Trustmark Corporation Announces Fourth Quarter and Fiscal Year 2022 Financial Results
01/24/2023 - 04:30 PM
Record Loan Growth, Solid Credit Quality, Expanded Net Interest Margin
JACKSON, Miss. --(BUSINESS WIRE)--
Trustmark Corporation (NASDAQGS:TRMK) reported a loss of $34.1 million , or $0.56 per diluted share, in the fourth quarter of 2022. As previously disclosed, Trustmark agreed to a settlement that, pending court approval, will resolve all current and potential future claims relating to litigation involving the Stanford Financial Group that began in 2009. In the fourth quarter, Trustmark recognized litigation settlement expense of $100.0 million as well as an additional $750 thousand in legal fees, which are included in noninterest expense. The litigation settlement expense reduced fourth quarter net income by $75.6 million , or $1.24 per diluted share. Excluding this expense, Trustmark’s fourth quarter net income totaled $41.5 million , or $0.68 per diluted share. For the full year, Trustmark’s net income totaled $71.9 million , representing diluted earnings per share of $1.17 . Excluding the litigation settlement expense, Trustmark’s net income in 2022 totaled $147.5 million , representing diluted earnings per share of $2.40 . Please refer to the Consolidated Financial Information, Note 1 – Litigation Settlement and Note 7 – Non-GAAP Financial Measures. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2023 , to shareholders of record on March 1, 2023 .
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2022 Highlights
Loans held for investment (HFI) increased $2.0 billion , or 19.1% , in 2022
Nonperforming assets declined to 0.55% of loans HFI and held for sale (HFS)
Net charge-offs represented 0.01% of average loans in 2022
Net interest income FTE totaled $507.1 million , up 17.9% in 2022 to produce a net interest margin of 3.17% , up 41 basis points from 2021
Insurance revenue increased 10.7% in 2022 while wealth management remained stable
Noninterest income totaled $205.1 million and represented 29.3% of total revenue
Noninterest expense, excluding litigation settlement expense, totaled $502.5 million , up 2.7% from the prior year
Expanded market optimization efforts with a net reduction of 11 branch offices during the year
Continued technology investments to enhance efficiency and productivity
Duane A. Dewey , President and CEO, commented, “We made significant progress across the organization during the year. Loan growth in 2022 was the highest in Trustmark’s history. Credit quality remained strong. Net interest income and the net interest margin were up significantly. Our insurance business posted another record year. We made significant investments in technology, including conversion to a state-of-the-art loan system designed to enhance efficiency and productivity. With all of these positive advancements, our financial results were overshadowed by the litigation settlement. While we expressly deny any liability or wrongdoing with respect to this matter, we believe the settlement is in the best interest of Trustmark and our shareholders as it eliminates risk, ongoing expense and uncertainty. With this matter now behind us, we will focus more intently on the future and the opportunities that are ahead. Trustmark is very well-positioned to serve and expand its customer base and create long-term value for shareholders.”
Balance Sheet Management
Loans HFI increased $618.0 million , or 5.3% , during the quarter
Investment securities decreased $82.9 million , or 2.3% , linked-quarter as liquidity from maturing security balances was deployed to fund loan growth
Total deposits increased $12.5 million , or 0.1% , linked-quarter
Maintained strong capital position with CET1 ratio of 9.74% and total risk-based capital ratio of 11.91%
Loans HFI totaled $12.2 billion at December 31, 2022 , reflecting an increase of $618.0 million , or 5.3% , linked-quarter and $2.0 billion , or 19.1% , year-over-year. The linked-quarter growth was broad-based and reflected increases in virtually every category. Trustmark’s loan portfolio remains well-diversified by loan type and geography.
As previously disclosed in the third quarter of 2022, Trustmark initiated a cash flow hedging program under which interest rate swaps convert floating rate loans to fixed rate. The intent of the program is to manage the natural asset sensitivity of Trustmark’s balance sheet. As of December 31, 2022 , notional balances totaled $825.0 million with a weighted average receive fixed rate of 3.10% .
Deposits totaled $14.4 billion at December 31, 2022 , up $12.5 million , or 0.1% , from the prior quarter and down $649.5 million , or 4.3% , year-over-year. Trustmark continues to maintain a strong liquidity position as loans HFI represented 84.5% of total deposits at year end 2022. Noninterest-bearing deposits represented 28.4% of total deposits at December 31, 2022 . Interest-bearing deposit costs totaled 0.71% for the fourth quarter, an increase of 51 basis points linked-quarter. The total cost of interest-bearing liabilities was 1.03% for the fourth quarter of 2022, an increase of 72 basis points from the prior quarter.
During the fourth quarter, Trustmark did not repurchase any of its common shares. During the twelve months ended December 31, 2022 , Trustmark repurchased $24.6 million , or approximately 789 thousand of its common shares. As previously announced, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2023 , under which $50.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2023 . The repurchase program, which is subject to market conditions and management discretion, will continue to be implemented through open market repurchases or privately negotiated transactions. At December 31, 2022 , Trustmark’s tangible equity to tangible assets ratio was 6.27% , while the total risk-based capital ratio was 11.91% . Tangible book value per share was $18.11 at December 31, 2022 , down 1.5% from the prior quarter.
Credit Quality
Allowance for credit losses (ACL) represented 0.99% of loans HFI and 399.19% of nonperforming loans, excluding individually analyzed loans at year-end
Net charge-offs totaled 0.06% of average loans in the fourth quarter
Nonaccrual loans totaled $66.0 million at December 31, 2022 , a decrease of $2.0 million from the prior quarter and an increase of $3.3 million year-over-year. Other real estate totaled $2.0 million , reflecting a $985 thousand decrease from the prior quarter and a $2.6 million decline from the prior year. Collectively, nonperforming assets totaled $68.0 million , reflecting a linked-quarter decrease of 4.1% and year-over-year increase of 1.0% .
The provision for credit losses for loans HFI was $6.9 million in the fourth quarter primarily attributable to loan growth and the weakening in the macroeconomic forecast. The provision for credit losses for off-balance sheet credit exposures was $5.2 million in the fourth quarter, primarily driven by increases in unfunded commitments and the macroeconomic forecast. Collectively, the provision for credit losses totaled $12.1 million in the fourth quarter compared to $11.6 million in the prior quarter and a negative $1.6 million in the fourth quarter of 2021.
Allocation of Trustmark’s $120.2 million ACL on loans HFI represented 0.85% of commercial loans and 1.41% of consumer and home mortgage loans, resulting in an ACL to total loans HFI of 0.99% at December 31, 2022 . Management believes the level of the ACL is commensurate with the credit losses currently expected in the loan portfolio.
Revenue Generation
Net interest income (FTE) totaled $150.0 million in the fourth quarter, up 7.9% linked-quarter
Net interest margin expanded 16 basis points to 3.66% in the fourth quarter
Revenue in the fourth quarter totaled $191.8 million , an increase of 1.6% from the prior quarter and 28.6% from the same quarter in the prior year. The linked-quarter increase primarily reflects higher net interest income offset by lower noninterest income while the year-over-year growth is attributed to higher net interest income offset in part by reduced mortgage banking revenue. In 2022, revenue totaled $699.9 million , an increase of 9.3% from the prior year.
Net interest income (FTE) in the fourth quarter totaled $150.0 million , resulting in a net interest margin of 3.66% , up 16 basis points from the prior quarter. The expansion of the net interest margin was due to increases in the yields on the loans HFI and HFS portfolio and the securities portfolio and was partially offset by costs of interest-bearing liabilities, which resulted from the higher interest rate environment.
Noninterest income in the fourth quarter totaled $45.2 million , a decrease of $7.4 million from the prior quarter and $5.6 million from the prior year. The linked-quarter change reflects a decline in mortgage banking revenue, a seasonal decline in insurance revenue, as well as lower bank card and other fees and wealth management revenue. The decrease in noninterest income year-over-year is principally due to lower mortgage banking revenue.
Mortgage loan production in the fourth quarter totaled $390.8 million , a decline of 23.1% linked-quarter and 33.9% year-over-year. Mortgage banking revenue totaled $3.4 million in the fourth quarter, a decrease of $3.5 million from the prior quarter and $8.2 million year-over-year. The linked-quarter decline is attributable to an increase in net negative hedge ineffectiveness as well as volume-related lower gains on sales of mortgage loans in the secondary market. In 2022, mortgage loan production totaled $2.1 billion , down 24.2% from the prior year. Mortgage banking revenue totaled $28.3 million in 2022, compared to $63.8 million in the prior year.
Insurance revenue in the fourth quarter totaled $12.0 million , a seasonal decline of $1.9 million from the prior quarter and an increase of $303 thousand from the prior year. Insurance revenue in 2022 totaled $53.7 million , up $5.2 million , or 10.7% , from the prior year. The solid performance during the year reflects an expanded producer workforce, a hardening of the insurance market, and the realization of operational efficiencies from investments in technology and improved processes.
