Exhibit 99.1
[OBJECT OMITTED] News Release
Trustmark Announces Second Quarter Financial Results
Jackson, Miss. - July 19, 2005 - Trustmark Corporation (NASDAQ:TRMK) announced
financial results for the second quarter ended June 30, 2005. Highlights of the
quarter included:
o Total loans increased $396.5 million, or 7.36%, compared to figures one
year earlier
o Total deposits expanded $277.6 million, or 5.29%, compared to figures one
year earlier
o Sale of certain investment securities to better position balance sheet for
rising interest rate environment
o Recognized as Dividend Achiever by Mergent, Inc.
Net income was $22.2 million in the second quarter of 2005, which represented
basic and diluted earnings per share of $0.39. Earnings during the quarter
included a non-cash after-tax charge of $3.0 million, or $0.052 per share, for
impairment of the Company's home mortgage servicing portfolio related to
declines in long-term interest rates during the quarter. This non-cash charge
against income could be reversed, in whole or in part, if long-term interest
rates rise, refinancing slows and the expected life of home mortgage loans
lengthens. Also included in the financial results for the second quarter is an
after-tax charge of $2.5 million, or $0.044 per share, related to the sale of
certain investment securities. Trustmark's performance for the quarter ended
June 30, 2005 resulted in a return on average assets of 1.08% and a return on
average shareholders' equity of 11.84%. Excluding the home mortgage servicing
impairment charge and the loss on the sale of investment securities, Trustmark's
performance for the second quarter resulted in a return on average assets of
1.35% and return on average shareholders' equity of 14.76%.
Basic and diluted earnings per share for the six months ended June 30, 2005 were
$0.86. Trustmark's performance during the first half of 2005 resulted in a
return on average assets of 1.21% and a return on average shareholders' equity
of 13.13%. At June 30, 2005, Trustmark reported total loans of $5.8 billion,
total deposits of $5.5 billion and shareholders' equity of $744.6 million.
Richard G. Hickson, Chairman and CEO, stated, "Financial institutions have faced
significant challenges in the current interest rate environment. This year,
short-term interest rates have risen 100 basis points while most longer-term
rates have fallen, resulting in a relatively flat yield curve. As such, the
profitability of holding longer-term investment securities has diminished. We
are continuing to implement strategies, as we did in the fourth quarter of 2004,
to mitigate our exposure to cyclical increases in interest rates. To this end,
Trustmark sold $256 million in U.S. Government Agency and U.S. Treasury
securities with an average maturity of 2.14 years, which reduced second quarter
net income by $2.5 million. Proceeds from the sale were used to reduce balances
of higher-cost funding sources, which are estimated to exceed the average book
yield of 2.94% of the securities sold. We intend to maintain lower balances of
investment securities, and reduce dependence on wholesale funding until market
conditions provide more attractive reinvestment opportunities.
"At June 30, 2005, our investment securities portfolio comprised 19% of total
assets and had an average duration of 2.46 years. We intentionally reduced the
size of the investment portfolio in the fourth quarter of 2004 and again in the
second quarter of 2005 and have maintained a historically short duration. As a
consequence, our spread, which is the difference in interest income on our
assets less the interest expense on our deposits and other funding, has been
constrained, as investment yields remain low. As such, we have forgone current
earnings in an effort to better position our net interest margin in a rising
rate environment," said Hickson.
"We are pleased with loan growth throughout our four state franchise. During the
twelve-month period ending June 30, 2005, Trustmark's total loans increased
$396.5 million, or 7.36% due in part to growth in Trustmark's Florida Gulf
Coast, Mortgage Banking, Commercial Real Estate and Indirect Auto portfolios.
Loans grew approximately $208 million, or 3.74% from the first quarter of 2005.
We are especially pleased that our Florida Gulf Coast markets now represent
approximately $515 million, or 8.9% of Trustmark's loan portfolio. The growth of
our loan portfolio has not been at the expense of credit quality, which
continues to be a hallmark of our organization. Nonperforming assets were $36.3
million at June 30, 2005, and the allowance coverage for nonperforming loans was
201.6%. Net charge offs represented 0.16% of average loans in the second
quarter," said Hickson.
"Total deposits increased $277.6 million, or 5.29% when compared to figures one
year earlier, due in part to the contributions of our Florida Gulf Coast and
Memphis markets as well as our Corporate and Public Services groups. We remain
diligently focused upon increasing core deposit relationships under attractive
terms. In this regard, we will be opening a total of 8 to 10 new banking centers
in the Florida Gulf Coast, Houston, Jackson and Memphis markets during the next
24 months. Locations in these attractive markets will present excellent
opportunities for additional deposit growth," said Hickson.
