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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Trustmark Corporation | NASDAQ:TRMK | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.04 | 0.12% | 33.76 | 28.18 | 34.47 | 34.50 | 33.63 | 33.99 | 292,279 | 23:10:03 |
Performance Reflects Continued Balance Sheet Growth, Strong Credit Quality and Disciplined Expense Management
Trustmark Corporation (NASDAQGS: TRMK) reported net income of $21.2 million in the third quarter of 2021, representing diluted earnings per share of $0.34. Third quarter results include costs of a previously announced voluntary early retirement program, which reduced net income by $4.3 million, or approximately $0.07 per diluted share. Results for the quarter also include a previously disclosed charge to resolve allegations by regulatory authorities regarding fair lending matters, which reduced net income by $5.0 million, or approximately $0.08 per diluted share. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2021, to shareholders of record on December 1, 2021.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211026006141/en/
Printer friendly version of earnings release with consolidated financial statements and notes: https://www.businesswire.com/news/home/52515085/en
Third Quarter Highlights
Duane A. Dewey, President and CEO, stated, “We made significant progress across the organization in the third quarter as reflected by continued balance sheet growth, strong credit quality, and disciplined expense management. Our associates are focused on expanding customer relationships, which is reflected in the solid performance of our banking, insurance, and wealth management businesses.
“Our third quarter results were impacted by our previously announced settlement with regulatory authorities to resolve fair lending allegations in our Memphis, Tennessee market. We entered into these settlements to avoid the distraction of protracted litigation and because we share the common goals of breaking down barriers to home financing and exploring innovative ways to help residents of underserved areas achieve the dream of homeownership. Our quarterly results also reflect the costs associated with our voluntary early retirement program, which was accepted by 98 associates, or 3.6% of our workforce. As you may recall, we also had a voluntary early retirement program in the first quarter of 2020 in which 107 associates, or 3.8% of the workforce at that time, elected to participate. Collectively, these programs have provided additional opportunities to redesign workflows and restructure the organization to leverage investments in technology and improve efficiency.”
Balance Sheet Management
Loans HFI totaled $10.2 billion at September 30, 2021, reflecting an increase of $22.0 million, or 0.2%, linked-quarter and $327.2 million, or 3.3%, year-over-year. The linked-quarter growth primarily reflects increases in loans secured by nonfarm, nonresidential properties and 1-4 family mortgage loans, which were largely offset by declines in construction loans, other real estate secured loans, and municipal loans. Trustmark’s loan portfolio remains well-diversified by loan type and geography.
Deposits totaled $14.9 billion at September 30, 2021, up $290.8 million, or 2.0%, from the prior quarter and $1.7 billion, or 12.9%, year-over-year. Trustmark continues to maintain a strong liquidity position as loans HFI represented 68.2% of total deposits at September 30, 2021. Noninterest-bearing deposits represented 33.4% of total deposits at the end of the third quarter. Interest-bearing deposit costs totaled 0.14% in the third quarter, a decrease of 5 basis points from the prior quarter. The total cost of interest-bearing liabilities was 0.21% in the third quarter of 2021, a decrease of 4 basis points from the prior quarter.
During the third quarter, Trustmark repurchased $9.7 million, or approximately 319 thousand of its common shares. During the nine months ended September 30, 2021, Trustmark repurchased $34.6 million, or approximately 1.1 million of its common shares. At September 30, 2021, Trustmark had $65.4 million in remaining authority under its existing stock repurchase program, which expires on December 31, 2021. The repurchase program, which is subject to market conditions and management discretion, will continue to be implemented through open market repurchases or privately negotiated transactions. At September 30, 2021,Trustmark’s tangible equity-to-tangible assets ratio was 8.12% while its total risk-based capital ratio was 14.01%.
Credit Quality
Nonaccrual loans totaled $66.2 million at September 30, 2021, up $14.8 million from the prior quarter and up $12.4 million year-over-year. Other real estate totaled $6.2 million, reflecting a $3.2 million decrease from the prior quarter and a decline of $10.0 million year-over-year. Collectively, nonperforming assets totaled $72.5 million at September 30, 2021, reflecting a linked-quarter increase of $11.6 million and year-over-year increase of $2.3 million.
The provision for credit losses for loans HFI was a negative $2.5 million in the third quarter. Negative provisioning was primarily due to improvements in credit quality and the economic forecasts. The provision for credit losses for off-balance sheet credit exposures was a negative $1.0 million in the third quarter and was primarily driven by decreases in the total reserve rates applied to the unfunded portion of the loan portfolio. Collectively, the provision for credit losses totaled a negative $3.5 million in the third quarter compared to an expense of $537 thousand in the prior quarter and a negative $1.2 million in the third quarter of 2020.
Allocation of Trustmark’s $104.1 million allowance for credit losses on loans HFI represented 1.05% of commercial loans and 0.91% of consumer and home mortgage loans, resulting in an allowance to total loans HFI of 1.02% at September 30, 2021. Management believes the level of the ACL is commensurate with the credit losses currently expected in the loan portfolio.
Revenue Generation
Revenue in the third quarter totaled $152.4 million, a decrease of $23.4 million, or 13.3%, from the prior quarter. During the third quarter, mortgage banking revenue declined $3.3 million while second quarter results included $18.6 million of PPP loan origination fees attributable to the sale of PPP loans.
Net interest income (FTE) in the third quarter totaled $101.2 million, resulting in a net interest margin of 2.57%. The net interest margin, excluding PPP loans and Federal Reserve Bank balance, totaled 2.90% during the third quarter, a decrease of 4 basis points when compared to the prior quarter. Continued low interest rates decreased the yield on the loans HFI and held for sale portfolio as well as the securities portfolio and were partially offset by lower costs of interest-bearing deposits.
Noninterest income in the third quarter totaled $54.1 million, a decrease of $2.3 million from the prior quarter and $19.6 million year-over-year. The linked-quarter and year-over-year changes are principally attributable to lower mortgage banking revenue. Mortgage loan production in the third quarter totaled $708.8 million, down 3.8% from the prior quarter and 20.0% year-over-year. Mortgage banking revenue totaled $14.0 million in the third quarter, a decrease of $3.3 million from the prior quarter and $22.4 million year-over-year. The linked-quarter decline is attributable to reduced spreads which resulted in lower net gains on sales of mortgage loans in the secondary market as well as reduced net hedge ineffectiveness.
Wealth management revenue totaled $9.1 million in the third quarter, an increase of $125 thousand, or 1.4%, from the prior quarter and $1.4 million, or 18.1%, year-over-year. The growth is attributable to increased trust and investment and brokerage business. Insurance revenue totaled $12.1 million in the third quarter, relatively unchanged from the prior quarter and up $571 thousand, or 4.9%, year-over-year due in part to increased property and casualty commissions. Service charges on deposit accounts increased $1.3 million, or 17.0%, from the prior quarter and $1.3 million, or 17.6%, year-over-year. Bank card and other fees increased $248 thousand from the prior quarter and decreased $294 thousand year-over-year. The linked-quarter and year-over-year changes are attributable to the level of customer derivative revenue.
Noninterest Expense
Trustmark continued proactive measures to manage noninterest expense. During the third quarter, Trustmark completed a voluntary early retirement program. Of those eligible for the program, 98 associates, or 3.6% of the workforce, elected early retirement. A one-time, pre-tax charge of $5.7 million related to this program was incurred during the third quarter, reflecting $5.6 million in salaries and employee benefits expense and $89 thousand in other expense. The result of this program is expected to result in pre-tax savings of approximately $1.3 million in the fourth quarter of 2021 and $4.3 million in 2022.
Adjusted noninterest expense in the third quarter was $116.6 million, up $384 thousand, or 0.3%, from the prior quarter and $2.0 million, or 1.8%, year-over-year. Salaries and employee benefits expense increased $4.5 million linked-quarter; excluding the $5.6 million in charges related to the voluntary early retirement program, salary and employee benefits expense declined $1.1 million linked-quarter. Total other expense increased $5.4 million linked-quarter principally due to regulatory settlement expenses.
“Looking forward, Trustmark will continue to focus upon efficiency, growth, and innovation opportunities. We continue to redesign workflows and restructure the organization to leverage investments in technology, enhance the customer experience, and improve efficiency. We are focused on providing the services and advice our customers have come to expect while building long-term value for our shareholders,” said Dewey.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 27, 2021 at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, November 10, 2021, in archived format at the same web address or by calling (877) 344-7529, passcode 10160480.
Trustmark is a financial services company providing banking and financial solutions through 180 offices in Alabama, Florida, Mississippi, Tennessee, and Texas.
Forward-Looking Statements
Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential,” “seek,” “continue,” “could,” “would,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission (SEC) 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. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the novel coronavirus (COVID-19) pandemic, and also by the effectiveness of varying governmental responses in ameliorating the impact of the pandemic on our customers and the economies where they operate.
Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, an increase in unemployment levels and slowdowns in economic growth, our ability to manage the impact of the COVID-19 pandemic on our markets and our customers, as well as the effectiveness of actions of federal, state and local governments and agencies (including the Board of Governors of the Federal Reserve System (FRB)) to mitigate its spread and economic impact, local, state and national economic and market conditions, conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets, levels of and volatility in crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of issues related to the European financial system and monetary and other governmental actions designed to address credit, securities, and/or commodity markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, pandemics or other health crises, acts of war or terrorism, and other risks described in our filings with the SEC.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands) (unaudited) Linked Quarter Year over Year QUARTERLY AVERAGE BALANCES 9/30/2021 6/30/2021 9/30/2020 $ Change % Change $ Change % Change Securities AFS-taxable$
2,686,765
$
2,339,662
$
1,857,050
$
347,103
14.8
%
$
829,715
44.7
%
Securities AFS-nontaxable
5,159
5,174
5,973
(15
)
-0.3
%
(814
)
-13.6
%
Securities HTM-taxable
401,685
441,688
608,585
(40,003
)
-9.1
%
(206,900
)
-34.0
%
Securities HTM-nontaxable
8,641
10,958
25,508
(2,317
)
-21.1
%
(16,867
)
-66.1
%
Total securities
3,102,250
2,797,482
2,497,116
304,768
10.9
%
605,134
24.2
%
Paycheck protection program loans (PPP)
122,176
648,222
941,456
(526,046
)
-81.2
%
(819,280
)
-87.0
%
Loans (includes loans held for sale)
10,389,826
10,315,927
10,162,379
73,899
0.7
%
227,447
2.2
%
Fed funds sold and reverse repurchases
69
55
301
14
25.5
%
(232
)
-77.1
%
Other earning assets
2,038,515
1,750,385
722,917
288,130
16.5
%
1,315,598
n/m
Total earning assets
15,652,836
15,512,071
14,324,169
140,765
0.9
%
1,328,667
9.3
%
Allowance for credit losses (ACL), loans held for investment (LHFI)
(104,857
)
(112,346
)
(121,842
)
7,489
-6.7
%
16,985
13.9
%
Other assets
1,602,611
1,622,388
1,564,825
(19,777
)
-1.2
%
37,786
2.4
%
Total assets$
17,150,590
$
17,022,113
$
15,767,152
$
128,477
0.8
%
$
1,383,438
8.8
%
Interest-bearing demand deposits$
4,224,717
$
4,056,910
$
3,669,249
$
167,807
4.1
%
$
555,468
15.1
%
Savings deposits
4,617,683
4,627,180
4,416,046
(9,497
)
-0.2
%
201,637
4.6
%
Time deposits
1,258,829
1,301,896
1,507,348
(43,067
)
-3.3
%
(248,519
)
-16.5
%
Total interest-bearing deposits
10,101,229
9,985,986
9,592,643
115,243
1.2
%
508,586
5.3
%
Fed funds purchased and repurchases
147,635
174,620
84,077
(26,985
)
-15.5
%
63,558
75.6
%
Other borrowings
109,735
132,199
167,262
(22,464
)
-17.0
%
(57,527
)
-34.4
%
Subordinated notes
122,951
122,897
—
54
0.0
%
122,951
n/m
Junior subordinated debt securities
61,856
61,856
61,856
—
0.0
%
—
0.0
%
Total interest-bearing liabilities
10,543,406
10,477,558
9,905,838
65,848
0.6
%
637,568
6.4
%
Noninterest-bearing deposits
4,566,924
4,512,268
3,921,867
54,656
1.2
%
645,057
16.4
%
Other liabilities
257,956
251,582
244,544
6,374
2.5
%
13,412
5.5
%
Total liabilities
15,368,286
15,241,408
14,072,249
126,878
0.8
%
1,296,037
9.2
%
Shareholders' equity
1,782,304
1,780,705
1,694,903
1,599
0.1
%
87,401
5.2
%
Total liabilities and equity$
17,150,590
$
17,022,113
$
15,767,152
$
128,477
0.8
%
$
1,383,438
8.8
%
n/m - percentage changes greater than +/- 100% are considered not meaningful See Notes to Consolidated Financials TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands) (unaudited) Linked Quarter Year over Year PERIOD END BALANCES 9/30/2021 6/30/2021 9/30/2020 $ Change % Change $ Change % Change Cash and due from banks$
2,175,058
$
2,267,224
$
564,588
$
(92,166
)
-4.1
%
$
1,610,470
n/m
Fed funds sold and reverse repurchases
—
—
50
—
n/m
(50
)
-100.0
%
Securities available for sale
3,057,605
2,548,739
1,922,728
508,866
20.0
%
1,134,877
59.0
%
Securities held to maturity
394,905
433,012
611,280
(38,107
)
-8.8
%
(216,375
)
-35.4
%
PPP loans
46,486
166,119
944,270
(119,633
)
-72.0
%
(897,784
)
-95.1
%
Loans held for sale (LHFS)
335,339
332,132
485,103
3,207
1.0
%
(149,764
)
-30.9
%
Loans held for investment (LHFI)
10,174,899
10,152,869
9,847,728
22,030
0.2
%
327,171
3.3
%
ACL LHFI
(104,073
)
(104,032
)
(122,010
)
(41
)
0.0
%
17,937
14.7
%
Net LHFI
10,070,826
10,048,837
9,725,718
21,989
0.2
%
345,108
3.5
%
Premises and equipment, net
201,937
200,970
192,722
967
0.5
%
9,215
4.8
%
Mortgage servicing rights
84,101
80,764
61,613
3,337
4.1
%
22,488
36.5
%
Goodwill
384,237
384,237
385,270
—
0.0
%
(1,033
)
-0.3
%
Identifiable intangible assets
5,621
6,170
8,142
(549
)
-8.9
%
(2,521
)
-31.0
%
Other real estate
6,213
9,439
16,248
(3,226
)
-34.2
%
(10,035
)
-61.8
%
Operating lease right-of-use assets
34,689
33,201
30,508
1,488
4.5
%
4,181
13.7
%
Other assets
567,627
587,288
609,922
(19,661
)
-3.3
%
(42,295
)
-6.9
%
Total assets$
17,364,644
$
17,098,132
$
15,558,162
$
266,512
1.6
%
$
1,806,482
11.6
%
Deposits: Noninterest-bearing$
4,987,885
$
4,446,991
$
3,964,023
$
540,894
12.2
%
$
1,023,862
25.8
%
Interest-bearing
9,934,954
10,185,093
9,258,390
(250,139
)
-2.5
%
676,564
7.3
%
Total deposits
14,922,839
14,632,084
13,222,413
290,755
2.0
%
1,700,426
12.9
%
Fed funds purchased and repurchases
146,417
157,176
153,834
(10,759
)
-6.8
%
(7,417
)
-4.8
%
Other borrowings
94,889
117,223
178,599
(22,334
)
-19.1
%
(83,710
)
-46.9
%
Subordinated notes
122,987
122,932
—
55
0.0
%
122,987
n/m
Junior subordinated debt securities
61,856
61,856
61,856
—
0.0
%
—
0.0
%
ACL on off-balance sheet credit exposures
32,684
33,733
39,659
(1,049
)
-3.1
%
(6,975
)
-17.6
%
Operating lease liabilities
36,531
34,959
31,838
1,572
4.5
%
4,693
14.7
%
Other liabilities
177,494
158,860
159,922
18,634
11.7
%
17,572
11.0
%
Total liabilities
15,595,697
15,318,823
13,848,121
276,874
1.8
%
1,747,576
12.6
%
Common stock
13,014
13,079
13,215
(65
)
-0.5
%
(201
)
-1.5
%
Capital surplus
201,837
210,420
231,836
(8,583
)
-4.1
%
(29,999
)
-12.9
%
Retained earnings
1,573,176
1,566,451
1,459,306
6,725
0.4
%
113,870
7.8
%
Accumulated other comprehensive income (loss), net of tax
(19,080
)
(10,641
)
5,684
(8,439
)
-79.3
%
(24,764
)
n/m
Total shareholders' equity
1,768,947
1,779,309
1,710,041
(10,362
)
-0.6
%
58,906
3.4
%
Total liabilities and equity$
17,364,644
$
17,098,132
$
15,558,162
$
266,512
1.6
%
$
1,806,482
11.6
%
n/m - percentage changes greater than +/- 100% are considered not meaningful See Notes to Consolidated Financials TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands except per share data) (unaudited) Quarter Ended Linked Quarter Year over Year INCOME STATEMENTS 9/30/2021 6/30/2021 9/30/2020 $ Change % Change $ Change % Change Interest and fees on LHFS & LHFI-FTE$