Wealth management revenue totaled $8.1 million in the fourth quarter, down 8.0% from the prior quarter and 7.7% from the prior year. The linked-quarter decline is principally due to reduced investment services and trust management revenue while the year-over-year change is attributable to reduced brokerage and trust management revenue. In 2022, wealth management revenue totaled $35.0 million , in line with the prior year. During 2022, Trustmark selectively expanded its salesforce in Birmingham , Jackson and the Florida Panhandle as well as expanded business development efforts in new markets.
Noninterest Expense
Total noninterest expense in the fourth quarter was $231.2 million ; excluding litigation settlement expense of $100.8 million , noninterest expense was $130.5 million , up $3.8 million , or 3.0% , from the prior quarter. Please refer to the Consolidated Financial Information, Note 7 – Non-GAAP Financial Measures.
Salaries and employee benefits expense in the fourth quarter totaled $73.5 million , up $762 thousand , or 1.0% , from the prior quarter principally due to one-time severance expense related to the FIT2GROW initiative. Total services and fees increased $964 thousand during the fourth quarter principally due to continued investments in technology and higher professional fees. Net occupancy – premises expense increased $503 thousand during the fourth quarter principally due to early lease termination expenses related to closed branch offices. Other expense increased $1.4 million during the fourth quarter reflecting in part write-downs associated with branch offices that were closed during the quarter.
FIT2GROW
“In 2022 we announced FIT2GROW, a comprehensive program of Focus, Innovation and Transformation designed to enhance Trustmark’s ability to grow and serve customers. Earlier this month, we refocused our community bank efforts on commercial, small business, and consumer lines of business to provide additional expertise for our customers and enhance profitable revenue growth. Additionally, our Atlanta loan production office is now fully functioning and is focused on Commercial Real Estate , Residential Real Estate , Corporate Banking, and Equipment Finance,” said Dewey.
“We continued efforts to optimize our branch network, reflecting changing customer preferences and the continued migration to mobile and digital channels. In 2022, we consolidated 12 branch offices, opened a full-service banking center as well as loan production offices in Birmingham, AL , and Memphis, TN. We also expanded deployment of my Teller interactive teller machine technology. These efforts are designed to efficiently serve and expand customer relationships,” said Dewey.
“Innovation is also a key component of FIT2GROW. In 2022, we successfully completed our core loan system conversion and selected the replacement for our core deposit system. Collectively, these investments are designed to provide best-in-class service to customers as well as enhance our productivity and efficiency. Looking forward, we will continue to pursue opportunities to redesign workflows and restructure the organization to further leverage investments in technology that will broaden our reach, enhance the customer experience, and improve efficiency. We remain focused on providing the financial services and advice our customers have come to expect while building long-term value for our shareholders,” said Dewey.
Additional Information
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 25, 2023 , at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com . A replay of the conference call will also be available through Wednesday, February 8, 2023 , in archived format at the same web address or by calling (877) 344-7529, passcode 3725903.
Trustmark is a financial services company providing banking and financial solutions through offices in Alabama , Florida , Georgia , Mississippi , Tennessee and Texas . Visit trustmark.com for more information.
Forward-Looking Statements
Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential,” “seek,” “continue,” “could,” “would,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission (SEC) could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the novel coronavirus (COVID-19) pandemic, and also by the effectiveness of varying governmental responses in ameliorating the impact of the pandemic on our customers and the economies where they operate.
Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, an increase in unemployment levels and slowdowns in economic growth, our ability to manage the impact of the COVID-19 pandemic on our markets, as well as the effectiveness of actions of federal, state and local governments and agencies (including the Board of Governors of the Federal Reserve System (FRB)) to mitigate its spread and economic impact, local, state and national economic and market conditions, conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets, levels of and volatility in crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of recent heightened levels of inflation and the reactions of the FRB and other governmental departments and agencies in response thereto, the potential impact of issues related to the European financial system and monetary and other governmental actions designed to address credit, securities, and/or commodity markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, pandemics or other health crises, acts of war or terrorism, and other risks described in our filings with the SEC .
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
($ in thousands)
(unaudited)
Linked Quarter
Year over Year
QUARTERLY AVERAGE BALANCES
12/31/2022
9/30/2022
12/31/2021
$ Change
% Change
$ Change
% Change
Securities AFS-taxable (1)
$
2,572,675
$
2,824,254
$
3,156,740
$
(251,579
)
-8.9
%
$
(584,065
)
-18.5
%
Securities AFS-nontaxable
4,828
4,928
5,143
(100
)
-2.0
%
(315
)
-6.1
%
Securities HTM-taxable (1)
1,268,952
1,140,685
364,038
128,267
11.2
%
904,914
n/m
Securities HTM-nontaxable
4,514
5,057
7,618
(543
)
-10.7
%
(3,104
)
-40.7
%
Total securities
3,850,969
3,974,924
3,533,539
(123,955
)
-3.1
%
317,430
9.0
%
Paycheck protection program loans (PPP)
3,235
9,821
42,749
(6,586
)
-67.1
%
(39,514
)
-92.4
%
Loans (includes loans held for sale)
12,006,661
11,459,551
10,487,679
547,110
4.8
%
1,518,982
14.5
%
Fed funds sold and reverse repurchases
6,566
226
58
6,340
n/m
6,508
n/m
Other earning assets
375,190
325,620
1,839,498
49,570
15.2
%
(1,464,308
)
-79.6
%
Total earning assets
16,242,621
15,770,142
15,903,523
472,479
3.0
%
339,098
2.1
%
Allowance for credit losses (ACL), loans held for investment (LHFI)
(114,948
)
(102,951
)
(104,148
)
(11,997
)
-11.7
%
(10,800
)
-10.4
%
Other assets
1,630,085
1,576,653
1,570,501
53,432
3.4
%
59,584
3.8
%
Total assets
$
17,757,758
$
17,243,844
$
17,369,876
$
513,914
3.0
%
$
387,882
2.2
%
Interest-bearing demand deposits
$
4,719,303
$
4,613,733
$
4,353,599
$
105,570
2.3
%
$
365,704
8.4
%
Savings deposits
4,379,673
4,514,579
4,585,624
(134,906
)
-3.0
%
(205,951
)
-4.5
%
Time deposits
1,152,905
1,111,440
1,220,083
41,465
3.7
%
(67,178
)
-5.5
%
Total interest-bearing deposits
10,251,881
10,239,752
10,159,306
12,129
0.1
%
92,575
0.9
%
Fed funds purchased and repurchases
549,406
249,809
201,856
299,597
n/m
347,550
n/m
Other borrowings
530,993
88,697
94,328
442,296
n/m
436,665
n/m
Subordinated notes
123,226
123,171
123,007
55
0.0
%
219
0.2
%
Junior subordinated debt securities
61,856
61,856
61,856
—
0.0
%
—
0.0
%
Total interest-bearing liabilities
11,517,362
10,763,285
10,640,353
754,077
7.0
%
877,009
8.2
%
Noninterest-bearing deposits
4,177,113
4,444,370
4,679,951
(267,257
)
-6.0
%
(502,838
)
-10.7
%
Other liabilities
569,992
429,720
291,449
140,272
32.6
%
278,543
95.6
%
Total liabilities
16,264,467
15,637,375
15,611,753
627,092
4.0
%
652,714
4.2
%
Shareholders' equity
1,493,291
1,606,469
1,758,123
(113,178
)
-7.0
%
(264,832
)
-15.1
%
Total liabilities and equity
$
17,757,758
$
17,243,844
$
17,369,876
$
513,914
3.0
%
$
387,882
2.2
%
(1)
During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.
