Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $25.9 million in the third quarter of 2010, which represented basic earnings per common share of $0.40. Trustmark’s third quarter net income produced a return on average tangible common equity of 12.38%. During the first nine months of 2010, Trustmark’s net income available to common shareholders totaled $75.5 million, which represented basic earnings per common share of $1.18. Trustmark’s performance during the first nine months of 2010 resulted in a return on average tangible common equity of 12.43%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share. The dividend is payable December 15, 2010, to shareholders of record on December 1, 2010.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6481936&lang=en

Richard G. Hickson, Chairman and CEO, stated, “Trustmark continued to produce strong financial results as reflected by robust net interest income, diversified noninterest income, and disciplined expense management. We look forward to the future as solid earnings, coupled with the strength of Trustmark’s human and financial capital, have positioned us to take advantage of opportunities in the marketplace to build shareholder value.”

Credit Quality
  • Provision for loan losses totaled $12.3 million
  • Nonperforming assets declined, reflecting reduced foreclosed other real estate

Net charge-offs during the quarter totaled $18.5 million, or 1.18% of average loans, and the provision for loan losses totaled $12.3 million. During the third quarter, Trustmark experienced a $21.1 million reduction in classified loans, including a $14.8 million decline in its Florida market, relative to the prior quarter. This reduction in classified loans, coupled with a lower migration of new classified loans, resulted in provisioning being less than net charge-offs during the third quarter.

Allocation of Trustmark’s $94.5 million allowance for loan losses represented 1.97% of commercial loans and 0.81% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.57% as of September 30, 2010. The allowance for loan losses represented 140.9% of nonperforming loans, excluding impaired loans which have been charged down to fair value.

Trustmark continues to make significant progress in the resolution of its construction and land development portfolio in Florida. During the last 12 months, this portfolio has been reduced by 31.2% to $145.9 million. At September 30, 2010, Florida nonimpaired construction and land development loans totaled $116.1 million with an associated reserve for loan losses of $13.0 million, or 11.18%. Managing credit risks resulting from current economic and real estate market conditions continues to be a primary focus for Trustmark.

At September 30, 2010, nonperforming assets totaled $244.0 million, a decrease of $7.2 million, or 2.9%, from the prior quarter. Nonperforming loans decreased $562 thousand relative to the prior quarter to total $159.3 million, or 2.54% of total loans. Foreclosed real estate decreased $6.7 million, or 7.3%, from the prior quarter to total $84.7 million.

Capital Strength
  • Tangible common equity to tangible assets increased to 9.34%
  • Total risk-based capital increased to 15.75%

The fundamental strengths of Trustmark’s diversified financial services business were reflected in pre-tax, pre-provision earnings of $47.1 million in the third quarter of 2010. Consistent profitability and sound balance sheet management continued to be reflected in Trustmark’s solid capital position. At September 30, 2010, tangible common equity totaled $850.5 million and represented 9.34% of tangible assets. Total risk-based capital increased to 15.75%, significantly exceeding the 10% regulatory requirement to be classified as “well-capitalized.” Trustmark’s strong capital base provides strategic flexibility to support organic growth as well as acquisition opportunities that strengthen the value of the franchise.

Balance Sheet Management
  • Average earning assets remained stable at $8.2 billion
  • Net interest income (FTE) totaled $90.9 million

Average loans during the third quarter totaled $6.2 billion, a decline of $70.2 million from the prior quarter, and reflected continued efforts to reduce exposure to construction and land development lending as well as the decision to discontinue indirect auto financing. Current economic conditions also reduced demand for credit. Average investment securities during the third quarter increased $45.7 million to $1.9 billion. As a result, average earning assets remained stable at $8.2 billion during the third quarter.

Average deposits totaled $7.1 billion during the third quarter, a decrease of $92.7 million relative to the prior quarter. During this period, average interest bearing deposits declined $185.7 million while average noninterest-bearing deposits increased $93.0 million. Lower deposit costs continued to reflect Trustmark’s strong liquidity while disciplined loan pricing and required minimum loan rates have sustained loan yields. As a result, net interest income (FTE) totaled $90.9 million, resulting in a net interest margin of 4.39% during the third quarter.

Noninterest Income
  • Noninterest income (excluding security gains) increased to $44.0 million
  • Fee income represented 32.6% of total revenue

Mortgage banking income during the third quarter totaled $9.9 million, an increase of $1.0 million from the prior quarter. During the third quarter, mortgage production exceeded $450 million, a 52.5% increase relative to the prior quarter. Performance in mortgage banking continued to reflect stable mortgage servicing income, solid secondary marketing gains, and successful hedging initiatives. In addition, Trustmark has not experienced any significant mortgage repurchase activity. Trustmark operates a conservative, full service mortgage banking business and is confident in its mortgage foreclosure processes. Trustmark has not engaged in "robo-signing" and has not participated in private label securitizations, both of which have been a cause of concern in the mortgage industry. Trustmark works diligently to keep borrowers in their homes, resorting to foreclosure only as a last option.

In addition to growth in mortgage banking income, service charges on deposit accounts totaled $14.5 million, reflecting an increase from the prior quarter as well as from levels one year earlier. Insurance revenue totaled $7.7 million, an increase of $862 thousand from the prior quarter while wealth management income totaled $5.2 million. Bank card and other fees remained stable at $6.2 million in the third quarter.

Noninterest Expense

  • Foreclosure expense totaled $8.7 million
  • Noninterest expense remained well-controlled

Trustmark has substantially completed its 2010 reappraisal of the Florida other real estate (ORE) portfolio. Year-to-date, Florida ORE balances declined 31% to total $31.7 million at September 30, 2010, and represents approximately 37% of the Corporation’s ORE. Collectively, Trustmark’s Florida ORE has been written down by approximately 50% from the point at which the loans failed to perform in accordance with contractual terms. ORE in Trustmark’s Mississippi, Tennessee and Texas markets, which represent approximately 63% of the Corporation’s total, did not experience a significant increase in real estate prices during the current economic cycle as did Florida. Excluding ORE expense, core noninterest expense remained well-controlled, increasing less than 1% from the prior quarter.

ADDITIONAL INFORMATION

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 27 at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (800) 860-2442, passcode 436565 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Thursday, November 4, 2010 in archived format at the same web address or by calling (877) 344-7529, passcode 436565.

Trustmark is a financial services company providing banking and financial solutions through over 150 offices in Florida, Mississippi, Tennessee and Texas.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism and other risks described in our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2010
($ in thousands)
(unaudited)
                             
Linked Quarter Year over Year
QUARTERLY AVERAGE BALANCES   9/30/2010     6/30/2010     9/30/2009  

$ Change
% Change

$ Change
% Change
Securities AFS-taxable $ 1,654,335 $ 1,586,165 $ 1,377,318 $ 68,170 4.3 % $ 277,017 20.1 %
Securities AFS-nontaxable 111,959 110,969 89,259 990 0.9 % 22,700 25.4 %
Securities HTM-taxable 143,124 162,691 191,934 (19,567 ) -12.0 % (48,810 ) -25.4 %
Securities HTM-nontaxable   37,703     41,628     55,440     (3,925 ) -9.4 %   (17,737 ) -32.0 %
Total securities   1,947,121     1,901,453     1,713,951     45,668   2.4 %   233,170   13.6 %
Loans (including loans held for sale) 6,230,961 6,301,201 6,693,482 (70,240 ) -1.1 % (462,521 ) -6.9 %
Fed funds sold and rev repos 8,418 7,478 12,821 940 12.6 % (4,403 ) -34.3 %
Other earning assets   33,615     38,764     43,894     (5,149 ) -13.3 %   (10,279 ) -23.4 %
Total earning assets   8,220,115     8,248,896     8,464,148     (28,781 ) -0.3 %   (244,033 ) -2.9 %
Allowance for loan losses (102,528 ) (104,814 ) (102,545 ) 2,286 -2.2 % 17 0.0 %
Cash and due from banks 214,736 207,670 205,361 7,066 3.4 % 9,375 4.6 %
Other assets   885,600     898,749     871,477     (13,149 ) -1.5 %   14,123   1.6 %
Total assets $ 9,217,923   $ 9,250,501   $ 9,438,441   $ (32,578 ) -0.4 % $ (220,518 ) -2.3 %
 
