Trustmark Corporation (TRMK) Q3 2026 earnings review
Trustmark's interest income rises, but its loan book shrinks
Trustmark, a Southern regional bank, kept its lending spread steady through a balance-sheet overhaul even as its loan book shrank. Chief executive Duane Dewey sold 34 branches and used the $62 million gain to swap low-yielding bonds for higher-paying ones, lifting net interest income 3% from a year ago. However, commercial payoffs pulled total loans down slightly from last quarter, leaving loan growth far behind what the full-year plan implied.
| Net interest income (tax-equivalent) | $170.6M +3.2% from a year ago |
|---|---|
| Loans held for investment | $13.87B -0.3% from last quarter |
| Net interest margin | 3.84% unchanged from last quarter |
| Profit per share | $1.00 +6.4% from a year ago |
⚖️ Verdict: 🔴 Bearish
The story got worse because loan growth went backward in the quarter that needed a second-half speedup, while non-paying loans in Mississippi rose 19%. The bright spot: swapping $630 million of bonds from a 1.4% yield to 5% and paying down expensive wholesale debt offset an uptick in deposit costs.
The question now is whether the higher bond yields can keep interest income growing if commercial loan payoffs keep shrinking the loan book. Either new lending rebounds in the fourth quarter, or the bond swap is a one-time lift that masks weak loan demand. Management's updated full-year outlook on the conference call will settle it.
🐂 Bull Case
Bond Swaps Offset Rising Deposit Costs
Trustmark, a regional bank operating across the American South, earns most of its money on the spread between loan yields and funding costs. After four quarters of falling deposit rates, competition pushed the bank's total deposit cost up 0.08 percentage points from last quarter to 1.67%. Even so, its net interest margin — the profit spread on its earning assets — held steady at 3.84%, and tax-equivalent net interest income rose 1.2% from last quarter to $170.6 million.
Chief executive Duane Dewey took two steps to protect that spread. First, the lender sold $629.5 million of bonds yielding 1.4% and bought $628.0 million yielding 5.0%, which adds about $22.6 million a year in interest income by our math. Second, it grew customer deposits "excluding the intentional decline in brokered deposits" by $184.3 million, or 1.2%, and used that cash to cut average short-term borrowings by 53.7%.
What to watch: the fourth-quarter net interest margin on the next release. Because the bond swap closed during the third quarter, a full quarter of the 5.0% bond yield should lift the margin unless deposit costs jump again.
Lower Miscellaneous Costs Kept Expenses in Check
In the first half of 2026, operating expenses grew faster than revenue because the bank was replacing its 45-year-old deposit technology system. That upgrade finished in the second quarter. In the third quarter, total noninterest expense rose 0.6% from last quarter and 2.7% from a year ago to $134.4 million, nearly matching the 2.4% rise in total revenue.
Payrolls and rent still rose: salaries and benefits grew 4.4% from a year ago to $74.7 million (up 0.7 percentage points of revenue by our math), and branch occupancy costs rose 10.7% from last quarter to $8.6 million after the branch sale-leaseback. A 10.4% quarterly drop in other miscellaneous expenses to $14.3 million, helped by lower foreclosed-property and loan costs, absorbed those increases.
What to watch: full-time employee headcount in the quarterly filing. Management previously said it would trim 35 to 45 temporary branch roles added for the technology switch later this year, which would slow salary growth.
Wealth Fees and Buybacks Lifted Per-Share Profit
While banking fees from mortgages and deposit service charges fell from a year ago, the wealth management unit — which manages investments and trusts for clients — grew revenue 13.9% from a year ago and 2.2% from last quarter to $11.2 million. Meanwhile, management bought back 428 thousand shares for $20.1 million during the quarter, bringing nine-month repurchases to $60.9 million.
Those buybacks cut the diluted share count by 3.8% from a year ago to 58.2 million shares. Because the profit was split among fewer shares, diluted earnings per share rose 6.4% from a year ago to $1.00, nearly triple the 2.3% growth in net income. Management has Not commented on acquisition talks in the release.
What to watch: fourth-quarter share repurchases against the remaining $39.1 million authorization. Keeping the $20 million quarterly pace will show management still prefers buybacks over saving cash for a bank acquisition.
🐻 Bear Case
Loan Contraction Threatens the Full-Year Growth Plan
"Our third quarter results demonstrated the strength of our core franchise," chief executive Duane Dewey said. Yet a bank's core engine is its loan book, and loans held for investment shrank by $43.9 million, or 0.3%, from last quarter to $13.87 billion. Management blamed "continued elevated commercial loan payoffs" in a competitive market, even as commercial and industrial lending grew from a year ago.
