Shareholders' Equity

12 Months Ended

Dec. 31, 2019

Note 19 – Shareholders’ Equity

Regulatory Capital

Trustmark and TNB are subject to minimum risk-based capital and leverage capital requirements, as described in the section captioned “Capital Adequacy” included in Part I. Item 1. – Business of this report, which are administered by the federal bank regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Trustmark’s and TNB’s minimum risk-based capital requirements include the

phased in capital conservation buffer of 2.500% at December 31, 2019 and 1.875% at December 31, 2018. Accumulated other comprehensive loss, net of tax, is not included in computing regulatory capital. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB and limit Trustmark’s and TNB’s ability to pay dividends. As of December 31, 2019, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at December 31, 2019. To be categorized in this manner, Trustmark and TNB maintained minimum common equity Tier 1 risk-based capital, Tier 1 risk-based capital, total risk-based capital and Tier 1 leverage ratios as set forth in the accompanying table, and were not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by their primary federal regulators to meet and maintain a specific capital level for any capital measures. There are no significant conditions or events that have occurred since December 31, 2019, which Management believes have affected Trustmark’s or TNB’s present classification.

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

	Actual
	Regulatory Capital					Minimum			To Be Well
	Amount		Ratio			Requirement			Capitalized
At December 31, 2019:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,312,668		11.93	%		7.000	%	n/a
Trustmark National Bank		1,352,893		12.30	%		7.000	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,372,668		12.48	%		8.500	%	n/a
Trustmark National Bank		1,352,893		12.30	%		8.500	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,457,760		13.25	%		10.500	%	n/a
Trustmark National Bank		1,437,985		13.07	%		10.500	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,372,668		10.48	%		4.00	%	n/a
Trustmark National Bank		1,352,893		10.35	%		4.00	%		5.00	%

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

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

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

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

Dividends on Common Stock

Dividends paid by Trustmark are substantially funded from dividends received from TNB. Approval by TNB’s regulators is required if the total of all dividends declared in any calendar year exceeds the total of its net income for that year combined with its retained net income of the preceding two years. In 2020, TNB will have available approximately $56.8 million plus its net income for that year to pay as dividends.

Stock Repurchase Program

On March 11, 2016, the Board of Directors of Trustmark authorized a stock repurchase program under which $100.0 million of Trustmark’s outstanding common stock could be acquired through March 31, 2019. Trustmark repurchased approximately 1.2 million shares of its common stock valued at $36.9 million during the year ended December 31, 2019, compared to 2.0 million shares of its common stock valued at $62.4 million repurchased during the year ended December 31, 2018 and no common stock repurchased during the year ended December 31, 2017. Under the 2016 program, Trustmark repurchased approximately 3.2 million shares valued at $100.0 million.

The Board of Directors of Trustmark authorized a stock repurchase program effective April 1, 2019 under which $100.0 million of Trustmark’s outstanding common stock may be acquired through March 31, 2020. The adoption of this stock repurchase program followed the receipt of non-objection from the FRB. The shares may be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Under this authority, Trustmark repurchased approximately 601 thousand shares of its common stock valued at $19.7 million during the year ended December 31, 2019.

Together, with the repurchases under the 2016 program, Trustmark purchased approximately 1.8 million shares of its common stock valued at $56.6 million during the year ended December 31, 2019.

On January 28, 2020, the Board of Directors of Trustmark authorized a new stock repurchase program effective April 1, 2020 under which $100.0 million of Trustmark’s outstanding common stock may be acquired through December 31, 2021. The shares may be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. There is no guarantee as to the number of shares that may be repurchased by Trustmark, and Trustmark may discontinue purchases at any time at Management’s discretion.

Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

The following tables present the net change in the components of accumulated other comprehensive loss and the related tax effects allocated to each component for the years ended December 31, 2019, 2018 and 2017 ($ in thousands). Reclassification adjustments related to securities available for sale are included in securities gains (losses), net in the accompanying consolidated statements of income. The amortization of prior service cost, recognized net loss due to lump sum settlements, change in net actuarial loss and recognized net loss due to defined benefit plan termination for pension and other postretirement benefit plans are included in the computation of net periodic benefit cost (see Note 16 – Defined Benefit and Other Postretirement Benefits for additional details). Reclassification adjustments related to pension and other postretirement benefit plans are included in salaries and employee benefits, defined benefit plan termination and other expense in the accompanying consolidated statements of income. Reclassification adjustments related to the cash flow hedge derivative are included in other interest expense in the accompanying consolidated statements of income.