94,101
$
93,698
$
97,429
$
403
0.4
%
$
(3,328
)
-3.4
%
Interest and fees on PPP loans
1,533
25,555
6,729
(24,022
)
-94.0
%
(5,196
)
-77.2
%
Interest on securities-taxable
9,973
8,991
12,542
982
10.9
%
(2,569
)
-20.5
%
Interest on securities-tax exempt-FTE
132
149
301
(17
)
-11.4
%
(169
)
-56.1
%
Interest on fed funds sold and reverse repurchases
—
—
1
—
n/m
(1
)
-100.0
%
Other interest income
949
489
331
460
94.1
%
618
n/m
Total interest income-FTE
106,688
128,882
117,333
(22,194
)
-17.2
%
(10,645
)
-9.1
%
Interest on deposits
3,691
4,630
7,437
(939
)
-20.3
%
(3,746
)
-50.4
%
Interest on fed funds purchased and repurchases
51
59
32
(8
)
-13.6
%
19
59.4
%
Other interest expense
1,733
1,813
688
(80
)
-4.4
%
1,045
n/m
Total interest expense
5,475
6,502
8,157
(1,027
)
-15.8
%
(2,682
)
-32.9
%
Net interest income-FTE
101,213
122,380
109,176
(21,167
)
-17.3
%
(7,963
)
-7.3
%
Provision for credit losses, LHFI
(2,492
)
(3,991
)
1,760
1,499
37.6
%
(4,252
)
n/m
Provision for credit losses, off-balance sheet credit exposures (1)
(1,049
)
4,528
(3,004
)
(5,577
)
n/m
1,955
65.1
%
Net interest income after provision-FTE
104,754
121,843
110,420
(17,089
)
-14.0
%
(5,666
)
-5.1
%
Service charges on deposit accounts
8,911
7,613
7,577
1,298
17.0
%
1,334
17.6
%
Bank card and other fees
8,549
8,301
8,843
248
3.0
%
(294
)
-3.3
%
Mortgage banking, net
14,004
17,333
36,439
(3,329
)
-19.2
%
(22,435
)
-61.6
%
Insurance commissions
12,133
12,217
11,562
(84
)
-0.7
%
571
4.9
%
Wealth management
9,071
8,946
7,679
125
1.4
%
1,392
18.1
%
Other, net
1,481
2,001
1,601
(520
)
-26.0
%
(120
)
-7.5
%
Total noninterest income
54,149
56,411
73,701
(2,262
)
-4.0
%
(19,552
)
-26.5
%
Salaries and employee benefits
74,623
70,115
67,342
4,508
6.4
%
7,281
10.8
%
Services and fees
22,306
21,769
20,992
537
2.5
%
1,314
6.3
%
Net occupancy-premises
6,854
6,578
7,000
276
4.2
%
(146
)
-2.1
%
Equipment expense
5,941
5,567
5,828
374
6.7
%
113
1.9
%
Other real estate expense, net
1,357
1,511
1,203
(154
)
-10.2
%
154
12.8
%
Other expense
18,519
13,139
14,598
5,380
40.9
%
3,921
26.9
%
Total noninterest expense
129,600
118,679
116,963
10,921
9.2
%
12,637
10.8
%
Income before income taxes and tax eq adj
29,303
59,575
67,158
(30,272
)
-50.8
%
(37,855
)
-56.4
%
Tax equivalent adjustment
2,947
2,957
2,969
(10
)
-0.3
%
(22
)
-0.7
%
Income before income taxes
26,356
56,618
64,189
(30,262
)
-53.4
%
(37,833
)
-58.9
%
Income taxes
5,156
8,637
9,749
(3,481
)
-40.3
%
(4,593
)
-47.1
%
Net income$
21,200
$
47,981
$
54,440
$
(26,781
)
-55.8
%
$
(33,240
)
-61.1
%
Per share data Earnings per share - basic$
0.34
$
0.76
$
0.86
$
(0.42
)
-55.3
%
$
(0.52
)
-60.5
%
Earnings per share - diluted$
0.34
$
0.76
$
0.86
$
(0.42
)
-55.3
%
$
(0.52
)
-60.5
%
Dividends per share$
0.23
$
0.23
$
0.23
—
0.0
%
—
0.0
%
Weighted average shares outstanding Basic
62,521,684
63,214,593
63,422,692
Diluted
62,730,157
63,409,683
63,581,964
Period end shares outstanding
62,461,832
62,773,226
63,423,820
(1) During the second quarter of 2021, Trustmark reclassified its credit loss expense related to off-balance sheet credit exposures from noninterest expense to provision for credit losses, off-balance sheet credit exposures. Prior periods have been reclassified accordingly. n/m - percentage changes greater than +/- 100% are considered not meaningful See Notes to Consolidated Financials TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands) (unaudited) Quarter Ended Linked Quarter Year over Year NONPERFORMING ASSETS (1) 9/30/2021 6/30/2021 9/30/2020 $ Change % Change $ Change % Change Nonaccrual LHFI Alabama
$
9,223
$
8,952
$
3,860
$
271
3.0
%
$
5,363
n/m
Florida
381
467
617
(86
)
-18.4
%
(236
)
-38.2
%
Mississippi (2)
22,898
23,422
35,617
(524
)
-2.2
%
(12,719
)
-35.7
%
Tennessee (3)
10,356
10,751
13,041
(395
)
-3.7
%
(2,685
)
-20.6
%
Texas
23,382
7,856
721
15,526
n/m
22,661
n/m
Total nonaccrual LHFI
66,240
51,448
53,856
14,792
28.8
%
12,384
23.0
%
Other real estate Alabama
613
2,830
3,725
(2,217
)
-78.3
%
(3,112
)
-83.5
%
Florida
—
—
3,665
—
n/m
(3,665
)
-100.0
%
Mississippi (2)
5,600
6,550
8,718
(950
)
-14.5
%
(3,118
)
-35.8
%
Tennessee (3)
—
59
140
(59
)
-100.0
%
(140
)
-100.0
%
Texas
—
—
—
—
n/m
—
n/m
Total other real estate
6,213
9,439
16,248
(3,226
)
-34.2
%
(10,035
)
-61.8
%
Total nonperforming assets$
72,453
$
60,887
$
70,104
$
11,566
19.0
%
$
2,349
3.4
%
LOANS PAST DUE OVER 90 DAYS (1) LHFI$
625
$
423
$
782
$
202
47.8
%
$
(157
)
-20.1
%
LHFS-Guaranteed GNMA serviced loans (no obligation to repurchase)$
75,091
$
81,538
$
121,281
$
(6,447
)
-7.9
%
$
(46,190
)
-38.1
%
Quarter Ended Linked Quarter Year over Year ACL LHFI (1) 9/30/2021 6/30/2021 9/30/2020 $ Change % Change $ Change % Change Beginning Balance$
104,032
$
109,191
$
119,188
$
(5,159
)
-4.7
%
$
(15,156
)
-12.7
%
CECL adoption adjustments: LHFI
—
—
—
—
n/m
—
n/m
Acquired loan transfers
—
—
—
—
n/m
—
n/m
Provision for credit losses, LHFI
(2,492
)
(3,991
)
1,760
1,499
37.6
%
(4,252
)
n/m
Charge-offs
(1,586
)
(4,828
)
(1,263
)
3,242
67.1
%
(323
)
-25.6
%
Recoveries
4,119
3,660
2,325
459
12.5
%
1,794
77.2
%
Net (charge-offs) recoveries
2,533
(1,168
)
1,062
3,701
n/m
1,471
n/m
Ending Balance
$
104,073
$
104,032
$
122,010
$
41
0.0
%
$
(17,937
)
-14.7
%
NET (CHARGE-OFFS) RECOVERIES (1) Alabama$
247
$
203
$
117
$
44
21.7
%
$
130
n/m
Florida
356
167
387
189
n/m
(31
)
-8.0
%
Mississippi (2)
1,436
(3,071
)
442
4,507
n/m
994
n/m
Tennessee (3)
(8
)
1,031
42
(1,039
)
n/m
(50
)
n/m
Texas
502
502
74
—
0.0
%
428
n/m
Total net (charge-offs) recoveries
$
2,533
$
(1,168
)
$
1,062
$
3,701
n/m
$
1,471
n/m
(1) Excludes PPP loans. (2) Mississippi includes Central and Southern Mississippi Regions. (3) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. n/m - percentage changes greater than +/- 100% are considered not meaningful See Notes to Consolidated Financials TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands) (unaudited) Quarter Ended Nine Months Ended AVERAGE BALANCES 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 9/30/2021 9/30/2020 Securities AFS-taxable
$
2,686,765
$
2,339,662
$
2,098,089
$
1,902,162
$
1,857,050
$
2,376,995
$
1,734,380
Securities AFS-nontaxable
5,159
5,174
5,190
5,206
5,973
5,174
12,594
Securities HTM-taxable
401,685
441,688
489,260
550,563
608,585
443,890
652,642
Securities HTM-nontaxable
8,641
10,958
24,070
24,752
25,508
14,500
25,573
Total securities
3,102,250
2,797,482
2,616,609
2,482,683
2,497,116
2,840,559
2,425,189
PPP loans
122,176
648,222
598,139
875,098