See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
($ in thousands)
(unaudited)
Linked Quarter
Year over Year
PERIOD END BALANCES
12/31/2022
9/30/2022
12/31/2021
$ Change
% Change
$ Change
% Change
Cash and due from banks
$
734,787
$
479,637
$
2,266,829
$
255,150
53.2
%
$
(1,532,042
)
-67.6
%
Fed funds sold and reverse repurchases
4,000
10,098
—
(6,098
)
-60.4
%
4,000
n/m
Securities available for sale (1)
2,024,082
2,444,486
3,238,877
(420,404
)
-17.2
%
(1,214,795
)
-37.5
%
Securities held to maturity (1)
1,494,514
1,156,985
342,537
337,529
29.2
%
1,151,977
n/m
PPP loans
—
4,798
33,336
(4,798
)
-100.0
%
(33,336
)
-100.0
%
Loans held for sale (LHFS)
135,226
165,213
275,706
(29,987
)
-18.2
%
(140,480
)
-51.0
%
Loans held for investment (LHFI)
12,204,039
11,586,064
10,247,829
617,975
5.3
%
1,956,210
19.1
%
ACL LHFI
(120,214
)
(115,050
)
(99,457
)
(5,164
)
-4.5
%
(20,757
)
-20.9
%
Net LHFI
12,083,825
11,471,014
10,148,372
612,811
5.3
%
1,935,453
19.1
%
Premises and equipment, net
212,365
210,761
205,644
1,604
0.8
%
6,721
3.3
%
Mortgage servicing rights
129,677
132,615
87,687
(2,938
)
-2.2
%
41,990
47.9
%
Goodwill
384,237
384,237
384,237
—
0.0
%
—
0.0
%
Identifiable intangible assets
3,640
3,952
5,074
(312
)
-7.9
%
(1,434
)
-28.3
%
Other real estate
1,986
2,971
4,557
(985
)
-33.2
%
(2,571
)
-56.4
%
Operating lease right-of-use assets
36,301
37,282
34,603
(981
)
-2.6
%
1,698
4.9
%
Other assets
770,838
686,585
568,177
84,253
12.3
%
202,661
35.7
%
Total assets
$
18,015,478
$
17,190,634
$
17,595,636
$
824,844
4.8
%
$
419,842
2.4
%
Deposits:
Noninterest-bearing
$
4,093,771
$
4,358,805
$
4,771,065
$
(265,034
)
-6.1
%
$
(677,294
)
-14.2
%
Interest-bearing
10,343,877
10,066,375
10,316,095
277,502
2.8
%
27,782
0.3
%
Total deposits
14,437,648
14,425,180
15,087,160
12,468
0.1
%
(649,512
)
-4.3
%
Fed funds purchased and repurchases
449,331
544,068
238,577
(94,737
)
-17.4
%
210,754
88.3
%
Other borrowings
1,050,938
223,172
91,025
827,766
n/m
959,913
n/m
Subordinated notes
123,262
123,207
123,042
55
0.0
%
220
0.2
%
Junior subordinated debt securities
61,856
61,856
61,856
—
0.0
%
—
0.0
%
ACL on off-balance sheet credit exposures
36,838
31,623
35,623
5,215
16.5
%
1,215
3.4
%
Operating lease liabilities
38,932
39,797
36,468
(865
)
-2.2
%
2,464
6.8
%
Other liabilities
324,405
232,786
180,574
91,619
39.4
%
143,831
79.7
%
Total liabilities
16,523,210
15,681,689
15,854,325
841,521
5.4
%
668,885
4.2
%
Common stock
12,705
12,700
12,845
5
0.0
%
(140
)
-1.1
%
Capital surplus
154,645
154,150
175,913
495
0.3
%
(21,268
)
-12.1
%
Retained earnings
1,600,321
1,648,507
1,585,113
(48,186
)
-2.9
%
15,208
1.0
%
Accumulated other comprehensive
income (loss), net of tax
(275,403
)
(306,412
)
(32,560
)
31,009
10.1
%
(242,843
)
n/m
Total shareholders' equity
1,492,268
1,508,945
1,741,311
(16,677
)
-1.1
%
(249,043
)
-14.3
%
Total liabilities and equity
$
18,015,478
$
17,190,634
$
17,595,636
$
824,844
4.8
%
$
419,842
2.4
%
(1)
During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.
See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
($ in thousands except per share data)
(unaudited)
Quarter Ended
Linked Quarter
Year over Year
INCOME STATEMENTS
12/31/2022
9/30/2022
12/31/2021
$ Change
% Change
$ Change
% Change
Interest and fees on LHFS & LHFI-FTE
$
159,566
$
129,395
$
94,137
$
30,171
23.3
%
$
65,429
69.5
%
Interest and fees on PPP loans
101
186
397
(85
)
-45.7
%
(296
)
-74.6
%
Interest on securities-taxable
16,577
16,222
10,796
355
2.2
%
5,781
53.5
%
Interest on securities-tax exempt-FTE
93
100
123
(7
)
-7.0
%
(30
)
-24.4
%
Interest on fed funds sold and reverse repurchases
71
2
—
69
n/m
71
n/m
Other interest income
3,556
1,493
826
2,063
n/m
2,730
n/m
Total interest income-FTE
179,964
147,398
106,279
32,566
22.1
%
73,685
69.3
%
Interest on deposits
18,438
5,097
3,401
13,341
n/m
15,037
n/m
Interest on fed funds purchased and repurchases
4,762
1,225
66
3,537
n/m
4,696
n/m
Other interest expense
6,730
1,996
1,580
4,734
n/m
5,150
n/m
Total interest expense
29,930
8,318
5,047
21,612
n/m
24,883
n/m
Net interest income-FTE
150,034
139,080
101,232
10,954
7.9
%
48,802
48.2
%
Provision for credit losses, LHFI
6,902
12,919
(4,515
)
(6,017
)
-46.6
%
11,417
n/m
Provision for credit losses, off-balance sheet credit exposures
5,215
(1,326
)
2,939
6,541
n/m
2,276
77.4
%
Net interest income after provision-FTE
137,917
127,487
102,808
10,430
8.2
%
35,109
34.2
%
Service charges on deposit accounts
11,162
11,318
9,366
(156
)
-1.4
%
1,796
19.2
%
Bank card and other fees
8,191
9,305
8,340
(1,114
)
-12.0
%
(149
)
-1.8
%
Mortgage banking, net
3,408
6,876
11,609
(3,468
)
-50.4
%
(8,201
)
-70.6
%
Insurance commissions
12,019
13,911
11,716
(1,892
)
-13.6
%
303
2.6
%
Wealth management
8,079
8,778
8,757
(699
)
-8.0
%
(678
)
-7.7
%
Other, net
2,311
2,418
979
(107
)
-4.4
%
1,332
n/m
Total noninterest income
45,170
52,606
50,767
(7,436
)
-14.1
%
(5,597
)
-11.0
%
Salaries and employee benefits
73,469
72,707
68,258
762
1.0
%
5,211
7.6
%
Services and fees
26,759
25,795
22,904
964
3.7
%
3,855
16.8
%
Net occupancy-premises
7,898
7,395
6,816
503
6.8
%
1,082
15.9
%
Equipment expense
6,268
6,072
6,585
196
3.2
%
(317
)
-4.8
%
Litigation settlement expense (1)
100,750
—
—
100,750
n/m
100,750
n/m
Other expense
16,085
14,729
14,906
1,356
9.2
%
1,179
7.9
%
Total noninterest expense
231,229
126,698
119,469
104,531
82.5
%
111,760
93.5
%
Income (loss) before income taxes and tax eq adj
(48,142
)
53,395
34,106
(101,537
)
n/m
(82,248
)
n/m
Tax equivalent adjustment
3,451
2,975
2,906
476
16.0
%
545
18.8
%
Income (loss) before income taxes
(51,593
)
50,420
31,200
(102,013
)
n/m
(82,793
)
n/m
Income taxes
(17,530
)
7,965
4,978
(25,495
)
n/m
(22,508
)
n/m
Net income (loss)
$
(34,063
)
$
42,455
$
26,222
$
(76,518
)
n/m
$
(60,285
)
n/m
Per share data
Earnings (loss) per share - basic
$
(0.56
)
$
0.69
$
0.42
$
(1.25
)
n/m
$
(0.98
)
n/m
Earnings (loss) per share - diluted
$
(0.56
)
$
0.69
$
0.42
$
(1.25
)
n/m
$
(0.98
)
n/m
Dividends per share
$
0.23
$
0.23
$
0.23
—
0.0
%
—
0.0
%
Weighted average shares outstanding
Basic
60,969,400
61,114,804
62,037,884
Diluted
61,173,249
61,318,715
62,264,983
Period end shares outstanding
60,977,686
60,953,864
61,648,679
(1)
See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information.
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
($ in thousands)
(unaudited)
Quarter Ended
Linked Quarter
Year over Year
NONPERFORMING ASSETS (1)
12/31/2022
9/30/2022
12/31/2021
$ Change
% Change
$ Change
% Change
Nonaccrual LHFI
Alabama
$
12,300
$
12,710
$
8,182
$
(410
)
-3.2
%
$
4,118
50.3
%
Florida
227
227
313
—
0.0
%
(86
)
-27.5
%
Mississippi (2)
24,683
23,517
21,636
1,166
5.0
%
3,047
14.1
%
Tennessee (3)
5,566
5,120
10,501
446
8.7
%
(4,935
)
-47.0
%
Texas
23,196
26,353
22,066
(3,157
)
-12.0
%
1,130
5.1
%
Total nonaccrual LHFI
65,972
67,927
62,698
(1,955
)
-2.9
%
3,274
5.2
%
Other real estate
Alabama
194
217
—
(23
)
-10.6
%
194
n/m
Mississippi (2)
1,769
2,754
4,557
(985
)
-35.8
%
(2,788
)
-61.2
%
Tennessee (3)
23
—
—
23
n/m
23
n/m
Total other real estate
1,986
2,971
4,557
(985
)
-33.2
%
(2,571
)
-56.4
%
Total nonperforming assets
$
67,958
$
70,898
$
67,255
$
(2,940
)
-4.1
%
$
703
1.0
%
LOANS PAST DUE OVER 90 DAYS (1)
LHFI
$
3,929
$
1,842
$
2,114
$
2,087
n/m
$
1,815
85.9
%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)
$
49,320
$
48,313
$
69,894
$
1,007
2.1
%
$
(20,574
)
-29.4
%
Quarter Ended
Linked Quarter
Year over Year
ACL LHFI (1)
12/31/2022
9/30/2022
12/31/2021
$ Change
% Change
$ Change
% Change
Beginning Balance
$
115,050
$
103,140
$
104,073
$
11,910
11.5
%
$
10,977
10.5
%
Provision for credit losses, LHFI
6,902
12,919
(4,515
)
(6,017
)
-46.6
%
11,417
n/m
Charge-offs
(3,893
)
(2,920
)
(2,616
)
(973
)
-33.3
%
(1,277
)
-48.8
%
Recoveries
2,155
1,911
2,515
244
12.8
%
(360
)
-14.3
%
Net (charge-offs) recoveries
(1,738
)
(1,009
)
(101
)
(729
)
72.2
%
(1,637
)
n/m
Ending Balance
$
120,214
$
115,050
$
99,457
$
5,164
4.5
%
$
20,757
20.9
%
NET (CHARGE-OFFS) RECOVERIES (1)
Alabama
$
98
$
93
$
747
$
5
5.4
%
$
(649
)
-86.9
%
Florida
(60
)
(23
)
(32
)
(37
)
n/m
(28
)
-87.5
%
Mississippi (2)
(1,657
)
(702
)
(683
)
(955
)
n/m
(974
)
n/m
Tennessee (3)
(195
)
(202
)
(130
)
7
3.5
%
(65
)
-50.0
%
Texas
76
(175
)
(3
)
251
n/m
79
n/m
Total net (charge-offs) recoveries
$
(1,738
)
$
(1,009
)
$
(101
)
$
(729
)
-72.2
%
$
(1,637
)
n/m
(1)
Excludes PPP loans.