"In addition to growth of our general banking franchise, significant
achievements have been noted in Trustmark's other financial services businesses.
Insurance revenues in the second quarter of 2005 increased 93% when compared to
figures one year earlier. This growth is attributable in part to our acquisition
of Fisher-Brown, Inc., northwest Florida's leading insurance agency. Revenue
from our wealth management business, which has assets under management and
administration of $6.1 billion, increased 9.2% relative to the comparable period
in 2004. Collectively, revenues from our insurance and wealth management
businesses totaled $26.9 million, or 13.12% of total revenue during the first
half of 2005," remarked Hickson.
"Revenue generation and prudent expense management remain key areas of focus at
Trustmark. We are pleased to have reduced non-interest expenses by 1.4% on a
linked quarter basis and will continue to make investments to support additional
revenue growth and profitability," said Hickson.
"Despite the challenges posed by the current interest rate environment and
relatively flat yield curve, the fundamentals of Trustmark's key businesses are
strong. We will continue to diversify our revenue stream, reduce exposure to
cyclical changes in interest rates, and diligently manage expenses," said
Hickson.
Mergent, Inc., a leading provider of global business and financial information
on publicly traded companies and fixed income securities, has again named
Trustmark Corporation a Mergent Dividend Achiever - a recognition reserved for
only 3% of dividend paying public companies in the United States. Mergent stated
that Trustmark is "part of an elite group of companies that consistently deliver
dividend increases to your shareholders." Trustmark has increased its annual
dividend 22 consecutive years.
During the first six months of 2005, Trustmark repurchased approximately 1.2
million of its common shares, including approximately 300 thousand during the
second quarter. At June 30, 2005, Trustmark had authority to repurchase up to an
additional 1.8 million shares. The repurchase program is subject to market
conditions and management discretion and will continue to be implemented through
open market purchases or privately negotiated transactions.
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 June 30,
-----------------------
AVERAGE BALANCES 2005 2004 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Securities AFS-taxable $1,390,756 $1,944,596 $(553,840) -28.5%
Securities AFS-nontaxable 63,520 70,569 (7,049) -10.0%
Securities HTM-taxable 209,566 76,931 132,635 172.4%
Securities HTM-nontaxable 93,658 88,327 5,331 6.0%
---------- ---------- ---------
Total securities 1,757,500 2,180,423 (422,923) -19.4%
---------- ---------- ---------
Loans 5,669,110 5,288,298 380,812 7.2%
Fed funds sold and
rev repos 18,308 24,132 (5,824) -24.1%
---------- ---------- ---------
Total earning assets 7,444,918 7,492,853 (47,935) -0.6%
---------- ---------- ---------
Allowance for loan losses (66,243) (74,215) 7,972 -10.7%
Cash and due from banks 343,117 337,596 5,521 1.6%
Other assets 532,805 486,184 46,621 9.6%
---------- ---------- ---------
Total assets $8,254,597 $8,242,418 $ 12,179 0.1%
========== ========== =========
Int-bearing demand dep $1,251,831 $1,350,812 $ (98,981) -7.3%
Savings deposits 1,124,568 1,020,639 103,929 10.2%
Time deposits less than
$100,000 1,312,717 1,280,910 31,807 2.5%
Time deposits of
$100,000 or more 588,732 456,185 132,547 29.1%
---------- ---------- ---------
Total interest-bearing dep 4,277,848 4,108,546 169,302 4.1%
Fed funds pch and repos 745,858 894,158 (148,300) -16.6%
Short-term borrowings 961,431 775,093 186,338 24.0%
