ITEM 1A. RISK FACTORS
Trustmark and its subsidiaries could be adversely impacted by various risks and uncertainties, which are difficult to predict. As a financial institution, Trustmark has significant exposure to market risks, including interest rate risk, liquidity risk and credit risk. This section includes a description of the risks, uncertainties and assumptions identified by Management that could, individually or in combination, materially affect Trustmark’s financial condition and results of operations, as well as the value of Trustmark’s financial instruments in general, and Trustmark common stock, in particular. Additional risks and uncertainties that Management currently deems immaterial or is unaware of may also impair Trustmark’s financial condition and results of operations. This report is qualified in its entirety by the risk factors that are identified below.
Risks Related to Trustmark’s Business
Interest Rate Risks
Trustmark’s largest source of revenue (net interest income) is subject to interest rate risk.
Trustmark’s profitability depends to a large extent on net interest income, which is the difference between income on interest-earning assets, such as loans and investment securities, and expense on interest-bearing liabilities, such as deposits and borrowings. Trustmark is exposed to interest rate risk in its core banking activities of lending and deposit taking, since assets and liabilities reprice at different times and by different amounts as interest rates change. Trustmark is unable to predict changes in market interest rates, which are affected by many factors beyond Trustmark’s control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets. For most of 2025, the FRB left the target federal funds rate unchanged at a range of 4.25% to 4.50% and maintained the rate it pays on reserves at 4.40%. However, beginning with the
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September 2025 meeting of the FRB's Federal Open Market Committee, the FRB noted increases in unemployment and inflation shifting the balance of risks to achieving its goals. As a result, the FRB decreased the target federal funds rate and the rate it pays on reserves multiple times during the fourth quarter of 2025, lowering the target federal funds rate to a range of 3.50% to 3.75% and the rate it pays on reserves to 3.65% as of December 2025. Prior period rate increases increased the competitive pressures on the deposit cost of funds. While rate cuts potentially reduced those competitive pressures, they increased pressure on Trustmark's net interest margin, a key component to its financial results. It is not possible to predict the direction, pace or magnitude of further changes, if any, in interest rates, or the impact any such rate changes will have on Trustmark's results of operations.
Financial simulation models are the primary tools used by Trustmark to measure interest rate exposure. Using a wide range of scenarios, Management is provided with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Trustmark’s balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of Trustmark’s balance sheet, resulting from both strategic plans and customer behavior. In addition, the model incorporates Management’s assumptions and expectations regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates. Trustmark’s simulation model using static balances at December 31, 2025 estimated that in the event of a hypothetical 200 basis point increase in interest rates, net interest income may increase 3.1%, while a hypothetical 100 basis point increase in interest rates may increase net interest income 1.5%. In the event of a hypothetical 100 basis point decrease in interest rates using static balances at December 31, 2025, it is estimated net interest income may decrease 2.1%, while a hypothetical 200 basis point decrease in interest rates may decrease net interest income 4.8%.
Net interest income is Trustmark’s largest revenue source, and it is important to discuss how Trustmark’s interest rate risk may be influenced by the various factors shown below:
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In general, for a given change in interest rates, the amount of the change in value (positive or negative) is larger for assets and liabilities with longer remaining maturities. The shape of the yield curve may affect new loan yields, funding costs and investment income differently.
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The remaining maturity of various assets or liabilities may shorten or lengthen as payment behavior changes in response to changes in interest rates. For example, if interest rates decline sharply, fixed-rate loans may pre-pay, or pay down, faster than anticipated, thus reducing future cash flows and interest income. Conversely, if interest rates increase, depositors may cash in their certificates of deposit prior to term (notwithstanding any applicable early withdrawal penalties) or otherwise reduce their deposits to pursue higher yielding investment alternatives. Repricing frequencies and maturity profiles for assets and liabilities may occur at different times. For example, in a falling rate environment, if assets reprice faster than liabilities, there will be an initial decline in earnings. Moreover, if assets and liabilities reprice at the same time, they may not be by the same increment. For instance, if the federal funds rate increased 50 basis points, rates on demand deposits may rise by 10 basis points, whereas rates on prime-based loans will instantly rise 50 basis points.
Financial instruments do not respond in a parallel fashion to rising or falling interest rates. This causes asymmetry in the magnitude of changes in net interest income, net economic value and investment income resulting from the hypothetical increases and decreases in interest rates. Therefore, Management monitors interest rate risk and adjusts Trustmark’s investment, funding and hedging strategies to mitigate adverse effects of interest rate shifts on Trustmark’s balance sheet.
Trustmark utilizes derivative contracts to hedge the mortgage servicing rights (MSR) in order to offset changes in fair value resulting from changes in interest rate environments. In spite of Trustmark’s due diligence in regard to these hedging strategies, significant risks are involved that, if realized, may prove such strategies to be ineffective, which could adversely affect Trustmark’s financial condition or results of operations. Risks associated with these strategies include the risk that counterparties in any such derivative and other hedging transactions may not perform; the risk that these hedging strategies rely on Management’s assumptions and projections regarding these assets and general market factors, including prepayment risk, basis risk, market volatility and changes in the shape of the yield curve, and that these assumptions and projections may prove to be incorrect; the risk that these hedging strategies do not adequately mitigate the impact of changes in interest rates, prepayment speeds or other forecasted inputs to the hedging model; and the risk that the models used to forecast the effectiveness of hedging instruments may project expectations that differ from actual results. In addition, increased regulation of the derivative markets may increase the cost to Trustmark to implement and maintain an effective hedging strategy.
Trustmark closely monitors the sensitivity of net interest income and investment income to changes in interest rates and attempts to limit the variability of net interest income as interest rates change. Trustmark makes use of both on- and off-balance sheet financial instruments to mitigate exposure to interest rate risk.
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Credit and Lending Risks
Trustmark is subject to lending risk, which could impact the adequacy of the allowance for credit losses and results of operations.
There are inherent risks associated with Trustmark’s lending activities. If trends in the housing and real estate markets were to decline appreciably, Trustmark may experience higher than normal delinquencies and credit losses. Moreover, if the United States economy were to enter into a recession, Management expects that this scenario could severely affect economic conditions in Trustmark’s market areas and that Trustmark could experience significantly higher delinquencies and credit losses.
In addition, bank regulatory agencies periodically review Trustmark’s allowance for credit losses and may require an increase in the provision for credit losses or the recognition of further charge-offs, based on judgments different from those of Management. As a result, Trustmark may elect, or be required, to make further increases in its provision for credit losses in the future, particularly if economic conditions deteriorate.
Trustmark may also rely on information furnished by or on behalf of customers and counterparties in deciding whether to extend credit or enter into other transactions. This information could include financial statements, credit reports, business plans, and other information. Trustmark may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other information could have a material adverse impact on Trustmark’s business, financial condition and results of operations.
Trustmark is subject to environmental liability risk associated with lending activities.
A significant portion of Trustmark’s loan portfolio is secured by real property. During the ordinary course of business, Trustmark forecloses on and takes title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, Trustmark may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require Trustmark to incur substantial expenses and may materially reduce the affected property’s value or limit Trustmark’s ability to use or ability to sell the affected property or to repay the indebtedness secured by the property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase Trustmark’s exposure to environmental liability. Environmental reviews of nonresidential real estate before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on Trustmark’s business, financial condition and results of operations.
Declines in asset values may result in credit losses and adversely affect the value of Trustmark’s investments.
Trustmark maintains an investment portfolio that includes, among other asset classes, obligations of states and municipalities, agency debt securities and agency mortgage-related securities. The market value of investments in Trustmark’s investment portfolio may be affected by factors other than interest rates or the underlying performance of the issuer of the securities, such as ratings downgrades, adverse changes in the business climate and a lack of pricing information or liquidity in the secondary market for certain investment securities. In addition, government involvement or intervention in the financial markets or the lack thereof or market perceptions regarding the existence or absence of such activities could affect the market and the market prices for these securities.
On a quarterly basis, Trustmark evaluates investments and other assets for expected credit losses. At December 31, 2025, gross unrealized losses on securities for which an allowance for credit losses has not been recorded totaled $14.5 million. Trustmark may be required to record credit loss expense if these investments suffer a decline in value that is the result of a credit loss. If Trustmark determines that a credit loss exists, the credit portion of the allowance would be measured using a discounted cash flow (DCF) analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss Trustmark may record is limited to the amount by which the amortized cost exceeds the fair value, which could have a material adverse effect on results of operations in the period in which a credit loss, if any, occurs.
Liquidity Risk
Trustmark is subject to liquidity risk, which could disrupt its ability to meet its financial obligations.
Liquidity refers to Trustmark’s ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes. Liquidity risk arises whenever the maturities of financial instruments included in assets and liabilities differ or when assets cannot be liquidated at fair market value as needed. Trustmark obtains funding through deposits and various short-term and long-term wholesale borrowings, including federal funds purchased and securities sold under repurchase agreements, the Federal Reserve Discount Window
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(Discount Window) and Federal Home Loan Bank (FHLB) advances. Any significant restriction or disruption of Trustmark’s ability to obtain funding from these or other sources could have a negative effect on Trustmark’s ability to satisfy its current and future financial obligations, which could materially affect Trustmark’s financial condition or results of operations.
In addition to the risk that one or more of the funding sources may become constrained due to market conditions unrelated to Trustmark, there is the risk that Trustmark’s credit profile may decline such that one or more of these funding sources becomes partially or wholly unavailable to Trustmark.
Trustmark attempts to quantify such credit event risk by modeling bank specific and systemic scenarios that estimate the liquidity impact. Trustmark estimates such impact by attempting to measure the effect on available unsecured lines of credit, available capacity from secured borrowing sources and securitizable assets. To mitigate such risk, Trustmark maintains available lines of credit with the FRBA and the FHLB of Dallas that are secured by loans and investment securities. Management continuously monitors Trustmark’s liquidity position for compliance with internal policies.
External and Market-Related Risks
Trustmark’s business may be adversely affected by conditions in the financial markets and economic conditions in general.
Economic activity improved slightly during 2025, but was characterized by mixed signals, notably, strong equity market performance, continued consumer spending and FRB rate cuts, but also a softening labor market and persistent inflationary pressures, driven partly by new tariffs. United States stocks performed strongly during the second half of 2025, supported by optimistic sentiment around lower interest rates, better-than-expected corporate earnings and strong performance in the technology and AI sectors. However, economic concerns remain as a result of the cumulative weight of uncertainty regarding the potential economic impact of geopolitical developments, such as the conflicts in Ukraine and the Middle East, the current United States presidential administration's policies, inflationary and broader pricing pressures and other economic and industry volatility. Concerns surrounding the direction of global markets and the potential impact on the United States economy are expected to persist for the near term. While Trustmark's customer base is wholly domestic, international economic conditions affect domestic economic conditions, and thus may have an impact upon Trustmark's financial condition or results of operations.
Strategic risk, including threats to business models from increasing pressures on net interest margins and modest economic growth, remains high. Management’s ability to plan, prioritize and allocate resources in this environment will be critical to Trustmark’s ability to sustain earnings that will attract capital. Because of the complexities presented by current economic conditions, Management will continue to be challenged in identifying alternative sources of revenue, prudently diversifying assets, liabilities and revenue and effectively managing the costs of compliance.
Trustmark is intently monitoring the impact of tariffs and other administrative policies on its customer base, interest rates and credit-related issues. Economic uncertainty or disruptions in the marketplace as a result of such policies could reduce loan demand or increase loan nonperformance. It is not possible to predict the timing or magnitude of changes to policies by the current United States presidential administration, if any, or the impact any such policy changes could have on Trustmark's customer base, credit quality or results of operations.
Trustmark does not assume that current uncertain conditions in the economy will improve significantly in the near future. A weakened economy could affect Trustmark in a variety of substantial and unpredictable ways. In particular, Trustmark may face the following risks in connection with these events:
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Market developments and the resulting economic pressure on consumers may affect consumer confidence levels and may cause increases in delinquencies and default rates, which, among other effects, could further affect Trustmark’s charge-offs and provision for credit losses.
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Loan performance could experience a significantly extended deterioration or loan default levels could accelerate, foreclosure activity could significantly increase, or Trustmark’s assets (including loans and investment securities) could materially decline in value, any one of which, or any combination of more than one of which, could have a material adverse effect on Trustmark’s financial condition or results of operations.
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Management’s ability to measure the fair value of Trustmark’s assets could be adversely affected by market disruptions that could make valuation of assets more difficult and subjective. If Management determines that a significant portion of its assets have values that are significantly below their recorded carrying value, Trustmark could recognize a material charge
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to earnings in the quarter during which such determination was made, Trustmark’s capital ratios would be adversely affected by any such charge, and a rating agency might downgrade Trustmark’s credit rating or put Trustmark on credit watch.