941,456
454,436
569,985
Loans (includes loans held for sale)
10,389,826
10,315,927
10,316,319
10,231,671
10,162,379
10,340,960
9,917,127
Fed funds sold and reverse repurchases
69
55
136
303
301
86
193
Other earning assets
2,038,515
1,750,385
1,667,906
860,540
722,917
1,820,293
588,787
Total earning assets
15,652,836
15,512,071
15,199,109
14,450,295
14,324,169
15,456,334
13,501,281
ACL LHFI
(104,857
)
(112,346
)
(119,557
)
(124,088
)
(121,842
)
(112,199
)
(103,355
)
Other assets
1,602,611
1,622,388
1,601,250
1,620,694
1,564,825
1,608,754
1,582,888
Total assets
$
17,150,590
$
17,022,113
$
16,680,802
$
15,946,901
$
15,767,152
$
16,952,889
$
14,980,814
Interest-bearing demand deposits
$
4,224,717
$
4,056,910
$
3,743,651
$
3,649,590
$
3,669,249
$
4,010,188
$
3,562,310
Savings deposits
4,617,683
4,627,180
4,659,037
4,350,783
4,416,046
4,634,482
4,082,396
Time deposits
1,258,829
1,301,896
1,371,830
1,436,677
1,507,348
1,310,438
1,567,577
Total interest-bearing deposits
10,101,229
9,985,986
9,774,518
9,437,050
9,592,643
9,955,108
9,212,283
Fed funds purchased and repurchases
147,635
174,620
166,909
170,474
84,077
162,984
145,537
Other borrowings
109,735
132,199
166,926
173,525
167,262
136,077
120,197
Subordinated notes
122,951
122,897
122,875
42,828
—
122,908
—
Junior subordinated debt securities
61,856
61,856
61,856
61,856
61,856
61,856
61,856
Total interest-bearing liabilities
10,543,406
10,477,558
10,293,084
9,885,733
9,905,838
10,438,933
9,539,873
Noninterest-bearing deposits
4,566,924
4,512,268
4,363,559
4,100,849
3,921,867
4,481,662
3,494,425
Other liabilities
257,956
251,582
264,808
235,284
244,544
258,090
279,517
Total liabilities
15,368,286
15,241,408
14,921,451
14,221,866
14,072,249
15,178,685
13,313,815
Shareholders' equity
1,782,304
1,780,705
1,759,351
1,725,035
1,694,903
1,774,204
1,666,999
Total liabilities and equity
$
17,150,590
$
17,022,113
$
16,680,802
$
15,946,901
$
15,767,152
$
16,952,889
$
14,980,814
See Notes to Consolidated Financials TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands) (unaudited) PERIOD END BALANCES 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Cash and due from banks
$
2,175,058
$
2,267,224
$
1,774,541
$
1,952,504
$
564,588
Fed funds sold and reverse repurchases
—
—
—
50
50
Securities available for sale
3,057,605
2,548,739
2,337,676
1,991,815
1,922,728
Securities held to maturity
394,905
433,012
493,738
538,072
611,280
PPP loans
46,486
166,119
679,725
610,134
944,270
LHFS
335,339
332,132
412,999
446,951
485,103
LHFI
10,174,899
10,152,869
9,983,704
9,824,524
9,847,728
ACL LHFI
(104,073
)
(104,032
)
(109,191
)
(117,306
)
(122,010
)
Net LHFI
10,070,826
10,048,837
9,874,513
9,707,218
9,725,718
Premises and equipment, net
201,937
200,970
199,098
194,278
192,722
Mortgage servicing rights
84,101
80,764
83,035
66,464
61,613
Goodwill
384,237
384,237
384,237
385,270
385,270
Identifiable intangible assets
5,621
6,170
6,724
7,390
8,142
Other real estate
6,213
9,439
10,651
11,651
16,248
Operating lease right-of-use assets
34,689
33,201
33,704
30,901
30,508
Other assets
567,627
587,288
587,672
609,142
609,922
Total assets
$
17,364,644
$
17,098,132
$
16,878,313
$
16,551,840
$
15,558,162
Deposits: Noninterest-bearing
$
4,987,885
$
4,446,991
$
4,705,991
$
4,349,010
$
3,964,023
Interest-bearing
9,934,954
10,185,093
9,677,449
9,699,754
9,258,390
Total deposits
14,922,839
14,632,084
14,383,440
14,048,764
13,222,413
Fed funds purchased and repurchases
146,417
157,176
160,991
164,519
153,834
Other borrowings
94,889
117,223
145,994
168,252
178,599
Subordinated notes
122,987
122,932
122,877
122,921
—
Junior subordinated debt securities
61,856
61,856
61,856
61,856
61,856
ACL on off-balance sheet credit exposures
32,684
33,733
29,205
38,572
39,659
Operating lease liabilities
36,531
34,959
35,389
32,290
31,838
Other liabilities
177,494
158,860
178,856
173,549
159,922
Total liabilities
15,595,697
15,318,823
15,118,608
14,810,723
13,848,121
Common stock
13,014
13,079
13,209
13,215
13,215
Capital surplus
201,837
210,420
229,892
233,120
231,836
Retained earnings
1,573,176
1,566,451
1,533,110
1,495,833
1,459,306
Accumulated other comprehensive income (loss), net of tax
(19,080
)
(10,641
)
(16,506
)
(1,051
)
5,684
Total shareholders' equity
1,768,947
1,779,309
1,759,705
1,741,117
1,710,041
Total liabilities and equity
$
17,364,644
$
17,098,132
$
16,878,313
$
16,551,840
$
15,558,162
See Notes to Consolidated Financials TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands except per share data) (unaudited) Quarter Ended Nine Months Ended INCOME STATEMENTS 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 9/30/2021 9/30/2020 Interest and fees on LHFS & LHFI-FTE
$
94,101
$
93,698
$
93,394
$
96,453
$
97,429
$
281,193
$
306,086
Interest and fees on PPP loans
1,533
25,555
9,241
14,870
6,729
36,329
11,773
Interest on securities-taxable
9,973
8,991
8,938
9,998
12,542
27,902
38,252
Interest on securities-tax exempt-FTE
132
149
290
293
301
571
1,073
Interest on fed funds sold and reverse repurchases
—
—
—
—
1
—
1
Other interest income
949
489
503
249
331
1,941
1,310
Total interest income-FTE
106,688
128,882
112,366
121,863
117,333
347,936
358,495
Interest on deposits
3,691
4,630
5,223
6,363
7,437
13,544
31,124
Interest on fed funds purchased and repurchases
51
59
56
56
32
166
699
Other interest expense
1,733
1,813
1,857
1,127
688
5,403
2,429
Total interest expense
5,475
6,502
7,136
7,546
8,157
19,113
34,252
Net interest income-FTE
101,213
122,380
105,230
114,317
109,176
328,823
324,243
Provision for credit losses, LHFI
(2,492
)
(3,991
)
(10,501
)
(4,413
)
1,760
(16,984
)
40,526
Provision for credit losses, off-balance sheet credit exposures (1)
(1,049
)
4,528
(9,367
)
(1,087
)
(3,004
)
(5,888
)
10,021
Net interest income after provision-FTE
104,754
121,843
125,098
119,817
110,420
351,695
273,696
Service charges on deposit accounts
8,911
7,613
7,356
8,283
7,577
23,880
24,006
Bank card and other fees
8,549
8,301
9,472
9,107
8,843
26,322
21,915
Mortgage banking, net
14,004
17,333
20,804
28,155
36,439
52,141
97,667
Insurance commissions
12,133
12,217
12,445
10,196
11,562
36,795
34,980
Wealth management
9,071
8,946
8,416
7,838
7,679
26,433
23,787
Other, net
1,481
2,001
2,090
2,538
1,601
5,572
6,121
Total noninterest income
54,149
56,411
60,583
66,117
73,701
171,143
208,476
Salaries and employee benefits
74,623
70,115
71,162
69,660
67,342
215,900
202,597
Services and fees
22,306
21,769
22,484
22,327
20,992
66,559
61,489
Net occupancy-premises
6,854
6,578
6,795
6,616
7,000
20,227
19,873
Equipment expense
5,941
5,567
6,244
6,213
5,828
17,752
17,064
Other real estate expense, net
1,357
1,511
324
(812
)
