provision for loan losses | $ | (2,968 | ) | $ | (535 | ) | $ | 3,293 | $ | (2,433 | ) | n/m | $ | (6,261 | ) | n/m | ||||||||||
|
NET CHARGE-OFFS (4) |
||||||||||||||||||||||||||
| Alabama | $ | 11 | $ | - | $ | - | $ | 11 | n/m | $ | 11 | n/m | ||||||||||||||
| Florida | (849 | ) | (237 | ) | 1,495 | (612 | ) | n/m | (2,344 | ) | n/m | |||||||||||||||
| Mississippi (2) | (290 | ) | 874 | 251 | (1,164 | ) | n/m | (541 | ) | n/m | ||||||||||||||||
| Tennessee (3) | 249 | (43 | ) | 223 | 292 | n/m | 26 | 11.7 | % | |||||||||||||||||
| Texas | (251 | ) | 3,659 | (37 | ) | (3,910 | ) | n/m | (214 | ) | n/m | |||||||||||||||
| Total net (recoveries) charge-offs | $ | (1,130 | ) | $ | 4,253 | $ | 1,932 | $ | (5,383 | ) | n/m | $ | (3,062 | ) | n/m | |||||||||||
|
CREDIT QUALITY RATIOS (1) |
||||||||||||||||||||||||||
| Net charge offs/average loans | -0.08 | % | 0.29 | % | 0.13 | % | ||||||||||||||||||||
| Provision for loan losses/average loans | -0.21 | % | -0.04 | % | 0.22 | % | ||||||||||||||||||||
| Nonperforming loans/total loans (incl LHFS) | 1.47 | % | 1.41 | % | 1.76 | % | ||||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) | 3.55 | % | 2.74 | % | 3.02 | % | ||||||||||||||||||||
| Nonperforming assets/total loans (incl LHFS) +ORE | 3.48 | % | 2.71 | % | 2.99 | % | ||||||||||||||||||||
| ALL/total loans (excl LHFS) | 1.40 | % | 1.41 | % | 1.57 | % | ||||||||||||||||||||
| ALL-commercial/total commercial loans | 1.56 | % | 1.59 | % | 1.97 | % | ||||||||||||||||||||
| ALL-consumer/total consumer and home mortgage loans | 0.98 | % | 0.97 | % | 0.75 | % | ||||||||||||||||||||
| ALL/nonperforming loans | 92.29 | % | 95.60 | % | 85.92 | % | ||||||||||||||||||||
|
ALL/nonperforming loans - (excl impaired loans) |
145.83 | % | 174.46 | % | 181.11 | % | ||||||||||||||||||||
|
CAPITAL RATIOS |
||||||||||||||||||||||||||
| Common equity/total assets | 11.42 | % | 13.10 | % | 12.50 | % | ||||||||||||||||||||
| Tangible common equity/tangible assets | 8.20 | % | 10.28 | % | 9.68 | % | ||||||||||||||||||||
| Tangible common equity/risk-weighted assets | 11.88 | % | 14.56 | % | 13.89 | % | ||||||||||||||||||||
| Tier 1 leverage ratio | 9.94 | % | 10.97 | % | 10.55 | % | ||||||||||||||||||||
| Tier 1 common risk-based capital ratio | 11.91 | % | 14.63 | % | 13.98 | % | ||||||||||||||||||||
| Tier 1 risk-based capital ratio | 13.09 | % | 15.53 | % | 14.87 | % | ||||||||||||||||||||
| Total risk-based capital ratio | 14.52 | % | 17.22 | % | 16.72 | % | ||||||||||||||||||||
| (1) - Excludes Acquired Loans and Covered Other Real Estate | ||||||||||||||||||||||||||
| (2) - Mississippi includes Central and Southern Mississippi Regions | ||||||||||||||||||||||||||
| (3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions | ||||||||||||||||||||||||||
| (4) - Excludes Acquired Loans | ||||||||||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful | ||||||||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||
| March 31, 2013 | ||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||
|
AVERAGE BALANCES |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||||||
| Securities AFS-taxable | $ | 2,836,051 | $ | 2,466,738 | $ | 2,409,292 | $ | 2,341,475 | $ | 2,327,572 | ||||||||||
| Securities AFS-nontaxable | 167,773 | 169,906 | 169,037 | 167,287 | 160,870 | |||||||||||||||
| Securities HTM-taxable | 48,632 | 26,510 | 28,333 | 30,136 | 33,270 | |||||||||||||||
| Securities HTM-nontaxable | 16,648 | 17,443 | 18,361 | 19,378 | 21,598 | |||||||||||||||
| Total securities | 3,069,104 | 2,680,597 | 2,625,023 | 2,558,276 | 2,543,310 | |||||||||||||||
| Loans (including loans held for sale) | 5,741,340 | 5,834,525 | 5,886,447 | 5,938,168 | 6,014,133 | |||||||||||||||
| Acquired loans: | ||||||||||||||||||||
| Noncovered loans | 530,643 | 82,317 | 88,562 | 97,341 | 19,931 | |||||||||||||||
| Covered loans | 49,815 | 58,272 | 65,259 | 70,217 | 75,612 | |||||||||||||||
| Fed funds sold and rev repos | 6,618 | 8,747 | 6,583 | 5,309 | 9,568 | |||||||||||||||
| Other earning assets | 34,661 | 31,168 | 31,758 | 29,654 | 34,102 | |||||||||||||||
| Total earning assets | 9,432,181 | 8,695,626 | 8,703,632 | 8,698,965 | 8,696,656 | |||||||||||||||
| Allowance for loan losses | (86,447 | ) | (88,715 | ) | (86,865 | ) | (92,223 | ) | (92,062 | ) | ||||||||||
| Cash and due from banks | 270,740 | 238,976 | 236,566 | 272,283 | 232,139 | |||||||||||||||
| Other assets | 1,183,493 | 972,748 | 958,030 | 947,914 | 918,273 | |||||||||||||||
| Total assets | $ | 10,799,967 | $ | 9,818,635 | $ | 9,811,363 | $ | 9,826,939 | $ | 9,755,006 | ||||||||||
| Interest-bearing demand deposits | $ | 1,703,336 | $ | 1,545,967 | $ | 1,534,244 | $ | 1,545,203 | $ | 1,545,045 | ||||||||||
| Savings deposits | 2,767,747 | 2,275,569 | 2,348,413 | 2,467,546 | 2,339,166 | |||||||||||||||
| Time deposits less than $100,000 | 1,268,619 | 1,120,735 | 1,150,620 | 1,169,532 | 1,190,888 | |||||||||||||||
| Time deposits of $100,000 or more | 893,104 | 760,363 | 781,926 | 813,530 | 825,214 | |||||||||||||||
| Total interest-bearing deposits | 6,632,806 | 5,702,634 | 5,815,203 | 5,995,811 | 5,900,313 | |||||||||||||||
| Fed funds purchased and repos | 266,958 | 388,007 | 374,885 | 280,726 | 437,270 | |||||||||||||||
| Short-term borrowings | 66,999 | 85,313 | 81,773 | 80,275 | 84,797 | |||||||||||||||
| Long-term FHLB advances | 4,580 | - | - | - | - | |||||||||||||||
| Subordinated notes | 49,874 | 49,866 | 49,858 | 49,850 | 49,842 | |||||||||||||||
| Junior subordinated debt securities | 77,989 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||||
| Total interest-bearing liabilities | 7,099,206 | 6,287,676 | 6,383,575 | 6,468,518 | 6,534,078 | |||||||||||||||
| Noninterest-bearing deposits | 2,199,043 | 2,115,784 | 2,039,729 | 1,998,077 | 1,869,758 | |||||||||||||||
| Other liabilities | 176,210 | 126,953 | 114,454 | 104,628 | 122,668 | |||||||||||||||
| Total liabilities | 9,474,459 | 8,530,413 | 8,537,758 | 8,571,223 | 8,526,504 | |||||||||||||||
| Shareholders' equity | 1,325,508 | 1,288,222 | 1,273,605 | 1,255,716 | 1,228,502 | |||||||||||||||
| Total liabilities and equity | $ | 10,799,967 | $ | 9,818,635 | $ | 9,811,363 | $ | 9,826,939 | $ | 9,755,006 | ||||||||||
