Good morning, ladies and gentlemen, and welcome to the Trustmark Corporation's third quarter earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question and answer session. To ask a question, you may press star then 1 on your touchtone phone, and to withdraw your question, please press star then 2. As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Corporate Strategy at Trustmark. Please go ahead.

Good morning. Our third quarter earnings release and presentation for today's call are available in the investor relations section of Trustmark.com. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these statements because of risks and uncertainties outlined in our earnings release and our other filings with the Securities and Exchange Commission. Now I'll turn the call over to Duane Dewey, President and CEO of Trustmark.

Thank you, Joey, and good morning everyone. Thank you for joining us this morning. With me today are Tom Owens, our Chief Operating Officer, Joe Bond, our Chief Financial Officer, Barry Harvey, our Chief Credit and Operations Officer, and Tom Chambers, our Chief Accounting Officer. I'll review our performance and outlook and have Barry and Joe add some color before taking your questions. Pressmark delivered a solid third quarter highlighted by growing net interest income, strong credit quality, and core deposit growth. Results demonstrate the strength of the core franchise while strategic balance sheet actions taken during the quarter are designed to enhance future earnings capacity. Wealth Management also continued its positive momentum and we maintained our focus on disciplined expense management and returning capital to shareholders. Turning to slide three, financial highlights, Trustmark reported third quarter debt income of $58.1 million for $1 per diluted share with a return on average tangible equity of 12.72% and a return on average assets of 1.21%. The quarterly operating EPS is a record for Trustmark in our 137 year history. The quarter included two strategic non-routine transactions. We sold 34 branch properties and simultaneously entered into a triple net lease agreement for each, generating a pre-tax gain of $61.5 million after transaction related expenses. We also repositioned our investment securities portfolio, reclassifying held to maturity securities for available for sale. We sold $629.5 million of securities yielding a weighted average of 1.4% and purchased $628 million of securities yielding a weighted average of approximately 5%. The resulting $61.5 million pre-tax loss was effectively offset by the sale-leaseback gain. In the quarter, loans held for investment declined $43.9 million or 0.3% but increased $321 million or 2.4% year-over-year. Loan production trends remained solid during the quarter, although growth was offset by continued elevated commercial loan payoffs. Barry Harvey will provide more detail after my summary comments. On the deposit side, excluding planned broker deposit runoff, deposits grew $184.3 million, or 1.2% link quarter, and 3.4% year-over-year. Total deposit costs were 1.67% for the quarter, reflecting the strength of our attractive, low-cost deposit base. Revenue remained solid at $207.1 million, down 0.5% link quarter, and up 2.4% year-over-year. Fully tax equivalent net interest income rose $2 million, or 1.2% link quarter, while the net interest margin held steady at 3.84%. The income reflected quarterly variability. Mortgage banking loan production volume was down 11.7% and linked quarter revenue was down 11.6%. Treasury management fee revenue was also down due to our core conversion shift to on balance sheet deposits from fee income oriented products. Finally, wealth management revenue showed continued solid growth. Expense discipline remains a priority. Non-interest expense rose $753,000 or 0.6% linked quarter. Salaries and employee benefits increased $1.7 million or 2.3% while other expense fell $1.7 million or 10.4%. primarily due to lower other real estate miscellaneous and loan expenses. Credit quality remains strong with third quarter net provision for credit losses of $2.3 million and net charge offs were 1 million or three basis points of average loans. During the quarter, we continued our share repurchase program. In the first nine months of 2026, we repurchased 60.9 million of common stocks for approximately 1.4 million shares. This included 20.1 million or approximately 428,000 shares in the third quarter. The board also declared a quarterly cash dividend of 25 cents per share payable December 15th to shareholders of record on December 1st. Turning to our full year outlook on slide 15. Note, it is a full year outlook. We continue to expect mid single digit growth in both loans held for investment and deposits, excluding broker deposits. Security balances are expected to remain stable. We have raised our full year 2026 net interest margin margin guidance to 3.83 to 3.87%. This is for the full year. You will recall Q1 NIM was 3.81 while second and third quarters were 3.84. We do expect to be at the high end of our guide range with a Q4 NIM around 4%. We expect fully tax equivalent net interest income to be up mid single digits compared to 2025. We expect the total provision for credit losses, including off-balance sheet credit exposure, to normalize and remain consistent with prior 2026 quarters. This outlook is in line with our disciplined credit risk management and strong third quarter asset quality metrics. With the challenging mortgage markets and the movement of treasury management revenue to NII, we now expect low to mid single digit growth in full year non-interest income and we reaffirm our full year 2026 non-interest expense guidance of middle single digit growth as we continue investing in the business while maintaining expense discipline. As previously communicated, we will maintain a disciplined approach to capital deployment favoring organic loan growth, potential market expansion, M&A and other general corporate purposes as market conditions warrant. And with that overall summary, I'll turn it over to Barry for a few comments on loans.

