What changed in TRUSTMARK CORP's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of TRUSTMARK CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+515 added−475 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)
Top changes in TRUSTMARK CORP's 2023 10-K
515 paragraphs added · 475 removed · 398 edited across 9 sections
- Item 7. Management's Discussion & Analysis+332 / −327 · 279 edited
- Item 1A. Risk Factors+79 / −62 · 52 edited
- Item 1. Business+71 / −54 · 37 edited
- Item 5. Market for Registrant's Common Equity+10 / −12 · 10 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+11 / −9 · 9 edited
Item 1. Business
Business — how the company describes what it does
37 edited+34 added−17 removed130 unchanged
Item 1. Business
Business — how the company describes what it does
37 edited+34 added−17 removed130 unchanged
2022 filing
2023 filing
Biggest changeRecent Economic and Industry Developments Economic activity continued to improve during 2022 as COVID-19 cases declined across the United States and restrictions were lifted; however, economic concerns remain as a result of the cumulative weight of uncertainty regarding the long-term effectiveness of the COVID-19 vaccine and the potential economic impact of recent geopolitical developments, such as Russia's invasion of Ukraine.
Biggest changeRecent Economic and Industry Developments Economic activity improved slightly during 2023; however, economic concerns remain as a result of the cumulative weight of uncertainty regarding the potential economic impact of geopolitical developments, such as the conflicts in Ukraine and the Middle East, inflation, the consequences of bank failures in the first half of 2023 and other economic and industry volatility, the 2024 political cycle in the United States, supply chain issues, higher energy prices and broader price pressures.
Community Reinvestment Act The CRA requires an insured depository institution’s appropriate federal banking regulator to evaluate the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, and to consider this record in its evaluation of certain applications to banking regulators, such as an application for approval of a merger or the establishment of a branch.
Community Reinvestment Act The Community Reinvestment Act (CRA) requires an insured depository institution’s appropriate federal banking regulator to evaluate the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, and to 12 consider this record in its evaluation of certain applications to banking regulators, such as an application for approval of a merger or the establishment of a branch.
Finally, the Dodd-Frank Act potentially expanded state regulation over banks by eliminating National Bank Act preemption for national bank operating subsidiaries, including operating subsidiaries of TNB. Financial Privacy Laws and Cybersecurity The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (GLB Act) imposed requirements related to the privacy of customer financial information.
Finally, the Dodd-Frank Act potentially expanded state regulation over banks by eliminating National Bank Act preemption for national bank operating subsidiaries, including operating subsidiaries of TNB. 13 Financial Privacy Laws and Cybersecurity The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (GLB Act) imposed requirements related to the privacy of customer financial information.
In addition, the FRB’s rules allow for an upward 13 adjustment of no more than one cent to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the rule.
In addition, the FRB’s rules allow for an upward adjustment of no more than one cent to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the rule.
The principal products produced and services rendered by TNB and Trustmark’s other subsidiaries are as follows: 3 Trustmark National Bank Commercial Banking – TNB provides a full range of commercial banking services to corporations and other business customers.
The principal products produced and services rendered by TNB and Trustmark’s other subsidiaries are as follows: Trustmark National Bank Commercial Banking – TNB provides a full range of commercial banking services to corporations and other business customers.
At December 31, 2022, TNB was well-capitalized based on the ratios and guidelines described above. In December 2018, the federal banking agencies issued a final rule that allows institutions to elect to phase in the regulatory capital effects of the Current Expected Credit Losses (CECL) accounting standard over three years.
At December 31, 2023, TNB was well-capitalized based on the ratios and guidelines described above. In December 2018, the federal banking agencies issued a final rule that allows institutions to elect to phase in the regulatory capital effects of the Current Expected Credit Losses (CECL) accounting standard over three years.
The FRB is also required to take into account in evaluating such a transaction the effectiveness of the parties in combatting money laundering activities. Provisions of the FDI Act known as the Bank Merger Act impose similar approval standards for an insured depository institution to merge with another insured depository institution.
The FRB is also required to take into account in evaluating such a transaction the effectiveness of the parties in combating money laundering activities. Provisions of the FDI Act known as the Bank Merger Act impose similar approval standards for an insured depository institution to merge with another insured depository institution.
Anti-Money Laundering (AML) Initiatives and Sanctions Compliance Trustmark and TNB are subject to extensive laws and regulations aimed at combatting money laundering and terrorist financing, including the USA Patriot Act of 2001 (USA Patriot Act) and the Bank Secrecy Act.
Anti-Money Laundering (AML) Initiatives and Sanctions Compliance Trustmark and TNB are subject to extensive laws and regulations aimed at combating money laundering and terrorist financing, including the USA Patriot Act of 2001 (USA Patriot Act) and the Bank Secrecy Act.
Chambers, Jr., 63 Trustmark Corporation Principal Accounting Officer since March 2021 Trustmark National Bank Executive Vice President and Chief Accounting Officer since March 2021 Senior Vice President and Controller from March 2009 to February 2021 Monica A.
Chambers, Jr., 64 Trustmark Corporation Principal Accounting Officer since March 2021 Trustmark National Bank Executive Vice President and Chief Accounting Officer since March 2021 Senior Vice President and Controller from March 2009 to February 2021 Monica A.
Through TNB and its subsidiaries, Trustmark operates as a financial services organization providing banking and other financial solutions through 169 offices and 2,738 full-time equivalent associates (measured at December 31, 2022) located in the states of Alabama (includes the Georgia Loan Production Office (LPO), which are collectively referred to herein as Trustmark's Alabama market region), Florida (primarily in the northwest or “Panhandle” region of that state, which is referred to herein as Trustmark’s Florida market), Mississippi, Tennessee (in the Memphis and Northern Mississippi regions, which are collectively referred to herein as Trustmark’s Tennessee market), and Texas (primarily in Houston, which is referred to herein as Trustmark’s Texas market).
Through TNB and its subsidiaries, Trustmark operates as a financial services organization providing banking and other financial solutions through offices and 2,757 full-time equivalent associates (measured at December 31, 2023) located in the states of Alabama (includes the Georgia Loan Production Office (LPO), which are collectively referred to herein as Trustmark's Alabama market region), Florida (primarily in the northwest or “Panhandle” region of that state, which is referred to herein as Trustmark’s Florida market), Mississippi, Tennessee (in the Memphis and Northern Mississippi regions, which are collectively referred to herein as Trustmark’s 3 Tennessee market), and Texas (primarily in Houston, which is referred to herein as Trustmark’s Texas market).
At June 30, 2022, Trustmark’s deposit market share ranked within the top three positions in 55.0% of the 56 counties served and within the top five positions in 68.0% of the counties served. The following table presents Federal Deposit Insurance Corporation (FDIC) deposit data regarding TNB’s deposit market share by state as of June 30, 2022.
At June 30, 2023, Trustmark’s deposit market share ranked within the top three positions in 56.0% of the 55 counties served and within the top five positions in 69.0% of the counties served. The following table presents Federal Deposit Insurance Corporation (FDIC) deposit data regarding TNB’s deposit market share by state as of June 30, 2023.
Host, 68 Trustmark Corporation Chairman since May 2022 Executive Chairman from January 2021 to April 2022 Chairman from April 2020 to December 2020 President and Chief Executive Officer from January 2011 to December 2020 Trustmark National Bank Chairman since May 2022 Executive Chairman from January 2021 to April 2022 Chairman from April 2020 to December 2020 Chief Executive Officer from January 2011 to December 2020 President from January 2011 to December 2019 Duane A.
Host, 69 Trustmark Corporation Chairman since May 2022 Executive Chairman from January 2021 to April 2022 Chairman from April 2020 to December 2020 President and Chief Executive Officer from January 2011 to December 2020 Trustmark National Bank Chairman since May 2022 Executive Chairman from January 2021 to April 2022 Chairman from April 2020 to December 2020 Chief Executive Officer from January 2011 to December 2020 President from January 2011 to December 2019 15 Duane A.
Arthur Stevens, 57 Trustmark National Bank President – Retail Banking since September 2011 Maria Luisa "Ria" Sugay, 41 Trustmark National Bank Bank Treasurer since March 2021 Bank Co-Treasurer from July 2020 to February 2021 Executive Vice President since July 2020 USAA Director, Asset Liability Management from June 2016 to June 2020 Granville Tate, Jr., 66 Trustmark Corporation Secretary since December 2015 Trustmark National Bank Chief Administrative Officer since January 2021 Chief Risk Officer from June 2016 to November 2021 General Counsel from December 2015 to November 2021 Executive Vice President and Secretary since December 2015
Arthur Stevens, 59 Trustmark National Bank President – Retail Banking since September 2011 Maria Luisa "Ria" Sugay, 42 Trustmark National Bank Bank Treasurer since March 2021 Bank Co-Treasurer from July 2020 to February 2021 Executive Vice President since July 2020 USAA Director, Asset Liability Management from June 2016 to June 2020 Granville Tate, Jr., 67 Trustmark Corporation Secretary since December 2015 Trustmark National Bank Chief Administrative Officer since January 2021 Chief Risk Officer from June 2016 to November 2021 General Counsel from December 2015 to November 2021 Executive Vice President and Secretary since December 2015
Credit underwriting standards include evaluation of the borrower’s credit history and repayment capacity, including verification of income and valuation of collateral. Portfolio performance is continuously evaluated through updated credit bureau scores and monitoring of repayment performance.
Credit underwriting standards include evaluation of the borrower’s credit history and repayment capacity, including verification of income and valuation of collateral. Portfolio performance is continuously evaluated through monitoring of repayment performance.
Owens, 58 Trustmark Corporation Treasurer and Principal Financial Officer since March 2021 Trustmark National Bank Chief Financial Officer since March 2021 Bank Treasurer from September 2013 to February 2021 Executive Vice President since 2013 15 W.
Owens, 59 Trustmark Corporation Treasurer and Principal Financial Officer since March 2021 Trustmark National Bank Chief Financial Officer since March 2021 Bank Treasurer from September 2013 to February 2021 Executive Vice President since 2013 W.
The FDIC also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance if the institution has no tangible capital. In 2022, TNB’s expenses related to deposit insurance premiums totaled $7.4 million. TNB Subsidiaries TNB’s nonbanking subsidiaries are subject to a variety of state and federal laws and regulations.
The FDIC also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance if the institution has no tangible capital. In 2023, TNB’s expenses related to deposit insurance premiums totaled $13.5 million. TNB Subsidiaries TNB’s nonbanking subsidiaries are subject to a variety of state and federal laws and regulations.
State Deposit Market Share Alabama 1.70 % Florida 0.16 % Mississippi 12.88 % Tennessee 0.33 % Texas 0.04 % Services provided by the Wealth Management Segment face competition from many national, regional and local financial institutions.
State Deposit Market Share Alabama 1.80 % Florida 0.17 % Mississippi 12.87 % Tennessee 0.33 % Texas 0.04 % Services provided by the Wealth Management Segment face competition from many national, regional and local financial institutions.
Trustmark believes its employee relations to be satisfactory. Information about Executive Officers of Trustmark As of the filing date, the executive officers of Trustmark and its primary bank subsidiary, TNB, including their ages, positions and principal occupations for the last five years are as follows: Gerard R.
Information about Executive Officers of Trustmark As of the filing date, the executive officers of Trustmark and its primary bank subsidiary, TNB, including their ages, positions and principal occupations for the last five years are as follows: Gerard R.
Day, 62 Trustmark National Bank President – Institutional Banking since April 2019 Executive Vice President and Real Estate Banking Manager from May 2017 to April 2019 Senior Vice President and Corporate Commercial Real Estate Manager from October 2008 to May 2017 Robert Barry Harvey, 63 Trustmark National Bank Chief Credit and Operations Officer since June 2021 Chief Credit Officer from March 2010 to May 2021 Executive Vice President since March 2010 Thomas C.
Day, 63 Trustmark National Bank President – Institutional Banking since April 2019 Executive Vice President and Real Estate Banking Manager from May 2017 to April 2019 Robert Barry Harvey, 64 Trustmark National Bank Chief Credit and Operations Officer since June 2021 Chief Credit Officer from March 2010 to May 2021 Executive Vice President since March 2010 Thomas C.
At December 31, 2022, TNB had total assets of $18.013 billion, which represented approximately 99.99% of the consolidated assets of Trustmark.
At December 31, 2023, TNB had total assets of $18.720 billion, which represented approximately 99.99% of the consolidated assets of Trustmark.
The FRB also has established rules governing routing and exclusivity that require debt card issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.
Trustmark is evaluating the impact of this proposal. The FRB also has established rules governing routing and exclusivity that require debt card issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.
At December 31, 2022, TNB also exceeded these requirements with common equity Tier 1 capital, Tier 1 capital and total capital equal to 10.34%, 10.34% and 11.26% of its total risk-weighted assets, respectively. At December 31, 2022, the leverage ratios for Trustmark and TNB were 8.47% and 8.65%, respectively.
At December 31, 2023, TNB also exceeded these requirements with common equity Tier 1 capital, Tier 1 capital and total capital equal to 10.58%, 10.58% and 11.61% of its total risk-weighted assets, respectively. At December 31, 2023, the leverage ratios for Trustmark and TNB were 8.62% and 8.75%, respectively.
Dewey, 64 Trustmark Corporation President and Chief Executive Officer since January 2021 Trustmark National Bank Chief Executive Officer since January 2021 President since January 2020 Chief Operating Officer from January 2019 to December 2020 President – Corporate Banking from September 2011 to December 2018 George T.
Dewey, 65 Trustmark Corporation President and Chief Executive Officer since January 2021 Trustmark National Bank Chief Executive Officer since January 2021 President since January 2020 Chief Operating Officer from January 2019 to December 2020 George T.
Trustmark’s products and services are designed to strengthen and expand customer relationships and enhance the organization’s competitive advantages in its markets as well as to provide cross-selling opportunities that will enable Trustmark to continue to diversify its revenue and earnings streams. 4 The following table sets forth summary data regarding Trustmark’s securities, loans, assets, deposits, equity and revenue over the past three years ($ in thousands): December 31, 2022 2021 2020 Securities $ 3,518,596 $ 3,581,414 $ 2,529,887 Total securities growth (decline) $ (62,818 ) $ 1,051,527 $ 189,384 Total securities growth (decline) -1.8 % 41.6 % 8.1 % Loans held for investment (LHFI) $ 12,204,039 $ 10,247,829 $ 9,824,524 Total loans growth (decline) $ 1,956,210 $ 423,305 $ 416,295 Total loans growth (decline) 19.1 % 4.3 % 4.4 % Assets $ 18,015,478 $ 17,595,636 $ 16,551,840 Total assets growth (decline) $ 419,842 $ 1,043,796 $ 3,053,963 Total assets growth (decline) 2.4 % 6.3 % 22.6 % Deposits $ 14,437,648 $ 15,087,160 $ 14,048,764 Total deposits growth (decline) $ (649,512 ) $ 1,038,396 $ 2,803,207 Total deposits growth (decline) -4.3 % 7.4 % 24.9 % Equity $ 1,492,268 $ 1,741,311 $ 1,741,117 Total equity growth (decline) $ (249,043 ) $ 194 $ 80,415 Total equity growth (decline) -14.3 % — 4.8 % Years Ended December 31, Revenue * $ 699,852 $ 640,261 $ 701,130 Total revenue growth (decline) $ 59,591 $ (60,869 ) $ 87,496 Total revenue growth (decline) 9.3 % -8.7 % 14.3 % * Consistent with Trustmark’s audited financial statements, revenue is defined as net interest income plus noninterest income.
