Equibles

8-K

TRUSTMARK CORP (TRMK)

8-K 2023-10-24 For: 2023-10-24
View Original
Added on April 04, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

October 24, 2023

Date of Report (Date of earliest event reported)

img233987121_0.jpg

TRUSTMARK CORPORATION

(Exact name of registrant as specified in its charter)

Mississippi 000-03683 64-0471500
(State or other jurisdiction<br><br>of incorporation) (Commission<br><br>File Number) (IRS Employer<br><br>Identification No.)
248 East Capitol Street, Jackson, Mississippi 39201
--- ---
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (601) 208-5111

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered Pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, no par value TRMK Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On October 24, 2023, Trustmark Corporation issued a press release announcing its financial results for the period ended September 30, 2023. A copy of this press release and the accompanying financial statements and slide presentation are attached hereto as Exhibits 99.1 and 99.2 to this report and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number Description of Exhibits
99.1 Press release announcing financial results for the period ended September 30, 2023
99.2 Investor slide presentation for the period ended September 30, 2023
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TRUSTMARK CORPORATION

BY: /s/ Thomas C. Owens
Thomas C. Owens
Treasurer and Principal Financial Officer
DATE: October 24, 2023

EX-99.1

Exhibit 99.1

News Release

Trustmark Corporation Announces Third Quarter 2023 Financial Results

Performance Reflects Continued Loan and Deposit Growth, Solid Credit Quality, and Diversified Fee Income

JACKSON, Miss. – October 24, 2023 – Trustmark Corporation (NASDAQGS: TRMK) reported net income of $34.0 million in the third quarter of 2023, representing diluted earnings per share of $0.56. As previously disclosed, Trustmark recognized a litigation settlement expense of $6.5 million in the third quarter, which reduced net income by $4.9 million, or $0.08 per diluted share. Excluding this expense, Trustmark’s third quarter net income totaled $38.9 million, or $0.64 per diluted share. Please refer to the Consolidated Financial Information, Note 1 – Litigation Settlement and Note 7 – Non-GAAP Financial Measures. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2023, to shareholders of record on December 1, 2023.

Third Quarter Highlights

• Loans held for investment (HFI) increased $196.3 million, or 1.6%, from the prior quarter to $12.8 billion

• Deposits expanded $188.0 million, or 1.3%, linked-quarter to $15.1 billion

• Net interest income (FTE) totaled $141.9 million, down $1.4 million linked-quarter, resulting in a net interest margin of 3.29%

• Noninterest income totaled $52.2 million for the third quarter, representing 27.4% of total revenue

• Noninterest expense, excluding litigation settlement expense, increased 1.7% from the prior quarter

• Credit quality remained solid; net charge-offs totaled $3.6 million, or 0.11% of average loans, in the third quarter

Duane A. Dewey, President and CEO, stated, “Trustmark’s financial performance during the third quarter reflected continued loan and deposit growth, stable net interest income, strong performance in our insurance business, and solid credit quality. During the first nine months of 2023, Trustmark’s net income totaled $129.4 million, which represented diluted earnings per share of $2.11, an increase of 22.7% from the same period in 2022. We continue to implement significant cost savings initiatives to improve efficiency as well as technology to enhance our ability to grow and serve customers. Trustmark is well-positioned to respond to changing economic conditions and create long-term value for our shareholders.”

Balance Sheet Management

• Loans HFI totaled $12.8 billion, up 1.6% from the prior quarter and 10.6% year-over-year

• Deposits totaled $15.1 billion, up 1.3% from the prior quarter and 4.7% year-over-year

• Maintained strong capital position with CET1 ratio of 9.89% and total risk-based capital ratio of 12.11%

Loans HFI totaled $12.8 billion at September 30, 2023, reflecting an increase of $196.3 million, or 1.6%, linked-quarter and $1.2 billion, or 10.6%, year-over-year. The linked quarter growth primarily reflected increases in other real estate secured loans and nonfarm, nonresidential properties offset in part by declines in construction, land development and other land loans, state and other political subdivision loans, and commercial and industrial loans. Trustmark’s loan portfolio remains well-diversified by loan type and geography.

Deposits totaled $15.1 billion at September 30, 2023, up $188.0 million, or 1.3%, from the prior quarter and $676.7 million, or 4.7%, year-over-year. Trustmark continues to maintain a strong liquidity position as loans HFI represented 84.8% of total deposits at September 30, 2023. Migration into higher-yielding products continued to drive a change in deposit mix from noninterest-bearing deposits, which represented 22.0% of total deposits at September 30, 2023. Interest-bearing deposit costs totaled 2.39% in the third quarter, while the total cost of deposits was 1.84%. The total cost of interest-bearing liabilities was 2.72% in the third quarter of 2023.

As previously announced, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2023, under which $50.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2023. As of September 30, 2023, Trustmark had not repurchased any of its outstanding common shares under this program. Trustmark’s regulatory capital ratios continued to exceed all levels to be considered “well-capitalized” as of September 30, 2023. Trustmark’s tangible equity-to-tangible assets ratio was 6.57% while its total risk-based capital ratio was 12.11% at September 30, 2023.

Credit Quality

• Net charge-offs totaled $3.6 million in the third quarter, representing 0.11% of average loans

• Provision for credit losses for loans HFI was $8.3 million for the third quarter

• Allowance for credit losses (ACL) represented 1.05% of loans HFI and 273.60% of nonaccrual loans, excluding individually evaluated loans at September 30, 2023

Nonaccrual loans totaled $90.9 million at September 30, 2023, up $15.9 million from the prior quarter and $23.0 million year-over-year. Other real estate totaled $5.5 million, reflecting increases of $4.3 million from the prior quarter and $2.5 million year-over-year. Collectively, nonperforming assets totaled $96.4 million at September 30, 2023, reflecting a linked-quarter increase of $20.2 million and a year-over-year increase of $25.5 million.

During the third quarter, a fully-reserved nonaccrual loan transitioned to other real estate. This credit represented substantially all the net charge-offs experienced during the quarter and was also responsible for the increase in other real estate.

The provision for credit losses for loans HFI was $8.3 million in the third quarter and was primarily attributable to a single new individually evaluated nonaccrual loan for which specific reserves were established, a weakening macroeconomic forecast, loan growth, and net adjustments to the qualitative factors. The provision for credit losses for off-balance sheet credit exposures was $104 thousand in the third quarter. Collectively, the provision for credit losses totaled $8.4 million in the third quarter compared to $8.5 million in the prior quarter and $11.6 million in the third quarter of 2022.

Allocation of Trustmark’s $134.0 million ACL on loans HFI represented 0.86% of commercial loans and 1.66% of consumer and home mortgage loans, resulting in an allowance to total loans HFI of 1.05% at September 30, 2023. Management believes the level of the ACL is commensurate with the credit losses currently expected in the loan portfolio.

Revenue Generation

• Revenue totaled $190.9 million, down 1.3% linked-quarter

• Net interest income (FTE) totaled $141.9 million in the third quarter, down 0.9% from the prior quarter

• Noninterest income totaled $52.2 million, representing 27.4% of total revenue in the third quarter

Net interest income (FTE) in the third quarter totaled $141.9 million, resulting in a net interest margin of 3.29%, down 4 basis points from the prior quarter. The decrease in the net interest margin was due to increased costs of interest-bearing deposits which were partially offset by increased yields on the loans HFI and HFS portfolio and securities portfolio.

Noninterest income in the third quarter totaled $52.2 million, a decrease of $1.3 million from the prior quarter and $382 thousand year-over-year. The linked-quarter decline was attributable to lower other income net, bank card and other fees, mortgage banking revenue, and wealth management revenue, which were offset in part by increased insurance commissions and service charges on deposit accounts.

Mortgage loan production in the third quarter totaled $389.9 million, down 9.6% from the prior quarter and 23.3% year-over-year. Mortgage banking revenue totaled $6.5 million in the third quarter, a decrease of $142 thousand from the prior quarter and $418 thousand year-over-year. The linked-quarter decrease was principally attributable to accelerated amortization of mortgage servicing rights offset in part by reduced net negative hedge ineffectiveness.

Insurance commissions totaled $15.3 million in the third quarter, up $539 thousand, or 3.7%, linked-quarter and $1.4 million, or 10.0%, year-over-year due principally to increased property and casualty and group health commissions. Wealth management revenue totaled $8.8 million in the third quarter, a decrease of $109 thousand, or 1.2%, from the prior quarter and unchanged year-over-year. The linked-quarter change reflected growth in investment services, which was more than offset by lower trust management revenue. Service charges on deposit accounts increased $379 thousand, or 3.5%, from the prior quarter and declined $244 thousand, or 2.2%, year-over-year. Bank card and other fees decreased $700 thousand from the prior quarter and $1.1 million year-over-year. The linked-quarter change was attributable to seasonal factors while the year-over-year change was due to reduced customer derivative revenue.

