EXHIBIT 99.1
[OBJECT OMITTED] News Release
FOR IMMEDIATE RELEASE
April 20, 2004
Trustmark Announces First Quarter Earnings
Earnings per share rise 12.2%, Loans and Deposits increase 12%
Jackson, Miss. - Trustmark Corporation (NASDAQ:TRMK) announced basic and diluted
earnings per share of $0.46 for the first quarter of 2004, which represents a
12.2% increase compared to $0.41 for the first quarter of 2003. During the first
three months of 2004, earnings totaled $26.8 million, up 9.3% from the prior
year. Trustmark's first quarter net income produced annualized returns on
average shareholders' equity and average assets of 15.27% and 1.36%,
respectively. At March 31, 2004, Trustmark reported total loans of $5.2 billion,
total assets of $8.1 billion, total deposits of $5.6 billion and shareholders'
equity of $719 million.
Richard G. Hickson, Chairman and CEO of Trustmark Corporation, remarked, "Our
expansion efforts in Houston and the Florida panhandle have made important
contributions to Trustmark's growth. Our loans have increased $567 million, or
12.2%, while deposits grew $597 million, or 12.0%, when compared to figures one
year earlier. We appreciate the confidence our customers have placed in
Trustmark and commend our associates for their dedication to becoming a premier
financial services company in our marketplace."
Like many other financial services firms, fluctuations in interest rates have
reduced the profitability of Trustmark's home mortgage lending business. Higher
home mortgage rates during most of the first quarter resulted in lower loan
originations, which reduced home mortgage banking income. In addition, the
decline in the 10-year U.S. Treasury rate in mid-March resulted in increased
amortization and impairment in the value of our home mortgage servicing rights.
The increase in amortization and impairment from the prior quarter reduced
Trustmark's first quarter earnings by $2.7 million after tax, or $0.05 per
share. This non-cash charge against income could be reversed, in whole or in
part, if interest rates rise, refinancing slows and the expected life of home
mortgage loans lengthens.
Trustmark is a financial services company providing banking and financial
solutions through over 145 offices and 2,400 associates in Mississippi, Florida,
Tennessee and Texas. For additional information, visit Trustmark's web site at
www.trustmark.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of and
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. A forward-looking statement in this press release
encompasses any estimate, prediction, expectation, projection, opinion,
anticipation, outlook or statement of belief included therein, as well as the
management assumptions underlying those forward-looking statements. Factors that
might cause future results to differ from such forward-looking statements are
described in Trustmark's filings with the Securities and Exchange Commission.
Trustmark undertakes no obligation to update or revise any of this information,
whether as the result of new information, future events or developments, or
otherwise.
Investors: Zach Wasson Joseph Rein
Executive Vice President and CFO First Vice President
601-208-6816 601-208-6898
Media: Gray Wiggers
Senior Vice President
601-208-5942
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
March 31, 2004
($ in thousands)
(unaudited)
Quarter Ended March 31,
-----------------------
AVERAGE BALANCES 2004 2003 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Securities AFS-taxable $1,875,063 $1,235,837 $ 639,226 51.7%
