Trustmark Corporation
08/05/2025 | Press release | Distributed by Public on 08/05/2025 14:18
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following provides a narrative discussion and analysis of Trustmark Corporation's (Trustmark) financial condition and results of operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the supplemental financial data included in Part I. Item 1. - Financial Statements of this report.
Description of Business
Trustmark, a Mississippi business corporation incorporated in 1968, is a bank holding company headquartered in Jackson, Mississippi. As previously disclosed, on August 4, 2025, Trustmark's principal subsidiary, Trustmark National Bank, initially chartered by the State of Mississippi in 1889, converted from a national banking association to a Mississippi-chartered banking corporation and changed its name to Trustmark Bank (TB). TB is a member bank of the Federal Reserve System and is supervised by the Federal Reserve Bank of Atlanta (FRBA) and the Mississippi Department of Banking and Consumer Finance (MDBCF). In addition, as a large provider of consumer financial services, TB remains subject to regulation, supervision, enforcement and examination by the Consumer Financial Protection Bureau (CFPB). As a Mississippi state-chartered banking corporation, TB must obtain the approval of the MDBCF prior to declaring or paying a dividend on its common stock. Dividends from TB are Trustmark's principal source of cash. At June 30, 2025, TB had total assets of $18.613 billion, which represented approximately 99.99% of the consolidated assets of Trustmark.
Through TB and its other subsidiaries, Trustmark operates as a financial services organization providing banking and other financial solutions through offices and 2,510 full-time equivalent associates (measured at June 30, 2025) located in the states of Alabama, Florida (primarily in the northwest or "Panhandle" region of that state, which is referred to herein as Trustmark's Florida market), Georgia (primarily in Atlanta, which is referred to herein as Trustmark's Georgia market), Mississippi, Tennessee (in the Memphis and Northern Mississippi regions, which are collectively referred to herein as Trustmark's Tennessee market), and Texas (primarily in Houston, which is referred to herein as Trustmark's Texas market). Trustmark's operations are managed along two operating segments: General Banking Segment and Wealth Management Segment. For a complete overview of Trustmark's business, see the section captioned "The Corporation" included in Part I. Item 1. - Business of Trustmark's Annual Report on Form 10-K for its fiscal year ended December 31, 2024 (2024 Annual Report).
Executive Overview
Trustmark's financial results for the first six months of 2025 reflected continued growth in loans held for investment (LHFI), stable credit quality and an attractive deposit base. Trustmark's capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. Trustmark continues efforts to expand customer relationships and diligently manage expenses. With robust capital, liquidity and profitability, Trustmark is well-positioned to compete in changing economic conditions and create long-term value for its shareholders. Trustmark's Board of Directors declared a quarterly cash dividend of $0.24 per share. The dividend is payable September 15, 2025, to shareholders of record on September 1, 2025. Trustmark's payment of the dividend will be fully funded by a dividend from TB to Trustmark, which the MDBCF approved on August 4, 2025.
Recent Economic and Industry Developments
Economic activity declined slightly during the second quarter of 2025. Economic concerns remain as a result of the cumulative weight of uncertainty regarding the potential economic impact of geopolitical developments, such as the conflicts in Ukraine and the Middle East, inflation, other economic and industry volatility, the current United States presidential administration's policies, higher energy prices and broader price pressures. Doubts surrounding the near-term direction of global markets and the potential impact on the United States economy are expected to persist for the near term. While Trustmark's customer base is wholly domestic, international economic conditions affect domestic economic conditions, and thus may have an impact upon Trustmark's financial condition or results of operations.
Market interest rates remained elevated during most of 2024. In September 2024, the FRB began lowering the target federal funds rate, making multiple decreases during the fourth quarter of 2024 to a range of 4.25% to 4.50% as of December 2024, based on its confidence that inflation was moving substantially toward 2.00% and that the risks to achieving the FRB's employment and inflation goals were roughly balanced. In addition, in September 2024, the FRB made the first of multiple reductions in the rate it pays on reserves, lowering the rate to 4.40% as of December 2024. At each of the FRB's Federal Open Market Committee meetings during the first six months of 2025, the FRB determined to leave the target federal funds rate unchanged at a range of 4.25% to 4.50% and to maintain the rate it pays on reserves at 4.40%. Prior period rate increases increased the competitive pressures on the deposit cost of funds. While rate cuts potentially reduced those competitive pressures, they increased pressure on Trustmark's net interest margin, a key component to its financial results. It is not possible to predict the direction, pace or magnitude of further changes, if any, in interest rates, or the impact any such rate changes will have on Trustmark's results of operations.
In the May 2025 and July 2025 "Summary of Commentary on Current Economic Conditions by Federal Reserve District," the twelve Federal Reserve Districts' reports suggested that during the reporting periods (covering the periods from April 15, 2025 through May 23, 2025 and May 24, 2025 through July 7, 2025) economic activity declined slightly, and uncertainty remained elevated, contributing
to ongoing caution by businesses. Reports by the twelve Federal Reserve Districts (Districts) noted the following during the reporting periods:
•
Consumer spending reports were mixed, with most Districts reporting slight declines or no change; however, some Districts reported increases in spending on items expected to be affected by tariffs. Nonauto consumer spending declined in most Districts, softening slightly overall. Auto sales receded modestly on average, after consumers had rushed to buy vehicles earlier this year to avoid tariffs. Tourism activity was mixed, manufacturing activity edged lower, and nonfinancial services activity was little changed on average but varied across Districts.
•
Construction activity slowed somewhat, constrained by rising costs in some Districts. Home sales were flat or little changed in most Districts, and nonresidential real estate activity was also mostly steady.
•
Reports on bank loan demand and capital spending plans were mixed. Loan volume increased slightly in most Districts. Activity in the agriculture sector remained weak. Energy sector activity declined slightly, and transportation activity was mixed. The outlook was neutral to slightly pessimistic, as only two Districts expected activity to increase, and others foresaw flat or slightly weaker activity. All Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions.
•
Employment increased very slightly overall. Hiring remained generally cautious, which many contacts attributed to ongoing economic and policy uncertainty. Labor availability improved for many employers, with further reductions in turnover rates and increased job applications. A growing number of Districts cited labor shortages in the skilled trades. Several Districts also mentioned reduced availability of foreign-born workers, attributed to changes in immigration policy. Employers in a few Districts ramped up investments in automation and AI aimed at reducing the need for additional hiring in certain segments. Wages increased modestly overall, extending recent trends, with a few Districts indicated that higher costs of living continued to put upward pressure on wages. Although reports of layoffs were limited in all industries, they were somewhat more common among manufacturers. Looking ahead, many contacts expected to postpone major hiring and layoff decisions until uncertainty diminished.
•
Prices increased at a modest-to-moderate pace in most Districts, with several Districts reporting an uptick in the pace of increase relative to previous reports. Businesses across all Districts reported experiencing modest to pronounced input cost pressures related to tariffs, especially for raw materials used in manufacturing and construction. Rising insurance costs represented another widespread source of pricing pressure. Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges, although some held off raising prices because of customers' growing price sensitivity, resulting in compressed profit margins. Contacts in a wide range of industries expected cost pressures to remain elevated in the coming months, increasing the likelihood that consumer prices will start to rise more rapidly by late summer.
Reports by the Federal Reserve's Sixth District, Atlanta (which includes Trustmark's Alabama, Florida, Georgia and Mississippi market regions), Eighth District, St. Louis (which includes Trustmark's Tennessee market region), and Eleventh District, Dallas (which includes Trustmark's Texas market region), noted similar findings for the reporting period as those discussed above. The Federal Reserve's Sixth District reported overall loan growth was flat as business investment stalled amid economic uncertainty and as banks tightened standards for both commercial and consumer lending. The Federal Reserve's Sixth District also reported that bankers described increased household financial stress and rising credit card usage among customers, delinquencies continued to tick up but remained at relatively low levels and slowing demand raised institutions' concerns about some businesses' cash flow expectations and their ability to service debt. The Federal Reserve's Eighth District reported that banking activity remained unchanged, and while credit conditions remained strong, loan growth had been modest, with banks noting a decrease in loan demand. The Federal Reserve's Eighth District noted that overall, bankers across the District reported improved earnings in the second quarter due to lower funding costs from balance sheet restructuring and some loans in their portfolio being repriced at higher rates. The Federal Reserve's Eleventh District reported that loan volume and loan demand accelerated in June 2025, driven by commercial lending, while volumes continued to decline slightly for mortgages and consumer loans, credit tightening continued, but loan pricing declined and increases in loan nonperformance were more widespread. The Federal Reserve's Eleventh District also noted that bankers reported rising general business activity; however, their outlooks remained mixed as expected improvements in loan demand and business activity were softened by anticipated increases in loan nonperformance.
Trustmark is intently monitoring the impact of tariffs and other administrative policies on its customer base, interest rates and credit-related issues. Although there has been no immediate impact to Trustmark's financial condition or results of operations, economic uncertainty or disruptions in the marketplace as a result of such policies could reduce loan demand or increase loan nonperformance. It is not possible to predict the timing or magnitude of changes to policies by the current United States presidential administration, if any, or the impact any such policy changes could have on Trustmark's customer base, credit quality or results of operations.
Financial Highlights
Trustmark reported net income of $55.8 million, or basic and diluted earnings per share (EPS) of $0.92, in the second quarter of 2025, compared to $73.8 million, or basic and diluted EPS of $1.21 and $1.20, respectively, in the second quarter of 2024. Trustmark's reported performance during the quarter ended June 30, 2025 produced a return on average tangible equity of 13.13%, a return on average assets of 1.21%, an average equity to average assets ratio of 11.07% and a dividend payout ratio of 26.09%, compared to a return on average tangible equity of 21.91%, a return on average assets of 1.58%, an average equity to average assets ratio of 9.20% and a dividend payout ratio of 19.01% during the quarter ended June 30, 2024.
Trustmark reported net income of $109.5 million, or basic and diluted EPS of $1.81 and $1.80, respectively, for the six months ended June 30, 2025, compared to $115.4 million, or basic and diluted EPS of $1.89 and $1.88, respectively, for the same time period in 2024. Trustmark's reported performance during the first six months of 2025 produced a return on average tangible equity of 13.13%, a return on average assets of 1.20%, an average equity to average assets ratio of 11.00% and a dividend payout ratio of 26.52%, compared to a return on average tangible equity of 17.56%, a return on average assets of 1.24%, an average equity to average assets ratio of 9.09% and a dividend payout ratio of 24.34% for the same time period in 2024.
Trustmark completed the sale of FBBI during the second quarter of 2024. As such, financial results for the three and six months ended June 30, 2024 consisted of both continuing and discontinued operations. The discontinued operations included the financial results of FBBI prior to the sale. Trustmark reported a loss from continuing operations of $100.6 million and $62.4 million for the three and six months ended June 30, 2024, respectively. Trustmark's reported performance from continuing operations for the three and six months ended June 30, 2024 produced a return on average tangible equity from continuing operations of -29.05% and -9.18%, respectively, and a return on average assets from continuing operations of -2.16% and -0.67%, respectively. The loss from continuing operations for the three and six months ended June 30, 2024 was principally due to the loss on the sale of available for sale securities during the second quarter of 2024.
Total revenue, which is defined as net interest income plus noninterest income (loss), for the three months ended June 30, 2025 was $198.6 million, an increase of $198.9 million when compared to the same time period in 2024. Total revenue for the six months ended June 30, 2025 was $393.3 million, an increase of $221.4 million when compared to the same time period in 2024. The increase in total revenue when the three and six months ended June 30, 2025 are compared to the same time periods in 2024, were principally due to non-routine transactions that occurred during the second quarter of 2024, which included the $182.8 million loss on the sale of available for sale securities and the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans partially offset by the $8.1 million fair value adjustment for the Visa C shares, and an increase in net interest income.
Net interest income for the three and six months ended June 30, 2025 totaled $158.8 million and $310.8 million, respectively, an increase of $17.7 million, or 12.6%, and $37.0 million, or 13.5%, respectively, when compared to the same time periods in 2024, principally attributable to an increase in interest on securities as well as a decline in interest expense on deposits, partially offset by declines in interest and fees on loans held for sale (LHFS) and LHFI and other interest income. Interest income totaled $237.4 million and $466.6 million for the three and six months ended June 30, 2025, respectively, a decrease of $1.7 million, or 0.7%, and $2.4 million, or 0.5%, respectively, when compared to the same time periods in 2024, reflecting decreases in interest and fees on LHFS and LHFI, primarily as a result of a decline in yields on the LHFS and LHFI portfolios, and other interest income, primarily due to a decline in interest earned on balances held at the FRBA, partially offset by an increase in interest on securities, primarily as a result of restructuring the available for sale securities portfolio during the second quarter of 2024. Interest expense totaled $78.7 million and $155.8 million for the three and six months ended June 30, 2025, respectively, a decrease of $19.5 million, or 19.8%, and $39.4 million, or 20.2%, respectively, when compared to the same time periods in 2024 principally due to a decline in interest expense on deposits.
Noninterest income (loss) for the three and six months ended June 30, 2025 totaled $39.9 million and $82.5 million, respectively, an increase of $181.2 million and $184.4 million, respectively, when compared to the same time periods in 2024 principally due to the loss on the sale of the available for sale securities during the second quarter of 2024 and an increase in mortgage banking, net, partially offset by a decrease in other, net. Mortgage banking, net totaled $8.6 million and $17.4 million for the three and six months ended June 30, 2025, respectively, an increase of $4.4 million and $4.3 million, respectively, when compared to the same time periods in 2024 principally due to improvement in the net negative hedge ineffectiveness. Other, net totaled $2.3 million and $8.3 million for the three and six months ended June 30, 2025, respectively, a decrease of $5.2 million, or 69.0%, and $2.3 million, or 21.6%, respectively, when compared to the same time periods in 2024. The decrease in other, net when the three months ended June 30, 2025 is compared to the same time period in 2024 was principally due to the $8.1 million fair value adjustment for the Visa C shares during the second quarter of 2024 as well as a decrease in the gain on sale of premises and equipment, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans during the second quarter of 2024. The decrease in other, net when the six months ended June 30, 2025 is compared to the same time period in 2024 was principally due to the $8.1 million fair value adjustment for the Visa C shares during the second quarter of 2024, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans
during the second quarter of 2024 and an increase in gain on sale of premises and equipment primarily attributable to a $2.4 million gain on the sale of a bank property during the first quarter of 2025.
Noninterest expense for the three and six months ended June 30, 2025 totaled $125.1 million and $249.1 million, respectively, an increase of $6.8 million, or 5.7%, and $11.1 million, or 4.7%, respectively, when compared to the same time periods in 2024, principally due to increases in salaries and employee benefits and services and fees. Salaries and employee benefits totaled $68.3 million and $136.8 million for the three and six months ended June 30, 2025, respectively, an increase of $3.5 million, or 5.3%, and $6.5 million, or 5.0%, respectively, when compared to the same time periods in 2024, primarily due to increases in salaries expense principally due to general merit increases, management performance incentives, medical insurance expense and commissions related to mortgage originations. Services and fees totaled $27.0 million and $53.2 million for the three and six months ended June 30, 2025, respectively, an increase of $2.3 million, or 9.1%, and $4.1 million, or 8.3%, respectively, when compared to the same time periods in 2024, principally due to increases in data processing expenses related to software, business process operations outsourcing expense, other services and fees, advertising expense and legal expense.
Trustmark's total PCL on LHFI for the three and six months ended June 30, 2025 totaled $5.3 million and $13.5 million, respectively, compared to a total PCL on LHFI of $23.3 million and $31.0 million, respectively, for the same time periods in 2024. The total PCL on LHFI for the three and six months ended June 30, 2024 included a $8.6 million PCL, LHFI sale of 1-4 family mortgage loans for the credit-related portion of the loss on the sale of the 1-4 family mortgage loans during the second quarter of 2024. The PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, decreased $9.4 million, or 63.6%, and $8.9 million, or 39.9%, respectively, when the three and six months ended June 30, 2025 are compared to the same time periods in 2024 principally due to reserves recorded during the second quarter of 2024 related to credit migration. The PCL, LHFI for the three months ended June 30, 2025 primarily reflected increases in required reserves as a result of loan growth and changes in macroeconomic forecasts partially offset by declines in required reserves as a result of positive credit migration and updates to various qualitative reserve factors. The PCL, LHFI for the six months ended June 30, 2025 primarily reflected increases in required reserves as a result of loan growth and changes in macroeconomic forecasts partially offset by declines in required reserves as a result of updates to various qualitative reserve factors. The PCL, off-balance sheet credit exposures totaled a negative $670 thousand and a negative $3.5 million for the three and six months ended June 30, 2025, respectively, compared to a negative $3.6 million and a negative $3.8 million, respectively, for the same time periods in 2024. The release in PCL, off-balance sheet credit exposures for the three months ended June 30, 2025, primarily reflected a decrease in required reserves as a result of positive credit migration partially offset by an increase in required reserves as a result of changes in the total reserve rate primarily related to 1-4 family construction and commercial and industrial credits. The release in PCL, off-balance sheet credit exposures for the six months ended June 30, 2025, primarily reflected a decrease in required reserves as a result of positive credit migration, a decrease in the unfunded commitments and net changes in the total reserve rate. Please see the section captioned "Provision for Credit Losses" for additional information regarding the PCL on LHFI and off-balance sheet credit exposures.
