Trustmark(TRMK) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Highlights Trustmark Corporation reported strong Q2 2025 financial results, driven by diversified growth, stable credit, and robust fee income Q2 2025 Key Financial Results | Metric | Value | | :--- | :--- | | Net Income | $55.8 million | | Diluted EPS | $0.92 | | Return on Average Tangible Equity | 13.13% | | Return on Average Assets | 1.21% | | Quarterly Cash Dividend | $0.24 per share | - The President and CEO highlighted building momentum, successful expansion of cost-effective core deposit relationships, and strong performance in mortgage banking and wealth management as key drivers of the solid financial results[3] Q2 2025 Performance Summary (Linked-Quarter) | Metric | Value | Change | | :--- | :--- | :--- | | Loans HFI | $13.5 billion | +1.7% | | Deposits | $15.1 billion | +0.2% | | Cost of Total Deposits | 1.80% | -3 bps | | Total Revenue | $198.6 million | +2.1% | | Net Interest Income (FTE) | $161.4 million | +4.3% | | Net Interest Margin | 3.81% | +6 bps | | Noninterest Expense | $125.1 million | +0.9% | Financial Condition Analysis The company's financial condition reflects robust balance sheet management, stable credit quality, and strong capital adequacy Balance Sheet Management Balance sheet management as of June 30, 2025, shows growth in loans and deposits, improved deposit costs, and strong capital position Loan Growth (as of June 30, 2025) | Metric | Value | Linked-Quarter Change | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Loans HFI | $13.5 billion | +$223.3 million (+1.7%) | +$309.4 million (+2.4%) | Deposit Composition (as of June 30, 2025) | Metric | Value | Linked-Quarter Change | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Deposits | $15.1 billion | +$35.2 million (+0.2%) | -$347.0 million (-2.2%) | | Noninterest-bearing Deposits | 20.7% of total | - | - | | Cost of Total Deposits | 1.80% | -3 bps | - | - The company maintained a strong capital position with a Common Equity Tier 1 (CET1) ratio of 11.70% and a total risk-based capital ratio of 14.15%[7] - Trustmark repurchased $11.0 million (approx. 341 thousand shares) of its common stock in Q2 2025, bringing the total for the first six months to $26.0 million (approx. 764 thousand shares) under its $100.0 million repurchase program[8] Credit Quality Credit quality remained stable in Q2 2025, marked by declining nonperforming assets and a prudent allowance for credit losses Nonperforming Assets (as of June 30, 2025) | Metric | Value | Linked-Quarter Change | | :--- | :--- | :--- | | Nonaccrual Loans | $81.0 million | -$5.6 million | | Other Real Estate | $9.0 million | +$0.6 million | | Total Nonperforming Assets | $90.0 million | -$5.0 million (-5.3%) | - The provision for credit losses for loans HFI was $5.3 million, primarily due to loan growth and macroeconomic forecast changes, while the provision for off-balance sheet exposures was a negative $670 thousand, resulting in a total provision of $4.7 million[10] Allowance for Credit Losses (ACL) (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Total ACL on Loans HFI | $168.2 million | | ACL as % of Total Loans HFI | 1.25% | | ACL as % of Nonaccrual Loans (excl. individually analyzed) | 272.20% | - Net charge-offs for the quarter totaled $4.1 million, representing 0.12% of average loans. This included $2.7 million from three individually analyzed credits that were reserved for in prior periods[17] Results of Operations Analysis Operational results for Q2 2025 show revenue growth driven by net interest income, despite a slight increase in noninterest expense Revenue Generation Revenue generation in Q2 2025 was strong, driven by increased net interest income and improved net interest margin Q2 2025 Revenue Components (Linked-Quarter Change) | Metric | Value | Change | | :--- | :--- | :--- | | Total Revenue | $198.6 million | +2.1% | | Net Interest Income (FTE) | $161.4 million | +4.3% | | Noninterest Income | $39.9 million | -6.3% | - The net interest margin expanded to 3.81%, up 6 basis points from the prior quarter, primarily due to higher yields on the loan portfolio and a decrease in the cost of interest-bearing liabilities[13] - Excluding a $2.4 million gain on a bank facility sale in Q1 and a small net loss in Q2, noninterest income was unchanged linked-quarter. Increases in bank card fees and wealth