While the banking industry has stabilized since the disruptions associated with bank failures in Spring 2023, there remains heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses and capital among counterparties, customers and regulators. It is difficult to predict the extent to which these conditions will persist or whether recent progress in the economic recovery will instead shift to the potential for further decline. If the economy does weaken in the future, it is uncertain how Trustmark’s business would be affected and whether Trustmark would be able to successfully mitigate any such effects on its business. Accordingly, these factors in the United States (and, indirectly, global) economy could have a material adverse effect on Trustmark’s financial condition and results of operations.
Trustmark operates in a highly competitive financial services industry.
Trustmark faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have greater financial resources. Such competitors primarily include banks, as well as community banks operating nationwide and regionally within the various markets in which Trustmark operates. Trustmark also faces competition from many other types of financial institutions, including savings and loans, credit unions, finance companies, brokerage firms, factoring companies and other financial intermediaries. Additionally, fintech developments, such as blockchain and other distributed ledger technologies, have the potential to disrupt the financial industry and change the way banks do business. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.
Some of Trustmark’s competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many of Trustmark’s larger competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than Trustmark.
Trustmark’s ability to compete successfully depends on a number of factors, including: the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; the ability to continue to expand Trustmark’s market position through organic growth and acquisitions; the scope, relevance and pricing of products and services offered to meet customer needs and demands; the rate at which Trustmark introduces new products and services relative to its competitors; and industry and general economic trends. Failure to perform in any of these areas could significantly weaken Trustmark’s competitive position, which could adversely affect Trustmark’s financial condition or results of operations.
The soundness of other financial institutions could adversely affect Trustmark.
Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. As a result, defaults by, or questions or rumors about, one or more financial services institutions or the financial services industry in general, could lead to market-wide liquidity problems, which could, in turn, lead to defaults or losses by Trustmark and by other institutions. Trustmark has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, mutual funds, and other institutional clients. Many of these transactions expose Trustmark to credit risk in the event of default of its counterparty or client. In addition, Trustmark’s credit risk may be exacerbated when the collateral it holds cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure owed to Trustmark. Losses related to these credit risks could materially and adversely affect Trustmark’s results of operations.
Compliance and Regulatory Risks
Trustmark is subject to extensive government regulation and supervision and possible enforcement and other legal actions.
Trustmark, primarily through TB and certain nonbank subsidiaries, is subject to extensive federal and state regulation and supervision, which vests a significant amount of discretion in the various regulatory authorities. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not security holders. These regulations and supervisory guidance affect Trustmark’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal and state regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies or supervisory guidance, including changes in interpretation or implementation or statutes, regulations, policies and supervisory guidance, could affect Trustmark in substantial and unpredictable ways. Such changes could subject Trustmark to additional costs, limit the types of financial services and products Trustmark may offer and/or increase the ability of nonbanks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, policies or supervisory guidance could result in enforcement and other legal actions by Federal or state authorities, including criminal and civil penalties, the loss of FDIC insurance, the revocation of a banking charter, civil money penalties, other sanctions by
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regulatory agencies and/or reputational damage. In this regard, government authorities, including bank regulatory agencies, have the authority to pursue enforcement agendas with respect to compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived compliance failures. Any of the foregoing could have a material adverse effect on Trustmark’s financial condition or results of operations.
Trustmark is subject to numerous laws designed to protect consumers, including fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
The Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The DOJ and other federal agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s performance under fair lending laws and regulations could result in a wide variety of direct or indirect negative consequences, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on geographic expansion and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on Trustmark’s business, financial condition or results of operations.
In addition, financial institutions face scrutiny on actions and policies that are deemed to adversely impact consumers under the Dodd-Frank Act’s prohibition against unfair, deceptive or abusive acts and practices and Section 5 of the Federal Trade Commission Act’s prohibition against unfair or deceptive acts and practices. Bank regulators and the CFPB are responsible for enforcing these prohibitions against banking organizations. These prohibitions have been applied to prohibit perceived customer abuse in connection with a range of products, services, and practices, including account openings and fees charged where inadequate or no services are rendered for which charges were imposed, as well as other instances where consumers may have been misled through bank disclosures. In addition, the enforcement priorities of the agencies enforcing consumer protection laws have evolved over time and may continue to do so.
Failure by Trustmark to perform satisfactorily on its CRA evaluations could make it more difficult for Trustmark’s business to grow.
The performance of a bank under the CRA in meeting the credit needs of its community is a factor that must be taken into consideration when the federal banking agencies evaluate applications related to mergers and acquisitions, as well as branch opening and relocations. As of its last examination, TB received a CRA rating of “Outstanding,” which represented an improvement from its previous CRA rating of “Needs to Improve.” TB’s failure to maintain at least a “Satisfactory” CRA rating in the future could adversely affect its ability to complete the acquisition of another financial institution or open a new branch. If TB were to receive an overall CRA rating of less than “Satisfactory” in the future, the FRB would not re-evaluate the CRA rating until TB’s next CRA examination, which may not occur for several years. It is possible that a low CRA rating would not improve in the future.
Trustmark is subject to stringent capital requirements.
Under the regulatory capital rules of the FRB, OCC, and FDIC that implement a set of capital requirements issued by the Basel Committee on Banking Supervision known as Basel III, Trustmark and TB are required to maintain a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0% (a minimum of 4.5% plus a capital conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of at least 8.5% (a minimum of 6.0% plus a capital conservation buffer of 2.5%), a total capital to risk-weighted assets ratio of at least 10.5% (a minimum of 8.0% plus a capital conservation buffer of 2.5%) and a leverage ratio of Tier 1 capital to total consolidated assets of at least 4.0%. In addition, for TB to be “well-capitalized” under the banking agencies’ prompt corrective action framework, it must have a common equity Tier 1 capital ratio of at least 6.5%, a Tier 1 capital ratio of at least 8.0%, a total capital ratio of at least 10.0% and a leverage ratio of at least 5.0%, and must not be subject to any written agreement, order or capital directive, or prompt corrective action directive issued by its primary federal regulator to meet and maintain a specific capital level for any capital measure.
The capital rules also include stringent criteria for capital instruments to qualify as Tier 1 or Tier 2 capital. For instance, the rules effectively disallow newly issued trust preferred securities to be a component of a holding company’s Tier 1 capital. Trustmark will continue to count $60.0 million in outstanding trust preferred securities issued by the Trust as Tier 1 capital up to the regulatory limit, as permitted by a grandfather provision in the capital rules, but this grandfather provision may cease to apply if Trustmark consummates an acquisition of a depository institution holding company.
Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 326, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments,” requires Trustmark to recognize all expected credit losses over the life of a loan based on historical experience, current conditions and reasonable and supportable forecasts. FASB ASC Topic 326 generally results in earlier recognition of credit losses, which would increase reserves and decrease capital. Additionally, the allowance for credit losses model could be materially impacted by changes in current and forecasted macroeconomic conditions. It is not possible to predict the timing or magnitude of changes in macroeconomic conditions or the impact such changes could have on Trustmark’s
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allowance for credit losses; however, material changes in the allowance for credit losses could have a material impact on Trustmark’s reserves and capital.
The regulatory capital rules applicable to Trustmark and TB may continue to evolve as a result of new requirements established by the Basel Committee on Banking Supervision or legislative, regulatory or accounting changes in the United States. Management cannot predict the effect that any changes to current capital requirements would have on Trustmark and TB.
Trustmark’s use of third-party service providers and Trustmark’s other ongoing third-party business relationships are subject to increasing regulatory requirements and attention.
Trustmark regularly uses third-party service providers and subcontractors as part of its business. Trustmark also has substantial ongoing business relationships with partners and other third-parties and relies on certain third-parties to provide products and services necessary to maintain day-to-day operations. These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by regulators, including the FRB, OCC, CFPB and FDIC. Under interagency regulatory guidance issued in 2023, Trustmark is required to apply stringent due diligence, conduct ongoing monitoring and maintain effective control over third-party service providers and subcontractors and other ongoing third-party business relationships. These regulatory expectations may continue to evolve and become more rigorous over time. Trustmark expects that the regulators will hold Trustmark responsible for deficiencies in its oversight and control of its third-party relationships and in the performance of the parties with which Trustmark has these relationships. Trustmark maintains a system of policies and procedures designed to ensure adequate due diligence is performed and to monitor vendor risks. While Trustmark believes these policies and procedures effectively mitigate risk, if the regulators conclude that Trustmark has not exercised adequate oversight and control over third-party service providers and subcontractors or other ongoing third-party business relationships or that such third-parties have not performed appropriately, Trustmark could be subject to enforcement actions, including civil monetary penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation.
Trustmark's ability to declare and pay dividends is subject to restriction by various laws and regulations and other factors.
Trustmark is a separate and distinct legal entity from TB, and receives substantially all of its cash stream from dividends from TB. These dividends are the principal source of funds to pay dividends on Trustmark's common stock and interest on its debt. Various federal and state laws and regulations limit the amount of dividends that TB may pay to Trustmark. In the event TB is unable to declare dividends, or is limited in the amount of any dividend it may be able to declare, Trustmark may not be able to declare dividends on its common stock or meet other financial obligations. Any inability to receive dividends from TB could have a material adverse effect on Trustmark's business, financial condition and results of operations. The information under the section captioned “Supervision and Regulation” included in Part I. Item 1. – Business in this report provides further discussion about the restrictions governing TB’s ability to transfer funds to Trustmark.
Operational Risks
There may be risks resulting from the extensive use of models in Trustmark’s business.
Trustmark relies on statistical and quantitative models to measure risks and to estimate certain financial values. Models may be used in such processes as determining the pricing of various products, assessing potential acquisition opportunities, developing presentations made to market analysts and others, creating loans and extending credit, measuring interest rate and other market risks, predicting losses, assessing capital adequacy, calculating regulatory capital levels and estimating the fair value of financial instruments and balance sheet items. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If models for determining interest rate risk and asset-liability management are inadequate, Trustmark may incur increased or unexpected losses upon changes in market interest rates or other market measures. If models for determining expected credit losses are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs. If models to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what Trustmark could realize upon sale or settlement of such financial instruments. Any such failure in the analytical or forecasting models could have a material adverse effect on Trustmark’s financial condition or results of operations.
Also, information Trustmark provides to its regulators based on poorly designed or implemented models could be inaccurate or misleading. Certain decisions that the regulators make, including those related to capital distributions and dividends to Trustmark’s shareholders, could be adversely affected due to the regulator’s perception that the quality of Trustmark’s models used to generate the relevant information is insufficient.
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Trustmark could be required to write down goodwill and other intangible assets.
If Trustmark consummates an acquisition, a portion of the purchase price would generally be allocated to goodwill and other identifiable intangible assets. The amount of the purchase price that is allocated to goodwill and other intangible assets is determined by the excess of the purchase price over the net identifiable assets acquired. At December 31, 2025, goodwill was $334.6 million. Trustmark's other identifiable intangible assets, net were fully amortized as of December 31, 2025. Under current accounting standards, if Trustmark determines goodwill or other intangible assets are impaired, Trustmark would be required to write down the carrying value of these assets. Trustmark’s annual goodwill impairment evaluation performed during the fourth quarter of 2025 indicated no impairment of goodwill for any reporting segment. Management cannot provide assurance, however, that Trustmark will not be required to take an impairment charge in the future. Any impairment charge would have an adverse effect on Trustmark’s shareholders’ equity and financial condition and could cause a decline in Trustmark’s stock price.
Trustmark holds other real estate and may acquire and hold significant additional amounts, which could lead to increased operating expenses and vulnerability to additional declines in real property values.
As business necessitates, Trustmark forecloses on and takes title to real estate serving as collateral for loans. At December 31, 2025, Trustmark held $7.0 million of other real estate. The amount of other real estate held by Trustmark may increase in the future as a result of, among other things, business combinations, increased uncertainties in the housing market or increased levels of credit stress in residential real estate loan portfolios. Increased other real estate balances could lead to greater expenses as Trustmark incurs costs to manage, maintain and dispose of real properties as well as to remediate any environmental cleanup costs incurred in connection with any contamination discovered on real property on which Trustmark has foreclosed and to which Trustmark has taken title. As a result, Trustmark’s earnings could be negatively affected by various expenses associated with other real estate owned, including personnel costs, insurance and taxes, completion and repair costs, valuation adjustments and other expenses associated with real property ownership, as well as by the funding costs associated with other real estate assets. The expenses associated with holding a significant amount of other real estate could have a material adverse effect on Trustmark’s financial condition or results of operations.
If Trustmark is required to repurchase a significant number of mortgage loans that it had previously sold, such repurchases could negatively affect earnings.
One of Trustmark’s primary business operations is mortgage banking, under which residential mortgage loans are sold in the secondary market under agreements that contain representations and warranties related to, among other things, the origination and characteristics of the mortgage loans. Trustmark may be required to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the anticipated economic benefits of a loan if it is determined that the loan sold was in violation of representations or warranties made by Trustmark at the time of the sale, herein referred to as mortgage loan servicing putback expenses. Such representations and warranties typically include those made regarding loans that had missing or insufficient file documentation, loans that do not meet investor guidelines, loans in which the appraisal does not support the value and/or loans obtained through fraud by the borrowers or other third parties. Generally, putback requests may be made until the loan is paid in full. However, mortgage loans delivered to the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) on or after January 1, 2013 are subject to the Representations and Warranties Framework, which provides that FNMA and FHLMC will not exercise their remedies, including a putback request, for breaches of certain selling representations and warranties if the mortgage loans satisfy certain criteria, such as payment history or quality control review.
