Trustmark (TRMK) 2026年第三季度业绩说明会：每股收益创新高并上调净息差指引

核心要点

• Trustmark 公司公布 2026 年第三季度净利润为 5810 万美元，即摊薄后每股收益 1.00 美元。管理层表示，季度运营每股收益创下该公司 137 年历史上的最高纪录。
• 完全应税等值净利息收入环比增长 1.2%，净息差保持在 3.84%。管理层将全年净息差指引上调至 3.83%–3.87%，并预计第四季度净息差将在 4% 左右。
• 用于投资的贷款较第二季度减少 4390 万美元（降幅 0.3%），但同比增长 3.21 亿美元（增幅 2.4%）。高企的商业贷款提前还款抵消了坚实的贷款发放量。
• 扣除计划中的中介存款流失，存款环比增长 1.843 亿美元（增幅 1.2%），同比增长 3.4%。中介存款减少了 1.98 亿美元，占总存款的 1.3%。
• Trustmark 出售了 6.295 亿美元收益率为 1.4% 的证券，并购买了 6.28 亿美元收益率约为 5% 的证券。管理层预计组合重组及相关售后回租交易将使第四季度净利息收入增加约 570 万美元。
• 信贷质量保持强劲，信用损失准备金为 230 万美元，净核销为 100 万美元，相当于平均贷款额的 3 个基点。

核心财务数据

业务与运营表现

商业地产（CRE）贷款提前偿还仍是限制贷款增长的主要因素。意外发生的 CRE 提前还款总计约 2.14 亿美元，其中包括 5200 万美元的关注类贷款。工商业（C&I）贷款在 4 笔信用额度中出现了约 6000 万美元的意外提前还款，而公共融资余额减少了约 4300 万美元。

管理层表示，截至季度末已获批贷款储备接近 10 亿美元，且覆盖范围比此前时期更为广泛，在 C&I、CRE、设备融资和市政贷款方面均有业务机会。一项新的公共融资额度尚有约 1.15 亿美元可供放款，预计放款将分布在 2026 年第四季度及 2027 年。

商业与零售渠道的存款增长使 Trustmark 能够减少 1.98 亿美元的中介存款。存款结构保持在约 80% 为计息存款，20% 为无息存款。

住房抵押贷款业务发放量环比下降 11.7%，抵押贷款收入下降 11.6%。资金管理服务费收入也有所减少，原因是核心系统转换后，此前每月录得的手续费收入中约有 25 万美元的经济效益现改在净利息收入中列报。财富管理业务收入继续保持增长。

Trustmark 完成了 34 处分行物业的售后回租，在扣除交易相关费用后获得了 6150 万美元的税前收益。公司还因重组其证券投资组合而确认了 6150 万美元的税前亏损，正好抵消了物业收益。

2026 年前九个月，Trustmark 回购了 6090 万美元的普通股，约合 140 万股。第三季度回购总额为 2010 万美元，约合 42.8 万股。董事会宣布发放每股 0.25 美元的季度股息，将于 12 月 15 日支付给 12 月 1 日登记在册的股东。

管理层业绩指引

• 管理层继续预计，不含中介存款在内，全年用于投资的贷款和存款将实现中个位数的增长。
• 证券余额预计保持稳定。
• 2026 年全年净息差指引上调至 3.83%–3.87%，管理层预计表现将处于该区间高端，且第四季度净息差在 4% 左右。
• 完全应税等值净利息收入预计将较 2025 年实现中个位数百分比的增长。
• 管理层预计，包括表外信贷风险敞口在内的信用损失准备金将趋于正常化，并与 2026 年前几个季度保持一致。
• 受抵押贷款市场环境艰难以及资金管理收入转入净利息收入的影响，目前预计全年非利息收入将以低至中个位数的增速增长。
• 全年非利息费用指引维持在中个位数增长。
• 管理层预测存款成本约为 1.76%，贝塔系数为 33%，反映了美联储加息前推出的存款营销活动影响。

