Jackson, Miss. – July 28, 2009 – Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $13.4 million in the second quarter of 2009, which represented basic earnings per common share of $0.23. Earnings during the quarter were impacted by a previously announced special FDIC deposit insurance assessment applicable to all insured depository institutions, which reduced Trustmark’s net income by $2.7 million, or $0.05 per share. Trustmark’s second quarter 2009 net income produced a return on average tangible common equity of 8.20%. During the first six months of 2009, Trustmark’s net income available to common shareholders totaled $36.8 million, which represented basic earnings per common share of $0.64. Trustmark’s performance during the first half of 2009 resulted in a return on average tangible common equity of 11.28%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share. The dividend is payable September 15, 2009, to shareholders of record on September 1, 2009.
Richard G. Hickson, Chairman and CEO, stated, “Trustmark produced positive financial results during the second quarter as reflected by our robust net interest margin and disciplined management of core noninterest expense. We continued to devote significant resources in the management of our real estate loan portfolio in the Florida panhandle. During the quarter, we conducted extensive examinations and reappraisals to reflect the current condition of real estate values in Florida, which is reflected in our financial performance.”
“We continued to make investments to support revenue growth and efficiency. During the quarter, we completed piloting our new retail sales and service platform designed to enhance customer service and improve associate productivity. This technology will be implemented system wide by year end. We look forward to the future as solid core earnings, coupled with the strength of Trustmark’s human and financial capital, have positioned us to take advantage of growth opportunities resulting from this challenging financial environment,” said Hickson.
Credit Quality
| · | Continued to conduct extensive review and analysis of Florida loan portfolio |
| · | Nonperforming loans decreased $1.5 million to $133.0 million, or 1.94% of total loans |
| · | Nonperforming assets increased $11.5 million to $188.2 million, representing 2.72% of total loans and other real estate |
| · | Net charge-offs totaled $25.4 million, or 1.48% of average loans |
| · | Provision for loan losses totaled $26.8 million |
Trustmark continued to conduct extensive reviews of its Florida loan portfolio. Corporate loan review, in conjunction with associates dedicated to special assets in Florida, completed thorough due diligence examinations encompassing 92% of the outstanding Florida portfolio. As part of the review, updated financial information on borrowers and guarantors was obtained as well as 160 updated property appraisals. As a result of this review and appraisal process, $21.2 million in Florida loans were charged-off based upon current property values in the marketplace. Over the last 18 months, the Florida construction and land development portfolio has been reduced by $140.7 million, or 36.4%, to $245.5 million. Nonperforming assets in Florida declined $5.0 million in the second quarter relative to the prior quarter. At June 30, 2009, Florida non-impaired construction and land development loans totaled $203.8 million with an associated reserve for loan loss of $25.7 million, or 12.6%.
Trustmark’s total net charge-offs were $25.4 million during the second quarter, including Florida net charge-offs of $21.2 million, which represented 83% of total net charge-offs. Loan portfolios in the Corporation’s other geographic areas and lines of business continued to perform relatively well in the current economic environment. Allocation of Trustmark’s $101.8 million allowance for loan losses represented 2.01% of commercial loans and 0.73% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.55% as of June 30, 2009.
Capital Strength
| · | Tangible common equity to tangible assets increased to 7.34% |
| · | Total risk-based capital increased to 15.45% |
Consistent profitability, sound balance sheet management and a prudent capital philosophy continue to be reflected in Trustmark’s solid capital base. Internally generated tangible common equity increased to $683.2 million and represented 7.34% of tangible assets at June 30, 2009, while total risk-based capital expanded to 15.45%. Excluding the $215 million in Senior Preferred stock issued under the Capital Purchase Program, Trustmark’s total risk-based capital ratio is an estimated 12.44%, exceeding guidelines to be classified as “well-capitalized” at June 30, 2009. Trustmark’s strong capital base is well-positioned to support the expansion of lending opportunities across the Corporation’s four-state franchise.
The fundamental strengths of Trustmark’s business, as reflected by pretax, pre-provision earnings, remain solid despite the challenging economic environment. Based upon the existing capital base and the expectation of the level of profitability going forward, Trustmark believes at this time in the sustainability of its cash dividend to common shareholders.
