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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 | -0.14% | 29.54 | 29.01 | 30.21 | 29.94 | 29.23 | 29.85 | 298,727 | 00:01:34 |
Performance Reflects Continued Loan and Deposit Growth, Solid Credit Quality, and Diversified Fee Income
Trustmark Corporation (NASDAQGS: TRMK) reported net income of $34.0 million in the third quarter of 2023, representing diluted earnings per share of $0.56. As previously disclosed, Trustmark recognized a litigation settlement expense of $6.5 million in the third quarter, which reduced net income by $4.9 million, or $0.08 per diluted share. Excluding this expense, Trustmark’s third quarter net income totaled $38.9 million, or $0.64 per diluted share. Please refer to the Consolidated Financial Information, Note 1 – Litigation Settlement and Note 7 – Non-GAAP Financial Measures. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2023, to shareholders of record on December 1, 2023.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20231024731289/en/
Printer friendly version of earnings release with consolidated financial statements and notes: https://www.businesswire.com/news/home/53667141/en
Third Quarter Highlights
Duane A. Dewey, President and CEO, stated, “Trustmark’s financial performance during the third quarter reflected continued loan and deposit growth, stable net interest income, strong performance in our insurance business, and solid credit quality. During the first nine months of 2023, Trustmark’s net income totaled $129.4 million, which represented diluted earnings per share of $2.11, an increase of 22.7% from the same period in 2022. We continue to implement significant cost savings initiatives to improve efficiency as well as technology to enhance our ability to grow and serve customers. Trustmark is well-positioned to respond to changing economic conditions and create long-term value for our shareholders.”
Balance Sheet Management
Loans HFI totaled $12.8 billion at September 30, 2023, reflecting an increase of $196.3 million, or 1.6%, linked-quarter and $1.2 billion, or 10.6%, year-over-year. The linked quarter growth primarily reflected increases in other real estate secured loans and nonfarm, nonresidential properties offset in part by declines in construction, land development and other land loans, state and other political subdivision loans, and commercial and industrial loans. Trustmark’s loan portfolio remains well-diversified by loan type and geography.
Deposits totaled $15.1 billion at September 30, 2023, up $188.0 million, or 1.3%, from the prior quarter and $676.7 million, or 4.7%, year-over-year. Trustmark continues to maintain a strong liquidity position as loans HFI represented 84.8% of total deposits at September 30, 2023. Migration into higher-yielding products continued to drive a change in deposit mix from noninterest-bearing deposits, which represented 22.0% of total deposits at September 30, 2023. Interest-bearing deposit costs totaled 2.39% in the third quarter, while the total cost of deposits was 1.84%. The total cost of interest-bearing liabilities was 2.72% in the third quarter of 2023.
As previously announced, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2023, under which $50.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2023. As of September 30, 2023, Trustmark had not repurchased any of its outstanding common shares under this program. Trustmark’s regulatory capital ratios continued to exceed all levels to be considered “well-capitalized” as of September 30, 2023. Trustmark’s tangible equity-to-tangible assets ratio was 6.57% while its total risk-based capital ratio was 12.11% at September 30, 2023.
Credit Quality
Nonaccrual loans totaled $90.9 million at September 30, 2023, up $15.9 million from the prior quarter and $23.0 million year-over-year. Other real estate totaled $5.5 million, reflecting increases of $4.3 million from the prior quarter and $2.5 million year-over-year. Collectively, nonperforming assets totaled $96.4 million at September 30, 2023, reflecting a linked-quarter increase of $20.2 million and a year-over-year increase of $25.5 million.
During the third quarter, a fully-reserved nonaccrual loan transitioned to other real estate. This credit represented substantially all the net charge-offs experienced during the quarter and was also responsible for the increase in other real estate.
The provision for credit losses for loans HFI was $8.3 million in the third quarter and was primarily attributable to a single new individually evaluated nonaccrual loan for which specific reserves were established, a weakening macroeconomic forecast, loan growth, and net adjustments to the qualitative factors. The provision for credit losses for off-balance sheet credit exposures was $104 thousand in the third quarter. Collectively, the provision for credit losses totaled $8.4 million in the third quarter compared to $8.5 million in the prior quarter and $11.6 million in the third quarter of 2022.
Allocation of Trustmark’s $134.0 million ACL on loans HFI represented 0.86% of commercial loans and 1.66% of consumer and home mortgage loans, resulting in an allowance to total loans HFI of 1.05% at September 30, 2023. Management believes the level of the ACL is commensurate with the credit losses currently expected in the loan portfolio.
Revenue Generation
Net interest income (FTE) in the third quarter totaled $141.9 million, resulting in a net interest margin of 3.29%, down 4 basis points from the prior quarter. The decrease in the net interest margin was due to increased costs of interest-bearing deposits which were partially offset by increased yields on the loans HFI and HFS portfolio and securities portfolio.
Noninterest income in the third quarter totaled $52.2 million, a decrease of $1.3 million from the prior quarter and $382 thousand year-over-year. The linked-quarter decline was attributable to lower other income net, bank card and other fees, mortgage banking revenue, and wealth management revenue, which were offset in part by increased insurance commissions and service charges on deposit accounts.
Mortgage loan production in the third quarter totaled $389.9 million, down 9.6% from the prior quarter and 23.3% year-over-year. Mortgage banking revenue totaled $6.5 million in the third quarter, a decrease of $142 thousand from the prior quarter and $418 thousand year-over-year. The linked-quarter decrease was principally attributable to accelerated amortization of mortgage servicing rights offset in part by reduced net negative hedge ineffectiveness.
Insurance commissions totaled $15.3 million in the third quarter, up $539 thousand, or 3.7%, linked-quarter and $1.4 million, or 10.0%, year-over-year due principally to increased property and casualty and group health commissions. Wealth management revenue totaled $8.8 million in the third quarter, a decrease of $109 thousand, or 1.2%, from the prior quarter and unchanged year-over-year. The linked-quarter change reflected growth in investment services, which was more than offset by lower trust management revenue. Service charges on deposit accounts increased $379 thousand, or 3.5%, from the prior quarter and declined $244 thousand, or 2.2%, year-over-year. Bank card and other fees decreased $700 thousand from the prior quarter and $1.1 million year-over-year. The linked-quarter change was attributable to seasonal factors while the year-over-year change was due to reduced customer derivative revenue.
Noninterest Expense
Salaries and employee benefits increased $726 thousand, or 1.0%, linked-quarter due primarily to increased salary expense. Services and fees decreased $382 thousand, or 1.4%, linked-quarter due to reduced professional fees. Net occupancy-premises expense increased $275 thousand, or 3.9%, linked-quarter due in part to seasonal increases in utilities and increased rental expense. Equipment expense increased $412 thousand, or 6.4%, linked-quarter. Other expense increased $1.2 million, or 8.2%, linked-quarter, principally due to increased FDIC assessment expense.
FIT2GROW
“In 2022, we announced FIT2GROW, a comprehensive program of Focus, Innovation and Transformation designed to enhance our ability to grow and serve customers. Our Atlanta-based Equipment Finance division, established in late 2022, continues to gain traction as its portfolio has grown to $191 million as of September 30, 2023. Implementation of our technology plans for conversion of our deposit/teller/customer information system continued during the quarter. In addition, work continued on the design of our sales through service process, which will be implemented across the retail branch network in early 2024. These actions, along with cost savings initiatives, are designed to enhance Trustmark’s performance and build long-term value for our shareholders,” said Dewey.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 25, 2023, 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 8, 2023, in archived format at the same web address or by calling (877) 344-7529, passcode 4921731.
Trustmark is a financial services company providing banking and financial solutions through offices in Alabama, Florida, Georgia, 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.