Thank you, Duane. And as you know, our balances were down $44 million for the quarter, and that puts us up here today $195 million. We do continue to see CRE payoffs, both expected and unexpected. The unexpected payoffs for the quarter were about $214 million. Some good news on some payoffs is we did have $52 million worth of payoffs that were criticized credits and we're glad to see those leave us. From the CNI perspective, we did experience about 60 million in unexpected payoffs coming from four credits. And then on the public finance side, we had a slight decline of about $43 million. The good news there is while we did have one credit that paid off that drove most of that decline, In the third quarter, we did also create a new facility for that same customer that has today about $115 million worth of availability to be drawn. We do expect that to fund up over Q4 and into 27. And on the equipment finance side, we did have a little bit of slower quarter than we've become accustomed to. We do fully expect that that faster growth will reoccur in Q4 of this year. just from the standpoint of the pipeline, the approved loan pipeline is very strong right now for us. We continue to have confidence in our ability to generate solid loan growth in Q4 and beyond. And the pipeline as it sits today of approved commitments is around a billion dollars. Obviously not all those will close, but we do feel very positive about the momentum that we do have. At this time, I'd like to turn it over to Joe Bond, our CFO.

Thank you, Barry. Let me give a little more color on the deposit. Last quarter on June 30th, we had a surge on the last day of $200 million of non-interest-bearing deposits that left soon thereafter. With that, deposit growth across both commercial and consumer channels allowed us to reduce Broker deposits by $198 million during the quarter, further strengthening our funding profile. Broker deposits now represent just 1.3% of total deposits. Deposit costs were 1.67% for the quarter, one basis point above our guidance last quarter. For the quarter, we are forecasting deposit costs of approximately 1.76% with a 33 data. The increase in this quarter primarily reflects deposit campaigns launched before the FOMC rate increase. We have not changed our promotional pricing since those campaigns were launched. We also have not changed pricing of our standard products. Exception pricing remains limited. Our deposit mix remains approximately 80% interest bearing and 20% non-interest bearing. We expect that mix to remain relatively stable in our forecast. Importantly, this deposit franchise has been built organically over decades through long-standing customer relationships and the work of our associates. We believe that provides us with a durable funding advantage in this competitive market. Now turning over to net interest margin and revenue, net interest margin was stable at 384 as Duane has spoken to. On a linked quarter basis, loan yields increased four basis points and securities were up eight basis points, while the cost of interest bearing liabilities rose four basis points. On a year over year basis, the cost of interest bearing liabilities is down 27 basis points. approximately 59% of the loan portfolio reprices within the first three months following a rate change, which provides relatively rapid asset pricing. Based on our current modeling, we expect approximately two basis points of NIM expansion for each 25 basis point change in rates, assuming no growth over a one-year period. on non-interest income, there are two items that are helpful in understanding the linked quarter comparison. Following the core conversion, approximately $250,000 per month, roughly $750,000 per quarter of economic previously reflected in fee income, now flows through the net interest margin, a geography change on the income statement in the balance sheet because those products were no longer offered. In addition, the second quarter non-interest income included $1.2 million of partnership distributions that did not repeat this quarter. Moving over to the sale, lease, back, and investment portfolio restructuring, I want to highlight the combined economic effect of two significant transactions this quarter. Together, these transactions allowed us to unlock capital embedded in our branch network and redeploy it through restructuring of our investment portfolio to further strengthen our balance sheet. The objective was to improve the timing of portfolio cash flows strengthen our interest rate risk profile and enhance future earnings. For the fourth quarter of 2026, we currently expect the transaction to contribute approximately $5.7 million of incremental net interest income, which equates to approximately 12 basis points of margin. After considering net occupancy and premise impact Premises Impact, and taxes approximately $3.2 million of income, incremental net income, or five basis points of diluted share. This was a flawless, coordinated effort across our treasury, accounting, finance, facilities, properties, and legal teams, and I want to recognize the associates across those groups who worked to execute these transactions.

