Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $25.2 million in the fourth quarter of 2010, which represented basic earnings per common share of $0.39. For the year ended December 31, 2010, Trustmark’s net income available to common shareholders totaled $100.6 million, which represented basic earnings per common share of $1.58, an increase of 25.4% compared to figures one year earlier. Trustmark’s performance during 2010 produced a return on average tangible common equity of 12.31% and a return on average assets of 1.08%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share. The dividend is payable March 15, 2011, to shareholders of record on March 1, 2011.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6583615&lang=en

Richard G. Hickson, Chairman, stated, “Trustmark continued to produce outstanding financial results during the fourth quarter. The Board of Directors and I are delighted with the election of Jerry Host as Chief Executive Officer of Trustmark, which became effective January 1. We are confident that Trustmark, under Jerry’s leadership, will continue to meet the financial needs of our customers and achieve financial results that will enhance shareholder value.”

Credit Quality
  • Nonperforming loans declined 10.3% while nonperforming assets fell 5.9%
  • Allowance for loan losses represented 188.11% of nonperforming loans (excluding impaired loans)
  • Florida construction and land development exposure declined 33.6% in 2010

During the fourth quarter, nonperforming loans decreased $16.4 million, or 10.3%, relative to the prior quarter to total $142.9 million, or 2.30% of total loans. Foreclosed real estate increased $2.0 million from the prior quarter to total $86.7 million. Collectively, nonperforming assets decreased $14.4 million, or 5.9%, to total $229.6 million at December 31, 2010.

Net charge-offs during the fourth quarter totaled $12.7 million, or 0.82% of average loans, and the provision for loan losses totaled $11.8 million. During the fourth quarter, Trustmark experienced a steady and continued reduction in criticized loans, including a $15.3 million decline in its Florida market, relative to the prior quarter. This reduction in criticized loans, coupled with lower migration of new criticized and nonperforming loans, resulted in provisioning being less than net charge-offs during the fourth quarter.

Allocation of Trustmark’s $93.5 million allowance for loan losses represented 1.94% of commercial loans and 0.78% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.54% as of December 31, 2010. The allowance for loan losses represented 188.11% of nonperforming loans, excluding impaired loans.

Trustmark continued to make significant progress in the resolution of its construction and land development portfolio in Florida. During the last 12 months, this portfolio was reduced by 33.6% to total $132.0 million. At December 31, 2010, the associated reserve for loan losses on this portfolio totaled $16.4 million, or 12.41%. Managing credit risks resulting from current economic and real estate market conditions continues to be a primary focus for Trustmark.

Capital Strength
  • Tangible common equity to tangible assets totaled 9.11%
  • Total risk-based capital increased to 15.77%

The fundamental strengths of Trustmark’s diversified financial services business were reflected in pre-tax, pre-provision earnings of $46.7 million in the fourth quarter of 2010. Consistent profitability and sound balance sheet management continued to be reflected in Trustmark’s solid capital position. At December 31, 2010, tangible common equity totaled $842.1 million and represented 9.11% of tangible assets. Total risk-based capital increased to 15.77%, 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 increased to $8.4 billion
  • Net interest income (FTE) expanded to $92.0 million, resulting in a 4.36% net interest margin

Average loans during the fourth quarter remained stable at $6.2 billion while average investment securities increased to $2.1 billion. As a result, average earning assets expanded $144.4 million relative to the prior quarter to total $8.4 billion.

Over the course of the year, the success of Trustmark’s continued efforts to reduce exposure to construction and land development lending as well as the decision to discontinue indirect auto financing were reflected in loan totals. At December 31, 2010, total loans held for investment were $6.1 billion, a decrease of $259.6 million relative to figures one year earlier. During this period, construction and land development loans declined $246.8 million while the indirect auto portfolio declined $192.2 million. Loans in Trustmark’s other business lines expanded $179.4 million during 2010.

Average deposits totaled $7.0 billion during the fourth quarter, a decrease of $97.9 million relative to the prior quarter. During this period, average interest bearing deposits declined $174.9 million while average noninterest-bearing deposits increased $77.0 million. Lower deposit costs continued to reflect Trustmark’s strong liquidity while disciplined loan pricing and required minimum loan rates sustained loan yields. As a result, net interest income (FTE) totaled $92.0 million, resulting in a net interest margin of 4.36% during the fourth quarter.

Noninterest Income
  • Noninterest income totaled $38.6 million
  • Fee income represented 29.6% of total revenue

During the fourth quarter, mortgage production exceeded $480 million, a 6.9% increase relative to the prior quarter. Mortgage banking income totaled $4.5 million during the fourth quarter, reflecting stable mortgage servicing income, solid secondary marketing gains, and successful hedging initiatives. Trustmark has not experienced 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.

Service charges on deposit accounts totaled $13.5 million, a decline of $1.0 million from the prior quarter. This decline was principally due to a reduction in NSF fees of approximately $872 thousand. Insurance revenue totaled $6.2 million, reflecting a seasonal decline from the prior quarter as well as the consequences of a soft insurance market, while bank card and other fees expanded to $6.5 million. Wealth management income totaled $5.8 million, an increase of 10.8% relative to the prior quarter. During the course of the year, Trustmark’s wealth management assets expanded approximately 4% to $8.8 billion at December 31, 2010.

Other noninterest income included a previously disclosed $2.0 million merger transaction termination fee, approximately half of which was offset by direct transaction expense.

Noninterest Expense
  • Foreclosure expense declined 62.1% from the prior quarter to $3.3 million
  • Noninterest expense remained well-controlled

Trustmark continued to diligently manage expenses. During the fourth quarter, noninterest expense declined $4.0 million, or 4.7% from the prior quarter, to total $80.4 million, principally due to a $5.4 million reduction in foreclosure expense. Trustmark’s commitment to prudent expense management was reflected in an efficiency ratio of 61.65% during the fourth quarter of 2010.

ADDITIONAL INFORMATION

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 26 at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-6789, passcode 446676, 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, February 3, 2011 in archived format at the same web address or by calling (877) 344-7529, passcode 446676.

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
December 31, 2010
($ in thousands)
(unaudited)
 
                Linked Quarter     Year over Year

QUARTERLY AVERAGE BALANCES
12/31/2010 9/30/2010 12/31/2009

$ Change
    % Change

$ Change
    % Change
Securities AFS-taxable $ 1,817,996 $ 1,654,335 $ 1,369,022 $ 163,661 9.9 % $ 448,974 32.8 %
Securities AFS-nontaxable 140,139 111,959 98,456 28,180 25.2 % 41,683 42.3 %
Securities HTM-taxable 121,278 143,124 202,235 (21,846 ) -15.3 % (80,957 ) -40.0 %
Securities HTM-nontaxable   33,138     37,703     50,411     (4,565 ) -12.1 %   (17,273 ) -34.3 %
Total securities   2,112,551     1,947,121     1,720,124     165,430   8.5 %   392,427   22.8 %
Loans (including loans held for sale) 6,199,875 6,230,961 6,544,448 (31,086 ) -0.5 % (344,573 ) -5.3 %
Fed funds sold and rev repos 10,766 8,418 10,609 2,348 27.9 % 157 1.5 %
Other earning assets   41,359     33,615     44,197     7,744   23.0 %   (2,838 ) -6.4 %
Total earning assets   8,364,551     8,220,115     8,319,378     144,436   1.8 %   45,173   0.5 %
Allowance for loan losses (96,559 ) (102,528 ) (105,223 ) 5,969 -5.8 % 8,664 -8.2 %
Cash and due from banks 207,874 214,736 199,586 (6,862 ) -3.2 % 8,288 4.2 %
Other assets   888,666     885,600     855,714     3,066   0.3 %   32,952   3.9 %
Total assets $ 9,364,532   $ 9,217,923   $ 9,269,455   $ 146,609   1.6 % $ 95,077   1.0 %
 
