8-K
TRUSTMARK CORP (TRMK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
January 24, 2023
Date of Report (Date of earliest event reported)
TRUSTMARK CORPORATION
(Exact name of registrant as specified in its charter)
| Mississippi | 000-03683 | 64-0471500 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) |
| 248 East Capitol Street, Jackson, Mississippi | 39201 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: | (601) 208-5111 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, no par value | TRMK | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
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. ☐
Item 2.02. Results of Operations and Financial Condition.
On January 24, 2023, Trustmark Corporation issued a press release announcing its financial results for the period ended December 31, 2022. A copy of this press release and the accompanying financial statements and slide presentation are attached hereto as Exhibits 99.1 and 99.2 to this report and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description of Exhibits |
|---|---|
| 99.1 | Press release announcing financial results for the period ended December 31, 2022 |
| 99.2 | Investor slide presentation for the period ended December 31, 2022 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TRUSTMARK CORPORATION
| BY: | /s/ Thomas C. Owens |
|---|---|
| Thomas C. Owens | |
| Treasurer and Principal Financial Officer | |
| DATE: | January 24, 2023 |
EX-99.1
Exhibit 99.1
| News Release |
|---|
Trustmark Corporation Announces Fourth Quarter and Fiscal Year 2022 Financial Results
Record Loan Growth, Solid Credit Quality, Expanded Net Interest Margin
JACKSON, Miss. – January 24, 2023 – Trustmark Corporation (NASDAQGS:TRMK) reported a loss of $34.1 million, or $0.56 per diluted share, in the fourth quarter of 2022. As previously disclosed, Trustmark agreed to a settlement that, pending court approval, will resolve all current and potential future claims relating to litigation involving the Stanford Financial Group that began in 2009. In the fourth quarter, Trustmark recognized litigation settlement expense of $100.0 million as well as an additional $750 thousand in legal fees, which are included in noninterest expense. The litigation settlement expense reduced fourth quarter net income by $75.6 million, or $1.24 per diluted share. Excluding this expense, Trustmark’s fourth quarter net income totaled $41.5 million, or $0.68 per diluted share. For the full year, Trustmark’s net income totaled $71.9 million, representing diluted earnings per share of $1.17. Excluding the litigation settlement expense, Trustmark’s net income in 2022 totaled $147.5 million, representing diluted earnings per share of $2.40. Please refer to the Consolidated Financial Information, Note 1 – Litigation Settlement and Note 7 – Non-GAAP Financial Measures. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2023, to shareholders of record on March 1, 2023.
2022 Highlights
• Loans held for investment (HFI) increased $2.0 billion, or 19.1%, in 2022
• Nonperforming assets declined to 0.55% of loans HFI and held for sale (HFS)
• Net charge-offs represented 0.01% of average loans in 2022
• Net interest income FTE totaled $507.1 million, up 17.9% in 2022 to produce a net interest margin of 3.17%, up 41 basis points from 2021
• Insurance revenue increased 10.7% in 2022 while wealth management remained stable
• Noninterest income totaled $205.1 million and represented 29.3% of total revenue
• Noninterest expense, excluding litigation settlement expense, totaled $502.5 million, up 2.7% from the prior year
• Expanded market optimization efforts with a net reduction of 11 branch offices during the year
• Continued technology investments to enhance efficiency and productivity
Duane A. Dewey, President and CEO, commented, “We made significant progress across the organization during the year. Loan growth in 2022 was the highest in Trustmark’s history. Credit quality remained strong. Net interest income and the net interest margin were up significantly. Our insurance business posted another record year. We made significant investments in technology, including conversion to a state-of-the-art loan system designed to enhance efficiency and productivity. With all of these positive advancements, our financial results were overshadowed by the litigation settlement. While we expressly deny any liability or wrongdoing with respect to this matter, we believe the settlement is in the best interest of Trustmark and our shareholders as it eliminates risk, ongoing expense and uncertainty. With this matter now behind us, we will focus more intently on the future and the opportunities that are ahead. Trustmark is very well-positioned to serve and expand its customer base and create long-term value for shareholders.”
Balance Sheet Management
• Loans HFI increased $618.0 million, or 5.3%, during the quarter
• Investment securities decreased $82.9 million, or 2.3%, linked-quarter as liquidity from maturing security balances was deployed to fund loan growth
• Total deposits increased $12.5 million, or 0.1%, linked-quarter
• Maintained strong capital position with CET1 ratio of 9.74% and total risk-based capital ratio of 11.91%
Loans HFI totaled $12.2 billion at December 31, 2022, reflecting an increase of $618.0 million, or 5.3%, linked-quarter and $2.0 billion, or 19.1%, year-over-year. The linked-quarter growth was broad-based and reflected increases in virtually every category. Trustmark’s loan portfolio remains well-diversified by loan type and geography.
As previously disclosed in the third quarter of 2022, Trustmark initiated a cash flow hedging program under which interest rate swaps convert floating rate loans to fixed rate. The intent of the program is to manage the natural asset sensitivity of Trustmark’s balance sheet. As of December 31, 2022, notional balances totaled $825.0 million with a weighted average receive fixed rate of 3.10%.
Deposits totaled $14.4 billion at December 31, 2022, up $12.5 million, or 0.1%, from the prior quarter and down $649.5 million, or 4.3%, year-over-year. Trustmark continues to maintain a strong liquidity position as loans HFI represented 84.5% of total deposits at year end 2022. Noninterest-bearing deposits represented 28.4% of total deposits at December 31, 2022. Interest-bearing deposit costs totaled 0.71% for the fourth quarter, an increase of 51 basis points linked-quarter. The total cost of interest-bearing liabilities was 1.03% for the fourth quarter of 2022, an increase of 72 basis points from the prior quarter.
During the fourth quarter, Trustmark did not repurchase any of its common shares. During the twelve months ended December 31, 2022, Trustmark repurchased $24.6 million, or approximately 789 thousand of its common shares. As previously announced, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2023, under which $50.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2023. The repurchase program, which is subject to market conditions and management discretion, will continue to be implemented through open market repurchases or privately negotiated transactions. At December 31, 2022, Trustmark’s tangible equity to tangible assets ratio was 6.27%, while the total risk-based capital ratio was 11.91%. Tangible book value per share was $18.11 at December 31, 2022, down 1.5% from the prior quarter.
Credit Quality
• Allowance for credit losses (ACL) represented 0.99% of loans HFI and 399.19% of nonperforming loans, excluding individually analyzed loans at year-end
• Net charge-offs totaled 0.06% of average loans in the fourth quarter
Nonaccrual loans totaled $66.0 million at December 31, 2022, a decrease of $2.0 million from the prior quarter and an increase of $3.3 million year-over-year. Other real estate totaled $2.0 million, reflecting a $985 thousand decrease from the prior quarter and a $2.6 million decline from the prior year. Collectively, nonperforming assets totaled $68.0 million, reflecting a linked-quarter decrease of 4.1% and year-over-year increase of 1.0%.
The provision for credit losses for loans HFI was $6.9 million in the fourth quarter primarily attributable to loan growth and the weakening in the macroeconomic forecast. The provision for credit losses for off-balance sheet credit exposures was $5.2 million in the fourth quarter, primarily driven by increases in unfunded commitments and the macroeconomic forecast. Collectively, the provision for credit losses totaled $12.1 million in the fourth quarter compared to $11.6 million in the prior quarter and a negative $1.6 million in the fourth quarter of 2021.
Allocation of Trustmark’s $120.2 million ACL on loans HFI represented 0.85% of commercial loans and 1.41% of consumer and home mortgage loans, resulting in an ACL to total loans HFI of 0.99% at December 31, 2022. Management believes the level of the ACL is commensurate with the credit losses currently expected in the loan portfolio.
Revenue Generation
• Net interest income (FTE) totaled $150.0 million in the fourth quarter, up 7.9% linked-quarter
• Net interest margin expanded 16 basis points to 3.66% in the fourth quarter
Revenue in the fourth quarter totaled $191.8 million, an increase of 1.6% from the prior quarter and 28.6% from the same quarter in the prior year. The linked-quarter increase primarily reflects higher net interest income offset by lower noninterest income while the year-over-year growth is attributed to higher net interest income offset in part by reduced mortgage banking revenue. In 2022, revenue totaled $699.9 million, an increase of 9.3% from the prior year.
Net interest income (FTE) in the fourth quarter totaled $150.0 million, resulting in a net interest margin of 3.66%, up 16 basis points from the prior quarter. The expansion of the net interest margin was due to increases in the yields on the loans HFI and HFS portfolio and the securities portfolio and was partially offset by costs of interest-bearing liabilities, which resulted from the higher interest rate environment.
Noninterest income in the fourth quarter totaled $45.2 million, a decrease of $7.4 million from the prior quarter and $5.6 million from the prior year. The linked-quarter change reflects a decline in mortgage banking revenue, a seasonal decline in insurance revenue, as well as lower bank card and other fees and wealth management revenue. The decrease in noninterest income year-over-year is principally due to lower mortgage banking revenue.
Mortgage loan production in the fourth quarter totaled $390.8 million, a decline of 23.1% linked-quarter and 33.9% year-over-year. Mortgage banking revenue totaled $3.4 million in the fourth quarter, a decrease of $3.5 million from the prior quarter and $8.2 million year-over-year. The linked-quarter decline is attributable to an increase in net negative hedge ineffectiveness as well as volume-related lower gains on sales of mortgage loans in the secondary market. In 2022, mortgage loan production totaled $2.1 billion, down 24.2% from the prior year. Mortgage banking revenue totaled $28.3 million in 2022, compared to $63.8 million in the prior year.
Insurance revenue in the fourth quarter totaled $12.0 million, a seasonal decline of $1.9 million from the prior quarter and an increase of $303 thousand from the prior year. Insurance revenue in 2022 totaled $53.7 million, up $5.2 million, or 10.7%, from the prior year. The solid performance during the year reflects an expanded producer workforce, a hardening of the insurance market, and the realization of operational efficiencies from investments in technology and improved processes.
Wealth management revenue totaled $8.1 million in the fourth quarter, down 8.0% from the prior quarter and 7.7% from the prior year. The linked-quarter decline is principally due to reduced investment services and trust management revenue while the year-over-year change is attributable to reduced brokerage and trust management revenue. In 2022, wealth management revenue totaled $35.0 million, in line with the prior year. During 2022, Trustmark selectively expanded its salesforce in Birmingham, Jackson and the Florida Panhandle as well as expanded business development efforts in new markets.
Noninterest Expense
• Total noninterest expense in the fourth quarter was $231.2 million; excluding litigation settlement expense of $100.8 million, noninterest expense was $130.5 million, up $3.8 million, or 3.0%, from the prior quarter. Please refer to the Consolidated Financial Information, Note 7 – Non-GAAP Financial Measures.
Salaries and employee benefits expense in the fourth quarter totaled $73.5 million, up $762 thousand, or 1.0%, from the prior quarter principally due to one-time severance expense related to the FIT2GROW initiative. Total services and fees increased $964 thousand during the fourth quarter principally due to continued investments in technology and higher professional fees. Net occupancy – premises expense increased $503 thousand during the fourth quarter principally due to early lease termination expenses related to closed branch offices. Other expense increased $1.4 million during the fourth quarter reflecting in part write-downs associated with branch offices that were closed during the quarter.
FIT2GROW
“In 2022 we announced FIT2GROW, a comprehensive program of Focus, Innovation and Transformation designed to enhance Trustmark’s ability to grow and serve customers. Earlier this month, we refocused our community bank efforts on commercial, small business, and consumer lines of business to provide additional expertise for our customers and enhance profitable revenue growth. Additionally, our Atlanta loan production office is now fully functioning and is focused on Commercial Real Estate, Residential Real Estate, Corporate Banking, and Equipment Finance,” said Dewey.
