Exhibit 99.1
[OBJECT OMITTED] News Release
FOR IMMEDIATE RELEASE
April 19, 2005
Trustmark Announces First Quarter Earnings
Jackson, Miss. - Trustmark Corporation (NASDAQ:TRMK) announced basic and diluted
earnings per share of $0.47 for the first quarter of 2005, compared to $0.46 for
the first quarter of 2004. During the first three months of 2005, earnings
totaled $26.8 million. Trustmark's first quarter net income produced annualized
returns on average shareholders' equity and average assets of 14.42% and 1.33%,
respectively. At March 31, 2005, Trustmark reported total loans of $5.6 billion,
total assets of $8.2 billion, total deposits of $5.5 billion and shareholders'
equity of $731.5 million.
Richard G. Hickson, Chairman and CEO of Trustmark Corporation, remarked, "Our
expansion efforts in Houston and the Florida Panhandle, along with solid
performance in our Jackson and Memphis markets, have contributed to Trustmark's
growth. Average loans in the first quarter of 2005 increased $425.6 million, or
8.4%, while average deposits grew $333.7 million, or 6.4%, when compared to
figures one year earlier. Increasing contributions from wealth management and
insurance services, combined with the solid profitability of our traditional
banking franchise, have enhanced Trustmark's earnings. 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."
During the first quarter, higher interest rates increased the value of
Trustmark's home mortgage servicing rights. Consequently, Trustmark reversed
non-cash mortgage servicing impairment charges recorded in previous quarters,
which increased the company's first quarter net income by $1.7 million, or
$0.029 per share. Additional non-cash recoveries of mortgage servicing
impairment could occur if interest rates rise, refinancing slows and the
expected life of home mortgage loans lengthens.
Trustmark is a financial services company providing banking and financial
solutions through over 145 offices and 2,600 associates in Florida, Mississippi,
Tennessee and Texas. For additional information, visit our web site at
www.trustmark.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of and
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. A forward-looking statement in this press release
encompasses any estimate, prediction, expectation, projection, opinion,
anticipation, outlook or statement of belief included therein, as well as the
management assumptions underlying those forward-looking statements. Factors that
might cause future results to differ from such forward-looking statements are
described in Trustmark's filings with the Securities and Exchange Commission.
Trustmark undertakes no obligation to update or revise any of this information,
whether as the result of new information, future events or developments, or
otherwise.
Trustmark Contacts
Investors: Zach Wasson Joseph Rein
Executive Vice President and CFO First Vice President
601-208-6816 601-208-6898
Media: Gray Wiggers
Senior Vice President
601-208-5942
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
($ in thousands)
(unaudited)
Quarter Ended March 31,
------------------------
AVERAGE BALANCES 2005 2004 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Securities AFS-taxable $1,504,392 $1,875,063 $(370,671) -19.8%
Securities AFS-nontaxable 66,592 71,632 (5,040) -7.0%
Securities HTM-taxable 130,171 84,455 45,716 54.1%
Securities HTM-nontaxable 85,690 89,273 (3,583) -4.0%
---------- ---------- ---------
Total securities 1,786,845 2,120,423 (333,578) -15.7%
---------- ---------- ---------
Loans 5,489,018 5,063,411 425,607 8.4%
Fed funds sold
and rev repos 48,031 17,238 30,793 178.6%
---------- ---------- ---------
Total earning assets 7,323,894 7,201,072 122,822 1.7%
---------- ----------- ---------