Noninterest Expense

• Total noninterest expense in the third quarter was $140.9 million; excluding litigation settlement expense of $6.5 million, noninterest expense was $134.4 million, up $2.2 million, or 1.7%, from the prior quarter. Please refer to the Consolidated Financial Information, Note 7 – Non-GAAP Financial Measures

• FDIC assessment expense totaled $3.8 million in the third quarter, up $1.2 million, or 47.6%, from the prior quarter

Salaries and employee benefits increased $726 thousand, or 1.0%, linked-quarter due primarily to increased salary expense. Services and fees decreased $382 thousand, or 1.4%, linked-quarter due to reduced professional fees. Net occupancy-premises expense increased $275 thousand, or 3.9%, linked-quarter due in part to seasonal increases in utilities and increased rental expense. Equipment expense increased $412 thousand, or 6.4%, linked-quarter. Other expense increased $1.2 million, or 8.2%, linked-quarter, principally due to increased FDIC assessment expense.

FIT2GROW

“In 2022, we announced FIT2GROW, a comprehensive program of Focus, Innovation and Transformation designed to enhance our ability to grow and serve customers. Our Atlanta-based Equipment Finance division, established in late 2022, continues to gain traction as its portfolio has grown to $191 million as of September 30, 2023. Implementation of our technology plans for conversion of our deposit/teller/customer information system continued during the quarter. In addition, work continued on the design of our sales through service process, which will be implemented across the retail branch network in early 2024. These actions, along with cost savings initiatives, are designed to enhance Trustmark’s performance and build long-term value for our shareholders,” said Dewey.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 25, 2023, at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, November 8, 2023, in archived format at the same web address or by calling (877) 344-7529, passcode 4921731.

Trustmark is a financial services company providing banking and financial solutions through offices in Alabama, Florida, Georgia, Mississippi, Tennessee, and Texas.

Forward-Looking Statements

Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential,” “seek,” “continue,” “could,” “would,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission (SEC) could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, an increase in unemployment levels and slowdowns in economic growth, actions by the Board of Governors of the Federal Reserve System (FRB) that impact the level of market interest rates, local, state and national economic and market conditions, conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets, levels of and volatility in crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of issues related to the European financial system and monetary and other governmental actions designed to address credit, securities, and/or commodity markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer

spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, pandemics or other health crises, acts of war or terrorism, and other risks described in our filings with the SEC.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.

Trustmark Investor Contacts: Trustmark Media Contact:
Thomas C. Owens Melanie A. Morgan
Treasurer and Senior Vice President
Principal Financial Officer 601-208-2979
601-208-7853

F. Joseph Rein, Jr.

Senior Vice President

601-208-6898

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands)
(unaudited)
Linked Quarter Year over Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
QUARTERLY AVERAGE BALANCES 9/30/2023 6/30/2023 9/30/2022 Change % Change Change % Change
Securities AFS-taxable (1) $ 2,049,006 $ 2,140,505 $ 2,824,254 ) -4.3 % ) -27.4 %
Securities AFS-nontaxable 4,779 4,796 4,928 ) -0.4 % ) -3.0 %
Securities HTM-taxable (1) 1,445,895 1,463,086 1,140,685 ) -1.2 % 26.8 %
Securities HTM-nontaxable 907 1,718 5,057 ) -47.2 % ) -82.1 %
Total securities 3,500,587 3,610,105 3,974,924 ) -3.0 % ) -11.9 %
Paycheck protection program loans (PPP) — — 9,821 n/m ) -100.0 %
Loans (includes loans held for sale) 12,926,942 12,732,057 11,459,551 1.5 % 12.8 %
Fed funds sold and reverse repurchases 230 3,275 226 ) -93.0 % 1.8 %
Other earning assets 682,644 903,027 325,620 ) -24.4 % n/m
Total earning assets 17,110,403 17,248,464 15,770,142 ) -0.8 % 8.5 %
Allowance for credit losses (ACL), loans held <br>   for investment (LHFI) (127,915 ) (121,960 ) (102,951 ) ) -4.9 % ) -24.2 %
Other assets 1,721,310 1,648,583 1,576,653 4.4 % 9.2 %
Total assets $ 18,703,798 $ 18,775,087 $ 17,243,844 ) -0.4 % 8.5 %
Interest-bearing demand deposits $ 4,875,714 $ 4,803,737 $ 4,613,733 1.5 % 5.7 %
Savings deposits 3,642,158 4,002,134 4,514,579 ) -9.0 % ) -19.3 %
Time deposits 3,075,224 2,335,752 1,111,440 31.7 % n/m
Total interest-bearing deposits 11,593,096 11,141,623 10,239,752 4.1 % 13.2 %
Fed funds purchased and repurchases 414,696 389,834 249,809 6.4 % 66.0 %
Other borrowings 912,151 1,330,010 88,697 ) -31.4 % n/m
Subordinated notes 123,391 123,337 123,171 0.0 % 0.2 %
Junior subordinated debt securities 61,856 61,856 61,856 0.0 % 0.0 %
Total interest-bearing liabilities 13,105,190 13,046,660 10,763,285 0.4 % 21.8 %
Noninterest-bearing deposits 3,429,815 3,595,927 4,444,370 ) -4.6 % ) -22.8 %
Other liabilities 585,908 552,209 429,720 6.1 % 36.3 %
Total liabilities 17,120,913 17,194,796 15,637,375 ) -0.4 % 9.5 %
Shareholders' equity 1,582,885 1,580,291 1,606,469 0.2 % ) -1.5 %
Total liabilities and equity $ 18,703,798 $ 18,775,087 $ 17,243,844 ) -0.4 % 8.5 %
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
n/m - percentage changes greater than +/- 100% are considered not meaningful

All values are in US Dollars.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands)
(unaudited)
Linked Quarter Year over Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
PERIOD END BALANCES 9/30/2023 6/30/2023 9/30/2022 Change % Change Change % Change
Cash and due from banks $ 750,492 $ 832,052 $ 479,637 ) -9.8 % 56.5 %
Fed funds sold and reverse repurchases — — 10,098 n/m ) -100.0 %
Securities available for sale (1) 1,766,174 1,871,883 2,444,486 ) -5.6 % ) -27.7 %
Securities held to maturity (1) 1,438,287 1,458,665 1,156,985 ) -1.4 % 24.3 %
PPP loans — — 4,798 n/m ) -100.0 %
Loans held for sale (LHFS) 169,244 181,094 165,213 ) -6.5 % 2.4 %
Loans held for investment (LHFI) 12,810,259 12,613,967 11,586,064 1.6 % 10.6 %
ACL LHFI (134,031 ) (129,298 ) (115,050 ) ) -3.7 % ) -16.5 %
Net LHFI 12,676,228 12,484,669 11,471,014 1.5 % 10.5 %
Premises and equipment, net 230,718 227,630 210,761 1.4 % 9.5 %
Mortgage servicing rights 142,379 134,350 132,615 6.0 % 7.4 %
Goodwill 384,237 384,237 384,237 0.0 % 0.0 %
Identifiable intangible assets 3,093 3,222 3,952 ) -4.0 % ) -21.7 %
Other real estate 5,485 1,137 2,971 n/m 84.6 %
Operating lease right-of-use assets 39,639 38,179 37,282 3.8 % 6.3 %
Other assets 784,863 805,508 686,585 ) -2.6 % 14.3 %
Total assets $ 18,390,839 $ 18,422,626 $ 17,190,634 ) -0.2 % 7.0 %
Deposits:
Noninterest-bearing $ 3,320,124 $ 3,461,073 $ 4,358,805 ) -4.1 % ) -23.8 %
Interest-bearing 11,781,799 11,452,827 10,066,375 2.9 % 17.0 %
Total deposits 15,101,923 14,913,900 14,425,180 1.3 % 4.7 %
Fed funds purchased and repurchases 321,799 311,179 544,068 3.4 % ) -40.9 %
Other borrowings 793,193 1,056,714 223,172 ) -24.9 % n/m
Subordinated notes 123,427 123,372 123,207 0.0 % 0.2 %
Junior subordinated debt securities 61,856 61,856 61,856 0.0 % 0.0 %
ACL on off-balance sheet credit exposures 34,945 34,841 31,623 0.3 % 10.5 %
Operating lease liabilities 42,730 40,845 39,797 4.6 % 7.4 %
Other liabilities 340,615 308,726 232,786 10.3 % 46.3 %
Total liabilities 16,820,488 16,851,433 15,681,689 ) -0.2 % 7.3 %
Common stock 12,724 12,724 12,700 0.0 % 0.2 %
Capital surplus 158,316 156,834 154,150 0.9 % 2.7 %
Retained earnings 1,687,199 1,667,339 1,648,507 1.2 % 2.3 %
Accumulated other comprehensive <br>   income (loss), net of tax (287,888 ) (265,704 ) (306,412 ) ) -8.3 % 6.0 %
Total shareholders' equity 1,570,351 1,571,193 1,508,945 ) -0.1 % 4.1 %
Total liabilities and equity $ 18,390,839 $ 18,422,626 $ 17,190,634 ) -0.2 % 7.0 %
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
n/m - percentage changes greater than +/- 100% are considered not meaningful

