10-Q

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2024, there were 61,206,606 shares outstanding of the registrant’s common stock (no par value).

Certain statements contained in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential,” “seek,” “continue,” “could,” “would,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission (SEC) could have an adverse effect on our business, results of operations or financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, actions by the Board of Governors of the Federal Reserve System (FRB) that impact the level of market interest rates, local, state, national and international economic and market conditions, conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets, changes in the level of nonperforming assets and charge-offs, an increase in unemployment levels and slowdowns in economic growth, changes in our ability to measure the fair value of assets in our portfolio, changes in the level and/or volatility of market interest rates, the impacts related to or resulting from bank failures and other economic and industry volatility, including potential increased regulatory requirements, the demand for the products and services we offer, potential unexpected adverse outcomes in pending litigation matters, our ability to attract and retain noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, pandemics or other health crises, acts of war or terrorism, and other risks described in our filings with the SEC.

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

(1) Due to rounding, earnings (loss) per share from continuing operations and discontinued operations may not sum to earnings per share from net income.

Note 4 – LHFI and ACL, LHFI

At June 30, 2024 and December 31, 2023, LHFI consisted of the following ($ in thousands):


	June 30, 2024		December 31, 2023
Loans secured by real estate:
Construction, land development and other land	$	616,528	$	642,886
Other secured by 1-4 family residential properties		642,765		622,397
Secured by nonfarm, nonresidential properties		3,598,647		3,489,434
Other real estate secured		1,344,968		1,312,551
Other loans secured by real estate:
Other construction		1,022,444		867,793
Secured by 1-4 family residential properties		2,235,530		2,282,318
Commercial and industrial loans		1,880,607		1,922,910
Consumer loans		156,709		165,734
State and other political subdivision loans		1,053,015		1,088,466
Other commercial loans and leases		604,205		556,035
LHFI		13,155,418		12,950,524
Less ACL		154,685		139,367
Net LHFI	$	13,000,733	$	12,811,157

Accrued interest receivable is not included in the amortized cost basis of Trustmark’s LHFI. At June 30, 2024 and December 31, 2023, accrued interest receivable for LHFI totaled $70.6 million and $71.0 million, respectively, with no related ACL and was reported in other assets on the accompanying consolidated balance sheet.

Loan Concentrations

Trustmark does not have any loan concentrations other than those reflected in the preceding table, which exceed 10% of total LHFI. At June 30, 2024, Trustmark’s geographic loan distribution was concentrated primarily in its five key market regions: Alabama, Florida, Mississippi, Tennessee and Texas. Accordingly, the ultimate collectability of a substantial portion of these loans is susceptible to changes in market conditions in these areas.

Nonaccrual and Past Due LHFI

No material interest income was recognized in the income statement on nonaccrual LHFI for each of the periods ended June 30, 2024 and 2023.

The following tables provide the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more still accruing interest at June 30, 2024 and December 31, 2023 ($ in thousands):


	June 30, 2024
	Nonaccrual With No ACL		Total Nonaccrual		Loans Past Due 90 Days or More Still Accruing
Loans secured by real estate:
Construction, land development and other land	$	—	$	226	$	—
Other secured by 1-4 family residential properties		907		7,167		326
Secured by nonfarm, nonresidential properties		9,730		11,547		—
Other real estate secured		—		120		—
Other loans secured by real estate:
Other construction		—		60		—
Secured by 1-4 family residential properties		1,019		6,946		4,635
Commercial and industrial loans		33		16,874		39
Consumer loans		—		326		413
Other commercial loans and leases		—		1,026		—
Total	$	11,689	$	44,292	$	5,413


	December 31, 2023
	Nonaccrual With No ACL		Total Nonaccrual		Loans Past Due 90 Days or More Still Accruing
Loans secured by real estate:
Construction, land development and other land	$	2,020	$	2,642	$	—
Other secured by 1-4 family residential properties		946		6,518		1,238
Secured by nonfarm, nonresidential properties		20,812		23,061		54
Other real estate secured		—		158		106
Other loans secured by real estate:
Other construction		—		62		—
Secured by 1-4 family residential properties		3,235		43,815		3,740
Commercial and industrial loans		79		22,303		24
Consumer loans		—		243		628
Other commercial loans and leases		—		1,206		—
Total	$	27,092	$	100,008	$	5,790

The following tables provide an aging analysis of the amortized cost basis of past due LHFI (including nonaccrual LHFI) at June 30, 2024 and December 31, 2023 ($ in thousands):


	June 30, 2024
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	228	$	—	$	—	$	228	$	616,300	$	616,528
Other secured by 1-4 family residential properties		6,395		1,516		3,489		11,400		631,365		642,765
Secured by nonfarm, nonresidential properties		1,275		—		1,028		2,303		3,596,344		3,598,647
Other real estate secured		115		—		—		115		1,344,853		1,344,968
Other loans secured by real estate:
Other construction		—		—		—		—		1,022,444		1,022,444
Secured by 1-4 family residential properties		15,844		7,282		7,201		30,327		2,205,203		2,235,530
Commercial and industrial loans		4,006		750		15,188		19,944		1,860,663		1,880,607
Consumer loans		1,406		573		438		2,417		154,292		156,709
State and other political subdivision loans		7		—		—		7		1,053,008		1,053,015
Other commercial loans and leases		66		11		—		77		604,128		604,205
Total	$	29,342	$	10,132	$	27,344	$	66,818	$	13,088,600	$	13,155,418


	December 31, 2023
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	93	$	507	$	2,362	$	2,962	$	639,924	$	642,886
Other secured by 1-4 family residential properties		4,493		1,687		2,716		8,896		613,501		622,397
Secured by nonfarm, nonresidential properties		1,531		1,063		727		3,321		3,486,113		3,489,434
Other real estate secured		126		—		207		333		1,312,218		1,312,551
Other loans secured by real estate:
Other construction		62		—		—		62		867,731		867,793
Secured by 1-4 family residential properties		19,298		9,327		22,164		50,789		2,231,529		2,282,318
Commercial and industrial loans		11,881		484		499		12,864		1,910,046		1,922,910
Consumer loans		2,112		772		647		3,531		162,203		165,734
State and other political subdivision loans		152		—		—		152		1,088,314		1,088,466
Other commercial loans and leases		1,247		58		—		1,305		554,730		556,035
Total	$	40,995	$	13,898	$	29,322	$	84,215	$	12,866,309	$	12,950,524

Modified LHFI

Occasionally, Trustmark modifies loans for borrowers experiencing financial difficulties by providing payment concessions, interest-only payments for an extended period of time, maturity extensions or interest rate reductions. Other concessions may arise from court proceedings or may be imposed by law. In some cases, Trustmark provides multiple types of concessions on one loan.

The following tables present the amortized cost of LHFI at the end of each of the periods presented of loans modified to borrowers experiencing financial difficulty disaggregated by class of loan and type of modification ($ in thousands). The percentage of the amortized cost basis of LHFI that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of LHFI is also presented below:


	Three Months Ended June 30, 2024
	Term Extension		% of Total Class of Loan
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	493		0.08	%
Total	$	493		0.00	%


	Three Months Ended June 30, 2023
	Payment Concession		Term Extension		Total		% of Total Class of Loan
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	—	$	401	$	401		0.07	%
Other loans secured by real estate:
Secured by 1-4 family residential properties		—		276		276		0.01	%
Commercial and industrial loans		255		—		255		0.01	%
Consumer loans		—		42		42		0.03	%
Other commercial loans and leases		117		31		148		0.03	%
Total	$	372	$	750	$	1,122		0.01	%


	Six Months Ended June 30, 2024
	Term Extension		% of Total Class of Loan
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	1,891		0.29	%
Total	$	1,891		0.01	%


	Six Months Ended June 30, 2023
	Payment Concession		Term Extension		Total		% of Total Class of Loan
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	—	$	401	$	401		0.07	%
Secured by nonfarm, nonresidential properties		—		384		384		0.01	%
Other loans secured by real estate:
Secured by 1-4 family residential properties		—		768		768		0.03	%
Commercial and industrial loans		255		—		255		0.01	%
Consumer loans		—		42		42		0.03	%
Other commercial loans and leases		117		31		148		0.03	%
Total	$	372	$	1,626	$	1,998		0.02	%

The following tables detail the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the periods presented:


		Three Months Ended June 30, 2024
		Financial Effect
		Term Extension
Loans secured by real estate:
Other secured by 1-4 family residential properties		Modified two loans and lines of credit to amortize over 24 month terms


	Three Months Ended June 30, 2023
	Financial Effect
	Payment Concessions	Term Extension
Loans secured by real estate:
Other secured by 1-4 family residential properties		Modified lines of credit to amortize over a twenty-four month term
Other loans secured by real estate:
Secured by 1-4 family residential properties		Extended amortization with term adjusted by weighted-average 2.3 years
Commercial and industrial loans	Six month payment deferrals
Consumer loans		Bankruptcies extended amortization with term adjusted by weighted average 1.3 years reducing borrower payment
Other commercial loans and leases	Six month payment deferrals	One loan renewed and extended maturity by seven months


		Six Months Ended June 30, 2024
		Financial Effect
		Term Extension
Loans secured by real estate:
Other secured by 1-4 family residential properties		Modified three loans and lines of credit to amortize over 24 month terms.


	Six Months Ended June 30, 2023
	Financial Effect
	Payment Concessions	Term Extension
Loans secured by real estate:
Other secured by 1-4 family residential properties		Modified lines of credit to amortize over a twenty-four month term
Secured by nonfarm, nonresidential properties		One loan renewed and extended maturity by six months
Other loans secured by real estate:
Secured by 1-4 family residential properties		Extended amortization with term adjusted by weighted-average 1.8 years
Commercial and industrial loans	Six month payment deferrals
Consumer loans		Bankruptcies extended amortization with term adjusted by weighted average 1.3 years reducing borrower payment
Other commercial loans and leases	Six month payment deferrals	One loan renewed and extended maturity by seven months

Trustmark had no unused commitments on modified loans to borrowers experiencing financial difficulty at June 30, 2024.

During the six months ended June 30, 2024 and 2023, payment defaults of LHFI that were modified within the twelve months prior to that default to borrowers experiencing financial difficulty were immaterial.

Trustmark has utilized loans 90 days or more past due to define payment default in determining modified loans that have subsequently defaulted. If Trustmark determines that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off against the ACL, LHFI.

Trustmark closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following tables provide details of the performance of such LHFI that have been modified during the periods presented ($ in thousands):


	Three Months Ended June 30, 2024
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	—	$	—	$	—	$	—	$	493	$	493


	Three Months Ended June 30, 2023
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	38	$	19	$	—	$	57	$	344	$	401
Other loans secured by real estate:
Secured by 1-4 family residential properties		—		—		—		—		276		276
Commercial and industrial loans		—		—		—		—		255		255
Consumer loans		22		—		—		22		20		42
Other commercial loans and leases		—		—		—		—		148		148
Total	$	60	$	19	$	—	$	79	$	1,043	$	1,122


	Six Months Ended June 30, 2024
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	540	$	—	$	—	$	540	$	1,351	$	1,891


	Six Months Ended June 30, 2023
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	38	$	19	$	—	$	57	$	344	$	401
Secured by nonfarm, nonresidential properties		—		—		—		—		384		384
Other loans secured by real estate:
Secured by 1-4 family residential properties		—		—		—		—		768		768
Commercial and industrial loans		—		—		—		—		255		255
Consumer loans		22		—		—		22		20		42
Other commercial loans and leases		—		—		—		—		148		148
Total	$	60	$	19	$	—	$	79	$	1,919	$	1,998

Collateral-Dependent Loans

The following tables present the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of June 30, 2024 and December 31, 2023 ($ in thousands):


	June 30, 2024
	Real Estate		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Other secured by 1-4 family residential properties	$	907	$	—	$	—	$	907
Secured by nonfarm, nonresidential properties		9,730		—		—		9,730
Other loans secured by real estate:
Secured by 1-4 family residential properties		1,019		—		—		1,019
Commercial and industrial loans		5		33		14,774		14,812
Other commercial loans and leases		—		—		887		887
Total	$	11,661	$	33	$	15,661	$	27,355


	December 31, 2023
	Real Estate		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Construction, land development and other land	$	2,020	$	—	$	—	$	2,020
Other secured by 1-4 family residential properties		946		—		—		946
Secured by nonfarm, nonresidential properties		20,812		—		—		20,812
Other loans secured by real estate:
Secured by 1-4 family residential properties		3,235		—		—		3,235
Commercial and industrial loans		38		41		21,023		21,102
Other commercial loans and leases		—		—		967		967
Total	$	27,051	$	41	$	21,990	$	49,082

A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The following provides a qualitative description by class of loan of the collateral that secures Trustmark’s collateral-dependent LHFI:

•

Loans secured by real estate – Loans within these loan classes are secured by liens on real estate properties. There have been no significant changes to the collateral that secures these financial assets during the period.

•

Other loans secured by real estate – Loans within these loan classes are secured by liens on real estate properties. There have been no significant changes to the collateral that secures these financial assets during the period.

•

Commercial and industrial loans – Loans within this loan class are primarily secured by inventory, accounts receivables, equipment and other non-real estate collateral. During the quarter, one relationship had a slight decrease in collateral value that secures the credit. There have been no other significant changes to the collateral that secures these financial assets during the period.

•

State and other political subdivision loans – Loans within this loan class are secured by liens on real estate properties or other non-real estate collateral. There have been no significant changes to the collateral that secures these financial assets during the period.

•

Other commercial loans – Loans within this loan class are secured by non-real estate collateral. There have been no significant changes to the collateral that secures these financial assets during the period.

Credit Quality Indicators

Trustmark’s LHFI portfolio credit quality indicators focus on six key quality ratios that are compared against bank tolerances. The loan indicators are total classified outstanding, total criticized outstanding, nonperforming loans, nonperforming assets, delinquencies and net loan losses. Due to the homogeneous nature of consumer loans, Trustmark does not assign a formal internal risk rating to each credit and therefore the criticized and classified measures are primarily composed of commercial loans.

In addition to monitoring portfolio credit quality indicators, Trustmark also measures how effectively the lending process is being managed and risks are being identified. As part of an ongoing monitoring process, Trustmark grades the commercial portfolio segment as it relates to credit file completion and financial statement exceptions, underwriting, collateral documentation and compliance with law as shown below:

•

Credit File Completeness and Financial Statement Exceptions – evaluates the quality and condition of credit files in terms of content and completeness and focuses on efforts to obtain and document sufficient information to determine the quality and status of credits. Also included is an evaluation of the systems/procedures used to ensure compliance with policy.

•

Underwriting – evaluates whether credits are adequately analyzed, appropriately structured and properly approved within loan policy requirements. A properly approved credit is approved by an adequate authority in a timely manner with all conditions of approval fulfilled. Total policy exceptions measure the level of underwriting and other policy exceptions within a portfolio segment.

•

Collateral Documentation – focuses on the adequacy of documentation to perfect Trustmark’s collateral position and substantiate collateral value. Collateral exceptions measure the level of documentation exceptions within a portfolio segment. Collateral exceptions occur when certain collateral documentation is either not present or not current.

•

Compliance with Law – focuses on underwriting, documentation, approval and reporting in compliance with banking laws and regulations. Primary emphasis is directed to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Regulation O requirements and regulations governing appraisals.

Commercial Credits

Trustmark has established a loan grading system that consists of ten individual credit risk grades (risk ratings) that encompass a range from loans where the expectation of loss is negligible to loans where loss has been established. The model is based on the risk of default for an individual credit and establishes certain criteria to delineate the level of risk across the ten unique credit risk grades. Credit risk grade definitions are as follows:

•

Risk Rate (RR) 1 through RR 6 – Grades one through six represent groups of loans that are not subject to criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent low to moderate risk measured by using a variety of credit risk criteria such as cash flow coverage, debt service coverage, balance sheet leverage, liquidity, management experience, industry position, prevailing economic conditions, support from secondary sources of repayment and other credit factors that may be relevant to a specific loan. In general, these loans are supported by properly margined collateral and guarantees of principal parties.

•

Other Assets Especially Mentioned (Special Mention) (RR 7) – a loan that has a potential weakness that if not corrected will lead to a more severe rating. This rating is for credits that are currently protected but potentially weak because of an adverse feature or condition that if not corrected will lead to a further downgrade.

•

Substandard (RR 8) – a loan that has at least one identified weakness that is well defined. This rating is for credits where the primary sources of repayment are not viable at the time of evaluation or where either the capital or collateral is not adequate to support the loan and the secondary means of repayment do not provide a sufficient level of support to offset the identified weakness. Loss potential exists in the aggregate amount of substandard loans but does not necessarily exist in individual loans.

•

Doubtful (RR 9) – a loan with an identified weakness that does not have a valid secondary source of repayment. Generally, these credits have an impaired primary source of repayment and secondary sources are not sufficient to prevent a loss in the credit. The exact amount of the loss has not been determined at this time.

•

Loss (RR 10) – a loan or a portion of a loan that is deemed to be uncollectible.

By definition, credit risk grades special mention (RR 7), substandard (RR 8), doubtful (RR 9) and loss (RR 10) are criticized loans while substandard (RR 8), doubtful (RR 9) and loss (RR 10) are classified loans. These definitions are standardized by the bank regulatory agencies and are generally equally applied to each individual lending institution. The remaining credit risk grades are considered pass credits and are solely defined by Trustmark.