Securities AFS-nontaxable 71,632 70,021 1,611 2.3%
Securities HTM-taxable 84,455 408,165 (323,710) -79.3%
Securities HTM-nontaxable 89,273 90,945 (1,672) -1.8%
---------- ---------- ---------
Total securities 2,120,423 1,804,968 315,455 17.5%
---------- ---------- ---------
Loans 5,063,411 4,617,076 446,335 9.7%
Fed funds sold
and rev repos 17,238 29,700 (12,462) -42.0%
---------- ---------- ---------
Total earning assets 7,201,072 6,451,744 749,328 11.6%
---------- ---------- ---------
Allowance for loan losses (74,368) (75,143) 775 -1.0%
Cash and due from banks 336,755 302,372 34,383 11.4%
Other assets 465,950 410,141 55,809 13.6%
---------- ---------- ---------
Total assets $7,929,409 $7,089,114 $ 840,295 11.9%
========== ========== =========
Int-bearing demand dep $1,307,488 $1,040,166 $ 267,322 25.7%
Savings deposits 969,113 784,866 184,247 23.5%
Time deposits less
than $100,000 1,260,671 1,261,873 (1,202) -0.1%
Time deposits of $100,000
or more 457,432 464,029 (6,597) -1.4%
---------- ---------- ---------
Total interest-bearing dep 3,994,704 3,550,934 443,770 12.5%
Fed funds pch and repos 892,204 926,205 (34,001) -3.7%
Short-term borrowings 512,646 241,371 271,275 112.4%
Long-term FHLB advances 512,301 475,198 37,103 7.8%
---------- ---------- ---------
Total interest-bearing
liabilities 5,911,855 5,193,708 718,147 13.8%
Nonint-bearing deposits 1,258,065 1,158,944 99,121 8.6%
Other liabilities 54,928 69,053 (14,125) -20.5%
Shareholders' equity 704,561 667,409 37,152 5.6%
---------- ---------- ---------
Total liab and equity $7,929,409 $7,089,114 $ 840,295 11.9%
========== ========== =========
March 31,
-----------------------
PERIOD END BALANCES 2004 2003 $ Change % Change
- ------------------- ---------- ---------- --------- --------
Sec available for sale $1,958,767 $1,523,599 $ 435,168 28.6%
Sec held to maturity 169,708 442,946 (273,238) -61.7%
---------- ---------- ---------
Total securities 2,128,475 1,966,545 161,930 8.2%
Loans 5,198,296 4,631,080 567,216 12.2%
Fed funds sold
and rev repos 19,209 27,015 (7,806) -28.9%
---------- ---------- ---------
Total earning assets 7,345,980 6,624,640 721,340 10.9%
---------- ---------- ---------
Allowance for loan losses (74,179) (74,867) 688 -0.9%
Cash and due from banks 340,114 363,738 (23,624) -6.5%
Intang-other identifiable 22,064 21,925 139 0.6%
Intang-mortgage servicing 47,476 39,655 7,821 19.7%
Intang-goodwill 110,271 48,028 62,243 129.6%
Other assets 298,737 282,745 15,992 5.7%
---------- ---------- ---------
Total assets $8,090,463 $7,305,864 $ 784,599 10.7%
========== ========== =========
Nonint-bearing deposits $1,316,817 $1,223,941 $ 92,876 7.6%
Int-bearing deposits 4,258,071 3,754,058 504,013 13.4%
---------- ---------- ---------
Total deposits 5,574,888 4,977,999 596,889 12.0%
Fed funds pch and repos 713,802 816,475 (102,673) -12.6%
Short-term borrowings 541,716 321,879 219,837 68.3%
Long-term FHLB advances 481,004 457,667 23,337 5.1%
Other liabilities 60,428 71,201 (10,773) -15.1%
---------- ---------- ---------
Total liabilities 7,371,838 6,645,221 726,617 10.9%
---------- ---------- ---------
Common stock 12,143 12,337 (194) -1.6%
Surplus 133,147 157,954 (24,807) -15.7%
Retained earnings 564,199 484,980 79,219 16.3%
Accum other comprehensive
income, net of taxes 9,136 5,372 3,764 70.1%
---------- ---------- ---------
Total shareholders' equity 718,625 660,643 57,982 8.8%
---------- ---------- ---------
Total liab and equity $8,090,463 $7,305,864 $ 784,599 10.7%
========== ========== =========