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, actions by the Board of Governors of the Federal Reserve System (FRB) that impact the level of market interest rates, 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 impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions, 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, 2023 ($ in thousands) (unaudited) Linked Quarter Year over Year QUARTERLY AVERAGE BALANCES 9/30/2023 6/30/2023 9/30/2022 $ Change % Change $ Change % Change Securities AFS-taxable (1)$
2,049,006
$
2,140,505
$
2,824,254
$
(91,499
)
-4.3
%
$
(775,248
)
-27.4
%
Securities AFS-nontaxable
4,779
4,796
4,928
(17
)
-0.4
%
(149
)
-3.0
%
Securities HTM-taxable (1)
1,445,895
1,463,086
1,140,685
(17,191
)
-1.2
%
305,210
26.8
%
Securities HTM-nontaxable
907
1,718
5,057
(811
)
-47.2
%
(4,150
)
-82.1
%
Total securities
3,500,587
3,610,105
3,974,924
(109,518
)
-3.0
%
(474,337
)
-11.9
%
Paycheck protection program loans (PPP)
—
—
9,821
—
n/m
(9,821
)
-100.0
%
Loans (includes loans held for sale)
12,926,942
12,732,057
11,459,551
194,885
1.5
%
1,467,391
12.8
%
Fed funds sold and reverse repurchases
230
3,275
226
(3,045
)
-93.0
%
4
1.8
%
Other earning assets
682,644
903,027
325,620
(220,383
)
-24.4
%
357,024
n/m
Total earning assets
17,110,403
17,248,464
15,770,142
(138,061
)
-0.8
%
1,340,261
8.5
%
Allowance for credit losses (ACL), loans held for investment (LHFI)
(127,915
)
(121,960
)
(102,951
)
(5,955
)
-4.9
%
(24,964
)
-24.2
%
Other assets
1,721,310
1,648,583
1,576,653
72,727
4.4
%
144,657
9.2
%
Total assets$
18,703,798
$
18,775,087
$
17,243,844
$
(71,289
)
-0.4
%
$
1,459,954
8.5
%
Interest-bearing demand deposits$
4,875,714
$
4,803,737
$
4,613,733
$
71,977
1.5
%
$
261,981
5.7
%
Savings deposits
3,642,158
4,002,134
4,514,579
(359,976
)
-9.0
%
(872,421
)
-19.3
%
Time deposits
3,075,224
2,335,752
1,111,440
739,472
31.7
%
1,963,784
n/m
Total interest-bearing deposits
11,593,096
11,141,623
10,239,752
451,473
4.1
%
1,353,344
13.2
%
Fed funds purchased and repurchases
414,696
389,834
249,809
24,862
6.4
%
164,887
66.0
%
Other borrowings
912,151
1,330,010
88,697
(417,859
)
-31.4
%
823,454
n/m
Subordinated notes
123,391
123,337
123,171
54
0.0
%
220
0.2
%
Junior subordinated debt securities
61,856
61,856
61,856
—
0.0
%
—
0.0
%
Total interest-bearing liabilities
13,105,190
13,046,660
10,763,285
58,530
0.4
%
2,341,905
21.8
%
Noninterest-bearing deposits
3,429,815
3,595,927
4,444,370
(166,112
)
-4.6
%
(1,014,555
)
-22.8
%
Other liabilities
585,908
552,209
429,720
33,699
6.1
%
156,188
36.3
%
Total liabilities
17,120,913
17,194,796
15,637,375
(73,883
)
-0.4
%
1,483,538
9.5
%
Shareholders' equity
1,582,885
1,580,291
1,606,469
2,594
0.2
%
(23,584
)
-1.5
%
Total liabilities and equity$
18,703,798
$
18,775,087
$
17,243,844
$
(71,289
)
-0.4
%
$
1,459,954
8.5
%
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information. n/m - percentage changes greater than +/- 100% are considered not meaningfulSee Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2023 ($ in thousands) (unaudited) Linked Quarter Year over Year PERIOD END BALANCES 9/30/2023 6/30/2023 9/30/2022 $ Change % Change $ Change % Change Cash and due from banks$
750,492
$
832,052
$
479,637
$
(81,560
)
-9.8
%
$
270,855
56.5
%
Fed funds sold and reverse repurchases
—
—
10,098
—
n/m
(10,098
)
-100.0
%
Securities available for sale (1)
1,766,174
1,871,883
2,444,486
(105,709
)
-5.6
%
(678,312
)
-27.7
%
Securities held to maturity (1)
1,438,287
1,458,665
1,156,985
(20,378
)
-1.4
%
281,302
24.3
%
PPP loans
—
—
4,798
—
n/m
(4,798
)
-100.0
%
Loans held for sale (LHFS)
169,244
181,094
165,213
(11,850
)
-6.5
%
4,031
2.4
%
Loans held for investment (LHFI)
12,810,259
12,613,967
11,586,064
196,292
1.6
%
1,224,195
10.6
%
ACL LHFI
(134,031
)
(129,298
)
(115,050
)
(4,733
)
-3.7
%
(18,981
)
-16.5
%
Net LHFI
12,676,228
12,484,669
11,471,014
191,559
1.5
%
1,205,214
10.5
%
Premises and equipment, net
230,718
227,630
210,761
3,088
1.4
%
19,957
9.5
%
Mortgage servicing rights
142,379
134,350
132,615
8,029
6.0
%
9,764
7.4
%
Goodwill
384,237
384,237
384,237
—
0.0
%
—
0.0
%
Identifiable intangible assets
3,093
3,222
3,952
(129
)
-4.0
%
(859
)
-21.7
%
Other real estate
5,485
1,137
2,971
4,348
n/m
2,514
84.6
%
Operating lease right-of-use assets
39,639
38,179
37,282
1,460
3.8
%
2,357
6.3
%
Other assets
784,863
805,508
686,585
(20,645
)
-2.6
%
98,278
14.3
%
Total assets$
18,390,839
$
18,422,626
$
17,190,634
$
(31,787
)
-0.2
%
$
1,200,205
7.0
%
Deposits: Noninterest-bearing$
3,320,124
$
3,461,073
$
4,358,805
$
(140,949
)
-4.1
%
$
(1,038,681
)
-23.8
%
Interest-bearing
11,781,799
11,452,827
10,066,375
328,972
2.9
%
1,715,424
17.0
%
Total deposits
15,101,923
14,913,900
14,425,180
188,023
1.3
%
676,743
4.7
%
Fed funds purchased and repurchases
321,799
311,179
544,068
10,620
3.4
%
(222,269
)
-40.9
%
Other borrowings
793,193
1,056,714
223,172
(263,521
)
-24.9
%
570,021
n/m
Subordinated notes
123,427
123,372
123,207
55
0.0
%
220
0.2
%
Junior subordinated debt securities
61,856
61,856
61,856
—
0.0
%
—
0.0
%
ACL on off-balance sheet credit exposures
34,945
34,841
31,623
104
0.3
%
3,322
10.5
%
Operating lease liabilities
42,730
40,845
39,797
1,885
4.6
%
2,933
7.4
%
Other liabilities
340,615
308,726
232,786
31,889
10.3
%
107,829
46.3
%
Total liabilities
16,820,488
16,851,433
15,681,689
(30,945
)
-0.2
%
1,138,799
7.3
%
Common stock
12,724
12,724
12,700
—
0.0
%
24
0.2
%
Capital surplus
158,316
156,834
154,150
1,482
0.9
%
4,166
2.7
%
Retained earnings
1,687,199
1,667,339
1,648,507
19,860
1.2
%
38,692
2.3
%
Accumulated other comprehensive income (loss), net of tax
(287,888
)
(265,704
)
(306,412
)
(22,184
)
-8.3
%
18,524
6.0
%
Total shareholders' equity
1,570,351
1,571,193
1,508,945
(842
)
-0.1
%
61,406
4.1
%
Total liabilities and equity$
18,390,839
$
18,422,626
$
17,190,634
$
(31,787
)
-0.2
%
$
1,200,205
7.0
%
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information. n/m - percentage changes greater than +/- 100% are considered not meaningfulSee Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2023 ($ in thousands except per share data) (unaudited) Quarter Ended Linked Quarter Year over Year INCOME STATEMENTS 9/30/2023 6/30/2023 9/30/2022 $ Change % Change $ Change % Change Interest and fees on LHFS & LHFI-FTE$
206,523
$
192,941
$
129,395
$
13,582
7.0
%
$
77,128
59.6
%
Interest and fees on PPP loans
—
—
186
—
n/m
(186
)
-100.0
%
Interest on securities-taxable
16,624
16,779
16,222
(155
)
-0.9
%
402
2.5
%
Interest on securities-tax exempt-FTE
58
69
100
(11
)
-15.9
%
(42
)
-42.0
%
Interest on fed funds sold and reverse repurchases
3
45
2
(42
)
-93.3
%
1
50.0
%
Other interest income
8,613
12,077
1,493
(3,464
)
-28.7
%
7,120
n/m
Total interest income-FTE
231,821
221,911
147,398
9,910
4.5
%
84,423
57.3
%
Interest on deposits
69,797
54,409
5,097
15,388
28.3
%
64,700
n/m
Interest on fed funds purchased and repurchases
5,375
4,865
1,225
510
10.5
%
4,150
n/m
Other interest expense
14,713
19,350
1,996
(4,637
)
-24.0
%
12,717
n/m
Total interest expense
89,885
78,624
8,318
11,261