Trustmark’s products and services are designed to strengthen and expand customer relationships and enhance the organization’s competitive advantages in its markets as well as to provide cross-selling opportunities that will enable Trustmark to continue to diversify its revenue and earnings streams. 4 The following table sets forth summary data regarding Trustmark’s securities, loans, assets, deposits, equity and revenue over the past three years ($ in thousands): December 31, 2023 2022 2021 Securities $ 3,189,157 $ 3,518,596 $ 3,581,414 Total securities growth (decline) $ (329,439 ) $ (62,818 ) $ 1,051,527 Total securities growth (decline) -9.4 % -1.8 % 41.6 % Loans held for investment (LHFI) $ 12,950,524 $ 12,204,039 $ 10,247,829 Total loans growth (decline) $ 746,485 $ 1,956,210 $ 423,305 Total loans growth (decline) 6.1 % 19.1 % 4.3 % Assets $ 18,722,189 $ 18,015,478 $ 17,595,636 Total assets growth (decline) $ 706,711 $ 419,842 $ 1,043,796 Total assets growth (decline) 3.9 % 2.4 % 6.3 % Deposits $ 15,569,763 $ 14,437,648 $ 15,087,160 Total deposits growth (decline) $ 1,132,115 $ (649,512 ) $ 1,038,396 Total deposits growth (decline) 7.8 % -4.3 % 7.4 % Equity $ 1,661,847 $ 1,492,268 $ 1,741,311 Total equity growth (decline) $ 169,579 $ (249,043 ) $ 194 Total equity growth (decline) 11.4 % -14.3 % — Years Ended December 31, Revenue * $ 759,836 $ 699,852 $ 640,261 Total revenue growth (decline) $ 59,984 $ 59,591 $ (60,869 ) Total revenue growth (decline) 8.6 % 9.3 % -8.7 % * Consistent with Trustmark’s audited financial statements, revenue is defined as net interest income plus noninterest income.
In the January 2023 “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” the twelve Federal Reserve Districts’ reports suggested that economic activity during the reporting period (covering the period from November 24, 2022 through January 9, 2023) was mixed across Districts, with five Districts reporting slight to modest increases in overall activity, six Districts reporting no change or slight declines and one District reporting a significant decline.
In the January 2024 “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” the twelve Federal Reserve Districts’ reports suggested that economic activity during the reporting period (covering the period from November 18, 2023 through January 8, 2024) was mixed across Districts, with three Districts reporting modest increases in overall activity, eight Districts reporting little or no change and one District reporting a moderate decline.
Trustmark makes available through this address, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed, or furnished to, the SEC. 14 Employees At December 31, 2022, Trustmark employed 2,738 full-time equivalent associates, none of which are represented by a collective bargaining agreement.
Trustmark makes available through this address, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed, or furnished to, the SEC.
At December 31, 2022, Trustmark exceeded its minimum capital requirements with common equity Tier 1 capital, Tier 1 capital and total capital equal to 9.74%, 10.15% and 11.91% of its total risk-weighted assets, respectively.
At December 31, 2023, Trustmark exceeded its minimum capital requirements with common equity Tier 1 capital, Tier 1 capital and total capital equal to 10.04%, 10.44% and 12.29% of its total risk-weighted assets, respectively.
Additionally, federal banking agencies issued a final rule in November 2021 which requires banking organizations to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.
Additionally, banking organizations are required to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.
For additional discussion of the impact of the current economic environment on the financial condition and results of operations of Trustmark and its subsidiaries, see Part II. Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.
There is heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses and capital. For additional discussion of the impact of the current economic environment on the financial condition and results of operations of Trustmark and its subsidiaries, see Part II. Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.
Reports by the Federal Reserve’s Sixth District, Atlanta (which includes Trustmark’s Alabama, Florida and Mississippi market regions), Eighth District, St. Louis (which includes Trustmark’s Tennessee market region), and Eleventh District, Dallas (which includes Trustmark’s Texas market region), noted similar findings for the reporting period as those discussed above.
Louis (which includes Trustmark’s Tennessee market region), and Eleventh District, Dallas (which includes Trustmark’s Texas market region), noted similar findings for the reporting period as those discussed above.
Starting in March 2022, the FRB began raising the target federal funds rate for the first time in three years and continued with multiple increases throughout 2022, up to a range of 4.25% to 4.50% as of December 2022. The FRB also signaled the possibility of additional rate increases throughout 2023.
Market interest rates began to rise during 2022 after an extended period at historical lows. Starting in March 2022, the FRB began raising the target federal funds rate for the first time in three years and continued with multiple increases throughout 2022 and 2023, up to a range of 5.25% to 5.50% as of December 2023.
All consumer loans are subject to a standardized underwriting process through Trustmark’s consumer loan center, which uses a custom credit scoring model with emphasis placed upon the borrower’s credit evaluation and historical performance, income evaluation and valuation of collateral (where applicable).
Consumer LHFI – Consumer credit includes loans to individuals for household and personal items, automobile purchases, unsecured loans, personal lines of credit and credit cards. All consumer loans are subject to a standardized underwriting process through Trustmark’s consumer loan center, with emphasis placed upon the borrower’s credit evaluation and historical performance, income evaluation and valuation of collateral (where applicable).
The FDIC adopted a restoration plan in September 2020, to restore the DIF reserve ratio to at least 1.35% by September 30, 2028. On October 18, 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2 basis points, beginning with the first quarterly assessment period of 2023.
On October 18, 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2 basis points, which began with the first quarterly assessment period of 2023. The increased assessment rate schedules will remain in effect unless and until the DIF reserve ratio meets or exceeds 2.00%.
In addition, the FRB increased the interest that it pays on reserves multiple times during 2022 from 0.10% to 4.40% as of December 2022. The prolonged period of reduced interest rates has had and may continue to have an adverse effect on net interest income and margins and profitability for financial institutions, including Trustmark.
In addition, the FRB increased the interest that it pays on reserves multiple times during 2022 and 2023 from 0.10% to 5.40% as of December 2023. As interest rates have increased, so have competitive pressures on the deposit cost of funds.
Additionally, as interest rates have increased, so have competitive pressures on the deposit cost of funds. It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on Trustmark's results of operations.
This has been exacerbated by bank failures and the resulting heightened competition for deposits, which has also affected the interest that Trustmark pays on deposits. It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on Trustmark's results of operations.
While Trustmark's customer base is wholly domestic, international economic conditions affect domestic economic conditions, and thus may have an impact upon Trustmark's financial condition or results of operations. Market interest rates began to rise during 2022 after an extended period at historical lows.
Doubts surrounding the near-term direction of global markets and the potential impact on the United States economy are expected to persist for the near term. While Trustmark's customer base is wholly domestic, international economic conditions affect domestic economic conditions, and thus may have an impact upon Trustmark's financial condition or results of operations.
The increased assessment rate schedules will remain in effect unless and until the DIF reserve ratio meets or exceeds 2.00%. As a result of the new rule, the FDIC insurance costs of insured depository institutions, including TNB, will generally increase.
As a result of this rule, the FDIC insurance costs of insured depository institutions, including TNB, have generally increased. TNB incurred an additional $2.6 million of FDIC assessment expense during 2023 as a result of this rule.
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Consumer LHFI – Consumer credit includes loans to individuals for household and personal items, automobile purchases, unsecured loans, personal lines of credit and credit cards.
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Reports by the twelve Federal Reserve Districts noted the following during the reporting period: • Consumer spending provided some seasonal relief over the holidays by meeting expectations in most Districts and exceeding expectations in three Districts. Several Districts noted increased leisure travel. Contacts in nearly all Districts reported decreases in manufacturing activity.
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Updated credit bureau scores are obtained on all existing consumer loans/lines on a periodic basis in order to monitor portfolio credit quality changes and mitigate risk.
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Districts continued to note that high interest rates were limiting auto sales and real estate deals; however, the prospect of falling interest rates was cited by numerous contacts in various sectors as a source of optimism. • Concerns about the office market, weakening overall demand and the 2024 political cycle were often cited as sources of economic uncertainty.
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Inflation has become elevated, reflecting supply and demand imbalances related to the pandemic, supply chain issues, higher energy prices and broader price pressures. Doubts surrounding the near-term direction of global markets and the potential impact on the United States economy are expected to persist for the near term.
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Overall, most Districts indicated that expectations of their firms for future growth were positive, had improved or both. 7 • Most Districts reported little or no net change in overall employment levels, while four Districts described the pace of job growth as modest to moderate. Several Districts reported ongoing challenges in recruiting and hiring skilled tradespeople.
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Reports by the twelve Federal Reserve Districts noted the following during the reporting period: • Consumer spending increased slightly, with some retailers reporting more robust sales over the holidays. Other retailers noted that high inflation continued to reduce customers' purchasing power, particularly among low- and moderate-income households.
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Nearly all Districts cited one or more signs of a cooling labor market, such as larger applicant pools, lower turnover rates, more selective hiring by firms and easing wage pressures. Wage growth remained modest to moderate in most Districts.
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Auto sales were flat on average, but some dealers noted that increased vehicle availability boosted sales. Tourism contacts reported moderate to robust activity augmented by strong holiday travel. Manufacturers indicated that activity declined modestly on average, and, in many Districts, reported that supply chain disruptions had eased. • Housing markets continued to weaken, with sales and construction declining across Districts.
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Firms from many Districts expected wage pressures to ease and wage growth to fall further over the next year. • Prices increased at a slight to moderate pace overall. Some Districts noted that overall price increases had subsided to some degree from the prior reporting period.
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Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market. 7 • Most bankers reported that residential mortgage demand remained weak, and some said higher borrowing costs had begun to dampen commercial lending. • Energy activity continued to increase moderately and agriculture conditions were generally unchanged or improving. • Employment continued to grow at a modest to moderate pace for most Districts.
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Firms in most Districts cited examples of steady or falling input prices, especially in the manufacturing and construction sectors and more discounting by auto dealers. Districts also noted that increased consumer price sensitivity had forced retailers to narrow their profit margins and to push back in turn on their suppliers' efforts to raise prices.
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While some Districts noted that labor availability had increased, firms continued to report difficulty in filling open positions. Many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if needed.
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Premium increases for property and casualty insurance and for health insurance continued to impact most firms. Reports by the Federal Reserve’s Sixth District, Atlanta (which includes Trustmark’s Alabama, Florida and Mississippi market regions), Eighth District, St.
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With persistently tight labor markets, wage pressures remained elevated across Districts, though some reported that these pressures had eased somewhat.
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The Federal Reserve’s Sixth District also noted lending increased during the reporting period, especially for multifamily and home equity loans; however, consumer lending contracted overall, alongside a rise in delinquencies in credit cards, auto loans and unsecured personal loans.
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Some employers noted they have continued to offer bonuses and enhanced benefits to attract and retain workers. • Selling prices increased at a modest or moderate pace in most Districts, though many said that the pace of increases had slowed from that of recent reporting periods.
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The Federal Reserve's Sixth District reported that demand and large time deposit balances continued to increase as financial institutions paid higher interest rates on deposits; however, these higher funding costs have led to earnings concerns resulting in some banks restructuring securities portfolios and reinvesting proceeds into higher-yielding securities to protect margins.
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Manufacturers in many Districts reported continued easing in freight costs and prices of commodities, including steel and lumber, though some said input costs remained elevated. Many retailers noted increased difficulty in passing through cost increases, suggesting greater price sensitivity on the part of consumers.
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The Federal Reserve’s Eighth District also reported that loan growth slowed at a modest pace during the reporting period, but banking conditions and lending activity remained healthy.
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In addition, some retailers offered more discounts and promotions than they had a year ago in order to move merchandise and clear out excess inventories. On balance, contacts across Districts said they expected future price growth to moderate further in 2023. • On balance, contacts generally expected little growth in the overall economic activity in the months ahead.
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The Federal Reserve’s Eighth District also noted that commercial and industrial loan growth decreased slightly despite an increase in overall loan volume, demand for loans continues to be lower than the prior year and an ongoing modest decline in real estate loan growth.
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The Federal Reserve’s Sixth District also noted that loan growth for a majority of portfolios was steady, institutions cut investments in mortgage-backed securities as unrealized losses in securities portfolios increased, deposit growth shifted primarily to time deposits as growth in other deposits declined during the reporting period, and institutions increased short-term borrowings to fund ongoing loan growth, and asset quality metrics showed a steady increase in the level of nonperformance.
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The Federal Reserve’s Eighth District also reported that total deposit growth increased modestly although faster than the national rate.
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The Federal Reserve’s Eleventh District also reported energy activity continued to expand during the reporting period, with a slight increase in rig count and sizeable increases in both oil and natural gas production during the fourth quarter of 2022, and due to high demand for oilfield services and supply chain issues, the industry remained constrained on equipment and labor and expectations were for activity to expand at a slow and steady pace in 2023.
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The Federal Reserve’s Eleventh District also reported loan volumes stabilized during the reporting period and the pace of credit tightening decelerated, loan demand continued to decline, though at a slower pace, loan nonperformance continued to rise, still largely driven by consumer loans, and loan pricing continued to increase but at a slower rate.
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The Federal Reserve’s Eleventh District report also noted that contacts seemed confident that crude oil markets to remain tight for the next several years, keeping oil prices higher enough for most District producers to profitably drill new wells, and that outlooks for the energy sector improved overall and most contacts expecting increases in capital spending in 2023.
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The Federal Reserve’s Eleventh District also noted that bankers reported increased core deposit volumes and although banking outlooks remain pessimistic and future business activity and loan demand are expected to decline, the rate of decline is anticipated to be milder than prior expectations.
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A rating 12 of less than “Satisfactory” may provide a basis for denial of such an application. Federal regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation.
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The rising interest rate environment during 2022 and 2023, the resulting industry-wide reduction in the fair value of securities portfolios and the bank runs that led to the failures of some financial institutions in March 2023, among other events, have resulted in a current state of volatility and uncertainty with respect to the health of the United States banking system.
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As of its last examination from the OCC, TNB received a CRA rating of “Satisfactory.” On May 5, 2022, the federal banking agencies issued a proposed rule that would substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate- income individuals and neighborhoods, under the CRA.
Added
As of its last examination from the OCC, TNB received a CRA rating of “Needs to Improve.” The evaluation covered activities in the period from January 1, 2019 through December 31, 2021. TNB received performance ratings of “High Satisfactory” on each of the three individual components of the CRA examination.
Removed
If this rule is finalized as proposed, it may become more challenging and/or costly for insured depository institutions, including TNB, to achieve an “Outstanding” or “Satisfactory” CRA rating, which could negatively impact their ability to obtain regulatory approval for an acquisition.
Added
The TNB’s final overall rating, however, was downgraded from “Satisfactory” to “Needs to Improve” as a result of alleged discriminatory credit practices in the Memphis Metropolitan Statistical Area between 2014 and 2018. As previously disclosed on October 22, 2021, TNB entered into a consent order with the OCC and a separate consent order jointly with the U.S.
Added
Department of Justice and the CFPB, to resolve allegations that TNB previously violated the FHA, the Equal Credit Opportunity Act and the Consumer Financial Protection Act within the Memphis Metropolitan Statistical Area.
Added
The OCC Performance Evaluation states that “Following the findings, the bank undertook significant corrective actions to address the impact of these practices and ensure that the conduct does not recur.” A “Needs to Improve” rating adversely affects TNB’s ability to obtain regulatory approvals to engage in certain expansionary activities, including certain mergers and acquisitions and the establishment of bank branches.
Added
These limitations will remain in place until TNB receives a CRA rating of at least “Satisfactory” following a subsequent CRA examination. The precise timing of the completion of that examination and any results therefrom will not be known until later.
Added
On October 24, 2023, the federal banking agencies released a final rule significantly revising the framework that the agencies use to evaluate banks’ records of meeting the credit needs of their entire communities under the CRA.
Added
Under the revised framework, banks with assets of at least $2 billion, including TNB, are considered large banks and, accordingly, will have their retail lending, retail services and products, community development financing and community development services subject to periodic evaluation under complex, multi-part standards.
Added
Large banks will be subject to enhanced data collection and reporting requirements, with additional data collection and reporting requirements applying to banks, such as TNB, with assets greater than $10 billion.
Added
Depending on a large bank’s geographic concentrations of lending, the evaluation of retail lending may include assessment areas in which the bank extends loans but does not operate any deposit-taking facilities, in addition to assessment areas in which the bank has deposit-taking facilities. The rule becomes effective April 1, 2024.