To enhance this process, Trustmark has determined that certain loans will be individually assessed, and a formal analysis will be performed and based upon the analysis the loan will be written down to the net realizable value. Trustmark will individually assess and remove loans from the pool in the following circumstances:

•

Commercial nonaccrual loans with total exposure of $500 thousand (excluding those portions of the debt that are government guaranteed or are secured by Trustmark deposits or marketable securities) or more.

•

Any loan that is believed to not share similar risk characteristics with the rest of the pool will be individually assessed. Otherwise, the loan will be left within the pool based on the results of the assessment.

•

Commercial accruing loans deemed to be a modified loan to a borrower experiencing financial difficulty with total exposure of $500 thousand (excluding those portions of the debt that are government guaranteed or are secured by Trustmark deposits or marketable securities) or more. If the loan is believed to not share similar risk characteristics with the rest of the loan pool, the loan will be individually assessed. Otherwise, the loan will be left within the pool and monitored on an ongoing basis.

Each loan officer assesses the appropriateness of the internal risk rating assigned to their credits on an ongoing basis. Trustmark’s Asset Review area conducts independent credit quality reviews of the majority of Trustmark’s commercial loan portfolio both on the underlying credit quality of each individual loan class as well as the adherence to Trustmark’s loan policy and the loan administration process.

In addition to the ongoing internal risk rate monitoring described above, Trustmark’s Credit Quality Review Committee meets monthly and performs a review of all loans of $100 thousand or more that are either delinquent 30 days or more or on nonaccrual. This review includes recommendations regarding risk ratings, accrual status, charge-offs and appropriate servicing officer as well as evaluation of problem credits for determination of modified status. Quarterly, the Credit Quality Review Committee reviews and modifies continuous action plans for all credits risk rated seven or worse for relationships of $100 thousand or more.

In addition, periodic reviews of significant development, construction, multi-family, nonowner-occupied and other commercial credits are performed. These reviews assess each particular project with respect to location, project valuations, progress of completion, leasing status, current financial information, rents, operating expenses, cash flow, adherence to budget and projections and other information that is pertinent to the particular type of credit as applicable. Summary results are reviewed by Senior and Regional Credit Officers in addition to the Chief Credit Officer with a determination made as to the appropriateness of existing risk ratings and accrual status.

Consumer Credits

The Retail Credit Review Committee, Management Credit Policy Committee and the Enterprise Risk Committee review the volume and percentage of consumer loan delinquencies and losses to monitor the overall quality of the consumer portfolio.

Trustmark monitors the levels and severity of past due consumer LHFI on a daily basis through its collection activities. A detailed assessment of consumer LHFI delinquencies is performed monthly at both a product and market level.

The tables below present the amortized cost basis of loans by credit quality indicator and class of loans based on analyses performed at June 30, 2024 and December 31, 2023 ($ in thousands):


	Term Loans by Origination Year
	2024		2023		2022		2021			2020		Prior			Revolving Loans		Total
As of June 30, 2024	Commercial LHFI
Loans secured by real estate:
Construction, land development and other land:
Pass - RR 1 through RR 6	$	215,236	$	180,580	$	60,100	$	27,134		$	9,879	$	2,989		$	49,901	$	545,819
Special Mention - RR 7		—		—		—		349			—		—			—		349
Substandard - RR 8		—		72		110		—			18		—			170		370
Doubtful - RR 9		—		—		—		—			—		—			—		—
Total		215,236		180,652		60,210		27,483			9,897		2,989			50,071		546,538
Current period gross charge-offs		—		—		—		—			—		(24	)		—		(24	)

Other secured by 1-4 family residential properties:
Pass - RR 1 through RR 6	$	12,075	$	28,956	$	27,475	$	26,442		$	12,824	$	7,928		$	8,379	$	124,079
Special Mention - RR 7		27		406		51		40			—		—			—		524
Substandard - RR 8		59		194		627		153			—		287			32		1,352
Doubtful - RR 9		—		—		—		—			—		—			—		—
Total		12,161		29,556		28,153		26,635			12,824		8,215			8,411		125,955
Current period gross charge-offs		—		—		—		—			—		(12	)		—		(12	)

Secured by nonfarm, nonresidential properties:
Pass - RR 1 through RR 6	$	306,701	$	413,086	$	926,322	$	486,858		$	540,635	$	510,001		$	110,669	$	3,294,272
Special Mention - RR 7		—		—		97,410		—			18,175		19,658			—		135,243
Substandard - RR 8		25,362		8,463		34,845		30,695			10,529		59,210			—		169,104
Doubtful - RR 9		15		—		—		—			—		9			—		24
Total		332,078		421,549		1,058,577		517,553			569,339		588,878			110,669		3,598,643
Current period gross charge-offs		—		—		—		(2,412	)		—		(16	)		—		(2,428	)

Other real estate secured:
Pass - RR 1 through RR 6	$	127,057	$	99,579	$	550,833	$	272,166		$	160,386	$	45,345		$	8,636	$	1,264,002
Special Mention - RR 7		—		—		—		39,658			—		—			—		39,658
Substandard - RR 8		98		14,651		669		64			262		25,408			—		41,152
Doubtful - RR 9		43		—		—		—			—		—			—		43
Total		127,198		114,230		551,502		311,888			160,648		70,753			8,636		1,344,855
Current period gross charge-offs		—		—		—		—			—		—			—		—


	Term Loans by Origination Year
	2024		2023			2022			2021			2020			Prior			Revolving Loans		Total
As of June 30, 2024	Commercial LHFI
Other loans secured by real estate:
Other construction:
Pass - RR 1 through RR 6	$	53,110	$	331,222		$	439,448		$	122,229		$	—		$	—		$	18,541	$	964,550
Special Mention - RR 7		—		—			25,290			15,082			—			—			—		40,372
Substandard - RR 8		60		—			—			—			17,462			—			—		17,522
Doubtful - RR 9		—		—			—			—			—			—			—		—
Total		53,170		331,222			464,738			137,311			17,462			—			18,541		1,022,444
Current period gross charge-offs		—		—			(2,494	)		—			—			—			—		(2,494	)

Commercial and industrial loans:
Pass - RR 1 through RR 6	$	293,438	$	408,202		$	289,668		$	113,913		$	52,701		$	67,048		$	486,231	$	1,711,201
Special Mention - RR 7		1,731		11,512			30,655			1,310			189			335			25,100		70,832
Substandard - RR 8		4,344		1,602			49,199			12,833			10,970			409			18,509		97,866
Doubtful - RR 9		327		9			159			145			—			55			13		708
Total		299,840		421,325			369,681			128,201			63,860			67,847			529,853		1,880,607
Current period gross charge-offs		—		(3	)		(317	)		(370	)		(8	)		(77	)		—		(775	)

State and other political subdivision loans:
Pass - RR 1 through RR 6	$	36,151	$	125,577		$	246,825		$	161,360		$	90,875		$	388,235		$	3,992	$	1,053,015
Special Mention - RR 7		—		—			—			—			—			—			—		—
Substandard - RR 8		—		—			—			—			—			—			—		—
Doubtful - RR 9		—		—			—			—			—			—			—		—
Total		36,151		125,577			246,825			161,360			90,875			388,235			3,992		1,053,015
Current period gross charge-offs		—		—			—			—			—			—			—		—

Other commercial loans and leases:
Pass - RR 1 through RR 6	$	104,879	$	185,138		$	17,709		$	24,899		$	17,886		$	38,984		$	212,365	$	601,860
Special Mention - RR 7		—		—			—			—			180			—			—		180
Substandard - RR 8		968		55			124			112			—			—			906		2,165
Doubtful - RR 9		—		—			—			—			—			—			—		—
Total		105,847		185,193			17,833			25,011			18,066			38,984			213,271		604,205
Current period gross charge-offs		—		—			(28	)		—			—			(25	)		—		(53	)

Total commercial LHFI	$	1,181,681	$	1,809,304		$	2,797,519		$	1,335,442		$	942,971		$	1,165,901		$	943,444	$	10,176,262
Total commercial LHFI gross charge-offs	$	—	$	(3	)	$	(2,839	)	$	(2,782	)	$	(8	)	$	(154	)	$	—	$	(5,786	)


	Term Loans by Origination Year
	2024		2023			2022			2021			2020			Prior			Revolving Loans		Total
As of June 30, 2024	Consumer LHFI
Loans secured by real estate:
Construction, land development and other land:
Current	$	12,399	$	39,898		$	7,752		$	4,045		$	1,115		$	2,300		$	2,409	$	69,918
Past due 30-89 days		—		25			—			3			—			12			—		40
Past due 90 days or more		—		—			—			—			—			—			—		—
Nonaccrual		—		—			—			5			—			27			—		32
Total		12,399		39,923			7,752			4,053			1,115			2,339			2,409		69,990
Current period gross charge-offs		—		—			—			—			—			—			—		—

Other secured by 1-4 family residential properties:
Current	$	17,683	$	22,415		$	8,508		$	5,436		$	3,978		$	10,221		$	435,337	$	503,578
Past due 30-89 days		1,149		34			63			100			54			342			4,749		6,491
Past due 90 days or more		—		—			—			—			—			65			261		326
Nonaccrual		—		12			101			44			109			486			5,663		6,415
Total		18,832		22,461			8,672			5,580			4,141			11,114			446,010		516,810
Current period gross charge-offs		—		(49	)		(42	)		(40	)		(9	)		(28	)		—		(168	)

Secured by nonfarm, nonresidential properties:
Current	$	—	$	—		$	—		$	4		$	—		$	—		$	—	$	4
Past due 30-89 days		—		—			—			—			—			—			—		—
Past due 90 days or more		—		—			—			—			—			—			—		—
Nonaccrual		—		—			—			—			—			—			—		—
Total		—		—			—			4			—			—			—		4
Current period gross charge-offs		—		—			—			—			—			—			—		—

Other real estate secured:
Current	$	—	$	—		$	—		$	—		$	73		$	40		$	—	$	113
Past due 30-89 days		—		—			—			—			—			—			—		—
Past due 90 days or more		—		—			—			—			—			—			—		—
Nonaccrual		—		—			—			—			—			—			—		—
Total		—		—			—			—			73			40			—		113
Current period gross charge-offs		—		—			—			—			—			—			—		—


	Term Loans by Origination Year
	2024			2023			2022			2021			2020			Prior			Revolving Loans			Total
As of June 30, 2024	Consumer LHFI
Other loans secured by real estate:
Secured by 1-4 family residential properties
Current	$	104,531		$	242,772		$	846,347		$	492,916		$	171,148		$	343,828		$	—		$	2,201,542
Past due 30-89 days		—			4,227			13,089			2,706			1,334			1,052			—			22,408
Past due 90 days or more		—			764			2,690			559			209			413			—			4,635
Nonaccrual		—			260			2,476			1,016			651			2,542			—			6,945
Total		104,531			248,023			864,602			497,197			173,342			347,835			—			2,235,530
Current period gross charge-offs		(33	)		(89	)		(8,948	)		(29	)		—			(92	)		—			(9,191	)

Consumer loans:
Current	$	36,051		$	35,373		$	20,688		$	6,690		$	1,738		$	418		$	53,117		$	154,075
Past due 30-89 days		463			349			170			37			—			21			854			1,894
Past due 90 days or more		3			46			29			32			—			—			303			413
Nonaccrual		13			47			125			76			26			—			40			327
Total		36,530			35,815			21,012			6,835			1,764			439			54,314			156,709
Current period gross charge-offs		(2,840	)		(495	)		(189	)		(58	)		(35	)		—			(1,315	)		(4,932	)

Total consumer LHFI	$	172,292		$	346,222		$	902,038		$	513,669		$	180,435		$	361,767		$	502,733		$	2,979,156
Total consumer LHFI gross charge-offs	$	(2,873	)	$	(633	)	$	(9,179	)	$	(127	)	$	(44	)	$	(120	)	$	(1,315	)	$	(14,291	)

Total LHFI	$	1,353,973		$	2,155,526		$	3,699,557		$	1,849,111		$	1,123,406		$	1,527,668		$	1,446,177		$	13,155,418
Total current period gross charge-offs	$	(2,873	)	$	(636	)	$	(12,018	)	$	(2,909	)	$	(52	)	$	(274	)	$	(1,315	)	$	(20,077	)


	Term Loans by Origination Year
	2023		2022			2021			2020		2019			Prior			Revolving Loans		Total
As of December 31, 2023	Commercial LHFI
Loans secured by real estate:
Construction, land development and other land:
Pass - RR 1 through RR 6	$	359,813	$	98,742		$	35,095		$	10,591	$	2,036		$	1,961		$	52,351	$	560,589
Special Mention - RR 7		—		—			360			—		—			—			—		360
Substandard - RR 8		606		336			1,512			19		—			21			—		2,494
Doubtful - RR 9		—		—			—			—		—			24			—		24
Total		360,419		99,078			36,967			10,610		2,036			2,006			52,351		563,467
Current period gross charge-offs		—		(4	)		(10	)		—		(228	)		—			—		(242	)

Other secured by 1-4 family residential properties:
Pass - RR 1 through RR 6	$	33,072	$	30,760		$	29,159		$	14,309	$	8,084		$	2,822		$	10,077	$	128,283
Special Mention - RR 7		—		82			48			10		—			—			—		140
Substandard - RR 8		220		625			157			22		80			306			98		1,508
Doubtful - RR 9		—		—			—			—		—			—			—		—
Total		33,292		31,467			29,364			14,341		8,164			3,128			10,175		129,931
Current period gross charge-offs		—		—			(24	)		—		—			(6	)		—		(30	)

Secured by nonfarm, nonresidential properties:
Pass - RR 1 through RR 6	$	501,327	$	919,519		$	526,412		$	596,240	$	323,687		$	369,250		$	129,142	$	3,365,577
Special Mention - RR 7		4,271		14,930			—			138		23,966			—			—		43,305
Substandard - RR 8		6,332		1,964			47,491			10,809		8,614			5,200			48		80,458
Doubtful - RR 9		21		—			—			—		53			13			—		87
Total		511,951		936,413			573,903			607,187		356,320			374,463			129,190		3,489,427
Current period gross charge-offs		—		(39	)		(82	)		—		(19	)		(138	)		—		(278	)

Other real estate secured:
Pass - RR 1 through RR 6	$	194,141	$	447,200		$	332,818		$	209,757	$	56,024		$	11,080		$	8,880	$	1,259,900
Special Mention - RR 7		126		2,076			—			—		35,881			—			—		38,083
Substandard - RR 8		—		14,064			—			290		—			39			—		14,393
Doubtful - RR 9		42		—			—			—		—			—			—		42
Total		194,309		463,340			332,818			210,047		91,905			11,119			8,880		1,312,418
Current period gross charge-offs		—		—			—			—		—			—			—		—


	Term Loans by Origination Year
	2023			2022			2021			2020			2019			Prior			Revolving Loans			Total
As of December 31, 2023	Commercial LHFI
Other loans secured by real estate:
Other construction
Pass - RR 1 through RR 6	$	179,676		$	518,062		$	149,883		$	14,062		$	—		$	6		$	6,042		$	867,731
Special Mention - RR 7		—			—			—			—			—			—			—			—
Substandard - RR 8		62			—			—			—			—			—			—			62
Doubtful - RR 9		—			—			—			—			—			—			—			—
Total		179,738			518,062			149,883			14,062			—			6			6,042			867,793
Current period gross charge-offs		(61	)		—			(3,392	)		—			—			—			—			(3,453	)

Commercial and industrial loans:
Pass - RR 1 through RR 6	$	497,730		$	474,737		$	158,659		$	80,646		$	31,876		$	44,972		$	537,527		$	1,826,147
Special Mention - RR 7		12,570			10,141			3,149			1,381			110			—			126			27,477
Substandard - RR 8		4,797			16,872			13,909			11,958			40			80			21,528			69,184
Doubtful - RR 9		6			58			1			—			—			25			12			102
Total		515,103			501,808			175,718			93,985			32,026			45,077			559,193			1,922,910
Current period gross charge-offs		(42	)		(1,071	)		(700	)		(138	)		(95	)		(108	)		(7	)		(2,161	)

State and other political subdivision loans:
Pass - RR 1 through RR 6	$	152,157		$	247,034		$	174,812		$	99,786		$	32,118		$	377,225		$	5,334		$	1,088,466
Special Mention - RR 7		—			—			—			—			—			—			—			—
Substandard - RR 8		—			—			—			—			—			—			—			—
Doubtful - RR 9		—			—			—			—			—			—			—			—
Total		152,157			247,034			174,812			99,786			32,118			377,225			5,334			1,088,466
Current period gross charge-offs		—			—			—			—			—			—			—			—

Other commercial loans and leases:
Pass - RR 1 through RR 6	$	211,402		$	48,947		$	30,071		$	21,377		$	32,837		$	8,468		$	201,339		$	554,441
Special Mention - RR 7		—			—			—			208			—			—			20			228
Substandard - RR 8		106			211			42			—			—			—			987			1,346
Doubtful - RR 9		—			—			—			—			—			20			—			20
Total		211,508			49,158			30,113			21,585			32,837			8,488			202,346			556,035
Current period gross charge-offs		(40	)		(248	)		—			(26	)		—			—			—			(314	)