All values are in US Dollars.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands except per share data)
(unaudited)
Quarter Ended Linked Quarter Year over Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
INCOME STATEMENTS 9/30/2023 6/30/2023 9/30/2022 Change % Change Change % Change
Interest and fees on LHFS & LHFI-FTE $ 206,523 $ 192,941 $ 129,395 7.0 % 59.6 %
Interest and fees on PPP loans — — 186 n/m ) -100.0 %
Interest on securities-taxable 16,624 16,779 16,222 ) -0.9 % 2.5 %
Interest on securities-tax exempt-FTE 58 69 100 ) -15.9 % ) -42.0 %
Interest on fed funds sold and reverse<br>   repurchases 3 45 2 ) -93.3 % 50.0 %
Other interest income 8,613 12,077 1,493 ) -28.7 % n/m
Total interest income-FTE 231,821 221,911 147,398 4.5 % 57.3 %
Interest on deposits 69,797 54,409 5,097 28.3 % n/m
Interest on fed funds purchased and repurchases 5,375 4,865 1,225 10.5 % n/m
Other interest expense 14,713 19,350 1,996 ) -24.0 % n/m
Total interest expense 89,885 78,624 8,318 14.3 % n/m
Net interest income-FTE 141,936 143,287 139,080 ) -0.9 % 2.1 %
Provision for credit losses, LHFI 8,322 8,211 12,919 1.4 % ) -35.6 %
Provision for credit losses, off-balance sheet <br>   credit exposures 104 245 (1,326 ) ) -57.6 % n/m
Net interest income after provision-FTE 133,510 134,831 127,487 ) -1.0 % 4.7 %
Service charges on deposit accounts 11,074 10,695 11,318 3.5 % ) -2.2 %
Bank card and other fees 8,217 8,917 9,305 ) -7.9 % ) -11.7 %
Mortgage banking, net 6,458 6,600 6,876 ) -2.2 % ) -6.1 %
Insurance commissions 15,303 14,764 13,911 3.7 % 10.0 %
Wealth management 8,773 8,882 8,778 ) -1.2 % ) -0.1 %
Other, net 2,399 3,695 2,418 ) -35.1 % ) -0.8 %
Total noninterest income 52,224 53,553 52,606 ) -2.5 % ) -0.7 %
Salaries and employee benefits 76,666 75,940 72,707 1.0 % 5.4 %
Services and fees (2) 27,882 28,264 26,787 ) -1.4 % 4.1 %
Net occupancy-premises 7,383 7,108 7,395 3.9 % ) -0.2 %
Equipment expense 6,816 6,404 6,072 6.4 % 12.3 %
Litigation settlement expense (1) 6,500 — — n/m n/m
Other expense (2) 15,698 14,502 13,737 8.2 % 14.3 %
Total noninterest expense 140,945 132,218 126,698 6.6 % 11.2 %
Income (loss) before income taxes and tax eq adj 44,789 56,166 53,395 ) -20.3 % ) -16.1 %
Tax equivalent adjustment 3,299 3,383 2,975 ) -2.5 % 10.9 %
Income (loss) before income taxes 41,490 52,783 50,420 ) -21.4 % ) -17.7 %
Income taxes 7,461 7,746 7,965 ) -3.7 % ) -6.3 %
Net income (loss) $ 34,029 $ 45,037 $ 42,455 ) -24.4 % ) -19.8 %
Per share data
Earnings (loss) per share - basic $ 0.56 $ 0.74 $ 0.69 ) -24.3 % ) -18.8 %
Earnings (loss) per share - diluted $ 0.56 $ 0.74 $ 0.69 ) -24.3 % ) -18.8 %
Dividends per share $ 0.23 $ 0.23 $ 0.23 0.0 % 0.0 %
Weighted average shares outstanding
Basic 61,069,750 61,063,277 61,114,804
Diluted 61,263,032 61,230,031 61,318,715
Period end shares outstanding 61,070,095 61,069,036 60,953,864
(1) See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information.
(2) During the first quarter of 2023, Trustmark reclassified its debit card transaction fees from other expense to services and fees. Prior periods have been reclassified accordingly.
n/m - percentage changes greater than +/- 100% are considered not meaningful

All values are in US Dollars.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands)
(unaudited)
Quarter Ended Linked Quarter Year over Year
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
NONPERFORMING ASSETS (1) 9/30/2023 6/30/2023 9/30/2022 Change % Change Change % Change
Nonaccrual LHFI
Alabama (2) $ 23,530 $ 11,058 $ 12,710 n/m 85.1 %
Florida 151 334 227 ) -54.8 % ) -33.5 %
Mississippi (3) 45,050 36,288 23,517 24.1 % 91.6 %
Tennessee (4) 1,841 5,088 5,120 ) -63.8 % ) -64.0 %
Texas 20,327 22,259 26,353 ) -8.7 % ) -22.9 %
Total nonaccrual LHFI 90,899 75,027 67,927 21.2 % 33.8 %
Other real estate
Alabama (2) 315 — 217 n/m 45.2 %
Mississippi (3) 942 1,137 2,754 ) -17.2 % ) -65.8 %
Texas 4,228 — — n/m n/m
Total other real estate 5,485 1,137 2,971 n/m 84.6 %
Total nonperforming assets $ 96,384 $ 76,164 $ 70,898 26.5 % 35.9 %
LOANS PAST DUE OVER 90 DAYS (1)
LHFI $ 3,804 $ 3,911 $ 1,842 ) -2.7 % n/m
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 42,532 $ 35,766 $ 48,313 18.9 % ) -12.0 %
Quarter Ended Linked Quarter Year over Year
ACL LHFI (1) 9/30/2023 6/30/2023 9/30/2022 Change % Change Change % Change
Beginning Balance $ 129,298 $ 122,239 $ 103,140 5.8 % 25.4 %
Provision for credit losses, LHFI 8,322 8,211 12,919 1.4 % ) -35.6 %
Charge-offs (7,496 ) (2,773 ) (2,920 ) ) n/m ) n/m
Recoveries 3,907 1,621 1,911 n/m n/m
Net (charge-offs) recoveries (3,589 ) (1,152 ) (1,009 ) ) n/m ) n/m
Ending Balance $ 134,031 $ 129,298 $ 115,050 3.7 % 16.5 %
NET (CHARGE-OFFS) RECOVERIES (1)
Alabama (2) $ (165 ) $ (141 ) $ 93 ) -17.0 % ) n/m
Florida 21 (35 ) (23 ) n/m n/m
Mississippi (3) (1,867 ) (762 ) (702 ) ) n/m ) n/m
Tennessee (4) 2,127 (166 ) (202 ) n/m n/m
Texas (3,705 ) (48 ) (175 ) ) n/m ) n/m
Total net (charge-offs) recoveries $ (3,589 ) $ (1,152 ) $ (1,009 ) ) n/m ) 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