Allowance for loan losses (64,885) (74,368) 9,483 -12.8%
Cash and due from banks 348,803 336,755 12,048 3.6%
Other assets 530,989 465,950 65,039 14.0%
---------- ---------- ---------
Total assets $8,138,801 $7,929,409 $ 209,392 2.6%
========== ========== =========
Int-bearing demand dep $1,458,290 $1,307,488 $ 150,802 11.5%
Savings deposits 955,906 969,113 (13,207) -1.4%
Time deposits less than
$100,000 1,305,877 1,260,671 45,206 3.6%
Time deposits of $100,000
or more 549,299 457,432 91,867 20.1%
---------- ---------- ---------
Total interest-bearing dep 4,269,372 3,994,704 274,668 6.9%
Fed funds pch and repos 688,219 892,204 (203,985) -22.9%
Short-term borrowings 892,849 512,646 380,203 74.2%
Long-term FHLB advances 147,490 512,301 (364,811) -71.2%
---------- ---------- ---------
Total interest-bearing liab 5,997,930 5,911,855 86,075 1.5%
Nonint-bearing deposits 1,317,140 1,258,065 59,075 4.7%
Other liabilities 70,761 54,928 15,833 28.8%
Shareholders' equity 752,970 704,561 48,409 6.9%
---------- ---------- ---------
Total liab and equity $8,138,801 $7,929,409 $ 209,392 2.6%
========== ========== =========
March 31,
------------------------
PERIOD END BALANCES 2005 2004 $ Change % Change
- ------------------- ---------- ---------- --------- --------
Sec available for sale $1,527,247 $1,958,767 $(431,520) -22.0%
Sec held to maturity 300,234 169,708 130,526 76.9%
---------- ---------- ---------
Total securities 1,827,481 2,128,475 (300,994) -14.1%
Loans 5,572,808 5,198,296 374,512 7.2%
Fed funds sold and rev repos 10,378 19,209 (8,831) -46.0%
---------- ---------- ---------
Total earning assets 7,410,667 7,345,980 64,687 0.9%
---------- ---------- ---------
Allowance for loan losses (66,787) (74,179) 7,392 -10.0%
Cash and due from banks 286,868 340,114 (53,246) -15.7%
Mortgage servicing rights 55,484 47,476 8,008 16.9%
Goodwill 137,412 110,271 27,141 24.6%
Identifiable intangible assets 31,214 22,064 9,150 41.5%
Other assets 325,135 298,737 26,398 8.8%
---------- ---------- ---------
Total assets $8,179,993 $8,090,463 $ 89,530 1.1%
========== ========== =========
Nonint-bearing deposits $1,265,814 $1,316,817 $ (51,003) -3.9%
Int-bearing deposits 4,268,914 4,258,071 10,843 0.3%
---------- ---------- ---------
Total deposits 5,534,728 5,574,888 (40,160) -0.7%
Fed funds pch and repos 770,273 713,802 56,471 7.9%
Short-term borrowings 964,687 541,716 422,971 78.1%
Long-term FHLB advances 105,862 481,004 (375,142) -78.0%
Other liabilities 72,937 60,428 12,509 20.7%
---------- ---------- ---------
Total liabilities 7,448,487 7,371,838 76,649 1.0%
---------- ---------- ---------
Common stock 11,873 12,143 (270) -2.2%
Surplus 97,692 133,147 (35,455) -26.6%
Retained earnings 635,935 564,199 71,736 12.7%
Accum other comprehensive
(loss) income, net of tax (13,994) 9,136 (23,130) n/m
---------- ---------- ---------
Total shareholders' equity 731,506 718,625 12,881 1.8%
---------- ---------- ---------
Total liab and equity $8,179,993 $8,090,463 $ 89,530 1.1%
========== ========== =========
Total int-bearing liab $6,109,736 $5,994,593 $ 115,143 1.9%
========== ========== =========
n/m - not meaningful
Quarter Ended March 31,
------------------------
INCOME STATEMENTS 2005 2004 $ Change % Change
- ----------------- ---------- ---------- --------- --------
Int and fees on loans-FTE $ 79,044 $ 71,442 $ 7,602 10.6%
Int on securities-taxable 15,734 16,196 (462) -2.9%
Int on securities-tax
exempt-FTE 2,863 3,071 (208) -6.8%
Int on fed funds sold
and rev repo 273 43 230 534.9%
Other interest income 20 12 8 66.7%
---------- ---------- ---------
Total interest income-FTE 97,934 90,764 7,170 7.9%
---------- ---------- ---------
Interest on deposits 16,368 13,386 2,982 22.3%
Interest on fed funds
pch and repos 3,648 2,104 1,544 73.4%