Interest-bearing demand deposits $ 1,363,377 $ 1,306,783 $ 1,148,537 $ 56,594 4.3 % $ 214,840 18.7 %
Savings deposits 1,888,121 2,066,612 1,797,421 (178,491 ) -8.6 % 90,700 5.0 %
Time deposits less than $100,000 1,276,088 1,307,611 1,434,097 (31,523 ) -2.4 % (158,009 ) -11.0 %
Time deposits of $100,000 or more   957,148     989,397     1,095,431     (32,249 ) -3.3 %   (138,283 ) -12.6 %
Total interest-bearing deposits 5,484,734 5,670,403 5,475,486 (185,669 ) -3.3 % 9,248 0.2 %
Fed funds purchased and repos 522,523 495,904 644,012 26,619 5.4 % (121,489 ) -18.9 %
Short-term borrowings 202,017 181,669 263,891 20,348 11.2 % (61,874 ) -23.4 %
Long-term FHLB advances - 15,833 75,000 (15,833 ) -100.0 % (75,000 ) -100.0 %
Subordinated notes 49,793 49,785 49,760 8 0.0 % 33 0.1 %
Junior subordinated debt securities   70,104     70,104     70,104     -   0.0 %   -   0.0 %
Total interest-bearing liabilities 6,329,171 6,483,698 6,578,253 (154,527 ) -2.4 % (249,082 ) -3.8 %
Noninterest-bearing deposits 1,629,122 1,536,153 1,529,381 92,969 6.1 % 99,741 6.5 %
Other liabilities   104,576     91,715     113,820     12,861   14.0 %   (9,244 ) -8.1 %
Total liabilities 8,062,869 8,111,566 8,221,454 (48,697 ) -0.6 % (158,585 ) -1.9 %
Preferred equity - - 206,308 - n/m (206,308 ) -100.0 %
Common equity   1,155,054     1,138,935     1,010,679     16,119   1.4 %   144,375   14.3 %
Total shareholders' equity   1,155,054     1,138,935     1,216,987     16,119   1.4 %   (61,933 ) -5.1 %
Total liabilities and equity $ 9,217,923   $ 9,250,501   $ 9,438,441   $ (32,578 ) -0.4 % $ (220,518 ) -2.3 %
 
 
Linked Quarter Year over Year
PERIOD END BALANCES   9/30/2010     6/30/2010     9/30/2009  

$ Change
% Change

$ Change

% Change
Cash and due from banks $ 196,136 $ 186,365 $ 191,449 $ 9,771 5.2 % $ 4,687 2.4 %
Fed funds sold and rev repos 6,655 5,713 8,551 942 16.5 % (1,896 ) -22.2 %
Securities available for sale 1,968,624 1,786,710 1,528,625 181,914 10.2 % 439,999 28.8 %
Securities held to maturity 168,849 192,860 242,603 (24,011 ) -12.4 % (73,754 ) -30.4 %
Loans held for sale 268,137 218,369 237,152 49,768 22.8 % 30,985 13.1 %
Loans 5,998,704 6,054,995 6,382,440 (56,291 ) -0.9 % (383,736 ) -6.0 %
Allowance for loan losses   (94,458 )   (100,656 )   (103,016 )   6,198   -6.2 %   8,558   -8.3 %
Net Loans 5,904,246 5,954,339 6,279,424 (50,093 ) -0.8 % (375,178 ) -6.0 %
Premises and equipment, net 143,393 143,536 148,656 (143 ) -0.1 % (5,263 ) -3.5 %
Mortgage servicing rights 41,972 43,044 56,042 (1,072 ) -2.5 % (14,070 ) -25.1 %
Goodwill 291,104 291,104 291,104 - 0.0 % - 0.0 %
Identifiable intangible assets 17,181 18,062 20,819 (881 ) -4.9 % (3,638 ) -17.5 %
Other assets   410,608     404,443     364,073     6,165   1.5 %   46,535   12.8 %
Total assets $ 9,416,905   $ 9,244,545   $ 9,368,498   $ 172,360   1.9 % $ 48,407   0.5 %
 
Deposits:
Noninterest-bearing $ 1,709,311 $ 1,539,598 $ 1,493,424 $ 169,713 11.0 % $ 215,887 14.5 %
Interest-bearing   5,316,025     5,599,796     5,377,011     (283,771 ) -5.1 %   (60,986 ) -1.1 %
Total deposits 7,025,336 7,139,394 6,870,435 (114,058 ) -1.6 % 154,901 2.3 %
Fed funds purchased and repos 633,065 492,367 645,057 140,698 28.6 % (11,992 ) -1.9 %
Short-term borrowings 318,457 208,136 315,105 110,321 53.0 % 3,352 1.1 %
Long-term FHLB advances - - 75,000 - n/m (75,000 ) n/m
Subordinated notes 49,798 49,790 49,766 8 0.0 % 32 0.1 %
Junior subordinated debt securities 70,104 70,104 70,104 - 0.0 % - 0.0 %
Other liabilities   161,353     142,374     121,670     18,979   13.3 %   39,683   32.6 %
Total liabilities   8,258,113     8,102,165     8,147,137     155,948   1.9 %   110,976   1.4 %
Preferred stock - - 206,461 - n/m (206,461 ) -100.0 %
Common stock 13,311 13,311 11,968 - 0.0 % 1,343 11.2 %
Capital surplus 254,288 253,133 145,352 1,155 0.5 % 108,936 74.9 %
Retained earnings 881,545 870,532 854,508 11,013 1.3 % 27,037 3.2 %

Accum other comprehensive income (loss), net of tax
  9,648     5,404     3,072     4,244   78.5 %   6,576   n/m
Total shareholders' equity   1,158,792     1,142,380     1,221,361     16,412   1.4 %   (62,569 ) -5.1 %
Total liabilities and equity $ 9,416,905   $ 9,244,545   $ 9,368,498   $ 172,360   1.9 % $ 48,407   0.5 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
   
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2010
($ in thousands except per share data)
(unaudited)
                         
 
Quarter Ended Linked Quarter Year over Year
INCOME STATEMENTS   9/30/2010     6/30/2010     9/30/2009  

$ Change
% Change

$ Change
% Change
Interest and fees on loans-FTE $ 83,374 $ 84,362 $ 89,672 $ (988 ) -1.2 % $ (6,298 ) -7.0 %
Interest on securities-taxable 18,641 19,626 19,524 (985 ) -5.0 % (883 ) -4.5 %
Interest on securities-tax exempt-FTE 2,080 2,151 2,172 (71 ) -3.3 % (92 ) -4.2 %
Interest on fed funds sold and rev repos 9 7 16 2 28.6 % (7 ) -43.8 %
Other interest income   332     366     381     (34 ) -9.3 %   (49 ) -12.9 %
Total interest income-FTE   104,436     106,512     111,765     (2,076 ) -1.9 %   (7,329 ) -6.6 %
Interest on deposits 11,609 12,785 18,403 (1,176 ) -9.2 % (6,794 ) -36.9 %
Interest on fed funds pch and repos 294 260 282 34 13.1 % 12 4.3 %
Other interest expense   1,631     1,597     1,786     34   2.1 %   (155 ) -8.7 %
Total interest expense   13,534     14,642     20,471     (1,108 ) -7.6 %   (6,937 ) -33.9 %
Net interest income-FTE 90,902 91,870 91,294 (968 ) -1.1 % (392 ) -0.4 %
Provision for loan losses   12,259     10,398     15,770     1,861   17.9 %   (3,511 ) -22.3 %
Net interest income after provision-FTE   78,643     81,472     75,524     (2,829 ) -3.5 %   3,119   4.1 %
Service charges on deposit accounts 14,493 14,220 14,157 273 1.9 % 336 2.4 %
Insurance commissions 7,746 6,884 7,894 862 12.5 % (148 ) -1.9 %
Wealth management 5,199 5,558 5,589 (359 ) -6.5 % (390 ) -7.0 %
Bank card and other fees 6,235 6,417 5,620 (182 ) -2.8 % 615 10.9 %
Mortgage banking, net 9,861 8,910 8,871 951 10.7 % 990 11.2 %
Other, net   441     1,103     994     (662 ) -60.0 %   (553 ) -55.6 %
Nonint inc-excl sec gains, net 43,975 43,092 43,125 883 2.0 % 850 2.0 %
Security gains, net   4     1,855     1,014     (1,851 ) -99.8 %   (1,010 ) -99.6 %
Total noninterest income   43,979     44,947     44,139     (968 ) -2.2 %   (160 ) -0.4 %
Salaries and employee benefits 44,034 43,282 42,629 752 1.7 % 1,405 3.3 %
Services and fees 10,709 10,523 10,124 186 1.8 % 585 5.8 %
Net occupancy-premises 4,961 4,917 4,862 44 0.9 % 99 2.0 %
Equipment expense 4,356 4,247 4,104 109 2.6 % 252 6.1 %
Other expense   20,363     21,459     17,515     (1,096 ) -5.1 %   2,848   16.3 %
Total noninterest expense   84,423     84,428     79,234     (5 ) 0.0 %   5,189   6.5 %
Income before income taxes and tax eq adj 38,199 41,991 40,429 (3,792 ) -9.0 % (2,230 ) -5.5 %
Tax equivalent adjustment   3,335     3,384     2,417     (49 ) -1.4 %   918   38.0 %
Income before income taxes 34,864 38,607 38,012 (3,743 ) -9.7 % (3,148 ) -8.3 %
Income taxes   9,004     12,446     12,502     (3,442 ) -27.7 %   (3,498 ) -28.0 %
Net income   25,860     26,161     25,510     (301 ) -1.2 %   350   1.4 %
 