风险与关注焦点

商业贷款提前偿还仍难以预测。管理层指出，每个季度都会发生意外的提前还款，同时接近 10 亿美元的已获批储备贷款的具体落地时间和最终转化率仍存在不确定性。

商业地产（CRE）、工商业（C&I）及公共融资领域的竞争继续影响定价和贷款增长。Trustmark 表示将继续保持选择性，不会为了争取业务而放宽定价或核保标准。

随着促销活动到期成熟以及大额存单按估计 6 个月的滞后进行重新定价，存款成本可能会上升。管理层的预测假设存款结构保持稳定，但也承认存在潜在的结构变动风险。

高利率为商业地产借款人带来了再融资和偿债风险。Trustmark 表示，公司采用实际利率、核保利率或 10 年期国债利率加上 200–250 个基点加点中的最高者对贷款进行压力测试；当交易缓冲不足时，可能要求借款人追加股权资本。

分析师问答亮点

管理层表示，模型预测的全年利率变动下总存款贝塔系数约为 40%。在计息存款基础上，确认首次加息对应的贝塔系数约为 55%。

Trustmark 估计其约 59% 的贷款组合将在利率变动后三个月内重新定价。其当前模型显示，在假设一年内资产负债表无增长的前提下，基准利率每变动 25 个基点，净息差大约会扩大 2 个基点。

高管对第四季度的贷款增长表达了信心，因为已获批的储备贷款较历史水平更为强劲且多元化。然而，管理层强调，并非所有已获批的承诺都会在本季度内交割或放款。

管理层还表示，较高利率可能会促使已稳定或趋于稳定的项目更长时间保留在 Trustmark 的资产负债表上，从而放缓 CRE 贷款的流失速度。由于这些贷款通常为浮动利率，Trustmark 可以在保留信贷资产的同时受益于较高的基准利率。

在经营杠杆方面，管理层表示净息差、存款资金动态、非利息收入和内生增长均存在上升潜力。Trustmark 在第三季度招募了 18 或 19 名业务人员，包括人员替换与团队升级。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Operator

Good morning, ladies and gentlemen, and welcome to the Trustmark Corporation's Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Corporate Strategy at Trustmark. Please go ahead.

F. Joseph Rein

Good morning. Our third quarter earnings release and presentation for today's call are available in the Investor Relations section of trustmark.com. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these statements because of risks and uncertainties outlined in our earnings release and our other filings with the Securities and Exchange Commission.

Now I'll turn the call over to Duane Dewey, President and CEO of Trustmark.

Duane Dewey

Thank you, Joey, and good morning, everyone. Thank you for joining us this morning. With me today are Tom Owens, our Chief Operating Officer; Joe Bond, our Chief Financial Officer; Barry Harvey, our Chief Credit and Operations Officer; and Tom Chambers, our Chief Accounting Officer. I'll review our performance and outlook and have Barry and Joe add some color before taking your questions.

Trustmark delivered a solid third quarter, highlighted by growing net interest income, strong credit quality and core deposit growth. Results demonstrate the strength of the core franchise, while strategic balance sheet actions taken during the quarter are designed to enhance future earnings capacity. Wealth Management also continued its positive momentum, and we maintained our focus on disciplined expense management and returning capital to shareholders.

Turning to Slide 3, financial highlights. Trustmark reported third quarter net income of $58.1 million or $1 per diluted share with a return on average tangible equity of 12.72% and a return on average assets of 1.21%. The quarterly operating EPS is a record for Trustmark in our 137-year history. The quarter included two strategic nonroutine transactions. We sold 34 branch properties and simultaneously entered into a triple net lease agreement for each generating a pretax gain of $61.5 million after transaction-related expenses.

We also repositioned our Investment Securities portfolio, reclassifying held-to-maturity securities for -- available for sale. We sold $629.5 million of securities yielding a weighted average of 1.4% and purchased $628 million of securities yielding a weighted average of approximately 5%. The resulting $61.5 million pretax loss was effectively offset by the sale-leaseback gain. In the quarter, loans held for investment declined $43.9 million or 0.3%, but increased $321 million or 2.4% year-over-year. Loan production trends remained solid during the quarter, although growth was offset by continued elevated commercial loan payoffs. Barry Harvey will provide more detail after my summary comments.

On the deposit side, excluding planned brokered deposit runoff, deposits grew $184.3 million or 1.2% linked quarter and 3.4% year-over-year. Total deposit costs were 1.67% for the quarter, reflecting the strength of our attractive low-cost deposit base. Revenue remained solid at $207.1 million, down 0.5% linked quarter and up 2.4% year-over-year. Fully tax equivalent net interest income rose $2 million or 1.2% linked quarter, while the net interest margin held steady at 3.84%. Fee income reflected quarterly variability.

