Earnings and profitability significantly enhanced, share repurchase activity resumed, quarterly cash dividend increased

Trustmark Corporation (NASDAQGS:TRMK) reported net income of $56.3 million in the fourth quarter of 2024, representing diluted earnings per share of $0.92. Net income increased $5.0 million, or 9.7%, from the prior quarter while diluted EPS increased $0.08. In the fourth quarter, Trustmark’s net income produced a return on average tangible equity of 13.68% and a return on average assets of 1.23%.

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Financial results in 2024, which included the sale of Fisher Brown Bottrell Insurance, Inc. (FBBI) in the second quarter, consisted of both continuing operations and discontinued operations. The discontinued operations included the financial results of FBBI prior to the sale as well as the gain on sale in the second quarter. The discontinued operations results are presented as a single line item below income from continuing operations and as separate lines in the balance sheet in the accompanying tables for all periods presented. Financial results from adjusted continuing operations⁽¹⁾ exclude significant non-routine transactions.

For the full year, Trustmark reported net income from continuing operations of $45.2 million, representing diluted earnings per share of $0.74 and net income from adjusted continuing operations⁽¹⁾ of $186.3 million, or $3.04 per diluted share. Net income from adjusted continuing operations⁽¹⁾ in 2024 increased $27.1 million, or 17.0%, compared to the prior year.

Trustmark’s net income from continuing operations in 2024 produced a return on average tangible equity of 3.04% and a return on average assets of 0.24% while net income from adjusted continuing operations⁽¹⁾ generated a return on average tangible equity of 12.71% and a return on average assets of 1.01%.

Trustmark’s Board of Directors announced a 4.3% increase in its regular quarterly dividend to $0.24 per share from $0.23 per share. The Board declared the dividend payable March 15, 2025, to shareholders of record on March 1, 2025. This action raises the indicated annual dividend rate to $0.96 per share from $0.92 per share. During the fourth quarter Trustmark repurchased $7.5 million, or approximately 203 thousand of its common shares. The increase in Trustmark's quarterly dividend and resumption of activity in the share repurchase program have been made possible by continued improvement in profitability and accretion of capital.

2024 Highlights

• Total revenue from continuing operations in 2024 was $561.0 million while total revenue from adjusted continuing operations⁽¹⁾ was $740.5 million, an increase of $39.2 million, or 5.6%, from the prior year
• Net interest income (FTE) totaled $597.0 million, up 5.4% in 2024 to produce a net interest margin of 3.51%, up 19 basis points from 2023
• Wealth management revenue totaled $37.3 million, up 6.2% in 2024
• Noninterest income from continuing operations was a negative $23.4 million in 2024 while noninterest income from adjusted continuing operations⁽¹⁾ totaled $156.1 million, up $7.7 million, or 5.2%, from the prior year
• Noninterest expense from continuing operations totaled $485.7 million in 2024, a decline of $10.0 million compared to the prior year; noninterest expense from adjusted continuing operations⁽¹⁾ declined $2.1 million in 2024
• Efficiency ratio improved 400 basis points to 63.26% in 2024
• Loans held for investment (HFI) increased $139.4 million, or 1.1%, in 2024
• Net charge-offs represented 0.12% of average loans in 2024, excluding portfolio sale of 1-4 family mortgage loans in the second quarter
• Deposits decreased $461.6 million, or 3.0%, in 2024 driven largely by intentional declines in public funds and brokered deposits of $397.9 million and $328.9 million, respectively
• Capital ratios materially increased during 2024; repurchased $7.5 million, or approximately 203 thousand shares, of common stock
• Continued technology investments to enhance efficiency and productivity

Duane A. Dewey, President and CEO, commented, “2024 was a transformational year for Trustmark, reflecting the sale of our insurance agency, the restructuring of our balance sheet, and expanded sales and service initiatives designed to meet the needs of our customers. These actions, along with other initiatives in prior years, have significantly enhanced financial performance and Trustmark’s forward earnings profile. Our capital levels rose meaningfully, which led to the Board’s decision to increase the quarterly cash dividend along with our renewed activity in the share repurchase program. Thanks to the dedicated efforts of our associates, Trustmark is well-positioned for 2025 and beyond.”