Preferred stock dividends - - 2,688 - n/m (2,688 ) -100.0 %
Accretion of preferred stock discount   -     -     452     -   n/m   (452 ) -100.0 %
Net income available to common shareholders $ 25,860   $ 26,161   $ 22,370   $ (301 ) -1.2 % $ 3,490   15.6 %
 
 
Per common share data
Earnings per share - basic $ 0.40   $ 0.41   $ 0.39   $ (0.01 ) -2.4 % $ 0.01   2.6 %
 
Earnings per share - diluted $ 0.40   $ 0.41   $ 0.39   $ (0.01 ) -2.4 % $ 0.01   2.6 %
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ -   0.0 % $ -   0.0 %
 
Weighted average common shares outstanding
Basic   63,885,647     63,872,879     57,431,128  
 
Diluted   64,066,798     64,054,171     57,559,492  
 
Period end common shares outstanding   63,885,959     63,885,403     57,440,047  
 
OTHER FINANCIAL DATA
Return on common equity 8.88 % 9.21 % 8.78 %
Return on average tangible common equity 12.38 % 12.92 % 13.06 %
Return on equity 8.88 % 9.21 % 8.32 %
Return on assets 1.11 % 1.13 % 1.07 %
Interest margin - Yield - FTE 5.04 % 5.18 % 5.24 %
Interest margin - Cost 0.65 % 0.71 % 0.96 %
Net interest margin - FTE 4.39 % 4.47 % 4.28 %
Efficiency ratio 62.59 % 62.56 % 58.95 %
Full-time equivalent employees 2,501 2,527 2,550
 
COMMON STOCK PERFORMANCE
Market value-Close $ 21.74 $ 20.82 $ 19.05
Common book value $ 18.14 $ 17.88 $ 17.67
Tangible common book value $ 13.31 $ 13.04 $ 12.24
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2010
($ in thousands)
(unaudited)
 
    Quarter Ended     Linked Quarter     Year over Year
NONPERFORMING ASSETS   9/30/2010         6/30/2010         9/30/2009  

$ Change
    % Change

$ Change
  % Change
Nonaccrual loans
Florida $ 65,759 $ 74,954 $ 72,063 $ (9,195 ) -12.3 % $ (6,304 ) -8.7 %
Mississippi (1) 48,962 39,924 28,470 9,038 22.6 % 20,492 72.0 %
Tennessee (2) 9,207 9,778 11,481 (571 ) -5.8 % (2,274 ) -19.8 %
Texas   35,388     35,222     26,490     166   0.5 %   8,898   33.6 %
Total nonaccrual loans 159,316 159,878 138,504 (562 ) -0.4 % 20,812 15.0 %
Other real estate
Florida 31,665 31,814 34,030 (149 ) -0.5 % (2,365 ) -6.9 %
Mississippi (1) 24,548 28,020 22,932 (3,472 ) -12.4 % 1,616 7.0 %
Tennessee (2) 16,456 12,493 9,809 3,963 31.7 % 6,647 67.8 %
Texas   12,053     19,073     4,918     (7,020 ) -36.8 %   7,135   n/m
Total other real estate   84,722     91,400     71,689     (6,678 ) -7.3 %   13,033   18.2 %
Total nonperforming assets $ 244,038   $ 251,278   $ 210,193   $ (7,240 ) -2.9 % $ 33,845   16.1 %
 
LOANS PAST DUE OVER 90 DAYS
Loans held for investment $ 5,795   $ 6,057   $ 6,854   $ (262 ) -4.3 % $ (1,059 ) -15.5 %
 

Loans HFS-Guaranteed GNMA serviced loans (no obligation to repurchase)
$ 50,246     $ 49,712     $ 36,686     $ 534   1.1 % $ 13,560   37.0 %
 
 
Quarter Ended     Linked Quarter Year over Year
ALLOWANCE FOR LOAN LOSSES   9/30/2010     6/30/2010     9/30/2009  

$ Change
% Change

$ Change
% Change
Beginning Balance $ 100,656 $ 101,643 $ 101,751 $ (987 ) -1.0 % $ (1,095 ) -1.1 %
Provision for loan losses 12,259 10,398 15,770 1,861 17.9 % (3,511 ) -22.3 %
Charge-offs (21,942 ) (14,297 ) (18,687 ) (7,645 ) 53.5 % (3,255 ) 17.4 %
Recoveries   3,485     2,912     4,182     573   19.7 %   (697 ) -16.7 %
Net charge-offs   (18,457 )   (11,385 )   (14,505 )   (7,072 ) 62.1 %   (3,952 ) 27.2 %
Ending Balance $ 94,458   $ 100,656   $ 103,016   $ (6,198 ) -6.2 % $ (8,558 ) -8.3 %
 
PROVISION FOR LOAN LOSSES `
Florida $ 4,520 $ 2,432 $ (3,295 ) $ 2,088 85.9 % $ 7,815 n/m
Mississippi (1) 4,398 3,430 12,009 968 28.2 % (7,611 ) -63.4 %
Tennessee (2) (172 ) 3,560 159 (3,732 ) n/m (331 ) n/m
Texas   3,513     976     6,897     2,537   n/m   (3,384 ) -49.1 %
Total provision for loan losses $ 12,259   $ 10,398   $ 15,770   $ 1,861   17.9 % $ (3,511 ) -22.3 %
 
NET CHARGE-OFFS
Florida $ 8,951 $ 5,880 $ 131 $ 3,071 52.2 % $ 8,820 n/m
Mississippi (1) 3,879 3,885 9,629 (6 ) -0.2 % (5,750 ) -59.7 %
Tennessee (2) 3,475 1,031 872 2,444 n/m 2,603 n/m
Texas   2,152     589     3,873     1,563   n/m   (1,721 ) -44.4 %
Total net charge-offs $ 18,457   $ 11,385   $ 14,505   $ 7,072   62.1 % $ 3,952   27.2 %
 
CREDIT QUALITY RATIOS
Net charge offs/average loans 1.18 % 0.72 % 0.86 %
Provision for loan losses/average loans 0.78 % 0.66 % 0.93 %
Nonperforming loans/total loans (incl LHFS) 2.54 % 2.55 % 2.09 %
Nonperforming assets/total loans (incl LHFS) 3.89 % 4.01 % 3.18 %
Nonperforming assets/total loans (incl LHFS) +ORE 3.84 % 3.95 % 3.14 %
ALL/total loans (excl LHFS) 1.57 % 1.66 % 1.61 %
ALL-commercial/total commercial loans 1.97 % 2.10 % 2.08 %
ALL-consumer/total consumer and home mortgage loans 0.81 % 0.82 % 0.76 %
ALL/nonperforming loans 59.29 % 62.96 % 74.38 %

