Trustmark Corporation Announces Second Quarter 2023 Financial Results

Business Wire
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In this article:

Loan and Deposit Growth Continues, Credit Quality Remains Strong,
Net Interest Income and Noninterest Income Expand

JACKSON, Miss., July 25, 2023--(BUSINESS WIRE)--Trustmark Corporation (NASDAQGS:TRMK) reported net income of $45.0 million in the second quarter of 2023, representing diluted earnings per share of $0.74. Trustmark’s performance during the second quarter produced a return on average tangible equity of 15.18% and a return on average assets of 0.96%. The Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2023, to shareholders of record on September 1, 2023.

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Second Quarter Highlights

  • Loans held for investment (HFI) increased $116.8 million, or 0.9%, from the prior quarter to $12.6 billion

  • Deposits expanded $130.2 million, or 0.9%, linked-quarter to $14.9 billion

  • Total revenue increased $4.5 million, or 2.4%, linked-quarter to $193.5 million

  • Net interest income (FTE) increased $2.2 million linked-quarter to $143.3 million, resulting in a net interest margin of 3.33%

  • Noninterest income totaled $53.6 million, representing 27.7% of total revenue

  • Credit quality remained strong; net charge-offs represented 4 basis points of average loans

Duane A. Dewey, President and CEO, stated, "Trustmark continued to post solid financial results in the second quarter, reflecting continued loan and deposit growth, expanding net interest income, and growth in our fee-based businesses. During the first six months of 2023, Trustmark’s net income totaled $95.3 million, which represented diluted earnings of $1.56 per share, an increase of 51.5% from the same period in 2022. We have a tremendous team of associates throughout our system that are focused on expanding existing customer relationships as well as demonstrating the value Trustmark can provide potential customers as their trusted financial partner. We have added very talented people across the organization in numerous production and back office roles to meet our objectives. We continue to implement initiatives to improve efficiency, enhance our ability to grow and serve customers, and build long-term value for our shareholders."

Balance Sheet Management

  • Loans HFI totaled $12.6 billion, up 0.9% from the prior quarter and 15.3% year-over-year

  • Deposits totaled $14.9 billion, up 0.9% from the previous quarter and 1.0% year-over-year

  • Maintained strong capital position with CET1 ratio of 9.87% and total risk-based capital ratio of 12.08%

Loans HFI totaled $12.6 billion at June 30, 2023, reflecting an increase of $116.8 million, or 0.9%, linked-quarter and $1.7 billion, or 15.3%, year-over-year. The linked quarter growth reflected increases in other real estate secured loans, nonfarm, nonresidential loans, and 1-4 family residential loans offset in part by declines in other loans, state and political subdivision loans, and construction, land development and other land loans. Trustmark’s loan portfolio continues to be well-diversified by loan type and geography.

Deposits totaled $14.9 billion at June 30, 2023, up $130.2 million, or 0.9%, from the prior quarter and up $143.7 million, or 1.0%, year-over-year. Trustmark continues to maintain a strong liquidity position as loans HFI represented 84.6% of total deposits at June 30, 2023. Migration into higher-yielding products continued to drive a change in deposit mix from noninterest-bearing deposits, which represented 23.2% of total deposits at June 30, 2023. Interest-bearing deposit costs totaled 1.96% for the second quarter, while the total cost of deposits was 1.48%. The total cost of interest-bearing liabilities was 2.42% for the second 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 June 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 June 30, 2023.

Credit Quality

  • Nonperforming assets represented 0.60% of total loans and other real estate at June 30, 2023

  • Net charge-offs totaled $1.2 million in the second quarter, representing 0.04% of average loans

  • Allowance for credit losses (ACL) represented 1.03% of loans HFI and 301.4% of nonaccrual loans, excluding individually analyzed loans, at June 30, 2023

Nonaccrual loans totaled $75.0 million at June 30, 2023, up $2.7 million from the prior quarter and an increase of $13.0 million year-over-year. Other real estate totaled $1.1 million, reflecting a $547 thousand decrease from the prior quarter and a $1.9 million decline from the prior year.

The provision for credit losses for loans HFI was $8.2 million in the second quarter and was primarily attributable to extended maturities on mortgage loans resulting from lower prepayment speeds, weakening macroeconomic factors, and loan growth. The provision for credit losses for off-balance sheet credit exposures was $245 thousand, primarily driven by weakening macroeconomic factors. Collectively, the provision for credit losses totaled $8.5 million in the second quarter compared to $1.0 million from the prior quarter and $1.1 million in the second quarter of 2022.

Allocation of Trustmark’s $129.3 million ACL on loans HFI represented 0.84% of commercial loans and 1.60% of consumer and home mortgage loans, resulting in an ACL to total loans HFI of 1.03% at June 30, 2023. Management believes the level of the ACL is commensurate with the credit losses currently expected in the loan portfolio.

Revenue Generation

  • Total revenue increased $4.5 million, or 2.4%, linked-quarter

  • Net interest income (FTE) totaled $143.3 million in the second quarter, up 1.6% linked-quarter

  • Noninterest income increased 4.2% linked-quarter to total $53.6 million, representing 27.7% of total revenue in the second quarter

Revenue in the second quarter totaled $193.5 million, an increase of $4.5 million, or 2.4%, from the prior quarter and $27.5 million, or 16.6%, from the prior year. The linked-quarter increase primarily reflects higher net interest income and solid growth in all fee income business with the exception of mortgage banking. The year-over-year growth in revenue is attributed to higher net interest income.

Net interest income (FTE) in the second quarter totaled $143.3 million, resulting in a net interest margin of 3.33%, down 6 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 second quarter totaled $53.6 million, an increase of $2.2 million, or 4.2%, from the prior quarter and a $300 thousand increase year-over-year. With the exception of mortgage banking, all categories increased linked-quarter with other, net and bank card and other fees increasing $1.2 million and $1.1 million, respectively. Year-over-year increases in insurance, other, net and service charges on deposit accounts, were offset in part by declines in bank card and other fees, mortgage banking and wealth management revenue.

Mortgage loan production in the second quarter totaled $431.3 million, an increase of 19.5% from the prior quarter and a decrease of 36.7% year-over-year. Mortgage banking revenue totaled $6.6 million in the second quarter, a decrease of $1.0 million linked-quarter and $1.5 million 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 revenue totaled $14.8 million in the second quarter, up $459 thousand, or 3.2%, from the prior quarter and $1.1 million, or 7.8%, year-over-year. The linked-quarter increase primarily reflected growth in policy fees and other commissions while the year-over-year increase primarily reflected growth in commercial property and casualty commissions. Wealth management revenue in the second quarter totaled $8.9 million, an increase of $102 thousand, or 1.2%, from the prior quarter and a decline of $220 thousand, or 2.4%, year-over-year. The linked-quarter growth reflected higher trust management revenue while the year-over-year decline reflected reduced brokerage revenue.

Noninterest Expense

  • Noninterest expense totaled $132.2 million in the second quarter, up 3.0%, from the prior quarter

  • Adjusted noninterest expense, which excludes other real estate expense, amortization of intangibles, and charitable contributions resulting in state tax credits, totaled $131.6 million in the second quarter, an increase of 3.2% from the prior quarter. Please refer to the Consolidated Financial Information, Note 7 – Non-GAAP Financial Measures

Noninterest expense in the second quarter totaled $132.2 million, an increase of $3.9 million, or 3.0%, when compared to the prior quarter. Salaries and employee benefits increased $1.9 million linked-quarter principally due to commissions and annual merit increases. Services and fees increased $2.8 million, or 11.2%, linked-quarter primarily due to increases in professional fees. Net occupancy expense declined $521 thousand, or 6.8%, while other expense declined $309 thousand, or 2.1%, linked-quarter.