(2)
Mississippi includes Central and Southern Mississippi Regions.
(3)
Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
($ in thousands)
(unaudited)
Quarter Ended
Year Ended
AVERAGE BALANCES
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Securities AFS-taxable (1)
$
2,572,675
$
2,824,254
$
3,094,364
$
3,245,502
$
3,156,740
$
2,932,054
$
2,573,533
Securities AFS-nontaxable
4,828
4,928
5,110
5,127
5,143
4,997
5,166
Securities HTM-taxable (1)
1,268,952
1,140,685
811,599
410,851
364,038
911,010
423,763
Securities HTM-nontaxable
4,514
5,057
5,630
7,327
7,618
5,623
12,765
Total securities
3,850,969
3,974,924
3,916,703
3,668,807
3,533,539
3,853,684
3,015,227
PPP loans
3,235
9,821
17,746
29,009
42,749
14,868
350,668
Loans (includes loans held for sale)
12,006,661
11,459,551
10,910,178
10,550,712
10,487,679
11,236,388
10,377,941
Fed funds sold and reverse repurchases
6,566
226
110
56
58
1,753
79
Other earning assets
375,190
325,620
1,139,312
1,811,713
1,839,498
907,414
1,825,134
Total earning assets
16,242,621
15,770,142
15,984,049
16,060,297
15,903,523
16,014,107
15,569,049
ACL LHFI
(114,948
)
(102,951
)
(99,106
)
(99,390
)
(104,148
)
(104,138
)
(110,170
)
Other assets
1,630,085
1,576,653
1,513,127
1,550,848
1,570,501
1,567,921
1,599,114
Total assets
$
17,757,758
$
17,243,844
$
17,398,070
$
17,511,755
$
17,369,876
$
17,477,890
$
17,057,993
Interest-bearing demand deposits
$
4,719,303
$
4,613,733
$
4,578,235
$
4,429,056
$
4,353,599
$
4,585,955
$
4,096,746
Savings deposits
4,379,673
4,514,579
4,638,849
4,791,104
4,585,624
4,579,742
4,622,167
Time deposits
1,152,905
1,111,440
1,159,065
1,193,435
1,220,083
1,153,983
1,287,663
Total interest-bearing deposits
10,251,881
10,239,752
10,376,149
10,413,595
10,159,306
10,319,680
10,006,576
Fed funds purchased and repurchases
549,406
249,809
118,753
212,006
201,856
283,328
172,782
Other borrowings
530,993
88,697
80,283
91,090
94,328
198,672
125,554
Subordinated notes
123,226
123,171
123,116
123,061
123,007
123,144
122,933
Junior subordinated debt securities
61,856
61,856
61,856
61,856
61,856
61,856
61,856
Total interest-bearing liabilities
11,517,362
10,763,285
10,760,157
10,901,608
10,640,353
10,986,680
10,489,701
Noninterest-bearing deposits
4,177,113
4,444,370
4,590,338
4,601,108
4,679,951
4,452,046
4,531,642
Other liabilities
569,992
429,720
439,266
295,287
291,449
434,310
266,499
Total liabilities
16,264,467
15,637,375
15,789,761
15,798,003
15,611,753
15,873,036
15,287,842
Shareholders' equity
1,493,291
1,606,469
1,608,309
1,713,752
1,758,123
1,604,854
1,770,151
Total liabilities and equity
$
17,757,758
$
17,243,844
$
17,398,070
$
17,511,755
$
17,369,876
$
17,477,890
$
17,057,993
(1)
During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.
See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
($ in thousands)
(unaudited)
PERIOD END BALANCES
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Cash and due from banks
$
734,787
$
479,637
$
742,461
$
1,917,564
$
2,266,829
Fed funds sold and reverse repurchases
4,000
10,098
—
—
—
Securities available for sale (1)
2,024,082
2,444,486
2,644,364
3,018,246
3,238,877
Securities held to maturity (1)
1,494,514
1,156,985
1,137,754
607,598
342,537
PPP loans
—
4,798
12,549
18,579
33,336
LHFS
135,226
165,213
190,186
222,538
275,706
LHFI
12,204,039
11,586,064
10,944,840
10,397,129
10,247,829
ACL LHFI
(120,214
)
(115,050
)
(103,140
)
(98,734
)
(99,457
)
Net LHFI
12,083,825
11,471,014
10,841,700
10,298,395
10,148,372
Premises and equipment, net
212,365
210,761
207,914
207,301
205,644
Mortgage servicing rights
129,677
132,615
121,014
111,050
87,687
Goodwill
384,237
384,237
384,237
384,237
384,237
Identifiable intangible assets
3,640
3,952
4,264
4,591
5,074
Other real estate
1,986
2,971
3,034
3,187
4,557
Operating lease right-of-use assets
36,301
37,282
34,684
34,048
34,603
Other assets
770,838
686,585
627,349
614,217
568,177
Total assets
$
18,015,478
$
17,190,634
$
16,951,510
$
17,441,551
$
17,595,636
Deposits:
Noninterest-bearing
$
4,093,771
$
4,358,805
$
4,509,472
$
4,739,102
$
4,771,065
Interest-bearing
10,343,877
10,066,375
10,260,696
10,374,190
10,316,095
Total deposits
14,437,648
14,425,180
14,770,168
15,113,292
15,087,160
Fed funds purchased and repurchases
449,331
544,068
70,157
170,499
238,577
Other borrowings
1,050,938
223,172
72,553
84,644
91,025
Subordinated notes
123,262
123,207
123,152
123,097
123,042
Junior subordinated debt securities
61,856
61,856
61,856
61,856
61,856
ACL on off-balance sheet credit exposures
36,838
31,623
32,949
34,517
35,623
Operating lease liabilities
38,932
39,797
37,108
35,912
36,468
Other liabilities
324,405
232,786
196,871
186,352
180,574
Total liabilities
16,523,210
15,681,689
15,364,814
15,810,169
15,854,325
Common stock
12,705
12,700
12,752
12,806
12,845
Capital surplus
154,645
154,150
160,876
167,094
175,913
Retained earnings
1,600,321
1,648,507
1,620,210
1,600,138
1,585,113
Accumulated other comprehensive income (loss), net of tax
(275,403
)
(306,412
)
(207,142
)
(148,656
)
(32,560
)
Total shareholders' equity
1,492,268
1,508,945
1,586,696
1,631,382
1,741,311
Total liabilities and equity
$
18,015,478
$
17,190,634
$
16,951,510
$
17,441,551
$
17,595,636
(1)
During the fourth quarter of 2022, Trustmark transferred $422.9 million of securities available for sale to securities held to maturity.