Total commercial LHFI	$	2,158,477		$	2,846,360		$	1,503,578		$	1,071,603		$	555,406		$	821,512		$	973,511		$	9,930,447
Total commercial LHFI gross charge-offs	$	(143	)	$	(1,362	)	$	(4,208	)	$	(164	)	$	(342	)	$	(252	)	$	(7	)	$	(6,478	)


	Term Loans by Origination Year
	2023		2022			2021			2020			2019			Prior			Revolving Loans			Total
As of December 31, 2023	Consumer LHFI
Loans secured by real estate:
Construction, land development and other land:
Current	$	44,912	$	23,110		$	5,973		$	1,203		$	1,082		$	1,864		$	653		$	78,797
Past due 30-89 days		—		250			—			—			30			191			—			471
Past due 90 days or more		—		—			—			—			—			—			—			—
Nonaccrual		—		—			148			—			—			3			—			151
Total		44,912		23,360			6,121			1,203			1,112			2,058			653			79,419
Current period gross charge-offs		—		—			—			—			—			—			—			—

Other secured by 1-4 family residential properties:
Current	$	29,636	$	11,366		$	5,733		$	4,471		$	4,313		$	7,674		$	417,383		$	480,576
Past due 30-89 days		225		68			74			4			51			220			4,292			4,934
Past due 90 days or more		—		264			—			—			—			41			934			1,239
Nonaccrual		8		76			48			8			—			616			4,961			5,717
Total		29,869		11,774			5,855			4,483			4,364			8,551			427,570			492,466
Current period gross charge-offs		—		(100	)		(9	)		(2	)		(10	)		(22	)		(147	)		(290	)

Secured by nonfarm, nonresidential properties:
Current	$	—	$	—		$	7		$	—		$	—		$	—		$	—		$	7
Past due 30-89 days		—		—			—			—			—			—			—			—
Past due 90 days or more		—		—			—			—			—			—			—			—
Nonaccrual		—		—			—			—			—			—			—			—
Total		—		—			7			—			—			—			—			7
Current period gross charge-offs		—		—			—			—			—			—			—			—

Other real estate secured:
Current	$	—	$	—		$	—		$	78		$	—		$	55		$	—		$	133
Past due 30-89 days		—		—			—			—			—			—			—			—
Past due 90 days or more		—		—			—			—			—			—			—			—
Nonaccrual		—		—			—			—			—			—			—			—
Total		—		—			—			78			—			55			—			133
Current period gross charge-offs		—		—			—			—			—			—			—			—


	Term Loans by Origination Year
	2023			2022			2021			2020			2019			Prior			Revolving Loans			Total
As of December 31, 2023	Consumer LHFI
Other loans secured by real estate:
Secured by 1-4 family residential properties
Current	$	258,800		$	878,893		$	516,324		$	180,272		$	98,552		$	277,664		$	—		$	2,210,505
Past due 30-89 days		3,370			11,293			5,513			2,121			298			1,664			—			24,259
Past due 90 days or more		376			1,219			1,208			682			—			255			—			3,740
Nonaccrual		678			15,586			11,452			4,884			1,848			9,366			—			43,814
Total		263,224			906,991			534,497			187,959			100,698			288,949			—			2,282,318
Current period gross charge-offs		(64	)		(930	)		(217	)		(104	)		—			(142	)		—			(1,457	)

Consumer loans:
Current	$	59,496		$	32,767		$	10,698		$	2,604		$	917		$	294		$	55,321		$	162,097
Past due 30-89 days		1,274			475			134			34			5			5			839			2,766
Past due 90 days or more		64			44			3			1			—			—			516			628
Nonaccrual		44			65			84			26			—			—			24			243
Total		60,878			33,351			10,919			2,665			922			299			56,700			165,734
Current period gross charge-offs		(6,138	)		(559	)		(167	)		(43	)		(1	)		(1	)		(2,381	)		(9,290	)

Total consumer LHFI	$	398,883		$	975,476		$	557,399		$	196,388		$	107,096		$	299,912		$	484,923		$	3,020,077
Total consumer LHFI gross charge-offs	$	(6,202	)	$	(1,589	)	$	(393	)	$	(149	)	$	(11	)	$	(165	)	$	(2,528	)	$	(11,037	)

Total LHFI	$	2,557,360		$	3,821,836		$	2,060,977		$	1,267,991		$	662,502		$	1,121,424		$	1,458,434		$	12,950,524
Total current period gross charge-offs	$	(6,345	)	$	(2,951	)	$	(4,601	)	$	(313	)	$	(353	)	$	(417	)	$	(2,535	)	$	(17,515	)

Past Due LHFS

LHFS past due 90 days or more totaled $58.1 million and $51.2 million at June 30, 2024 and December 31, 2023, respectively. LHFS past due 90 days or more are serviced loans eligible for repurchase, which are fully guaranteed by the Government National Mortgage Association (GNMA). GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When Trustmark is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans held for sale, regardless of whether Trustmark intends to exercise the buy-back option. These loans are reported as held for sale with the offsetting liability being reported as short-term borrowings.

Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during the first six months of 2024 or 2023.

ACL on LHFI

Trustmark’s ACL methodology for LHFI is based upon guidance within the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 326-20 as well as applicable regulatory guidance. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for LHFI. The ACL is an estimate of expected losses inherent within Trustmark’s existing LHFI portfolio. The ACL for LHFI is adjusted through the PCL, LHFI and reduced by the charge off of loan amounts, net of recoveries.

The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a collective, or pooled, component for estimated expected credit losses for pools of loans that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit

losses for such individual loans. In estimating the ACL for the collective component, loans are segregated into loan pools based on loan product types and similar risk characteristics.

The loans secured by real estate and other loans secured by real estate portfolio segments include loans for both commercial and residential properties. The underwriting process for these loans includes analysis of the financial position and strength of both the borrower and guarantor, experience with similar projects in the past, market demand and prospects for successful completion of the proposed project within the established budget and schedule, values of underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type. The borrower’s financial strength and capacity to repay their obligations remain the primary focus of underwriting. Financial strength is evaluated based upon analytical tools that consider historical and projected cash flows and performance in addition to analysis of the proposed project for income-producing properties. Additional support offered by guarantors is also considered. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity and availability of long-term financing.

The commercial and industrial LHFI portfolio segment includes loans within Trustmark’s geographic markets made to many types of businesses for various purposes, such as short-term working capital loans that are usually secured by accounts receivable and inventory and term financing for equipment and fixed asset purchases that are secured by those assets. Trustmark’s credit underwriting process for commercial and industrial loans includes analysis of historical and projected cash flows and performance, evaluation of financial strength of both borrowers and guarantors as reflected in current and detailed financial information and evaluation of underlying collateral to support the credit.

The consumer LHFI portfolio segment is comprised of loans that are centrally underwritten based on the borrower's credit bureau score as well as an evaluation of the borrower’s repayment capacity, credit, and collateral. Property appraisals are obtained to assist in evaluating collateral. Loan-to-value and debt-to-income ratios, loan amount, and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices and demand and levels of unemployment.

The state and other political subdivision LHFI and the other commercial LHFI and leases portfolio segments primarily consist of loans to non-depository financial institutions, such as mortgage companies, finance companies and other financial intermediaries, loans to state and political subdivisions, and loans to non-profit and charitable organizations. These loans are underwritten based on the specific nature or purpose of the loan and underlying collateral with special consideration given to the specific source of repayment for the loan. The lease segment primarily consists of commercial equipment finance leases. Trustmark’s credit underwriting process for equipment finance leases includes analysis of historical and projected cash flows and performance, evaluation of financial strength of both borrowers and guarantors as reflected in current and detailed financial information and evaluation of underlying collateral to support the credit.

During the first quarter of 2024 as part of Trustmark's ongoing model monitoring procedures the annual loss driver analysis was performed. The analysis resulted in changes in the loss drivers for all discounted cash-flow models along with changes in the loss drivers for the equipment and finance loans and leases model. These changes were a result of updating Trustmark's peer group and incorporating data through 2022 which led to more intuitive loss drivers. All models were validated by a third party before implementation.

The following table provides a description of each of Trustmark’s portfolio segments, loan classes, loan pools and the ACL methodology and loss drivers at June 30, 2024:


Portfolio Segment	Loan Class	Loan Pool	Methodology	Loss Drivers
Loans secured by real estate	Construction, land development and other land	1-4 family residential construction	DCF	National HPI, National Unemployment
		Lots and development	DCF	National HPI, National Unemployment
		Unimproved land	DCF	National HPI, National Unemployment
		All other consumer	DCF	National HPI, National Unemployment
	Other secured by 1-4 family residential properties	Consumer 1-4 family - 1st liens	DCF	National HPI, National Unemployment
		All other consumer	DCF	National HPI, National Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National CRE Price Index
	Secured by nonfarm, nonresidential properties	Nonowner-occupied - hotel/motel	DCF	National CRE Price Index, Southern Unemployment
		Nonowner-occupied - office	DCF	National CRE Price Index, Southern Unemployment
		Nonowner-occupied- Retail	DCF	National CRE Price Index, Southern Unemployment
		Nonowner-occupied - senior living/nursing homes	DCF	National CRE Price Index, Southern Unemployment
		Nonowner-occupied - all other	DCF	National CRE Price Index, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National CRE Price Index
	Other real estate secured	Nonresidential nonowner -occupied - apartments	DCF	National CRE Price Index, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National CRE Price Index
		Nonowner-occupied - all other	DCF	National CRE Price Index, Southern Unemployment
Other loans secured by real estate	Other construction	Other construction	DCF	National CRE Price Index, National Unemployment, BBB 7-10 US CBI
	Secured by 1-4 family residential properties	Trustmark mortgage	WARM	Southern Unemployment


Portfolio Segment	Loan Class	Loan Pool	Methodology	Loss Drivers
Commercial and industrial loans	Commercial and industrial loans	Commercial and industrial - non-working capital	DCF	Trustmark historical data
		Commercial and industrial - working capital	DCF	Trustmark historical data
		Equipment finance loans	WARM	Southern Unemployment, National GDP
		Credit cards	WARM	Trustmark call report data
Consumer loans	Consumer loans	Credit cards	WARM	Trustmark call report data
		Overdrafts	Loss Rate	Trustmark historical data
		All other consumer	DCF	National HPI, National Unemployment
State and other political subdivision loans	State and other political subdivision loans	Obligations of state and political subdivisions	DCF	Moody's Bond Default Study
Other commercial loans and leases	Other commercial loans and leases	Other loans	DCF	BBB 7-10 US CBI, Southern Unemployment
		Commercial and industrial - non-working capital	DCF	Trustmark historical data
		Commercial and industrial - working capital	DCF	Trustmark historical data
		Equipment finance leases	WARM	Southern Unemployment, National GDP

The following table provides a description of each of Trustmark’s portfolio segments, loan classes, loan pools and the ACL methodology and loss drivers at December 31, 2023:


Portfolio Segment	Loan Class	Loan Pool	Methodology	Loss Drivers
Loans secured by real estate	Construction, land development and other land	1-4 family residential construction	DCF	Prime Rate, National GDP
		Lots and development	DCF	Prime Rate, Southern Unemployment
		Unimproved land	DCF	Prime Rate, Southern Unemployment
		All other consumer	DCF	Southern Unemployment
	Other secured by 1-4 family residential properties	Consumer 1-4 family - 1st liens	DCF	Prime Rate, Southern Unemployment
		All other consumer	DCF	Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
	Secured by nonfarm, nonresidential properties	Nonowner-occupied - hotel/motel	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - office	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied- Retail	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - senior living/nursing homes	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - all other	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
	Other real estate secured	Nonresidential nonowner -occupied - apartments	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
		Nonowner-occupied - all other	DCF	Southern Vacancy Rate, Southern Unemployment
Other loans secured by real estate	Other construction	Other construction	DCF	Prime Rate, National Unemployment
	Secured by 1-4 family residential properties	Trustmark mortgage	WARM	Southern Unemployment
Commercial and industrial loans	Commercial and industrial loans	Commercial and industrial - non-working capital	DCF	Trustmark historical data
		Commercial and industrial - working capital	DCF	Trustmark historical data
		Equipment finance loans	WARM	Southern Unemployment, Southern GDP
		Credit cards	WARM	Trustmark call report data
Consumer loans	Consumer loans	Credit cards	WARM	Trustmark call report data
		Overdrafts	Loss Rate	Trustmark historical data
		All other consumer	DCF	Southern Unemployment
State and other political subdivision loans	State and other political subdivision loans	Obligations of state and political subdivisions	DCF	Moody's Bond Default Study
Other commercial loans and leases	Other commercial loans and leases	Other loans	DCF	Prime Rate, Southern Unemployment
		Commercial and industrial - non-working capital	DCF	Trustmark historical data
		Commercial and industrial - working capital	DCF	Trustmark historical data
		Equipment finance leases	WARM	Southern Unemployment, Southern GDP

In general, Trustmark utilizes a DCF method to estimate the quantitative portion of the ACL for loan pools. The DCF model consists of two key components, a loss driver analysis (LDA) and a cash flow analysis. For loan pools utilizing the DCF methodology, multiple assumptions are in place, depending on the loan pool. A reasonable and supportable forecast is utilized for each loan pool by developing a LDA for each loan class. The LDA uses charge off data from Federal Financial Institutions Examination Council (FFIEC) reports to construct a periodic default rate (PDR). The PDR is decomposed into a PD. Regressions are run using the data for various macroeconomic variables in order to determine which ones correlate to Trustmark’s losses. These variables are then incorporated into the application to calculate a quarterly PD using a third-party baseline forecast. In addition to the PD, a LGD is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the levels of PD forecasts. This model approach is applicable to all pools within the construction, land development and other land, other secured by 1-4 family residential properties, secured by nonfarm, nonresidential properties and other real estate secured loan classes as well as consumer loans and other commercial loans.

During 2022, Management elected to incorporate a methodology change related to the other construction pool. Components of this change include management utilizing an alternative LDA to support the PD and LGD assumptions necessary to apply a DCF methodology to the other construction pool. Fundamentally, this approach utilizes publicly reported default balances and leverages a generalized linear model (GLM) framework to estimate PD. Taken together, these differences allow for results to be scaled to be specific and directly applicable to the other construction segment. LGD is assumed to be a through-the-cycle constant based on the actual performance of Trustmark’s other construction segment. These assumptions are then input into the DCF model and used in conjunction with prepayment data to calculate the cash flows at the individual loan level. Previously, the other construction pool used the weighted average remaining maturity (WARM) method. Management believes this change is commensurate with the level of risk in the pool.

For the commercial and industrial loans related pools, Trustmark uses its own PD and LGD data, instead of the macroeconomic variables and the Frye Jacobs method described above, to calculate the PD and LGD as there were no defensible macroeconomic variables that correlated to Trustmark’s losses. Trustmark utilizes a third-party Bond Default Study to derive the PD and LGD for the obligations of state and political subdivisions pool. Due to the lack of losses within this pool, no defensible macroeconomic factors were identified to correlate.

The PD and LGD measures are used in conjunction with prepayment data as inputs into the DCF model to calculate the cash flows at the individual loan level. Contractual cash flows based on loan terms are adjusted for PD, LGD and prepayments to derive loss cash flows. These loss cash flows are discounted by the loan’s coupon rate to arrive at the discounted cash flow based quantitative loss. The prepayment studies are updated quarterly by a third-party for each applicable pool.

An alternate method of estimating the ACL is used for certain loan pools due to specific characteristics of these loans. For the non-DCF pools, specifically, those using the WARM method, the remaining life is incorporated into the ACL quantitative calculation.

During the second quarter of 2024, Trustmark executed a sale on a portfolio of 1-4 family mortgage loans that were at least three payments delinquent and/or nonaccrual at the time of selection. As a result of this sale, a credit mark was established for a sub-pool of the loans in the sale. Due to the lack of historical experience and the use of industry data for this sub-pool, management elected to use the credit mark for reserving purposes on a go forward basis for this sub-pool that meets the same credit criteria of being three payments delinquent and/or nonaccrual. All loans of the sub-pool that meet the above credit criteria will be removed from the 1-4 family residential properties pool and placed into a separate pool with the credit mark reserve applied to the total balance.

Trustmark determined that reasonable and supportable forecasts could be made for a twelve-month period for all of its loan pools. To the extent the lives of the loans in the LHFI portfolio extend beyond this forecast period, Trustmark uses a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans. The econometric models currently in production reflect segment or pool level sensitivities of PD to changes in macroeconomic variables. By measuring the relationship between defaults and changes in the economy, the quantitative reserve incorporates reasonable and supportable forecasts of future conditions that will affect the value of Trustmark’s assets, as required by FASB ASC Topic 326. Under stable forecasts, these linear regressions will reasonably predict a pool’s PD. However, due to the COVID-19 pandemic, the macroeconomic variables used for reasonable and supportable forecasting changed rapidly. At the macroeconomic levels experienced during the COVID-19 pandemic, it was not clear that the models in production would produce reasonably representative results since the models were originally estimated using data beginning in 2004 through 2019. During this period, a traditional, albeit severe, economic recession occurred. Thus, econometric models are sensitive to similar future levels of PD.

National Commercial Real Estate (CRE) Price Index and the BBB 7-10 Year US Corporate Bond Index (CBI). The upper and lower limits are based on the distribution of the macroeconomic variable by selecting extreme percentiles at the upper and lower limits of the distribution, the 1stand 99th percentiles, respectively. These upper and lower limits are then used to calculate the PD for the forecast time period in which the forecasted values are outside of the upper and lower limit range. Due to multiple periods having a PD or LGD at or near zero as a result of the improving macroeconomic forecasts, Management implemented PD and LGD floors to account for the risk associated with each portfolio. The PD and LGD floors are based on Trustmark’s historical loss experience and applied at a portfolio level.