Added
Compliance with most provisions of the final rule will be required beginning January 1, 2026, and compliance with the remaining provisions will be required beginning January 1, 2027. Trustmark is evaluating the impact of the final rule.
Added
The CFPB also has authority to issue regulations and has proposed several rules that would restrict various fees that financial institutions can charge consumers, including credit card late fees, overdraft fees and certain insufficient funds (NSF) fees.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
52 edited+27 added−10 removed123 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
52 edited+27 added−10 removed123 unchanged
2022 filing
2023 filing
Biggest changeThe transition from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk. Since alternative reference rates are calculated differently than LIBOR, payments under contracts referencing new alternative reference rates will differ from those referencing LIBOR.
Biggest changeSince alternative reference rates are calculated differently than LIBOR, payments under contracts referencing new alternative reference rates will differ from those referencing LIBOR. Trustmark cannot predict what the ultimate impact of the transition from LIBOR will be; however, Trustmark has implemented various measures to manage the transition and mitigate risks.
If the economy does weaken in the future, it is uncertain how Trustmark’s business would be affected and whether Trustmark would be able successfully to mitigate any such effects on its business. Accordingly, these factors in the United States (and, indirectly, global) economy could have a material adverse effect on Trustmark’s financial condition and results of operations.
If the economy does weaken in the future, it is uncertain how Trustmark’s business would be affected and whether Trustmark would be able to successfully mitigate any such effects on its business. Accordingly, these factors in the United States (and, indirectly, global) economy could have a material adverse effect on Trustmark’s financial condition and results of operations.
The factors affecting financial stocks generally and Trustmark’s stock price in particular include: • actual or anticipated variations in earnings; • changes in analysts’ recommendations or projections; • operating and stock performance of other companies deemed to be peers; • perception in the marketplace regarding Trustmark, its competitors and/or the industry as a whole; • significant acquisitions or business combinations involving Trustmark or its competitors; • provisions in Trustmark’s by-laws and articles of incorporation that may discourage takeover attempts, which may make Trustmark less attractive to a potential purchaser; • changes in government regulation; • failure to integrate acquisitions or realize anticipated benefits from acquisitions; and • volatility affecting the financial markets in general.
The factors affecting financial stocks generally and Trustmark’s stock price in particular include: • actual or anticipated variations in earnings; • changes in analysts’ recommendations or projections; • operating and stock performance of other companies deemed to be peers; 26 • perception in the marketplace regarding Trustmark, its competitors and/or the industry as a whole; • significant acquisitions or business combinations involving Trustmark or its competitors; • provisions in Trustmark’s by-laws and articles of incorporation that may discourage takeover attempts, which may make Trustmark less attractive to a potential purchaser; • changes in government regulation; • failure to integrate acquisitions or realize anticipated benefits from acquisitions; and • volatility affecting the financial markets in general.
If Management determines that a significant portion of its assets have values that are significantly below their recorded carrying value, Trustmark could recognize a material charge 19 to earnings in the quarter during which such determination was made, Trustmark’s capital ratios would be adversely affected by any such charge, and a rating agency might downgrade Trustmark’s credit rating or put Trustmark on credit watch.
If Management determines that a significant portion of its assets have values that are significantly below their recorded carrying value, Trustmark could recognize a material charge to earnings in the quarter during which such determination was made, Trustmark’s capital ratios would be adversely affected by any such charge, and a rating agency might downgrade Trustmark’s credit rating or put Trustmark on credit watch.
Significant harm to Trustmark’s reputation can also arise from other sources, including employee misconduct, actual or perceived 24 unethical or illegal behavior, litigation or regulatory outcomes, failing to deliver minimum or required standards of service and quality, compliance failures, disclosure of confidential information, significant or numerous failures, interruptions or breaches of its information systems and the activities of its clients, customers and counterparties, including vendors.
Significant harm to Trustmark’s reputation can also arise from other sources, including employee misconduct, actual or perceived unethical or illegal behavior, litigation or regulatory outcomes, failing to deliver minimum or required standards of service and quality, compliance failures, disclosure of confidential information, significant or numerous failures, interruptions or breaches of its information systems and the activities of its clients, customers and counterparties, including vendors.
In this regard, government authorities, including bank regulatory agencies, continue to pursue enforcement agendas with respect to compliance and other legal matters involving financial activities, which heightens the risks 20 associated with actual and perceived compliance failures. Any of the foregoing could have a material adverse effect on Trustmark’s financial condition or results of operations.
In this regard, government authorities, including bank regulatory agencies, continue to pursue enforcement agendas with respect to compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived compliance failures. Any of the foregoing could have a material adverse effect on Trustmark’s financial condition or results of operations.
In 2017, the United Kingdom’s Financial Conduct Authority (FCA), which regulates LIBOR, announced that after the end of 2021 it would no longer compel banks to submit the rates required to calculate LIBOR. On March 5, 2021, the FCA confirmed that the publication of most LIBOR term rates will end on June 30, 2023 (excluding one-week U.S.
In 2017, the United Kingdom’s Financial Conduct Authority (FCA), which regulates LIBOR, announced that after the end of 2021 it would no longer compel banks to submit the rates required to calculate LIBOR. On March 5, 2021, the FCA confirmed that the publication of most LIBOR term rates would end on June 30, 2023 (excluding one-week U.S.
The Alternative Reference Rates Committee (ARRC), a committee of U.S. financial market participants, has identified the Secured Overnight Financing Rate (SOFR) as the reference rate that represents best practice as the alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. However, there are conceptual and technical differences between LIBOR and SOFR.
The Alternative Reference Rates Committee (ARRC), a committee of U.S. financial market participants, identified the Secured Overnight Financing Rate (SOFR) as the reference rate that represents best practice as the alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. However, there are conceptual and technical differences between LIBOR and SOFR.
The expenses associated with holding a significant amount of other real estate could have a material adverse effect on Trustmark’s financial condition or results of operations. If Trustmark is required to repurchase a significant number of mortgage loans that it had previously sold, such repurchases could negatively affect earnings.
The expenses associated with holding a significant amount of other real estate could have a material adverse effect on Trustmark’s financial condition or results of operations. 23 If Trustmark is required to repurchase a significant number of mortgage loans that it had previously sold, such repurchases could negatively affect earnings.
Any failure or circumvention of Trustmark’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on Trustmark’s business, financial condition and results of operations. Trustmark may be subject to increased claims and litigation, which could result in legal liability and reputational damage.
Any failure or circumvention of Trustmark’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on Trustmark’s business, financial condition and results of operations. 25 Trustmark may be subject to increased claims and litigation, which could result in legal liability and reputational damage.
Trustmark relies on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data. However, these precautions may not protect Trustmark’s systems from compromise or breaches of security, which could result in significant legal liability and significant damage to Trustmark’s reputation and business.
Trustmark relies on standard internet security systems to provide the 24 security and authentication necessary to effect secure transmission of data. However, these precautions may not protect Trustmark’s systems from compromise or breaches of security, which could result in significant legal liability and significant damage to Trustmark’s reputation and business.
This section includes a description of the risks, uncertainties and assumptions identified by Management that could, individually or in combination, materially affect Trustmark’s financial condition and results of operations, as well as the value of Trustmark’s financial instruments in general, and Trustmark common stock, in particular.
This 16 section includes a description of the risks, uncertainties and assumptions identified by Management that could, individually or in combination, materially affect Trustmark’s financial condition and results of operations, as well as the value of Trustmark’s financial instruments in general, and Trustmark common stock, in particular.
Any such losses, which may be difficult to detect, could adversely 23 affect Trustmark’s financial condition or results of operations. In addition, the occurrence of such a loss could expose Trustmark to reputational risk, the loss of customer business and additional regulatory scrutiny.
Any such losses, which may be difficult to detect, could adversely affect Trustmark’s financial condition or results of operations. In addition, the occurrence of such a loss could expose Trustmark to reputational risk, the loss of customer business and additional regulatory scrutiny.
This information could include financial statements, credit reports, business plans, and other information. Trustmark may also rely on representations of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and completeness of that information.
This information could include financial statements, credit reports, business plans, and 18 other information. Trustmark may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information.
It is not possible to predict the timing or magnitude of changes in macroeconomic conditions or the impact such changes could have on 21 Trustmark’s allowance for credit losses; however, material changes in the allowance for credit losses could have a material impact on Trustmark’s reserves and capital.
It is not possible to predict the timing or magnitude of changes in macroeconomic conditions or the impact such changes could have on Trustmark’s allowance for credit losses; however, material changes in the allowance for credit losses could have a material impact on Trustmark’s reserves and capital.
These regulatory expectations may change, and potentially become more rigorous in certain ways, due to an interagency effort to replace existing guidance on the risk management of third-party relationships with new guidance.
These regulatory expectations may change, and potentially become more rigorous in certain ways, due to an interagency effort to replace existing guidance on the risk management of third-party 22 relationships with new guidance.
The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Some of Trustmark’s competitors have fewer regulatory constraints and may have lower cost structures.
The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. 20 Some of Trustmark’s competitors have fewer regulatory constraints and may have lower cost structures.
Trustmark’s accounting policies and methods are fundamental to how Trustmark records and reports its financial condition and results of operations. From time to time, the FASB changes the financial accounting and reporting standards that govern the preparation of 25 Trustmark’s financial statements.
Trustmark’s accounting policies and methods are fundamental to how Trustmark records and reports its financial condition and results of operations. From time to time, the FASB changes the financial accounting and reporting standards that govern the preparation of Trustmark’s financial statements.
The United States Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
The United States Congress, state legislatures and 27 federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
For additional information regarding this settlement, see the section captioned “Legal Proceedings” in Note 16 - Commitments and Contingencies included in Part II. Item 8. - Financial Statements and Supplementary Data of this report. Damage to Trustmark’s reputation could have a significant negative impact on Trustmark’s business.
For additional information regarding these settlements, see the section captioned “Legal Proceedings” in Note 16 - Commitments and Contingencies included in Part II. Item 8. - Financial Statements and Supplementary Data of this report. Damage to Trustmark’s reputation could have a significant negative impact on Trustmark’s business.
At December 31, 2022, goodwill and other identifiable intangible assets were $387.9 million. Under current accounting standards, if Trustmark determines goodwill or intangible assets are impaired, Trustmark would be required to write down the carrying value of these assets. Trustmark’s annual goodwill impairment evaluation performed during the fourth quarter of 2022 indicated no impairment of goodwill for any reporting segment.
At December 31, 2023, goodwill and other identifiable intangible assets were $387.2 million. Under current accounting standards, if Trustmark determines goodwill or intangible assets are impaired, Trustmark would be required to write down the carrying value of these assets. Trustmark’s annual goodwill impairment evaluation performed during the fourth quarter of 2023 indicated no impairment of goodwill for any reporting segment.
At December 31, 2022, gross unrealized losses on securities for which an allowance for credit losses has not been recorded totaled $335.0 million. Trustmark may be required to record credit loss expense if these investments suffer a decline in value that is the result of a credit loss.
At December 31, 2023, gross unrealized losses on securities for which an allowance for credit losses has not been recorded totaled $196.1 million. Trustmark may be required to record credit loss expense if these investments suffer a decline in value that is the result of a credit loss.
Starting in March 2022, the FRB began raising the target federal funds rate for the first time in three years and continued with multiple increases throughout 2022, up to a range of 4.25% to 4.50% as of December 2022. The FRB also signaled the possibility of additional rate increases throughout 2023.
Starting in March 2022, the FRB began raising the target federal funds rate for the first time in three years and continued with multiple increases throughout 2022 and 2023, up to a range of 5.25% to 5.50% as of December 2023.
Substantial legal liability against Trustmark, including its subsidiaries, could materially adversely affect Trustmark’s business, financial condition or results of operations, or cause significant harm to its reputation. TNB recently agreed to a settlement relating to litigation involving the Stanford Financial Group.
Substantial legal liability against Trustmark, including its subsidiaries, could materially adversely affect Trustmark’s business, financial condition or results of operations, or cause significant harm to its reputation. TNB recently agreed to settlements relating to litigation involving the Stanford Financial Group and Adams/Madison Timber.
While the housing and real estate markets have shown continued improvement, if trends in the housing and real estate markets were to revert or further decline below recession levels, Trustmark may experience higher than normal delinquencies and credit losses.
If trends in the housing and real estate markets were to revert to or decline below recession levels, Trustmark may experience higher than normal delinquencies and credit losses.
Trustmark’s simulation model using static balances at December 31, 2022, estimated that in the event of a hypothetical 200 basis point increase in interest rates, net interest income may increase 3.3%, while a hypothetical 100 basis point increase in interest rates, may increase net 16 interest income 1.7%.
Trustmark’s simulation model using static balances at December 31, 2023, estimated that in the event of a hypothetical 200 basis point increase in interest rates, net interest income may increase 0.5%, while a hypothetical 100 basis point increase in interest rates, may increase net interest income 0.3%.
Using a wide range of scenarios, Management is provided with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Trustmark’s balance sheet.
Financial simulation models are the primary tools used by Trustmark to measure interest rate exposure. Using a wide range of scenarios, Management is provided with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Trustmark’s balance sheet.
Trustmark and TNB could be subject to other enforcement actions in the future. In addition, financial institutions face scrutiny on actions and policies that are deemed to adversely impact consumers under the Dodd-Frank Act’s prohibition against unfair, deceptive or abusive acts and practices and Section 5 of the Federal Trade Commission Act’s prohibition against unfair or deceptive acts and practices.
In addition, financial institutions face scrutiny on actions and policies that are deemed to adversely impact consumers under the Dodd-Frank Act’s prohibition against unfair, deceptive or abusive acts and practices and Section 5 of the Federal Trade Commission Act’s 21 prohibition against unfair or deceptive acts and practices.
In the event of a hypothetical 100 basis point decrease in interest rates using static balances at December 31, 2022, it is estimated net interest income may decrease by 1.8%.
In the event of a hypothetical 100 basis point decrease in interest rates using static balances at December 31, 2023, it is estimated net interest income may decrease by 0.4%, while a hypothetical 200 basis point decrease in interest rates, may decrease net interest income 1.0%.
Liquidity refers to Trustmark’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes.
Liquidity Risk Trustmark is subject to liquidity risk, which could disrupt its ability to meet its financial obligations. Liquidity refers to Trustmark’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes.
The amount of credit loss Trustmark may record is limited to the amount by which the amortized cost exceeds the fair value, which could have a material adverse effect on results of operations in the period in which a credit loss, if any, occurs. 18 Liquidity Risk Trustmark is subject to liquidity risk, which could disrupt its ability to meet its financial obligations.
The amount of credit loss Trustmark may record is limited to the amount by which the amortized cost exceeds the fair value, which could have a material adverse effect on results of operations in the period in which a credit loss, if any, occurs.
Management cannot provide any assurances that Trustmark will be successful in utilizing such new technologies. Incorporation of new products and services, such as internet and mobile banking services, may require significant resources and expose Trustmark to additional risks, including cyber-security risks. Trustmark’s controls and procedures may fail or be circumvented.
Incorporation of new products and services, such as internet and mobile banking services, may require significant resources and expose Trustmark to additional risks, including cyber-security risks. Trustmark’s controls and procedures may fail or be circumvented.
To mitigate such risk, Trustmark maintains available lines of credit with the Federal Reserve Bank of Atlanta and the FHLB of Dallas that are secured by loans and investment securities. Management continuously monitors Trustmark’s liquidity position for compliance with internal policies.
To mitigate such risk, Trustmark maintains available lines of credit with the Federal Reserve Bank of Atlanta and the FHLB of Dallas that are secured by loans and investment securities.
In addition, the enforcement priorities of the agencies enforcing consumer protection laws have evolved over time and may continue to do so. Failure by Trustmark to perform satisfactorily on its CRA evaluations could make it more difficult for Trustmark’s business to grow.