Mortgage banking loan production volume was down 11.7% and linked quarter revenue was down 11.6%. Treasury management fee revenue was also down due to our core conversion shift to on-balance sheet deposits from fee income-oriented products. Finally, Wealth Management revenue showed continued solid growth.

Expense discipline remains a priority. Noninterest expense rose $753,000 or 0.6% linked quarter. Salaries and employee benefits increased $1.7 million or 2.3%, while other expense fell $1.7 million or 10.4%, primarily due to lower other real estate miscellaneous and loan expenses. Credit quality remained strong with third quarter net provision for credit losses of $2.3 million and net charge-offs were $1 million or 3 basis points of average loans. During the quarter, we continued our share repurchase program. In the first 9 months of 2026, we repurchased $60.9 million of common stock or approximately 1.4 million shares. This included $20.1 million or approximately 428,000 shares in the third quarter. The Board also declared a quarterly cash dividend of $0.25 per share payable December 15 to shareholders of record on December 1.

Turning to our full year outlook on Slide 15. Note, it is a full year outlook. We continue to expect mid-single-digit growth in both loans held for investment and deposits, excluding brokered deposits. Security balances are expected to remain stable. We have raised our full year 2026 net interest margin guidance to 3.83% to 3.87%. This is for the full year. You will recall Q1 NIM was 3.81%, while second and third quarters were 3.84% we do expect to be at the high end of our guide range with a Q4 NIM around 4%. We expect fully tax equivalent net interest income to be up mid-single digits compared to 2025. We expect the total provision for credit losses, including off-balance sheet credit exposure to normalize and remain consistent with prior 2026 quarters. This outlook is in line with our disciplined credit risk management and strong third quarter asset quality metrics.

With the challenging mortgage markets and the movement of treasury management revenue to NII, we now expect low to mid-single-digit growth in full year noninterest income, and we reaffirm our full year 2026 noninterest expense guidance of middle single-digit growth as we continue investing in the business while maintaining expense discipline. As previously communicated, we will maintain a disciplined approach to capital deployment, favoring organic loan growth, potential market expansion, M&A and other general corporate purposes as market conditions warrant.

And with that overall summary, I'll turn it over to Barry for a few comments on loans.

Robert Harvey

Thank you, Duane. And as you know, our balances were down $44 million for the quarter, and that puts us up year-to-date $195 million. We do continue to see CRE payoffs, both expected and unexpected. The unexpected payoffs for the quarter were about $214 million. Some good news on some payoffs is we did have $52 million worth of payoffs that were criticized credits, and we're glad to see those leave us. From the C&I perspective, we did experience about $60 million in unexpected payoffs coming from 4 credits. And then on the public finance side, we had a slight decline of about $43 million. The good news there is we -- while we did have one credit that paid-off that drove most of that decline, in the third quarter, we did also create a new facility for that same customer that has today about $115 million worth of availability to be drawn. We do expect that to fund up over Q4 and into '27.

And on the equipment finance side, we did have a little bit of a slower quarter than we've become accustomed to. We do fully expect that, that faster growth will reoccur in Q4 of this year. Just from the standpoint of the pipeline, the approved loan pipeline is very strong right now for us. We continue to have confidence in our ability to generate solid loan growth in Q4 and beyond. And the pipeline as it sits today of approved commitments is around $1 billion. Obviously, not all those will close, but we do feel very positive about the momentum that we do have.

At this time, I'd like to turn it over to Joe Bond, our CFO.

Joseph Bond

Thank you, Barry. Let me give a little more color on the deposits. Last quarter, on June 30, we had a surge on the last day of $200 million of noninterest-bearing deposits that left soon thereafter. With that, deposit growth across both commercial and consumer channels allowed us to reduce broker deposits by $198 million during the quarter, further strengthening our funding profile. Brokered deposits now represent just 1.3% of total deposits. Deposit costs were 1.67% for the quarter, 1 basis point above our guidance last quarter. For the quarter, we are forecasting deposit costs of approximately 1.76% with a 33% beta. The increase in this quarter primarily reflects deposit campaigns launched before the FOMC rate increase. We have not changed our promotional pricing since those campaigns were launched. We also have not changed pricing of our standard products, exception pricing remains limited.

Our deposit mix remains approximately 80% interest-bearing and 20% noninterest-bearing. We expect that mix to remain relatively stable in our forecast. Importantly, this deposit franchise has been built organically over decades through long-standing customer relationships and the work of our associates. We believe that provides us with a durable funding advantage in this competitive market.