	Before Tax			Tax (Expense)			Net of Tax
	Amount			Benefit			Amount
Year Ended December 31, 2019
Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	44,136		$	(11,033	)	$	33,103
Change in net unrealized holding loss on securities transferred to held to maturity		3,605			(901	)		2,704
Total securities available for sale and transferred securities		47,741			(11,934	)		35,807
Pension and other postretirement benefit plans:
Change in the actuarial loss of pension and other postretirement benefit plans		(5,703	)		1,425			(4,278	)
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		250			(63	)		187
Recognized net loss due to lump sum settlements		312			(77	)		235
Change in net actuarial loss		796			(199	)		597
Total pension and other postretirement benefit plans		(4,345	)		1,086			(3,259	)
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		(145	)		36			(109	)
Reclassification adjustment for (gain) loss realized in net income		(479	)		119			(360	)
Total cash flow hedge derivatives		(624	)		155			(469	)
Total other comprehensive income (loss)	$	42,772		$	(10,693	)	$	32,079

Year Ended December 31, 2018
Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	(19,221	)	$	4,805		$	(14,416	)
Change in net unrealized holding loss on securities transferred to held to maturity		3,761			(940	)		2,821
Total securities available for sale and transferred securities		(15,460	)		3,865			(11,595	)
Pension and other postretirement benefit plans:
Change in the actuarial loss of pension and other postretirement benefit plans		3,742			(936	)		2,806
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		250			(63	)		187
Recognized net loss due to lump sum settlements		161			(39	)		122
Change in net actuarial loss		1,225			(306	)		919
Total pension and other postretirement benefit plans		5,378			(1,344	)		4,034
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		497			(124	)		373
Reclassification adjustment for (gain) loss realized in net income		(322	)		80			(242	)
Total cash flow hedge derivatives		175			(44	)		131
Total other comprehensive income (loss)	$	(9,907	)	$	2,477		$	(7,430	)

Year Ended December 31, 2017
Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	(13,994	)	$	5,353		$	(8,641	)
Reclassification adjustment for net (gains) losses realized in net income		(15	)		6			(9	)
Change in net unrealized holding loss on securities transferred to held to maturity		4,721			(1,806	)		2,915
Total securities available for sale and transferred securities		(9,288	)		3,553			(5,735	)
Pension and other postretirement benefit plans:
Change in the actuarial loss of pension and other postretirement benefit plans		(1,231	)		471			(760	)
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		250			(96	)		154
Change in net actuarial loss		1,962			(751	)		1,211
Recognized net loss due to defined benefit plan termination		17,662			(6,755	)		10,907
Total pension and other postretirement benefit plans		18,643			(7,131	)		11,512
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		198			(76	)		122
Reclassification adjustment for (gain) loss realized in net income		282			(108	)		174
Total cash flow hedge derivatives		480			(184	)		296
Total other comprehensive income (loss)	$	9,835		$	(3,762	)	$	6,073

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

	Securities Available for Sale and Transferred Securities			Defined Benefit Pension Items			Cash Flow Hedge Derivative			Total
Balance, January 1, 2017	$	(20,800	)	$	(24,980	)	$	(18	)	$	(45,798	)
Other comprehensive income (loss) before reclassification		(5,726	)		(760	)		122			(6,364	)
Amounts reclassified from accumulated other comprehensive loss		(9	)		12,272			174			12,437
Net other comprehensive income (loss)		(5,735	)		11,512			296			6,073
Balance, December 31, 2017		(26,535	)		(13,468	)		278			(39,725	)
Other comprehensive income (loss) before reclassification		(11,595	)		2,806			373			(8,416	)
Amounts reclassified from accumulated other comprehensive loss		—			1,228			(242	)		986
Net other comprehensive income (loss)		(11,595	)		4,034			131			(7,430	)
Reclassification of certain income tax effects related to the change in the federal statutory income tax rate under the Tax Reform Act		(5,694	)		(2,890	)		60			(8,524	)
Balance, December 31, 2018		(43,824	)		(12,324	)		469			(55,679	)
Other comprehensive income (loss) before reclassification		35,807			(4,278	)		(109	)		31,420
Amounts reclassified from accumulated other comprehensive loss		—			1,019			(360	)		659
Net other comprehensive income (loss)		35,807			(3,259	)		(469	)		32,079
Balance, December 31, 2019	$	(8,017	)	$	(15,583	)	$	—		$	(23,600	)