Total int-bearing liab $5,994,593 $5,350,079 $ 644,514 12.0%
========== ========== =========
Quarter Ended March 31,
-----------------------
INCOME STATEMENTS 2004 2003 $ Change % Change
- ----------------- ---------- ---------- --------- --------
Int and fees on loans-FTE $ 71,442 $ 71,791 $ (349) -0.5%
Int on securities-taxable 16,196 20,155 (3,959) -19.6%
Int on securities-tax
exempt-FTE 3,071 3,183 (112) -3.5%
Int on fed funds sold
and rev repos 43 82 (39 -47.6%
Other interest income 12 12 - 0.0%
---------- ---------- ---------
Total interest income-FTE 90,764 95,223 (4,459) -4.7%
---------- ---------- ---------
Interest on deposits 13,386 16,062 (2,676) -16.7%
Interest on fed funds
pch and repos 2,104 2,726 (622) -22.8%
Other interest expense 4,758 5,032 (274) -5.4%
---------- ---------- ---------
Total interest expense 20,248 23,820 (3,572) -15.0%
---------- ---------- ---------
Net interest income-FTE 70,516 71,403 (887 -1.2%
Provision for loan losses 1,052 3,000 (1,948) -64.9%
---------- ---------- ---------
Net interest income after
provision-FTE 69,464 68,403 1,061 1.6%
---------- ---------- ---------
Service charges on
deposit accounts 13,326 12,680 646 5.1%
Other acct charges and fees 6,827 6,625 202 3.0%
Insurance commissions 3,746 3,787 (41) -1.1%
Mortgage servicing fees 4,228 4,326 (98) -2.3%
Trust service income 2,596 2,311 285 12.3%
Gains on sales of loans 1,730 3,893 (2,163) -55.6%
Other income 58 (587) 645 -109.9%
---------- ---------- ---------
Nonint inc-excl sec gains 32,511 33,035 (524) -1.6%
Security gains 13 8,148 (8,135) -99.8%
---------- ---------- ---------
Total noninterest income 32,524 41,183 (8,659) -21.0%
---------- ---------- ---------
Salaries and employee
benefits 30,443 35,924 (5,481) -15.3%
Net occupancy-premises 3,213 2,986 227 7.6%
Equipment expense 3,542 3,710 (168) -4.5%
Services and fees 8,379 7,879 500 6.3%
Amtz/impairment of intang
assets 6,317 11,655 (5,338) -45.8%
Other expense 7,588 7,572 16 0.2%
---------- ---------- ---------
Total noninterest expense 59,482 69,726 (10,244) -14.7%
---------- ---------- ---------
Income before income taxes 42,506 39,860 2,646 6.6%
Tax equivalent adjustment 2,157 2,206 (49) -2.2%
Income taxes 13,598 13,170 428 3.2%
---------- ---------- ---------
Net income $ 26,751 $ 24,484 $ 2,267 9.3%
========== ========== =========
Earnings per share
Basic $ 0.46 $ 0.41 $ 0.05 12.2%
========== ========== =========
Diluted $ 0.46 $ 0.41 $ 0.05 12.2%
========== ========== =========
Weighted average shares o/s
Basic 58,267,684 59,912,276 -2.7%
========== ==========
Diluted 58,587,611 60,055,751 -2.4%
========== ==========
Period end shares o/s 58,280,233 59,210,244 -1.6%
========== ==========
Dividends per share $ 0.1900 $ 0.1650 15.2%
========== ==========
March 31,
-----------------------
NONPERFORMING ASSETS 2004 2003 $ Change % Change
- -------------------- ---------- ---------- --------- --------
Nonaccrual loans $ 27,482 $ 31,769 $ (4,287) -13.5%
Restructured loans - - -
---------- ---------- ---------
Total nonperforming loans 27,482 31,769 (4,287) -13.5%
Other real estate 7,149 7,281 (132) -1.8%
---------- ---------- ---------
Total nonperforming assets 34,631 39,050 (4,419) -11.3%
Loans past due over 90 days 5,443 2,512 2,931 116.7%
---------- ---------- ---------
Total nonperforming
assets plus past
due over 90 days $ 40,074 $ 41,562 $ (1,488) -3.6%
========== ========== =========
Quarter Ended March 31,
-----------------------
ALLOWANCE FOR LOAN LOSSES 2004 2003 $ Change % Change