At June 30, 2025, nonperforming assets totaled $90.0 million, an increase of $3.9 million, or 4.6%, compared to December 31, 2024, reflecting increases in both nonaccrual LHFI and other real estate. Nonaccrual LHFI totaled $81.0 million at June 30, 2025, an increase of $891 thousand, or 1.1%, relative to December 31, 2024, primarily as a result of 1-4 family mortgage loans placed on nonaccrual status partially offset by nonaccrual loans foreclosed and paid off in the Mississippi market region and the resolution of one large nonaccrual commercial credit in the Alabama market region. Other real estate, net totaled $9.0 million at June 30, 2025, an increase of $3.1 million, or 51.6%, when compared to December 31, 2024, principally due to properties foreclosed partially offset by properties sold in the Mississippi and Alabama market regions.
LHFI totaled $13.465 billion at June 30, 2025, an increase of $374.8 million, or 2.9%, compared to December 31, 2024. The increase in LHFI during the first six months of 2025 was primarily due to net growth in LHFI secured by real estate and other commercial loans and leases. For additional information regarding changes in LHFI and comparative balances by loan category, see the section captioned "LHFI."
Management has continued its practice of maintaining excess funding capacity to provide Trustmark with adequate liquidity for its ongoing operations. In this regard, Trustmark benefits from its strong deposit base, its investment portfolio and its access to funding from a variety of external funding sources such as upstream federal funds lines, FHLB advances and brokered deposits. See the section captioned "Capital Resources and Liquidity" for further discussion of the components of Trustmark's excess funding capacity.
Total deposits were $15.116 billion at June 30, 2025, an increase of $7.7 million, or 0.1%, compared to December 31, 2024. During the first six months of 2025, noninterest-bearing deposits increased $61.9 million, or 2.0%, principally due to growth in commercial noninterest-bearing demand deposit accounts partially offset by a decline in public noninterest-bearing demand deposit accounts. Interest-bearing deposits decreased $54.2 million, or 0.5%, during the first six months of 2025, primarily due to declines in all categories of interest checking accounts and consumer money market deposit accounts (MMDA), partially offset by growth in all categories of certificates of deposits (CDs) and commercial MMDA.
Federal funds purchased and securities sold under repurchase agreements totaled $456.3 million at June 30, 2025, an increase of $132.3 million, or 40.8%, compared to December 31, 2024, principally due to an increase in upstream federal funds purchased. Other borrowings totaled $558.7 million at June 30, 2025, an increase of $257.1 million, or 85.3%, compared to December 31, 2024, principally due to an increase in outstanding short-term FHLB advances with the FHLB of Dallas.
Recent Legislative and Regulatory Developments
On October 24, 2023, the federal banking agencies released a final rule significantly revising the framework that the agencies use to evaluate banks' records of meeting the credit needs of their entire communities under the Community Reinvestment Act (CRA). On July 16, 2025, the agencies issued a notice of proposed rulemaking to rescind the October 2023 final rule and restore the CRA framework that existed previously, which has remained in effect due to a preliminary injunction that stayed implementation of the October 2023 rule. TB received a rating of "Outstanding" in its most recent CRA performance evaluation, which was conducted using the CRA framework that existed prior to the October 2023 final rule.
On July 30, 2024, the FDIC issued a proposed rule that would revise the FDIC's regulations governing the classification and treatment of brokered deposits. On March 3, 2025, the FDIC withdrew the proposed rule.
On October 22, 2024, the CFPB released a final rule to implement Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the final rule, financial institutions are required, upon request, to make available to a consumer or third party authorized by the consumer certain information TB has concerning a consumer financial product or service covered by the rule, such as a credit card or a deposit account. Industry organizations challenged the final rule in court. On May 30, 2025, the CFPB filed a motion for summary judgment in the litigation, stating that it had concluded that the final rule exceeded the agency's statutory authority and is arbitrary and capricious. The CFPB requested that the court vacate the final rule. On July 29, 2025, the CFPB filed a motion to stay the proceedings, announcing its plans to issue an advanced notice of proposed rulemaking that will serve as the starting point of an accelerated rulemaking process for a new final rule. The same day, the court granted the CFPB's motion to stay and denied the CFPB's summary judgment motion without prejudice.
On July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) into law, establishing a federal licensing and supervisory framework for payment stablecoins and their issuers. The GENIUS Act may accelerate and increase the competition that non-traditional financial institutions pose to banks' payment services but may also create opportunities for banks to hold stablecoin reserve assets, custody stablecoins or issue stablecoins. Several key provisions of the GENIUS Act require federal regulatory agencies to adopt implementing regulations, and the Act will take effect the earlier of 18 months after its enactment or 120 days after the agencies issue final implementing regulations.
For additional information regarding legislation and regulation applicable to Trustmark, see the section captioned "Supervision and Regulation" included in Part I. Item 1. - Business of Trustmark's 2024 Annual Report.
Selected Financial Data
The following tables present financial data derived from Trustmark's consolidated financial statements as of and for the periods presented ($ in thousands, except per share data):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Consolidated Statements of Income (Loss) |
||||||||||||||||
|
Total interest income |
$ |
237,428 |
$ |
239,151 |
$ |
466,575 |
$ |
468,991 |
||||||||
|
Total interest expense |
78,672 |
98,122 |
155,764 |
195,132 |
||||||||||||
|
Net interest income |
158,756 |
141,029 |
310,811 |
273,859 |
||||||||||||
|
PCL, LHFI |
5,346 |
14,696 |
13,471 |
22,404 |
||||||||||||
|
PCL, LHFI sale of 1-4 family mortgage loans |
- |
8,633 |
- |
8,633 |
||||||||||||
|
PCL, off-balance sheet credit exposures |
(670 |
) |
(3,600 |
) |
(3,501 |
) |
(3,792 |
) |
||||||||
|
Noninterest income (loss) |
39,890 |
(141,286 |
) |
82,474 |
(101,931 |
) |
||||||||||
|
Noninterest expense |
125,114 |
118,326 |
249,125 |
237,990 |
||||||||||||
|
Income (loss) from continuing operations before income taxes |
68,856 |
(138,312 |
) |
134,190 |
(93,307 |
) |
||||||||||
|
Income taxes from continuing operations |
13,015 |
(37,707 |
) |
24,716 |
(30,875 |
) |
||||||||||
|
Income (loss) from continuing operations |
55,841 |
(100,605 |
) |
109,474 |
(62,432 |
) |
||||||||||
|
Income from discontinued operations before income taxes |
- |
232,640 |
- |
237,152 |
||||||||||||
|
Income taxes from discontinued operations |
- |
58,203 |
- |
59,353 |
||||||||||||
|
Income from discontinued operations |
- |
174,437 |
- |
177,799 |
||||||||||||
|
Net income |
$ |
55,841 |
$ |
73,832 |
$ |
109,474 |
$ |
115,367 |
||||||||
|
Total Revenue (1) |
$ |
198,646 |
$ |
(257 |
) |
$ |
393,285 |
$ |
171,928 |
|||||||
|
Per Share Data (2) |
||||||||||||||||
|
Basic earnings (loss) per share (EPS) from continuing operations |
$ |
0.92 |
$ |
(1.64 |
) |
$ |
1.81 |
$ |
(1.02 |
) |
||||||
|
Basic EPS from discontinued operations |
$ |
- |
$ |
2.85 |
$ |
- |
$ |
2.91 |
||||||||
|
Basic EPS - total |
$ |
0.92 |
$ |
1.21 |
$ |
1.81 |
$ |
1.89 |
||||||||
|
Diluted EPS from continuing operations |
$ |
0.92 |
$ |
(1.64 |
) |
$ |
1.80 |
$ |
(1.02 |
) |
||||||
|
Diluted EPS from discontinued operations |
$ |
- |
$ |
2.84 |
$ |
- |
$ |
2.90 |
||||||||
|
Diluted EPS - total |
$ |
0.92 |
$ |
1.20 |
$ |
1.80 |
$ |
1.88 |
||||||||
|
Cash dividends per share |
$ |
0.24 |
$ |
0.23 |
$ |
0.48 |
$ |
0.46 |
||||||||
|
Performance Ratios |
||||||||||||||||
|
Return on average equity |
10.97 |
% |
17.19 |
% |
10.95 |
% |
13.63 |
% |
||||||||
|
Return on average equity from continuing operations |
10.97 |
% |
-23.42 |
% |
10.95 |
% |
-7.38 |
% |
||||||||
|
Return on average tangible equity |
13.13 |
% |
21.91 |
% |
13.13 |
% |
17.56 |
% |
||||||||
|
Return on average tangible equity from continuing operations |
13.13 |
% |
-29.05 |
% |
13.13 |
% |
-9.18 |
% |
||||||||
|
Return on average assets |
1.21 |
% |
1.58 |
% |
1.20 |
% |
1.24 |
% |
||||||||
|
Return on average assets from continuing operations |
1.21 |
% |
-2.16 |
% |
1.20 |
% |
-0.67 |
% |
||||||||
|
Average equity / average assets |
11.07 |
% |
9.20 |
% |
11.00 |
% |
9.09 |
% |
||||||||
|
Net interest margin (fully taxable equivalent) |
3.81 |
% |
3.38 |
% |
3.78 |
% |
3.29 |
% |
||||||||
|
Dividend payout ratio |
26.09 |
% |
19.01 |
% |
26.52 |
% |
24.34 |
% |
||||||||
|
Dividend payout ratio from continuing operations |
26.09 |
% |
-14.02 |
% |
26.52 |
% |
-45.10 |
% |
||||||||
|
Credit Quality Ratios |
||||||||||||||||
|
Net charge-offs (recoveries) (excl sale of 1-4 family mortgage loans) / average loans |
0.12 |
% |
0.09 |
% |
0.08 |
% |
0.11 |
% |
||||||||
|
PCL, LHFI (excl PCI, LHFI sale of 1-4 family mortgage loans) / average loans |
0.16 |
% |
0.44 |
% |
0.20 |
% |
0.34 |
% |
||||||||
|
Nonaccrual LHFI / (LHFI + LHFS) |
0.59 |
% |
0.33 |
% |
||||||||||||
|
Nonperforming assets / (LHFI + LHFS) plus other real estate |
0.66 |
% |
0.38 |
% |
||||||||||||
|
ACL, LHFI / LHFI |
1.25 |
% |
1.18 |
% |
||||||||||||
(1)
Consistent with Trustmark's audited annual financial statements, total revenue is defined as net interest income plus noninterest income (loss).
(2)
Due to rounding, EPS from continuing operations and discontinued operations may not sum to EPS from net income.
|
June 30, |
||||||||
|
2025 |
2024 |
|||||||
|
Consolidated Balance Sheets |
||||||||
|
Total assets |
$ |
18,615,659 |
$ |
18,452,487 |
||||
|
Securities |
3,072,664 |
3,002,146 |
||||||
|
Total loans (LHFI + LHFS) |
13,684,429 |
13,341,116 |
||||||
|
Deposits |
15,115,861 |
15,462,888 |
||||||
|
Total shareholders' equity |
2,070,789 |
1,879,141 |
||||||
|
Stock Performance |
||||||||
|
Market value - close |
$ |
36.46 |
$ |
30.04 |
||||
|
Book value |
34.28 |
30.70 |
||||||
|
Tangible book value |
28.74 |
25.23 |
||||||
|
Capital Ratios |
||||||||
|
Total equity / total assets |
11.12 |
% |
10.18 |
% |
||||
|
Tangible equity / tangible assets |
9.50 |
% |
8.52 |
% |
||||
|
Tangible equity / risk-weighted assets |
11.41 |
% |
10.18 |
% |
||||
|
Tier 1 leverage ratio |
10.15 |
% |
9.29 |
% |
||||
|
Common equity Tier 1 risk-based capital ratio |
11.70 |
% |
10.92 |
% |
||||
|
Tier 1 risk-based capital ratio |
12.09 |
% |
11.31 |
% |
||||
|
Total risk-based capital ratio |
14.15 |
% |
13.29 |
% |
||||
Non-GAAP Financial Measures
In addition to capital ratios defined by U.S. generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets. Trustmark'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 calculation methods may not be comparable with those of other organizations. Also, there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety and not to rely on any single financial measure.
The following table reconciles Trustmark's calculation of these measures to amounts reported under GAAP for the periods presented ($ in thousands, except per share data):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
||||||||||||||
|
TANGIBLE EQUITY |
|||||||||||||||||
|
AVERAGE BALANCES |
|||||||||||||||||
|
Total shareholders' equity |
$ |
2,041,209 |
$ |
1,727,489 |
$ |
2,016,519 |
$ |
1,702,005 |
|||||||||
|
Less: Goodwill |
(334,605 |
) |
(334,605 |
) |
(334,605 |
) |
(334,605 |
) |
|||||||||
|
Identifiable intangible assets |
(80 |
) |
(195 |
) |
(97 |
) |
(210 |
) |
|||||||||
|
Total average tangible equity |
$ |
1,706,524 |
$ |
1,392,689 |
$ |
1,681,817 |
$ |
1,367,190 |
|||||||||
|
PERIOD END BALANCES |
|||||||||||||||||
|
Total shareholders' equity |
$ |
2,070,789 |
$ |
1,879,141 |
|||||||||||||
|
Less: Goodwill |
(334,605 |
) |
(334,605 |
) |
|||||||||||||
|
Identifiable intangible assets |
(63 |
) |
(181 |
) |
|||||||||||||
|
Total tangible equity |
(a) |
$ |
1,736,121 |
$ |
1,544,355 |
||||||||||||
|
TANGIBLE ASSETS |
|||||||||||||||||
|
Total assets |
$ |
18,615,659 |
$ |
18,452,487 |
|||||||||||||
|
Less: Goodwill |
(334,605 |
) |
(334,605 |
) |
|||||||||||||
|
Identifiable intangible assets |
(63 |
) |
(181 |
) |
|||||||||||||
|
Total tangible assets |
(b) |
$ |
18,280,991 |
$ |
18,117,701 |
||||||||||||
|
Risk-weighted assets |
(c) |
$ |
15,215,021 |
$ |
15,165,038 |
||||||||||||
|
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION |
|||||||||||||||||
|
Net income (loss) from continuing operations |
$ |
55,841 |
$ |
(100,605 |
) |
$ |
109,474 |
$ |
(62,432 |
) |
|||||||
|
Plus: Intangible amortization net of tax from |
24 |
20 |
48 |
40 |
|||||||||||||
|
Net income (loss) from continuing operations adjusted for |
$ |
55,865 |
$ |
(100,585 |
) |
$ |
109,522 |
$ |
(62,392 |
) |
|||||||
|
Period end shares outstanding |
(d) |
60,401,684 |
61,205,969 |
||||||||||||||
|
TANGIBLE EQUITY MEASUREMENTS |
|||||||||||||||||
|
Return on average tangible equity from |
13.13 |
% |
(29.05 |
)% |
13.13 |
% |
-9.18 |
% |
|||||||||
|
Tangible equity/tangible assets |
(a)/(b) |
9.50 |
% |
8.52 |
% |
||||||||||||
|
Tangible equity/risk-weighted assets |
(a)/(c) |
11.41 |
% |
10.18 |
% |
||||||||||||
|
Tangible book value |
(a)/(d)*1,000 |
$ |
28.74 |
$ |
25.23 |
||||||||||||
|
COMMON EQUITY TIER 1 CAPITAL (CET1) |
|||||||||||||||||
|
Total shareholders' equity |
$ |
2,070,789 |
$ |
1,879,141 |
|||||||||||||
|
CECL transitional adjustment |
- |
6,500 |
|||||||||||||||
|
AOCI-related adjustments |
30,489 |
91,557 |
|||||||||||||||
|
CET1 adjustments and deductions: |
|||||||||||||||||
|
Goodwill net of associated deferred tax liabilities (DTLs) |
(320,755 |
) |
(320,758 |
) |
|||||||||||||
|
Other adjustments and deductions for CET1 (2) |
(955 |
) |
(847 |
) |
|||||||||||||
|
CET1 capital |
(e) |
1,779,568 |
1,655,593 |
||||||||||||||
|
Additional Tier 1 capital instruments plus related surplus |
60,000 |
60,000 |
|||||||||||||||
|
Tier 1 capital |
$ |
1,839,568 |
$ |
1,715,593 |
|||||||||||||
|
Common equity tier 1 risk-based capital ratio |
(e)/(c) |
11.70 |
% |
10.92 |
% |
||||||||||||
(1)
Calculated using annualized net income (loss) from continuing operations adjusted for intangible amortization divided by total average tangible equity.
(2)
Includes other intangible assets, net of DTLs, disallowed deferred tax assets and threshold deductions, as applicable.