1,203
3,192
2,768
Other expense
18,519
13,139
14,539
15,890
14,598
46,197
42,616
Total noninterest expense
129,600
118,679
121,548
119,894
116,963
369,827
346,407
Income before income taxes and tax eq adj
29,303
59,575
64,133
66,040
67,158
153,011
135,765
Tax equivalent adjustment
2,947
2,957
2,894
2,939
2,969
8,798
9,084
Income before income taxes
26,356
56,618
61,239
63,101
64,189
144,213
126,681
Income taxes
5,156
8,637
9,277
11,884
9,749
23,070
17,873
Net income$
21,200
$
47,981
$
51,962
$
51,217
$
54,440
$
121,143
$
108,808
Per share data Earnings per share - basic$
0.34
$
0.76
$
0.82
$
0.81
$
0.86
$
1.92
$
1.71
Earnings per share - diluted$
0.34
$
0.76
$
0.82
$
0.81
$
0.86
$
1.92
$
1.71
Dividends per share$
0.23
$
0.23
$
0.23
$
0.23
$
0.23
$
0.69
$
0.69
Weighted average shares outstanding Basic
62,521,684
63,214,593
63,395,911
63,424,219
63,422,692
63,040,860
63,531,478
Diluted
62,730,157
63,409,683
63,562,503
63,616,767
63,581,964
63,219,987
63,665,127
Period end shares outstanding
62,461,832
62,773,226
63,394,522
63,424,526
63,423,820
62,461,832
63,423,820
(1) During the second quarter of 2021, Trustmark reclassified its credit loss expense related to off-balance sheet credit exposures from noninterest expense to provision for credit losses, off-balance sheet credit exposures. Prior periods have been reclassified accordingly.See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 ($ in thousands) (unaudited) Quarter Ended NONPERFORMING ASSETS (1) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Nonaccrual LHFI Alabama$
9,223
$
8,952
$
9,161
$
9,221
$
3,860
Florida
381
467
607
572
617
Mississippi (2)
22,898
23,422
35,534
35,015
35,617
Tennessee (3)
10,356
10,751
12,451
12,572
13,041
Texas
23,382
7,856
5,761
5,748
721
Total nonaccrual LHFI
66,240
51,448
63,514
63,128
53,856
Other real estate Alabama
613
2,830
3,085
3,271
3,725
Florida
—
—
—
—
3,665
Mississippi (2)
5,600
6,550
7,566
8,330
8,718
Tennessee (3)
—
59
—
50
140
Texas
—
—
—
—
—
Total other real estate
6,213
9,439
10,651
11,651
16,248
Total nonperforming assets
$
72,453
$
60,887
$
74,165
$
74,779
$
70,104
LOANS PAST DUE OVER 90 DAYS (1) LHFI
$
625
$
423
$
2,593
$
1,576
$
782
LHFS-Guaranteed GNMA serviced loans (no obligation to repurchase)
$
75,091
$
81,538
$
109,566
$
119,409
$
121,281
Quarter Ended Nine Months Ended ACL LHFI (1) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 9/30/2021 9/30/2020 Beginning Balance
$
104,032
$
109,191
$
117,306
$
122,010
$
119,188
$
117,306
$
84,277
CECL adoption adjustments: LHFI
—
—
—
—
—
—
(3,039
)
Acquired loan transfers
—
—
—
—
—
—
1,822
Provision for credit losses, LHFI
(2,492
)
(3,991
)
(10,501
)
(4,413
)
1,760
(16,984
)
40,526
Charge-offs
(1,586
)
(4,828
)
(1,245
)
(2,797
)
(1,263
)
(7,659
)
(8,678
)
Recoveries
4,119
3,660
3,631
2,506
2,325
11,410
7,102
Net (charge-offs) recoveries
2,533
(1,168
)
2,386
(291
)
1,062
3,751
(1,576
)
Ending Balance$
104,073
$
104,032
$
109,191
$
117,306
$
122,010
$
104,073
$
122,010
NET (CHARGE-OFFS) RECOVERIES (1) Alabama
$
247
$
203
$
102
$
(1,011
)
$
117
$
552
$
(437
)
Florida
356
167
30
66
387
553
324
Mississippi (2)
1,436
(3,071
)
2,207
332
442
572
482
Tennessee (3)
(8
)
1,031
47
303
42
1,070
(2,078
)
Texas
502
502
—
19
74
1,004
133
Total net (charge-offs) recoveries
$
2,533
$
(1,168
)
$
2,386
$
(291
)
$
1,062
$
3,751
$
(1,576
)
(1) Excludes PPP loans. (2) Mississippi includes Central and Southern Mississippi Regions. (3) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2021 (unaudited) Quarter Ended Nine Months Ended FINANCIAL RATIOS AND OTHER DATA 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 9/30/2021 9/30/2020 Return on average equity
4.72
%
10.81
%
11.98
%
11.81
%
12.78
%
9.13
%
8.72
%
Return on average tangible equity
6.16
%
13.96
%
15.56
%
15.47
%
16.82
%
11.84
%
11.57
%
Return on average assets
0.49
%
1.13
%
1.26
%
1.28
%
1.37
%
0.96
%
0.97
%
Interest margin - Yield - FTE
2.70
%
3.33
%
3.00
%
3.35
%
3.26
%
3.01
%
3.55
%
Interest margin - Cost
0.14
%
0.17
%
0.19
%
0.21
%
0.23
%
0.17
%
0.34
%
Net interest margin - FTE
2.57
%
3.16
%
2.81
%
3.15
%
3.03
%
2.84
%
3.21
%
Efficiency ratio (1)
74.10
%
64.31
%
71.84
%
65.59
%
62.19
%
69.85
%
62.59
%
Full-time equivalent employees
2,680
2,772
2,793
2,797
2,807
CREDIT QUALITY RATIOS (2) Net (recoveries) charge-offs / average loans
-0.10
%
0.05
%
-0.09
%
0.01
%
-0.04
%
-0.05
%
0.02
%
Provision for credit losses, LHFI / average loans
-0.10
%
-0.16
%
-0.41
%
-0.17
%
0.07
%
-0.22
%
0.55
%
Nonaccrual LHFI / (LHFI + LHFS)
0.63
%
0.49
%
0.61
%
0.61
%
0.52
%
Nonperforming assets / (LHFI + LHFS)
0.69
%
0.58
%
0.71
%
0.73
%
0.68
%
Nonperforming assets / (LHFI + LHFS + other real estate)
0.69
%
0.58
%
0.71
%
0.73
%
0.68
%
ACL LHFI / LHFI
1.02
%
1.02
%
1.09
%
1.19
%
1.24
%
ACL LHFI-commercial / commercial LHFI
1.05
%
1.04
%
1.13
%
1.20
%
1.20
%
ACL LHFI-consumer / consumer and home mortgage LHFI
0.91
%
0.98
%
0.95
%
1.16
%
1.41
%
ACL LHFI / nonaccrual LHFI
157.11
%
202.21
%
171.92
%
185.82
%
226.55
%
ACL LHFI / nonaccrual LHFI (excl individually evaluated loans)
520.77
%
537.35
%
437.08
%
572.69
%
593.72
%
CAPITAL RATIOS Total equity / total assets
10.19
%
10.41
%
10.43
%
10.52
%
10.99
%
Tangible equity / tangible assets
8.12
%
8.31
%
8.30
%
8.34
%
8.68
%
Tangible equity / risk-weighted assets
11.19
%
11.33
%
11.23
%
11.22
%
11.01
%
Tier 1 leverage ratio
8.92
%
9.00
%
9.11
%
9.33
%
9.20
%
Common equity tier 1 capital ratio
11.68
%
11.76
%
11.71
%
11.62
%
11.36
%
Tier 1 risk-based capital ratio
12.17
%
12.25
%
12.20
%
12.11
%
11.86
%
Total risk-based capital ratio
14.01
%
14.10
%
14.07
%
14.12
%
12.88
%
STOCK PERFORMANCE Market value-Close$
32.22
$
30.80
$
33.66
$
27.31
$
21.41
Book value
$
28.32
$
28.35
$
27.76
$
27.45
$
26.96
Tangible book value
$
22.08
$
22.13
$
21.59
$
21.26
$
20.76
(1) See Note 10 – Non-GAAP Financial Measures in the Notes to Consolidated Financials for Trustmark’s efficiency ratio calculation. (2) Excludes PPP loans.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands) (unaudited)
Note 1 – Regulatory Matters
On October 22, 2021, Trustmark Corporation’s subsidiary, Trustmark National Bank (“TNB”), issued a press release announcing that it entered into a consent order with the Office of the Comptroller of the Currency (“OCC”) and a separate consent order jointly with the U.S. Department of Justice (“DOJ”) and the Consumer Financial Protection Bureau (“CFPB”), to resolve allegations that TNB previously violated the Fair Housing Act (the “FHA”), the Equal Credit Opportunity Act (the “ECOA”) and the Consumer Financial Protection Act within the Memphis metropolitan statistical area (the “Memphis MSA”).
