Trustmark(TRMK) - 2025 Q2 - Quarterly Report

Form 10-Q Cover Page This section provides the official filing details for Trustmark Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 2025 - Trustmark Corporation filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] Registrant Information | Field | Value | | :--- | :--- | | Registrant Name | Trustmark Corporation | | State of Incorporation | Mississippi | | Address | 248 East Capitol Street, Jackson, Mississippi 39201 | | Telephone Number | (601) 208-5111 | | Common Stock Trading Symbol | TRMK | | Exchange | Nasdaq Global Select Market | | Filer Status | Large accelerated filer | | Common Stock Outstanding (July 31, 2025) | 60,366,573 shares | Forward-Looking Statements This section cautions readers about forward-looking statements, highlighting inherent risks that could cause actual financial and operational results to differ materially - The report contains forward-looking statements regarding future operating and financial performance, including net interest margin, credit quality, and business initiatives. These statements are subject to risks outlined in SEC filings, and actual results may differ materially[6][7][8] - Key risks include actions by the Federal Reserve impacting interest rates, local and national economic conditions, changes in nonperforming assets, unemployment levels, market volatility, demand for products, litigation, deposit retention, competition, accounting standard changes, technological changes, natural disasters, and policy effects[7] PART I. FINANCIAL INFORMATION This part presents Trustmark's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1. FINANCIAL STATEMENTS This section presents Trustmark Corporation's unaudited consolidated financial statements, including balance sheets, income statements, and cash flow statements, with detailed notes on accounting policies Consolidated Balance Sheets The consolidated balance sheets show Trustmark's financial position at June 30, 2025, compared to December 31, 2024, indicating an increase in total assets and shareholders' equity, driven primarily by growth in loans held for investment and an increase in cash and due from banks Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change (Absolute) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $18,615,659 | $18,152,422 | $463,237 | 2.55% | | Total Liabilities | $16,544,870 | $16,190,095 | $354,775 | 2.19% | | Total Shareholders' Equity | $2,070,789 | $1,962,327 | $108,462 | 5.53% | | Cash and due from banks | $634,402 | $567,251 | $67,151 | 11.84% | | Loans held for investment (LHFI) | $13,464,780 | $13,089,942 | $374,838 | 2.86% | | Total deposits | $15,115,861 | $15,108,175 | $7,686 | 0.05% | | Noninterest-bearing deposits | $3,135,435 | $3,073,565 | $61,870 | 2.01% | | Interest-bearing deposits | $11,980,426 | $12,034,610 | $(54,184) | -0.45% | | Accumulated other comprehensive income (loss), net of tax | $(30,489) | $(83,659) | $53,170 | -63.56% | Consolidated Statements of Income (Loss) The consolidated statements of income (loss) for the three and six months ended June 30, 2025, show a significant improvement in income from continuing operations compared to the prior year, primarily due to increased net interest income and a substantial recovery in noninterest income, which was negatively impacted by securities losses in 2024 Consolidated Statements of Income (Loss) Highlights (in thousands, except per share data) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | 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 | | Provision for credit losses (PCL), LHFI | $5,346 | $14,696 | $13,471 | $22,404 | | Total Noninterest Income (Loss) | $39,890 | $(141,286) | $82,474 | $(101,931) | | Total Noninterest Expense | $125,114 | $118,326 | $249,125 | $237,990 | | Income (Loss) From Continuing Operations | $55,841 | $(100,605) | $109,474 | $(62,432) | | Income From Discontinued Operations | $0 | $174,437 | $0 | $177,799 | | Net Income | $55,841 | $73,832 | $109,474 | $115,367 | | Basic EPS from continuing operations | $0.92 | $(1.64) | $1.81 | $(1.02) | | Basic EPS (Total) | $0.92 | $1.21 | $1.81 | $1.89 | | Diluted EPS (Total) | $0.92 | $1.20 | $1.80 | $1.88 | Consolidated Statements of Comprehensive Income (Loss) The consolidated statements of comprehensive income (loss) show a positive shift in other comprehensive income (loss) for the three and six months ended June 30, 2025, primarily driven by net unrealized gains on available-for-sale securities, contrasting with significant reclassification adjustments in the prior year due to securities sales Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $55,841 | $73,832 | $109,474 | $115,367 | | Other comprehensive income (loss), net of tax | $18,213 | $135,597 | $53,170 | $128,166 | | Net unrealized holding gains (losses) arising during the period | $10,493 | $(4,321) | $34,943 | $(6,235) | | Reclassification adjustment for net (gains) losses realized in net income | $0 | $137,094 | $0 | $137,094 | | Comprehensive income (loss) | $74,054 | $209,429 | $162,644 | $243,533 | Consolidated Statements of Changes in Shareholders' Equity The consolidated statements of changes in shareholders' equity reflect an increase in total shareholders' equity for the six months ended June 30, 2025, primarily due to net income and positive other comprehensive income, partially offset by common stock dividends and repurchases Changes in Shareholders' Equity (in thousands) | Item | Balance, January 1, 2025 | Balance, June 30, 2025 | | :--- | :--- | :--- | | Total Shareholders' Equity | $1,962,327 | $2,070,789 | | Net income | $53,633 (Q1) + $55,841 (Q2) = $109,474 | | | Other comprehensive income (loss), net of tax | $34,957 (Q1) + $18,213 (Q2) = $53,170 | | | Common stock dividends paid | $(14,732) (Q1) + $(14,620) (Q2) = $(29,352) | | | Repurchase and retirement of common stock | $(15,014) (Q1) + $(11,010) (Q2) = $(26,024) | | | Shares Outstanding (June 30, 2025) | 60,401,684 | | Consolidated Statements of Cash Flows The consolidated statements of cash flows show a significant shift from net cash used in operating activities in 2024 to net cash provided by operating activities in 2025, alongside a change from net cash provided by investing activities to net cash used, and a reversal in financing activities, reflecting strategic adjustments in investments and borrowings Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $120,026 | $(41,834) | | Net cash from investing activities | $(384,814) | $267,252 | | Net cash from financing activities | $331,939 | $(378,620) | | Net change in cash and cash equivalents | $67,151 | $(153,202) | | Cash and cash equivalents at end of period | $634,402 | $822,141 | Notes to Consolidated Financial Statements The notes provide detailed disclosures on Trustmark's business, accounting policies, discontinued operations, securities, loans, credit losses, and other key financial areas Note 1 – Business, Basis of Financial Statement Presentation and Principles of Consolidation Trustmark Corporation, a bank holding company, provides financial services across multiple states. Its principal subsidiary, Trustmark National Bank, converted to Trustmark Bank (TB) and became a Mississippi-chartered banking corporation. The consolidated financial statements are prepared in conformity with GAAP for interim financial information, with all significant intercompany transactions eliminated - Trustmark Corporation operates as a financial services organization through its subsidiaries in Alabama, Florida, Georgia, Mississippi, Tennessee, and Texas[25] - On August 4, 2025, Trustmark National Bank converted to a Mississippi-chartered banking corporation and changed its name to Trustmark Bank (TB)[25] - The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP for interim financial information and should be read in conjunction with the 2024 Annual Report on Form 10-K[27] Note 2 - Discontinued Operations On May 31, 2024, Trustmark completed the sale of its insurance subsidiary, Fisher Brown Bottrell Insurance, Inc. (FBBI), for approximately $336.9 million in cash, resulting in a pre-tax net gain of $228.3 million. The financial results of FBBI prior to the sale are presented as discontinued operations in the consolidated financial statements - Trustmark completed the sale of Fisher Brown Bottrell Insurance, Inc. (FBBI) on