Long-term FHLB advances 177,278 409,330 (232,052) -56.7%
---------- ---------- ---------
Total interest-bearing
liabilities 6,162,415 6,187,127 (24,712) -0.4%
Nonint-bearing deposits 1,261,788 1,283,043 (21,255) -1.7%
Other liabilities 78,121 54,867 23,254 42.4%
Shareholders' equity 752,273 717,381 34,892 4.9%
---------- ---------- ---------
Total liab and equity $8,254,597 $8,242,418 $ 12,179 0.1%
========== ========== =========
Year-to-date June 30,
-----------------------
AVERAGE BALANCES 2005 2004 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Securities AFS-taxable $1,447,260 $1,909,830 $(462,570) -24.2%
Securities AFS-nontaxable 65,048 71,101 (6,053) -8.5%
Securities HTM-taxable 170,088 80,693 89,395 110.8%
Securities HTM-nontaxable 89,696 88,800 896 1.0%
---------- ---------- ---------
Total securities 1,772,092 2,150,424 (378,332) -17.6%
---------- ---------- ---------
Loans 5,579,561 5,175,855 403,706 7.8%
Fed funds sold and
rev repos 33,087 20,685 12,402 60.0%
---------- ---------- ---------
Total earning assets 7,384,740 7,346,964 37,776 0.5%
---------- ---------- ---------
Allowance for loan losses (65,568) (74,292) 8,724 -11.7%
Cash and due from banks 345,944 337,176 8,768 2.6%
Other assets 531,903 476,066 55,837 11.7%
---------- ---------- ---------
Total assets $8,197,019 $8,085,914 $ 111,105 1.4%
========== ========== =========
Int-bearing demand dep $1,354,490 $1,329,150 $ 25,340 1.9%
Savings deposits 1,040,703 994,876 45,827 4.6%
Time deposits less than
$100,000 1,309,317 1,270,790 38,527 3.0%
Time deposits of
$100,000 or more 569,124 456,809 112,315 24.6%
---------- ---------- ---------
Total interest-bearing dep 4,273,634 4,051,625 222,009 5.5%
Fed funds pch and repos 717,198 893,181 (175,983) -19.7%
Short-term borrowings 927,329 643,870 283,459 44.0%
Long-term FHLB advances 162,466 460,816 (298,350) -64.7%
---------- ---------- ---------
Total interest-bearing
liabilities 6,080,627 6,049,492 31,135 0.5%
Nonint-bearing deposits 1,289,311 1,270,554 18,757 1.5%
Other liabilities 74,461 54,897 19,564 35.6%
Shareholders' equity 752,620 710,971 41,649 5.9%
---------- ---------- ---------
Total liab and equity $8,197,019 $8,085,914 $ 111,105 1.4%
========== ========== =========
June 30,
-----------------------
PERIOD END BALANCES 2005 2004 $ Change % Change
- ------------------- ---------- ---------- --------- --------
Sec available for sale $1,212,669 $1,992,239 $(779,570) -39.1%
Sec held to maturity 304,589 159,173 145,416 91.4%
---------- ---------- ---------
Total securities 1,517,258 2,151,412 (634,154) -29.5%
Loans 5,781,272 5,384,791 396,481 7.4%
Fed funds sold
and rev repos 24,025 23,102 923 4.0%
---------- ---------- ---------
Total earning assets 7,322,555 7,559,305 (236,750) -3.1%
---------- ---------- ---------
Allowance for loan losses (65,902) (74,179) 8,277 -11.2%
Cash and due from banks 300,585 269,560 31,025 11.5%
Mortgage servicing rights 51,561 54,635 (3,074) -5.6%
Goodwill 137,412 110,271 27,141 24.6%
Identifiable intangible
assets 30,425 21,672 8,753 40.4%
Other assets 318,558 309,073 9,485 3.1%
---------- ---------- ---------
Total assets $8,095,194 $8,250,337 $(155,143) -1.9%
========== ========== =========
Nonint-bearing deposits $1,249,464 $1,260,238 $ (10,774) -0.9%
Int-bearing deposits 4,271,260 3,982,931 288,329 7.2%
---------- ---------- ---------
Total deposits 5,520,724 5,243,169 277,555 5.3%
Fed funds pch and repos 726,846 915,121 (188,275) -20.6%
Short-term borrowings 818,142 944,715 (126,573) -13.4%
Long-term FHLB advances 205,827 380,970 (175,143) -46.0%
Other liabilities 79,017 56,561 22,456 39.7%
---------- ---------- ---------