Other interest expense 7,497 4,758 2,739 57.6%
---------- ---------- ---------
Total interest expense 27,513 20,248 7,265 35.9%
---------- ---------- ---------
Net interest income-FTE 70,421 70,516 (95) -0.1%
Provision for loan losses 2,796 1,052 1,744 165.8%
---------- ---------- ---------
Net interest income after
provision-FTE 67,625 69,464 (1,839) -2.6%
---------- ---------- ---------
Service charges on
deposit accounts 12,384 13,326 (942) -7.1%
Insurance commissions 7,862 3,185 4,677 146.8%
Wealth management 5,243 5,016 227 4.5%
Retail banking - other 4,752 4,132 620 15.0%
Mortgage banking 3,851 (1,903) 5,754 n/m
Other, net 2,453 2,220 233 10.5%
---------- ---------- ---------
Nonint inc-excl sec gains 36,545 25,976 10,569 40.7%
Security gains 3 13 (10) -76.9%
---------- ---------- ---------
Total noninterest income 36,548 25,989 10,559 40.6%
---------- ---------- ---------
Salaries and employee
benefits 37,359 31,109 6,250 20.1%
Services and fees 8,958 8,379 579 6.9%
Net occupancy-premises 3,691 3,213 478 14.9%
Equipment expense 3,953 3,542 411 11.6%
Other expense 7,181 6,704 477 7.1%
---------- ---------- ---------
Total noninterest expense 61,142 52,947 8,195 15.5%
---------- ---------- ---------
Income before income taxes 43,031 42,506 525 1.2%
Tax equivalent adjustment 2,012 2,157 (145) -6.7%
Income taxes 14,238 13,598 640 4.7%
---------- ---------- ---------
Net income $ 26,781 $ 26,751 $ 30 0.1%
========== ========== =========
Earnings per share
Basic $ 0.47 $ 0.46 $ 0.01 2.2%
========== ========== =========
Diluted $ 0.47 $ 0.46 $ 0.01 2.2%
========== ========== =========
Weighted average shares o/s
Basic 57,399,430 58,267,684 -1.5%
========== ==========
Diluted 57,545,056 58,587,611 -1.8%
========== ==========
Period end shares o/s 56,982,701 58,280,233 -2.2%
========== ==========
Dividends per share $ 0.2000 $ 0.1900 5.3%
========== ==========
n/m - not meaningful
March 31,
------------------------
NONPERFORMING ASSETS 2005 2004 $ Change % Change
- -------------------- ---------- ---------- --------- --------
Nonaccrual loans $ 36,595 $ 27,482 $ 9,113 33.2%
Restructured loans - - -
---------- ---------- ---------
Total nonperforming loans 36,595 27,482 9,113 33.2%
Other real estate 4,306 7,149 (2,843) -39.8%
---------- ---------- ---------
Total nonperforming assets 40,901 34,631 6,270 18.1%
Loans past due over 90 days 1,506 5,443 (3,937) -72.3%
---------- ---------- ---------
Total nonperforming assets
plus past due over 90 days $ 42,407 $ 40,074 $ 2,333 5.8%
========== ========== =========
Quarter Ended March 31,
------------------------
ALLOWANCE FOR LOAN LOSSES 2005 2004 $ Change % Change
- ------------------------- ---------- ---------- --------- --------
Beginning Balance $ 64,757 $ 74,276 $ (9,519) -12.8%
Charge-offs (3,182) (3,828) 646 -16.9%
Recoveries 2,416 2,679 (263) -9.8%
Provision for loan losses 2,796 1,052 1,744 n/m
---------- ---------- ---------
Ending Balance $ 66,787 $ 74,179 $ (7,392) -10.0%
========== ========== =========
Quarter Ended March 31,
-----------------------
RATIOS 2005 2004
- ------ ---------- ----------
ROA 1.33% 1.36%
ROE 14.42% 15.27%
Equity generation rate 8.29% 8.96%
EOP equity/ EOP assets 8.94% 8.88%
Average equity/average assets 9.25% 8.89%
Interest margin - Yield - FTE 5.42% 5.07%
Interest margin - Cost - FTE 1.52% 1.13%
Net interest margin - FTE 3.90% 3.94%
Rate on interest-bearing liabilities 1.86% 1.38%
Efficiency ratio 59.37% 54.18%
Expense ratio 1.36% 1.51%
Net charge offs/average loans 0.06% 0.09%
Provision for loan losses/average loans 0.21% 0.08%
Nonperforming loans/total loans 0.66% 0.53%
Nonperforming assets/total loans 0.73% 0.67%
Nonperforming assets/total loans+ORE 0.73% 0.67%
ALL/nonperforming loans 182.50% 269.92%
