Performance Reflects Continued Loan and Deposit Growth, Solid Credit Quality, and Diversified Revenue Base

Trustmark Corporation (NASDAQGS:TRMK) reported net income of $36.1 million in the fourth quarter of 2023, representing diluted earnings per share of $0.59. For the full year, Trustmark’s net income totaled $165.5 million, representing diluted earnings per share of $2.70. Trustmark’s net income in 2023 produced a return on average tangible equity of 14.04% and a return on average assets of 0.89%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2024, to shareholders of record on March 1, 2024.

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2023 Highlights

• Loans held for investment (HFI) increased $746.5 million, or 6.1%, in 2023
• Net charge-offs represented 0.06% of average loans in 2023
• Deposits increased $1.1 billion, or 7.8%, in 2023
• Net interest income (FTE) totaled $566.3 million, up 11.7% in 2023 to produce a net interest margin of 3.32%, up 15 basis points from 2022
• Insurance revenue increased 7.2% while wealth management remained stable
• Noninterest income totaled $207.0 million and represented 27.2% of total revenue
• Total revenue increased $60.0 million, or 8.6%, to $759.8 million in 2023
• Continued technology investments to enhance efficiency and productivity
• Noninterest expense totaled $537.9 million in 2023; adjusted noninterest expense totaled $527.9 million, up 5.9% from the prior year; please refer to the Consolidated Financial Information Note 7 – Non-GAAP Financial Measures

Duane A. Dewey, President and CEO, commented, “We continued to make significant progress across the organization. Our performance reflected solid loan production and credit quality, and continued deposit growth in an increasingly competitive marketplace. We achieved double-digit growth in net interest income in 2023 while noninterest income continued to expand thanks in part to another record year in our insurance business and commendable results in our banking, mortgage banking and wealth management businesses. We have a tremendous team of associates focused on expanding customer relationships and demonstrating the value Trustmark can provide as their trusted financial partner. 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.”

Balance Sheet Management

• Loans HFI increased $140.3 million, or 1.1%, during the quarter
• Total deposits increased $467.8 million, or 3.1%, linked-quarter
• Maintained strong capital position with CET1 ratio of 10.04% and total risk-based capital ratio of 12.29%

Loans HFI totaled $13.0 billion at December 31, 2023, reflecting an increase of $140.3 million, or 1.1%, linked-quarter and $746.5 million, or 6.1%, year-over-year. The linked-quarter growth reflected increases in commercial and industrial loans, other real estate secured loans, other loans and leases, and state and other political subdivision loans offset in part by declines in construction, land development and other land loans, and loans secured by nonfarm, nonresidential properties. Trustmark’s loan portfolio remains well-diversified by loan type and geography.

Deposits totaled $15.6 billion at December 31, 2023, up $467.8 million, or 3.1%, from the prior quarter and up $1.1 billion, or 7.8%, year-over-year. Trustmark continues to maintain a strong liquidity position as loans HFI represented 83.2% of total deposits at year-end 2023. Noninterest-bearing deposits represented 20.5% of total deposits at December 31, 2023. Interest-bearing deposit costs totaled 2.67% for the fourth quarter, an increase of 28 basis points linked-quarter. The total cost of interest-bearing liabilities was 2.89% for the fourth quarter of 2023, an increase of 17 basis points from the prior quarter.

Trustmark did not repurchase any of its common shares in 2023. As previously announced, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2024, under which $50.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2024. The repurchase program, which is subject to market conditions and management discretion, will continue to be implemented through open market repurchases or privately negotiated transactions. At December 31, 2023, Trustmark’s tangible equity to tangible assets ratio was 6.95%, while the total risk-based capital ratio was 12.29%. Tangible book value per share was $20.87 at December 31, 2023, up 7.7% from the prior quarter and 15.2% from the prior year.

Credit Quality

• Net charge-offs totaled $2.2 million, representing 0.07% of average loans in the fourth quarter
• Provision for credit losses for loans HFI was $7.6 million in the fourth quarter
• Allowance for credit losses (ACL) represented 1.08% of loans HFI and 249.31% of nonperforming loans, excluding individually analyzed loans at year-end

Nonaccrual loans totaled $100.0 million at December 31, 2023, an increase of $9.1 million from the prior quarter and $34.0 million year-over-year. Other real estate totaled $6.9 million, reflecting increases of $1.4 million and $4.9 million from the prior quarter and prior year, respectively. Collectively, nonperforming assets totaled $106.9 million, representing 0.81% of loans HFI and held for sale (HFS) at December 31, 2023.