Interest-bearing demand deposits $ 1,347,252 $ 1,363,377 $ 1,134,995 $ (16,125 ) -1.2 % $ 212,257 18.7 %
Savings deposits 1,794,352 1,888,121 1,801,870 (93,769 ) -5.0 % (7,518 ) -0.4 %
Time deposits less than $100,000 1,235,529 1,276,088 1,422,270 (40,559 ) -3.2 % (186,741 ) -13.1 %
Time deposits of $100,000 or more   932,744     957,148     1,039,565     (24,404 ) -2.5 %   (106,821 ) -10.3 %
Total interest-bearing deposits 5,309,877 5,484,734 5,398,700 (174,857 ) -3.2 % (88,823 ) -1.6 %
Fed funds purchased and repos 701,978 522,523 579,616 179,455 34.3 % 122,362 21.1 %
Short-term borrowings 254,442 202,017 238,060 52,425 26.0 % 16,382 6.9 %
Long-term FHLB advances - - 75,000 - n/m (75,000 ) -100.0 %
Subordinated notes 49,801 49,793 49,769 8 0.0 % 32 0.1 %
Junior subordinated debt securities   64,546     70,104     70,104     (5,558 ) -7.9 %   (5,558 ) -7.9 %
Total interest-bearing liabilities 6,380,644 6,329,171 6,411,249 51,473 0.8 % (30,605 ) -0.5 %
Noninterest-bearing deposits 1,706,089 1,629,122 1,533,588 76,967 4.7 % 172,501 11.2 %
Other liabilities   117,741     104,576     118,906     13,165   12.6 %   (1,165 ) -1.0 %
Total liabilities 8,204,474 8,062,869 8,063,743 141,605 1.8 % 140,731 1.7 %
Preferred equity - - 157,270 - n/m (157,270 ) -100.0 %
Common equity   1,160,058     1,155,054     1,048,442     5,004   0.4 %   111,616   10.6 %
Total shareholders' equity   1,160,058     1,155,054     1,205,712     5,004   0.4 %   (45,654 ) -3.8 %
Total liabilities and equity $ 9,364,532   $ 9,217,923   $ 9,269,455   $ 146,609   1.6 % $ 95,077   1.0 %
 
 
Linked Quarter Year over Year

PERIOD END BALANCES
12/31/2010 9/30/2010 12/31/2009

$ Change
% Change

$ Change
% Change
Cash and due from banks $ 161,544 $ 196,136 $ 213,519 $ (34,592 ) -17.6 % $ (51,975 ) -24.3 %
Fed funds sold and rev repos 11,773 6,655 6,374 5,118 76.9 % 5,399 84.7 %
Securities available for sale 2,177,249 1,968,624 1,684,396 208,625 10.6 % 492,853 29.3 %
Securities held to maturity 140,847 168,849 232,984 (28,002 ) -16.6 % (92,137 ) -39.5 %
Loans held for sale 153,044 268,137 226,225 (115,093 ) -42.9 % (73,181 ) -32.3 %
Loans 6,060,242 5,998,704 6,319,797 61,538 1.0 % (259,555 ) -4.1 %
Allowance for loan losses   (93,510 )   (94,458 )   (103,662 )   948   -1.0 %   10,152   -9.8 %
Net Loans 5,966,732 5,904,246 6,216,135 62,486 1.1 % (249,403 ) -4.0 %
Premises and equipment, net 142,289 143,393 147,488 (1,104 ) -0.8 % (5,199 ) -3.5 %
Mortgage servicing rights 51,151 41,972 50,513 9,179 21.9 % 638 1.3 %
Goodwill 291,104 291,104 291,104 - 0.0 % - 0.0 %
Identifiable intangible assets 16,306 17,181 19,825 (875 ) -5.1 % (3,519 ) -17.8 %
Other real estate 86,704 84,722 90,095 1,982 2.3 % (3,391 ) -3.8 %
Other assets   355,159     325,886     347,360     29,273   9.0 %   7,799   2.2 %
Total assets $ 9,553,902   $ 9,416,905   $ 9,526,018   $ 136,997   1.5 % $ 27,884   0.3 %
 
Deposits:
Noninterest-bearing $ 1,636,625 $ 1,709,311 $ 1,685,187 $ (72,686 ) -4.3 % $ (48,562 ) -2.9 %
Interest-bearing   5,407,942     5,316,025     5,503,278     91,917   1.7 %   (95,336 ) -1.7 %
Total deposits 7,044,567 7,025,336 7,188,465 19,231 0.3 % (143,898 ) -2.0 %
Fed funds purchased and repos 700,138 633,065 653,032 67,073 10.6 % 47,106 7.2 %
Short-term borrowings 425,343 318,457 253,957 106,886 33.6 % 171,386 67.5 %
Long-term FHLB advances - - 75,000 - n/m (75,000 ) n/m
Subordinated notes 49,806 49,798 49,774 8 0.0 % 32 0.1 %
Junior subordinated debt securities 61,856 70,104 70,104 (8,248 ) -11.8 % (8,248 ) -11.8 %
Other liabilities   122,708     161,353     125,626     (38,645 ) -24.0 %   (2,918 ) -2.3 %
Total liabilities   8,404,418     8,258,113     8,415,958     146,305   1.8 %   (11,540 ) -0.1 %
Common stock 13,318 13,311 13,267 7 0.1 % 51 0.4 %
Capital surplus 256,675 254,288 244,864 2,387 0.9 % 11,811 4.8 %
Retained earnings 890,917 881,545 853,553 9,372 1.1 % 37,364 4.4 %

Accum other comprehensive (loss) income, net of tax
  (11,426 )   9,648     (1,624 )   (21,074 ) n/m   (9,802 ) n/m
Total shareholders' equity   1,149,484     1,158,792     1,110,060     (9,308 ) -0.8 %   39,424   3.6 %
Total liabilities and equity $ 9,553,902   $ 9,416,905   $ 9,526,018   $ 136,997   1.5 % $ 27,884   0.3 %
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 

See Notes to Consolidated Financials
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2010
($ in thousands except per share data)
(unaudited)
 