management were offset by declines in other income and mortgage banking[14] Q2 2025 Mortgage and Wealth Management | Metric | Value | Linked-Quarter Change | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Mortgage Loan Production | $426.3 million | +33.7% | +12.3% | | Mortgage Banking Revenue | $8.6 million | -1.9% | +$4.4 million | | Wealth Management Revenue | $9.6 million | +1.0% | -0.6% | Noninterest Expense Noninterest expense for Q2 2025 increased slightly, primarily driven by higher services and fees, partially offset by seasonal salary adjustments Q2 2025 Noninterest Expense Components (Linked-Quarter Change) | Expense Category | Value | Change | | :--- | :--- | :--- | | Total Noninterest Expense | $125.1 million | +0.9% | | Salaries and Employee Benefits | $68.3 million | -0.3% | | Services and Fees | $27.0 million | +2.9% | | Other Expense | $16.1 million | +3.4% | - The linked-quarter decline in salaries and benefits was due to a seasonal decrease in payroll taxes and stock compensation, partially offset by higher commissions. The increase in other expense was driven by higher loan and miscellaneous expenses[20] Consolidated Financial Statements The consolidated financial statements provide a detailed overview of the company's balance sheet, income, credit quality, and key financial ratios Consolidated Balance Sheets The consolidated balance sheet as of June 30, 2025, shows growth in total assets, loans, deposits, and shareholders' equity Selected Period End Balance Sheet Data ($ in thousands) | Account | 6/30/2025 | 3/31/2025 | 6/30/2024 | | :--- | :--- | :--- | :--- | | Total Assets | $18,615,659 | $18,296,203 | $18,452,487 | | Net LHFI | $13,296,543 | $13,074,459 | $13,000,733 | | Total Deposits | $15,115,861 | $15,080,704 | $15,462,888 | | Total Shareholders' Equity | $2,070,789 | $2,021,227 | $1,879,141 | Consolidated Income Statements The consolidated income statement for Q2 2025 shows increased net income and diluted EPS, driven by higher net interest income Selected Quarterly Income Statement Data ($ in thousands) | Account | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income-FTE | $161,408 | $154,739 | $144,333 | | Provision for Credit Losses (Total) | $4,676 | $5,294 | $19,629 | | Total Noninterest Income | $39,890 | $42,584 | $(141,286) | | Total Noninterest Expense | $125,114 | $124,011 | $118,326 | | Net Income | $55,841 | $53,633 | $73,832 | | Diluted EPS | $0.92 | $0.88 | $1.20 | Credit Quality Data Credit quality data as of June 30, 2025, indicates a decrease in nonperforming assets and a stable allowance for credit losses Nonperforming Assets ($ in thousands) | Category | 6/30/2025 | 3/31/2025 | 6/30/2024 | | :--- | :--- | :--- | :--- | | Total Nonaccrual LHFI | $81,000 | $86,620 | $44,292 | | Total Other Real Estate | $8,972 | $8,348 | $6,586 | | Total Nonperforming Assets | $89,972 | $94,968 | $50,878 | ACL LHFI Rollforward for Q2 2025 ($ in thousands) | Item | Amount | | :--- | :--- | | Beginning Balance (3/31/2025) | $167,010 | | PCL, LHFI | $5,346 | | Net Charge-offs | $(4,119) | | Ending Balance (6/30/2025) | $168,237 | Key Financial Ratios Key financial ratios for Q2 2025 reflect strong profitability, an expanded net interest margin, and robust capital adequacy Selected Financial Ratios | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Return on Average Tangible Equity | 13.13% | 13.13% | 21.91% | | Return on Average Assets | 1.21% | 1.19% | 1.58% | | Net Interest Margin - FTE | 3.81% | 3.75% | 3.38% | | Efficiency Ratio | 61.24% | 61.77% | 63.81% | | Common Equity Tier 1 Capital Ratio | 11.70% | 11.63% | 10.92% | | Tangible Book Value per Share | $28.74 | $27.78 | $25.23 | Notes to Consolidated Financials Notes to the consolidated financials provide additional details on significant transactions, portfolio composition, yields, and non-GAAP measures Note 1: Significant Non-Routine Transactions Q2 2024 included significant non-routine transactions such as the sale of an insurance subsidiary, securities portfolio restructuring, and mortgage loan sales - Key non-routine transactions in Q2 2024 included: - Sale of FBBI subsidiary, resulting in a gain of $228.3 million ($171.2 million net of tax) - Restructuring of the investment portfolio by selling $1.561 billion of securities, generating a loss of $182.8 million - Sale of a $56.2 million portfolio of delinquent 1-4 