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DATE
Wednesday, July 23, 2025 at 9:30 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Duane Dewey
Chief Financial Officer — Tom Owens
Chief Credit and Operations Officer — Barry Harvey
Chief Accounting Officer — Tom Chambers
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TAKEAWAYS
Loans Held for Investment: Increased $223 million (1.7%) from Q1 2025 to Q2 2025, with year-to-date growth of $374.8 million (2.9%) as of Q2 2025, led by one-to-four family mortgage, commercial and industrial, and other loans and leases.
Total Deposits: Grew $35 million during Q2 2025; personal and commercial deposits rose $103.8 million (0.8%) to $13 billion as of Q2 2025, with non-interest-bearing growth partially offset by a decrease in interest-bearing deposits.
Cost of Total Deposits: Declined three basis points sequentially to 1.8% in Q2 2025.
Net Income: Reported at $55.8 million in Q2 2025, fully diluted EPS of $0.92, up 4.5% from Q1 2025.
Profitability Metrics: Return on average assets was 1.21%. and return on average tangible equity reached 13.13%.
Net Interest Income: Rose 4.3% to $161.4 million in Q2 2025, pushing the net interest margin to 3.81%, Net interest margin increased six basis points from Q1 2025.
Non-Interest Income: Non-interest income totaled $39.9 million; when adjusting for facility sale gains/losses, non-interest income was flat quarter over quarter.
Non-Interest Expense: Increased $1.1 million (0.9%) from Q1 2025 to Q2 2025, after prior declines both in 2024 and early 2025; lower salaries, employee benefits, and equipment expense countered higher professional fees.
Credit Quality: Non-performing assets decreased $5 million (5.3%), and net charge-offs were $4.1 million, or 12 basis points of average loans; provision for credit losses was $4.7 million, with allowance at 1.25% of loans held for investment as of Q2 2025.
Capital Ratios: CET1 ratio improved seven basis points to 11.7%, total risk-based capital rose five basis points to 14.15%.
Share Repurchase: $11 million in common stock repurchased; $26 million repurchased in the first six months of 2025, with $74 million remaining authorized for 2025.
Tangible Book Value Per Share: Tangible book value per share reached $28.74 at June 30, 2025, up 3.5% from Q1 2025 and 13.9% year over year.
Dividend: Quarterly cash dividend declared at $0.24 per share, payable September 15 to shareholders of record as of September 1.
Loan Growth Guidance: Management revised its 2025 outlook for loans held for investment to mid-single-digit percentage growth for the full year, up from the prior low-single-digit range.
Deposit Guidance: Full-year 2025 expectation for deposit growth, excluding brokered deposits, remains in the low-single-digit range.
Net Interest Margin Guidance: Tightened to a range of 3.77%-3.83% for 2025 (previously 3.75%-3.85% for the full year).
Net Interest Income Guidance: Expected to increase in the high-single-digit percentage range for 2025.
Provision for Credit Losses Guidance: Anticipated to trend lower in 2025 compared with 2024, a positive revision from previous stability guidance.
Effective Tax Rate Outlook: Projected to be 18.3%-18.5% for 2025, dependent on pretax income levels.
Market Expansion and M&A: Management highlighted ongoing talent recruitment across current and adjacent growth markets, and confirmed an active but selective approach to potential M&A opportunities.
Reserve Drivers: Unfunded commitments declined by $187 million in the first half of 2025, reducing related reserve requirements.
SUMMARY
Management affirmed that profitability improvements were largely driven by margin expansion and disciplined expense control, referencing the first half of 2025 and expense declines in 2024, resulting in rising ROA and ROTCE. The quarter saw significant reductions in criticized and classified loans, with declines of $71 million and $40 million, respectively, and $75 million of previously non-pass credits upgraded to pass status. The company’s loan growth outlook improved for 2025 due to both higher non-CRE origination and the extension of CRE maturities into future periods. Management reported that the revised 2025 net interest income guidance incorporates baseline scenarios with two potential Fed rate cuts later in the year. Strategic capital deployment will balance organic growth, opportunistic M&A within target geographies and size ranges, and continued share repurchases. Management intends to opportunistically utilize the $74 million share repurchase authorization remaining for 2025 and indicated that capital accretion provides “important strategic decisions to make going forward”
Tom Owens disclosed, “We are slightly asset sensitive”, although rate cut timing remains uncertain.
