Trustmark Q3 2026 Earnings: Net Interest Income Growth Offsets Fee Pressure

Trustmark (NASDAQ: TRMK) reported Q3 2026 revenue of $207.1 million, up 2.4% year over year, while diluted EPS increased 6.4% to $1.00 from $0.94. Net income rose 2.3% to $58.1 million as net interest income grew, although weaker fee income and higher operating expenses limited the improvement. The bank also used a branch sale-leaseback gain to offset the loss from repositioning its securities portfolio.

Core Financial Results

For the quarter ended September 30, 2026, fully taxable-equivalent net interest income increased 3.2% year over year to $170.6 million. That growth more than offset a 1.1% decline in noninterest income, while noninterest expense rose 2.7% to $134.4 million.

Sequential trends were softer: revenue declined 0.5% and net income fell 8.6% from Q2. Net interest income still increased 1.2%, but noninterest income decreased 7.2% amid lower mortgage banking, cash management, and other revenue. EPS grew faster than net income year over year, helped by a decline in diluted weighted-average shares to 58.2 million from 60.5 million.

Lending, Deposits, and Fee Businesses

Loans held for investment totaled $13.9 billion, up 2.4% year over year but down 0.3% from the previous quarter. Trustmark attributed the sequential decline to elevated commercial loan payoffs and a highly competitive lending environment, even as loan production remained solid. Year-over-year growth came from commercial and industrial, residential mortgage, construction, land development, consumer, and other loans and leases.

Deposits reached $16.1 billion, increasing 2.7% from a year earlier and declining 0.1% sequentially. Excluding an intentional $197.5 million reduction in brokered deposits, balances grew $184.3 million, or 1.2%, from Q2. Noninterest-bearing deposits represented 20.3% of total deposits, while the loan-to-deposit ratio was 86.4%.

Fee businesses produced mixed results. Wealth management revenue increased 13.9% year over year to $11.2 million, supported by higher trust management and brokerage revenue. In contrast, mortgage banking revenue declined 3.7% to $7.9 million, service charges fell 5.6% to $10.6 million, and bank card and other fees decreased 2.0% to $8.1 million.

Profitability, Credit Quality, and Capital

The net interest margin was 3.84%, unchanged from Q2, even as funding costs increased. The cost of interest-bearing deposits rose nine basis points sequentially to 2.09%, while the total deposit cost increased eight basis points to 1.67%. Trustmark generated a 12.72% return on average tangible equity and a 1.21% return on average assets.

Credit metrics remained low, although some balances increased. Nonperforming assets totaled $57.0 million, or 0.40% of loans held for investment and sale, rising 4.0% sequentially. Nonaccrual loans increased by $4.7 million to $54.3 million, while net charge-offs were $1.0 million, equivalent to 0.03% of average loans. The total provision for credit losses was $2.3 million, compared with $1.7 million a year earlier.

The allowance for credit losses was $148.3 million, or 1.07% of loans held for investment. Trustmark ended the quarter with an 11.98% common equity Tier 1 ratio and a 14.57% total risk-based capital ratio. Tangible book value per share was $30.42, up 2.8% year over year but down 2.1% sequentially because higher market interest rates increased the accumulated other comprehensive loss associated with the securities portfolio.

Trustmark repurchased approximately 428,000 shares for $20.1 million during the quarter. It also declared a quarterly dividend of $0.25 per share.

Securities Repositioning Raised Portfolio Yield Without a Net Pretax Gain

Trustmark sold 34 branch properties and leased them back under triple-net agreements, producing a $61.5 million pretax gain after transaction expenses. It then reclassified its held-to-maturity securities as available for sale and sold $629.5 million of securities yielding approximately 1.4%, recognizing a $61.5 million pretax loss that offset the real estate gain.

The bank reinvested $628.0 million into securities with a weighted-average yield of approximately 5.0%. Consequently, the two transactions had no material net pretax gain in Q3, but the new securities carry a substantially higher yield and provide greater balance-sheet flexibility. The trade-off is a higher ongoing property cost: net occupancy expense increased 10.7% sequentially to $8.6 million, driven by higher lease, maintenance, and utility expenses.

Management Commentary

President and CEO Duane A. Dewey emphasized continued net interest income growth, low credit losses, and deposit growth after excluding non-core brokered deposit runoff. Management views the branch sale-leaseback and securities repositioning as steps that improve balance-sheet flexibility and future earnings capacity while preserving capital returns through dividends and share repurchases.

Recent Insider Transactions

The supplied insider data classified 29,318 shares as purchases and 530 shares as sales over the latest six-month period, resulting in net purchases of 28,788 shares. The only reported sale was made by a director; the other nine most recent records were direct stock awards for which no share quantities were supplied.

The transaction data alone does not establish the insider’s view of Trustmark’s future performance.

Risks Investors Need to Watch

• Loan growth is facing competing pressures. Loans increased year over year, but elevated commercial payoffs and competitive pricing caused a sequential decline and could limit earning-asset growth.
• Deposit costs are rising. Higher interest-bearing and total deposit costs did not reduce the net interest margin in Q3, but further increases could pressure net interest income if asset yields do not keep pace.
• Fee revenue remains variable. Sequential declines in mortgage banking, cash management, and other income drove a 7.2% decrease in noninterest income from Q2.
• Credit trends require monitoring despite low loss rates. Nonaccrual loans and total nonperforming assets increased sequentially, although net charge-offs and nonperforming asset ratios remained low.
• The balance-sheet repositioning introduces new costs and rate sensitivity. The higher-yielding securities may support future income, but lease expenses have increased and securities-related accumulated other comprehensive losses reduced tangible book value during the quarter.

Summary

Trustmark’s Q3 2026 results reflected higher net interest income, modest year-over-year earnings growth, and continued low credit losses, partly offset by softer fee revenue and higher expenses. The securities repositioning exchanged a low-yielding portfolio for higher-yielding assets without creating a net pretax gain, while introducing higher lease costs and tangible book value sensitivity. Future results will depend on loan growth, deposit pricing, fee-income stabilization, and the earnings contribution from the repositioned securities portfolio.