14.3
%
81,567
n/m
Net interest income-FTE
141,936
143,287
139,080
(1,351
)
-0.9
%
2,856
2.1
%
Provision for credit losses, LHFI
8,322
8,211
12,919
111
1.4
%
(4,597
)
-35.6
%
Provision for credit losses, off-balance sheet credit exposures
104
245
(1,326
)
(141
)
-57.6
%
1,430
n/m
Net interest income after provision-FTE
133,510
134,831
127,487
(1,321
)
-1.0
%
6,023
4.7
%
Service charges on deposit accounts
11,074
10,695
11,318
379
3.5
%
(244
)
-2.2
%
Bank card and other fees
8,217
8,917
9,305
(700
)
-7.9
%
(1,088
)
-11.7
%
Mortgage banking, net
6,458
6,600
6,876
(142
)
-2.2
%
(418
)
-6.1
%
Insurance commissions
15,303
14,764
13,911
539
3.7
%
1,392
10.0
%
Wealth management
8,773
8,882
8,778
(109
)
-1.2
%
(5
)
-0.1
%
Other, net
2,399
3,695
2,418
(1,296
)
-35.1
%
(19
)
-0.8
%
Total noninterest income
52,224
53,553
52,606
(1,329
)
-2.5
%
(382
)
-0.7
%
Salaries and employee benefits
76,666
75,940
72,707
726
1.0
%
3,959
5.4
%
Services and fees (2)
27,882
28,264
26,787
(382
)
-1.4
%
1,095
4.1
%
Net occupancy-premises
7,383
7,108
7,395
275
3.9
%
(12
)
-0.2
%
Equipment expense
6,816
6,404
6,072
412
6.4
%
744
12.3
%
Litigation settlement expense (1)
6,500
—
—
6,500
n/m
6,500
n/m
Other expense (2)
15,698
14,502
13,737
1,196
8.2
%
1,961
14.3
%
Total noninterest expense
140,945
132,218
126,698
8,727
6.6
%
14,247
11.2
%
Income (loss) before income taxes and tax eq adj
44,789
56,166
53,395
(11,377
)
-20.3
%
(8,606
)
-16.1
%
Tax equivalent adjustment
3,299
3,383
2,975
(84
)
-2.5
%
324
10.9
%
Income (loss) before income taxes
41,490
52,783
50,420
(11,293
)
-21.4
%
(8,930
)
-17.7
%
Income taxes
7,461
7,746
7,965
(285
)
-3.7
%
(504
)
-6.3
%
Net income (loss)$
34,029
$
45,037
$
42,455
$
(11,008
)
-24.4
%
$
(8,426
)
-19.8
%
Per share data Earnings (loss) per share - basic$
0.56
$
0.74
$
0.69
$
(0.18
)
-24.3
%
$
(0.13
)
-18.8
%
Earnings (loss) per share - diluted$
0.56
$
0.74
$
0.69
$
(0.18
)
-24.3
%
$
(0.13
)
-18.8
%
Dividends per share$
0.23
$
0.23
$
0.23
—
0.0
%
—
0.0
%
Weighted average shares outstanding Basic
61,069,750
61,063,277
61,114,804
Diluted
61,263,032
61,230,031
61,318,715
Period end shares outstanding
61,070,095
61,069,036
60,953,864
(1) See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information.
(2) During the first quarter of 2023, Trustmark reclassified its debit card transaction fees from other expense to services and fees. Prior periods have been reclassified accordingly.
n/m - percentage changes greater than +/- 100% are considered not meaningfulSee Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2023 ($ in thousands) (unaudited) Quarter Ended Linked Quarter Year over Year NONPERFORMING ASSETS (1) 9/30/2023 6/30/2023 9/30/2022 $ Change % Change $ Change % Change Nonaccrual LHFI Alabama (2)$
23,530
$
11,058
$
12,710
$
12,472
n/m
$
10,820
85.1
%
Florida
151
334
227
(183
)
-54.8
%
(76
)
-33.5
%
Mississippi (3)
45,050
36,288
23,517
8,762
24.1
%
21,533
91.6
%
Tennessee (4)
1,841
5,088
5,120
(3,247
)
-63.8
%
(3,279
)
-64.0
%
Texas
20,327
22,259
26,353
(1,932
)
-8.7
%
(6,026
)
-22.9
%
Total nonaccrual LHFI
90,899
75,027
67,927
15,872
21.2
%
22,972
33.8
%
Other real estate Alabama (2)
315
—
217
315
n/m
98
45.2
%
Mississippi (3)
942
1,137
2,754
(195
)
-17.2
%
(1,812
)
-65.8
%
Texas
4,228
—
—
4,228
n/m
4,228
n/m
Total other real estate
5,485
1,137
2,971
4,348
n/m
2,514
84.6
%
Total nonperforming assets$
96,384
$
76,164
$
70,898
$
20,220
26.5
%
$
25,486
35.9
%
LOANS PAST DUE OVER 90 DAYS (1) LHFI$
3,804
$
3,911
$
1,842
$
(107
)
-2.7
%
$
1,962
n/m
LHFS-Guaranteed GNMA serviced loans (no obligation to repurchase)
$
42,532
$
35,766
$
48,313
$
6,766
18.9
%
$
(5,781
)
-12.0
%
Quarter Ended Linked Quarter Year over Year ACL LHFI (1) 9/30/2023 6/30/2023 9/30/2022 $ Change % Change $ Change % Change Beginning Balance$
129,298
$
122,239
$
103,140
$
7,059
5.8
%
$
26,158
25.4
%
Provision for credit losses, LHFI
8,322
8,211
12,919
111
1.4
%
(4,597
)
-35.6
%
Charge-offs
(7,496
)
(2,773
)
(2,920
)
(4,723
)
n/m
(4,576
)
n/m
Recoveries
3,907
1,621
1,911
2,286
n/m
1,996
n/m
Net (charge-offs) recoveries
(3,589
)
(1,152
)
(1,009
)
(2,437
)
n/m
(2,580
)
n/m
Ending Balance
$
134,031
$
129,298
$
115,050
$
4,733
3.7
%
$
18,981
16.5
%
NET (CHARGE-OFFS) RECOVERIES (1) Alabama (2)$
(165
)
$
(141
)
$
93
$
(24
)
-17.0
%
$
(258
)
n/m
Florida
21
(35
)
(23
)
56
n/m
44
n/m
Mississippi (3)
(1,867
)
(762
)
(702
)
(1,105
)
n/m
(1,165
)
n/m
Tennessee (4)
2,127
(166
)
(202
)
2,293
n/m
2,329
n/m
Texas
(3,705
)
(48
)
(175
)
(3,657
)
n/m
(3,530
)
n/m
Total net (charge-offs) recoveries
$
(3,589
)
$
(1,152
)
$
(1,009
)
$
(2,437
)
n/m
$
(2,580
)
n/m
(1) Excludes PPP loans. (2) Alabama includes the Georgia Loan Production Office. (3) Mississippi includes Central and Southern Mississippi Regions. (4) 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, 2023 ($ in thousands) (unaudited) Quarter Ended Nine Months Ended AVERAGE BALANCES 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022 Securities AFS-taxable (1)$
2,049,006
$
2,140,505
$
2,187,121
$
2,572,675
$
2,824,254
$
2,125,038
$
3,053,164
Securities AFS-nontaxable
4,779
4,796
4,812
4,828
4,928
4,796
5,054
Securities HTM-taxable (1)
1,445,895
1,463,086
1,479,283
1,268,952
1,140,685
1,462,632
790,385
Securities HTM-nontaxable
907
1,718
4,509
4,514
5,057
2,365
5,996
Total securities
3,500,587
3,610,105
3,675,725
3,850,969
3,974,924
3,594,831
3,854,599
PPP loans
—
—
—
3,235
9,821
—
18,788
Loans (includes loans held for sale)
12,926,942
12,732,057
12,530,449
12,006,661
11,459,551
12,731,268
10,976,809
Fed funds sold and reverse repurchases
230
3,275
2,379
6,566
226
1,953
131
Other earning assets
682,644
903,027
647,760
375,190
325,620
747,627
1,086,771
Total earning assets
17,110,403
17,248,464
16,856,313
16,242,621
15,770,142
17,075,679
15,937,098
ACL LHFI
(127,915
)
(121,960
)
(119,978
)
(114,948
)
(102,951
)
(123,313
)
(100,495
)
Other assets
1,721,310
1,648,583
1,762,449
1,630,085
1,576,653
1,707,608
1,546,972
Total assets
$
18,703,798
$
18,775,087
$
18,498,784
$
17,757,758
$
17,243,844
$
18,659,974
$
17,383,575
Interest-bearing demand deposits
$
4,875,714
$
4,803,737
$
4,751,154
$
4,719,303
$
4,613,733
$
4,810,658
$
4,541,018
Savings deposits
3,642,158
4,002,134
4,193,764
4,379,673
4,514,579
3,943,998
4,647,164
Time deposits
3,075,224
2,335,752
1,907,449
1,152,905
1,111,440
2,443,753
1,154,346
Total interest-bearing deposits
11,593,096
11,141,623
10,852,367
10,251,881
10,239,752
11,198,409
10,342,528
Fed funds purchased and repurchases
414,696
389,834
436,535
549,406
249,809
413,608
193,661
Other borrowings
912,151
1,330,010
1,110,843
530,993
88,697
1,116,940
86,681
Subordinated notes
123,391
123,337
123,281
123,226
123,171
123,337
123,116
Junior subordinated debt securities
61,856
61,856
61,856
61,856
61,856
61,856
61,856
Total interest-bearing liabilities
13,105,190
13,046,660
12,584,882
11,517,362
10,763,285
12,914,150
10,807,842
Noninterest-bearing deposits
3,429,815
3,595,927
3,813,248
4,177,113
4,444,370
3,611,592
4,544,698
Other liabilities
585,908
552,209
576,826
569,992