Thank you, Jen. I will open the floor up for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. And if at any time your question has been addressed and you would like to withdraw your question, please press star then 2. And today's first question will come from Michael Rose with Raymond James. Please go ahead.

Hey, good morning, guys. Thanks for taking my question. I appreciate the color on the fourth quarter NIM. I think I misunderstood the slides last night, but good to hear, and I appreciate the color around the sensitivity to forward rates. Can you just give us some underlying assumptions around deposit betas and then maybe what we should expect just on a as we move in beyond the fourth quarter where you'll get the big benefit just given the competitive pressures on both loans and deposits. Thanks, guys.

Sure. The data that we're assuming assumes a full year of rate movement. So typically that will work out into total deposits of around 40 basis points. Our CDs do have a lag effect, which takes about six months for that to eventually follow through the rate increase and our interest-bearing transaction deposits, as I've spoken to in my comments, we have not changed standard pricing. They're lagging. Current rates and the balances are evolving as expected, so we're monitoring those very closely, but essentially that's the betas that I'm expecting.

Barry, any comments on the loan yields or what's happening?

No, I think the loan yields remain competitive in all categories, whether it's CNI or CRE. We're continuing to be disciplined and make sure that if it is a enterprise credit, it is for the right borrowers. But it's more of the same, Duane.

Okay, that's helpful. And then just as it relates to loans, you know, a little bit of a shrinkage this quarter, you kind of reiterated the guide. It implies a pretty big step up in the fourth quarter. I guess maybe you can use, you know, kind of talk about, you know, pipelines and maybe what you see kind of driving that reversal in a somewhat material way in the fourth quarter. Thanks.

Sure, Michael. This is Barry. you know as I mentioned the pipeline of our approved commitments is just a little less than a billion dollars as of 930 and the pull through on that remains to be seen but typically for us when we go through all the steps of getting something formally approved the close rate is very strong there and that's a stronger pipeline than we've seen historically. I do think we've got a a lot of opportunities with live deals that we've approved that will come to fruition during the fourth quarter. We're vetting a tremendous number of deals, Michael. Every deal that before our relationship managers and portfolio managers spend a lot of time on it, we do vet deals and it gives us, from the credit perspective, an opportunity to understand where the opportunities are and we either green light those deals and move them forward or something we may need some additional information on. But I will say we've been extremely busy the last three, probably the last three months, vetting deals more so than normal, both CRE, but as well as CNI, both working capital, non-working capital. It takes a little while for those deals to fully maturate and to get them approved and then to get them closed and booked. But we do feel like there's a lot of momentum going into fourth quarter that will come to fruition then. So we're encouraged across the board by the activities I mentioned. I mean, just on the public finance side, the payoff we've received with the new facility we've put in place, There's an additional $110 million worth of funding that we didn't have available previously. So there's quite a few things that we feel very encouraged about for Q4 and then going into 27, but specifically for Q4.

I appreciate all the color, Barry. I'll step back. Thanks, everyone.

Thanks, Michael. The next question will come from Steven Scouten with Piper Sandler. Please go ahead.

Yeah, thanks, everyone. Maybe just drilling down a little bit more, Barry, on that pipeline. I think you gave a billion-dollar figure of the current approved pipeline, and I don't remember if you gave that number last quarter, but could you remind us how that compared, maybe kind of quarter over quarter, and just what you expect, again, from a payoff perspective?

