Trustmark tightens 2025 net interest margin outlook to 3.78%-3.82% while advancing hiring and organic growth initiatives

Earnings Call Insights: Trustmark Corporation (TRMK) Q3 2025

MANAGEMENT VIEW

* Duane Dewey, President, CEO & Director, reported that Trustmark's performance in the third quarter reflected diversified loan growth, stable credit quality, and cost-effective core deposit growth. Dewey stated, "Our performance reflected diversified loan growth and stable credit quality, along with cost-effective core deposit growth. During the quarter, we continued to implement organic growth initiatives and added established customer relationship managers and production talent in key markets across our franchise. These investments are designed to further enhance financial performance and shareholder value."
* Dewey highlighted that loans held for investment increased $83 million linked quarter and $448 million year-over-year, while deposits grew $550 million with noninterest-bearing deposits up $186 million. Net income for the quarter was $56.8 million, with fully diluted EPS of $0.94.
* Dewey also announced a share repurchase of $11 million in the quarter and affirmed ongoing repurchase capacity, saying, "We have $63 million in repurchase authority for the remainder of this year."
* Thomas Owens, Principal Financial Officer & Treasurer, noted, "We've been very pleased at our ability to continue to deploy capital via repurchase while supporting loan growth and continuing to drive nice accretion to our regulatory capital ratios, I think we're up 18 basis points linked quarter."
* George Chambers, Principal Accounting Officer, provided more color on expenses, stating, "What hit us in the third quarter for the additional new hires was about $400,000. And of course, that's because we're hiring throughout the quarter, fully loaded, we would expect that to increase during the fourth quarter."

OUTLOOK

* Dewey said, "We affirm our guidance and expect loans held for investment to increase mid-single digits for the full year '25. Similarly, we affirm our guidance of low single-digit growth in deposits, excluding brokered deposits for the full year '25."
* Guidance for net interest margin was tightened: "We've tightened the anticipated range of the net interest margin for the full year. The range is now 3.78% to 3.82% for the year compared to our prior of 3.77% to 3.83%."
* Dewey affirmed expectations for net interest income to increase in the high single digits for 2025 and continued trends of lower provision for credit losses compared to full year 2024.
* Noninterest income and noninterest expense are both expected to increase mid-single digits for 2025.
* Dewey reiterated a disciplined approach to capital deployment, emphasizing organic loan growth, potential market expansion, M&A, and opportunistic share repurchases.

FINANCIAL RESULTS

* Loans held for investment increased $83 million linked quarter and $448 million year-over-year.
* Deposit base grew $550 million linked quarter, with noninterest-bearing deposits up $186 million.
* Net income reported was $56.8 million, with fully diluted EPS of $0.94, up 2.2% from the prior quarter.
* Net interest income expanded to $165.2 million, net interest margin increased to 3.83% from 3.81% prior quarter.
* Noninterest income was $39.9 million, up 6.3% year-over-year.
* Noninterest expense increased $5.8 million, including $2.3 million in nonroutine items. Salaries and benefits increased $3.2 million due to merit increases and new hires.
* Tangible book value per share at September 30 was $29.60.
* CET1 ratio expanded 18 basis points to 11.88%; total risk-based capital ratio increased to 14.33%.

Q&A

* Stephen Scouten, Piper Sandler: Asked about hiring trends and future hiring plans. Dewey responded, "We hired approximately 29 new associates in the third quarter alone. 21 of those 29 new associates are production related...across all business units from commercial real estate, equipment finance, corporate banking, commercial banking...Houston, Birmingham, Huntsville, Alabama, the Panhandle of Florida, South Alabama and Atlanta."
* Scouten also inquired about expense build related to hiring. Chambers noted, "What hit us in the third quarter for the additional new hires was about $400,000...we would expect that to increase during the fourth quarter."
* Michael Rose, Raymond James: Asked about M&A opportunities and growth guidance. Dewey said, "We think that and prior experience would say that every M&A deal in given markets does present opportunity...it is really in predominantly all markets that we serve today."
* Feddie Strickland, Hovde Group: Sought clarification on expense guidance and margin trends. Chambers confirmed, "We expect, obviously, those nonrecurrings should fall off, but we're still guiding to mid-single-digit growth year-over-year in expenses."
* Catherine Mealor, KBW: Asked about deposit cost trends and beta amid anticipated Fed cuts. Owens responded, "We do have an extremely valuable deposit base, which we continue to demonstrate as we manage our way through interest rate cycles...when you look at our outlook for fourth quarter deposit costs dropping from 1.84% to 1.72%, that reflects the intended price cut or deposit rate cuts that we'll be making as the Fed cuts today."

SENTIMENT ANALYSIS

* Analysts' tone was generally neutral to slightly positive, with a focus on growth initiatives, expense management, deposit trends, and potential M&A opportunities. Questions surfaced around sustainability of expense growth and margin management under changing rate scenarios.
* Management maintained a confident and constructive tone in both prepared remarks and responses, often emphasizing ongoing execution of strategic priorities and organic growth. Dewey used affirming language: "We're very optimistic there."
* Compared to the previous quarter, both analyst and management tone remained constructive, with a slight uptick in analyst focus on forward expense trends and market opportunities created by M&A in overlapping markets.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for loans and deposits growth was affirmed at mid-single and low-single digits, respectively, consistent with Q2.
* The net interest margin guidance was tightened to a slightly narrower range, compared to Q2's slightly wider band.
* Both quarters showed incremental expansion in capital ratios and tangible book value per share.
* Analysts' focus shifted marginally toward the impact of recent hiring, expense build, and organic growth strategy, compared to more general profitability and margin expansion discussions in Q2.
* Management's confidence in organic growth and market expansion was reinforced in both quarters, but the Q3 call placed more emphasis on hiring and market-specific initiatives.

RISKS AND CONCERNS

* Nonroutine expenses, including professional fees and ORE reserves, contributed to higher noninterest expense in the quarter.
* Management acknowledged ongoing headwinds in a competitive deposit environment and potential for choppiness in margin due to rate cycle shifts.
* Analysts highlighted the need to monitor expense growth, sustainability of loan/deposit growth, and the competitive landscape for both deposits and loan pricing.

FINAL TAKEAWAY

Trustmark Corporation reiterated its commitment to organic growth, disciplined capital deployment, and maintaining stable credit performance as core drivers for 2025. The company tightened its net interest margin guidance and affirmed expectations for mid-single digit loan growth, supported by ongoing hiring in key growth markets and continued share repurchases. Management signaled confidence in its business model and ability to generate shareholder value despite a competitive market and rising expenses associated with strategic investments in talent and operations.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/trmk/earnings/transcripts]

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