429,720
571,681
388,585
Total liabilities
17,120,913
17,194,796
16,974,956
16,264,467
15,637,375
17,097,423
15,741,125
Shareholders' equity
1,582,885
1,580,291
1,523,828
1,493,291
1,606,469
1,562,551
1,642,450
Total liabilities and equity
$
18,703,798
$
18,775,087
$
18,498,784
$
17,757,758
$
17,243,844
$
18,659,974
$
17,383,575
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2023 ($ in thousands) (unaudited) PERIOD END BALANCES 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Cash and due from banks$
750,492
$
832,052
$
1,297,144
$
734,787
$
479,637
Fed funds sold and reverse repurchases
—
—
—
4,000
10,098
Securities available for sale (1)
1,766,174
1,871,883
1,984,162
2,024,082
2,444,486
Securities held to maturity (1)
1,438,287
1,458,665
1,474,338
1,494,514
1,156,985
PPP loans
—
—
—
—
4,798
LHFS
169,244
181,094
175,926
135,226
165,213
LHFI
12,810,259
12,613,967
12,497,195
12,204,039
11,586,064
ACL LHFI
(134,031
)
(129,298
)
(122,239
)
(120,214
)
(115,050
)
Net LHFI
12,676,228
12,484,669
12,374,956
12,083,825
11,471,014
Premises and equipment, net
230,718
227,630
223,975
212,365
210,761
Mortgage servicing rights
142,379
134,350
127,206
129,677
132,615
Goodwill
384,237
384,237
384,237
384,237
384,237
Identifiable intangible assets
3,093
3,222
3,352
3,640
3,952
Other real estate
5,485
1,137
1,684
1,986
2,971
Operating lease right-of-use assets
39,639
38,179
35,315
36,301
37,282
Other assets
784,863
805,508
794,883
770,838
686,585
Total assets
$
18,390,839
$
18,422,626
$
18,877,178
$
18,015,478
$
17,190,634
Deposits: Noninterest-bearing
$
3,320,124
$
3,461,073
$
3,797,055
$
4,093,771
$
4,358,805
Interest-bearing
11,781,799
11,452,827
10,986,606
10,343,877
10,066,375
Total deposits
15,101,923
14,913,900
14,783,661
14,437,648
14,425,180
Fed funds purchased and repurchases
321,799
311,179
477,980
449,331
544,068
Other borrowings
793,193
1,056,714
1,485,181
1,050,938
223,172
Subordinated notes
123,427
123,372
123,317
123,262
123,207
Junior subordinated debt securities
61,856
61,856
61,856
61,856
61,856
ACL on off-balance sheet credit exposures
34,945
34,841
34,596
36,838
31,623
Operating lease liabilities
42,730
40,845
37,988
38,932
39,797
Other liabilities
340,615
308,726
310,500
324,405
232,786
Total liabilities
16,820,488
16,851,433
17,315,079
16,523,210
15,681,689
Common stock
12,724
12,724
12,720
12,705
12,700
Capital surplus
158,316
156,834
155,297
154,645
154,150
Retained earnings
1,687,199
1,667,339
1,636,463
1,600,321
1,648,507
Accumulated other comprehensive income (loss), net of tax
(287,888
)
(265,704
)
(242,381
)
(275,403
)
(306,412
)
Total shareholders' equity
1,570,351
1,571,193
1,562,099
1,492,268
1,508,945
Total liabilities and equity
$
18,390,839
$
18,422,626
$
18,877,178
$
18,015,478
$
17,190,634
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2023 ($ in thousands except per share data) (unaudited) Quarter Ended Nine Months Ended INCOME STATEMENTS 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022 Interest and fees on LHFS & LHFI-FTE$
206,523
$
192,941
$
178,967
$
159,566
$
129,395
$
578,431
$
325,680
Interest and fees on PPP loans
—
—
—
101
186
—
538
Interest on securities-taxable
16,624
16,779
16,761
16,577
16,222
50,164
43,140
Interest on securities-tax exempt-FTE
58
69
92
93
100
219
329
Interest on fed funds sold and reverse repurchases
3
45
30
71
2
78
3
Other interest income
8,613
12,077
6,527
3,556
1,493
27,217
4,524
Total interest income-FTE
231,821
221,911
202,377
179,964
147,398
656,109
374,214
Interest on deposits
69,797
54,409
40,898
18,438
5,097
165,104
10,631
Interest on fed funds purchased and repurchases
5,375
4,865
4,832
4,762
1,225
15,072
1,365
Other interest expense
14,713
19,350
15,575
6,730
1,996
49,638
5,199
Total interest expense
89,885
78,624
61,305
29,930
8,318
229,814
17,195
Net interest income-FTE
141,936
143,287
141,072
150,034
139,080
426,295
357,019
Provision for credit losses, LHFI
8,322
8,211
3,244
6,902
12,919
19,777
14,775
Provision for credit losses, off-balance sheet credit exposures
104
245
(2,242
)
5,215
(1,326
)
(1,893
)
(4,000
)
Net interest income after provision-FTE
133,510
134,831
140,070
137,917
127,487
408,411
346,244
Service charges on deposit accounts
11,074
10,695
10,336
11,162
11,318
32,105
30,995
Bank card and other fees
8,217
8,917
7,803
8,191
9,305
24,937
27,914
Mortgage banking, net
6,458
6,600
7,639
3,408
6,876
20,697
24,898
Insurance commissions
15,303
14,764
14,305
12,019
13,911
44,372
41,702
Wealth management
8,773
8,882
8,780
8,079
8,778
26,435
26,934
Other, net
2,399
3,695
2,514
2,311
2,418
8,608
7,531
Total noninterest income
52,224
53,553
51,377
45,170
52,606
157,154
159,974
Salaries and employee benefits
76,666
75,940
74,056
73,469
72,707
226,662
213,971
Services and fees (2)
27,882
28,264
25,426
27,709
26,787
81,572
77,760
Net occupancy-premises
7,383
7,108
7,629
7,898
7,395
22,120
21,366
Equipment expense
6,816
6,404
6,405
6,268
6,072
19,625
18,180
Litigation settlement expense (1)
6,500
—
—
100,750
—
6,500
—
Other expense (2)
15,698
14,502
14,811
15,135
13,737
45,011
40,707
Total noninterest expense
140,945
132,218
128,327
231,229
126,698
401,490
371,984
Income (loss) before income taxes and tax eq adj
44,789
56,166
63,120
(48,142
)
53,395
164,075
134,234
Tax equivalent adjustment
3,299
3,383
3,477
3,451
2,975
10,159
8,894
Income (loss) before income taxes
41,490
52,783
59,643
(51,593
)
50,420
153,916
125,340
Income taxes
7,461
7,746
9,343
(17,530
)
7,965
24,550
19,390
Net income (loss)
$
34,029
$
45,037
$
50,300
$
(34,063
)
$
42,455
$
129,366
$
105,950
Per share data Earnings (loss) per share - basic
$
0.56
$
0.74
$
0.82
$
(0.56
)
$
0.69
$
2.12
$
1.73
Earnings (loss) per share - diluted
$
0.56
$
0.74
$
0.82
$
(0.56
)
$
0.69
$
2.11
$
1.72
Dividends per share
$
0.23
$
0.23
$
0.23
$
0.23
$
0.23
$
0.69
$
0.69
Weighted average shares outstanding Basic
61,069,750
61,063,277
61,011,059
60,969,400
61,114,804
61,048,244
61,334,344
Diluted
61,263,032
61,230,031
61,193,275
61,173,249
61,318,715
61,219,022
61,519,685
Period end shares outstanding
61,070,095
61,069,036
61,048,516
60,977,686
60,953,864
61,070,095
60,953,864
(1) See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information. (2) During the first quarter of 2023, Trustmark reclassified its debit card transaction fees from other expense to services and fees. Prior periods have been reclassified accordingly.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2023 ($ in thousands) (unaudited) Quarter Ended NONPERFORMING ASSETS (1) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Nonaccrual LHFI Alabama (2)$
23,530
$
11,058
$
10,919
$
12,300
$
12,710
Florida
151
334
256
227
227
Mississippi (3)
45,050
36,288
32,560
24,683
23,517
Tennessee (4)
1,841
5,088
5,416
5,566
5,120
Texas
20,327
22,259
23,224
23,196
26,353
Total nonaccrual LHFI
90,899
75,027
72,375
65,972
67,927
Other real estate Alabama (2)
315
—
—
194
217
Mississippi (3)
942
1,137
1,495
1,769
2,754
Tennessee (4)
—
—
189
23
—
Texas
4,228
—
—
—
—
Total other real estate
5,485
1,137
1,684
1,986