Sure, Stephen. You know, from a quarter over quarter, it's a little hard to say, only because we've changed some of our methodologies, and we're were evaluating the pipeline, so it's a little hard to compare previous years. We do feel like that it is a stronger pipeline than we've had historically, and we've got a number of deals that are far along in the process, and we feel like the probability of closing is much higher. The second half of your question reminded me.

Just kind of any expectations for payoffs relative to last quarter. And I know a lot of that was unexpected payoffs, but just kind of what you see is more scheduled, I suppose.

Yeah, and on the schedule side, it's in line with what we've had in the previous three quarters for Q4. I would say also that, you know, unexpected while it does, it does. in and of itself indicate that we were not planning on it. Obviously, unexpected happens every quarter. We just don't know which ones they are. They're not maturities that we would expect to see leave us based upon the feedback from the borrower. There are situations where the borrower's circumstances have changed, so we do have some unexpected every quarter, but we can just speak to third quarters, about $214 million and we'll have to wait and see what we experience in the fourth quarter. Typically there's a lot of things that end up pushing into the next year when you get to the fourth quarter. So we'll have to just wait and see how that plays out. But we are very encouraged by the activity we have going and the stage at which it is relative to being able to get the loan closed and booked and funded, funded and booked all in Q4.

Steven, I'll add real quick. This is Duane. Just to note, that pipeline is significantly broader than we've experienced, I think, where for several quarters, periods, years even, where we were predominantly CRE-focused, where now we're seeing much broader CNI opportunities and then further equipment finance and municipal. So we're seeing some things now. Barry mentioned in his prior comments that are very encouraging along the loan diversity perspective. So good news on that front.

Okay, great. And maybe just one more around loan growth. I mean, with the mid single digit guide, you know, kind of year to date, I think like Michael said, it'd be a pretty heavy lift here in the fourth quarter, but you sound confident. But kind of year to date, what do you think maybe has been slightly behind schedule with what you would have seen at the beginning of the year? Is that competitive factors, pricing, payoff levels, maybe a little bit of everything, I assume. But if you can kind of speak to what's been maybe the biggest surprise relative to what, you know, you would have hoped could happen at the high end.

Steven, I think it's a combination of all that you mentioned. I mean, we, we are, we are seeing a little bit more in the way of payoffs than we might would have expected. But having said that, it's, you know, it's a very competitive landscape. And whether it's whether you're talking about CRE or whether you're talking about C&I working capital, not working capital, we You know, we have, we haven't seen a lot of new public opportunities. We do have quite a few of those in front of us today, but I think it's a matter of just the need has has arisen for the, for some of the municipalities and other entities that fit inside that public finance. category. So we are seeing some opportunities there. But here again, on the public side, everything pretty much there's a lot a lot of it is bid. So it's you know, you don't you haven't wanted to you wanted and and so it's one of those things where you just got to be very competitive from the beginning. And, and then we do have some situations where due to some long term relationships, we are able to, it's a negotiated deal as opposed to a bid deal. but we are seeing some opportunities there that we haven't seen in the prior quarter. So public finance has obviously been slower through the first three quarters than we would have anticipated. I think CNI and CRE, it's a function of competitiveness and the number of players pursuing the opportunities and in some cases where competitors are willing to go to win an opportunity. So we're gonna have to remain disciplined and be selected for when we get very, very thin on pricing. But I am encouraged by the level of our pipeline that are approved deals waiting to be closed, funded. And so we're encouraged by what we see at this point for Q4.

Okay. And maybe just one last for me. On the deposit may be referenced potentially, Joe is like 40%, I believe. Is that, I guess, total deposit beta that you're thinking about? It looks like maybe on the first hike through 4Q, you'd be at like 55% interest bearing. So is that kind of the right way to think about it on an interest bearing perspective? Yes. Okay. And is that just kind of standard or is there any mixed shift dynamic affecting that as well?

No, we don't have mixed shift right now in our forecast, but there could be risk with that. but right now in our forecast modeling, we don't have that mix.

Okay, perfect. Thanks for the time this morning.

Thank you. The next question will come from Freddie Strickland with HVD Group. Please go ahead.

