TRUSTMARK CORP

Previous wording

Trustmark, a Mississippi business corporation incorporated in 1968, is a bank holding company headquartered in Jackson, Mississippi. Trustmark’s principal subsidiary is Trustmark National Bank (TNB), initially chartered by the State of Mississippi in 1889. At June 30, 2024, TNB had total assets of $18.450 billion, which represented approximately 99.99% of the consolidated assets of Trustmark.

Current wording

Trustmark, a Mississippi business corporation incorporated in 1968, is a bank holding company headquartered in Jackson, Mississippi. Trustmark’s principal subsidiary is Trustmark National Bank (TNB), initially chartered by the State of Mississippi in 1889. At September 30, 2024, TNB had total assets of $18.478 billion, which represented approximately 99.99% of the consolidated assets of Trustmark.

Previous wording

Through TNB and its other subsidiaries, Trustmark operates as a financial services organization providing banking and other financial solutions through offices and 2,515 full-time equivalent associates (measured at June 30, 2024) located in the states of Alabama (including the Georgia Loan Production Office (LPO), which are collectively referred to herein as Trustmark's Alabama market region), Florida (primarily in the northwest or “Panhandle” region of that state, which is referred to herein as Trustmark’s Florida 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, 2023 (2023 Annual Report).

Current wording

Through TNB and its other subsidiaries, Trustmark operates as a financial services organization providing banking and other financial solutions through offices and 2,500 full-time equivalent associates (measured at September 30, 2024) 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, 2023 (2023 Annual Report).

Previous wording

In addition to these significant non-routine transactions, Trustmark's financial results for the three and six months ended June 30, 2024 reflected continued growth in loans held for investment (LHFI), an increase in noninterest income and disciplined expense management. Trustmark's capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. Trustmark remains well-positioned and committed to meeting the banking and financial needs of its customers and the communities it serves, and remains focused on providing support, advice and solutions to meet its customers’ unique needs. Trustmark is committed to managing the franchise for the long term, supporting investments to promote profitable revenue growth, realigning delivery channels to support changing customer preferences as well as reengineering and efficiency opportunities to enhance long-term shareholder value. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share. The dividend is payable September 15, 2024, to shareholders of record on September 1, 2024.

Current wording

In addition to the significant non-routine transactions that were completed during the second quarter of 2024, Trustmark's financial results for the first nine months of 2024 reflected continued growth in loans held for investment (LHFI), an increase in noninterest income and disciplined expense management. Please see the section captioned "Non-GAAP Financial Measures" for additional information regarding the significant non-routine transactions. Trustmark's capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. These accomplishments are the result of focused efforts to enhance Trustmark's long-term performance and competitiveness. Trustmark continues to implement technology and streamline processes to enhance its ability to grow and serve customers. 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 $0.23 per share. The dividend is payable December 15, 2024, to shareholders of record on December 1, 2024.

Previous wording

Economic activity improved slightly during the first six months of 2024; however, 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 2024 election cycle in the United States, 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.

Current wording

Economic activity improved slightly during the first nine months of 2024; however, 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 2024 election cycle in the United States, 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.

Previous wording

Market interest rates began to rise during 2022 after an extended period at historical lows. Starting in March 2022, the FRB began raising the target federal funds rate for the first time in three years and continued with multiple increases throughout 2022 and the first half of 2023. The FRB has maintained the target federal funds rate at a range of 5.25% to 5.50% since July 2023. In addition, the FRB increased the interest that it pays on reserves multiple times during 2022 and the first half of 2023 from 0.10% to 5.40% as of July 2023. The FRB has maintained the rate it pays on reserves at 5.40% since July 2023. These higher interest rates have increased the competitive pressures on the deposit cost of funds. It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on Trustmark's results of operations.

Current wording

Market interest rates began to rise during 2022 after an extended period at historical lows. Starting in March 2022, the FRB began raising the target federal funds rate for the first time in three years and continued with multiple increases throughout 2022 and the first half of 2023. The FRB maintained the target federal funds rate at a range of 5.25% to 5.50% from July 2023 through September 2024. In September 2024, the FRB lowered the target federal funds rate to a range of 4.75% to 5.00% 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, the FRB increased the interest that it pays on reserves multiple times during 2022 and the first half of 2023 from 0.10% to 5.40% as of July 2023. The FRB maintained the rate it pays on reserves at 5.40% from July 2023 through September 2024. In September 2024, the FRB lowered the rate is pays on reserves to 4.90%. Prior period rate increases increased the competitive pressures on the deposit cost of funds. While rate cuts potentially reduce those competitive pressures, they increase pressure on Trustmark's net interest margin, a key component to its financial results. While the FRB has suggested that further rate cuts may occur in the near term, it is not possible to predict the direction, pace or magnitude of further changes in interest rates, or the impact any such rate changes will have on Trustmark's results of operations.

Previous wording

In the July 2024 “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” the twelve Federal Reserve Districts’ reports suggested that during the reporting period (covering the period from May 21, 2024 through July 8, 2024) economic activity maintained a slight to modest growth. Reports by the twelve Federal Reserve Districts (Districts) noted the following during the reporting period:

Current wording

In the October 2024 “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” the twelve Federal Reserve Districts’ reports suggested that during the reporting period (covering the period from August 26, 2024 through October 11, 2024) economic activity was little changed. Reports by the twelve Federal Reserve Districts (Districts) noted the following during the reporting period:

Previous wording

Reports by the Federal Reserve’s Sixth District, Atlanta (which includes Trustmark’s Alabama, Florida 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 also noted lending remained relatively flat, high deposit and borrowing costs continued to weigh on bank earnings with some financial institutions selling securities in order to reinvest proceeds into higher-yielding assets, elevated interest rates adversely impacted bank customers as businesses and consumers refinanced debt at higher rates and increased delinquencies were observed as credit conditions continued to normalize. The Federal Reserve’s Eleventh District reported that credit standards continued to tighten, though at a slower pace, for all loan types except for consumer loans, loan volumes grew at a faster pace as loan demand increased despite credit standards continuing to tighten, loan price increases moderated and bankers anticipate credit tightening for commercial real estate loans to accelerate over the next three months. The Federal Reserve’s Eleventh District also noted close to half of bankers reported an increase in deposits and slightly more expect deposits to rise in the near term, loan nonperformance continued to rise, particularly for consumer and commercial and industrial loans, and bankers’ outlooks remained mixed as they expect an increase in loan demand in the near term but a deterioration in loan performance and business activity.

Current wording

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 also noted that although loan growth was modest, financial institutions noted anticipating additional future loan demand in a lower rate environment and multifamily lending increased moderately as the demand for housing continued to exceed supply. The Federal Reserve’s Sixth District reported that deposits, including large time deposits, increased modestly, borrowings continued to decline as banks reduced reliance on more expensive sources of funding, and rising cash balances drove increasing cash-to-assets ratios at District institutions and across the industry broadly. The Federal Reserve’s Eighth District also noted that banks were able to adjust deposit rates downward without receiving much pushback from customers, past-due credit card payments increased but bankers' credit quality forecasts continued to be favorable and bankers reported positive moves in their capital and balance sheets due to favorable changes in bond values. The Federal Reserve’s Eleventh District reported that credit tightening continued and loan nonperformance rose but at a slower pace, there was a notable uptick in concern for the performance of office commercial real estate loans, and bankers reported working with borrowers to keep commercial real estate loans in good standing prior to maturity when they can be refinanced. The Federal Reserve’s Eleventh District also noted that despite increased concerns, bankers' outlooks turned sharply optimistic and contacts expect a significant improvement in loan demand and business activity six months from now, although they still anticipate continued deterioration in loan performance.