Changes in retail distribution strategies and consumer behavior may adversely impact Trustmark’s investments in premises, equipment, technology and other assets and may lead to increased expenditures to change its retail distribution channel.
Trustmark has significant investments in bank premises and equipment for its branch network. Advances in technology such as ecommerce, telephone, internet and mobile banking, and in-branch self-service technologies including interactive teller machines (ITMs) and other equipment, as well as an increasing customer preference for these other methods of accessing Trustmark’s products and services, could decrease the value of its branch network, technology, or other retail distribution physical assets and may cause Trustmark to change its retail distribution strategy, close and/or sell certain branches or parcels of land held for development and restructure or reduce its remaining branches and work force. These actions could lead to losses on these assets or could adversely impact the carrying value of any long-lived assets and may lead to increased expenditures to renovate, reconfigure or close a number of Trustmark’s remaining branches or to otherwise reform its retail distribution channel.
Trustmark may experience disruptions of its operating systems or breaches in its information system security.
Trustmark is dependent upon communications and information systems to conduct business as such systems are used to manage virtually all aspects of Trustmark’s business. Trustmark’s operations rely on the secure processing, storage and transmission of confidential and other information within its computer systems and networks. Any failure, interruption or breach in security of these systems could result
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in significant disruption to Trustmark's operations. Trustmark has taken protective measures, which are continuously monitored and modified as warranted; however, Trustmark’s computer systems, software and networks may fail to operate properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond Trustmark’s control. There could be sudden increases in customer transaction volume; electrical, telecommunications or other major physical infrastructure outages; natural disasters; and events arising from local or larger scale political or social matters, including terrorist acts.
Further, Trustmark’s operational and security systems and infrastructure may be vulnerable to breaches and cybersecurity-related incidents including, but not limited to, attempts to access information, including customer and company information, malicious code, computer viruses and denial of service attacks that could result in unauthorized access, theft, misuse, loss, release or destruction of data (including confidential customer information), account takeovers, unavailability of service or other events. These types of threats may derive from human error, fraud or malice on the part of external or internal parties, or may result from accidental technological failure. If one or more of these events were to occur, Trustmark’s or its customers’ confidential and other information would be jeopardized, or such an event could cause interruptions or malfunctions in Trustmark’s or its customers’ or counterparties’ operations. Any failures related to upgrades and maintenance of Trustmark's technology and information systems could further increase its information and system security risk. Trustmark's increased use of cloud and other technologies, such as remote work technologies, also increases its risk of being subject to a cyber-attack. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Trustmark may be required to expend significant additional resources to modify its protective measures or to investigate and remediate vulnerabilities or other exposures in its computer systems and networks, and Trustmark may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by Trustmark. Any such losses, which may be difficult to detect, could adversely affect Trustmark’s financial condition or results of operations. In addition, the occurrence of such a loss could expose Trustmark to reputational risk, the loss of customer business and additional regulatory scrutiny.
Security breaches in Trustmark’s internet and mobile banking activities (myTrustmark®) could further expose Trustmark to possible liability and reputational risk. Any compromise in security could deter customers from using Trustmark’s internet and mobile banking services that involve the transmission of confidential information. Trustmark relies on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data. However, these precautions may not protect Trustmark’s systems from compromise or breaches of security, which could result in significant legal liability and significant damage to Trustmark’s reputation and business.
Trustmark relies upon certain third-party vendors to provide products and services necessary to maintain day-to-day operations. Accordingly, Trustmark’s operations are exposed to the risk that these vendors might not perform in accordance with applicable contractual arrangements or service level agreements or that the security of the third-party vendors’ computer systems, software and networks may be vulnerable to compromises that could impact information system security. Trustmark maintains a system of policies and procedures designed to monitor vendor risks. While Trustmark believes these policies and procedures effectively mitigate risk, the failure of an external vendor to perform in accordance with applicable contractual arrangements or service level agreements or any compromise in the security of an external vendor’s information systems could be disruptive to Trustmark’s operations, which could have a material adverse effect on its financial condition or results of operations.
As of the date of this Annual Report on Form 10-K, Trustmark has seen no material adverse impact on its business or operations from cyber-attacks or events. Trustmark's customers, employees and third parties that it does business with have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware programs to its information systems, the information systems of its merchants or third-party service providers and/or its customers' personal devices, which are beyond Trustmark's security control systems. Though Trustmark endeavors to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber-attacks against Trustmark, its merchants, third-party service providers and customers remain a serious issue and have been successful in the past.
Although Trustmark makes significant efforts to maintain the security and integrity of its information systems and has implemented various measures to manage the risks of a security breach or disruption, there can be no assurance that its security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, Trustmark may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for Trustmark to entirely mitigate this risk. Furthermore, in the event of a cyber-attack, Trustmark may be delayed in identifying or responding to the attack, which could increase the negative impact of the cyber-attack on its business, financial condition and results of operations. A security breach or other significant disruption of Trustmark's information systems or those related to its customers, merchants or third-party vendors, including as a result of cyber-attacks, could (i) disrupt the proper functioning of its networks and systems and therefore
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its operations and/or those of its customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of Trustmark or its customers; (iii) result in a violation of applicable privacy, data breach and other laws, subjecting Trustmark to additional regulatory scrutiny and exposing it to civil litigation, enforcement actions, governmental fines and possible financial liability; (iv) require significant management attention and resources to remedy the damages that result; or (v) harm Trustmark's reputation or cause a decrease in the number of customers that choose to do business with Trustmark. The occurrence of any of the foregoing could have a material adverse effect on Trustmark's business, financial condition and results of operations.
Trustmark must utilize new technologies to deliver its products and services, which could require significant resources and expose Trustmark to additional risks, including cyber-security risks.
In order to deliver new products and services and to improve the productivity of existing products and services, the banking industry relies on rapidly evolving technologies. Trustmark continues to invest in technology to facilitate the ability of its customers to engage in financial transactions, and otherwise enhance the customer experience with respect to its products and services. Trustmark’s ability to effectively utilize new technologies to address customer needs and create operating efficiencies could materially affect future prospects. Management cannot provide any assurances that Trustmark will be successful in utilizing such new technologies. Incorporation of new products and services, such as internet and mobile banking services, may require significant resources and expose Trustmark to additional risks, including cyber-security risks.
Trustmark’s controls and procedures may fail or be circumvented.
Trustmark’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures are based in part on assumptions, and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of Trustmark’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on Trustmark’s business, financial condition and results of operations.
Trustmark may be subject to increased claims and litigation, which could result in legal liability and reputational damage.
Trustmark has been named from time to time as a defendant in litigation relating to its businesses and activities. Litigation may include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages.
In recent years, a number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or shareholders. Substantial legal liability against Trustmark, including its subsidiaries, could materially adversely affect Trustmark’s business, financial condition or results of operations, or cause significant harm to its reputation.
Damage to Trustmark’s reputation could have a significant negative impact on Trustmark’s business.
Trustmark’s ability to attract and retain customers, clients, investors, and highly-skilled management and employees is affected by its reputation. Significant harm to Trustmark’s reputation can also arise from other sources, including employee misconduct, actual or perceived unethical or illegal behavior, litigation or regulatory outcomes, failing to deliver minimum or required standards of service and quality, compliance failures, disclosure of confidential information, significant or numerous failures, interruptions or breaches of its information systems and the activities of its clients, customers and counterparties, including vendors. Actions by the financial services industry generally or by certain members or individuals in the industry may have a significant adverse effect on Trustmark’s reputation. Trustmark could also suffer significant reputational harm if it fails to properly identify and manage potential conflicts of interest. Management of potential conflicts of interests has become increasingly complex as Trustmark expands its business activities through more numerous transactions, obligations and interests with and among its clients. The actual or perceived failure to adequately address conflicts of interest could affect the willingness of clients to deal with Trustmark, which could adversely affect Trustmark’s businesses.
Risk Related to Acquisition Activity
Potential acquisitions by Trustmark may disrupt Trustmark’s business and dilute shareholder value.
Trustmark continuously monitors the market for merger or acquisition opportunities and, depending upon business and other considerations, may elect to pursue one or more such opportunities in the future. Any such merger or acquisition candidate would need to have a similar culture to Trustmark, have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services. Acquiring other banks, businesses,
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or branches involves various risks commonly associated with acquisitions, including: potential exposure to unknown or contingent liabilities of the target company, exposure to potential asset quality issues of the target company, difficulty and expense of integrating the operations and personnel of the target company, potential disruption to Trustmark’s business, potential diversion of Trustmark’s Management’s time and attention, the possible loss of key employees and customers of the target company, difficulty in estimating the value of the target company and potential changes in banking or tax laws or regulations that may affect the target company. Acquisitions may involve the payment of a premium over book and market values, and, therefore, some dilution of Trustmark’s tangible book value and net income per share of common stock may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue projections, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on Trustmark’s financial condition or results of operations.
General Risk Factors
The stock price of financial institutions, like Trustmark, can be volatile.
The volatility in the stock prices of companies in the financial services industry, such as Trustmark, may make it more difficult for shareholders to resell Trustmark common stock at attractive prices in a timely manner. Trustmark’s stock price can fluctuate significantly in response to a variety of factors, including factors affecting the financial industry as a whole, such as the bank failures in Spring 2023. The factors affecting financial stocks generally and Trustmark’s stock price in particular include:
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actual or anticipated variations in earnings;
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changes in analysts’ recommendations or projections;
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operating and stock performance of other companies deemed to be peers;
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perception in the marketplace regarding Trustmark, its competitors and/or the industry as a whole;
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significant acquisitions or business combinations involving Trustmark or its competitors;
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provisions in Trustmark’s by-laws and articles of incorporation that may discourage takeover attempts, which may make Trustmark less attractive to a potential purchaser;
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changes in government regulation;
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failure to integrate acquisitions or realize anticipated benefits from acquisitions; and
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volatility affecting the financial markets in general.
General market fluctuations, the potential for breakdowns on electronic trading or other platforms for executing securities transactions, industry factors and general economic and political conditions could also cause Trustmark’s stock price to decrease regardless of operating results.
Changes in accounting standards may affect how Trustmark reports its financial condition and results of operations.
Trustmark’s accounting policies and methods are fundamental to how Trustmark records and reports its financial condition and results of operations. From time to time, the FASB changes the financial accounting and reporting standards that govern the preparation of Trustmark’s financial statements. The most recent economic recession resulted in increased scrutiny of accounting standards by regulators and legislators, particularly as they relate to fair value accounting principles. In addition, ongoing efforts to achieve convergence between generally accepted accounting principles (GAAP) and International Financial Reporting Standards may result in changes to GAAP. Any such changes can be difficult to predict and can materially affect how Trustmark records and reports its financial condition or results of operations. For additional details regarding recently adopted and pending accounting pronouncements, see Note 1 – Significant Accounting Policies included in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
Trustmark may not be able to attract or retain key employees.
Trustmark’s success depends substantially on its ability to attract and retain skilled, experienced personnel. Competition for qualified candidates in the activities and markets that Trustmark serves is intense. While Trustmark invests significantly in the training and development of its employees, it is possible that Trustmark may not be able to retain key employees. If Trustmark were unable to retain its most qualified employees, its performance and competitive positioning could be materially adversely affected.
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Natural disasters, such as hurricanes, could have a significant negative impact on Trustmark’s business.
Many of Trustmark’s loans are secured by property or are made to businesses in or near the Gulf Coast regions of Alabama, Florida, Mississippi and Texas, which are often in the path of seasonal hurricanes. Natural disasters, such as hurricanes, could have a significant negative impact on the stability of Trustmark’s deposit base, the ability of borrowers to repay outstanding loans and the value of collateral securing loans, and could cause Trustmark to incur material additional expenses. Although Management has established disaster recovery policies and procedures, the occurrence of a natural disaster, especially if any applicable insurance coverage is not adequate to enable Trustmark’s borrowers to recover from the effects of the event, could have a material adverse effect on Trustmark’s financial condition or results of operations.
Expectations around Environmental, Social and Governance (ESG) practices as well as climate change and related regulatory initiatives could adversely affect Trustmark’s business and results of operations, including indirectly through impact to its customers.