|
PERIOD END BALANCES |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||||||
| Cash and due from banks | $ | 242,896 | $ | 231,489 | $ | 209,188 | $ | 284,735 | $ | 213,500 | ||||||||||
| Fed funds sold and rev repos | 5,926 | 7,046 | 5,295 | 6,725 | 6,301 | |||||||||||||||
| Securities available for sale | 3,546,083 | 2,657,745 | 2,724,446 | 2,592,807 | 2,595,664 | |||||||||||||||
| Securities held to maturity | 73,666 | 42,188 | 45,484 | 47,867 | 52,010 | |||||||||||||||
| Loans held for sale (LHFS) | 207,758 | 257,986 | 324,897 | 286,221 | 227,449 | |||||||||||||||
| Loans held for investment (LHFI) | 5,474,396 | 5,592,754 | 5,527,963 | 5,650,548 | 5,774,753 | |||||||||||||||
| Allowance for loan losses | (76,900 | ) | (78,738 | ) | (83,526 | ) | (84,809 | ) | (90,879 | ) | ||||||||||
| Net LHFI | 5,397,496 | 5,514,016 | 5,444,437 | 5,565,739 | 5,683,874 | |||||||||||||||
| Acquired loans: | ||||||||||||||||||||
| Noncovered loans | 1,003,127 | 81,523 | 83,110 | 94,013 | 100,669 | |||||||||||||||
| Covered loans | 47,589 | 52,041 | 64,503 | 66,015 | 74,419 | |||||||||||||||
| Allowance for loan losses, acquired loans | (6,458 | ) | (6,075 | ) | (4,343 | ) | (1,526 | ) | (773 | ) | ||||||||||
| Net acquired loans | 1,044,258 | 127,489 | 143,270 | 158,502 | 174,315 | |||||||||||||||
| Net LHFI and acquired loans | 6,441,754 | 5,641,505 | 5,587,707 | 5,724,241 | 5,858,189 | |||||||||||||||
| Premises and equipment, net | 210,789 | 154,841 | 155,467 | 156,089 | 156,158 | |||||||||||||||
| Mortgage servicing rights | 51,529 | 47,341 | 44,211 | 43,580 | 45,893 | |||||||||||||||
| Goodwill | 366,366 | 291,104 | 291,104 | 291,104 | 291,104 | |||||||||||||||
| Identifiable intangible assets | 49,361 | 17,306 | 18,327 | 19,356 | 18,821 | |||||||||||||||
| Other real estate, excluding covered other real estate | 118,406 | 78,189 | 82,475 | 73,673 | 75,742 | |||||||||||||||
| Covered other real estate | 5,879 | 5,741 | 5,722 | 6,482 | 5,824 | |||||||||||||||
| FDIC indemnification asset | 20,198 | 21,774 | 23,979 | 25,309 | 28,260 | |||||||||||||||
| Other assets | 509,904 | 374,412 | 353,857 | 332,657 | 356,678 | |||||||||||||||
| Total assets | $ | 11,850,515 | $ | 9,828,667 | $ | 9,872,159 | $ | 9,890,846 | $ | 9,931,593 | ||||||||||
| Deposits: | ||||||||||||||||||||
| Noninterest-bearing | $ | 2,534,287 | $ | 2,254,211 | $ | 2,118,853 | $ | 2,063,261 | $ | 2,024,290 | ||||||||||
| Interest-bearing | 7,375,144 | 5,642,306 | 5,685,188 | 5,932,596 | 6,066,456 | |||||||||||||||
| Total deposits | 9,909,431 | 7,896,517 | 7,804,041 | 7,995,857 | 8,090,746 | |||||||||||||||
| Fed funds purchased and repos | 219,769 | 288,829 | 408,711 | 297,669 | 254,878 | |||||||||||||||
| Short-term borrowings | 46,325 | 86,920 | 83,612 | 78,594 | 82,023 | |||||||||||||||
| Long-term FHLB advances | 10,969 | - | - | - | - | |||||||||||||||
| Subordinated notes | 49,879 | 49,871 | 49,863 | 49,855 | 49,847 | |||||||||||||||
| Junior subordinated debt securities | 94,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||||
| Other liabilities | 166,340 | 157,305 | 186,061 | 148,520 | 150,723 | |||||||||||||||
| Total liabilities | 10,497,569 | 8,541,298 | 8,594,144 | 8,632,351 | 8,690,073 | |||||||||||||||
| Common stock | 13,992 | 13,506 | 13,496 | 13,496 | 13,494 | |||||||||||||||
| Capital surplus | 342,233 | 285,905 | 284,089 | 283,023 | 282,388 | |||||||||||||||
| Retained earnings | 991,012 | 984,563 | 973,182 | 958,322 | 944,101 | |||||||||||||||
|
Accum other comprehensive income, net of tax |
5,709 | 3,395 | 7,248 | 3,654 | 1,537 | |||||||||||||||
| Total shareholders' equity | 1,352,946 | 1,287,369 | 1,278,015 | 1,258,495 | 1,241,520 | |||||||||||||||
| Total liabilities and equity | $ | 11,850,515 | $ | 9,828,667 | $ | 9,872,159 | $ | 9,890,846 | $ | 9,931,593 | ||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||
| March 31, 2013 | ||||||||||||||||||||
| ($ in thousands except per share data) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||
|
INCOME STATEMENTS |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 67,412 | $ | 69,989 | $ | 72,554 | $ | 73,669 | $ | 75,781 | ||||||||||
| Interest and fees on acquired loans | 12,782 | 4,859 | 5,229 | 4,377 | 2,937 | |||||||||||||||
| Interest on securities-taxable | 16,539 | 15,305 | 15,909 | 17,352 | 18,384 | |||||||||||||||
| Interest on securities-tax exempt-FTE | 2,018 | 2,066 | 2,089 | 2,086 | 2,102 | |||||||||||||||
| Interest on fed funds sold and rev repos | 4 | 9 | 6 | 5 | 6 | |||||||||||||||
| Other interest income | 355 | 337 | 339 | 336 | 330 | |||||||||||||||
| Total interest income-FTE | 99,110 | 92,565 | 96,126 | 97,825 | 99,540 | |||||||||||||||
| Interest on deposits | 4,909 | 5,061 | 5,725 | 6,465 | 7,353 | |||||||||||||||
| Interest on fed funds pch and repos | 81 | 140 | 135 | 142 | 171 | |||||||||||||||
| Other interest expense | 1,490 | 1,346 | 1,358 | 1,359 | 1,414 | |||||||||||||||
| Total interest expense | 6,480 | 6,547 | 7,218 | 7,966 | 8,938 | |||||||||||||||
| Net interest income-FTE | 92,630 | 86,018 | 88,908 | 89,859 | 90,602 | |||||||||||||||
| Provision for loan losses, LHFI | (2,968 | ) | (535 | ) | 3,358 | 650 | 3,293 | |||||||||||||
| Provision for loan losses, acquired loans | 130 | 1,945 | 2,105 | 1,672 | (194 | ) | ||||||||||||||
| Net interest income after provision-FTE | 95,468 | 84,608 | 83,445 | 87,537 | 87,503 | |||||||||||||||
| Service charges on deposit accounts | 11,681 | 12,391 | 13,135 | 12,614 | 12,211 | |||||||||||||||
| Insurance commissions | 7,242 | 6,887 | 7,533 | 7,179 | 6,606 | |||||||||||||||
| Wealth management | 6,875 | 6,181 | 5,612 | 5,762 | 5,501 | |||||||||||||||
| Bank card and other fees | 7,945 | 7,978 | 6,924 | 8,179 | 7,364 | |||||||||||||||
| Mortgage banking, net | 11,583 | 11,331 | 11,150 | 11,184 | 7,295 | |||||||||||||||
| Other, net | (1,191 | ) | (2,007 | ) | 512 | (1,150 | ) | 3,758 | ||||||||||||
| Nonint inc-excl sec gains (losses), net | 44,135 | 42,761 | 44,866 | 43,768 | 42,735 | |||||||||||||||
| Security gains (losses), net | 204 | 18 | (1 | ) | (8 | ) | 1,050 | |||||||||||||
| Total noninterest income | 44,339 | 42,779 | 44,865 | 43,760 | 43,785 | |||||||||||||||