Previous wording

Trustmark reported net income of $73.8 million, or basic and diluted earnings per share (EPS) of $1.21 and $1.20, respectively, in the second quarter of 2024, compared to $45.0 million, or basic and diluted EPS of $0.74, in the second quarter of 2023. Trustmark’s reported performance during the quarter ended June 30, 2024 produced 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%, compared to a return on average tangible equity of 15.18%, a return on average assets of 0.96%, an average equity to average assets ratio of 8.42% and a dividend payout ratio of 31.08% during the quarter ended June 30, 2023.

Current wording

Trustmark reported net income of $51.3 million, or basic and diluted earnings per share (EPS) of $0.84, in the third quarter of 2024, compared to $34.0 million, or basic and diluted EPS of $0.56, in the third quarter of 2023. Trustmark’s reported performance during the quarter ended September 30, 2024 produced a return on average tangible equity of 12.86%, a return on average assets of 1.10%, an average equity to average assets ratio of 10.39% and a dividend payout ratio of 27.38%, compared to a return on average tangible equity of 11.32%, a return on average assets of 0.72%, an average equity to average assets ratio of 8.46% and a dividend payout ratio of 41.07% during the quarter ended September 30, 2023.

Previous wording

Trustmark reported net income of $115.4 million, or basic and diluted EPS of $1.89 and $1.88, respectively, for the six months ended June 30, 2024, compared to $95.3 million, or basic and diluted EPS of $1.56 for the same time period in 2023. Trustmark's reported performance during the first six months of 2024 produced 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%, compared to return on average tangible equity of 16.56%, a return on average assets of 1.03%, an average equity to average assets ratio of 8.33% and a dividend payout ratio of 29.49% for the first six months of 2023.

Current wording

Trustmark reported net income of $166.7 million, or basic and diluted EPS of $2.72, for the nine months ended September 30, 2024, compared to $129.4 million, or basic and diluted EPS of $2.12 and $2.11, respectively, for the same time period in 2023. Trustmark's reported performance during the first nine months of 2024 produced a return on average tangible equity of 15.79%, a return on average assets of 1.19%, an average equity to average assets ratio of 9.52% and a dividend payout ratio of 25.37%, compared to return on average tangible equity of 14.77%, a return on average assets of 0.93%, an average equity to average assets ratio of 8.37% and a dividend payout ratio of 32.55% for the first nine months of 2023.

Previous wording

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 consist of both continuing and discontinued operations. The discontinued operations include the financial results of FBBI prior to the sale as well as the net gain on the sale in the second quarter. Trustmark reported a net loss from continuing operations for the three and six months ended June 30, 2024 of $100.6 million and $62.4 million, respectively, compared to net income from continuing operations of $41.2 million and $88.8 million, respectively, for the same time periods in 2023. Trustmark's reported performance from continuing operations for the three and six month ended June 30, 2024 produced a return on average tangible equity of -29.05% and -9.18%, respectively, and a return on average assets of -2.16% and -0.67%, respectively, compared to a return on average tangible equity of 13.28% and 14.75%, respectively, and a return on average assets of 0.88% and 0.97%, respectively, for the same time periods in 2023. The net 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.

Current wording

Trustmark completed the sale of FBBI during the second quarter of 2024. As such, financial results for the nine months ended September 30, 2024 and the three and nine months ended September 30, 2023, consist of both continuing and discontinued operations. The discontinued operations include the financial results of FBBI prior to the sale as well as the net gain on the sale in the second quarter. Trustmark reported net income from continuing operations of $51.3 million and a net loss from continuing operations of $11.1 million for the three and nine months ended September 30, 2024, respectively, compared to net income from continuing operations of $30.6 million and $119.4 million, respectively, for the same time periods in 2023. Trustmark's reported performance from continuing operations for the three and nine month ended September 30, 2024 produced a return on average tangible equity of 12.86% and -1.02%, respectively, and a return on average assets of 1.10% and -0.08%, respectively, compared to a return on average tangible equity of 9.72% and 13.03%, respectively, and a return on average assets of 0.65% and 0.86%, respectively, for the same time periods in 2023. The net loss from continuing operations for the nine months ended September 30, 2024 was principally due to the loss on the sale of available for sale securities during the second quarter of 2024.

Previous wording

Net interest income for the three and six months ended June 30, 2024 totaled $141.0 million and $273.9 million, respectively, an increase of $1.1 million, or 0.8%, and a decrease of $3.6 million, or 1.3%, respectively, when compared to the same time periods in 2023, principally attributable to an increase in interest and fees on loans held for sale (LHFS) and LHFI, an increase in interest on deposits and a decline in other interest expense. Interest income totaled $239.2 million and $469.0 million for the three and six months ended June 30, 2024, respectively, an increase of $20.6 million, or 9.4%, and $51.6 million, or 12.4%, respectively, when compared to the same time periods in 2023, principally due to an increase in interest and fees on LHFS and LHFI primarily as a result of the higher interest rate environment and loan growth. Interest expense totaled $98.1 million and $195.1 million for the three and six months ended June 30, 2024, an increase of $19.5 million, or 24.8%, and $55.2 million, or 39.5%, respectively, when compared to the same time periods in 2023. The increase in interest expense when the three and six months ended June 30, 2024 are compared to the same time periods in 2023 was principally due to an increase in interest on deposits primarily due to rising interest rates, increased competition for deposits and higher average balances, partially offset by a decrease in other interest expense primarily due to a decrease in short-term Federal Home Loan Bank (FHLB) advances.

Current wording

Net interest income for the three and nine months ended September 30, 2024 totaled $154.7 million and $428.6 million, respectively, an increase of $16.1 million, or 11.6%, and $12.4 million, or 3.0%, respectively, when compared to the same time periods in 2023, principally attributable to increases in interest and fees from LHFS and LHFI and interest on securities as well as a decline in other interest expense, partially offset by an increase in interest expense on deposits. Interest income totaled $251.6 million and $720.6 million for the three and nine months ended September 30, 2024, respectively, an increase of $23.1 million, or 10.1%, and $74.6 million, or 11.6%, respectively, when compared to the same time periods in 2023, principally due to increases in interest and fees on LHFS and LHFI, primarily as a result of the higher interest rate environment and loan growth, and interest on securities, primarily as a result of restructuring the securities portfolio during the second quarter of 2024. Interest expense totaled $96.9 million and $292.0 million for the three and nine months ended September 30, 2024, respectively, an increase of $7.0 million, or 7.8%, and $62.2 million, or 27.1%, respectively, when compared to the same time periods in 2023. The increase in interest expense when the three and nine months ended September 30, 2024 are compared to the same time periods in 2023 was principally due to an increase in interest on deposits primarily due to rising interest rates, increased competition for deposits and higher average balances, partially offset by a decrease in other interest expense primarily due to a decrease in short-term Federal Home Loan Bank (FHLB) advances.