“We continued efforts to optimize our branch network, reflecting changing customer preferences and the continued migration to mobile and digital channels. In 2022, we consolidated 12 branch offices, opened a full-service banking center as well as loan production offices in Birmingham, AL, and Memphis, TN. We also expanded deployment of myTeller interactive teller machine technology. These efforts are designed to efficiently serve and expand customer relationships,” said Dewey.
“Innovation is also a key component of FIT2GROW. In 2022, we successfully completed our core loan system conversion and selected the replacement for our core deposit system. Collectively, these investments are designed to provide best-in-class service to customers as well as enhance our productivity and efficiency. Looking forward, we will continue to pursue opportunities to redesign workflows and restructure the organization to further leverage investments in technology that will broaden our reach, enhance the customer experience, and improve efficiency. We remain focused on providing the financial services and advice our customers have come to expect while building long-term value for our shareholders,” said Dewey.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 25, 2023, at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, February 8, 2023, in archived format at the same web address or by calling (877) 344-7529, passcode 3725903.
Trustmark is a financial services company providing banking and financial solutions through offices in Alabama, Florida, Georgia, Mississippi, Tennessee and Texas. Visit trustmark.com for more information.
Forward-Looking Statements
Certain statements contained in this document 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 and 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. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the novel coronavirus (COVID-19) pandemic, and also by the effectiveness of varying governmental responses in ameliorating the impact of the pandemic on our customers and the economies where they operate.
Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, an increase in unemployment levels and slowdowns in economic growth, our ability to manage the impact of the COVID-19 pandemic on our markets, as well as the effectiveness of actions of federal, state and local governments and agencies (including the Board of Governors of the Federal Reserve System (FRB)) to mitigate its spread and economic impact, local, state and national 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, levels of and volatility in crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract 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, including the potential impact of recent heightened levels of inflation and the reactions of the FRB and other governmental departments and agencies in response thereto, the potential impact of issues related to the European financial system and monetary and other governmental actions designed to address credit, securities, and/or commodity markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, 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, changes in our ability to control expenses, 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.
| Trustmark Investor Contacts: | Trustmark Media Contact: |
|---|---|
| Thomas C. Owens | Melanie A. Morgan |
| Treasurer and | Senior Vice President |
| Principal Financial Officer | 601-208-2979 |
| 601-208-7853 |
F. Joseph Rein, Jr.
Senior Vice President
601-208-6898
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Linked Quarter | Year over Year | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| QUARTERLY AVERAGE BALANCES | 9/30/2022 | 12/31/2021 | Change | % Change | Change | % Change | ||||||||||||
| Securities AFS-taxable (1) | 2,572,675 | $ | 2,824,254 | $ | 3,156,740 | ) | -8.9 | % | ) | -18.5 | % | |||||||
| Securities AFS-nontaxable | 4,828 | 4,928 | 5,143 | ) | -2.0 | % | ) | -6.1 | % | |||||||||
| Securities HTM-taxable (1) | 1,268,952 | 1,140,685 | 364,038 | 11.2 | % | n/m | ||||||||||||
| Securities HTM-nontaxable | 4,514 | 5,057 | 7,618 | ) | -10.7 | % | ) | -40.7 | % | |||||||||
| Total securities | 3,850,969 | 3,974,924 | 3,533,539 | ) | -3.1 | % | 9.0 | % | ||||||||||
| Paycheck protection program loans (PPP) | 3,235 | 9,821 | 42,749 | ) | -67.1 | % | ) | -92.4 | % | |||||||||
| Loans (includes loans held for sale) | 12,006,661 | 11,459,551 | 10,487,679 | 4.8 | % | 14.5 | % | |||||||||||
| Fed funds sold and reverse repurchases | 6,566 | 226 | 58 | n/m | n/m | |||||||||||||
| Other earning assets | 375,190 | 325,620 | 1,839,498 | 15.2 | % | ) | -79.6 | % | ||||||||||
| Total earning assets | 16,242,621 | 15,770,142 | 15,903,523 | 3.0 | % | 2.1 | % | |||||||||||
| Allowance for credit losses (ACL), loans held for investment (LHFI) | (114,948 | ) | (102,951 | ) | (104,148 | ) | ) | -11.7 | % | ) | -10.4 | % | ||||||
| Other assets | 1,630,085 | 1,576,653 | 1,570,501 | 3.4 | % | 3.8 | % | |||||||||||
| Total assets | 17,757,758 | $ | 17,243,844 | $ | 17,369,876 | 3.0 | % | 2.2 | % | |||||||||
| Interest-bearing demand deposits | 4,719,303 | $ | 4,613,733 | $ | 4,353,599 | 2.3 | % | 8.4 | % | |||||||||
| Savings deposits | 4,379,673 | 4,514,579 | 4,585,624 | ) | -3.0 | % | ) | -4.5 | % | |||||||||
| Time deposits | 1,152,905 | 1,111,440 | 1,220,083 | 3.7 | % | ) | -5.5 | % | ||||||||||
| Total interest-bearing deposits | 10,251,881 | 10,239,752 | 10,159,306 | 0.1 | % | 0.9 | % | |||||||||||
| Fed funds purchased and repurchases | 549,406 | 249,809 | 201,856 | n/m | n/m | |||||||||||||
| Other borrowings | 530,993 | 88,697 | 94,328 | n/m | n/m | |||||||||||||
| Subordinated notes | 123,226 | 123,171 | 123,007 | 0.0 | % | 0.2 | % | |||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 0.0 | % | 0.0 | % | |||||||||||
| Total interest-bearing liabilities | 11,517,362 | 10,763,285 | 10,640,353 | 7.0 | % | 8.2 | % | |||||||||||
| Noninterest-bearing deposits | 4,177,113 | 4,444,370 | 4,679,951 | ) | -6.0 | % | ) | -10.7 | % | |||||||||
| Other liabilities | 569,992 | 429,720 | 291,449 | 32.6 | % | 95.6 | % | |||||||||||
| Total liabilities | 16,264,467 | 15,637,375 | 15,611,753 | 4.0 | % | 4.2 | % | |||||||||||
| Shareholders' equity | 1,493,291 | 1,606,469 | 1,758,123 | ) | -7.0 | % | ) | -15.1 | % | |||||||||
| Total liabilities and equity | 17,757,758 | $ | 17,243,844 | $ | 17,369,876 | 3.0 | % | 2.2 | % | |||||||||
| (1) During the fourth quarter of 2022, Trustmark transferred 422.9 million of securities available for sale to securities held to maturity. | ||||||||||||||||||
| See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information. | ||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Linked Quarter | Year over Year | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| PERIOD END BALANCES | 9/30/2022 | 12/31/2021 | Change | % Change | Change | % Change | ||||||||||||
| Cash and due from banks | 734,787 | $ | 479,637 | $ | 2,266,829 | 53.2 | % | ) | -67.6 | % | ||||||||
| Fed funds sold and reverse repurchases | 4,000 | 10,098 | — | ) | -60.4 | % | n/m | |||||||||||
| Securities available for sale (1) | 2,024,082 | 2,444,486 | 3,238,877 | ) | -17.2 | % | ) | -37.5 | % | |||||||||
| Securities held to maturity (1) | 1,494,514 | 1,156,985 | 342,537 | 29.2 | % | n/m | ||||||||||||
| PPP loans | — | 4,798 | 33,336 | ) | -100.0 | % | ) | -100.0 | % | |||||||||
| Loans held for sale (LHFS) | 135,226 | 165,213 | 275,706 | ) | -18.2 | % | ) | -51.0 | % | |||||||||
| Loans held for investment (LHFI) | 12,204,039 | 11,586,064 | 10,247,829 | 5.3 | % | 19.1 | % | |||||||||||
| ACL LHFI | (120,214 | ) | (115,050 | ) | (99,457 | ) | ) | -4.5 | % | ) | -20.9 | % | ||||||
| Net LHFI | 12,083,825 | 11,471,014 | 10,148,372 | 5.3 | % | 19.1 | % | |||||||||||
| Premises and equipment, net | 212,365 | 210,761 | 205,644 | 0.8 | % | 3.3 | % | |||||||||||
| Mortgage servicing rights | 129,677 | 132,615 | 87,687 | ) | -2.2 | % | 47.9 | % | ||||||||||
| Goodwill | 384,237 | 384,237 | 384,237 | 0.0 | % | 0.0 | % | |||||||||||
| Identifiable intangible assets | 3,640 | 3,952 | 5,074 | ) | -7.9 | % | ) | -28.3 | % | |||||||||
| Other real estate | 1,986 | 2,971 | 4,557 | ) | -33.2 | % | ) | -56.4 | % | |||||||||
| Operating lease right-of-use assets | 36,301 | 37,282 | 34,603 | ) | -2.6 | % | 4.9 | % | ||||||||||
| Other assets | 770,838 | 686,585 | 568,177 | 12.3 | % | 35.7 | % | |||||||||||
| Total assets | 18,015,478 | $ | 17,190,634 | $ | 17,595,636 | 4.8 | % | 2.4 | % | |||||||||
| Deposits: | ||||||||||||||||||
| Noninterest-bearing | 4,093,771 | $ | 4,358,805 | $ | 4,771,065 | ) | -6.1 | % | ) | -14.2 | % | |||||||
| Interest-bearing | 10,343,877 | 10,066,375 | 10,316,095 | 2.8 | % | 0.3 | % | |||||||||||
| Total deposits | 14,437,648 | 14,425,180 | 15,087,160 | 0.1 | % | ) | -4.3 | % | ||||||||||
| Fed funds purchased and repurchases | 449,331 | 544,068 | 238,577 | ) | -17.4 | % | 88.3 | % | ||||||||||
| Other borrowings | 1,050,938 | 223,172 | 91,025 | n/m | n/m | |||||||||||||
| Subordinated notes | 123,262 | 123,207 | 123,042 | 0.0 | % | 0.2 | % | |||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 0.0 | % | 0.0 | % | |||||||||||
| ACL on off-balance sheet credit exposures | 36,838 | 31,623 | 35,623 | 16.5 | % | 3.4 | % | |||||||||||