    Quarter Ended     Linked Quarter     Year over Year

INCOME STATEMENTS
12/31/2010     9/30/2010     12/31/2009

$ Change
    % Change

$ Change
    % Change
Interest and fees on loans-FTE $ 82,664 $ 83,374 $ 87,640 $ (710 ) -0.9 % $ (4,976 ) -5.7 %
Interest on securities-taxable 19,076 18,641 19,093 435 2.3 % (17 ) -0.1 %
Interest on securities-tax exempt-FTE 2,169 2,080 2,183 89 4.3 % (14 ) -0.6 %
Interest on fed funds sold and rev repos 12 9 12 3 33.3 % - 0.0 %
Other interest income   328     332     377     (4 ) -1.2 %   (49 ) -13.0 %
Total interest income-FTE   104,249     104,436     109,305     (187 ) -0.2 %   (5,056 ) -4.6 %
Interest on deposits 10,359 11,609 16,513 (1,250 ) -10.8 % (6,154 ) -37.3 %
Interest on fed funds pch and repos 403 294 215 109 37.1 % 188 87.4 %
Other interest expense   1,535     1,631     1,716     (96 ) -5.9 %   (181 ) -10.5 %
Total interest expense   12,297     13,534     18,444     (1,237 ) -9.1 %   (6,147 ) -33.3 %
Net interest income-FTE 91,952 90,902 90,861 1,050 1.2 % 1,091 1.2 %
Provision for loan losses   11,794     12,259     17,709     (465 ) -3.8 %   (5,915 ) -33.4 %
Net interest income after provision-FTE   80,158     78,643     73,152     1,515   1.9 %   7,006   9.6 %
Service charges on deposit accounts 13,493 14,493 14,118 (1,000 ) -6.9 % (625 ) -4.4 %
Insurance commissions 6,224 7,746 6,391 (1,522 ) -19.6 % (167 ) -2.6 %
Wealth management 5,760 5,199 5,438 561 10.8 % 322 5.9 %
Bank card and other fees 6,482 6,235 5,951 247 4.0 % 531 8.9 %
Mortgage banking, net 4,502 9,861 6,552 (5,359 ) -54.3 % (2,050 ) -31.3 %
Other, net   2,070     441     1,814     1,629   n/m   256   14.1 %
Nonint inc-excl sec gains, net 38,531 43,975 40,264 (5,444 ) -12.4 % (1,733 ) -4.3 %
Security gains, net   101     4     19     97   n/m   82   n/m
Total noninterest income   38,632     43,979     40,283     (5,347 ) -12.2 %   (1,651 ) -4.1 %
Salaries and employee benefits 44,412 44,034 42,209 378 0.9 % 2,203 5.2 %
Services and fees 10,462 10,709 9,919 (247 ) -2.3 % 543 5.5 %
Net occupancy-premises 4,896 4,961 5,063 (65 ) -1.3 % (167 ) -3.3 %
Equipment expense 4,229 4,356 4,084 (127 ) -2.9 % 145 3.6 %
FDIC assessment expense 2,942 3,037 2,865 (95 ) -3.1 % 77 2.7 %
ORE/Foreclosure expense 3,310 8,728 3,626 (5,418 ) -62.1 % (316 ) -8.7 %
Other expense   10,186     8,598     7,881     1,588   18.5 %   2,305   29.2 %
Total noninterest expense   80,437     84,423     75,647     (3,986 ) -4.7 %   4,790   6.3 %
Income before income taxes and tax eq adj 38,353 38,199 37,788 154 0.4 % 565 1.5 %
Tax equivalent adjustment   3,400     3,335     2,569     65   1.9 %   831   32.3 %
Income before income taxes 34,953 34,864 35,219 89 0.3 % (266 ) -0.8 %
Income taxes   9,793     9,004     10,742     789   8.8 %   (949 ) -8.8 %
Net income   25,160     25,860     24,477     (700 ) -2.7 %   683   2.8 %
 
Preferred stock dividends - - 2,061 - n/m (2,061 ) -100.0 %
Accretion of preferred stock discount   -     -     8,539     -   n/m   (8,539 ) -100.0 %
Net income available to common shareholders $ 25,160   $ 25,860   $ 13,877   $ (700 ) -2.7 % $ 11,283   81.3 %
 
 
Per common share data
Earnings per share - basic $ 0.39   $ 0.40   $ 0.23   $ (0.01 ) -2.5 % $ 0.16   69.6 %
 
Earnings per share - diluted $ 0.39   $ 0.40   $ 0.23   $ (0.01 ) -2.5 % $ 0.16   69.6 %
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ -   0.0 % $ -   0.0 %
 
Weighted average common shares outstanding
Basic   63,892,362     63,885,647     59,131,451  
 
Diluted   64,105,064     64,066,798     59,287,459  
 
Period end common shares outstanding   63,917,591     63,885,959     63,673,839  
 

OTHER FINANCIAL DATA
Return on common equity 8.60 % 8.88 % 5.25 %
Return on average tangible common equity 11.96 % 12.38 % 7.80 %
Return on equity 8.60 % 8.88 % 8.05 %
Return on assets 1.07 % 1.11 % 1.05 %
Interest margin - Yield - FTE 4.94 % 5.04 % 5.21 %
Interest margin - Cost 0.58 % 0.65 % 0.88 %
Net interest margin - FTE 4.36 % 4.39 % 4.33 %
Efficiency ratio 61.65 % 62.59 % 57.69 %
Full-time equivalent employees 2,490 2,501 2,524
 

COMMON STOCK PERFORMANCE
Market value-Close $ 24.84 $ 21.74 $ 22.54
Common book value $ 17.98 $ 18.14 $ 17.43
Tangible common book value $ 13.17 $ 13.31 $ 12.55
 
n/m - percentage changes greater than +/- 100% are considered not meaningful
 

See Notes to Consolidated Financials
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2010
($ in thousands)
(unaudited)
 
    Quarter Ended     Linked Quarter     Year over Year

NONPERFORMING ASSETS
12/31/2010     9/30/2010     12/31/2009

$ Change
    % Change

$ Change
    % Change
Nonaccrual loans
Florida $ 53,773 $ 65,759 $ 74,159 $ (11,986 ) -18.2 % $ (20,386 ) -27.5 %
Mississippi (1) 39,803 48,962 31,050 (9,159 ) -18.7 % 8,753 28.2 %
Tennessee (2) 14,703 9,207 12,749 5,496 59.7 % 1,954 15.3 %
Texas   34,644     35,388     23,204     (744 ) -2.1 %   11,440   49.3 %
Total nonaccrual loans 142,923 159,316 141,162 (16,393 ) -10.3 % 1,761 1.2 %
Other real estate
Florida 32,370 31,665 45,927 705 2.2 % (13,557 ) -29.5 %
Mississippi (1) 24,181 24,548 22,373 (367 ) -1.5 % 1,808 8.1 %
Tennessee (2) 16,407 16,456 10,105 (49 ) -0.3 % 6,302 62.4 %
Texas   13,746     12,053     11,690     1,693   14.0 %   2,056   17.6 %
Total other real estate   86,704     84,722     90,095     1,982   2.3 %   (3,391 ) -3.8 %
Total nonperforming assets $ 229,627   $ 244,038   $ 231,257   $ (14,411 ) -5.9 % $ (1,630 ) -0.7 %
 

LOANS PAST DUE OVER 90 DAYS
Loans held for investment $ 3,608   $ 5,795   $ 8,901   $ (2,187 ) -37.7 % $ (5,293 ) -59.5 %
 

Loans HFS-Guaranteed GNMA serviced loans (no obligation to repurchase)
$ 15,777   $ 50,246   $ 46,661   $ (34,469 ) -68.6 % $ (30,884 ) -66.2 %
 
Quarter Ended Linked Quarter Year over Year

ALLOWANCE FOR LOAN LOSSES
12/31/2010 9/30/2010 12/31/2009

$ Change
% Change

$ Change
% Change
Beginning Balance $ 94,458 $ 100,656 $ 103,016 $ (6,198 )

-6.2
% $ (8,558 ) -8.3 %
Provision for loan losses 11,794 12,259 17,709 (465 ) -3.8 % (5,915 ) -33.4 %
Charge-offs (15,883 ) (21,942 ) (20,139 ) 6,059 -27.6 % 4,256 -21.1 %
Recoveries   3,141     3,485     3,076     (344 ) -9.9 %   65   2.1 %
Net charge-offs   (12,742 )   (18,457 )   (17,063 )   5,715   -31.0 %   4,321   -25.3 %
Ending Balance $ 93,510   $ 94,458   $ 103,662   $ (948 ) -1.0 % $ (10,152 ) -9.8 %
 