Previous wording

Noninterest income (loss) for the three and six months ended June 30, 2024 totaled a negative $141.3 million and a negative $101.9 million, respectively, a decrease of $179.1 million and $176.8 million, respectively, when compared to the same time periods in 2023, primarily due to the loss on the sale of the available for sale securities and a decline in mortgage banking, net, partially offset by an increase in other, net. Other, net totaled $7.5 million and $10.6 million for the three and six months ended June 30, 2024, respectively, an increase of $4.7 million and $5.3 million, respectively, when compared to the same time periods in 2023, principally due to the $8.1 million Visa C shares fair value adjustment as well as increases in cash management service fees and net gains on the sale of premises and equipment, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans. Mortgage banking, net totaled $4.2 million and $13.1 million for the three and six months ended June 30, 2024, respectively, a decrease of $2.4 million, or 36.3%, and $1.1 million, or 7.9%, respectively, when compared to the same time period in 2023, principally due to increases in the net negative hedge ineffectiveness and the run-off of the MSR, partially offset by an increase in the gain on sales of loans, net.

Current wording

Noninterest income (loss) for the three and nine months ended September 30, 2024 totaled $37.6 million and a negative $64.4 million, respectively, an increase of $641 thousand, or 1.7%, and a decrease of $176.2 million, respectively, when compared to the same time periods in 2023. The decrease in noninterest income (loss) when the first nine months of 2024 is compared to the same time period in 2023 was primarily due to the $182.8 million loss on the sale of the available for sale securities during the second quarter of 2024, partially offset by an increase in other, net. Other, net totaled $13.5 million for the nine months ended September 30, 2024, an increase of $5.9 million, or 76.6%, when compared to the same time period in 2023, principally due to the $8.1 million Visa C shares fair value adjustment during the second quarter of 2024 as well as an increase in cash management service fees, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans recorded during the second quarter of 2024.

Previous wording

Noninterest expense for the three and six months ended June 30, 2024 totaled $118.3 million and $238.0 million, respectively, a decrease of $3.3 million, or 2.7%, and $1.2 million, or 0.5%, respectively, when compared to the same time periods in 2023. The decrease in noninterest expense for the three and six months ended June 30, 2024 was principally due to declines in services and fees and salaries and employee benefits partially offset by an increase in other expense. Services and fees for the three and six months ended June 30, 2024 totaled $24.7 million and $49.2 million, respectively, a decrease of $3.1 million, or 11.1%, and $3.7 million, or 7.0%, respectively, when compared to the same time periods in 2023, principally due to declines in outside services and fees, primarily related to other services and fees and legal expense, communication expense, primarily related to telephone expense, and advertising expense, partially offset by an increase in data processing expenses related to software. Salaries and employee benefits totaled $64.8 million and $130.3 million for the three and six months ended June 30, 2024, respectively, a decrease of $2.0 million, or 2.9%, and $1.2 million, or 0.9%, respectively. The decrease in salaries and employee benefits when the three months ended June 30, 2024 is compared to the same time period in 2023 was principally due to declines in commissions related to mortgage production, annual retail management incentive compensation and various other salaries expenses, partially offset by increases in annual general incentive compensation and broker commissions. The decrease in salaries and employee benefits when the six months ended June 30, 2024 is compared to the same time period in 2023 was principally due to declines in commission expense related to mortgage production, miscellaneous other salaries expenses, annual retail management incentive compensation and medical insurance expense, partially offset by increases in salaries expense, primarily due to general merit increases, broker commissions and annual general incentive compensation. Other expense totaled $15.2 million and $31.4 million for the three and six months ended June 30, 2024, respectively, an increase of $1.5 million, or 10.7%, and $3.5 million, or 12.3%, respectively, when compared to the same time periods in 2023. The increase in other expense when the three months ended June 30, 2024 is compared to the same time period in 2023 was principally due to an increase in FDIC assessment expense, primarily due to an increase in the assessment rate, partially offset by declines in various other miscellaneous expenses, including sponsorships and contributions, operational losses and franchise taxes. The increase in other expense when the first six months of 2024 is compared to the same time period in 2023 was principally due to increases in FDIC assessment expense and other real estate expense, primarily due to an increase in the net loss on the sale of…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Noninterest expense for the three and nine months ended September 30, 2024 totaled $123.3 million and $361.3 million, respectively, a decrease of $7.0 million, or 5.4%, and $8.2 million, or 2.2%, respectively, when compared to the same time periods in 2023. The decrease in noninterest expense for the three months ended September 30, 2024 was principally due to the $6.5 million litigation settlement expense recorded during the third quarter of 2023 as well as a decline in services and fees partially offset by an increase in other expense. The decrease in noninterest expense for the nine months ended September 30, 2024 was principally due to the $6.5 million litigation settlement expense recorded during the third quarter of 2023 as well as declines in services and fees and salaries and employee benefits partially offset by an increase in other expense. Services and fees for the three and nine months ended September 30, 2024 totaled $25.7 million and $74.9 million, respectively, a decrease of $1.7 million, or 6.4%, and $5.4 million, or 6.8%, respectively, when compared to the same time periods in 2023, principally due to declines in outside services and fees, primarily related to other services and fees and legal expense, communication expense, primarily related to telephone expense, and advertising expense, partially offset by an increase in data processing expenses related to software. Salaries and employee benefits totaled $197.0 million for the nine months ended September 30, 2024, a decrease of $1.9 million, or 1.0%, when compared to the same time period in 2023, principally due to declines in commissions related to mortgage production, other salaries expense and medical insurance expense, partially offset by an increase in salaries expense primarily due to general merit increases. Other expense totaled $17.3 million and $48.7 million for the three and nine months ended September 30, 2024, respectively, an increase of $2.3 million, or 15.1%, and $5.7 million, or 13.3%, respectively, when compared to the same time periods in 2023. The increase in other expense when the three and nine months ended September 30, 2024 are compared to the same time periods in 2023 was principally due to increases in FDIC assessment expense, primarily due to an increase in the assessment rate, and other real estate expense, net, primarily attributable to a reserve for other real estate write-down recorded for one foreclosed property in the Texas market region which was under contract to be sold during the fourth quarter of 2024.

Previous wording

Trustmark’s total PCL on LHFI for the three and six months ended June 30, 2024 totaled $23.3 million and $31.0 million, respectively, and 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. The PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, totaled $14.7 million and $22.4 million for the three and six months ended June 30, 2024, respectively, compared to $8.2 million and $11.5 million, respectively, for the same time periods in 2023. The PCL on LHFI, excluding the PCL, LHFI 1-4 family mortgage loans, for the three and six months ended June 30, 2024 primarily reflected an increase in required reserves as a result of net adjustments to the qualitative factors due to credit migrations and loan growth and net changes in the macroeconomic forecast associated with specific loss driver models as a result of loss driver updates. The PCL on off-balance sheet credit exposures totaled a negative $3.6 million and a negative $3.8 million for the three and six months ended June 30, 2024, respectively, compared to $245 thousand and a negative $2.0 million, respectively, for the same time periods in 2023. The release in PCL on off-balance sheet credit exposures for the three and six months ended June 30, 2024, primarily reflected a decrease in required reserves as a result of a decrease in unfunded commitments and changes in the total reserve rate, partially offset by an increase in required reserves as a result of implementing the performance trend qualitative reserve factor. Please see the section captioned “Provision for Credit Losses” for additional information regarding the PCL on LHFI and off-balance sheet credit exposures.

