Trustmark Corporation (NASDAQ:TRMK) Q1 2025 Results Conference Call April 23, 2025 9:30 AM ET Company Participants Joey Rein - Director of Corporate Strategy Duane Dewey - President & Chief Executive Officer Tom Owens - Chief Financial Officer Barry Harvey - Chief Credit & Operations Officer Tom Chambers - Chief Accounting Officer Conference Call Participants Will Jones - KBW Tim Mitchell - Raymond James Christopher Marinac - Janney Montgomery Scott Operator Good morning, ladies and gentlemen, and welcome t ...

Core Insights - Trustmark (TRMK) reported revenue of $197.32 million for Q1 2025, a 3% year-over-year increase, with EPS of $0.88 compared to $0.68 a year ago, exceeding Zacks Consensus Estimates for both revenue and EPS [1] - The company’s performance metrics indicate a mixed outlook, with some metrics meeting or exceeding estimates while others fell short [4] Financial Performance - Revenue: $197.32 million, a 3% increase year-over-year, compared to Zacks Consensus Estimate of $196.3 million, resulting in a surprise of +0.52% [1] - EPS: $0.88, surpassing the consensus estimate of $0.82, with a surprise of +7.32% [1] - Net Interest Margin: 3.8%, matching the average estimate [4] - Efficiency Ratio: 61.8%, better than the estimated 64.2% [4] - Net (recoveries) charge-offs / average loans: 0%, compared to the estimated 0.2% [4] - Total nonaccrual LHFI: $86.62 million, slightly above the average estimate of $85.01 million [4] - Total nonperforming assets: $94.97 million, higher than the estimated $92.38 million [4] - Average Balances - Total earning assets: $16.74 billion, exceeding the estimate of $16.70 billion [4] - Net Interest Income: $152.06 million, below the estimate of $153.66 million [4] - Total Noninterest income: $42.58 million, significantly lower than the estimated $48.82 million [4] - Net Interest Income (FTE): $154.74 million, slightly below the estimate of $155.26 million [4] Stock Performance - Trustmark shares have returned -6.9% over the past month, compared to the Zacks S&P 500 composite's -8.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Performance - Trustmark Corporation reported net income of $53.6 million for Q1 2025, with diluted earnings per share of $0.88, reflecting a return on average tangible equity of 13.13% and a return on average assets of 1.19%[2] - Net income for Q1 2025 was $53,633, a decrease of $2,679 or 4.8% from the previous quarter, but an increase of $12,098 or 29.1% year-over-year[33] - Basic earnings per share from continuing operations was $0.88, down $0.04 or 4.3% from the previous quarter, but up $0.26 or 41.9% year-over-year[33] - The company reported a net income adjusted for intangible amortization of $51.35 million for the quarter ended March 31, 2025[65] - The net income from continuing operations (GAAP) for the quarter was $53,633 thousand, compared to a loss of $100,605 thousand in the same quarter last year, showing a substantial turnaround[69] Loan and Deposit Activity - Loans held for investment (HFI) increased by $151.5 million, or 1.2%, linked-quarter, totaling $13.2 billion, and increased by $183.5 million, or 1.4%, year-over-year[4] - Total deposits amounted to $15.1 billion, down $27.5 million, or 0.2%, from the prior quarter, and down $257.9 million, or 1.7%, year-over-year[5] - Total loans, including loans held for sale, amounted to $13,320,276,000, a slight increase from $13,275,762,000 in the previous quarter[38] - The total loans held for investment (LHFI) amounted to $13.241 billion as of March 31, 2025, an