Under the DOJ and CFPB’s joint consent order, TNB will pay a civil money penalty totaling $5.0 million, of which $4.0 million will satisfy the OCC’s civil money penalty as set forth in the OCC’s consent order; the remaining $1.0 million will be paid to the CFPB. The joint consent order also requires TNB, among other things, to implement a mutually agreed-upon Fair Lending Plan, invest $3.85 million over five years in a loan subsidy fund to increase credit opportunities to residents of majority-Black and Hispanic neighborhoods, and devote a minimum of $400 thousand over five years toward community development partnership contributions and $200 thousand per year over five years toward advertising, community outreach, and credit repair and education in TNB’s Memphis lending area (defined in the consent order as consisting of Shelby County and Fayette County in Tennessee and DeSoto County in Mississippi). TNB will also open one new mortgage loan production office to serve the credit needs of residents in a majority-Black and Hispanic neighborhood in TNB’s Memphis lending area. In addition, TNB will continue to maintain its full-time Community Lending Manager position and its full-time Community Development Manager position, which are both focused on the Memphis MSA.
The joint consent order must be approved by the United States District Court for the Western District of Tennessee.
Note 2 - Paycheck Protection Program
On June 30, 2021, Trustmark announced the sale of substantially all PPP loans originated in 2021 by its wholly owned subsidiary, TNB, to The Loan Source, Inc. (Loan Source), a firm with significant expertise in PPP loans. As a result of this transaction, Loan Source will assume responsibility for the servicing and forgiveness process for the loans it has acquired from Trustmark. This transaction will allow Trustmark to focus on more traditional lending efforts and increase its ability to provide customers with financial services in an improving economic environment.
Trustmark accelerated the recognition of unamortized PPP loan origination fees, net of cost, of approximately $18.6 million, in the second quarter of 2021 due to the sale of approximately $354.2 million in PPP loans. This revenue is substantially the same as Trustmark would expect to recognize upon the maturity or forgiveness of the PPP loans being sold in this transaction, and thus this transaction serves to accelerate revenue anticipated in future periods into the second quarter.
At September 30, 2021, Trustmark had PPP loans outstanding that totaled $46.5 million (net of $798 thousand of deferred fees and costs) under the CARES Act. Due to the amount and nature of the PPP loans, these loans were not included in the LHFI portfolio and are presented separately in the accompanying consolidated balance sheets. The PPP loans are fully guaranteed by the Small Business Administration; therefore, no ACL was estimated for these loans.
Note 3 - 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:
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities
$
278,615
$
30,025
$
—
$
—
$
—
U.S. Government agency obligations
14,979
16,023
17,349
18,041
19,011
Obligations of states and political subdivisions
5,734
5,807
5,798
5,835
8,315
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA
43,860
48,445
52,406
56,862
62,156
Issued by FNMA and FHLMC
2,187,412
1,983,783
1,749,144
1,441,321
1,279,919
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
236,885
283,988
345,869
419,437
500,858
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
290,120
180,668
167,110
50,319
52,469
Total securities available for sale
$
3,057,605
$
2,548,739
$
2,337,676
$
1,991,815
$
1,922,728
SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions
$
10,683
$
12,994
$
26,554
$
26,584
$
31,605
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA
5,912
6,249
7,268
7,598
8,244
Issued by FNMA and FHLMC
48,554
53,406
61,855
67,944
78,213
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
264,638
291,477
324,360
360,361
399,400
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
65,118
68,886
73,701
75,585
93,818
Total securities held to maturity
$
394,905
$
433,012
$
493,738
$
538,072
$
611,280
At September 30, 2021, the net unamortized, unrealized loss included in accumulated other comprehensive income (loss) in the accompanying balance sheet for securities held to maturity previously transferred from securities available for sale totaled approximately $6.8 million ($5.1 million, net of tax).
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands) (unaudited)
Note 3 - Securities Available for Sale and Held to Maturity (continued)
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 98.5% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.
Note 4 – Loan Composition
LHFI consisted of the following during the periods presented:
LHFI BY TYPE
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
Loans secured by real estate:
Construction, land development and other land loans
$
1,286,613
$
1,360,302
$
1,342,088
$
1,309,039
$
1,385,947
Secured by 1-4 family residential properties
1,891,292
1,810,396
1,742,782
1,741,132
1,775,400
Secured by nonfarm, nonresidential properties
2,924,953
2,819,662
2,799,195
2,709,026
2,707,627
Other real estate secured
986,163
1,078,622
1,135,005
1,065,964
887,792
Commercial and industrial loans
1,327,211
1,326,605
1,323,277
1,309,078
1,398,468
Consumer loans
157,963
153,519
153,267
161,174
160,960
State and other political subdivision loans
1,125,186
1,136,764
1,036,694
1,000,776
935,349
Other loans
475,518
466,999
451,396
528,335
596,185
LHFI
10,174,899
10,152,869
9,983,704
9,824,524
9,847,728
ACL LHFI
(104,073
)
(104,032
)
(109,191
)
(117,306
)
(122,010
)
Net LHFI
$
10,070,826
$
10,048,837
$
9,874,513
$
9,707,218
$
9,725,718
The following table presents the LHFI composition by region at September 30, 2021 and reflects each region’s diversified mix of loans:
September 30, 2021
LHFI - COMPOSITION BY REGION
Total
Alabama
Florida
Mississippi (Central and Southern Regions)
Tennessee (Memphis, TN and Northern MS Regions)
Texas
Loans secured by real estate:
Construction, land development and other land loans
$
1,286,613
$
554,207
$
45,335
$
374,064
$
38,583
$
274,424
Secured by 1-4 family residential properties
1,891,292
109,986
39,699
1,659,289
68,123
14,195
Secured by nonfarm, nonresidential properties
2,924,953
834,328
259,997
1,089,333
174,338
566,957
Other real estate secured
986,163
221,832
6,154
303,760
19,850
434,567
Commercial and industrial loans
1,327,211
230,698
23,678
597,197
276,876
198,762
Consumer loans
157,963
22,125
8,403
101,034
19,398
7,003
State and other political subdivision loans
1,125,186
101,679
54,619
734,853
37,408
196,627
Other loans
475,518
74,703
11,903
289,739
69,725
29,448
Loans
$
10,174,899
$
2,149,558
$
449,788
$
5,149,269
$
704,301
$
1,721,983
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION
Lots
$
60,804
$
27,014
$
8,676
$
17,782
$
905
$
6,427
Development
124,213
48,692
612
46,452
13,016
15,441
Unimproved land
93,283
28,095
12,146
28,601
11,187
13,254
1-4 family construction
281,504
147,073
19,485
70,508
12,528
31,910
Other construction
726,809
303,333
4,416
210,721
947
207,392
Construction, land development and other land loans
$
1,286,613
$
554,207
$
45,335
$
374,064
$
38,583
$
274,424
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands) (unaudited)
Note 4 – Loan Composition (continued)
September 30, 2021
Total
Alabama
Florida
Mississippi (Central and Southern Regions)
Tennessee (Memphis, TN and Northern MS Regions)
Texas
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION
Non-owner occupied:
Retail
$
384,940
$
155,375
$
32,778
$
105,444
$
18,285
$
73,058
Office
215,297
52,628
23,835
67,094
11,714
60,026
Hotel/motel
347,023
176,352
76,664
47,229
32,638
14,140
Mini-storage
130,853
22,757
2,227
76,790
632
28,447
Industrial
246,576
57,901
20,755
62,071
137
105,712
Health care
59,676
39,225
1,140
16,755
370
2,186
Convenience stores
23,047
8,010
683
3,627
1,194
9,533
Nursing homes/senior living
204,678
106,572
—
71,672
6,434
20,000
Other