| Operating lease liabilities | 38,932 | 39,797 | 36,468 | ) | -2.2 | % | 6.8 | % | ||||||||||
| Other liabilities | 324,405 | 232,786 | 180,574 | 39.4 | % | 79.7 | % | |||||||||||
| Total liabilities | 16,523,210 | 15,681,689 | 15,854,325 | 5.4 | % | 4.2 | % | |||||||||||
| Common stock | 12,705 | 12,700 | 12,845 | 0.0 | % | ) | -1.1 | % | ||||||||||
| Capital surplus | 154,645 | 154,150 | 175,913 | 0.3 | % | ) | -12.1 | % | ||||||||||
| Retained earnings | 1,600,321 | 1,648,507 | 1,585,113 | ) | -2.9 | % | 1.0 | % | ||||||||||
| Accumulated other comprehensive income (loss), net of tax | (275,403 | ) | (306,412 | ) | (32,560 | ) | 10.1 | % | ) | n/m | ||||||||
| Total shareholders' equity | 1,492,268 | 1,508,945 | 1,741,311 | ) | -1.1 | % | ) | -14.3 | % | |||||||||
| Total liabilities and equity | 18,015,478 | $ | 17,190,634 | $ | 17,595,636 | 4.8 | % | 2.4 | % | |||||||||
| (1) During the fourth quarter of 2022, Trustmark transferred 422.9 million of securities available for sale to securities held to maturity. | ||||||||||||||||||
| See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information. | ||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||
| ($ in thousands except per share data) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| INCOME STATEMENTS | 12/31/2022 | 9/30/2022 | 12/31/2021 | Change | % Change | Change | % Change | ||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 159,566 | $ | 129,395 | $ | 94,137 | 23.3 | % | 69.5 | % | |||||||||
| Interest and fees on PPP loans | 101 | 186 | 397 | ) | -45.7 | % | ) | -74.6 | % | ||||||||||
| Interest on securities-taxable | 16,577 | 16,222 | 10,796 | 2.2 | % | 53.5 | % | ||||||||||||
| Interest on securities-tax exempt-FTE | 93 | 100 | 123 | ) | -7.0 | % | ) | -24.4 | % | ||||||||||
| Interest on fed funds sold and reverse<br> repurchases | 71 | 2 | — | n/m | n/m | ||||||||||||||
| Other interest income | 3,556 | 1,493 | 826 | n/m | n/m | ||||||||||||||
| Total interest income-FTE | 179,964 | 147,398 | 106,279 | 22.1 | % | 69.3 | % | ||||||||||||
| Interest on deposits | 18,438 | 5,097 | 3,401 | n/m | n/m | ||||||||||||||
| Interest on fed funds purchased and repurchases | 4,762 | 1,225 | 66 | n/m | n/m | ||||||||||||||
| Other interest expense | 6,730 | 1,996 | 1,580 | n/m | n/m | ||||||||||||||
| Total interest expense | 29,930 | 8,318 | 5,047 | n/m | n/m | ||||||||||||||
| Net interest income-FTE | 150,034 | 139,080 | 101,232 | 7.9 | % | 48.2 | % | ||||||||||||
| Provision for credit losses, LHFI | 6,902 | 12,919 | (4,515 | ) | ) | -46.6 | % | n/m | |||||||||||
| Provision for credit losses, off-balance sheet <br> credit exposures | 5,215 | (1,326 | ) | 2,939 | n/m | 77.4 | % | ||||||||||||
| Net interest income after provision-FTE | 137,917 | 127,487 | 102,808 | 8.2 | % | 34.2 | % | ||||||||||||
| Service charges on deposit accounts | 11,162 | 11,318 | 9,366 | ) | -1.4 | % | 19.2 | % | |||||||||||
| Bank card and other fees | 8,191 | 9,305 | 8,340 | ) | -12.0 | % | ) | -1.8 | % | ||||||||||
| Mortgage banking, net | 3,408 | 6,876 | 11,609 | ) | -50.4 | % | ) | -70.6 | % | ||||||||||
| Insurance commissions | 12,019 | 13,911 | 11,716 | ) | -13.6 | % | 2.6 | % | |||||||||||
| Wealth management | 8,079 | 8,778 | 8,757 | ) | -8.0 | % | ) | -7.7 | % | ||||||||||
| Other, net | 2,311 | 2,418 | 979 | ) | -4.4 | % | n/m | ||||||||||||
| Total noninterest income | 45,170 | 52,606 | 50,767 | ) | -14.1 | % | ) | -11.0 | % | ||||||||||
| Salaries and employee benefits | 73,469 | 72,707 | 68,258 | 1.0 | % | 7.6 | % | ||||||||||||
| Services and fees | 26,759 | 25,795 | 22,904 | 3.7 | % | 16.8 | % | ||||||||||||
| Net occupancy-premises | 7,898 | 7,395 | 6,816 | 6.8 | % | 15.9 | % | ||||||||||||
| Equipment expense | 6,268 | 6,072 | 6,585 | 3.2 | % | ) | -4.8 | % | |||||||||||
| Litigation settlement expense (1) | 100,750 | — | — | n/m | n/m | ||||||||||||||
| Other expense | 16,085 | 14,729 | 14,906 | 9.2 | % | 7.9 | % | ||||||||||||
| Total noninterest expense | 231,229 | 126,698 | 119,469 | 82.5 | % | 93.5 | % | ||||||||||||
| Income (loss) before income taxes and tax eq adj | (48,142 | ) | 53,395 | 34,106 | ) | n/m | ) | n/m | |||||||||||
| Tax equivalent adjustment | 3,451 | 2,975 | 2,906 | 16.0 | % | 18.8 | % | ||||||||||||
| Income (loss) before income taxes | (51,593 | ) | 50,420 | 31,200 | ) | n/m | ) | n/m | |||||||||||
| Income taxes | (17,530 | ) | 7,965 | 4,978 | ) | n/m | ) | n/m | |||||||||||
| Net income (loss) | $ | (34,063 | ) | $ | 42,455 | $ | 26,222 | ) | n/m | ) | n/m | ||||||||
| Per share data | |||||||||||||||||||
| Earnings (loss) per share - basic | $ | (0.56 | ) | $ | 0.69 | $ | 0.42 | ) | n/m | ) | n/m | ||||||||
| Earnings (loss) per share - diluted | $ | (0.56 | ) | $ | 0.69 | $ | 0.42 | ) | n/m | ) | n/m | ||||||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | 0.0 | % | 0.0 | % | |||||||||
| Weighted average shares outstanding | |||||||||||||||||||
| Basic | 60,969,400 | 61,114,804 | 62,037,884 | ||||||||||||||||
| Diluted | 61,173,249 | 61,318,715 | 62,264,983 | ||||||||||||||||
| Period end shares outstanding | 60,977,686 | 60,953,864 | 61,648,679 | ||||||||||||||||
| (1) See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information. | |||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| NONPERFORMING ASSETS (1) | 12/31/2022 | 9/30/2022 | 12/31/2021 | Change | % Change | Change | % Change | ||||||||||||
| Nonaccrual LHFI | |||||||||||||||||||
| Alabama | $ | 12,300 | $ | 12,710 | $ | 8,182 | ) | -3.2 | % | 50.3 | % | ||||||||
| Florida | 227 | 227 | 313 | 0.0 | % | ) | -27.5 | % | |||||||||||
| Mississippi (2) | 24,683 | 23,517 | 21,636 | 5.0 | % | 14.1 | % | ||||||||||||
| Tennessee (3) | 5,566 | 5,120 | 10,501 | 8.7 | % | ) | -47.0 | % | |||||||||||
| Texas | 23,196 | 26,353 | 22,066 | ) | -12.0 | % | 5.1 | % | |||||||||||
| Total nonaccrual LHFI | 65,972 | 67,927 | 62,698 | ) | -2.9 | % | 5.2 | % | |||||||||||
| Other real estate | |||||||||||||||||||
| Alabama | 194 | 217 | — | ) | -10.6 | % | n/m | ||||||||||||
| Mississippi (2) | 1,769 | 2,754 | 4,557 | ) | -35.8 | % | ) | -61.2 | % | ||||||||||
| Tennessee (3) | 23 | — | — | n/m | n/m | ||||||||||||||
| Total other real estate | 1,986 | 2,971 | 4,557 | ) | -33.2 | % | ) | -56.4 | % | ||||||||||
| Total nonperforming assets | $ | 67,958 | $ | 70,898 | $ | 67,255 | ) | -4.1 | % | 1.0 | % | ||||||||
| LOANS PAST DUE OVER 90 DAYS (1) | |||||||||||||||||||
| LHFI | $ | 3,929 | $ | 1,842 | $ | 2,114 | n/m | 85.9 | % | ||||||||||
| LHFS-Guaranteed GNMA serviced loans | |||||||||||||||||||
| (no obligation to repurchase) | $ | 49,320 | $ | 48,313 | $ | 69,894 | 2.1 | % | ) | -29.4 | % | ||||||||
| Quarter Ended | Linked Quarter | Year over Year | |||||||||||||||||
| ACL LHFI (1) | 12/31/2022 | 9/30/2022 | 12/31/2021 | Change | % Change | Change | % Change | ||||||||||||
| Beginning Balance | $ | 115,050 | $ | 103,140 | $ | 104,073 | 11.5 | % | 10.5 | % | |||||||||
| Provision for credit losses, LHFI | 6,902 | 12,919 | (4,515 | ) | ) | -46.6 | % | n/m | |||||||||||
| Charge-offs | (3,893 | ) | (2,920 | ) | (2,616 | ) | ) | -33.3 | % | ) | -48.8 | % | |||||||
| Recoveries | 2,155 | 1,911 | 2,515 | 12.8 | % | ) | -14.3 | % | |||||||||||
| Net (charge-offs) recoveries | (1,738 | ) | (1,009 | ) | (101 | ) | ) | 72.2 | % | ) | n/m | ||||||||
| Ending Balance | $ | 120,214 | $ | 115,050 | $ | 99,457 | 4.5 | % | 20.9 | % | |||||||||
| NET (CHARGE-OFFS) RECOVERIES (1) | |||||||||||||||||||
| Alabama | $ | 98 | $ | 93 | $ | 747 | 5.4 | % | ) | -86.9 | % | ||||||||
| Florida | (60 | ) | (23 | ) | (32 | ) | ) | n/m | ) | -87.5 | % | ||||||||
| Mississippi (2) | (1,657 | ) | (702 | ) | (683 | ) | ) | n/m | ) | n/m | |||||||||
| Tennessee (3) | (195 | ) | (202 | ) | (130 | ) | 3.5 | % | ) | -50.0 | % | ||||||||
| Texas | 76 | (175 | ) | (3 | ) | n/m | n/m | ||||||||||||
| Total net (charge-offs) recoveries | $ | (1,738 | ) | $ | (1,009 | ) | $ | (101 | ) | ) | -72.2 | % | ) | n/m | |||||
| (1) Excludes PPP loans. | |||||||||||||||||||
| (2) Mississippi includes Central and Southern Mississippi Regions. | |||||||||||||||||||
| (3) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. | |||||||||||||||||||
| n/m - percentage changes greater than +/- 100% are considered not meaningful |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Year Ended | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| AVERAGE BALANCES | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||||||||
| Securities AFS-taxable (1) | 2,572,675 | $ | 2,824,254 | $ | 3,094,364 | $ | 3,245,502 | $ | 3,156,740 | $ | 2,932,054 | $ | 2,573,533 | |||||||
| Securities AFS-nontaxable | 4,828 | 4,928 | 5,110 | 5,127 | 5,143 | 4,997 | 5,166 | |||||||||||||
| Securities HTM-taxable (1) | 1,268,952 | 1,140,685 | 811,599 | 410,851 | 364,038 | 911,010 | 423,763 | |||||||||||||
| Securities HTM-nontaxable | 4,514 | 5,057 | 5,630 | 7,327 | 7,618 | 5,623 | 12,765 | |||||||||||||
| Total securities | 3,850,969 | 3,974,924 | 3,916,703 | 3,668,807 | 3,533,539 | 3,853,684 | 3,015,227 | |||||||||||||
| PPP loans | 3,235 | 9,821 | 17,746 | 29,009 | 42,749 | 14,868 | 350,668 | |||||||||||||
| Loans (includes loans held for sale) | 12,006,661 | 11,459,551 | 10,910,178 | 10,550,712 | 10,487,679 | 11,236,388 | 10,377,941 | |||||||||||||
