Trustmark Corporation Q4 FY2025 earnings call

• Trustmark achieved record earnings in 2025 with traditional Banking, Mortgage Banking, and Wealth Management showing growth.
• Loans held for investment increased, deposit base had changes with core deposits remaining strong.
• Repurchased $43 million of common stock in Q4 and $80 million for the year, with authorization to repurchase up to $100 million in 2026.
• Return on average assets and tangible equity were strong. Dividend increased to $0.25 per share, full year dividend $1 per share.
• Credit quality was solid with net charge-offs low, provision for credit losses expected to normalize.

Trustmark's traditional Banking business drove loan and deposit growth, strong net interest margin, and solid credit quality. The Mortgage Banking business achieved increased production and significant improvement in profitability. The Wealth Management business reached an all-time high in revenue. Fourth quarter net income totaled $57.9 million, diluted EPS $0.97, up 3.2% linked-quarter and 5.4% year-over-year. Full year 2025 net income was $224.1 million, diluted EPS $3.70. Loans held for investment increased $126 million linked-quarter and $584 million year-over-year. Deposits declined $131 million linked-quarter but increased $392 million year-over-year. Net interest income in Q4 was $166 million, net interest margin 3.81%. Noninterest income in Q4 was $41 million, up 3.3% linked-quarter. Net charge-offs in Q4 were $7.6 million, 0.22% of average loans. Full year net charge-offs were 13 basis points of average loans. The provision for credit losses in Q4 was $1.2 million, $12.9 million full year. Return on average assets was 1.21%, return on average tangible equity 12.97%.

• Expect loans held for investment and deposits (excluding brokered) to increase mid-single digits in 2026.
• Securities balances expected to remain stable. Net interest margin expected to be in the range of 3.8% to 3.85% for full year 2026, net interest income to increase mid-single digits.
• Total provision for credit losses, including off-balance sheet credit exposure, expected to normalize. Noninterest income and noninterest expense expected to increase mid-single digits. Disciplined approach to capital deployment with preference for organic loan growth, potential market expansion, M&A or other general corporate purposes depending on market conditions.

• Forward-looking statements may differ materially from actual results due to risks and uncertainties outlined in earnings release and SEC filings.
• Market conditions could impact share repurchase program.
• Macroeconomic uncertainties may affect credit quality and provision for credit losses.
• Integration risks associated with potential M&A activity.

Q: Curious how many new hires maybe you had in fourth quarter, if any, and if these deals kind of accelerate any of your thoughts around talent acquisition in '26?

A: In the fourth quarter, there were in the range of 13 new production hires. They're in all markets and several different disciplines throughout the company. We continue to focus on organic expansion and bringing in new talent. M&A activity creates opportunity but also disruption, and we continue to monitor and recruit actively.

Q: Can you frame up what you might expect within that normalizing from a charge-off and a reserve perspective?

A: 13 to 15 basis points of average loans for net charge-offs is a good range. For provisioning, 14 to 18 basis points of average loans seems like a range. Substantial improvement in credit quality in 2025 with criticized and classified loans down, which helps provisioning.

Q: On the other guidance areas, can you talk about just the lever points that you see as it impacts the guidance, whether it's growth, fees, expenses, kind of where you see the most sensitivity and leverage potentially as we work through the year?

A: Loan growth is a key driver. Capital deployment is related. Improving conditions in the mortgage market impact noninterest income. Wealth Management has record revenue and potential for improvement. Expense management is a continued focus. The relationship between loan growth and capital deployment is a big lever.

Q: In the fourth quarter, the pickup in revenue there sequentially, what the driver was?

A: General improvement in asset values driving fee revenue, new account acquisition, investment in the business, new talent, cross sales, and conversion of brokerage platform to a new one.

Q: Curious to see what the cadence of expense growth throughout the year, is it relatively steady as you make these investments in new talent? Or is there any particular quarter that's higher?

A: The second half of the year typically has higher increases due to annual merit increases starting July 1 and potential year-end bonuses, production, commissions. The first half is more steady. Technology investments and other normal course expenses also contribute to expense increases.

Q: Would you say a deal is any more or less likely in '26? And just a quick refresher on preferred geographies, what you're looking for in terms of partners.

A: There is increased discussion and consideration in markets like Houston, Dallas, Arkansas, Louisiana, Tennessee. Size ranges from $1 billion to $10 billion. It's opportunistic, looking for good cultural fit and market opportunity. Focused on organic strategy but will consider M&A if opportunity presents itself.

Q: Do you think that there's a scenario where you don't do an M&A deal because there's too much happening around you?

A: There is disruption from other deals, but it creates opportunities. We have a strong organic strategy in markets we serve, and may see us not do a deal if it's not the right opportunity.

Q: Are you doing anything to incent deposits differently than you had in past years?

A: Yes, increasing focus on deposit customer acquisition and balance acquisition. Emphasized in CRM bonus templates. Pleased with ability to grow balances cost-effectively with personal and commercial balances up year-over-year.

Q: Can you give color on where deposit maybe ended the quarter or exiting the quarter just to kind of get a sense as to where we're going to start '26 just as we factor in the full impact of the recent rate cut?

A: Net interest margin had a 2 basis point linked-quarter decline due to accelerated recognition of capitalized costs from 2020 sub debt issue. Adjusted, it would have been 3.83%. Deposit costs in Q4 were 1.72%, expected to decline in 2026 with CD book repricing.

Q: Is it fair to put your entire authorization in our expectations? For the year, do you think you have enough capital where you could really lean into the buyback today but still have enough capital for a future deal? Or is it -- or are you a little bit more price-sensitive on that?

A: Our internal projections show we would end 2026 slightly above 12% CET1 without share repurchase. With $100 million authorization, a range of $60 million to $70 million of buyback would keep capital ratios where they are. So likely guide to $60 million to $70 million range.