Stakeholders' expectations regarding ESG practices, as well as climate-related legislative and regulatory initiatives, continue to evolve. Institutional investors, and investor advocacy groups, in particular, are increasingly focused on these matters and expectations in many of these areas can vary widely. In addition, increased ESG related compliance costs could result in increases to Trustmark’s overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards, and fluctuations in these standards, could negatively impact Trustmark’s reputation, ability to do business with certain partners and its stock price. New government regulations (including at the state level) could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence and disclosure. Consumers and businesses also may change their behavior on their own as a result of these concerns. It is not possible to predict how climate change may impact Trustmark’s financial condition and operations; however, Trustmark operates in areas where its business and the activities of its customers could be impacted by the effects of climate change. The effects of climate change may include increased frequency or severity of weather-related events, such as severe storms, hurricanes, flooding and droughts and rising sea levels. These effects can disrupt business operations, damage property, devalue assets and change customer and business preferences, which may adversely affect borrowers, increase credit risk and reduce demand for Trustmark’s products and services. Trustmark and its customers may need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. Trustmark and its customers may face cost increases, asset value reductions, operating process changes and the like. The impact to Trustmark’s customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. In addition, Trustmark could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. Trustmark’s efforts to take these risks into account may not be effective in protecting it from the negative impact of regulatory initiatives or changes in consumer or business behavior and could have a material adverse effect on Trustmark’s financial condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Trustmark recognizes the critical importance of identifying, assessing and managing material risks from cybersecurity threats. Trustmark is committed to implementing and maintaining a comprehensive information security program to manage such risks and safeguard its systems and data.
Trustmark’s Board of Directors has ultimate oversight of cybersecurity-related risks and it is assisted in this role by the Enterprise Risk Committee and the Audit Committee. Processes for identifying, assessing and managing cybersecurity-related risks are integrated into Trustmark’s overall enterprise risk management process, which is overseen by the Enterprise Risk Committee.The Enterprise Risk Committee is responsible for monitoring risks that are being taken by Trustmark, understanding the enterprise-wide effect of those risks and reporting such risks to the Board. In fulfilling this role, the Enterprise Risk Committee has primary oversight responsibility over management’s efforts to manage and mitigate cybersecurity-related risk and reviews and approves Trustmark’s cybersecurity strategy for protecting Trustmark’s information assets and technology platforms. The Audit Committee oversees Trustmark’s Internal Audit Department, which conducts reviews and assessments related to information security. Management provides periodic reports to the Enterprise Risk Committee and the Audit Committee, both of which provide reports of their meetings to the full Board. These reports to the Board and its Committees address the threat environment, vulnerability assessments, specific cyber incidents and management’s efforts to monitor, detect and prevent cyber threats.
Trustmark’s information security program is primarily administered at the management level by the Information Security Department, which is led by Trustmark’s Chief Information Security Officer (CISO), and is supported by the Information Technology Department, which is led by Trustmark’s Chief Information Officer (CIO).The CISO reports to the CIO, who in turn reports to Trustmark’s Chief Credit and Operations Officer.Trustmark’s Information Security Department is responsible for day-to-day management of Trustmark’s
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information security program, including data loss prevention, access control, threat monitoring, incident response, insider threat monitoring and employee education and training. The Information Security Department also maintains policies related to cybersecurity and data security that provide the required governance for the information security program. Additionally, Trustmark’s Information Technology Department maintains policies that govern technical aspects of Trustmark’s information security program. Each policy is reviewed and approved by the Enterprise Risk Committee in accordance with Trustmark's Policy Framework and is mapped to applicable regulatory guidance. The Cybersecurity Operations team within the Information Technology Department maintains and runs Trustmark’s security operations center and is responsible for cybersecurity event management and maintaining security tooling. Trustmark also maintains an Information Security / Cybersecurity Management Committee, which is comprised of representatives from the Information Security, Information Technology, Enterprise Risk, Corporate Security, Internal Audit and Legal departments and members of executive management. This committee meets quarterly to discuss and review Trustmark’s information security program and receives qualitative and quantitative update reports from the Information Security Department, Internal Audit Department and Information Technology Department.
Trustmark engages third party assessors, consultants and auditors in connection with its information security program, including to conduct external penetration testing, independent audits and risk assessments. Trustmark also utilizes third party service providers in the ordinary course of business. The Information Security Department performs information security assessments for third party service providers that store or process Trustmark confidential data. These information security assessments include a review of any systems and organization control reports, proof of the vendor’s independent testing of their data protection controls, as well as a review of any exceptions noted and assessment of management responses, results of vulnerability and penetration testing, incident response processes and third party data protection controls (which can include, but is not limited to: access reviews and controls, backups, monitoring, encryption standards and disaster recovery). The review of these areas is taken into account in order to provide an overall information security conclusion and risk rating for the vendor.
As a regulated financial institution, Trustmark is also subject to financial privacy laws and its cybersecurity practices are subject to oversight by the federal banking agencies. For additional information, see “Supervision and Regulation – Financial Privacy Laws and Cybersecurity” included in Part I. Item 1 – Business of this report.
Although Trustmark has not, as of the date of this Annual Report on Form 10-K, experienced a cybersecurity threat or incident that materially affected its business strategy, results of operations or financial condition, there can be no guarantee that Trustmark will not experience such an incident in the future. For additional information regarding the risk Trustmark faces from cybersecurity threats, please see the risk factors titled “Trustmark may experience disruptions of its operating systems or breaches in its information system security” and “Trustmark must utilize new technologies to deliver its products and services, which could require significant resources and expose Trustmark to additional risks, including cyber-security risks” included in Part I. Item 1A. – Risk Factors of this report.
ITEM 2. PROPERTIES
Trustmark’s principal offices are housed in its main office building located in downtown Jackson, Mississippi and owned by TB. Trustmark’s main office building is primarily allocated for bank use with a small portion available for occupancy by tenants on a lease basis, although such incidental leasing activity is not material to Trustmark’s operations. At December 31, 2025, Trustmark, through TB, operated 160 full-service branches, 7 limited-service branches and an automated teller machine (ATM) network, which included 116 ATMs and 138 ITMs at its branches and other locations. In addition, Trustmark operated 8 offices in various locations providing mortgage banking, wealth management and/or corporate lending services. Trustmark leases 28 of its branch and other office locations with the remainder being owned. Trustmark believes its properties are suitable and adequate to operate its financial services business.
ITEM 3. LEGAL PROCEEDINGS
Information required in this section is set forth under the heading “Legal Proceedings” of Note 16 – Commitments and Contingencies in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
In accordance FASB ASC Subtopic 450-20, “Loss Contingencies,” Trustmark will establish an accrued liability for litigation matters when those matters present loss contingencies that are both probable and reasonably estimable. At the present time, Trustmark believes, based on its evaluation and the advice of legal counsel, that a loss in any currently pending legal proceeding is not probable and reasonably estimable. All matters will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable. In view of the inherent difficulty of predicting the outcome of legal proceedings, Trustmark cannot predict the eventual outcomes of the currently pending matters or the timing of their ultimate resolution. Management currently believes, however, based upon the advice of legal counsel and Management’s evaluation and after taking into account its current insurance coverage, that the legal proceedings currently pending should not have a material adverse effect on Trustmark’s consolidated financial condition.
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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Prices and Dividends
Trustmark’s common stock is listed on the Nasdaq Stock Market and is traded under the symbol “TRMK.”
Trustmark paid quarterly cash dividends to shareholders of $0.24 per share, or $0.96 per share annually, in 2025. As a component of return to common shareholders, Trustmark intends to pay cash dividends when corporate financial performance and capital strength allow it to do so. All dividend payments must be approved and declared by the Board of Directors of Trustmark and are required to be in compliance with all applicable laws and regulations.
At January 31, 2026, there were approximately 2,767 registered shareholders of record and approximately 30,248 beneficial account holders of shares in nominee name of Trustmark’s common stock. Other information required by this item can be found in Note 17 – Shareholders’ Equity included in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
Stock Repurchase Program
On December 6, 2022, the Board of Directors of Trustmark authorized a stock repurchase program, effective January 1, 2023, under which $50.0 million of Trustmark's outstanding common stock could be acquired through December 31, 2023. No shares were repurchased under this authority.
On December 5, 2023, the Board of Directors of Trustmark authorized a stock repurchase program, effective January 1, 2024, under which $50.0 million of Trustmark's outstanding common stock could be acquired through December 31, 2024. Under this authority, Trustmark repurchased 203 thousand shares of its common stock valued at $7.5 million during the twelve months ended December 31, 2024.
On December 3, 2024, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2025, under which $100.0 million of Trustmark’s outstanding shares could be acquired through December 31, 2025. Under this authority, Trustmark repurchased 2.2 million shares of its common stock valued at $80.0 million during the twelve months ended December 31, 2025.
The following table sets forth information regarding purchases of shares of Trustmark common stock by Trustmark or on Trustmark’s behalf during the three months ended December 31, 2025 (amounts in thousands, except share and per share data):
On December 2, 2025, Trustmark’s Board of Directors authorized a stock repurchase program effective January 1, 2026, under which $100.0 million of Trustmark’s outstanding shares may be acquired through December 31, 2026. The repurchase program, which is subject to market conditions and management discretion, will be implemented through open market repurchases or privately negotiated transactions. Under this authority, Trustmark repurchased 163 thousand shares of its common stock valued at $6.5 million during January 2026.
Performance Graph
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The following graph compares Trustmark’s annual percentage change in cumulative total return on common shares over the past five years with the cumulative total return of companies comprising the Nasdaq market value index and the S&P 500 – Regional Banks index. The S&P 500 – Regional Banks index is an industry index published by S&P Dow Jones Indices, a division of S&P Global, and is comprised of stock in the S&P Total Market Index that are classified in the Global Industry Classification Standard regional banks sub-industry. This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2020, and that dividends received were immediately invested in additional shares. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown.
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2026.
Index Data: Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved.
Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
ITEM 6. SELECTED FINANCIAL DATA
The following unaudited consolidated financial data is derived from Trustmark’s audited financial statements as of and for each year in the three year period ended December 31, 2025 ($ in thousands, except per share data). The data should be read in conjunction with Part II. Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. – Financial Statements and Supplementary Data.
Trustmark completed the sale of Fisher Brown Bottrell Insurance, Inc., (FBBI), a wholly owned subsidiary of TB, during the second quarter of 2024. As such, financial results presented in the table below for the years ended December 31, 2024 and 2023, consist of both continuing and discontinued operations. The discontinued operations include the financial results of FBBI prior to the sale as well as the net gain on the sale. For additional information regarding discontinued operations, please see Note 2 – Discontinued Operations set forth in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
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Consolidated Statements of Income (Loss)
PCL, LHFI sale of 1-4 family mortgage loans — 8,633 —
PCL, off-balance sheet credit exposures (1,441 ) (4,665 ) (2,781 )
Income from discontinued operations before income taxes — 237,152 16,302
Income taxes from discontinued operations — 59,353 4,103
Per Share Data (2)
Basic EPS from discontinued operations $ — $ 2.91 $ 0.20
Diluted EPS from continuing operations $ 3.70 $ 0.74 $ 2.50
Diluted EPS from discontinued operations $ — $ 2.90 $ 0.20
Performance Ratios
Return on average equity from continuing operations 10.86 % 2.48 % 9.76 %
Return on average assets from continuing operations 1.21 % 0.24 % 0.82 %
Average equity / average assets 11.16 % 9.84 % 8.41 %
Net interest margin (fully taxable equivalent) 3.80 % 3.51 % 3.32 %
Dividend payout ratio from continuing operations 25.81 % 124.32 % 36.65 %
Credit Quality Ratios
Nonaccrual LHFI / (LHFI + LHFS) 0.60 % 0.60 % 0.76 %
Nonperforming assets / (LHFI + LHFS) plus other real estate 0.65 % 0.65 % 0.81 %
Allowance for credit losses (ACL), LHFI / LHFI 1.15 % 1.22 % 1.08 %
(1)
Revenue is defined as net interest income plus noninterest income (loss).
(2)
Due to rounding, EPS from continuing operations and discontinued operations may not sum to EPS from net income.
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Consolidated Balance Sheets
Stock Performance
Capital Ratios
Tangible equity / tangible assets 9.61 % 9.13 % 7.22 %
Tangible equity / risk-weighted assets 11.54 % 10.86 % 8.76 %
Common equity tier 1 risk-based capital ratio 11.72 % 11.54 % 10.04 %
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following provides a narrative discussion and analysis of Trustmark’s financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements and the supplemental financial data included in Part II. Item 8. – Financial Statements and Supplementary Data of this report. Further discussion and analysis of Trustmark’s financial condition and results of operations for the years ended December 31, 2024 and 2023 are included in the respective sections within Part II. Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of Trustmark’s Annual Report filed on Form 10-K for the year ended December 31, 2024.
Executive Overview
Trustmark has been committed to meeting the banking and financial needs of its customers and communities for over 130 years and remains focused on providing support, advice and solutions to its customers' unique needs. Trustmark achieved record earnings in 2025, reflecting significant achievement across its diverse financial services businesses. During 2025, Trustmark's traditional banking business drove continued loan and deposit growth, a strong net interest margin and solid credit quality. Trustmark's mortgage banking business increased production and achieved significant improvement in profitability during 2025, while revenue from its wealth management business reached an all-time high.