Trustmark discloses certain non-GAAP financial measures, including net income adjusted for significant non-routine transactions, 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 its 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 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 adjustments to net income and selected financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented ($ in thousands, except per share data):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Net Income (loss) from continuing operations (GAAP) |
$ |
55,841 |
$ |
(100,605 |
) |
$ |
109,474 |
$ |
(62,432 |
) |
||||||
|
Significant non-routine transactions (net of taxes): |
||||||||||||||||
|
PCL, LHFI sale of 1-4 family mortgage loans |
- |
6,475 |
- |
6,475 |
||||||||||||
|
Loss on sale of 1-4 family mortgage loans |
- |
3,598 |
- |
3,598 |
||||||||||||
|
Visa C shares fair value adjustment |
- |
(6,042 |
) |
- |
(6,042 |
) |
||||||||||
|
Securities gains (losses), net |
- |
137,094 |
- |
137,094 |
||||||||||||
|
Net income adjusted for significant non-routine |
$ |
55,841 |
$ |
40,520 |
$ |
109,474 |
$ |
78,693 |
||||||||
|
Diluted EPS from adjusted continuing operations |
$ |
0.92 |
$ |
0.66 |
$ |
1.80 |
$ |
1.28 |
||||||||
|
Financial Ratios - Reported (GAAP) |
||||||||||||||||
|
Return on average equity from continuing operations |
10.97 |
% |
-23.42 |
% |
10.95 |
% |
-7.38 |
% |
||||||||
|
Return on average tangible equity from continuing operations |
13.13 |
% |
-29.05 |
% |
13.13 |
% |
-9.18 |
% |
||||||||
|
Return on average assets from continuing operations |
1.21 |
% |
-2.16 |
% |
1.20 |
% |
-0.67 |
% |
||||||||
|
Financial Ratios - Adjusted (Non-GAAP) |
||||||||||||||||
|
Return on average equity from adjusted continuing operations |
n/a |
9.06 |
% |
n/a |
9.11 |
% |
||||||||||
|
Return on average tangible equity from adjusted continuing |
n/a |
11.14 |
% |
n/a |
11.29 |
% |
||||||||||
|
Return on average assets from adjusted continuing operations |
n/a |
0.87 |
% |
n/a |
0.85 |
% |
||||||||||
Results of Operations
Net Interest Income
Net interest income is the principal component of Trustmark's income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The net interest margin is computed by dividing fully taxable equivalent (FTE) net interest income by average interest-earning assets and measures how effectively Trustmark utilizes its interest-earning assets in relationship to the interest cost of funding them. The accompanying yield/rate analysis tables show the average balances for all assets and liabilities of Trustmark and the interest income or expense associated with earning assets and interest-bearing liabilities. The yields and rates have been computed based upon interest income and expense adjusted to a FTE basis using the federal statutory corporate tax rate in effect for each of the periods shown. Loans on nonaccrual have been included in the average loan balances, and interest collected prior to these loans having been placed on nonaccrual has been included in interest income. Loan fees included in interest associated with the average LHFS and LHFI balances were immaterial.
Net interest income-FTE for the three and six months ended June 30, 2025 increased $17.1 million, or 11.8%, and $35.6 million, or 12.7%, respectively, when compared with the same time periods in 2024 reflecting declines in all categories of interest expense as well as an increase in interest on securities, partially offset by declines in interest and fees on LHFS and LHFI-FTE and other interest income. The net interest margin-FTE for the three and six months ended June 30, 2025 increased 43 basis points and 49 basis points to 3.81% and 3.78%, respectively, when compared to the same time periods in 2024, principally due to an increase in the yield on the securities portfolio, primarily due to the restructuring of the available for sale securities portfolio during the second quarter of 2024, as well as decreases in the cost of interest-bearing liabilities.
Average interest-earning assets for the three and six months ended June 30, 2025 totaled $17.007 billion and $16.873 billion, respectively, compared to $17.189 billion and $17.139 billion, respectively, for the same time periods in 2024, a decrease of $182.1 million, or 1.1%, and $265.5 million, or 1.5%, respectively, principally due to decreases in average total securities and average other earning assets partially offset by an increase in average loans (LHFS and LHFI). Average total securities declined $238.5 million, or 7.3%, and $266.7 million, or 8.0%, respectively, when the three and six months ended June 30, 2025 are compared to the same time periods in 2024, principally due to available for sale securities sold net of available for sale securities purchased as part of the restructuring of the available for sale securities portfolio during the second quarter of 2024 as well as calls, maturities and pay-downs of the loans underlying GSE guaranteed securities net of securities purchased. Average other earning assets decreased $178.0 million,
or 30.0%, and $191.8 million, or 32.9%, respectively, when the three and six months ended June 30, 2025 are compared to the same time periods in 2024, primarily due to a decrease in reserves held at the FRBA. Average loans (LHFS and LHFI) increased $234.4 million, or 1.8%, and $193.0 million, or 1.5%, respectively, when the three and six months ended June 30, 2025 are compared to the same time periods in 2024, principally due to an increase in the average balance of the LHFI portfolio of $204.7 million, or 1.6%, and $174.2 million, or 1.3%, respectively. The increase in the LHFI portfolio when the average balances at June 30, 2025 are compared to June 30, 2024 was principally due to net growth in LHFI secured by real estate and other commercial loans and leases partially offset by declines in commercial and industrial loans and state and other political subdivision loans.
Interest income-FTE for the three and six months ended June 30, 2025 totaled $240.1 million and $471.9 million, respectively, a decrease of $2.4 million, or 1.0%, and $3.7 million, or 0.8%, respectively. The yield on total earning assets for the three months ended June 30, 2025 decreased 1 basis point to 5.66% when compared to the same time period in 2024. The yield on total earning assets for the six months ended June 30, 2025 increased 6 basis points to 5.64% when compared to the same time period in 2024. The decrease in interest income-FTE for the three and six months ended June 30, 2025 was primarily due to decreases in interest and fees on LHFS and LHFI-FTE and other interest income partially offset by an increase in interest on securities-taxable. During the three and six months ended June 30, 2025, interest and fees on LHFS and LHFI-FTE decreased $7.3 million, or 3.4%, and $14.8 million, or 3.5%, respectively, while the yield on LHFS and LHFI decreased 35 basis points to 6.19% and 30 basis points to 6.17%, respectively, when compared to the same time periods in 2024, primarily due to a decline in interest rates. During the three and six months ended June 30, 2025, other interest income declined $3.4 million, or 41.7%, and $7.7 million, or 47.2%, respectively, principally due to a decline in interest earned on reserves held at the FRBA reflecting a decline in the average balance of reserves held at the FRBA, while the yield on other earning assets decreased 93 basis points and 118 basis points to 4.58% and 4.43%, respectively, when compared to the same time periods in 2024, principally due to a decline in the rate paid by the FRB on reserve balances. Interest on securities-taxable increased $8.3 million, or 46.5%, and $18.8 million, or 55.9%, respectively, when the three and six months ended June 30, 2025 are compared to the same time periods in 2024, while the yield on securities-taxable increased to 3.46% for both the three and six months ended June 30, 2025, compared to 2.19% and 2.03%, respectively, for the same time periods in 2024, principally due to the restructuring of the available for sale securities portfolio during the second quarter of 2024.
Average interest-bearing liabilities for the three and six months ended June 30, 2025 totaled $13.019 billion and $12.949 billion, respectively, compared to $13.377 billion for the three and six months ended June 30, 2024, a decrease of $357.5 million, or 2.7%, and $427.8 million, or 3.2%, respectively, reflecting declines in all categories of average interest-bearing liabilities. Average interest-bearing deposits for the three and six months ended June 30, 2025 decreased $236.6 million, or 1.9%, and $296.6 million, or 2.4%, respectively, when compared to the same time periods in 2024, reflecting declines in all categories of average interest-bearing deposits. Average other borrowings for the three and six months ended June 30, 2025 decreased $102.3 million, or 14.2%, and $110.5 million, or 16.1%, respectively, when compared to the same time periods in 2024, principally due to the decrease in average short-term FHLB advances outstanding with the FHLB of Dallas as a result of changes in funding needs. Average federal funds purchased and securities sold under repurchase agreements for the three and six months ended June 30, 2025 decreased $18.7 million, or 4.3%, and $20.8 million, or 4.8%, respectively, when compared to the same time periods in 2024, principally due to declines in average securities sold under repurchase agreements, which represent customer sweep transactions.
Interest expense for the three and six months ended June 30, 2025 totaled $78.7 million and $155.8 million, respectively, a decrease of $19.5 million, or 19.8%, and $39.4 million, or 20.2%, respectively, when compared with the same time periods in 2024, while the rate on total interest-bearing liabilities decreased 53 basis points and 50 basis points to 2.42% and 2.43%, respectively, reflecting declines in all categories of interest expense. Interest on deposits for the three and six months ended June 30, 2025 decreased $15.5 million, or 18.5%, and $31.5 million, or 18.8%, respectively, while the rate on interest-bearing deposits decreased 47 basis points and 46 basis points to 2.28% and 2.29%, respectively, when compared to the same time periods in 2024, primarily due to declines in average balances of public interest checking accounts and brokered deposits as well as a decline in rates on interest-bearing deposits. Other interest expense for the three and six months ended June 30, 2025 decreased $2.8 million, or 31.9%, and $5.4 million, or 32.9%, respectively, while the rate on other borrowings decreased 102 basis points and 95 basis points to 3.89%, respectively, when compared to the same time periods in 2024, primarily due to the decrease in average outstanding short-term FHLB advances with the FHLB of Dallas as well as a decline in the rate on short-term FHLB advances. Interest expense on federal funds purchased and securities sold under repurchase agreements for the three and six months ended June 30, 2025 decreased of $1.2 million, or 20.3%, and $2.4 million, or 21.7%, respectively, while the rate on federal funds purchased and securities sold under repurchase agreements decreased 89 basis points and 92 basis points to 4.35% and 4.33%, respectively, when compared to the same time periods in 2024, reflecting a decrease in the target rate on federal funds purchased by the FRB.
The following tables provide the tax equivalent basis yield or rate for each component of the tax equivalent net interest margin for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
||||||||||||||||||||||||
|
2025 |
2024 |
|||||||||||||||||||||||
|
Average |
Interest |
Yield/ |
Average |
Interest |
Yield/ |
|||||||||||||||||||
|
Assets |
||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||
|
Securities - taxable |
$ |
3,049,119 |
$ |
26,269 |
3.46 |
% |
$ |
3,287,473 |
$ |
17,929 |
2.19 |
% |
||||||||||||
|
Securities - nontaxable |
- |
- |
- |
112 |
1 |
3.59 |
% |
|||||||||||||||||
|
Loans (LHFS and LHFI) |
13,543,505 |
209,077 |
6.19 |
% |
13,309,127 |
216,399 |
6.54 |
% |
||||||||||||||||
|
Other earning assets |
414,733 |
4,734 |
4.58 |
% |
592,735 |
8,126 |
5.51 |
% |
||||||||||||||||
|
Total interest-earning assets |
17,007,357 |
240,080 |
5.66 |
% |
17,189,447 |
242,455 |
5.67 |
% |
||||||||||||||||
|
Other assets |
1,605,786 |
1,740,307 |
||||||||||||||||||||||
|
ACL, LHFI |
(166,430 |
) |
(143,245 |
) |
||||||||||||||||||||
|
Total assets |
$ |
18,446,713 |
$ |
18,786,509 |
||||||||||||||||||||
|
Liabilities and Shareholders' Equity |
||||||||||||||||||||||||
|
Interest-bearing liabilities: |
||||||||||||||||||||||||
|
Interest-bearing deposits |
$ |
11,985,793 |
68,177 |
2.28 |
% |
$ |
12,222,381 |
83,681 |
2.75 |
% |
||||||||||||||
|
Federal funds purchased and |
416,104 |
4,513 |
4.35 |
% |
434,760 |
5,663 |
5.24 |
% |
||||||||||||||||
|
Other borrowings |
617,496 |
5,982 |
3.89 |
% |
719,762 |
8,778 |
4.91 |
% |
||||||||||||||||
|
Total interest-bearing liabilities |
13,019,393 |
78,672 |
2.42 |
% |
13,376,903 |
98,122 |
2.95 |
% |
||||||||||||||||
|
Noninterest-bearing demand deposits |
3,171,796 |
3,183,524 |
||||||||||||||||||||||
|
Other liabilities |
214,315 |
498,593 |
||||||||||||||||||||||
|
Shareholders' equity |
2,041,209 |
1,727,489 |
||||||||||||||||||||||
|
Total liabilities and |
$ |
18,446,713 |
$ |
18,786,509 |
||||||||||||||||||||
|
Net interest margin |
161,408 |
3.81 |
% |
144,333 |
3.38 |
% |
||||||||||||||||||
|
Less tax equivalent adjustment |
2,652 |
3,304 |
||||||||||||||||||||||
|
Net interest margin per |
$ |
158,756 |
$ |
141,029 |
||||||||||||||||||||
|
Six Months Ended June 30, |
||||||||||||||||||||||||
|
2025 |
2024 |
|||||||||||||||||||||||
|
Average |
Interest |
Yield/ |
Average |
Interest |
Yield/ |
|||||||||||||||||||
|
Assets |
||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||
|
Securities - taxable |
$ |
3,050,291 |
$ |
52,325 |
3.46 |
% |
$ |
3,316,784 |
$ |
33,563 |
2.03 |
% |
||||||||||||
|
Securities - nontaxable |
- |
- |
- |
226 |
5 |
4.45 |
% |
|||||||||||||||||
|
Loans (LHFS and LHFI) |
13,432,507 |
411,006 |
6.17 |
% |
13,239,466 |
425,855 |
6.47 |
% |
||||||||||||||||
|
Other earning assets |
390,255 |
8,580 |
4.43 |
% |
582,032 |
16,237 |
5.61 |
% |
||||||||||||||||
|
Total interest-earning assets |
16,873,053 |
471,911 |
5.64 |
% |
17,138,508 |
475,660 |
5.58 |
% |
||||||||||||||||
|
Other assets |
1,615,132 |
1,735,414 |
||||||||||||||||||||||
|
ACL, LHFI |
(163,180 |
) |
(140,978 |
) |
||||||||||||||||||||
|
Total assets |
$ |
18,325,005 |
$ |
18,732,944 |
||||||||||||||||||||
|
Liabilities and Shareholders' Equity |
||||||||||||||||||||||||
|
Interest-bearing liabilities: |
||||||||||||||||||||||||
|
Interest-bearing deposits |
$ |
11,964,318 |
135,895 |
2.29 |
% |
$ |
12,260,895 |
167,397 |
2.75 |
% |
||||||||||||||
|
Federal funds purchased and |
410,677 |
8,811 |
4.33 |
% |
431,444 |
11,254 |
5.25 |
% |
||||||||||||||||
|
Other borrowings |
573,799 |
11,058 |
3.89 |
% |
684,290 |
16,481 |
4.84 |
% |
||||||||||||||||
|
Total interest-bearing liabilities |
12,948,794 |
155,764 |
2.43 |
% |
13,376,629 |
195,132 |
2.93 |
% |
||||||||||||||||
|
Noninterest-bearing demand deposits |
3,113,886 |
3,152,045 |
||||||||||||||||||||||
|
Other liabilities |
245,806 |
502,265 |
||||||||||||||||||||||
|
Shareholders' equity |
2,016,519 |
1,702,005 |
||||||||||||||||||||||
|
Total liabilities and |
$ |
18,325,005 |
$ |
18,732,944 |
||||||||||||||||||||
|
Net interest margin |
316,147 |
3.78 |
% |
280,528 |
3.29 |
% |
||||||||||||||||||
|
Less tax equivalent adjustment |
5,336 |
6,669 |
||||||||||||||||||||||
|
Net interest margin per |
$ |
310,811 |
$ |
273,859 |
||||||||||||||||||||
Provision for Credit Losses
The PCL, LHFI is the amount necessary to maintain the ACL for LHFI at the amount of expected credit losses inherent within the LHFI portfolio. The amount of PCL and the related ACL for LHFI are based on Trustmark's ACL methodology. The PCL, LHFI totaled $5.3 million and $13.5 million for the three and six months ended June 30, 2025, respectively, compared to a PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, of $14.7 million and $22.4 million, respectively, for the same time periods in 2024. The PCL, LHFI for the three months ended June 30, 2025 primarily reflected increases in required reserves as a result of loan growth and changes in macroeconomic forecasts partially offset by declines in required reserves as a result of positive credit migration and updates to various qualitative reserve factors. The PCL, LHFI for the six months ended June 30, 2025 primarily reflected increases in required reserves as a result of loan growth and changes in macroeconomic forecasts partially offset by declines in required reserves as a result of updates to various qualitative reserve factors.