Balance Sheet Management
| · | Reduced exposure to construction and land development lending |
| · | Expanded focused business development activities |
| · | Increased noninterest-bearing deposits |
Loans held for investment declined $70.0 million during the second quarter to total $6.6 billion. This reduction was due principally to Trustmark’s continued efforts to reduce exposure to construction and land development lending and to its decision to discontinue indirect auto financing. Trustmark’s targeted business development activities are focused upon the generation of additional commercial and industrial loan opportunities meeting underwriting and profitability criteria. The relatively low interest rate environment resulted in mortgage banking production in excess of $583 million during the second quarter. During the first six months of 2009, mortgage banking production totaled $1.2 billion, up 56.1% relative to figures one year earlier.
Trustmark’s deposit base remained stable at $7.1 billion during the second quarter as declines in interest-bearing deposits were effectively offset by growth in noninterest-bearing deposits. At June 30, 2009, noninterest-bearing deposits represented 21.8% of total deposits.
Net Interest Income
| · | Net interest income totaled $90.8 million |
| · | Net interest margin expanded to 4.20% |
Trustmark took advantage of its capital strength, solid branding, and strong liquidity to lower its cost of deposits and optimize funding costs. In addition, disciplined loan pricing and required minimum loan rates slowed erosion of loan yields. As a consequence, net interest income of $90.8 million continued to validate core revenue strength during the second quarter and resulted in an expansion of the net interest margin to 4.20%.
Noninterest Income
| · | Service charges on deposit accounts expanded |
| · | Debit card income increased |
| · | Gain on sale of securities totaled $4.4 million |
Noninterest income during the second quarter of 2009 totaled $40.8 million, a decline of $2.2 million relative to the prior quarter. Mortgage banking income during the quarter was $2.5 million, down $8.4 million from the prior quarter due largely to negative mortgage servicing rights hedge ineffectiveness. Mortgage servicing income and gain on sales of mortgage loans remained stable during the quarter. Service charges on deposit accounts increased $676 thousand relative to the prior quarter to total $13.2 million while other general banking income increased $656 thousand to $6.1 million due to growth in debit card related income. Insurance revenue totaled $7.4 million during the second quarter, relatively unchanged from the prior quarter. Wealth management revenue also remained stable at $5.5 million when compared to the first quarter. During the second quarter of 2009, Trustmark capitalized upon advantageous market conditions and sold approximately $153 million of short-term mortgage related securities, which resulted in a gain of $4.4 million.
Noninterest Expense
| · | Core noninterest expense remained well-controlled |
| · | Salary and benefit expense declined $2.4 million |
| · | FDIC Special Assessment totaled $4.4 million |
| · | Foreclosure expense increased $2.1 million |
During the second quarter of 2009, noninterest expense totaled $79.0 million, an increase of $4.6 million from the prior quarter. Excluding the previously mentioned FDIC special assessment, noninterest expense increased $100 thousand relative to the first quarter. Salary and benefit expense declined $2.4 million during the second quarter as a result of strategic human capital management initiatives, including the decision to freeze benefits under the Corporation’s defined benefit pension plan. During the last 12 months, the Corporation reduced its full time equivalent work force by 75, or approximately 3%, through attrition. Trustmark remains committed to identifying reengineering and efficiency opportunities to enhance shareholder value.
ADDITIONAL INFORMATION
As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 29 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) 627-6580, passcode 9794118 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 Wednesday, August 5, 2009 in archived format at the same web address or by calling (888) 203-1112, passcode 9794118.
Trustmark is a financial services company providing banking and financial solutions through over 150 offices and 2,600 associates 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 effect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of Trustmark’s borrowers, changes in Trustmark’s ability to control expenses, changes in Trustmark’s compensation and benefit plans, greater than expected costs or difficulties related to the integration of new products and lines of business, natural disasters, acts of war or terrorism and other risks described in Trustmark’s filings with the Securities and Exchange Commission.
Although Management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Trustmark undertakes no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.