See Note 2 - Securities Available for Sale and Held to Maturity in the Notes to Consolidated Financials for additional information.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION December 31, 2022
($ in thousands except per share data)
(unaudited)
Quarter Ended
Year Ended
INCOME STATEMENTS
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Interest and fees on LHFS & LHFI-FTE
$
159,566
$
129,395
$
103,033
$
93,252
$
94,137
$
485,246
$
375,330
Interest and fees on PPP loans
101
186
184
168
397
639
36,726
Interest on securities-taxable
16,577
16,222
14,561
12,357
10,796
59,717
38,698
Interest on securities-tax exempt-FTE
93
100
107
122
123
422
694
Interest on fed funds sold and reverse repurchases
71
2
1
—
—
74
—
Other interest income
3,556
1,493
2,214
817
826
8,080
2,767
Total interest income-FTE
179,964
147,398
120,100
106,716
106,279
554,178
454,215
Interest on deposits
18,438
5,097
2,774
2,760
3,401
29,069
16,945
Interest on fed funds purchased and repurchases
4,762
1,225
70
70
66
6,127
232
Other interest expense
6,730
1,996
1,664
1,539
1,580
11,929
6,983
Total interest expense
29,930
8,318
4,508
4,369
5,047
47,125
24,160
Net interest income-FTE
150,034
139,080
115,592
102,347
101,232
507,053
430,055
Provision for credit losses, LHFI
6,902
12,919
2,716
(860
)
(4,515
)
21,677
(21,499
)
Provision for credit losses, off-balance sheet credit exposures
5,215
(1,326
)
(1,568
)
(1,106
)
2,939
1,215
(2,949
)
Net interest income after provision-FTE
137,917
127,487
114,444
104,313
102,808
484,161
454,503
Service charges on deposit accounts
11,162
11,318
10,226
9,451
9,366
42,157
33,246
Bank card and other fees
8,191
9,305
10,167
8,442
8,340
36,105
34,662
Mortgage banking, net
3,408
6,876
8,149
9,873
11,609
28,306
63,750
Insurance commissions
12,019
13,911
13,702
14,089
11,716
53,721
48,511
Wealth management
8,079
8,778
9,102
9,054
8,757
35,013
35,190
Other, net
2,311
2,418
1,907
3,206
979
9,842
6,551
Total noninterest income
45,170
52,606
53,253
54,115
50,767
205,144
221,910
Salaries and employee benefits
73,469
72,707
71,679
69,585
68,258
287,440
284,158
Services and fees
26,759
25,795
24,538
24,453
22,904
101,545
89,463
Net occupancy-premises
7,898
7,395
6,892
7,079
6,816
29,264
27,043
Equipment expense
6,268
6,072
6,047
6,061
6,585
24,448
24,337
Litigation settlement expense (1)
100,750
—
—
—
—
100,750
—
Other expense
16,085
14,729
14,611
14,341
14,906
59,766
64,295
Total noninterest expense
231,229
126,698
123,767
121,519
119,469
603,213
489,296
Income (loss) before income taxes and tax eq adj
(48,142
)
53,395
43,930
36,909
34,106
86,092
187,117
Tax equivalent adjustment
3,451
2,975
2,916
3,003
2,906
12,345
11,704
Income (loss) before income taxes
(51,593
)
50,420
41,014
33,906
31,200
73,747
175,413
Income taxes
(17,530
)
7,965
6,730
4,695
4,978
1,860
28,048
Net income (loss)
$
(34,063
)
$
42,455
$
34,284
$
29,211
$
26,222
$
71,887
$
147,365
Per share data
Earnings (loss) per share - basic
$
(0.56
)
$
0.69
$
0.56
$
0.47
$
0.42
$
1.17
$
2.35
Earnings (loss) per share - diluted
$
(0.56
)
$
0.69
$
0.56
$
0.47
$
0.42
$
1.17
$
2.34
Dividends per share
$
0.23
$
0.23
$
0.23
$
0.23
$
0.23
$
0.92
$
0.92
Weighted average shares outstanding
Basic
60,969,400
61,114,804
61,378,226
61,514,395
62,037,884
61,242,358
62,788,055
Diluted
61,173,249
61,318,715
61,546,285
61,709,797
62,264,983
61,431,726
62,973,464
Period end shares outstanding
60,977,686
60,953,864
61,201,123
61,463,392
61,648,679
60,977,686
61,648,679
(1)
See Note 1 - Litigation Settlement in the Notes to Consolidated Financials for additional information.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
($ in thousands)
(unaudited)
Quarter Ended
NONPERFORMING ASSETS (1)
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Nonaccrual LHFI
Alabama
$
12,300
$
12,710
$
2,698
$
7,506
$
8,182
Florida
227
227
233
310
313
Mississippi (2)
24,683
23,517
23,039
21,318
21,636
Tennessee (3)
5,566
5,120
9,500
9,266
10,501
Texas
23,196
26,353
26,582
25,999
22,066
Total nonaccrual LHFI
65,972
67,927
62,052
64,399
62,698
Other real estate
Alabama
194
217
84
—
—
Mississippi (2)
1,769
2,754
2,950
3,187
4,557
Tennessee (3)
23
—
—
—
—
Total other real estate
1,986
2,971
3,034
3,187
4,557
Total nonperforming assets
$
67,958
$
70,898
$
65,086
$
67,586
$
67,255
LOANS PAST DUE OVER 90 DAYS (1)
LHFI
$
3,929
$
1,842
$
1,347
$
1,503
$
2,114
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)
$
49,320
$
48,313
$
51,164
$
62,078
$
69,894
Quarter Ended
Year Ended
ACL LHFI (1)
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Beginning Balance
$
115,050
$
103,140
$
98,734
$
99,457
$
104,073
$
99,457
$
117,306
Provision for credit losses, LHFI
6,902
12,919
2,716
(860
)
(4,515
)
21,677
(21,499
)
Charge-offs
(3,893
)
(2,920
)
(2,277
)
(2,242
)
(2,616
)
(11,332
)
(10,275
)
Recoveries
2,155
1,911
3,967
2,379
2,515
10,412
13,925
Net (charge-offs) recoveries
(1,738
)
(1,009
)
1,690
137
(101
)
(920
)
3,650
Ending Balance
$
120,214
$
115,050
$
103,140
$
98,734
$
99,457
$
120,214
$
99,457
NET (CHARGE-OFFS) RECOVERIES (1)
Alabama
$
98
$
93
$
1,129
$
699
$
747
$
2,019
$
1,299
Florida
(60
)
(23
)
761
(26
)
(32
)
652
521
Mississippi (2)
(1,657
)
(702
)
(266
)
(88
)
(683
)
(2,713
)
(111
)
Tennessee (3)
(195
)
(202
)
31
(424
)
(130
)
(790
)
940
Texas
76
(175
)
35
(24
)
(3
)
(88
)
1,001
Total net (charge-offs) recoveries
$
(1,738
)
$
(1,009
)
$
1,690
$
137
$
(101
)
$
(920
)
$
3,650
(1)
Excludes PPP loans.
(2)
Mississippi includes Central and Southern Mississippi Regions.
(3)
Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2022
(unaudited)
Quarter Ended
FINANCIAL RATIOS AND OTHER DATA
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Return on average equity
-9.05
%
10.48
%
8.55
%
6.91
%
5.92
%
Return on average tangible equity
-12.14
%
13.90
%
11.36
%
9.05
%
7.72
%
Return on average assets
-0.76
%
0.98
%
0.79
%
0.68
%
0.60
%
Interest margin - Yield - FTE
4.40
%
3.71
%
3.01
%
2.69
%
2.65
%
Interest margin - Cost
0.73
%
0.21
%
0.11
%
0.11
%
0.13
%
Net interest margin - FTE
3.66
%
3.50
%
2.90
%
2.58
%
2.53
%
Efficiency ratio (1)
65.85
%
64.96
%
71.89
%
76.44
%
76.52
%
Full-time equivalent employees
2,738
2,717
2,727
2,725
2,692
CREDIT QUALITY RATIOS (2)
Net (recoveries) charge-offs / average loans
0.06
%
0.03
%
-0.06
%
-0.01
%
0.00
%
Provision for credit losses, LHFI / average loans
0.23
%
0.45
%
0.10
%
-0.03
%
-0.17
%
Nonaccrual LHFI / (LHFI + LHFS)
0.53
%
0.58
%
0.56
%
0.61
%
0.60
%
Nonperforming assets / (LHFI + LHFS)
0.55
%
0.60
%
0.58
%
0.64
%
0.64
%
Nonperforming assets / (LHFI + LHFS + other real estate)
0.55
%
0.60
%
0.58
%
0.64
%
0.64
%
ACL LHFI / LHFI
0.99
%
0.99
%
0.94
%
0.95
%
0.97
%
ACL LHFI-commercial / commercial LHFI
0.85
%
0.93
%
0.88
%
0.95
%
1.00
%
ACL LHFI-consumer / consumer and home mortgage LHFI
1.41
%
1.20
%
1.14
%
0.96
%
0.87
%
ACL LHFI / nonaccrual LHFI
182.22
%
169.37
%
166.22
%
153.32
%
158.63
%
ACL LHFI / nonaccrual LHFI (excl individually analyzed loans)
399.19
%
466.03
%
475.27
%
484.01
%
500.85
%
CAPITAL RATIOS
Total equity / total assets
8.28
%
8.78
%
9.36
%
9.35
%
9.90
%
Tangible equity / tangible assets
6.27
%
6.67
%
7.23
%
7.29
%
7.86
%
Tangible equity / risk-weighted assets
7.61
%
8.15
%
9.16
%
9.79
%
10.71
%
Tier 1 leverage ratio
8.47
%
9.01
%
8.80
%
8.66
%
8.73
%
Common equity tier 1 capital ratio
9.74
%
10.63
%
11.01
%
11.23
%
11.29
%
Tier 1 risk-based capital ratio
10.15
%
11.06
%
11.47
%
11.70
%
11.77
%
Total risk-based capital ratio
11.91
%
12.85
%
13.26
%
13.53
%
13.55
%
STOCK PERFORMANCE
Market value-Close
$
34.91
$
30.63
$
29.19
$
30.39
$
32.46
Book value
$
24.47
$
24.76
$
25.93
$
26.54
$
28.25
Tangible book value
$
18.11
$
18.39
$
19.58
$
20.22
$
21.93
(1)
See Note 7 – Non-GAAP Financial Measures in the Notes to Consolidated Financials for Trustmark’s efficiency ratio calculation.