PROVISION FOR LOAN LOSSES
Florida $ 7,473 $ 4,520 $ 11,371 $ 2,953 65.3 % $ (3,898 ) -34.3 %
Mississippi (1) 2,673 4,398 6,310 (1,725 ) -39.2 % (3,637 ) -57.6 %
Tennessee (2) 910 (172 ) 2,097 1,082 n/m (1,187 ) -56.6 %
Texas   738     3,513     (2,069 )   (2,775 ) -79.0 %   2,807   n/m
Total provision for loan losses $ 11,794   $ 12,259   $ 17,709   $ (465 ) -3.8 % $ (5,915 ) -33.4 %
 

NET CHARGE-OFFS
Florida $ 4,830 $ 8,951 $ 8,174 $ (4,121 ) -46.0 % $ (3,344 ) -40.9 %
Mississippi (1) 4,422 3,879 5,448 543 14.0 % (1,026 ) -18.8 %
Tennessee (2) 1,646 3,475 1,169 (1,829 ) -52.6 % 477 40.8 %
Texas   1,844     2,152     2,272     (308 ) -14.3 %   (428 ) -18.8 %
Total net charge-offs $ 12,742   $ 18,457   $ 17,063   $ (5,715 ) -31.0 % $ (4,321 ) -25.3 %
 

CREDIT QUALITY RATIOS
Net charge offs/average loans 0.82 % 1.18 % 1.03 %
Provision for loan losses/average loans 0.75 % 0.78 % 1.07 %
Nonperforming loans/total loans (incl LHFS) 2.30 % 2.54 % 2.16 %
Nonperforming assets/total loans (incl LHFS) 3.70 % 3.89 % 3.53 %
Nonperforming assets/total loans (incl LHFS) +ORE 3.64 % 3.84 % 3.48 %
ALL/total loans (excl LHFS) 1.54 % 1.57 % 1.64 %
ALL-commercial/total commercial loans 1.94 % 1.97 % 2.10 %
ALL-consumer/total consumer and home mortgage loans 0.78 % 0.81 % 0.80 %
ALL/nonperforming loans 65.43 % 59.29 % 73.43 %

ALL/nonperforming loans - (excl impaired loans)
188.11 % 140.94 % 150.13 %
 

CAPITAL RATIOS
Total equity/total assets 12.03 % 12.31 % 11.65 %
Common equity/total assets 12.03 % 12.31 % 11.65 %
Tangible common equity/tangible assets 9.11 % 9.34 % 8.67 %
Tangible common equity/risk-weighted assets 12.62 % 12.78 % 11.55 %
Tier 1 leverage ratio 10.14 % 10.26 % 9.74 %
Tier 1 common risk-based capital ratio 12.87 % 12.72 % 11.63 %
Tier 1 risk-based capital ratio 13.77 % 13.75 % 12.61 %
Total risk-based capital ratio 15.77 % 15.75 % 14.58 %
 
(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
 

See Notes to Consolidated Financials
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2010
($ in thousands)
(unaudited)
 
    Quarter Ended     Year Ended

AVERAGE BALANCES
12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009 12/31/2010     12/31/2009
Securities AFS-taxable $ 1,817,996 $ 1,654,335 $ 1,586,165 $ 1,514,029 $ 1,369,022 $ 1,643,995 $ 1,411,275
Securities AFS-nontaxable 140,139 111,959 110,969 105,067 98,456 117,116 75,516
Securities HTM-taxable 121,278 143,124 162,691 179,076 202,235 151,361 191,732
Securities HTM-nontaxable   33,138     37,703     41,628     46,852     50,411     39,787     58,526  
Total securities   2,112,551     1,947,121     1,901,453     1,845,024     1,720,124     1,952,259     1,737,049  
Loans (including loans held for sale) 6,199,875 6,230,961 6,301,201 6,412,671 6,544,448 6,285,443 6,773,768
Fed funds sold and rev repos 10,766 8,418 7,478 10,438 10,609 9,274 15,077
Other earning assets   41,359     33,615     38,764     46,199     44,197     39,954     43,925  
Total earning assets   8,364,551     8,220,115     8,248,896     8,314,332     8,319,378     8,286,930     8,569,819  
Allowance for loan losses (96,559 ) (102,528 ) (104,814 ) (106,200 ) (105,223 ) (102,499 ) (103,080 )
Cash and due from banks 207,874 214,736 207,670 216,305 199,586 211,632 214,637
Other assets   888,666     885,600     898,749     910,401     855,714     895,764     839,066  
Total assets $ 9,364,532   $ 9,217,923   $ 9,250,501   $ 9,334,838   $ 9,269,455   $ 9,291,827   $ 9,520,442  
 
Interest-bearing demand deposits $ 1,347,252 $ 1,363,377 $ 1,306,783 $ 1,270,827 $ 1,134,995 $ 1,322,382 $ 1,133,498
Savings deposits 1,794,352 1,888,121 2,066,612 1,953,711 1,801,870 1,925,159 1,821,086
Time deposits less than $100,000 1,235,529 1,276,088 1,307,611 1,356,469 1,422,270 1,293,544 1,458,563
Time deposits of $100,000 or more   932,744     957,148     989,397     1,014,027     1,039,565     973,062     1,076,465  
Total interest-bearing deposits 5,309,877 5,484,734 5,670,403 5,595,034 5,398,700 5,514,147 5,489,612
Fed funds purchased and repos 701,978 522,523 495,904 600,826 579,616 580,427 621,638
Short-term borrowings 254,442 202,017 181,669 199,550 238,060 209,550 371,173
Long-term FHLB advances - - 15,833 75,000 75,000 22,441 70,890
Subordinated notes 49,801 49,793 49,785 49,777 49,769 49,789 49,756
Junior subordinated debt securities   64,546     70,104     70,104     70,104     70,104     68,703     70,104  
Total interest-bearing liabilities 6,380,644 6,329,171 6,483,698 6,590,291 6,411,249 6,445,057 6,673,173
Noninterest-bearing deposits 1,706,089 1,629,122 1,536,153 1,535,209 1,533,588 1,602,187 1,522,300
Other liabilities   117,741     104,576     91,715     85,982     118,906     100,102     119,327  
Total liabilities 8,204,474 8,062,869 8,111,566 8,211,482 8,063,743 8,147,346 8,314,800
Preferred equity - - - - 157,270 - 193,616
Common equity   1,160,058     1,155,054     1,138,935     1,123,356     1,048,442     1,144,481     1,012,026  
Total shareholders' equity   1,160,058     1,155,054     1,138,935     1,123,356     1,205,712     1,144,481     1,205,642  
Total liabilities and equity $ 9,364,532   $ 9,217,923   $ 9,250,501   $ 9,334,838   $ 9,269,455   $ 9,291,827   $ 9,520,442  
 
 

PERIOD END BALANCES
12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009
Cash and due from banks $ 161,544 $ 196,136 $ 186,365 $ 191,973 $ 213,519
Fed funds sold and rev repos 11,773 6,655 5,713 11,599 6,374
Securities available for sale 2,177,249 1,968,624 1,786,710 1,706,565 1,684,396
Securities held to maturity 140,847 168,849 192,860 215,888 232,984
Loans held for sale 153,044 268,137 218,369 176,682 226,225
Loans 6,060,242 5,998,704 6,054,995 6,170,878 6,319,797
Allowance for loan losses   (93,510 )   (94,458 )   (100,656 )   (101,643 )   (103,662 )
Net Loans 5,966,732 5,904,246 5,954,339 6,069,235 6,216,135
Premises and equipment, net 142,289 143,393 143,536 145,113 147,488
Mortgage servicing rights 51,151 41,972 43,044 50,037 50,513
Goodwill 291,104 291,104 291,104 291,104 291,104
Identifiable intangible assets 16,306 17,181 18,062 18,944 19,825
Other real estate 86,704 84,722 91,400 91,176 90,095
Other assets   355,159     325,886     313,043     324,899     347,360  
Total assets $ 9,553,902   $ 9,416,905   $ 9,244,545   $ 9,293,215   $ 9,526,018  
 