family mortgage loans, resulting in a loss of $13.4 million - A gain of $8.1 million from tendering Visa B-1 shares in an exchange offer[52] Note 2: Securities Portfolio As of June 30, 2025, the securities portfolio totaled $3.07 billion, focused on high-quality U.S. Treasury and GSE-backed obligations Securities Portfolio Summary (June 30, 2025) | Category | Fair Value / Amortized Cost | | :--- | :--- | | Total Securities Available for Sale | $1,782,092 thousand | | Total Securities Held to Maturity | $1,290,572 thousand | - Management emphasizes a focus on asset quality, with 100% of the securities portfolio invested in U.S. Treasury securities and GSE-backed obligations. The company holds no securities collateralized by sub-prime assets[51] Note 3: Loan Portfolio Composition As of June 30, 2025, the $13.46 billion LHFI portfolio is diversified by loan type and geography LHFI by Type (June 30, 2025, $ in thousands) | Loan Type | Amount | | :--- | :--- | | Secured by nonfarm, nonresidential properties | $3,478,932 | | Secured by 1-4 family residential properties | $3,057,362 | | Other real estate secured | $1,918,341 | | Commercial and industrial loans | $1,832,295 | | Construction, land development and other land loans | $1,355,223 | | Total LHFI | $13,464,780 | - The loan portfolio is geographically diversified, with the largest concentration in the Mississippi region ($6.80 billion), followed by Alabama ($3.08 billion) and Texas ($1.75 billion)[53] Note 4: Yields on Earning Assets and Interest-Bearing Liabilities Net interest margin expanded in Q2 2025 due to higher loan yields and lower costs of interest-bearing deposits Key Yields and Costs (Quarter Ended) | Metric | 6/30/2025 | 3/31/2025 | | :--- | :--- | :--- | | Yield on LHFI & LHFS | 6.19% | 6.15% | | Cost of Interest-bearing Deposits | 2.28% | 2.30% | | Cost of Total Deposits | 1.80% | 1.83% | | Net Interest Margin | 3.81% | 3.75% | - The six basis point increase in net interest margin from Q1 2025 was primarily driven by the increased yield on the loan portfolio and a decrease in the cost of interest-bearing liabilities[57] Note 5: Mortgage Banking Q2 2025 mortgage banking revenue was $8.6 million, with hedging strategies for MSRs resulting in a net negative ineffectiveness Components of Mortgage Banking Revenues for Q2 2025 ($ in thousands) | Component | Amount | | :--- | :--- | | Mortgage servicing income, net | $7,142 | | Gain on sales of loans, net | $5,597 | | Change in fair value-MSR from runoff | $(3,596) | | Net negative hedge ineffectiveness | $(541) | | Mortgage banking, net | $8,602 | - Trustmark uses a portfolio of exchange-traded derivatives to offset changes in the fair value of MSRs. The ineffectiveness of this hedge is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset[58] Note 6: Other Noninterest Income and Expense Q2 2025 other noninterest income totaled $2.3 million, while other noninterest expense was $16.1 million, including FDIC assessments Other Noninterest Income for Q2 2025 ($ in thousands) | Component | Amount | | :--- | :--- | | Partnership amortization for tax credit purposes | $(2,137) | | Increase in life insurance cash surrender value | $1,911 | | Other miscellaneous income | $2,537 | | Total other, net | $2,311 | Other Noninterest Expense for Q2 2025 ($ in thousands) | Component | Amount | | :--- | :--- | | Loan expense | $3,377 | | FDIC assessment expense | $4,064 | | Other miscellaneous expense | $8,473 | | Total other expense | $16,105 | Note 7: Non-GAAP Financial Measures Trustmark uses non-GAAP measures like tangible common equity and PPNR to assess core performance and capital adequacy, excluding non-routine items - The company uses tangible common equity measures because they reflect capital available to withstand unexpected market conditions and allow for comparison with other banking organizations, particularly those with significant goodwill from acquisitions[62][63] Key Non-GAAP Metrics (as of or for Q2 2025) | Metric | Value | | :--- | :--- | | Tangible Book Value per Share | $28.74 | | Pre-Provision Net Revenue (PPNR) | $73.5 million | | Efficiency Ratio | 61.24% | - The company provides adjusted net income and related ratios to exclude significant non-routine items, such as the securities portfolio restructuring and asset sales that occurred in Q2 2024, to present a clearer view of core performance[69]