2,971
Total nonperforming assets
$
96,384
$
76,164
$
74,059
$
67,958
$
70,898
LOANS PAST DUE OVER 90 DAYS (1) LHFI
$
3,804
$
3,911
$
2,255
$
3,929
$
1,842
LHFS-Guaranteed GNMA serviced loans (no obligation to repurchase)
$
42,532
$
35,766
$
41,468
$
49,320
$
48,313
Quarter Ended Nine Months Ended ACL LHFI (1) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022 Beginning Balance
$
129,298
$
122,239
$
120,214
$
115,050
$
103,140
$
120,214
$
99,457
Provision for credit losses, LHFI
8,322
8,211
3,244
6,902
12,919
19,777
14,775
Charge-offs
(7,496
)
(2,773
)
(2,996
)
(3,893
)
(2,920
)
(13,265
)
(7,439
)
Recoveries
3,907
1,621
1,777
2,155
1,911
7,305
8,257
Net (charge-offs) recoveries
(3,589
)
(1,152
)
(1,219
)
(1,738
)
(1,009
)
(5,960
)
818
Ending Balance
$
134,031
$
129,298
$
122,239
$
120,214
$
115,050
$
134,031
$
115,050
NET (CHARGE-OFFS) RECOVERIES (1) Alabama (2)
$
(165
)
$
(141
)
$
(268
)
$
98
$
93
$
(574
)
$
1,921
Florida
21
(35
)
(36
)
(60
)
(23
)
(50
)
712
Mississippi (3)
(1,867
)
(762
)
(775
)
(1,657
)
(702
)
(3,404
)
(1,056
)
Tennessee (4)
2,127
(166
)
(124
)
(195
)
(202
)
1,837
(595
)
Texas
(3,705
)
(48
)
(16
)
76
(175
)
(3,769
)
(164
)
Total net (charge-offs) recoveries$
(3,589
)
$
(1,152
)
$
(1,219
)
$
(1,738
)
$
(1,009
)
$
(5,960
)
$
818
(1) Excludes PPP loans. (2) Alabama includes the Georgia Loan Production Office. (3) Mississippi includes Central and Southern Mississippi Regions. (4) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION September 30, 2023 (unaudited) Quarter Ended Nine Months Ended FINANCIAL RATIOS AND OTHER DATA 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022 Return on average equity
8.53
%
11.43
%
13.39
%
-9.05
%
10.48
%
11.07
%
8.62
%
Return on average tangible equity
11.32
%
15.18
%
18.03
%
-12.14
%
13.90
%
14.77
%
11.39
%
Return on average assets
0.72
%
0.96
%
1.10
%
-0.76
%
0.98
%
0.93
%
0.81
%
Interest margin - Yield - FTE
5.38
%
5.16
%
4.87
%
4.40
%
3.71
%
5.14
%
3.14
%
Interest margin - Cost
2.08
%
1.83
%
1.47
%
0.73
%
0.21
%
1.80
%
0.14
%
Net interest margin - FTE
3.29
%
3.33
%
3.39
%
3.66
%
3.50
%
3.34
%
3.00
%
Efficiency ratio (1)
68.33
%
66.17
%
65.60
%
65.85
%
64.96
%
66.70
%
70.70
%
Full-time equivalent employees
2,756
2,761
2,758
2,738
2,717
CREDIT QUALITY RATIOS (2) Net (recoveries) charge-offs / average loans
0.11
%
0.04
%
0.04
%
0.06
%
0.03
%
0.06
%
-0.01
%
Provision for credit losses, LHFI / average loans
0.26
%
0.26
%
0.10
%
0.23
%
0.45
%
0.21
%
0.18
%
Nonaccrual LHFI / (LHFI + LHFS)
0.70
%
0.59
%
0.57
%
0.53
%
0.58
%
Nonperforming assets / (LHFI + LHFS)
0.74
%
0.60
%
0.58
%
0.55
%
0.60
%
Nonperforming assets / (LHFI + LHFS + other real estate)
0.74
%
0.60
%
0.58
%
0.55
%
0.60
%
ACL LHFI / LHFI
1.05
%
1.03
%
0.98
%
0.99
%
0.99
%
ACL LHFI-commercial / commercial LHFI
0.86
%
0.84
%
0.80
%
0.85
%
0.93
%
ACL LHFI-consumer / consumer and home mortgage LHFI
1.66
%
1.60
%
1.54
%
1.41
%
1.20
%
ACL LHFI / nonaccrual LHFI
147.45
%
172.34
%
168.90
%
182.22
%
169.37
%
ACL LHFI / nonaccrual LHFI (excl individually analyzed loans)
273.60
%
301.44
%
320.80
%
399.19
%
466.03
%
CAPITAL RATIOS Total equity / total assets
8.54
%
8.53
%
8.28
%
8.28
%
8.78
%
Tangible equity / tangible assets
6.57
%
6.56
%
6.35
%
6.27
%
6.67
%
Tangible equity / risk-weighted assets
7.81
%
7.91
%
7.94
%
7.61
%
8.15
%
Tier 1 leverage ratio
8.49
%
8.35
%
8.29
%
8.47
%
9.01
%
Common equity tier 1 capital ratio
9.89
%
9.87
%
9.76
%
9.74
%
10.63
%
Tier 1 risk-based capital ratio
10.29
%
10.27
%
10.17
%
10.15
%
11.06
%
Total risk-based capital ratio
12.11
%
12.08
%
11.95
%
11.91
%
12.85
%
STOCK PERFORMANCE Market value-Close$
21.73
$
21.12
$
24.70
$
34.91
$
30.63
Book value
$
25.71
$
25.73
$
25.59
$
24.47
$
24.76
Tangible book value
$
19.37
$
19.38
$
19.24
$
18.11
$
18.39
(1) See Note 7 – 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, 2023 ($ in thousands) (unaudited)
Note 1 - Litigation Settlement
As previously announced, on December 31, 2022, Trustmark National Bank (TNB) agreed to a settlement in principle (the Stanford Settlement) relating to litigation involving the Stanford Financial Group. On January 13, 2023, TNB entered into a Settlement Agreement (the Stanford Settlement Agreement) reflecting the terms of the Stanford Settlement. The parties to the Stanford Settlement Agreement are, on the one hand, (i) Ralph S. Janvey, solely in his capacity as the court-appointed receiver (the Stanford Receiver) for the Stanford Receivership Estate; (ii) the Official Stanford Investors Committee; (iii) each of the plaintiffs in the Rotstain and Smith Actions; and, on the other hand, (iv) TNB. Under the terms of the Stanford Settlement Agreement, the parties agreed to settle and dismiss the Rotstain Action, the Smith Action, and all current or future claims by plaintiffs in either such Action arising from or related to Stanford. In addition, the Stanford Settlement Agreement provided that the parties would request dismissal of the Jackson Action pursuant to the terms of the bar orders described below. If the Court’s approval (as described below) of the Stanford Settlement Agreement, including the bar orders described below, is upheld on appeal, TNB will make a one-time cash payment of $100.0 million to the Stanford Receiver.
The Stanford Settlement Agreement included the parties’ agreement to seek the Northern District of Texas District Court’s entry of bar orders prohibiting any continued or future claims by the plaintiffs in the Actions or by any other person or entity against TNB and its related parties relating to Stanford, whether asserted to date or not. The bar orders therefore would prohibit all litigation relating to Stanford described herein, including not only the Actions and any pending matters but also any actions that may be brought in the future. Final Court approval of these bar orders is a condition of the Stanford Settlement.
The Stanford Settlement Agreement is also subject to notice to Stanford’s investor claimants (which has been provided) and final, non-appealable approval by the U.S. District Court for the Northern District of Texas. While TNB believes that the Stanford Settlement Agreement is consistent with the terms of prior Stanford-related settlements that have been approved by the Court and were not successfully appealed, it is possible that the Court’s approval of the Stanford Settlement Agreement (which has occurred, as described further below) may not be upheld on appeal.
The Stanford Settlement Agreement also provides that TNB denies and makes no admission of liability or wrongdoing in connection with any Stanford matter. As has been the case throughout the pendency of the Actions, TNB expressly denies any liability or wrongdoing with respect to any matter alleged in regard to the multi-billion-dollar Ponzi scheme operated by Stanford for almost 20 years. TNB’s relationship with Stanford began as a result of TNB’s acquisition of a Houston-based bank in August 2006, and consisted of ordinary banking services provided to business deposit customers.