Hey, good morning, gentlemen. Just wanted to continue on the loan discussion here, specifically on the payoffs. I realize there's still a headwind today, and you kind of talked through a good bit of what to expect in your term, but if we continue to see rates go up a little bit, could we see those slow down, given what you've seen historically, or do you think we'll see the same level we've been seeing the last couple quarters?

This is Barry, and I would agree with you. We're starting to see that a little bit already, where there's... There's a little bit of a pause, and there's additional time wanted to evaluate the direction things may ultimately go from an interest rate perspective. There's also the need for a lot of these projects, especially on the CRA side, the projects have always have, in almost every real estate deal, there's some delays during construction. that result in slower stabilization. The project's going according to plan from the standpoint of they're getting the rents they expect and the occupancy is coming as quickly as they anticipated, but it just started later. And therefore there's oftentimes a need for another six months to 12 months. That's just normal business and that's occurring. And then you do have the situation where a little bit of higher rates and the potential for higher rates then we do have projects that are staying with us. Of course, we're actively pursuing those opportunities. These are projects where it's been constructed, it's stabilized or stabilizing, it's well-passed and one-to-one debt service coverage on P&I basis and performing, just not fully baked from the standpoint of getting the maximum value out of the project when you're selling it into the marketplace. but we're very excited about those projects staying with us. They're well priced relative to the new deals we're looking at today. And for the most part, we're not necessarily talking about the need to reprice them for that extra 12 months, 18 months where they won't stay. And they're all variable rates. So as these rates bump up and the pricing stays the same, we get the benefit of the index moving up. So we're encouraged that the little bit higher rates are the belief that there's going to be higher rates will allow these projects to stay a little longer than we anticipated. That will help us some on the runoff and the need for production to cover the runoff.

Thanks, Barry. That's really helpful, Culler. And just one more from me on just in the environment. Has the return of higher rates and some uncertainty increased or decreased the amount of conversations there? And what are you seeing from smaller banks?

I'd say in general about the same, not a lot of change. And I think as we have mentioned in our prior quarterly calls, I mean, we do believe scale is going to be critically important moving forward. And so we remain very interested. And, you know, there are conversations ongoing across all spectrums of sizes. So I really haven't seen much change. I do think the interest rate environment could impact things a little bit, but at the end of the day, I do believe the push to scale is really continuing.

All right, great. Thanks for taking my questions. I'll step back.

Thank you. The next question will come from Will Jones with KBW. Please go ahead.

Yeah, hey, great. Thanks, guys. Good morning.

Good morning, Will.

Hey so I wanted to just ask if I kind of put all the moving pieces together you know a higher margin next quarter you give us you know the expense guy which which is roughly unchanged you know between those two dynamics it feels like there's still a good opportunity for operating leverage into 2027 I guess just just is that a fair comment to say Duane is that kind of how you see things and then you know within that you know we kind of sit at this higher level of profitability following the last insurance trade and bond trade. We now have the HTM restructure here. What do you feel like the ultimate upside is to profitability, kind of putting all these moving pieces together? Thank you.

On the operating leverage, the response is yes. I do see there is upside opportunity really across all avenues in terms of what's driving the net interest margin, the dynamics of our deposit base and funding there, net interest, non-interest, revenue items as well. So I do see the opportunity for upside potential there, and I'll turn it over to Duane.

Yeah, and I would just conclude with basically what we've said all along, focused, intense, organic growth. We've talked about hiring and things we're doing in our production staffs across our franchise. So we're focused on organic key market growth. Third quarter, 2026, we hired 18, 19 new production professionals across the system. Some of those were replacements or upgrades. But, you know, continued focus on organic growth is going to drive it. And I do think selective M&A and, like I've said a second ago, I think scale and factors that impact scale are going to be critically important moving forward.

Yeah, okay, great. Thanks, guys. We've already talked about a lot here, so that's all from me, but I appreciate that, Keller.

Thank you. The next question will come from Christopher Maranac with Breen Capital. Please go ahead.