(2)
Excludes PPP loans.
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 1 - Litigation Settlement
As previously announced, on December 31, 2022, Trustmark National Bank (“Trustmark”) agreed to a settlement in principle (the “Settlement”) relating to litigation involving the Stanford Financial Group that includes a lawsuit initially filed in the District Court of Harris County, Texas on August 23, 2009 and also includes other subsequently-filed Stanford -related lawsuits. Trustmark Corporation , the parent company of Trustmark, has provided disclosure relating to these matters in its periodic reports on Forms 10-K and 10-Q throughout the pendency of these actions.
The parties to the Settlement are, on the one hand, (i) Ralph S. Janvey , solely in his capacity as the court-appointed receiver (the “Receiver”) for the Stanford Receivership Estate; (ii) the Official Stanford Investors Committee; (iii) each of the plaintiffs in the Rotstain and Smith Actions (as defined below); and, on the other hand, (iv) Trustmark.
Under the terms of the Settlement, the parties have agreed to settle and dismiss Rotstain et al. v. Trustmark National Bank , et al., CA No. 4-22-CV-00800 (S.D. Tex .) (the “Rotstain Action”), Smith et al. v. Independent Bank, et al., CA No. 4-20-CV-00675 (S.D. Tex .) (the “Smith Action”), and all current or future claims arising from or related to Stanford . In addition, the Settlement provides that the parties will request dismissal of Jackson , et al., v. Cox, et al., CA No. 3:10-CV-0328 (N.D. Tex .) (the “Jackson Action” and, collectively with the Rotstain Action and the Smith Action, the “Actions”) pursuant to the terms of the bar orders described below. If the Settlement, including the bar orders described below, is approved by the Court and is not subject to further appeal, Trustmark will make a one-time cash payment of $100.0 million to the Receiver. Trustmark expects to be relieved of pre-trial deadlines and the February 27, 2023 trial setting in the Rotstain Action pending final Court approval of a Settlement Agreement reflecting the terms of the Settlement and pending entry of the bar orders. The Smith and Jackson Actions are currently stayed.
The Settlement includes the parties’ agreement to seek the Northern District of Texas District Court’s entry of bar orders prohibiting any continued or future claims against Trustmark and its related parties relating to Stanford , whether asserted to date or not. The bar orders therefore would prohibit all litigation relating to Stanford described in Trustmark Corporation’s SEC periodic reports, including not only the Actions and any pending matters but also any actions that may be brought in the future. Final Court approval of these bar orders is a condition of the Settlement.
The Settlement is also subject to the execution and delivery of a definitive Settlement Agreement reflecting the terms of the Settlement, notice to Stanford’s investor claimants and final, non-appealable approval by the U.S. District Court for the Northern District of Texas . The timing of any final decision by the Court is subject to the discretion of the Court and any appeal. While Trustmark believes that the Settlement is consistent with the terms of prior Stanford -related settlements that have been approved by the Court and were not successfully appealed, it is possible that the Court may decide not to approve the Settlement Agreement or that the Fifth Circuit Court of Appeals could decide to accept an appeal thereof.
The Settlement Agreement will provide that Trustmark makes no admission of liability or wrongdoing in connection with any Stanford matter. As has been the case throughout the pendency of the Actions, Trustmark expressly denies any liability or wrongdoing with respect to any matter alleged in regard of the multi-billion-dollar Ponzi scheme operated by Stanford for almost 20 years. Trustmark’s relationship with Stanford consisted of ordinary banking services provided to business deposit customers.
Trustmark and Trustmark Corporation have determined that it is in the best interest of Trustmark, Trustmark Corporation and the shareholders of Trustmark Corporation to enter into the Settlement to eliminate the risk, ongoing expense, uncertainty as to ultimate outcome and imposition on management and the business of Trustmark of further litigation of the Actions and related Stanford claims.
As a result of the entry into the Settlement, Trustmark Corporation recognized $100.0 million of litigation settlement expense, as well as an additional $750 thousand in legal fees, that were included in noninterest expense related to the Stanford litigation during the fourth quarter of 2022. Trustmark Corporation expects that the Settlement will be tax deductible. Trustmark will remain substantially above levels considered to be well-capitalized under all relevant standards.
The foregoing description of the Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Settlement Agreement, a copy of which will be filed as an exhibit to a future periodic or current report of Trustmark Corporation .
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 2 - Securities Available for Sale and Held to Maturity
The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity:
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities
$
391,513
$
416,278
$
419,696
$
361,822
$
344,640
U.S. Government agency obligations
7,766
9,116
11,947
12,623
13,727
Obligations of states and political subdivisions
4,862
4,763
5,179
5,359
5,714
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA
27,097
28,164
32,240
35,117
39,573
Issued by FNMA and FHLMC
1,345,463
1,718,057
1,888,546
2,038,331
2,218,429
Other residential mortgage-backed securities
Issued or guaranteed by FNMA , FHLMC, or GNMA
115,140
126,138
144,158
164,506
196,690
Commercial mortgage-backed securities
Issued or guaranteed by FNMA , FHLMC, or GNMA
132,241
141,970
142,598
400,488
420,104
Total securities available for sale
$
2,024,082
$
2,444,486
$
2,644,364
$
3,018,246
$
3,238,877
SECURITIES HELD TO MATURITY
U.S. Treasury securities
$
28,295
$
—
$
—
$
—
$
—
Obligations of states and political subdivisions
4,510
4,512
5,320
7,324
7,328
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA
4,442
4,527
4,624
4,831
5,005
Issued by FNMA and FHLMC
509,311
179,375
185,554
192,373
43,444
Other residential mortgage-backed securities
Issued or guaranteed by FNMA , FHLMC, or GNMA
188,201
197,923
210,479
224,012
241,934
Commercial mortgage-backed securities
Issued or guaranteed by FNMA , FHLMC, or GNMA
759,755
770,648
731,777
179,058
44,826
Total securities held to maturity
$
1,494,514
$
1,156,985
$
1,137,754
$
607,598
$
342,537
During the fourth quarter of 2022, Trustmark reclassified $422.9 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $57.1 million ($42.8 million , net of tax). The net unrealized holding loss will be amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer.
During the second quarter of 2022, Trustmark reclassified $343.1 million of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $34.8 million ($26.1 million , net of tax). The net unrealized holding loss will be amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer.
At December 31, 2022, the net unamortized, unrealized loss included in accumulated other comprehensive income (loss) in the accompanying balance sheet for securities held to maturity transferred from securities available for sale totaled approximately $92.3 million ($69.2 million , net of tax).
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 99.8% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas , Federal Home Loan Bank of Atlanta and Federal Reserve Bank , Trustmark does not hold any other equity investment in a GSE.