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 $127 million as of June 30, 2023. Implementation of our technology plans continued during the second quarter with conversion of our credit card platform to a best-in-class product for our customers. In addition, advancements in our loan underwriting system were implemented and plans for conversion of our deposit system continued. During the quarter, 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 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, July 26, 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, August 9, 2023, in archived format at the same web address or by calling (877) 344-7529, passcode 7655682.

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 (including uncertainty regarding the federal government's debt limit or a prolonged shutdown of the federal government), 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

June 30, 2023

($ in thousands)

(unaudited)

Linked Quarter

Year over Year

QUARTERLY AVERAGE BALANCES

6/30/2023

3/31/2023

6/30/2022

$ Change

% Change

$ Change

% Change

Securities AFS-taxable (1)

$

2,140,505

$

2,187,121

$

3,094,364

$

(46,616

)

-2.1

%

$

(953,859

)

-30.8

%

Securities AFS-nontaxable

4,796

4,812

5,110

(16

)

-0.3

%

(314

)

-6.1

%

Securities HTM-taxable (1)

1,463,086

1,479,283

811,599

(16,197

)

-1.1

%

651,487

80.3

%

Securities HTM-nontaxable

1,718

4,509

5,630

(2,791

)

-61.9

%

(3,912

)

-69.5

%

Total securities

3,610,105

3,675,725

3,916,703

(65,620

)

-1.8

%

(306,598

)

-7.8

%

Paycheck protection program loans (PPP)

—

—

17,746

—

n/m

(17,746

)

-100.0

%

Loans (includes loans held for sale)

12,732,057

12,530,449

10,910,178

201,608

1.6

%

1,821,879

16.7

%

Fed funds sold and reverse repurchases

3,275

2,379

110

896

37.7

%

3,165

n/m

Other earning assets

903,027

647,760

1,139,312

255,267

39.4

%

(236,285

)

-20.7

%

Total earning assets

17,248,464

16,856,313

15,984,049

392,151

2.3

%

1,264,415

7.9

%

Allowance for credit losses (ACL), loans held
for investment (LHFI)

(121,960

)

(119,978

)

(99,106

)

(1,982

)

-1.7

%

(22,854

)

-23.1

%

Other assets

1,648,583

1,762,449

1,513,127

(113,866

)

-6.5

%

135,456

9.0

%

Total assets

$

18,775,087

$

18,498,784

$

17,398,070

$

276,303

1.5

%

$

1,377,017

7.9

%

Interest-bearing demand deposits

$

4,803,737

$

4,751,154

$

4,578,235

$

52,583

1.1

%

$

225,502

4.9

%

Savings deposits

4,002,134

4,193,764

4,638,849

(191,630

)

-4.6

%

(636,715

)

-13.7

%

Time deposits

2,335,752

1,907,449

1,159,065

428,303

22.5

%

1,176,687

n/m

Total interest-bearing deposits

11,141,623

10,852,367

10,376,149

289,256

2.7

%

765,474

7.4

%

Fed funds purchased and repurchases

389,834

436,535

118,753

(46,701

)

-10.7

%

271,081

n/m

Other borrowings

1,330,010

1,110,843

80,283

219,167

19.7

%

1,249,727

n/m

Subordinated notes

123,337

123,281

123,116

56

0.0

%

221

0.2

%

Junior subordinated debt securities

61,856

61,856

61,856

—

0.0

%

—

0.0

%

Total interest-bearing liabilities

13,046,660

12,584,882

10,760,157

461,778

3.7

%

2,286,503

21.2

%

Noninterest-bearing deposits

3,595,927

3,813,248

4,590,338

(217,321

)

-5.7

%

(994,411

)

-21.7

%

Other liabilities

552,209

576,826

439,266

(24,617

)

-4.3

%

112,943

25.7

%

Total liabilities

17,194,796

16,974,956

15,789,761

219,840

1.3

%

1,405,035

8.9

%

Shareholders' equity

1,580,291

1,523,828

1,608,309

56,463

3.7

%

(28,018

)

-1.7

%

Total liabilities and equity

$

18,775,087

$

18,498,784

$

17,398,070

$

276,303

1.5

%

$

1,377,017

7.9

%

(1) During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.

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 meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2023

($ in thousands)

(unaudited)

Linked Quarter

Year over Year

PERIOD END BALANCES

6/30/2023

3/31/2023

6/30/2022

$ Change

% Change

$ Change

% Change

Cash and due from banks

$

832,052

$

1,297,144

$

742,461

$

(465,092

)

-35.9

%

$

89,591

12.1

%

Fed funds sold and reverse repurchases

—

—

—

—

n/m

—

n/m

Securities available for sale (1)

1,871,883

1,984,162

2,644,364

(112,279

)

-5.7

%

(772,481

)

-29.2

%

Securities held to maturity (1)

1,458,665

1,474,338

1,137,754

(15,673

)

-1.1

%

320,911

28.2

%

PPP loans

—

—

12,549

—

n/m

(12,549

)

-100.0

%

Loans held for sale (LHFS)

181,094

175,926

190,186

5,168

2.9

%

(9,092

)

-4.8

%

Loans held for investment (LHFI)

12,613,967

12,497,195

10,944,840

116,772

0.9

%

1,669,127

15.3

%

ACL LHFI

(129,298

)

(122,239

)

(103,140

)

(7,059

)

-5.8

%

(26,158

)

-25.4

%

Net LHFI

12,484,669

12,374,956

10,841,700

109,713

0.9

%

1,642,969

15.2

%

Premises and equipment, net

227,630

223,975

207,914

3,655

1.6

%

19,716

9.5

%

Mortgage servicing rights

134,350

127,206

121,014

7,144

5.6

%

13,336

11.0

%

Goodwill

384,237

384,237

384,237

—

0.0

%

—

0.0

%

Identifiable intangible assets

3,222

3,352

4,264

(130

)

-3.9

%

(1,042

)

-24.4

%

Other real estate

1,137

1,684

3,034

(547

)

-32.5

%

(1,897

)

-62.5

%

Operating lease right-of-use assets

38,179

35,315

34,684

2,864

8.1

%

3,495

10.1

%

Other assets

805,508

794,883

627,349

10,625

1.3

%

178,159

28.4

%

Total assets

$

18,422,626

$

18,877,178

$

16,951,510

$

(454,552

)

-2.4

%

$

1,471,116

8.7

%

Deposits:

Noninterest-bearing

$

3,461,073

$

3,797,055

$

4,509,472

$

(335,982

)

-8.8

%

$

(1,048,399

)

-23.2

%

Interest-bearing

11,452,827

10,986,606

10,260,696

466,221

4.2

%

1,192,131

11.6

%

Total deposits

14,913,900

14,783,661

14,770,168

130,239

0.9

%

143,732

1.0

%

Fed funds purchased and repurchases

311,179

477,980

70,157

(166,801

)

-34.9

%

241,022

n/m

Other borrowings

1,056,714

1,485,181

72,553

(428,467

)

-28.8

%

984,161

n/m

Subordinated notes

123,372

123,317

123,152

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

34,841

34,596

32,949

245

0.7

%

1,892

5.7

%

Operating lease liabilities

40,845

37,988

37,108

2,857

7.5

%

3,737

10.1

%

Other liabilities

308,726

310,500

196,871

(1,774

)

-0.6

%

111,855

56.8

%

Total liabilities

16,851,433

17,315,079

15,364,814

(463,646

)

-2.7

%

1,486,619

9.7

%

Common stock

12,724

12,720

12,752

4

0.0

%

(28

)

-0.2

%

Capital surplus

156,834

...