ALL/nonperforming loans - (excl impaired loans with no specific reserves)
140.94 % 148.86 % 117.93 %
 
CAPITAL RATIOS
Total equity/total assets 12.31 % 12.36 % 13.04 %
Common equity/total assets 12.31 % 12.36 % 10.83 %
Tangible common equity/tangible assets 9.34 % 9.32 % 7.76 %
Tangible common equity/risk-weighted assets 12.78 % 12.51 % 10.15 %
Tier 1 leverage ratio 10.26 % 10.07 % 10.70 %
Tier 1 common risk-based capital ratio 12.72 % 12.51 % 10.15 %
Tier 1 risk-based capital ratio 13.75 % 13.53 % 14.11 %
Total risk-based capital ratio 15.75 % 15.53 % 16.09 %
 
(1) - Mississippi includes Central and Southern Mississippi Regions
(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
n/m - percentage changes greater than +/- 100% are considered not meaningful
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2010
($ in thousands)
(unaudited)
                             
 
Quarter Ended Nine Months Ended
AVERAGE BALANCES   9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009     9/30/2010     9/30/2009  
Securities AFS-taxable $ 1,654,335 $ 1,586,165 $ 1,514,029 $ 1,369,022 $ 1,377,318 $ 1,585,357 $ 1,425,514
Securities AFS-nontaxable 111,959 110,969 105,067 98,456 89,259 109,357 67,786
Securities HTM-taxable 143,124 162,691 179,076 202,235 191,934 161,499 188,193
Securities HTM-nontaxable   37,703     41,628     46,852     50,411     55,440     42,027     61,261  
Total securities   1,947,121     1,901,453     1,845,024     1,720,124     1,713,951     1,898,240     1,742,754  
Loans (including loans held for sale) 6,230,961 6,301,201 6,412,671 6,544,448 6,693,482 6,314,279 6,851,047
Fed funds sold and rev repos 8,418 7,478 10,438 10,609 12,821 8,771 16,582
Other earning assets   33,615     38,764     46,199     44,197     43,894     39,480     43,833  
Total earning assets   8,220,115     8,248,896     8,314,332     8,319,378     8,464,148     8,260,770     8,654,216  
Allowance for loan losses (102,528 ) (104,814 ) (106,200 ) (105,223 ) (102,545 ) (104,501 ) (102,357 )
Cash and due from banks 214,736 207,670 216,305 199,586 205,361 212,898 219,709
Other assets   885,600     898,749     910,401     855,714     871,477     898,159     833,456  
Total assets $ 9,217,923   $ 9,250,501   $ 9,334,838   $ 9,269,455   $ 9,438,441   $ 9,267,326   $ 9,605,024  
 
Interest-bearing demand deposits $ 1,363,377 $ 1,306,783 $ 1,270,827 $ 1,134,995 $ 1,148,537 $ 1,314,001 $ 1,132,994
Savings deposits 1,888,121 2,066,612 1,953,711 1,801,870 1,797,421 1,969,241 1,827,562
Time deposits less than $100,000 1,276,088 1,307,611 1,356,469 1,422,270 1,434,097 1,313,094 1,470,794
Time deposits of $100,000 or more   957,148     989,397     1,014,027     1,039,565     1,095,431     986,649     1,088,900  
Total interest-bearing deposits 5,484,734 5,670,403 5,595,034 5,398,700 5,475,486 5,582,985 5,520,250
Fed funds purchased and repos 522,523 495,904 600,826 579,616 644,012 539,464 635,799
Short-term borrowings 202,017 181,669 199,550 238,060 263,891 194,421 416,031
Long-term FHLB advances - 15,833 75,000 75,000 75,000 30,003 69,505
Subordinated notes 49,793 49,785 49,777 49,769 49,760 49,785 49,752
Junior subordinated debt securities   70,104     70,104     70,104     70,104     70,104     70,104     70,104  
Total interest-bearing liabilities 6,329,171 6,483,698 6,590,291 6,411,249 6,578,253 6,466,762 6,761,441
Noninterest-bearing deposits 1,629,122 1,536,153 1,535,209 1,533,588 1,529,381 1,567,172 1,518,496
Other liabilities   104,576     91,715     85,982     118,906     113,820     94,161     119,468  
Total liabilities 8,062,869 8,111,566 8,211,482 8,063,743 8,221,454 8,128,095 8,399,405
Preferred equity - - - 157,270 206,308 - 205,865
Common equity   1,155,054     1,138,935     1,123,356     1,048,442     1,010,679     1,139,231     999,754  
Total shareholders' equity   1,155,054     1,138,935     1,123,356     1,205,712     1,216,987     1,139,231     1,205,619  
Total liabilities and equity $ 9,217,923   $ 9,250,501   $ 9,334,838   $ 9,269,455   $ 9,438,441   $ 9,267,326   $ 9,605,024  
 
 
 
 
PERIOD END BALANCES   9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009  
Cash and due from banks $ 196,136 $ 186,365 $ 191,973 $ 213,519 $ 191,449
Fed funds sold and rev repos 6,655 5,713 11,599 6,374 8,551
Securities available for sale 1,968,624 1,786,710 1,706,565 1,684,396 1,528,625
Securities held to maturity 168,849 192,860 215,888 232,984 242,603
Loans held for sale 268,137 218,369 176,682 226,225 237,152
Loans 5,998,704 6,054,995 6,170,878 6,319,797 6,382,440
Allowance for loan losses   (94,458 )   (100,656 )   (101,643 )   (103,662 )   (103,016 )
Net Loans 5,904,246 5,954,339 6,069,235 6,216,135 6,279,424
Premises and equipment, net 143,393 143,536 145,113 147,488 148,656
Mortgage servicing rights 41,972 43,044 50,037 50,513 56,042
Goodwill 291,104 291,104 291,104 291,104 291,104
Identifiable intangible assets 17,181 18,062 18,944 19,825 20,819
Other assets   410,608     404,443     416,075     437,455     364,073  
Total assets $ 9,416,905   $ 9,244,545   $ 9,293,215   $ 9,526,018   $ 9,368,498  
 
Deposits:
Noninterest-bearing $ 1,709,311 $ 1,539,598 $ 1,511,080 $ 1,685,187 $ 1,493,424
Interest-bearing   5,316,025     5,599,796     5,635,973     5,503,278     5,377,011  
Total deposits 7,025,336 7,139,394 7,147,053 7,188,465 6,870,435
Fed funds purchased and repos 633,065 492,367 571,711 653,032 645,057
Short-term borrowings 318,457 208,136 132,784 253,957 315,105
Long-term FHLB advances - - 75,000 75,000 75,000
Subordinated notes 49,798 49,790 49,782 49,774 49,766
Junior subordinated debt securities 70,104 70,104 70,104 70,104 70,104
Other liabilities   161,353     142,374     118,252     125,626     121,670  
Total liabilities   8,258,113     8,102,165     8,164,686     8,415,958     8,147,137  
Preferred stock - - - - 206,461
Common stock 13,311 13,311 13,302 13,267 11,968
Capital surplus 254,288 253,133 250,365 244,864 145,352
Retained earnings 881,545 870,532 860,398 853,553 854,508

Accum other comprehensive income (loss), net of tax
  9,648     5,404     4,464     (1,624 )   3,072  
Total shareholders' equity   1,158,792     1,142,380     1,128,529     1,110,060     1,221,361  
Total liabilities and equity $ 9,416,905   $ 9,244,545   $ 9,293,215   $ 9,526,018   $ 9,368,498  
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2010
($ in thousands except per share data)
(unaudited)
                             