Balance Sheet Management

• Loans HFI totaled $13.1 billion at December 31, 2024, down 0.1% from the prior quarter and up 1.1% year over year
• Deposits totaled $15.1 billion at December 31, 2024, down 0.9% from the previous quarter and 3.0% year-over-year
• Maintained strong capital position with CET1 ratio of 11.54% and total risk-based capital ratio of 13.97%

Loans HFI totaled $13.1 billion at December 31, 2024, reflecting a decrease of $10.2 million, or 0.1%, linked-quarter and an increase of $139.4 million, or 1.1%, year-over-year. Trustmark’s loan portfolio remains well-diversified by loan type and geography.

Deposits totaled $15.1 billion at December 31, 2024, down $132.8 million, or 0.9%, from the prior quarter driven by the intentional decline in brokered deposits of $150.0 million. Year-over-year, deposits declined $461.6 million, or 3.0%, driven by intentional declines in public funds and brokered deposits of $397.9 million and $328.9 million, respectively. Trustmark continues to maintain a strong liquidity position as loans HFI represented 86.6% of total deposits at year-end 2024. Noninterest-bearing deposits represented 20.3% of total deposits at December 31, 2024. Interest-bearing deposit costs totaled 2.51% for the fourth quarter, a decrease of 30 basis points linked-quarter. The total cost of interest-bearing liabilities was 2.61% for the fourth quarter of 2024, a decrease of 33 basis points from the prior quarter.

During the fourth quarter, and for the twelve months ended December 31, 2024, Trustmark repurchased $7.5 million, or approximately 203 thousand of its common shares. As previously announced, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2025, under which $100.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2025. 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, 2024, Trustmark’s tangible equity to tangible assets ratio was 9.13%, while the total risk-based capital ratio was 13.97%. Tangible book value per share was $26.68 at December 31, 2024, up 22.8% from the prior year.

Credit Quality

• Net charge-offs totaled $4.6 million, representing 0.14% of average loans in the fourth quarter
• Net provision for credit losses totaled $7.5 million in the fourth quarter
• Allowance for credit losses (ACL) represented 1.22% of loans HFI and 341.20% of nonperforming loans, excluding individually analyzed loans at year-end

Nonaccrual loans totaled $80.1 million at December 31, 2024, an increase of $6.3 million from the prior quarter and a decline of $19.9 million year-over-year. Other real estate totaled $5.9 million, reflecting an increase of $2.0 million from the prior quarter and a decrease of $1.0 million from the prior year. Collectively, nonperforming assets totaled $86.0 million, representing 0.65% of loans HFI and held for sale (HFS) at December 31, 2024.

The net provision for credit losses totaled $7.5 million in the fourth quarter compared to $6.5 million in the third quarter and $6.7 million in the fourth quarter of 2023. The provision for credit losses for loans HFI was $7.0 million in the fourth quarter and was primarily attributable to changes to the economic forecast and net adjustments to the qualitative factors. The provision for credit losses for off-balance sheet credit exposures was $502 thousand, primarily driven by net adjustments to the qualitative factors and increases in unfunded commitments.

Allocation of Trustmark’s $160.3 million ACL on loans HFI represented 1.10% of commercial loans and 1.62% of consumer and home mortgage loans, resulting in an ACL to total loans HFI of 1.22% at December 31, 2024. Management believes the level of the ACL is commensurate with the credit losses currently expected in the loan portfolio.