| Fed funds sold and reverse repurchases | 6,566 | 226 | 110 | 56 | 58 | 1,753 | 79 | |||||||||||||
| Other earning assets | 375,190 | 325,620 | 1,139,312 | 1,811,713 | 1,839,498 | 907,414 | 1,825,134 | |||||||||||||
| Total earning assets | 16,242,621 | 15,770,142 | 15,984,049 | 16,060,297 | 15,903,523 | 16,014,107 | 15,569,049 | |||||||||||||
| ACL LHFI | (114,948 | ) | (102,951 | ) | (99,106 | ) | (99,390 | ) | (104,148 | ) | (104,138 | ) | (110,170 | ) | ||||||
| Other assets | 1,630,085 | 1,576,653 | 1,513,127 | 1,550,848 | 1,570,501 | 1,567,921 | 1,599,114 | |||||||||||||
| Total assets | 17,757,758 | $ | 17,243,844 | $ | 17,398,070 | $ | 17,511,755 | $ | 17,369,876 | $ | 17,477,890 | $ | 17,057,993 | |||||||
| Interest-bearing demand deposits | 4,719,303 | $ | 4,613,733 | $ | 4,578,235 | $ | 4,429,056 | $ | 4,353,599 | $ | 4,585,955 | $ | 4,096,746 | |||||||
| Savings deposits | 4,379,673 | 4,514,579 | 4,638,849 | 4,791,104 | 4,585,624 | 4,579,742 | 4,622,167 | |||||||||||||
| Time deposits | 1,152,905 | 1,111,440 | 1,159,065 | 1,193,435 | 1,220,083 | 1,153,983 | 1,287,663 | |||||||||||||
| Total interest-bearing deposits | 10,251,881 | 10,239,752 | 10,376,149 | 10,413,595 | 10,159,306 | 10,319,680 | 10,006,576 | |||||||||||||
| Fed funds purchased and repurchases | 549,406 | 249,809 | 118,753 | 212,006 | 201,856 | 283,328 | 172,782 | |||||||||||||
| Other borrowings | 530,993 | 88,697 | 80,283 | 91,090 | 94,328 | 198,672 | 125,554 | |||||||||||||
| Subordinated notes | 123,226 | 123,171 | 123,116 | 123,061 | 123,007 | 123,144 | 122,933 | |||||||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||||||
| Total interest-bearing liabilities | 11,517,362 | 10,763,285 | 10,760,157 | 10,901,608 | 10,640,353 | 10,986,680 | 10,489,701 | |||||||||||||
| Noninterest-bearing deposits | 4,177,113 | 4,444,370 | 4,590,338 | 4,601,108 | 4,679,951 | 4,452,046 | 4,531,642 | |||||||||||||
| Other liabilities | 569,992 | 429,720 | 439,266 | 295,287 | 291,449 | 434,310 | 266,499 | |||||||||||||
| Total liabilities | 16,264,467 | 15,637,375 | 15,789,761 | 15,798,003 | 15,611,753 | 15,873,036 | 15,287,842 | |||||||||||||
| Shareholders' equity | 1,493,291 | 1,606,469 | 1,608,309 | 1,713,752 | 1,758,123 | 1,604,854 | 1,770,151 | |||||||||||||
| Total liabilities and equity | 17,757,758 | $ | 17,243,844 | $ | 17,398,070 | $ | 17,511,755 | $ | 17,369,876 | $ | 17,477,890 | $ | 17,057,993 | |||||||
| (1) During the fourth quarter of 2022, Trustmark transferred 422.9 million of securities available for sale to securities held to maturity. | ||||||||||||||||||||
| See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information. |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||
| December 31, 2022 | ||||||||||||||
| ($ in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| PERIOD END BALANCES | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Cash and due from banks | 734,787 | $ | 479,637 | $ | 742,461 | $ | 1,917,564 | $ | 2,266,829 | |||||
| Fed funds sold and reverse repurchases | 4,000 | 10,098 | — | — | — | |||||||||
| Securities available for sale (1) | 2,024,082 | 2,444,486 | 2,644,364 | 3,018,246 | 3,238,877 | |||||||||
| Securities held to maturity (1) | 1,494,514 | 1,156,985 | 1,137,754 | 607,598 | 342,537 | |||||||||
| PPP loans | — | 4,798 | 12,549 | 18,579 | 33,336 | |||||||||
| LHFS | 135,226 | 165,213 | 190,186 | 222,538 | 275,706 | |||||||||
| LHFI | 12,204,039 | 11,586,064 | 10,944,840 | 10,397,129 | 10,247,829 | |||||||||
| ACL LHFI | (120,214 | ) | (115,050 | ) | (103,140 | ) | (98,734 | ) | (99,457 | ) | ||||
| Net LHFI | 12,083,825 | 11,471,014 | 10,841,700 | 10,298,395 | 10,148,372 | |||||||||
| Premises and equipment, net | 212,365 | 210,761 | 207,914 | 207,301 | 205,644 | |||||||||
| Mortgage servicing rights | 129,677 | 132,615 | 121,014 | 111,050 | 87,687 | |||||||||
| Goodwill | 384,237 | 384,237 | 384,237 | 384,237 | 384,237 | |||||||||
| Identifiable intangible assets | 3,640 | 3,952 | 4,264 | 4,591 | 5,074 | |||||||||
| Other real estate | 1,986 | 2,971 | 3,034 | 3,187 | 4,557 | |||||||||
| Operating lease right-of-use assets | 36,301 | 37,282 | 34,684 | 34,048 | 34,603 | |||||||||
| Other assets | 770,838 | 686,585 | 627,349 | 614,217 | 568,177 | |||||||||
| Total assets | 18,015,478 | $ | 17,190,634 | $ | 16,951,510 | $ | 17,441,551 | $ | 17,595,636 | |||||
| Deposits: | ||||||||||||||
| Noninterest-bearing | 4,093,771 | $ | 4,358,805 | $ | 4,509,472 | $ | 4,739,102 | $ | 4,771,065 | |||||
| Interest-bearing | 10,343,877 | 10,066,375 | 10,260,696 | 10,374,190 | 10,316,095 | |||||||||
| Total deposits | 14,437,648 | 14,425,180 | 14,770,168 | 15,113,292 | 15,087,160 | |||||||||
| Fed funds purchased and repurchases | 449,331 | 544,068 | 70,157 | 170,499 | 238,577 | |||||||||
| Other borrowings | 1,050,938 | 223,172 | 72,553 | 84,644 | 91,025 | |||||||||
| Subordinated notes | 123,262 | 123,207 | 123,152 | 123,097 | 123,042 | |||||||||
| Junior subordinated debt securities | 61,856 | 61,856 | 61,856 | 61,856 | 61,856 | |||||||||
| ACL on off-balance sheet credit exposures | 36,838 | 31,623 | 32,949 | 34,517 | 35,623 | |||||||||
| Operating lease liabilities | 38,932 | 39,797 | 37,108 | 35,912 | 36,468 | |||||||||
| Other liabilities | 324,405 | 232,786 | 196,871 | 186,352 | 180,574 | |||||||||
| Total liabilities | 16,523,210 | 15,681,689 | 15,364,814 | 15,810,169 | 15,854,325 | |||||||||
| Common stock | 12,705 | 12,700 | 12,752 | 12,806 | 12,845 | |||||||||
| Capital surplus | 154,645 | 154,150 | 160,876 | 167,094 | 175,913 | |||||||||
| Retained earnings | 1,600,321 | 1,648,507 | 1,620,210 | 1,600,138 | 1,585,113 | |||||||||
| Accumulated other comprehensive income (loss), net of tax | (275,403 | ) | (306,412 | ) | (207,142 | ) | (148,656 | ) | (32,560 | ) | ||||
| Total shareholders' equity | 1,492,268 | 1,508,945 | 1,586,696 | 1,631,382 | 1,741,311 | |||||||||
| Total liabilities and equity | 18,015,478 | $ | 17,190,634 | $ | 16,951,510 | $ | 17,441,551 | $ | 17,595,636 | |||||
| (1) During the fourth quarter of 2022, Trustmark transferred 422.9 million of securities available for sale to securities held to maturity. | ||||||||||||||
| See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information. |
All values are in US Dollars.
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | ||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||
| ($ in thousands except per share data) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| INCOME STATEMENTS | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Interest and fees on LHFS & LHFI-FTE | $ | 159,566 | $ | 129,395 | $ | 103,033 | $ | 93,252 | $ | 94,137 | $ | 485,246 | $ | 375,330 | ||||||
| Interest and fees on PPP loans | 101 | 186 | 184 | 168 | 397 | 639 | 36,726 | |||||||||||||
| Interest on securities-taxable | 16,577 | 16,222 | 14,561 | 12,357 | 10,796 | 59,717 | 38,698 | |||||||||||||
| Interest on securities-tax exempt-FTE | 93 | 100 | 107 | 122 | 123 | 422 | 694 | |||||||||||||
| Interest on fed funds sold and reverse repurchases | 71 | 2 | 1 | — | — | 74 | — | |||||||||||||
| Other interest income | 3,556 | 1,493 | 2,214 | 817 | 826 | 8,080 | 2,767 | |||||||||||||
| Total interest income-FTE | 179,964 | 147,398 | 120,100 | 106,716 | 106,279 | 554,178 | 454,215 | |||||||||||||
| Interest on deposits | 18,438 | 5,097 | 2,774 | 2,760 | 3,401 | 29,069 | 16,945 | |||||||||||||
| Interest on fed funds purchased and repurchases | 4,762 | 1,225 | 70 | 70 | 66 | 6,127 | 232 | |||||||||||||
| Other interest expense | 6,730 | 1,996 | 1,664 | 1,539 | 1,580 | 11,929 | 6,983 | |||||||||||||
| Total interest expense | 29,930 | 8,318 | 4,508 | 4,369 | 5,047 | 47,125 | 24,160 | |||||||||||||
| Net interest income-FTE | 150,034 | 139,080 | 115,592 | 102,347 | 101,232 | 507,053 | 430,055 | |||||||||||||
| Provision for credit losses, LHFI | 6,902 | 12,919 | 2,716 | (860 | ) | (4,515 | ) | 21,677 | (21,499 | ) | ||||||||||
| Provision for credit losses, off-balance sheet <br> credit exposures | 5,215 | (1,326 | ) | (1,568 | ) | (1,106 | ) | 2,939 | 1,215 | (2,949 | ) | |||||||||
| Net interest income after provision-FTE | 137,917 | 127,487 | 114,444 | 104,313 | 102,808 | 484,161 | 454,503 | |||||||||||||
| Service charges on deposit accounts | 11,162 | 11,318 | 10,226 | 9,451 | 9,366 | 42,157 | 33,246 | |||||||||||||
| Bank card and other fees | 8,191 | 9,305 | 10,167 | 8,442 | 8,340 | 36,105 | 34,662 | |||||||||||||
| Mortgage banking, net | 3,408 | 6,876 | 8,149 | 9,873 | 11,609 | 28,306 | 63,750 | |||||||||||||
| Insurance commissions | 12,019 | 13,911 | 13,702 | 14,089 | 11,716 | 53,721 | 48,511 | |||||||||||||
| Wealth management | 8,079 | 8,778 | 9,102 | 9,054 | 8,757 | 35,013 | 35,190 | |||||||||||||
| Other, net | 2,311 | 2,418 | 1,907 | 3,206 | 979 | 9,842 | 6,551 | |||||||||||||
| Total noninterest income | 45,170 | 52,606 | 53,253 | 54,115 | 50,767 | 205,144 | 221,910 | |||||||||||||
| Salaries and employee benefits | 73,469 | 72,707 | 71,679 | 69,585 | 68,258 | 287,440 | 284,158 | |||||||||||||
| Services and fees | 26,759 | 25,795 | 24,538 | 24,453 | 22,904 | 101,545 | 89,463 | |||||||||||||
| Net occupancy-premises | 7,898 | 7,395 | 6,892 | 7,079 | 6,816 | 29,264 | 27,043 | |||||||||||||