Duane Dewey confirmed that Texas, Northern Arkansas, and adjacent Southeastern U.S. markets are particularly attractive for both organic growth and potential M&A targets.
Barry Harvey described the improvement in credit quality as “a meaningful reduction in criticized loans about $71 million” and upgrades of problem credits to pass category, keeping earning assets on the balance sheet.
The company’s preference remains for internal loan growth, but management is seeing “many different options and discussions happening” around M&A and is open to deals in the $1 billion to $5 billion target range.
INDUSTRY GLOSSARY
CRE (Commercial Real Estate): Loans secured by income-producing or owner-occupied commercial properties, a significant segment for banks like Trustmark Corporation.
Criticized Loans: Loans identified by the bank’s credit risk process as requiring closer review due to higher risk of repayment difficulties.
Classified Loans: Subset of criticized loans considered to have well-defined weaknesses that could threaten repayment, classified as substandard, doubtful, or loss according to regulatory guidelines.
Non-Pass Credits: Loans not rated as “pass” by internal credit quality systems, implying higher-than-normal credit risk.
Unfunded Commitments: Loan commitments extended by the bank but not yet drawn by the borrower, for which reserves may be required due to potential future exposure.
CET1 Ratio: Common Equity Tier 1 capital ratio; a key regulatory capital metric measuring a bank’s core equity capital compared with its risk-weighted assets.
ROTCE (Return on Tangible Common Equity): A profitability measure reflecting net income as a percentage of average tangible common equity.
Full Conference Call Transcript
Duane Dewey: this morning. With me are Tom Owens, our Chief Financial Officer, Barry Harvey, our Chief Credit and Operations Officer, and Tom Chambers, our Chief Accounting Officer. We continue to build momentum in the second quarter as Trustmark's profitability metrics expanded, fueled by loan and deposit growth, solid credit quality, diversified fee income, and disciplined expense management. In our presentation this morning, I will provide a summary of our performance, discuss our forward guidance, and then move to This will reduce the time spent on our comments and allow more time for your questions. Now turning to Slide three, the financial highlights.
From the balance sheet perspective, loans held for investment increased $223 million or 1.7% linked quarter and $374.8 million or 2.9% year to date. Our linked quarter growth is diversified with one to four family mortgage loans, other loans and leases, and commercial and industrial loans leading the way. Our deposit base grew $35 million during the quarter as growth in non-interest-bearing deposits was offset in part by a decline in interest-bearing deposits. Personal and commercial deposits totaled $13 billion at June 30, an increase of $103.8 million or 0.8% from the prior quarter. Our cost of total deposits in the second quarter was 1.8%, a decline of three basis points linked quarter.
Trustmark reported net income in the second quarter of $55.8 million, representing fully diluted EPS of $0.92 a share, up 4.5% from the prior quarter. This level of earnings resulted in a return on average assets of 1.21% and a return on average tangible equity of 13.13% in the second quarter. Net interest income expanded 4.3% to $161.4 million, which produced a net interest margin of 3.81%, an increase of six basis points from the prior quarter. Non-interest income totaled $39.9 million, excluding the gain on a sale of a bank facility in the first quarter and a net loss on the sale of bank facilities in the second quarter, non-interest income was unchanged linked quarter.