Qualitative factors used in the ACL methodology include the following:

•

Lending policies and procedures

•

Economic conditions and concentrations of credit

•

Nature and volume of the portfolio

•

Performance trends

•

External factors

While all these factors are incorporated into the overall methodology, only three are currently considered active at June 30, 2024: (i) economic conditions and concentrations of credit, (ii) nature and volume of the portfolio and (iii) performance trends.

Two of Trustmark’s largest loan classes are the loans secured by nonfarm, nonresidential properties and the loans secured by other real estate. Trustmark elected to create a qualitative factor specifically for these loan classes which addresses changes in the economic conditions of metropolitan areas and applies additional pool level reserves. This qualitative factor is based on third-party market data and forecast trends and is updated quarterly as information is available, by market and by loan pool.

Trustmark's current quantitative methodologies do not completely incorporate changes in credit quality. As a result, Trustmark utilizes the performance trends qualitative factor. This factor is based on migration analyses, that allocates additional ACL to non-pass/delinquent loans within each pool. In this way, Management believes the ACL will directly reflect changes in risk, based on the performance of the loans within a pool, whether declining or improving.

The performance trends qualitative factor is estimated by properly segmenting loan pools into risk levels by risk rating for commercial credits and delinquency status for consumer credits. A migration analysis is then performed quarterly using a third-party software and the results for each risk level are compiled to calculate the historical PD average for each loan portfolio based on risk levels. This average historical PD rate is updated annually. For the mortgage portfolio, Trustmark uses an internal report to incorporate a roll rate method for the calculation of the PD rate. In addition to the PD rate for each portfolio, Management incorporates the quantitative rate and the k value derived from the Frye-Jacobs method to calculate a loss estimate that includes both PD and LGD. The quantitative rate is used to eliminate any additional reserve that the quantitative reserve already includes. Finally, the loss estimate rate is then applied to the total balances for each risk level for each portfolio to calculate a qualitative reserve.

During 2022, Management elected to activate the nature and volume of the portfolio qualitative factor as a result of a sub-pool of the secured by 1-4 family residential properties growing to a significant size along with the underlying nature being different as well. The nature and volume of the portfolio qualitative factor utilizes a WARM methodology that uses industry data for the assumptions to support the qualitative adjustment. The industry data is used to compile a PD based on credit score ranges along with using the industry data to compile an LGD. The sub-pool of credits is then aggregated into the appropriate credit score bands in which a weighted average loss rate is calculated based on the PD and LGD for each credit score range. This weighted average loss rate is then applied to the expected balance for the sub-segment of credits. This total is then used as the qualitative reserve adjustment.

contemporaneous unemployment peaks and loan defaults, this might not have occurred when borrowers could request payment deferrals. Thus, for the affected population, economic conditions were not fully considered as a part of Trustmark’s quantitative reserve. The second principle is the change in risk that is identified by rating changes. As a part of Trustmark’s credit review process, loans in the affected population were given more frequent screening to ensure accurate ratings were maintained through this dynamic period. Trustmark’s quantitative reserve did not directly address changes in ratings, thus a migration qualitative factor was designed to work in concert with the quantitative reserve.

As discussed above, the disconnect of economic factors means that changes in rating caused by deteriorating and weak economic conditions as a result of the pandemic were not being captured in the quantitative reserve. During 2020, due to unforeseen pandemic conditions that varied from Management’s expectations, additional reserves were further dimensioned in order to appropriately reflect the risk within the portfolio related to the COVID-19 pandemic. In an effort to ensure the External Factor-Pandemic qualitative factor was reasonable and supportable, historical Trustmark loss data was leveraged to construct a framework that was quantitative in nature. To dimension the additional reserve, Management used the sensitivity of the quantitative commercial loan reserve to changes in macroeconomic conditions to apply to loans rated acceptable or better (RR 1-4). In addition, to account for the known changes in risk, a weighted average of the commercial loan portfolio loss rate, derived from the performance trends qualitative factor, was used to dimension additional reserves for downgraded credits. Loans rated acceptable with risk (RR 5) or watch (RR 6) received the additional reserves based on the average of the macroeconomic conditions and weighted-average of the commercial loan portfolio loss rate while the loans rated special mention (RR 7) and substandard (RR 8) received additional reserves based on the weighted-average described above. During 2022, Management noted that all pass rated loans (RR 5 & RR 6) related to the External Factor-Pandemic qualitative factor either did not experience significant stress related to the pandemic or had since recovered and did not expect future stresses attributed to the pandemic that could affect these loans. As a result, Management decided to accelerate the release of the additional pandemic reserves on all pass rated loans as a result of pandemic conditions resolving. During the fourth quarter of 2023, Management decided to resolve the External Factor-Pandemic qualitative factor as a result of the remaining loan balances that were identified as COVID affected loans being immaterial from both a reserve and balance perspective. The remaining loans were incorporated back into the performance qualitative factor as a result of this resolution. Further, due to this resolution there is no longer any active External Factor as of December 31, 2023.

The following tables disaggregate the ACL and the amortized cost basis of the loans by the measurement methodology used at June 30, 2024 and December 31, 2023 ($ in thousands):


	June 30, 2024
	ACL						LHFI
	Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	5,101	$	5,101	$	—		616,528	$	616,528
Other secured by 1-4 family residential properties		—		10,373		10,373		907		641,858		642,765
Secured by nonfarm, nonresidential properties		—		41,136		41,136		9,730		3,588,917		3,598,647
Other real estate secured		—		12,037		12,037		—		1,344,968		1,344,968
Other loans secured by real estate:
Other construction		—		13,897		13,897		—		1,022,444		1,022,444
Secured by 1-4 family residential properties		—		30,647		30,647		1,019		2,234,511		2,235,530
Commercial and industrial loans		11,491		17,244		28,735		14,812		1,865,795		1,880,607
Consumer loans		—		5,645		5,645		—		156,709		156,709
State and other political subdivision loans		—		625		625		—		1,053,015		1,053,015
Other commercial loans and leases		887		5,602		6,489		887		603,318		604,205
Total	$	12,378	$	142,307	$	154,685	$	27,355	$	13,128,063	$	13,155,418


	December 31, 2023
	ACL						LHFI
	Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	17,192	$	17,192	$	2,020	$	640,866	$	642,886
Other secured by 1-4 family residential properties		—		12,942		12,942		946		621,451		622,397
Secured by nonfarm, nonresidential properties		—		24,043		24,043		20,812		3,468,622		3,489,434
Other real estate secured		—		4,488		4,488		—		1,312,551		1,312,551
Other loans secured by real estate:
Other construction		—		5,758		5,758		—		867,793		867,793
Secured by 1-4 family residential properties		—		34,794		34,794		3,235		2,279,083		2,282,318
Commercial and industrial loans		11,436		15,202		26,638		21,102		1,901,808		1,922,910
Consumer loans		—		5,794		5,794		—		165,734		165,734
State and other political subdivision loans		—		646		646		—		1,088,466		1,088,466
Other commercial loans and leases		967		6,105		7,072		967		555,068		556,035
Total	$	12,403	$	126,964	$	139,367	$	49,082	$	12,901,442	$	12,950,524

Changes in the ACL, LHFI were as follows for the periods presented ($ in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Balance at beginning of period	$	142,998		$	122,239		$	139,367		$	120,214
Loans charged-off, sale of 1-4 family mortgage loans		(8,633	)		—			(8,633	)		—
Loans charged-off		(5,120	)		(2,773	)		(11,444	)		(5,769	)
Recoveries		2,111			1,621			4,358			3,398
Net (charge-offs) recoveries		(11,642	)		(1,152	)		(15,719	)		(2,371	)
PCL, LHFI		14,696			8,211			22,404			11,455
PCL, LHFI sale of 1-4 family mortgage loans		8,633			—			8,633			—
Balance at end of period	$	154,685		$	129,298		$	154,685		$	129,298

The following tables detail changes in the ACL, LHFI by loan class for the periods presented ($ in thousands):


	Three Months Ended June 30, 2024
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	5,743	$	—		$	7	$	(649	)	$	5,101
Other secured by 1-4 family residential properties		10,554		(104	)		63		(140	)		10,373
Secured by nonfarm, nonresidential properties		33,292		—			17		7,827			41,136
Other real estate secured		9,251		—			—		2,786			12,037
Other loans secured by real estate:
Other construction		12,065		(2,494	)		255		4,071			13,897
Secured by 1-4 family residential properties		31,946		(8,780	)		27		7,454			30,647
Commercial and industrial loans		27,930		(191	)		272		724			28,735
Consumer loans		5,523		(2,184	)		1,447		859			5,645
State and other political subdivision loans		638		—			—		(13	)		625
Other commercial loans and leases		6,056		—			23		410			6,489
Total	$	142,998	$	(13,753	)	$	2,111	$	23,329		$	154,685

The PCL, LHFI for the secured by nonfarm, nonresidential properties, the secured by 1-4 family residential properties, other construction, and other real estate secured portfolios for the three months ended June 30, 2024 was primarily due to net adjustments to the qualitative factors due to credit migration coupled with loan growth.

The negative PCL, LHFI for the construction, land development and other land and the other secured by 1-4 family residential properties portfolios for the three months ended June 30, 2024 was primarily due to changes in the macroeconomic forecast.


	Three Months Ended June 30, 2023
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	13,260	$	—		$	64	$	2,019		$	15,343
Other secured by 1-4 family residential properties		11,918		(86	)		75		266			12,173
Secured by nonfarm, nonresidential properties		18,640		(58	)		10		1,784			20,376
Other real estate secured		2,362		—			2		1,117			3,481
Other loans secured by real estate:
Other construction		14,470		—			18		(111	)		14,377
Secured by 1-4 family residential properties		26,156		(161	)		14		2,546			28,555
Commercial and industrial loans		23,462		(456	)		217		(53	)		23,170
Consumer loans		5,532		(1,989	)		1,221		776			5,540
State and other political subdivision loans		729		—			—		(53	)		676
Other commercial loans and leases		5,710		(23	)		—		(80	)		5,607
Total	$	122,239	$	(2,773	)	$	1,621	$	8,211		$	129,298

The increases in the PCL, LHFI for the three months ended June 30, 2023 were primarily attributable to extended maturities on the secured by 1-4 family residential properties portfolio resulting from lower prepayment speeds, the weakening macroeconomic forecasts and loan growth.


	Six Months Ended June 30, 2024
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	17,192	$	(24	)	$	8	$	(12,075	)	$	5,101
Other secured by 1-4 family residential properties		12,942		(180	)		513		(2,902	)		10,373
Secured by nonfarm, nonresidential properties		24,043		(2,428	)		26		19,495			41,136
Other real estate secured		4,488		—			—		7,549			12,037
Other loans secured by real estate:
Other construction		5,758		(2,494	)		272		10,361			13,897
Secured by 1-4 family residential properties		34,794		(9,191	)		65		4,979			30,647
Commercial and industrial loans		26,638		(775	)		470		2,402			28,735
Consumer loans		5,794		(4,932	)		2,952		1,831			5,645
State and other political subdivision loans		646		—			—		(21	)		625
Other commercial loans and leases		7,072		(53	)		52		(582	)		6,489
Total	$	139,367	$	(20,077	)	$	4,358	$	31,037		$	154,685

The PCL, LHFI for the secured by nonfarm, nonresidential properties, other construction and other real estate secured portfolios for the six months ended June 30, 2024 was primarily due to changes in the macroeconomic forecast associated with these specific loss driver models as a result of the loss driver update, coupled with net adjustments to the qualitative factors due to credit migration and loan growth. The PCL, LHFI for the secured by 1-4 family residential properties portfolio for the six months ended June 30, 2024 was primarily due to adjustments to the Nature and Volume of Portfolio qualitative factor, coupled with implementing the credit mark reserve as a result of the mortgage loan sale. The PCL, LHFI for the commercial and industrial portfolio for the six months ended June 30, 2024 was primarily due to net adjustments to the qualitative factors due to credit migration.

The negative PCL, LHFI for the construction, land development and other land, other secured by 1-4 family residential properties, and other commercial loans and leases portfolios for the six months ended June 30, 2024 was primarily due to changes in the macroeconomic forecast associated with these specific loss driver models as a result of the loss driver update for these loan portfolios.


	Six Months Ended June 30, 2023
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	12,828	$	(14	)	$	72	$	2,457		$	15,343
Other secured by 1-4 family residential properties		12,374		(120	)		122		(203	)		12,173
Secured by nonfarm, nonresidential properties		19,488		(86	)		106		868			20,376
Other real estate secured		4,743		—			5		(1,267	)		3,481
Other loans secured by real estate:
Other construction		15,132		—			48		(803	)		14,377
Secured by 1-4 family residential properties		21,185		(455	)		20		7,805			28,555
Commercial and industrial loans		23,140		(927	)		487		470			23,170
Consumer loans		5,792		(4,144	)		2,538		1,354			5,540
State and other political subdivision loans		885		—			—		(209	)		676
Other commercial loans and leases		4,647		(23	)		—		983			5,607
Total	$	120,214	$	(5,769	)	$	3,398	$	11,455		$	129,298

The increases in the PCL, LHFI for the six months ended June 30, 2023 were primarily attributable to loan growth and the nature and volume of portfolio qualitative factor.

The PCL, LHFI for the other construction portfolio and the other real estate secured portfolio decreased $2.1 million during the six months ended June 30, 2023 primarily due to improvements in the macroeconomic forecast variables used in the ACL modeling, such as National and Southern Unemployment, National GDP, Prime Rate, and Southern Vacancy Rate and the PD and LGD floors.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following provides a narrative discussion and analysis of Trustmark Corporation’s (Trustmark) financial condition and results of operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the supplemental financial data included in Part I. Item 1. – Financial Statements of this report.

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.

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).

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

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.

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.

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.

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:

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.

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.

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.

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.

Total revenue, which is defined as net interest income plus noninterest income (loss), for the three months ended June 30, 2024 was a negative $257 thousand, a decrease of $178.0 million when compared to the same time period in 2023, principally due to the $182.8 million loss on the sale of available for sale securities and the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans partially offset by the $8.1 million fair value adjustment for the Visa C shares and an increase in net interest income. Total revenue for the six months ended June 30, 2024 was $171.9 million, a decrease of $180.5 million, or 51.2%, when compared to the same time period in 2023, principally due to the 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 net interest income partially offset by the fair value adjustment for the Visa C shares.

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.

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.

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 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.

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.

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.

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.”

Management has continued its practice of maintaining excess funding capacity to provide Trustmark with adequate liquidity for its ongoing operations. In this regard, Trustmark benefits from its strong deposit base, its investment portfolio and its access to funding from a variety of external funding sources such as upstream federal funds lines, FHLB advances and brokered deposits. See the section captioned “Capital Resources and Liquidity” for further discussion of the components of Trustmark’s excess funding capacity.

Total deposits were $15.463 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).

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.

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.

The following tables present financial data derived from Trustmark’s consolidated financial statements as of and for the periods presented ($ in thousands, except per share data):

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

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

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

The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP for the periods presented ($ in thousands, except per share data):

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

The following table presents adjustments to net income and selected financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented ($ in thousands, except per share data):

Net interest income is the principal component of Trustmark’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The net interest margin is computed by dividing fully taxable equivalent (FTE) net interest income by average interest-earning assets and measures how effectively Trustmark utilizes its interest-earning assets in relationship to the interest cost of funding them. The accompanying yield/rate analysis tables show the average balances for all assets and liabilities of Trustmark and the interest income or expense associated with earning assets and interest-bearing liabilities. The yields and rates have been computed based upon interest income and expense adjusted to a FTE basis using the federal statutory corporate tax rate in effect for each of the periods shown. Loans on nonaccrual have been included in the average loan balances, and interest collected prior to these loans having been placed on nonaccrual has been included in interest income. Loan fees included in interest associated with the average LHFS and LHFI balances were immaterial.

Net interest income-FTE for the three 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.

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.

Interest income-FTE for the three and six months ended June 30, 2024 totaled $242.5 million and $475.7 million, respectively, an increase of $20.5 million, or 9.3%, and $51.4 million, or 12.1%, respectively, while the yield on total earning assets increased to 5.67% and 5.58%, respectively, compared to 5.16% and 5.02%, respectively, for the same time periods in 2023. The increase in interest income-FTE for the three and six months ended June 30, 2024 was primarily due to an increase in interest and fees on LHFS and LHFI-FTE. During the three and six months ended June 30, 2024, interest and fees on LHFS and LHFI-FTE increased $23.5 million, or 12.2%, and $53.9 million, or 14.5%, respectively, while the yield on LHFS and LHFI increased 46 basis points to 6.54% and 53 basis points to 6.47%, respectively, when compared to the same time periods in 2023, primarily due to the higher interest rate environment as well as the increase in the average balance of LHFI.

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.

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.

The following table provides the tax equivalent basis yield or rate for each component of the tax equivalent net interest margin for the periods presented ($ in thousands):

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.

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.

See the section captioned “Allowance for Credit Losses” for information regarding Trustmark’s ACL methodology as well as further analysis of the PCL.