Now turning over to net interest margin and revenue. Net interest margin was stable at 3.84%, as Duane has spoken to. On a linked-quarter basis, loan yields increased 4 basis points and securities were up 8 basis points, while the cost of interest-bearing liabilities rose 4 basis points. On a year-over-year basis, the cost of interest-bearing liabilities is down 27 basis points. Approximately 59% of the loan portfolio reprices within the first 3 months following a rate change, which provides relatively rapid asset pricing. Based on our current modeling, we expect approximately 2 basis points of NIM expansion for each 25 basis point change in rates, assuming no growth over a 1-year period.

On noninterest income, there are two items that are helpful in understanding the linked quarter comparison. Following the core conversion, approximately $250,000 per month or roughly $750,000 per quarter of economics previously reflected in fee income now flows through the net interest margin, a geography change on the income statement and the balance sheet because those products were no longer offered. In addition, the second quarter noninterest income included $1.2 million of partnership distributions that did not repeat this quarter.

Moving over to the sale leaseback and investment portfolio restructuring, I want to highlight the combined economic effect of two significant transactions this quarter. Together, these transactions allowed us to unlock capital embedded in our branch network and redeploy it through restructuring of our investment portfolio to further strengthen our balance sheet. The objective was to improve the timing of portfolio cash flows, strengthen our interest rate risk profile and enhance future earnings. For the fourth quarter of 2026, we currently expect the transaction to contribute approximately $5.7 million of incremental net interest income, which equates to approximately 12 basis points of margin after considering net occupancy and premises impact and taxes, approximately $3.2 million of income -- incremental net income or 5 basis points of diluted share. This was a flawless coordinated effort across our treasury, accounting, finance, facilities, properties and legal teams, and I want to recognize the associates across those groups who work to execute these transactions. Duane?

Duane Dewey

Thank you, Joe, and I will open the floor up for questions.

Operator

[Operator Instructions] And today's first question will come from Michael Rose with Raymond James.

分析师问答

Michael Rose

I appreciate the color on the fourth quarter NIM. I think I misunderstood the slides last night, but good to hear, and I appreciate the color around the sensitivity to forward rates. Can you just give us some underlying assumptions around deposit betas and then maybe what we should expect just on a -- as we move in beyond the fourth quarter, will you get the big benefit just given the competitive pressures on both loans and deposits?

Joseph Bond

Sure. The beta that we're assuming assumes a full year of rate movement. So typically, that will work out into total deposits of around 40 basis points. Our CDs we do have a lag effect, which takes about 6-months for that to eventually follow through the rate increase and our interest-bearing transaction deposits, as I've spoken to in my comments, we have not changed standard pricing. They're lagging current rates and the balances are evolving as expected. So we're monitoring those very closely. But essentially, that's the betas that I'm expecting.

Duane Dewey

Barry, any comments on the loan yields or what's happening?

Robert Harvey

No, I think the loan yields remain competitive and in all categories, whether it's C&I or CRE, we're continuing to be disciplined and make sure that if we are -- if it is a thinner priced credit, it is for the right borrowers. And -- but it's more of the same Duane.

Michael Rose

Okay. That's helpful. And then just as it relates to loans, a little bit of a shrinkage this quarter. You kind of reiterated the guide. It implies a pretty big step-up in the fourth quarter. I guess maybe can you just kind of talk about pipelines and maybe what you see kind of driving that reversal in a somewhat material way in the fourth quarter?

Robert Harvey

Sure, Michael. This is Barry. As I mentioned, the pipeline of our approved commitments is just a little less than $1 billion as of 9/30. And the pull-through on that remains to be seen. But typically, for us, when we go through all the steps of getting something formally approved, the close rate is very strong there. And that's a stronger pipeline than we've seen historically. I do think we've got a lot of opportunities with live deals that we've approved that will come to fruition during the fourth quarter. We're vetting a tremendous number of deals, Michael. Every deal that -- before our relationship managers and portfolio managers spend a lot of time on it, we do vet deals. And it gives us from the credit perspective, an opportunity to understand where the opportunities are and we need to greenlight those deals and move them forward or it's something we may need some additional information on.

