10-Q: Trustmark Reports Strong Q3 Earnings, Loan Growth, and Capital

Trustmark Corporation announced robust financial results for the third quarter and first nine months of 2025, driven by increased net interest income, significant loan and deposit growth, and a solid capital position.

Summary

• Net income for the third quarter of 2025 increased to $56.8 million, or $0.94 per basic and diluted share, up from $51.3 million, or $0.84 per share, in Q3 2024.
• Year-to-date net income for September 30, 2025, was $166.3 million, or $2.75 basic EPS and $2.74 diluted EPS, compared to $166.7 million, or $2.72 basic and diluted EPS, for the same period in 2024 (note: 2024 included a significant gain from discontinued operations).
• Total revenue for Q3 2025 rose to $202.4 million, a 5.3% increase from $192.3 million in Q3 2024.
• Net interest income for Q3 2025 was $162.4 million, up 5.0% from $154.7 million in Q3 2024, with the net interest margin (FTE) increasing to 3.83% from 3.69%.
• Loans held for investment (LHFI) grew by $458.2 million, or 3.5%, to $13.548 billion at September 30, 2025, compared to December 31, 2024.
• Total deposits increased by $522.8 million, or 3.5%, to $15.631 billion at September 30, 2025, with noninterest-bearing deposits up 8.1% and interest-bearing deposits up 2.3%.
• The provision for credit losses (PCL) on LHFI significantly decreased to $1.4 million in Q3 2025 from $7.9 million in Q3 2024.
• Nonperforming assets increased to $92.3 million at September 30, 2025, up 7.3% from $86.0 million at December 31, 2024.
• Trustmark and its subsidiary bank, TB, exceeded all minimum regulatory capital standards and are considered 'well-capitalized' as of September 30, 2025.
• The Board of Directors authorized a $100.0 million stock repurchase program for 2025, with $37.1 million (1.0 million shares) repurchased year-to-date September 30, 2025.
• A quarterly cash dividend of $0.24 per share was declared, payable December 15, 2025, to shareholders of record on December 1, 2025, bringing the indicated 2025 dividend to $0.96 per common share, an increase from $0.92 in 2024.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance with significant increases in net income, EPS, net interest income, and net interest margin, especially when adjusting for one-time events in the prior year. Loan and deposit growth are robust, and capital ratios are healthy. While nonperforming assets increased and interest income declined, the overall picture reflects effective management and a solid financial position, leading to an increased dividend and active share repurchases.

Positives

• Net income and EPS for Q3 2025 and YTD 2025 (adjusted for non-routine items) showed strong growth, indicating improved core profitability.
• Net interest income increased by 5.0% in Q3 2025 and 10.4% YTD 2025, reflecting effective interest rate management.
• Net interest margin (FTE) expanded by 14 basis points in Q3 2025 to 3.83% and by 37 basis points YTD 2025 to 3.80%.
• Loans held for investment (LHFI) experienced diversified growth of 3.5% ($458.2 million) year-to-date, driven by increases in other commercial loans and leases, real estate secured loans, and commercial and industrial loans.
• Total deposits increased by 3.5% ($522.8 million) year-to-date, including an 8.1% increase in noninterest-bearing deposits, demonstrating strong core funding.
• The provision for credit losses (PCL) on LHFI decreased significantly by 82.4% in Q3 2025 and 51.0% YTD 2025 (excluding the 2024 mortgage loan sale PCL), indicating improved credit quality trends.
• Capital ratios improved, with Common Equity Tier 1 Capital Ratio at 11.88%, Tier 1 Capital Ratio at 12.27%, Total Capital Ratio at 14.33%, and Tier 1 Leverage Ratio at 10.26%, all exceeding minimum requirements and classifying Trustmark as 'well-capitalized'.
• Mortgage banking, net, increased by 33.7% in Q3 2025 and 32.8% YTD 2025, primarily due to improved net negative hedge ineffectiveness and higher gains on loan sales.
• The company increased its quarterly cash dividend to $0.24 per share, and the indicated annual dividend for 2025 is $0.96 per share, up from $0.92 in 2024.
• Trustmark actively returned capital to shareholders through its stock repurchase program, acquiring $37.1 million (1.0 million shares) year-to-date 2025.

