Mail Stop 4561
April 20, 2009
By U.S. Mail and Facsimile to (601) 208-6344
Mr. Richard G. Hickson
Chairman, President and Chief Executive Officer
Trustmark Corporation
248 East Capitol Street
Jackson, Mississippi 39201
Re: Trustmark Corporation
File No. 000-03683
Form 10-K for the fiscal year ended December 31, 2008
Definitive Schedule 14A filed April 3, 2009
Dear Mr. Hickson:
We have reviewed your filings and have the following
comments.
Our accounting review is limited to the specific comments issued.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K
Business, page 3
1. Please provide to us and revise the first paragraph to report
revenues, profit or loss and total assets for each of the last
three
fiscal years as required by Item 101(b) of Regulation S-K.
2. Please provide to us and revise the second paragraph to
describe
the general development of the business of you, your subsidiaries
and
any predecessor(s) during the past five years (and earlier) as
required by Item 101(a) of Regulation S-K. In this regard, add
disclosure for, among other things, the acquisitions, such as
Republic, as well as asset, revenue, and equity growth over the
last
five years.
3. Please provide to us and revise the second paragraph to
describe
the business done and intended to be done by you, as required by
Item
101 (c)(1) of Regulation S-K. Please address any changes in your
business as a result of the recession including drops in loans and
deposits, increases in defaults and foreclosures and increases in
borrowings from the federal government. We note that you devote
over
four pages to describing bank regulation but only one page to
describing your business. In this regard, also briefly describe
any
changes in policies and/or programs to prevent or minimize
foreclosures, any changes in the standards you use to extend
credit
and any changes in the number or amounts of loans you originate.
4. Please provide to us and revise the first paragraph to describe
the principal products produced and services rendered by you
(instead
of an incomplete list of "significant services") and the principal
markets for, and methods of distribution of, the segment`s
principal
products and services as required by Item 101(c)(1)(i) of
Regulation
S-K. Disclose revenues from each of the four states in which you
operate and the percentage of your loans in each state.
Competition, page 3
5. Please provide to us and revise this section to describe
competitive conditions (beyond simply stating that you have
"significant competition"),as required by Item 101(c)(1)(x) of
Regulation S-K, including but not limited to the following:
* the identity of the particular markets in which you compete;
* an estimate of the number of your competitors that operate in
those
markets;
* an estimate of your competitive position; and
* identify and explain positive and negative factors pertaining to
your competitive position.
Please give separate consideration to the principal products or
services or classes of products or services of the segment.
Please
discuss the extent to which you compete with national and
international financial institutions that have far greater
resources
and are able to offer lower rates on loans and higher rates on
deposits than you and offer a broader range of products and
services.
Risk Factors, page 9
6. Please provide to us and revise the introductory paragraph to
this
section consistent with sample comment 30 to Staff Legal Bulletin
No.7 and Item 503(c) which requires that you must disclose all
risks
that you believe are material at the time you file the Form 10-K.
Please delete references to "among others" and "certain risks."
Please clarify that in the last sentence that you are qualifying
your
report by the risks factors that are included rather than the ones
that are not included.
7. Please provide to us and revise this section to comply with
Item
503(c) of Regulation S-K which requires that you disclose in this
section "the most significant factors that make the offering
speculative or risky." Item 503(c) specifically directs notes
that
an issuer should not present risks that apply to any issuer or any
offering. Please review all risks and remove those that do not
comply including, but not limited to, those relating to controls
and
procedures, technology change, lawsuits in the ordinary course of
business, natural disasters.
8. Please provide to us and revise each of your subcaptions, to
comply with the following:
* Item 503(c) which requires that you set forth each risk factor
under a subcaption that adequately describes the risk;
* sample comment 36 to Staff Legal Bulletin No.7, which directs
that
you revise each subheading to "ensure it reflects the risk that
you
discuss in the text." rather than "merely state a fact about your
business...succinctly state in your subheadings the risks that
result
from the facts or uncertainties;" and
* sample comment 37 to Staff Legal Bulletin No.7, which directs
that
you revise each subheading to eliminate language that is "too
vague
and generic to adequately describe the risk that follows."