Revenue Generation

• Total revenue expanded to $196.8 million in the fourth quarter
• Net interest income (FTE) totaled $158.4 million in the fourth quarter, up 0.3% linked-quarter
• Net interest margin totaled 3.76% in the fourth quarter, up 7 basis points from the prior quarter
• Noninterest income totaled $41.0 million, up 9.0% from the prior quarter, representing 20.8% of total revenue in the fourth quarter

Revenue in the fourth quarter totaled $196.8 million, an increase of 2.4% from the prior quarter, reflecting growth in net interest income and noninterest income. In 2024, total revenue from continuing operations was $561.0 million while total revenue from adjusted continuing operations⁽¹⁾ was $740.5 million, an increase of $39.2 million, or 5.6%, from the prior year.

Net interest income (FTE) in the fourth quarter totaled $158.4 million, resulting in a net interest margin of 3.76%, up 7 basis points from the prior quarter. The increase in the net interest margin was primarily due to lower costs of interest-bearing liabilities which were offset in part by lower yields on the loans HFI and HFS portfolio.

Noninterest income in the fourth quarter totaled $41.0 million, an increase of $3.4 million from the prior quarter. The linked-quarter change was broad-based and reflected growth in virtually all fee-based businesses.

Mortgage loan production in the fourth quarter totaled $372.2 million, a decrease of 5.1% linked-quarter and an increase of 36.9% year-over-year. Mortgage banking revenue totaled $7.4 million in the fourth quarter, an increase of $1.3 million from the prior quarter and $1.9 million year-over-year. The linked-quarter increase is attributable to a decrease in negative net hedge ineffectiveness. In 2024, mortgage loan production totaled $1.4 billion, down 2.5% from the prior year. Mortgage banking revenue totaled $26.6 million in 2024, up $410 thousand from the prior year.

Wealth management revenue totaled $9.3 million in the fourth quarter, up 0.3% from the prior quarter and 7.6% from the prior year. The year-over-year change is attributable to increased trust management and brokerage revenue. In 2024, wealth management revenue totaled $37.3 million, up $2.2 million, or 6.2%, from the prior year, reflecting expanded investment services revenue driven by growth in assets under management.

Noninterest Expense

• Noninterest expense increased $1.2 million, or 0.9%, linked-quarter
• Salaries and employee benefits expense increased $2.5 million, or 3.8%, linked-quarter
• Total other expense decreased $2.2 million, or 12.7%, linked-quarter

Salaries and employee benefits expense in the fourth quarter totaled $69.2 million, an increase of $2.5 million, or 3.8%, from the prior quarter. The increase was driven principally by year-end incentives. Total services and fees in the fourth quarter totaled $26.7 million, up $1.0 million from the prior quarter reflecting increased professional fees. Total other expense decreased $2.2 million, or 12.7%, linked-quarter to $15.1 million principally due to reduced other real estate expense, net.

⁽¹⁾ Please refer to Consolidated Financial Information, Note 1 – Significant Non-Routine Transactions and Note 7 – Non-GAAP Financial Measures.

Significant Non-Routine Transactions in the Second Quarter

• Completed sale of FBBI, producing a gain on sale of $228.3 million ($171.2 million, net of taxes)
• Restructured investment securities portfolio; sold available for sale securities of $1.6 billion with an average yield of 1.36%, which generated a loss of $182.8 million ($137.1 million, net of taxes); purchased $1.4 billion of available for sale securities with an average yield of 4.85%
• Sold a portfolio of 1-4 family mortgage loans that were three payments delinquent and/or nonaccrual at time of selection totaling $56.2 million (Mortgage Loan Sale) which generated a loss of $13.4 million ($10.1 million, net of taxes); sale drove a $54.1 million reduction in nonperforming loans
• Exchanged Visa Class B-1 shares for Visa Class B-2 shares and Visa Class C common stock; Visa Class C stock exchange resulted in a gain of $8.1 million ($6.0 million, net of taxes)

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 29, 2025, 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 12, 2025, in archived format at the same web address or by calling (877) 344-7529, passcode 2478325.

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 or financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

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

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