| Salaries and employee benefits | 53,592 | 49,724 | 47,404 | 46,959 | 46,432 | |||||||||||||||
| Services and fees | 13,032 | 12,572 | 11,682 | 11,750 | 10,747 | |||||||||||||||
| Net occupancy-premises | 5,955 | 5,023 | 5,352 | 4,954 | 4,938 | |||||||||||||||
| Equipment expense | 5,674 | 5,288 | 5,095 | 5,183 | 4,912 | |||||||||||||||
| FDIC assessment expense | 2,021 | 1,075 | 1,826 | 1,826 | 1,775 | |||||||||||||||
| ORE/Foreclosure expense | 3,820 | 3,173 | 1,702 | 2,388 | 3,902 | |||||||||||||||
| Other expense | 18,051 | 10,454 | 10,399 | 14,899 | 13,068 | |||||||||||||||
| Total noninterest expense | 102,145 | 87,309 | 83,460 | 87,959 | 85,774 | |||||||||||||||
| Income before income taxes and tax eq adj | 37,662 | 40,078 | 44,850 | 43,338 | 45,514 | |||||||||||||||
| Tax equivalent adjustment | 3,655 | 3,699 | 3,629 | 3,411 | 3,658 | |||||||||||||||
| Income before income taxes | 34,007 | 36,379 | 41,221 | 39,927 | 41,856 | |||||||||||||||
| Income taxes | 9,141 | 8,669 | 11,317 | 10,578 | 11,536 | |||||||||||||||
| Net income available to common shareholders | $ | 24,866 | $ | 27,710 | $ | 29,904 | $ | 29,349 | $ | 30,320 | ||||||||||
| Per common share data | ||||||||||||||||||||
| Earnings per share - basic | $ | 0.38 | $ | 0.43 | $ | 0.46 | $ | 0.45 | $ | 0.47 | ||||||||||
| Earnings per share - diluted | $ | 0.38 | $ | 0.43 | $ | 0.46 | $ | 0.45 | $ | 0.47 | ||||||||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | ||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||
| Basic | 65,983,204 | 64,785,457 | 64,778,329 | 64,771,530 | 64,297,038 | |||||||||||||||
| Diluted | 66,149,656 | 65,007,281 | 64,992,614 | 64,938,697 | 64,477,277 | |||||||||||||||
| Period end common shares outstanding | 67,151,087 | 64,820,414 | 64,779,937 | 64,775,694 | 64,765,581 | |||||||||||||||
|
OTHER FINANCIAL DATA |
||||||||||||||||||||
| Return on common equity | 7.61 | % | 8.56 | % | 9.34 | % | 9.40 | % | 9.93 | % | ||||||||||
| Return on average tangible common equity | 10.82 | % | 11.51 | % | 12.61 | % | 12.74 | % | 13.41 | % | ||||||||||
| Return on assets | 0.93 | % | 1.12 | % | 1.21 | % | 1.20 | % | 1.25 | % | ||||||||||
| Interest margin - Yield - FTE | 4.26 | % | 4.23 | % | 4.39 | % | 4.52 | % | 4.60 | % | ||||||||||
| Interest margin - Cost | 0.28 | % | 0.30 | % | 0.33 | % | 0.37 | % | 0.41 | % | ||||||||||
| Net interest margin - FTE | 3.98 | % | 3.94 | % | 4.06 | % | 4.15 | % | 4.19 | % | ||||||||||
| Efficiency ratio (1) | 67.84 | % | 67.80 | % | 62.39 | % | 66.26 | % | 63.70 | % | ||||||||||
| Full-time equivalent employees | 3,164 | 2,666 | 2,632 | 2,598 | 2,611 | |||||||||||||||
|
COMMON STOCK PERFORMANCE |
||||||||||||||||||||
| Market value-Close | $ | 25.01 | $ | 22.46 | $ | 24.34 | $ | 24.48 | $ | 24.98 | ||||||||||
| Common book value | $ | 20.15 | $ | 19.86 | $ | 19.73 | $ | 19.43 | $ | 19.17 | ||||||||||
| Tangible common book value | $ | 13.96 | $ | 15.10 | $ | 14.95 | $ | 14.64 | $ | 14.38 | ||||||||||
| (1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and non-routine acquisition related transaction expenses. | ||||||||||||||||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||
| March 31, 2013 | ||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||
|
NONPERFORMING ASSETS (1) |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||||||
| Nonaccrual loans | ||||||||||||||||||||
| Alabama | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Florida | 14,046 | 19,314 | 21,456 | 22,260 | 22,174 | |||||||||||||||
| Mississippi (2) | 46,697 | 38,960 | 32,041 | 47,322 | 48,648 | |||||||||||||||
| Tennessee (3) | 4,877 | 8,401 | 7,388 | 11,171 | 13,972 | |||||||||||||||
| Texas | 17,702 | 15,688 | 19,773 | 18,927 | 20,979 | |||||||||||||||
| Total nonaccrual loans | 83,322 | 82,363 | 80,658 | 99,680 | 105,773 | |||||||||||||||
| Other real estate | ||||||||||||||||||||
| Alabama | 28,870 | - | - | - | - | |||||||||||||||
| Florida | 30,662 | 18,569 | 22,340 | 23,324 | 26,226 | |||||||||||||||
| Mississippi (2) | 26,457 | 27,771 | 27,113 | 19,511 | 19,240 | |||||||||||||||
| Tennessee (3) | 18,339 | 17,589 | 18,545 | 18,850 | 17,665 | |||||||||||||||
| Texas | 14,078 | 14,260 | 14,477 | 11,988 | 12,611 | |||||||||||||||
| Total other real estate | 118,406 | 78,189 | 82,475 | 73,673 | 75,742 | |||||||||||||||
| Total nonperforming assets | $ | 201,728 | $ | 160,552 | $ | 163,133 | $ | 173,353 | $ | 181,515 | ||||||||||
|
LOANS PAST DUE OVER 90 DAYS (4) |
||||||||||||||||||||
| LHFI | $ | 2,772 | $ | 6,378 | $ | 5,699 | $ | 1,843 | $ | 1,553 | ||||||||||
| LHFS-Guaranteed GNMA serviced loans | ||||||||||||||||||||
| (no obligation to repurchase) | $ | 4,469 | $ | 43,073 | $ | 39,492 | $ | 35,270 | $ | 39,496 | ||||||||||
| Quarter Ended | ||||||||||||||||||||
|
ALLOWANCE FOR LOAN LOSSES (4) |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||||||
| Beginning Balance | $ | 78,738 | $ | 83,526 | $ | 84,809 | $ | 90,879 | $ | 89,518 | ||||||||||
| Provision for loan losses | (2,968 | ) | (535 | ) | 3,358 | 650 | 3,293 | |||||||||||||
| Charge-offs | (3,325 | ) | (8,829 | ) | (7,907 | ) | (9,264 | ) | (5,376 | ) | ||||||||||
| Recoveries | 4,455 | 4,576 | 3,266 | 2,544 | 3,444 | |||||||||||||||
| Net recoveries (charge-offs) | 1,130 | (4,253 | ) | (4,641 | ) | (6,720 | ) | (1,932 | ) | |||||||||||
| Ending Balance | $ | 76,900 | $ | 78,738 | $ | 83,526 | $ | 84,809 | $ | 90,879 | ||||||||||
|
PROVISION FOR LOAN LOSSES (4) |
||||||||||||||||||||
| Alabama | $ | 676 | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Florida | (3,675 | ) | (706 | ) | 7 | (770 | ) | 739 | ||||||||||||
| Mississippi (2) | (1,920 | ) | 2,031 | 466 | 1,141 | 4,152 | ||||||||||||||
| Tennessee (3) | (378 | ) | (1,037 | ) | 687 | 839 | (29 | ) | ||||||||||||
| Texas | 2,329 | (823 | ) | 2,198 | (560 | ) | (1,569 | ) | ||||||||||||
| Total provision for loan losses | $ | (2,968 | ) | $ | (535 | ) | $ | 3,358 | $ | 650 | $ | 3,293 | ||||||||
|
NET CHARGE-OFFS (4) |
||||||||||||||||||||
| Alabama | $ | 11 | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Florida | (849 | ) | (237 | ) | (488 | ) | 4,491 | 1,495 | ||||||||||||
| Mississippi (2) | (290 | ) | 874 | 4,726 | 1,751 | 251 | ||||||||||||||