155,297

160,876

1,537

1.0

%

(4,042

)

-2.5

%

Retained earnings

1,667,339

1,636,463

1,620,210

30,876

1.9

%

47,129

2.9

%

Accumulated other comprehensive
income (loss), net of tax

(265,704

)

(242,381

)

(207,142

)

(23,323

)

-9.6

%

(58,562

)

-28.3

%

Total shareholders' equity

1,571,193

1,562,099

1,586,696

9,094

0.6

%

(15,503

)

-1.0

%

Total liabilities and equity

$

18,422,626

$

18,877,178

$

16,951,510

$

(454,552

)

-2.4

%

$

1,471,116

8.7

%

(1) During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.

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 meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2023

($ in thousands except per share data)

(unaudited)

Quarter Ended

Linked Quarter

Year over Year

INCOME STATEMENTS

6/30/2023

3/31/2023

6/30/2022

$ Change

% Change

$ Change

% Change

Interest and fees on LHFS & LHFI-FTE

$

192,941

$

178,967

$

103,033

$

13,974

7.8

%

$

89,908

87.3

%

Interest and fees on PPP loans

—

—

184

—

n/m

(184

)

-100.0

%

Interest on securities-taxable

16,779

16,761

14,561

18

0.1

%

2,218

15.2

%

Interest on securities-tax exempt-FTE

69

92

107

(23

)

-25.0

%

(38

)

-35.5

%

Interest on fed funds sold and reverse
repurchases

45

30

1

15

50.0

%

44

n/m

Other interest income

12,077

6,527

2,214

5,550

85.0

%

9,863

n/m

Total interest income-FTE

221,911

202,377

120,100

19,534

9.7

%

101,811

84.8

%

Interest on deposits

54,409

40,898

2,774

13,511

33.0

%

51,635

n/m

Interest on fed funds purchased and repurchases

4,865

4,832

70

33

0.7

%

4,795

n/m

Other interest expense

19,350

15,575

1,664

3,775

24.2

%

17,686

n/m

Total interest expense

78,624

61,305

4,508

17,319

28.3

%

74,116

n/m

Net interest income-FTE

143,287

141,072

115,592

2,215

1.6

%

27,695

24.0

%

Provision for credit losses, LHFI

8,211

3,244

2,716

4,967

n/m

5,495

n/m

Provision for credit losses, off-balance sheet
credit exposures

245

(2,242

)

(1,568

)

2,487

n/m

1,813

n/m

Net interest income after provision-FTE

134,831

140,070

114,444

(5,239

)

-3.7

%

20,387

17.8

%

Service charges on deposit accounts

10,695

10,336

10,226

359

3.5

%

469

4.6

%

Bank card and other fees

8,917

7,803

10,167

1,114

14.3

%

(1,250

)

-12.3

%

Mortgage banking, net

6,600

7,639

8,149

(1,039

)

-13.6

%

(1,549

)

-19.0

%

Insurance commissions

14,764

14,305

13,702

459

3.2

%

1,062

7.8

%

Wealth management

8,882

8,780

9,102

102

1.2

%

(220

)

-2.4

%

Other, net

3,695

2,514

1,907

1,181

47.0

%

1,788

93.8

%

Total noninterest income

53,553

51,377

53,253

2,176

4.2

%

300

0.6

%

Salaries and employee benefits

75,940

74,056

71,679

1,884

2.5

%

4,261

5.9

%

Services and fees (2)

28,264

25,426

25,659

2,838

11.2

%

2,605

10.2

%

Net occupancy-premises

7,108

7,629

6,892

(521

)

-6.8

%

216

3.1

%

Equipment expense

6,404

6,405

6,047

(1

)

0.0

%

357

5.9

%

Litigation settlement expense (1)

—

—

—

—

n/m

—

n/m

Other expense (2)

14,502

14,811

13,490

(309

)

-2.1

%

1,012

7.5

%

Total noninterest expense

132,218

128,327

123,767

3,891

3.0

%

8,451

6.8

%

Income (loss) before income taxes and tax eq adj

56,166

63,120

43,930

(6,954

)

-11.0

%

12,236

27.9

%

Tax equivalent adjustment

3,383

3,477

2,916

(94

)

-2.7

%

467

16.0

%

Income (loss) before income taxes

52,783

59,643

41,014

(6,860

)

-11.5

%

11,769

28.7

%

Income taxes

7,746

9,343

6,730

(1,597

)

-17.1

%

1,016

15.1

%

Net income (loss)

$

45,037

$

50,300

$

34,284

$

(5,263

)

-10.5

%

$

10,753

31.4

%

Per share data

Earnings (loss) per share - basic

$

0.74

$

0.82

$

0.56

$

(0.08

)

-9.8

%

$

0.18

32.1

%

Earnings (loss) per share - diluted

$

0.74

$

0.82

$

0.56

$

(0.08

)

-9.8

%

$

0.18

32.1

%

Dividends per share

$

0.23

$

0.23

$

0.23

—

0.0

%

—

0.0

%

Weighted average shares outstanding

Basic

61,063,277

61,011,059

61,378,226

Diluted

61,230,031

61,193,275

61,546,285

Period end shares outstanding

61,069,036

61,048,516

61,201,123

(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 meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2023

($ in thousands)

(unaudited)

Quarter Ended

Linked Quarter

Year over Year

NONPERFORMING ASSETS (1)

6/30/2023

3/31/2023

6/30/2022

$ Change

% Change

$ Change

% Change

Nonaccrual LHFI

Alabama (2)

$

11,058

$

10,919

$

2,698

$

139

1.3

%

$

8,360

n/m

Florida

334

256

233

78

30.5

%

101

43.3

%

Mississippi (3)

36,288

32,560

23,039

3,728

11.4

%

13,249

57.5

%

Tennessee (4)

5,088

5,416

9,500

(328

)

-6.1

%

(4,412

)

-46.4

%

Texas

22,259

23,224

26,582

(965

)

-4.2

%

(4,323

)

-16.3

%

Total nonaccrual LHFI

75,027

72,375

62,052

2,652

3.7

%

12,975

20.9

%

Other real estate

Alabama (2)

—

—

84

—

n/m

(84

)

-100.0

%

Mississippi (3)

1,137

1,495

2,950

(358

)

-23.9

%

(1,813

)

-61.5

%

Tennessee (4)

—

189

—

(189

)

-100.0

%

—

n/m

Total other real estate

1,137

1,684

3,034

(547

)

-32.5

%

(1,897

)

-62.5

%

Total nonperforming assets

$

76,164

$

74,059

$

65,086

$

2,105

2.8

%

$

11,078

17.0

%

LOANS PAST DUE OVER 90 DAYS (1)

LHFI

$

3,911

$

2,255

$

1,347

$

1,656

73.4

%

$

2,564

n/m

LHFS-Guaranteed GNMA serviced loans

(no obligation to repurchase)

$

35,766

$

41,468

$

51,164

$

(5,702

)

-13.8

%

$

(15,398

)

-30.1

%

Quarter Ended

Linked Quarter

Year over Year

ACL LHFI (1)

6/30/2023

3/31/2023

6/30/2022

$ Change

% Change

$ Change

% Change

Beginning Balance

$

122,239

$

120,214

$

98,734

$

2,025

1.7

%

$

23,505

23.8

%

Provision for credit losses, LHFI

8,211

3,244

2,716

4,967

n/m

5,495

n/m

Charge-offs

(2,773

)