These accomplishments are the result of focused efforts to enhance Trustmark's long-term performance and competitiveness. Trustmark continues to implement technology and streamline processes to enhance its ability to grow and serve customers. Trustmark is well-positioned to compete in changing economic conditions and create long-term value for its shareholders. The Board of Directors of Trustmark announced a 4.2% increase in its regular quarterly cash dividend to $0.25 per share from $0.24 per share, reflecting Trustmark's profitability and financial strength. The dividend is payable March 15, 2026, to shareholders of record on March 1, 2026. Trustmark’s payment of the dividend will be funded fully by a dividend from TB to Trustmark, which the MDBCF approved on January 28, 2026.
Financial Highlights
Quarter Ended December 31, 2025
Trustmark reported net income of $57.9 million, or basic and diluted EPS of $0.97, for the fourth quarter of 2025, compared to net income of $56.3 million, or basic and diluted EPS of $0.92, for the fourth quarter of 2024. Trustmark’s reported performance during the quarter ended December 31, 2025, produced a return on average tangible equity of 12.82%, a return on average assets of 1.23%, an average equity to average assets ratio of 11.35% and a dividend payout ratio of 24.74%, compared to a return on average tangible equity
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of 13.68%, a return on average assets of 1.23%, an average equity to average assets ratio of 10.82% and a dividend payout ratio of 25.00% during the quarter ended December 31, 2024.
The increase in net income when the fourth quarter of 2025 is compared to the fourth quarter of 2024 was principally due to an increase in revenue and a decrease in the PCL, LHFI, partially offset by increases in noninterest expense and income taxes. Revenue totaled $204.1 million for the quarter ended December 31, 2025 compared to $196.8 million for the quarter ended December 31, 2024, an increase of $7.3 million, or 3.7%. The increase in revenue for the fourth quarter of 2025 compared to the same time period in 2024 primarily resulted from an increase in net interest income, principally due to a decline in interest expense on deposits.
Net interest income for the fourth quarter of 2025 totaled $162.9 million, an increase of $7.0 million, or 4.5%, when compared to the fourth quarter of 2024. Interest income totaled $239.3 million for the fourth quarter of 2025, a decrease of $417 thousand, or 0.2%, when compared to the same time period in 2024, principally due to a decline in other interest income primarily due to a decline in the average balance held at the FRBA and the FRB's decision to lower the rate it pays on reserves, partially offset by a slight increase in interest and fees on LHFS and LHFI. Interest expense totaled $76.4 million for the fourth quarter of 2025, a decrease of $7.5 million, or 8.9%, when compared to the same time period in 2024, primarily due to a decline in interest on deposits. Interest expense on deposits totaled $67.7 million for the fourth quarter of 2025, a decline of $8.2 million, or 10.9%, when compared to the fourth quarter of 2024 primarily due to declines in interest expense on brokered and personal certificates of deposit (CDs), all categories of money market demand deposit accounts (MMDA) and commercial interest checking accounts, primarily reflecting a decline in interest rates.
Noninterest income (loss) for the fourth quarter of 2025 totaled $41.2 million, an increase of $285 thousand, or 0.7%, when compared to the fourth quarter of 2024, principally due to an increase in wealth management largely offset by a decline in other, net. Wealth management totaled $11.1 million for the fourth quarter of 2025, an increase of $1.8 million, or 19.5%, when compared to the same time period in 2024, principally due to an increase in income from brokerage and trust management services. Other, net totaled $2.7 million for the fourth quarter of 2025, a decrease of $1.6 million, or 36.1%, when compared to the same time period in 2024, principally due to a decrease in income from other partnership investments and an increase in amortization of tax credit partnerships.
Noninterest expense for the fourth quarter of 2025 totaled $132.2 million, an increase of $7.7 million, or 6.2%, when compared to the fourth quarter of 2024, principally due to an increase in salaries and employee benefits. Salaries and employee benefits totaled $75.1 million for the fourth quarter of 2025, an increase of $5.9 million, or 8.5%, when compared to the fourth quarter of 2024 primarily due to increases in salaries expense, principally due to general merit increases and new associates added during 2025, annual management performance incentive compensation expense and broker commissions expense.
Trustmark’s PCL, LHFI for the three months ended December 31, 2025 totaled a negative $550 thousand compared to $7.0 million for the three months ended December 31, 2024, a decrease of $7.5 million, primarily due to positive credit migration partially offset by loan growth and changes in the macroeconomic forecast. The PCL, off-balance sheet credit exposures totaled $1.8 million for the three months ended December 31, 2025 compared to $502 thousand for the three months ended December 31, 2024, an increase of $1.3 million, primarily due to increases in the total reserve rate and unfunded commitments partially offset by positive credit migration. Please see the section captioned “Provision for Credit Losses,” for additional information regarding the PCL on LHFI and off-balance sheet credit exposures.
Year Ended December 31, 2025
For the year ended December 31, 2025, Trustmark reported net income of $224.1 million, or basic and diluted EPS of $3.72 and $3.70, respectively, compared to $223.0 million, or basic and diluted EPS of $3.65 and $3.63, respectively, for the year ended December 31, 2024 and $165.5 million, or basic and diluted EPS of $2.71 and $2.70, respectively, for the year ended December 31, 2023. Trustmark’s reported performance for the year ended December 31, 2025, produced a return on average tangible equity of 12.97%, a return on average assets of 1.21% and a dividend payout ratio of 25.81%, compared to a return on average tangible equity of 15.20%, a return on average assets of 1.20% and a dividend payout ratio of 25.21% for the year ended December 31, 2024 and a return on average tangible equity of 14.04%, a return on average assets of 0.89% and a dividend payout ratio of 33.95% for the year ended December 31, 2023. Trustmark’s average equity to average assets ratio was 11.16%, 9.84% and 8.41% for the years ended December 31, 2025, 2024 and 2023, respectively.
Trustmark completed the sale of FBBI during the second quarter of 2024. As such, financial results for the years ended December 31, 2024 and 2023, consist of both continuing and discontinued operations. The discontinued operations include the financial results of FBBI prior to the sale as well as the net gain on the sale. Trustmark reported net income from continuing operations of $45.2 million and $153.3 million for the years ended December 31, 2024 and 2023, respectively. Trustmark's reported performance from continuing operations for the year ended December 31, 2024 produced a return on average tangible equity of 3.04%, a return on average assets of 0.24% and a dividend payout ratio of 124.32%, compared to a return on average tangible equity of 12.43%, a return on average assets of 0.82% and a dividend payout ratio of 36.65% for the year ended December 31, 2023. The increase in net income from continuing
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operations when 2025 is compared to 2024 was principally due to an increase in revenue and a decline in PCL, LHFI, partially offset by increases in income taxes and noninterest expense.
Revenue totaled $799.8 million for the year ended December 31, 2025, compared to $561.0 million and $701.3 million for the years ended December 31, 2024 and 2023, respectively, an increase of $238.8 million, or 42.6%, and a decrease of $140.3 million, or 20.0%, respectively. The increase in revenue for 2025 compared to 2024 was principally due to (i) an increase in noninterest income (loss), primarily as a result of the loss on the sale of available for sale securities during the second quarter of 2024 and increases in mortgage banking, net and wealth management, partially offset by a decrease in other, net, and (ii) an increase in net interest income, primarily resulting from a decline in total interest expense and an increase in interest on securities, partially offset by declines in interest and fees from LHFS and LHFI and other interest income.
Net interest income for the year ended December 31, 2025 totaled $636.1 million, an increase of $51.7 million, or 8.8%, when compared to the year ended December 31, 2024. Interest income totaled $948.6 million for the year ended December 31, 2025, a decrease of $11.7 million, or 1.2%, when compared to the year ended December 31, 2024, reflecting declines in interest and fees on LHFS and LHFI, primarily due to a decrease in interest rates, and other interest income, primarily due to a decline in the average balance held at the FRBA and the FRB's decision to lower the rate it pays on reserves, partially offset by an increase in interest on securities, primarily as a result of higher yielding securities purchased during 2025 and the restructuring of the available for sale securities portfolio during the second quarter of 2024. Interest expense totaled $312.5 million for the year ended December 31, 2025, a decrease of $63.4 million, or 16.9%, when compared to the year ended December 31, 2024, reflecting declines in all categories of interest expense. Interest on deposits totaled $274.7 million for 2025, a decrease of $54.7 million, or 16.6%, when compared to 2024, primarily reflecting declines in interest on brokered and personal CDs, personal and commercial MMDA and public and commercial interest checking accounts, principally due to declines in interest rates. Other interest expense for 2025 totaled $20.3 million, a decrease of $6.1 million, or 23.0%, when compared to 2024, primarily due to a decline in interest expense on FHLB advances, principally due to a decline in rates on short-term FHLB advances, partially offset by an increase in subordinated debt issuance cost as a result of the $175.0 million of subordinated notes issued during the fourth quarter of 2025. Interest on federal funds purchased and securities purchased under repurchase agreements totaled $17.5 million for 2025, a decrease of $2.6 million, or 13.0%, when compared to 2024, primarily reflecting declines in the target federal funds rate by the FRB.
Noninterest income (loss) for 2025 totaled $163.6 million, an increase of $187.1 million when compared to 2024, principally due to the $182.8 million loss on the sale of available for sale securities during the second quarter of 2024, and increases in mortgage banking, net and wealth management, partially offset by a decrease in other, net. Mortgage banking, net totaled $33.1 million for 2025, an increase of $6.5 million, or 24.2%, when compared to 2024, primarily reflecting a decrease in the net negative hedge ineffectiveness and increases in the gain on sales of loans, net and mortgage servicing income, net, partially offset by an increase in the run-off of the MSR. Wealth management totaled $40.1 million for 2025, an increase of $2.9 million, or 7.7%, when compared to 2024, primarily due to increases in income from brokerage and trust management services. Other, net totaled $13.4 million for 2025, a decrease of $4.4 million, or 24.7%, when compared to 2024, principally due to the $8.1 million Visa C shares fair value adjustment during the second quarter of 2024 as well as an increase in amortization of tax credit partnerships, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans recorded during the second quarter of 2024.
Noninterest expense totaled $512.2 million for 2025, an increase of $26.5 million, or 5.5%, when compared to 2024, principally due to increases in salaries and employee benefits and services and fees. Salaries and employee benefits totaled $283.4 million for the year ended December 31, 2025, an increase of $17.1 million, or 6.4%, when compared to the year ended December 31, 2024, principally due to increases in salaries expense, primarily due to general merit increases and new associates added during 2025, annual management performance incentives, medical insurance expense, commission expense due to the increase in mortgage originations and other salaries expense. Services and fees totaled $109.4 million for 2025, an increase of $7.8 million, or 7.7%, when compared to 2024, principally due to increases in data processing charges related to software, business process outsourcing fees, advertising expense and legal expense.
The PCL, LHFI for 2025 totaled $14.3 million compared to a total PCL, LHFI of $45.9 million for 2024. The PCL, LHFI for 2024 included an $8.6 million PCL, LHFI sale of 1-4 family mortgage loans for the credit-related portion of the loss on the sale of the 1-4 family mortgage loans. The PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, for 2024 totaled $37.3 million. The PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, decreased $23.0 million, or 61.6%, when 2025 is compared to 2024, primarily due to positive credit migration, the resolution of the External Factor – Credit Quality Review qualitative reserve factor and changes to specific reserves associated with individually analyzed credits, partially offset by increases in required reserves related to loan growth, changes in macroeconomic forecasts and updates to other qualitative reserve factors. The PCL, off-balance sheet credit exposures totaled a negative $1.4 million for 2025 compared to a negative $4.7 million for 2024, a decrease in the negative provision of $3.2 million, or 69.1%, primarily due to increases in the total reserve rate and unfunded commitments, partially offset by positive credit migration and the resolution of the External Factor – Credit Quality Review qualitative reserve factor. Please see the section captioned “Provision for Credit Losses” for additional information regarding the PCL on LHFI and off-balance sheet credit exposures.
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LHFI totaled $13.674 billion at December 31, 2025, an increase of $584.3 million, or 4.5%, compared to December 31, 2024. The increase in LHFI during 2025 was primarily due to net growth in other commercial loans and leases, commercial and industrial LHFI, LHFI secured by real estate and state and other political subdivision LHFI. For additional information regarding changes in LHFI and comparative balances by loan category, see the section captioned “LHFI.”
At December 31, 2025, nonperforming assets totaled $91.3 million, an increase of $5.3 million, or 6.2%, compared to December 31, 2024, reflecting increases in both nonaccrual LHFI and other real estate. Total nonaccrual LHFI were $84.4 million at December 31, 2025, an increase of $4.3 million, or 5.3%, relative to December 31, 2024, primarily as a result of mortgage loans placed on nonaccrual in the Mississippi market region, largely offset by the resolution of three large nonaccrual commercial credits in the Alabama and Texas market regions which were reserved for in a prior period. Trustmark's mortgage loans are primarily included in the Mississippi market region because these loans are centrally analyzed and approved as part of the mortgage line of business, which is located in Jackson, Mississippi. The percentage of total loans (LHFS and LHFI) that are 30 days or more past due or classified as nonaccrual increased in 2025 to 1.85% compared to 1.62% in 2024. Other real estate totaled $7.0 million at December 31, 2025, an increase of $1.0 million, or 17.6%, when compared to December 31, 2024, primarily reflecting property foreclosed in the Mississippi and Alabama market regions, largely offset by foreclosed properties sold in the Mississippi, Texas and Alabama market regions.