Deposits:
Noninterest-bearing $ 1,636,625 $ 1,709,311 $ 1,539,598 $ 1,511,080 $ 1,685,187
Interest-bearing   5,407,942     5,316,025     5,599,796     5,635,973     5,503,278  
Total deposits 7,044,567 7,025,336 7,139,394 7,147,053 7,188,465
Fed funds purchased and repos 700,138 633,065 492,367 571,711 653,032
Short-term borrowings 425,343 318,457 208,136 132,784 253,957
Long-term FHLB advances - - - 75,000 75,000
Subordinated notes 49,806 49,798 49,790 49,782 49,774
Junior subordinated debt securities 61,856 70,104 70,104 70,104 70,104
Other liabilities   122,708     161,353     142,374     118,252     125,626  
Total liabilities   8,404,418     8,258,113     8,102,165     8,164,686     8,415,958  
Common stock 13,318 13,311 13,311 13,302 13,267
Capital surplus 256,675 254,288 253,133 250,365 244,864
Retained earnings 890,917 881,545 870,532 860,398 853,553

Accum other comprehensive (loss) income, net of tax
  (11,426 )   9,648     5,404     4,464     (1,624 )
Total shareholders' equity   1,149,484     1,158,792     1,142,380     1,128,529     1,110,060  
Total liabilities and equity $ 9,553,902   $ 9,416,905   $ 9,244,545   $ 9,293,215   $ 9,526,018  
 

See Notes to Consolidated Financials
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2010
($ in thousands except per share data)
(unaudited)
 
    Quarter Ended     Year Ended

INCOME STATEMENTS
12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009 12/31/2010     12/31/2009
Interest and fees on loans-FTE $ 82,664 $ 83,374 $ 84,362 $ 84,127 $ 87,640 $ 334,527 $ 361,346
Interest on securities-taxable 19,076 18,641 19,626 19,735 19,093 77,078 80,715
Interest on securities-tax exempt-FTE 2,169 2,080 2,151 2,180 2,183 8,580 8,229
Interest on fed funds sold and rev repos 12 9 7 8 12 36 66
Other interest income   328     332     366     383     377     1,409     1,414  
Total interest income-FTE   104,249     104,436     106,512     106,433     109,305     421,630     451,770  
Interest on deposits 10,359 11,609 12,785 13,904 16,513 48,657 78,886
Interest on fed funds pch and repos 403 294 260 226 215 1,183 1,133
Other interest expense   1,535     1,631     1,597     1,592     1,716     6,355     7,834  
Total interest expense   12,297     13,534     14,642     15,722     18,444     56,195     87,853  
Net interest income-FTE 91,952 90,902 91,870 90,711 90,861 365,435 363,917
Provision for loan losses   11,794     12,259     10,398     15,095     17,709     49,546     77,112  
Net interest income after provision-FTE   80,158     78,643     81,472     75,616     73,152     315,889     286,805  
Service charges on deposit accounts 13,493 14,493 14,220 12,977 14,118 55,183 54,087
Insurance commissions 6,224 7,746 6,884 6,837 6,391 27,691 29,079
Wealth management 5,760 5,199 5,558 5,355 5,438 21,872 22,079
Bank card and other fees 6,482 6,235 6,417 5,880 5,951 25,014 23,041
Mortgage banking, net 4,502 9,861 8,910 6,072 6,552 29,345 28,873
Other, net   2,070     441     1,103     879     1,814     4,493     5,616  
Nonint inc-excl sec gains, net 38,531 43,975 43,092 38,000 40,264 163,598 162,775
Security gains, net   101     4     1,855     369     19     2,329     5,467  
Total noninterest income   38,632     43,979     44,947     38,369     40,283     165,927     168,242  
Salaries and employee benefits 44,412 44,034 43,282 42,854 42,209 174,582 169,252
Services and fees 10,462 10,709 10,523 10,255 9,919 41,949 40,292
Net occupancy-premises 4,896 4,961 4,917 5,034 5,063 19,808 20,051
Equipment expense 4,229 4,356 4,247 4,303 4,084 17,135 16,462
FDIC assessment expense 2,942 3,037 3,035 3,147 2,865 12,161 15,808
ORE/Foreclosure expense 3,310 8,728 9,278 3,061 3,626 24,377 12,860
Other expense   10,186     8,598     9,146     7,707     7,881     35,637     33,534  
Total noninterest expense   80,437     84,423     84,428     76,361     75,647     325,649     308,259  
Income before income taxes and tax eq adj 38,353 38,199 41,991 37,624 37,788 156,167 146,788
Tax equivalent adjustment   3,400     3,335     3,384     3,293     2,569     13,412     9,708  
Income before income taxes 34,953 34,864 38,607 34,331 35,219 142,755 137,080
Income taxes   9,793     9,004     12,446     10,876     10,742     42,119     44,033  
Net income   25,160     25,860     26,161     23,455     24,477     100,636     93,047  
 
Preferred stock dividends - - - - 2,061 - 10,124
Accretion of preferred stock discount   -     -     -     -     8,539     -     9,874  
Net income available to common shareholders $ 25,160   $ 25,860   $ 26,161   $ 23,455   $ 13,877   $ 100,636   $ 73,049  
 
Per common share data
Earnings per share - basic $ 0.39   $ 0.40   $ 0.41   $ 0.37   $ 0.23   $ 1.58   $ 1.26  
 
Earnings per share - diluted $ 0.39   $ 0.40   $ 0.41   $ 0.37   $ 0.23   $ 1.57   $ 1.26  
 
Dividends per share $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.23   $ 0.92   $ 0.92  
 
Weighted average common shares outstanding
Basic   63,892,362     63,885,647     63,872,879     63,743,302     59,131,451     63,849,058     57,833,774  
 
Diluted   64,105,064     64,066,798     64,054,171     63,933,333     59,287,459     64,039,389     57,936,433  
 
Period end common shares outstanding   63,917,591     63,885,959     63,885,403     63,844,500     63,673,839     63,917,591     63,673,839  
 
 

OTHER FINANCIAL DATA
Return on common equity 8.60 % 8.88 % 9.21 % 8.47 % 5.25 % 8.79 % 7.22 %
Return on average tangible common equity 11.96 % 12.38 % 12.92 % 11.98 % 7.80 % 12.31 % 10.80 %
Return on equity 8.60 % 8.88 % 9.21 % 8.47 % 8.05 % 8.79 % 7.72 %
Return on assets 1.07 % 1.11 % 1.13 % 1.02 % 1.05 % 1.08 % 0.98 %
Interest margin - Yield - FTE 4.94 % 5.04 % 5.18 % 5.19 % 5.21 % 5.09 % 5.27 %
Interest margin - Cost 0.58 % 0.65 % 0.71 % 0.77 % 0.88 % 0.68 % 1.03 %
Net interest margin - FTE 4.36 % 4.39 % 4.47 % 4.42 % 4.33 % 4.41 % 4.25 %
Efficiency ratio 61.65 % 62.59 % 62.56 % 59.33 % 57.69 % 61.56 % 57.70 %
Full-time equivalent employees 2,490 2,501 2,527 2,506 2,524
 