(2,996

)

(2,277

)

223

7.4

%

(496

)

-21.8

%

Recoveries

1,621

1,777

3,967

(156

)

-8.8

%

(2,346

)

-59.1

%

Net (charge-offs) recoveries

(1,152

)

(1,219

)

1,690

67

5.5

%

(2,842

)

n/m

Ending Balance

$

129,298

$

122,239

$

103,140

$

7,059

5.8

%

$

26,158

25.4

%

NET (CHARGE-OFFS) RECOVERIES (1)

Alabama (2)

$

(141

)

$

(268

)

$

1,129

$

127

-47.4

%

$

(1,270

)

n/m

Florida

(35

)

(36

)

761

1

2.8

%

(796

)

n/m

Mississippi (3)

(762

)

(775

)

(266

)

13

1.7

%

(496

)

n/m

Tennessee (4)

(166

)

(124

)

31

(42

)

-33.9

%

(197

)

n/m

Texas

(48

)

(16

)

35

(32

)

n/m

(83

)

n/m

Total net (charge-offs) recoveries

$

(1,152

)

$

(1,219

)

$

1,690

$

67

5.5

%

$

(2,842

)

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

June 30, 2023

($ in thousands)

(unaudited)

Quarter Ended

Six Months Ended

AVERAGE BALANCES

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Securities AFS-taxable (1)

$

2,140,505

$

2,187,121

$

2,572,675

$

2,824,254

$

3,094,364

$

2,163,684

$

3,169,515

Securities AFS-nontaxable

4,796

4,812

4,828

4,928

5,110

4,804

5,118

Securities HTM-taxable (1)

1,463,086

1,479,283

1,268,952

1,140,685

811,599

1,471,140

612,332

Securities HTM-nontaxable

1,718

4,509

4,514

5,057

5,630

3,106

6,474

Total securities

3,610,105

3,675,725

3,850,969

3,974,924

3,916,703

3,642,734

3,793,439

PPP loans

—

—

3,235

9,821

17,746

—

23,346

Loans (includes loans held for sale)

12,732,057

12,530,449

12,006,661

11,459,551

10,910,178

12,631,810

10,731,438

Fed funds sold and reverse repurchases

3,275

2,379

6,566

226

110

2,829

83

Other earning assets

903,027

647,760

375,190

325,620

1,139,312

780,657

1,473,655

Total earning assets

17,248,464

16,856,313

16,242,621

15,770,142

15,984,049

17,058,030

16,021,961

ACL LHFI

(121,960

)

(119,978

)

(114,948

)

(102,951

)

(99,106

)

(120,974

)

(99,247

)

Other assets

1,648,583

1,762,449

1,630,085

1,576,653

1,513,127

1,700,643

1,531,884

Total assets

$

18,775,087

$

18,498,784

$

17,757,758

$

17,243,844

$

17,398,070

$

18,637,699

$

17,454,598

Interest-bearing demand deposits

$

4,803,737

$

4,751,154

$

4,719,303

$

4,613,733

$

4,578,235

$

4,777,591

$

4,504,058

Savings deposits

4,002,134

4,193,764

4,379,673

4,514,579

4,638,849

4,097,420

4,714,556

Time deposits

2,335,752

1,907,449

1,152,905

1,111,440

1,159,065

2,122,784

1,176,155

Total interest-bearing deposits

11,141,623

10,852,367

10,251,881

10,239,752

10,376,149

10,997,795

10,394,769

Fed funds purchased and repurchases

389,834

436,535

549,406

249,809

118,753

413,055

165,122

Other borrowings

1,330,010

1,110,843

530,993

88,697

80,283

1,221,032

85,657

Subordinated notes

123,337

123,281

123,226

123,171

123,116

123,309

123,089

Junior subordinated debt securities

61,856

61,856

61,856

61,856

61,856

61,856

61,856

Total interest-bearing liabilities

13,046,660

12,584,882

11,517,362

10,763,285

10,760,157

12,817,047

10,830,493

Noninterest-bearing deposits

3,595,927

3,813,248

4,177,113

4,444,370

4,590,338

3,703,987

4,595,693

Other liabilities

552,209

576,826

569,992

429,720

439,266

564,450

367,673

Total liabilities

17,194,796

16,974,956

16,264,467

15,637,375

15,789,761

17,085,484

15,793,859

Shareholders' equity

1,580,291

1,523,828

1,493,291

1,606,469

1,608,309

1,552,215

1,660,739

Total liabilities and equity

$

18,775,087

$

18,498,784

$

17,757,758

$

17,243,844

$

17,398,070

$

18,637,699

$

17,454,598

(1) During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.

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

June 30, 2023

($ in thousands)

(unaudited)

PERIOD END BALANCES

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

Cash and due from banks

$

832,052

$

1,297,144

$

734,787

$

479,637

$

742,461

Fed funds sold and reverse repurchases

—

—

4,000

10,098

—

Securities available for sale (1)

1,871,883

1,984,162

2,024,082

2,444,486

2,644,364

Securities held to maturity (1)

1,458,665

1,474,338

1,494,514

1,156,985

1,137,754

PPP loans

—

—

—

4,798

12,549

LHFS

181,094

175,926

135,226

165,213

190,186

LHFI

12,613,967

12,497,195

12,204,039

11,586,064

10,944,840

ACL LHFI

(129,298

)

(122,239

)

(120,214

)

(115,050

)

(103,140

)

Net LHFI

12,484,669

12,374,956

12,083,825

11,471,014

10,841,700

Premises and equipment, net

227,630

223,975

212,365

210,761

207,914

Mortgage servicing rights

134,350

127,206

129,677

132,615

121,014

Goodwill

384,237

384,237

384,237

384,237

384,237

Identifiable intangible assets

3,222

3,352

3,640

3,952

4,264

Other real estate

1,137

1,684

1,986

2,971

3,034

Operating lease right-of-use assets

38,179

35,315

36,301

37,282

34,684

Other assets

805,508

794,883

770,838

686,585

627,349

Total assets

$

18,422,626

$

18,877,178

$

18,015,478

$

17,190,634

$

16,951,510

Deposits:

Noninterest-bearing

$

3,461,073

$

3,797,055

$

4,093,771

$

4,358,805

$

4,509,472

Interest-bearing

11,452,827

10,986,606

10,343,877

10,066,375

10,260,696

Total deposits

14,913,900

14,783,661

14,437,648

14,425,180

14,770,168

Fed funds purchased and repurchases

311,179

477,980

449,331

544,068

70,157

Other borrowings

1,056,714

1,485,181

1,050,938

223,172

72,553

Subordinated notes

123,372

123,317

123,262

123,207

123,152

Junior subordinated debt securities

61,856

61,856

61,856

61,856

61,856

ACL on off-balance sheet credit exposures

34,841

34,596

36,838

31,623

32,949

Operating lease liabilities

40,845

37,988

38,932

39,797

37,108

Other liabilities

308,726

310,500

324,405

232,786

196,871

Total liabilities

16,851,433

17,315,079

16,523,210

15,681,689

15,364,814

Common stock

12,724

12,720

12,705

12,700

12,752

Capital surplus

156,834

155,297

154,645

154,150

160,876

Retained earnings

1,667,339

1,636,463

1,600,321

1,648,507

1,620,210

Accumulated other comprehensive income (loss),
net of tax

(265,704

)

(242,381

)

(275,403

)

(306,412

)

(207,142

)

Total shareholders' equity

1,571,193

1,562,099

1,492,268

1,508,945

1,586,696

Total liabilities and equity

$

18,422,626

$

18,877,178

$

18,015,478

$

17,190,634

$

16,951,510

(1) During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.

