Trustmark Q3 Net Interest Income Rises, Margin Outlook Revised

Trustmark Corporation (NASDAQ: TRMK) reported third-quarter 2026 net income of $58.1 million, or $1.00 per diluted share, as growth in net interest income and low credit losses supported earnings despite softer fee revenue and higher employee costs. The bank also completed offsetting sale-leaseback and securities transactions intended to improve future profitability without materially affecting quarterly pretax income.

Quarterly net income compared with GAAP net income of $63.5 million, or $1.08 per share, in the second quarter and $56.8 million, or $0.94 per share, a year earlier. Second-quarter operating net income, which excluded non-routine items, was $56.7 million, or $0.97 per share. Trustmark posted a return on average assets of 1.21% and a return on average tangible equity of 12.72% in the latest quarter.

Revenue totaled $207.1 million, down 0.5% from the previous quarter but up 2.4% year over year. Fully taxable-equivalent net interest income increased 1.2% sequentially to $170.6 million, while the net interest margin held at 3.84%. The securities yield rose eight basis points from the second quarter to 3.60%, while the cost of interest-bearing liabilities increased four basis points to 2.17%.

Trustmark revised its full-year net interest margin expectation to a range of 3.83% to 3.87%, compared with its previous range of 3.80% to 3.85%. It continued to expect fully taxable-equivalent net interest income to increase at a mid-single-digit rate in 2026.

Balance-sheet growth remains measured

Loans held for investment totaled $13.9 billion at September 30, declining $43.9 million, or 0.3%, from the prior quarter but increasing $321.0 million, or 2.4%, from a year earlier. The largest year-over-year increase came from commercial and industrial loans, which rose $309 million to $2.21 billion. That growth was partly offset by declines in nonfarm nonresidential and other real estate-secured loans.

Trustmark said it remained focused on profitable, credit-disciplined lending. Its $5.02 billion commercial real estate portfolio was spread across multifamily, non-owner-occupied properties and construction-related credits. Office commercial real estate totaled $189 million, representing 1.4% of loans held for investment, with no year-to-date net charge-offs, delinquencies or nonperforming loans reported in that portfolio.

Deposits were $16.1 billion, nearly unchanged from the second quarter and up $427.1 million, or 2.7%, year over year. Excluding the intentional runoff of brokered deposits, deposits increased 1.2% sequentially and 3.4% from a year earlier. Brokered deposits fell by $197.5 million during the quarter to $211.2 million, or 1.3% of total deposits.

The total cost of deposits increased eight basis points sequentially to 1.67%, while the cost of interest-bearing deposits rose nine basis points to 2.09%. Noninterest-bearing deposits accounted for 20% of average deposits during the quarter.

Fee revenue declines as expenses edge higher

Noninterest income totaled $39.5 million, down $3.1 million from the second quarter and $431,000 from the prior-year period. Mortgage banking revenue declined sequentially by $1.0 million to $7.9 million, while other income fell $1.9 million to $1.7 million because of lower investment partnership and cash-management revenue. Wealth-management revenue increased to $11.2 million, up $239,000 sequentially and $1.4 million year over year.

Trustmark revised its 2026 noninterest income outlook to growth in the low- to mid-single digits from its previous expectation for mid-single-digit growth.

Noninterest expense increased $753,000 from the prior quarter to $134.4 million. Salaries and employee benefits rose 2.3% to $74.7 million, primarily reflecting annual merit increases and performance incentives. Occupancy expense increased by $827,000 to $8.6 million, mainly because of higher lease, maintenance and utility costs. Those increases were partly offset by a 10.4% decline in other expense to $14.3 million. Management maintained its expectation for mid-single-digit full-year expense growth.

Strategic transactions offset in the quarter

During the quarter, Trustmark sold 34 bank branch properties and entered into triple-net leases for the locations, producing a $61.5 million pretax gain after transaction costs. The company also reclassified held-to-maturity securities as available for sale and sold $629.5 million of lower-yielding investments carrying a weighted-average yield of about 1.4%.

Trustmark reinvested $628.0 million in securities with a weighted-average yield of approximately 5.0%. The portfolio restructuring generated a pretax loss of about $61.5 million, offsetting the sale-leaseback gain. The company characterized the actions as measures to enhance future profitability.

Credit metrics and capital remain stable

The net provision for credit losses was $2.3 million, while net charge-offs were $1.0 million, equal to 0.03% of average loans. Nonaccrual loans represented 0.39% of total loans, and nonperforming assets were 0.40%. The allowance for credit losses was 1.07% of loans held for investment and covered 560.10% of nonaccrual loans, excluding individually evaluated credits.

At quarter-end, Trustmark’s common equity Tier 1 ratio was 11.98%, and its total risk-based capital ratio was 14.57%. The company repurchased $20.1 million of common stock during the quarter and $60.9 million during the first nine months of 2026, leaving $39.1 million under its 2026 authorization. The board also declared a quarterly dividend of $0.25 per share, payable December 15 to shareholders of record on December 1.

For 2026, management continued to expect loans and deposits excluding brokered funds to increase at mid-single-digit rates, securities balances to remain stable and credit-loss provisions to normalize. These expectations remain subject to changes in interest rates, economic and real estate conditions, deposit and loan pricing competition, borrower performance, regulatory developments, litigation, cybersecurity events and other risks identified in Trustmark’s regulatory filings.