- ------------------------- ---------- ---------- --------- --------
Beginning Balance $ 74,276 $ 74,771 $ (495) -0.7%
Charge-offs (3,828) (5,191) 1,363 -26.3%
Recoveries 2,679 2,287 392 17.1%
Provision for loan losses 1,052 3,000 (1,948) -64.9%
---------- ---------- ---------
Ending Balance $ 74,179 $ 74,867 $ (688) -0.9%
========== ========== =========
Quarter Ended March 31,
-----------------------
2004 2003
RATIOS ----------- ---------
- ------
ROA 1.36% 1.40%
ROE 15.27% 14.88%
Equity generation rate 8.96% 8.89%
EOP equity/ EOP assets 8.88% 9.04%
Average equity/average assets 8.89% 9.41%
Interest margin - Yield - FTE 5.07% 5.99%
Interest margin - Cost - FTE 1.13% 1.50%
Net interest margin - FTE 3.94% 4.49%
Rate on interest-bearing liab 1.38% 1.86%
Efficiency ratio 56.15% 54.17%
Expense ratio 1.51% 2.31%
Net charge offs/average loans 0.09% 0.26%
Prov for loan losses/average loans 0.08% 0.26%
Nonperforming loans/total loans 0.53% 0.69%
Nonperforming assets/total loans 0.67% 0.84%
Nonperf assets/total loans+ORE 0.67% 0.84%
ALL/nonperforming loans 269.92% 235.66%
ALL/total loans 1.43% 1.62%
Net loans/total assets 63.34% 62.36%
COMMON STOCK PERFORMANCE
- ------------------------
Market value of stock-Close $ 29.020 $ 23.760
Market value of stock-High $ 30.730 $ 24.800
Market value of stock-Low $ 28.270 $ 22.560
Book value of stock $ 12.33 $ 11.16
Tangible book value of stock $ 10.06 $ 9.31
Tangible equity $ 586,290 $ 590,690
Market/Book value of stock 235.36% 212.90%
Price/Earnings ratio 15.69 14.29
Dividend payout 41.30% 40.24%
OTHER DATA
- ----------
EOP Employees - FTE 2,425 2,283
Quarter Ended
-----------------------
AVERAGE BALANCES 3/31/2004 12/31/2003 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Securities AFS-taxable $1,875,063 $1,737,519 $ 137,544 7.9%
Securities AFS-nontaxable 71,632 68,976 2,656 3.9%
Securities HTM-taxable 84,455 97,536 (13,081) -13.4%
Securities HTM-nontaxable 89,273 90,530 (1,257) -1.4%
---------- ---------- ---------
Total securities 2,120,423 1,994,561 125,862 6.3%
---------- ---------- ---------
Loans 5,063,411 4,991,449 71,962 1.4%
Fed funds sold
and rev repos 17,238 19,569 (2,331) -11.9%
---------- ---------- ---------
Total earning assets 7,201,072 7,005,579 195,493 2.8%
---------- ---------- ---------
Allowance for loan losses (74,368) (74,449) 81 -0.1%
Cash and due from banks 336,755 296,340 40,415 13.6%
Other assets 465,950 463,625 2,325 0.5%
---------- ---------- ---------
Total assets $7,929,409 $7,691,095 $ 238,314 3.1%
========== ========== =========
Int-bearing demand dep $1,307,488 $1,165,721 $ 141,767 12.2%
Savings deposits 969,113 866,248 102,865 11.9%
Time deposits less
than $100,000 1,260,671 1,226,521 34,150 2.8%
Time deposits of
$100,000 or more 457,432 462,732 (5,300) -1.1%
---------- ---------- ---------
Total interest-bearing dep 3,994,704 3,721,222 273,482 7.3%
Fed funds pch and repos 892,204 892,546 (342) 0.0%
Short-term borrowings 512,646 584,931 (72,285) -12.4%
Long-term FHLB advances 512,301 502,796 9,505 1.9%
---------- ---------- ---------
Total interest-bearing
liabilities 5,911,855 5,701,495 210,360 3.7%
Nonint-bearing deposits 1,258,065 1,246,389 11,676 0.9%
Other liabilities 54,928 52,506 2,422 4.6%
Shareholders' equity 704,561 690,705 13,856 2.0%
---------- ---------- ---------
Total liab and equity $7,929,409 $7,691,095 $ 238,314 3.1%
========== ========== =========
Period Ended
-----------------------
PERIOD END BALANCES 3/31/2004 12/31/2003 $ Change % Change
- ------------------- ---------- ---------- --------- --------