In addition, the enforcement priorities of the agencies enforcing consumer protection laws have evolved over time and may continue to do so. TNB's CRA rating of "Needs to Improve" could make it more difficult for Trustmark’s business to grow.
The volatility in the stock prices of companies in the financial services industry, such as Trustmark, may make it more difficult for shareholders to resell Trustmark common stock at attractive prices in a timely manner. Trustmark’s stock price can fluctuate significantly in response to a variety of factors, including factors affecting the financial industry as a whole.
The volatility in the stock prices of companies in the financial services industry, such as Trustmark, may make it more difficult for shareholders to resell Trustmark common stock at attractive prices in a timely manner.
If one or more of these events were to occur, Trustmark’s or its customers’ confidential and other information would be jeopardized, or such an event could cause interruptions or malfunctions in Trustmark’s or its customers’ or counterparties’ operations.
If one or more of these events were to occur, Trustmark’s or its customers’ confidential and other information would be jeopardized, or such an event could cause interruptions or malfunctions in Trustmark’s or its customers’ or counterparties’ operations. Any failures related to upgrades and maintenance of Trustmark's technology and information systems could further increase its information and system security risk.
It is difficult to predict the extent to which these challenging economic conditions will persist or whether recent progress in the economic recovery will instead shift to the potential for further decline.
There is heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses and capital. It is difficult to predict the extent to which these challenging economic conditions will persist or whether recent progress in the economic recovery will instead shift to the potential for further decline.
External and Market-Related Risks Trustmark’s business may be adversely affected by conditions in the financial markets and economic conditions in general.
Management continuously monitors Trustmark’s liquidity position for compliance with internal policies. 19 External and Market-Related Risks Trustmark’s business may be adversely affected by conditions in the financial markets and economic conditions in general.
While the benchmark provider for US$ LIBOR (which was typically the benchmark that Trustmark used) intends to provide the benchmark for some tenors of US$ LIBOR through June 2023, Trustmark has transitioned to SOFR for new variable rate loans, derivative contracts, borrowings and other financial instruments as of January 1, 2022. 17 Trustmark has a significant number of existing loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR.
Trustmark transitioned to SOFR for new variable rate loans, derivative contracts, borrowings and other financial instruments as of January 1, 2022. Trustmark had a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that were either directly or indirectly dependent on LIBOR.
Market participants are currently working on industry-wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. On December 16, 2022, the FRB adopted a final rule that implements the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023.
On December 16, 2022, the FRB adopted a final rule that implemented the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023.
This causes asymmetry in the magnitude of changes in net interest income, net economic value and investment income resulting from the hypothetical increases and decreases in interest rates. Therefore, Management monitors interest rate risk and adjusts Trustmark’s investment, funding and hedging strategies to mitigate adverse effects of interest rate shifts on Trustmark’s balance sheet.
This causes asymmetry in the magnitude of changes in net interest income, net economic value and investment income resulting from the hypothetical increases and decreases in interest rates.
Trustmark utilizes derivative contracts to hedge the mortgage servicing rights (MSR) in order to offset changes in fair value resulting from changes in interest rate environments.
Therefore, Management monitors interest rate risk and adjusts Trustmark’s investment, funding and hedging strategies to mitigate adverse effects of interest rate shifts on Trustmark’s balance sheet. 17 Trustmark utilizes derivative contracts to hedge the mortgage servicing rights (MSR) in order to offset changes in fair value resulting from changes in interest rate environments.
Trustmark continues to invest in technology to facilitate the ability of its customers to engage in financial transactions, and otherwise enhance the customer experience with respect to its products and services. Trustmark’s ability to effectively utilize new technologies to address customer needs and create operating efficiencies could materially affect future prospects.
In order to deliver new products and services and to improve the productivity of existing products and services, the banking industry relies on rapidly evolving technologies. Trustmark continues to invest in technology to facilitate the ability of its customers to engage in financial transactions, and otherwise enhance the customer experience with respect to its products and services.
Management cannot provide assurance, however, that Trustmark will not be required to take an impairment charge in the future.
Management cannot provide assurance, however, that Trustmark will not be required to take an impairment charge in the future. Any impairment charge would have an adverse effect on Trustmark’s shareholders’ equity and financial condition and could cause a decline in Trustmark’s stock price.
Trustmark must utilize new technologies to deliver its products and services, which could require significant resources and expose Trustmark to additional risks, including cyber-security risks. In order to deliver new products and services and to improve the productivity of existing products and services, the banking industry relies on rapidly evolving technologies.
The occurrence of any of the foregoing could have a material adverse effect on Trustmark's business, financial condition and results of operations. Trustmark must utilize new technologies to deliver its products and services, which could require significant resources and expose Trustmark to additional risks, including cyber-security risks.
In addition, the FRB increased the interest that it pays on reserves multiple times during 2022 from 0.10% to 4.40% as of December 2022. The prolonged period of reduced interest rates has had and may continue to have an adverse effect on net interest income and margins and profitability for financial institutions, including Trustmark.
In addition, the FRB increased the interest that it pays on reserves multiple times during 2022 and 2023 from 0.10% to 5.40% as of December 2023. As interest rates have increased, so have competitive pressures on the deposit cost of funds.
As business necessitates, Trustmark forecloses on and takes title to real estate serving as collateral for loans. At December 31, 2022, Trustmark held $2.0 million of other real estate, compared to $4.6 million at December 31, 2021.
Trustmark holds other real estate and may acquire and hold significant additional amounts, which could lead to increased operating expenses and vulnerability to additional declines in real property values. As business necessitates, Trustmark forecloses on and takes title to real estate serving as collateral for loans. At December 31, 2023, Trustmark held $6.9 million of other real estate.
Management’s ability to plan, prioritize and allocate resources in this new environment will be critical to Trustmark’s ability to sustain earnings that will attract capital. Because of the complexities presented by current economic conditions, Management will continue to be challenged in identifying alternative sources of revenue, prudently diversifying assets, liabilities and revenue and effectively managing the costs of compliance.
Because of the complexities presented by current economic conditions, Management will continue to be challenged in identifying alternative sources of revenue, prudently diversifying assets, liabilities and revenue and effectively managing the costs of compliance. Market interest rates began to rise during 2022 after an extended period at historical lows and continued to rise in 2023.
While Trustmark’s customer base is wholly domestic, international economic conditions affect domestic conditions, and thus may have an impact upon Trustmark’s financial condition or results of operations. Strategic risk, including threats to business models from rising rates and modest economic growth, remains high.
Doubts surrounding the near-term direction of global markets, and the potential impact of these trends on the United States economy, are expected to persist for the near term. While Trustmark’s customer base is wholly domestic, international economic conditions affect domestic conditions, and thus may have an impact upon Trustmark’s financial condition or results of operations.
Further, Trustmark’s operational and security systems and infrastructure may be vulnerable to breaches, unauthorized access, misuse, computer viruses or other malicious codes and cyber-attacks that could affect their information system security.
Further, Trustmark’s operational and security systems and infrastructure may be vulnerable to breaches and cybersecurity-related incidents including, but not limited to, attempts to access information, including customer and company information, malicious code, computer viruses and denial of service attacks that could result in unauthorized access, theft, misuse, loss, release or destruction of data (including confidential customer information), account takeovers, unavailability of service or other events.
Trustmark’s ability to attract and retain customers, clients, investors, and highly-skilled management and employees is affected by its reputation. Public perception of the financial services industry declined as a result of the economic downturn and related government response. Trustmark faces increased public and regulatory scrutiny resulting from the financial crisis and economic downturn.
Trustmark’s ability to attract and retain customers, clients, investors, and highly-skilled management and employees is affected by its reputation.
Additionally, as interest rates have increased, so have competitive pressures on the deposit cost of funds. It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on Trustmark's results of operations. Financial simulation models are the primary tools used by Trustmark to measure interest rate exposure.
This has been exacerbated by the bank failures in the first half of 2023 and the resulting heightened competition for deposits, which has also affected the interest that Trustmark pays on deposits. It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on Trustmark's results of operations.
Removed
The transition has changed and will continue to change, Trustmark’s market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies.
Added
Following the LIBOR cessation date of June 30, 2023, the nationwide process for replacing LIBOR in financial contracts that mature thereafter and that do not provide for an effective means to replace LIBOR upon its cessation took effect pursuant to the Adjustable Interest Rate (LIBOR) Act.
Removed
Trustmark cannot predict what the ultimate impact of the transition from LIBOR will be; however, failure to adequately manage the transition could have a material adverse effect on Trustmark’s business, financial condition, results of operations and reputation with its customers.
Added
For contracts in which a party has the discretion to identify a replacement rate, the Adjustable Interest Rate (LIBOR) Act also provides a safe harbor to parties if they choose the SOFR-based benchmark replacement rate to be identified by the FRB.
Removed
Economic activity continued to improve during 2022 as COVID-19 cases declined across the United States and restrictions were lifted; however, economic concerns remain as a result of the cumulative weight of uncertainty regarding the long-term effectiveness of the COVID-19 vaccine and the potential economic impact of recent geopolitical developments, such as Russia's invasion of Ukraine.
Added
As of December 31, 2023, all of Trustmark’s LIBOR exposure was remediated or in the process of being remediated. The transition from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk.
Removed
Inflation has become elevated, reflecting supply and demand imbalances related to the pandemic, supply chain issues, higher energy prices and broader price pressures. Doubts surrounding the near-term direction of global markets, and the potential impact of these trends on the United States economy, are expected to persist for the near term.
Added
Economic activity improved slightly during 2023; however, economic concerns remain as a result of the cumulative weight of uncertainty regarding the potential economic impact of geopolitical developments, such as the conflicts in Ukraine and the Middle East, inflation, the consequences of bank failures and other economic and industry volatility, the 2024 political cycle in the United States, supply chain issues, higher energy prices and broader price pressures.
Removed
Market interest rates rose during 2022 after an extended period at historical lows. The prolonged period of reduced interest rates in recent years, has and may continue to place pressure on net interest margins for Trustmark (as well as its competitors). Conversely, as interest rates rise, so do competitive pressures on the deposit cost of funds.
Added
Strategic risk, including threats to business models from rising rates and modest economic growth, remains high. Management’s ability to plan, prioritize and allocate resources in this environment will be critical to Trustmark’s ability to sustain earnings that will attract capital.
Removed
If TNB is unable to maintain at least a “Satisfactory” CRA rating, its ability to complete the acquisition of another financial institution or open a new branch will be adversely impacted.
Added
As interest rates have increased, so have competitive pressures on the deposit cost of funds. This has been exacerbated by bank failures and the resulting heightened competition for deposits, which has also affected the interest that Trustmark pays on deposits.
Removed
If TNB received an overall CRA rating of less than “Satisfactory,” the FDIC would not re-evaluate its rating until its next CRA examination, which may not occur for several more years, and it is possible that a low CRA rating would not improve in the future.
Added
The rising interest rate environment during 2022 and 2023, the resulting industry-wide reduction in the fair value of securities portfolios and the bank runs that led to the failures of some financial institutions in March 2023, among other events, have resulted in a current state of volatility and uncertainty with respect to the health of the United States banking system.
Removed
As of its last examination, TNB received a CRA rating of “Satisfactory.” Trustmark is subject to stringent capital requirements.
Added
Trustmark and TNB could be subject to other enforcement actions in the future.
Removed
Any impairment charge would have an adverse effect on Trustmark’s shareholders’ equity and financial condition and could cause a decline in Trustmark’s stock price. 22 Trustmark holds other real estate and may acquire and hold significant additional amounts, which could lead to increased operating expenses and vulnerability to additional declines in real property values.
Added
As of its last examination, TNB received a CRA rating of “Needs to Improve,” which is downgraded from its prior rating of “Satisfactory.” The rating of “Needs to Improve” adversely affects TNB’s ability to obtain regulatory approvals to engage in certain expansionary activities, including certain mergers and acquisitions and the establishment of bank branches.
Removed
Climate change and societal responses to climate change could adversely affect Trustmark’s business and results of operations, including indirectly through impact to its customers. The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment.
Added
These limitations will remain in place until TNB receives a CRA rating of at least “Satisfactory” following a subsequent CRA examination. The precise timing of the completion of that examination and any results therefrom will not be known until later, and it is possible that TNB’s current CRA rating would not improve in the next examination.
Added
Any failure, interruption or breach in security of these systems could result in significant disruption to Trustmark's operations.
Added
These types of threats may derive from human error, fraud or malice on the part of external or internal parties, or may result from accidental technological failure.
Added
Trustmark's increased use of cloud and other technologies, such as remote work technologies, also increases its risk of being subject to a cyber-attack. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
Added
As of the date of this Annual Report on Form 10-K, Trustmark has seen no material adverse impact on its business or operations from cyber-attacks or events.
Added
Trustmark's customers, employees and third parties that it does business with have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware programs to its information systems, the information systems of its merchants or third-party service providers and/or its customers' personal devices, which are beyond Trustmark's security control systems.
Added
Though Trustmark endeavors to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber-attacks against Trustmark, its merchants, third-party service providers and customers remain a serious issue and have been successful in the past.
Added
Although Trustmark makes significant efforts to maintain the security and integrity of its information systems and has implemented various measures to manage the risks of a security breach or disruption, there can be no assurance that its security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Added
Even well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
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Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed1 unchanged
Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed1 unchanged
2022 filing
2023 filing
Biggest changeAt December 31, 2022, Trustmark, through TNB, operated 163 full-service branches, 6 limited-service branches and an automated teller machine (ATM) network, which included 26 150 ATMs and 108 ITMs at its branches and other locations. In addition, Trustmark operated 16 offices in various locations providing mortgage banking, wealth management and insurance services.
Biggest changeAt December 31, 2023, Trustmark, through TNB, operated 163 full-service branches, 7 limited-service branches and an automated teller machine (ATM) network, which included 131 ATMs and 128 ITMs at its branches and other locations. In addition, Trustmark operated 13 offices in various locations providing mortgage banking, wealth management and insurance services.
Trustmark leases 35 of its branch and other office locations with the remainder being owned. Trustmark believes its properties are suitable and adequate to operate its financial services business.
Trustmark leases 32 of its branch and other office locations with the remainder being owned. Trustmark believes its properties are suitable and adequate to operate its financial services business.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
3 edited+1 added−0 removed3 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
3 edited+1 added−0 removed3 unchanged
2022 filing
2023 filing
Biggest changeManagement currently believes, however, based upon the advice of legal counsel and Management’s evaluation and after taking into account its current insurance coverage, that the legal proceedings currently pending other than the settled Stanford litigation should not have a material adverse effect on Trustmark’s consolidated financial condition. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. PART II
Biggest changeManagement currently believes, however, based upon the advice of legal counsel and Management’s evaluation and after taking into account its current insurance coverage, that the legal proceedings currently pending should not have a material adverse effect on Trustmark’s consolidated financial condition. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. PART II
As a result of the entry into the Settlement relating to the litigation involving the Stanford Financial Group, Trustmark recognized a $100.0 million litigation settlement expense included in noninterest expense during the fourth quarter of 2022, plus an additional $750 thousand in related legal fees.
As a result of the entry into the Stanford Settlement relating to the litigation involving the Stanford Financial Group, Trustmark recognized a $100.0 million litigation settlement expense included in noninterest expense during 2022, plus an additional $750 thousand in related legal fees.
At the present time, Trustmark believes, based on its evaluation and the advice of legal counsel, that a loss in any currently pending legal proceeding other than the settled Stanford litigation is not probable and reasonably estimable. All matters will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable.
At the present time, Trustmark believes, based on its evaluation and the advice of legal counsel, that a loss in any currently pending legal proceeding is not probable and reasonably estimable. All matters will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable.
Added
As a result of the entry into the Adams/Madison Timber Settlement relating to the litigation involving Adams/Madison Timber, Trustmark recognized a $6.5 million litigation settlement expense included in noninterest expense during 2023.