ALL/total loans 1.20% 1.43%
Net loans/total assets 67.31% 63.34%
COMMON STOCK PERFORMANCE
- ------------------------
Market value of stock-Close $ 29.000 $ 29.020
Market value of stock-High $ 31.150 $ 30.730
Market value of stock-Low $ 26.690 $ 28.270
Book value of stock $ 12.84 $ 12.33
Tangible book value of stock $ 9.88 $ 10.06
Tangible equity $ 562,880 $ 586,290
Market/Book value of stock 225.86% 235.36%
Price/Earnings ratio 15.21 15.69
Dividend payout 42.55% 41.30%
OTHER DATA
- ----------
EOP Employees - FTE 2,616 2,425
n/m - not meaningful
Quarter Ended
------------------------
AVERAGE BALANCES 3/31/2005 12/31/2004 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Securities AFS-taxable $1,504,392 $1,796,714 $(292,322) -16.3%
Securities AFS-nontaxable 66,592 68,745 (2,153) -3.1%
Securities HTM-taxable 130,171 55,610 74,561 134.1%
Securities HTM-nontaxable 85,690 86,741 (1,051) -1.2%
---------- ---------- ---------
Total securities 1,786,845 2,007,810 (220,965) -11.0%
---------- ---------- ---------
Loans 5,489,018 5,382,489 106,529 2.0%
Fed funds sold and
rev repos 48,031 36,388 11,643 32.0%
---------- ---------- ---------
Total earning assets 7,323,894 7,426,687 (102,793) -1.4%
---------- ---------- ---------
Allowance for loan losses (64,885) (73,955) 9,070 -12.3%
Cash and due from banks 348,803 319,383 29,420 9.2%
Other assets 530,989 503,218 27,771 5.5%
---------- ---------- ---------
Total assets $8,138,801 $8,175,333 $ (36,532) -0.4%
========== ========== =========
Int-bearing demand dep $1,458,290 $1,301,509 $ 156,781 12.0%
Savings deposits 955,906 939,395 16,511 1.8%
Time deposits less
than $100,000 1,305,877 1,358,170 (52,293) -3.9%
Time deposits of
$100,000 or more 549,299 497,876 51,423 10.3%
---------- ---------- ---------
Total interest-bearing dep 4,269,372 4,096,950 172,422 4.2%
Fed funds pch and repos 688,219 797,724 (109,505) -13.7%
Short-term borrowings 892,849 1,001,530 (108,681) -10.9%
Long-term FHLB advances 147,490 164,081 (16,591) -10.1%
---------- ---------- ---------
Total interest-bearing
liabilities 5,997,930 6,060,285 (62,355) -1.0%
Nonint-bearing deposits 1,317,140 1,291,621 25,519 2.0%
Other liabilities 70,761 74,476 (3,715) -5.0%
Shareholders' equity 752,970 748,951 4,019 0.5%
---------- ---------- ---------
Total liab and equity $8,138,801 $8,175,333 $ (36,532) -0.4%
========== ========== =========
PERIOD END BALANCES 3/31/2005 12/31/2004 $ Change % Change
- ------------------- ---------- ---------- --------- --------
Sec available for sale $1,527,247 $1,580,270 $ (53,023) -3.4%
Sec held to maturity 300,234 136,797 163,437 119.5%
---------- ---------- ---------
Total securities 1,827,481 1,717,067 110,414 6.4%
Loans 5,572,808 5,431,277 141,531 2.6%
Fed funds sold and rev repos 10,378 86,191 (75,813) -88.0%
---------- ---------- ---------
Total earning assets 7,410,667 7,234,535 176,132 2.4%
---------- ---------- ---------
Allowance for loan losses (66,787) (64,757) (2,030) 3.1%
Cash and due from banks 286,868 343,125 (56,257) -16.4%
Mortgage servicing rights 55,484 52,463 3,021 5.8%
Goodwill 137,412 137,225 187 0.1%
Identifiable intangible assets 31,214 32,004 (790) -2.5%
Other assets 325,135 318,362 6,773 2.1%
---------- ---------- ---------
Total assets $8,179,993 $8,052,957 $ 127,036 1.6%
========== ========== =========
Nonint-bearing deposits $1,265,814 $1,354,749 $ (88,935) -6.6%
Int-bearing deposits 4,268,914 4,095,344 173,570 4.2%
---------- ---------- ---------
Total deposits 5,534,728 5,450,093 84,635 1.6%
Fed funds pch and repos 770,273 617,546 152,727 24.7%
Short-term borrowings 964,687 980,318 (15,631) -1.6%
Long-term FHLB advances 105,862 180,894 (75,032) -41.5%
Other liabilities 72,937 73,710 (773) -1.0%
---------- ---------- ---------