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 3 – Loan Composition
LHFI consisted of the following during the periods presented:
LHFI BY TYPE
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Loans secured by real estate:
Construction, land development and other land loans
$
1,719,542
$
1,647,395
$
1,440,058
$
1,273,959
$
1,308,781
Secured by 1-4 family residential properties
2,775,847
2,597,112
2,424,962
2,106,998
1,977,993
Secured by nonfarm, nonresidential properties
3,278,830
3,206,946
3,178,079
2,975,039
2,977,084
Other real estate secured
742,538
593,119
555,311
715,939
726,043
Commercial and industrial loans
1,821,259
1,689,532
1,551,001
1,495,060
1,414,279
Consumer loans
166,425
163,412
160,716
154,215
159,472
State and other political subdivision loans
1,223,863
1,188,703
1,110,795
1,215,023
1,146,251
Other loans
475,735
499,845
523,918
460,896
537,926
LHFI
12,204,039
11,586,064
10,944,840
10,397,129
10,247,829
ACL LHFI
(120,214
)
(115,050
)
(103,140
)
(98,734
)
(99,457
)
Net LHFI
$
12,083,825
$
11,471,014
$
10,841,700
$
10,298,395
$
10,148,372
The following table presents the LHFI composition by region and reflects each region’s diversified mix of loans:
December 31, 2022
LHFI - COMPOSITION BY REGION
Total
Alabama
Florida
Mississippi
(Central and
Southern
Regions)
Tennessee
(Memphis, TN and
Northern MS
Regions)
Texas
Loans secured by real estate:
Construction, land development and other land loans
$
1,719,542
$
841,298
$
65,920
$
421,210
$
33,205
$
357,909
Secured by 1-4 family residential properties
2,775,847
133,596
50,672
2,483,094
79,782
28,703
Secured by nonfarm, nonresidential properties
3,278,830
895,306
212,185
1,394,562
172,432
604,345
Other real estate secured
742,538
202,453
2,013
339,592
6,822
191,658
Commercial and industrial loans
1,821,259
502,492
26,496
773,135
285,706
233,430
Consumer loans
166,425
24,172
8,528
103,107
18,442
12,176
State and other political subdivision loans
1,223,863
77,017
62,962
859,117
27,881
196,886
Other loans
475,735
74,478
9,245
268,903
58,052
65,057
Loans
$
12,204,039
$
2,750,812
$
438,021
$
6,642,720
$
682,322
$
1,690,164
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION
Lots
$
71,964
$
37,553
$
9,802
$
16,654
$
1,923
$
6,032
Development
140,114
56,653
1,392
46,940
6,798
28,331
Unimproved land
108,972
22,548
14,348
35,177
5,039
31,860
1-4 family construction
369,566
197,352
24,903
97,370
17,436
32,505
Other construction
1,028,926
527,192
15,475
225,069
2,009
259,181
Construction, land development and other land loans
$
1,719,542
$
841,298
$
65,920
$
421,210
$
33,205
$
357,909
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 3 – Loan Composition (continued)
December 31, 2022
Total
Alabama
Florida
Mississippi
(Central and
Southern
Regions)
Tennessee
(Memphis, TN and
Northern MS
Regions)
Texas
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION
Non-owner occupied:
Retail
$
343,073
$
133,173
$
33,675
$
91,921
$
21,695
$
62,609
Office
271,112
122,818
17,394
70,836
10,435
49,629
Hotel/motel
298,159
170,048
40,031
60,191
27,889
—
Mini-storage
155,037
28,072
2,104
105,229
482
19,150
Industrial
333,650
68,863
17,523
121,055
2,799
123,410
Health care
49,363
17,633
989
26,836
343
3,562
Convenience stores
33,721
7,416
641
14,959
593
10,112
Nursing homes/senior living
390,739
136,986
—
184,730
5,595
63,428
Other
136,120
35,040
9,793
61,086
16,397
13,804
Total non-owner occupied loans
2,010,974
720,049
122,150
736,843
86,228
345,704
Owner-occupied:
Office
165,403
43,628
36,375
48,325
8,827
28,248
Churches
72,472
16,167
5,255
41,036
7,165
2,849
Industrial warehouses
175,272
19,344
4,996
47,413
16,872
86,647
Health care
130,604
12,216
6,384
95,437
2,341
14,226
Convenience stores
136,785
12,558
21,581
65,069
376
37,201
Retail
101,087
11,360
8,118
44,578
19,187
17,844
Restaurants
55,944
3,999
4,169
32,275
12,229
3,272
Auto dealerships
49,304
6,794
228
24,282
18,000
—
Nursing homes/senior living
237,082
36,132
—
174,750
—
26,200
Other
143,903
13,059
2,929
84,554
1,207
42,154
Total owner-occupied loans
1,267,856
175,257
90,035
657,719
86,204
258,641
Loans secured by nonfarm, nonresidential properties
$
3,278,830
$
895,306
$
212,185
$
1,394,562
$
172,432
$
604,345
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities
The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:
Quarter Ended
Year Ended
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Securities – taxable
1.71
%
1.62
%
1.50
%
1.37
%
1.22
%
1.55
%
1.29
%
Securities – nontaxable
3.95
%
3.97
%
4.00
%
3.97
%
3.82
%
3.97
%
3.87
%
Securities – total
1.72
%
1.63
%
1.50
%
1.38
%
1.23
%
1.56
%
1.31
%
PPP loans
12.39
%
7.51
%
4.16
%
2.35
%
3.68
%
4.30
%
10.47
%
Loans - LHFI & LHFS
5.27
%
4.48
%
3.79
%
3.58
%
3.56
%
4.32
%
3.62
%
Loans - total
5.27
%
4.48
%
3.79
%
3.58
%
3.56
%
4.32
%
3.84
%
Fed funds sold & reverse repurchases
4.29
%
3.51
%
3.65
%
—
—
4.22
%
—
Other earning assets
3.76
%
1.82
%
0.78
%
0.18
%
0.18
%
0.89
%
0.15
%
Total earning assets
4.40
%
3.71
%
3.01
%
2.69
%
2.65
%
3.46
%
2.92
%
Interest-bearing deposits
0.71
%
0.20
%
0.11
%
0.11
%
0.13
%
0.28
%
0.17
%
Fed funds purchased & repurchases
3.44
%
1.95
%
0.24
%
0.13
%
0.13
%
2.16
%
0.13
%
Other borrowings
3.73
%
2.89
%
2.52
%
2.26
%
2.25
%
3.11
%
2.25
%
Total interest-bearing liabilities
1.03
%
0.31
%
0.17
%
0.16
%
0.19
%
0.43
%
0.23
%
Net interest margin
3.66
%
3.50
%
2.90
%
2.58
%
2.53
%
3.17
%
2.76
%
Net interest margin excluding PPP loans
and the FRB balance
3.66
%
3.53
%
3.06
%
2.88
%
2.82
%
3.30
%
2.91
%
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities (continued)
Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding PPP loans and the balance held at the Federal Reserve Bank of Atlanta (FRB), which equals reported net interest income-FTE excluding interest income on PPP loans and the FRB balance, annualized, as a percent of average earning assets excluding average PPP loans and the FRB balance.
At December 31, 2022 and September 30, 2022, the average FRB balance totaled $299.2 million and $275.4 million , respectively, and is included in other earning assets in the accompanying average consolidated balance sheets.
The net interest margin excluding PPP loans and the FRB balance increased 13 basis points when compared to the third quarter of 2022, totaling 3.66% for the fourth quarter of 2022. The expansion of the net interest margin excluding PPP loans and the FRB balance was due to increases in the yields on the loans held for investment and held for sale portfolio and the securities portfolio and was partially offset by increased costs of interest-bearing liabilities, which resulted from the higher interest-rate environment.
Note 5 – Mortgage Banking
Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net negative ineffectiveness of $3.6 million during the fourth quarter of 2022.
The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
Quarter Ended
Year Ended
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Mortgage servicing income, net
$
6,636
$
6,669
$
6,557
$
6,429
$
6,571
$
26,291
$
25,476
Change in fair value-MSR from runoff
(2,981
)
(3,462
)
(3,806
)
(3,785
)
(4,745
)
(14,034
)
(20,160
)
Gain on sales of loans, net
3,328
4,597
6,030
6,223
9,005
20,178
55,976
Mortgage banking income before hedge
ineffectiveness
6,983
7,804
8,781
8,867
10,831
32,435
61,292
Change in fair value-MSR from market changes
(3,348
)
10,770
8,739
22,020
2,221
38,181
13,258
Change in fair value of derivatives
(227
)
(11,698
)
(9,371
)
(21,014
)
(1,443
)
(42,310
)
(10,800
)
Net positive (negative) hedge ineffectiveness
(3,575
)
(928
)
(632
)
1,006
778
(4,129
)
2,458
Mortgage banking, net
$
3,408
$
6,876
$
8,149
$
9,873
$
11,609
$
28,306
$
63,750
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 6 – Other Noninterest Income and Expense
Other noninterest income consisted of the following for the periods presented:
Quarter Ended
Year Ended
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Partnership amortization for tax credit purposes
$
(1,869
)
$
(1,531
)
$
(1,475
)
$
(1,336
)
$
(2,455
)
$
(6,211
)
$
(8,011
)
Increase in life insurance cash surrender value
1,687
1,676
1,683
1,627
1,675
6,673
6,630
Other miscellaneous income
2,493
2,273
1,699
2,915
1,759
9,380
7,932
Total other, net
$
2,311
$
2,418
$
1,907
$
3,206
$
979
$
9,842
$
6,551
Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low-income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.
Other noninterest expense consisted of the following for the periods presented:
Quarter Ended
Year Ended
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Loan expense
$
3,858
$
3,858
$
4,068
$
4,389
$
3,221
$
16,173
$
15,148
Amortization of intangibles
312
312
328
482
548
1,434
2,316
FDIC assessment expense
2,130
1,945
1,810
1,500
1,475
7,385
5,515
Regulatory settlement charge
—
—
—
—
—
—
5,000
Other real estate expense, net
18
497
623
35
336
1,173
3,528
Other miscellaneous expense
9,767
8,117
7,782
7,935
9,326
33,601
32,788
Total other expense
$
16,085
$
14,729
$
14,611
$
14,341
$
14,906
$
59,766
$
64,295
Note 7 – Non-GAAP Financial Measures
In addition to capital ratios defined by GAAP and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets. Trustmark’s Common Equity Tier 1 capital includes common stock, capital surplus and retained earnings, and is reduced by goodwill and other intangible assets, net of associated net deferred tax liabilities as well as disallowed deferred tax assets and threshold deductions as applicable.
Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.
These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its audited consolidated financial statements and the notes related thereto in their entirety and not to rely on any single financial measure.