For instance, the caption to your first risk factor which merely
states "Trustmark is subject to interest rate risk" does not
comply
with the applicable requirements.
9. Please provide to us and revise each risk factor to comply with
the following:
* Securities Act Release No. 33-7497 which requires that you
"place
any risk factor in context so investors can understand the
specific
risk as it applies to your company and its operations;"
* sample comment 34 to Staff Legal Bulletin No.7, which directs
that
you provide the information investors need to "assess the
magnitude"
of each risk and "explain why" each risk may result in a material
adverse effect on you; and
* sample comment 38 to Staff Legal Bulletin No.7, which directs
that
you include "specific disclosure of how your [operations]
[financial
condition] [business] would be affected" by each risk.
For instance, in the first risk factor, please discuss the
specific
interest rate risks that you face including the extent to which
you
loan portfolio includes adjustable rate loans. For instance, in
the
second risk factor, discuss the risks associated with the market
conditions in your specific markets, particularly Florida, such as
the rise in foreclosures and loan defaults and the decline in the
housing starts and housing prices. For instance, in the third
risk
factor discuss the risks from specific portions of your loan
portfolio.
10. Consider adding a risk factor relating to your liquidity and
regulatory capital given your borrowings $215 million from the
Treasury`s TARP program and $200 million Federal Reserve`s TAF
program as well as your increase in Federal funds purchased from
$279
million in 2007 to $616 million in 2008.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 19
11. Please provide to us and revise to include an overview with
meaningful disclosure and analysis relating to your business
condition, financial condition and results of operations
consistent
with Release No. 33-8350 including, but not limited to, the
following:
* provide a balanced, executive-level discussion that identifies
the
most important themes or other significant matters with which
management is concerned primarily in evaluating the company`s
financial condition and operating results;
* identify and provide insight into material opportunities,
challenges and risks that you face, on which your executives are
most
focused for both the short and long term such as:
* your need for additional capital as evidenced by your dramatic
increase in borrowings from the Federal government;
* how you have been effected by the financial and credit crisis;
* the extent of your loan portfolio attributable to real estate
loans;
* the economic recession in your market areas;
* the rise of loan defaults and foreclosures at your institution;
* the drop in real estate prices, real estate sales and new
construction in your market areas; and
* the rise in unemployment in your market areas; and
* identify and provide insight into the actions you are taking to
address each of the serious challenges and risks that you face
including, but not limited to, changes your standards for making
loans and for investing in securities and plans to raise
additional
capital through government programs and/or other means.
Critical Accounting Policies, pages 19-21
General
12. Since critical accounting estimates and assumptions are based
on
matters that are highly uncertain, please revise to provide
additional disclosure for each of your critical estimates to
analyze
their specific sensitivity to change, based on other outcomes that
are reasonably likely to occur and would have a material effect.
Provide quantitative as well as qualitative disclosure when
quantitative information is reasonably available and will provide
material information for investors. For example, if reasonably
likely changes in the long-term rate of return used in accounting
for
a company`s pension plan would have a material effect on the
financial condition or operating performance of the company, the
impact that could result given the range of reasonably likely
outcomes should be disclosed and, because of the nature of
estimates
of long-term rates of return, quantified.
Financial Highlights, page 22
13. Please provide to us and revise this section in its entirety
to
comply with Item 303 and Release No. 33-8350 by identifying and
analyzing known trends, events, demands, commitments and
uncertainties that are reasonably likely to have a material effect
on
your financial condition or operating performance including, but
not
limited to, analysis of the following:
* how the deterioration of the real estate market and the economy
in
your markets has affected you and how the continued deterioration
may
affect you;
* how the carrying amount of your investment securities (level 2)
and
loans held for sale may be overvalued due to dramatic decline in
the
market value of these assets;
* trends in the number and percentage of your loans that are
overdue
by 60 days or more;
* trends in the number and percentage of your loans that have
defaulted or foreclosed; and
* trends in the provision for loan losses.