Current wording

Trustmark’s total PCL on LHFI for the three months ended September 30, 2024 totaled $7.9 million, a decrease of $399 thousand, or 4.8%, when compared to the same time period in 2023. The PCL, LHFI for the three months ended September 30, 2024 primarily reflected increases in required reserves related to individually analyzed LHFI and the implementation of the External Factor-Credit Quality Review qualitative factor, partially offset by declines in required reserves resulting from the update of the macroeconomic forecasts and net changes in other qualitative reserve factors. During the third quarter of 2024, Trustmark activated the External Factor – Credit Quality Review qualitative factor to ensure reserve adequacy for collectively evaluated commercial loans that may not have been identified and downgraded timely for various reasons. Please see the section captioned “Allowance for Credit Losses: LHFI” for additional information regarding the External Factor-Credit Quality Review qualitative factor. The PCL, LHFI for the nine months ended September 30, 2024 totaled $39.0 million and 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. The PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, for the nine months ended September 30, 2024 totaled $30.3 million, compared to $19.8 million for the same time period in 2023. The PCL on LHFI, excluding the PCL, LHFI 1-4 family mortgage loans, for the nine months ended September 30, 2024 primarily reflected an increase in required reserves as a result of net adjustments to the qualitative factors due to credit migration, implementation of the External Factor-Credit Quality Review qualitative factor, and specific reserves for individually analyzed LHFI, partially offset by net changes in the macroeconomic forecast associated with specific loss driver models as a result of loss driver updates and net changes in other qualitative reserve factors.

Previous wording

At June 30, 2024, nonperforming assets totaled $50.9 million, a decrease of $56.0 million, or 52.4%, compared to December 31, 2023, reflecting declines in both nonaccrual LHFI and other real estate. Nonaccrual LHFI totaled $44.3 million at June 30, 2024, a decrease of $55.7 million, or 55.7%, relative to December 31, 2023, primarily as a result of the sale of 1-4 family mortgage loans during the second quarter of 2024 as well as the resolution of one large nonaccrual commercial credit in the Texas market region and a significant reduction of one large nonaccrual commercial credit in the Alabama market region, partially offset by one large commercial credit placed on nonaccrual in the Alabama market region. Other real estate, net totaled $6.6 million at June 30, 2024, a decrease of $281 thousand, or 4.1%, when compared to December 31, 2023, principally due to properties sold in the Mississippi and Alabama market regions largely offset by properties foreclosed in the Mississippi market region.

Current wording

At September 30, 2024, nonperforming assets totaled $77.7 million, a decrease of $29.1 million, or 27.3%, compared to December 31, 2023, reflecting declines in both nonaccrual LHFI and other real estate. Nonaccrual LHFI totaled $73.8 million at September 30, 2024, a decrease of $26.2 million, or 26.2%, relative to December 31, 2023, primarily as a result of the sale of 1-4 family mortgage loans during the second quarter of 2024 as well as the resolution of two large nonaccrual commercial credits in the Texas and Alabama market regions, partially offset by three large commercial credits placed on nonaccrual in the Alabama and Texas market regions. Other real estate, net totaled $3.9 million at September 30, 2024, a decrease of $2.9 million, or 42.9%, when compared to December 31, 2023, principally due to properties sold in the Mississippi and Alabama market regions and a reserve for other real estate write-downs recorded for a foreclosed property in the Texas market region which is under contract to be sold during the fourth quarter of 2024, partially offset by properties foreclosed in the Mississippi market region.

Previous wording

LHFI totaled $13.155 billion at June 30, 2024, an increase of $204.9 million, or 1.6%, compared to December 31, 2023. The increase in LHFI during the first six months of 2024 was primarily due to net growth in LHFI secured by real estate and other commercial loans and leases partially offset by declines in commercial and industrial LHFI and state and other political subdivision LHFI. For additional information regarding changes in LHFI and comparative balances by loan category, see the section captioned “LHFI.”

Current wording

LHFI totaled $13.100 billion at September 30, 2024, an increase of $149.6 million, or 1.2%, compared to December 31, 2023. The increase in LHFI during the first nine months of 2024 was primarily due to net growth in LHFI secured by real estate and other commercial loans and leases partially offset by declines in commercial and industrial LHFI and state and other political subdivision LHFI. For additional information regarding changes in LHFI and comparative balances by loan category, see the section captioned “LHFI.”

Previous wording

Total deposits were $15.463 billion at June 30, 2024, a decrease of $106.9 million, or 0.7%, compared to December 31, 2023. During the first six months of 2024, noninterest-bearing deposits decreased $44.1 million, or 1.4%, principally due to declines in commercial noninterest-bearing demand deposit accounts. Interest-bearing deposits decreased $62.8 million, or 0.5%, during the first six months of 2024, primarily due to declines in public and consumer interest checking accounts and consumer savings accounts, partially offset by growth in commercial interest checking accounts, business and consumer money market deposit accounts (MMDA) and all categories of certificates of deposits (CDs).

Current wording

Total deposits were $15.241 billion at September 30, 2024, a decrease of $328.8 million, or 2.1%, compared to December 31, 2023. During the first nine months of 2024, noninterest-bearing deposits decreased $54.8 million, or 1.7%, principally due to declines in consumer noninterest-bearing demand deposit accounts. Interest-bearing deposits decreased $274.0 million, or 2.2%, during the first nine months of 2024, primarily due to declines in public and consumer interest checking accounts, consumer savings accounts and brokered certificates of deposits (CDs), partially offset by growth in commercial interest checking accounts and commercial and consumer money market deposit accounts (MMDA) and CDs.

Previous wording

Federal funds purchased and securities sold under repurchase agreements totaled $314.1 million at June 30, 2024, a decrease of $91.6 million, or 22.6%, compared to December 31, 2023, principally due to a decrease in upstream federal funds purchased. Other borrowings totaled $336.7 million at June 30, 2024, a decrease of $146.5 million, or 30.3%, compared to December 31, 2023, principally due to a decline in outstanding short-term FHLB advances with the FHLB of Dallas.

Current wording

Federal funds purchased and securities sold under repurchase agreements totaled $365.6 million at September 30, 2024, a decrease of $40.1 million, or 9.9%, compared to December 31, 2023, principally due to a decrease in upstream federal funds purchased. Other borrowings totaled $443.5 million at September 30, 2024, a decrease of $39.8 million, or 8.2%, compared to December 31, 2023, principally due to a decline in outstanding short-term FHLB advances with the FHLB of Dallas.

Previous wording

There have been no material changes to the regulatory developments included in Trustmark’s 2023 Annual Report. 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 2023 Annual Report.

Current wording

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 2023 Annual Report.