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
1 edited+0 added−0 removed0 unchanged
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
1 edited+0 added−0 removed0 unchanged
2022 filing
2023 filing
Biggest changeItem 4. Mine Safety Disclosures 27 PART II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. Selected Financial Data 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 29 PART II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Selected Financial Data 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 66 Item 8.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
10 edited+0 added−2 removed2 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
10 edited+0 added−2 removed2 unchanged
2022 filing
2023 filing
Biggest changeUnder this authority, Trustmark repurchased approximately 789 thousand shares of its common stock value at $24.6 million during 2022. 27 On December 6, 2022, the Board of Directors of Trustmark authorized a new stock repurchase program, effective January 1, 2023, under which $50.0 million of Trustmark's outstanding common stock may be acquired through December 31, 2023.
Biggest changeOn December 7, 2021, the Board of Directors of Trustmark authorized a stock repurchase program, effective January 1, 2022, under which $100.0 million of Trustmark’s outstanding common stock could be acquired through December 31, 2022. Under this authority, Trustmark repurchased approximately 789 thousand shares of its common stock value at $24.6 million during 2022.
This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2017, and that dividends received were immediately invested in additional shares. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown.
This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2018, and that dividends received were immediately invested in additional shares. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown.
ITEM 5. MARKET FOR THE REGISTRANT’S COMM ON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Prices and Dividends Trustmark’s common stock is listed on the Nasdaq Stock Market and is traded under the symbol “TRMK.” Trustmark paid quarterly cash dividends to shareholders of $0.23 per share, or $0.92 per share annually, in 2022.
ITEM 5. MARKET FOR THE REGISTRANT’S COMM ON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Prices and Dividends Trustmark’s common stock is listed on the Nasdaq Stock Market and is traded under the symbol “TRMK.” 29 Trustmark paid quarterly cash dividends to shareholders of $0.23 per share, or $0.92 per share annually, in 2023.
Used with permission. All rights reserved. Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
Used with permission. All rights reserved. Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved. 31
At January 31, 2023, there were approximately 3,050 registered shareholders of record and approximately 18,774 beneficial account holders of shares in nominee name of Trustmark’s common stock. Other information required by this item can be found in Note 17 - Shareholders’ Equity included in Part II. Item 8. - Financial Statements and Supplementary Data of this report.
At January 31, 2024, there were approximately 2,936 registered shareholders of record and approximately 15,952 beneficial account holders of shares in nominee name of Trustmark’s common stock. Other information required by this item can be found in Note 17 - Shareholders’ Equity included in Part II. Item 8. - Financial Statements and Supplementary Data of this report.
Performance Graph The following graph compares Trustmark’s annual percentage change in cumulative total return on common shares over the past five years with the cumulative total return of companies comprising the Nasdaq market value index and the S&P 500 – Regional Banks index.
No shares have been repurchased under this authority. 30 Performance Graph The following graph compares Trustmark’s annual percentage change in cumulative total return on common shares over the past five years with the cumulative total return of companies comprising the Nasdaq market value index and the S&P 500 – Regional Banks index.
Stock Repurchase Program The Board of Directors of Trustmark authorized a stock repurchase program effective April 1, 2019, under which $100.0 million of Trustmark’s outstanding common shares could be acquired through March 31, 2020. Under this authority, Trustmark repurchased approximately 1.5 million shares of its common stock valued at $47.2 million.
Stock Repurchase Program On January 28, 2020, the Board of Directors of Trustmark authorized a stock repurchase program, effective April 1, 2020, under which $100.0 million of Trustmark’s outstanding common stock could be acquired through December 31, 2021. Under this authority, Trustmark repurchased approximately 1.9 million shares of its outstanding common stock valued at $61.8 million during 2021.
On December 7, 2021, the Board of Directors of Trustmark authorized a stock repurchase program, effective January 1, 2022, under which $100.0 million of Trustmark’s outstanding common stock could be acquired through December 31, 2022.
On December 6, 2022, the Board of Directors of Trustmark authorized a stock repurchase program, effective January 1, 2023, under which $50.0 million of Trustmark's outstanding common stock could be acquired through December 31, 2023. No shares were repurchased under this authority.
The repurchase program, which is subject to market conditions and management discretion, will be implemented through open market repurchases or privately negotiated transactions. No shares have been repurchased under this authority.
On December 5, 2023, the Board of Directors of Trustmark authorized a new stock repurchase program, effective January 1, 2024, under which $50.0 million of Trustmark's outstanding common stock may be acquired through December 31, 2024. The repurchase program, which is subject to market conditions and management discretion, will be implemented through open market repurchases or privately negotiated transactions.
Company 2017 2018 2019 2020 2021 2022 Trustmark $ 100.00 $ 91.78 $ 114.48 $ 93.98 $ 115.00 $ 127.27 NASDAQ Composite-Total Return 100.00 97.16 132.81 192.47 235.15 158.65 S&P 500 - Regional Banks 100.00 81.82 110.80 105.77 148.65 110.72 Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2023. Index Data: Copyright NASDAQ OMX, Inc.
Company 2018 2019 2020 2021 2022 2023 Trustmark $ 100.00 $ 124.73 $ 102.39 $ 125.30 $ 138.67 $ 115.09 NASDAQ Composite-Total Return 100.00 136.69 198.10 242.03 163.28 236.17 S&P 500 - Regional Banks 100.00 135.42 129.28 181.68 135.32 106.07 Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2024. Index Data: Copyright NASDAQ OMX, Inc.
Removed
On January 28, 2020, the Board of Directors of Trustmark authorized a stock repurchase program, effective April 1, 2020, under which $100.0 million of Trustmark’s outstanding common stock could be acquired through December 31, 2021. On March 9, 2020, Trustmark suspended its share repurchase programs to preserve capital to support customers during the COVID-19 pandemic.
Removed
Trustmark resumed the repurchase of its shares in January 2021. Under this authority, Trustmark repurchased approximately 1.9 million shares of its outstanding common stock valued at $61.8 million during 2021.
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
5 edited+0 added−0 removed0 unchanged
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
5 edited+0 added−0 removed0 unchanged
2022 filing
2023 filing
Biggest changeYears Ended December 31, 2022 2021 2020 Consolidated Statements of Income Total interest income $ 541,833 $ 442,511 $ 468,335 Total interest expense 47,125 24,160 41,798 Net interest income 494,708 418,351 426,537 Provision for credit losses (PCL), LHFI 21,677 (21,499 ) 36,113 PCL, off-balance sheet credit exposures (1) 1,215 (2,949 ) 8,934 Noninterest income 205,144 221,910 274,593 Noninterest expense (1) 603,213 489,296 466,301 Income before income taxes 73,747 175,413 189,782 Income taxes 1,860 28,048 29,757 Net Income $ 71,887 $ 147,365 $ 160,025 Total Revenue (2) $ 699,852 $ 640,261 $ 701,130 Per Share Data Basic earnings per share $ 1.17 $ 2.35 $ 2.52 Diluted earnings per share 1.17 2.34 2.51 Cash dividends per share 0.92 0.92 0.92 Performance Ratios Return on average equity 4.48 % 8.32 % 9.52 % Return on average tangible equity 6.00 % 10.81 % 12.58 % Return on average assets 0.41 % 0.86 % 1.05 % Average equity / average assets 9.18 % 10.38 % 11.05 % Net interest margin (fully taxable equivalent) 3.17 % 2.76 % 3.19 % Dividend payout ratio 78.63 % 39.15 % 36.51 % Credit Quality Ratios (3) Net charge-offs (recoveries)/average loans 0.01 % -0.04 % 0.02 % PCL, LHFI / average loans 0.19 % -0.21 % 0.36 % Nonaccrual LHFI / (LHFI + LHFS) 0.53 % 0.60 % 0.61 % Nonperforming assets / (LHFI + LHFS) plus other real estate 0.55 % 0.64 % 0.73 % Allowance for credit losses (ACL), LHFI / LHFI 0.99 % 0.97 % 1.19 % (1) During 2021, Trustmark reclassified its credit loss expense on off-balance sheet credit exposures from noninterest expense to PCL, off-balance sheet credit exposures.
Biggest changeYears Ended December 31, 2023 2022 2021 Consolidated Statements of Income Total interest income $ 878,832 $ 541,833 $ 442,511 Total interest expense 325,954 47,125 24,160 Net interest income 552,878 494,708 418,351 Provision for credit losses (PCL), LHFI 27,362 21,677 (21,499 ) PCL, off-balance sheet credit exposures (2,781 ) 1,215 (2,949 ) Noninterest income 206,958 205,144 221,910 Noninterest expense 537,919 603,213 489,296 Income before income taxes 197,336 73,747 175,413 Income taxes 31,847 1,860 28,048 Net Income $ 165,489 $ 71,887 $ 147,365 Total Revenue (1) $ 759,836 $ 699,852 $ 640,261 Per Share Data Basic earnings per share $ 2.71 $ 1.17 $ 2.35 Diluted earnings per share 2.70 1.17 2.34 Cash dividends per share 0.92 0.92 0.92 Performance Ratios Return on average equity 10.54 % 4.48 % 8.32 % Return on average tangible equity 14.04 % 6.00 % 10.81 % Return on average assets 0.89 % 0.41 % 0.86 % Average equity / average assets 8.41 % 9.18 % 10.38 % Net interest margin (fully taxable equivalent) 3.32 % 3.17 % 2.76 % Dividend payout ratio 33.95 % 78.63 % 39.15 % Credit Quality Ratios (2) Net charge-offs (recoveries)/average loans 0.06 % 0.01 % -0.04 % PCL, LHFI / average loans 0.21 % 0.19 % -0.21 % Nonaccrual LHFI / (LHFI + LHFS) 0.76 % 0.53 % 0.60 % Nonperforming assets / (LHFI + LHFS) plus other real estate 0.81 % 0.55 % 0.64 % Allowance for credit losses (ACL), LHFI / LHFI 1.08 % 0.99 % 0.97 % (1) Consistent with Trustmark’s audited financial statements, total revenue is defined as net interest income plus noninterest income.
ITEM 6. SELECTED FINANCIAL DATA The following unaudited consolidated financial data is derived from Trustmark’s audited financial statements as of and for the three years ended December 31, 2022 ($ in thousands, except per share data). The data should be read in conjunction with Part II.
ITEM 6. SELECTED FINANCIAL DATA The following unaudited consolidated financial data is derived from Trustmark’s audited financial statements as of and for the three years ended December 31, 2023 ($ in thousands, except per share data). The data should be read in conjunction with Part II.
Item 7. - 28 Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. – Financial Statements and Supplementary Data.
Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. – Financial Statements and Supplementary Data.
PPP, LHFS and LHFI) 12,339,265 10,556,871 10,881,609 Deposits 14,437,648 15,087,160 14,048,764 Total shareholders' equity 1,492,268 1,741,311 1,741,117 Stock Performance Market value - close $ 34.91 $ 32.46 $ 27.31 Book value 24.47 28.25 27.45 Tangible book value 18.11 21.93 21.26 Capital Ratios Total equity / total assets 8.28 % 9.90 % 10.52 % Tangible equity / tangible assets 6.27 % 7.86 % 8.34 % Tangible equity / risk-weighted assets 7.61 % 10.71 % 11.22 % Tier 1 leverage ratio (1) 8.47 % 8.73 % 9.33 % Common equity tier 1 risk-based capital ratio (1) 9.74 % 11.29 % 11.62 % Tier 1 risk-based capital ratio (1) 10.15 % 11.77 % 12.11 % Total risk-based capital ratio (1) 11.91 % 13.55 % 14.12 % (1) Effective 2020, Trustmark elected the five-year phase-in transition period related to adopting FASB ASU 2016-13 for regulatory capital purposes.
PPP, LHFS and LHFI) 13,135,336 12,339,265 10,556,871 Deposits 15,569,763 14,437,648 15,087,160 Total shareholders' equity 1,661,847 1,492,268 1,741,311 Stock Performance Market value - close $ 27.88 $ 34.91 $ 32.46 Book value 27.21 24.47 28.25 Tangible book value 20.87 18.11 21.93 Capital Ratios Total equity / total assets 8.88 % 8.28 % 9.90 % Tangible equity / tangible assets 6.95 % 6.27 % 7.86 % Tangible equity / risk-weighted assets 8.41 % 7.61 % 10.71 % Tier 1 leverage ratio (1) 8.62 % 8.47 % 8.73 % Common equity tier 1 risk-based capital ratio (1) 10.04 % 9.74 % 11.29 % Tier 1 risk-based capital ratio (1) 10.44 % 10.15 % 11.77 % Total risk-based capital ratio (1) 12.29 % 11.91 % 13.55 % (1) Effective 2020, Trustmark elected the five-year phase-in transition period related to adopting FASB ASU 2016-13 for regulatory capital purposes.
Prior periods have been reclassified accordingly. (2) Consistent with Trustmark’s audited financial statements, total revenue is defined as net interest income plus noninterest income. (3) Excludes Paycheck Protection Program (PPP) loans. 29 December 31, 2022 2021 2020 Consolidated Balance Sheets Total assets $ 18,015,478 $ 17,595,636 $ 16,551,840 Securities 3,518,596 3,581,414 2,529,887 Total loans (incl.