 
Quarter Ended Nine Months Ended
INCOME STATEMENTS   9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009     9/30/2010     9/30/2009  
Interest and fees on loans-FTE $ 83,374 $ 84,362 $ 84,127 $ 87,640 $ 89,672 $ 251,863 $ 273,706
Interest on securities-taxable 18,641 19,626 19,735 19,093 19,524 58,002 61,622
Interest on securities-tax exempt-FTE 2,080 2,151 2,180 2,183 2,172 6,411 6,046
Interest on fed funds sold and rev repos 9 7 8 12 16 24 54
Other interest income   332     366     383     377     381     1,081     1,037  
Total interest income-FTE   104,436     106,512     106,433     109,305     111,765     317,381     342,465  
Interest on deposits 11,609 12,785 13,904 16,513 18,403 38,298 62,373
Interest on fed funds pch and repos 294 260 226 215 282 780 918
Other interest expense   1,631     1,597     1,592     1,716     1,786     4,820     6,118  
Total interest expense   13,534     14,642     15,722     18,444     20,471     43,898     69,409  
Net interest income-FTE 90,902 91,870 90,711 90,861 91,294 273,483 273,056
Provision for loan losses   12,259     10,398     15,095     17,709     15,770     37,752     59,403  
Net interest income after provision-FTE   78,643     81,472     75,616     73,152     75,524     235,731     213,653  
Service charges on deposit accounts 14,493 14,220 12,977 14,118 14,157 41,690 39,969
Insurance commissions 7,746 6,884 6,837 6,391 7,894 21,467 22,688
Wealth management 5,199 5,558 5,355 5,438 5,589 16,112 16,641
Bank card and other fees 6,235 6,417 5,880 5,951 5,620 18,532 17,090
Mortgage banking, net 9,861 8,910 6,072 6,552 8,871 24,843 22,321
Other, net   441     1,103     879     1,814     994     2,423     3,802  
Nonint inc-excl sec gains, net 43,975 43,092 38,000 40,264 43,125 125,067 122,511
Security gains, net   4     1,855     369     19     1,014     2,228     5,448  
Total noninterest income   43,979     44,947     38,369     40,283     44,139     127,295     127,959  
Salaries and employee benefits 44,034 43,282 42,854 42,209 42,629 130,170 127,043
Services and fees 10,709 10,523 10,255 9,919 10,124 31,487 30,373
Net occupancy-premises 4,961 4,917 5,034 5,063 4,862 14,912 14,988
Equipment expense 4,356 4,247 4,303 4,084 4,104 12,906 12,378
Other expense   20,363     21,459     13,915     14,372     17,515     55,737     47,830  
Total noninterest expense   84,423     84,428     76,361     75,647     79,234     245,212     232,612  
Income before income taxes and tax eq adj 38,199 41,991 37,624 37,788 40,429 117,814 109,000
Tax equivalent adjustment   3,335     3,384     3,293     2,569     2,417     10,012     7,139  
Income before income taxes 34,864 38,607 34,331 35,219 38,012 107,802 101,861
Income taxes   9,004     12,446     10,876     10,742     12,502     32,326     33,291  
Net income   25,860     26,161     23,455     24,477     25,510     75,476     68,570  
 
Preferred stock dividends - - - 2,061 2,688 - 8,063
Accretion of preferred stock discount   -     -     -     8,539     452     -     1,335  
Net income available to common shareholders $ 25,860   $ 26,161   $ 23,455   $ 13,877   $ 22,370   $ 75,476   $ 59,172  
 
Per common share data
Earnings per share - basic $ 0.40   $ 0.41   $ 0.37   $ 0.23   $ 0.39   $ 1.18   $ 1.03  
 
Earnings per share - diluted $ 0.40   $ 0.41   $ 0.37   $ 0.23   $ 0.39   $ 1.18   $ 1.03  
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.69   $ 0.69  
 
Weighted average common shares outstanding
Basic   63,885,647     63,872,879     63,743,302     59,131,451     57,431,128     63,834,464     57,396,461  
 
Diluted   64,066,798     64,054,171     63,933,333     59,287,459     57,559,492     64,016,341     57,496,230  
 
Period end common shares outstanding   63,885,959     63,885,403     63,844,500     63,673,839     57,440,047     63,885,959     57,440,047  
 
 
OTHER FINANCIAL DATA
Return on common equity 8.88 % 9.21 % 8.47 % 5.25 % 8.78 % 8.86 % 7.91 %
Return on average tangible common equity 12.38 % 12.92 % 11.98 % 7.80 % 13.06 % 12.43 % 11.89 %
Return on equity 8.88 % 9.21 % 8.47 % 8.05 % 8.32 % 8.86 % 7.60 %
Return on assets 1.11 % 1.13 % 1.02 % 1.05 % 1.07 % 1.09 % 0.95 %
Interest margin - Yield - FTE 5.04 % 5.18 % 5.19 % 5.21 % 5.24 % 5.14 % 5.29 %
Interest margin - Cost 0.65 % 0.71 % 0.77 % 0.88 % 0.96 % 0.71 % 1.07 %
Net interest margin - FTE 4.39 % 4.47 % 4.42 % 4.33 % 4.28 % 4.43 % 4.22 %
Efficiency ratio 62.59 % 62.56 % 59.33 % 57.69 % 58.95 % 61.53 % 57.70 %
Full-time equivalent employees 2,501 2,527 2,506 2,524 2,550
 
 
COMMON STOCK PERFORMANCE
Market value-Close $ 21.74 $ 20.82 $ 24.43 $ 22.54 $ 19.05
Common book value $ 18.14 $ 17.88 $ 17.68 $ 17.43 $ 17.67
Tangible common book value $ 13.31 $ 13.04 $ 12.82 $ 12.55 $ 12.24
 
 
 
 
 
 
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2010
($ in thousands)
(unaudited)
                         
Quarter Ended
NONPERFORMING ASSETS   9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009  
Nonaccrual loans
Florida $ 65,759 $ 74,954 $ 79,687 $ 74,159 $ 72,063
Mississippi (1) 48,962 39,924 41,795 31,050 28,470
Tennessee (2) 9,207 9,778 12,673 12,749 11,481
Texas   35,388     35,222     31,354     23,204     26,490  
Total nonaccrual loans 159,316 159,878 165,509 141,162 138,504
Other real estate
Florida 31,665 31,814 40,145 45,927 34,030
Mississippi (1) 24,548 28,020 23,082 22,373 22,932
Tennessee (2) 16,456 12,493 9,769 10,105 9,809
Texas   12,053     19,073     18,180     11,690     4,918  
Total other real estate   84,722     91,400     91,176     90,095     71,689  
Total nonperforming assets $ 244,038   $ 251,278   $ 256,685   $ 231,257   $ 210,193  
 
LOANS PAST DUE OVER 90 DAYS
Loans held for investment $ 5,795   $ 6,057   $ 8,411   $ 8,901   $ 6,854  
 

Loans HFS-Guaranteed GNMA serviced loans (no obligation to repurchase)
$ 50,246   $ 49,712   $ 48,571   $ 46,661   $ 36,686  
 
 
Quarter Ended Nine Months Ended
ALLOWANCE FOR LOAN LOSSES   9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009     9/30/2010     9/30/2009  
Beginning Balance $ 100,656 $ 101,643 $ 103,662 $ 103,016 $ 101,751 $ 103,662 $ 94,922
Provision for loan losses 12,259 10,398 15,095 17,709 15,770 37,752 59,403
Charge-offs (21,942 ) (14,297 ) (19,775 ) (20,139 ) (18,687 ) (56,014 ) (60,572 )
Recoveries   3,485     2,912     2,661     3,076     4,182     9,058     9,263  
Net charge-offs   (18,457 )   (11,385 )   (17,114 )   (17,063 )   (14,505 )   (46,956 )   (51,309 )
Ending Balance $ 94,458   $ 100,656   $ 101,643   $ 103,662   $ 103,016   $ 94,458   $ 103,016  
 
PROVISION FOR LOAN LOSSES
Florida $ 4,520 $ 2,432 $ 5,501 $ 11,371 $ (3,295 ) $ 12,453 $ 36,353
Mississippi (1) 4,398 3,430 3,748 6,310 12,009 11,576 15,351
Tennessee (2) (172 ) 3,560 1,314 2,097 159 4,702 1,121
Texas   3,513     976     4,532     (2,069 )   6,897     9,021     6,578  
Total provision for loan losses $ 12,259   $ 10,398   $ 15,095   $ 17,709   $ 15,770   $ 37,752   $ 59,403  
 