All values are in US Dollars.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands)
(unaudited)
Quarter Ended Nine Months Ended
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
AVERAGE BALANCES 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Securities AFS-taxable (1) $ 2,049,006 $ 2,140,505 $ 2,187,121 $ 2,572,675 $ 2,824,254 $ 2,125,038 $ 3,053,164
Securities AFS-nontaxable 4,779 4,796 4,812 4,828 4,928 4,796 5,054
Securities HTM-taxable (1) 1,445,895 1,463,086 1,479,283 1,268,952 1,140,685 1,462,632 790,385
Securities HTM-nontaxable 907 1,718 4,509 4,514 5,057 2,365 5,996
Total securities 3,500,587 3,610,105 3,675,725 3,850,969 3,974,924 3,594,831 3,854,599
PPP loans — — — 3,235 9,821 — 18,788
Loans (includes loans held for sale) 12,926,942 12,732,057 12,530,449 12,006,661 11,459,551 12,731,268 10,976,809
Fed funds sold and reverse repurchases 230 3,275 2,379 6,566 226 1,953 131
Other earning assets 682,644 903,027 647,760 375,190 325,620 747,627 1,086,771
Total earning assets 17,110,403 17,248,464 16,856,313 16,242,621 15,770,142 17,075,679 15,937,098
ACL LHFI (127,915 ) (121,960 ) (119,978 ) (114,948 ) (102,951 ) (123,313 ) (100,495 )
Other assets 1,721,310 1,648,583 1,762,449 1,630,085 1,576,653 1,707,608 1,546,972
Total assets $ 18,703,798 $ 18,775,087 $ 18,498,784 $ 17,757,758 $ 17,243,844 $ 18,659,974 $ 17,383,575
Interest-bearing demand deposits $ 4,875,714 $ 4,803,737 $ 4,751,154 $ 4,719,303 $ 4,613,733 $ 4,810,658 $ 4,541,018
Savings deposits 3,642,158 4,002,134 4,193,764 4,379,673 4,514,579 3,943,998 4,647,164
Time deposits 3,075,224 2,335,752 1,907,449 1,152,905 1,111,440 2,443,753 1,154,346
Total interest-bearing deposits 11,593,096 11,141,623 10,852,367 10,251,881 10,239,752 11,198,409 10,342,528
Fed funds purchased and repurchases 414,696 389,834 436,535 549,406 249,809 413,608 193,661
Other borrowings 912,151 1,330,010 1,110,843 530,993 88,697 1,116,940 86,681
Subordinated notes 123,391 123,337 123,281 123,226 123,171 123,337 123,116
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856 61,856 61,856
Total interest-bearing liabilities 13,105,190 13,046,660 12,584,882 11,517,362 10,763,285 12,914,150 10,807,842
Noninterest-bearing deposits 3,429,815 3,595,927 3,813,248 4,177,113 4,444,370 3,611,592 4,544,698
Other liabilities 585,908 552,209 576,826 569,992 429,720 571,681 388,585
Total liabilities 17,120,913 17,194,796 16,974,956 16,264,467 15,637,375 17,097,423 15,741,125
Shareholders' equity 1,582,885 1,580,291 1,523,828 1,493,291 1,606,469 1,562,551 1,642,450
Total liabilities and equity $ 18,703,798 $ 18,775,087 $ 18,498,784 $ 17,757,758 $ 17,243,844 $ 18,659,974 $ 17,383,575
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands)
(unaudited)
PERIOD END BALANCES 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Cash and due from banks $ 750,492 $ 832,052 $ 1,297,144 $ 734,787 $ 479,637
Fed funds sold and reverse repurchases — — — 4,000 10,098
Securities available for sale (1) 1,766,174 1,871,883 1,984,162 2,024,082 2,444,486
Securities held to maturity (1) 1,438,287 1,458,665 1,474,338 1,494,514 1,156,985
PPP loans — — — — 4,798
LHFS 169,244 181,094 175,926 135,226 165,213
LHFI 12,810,259 12,613,967 12,497,195 12,204,039 11,586,064
ACL LHFI (134,031 ) (129,298 ) (122,239 ) (120,214 ) (115,050 )
Net LHFI 12,676,228 12,484,669 12,374,956 12,083,825 11,471,014
Premises and equipment, net 230,718 227,630 223,975 212,365 210,761
Mortgage servicing rights 142,379 134,350 127,206 129,677 132,615
Goodwill 384,237 384,237 384,237 384,237 384,237
Identifiable intangible assets 3,093 3,222 3,352 3,640 3,952
Other real estate 5,485 1,137 1,684 1,986 2,971
Operating lease right-of-use assets 39,639 38,179 35,315 36,301 37,282
Other assets 784,863 805,508 794,883 770,838 686,585
Total assets $ 18,390,839 $ 18,422,626 $ 18,877,178 $ 18,015,478 $ 17,190,634
Deposits:
Noninterest-bearing $ 3,320,124 $ 3,461,073 $ 3,797,055 $ 4,093,771 $ 4,358,805
Interest-bearing 11,781,799 11,452,827 10,986,606 10,343,877 10,066,375
Total deposits 15,101,923 14,913,900 14,783,661 14,437,648 14,425,180
Fed funds purchased and repurchases 321,799 311,179 477,980 449,331 544,068
Other borrowings 793,193 1,056,714 1,485,181 1,050,938 223,172
Subordinated notes 123,427 123,372 123,317 123,262 123,207
Junior subordinated debt securities 61,856 61,856 61,856 61,856 61,856
ACL on off-balance sheet credit exposures 34,945 34,841 34,596 36,838 31,623
Operating lease liabilities 42,730 40,845 37,988 38,932 39,797
Other liabilities 340,615 308,726 310,500 324,405 232,786
Total liabilities 16,820,488 16,851,433 17,315,079 16,523,210 15,681,689
Common stock 12,724 12,724 12,720 12,705 12,700
Capital surplus 158,316 156,834 155,297 154,645 154,150
Retained earnings 1,687,199 1,667,339 1,636,463 1,600,321 1,648,507
Accumulated other comprehensive income (loss), <br>   net of tax (287,888 ) (265,704 ) (242,381 ) (275,403 ) (306,412 )
Total shareholders' equity 1,570,351 1,571,193 1,562,099 1,492,268 1,508,945
Total liabilities and equity $ 18,390,839 $ 18,422,626 $ 18,877,178 $ 18,015,478 $ 17,190,634
(1) See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands except per share data)
(unaudited)
Quarter Ended Nine Months Ended
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
INCOME STATEMENTS 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Interest and fees on LHFS & LHFI-FTE $ 206,523 $ 192,941 $ 178,967 $ 159,566 $ 129,395 $ 578,431 $ 325,680
Interest and fees on PPP loans — — — 101 186 — 538
Interest on securities-taxable 16,624 16,779 16,761 16,577 16,222 50,164 43,140
Interest on securities-tax exempt-FTE 58 69 92 93 100 219 329
Interest on fed funds sold and reverse repurchases 3 45 30 71 2 78 3
Other interest income 8,613 12,077 6,527 3,556 1,493 27,217 4,524
Total interest income-FTE 231,821 221,911 202,377 179,964 147,398 656,109 374,214
Interest on deposits 69,797 54,409 40,898 18,438 5,097 165,104 10,631
Interest on fed funds purchased and repurchases 5,375 4,865 4,832 4,762 1,225 15,072 1,365
Other interest expense 14,713 19,350 15,575 6,730 1,996 49,638 5,199
Total interest expense 89,885 78,624 61,305 29,930 8,318 229,814 17,195
Net interest income-FTE 141,936 143,287 141,072 150,034 139,080 426,295 357,019
Provision for credit losses, LHFI 8,322 8,211 3,244 6,902 12,919 19,777 14,775
Provision for credit losses, off-balance sheet <br>   credit exposures 104 245 (2,242 ) 5,215 (1,326 ) (1,893 ) (4,000 )
Net interest income after provision-FTE 133,510 134,831 140,070 137,917 127,487 408,411 346,244
Service charges on deposit accounts 11,074 10,695 10,336 11,162 11,318 32,105 30,995
Bank card and other fees 8,217 8,917 7,803 8,191 9,305 24,937 27,914
Mortgage banking, net 6,458 6,600 7,639 3,408 6,876 20,697 24,898
Insurance commissions 15,303 14,764 14,305 12,019 13,911 44,372 41,702
Wealth management 8,773 8,882 8,780 8,079 8,778 26,435 26,934
Other, net 2,399 3,695 2,514 2,311 2,418 8,608 7,531
Total noninterest income 52,224 53,553 51,377 45,170 52,606 157,154 159,974
Salaries and employee benefits 76,666 75,940 74,056 73,469 72,707 226,662 213,971
Services and fees (2) 27,882 28,264 25,426 27,709 26,787 81,572 77,760
Net occupancy-premises 7,383 7,108 7,629 7,898 7,395 22,120 21,366
Equipment expense 6,816 6,404 6,405 6,268 6,072 19,625 18,180
Litigation settlement expense (1) 6,500 — — 100,750 — 6,500 —
Other expense (2) 15,698 14,502 14,811 15,135 13,737 45,011 40,707
Total noninterest expense 140,945 132,218 128,327 231,229 126,698 401,490 371,984
Income (loss) before income taxes and tax eq adj 44,789 56,166 63,120 (48,142 ) 53,395 164,075 134,234
Tax equivalent adjustment 3,299 3,383 3,477 3,451 2,975 10,159 8,894
Income (loss) before income taxes 41,490 52,783 59,643 (51,593 ) 50,420 153,916 125,340
Income taxes 7,461 7,746 9,343 (17,530 ) 7,965 24,550 19,390
Net income (loss) $ 34,029 $ 45,037 $ 50,300 $ (34,063 ) $ 42,455 $ 129,366 $ 105,950
Per share data
Earnings (loss) per share - basic $ 0.56 $ 0.74 $ 0.82 $ (0.56 ) $ 0.69 $ 2.12 $ 1.73
Earnings (loss) per share - diluted $ 0.56 $ 0.74 $ 0.82 $ (0.56 ) $ 0.69 $ 2.11 $ 1.72
Dividends per share $ 0.23 $ 0.23 $ 0.23 $ 0.23 $ 0.23 $ 0.69 $ 0.69
Weighted average shares outstanding
Basic 61,069,750 61,063,277 61,011,059 60,969,400 61,114,804 61,048,244 61,334,344
Diluted 61,263,032 61,230,031 61,193,275 61,173,249 61,318,715 61,219,022 61,519,685
Period end shares outstanding 61,070,095 61,069,036 61,048,516 60,977,686 60,953,864 61,070,095 60,953,864
(1) See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information.
(2) During the first quarter of 2023, Trustmark reclassified its debit card transaction fees from other expense to services and fees. Prior periods have been reclassified accordingly.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
($ in thousands)
(unaudited)
Quarter Ended
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
NONPERFORMING ASSETS (1) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
Nonaccrual LHFI
Alabama (2) $ 23,530 $ 11,058 $ 10,919 $ 12,300 $ 12,710
Florida 151 334 256 227 227
Mississippi (3) 45,050 36,288 32,560 24,683 23,517
Tennessee (4) 1,841 5,088 5,416 5,566 5,120
Texas 20,327 22,259 23,224 23,196 26,353
Total nonaccrual LHFI 90,899 75,027 72,375 65,972 67,927
Other real estate
Alabama (2) 315 — — 194 217
Mississippi (3) 942 1,137 1,495 1,769 2,754
Tennessee (4) — — 189 23 —
Texas 4,228 — — — —
Total other real estate 5,485 1,137 1,684 1,986 2,971
Total nonperforming assets $ 96,384 $ 76,164 $ 74,059 $ 67,958 $ 70,898
LOANS PAST DUE OVER 90 DAYS (1)
LHFI $ 3,804 $ 3,911 $ 2,255 $ 3,929 $ 1,842
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase) $ 42,532 $ 35,766 $ 41,468 $ 49,320 $ 48,313
Quarter Ended Nine Months Ended
ACL LHFI (1) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Beginning Balance $ 129,298 $ 122,239 $ 120,214 $ 115,050 $ 103,140 $ 120,214 $ 99,457
Provision for credit losses, LHFI 8,322 8,211 3,244 6,902 12,919 19,777 14,775
Charge-offs (7,496 ) (2,773 ) (2,996 ) (3,893 ) (2,920 ) (13,265 ) (7,439 )
Recoveries 3,907 1,621 1,777 2,155 1,911 7,305 8,257
Net (charge-offs) recoveries (3,589 ) (1,152 ) (1,219 ) (1,738 ) (1,009 ) (5,960 ) 818
Ending Balance $ 134,031 $ 129,298 $ 122,239 $ 120,214 $ 115,050 $ 134,031 $ 115,050
NET (CHARGE-OFFS) RECOVERIES (1)
Alabama (2) $ (165 ) $ (141 ) $ (268 ) $ 98 $ 93 $ (574 ) $ 1,921
Florida 21 (35 ) (36 ) (60 ) (23 ) (50 ) 712
Mississippi (3) (1,867 ) (762 ) (775 ) (1,657 ) (702 ) (3,404 ) (1,056 )
Tennessee (4) 2,127 (166 ) (124 ) (195 ) (202 ) 1,837 (595 )
Texas (3,705 ) (48 ) (16 ) 76 (175 ) (3,769 ) (164 )
Total net (charge-offs) recoveries $ (3,589 ) $ (1,152 ) $ (1,219 ) $ (1,738 ) $ (1,009 ) $ (5,960 ) $ 818
(1) Excludes PPP loans.
(2) Alabama includes the Georgia Loan Production Office.
(3) Mississippi includes Central and Southern Mississippi Regions.
(4) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2023
(unaudited)
Quarter Ended Nine Months Ended
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
FINANCIAL RATIOS AND OTHER DATA 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Return on average equity 8.53 % 11.43 % 13.39 % -9.05 % 10.48 % 11.07 % 8.62 %
Return on average tangible equity 11.32 % 15.18 % 18.03 % -12.14 % 13.90 % 14.77 % 11.39 %
Return on average assets 0.72 % 0.96 % 1.10 % -0.76 % 0.98 % 0.93 % 0.81 %
Interest margin - Yield - FTE 5.38 % 5.16 % 4.87 % 4.40 % 3.71 % 5.14 % 3.14 %
Interest margin - Cost 2.08 % 1.83 % 1.47 % 0.73 % 0.21 % 1.80 % 0.14 %
Net interest margin - FTE 3.29 % 3.33 % 3.39 % 3.66 % 3.50 % 3.34 % 3.00 %
Efficiency ratio (1) 68.33 % 66.17 % 65.60 % 65.85 % 64.96 % 66.70 % 70.70 %
Full-time equivalent employees 2,756 2,761 2,758 2,738 2,717
CREDIT QUALITY RATIOS (2)
Net (recoveries) charge-offs / average loans 0.11 % 0.04 % 0.04 % 0.06 % 0.03 % 0.06 % -0.01 %
Provision for credit losses, LHFI / average loans 0.26 % 0.26 % 0.10 % 0.23 % 0.45 % 0.21 % 0.18 %
Nonaccrual LHFI / (LHFI + LHFS) 0.70 % 0.59 % 0.57 % 0.53 % 0.58 %
Nonperforming assets / (LHFI + LHFS) 0.74 % 0.60 % 0.58 % 0.55 % 0.60 %
Nonperforming assets / (LHFI + LHFS <br>   + other real estate) 0.74 % 0.60 % 0.58 % 0.55 % 0.60 %
ACL LHFI / LHFI 1.05 % 1.03 % 0.98 % 0.99 % 0.99 %
ACL LHFI-commercial / commercial LHFI 0.86 % 0.84 % 0.80 % 0.85 % 0.93 %
ACL LHFI-consumer / consumer and <br>   home mortgage LHFI 1.66 % 1.60 % 1.54 % 1.41 % 1.20 %
ACL LHFI / nonaccrual LHFI 147.45 % 172.34 % 168.90 % 182.22 % 169.37 %
ACL LHFI / nonaccrual LHFI <br>   (excl individually analyzed loans) 273.60 % 301.44 % 320.80 % 399.19 % 466.03 %
CAPITAL RATIOS
Total equity / total assets 8.54 % 8.53 % 8.28 % 8.28 % 8.78 %
Tangible equity / tangible assets 6.57 % 6.56 % 6.35 % 6.27 % 6.67 %
Tangible equity / risk-weighted assets 7.81 % 7.91 % 7.94 % 7.61 % 8.15 %
Tier 1 leverage ratio 8.49 % 8.35 % 8.29 % 8.47 % 9.01 %
Common equity tier 1 capital ratio 9.89 % 9.87 % 9.76 % 9.74 % 10.63 %
Tier 1 risk-based capital ratio 10.29 % 10.27 % 10.17 % 10.15 % 11.06 %
Total risk-based capital ratio 12.11 % 12.08 % 11.95 % 11.91 % 12.85 %
STOCK PERFORMANCE
Market value-Close $ 21.73 $ 21.12 $ 24.70 $ 34.91 $ 30.63
Book value $ 25.71 $ 25.73 $ 25.59 $ 24.47 $ 24.76
Tangible book value $ 19.37 $ 19.38 $ 19.24 $ 18.11 $ 18.39
(1) See Note 7 – Non-GAAP Financial Measures in the Notes to Consolidated Financials for Trustmark’s efficiency ratio calculation.
(2) Excludes PPP loans.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 1 - Litigation Settlement