The foregoing description of the terms of the Stanford Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Stanford Settlement Agreement, a copy of which is filed as Exhibit 10.ai to the 2022 Annual Report and is incorporated herein by reference.
On January 20, 2023, the U.S. District Court for the Northern District of Texas entered an order preliminarily finding that the Stanford Settlement is fair, reasonable, and equitable; has no obvious deficiencies; and is the product of serious, informed, good faith, and arm’s-length negotiations. Following the provision of notice as required by the Stanford Settlement Agreement and by the Court’s preliminary order, the Court (Judge David C. Godbey, presiding) held a Final Approval Hearing on May 3, 2023, at which the Court approved the Stanford Settlement from the bench. On May 4, 2023, Judge Godbey signed the written orders confirming his oral ruling, including the bar order contemplated by the Stanford Settlement Agreement and the judgment and bar order with respect to the Jackson Action.
On May 10, 2023, Robert Allen Stanford, writing from prison, appealed the District Court’s approval of the Stanford Settlement to the Fifth Circuit Court of Appeals. On June 12, 2023, the Stanford Receiver moved to dismiss the appeal as frivolous. On July 25, 2023, a three-judge panel of the Fifth Circuit issued a per curiam order dismissing Stanford’s appeal as frivolous. On August 8, 2023, Mr. Stanford filed a motion for stay of mandate pending petition for certiorari. On August 22, 2023, the Fifth Circuit denied the motion for stay of mandate. On August 30, 2023, the Fifth Circuit issued the mandate.
The Stanford Settlement will become effective when the trial court’s ruling approving the Stanford Settlement and entering the bar order becomes final and non-appealable, as defined in the Stanford Settlement Agreement (the Stanford Settlement Effective Date). Within five days of the Stanford Settlement Effective Date, the parties to the Rotstain and Smith Actions will file agreed dismissals of those cases. Absent any further appeal in either of the Rotstain or Smith Actions, those dismissals will become final 30 days after entered and signed by the respective judges. TNB will be required to make the Stanford Settlement payment within 30 days after those dismissals become final. Any further appeal of any of the orders described above would delay the making of the Stanford Settlement payment.
On August 11, 2023, the Stanford Receiver filed a Motion to Enforce Settlement Agreement in the Northern District of Texas District Court, asking Judge Godbey to rule that the Stanford Settlement Effective Date has occurred. The Stanford Receiver took the position that Mr. Stanford’s appeals are frivolous and do not prevent the trial court’s ruling from becoming final and non-appealable, as defined in the Stanford Settlement Agreement. TNB filed a response in opposition to the Stanford Receiver’s Motion to Enforce. The trial court has not yet ruled on the Motion to Enforce. On September 22, 2023, the Stanford Receiver filed a Motion to Enjoin, requesting that the trial court enjoin Mr. Stanford from making court filings in any Stanford-related case, including notices of appeal, without obtaining leave of the court. The court has not yet ruled on the Motion to Enjoin.
Pending the resolution of the Stanford Settlement approval process, the Rotstain, Smith and Jackson Actions are stayed.
TNB and Trustmark Corporation determined that it was in the best interest of TNB, Trustmark Corporation and the shareholders of Trustmark Corporation to enter into the Stanford Settlement and the Stanford Settlement Agreement to eliminate the risk, ongoing expense, uncertainty as to ultimate outcome, and imposition on management and the business of TNB of further litigation of the Actions and related Stanford claims.
As previously announced, on August 30, 2023, TNB agreed to a settlement in principle (the Adams/Madison Timber Settlement) relating to litigation and claims involving Arthur Lamar Adams and Madison Timber Properties, LLC (collectively, Adams/Madison Timber). On October 9, 2023, TNB entered into a Settlement Agreement (the Adams/Madison Timber Settlement Agreement) reflecting the terms of the Adams/Madison Timber Settlement. The parties to the Adams/Madison Timber Settlement are, on the one hand, Alysson Mills in her capacity as Court-appointed Receiver (the Adams/Madison Timber Receiver); and, on the other hand, TNB. Under the terms of the Adams/Madison Timber Settlement Agreement, the parties agreed to settle and dismiss the Adams/Madison Timber Action, and the Adams/Madison Timber Receiver will fully release all claims against TNB and any of its employees, agents and representatives. The Adams/Madison Timber Settlement includes the parties’ agreement to seek the Court’s entry of bar orders prohibiting any continued or future claims by anyone against TNB and its related parties relating to Adams/Madison Timber, whether asserted to date or not. The bar orders therefore would prohibit all litigation relating to Adams/Madison Timber described herein. Final Court approval of a bar order is a condition of the Adams/Madison Timber Settlement.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 1 - Litigation Settlement (continued)
The Adams/Madison Timber Settlement is also subject to notice to Adams/Madison Timber investors, and final, non-appealable approval by the Court and entry of a judgment dismissing the Lawsuit against TNB. The timing of any final decision by the Court is subject to the discretion of the Court and any appeal. If the Adams/Madison Timber Settlement, including the bar order described above, is approved by the Court and is not subject to further appeal, TNB will make a one-time cash payment of $6.5 million to the Adams/Madison Timber Receiver.
While TNB believes that the Adams/Madison Timber Settlement is consistent with the terms of settlements in similar cases that have been approved and were not successfully appealed, it is possible that the Court may decide not to approve the Adams/Madison Timber Settlement Agreement or that the Court of Appeals could reject the Adams/Madison Timber Settlement Agreement on an appeal, either of which could render the Adams/Madison Timber Settlement a nullity.
At the time of the entry into the Stanford Settlement as described above, Trustmark Corporation recognized $100.0 million of litigation settlement expense, as well as an additional $750 thousand in legal fees, which were included in noninterest expense related to the Stanford litigation during the fourth quarter of 2022. As a result of the entry into the Adams/Madison Timber Settlement as described above, Trustmark Corporation recognized $6.5 million of litigation settlement expense which was included in noninterest expense related to the Adams/Madison Timber litigation during the third quarter of 2023. Trustmark Corporation expects that both the Stanford Settlement and Adams/Madison Timber Settlement will be tax deductible. Trustmark Corporation and TNB remain substantially above levels considered to be well-capitalized under all relevant standards.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 2 - Securities Available for Sale and Held to Maturity
The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity:
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities
$
363,476
$
362,966
$
386,903
$
391,513
$
416,278
U.S. Government agency obligations
6,780
6,999
7,254
7,766
9,116
Obligations of states and political subdivisions
4,642
4,813
4,907
4,862
4,763
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA
22,881
25,336
26,851
27,097
28,164
Issued by FNMA and FHLMC
1,171,521
1,250,435
1,317,848
1,345,463
1,718,057
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
90,402
98,388
108,192
115,140
126,138
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
106,472
122,946
132,207
132,241
141,970
Total securities available for sale
$
1,766,174
$
1,871,883
$
1,984,162
$
2,024,082
$
2,444,486
SECURITIES HELD TO MATURITY
U.S. Treasury securities
$
28,872
$
28,679
$
28,486
$
28,295
$
—
Obligations of states and political subdivisions
341
1,180
4,507
4,510
4,512
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA
13,090
13,235
4,336
4,442
4,527
Issued by FNMA and FHLMC
474,003
484,679
497,854
509,311
179,375
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
162,031
171,002
179,334
188,201
197,923
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA
759,950
759,890
759,821
759,755
770,648
Total securities held to maturity
$
1,438,287
$
1,458,665
$
1,474,338
$
1,494,514
$
1,156,985
During the fourth quarter of 2022, Trustmark reclassified $422.9 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $57.1 million ($42.8 million, net of tax). The net unrealized holding loss will be amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer.
During the second quarter of 2022, Trustmark reclassified $343.1 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $34.8 million ($26.1 million, net of tax). The net unrealized holding loss will be amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer.
At September 30, 2023, the net unamortized, unrealized loss included in accumulated other comprehensive income (loss) in the accompanying balance sheet for securities held to maturity transferred from securities available for sale totaled $60.4 million.