NET CHARGE-OFFS
Florida $ 8,951 $ 5,880 $ 8,989 $ 8,174 $ 131 $ 23,820 $ 28,231
Mississippi (1) 3,879 3,885 6,777 5,448 9,629 14,541 16,351
Tennessee (2) 3,475 1,031 426 1,169 872 4,932 2,554
Texas   2,152     589     922     2,272     3,873     3,663     4,173  
Total net charge-offs $ 18,457   $ 11,385   $ 17,114   $ 17,063   $ 14,505   $ 46,956   $ 51,309  
 
CREDIT QUALITY RATIOS
Net charge offs/average loans 1.18 % 0.72 % 1.08 % 1.03 % 0.86 % 0.99 % 1.00 %
Provision for loan losses/average loans 0.78 % 0.66 % 0.95 % 1.07 % 0.93 % 0.80 % 1.16 %
Nonperforming loans/total loans (incl LHFS) 2.54 % 2.55 % 2.61 % 2.16 % 2.09 %
Nonperforming assets/total loans (incl LHFS) 3.89 % 4.01 % 4.04 % 3.53 % 3.18 %
Nonperforming assets/total loans (incl LHFS) +ORE 3.84 % 3.95 % 3.99 % 3.48 % 3.14 %
ALL/total loans (excl LHFS) 1.57 % 1.66 % 1.65 % 1.64 % 1.61 %
ALL-commercial/total commercial loans 1.97 % 2.10 % 2.10 % 2.10 % 2.08 %
ALL-consumer/total consumer and home mortgage loans 0.81 % 0.82 % 0.80 % 0.80 % 0.76 %
ALL/nonperforming loans 59.29 % 62.96 % 61.41 % 73.43 % 74.38 %

ALL/nonperforming loans - (excl impaired loans with no specific reserves)
140.94 % 148.86 % 131.36 % 150.13 % 117.93 %
 
CAPITAL RATIOS
Total equity/total assets 12.31 % 12.36 % 12.14 % 11.65 % 13.04 %
Common equity/total assets 12.31 % 12.36 % 12.14 % 11.65 % 10.83 %
Tangible common equity/tangible assets 9.34 % 9.32 % 9.11 % 8.67 % 7.76 %
Tangible common equity/risk-weighted assets 12.78 % 12.51 % 12.15 % 11.55 % 10.15 %
Tier 1 leverage ratio 10.26 % 10.07 % 9.81 % 9.74 % 10.70 %
Tier 1 common risk-based capital ratio 12.72 % 12.51 % 12.14 % 11.63 % 10.15 %
Tier 1 risk-based capital ratio 13.75 % 13.53 % 13.15 % 12.61 % 14.11 %
Total risk-based capital ratio 15.75 % 15.53 % 15.15 % 14.58 % 16.09 %
 
 
(1) - Mississippi includes Central and Southern Mississippi Regions
(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
 
 
 
 
 
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2010

($ in thousands)

(unaudited)
 

Note 1 - Securities Available for Sale and Held to Maturity
 

The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):
 
    9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies $ 14 $ 16 $ 18 $ 20 $ 21
Issued by U.S. Government sponsored agencies 149,588 124,566 68,574 47,917 24,992
Obligations of states and political subdivisions 148,772 125,234 123,292 117,508 151,427
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 13,273 13,390 11,986 12,192 9,590
Issued by FNMA and FHLMC 243,220 142,900 51,292 49,279 7,229
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,366,373 1,333,725 1,387,752 1,382,556 1,258,779
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 41,359 40,789 57,485 68,735 70,359
Corporate debt securities   6,025   6,090   6,166   6,189   6,228
Total securities available for sale $ 1,968,624 $ 1,786,710 $ 1,706,565 $ 1,684,396 $ 1,528,625
 
SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions $ 61,139 $ 64,517 $ 69,975 $ 74,643 $ 78,522
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 6,462 6,591 6,801 7,044 7,269
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 98,217 118,708 136,054 148,226 153,728
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   3,031   3,044   3,058   3,071   3,084
Total securities held to maturity $ 168,849 $ 192,860 $ 215,888 $ 232,984 $ 242,603
 

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 91% of the portfolio in U.S. Government agency-backed obligations and other AAA rated securities.  None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of membership in the Federal Home Loan Bank of Dallas, Federal Reserve Bank and Depository Trust and Clearing Corporation, Trustmark does not hold any equity investment in government sponsored entities.
 
 

Note 2 – Loan Composition
 
LOANS BY TYPE       9/30/2010         6/30/2010         3/31/2010         12/31/2009         9/30/2009  
Loans secured by real estate:
Construction, land development and other land loans $ 615,554 $ 737,015 $ 803,942 $ 830,069 $ 872,367
Secured by 1-4 family residential properties 1,672,199 1,630,353 1,637,121 1,650,743 1,637,322
Secured by nonfarm, nonresidential properties 1,531,953 1,463,657 1,466,296 1,467,307 1,472,147
Other real estate secured 203,931 189,118 194,641 197,421 209,957
Commercial and industrial loans 1,016,292 1,040,152 1,041,580 1,059,164 1,101,967
Consumer loans 444,927 492,262 542,488 606,315 661,075
Other loans   513,848     502,438     484,810     508,778     427,605  
Loans 5,998,704

 
6,054,995 6,170,878 6,319,797 6,382,440
Allowance for loan losses   (94,458 )   (100,656 )   (101,643 )   (103,662 )   (103,016 )
Net Loans $ 5,904,246  

 
$ 5,954,339   $ 6,069,235   $ 6,216,135   $ 6,279,424  
 
 
 
Note 2 – Loan Composition (continued)
 
      September 30, 2010
LOAN COMPOSITION BY REGION Total     Florida    

Mississippi

(Central and

Southern

Regions)
   

Tennessee

(Memphis, TN

and Northern

MS Regions)
    Texas
Loans secured by real estate:
Construction, land development and other land loans $ 615,554 $ 145,907 $ 258,054 $ 44,090 $ 167,503
Secured by 1-4 family residential properties 1,672,199 73,738 1,397,624 161,451 39,386
Secured by nonfarm, nonresidential properties 1,531,953 184,992 821,502 208,986 316,473
Other real estate secured 203,931 12,223 159,059 9,102 23,547
Commercial and industrial loans 1,016,292 17,512 733,089 78,949 186,742
Consumer loans 444,927 1,636 410,578 25,175 7,538
Other loans   513,848   28,194   432,396   17,805   35,453
Loans $ 5,998,704 $ 464,202 $ 4,212,302 $ 545,558 $ 776,642
 
 
 
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION
Lots $ 85,993 $ 48,700 $ 24,075 $ 2,638 $ 10,580
Development 169,767 24,060 61,000 7,978 76,729
Unimproved land 227,186 61,676 104,034 25,646 35,830
1-4 family construction 99,193 7,864 63,322 4,726 23,281
Other construction   33,415   3,607   5,623   3,102   21,083
Construction, land development and other land loans $ 615,554 $ 145,907 $ 258,054 $ 44,090 $ 167,503
 
 
 
 
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION
Income producing:
Retail $ 174,038 $ 40,237 $ 73,008 $ 26,760 $ 34,033
Office 170,355 59,339 80,703 15,100 15,213
Nursing homes/assisted living 123,731 - 113,713 4,643 5,375
Hotel/motel 66,109 11,362 30,128 10,876 13,743
Industrial 32,704 9,830 4,879 1,176 16,819
Health care 13,294 - 12,156 62 1,076
Convenience stores 11,288 262 5,783 2,519 2,724
Other   172,711   13,153   74,436   11,071   74,051
Total income producing loans 764,230 134,183 394,806 72,207 163,034
 
