JACKSON, Miss.--(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.
Printer friendly version of earnings release with consolidated financial statements and notes: https://www.businesswire.com/news/home/53477140/en
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
| Tennessee
| 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
| Tennessee
| 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
| 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
| 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
| (370,227 | ) | (370,234 | ) | (370,241 | ) | (370,217 | ) | (370,229 | ) | ||||||||||||||||||||
Other adjustments and deductions
| (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
| 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
| (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 | % | |||||||||||||
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
