Trustmark Q2 Earnings Call Highlights

Trustmark (NASDAQ:TRMK) reported second-quarter net income of $63.5 million, or $1.08 per diluted share, as loan and deposit growth supported higher net interest income and the company completed a major core systems conversion.

Results included two non-routine items that together added $6.9 million, or $0.11 per diluted share, to net income. Excluding those items, operating net income was $56.7 million, or $0.97 per diluted share, President and CEO Duane Dewey said during the company’s earnings call.

The company sold $73.8 million of mortgage loans that were primarily three payments delinquent or non-accrual. The reserve associated with the portfolio exceeded the credit discount, producing a $3.2 million increase in net income. The transaction reduced non-performing loans by $47.1 million and lowered the risk profile of Trustmark’s one-to-four-family mortgage portfolio. Trustmark also recorded a $3.7 million after-tax gain from an exchange of Visa shares.

Loans, Deposits and Margin

Loans held for investment rose $35.1 million, or 0.3%, from the prior quarter and increased $448.2 million, or 3.3%, year over year. Excluding the mortgage loan sale, loans increased $108.9 million, or 0.8%, sequentially, and $522 million, or 3.9%, from a year earlier.

Chief Credit and Operations Officer Barry Harvey said Trustmark originated $643 million in new loans during the quarter and saw $456 million in line draws. Production was similar to the first quarter, he said, while utilization of commercial and industrial revolving lines rose to 38% at quarter-end from 32% at year-end.

Loan growth was partly offset by $318 million of commercial real estate prepayments and $334 million of payoffs. Harvey said the company expects to meet its full-year target for mid-single-digit loan growth, although the pace will depend largely on scheduled and unexpected commercial real estate payoffs.

Deposits grew $358.7 million, or 2.3%, from the first quarter, and increased $955.4 million, or 6.3%, year over year. The cost of total deposits declined 4 basis points sequentially to 1.59%.

Net interest income on a fully tax-equivalent basis increased $5 million, or 3.1%, from the prior quarter. Trustmark’s net interest margin expanded 3 basis points to 3.84%.

Chief Financial Officer Joe Bond said the company expects deposit pricing decisions and competitive conditions to create a few basis points of margin pressure during the third quarter. Trustmark expects that pressure to reverse in the fourth quarter, aided by repricing of fixed-rate loans and investment securities and a rate increase reflected in its forward curve for September.

The company reaffirmed its full-year net interest margin outlook of 3.80% to 3.85% and its expectation for mid-single-digit growth in net interest income compared with 2025.

Credit Quality Improves Following Mortgage Sale

Trustmark’s non-performing assets declined 47.3% during the quarter to 0.39% of loans held for investment. Reported net charge-offs totaled $7.5 million, but excluding the mortgage loan sale, net charge-offs were $1.2 million, or 0.03% of average loans.

The net provision for credit losses was $6 million, excluding a $9.2 million provision release related to the mortgage sale. Management expects total provision expense, including off-balance-sheet credit exposure, to normalize in the second half at a level more consistent with the first quarter than the second quarter.

Harvey said the lower level of nonperforming loans should reduce future charge-offs. He also said the company updates its expected-loss assumptions each quarter, meaning lower realized charge-offs could contribute to lower provisioning over time.

Core Conversion and Efficiency Efforts

Trustmark completed the conversion of its core deposit and related systems to new vendor-supported platforms during the second quarter. Dewey described the conversion as the culmination of years of planning, replacing a 45-year-old core system that had been self-supported for more than two decades.

Non-interest expense increased $1.5 million, or 1.2%, from the prior quarter to $133.7 million. Salaries and employee benefits declined $1.3 million, while services and fees increased $1.8 million, primarily due to data-processing and professional fees related to the core conversion and data-center migration.

The company added roughly 50 to 55 associates across its retail operation during the conversion to support customer interactions. Dewey said Trustmark expects staffing to trend lower over time, with approximately 10 to 15 of those positions potentially remaining permanent.

Management said the new platform could allow Trustmark to reposition technology-support roles, reduce some positions over time through attrition, introduce new deposit pricing capabilities and pursue other efficiency opportunities. Dewey said the company has also developed plans for artificial intelligence initiatives, though it is too early to quantify their financial effects.

Capital Deployment and Outlook

Trustmark repurchased $40.9 million of common stock, or approximately 952,000 shares, during the first six months of 2026. That included $21.1 million, or about 475,000 shares, in the second quarter. Dewey said the company expects repurchases in the second half to be broadly in line with the roughly $20 million quarterly pace seen in the first half, subject to market conditions and other opportunities.

The board declared a quarterly cash dividend of $0.25 per share, payable Sept. 15 to shareholders of record on Sept. 1.

For 2026, Trustmark maintained guidance for mid-single-digit growth in loans held for investment and deposits excluding brokered deposits, while expecting securities balances to remain stable. Management said it remains focused on organic growth, possible market expansion, acquisitions and other corporate uses of capital. Dewey said that with the core conversion completed, the company is more actively evaluating merger-and-acquisition opportunities while maintaining a disciplined approach.

About Trustmark (NASDAQ:TRMK)

Trustmark Corporation is a financial services holding company headquartered in Jackson, Mississippi. Through its principal subsidiary, Trustmark National Bank, the company provides a broad spectrum of commercial and consumer banking services. Trustmark's offerings include deposit accounts, lending solutions, cash management services, residential and commercial mortgage financing, and credit card processing.

In addition to traditional banking, Trustmark offers trust and wealth management services designed to meet the needs of high-net-worth individuals, families and institutional clients.

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