Negatives

• Interest income decreased by 3.5% in Q3 2025 and 1.6% YTD 2025, primarily due to declines in yields on LHFS and LHFI portfolios and lower interest earned on reserves held at the FRBA.
• Nonperforming assets increased by 7.3% to $92.3 million at September 30, 2025, reflecting increases in both nonaccrual LHFI and other real estate.
• Nonaccrual LHFI increased by 4.8% to $84.0 million, mainly due to 1-4 family mortgage loans placed on nonaccrual status in the Mississippi market region.
• Other real estate increased by 40.7% to $8.3 million, primarily due to properties foreclosed in the Mississippi market region.
• Noninterest expense increased by 6.2% in Q3 2025 and 5.2% YTD 2025, driven by higher salaries and employee benefits (due to merit increases, performance incentives, medical insurance) and increased services and fees (data processing, outsourcing, legal, advertising).
• The Moodys downgrade of the United States' credit rating from Aaa to Aa1 during Q2 2025 resulted in a significant portion of Trustmark's investment portfolio moving to the Aa1 to Aa3 credit rating category.

Risks

• Actions by the Board of Governors of the Federal Reserve System (FRB) that impact the level of market interest rates.
• Local, state, national, and international economic and market conditions, including geopolitical developments (Ukraine, Middle East) and the current United States presidential administration's policies (tariffs, government shutdown).
• Conditions in the housing and real estate markets in the regions in which Trustmark operates.
• Conditions and changes, including volatility, in the credit and financial markets.
• Changes in the level of nonperforming assets and charge-offs.
• An increase in unemployment levels or a slowdown in economic growth.
• Changes in Trustmark's ability to measure the fair value of assets in its portfolio.
• The demand for the products and services offered by Trustmark.
• Potential unexpected adverse outcomes in pending litigation matters.
• Trustmark's ability to attract and retain noninterest-bearing deposits and other low-cost funds.
• Competition in loan and deposit pricing, as well as the entry of new competitors into Trustmark's markets.
• Changes in accounting standards and practices, including changes in the interpretation of existing standards.
• Changes in consumer spending, borrowings, and savings habits.
• Technological changes, cyber-attacks, and other breaches affecting information system security.
• Natural disasters, environmental disasters, pandemics or other health crises, acts of war or terrorism.
• Changes to the credit rating of U.S. Government securities.
• Inherent uncertainty in reasonably estimating the requirement for reserves against potential future mortgage loan servicing putback expenses.
• Increased federal regulation of the derivatives markets, which may increase the cost to administer derivatives programs.
• The inherent difficulty of predicting the outcome of legal proceedings.
• Econometric models' sensitivity to extreme economic instability and the need for upper/lower limits and floors to prevent extrapolation beyond reasonable boundaries.
• The GENIUS Act establishing a federal licensing and supervisory framework for payment stablecoins, which may accelerate competition from non-traditional financial institutions but also create opportunities for banks.

Future Outlook

Management expects economic uncertainty and geopolitical developments to persist in the near term, potentially impacting global and domestic markets. While Federal Reserve rate cuts may reduce competitive pressures on deposit costs, they could increase pressure on net interest margin. The company is intently monitoring the impact of tariffs, government shutdown, and other administrative policies on its customer base, interest rates, and credit quality. Trustmark estimates that $2.7 million will be reclassified as a reduction to interest and fees on LHFS and LHFI over the next twelve months, subject to changes in interest rates and hedging activities. The company intends to adopt new accounting standards (ASU 2024-03 and ASU 2025-06) in future periods, but does not expect a material impact on its financial statements or results of operations.

Management Comments

• Our financial results for the first nine months of 2025 reflected diversified growth in loans held for investment (LHFI), stable credit quality and cost-effective core deposit growth.
• Our capital position remained solid, reflecting the consistent profitability of our diversified financial services businesses.
• With robust capital, liquidity and profitability, we are well-positioned to compete in changing economic conditions and create long-term value for our shareholders.
• We believe that Trustmark has sufficient liquidity and capital resources to meet presently known cash flow requirements arising from ongoing business transactions.
• We are not aware of any events that are reasonably likely to have a material adverse effect on Trustmark's liquidity, capital resources or operations.
• We are not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on Trustmark.
• We will continue to prudently manage the balance sheet in an effort to control interest rate risk and maintain profitability over the long term.

