Trustmark(TRMK) - 2024 Q4 - Annual Report

Credit Risk Management - Trustmark's Loans Held for Investment (LHFI) and Loans Held for Sale (LHFS) are categorized based on geographic market regions, with specific underwriting policies in place to mitigate credit risk[30][31][32]. - Trustmark's credit risk management includes adherence to conservative lending practices, collateral monitoring, and oversight of borrowers' financial performance[31][40]. - The credit performance of consumer residential real estate loans is highly dependent on housing values and household income, which are influenced by economic conditions[35][34]. - Trustmark's commercial loans are subject to specific lending policies, including maximum loan-to-value ratios and minimum debt service coverage requirements[36][40]. Economic Conditions - Economic activity improved moderately during 2024, but concerns remain regarding geopolitical developments, inflation, and broader economic volatility[46]. - Consumer spending increased moderately, with strong holiday sales reported, although high mortgage rates continued to suppress residential real estate demand[50]. Regulatory Environment - Trustmark is subject to various regulatory capital requirements, including a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0%[69]. - The BHC Act requires bank holding companies to obtain prior approval from the FRB for acquisitions of voting shares of any bank if they will own or control 5.0% or more of the voting shares post-acquisition[59]. - The OCC finalized a new Policy Statement in September 2024 regarding factors to consider in evaluating proposed bank merger transactions, which may impact Trustmark's future acquisitions[61]. - Trustmark's ability to pay dividends or repurchase stock is limited by the FRB, which requires that cash dividends be covered by the company's net income for the past year[76]. - Trustmark's cash revenue primarily comes from dividends paid by TNB, with regulatory approval required for dividends exceeding TNB's net income for the year plus retained earnings from the previous two years[84]. - TNB is subject to enhanced data collection and reporting requirements under the revised Community Reinvestment Act framework, which applies to banks with assets of at least $2 billion[86]. - The Gramm-Leach-Bliley Act mandates that Trustmark must comply with privacy regulations regarding customer financial information, affecting how consumer data is shared[93]. - TNB's operations are subject to extensive regulation by the OCC and the CFPB, impacting various aspects of its financial services and consumer protection practices[80][87]. - The Dodd-Frank Act has expanded state regulation over national banks, including TNB, potentially increasing compliance requirements[91][92]. - TNB's lending practices are restricted by federal regulations, including limits on loans to insiders and single borrowers, ensuring compliance with safety and soundness standards[81][82]. Financial Performance - The overall asset quality remained stable with low levels of nonperforming loans as a percentage of total loans, despite some concerns about delinquencies among small businesses and lower-income households[48][50]. - Trustmark exceeded its minimum capital requirements with common equity Tier 1 capital, Tier 1 capital, and total capital equal to 11.54$19.2 million in 2024[105]. Market Position - As of June 30, 2024, Trustmark's deposit market share ranked within the top three positions in 55.0% of the 56 counties served and within the top five positions in 68.0% of the counties served[54]. - Trustmark's deposit market share by state includes Alabama at 1.91%, Florida at 0.17%, Mississippi at 13.05%, Tennessee at 0.32%, and Texas at 0.04%[55]. - Trustmark faces significant competition in the banking and financial services industry, with increasing pressure from both online and traditional financial institutions[52]. - Trustmark's ability to compete effectively is attributed to providing customers with desired products and services in a convenient and cost-effective manner[56]. Interest Rate Risk Management - Trustmark's interest rate risk management includes simulations that estimate the impact of various interest rate shifts on net interest income[408]. - A +200 basis points change in interest rates is estimated to increase net interest income by 0.8% in 2024[410]. - A +200 basis points change in interest rates is estimated to decrease net portfolio value by 1.3% in 2024[413]. Mortgage Servicing Rights - The estimated fair value of the Mortgage Servicing Rights (MSR) was $139.3 million at December 31, 2024, up from$131.9 million at December 31, 2023[415]. - A 10% adverse change in prepayment speeds would result in a decline in MSR fair value of approximately $4.9 million at December 31, 2024[415]. - A 100-basis point increase in discount rates would lead to a decline in MSR fair value of approximately$5.6 million at December 31, 2024[415]. Employee Information - Trustmark's employee count stood at 2,500 full-time equivalent associates as of December 31, 2024[109]. FDIC Assessment - The FDIC's risk-based assessment system for deposit insurance premiums is influenced by TNB's financial ratios and supervisory ratings, with an additional $3.4 million in FDIC assessment expense incurred during 2024 due to increased rates[101]. - The FDIC will implement a special assessment at a quarterly rate of 3.36 basis points, approximately 13.4 basis points annually, starting in 2024 to recover losses from the receiverships of Silicon Valley Bank and Signature Bank[102].