Total liabilities 7,448,487 7,302,561 145,926 2.0%
---------- ---------- ---------
Common stock 11,873 12,055 (182) -1.5%
Surplus 97,692 121,705 (24,013) -19.7%
Retained earnings 635,935 620,588 15,347 2.5%
Accum other comprehensive
loss, net of tax (13,994) (3,952) (10,042) n/m
---------- ---------- ---------
Total shareholders' equity 731,506 750,396 (18,890) -2.5%
---------- ---------- ---------
Total liab and equity $8,179,993 $8,052,957 $ 127,036 1.6%
========== ========== =========
Total int-bearing liab $6,109,736 $5,874,102 $ 235,634 4.0%
========== ========== =========
n/m - not meaningful
Quarter Ended
------------------------
INCOME STATEMENTS 3/31/2005 12/31/2004 $ Change % Change
- ----------------- ---------- ---------- --------- --------
Int and fees on loans-FTE $ 79,044 $ 77,418 $ 1,626 2.1%
Int on securities-taxable 15,734 14,596 1,138 7.8%
Int on securities-tax
exempt-FTE 2,863 2,930 (67) -2.3%
Int on fed funds sold
and rev repos 273 191 82 42.9%
Other interest income 20 18 2 11.1%
---------- ---------- ---------
Total interest income-FTE 97,934 95,153 2,781 2.9%
---------- ---------- ---------
Interest on deposits 16,368 14,864 1,504 10.1%
Interest on fed funds
pch and repos 3,648 3,378 270 8.0%
Other interest expense 7,497 7,071 426 6.0%
---------- ---------- ---------
Total interest expense 27,513 25,313 2,200 8.7%
---------- ---------- ---------
Net interest income-FTE 70,421 69,840 581 0.8%
Provision for loan losses 2,796 (6,971) 9,767 n/m
---------- ---------- ---------
Net interest income after
provision-FTE 67,625 76,811 (9,186) -12.0%
---------- ---------- ---------
Service charges on
deposit accounts 12,384 13,979 (1,595) -11.4%
Insurance commissions 7,862 5,079 2,783 54.8%
Wealth management 5,243 5,265 (22) -0.4%
Retail banking - other 4,752 4,972 (220) -4.4%
Mortgage banking 3,851 2,304 1,547 67.1%
Other, net 2,453 962 1,491 155.0%
---------- ---------- ---------
Nonint inc-excl sec
gains (losses) 36,545 32,561 3,984 12.2%
Security gains (losses) 3 (4,664) 4,667 n/m
---------- ---------- ---------
Total noninterest income 36,548 27,897 8,651 31.0%
---------- ---------- ---------
Salaries and employee
benefits 37,359 35,499 1,860 5.2%
Services and fees 8,958 8,825 133 1.5%
Net occupancy-premises 3,691 4,250 (559) -13.2%
Equipment expense 3,953 3,885 68 1.8%
Other expense 7,181 6,908 273 4.0%
---------- ---------- ---------
Total noninterest expense 61,142 59,367 1,775 3.0%
---------- ---------- ---------
Income before income taxes 43,031 45,341 (2,310) -5.1%
Tax equivalent adjustment 2,012 2,053 (41) -2.0%
Income taxes 14,238 14,440 (202) -1.4%
---------- ---------- ---------
Net income $ 26,781 $ 28,848 $ (2,067) -7.2%
========== ========== =========
Earnings per share
Basic $ 0.47 $ 0.50 $ (0.03) -6.0%
========== ========== =========
Diluted $ 0.47 $ 0.50 $ (0.03) -6.0%
========== ========== =========
Weighted average shares o/s
Basic 57,399,430 57,863,624 -0.8%
========== ==========
Diluted 57,545,056 58,200,352 -1.1%
========== ==========
Period end shares o/s 56,982,701 57,858,497 -1.5%
========== ==========
Dividends per share $ 0.2000 $ 0.2000 0.0%
========== ==========
n/m - not meaningful
NONPERFORMING ASSETS 3/31/2005 12/31/2004 $ Change % Change
- -------------------- ---------- ---------- --------- --------
Nonaccrual loans $ 36,595 $ 21,864 $ 14,731 67.4%
Restructured loans - - -
---------- ---------- ---------
Total nonperforming loans 36,595 21,864 14,731 67.4%
Other real estate 4,306 5,615 (1,309) -23.3%
---------- ---------- ---------
Total nonperforming assets 40,901 27,479 13,422 48.8%
Loans past due over 90 days 1,506 5,284 (3,778) -71.5%
---------- ---------- ---------
Total nonperforming assets
plus past due over 90 days $ 42,407 $ 32,763 $ 9,644 29.4%