The following table provides the comparative components of noninterest income (loss) for the periods presented ($ in thousands):

Changes in various components of noninterest income (loss) are discussed in further detail below. For analysis of Trustmark’s wealth management income, please see the section captioned “Results of Segment Operations.”

The following table illustrates the components of mortgage banking, net included in noninterest income (loss) for the periods presented ($ in thousands):

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%.

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.

The following table illustrates the components of other, net included in noninterest income (loss) for the periods presented ($ in thousands):

The increases in other, net for the three and six months ended June 30, 2024, when compared to the same time periods in 2023 were principally due to the gain on the fair value adjustment for the Visa C shares as well as increases in cash management service fees and net gains on the sale of premises and equipment partially offset by the noncredit-related loss on the sale of the 1-4 family mortgage loans.

The following table illustrates the comparative components of noninterest expense for the periods presented ($ in thousands):

Changes in the various components of noninterest expense are discussed in further detail below. Management considers disciplined expense management a key area of focus in the support of improving shareholder value.

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.

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.

The following table illustrates the comparative components of other noninterest expense for the periods presented ($ in thousands):

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.

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.

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.”

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).”

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.”

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.

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.

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.

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%.

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.

When compared to December 31, 2023, total investment securities decreased by $187.0 million, or 5.9%, during the first six months of 2024. This decrease resulted primarily from 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. Trustmark sold $1.561 billion of available for sale securities generating a loss of $182.8 million during the first six months of 2024, compared to no securities sold during the first six months of 2023.

During 2022, Trustmark reclassified approximately $766.0 million of securities available for sale to securities held to maturity to mitigate the potential adverse impact of a rising interest rate environment on the fair value of the available for sale securities and the

related impact on tangible common equity. At the date of these transfers, the net unrealized holding loss on the available for sale securities totaled approximately $91.9 million ($68.9 million net of tax). The resulting net unrealized holding losses are being amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security.

At June 30, 2024, the net unamortized, unrealized loss on all transferred securities included in accumulated other comprehensive income (loss) (AOCI) in the accompanying consolidated balance sheets totaled $52.1 million compared to $57.6 million at December 31, 2023.

Available for sale securities are carried at their estimated fair value with unrealized gains or losses recognized, net of taxes, in AOCI, a separate component of shareholders’ equity. At June 30, 2024, available for sale securities totaled $1.622 billion, which represented 54.0% of the securities portfolio, compared to $1.763 billion, or 55.3% of total securities, at December 31, 2023. At June 30, 2024, unrealized losses, net on available for sale securities totaled $21.7 million compared to unrealized losses, net of $196.1 million at December 31, 2023. At June 30, 2024, available for sale securities consisted of U.S. Treasury securities and GSE guaranteed mortgage-related securities.

Held to maturity securities are carried at amortized cost and represent those securities that Trustmark both intends and has the ability to hold to maturity. At June 30, 2024, held to maturity securities totaled $1.380 billion, which represented 46.0% of the total securities portfolio, compared to $1.426 billion, or 44.7% of total securities, at December 31, 2023.

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 100.0% of the portfolio in U.S. Treasury securities, GSE-backed obligations and other Aaa-rated securities as determined by Moody’s Investors Services (Moody’s). None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the FHLB of Dallas and FRBA, Trustmark does not hold any other equity investment in a GSE or other governmental entity.

As of June 30, 2024, Trustmark did not hold securities of any one issuer with a carrying value exceeding 10% of total shareholders’ equity, other than certain GSEs which are exempt from inclusion. Management continues to closely monitor the credit quality as well as the ratings of the debt and mortgage-backed securities issued by the GSEs and held in Trustmark’s securities portfolio.

The following table presents Trustmark’s securities portfolio by amortized cost and estimated fair value and by credit rating, as determined by Moody’s, at June 30, 2024 and December 31, 2023 ($ in thousands):

The table above presenting the credit rating of Trustmark’s securities is formatted to show the securities according to the credit rating category, and not by category of the underlying security.

At June 30, 2024, LHFS totaled $185.7 million, consisting of $103.1 million of residential real estate mortgage loans in the process of being sold to third parties and $82.6 million of GNMA optional repurchase loans. At December 31, 2023, LHFS totaled $184.8 million, consisting of $106.0 million of residential real estate mortgage loans in the process of being sold to third parties and $78.8 million of GNMA optional repurchase loans. Please refer to the nonperforming assets table that follows for information on GNMA loans eligible for repurchase which are past due 90 days or more.

Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during the first six months of 2024 or 2023.

For additional information regarding the GNMA optional repurchase loans, please see the section captioned “Past Due LHFS” included in Note 4 – LHFI and Allowance for Credit Losses, LHFI of Part I. Item 1. – Financial Statements of this report.

At June 30, 2024 and December 31, 2023, LHFI consisted of the following ($ in thousands):

LHFI increased $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.

LHFI secured by real estate increased $243.5 million, or 2.6%, during the first six months of 2024, reflecting net growth in other construction LHFI, LHFI secured by nonfarm, nonresidential properties (NFNR), other real estate secured LHFI, and other LHFI secured by 1-4 family residential properties, partially offset by net declines in construction, land development and other land LHFI and LHFI secured by 1-4 family residential properties. Other construction loans increased $154.7 million, or 17.8%, during the first six months of 2024 primarily due to new construction loans in the Alabama, Mississippi and Texas market regions partially offset by other construction loans moved to other loan categories upon the completion of the related construction project. During the first six months of 2024, $414.1 million loans were moved from other construction to other loan categories, including $118.8 million to multi-family residential loans, $277.3 million to nonowner-occupied loans and $18.0 million to owner-occupied loans. Excluding all reclassifications between loan categories, growth in other construction loans across all five market regions totaled $545.7 million, or 62.9%, during the first six months of 2024. NFNR LHFI increased $109.2 million, or 3.1%, during the first six months of 2024 principally due to other construction loans that moved to NFNR LHFI in the Mississippi, Alabama, and Texas market regions. Excluding other construction loan reclassifications, NFNR LHFI decreased $186.1 million, or 5.3%, during the first six months of 2024 principally due to declines in nonowner-occupied loans in the Mississippi, Texas and Tennessee market regions and owner-occupied loans in the Mississippi and Tennessee market regions, partially offset by an increase in owner-occupied loans in the Alabama market region. Other real estate secured LHFI increased $32.4 million, or 2.5%, during the first six months of 2024, primarily due to other construction loans that moved to LHFI secured by multi-family residential properties in the Alabama, Texas and Mississippi market regions. Excluding other construction loan reclassifications, other real estate secured LHFI decreased $86.4 million, or 6.6%, during the first six months of 2024 principally due to declines in LHFI secured by multi-family residential properties in the Alabama and Mississippi market regions, partially offset by growth in LHFI secured by multi-family residential properties in the Texas market region. Other LHFI secured by 1-4 family residential properties increased $20.4 million, or 3.3%, during the first six months of 2024, principally due to growth in the Mississippi, Florida and Texas market regions. LHFI secured by construction, land development and other land decreased $26.4 million, or 4.1%, during the first six months of 2024 primarily due to declines in land development loans in the Alabama and Mississippi market

regions. LHFI secured by 1-4 family residential properties decreased $46.8 million, or 2.1%, during the first six months of 2024 primarily in the Mississippi market region as a result of the sale of 1-4 family mortgage loans during the second quarter of 2024. Trustmark's LHFI secured by 1-4 family residential properties are primarily included in the Mississippi market region because these loans are centrally analyzed and approved as part of the mortgage line of business which is located in Jackson, Mississippi.

Other commercial loans and leases increased $48.2 million, or 8.7%, during the first six months of 2024, principally due to an increase in equipment finance leases. Commercial and industrial LHFI decline $42.3 million, or 2.2%, during the first six months of 2024 reflecting declines in the Tennessee, Texas and Florida market regions, partially offset by growth in the Mississippi and Alabama market regions. State and other political subdivision LHFI declined $35.5 million, or 3.3%, during the first six months of 2024, reflecting declines in the Mississippi, Texas, Tennessee and Florida market regions.

The following table provides information regarding Trustmark’s home equity loans and home equity lines of credit which are included in the LHFI secured by 1-4 family residential properties for the periods presented ($ in thousands):

Due to the increased risk associated with second liens, loan terms and underwriting guidelines differ from those used for products secured by first liens. Loan amounts and loan-to-value ratios are limited and are lower for second liens than first liens. Also, interest rates and maximum amortization periods are adjusted accordingly. In addition, regardless of lien position, the passing credit score for approval of all home equity lines of credit is generally higher than that of term loans. The ACL on LHFI is also reflective of the increased risk related to second liens through application of a greater loss factor to this portion of the portfolio.

Trustmark’s variable rate LHFI are based primarily on various prime and SOFR interest rate bases. The following tables provide information regarding the interest rate terms of Trustmark’s LHFI as of June 30, 2024 and December 31, 2023 ($ in thousands):

In the following tables, LHFI reported by region (along with related nonperforming assets and net charge-offs) are associated with location of origination except for loans secured by 1-4 family residential properties (representing traditional mortgages) and credit cards. These loans are included in the Mississippi Region because they are centrally analyzed and approved as part of a specific line of business located at Trustmark’s headquarters in Jackson, Mississippi.

The following table presents the LHFI composition by region at June 30, 2024 and reflects each region’s diversified mix of loans ($ in thousands):

Trustmark’s ACL methodology for LHFI is based upon guidance within FASB ASC Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost,” as well as applicable regulatory guidance from its primary regulator. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Trustmark’s existing LHFI portfolio. The ACL on LHFI is adjusted through the PCL, LHFI and reduced by the charge off of loan amounts, net of recoveries.

The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Trustmark’s LHFI portfolio segments. These segments are further disaggregated into loan classes, the level at which credit risk is estimated. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations.

During the second quarter of 2024, Trustmark executed a sale on a portfolio of 1-4 family mortgage loans that were at least three payments delinquent and/or nonaccrual at the time of selection. As a result of this sale, a credit mark was established for a sub-pool of the loans in the sale. Due to the lack of historical experience and the use of industry data for this sub-pool, management elected to use the credit mark for reserving purposes on a go forward basis for this sub-pool that meet the same credit criteria of being three payments delinquent and/or nonaccrual. All loans of the sub-pool that meet the above credit criteria will be removed from the 1-4 family residential properties pool and placed into a separate pool with the credit mark reserve applied to the total balance.

The econometric models currently in production reflect segment or pool level sensitivities of probability of default (PD) to changes in macroeconomic variables. By measuring the relationship between defaults and changes in the economy, the quantitative reserve incorporates reasonable and supportable forecasts of future conditions that will affect the value of Trustmark's assets, as required by FASB ASC Topic 326. Under stable forecasts, these linear regressions will reasonably predict a pool’s PD. However, due to the COVID-19 pandemic, the macroeconomic variables used for reasonable and supportable forecasting changed rapidly. At the macroeconomic levels experienced during the COVID-19 pandemic, it was not clear that the models in production would produce reasonably representative results since the models were originally estimated using data beginning in 2004 through 2019. During this period, a traditional, albeit severe, economic recession occurred. Thus, econometric models are sensitive to similar future levels of PD.

In order to prevent the econometric models from extrapolating beyond reasonable boundaries of their input variables, Trustmark chose to establish an upper and lower limit process when applying the periodic forecasts. In this way, Management will not rely upon unobserved and untested relationships in the setting of the quantitative reserve. This approach applies to all input variables, including: Southern Unemployment, National Unemployment, National Gross Domestic Product (GDP), National Home Price Index (HPI), National Commercial Real Estate (CRE) Price Index and the BBB 7-10 Year US Corporate Bond Index. The upper and lower limits are based on the distribution of the macroeconomic variable by selecting extreme percentiles at the upper and lower limits of the distribution, the 1st and 99th percentiles, respectively. These upper and lower limits are then used to calculate the PD for the forecast time period in which the forecasted values are outside of the upper and lower limit range. Due to multiple periods having a PD or loss given default (LGD) at or near zero as a result of the improving macroeconomic forecasts, Management implemented PD and LGD floors to account for the risk associated with each portfolio. The PD and LGD floors are based on Trustmark's historical loss experience and applied at a portfolio level.

The external factors qualitative factor is Management’s best judgment on the loan or pool level impact of all factors that affect the portfolio that are not accounted for using any other part of the ACL methodology (i.e., natural disasters, changes in legislation, impacts due to technology and pandemics). Trustmark's External Factor – Pandemic ensured reserve adequacy for collectively evaluated loans most likely to be impacted by the unique economic and behavioral conditions created by the COVID-19 pandemic. Additional qualitative reserves are derived based on two principles. The first is the disconnect of economic factors to Trustmark’s modeled PD (derived from the econometric models underpinning the quantitative pooled reserves). During the pandemic, extraordinary measures by the federal government were made available to consumers and businesses, including COVID-19 loan payment concessions, direct transfer payments to households, tax deferrals and reduced interest rates, among others. These government interventions may have extended the lag between economic conditions and default, relative to what was captured in the model development data. Because Trustmark’s econometric PD models rely on the observed relationship from the economic downturn from 2007 to 2009 in both timing and severity, Management did not expect the models to reflect these conditions. For example, while the models would predict contemporaneous unemployment peaks and loan defaults, this might not have occurred when borrowers could request payment deferrals. Thus, for the affected population, economic conditions were not fully considered as a part of Trustmark’s quantitative reserve. The second principle is the change in risk that is identified by rating changes. As a part of Trustmark’s credit review process, loans in the affected population were given more frequent screening to ensure accurate ratings were maintained through this dynamic period. Trustmark’s quantitative reserve did not directly address changes in ratings; thus, a migration qualitative factor was designed to work in concert with the quantitative reserve.

macroeconomic conditions to apply to loans rated acceptable or better (risk rates 1-4). In addition, to account for the known changes in risk, a weighted average of the commercial loan portfolio loss rate, derived from the performance trends qualitative factor, was used to dimension additional reserves for downgraded credits. Loans rated acceptable with risk (risk rate 5) or watch (risk rate 6) received the additional reserves based on the average of the macroeconomic conditions and weighted average of the commercial loan portfolio loss rate while the loans rated special mention (risk rate 7) and substandard (risk rate 8) received additional reserves based on the weighted-average described above. During 2022, Management noted that all pass rate loans (risk rate 5 and 6) related to the External Factor - Pandemic qualitative factor either did not experience significant stress related to the pandemic or had since recovered and did not expect future stresses attributed to the pandemic that could affect these loans. As a result, Management decided to accelerate the release of the additional pandemic reserves on all pass rate loans as a result of pandemic conditions resolving. During the fourth quarter of 2023, Management decided to resolve the External Factor-Pandemic qualitative factor as a result of the remaining loan balances that were identified as COVID affected loans being immaterial from both a reserve and balance perspective. The remaining loans were incorporated back into the performance qualitative factor as a result of this resolution. Further, due to this resolution there is no longer any active External Factor as of December 31, 2023.

During 2022, Management elected to activate the nature and volume of the portfolio qualitative factor as a result of a sub-pool of the secured by 1-4 family residential properties growing to a significant size along with the underlying nature being different as well. The nature and volume of the portfolio qualitative factor utilizes a WARM methodology that uses industry data for the assumptions to support the qualitative adjustment. The industry data is used to compile a PD based on credit score ranges along with using the industry data to compile an LGD. The sub-pool of credits are then aggregated into the appropriate credit score bands in which a weighted-average loss rate is calculated based on the PD and LGD for each credit score range. This weighted-average loss rate is then applied to the expected balance for the sub-segment of credits. This total is then used as the qualitative reserve adjustment.

Determining the appropriateness of the allowance is complex and requires judgment by Management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall LHFI portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense.

For a complete description of Trustmark’s ACL methodology and the quantitative and qualitative factors included in the calculation, please see Note 4 – LHFI and Allowance for Credit Losses, LHFI included in Part I. Item 1. – Financial Statements of this report.

At June 30, 2024, the ACL on LHFI was $154.7 million, an increase of $15.3 million, or 11.0%, when compared with December 31, 2023. The increase in the ACL during the first six months of 2024 was principally due to 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. Allocation of Trustmark’s $154.7 million ACL on LHFI, represented 1.05% of commercial LHFI and 1.59% of consumer and home mortgage LHFI, resulting in an ACL to total LHFI of 1.18% as of June 30, 2024. This compares with an ACL to total LHFI of 1.08% at December 31, 2023, which was allocated to commercial LHFI at 0.85% and to consumer and mortgage LHFI at 1.81%.

The following table presents changes in the ACL on LHFI for the periods presented ($ in thousands):

The increase in net charge-offs when the three and six months ended June 30, 2024, are compared to the same time periods in 2023 was principally due to the charge-offs related to the sale of 1-4 family mortgage loans during the second quarter of 2024 and an increase in gross charge-offs in the Texas market region primarily related to two large nonaccrual commercial credits.

The following table presents the net (charge-offs) recoveries by geographic market region for the periods presented ($ in thousands):

The PCL, LHFI, excluding the PCL, LHFI 1-4 family mortgage loans, for the three and six months ended June 30, 2024 totaled 0.44% and 0.34%, respectively, of average loans (LHFS and LHFI) compared to 0.26% and 0.18%, respectively, of average loans (LHFS and LHFI) 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.