| Equipment expense | 6,268 | 6,072 | 6,047 | 6,061 | 6,585 | 24,448 | 24,337 | |||||||||||||
| Litigation settlement expense (1) | 100,750 | — | — | — | — | 100,750 | — | |||||||||||||
| Other expense | 16,085 | 14,729 | 14,611 | 14,341 | 14,906 | 59,766 | 64,295 | |||||||||||||
| Total noninterest expense | 231,229 | 126,698 | 123,767 | 121,519 | 119,469 | 603,213 | 489,296 | |||||||||||||
| Income (loss) before income taxes and tax eq adj | (48,142 | ) | 53,395 | 43,930 | 36,909 | 34,106 | 86,092 | 187,117 | ||||||||||||
| Tax equivalent adjustment | 3,451 | 2,975 | 2,916 | 3,003 | 2,906 | 12,345 | 11,704 | |||||||||||||
| Income (loss) before income taxes | (51,593 | ) | 50,420 | 41,014 | 33,906 | 31,200 | 73,747 | 175,413 | ||||||||||||
| Income taxes | (17,530 | ) | 7,965 | 6,730 | 4,695 | 4,978 | 1,860 | 28,048 | ||||||||||||
| Net income (loss) | $ | (34,063 | ) | $ | 42,455 | $ | 34,284 | $ | 29,211 | $ | 26,222 | $ | 71,887 | $ | 147,365 | |||||
| Per share data | ||||||||||||||||||||
| Earnings (loss) per share - basic | $ | (0.56 | ) | $ | 0.69 | $ | 0.56 | $ | 0.47 | $ | 0.42 | $ | 1.17 | $ | 2.35 | |||||
| Earnings (loss) per share - diluted | $ | (0.56 | ) | $ | 0.69 | $ | 0.56 | $ | 0.47 | $ | 0.42 | $ | 1.17 | $ | 2.34 | |||||
| Dividends per share | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.92 | $ | 0.92 | ||||||
| Weighted average shares outstanding | ||||||||||||||||||||
| Basic | 60,969,400 | 61,114,804 | 61,378,226 | 61,514,395 | 62,037,884 | 61,242,358 | 62,788,055 | |||||||||||||
| Diluted | 61,173,249 | 61,318,715 | 61,546,285 | 61,709,797 | 62,264,983 | 61,431,726 | 62,973,464 | |||||||||||||
| Period end shares outstanding | 60,977,686 | 60,953,864 | 61,201,123 | 61,463,392 | 61,648,679 | 60,977,686 | 61,648,679 | |||||||||||||
| (1) See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| NONPERFORMING ASSETS (1) | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||||||||
| Nonaccrual LHFI | |||||||||||||||||||||
| Alabama | $ | 12,300 | $ | 12,710 | $ | 2,698 | $ | 7,506 | $ | 8,182 | |||||||||||
| Florida | 227 | 227 | 233 | 310 | 313 | ||||||||||||||||
| Mississippi (2) | 24,683 | 23,517 | 23,039 | 21,318 | 21,636 | ||||||||||||||||
| Tennessee (3) | 5,566 | 5,120 | 9,500 | 9,266 | 10,501 | ||||||||||||||||
| Texas | 23,196 | 26,353 | 26,582 | 25,999 | 22,066 | ||||||||||||||||
| Total nonaccrual LHFI | 65,972 | 67,927 | 62,052 | 64,399 | 62,698 | ||||||||||||||||
| Other real estate | |||||||||||||||||||||
| Alabama | 194 | 217 | 84 | — | — | ||||||||||||||||
| Mississippi (2) | 1,769 | 2,754 | 2,950 | 3,187 | 4,557 | ||||||||||||||||
| Tennessee (3) | 23 | — | — | — | — | ||||||||||||||||
| Total other real estate | 1,986 | 2,971 | 3,034 | 3,187 | 4,557 | ||||||||||||||||
| Total nonperforming assets | $ | 67,958 | $ | 70,898 | $ | 65,086 | $ | 67,586 | $ | 67,255 | |||||||||||
| LOANS PAST DUE OVER 90 DAYS (1) | |||||||||||||||||||||
| LHFI | $ | 3,929 | $ | 1,842 | $ | 1,347 | $ | 1,503 | $ | 2,114 | |||||||||||
| LHFS-Guaranteed GNMA serviced loans | |||||||||||||||||||||
| (no obligation to repurchase) | $ | 49,320 | $ | 48,313 | $ | 51,164 | $ | 62,078 | $ | 69,894 | |||||||||||
| Quarter Ended | Year Ended | ||||||||||||||||||||
| ACL LHFI (1) | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||||||||
| Beginning Balance | $ | 115,050 | $ | 103,140 | $ | 98,734 | $ | 99,457 | $ | 104,073 | $ | 99,457 | $ | 117,306 | |||||||
| Provision for credit losses, LHFI | 6,902 | 12,919 | 2,716 | (860 | ) | (4,515 | ) | 21,677 | (21,499 | ) | |||||||||||
| Charge-offs | (3,893 | ) | (2,920 | ) | (2,277 | ) | (2,242 | ) | (2,616 | ) | (11,332 | ) | (10,275 | ) | |||||||
| Recoveries | 2,155 | 1,911 | 3,967 | 2,379 | 2,515 | 10,412 | 13,925 | ||||||||||||||
| Net (charge-offs) recoveries | (1,738 | ) | (1,009 | ) | 1,690 | 137 | (101 | ) | (920 | ) | 3,650 | ||||||||||
| Ending Balance | $ | 120,214 | $ | 115,050 | $ | 103,140 | $ | 98,734 | $ | 99,457 | $ | 120,214 | $ | 99,457 | |||||||
| NET (CHARGE-OFFS) RECOVERIES (1) | |||||||||||||||||||||
| Alabama | $ | 98 | $ | 93 | $ | 1,129 | $ | 699 | $ | 747 | $ | 2,019 | $ | 1,299 | |||||||
| Florida | (60 | ) | (23 | ) | 761 | (26 | ) | (32 | ) | 652 | 521 | ||||||||||
| Mississippi (2) | (1,657 | ) | (702 | ) | (266 | ) | (88 | ) | (683 | ) | (2,713 | ) | (111 | ) | |||||||
| Tennessee (3) | (195 | ) | (202 | ) | 31 | (424 | ) | (130 | ) | (790 | ) | 940 | |||||||||
| Texas | 76 | (175 | ) | 35 | (24 | ) | (3 | ) | (88 | ) | 1,001 | ||||||||||
| Total net (charge-offs) recoveries | $ | (1,738 | ) | $ | (1,009 | ) | $ | 1,690 | $ | 137 | $ | (101 | ) | $ | (920 | ) | $ | 3,650 | |||
| (1) Excludes PPP loans. | |||||||||||||||||||||
| (2) Mississippi includes Central and Southern Mississippi Regions. | |||||||||||||||||||||
| (3) Tennessee includes Memphis, Tennessee and Northern Mississippi Regions. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||
| Quarter Ended | Year Ended | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| FINANCIAL RATIOS AND OTHER DATA | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||||||||
| Return on average equity | -9.05 | % | 10.48 | % | 8.55 | % | 6.91 | % | 5.92 | % | 4.48 | % | 8.32 | % | |||||||
| Return on average tangible equity | -12.14 | % | 13.90 | % | 11.36 | % | 9.05 | % | 7.72 | % | 6.00 | % | 10.81 | % | |||||||
| Return on average assets | -0.76 | % | 0.98 | % | 0.79 | % | 0.68 | % | 0.60 | % | 0.41 | % | 0.86 | % | |||||||
| Interest margin - Yield - FTE | 4.40 | % | 3.71 | % | 3.01 | % | 2.69 | % | 2.65 | % | 3.46 | % | 2.92 | % | |||||||
| Interest margin - Cost | 0.73 | % | 0.21 | % | 0.11 | % | 0.11 | % | 0.13 | % | 0.29 | % | 0.16 | % | |||||||
| Net interest margin - FTE | 3.66 | % | 3.50 | % | 2.90 | % | 2.58 | % | 2.53 | % | 3.17 | % | 2.76 | % | |||||||
| Efficiency ratio (1) | 65.85 | % | 64.96 | % | 71.89 | % | 76.44 | % | 76.52 | % | 69.37 | % | 71.41 | % | |||||||
| Full-time equivalent employees | 2,738 | 2,717 | 2,727 | 2,725 | 2,692 | ||||||||||||||||
| CREDIT QUALITY RATIOS (2) | |||||||||||||||||||||
| Net (recoveries) charge-offs / average loans | 0.06 | % | 0.03 | % | -0.06 | % | -0.01 | % | 0.00 | % | 0.01 | % | -0.04 | % | |||||||
| Provision for credit losses, LHFI / average loans | 0.23 | % | 0.45 | % | 0.10 | % | -0.03 | % | -0.17 | % | 0.19 | % | -0.21 | % | |||||||
| Nonaccrual LHFI / (LHFI + LHFS) | 0.53 | % | 0.58 | % | 0.56 | % | 0.61 | % | 0.60 | % | |||||||||||
| Nonperforming assets / (LHFI + LHFS) | 0.55 | % | 0.60 | % | 0.58 | % | 0.64 | % | 0.64 | % | |||||||||||
| Nonperforming assets / (LHFI + LHFS <br> + other real estate) | 0.55 | % | 0.60 | % | 0.58 | % | 0.64 | % | 0.64 | % | |||||||||||
| ACL LHFI / LHFI | 0.99 | % | 0.99 | % | 0.94 | % | 0.95 | % | 0.97 | % | |||||||||||
| ACL LHFI-commercial / commercial LHFI | 0.85 | % | 0.93 | % | 0.88 | % | 0.95 | % | 1.00 | % | |||||||||||
| ACL LHFI-consumer / consumer and <br> home mortgage LHFI | 1.41 | % | 1.20 | % | 1.14 | % | 0.96 | % | 0.87 | % | |||||||||||
| ACL LHFI / nonaccrual LHFI | 182.22 | % | 169.37 | % | 166.22 | % | 153.32 | % | 158.63 | % | |||||||||||
| ACL LHFI / nonaccrual LHFI <br> (excl individually analyzed loans) | 399.19 | % | 466.03 | % | 475.27 | % | 484.01 | % | 500.85 | % | |||||||||||
| CAPITAL RATIOS | |||||||||||||||||||||
| Total equity / total assets | 8.28 | % | 8.78 | % | 9.36 | % | 9.35 | % | 9.90 | % | |||||||||||
| Tangible equity / tangible assets | 6.27 | % | 6.67 | % | 7.23 | % | 7.29 | % | 7.86 | % | |||||||||||
| Tangible equity / risk-weighted assets | 7.61 | % | 8.15 | % | 9.16 | % | 9.79 | % | 10.71 | % | |||||||||||
| Tier 1 leverage ratio | 8.47 | % | 9.01 | % | 8.80 | % | 8.66 | % | 8.73 | % | |||||||||||
| Common equity tier 1 capital ratio | 9.74 | % | 10.63 | % | 11.01 | % | 11.23 | % | 11.29 | % | |||||||||||
| Tier 1 risk-based capital ratio | 10.15 | % | 11.06 | % | 11.47 | % | 11.70 | % | 11.77 | % | |||||||||||
| Total risk-based capital ratio | 11.91 | % | 12.85 | % | 13.26 | % | 13.53 | % | 13.55 | % | |||||||||||
| STOCK PERFORMANCE | |||||||||||||||||||||
| Market value-Close | $ | 34.91 | $ | 30.63 | $ | 29.19 | $ | 30.39 | $ | 32.46 | |||||||||||
| Book value | $ | 24.47 | $ | 24.76 | $ | 25.93 | $ | 26.54 | $ | 28.25 | |||||||||||
| Tangible book value | $ | 18.11 | $ | 18.39 | $ | 19.58 | $ | 20.22 | $ | 21.93 | |||||||||||
| (1) See Note 7 – Non-GAAP Financial Measures in the Notes to Consolidated Financials for Trustmark’s efficiency ratio calculation. | |||||||||||||||||||||
| (2) Excludes PPP loans. |
See Notes to Consolidated Financials
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| December 31, 2022 |
| ($ in thousands) |
| (unaudited) |
Note 1 - Litigation Settlement
As previously announced, on December 31, 2022, Trustmark National Bank (“Trustmark”) agreed to a settlement in principle (the “Settlement”) relating to litigation involving the Stanford Financial Group that includes a lawsuit initially filed in the District Court of Harris County, Texas on August 23, 2009 and also includes other subsequently-filed Stanford-related lawsuits. Trustmark Corporation, the parent company of Trustmark, has provided disclosure relating to these matters in its periodic reports on Forms 10-K and 10-Q throughout the pendency of these actions.