Disciplined expense management continues to be a priority. Non-interest expense increased $1.1 million or 0.9% linked quarter, which follows a full year decline in 2024 as well as the decline in the first quarter of 2025. Salaries and employee benefits and equipment expense were lower linked quarter while services and fees increased reflecting higher professional fees. Credit quality remained solid with some improvement. Non-performing assets declined $5 million or 5.3% linked quarter. Net charge-offs were $4.1 million, including three individually analyzed credits totaling $2.7 million which were reserved for in prior periods. Net charge-offs represented 12 basis points of average loans in the second quarter.
The net provision for credit losses was $4.7 million and the allowance for credit losses represented 1.25% of loans held for investment. Again, very solid performance. From a capital management perspective, each of our capital ratios increased during the quarter. The CET1 ratio expanded seven basis points to 11.7% while our total risk-based capital ratio increased five basis points to 14.15%. During the quarter, we repurchased $11 million of Trustmark common stock. In the first six months of the year, we have repurchased $26 million of common stock. We have a remaining $74 million in repurchase authority for the year. This program continues to be subject to market conditions and management discretion.
Tangible book value per share was $28.74 at June 30, up 3.5% linked quarter and 13.9% year over year. The Board also declared a quarterly cash dividend of $0.24 per share payable September 15, to shareholders of record on September 1. Now let's focus on our forward-looking guidance for the year, which is on Page 15 of the deck. As you can see, we are making positive revisions in affirming our previously provided full year 2025 expectations in all other areas. Although we are monitoring the impact of tariffs and other administrative policies on our customer base, interest rates, and credit-related issues, the situation continues to evolve and we've not seen a significant impact at this point.
We expect loans held for investment to increase mid-single digits for the full year. This is revised up from our previous guidance of low single-digit growth. We affirm our guidance of low single-digit growth in deposits excluding brokered deposits for the full year 2025. There is no change in guidance regarding securities as they are expected to remain stable as we continue to reinvest cash flows. We've tightened our anticipated range of net interest margin for full year 2025. The range is now 3.77% to 3.83% for the full year compared to our prior guidance of 3.75% to 3.85%. We've revised our expectations for net interest income to increase high single digits in 2025.
Our previous guidance was an increase of mid to high single digits. From a credit perspective, the provision for credit losses including unfunded commitments is expected to continue to trend lower when compared to full year 2024. This is a positive revision from our previous guidance for the provision to remain stable. There is no change in our non-interest income and non-interest expense guidance for the full year 2025. We will continue our disciplined approach to capital deployment with a preference for organic loan growth, potential market expansion, and M&A or other general corporate activities depending on market conditions. As noted earlier, we do have remaining availability in our Board authorized share repurchase program that we'll consider opportunistically.
So with that summary and overview, I'd like to open the floor up to
Joey Rein: questions.
Operator: We will now begin the question and answer session. Our first question comes from Catherine Mealor with KBW. Good morning, everyone.
Duane Dewey: Good morning, Catherine. Good morning, Catherine.
Catherine Mealor: It was nice to see the increase in your growth guide back up to mid-single digits. Can you talk a little bit about what's driving that? Is it more that you're seeing less pay downs or better origination growth?
Barry Harvey: Catherine, this is Barry. It's a combination of
Duane Dewey: Hey, morning. It's a combination of things. Our production
Barry Harvey: really in Q4 and the first half of this year in non-CRE categories has been very good. And, so we're seeing more activity in those non-CRE categories. Within CRE, we're seeing good solid production, good solid fundings like we have historically. And then to your other point, as it relates to delays and payoffs, we this quarter at the first half of the year
Duane Dewey: at what was scheduled maturities for our CRE book. And about 50 plus percent of the scheduled maturities pushed out they for the first half of the year, they either pushed out to the second half of this year or they pushed out into '26 and '27. With extensions. And so, we are seeing a
Barry Harvey: that occur
Duane Dewey: we're pleased to see that because it helps things be able to be smoothed out a little bit. But also, I think it's very important to note that in non-CRE categories, we are seeing good growth that we may not have always seen previously to the same extent we are now. So that's very encouraging.
