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TC

TRUSTMARK CORP (TRMK)·Q1 2025 Earnings Summary

Executive Summary

  • Trustmark delivered solid Q1 2025 results: diluted EPS of $0.88 and reported total revenue of $194.6M; EPS beat S&P Global consensus ($0.82*) while revenue was slightly below consensus ($195.4M*) .
  • Net interest margin (NIM) was 3.75% (down ~1bp q/q); CFO noted seasonally lower loan fees (~3bps) masked an underlying ~2bp NIM increase and guided to “low single-digit linked‑quarter NIM accretion” given deposit beta discipline .
  • Credit quality remained stable: net charge-offs of $1.4M (0.04% of average loans), ACL/LHFI 1.26%, and CET1 of 11.63%; nonaccrual loans rose modestly to $86.6M .
  • Guidance affirmed: FY2025 NIM 3.75–3.85%, NII up mid‑to‑high single digits, loans/deposits (ex‑brokered) up low single digits, noninterest income/expense up mid-single digits; buybacks to be used opportunistically ($15M repurchased in Q1) .
  • Catalysts: CRA rating “Outstanding,” disciplined deposit cost management (interest‑bearing deposit cost down 21bps), and affirmed guidance despite tariff/macro uncertainty .

What Went Well and What Went Wrong

What Went Well

  • Continued relationship-driven growth: Loans HFI +1.2% q/q to $13.24B; personal & commercial deposits +$7.1M q/q; NII (FTE) remained strong at $154.7M with NIM 3.75% .
  • Fee diversification: Noninterest income +4.0% q/q to $42.6M; mortgage banking +18.7% q/q; wealth management +2.4% q/q; “strength of diversified business lines” (CEO) .
  • Expense discipline and capital build: Noninterest expense −0.3% q/q to $124.0M; CET1 improved to 11.63%; buybacks of $15M; tangible book value/share +4.1% q/q .

Management quotes:

  • CEO: “We continued to build upon the strong momentum from 2024… continued loan growth, stable credit quality, and an attractive core deposit base.” Also highlighted CRA “Outstanding” rating .
  • CFO: “On a normalized basis… rather than a 1bp decline, that would have been a 2bp increase… primary driver is ongoing repricing of fixed‑rate loan book and HTM securities” .
  • CFO on deposit beta: “Objective… maintain cumulative beta in the mid‑30s… allowing low single‑digit linked‑quarter NIM accretion” .

What Went Wrong

  • Modest sequential revenue/NII pressure: Reported total revenue down 1.1% q/q; NII (FTE) −2.3% q/q as seasonal fee declines offset deposit cost relief .
  • Incremental credit reserve and nonaccruals: ACL/LHFI increased 4bps to 1.26%; nonaccrual loans +$6.5M q/q to $86.6M; provision (net) $5.3M .
  • Seasonal/derivative-driven fee headwinds: Bank card & other fees −$1.1M q/q; mortgage production −14.4% q/q; hedge ineffectiveness remained a factor (net −$0.6M) .

Analyst concerns:

  • Loan pipelines vs macro/tariff uncertainty may temper new originations despite strong starting pipelines; management polling indicates potential near‑term slowdown .
  • Expense growth later in the year (merit now in Q3) and core conversion program expenses could lift OpEx to mid‑single‑digit y/y .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$192.3 $196.8 $194.6
Diluted EPS ($)$0.84 $0.92 $0.88
Net Interest Income - FTE ($USD Millions)$158.0 $158.4 $154.7
Noninterest Income ($USD Millions)$37.6 $41.0 $42.6
Net Interest Margin %3.69% 3.76% 3.75%
Efficiency Ratio % (Non-GAAP)60.99% 61.77% 61.77%
ROATCE % (Continuing Ops)12.86% 13.68% 13.13%

Key KPIs

KPIQ3 2024Q4 2024Q1 2025
Loans HFI (Period-end, $USD Billions)$13.10 $13.09 $13.24
Deposits (Period-end, $USD Billions)$15.24 $15.11 $15.08
Loans-to-Deposits %86.0% 86.6% 87.8%
Interest-Bearing Deposit Cost %2.81% 2.51% 2.30%
Net Charge-offs ($USD Millions)$4.68 $4.62 $1.39
Nonaccrual Loans ($USD Millions)$73.83 $80.11 $86.62
ACL / LHFI %1.21% 1.22% 1.26%
CET1 Ratio %11.30% 11.54% 11.63%

Revenue Components

Component ($USD Millions)Q3 2024Q4 2024Q1 2025
Mortgage Banking, net$6.12 $7.39 $8.77
Wealth Management$9.29 $9.32 $9.54
Service Charges on Deposits$11.27 $11.23 $10.64
Bank Card & Other Fees$7.93 $8.72 $7.66
Other, net$2.95 $4.30 $5.97

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (FTE)FY20253.75–3.85% (previously provided)3.75–3.85%Maintained
Net Interest IncomeFY2025Mid-to-high single-digit growthMid-to-high single-digit growthMaintained
Loans HFIFY2025Low single-digit growthLow single-digit growthMaintained
Deposits (ex-brokered)FY2025Low single-digit growthLow single-digit growthMaintained
Provision for Credit Losses (incl. unfunded)FY2025StableStableMaintained
Noninterest Income (Adjusted)FY2025Mid single-digit growthMid single-digit growthMaintained
Noninterest Expense (Adjusted)FY2025Mid single-digit growthMid single-digit growthMaintained
Share Repurchases2025Authorized $100M; pace subject to conditions$15M in Q1; future repurchases opportunisticMaintained/Active