| Tennessee (3) | 249 | (43 | ) | 438 | 536 | 223 | ||||||||||||||
| Texas | (251 | ) | 3,659 | (35 | ) | (58 | ) | (37 | ) | |||||||||||
| Total net (recoveries) charge-offs | $ | (1,130 | ) | $ | 4,253 | $ | 4,641 | $ | 6,720 | $ | 1,932 | |||||||||
|
CREDIT QUALITY RATIOS (1) |
||||||||||||||||||||
| Net charge offs/average loans | -0.08 | % | 0.29 | % | 0.31 | % | 0.46 | % | 0.13 | % | ||||||||||
| Provision for loan losses/average loans | -0.21 | % | -0.04 | % | 0.23 | % | 0.04 | % | 0.22 | % | ||||||||||
| Nonperforming loans/total loans (incl LHFS) | 1.47 | % | 1.41 | % | 1.38 | % | 1.68 | % | 1.76 | % | ||||||||||
| Nonperforming assets/total loans (incl LHFS) | 3.55 | % | 2.74 | % | 2.79 | % | 2.92 | % | 3.02 | % | ||||||||||
| Nonperforming assets/total loans (incl LHFS) +ORE | 3.48 | % | 2.71 | % | 2.75 | % | 2.88 | % | 2.99 | % | ||||||||||
| ALL/total loans (excl LHFS) | 1.40 | % | 1.41 | % | 1.51 | % | 1.50 | % | 1.57 | % | ||||||||||
| ALL-commercial/total commercial loans | 1.56 | % | 1.59 | % | 1.79 | % | 1.81 | % | 1.97 | % | ||||||||||
| ALL-consumer/total consumer and home mortgage loans | 0.98 | % | 0.97 | % | 0.84 | % | 0.81 | % | 0.75 | % | ||||||||||
| ALL/nonperforming loans | 92.29 | % | 95.60 | % | 103.56 | % | 85.08 | % | 85.92 | % | ||||||||||
| ALL/nonperforming loans - | ||||||||||||||||||||
| (excl impaired loans) | 145.83 | % | 174.46 | % | 174.09 | % | 186.45 | % | 181.11 | % | ||||||||||
|
CAPITAL RATIOS |
||||||||||||||||||||
| Common equity/total assets | 11.42 | % | 13.10 | % | 12.95 | % | 12.72 | % | 12.50 | % | ||||||||||
| Tangible common equity/tangible assets | 8.20 | % | 10.28 | % | 10.13 | % | 9.90 | % | 9.68 | % | ||||||||||
| Tangible common equity/risk-weighted assets | 11.88 | % | 14.56 | % | 14.49 | % | 14.30 | % | 13.89 | % | ||||||||||
| Tier 1 leverage ratio | 9.94 | % | 10.97 | % | 10.83 | % | 10.63 | % | 10.55 | % | ||||||||||
| Tier 1 common risk-based capital ratio | 11.91 | % | 14.63 | % | 14.50 | % | 14.36 | % | 13.98 | % | ||||||||||
| Tier 1 risk-based capital ratio | 13.09 | % | 15.53 | % | 15.40 | % | 15.26 | % | 14.87 | % | ||||||||||
| Total risk-based capital ratio | 14.52 | % | 17.22 | % | 17.25 | % | 17.12 | % | 16.72 | % | ||||||||||
| (1) - Excludes Acquired Loans and Covered Other Real Estate | ||||||||||||||||||||
| (2) - Mississippi includes Central and Southern Mississippi Regions | ||||||||||||||||||||
| (3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions | ||||||||||||||||||||
| (4) - Excludes Acquired Loans | ||||||||||||||||||||
Note 1 – Business Combinations
Oxford, Mississippi Branches
On March 29, 2013, Trustmark National Bank (TNB), a subsidiary of Trustmark Corporation (Trustmark), announced the signing of a definitive Branch Purchase and Assumption Agreement (the Agreement) pursuant to which TNB will acquire the two branches of SOUTHBank, F.S.B. (SOUTHBank), serving the Oxford, Mississippi market. The Agreement contemplates the assumption of selected deposit accounts of approximately $11.8 million as well as the purchase of the physical branch offices. The proposed transaction, which is subject to regulatory approval and customary closing conditions, is expected to be completed during the summer of 2013. The proposed transaction is not material to Trustmark’s consolidated financial statements and is not considered a business combination in accordance with FASB ASC Topic 805, “Business Combinations.”
BancTrust Financial Group, Inc.
On February 15, 2013, Trustmark completed its merger with BancTrust Financial Group, Inc. (BancTrust), a 26-year-old bank holding company headquartered in Mobile, Alabama. In accordance with the terms of the definitive agreement, the holders of BancTrust common stock received 0.125 of a share of Trustmark common stock for each share of BancTrust common stock in a tax-free exchange. Trustmark issued approximately 2.24 million shares of its common stock for all issued and outstanding shares of BancTrust common stock. The total value of the 2.24 million shares of Trustmark common stock issued to the BancTrust shareholders on the acquisition date was approximately $53.5 million, based on a closing stock price of $23.83 per share of Trustmark common stock on February 15, 2013. At closing, Trustmark repurchased the $50.0 million of BancTrust preferred stock and associated warrant issued to the U.S. Department of Treasury under the Capital Purchase Program for approximately $52.6 million.
This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, are recorded at their estimated fair values as of the acquisition date. The estimated fair values were considered preliminary as of March 31, 2013 and are subject to refinement as additional information relative to the closing date fair values become available through the measurement period, not to exceed one year.
The acquisition of BancTrust is consistent with Trustmark’s strategic plan to selectively expand the Trustmark franchise. The acquisition of BancTrust provided Trustmark entry into more than 15 markets in Alabama and enhanced the Trustmark franchise in the Florida Panhandle. The statement of assets purchased and liabilities assumed in the BancTrust acquisition is presented below at their estimated fair values as of the acquisition date of February 15, 2013 ($ in thousands):
| Assets: | ||||
| Cash and due from banks | $ | 141,616 | ||
| Securities | 528,016 | |||
| Loans held for sale | 1,050 | |||
| Acquired noncovered loans | 951,011 | |||
| Premises and equipment, net | 57,146 | |||
| Identifiable intangible assets | 33,498 | |||
| Other real estate | 41,168 | |||
| Other assets | 98,373 | |||
| Total Assets | 1,851,878 | |||
| Liabilities: | ||||
| Deposits | 1,740,254 | |||
| Other borrowings | 64,051 | |||
| Other liabilities | 16,761 | |||
| Total Liabilities | 1,821,066 | |||
| Net identified assets acquired at fair value | 30,812 | |||
| Goodwill | 75,262 | |||
| Net assets acquired at fair value | $ | 106,074 | ||
The excess of the consideration paid over the estimated fair value of the net assets acquired was $75.3 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the acquisition date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years.