The provision for credit losses for loans HFI was $7.6 million in the fourth quarter and was primarily attributable to loan growth, net adjustments to the qualitative factors, and changes in the macroeconomic forecast. The provision for credit losses for off-balance sheet credit exposures was a negative $888 thousand in the fourth quarter. Collectively, the provision for credit losses totaled $6.7 million in the fourth quarter compared to $8.4 million in the prior quarter and $12.1 million in the fourth quarter of 2022.

Allocation of Trustmark’s $139.4 million ACL on loans HFI represented 0.85% of commercial loans and 1.81% of consumer and home mortgage loans, resulting in an ACL to total loans HFI of 1.08% at December 31, 2023. 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 $140.0 million in the fourth quarter, down 1.3% linked-quarter
• Net interest margin totaled 3.25% in the fourth quarter, down 4 basis points from the prior quarter
• Noninterest income totaled $49.8 million, representing 26.7% of total revenue in the fourth quarter

Revenue in the fourth quarter totaled $186.5 million, a decrease of 2.3% from the prior quarter and 2.7% from the same quarter in the prior year. The linked-quarter decrease reflects lower noninterest income and net interest income while the year-over-year decline reflects growth in noninterest income being more than offset by lower net interest income. In 2023, revenue totaled $759.8 million, an increase of 8.6% from the prior year.

Net interest income (FTE) in the fourth quarter totaled $140.0 million, resulting in a net interest margin of 3.25%, down 4 basis points from the prior quarter. The decrease in the net interest margin was primarily due to increased costs of interest-bearing liabilities, which was offset in part by higher yields on the loans HFI and HFS portfolio.

Noninterest income in the fourth quarter totaled $49.8 million, a decrease of $2.4 million from the prior quarter and an increase of $4.6 million from the prior year. The linked-quarter change reflects a seasonal decline in insurance revenue, as well as lower mortgage banking and wealth management revenue. The increase in noninterest income year-over-year was well diversified across all fee-based categories.

Mortgage loan production in the fourth quarter totaled $271.9 million, a decline of 30.3% linked-quarter and 30.4% year-over-year. Mortgage banking revenue totaled $5.5 million in the fourth quarter, a decrease of $939 thousand from the prior quarter and an increase of $2.1 million year-over-year. The linked-quarter decline is attributable to an increase in net negative hedge ineffectiveness. In 2023, mortgage loan production totaled $1.5 billion, down 31.6% from the prior year. Mortgage banking revenue totaled $26.2 million in 2023, down $2.1 million from the prior year.

Insurance revenue in the fourth quarter totaled $13.2 million, a seasonal decline of $2.1 million from the prior quarter and an increase of $1.2 million from the prior year. Insurance revenue in 2023 totaled $57.6 million, up $3.8 million, or 7.2%, 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 $8.7 million in the fourth quarter, down 1.3% from the prior quarter and up 7.2% from the prior year. The linked-quarter decline is principally due to reduced trust management revenue offset in part by increased brokerage revenue while the year-over-year change is attributable to increased investment services revenue. In 2023, wealth management revenue totaled $35.1 million, in line with the prior year. During 2023, Trustmark selectively expanded its salesforce in the Houston, Mobile, Jackson, and Florida Panhandle markets.

Noninterest Expense

• Total noninterest expense in the fourth quarter was $136.4 million; adjusted noninterest expense, which excludes ORE expense, amortization of intangibles, charitable contributions resulting in state tax credits, reduction in force expense, and litigation settlement expense, totaled $134.8 million, up $723 thousand from the prior quarter. Please refer to the Consolidated Financial Information Note 7 – Non-GAAP Financial Measures
• FDIC assessment expense totaled $4.8 million in the fourth quarter, up $1.1 million, or 28.7%, from the prior quarter

Salaries and employee benefits expense in the fourth quarter totaled $78.0 million, an increase of $1.3 million, or 1.7% from the prior quarter. Excluding reduction in force expense related to restructuring initiatives of $1.4 million, salaries and benefits expense totaled $76.6 million, a decline of $69 thousand from the prior quarter. Total services and fees in the fourth quarter totaled $27.9 million, unchanged from the prior quarter. Net occupancy – premises expense during the fourth quarter totaled $7.4 million, unchanged from the prior quarter. Equipment expense declined 4.4% linked-quarter to total $6.5 million. Other expense increased $943 thousand, or 6.0%, linked-quarter principally due to increased FDIC assessment expense.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 24, 2024, 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 7, 2024, in archived format at the same web address or by calling (877) 344-7529, passcode 6776577.

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.

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, actions by the Board of Governors of the Federal Reserve System (FRB) that impact the level of market interest rates, 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 impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions, 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 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.

See Notes to Consolidated Financials

See Notes to Consolidated Financials

See Notes to Consolidated Financials

See Notes to Consolidated Financials