increase from $13.090 billion at the end of 2024[52] - Total interest-bearing deposits decreased by $356,802, or 2.9%, year over year, totaling $11,942,605[29] Noninterest Income and Expense - Noninterest income rose to $42.6 million, an increase of $1.6 million, or 4.0%, linked-quarter, and $3.2 million, or 8.2%, year-over-year[14] - Noninterest expense totaled $124.0 million, a decrease of $419 thousand, or 0.3%, linked-quarter, and an increase of $4.3 million, or 3.6%, year-over-year[20] - Total noninterest income increased to $42,584 thousand from $40,950 thousand, an increase of 4%[41] - Total noninterest expense was $124,011 thousand, a slight increase from $119,664 thousand in the same quarter last year[70] Credit Quality and Loss Provisions - The provision for credit losses was $5.3 million in Q1 2025, down from $7.5 million in both the prior quarter and the same quarter in 2024[10] - Provision for credit losses (PCL) for loans held for investment was $8,125, an increase of $1,165 or 16.7% from the previous quarter[33] - The allowance for credit losses on loans held for investment increased by $24,012, or 16.8%, year over year, totaling $(167,010)[31] - Total nonperforming assets increased to $94,968,000, a 10.4% increase from the previous quarter and a 10.4% decrease year over year[35] - Nonaccrual loans held for investment (LHFI) totaled $86,620,000, reflecting an 8.1% increase from the linked quarter and an 11.9% decrease year over year[35] Capital and Asset Management - Trustmark's tangible book value per share increased by 4.1% from the prior quarter and 26.1% from the prior year, reaching $27.78[6] - Trustmark's total risk-based capital ratio stood at 14.10%, maintaining a strong capital position[8] - Shareholders' equity increased by $315,033, or 18.8%, year over year, reaching $1,991,554[29] - Common equity tier 1 capital (CET1) as of March 31, 2025, was $1,746.99 million, with a CET1 capital ratio of 11.63%[65] - Tangible equity to risk-weighted assets ratio was 11.23% as of March 31, 2025, compared to 10.97% in the previous quarter[65] Market and Investment Activity - Trustmark recognized a gain of $228.3 million ($171.2 million net of taxes) from the sale of its subsidiary, Fisher Brown Bottrell Insurance, Inc.[51] - Trustmark sold $1.561 billion of available for sale securities with an average yield of 1.36%, resulting in a loss of $182.8 million ($137.1 million net of taxes)[51] - Trustmark purchased $1.378 billion of available for sale securities with an average yield of 4.85% following the restructuring of its investment securities portfolio[51] - Trustmark's investment portfolio is 100% in U.S. Treasury securities, GSE-backed obligations, and other Aaa rated securities, ensuring asset quality[50] Operational Efficiency - The efficiency ratio remained stable at 61.77%, unchanged from the previous quarter, indicating consistent operational efficiency[46] - Adjusted pre-provision net revenue (Non-GAAP) for the quarter was $70,628 thousand, up from $52,521 thousand year-over-year, reflecting a growth of 34.5%[68] - Trustmark's adjusted revenue (Non-GAAP) for the quarter was $199,447 thousand, compared to $177,384 thousand in the same quarter last year, reflecting a growth of 12.4%[70] Employee and Operational Metrics - Full-time equivalent employees increased to 2,506, up from 2,500 in the previous quarter, suggesting growth in operational capacity[46] - Weighted average diluted shares outstanding decreased to 61,049,120 from 61,367,825 in the previous quarter[33]

