TRMK Q1 Deep Dive: Loan Growth, Expense Control, and Cautious Outlook on Tariffs and Rates

Regional banking company Trustmark (NASDAQ:TRMK) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 3.4% year on year to $194.6 million. Its non-GAAP profit of $0.88 per share was 7.8% above analysts’ consensus estimates.

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StockStory’s Take

Trustmark’s first quarter performance was defined by continued loan growth, stable credit quality, and disciplined expense management, as highlighted by CEO Duane Dewey. Management pointed to diversified loan increases across commercial real estate, other commercial segments, and mortgage lending, while also noting a modest decline in non-interest expenses. CFO Tom Owens credited the net interest margin’s stability to ongoing repricing of the fixed-rate loan book and securities portfolio, while Chief Credit and Operations Officer Barry Harvey emphasized that net charge-offs and provisions remained in line with expectations, with no major surprises in credit quality during the quarter.

Looking ahead, Trustmark reaffirmed its full-year 2025 expectations for low single-digit loan and deposit growth, citing ongoing uncertainty from tariffs and interest rate policies. Dewey acknowledged early signs of cautious client behavior following recent tariff developments, noting, “We could see some slowdown in some of that new origination volume that we were anticipating.” Management remains watchful of changing market sentiment, while continuing to prioritize organic loan growth and potential expansion into high-growth markets such as Houston, Birmingham, and the Gulf Coast. The company expects disciplined capital deployment, including opportunistic share repurchases, to remain a focus as the year progresses.

Key Insights from Management’s Remarks

Management attributed first quarter results to broad-based loan growth, lower expenses, and ongoing stability in credit quality, while also acknowledging emerging external uncertainties.

• Diversified loan growth: Loan balances increased across commercial real estate (CRE), commercial, and mortgage segments. Harvey explained that many CRE borrowers are choosing to extend maturing loans due to rate uncertainty, which has deferred expected payoffs and supported loan growth in the quarter.

• Deposit base stability: CFO Tom Owens noted stable personal and commercial deposit balances, with the cost of total deposits declining 15 basis points. The company continues to optimize deposit pricing without relying on promotional rates, which Owens indicated gives “good flexibility” for supporting future loan growth.

• Expense management focus: Non-interest expenses declined slightly, driven by lower salaries, benefits, and commissions. Dewey credited slower hiring and production in areas like mortgage banking as key drivers, and highlighted ongoing efforts to control expenses despite some planned increases later in the year, including a core system conversion.

• Credit quality maintained: Net charge-offs and provisions remained near historical norms, with Harvey noting a modest provision increase driven by loan growth and updated risk ratings. The allowance for credit losses was adjusted upward, but management described overall credit trends as stable.

• Strategic capital deployment: The company repurchased $15 million of stock during the quarter and has $85 million of remaining authorization. Dewey indicated that capital deployment decisions—including buybacks and potential M&A—will depend on market conditions and ongoing loan growth, with organic expansion in select high-growth markets as a priority.

Drivers of Future Performance

Trustmark’s guidance for the year is shaped by external economic uncertainty, evolving customer behavior, and a focus on expense discipline and market expansion.

• Tariffs and policy impacts: Management is closely monitoring the effects of recently announced tariffs and administrative policies, acknowledging that clients are beginning to show caution in new borrowing decisions. Dewey noted that while loan origination pipelines remain solid, “we could see some slowdown” if uncertainty persists.

• Interest rate sensitivity: The company’s net interest margin outlook depends on the future path of Federal Reserve rate cuts. Owens explained that, assuming two cuts this year, the margin is expected to improve slightly through ongoing repricing of loans and securities. However, a faster-than-expected decline in rates could limit margin expansion.

• Expense growth and investment: Planned expenses later in the year, including merit increases and technology investments like a core system conversion, are expected to drive mid-single-digit expense growth. Management aims to offset these increases through continued expense discipline, with Chambers noting that merit increases are now timed for the third quarter, impacting the expense trajectory.

Catalysts in Upcoming Quarters

Moving forward, the StockStory team will be watching (1) signs of changing client demand and loan origination volumes in response to tariffs and rate uncertainty, (2) the pace and impact of planned investments such as the core system conversion on expense growth, and (3) the company’s ability to maintain stable credit quality as competitive pressures increase and economic conditions evolve. Progress in market expansion initiatives and capital deployment strategies will also be important to monitor.

Trustmark currently trades at $34.66, down from $35.82 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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