The parties to the Settlement are, on the one hand, (i) Ralph S. Janvey, solely in his capacity as the court-appointed receiver (the “Receiver”) for the Stanford Receivership Estate; (ii) the Official Stanford Investors Committee; (iii) each of the plaintiffs in the Rotstain and Smith Actions (as defined below); and, on the other hand, (iv) Trustmark.
Under the terms of the Settlement, the parties have agreed to settle and dismiss Rotstain et al. v. Trustmark National Bank, et al., CA No. 4-22-CV-00800 (S.D. Tex.) (the “Rotstain Action”), Smith et al. v. Independent Bank, et al., CA No. 4-20-CV-00675 (S.D. Tex.) (the “Smith Action”), and all current or future claims arising from or related to Stanford. In addition, the Settlement provides that the parties will request dismissal of Jackson, et al., v. Cox, et al., CA No. 3:10-CV-0328 (N.D. Tex.) (the “Jackson Action” and, collectively with the Rotstain Action and the Smith Action, the “Actions”) pursuant to the terms of the bar orders described below. If the Settlement, including the bar orders described below, is approved by the Court and is not subject to further appeal, Trustmark will make a one-time cash payment of $100.0 million to the Receiver. Trustmark expects to be relieved of pre-trial deadlines and the February 27, 2023 trial setting in the Rotstain Action pending final Court approval of a Settlement Agreement reflecting the terms of the Settlement and pending entry of the bar orders. The Smith and Jackson Actions are currently stayed.
The Settlement includes the parties’ agreement to seek the Northern District of Texas District Court’s entry of bar orders prohibiting any continued or future claims against Trustmark and its related parties relating to Stanford, whether asserted to date or not. The bar orders therefore would prohibit all litigation relating to Stanford described in Trustmark Corporation’s SEC periodic reports, including not only the Actions and any pending matters but also any actions that may be brought in the future. Final Court approval of these bar orders is a condition of the Settlement.
The Settlement is also subject to the execution and delivery of a definitive Settlement Agreement reflecting the terms of the Settlement, notice to Stanford’s investor claimants and final, non-appealable approval by the U.S. District Court for the Northern District of Texas. The timing of any final decision by the Court is subject to the discretion of the Court and any appeal. While Trustmark believes that the Settlement is consistent with the terms of prior Stanford-related settlements that have been approved by the Court and were not successfully appealed, it is possible that the Court may decide not to approve the Settlement Agreement or that the Fifth Circuit Court of Appeals could decide to accept an appeal thereof.
The Settlement Agreement will provide that Trustmark makes no admission of liability or wrongdoing in connection with any Stanford matter. As has been the case throughout the pendency of the Actions, Trustmark expressly denies any liability or wrongdoing with respect to any matter alleged in regard of the multi-billion-dollar Ponzi scheme operated by Stanford for almost 20 years. Trustmark’s relationship with Stanford consisted of ordinary banking services provided to business deposit customers.
Trustmark and Trustmark Corporation have determined that it is in the best interest of Trustmark, Trustmark Corporation and the shareholders of Trustmark Corporation to enter into the Settlement to eliminate the risk, ongoing expense, uncertainty as to ultimate outcome and imposition on management and the business of Trustmark of further litigation of the Actions and related Stanford claims.
As a result of the entry into the Settlement, Trustmark Corporation recognized $100.0 million of litigation settlement expense, as well as an additional $750 thousand in legal fees, that were included in noninterest expense related to the Stanford litigation during the fourth quarter of 2022. Trustmark Corporation expects that the Settlement will be tax deductible. Trustmark will remain substantially above levels considered to be well-capitalized under all relevant standards.
The foregoing description of the Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Settlement Agreement, a copy of which will be filed as an exhibit to a future periodic or current report of Trustmark Corporation.
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| December 31, 2022 |
| ($ in thousands) |
| (unaudited) |
Note 2 - Securities Available for Sale and Held to Maturity
The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity:
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SECURITIES AVAILABLE FOR SALE | ||||||||||
| U.S. Treasury securities | $ | 391,513 | $ | 416,278 | $ | 419,696 | $ | 361,822 | $ | 344,640 |
| U.S. Government agency obligations | 7,766 | 9,116 | 11,947 | 12,623 | 13,727 | |||||
| Obligations of states and political subdivisions | 4,862 | 4,763 | 5,179 | 5,359 | 5,714 | |||||
| Mortgage-backed securities | ||||||||||
| Residential mortgage pass-through securities | ||||||||||
| Guaranteed by GNMA | 27,097 | 28,164 | 32,240 | 35,117 | 39,573 | |||||
| Issued by FNMA and FHLMC | 1,345,463 | 1,718,057 | 1,888,546 | 2,038,331 | 2,218,429 | |||||
| Other residential mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 115,140 | 126,138 | 144,158 | 164,506 | 196,690 | |||||
| Commercial mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 132,241 | 141,970 | 142,598 | 400,488 | 420,104 | |||||
| Total securities available for sale | $ | 2,024,082 | $ | 2,444,486 | $ | 2,644,364 | $ | 3,018,246 | $ | 3,238,877 |
| SECURITIES HELD TO MATURITY | ||||||||||
| U.S. Treasury securities | $ | 28,295 | $ | — | $ | — | $ | — | $ | — |
| Obligations of states and political subdivisions | 4,510 | 4,512 | 5,320 | 7,324 | 7,328 | |||||
| Mortgage-backed securities | ||||||||||
| Residential mortgage pass-through securities | ||||||||||
| Guaranteed by GNMA | 4,442 | 4,527 | 4,624 | 4,831 | 5,005 | |||||
| Issued by FNMA and FHLMC | 509,311 | 179,375 | 185,554 | 192,373 | 43,444 | |||||
| Other residential mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 188,201 | 197,923 | 210,479 | 224,012 | 241,934 | |||||
| Commercial mortgage-backed securities | ||||||||||
| Issued or guaranteed by FNMA, FHLMC, or GNMA | 759,755 | 770,648 | 731,777 | 179,058 | 44,826 | |||||
| Total securities held to maturity | $ | 1,494,514 | $ | 1,156,985 | $ | 1,137,754 | $ | 607,598 | $ | 342,537 |
During the fourth quarter of 2022, Trustmark reclassified $422.9 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $57.1 million ($42.8 million, net of tax). The net unrealized holding loss will be 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. There were no gains or losses recognized as a result of the transfer.
During the second quarter of 2022, Trustmark reclassified $343.1 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $34.8 million ($26.1 million, net of tax). The net unrealized holding loss will be 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. There were no gains or losses recognized as a result of the transfer.
At December 31, 2022, the net unamortized, unrealized loss included in accumulated other comprehensive income (loss) in the accompanying balance sheet for securities held to maturity transferred from securities available for sale totaled approximately $92.3 million ($69.2 million, net of tax).
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 99.8% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| December 31, 2022 |
| ($ in thousands) |
| (unaudited) |
Note 3 – Loan Composition
LHFI consisted of the following during the periods presented:
| LHFI BY TYPE | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans secured by real estate: | |||||||||||||||
| Construction, land development and other land loans | $ | 1,719,542 | $ | 1,647,395 | $ | 1,440,058 | $ | 1,273,959 | $ | 1,308,781 | |||||
| Secured by 1-4 family residential properties | 2,775,847 | 2,597,112 | 2,424,962 | 2,106,998 | 1,977,993 | ||||||||||
| Secured by nonfarm, nonresidential properties | 3,278,830 | 3,206,946 | 3,178,079 | 2,975,039 | 2,977,084 | ||||||||||
| Other real estate secured | 742,538 | 593,119 | 555,311 | 715,939 | 726,043 | ||||||||||
| Commercial and industrial loans | 1,821,259 | 1,689,532 | 1,551,001 | 1,495,060 | 1,414,279 | ||||||||||
| Consumer loans | 166,425 | 163,412 | 160,716 | 154,215 | 159,472 | ||||||||||
| State and other political subdivision loans | 1,223,863 | 1,188,703 | 1,110,795 | 1,215,023 | 1,146,251 | ||||||||||
| Other loans | 475,735 | 499,845 | 523,918 | 460,896 | 537,926 | ||||||||||
| LHFI | 12,204,039 | 11,586,064 | 10,944,840 | 10,397,129 | 10,247,829 | ||||||||||
| ACL LHFI | (120,214 | ) | (115,050 | ) | (103,140 | ) | (98,734 | ) | (99,457 | ) | |||||
| Net LHFI | $ | 12,083,825 | $ | 11,471,014 | $ | 10,841,700 | $ | 10,298,395 | $ | 10,148,372 |
The following table presents the LHFI composition by region and reflects each region’s diversified mix of loans:
| December 31, 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LHFI - COMPOSITION BY REGION | Total | Alabama | Florida | Mississippi <br>(Central and <br>Southern <br>Regions) | Tennessee <br>(Memphis, TN and <br>Northern MS<br>Regions) | Texas | ||||||
| Loans secured by real estate: | ||||||||||||
| Construction, land development and other land loans | $ | 1,719,542 | $ | 841,298 | $ | 65,920 | $ | 421,210 | $ | 33,205 | $ | 357,909 |
| Secured by 1-4 family residential properties | 2,775,847 | 133,596 | 50,672 | 2,483,094 | 79,782 | 28,703 | ||||||
| Secured by nonfarm, nonresidential properties | 3,278,830 | 895,306 | 212,185 | 1,394,562 | 172,432 | 604,345 | ||||||
| Other real estate secured | 742,538 | 202,453 | 2,013 | 339,592 | 6,822 | 191,658 | ||||||
| Commercial and industrial loans | 1,821,259 | 502,492 | 26,496 | 773,135 | 285,706 | 233,430 | ||||||
| Consumer loans | 166,425 | 24,172 | 8,528 | 103,107 | 18,442 | 12,176 | ||||||