76,742
16,021
7,388
31,370
10,939
11,024
Total non-owner occupied loans
1,688,832
634,841
165,470
482,052
82,343
324,126
Owner-occupied:
Office
167,713
37,485
42,334
49,810
9,794
28,290
Churches
96,810
19,892
6,089
48,537
9,352
12,940
Industrial warehouses
178,394
11,807
2,989
50,594
18,686
94,318
Health care
143,180
12,033
6,915
107,190
2,296
14,746
Convenience stores
141,490
16,155
13,945
68,325
489
42,576
Retail
75,640
13,214
13,577
20,040
12,035
16,774
Restaurants
56,892
3,750
4,545
31,612
13,585
3,400
Auto dealerships
56,403
6,358
261
25,240
24,544
—
Nursing homes/senior living
211,190
73,078
—
138,112
—
—
Other
108,409
5,715
3,872
67,821
1,214
29,787
Total owner-occupied loans
1,236,121
199,487
94,527
607,281
91,995
242,831
Loans secured by nonfarm, nonresidential properties
$
2,924,953
$
834,328
$
259,997
$
1,089,333
$
174,338
$
566,957
Note 5 – Subordinated Notes
During the fourth quarter of 2020, Trustmark agreed to issue and sell $125.0 million aggregate principal amount of its 3.625% Fixed-to-Floating Rate Subordinated Notes (the Notes) due December 1, 2030. At September 30, 2021, the carrying amount of the Notes was $123.0 million. The Notes are unsecured obligations and are subordinated in right of payment to all of Trustmark’s existing and future senior indebtedness, whether secured or unsecured. The Notes are obligations of Trustmark only and are not obligations of, and are not guaranteed by, any of its subsidiaries, including TNB. From the date of issuance until November 30, 2025, the Notes bear interest at a fixed rate of 3.625% per year, payable semi-annually in arrears on June 1 and December 1 of each year. Beginning December 1, 2025, the Notes will bear interest at a floating rate per year equal to the Benchmark rate, which is the Three-Month Term Secured Overnight Financing Rate (SOFR), plus 338.7 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year. The Notes qualify as Tier 2 capital for Trustmark. The Notes may be redeemed at Trustmark’s option under certain circumstances. Trustmark intends to use the net proceeds for general corporate purposes.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands) (unaudited)
Note 6 – 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
Nine Months Ended
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
9/30/2021
9/30/2020
Securities – taxable
1.28
%
1.30
%
1.40
%
1.62
%
2.02
%
1.32
%
2.14
%
Securities – nontaxable
3.79
%
3.70
%
4.02
%
3.89
%
3.80
%
3.88
%
3.76
%
Securities – total
1.29
%
1.31
%
1.43
%
1.65
%
2.05
%
1.34
%
2.17
%
PPP loans
4.98
%
15.81
%
6.27
%
6.76
%
2.84
%
10.69
%
2.76
%
Loans - LHFI & LHFS
3.59
%
3.64
%
3.67
%
3.75
%
3.81
%
3.64
%
4.12
%
Loans - total
3.61
%
4.36
%
3.81
%
3.99
%
3.73
%
3.93
%
4.05
%
Fed funds sold & reverse repurchases
—
—
—
—
1.32
%
—
0.69
%
Other earning assets
0.18
%
0.11
%
0.12
%
0.12
%
0.18
%
0.14
%
0.30
%
Total earning assets
2.70
%
3.33
%
3.00
%
3.35
%
3.26
%
3.01
%
3.55
%
Interest-bearing deposits
0.14
%
0.19
%
0.22
%
0.27
%
0.31
%
0.18
%
0.45
%
Fed funds purchased & repurchases
0.14
%
0.14
%
0.14
%
0.13
%
0.15
%
0.14
%
0.64
%
Other borrowings
2.33
%
2.29
%
2.14
%
1.61
%
1.19
%
2.25
%
1.78
%
Total interest-bearing liabilities
0.21
%
0.25
%
0.28
%
0.30
%
0.33
%
0.24
%
0.48
%
Net interest margin
2.57
%
3.16
%
2.81
%
3.15
%
3.03
%
2.84
%
3.21
%
Net interest margin excluding PPP loans and the FRB balance
2.90
%
2.94
%
2.99
%
3.09
%
3.20
%
2.94
%
3.36
%
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 PPP loans and the balance held at the Federal Reserve Bank of Atlanta (FRB), which equals reported net interest income-FTE excluding interest income on PPP loans and the FRB balance, annualized, as a percent of average earning assets excluding average PPP loans and the FRB balance.
At September 30, 2021 and June 30, 2021, the average FRB balance totaled $1.996 billion and $1.700 billion, respectively, and is included in other earning assets in the accompanying average consolidated balance sheets.
The net interest margin excluding PPP loans and the FRB balance totaled 2.90% for the third quarter of 2021, a decrease of 4 basis points when compared to the second quarter of 2021. Continued low interest rates decreased the yield on the loans held for investment and held for sale portfolio as well as the securities portfolio and were partially offset by lower costs of interest-bearing deposits.
Note 7 – 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 $144 thousand during the third quarter of 2021.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands) (unaudited)
Note 7 – Mortgage Banking (continued)
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
Quarter Ended
Nine Months Ended
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
9/30/2021
9/30/2020
Mortgage servicing income, net
$
6,406
$
6,318
$
6,181
$
6,227
$
5,742
$
18,905
$
17,454
Change in fair value-MSR from runoff
(5,283
)
(5,029
)
(5,103
)
(5,177
)
(4,590
)
(15,415
)
(11,411
)
Gain on sales of loans, net
12,737
14,778
19,456
28,014
34,472
46,971
82,889
Mortgage banking income before hedge ineffectiveness
13,860
16,067
20,534
29,064
35,624
50,461
88,932
Change in fair value-MSR from market changes
1,806
(4,465
)
13,696
951
60
11,037
(27,098
)
Change in fair value of derivatives
(1,662
)
5,731
(13,426
)
(1,860
)
755
(9,357
)
35,833
Net positive (negative) hedge ineffectiveness
144
1,266
270
(909
)
815
1,680
8,735
Mortgage banking, net
$
14,004
$
17,333
$
20,804
$
28,155
$
36,439
$
52,141
$
97,667
Note 8 – Salaries and Employee Benefit Plans
Early Retirement Program
In June 2021, Trustmark announced a voluntary early retirement program. In general, associates who were eligible to participate had to be at least 60 years of age with five or more years of continuous service. The cost of this program is reflected in a one-time charge of approximately $5.7 million (salaries and benefits of $5.6 million and other miscellaneous expense of $89 thousand; or $0.07 per diluted share net of tax) in Trustmark’s third quarter of 2021 earnings. The salary and employee benefits expense savings resulting from the implementation of the early retirement program are expected to total approximately $1.3 million ($0.02 per diluted share net of tax) and $4.3 million ($0.05 per diluted share net of tax) for the remainder of 2021 and for the year ended 2022, respectively.
Note 9 – Other Noninterest Income and Expense
Other noninterest income consisted of the following for the periods presented:
Quarter Ended
Nine Months Ended
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
9/30/2021
9/30/2020
Partnership amortization for tax credit purposes
$
(2,045
)
$
(1,989
)
$
(1,522
)
$
(1,877
)
$
(1,457
)
$
(5,556
)
$
(3,823
)
Increase in life insurance cash surrender value
1,663
1,653
1,639
1,708
1,755
4,955
5,173
Other miscellaneous income
1,863
2,337
1,973
2,707
1,303
6,173
4,771
Total other, net
$
1,481
$
2,001
$
2,090
$
2,538
$
1,601
$
5,572
$
6,121
Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low-income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.
Other noninterest expense consisted of the following for the periods presented:
Quarter Ended
Nine Months Ended
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
9/30/2021
9/30/2020
Loan expense
$
4,022
$
3,738
$
4,167
$
4,243
$
4,184
$
11,927
$
10,934
Amortization of intangibles
549
553
666
752
752
1,768
2,300
FDIC assessment expense
1,275
1,225
1,540
1,500
1,410
4,040
4,590
Regulatory settlement charge
5,000
—
—
—
—
5,000
—
Other miscellaneous expense
7,673
7,623
8,166
9,395
8,252
23,462
24,792
Total other expense
$
18,519
$
13,139
$
14,539
$
15,890
$
14,598
$
46,197
$
42,616
During the third quarter of 2021, other expense included a charge of $5.0 million to resolve allegations by regulatory authorities regarding fair lending matters. See Note 1 – Regulatory Matters for further details.
Note 10 – Non-GAAP Financial Measures
In addition to capital ratios defined by U.S. generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.
Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other tangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.