Catherine Mealor: Great. And maybe just maybe to step back a bigger picture question. Your profitability has continued to move higher really throughout the past over the past one point years, and you're now at 1.2 ROA, 13% ROC. Any thoughts on just goals or where you think that's going to? It's a lot of it's been just from margin expansion. So maybe that's kind of a margin question if you see there if you think there's more margin expansion within that. But just curious if you think there's still profitability improvement ahead for us? Thanks.
Tom Owens: So Catherine, this is Tom Owens. I'll start. I think that, yes, there is upside going forward in terms of profitability. I think the combination of continuing to drive operating leverage growing balance sheet, I think the potential for some continued NIM expansion going forward will continue to drive higher ROA. The question in terms of ROTCE I think, is very much going to be a function of how we manage capital. We've been very pleased with the capital story. Our higher run rate profitability has allowed us to support pretty solid loan growth at the same time that we're deploying capital via repurchase. While simultaneously continuing to drive pretty meaningful link quarter accretion in our capital ratios. And so
Duane Dewey: I think
Tom Owens: I think it's reasonable to assume that we'll continue in this range of $10 million to $15 million a quarter in terms of share repurchase here in 2025. I think as those capital ratios continue to accrete,
Duane Dewey: as we get into '26,
Tom Owens: that's sort of a headwind to return on tangible common equity, right? The build in capital. And so we talk about the strategic optionality that we have now with the very favorable circumstances that we find ourselves in. And so we're going to have some important strategic decisions to make going forward in terms of how we manage capital. Hey, Catherine, and I will add. This is Duane. And we can't forget back you're looking back eighteen months, our Fit to Grow initiatives and all the focus on some restructuring, the focus on expense management and expense control, And you think of a 2024 actual decline in expenses, first half looks real solid.
We do have some things that are happening in the second quarter, merit increase in the like hit in the second quarter or the second half of the year. But the diligent expense focus has been paying dividends as well. So with the combination results are pretty telling.
Catherine Mealor: Yes. For sure. Okay. Great. Thank you for the color.
Operator: Our next question comes from Tim Mitchell with Raymond James. Hey, good morning everyone.
Duane Dewey: Good morning, everyone. Just wanted to start on the NIM guidance. And obviously, to see you raised the But Just curious if you're Sorry. You're breaking up. Any You're breaking up. We can't we couldn't make out your comments. I'm sorry. Can you hear me now?
Tom Owens: Yes. Yes. Sorry about that.
Tim Mitchell: Just on the NIM and the NII outlook, just curious
Eric Spector: any rate cut assumptions underlying that? And then within that, there's what would take you to kind of the top end versus lower end of the NIM range?
Tom Owens: Sure. This is Tom Owens. Thanks for the question. So in our baseline forecast, which reflects market implied forwards, We do have a Fed rate cut in September and December of this year. So the December one won't be so on net interest margin this year. And it remains to be seen, obviously, whether the Fed does cut September or not. I mean, last I looked at
Duane Dewey: market implied forwards, it's greater than a fifty-fifty probability, but certainly not a high probability yet at this point.
Tom Owens: We are slightly asset sensitive And so to the extent that the Fed does not cut And we've talked on prior calls about the ongoing repricing the tailwind we had to net interest margin from ongoing repricing of fixed rate loans in
Duane Dewey: securities? That is helpful. That should continue to drive modest linked quarter increases in net interest margin. And to the extent that the Fed does cut
Tom Owens: obviously, we'd be reacting with deposit cuts to rates paid on deposit with the objective of defending our net interest margin. So feel like we're in a good place in terms of the guidance that we've put out there.
Duane Dewey: Really from the start of the year,
Tom Owens: And I think we're at 3.78% year to date.
Duane Dewey: And feel good about the guidance for the remainder of the year.
