TRUSTMARK CORP (TRMK) stock intrinsic value fair value estimate & owner earnings analysis

Trustmark is the holding company for Trustmark National Bank, a regional bank serving Mississippi, Alabama, Florida, Georgia, the Memphis area of Tennessee and Houston, Texas. It earns most of its money from the spread between what it earns on loans and securities and what it pays on deposits (net interest income of $636 million in 2025), plus fees, mortgage banking and wealth services (noninterest income of $164 million). It sold its insurance agency, Fisher Brown Bottrell, in 2024. How we measured earnings. We start with operating cash flow, remove swings in mortgage loans held for sale and other assets and liabilities, subtract stock compensation and the maintenance portion of capital spending, and, because loan losses are a real and recurring cost of lending, subtract each year's provision for credit losses rather than adding it back. On that basis owner earnings per share were: 2016 $2.07, 2017 $2.21, 2018 $2.47, 2019 $2.75, 2020 $2.64, 2021 $2.60, 2022 about $0, 2023 $2.39, 2024 $2.55 and 2025 $3.96. Two years are set aside. 2022 absorbed a one-time litigation settlement of about $100.8 million (the Stanford Financial matter). 2024 was distorted by the insurance sale, a $182.8 million loss from selling securities in order to reinvest at higher yields, and a $108.5 million outflow in other liabilities. Because deposits and borrowings are the raw material of a bank, interest is treated as an operating cost and no debt is deducted from the value; the subordinated notes (about $172 million issued in 2025, replacing $125 million) matter through funding cost, which is already inside earnings. Starting level. We use $3.17 per share, the midpoint of 2023 ($2.39) and 2025 ($3.96), the two clean years either side of the 2024 changes. It sits below 2025 on purpose: bank earnings move with interest rates, and 2025 is the only full year on the new balance sheet. 2023 also included roughly $0.20 per share of profit from the insurance agency that has since been sold. First-half 2026 results support the 2025 level: net income was $119.6 million versus $109.5 million a year earlier, diluted EPS was $2.03 versus $1.80, and net interest income was $326.2 million versus $310.8 million. Two quarters do not move our starting level, but they inform the bull case. Growth check: owner earnings per share rose about 55% in 2025 ($3.96 versus $2.55), but 2024 was depressed by the items above, so we do not treat that as a trend; the base case assumes just 3% in year 1 from the $3.17 start. Base case, $57.49 per share. Earnings grow 3% a year, easing to 1% by year 10. This growth is credited because Trustmark has compounded book value per share by about 5.4% a year, from $22.46 in 2016 to $36.06 in 2025, through the 2022 rate shock and the settlement year, funded from its own earnings, and because diluted shares fell from 67.8 million to 60.5 million (including $80.0 million of buybacks in 2025). We use a rate below that record. Growth needs capital, so we deduct the earnings that must be retained to fund it (growth divided by an assumed 10.5% return on equity, in line with 2025 net income of $224.1 million on $2.12 billion of equity). Earnings reach about $3.94 per share in year 10, close to today's level, and are then held flat with no further growth. The first ten years of distributable earnings are worth $20.82 and the period after is worth $36.67. The business is worth $57.49 per share, it owes no deductible debt, and the difference is $57.49. Bull case, $75.39 per share. The 2025 level of $3.96 per share holds, as the first half of 2026 suggests, and grows 5% a year, easing to 1% by year 10, in line with (and just under) the demonstrated 5.4% book value compounding. Earnings reach about $5.53 per share in year 10 and are then held flat. Years 1 to 10 are worth $23.95 and the period after is worth $51.44. The business is worth $75.39, it owes no deductible debt, and the difference is $75.39. Bear case, $33.22 per share. Lower rates compress spreads and earnings fall back to about $2.10 per share, the level of 2016 and 2017, with no growth. In year 2 the bank also absorbs a one-time hit of $2.00 per share from credit or legal losses. There is precedent: the provision for credit losses reached $45.0 million in 2020, the 2022 settlement cost about $100.8 million, and the filings note that many loans are in Gulf Coast areas exposed to hurricanes. Years 1 to 10 are worth $13.68 and the period after is worth $19.54. The business is worth $33.22, it owes no deductible debt, and the difference is $33.22. What we left out. We did not credit wider margins, faster loan growth than the historical record, cost savings or acquisitions, because none is contracted or an established, repeatable process. We also did not carry the 2025 peak-like level forward in the base case because rate-driven spreads can reverse. We tested two points against the filings. First, whether litigation is a recurring drain: the 2025 annual report shows only the 2022 Stanford settlement (a $100.0 million charge plus $0.75 million of legal fees) and a $6.5 million settlement in 2023, with no comparable pending item disclosed in that discussion. Second, whether credit quality supports the starting level: net charge-offs were $17.5 million in 2025 (0.13% of average loans), $25.0 million in 2024 and $8.2 million in 2023. Change since our last view. We previously estimated $29.08 / $53.28 / $88.05 for the bear, base and bull cases. The bear and base cases rise because 2025 and early 2026 results confirmed that earnings recovered after the 2022 settlement, and because we now measure earnings with credit losses charged explicitly and a flat 6% discount rate. The bull case falls because we no longer assume a decade of 6% growth; growth is capped at the bank's demonstrated 5.4% pace and tapers. What would make this wrong: a sharp fall in rates that shrinks spreads more than the bear case, a credit cycle deeper than 2020, a hurricane or another legal settlement, or growth that requires more capital than we assume. Margin-of-safety price: $36.00, close to the bear value and about 37% below the base value, reflecting a regional bank's sensitivity to rates, credit and weather.