Previous wording

Trustmark completed the following significant non-routine transactions during the second quarter of 2024:

Current wording

Trustmark completed the following significant non-routine transactions during the second quarter of 2024, which are included in the financial results for the nine months ended September 30, 2024:

Previous wording

On April 8, 2024, Visa commenced an initial exchange offer expiring on May 3, 2024, for any and all outstanding shares of Visa Class B-1 common stock (Visa B-1 shares). Holders participating in the exchange offer would receive a combination of Visa Class B-2 common stock (Visa B-2 shares) and Visa Class C common stock (Visa C shares) in exchange for Visa B-1 shares that were validly tendered and accepted for exchange by Visa. TNB tendered its 38.7 thousand Visa B-1 shares, which were accepted by Visa. In exchange for each Visa B-1 share that was validly tendered and accepted for exchange by Visa, TNB received 50.0% of a newly issued Visa B-2 share and newly issued Visa C shares equivalent in value to 50.0% of a Visa B-1 share. The Visa C shares that were received by TNB were recognized at fair value, which resulted in a gain of $8.1 million ($6.0 million, net of taxes) and was recorded to noninterest income (loss) in other, net during the second quarter of 2024. The Visa B-2 shares were recorded at their nominal carrying value.

Current wording

On April 8, 2024, Visa commenced an initial exchange offer expiring on May 3, 2024, for any and all outstanding shares of Visa Class B-1 common stock (Visa B-1 shares). Holders participating in the exchange offer would receive a combination of Visa Class B-2 common stock (Visa B-2 shares) and Visa Class C common stock (Visa C shares) in exchange for Visa B-1 shares that were validly tendered and accepted for exchange by Visa. TNB tendered its 38.7 thousand Visa B-1 shares, which were accepted by Visa. In exchange for each Visa B-1 share that was validly tendered and accepted for exchange by Visa, TNB received 50.0% of a newly issued Visa B-2 share and newly issued Visa C shares equivalent in value to 50.0% of a Visa B-1 share. The Visa C shares that were received by TNB were recognized at fair value, which resulted in a gain of $8.1 million ($6.0 million, net of taxes) and was recorded to noninterest income (loss) in other, net during the second quarter of 2024. During the third quarter of 2024, TNB sold all of the Visa C shares for approximately the same carrying value as of June 30, 2024. The Visa B-2 shares were recorded at their nominal carrying value.

Previous wording

Net interest income-FTE for the three months ended June 30, 2024, increased $1.0 million, or 0.7%, when compared to the same time period in 2023 principally due to an increase in interest and fees on LHFS and LHFI-FTE and a decline in other interest expense, partially offset by an increase in interest on deposits. Net interest income-FTE for the six months ended June 30, 2024 decreased $3.8 million, or 1.3%, when compared with the same time period in 2023 principally due to an increase in interest on deposits partially offset by an increase in interest and fees on LHFS and LHFI-FTE and a decrease in other interest expense. The net interest margin-FTE for the three months ended June 30, 2024 increased 5 basis points to 3.38% when compared to the same time period in 2023. The increase in the net interest margin for the three months ended June 30, 2024 when compared to the same time period in 2023, was principally due to increases in the yields on the LHFS and LHFI portfolios and the securities portfolio, primarily due to the restructuring of the available for sale securities portfolio during the second quarter of 2024, partially offset by an increase in the cost of interest-bearing deposits. The net interest margin-FTE for the six months ended June 30, 2024 decreased 7 basis points to 3.29% when compared to the same time period in 2023. The decrease in the net interest margin for the six months ended June 30, 2024 when compared to the same time period in 2023, was principally due to an increase in the cost of interest-bearing deposits partially offset by the increase in the yield on the LHFS and LHFI portfolios.

Current wording

Net interest income-FTE for the three months ended September 30, 2024, increased $16.1 million, or 11.3%, when compared to the same time period in 2023 principally due to increases in interest and fees on LHFS and LHFI-FTE and interest on securities-taxable as well as a decline in other interest expense, partially offset by an increase in interest on deposits. Net interest income-FTE for the nine months ended September 30, 2024 increased $12.3 million, or 2.9%, when compared with the same time period in 2023 principally due to increases in interest and fees on LHFS and LHFI-FTE and interest on securities-taxable as well as a decline in other interest expense, partially offset by an increase in interest on deposits and a decline in other interest income. The net interest margin-FTE for the three and nine months ended September 30, 2024 increased 40 basis points to 3.69% and 9 basis points to 3.43%, respectively, when compared to the same time periods in 2023, principally due to increases in the yields on the LHFS and LHFI portfolios and the securities portfolio, primarily due to the restructuring of the available for sale securities portfolio during the second quarter of 2024, partially offset by an increase in the cost of interest-bearing deposits.

Previous wording

Average interest-earning assets for the three months ended June 30, 2024 was $17.189 billion compared to $17.248 billion for the same time period in 2023, a decline of $59.0 million, or 0.3%, principally due to a decline in average total securities and average other earning assets partially offset by an increase in average loans (LHFS and LHFI). Average interest-earning assets for the six months ended June 30, 2024 was $17.139 billion compared to $17.058 billion for the same time period in 2023, an increase of $80.5 million, or 0.5%, principally due to an increase in average loans (LHFS and LHFI) partially offset by a decline in average total securities and average other earning assets. Average loans (LHFS and LHFI) increased $577.1 million, or 4.5%, and $607.7 million, or 4.8%, when the three and six months ended June 30, 2024, respectively, are compared to the same time periods in 2023, principally due to an increase in the average balance of the LHFI portfolio of $571.8 million, or 4.6%, and $587.2 million, or 4.7%, respectively. The increase in the LHFI portfolio when the balances at June 30, 2024 are compared to June 30, 2023 was principally due to net growth in LHFI secured by real estate and other commercial loans and leases. Average total securities declined $322.5 million, or 8.9%, and $325.7 million, or 8.9%, when the three and six months ended June 30, 2024 are compared to the same time periods in 2023, 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. Average other earning assets decreased $310.4 million, or 34.4%, and $198.7 million, or 25.5%, respectively, when the three and six months ended June 30, 2024 are compared to the same time periods in 2023, primarily due to decreases in reserves held at the FRBA and investments in FHLB stock.

Current wording

Average interest-earning assets for the three months ended September 30, 2024 was $17.016 billion compared to $17.110 billion for the same time period in 2023, a decline of $94.9 million, or 0.6%, principally due to a decline in average total securities and average other earning assets partially offset by an increase in average loans (LHFS and LHFI). Average interest-earning assets for the nine months ended September 30, 2024 was $17.097 billion compared to $17.076 billion for the same time period in 2023, an increase of $21.5 million, or 0.1%, principally due to an increase in average loans (LHFS and LHFI) largely offset by a decline in average total securities and average other earning assets. Average loans (LHFS and LHFI) increased $452.7 million, or 3.5%, and $555.3 million, or 4.4%, when the three and nine months ended September 30, 2024, respectively, are compared to the same time periods in 2023, principally due to an increase in the average balance of the LHFI portfolio of $442.0 million, or 3.5%, and $538.1 million, or 4.3%, respectively. The increase in the LHFI portfolio when the balances at September 30, 2024 are compared to September 30, 2023 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. Average total securities declined $472.6 million, or 13.5%, and $374.9 million, or 10.4%, respectively, when the three and nine months ended September 30, 2024 are compared to the same time periods in 2023, 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. Average other earning assets decreased $75.4 million, or 11.0%, and $157.2 million, or 21.0%, respectively, when the three and nine months ended September 30, 2024 are compared to the same time periods in 2023, primarily due to decreases in reserves held at the FRBA and investments in FHLB stock.