Tim Mitchell: Okay, great. And then just as a follow-up, just curious your updated thoughts. Obviously, we've seen some more M and A activity here in the past couple of weeks. And, you know, a lot of banks are talking about hiring and organic growth via, you know, bringing on new lenders and such. So just kind of curious your thoughts on whether you favor one of those strategies or just kind of your updated thoughts on growing through those means? Thanks.
Duane Dewey: This is Duane. And I would say on both counts, yes. We are focusing on the growth markets that we serve currently, which we have a number when you look at markets like Houston, Texas and Birmingham and Atlanta and South Alabama, Panhandle, Florida, and even in our home market of Jackson, Mississippi, we're we are very actively recruiting and looking for talent across the board. And so that's a key part of our strategic focus. And as you know, that generates organic growth. And then I would say, yes, the M and A activity has increased fairly significantly. There are many, many different options and discussions happening across and not just at Trustmark, assume across the overall industry.
And we are interested and we'll be very focused and, conservative, I think, in our approach to M and A, but are very, very interested in participating.
Tim Mitchell: Okay, great. Thanks for taking my questions.
Duane Dewey: Thank you.
Operator: Our next question comes from Christopher Marinac with Janney. Thanks. Good morning. I want to follow-up on the M and A question only from the perspective of as you have other acquisitions like what we saw in Texas last week, does that change
Eric Spector: your kind of partner program with the preferred banks you partner with Could that widen the lens as we see other changes around you?
Duane Dewey: I don't know, Chris. I'm not sure it changes a whole lot. I mean, Texas is a very attractive market. We are and have a presence in the Texas market. We both bank and have direct banking activities in Houston, but we also have a lot of other credit exposure etcetera throughout the state. That's a very attractive market to us. And have for a time and now probably are in the best position consider optionality there. But that does not preclude us from looking at other parts of our contiguous markets and markets that are very significant high growth markets that present opportunity for us in all of our different lines of business.
So I think across the board, Texas is very interesting. But the rest of our markets are equally interesting as well. So Okay. Great. That's helpful, Duane. Thank you. And
Eric Spector: just a quick credit question as it pertains to the kind of the positive revision that we saw in the guide. Does that have any implications on the reserve or is it more just about the quarterly amount from a provision expense?
Barry Harvey: Rich, it was
Duane Dewey: this is Barry. It hard to hear your question, but were you asking specifically about prevention for this quarter versus going forward?
Eric Spector: It was more about how the reserve and do you have changes
Duane Dewey: in the big picture of the reserve as a result of this small revision we saw? Is there any relief ahead as you look out how the reserve is comprised?
Barry Harvey: Yes. The reserve itself, we moved this quarter, we were at 1.25 versus the 1.26 we saw in the previous quarter. We from the provisioning standpoint, we expect the provisioning as we've guided to continue to be
Duane Dewey: similar
Barry Harvey: if to what we've seen in the first half of this year. From the standpoint of the reserve levels, we continue to see less in terms of unfunded commitments That particular unfunded commitments is down for the for the year. By about $187 million And so that's reserving that we don't have to do on the contingent liability piece of the equation. We do continue to see meaningful reserves meaningful provisioning on the funded side, of the of the provision expense. And so, but I think what we see going forward from a guide perspective is similar to what we saw in the first half of the year. And we're very pleased with that.
I would say Chris, as it relates to the provisioning for this quarter, we had good loan growth, which required provisioning. We had some weakening economic factors that are baked that are baked into our quantitative forward forecasting models But what really drove the provisioning down for this quarter unlike previous quarters, was we did see a meaningful reduction in criticized loans about $71 million We also saw a meaningful reduction in classified loans about $40 million And when you see those reductions, those in and of themselves, we're very pleased with. But we're also pleased with the fact that about we had about $75 million worth of non-past credits upgraded to pass.