 

COMMON STOCK PERFORMANCE
Market value-Close $ 24.84 $ 21.74 $ 20.82 $ 24.43 $ 22.54
Common book value $ 17.98 $ 18.14 $ 17.88 $ 17.68 $ 17.43
Tangible common book value $ 13.17 $ 13.31 $ 13.04 $ 12.82 $ 12.55
 

See Notes to Consolidated Financials
 
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2010
($ in thousands)
(unaudited)
 
    Quarter Ended        

NONPERFORMING ASSETS
12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009
Nonaccrual loans
Florida $ 53,773 $ 65,759 $ 74,954 $ 79,687 $ 74,159
Mississippi (1) 39,803 48,962 39,924 41,795 31,050
Tennessee (2) 14,703 9,207 9,778 12,673 12,749
Texas   34,644     35,388     35,222     31,354     23,204  
Total nonaccrual loans 142,923 159,316 159,878 165,509 141,162
Other real estate
Florida 32,370 31,665 31,814 40,145 45,927
Mississippi (1) 24,181 24,548 28,020 23,082 22,373
Tennessee (2) 16,407 16,456 12,493 9,769 10,105
Texas   13,746     12,053     19,073     18,180     11,690  
Total other real estate   86,704     84,722     91,400     91,176     90,095  
Total nonperforming assets $ 229,627   $ 244,038   $ 251,278   $ 256,685   $ 231,257  
 

LOANS PAST DUE OVER 90 DAYS
Loans held for investment $ 3,608   $ 5,795   $ 6,057   $ 8,411   $ 8,901  
 

Loans HFS-Guaranteed GNMA serviced loans (no obligation to repurchase)
$ 15,777   $ 50,246   $ 49,712   $ 48,571   $ 46,661  
 
 
Quarter Ended Year Ended

ALLOWANCE FOR LOAN LOSSES
12/31/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 12/31/2010 12/31/2009
Beginning Balance $ 94,458 $ 100,656 $ 101,643 $ 103,662 $ 103,016 $ 103,662 $ 94,922
Provision for loan losses 11,794 12,259 10,398 15,095 17,709 49,546 77,112
Charge-offs (15,883 ) (21,942 ) (14,297 ) (19,775 ) (20,139 ) (71,897 ) (80,711 )
Recoveries   3,141     3,485     2,912     2,661     3,076     12,199     12,339  
Net charge-offs   (12,742 )   (18,457 )   (11,385 )   (17,114 )   (17,063 )   (59,698 )   (68,372 )
Ending Balance $ 93,510   $ 94,458   $ 100,656   $ 101,643   $ 103,662   $ 93,510   $ 103,662  
 

PROVISION FOR LOAN LOSSES
Florida $ 7,473 $ 4,520 $ 2,432 $ 5,501 $ 11,371 $ 19,926 $ 47,724
Mississippi (1) 2,673 4,398 3,430 3,748 6,310 14,249 21,661
Tennessee (2) 910 (172 ) 3,560 1,314 2,097 5,612 3,218
Texas   738     3,513     976     4,532     (2,069 )   9,759     4,509  
Total provision for loan losses $ 11,794   $ 12,259   $ 10,398   $ 15,095   $ 17,709   $ 49,546   $ 77,112  
 

NET CHARGE-OFFS
Florida $ 4,830 $ 8,951 $ 5,880 $ 8,989 $ 8,174 $ 28,650 $ 36,405
Mississippi (1) 4,422 3,879 3,885 6,777 5,448 18,963 21,799
Tennessee (2) 1,646 3,475 1,031 426 1,169 6,578 3,723
Texas   1,844     2,152     589     922     2,272     5,507     6,445  
Total net charge-offs $ 12,742   $ 18,457   $ 11,385   $ 17,114   $ 17,063   $ 59,698   $ 68,372  
 

CREDIT QUALITY RATIOS
Net charge offs/average loans 0.82 % 1.18 % 0.72 % 1.08 % 1.03 % 0.95 % 1.01 %
Provision for loan losses/average loans 0.75 % 0.78 % 0.66 % 0.95 % 1.07 % 0.79 % 1.14 %
Nonperforming loans/total loans (incl LHFS) 2.30 % 2.54 % 2.55 % 2.61 % 2.16 %
Nonperforming assets/total loans (incl LHFS) 3.70 % 3.89 % 4.01 % 4.04 % 3.53 %
Nonperforming assets/total loans (incl LHFS) +ORE 3.64 % 3.84 % 3.95 % 3.99 % 3.48 %
ALL/total loans (excl LHFS) 1.54 % 1.57 % 1.66 % 1.65 % 1.64 %
ALL-commercial/total commercial loans 1.94 % 1.97 % 2.10 % 2.10 % 2.10 %
ALL-consumer/total consumer and home mortgage loans 0.78 % 0.81 % 0.82 % 0.80 % 0.80 %
ALL/nonperforming loans 65.43 % 59.29 % 62.96 % 61.41 % 73.43 %

ALL/nonperforming loans - (excl impaired loans)
188.11 % 140.94 % 148.86 % 131.36 % 150.13 %
 

CAPITAL RATIOS
Total equity/total assets 12.03 % 12.31 % 12.36 % 12.14 % 11.65 %
Common equity/total assets 12.03 % 12.31 % 12.36 % 12.14 % 11.65 %
Tangible common equity/tangible assets 9.11 % 9.34 % 9.32 % 9.11 % 8.67 %
Tangible common equity/risk-weighted assets 12.62 % 12.78 % 12.51 % 12.15 % 11.55 %
Tier 1 leverage ratio 10.14 % 10.26 % 10.07 % 9.81 % 9.74 %
Tier 1 common risk-based capital ratio 12.87 % 12.72 % 12.51 % 12.14 % 11.63 %
Tier 1 risk-based capital ratio 13.77 % 13.75 % 13.53 % 13.15 % 12.61 %
Total risk-based capital ratio 15.77 % 15.75 % 15.53 % 15.15 % 14.58 %
 
(1) - Mississippi includes Central and Southern Mississippi Regions
(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
 

See Notes to Consolidated Financials
 

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 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):
 
    12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009

SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies $ 12 $ 14 $ 16 $ 18 $ 20
Issued by U.S. Government sponsored agencies 122,023 149,588 124,566 68,574 47,917
Obligations of states and political subdivisions 159,637 148,772 125,234 123,292 117,508
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 12,442 13,273 13,390 11,986 12,192
Issued by FNMA and FHLMC 426,504 243,220 142,900 51,292 49,279
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 1,400,816 1,366,373 1,333,725 1,387,752 1,382,556
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 55,815 41,359 40,789 57,485 68,735
Corporate debt securities   -   6,025   6,090   6,166   6,189
Total securities available for sale $ 2,177,249 $ 1,968,624 $ 1,786,710 $ 1,706,565 $ 1,684,396
 

SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions $ 53,246 $ 61,139 $ 64,517 $ 69,975 $ 74,643
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA 6,058 6,462 6,591 6,801 7,044
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA 78,526 98,217 118,708 136,054 148,226
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA   3,017   3,031   3,044   3,058   3,071
Total securities held to maturity $ 140,847 $ 168,849 $ 192,860 $ 215,888 $ 232,984
 

