Trustmark (TRMK)

Regional banking company Trustmark (NASDAQ:TRMK) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 7.9% year on year to $207.5 million. Its non-GAAP profit of $0.94 per share was in line with analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1889 in Mississippi, Trustmark (NASDAQ:TRMK) is a financial services organization providing banking, wealth management, insurance, and mortgage services across five southeastern states.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Trustmark competes with regional banks operating in the Southeast such as Regions Financial (NYSE:RF), Hancock Whitney (NASDAQ:HWC), Renasant (NASDAQ:RNST), and BancorpSouth (now Cadence Bank, NYSE:CADE), as well as national banks with significant presence in its markets like Truist Financial (NYSE:TFC) and Wells Fargo (NYSE:WFC).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Unfortunately, Trustmark’s 3.3% annualized revenue growth over the last five years was mediocre. This wasn’t a great result compared to the rest of the banking sector, but there are still things to like about Trustmark.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Trustmark’s annualized revenue growth of 4.2% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Trustmark reported year-on-year revenue growth of 7.9%, and its $207.5 million of revenue exceeded Wall Street’s estimates by 3.3%.

Net interest income made up -2,675% of the company’s total revenue during the last five years, meaning Trustmark is well diversified and has a variety of income streams driving its overall growth. Nevertheless, net interest income is critical to analyze for banks because they’re considered a higher-quality, more recurring revenue source by investors.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Trustmark’s EPS grew at a spectacular 9.7% compounded annual growth rate over the last five years, higher than its 3.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Trustmark, its two-year annual EPS growth of 12.7% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Trustmark reported adjusted EPS of $0.94, up from $0.84 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Trustmark’s full-year EPS of $3.66 to stay about the same.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Trustmark’s TBVPS grew at an impressive 7.4% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 23.6% annually over the last two years from $19.37 to $29.60 per share.

Over the next 12 months, Consensus estimates call for Trustmark’s TBVPS to grow by 8.8% to $32.19, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Trustmark has averaged a Tier 1 capital ratio of 11.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Trustmark has averaged an ROE of 7.1%, uninspiring for a company operating in a sector where the average shakes out around 7.5%. We’re optimistic Trustmark can turn the ship around given its success in other measures of financial health.

We enjoyed seeing Trustmark beat analysts’ revenue expectations this quarter. We were also happy its efficiency ratio and tangible book value per share narrowly outperformed Wall Street’s estimates. On the other hand, its EPS was in line. Zooming out, we think this was a mixed quarter. The stock remained flat at $38.71 immediately following the results.

Updated: December 3, 2025 at 11:47 PM EST

Are you wondering whether to buy Trustmark or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Trustmark isn’t a terrible business, but it doesn’t pass our quality test. For starters, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its TBVPS growth was impressive over the last five years, the downside is its projected EPS for the next year is lacking. On top of that, its mediocre ROE lags the market and is a headwind for its stock price.

Trustmark’s P/B ratio based on the next 12 months is 1.1x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $43.80 on the company (compared to the current share price of $39.27).