FASB ASC Topic 326 requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable by Trustmark. Trustmark maintains a separate ACL for off-balance sheet credit exposures, including unfunded commitments and letters of credit. Adjustments to the ACL on off-balance sheet credit exposures are recorded to the PCL, off-balance sheet credit exposures. The PCL, off-balance sheet credit exposures totaled a negative $670 thousand and a negative $3.5 million for the three and six months ended June 30, 2025, respectively, compared to a negative $3.6 million and a negative $3.8 million, respectively, for the same time periods in 2024. The release in PCL, off-balance sheet credit exposures for the three months ended June 30, 2025, primarily reflected a decrease in required reserves as a result of positive credit migration partially offset by an increase in
required reserves as a result of changes in the total reserve rate primarily related to 1-4 family construction and commercial and industrial credits. The release in PCL, off-balance sheet credit exposures for the six months ended June 30, 2025, primarily reflected a decrease in required reserves as a result of positive credit migration, a decrease in the unfunded commitments and net changes in the total reserve rate.
See the section captioned "Allowance for Credit Losses" for information regarding Trustmark's ACL methodology as well as further analysis of the PCL.
Noninterest Income (Loss)
The following table provides the comparative components of noninterest income (loss) for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Service charges on deposit |
$ |
10,585 |
$ |
10,924 |
$ |
(339 |
) |
-3.1 |
% |
$ |
21,221 |
$ |
21,882 |
$ |
(661 |
) |
-3.0 |
% |
||||||||||||||
|
Bank card and other fees |
8,754 |
9,225 |
(471 |
) |
-5.1 |
% |
16,418 |
16,653 |
(235 |
) |
-1.4 |
% |
||||||||||||||||||||
|
Mortgage banking, net |
8,602 |
4,204 |
4,398 |
n/m |
17,373 |
13,119 |
4,254 |
32.4 |
% |
|||||||||||||||||||||||
|
Wealth management |
9,638 |
9,692 |
(54 |
) |
-0.6 |
% |
19,181 |
18,644 |
537 |
2.9 |
% |
|||||||||||||||||||||
|
Other, net |
2,311 |
7,461 |
(5,150 |
) |
-69.0 |
% |
8,281 |
10,563 |
(2,282 |
) |
-21.6 |
% |
||||||||||||||||||||
|
Securities gains (losses), net |
- |
(182,792 |
) |
182,792 |
100.0 |
% |
- |
(182,792 |
) |
182,792 |
100.0 |
% |
||||||||||||||||||||
|
Total noninterest income |
$ |
39,890 |
$ |
(141,286 |
) |
$ |
181,176 |
n/m |
$ |
82,474 |
$ |
(101,931 |
) |
$ |
184,405 |
n/m |
||||||||||||||||
n/m - percentage changes greater than +/- 100% are not considered meaningful
Changes in various components of noninterest income (loss) are discussed in further detail below. For analysis of Trustmark's wealth management income, please see the section captioned "Results of Segment Operations."
Mortgage Banking, Net
The following table illustrates the components of mortgage banking, net included in noninterest income (loss) for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Mortgage servicing income, net |
$ |
7,142 |
$ |
6,993 |
$ |
149 |
2.1 |
% |
$ |
14,303 |
$ |
13,927 |
$ |
376 |
2.7 |
% |
||||||||||||||||
|
Change in fair value-MSR |
(3,596 |
) |
(3,447 |
) |
(149 |
) |
-4.3 |
% |
(5,658 |
) |
(5,373 |
) |
(285 |
) |
-5.3 |
% |
||||||||||||||||
|
Gain on sales of loans, net |
5,597 |
5,151 |
446 |
8.7 |
% |
9,850 |
10,160 |
(310 |
) |
-3.1 |
% |
|||||||||||||||||||||
|
Mortgage banking income |
9,143 |
8,697 |
446 |
5.1 |
% |
18,495 |
18,714 |
(219 |
) |
-1.2 |
% |
|||||||||||||||||||||
|
Change in fair value-MSR from |
(1,946 |
) |
(1,626 |
) |
(320 |
) |
-19.7 |
% |
(7,874 |
) |
3,497 |
(11,371 |
) |
n/m |
||||||||||||||||||
|
Change in fair value of |
1,405 |
(2,867 |
) |
4,272 |
n/m |
6,752 |
(9,092 |
) |
15,844 |
n/m |
||||||||||||||||||||||
|
Net hedge ineffectiveness |
(541 |
) |
(4,493 |
) |
3,952 |
88.0 |
% |
(1,122 |
) |
(5,595 |
) |
4,473 |
79.9 |
% |
||||||||||||||||||
|
Mortgage banking, net |
$ |
8,602 |
$ |
4,204 |
$ |
4,398 |
n/m |
$ |
17,373 |
$ |
13,119 |
$ |
4,254 |
32.4 |
% |
|||||||||||||||||
n/m - percentage changes greater than +/- 100% are not considered meaningful
The increase in mortgage banking, net for the three and six months ended June 30, 2025 when compared to the same time periods in 2024 was principally due to improvement in the net negative hedge ineffectiveness. Mortgage loan production for the three and six months ended June 30, 2025 was $426.3 million and $745.1 million, respectively, an increase of $46.8 million, or 12.3%, and $91.6 million, or 14.0%, respectively, when compared to the same time periods in 2024. Loans serviced for others totaled $8.859 billion at June 30, 2025, compared with $8.628 billion at June 30, 2024, an increase of $230.9 million, or 2.7%.
Representing a significant component of mortgage banking income is the gain on sales of loans, net. The increase in the gain on sale of loans, net when the three months ended June 30, 2025 is compared to the same time period in 2024 was principally due to an increase in the mortgage valuation adjustment partially offset by decreases in the volume of loans sold and lower profit margins in secondary
marketing activities. The decrease in the gain on sales of loans, net when the six months ended June 30, 2025 is compared to the same time period in 2024, was primarily the result of lower profit margins in secondary marketing activities and a decrease in the volume of loans sold partially offset by an increase in the mortgage valuation adjustment. Loan sales totaled $274.9 million and $530.6 million for the three and six months ended June 30, 2025, respectively, a decrease of $22.0 million, or 7.4%, and $24.4 million, or 4.4%, respectively, when compared with the same time periods in 2024.
Other, Net
The following table illustrates the components of other, net included in noninterest income (loss) for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Partnership amortization for tax |
$ |
(2,137 |
) |
$ |
(1,824 |
) |
$ |
(313 |
) |
-17.2 |
% |
$ |
(4,261 |
) |
$ |
(3,658 |
) |
$ |
(603 |
) |
-16.5 |
% |
||||||||||
|
Increase in life insurance cash |
1,911 |
1,860 |
51 |
2.7 |
% |
3,778 |
3,704 |
74 |
2.0 |
% |
||||||||||||||||||||||
|
Loss on sale of 1-4 family |
- |
(4,798 |
) |
4,798 |
100.0 |
% |
- |
(4,798 |
) |
4,798 |
100.0 |
% |
||||||||||||||||||||
|
Visa C shares fair value |
- |
8,056 |
(8,056 |
) |
-100.0 |
% |
- |
8,056 |
(8,056 |
) |
-100.0 |
% |
||||||||||||||||||||
|
Other miscellaneous income |
2,537 |
4,167 |
(1,630 |
) |
-39.1 |
% |
8,764 |
7,259 |
1,505 |
20.7 |
% |
|||||||||||||||||||||
|
Total other, net |
$ |
2,311 |
$ |
7,461 |
$ |
(5,150 |
) |
-69.0 |
% |
$ |
8,281 |
$ |
10,563 |
$ |
(2,282 |
) |
-21.6 |
% |
||||||||||||||
n/m - percentage changes greater than +/- 100% are not considered meaningful
The decrease in other, net when the three months ended June 30, 2025 is compared to the same time period in 2024 was principally due to the $8.1 million fair value adjustment for the Visa C shares during the second quarter of 2024 as well as a decrease in the gain on sale of premises and equipment, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans during the second quarter of 2024. The decrease in other, net when the six months ended June 30, 2025 is compared to the same time period in 2024 was principally due to the $8.1 million fair value adjustment for the Visa C shares during the second quarter of 2024, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans during the second quarter of 2024 and an increase in gain on sale of premises and equipment primarily attributable to a $2.4 million gain on the sale of a bank property during the first quarter of 2025.
Noninterest Expense
The following table illustrates the comparative components of noninterest expense for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Salaries and employee benefits |
$ |
68,298 |
$ |
64,838 |
$ |
3,460 |
5.3 |
% |
$ |
136,790 |
$ |
130,325 |
$ |
6,465 |
5.0 |
% |
||||||||||||||||
|
Services and fees |
26,998 |
24,743 |
2,255 |
9.1 |
% |
53,245 |
49,174 |
4,071 |
8.3 |
% |
||||||||||||||||||||||
|
Net occupancy-premises |
7,507 |
7,265 |
242 |
3.3 |
% |
14,892 |
14,535 |
357 |
2.5 |
% |
||||||||||||||||||||||
|
Equipment expense |
6,206 |
6,241 |
(35 |
) |
-0.6 |
% |
12,514 |
12,566 |
(52 |
) |
-0.4 |
% |
||||||||||||||||||||
|
Other expense |
16,105 |
15,239 |
866 |
5.7 |
% |
31,684 |
31,390 |
294 |
0.9 |
% |
||||||||||||||||||||||
|
Total noninterest expense |
$ |
125,114 |
$ |
118,326 |
$ |
6,788 |
5.7 |
% |
$ |
249,125 |
$ |
237,990 |
$ |
11,135 |
4.7 |
% |
||||||||||||||||
Changes in the various components of noninterest expense are discussed in further detail below. Management considers disciplined expense management a key area of focus in the support of improving shareholder value.
Salaries and Employee Benefits
The increase in salaries and employee benefits when the three and six months ended June 30, 2025 are compared to the same time periods in 2024 was primarily due to increases in salaries expense principally due to general merit increases, management performance incentives, medical insurance expense and commissions related to mortgage originations.
Services and Fees
The increases in services and fees when the three and six months ended June 30, 2025 are compared to the same time periods in 2024 were principally due to increases in data processing expenses related to software, business process operations outsourcing expense, other services and fees, advertising expense and legal expense.
Other Expense
The following table illustrates the comparative components of other noninterest expense for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
|
2025 |
2024 |
$ Change |
% Change |
2025 |
2024 |
$ Change |
% Change |
|||||||||||||||||||||||||
|
Loan expense |
$ |
3,377 |
$ |
2,880 |
$ |
497 |
17.3 |
% |
$ |
6,169 |
$ |
5,835 |
$ |
334 |
5.7 |
% |
||||||||||||||||
|
Amortization of intangibles |
32 |
27 |
5 |
18.5 |
% |
63 |
55 |
8 |
14.5 |
% |
||||||||||||||||||||||
|
FDIC assessment expense |
4,064 |
4,816 |
(752 |
) |
-15.6 |
% |
8,224 |
9,325 |
(1,101 |
) |
-11.8 |
% |
||||||||||||||||||||
|
Other real estate expense, net |
159 |
327 |
(168 |
) |
-51.4 |
% |
611 |
998 |
(387 |
) |
-38.8 |
% |
||||||||||||||||||||
|
Other miscellaneous expense |
8,473 |
7,189 |
1,284 |
17.9 |
% |
16,617 |
15,177 |
1,440 |
9.5 |
% |
||||||||||||||||||||||
|
Total other expense |
$ |
16,105 |
$ |
15,239 |
$ |
866 |
5.7 |
% |
$ |
31,684 |
$ |
31,390 |
$ |
294 |
0.9 |
% |
||||||||||||||||
Results of Segment Operations
For a description of the methodologies used to measure financial performance and financial information by reportable segment, please see Note 19 - Segment Information included in Part I. Item 1. - Financial Statements of this report. The Insurance Segment is included in discontinued operations for the six months ended June 30, 2024. For additional information about discontinued operations, please see Note 2 - Discontinued Operations included in Part I. Item 1. - Financial Statements of this report. The following discusses changes in the results of operations of each reportable segment for the six months ended June 30, 2025 and 2024.
General Banking
Net interest income for the General Banking Segment increased $36.0 million, or 13.3%, when the six months ended June 30, 2025 is compared with the same time period in 2024. The increase in net interest income was principally due to an increase in interest on securities as well as declines in all categories of interest expense, partially offset by declines in interest and fees from LHFS and LHFI and other interest income. The net PCL (LHFI and off-balance sheet credit exposures) for the General Banking Segment for the six months ended June 30, 2025 totaled $10.0 million compared to a net PCL of $27.1 million for the same time period in 2024, a decrease of $17.1 million, or 63.1%. Excluding the $8.6 million PCL, LHFI sale of 1-4 family mortgage loans recorded in the second quarter of 2024, the net PCL for the General Banking Segment decreased $8.5 million, or 45.8%, when the six months ended June 30, 2025 is compared to the same time period in 2024. For more information on these net interest income and PCL items, please see the sections captioned "Financial Highlights" and "Results of Operations."
Noninterest income (loss) for the General Banking Segment increased $183.9 million when the first six months of 2025 is compared to the same time period in 2024, principally due to the net loss on the sale of the available for sale securities and the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans during the second quarter of 2024, an increase in mortgage banking, net, and an increase in gain on sale of premises and equipment primarily attributable to a $2.4 million gain on the sale of a bank property during the first quarter of 2025, partially offset by the $8.1 million fair value adjustment for the Visa C shares during the second quarter of 2024. Noninterest income (loss) for the General Banking Segment includes service charges on deposit accounts; wealth management; bank card and other fees; mortgage banking, net; other, net and securities gains (losses), net. For more information on these noninterest income (loss) items, please see the analysis included in the section captioned "Noninterest Income (Loss)."
Noninterest expense for the General Banking Segment increased $11.3 million, or 5.1%, when the first six months of 2025 is compared with the same time period in 2024, principally due to increases in salaries and employee benefits and services and fees. For more information on these noninterest expense items, please see the analysis included in the section captioned "Noninterest Expense."
Wealth Management
Net income for the Wealth Management Segment for the first six months of 2025 increased $1.4 million, or 36.2%, when compared to the same time period in 2024, primarily due to increases in net interest income and noninterest income. Net interest income for the Wealth Management Segment for the six months ended June 30, 2025 increased $923 thousand, or 32.8%, when compared to the same time period in 2024, principally due to an increase in interest and fees on loans as well as a decline in interest expense on deposits generated by the Private Banking group. The net PCL for the six months ended June 30, 2025 totaled a negative $20 thousand compared
to a net PCL of $165 thousand for the same period in 2024, a decrease of $185 thousand. Noninterest income for the Wealth Management Segment, which primarily includes income related to investment management, trust and brokerage services, increased $553 thousand, or 3.0%, when the first six months of 2025 is compared to the same time period in 2024, primarily due to an increase in income from trust management services partially offset by a decline in income from brokerage services. Noninterest expense for the Wealth Management Segment reflected a slight decrease of $149 thousand, or 0.9%, when the first six months of 2025 is compared to the same time period in 2024.
At June 30, 2025 and 2024, Trustmark held assets under management and administration of $9.818 billion and $9.036 billion, respectively, and brokerage assets of $2.757 billion and $2.848 billion, respectively.
Income Taxes
For the three and six months ended June 30, 2025, Trustmark's combined effective tax rate from continuing operations was 18.9% and 18.4%, respectively, compared to 27.3% and 33.1%, respectively, for the same time periods in 2024. The elevated effective tax rate from continuing operations for the three and six months ended June 30, 2024 was principally due to the significant non-routine transactions that occurred during the second quarter of 2024. Excluding the significant non-routine transactions, Trustmark's combined effective tax rate from continuing operations for the three and six months ended June 30, 2024 was 18.7% and 17.0%, respectively. Trustmark's effective tax rate continues to be less than the statutory rate primarily due to various tax-exempt income items and its utilization of income tax credit programs. 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 or 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.
Financial Condition
Earning assets serve as the primary revenue streams for Trustmark and are comprised of securities, loans and other earning assets. Average earning assets totaled $16.873 billion, or 92.1% of total average assets, for the six months ended June 30, 2025, compared to $17.139 billion, or 91.5% of total average assets, for the six months ended June 30, 2024, a decrease of $265.5 million, or 1.5%.
Securities
The securities portfolio is utilized by Management to manage interest rate risk, generate interest income, provide liquidity and use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering duration, composition and/or balance of the portfolio. The weighted-average life of the portfolio was 4.6 years at June 30, 2025 compared to 4.8 years at December 31, 2024.
When compared to December 31, 2024, total investment securities increased by $44.7 million, or 1.5%, during the first six months of 2025. This increase resulted primarily from purchases of available for sale securities and an increase in the fair market value of the available for sale securities, partially offset by calls, maturities and pay-downs of the loans underlying GSE guaranteed securities. Trustmark sold no securities during the first six months of 2025, compared to $1.561 billion of available for sale securities sold generating a loss of $182.8 million during the first six months of 2024.