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

June 30, 2023

($ in thousands except per share data)

(unaudited)

Quarter Ended

Six Months Ended

INCOME STATEMENTS

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Interest and fees on LHFS & LHFI-FTE

$

192,941

$

178,967

$

159,566

$

129,395

$

103,033

$

371,908

$

196,285

Interest and fees on PPP loans

—

—

101

186

184

—

352

Interest on securities-taxable

16,779

16,761

16,577

16,222

14,561

33,540

26,918

Interest on securities-tax exempt-FTE

69

92

93

100

107

161

229

Interest on fed funds sold and reverse repurchases

45

30

71

2

1

75

1

Other interest income

12,077

6,527

3,556

1,493

2,214

18,604

3,031

Total interest income-FTE

221,911

202,377

179,964

147,398

120,100

424,288

226,816

Interest on deposits

54,409

40,898

18,438

5,097

2,774

95,307

5,534

Interest on fed funds purchased and repurchases

4,865

4,832

4,762

1,225

70

9,697

140

Other interest expense

19,350

15,575

6,730

1,996

1,664

34,925

3,203

Total interest expense

78,624

61,305

29,930

8,318

4,508

139,929

8,877

Net interest income-FTE

143,287

141,072

150,034

139,080

115,592

284,359

217,939

Provision for credit losses, LHFI

8,211

3,244

6,902

12,919

2,716

11,455

1,856

Provision for credit losses, off-balance sheet
credit exposures

245

(2,242

)

5,215

(1,326

)

(1,568

)

(1,997

)

(2,674

)

Net interest income after provision-FTE

134,831

140,070

137,917

127,487

114,444

274,901

218,757

Service charges on deposit accounts

10,695

10,336

11,162

11,318

10,226

21,031

19,677

Bank card and other fees

8,917

7,803

8,191

9,305

10,167

16,720

18,609

Mortgage banking, net

6,600

7,639

3,408

6,876

8,149

14,239

18,022

Insurance commissions

14,764

14,305

12,019

13,911

13,702

29,069

27,791

Wealth management

8,882

8,780

8,079

8,778

9,102

17,662

18,156

Other, net

3,695

2,514

2,311

2,418

1,907

6,209

5,113

Total noninterest income

53,553

51,377

45,170

52,606

53,253

104,930

107,368

Salaries and employee benefits

75,940

74,056

73,469

72,707

71,679

149,996

141,264

Services and fees (2)

28,264

25,426

27,709

26,787

25,659

53,690

50,973

Net occupancy-premises

7,108

7,629

7,898

7,395

6,892

14,737

13,971

Equipment expense

6,404

6,405

6,268

6,072

6,047

12,809

12,108

Litigation settlement expense (1)

—

—

100,750

—

—

—

—

Other expense (2)

14,502

14,811

15,135

13,737

13,490

29,313

26,970

Total noninterest expense

132,218

128,327

231,229

126,698

123,767

260,545

245,286

Income (loss) before income taxes and tax eq adj

56,166

63,120

(48,142

)

53,395

43,930

119,286

80,839

Tax equivalent adjustment

3,383

3,477

3,451

2,975

2,916

6,860

5,919

Income (loss) before income taxes

52,783

59,643

(51,593

)

50,420

41,014

112,426

74,920

Income taxes

7,746

9,343

(17,530

)

7,965

6,730

17,089

11,425

Net income (loss)

$

45,037

$

50,300

$

(34,063

)

$

42,455

$

34,284

$

95,337

$

63,495

Per share data

Earnings (loss) per share - basic

$

0.74

$

0.82

$

(0.56

)

$

0.69

$

0.56

$

1.56

$

1.03

Earnings (loss) per share - diluted

$

0.74

$

0.82

$

(0.56

)

$

0.69

$

0.56

$

1.56

$

1.03

Dividends per share

$

0.23

$

0.23

$

0.23

$

0.23

$

0.23

$

0.46

$

0.46

Weighted average shares outstanding

Basic

61,063,277

61,011,059

60,969,400

61,114,804

61,378,226

61,037,312

61,445,934

Diluted

61,230,031

61,193,275

61,173,249

61,318,715

61,546,285

61,206,799

61,624,569

Period end shares outstanding

61,069,036

61,048,516

60,977,686

60,953,864

61,201,123

61,069,036

61,201,123

(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

June 30, 2023

($ in thousands)

(unaudited)

Quarter Ended

NONPERFORMING ASSETS (1)

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

Nonaccrual LHFI

Alabama (2)

$

11,058

$

10,919

$

12,300

$

12,710

$

2,698

Florida

334

256

227

227

233

Mississippi (3)

36,288

32,560

24,683

23,517

23,039

Tennessee (4)

5,088

5,416

5,566

5,120

9,500

Texas

22,259

23,224

23,196

26,353

26,582

Total nonaccrual LHFI

75,027

72,375

65,972

67,927

62,052

Other real estate

Alabama (2)

—

—

194

217

84

Mississippi (3)

1,137

1,495

1,769

2,754

2,950

Tennessee (4)

—

189

23

—

—

Total other real estate

1,137

1,684

1,986

2,971

3,034

Total nonperforming assets

$

76,164

$

74,059

$

67,958

$

70,898

$

65,086

LOANS PAST DUE OVER 90 DAYS (1)

LHFI

$

3,911

$

2,255

$

3,929

$

1,842

$

1,347

LHFS-Guaranteed GNMA serviced loans

(no obligation to repurchase)

$

35,766

$

41,468

$

49,320

$

48,313

$

51,164

Quarter Ended

Six Months Ended

ACL LHFI (1)

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Beginning Balance

$

122,239

$

120,214

$

115,050

$

103,140

$

98,734

$

120,214

$

99,457

Provision for credit losses, LHFI

8,211

3,244

6,902

12,919

2,716

11,455

1,856

Charge-offs

(2,773

)

(2,996

)

(3,893

)

(2,920

)

(2,277

)

(5,769

)

(4,519

)

Recoveries

1,621

1,777

2,155

1,911

3,967

3,398

6,346

Net (charge-offs) recoveries

(1,152

)

(1,219

)

(1,738

)

(1,009

)

1,690

(2,371

)

1,827

Ending Balance

$

129,298

$

122,239

$

120,214

$

115,050

$

103,140

$

129,298

$

103,140

NET (CHARGE-OFFS) RECOVERIES (1)

Alabama (2)

$

(141

)

$

(268

)

$

98

$

93

$

1,129

$

(409

)

$

1,828

Florida

(35

)

(36

)

(60

)

(23

)

761

(71

)

735

Mississippi (3)

(762

)

(775

)

(1,657

)

(702

)

(266

)

(1,537

)

(354

)

Tennessee (4)

(166

)

(124

)

(195

)

(202

)

31

(290

)

(393

)

Texas

(48

)

(16

)

76

(175

)

35

(64

)

11

Total net (charge-offs) recoveries

$

(1,152

)

$

(1,219

)

$

(1,738

)

$

(1,009

)

$

1,690

$

(2,371

)

$

1,827

(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

June 30, 2023

($ in thousands)

(unaudited)