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 99.9% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 3 – Loan Composition
LHFI consisted of the following during the periods presented:
LHFI BY TYPE
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
Loans secured by real estate:
Construction, land development and other land loans
$
1,609,326
$
1,722,657
$
1,723,772
$
1,719,542
$
1,647,395
Secured by 1-4 family residential properties
2,893,606
2,854,182
2,822,048
2,775,847
2,597,112
Secured by nonfarm, nonresidential properties
3,569,671
3,471,728
3,375,579
3,278,830
3,206,946
Other real estate secured
1,218,499
954,410
847,527
742,538
593,119
Commercial and industrial loans
1,828,924
1,883,480
1,882,360
1,821,259
1,689,532
Consumer loans
161,940
163,788
162,911
166,425
163,412
State and other political subdivision loans
1,056,569
1,111,710
1,193,727
1,223,863
1,188,703
Other loans
471,724
452,012
489,271
475,735
499,845
LHFI
12,810,259
12,613,967
12,497,195
12,204,039
11,586,064
ACL LHFI
(134,031
)
(129,298
)
(122,239
)
(120,214
)
(115,050
)
Net LHFI
$
12,676,228
$
12,484,669
$
12,374,956
$
12,083,825
$
11,471,014
The following table presents the LHFI composition by region and reflects each region’s diversified mix of loans:
September 30, 2023
LHFI - COMPOSITION BY REGION
Total
Alabama (1)
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
$
1,609,326
$
663,662
$
48,627
$
420,356
$
36,803
$
439,878
Secured by 1-4 family residential properties
2,893,606
143,673
53,575
2,582,837
83,462
30,059
Secured by nonfarm, nonresidential properties
3,569,671
1,034,874
225,415
1,472,990
158,448
677,944
Other real estate secured
1,218,499
574,432
1,786
339,070
7,234
295,977
Commercial and industrial loans
1,828,924
596,259
24,918
748,944
210,930
247,873
Consumer loans
161,940
22,496
7,870
100,908
20,332
10,334
State and other political subdivision loans
1,056,569
75,952
61,154
794,052
25,302
100,109
Other loans
471,724
159,267
8,615
198,567
32,950
72,325
Loans
$
12,810,259
$
3,270,615
$
431,960
$
6,657,724
$
575,461
$
1,874,499
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION
Lots
$
70,356
$
28,476
$
9,633
$
17,847
$
3,786
$
10,614
Development
141,561
66,958
1,264
37,430
9,547
26,362
Unimproved land
104,733
21,528
12,079
33,736
8,399
28,991
1-4 family construction
338,731
175,267
17,871
91,549
15,071
38,973
Other construction
953,945
371,433
7,780
239,794
—
334,938
Construction, land development and other land loans
$
1,609,326
$
663,662
$
48,627
$
420,356
$
36,803
$
439,878
(1) Includes Georgia Loan Production Office.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 3 – Loan Composition (continued)
September 30, 2023
Total
Alabama (1)
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
$
347,583
$
113,885
$
26,299
$
117,698
$
20,497
$
69,204
Office
279,701
102,062
17,527
90,600
1,679
67,833
Hotel/motel
302,738
172,577
50,221
53,467
26,473
—
Mini-storage
158,429
32,591
1,952
103,801
765
19,320
Industrial
401,023
90,512
20,175
134,431
9,839
146,066
Health care
96,798
68,699
—
25,316
335
2,448
Convenience stores
30,278
7,105
432
13,618
561
8,562
Nursing homes/senior living
500,572
224,541
—
158,619
5,076
112,336
Other
128,293
46,672
9,382
53,862
8,558
9,819
Total non-owner occupied loans
2,245,415
858,644
125,988
751,412
73,783
435,588
Owner-occupied:
Office
156,016
43,789
35,448
46,191
11,153
19,435
Churches
62,835
16,432
4,261
36,020
3,594
2,528
Industrial warehouses
164,150
15,231
3,957
40,616
17,002
87,344
Health care
126,980
11,400
6,017
88,912
2,287
18,364
Convenience stores
143,188
11,801
29,443
67,261
196
34,487
Retail
90,471
10,370
13,880
39,378
17,836
9,007
Restaurants
57,112
4,095
3,467
31,116
15,181
3,253
Auto dealerships
44,669
5,780
206
21,859
16,824
—
Nursing homes/senior living
346,129
43,995
—
275,934
—
26,200
Other
132,706
13,337
2,748
74,291
592
41,738
Total owner-occupied loans
1,324,256
176,230
99,427
721,578
84,665
242,356
Loans secured by nonfarm, nonresidential properties
$
3,569,671
$
1,034,874
$
225,415
$
1,472,990
$
158,448
$
677,944
(1) Includes Georgia Loan Production Office.
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
Nine Months Ended
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
9/30/2023
9/30/2022
Securities – taxable
1.89
%
1.87
%
1.85
%
1.71
%
1.62
%
1.87
%
1.50
%
Securities – nontaxable
4.05
%
4.25
%
4.00
%
3.95
%
3.97
%
4.09
%
3.98
%
Securities – total
1.89
%
1.87
%
1.86
%
1.72
%
1.63
%
1.87
%
1.51
%
PPP loans
—
—
—
12.39
%
7.51
%
—
3.83
%
Loans - LHFI & LHFS
6.34
%
6.08
%
5.79
%
5.27
%
4.48
%
6.07
%
3.97
%
Loans - total
6.34
%
6.08
%
5.79
%
5.27
%
4.48
%
6.07
%
3.97
%
Fed funds sold & reverse repurchases
5.17
%
5.51
%
5.11
%
4.29
%
3.51
%
5.34
%
3.06
%
Other earning assets
5.01
%
5.36
%
4.09
%
3.76
%
1.82
%
4.87
%
0.56
%
Total earning assets
5.38
%
5.16
%
4.87
%
4.40
%
3.71
%
5.14
%
3.14
%
Interest-bearing deposits
2.39
%
1.96
%
1.53
%
0.71
%
0.20
%
1.97
%
0.14
%
Fed funds purchased & repurchases
5.14
%
5.01
%
4.49
%
3.44
%
1.95
%
4.87
%
0.94
%
Other borrowings
5.32
%
5.12
%
4.87
%
3.73
%
2.89
%
5.10
%
2.56
%
Total interest-bearing liabilities
2.72
%
2.42
%
1.98
%
1.03
%
0.31
%
2.38
%
0.21
%
Total Deposits
1.84
%
1.48
%
1.13
%
0.51
%
0.14
%
1.49
%
0.10
%
Net interest margin
3.29
%
3.33
%
3.39
%
3.66
%
3.50
%
3.34
%
3.00
%
Net interest margin excluding PPP loans and the FRB balance
3.24
%
3.23
%
3.36
%
3.66
%
3.53
%
3.27
%
3.17
%
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities (continued)
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.
For the third quarter of 2023, the average FRB balance totaled $566.3 million compared to $777.0 million for the second quarter of 2023 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 remained relatively flat when compared to the second quarter of 2023, totaling 3.24% for the third quarter of 2023, as increased yields on the loans held for investment and held for sale portfolio was mostly offset by increased costs of interest-bearing deposits.
Note 5 – Mortgage Banking
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net negative hedge ineffectiveness of $1.0 million during the third quarter of 2023.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
Quarter Ended
Nine Months Ended
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
9/30/2023
9/30/2022
Mortgage servicing income, net
$
6,916
$
6,764
$
6,785
$
6,636
$
6,669
$
20,465
$
19,655
Change in fair value-MSR from runoff
(3,203
)
(2,710
)
(1,145
)
(2,981
)
(3,462
)
(7,058
)
(11,053
)
Gain on sales of loans, net
3,748
3,887
3,797
3,328
4,597
11,432
16,850
Mortgage banking income before hedge ineffectiveness
7,461
7,941
9,437
6,983
7,804
24,839
25,452
Change in fair value-MSR from market changes
6,809
5,898
(3,972
)
(3,348
)
10,770
8,735
41,529
Change in fair value of derivatives
(7,812
)
(7,239
)
2,174
(227
)
(11,698
)
(12,877
)
(42,083
)
Net positive (negative) hedge ineffectiveness
(1,003
)
(1,341
)
(1,798
)
(3,575
)
(928
)
(4,142
)
(554
)
Mortgage banking, net
$
6,458
$
6,600
$
7,639
$
3,408
$
6,876
$
20,697
$
24,898
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 6 – Other Noninterest Income and Expense
Other noninterest income consisted of the following for the periods presented:
Quarter Ended
Nine Months Ended
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
9/30/2023
9/30/2022
Partnership amortization for tax credit purposes
$
(1,995
)
$
(2,019
)
$
(1,961
)
$
(1,869
)
$
(1,531
)
$
(5,975
)
$
(4,342
)
Increase in life insurance cash surrender value
1,784
1,716
1,693
1,687
1,676
5,193
4,986
Other miscellaneous income
2,610
3,998
2,782
2,493
2,273
9,390
6,887
Total other, net
$
2,399
$
3,695
$
2,514
$
2,311
$
2,418
$
8,608
$
7,531
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
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
9/30/2023
9/30/2022
Loan expense (1)
$
3,130
$
3,066
$
2,538
$
2,908
$
2,866
$
8,734
$
9,341
Amortization of intangibles
129
130
288
312
312
547
1,122
FDIC assessment expense
3,765
2,550
2,370
2,130
1,945
8,685
5,255
Other real estate expense, net
(40
)
171
172
18
497
303
1,155
Other miscellaneous expense
8,714
8,585
9,443
9,767
8,117
26,742
23,834
Total other expense (1)
$
15,698
$
14,502
$
14,811
$
15,135
$
13,737
$
45,011
$
40,707
(1) During the first quarter of 2023, Trustmark reclassified its debit card transaction fees from other expense to services and fees. Prior periods have been reclassified accordingly.