Owner-occupied:
Office 126,041 17,824 64,925 18,765 24,527
Churches 120,535 2,291 55,495 58,983 3,766
Industrial warehouses 96,010 2,468 58,158 409 34,975
Health care 80,918 11,138 54,803 7,210 7,767
Convenience stores 65,514 1,287 38,876 2,884 22,467
Retail 33,843 5,837 17,764 1,569 8,673
Restaurants 32,779 828 24,017 6,627 1,307
Auto dealerships 21,308 615 15,883 1,559 3,251
Other   190,775   8,521   96,775   38,773   46,706
Total owner-occupied loans 767,723 50,809 426,696 136,779 153,439
         
Loans secured by nonfarm, nonresidential properties $ 1,531,953 $ 184,992 $ 821,502 $ 208,986 $ 316,473
 
 
 
Note 2 – Loan Composition (continued)
           
September 30, 2010
 
Classified (3)
FLORIDA CREDIT QUALITY Total Loans

Criticized

Loans (1)

Special

Mention (2)
Accruing

Nonimpaired

Nonaccrual

Impaired

Nonaccrual (4)
Construction, land development and other land loans:
Lots $ 48,700 $ 19,616 $ 93 $ 9,271 $ 4,830 $ 5,422
Development 24,060 13,862 - 3,573 328 9,961
Unimproved land 61,676 38,876 21,771 5,447 1,417 10,241
1-4 family construction 7,864 5,660 - 1,474 - 4,186
Other construction   3,607   -   -     -   -   -
Construction, land development and other land loans 145,907 78,014 21,864 19,765 6,575 29,810
Commercial, commercial real estate and consumer   318,295   76,766   15,623     31,769   10,173   19,201
 
Total Florida loans $ 464,202 $ 154,780 $ 37,487   $ 51,534 $ 16,748 $ 49,011
 
 
FLORIDA CREDIT QUALITY (continued)

Total Loans

Less Impaired

Loans

Loan Loss

Reserves

Loan Loss

Reserve % of

Nonimpaired

Loans
Construction, land development and other land loans:
Lots $ 43,278 $ 4,654 10.75 %
Development 14,099 1,546 10.97 %
Unimproved land 51,435 6,158 11.97 %
1-4 family construction 3,678 435 11.83 %
Other construction   3,607   185 5.13 %
Construction, land development and other land loans 116,097 12,978 11.18 %
Commercial, commercial real estate and consumer   299,094   6,787 2.27 %
 
Total Florida loans $ 415,191 $ 19,765 4.76 %
 

(1) Criticized loans equal all special mention and classified loans.

(2) Special mention loans exhibit potential credit weaknesses that, if not resolved, may ultimately result in a more severe classification.

(3) Classified loans include those loans identified by management as exhibiting well-defined credit weaknesses that may jeopardize repayment in full of the debt.

(4) All nonaccrual loans over $500 thousand are individually assessed for impairment.  Impaired loans have been determined to be collateral dependent and assessed using a fair value approach.  Fair value estimates begin with appraised values, normally from recently received and reviewed appraisals.  Appraised values are adjusted down for costs associated with asset disposal.  When a loan is deemed to be impaired, the full difference between book value and the most likely estimate of the asset’s net realizable value is charged off.
                 
 
LOAN COMPOSITION -FLORIDA 9/30/2010 6/30/2010 3/31/2010 12/31/2009 9/30/2009
Loans secured by real estate:
Construction, land development and other land loans $ 145,907 $ 173,932 $ 183,670 $ 198,906 $ 211,974
Secured by 1-4 family residential properties 73,738 77,680 81,297 87,282 92,088
Secured by nonfarm, nonresidential properties 184,992 178,297 179,637 180,267 182,548
Other real estate secured 12,223 8,062 5,195 5,388 12,891
Commercial and industrial loans 17,512 25,254 22,100 19,869 19,762
Consumer loans 1,636 1,756 2,077 2,287 2,276
Other loans   28,194   29,354   29,480   29,655   29,880
Loans $ 464,202 $ 494,335 $ 503,456 $ 523,654 $ 551,419
 
 
 
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS - FLORIDA
Lots $ 48,700 $ 54,406 $ 57,436 $ 61,725 $ 63,645
Development 24,060 24,632 27,381 27,227 28,376
Unimproved land 61,676 69,003 71,271 76,762 83,437
1-4 family construction 7,864 9,148 10,247 10,929 13,237
Other construction   3,607   16,743   17,335   22,263   23,279
Construction, land development and other land loans $ 145,907 $ 173,932 $ 183,670 $ 198,906 $ 211,974
 
 
 
 

Note 3 – Stockholders’ Equity

Common Stock Offering

On December 7, 2009, Trustmark completed a public offering of 6,216,216 shares of its common stock, including 810,810 shares issued pursuant to the exercise of the underwriters’ over-allotment option, at a price of $18.50 per share. Trustmark received net proceeds of approximately $109.3 million after deducting underwriting discounts, commissions and estimated offering expenses. Proceeds from this offering were used in the redemption of preferred stock discussed below.

Repurchase of Preferred Stock

On November 21, 2008, Trustmark issued 215,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, (Senior Preferred Stock) to the U.S. Treasury (Treasury) in a private placement transaction as part of the Troubled Assets Relief Program Capital Purchase Program (TARP CPP), a voluntary initiative for healthy U.S. financial institutions. As part of its participation in the TARP CPP, Trustmark also issued to the Treasury a ten-year warrant (the Warrant) to purchase up to 1,647,931 shares of Trustmark’s common stock, at an initial exercise price of $19.57 per share, subject to customary anti-dilution adjustments.

On December 9, 2009, Trustmark completed the repurchase of its 215,000 shares of Senior Preferred Stock from the Treasury at a purchase price of $215.0 million plus a final accrued dividend of $716.7 thousand. The repurchase of the Senior Preferred Stock resulted in a one-time, non-cash charge of approximately $8.2 million to net income available to common shareholders in Trustmark’s fourth quarter financial statements for the unaccreted discount recorded at the date of issuance of the Senior Preferred Stock. In addition, on December 30, 2009, Trustmark repurchased in full from the Treasury, the Warrant to purchase 1,647,931 shares of Trustmark’s common stock, which was issued to the Treasury pursuant to the TARP CPP. The purchase price paid by Trustmark to the Treasury for the Warrant was its fair value of $10.0 million.
 
 
 
 
 

Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities
 

The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:
 
    Quarter Ended     Nine Months Ended
9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009 9/30/2010     9/30/2009
Securities – Taxable 4.11 % 4.50 % 4.73 % 4.82 % 4.94 % 4.44 % 5.11 %
Securities – Nontaxable 5.51 % 5.65 % 5.82 % 5.82 % 5.96 % 5.66 % 6.26 %
Securities – Total 4.22 % 4.59 % 4.82 % 4.91 % 5.02 % 4.54 % 5.19 %
Loans 5.31 % 5.37 % 5.32 % 5.31 % 5.32 % 5.33 % 5.34 %
FF Sold & Rev Repo 0.42 % 0.38 % 0.31 % 0.45 % 0.50 % 0.37 % 0.44 %
Other Earning Assets 3.92 % 3.79 % 3.36 % 3.38 % 3.44 % 3.66 % 3.16 %
Total Earning Assets 5.04 % 5.18 % 5.19 % 5.21 % 5.24 % 5.14 % 5.29 %
 
Interest-bearing Deposits 0.84 % 0.90 % 1.01 % 1.21 % 1.33 % 0.92 % 1.51 %
FF Pch & Repo 0.22 % 0.21 % 0.15 % 0.15 % 0.17 % 0.19 % 0.19 %
Borrowings 2.01 % 2.02 % 1.64 % 1.57 % 1.54 % 1.87 % 1.35 %
Total Interest-bearing Liabilities 0.85 % 0.91 % 0.97 % 1.14 % 1.23 % 0.91 % 1.37 %
 
Net interest margin 4.39 % 4.47 % 4.42 % 4.33 % 4.28 % 4.43 % 4.22 %
 

During the third quarter of 2010, the net interest margin decreased 8 basis points to 4.39%, from 4.47% for the second quarter of 2010. The decrease is primarily a result of the downward repricing of fixed-rate assets, mostly within Trustmark's investment securities portfolio, which was partially offset by declines in interest-bearing deposit costs.
 