Previous wording

Average interest-bearing liabilities for both the three and six months ended June 30, 2024 totaled $13.377 billion compared to $13.047 billion and $12.817 billion, respectively, for the same time periods in 2023, an increase of $330.2 million, or 2.5%, and $559.6 million, or 4.4%, respectively. The increase in average interest-bearing liabilities when the three and six months ended June 30, 2024 are compared to the same time periods in 2023 was primarily the result of an increase in average interest-bearing deposits partially offset by a decline in average other borrowings. Average interest-bearing deposits for the three and six months ended June 30, 2024 increased $1.081 billion, or 9.7%, and $1.263 billion, or 11.5%, respectively, when compared to the same time periods in 2023, reflecting growth in average time deposits and average interest-bearing demand deposits, partially offset by declines in average savings deposits. Average other borrowings for the three and six months ended June 30, 2024 decreased $795.4 million, or 52.5%, and $721.9 million, or 51.3%, respectively, when compared to the same time periods in 2023, principally due to the decrease in outstanding short-term FHLB advances with the FHLB of Dallas as a result of changes in funding needs.

Current wording

Average interest-bearing liabilities for the three months ended September 30, 2024 totaled $13.088 billion compared to $13.105 billion for the same time period in 2023, a decrease of $17.2 million, or 0.1%, principally due to declines in average other borrowings and average federal funds purchased and securities sold under repurchase agreements largely offset by growth in average interest-bearing deposits. Average interest-bearing liabilities for the nine months ended September 30, 2024 totaled $13.280 billion compared to $12.914 billion for the same time period in 2023, an increase of $365.6 million, or 2.8%, principally due to growth in interest-bearing deposits partially offset by a decline in average other borrowings. Average interest-bearing deposits for the three and nine months ended September 30, 2024 increased $594.4 million, or 5.1%, and $1.038 billion, or 9.3%, respectively, when compared to the same time periods in 2023, reflecting growth in average time deposits and average interest-bearing demand deposits, partially offset by declines in average savings deposits. Average federal funds purchased and securities sold under repurchase agreements for the three months ended September 30, 2024 decreased $39.1 million, or 9.4%, when compared to the same time period in 2023, principally due to a decline in upstream federal funds purchased. Average other borrowings for the three and nine months ended September 30, 2024 decreased $572.5 million, or 52.2%, and $671.4 million, or 51.6%, respectively, when compared to the same time periods in 2023, principally due to the decrease in outstanding short-term FHLB advances with the FHLB of Dallas as a result of changes in funding needs.

Previous wording

Interest expense for the three and six months ended June 30, 2024 totaled $98.1 million and $195.1 million, respectively, an increase of $19.5 million, or 24.8%, and $55.2 million, or 39.5%, respectively, when compared with the same time periods in 2023, while the rate on total interest-bearing liabilities increased 53 basis points to 2.95% and 73 basis points to 2.93%, respectively, principally due to an increase in interest on deposits partially offset by a decline in other interest expense. Interest on deposits for the three and six months ended June 30, 2024 increased $29.3 million, or 53.8%, and $72.1 million, or 75.6%, respectively, while the rate on interest-bearing deposits increased 79 basis points to 2.75% and 100 basis points to 2.75%, respectively, when compared to the same time periods in 2023, primarily due to higher interest rates, reflecting the increased competitive pressures on deposits, and increases in average balances of time deposits and MMDA accounts. Other interest expense for the three and six months ended June 30, 2024 decreased $10.6 million, or 54.6%, and $18.4 million, or 52.8%, respectively, while the rate on other borrowings decreased 21 basis points to 4.91% and 17 basis points to 4.84%, respectively, when compared to the same time periods in 2023, primarily due to the decrease in outstanding short-term FHLB advances with the FHLB of Dallas.

Current wording

Interest expense for the three and nine months ended September 30, 2024 totaled $96.9 million and $292.0 million, respectively, an increase of $7.0 million, or 7.8%, and $62.2 million, or 27.1%, respectively, when compared with the same time periods in 2023, while the rate on total interest-bearing liabilities increased 22 basis points and 56 basis points, respectively, to 2.94%, principally due to an increase in interest on deposits partially offset by a decline in other interest expense. Interest on deposits for the three and nine months ended September 30, 2024 increased $16.2 million, or 23.3%, and $88.3 million, or 53.5%, respectively, while the rate on interest-bearing deposits increased 42 basis points to 2.81% and 80 basis points to 2.77%, respectively, when compared to the same time periods in 2023, primarily due to higher interest rates, reflecting the increased competitive pressures on deposits, and increases in average balances of time deposits and MMDA accounts. Other interest expense for the three and nine months ended September 30, 2024 decreased $8.7 million, or 59.4%, and $27.2 million, or 54.8%, respectively, while the rate on other borrowings decreased 79 basis points to 4.53% and 35 basis points to 4.75%, respectively, when compared to the same time periods in 2023, primarily due to the decrease in outstanding short-term FHLB advances with the FHLB of Dallas.

Previous wording

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, excluding the PCL, LHFI sale of 1-4 family mortgage loans, totaled $14.7 million and $22.4 million for the three and six months ended June 30, 2024, respectively, compared to $8.2 million and $11.5 million, respectively, for the same time periods in 2023. The PCL on LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, for the three and six months ended June 30, 2024 primarily reflected an increase in required reserves as a result of net adjustments to the qualitative factors due to credit migrations and loan growth and net changes in the macroeconomic forecast associated with specific loss driver models as a result of loss driver updates.

Current wording

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, excluding the PCL, LHFI sale of 1-4 family mortgage loans, totaled $7.9 million and $30.3 million for the three and nine months ended September 30, 2024, respectively, compared to $8.3 million and $19.8 million, respectively, for the same time periods in 2023. The PCL on LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, for the three months ended September 30, 2024 primarily reflected increases in required reserves related to individually analyzed LHFI and the implementation of the External Factor-Credit Quality Review qualitative factor, partially offset by declines in required reserves resulting from the update of the macroeconomic forecasts and net changes in other qualitative reserve factors. The PCL on LHFI, excluding the PCL, LHFI 1-4 family mortgage loans, for the nine months ended September 30, 2024 primarily reflected an increase in required reserves as a result of net adjustments to the qualitative factors due to credit migration, implementation of the External Factor-Credit Quality Review qualitative factor, and specific reserves for individually analyzed LHFI, partially offset by net changes in the macroeconomic forecast associated with specific loss driver models as a result of loss driver updates and net changes in other qualitative reserve factors.

Previous wording

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 $3.6 million and a negative $3.8 million for the three and six months ended June 30, 2024, respectively, compared to $245 thousand and a negative $2.0 million, respectively, for the same time periods in 2023. The release in PCL on off-balance sheet credit exposures for the three and six months ended June 30, 2024, primarily reflected a decrease in required reserves as a result of a decrease in unfunded commitments and changes in the total reserve rate, partially offset by an increase in required reserves as a result of implementing the performance trend qualitative reserve factor.