As previously announced, on December 31, 2022, Trustmark National Bank (TNB) agreed to a settlement in principle (the Stanford Settlement) relating to litigation involving the Stanford Financial Group. On January 13, 2023, TNB entered into a Settlement Agreement (the Stanford Settlement Agreement) reflecting the terms of the Stanford Settlement. The parties to the Stanford Settlement Agreement are, on the one hand, (i) Ralph S. Janvey, solely in his capacity as the court-appointed receiver (the Stanford Receiver) for the Stanford Receivership Estate; (ii) the Official Stanford Investors Committee; (iii) each of the plaintiffs in the Rotstain and Smith Actions; and, on the other hand, (iv) TNB. Under the terms of the Stanford Settlement Agreement, the parties agreed to settle and dismiss the Rotstain Action, the Smith Action, and all current or future claims by plaintiffs in either such Action arising from or related to Stanford. In addition, the Stanford Settlement Agreement provided that the parties would request dismissal of the Jackson Action pursuant to the terms of the bar orders described below. If the Court’s approval (as described below) of the Stanford Settlement Agreement, including the bar orders described below, is upheld on appeal, TNB will make a one-time cash payment of $100.0 million to the Stanford Receiver.

The Stanford Settlement Agreement included the parties’ agreement to seek the Northern District of Texas District Court’s entry of bar orders prohibiting any continued or future claims by the plaintiffs in the Actions or by any other person or entity against TNB and its related parties relating to Stanford, whether asserted to date or not. The bar orders therefore would prohibit all litigation relating to Stanford described herein, including not only the Actions and any pending matters but also any actions that may be brought in the future. Final Court approval of these bar orders is a condition of the Stanford Settlement.

The Stanford Settlement Agreement is also subject to notice to Stanford’s investor claimants (which has been provided) and final, non-appealable approval by the U.S. District Court for the Northern District of Texas. While TNB believes that the Stanford Settlement Agreement is consistent with the terms of prior Stanford-related settlements that have been approved by the Court and were not successfully appealed, it is possible that the Court’s approval of the Stanford Settlement Agreement (which has occurred, as described further below) may not be upheld on appeal.

The Stanford Settlement Agreement also provides that TNB denies and makes no admission of liability or wrongdoing in connection with any Stanford matter. As has been the case throughout the pendency of the Actions, TNB expressly denies any liability or wrongdoing with respect to any matter alleged in regard to the multi-billion-dollar Ponzi scheme operated by Stanford for almost 20 years. TNB’s relationship with Stanford began as a result of TNB’s acquisition of a Houston-based bank in August 2006, and consisted of ordinary banking services provided to business deposit customers.

The foregoing description of the terms of the Stanford Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Stanford Settlement Agreement, a copy of which is filed as Exhibit 10.ai to the 2022 Annual Report and is incorporated herein by reference.

On January 20, 2023, the U.S. District Court for the Northern District of Texas entered an order preliminarily finding that the Stanford Settlement is fair, reasonable, and equitable; has no obvious deficiencies; and is the product of serious, informed, good faith, and arm’s-length negotiations. Following the provision of notice as required by the Stanford Settlement Agreement and by the Court’s preliminary order, the Court (Judge David C. Godbey, presiding) held a Final Approval Hearing on May 3, 2023, at which the Court approved the Stanford Settlement from the bench. On May 4, 2023, Judge Godbey signed the written orders confirming his oral ruling, including the bar order contemplated by the Stanford Settlement Agreement and the judgment and bar order with respect to the Jackson Action.