 
 
 

Note 5 – Other Noninterest Expense
 

Other noninterest expense consisted of the following ($ in thousands):
 
    Quarter Ended     Nine Months Ended
9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009 9/30/2010     9/30/2009
FDIC assessment expense $ 3,037 $ 3,035 $ 3,147 $ 2,865 $ 2,913 $ 9,219 $ 12,943
ORE/Foreclosure expense 8,728 9,278 3,061 3,626 5,871 21,067 9,234
Other expense   8,598   9,146   7,707   7,881   8,731   25,451   25,653
Total other expense $ 20,363 $ 21,459 $ 13,915 $ 14,372 $ 17,515 $ 55,737 $ 47,830
 
 
 
 

Note 6 – Mortgage Banking
 

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and exchange-traded option contracts, to achieve a fair value return that offsets the changes in fair value of MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting.  Changes in the fair value of these exchange-traded derivative instruments are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of MSR.  The MSR fair value represents the effect of present value decay and the effect of changes in interest rates.  Ineffectiveness of hedging the MSR fair value is measured by comparing the total hedge cost to the changes in the fair value of the MSR asset attributable to interest rate changes.  The impact of this strategy resulted in a net positive ineffectiveness of $2.9 million and $2.1 million for the quarters ended September 30, 2010 and 2009, respectively.  For the nine months ended September 30, 2010 and 2009, the impact was a net positive ineffectiveness of $7.6 million and a net negative ineffectiveness of $0.4 million, respectively.  The accompanying table shows that the MSR value decreased $3.1 million for the quarter ended September 30, 2010 primarily due to a decline in mortgage rates.  More than offsetting the MSR change is a $6.0 million increase in the value of derivative instruments primarily due to a decline in the 10-year Treasury note yield.
 

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
 
    Quarter Ended     Nine Months Ended
  9/30/2010         6/30/2010         3/31/2010         12/31/2009         9/30/2009     9/30/2010         9/30/2009  
Mortgage servicing income, net $ 3,406 $ 3,495 $ 3,449 $ 3,763 $ 4,092 $ 10,350 $ 12,122
Change in fair value-MSR from runoff (2,255 ) (1,374 ) (1,170 ) (1,219 ) (1,608 ) (4,799 ) (7,348 )
Gain on sales of loans, net 3,911 1,897 3,755 3,738 4,081 9,563 17,017
Other, net   1,919     1,193     (1,002 )   (139 )   179     2,110     961  
Mortgage banking income before hedge ineffectiveness   6,981     5,211     5,032     6,143     6,744     17,224     22,752  
Change in fair value-MSR from market changes (3,115 ) (8,631 ) (3,067 ) 2,710 (9,344 ) (14,813 ) 3,897
Change in fair value of derivatives   5,995     12,330     4,107     (2,301 )   11,471     22,432     (4,328 )
Net positive (negative) hedge ineffectiveness   2,880     3,699     1,040     409     2,127     7,619     (431 )
Mortgage banking, net $ 9,861   $ 8,910   $ 6,072   $ 6,552   $ 8,871   $ 24,843   $ 22,321  
 

During the first quarter of 2010, Trustmark completed the final settlement of the sale of approximately $920.9 million in mortgages serviced for others, which reduced Trustmark’s MSR by approximately $8.5 million.   The effect of this transaction did not have a material impact on Trustmark's results of operations.
 
 
 
 

Note 7 – Non-GAAP Financial Measures
 

In addition to capital ratios defined by generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy.  Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.
 

Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations.  These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations.
 

These calculations are intended to complement the capital ratios defined by GAAP and banking regulators.  Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios.  Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.
 
  Quarter Ended     Nine Months Ended
  9/30/2010         6/30/2010         3/31/2010         12/31/2009         9/30/2009     9/30/2010         9/30/2009  
TANGIBLE COMMON EQUITY    
AVERAGE BALANCES
Total shareholders' equity $ 1,155,054 $ 1,138,935 $ 1,123,356 $ 1,205,712 $ 1,216,987 $ 1,139,231 $ 1,205,619
Less: Preferred stock   -     -     -     (157,270 )   (206,308 )   -     (205,865 )
Total average common equity 1,155,054 1,138,935 1,123,356 1,048,442 1,010,679 1,139,231 999,754
Less: Goodwill (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 )
Identifiable intangible assets   (17,716 )   (18,596 )   (19,484 )   (20,426 )   (21,430 )   (18,594 )   (22,424 )
Total average tangible common equity $ 846,234   $ 829,235   $ 812,768   $ 736,912   $ 698,145   $ 829,533   $ 686,226  
 
PERIOD END BALANCES
Total shareholders' equity $ 1,158,792 $ 1,142,380 $ 1,128,529 $ 1,110,060 $ 1,221,361
Less: Preferred stock   -     -     -     -     (206,461 )
Total common equity 1,158,792 1,142,380 1,128,529 1,110,060 1,014,900
Less: Goodwill (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 )
Identifiable intangible assets   (17,181 )   (18,062 )   (18,944 )   (19,825 )   (20,819 )
Total tangible common equity

(a)
$ 850,507   $ 833,214   $ 818,481   $ 799,131   $ 702,977  
 
TANGIBLE ASSETS
Total assets $ 9,416,905 $ 9,244,545 $ 9,293,215 $ 9,526,018 $ 9,368,498
Less: Goodwill (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 )
Identifiable intangible assets   (17,181 )   (18,062 )   (18,944 )   (19,825 )   (20,819 )
Total tangible assets (b) $ 9,108,620   $ 8,935,379   $ 8,983,167   $ 9,215,089   $ 9,056,575  
 
Risk-weighted assets (c) $ 6,653,479   $ 6,658,897   $ 6,737,084   $ 6,918,802   $ 6,923,907  
 
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION    
Net income available to common shareholders $ 25,860 $ 26,161 $ 23,455 $ 13,877 $ 22,370 $ 75,476 $ 59,172
Plus: Intangible amortization net of tax   545     545     545     614     619     1,635     1,855  
Net income adjusted for intangible amortization $ 26,405   $ 26,706   $ 24,000   $ 14,491   $ 22,989   $ 77,111   $ 61,027  
 
Period end common shares outstanding (d)   63,885,959     63,885,403     63,844,500     63,673,839     57,440,047  
 
TANGIBLE COMMON EQUITY MEASUREMENTS    
Return on average tangible common equity 1 12.38 % 12.92 % 11.98 % 7.80 % 13.06 % 12.43 % 11.89 %
Tangible common equity/tangible assets (a)/(b) 9.34 % 9.32 % 9.11 % 8.67 % 7.76 %
Tangible common equity/risk-weighted assets (a)/(c) 12.78 % 12.51 % 12.15 % 11.55 % 10.15 %
Tangible common book value (a)/(d)*1,000 $ 13.31 $ 13.04 $ 12.82 $ 12.55 $ 12.24
 
TIER 1 COMMON RISK-BASED CAPITAL    
Total shareholders' equity $ 1,158,792 $ 1,142,380 $ 1,128,529 $ 1,110,060 $ 1,221,361
Eliminate qualifying AOCI (9,648 ) (5,404 ) (4,464 ) 1,624 (3,072 )
Qualifying tier 1 capital 68,000 68,000 68,000 68,000 68,000
Disallowed goodwill (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 )
Adj to goodwill allowed for deferred taxes 9,863 9,510 9,158 8,805 8,453
Other disallowed intangibles (17,181 ) (18,062 ) (18,944 ) (19,825 ) (20,819 )
Disallowed servicing intangible   (4,197 )   (4,304 )   (5,004 )   (5,051 )   (5,604 )
Total tier 1 capital $ 914,525 $ 901,016 $ 886,171 $ 872,509 $ 977,215
Less: Qualifying tier 1 capital (68,000 ) (68,000 ) (68,000 ) (68,000 ) (68,000 )
Preferred stock   -     -     -     -     (206,461 )
Total tier 1 common capital (e) $ 846,525   $ 833,016   $ 818,171   $ 804,509   $ 702,754  
 
Tier 1 common risk-based capital ratio (e)/(c) 12.72 % 12.51 % 12.14 % 11.63 % 10.15 %
 
1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity
 
 
 
 

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