Current wording

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 $1.4 million and a negative $5.2 million for the three and nine months ended September 30, 2024, respectively, compared to $104 thousand and a negative $1.9 million, respectively, for the same time periods in 2023. The release in PCL on off-balance sheet credit exposures for the three months ended September 30, 2024, primarily reflected a decrease in required reserves as a result of a decrease in unfunded commitments and changes in the total reserve rate, partially offset by an increase in required reserves as a result of implementing the External Factor-Credit Quality Review qualitative reserve factor. The release in PCL on off-balance sheet credit exposures for the nine months ended September 30, 2024, primarily reflected a decrease in required reserves as a result of a decrease in unfunded commitments and changes in the total reserve rate, partially offset by an increase in required reserves as a result of implementing the performance trend and the External Factor-Credit Quality Review qualitative reserve factors.

Previous wording

The decreases in mortgage banking, net for the three and six months ended June 30, 2024 when compared to the same time periods in 2023 were principally due to increases in the net negative hedge ineffectiveness and the run-off of the MSR, partially offset by an increase in the gain on sales of loans, net. Mortgage loan production for the three and six months ended June 30, 2024 was $379.5 million and $653.5 million, respectively, a decrease of $51.8 million, or 12.0%, and $138.9 million, or 17.5%, respectively, when compared to the same time periods in 2023. Loans serviced for others totaled $8.628 billion at June 30, 2024, compared with $8.260 billion at June 30, 2023, an increase of $367.7 million, or 4.5%.

Current wording

The decrease in mortgage banking, net for the three months ended September 30, 2024 when compared to the same time period in 2023 was principally due to an increase in the net negative hedge ineffectiveness, partially offset by an increase in the gain on sales of loans, net. The decrease in mortgage banking, net for the nine months ended September 30, 2024 when compared to the same time period in 2023 was principally due to increases in the net negative hedge ineffectiveness and the run-off of the MSR, partially offset by an increase in the gain on sales of loans, net. Mortgage loan production for the three and nine months ended September 30, 2024 was $392.1 million and $1.046 billion, respectively, an increase of $2.2 million, or 0.6%, and a decrease of $136.7 million, or 11.6%, respectively, when compared to the same time periods in 2023. Loans serviced for others totaled $8.691 billion at September 30, 2024, compared with $8.403 billion at September 30, 2023, an increase of $287.9 million, or 3.4%.

Previous wording

Representing a significant component of mortgage banking income is the gain on sales of loans, net. The increase in the gain on sales of loans, net when the three months ended June 30, 2024 is compared to the same time period in 2023, was primarily the result of higher profit margins in secondary marketing activities. The increase in the gain on sales of loans, net when the six months ended June 30, 2024 is compared to the same time period in 2023, was primarily the result of higher profit margins in secondary marketing activities partially offset by a decline in the mortgage fair value adjustment. Loan sales totaled $296.8 million and $555.1 million for the three and six months ended June 30, 2024, respectively, a decrease of $38.7 million, or 11.5%, and an increase of $5.8 million, or 1.1%, respectively, when compared with the same time periods in 2023.

Current wording

Representing a significant component of mortgage banking income is the gain on sales of loans, net. The increase in the gain on sales of loans, net when the three months ended September 30, 2024 is compared to the same time period in 2023, was primarily the result of higher profit margins in secondary marketing activities and an increase in the mortgage valuation adjustment, partially offset by a decline in the volume of loans sold. The increase in the gain on sales of loans, net when the nine months ended September 30, 2024 is compared to the same time period in 2023, was primarily the result of higher profit margins in secondary marketing activities partially offset by declines in the mortgage valuation adjustment and the volume of loans sold. Loan sales totaled $288.5 million and $843.6 million for the three and nine months ended September 30, 2024, respectively, a decrease of $55.2 million, or 16.1%, and $49.4 million, or 5.5%, respectively, when compared with the same time periods in 2023.

Previous wording

The decreases in services and fees when the three and six months ended June 30, 2024 are compared to the same time periods in 2023 were principally due to declines in outside services and fees, primarily related to other services and fees and legal expense, communication expense, primarily related to telephone expense, and advertising expense, partially offset by an increase in data processing expense related to software.

Current wording

The decreases in services and fees when the three and nine months ended September 30, 2024 are compared to the same time periods in 2023 were principally due to declines in outside services and fees, primarily related to other professional fees and legal expense, communication expense, primarily related to telephone expense, and advertising expense, partially offset by an increase in data processing expenses related to software.

Previous wording

The increase in other expense when the three months ended June 30, 2024 is compared to the same time period in 2023 was principally due to an increase in FDIC assessment expense, primarily due to an increase in the assessment rate, partially offset by declines in various other miscellaneous expenses, including sponsorships and contributions, operational losses and franchise taxes. The increase in other expense when the first six months of 2024 is compared to the same time period in 2023 was principally due to increases in FDIC assessment expense and other real estate expense, primarily due to an increase in the net loss on the sale of other real estate properties, partially offset by declines in various other miscellaneous expenses, including stationery and supplies expense, sponsorships and contributions, travel and entertainment expense and franchise taxes. The increase in FDIC assessment rate was principally due to increases in the overall assessment rate and the 2 basis point increase in the initial base assessment rate by the FDIC during the second quarter of 2023 as part of the FDIC's final rule to restore the DIF to required levels. During the three and six months ended June 30, 2024, Trustmark sold other real estate properties totaling $3.7 million and $4.7 million, respectively, generating net losses of $907 thousand and $962 thousand, respectively. During the second quarter of 2024, $2.1 million of the other real estate properties sold were part of the sale of 1-4 family mortgage loans, which generated a net loss of $781 thousand.

Current wording

The increase in other expense when the three and nine months ended September 30, 2024 is compared to the same time period in 2023 was principally due to increases in FDIC assessment expense, primarily due to an increase in the assessment rate, and other real estate expense, net, primarily attributable to a reserve for other real estate write-down recorded for one foreclosed property in the Texas market region which was under contract to be sold during the fourth quarter of 2024. The increase in FDIC assessment rate was principally due to increases in the overall assessment rate and the 2-basis point increase in the initial base assessment rate by the FDIC during the second quarter of 2023 as part of the FDIC's final rule to restore the DIF to required levels.

Previous wording

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 all periods presented in the accompanying consolidated balance sheets and the consolidated statements of income (loss). 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, 2024 and 2023.

Current wording

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 all periods presented in the accompanying consolidated balance sheets and the consolidated statements of income (loss). 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 nine months ended September 30, 2024 and 2023.

Previous wording

Net interest income for the General Banking Segment decreased $3.5 million, or 1.3%, when the six months ended June 30, 2024 is compared with the same time period in 2023. The decrease in net interest income was principally due to an increase in interest on deposits and a decline in other interest income related to interest earned on the balance held at the FRBA, partially offset by an increase in interest and fees on LHFS and LHFI and a decline in other interest expense related to interest on FHLB advances. The PCL (LHFI and off-balance sheet credit exposures) for the General Banking Segment for the six months ended June 30, 2024 totaled $27.1 million compared to a PCL of $9.4 million for the same period in 2023, an increase of $17.7 million. Excluding the $8.6 million PCL, LHFI sale of 1-4 family mortgage loans, the PCL for the General Banking Segment totaled $18.4 million for the first six months of 2024, an increase of $9.1 million, or 96.9%. For more information on these net interest income and PCL items, please see the sections captioned “Financial Highlights” and “Results of Operations.”