During 2022, Trustmark reclassified approximately $766.0 million of securities available for sale to securities held to maturity to mitigate the potential adverse impact of a rising interest rate environment on the fair value of the available for sale securities and the related impact on tangible common equity. At the date of these transfers, the net unrealized holding loss on the available for sale securities totaled approximately $91.9 million ($68.9 million net of tax). The resulting net unrealized holding losses are being 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.
At June 30, 2025, the net unamortized, unrealized loss on all transferred securities included in accumulated other comprehensive income (loss) (AOCI) in the accompanying consolidated balance sheets totaled $41.5 million compared to $46.6 million at December 31, 2024.
Available for sale securities are carried at their estimated fair value with unrealized gains or losses recognized, net of taxes, in AOCI, a separate component of shareholders' equity. At June 30, 2025, available for sale securities totaled $1.782 billion, which represented 58.0% of the securities portfolio, compared to $1.693 billion, or 55.9% of total securities, at December 31, 2024. At June 30, 2025, unrealized gains, net on available for sale securities totaled $19.6 million compared to unrealized losses, net of $27.0 million at December 31, 2024. At June 30, 2025, available for sale securities consisted of U.S. Treasury securities, direct obligations of government agencies and GSE guaranteed mortgage-related securities.
Held to maturity securities are carried at amortized cost and represent those securities that Trustmark both intends and has the ability to hold to maturity. At June 30, 2025, held to maturity securities totaled $1.291 billion, which represented 42.0% of the total securities portfolio, compared to $1.335 billion, or 44.1% of total securities, at December 31, 2024.
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 100.0% of the portfolio in U.S. Treasury securities, direct obligations of government agencies and GSE-backed obligations. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the FHLB of Dallas and FRBA, Trustmark does not hold any other equity investment in a GSE or other governmental entity.
As of June 30, 2025, Trustmark did not hold securities of any one issuer with a carrying value exceeding 10% of total shareholders' equity, other than certain GSEs which are exempt from inclusion. Management continues to closely monitor the credit quality as well as the ratings of the debt and mortgage-backed securities issued by the GSEs and held in Trustmark's securities portfolio.
The following tables present Trustmark's securities portfolio by amortized cost and estimated fair value and by credit rating, as determined by Moody's Investors Services (Moody's), at June 30, 2025 and December 31, 2024 ($ in thousands):
|
June 30, 2025 |
||||||||||||||||
|
Amortized Cost |
Estimated Fair Value |
|||||||||||||||
|
Amount |
% |
Amount |
% |
|||||||||||||
|
Securities Available for Sale |
||||||||||||||||
|
Aaa |
$ |
39,396 |
2.2 |
% |
$ |
40,537 |
2.3 |
% |
||||||||
|
Aa1 to Aa3 |
1,723,108 |
97.8 |
% |
1,741,555 |
97.7 |
% |
||||||||||
|
Total securities available for sale |
$ |
1,762,504 |
100.0 |
% |
$ |
1,782,092 |
100.0 |
% |
||||||||
|
Securities Held to Maturity |
||||||||||||||||
|
Aaa |
$ |
53,200 |
4.1 |
% |
$ |
50,456 |
4.0 |
% |
||||||||
|
Aa1 to Aa3 |
1,237,372 |
95.9 |
% |
1,197,226 |
96.0 |
% |
||||||||||
|
Total securities held to maturity |
$ |
1,290,572 |
100.0 |
% |
$ |
1,247,682 |
100.0 |
% |
||||||||
|
December 31, 2024 |
||||||||||||||||
|
Amortized Cost |
Estimated Fair Value |
|||||||||||||||
|
Amount |
% |
Amount |
% |
|||||||||||||
|
Securities Available for Sale |
||||||||||||||||
|
Aaa |
$ |
1,719,537 |
100.0 |
% |
$ |
1,692,534 |
100.0 |
% |
||||||||
|
Securities Held to Maturity |
||||||||||||||||
|
Aaa |
$ |
1,335,385 |
100.0 |
% |
$ |
1,259,107 |
100.0 |
% |
||||||||
The table above presenting the credit rating of Trustmark's securities is formatted to show the securities according to the credit rating category, and not by category of the underlying security. As noted in the tables above, a significant portion of Trustmark's investment portfolio moved from the Aaa credit rating to the Aa1 to Aa3 credit rating as of June 30, 2025. The change in the credit rating of Trustmark's investment portfolio was the result of Moody's downgrade of the United States' credit rating from Aaa to Aa1 during the second quarter of 2025. The downgrade was primarily due to concerns about the rising federal debt, increasing interest costs and a perceived weakening of the government's ability to respond to future economic shocks.
LHFS
At June 30, 2025, LHFS totaled $219.6 million, consisting of $114.7 million of residential real estate mortgage loans in the process of being sold to third parties and $105.0 million of GNMA optional repurchase loans. At December 31, 2024, LHFS totaled $200.3 million, consisting of $102.7 million of residential real estate mortgage loans in the process of being sold to third parties and $97.6 million of GNMA optional repurchase loans. Please refer to the nonperforming assets table that follows for information on GNMA loans eligible for repurchase which are past due 90 days or more.
Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during the first six months of 2025 or 2024.
For additional information regarding the GNMA optional repurchase loans, please see the section captioned "Past Due LHFS" included in Note 4 - LHFI and Allowance for Credit Losses, LHFI of Part I. Item 1. - Financial Statements of this report.
LHFI
At June 30, 2025 and December 31, 2024, LHFI consisted of the following ($ in thousands):
|
June 30, 2025 |
December 31, 2024 |
|||||||||||||||
|
Amount |
% |
Amount |
% |
|||||||||||||
|
Loans secured by real estate: |
||||||||||||||||
|
Construction, land development and other land |
$ |
560,913 |
4.2 |
% |
$ |
587,244 |
4.5 |
% |
||||||||
|
Other secured by 1-4 family residential properties |
689,089 |
5.1 |
% |
650,550 |
5.0 |
% |
||||||||||
|
Secured by nonfarm, nonresidential properties |
3,478,932 |
25.8 |
% |
3,533,282 |
27.0 |
% |
||||||||||
|
Other real estate secured |
1,918,341 |
14.3 |
% |
1,633,830 |
12.5 |
% |
||||||||||
|
Other loans secured by real estate: |
||||||||||||||||
|
Other construction |
794,310 |
5.9 |
% |
829,904 |
6.3 |
% |
||||||||||
|
Secured by 1-4 family residential properties |
2,368,273 |
17.6 |
% |
2,298,993 |
17.6 |
% |
||||||||||
|
Commercial and industrial loans |
1,832,295 |
13.6 |
% |
1,840,722 |
14.0 |
% |
||||||||||
|
Consumer loans |
152,921 |
1.1 |
% |
156,569 |
1.2 |
% |
||||||||||
|
State and other political subdivision loans |
961,251 |
7.1 |
% |
969,836 |
7.4 |
% |
||||||||||
|
Other commercial loans and leases |
708,455 |
5.3 |
% |
589,012 |
4.5 |
% |
||||||||||
|
LHFI |
$ |
13,464,780 |
100.0 |
% |
$ |
13,089,942 |
100.0 |
% |
||||||||
LHFI increased $374.8 million, or 2.9%, compared to December 31, 2024. The increase in LHFI during the first six months of 2025 was primarily due to net growth in LHFI secured by real estate and other commercial loans and leases.
LHFI secured by real estate increased $276.1 million, or 2.9%, during the first six months of 2025, reflecting net growth in other real estate secured LHFI, LHFI secured by 1-4 family residential properties and other LHFI secured by 1-4 family residential properties, partially offset by net declines in LHFI secured by nonfarm, nonresidential properties (NFNR LHFI), other construction LHFI and construction, land development and other land LHFI. Other real estate secured LHFI increased $284.5 million, or 17.4%, during the first six months of 2025, primarily due to other construction loans that moved to LHFI secured by multi-family residential properties in the Alabama, Texas, Mississippi and Georgia market regions. Excluding other construction loan reclassifications, other real estate secured LHFI decreased $165.3 million, or 10.1%, during the first six months of 2025 principally due to declines in LHFI secured by multi-family residential properties in the Alabama and Texas market regions partially offset by growth in the Georgia and Mississippi market regions. LHFI secured by 1-4 family residential properties increased $69.3 million, or 3.0%, during the first six months of 2025 principally due to an increase in mortgage loan originations in the Mississippi market region. LHFI secured by 1-4 family residential properties are primarily included in the Mississippi Region because they are centrally analyzed and approved as part of a specific line of business located at Trustmark's headquarters in Jackson, Mississippi. Other LHFI secured by 1-4 family residential properties increased $38.5 million, or 5.9%, during the first six months of 2025, reflecting growth in the Mississippi, Alabama, Tennessee, Florida and Texas market regions. NFNR LHFI declined $54.4 million, or 1.5%, during the first six months of 2025 principally due to declines in nonowner-occupied LHFI in Trustmark's Alabama, Texas, Georgia and Florida market regions and owner-occupied LHFI in the Alabama market region, partially offset by growth in nonowner-occupied LHFI in the Mississippi market region and other construction loans that moved to NFNR LHFI in the Alabama, Georgia, Mississippi, Texas and Florida market regions. Excluding other construction loan reclassifications, NFNR LHFI declined $126.6 million, or 3.6%, during the first six months of 2025. Other construction loans decreased $35.6 million, or 4.3%, during the first six months of 2025 primarily due to other construction loans moved to other loan categories upon the completion of the related construction project in the Alabama, Mississippi, Texas, Georgia and Florida market regions partially offset by new construction loans in the Georgia, Alabama, Mississippi, Texas and Florida market regions. During the first six months of 2025, $523.4 million loans were moved from other construction to other loan categories, including $449.8 million to multi-family residential loans, $45.6 million to nonowner-occupied loans and $28.0 million to owner-occupied loans. Excluding all reclassifications between loan categories, growth in other construction loans across the Georgia, Alabama, Mississippi, Texas and Florida market regions totaled $486.2 million, or 58.6%, during the first six months of 2025. LHFI secured by construction, land development and other land decreased $26.3 million, or 4.5%, during the first six months of 2025 primarily due to declines in 1-4 family construction loans in the Texas, Mississippi, Georgia and Alabama market regions, unimproved land loans in the Florida, Mississippi and Tennessee market regions and land development loans in the Alabama market region, partially offset by growth in 1-4 family construction loans in the Tennessee and Florida market regions, land development loans in the Tennessee and Texas market regions and unimproved land loans in the Texas market region.
Other commercial loans and leases increased $119.4 million, or 20.3%, during the first six months of 2025, principally due to increases in other commercial loans in the Mississippi, Georgia and Texas market regions and equipment finance leases in the Georgia market region, partially offset by declines in other commercial loans in the Alabama, Tennessee and Florida market regions. The equipment finance leases are primarily reported in the Georgia market region because they are centrally analyzed and approved as part of the Equipment Finance line of business which is located in Atlanta, Georgia.
The following table provides information regarding Trustmark's home equity loans and home equity lines of credit which are included in the other LHFI secured by 1-4 family residential properties for the periods presented ($ in thousands):
|
June 30, 2025 |
December 31, 2024 |
|||||||
|
Home equity loans |
$ |
72,614 |
$ |
72,183 |
||||
|
Home equity lines of credit |
484,041 |
458,327 |
||||||
|
Percentage of loans and lines for which Trustmark holds first lien |
45.8 |
% |
46.7 |
% |
||||
|
Percentage of loans and lines for which Trustmark does not hold first lien |
54.2 |
% |
53.3 |
% |
||||
Due to the increased risk associated with second liens, loan terms and underwriting guidelines differ from those used for products secured by first liens. Loan amounts and loan-to-value ratios are limited and are lower for second liens than first liens. Also, interest rates and maximum amortization periods are adjusted accordingly. In addition, regardless of lien position, the passing credit score for approval of all home equity lines of credit is generally higher than that of term loans. The ACL on LHFI is also reflective of the increased risk related to second liens through application of a greater loss factor to this portion of the portfolio.
Trustmark's variable rate LHFI are based primarily on various prime and SOFR interest rate bases. The following tables provide information regarding the interest rate terms of Trustmark's LHFI as of June 30, 2025 and December 31, 2024 ($ in thousands):
|
June 30, 2025 |
||||||||||||
|
Fixed |
Variable |
Total |
||||||||||
|
Loans secured by real estate: |
||||||||||||
|
Construction, land development and other land |
$ |
131,804 |
$ |
429,109 |
$ |
560,913 |
||||||
|
Other secured by 1- 4 family residential properties |
204,486 |
484,603 |
689,089 |
|||||||||
|
Secured by nonfarm, nonresidential properties |
1,284,521 |
2,194,411 |
3,478,932 |
|||||||||
|
Other real estate secured |
159,545 |
1,758,796 |
1,918,341 |
|||||||||
|
Other loans secured by real estate: |
||||||||||||
|
Other construction |
24,417 |
769,893 |
794,310 |
|||||||||
|
Secured by 1- 4 family residential properties |
1,197,685 |
1,170,588 |
2,368,273 |
|||||||||
|
Commercial and industrial loans |
817,373 |
1,014,922 |
1,832,295 |
|||||||||
|
Consumer loans |
127,631 |
25,290 |
152,921 |
|||||||||
|
State and other political subdivision loans |
894,392 |
66,859 |
961,251 |
|||||||||
|
Other commercial loans and leases |
401,127 |
307,328 |
708,455 |
|||||||||
|
LHFI |
$ |
5,242,981 |
$ |
8,221,799 |
$ |
13,464,780 |
||||||
|
December 31, 2024 |
||||||||||||
|
Fixed |
Variable |
Total |
||||||||||
|
Loans secured by real estate: |
||||||||||||
|
Construction, land development and other land |
$ |
139,526 |
$ |
447,718 |
$ |
587,244 |
||||||
|
Other secured by 1- 4 family residential properties |
187,912 |
462,638 |
650,550 |
|||||||||
|
Secured by nonfarm, nonresidential properties |
1,381,111 |
2,152,171 |
3,533,282 |
|||||||||
|
Other real estate secured |
159,839 |
1,473,991 |
1,633,830 |
|||||||||
|
Other loans secured by real estate: |
||||||||||||
|
Other construction |
31,466 |
798,438 |
829,904 |
|||||||||
|
Secured by 1- 4 family residential properties |
1,256,835 |
1,042,158 |
2,298,993 |
|||||||||
|
Commercial and industrial loans |
762,649 |
1,078,073 |
1,840,722 |
|||||||||
|
Consumer loans |
130,905 |
25,664 |
156,569 |
|||||||||
|
State and other political subdivision loans |
906,250 |
63,586 |
969,836 |
|||||||||
|
Other commercial loans and leases |
376,705 |
212,307 |
589,012 |
|||||||||
|
LHFI |
$ |
5,333,198 |
$ |
7,756,744 |
$ |
13,089,942 |
||||||
In the following tables, LHFI reported by region (along with related nonperforming assets and net charge-offs) are associated with location of origination except for loans secured by 1-4 family residential properties (representing traditional mortgages), credit cards and equipment finance loans and leases. Loans secured by 1-4 family residential properties and credit cards are included in the Mississippi Region because they are centrally analyzed and approved as part of a specific line of business located at Trustmark's headquarters in Jackson, Mississippi. The equipment finance loans and leases are primarily reported in the Georgia market region because they are centrally analyzed and approved as part of the Equipment Finance line of business which is located in Atlanta, Georgia.
