TRMK Q3 Deep Dive: Organic Growth Initiatives and Deposit Competition Shape Outlook

Regional banking company Trustmark (NASDAQ:TRMK) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 5.3% year on year to $202.4 million. Its non-GAAP profit of $0.94 per share was in line with analysts’ consensus estimates.

Is now the time to buy TRMK? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Trustmark’s third quarter results drew a negative market reaction, as higher-than-expected expenses and competitive deposit dynamics weighed on sentiment. Management attributed performance to steady loan growth across commercial and real estate segments, as well as successful deposit gathering in key markets. CEO Duane Dewey emphasized, “Our performance reflected diversified loan growth and stable credit quality, along with cost-effective core deposit growth.” Trustmark also faced increased noninterest expenses, partly due to strategic hiring and nonroutine items like professional fees and reserves. The quarter’s focus centered on expanding production talent to support organic growth strategies, especially in competitive metropolitan areas.

Looking ahead, Trustmark’s guidance is underpinned by expectations of mid-single-digit loan growth and stable credit quality, though management remains cautious about short-term expense pressure from recent hiring activity. Dewey noted that the company is investing in “key growth markets” and anticipates these additions will drive revenue expansion, while CFO Tom Owens cautioned that net interest margin could see some volatility as the bank responds to potential Federal Reserve rate cuts. The company will continue balancing capital deployment between organic growth, opportunistic share repurchases, and monitoring M&A developments in its core regions.

Key Insights from Management’s Remarks

Management highlighted the impact of organic hiring, deposit competition, and shifting loan yields on the quarter’s operating performance, while outlining progress in targeted market expansion.

• Strategic hiring focus: Trustmark added 29 new associates in Q3, with 21 in production or direct support roles, targeting markets such as Houston, Birmingham, Atlanta, and the Florida Panhandle to strengthen business development and customer acquisition.
• Deposit growth initiatives: The company grew core deposits by 3.4% quarter-over-quarter, utilizing promotional campaigns and proactive rate management to retain and attract funds, even as the deposit environment remained competitive.
• Expense growth drivers: Noninterest expenses increased due to annual salary adjustments, incentive accruals, and nonroutine items such as professional fees tied to a state banking charter conversion and reserves for specific properties. Management expects some ongoing expense pressure as new hires ramp up.
• Credit quality improvement: Criticized loan balances declined by $49 million in the quarter and $123 million year-to-date, helping to support a lower provision for credit losses and maintain solid asset quality metrics.
• Capital management approach: Trustmark continued share repurchases, retiring about 2% of its shares year-to-date. Management plans to balance repurchases with organic loan growth and remains open to M&A opportunities, particularly as capital ratios strengthen.

Drivers of Future Performance

Management’s outlook centers on organic loan and deposit growth, expense discipline, and navigating a competitive deposit landscape influenced by interest rate changes.

• Organic growth in key markets: Trustmark’s revenue outlook relies on continued expansion in high-growth metropolitan areas through strategic hiring and business development efforts, particularly in commercial and equipment finance lines.
• Net interest margin management: Owens explained that the company is proactively adjusting deposit rates in response to anticipated Federal Reserve rate cuts, aiming to keep net interest margin stable. However, competitive pressures and depositor response could introduce some quarter-to-quarter volatility.
• Expense and efficiency focus: While recent hiring is expected to drive future revenue, management acknowledged that related expense growth could persist in the near term. The company is targeting mid-single-digit increases in both noninterest income and expense, with an emphasis on generating operating leverage over the longer term.

Catalysts in Upcoming Quarters

Going forward, our analysts will track (1) Trustmark’s ability to translate new hires into sustainable loan and deposit growth in core markets, (2) the bank’s effectiveness in maintaining net interest margin stability as the Federal Reserve adjusts rates, and (3) progress in expense containment relative to revenue expansion. We will also monitor any strategic shifts in capital deployment, particularly as M&A opportunities emerge in Trustmark’s footprint.

Trustmark currently trades at $38.42, in line with $38.64 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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