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
    12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009
Loans secured by real estate:
Construction, land development and other land loans $ 583,316 $ 615,554 $ 737,015 $ 803,942 $ 830,069
Secured by 1-4 family residential properties 1,732,056 1,672,199 1,630,353 1,637,121 1,650,743
Secured by nonfarm, nonresidential properties 1,498,108 1,531,953 1,463,657 1,466,296 1,467,307
Other real estate secured 231,963 203,931 189,118 194,641 197,421
Commercial and industrial loans 1,068,369 1,016,292 1,040,152 1,041,580 1,059,164
Consumer loans 402,165 444,927 492,262 542,488 606,315
Other loans   544,265     513,848     502,438     484,810     508,778  
Loans 6,060,242 5,998,704 6,054,995 6,170,878 6,319,797
Allowance for loan losses   (93,510 )   (94,458 )   (100,656 )   (101,643 )   (103,662 )
Net Loans $ 5,966,732   $ 5,904,246   $ 5,954,339   $ 6,069,235   $ 6,216,135  
 
Note 2 – Loan Composition (continued)
 
    December 31, 2010

LOAN COMPOSITION BY REGION
Total     Florida    

Mississippi(Central andSouthernRegions)
   

Tennessee(Memphis, TNand NorthernMS Regions)
    Texas
Loans secured by real estate:
Construction, land development and other land loans $ 583,316 $ 132,021 $ 246,036 $ 43,902 $ 161,357
Secured by 1-4 family residential properties 1,732,056 72,114 1,471,570 156,210 32,162
Secured by nonfarm, nonresidential properties 1,498,108 183,250 800,096 199,127 315,635
Other real estate secured 231,963 14,038 171,036 8,864 38,025
Commercial and industrial loans 1,068,369 16,053 772,104 81,743 198,469
Consumer loans 402,165 1,487 369,129 24,818 6,731
Other loans   544,265   25,488   466,016   18,538   34,223
Loans $ 6,060,242 $ 444,451 $ 4,295,987 $ 533,202 $ 786,602
 
 

CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION
Lots $ 83,183 $ 46,907 $ 22,764 $ 1,955 $ 11,557
Development 156,860 21,144 56,717 7,420 71,579
Unimproved land 212,417 57,811 94,586 24,094 35,926
1-4 family construction 89,232 2,277 60,875 5,019 21,061
Other construction   41,624   3,882   11,094   5,414   21,234
Construction, land development and other land loans $ 583,316 $ 132,021 $ 246,036 $ 43,902 $ 161,357
 
 

LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION
Income producing:
Retail $ 173,601 $ 48,945 $ 69,985 $ 25,096 $ 29,575
Office 159,603 48,885 79,015 13,769 17,934
Nursing homes/assisted living 122,440 - 112,501 4,564 5,375
Hotel/motel 68,124 13,084 29,849 11,098 14,093
Industrial 36,273 9,355 5,132 1,246 20,540
Health care 13,505 - 12,377 59 1,069
Convenience stores 12,343 456 6,736 2,476 2,675
Other   163,453   13,050   67,199   12,819   70,385
Total income producing loans 749,342 133,775 382,794 71,127 161,646
 
Owner-occupied:
Office 123,688 18,296 63,318 18,255 23,819
Churches 117,552 2,182 54,153 55,744 5,473
Industrial warehouses 94,574 2,444 57,326 400 34,404
Health care 80,649 11,051 54,918 7,080 7,600
Convenience stores 61,913 1,277 35,271 2,855 22,510
Retail 36,556 5,732 22,688 1,521 6,615
Restaurants 30,537 800 24,053 3,994 1,690
Auto dealerships 20,875 606 15,530 1,516 3,223
Other   182,422   7,087   90,045   36,635   48,655
Total owner-occupied loans 748,766 49,475 417,302 128,000 153,989
         
Loans secured by nonfarm, nonresidential properties $ 1,498,108 $ 183,250 $ 800,096 $ 199,127 $ 315,635
 
Note 2 – Loan Composition (continued)
 
    December 31, 2010
           

 

Classified (3)

FLORIDA CREDIT QUALITY

Total Loans

CriticizedLoans (1)

Special Mention(2)
Accruing    

NonimpairedNonaccrual
   

ImpairedNonaccrual (4)
Construction, land development and other land loans:
Lots $ 46,907 $ 15,964 $ 671 $ 10,037 $ 3,233 $ 2,023
Development 21,144 11,152 - 3,753 99 7,300
Unimproved land 57,811 37,098 21,676 2,164 779 12,479
1-4 family construction 2,277 1,081 - - - 1,081
Other construction   3,882   302   -     302   -   -
Construction, land development and other land loans 132,021 65,597 22,347 16,256 4,111 22,883
Commercial, commercial real estate and consumer   312,430   73,928   12,522     34,627   7,652   19,127
 
Total Florida loans $ 444,451 $ 139,525 $ 34,869   $ 50,883 $ 11,763 $ 42,010
 
 

FLORIDA LOAN LOSS RESERVES BY LOAN TYPE
Total Loans

Loan LossReserves

Loan LossReserve % ofTotal Loans
Construction, land development and other land loans:
Lots $ 46,907 $ 4,192 8.94 %
Development 21,144 4,272 20.20 %
Unimproved land 57,811 7,629 13.20 %
1-4 family construction 2,277 32 1.41 %
Other construction   3,882   259 6.67 %
Construction, land development and other land loans 132,021 16,384 12.41 %
Commercial, commercial real estate and consumer   312,430   7,276 2.33 %
 
Total Florida loans $ 444,451 $ 23,660 5.32 %
 
(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. At the time 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. However, as subsequent events dictate and estimated net realizable values decline, required reserves are established.
 

LOAN COMPOSITION -FLORIDA
    12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009
Loans secured by real estate:
Construction, land development and other land loans $ 132,021 $ 145,907 $ 173,932 $ 183,670 $ 198,906
Secured by 1-4 family residential properties 72,114 73,738 77,680 81,297 87,282
Secured by nonfarm, nonresidential properties 183,250 184,992 178,297 179,637 180,267
Other real estate secured 14,038 12,223 8,062 5,195 5,388
Commercial and industrial loans 16,053 17,512 25,254 22,100 19,869
Consumer loans 1,487 1,636 1,756 2,077 2,287
Other loans   25,488   28,194   29,354   29,480   29,655
Loans $ 444,451 $ 464,202 $ 494,335 $ 503,456 $ 523,654
 
 

CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS - FLORIDA
Lots $ 46,907 $ 48,700 $ 54,406 $ 57,436 $ 61,725
Development 21,144 24,060 24,632 27,381 27,227
Unimproved land 57,811 61,676 69,003 71,271 76,762
1-4 family construction 2,277 7,864 9,148 10,247 10,929
Other construction   3,882   3,607   16,743   17,335   22,263
Construction, land development and other land loans $ 132,021 $ 145,907 $ 173,932 $ 183,670 $ 198,906
 

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     Year Ended
12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009 12/31/2010     12/31/2009
Securities – Taxable 3.90 % 4.11 % 4.50 % 4.73 % 4.82 % 4.29 % 5.04 %
Securities – Nontaxable 4.97 % 5.51 % 5.65 % 5.82 % 5.82 % 5.47 % 6.14 %
Securities – Total 3.99 % 4.22 % 4.59 % 4.82 % 4.91 % 4.39 % 5.12 %
Loans 5.29 % 5.31 % 5.37 % 5.32 % 5.31 % 5.32 % 5.33 %
FF Sold & Rev Repo 0.44 % 0.42 % 0.38 % 0.31 % 0.45 % 0.39 % 0.44 %
Other Earning Assets 3.15 % 3.92 % 3.79 % 3.36 % 3.38 % 3.53 % 3.22 %
Total Earning Assets 4.94 % 5.04 % 5.18 % 5.19 % 5.21 % 5.09 % 5.27 %
 