Management has continued its practice of maintaining excess funding capacity to provide Trustmark with adequate liquidity for its ongoing operations. In this regard, Trustmark benefits from its strong deposit base, its investment portfolio and its access to funding from a variety of external funding sources such as upstream federal funds lines, FHLB advances and brokered deposits. See the section captioned “Capital Resources and Liquidity” for further discussion of the components of Trustmark’s excess funding capacity.
Total deposits were $15.500 billion at December 31, 2025, an increase of $391.6 million, or 2.6%, compared to December 31, 2024. During 2025, noninterest-bearing deposits decreased $37.1 million, or 1.2%, primarily due to a decline in public demand deposit accounts partially offset by increases in commercial and personal demand deposit accounts. Interest-bearing deposits increased $428.7 million, or 3.6%, during 2025, primarily due to growth in all categories of CDs and MMDA as well as commercial interest checking accounts, partially offset by declines in public and consumer interest checking accounts.
Federal funds purchased and securities sold under repurchase agreements totaled $445.0 million at December 31, 2025 compared to $324.0 million at December 31, 2024, an increase of $121.0 million, or 37.3%, principally due to an increase in upstream federal funds purchased. Trustmark had $445.0 million of upstream federal funds purchased at December 31, 2025, compared to $285.0 million at December 31, 2024. Other borrowings totaled $364.8 million at December 31, 2025, an increase of $63.2 million, or 21.0%, when compared with $301.5 million at December 31, 2024, principally due to increases in Government National Mortgage Association (GNMA) loans eligible for repurchase and outstanding short-term FHLB advances obtained from the FHLB of Dallas.
Subordinated notes totaled $172.0 million at December 31, 2025, compared to $123.7 million at December 31, 2024, an increase of $48.3 million, or 39.0%, as a result of the issuance of $175.0 million of new subordinated notes and the pay-off of $125.0 million of outstanding subordinated notes. During the fourth quarter of 2025, Trustmark issued and sold $175.0 million aggregate principal amount of its 6.00% Fixed-to-Floating Rate Subordinated Notes (the 2025 Notes) due December 1, 2035. The 2025 Notes were sold at an underwriting discount of 1.1%, resulting in net proceeds to Trustmark of $173.1 million before deducting offering expenses. Trustmark used the net proceeds from the offering, after the payment of offering expenses, to repay the outstanding $125.0 million of aggregate principal amount of the subordinated notes issued in 2020 plus accrued interest and for general corporate purposes. See the section captioned "Subordinated Notes" for additional information regarding Trustmark's subordinated debt.
Critical Accounting Policies and Accounting Estimates
Trustmark’s consolidated financial statements are prepared in accordance with GAAP and follow general practices within the financial services industry. Application of these accounting principles requires Management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on historical experience, current information and other factors deemed relevant as of the date of the consolidated financial statements; accordingly, as this information changes, actual financial results could differ from those estimates.
Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. An accounting estimate is considered critical if the accounting estimate requires Management to make assumptions about matters with a significant level of uncertainty and if the accounting estimate, or changes to the accounting estimate that are reasonably likely to occur from period to period, have had or are reasonable likely to have a material impact to the consolidated financial statements.
For additional information regarding the accounting policies discussed below, please see Note 1 – Significant Accounting Policies set forth in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
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ACL on LHFI and Off-Balance Sheet Credit Exposures
LHFI
The ACL, LHFI is a valuation account, calculated in accordance with FASB ASC Topic 326, that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The ACL, LHFI represents Management’s best estimate of current expected credit losses on Trustmark’s existing LHFI portfolio considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. The ACL, LHFI is adjusted through the PCL, LHFI and reduced by the charge off of loan amounts, net of recoveries.
The credit loss estimation process involves procedures to appropriately consider the unique characteristics of Trustmark’s LHFI portfolio segments. These segments are further disaggregated into loan classes, the level at which credit risk is estimated. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Trustmark’s overall ACL methodology incorporates various qualitative factors, including economic conditions and concentrations of credit, nature and volume of the portfolio, performance trends and external factors. The economic conditions and concentrations of credit qualitative factor was created for the loans secured by NFNR properties and the loans secured by other real estate loan class, two of Trustmark’s largest loan classes, to address changes in the economic conditions of metropolitan areas and apply additional pool level reserves based on third-party market data and forecast trends. The performance trend qualitative reserve factor is utilized to incorporate changes in credit quality and is based on migration analyses that allocate additional ACL to non-pass/delinquent loans within each loan pool. The nature and volume of the portfolio qualitative factor applies to a sub-pool of the LHFI secured by 1-4 family residential properties and utilizes a weighted average remaining maturity (WARM) methodology that uses industry data for the PD and LGD assumptions to support the qualitative adjustment. During the first quarter of 2025, Management elected to utilize Trustmark's historical data to develop a PD based on the credit score ranges initially established as well as the same LGD value from the mortgage sale that occurred in the second quarter of 2024 along with the same weighted average life assumption utilized to determine the credit mark on this portfolio. The external factors qualitative factor is Management’s best judgment on the loan or pool level impact of all factors that affect the portfolio that are not accounted for using any other part of the ACL methodology. During the third quarter of 2024, Trustmark activated the External Factor – Credit Quality Review qualitative factor. This qualitative factor ensures reserve adequacy for collectively evaluated commercial loans that may not have been identified and downgraded timely for various reasons. This qualitative factor population is all commercial loans risk rated 1-5. These loans are then applied to the historical average of the Watch/Special Mention rated percentage. Then the balance of these loans are applied additional reserves based on the same reserve rates utilized in the performance trends qualitative factor for Watch/Special Mention rated loans. During the third quarter of 2025, Management determined that the risk related to delayed identification and downgrading of commercial loans had sufficiently diminished and, as a result, resolved the External Factor – Credit Quality Review qualitative factor and released the associated reserves.
Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the ACL, LHFI is complex and requires judgment by Management about the effect of matters that are inherently uncertain. While Management utilizes its best judgment and information available, the ultimate adequacy of Trustmark’s ACL, LHFI is dependent upon a variety of factors beyond its controls, including the performance of the portfolios, the economy, changes in interest rates and the view of regulatory authorities toward classification of assets. In future periods, evaluations of the overall LHFI portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and PCL for LHFI. Given the nature of many of the factors, forecasts and assumptions in the ACL methodology for LHFI, it is not possible to provide meaningful estimates of the impact of any such potential change.
For a complete description of Trustmark’s ACL methodology for the LHFI portfolio, please see Note 4 – LHFI and ACL, LHFI included in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
Off-Balance Sheet Credit Exposures
Trustmark maintains a separate ACL on off-balance sheet credit exposures, including unfunded loan commitments and letters of credit, which are not unconditionally cancellable. The ACL on off-balance sheet credit exposures is a liability account calculated in accordance with FASB ASC Topic 326 and presented in the accompanying consolidated balance sheets. Adjustments to the ACL on off-balance sheet credit exposures are recorded to PCL, off-balance sheet credit exposures.
Expected credit losses for off-balance sheet credit exposures are estimated by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by Trustmark. Trustmark calculates a loan pool level unfunded amount for the period. In addition to the unfunded balances, Trustmark uses a funding rate for loan pools that are considered open-ended. In order to mitigate volatility and incorporate historical experience in the funding rate, Trustmark uses a twelve-quarter moving average. For the closed-ended loan pools, Trustmark takes a conservative approach and uses a 100% funding rate. The expected funding rate is applied to each pool’s unfunded commitment balances to ensure that reserves will be applied to each pool based upon balances expected
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to be funded based upon historical levels. In addition to the funding rate being applied to the unfunded commitment balance, a reserve rate is applied that is loan pool specific and is applied to the unfunded amount, which includes both quantitative and a majority of the qualitative aspects of the current period's expected credit loss rate. During 2024, Management implemented a performance trends qualitative factor for unfunded commitments and an External Factor – Credit Quality Review qualitative factor for unfunded commitments. For both qualitative factors, the same assumptions are applied in the unfunded commitment calculation that are used in the funded balance calculation with the only difference being the unfunded commitment calculation includes the funding rates for the unfunded commitments. The reserves for these two qualitative factors are added to the other calculated reserve to get a total reserve for off-balance sheet credit exposures. During the third quarter of 2025, Management determined that the risk related to delayed identification and downgrading of commercial loans had sufficiently diminished and, as a result, resolved the External Factor – Credit Quality Review qualitative factor and released the associated reserves.
Evaluations of the unfunded commitments are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the ACL on off-balance sheet credit exposures is complex and requires judgment by Management about the effect of matters that are inherently uncertain. While Management utilizes its best judgment and information available, the ultimate adequacy of Trustmark’s ACL on off-balance sheet credit exposures is dependent upon a variety of factors beyond its control, including the performance of the portfolios, the economy, changes in interest rates and the view of regulatory authorities toward classification of assets. In future periods, evaluations of off-balance sheet credit exposures, in light of the factors and forecasts then prevailing, may result in significant changes in the ACL and PCL on off-balance sheet credit exposures. Given the nature of many of the factors, forecasts and assumptions in the ACL methodology for off-balance sheet credit exposures, it is not possible to provide meaningful estimates of the impact of any such potential change.
For a complete description of Trustmark’s ACL methodology for off-balance sheet credit exposures, please see the section captioned “ACL on Off-Balance Sheet Credit Exposures” in Note 16 – Commitments and Contingencies included in Part II. Item 8. – Financial Statements and Supplementary Data of this report.
MSR
Trustmark recognizes as assets the rights to service mortgage loans based on the estimated fair value of the MSR when loans are sold and the associated servicing rights are retained. Trustmark has elected to account for the MSR at fair value.
The fair value of the MSR is determined using a valuation model administered by a third party that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, escrow account earnings and contractual servicing fee income and costs. Management reviews all significant assumptions at least quarterly. Mortgage loan prepayment speeds, a key assumption in the model, is the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate used to determine the present value of estimated future net servicing income, another key assumption in the model, is an estimate of the required rate of return investors in the market would require for an asset with similar risk. Both assumptions can, and generally will, change as market conditions and interest rates change.
By way of example, an increase in either the prepayment speed or discount rate assumption may result in a decrease in the fair value of the MSR, while a decrease in either assumption may result in an increase in the fair value of the MSR. In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and discount rates. These fluctuations can be rapid and may continue to be significant. Therefore, estimating prepayment speeds and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.
At December 31, 2025, the MSR fair value was $131.3 million. The impact on the MSR fair value of either a 10% adverse change in prepayment speeds or a 100 basis point increase in discount rates at December 31, 2025, would be a decline in fair value of approximately $5.1 million and $5.2 million, respectively. Changes of equal magnitude in the opposite direction would produce similar increases in fair value in the respective amounts. See the section captioned “MSR” in Note 6 – Mortgage Banking included in Part II. Item 8. – Financial Statements and Supplementary Data of this report for additional information regarding the valuation of the MSR.
Recent Legislative and Regulatory Developments
For information regarding legislation and regulation applicable to Trustmark, see the section captioned “Supervision and Regulation” included in Part I. Item 1. – Business of this report.
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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.
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The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP for the periods presented ($ in thousands, except per share data):
Years Ended December 31,
TANGIBLE EQUITY
AVERAGE BALANCES
Identifiable intangible assets (62 ) (182 ) (325 )
PERIOD END BALANCES
Identifiable intangible assets — (126 ) (236 )
TANGIBLE ASSETS
Identifiable intangible assets — (126 ) (236 )
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Plus: Intangible amortization net of tax from continuing operations 96 81 217
TANGIBLE EQUITY MEASUREMENTS
Tangible equity/tangible assets (a)/(b) 9.61 % 9.13 % 7.22 %
Tangible equity/risk-weighted assets (a)/(c) 11.54 % 10.86 % 8.76 %
COMMON EQUITY TIER 1 CAPITAL (CET1)
CET1 adjustments and deductions:
Other adjustments and deductions for CET1 (2) (253 ) (2,058 ) (2,693 )
(1)
Calculated using net income from continuing operations adjusted for intangible amortization divided by total average tangible equity.
(2)
Includes other intangible assets, net of DTLs, disallowed deferred tax assets and threshold deductions, as applicable.
Significant Non-routine Transactions
Trustmark discloses certain non-GAAP financial measures, including net income adjusted for significant non-routine transactions, 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 net income adjusted for significant non-routine transactions as a measure of its core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. This non-GAAP measure also provides 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 audited consolidated financial statements and the notes related
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thereto, included in Part II. Item 8. – Financial Statements and Supplementary Data of this report, in their entirety, and not to rely on any single financial measure.