Total liabilities 7,350,556 7,540,536 (189,980) -2.5%
---------- ---------- ---------
Common stock 11,824 12,044 (220) -1.8%
Surplus 91,619 120,608 (28,989) -24.0%
Retained earnings 646,782 586,215 60,567 10.3%
Accum other comprehensive
loss, net of tax (5,587) (9,066) 3,479 n/m
---------- ---------- ---------
Total shareholders' equity 744,638 709,801 34,837 4.9%
---------- ---------- ---------
Total liab and equity $8,095,194 $8,250,337 $(155,143) -1.9%
========== ========== =========
Total int-bearing liab $6,022,075 $6,223,737 $(201,662) -3.2%
========== ========== =========
n/m - not meaningful
PERIOD END BALANCES 6/30/2005 12/31/2004 $ Change % Change
- ------------------- ---------- ---------- --------- --------
Sec available for sale $1,212,669 $1,580,270 $(367,601) -23.3%
Sec held to maturity 304,589 136,797 167,792 122.7%
---------- ---------- ---------
Total securities 1,517,258 1,717,067 (199,809) -11.6%
Loans 5,781,272 5,431,277 349,995 6.4%
Fed funds sold
and rev repos 24,025 86,191 (62,166) -72.1%
---------- ---------- ---------
Total earning assets 7,322,555 7,234,535 88,020 1.2%
---------- ---------- ---------
Allowance for loan losses (65,902) (64,757) (1,145) 1.8%
Cash and due from banks 300,585 343,125 (42,540) -12.4%
Mortgage servicing rights 51,561 52,463 (902) -1.7%
Goodwill 137,412 137,225 187 0.1%
Identifiable intangible
assets 30,425 32,004 (1,579) -4.9%
Other assets 318,558 318,362 196 0.1%
---------- ---------- ---------
Total assets $8,095,194 $8,052,957 $ 42,237 0.5%
========== ========== =========
Nonint-bearing deposits $1,249,464 $1,354,749 $(105,285) -7.8%
Int-bearing deposits 4,271,260 4,095,344 175,916 4.3%
---------- ---------- ---------
Total deposits 5,520,724 5,450,093 70,631 1.3%
Fed funds pch and repos 726,846 617,546 109,300 17.7%
Short-term borrowings 818,142 980,318 (162,176) -16.5%
Long-term FHLB advances 205,827 180,894 24,933 13.8%
Other liabilities 79,017 73,710 5,307 7.2%
---------- ---------- ---------
Total liabilities 7,350,556 7,302,561 47,995 0.7%
---------- ---------- ---------
Common stock 11,824 12,055 (231) -1.9%
Surplus 91,619 121,705 (30,086) -24.7%
Retained earnings 646,782 620,588 26,194 4.2%
Accum other comprehensive
loss, net of tax (5,587) (3,952) (1,635) n/m
---------- ---------- ---------
Total shareholders' equity 744,638 750,396 (5,758) -0.8%
---------- ---------- ---------
Total liab and equity $8,095,194 $8,052,957 $ 42,237 0.5%
========== ========== =========
Total int-bearing liab $6,022,075 $5,874,102 $ 147,973 2.5%
========== ========== =========
n/m - not meaningful
Quarter Ended June 30,
-----------------------
INCOME STATEMENTS 2005 2004 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Int and fees on loans-FTE $ 85,641 $ 73,908 $ 11,733 15.9%
Int on securities-taxable 13,993 14,825 (832) -5.6%
Int on securities-tax
exempt-FTE 2,917 3,026 (109) -3.6%
Int on fed funds sold
and rev rep 143 63 80 127.0%
Other interest income 22 9 13 144.4%
---------- ---------- ---------
Total interest income-FTE 102,716 91,831 10,885 11.9%
---------- ---------- ---------
Interest on deposits 18,326 13,326 5,000 37.5%
Interest on fed funds
pch and repos 4,995 2,156 2,839 131.7%
Other interest expense 9,413 4,726 4,687 99.2%
---------- ---------- ---------
Total interest expense 32,734 20,208 12,526 62.0%
---------- ---------- ---------
Net interest income-FTE 69,982 71,623 (1,641) -2.3%
Provision for loan losses 1,429 1,703 (274) -16.1%
---------- ---------- ---------
Net interest income after
provision-FTE 68,553 69,920 (1,367) -2.0%
---------- ---------- ---------
Service charges on
deposit accounts 13,541 13,959 (418) -3.0%
Insurance commissions 8,370 4,346 4,024 92.6%