Loans acquired from BancTrust were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that TNB would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements and leases, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”
Note 1 – Business Combinations (continued)
The following table illustrates loans and other real estate acquired from BancTrust, the credit mark and the resulting fair values as of February 15, 2013:
| Balance | Total Credit Mark | Fair Value | |||||||||||
| 2/15/2013 | $ | % | 2/15/2013 | ||||||||||
| Loans secured by real estate: | |||||||||||||
| Construction, land development and other land loans | $ | 236,237 | $ | 100,045 | 42.3 | % | $ | 136,192 | |||||
| Secured by 1-4 family residential properties | 216,444 | 22,914 | 10.6 | % | 193,530 | ||||||||
| Secured by nonfarm, nonresidential properties | 329,026 | 28,140 | 8.6 | % | 300,886 | ||||||||
| Other real estate secured | 34,715 | 2,751 | 7.9 | % | 31,964 | ||||||||
| Commercial and industrial loans | 262,536 | 25,489 | 9.7 | % | 237,047 | ||||||||
| Consumer loans | 40,808 | 2,152 | 5.3 | % | 38,656 | ||||||||
| Other loans | 14,248 | 462 | 3.2 | % | 13,786 | ||||||||
| Total loans acquired from BancTrust | 1,134,014 | 181,953 | 16.0 | % | 952,061 | ||||||||
| Other real estate | 58,083 | 16,915 | 29.1 | % | 41,168 | ||||||||
| Total loans and other real estate acquired from BancTrust | $ | 1,192,097 | $ | 198,868 | 16.7 | % | $ | 993,229 | |||||
The operations of BancTrust are included in Trustmark’s operating results from February 15, 2013, and added revenue of $9.4 million and net income available to common shareholders, excluding non-routine transaction expenses, of approximately $2.0 million through March 31, 2013. Such operating results are not necessarily indicative of future operating results. Included in Trustmark’s noninterest expense during the first quarter of 2013 are non-routine BancTrust transaction expenses totaling approximately $9.4 million (change in control and severance expense of $1.4 million included in salaries and benefits; professional fees, contract termination and other expenses of $7.9 million included in other expense).
Bay Bank & Trust Company
On March 16, 2012, TNB completed its merger with Bay Bank & Trust Co. (Bay Bank), a 76-year old financial institution headquartered in Panama City, Florida. Trustmark acquired all outstanding common stock of Bay Bank for approximately $22 million in cash and stock, comprised of $10 million in cash and the issuance of approximately 510 thousand shares of Trustmark common stock value at $12 million. This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, are recorded at their estimated fair values as of the acquisition date. The purchase price allocation was deemed preliminary as of March 31, 2012 and was finalized in the second quarter of 2012.
The statement of assets purchased and liabilities assumed in the Bay Bank acquisition is presented below at their estimated fair values as of the acquisition date of March 16, 2012 ($ in thousands):
| Assets | ||||
| Cash and due from banks | $ | 88,154 | ||
| Securities available for sale | 26,369 | |||
| Acquired noncovered loans | 97,914 | |||
| Premises and equipment, net | 9,466 | |||
| Identifiable intangible assets | 7,017 | |||
| Other real estate | 2,569 | |||
| Other assets | 3,471 | |||
| Total Assets | 234,960 | |||
| Liabilities | ||||
| Deposits | 208,796 | |||
| Other liabilities | 526 | |||
| Total Liabilities | 209,322 | |||
| Net assets acquired at fair value | 25,638 | |||
| Consideration paid to Bay Bank | 22,003 | |||
| Bargain purchase gain | 3,635 | |||
| Income taxes | - | |||
| Bargain purchase gain, net of taxes | $ | 3,635 | ||
The bargain purchase gain represents the excess of the net of the estimated fair value of the assets acquired and liabilities assumed over the consideration paid to Bay Bank. Initially, Trustmark recognized a bargain purchase gain of $2.8 million during the first quarter of 2012 and subsequently increased the bargain purchase gain by $881 thousand during the second quarter of 2012 as the fair values associated with the Bay Bank acquisition were finalized. The gain of $3.6 million recognized by Trustmark is considered a gain from a bargain purchase under FASB ASC Topic 805 and is included in other noninterest income. Included in noninterest expense during the first quarter of 2012 are non-routine Bay Bank transaction expenses totaling approximately $2.6 million (change in control and severance expense of $672 thousand included in salaries and benefits; contract termination and other expenses of $1.9 million included in other expense).
Loans acquired from Bay Bank were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that TNB would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30.
Note 2 - Securities Available for Sale and Held to Maturity
The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):
| 3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||
|
SECURITIES AVAILABLE FOR SALE |
|||||||||||||||
| U.S. Treasury securities | $ | 506 | $ | - | $ | - | $ | - | $ | - | |||||
| U.S. Government agency obligations | |||||||||||||||
| Issued by U.S. Government agencies | 141,226 | 10 | 18 | 22 | 31 | ||||||||||
| Issued by U.S. Government sponsored agencies | 186,293 | 105,735 | 60,671 | 72,923 | 101,941 | ||||||||||
| Obligations of states and political subdivisions | 218,467 | 215,761 | 215,900 | 213,826 | 208,234 | ||||||||||
| Mortgage-backed securities | |||||||||||||||
| Residential mortgage pass-through securities | |||||||||||||||
| Guaranteed by GNMA | 51,138 | 19,902 | 21,352 | 22,367 | 20,064 | ||||||||||
| Issued by FNMA and FHLMC | 241,365 | 208,564 | 237,886 | 264,018 | 286,169 | ||||||||||
| Other residential mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 2,090,516 | 1,466,366 | 1,565,290 | 1,570,226 | 1,619,920 | ||||||||||
| Commercial mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 377,070 | 399,780 | 381,207 | 354,453 | 330,318 | ||||||||||
| Asset-backed securities | 239,502 | 241,627 | 242,122 | 91,293 | 23,693 | ||||||||||
| Corporate debt securities | - | - | - | 3,679 | 5,294 | ||||||||||
| Total securities available for sale | $ | 3,546,083 | $ | 2,657,745 | $ | 2,724,446 | $ | 2,592,807 | $ | 2,595,664 | |||||
|
SECURITIES HELD TO MATURITY |
|
||||||||||||||
| Obligations of states and political subdivisions | $ | 33,071 | $ | 36,206 | $ | 37,669 | $ | 38,351 | $ | 40,393 | |||||
| Mortgage-backed securities | |||||||||||||||
| Residential mortgage pass-through securities | |||||||||||||||
| Guaranteed by GNMA | 2,932 | 3,245 | 3,435 | 3,745 | 4,089 | ||||||||||
| Issued by FNMA and FHLMC | 569 | 572 | 580 | 583 | 586 | ||||||||||
| Other residential mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | - | - | 1,624 | 3,000 | 4,743 | ||||||||||
| Commercial mortgage-backed securities | |||||||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 37,094 | 2,165 | 2,176 | 2,188 | 2,199 | ||||||||||
| Total securities held to maturity | $ | 73,666 | $ | 42,188 | $ | 45,484 | $ | 47,867 | $ | 52,010 | |||||
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 92% of the portfolio in U.S. Government agency-backed obligations and other Aaa rated securities. None of the securities owned by Trustmark are collateralized by assets which are considered subprime. Furthermore, outside of membership in the Federal Home Loan Bank of Dallas and Federal Reserve Bank, Trustmark does not hold any equity investment in government sponsored entities.