May 31, 2024, for approximately $336.9 million in cash[29] - The sale resulted in a pre-tax net gain of $228.3 million[29] Financial Information from Discontinued Operations (in thousands) | Item | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total noninterest income | $240,533 | $256,527 | | Total noninterest expense | $7,893 | $19,375 | | Income from discontinued operations before income taxes | $232,640 | $237,152 | | Income from discontinued operations | $174,437 | $177,799 | Note 3 – Securities Available for Sale and Held to Maturity This note details Trustmark's securities portfolio, distinguishing between available-for-sale and held-to-maturity securities. As of June 30, 2025, the portfolio showed net unrealized gains for available-for-sale securities, a significant improvement from net unrealized losses at December 31, 2024, with no credit losses recognized on either category. The report also highlights a portfolio restructuring in Q2 2024 and a credit rating downgrade for U.S. Treasury securities in Q2 2025 Securities Available for Sale and Held to Maturity (in thousands) | Category | June 30, 2025 (Amortized Cost) | June 30, 2025 (Fair Value) | Dec 31, 2024 (Amortized Cost) | Dec 31, 2024 (Fair Value) | | :--- | :--- | :--- | :--- | :--- | | Securities Available for Sale | $1,762,504 | $1,782,092 | $1,719,537 | $1,692,534 | | Securities Held to Maturity | $1,290,572 | $1,247,682 | $1,335,385 | $1,259,107 | | Total | $3,053,076 | $3,029,774 | $3,054,922 | $2,951,641 | - At June 30, 2025, securities available for sale had gross unrealized gains of $40.8 million and gross unrealized losses of $21.2 million, resulting in a net unrealized gain[32] - At December 31, 2024, securities available for sale had gross unrealized gains of $3.0 million and gross unrealized losses of $30.0 million, resulting in a net unrealized loss[33] - The net unamortized, unrealized loss on transferred securities (from AFS to HTM in 2022) included in AOCI was $41.5 million at June 30, 2025, down from $46.6 million at December 31, 2024[33] - Moody's downgraded the U.S. credit rating from Aaa to Aa1 during Q2 2025, impacting the credit rating of a significant portion of Trustmark's investment portfolio[288] ACL on Securities Trustmark evaluates securities for credit losses quarterly, performing a discounted cash flow (DCF) analysis if fair value is less than amortized cost. As of June 30, 2025, and December 31, 2024, no credit losses were identified or recognized for either available-for-sale or held-to-maturity securities - Trustmark evaluates securities for credit losses quarterly using a DCF analysis if fair value is below amortized cost[34] - No credit loss was recognized on any securities available for sale at June 30, 2025, or December 31, 2024[35] - No securities held to maturity were identified with potential for credit loss exposure at June 30, 2025, or December 31, 2024[37] Securities Gains and Losses Realized gains and losses on securities are determined using the specific identification method. For the three and six months ended June 30, 2025, there were no gross realized gains or losses. In contrast, Q2 2024 saw a significant portfolio restructuring, with $1.561 billion of available-for-sale securities sold, generating a loss of $182.8 million, and proceeds used to purchase higher-yielding securities - No gross realized gains or losses on available-for-sale securities for the three and six months ended June 30, 2025[41][42] - During Q2 2024, Trustmark restructured its investment securities portfolio by selling $1.561 billion of available-for-sale securities, resulting in a $182.8 million loss ($137.1 million, net of taxes)[42] - Proceeds from the Q2 2024 sale were used to purchase $1.378 billion of available-for-sale securities with an average yield of 4.85%[42] Securities Pledged Securities with a carrying value of $1.783 billion were pledged at June 30, 2025, to collateralize public deposits and securities sold under repurchase agreements, a decrease from $1.910 billion at December 31, 2024. None of these securities were pledged under the Federal Reserve Discount Window program Securities Pledged (in