But I will say we've been extremely busy the last 3 -- probably the last 3 months vetting deals more so than normal, both on CRE but as well as C&I, both working capital and nonworking capital. It takes a little while for those deals to fully maturate and to get them approved and then to get them closed and booked. But we do feel like there's a lot of momentum going into fourth quarter that will come to fruition then. So we're encouraged across the board by the activities I mentioned, I mean, just on the public finance side. The payoff we've received with the new facility we've put in place, there's an additional $110 million worth of funding that we didn't have available previously. So there's quite a few things that we feel very encouraged about for Q4 and then going into '27, but specifically for Q4.

Operator

The next question will come from Stephen Scouten with Piper Sandler.

Stephen Scouten

Maybe just drilling down a little bit more, Barry, on that pipeline. I think you gave a $1 billion figure of the current approved pipeline. I don't remember if you've given -- if you gave that number last quarter, but could you remind us how that compared maybe kind of quarter-over-quarter and just what you expect again from a payoff perspective?

Robert Harvey

Sure, Stephen. From a quarter-over-quarter, it's a little hard to say only because we've changed our -- some of our methodologies and we're evaluating the pipeline. So it's a little hard to compare previous periods. We do feel like that it is a stronger pipeline than we've had historically. And we've got a number of deals that are far along in the process and that we feel like the probability of closing is much higher. The second half of your question, remind me.

Stephen Scouten

Just kind of any expectations for payoffs relative to last quarter. And I know a lot of that was unexpected payoffs, but just kind of what you see as more scheduled? I suppose.

Robert Harvey

Yes. And on the scheduling side, it's in line with what we've had in the previous 3 quarters for Q4. I would say also that unexpected, while it does in and of itself indicate that we were not planning on it, obviously, unexpected happens every quarter. We just don't know which ones they are. They're not maturities that we would expect to see leave us based upon the feedback from the borrower. There are situations where the borrower circumstances have changed. So we do have some unexpected every quarter, but we can just speak to third quarter, it's about $214 million, and we'll have to wait and see what we experience in the fourth quarter.

Typically, there's a lot of things that end up pushing into the next year when you get to the fourth quarter. So we'll have to just wait and see how that plays out. But we are very encouraged by the activity we have going and the stage at which it is relative to being able to get the loan closed and booked -- and funded and booked all in Q4.

Duane Dewey

Stephen, I'll add real quick. This is Duane. Just to note, that pipeline is significantly broader than we've experienced. I think where for several quarters, periods, years even where we were predominantly CRE-focused, where now we're seeing much broader C&I opportunities and then further equipment finance and municipal. So we're seeing some things now. Barry mentioned in his prior comments that are very encouraging along the loan diversity perspective. So good news on that front.

Stephen Scouten

Okay. Great. And maybe just one more around loan growth. I mean with the mid-single-digit guide kind of year-to-date, I think like Michael said, it would be a pretty heavy lift here in the fourth quarter, but you sound confident. But kind of year-to-date, what do you think maybe has been slightly behind schedule with what you would have seen at the beginning of the year? Is that competitive factors, pricing, payoff levels, maybe a little bit of everything I assume. But if you could kind of speak to what's been maybe the biggest surprise relative to what you would have hoped could happen at the high end?

Robert Harvey

Stephen, I think it's a combination of all that you mentioned. I mean we are seeing a little bit more in the way of payoffs than we might would have expected. But having said that, it's a very competitive landscape. And whether it's -- whether you're talking about CRE or whether you're talking about C&I, working capital, nonworking capital, we haven't seen a lot of new public opportunities. We do have quite a few of those in front of us today. But I think it's a matter of just the need has arisen for the -- for some of the municipalities and other entities that fit inside that public finance category. So we are seeing some opportunities there.

But here, again, on the public side, everything pretty much -- there's a lot of it is bid. So it's -- you don't -- you haven't won it until you want it. And so it's one of those things where you just got to be very competitive from the beginning, and then we do have some situations where due to some long-term relationships, we are able to -- it's a negotiated deal as opposed to a bid deal. But we are seeing some opportunities there that we haven't seen in the prior quarters. So public finance has obviously been slower through the first 3 quarters than we would have anticipated. I think C&I and CRE is a function of competitiveness and the number of players pursuing the opportunities. And in some cases, where competitors are willing to go to win an opportunity. So we're going to have to remain disciplined and be selective for when we get very baked in on pricing. But I am encouraged by the level of our pipeline that are approved deals waiting to be closed, funded. And so we're encouraged by what we see at this point for Q4.

