Analyst Ratings

Return to Article

Moody's Downgrades Trustmark, Outlook Negative

The Associated Press

NEW YORK (AP) — Moody's Investors Service on Tuesday downgraded the ratings of Trustmark Corp. and said the regional bank's outlook is negative.

Moody's cut the parent corporation's ratings by one notch to Baa1 from A3. The lead bank subsidiary, Trustmark National Bank, which operates in Florida, Mississippi, Tennessee and Texas, had its long-term bank deposits rating cut to A3 from A2, and its bank financial strength rating cut to C from C+.

The bank's short-term ratings were lowered to Prime-2 from Prime-1. The ratings remain investment grade.

Moody's said the downgrade and negative outlook reflects its view that Trustmark's financial strength, particularly its capital levels and earnings generation, is likely to be pressured by deterioration in its commercial real estate portfolio.

Commercial real estate exposure accounts for about three times Trustmark's tangible common equity, with construction lending comprising nearly 60 percent of the total.

Moody's noted that Trustmark's commercial real estate lending is highly concentrated in Mississippi, where half of its related portfolio was originated. Nearly 20 percent of the portfolio is in Florida.

The ratings agency said it had previously incorporated Trustmark's real estate lending exposure into its ratings, but the sharp decline in real estate prices and anticipated deterioration in loan performance has led to considerably higher loss expectations in the segment, especially from construction and land development.

While most of Trustmark's commercial real estate losses to date stem from its construction portfolio in Florida, Moody's expects its other holdings will generate higher credit costs in the future because of the weak economy. Moody's also expects further losses from Trustmark's Florida exposures.

The downgrade was limited to one notch because Trustmark still has good capital and liquidity, Moody's said.

Trustmark shares closed Tuesday down $1.94, or 9.6 percent, at $18.24, echoing a sharp decline across the banking sector as the broader market fell about 2 percent. Shares have traded between $14.18 and $34 in the past 52 weeks, and are down about 16 percent for the year.