(2) Excludes Paycheck Protection Program (PPP) loans. 32 December 31, 2023 2022 2021 Consolidated Balance Sheets Total assets $ 18,722,189 $ 18,015,478 $ 17,595,636 Securities 3,189,157 3,518,596 3,581,414 Total loans (incl.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
279 edited+53 added−48 removed98 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
279 edited+53 added−48 removed98 unchanged
2022 filing
2023 filing
Biggest changeOther interest expense increased $4.9 million, or 70.8%, while the rate on other borrowings increased 86 basis points to 3.11%, when 2022 is compared to 2021, principally due to an increase in the amount of short-term FHLB advances obtained from the FHLB of Dallas. 39 The following table provides the tax equivalent basis yield or rate for each component of the tax equivalent net interest margin for the periods presented ($ in thousands): Years Ended December 31, 2022 2021 2020 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Interest-earning assets: Federal funds sold and securities purchased under reverse repurchase agreements $ 1,753 $ 74 4.22 % $ 79 $ — — $ 221 $ 1 0.45 % Securities available for sale: Taxable 2,932,054 38,799 1.32 % 2,573,533 30,453 1.18 % 1,776,555 35,375 1.99 % Nontaxable 4,997 195 3.90 % 5,166 199 3.85 % 10,737 384 3.58 % Securities held to maturity: Taxable 911,010 20,918 2.30 % 423,763 8,245 1.95 % 626,983 12,875 2.05 % Nontaxable 5,623 227 4.04 % 12,765 495 3.88 % 25,366 982 3.87 % PPP loans 14,868 639 4.30 % 350,668 36,726 10.47 % 646,680 26,643 4.12 % Loans (LHFS and LHFI) 11,236,388 485,246 4.32 % 10,377,941 375,330 3.62 % 9,996,192 402,539 4.03 % Other earning assets 907,414 8,080 0.89 % 1,825,134 2,767 0.15 % 657,096 1,559 0.24 % Total interest-earning assets 16,014,107 554,178 3.46 % 15,569,049 454,215 2.92 % 13,739,830 480,358 3.50 % Other assets 1,567,921 1,599,114 1,592,393 Allowance for loan losses (104,138 ) (110,170 ) (108,567 ) Total Assets $ 17,477,890 $ 17,057,993 $ 15,223,656 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand deposits $ 4,585,955 16,409 0.36 % $ 4,096,746 4,906 0.12 % $ 3,584,249 9,985 0.28 % Savings deposits 4,579,742 9,654 0.21 % 4,622,167 7,912 0.17 % 4,149,860 13,481 0.32 % Time deposits 1,153,983 3,006 0.26 % 1,287,663 4,127 0.32 % 1,534,673 14,021 0.91 % Federal funds purchased and securities sold under repurchase agreements 283,328 6,127 2.16 % 172,782 232 0.13 % 151,805 755 0.50 % Other borrowings 198,672 4,963 2.50 % 125,554 1,037 0.83 % 133,602 1,389 1.04 % Subordinated notes 123,144 4,751 3.86 % 122,933 4,752 3.87 % 10,766 474 4.40 % Junior subordinated debt securities 61,856 2,215 3.58 % 61,856 1,194 1.93 % 61,856 1,693 2.74 % Total interest-bearing liabilities 10,986,680 47,125 0.43 % 10,489,701 24,160 0.23 % 9,626,811 41,798 0.43 % Noninterest-bearing demand deposits 4,452,046 4,531,642 3,646,860 Other liabilities 434,310 266,499 268,398 Shareholders' equity 1,604,854 1,770,151 1,681,587 Total Liabilities and Shareholders' Equity $ 17,477,890 $ 17,057,993 $ 15,223,656 Net Interest Margin 507,053 3.17 % 430,055 2.76 % 438,560 3.19 % Less tax equivalent adjustments: Investments 89 146 287 Loans 12,256 11,558 11,736 Net Interest Margin per Consolidated Statements of Income $ 494,708 $ 418,351 $ 426,537 40 The table below shows the change from year to year for each component of the tax equivalent net interest margin in the amount generated by volume changes and the amount generated by changes in the yield or rate (tax equivalent basis) for the periods presented ($ in thousands): 2022 Compared to 2021 2021 Compared to 2020 Increase (Decrease) Due To: Increase (Decrease) Due To: Yield/ Yield/ Volume Rate Net Volume Rate Net Interest earned on: Federal funds sold and securities purchased under reverse repurchase agreements $ — $ 74 $ 74 $ (1 ) $ — $ (1 ) Securities available for sale: Taxable 4,508 3,838 8,346 12,509 (17,431 ) (4,922 ) Nontaxable (7 ) 3 (4 ) (212 ) 27 (185 ) Securities held to maturity: Taxable 10,962 1,711 12,673 (4,024 ) (606 ) (4,630 ) Nontaxable (287 ) 19 (268 ) (490 ) 3 (487 ) PPP loans (22,339 ) (13,748 ) (36,087 ) (16,498 ) 26,581 10,083 Loans, net of unearned income (LHFS and LHFI) 32,932 76,984 109,916 14,945 (42,154 ) (27,209 ) Other earning assets (2,008 ) 7,321 5,313 1,974 (766 ) 1,208 Total interest-earning assets 23,761 76,202 99,963 8,203 (34,346 ) (26,143 ) Interest paid on: Interest-bearing demand deposits 648 10,855 11,503 1,279 (6,358 ) (5,079 ) Savings deposits (73 ) 1,815 1,742 1,344 (6,913 ) (5,569 ) Time deposits (399 ) (722 ) (1,121 ) (1,968 ) (7,926 ) (9,894 ) Federal funds purchased and securities sold under repurchase agreements 233 5,662 5,895 95 (618 ) (523 ) Other borrowings 881 3,045 3,926 (81 ) (271 ) (352 ) Subordinated notes 9 (10 ) (1 ) 4,342 (64 ) 4,278 Junior subordinated debt securities — 1,021 1,021 — (499 ) (499 ) Total interest-bearing liabilities 1,299 21,666 22,965 5,011 (22,649 ) (17,638 ) Change in net interest income on a tax equivalent basis $ 22,462 $ 54,536 $ 76,998 $ 3,192 $ (11,697 ) $ (8,505 ) The change in interest due to both volume and yield or rate has been allocated to change due to volume and change due to yield or rate in proportion to the absolute value of the change in each.
Biggest changeThe following table provides the tax equivalent basis yield or rate for each component of the tax equivalent net interest margin for the periods presented ($ in thousands): Years Ended December 31, 2023 2022 2021 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Interest-earning assets: Federal funds sold and securities purchased under reverse repurchase agreements $ 1,492 $ 80 5.36 % $ 1,753 $ 74 4.22 % $ 79 $ — — Securities available for sale: Taxable 2,090,201 35,359 1.69 % 2,932,054 38,799 1.32 % 2,573,533 30,453 1.18 % Nontaxable 4,657 182 3.91 % 4,997 195 3.90 % 5,166 199 3.85 % Securities held to maturity: Taxable 1,454,450 30,741 2.11 % 911,010 20,918 2.30 % 423,763 8,245 1.95 % Nontaxable 1,854 81 4.37 % 5,623 227 4.04 % 12,765 495 3.88 % PPP loans — — — 14,868 639 4.30 % 350,668 36,726 10.47 % Loans (LHFS and LHFI) 12,801,531 788,719 6.16 % 11,236,388 485,246 4.32 % 10,377,941 375,330 3.62 % Other earning assets 728,181 37,135 5.10 % 907,414 8,080 0.89 % 1,825,134 2,767 0.15 % Total interest-earning assets 17,082,366 892,297 5.22 % 16,014,107 554,178 3.46 % 15,569,049 454,215 2.92 % Other assets 1,718,058 1,567,921 1,599,114 Allowance for credit losses (125,942 ) (104,138 ) (110,170 ) Total Assets $ 18,674,482 $ 17,477,890 $ 17,057,993 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand deposits $ 4,871,977 121,138 2.49 % $ 4,585,955 16,409 0.36 % $ 4,096,746 4,906 0.12 % Savings deposits 3,838,791 28,605 0.75 % 4,579,742 9,654 0.21 % 4,622,167 7,912 0.17 % Time deposits 2,691,682 96,208 3.57 % 1,153,983 3,006 0.26 % 1,287,663 4,127 0.32 % Federal funds purchased and securities sold under repurchase agreements 410,945 20,419 4.97 % 283,328 6,127 2.16 % 172,782 232 0.13 % Other borrowings 984,315 50,441 5.12 % 198,672 4,963 2.50 % 125,554 1,037 0.83 % Subordinated notes 123,364 4,751 3.85 % 123,144 4,751 3.86 % 122,933 4,752 3.87 % Junior subordinated debt securities 61,856 4,392 7.10 % 61,856 2,215 3.58 % 61,856 1,194 1.93 % Total interest-bearing liabilities 12,982,930 325,954 2.51 % 10,986,680 47,125 0.43 % 10,489,701 24,160 0.23 % Noninterest-bearing demand deposits 3,532,134 4,452,046 4,531,642 Other liabilities 589,320 434,310 266,499 Shareholders' equity 1,570,098 1,604,854 1,770,151 Total Liabilities and Shareholders' Equity $ 18,674,482 $ 17,477,890 $ 17,057,993 Net Interest Margin 566,343 3.32 % 507,053 3.17 % 430,055 2.76 % Less tax equivalent adjustments: Investments 55 89 146 Loans 13,410 12,256 11,558 Net Interest Margin per Consolidated Statements of Income $ 552,878 $ 494,708 $ 418,351 42 The table below shows the change from year to year for each component of the tax equivalent net interest margin in the amount generated by volume changes and the amount generated by changes in the yield or rate (tax equivalent basis) for the periods presented ($ in thousands): 2023 Compared to 2022 2022 Compared to 2021 Increase (Decrease) Due To: Increase (Decrease) Due To: Yield/ Yield/ Volume Rate Net Volume Rate Net Interest earned on: Federal funds sold and securities purchased under reverse repurchase agreements $ (12 ) $ 18 $ 6 $ — $ 74 $ 74 Securities available for sale: Taxable (12,720 ) 9,280 (3,440 ) 4,508 3,838 8,346 Nontaxable (13 ) — (13 ) (7 ) 3 (4 ) Securities held to maturity: Taxable 11,669 (1,846 ) 9,823 10,962 1,711 12,673 Nontaxable (164 ) 18 (146 ) (287 ) 19 (268 ) PPP loans (319 ) (320 ) (639 ) (22,339 ) (13,748 ) (36,087 ) Loans, net of unearned income (LHFS and LHFI) 74,788 228,685 303,473 32,932 76,984 109,916 Other earning assets (1,898 ) 30,953 29,055 (2,008 ) 7,321 5,313 Total interest-earning assets 71,331 266,788 338,119 23,761 76,202 99,963 Interest paid on: Interest-bearing demand deposits 1,093 103,636 104,729 648 10,855 11,503 Savings deposits (1,806 ) 20,757 18,951 (73 ) 1,815 1,742 Time deposits 8,831 84,371 93,202 (399 ) (722 ) (1,121 ) Federal funds purchased and securities sold under repurchase agreements 3,676 10,616 14,292 233 5,662 5,895 Other borrowings 35,951 9,527 45,478 881 3,045 3,926 Subordinated notes 10 (10 ) — 9 (10 ) (1 ) Junior subordinated debt securities — 2,177 2,177 — 1,021 1,021 Total interest-bearing liabilities 47,755 231,074 278,829 1,299 21,666 22,965 Change in net interest income on a tax equivalent basis $ 23,576 $ 35,714 $ 59,290 $ 22,462 $ 54,536 $ 76,998 The change in interest due to both volume and yield or rate has been allocated to change due to volume and change due to yield or rate in proportion to the absolute value of the change in each.
For a complete description of Trustmark’s ACL methodology for the off-balance sheet credit exposures, please see the section captioned “Lending Related” in Note 16 – Commitments and Contingencies included in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
For a complete description of Trustmark’s ACL methodology for off-balance sheet credit exposures, please see the section captioned “Lending Related” in Note 16 – Commitments and Contingencies included in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
Tax-exempt income has been adjusted to a tax equivalent basis using the federal statutory corporate tax rate in effect for each of the three years presented. The balances of nonaccrual loans and related income recognized have been included for purposes of these computations.
Tax-exempt income has been adjusted to a tax equivalent basis using the federal statutory corporate tax rate in effect for each of the three years presented. The balances of nonaccrual loans and the related income recognized have been included for purposes of these computations.
Provision for Credit Losses The PCL, LHFI is the amount necessary to maintain the ACL for LHFI at the amount of expected credit losses inherent within the LHFI portfolio. The amount of PCL and the related ACL for LHFI are based on Trustmark’s ACL methodology.
Provision for Credit Losses The PCL, LHFI is the amount necessary to maintain the ACL, LHFI at the amount of expected credit losses inherent within the LHFI portfolio. The amount of PCL and the related ACL for LHFI are based on Trustmark’s ACL methodology.
FASB ASC Topic 326 requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable by Trustmark. Trustmark maintains a separate ACL for off-balance sheet credit exposures, including unfunded commitments and letters of credit. Adjustments to the ACL on off-balance sheet credit exposures are recorded to the PCL, off-balance sheet credit exposures.
FASB ASC Topic 326 requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable by Trustmark. Trustmark maintains a separate ACL on off-balance sheet credit exposures, including unfunded commitments and letters of credit. Adjustments to the ACL on off-balance sheet credit exposures are recorded to the PCL, off-balance sheet credit exposures.
When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future.
When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future.
In this way, Management will not rely upon unobserved and untested relationships in the setting of the quantitative reserve. This approach applies to all input variables, including: Southern Unemployment, National Unemployment, National Gross Domestic Product (GDP), Southern Vacancy Rate and the Prime Rate.
In this way, Management will not rely upon unobserved and untested relationships in the setting of the quantitative reserve. This approach applies to all input variables, including: Southern Unemployment, National Unemployment, National Gross Domestic Product (GDP), Southern GDP, Southern Vacancy Rate and the Prime Rate.
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that economically hedges changes in fair value of the MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under GAAP.
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that economically hedges changes in the fair value of the MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under GAAP.
Assumptions, which have been chosen to represent the estimate of a particular event as required by GAAP, have been reviewed and approved by Management based on recommendations from its actuaries. The range of potential contributions to the Continuing Plan is determined annually by the Continuing Plan’s actuary in accordance with applicable IRS rules and regulations.
Assumptions, which have been chosen to represent the estimate of a particular event as required by GAAP, have been reviewed and approved by Management based on recommendations from its actuaries. 60 The range of potential contributions to the Continuing Plan is determined annually by the Continuing Plan’s actuary in accordance with applicable IRS rules and regulations.
Management’s Asset/Liability Committee, in its oversight role for the management of interest rate risk, approves the use of derivatives in balance sheet hedging strategies. The most common derivatives employed by Trustmark are interest rate lock commitments, forward contracts (both futures contracts and options on futures contracts), interest rate swaps, interest rate caps and interest rate floors.
Management’s Asset/Liability Committee, in its oversight role for the management of interest rate risk, approves the use of derivatives in balance sheet hedging strategies. The most common 64 derivatives employed by Trustmark are interest rate lock commitments, forward contracts (both futures contracts and options on futures contracts), interest rate swaps, interest rate caps and interest rate floors.
While Management utilizes its best judgment and information available, the ultimate adequacy of Trustmark’s ACL is dependent upon a variety of factors beyond its controls, including the performance of the portfolios, the economy, changes in interest rates and the view of regulatory authorities toward classification of assets.
While Management utilizes its best judgment and information available, the ultimate adequacy of Trustmark’s ACL, LHFI is dependent upon a variety of factors beyond its controls, including the performance of the portfolios, the economy, changes in interest rates and the view of regulatory authorities toward classification of assets.
Derivatives transactions executed as part of this program are not designated as qualifying hedging relationships under GAAP and are, therefore, carried on Trustmark’s financial statements at fair value with the change in fair value recorded as noninterest income in bank card and other fees.
Derivatives transactions executed as part of this program are not designated as qualifying hedging relationships under GAAP and are, therefore, carried on Trustmark’s financial statements at fair value with the change in fair value recorded as noninterest 65 income in bank card and other fees.
Allowance for Credit Losses (ACL) LHFI 33 The ACL for LHFI is a valuation account, calculated in accordance with FASB ASC Topic 326, that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.
Allowance for Credit Losses (ACL) LHFI The ACL, LHFI is a valuation account, calculated in accordance with FASB ASC Topic 326, that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.
During 2022, Trustmark reclassified approximately $766.0 million of securities available for sale to securities held to 46 maturity to mitigate the potential adverse impact of a rising interest rate environment on the fair value of the available for sale securities and the related impact on tangible common equity.
During 2022, Trustmark reclassified approximately $766.0 million of securities available for sale to securities held to maturity to mitigate the potential adverse impact of a rising interest rate environment on the fair value of the available for sale securities and the related impact on tangible common equity.
The increase in net interest income for the Wealth Management Segment during 2022 was principally due to an increase in interest and fees on loans partially offset by an increase in interest on deposits generated by the Private Banking Group.
The increase in net interest income for the Wealth Management Segment during 2023 and 2022 was principally due to an increase in interest and fees on loans partially offset by an increase in interest on deposits generated by the Private Banking Group.
Loans on nonaccrual have been included in the average loan balances, and interest collected prior to these loans having been placed on 37 nonaccrual has been included in interest income. Loan fees included in interest associated with the average LHFS and LHFI balances are immaterial.
Loans on nonaccrual have been included in the average loan balances, and interest collected prior to these loans having been placed on nonaccrual has been included in interest income. Loan fees included in interest associated with the average LHFS and LHFI balances are immaterial.
Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB and limit Trustmark’s and TNB’s ability to pay dividends. At December 31, 2022, Trustmark and TNB exceeded all applicable minimum capital standards.
Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB and limit Trustmark’s and TNB’s ability to pay dividends. At December 31, 2023, Trustmark and TNB exceeded all applicable minimum capital standards.
At December 31, 2022, unrecognized actuarial losses and unrecognized prior service costs continue to be amortized over future service periods. Legal Environment Information required in this section is set forth under the heading “Legal Proceedings” of Note 16 – Commitments and Contingencies in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
At December 31, 2023, unrecognized actuarial losses and unrecognized prior service costs continue to be amortized over future service periods. Legal Environment Information required in this section is set forth under the heading “Legal Proceedings” of Note 16 – Commitments and Contingencies in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during 2022 or 2021. For additional information regarding the GNMA optional repurchase loans, please see the section captioned “Past Due LHFS” included in Note 4 – LHFI and Allowance for Credit Losses, LHFI of Part II.
Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during 2023 or 2022. For additional information regarding the GNMA optional repurchase loans, please see the section captioned “Past Due LHFS” included in Note 4 – LHFI and Allowance for Credit Losses, LHFI of Part II.