Wall Street analysts forecast that Trustmark (TRMK) will report quarterly earnings of $0.82 per share in its upcoming release, pointing to a year-over-year increase of 20.6%. It is anticipated that revenues will amount to $196.3 million, exhibiting an increase of 2.5% compared to the year-ago quarter.The consensus EPS estimate for the quarter has undergone an upward revision of 0.8% in the past 30 days, bringing it to its present level. This represents how the covering analysts, as a whole, have reassessed ...

Company Overview - Trustmark (TRMK) is headquartered in Jackson and operates in the Finance sector, experiencing a price change of -12.64% since the beginning of the year [3] - The company currently pays a dividend of $0.24 per share, resulting in a dividend yield of 3.11%, which is higher than the Banks - Southeast industry's yield of 2.52% and the S&P 500's yield of 1.76% [3] Dividend Information - Trustmark's annualized dividend of $0.96 has increased by 4.3% from the previous year, with a historical average annual increase of 0.24% over the last 5 years [4] - The company's current payout ratio is 30%, indicating that it pays out 30% of its trailing 12-month earnings per share as dividends [4] Earnings Growth Expectations - For the fiscal year, Trustmark anticipates solid earnings growth, with the Zacks Consensus Estimate for 2025 projected at $3.37 per share, reflecting an expected increase of 10.86% from the previous year [5] Investment Considerations - Trustmark is viewed as a compelling investment opportunity due to its strong dividend profile and current Zacks Rank of 3 (Hold) [7]