Trustmark maintains a separate ACL on off-balance sheet credit exposures, including unfunded loan commitments and letters of credit, which is included on the accompanying consolidated balance sheets. Expected credit losses for off-balance sheet credit exposures are estimated by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by Trustmark. Trustmark calculates a loan pool level unfunded amount for the period. Trustmark calculates an expected funding rate each period which is applied to each pool’s unfunded commitment balances to ensure that reserves will be applied to each pool based upon balances expected to be funded based upon historical levels. Additionally, a reserve rate is applied to the unfunded commitment balance, which incorporates both quantitative and a majority of the qualitative aspects of the current period’s expected credit loss rate. The reserve rate that is applied excludes the reserve impact of the performance trends qualitative factor. During the first quarter of 2024, Management decided to implement a performance trends qualitative factor for unfunded commitments. The same assumptions are applied in this calculation that the funded balances utilize with the addition of using the funding rates on the unfunded commitments. The performance trends qualitative factor reserve is then added to the other calculated reserve to get a total reserve for off-balance sheet credit exposures. See the section captioned “ACL on Off-Balance Sheet Credit Exposures” in Note 13 – Contingencies included in Part I. Item 1. – Financial Statements of this report for complete description of Trustmark’s ACL methodology on off-balance sheet credit exposures.

Adjustments to the ACL on off-balance sheet credit exposures are recorded to the PCL, off-balance sheet credit exposures. At June 30, 2024, the ACL on off-balance sheet credit exposures totaled $30.3 million compared to $34.1 million at December 31, 2023, a decrease of $3.8 million, or 11.1%. 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.

The table below provides the components of nonperforming assets by geographic market region at June 30, 2024 and December 31, 2023 ($ in thousands):

See the previous discussion of LHFS for more information on Trustmark’s serviced GNMA loans eligible for repurchase and the impact of Trustmark’s repurchases of delinquent mortgage loans under the GNMA optional repurchase program.

At June 30, 2024, nonaccrual LHFI totaled $44.3 million, or 0.33% of total LHFS and LHFI, reflecting a decrease of $55.7 million, or 55.7%, relative to December 31, 2023. The decrease in nonaccrual LHFI during the first six months of 2024 was primarily 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.

For additional information regarding nonaccrual LHFI, see the section captioned “Nonaccrual and Past Due LHFI” included in Note 4 – LHFI and Allowance for Credit Losses, LHFI in Part I. Item 1. – Financial Statements of this report.

Other real estate at June 30, 2024 decreased $281 thousand, or 4.1%, when compared with December 31, 2023. The decrease in other real estate was principally due to properties sold in the Mississippi and Alabama market regions largely offset by properties foreclosed in the Mississippi market region. During the first six months of 2024, Trustmark foreclosed and subsequently sold properties totaling $2.7 million in the Mississippi market region, $2.1 million of which was sold as part of the sale of 1-4 family mortgage loans during the second quarter of 2024.

The following tables illustrate changes in other real estate by geographic market region for the periods presented ($ in thousands):

Other real estate is revalued on an annual basis or more often if market conditions necessitate. Subsequent to foreclosure, losses on the periodic revaluation of the property are charged against the reserve for other real estate write-downs or net income in other real estate expense, if a reserve does not exist. Write-downs of other real estate decreased $439 thousand when the first six months of 2024 is compared to the same time period in 2023, primarily due to an increase in recoveries on other real estate properties foreclosed in the Mississippi and Alabama market regions.

For additional information regarding other real estate, please see Note 6 – Other Real Estate included in Part I. Item 1. – Financial Statements of this report.

Trustmark’s deposits are its primary source of funding and primarily consist of core deposits from the communities Trustmark serves. Deposits include interest-bearing and noninterest-bearing demand accounts, savings, MMDA, CDs and individual retirement accounts. Total deposits were $15.463 billion at June 30, 2024 compared to $15.570 billion at December 31, 2023, a decrease of $106.9 million, or 0.7%. 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 MMDA and all categories of CDs.

At June 30, 2024, Trustmark's total uninsured deposits were $5.552 billion, or 35.9% of total deposits, compared to $5.601 billion, or 36.0% of total deposits, at December 31, 2023.

Trustmark uses short-term borrowings, such as federal funds purchased, securities sold under repurchase agreements and short-term FHLB advances, to fund growth of earning assets in excess of deposit growth. See the section captioned “Liquidity” for further discussion of the components of Trustmark’s excess funding capacity.

Federal funds purchased and securities sold under repurchase agreements totaled $314.1 million at June 30, 2024 compared to $405.7 million at December 31, 2023, a decrease of $91.6 million, or 22.6%, principally due to a decrease in upstream federal funds purchased. At June 30, 2024 and December 31, 2023, $29.1 million and $35.7 million, respectively, represented customer related transactions, such as commercial sweep repurchase balances. Trustmark had $285.0 million of upstream federal funds purchased at June 30, 2024 compared to $370.0 million at December 31, 2023.

Other borrowings totaled $336.7 million at June 30, 2024, a decrease of $146.5 million, or 30.3%, when compared with $483.2 million at December 31, 2023, principally due to a decline in outstanding short-term FHLB advances with the FHLB of Dallas.

Information required in this section is set forth under the heading “Legal Proceedings” of Note 13 – Contingencies included in Part I. Item 1. – Financial Statements of this report.

Information required in this section is set forth under the heading “Lending Related” of Note 13 – Contingencies included in Part I. Item 1. – Financial Statements of this report.

Trustmark places a significant emphasis on the maintenance of a strong capital position, which promotes investor confidence, provides access to funding sources under favorable terms and enhances Trustmark’s ability to capitalize on business growth and acquisition opportunities. Higher levels of liquidity, however, bear corresponding costs, measured in terms of lower yields on short-term, more liquid earning assets and higher expenses for extended liability maturities. Trustmark manages capital based upon risks and growth opportunities as well as regulatory requirements. Trustmark utilizes a capital model in order to provide Management with a monthly tool for analyzing changes in its strategic capital ratios. This allows Management to hold sufficient capital to provide for growth opportunities and protect the balance sheet against sudden adverse market conditions, while maintaining an attractive return on equity to shareholders.

At June 30, 2024, Trustmark’s total shareholders’ equity was $1.879 billion, an increase of $217.3 million, or 13.1%, when compared to December 31, 2023. During the first six months of 2024, shareholders’ equity increased primarily as a result of the net change in the fair market value of securities available for sale, principally due to the restructuring of the available for sale securities portfolio during the second quarter of 2024, as well as net income of $115.4 million, partially offset by common stock dividends of $28.4 million.

Trustmark and TNB are subject to minimum risk-based capital and leverage capital requirements, as described in the section captioned “Capital Adequacy” included in Part I. Item 1. – Business of Trustmark’s 2023 Annual Report, which are administered by the federal bank regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures

of assets, liabilities and certain off-balance sheet instruments. Trustmark’s and TNB’s minimum risk-based capital requirements include a capital conservation buffer of 2.5%. AOCI is not included in computing regulatory capital. Trustmark elected the five-year phase-in transition period (through December 31, 2024) related to adopting FASB ASU 2016-13 for regulatory capital purposes. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB and limit Trustmark’s and TNB’s ability to pay dividends. At June 30, 2024, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at June 30, 2024. To be categorized in this manner, Trustmark and TNB maintained minimum common equity Tier 1 risk-based capital, Tier 1 risk-based capital, total risk-based capital and Tier 1 leverage ratios, and were not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by their primary federal regulators to meet and maintain a specific capital level for any capital measures. There are no significant conditions or events that have occurred since June 30, 2024 which Management believes have affected Trustmark’s or TNB’s present classification.

In 2020, Trustmark enhanced its capital structure with the issuance of $125.0 million of subordinated notes. At June 30, 2024, the carrying amount of the subordinated notes was $123.6 million compared to $123.5 million at December 31, 2023. The subordinated notes mature December 1, 2030 and are redeemable at Trustmark’s option under certain circumstances. For regulatory capital purposes, the subordinated notes qualified as Tier 2 capital for Trustmark at June 30, 2024 and December 31, 2023. Trustmark may utilize the full carrying value of the subordinated notes as Tier 2 capital until December 1, 2025 (five years prior to maturity). Beginning December 1, 2025, the subordinated notes will phase out of Tier 2 capital 20.0% each year until maturity.

In 2006, Trustmark enhanced its capital structure with the issuance of trust preferred securities. For regulatory capital purposes, the trust preferred securities qualified as Tier 1 capital at June 30, 2024 and December 31, 2023. Trustmark intends to continue to utilize $60.0 million in trust preferred securities issued by Trustmark Preferred Capital Trust I (the Trust) as Tier 1 capital up to the regulatory limit, as permitted by the grandfather provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III Final Rule.

Refer to the section captioned “Regulatory Capital” included in Note 16 – Shareholders’ Equity in Part I. Item 1. – Financial Statements of this report for an illustration of Trustmark’s and TNB’s actual regulatory capital amounts and ratios under regulatory capital standards in effect at June 30, 2024 and December 31, 2023.

Dividends per common share for the six months ended June 30, 2024 and 2023 were $0.46. Trustmark’s indicated dividend for 2024 is $0.92 per common share, which is the same as dividends per common share declared in 2023.

From time to time, Trustmark's Board of Directors has authorized stock repurchase plans. In general, stock repurchase plans allow Trustmark to proactively manage its capital position and return excess capital to shareholders. Shares purchased also provide Trustmark with shares of common stock necessary to satisfy obligations related to stock compensation awards.

On December 6, 2022, the Board of Directors of Trustmark authorized a stock repurchase program, effective January 1, 2023, under which $50.0 million of Trustmark's outstanding common stock could be acquired through December 31, 2023. No shares were repurchased under this authority.

On December 5, 2023, the Board of Directors of Trustmark authorized a new stock repurchase program, effective January 1, 2024, under which $50.0 million of Trustmark's outstanding common stock may be acquired through December 31, 2024. The repurchase program, which is subject to market conditions and management discretion, will be implemented through open market repurchases or privately negotiated transactions. No shares have been repurchased under this authority.

Liquidity is the ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes. Consistent cash flows from operations and adequate capital provide internally generated liquidity. Furthermore, Management maintains funding capacity from a variety of external sources to meet daily funding needs, such as those required to meet deposit withdrawals, loan disbursements and security settlements. Liquidity strategy also includes the use of wholesale funding sources to provide for the seasonal fluctuations of deposit and loan demand and the cyclical fluctuations of the economy that impact the availability of funds. Management keeps excess funding capacity available to meet potential demands associated with adverse circumstances.

The asset side of the balance sheet provides liquidity primarily through maturities and cash flows from loans and securities as well as the ability to pledge or sell certain loans and securities. The liability portion of the balance sheet provides liquidity primarily through noninterest and interest-bearing deposits. Trustmark utilizes federal funds purchased, FHLB advances, securities sold under repurchase agreements, the Federal Reserve Discount Window (Discount Window) and brokered deposits to provide additional liquidity. Access to these additional sources represents Trustmark’s incremental borrowing capacity.

Trustmark's liquidity position is continuously monitored and adjustments are made to manage the balance as deemed appropriate. Liquidity risk management is an important element to Trustmark's asset/liability management process. Trustmark regularly models liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions or other significant occurrences as deemed appropriate by Management. These scenarios are incorporated into Trustmark's contingency funding plan, which provides the basis for the identification of its liquidity needs.

Deposit accounts represent Trustmark’s largest funding source. Average deposits totaled $15.413 billion for the first six months of 2024 and represented approximately 82.3% of average liabilities and shareholders’ equity, compared to average deposits of $14.702 billion, which represented 78.9% of average liabilities and shareholders’ equity for the first six months of 2023. For more information on average interest-bearing deposits, please see the analysis included in the section captioned “Net Interest Income.”

Trustmark had $539.4 million held in an interest-bearing account at the FRBA at June 30, 2024, compared to $712.0 million held at December 31, 2023.

Trustmark utilizes brokered deposits to supplement other wholesale funding sources. At June 30, 2024, brokered sweep MMDA deposits totaled $10.3 million compared to $10.6 million at December 31, 2023. In addition, Trustmark had $599.8 million of brokered CDs at June 30, 2024 compared to $578.8 million at December 31, 2023.

At June 30, 2024, Trustmark had $285.0 million of upstream federal funds purchased compared to $370.0 million of upstream federal funds purchased at December 31, 2023. Trustmark maintains adequate federal funds lines to provide sufficient short-term liquidity.

Trustmark maintains a relationship with the FHLB of Dallas, which provided $250.0 million of outstanding short-term and no long-term advances at June 30, 2024, compared to $400.0 million of outstanding short-term and no long-term advances at December 31, 2023. Under the existing borrowing agreement, Trustmark had sufficient qualifying collateral to increase FHLB advances or letters of credit with the FHLB of Dallas by $4.177 billion at June 30, 2024.

In addition, at June 30, 2024, Trustmark had no short-term or long-term FHLB advances outstanding with the FHLB of Atlanta compared to no short-term and $58 thousand in long-term FHLB advances at December 31, 2023, which were acquired in the BancTrust merger in 2013. Trustmark had non-member status and thus no additional borrowing capacity with the FHLB of Atlanta.

Additionally, Trustmark has the ability to leverage its unencumbered investment securities as collateral. At June 30, 2024, Trustmark had approximately $726.0 million available in unencumbered agency securities compared to $842.0 million in unencumbered Treasury and agency securities at December 31, 2023.

Another borrowing source is the Discount Window. At June 30, 2024, Trustmark had approximately $1.247 billion available in collateral capacity at the Discount Window primarily from pledges of commercial and industrial LHFI, compared with $1.374 billion at December 31, 2023.

Additionally, on March 15, 2020, in response to the COVID-19 pandemic, the FRB reduced reserve requirements for insured depository institutions to zero percent, which increased TNB’s available liquidity.

During 2020, Trustmark issued $125.0 million aggregate principal amount of its 3.625% fixed-to-floating rate subordinated notes. At June 30, 2024, the carrying amount of the subordinated notes was $123.6 million compared to $123.5 million at December 31, 2023. The subordinated notes mature December 1, 2030 and are redeemable at Trustmark’s option under certain circumstances. The subordinated notes are unsecured obligations and are subordinated in right of payment to all of Trustmark’s existing and future senior indebtedness, whether secured or unsecured. The subordinated notes are obligations of Trustmark only and are not obligations of, and are not guaranteed by, any of its subsidiaries, including TNB.

During 2006, Trustmark completed a private placement of $60.0 million of trust preferred securities through a newly formed Delaware trust affiliate, the Trust. The trust preferred securities mature September 30, 2036 and are redeemable at Trustmark’s option. The proceeds from the sale of the trust preferred securities were used by the Trust to purchase $61.9 million in aggregate principal amount of Trustmark’s junior subordinated debentures.

The Board of Directors of Trustmark currently has the authority to issue up to 20.0 million preferred shares with no par value. The ability to issue preferred shares in the future will provide Trustmark with additional financial and management flexibility for general corporate and acquisition purposes. At June 30, 2024, Trustmark had no shares of preferred stock issued and outstanding.

Management believes that Trustmark has sufficient liquidity and capital resources to meet presently known cash flow requirements arising from ongoing business transactions. As of June 30, 2024, Management is not aware of any events that are reasonably likely to have a material adverse effect on Trustmark's liquidity, capital resources or operations. In addition, Management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on Trustmark.

In the ordinary course of business, Trustmark has entered into contractual obligations and has made other commitments to make future payments. Please refer to the accompanying notes to the consolidated financial statements included in Part I. Item 1. – Financial Statements of this report and Trustmark's 2023 Annual Report for the expected timing of such payments as of June 30, 2024 and December 31, 2023. There have been no material changes in Trustmark's contractual obligations since year-end.

Market risk reflects the potential risk of loss arising from adverse changes in interest rates and market prices. Trustmark has risk management policies to monitor and limit exposure to market risk. Trustmark’s primary market risk is interest rate risk created by core banking activities. Interest rate risk is the potential variability of the income generated by Trustmark’s financial products or services, which results from changes in various market interest rates. Market rate changes may take the form of absolute shifts, variances in the relationships between different rates and changes in the shape or slope of the interest rate term structure.

Following the LIBOR cessation date of June 30, 2023, the nationwide process for replacing LIBOR in financial contracts that mature thereafter and that do not provide for an effective means to replace LIBOR upon its cessation took effect pursuant to the Adjustable Interest Rate (LIBOR) Act. For contracts in which a party has the discretion to identify a replacement rate, the Adjustable Interest Rate (LIBOR) Act also provides a safe harbor to parties if they choose the SOFR-based benchmark replacement rate to be identified by the FRB. Trustmark had a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that were either directly or indirectly dependent on LIBOR. As of June 30, 2024, all of Trustmark’s LIBOR exposure was remediated or in the process of being remediated. The transition from LIBOR could create costs and additional risk. Trustmark cannot predict what the ultimate impact of the transition from LIBOR will be; however, Trustmark has implemented various measures to manage the transition and mitigate risks. For additional information regarding the transition from LIBOR and Trustmark’s management of this transition, please see the respective risk factor included in Part I. Item 1A. – Risk Factors, of Trustmark’s 2023 Annual Report.

Management continually develops and applies cost-effective strategies to manage these risks. Management’s Asset/Liability Committee sets the day-to-day operating guidelines, approves strategies affecting net interest income and coordinates activities within policy limits established by the Board of Directors of Trustmark. A key objective of the asset/liability management program is to quantify, monitor and manage interest rate risk and to assist Management in maintaining stability in the net interest margin under varying interest rate environments.