Hey, thanks. Good morning. Barry, can you remind us on the stress testing process that you've been doing for a while on debt service coverage for real estate and then how does it change given what's happened with rates the last couple of months, let alone what the look forward is?

Sure. Be glad to. Be glad to, Chris. We do – our stress testing process is – or there's bottoms up we do annually and the top down we do twice a year. One on the on cycle and one is of the off cycle. So we are constantly during all those, especially on the top down, we are stressing interest rates throughout that process and evaluating what level of stress it's applying to the portfolio and then we're obviously passing that information over to our treasure group where it's incorporated into our enterprise-wide stress testing. You know, on a credit-only basis, We have an annual review process to where we look at approximately 50% of our credits through the annual review process. Then we get another 30% coverage to get us between 75% and 80% of the total book off of what we touch through a modification, a renewal, an extension of one type or another. and so we get a lot of opportunities to touch those credits and reevaluate how they're doing in the interest rate environment. When we're underwriting, we do have a underwriting rate that we use that's different and apart from the actual rate or the Treasury plus, 10-year Treasury plus a spread. On all of our covenant testing, that we established, Chris. We used the higher of either the artificial underwriting rate that we've established that we monitor with our peers to make sure we're all kind of in line with how we're underwriting these credits, trying to give ourselves as much cushion as we can between the actual rate and the artificial rate that we established for underwriting. But when we establish covenants, we're usually going to look at the higher of the three, the actual rate for the test, the underwriting rate that was used at the time, it was obviously underwritten, and then some type of 10-year treasury plus the spread of 200 to 250 basis points just so as rates do move and we do we're not you know we're looking at obviously they're making the payments based upon the actual rate but we want to make sure we're quickly deducing how is the credit going to perform in the in the new environment if in fact it has to be refinanced at some point we don't want to be caught surprised by the impact of the higher rates on the credit, even though it may be a year or two away from that at the time. And if it's not going to work or not going to work as well, we're having those conversations with the ballers about right-sizing what interest reserves carry that we need to establish to make sure that as it has to live in a higher rate environment once it's refinanced, then the project works and works well. I hope that answers your question.

No, it does. And then, you know, the increased pipeline that you have, those deals have been vetted on this basis, I presume.

Yeah, everything about what I just mentioned is what we do on a daily basis. And they're all vetted based upon what we believe the interest rate environment is today, where we think it's heading, and determining how much cushion there is in deals in today's environment. Obviously, when with rates, when rates are lower, there's more opportunity for cushion in the deals, and the deals still work. But the way you address that is through additional equity on the front end, and that's what we have to require. If we believe the deal is too tight, the only way to, if we're gonna move forward with the deal, the only way to protect ourselves is to require more equity on the front end, and we do that on a case-by-case basis.

Got it. Thank you for all that color. I appreciate it. With a larger pipeline, are you doing larger deals or is your deal size still the same as in the past?

Yeah, our deal sizes have not changed, Chris, on what we're doing day in and day out. If you say around the edges, Do we do an additional million or two on a deal because there's reasons that are advantageous for Trustmark to do so? For example, in CRE world, if we need to do a couple million more to keep it a two bank deal, which is much more manageable, and it's 100% voting rights, and we like the partner that we're doing business with, but they're full, you know, and they're a larger bank and they're full. then we'll probably we'll do that additional couple million but two or three million dollars more to keep it a two bank deal so that we don't get cut back more than we want to be and then we don't have to introduce a smaller bank third party that we really don't want to deal with in case the project has bumps in the road it's a little easier to build consensus with two banks especially with the larger bank being typically more rational and less capital constrained So for all those reasons, we do make adjustments around the edges of what we say we do hard and fast, but we've not made any changes to our approach in order to generate more activity.

Great. Thanks again, Barry. I appreciate it, and thanks for hosting us this morning.

Thank you. And this will conclude our question and answer session. I would like to turn the conference back over to Mr. Duane Dewey for any closing remarks. Please go ahead.

Well, thank you again for joining us this morning. We appreciate everybody on the call and we look forward to catching back up at the end of the fourth quarter. We believe the third quarter was a solid one and one that positions us well for the future. And we look to catch up again in January. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.