Wealth management 5,414 4,958 456 9.2%
Retail banking - other 5,284 4,685 599 12.8%
Mortgage banking (3,246) 9,101 (12,347) -135.7%
Other, net 2,644 1,821 823 45.2%
---------- ---------- ---------
Nonint inc-excl sec
(losses) gains 32,007 38,870 (6,863) -17.7%
Security (losses) gains (4,057) 2 (4,059) n/m
---------- ---------- ---------
Total noninterest income 27,950 38,872 (10,922) -28.1%
---------- ---------- ---------
Salaries and employee
benefits 37,245 32,974 4,271 13.0%
Services and fees 8,104 8,846 (742) -8.4%
Net occupancy-premises 3,661 3,517 144 4.1%
Equipment expense 3,855 3,781 74 2.0%
Other expense 7,396 6,660 736 11.1%
---------- ---------- ---------
Total noninterest expense 60,261 55,778 4,483 8.0%
---------- ---------- ---------
Income before income taxes 36,242 53,014 (16,772) -31.6%
Tax equivalent adjustment 2,073 2,075 (2) -0.1%
Income taxes 11,963 17,916 (5,953) -33.2%
---------- ---------- ---------
Net income $ 22,206 $ 33,023 $ (10,817) -32.8%
========== ========== =========
Earnings per share
Basic $ 0.39 $ 0.57 $ (0.18) -31.6%
========== ========== =========
Diluted $ 0.39 $ 0.57 $ (0.18) -31.6%
========== ========== =========
Weighted average shares o/s
Basic 56,828,841 58,055,793 -2.1%
========== ==========
Diluted 56,967,995 58,311,332 -2.3%
========== ==========
Period end shares o/s 56,751,801 57,804,333 -1.8%
========== ==========
Dividends per share $ 0.2000 $ 0.1900 5.3%
========== ==========
n/m - not meaningful
Year-to-date June 30,
-----------------------
INCOME STATEMENTS 2005 2004 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Int and fees on loans-FTE $ 164,685 $ 145,350 $ 19,335 13.3%
Int on securities-taxable 29,727 31,021 (1,294) -4.2%
Int on securities-tax
exempt-FTE 5,780 6,097 (317) -5.2%
Int on fed funds sold
and rev rep 416 106 310 292.5%
Other interest income 42 21 21 100.0%
---------- ---------- ---------
Total interest income-FTE 200,650 182,595 18,055 9.9%
---------- ---------- ---------
Interest on deposits 34,694 26,712 7,982 29.9%
Interest on fed funds
pch and repos 8,643 4,260 4,383 102.9%
Other interest expense 16,910 9,484 7,426 78.3%
---------- ---------- ---------
Total interest expense 60,247 40,456 19,791 48.9%
---------- ---------- ---------
Net interest income-FTE 140,403 142,139 (1,736) -1.2%
Provision for loan losses 4,225 2,755 1,470 53.4%
---------- ---------- ---------
Net interest income after
provision-FTE 136,178 139,384 (3,206) -2.3%
---------- ---------- ---------
Service charges on
deposit accounts 25,925 27,285 (1,360) -5.0%
Insurance commissions 16,232 7,531 8,701 115.5%
Wealth management 10,657 9,974 683 6.8%
Retail banking - other 10,036 8,817 1,219 13.8%
Mortgage banking 605 7,198 (6,593) -91.6%
Other, net 5,097 4,041 1,056 26.1%
---------- ---------- ---------
Nonint inc-excl sec
(losses) gains 68,552 64,846 3,706 5.7%
Security (losses) gains (4,054) 15 (4,069) n/m
---------- ---------- ---------
Total noninterest income 64,498 64,861 (363) -0.6%
---------- ---------- ---------
Salaries and employee
benefits 74,604 64,083 10,521 16.4%
Services and fees 17,062 17,225 (163) -0.9%
Net occupancy-premises 7,352 6,730 622 9.2%
Equipment expense 7,808 7,323 485 6.6%
Other expense 14,577 13,364 1,213 9.1%
---------- ---------- ---------
Total noninterest expense 121,403 108,725 12,678 11.7%
---------- ---------- ---------
Income before income taxes 79,273 95,520 (16,247) -17.0%
Tax equivalent adjustment 4,085 4,232 (147) -3.5%
Income taxes 26,201 31,514 (5,313) -16.9%
---------- ---------- ---------
Net income $ 48,987 $ 59,774 $ (10,787) -18.0%
========== ========== =========
Earnings per share
Basic $ 0.86 $ 1.03 $ (0.17) -16.5%