Trustmark uses financial derivatives for management of interest rate risk. Management’s Asset/Liability Committee, in its oversight role for the management of interest rate risk, approves the use of derivatives in balance sheet hedging strategies. The most common derivatives employed by Trustmark are interest rate lock commitments, forward contracts (both futures contracts and options on futures contracts), interest rate swaps, interest rate caps and interest rate floors. As a general matter, the values of these instruments are designed to be inversely related to the values of the assets that they hedge (i.e., if the value of the hedged asset falls, the value of the related hedge rises). In addition, Trustmark has entered into derivatives contracts as counterparty to one or more customers in connection with loans extended to those customers. These transactions are designed to hedge interest rate exposure of the customers and are not entered into by Trustmark for speculative purposes. Increased federal regulation of the derivatives markets may increase the cost to Trustmark to administer derivatives programs.

Trustmark engages in a cash flow hedging program to add stability to interest income and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for Trustmark making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate floor spreads designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates fall below

the purchased floor strike rate on the contract and payments of variable rate amounts if interest rates fall below the sold floor strike rate on the contract. Trustmark uses such derivatives to hedge the variable cash flows associated with existing and anticipated variable-rate loan assets. At June 30, 2024, the aggregate notional value of Trustmark's interest rate swaps and floor spreads designated as cash flow hedges totaled $1.315 billion compared to $1.125 billion at December 31, 2023.

Trustmark records any gains or losses on these cash flow hedges in AOCI. Gains and losses on derivatives representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with Trustmark’s accounting policy election. The earnings recognition of excluded components included in interest and fees on LHFS and LHFI totaled $124 thousand and $209 thousand of amortization expense for the three and six months ended June 30, 2024, respectively, compared to $13 thousand and $22 thousand of amortization expense for the three and six months ended June 30, 2023, respectively. As interest payments are received on Trustmark's variable-rate assets, amounts reported in AOCI are reclassified into interest and fees on LHFS and LHFI in the accompanying consolidated statements of income during the same period. For the three and six months ended June 30, 2024, Trustmark reclassified a loss, net of tax, of $3.7 million and $7.3 million, respectively, into interest and fees on LHFS and LHFI, compared to $3.0 million and $5.2 million for the same time periods in 2023, respectively. During the next twelve months, Trustmark estimates that $15.6 million will be reclassified as a reduction to interest and fees on LHFS and LHFI. This amount could differ due to changes in interest rates, hedge de-designations or the addition of other hedges.

As part of Trustmark’s risk management strategy in the mortgage banking business, various derivative instruments such as interest rate lock commitments and forward sales contracts are utilized. Rate lock commitments are residential mortgage loan commitments with customers, which guarantee a specified interest rate for a specified period of time. Trustmark’s obligations under forward contracts consist of commitments to deliver mortgage loans, originated and/or purchased, in the secondary market at a future date. The gross notional amount of Trustmark’s off-balance sheet obligations under these derivative instruments totaled $214.5 million at June 30, 2024, with a positive valuation adjustment of $809 thousand, compared to $171.4 million, with a negative valuation adjustment of $150 thousand at December 31, 2023.

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that economically hedges changes in fair value of the MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under GAAP. The total notional amount of these derivative instruments was $301.5 million at June 30, 2024 compared to $285.0 million at December 31, 2023. These exchange-traded derivative instruments are accounted for at fair value with changes in the fair value recorded as noninterest income (loss) in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net negative ineffectiveness of $4.5 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, the impact was a net negative ineffectiveness of $5.6 million and $3.1 million, respectively.

Trustmark offers certain interest rate derivatives products directly to qualified commercial lending clients seeking to manage their interest rate risk under loans they have entered into with TNB. Trustmark economically hedges interest rate swap transactions executed with commercial lending clients by entering into offsetting interest rate swap transactions with institutional derivatives market participants. Derivatives transactions executed as part of this program are not designated as qualifying hedging relationships under GAAP and are, therefore, carried on Trustmark’s financial statements at fair value with the change in fair value recorded as noninterest income in bank card and other fees. Because these derivatives have mirror-image contractual terms, in addition to collateral provisions which mitigate the impact of non-performance risk, the changes in fair value are expected to substantially offset. The Chicago Mercantile Exchange rules legally characterize variation margin collateral payments made or received for centrally cleared interest rate swaps as settlements rather than collateral. As a result, centrally cleared interest rate swaps included in other assets and other liabilities are presented on a net basis in the accompanying consolidated balance sheets. As of June 30, 2024, Trustmark had interest rate swaps with an aggregate notional amount of $1.640 billion related to this program, compared to $1.500 billion as of December 31, 2023.

Trustmark has agreements with its financial institution counterparties that contain provisions where if Trustmark defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Trustmark could also be deemed to be in default on its derivatives obligations.

At June 30, 2024, there was no termination value of interest rate swaps in a liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements compared to $1.4 million at December 31, 2023. At June 30, 2024 and December 31, 2023, Trustmark had posted collateral of $40 thousand and $2.0 million, respectively, against its obligations because of negotiated thresholds and minimum transfer amounts under these agreements. If Trustmark had breached any of these triggering provisions at June 30, 2024, it could have been required to settle its obligations under the agreements at the termination value (which is expected to approximate fair market value).

Credit risk participation agreements arise when Trustmark contracts with other financial institutions, as a guarantor or beneficiary, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third-party default on the underlying swap. At June 30, 2024, Trustmark had entered into eight risk participation agreements as a beneficiary with an aggregate notional amount of $53.4 million compared to six risk participation agreements as a beneficiary with an aggregate notional amount of $40.1 million at December 31, 2023. At June 30, 2024, Trustmark had entered into thirty-seven risk participation agreements as a guarantor with an aggregate notional amount of $304.9 million compared to thirty-five risk participation agreements as a guarantor with an aggregate notional amount of $304.7 million at December 31, 2023. The aggregate fair values of these risk participation agreements were immaterial at both June 30, 2024 and December 31, 2023.

Trustmark’s participation in the derivatives markets is subject to increased federal regulation of these markets. Trustmark believes that it may continue to use financial derivatives to manage interest rate risk and also to offer derivatives products to certain qualified commercial lending clients in compliance with the Volcker Rule. However, the increased federal regulation of the derivatives markets has increased the cost to Trustmark of administering its derivatives programs. Some of these costs (particularly compliance costs related to the Volcker Rule and other federal regulations) are expected to recur in the future.

The primary purpose in managing interest rate risk is to invest capital effectively and preserve the value created by the core banking business. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.

Financial simulation models are the primary tools used by Management’s Asset/Liability Committee to measure interest rate exposure. The significant increase in short-term market interest rates and the overall interest rate environment is likely to affect the balance sheet composition and rates. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior. Using a wide range of scenarios, Management is provided with extensive information on the potential impact on net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Trustmark’s balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of Trustmark’s balance sheet, resulting from both strategic plans and customer behavior. In addition, the model incorporates Management’s assumptions and expectations regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates.

Based on the results of the simulation models using static balances, the table below summarizes the effect various one-year interest rate shift scenarios would have on net interest income compared to a base case, flat scenario at June 30, 2024 and 2023.

Management cannot provide any assurance about the actual effect of changes in interest rates on net interest income. The estimates provided do not include the effects of possible strategic changes in the balances of various assets and liabilities throughout 2024 or additional actions Trustmark could undertake in response to changes in interest rates. Management will continue to prudently manage the balance sheet in an effort to control interest rate risk and maintain profitability over the long term.

Another component of interest rate risk management is measuring the economic value-at-risk for a given change in market interest rates. The economic value-at-risk may indicate risks associated with longer-term balance sheet items that may not affect net interest income at risk over shorter time periods. Trustmark uses computer-modeling techniques to determine the present value of all asset and liability cash flows (both on- and off-balance sheet), adjusted for prepayment expectations, using a market discount rate. The economic value

of equity (EVE), also known as net portfolio value, is defined as the difference between the present value of asset cash flows and the present value of liability cash flows. The resulting change in EVE in different market rate environments, from the base case scenario, is the amount of EVE at risk from those rate environments.

The following table summarizes the effect that various interest rate shifts would have on net portfolio value at June 30, 2024 and 2023.

Trustmark determines the fair value of the MSR using a valuation model administered by a third party that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, default rates, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income and other ancillary income such as late fees. Management reviews all significant assumptions quarterly. Mortgage loan prepayment speeds, a key assumption in the model, is the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate used to determine the present value of estimated future net servicing income, another key assumption in the model, is an estimate of the required rate of return investors in the market would require for an asset with similar risk. Both assumptions can, and generally will, change as market conditions and interest rates change.

By way of example, an increase in either the prepayment speed or discount rate assumption will result in a decrease in the fair value of the MSR, while a decrease in either assumption will result in an increase in the fair value of the MSR. In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and discount rates. These fluctuations can be rapid and may continue to be significant. Therefore, estimating prepayment speed and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.

At June 30, 2024, the MSR fair value was $136.7 million, compared to $134.4 million at June 30, 2023. The impact on the MSR fair value of a 10% adverse change in prepayment speed or a 100 basis point increase in discount rate at June 30, 2024, would be a decline in fair value of approximately $4.9 million and $5.5 million, respectively, compared to a decline in fair value of approximately $4.7 million and $5.5 million, respectively, at June 30, 2023. Changes of equal magnitude in the opposite direction would produce similar increases in fair value in the respective amounts.

For an overview of Trustmark’s critical accounting policies, see the section captioned “Critical Accounting Policies” included in Part II. Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Trustmark’s 2023 Annual Report. There have been no significant changes in Trustmark’s critical accounting policies during the first six months of 2024.

For additional information regarding Trustmark’s basis of presentation and accounting policies, see Note 1 – Business, Basis of Financial Statement Presentation and Principles of Consolidation included in Part I. Item 1. – Financial Statements of this report.

For a complete list of recently adopted and pending accounting policies and the impact on Trustmark, see Note 20 – Accounting Policies Recently Adopted and Pending Accounting Pronouncements included in Part I. Item 1. – Financial Statements of this report.

The information required by this item is included in the discussion of Market/Interest Rate Risk Management found in Management’s Discussion and Analysis.

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by Trustmark’s Management, with the participation of its Chief Executive Officer and Treasurer and Principal Financial Officer (Principal Financial Officer), of the effectiveness of Trustmark’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and the Principal Financial Officer concluded that Trustmark’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There has been no change in Trustmark’s internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, Trustmark’s internal control over financial reporting.

Information required in this section is set forth under the heading “Legal Proceedings” of Note 13 – Contingencies in Part I. Item 1 – Financial Statements of this report.

In accordance with FASB Accounting Standards Codification (ASC) Topic 450-20, “Loss Contingencies,” Trustmark will establish an accrued liability for litigation matters when those matters present loss contingencies that are both probable and reasonably estimable. At the present time, Trustmark believes, based on its evaluation and the advice of legal counsel, that a loss in any such proceeding is not probable and reasonably estimable. All matters will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable. In view of the inherent difficulty of predicting the outcome of legal proceedings, Trustmark cannot predict the eventual outcomes of the currently pending matters or the timing of their ultimate resolution. Trustmark currently believes, however, based upon the advice of legal counsel and Management’s evaluation and after taking into account its current insurance coverage, that the legal proceedings currently pending should not have a material adverse effect on Trustmark’s consolidated financial condition.

There has been no material change in the risk factors previously disclosed in Trustmark’s 2023 Annual Report.

On December 5, 2023, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2024, under which $50.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2024. The repurchase program, which is subject to market conditions and management discretion, will be implemented through open market repurchases or privately negotiated transactions.

The following table provides information with respect to purchases by Trustmark or made on behalf of Trustmark of its common stock during the three months ended June 30, 2024 ($ in thousands, except per share amounts):

During the three months ended June 30, 2024, none of Trustmark’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Trustmark’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).

The exhibits listed in the Exhibit Index are filed herewith or are incorporated herein by reference.

All other exhibits are omitted, as they are inapplicable or not required by the related instructions.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Mississippi		64-0471500
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


248 East Capitol Street, Jackson, Mississippi		39201
(Address of principal executive offices)		(Zip Code)


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


	(Unaudited)
	June 30, 2024			December 31, 2023
Assets
Cash and due from banks	$	822,141		$	975,343
Securities available for sale, at fair value (amortized cost: $1,643,310 - 2024 $1,959,007-2023; allowance for credit losses (ACL): $0)		1,621,659			1,762,878
Securities held to maturity, net of ACL of $0 (fair value: $1,293,131 - 2024; $1,355,504-2023)		1,380,487			1,426,279
Loans held for sale (LHFS)		185,698			184,812
Loans held for investment (LHFI)		13,155,418			12,950,524
Less ACL, LHFI		154,685			139,367
Net LHFI		13,000,733			12,811,157
Premises and equipment, net		232,681			232,229
Mortgage servicing rights (MSR)		136,658			131,870
Goodwill		334,605			334,605
Identifiable intangible assets, net		181			236
Other real estate, net		6,586			6,867
Operating lease right-of-use assets		36,925			35,711
Other assets		694,133			752,568
Assets of discontinued operations		—			67,634
Total Assets	$	18,452,487		$	18,722,189

Liabilities
Deposits:
Noninterest-bearing	$	3,153,506		$	3,197,620
Interest-bearing		12,309,382			12,372,143
Total deposits		15,462,888			15,569,763
Federal funds purchased and securities sold under repurchase agreements		314,121			405,745
Other borrowings		336,687			483,230
Subordinated notes		123,592			123,482
Junior subordinated debt securities		61,856			61,856
ACL on off-balance sheet credit exposures		30,265			34,057
Operating lease liabilities		40,517			39,097
Other liabilities		203,420			331,085
Liabilities of discontinued operations		—			12,027
Total Liabilities		16,573,346			17,060,342

Shareholders' Equity
Common stock, no par value:
Authorized: 250,000,000 shares Issued and outstanding: 61,205,969 shares - 2024; 61,071,173 shares - 2023		12,753			12,725
Capital surplus		161,834			159,688
Retained earnings		1,796,111			1,709,157
Accumulated other comprehensive income (loss), net of tax		(91,557	)		(219,723	)
Total Shareholders' Equity		1,879,141			1,661,847
Total Liabilities and Shareholders' Equity	$	18,452,487		$	18,722,189


	Three Months Ended June 30,					Six Months Ended June 30,
	2024			2023		2024			2023
Interest Income
Interest and fees on LHFS & LHFI	$	213,095		$	189,573	$	419,187		$	365,082
Interest on securities:
Taxable		17,929			16,779		33,563			33,540
Tax exempt		1			54		4			127
Interest on federal funds sold and securities purchased under reverse repurchase agreements		2			45		3			75
Other interest income		8,124			12,077		16,234			18,604
Total Interest Income		239,151			218,528		468,991			417,428
Interest Expense
Interest on deposits		83,681			54,409		167,397			95,307
Interest on federal funds purchased and securities sold under repurchase agreements		5,663			4,865		11,254			9,697
Other interest expense		8,778			19,350		16,481			34,925
Total Interest Expense		98,122			78,624		195,132			139,929
Net Interest Income		141,029			139,904		273,859			277,499
Provision for credit losses (PCL), LHFI		14,696			8,211		22,404			11,455
PCL, off-balance sheet credit exposures		(3,600	)		245		(3,792	)		(1,997	)
PCL, LHFI sale of 1-4 family mortgage loans		8,633			—		8,633			—
Net Interest Income After PCL		121,300			131,448		246,614			268,041
Noninterest Income (Loss)
Service charges on deposit accounts		10,924			10,695		21,882			21,031
Bank card and other fees		9,225			8,917		16,653			16,720
Mortgage banking, net		4,204			6,600		13,119			14,239
Wealth management		9,692			8,882		18,644			17,662
Other, net		7,461			2,735		10,563			5,255
Security gains (losses), net		(182,792	)		—		(182,792	)		—
Total Noninterest Income (Loss)		(141,286	)		37,829		(101,931	)		74,907
Noninterest Expense
Salaries and employee benefits		64,838			66,799		130,325			131,571
Services and fees		24,743			27,821		49,174			52,855
Net occupancy - premises		7,265			6,897		14,535			14,212
Equipment expense		6,241			6,337		12,566			12,632
Other expense		15,239			13,767		31,390			27,940
Total Noninterest Expense		118,326			121,621		237,990			239,210
Income (Loss) From Continuing Operations Before Income Taxes		(138,312	)		47,656		(93,307	)		103,738
Income taxes from continuing operations		(37,707	)		6,452		(30,875	)		14,889
Income (Loss) From Continuing Operations		(100,605	)		41,204		(62,432	)		88,849
Income from discontinued operations before income taxes		232,640			5,127		237,152			8,688
Income taxes from discontinued operations		58,203			1,294		59,353			2,200
Income From Discontinued Operations		174,437			3,833		177,799			6,488
Net Income	$	73,832		$	45,037	$	115,367		$	95,337

Earnings (Loss) Per Share (EPS)
Basic EPS from continuing operations	$	(1.64	)	$	0.67	$	(1.02	)	$	1.46
Basic EPS from discontinued operations		2.85			0.06		2.91			0.11
Basic EPS (1)		1.21			0.74		1.89			1.56

Diluted EPS from continuing operations	$	(1.64	)	$	0.67	$	(1.02	)	$	1.45
Diluted EPS from discontinued operations		2.84			0.06		2.90			0.11
Diluted EPS (1)		1.20			0.74		1.88			1.56