Stephen Scouten

Okay. And maybe just one last for me. On the deposit beta you referenced potentially, Joe, it was like 40%, I believe. Is that, I guess, total deposit beta that you're thinking about? It looks like maybe on the first hike through 4Q, you'd be at like 55% interest-bearing. So is that kind of the right way to think about it on an interest-bearing perspective?

Joseph Bond

Yes.

Stephen Scouten

Okay. And is that just kind of standard? Or is there any mix shift dynamic affecting that as well?

Joseph Bond

No, we don't have mix shift right now in our forecast, but there could be risk with that truly. But right now, in our forecast modeling, we don't have that mix.

Operator

The next question will come from Feddie Strickland with Hovde Group.

Feddie Strickland

Just wanted to continue on the loan discussion here, specifically on the payoff. I realize there's still a headwind today and you can kind of talk through a bit of what you expect near term. But if we continue to see rates go up a little bit, could we see those slow down given what you've seen historically? Or do you think we'll see the same level we've been seeing in the last couple of quarters?

Robert Harvey

Feddie, this is Barry. And I would agree with you. We're starting to see that a little bit already, where there's a little bit of a pause. And it's going to -- and there's additional time wanted to evaluate the direction things may ultimately go from an interest rate perspective. There's also the need for a lot of these projects, especially on the CRE side, the projects have always have in almost every real estate deal, there's some delays during construction that result in slower stabilization. The project is going according to plan from the standpoint of they're getting the rents they expect and the occupancy is coming as quickly as they anticipated, but it just started later. And therefore, there's oftentimes a need for another 6 months to 12 months. That's just normal business, and that's occurring.

And then you do have the situation where a little bit of higher rates and the potential for higher rates then you do have -- we do have projects that are staying with us. Of course, we're actively pursuing those opportunities. These are projects where it's been constructed, it's stabilized or stabilizing. It's well past a 1:1 debt service coverage on P&I basis and performing, just not fully baked from the standpoint of getting the maximum value out of the project when you're selling it into the marketplace. But we're very excited about those projects staying with us. They're well priced relative to the new deals we're looking at today. And for the most part, we're not necessarily talking about the need to reprice them for that extra 12 months, 18 months where they want to stay. So -- and they're all variable rates. So as these rates bump up and the pricing stays the same, we get the benefit of the index moving up.

So we're encouraged that a little bit higher rates or the belief that there's going to be higher rates will allow these projects to stay a little longer than we anticipated. That will help us some on the runoff and the need for production to cover the runoff.

Feddie Strickland

That's really helpful color. And just one more for me on -- just in the environment. Has the return of higher rates and some uncertainty increased or decreased the amount of conversations there? And what are you seeing from smaller banks?

Duane Dewey

I'd say, in general, about the same, not a lot of change. And I think as we have mentioned in our prior quarterly calls, I mean, we do believe scale is going to be critically important moving forward. And so we remain very interested. And there are conversations ongoing across all spectrums of sizes. So I really haven't seen much change. I do think the interest rate environment could impact things a little bit. But at the end of the day, I do believe the push to scale is really continuing.

Operator

The next question will come from Will Jones with KBW.

William Jones

I wanted to just ask, if I kind of put all the moving pieces together, a higher margin next quarter. You gave us the expense guide, which is roughly unchanged. Between those two dynamics, it feels like there's still a good opportunity for operating leverage into 2027. I guess just -- is that a fair comment to say, Duane? Is that kind of how you see things? And then within that, when we kind of set at this high level of profitability following the last insurance trade and bond trade. We now have the HTM restructure here. What do you feel like the ultimate upside is to profitability kind of putting all these moving pieces together?

Joseph Bond

On the operating leverage, the response is, yes. I do see there is upside opportunity really across all avenues in terms of what's driving the net interest margin, the dynamics of our deposit base and funding there, net interest -- noninterest revenue items as well. So I do see the opportunity for upside potential there, and I'll turn it over to Duane.

Duane Dewey

Yes. And I would just conclude with basically, what we've said all along, focused-intense organic growth. We've talked about hiring and things we're doing in our production staffs across our franchise. So we're focused on organic key market growth. Third quarter 2026, we hired 18, 19 new production professionals across the system. Some of those were replacements or upgrades, but continued focus on organic growth is going to drive it. And I do think selective M&A, and like I've said a second ago, I think scale and factors that impact scale are going to be critically important moving forward.

