Trustmark Corp (TRMK) SEC Filing 10-Q Quarterly report for the period ending Wednesday, September 30, 2020

Exhibit 99.1

Trustmark Corporation Announces Third Quarter 2020 Financial Results

Performance reflects value of diversified financial services businesses

JACKSON, Miss. – October 27, 2020 – Trustmark Corporation (Nasdaq:TRMK) reported net income of $54.4 million in the third quarter of 2020, representing diluted earnings per share of $0.86.  This level of earnings resulted in a return on average tangible equity of 16.82% and a return on average assets of 1.37%.  Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2020, to shareholders of record on December 1, 2020.  

Third Quarter Highlights

Gerard R. Host, Chairman and CEO, stated, “Our third quarter results demonstrate the value of our diversified financial services businesses with strong performance in both our banking and noninterest lines of business.  Loans held for investment increased 6.8% year-over-year, and mortgage loan production was up over 56% year-over-year.  We experienced significant year-over-year growth in pre-tax, pre-provision income, and we maintained our solid capital base and liquidity position.  Trustmark remains committed to ensuring the safety of customers and associates and supporting local economies in this challenging environment.  We continue to focus on serving customers and creating long-term value for shareholders.”

Balance Sheet Management

Loans held for investment totaled $9.8 billion at September 30, 2020, reflecting an increase of 1.9% linked-quarter and 6.8% year-over-year.  The linked-quarter growth was driven primarily by construction and development loans and commercial real estate loans.  At September 30, 2020, Trustmark’s gross Paycheck Protection Program (PPP) loans totaled $970.0 million.  Net of deferred fees and costs of $25.7 million, PPP loans totaled $944.3 million.  Collectively, loans held for investment and PPP loans totaled $10.8 billion at the end of the third quarter of 2020.  

Deposits totaled $13.2 billion at September 30, 2020, down $283.1 million, or 2.1%, from the prior quarter.  However, deposits are up $2.0 billion, or 17.5%, year-over-year primarily reflecting the impact of additional customer liquidity associated with PPP loans and government stimulus payments.  Interest-bearing deposit costs totaled 0.31% for the third quarter, a decrease of 6 basis points linked-quarter.  Trustmark continues to maintain an attractive, low-cost deposit base with approximately 62% of deposit balances in checking accounts.  The total cost of interest-bearing liabilities was 0.33% for the third quarter of 2020, a decrease of 6 basis points from the prior quarter.  

Trustmark’s capital position remained solid, reflecting the strength and diversity of its financial services businesses.  At September 30, 2020, Trustmark’s tangible equity to tangible assets ratio was 8.68%, while the total risk-based capital ratio was 12.88%.  

Credit Quality

Allocation of Trustmark's $122.0 million allowance for credit losses on loans held for investment represented 1.20% of commercial loans and 1.41% of consumer and home mortgage loans, resulting in an allowance for credit losses to total loans held for investment of 1.24% at September 30, 2020, representing a level management considers commensurate with the present risk in the loan portfolio.  Trustmark recorded a provision for credit losses of $1.8 million in the third quarter.  

Nonperforming loans totaled $53.9 million at September 30, 2020, up $3.9 million from the prior quarter and down $5.2 million year-over-year.  Other real estate totaled $16.2 million, reflecting a $2.0 million decrease from the prior quarter and down $15.7 million from the prior year.  Collectively, nonperforming assets totaled $70.1 million, reflecting a linked-quarter increase of $1.8 million and a year-over-year decrease of $20.9 million.

Revenue Generation

Revenue in the third quarter totaled $179.9 million, up 3.1% from the prior quarter and up 14.7% from the same quarter in the prior year.  Excluding $6.7 million of interest and fees on PPP loans, revenue totaled $173.2 million in the third quarter, up 2.2% from the prior quarter and up 12.1% year-over-year.  The linked-quarter and year-over-year changes primarily reflect higher noninterest income.  Net interest income (FTE) in the third quarter totaled $109.2 million, resulting in a net interest margin of 3.03%.  Excluding PPP loans, the net interest margin totaled 3.05%, a linked-quarter decline of 9 basis points.  Continued low interest rates decreased the yield on the loans held for investment and held for sale portfolio as well as the securities portfolio and were partially offset by lower costs of interest-bearing deposits.  Relative to the prior quarter, net interest income (FTE) increased $1.2 million as a $327 thousand reduction in interest income was more than offset by a $1.5 million reduction in interest expense.  

Noninterest income in the third quarter totaled $73.7 million, an increase of $4.2 million from the prior quarter and an increase of $25.4 million year-over-year.  The linked-quarter change reflects increases in mortgage banking revenue, service charges on deposit accounts and bank card and other fees.  Mortgage banking revenue before hedge ineffectiveness totaled $35.6 million in the third quarter, in line with the prior quarter.  Third quarter results include $815 thousand in positive net hedge ineffectiveness.  Mortgage loan production in the third quarter totaled $885.8 million, up $32.5 million from the prior quarter and $319.6 million from the same period in the prior year.  Gain on sale of loans, net totaled $34.5 million in the third quarter, up $394 thousand from the prior quarter.  Mortgage banking revenue totaled $36.4 million in the third quarter, up $2.7 million from the prior quarter and $28.3 million from the same period in the prior year.