========== ========== =========
Quarter Ended
------------------------
ALLOWANCE FOR LOAN LOSSES 3/31/2005 12/31/2004 $ Change % Change
- ------------------------- ---------- ---------- --------- --------
Beginning Balance $ 64,757 $ 74,179 $ (9,422) -12.7%
Charge-offs (3,182) (4,451) 1,269 -28.5%
Recoveries 2,416 2,000 416 20.8%
Provision for loan losses 2,796 (6,971) 9,767 n/m
---------- ---------- ---------
Ending Balance $ 66,787 $ 64,757 $ 2,030 3.1%
========== ========== =========
Quarter Ended
-----------------------
RATIOS 3/31/2005 12/31/2004
- ------ ---------- ----------
ROA 1.33% 1.40%
ROE 14.42% 15.32%
Equity generation rate 8.29% 9.19%
EOP equity/ EOP assets 8.94% 9.32%
Average equity/average assets 9.25% 9.16%
Interest margin - Yield - FTE 5.42% 5.10%
Interest margin - Cost - FTE 1.52% 1.37%
Net interest margin - FTE 3.90% 3.74%
Rate on interest-bearing liabilities 1.86% 1.66%
Efficiency ratio 59.37% 58.71%
Expense ratio 1.36% 1.44%
Net charge offs/average loans 0.06% 0.18%
Provision for loan losses/average loans 0.21% -0.52%
Nonperforming loans/total loans 0.66% 0.40%
Nonperforming assets/total loans 0.73% 0.51%
Nonperforming assets/total loans+ORE 0.73% 0.51%
ALL/nonperforming loans 182.50% 296.18%
ALL/total loans 1.20% 1.19%
Net loans/total assets 67.31% 66.64%
COMMON STOCK PERFORMANCE
- ------------------------
Market value of stock-Close $ 29.000 $ 31.070
Market value of stock-High $ 31.150 $ 32.780
Market value of stock-Low $ 26.690 $ 29.120
Book value of stock $ 12.84 $ 12.97
Tangible book value of stock $ 9.88 $ 10.04
Tangible equity $ 562,880 $ 581,167
Market/Book value of stock 225.86% 239.55%
Price/Earnings ratio 15.21 15.62
Dividend payout 42.55% 40.00%
OTHER DATA
- ----------
EOP Employees - FTE 2,616 2,598
n/m - not meaningful
NOTES TO CONSOLIDATED FINANCIALS
Note 1- Business Combinations
On December 1, 2004, Trustmark acquired Fisher-Brown, Incorporated, located in
Pensacola, Florida. This business combination was accounted for under the
purchase method of accounting and includes the results of operations for
Fisher-Brown from the transaction date. Excess cost over tangible net assets
acquired totaled $36.2 million, of which $9.3 million and $26.9 million have
been allocated to identifiable intangibles and goodwill, respectively.
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
identifiable intangibles (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:
3/31/05 12/31/04 3/31/04
---------- ---------- ----------
Real Estate $3,469,374 $3,394,033 $3,197,065
Commercial and industrial 900,680 865,436 838,950
Consumer 817,058 802,334 756,597
Other 385,696 369,474 405,684
---------- ---------- ----------
Loans 5,572,808 5,431,277 5,198,296
Less Allowance for loan losses 66,787 64,757 74,179
---------- ---------- ----------
Net Loans $5,506,021 $5,366,520 $5,124,117
========== ========== ==========
The allowance for loan losses is maintained at a level believed adequate by
management, based on estimated probable losses within the existing loan
portfolio. Trustmark's allowance for possible loan loss methodology is based on
guidance provided in SEC Staff Accounting Bulletin No. 102, "Selected Loan Loss
Allowance Methodology and Documentation Issues," as well as other regulatory
guidance. Accordingly, Trustmark's methodology is based on historical loss
experience by type of loan and internal risk ratings, homogeneous risk pools,
and specific loss allocations, with adjustments considering current economic
events and conditions. The provision for loan losses reflects loan quality
trends, including the levels of and trends related to non-accrual loans, past
due loans, potential problem loans, criticized loans and net charge-offs or
recoveries and other factors.