Sec available for sale $1,958,767 $1,933,993 $ 24,774 1.3%
Sec held to maturity 169,708 178,450 (8,742) -4.9%
---------- ---------- ---------
Total securities 2,128,475 2,112,443 16,032 0.8%
Loans 5,198,296 5,032,612 165,684 3.3%
Fed funds sold
and rev repos 19,209 37,712 (18,503) -49.1%
---------- ---------- ---------
Total earning assets 7,345,980 7,182,767 163,213 2.3%
---------- ---------- ---------
Allowance for loan loss (74,179) (74,276) 97 -0.1%
Cash and due from banks 340,114 333,096 7,018 2.1%
Intang-other identifiable 22,064 21,921 143 0.7%
Intang-mortgage servicing 47,476 49,707 (2,231) -4.5%
Intang-goodwill 110,271 95,877 14,394 15.0%
Other assets 298,737 305,229 (6,492) -2.1%
---------- ---------- ---------
Total assets $8,090,463 $7,914,321 $ 176,142 2.2%
========== ========== =========
Nonint-bearing deposits $1,316,817 $1,329,444 $ (12,627) -0.9%
Int-bearing deposits 4,258,071 3,760,015 498,056 13.2%
---------- ---------- ---------
Total deposits 5,574,888 5,089,459 485,429 9.5%
Fed funds pch and repos 713,802 928,135 (214,333) -23.1%
Short-term borrowings 541,716 621,532 (79,816) -12.8%
Long-term FHLB advances 481,004 531,035 (50,031) -9.4%
Other liabilities 60,428 54,587 5,841 10.7%
---------- ---------- ---------
Total liabilities 7,371,838 7,224,748 147,090 2.0%
---------- ---------- ---------
Common stock 12,143 12,136 7 0.1%
Surplus 133,147 132,383 764 0.6%
Retained earnings 564,199 548,521 15,678 2.9%
Accum other comprehensive
income (loss), net of
taxes 9,136 (3,467) 12,603 -363.5%
---------- ---------- ---------
Total shareholders' equity 718,625 689,573 29,052 4.2%
---------- ---------- ---------
Total liab and equity $8,090,463 $7,914,321 $ 176,142 2.2%
========== ========== =========
Total int-bearing liab $5,994,593 $5,840,717 $ 153,876 2.6%
========== ========== =========
Quarter Ended
-----------------------
INCOME STATEMENTS 3/31/2004 12/31/2003 $ Change % Change
- ----------------- ---------- ---------- --------- --------
Int and fees on loans-FTE $ 71,442 $ 73,650 $ (2,208) -3.0%
Int on securities-taxable 16,196 14,722 1,474 10.0%
Int on securities-tax
exempt-FTE 3,071 3,080 (9) -0.3%
Int on fed funds sold
and rev repos 43 51 (8) -15.7%
Other interest income 12 13 (1) -7.7%
---------- ---------- ---------
Total interest income-FTE 90,764 91,516 (752) -0.8%
---------- ---------- ---------
Interest on deposits 13,386 13,445 (59) -0.4%
Interest on fed funds
pch and repos 2,104 2,159 (55) -2.5%
Other interest expense 4,758 5,295 (537) -10.1%
---------- ---------- ---------
Total interest expense 20,248 20,899 (651) -3.1%
---------- ---------- ---------
Net interest income-FTE 70,516 70,617 (101) -0.1%
Provision for loan losses 1,052 2,351 (1,299) -55.3%
---------- ---------- ---------
Net interest income after
provision-FTE 69,464 68,266 1,198 1.8%
---------- ---------- ---------
Service charges on
deposit accounts 13,326 14,297 (971) -6.8%
Other acct charges and fees 6,827 7,073 (246) -3.5%
Insurance commissions 3,746 4,109 (363) -8.8%
Mortgage servicing fees 4,228 4,174 54 1.3%
Trust service income 2,596 2,658 (62) -2.3%
Gains on sales of loans 1,730 1,223 507 41.5%
Other income 58 832 (774) -93.0%
---------- ---------- ---------
Nonint inc-excl sec gains 32,511 34,366 (1,855) -5.4%
Security gains 13 5 8 160.0%
---------- ---------- ---------
Total noninterest income 32,524 34,371 (1,847) -5.4%
---------- ---------- ---------
Salaries and employee
benefits 30,443 29,678 765 2.6%
Net occupancy-premises 3,213 3,276 (63) -1.9%