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’s Common Equity Tier 1 capital includes common stock, capital surplus and retained earnings, and is reduced by goodwill and other intangible assets, net of associated net deferred tax liabilities as well as disallowed deferred tax assets and threshold deductions as applicable.
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 intangible 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 audited consolidated financial statements and the notes related thereto in their entirety and not to rely on any single financial measure.
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 7 – Non-GAAP Financial Measures (continued)
Quarter Ended
Nine Months Ended
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
9/30/2023
9/30/2022
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity
$
1,582,885
$
1,580,291
$
1,523,828
$
1,493,291
$
1,606,469
$
1,562,551
$
1,642,450
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
Identifiable intangible assets
(3,174
)
(3,301
)
(3,523
)
(3,816
)
(4,131
)
(3,331
)
(4,479
)
Total average tangible equity
$
1,195,474
$
1,192,753
$
1,136,068
$
1,105,238
$
1,218,101
$
1,174,983
$
1,253,734
PERIOD END BALANCES
Total shareholders' equity
$
1,570,351
$
1,571,193
$
1,562,099
$
1,492,268
$
1,508,945
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
Identifiable intangible assets
(3,093
)
(3,222
)
(3,352
)
(3,640
)
(3,952
)
Total tangible equity
(a)
$
1,183,021
$
1,183,734
$
1,174,510
$
1,104,391
$
1,120,756
TANGIBLE ASSETS
Total assets
$
18,390,839
$
18,422,626
$
18,877,178
$
18,015,478
$
17,190,634
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
Identifiable intangible assets
(3,093
)
(3,222
)
(3,352
)
(3,640
)
(3,952
)
Total tangible assets
(b)
$
18,003,509
$
18,035,167
$
18,489,589
$
17,627,601
$
16,802,445
Risk-weighted assets
(c)
$
15,143,531
$
14,966,614
$
14,793,893
$
14,521,078
$
13,748,819
NET INCOME (LOSS) ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income (loss)
$
34,029
$
45,037
$
50,300
$
(34,063
)
$
42,455
$
129,366
$
105,950
Plus: Intangible amortization net of tax
96
97
216
234
234
409
842
Net income (loss) adjusted for intangible amortization
$
34,125
$
45,134
$
50,516
$
(33,829
)
$
42,689
$
129,775
$
106,792
Period end common shares outstanding
(d)
61,070,095
61,069,036
61,048,516
60,977,686
60,953,864
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)
11.32
%
15.18
%
18.03
%
-12.14
%
13.90
%
14.77
%
11.39
%
Tangible equity/tangible assets
(a)/(b)
6.57
%
6.56
%
6.35
%
6.27
%
6.67
%
Tangible equity/risk-weighted assets
(a)/(c)
7.81
%
7.91
%
7.94
%
7.61
%
8.15
%
Tangible book value
(a)/(d)*1,000
$
19.37
$
19.38
$
19.24
$
18.11
$
18.39
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity
$
1,570,351
$
1,571,193
$
1,562,099
$
1,492,268
$
1,508,945
CECL transition adjustment
13,000
13,000
13,000
19,500
19,500
AOCI-related adjustments
287,888
265,704
242,381
275,403
306,412
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)
(370,219
)
(370,227
)
(370,234
)
(370,241
)
(370,217
)
Other adjustments and deductions for CET1 (2)
(2,803
)
(2,915
)
(3,275
)
(3,258
)
(3,506
)
CET1 capital
(e)
1,498,217
1,476,755
1,443,971
1,413,672
1,461,134
Additional tier 1 capital instruments plus related surplus
60,000
60,000
60,000
60,000
60,000
Tier 1 capital
$
1,558,217
$
1,536,755
$
1,503,971
$
1,473,672
$
1,521,134
Common equity tier 1 capital ratio
(e)/(c)
9.89
%
9.87
%
9.76
%
9.74
%
10.63
%
(1) Calculation = ((net income (loss) 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, 2023 ($ in thousands) (unaudited)
Note 7 – 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
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
9/30/2023
9/30/2022
Net interest income (GAAP)
$
138,637
$
139,904
$
137,595
$
146,583
$
136,105
$
416,136
$
348,125
Noninterest income (GAAP)
52,224
53,553
51,377
45,170
52,606
157,154
159,974
Pre-provision revenue
(a)
$
190,861
$
193,457
$
188,972
$
191,753
$
188,711
$
573,290
$
508,099
Noninterest expense (GAAP)
$
140,945
$
132,218
$
128,327
$
231,229
$
126,698
$
401,490
$
371,984
Less: Litigation settlement expense
(6,500
)
—
—
(100,750
)
—
(6,500
)
—
Adjusted noninterest expense - PPNR (Non-GAAP)
(b)
$
134,445
$
132,218
$
128,327
$
130,479
$
126,698
$
394,990
$
371,984
PPNR (Non-GAAP)
(a)-(b)
$
56,416
$
61,239
$
60,645
$
61,274
$
62,013
$
178,300
$
136,115
The following table presents adjustments to net income (loss) 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
9/30/2023
9/30/2022
9/30/2023
9/30/2022
Amount
Diluted EPS
Amount
Diluted EPS
Amount
Diluted EPS
Amount
Diluted EPS
Net income (loss) (GAAP)
$
34,029
$
0.56
$
42,455
$
0.69
$
129,366
$
2.11
$
105,950
$
1.72
Significant non-routine transactions (net of taxes):
Litigation settlement expense
4,875
0.08
—
—
4,875
0.08
—
—
Net income adjusted for significant non-routine transactions (Non-GAAP)
$
38,904
$
0.64
$
42,455
$
0.69
$
134,241
$
2.19
$
105,950
$
1.72
Reported (GAAP)
Adjusted (Non- GAAP)
Reported (GAAP)
Adjusted (Non- GAAP)
Reported (GAAP)
Adjusted (Non- GAAP)
Reported (GAAP)
Adjusted (Non- GAAP)
Return on average equity
8.53
%
9.74
%
10.48
%
n/a
11.07
%
11.48
%
8.62
%
n/a
Return on average tangible equity
11.32
%
12.92
%
13.90
%
n/a
14.77
%
15.31
%
11.39
%
n/a
Return on average assets
0.72
%
0.83
%
0.98
%
n/a
0.93
%
0.96
%
0.81
%
n/a
n/a - not applicable
TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS September 30, 2023 ($ in thousands) (unaudited)
Note 7 – 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
9/30/2023
6/30/2023
3/31/2023
12/31/2022
9/30/2022
9/30/2023
9/30/2022
Total noninterest expense (GAAP)
$
140,945
$
132,218
$
128,327
$
231,229
$
126,698
$
401,490
$
371,984
Less: Other real estate expense, net
40
(171
)
(172
)
(18
)
(497
)
(303
)
(1,155
)
Amortization of intangibles
(129
)
(130
)
(288
)
(312
)
(312
)
(547
)
(1,122
)
Charitable contributions resulting in state tax credits
(325
)
(325
)
(325
)
(375
)
(375
)
(975
)
(1,125
)
Litigation settlement expense
(6,500
)
—
—
(100,750
)
—
(6,500
)
—
Adjusted noninterest expense (Non-GAAP)
(c)
$
134,031
$
131,592
$
127,542
$
129,774
$
125,514
$
393,165
$
368,582
Net interest income (GAAP)
$
138,637
$
139,904
$
137,595
$
146,583
$
136,105
$
416,136
$
348,125
Add: Tax equivalent adjustment
3,299
3,383
3,477
3,451
2,975
10,159
8,894
Net interest income-FTE (Non-GAAP)
(a)
$
141,936
$
143,287
$
141,072
$
150,034
$
139,080
$
426,295
$
357,019
Noninterest income (GAAP)
$
52,224
$
53,553
$
51,377
$
45,170
$
52,606
$
157,154
$
159,974
Add: Partnership amortization for tax credit purposes
1,995
2,019
1,961
1,869
1,531
5,975
4,342
Adjusted noninterest income (Non-GAAP)
(b)
$
54,219
$
55,572
$
53,338
$
47,039
$
54,137
$
163,129
$
164,316
Adjusted revenue (Non-GAAP)
(a)+(b)
$
196,155
$
198,859
$
194,410
$
197,073
$
193,217
$
589,424
$
521,335
Efficiency ratio (Non-GAAP)
(c)/((a)+(b))
68.33
%
66.17
%
65.60
%
65.85
%
64.96
%
66.70
%
70.70
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20231024731289/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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