14. Please provide to us and revise to include analysis in a
separate
captioned section of the reasons for your dramatically increasing
your borrowings from the federal government in 2008 and the costs
and
benefits to you of each, including but not limited to the
following:
* $215 million from the U.S. Treasury`s Troubled Assets Relief
Program;
* $200 million in short term loans from Federal Reserve`s Term
Auction Facility program at December 31, 2008; and
* $616 million in Federal funds purchased at December 31, 2008
compared to $279 million at December 31, 2007.
Please disclose the range of borrowings during the year not just
the
amount at December 31, 2008. Please disclose the extent to which
you
relied on other government programs such as the FDIC Temporary
Liquidity Guarantee Program.
15. Please provide to us and revise to disclose your obligations
to
the federal government under the various programs and your
compliance
to date including, but not limited to, the following:
* your agreement to "expand the flow of credit to U.S. consumers
and
businesses on competitive terms: and
* your agreement "to work diligently, under existing programs , to
modify the terms of residential mortgages."
Please provide analysis of changes in 2008 from 2007 and 2006 in
the
number and aggregate amount of each of the following: new loans
originated, loans refinanced and loans modified. Please
distinguish
between consumer loans and commercial loans.
16. Please provide to us and revise to include a separate section
at
the front of the MD&A section which analyzes your $215 million
loan
from the U.S. Treasury under the Troubled Asset Relief Program
including, but not limited to, analysis of the following:
* the reasons why you applied for the $215 million loan:
* the material terms of the transaction including the material
terms
of the securities and warrants you issued to the Treasury
Department;
and
* how you have used the $215 million in proceeds.
17. Please provide to us and revise to discuss how your
participation
in the Troubled Asset Relief Program effects you and your
shareholders including but not limited to the following:
* the impact on the holders of any outstanding senior classes of
your
securities;
* the impact on the rights of your existing common shareholders;
* the dilution of the interests of your existing common
shareholders;
* the requirement that you to expand your board of directors to
accommodate Treasury Department appointments to it;
* the requirement that you to register for resale securities you
have
issued to the Treasury Department;
* the extent to which it impacted how you operate your company;
* any material effect on your liquidity, capital resources or
results
of operations;.
* its impact on your capital ratios, income available to common
stockholders; and
* the limits and requirements relating to executive compensation
established by Section 111 of the Emergency Economic Stabilization
Act of 2008 and the applicable rules issued by the Department of
Treasury.
Segment Information
Administration, page 32
18. We note you plan to reduce your reporting segments from four
to
three by combining Administration into General Banking because the
revenues and expenses reflected in Administration are directly
related to General Banking. Please reconcile this to the first
sentence where you indicate Administration includes all other
activities that are not directly attributable to one of the major
lines of business. Also, tell us if there has been a change in
the
information evaluated regularly by your chief operating decision
maker.
Securities, page 32
19. In an effort to provide a reader with greater insight to the
quality of your investment securities available-for-sale (AFS) and
held-to-maturity (HTM), please provide to us and disclose the
following:
* present in a tabular format on a fair value and amortized cost
basis, any significant concentrations within your AFS and HTM
securities. In this regard, please disaggregate your mortgage-
backed
securities (e.g. Agency MBS, such as GNMA, FNMA, etc., Non-Agency
MBS, CMOs, etc.);
* provide a table, consistent with the format noted above, that
presents the investment securities with their respective credit
ratings; and
* in addition to the information above, provide us with
information
through March 31, 2009, if available.
Loans and Allowance for Loan Losses, page 34
20. Please provide to us and revise this section as follows:
* please disclose the extent to which your portfolio contains
subprime, "alt A" loans and no interest loans;
* explain why the chart, on page 36, entitled "Loan Maturities by
Category" only includes $4.3 billion of your $6.7 billion of loans
and explain why you did not disclose maturities for 1-4 family
residential properties and consumer loans;
* provide analysis of the ramifications to your business of having
a
large percentage of your loan portfolio maturing in less than a
year;
* explain why the chart, on page 36, entitled "Loan Maturities by
Interest Rate Sensitivity" only includes $2.1 billion of your $6.7
billion of loans;
* explain why in the chart, on page 38, entitled "Florida Credit
Quality" the rows of various categories of loans exceed the total
loans and revise the definitions to explain the differences
between
nonaccrual loans and impaired loans.