Regulatory Settlement Charge During the third quarter of 2021, Trustmark finalized a settlement with regulatory authorities to resolve fair lending allegations in the Memphis metropolitan statistical area (MSA). Trustmark incurred a one-time settlement expense of $5.0 million and made other commitments to enhance credit opportunities to residents in majority-Black and Hispanic neighborhoods in the Memphis MSA.
Regulatory Settlement Charge During 2021, Trustmark finalized a settlement with regulatory authorities to resolve fair lending allegations in the Memphis metropolitan statistical area (MSA). Trustmark incurred a one-time settlement expense of $5.0 million and made other commitments to enhance credit opportunities to residents in majority-Black and Hispanic neighborhoods in the Memphis MSA.
The external factors qualitative factor is Management’s best judgement on the loan or pool level impact of all factors that affect the portfolio that are not accounted for using any other part of the ACL methodology ( i.e. , natural disasters, changes in legislation, impacts due to technology and pandemics).
The external factors qualitative factor is Management’s best judgment on the loan or pool level impact of all factors that affect the portfolio that are not accounted for using any other part of the ACL methodology ( i.e. , natural disasters, changes in legislation, impacts due to technology and pandemics).
Item 8. – Financial Statements and Supplementary Data of this report for an illustration of Trustmark’s and TNB’s actual regulatory capital amounts and ratios under regulatory capital standards in effect at December 31, 2022 and 2021. Dividends on Common Stock Dividends per common share for each of the years ended December 31, 2022, 2021 and 2020 were $0.92.
Item 8. – Financial Statements and Supplementary Data of this report for an illustration of Trustmark’s and TNB’s actual regulatory capital amounts and ratios under regulatory capital standards in effect at December 31, 2023 and 2022. Dividends on Common Stock Dividends per common share for each of the years ended December 31, 2023, 2022 and 2021 were $0.92.
In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and discount rates. These fluctuations can be rapid and may continue to be significant. Therefore, estimating prepayment speed and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.
In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and discount rates. These fluctuations can be rapid and may continue 37 to be significant. Therefore, estimating prepayment speeds and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.
The following table details the weighted-average yield for each range of maturities of securities available for sale and held to maturity using the amortized cost at December 31, 2022 (tax equivalent basis): Maturing Within One Year After One, But Within Five Years After Five, But Within Ten Years After Ten Years Total Securities available for sale U.S.
The following table details the weighted-average yield for each range of maturities of securities available for sale and held to maturity using the amortized cost at December 31, 2023 (tax equivalent basis): Maturing Within One Year After One, But Within Five Years After Five, But Within Ten Years After Ten Years Total Securities Available for Sale U.S.
For 2022, 2021 and 2020, the process used to select the discount rate assumption under FASB ASC Topic 715, "Compensation-Retirement Benefits," takes into account the benefit cash flow and the segmented yields on high-quality corporate bonds that would be available to provide for the payment of the benefit cash flow.
For 2023, 2022 and 2021, the process used to select the discount rate assumption under FASB ASC Topic 715, "Compensation-Retirement Benefits," takes into account the benefit cash flow and the segmented yields on high-quality corporate bonds that would be available to provide for the payment of the benefit cash flow.
The subordinated notes mature December 1, 2030 and are redeemable at Trustmark’s option under certain circumstances. For regulatory capital purposes, the subordinated notes qualified as Tier 2 capital for Trustmark at December 31, 2022 and 2021. Trustmark may utilize the full carrying value of the subordinated notes as Tier 2 capital until December 1, 2025 (five years prior to maturity).
The subordinated notes mature December 1, 2030 and are redeemable at Trustmark’s option under certain circumstances. For regulatory capital purposes, the subordinated notes qualified as Tier 2 capital for Trustmark at December 31, 2023 and 2022. Trustmark may utilize the full carrying value of the subordinated notes as Tier 2 capital until December 1, 2025 (five years prior to maturity).
Beginning December 1, 2025, the subordinated notes will phase out of Tier 2 capital 20.0% each year until maturity. In 2006, Trustmark enhanced its capital structure with the issuance of trust preferred securities. For regulatory capital purposes, the trust preferred securities qualified as Tier 1 capital at December 31, 2022 and 2021.
Beginning December 1, 2025, the subordinated notes will phase out of Tier 2 capital 20.0% each year until maturity. In 2006, Trustmark enhanced its capital structure with the issuance of trust preferred securities. For regulatory capital purposes, the trust preferred securities qualified as Tier 1 capital at December 31, 2023 and 2022.
The decrease in the gain on sales of loans, net when 2022 is compared to 2021 was primarily the result of decreases in the volume of loans sold as well as lower profit margins in secondary marketing activities partially offset by an increase in the mortgage valuation adjustment.
The decrease in the gain on sales of loans, net when 2023 is compared to 2022 was primarily the result of decreases in the volume of loans sold as well as lower profit margins in secondary marketing activities partially offset by an increase in the mortgage valuation adjustment.
The actual amount of any dividends declared in 2023 by Trustmark will be determined by Trustmark’s Board of Directors. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable of March 15, 2023, to shareholders of record on March 1, 2023.
The actual amount of any dividends declared in 2024 by Trustmark will be determined by Trustmark’s Board of Directors. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable of March 15, 2024, to shareholders of record on March 1, 2024.
Item 8. – Financial Statements and Supplementary Data of this report. Discussion and analysis of Trustmark’s financial condition and results of operations for the years ended December 31, 2021 and 2020 are included in the respective sections within Part II.
Item 8. – Financial Statements and Supplementary Data of this report. Discussion and analysis of Trustmark’s financial condition and results of operations for the years ended December 31, 2022 and 2021 are included in the respective sections within Part II.
Trustmark performed an annual impairment test of the book value of goodwill held in the Insurance Segment as of October 1, 2022, 2021, and 2020. Based on this analysis, Trustmark concluded that no impairment charge was required.
Trustmark performed an annual impairment test of the book value of goodwill held in the Insurance Segment as of October 1, 2023, 2022, and 2021. Based on this analysis, Trustmark concluded that no impairment charge was required.
Executive Overview Trustmark has been committed to meeting the banking and financial needs of its customers and communities for over 130 years and remains focuses on providing support, advice and solutions to its customers' unique needs.
Executive Overview Trustmark has been committed to meeting the banking and financial needs of its customers and communities for over 130 years and remains focused on providing support, advice and solutions to its customers' unique needs.
In an effort to ensure the External Factor – Pandemic qualitative factor 53 is reasonable and supportable, historical Trustmark loss data was leveraged to construct a framework that is quantitative in nature.
In an effort to ensure the External Factor – Pandemic qualitative factor 54 is reasonable and supportable, historical Trustmark loss data was leveraged to construct a framework that is quantitative in nature.
The aggregate fair values of these risk participation agreements were immaterial at December 31, 2022 and 2021. Trustmark’s participation in the derivatives markets is subject to increased federal regulation of these markets.
The aggregate fair values of these risk participation agreements were immaterial at December 31, 2023 and 2022. Trustmark’s participation in the derivatives markets is subject to increased federal regulation of these markets.
During the fourth quarter of 2022, Management noted that all pass rate loans (risk rate 5 and 6) related to the External Factor - Pandemic qualitative factor either did not experience significant stress related to the pandemic or have since recovered and does not expect future stresses attributed to the pandemic that may affect these loans.
During 2022, Management noted that all pass rate loans (risk rate 5 and 6) related to the External Factor - Pandemic qualitative factor either did not experience significant stress related to the pandemic or have since recovered and does not expect future stresses attributed to the pandemic that may affect these loans.
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of Trustmark’s Annual Report filed on Form 10-K for the year ended December 31, 2021.
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of Trustmark’s Annual Report filed on Form 10-K for the year ended December 31, 2022.
Given the nature of many of the factors, forecasts and assumptions in the ACL methodology, it is not possible to provide meaningful estimates of the impact of any such potential change.
Given the nature of many of the factors, forecasts and assumptions in the ACL methodology for LHFI, it is not possible to provide meaningful estimates of the impact of any such potential change.
In future periods, evaluations of off-balance sheet credit exposures, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and PCL, off-balance sheet credit exposures in those future periods.
In future periods, evaluations of off-balance sheet credit exposures, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and PCL on off-balance sheet credit exposures.
Securities The securities portfolio is utilized by Management to manage interest rate risk, generate interest income, provide liquidity and use as collateral for public and wholesale funding. Risk and return can be adjusted by altering duration, composition and/or balance of the portfolio. The weighted-average life of the portfolio at December 31, 2022 and 2021 was 4.9 and 4.3 years, respectively.
Securities The securities portfolio is utilized by Management to manage interest rate risk, generate interest income, provide liquidity and use as collateral for public and wholesale funding. Risk and return can be adjusted by altering duration, composition and/or balance of the portfolio. The weighted-average life of the portfolio at December 31, 2023 and 2022 was 4.5 and 4.9 years, respectively.
Trustmark has non-member status and thus no additional borrowing capacity with the FHLB of Atlanta. Additionally, Trustmark has the ability to leverage its unencumbered investment securities as collateral. At December 31, 2022, Trustmark had approximately $797.0 million available in unencumbered Treasury and agency securities compared to $751.0 million at December 31, 2021. Another borrowing source is the Discount Window.
Trustmark has non-member status and thus no additional borrowing capacity with the FHLB of Atlanta. Additionally, Trustmark has the ability to leverage its unencumbered investment securities as collateral. At December 31, 2023, Trustmark had approximately $842.0 million available in unencumbered Treasury and agency securities compared to $797.0 million at December 31, 2022. Another borrowing source is the Discount Window.
By way of example, an increase in either the prepayment speed or discount rate assumption will result in a decrease in the fair value of the MSR, while a decrease in either assumption will result in an increase in the fair value of the MSR.
By way of example, an increase in either the prepayment speed or discount rate assumption may result in a decrease in the fair value of the MSR, while a decrease in either assumption may result in an increase in the fair value of the MSR.
As a result, centrally cleared interest rate swaps included in other assets and other liabilities are presented on a net basis in the accompanying consolidated balance sheets. At December 31, 2022, Trustmark had interest rate swaps with an aggregate notional amount of $1.391 billion related to this program, compared to $1.225 billion at December 31, 2021.
As a result, centrally cleared interest rate swaps included in other assets and other liabilities are presented on a net basis in the accompanying consolidated balance sheets. At December 31, 2023, Trustmark had interest rate swaps with an aggregate notional amount of $1.500 billion related to this program, compared to $1.391 billion at December 31, 2022.
Voluntary Early Retirement Program During the third quarter of 2021, Trustmark completed a voluntary early retirement program and incurred one-time charges of $5.7 million ($5.6 million of non-routine salaries and employee benefits expense and $89 thousand of non-routine other miscellaneous expense) related to this program.
Voluntary Early Retirement Program During 2021, Trustmark completed a voluntary early retirement program and incurred one-time charges of $5.7 million ($5.6 million of non-routine salaries and employee benefits expense and $89 thousand of non-routine other miscellaneous expense) related to this program.
In future periods, evaluations of the overall LHFI portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and PCL, LHFI in those future periods.
In future periods, evaluations of the overall LHFI portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and PCL for LHFI.
Increased federal regulation of the derivatives markets may increase the cost to Trustmark to administer derivatives programs. Derivatives Designated as Hedging Instruments During the third quarter of 2022, Trustmark initiated a cash flow hedging program. Trustmark's objectives in initiating this hedging program are to add stability to interest income and to manage its exposure to interest rate movements.
Increased federal regulation of the derivatives markets may increase the cost to Trustmark to administer derivatives programs. Derivatives Designated as Hedging Instruments During 2022, Trustmark initiated a cash flow hedging program. Trustmark's objectives in initiating this hedging program were to add stability to interest income and to manage its exposure to interest rate movements.
The increase in the net interest margin-FTE excluding PPP loans and the balance held at the FRBA for 2022 was principally due to increases in the yields on the LHFS and LHFI and securities portfolios, partially offset by higher costs of interest-bearing liabilities reflecting the higher interest rate environment.
The decrease in the net interest margin-FTE excluding PPP loans and the balance held at the FRBA for 2023 was principally due to higher costs of interest-bearing liabilities, partially offset by increases in the yields on the LHFS and LHFI and securities portfolios reflecting the higher interest rate environment.
Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the ACL is complex and requires judgement by Management about the effect of matters that are inherently uncertain.
Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments 36 as to the facts and circumstances of particular situations. Determining the appropriateness of the ACL, LHFI is complex and requires judgment by Management about the effect of matters that are inherently uncertain.
For additional analysis of other real estate and foreclosure expenses, please see the section captioned “Nonperforming Assets, Excluding PPP and Acquired Loans.” Results of Segment Operations Trustmark’s operations are managed along three operating segments: General Banking, Wealth Management and Insurance.
For additional analysis of other real estate and foreclosure expenses, please see the section captioned “Nonperforming Assets.” Results of Segment Operations Trustmark’s operations are managed along three operating segments: General Banking, Wealth Management and Insurance.
The total notional amount of these derivative instruments was $277.0 million at December 31, 2022 compared to $409.5 million at December 31, 2021. These exchange-traded derivative instruments are accounted for at fair value with changes in the fair value recorded as noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR.
The total notional amount of these derivative instruments was $285.0 million at December 31, 2023 compared to $277.0 million at December 31, 2022. These exchange-traded derivative instruments are accounted for at fair value with changes in the fair value recorded as noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR.
In addition, at December 31, 2022, Trustmark had no short-term and $78 thousand in long-term FHLB advances outstanding with the FHLB of Atlanta, which were acquired in the BancTrust merger, compared to no short-term and $97 thousand in long-term FHLB advances outstanding at December 31, 2021.
In addition, at December 31, 2023, Trustmark had no short-term and $58 thousand in long-term FHLB advances outstanding with the FHLB of Atlanta, which were acquired in the BancTrust merger, compared to no short-term and $78 thousand in long-term FHLB advances outstanding at December 31, 2022.
Approval by TNB’s regulators is required if the total of all dividends declared in any calendar year exceeds the total of its net income for that year combined with its retained net income of the preceding two years. In 2023, TNB will have available approximately $96.9 million plus its net income for that year to pay as dividends to Trustmark.
Approval by TNB’s regulators is required if the total of all dividends declared in any calendar year exceeds the total of its net income for that year combined with its retained net income of the preceding two years. In 2024, TNB will have available approximately $95.1 million plus its net income for that year to pay as dividends to Trustmark.
See the section captioned “Allowance for Credit Losses” for information regarding Trustmark’s ACL methodology as well as further analysis of the PCL. 41 Noninterest Income Noninterest income represented 29.3%, 34.7% and 39.2% of total revenue, before securities gains (losses), net in 2022, 2021 and 2020, respectively.
See the section captioned “Allowance for Credit Losses” for information regarding Trustmark’s ACL methodology as well as further analysis of the PCL. 43 Noninterest Income Noninterest income represented 27.2%, 29.3% and 34.7% of total revenue, before securities gains (losses), net in 2023, 2022 and 2021, respectively.
Loans serviced for others totaled $8.116 billion at December 31, 2022, compared with $7.953 billion at December 31, 2021, and $7.657 billion at December 31, 2020. Representing a significant component of mortgage banking income is gain on sales of loans, net.
Loans serviced for others totaled $8.477 billion at December 31, 2023, compared with $8.116 billion at December 31, 2022, and $7.953 billion at December 31, 2021. 44 Representing a significant component of mortgage banking income is gain on sales of loans, net.
While Management utilizes its best judgment and information available, the ultimate adequacy of Trustmark’s ACL is dependent upon a variety of factors beyond its control, including the performance of the portfolios, the economy, changes in interest rates and the view of regulatory authorities toward classification of assets.
While Management utilizes its best judgment and information available, the ultimate adequacy of Trustmark’s ACL on off-balance sheet credit exposures is dependent upon a variety of factors beyond its control, including the performance of the portfolios, the economy, changes in interest rates and the view of regulatory authorities toward classification of assets.