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


											Accumulated
											Other
	Common Stock										Comprehensive
	Shares				Capital			Retained			Income
	Outstanding		Amount		Surplus			Earnings			(Loss)			Total
Balance, January 1, 2024		61,071,173	$	12,725	$	159,688		$	1,709,157		$	(219,723	)	$	1,661,847
Net income per consolidated statements of income		—		—		—			41,535			—			41,535
Other comprehensive income (loss), net of tax		—		—		—			—			(7,431	)		(7,431	)
Common stock dividends paid ($0.23 per share)		—		—		—			(14,207	)		—			(14,207	)
Shares withheld to pay taxes, long-term incentive plan		107,193		22		(1,405	)		—			—			(1,383	)
Compensation expense, long-term incentive plan		—		—		2,238			—			—			2,238
Balance, March 31, 2024		61,178,366		12,747		160,521			1,736,485			(227,154	)		1,682,599
Net income per consolidated statements of income		—		—		—			73,832			—			73,832
Other comprehensive income (loss), net of tax		—		—		—			—			135,597			135,597
Common stock dividends paid ($0.23 per share)		—		—		—			(14,206	)		—			(14,206	)
Shares withheld to pay taxes, long-term incentive plan		27,603		6		(65	)		—			—			(59	)
Compensation expense, long-term incentive plan		—		—		1,378			—			—			1,378
Balance, June 30, 2024		61,205,969	$	12,753	$	161,834		$	1,796,111		$	(91,557	)	$	1,879,141


	December 31, 2023
Carrying amounts of assets included as part of discontinued operations:
Cash and due from banks	$	200
Premises and equipment, net		308
Goodwill		49,633
Identifiable intangible assets, net		2,729
Operating lease right-of-use assets		2,431
Other assets		12,333
Assets of discontinued operations	$	67,634

Carrying amounts of liabilities included as part of discontinued operations:
Operating lease liabilities	$	2,487
Other liabilities		9,540
Liabilities of discontinued operations	$	12,027


	Securities Available for Sale									Securities Held to Maturity
June 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	$	173,201	$	—	$	(246	)	$	172,955	$	29,455	$	—	$	(650	)	$	28,805
Mortgage-backed securities
Residential mortgage pass- through securities
Guaranteed by GNMA		26,415		4		(2,930	)		23,489		17,998		1		(867	)		17,132
Issued by FNMA and FHLMC		1,081,088		1,914		(22,133	)		1,060,869		449,781		35		(25,708	)		424,108
Other residential mortgage- backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		—		—		—			—		138,951		1		(10,193	)		128,759
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		362,606		2,653		(913	)		364,346		744,302		13		(49,988	)		694,327
Total	$	1,643,310	$	4,571	$	(26,222	)	$	1,621,659	$	1,380,487	$	50	$	(87,406	)	$	1,293,131


	Less than 12 Months					12 Months or More					Total
June 30, 2024	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	172,955	$	(246	)	$	28,804	$	(650	)	$	201,759	$	(896	)
U.S. Government agency obligations		—		—			—		—			—		—
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		15,142		(339	)		25,205		(3,458	)		40,347		(3,797	)
Issued by FNMA and FHLMC		645,501		(2,664	)		542,530		(45,177	)		1,188,031		(47,841	)
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		—		—			128,759		(10,193	)		128,759		(10,193	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		—		—			777,466		(50,901	)		777,466		(50,901	)
Total	$	833,598	$	(3,249	)	$	1,502,764	$	(110,379	)	$	2,336,362	$	(113,628	)


December 31, 2023
U.S. Treasury Securities	$	29,042	$	(26	)	$	372,368	$	(23,811	)	$	401,410	$	(23,837	)
U.S. Government agency obligations		—		—			5,791		(416	)		5,791		(416	)
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		9,381		(172	)		25,967		(2,938	)		35,348		(3,110	)
Issued by FNMA and FHLMC		309,466		(3,274	)		1,311,865		(176,421	)		1,621,331		(179,695	)
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		—		—			230,368		(16,115	)		230,368		(16,115	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		1,656		(13	)		812,520		(43,806	)		814,176		(43,819	)
Total	$	349,545	$	(3,485	)	$	2,758,879	$	(263,507	)	$	3,108,424	$	(266,992	)


	Three Months Ended June 30,					Six Months Ended June 30,
Available for Sale	2024			2023		2024			2023
Proceeds from calls and sales of securities	$	1,378,272		$	—	$	1,378,272		$	—
Gross realized (losses)		(182,792	)		—		(182,792	)		—


	Securities Available for Sale				Securities Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	39,770	$	39,748	$	—	$	—
Due after one year through five years		83,002		82,927		29,455		28,805
Due after five years through ten years		50,429		50,280		—		—
		173,201		172,955		29,455		28,805
Mortgage-backed securities		1,470,109		1,448,704		1,351,032		1,264,326
Total	$	1,643,310	$	1,621,659	$	1,380,487	$	1,293,131


	June 30, 2024		December 31, 2023
Federal National Mortgage Association	$	4,832,690	$	4,826,028
Government National Mortgage Association		3,608,146		3,510,983
Federal Home Loan Mortgage Corporation		161,375		112,352
Other		25,565		28,012
Total mortgage loans sold and serviced for others	$	8,627,776	$	8,477,375


	June 30, 2024		December 31, 2023
Alabama	$	485	$	1,397
Mississippi (1)		1,787		1,242
Tennessee (2)		86		—
Texas		4,228		4,228
Total other real estate	$	6,586	$	6,867


	June 30, 2024			December 31, 2023
Leases receivable	$	258,403		$	161,319
Unearned income		(44,744	)		(29,011	)
Initial direct costs		2,223			1,326
Unguaranteed lease residual		7,997			4,101
Total net investment	$	223,879		$	137,735


	June 30, 2024
2024 (excluding the six months ended June 30, 2024)	$	22,018
2025		42,624
2026		41,520
2027		54,075
2028		43,225
Thereafter		54,941
Lease receivable	$	258,403


	June 30, 2024			December 31, 2023
Finance lease right-of-use assets, net of accumulated depreciation	$	3,525		$	3,751
Finance lease liabilities		4,127			4,334
Operating lease right-of-use assets		36,925			35,711
Operating lease liabilities		40,517			39,097

Weighted-average lease term:
Finance leases	7.84 years			8.34 years
Operating leases	9.72 years			10.28 years

Weighted-average discount rate:
Finance leases		3.61	%		3.61	%
Operating leases		3.71	%		3.67	%


	June 30, 2024		December 31, 2023
Noninterest-bearing demand	$	3,153,506	$	3,197,620
Interest-bearing demand		5,358,136		4,947,626
Savings		3,538,317		4,047,853
Time		3,412,929		3,376,664
Total	$	15,462,888	$	15,569,763


	Three Months Ended June 30, 2024								Three Months Ended June 30, 2023
	Topic 606		Not Topic 606 (1)			Total			Topic 606		Not Topic 606 (1)			Total
General Banking Segment
Service charges on deposit accounts	$	10,903	$	—		$	10,903		$	10,673	$	—		$	10,673
Bank card and other fees		8,428		758			9,186			8,036		868			8,904
Mortgage banking, net		—		4,204			4,204			—		6,600			6,600
Wealth management		174		—			174			215		—			215
Other, net		7,251		78			7,329			2,932		(329	)		2,603
Security gains (losses), net		—		(182,792	)		(182,792	)		—		—			—
Total noninterest income (loss)	$	26,756	$	(177,752	)	$	(150,996	)	$	21,856	$	7,139		$	28,995

Wealth Management Segment
Service charges on deposit accounts	$	21	$	—		$	21		$	22	$	—		$	22
Bank card and other fees		39		—			39			13		—			13
Wealth management		9,518		—			9,518			8,667		—			8,667
Other, net		38		94			132			36		96			132
Total noninterest income	$	9,616	$	94		$	9,710		$	8,738	$	96		$	8,834

Consolidated
Service charges on deposit accounts	$	10,924	$	—		$	10,924		$	10,695	$	—		$	10,695
Bank card and other fees		8,467		758			9,225			8,049		868			8,917
Mortgage banking, net		—		4,204			4,204			—		6,600			6,600
Wealth management		9,692		—			9,692			8,882		—			8,882
Other, net		7,289		172			7,461			2,968		(233	)		2,735
Security gains (losses), net		—		(182,792	)		(182,792	)		—		—			—
Total noninterest income (loss)	$	36,372	$	(177,658	)	$	(141,286	)	$	30,594	$	7,235		$	37,829


	Three Months Ended June 30, 2024
	Performance Units			Time-Vested Units
Nonvested units, beginning of period		209,169			391,550
Granted		—			20,920
Released from restriction		—			(29,672	)
Forfeited		(1,124	)		(6,776	)
Nonvested units, end of period		208,045			376,022


	Actual
	Regulatory Capital					Minimum			To Be Well
	Amount		Ratio			Requirement			Capitalized
At June 30, 2024:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,655,593		10.92	%		7.00	%	n/a
Trustmark National Bank		1,762,660		11.63	%		7.00	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,715,593		11.31	%		8.50	%	n/a
Trustmark National Bank		1,762,660		11.63	%		8.50	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	2,015,973		13.29	%		10.50	%	n/a
Trustmark National Bank		1,939,448		12.79	%		10.50	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,715,593		9.29	%		4.00	%	n/a
Trustmark National Bank		1,762,660		9.55	%		4.00	%		5.00	%

At December 31, 2023:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,521,665		10.04	%		7.00	%	n/a
Trustmark National Bank		1,602,327		10.58	%		7.00	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,581,665		10.44	%		8.50	%	n/a
Trustmark National Bank		1,602,327		10.58	%		8.50	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,862,246		12.29	%		10.50	%	n/a
Trustmark National Bank		1,759,426		11.61	%		10.50	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,581,665		8.62	%		4.00	%	n/a
Trustmark National Bank		1,602,327		8.75	%		4.00	%		5.00	%


	Three Months Ended June 30, 2024									Three Months Ended June 30, 2023
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	(5,761	)	$	1,440		$	(4,321	)	$	(19,633	)	$	4,910		$	(14,723	)
Reclassification adjustment for net (gains) losses realized in net income		182,792			(45,698	)		137,094			—			—			—
Change in net unrealized holding loss on securities transferred to held to maturity		3,671			(918	)		2,753			3,940			(985	)		2,955
Total securities available for sale and transferred securities		180,702			(45,176	)		135,526			(15,693	)		3,925			(11,768	)
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		27			(7	)		20			27			(7	)		20
Recognized net loss due to lump sum settlements		(13	)		3			(10	)		—			—			—
Change in net actuarial loss		84			(20	)		64			69			(17	)		52
Total pension and other postretirement benefit plans		98			(24	)		74			96			(24	)		72
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		(4,873	)		1,218			(3,655	)		(19,500	)		4,875			(14,625	)
Reclassification adjustment for (gain) loss realized in net income		4,869			(1,217	)		3,652			3,997			(999	)		2,998
Total cash flow hedge derivatives		(4	)		1			(3	)		(15,503	)		3,876			(11,627	)
Total other comprehensive income (loss)	$	180,796		$	(45,199	)	$	135,597		$	(31,100	)	$	7,777		$	(23,323	)


	Securities Available for Sale and Transferred Securities			Defined Benefit Pension Items			Cash Flow Hedge Derivatives			Total
Balance at January 1, 2024	$	(204,670	)	$	(6,075	)	$	(8,978	)	$	(219,723	)
Other comprehensive income (loss) before reclassification		(736	)		—			(15,625	)		(16,361	)
Amounts reclassified from accumulated other comprehensive income (loss)		137,094			166			7,267			144,527
Net other comprehensive income (loss)		136,358			166			(8,358	)		128,166
Balance at June 30, 2024	$	(68,312	)	$	(5,909	)	$	(17,336	)	$	(91,557	)

Balance at January 1, 2023	$	(254,442	)	$	(5,792	)	$	(15,169	)	$	(275,403	)
Other comprehensive income (loss) before reclassification		14,256			—			(9,923	)		4,333
Amounts reclassified from accumulated other comprehensive income (loss)		—			170			5,196			5,366
Net other comprehensive income (loss)		14,256			170			(4,727	)		9,699
Balance at June 30, 2023	$	(240,186	)	$	(5,622	)	$	(19,896	)	$	(265,704	)


	June 30, 2024
	Total		Level 1		Level 2		Level 3
U.S. Treasury securities	$	172,955	$	172,955	$	—	$	—
Mortgage-backed securities		1,448,704		—		1,448,704		—
Securities available for sale		1,621,659		172,955		1,448,704		—
LHFS		185,698		—		185,698		—
MSR		136,658		—		—		136,658
Other assets		26,880		9,991		16,198		691
Other liabilities		41,645		180		41,465		—


	MSR			Other Assets - Derivatives
Balance, January 1, 2024	$	131,870		$	845
Total net (loss) gain included in Mortgage banking, net (1)		(1,876	)		1,556
Additions		6,664			—
Sales		—			(1,710	)
Balance, June 30, 2024	$	136,658		$	691

The amount of total gains (losses) for the period included in earnings that are attributable to the change in unrealized gains or losses still held at June 30, 2024	$	3,498		$	1,304

Balance, January 1, 2023	$	129,677		$	157
Total net (loss) gain included in Mortgage banking, net (1)		(1,929	)		1,553
Additions		6,602			—
Sales		—			(1,239	)
Balance, June 30, 2023	$	134,350		$	471

The amount of total gains (losses) for the period included in earnings that are attributable to the change in unrealized gains or losses still held at June 30, 2023	$	1,926		$	514


	June 30, 2024				December 31, 2023
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Level 2 Inputs:
Cash and short-term investments	$	822,141	$	822,141	$	975,343	$	975,343
Securities held to maturity		1,380,487		1,293,131		1,426,279		1,355,504
Level 3 Inputs:
Net LHFI		13,000,733		12,952,418		12,811,157		12,762,505

Financial Liabilities:
Level 2 Inputs:
Deposits		15,462,888		15,445,186		15,569,763		15,553,417
Federal funds purchased and securities sold under repurchase agreements		314,121		314,121		405,745		405,745
Other borrowings		336,687		336,687		483,230		483,226
Subordinated notes		123,592		112,500		123,482		108,125
Junior subordinated debt securities		61,856		47,629		61,856		48,856


	June 30, 2024		December 31, 2023
Fair value of LHFS	$	103,137	$	105,974
LHFS contractual principal outstanding		101,690		102,994
Fair value less unpaid principal	$	1,447	$	2,980


	June 30, 2024			December 31, 2023
Derivatives in hedging relationships:
Interest rate contracts:
Interest rate swaps included in other assets (1)	$	210		$	1,182
Interest rate floors included in other assets		2,092			1,689
Interest rate swaps included in other liabilities (1)		3,115			267

Derivatives not designated as hedging instruments:
Interest rate contracts:
Exchange traded purchased options included in other assets	$	23		$	180
OTC written options (rate locks) included in other assets		691			845
Futures contracts included in other assets		1,912			7,505
Interest rate swaps included in other assets (1)		13,891			11,910
Credit risk participation agreements included in other assets		5			5
Forward contracts included in other liabilities		(119	)		994
Exchange traded written options included in other liabilities		180			21
Interest rate swaps included in other liabilities (1)		38,423			34,255
Credit risk participation agreements included in other liabilities		46			63


Offsetting of Derivative Assets
As of June 30, 2024
							Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Received			Net Amount
Derivatives	$	16,193	$	—	$	16,193	$	(4,721	)	$	(6,220	)	$	5,252


Offsetting of Derivative Liabilities
As of June 30, 2024
							Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Posted			Net Amount
Derivatives	$	41,538	$	—	$	41,538	$	(4,721	)	$	(40	)	$	36,777


	June 30,
	2024			2023
Consolidated Balance Sheets
Total assets	$	18,452,487		$	18,422,626
Securities		3,002,146			3,330,548
Total loans (LHFI + LHFS)		13,341,116			12,795,061
Deposits		15,462,888			14,913,900
Total shareholders' equity		1,879,141			1,571,193

Stock Performance
Market value - close	$	30.04		$	21.12
Book value		30.70			25.73
Tangible book value		25.23			20.24

Capital Ratios
Total equity / total assets		10.18	%		8.53	%
Tangible equity / tangible assets		8.52	%		6.83	%
Tangible equity / risk-weighted assets		10.18	%		8.26	%
Tier 1 leverage ratio		9.29	%		8.35	%
Common equity Tier 1 risk-based capital ratio		10.92	%		9.87	%
Tier 1 risk-based capital ratio		11.31	%		10.27	%
Total risk-based capital ratio		13.29	%		12.08	%


	June 30, 2024
	Amortized Cost					Estimated Fair Value
	Amount		%			Amount		%
Securities Available for Sale
Aaa	$	1,643,310		100.0	%	$	1,621,659		100.0	%
Total securities available for sale	$	1,643,310		100.0	%	$	1,621,659		100.0	%

Securities Held to Maturity
Aaa	$	1,380,487		100.0	%	$	1,293,131		100.0	%
Total securities held to maturity	$	1,380,487		100.0	%	$	1,293,131		100.0	%


	June 30, 2024			December 31, 2023
Home equity loans	$	69,115		$	58,176
Home equity lines of credit		449,987			430,933
Percentage of loans and lines for which Trustmark holds first lien		47.6	%		47.8	%
Percentage of loans and lines for which Trustmark does not hold first lien		52.4	%		52.2	%