The following table presents the LHFI composition by region at June 30, 2025 and reflects each region's diversified mix of loans ($ in thousands):
|
June 30, 2025 |
||||||||||||||||||||||||||||
|
LHFI Composition by Region |
Total |
Alabama |
Florida |
Georgia |
Mississippi |
Tennessee |
Texas |
|||||||||||||||||||||
|
Loans secured by real estate: |
||||||||||||||||||||||||||||
|
Construction, land development and |
$ |
560,913 |
$ |
247,271 |
$ |
25,462 |
$ |
12,335 |
$ |
135,762 |
$ |
45,759 |
$ |
94,324 |
||||||||||||||
|
Other secured by 1-4 family residential |
689,089 |
159,166 |
62,104 |
- |
339,140 |
86,932 |
41,747 |
|||||||||||||||||||||
|
Secured by nonfarm, nonresidential |
3,478,932 |
958,454 |
179,528 |
88,022 |
1,519,616 |
127,731 |
605,581 |
|||||||||||||||||||||
|
Other real estate secured |
1,918,341 |
923,639 |
1,682 |
79,823 |
516,430 |
935 |
395,832 |
|||||||||||||||||||||
|
Other loans secured by real estate: |
||||||||||||||||||||||||||||
|
Other construction |
794,310 |
212,142 |
10,344 |
195,953 |
176,994 |
148 |
198,729 |
|||||||||||||||||||||
|
Secured by 1-4 family residential |
2,368,273 |
- |
- |
- |
2,365,979 |
2,294 |
- |
|||||||||||||||||||||
|
Commercial and industrial loans |
1,832,295 |
472,371 |
19,649 |
284,845 |
669,509 |
123,349 |
262,572 |
|||||||||||||||||||||
|
Consumer loans |
152,921 |
20,181 |
7,424 |
- |
94,261 |
14,107 |
16,948 |
|||||||||||||||||||||
|
State and other political subdivision loans |
961,251 |
55,704 |
65,965 |
13,032 |
712,260 |
24,228 |
90,062 |
|||||||||||||||||||||
|
Other commercial loans and leases |
708,455 |
26,773 |
3,641 |
306,942 |
266,051 |
56,299 |
48,749 |
|||||||||||||||||||||
|
LHFI |
$ |
13,464,780 |
$ |
3,075,701 |
$ |
375,799 |
$ |
980,952 |
$ |
6,796,002 |
$ |
481,782 |
$ |
1,754,544 |
||||||||||||||
|
Construction, Land Development and Other Land Loans by Region |
||||||||||||||||||||||||||||
|
Lots |
$ |
59,410 |
$ |
27,229 |
$ |
6,919 |
$ |
- |
$ |
15,732 |
$ |
1,089 |
$ |
8,441 |
||||||||||||||
|
Development |
100,941 |
47,362 |
264 |
- |
17,903 |
14,197 |
21,215 |
|||||||||||||||||||||
|
Unimproved land |
98,549 |
18,004 |
8,648 |
- |
22,689 |
8,457 |
40,751 |
|||||||||||||||||||||
|
1-4 family construction |
302,013 |
154,676 |
9,631 |
12,335 |
79,438 |
22,016 |
23,917 |
|||||||||||||||||||||
|
Construction, land development and |
$ |
560,913 |
$ |
247,271 |
$ |
25,462 |
$ |
12,335 |
$ |
135,762 |
$ |
45,759 |
$ |
94,324 |
||||||||||||||
|
Loans Secured by Nonfarm, Nonresidential Properties by Region |
||||||||||||||||||||||||||||
|
Nonowner-occupied: |
||||||||||||||||||||||||||||
|
Retail |
$ |
274,281 |
$ |
73,703 |
$ |
15,224 |
$ |
- |
$ |
98,635 |
$ |
19,837 |
$ |
66,882 |
||||||||||||||
|
Office |
233,501 |
82,433 |
18,266 |
- |
91,611 |
2,713 |
38,478 |
|||||||||||||||||||||
|
Hotel/motel |
277,749 |
143,283 |
43,238 |
- |
68,172 |
23,056 |
- |
|||||||||||||||||||||
|
Mini-storage |
159,599 |
40,004 |
1,371 |
30,531 |
86,638 |
593 |
462 |
|||||||||||||||||||||
|
Industrial |
521,155 |
100,337 |
16,256 |
57,491 |
199,356 |
2,483 |
145,232 |
|||||||||||||||||||||
|
Health care |
149,551 |
123,342 |
664 |
- |
23,158 |
317 |
2,070 |
|||||||||||||||||||||
|
Convenience stores |
20,209 |
2,130 |
386 |
- |
11,509 |
184 |
6,000 |
|||||||||||||||||||||
|
Nursing homes/senior living |
351,436 |
110,473 |
- |
- |
145,089 |
3,822 |
92,052 |
|||||||||||||||||||||
|
Other |
113,964 |
27,944 |
8,413 |
- |
61,507 |
7,280 |
8,820 |
|||||||||||||||||||||
|
Total nonowner-occupied loans |
2,101,445 |
703,649 |
103,818 |
88,022 |
785,675 |
60,285 |
359,996 |
|||||||||||||||||||||
|
Owner-occupied: |
||||||||||||||||||||||||||||
|
Office |
138,427 |
47,951 |
31,876 |
- |
32,190 |
8,351 |
18,059 |
|||||||||||||||||||||
|
Churches |
46,705 |
10,721 |
3,588 |
- |
27,137 |
2,940 |
2,319 |
|||||||||||||||||||||
|
Industrial warehouses |
198,471 |
14,427 |
7,936 |
- |
51,542 |
12,614 |
111,952 |
|||||||||||||||||||||
|
Health care |
119,133 |
11,243 |
7,685 |
- |
91,726 |
2,155 |
6,324 |
|||||||||||||||||||||
|
Convenience stores |
105,414 |
10,091 |
2,053 |
- |
57,497 |
- |
35,773 |
|||||||||||||||||||||
|
Retail |
77,442 |
7,914 |
12,589 |
- |
43,239 |
6,847 |
6,853 |
|||||||||||||||||||||
|
Restaurants |
59,179 |
2,706 |
2,620 |
- |
27,646 |
19,997 |
6,210 |
|||||||||||||||||||||
|
Auto dealerships |
38,342 |
3,552 |
160 |
- |
20,310 |
14,320 |
- |
|||||||||||||||||||||
|
Nursing homes/senior living |
471,731 |
129,518 |
- |
- |
316,320 |
- |
25,893 |
|||||||||||||||||||||
|
Other |
122,643 |
16,682 |
7,203 |
- |
66,334 |
222 |
32,202 |
|||||||||||||||||||||
|
Total owner-occupied loans |
1,377,487 |
254,805 |
75,710 |
- |
733,941 |
67,446 |
245,585 |
|||||||||||||||||||||
|
Loans secured by nonfarm, |
$ |
3,478,932 |
$ |
958,454 |
$ |
179,528 |
$ |
88,022 |
$ |
1,519,616 |
$ |
127,731 |
$ |
605,581 |
||||||||||||||
Allowance for Credit Losses
LHFI
Trustmark's ACL methodology for LHFI is based upon guidance within FASB ASC Subtopic 326-20, "Financial Instruments - Credit Losses - Measured at Amortized Cost," as well as applicable regulatory guidance from its primary regulator. The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for loans. The ACL is an
estimate of expected losses inherent within Trustmark's existing LHFI portfolio. The ACL on LHFI is adjusted through the PCL, LHFI and reduced by the charge off of loan amounts, net of recoveries.
The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Trustmark's LHFI portfolio segments. These segments are further disaggregated into loan classes, the level at which credit risk is estimated. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations.
During the second quarter of 2024, Trustmark executed a sale on a portfolio of 1-4 family mortgage loans that were at least three payments delinquent and/or nonaccrual at the time of selection. As a result of this sale, a credit mark was established for a sub-pool of the loans in the sale. Due to the lack of historical experience and the use of industry data for this sub-pool, management elected to use the credit mark for reserving purposes on a go forward basis for this sub-pool that meet the same credit criteria of being three payments delinquent and/or nonaccrual. All loans of the sub-pool that meet the above credit criteria will be removed from the 1-4 family residential properties pool and placed into a separate pool with the credit mark reserve applied to the total balance.
The econometric models currently in production reflect segment or pool level sensitivities of probability of default (PD) to changes in macroeconomic variables. By measuring the relationship between defaults and changes in the economy, the quantitative reserve incorporates reasonable and supportable forecasts of future conditions that will affect the value of Trustmark's assets, as required by FASB ASC Topic 326. Under stable forecasts, these linear regressions will reasonably predict a pool's PD. However, upon the occurrence of events that generate significant economic instability (such as the COVID-19 pandemic), the macroeconomic variables used for reasonable and supportable forecasting changed rapidly. At the macroeconomic levels experienced during the COVID-19 pandemic, it was not clear that the models in production would produce reasonably representative results since the models were originally estimated using data beginning in 2004 through 2019. During this period, a traditional, albeit severe, economic recession occurred. Thus, econometric models are sensitive to similar future levels of PD.
In order to prevent the econometric models from extrapolating beyond reasonable boundaries of their input variables, Trustmark chose to establish an upper and lower limit process when applying the periodic forecasts. In this way, Management will not rely upon unobserved and untested relationships in the setting of the quantitative reserve. This approach applies to all input variables, including: Southern Unemployment, National Unemployment, National Gross Domestic Product (GDP), National Home Price Index (HPI), National Commercial Real Estate (CRE) Price Index and the BBB 7-10 Year US Corporate Bond Index. The upper and lower limits are based on the distribution of the macroeconomic variable by selecting extreme percentiles at the upper and lower limits of the distribution, the 1st and 99th percentiles, respectively. These upper and lower limits are then used to calculate the PD for the forecast time period in which the forecasted values are outside of the upper and lower limit range. Additionally, for periods having a PD or loss given default (LGD) at or near zero as a result of the improving macroeconomic forecasts, Management implemented PD and LGD floors to account for the risk associated with each portfolio. The PD and LGD floors are based on Trustmark's historical loss experience and applied at a portfolio level.
The external factors qualitative factor is Management's best judgment on the loan or pool level impact of all factors that affect the portfolio that are not accounted for using any other part of the ACL methodology (e.g., natural disasters, changes in legislation, impacts due to technology and pandemics). During the third quarter of 2024, Trustmark activated the External Factor - Credit Quality Review qualitative factor. This qualitative factor ensures reserve adequacy for collectively evaluated commercial loans that may not have been identified and downgraded timely for various reasons. This qualitative factor population is all commercial loans risk rated 1-5. These loans are then applied to the historical average of the Watch/Special Mention rated percentage. Then the balance of these loans are applied additional reserves based on the same reserve rates utilized in the performance trends qualitative factor for Watch/Special Mention rated loans. Then the Watch/Special Mention population is applied the historical Substandard rated percentage and then subsequently applied the Substandard reserve rate utilized in the performance trends qualitative factor as well. The historical Watch/Special Mention and Substandard rated percentage averages capture the weighted-average life of the commercial loan portfolio. Thus, Trustmark will allocate additional reserves to capture the proportion of potential Watch/Special Mention and Substandard rated credits that may not have been categorized as such at any given point in time through the life of the commercial loan portfolio.
Management elected to activate the nature and volume of the portfolio qualitative factor for a sub-pool of the secured by 1-4 family residential properties due to its significant size as well as the underlying nature being different. The nature and volume of the portfolio qualitative factor utilizes a WARM methodology that uses industry data for the assumptions to support the qualitative adjustment. The industry data is used to compile a PD based on credit score ranges along with using the industry data to compile an LGD. The sub-pools of credits are then aggregated into the appropriate credit score bands in which a weighted-average loss rate is calculated based on the PD and LGD for each credit score range. This weighted-average loss rate is then applied to the expected balance for the sub-segment of credits. This total is then used as the qualitative reserve adjustment. During the first quarter of 2025, Management elected to utilize
Trustmark's historical data to develop a PD based on the credit score ranges initially set up. Additionally, Management elected to use the same LGD value from the mortgage sale that occurred in the second quarter of 2024 along with the same weighted average life assumption utilized to determine the credit mark on this portfolio.
Trustmark's current quantitative methodologies do not completely incorporate changes in credit quality. As a result, Trustmark utilizes the performance trends qualitative factor. This factor is based on migration analyses, that allocates additional ACL to non-pass/delinquent loans within each pool. In this way, Management believes the ACL will directly reflect changes in risk, based on the performance of the loans within a pool, whether declining or improving.
The performance trends qualitative factor is estimated by properly segmenting loan pools into risk levels by risk rating for commercial credits and delinquency status for consumer credits. A migration analysis is then performed quarterly using a third-party software and the results for each risk level are compiled to calculate the historical PD average for each loan portfolio based on risk levels. This average historical PD rate is updated annually. For the mortgage portfolio, Trustmark uses an internal report to incorporate a roll rate method for the calculation of the PD rate. In addition to the PD rate for each portfolio, Management incorporates the quantitative rate and the k value derived from the Frye-Jacobs method to calculate a loss estimate that includes both PD and LGD. The quantitative rate is used to eliminate any additional reserve that the quantitative reserve already includes. Finally, the loss estimate rate is then applied to the total balances for each risk level for each portfolio to calculate a qualitative reserve.
Determining the appropriateness of the allowance is complex and requires judgment by Management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall LHFI portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense.
For a complete description of Trustmark's ACL methodology and the quantitative and qualitative factors included in the calculation, please see Note 4 - LHFI and Allowance for Credit Losses, LHFI included in Part I. Item 1. - Financial Statements of this report.
At June 30, 2025, the ACL on LHFI was $168.2 million, an increase of $8.0 million, or 5.0%, when compared with December 31, 2024. The increase in the ACL during the first six months of 2025 was principally due to increases in required reserves as a result of loan growth and changes in macroeconomic forecasts partially offset by declines in required reserves as a result of updates to various qualitative reserve factors. Allocation of Trustmark's $168.2 million ACL on LHFI, represented 1.07% of commercial LHFI and 1.83% of consumer and home mortgage LHFI, resulting in an ACL to total LHFI of 1.25% as of June 30, 2025. This compares with an ACL to total LHFI of 1.22% at December 31, 2024, which was allocated to commercial LHFI at 1.10% and to consumer and mortgage LHFI at 1.62%.
The following table presents changes in the ACL on LHFI for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Balance at beginning of period |
$ |
167,010 |
$ |
142,998 |
$ |
160,270 |
$ |
139,367 |
||||||||
|
PCL, LHFI |
5,346 |
14,696 |
13,471 |
22,404 |
||||||||||||
|
PCL, LHFI sale of 1-4 family mortgage loans |
- |
8,633 |
- |
8,633 |
||||||||||||
|
Charge-offs |
(6,380 |
) |
(5,120 |
) |
(10,081 |
) |
(11,444 |
) |
||||||||
|
Charge-offs, sale of 1-4 family mortgage loans |
- |
(8,633 |
) |
- |
(8,633 |
) |
||||||||||
|
Recoveries |
2,261 |
2,111 |
4,577 |
4,358 |
||||||||||||
|
Net (charge-offs) recoveries |
(4,119 |
) |
(11,642 |
) |
(5,504 |
) |
(15,719 |
) |
||||||||
|
Balance at end of period |
$ |
168,237 |
$ |
154,685 |
$ |
168,237 |
$ |
154,685 |
||||||||
The PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, for the three and six months ended June 30, 2025 totaled 0.16% and 0.20% of average loans (LHFS and LHFI), respectively, compared to 0.44% and 0.34% of average loans (LHFS and LHFI), respectively, for the same time periods in 2024. The PCL, LHFI for the three months ended June 30, 2025 primarily reflected increases in required reserves as a result of loan growth and changes in macroeconomic forecasts partially offset by declines in required reserves as a result of positive credit migration and updates to various qualitative reserve factors. The PCL, LHFI for the six months ended June 30, 2025 primarily reflected increases in required reserves as a result of loan growth and changes in macroeconomic forecasts partially offset by declines in required reserves as a result of updates to various qualitative reserve factors.
The following table presents the net (charge-offs) recoveries by geographic market region for the periods presented ($ in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Alabama |
$ |
(2,331 |
) |
$ |
59 |
$ |
(2,538 |
) |
$ |
(282 |
) |
|||||
|
Florida |
151 |
4 |
134 |
281 |
||||||||||||
|
Mississippi |
(1,647 |
) |
(479 |
) |
(2,402 |
) |
(1,968 |
) |
||||||||
|
Tennessee |
(258 |
) |
(122 |
) |
(559 |
) |
(301 |
) |
||||||||
|
Texas |
(34 |
) |
(2,471 |
) |
(139 |
) |
(4,816 |
) |
||||||||
|
Net (charge-offs) recoveries, excluding sale of |
(4,119 |
) |
(3,009 |
) |
(5,504 |
) |
(7,086 |
) |
||||||||
|
Mississippi - sale of 1-4 family mortgage loans |
- |
(8,633 |
) |
- |
(8,633 |
) |
||||||||||
|
Total net (charge-offs) recoveries |
$ |
(4,119 |
) |
$ |
(11,642 |
) |
$ |
(5,504 |
) |
$ |
(15,719 |
) |
||||
The decrease in net charge-offs when the three and six months ended June 30, 2025 are compared to the same time periods in 2024 was principally due to the charge-offs related to the sale of 1-4 family mortgage loans during the second quarter of 2024. The increase in net charge-offs, excluding the sale of 1-4 family mortgage loans, when the three months ended June 30, 2025 is compared to the same time period in 2024 was principally due to the charge off of one large nonaccrual commercial credit in the Alabama market region during the second quarter of 2025 as well as an increase in gross charge-offs in the Mississippi market region, partially offset by one large nonaccrual commercial credit in the Texas market region that was charged off during the second quarter of 2024. The decrease in net charge-offs, excluding the sale of 1-4 family mortgage loans, when the six months ended June 30, 2025 is compared to the same time period in 2024 was principally due to two large nonaccrual commercial credits in the Texas market region that were charged off during the first six months of 2024, partially offset by one large nonaccrual commercial credit in the Alabama market region that was charged off during the second quarter of 2025 and an increase in gross charge-offs in the Mississippi market region.