And so that's the type of, reduction in criticized and classified we'd like to see. Cause one, we've returned a problem credit back to a past category. But we've kept the outstanding balances, and then we've kept good earning assets So we're very pleased with reducing criticized and classifieds however we have to but our preference, our strong preference is always to keep those balances and be able to return those credits to the past category. So this quarter, I think, was very important for us because during 2024, we our criticized and classifieds grew like most banks did, especially those who were in the, CRE business like we are.
Due to the five fifty basis point increase in interest rates that occurred over about an eighteen month period. That put a lot of pressure on CRE projects specifically. But then during the first quarter, we saw a leveling out of that increases in criticized and classified, and we were flat in those categories. This quarter, we saw a meaningful reduction, as I mentioned, dollars $71 million in criticized down dollars $40 million in classified down. But yet we were able to upgrade $75 million from non-pass to pass and keep those earning assets. And that helps on the loan growth side of the equation. As well.
So we're very pleased with what we saw and the provisioning is the provisioning. And in the numbers to number. Having said that, we're very pleased with the reason why our provisioning was lower this quarter.
Eric Spector: Great, Barry. That's really helpful background. Thank you sharing all that. Tom, just a quick question for you on the tax rate. Is the tax rate still
Tom Chambers: about this level that we saw in the past quarter?
Tom Owens: Yes. This is Tom Chambers.
Duane Dewey: You're looking at our year to date tax rate, through the first six months, you're looking at 18.4% effective tax rate. And looking forward, we believe that's going to our year end effective tax rate will be in that range of about I'd say, 18.3% to 18.5%. Of course, that's driven by pretax income or forecast pretax income. So
Tom Chambers: think we'll be in that level range.
Eric Spector: Great. Thank you very much, and thanks for hosting us all this morning.
Tom Chambers: Thanks.
Operator: Our next question comes from Fetty Strickland with Hovde Group.
Fetty Strickland: Was just hoping you could talk through the drivers of rising noninterest income.
Duane Dewey: Is it better wealth revenues that's really the driver, potentially better mortgage or sort of all of the above? I think it's this is Duane. I think it's all the above. They're not dramatic impacts across each of the segments that you mentioned, wealth management. Of course, wealth management is driven by the market, market increase in overall performance in the stock market side of the equation helps assets under management. It's a fee-based business. So that is a positive. We have a significant brokerage business that likewise is impacted positively by improving financial markets. The other big change probably for us mortgage continues to show improvement across the board. So not dramatic.
It's not the historic levels at this point, but improvement over the last several quarters. So all of those things end up contributing to our noninterest income categories. Understood. Thanks for that. And then just going back to the M and A discussion, Can you refresh us just on your rough criteria in terms of size, geography maybe earn back in terms of what you're looking for?
Tom Chambers: Sure. So
Duane Dewey: historically, so we operate of course, in the Southeast, Mississippi, Alabama, Panhandle, Florida, have a loan production office in Atlanta. We have, Western Tennessee, and Houston, Texas. And so what we have typically guided and talked about is the fact contiguous markets to all of those different areas. Across the Southeastern U. S. We jumped Louisiana. Louisiana has interest. Arkansas is a great market, very fast growing, especially Northern Arkansas is a very fast growing market. Tennessee is a fast growing market. Texas speaks for itself. Georgia North part of Florida is all of that is attractive. And historically, we've talked about those markets as being opportunistic for us.
In terms of size, it depends on the opportunity It seems like the $1 billion to $5 billion range would be a good range. We haven't been active in M and A for a period of time. And to move back in, it feels like that would be about the right range to consider. But we're also opportunistic on other situations that would be additive and help create shareholder value. And so it's, and I would echo the comments I said a few minutes ago. It is that the amount of discussion and opportunity seems to be increasing in all of those different both geographically and size ranges. Got it. That's helpful. Thanks for taking my questions. All right. Thanks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks.
Duane Dewey: Thank you again for participating in our call this morning, and we look forward to continuing to build momentum here into the coming quarters and look forward to our next call in October. Everybody have a great rest of the week.
Operator: The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.