| State and other political subdivision loans | 1,223,863 | 77,017 | 62,962 | 859,117 | 27,881 | 196,886 | ||||||
| Other loans | 475,735 | 74,478 | 9,245 | 268,903 | 58,052 | 65,057 | ||||||
| Loans | $ | 12,204,039 | $ | 2,750,812 | $ | 438,021 | $ | 6,642,720 | $ | 682,322 | $ | 1,690,164 |
| CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION | ||||||||||||
| Lots | $ | 71,964 | $ | 37,553 | $ | 9,802 | $ | 16,654 | $ | 1,923 | $ | 6,032 |
| Development | 140,114 | 56,653 | 1,392 | 46,940 | 6,798 | 28,331 | ||||||
| Unimproved land | 108,972 | 22,548 | 14,348 | 35,177 | 5,039 | 31,860 | ||||||
| 1-4 family construction | 369,566 | 197,352 | 24,903 | 97,370 | 17,436 | 32,505 | ||||||
| Other construction | 1,028,926 | 527,192 | 15,475 | 225,069 | 2,009 | 259,181 | ||||||
| Construction, land development and other land loans | $ | 1,719,542 | $ | 841,298 | $ | 65,920 | $ | 421,210 | $ | 33,205 | $ | 357,909 |
| TRUSTMARK CORPORATION AND SUBSIDIARIES | ||||||||||||
| --- | ||||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | ||||||||||||
| December 31, 2022 | ||||||||||||
| ($ in thousands) | ||||||||||||
| (unaudited) |
Note 3 – Loan Composition (continued)
| December 31, 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | Alabama | Florida | Mississippi <br>(Central and <br>Southern <br>Regions) | Tennessee <br>(Memphis, TN and <br>Northern MS<br>Regions) | Texas | |||||||
| LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION | ||||||||||||
| Non-owner occupied: | ||||||||||||
| Retail | $ | 343,073 | $ | 133,173 | $ | 33,675 | $ | 91,921 | $ | 21,695 | $ | 62,609 |
| Office | 271,112 | 122,818 | 17,394 | 70,836 | 10,435 | 49,629 | ||||||
| Hotel/motel | 298,159 | 170,048 | 40,031 | 60,191 | 27,889 | — | ||||||
| Mini-storage | 155,037 | 28,072 | 2,104 | 105,229 | 482 | 19,150 | ||||||
| Industrial | 333,650 | 68,863 | 17,523 | 121,055 | 2,799 | 123,410 | ||||||
| Health care | 49,363 | 17,633 | 989 | 26,836 | 343 | 3,562 | ||||||
| Convenience stores | 33,721 | 7,416 | 641 | 14,959 | 593 | 10,112 | ||||||
| Nursing homes/senior living | 390,739 | 136,986 | — | 184,730 | 5,595 | 63,428 | ||||||
| Other | 136,120 | 35,040 | 9,793 | 61,086 | 16,397 | 13,804 | ||||||
| Total non-owner occupied loans | 2,010,974 | 720,049 | 122,150 | 736,843 | 86,228 | 345,704 | ||||||
| Owner-occupied: | ||||||||||||
| Office | 165,403 | 43,628 | 36,375 | 48,325 | 8,827 | 28,248 | ||||||
| Churches | 72,472 | 16,167 | 5,255 | 41,036 | 7,165 | 2,849 | ||||||
| Industrial warehouses | 175,272 | 19,344 | 4,996 | 47,413 | 16,872 | 86,647 | ||||||
| Health care | 130,604 | 12,216 | 6,384 | 95,437 | 2,341 | 14,226 | ||||||
| Convenience stores | 136,785 | 12,558 | 21,581 | 65,069 | 376 | 37,201 | ||||||
| Retail | 101,087 | 11,360 | 8,118 | 44,578 | 19,187 | 17,844 | ||||||
| Restaurants | 55,944 | 3,999 | 4,169 | 32,275 | 12,229 | 3,272 | ||||||
| Auto dealerships | 49,304 | 6,794 | 228 | 24,282 | 18,000 | — | ||||||
| Nursing homes/senior living | 237,082 | 36,132 | — | 174,750 | — | 26,200 | ||||||
| Other | 143,903 | 13,059 | 2,929 | 84,554 | 1,207 | 42,154 | ||||||
| Total owner-occupied loans | 1,267,856 | 175,257 | 90,035 | 657,719 | 86,204 | 258,641 | ||||||
| Loans secured by nonfarm, nonresidential properties | $ | 3,278,830 | $ | 895,306 | $ | 212,185 | $ | 1,394,562 | $ | 172,432 | $ | 604,345 |
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities
The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:
| Quarter Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||||||||||||
| Securities – taxable | 1.71 | % | 1.62 | % | 1.50 | % | 1.37 | % | 1.22 | % | 1.55 | % | 1.29 | % | |||||||
| Securities – nontaxable | 3.95 | % | 3.97 | % | 4.00 | % | 3.97 | % | 3.82 | % | 3.97 | % | 3.87 | % | |||||||
| Securities – total | 1.72 | % | 1.63 | % | 1.50 | % | 1.38 | % | 1.23 | % | 1.56 | % | 1.31 | % | |||||||
| PPP loans | 12.39 | % | 7.51 | % | 4.16 | % | 2.35 | % | 3.68 | % | 4.30 | % | 10.47 | % | |||||||
| Loans - LHFI & LHFS | 5.27 | % | 4.48 | % | 3.79 | % | 3.58 | % | 3.56 | % | 4.32 | % | 3.62 | % | |||||||
| Loans - total | 5.27 | % | 4.48 | % | 3.79 | % | 3.58 | % | 3.56 | % | 4.32 | % | 3.84 | % | |||||||
| Fed funds sold & reverse repurchases | 4.29 | % | 3.51 | % | 3.65 | % | — | — | 4.22 | % | — | ||||||||||
| Other earning assets | 3.76 | % | 1.82 | % | 0.78 | % | 0.18 | % | 0.18 | % | 0.89 | % | 0.15 | % | |||||||
| Total earning assets | 4.40 | % | 3.71 | % | 3.01 | % | 2.69 | % | 2.65 | % | 3.46 | % | 2.92 | % | |||||||
| Interest-bearing deposits | 0.71 | % | 0.20 | % | 0.11 | % | 0.11 | % | 0.13 | % | 0.28 | % | 0.17 | % | |||||||
| Fed funds purchased & repurchases | 3.44 | % | 1.95 | % | 0.24 | % | 0.13 | % | 0.13 | % | 2.16 | % | 0.13 | % | |||||||
| Other borrowings | 3.73 | % | 2.89 | % | 2.52 | % | 2.26 | % | 2.25 | % | 3.11 | % | 2.25 | % | |||||||
| Total interest-bearing liabilities | 1.03 | % | 0.31 | % | 0.17 | % | 0.16 | % | 0.19 | % | 0.43 | % | 0.23 | % | |||||||
| Net interest margin | 3.66 | % | 3.50 | % | 2.90 | % | 2.58 | % | 2.53 | % | 3.17 | % | 2.76 | % | |||||||
| Net interest margin excluding PPP loans <br> and the FRB balance | 3.66 | % | 3.53 | % | 3.06 | % | 2.88 | % | 2.82 | % | 3.30 | % | 2.91 | % | |||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||
| --- | |||||||||||||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | |||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||
| (unaudited) |
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities (continued)
Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding PPP loans and the balance held at the Federal Reserve Bank of Atlanta (FRB), which equals reported net interest income-FTE excluding interest income on PPP loans and the FRB balance, annualized, as a percent of average earning assets excluding average PPP loans and the FRB balance.
At December 31, 2022 and September 30, 2022, the average FRB balance totaled $299.2 million and $275.4 million, respectively, and is included in other earning assets in the accompanying average consolidated balance sheets.
The net interest margin excluding PPP loans and the FRB balance increased 13 basis points when compared to the third quarter of 2022, totaling 3.66% for the fourth quarter of 2022. The expansion of the net interest margin excluding PPP loans and the FRB balance was due to increases in the yields on the loans held for investment and held for sale portfolio and the securities portfolio and was partially offset by increased costs of interest-bearing liabilities, which resulted from the higher interest-rate environment.
Note 5 – Mortgage Banking
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 offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income 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 $3.6 million during the fourth quarter of 2022.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
| Quarter Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||||||||||||
| Mortgage servicing income, net | $ | 6,636 | $ | 6,669 | $ | 6,557 | $ | 6,429 | $ | 6,571 | $ | 26,291 | $ | 25,476 | |||||||
| Change in fair value-MSR from runoff | (2,981 | ) | (3,462 | ) | (3,806 | ) | (3,785 | ) | (4,745 | ) | (14,034 | ) | (20,160 | ) | |||||||
| Gain on sales of loans, net | 3,328 | 4,597 | 6,030 | 6,223 | 9,005 | 20,178 | 55,976 | ||||||||||||||
| Mortgage banking income before hedge <br> ineffectiveness | 6,983 | 7,804 | 8,781 | 8,867 | 10,831 | 32,435 | 61,292 | ||||||||||||||
| Change in fair value-MSR from market changes | (3,348 | ) | 10,770 | 8,739 | 22,020 | 2,221 | 38,181 | 13,258 | |||||||||||||
| Change in fair value of derivatives | (227 | ) | (11,698 | ) | (9,371 | ) | (21,014 | ) | (1,443 | ) | (42,310 | ) | (10,800 | ) | |||||||
| Net positive (negative) hedge ineffectiveness | (3,575 | ) | (928 | ) | (632 | ) | 1,006 | 778 | (4,129 | ) | 2,458 | ||||||||||
| Mortgage banking, net | $ | 3,408 | $ | 6,876 | $ | 8,149 | $ | 9,873 | $ | 11,609 | $ | 28,306 | $ | 63,750 | |||||||
| TRUSTMARK CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||
| --- | |||||||||||||||||||||
| NOTES TO CONSOLIDATED FINANCIALS | |||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||
| (unaudited) |
Note 6 – Other Noninterest Income and Expense
Other noninterest income consisted of the following for the periods presented:
| Quarter Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||||||||||||
| Partnership amortization for tax credit purposes | $ | (1,869 | ) | $ | (1,531 | ) | $ | (1,475 | ) | $ | (1,336 | ) | $ | (2,455 | ) | $ | (6,211 | ) | $ | (8,011 | ) |
| Increase in life insurance cash surrender value | 1,687 | 1,676 | 1,683 | 1,627 | 1,675 | 6,673 | 6,630 | ||||||||||||||
| Other miscellaneous income | 2,493 | 2,273 | 1,699 | 2,915 | 1,759 | 9,380 | 7,932 | ||||||||||||||
| Total other, net | $ | 2,311 | $ | 2,418 | $ | 1,907 | $ | 3,206 | $ | 979 | $ | 9,842 | $ | 6,551 |
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 and 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.
Other noninterest expense consisted of the following for the periods presented:
| Quarter Ended | Year Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||
| Loan expense | $ | 3,858 | $ | 3,858 | $ | 4,068 | $ | 4,389 | $ | 3,221 | $ | 16,173 | $ | 15,148 |
| Amortization of intangibles | 312 | 312 | 328 | 482 | 548 | 1,434 | 2,316 | |||||||
| FDIC assessment expense | 2,130 | 1,945 | 1,810 | 1,500 | 1,475 | 7,385 | 5,515 | |||||||
| Regulatory settlement charge | — | — | — | — | — | — | 5,000 | |||||||
| Other real estate expense, net | 18 | 497 | 623 | 35 | 336 | 1,173 | 3,528 | |||||||
| Other miscellaneous expense | 9,767 | 8,117 | 7,782 | 7,935 | 9,326 | 33,601 | 32,788 | |||||||
| Total other expense | $ | 16,085 | $ | 14,729 | $ | 14,611 | $ | 14,341 | $ | 14,906 | $ | 59,766 | $ | 64,295 |
Note 7 – Non-GAAP Financial Measures
In addition to capital ratios defined by 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 calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its audited consolidated financial statements and the notes related thereto in their entirety and not to rely on any single financial measure.