These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands except per share data) (unaudited)
Note 10 – Non-GAAP Financial Measures (continued)
Quarter Ended
Nine Months Ended
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
9/30/2021
9/30/2020
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity
$
1,782,304
$
1,780,705
$
1,759,351
$
1,725,035
$
1,694,903
$
1,774,204
$
1,666,999
Less: Goodwill
(384,237
)
(384,237
)
(385,155
)
(385,270
)
(385,270
)
(384,540
)
(383,016
)
Identifiable intangible assets
(5,899
)
(6,442
)
(7,118
)
(7,803
)
(8,550
)
(6,482
)
(8,146
)
Total average tangible equity
$
1,392,168
$
1,390,026
$
1,367,078
$
1,331,962
$
1,301,083
$
1,383,182
$
1,275,837
PERIOD END BALANCES
Total shareholders' equity
$
1,768,947
$
1,779,309
$
1,759,705
$
1,741,117
$
1,710,041
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(385,270
)
(385,270
)
Identifiable intangible assets
(5,621
)
(6,170
)
(6,724
)
(7,390
)
(8,142
)
Total tangible equity
(a)
$
1,379,089
$
1,388,902
$
1,368,744
$
1,348,457
$
1,316,629
TANGIBLE ASSETS
Total assets
$
17,364,644
$
17,098,132
$
16,878,313
$
16,551,840
$
15,558,162
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(385,270
)
(385,270
)
Identifiable intangible assets
(5,621
)
(6,170
)
(6,724
)
(7,390
)
(8,142
)
Total tangible assets
(b)
$
16,974,786
$
16,707,725
$
16,487,352
$
16,159,180
$
15,164,750
Risk-weighted assets
(c)
$
12,324,254
$
12,256,492
$
12,188,988
$
12,017,378
$
11,963,269
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income
$
21,200
$
47,981
$
51,962
$
51,217
$
54,440
$
121,143
$
108,808
Plus: Intangible amortization net of tax
412
415
500
564
564
1,327
1,725
Net income adjusted for intangible amortization
$
21,612
$
48,396
$
52,462
$
51,781
$
55,004
$
122,470
$
110,533
Period end common shares outstanding
(d)
62,461,832
62,773,226
63,394,522
63,424,526
63,423,820
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)
6.16
%
13.96
%
15.56
%
15.47
%
16.82
%
11.84
%
11.57
%
Tangible equity/tangible assets
(a)/(b)
8.12
%
8.31
%
8.30
%
8.34
%
8.68
%
Tangible equity/risk-weighted assets
(a)/(c)
11.19
%
11.33
%
11.23
%
11.22
%
11.01
%
Tangible book value
(a)/(d)*1,000
$
22.08
$
22.13
$
21.59
$
21.26
$
20.76
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity
$
1,768,947
$
1,779,309
$
1,759,705
$
1,741,117
$
1,710,041
CECL transition adjustment
26,419
26,671
26,829
31,199
32,647
AOCI-related adjustments
19,080
10,641
16,506
1,051
(5,684
)
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)
(370,264
)
(370,276
)
(370,288
)
(371,333
)
(371,345
)
Other adjustments and deductions for CET1 (2)
(4,817
)
(5,243
)
(5,675
)
(6,190
)
(6,770
)
CET1 capital
(e)
1,439,365
1,441,102
1,427,077
1,395,844
1,358,889
Additional tier 1 capital instruments plus related surplus
60,000
60,000
60,000
60,000
60,000
Tier 1 capital
$
1,499,365
$
1,501,102
$
1,487,077
$
1,455,844
$
1,418,889
Common equity tier 1 capital ratio
(e)/(c)
11.68
%
11.76
%
11.71
%
11.62
%
11.36
%
(1)
Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity.
(2)
Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAs), threshold deductions and transition adjustments, as applicable.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands except per share data) unaudited)
Note 10 – Non-GAAP Financial Measures (continued)
Trustmark discloses certain non-GAAP financial measures because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views these as measures of our core operating business, which exclude the impact of the items detailed below, as these items are generally not operational in nature. These non-GAAP financial measures also provide another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.
The following table presents pre-provision net revenue (PPNR) during the periods presented:
Quarter Ended
Nine Months Ended
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
9/30/2021
9/30/2020
Net interest income (GAAP)
$
98,266
$
119,423
$
102,336
$
111,378
$
106,207
$
320,025
$
315,159
Noninterest income (GAAP)
54,149
56,411
60,583
66,117
73,701
171,143
208,476
Pre-provision revenue
(a)
$
152,415
$
175,834
$
162,919
$
177,495
$
179,908
$
491,168
$
523,635
Noninterest expense (GAAP)
$
129,600
$
118,679
$
121,548
$
119,894
$
116,963
$
369,827
$
346,407
Less: Voluntary early retirement program
(5,700
)
—
—
—
—
(5,700
)
(4,375
)
Regulatory settlement charge
(5,000
)
—
—
—
—
(5,000
)
—
Adjusted noninterest expense - PPNR (Non-GAAP)
(b)
$
118,900
$
118,679
$
121,548
$
119,894
$
116,963
$
359,127
$
342,032
PPNR (Non-GAAP)
(a)-(b)
$
33,515
$
57,155
$
41,371
$
57,601
$
62,945
$
132,041
$
181,603
The following table presents adjustments to net income and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented:
Quarter Ended
Nine Months Ended
9/30/2021
9/30/2020
9/30/2021
9/30/2020
Amount
Diluted EPS
Amount
Diluted EPS
Amount
Diluted EPS
Amount
Diluted EPS
Net income (GAAP)
$
21,200
$
0.34
$
54,440
$
0.86
$
121,143
$
1.92
$
108,808
$
1.71
Significant non-routine transactions (net of taxes):
Voluntary early retirement program
4,275
0.07
—
—
4,275
0.07
3,281
0.05
Regulatory settlement charge (not tax deductible)
5,000
0.08
—
—
5,000
0.08
—
—
Net income adjusted for significant non-routine
transactions (Non-GAAP)
$
30,475
$
0.49
$
54,440
$
0.86
$
130,418
$
2.07
$
112,089
$
1.76
Reported (GAAP)
Adjusted (Non GAAP)
Reported (GAAP)
Adjusted (Non GAAP)
Reported (GAAP)
Adjusted (Non GAAP)
Reported (GAAP)
Adjusted (Non GAAP)
Return on average equity
4.72
%
6.77
%
12.78
%
n/a
9.13
%
9.82
%
8.72
%
8.97
%
Return on average tangible equity
6.16
%
8.77
%
16.82
%
n/a
11.84
%
12.72
%
11.57
%
11.89
%
Return on average assets
0.49
%
0.71
%
1.37
%
n/a
0.96
%
1.03
%
0.97
%
1.00
%
n/a - not applicable
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2021 ($ in thousands except per share data) unaudited)
Note 10 – Non-GAAP Financial Measures (continued)
The following table presents Trustmark’s calculation of its efficiency ratio for the periods presented:
Quarter Ended
Nine Months Ended
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
9/30/2021
9/30/2020
Total noninterest expense (GAAP)
$
129,600
$
118,679
$
121,548
$
119,894
$
116,963
369,827
$
346,407
Less: Other real estate expense, net
(1,357
)
(1,511
)
(324
)
812
(1,203
)
(3,192
)
(2,768
)
Amortization of intangibles
(549
)
(553
)
(666
)
(752
)
(752
)
(1,768
)
(2,300
)
Charitable contributions resulting in state tax credits
(350
)
(355
)
(350
)
(375
)
(375
)
(1,055
)
(1,125
)
Voluntary early retirement program
(5,700
)
—
—
—
—
(5,700
)
(4,375
)
Regulatory settlement charge
(5,000
)
—
—
—
—
(5,000
)
—
Adjusted noninterest expense (Non-GAAP)
(c)
$
116,644
$
116,260
$
120,208
$
119,579
$
114,633
$
353,112
$
335,839
Net interest income (GAAP)
$
98,266
$
119,423
$
102,336
$
111,378
$
106,207
$
320,025
$
315,159
Add: Tax equivalent adjustment
2,947
2,957
2,894
2,939
2,969
8,798
9,084
Net interest income-FTE (Non-GAAP)
(a)
$
101,213
$
122,380
$
105,230
$
114,317
$
109,176
$
328,823
$
324,243
Noninterest income (GAAP)
$
54,149
$
56,411
$
60,583
$
66,117
$
73,701
$
171,143
$
208,476
Add: Partnership amortization for tax credit purposes
2,045
1,989
1,522
1,877
1,457
5,556
3,823
Adjusted noninterest income (Non-GAAP)
(b)
$
56,194
$
58,400
$
62,105
$
67,994
$
75,158
$
176,699
$
212,299
Adjusted revenue (Non-GAAP)
(a)+(b)
$
157,407
$
180,780
$
167,335
$
182,311
$
184,334
$
505,522
$
536,542
Efficiency ratio (Non-GAAP)
(c)/((a)+(b))
74.10
%
64.31
%
71.84
%
65.59
%
62.19
%
69.85
%
62.59
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20211026006141/en/
Trustmark Investor Contacts: Thomas C. Owens Treasurer and Principal Financial Officer 601-208-7853
F. Joseph Rein, Jr. Senior Vice President 601-208-6898
Trustmark Media Contact: Melanie A. Morgan Senior Vice President 601-208-2979
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