What Trustmark (TRMK) Said on Its Q3 Earnings Call

Key Points

• Strong Q3 performance: Trustmark reported net income of $58.1 million, or $1.00 per diluted share, supported by higher net interest income, core deposit growth and strong credit quality. Operating earnings per share were a company record, while net interest margin held at 3.84%.
• Strategic repositioning expected to lift earnings: The sale-leaseback of 34 branch properties generated a $61.5 million pretax gain, offsetting a loss from repositioning the securities portfolio toward higher-yielding assets. Management expects the combined actions to add about $3.2 million to quarterly net income, or roughly $0.05 per share, beginning in Q4.
• Improved outlook despite loan payoffs: Unexpected commercial loan payoffs caused a slight quarterly decline in loans, but Trustmark cited a nearly $1 billion approved pipeline and 1.2% sequential deposit growth. The company raised its 2026 net interest margin outlook to 3.83%-3.87%, expects roughly 4% in Q4, and continued share repurchases and dividends.

Trustmark NASDAQ: TRMK reported third-quarter net income of $58.1 million, or $1.00 per diluted share, as net interest income increased and the company completed a branch-property sale-leaseback and investment portfolio repositioning intended to support future earnings.

President and Chief Executive Officer Duane Dewey said the quarter was marked by growing net interest income, strong credit quality and core deposit growth. He said quarterly operating earnings per share represented a record for the company in its 137-year history.

Trustmark reported a return on average tangible equity of 12.72% and a return on average assets of 1.21%. Revenue totaled $207.1 million, down 0.5% from the preceding quarter but up 2.4% from a year earlier. Fully tax-equivalent net interest income rose $2 million, or 1.2%, sequentially, while net interest margin was unchanged at 3.84%.

Sale-Leaseback and Securities Repositioning

During the quarter, Trustmark sold 34 branch properties and entered triple-net lease agreements for the locations. The transaction generated a pretax gain of $61.5 million after transaction-related expenses.

The company also reclassified held-to-maturity securities as available-for-sale and repositioned its investment portfolio. Trustmark sold $629.5 million of securities with a weighted-average yield of 1.4% and purchased $628 million of securities with a weighted-average yield of about 5%. The securities transactions produced a $61.5 million pretax loss, which was effectively offset by the gain on the branch-property transaction, Dewey said.

Chief Financial Officer Joe Bond said the combined actions were designed to unlock capital from the branch network, improve the timing of investment portfolio cash flows, strengthen the company’s interest-rate-risk profile and enhance future earnings.

For the fourth quarter, Trustmark expects the transactions to contribute approximately $5.7 million of incremental net interest income, equivalent to roughly 12 basis points of margin. After considering occupancy and premises costs, Bond said the company expects about $3.2 million of incremental net income, or approximately $0.05 per diluted share.

Loans, Deposits and Margin Outlook

Loans held for investment declined $43.9 million, or 0.3%, during the third quarter, though they increased $321 million, or 2.4%, from a year earlier. Dewey said loan production trends remained solid, but elevated commercial loan payoffs offset growth.

Chief Credit and Operations Officer Barry Harvey said unexpected commercial real estate loan payoffs totaled about $214 million in the quarter, including $52 million of criticized credits. The company also recorded approximately $60 million in unexpected C&I payoffs from four credits. Public finance balances declined about $43 million, largely because of one payoff, although Trustmark established a new facility for that customer with approximately $115 million of available capacity that it expects to fund through the fourth quarter and into 2027.

Harvey said Trustmark’s approved loan pipeline was just under $1 billion as of Sept. 30, describing it as stronger and more diverse than the company has historically experienced. Management said the pipeline includes commercial real estate, C&I, equipment finance and municipal opportunities. Harvey added that scheduled payoffs expected in the fourth quarter are in line with prior quarters, while the level of unexpected payoffs cannot be predicted.

Excluding planned brokered deposit runoff, deposits increased $184.3 million, or 1.2%, from the previous quarter and 3.4% year over year. Trustmark reduced brokered deposits by $198 million during the quarter, bringing them to 1.3% of total deposits, Bond said.

Total deposit costs were 1.67% in the third quarter. The company expects deposit costs of approximately 1.76% in the fourth quarter, based on a 33% beta. Bond said Trustmark’s deposit mix remained approximately 80% interest-bearing and 20% non-interest-bearing, with no mix shift currently assumed in its forecast.

Trustmark raised its full-year 2026 net interest margin outlook to a range of 3.83% to 3.87% and expects to reach the high end of that range, with fourth-quarter margin around 4%. The company continues to expect mid-single-digit growth in full-year fully tax-equivalent net interest income compared with 2025.

Fees, Expenses and Credit Quality

Non-interest income faced pressure from mortgage banking and treasury management. Mortgage banking production volume fell 11.7% from the prior quarter, while related revenue declined 11.6%. Treasury management fee revenue also declined following a core conversion that shifted certain products to on-balance-sheet deposits and net interest income.

Bond said approximately $250,000 per month of economics previously recognized as fee income now flows through net interest margin. The prior quarter also included $1.2 million of partnership distributions that did not recur in the third quarter. Wealth management revenue continued to grow, according to Dewey.

Non-interest expense increased $753,000, or 0.6%, sequentially. Salaries and employee benefits rose $1.7 million, while other expenses declined $1.7 million, primarily reflecting lower other real estate, miscellaneous and loan expenses. Trustmark reaffirmed its full-year expectation for mid-single-digit growth in non-interest expense and now expects low- to mid-single-digit growth in non-interest income for the year.

Credit quality remained strong, management said. Trustmark recorded a $2.3 million net provision for credit losses and $1 million in net charge-offs, equal to 3 basis points of average loans. The company expects total provision for credit losses, including off-balance-sheet exposure, to normalize and remain consistent with prior 2026 quarters.

Capital Returns and Growth Priorities

Trustmark repurchased $60.9 million of common stock, or roughly 1.4 million shares, during the first nine months of 2026. Third-quarter repurchases totaled $20.1 million, representing approximately 428,000 shares. The board also declared a quarterly cash dividend of $0.25 per share, payable Dec. 15 to shareholders of record Dec. 1.

Dewey said the company remains focused on organic growth, including hiring production professionals and expanding in key markets. He said Trustmark would maintain a disciplined approach to capital deployment, prioritizing organic loan growth, potential market expansion, mergers and acquisitions, and other corporate purposes as market conditions warrant.

About Trustmark (NASDAQ:TRMK)

Trustmark Corporation NASDAQ: TRMK is a financial services company headquartered in Jackson, Mississippi. Through its principal subsidiary, Trustmark National Bank, the company provides banking, wealth management and insurance services to individuals, businesses and institutional clients.

Trustmark's banking activities include deposit accounts, consumer and commercial lending, mortgages, treasury management and other financial services. Its wealth management business offers trust, investment management, financial planning and related services, while its insurance operations provide personal and commercial insurance products.

Founded in 1889, Trustmark serves customers through banking and financial services operations in Mississippi, Alabama, Florida, Tennessee and Texas.

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