Operator

The next question will come from Christopher Marinac with Brean Capital.

Christopher Marinac

Barry, can you remind us on the stress testing process that you've been doing for a while on debt service coverage for real estate? And then how does it change given what's happened with rates the last couple of months, let alone what the look forward is?

Robert Harvey

Sure. Be glad to, Chris. We do -- our stress testing processes are -- there's bottoms up we do annually and the top down, we do twice a year, one on the on-cycle and one is the off-cycle. So we are constantly doing all those and especially on the top down, we are stressing interest rates throughout that process and evaluating what level of stress it's applying to the portfolio. And then we're obviously passing that information over to our treasury group where it's incorporated into our enterprise-wide stress testing.

On a credit-only basis, we have an annual review process to where we look at approximately 50% of our credits through the annual review process. We get another 30% coverage to get us between 75% and 80% of the total book, off of what we touch every -- through modification, a renewal and extension of one type or another. And so we get a lot of opportunities to touch those credits and reevaluate how they're doing in the interest rate environment. When we're underwriting, we do have an underwriting rate that we use that's different in apart from the actual rate or the treasury plus -- 10-year treasury plus a spread. On all of our covenant testing that we established, Chris, we use the higher of either the artificial underwriting rate that we've established that we monitor with our peers to make sure we're all kind of in line with how we're underwriting these credits, trying to give ourselves as much cushion as we can between the actual rate and the artificial rate that we establish for underwriting.

But when we establish covenants, we're usually going to look at the higher of the three, the actual rate for the test, the underwriting rate that was used at the time it was obviously underwritten and then some type of 10-year treasury plus the spread of 200 basis points to 250 basis points. Just so as rates do move and we do -- we're not -- we're looking at -- obviously, they're making the payments based on the actual rate, but we want to make sure we're quickly deducing how is the credit going to perform in the new environment if, in fact, it has to be refinanced at some point. We don't want to be caught surprised by the impact of the higher rates on the credit, even though it may be 1 year or 2 away from that at the time. And if it's not going to work or not going to work as well, we're having those conversations with the borrowers about rightsizing what interest reserve carry that we need to establish to make sure that as it has to live in a higher rate environment once it's refinanced, then the project works and works well. I hope that answers your question.

Christopher Marinac

No, it does. And then the increased pipeline that you have, those deals have been vetted on this basis, I presume. So...

Robert Harvey

They have, yes. Everything about what I just mentioned is what we do on a daily basis, and they're all vetted based upon what we believe the interest rate environment is today, where we think it's heading and determining how much cushion there is in deals in today's environment.

Obviously, with rates -- when rates are lower, there's more opportunity for cushion in the deals and the deals still work. But the way you address that is through additional equity on the front-end, and that's what we have to require. If we believe the deal is too tight, the only way to -- if we're going to move forward with the deal, the only way to protect ourselves is to require more equity on the front end, and we do that on a case-by-case basis.

Christopher Marinac

Got it. I appreciate it. With the larger pipeline, are you doing larger deals? Or is your deal size still the same as in the past?

Robert Harvey

Yes. Our deal sizes have not changed, Chris, on what we're doing day in and day out. If you say around the edges, do we do an additional $1 million or $2 million on a deal because there's reasons that are advantageous for Trustmark to do so. For example, in the CRE world, if we need to do a couple of million more to keep it a 2-bank deal, which is much more manageable and it's 100% voting rights, and we like the partner that we're doing business with, but they're full and they're a larger bank and they're full, then we'll probably -- we'll do that additional couple of million, $2 million or $3 million more to keep it a 2-bank deal so that we don't get cut back more than we want to be.

And then we don't have to introduce a smaller bank third party that we really don't want to deal with in case the project has bumps in the road, it's a little easier to build consensus with two banks, especially with the larger bank being typically more rational and less capital constrained. So for all those reasons, we do make adjustments around the edges of what we say we do, hard and fast, but we've not made any changes to our approach in order to generate more activity.

Operator

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Duane Dewey for any closing remarks. Please go ahead.

Duane Dewey

Well, thank you again for joining us this morning. We appreciate everybody on the call, and we look forward to catching back up at the end of the fourth quarter. We believe the third quarter was a solid one and one that positions us well for the future, and we look to catch up again in January. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.