Credit Risk Management - Trustmark's Loans Held for Investment (LHFI) and Loans Held for Sale (LHFS) are categorized based on geographic market regions, with specific underwriting policies in place to mitigate credit risk[30][31][32]. - Trustmark's credit risk management includes adherence to conservative lending practices, collateral monitoring, and oversight of borrowers' financial performance[31][40]. - The credit performance of consumer residential real estate loans is highly dependent on housing values and household income, which are influenced by economic conditions[35][34]. - Trustmark's commercial loans are subject to specific lending policies, including maximum loan-to-value ratios and minimum debt service coverage requirements[36][40]. Economic Conditions - Economic activity improved moderately during 2024, but concerns remain regarding geopolitical developments, inflation, and broader economic volatility[46]. - Consumer spending increased moderately, with strong holiday sales reported, although high mortgage rates continued to suppress residential real estate demand[50]. Regulatory Environment - Trustmark is subject to various regulatory capital requirements, including a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0%[69]. - The BHC Act requires bank holding companies to obtain prior approval from the FRB for acquisitions of voting shares of any bank if they will own or control 5.0% or more of the voting shares post-acquisition[59]. - The OCC finalized a new Policy Statement in September 2024 regarding factors to consider in evaluating proposed bank merger transactions, which may impact Trustmark's future acquisitions[61]. - Trustmark's ability to pay dividends or repurchase stock is limited by the FRB, which requires that cash dividends be covered by the company's net income for the past year[76]. - Trustmark's cash revenue primarily comes from dividends paid by TNB, with regulatory approval required for dividends exceeding TNB's net income for the year plus retained earnings from the previous two years[84]. - TNB is subject to enhanced data collection and reporting requirements under the revised Community Reinvestment Act framework, which applies to banks with assets of at least $2 billion[86]. - The Gramm-Leach-Bliley Act mandates that Trustmark must comply with privacy regulations regarding customer financial information, affecting how consumer data is shared[93]. - TNB's operations are subject to extensive regulation by the OCC and the CFPB, impacting various aspects of its financial services and consumer protection practices[80][87]. - The Dodd-Frank Act has expanded state regulation over national banks, including TNB, potentially increasing compliance requirements[91][92]. - TNB's lending practices are restricted by federal regulations, including limits on loans to insiders and single borrowers, ensuring compliance with safety and soundness standards[81][82]. Financial Performance - The overall asset quality remained stable with low levels of nonperforming loans as a percentage of total loans, despite some concerns about delinquencies among small businesses and lower-income households[48][50]. - Trustmark exceeded its minimum capital requirements with common equity Tier 1 capital, Tier 1 capital, and total capital equal to 11.54%, 11.94%, and 13.97% of its total risk-weighted assets, respectively, as of December 31, 2024[73]. - TNB also exceeded capital requirements with common equity Tier 1 capital, Tier 1 capital, and total capital equal to 12.20%, 12.20%, and 13.41% of its total risk-weighted assets, respectively, as of December 31, 2024[73]. - The leverage ratios for Trustmark and TNB were 9.99% and 10.21%, respectively, as of December 31, 2024[73]. - TNB's expenses related to deposit insurance premiums totaled $19.2 million in 2024[105]. Market Position - As of June 30, 2024, Trustmark's deposit market share ranked within the top three positions in 55.0% of the 56 counties served and within the top five positions in 68.0% of the counties served[54]. - Trustmark's deposit market share by state includes Alabama at 1.91%, Florida at 0.17%, Mississippi at 13.05%, Tennessee at 0.32%, and Texas at 0.04%[55]. - Trustmark faces significant competition in the banking and financial services industry, with increasing pressure from both online and traditional financial institutions[52]. - Trustmark's ability to compete effectively is attributed to providing customers with desired products and services in a convenient and cost-effective manner[56]. Interest Rate Risk Management - Trustmark's interest rate risk management includes simulations that estimate the impact of various interest rate shifts on net interest income[408]. - A +200 basis points change in interest rates is estimated to increase net interest income by 0.8% in 2024[410]. - A +200 basis points change in interest rates is estimated to decrease net portfolio value by 1.3% in 2024[413]. Mortgage Servicing Rights - The estimated fair value of the Mortgage Servicing Rights (MSR) was $139.3 million at December 31, 2024, up from $131.9 million at December 31, 2023[415]. - A 10% adverse change in prepayment speeds would result in a decline in MSR fair value of approximately $4.9 million at December 31, 2024[415]. - A 100-basis point increase in discount rates would lead to a decline in MSR fair value of approximately $5.6 million at December 31, 2024[415]. Employee Information - Trustmark's employee count stood at 2,500 full-time equivalent associates as of December 31, 2024[109]. FDIC Assessment - The FDIC's risk-based assessment system for deposit insurance premiums is influenced by TNB's financial ratios and supervisory ratings, with an additional $3.4 million in FDIC assessment expense incurred during 2024 due to increased rates[101]. - The FDIC will implement a special assessment at a quarterly rate of 3.36 basis points, approximately 13.4 basis points annually, starting in 2024 to recover losses from the receiverships of Silicon Valley Bank and Signature Bank[102].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Trustmark (TRMK) - Trustmark currently holds a Momentum Style Score of B and a Zacks Rank of 1 (Strong Buy), indicating strong potential for outperformance [2][3] - Over the past week, TRMK shares increased by 2.03%, outperforming the Zacks Banks - Southeast industry, which rose by 0.82% [5] - In the last quarter, TRMK shares rose by 1.74%, and over the past year, they have increased by 46.21%, compared to the S&P 500's gains of 1.46% and 22.28% respectively [6] Price and Volume Analysis - TRMK's average 20-day trading volume is 284,594 shares, which serves as a baseline for price-to-volume analysis; a rising stock with above-average volume is generally seen as bullish [7] - The monthly price change for TRMK is 10.96%, significantly higher than the industry's 4.59% performance [5] Earnings Outlook - Over the past two months, three earnings estimates for TRMK have been revised upwards, while none have been lowered, leading to an increase in the consensus estimate from $3.16 to $3.42 [9] - For the next fiscal year, two estimates have also moved upwards with no downward revisions [9] Conclusion - Given the positive momentum indicators and earnings outlook, TRMK is positioned as a strong buy candidate for investors seeking short-term opportunities [11]

Group 1 - Trustmark (TRMK) has reached a significant support level and is considered a good pick for investors from a technical perspective, having recently broken through the 200-day moving average, indicating a long-term bullish trend [1] - TRMK has moved 12.9% higher over the last four weeks, suggesting potential for further gains, and is currently rated as a Zacks Rank 1 (Strong Buy) stock [2] - Positive earnings estimate revisions strengthen the bullish case for TRMK, with three upward revisions compared to none lower for the current fiscal year, and the consensus estimate has also increased [3]

Trustmark (TRMK) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.The upward trend in estimate revisions for this holding company for Trustmark National Bank reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a stro ...

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, 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, conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets, chang ...