Item 1A. – Risk Factors of this report. Management continually develops and applies cost-effective strategies to manage these risks. Management’s Asset/Liability Committee sets the day-to-day operating guidelines, approves strategies affecting net interest income and coordinates activities within policy limits established by the Board of Directors of Trustmark.
Management continually develops and applies cost-effective strategies to manage these risks. Management’s Asset/Liability Committee sets the day-to-day operating guidelines, approves strategies affecting net interest income and coordinates activities within policy limits established by the Board of Directors of Trustmark.
The decrease in net income when the fourth quarter of 2022 is compared to the fourth quarter of 2021 was principally due to the litigation settlement expense recorded during the fourth quarter of 2022 related to the Stanford Financial Group litigation.
The increase in net income when the fourth quarter of 2023 is compared to the fourth quarter of 2022 was principally due to the litigation settlement expense recorded during the fourth quarter of 2022 related to the Stanford Financial Group litigation.
At December 31, 2022, the accrued benefit obligation for the supplemental retirement plans equaled $43.2 million, while the net periodic benefit cost equaled $2.4 million in 2022, $2.5 million in 2021 and $2.8 million in 2020. The net periodic benefit cost and projected benefit obligation are determined using actuarial assumptions as of the plans’ measurement date.
At December 31, 2023, the accrued benefit obligation for the supplemental retirement plans equaled $41.6 million, while the net periodic benefit cost equaled $2.5 million in 2023, $2.4 million in 2022 and $2.5 million in 2021. The net periodic benefit cost and projected benefit obligation are determined using actuarial assumptions as of the plans’ measurement date.
Income Taxes For the year ended December 31, 2022, Trustmark’s combined effective tax rate was 2.5% compared to 16.0% in 2021 and 15.7% in 2020. The decline in the effective tax rate for 2022 was principally due to the net loss recorded for the fourth quarter of 2022 as a result of the $100.8 million of litigation settlement expense.
Income Taxes For the year ended December 31, 2023, Trustmark’s combined effective tax rate was 16.1% compared to 2.5% in 2022 and 16.0% in 2021. The decline in the effective tax rate for 2022 was principally due to the net loss recorded for 2022 as a result of the $100.8 million of litigation settlement expense.
In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at December 31, 2022.
In addition, Trustmark and TNB met 61 applicable regulatory guidelines to be considered well-capitalized at December 31, 2023.
These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Trustmark’s and TNB’s minimum risk-based capital requirements include a capital conservation buffer of 2.500% at December 31, 2022 and 2021. AOCI is not included in computing regulatory capital.
These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Trustmark’s and TNB’s minimum risk-based capital requirements include a capital conservation buffer of 2.5%. AOCI is not included in computing regulatory capital.
Available for sale securities are carried at their estimated fair value with unrealized gains or losses recognized, net of taxes, in AOCI, a separate component of shareholders’ equity. At December 31, 2022, available for sale securities totaled $2.024 billion, which represented 57.5% of the securities portfolio, compared to $3.239 billion, or 90.4%, at December 31, 2021.
Available for sale securities are carried at their estimated fair value with unrealized gains or losses recognized, net of taxes, in AOCI, a separate component of shareholders’ equity. At December 31, 2023, available for sale securities totaled $1.763 billion, which represented 55.3% of the securities portfolio, compared to $2.024 billion, or 57.5%, at December 31, 2022.
Trustmark’s dividend payout ratio for 2022, 2021 and 2020 was 78.63%, 39.15%, and 36.51%, respectively. The increase in the dividend payout ratio for 2022 was principally due to the $100.8 million of litigation settlement expense recorded during the fourth quarter of 2022.
Trustmark’s dividend payout ratio for 2023, 2022 and 2021 was 33.95%, 78.63%, and 39.15%, respectively. The increase in the dividend payout ratio for 2022 was principally due to the $100.8 million of litigation settlement expense recorded during the fourth quarter of 2022.
At December 31, 2022, the MSR fair value was $129.7 million. The impact on the MSR fair value of either a 10% adverse change in prepayment speeds or a 100 basis point increase in discount rates at December 31, 2022, would be a decline in fair value of approximately $4.5 million and $5.4 million, respectively.
At December 31, 2023, the MSR fair value was $131.9 million. The impact on the MSR fair value of either a 10% adverse change in prepayment speeds or a 100 basis point increase in discount rates at December 31, 2023, would be a decline in fair value of approximately $4.8 million and $5.4 million, respectively.
Mortgage Servicing Rights (MSR) Trustmark recognizes as assets the rights to service mortgage loans based on the estimated fair value of the MSR when loans are sold and the associated servicing rights are retained.
Mortgage Servicing Rights (MSR) Trustmark recognizes as assets the rights to service mortgage loans based on the estimated fair value of the MSR when loans are sold and the associated servicing rights are retained. Trustmark has elected to account for the MSR at fair value.
In this regard, Trustmark benefits from its strong deposit base, its highly liquid investment portfolio and its access to funding from a variety of external funding sources such as upstream federal funds lines, FHLB advances and, on a limited basis, brokered deposits. See the section captioned “Liquidity” for further discussion of the components of Trustmark’s excess funding capacity.
In this regard, Trustmark benefits from its strong deposit base, its investment portfolio and its access to funding from a variety of external funding sources such as upstream federal funds lines, FHLB advances and brokered deposits. See the section captioned “Capital Resources and Liquidity” for further discussion of the components of Trustmark’s excess funding capacity.
The PCL (LHFI and off-balance sheet credit exposures) for the General Banking Segment for 2022 totaled $22.9 million compared to a negative PCL of $24.4 million during 2021 and a PCL of $45.1 million during 2020.
The PCL (LHFI and off-balance sheet credit exposures) for the General Banking Segment for 2023 totaled $26.7 million compared to a PCL of $22.9 million during 2022 and a negative PCL of $24.4 million during 2021.
The decrease in noninterest income for the General Banking Segment during 2022 was primarily due to the decrease in mortgage banking, net, partially offset by increases in service charges on deposit accounts and other income, net.
The decrease in noninterest income for the General Banking Segment during 2023 was primarily due to the decreases in bank card and other fees and mortgage banking, net, partially offset by increases in service charges on deposit accounts and other income, net.
For more information on these noninterest income items, please see the analysis included in the section captioned “Noninterest Income.” Noninterest expense for the General Banking Segment increased $109.8 million, or 26.1%, during 2022 compared to an increase of $19.8 million, or 4.9%, during 2021.
For more information on these noninterest income items, please see the analysis included in the section captioned “Noninterest Income.” Noninterest expense for the General Banking Segment decreased $67.9 million, or 12.8%, during 2023 compared to an increase of $109.8 million, or 26.1%, during 2022.
At December 31, 2022, Trustmark had approximately $1.345 billion available in collateral capacity at the Discount Window primarily from pledges of commercial and industrial LHFI, compared with $876.8 million at December 31, 2021.
At December 31, 2023, Trustmark had approximately $1.374 billion available in collateral capacity at the Discount Window primarily from pledges of commercial and industrial LHFI, compared with $1.345 billion at December 31, 2022.
The impact of this strategy resulted in a net negative ineffectiveness of $4.1 million for the year ended December 31, 2022, compared to a net positive ineffectiveness of $2.5 million for the year ended December 31, 2021 and a net positive ineffectiveness of $7.8 million for the year ended December 31, 2020.
The impact of this strategy resulted in a net negative ineffectiveness of $6.3 million for the year ended December 31, 2023, compared to a net negative ineffectiveness of $4.1 million for the year ended December 31, 2022 and a net positive ineffectiveness of $2.5 million for the year ended December 31, 2021.
Under the stock repurchase plan effective January 1, 2022 through December 31, 2022, Trustmark repurchased approximately 789 thousand shares of its common stock valued at $24.6 million.
Under the stock repurchase plan effective April 1, 2020 through December 31, 2021, Trustmark repurchased approximately 1.9 million shares of its common stock valued at $61.8 million. Under the stock repurchase plan effective January 1, 2022 through December 31, 2022, Trustmark repurchased approximately 789 thousand shares of its common stock valued at $24.6 million.
Financial Highlights Trustmark reported a net loss of $34.1 million, or basic and diluted earnings per share (EPS) of -$0.56, for the fourth quarter of 2022, compared to a net income of $26.2 million, or basic and diluted EPS of $0.42, in the fourth quarter of 2021.
Financial Highlights Trustmark reported net income of $36.1 million, or basic and diluted earnings per share (EPS) of $0.59, for the fourth quarter of 2023, compared to a net loss of $34.1 million, or basic and diluted EPS of -$0.56, in the fourth quarter of 2022.
At December 31, 2022, the fair value of the Continuing Plan’s assets totaled $2.9 million and was exceeded by the projected benefit obligation of $6.9 million by $4.0 million. Net periodic benefit cost equaled $410 thousand in 2022, compared to $1.1 million in 2021 and $786 thousand in 2020.
At December 31, 2023, the fair value of the Continuing Plan’s assets totaled $2.4 million and was exceeded by the projected benefit obligation of $5.9 million by $3.5 million. Net periodic benefit cost equaled $262 thousand in 2023, compared to $410 thousand in 2022 and $1.1 million in 2021.
For more information on these net interest income items, please see the sections captioned “Financial Highlights” and “Results of Operations.” Noninterest income for the General Banking Segment decreased $21.5 million, or 15.6%, during 2022 compared to a decrease of $59.8 million, or 30.3%, during 2021.
For more information on these net interest income items, please see the sections captioned “Financial Highlights” and “Results of Operations.” 46 Noninterest income for the General Banking Segment decreased $2.9 million, or 2.5%, during 2023 compared to a decrease of $21.5 million, or 15.6%, during 2022.
At December 31, 2022 and 2021, Trustmark had posted collateral of $740 thousand and $850 thousand, respectively, against its obligations because of negotiated thresholds and minimum transfer amounts under these agreements.
At December 31, 2023 and 2022, Trustmark had posted collateral of $2.0 million and $740 thousand, respectively, against its obligations because of negotiated thresholds and minimum transfer amounts under these agreements.
LHFI secured by other 1-4 family residential properties, which primarily consists of revolving home equity lines of credit, increased $73.1 million, or 14.1%, during 2022 reflecting growth across all five market regions.
LHFI secured by other 1-4 family residential properties, which primarily consists of revolving home equity lines of credit, increased $31.6 million, or 5.4%, during 2023 reflecting growth across all five market regions.
Evaluations of the unfunded commitments are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the ACL is complex and requires judgement by Management about the effect of matters that are inherently uncertain.
Evaluations of the unfunded commitments are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the ACL on off-balance sheet credit exposures is complex and requires judgment by Management about the effect of matters that are inherently uncertain.
No shares have been repurchased under this stock repurchase program. Liquidity Liquidity is the ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes. Consistent cash flows from operations and adequate capital provide internally generated liquidity.
Liquidity Liquidity is the ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes. Consistent cash flows from operations and adequate capital provide internally generated liquidity.
In order to mitigate volatility and incorporate historical experience in the funding rate, Trustmark uses a twelve-quarter moving average. For the closed-ended loan pools, Trustmark takes a conservative approach and uses a 100% funding rate.
In addition to the unfunded balances, Trustmark uses a funding rate for loan pools that are considered open-ended. In order to mitigate volatility and incorporate historical experience in the funding rate, Trustmark uses a twelve-quarter moving average. For the closed-ended loan pools, Trustmark takes a conservative approach and uses a 100% funding rate.
Noninterest income for the General Banking Segment includes service charges on deposit accounts; bank card and other fees; mortgage banking, net and other income, net.
Noninterest income for the General Banking Segment includes service charges on deposit accounts; wealth management; bank card and other fees; mortgage banking, net; other income, net and securities gains (losses), net.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
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2022 filing
2023 filing
Biggest changeThe resulting change in EVE in different market rate environments, from the base case scenario, is the amount of EVE at risk from those rate environments. 65 The following table summarizes the effect that various interest rate shifts would have on net portfolio value at December 31, 2022 and 2021.
Biggest changeThe following table summarizes the effect that various interest rate shifts would have on net portfolio value at December 31, 2023 and 2022.
The estimates provided do not include the effects of possible strategic changes in the balances of various assets and liabilities throughout 2022 or additional actions Trustmark could undertake in response to changes in interest rates. Management will continue to prudently manage the balance sheet in an effort to control interest rate risk and maintain profitability over the long term.
The estimates provided do not include the effects of possible strategic changes in the balances of various assets and liabilities throughout 2024 or additional actions Trustmark could undertake in response to changes in interest rates. Management will continue to prudently manage the balance sheet in an effort to control interest rate risk and maintain profitability over the long term.
Based on the results of the simulation models using static balances, the table below summarizes the effect various one-year interest rate shift scenarios would have on net interest income compared to a base case, flat scenario at December 31, 2022 and 2021.
Based on the results of the simulation models using static balances, the table below summarizes the effect various one-year interest rate shift scenarios would have on net interest income compared to a base case, flat scenario at December 31, 2023 and 2022.
Changes of equal magnitude in the opposite direction would produce similar increases in fair value in the respective amounts. 66
Changes of equal magnitude in the opposite direction would produce similar increases in fair value in the respective amounts. 67
The impact on the MSR fair value of a 10% adverse change in prepayment speeds or a 100 basis point increase in discount rates at December 31, 2022 would be a decline in fair value of approximately $4.5 million and $5.4 million, respectively, compared to a decline in fair value of approximately $4.4 million and $3.2 million, respectively, at December 31, 2021.
The impact on the MSR fair value of a 10% adverse change in prepayment speeds or a 100-basis point increase in discount rates at December 31, 2023 would be a decline in fair value of approximately $4.8 million and $5.4 million, respectively, compared to a decline in fair value of approximately $4.5 million and $5.4 million, respectively, at December 31, 2022.
Estimated % Change in Net Portfolio Value Change in Interest Rates 2022 2021 +200 basis points -1.6 % 10.1 % +100 basis points -0.6 % 5.9 % Trustmark determines the fair value of the MSR using a valuation model administered by a third party that calculates the present value of estimated future net servicing income.
Estimated % Change in Net Portfolio Value Change in Interest Rates 2023 2022 +200 basis points -2.3 % -1.6 % +100 basis points -0.9 % -0.6 % Trustmark determines the fair value of the MSR using a valuation model administered by a third party that calculates the present value of estimated future net servicing income.
Estimated % Change in Net Interest Income Change in Interest Rates 2022 2021 +200 basis points 3.3 % 20.1 % +100 basis points 1.7 % 9.7 % -100 basis points -1.8 % -6.7 % Management cannot provide any assurance about the actual effect of changes in interest rates on net interest income.
Estimated % Change in Net Interest Income Change in Interest Rates 2023 2022 +200 basis points 0.5 % 3.3 % +100 basis points 0.3 % 1.7 % -100 basis points -0.4 % -1.8 % -200 basis points -1.0 % — Management cannot provide any assurance about the actual effect of changes in interest rates on net interest income.
At December 31, 2022, the MSR fair value was $129.7 million, compared to $87.7 million at December 31, 2021.
At December 31, 2023, the MSR fair value was $131.9 million, compared to $129.7 million at December 31, 2022.
The economic value of equity (EVE), also known as net portfolio value, is defined as the difference between the present value of asset cash flows and the present value of liability cash flows.
The economic value of equity (EVE), also known as net portfolio value, is defined as the difference between the present value of asset cash flows and the present value of liability cash flows. The resulting change in EVE in different market rate environments, from the base case scenario, is the amount of EVE at risk from those rate environments.
Added
The significant increase in short-term market interest rates and the overall interest rate environment is likely to affect the balance sheet composition and rates. The simulation incorporates assumptions regarding the effects of such changes based on a combination of historical analysis and expected behavior.
Added
Given the 66 substantial increase in market rates, the down 200 basis points scenario has been added to the table below for the year ended December 31, 2023.