Current wording

Net interest income for the General Banking Segment increased $12.6 million, or 3.1%, when the nine months ended September 30, 2024 is compared with the same time period in 2023. The increase in net interest income was principally due to increases in interest and fees on LHFS and LHFI and interest on securities as well as a decline in other interest expense, primarily due to a decline in FHLB advances with the FHLB of Dallas, partially offset by an increase in interest on deposits and a decline in other interest income, primarily due to a decline in reserves held at the FRBA. The PCL (LHFI and off-balance sheet credit exposures) for the General Banking Segment for the nine months ended September 30, 2024 totaled $33.6 million compared to a PCL of $20.0 million for the same time period in 2023, an increase of $13.6 million, or 68.0%. Excluding the $8.6 million PCL, LHFI sale of 1-4 family mortgage loans, the PCL for the General Banking Segment totaled $25.0 million for the first nine months of 2024, an increase of $5.0 million, or 24.9%. For more information on these net interest income and PCL items, please see the sections captioned “Financial Highlights” and “Results of Operations.”

Previous wording

Noninterest income (loss) for the General Banking Segment decreased $178.0 million when the first six months of 2024 is compared to the same time period in 2023, primarily due to the net loss on the sale of available for sale securities, the noncredit-related loss on the sale of 1-4 family mortgage loans and a decrease in mortgage banking, net, partially offset by the gain on the conversion of Visa Class B-1 shares to Visa Class C shares. 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 security gains (losses), net. For more information on these noninterest income items, please see the analysis included in the section captioned “Noninterest Income (Loss).”

Current wording

Noninterest income (loss) for the General Banking Segment decreased $177.9 million when the first nine months of 2024 is compared to the same time period in 2023, primarily due to the net loss on the sale of available for sale securities, the noncredit-related loss on the sale of 1-4 family mortgage loans and a decrease in mortgage banking, net, partially offset by the gain on the conversion of Visa Class B-1 shares to Visa Class C shares and increases in cash management service fees and nonsufficient fund (NSF) and overdraft fees. 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 security gains (losses), net. For more information on these noninterest income items, please see the analysis included in the section captioned “Noninterest Income (Loss).”

Previous wording

Noninterest expense for the General Banking Segment decreased $1.5 million, or 0.7%, when the first six months of 2024 is compared with the same time period in 2023, principally due to declines in outside services and fees, salaries and employee benefits, advertising expenses and communications expense, partially offset by increases in FDIC assessment expense and data processing charges related to software. For more information on these noninterest expense items, please see the analysis included in the section captioned “Noninterest Expense.”

Current wording

Noninterest expense for the General Banking Segment decreased $8.4 million, or 2.4%, when the first nine months of 2024 is compared with the same time period in 2023, principally due to litigation settlement expense recorded in the third quarter of 2023 as well as declines in outside services and fees, salaries and employee benefits, advertising expenses and communications expense, partially offset by increases in FDIC assessment expense, other real estate expense and data processing charges related to software. For more information on these noninterest expense items, please see the analysis included in the section captioned “Noninterest Expense.”

Previous wording

Net income for the Wealth Management Segment for the first six months of 2024 increased $430 thousand, or 12.9%, when compared to the same time period in 2023, primarily due to an increase in noninterest income partially offset by an increase in noninterest expense and a decline in net interest income. Net interest income for the Wealth Management Segment decreased $156 thousand, or 5.3%, when the first six months of 2024 is compared to the same time period in 2023, principally due to a decline in interest and fees on loans as well as an increase in interest expense on deposits generated by the Private Banking Department. The PCL for the six months ended June 30, 2024 totaled $165 thousand compared to a PCL of $89 thousand for the same period in 2023. Noninterest income for the Wealth Management Segment, which primarily includes income related to investment management, trust and brokerage services, increased $1.1 million, or 6.3%, when the first six months of 2024 is compared to the same time period in 2023, primarily due to an increase in income from brokerage and investment services partially offset by a decrease in income from trust management services. Noninterest expense for the Wealth Management Segment increased $317 thousand, or 2.0%, when the first six months of 2024 is compared to the same time period in 2023, principally due to an increase in salaries and employee benefits expense, primarily related to broker commissions and trust incentives partially offset by a decrease in business process outsourcing expense.

Current wording

Net income for the Wealth Management Segment for the first nine months of 2024 decreased $628 thousand, or 9.7%, when compared to the same time period in 2023, primarily due to an increase in the PCL partially offset by an increase in noninterest income. The PCL for the nine months ended September 30, 2024 totaled $162 thousand compared to a negative PCL of $2.1 million for the same period in 2023, an increase of $2.3 million. Noninterest income for the Wealth Management Segment, which primarily includes income related to investment management, trust and brokerage services, increased $1.7 million, or 6.5%, when the first nine months of 2024 is compared to the same time period in 2023, primarily due to an increase in income from brokerage and investment services. Noninterest expense for the Wealth Management Segment increased $149 thousand, or 0.6%, when the first nine months of 2024 is compared to the same time period in 2023, principally due to an increase in salaries and employee benefits expense, primarily related to broker commissions and trust incentives, partially offset by a decrease in business process outsourcing expense.

Previous wording

At June 30, 2024 and 2023, Trustmark held assets under management and administration of $9.036 billion and $18.203 billion, respectively, and brokerage assets of $2.848 billion and $2.442 billion, respectively.

Current wording

At September 30, 2024 and 2023, Trustmark held assets under management and administration of $9.425 billion and $8.235 billion, respectively, and brokerage assets of $2.742 billion and $2.431 billion, respectively.

Previous wording

For the three and six months ended June 30, 2024, Trustmark’s combined effective tax rate from continuing operations was 27.3% and 33.1%, respectively, compared to 13.5% and 14.4%, respectively, for the same time periods in 2023. The increase in the 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.

Current wording

For the three and nine months ended September 30, 2024, Trustmark’s combined effective tax rate from continuing operations was 17.8% and 64.0%, respectively, compared to 17.1% and 15.1%, respectively, for the same time periods in 2023. The increase in the effective tax rate from continuing operations for the nine months ended September 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 nine months ended September 30, 2024 was 17.4%. 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.

Previous wording

Earning assets serve as the primary revenue streams for Trustmark and are comprised of securities, loans, federal funds sold, securities sold under reverse repurchase agreements and other earning assets. Average earning assets totaled $17.139 billion, or 91.5% of total average assets, for the six months ended June 30, 2024, compared to $17.058 billion, or 91.5% of total average assets, for the six months ended June 30, 2023, an increase of $80.5 million, or 0.5%.

Current wording

Earning assets serve as the primary revenue streams for Trustmark and are comprised of securities, loans, federal funds sold, securities sold under reverse repurchase agreements and other earning assets. Average earning assets totaled $17.097 billion, or 91.6% of total average assets, for the nine months ended September 30, 2024, compared to $17.076 billion, or 91.5% of total average assets, for the nine months ended September 30, 2023, an increase of $21.5 million, or 0.1%.

Previous wording

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 5.0 years at June 30, 2024 compared to 4.5 years at December 31, 2023. The increase in the weighted-average life of the portfolio was principally due to the restructuring of the available for sale securities portfolio during the second quarter of 2024.

Current wording

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 4.7 years at September 30, 2024 compared to 4.5 years at December 31, 2023. The increase in the weighted-average life of the portfolio was principally due to the restructuring of the available for sale securities portfolio during the second quarter of 2024.