Off-Balance Sheet Credit Exposures
Trustmark maintains a separate ACL on off-balance sheet credit exposures, including unfunded loan commitments and letters of credit, which is included on the accompanying consolidated balance sheets. Expected credit losses for off-balance sheet credit exposures are estimated by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by Trustmark. Trustmark calculates a loan pool level unfunded amount for the period. Trustmark calculates an expected funding rate each period which is applied to each pool's unfunded commitment balances to ensure that reserves will be applied to each pool based upon balances expected to be funded based upon historical levels. Additionally, a reserve rate is applied to the unfunded commitment balance, which includes both quantitative and a majority of the qualitative aspects of the current period's expected credit loss rate. During 2024, Management implemented a performance trends qualitative factor and an External Factor - Credit Quality Review qualitative factor for unfunded commitments. For both qualitative factors, the same assumptions are applied in the unfunded commitment calculation that are used in the funded balance calculation with the only difference being the unfunded commitment calculation includes the funding rates for the unfunded commitments. The reserves for these two qualitative factors are added to the other calculated reserve to get a total reserve for off-balance sheet credit exposures. See the section captioned "ACL on Off-Balance Sheet Credit Exposures" in Note 13 - Contingencies included in Part I. Item 1. - Financial Statements of this report for complete description of Trustmark's ACL methodology on off-balance sheet credit exposures.
Adjustments to the ACL on off-balance sheet credit exposures are recorded to the PCL, off-balance sheet credit exposures. At June 30, 2025, the ACL on off-balance sheet credit exposures totaled $25.9 million compared to $29.4 million at December 31, 2024, a decrease of $3.5 million, or 11.9%. The PCL, off-balance sheet credit exposures totaled a negative $670 thousand and a negative $3.5 million for the three and six months ended June 30, 2025, respectively, compared to a negative $3.6 million and a negative $3.8 million, respectively, for the same time periods in 2024. The release in PCL, off-balance sheet credit exposures for the three months ended June 30, 2025, primarily reflected a decrease in required reserves as a result of positive credit migration partially offset by an increase in required reserves as a result of changes in the total reserve rate primarily related to 1-4 family construction and commercial and industrial credits. The release in PCL, off-balance sheet credit exposures for the six months ended June 30, 2025, primarily reflected a decrease in required reserves as a result of positive credit migration, a decrease in the unfunded commitments and net changes in the total reserve rate.
Nonperforming Assets
The table below provides the components of nonperforming assets by geographic market region at June 30, 2025 and December 31, 2024 ($ in thousands):
|
June 30, 2025 |
December 31, 2024 |
|||||||
|
Nonaccrual LHFI |
||||||||
|
Alabama |
$ |
8,422 |
$ |
18,601 |
||||
|
Florida |
437 |
305 |
||||||
|
Mississippi |
54,015 |
42,203 |
||||||
|
Tennessee |
2,232 |
2,431 |
||||||
|
Texas |
15,894 |
16,569 |
||||||
|
Total nonaccrual LHFI |
81,000 |
80,109 |
||||||
|
Other real estate |
||||||||
|
Alabama |
772 |
170 |
||||||
|
Mississippi |
4,860 |
2,407 |
||||||
|
Tennessee |
1,079 |
1,079 |
||||||
|
Texas |
2,261 |
2,261 |
||||||
|
Total other real estate |
8,972 |
5,917 |
||||||
|
Total nonperforming assets |
$ |
89,972 |
$ |
86,026 |
||||
|
Nonperforming assets/total loans (LHFS and LHFI) and ORE |
0.66 |
% |
0.65 |
% |
||||
|
Loans past due 90 days or more |
||||||||
|
LHFI |
$ |
3,854 |
$ |
4,092 |
||||
|
LHFS - Guaranteed GNMA serviced loans (1) |
$ |
75,564 |
$ |
71,255 |
||||
(1)
No obligation to repurchase.
See the previous discussion of LHFS for more information on Trustmark's serviced GNMA loans eligible for repurchase and the impact of Trustmark's repurchases of delinquent mortgage loans under the GNMA optional repurchase program.
Nonaccrual LHFI
At June 30, 2025, nonaccrual LHFI totaled $81.0 million, or 0.59% of total LHFS and LHFI, reflecting an increase of $891 thousand, or 1.1%, relative to December 31, 2024. The increase in nonaccrual LHFI during the first six months of 2025 was primarily a result of 1-4 family mortgage loans placed on nonaccrual status partially offset by nonaccrual loans foreclosed and paid off in the Mississippi market region and the resolution of one large nonaccrual commercial credit in the Alabama market region. Trustmark's mortgage loans are primarily included in the Mississippi market region because these loans are centrally analyzed and approved as part of the mortgage line of business which is located in Jackson, Mississippi.
For additional information regarding nonaccrual LHFI, see the section captioned "Nonaccrual and Past Due LHFI" included in Note 4 - LHFI and Allowance for Credit Losses, LHFI in Part I. Item 1. - Financial Statements of this report.
Other Real Estate
Other real estate at June 30, 2025 increased $3.1 million, or 51.6%, when compared with December 31, 2024. The increase in other real estate was principally due to properties foreclosed partially offset by properties sold in the Mississippi and Alabama market regions.
The following tables illustrate changes in other real estate by geographic market region for the periods presented ($ in thousands):
|
Three Months Ended June 30, 2025 |
||||||||||||||||||||||||
|
Total |
Alabama |
Florida |
Mississippi |
Tennessee |
Texas |
|||||||||||||||||||
|
Balance at beginning of period |
$ |
8,348 |
$ |
271 |
$ |
- |
$ |
4,837 |
$ |
979 |
$ |
2,261 |
||||||||||||
|
Additions |
1,693 |
656 |
- |
1,037 |
- |
- |
||||||||||||||||||
|
Disposals |
(1,080 |
) |
(155 |
) |
- |
(925 |
) |
- |
- |
|||||||||||||||
|
Net (write-downs) recoveries |
11 |
- |
- |
(89 |
) |
100 |
- |
|||||||||||||||||
|
Balance at end of period |
$ |
8,972 |
$ |
772 |
$ |
- |
$ |
4,860 |
$ |
1,079 |
$ |
2,261 |
||||||||||||
|
Three Months Ended June 30, 2024 |
||||||||||||||||||||||||
|
Total |
Alabama |
Florida |
Mississippi |
Tennessee |
Texas |
|||||||||||||||||||
|
Balance at beginning of period |
$ |
7,620 |
$ |
1,050 |
$ |
71 |
$ |
2,870 |
$ |
86 |
$ |
3,543 |
||||||||||||
|
Additions |
1,900 |
- |
- |
1,900 |
- |
- |
||||||||||||||||||
|
Disposals |
(3,738 |
) |
(638 |
) |
(71 |
) |
(3,029 |
) |
- |
- |
||||||||||||||
|
Net (write-downs) recoveries |
804 |
73 |
- |
46 |
- |
685 |
||||||||||||||||||
|
Balance at end of period |
$ |
6,586 |
$ |
485 |
$ |
- |
$ |
1,787 |
$ |
86 |
$ |
4,228 |
||||||||||||
|
Six Months Ended June 30, 2025 |
||||||||||||||||||||||||
|
Total |
Alabama |
Florida |
Mississippi |
Tennessee |
Texas |
|||||||||||||||||||
|
Balance at beginning of period |
$ |
5,917 |
$ |
170 |
$ |
- |
$ |
2,407 |
$ |
1,079 |
$ |
2,261 |
||||||||||||
|
Additions |
5,132 |
699 |
- |
4,374 |
59 |
- |
||||||||||||||||||
|
Disposals |
(1,958 |
) |
(155 |
) |
- |
(1,744 |
) |
(59 |
) |
- |
||||||||||||||
|
Net (write-downs) recoveries |
(119 |
) |
58 |
- |
(177 |
) |
- |
- |
||||||||||||||||
|
Balance at end of period |
$ |
8,972 |
$ |
772 |
$ |
- |
$ |
4,860 |
$ |
1,079 |
$ |
2,261 |
||||||||||||
|
Six Months Ended June 30, 2024 |
||||||||||||||||||||||||
|
Total |
Alabama |
Florida |
Mississippi |
Tennessee |
Texas |
|||||||||||||||||||
|
Balance at beginning of period |
$ |
6,867 |
$ |
1,397 |
$ |
- |
$ |
1,242 |
$ |
- |
$ |
4,228 |
||||||||||||
|
Additions |
4,128 |
92 |
- |
4,002 |
34 |
- |
||||||||||||||||||
|
Disposals |
(4,695 |
) |
(1,160 |
) |
(71 |
) |
(3,464 |
) |
- |
- |
||||||||||||||
|
Net (write-downs) recoveries |
286 |
156 |
- |
78 |
52 |
- |
||||||||||||||||||
|
Adjustments |
- |
- |
71 |
(71 |
) |
- |
- |
|||||||||||||||||
|
Balance at end of period |
$ |
6,586 |
$ |
485 |
$ |
- |
$ |
1,787 |
$ |
86 |
$ |
4,228 |
||||||||||||
Other real estate is revalued on an annual basis or more often if market conditions necessitate. Subsequent to foreclosure, losses on the periodic revaluation of the property are charged against the reserve for other real estate write-downs or net income in other real estate expense, if a reserve does not exist. Write-downs of other real estate increased $405 thousand when the first six months of 2025 is compared to the same time period in 2024, principally due to an increase in write-downs in the Mississippi market region as well as declines in recoveries in the Alabama, Mississippi and Tennessee market regions.
For additional information regarding other real estate, please see Note 6 - Other Real Estate included in Part I. Item 1. - Financial Statements of this report.
Deposits
Trustmark's deposits are its primary source of funding and primarily consist of core deposits from the communities Trustmark serves. Deposits include interest-bearing and noninterest-bearing demand accounts, savings, MMDA, CDs and individual retirement accounts. Total deposits were $15.116 billion at June 30, 2025 compared to $15.108 billion at December 31, 2024, an increase of $7.7 million, or 0.1%. During the first six months of 2025, noninterest-bearing deposits increased $61.9 million, or 2.0%, principally due to growth in commercial noninterest-bearing demand deposit accounts partially offset by a decline in public noninterest-bearing demand deposit accounts. Interest-bearing deposits decreased $54.2 million, or 0.5%, during the first six months of 2025, primarily due to declines in all categories of interest checking accounts and consumer MMDA, partially offset by growth in all categories of CDs and commercial MMDA.
At June 30, 2025, Trustmark's total uninsured deposits were $5.363 billion, or 35.5% of total deposits, compared to $5.359 billion, or 35.5% of total deposits, at December 31, 2024.
Borrowings
Trustmark uses short-term borrowings, such as federal funds purchased, securities sold under repurchase agreements and short-term FHLB advances, to fund growth of earning assets in excess of deposit growth. See the section captioned "Liquidity" for further discussion of the components of Trustmark's excess funding capacity.
Federal funds purchased and securities sold under repurchase agreements totaled $456.3 million at June 30, 2025 compared to $324.0 million at December 31, 2024, an increase of $132.3 million, or 40.8%, principally due to an increase in upstream federal funds purchased. At June 30, 2025 and December 31, 2024, $21.3 million and $39.0 million, respectively, represented customer related transactions, such as commercial sweep repurchase balances. Trustmark had $435.0 million of upstream federal funds purchased at June 30, 2025 compared to $285.0 million at December 31, 2024.
Other borrowings totaled $558.7 million at June 30, 2025, an increase of $257.1 million, or 85.3%, when compared with $301.5 million at December 31, 2024, principally due to an increase in outstanding short-term FHLB advances with the FHLB of Dallas.
Legal Environment
Information required in this section is set forth under the heading "Legal Proceedings" of Note 13 - Contingencies included in Part I. Item 1. - Financial Statements of this report.
Off-Balance Sheet Arrangements
Information required in this section is set forth under the heading "Lending Related" of Note 13 - Contingencies included in Part I. Item 1. - Financial Statements of this report.
Capital Resources and Liquidity
Trustmark places a significant emphasis on the maintenance of a strong capital position, which promotes investor confidence, provides access to funding sources under favorable terms and enhances Trustmark's ability to capitalize on business growth and acquisition opportunities. Higher levels of liquidity, however, bear corresponding costs, measured in terms of lower yields on short-term, more liquid earning assets and higher expenses for extended liability maturities. Trustmark manages capital based upon risks and growth opportunities as well as regulatory requirements. Trustmark utilizes a capital model in order to provide Management with a monthly tool for analyzing changes in its strategic capital ratios. This allows Management to hold sufficient capital to provide for growth opportunities and protect the balance sheet against sudden adverse market conditions, while maintaining an attractive return on equity to shareholders.
At June 30, 2025, Trustmark's total shareholders' equity was $2.071 billion, an increase of $108.5 million, or 5.5%, when compared to December 31, 2024. During the first six months of 2025, shareholders' equity increased primarily as a result of net income of $109.5 million and a $34.9 million positive net change in the fair market value of securities available for sale, partially offset by common stock repurchases of $26.0 million and common stock dividends of $29.4 million.
Regulatory Capital
Trustmark and TB are subject to minimum risk-based capital and leverage capital requirements, as described in the section captioned "Capital Adequacy" included in Part I. Item 1. - Business of Trustmark's 2024 Annual Report, which are administered by the federal bank regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Trustmark's and TB's minimum risk-based capital requirements include a capital conservation buffer of 2.5%. AOCI is not included in computing regulatory capital. Trustmark elected the five-year phase-in transition period (through December 31, 2024) related to adopting FASB ASU 2016-13 for regulatory capital purposes. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TB and limit Trustmark's and TB's ability to pay dividends. At June 30, 2025, Trustmark and TB exceeded all applicable minimum capital standards. In addition, Trustmark and TB met applicable regulatory guidelines to be considered well-capitalized at June 30, 2025. To be categorized in this manner, Trustmark and TB maintained minimum common equity Tier 1 risk-based capital, Tier 1 risk-based capital, total risk-based capital and Tier 1 leverage ratios, and were not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by their primary federal regulators to meet and maintain a specific capital level for any capital measures. There are no significant conditions or events that have occurred since June 30, 2025 which Management believes have affected Trustmark's or TB's present classification.
In 2020, Trustmark enhanced its capital structure with the issuance of $125.0 million of subordinated notes. At June 30, 2025, the carrying amount of the subordinated notes was $123.8 million compared to $123.7 million at December 31, 2024. The subordinated notes mature December 1, 2030 and are redeemable at Trustmark's option under certain circumstances. For regulatory capital purposes, the subordinated notes qualified as Tier 2 capital for Trustmark at June 30, 2025 and December 31, 2024. Trustmark may utilize the full carrying value of the subordinated notes as Tier 2 capital until December 1, 2025 (five years prior to maturity). Beginning December 1, 2025, the subordinated notes will phase out of Tier 2 capital 20.0% each year until maturity.
In 2006, Trustmark enhanced its capital structure with the issuance of trust preferred securities. For regulatory capital purposes, the trust preferred securities qualified as Tier 1 capital at June 30, 2025 and December 31, 2024. Trustmark intends to continue to utilize $60.0 million in trust preferred securities issued by Trustmark Preferred Capital Trust I (the Trust) as Tier 1 capital up to the regulatory limit, as permitted by the grandfather provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III Final Rule.
Refer to the section captioned "Regulatory Capital" included in Note 16 - Shareholders' Equity in Part I. Item 1. - Financial Statements of this report for an illustration of Trustmark's and TB's actual regulatory capital amounts and ratios under regulatory capital standards in effect at June 30, 2025 and December 31, 2024.
Dividends on Common Stock
Dividends per common share for the six months ended June 30, 2025 and 2024 were $0.48 and $0.46, respectively. Trustmark's indicated dividend for 2025 is $0.96 per common share, an increase of $0.04 per common share when compared to $0.92 per common share in 2024.
Stock Repurchase Program
From time to time, Trustmark's Board of Directors has authorized stock repurchase plans. In general, stock repurchase plans allow Trustmark to proactively manage its capital position and return excess capital to shareholders. Shares purchased also provide Trustmark with shares of common stock necessary to satisfy obligations related to stock compensation awards.
On December 5, 2023, the Board of Directors of Trustmark authorized a stock repurchase program, effective January 1, 2024, under which $50.0 million of Trustmark's outstanding common stock could be acquired through December 31, 2024. Under this authority, Trustmark repurchased 203 thousand shares of its common stock valued at $7.5 million during the year ended December 31, 2024.
On December 3, 2024, Trustmark's Board of Directors authorized a stock repurchase program effective January 1, 2025, under which $100.0 million of Trustmark's outstanding shares may be acquired through December 31, 2025. The repurchase program, which is subject to market conditions and management discretion, will be implemented through open market repurchases or privately negotiated transactions. Under this authority, Trustmark repurchased 764 thousand shares of its common stock valued at $26.0 million during the first six months of 2025.
Liquidity
Liquidity is the ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes. Consistent cash flows from operations and adequate capital provide internally generated liquidity. Furthermore, Management maintains funding capacity from a variety of external sources to meet daily funding needs, such as those required to meet deposit withdrawals, loan disbursements and security settlements. Liquidity strategy also includes the use of wholesale funding sources to provide for the seasonal fluctuations of deposit and loan demand and the cyclical fluctuations of the economy that impact the availability of funds. Management keeps excess funding capacity available to meet potential demands associated with adverse circumstances.