Equipment expense 3,542 3,885 (343) -8.8%
Services and fees 8,379 7,587 792 10.4%
Amtz/impairment of intang
assets 6,317 1,859 4,458 239.8%
Other expense 7,588 7,446 142 1.9%
---------- ---------- ---------
Total noninterest expense 59,482 53,731 5,751 10.7%
---------- ---------- ---------
Income before income taxes 42,506 48,906 (6,400) -13.1%
Tax equivalent adjustment 2,157 2,004 153 7.6%
Income taxes 13,598 16,438 (2,840) -17.3%
---------- ---------- ---------
Net income $ 26,751 $ 30,464 $ (3,713) -12.2%
========== ========== =========
Earnings per share
Basic $ 0.46 $ 0.52 $ (0.06) -11.5%
========== ========== =========
Diluted $ 0.46 $ 0.52 $ (0.06) -11.5%
========== ========== =========
Weighted average shares o/s
Basic 58,267,684 58,401,559
========== ==========
Diluted 58,587,611 58,757,964
========== ==========
Period end shares o/s 58,280,233 58,246,733
========== ==========
Dividends per share $ 0.1900 $ 0.1900
========== ==========
Period Ended
-----------------------
NONPERFORMING ASSETS 3/31/2004 12/31/2003 $ Change % Change
- -------------------- ---------- ---------- --------- --------
Nonaccrual loans $ 27,482 $ 23,921 $ 3,561 14.9%
Restructured loans - - -
---------- ---------- ---------
Total nonperforming loans 27,482 23,921 3,561 14.9%
Other real estate 7,149 5,929 1,220 20.6%
---------- ---------- ---------
Total nonperforming assets 34,631 29,850 4,781 16.0%
Loans past due over 90 days 5,443 2,606 2,837 108.9%
---------- ---------- ---------
Total nonperforming
assets plus past
due over 90 days $ 40,074 $ 32,456 $ 7,618 23.5%
========== ========== =========
Quarter Ended
-----------------------
ALLOWANCE FOR LOAN LOSSES 3/31/2004 12/31/2003
- ------------------------- ---------- ----------
Beginning Balance $ 74,276 $ 74,486 $ (210) -0.3%
Charge-offs (3,828) (4,533) 705 -15.6%
Recoveries 2,679 1,972 707 35.9%
Provision for loan losses 1,052 2,351 (1,299) -55.3%
---------- ---------- ---------
Ending Balance $ 74,179 $ 74,276 $ (97) -0.1%
========== ========== =========
Quarter Ended
-----------------------
RATIOS 3/31/2004 12/31/2003
- ------ ---------- ----------
ROA 1.36% 1.57%
ROE 15.27% 17.50%
Equity generation rate 8.96% 11.10%
EOP equity/ EOP assets 8.88% 8.71%
Average equity/average assets 8.89% 8.98%
Interest margin - Yield - FTE 5.07% 5.18%
Interest margin - Cost - FTE 1.13% 1.18%
Net interest margin - FTE 3.94% 4.00%
Rate on interest-bearing liabilities 1.38% 1.45%
Efficiency ratio 56.15% 52.72%
Expense ratio 1.51% 1.10%
Net charge offs/average loans 0.09% 0.20%
Provision for loan losses/average loans 0.08% 0.19%
Nonperforming loans/total loans 0.53% 0.48%
Nonperforming assets/total loans 0.67% 0.59%
Nonperforming assets/total loans+ORE 0.67% 0.59%
ALL/nonperforming loans 269.92% 310.51%
ALL/total loans 1.43% 1.48%
Net loans/total assets 63.34% 62.65%
COMMON STOCK PERFORMANCE
- ------------------------
Market value of stock-Close $ 29.020 $ 29.270
Market value of stock-High $ 30.730 $ 30.000
Market value of stock-Low $ 28.270 $ 27.050
Book value of stock $ 12.33 $ 11.84
Tangible book value of stock $ 10.06 $ 9.82
Tangible equity $ 586,290 $ 571,775
Market/Book value of stock 235.36% 247.21%
Price/Earnings ratio 15.69 14.19
Dividend payout 41.30% 36.54%
OTHER DATA
- ----------
EOP Employees - FTE 2,425 2,356
NOTES TO CONSOLIDATED FINANCIALS
Note 1- Business Combinations
On March 12, 2004, Trustmark acquired five branches of Allied Houston Bank in a
business combination accounted for by the purchase method of accounting. In