Note 3 – Loan Composition
|
LHFI BY TYPE (excluding acquired loans) |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||||||
| Loans secured by real estate: | ||||||||||||||||||||
| Construction, land development and other land loans | $ | 485,419 | $ | 468,975 | $ | 460,599 | $ | 464,349 | $ | 465,486 | ||||||||||
| Secured by 1-4 family residential properties | 1,372,901 | 1,497,480 | 1,511,514 | 1,621,865 | 1,722,357 | |||||||||||||||
| Secured by nonfarm, nonresidential properties | 1,385,669 | 1,410,264 | 1,397,536 | 1,392,293 | 1,419,902 | |||||||||||||||
| Other real estate secured | 174,680 | 189,949 | 184,804 | 192,376 | 199,400 | |||||||||||||||
| Commercial and industrial loans | 1,206,851 | 1,169,513 | 1,163,681 | 1,142,282 | 1,142,813 | |||||||||||||||
| Consumer loans | 160,253 | 171,660 | 181,896 | 196,718 | 210,713 | |||||||||||||||
| Other loans | 688,623 | 684,913 | 627,933 | 640,665 | 614,082 | |||||||||||||||
| LHFI | 5,474,396 | 5,592,754 | 5,527,963 | 5,650,548 | 5,774,753 | |||||||||||||||
| Allowance for loan losses | (76,900 | ) | (78,738 | ) | (83,526 | ) | (84,809 | ) | (90,879 | ) | ||||||||||
| Net LHFI | $ | 5,397,496 | $ | 5,514,016 | $ | 5,444,437 | $ | 5,565,739 | $ | 5,683,874 | ||||||||||
|
ACQUIRED NONCOVERED LOANS BY TYPE |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | ||||||||||||||||||||||||
| Loans secured by real estate: | |||||||||||||||||||||||||||||
| Construction, land development and other land loans | $ | 138,442 | $ | 10,056 | $ | 11,504 | $ | 13,154 | $ | 14,346 | |||||||||||||||||||
| Secured by 1-4 family residential properties | 209,658 | 19,404 | 18,032 | 18,954 | 20,409 | ||||||||||||||||||||||||
| Secured by nonfarm, nonresidential properties | 339,953 | 45,649 | 47,114 | 53,272 | 54,954 | ||||||||||||||||||||||||
| Other real estate secured | 32,208 | 669 | 378 | 512 | 695 | ||||||||||||||||||||||||
| Commercial and industrial loans | 235,286 | 3,035 | 3,371 | 4,822 | 5,732 | ||||||||||||||||||||||||
| Consumer loans | 32,694 | 2,610 | 2,575 | 3,153 | 4,188 | ||||||||||||||||||||||||
| Other loans | 14,886 | 100 | 136 | 146 | 345 | ||||||||||||||||||||||||
| Noncovered loans | 1,003,127 | 81,523 | 83,110 | 94,013 | 100,669 | ||||||||||||||||||||||||
| Allowance for loan losses | (1,961 | ) | (1,885 | ) | (817 | ) | (62 | ) | (37 | ) | |||||||||||||||||||
| Net noncovered loans | $ | 1,001,166 | $ | 79,638 | $ | 82,293 | $ | 93,951 | $ | 100,632 | |||||||||||||||||||
|
ACQUIRED COVERED LOANS BY TYPE |
3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||||||
| Loans secured by real estate: | ||||||||||||||||||||
| Construction, land development and other land loans | $ | 3,875 | $ | 3,924 | $ | 3,714 | $ | 3,683 | $ | 3,940 | ||||||||||
| Secured by 1-4 family residential properties | 20,980 | 23,990 | 24,949 | 27,218 | 30,221 | |||||||||||||||
| Secured by nonfarm, nonresidential properties | 17,355 | 18,407 | 28,291 | 27,464 | 30,737 | |||||||||||||||
| Other real estate secured | 3,365 | 3,567 | 4,198 | 4,580 | 5,087 | |||||||||||||||
| Commercial and industrial loans | 648 | 747 | 1,803 | 1,382 | 2,768 | |||||||||||||||
| Consumer loans | 179 | 177 | 172 | 205 | 206 | |||||||||||||||
| Other loans | 1,187 | 1,229 | 1,376 | 1,483 | 1,460 | |||||||||||||||
| Covered loans | 47,589 | 52,041 | 64,503 | 66,015 | 74,419 | |||||||||||||||
| Allowance for loan losses | (4,497 | ) | (4,190 | ) | (3,526 | ) | (1,464 | ) | (736 | ) | ||||||||||
|
Net covered loans |
$ | 43,092 | $ | 47,851 | $ | 60,977 | $ | 64,551 | $ | 73,683 | ||||||||||
| Note 3 – Loan Composition (continued) | ||||||||||||||||||||
| March 31, 2013 | ||||||||||||||||||||
|
LHFI - COMPOSITION BY REGION (1) |
Total | Alabama | Florida |
Mississippi |
Tennessee |
Texas | ||||||||||||||
| Loans secured by real estate: | ||||||||||||||||||||
| Construction, land development and other land loans | $ | 485,419 | $ | 2,540 | $ | 84,686 | $ | 246,754 | $ | 43,266 | $ | 108,173 | ||||||||
| Secured by 1-4 family residential properties | 1,372,901 | 613 | 49,380 | 1,161,420 | 138,571 | 22,917 | ||||||||||||||
| Secured by nonfarm, nonresidential properties | 1,385,669 | 2,603 | 144,339 | 746,474 | 162,217 | 330,036 | ||||||||||||||
| Other real estate secured | 174,680 | 3,200 | 6,217 | 131,678 | 5,961 | 27,624 | ||||||||||||||
| Commercial and industrial loans | 1,206,851 | 6,191 | 12,711 | 813,092 | 98,209 | 276,648 | ||||||||||||||
| Consumer loans | 160,253 | 2,749 | 2,099 | 134,163 | 18,018 | 3,224 | ||||||||||||||
| Other loans | 688,623 | 2,246 | 24,392 | 562,682 | 33,835 | 65,468 | ||||||||||||||
| Loans | $ | 5,474,396 | $ | 20,142 | $ | 323,824 | $ | 3,796,263 | $ | 500,077 | $ | 834,090 | ||||||||
|
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1) |
||||||||||||||||||||
| Lots | $ | 50,532 | $ | 23 | $ | 32,081 | $ | 14,586 | $ | 1,202 | $ | 2,640 | ||||||||
| Development | 80,771 | 188 | 9,457 | 47,150 | 4,436 | 19,540 | ||||||||||||||
| Unimproved land | 145,466 | 1,956 | 40,248 | 61,215 | 16,406 | 25,641 | ||||||||||||||
| 1-4 family construction | 76,738 | 328 | 2,304 | 55,772 | 1,023 | 17,311 | ||||||||||||||
| Other construction | 131,912 | 45 | 596 | 68,031 | 20,199 | 43,041 | ||||||||||||||
| Construction, land development and other land loans | $ | 485,419 | $ | 2,540 | $ | 84,686 | $ | 246,754 | $ | 43,266 | $ | 108,173 | ||||||||
|
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1) |
||||||||||||||||||||
| Income producing: | ||||||||||||||||||||
| Retail | $ | 157,141 | $ | - | $ | 41,108 | $ | 62,068 | $ | 22,836 | $ | 31,129 | ||||||||
| Office | 159,386 | - | 37,048 | 83,666 | 8,452 | 30,220 | ||||||||||||||
| Nursing homes/assisted living | 98,842 | - | - | 90,576 | 3,957 | 4,309 | ||||||||||||||
| Hotel/motel | 62,254 | - | 391 | 27,077 | 25,451 | 9,335 | ||||||||||||||
| Industrial | 60,349 | - | 8,931 | 14,111 | 375 | 36,932 | ||||||||||||||
| Health care | 17,488 | - | - | 10,144 | 121 | 7,223 | ||||||||||||||
| Convenience stores | 8,660 | - | - | 4,776 | 1,393 | 2,491 | ||||||||||||||
| Other | 137,901 | 995 | 14,209 | 68,543 | 5,036 | 49,118 | ||||||||||||||
| Total income producing loans | 702,021 | 995 | 101,687 | 360,961 | 67,621 | 170,757 | ||||||||||||||
| Owner-occupied: | ||||||||||||||||||||
| Office | 107,049 | - | 14,146 | 65,372 | 4,068 | 23,463 | ||||||||||||||
| Churches | 78,573 | - | 3,117 | 43,684 | 26,807 | 4,965 | ||||||||||||||