Industry Context

Economic activity in Q3 2025 showed mixed signals, with strong equity markets and continued consumer spending alongside a softening labor market and persistent inflationary pressures, partly due to new tariffs. The Federal Reserve lowered the target federal funds rate in September 2025 to a range of 4.00%-4.25%, which could reduce competitive pressures on deposit costs but increase pressure on net interest margins for banks. Federal Reserve Districts reported flat to declining consumer spending, varied manufacturing activity, and generally muted labor demand. The financial services sector saw mixed conditions, with some improved business lending due to lower rates, while others noted muted activity and tightening lending standards. Multiple bank mergers were announced in the Southeast, affecting the banking landscape. The new GENIUS Act on stablecoins could accelerate competition from non-traditional financial institutions but also create new opportunities for banks.

Management Changes

Corporate Governance

Legal Proceedings

• Trustmark and its subsidiaries are parties to lawsuits and other claims arising in the ordinary course of business, some asserting substantial claims for damages related to lending, collection, servicing, investment, and trust activities.
• Management believes, based on evaluation and legal counsel, that a loss in any currently pending legal proceeding is not probable and a reasonable estimate cannot be made.
• All matters will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable.
• Trustmark believes that current legal proceedings should not have a material adverse effect on its consolidated financial condition, after considering current insurance coverage.

Stakeholder Impact

• Shareholders: Benefited from increased net income, EPS, an increased quarterly dividend of $0.24 per share, and an active stock repurchase program ($37.1 million repurchased YTD 2025).
• Employees: Salaries and employee benefits increased due to general merit increases, management annual performance incentives, medical insurance expense, and commissions related to mortgage originations.
• Customers: Provided banking and financial solutions; loan modifications offered to borrowers experiencing financial difficulty; subject to new CFPB rules on consumer data access (currently stayed).
• Regulatory Authorities: Trustmark Bank's conversion to a Mississippi-chartered entity changes its primary supervision to the Federal Reserve Bank of Atlanta and the Mississippi Department of Banking and Consumer Finance, while remaining subject to CFPB oversight.

Next Steps

• Management and the Board of Directors will monitor the Trustmark Corporation Pension Plan throughout 2025 to determine any additional funding requirements by the plan's measurement date of December 31, 2025.
• Trustmark will include the required disclosures for ASU 2023-09 in its Annual Report on Form 10-K for the year ending December 31, 2025.
• Trustmark intends to adopt the amendments of ASU 2024-03 effective January 1, 2027, and will include the required annual disclosures in its Annual Report on Form 10-K for the year ending December 31, 2027, and required interim disclosures in its Quarterly Report on Form 10-Q for the period ending March 31, 2028.
• Trustmark intends to adopt the amendments of ASU 2025-06 effective January 1, 2028.
• The CFPB will conduct a rulemaking to revise the final rule for Section 1033 of the Dodd-Frank Act, with a preliminary injunction preventing enforcement until reconsideration is complete.
• Federal regulatory agencies are required to adopt implementing regulations for the GENIUS Act, which will take effect the earlier of 18 months after its enactment or 120 days after final implementing regulations are issued.

Key Dates

Recommendation

The filing demonstrates strong underlying financial performance, with significant increases in adjusted net income, EPS, net interest income, and net interest margin. The company exhibits robust loan and deposit growth, indicating healthy business activity. Capital ratios are strong, exceeding regulatory requirements, and management is actively returning capital to shareholders through increased dividends and share repurchases. While there are some concerns regarding increased nonperforming assets and noninterest expenses, the overall positive trends in core profitability, credit quality (lower PCL), and capital management suggest a favorable outlook for investors.

Keywords

Banking, Financial Services, Regional Bank, Commercial Banking, Wealth Management, Loans, Deposits, Net Interest Income, Credit Quality, Capital Ratios, Dividends, Stock Repurchase, SEC Filing, 10-Q, TRMK