connection with the transaction, Trustmark acquired approximately $148.1 million
in assets and assumed $161.7 million in deposits and other liabilities for a $10
million deposit premium. Assets consisted of $145.9 million in loans, $585
thousand in premises and equipment and $1.6 million in other assets. The assets
and liabilities have been recorded at fair value based on market conditions and
risk characteristics at the acquisition date. Loans were recorded at a $6.4
million discount, consisting of a discount for general credit risk of $7.3
million offset by a market valuation premium of $862 thousand. Included in the
credit risk discount of $7.3 million was a specific amount for nonaccrual loans
of $1.7 million. Subsequent to the purchase date, the unpaid principal for these
nonaccrual loans were written down to their net realizable value against the
recorded discount. Excess cost over tangible net assets acquired totaled $15.7
million, of which $426 thousand and $15.3 million have been allocated to core
deposits and goodwill, respectively. Trustmark's financial statements include
the results of operations for this acquisition from the merger date.
On August 29, 2003, Trustmark acquired seven Florida branches of The Banc
Corporation of Birmingham, Alabama, in a business combination accounted for by
the purchase method of accounting. These branches, known as the Emerald Coast
Division, serve the markets from Destin to Panama City. In connection with the
transaction, Trustmark paid a $46.8 million deposit premium in exchange for
$232.8 million in assets and $209.2 million in deposits and other liabilities.
Assets consisted of $224.3 million in loans, $6.8 million in premises and
equipment and $1.7 million in other assets. These assets and liabilities have
been recorded at fair value based on market conditions and risk characteristics
at the acquisition date. Loans were recorded at a $1.9 million discount,
consisting of a discount for general credit risk of $3.5 million offset by a
market valuation premium of $1.6 million. Excess costs over tangible net assets
acquired totaled $49.5 million, of which $1.7 million and $47.8 million have
been allocated to core deposits and goodwill, respectively. Trustmark's
financial statements include the results of operations for this acquisition from
the merger date.
Note 2 - Loans and Allowance for Loan Losses
For the periods presented, loans consisted of the following:
3/31/2004 12/31/2003 3/31/2003
---------- ---------- ----------
Real Estate $3,197,065 $3,085,404 $2,657,450
Commercial and industrial 838,950 787,094 776,249
Consumer 756,597 787,316 817,726
Other 405,684 372,798 379,655
---------- ---------- ----------
Loans 5,198,296 5,032,612 4,631,080
Less Allowance for loan losses 74,179 74,276 74,867
---------- ---------- ----------
Net Loans $5,124,117 $4,958,336 $4,556,213
========== ========== ==========
Loans are stated at the amount of unpaid principal, adjusted for the net amount
of direct costs, nonrefundable loan fees and discounts on purchased loans. As
mentioned in Note 1, Trustmark purchased $370.2 million in net loans through
branch purchase acquisitions in Florida and Texas. The discount associated with
the acquired loans, which is netted against unpaid principal, was $10.8 million
and will be accreted into income over the life of the specific loans acquired
for loans which are expected to be fully collected. Unpaid principal on loans
that are not expected to be fully collected will be written down against the
recorded discount.