| Industrial warehouses | 91,497 | - | 1,312 | 42,958 | 3,012 | 44,215 | ||||||||||||||
| Health care | 107,527 | - | 14,203 | 62,078 | 15,650 | 15,596 | ||||||||||||||
| Convenience stores | 62,072 | - | 1,723 | 36,561 | 3,843 | 19,945 | ||||||||||||||
| Retail | 37,472 | - | 3,713 | 25,793 | 3,087 | 4,879 | ||||||||||||||
| Restaurants | 31,619 | - | 963 | 24,189 | 4,682 | 1,785 | ||||||||||||||
| Auto dealerships | 14,099 | - | 395 | 11,837 | 1,812 | 55 | ||||||||||||||
| Other | 153,740 | 1,608 | 3,080 | 73,041 | 31,635 | 44,376 | ||||||||||||||
| Total owner-occupied loans | 683,648 | 1,608 | 42,652 | 385,513 | 94,596 | 159,279 | ||||||||||||||
| Loans secured by nonfarm, nonresidential properties | $ | 1,385,669 | $ | 2,603 | $ | 144,339 | $ | 746,474 | $ | 162,217 | $ | 330,036 | ||||||||
|
(1) Excludes acquired loans. |
||||||||||||||||||||
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 | |||||||||||||||
| 3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||
| Securities – taxable | 2.33 | % | 2.44 | % | 2.60 | % | 2.94 | % | 3.13 | % | |||||
| Securities – nontaxable | 4.44 | % | 4.39 | % | 4.43 | % | 4.49 | % | 4.63 | % | |||||
| Securities – total | 2.45 | % | 2.58 | % | 2.73 | % | 3.06 | % | 3.24 | % | |||||
| Loans - LHFI & LHFS | 4.76 | % | 4.77 | % | 4.90 | % | 4.99 | % | 5.07 | % | |||||
| Acquired loans | 8.93 | % | 13.75 | % | 13.52 | % | 10.51 | % | 12.36 | % | |||||
| Loans - total | 5.14 | % | 4.98 | % | 5.12 | % | 5.14 | % | 5.18 | % | |||||
| FF sold & rev repo | 0.25 | % | 0.41 | % | 0.36 | % | 0.38 | % | 0.25 | % | |||||
| Other earning assets | 4.15 | % | 4.30 | % | 4.25 | % | 4.56 | % | 3.89 | % | |||||
| Total earning assets | 4.26 | % | 4.23 | % | 4.39 | % | 4.52 | % | 4.60 | % | |||||
| Interest-bearing deposits | 0.30 | % | 0.35 | % | 0.39 | % | 0.43 | % | 0.50 | % | |||||
| FF pch & repo | 0.12 | % | 0.14 | % | 0.14 | % | 0.20 | % | 0.16 | % | |||||
| Other borrowings | 3.03 | % | 2.72 | % | 2.79 | % | 2.85 | % | 2.89 | % | |||||
| Total interest-bearing liabilities | 0.37 | % | 0.41 | % | 0.45 | % | 0.50 | % | 0.55 | % | |||||
| Net interest margin | 3.98 | % | 3.94 | % | 4.06 | % | 4.15 | % | 4.19 | % | |||||
| Net interest margin excluding acquired loans | 3.66 | % | 3.77 | % | 3.89 | % | 4.03 | % | 4.10 | % | |||||
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 expanded 4 basis points during the first quarter primarily due to the significant increase in acquired loans from the BancTrust acquisition, which had an effective yield of approximately 5.80%, as well as a favorable decline in interest-bearing liabilities. The net interest margin excluding acquired loans compressed 11 basis points as earning assets continued to reprice at lower rates, which was partially offset by lower deposit costs.
Note 5 – Mortgage Banking
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net positive ineffectiveness of $1.3 million for the quarter ended March 31, 2013 compared to a net negative ineffectiveness of $1.0 million for the quarter ended March 31, 2012.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
| Quarter Ended | ||||||||||||||||||||
| 3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | ||||||||||||||||
| Mortgage servicing income, net | $ | 4,267 | $ | 4,441 | $ | 3,984 | $ | 3,891 | $ | 3,886 | ||||||||||
| Change in fair value-MSR from runoff | (2,460 | ) | (2,631 | ) | (2,751 | ) | (2,320 | ) | (2,106 | ) | ||||||||||
| Gain on sales of loans, net | 10,165 | 12,034 | 9,114 | 6,302 | 6,469 | |||||||||||||||
| Other, net | (1,649 | ) | (1,789 | ) | 2,608 | 3,139 | 64 | |||||||||||||
| Mortgage banking income before hedge ineffectiveness | 10,323 | 12,055 | 12,955 | 11,012 | 8,313 | |||||||||||||||
| Change in fair value-MSR from market changes | 1,127 | (418 | ) | (3,282 | ) | (5,926 | ) | 248 | ||||||||||||
| Change in fair value of derivatives | 133 | (306 | ) | 1,477 | 6,098 | (1,266 | ) | |||||||||||||
| Net positive (negative) hedge ineffectiveness | 1,260 | (724 | ) | (1,805 | ) | 172 | (1,018 | ) | ||||||||||||
| Mortgage banking, net | $ | 11,583 | $ | 11,331 | $ | 11,150 | $ | 11,184 | $ | 7,295 | ||||||||||
During the first quarter of 2013, Trustmark exercised its option to repurchase delinquent loans serviced for GNMA. The loans were subsequently sold to a third party under different repurchase provisions. Trustmark will retain the servicing for these loans, which are fully guaranteed by FHA/VA. As a result of this repurchase and sale, the loans are no longer carried as "LHFS-Guaranteed GNMA serviced loans" (see pages 3 and 6). A gain of $542 thousand resulted from the transaction and is included in the table above as "Gain on sales of loans, net."
Note 6 – Other Noninterest Income and Expense
Other noninterest income consisted of the following for the periods presented ($ in thousands):
| Quarter Ended | ||||||||||||||||||||
| 3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | ||||||||||||||||
| Partnership amortization for tax credit purposes | $ | (2,117 | ) | $ | (3,202 | ) | $ | (2,302 | ) | $ | (1,491 | ) | $ | (1,422 | ) | |||||
| Bargain purchase gain on acquisition | - | - | - | 881 | 2,754 | |||||||||||||||
| Decrease in FDIC indemnification asset | (1,365 | ) | (743 | ) | (609 | ) | (2,289 | ) | (81 | ) | ||||||||||
| Other miscellaneous income | 2,291 | 1,938 | 3,423 | 1,749 | 2,507 | |||||||||||||||
| Total other, net | $ | (1,191 | ) | $ | (2,007 | ) | $ | 512 | $ | (1,150 | ) | $ | 3,758 | |||||||
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). These investments are recorded based on the equity method of accounting, which requires the equity in partnership losses to be recognized when incurred and are recorded as a reduction in other income. The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.
As previously mentioned in Note 1 – Business Combinations, during the second quarter of 2012, the bargain purchase gain for Bay Bank was increased $881 thousand from $2.8 million that was recorded during the first quarter of 2012, as the fair values associated with the Bay Bank acquisition were finalized. In addition, during the first quarter of 2013, other noninterest income included a write-down of the FDIC indemnification asset of $1.4 million on acquired covered loans obtained from Heritage as a result of loan payoffs and improved cash flow projections and lower loss expectations for loan pools.