During the fourth quarter of 2004, Trustmark recorded a release of $9.4 million
to the allowance for loan losses resulting from changes in estimates to specific
factors for pooled loans and a specific class of commercial loans, both of which
had experienced positive trends in loss experience. As a result, Trustmark
recognized a benefit of $7.0 million and $3.1 million in the provision for loan
losses for the quarter and year ended December 31, 2004, respectively.
At March 31, 2005 non-performing loans totaled $36.6 million compared to $21.9
million at December 31, 2004 and $27.5 million at March 31, 2004. The increase
in nonperforming loans from December 31, 2004, is primarily attributable to a
single commercial credit of approximately $14.9 million of which $13.6 million
was placed on nonaccrual during the first quarter of 2005.
Note 3 - Mortgage Banking
For the periods presented, the carrying amount of mortgage servicing rights are
as follows:
3/31/05 12/31/04 3/31/04
---------- ---------- ----------
Mortgage Servicing Rights $ 58,796 $ 58,507 $ 65,476
Valuation Allowance (3,312) (6,044) (18,000)
---------- ---------- ----------
Mortgage Servicing Rights, net $ 55,484 $ 52,463 $ 47,476
========== ========== ==========
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 net
servicing income. At March 31, 2005, Trustmark serviced $3.5 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. During 2004, Trustmark reclassified $7.1 million of
mortgage servicing right impairment from temporary to other-than-temporary which
reduced the valuation allowance for impairment and the gross mortgage servicing
rights balance with no effect to the net mortgage servicing rights asset.
Impairment is considered to be other-than-temporary when Trustmark determines
that the carrying value is expected to exceed the fair value for an extended
period of time.
The following table illustrates the components of mortgage banking included in
noninterest income in the accompanying income statements:
Quarter Ended
--------------------------------------
3/31/05 12/31/04 3/31/04
---------- ---------- ----------
Mortgage servicing income $ 4,195 $ 4,252 $ 4,228
Mortgage guaranty fees (1,099) (1,093) (1,095)
---------- ---------- ----------
Mortgage servicing, net 3,096 3,159 3,133
Amortization of mortgage
servicing rights (2,620) (2,750) (3,601)
Recovery/(Impairment) of mortgage
servicing rights 2,732 1,275 (2,133)
Gain on sale of loans 334 357 550
Other, net 309 263 148
---------- ---------- ----------
Mortgage banking $ 3,851 $ 2,304 $ (1,903)
========== ========== ==========
Note 4 - 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
--------------------------------------
3/31/05 12/31/04 3/31/04
---------- ---------- ----------
Securities - Taxable 3.90% 3.13% 3.32%
Securities - Nontaxable 7.62% 7.50% 7.68%
Securities - Total 4.22% 3.47% 3.65%
Loans 5.84% 5.72% 5.67%
FF Sold & Rev Repo 2.31% 2.09% 1.00%
Total Earning Assets 5.42% 5.10% 5.07%
Interest-bearing Deposits 1.55% 1.44% 1.35%
FF Pch & Repo 2.15% 1.68% 0.95%
Borrowings 2.92% 2.41% 1.87%
Total Interest-bearing
Liabilities 1.86% 1.66% 1.38%
Net interest margin 3.90% 3.74% 3.94%
During the fourth quarter of 2004, Trustmark incurred a loss of $4.7 million on
the sales of $303.5 million in available for sale securities. Securities sold
were comprised of mortgage related and U.S. Treasury issues with an average life
and duration of 1.05 years and 1.01 years, respectively. Book yields on the
securities sold were expected to be less than funding costs anticipated in 2005.
Trustmark expects to use the proceeds from these sales to reinvest in new
securities as opportunities arise.
The impact of these security sales was also felt during the first quarter of
2005 as premium amortization on mortgage related securities decreased from $4.3
million to $900 thousand as Trustmark had less premium to amortize on remaining
securities. Premium amortization was also impacted by slower prepayment speeds
on mortgage related securities resulting from a slow down in mortgage
refinancing during a rising interest rate environment.
Note 5 - Basis of Presentation
Certain reclassifications have been made to prior period amounts to conform with
the current period presentation.