The following table presents adjustments to net income (loss) from continuing operations and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented ($ in thousands, except per share data):
Years Ended December 31,
Significant non-routine transactions (net of taxes):
PCL, LHFI sale of 1-4 family mortgage loans — 6,475 —
Loss on sale of 1-4 family mortgage loans — 3,598 —
Visa C shares fair value adjustment — (6,042 ) —
Securities losses from portfolio restructuring — 137,094 —
Reduction in force expense — — 1,055
Litigation settlement expense — — 4,875
Diluted EPS from adjusted continuing operations $ 3.70 $ 3.04 $ 2.60
Financial Ratios - Reported (GAAP)
Return on average equity from continuing operations 10.86 % 2.48 % 9.76 %
Return on average assets from continuing operations 1.21 % 0.24 % 0.82 %
Financial Ratios - Adjusted (Non-GAAP)
Return on average equity from adjusted continuing operations n/a 10.34 % 10.17 %
Return on average assets from adjusted continuing operations n/a 1.01 % 0.86 %
n/a - Not applicable.
Sale of 1-4 Family Mortgage Loans
During the second quarter of 2024, Trustmark sold a portfolio of 1-4 family mortgage loans that were at least three payments delinquent and/or nonaccrual at the time of selection totaling $56.2 million, which resulted in a loss of $13.4 million ($10.1 million, net of taxes). The portion of the loss related to credit totaled $8.6 million ($6.5 million, net of taxes) and was recorded as adjustments to charge-offs and the PCL, LHFI. The noncredit-related portion of the loss totaled $4.8 million ($3.6 million, net of taxes) and was recorded to noninterest income (loss) in other, net.
Visa Shares Conversion
On April 8, 2024, Visa commenced an initial exchange offer expiring on May 3, 2024, for any and all outstanding shares of Visa Class B-1 common stock (Visa B-1 shares). Holders participating in the exchange offer would receive a combination of Visa Class B-2 common stock (Visa B-2 shares) and Visa Class C common stock (Visa C shares) in exchange for Visa B-1 shares that were validly tendered and accepted for exchange by Visa. TB tendered its 38.7 thousand Visa B-1 shares, which were accepted by Visa. In exchange for each Visa B-1 share that was validly tendered and accepted for exchange by Visa, TB received 50.0% of a newly issued Visa B-2 share and newly issued Visa C shares equivalent in value to 50.0% of a Visa B-1 share. The Visa C shares that were received by TB were recognized at fair value, which resulted in a gain of $8.1 million ($6.0 million, net of taxes) and was recorded to noninterest income (loss) in other, net during the second quarter of 2024. During the third quarter of 2024, TB sold all of the Visa C shares for approximately the same carrying value as of June 30, 2024. The Visa B-2 shares were recorded at their nominal carrying value.
Securities Portfolio Restructuring
During the second quarter of 2024, Trustmark restructured its investment securities portfolio by selling $1.561 billion of available for sale securities with an average yield of 1.36%, which generated a loss of $182.8 million ($137.1 million, net of taxes) and was recorded to noninterest income (loss) in securities gains (losses), net. Trustmark also purchased $1.378 billion of available for sale securities with an average yield of 4.85%.
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Reduction in Force Expense
During the fourth quarter 2023, Trustmark incurred reduction in force expenses of $1.4 million related to various restructuring initiatives.
Litigation Settlement Expense
On October 9, 2023, Trustmark entered into a settlement agreement that resolved all current and potential future claims relating to litigation involving Adams/Madison Timber. As a result of this settlement, Trustmark recognized a one-time charge of $6.5 million of litigation settlement expense during the third quarter of 2023.
On January 13, 2023, TB entered into a settlement agreement relating to the litigation involving the Stanford Financial Group. As a result of this settlement, Trustmark recognized a one-time charge of $100.0 million of litigation settlement expense as well as an additional $750 thousand of legal fees during the fourth quarter of 2022.
Results of Operations
Net Interest Income
Net interest income is the principal component of Trustmark’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The net interest margin is computed by dividing fully taxable equivalent (FTE) net interest income by average interest-earning assets and measures how effectively Trustmark utilizes its interest-earning assets in relationship to the interest cost of funding them. The accompanying Yield/Rate Analysis Table shows the average balances for all assets and liabilities of Trustmark and the interest income or expense associated with earning assets and interest-bearing liabilities. The yields and rates have been computed based upon interest income and expense adjusted to a FTE basis using the federal statutory corporate tax rate in effect for each of the periods shown. Loans on nonaccrual have been included in the average loan balances, and interest collected prior to these loans having been placed on nonaccrual has been included in interest income. Loan fees included in interest associated with the average LHFS and LHFI balances are immaterial.
Net interest income-FTE for the year ended December 31, 2025 increased $50.2 million, or 8.4%, when compared with the year ended December 31, 2024. The increase in net interest income-FTE when 2025 is compared to 2024 was attributable to declines in all categories of interest expense, with the exception of interest on subordinated notes, and an increase in interest on securities available for sale-taxable partially offset by declines in interest and fees on LHFS and LHFI-FTE and other interest income. The net interest margin-FTE for 2025 increased 29 basis points to 3.80% when compared to 2024. The increase in the net interest margin-FTE for 2025 was principally due to declines in the costs of interest-bearing deposits and other short-term borrowings as well as an increase in the yield on securities available for sale, partially offset by declines in yields on LHFS and LHFI and other earning assets.
Average interest-earning assets for 2025 were $17.037 billion compared to $17.010 billion for 2024, an increase of $26.2 million, or 0.2%, reflecting growth in average loans (LHFS and LHFI) partially offset by declines in average securities and average other earning assets. Average loans (LHFS and LHFI) increased $324.9 million, or 2.4%, when 2025 is compared to 2024, primarily attributable to an increase in the average balance of the LHFI portfolio of $302.9 million, or 2.3%. The increase in the average LHFI portfolio when the balances at December 31, 2025 are compared to December 31, 2024 was principally due to net growth in average LHFI secured by real estate and average other commercial loans and leases. See the sections captioned "LHFS" and "LHFI" for additional information regarding changes in the LHFS and LHFI portfolios. Average total securities declined $135.1 million, or 4.3%, when 2025 is compared to 2024, principally due to calls, maturities and pay-downs of the loans underlying GSE guaranteed securities partially offset by purchases of available for sale securities. Average other earning assets decreased $163.6 million, or 29.8%, when 2025 is compared to 2024, primarily due to a decrease in the average balance held at the FRBA.
Interest income-FTE totaled $959.7 million for 2025, a decrease of $13.2 million, or 1.4%, while the yield on total earning assets decreased 9 basis points to 5.63% when compared to 2024. The decrease in interest income-FTE in 2025 primarily reflected declines in interest and fees on LHFS and LHFI-FTE and other interest income, partially offset by an increase in interest on securities available for sale-taxable. During 2025, interest and fees on LHFS and LHFI-FTE decreased $19.9 million, or 2.3%, when compared to 2024, while the yield on loans (LHFS and LHFI) decreased to 6.15% compared to 6.45% reflecting lower interest rates partially offset by the increase in the average balance of the LHFI portfolio. During 2025, other interest income decreased $12.9 million, or 43.4%, when compared to 2024, while the yield on other earning assets decreased to 4.36% compared to 5.41%, primarily due to a decline in the average balance held at the FRBA as well as the FRB's decision to lower the rate it pays on reserves. During 2025, interest on securities available for sale-taxable increased $22.1 million, or 39.5%, when compared to 2024, while the yield on taxable securities available for sale increased to 4.44% compared to 3.13% principally due to higher yielding securities purchased in 2025 as well as the restructuring of the available for sale securities portfolio during the second quarter of 2024.
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Average interest-bearing liabilities for 2025 totaled $13.042 billion compared to $13.159 billion for 2024, a decrease of $116.9 million, or 0.9%. The decrease in average interest-bearing liabilities was primarily the result of declines in average interest-bearing deposits and average other borrowings. Average interest-bearing deposits for 2025 decreased $59.2 million, or 0.5%, when compared to 2024, reflecting declines in average interest-bearing demand deposits and average savings deposits partially offset by growth in average time deposits. Average other borrowings for 2025 decreased $79.3 million, or 20.4%, when compared to 2024, principally due to a decrease in average short-term FHLB advances outstanding during the year partially offset by an increase in average GNMA loans eligible for repurchase.
Interest expense for 2025 totaled $312.5 million, a decrease of $63.4 million, or 16.9%, when compared with 2024, while the rate on total interest-bearing liabilities decreased to 2.40% compared to 2.86%. The decrease in interest expense for 2025 was principally due to decreases in interest on deposits, interest on other borrowings and interest on federal funds purchased and securities sold under repurchase agreements, partially offset by an increase in interest on subordinated notes. Interest on deposits decreased $54.7 million, or 16.6%, while the rate on interest-bearing deposits decreased to 2.26% compared to 2.70% when 2025 is compared to 2024, primarily due to declines in interest on brokered and personal CDs, personal and commercial MMDA and public and commercial interest checking accounts, principally due to declines in interest rates. Interest on other borrowings decreased $7.4 million, or 43.1%, while the rate on other borrowings decreased to 3.16% compared to 4.42%, when 2025 is compared to 2024, principally due to a decrease in interest expense on FHLB advances, principally due to a decline in rates on short-term FHLB advances. Interest on federal funds purchased and securities sold under repurchase agreements decreased $2.6 million, or 13.0%, while the rate on federal funds purchased and securities sold under repurchase agreements decreased to 4.26% compared to 5.05%, when 2025 is compared to 2024, principally due to a decline in interest expense on upstream federal funds purchased, reflecting declines in the federal funds target rate by the FRB. Interest on subordinated notes increased $1.9 million, or 39.9%, while the rate on subordinated notes increased to 4.99% from 3.84% when 2025 is compared to 2024, primarily due to the accelerated amortization of capitalized costs related to the subordinated notes issued in 2020 which were repaid fully during the fourth quarter of 2025. See the section captioned "Subordinated Notes" for additional information regarding changes in the subordinated notes.
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The following table provides the tax equivalent basis yield or rate for each component of the tax equivalent net interest margin for the periods presented ($ in thousands):
Years Ended December 31,
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets
Interest-earning assets:
Securities available for sale:
Securities held to maturity:
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Less tax equivalent adjustments:
Investments — 1 55
(1) During the first quarter of 2025, Trustmark ceased the daily sweep from low transaction interest-bearing demand deposits to savings deposits. Prior periods have been reclassified accordingly.
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The table below shows the change from year to year for each component of the tax equivalent net interest margin in the amount generated by volume changes and the amount generated by changes in the yield or rate (tax equivalent basis) for the periods presented ($ in thousands):
Increase (Decrease) Due To: Increase (Decrease) Due To:
Yield/ Yield/
Volume Rate Net Volume Rate Net
Interest earned on:
Securities available for sale:
Securities held to maturity:
Interest paid on:
Savings deposits (1) (27 ) — (27 ) (62 ) — (62 )
Junior subordinated debt securities — (582 ) (582 ) — 85 85
(1) During the first quarter of 2025, Trustmark ceased the daily sweep from low transaction interest-bearing demand deposits to savings deposits. Prior periods have been reclassified accordingly.
The change in interest due to both volume and yield or rate has been allocated to change due to volume and change due to yield or rate in proportion to the absolute value of the change in each. Tax-exempt income has been adjusted to a tax equivalent basis using the federal statutory corporate tax rate in effect for each of the three years presented. The balances of nonaccrual loans and the related income recognized have been included for purposes of these computations.
Provision for Credit Losses
The PCL, LHFI is the amount necessary to maintain the ACL, LHFI at the amount of expected credit losses inherent within the LHFI portfolio. The amount of PCL and the related ACL for LHFI are based on Trustmark’s ACL methodology. The PCL, LHFI totaled $14.3 million for 2025, compared to a PCL, LHFI, excluding the PCL, LHFI sale of 1-4 family mortgage loans, of $37.3 million for 2024 and a PCL, LHFI of $27.4 million for 2023. The PCL, LHFI for 2025 primarily reflected an increase in required reserves as a result of loan growth, changes in the macroeconomic forecast and updates to various qualitative reserve factors, partially offset by a decrease in specific reserves for individually analyzed credits, positive credit migration and reserves released associated with the resolution of the External Factor – Credit Quality Review qualitative factor.
FASB ASC Topic 326 requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable by Trustmark. Trustmark maintains a separate ACL for off-balance sheet credit exposures, including unfunded commitments and letters of credit. Adjustments to the ACL on off-balance sheet credit exposures are recorded to the PCL, off-balance sheet credit exposures. The PCL, off-balance sheet credit exposures totaled a negative $1.4 million for 2025 compared to a negative $4.7 million for 2024, and a negative $2.8 million for 2023. The release in PCL on off-balance sheet credit exposures for 2025 primarily reflected a decrease in required reserves as a result of positive credit migration and reserves released associated with the resolution of the External Factor – Credit Quality Review qualitative factor, partially offset by an increase in required reserves as a result of changes in the total reserve rate.