Preferred Stock, page 42
21. Please provide to us and revise your description of the Senior
Preferred Stock that you issued to the U.S. Treasury, under the
Troubled Asset Relief Program, to
* replace your explanation that you issued the preferred stock
under
the Troubled Assets Relief Program "designed to support the
economy"
to explain that you applied to the Department of Treasury for
government assistance under the TARP Program that is designed to
stabilize financial institutions such as yours; and
* disclose the closing price of your common stock on the day
before
you agreed to issue warrants to the Department of Treasury.
Regulatory Capital, page 42
22. Please provide to us and revise your claims that as of
December
31,2008 you "exceeded all of the minimum capital standards" and
were
"well-capitalized" to discuss whether you would have met these
standards without the assistance of funds borrowed from, or with
the
assistance of, the federal government.
Liquidity, page 43
23. We note you utilize brokered deposits, among other things, to
provide additional liquidity. Tell us, and quantify (including
interim filings) the amount of brokered deposits at each period
end.
Certification under Section 906
24. Please amend each of your certificates as follows:
* correct the name of the document to which the certification
relates
which is the Form 10-K for the fiscal year ended December 31, 2008
(rather than for "the period ended December 31, 2008"; and
* delete the qualification that the certifications are "to my
knowledge."
Exhibits
25. Please include as exhibits to your Form 10-K the Letter
Agreement
and the Securities Purchase Agreement between you and the United
States Department of Treasury, as required by the Item 601(b)(4) n
2008 nclusde he Senior preferred stock that you issuedm the
Federal
government;hich you met these standards with the assisisn of
Regulation S-K.
Financial Statements
Notes to Financial Statements
Note 1 - New Accounting Standards, page 58
26. Please revise to include new accounting standards issued but
not
effective rather than merely making reference to MD&A.
Note 16 - Shareholders` Equity
Preferred Stock, page 74
27. Please tell us and revise your future filings to more clearly
discuss the following regarding your issuances of preferred stock
and
warrants to the U.S. Treasury:
* how you determined the fair value of the preferred stock and the
fair value of common stock warrants;
* the market rate (discount rate) used when deriving the fair
value
of the preferred stock;
* the methodology and assumptions used to calculate the fair value
of
the common stock warrants; and
* the method used to amortize the discount on the preferred stock.
Note 17 - Fair Value
Financial Instruments Measured at Fair Value, pages 77-78
28. We note you utilize independent data providers to determine
the
fair value of the securities available-for-sale. Please tell us
and
revise future filings to disclose the following:
* the number of prices you generally obtained per instrument, and
if
you obtained multiple prices, how you determined the ultimate fair
value;
* whether, and if so, how and why, you adjusted quotes or prices
you
obtained from brokers and pricing services; and
* the procedures you performed to validate the prices you obtained
to
ensure the fair value determination is consistent with SFAS 157,
and
to ensure that you properly classified your assets and liabilities
in
the fair value hierarchy.
Schedule 14A
Employment Agreements. Page 32
29. Please revise to describe the differences between the 2007
employment agreement and the 2008 agreement with your Chairman and
CEO including, but not limited to, the following:
* clarify that the 2008 agreement did not "extend the term" as you
state on page 32 since the 2007 agreement did not have a
termination
date but could be terminated by either party;
* disclose that you increased the maximum amount of his annual
bonus
from seventy percent of his salary to one hundred percent;
* clarify that Mr. Hickson will receive the same salary as
Chairman
as he did when he served as both Chairman and CEO; and
* clarify whether Mr. Hickson will be entitled to a full year`s
compensation for five months of employment in 2011.
* * * * * * * * * * * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Christina Harley, at 202-551-3695 or Hugh
West, Branch Chief, at 551-3872 if you have questions regarding
comments on the financial statements and related matters. Please
contact either Jonathan E. Gottlieb at (202) 551-3416 or me at
(202)
551-3434 with any other questions.
Sincerely,
Michael Clampitt
Senior Attorney
Mr. Richard G. Hickson
Trustmark Corporation
April 20, 2009
Page 1