On May 10, 2023, Robert Allen Stanford, writing from prison, appealed the District Court’s approval of the Stanford Settlement to the Fifth Circuit Court of Appeals. On June 12, 2023, the Stanford Receiver moved to dismiss the appeal as frivolous. On July 25, 2023, a three-judge panel of the Fifth Circuit issued a per curiam order dismissing Stanford’s appeal as frivolous. On August 8, 2023, Mr. Stanford filed a motion for stay of mandate pending petition for certiorari. On August 22, 2023, the Fifth Circuit denied the motion for stay of mandate. On August 30, 2023, the Fifth Circuit issued the mandate.

The Stanford Settlement will become effective when the trial court’s ruling approving the Stanford Settlement and entering the bar order becomes final and non-appealable, as defined in the Stanford Settlement Agreement (the Stanford Settlement Effective Date). Within five days of the Stanford Settlement Effective Date, the parties to the Rotstain and Smith Actions will file agreed dismissals of those cases. Absent any further appeal in either of the Rotstain or Smith Actions, those dismissals will become final 30 days after entered and signed by the respective judges. TNB will be required to make the Stanford Settlement payment within 30 days after those dismissals become final. Any further appeal of any of the orders described above would delay the making of the Stanford Settlement payment.

On August 11, 2023, the Stanford Receiver filed a Motion to Enforce Settlement Agreement in the Northern District of Texas District Court, asking Judge Godbey to rule that the Stanford Settlement Effective Date has occurred. The Stanford Receiver took the position that Mr. Stanford’s appeals are frivolous and do not prevent the trial court’s ruling from becoming final and non-appealable, as defined in the Stanford Settlement Agreement. TNB filed a response in opposition to the Stanford Receiver’s Motion to Enforce. The trial court has not yet ruled on the Motion to Enforce. On September 22, 2023, the Stanford Receiver filed a Motion to Enjoin, requesting that the trial court enjoin Mr. Stanford from making court filings in any Stanford-related case, including notices of appeal, without obtaining leave of the court. The court has not yet ruled on the Motion to Enjoin.

Pending the resolution of the Stanford Settlement approval process, the Rotstain, Smith and Jackson Actions are stayed.

TNB and Trustmark Corporation determined that it was in the best interest of TNB, Trustmark Corporation and the shareholders of Trustmark Corporation to enter into the Stanford Settlement and the Stanford Settlement Agreement to eliminate the risk, ongoing expense, uncertainty as to ultimate outcome, and imposition on management and the business of TNB of further litigation of the Actions and related Stanford claims.

As previously announced, on August 30, 2023, TNB agreed to a settlement in principle (the Adams/Madison Timber Settlement) relating to litigation and claims involving Arthur Lamar Adams and Madison Timber Properties, LLC (collectively, Adams/Madison Timber). On October 9, 2023, TNB entered into a Settlement Agreement (the Adams/Madison Timber Settlement Agreement) reflecting the terms of the Adams/Madison Timber Settlement. The parties to the Adams/Madison Timber Settlement are, on the one hand, Alysson Mills in her capacity as Court-appointed Receiver (the Adams/Madison Timber Receiver); and, on the other hand, TNB. Under the terms of the Adams/Madison Timber Settlement Agreement, the parties agreed to settle and dismiss the Adams/Madison Timber Action, and the Adams/Madison Timber Receiver will fully release all claims against TNB and any of its employees, agents and representatives. The Adams/Madison Timber Settlement includes the parties’ agreement to seek the Court’s entry of bar orders prohibiting any continued or future claims by anyone against TNB and its related parties relating to Adams/Madison Timber, whether asserted to date or not. The bar orders therefore would prohibit all litigation relating to Adams/Madison Timber described herein. Final Court approval of a bar order is a condition of the Adams/Madison Timber Settlement.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 1 - Litigation Settlement (continued)

The Adams/Madison Timber Settlement is also subject to notice to Adams/Madison Timber investors, and final, non-appealable approval by the Court and entry of a judgment dismissing the Lawsuit against TNB. The timing of any final decision by the Court is subject to the discretion of the Court and any appeal. If the Adams/Madison Timber Settlement, including the bar order described above, is approved by the Court and is not subject to further appeal, TNB will make a one-time cash payment of $6.5 million to the Adams/Madison Timber Receiver.

While TNB believes that the Adams/Madison Timber Settlement is consistent with the terms of settlements in similar cases that have been approved and were not successfully appealed, it is possible that the Court may decide not to approve the Adams/Madison Timber Settlement Agreement or that the Court of Appeals could reject the Adams/Madison Timber Settlement Agreement on an appeal, either of which could render the Adams/Madison Timber Settlement a nullity.

At the time of the entry into the Stanford Settlement as described above, Trustmark Corporation recognized $100.0 million of litigation settlement expense, as well as an additional $750 thousand in legal fees, which were included in noninterest expense related to the Stanford litigation during the fourth quarter of 2022. As a result of the entry into the Adams/Madison Timber Settlement as described above, Trustmark Corporation recognized $6.5 million of litigation settlement expense which was included in noninterest expense related to the Adams/Madison Timber litigation during the third quarter of 2023. Trustmark Corporation expects that both the Stanford Settlement and Adams/Madison Timber Settlement will be tax deductible. Trustmark Corporation and TNB remain substantially above levels considered to be well-capitalized under all relevant standards.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 2 - Securities Available for Sale and Held to Maturity

The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity:

9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities $ 363,476 $ 362,966 $ 386,903 $ 391,513 $ 416,278
U.S. Government agency obligations 6,780 6,999 7,254 7,766 9,116
Obligations of states and political subdivisions 4,642 4,813 4,907 4,862 4,763
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 22,881 25,336 26,851 27,097 28,164
Issued by FNMA and FHLMC 1,171,521 1,250,435 1,317,848 1,345,463 1,718,057
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 90,402 98,388 108,192 115,140 126,138
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 106,472 122,946 132,207 132,241 141,970
Total securities available for sale $ 1,766,174 $ 1,871,883 $ 1,984,162 $ 2,024,082 $ 2,444,486
SECURITIES HELD TO MATURITY
U.S. Treasury securities $ 28,872 $ 28,679 $ 28,486 $ 28,295 $ —
Obligations of states and political subdivisions 341 1,180 4,507 4,510 4,512
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 13,090 13,235 4,336 4,442 4,527
Issued by FNMA and FHLMC 474,003 484,679 497,854 509,311 179,375
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 162,031 171,002 179,334 188,201 197,923
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 759,950 759,890 759,821 759,755 770,648
Total securities held to maturity $ 1,438,287 $ 1,458,665 $ 1,474,338 $ 1,494,514 $ 1,156,985

During the fourth quarter of 2022, Trustmark reclassified $422.9 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $57.1 million ($42.8 million, net of tax). The net unrealized holding loss will be amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer.

During the second quarter of 2022, Trustmark reclassified $343.1 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $34.8 million ($26.1 million, net of tax). The net unrealized holding loss will be amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer.

At September 30, 2023, the net unamortized, unrealized loss included in accumulated other comprehensive income (loss) in the accompanying balance sheet for securities held to maturity transferred from securities available for sale totaled $60.4 million.

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 99.9% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 3 – Loan Composition

LHFI consisted of the following during the periods presented:

LHFI BY TYPE 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
Loans secured by real estate:
Construction, land development and other land loans $ 1,609,326 $ 1,722,657 $ 1,723,772 $ 1,719,542 $ 1,647,395
Secured by 1-4 family residential properties 2,893,606 2,854,182 2,822,048 2,775,847 2,597,112
Secured by nonfarm, nonresidential properties 3,569,671 3,471,728 3,375,579 3,278,830 3,206,946
Other real estate secured 1,218,499 954,410 847,527 742,538 593,119
Commercial and industrial loans 1,828,924 1,883,480 1,882,360 1,821,259 1,689,532
Consumer loans 161,940 163,788 162,911 166,425 163,412
State and other political subdivision loans 1,056,569 1,111,710 1,193,727 1,223,863 1,188,703
Other loans 471,724 452,012 489,271 475,735 499,845
LHFI 12,810,259 12,613,967 12,497,195 12,204,039 11,586,064
ACL LHFI (134,031 ) (129,298 ) (122,239 ) (120,214 ) (115,050 )
Net LHFI $ 12,676,228 $ 12,484,669 $ 12,374,956 $ 12,083,825 $ 11,471,014