Earnings Call Themes & Trends

TopicQ3 2024 (Previous)Q4 2024 (Previous)Q1 2025 (Current)Trend
NIM trajectory & deposit betaNIM +31bps q/q to 3.69%; deposit cost 2.81% NIM 3.76%; deposit cost 2.51% NIM 3.75%; “normalized” +2bps excl. seasonality; targeting mid‑30s beta with low single‑digit q/q NIM accretion Slight upward bias with disciplined beta
Loan growth & CRE extensionsCRE maturities expected in 2025; customers may extend into 2026 Loan growth +1.1% y/y; continued diversification Pipelines strong; many CRE sponsors using extension options; expect payoffs skewed to H2 Steady near term; payoff risk pushed out
Tariffs/macro uncertaintyNot highlightedNot highlightedPost “Liberation Day” polling shows increased uncertainty; potential slowdown in new origination pace New headwind emerging
Capital deployment: buybacks/M&ANo buybacks through Q3; evaluating flexibility Resumed buybacks ($7.5M); dividend raised to $0.24 $15M buybacks; opportunistic pace; M&A interest contingent on conditions; CRA resolved Active buybacks; selective M&A optionality
Expense outlook & core conversionEfficiency ratio improved to 60.99%; ORRE reserve impacted “Other” Efficiency 61.77%; expense trend modestly higher q/q Merit shifts to Q3; core conversion in early 2026 drives project costs; full‑year OpEx mid-single-digit Controlled but rising later in 2025

Management Commentary

  • CEO prepared remarks: “Our results reflect continued loan growth, stable credit quality, and an attractive core deposit base… we are particularly pleased to have received a CRA rating of Outstanding” .
  • CFO guidance: “We continue to believe… low single‑digit linked‑quarter increases in net interest margin… primarily driven by ongoing repricing” .
  • CFO on deposit beta: “Maintain cumulative beta in the mid‑30s… continue to have low single‑digit linked‑quarter NIM accretion” .
  • CCO on CRE: “Meaningful maturing CRE loans during 2025… more of a second half event… many intend to avail themselves of 2 one‑year extension options” .
  • CEO on macro: “We are operating in a dynamic and challenging economic environment… Trustmark is well‑positioned” .

Q&A Highlights

  • Loan growth and CRE paydowns: Customers broadly using extension options; payoff cadence pushed into H2; pipelines remain solid across C&I/CRE/equipment finance .
  • NIM sensitivity: Ex‑seasonality, NIM effectively +2bps; planning for three Fed cuts (June, Sept, Dec); deposit beta targeted mid‑30s to sustain q/q NIM accretion .
  • Credit reserve build: Funded reserve $8.1M with qualitative factor adjustments and migration to internal PDs; unfunded commitments reserve released ($2.8M) .
  • Expenses: Slower hiring and commissions aided Q1; merit timing now Q3; core conversion prep costs to build across 2025, maintaining mid‑single‑digit OpEx growth .
  • Capital deployment: $15M buybacks in Q1; CET1 accreted ~9bps; pace to flex with loan growth and market conditions; selective M&A interest remains .

Estimates Context

MetricQ3 2024Q4 2024Q1 2025
EPS – Consensus Mean* ($)0.8230.8320.817
EPS – Actual ($)0.84 0.92 0.88
Revenue – Consensus Mean* ($USD Millions)193.0195.0195.4
Revenue – Actual ($USD Millions)192.3 196.8 194.6
  • EPS: Q1 2025 EPS beat consensus (0.88 vs 0.82*), continuing beats in Q3/Q4; EPS beat .
  • Revenue: Q1 reported revenue slightly below consensus ($194.6M vs $195.4M*); similar small misses in Q3/Q4; Revenue slight miss .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Earnings quality: Core trends solid; fee diversification offset seasonal headwinds; normalized NIM shows underlying accretion potential as fixed‑rate assets and HTM reprice .
  • Deposit discipline: Cost of interest‑bearing deposits fell 21bps q/q to 2.30%; maintaining mid‑30s deposit beta is key to delivering guided NIM accretion .
  • Credit stable, with watch items: Modest uptick in nonaccruals and qualitative reserve adjustments; low net charge‑offs (0.04% of avg loans) support benign credit cost outlook .
  • Capital flexibility: CET1 11.63% and TCE/TTA 9.39% support continued buybacks and organic growth; repurchase pace will flex with loan demand .
  • Macro/tariffs: Early signs new origination may slow; CRE sponsors widely using extension options—reducing near‑term payoff risk but extending exposure duration .
  • Expense trajectory: Expect back‑half lift in salaries (merit timing) and project spend for the 2026 core conversion; still guided to mid‑single‑digit OpEx growth .
  • Near‑term setup: With affirmed FY2025 guidance and deposit cost momentum, any evidence of sustained NIM accretion or stronger fee trends can support positive estimate revisions and stock sentiment .