- Third-quarter net loan change: down $43.9 million, vs up $83.4 million a year ago
- Nine-month net loan growth: up $194.9 million, or 1.4% since year-end 2025 by our math
- Fourth-quarter loan additions needed for a 5% full-year rise: $488.8 million by our math
This matters because the full-year outlook calls for mid-single-digit (4% to 6%) growth in both loans and net interest income. With three quarters done, hitting even the 4% floor requires adding $352 million of loans in the fourth quarter alone — nearly double what the bank added in the first nine months combined.
What to watch: whether management cuts its full-year loan growth outlook on the conference call. Lowering the target would confirm that commercial payoffs are outrunning new lending from its recent hires.
Mississippi Bad Loans Rose While Reserves Held Flat
Last quarter, Trustmark sold $73.8 million of overdue home mortgages, which cut its total nonperforming assets nearly in half. Meanwhile, troubled commercial loans moved the other way. In the third quarter, nonaccrual loans — loans no longer paying interest — rose 9.4%, or $4.7 million, from last quarter to $54.3 million. Loans past due over 90 days also rose 34.6% to $4.1 million.
All of the nonaccrual increase came in Mississippi, the bank's largest market, where nonaccrual loans climbed 18.9% from last quarter to $37.0 million. Despite more non-paying loans, the bank recorded only a $1.2 million credit provision for its loan book, and its allowance for credit losses stayed flat at 1.07% of loans, down from 1.22% a year ago.
What to watch: commercial substandard loan balances in the quarterly filing's credit footnote. Another jump from last quarter's $39.3 million would show commercial credit is worsening beyond a few isolated borrowers.
Risks this quarter didn't answer
Three standing questions from last quarter cannot be checked until the conference call and the quarterly filing arrive.
- Substandard commercial loans: tripled to $39.3 million in the first half; the quarterly filing's credit footnote will show whether that migration continued.
- Post-conversion headcount reduction: employee count is omitted from the third-quarter release; the filing will show if temporary branch staff have started leaving.
- Full-year growth targets: the earnings release contains no forward outlook table; the call will show whether management still stands behind mid-single-digit loan growth.
👓 Other Themes
Branch Sale-Leaseback Paid for the Bond Restructuring
Dewey completed actions to "improve the flexibility and future earnings capacity of our balance sheet" by selling 34 bank branches and leasing them back. The $61.5 million pre-tax sale gain matched the $61.5 million loss from selling low-yielding bonds, leaving net income untouched. However, moving all remaining held-to-maturity bonds into available-for-sale added $72.0 million of lease liabilities and pushed net occupancy costs up 10.7% from last quarter to $8.6 million because of "increased lease, maintenance and utility expense".
💲 Other KPIs
Fell 2.1% from last quarter after rising for four straight quarters, though still up 2.8% from a year ago. Tangible book value per share is the bank's net worth per share excluding goodwill. It dropped because higher market interest rates and the bond reclassification widened unrealized bond losses in equity by $75.4 million to $117.7 million.
Dropped 11.6% from last quarter and 3.7% from a year ago, dragging total fee income down 7.2% sequentially. Home mortgage loan production fell 11.7% from the second quarter to $421.4 million, and lower gains on loan sales reduced revenue.
Cut by more than half, falling 53.7% from last quarter and 53.0% from a year ago by our math. Because average customer deposits rose $309.1 million during the quarter, the bank paid down expensive federal funds purchased and other wholesale borrowings, saving $3.5 million in quarterly interest expense.
🔮 Guidance
Unchanged. The board declared a $0.25 per share dividend payable December 15, keeping the annual payout at $1.00 per share, up 4.2% from 2025.
Unchanged. Trustmark bought back $60.9 million of stock in the first nine months, including $20.1 million in the third quarter. By our math, that leaves $39.1 million available for the fourth quarter before the program expires on December 31.
❓ Key Questions
Does the mid-single-digit full-year loan growth plan still stand?
Loans held for investment are up only 1.4% through nine months after shrinking in the third quarter. Hitting a 4% full-year floor requires adding $352 million of loans in the fourth quarter alone.
Why did Mississippi nonaccrual loans rise $5.9 million this quarter?
After the second-quarter mortgage sale cleaned up consumer delinquencies, Mississippi nonaccruals rose 18.9% in the third quarter while loan loss reserves stayed at 1.07% of total loans.
How much will the bond swap lift the fourth-quarter margin?
Swapping $629.5 million of 1.4% bonds into 5.0% bonds adds about $22.6 million of annual interest income by our math, which should show up in full next quarter.
Have the temporary branch staff from the system upgrade left?
Management added 50 to 55 retail staff for the second-quarter technology conversion and planned to keep only 10 to 15 permanently once settled in late 2026.