Quarter Ended

Six Months Ended

FINANCIAL RATIOS AND OTHER DATA

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Return on average equity

11.43

%

13.39

%

-9.05

%

10.48

%

8.55

%

12.39

%

7.71

%

Return on average tangible equity

15.18

%

18.03

%

-12.14

%

13.90

%

11.36

%

16.56

%

10.16

%

Return on average assets

0.96

%

1.10

%

-0.76

%

0.98

%

0.79

%

1.03

%

0.73

%

Interest margin - Yield - FTE

5.16

%

4.87

%

4.40

%

3.71

%

3.01

%

5.02

%

2.85

%

Interest margin - Cost

1.83

%

1.47

%

0.73

%

0.21

%

0.11

%

1.65

%

0.11

%

Net interest margin - FTE

3.33

%

3.39

%

3.66

%

3.50

%

2.90

%

3.36

%

2.74

%

Efficiency ratio (1)

66.17

%

65.60

%

65.85

%

64.96

%

71.89

%

65.89

%

74.08

%

Full-time equivalent employees

2,761

2,758

2,738

2,717

2,727

CREDIT QUALITY RATIOS (2)

Net (recoveries) charge-offs / average loans

0.04

%

0.04

%

0.06

%

0.03

%

-0.06

%

0.04

%

-0.03

%

Provision for credit losses, LHFI / average loans

0.26

%

0.10

%

0.23

%

0.45

%

0.10

%

0.18

%

0.03

%

Nonaccrual LHFI / (LHFI + LHFS)

0.59

%

0.57

%

0.53

%

0.58

%

0.56

%

Nonperforming assets / (LHFI + LHFS)

0.60

%

0.58

%

0.55

%

0.60

%

0.58

%

Nonperforming assets / (LHFI + LHFS
+ other real estate)

0.60

%

0.58

%

0.55

%

0.60

%

0.58

%

ACL LHFI / LHFI

1.03

%

0.98

%

0.99

%

0.99

%

0.94

%

ACL LHFI-commercial / commercial LHFI

0.84

%

0.80

%

0.85

%

0.93

%

0.88

%

ACL LHFI-consumer / consumer and
home mortgage LHFI

1.60

%

1.54

%

1.41

%

1.20

%

1.14

%

ACL LHFI / nonaccrual LHFI

172.34

%

168.90

%

182.22

%

169.37

%

166.22

%

ACL LHFI / nonaccrual LHFI
(excl individually analyzed loans)

301.44

%

320.80

%

399.19

%

466.03

%

475.27

%

CAPITAL RATIOS

Total equity / total assets

8.53

%

8.28

%

8.28

%

8.78

%

9.36

%

Tangible equity / tangible assets

6.56

%

6.35

%

6.27

%

6.67

%

7.23

%

Tangible equity / risk-weighted assets

7.91

%

7.94

%

7.61

%

8.15

%

9.16

%

Tier 1 leverage ratio

8.35

%

8.29

%

8.47

%

9.01

%

8.80

%

Common equity tier 1 capital ratio

9.87

%

9.76

%

9.74

%

10.63

%

11.01

%

Tier 1 risk-based capital ratio

10.27

%

10.17

%

10.15

%

11.06

%

11.47

%

Total risk-based capital ratio

12.08

%

11.95

%

11.91

%

12.85

%

13.26

%

STOCK PERFORMANCE

Market value-Close

$

21.12

$

24.70

$

34.91

$

30.63

$

29.19

Book value

$

25.73

$

25.59

$

24.47

$

24.76

$

25.93

Tangible book value

$

19.38

$

19.24

$

18.11

$

18.39

$

19.58

(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

June 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 Settlement) relating to litigation involving the Stanford Financial Group. On January 13, 2023, TNB entered into a Settlement Agreement (the Settlement Agreement) reflecting the terms of the Settlement. The parties to the Settlement Agreement are, on the one hand, (i) Ralph S. Janvey, solely in his capacity as the court-appointed receiver (the 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 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 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 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 Receiver.

The 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 Settlement.

The 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 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 Settlement Agreement (which has occurred, as described further below) may not be upheld on appeal.

The 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 Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the 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 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 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 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 Settlement Agreement and the judgment and bar order with respect to the Jackson Action.

On May 11, 2023, Robert Allen Stanford, writing from prison, appealed the District Court’s approval of the Settlement to the Fifth Circuit Court of Appeals. On June 12, 2023, the Receiver moved to dismiss the appeal as frivolous. That motion is now fully briefed and awaiting the Fifth Circuit’s decision.

The Settlement will become effective when the Fifth Circuit’s ruling in favor of the approval of the Settlement becomes final and non-appealable (the Settlement Effective Date). Within five days of the 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 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 Settlement payment.

Pending the resolution of the 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 Settlement and the 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.

At the time of the entry into the Settlement, 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. Trustmark Corporation expects that the 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

June 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:

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

SECURITIES AVAILABLE FOR SALE

U.S. Treasury securities

$

362,966

$

386,903

$

391,513

$

416,278

$

419,696

U.S. Government agency obligations

6,999

7,254

7,766

9,116

11,947

Obligations of states and political subdivisions

4,813

4,907

4,862

4,763

5,179

Mortgage-backed securities

Residential mortgage pass-through securities

Guaranteed by GNMA

25,336

26,851

27,097

28,164

32,240

Issued by FNMA and FHLMC

1,250,435

1,317,848

1,345,463

1,718,057

1,888,546

Other residential mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

98,388

108,192

115,140

126,138

144,158

Commercial mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

122,946

132,207

132,241

141,970

142,598

Total securities available for sale

$

1,871,883

$

1,984,162

$

2,024,082

$

2,444,486

$

2,644,364

SECURITIES HELD TO MATURITY

U.S. Treasury securities

$

28,679

$

28,486

$

28,295

$

—

$

—

Obligations of states and political subdivisions

1,180

4,507

4,510

4,512

5,320

Mortgage-backed securities

Residential mortgage pass-through securities

Guaranteed by GNMA

13,235

4,336

4,442

4,527

4,624

Issued by FNMA and FHLMC

484,679

497,854

509,311

179,375

185,554

Other residential mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

171,002

179,334

188,201

197,923

210,479

Commercial mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC, or GNMA

759,890

759,821

759,755

770,648

731,777

Total securities held to maturity

$

1,458,665

$

1,474,338

$

1,494,514

$

1,156,985

$

1,137,754

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 June 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 $63.4 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 99.8% 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

June 30, 2023

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI consisted of the following during the periods presented:

LHFI BY TYPE

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

Loans secured by real estate:

Construction, land development and other land loans

$

1,722,657

$

1,723,772

$

1,719,542

$

1,647,395

$

1,440,058

Secured by 1-4 family residential properties

2,854,182

2,822,048

2,775,847

2,597,112

2,424,962

Secured by nonfarm, nonresidential properties

3,471,728

3,375,579

3,278,830

3,206,946

3,178,079

Other real estate secured

954,410

847,527

742,538

593,119

555,311

Commercial and industrial loans

1,883,480

1,882,360

1,821,259

1,689,532

1,551,001

Consumer loans

163,788

162,911

166,425

163,412

160,716

State and other political subdivision loans

1,111,710

1,193,727

1,223,863

1,188,703

1,110,795

Other loans

452,012

489,271

475,735

499,845

523,918

LHFI

12,613,967

12,497,195

12,204,039

11,586,064

10,944,840

ACL LHFI

(129,298

)

(122,239

)

(120,214

)

(115,050

)

(103,140

)

Net LHFI

$

12,484,669

$

12,374,956

$

12,083,825

$

11,471,014

$

10,841,700

The following table presents the LHFI composition by region and reflects each region’s diversified mix of loans:

June 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

$

1,722,657

$

817,793

$

54,845

$

395,489

$

30,387

$

424,143

Secured by 1-4 family residential properties

2,854,182

136,612

51,817

2,555,191

83,409

27,153

Secured by nonfarm, nonresidential properties

3,471,728

954,604

225,437

1,471,341

159,402

660,944

Other real estate secured

954,410

379,984

1,805

294,497

7,376

270,748

Commercial and industrial loans

1,883,480

576,345

25,686

750,161

257,002

274,286

Consumer loans

163,788

23,925

8,354

101,026

19,411

11,072

State and other political subdivision loans

1,111,710

77,931

61,148

805,342

25,596

141,693

Other loans

452,012

110,395

9,963

219,075

48,806

63,773

Loans

$

12,613,967

$

3,077,589

$

439,055

$

6,592,122

$

631,389

$

1,873,812

CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION

Lots

$

69,120

$

29,517

$

10,179

$

14,955

$

4,362

$

10,107

Development

130,166

55,946

1,366

36,602

7,465

28,787

Unimproved land

96,994

20,854

13,859

29,651

4,564

28,066

1-4 family construction

353,056

191,964

17,325

94,139

13,996

35,632

Other construction

1,073,321

519,512

12,116

220,142

—

321,551

Construction, land development and other land loans

$

1,722,657

$

817,793

$

54,845

$

395,489

$

30,387

$

424,143

(1) Includes Georgia Loan Production Office.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2023

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)

June 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

$

363,101

$

125,094

$

26,313

$

123,940

$

20,570

$

67,184

Office

275,841

102,162

16,822

86,818

2,152

67,887

Hotel/motel

298,632

167,641

50,344

53,705

26,942

—

Mini-storage

144,253

23,282

2,002

99,182

464

19,323

Industrial

375,366

89,226

18,416

103,343

9,976

154,405

Health care

70,788

41,098

—

26,846

338

2,506

Convenience stores

32,385

7,207

438

14,279

572

9,889

Nursing homes/senior living

471,414

174,609

—

201,391

5,249

90,165

Other

132,613

44,071

9,381

60,170

8,655

10,336

Total non-owner occupied loans

2,164,393

774,390

123,716

769,674

74,918

421,695

Owner-occupied:

Office

153,392

45,525

36,517

43,905

9,906

17,539

Churches

67,325

16,766

4,394

37,537

6,069

2,559

Industrial warehouses

164,540

16,056

4,571

41,402

17,487

85,024

Health care

146,007

10,420

6,141

108,638

2,305

18,503

Convenience stores

149,551

11,834

33,888

68,713

215

34,901

Retail

88,837

11,270

9,271

40,320

18,849

9,127

Restaurants

54,460

4,191

3,925

31,241

11,844

3,259

Auto dealerships

45,878

6,151

213

22,307

17,207

—

Nursing homes/senior living

301,226

44,709

—

230,317

—

26,200

Other

136,119

13,292

2,801

77,287

602

42,137

Total owner-occupied loans

1,307,335

180,214

101,721

701,667

84,484

239,249

Loans secured by nonfarm, nonresidential properties

$

3,471,728

$

954,604

$

225,437

$

1,471,341

$

159,402

$

660,944

(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

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Securities – taxable

1.87

%

1.85

%

1.71

%

1.62

%

1.50

%

1.86

%

1.44

%

Securities – nontaxable

4.25

%

4.00

%

3.95

%

3.97

%

4.00

%

4.10

%

3.98

%

Securities – total

1.87

%

1.86

%

1.72

%

1.63

%

1.50

%

1.87

%

1.44

%

PPP loans

—

—

12.39

%

7.51

%

4.16

%

—

3.04

%

Loans - LHFI & LHFS

6.08

%

5.79

%

5.27

%

4.48

%

3.79

%

5.94

%

3.69

%

Loans - total

6.08

%

5.79

%

5.27

%

4.48

%

3.79

%

5.94

%

3.69

%

Fed funds sold & reverse repurchases

5.51

%

5.11

%

4.29

%

3.51

%

3.65

%

5.35

%

2.43

%

Other earning assets

5.36

%

4.09

%

3.76

%

1.82

%

0.78

%

4.81

%

0.41

%

Total earning assets

5.16

%

4.87

%

4.40

%

3.71

%

3.01

%

5.02

%

2.85

%

Interest-bearing deposits

1.96

%

1.53

%

0.71

%

0.20

%

0.11

%

1.75

%

0.11

%

Fed funds purchased & repurchases

5.01

%

4.49

%

3.44

%

1.95

%

0.24

%

4.73

%

0.17

%

Other borrowings

5.12

%

4.87

%

3.73

%

2.89

%

2.52

%

5.01

%

2.39

%

Total interest-bearing liabilities

2.42

%

1.98

%

1.03

%

0.31

%

0.17

%

2.20

%

0.17

%

Total Deposits

1.48

%

1.13

%

0.51

%

0.14

%

0.07

%

1.31

%

0.07

%

Net interest margin

3.33

%

3.39

%

3.66

%

3.50

%

2.90

%

3.36

%

2.74

%

Net interest margin excluding PPP loans
and the FRB balance

3.23

%

3.36

%

3.66

%

3.53

%

3.06

%

3.30

%

2.97

%

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 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 second quarter of 2023, the average FRB balance totaled $777.0 million compared to $555.5 million for the first 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 decreased 13 basis points when compared to the first quarter of 2023, totaling 3.23% for the second quarter of 2023. The decrease in the net interest margin excluding PPP loans and the FRB balance was due to increased costs of interest-bearing deposits, which was partially offset by increases in the yields on the loans held for investment and held for sale portfolio and the securities portfolio.

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 $1.3 million during the second quarter of 2023.

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:

Quarter Ended

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Mortgage servicing income, net

$

6,764

$

6,785

$

6,636

$

6,669

$

6,557

$

13,549

$

12,986

Change in fair value-MSR from runoff

(2,710

)

(1,145

)

(2,981

)

(3,462

)

(3,806

)

(3,855

)

(7,591

)

Gain on sales of loans, net

3,887

3,797

3,328

4,597

6,030

7,684

12,253

Mortgage banking income before hedge
ineffectiveness

7,941

9,437

6,983

7,804

8,781

17,378

17,648

Change in fair value-MSR from market changes

5,898

(3,972

)

(3,348

)

10,770

8,739

1,926

30,759

Change in fair value of derivatives

(7,239

)

2,174

(227

)

(11,698

)

(9,371

)

(5,065

)

(30,385

)

Net positive (negative) hedge ineffectiveness

(1,341

)

(1,798

)

(3,575

)

(928

)

(632

)

(3,139

)

374

Mortgage banking, net

$

6,600

$

7,639

$

3,408

$

6,876

$

8,149

$

14,239

$

18,022

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 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

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Partnership amortization for tax credit purposes

$

(2,019

)

$

(1,961

)

$

(1,869

)

$

(1,531

)

$

(1,475

)

$

(3,980

)

$

(2,811

)

Increase in life insurance cash surrender value

1,716

1,693

1,687

1,676

1,683

3,409

3,310

Other miscellaneous income

3,998

2,782

2,493

2,273

1,699

6,780

4,614

Total other, net

$

3,695

$

2,514

$

2,311

$

2,418

$

1,907

$

6,209

$

5,113

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

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Loan expense (1)