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| December 31, 2022 |
| ($ in thousands except per share data) |
| (unaudited) |
Note 7 – Non-GAAP Financial Measures (continued)
| Quarter Ended | Year Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||||||||||
| TANGIBLE EQUITY | ||||||||||||||||||||||
| AVERAGE BALANCES | ||||||||||||||||||||||
| Total shareholders' equity | $ | 1,493,291 | $ | 1,606,469 | $ | 1,608,309 | $ | 1,713,752 | $ | 1,758,123 | $ | 1,604,854 | $ | 1,770,151 | ||||||||
| Less: Goodwill | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,463 | ) | ||||||||
| Identifiable intangible assets | (3,816 | ) | (4,131 | ) | (4,436 | ) | (4,879 | ) | (5,382 | ) | (4,312 | ) | (6,205 | ) | ||||||||
| Total average tangible equity | $ | 1,105,238 | $ | 1,218,101 | $ | 1,219,636 | $ | 1,324,636 | $ | 1,368,504 | $ | 1,216,305 | $ | 1,379,483 | ||||||||
| PERIOD END BALANCES | ||||||||||||||||||||||
| Total shareholders' equity | $ | 1,492,268 | $ | 1,508,945 | $ | 1,586,696 | $ | 1,631,382 | $ | 1,741,311 | ||||||||||||
| Less: Goodwill | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,237 | ) | ||||||||||||
| Identifiable intangible assets | (3,640 | ) | (3,952 | ) | (4,264 | ) | (4,591 | ) | (5,074 | ) | ||||||||||||
| Total tangible equity | (a) | $ | 1,104,391 | $ | 1,120,756 | $ | 1,198,195 | $ | 1,242,554 | $ | 1,352,000 | |||||||||||
| TANGIBLE ASSETS | ||||||||||||||||||||||
| Total assets | $ | 18,015,478 | $ | 17,190,634 | $ | 16,951,510 | $ | 17,441,551 | $ | 17,595,636 | ||||||||||||
| Less: Goodwill | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,237 | ) | (384,237 | ) | ||||||||||||
| Identifiable intangible assets | (3,640 | ) | (3,952 | ) | (4,264 | ) | (4,591 | ) | (5,074 | ) | ||||||||||||
| Total tangible assets | (b) | $ | 17,627,601 | $ | 16,802,445 | $ | 16,563,009 | $ | 17,052,723 | $ | 17,206,325 | |||||||||||
| Risk-weighted assets | (c) | $ | 14,521,078 | $ | 13,748,819 | $ | 13,076,981 | $ | 12,691,545 | $ | 12,623,630 | |||||||||||
| NET INCOME (LOSS) ADJUSTED FOR INTANGIBLE AMORTIZATION | ||||||||||||||||||||||
| Net income (loss) | $ | (34,063 | ) | $ | 42,455 | $ | 34,284 | $ | 29,211 | $ | 26,222 | $ | 71,887 | $ | 147,365 | |||||||
| Plus: Intangible amortization net of tax | 234 | 234 | 246 | 362 | 411 | 1,076 | 1,738 | |||||||||||||||
| Net income (loss) adjusted for intangible amortization | $ | (33,829 | ) | $ | 42,689 | $ | 34,530 | $ | 29,573 | $ | 26,633 | $ | 72,963 | $ | 149,103 | |||||||
| Period end common shares outstanding | (d) | 60,977,686 | 60,953,864 | 61,201,123 | 61,463,392 | 61,648,679 | ||||||||||||||||
| TANGIBLE COMMON EQUITY MEASUREMENTS | ||||||||||||||||||||||
| Return on average tangible equity (1) | -12.14 | % | 13.90 | % | 11.36 | % | 9.05 | % | 7.72 | % | 6.00 | % | 10.81 | % | ||||||||
| Tangible equity/tangible assets | (a)/(b) | 6.27 | % | 6.67 | % | 7.23 | % | 7.29 | % | 7.86 | % | |||||||||||
| Tangible equity/risk-weighted assets | (a)/(c) | 7.61 | % | 8.15 | % | 9.16 | % | 9.79 | % | 10.71 | % | |||||||||||
| Tangible book value | (a)/(d)*1,000 | $ | 18.11 | $ | 18.39 | $ | 19.58 | $ | 20.22 | $ | 21.93 | |||||||||||
| COMMON EQUITY TIER 1 CAPITAL (CET1) | ||||||||||||||||||||||
| Total shareholders' equity | $ | 1,492,268 | $ | 1,508,945 | $ | 1,586,696 | $ | 1,631,382 | $ | 1,741,311 | ||||||||||||
| CECL transition adjustment | 19,500 | 19,500 | 19,500 | 19,500 | 26,000 | |||||||||||||||||
| AOCI-related adjustments | 275,403 | 306,412 | 207,142 | 148,656 | 32,560 | |||||||||||||||||
| CET1 adjustments and deductions: | ||||||||||||||||||||||
| Goodwill net of associated deferred <br> tax liabilities (DTLs) | (370,241 | ) | (370,217 | ) | (370,229 | ) | (370,240 | ) | (370,252 | ) | ||||||||||||
| Other adjustments and deductions <br> for CET1 (2) | (3,258 | ) | (3,506 | ) | (3,757 | ) | (4,015 | ) | (4,392 | ) | ||||||||||||
| CET1 capital | (e) | 1,413,672 | 1,461,134 | 1,439,352 | 1,425,283 | 1,425,227 | ||||||||||||||||
| Additional tier 1 capital instruments <br> plus related surplus | 60,000 | 60,000 | 60,000 | 60,000 | 60,000 | |||||||||||||||||
| Tier 1 capital | $ | 1,473,672 | $ | 1,521,134 | $ | 1,499,352 | $ | 1,485,283 | $ | 1,485,227 | ||||||||||||
| Common equity tier 1 capital ratio | (e)/(c) | 9.74 | % | 10.63 | % | 11.01 | % | 11.23 | % | 11.29 | % |
(1) Calculation = ((net income (loss) adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity.
(2) Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAs), threshold deductions and transition adjustments, as applicable.
| TRUSTMARK CORPORATION AND SUBSIDIARIES |
|---|
| NOTES TO CONSOLIDATED FINANCIALS |
| December 31, 2022 |
| ($ in thousands) |
| (unaudited) |
Note 7 – Non-GAAP Financial Measures (continued)
Trustmark discloses certain non-GAAP financial measures 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 our 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 audited 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 pre-provision net revenue (PPNR) during the periods presented:
| Quarter Ended | Year Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||||||||||
| Net interest income (GAAP) | $ | 146,583 | $ | 136,105 | $ | 112,676 | $ | 99,344 | $ | 98,326 | $ | 494,708 | $ | 418,351 | |||||
| Noninterest income (GAAP) | 45,170 | 52,606 | 53,253 | 54,115 | 50,767 | 205,144 | 221,910 | ||||||||||||
| Pre-provision revenue | (a) | $ | 191,753 | $ | 188,711 | $ | 165,929 | $ | 153,459 | $ | 149,093 | $ | 699,852 | $ | 640,261 | ||||
| Noninterest expense (GAAP) | $ | 231,229 | $ | 126,698 | $ | 123,767 | $ | 121,519 | $ | 119,469 | $ | 603,213 | $ | 489,296 | |||||
| Less: | Litigation settlement expense | (100,750 | ) | — | — | — | — | (100,750 | ) | — | |||||||||
| Voluntary early retirement program | — | — | — | — | — | — | (5,700 | ) | |||||||||||
| Regulatory settlement charge | — | — | — | — | — | — | (5,000 | ) | |||||||||||
| Adjusted noninterest expense - PPNR (Non-GAAP) | (b) | $ | 130,479 | $ | 126,698 | $ | 123,767 | $ | 121,519 | $ | 119,469 | $ | 502,463 | $ | 478,596 | ||||
| PPNR (Non-GAAP) | (a)-(b) | $ | 61,274 | $ | 62,013 | $ | 42,162 | $ | 31,940 | $ | 29,624 | $ | 197,389 | $ | 161,665 |
The following table presents adjustments to net income (loss) and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented:
| Quarter Ended | Year Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||||||||||||||
| Amount | Diluted EPS | Amount | Diluted EPS | Amount | Diluted EPS | Amount | Diluted EPS | ||||||||||||||||
| Net income (loss) (GAAP) | $ | (34,063 | ) | $ | (0.56 | ) | $ | 26,222 | $ | 0.42 | $ | 71,887 | $ | 1.17 | $ | 147,365 | $ | 2.34 | |||||
| Significant non-routine transactions (net of taxes): | |||||||||||||||||||||||
| Litigation settlement expense | 75,563 | 1.24 | — | — | 75,563 | 1.23 | — | — | |||||||||||||||
| Voluntary early retirement program | — | — | — | — | — | — | 4,275 | 0.07 | |||||||||||||||
| Regulatory settlement charge <br> (not tax deductible) | — | — | — | — | — | — | 5,000 | 0.08 | |||||||||||||||
| Net income adjusted for significant non-routine <br> transactions (Non-GAAP) | $ | 41,500 | $ | 0.68 | $ | 26,222 | $ | 0.42 | $ | 147,450 | $ | 2.40 | $ | 156,640 | $ | 2.49 | |||||||
| Reported (GAAP) | Adjusted (Non-GAAP) | Reported (GAAP) | Adjusted (Non-GAAP) | Reported (GAAP) | Adjusted (Non-GAAP) | Reported (GAAP) | Adjusted (Non-GAAP) | ||||||||||||||||
| Return on average equity | -9.05 | % | 10.75 | % | 5.92 | % | n/a | 4.48 | % | 9.13 | % | 8.32 | % | 8.83 | % | ||||||||
| Return on average tangible equity | -12.14 | % | 14.49 | % | 7.72 | % | n/a | 6.00 | % | 12.12 | % | 10.81 | % | 11.45 | % | ||||||||
| Return on average assets | -0.76 | % | 0.93 | % | 0.60 | % | n/a | 0.41 | % | 0.84 | % | 0.86 | % | 0.92 | % | ||||||||
| n/a - not applicable |
Note 7 – Non-GAAP Financial Measures (continued)
The following table presents Trustmark’s calculation of its efficiency ratio for the periods presented:
| Quarter Ended | Year Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||||||||||||||
| Total noninterest expense (GAAP) | $ | 231,229 | $ | 126,698 | $ | 123,767 | $ | 121,519 | $ | 119,469 | $ | 603,213 | $ | 489,296 | |||||||||
| Less: | Other real estate expense, net | (18 | ) | (497 | ) | (623 | ) | (35 | ) | (336 | ) | (1,173 | ) | (3,528 | ) | ||||||||
| Amortization of intangibles | (312 | ) | (312 | ) | (328 | ) | (482 | ) | (548 | ) | (1,434 | ) | (2,316 | ) | |||||||||
| Charitable contributions resulting in <br> state tax credits | (375 | ) | (375 | ) | (375 | ) | (375 | ) | (391 | ) | (1,500 | ) | (1,446 | ) | |||||||||
| Litigation settlement expense | (100,750 | ) | — | — | — | — | (100,750 | ) | — | ||||||||||||||
| Voluntary early retirement program | — | — | — | — | — | — | (5,700 | ) | |||||||||||||||
| Regulatory settlement charge | — | — | — | — | — | — | (5,000 | ) | |||||||||||||||
| Adjusted noninterest expense (Non-GAAP) | (c) | $ | 129,774 | $ | 125,514 | $ | 122,441 | $ | 120,627 | $ | 118,194 | $ | 498,356 | $ | 471,306 | ||||||||
| Net interest income (GAAP) | $ | 146,583 | $ | 136,105 | $ | 112,676 | $ | 99,344 | $ | 98,326 | $ | 494,708 | $ | 418,351 | |||||||||
| Add: | Tax equivalent adjustment | 3,451 | 2,975 | 2,916 | 3,003 | 2,906 | 12,345 | 11,704 | |||||||||||||||
| Net interest income-FTE (Non-GAAP) | (a) | $ | 150,034 | $ | 139,080 | $ | 115,592 | $ | 102,347 | $ | 101,232 | $ | 507,053 | $ | 430,055 | ||||||||
| Noninterest income (GAAP) | $ | 45,170 | $ | 52,606 | $ | 53,253 | $ | 54,115 | $ | 50,767 | $ | 205,144 | $ | 221,910 | |||||||||
| Add: | Partnership amortization for tax credit purposes | 1,869 | 1,531 | 1,475 | 1,336 | 2,455 | 6,211 | 8,011 | |||||||||||||||
| Adjusted noninterest income (Non-GAAP) | (b) | $ | 47,039 | $ | 54,137 | $ | 54,728 | $ | 55,451 | $ | 53,222 | $ | 211,355 | $ | 229,921 | ||||||||
| Adjusted revenue (Non-GAAP) | (a)+(b) | $ | 197,073 | $ | 193,217 | $ | 170,320 | $ | 157,798 | $ | 154,454 | $ | 718,408 | $ | 659,976 | ||||||||
| Efficiency ratio (Non-GAAP) | (c)/((a)+(b)) | 65.85 | % | 64.96 | % | 71.89 | % | 76.44 | % | 76.52 | % | 69.37 | % | 71.41 | % |
Fourth Quarter & Fiscal Year 2022 Financial Results January 24, 2023 Exhibit 99.2
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