During the third quarter of 2012, Trustmark completed the sale of the Performance Funds by Trustmark Investment Advisors, Inc. (TIA) to Federated Investors, Inc. (Federated) and certain of Federated’s subsidiaries, pursuant to the terms of the previously announced definitive agreement between Federated, TIA, and TNB. The sale resulted in a gain of $1.2 million for Trustmark, which was recorded as other miscellaneous income.
Other noninterest expense consisted of the following for the periods presented ($ in thousands):
| Quarter Ended | |||||||||||||||
| 3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | |||||||||||
| Loan expense | $ | 2,995 | $ | 3,274 | $ | 3,150 | $ | 8,299 | $ | 5,525 | |||||
| Non-routine transaction expenses on acquisition | 7,920 | - | - | - | 1,917 | ||||||||||
| Amortization of intangibles | 1,442 | 1,022 | 1,028 | 1,028 | 710 | ||||||||||
| Other miscellaneous expense | 5,694 | 6,158 | 6,221 | 5,572 | 4,916 | ||||||||||
| Total other expense | $ | 18,051 | $ | 10,454 | $ | 10,399 | $ | 14,899 | $ | 13,068 | |||||
As previously mentioned in Note 1 – Business Combinations, during the first quarter of 2013, Trustmark incurred $7.9 million of non-routine BancTrust transaction expenses in other noninterest expense. These non-routine transaction expenses include $2.2 million of professional fees and $5.7 of contract termination and other expenses.
During the second quarter of 2012, Trustmark updated its quarterly analysis of mortgage loan putback exposure. This analysis, along with recent trends of increased mortgage loan putback activity in the mortgage industry, resulted in Trustmark providing an additional reserve of approximately $4.0 million in the second quarter of 2012. At March 31, 2013, the reserve for mortgage loan servicing putback expenses totaled $7.3 million. Notwithstanding significant changes in future behaviors and the demand patterns of investors, Trustmark believes that it is appropriately reserved for potential mortgage loan putback requests.
Note 7 – Non-GAAP Financial Measures
In addition to capital ratios defined by GAAP and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.
Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations.
These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.
| Note 7 - Non-GAAP Financial Measures (continued) | ||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||
| 3/31/2013 | 12/31/2012 | 9/30/2012 | 6/30/2012 | 3/31/2012 | ||||||||||||||||||
|
TANGIBLE COMMON EQUITY |
||||||||||||||||||||||
| AVERAGE BALANCES | ||||||||||||||||||||||
| Total shareholders' common equity | $ | 1,325,508 | $ | 1,288,222 | $ | 1,273,605 | $ | 1,255,716 | $ | 1,228,502 | ||||||||||||
|
Less: Goodwill |
(324,902 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | ||||||||||||
| Identifiable intangible assets | (35,187 | ) | (17,933 | ) | (18,971 | ) | (17,762 | ) | (14,703 | ) | ||||||||||||
| Total average tangible common equity | $ | 965,419 | $ | 979,185 | $ | 963,530 | $ | 946,850 | $ | 922,695 | ||||||||||||
| PERIOD END BALANCES | ||||||||||||||||||||||
| Total shareholders' common equity | $ | 1,352,946 | $ | 1,287,369 | $ | 1,278,015 | $ | 1,258,495 | $ | 1,241,520 | ||||||||||||
|
Less: Goodwill |
(366,366 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | ||||||||||||
| Identifiable intangible assets | (49,361 | ) | (17,306 | ) | (18,327 | ) | (19,356 | ) | (18,821 | ) | ||||||||||||
| Total tangible common equity | (a) | $ | 937,219 | $ | 978,959 | $ | 968,584 | $ | 948,035 | $ | 931,595 | |||||||||||
|
TANGIBLE ASSETS |
||||||||||||||||||||||
| Total assets | $ | 11,850,515 | $ | 9,828,667 | $ | 9,872,159 | $ | 9,890,846 | $ | 9,931,593 | ||||||||||||
|
Less: Goodwill |
(366,366 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | ||||||||||||
| Identifiable intangible assets | (49,361 | ) | (17,306 | ) | (18,327 | ) | (19,356 | ) | (18,821 | ) | ||||||||||||
| Total tangible assets | (b) | $ | 11,434,788 | $ | 9,520,257 | $ | 9,562,728 | $ | 9,580,386 | $ | 9,621,668 | |||||||||||
| Risk-weighted assets | (c) | $ | 7,891,580 | $ | 6,723,259 | $ | 6,684,820 | $ | 6,631,887 | $ | 6,707,026 | |||||||||||
|
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION |
||||||||||||||||||||||
| Net income available to common shareholders | $ | 24,866 | $ | 27,710 | $ | 29,904 | $ | 29,349 | $ | 30,320 | ||||||||||||
|
Plus: Intangible amortization net of tax |
890 | 631 | 635 | 635 | 438 | |||||||||||||||||
| Net income adjusted for intangible amortization | $ | 25,756 | $ | 28,341 | $ | 30,539 | $ | 29,984 | $ | 30,758 | ||||||||||||
| Period end common shares outstanding | (d) | 67,151,087 | 64,820,414 | 64,779,937 | 64,775,694 | 64,765,581 | ||||||||||||||||
|
TANGIBLE COMMON EQUITY MEASUREMENTS |
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| Return on average tangible common equity 1 | 10.82 | % | 11.51 | % | 12.61 | % | 12.74 | % | 13.41 | % | ||||||||||||
| Tangible common equity/tangible assets | (a)/(b) | 8.20 | % | 10.28 | % | 10.13 | % | 9.90 | % | 9.68 | % | |||||||||||
|
Tangible common equity/risk-weighted assets |
(a)/(c) | 11.88 | % | 14.56 | % | 14.49 | % | 14.30 | % | 13.89 | % | |||||||||||
| Tangible common book value | (a)/(d)*1,000 | $ | 13.96 | $ | 15.10 | $ | 14.95 | $ | 14.64 | $ | 14.38 | |||||||||||
|
TIER 1 COMMON RISK-BASED CAPITAL |
||||||||||||||||||||||
| Total shareholders' equity | $ | 1,352,946 | $ | 1,287,369 | $ | 1,278,015 | $ | 1,258,495 | $ | 1,241,520 | ||||||||||||
|
Eliminate qualifying AOCI |
(5,709 | ) | (3,395 | ) | (7,248 | ) | (3,654 | ) | (1,537 | ) | ||||||||||||
| Qualifying tier 1 capital | 93,000 | 60,000 | 60,000 | 60,000 | 60,000 | |||||||||||||||||
| Disallowed goodwill | (366,366 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | (291,104 | ) | ||||||||||||
| Adj to goodwill allowed for deferred taxes | 13,388 | 13,035 | 12,683 | 12,330 | 11,978 | |||||||||||||||||
| Other disallowed intangibles | (49,361 | ) | (17,306 | ) | (18,327 | ) | (19,356 | ) | (18,821 | ) | ||||||||||||
| Disallowed servicing intangible | (5,153 | ) | (4,734 | ) | (4,421 | ) | (4,358 | ) | (4,589 | ) | ||||||||||||
| Total tier 1 capital | $ | 1,032,745 | $ | 1,043,865 | $ | 1,029,598 | $ | 1,012,353 | $ | 997,447 | ||||||||||||
|
Less: Qualifying tier 1 capital |
(93,000 | ) | (60,000 | ) | (60,000 | ) | (60,000 | ) | (60,000 | ) | ||||||||||||
| Total tier 1 common capital | (e) | $ | 939,745 | $ | 983,865 | $ | 969,598 | $ | 952,353 | $ | 937,447 | |||||||||||
| Tier 1 common risk-based capital ratio | (e)/(c) | 11.91 | % | 14.63 | % | 14.50 | % | 14.36 | % | 13.98 | % | |||||||||||
| 1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity | ||||||||||||||||||||||