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See the section captioned “Allowance for Credit Losses” for information regarding Trustmark’s ACL methodology as well as further analysis of the PCL.
Noninterest Income (Loss)
The following table provides the comparative components of noninterest income (loss) for the periods presented ($ in thousands):
Years Ended December 31,
Amount % Change Amount % Change Amount % Change
Securities gains (losses), net — 100.0 % (182,792 ) n/m 39 n/m
n/m - percentage changes greater than +/- 100% are not considered meaningful
Changes in various components of noninterest income (loss) for the year ended December 31, 2025 are discussed in further detail below. For analysis of Trustmark’s wealth management income, please see the section captioned “Results of Segment Operations.”
Mortgage Banking, Net
The following table illustrates the components of mortgage banking, net included in noninterest income (loss) for the periods presented ($ in thousands):
Years Ended December 31,
Amount % Change Amount % Change Amount % Change
Change in fair value-MSR from market changes (9,840 ) n/m 5,801 n/m (1,489 ) n/m
n/m - percentage changes greater than +/- 100% are not considered meaningful
The increase in mortgage banking, net when 2025 is compared to 2024 was principally due to a decrease in the net negative hedge ineffectiveness and increases in the gain on sales of loans, net and mortgage servicing income, net, partially offset by an increase in the run-off of the MSR. Mortgage loan production totaled $1.528 billion for 2025, an increase of $109.9 million, or 7.8%, when compared to 2024. Loans serviced for others totaled $8.956 billion at December 31, 2025, compared with $8.763 billion at December 31, 2024, and $8.477 billion at December 31, 2023.
Representing a significant component of mortgage banking income is gain on sales of loans, net. The increase in the gain on sales of loans, net when 2025 is compared to 2024 was primarily the result of an increase in the mortgage valuation adjustment. Loan sales increased $16.2 million, or 1.4%, during 2025 to total $1.158 billion compared to an increase of $5.3 million, or 0.5%, during 2024 to total $1.141 billion.
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Other, Net
The following table illustrates the components of other, net included in noninterest income (loss) for the periods presented ($ in thousands):
Years Ended December 31,
Amount % Change Amount % Change Amount % Change
Loss on sale of 1-4 family mortgage loans — 100.0 % (4,798 ) n/m — —
Visa C shares fair value adjustment — -100.0 % 8,056 n/m — —
n/m - percentage changes greater than +/- 100% are not considered meaningful
The decrease in other, net when 2025 is compared to 2024 was principally due to the $8.1 million Visa C shares fair value adjustment during the second quarter of 2024 as well as an increase in amortization of tax credit partnerships, partially offset by the $4.8 million noncredit-related loss on the sale of 1-4 family mortgage loans recorded during the second quarter of 2024.
Noninterest Expense
The following table illustrates the comparative components of noninterest expense for the periods presented ($ in thousands):
Years Ended December 31,
Amount % Change Amount % Change Amount % Change
Litigation settlement expense — — — -100.0 % 6,500 -93.5 %
Changes in the various components of noninterest expense for the year ended December 31, 2025 are discussed in further detail below. Management considers disciplined expense management a key area of focus in the support of improving shareholder value.
Salaries and Employee Benefits
The increase in salaries and employee benefits when 2025 is compared to 2024 was principally due to increases in salaries expense, primarily due to general merit increases and new associates added during 2025, annual management performance incentives, medical insurance expense, commission expense due to the increase in mortgage originations and other salaries expense.
Services and Fees
The increase in services and fees when 2025 is compared to 2024 was principally due to increases in data processing charges related to software, business process outsourcing fees, advertising expense and legal expense.
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Other Expense
The following table illustrates the comparative components of other noninterest expense for the periods presented ($ in thousands):
Years Ended December 31,
Amount % Change Amount % Change Amount % Change
n/m - percentage changes greater than +/- 100% are not considered meaningful
The decrease in other expense when 2025 is compared to 2024 was principally due to a decrease in FDIC assessment expense, primarily due to a decrease in the assessment rate, which was largely offset by increases in loan expense and other miscellaneous expenses.
Results of Segment Operations
Trustmark’s operations are managed along two operating segments: General Banking and Wealth Management. A description of each segment and the methodologies used to measure financial performance and financial information by reportable segment are included in Note 20 – Segment Information located in Part II. Item 8. – Financial Statements and Supplementary Data of this report. The Insurance Segment is included in discontinued operations for all periods presented in the accompanying consolidated balance sheets and the consolidated statements of income (loss). For additional information about discontinued operations, please see Note 2 – Discontinued Operations included in Part I. Item 1. – Financial Statements of this report.
The following table provides the net income by reportable segment for the periods presented ($ in thousands):
Years Ended December 31,
General Banking
Net interest income for the General Banking Segment for 2025 increased $47.9 million, or 8.3%, when compared with 2024, primarily resulting from declines in all categories of interest expense as well as an increase in interest on securities, partially offset by decreases in interest and fees from LHFS and LHFI and other interest income. The PCL (LHFI and off-balance sheet credit exposures) for the General Banking Segment for 2025 totaled $12.9 million compared to a PCL of $41.1 million during 2024 and a PCL of $26.7 million during 2023. For more information on these net interest income items, please see the sections captioned “Financial Highlights” and “Results of Operations.”
Noninterest income (loss) for the General Banking Segment increased $183.9 million during 2025, primarily due to the net loss on the sale of available for sale securities and the noncredit-related loss on the sale of 1-4 family mortgage loans during the second quarter of 2024, as well as increases in mortgage banking, net and gain on sale on premises and equipment, partially offset by the gain on the conversion of Visa Class B-1 shares to Visa Class C shares during the second quarter of 2024 and a decrease in cash management service fees and an increase in the amortization of tax credit partnerships. Noninterest income (loss) for the General Banking Segment represented 16.4% of total revenue for 2025, a negative 11.7% for 2024 and 17.2% for 2023. Noninterest income (loss) for the General Banking Segment includes service charges on deposit accounts; wealth management; bank card and other fees; mortgage banking, net; other, net and securities gains (losses), net. For more information on these noninterest income (loss) items, please see the analysis included in the section captioned “Noninterest Income (Loss).”
Noninterest expense for the General Banking Segment increased $25.0 million, or 5.5%, during 2025, principally due to increases in salaries and employee benefits, data processing expenses related to software, outside services and fees, business process outsourcing expense, net occupancy-premise expenses, loan expenses and advertising expense, partially offset by a decrease in FDIC assessment
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expense. For more information on these noninterest expense items, please see the analysis included in the section captioned “Noninterest Expense.”
Wealth Management
During 2025, net income for the Wealth Management Segment increased $4.1 million, or 52.9%, principally due to increases in net interest income and noninterest income partially offset by an increase in noninterest expense. Net interest income for the Wealth Management Segment increased $3.8 million, or 63.4%, when 2025 is compared to 2024. The increase in net interest income for the Wealth Management Segment when 2025 is compared to 2024 was principally due to an increase in earnings credit on liabilities net of cost of funds on assets as well as an increase in interest on loans partially offset by an increase in interest on deposits generated by the Private Banking Group. The PCL for the Wealth Management Segment for 2025 totaled a negative $26 thousand compared to a PCL of $154 thousand during 2024 and a negative PCL of $2.1 million during 2023. Noninterest income for the Wealth Management Segment, which includes income related to investment management, trust and brokerage services, increased $3.1 million, or 8.4%, during 2025, principally due to increases in income from brokerage and trust management services. Noninterest expense increased $1.6 million, or 4.8%, when 2025 is compared to 2024, principally due to an increase in salaries and employee benefits, primarily related to broker commissions, other salaries expense, general merit increases and annual portfolio manager incentives partially offset by a decline in trust commissions.
At December 31, 2025 and 2024, Trustmark held assets under management and administration of $10.931 billion and $9.423 billion and brokerage assets of $2.582 billion and $2.638 billion, respectively.
Income Taxes
For the year ended December 31, 2025, Trustmark’s combined effective tax rate from continuing operations was 18.4% compared to a negative 32.7% in 2024 and 15.3% in 2023. The negative effective tax rate from continuing operations for the year ended December 31, 2024 was principally due to the significant non-routine transactions that occurred during the second quarter of 2024. Excluding the significant non-routine transactions, Trustmark’s combined effective tax rate from continuing operations for 2024 was 16.1%. Trustmark’s effective tax rate continues to be less than the statutory rate primarily due to various tax-exempt income items and its utilization of income tax credit programs. 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 or 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.
Financial Condition
Earning assets serve as the primary revenue streams for Trustmark and are comprised of securities, loans and other earning assets. Average earning assets totaled $17.037 billion, or 92.1% of total average assets, at December 31, 2025, compared with $17.010 billion, or 91.7% of total average assets, at December 31, 2024, an increase of $26.2 million, or 0.2%.
Securities
The securities portfolio is utilized by Management to manage interest rate risk, generate interest income, provide liquidity and use as collateral for public and wholesale funding. Risk and return can be adjusted by altering duration, composition and/or balance of the portfolio. The weighted-average life of the portfolio at December 31, 2025 and 2024 was 4.3 and 4.8 years, respectively.
When compared with December 31, 2024, total investment securities increased by $56.4 million, or 1.9%, during 2025. This increase resulted primarily from purchases of available for sale securities and an increase in the fair market value of the available for sale securities, partially offset by calls, maturities and pay-downs of the loans underlying GSE guaranteed securities. Trustmark sold no securities during 2025, compared to $1.561 billion of available for sale securities sold during 2024, generating a loss of $182.8 million.
During 2022, Trustmark reclassified approximately $766.0 million of securities available for sale to securities held to maturity to mitigate the potential adverse impact of a rising interest rate environment on the fair value of the available for sale securities and the related impact on tangible common equity. At the date of these transfers, the net unrealized holding loss on the available for sale securities totaled approximately $91.9 million ($68.9 million net of tax). The resulting net unrealized holding losses are being 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.
At December 31, 2025, the net unamortized, unrealized loss on all transferred securities included in accumulated other comprehensive income (loss) (AOCI) in the accompanying consolidated balance sheets totaled $36.3 million compared to $46.6 million at December 31, 2024.
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Available for sale securities are carried at their estimated fair value with unrealized gains or losses recognized, net of taxes, in AOCI, a separate component of shareholders’ equity. At December 31, 2025, available for sale securities totaled $1.877 billion, which represented 60.9% of the securities portfolio, compared to $1.693 billion, or 55.9%, at December 31, 2024. At December 31, 2025, unrealized gains, net on available for sale securities totaled $34.4 million compared to unrealized losses, net of $27.0 million at December 31, 2024. At December 31, 2025, available for sale securities consisted of U.S. Treasury securities, direct obligations of government agencies and GSE guaranteed mortgage-related securities.
Held to maturity securities are carried at amortized cost and represent those securities that Trustmark both intends and has the ability to hold to maturity. At December 31, 2025, held to maturity securities totaled $1.207 billion and represented 39.1% of the total securities portfolio, compared with $1.335 billion, or 44.1%, at December 31, 2024.
The following table details the weighted-average yield for each range of maturities of securities available for sale and held to maturity using the amortized cost at December 31, 2025 (tax equivalent basis):
Maturing
Securities Available for Sale
U.S. Government agency obligations — — 4.07 % — 4.07 %
Mortgage-backed securities
Residential mortgage pass-through securities
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA — 4.79 % 5.26 % 5.34 % 5.19 %
Securities Held to Maturity
U.S. Treasury securities — 1.04 % — — 1.04 %
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA — — — 4.40 % 4.40 %
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA — — 1.93 % 1.94 % 1.93 %
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 0.11 % 2.04 % 2.41 % 2.41 % 2.09 %
Mortgage-backed securities and collateralized mortgage obligations are included in maturity categories based on their stated maturity date. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.
Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of 100.0% of the portfolio in U.S. Treasury securities, GSE-backed obligations and other Aaa-rated securities as determined by Moody’s Investors Services (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 FHLB of Dallas and FRBA, Trustmark does not hold any other equity investment in a GSE.
At December 31, 2025, Trustmark did not hold securities of any one issuer with a carrying value exceeding 10% of total shareholders’ equity, other than certain GSEs which are exempt from inclusion. Management continues to closely monitor the credit quality as well as the ratings of the debt and mortgage-backed securities issued by the GSEs and held in Trustmark’s securities portfolio.
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The following tables present Trustmark’s securities portfolio by amortized cost and estimated fair value and by credit rating, as determined by Moody’s, at December 31, 2025 and 2024 ($ in thousands):
Amortized Cost Estimated Fair Value
Amount % Amount %
Securities Available for Sale
Securities Held to Maturity
Amortized Cost Estimated Fair Value
Amount % Amount %
Securities Available for Sale
Securities Held to Maturity