billions) | Date | Carrying Value of Pledged Securities | | :--- | :--- | | June 30, 2025 | $1.783 | | December 31, 2024 | $1.910 | - Pledged securities collateralize public deposits and securities sold under repurchase agreements[43] - No securities were pledged under the Federal Reserve Discount Window program at either date[43] Contractual Maturities The contractual maturities of securities available for sale and held to maturity at June 30, 2025, show a significant portion of the portfolio, particularly mortgage-backed securities, extending beyond one year. Expected maturities may differ from contractual maturities due to prepayment rights Securities by Contractual Maturity (June 30, 2025, in thousands) | Maturity Period | Securities Available for Sale (Amortized Cost) | Securities Available for Sale (Estimated Fair Value) | Securities Held to Maturity (Amortized Cost) | Securities Held to Maturity (Estimated Fair Value) | | :--- | :--- | :--- | :--- | :--- | | Due in one year or less | $33,868 | $34,004 | $0 | $0 | | Due after one year through five years | $49,590 | $50,196 | $30,226 | $30,291 | | Due after five years through ten years | $195,861 | $197,279 | $0 | $0 | | Mortgage-backed securities | $1,483,185 | $1,500,613 | $1,260,346 | $1,217,391 | | Total | $1,762,504 | $1,782,092 | $1,290,572 | $1,247,682 | - Expected maturities may differ from contractual maturities due to borrowers' rights to call or prepay obligations[44] Note 4 – LHFI and ACL, LHFI This note provides a comprehensive overview of Trustmark's Loans Held for Investment (LHFI) and the Allowance for Credit Losses (ACL) on LHFI. It details loan compositions, credit quality indicators, modification activities, and the methodology for estimating credit losses, highlighting an increase in LHFI and ACL, primarily due to loan growth and macroeconomic forecast changes, alongside a decrease in nonaccrual LHFI in some categories Loans Held for Investment (LHFI) Composition (in thousands) | Loan Category | June 30, 2025 | % of Total | December 31, 2024 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Loans secured by real estate | $6,647,275 | 49.37% | $6,870,006 | 52.49% | | Other loans secured by real estate | $3,162,583 | 23.49% | $3,128,897 | 23.90% | | Commercial and industrial loans | $1,832,295 | 13.61% | $1,840,722 | 14.06% | | Consumer loans | $152,921 | 1.13% | $156,569 | 1.19% | | State and other political subdivision loans | $961,251 | 7.14% | $969,836 | 7.41% | | Other commercial loans and leases | $708,455 | 5.26% | $589,012 | 4.50% | | Total LHFI | $13,464,780 | 100.00% | $13,089,942 | 100.00% | | Less ACL, LHFI | $168,237 | | $160,270 | | | Net LHFI | $13,296,543 | | $12,929,672 | | - LHFI increased by $374.8 million (2.9%) from December 31, 2024, to June 30, 2025, primarily due to net growth in real estate-secured loans and other commercial loans and leases[46][291] - The ACL on LHFI increased by $8.0 million (5.0%) to $168.2 million at June 30, 2025, compared to December 31, 2024, primarily due to loan growth and changes in macroeconomic forecasts[111][311] - The ACL to total LHFI ratio was 1.25% at June 30, 2025, up from 1.22% at December 31, 2024[311] Loan Concentrations Trustmark's loan portfolio is primarily concentrated in its six key market regions: Alabama, Florida, Georgia, Mississippi, Tennessee, and Texas. The collectability of these loans is susceptible to changes in market conditions within these geographic areas - Trustmark's geographic loan distribution is concentrated primarily in Alabama, Florida, Georgia, Mississippi, Tennessee, and Texas[47] - The collectability of a substantial portion of these loans is susceptible to changes in market conditions in these regions[47] Nonaccrual and Past Due LHFI Nonaccrual LHFI remained relatively stable at $81.0 million at June 30, 2025, compared to $80.1 million at December 31, 2024. Loans past due 90 days or more still accruing interest decreased slightly to $3.9 million from $4.1 million over the same period. No material interest income was recognized on nonaccrual LHFI Nonaccrual and Past Due LHFI (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Nonaccrual LHFI | $81,000 | $80,109 | | Loans Past Due 90 Days or More Still Accruing | $3,854 | $4,092 | - No material interest income was recognized on nonaccrual LHFI for the periods ended June 30, 2025 and 2024[48] Modified LHFI Trustmark modifies loans for borrowers experiencing financial difficulties through payment delays, term extensions, or interest rate reductions. For the six months ended June 30, 2025, total modified LHFI increased to $35.0 million, primarily through term extensions, compared to $1.9 million in the prior year. Payment defaults on modified loans in the commercial and industrial portfolio were $18.4 million for the six months ended June 30, 2025 Modified LHFI to Borrowers in Financial Difficulty (in thousands) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Modified LHFI | $19,830 | $493 | $34,958 | $1,891 | | % of Total Class of Loan (6 Months Ended June 30, 2025) | 0.26% | | | | | Payment Delay (6 Months Ended June 30, 2025) | $12,847 | | | | | Term Extension (6 Months Ended June 30, 2025) | $22,111 | | | | - Payment defaults during the six months ended June 30, 2025, on loans modified in the previous twelve months, totaled $18.4 million in the commercial and industrial portfolio (payment delay modifications) and $38 thousand in other secured by 1-4 family residential properties (term extension modifications)[55] - Trustmark had $256 thousand of unused commitments on modified loans to borrowers experiencing financial difficulty at June 30, 2025, compared to none at June 30, 2024[54] Collateral-Dependent Loans Collateral-dependent loans, where repayment relies substantially on collateral sale due to borrower financial difficulty, totaled $39.5 million at June 30, 2025, an increase from $37.1 million at December 31, 2024. These loans are secured by various collateral types, including real estate, vehicles, and miscellaneous assets Collateral-Dependent Loans by Collateral Type (in thousands) | Collateral Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Real Estate | $17,388 | $13,741 | | Vehicles | $1,971 | $1,818 | | Miscellaneous | $20,141 | $21,581 | | Total | $39,500 | $37,140 | - A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment is expected substantially through collateral sale[59] - During Q2 2025, one commercial and industrial relationship experienced a decrease in collateral value[59] Credit Quality Indicators Trustmark monitors LHFI credit quality using six key ratios and a ten-grade internal risk rating system for commercial loans, ranging from negligible loss expectation (RR 1-6) to uncollectible (RR 10). Criticized loans include Special Mention (RR 7), Substandard (RR 8), Doubtful (RR 9), and Loss (RR 10). Regular reviews are conducted by various committees and departments to assess credit quality and adherence to policy - Trustmark's LHFI credit quality indicators focus on total classified outstanding, total criticized outstanding, nonperforming loans, nonperforming assets, delinquencies, and net loan losses[60] - Commercial loans are graded using a ten-tier credit risk rating system (RR 1-10), where RR 7-10 are considered criticized loans and RR 8-10 are classified loans[61][62][63] - The Credit Quality Review Committee meets monthly to review loans of $100 thousand or more that are delinquent or on nonaccrual, making recommendations on risk ratings, accrual status, and charge-offs[65] Commercial LHFI by Credit Quality Indicator (June 30, 2025, in thousands) | Loan Class | Pass - RR 1-6 | Special Mention - RR 7 | Substandard - RR 8 | Doubtful - RR 9 | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Construction, land development and other land | $494,773 | $3,115 | $3,365 | $0 | $501,253 | | Other secured by 1-4 family residential properties | $133,499 | $49 | $2,933 | $0 | $136,481 | | Secured by nonfarm, nonresidential properties | $3,261,559 | $92,214 | $125,152 | $7 | $3,478,932 | | Other real estate secured | $1,724,147 | $32,107 | $161,442 | $0 | $1,917,696 | | Other construction | $771,369 | $5,121 | $17,820 | $0 | $794,310 | | Commercial and industrial loans | $1,767,301 | $27,490 | $37,347 | $157 | $1,832,295 | | State and other political subdivision loans | $961,251 | $0 | $0 | $0 |