Interest-bearing Deposits 0.77 % 0.84 % 0.90 % 1.01 % 1.21 % 0.88 % 1.44 %
FF Pch & Repo 0.23 % 0.22 % 0.21 % 0.15 % 0.15 % 0.20 % 0.18 %
Other Borrowings 1.65 % 2.01 % 2.02 % 1.64 % 1.57 % 1.81 % 1.39 %
Total Interest-bearing Liabilities 0.76 % 0.85 % 0.91 % 0.97 % 1.14 % 0.87 % 1.32 %
 
Net interest margin 4.36 % 4.39 % 4.47 % 4.42 % 4.33 % 4.41 % 4.25 %
 

During the fourth quarter of 2010, the net interest margin decreased 3 basis points to 4.36%, from 4.39% for the third 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 – 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 negative ineffectiveness of $307 thousand and a net positive ineffectiveness of $409 thousand for the quarters ended December 31, 2010 and 2009, respectively. For the year ended December 31, 2010 and 2009, the impact was a net positive ineffectiveness of $7.3 million and a net negative ineffectiveness of $22 thousand, respectively. The accompanying table shows that the MSR value increased $5.9 million for the quarter ended December 31, 2010 primarily due to an increase in mortgage rates. More than offsetting the MSR change is a $6.2 million decrease in the value of derivative instruments primarily due to an increase in the 10-year Treasury note yield.
 

Note 5 – Mortgage Banking (continued)
 

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
 
    Quarter Ended     Year Ended
12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009 12/31/2010     12/31/2009
Mortgage servicing income, net $ 3,577 $ 3,406 $ 3,495 $ 3,449 $ 3,763 $ 13,927 $ 15,885
Change in fair value-MSR from runoff (2,506 ) (2,255 ) (1,374 ) (1,170 ) (1,219 ) (7,305 ) (8,567 )
Gain on sales of loans, net 5,754 3,911 1,897 3,755 3,738 15,317 20,755
Other, net   (2,016 )   1,919     1,193     (1,002 )   (139 )   94     822  
Mortgage banking income before hedge ineffectiveness   4,809     6,981     5,211     5,032     6,143     22,033     28,895  
Change in fair value-MSR from market changes 5,870 (3,115 ) (8,631 ) (3,067 ) 2,710 (8,943 ) 6,607
Change in fair value of derivatives   (6,177 )   5,995     12,330     4,107     (2,301 )   16,255     (6,629 )
Net (negative) positive hedge ineffectiveness   (307 )   2,880     3,699     1,040     409     7,312     (22 )
Mortgage banking, net $ 4,502   $ 9,861   $ 8,910   $ 6,072   $ 6,552   $ 29,345   $ 28,873  
 

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. In addition, during December of 2010, Trustmark purchased approximately $54 million of GNMA serviced loans, which were subsequently sold to a third party. Trustmark will retain the servicing for these loans, which are fully guaranteed by FHA/VA. The effect of these transactions did not have a material impact on Trustmark's results of operations.
 

Note 6 – 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.
 

Note 6 - Non-GAAP Financial Measures (continued)
 
      Quarter Ended     Year Ended
12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009 12/31/2010     12/31/2009

TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' equity $ 1,160,058 $ 1,155,054 $ 1,138,935 $ 1,123,356 $ 1,205,712 $ 1,144,481 $ 1,205,642

Less: Preferred stock
  -     -     -     -     (157,270 )   -     (193,616 )
Total average common equity 1,160,058 1,155,054 1,138,935 1,123,356 1,048,442 1,144,481 1,012,026

Less: Goodwill
(291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 )
Identifiable intangible assets   (16,835 )   (17,716 )   (18,596 )   (19,484 )   (20,426 )   (18,149 )   (21,920 )
Total average tangible common equity $ 852,119   $ 846,234   $ 829,235   $ 812,768   $ 736,912   $ 835,228   $ 699,002  
 
PERIOD END BALANCES
Total shareholders' equity $ 1,149,484 $ 1,158,792 $ 1,142,380 $ 1,128,529 $ 1,110,060

Less: Preferred stock
  -     -     -     -     -  
Total common equity 1,149,484 1,158,792 1,142,380 1,128,529 1,110,060

Less: Goodwill
(291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 )
Identifiable intangible assets   (16,306 )   (17,181 )   (18,062 )   (18,944 )   (19,825 )
Total tangible common equity (a) $ 842,074   $ 850,507   $ 833,214   $ 818,481   $ 799,131  
 

TANGIBLE ASSETS
Total assets $ 9,553,902 $ 9,416,905 $ 9,244,545 $ 9,293,215 $ 9,526,018

Less: Goodwill
(291,104 ) (291,104 ) (291,104 ) (291,104 ) (291,104 )
Identifiable intangible assets   (16,306 )   (17,181 )   (18,062 )   (18,944 )   (19,825 )
Total tangible assets (b) $ 9,246,492   $ 9,108,620   $ 8,935,379   $ 8,983,167   $ 9,215,089  
 
Risk-weighted assets (c) $ 6,672,174   $ 6,653,479   $ 6,658,897   $ 6,737,084   $ 6,918,802  
 

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders $ 25,160 $ 25,860 $ 26,161 $ 23,455 $ 13,877 $ 100,636 $ 73,049

Plus: Intangible amortization net of tax
  538     545     545     545     614     2,173     2,469  
Net income adjusted for intangible amortization $ 25,698   $ 26,405   $ 26,706   $ 24,000   $ 14,491   $ 102,809   $ 75,518  
 
Period end common shares outstanding (d)   63,917,591     63,885,959     63,885,403     63,844,500     63,673,839  
 

TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity 1 11.96 % 12.38 % 12.92 % 11.98 % 7.80 % 12.31 % 10.80 %
Tangible common equity/tangible assets (a)/(b) 9.11 % 9.34 % 9.32 % 9.11 % 8.67 %
Tangible common equity/risk-weighted assets (a)/(c) 12.62 % 12.78 % 12.51 % 12.15 % 11.55 %
Tangible common book value (a)/(d)*1,000 $ 13.17 $ 13.31 $ 13.04 $ 12.82 $ 12.55
 

TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity $ 1,149,484 $ 1,158,792 $ 1,142,380 $ 1,128,529 $ 1,110,060
Eliminate qualifying AOCI 11,426 (9,648 ) (5,404 ) (4,464 ) 1,624
Qualifying tier 1 capital 60,000 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 10,215 9,863 9,510 9,158 8,805
Other disallowed intangibles (16,306 ) (17,181 ) (18,062 ) (18,944 ) (19,825 )
Disallowed servicing intangible   (5,115 )   (4,197 )   (4,304 )   (5,004 )   (5,051 )
Total tier 1 capital $ 918,600 $ 914,525 $ 901,016 $ 886,171 $ 872,509

Less: Qualifying tier 1 capital
(60,000 ) (68,000 ) (68,000 ) (68,000 ) (68,000 )
Preferred stock   -     -     -     -     -  
Total tier 1 common capital (e) $ 858,600   $ 846,525   $ 833,016   $ 818,171   $ 804,509  
 
Tier 1 common risk-based capital ratio (e)/(c) 12.87 % 12.72 % 12.51 % 12.14 % 11.63 %
 
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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