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands except per share data)
(unaudited)
Note 7 – Non-GAAP Financial Measures (continued)
Quarter Ended
Year Ended
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity
$
1,493,291
$
1,606,469
$
1,608,309
$
1,713,752
$
1,758,123
$
1,604,854
$
1,770,151
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,463
)
Identifiable intangible assets
(3,816
)
(4,131
)
(4,436
)
(4,879
)
(5,382
)
(4,312
)
(6,205
)
Total average tangible equity
$
1,105,238
$
1,218,101
$
1,219,636
$
1,324,636
$
1,368,504
$
1,216,305
$
1,379,483
PERIOD END BALANCES
Total shareholders' equity
$
1,492,268
$
1,508,945
$
1,586,696
$
1,631,382
$
1,741,311
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
Identifiable intangible assets
(3,640
)
(3,952
)
(4,264
)
(4,591
)
(5,074
)
Total tangible equity
(a)
$
1,104,391
$
1,120,756
$
1,198,195
$
1,242,554
$
1,352,000
TANGIBLE ASSETS
Total assets
$
18,015,478
$
17,190,634
$
16,951,510
$
17,441,551
$
17,595,636
Less: Goodwill
(384,237
)
(384,237
)
(384,237
)
(384,237
)
(384,237
)
Identifiable intangible assets
(3,640
)
(3,952
)
(4,264
)
(4,591
)
(5,074
)
Total tangible assets
(b)
$
17,627,601
$
16,802,445
$
16,563,009
$
17,052,723
$
17,206,325
Risk-weighted assets
(c)
$
14,521,078
$
13,748,819
$
13,076,981
$
12,691,545
$
12,623,630
NET INCOME (LOSS) ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income (loss)
$
(34,063
)
$
42,455
$
34,284
$
29,211
$
26,222
$
71,887
$
147,365
Plus: Intangible amortization net of tax
234
234
246
362
411
1,076
1,738
Net income (loss) adjusted for intangible amortization
$
(33,829
)
$
42,689
$
34,530
$
29,573
$
26,633
$
72,963
$
149,103
Period end common shares outstanding
(d)
60,977,686
60,953,864
61,201,123
61,463,392
61,648,679
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)
-12.14
%
13.90
%
11.36
%
9.05
%
7.72
%
6.00
%
10.81
%
Tangible equity/tangible assets
(a)/(b)
6.27
%
6.67
%
7.23
%
7.29
%
7.86
%
Tangible equity/risk-weighted assets
(a)/(c)
7.61
%
8.15
%
9.16
%
9.79
%
10.71
%
Tangible book value
(a)/(d)*1,000
$
18.11
$
18.39
$
19.58
$
20.22
$
21.93
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity
$
1,492,268
$
1,508,945
$
1,586,696
$
1,631,382
$
1,741,311
CECL transition adjustment
19,500
19,500
19,500
19,500
26,000
AOCI-related adjustments
275,403
306,412
207,142
148,656
32,560
CET1 adjustments and deductions:
Goodwill net of associated deferred
tax liabilities (DTLs)
(370,241
)
(370,217
)
(370,229
)
(370,240
)
(370,252
)
Other adjustments and deductions
for CET1 (2)
(3,258
)
(3,506
)
(3,757
)
(4,015
)
(4,392
)
CET1 capital
(e)
1,413,672
1,461,134
1,439,352
1,425,283
1,425,227
Additional tier 1 capital instruments
plus related surplus
60,000
60,000
60,000
60,000
60,000
Tier 1 capital
$
1,473,672
$
1,521,134
$
1,499,352
$
1,485,283
$
1,485,227
Common equity tier 1 capital ratio
(e)/(c)
9.74
%
10.63
%
11.01
%
11.23
%
11.29
%
(1)
Calculation = ((net income (loss) adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity.
(2)
Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAs), threshold deductions and transition adjustments, as applicable.
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 7 – Non-GAAP Financial Measures (continued)
Trustmark discloses certain non-GAAP financial measures because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views these as measures of our core operating business, which exclude the impact of the items detailed below, as these items are generally not operational in nature. These non-GAAP financial measures also provide another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.
The following table presents pre-provision net revenue (PPNR) during the periods presented:
Quarter Ended
Year Ended
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Net interest income (GAAP)
$
146,583
$
136,105
$
112,676
$
99,344
$
98,326
$
494,708
$
418,351
Noninterest income (GAAP)
45,170
52,606
53,253
54,115
50,767
205,144
221,910
Pre-provision revenue
(a)
$
191,753
$
188,711
$
165,929
$
153,459
$
149,093
$
699,852
$
640,261
Noninterest expense (GAAP)
$
231,229
$
126,698
$
123,767
$
121,519
$
119,469
$
603,213
$
489,296
Less: Litigation settlement expense
(100,750
)
—
—
—
—
(100,750
)
—
Voluntary early retirement program
—
—
—
—
—
—
(5,700
)
Regulatory settlement charge
—
—
—
—
—
—
(5,000
)
Adjusted noninterest expense - PPNR (Non-GAAP)
(b)
$
130,479
$
126,698
$
123,767
$
121,519
$
119,469
$
502,463
$
478,596
PPNR (Non-GAAP)
(a)-(b)
$
61,274
$
62,013
$
42,162
$
31,940
$
29,624
$
197,389
$
161,665
The following table presents adjustments to net income (loss) and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented:
Quarter Ended
Year Ended
12/31/2022
12/31/2021
12/31/2022
12/31/2021
Amount
Diluted
EPS
Amount
Diluted
EPS
Amount
Diluted
EPS
Amount
Diluted
EPS
Net income (loss) (GAAP)
$
(34,063
)
$
(0.56
)
$
26,222
$
0.42
$
71,887
$
1.17
$
147,365
$
2.34
Significant non-routine transactions (net of taxes):
Litigation settlement expense
75,563
1.24
—
—
75,563
1.23
—
—
Voluntary early retirement program
—
—
—
—
—
—
4,275
0.07
Regulatory settlement charge
(not tax deductible)
—
—
—
—
—
—
5,000
0.08
Net income adjusted for significant non-routine
transactions (Non-GAAP)
$
41,500
$
0.68
$
26,222
$
0.42
$
147,450
$
2.40
$
156,640
$
2.49
Reported
(GAAP)
Adjusted
(Non-GAAP)
Reported
(GAAP)
Adjusted
(Non-GAAP)
Reported
(GAAP)
Adjusted
(Non-GAAP)
Reported
(GAAP)
Adjusted
(Non-GAAP)
Return on average equity
-9.05
%
10.75
%
5.92
%
n/a
4.48
%
9.13
%
8.32
%
8.83
%
Return on average tangible equity
-12.14
%
14.49
%
7.72
%
n/a
6.00
%
12.12
%
10.81
%
11.45
%
Return on average assets
-0.76
%
0.93
%
0.60
%
n/a
0.41
%
0.84
%
0.86
%
0.92
%
n/a - not applicable
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2022
($ in thousands)
(unaudited)
Note 7 – Non-GAAP Financial Measures (continued)
The following table presents Trustmark’s calculation of its efficiency ratio for the periods presented:
Quarter Ended
Year Ended
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
12/31/2022
12/31/2021
Total noninterest expense (GAAP)
$
231,229
$
126,698
$
123,767
$
121,519
$
119,469
$
603,213
$
489,296
Less: Other real estate expense, net
(18
)
(497
)
(623
)
(35
)
(336
)
(1,173
)
(3,528
)
Amortization of intangibles
(312
)
(312
)
(328
)
(482
)
(548
)
(1,434
)
(2,316
)
Charitable contributions resulting in
state tax credits
(375
)
(375
)
(375
)
(375
)
(391
)
(1,500
)
(1,446
)
Litigation settlement expense
(100,750
)
—
—
—
—
(100,750
)
—
Voluntary early retirement program
—
—
—
—
—
—
(5,700
)
Regulatory settlement charge
—
—
—
—
—
—
(5,000
)
Adjusted noninterest expense (Non-GAAP)
(c)
$
129,774
$
125,514
$
122,441
$
120,627
$
118,194
$
498,356
$
471,306
Net interest income (GAAP)
$
146,583
$
136,105
$
112,676
$
99,344
$
98,326
$
494,708
$
418,351
Add: Tax equivalent adjustment
3,451
2,975
2,916
3,003
2,906
12,345
11,704
Net interest income-FTE (Non-GAAP)
(a)
$
150,034
$
139,080
$
115,592
$
102,347
$
101,232
$
507,053
$
430,055
Noninterest income (GAAP)
$
45,170
$
52,606
$
53,253
$
54,115
$
50,767
$
205,144
$
221,910
Add: Partnership amortization for tax credit purposes
1,869
1,531
1,475
1,336
2,455
6,211
8,011
Adjusted noninterest income (Non-GAAP)
(b)
$
47,039
$
54,137
$
54,728
$
55,451
$
53,222
$
211,355
$
229,921
Adjusted revenue (Non-GAAP)
(a)+(b)
$
197,073
$
193,217
$
170,320
$
157,798
$
154,454
$
718,408
$
659,976
Efficiency ratio (Non-GAAP)
(c)/((a)+(b))
65.85
%
64.96
%
71.89
%
76.44
%
76.52
%
69.37
%
71.41
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20230124005266/en/
Trustmark Investor Contacts:
Thomas C. Owens
Treasurer and Principal Financial Officer
601-208-7853
F. Joseph Rein , Jr.
Senior Vice President
601-208-6898
Trustmark Media Contact:
Melanie A. Morgan
Senior Vice President
601-208-2979
Source: Trustmark Corporation