$

3,066

$

2,538

$

2,908

$

2,866

$

2,947

$

5,604

$

6,475

Amortization of intangibles

130

288

312

312

328

418

810

FDIC assessment expense

2,550

2,370

2,130

1,945

1,810

4,920

3,310

Other real estate expense, net

171

172

18

497

623

343

658

Other miscellaneous expense

8,585

9,443

9,767

8,117

7,782

18,028

15,717

Total other expense (1)

$

14,502

$

14,811

$

15,135

$

13,737

$

13,490

$

29,313

$

26,970

(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

June 30, 2023

($ in thousands except per share data)

(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

Quarter Ended

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

TANGIBLE EQUITY

AVERAGE BALANCES

Total shareholders' equity

$

1,580,291

$

1,523,828

$

1,493,291

$

1,606,469

$

1,608,309

$

1,552,215

$

1,660,739

Less: Goodwill

(384,237

)

(384,237

)

(384,237

)

(384,237

)

(384,237

)

(384,237

)

(384,237

)

Identifiable intangible assets

(3,301

)

(3,523

)

(3,816

)

(4,131

)

(4,436

)

(3,411

)

(4,656

)

Total average tangible equity

$

1,192,753

$

1,136,068

$

1,105,238

$

1,218,101

$

1,219,636

$

1,164,567

$

1,271,846

PERIOD END BALANCES

Total shareholders' equity

$

1,571,193

$

1,562,099

$

1,492,268

$

1,508,945

$

1,586,696

Less: Goodwill

(384,237

)

(384,237

)

(384,237

)

(384,237

)

(384,237

)

Identifiable intangible assets

(3,222

)

(3,352

)

(3,640

)

(3,952

)

(4,264

)

Total tangible equity

(a)

$

1,183,734

$

1,174,510

$

1,104,391

$

1,120,756

$

1,198,195

TANGIBLE ASSETS

Total assets

$

18,422,626

$

18,877,178

$

18,015,478

$

17,190,634

$

16,951,510

Less: Goodwill

(384,237

)

(384,237

)

(384,237

)

(384,237

)

(384,237

)

Identifiable intangible assets

(3,222

)

(3,352

)

(3,640

)

(3,952

)

(4,264

)

Total tangible assets

(b)

$

18,035,167

$

18,489,589

$

17,627,601

$

16,802,445

$

16,563,009

Risk-weighted assets

(c)

$

14,966,614

$

14,793,893

$

14,521,078

$

13,748,819

$

13,076,981

NET INCOME (LOSS) ADJUSTED FOR INTANGIBLE AMORTIZATION

Net income (loss)

$

45,037

$

50,300

$

(34,063

)

$

42,455

$

34,284

$

95,337

$

63,495

Plus: Intangible amortization net of tax

97

216

234

234

246

313

608

Net income (loss) adjusted for intangible amortization

$

45,134

$

50,516

$

(33,829

)

$

42,689

$

34,530

$

95,650

$

64,103

Period end common shares outstanding

(d)

61,069,036

61,048,516

60,977,686

60,953,864

61,201,123

TANGIBLE COMMON EQUITY MEASUREMENTS

Return on average tangible equity (1)

15.18

%

18.03

%

-12.14

%

13.90

%

11.36

%

16.56

%

10.16

%

Tangible equity/tangible assets

(a)/(b)

6.56

%

6.35

%

6.27

%

6.67

%

7.23

%

Tangible equity/risk-weighted assets

(a)/(c)

7.91

%

7.94

%

7.61

%

8.15

%

9.16

%

Tangible book value

(a)/(d)*1,000

$

19.38

$

19.24

$

18.11

$

18.39

$

19.58

COMMON EQUITY TIER 1 CAPITAL (CET1)

Total shareholders' equity

$

1,571,193

$

1,562,099

$

1,492,268

$

1,508,945

$

1,586,696

CECL transition adjustment

13,000

13,000

19,500

19,500

19,500

AOCI-related adjustments

265,704

242,381

275,403

306,412

207,142

CET1 adjustments and deductions:

Goodwill net of associated deferred
tax liabilities (DTLs)

(370,227

)

(370,234

)

(370,241

)

(370,217

)

(370,229

)

Other adjustments and deductions
for CET1 (2)

(2,915

)

(3,275

)

(3,258

)

(3,506

)

(3,757

)

CET1 capital

(e)

1,476,755

1,443,971

1,413,672

1,461,134

1,439,352

Additional tier 1 capital instruments
plus related surplus

60,000

60,000

60,000

60,000

60,000

Tier 1 capital

$

1,536,755

$

1,503,971

$

1,473,672

$

1,521,134

$

1,499,352

Common equity tier 1 capital ratio

(e)/(c)

9.87

%

9.76

%

9.74

%

10.63

%

11.01

%

(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

June 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

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Net interest income (GAAP)

$

139,904

$

137,595

$

146,583

$

136,105

$

112,676

$

277,499

$

212,020

Noninterest income (GAAP)

53,553

51,377

45,170

52,606

53,253

104,930

107,368

Pre-provision revenue

(a)

$

193,457

$

188,972

$

191,753

$

188,711

$

165,929

$

382,429

$

319,388

Noninterest expense (GAAP)

$

132,218

$

128,327

$

231,229

$

126,698

$

123,767

$

260,545

$

245,286

Less: Litigation settlement expense

—

—

(100,750

)

—

—

—

—

Adjusted noninterest expense - PPNR (Non-GAAP)

(b)

$

132,218

$

128,327

$

130,479

$

126,698

$

123,767

$

260,545

$

245,286

PPNR (Non-GAAP)

(a)-(b)

$

61,239

$

60,645

$

61,274

$

62,013

$

42,162

$

121,884

$

74,102

The following table presents Trustmark’s calculation of its efficiency ratio for the periods presented:

Quarter Ended

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

Total noninterest expense (GAAP)

$

132,218

$

128,327

$

231,229

$

126,698

$

123,767

$

260,545

$

245,286

Less: Other real estate expense, net

(171

)

(172

)

(18

)

(497

)

(623

)

(343

)

(658

)

Amortization of intangibles

(130

)

(288

)

(312

)

(312

)

(328

)

(418

)

(810

)

Charitable contributions resulting in
state tax credits

(325

)

(325

)

(375

)

(375

)

(375

)

(650

)

(750

)

Litigation settlement expense

—

—

(100,750

)

—

—

—

—

Adjusted noninterest expense (Non-GAAP)

(c)

$

131,592

$

127,542

$

129,774

$

125,514

$

122,441

$

259,134

$

243,068

Net interest income (GAAP)

$

139,904

$

137,595

$

146,583

$

136,105

$

112,676

$

277,499

$

212,020

Add: Tax equivalent adjustment

3,383

3,477

3,451

2,975

2,916

6,860

5,919

Net interest income-FTE (Non-GAAP)

(a)

$

143,287

$

141,072

$

150,034

$

139,080

$

115,592

$

284,359

$

217,939

Noninterest income (GAAP)

$

53,553

$

51,377

$

45,170

$

52,606

$

53,253

$

104,930

$

107,368

Add: Partnership amortization for tax credit purposes

2,019

1,961

1,869

1,531

1,475

3,980

2,811

Adjusted noninterest income (Non-GAAP)

(b)

$

55,572

$

53,338

$

47,039

$

54,137

$

54,728

$

108,910

$

110,179

Adjusted revenue (Non-GAAP)

(a)+(b)

$

198,859

$

194,410

$

197,073

$

193,217

$

170,320

$

393,269

$

328,118

Efficiency ratio (Non-GAAP)

(c)/((a)+(b))

66.17

%

65.60

%

65.85

%

64.96

%

71.89

%

65.89

%

74.08

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20230725007677/en/

Contacts

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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