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

September 30, 2023
LHFI - COMPOSITION BY REGION Total Alabama (1) Florida Mississippi <br>(Central and <br>Southern <br>Regions) Tennessee <br>(Memphis, TN and <br>Northern MS<br>Regions) Texas
Loans secured by real estate:
Construction, land development and other land loans $ 1,609,326 $ 663,662 $ 48,627 $ 420,356 $ 36,803 $ 439,878
Secured by 1-4 family residential properties 2,893,606 143,673 53,575 2,582,837 83,462 30,059
Secured by nonfarm, nonresidential properties 3,569,671 1,034,874 225,415 1,472,990 158,448 677,944
Other real estate secured 1,218,499 574,432 1,786 339,070 7,234 295,977
Commercial and industrial loans 1,828,924 596,259 24,918 748,944 210,930 247,873
Consumer loans 161,940 22,496 7,870 100,908 20,332 10,334
State and other political subdivision loans 1,056,569 75,952 61,154 794,052 25,302 100,109
Other loans 471,724 159,267 8,615 198,567 32,950 72,325
Loans $ 12,810,259 $ 3,270,615 $ 431,960 $ 6,657,724 $ 575,461 $ 1,874,499
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION
Lots $ 70,356 $ 28,476 $ 9,633 $ 17,847 $ 3,786 $ 10,614
Development 141,561 66,958 1,264 37,430 9,547 26,362
Unimproved land 104,733 21,528 12,079 33,736 8,399 28,991
1-4 family construction 338,731 175,267 17,871 91,549 15,071 38,973
Other construction 953,945 371,433 7,780 239,794 — 334,938
Construction, land development and other land loans $ 1,609,326 $ 663,662 $ 48,627 $ 420,356 $ 36,803 $ 439,878
(1) Includes Georgia Loan Production Office.
TRUSTMARK CORPORATION AND SUBSIDIARIES
---
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 3 – Loan Composition (continued)

September 30, 2023
Total Alabama (1) Florida Mississippi <br>(Central and <br>Southern <br>Regions) Tennessee <br>(Memphis, TN and <br>Northern MS<br>Regions) Texas
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION
Non-owner occupied:
Retail $ 347,583 $ 113,885 $ 26,299 $ 117,698 $ 20,497 $ 69,204
Office 279,701 102,062 17,527 90,600 1,679 67,833
Hotel/motel 302,738 172,577 50,221 53,467 26,473 —
Mini-storage 158,429 32,591 1,952 103,801 765 19,320
Industrial 401,023 90,512 20,175 134,431 9,839 146,066
Health care 96,798 68,699 — 25,316 335 2,448
Convenience stores 30,278 7,105 432 13,618 561 8,562
Nursing homes/senior living 500,572 224,541 — 158,619 5,076 112,336
Other 128,293 46,672 9,382 53,862 8,558 9,819
Total non-owner occupied loans 2,245,415 858,644 125,988 751,412 73,783 435,588
Owner-occupied:
Office 156,016 43,789 35,448 46,191 11,153 19,435
Churches 62,835 16,432 4,261 36,020 3,594 2,528
Industrial warehouses 164,150 15,231 3,957 40,616 17,002 87,344
Health care 126,980 11,400 6,017 88,912 2,287 18,364
Convenience stores 143,188 11,801 29,443 67,261 196 34,487
Retail 90,471 10,370 13,880 39,378 17,836 9,007
Restaurants 57,112 4,095 3,467 31,116 15,181 3,253
Auto dealerships 44,669 5,780 206 21,859 16,824 —
Nursing homes/senior living 346,129 43,995 — 275,934 — 26,200
Other 132,706 13,337 2,748 74,291 592 41,738
Total owner-occupied loans 1,324,256 176,230 99,427 721,578 84,665 242,356
Loans secured by nonfarm, nonresidential properties $ 3,569,671 $ 1,034,874 $ 225,415 $ 1,472,990 $ 158,448 $ 677,944
(1) Includes Georgia Loan Production Office.

Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities

The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:

Quarter Ended Nine Months Ended
9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Securities – taxable 1.89 % 1.87 % 1.85 % 1.71 % 1.62 % 1.87 % 1.50 %
Securities – nontaxable 4.05 % 4.25 % 4.00 % 3.95 % 3.97 % 4.09 % 3.98 %
Securities – total 1.89 % 1.87 % 1.86 % 1.72 % 1.63 % 1.87 % 1.51 %
PPP loans — — — 12.39 % 7.51 % — 3.83 %
Loans - LHFI & LHFS 6.34 % 6.08 % 5.79 % 5.27 % 4.48 % 6.07 % 3.97 %
Loans - total 6.34 % 6.08 % 5.79 % 5.27 % 4.48 % 6.07 % 3.97 %
Fed funds sold & reverse repurchases 5.17 % 5.51 % 5.11 % 4.29 % 3.51 % 5.34 % 3.06 %
Other earning assets 5.01 % 5.36 % 4.09 % 3.76 % 1.82 % 4.87 % 0.56 %
Total earning assets 5.38 % 5.16 % 4.87 % 4.40 % 3.71 % 5.14 % 3.14 %
Interest-bearing deposits 2.39 % 1.96 % 1.53 % 0.71 % 0.20 % 1.97 % 0.14 %
Fed funds purchased & repurchases 5.14 % 5.01 % 4.49 % 3.44 % 1.95 % 4.87 % 0.94 %
Other borrowings 5.32 % 5.12 % 4.87 % 3.73 % 2.89 % 5.10 % 2.56 %
Total interest-bearing liabilities 2.72 % 2.42 % 1.98 % 1.03 % 0.31 % 2.38 % 0.21 %
Total Deposits 1.84 % 1.48 % 1.13 % 0.51 % 0.14 % 1.49 % 0.10 %
Net interest margin 3.29 % 3.33 % 3.39 % 3.66 % 3.50 % 3.34 % 3.00 %
Net interest margin excluding PPP loans <br>   and the FRB balance 3.24 % 3.23 % 3.36 % 3.66 % 3.53 % 3.27 % 3.17 %
TRUSTMARK CORPORATION AND SUBSIDIARIES
---
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities (continued)

Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding PPP loans and the balance held at the Federal Reserve Bank of Atlanta (FRB), which equals reported net interest income-FTE excluding interest income on PPP loans and the FRB balance, annualized, as a percent of average earning assets excluding average PPP loans and the FRB balance.

For the third quarter of 2023, the average FRB balance totaled $566.3 million compared to $777.0 million for the second quarter of 2023 and is included in other earning assets in the accompanying average consolidated balance sheets.

The net interest margin excluding PPP loans and the FRB balance remained relatively flat when compared to the second quarter of 2023, totaling 3.24% for the third quarter of 2023, as increased yields on the loans held for investment and held for sale portfolio was mostly offset by increased costs of interest-bearing deposits.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net negative hedge ineffectiveness of $1.0 million during the third quarter of 2023.

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

Quarter Ended Nine Months Ended
9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Mortgage servicing income, net $ 6,916 $ 6,764 $ 6,785 $ 6,636 $ 6,669 $ 20,465 $ 19,655
Change in fair value-MSR from runoff (3,203 ) (2,710 ) (1,145 ) (2,981 ) (3,462 ) (7,058 ) (11,053 )
Gain on sales of loans, net 3,748 3,887 3,797 3,328 4,597 11,432 16,850
Mortgage banking income before hedge <br>   ineffectiveness 7,461 7,941 9,437 6,983 7,804 24,839 25,452
Change in fair value-MSR from market changes 6,809 5,898 (3,972 ) (3,348 ) 10,770 8,735 41,529
Change in fair value of derivatives (7,812 ) (7,239 ) 2,174 (227 ) (11,698 ) (12,877 ) (42,083 )
Net positive (negative) hedge ineffectiveness (1,003 ) (1,341 ) (1,798 ) (3,575 ) (928 ) (4,142 ) (554 )
Mortgage banking, net $ 6,458 $ 6,600 $ 7,639 $ 3,408 $ 6,876 $ 20,697 $ 24,898
TRUSTMARK CORPORATION AND SUBSIDIARIES
---
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 6 – Other Noninterest Income and Expense

Other noninterest income consisted of the following for the periods presented:

Quarter Ended Nine Months Ended
9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Partnership amortization for tax credit purposes $ (1,995 ) $ (2,019 ) $ (1,961 ) $ (1,869 ) $ (1,531 ) $ (5,975 ) $ (4,342 )
Increase in life insurance cash surrender value 1,784 1,716 1,693 1,687 1,676 5,193 4,986
Other miscellaneous income 2,610 3,998 2,782 2,493 2,273 9,390 6,887
Total other, net $ 2,399 $ 3,695 $ 2,514 $ 2,311 $ 2,418 $ 8,608 $ 7,531

Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low-income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.

Other noninterest expense consisted of the following for the periods presented:

Quarter Ended Nine Months Ended
9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Loan expense (1) $ 3,130 $ 3,066 $ 2,538 $ 2,908 $ 2,866 $ 8,734 $ 9,341
Amortization of intangibles 129 130 288 312 312 547 1,122
FDIC assessment expense 3,765 2,550 2,370 2,130 1,945 8,685 5,255
Other real estate expense, net (40 ) 171 172 18 497 303 1,155
Other miscellaneous expense 8,714 8,585 9,443 9,767 8,117 26,742 23,834
Total other expense (1) $ 15,698 $ 14,502 $ 14,811 $ 15,135 $ 13,737 $ 45,011 $ 40,707

(1) During the first quarter of 2023, Trustmark reclassified its debit card transaction fees from other expense to services and fees. Prior periods have been reclassified accordingly.

Note 7 – Non-GAAP Financial Measures

In addition to capital ratios defined by GAAP and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets. Trustmark’s Common Equity Tier 1 capital includes common stock, capital surplus and retained earnings, and is reduced by goodwill and other intangible assets, net of associated net deferred tax liabilities as well as disallowed deferred tax assets and threshold deductions as applicable.

Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.

These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its audited consolidated financial statements and the notes related thereto in their entirety and not to rely on any single financial measure.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands except per share data)
(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

Quarter Ended Nine Months Ended
9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity $ 1,582,885 $ 1,580,291 $ 1,523,828 $ 1,493,291 $ 1,606,469 $ 1,562,551 $ 1,642,450
Less: Goodwill (384,237 ) (384,237 ) (384,237 ) (384,237 ) (384,237 ) (384,237 ) (384,237 )
Identifiable intangible assets (3,174 ) (3,301 ) (3,523 ) (3,816 ) (4,131 ) (3,331 ) (4,479 )
Total average tangible equity $ 1,195,474 $ 1,192,753 $ 1,136,068 $ 1,105,238 $ 1,218,101 $ 1,174,983 $ 1,253,734
PERIOD END BALANCES
Total shareholders' equity $ 1,570,351 $ 1,571,193 $ 1,562,099 $ 1,492,268 $ 1,508,945
Less: Goodwill (384,237 ) (384,237 ) (384,237 ) (384,237 ) (384,237 )
Identifiable intangible assets (3,093 ) (3,222 ) (3,352 ) (3,640 ) (3,952 )
Total tangible equity (a) $ 1,183,021 $ 1,183,734 $ 1,174,510 $ 1,104,391 $ 1,120,756
TANGIBLE ASSETS
Total assets $ 18,390,839 $ 18,422,626 $ 18,877,178 $ 18,015,478 $ 17,190,634
Less: Goodwill (384,237 ) (384,237 ) (384,237 ) (384,237 ) (384,237 )
Identifiable intangible assets (3,093 ) (3,222 ) (3,352 ) (3,640 ) (3,952 )
Total tangible assets (b) $ 18,003,509 $ 18,035,167 $ 18,489,589 $ 17,627,601 $ 16,802,445
Risk-weighted assets (c) $ 15,143,531 $ 14,966,614 $ 14,793,893 $ 14,521,078 $ 13,748,819
NET INCOME (LOSS) ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income (loss) $ 34,029 $ 45,037 $ 50,300 $ (34,063 ) $ 42,455 $ 129,366 $ 105,950
Plus: Intangible amortization net of tax 96 97 216 234 234 409 842
Net income (loss) adjusted for intangible amortization $ 34,125 $ 45,134 $ 50,516 $ (33,829 ) $ 42,689 $ 129,775 $ 106,792
Period end common shares outstanding (d) 61,070,095 61,069,036 61,048,516 60,977,686 60,953,864
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1) 11.32 % 15.18 % 18.03 % -12.14 % 13.90 % 14.77 % 11.39 %
Tangible equity/tangible assets (a)/(b) 6.57 % 6.56 % 6.35 % 6.27 % 6.67 %
Tangible equity/risk-weighted assets (a)/(c) 7.81 % 7.91 % 7.94 % 7.61 % 8.15 %
Tangible book value (a)/(d)*1,000 $ 19.37 $ 19.38 $ 19.24 $ 18.11 $ 18.39
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity $ 1,570,351 $ 1,571,193 $ 1,562,099 $ 1,492,268 $ 1,508,945
CECL transition adjustment 13,000 13,000 13,000 19,500 19,500
AOCI-related adjustments 287,888 265,704 242,381 275,403 306,412
CET1 adjustments and deductions:
Goodwill net of associated deferred <br>   tax liabilities (DTLs) (370,219 ) (370,227 ) (370,234 ) (370,241 ) (370,217 )
Other adjustments and deductions <br>   for CET1 (2) (2,803 ) (2,915 ) (3,275 ) (3,258 ) (3,506 )
CET1 capital (e) 1,498,217 1,476,755 1,443,971 1,413,672 1,461,134
Additional tier 1 capital instruments <br>   plus related surplus 60,000 60,000 60,000 60,000 60,000
Tier 1 capital $ 1,558,217 $ 1,536,755 $ 1,503,971 $ 1,473,672 $ 1,521,134
Common equity tier 1 capital ratio (e)/(c) 9.89 % 9.87 % 9.76 % 9.74 % 10.63 %

(1) Calculation = ((net income (loss) adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity.

(2) Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAs), threshold deductions and transition adjustments, as applicable.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands except per share data)
(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

Trustmark discloses certain non-GAAP financial measures because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views these as measures of our core operating business, which exclude the impact of the items detailed below, as these items are generally not operational in nature. These non-GAAP financial measures also provide another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.

The following table presents pre-provision net revenue (PPNR) during the periods presented:

Quarter Ended Nine Months Ended
9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Net interest income (GAAP) $ 138,637 $ 139,904 $ 137,595 $ 146,583 $ 136,105 $ 416,136 $ 348,125
Noninterest income (GAAP) 52,224 53,553 51,377 45,170 52,606 157,154 159,974
Pre-provision revenue (a) $ 190,861 $ 193,457 $ 188,972 $ 191,753 $ 188,711 $ 573,290 $ 508,099
Noninterest expense (GAAP) $ 140,945 $ 132,218 $ 128,327 $ 231,229 $ 126,698 $ 401,490 $ 371,984
Less: Litigation settlement expense (6,500 ) — — (100,750 ) — (6,500 ) —
Adjusted noninterest expense - PPNR (Non-GAAP) (b) $ 134,445 $ 132,218 $ 128,327 $ 130,479 $ 126,698 $ 394,990 $ 371,984
PPNR (Non-GAAP) (a)-(b) $ 56,416 $ 61,239 $ 60,645 $ 61,274 $ 62,013 $ 178,300 $ 136,115

The following table presents adjustments to net income (loss) and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items

occurring during the periods presented:

Quarter Ended Nine Months Ended
9/30/2023 9/30/2022 9/30/2023 9/30/2022
Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS Amount Diluted EPS
Net income (loss) (GAAP) $ 34,029 $ 0.56 $ 42,455 $ 0.69 $ 129,366 $ 2.11 $ 105,950 $ 1.72
Significant non-routine transactions (net of taxes):
Litigation settlement expense 4,875 0.08 — — 4,875 0.08 — —
Net income adjusted for significant non-routine <br>   transactions (Non-GAAP) $ 38,904 $ 0.64 $ 42,455 $ 0.69 $ 134,241 $ 2.19 $ 105,950 $ 1.72
Reported (GAAP) Adjusted (Non-GAAP) Reported (GAAP) Adjusted (Non-GAAP) Reported (GAAP) Adjusted (Non-GAAP) Reported (GAAP) Adjusted (Non-GAAP)
Return on average equity 8.53 % 9.74 % 10.48 % n/a 11.07 % 11.48 % 8.62 % n/a
Return on average tangible equity 11.32 % 12.92 % 13.90 % n/a 14.77 % 15.31 % 11.39 % n/a
Return on average assets 0.72 % 0.83 % 0.98 % n/a 0.93 % 0.96 % 0.81 % n/a
n/a - not applicable
TRUSTMARK CORPORATION AND SUBSIDIARIES
---
NOTES TO CONSOLIDATED FINANCIALS
September 30, 2023
($ in thousands)
(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

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

Quarter Ended Nine Months Ended
9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 9/30/2023 9/30/2022
Total noninterest expense (GAAP) $ 140,945 $ 132,218 $ 128,327 $ 231,229 $ 126,698 $ 401,490 $ 371,984
Less: Other real estate expense, net 40 (171 ) (172 ) (18 ) (497 ) (303 ) (1,155 )
Amortization of intangibles (129 ) (130 ) (288 ) (312 ) (312 ) (547 ) (1,122 )
Charitable contributions resulting in <br>   state tax credits (325 ) (325 ) (325 ) (375 ) (375 ) (975 ) (1,125 )
Litigation settlement expense (6,500 ) — — (100,750 ) — (6,500 ) —
Adjusted noninterest expense (Non-GAAP) (c) $ 134,031 $ 131,592 $ 127,542 $ 129,774 $ 125,514 $ 393,165 $ 368,582
Net interest income (GAAP) $ 138,637 $ 139,904 $ 137,595 $ 146,583 $ 136,105 $ 416,136 $ 348,125
Add: Tax equivalent adjustment 3,299 3,383 3,477 3,451 2,975 10,159 8,894
Net interest income-FTE (Non-GAAP) (a) $ 141,936 $ 143,287 $ 141,072 $ 150,034 $ 139,080 $ 426,295 $ 357,019
Noninterest income (GAAP) $ 52,224 $ 53,553 $ 51,377 $ 45,170 $ 52,606 $ 157,154 $ 159,974
Add: Partnership amortization for tax credit purposes 1,995 2,019 1,961 1,869 1,531 5,975 4,342
Adjusted noninterest income (Non-GAAP) (b) $ 54,219 $ 55,572 $ 53,338 $ 47,039 $ 54,137 $ 163,129 $ 164,316
Adjusted revenue (Non-GAAP) (a)+(b) $ 196,155 $ 198,859 $ 194,410 $ 197,073 $ 193,217 $ 589,424 $ 521,335
Efficiency ratio (Non-GAAP) (c)/((a)+(b)) 68.33 % 66.17 % 65.60 % 65.85 % 64.96 % 66.70 % 70.70 %

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