The allowance for loan losses is established through provisions for estimated
loan losses charged against earnings and is maintained at a level believed
adequate by Management to absorb estimated probable loan losses. However, in the
case of the acquired loans in Florida and Texas, no specific loan loss reserve
was required under generally accepted accounting principles at the purchase date
because the loans were purchased at a discount which considered interest rate
and credit risk. As a result, the ratio of the allowance for loan losses to
loans has decreased to 1.43% (see pages 3 and 6) for the quarter ended March 31,
2004.
Note 3 - Mortgage Servicing Rights
For the periods presented, the carrying amount of mortgage servicing rights are
as follows:
3/31/2004 12/31/2003 3/31/2003
---------- ---------- ----------
Mortgage Servicing Rights $ 65,476 $ 65,574 $ 58,857
Valuation Allowance (18,000) (15,867) (19,202)
---------- ---------- ----------
Mortgage Servicing Rights,net $ 47,476 $ 49,707 $ 39,655
========== ========== ==========
Mortgage servicing rights are rights to service mortgage loans for others,
whether the loans were acquired through purchase or loan origination. Purchased
mortgage servicing rights are capitalized at cost. For loans originated and sold
where the servicing rights are retained, Trustmark allocated the cost of the
loan and the servicing right based on their relative fair values. Mortgage
servicing rights are amortized over the estimated period of the related new
servicing income. At March 31, 2004 Trustmark serviced $3.4 billion in mortgage
loans for others.
Impairment for mortgage servicing rights occurs when the estimated fair value
falls below the underlying carrying value. Fair value is determined utilizing
specific risk characteristics of the mortgage loan, current interest rates and
current prepayment speeds. Trustmark would expect to recover a significant
portion of the valuation allowance when mortgage rates increase and stabilize
and prepayment speeds decrease. Since March 31, 2004, mortgage rates have
increased to December 2003 levels which would eliminate the impairment recorded
through other expenses for the quarter ended March 31, 2004.
Note 4 - Net Interest Margin
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
--------------------------------------
3/31/2004 12/31/2003 3/31/2003
---------- ---------- ----------
Securities - Taxable 3.32% 3.18% 4.97%
Securities - Nontaxable 7.68% 7.66% 8.02%
Securities - Total 3.65% 3.54% 5.24%
Loans 5.67% 5.85% 6.31%
FF Sold & Rev Repo 1.00% 1.03% 1.13%
Total Earning Assets 5.07% 5.18% 5.99%
Interest-bearing Deposits 1.35% 1.43% 1.83%
FF Pch & Repo 0.95% 0.96% 1.19%
Borrowings 1.87% 1.93% 2.85%
Total Interest-bearing
Liabilities 1.38% 1.45% 1.86%
Net interest margin 3.94% 4.00% 4.49%
Note 5 - Early Retirement Program
In February 2003, Trustmark announced a voluntary early retirement program (ERP)
for associates age 58 and above with ten or more years of service. This program
was accepted by 116 associates, or 4.75% of Trustmark's workforce. An after-tax
charge of approximately $4.1 million, or $0.07 per share, was recognized in
Trustmark's first quarter 2003 earnings.
Note 6 - Amortization/Impairment of Intangible Assets
The following table includes the components of amortization/impairment of
intangible assets:
Quarter Ended
--------------------------------------
3/31/2004 12/31/2003 3/31/2003
---------- ---------- ----------
Amortization:
Mortgage servicing rights $ 3,601 $ 2,894 $ 4,069
Other identifiable intang assets 583 577 864
Impairment of mortgage
servicing rights 2,133 (1,612) 6,722
---------- ---------- ----------
Total amort/impairment
of intangible assets $ 6,317 $ 1,859 $ 11,655
========== ========== ==========