The asset side of the balance sheet provides liquidity primarily through maturities and cash flows from loans and securities as well as the ability to pledge or sell certain loans and securities. The liability portion of the balance sheet provides liquidity primarily through noninterest and interest-bearing deposits. Trustmark utilizes federal funds purchased, FHLB advances, securities sold under repurchase agreements, the Federal Reserve Discount Window (Discount Window) and brokered deposits to provide additional liquidity. Access to these additional sources represents Trustmark's incremental borrowing capacity.
Trustmark's liquidity position is continuously monitored and adjustments are made to manage the balance as deemed appropriate. Liquidity risk management is an important element to Trustmark's asset/liability management process. Trustmark regularly models liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions or other
significant occurrences as deemed appropriate by Management. These scenarios are incorporated into Trustmark's contingency funding plan, which provides the basis for the identification of its liquidity needs.
Deposit accounts represent Trustmark's largest funding source. Average deposits totaled $15.078 billion for the first six months of 2025 and represented 82.3% of average liabilities and shareholders' equity, compared to average deposits of $15.413 billion, which represented 82.3% of average liabilities and shareholders' equity for the first six months of 2024. For more information on average interest-bearing deposits, please see the analysis included in the section captioned "Net Interest Income."
Trustmark had $343.7 million held in an interest-bearing account at the FRBA at June 30, 2025, compared to $297.3 million held at December 31, 2024.
Trustmark utilizes brokered deposits to supplement other wholesale funding sources. At June 30, 2025 and December 31, 2024, brokered sweep MMDA deposits totaled $9.8 million and $10.6 million, respectively. In addition, Trustmark had $300.0 million of brokered CDs at June 30, 2025 compared to $250.0 million at December 31, 2024.
At June 30, 2025, Trustmark had $435.0 million of upstream federal funds purchased compared to $285.0 million of upstream federal funds purchased at December 31, 2024. Trustmark maintains adequate federal funds lines to provide sufficient short-term liquidity.
Trustmark maintains a relationship with the FHLB of Dallas, which provided $450.0 million of outstanding short-term and no long-term advances at June 30, 2025, compared to $200.0 million of outstanding short-term and no long-term advances at December 31, 2024. Under the existing borrowing agreement, Trustmark had sufficient qualifying collateral to increase FHLB advances or letters of credit with the FHLB of Dallas by $1.621 billion at June 30, 2025.
Additionally, Trustmark has the ability to leverage its unencumbered investment securities as collateral. At June 30, 2025, Trustmark had approximately $1.283 billion available in unencumbered Treasury and agency securities compared to $1.107 billion in unencumbered Treasury and agency securities at December 31, 2024.
Another borrowing source is the Discount Window. At June 30, 2025, Trustmark had approximately $1.181 billion available in collateral capacity at the Discount Window primarily from pledges of commercial and industrial LHFI, compared with $1.187 billion at December 31, 2024.
During 2020, Trustmark issued $125.0 million aggregate principal amount of its 3.625% fixed-to-floating rate subordinated notes. At June 30, 2025, the carrying amount of the subordinated notes was $123.8 million compared to $123.7 million at December 31, 2024. The subordinated notes mature December 1, 2030 and are redeemable at Trustmark's option under certain circumstances. The subordinated notes are unsecured obligations and are subordinated in right of payment to all of Trustmark's existing and future senior indebtedness, whether secured or unsecured. The subordinated notes are obligations of Trustmark only and are not obligations of, and are not guaranteed by, any of its subsidiaries, including TB.
During 2006, Trustmark completed a private placement of $60.0 million of trust preferred securities through a newly formed Delaware trust affiliate, the Trust. The trust preferred securities mature September 30, 2036 and are redeemable at Trustmark's option. The proceeds from the sale of the trust preferred securities were used by the Trust to purchase $61.9 million in aggregate principal amount of Trustmark's junior subordinated debentures.
The Board of Directors of Trustmark currently has the authority to issue up to 20.0 million preferred shares with no par value. The ability to issue preferred shares in the future will provide Trustmark with additional financial and management flexibility for general corporate and acquisition purposes. At June 30, 2025, Trustmark had no shares of preferred stock issued and outstanding.
Management believes that Trustmark has sufficient liquidity and capital resources to meet presently known cash flow requirements arising from ongoing business transactions. As of June 30, 2025, Management is not aware of any events that are reasonably likely to have a material adverse effect on Trustmark's liquidity, capital resources or operations. In addition, Management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on Trustmark.
In the ordinary course of business, Trustmark has entered into contractual obligations and has made other commitments to make future payments. Please refer to the accompanying notes to the consolidated financial statements included in Part I. Item 1. - Financial Statements of this report and Trustmark's 2024 Annual Report for the expected timing of such payments as of June 30, 2025 and December 31, 2024. There have been no material changes in Trustmark's contractual obligations since year-end.
Asset/Liability Management
Overview
Market risk reflects the potential risk of loss arising from adverse changes in interest rates and market prices. Trustmark has risk management policies to monitor and limit exposure to market risk. Trustmark's primary market risk is interest rate risk created by core banking activities. Interest rate risk is the potential variability of the income generated by Trustmark's financial products or services, which results from changes in various market interest rates. Market rate changes may take the form of absolute shifts, variances in the relationships between different rates and changes in the shape or slope of the interest rate term structure.
Management continually develops and applies cost-effective strategies to manage these risks. Management's Asset/Liability Committee sets the day-to-day operating guidelines, approves strategies affecting net interest income and coordinates activities within policy limits established by the Board of Directors of Trustmark. A key objective of the asset/liability management program is to quantify, monitor and manage interest rate risk and to assist Management in maintaining stability in the net interest margin under varying interest rate environments.
Derivatives
Trustmark uses financial derivatives for management of interest rate risk. Management's Asset/Liability Committee, in its oversight role for the management of interest rate risk, approves the use of derivatives in balance sheet hedging strategies. The most common derivatives employed by Trustmark are interest rate lock commitments, forward contracts (both futures contracts and options on futures contracts), interest rate swaps, interest rate caps and interest rate floors. As a general matter, the values of these instruments are designed to be inversely related to the values of the assets that they hedge (i.e., if the value of the hedged asset falls, the value of the related hedge rises). In addition, Trustmark has entered into derivatives contracts as counterparty to one or more customers in connection with loans extended to those customers. These transactions are designed to hedge interest rate exposure of the customers and are not entered into by Trustmark for speculative purposes. Increased federal regulation of the derivatives markets may increase the cost to Trustmark to administer derivatives programs.
Derivatives Designated as Hedging Instruments
Trustmark engages in a cash flow hedging program to add stability to interest income and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for Trustmark making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate floor spreads designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates fall below the purchased floor strike rate on the contract and payments of variable rate amounts if interest rates fall below the sold floor strike rate on the contract. Trustmark uses such derivatives to hedge the variable cash flows associated with existing and anticipated variable-rate loan assets. At June 30, 2025, the aggregate notional value of Trustmark's interest rate swaps and floor spreads designated as cash flow hedges totaled $1.570 billion compared to $1.500 billion at December 31, 2024.
Trustmark records any gains or losses on these cash flow hedges in AOCI. Gains and losses on derivatives representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with Trustmark's accounting policy election. The earnings recognition of excluded components included in interest and fees on LHFS and LHFI totaled $131 thousand and $261 thousand of amortization expense for the three and six months ended June 30, 2025, respectively, compared to $124 thousand and $209 thousand of amortization expense for the three and six months ended June 30, 2024, respectively. As interest payments are received on Trustmark's variable-rate assets, amounts reported in AOCI are reclassified into interest and fees on LHFS and LHFI in the accompanying consolidated statements of income (loss) during the same period. For the three and six months ended June 30, 2025, Trustmark reclassified a loss, net of tax, of $2.0 million and $4.0 million, respectively, into interest and fees on LHFS and LHFI, compared to a loss, net of tax, of $3.7 million and $7.3 million, respectively, for the same time periods in 2024. During the next twelve months, Trustmark estimates that $4.9 million will be reclassified as a reduction to interest and fees on LHFS and LHFI. This amount could differ due to changes in interest rates, hedge de-designations or the addition of other hedges.
Derivatives Not Designated as Hedging Instruments
As part of Trustmark's risk management strategy in the mortgage banking business, various derivative instruments such as interest rate lock commitments and forward sales contracts are utilized. Rate lock commitments are residential mortgage loan commitments with customers, which guarantee a specified interest rate for a specified period of time. Changes in the fair value of these derivative instruments are recorded as noninterest income (loss) in mortgage banking, net and are offset by the changes in the fair value of forward sales contracts. The gross notional amount of Trustmark's off-balance sheet obligations under these derivative instruments totaled $89.1 million at June 30, 2025, with a positive valuation adjustment of $1.8 million, compared to $52.1 million, with a positive valuation
adjustment of $229 thousand at December 31, 2024. Trustmark's obligations under forward contracts consist of commitments to deliver mortgage loans, originated and/or purchased, in the secondary market at a future date. Changes in the fair value of these derivative instruments are recorded as noninterest income (loss) in mortgage banking, net and are offset by changes in the fair value of LHFS. The gross notional amount of Trustmark's off-balance sheet obligations under these derivative instruments totaled $133.5 million at June 30, 2025, with a negative valuation adjustment of $1.1 million, compared to $110.0 million, with a positive valuation adjustment of $679 thousand at December 31, 2024.
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 economically hedges changes in fair value of the MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under GAAP. The total notional amount of these derivative instruments was $333.0 million at June 30, 2025 compared to $311.5 million at December 31, 2024. These exchange-traded derivative instruments are accounted for at fair value with changes in the fair value recorded as noninterest income (loss) 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 ineffectiveness of $541 thousand and $4.5 million for the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024, the impact was a net negative ineffectiveness of $1.1 million and $5.6 million, respectively.
Trustmark offers certain interest rate derivatives products directly to qualified commercial lending clients seeking to manage their interest rate risk under loans they have entered into with TB. Trustmark economically hedges interest rate swap transactions executed with commercial lending clients by entering into offsetting interest rate swap transactions with institutional derivatives market participants. Derivatives transactions executed as part of this program are not designated as qualifying hedging relationships under GAAP and are, therefore, carried on Trustmark's financial statements at fair value with the change in fair value recorded as noninterest income (loss) in bank card and other fees. Because these derivatives have mirror-image contractual terms, in addition to collateral provisions which mitigate the impact of non-performance risk, the changes in fair value are expected to substantially offset. The Chicago Mercantile Exchange rules legally characterize variation margin collateral payments made or received for centrally cleared interest rate swaps as settlements rather than collateral. As a result, centrally cleared interest rate swaps included in other assets and other liabilities are presented on a net basis in the accompanying consolidated balance sheets. At June 30, 2025, Trustmark had interest rate swaps with an aggregate notional amount of $1.991 billion related to this program, compared to $1.819 billion at December 31, 2024.
Credit-Risk-Related Contingent Features
Trustmark has agreements with its financial institution counterparties that contain provisions where if Trustmark defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Trustmark could also be deemed to be in default on its derivatives obligations.
At June 30, 2025, there was no termination value of interest rate swaps in a liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements compared to $568 thousand at December 31, 2024. At June 30, 2025 and December 31, 2024, Trustmark had posted collateral of $2.2 million and $1.5 million, respectively, against its obligations because of negotiated thresholds and minimum transfer amounts under these agreements. If Trustmark had breached any of these triggering provisions at June 30, 2025, it could have been required to settle its obligations under the agreements at the termination value (which is expected to approximate fair market value).
Credit risk participation agreements arise when Trustmark contracts with other financial institutions, as a guarantor or beneficiary, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third-party default on the underlying swap. At June 30, 2025, Trustmark had entered into eleven risk participation agreements as a beneficiary with an aggregate notional amount of $107.2 million compared to eleven risk participation agreements as a beneficiary with an aggregate notional amount of $83.9 million at December 31, 2024. At June 30, 2025, Trustmark had entered into twenty-nine risk participation agreements as a guarantor with an aggregate notional amount of $259.8 million compared to twenty-eight risk participation agreements as a guarantor with an aggregate notional amount of $229.1 million at December 31, 2024. The aggregate fair values of these risk participation agreements were immaterial at both June 30, 2025 and December 31, 2024.
Trustmark's participation in the derivatives markets is subject to increased federal regulation of these markets. Trustmark believes that it may continue to use financial derivatives to manage interest rate risk and also to offer derivatives products to certain qualified commercial lending clients in compliance with the Volcker Rule. However, the increased federal regulation of the derivatives markets has increased the cost to Trustmark of administering its derivatives programs. Some of these costs (particularly compliance costs related to the Volcker Rule and other federal regulations) are expected to recur in the future.
Market/Interest Rate Risk Management
The primary purpose in managing interest rate risk is to invest capital effectively and preserve the value created by the core banking business. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.
Financial simulation models are the primary tools used by Management's Asset/Liability Committee to measure interest rate exposure. The significant increase in short-term market interest rates and the overall interest rate environment is likely to affect the balance sheet composition and rates. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior. Using a wide range of scenarios, Management is provided with extensive information on the potential impact on net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Trustmark's balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of Trustmark's balance sheet, resulting from both strategic plans and customer behavior. In addition, the model incorporates Management's assumptions and expectations regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates.
Based on the results of the simulation models using static balances, the table below summarizes the effect various one-year interest rate shift scenarios would have on net interest income compared to a base case, flat scenario at June 30, 2025 and 2024.
|
Estimated % Change |
||||||||
|
June 30, |
||||||||
|
Change in Interest Rates |
2025 |
2024 |
||||||
|
+200 basis points |
1.7 |
% |
1.7 |
% |
||||
|
+100 basis points |
0.8 |
% |
0.9 |
% |
||||
|
-100 basis points |
-1.5 |
% |
-1.3 |
% |
||||
|
-200 basis points |
-3.7 |
% |
-3.3 |
% |
||||
Management cannot provide any assurance about the actual effect of changes in interest rates on net interest income. The estimates provided do not include the effects of possible strategic changes in the balances of various assets and liabilities throughout 2025 or additional actions Trustmark could undertake in response to changes in interest rates. Management will continue to prudently manage the balance sheet in an effort to control interest rate risk and maintain profitability over the long term.
Another component of interest rate risk management is measuring the economic value-at-risk for a given change in market interest rates. The economic value-at-risk may indicate risks associated with longer-term balance sheet items that may not affect net interest income at risk over shorter time periods. Trustmark uses computer-modeling techniques to determine the present value of all asset and liability cash flows (both on- and off-balance sheet), adjusted for prepayment expectations, using a market discount rate. The economic value of equity (EVE), also known as net portfolio value, is defined as the difference between the present value of asset cash flows and the present value of liability cash flows. The resulting change in EVE in different market rate environments, from the base case scenario, is the amount of EVE at risk from those rate environments.
The following table summarizes the effect that various interest rate shifts would have on net portfolio value at June 30, 2025 and 2024.
|
Estimated % Change |
||||||||
|
June 30, |
||||||||
|
Change in Interest Rates |
2025 |
2024 |
||||||
|
+200 basis points |
-1.5 |
% |
-2.0 |
% |
||||
|
+100 basis points |
-0.5 |
% |
-0.8 |
% |
||||
Trustmark determines the fair value of the MSR using a valuation model administered by a third party that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, default rates, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income and other ancillary income such as late fees. Management reviews all significant assumptions quarterly. Mortgage loan prepayment speeds, a key assumption in the model, is the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate used to determine the present value of estimated future net servicing income, another key assumption in the model, is an estimate of the required rate of return investors in the market would require for an asset with similar risk. Both assumptions can, and generally will, change as market conditions and interest rates change.
By way of example, an increase in either the prepayment speed or discount rate assumption will result in a decrease in the fair value of the MSR, while a decrease in either assumption will result in an increase in the fair value of the MSR. In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and discount rates. These fluctuations can be rapid and may continue to be significant. Therefore, estimating prepayment speed and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.
At June 30, 2025, the MSR fair value was $132.7 million, compared to $136.7 million at June 30, 2024. The impact on the MSR fair value of a 10% adverse change in prepayment speed or a 100 basis point increase in discount rate at June 30, 2025, would be a decline in fair value of approximately $4.9 million and $5.2 million, respectively, compared to a decline in fair value of approximately $4.9 million and $5.5 million, respectively, at June 30, 2024. Changes of equal magnitude in the opposite direction would produce similar increases in fair value in the respective amounts.
Critical Accounting Policies
For an overview of Trustmark's critical accounting policies, see the section captioned "Critical Accounting Policies" included in Part II. Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations, of Trustmark's 2024 Annual Report. There have been no significant changes in Trustmark's critical accounting policies during the first six months of 2025.
For additional information regarding Trustmark's basis of presentation and accounting policies, see Note 1 - Business, Basis of Financial Statement Presentation and Principles of Consolidation included in Part I. Item 1. - Financial Statements of this report.
Accounting Policies Recently Adopted and Pending Accounting Pronouncements
For a complete list of recently adopted and pending accounting policies and the impact on Trustmark, see Note 20 - Accounting Policies Recently Adopted and Pending Accounting Pronouncements included in Part I. Item 1. - Financial Statements of this report.
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