========== ========== =========
Diluted $ 0.86 $ 1.02 $ (0.16) -15.7%
========== ========== =========
Weighted average shares o/s
Basic 57,112,559 58,161,738 -1.8%
========== ==========
Diluted 57,251,397 58,449,362 -2.0%
========== ==========
Period end shares o/s 56,751,801 57,804,333 -1.8%
========== ==========
Dividends per share $ 0.4000 $ 0.3800 5.3%
========== ==========
n/m - not meaningful
June 30,
-----------------------
NONPERFORMING ASSETS 2005 2004 $ Change % Change
- -------------------- ---------- ---------- --------- --------
Nonaccrual loans $ 32,684 $ 27,001 $ 5,683 21.0%
Restructured loans - - -
---------- ---------- ---------
Total nonperforming loans 32,684 27,001 5,683 21.0%
Other real estate 3,634 6,256 (2,622) -41.9%
---------- ---------- ---------
Total nonperforming assets 36,318 33,257 3,061 9.2%
Loans past due over 90 days 1,698 3,574 (1,876) -52.5%
---------- ---------- ---------
Total nonperforming
assets plus past
due over 90 days $ 38,016 $ 36,831 $ 1,185 3.2%
========== ========== =========
Quarter Ended June 30,
-----------------------
ALLOWANCE FOR LOAN LOSSES 2005 2004 $ Change % Change
- ------------------------- ---------- ---------- --------- --------
Beginning Balance $ 66,787 $ 74,179 $ (7,392) -10.0%
Charge-offs (4,443) (3,827) (616) 16.1%
Recoveries 2,129 2,124 5 0.2%
Provision for loan losses 1,429 1,703 (274) -16.1%
---------- ---------- ---------
Ending Balance $ 65,902 $ 74,179 $ (8,277) -11.2%
========== ========== =========
Year-to-date June 30,
-----------------------
ALLOWANCE FOR LOAN LOSSES 2005 2004 $ Change % Change
- ------------------------- ---------- ---------- --------- --------
Beginning Balance $ 64,757 $ 74,276 $ (9,519) -12.8%
Charge-offs (7,625) (7,655) 30 -0.4%
Recoveries 4,545 4,803 (258) -5.4%
Provision for loan losses 4,225 2,755 1,470 53.4%
---------- ---------- ---------
Ending Balance $ 65,902 $ 74,179 $ (8,277) -11.2%
========== ========== =========
Quarter Ended June 30,
----------------------
RATIOS 2005 2004
- ------ ---------- ---------
ROA 1.08% 1.61%
ROE 11.84% 18.51%
Equity generation rate 5.77% 12.34%
EOP equity/ EOP assets 9.20% 8.60%
Average equity/average assets 9.11% 8.70%
Interest margin - Yield - FTE 5.53% 4.93%
Interest margin - Cost - FTE 1.76% 1.09%
Net interest margin - FTE 3.77% 3.84%
Rate on interest-bearing liab 2.13% 1.31%
Efficiency ratio 56.97% 53.86%
Net charge offs/average loans 0.16% 0.13%
Prov for loan losses/average loans 0.10% 0.13%
Nonperf loans/total loans 0.57% 0.50%
Nonperf assets/total loans 0.63% 0.62%
Nonperf assets/total loans+ORE 0.63% 0.62%
ALL/nonperforming loans 201.63% 274.73%
ALL/total loans 1.14% 1.38%
Net loans/total assets 70.60% 64.37%
COMMON STOCK PERFORMANCE
- ------------------------
Market value of stock-Close $ 29.250 $ 28.920
Market value of stock-High $ 29.670 $ 29.990
Market value of stock-Low $ 26.710 $ 25.890
Book value of stock $ 13.12 $ 12.28
Tangible book value of stock $ 10.16 $ 10.00
Tangible equity $ 576,801 $ 577,858
Market/Book value of stock 222.94% 235.50%
OTHER DATA
- ----------
EOP Employees - FTE 2,616 2,465
Year-to-date June 30,
----------------------
RATIOS 2005 2004
- ------ ---------- ---------
ROA 1.21% 1.49%
ROE 13.13% 16.91%
Equity generation rate 7.02% 10.67%
EOP equity/ EOP assets 9.20% 8.60%
Average equity/average assets 9.18% 8.79%
Interest margin - Yield - FTE 5.48% 5.00%
Interest margin - Cost - FTE 1.65% 1.11%
Net interest margin - FTE 3.83% 3.89%
Rate on interest-bearing liab 2.00% 1.34%
Efficiency ratio 57.83% 54.01%
Net charge offs/average loans 0.11% 0.11%
Prov for loan losses/average loans 0.15% 0.11%
Nonperf loans/total loans 0.57% 0.50%
Nonperf assets/total loans 0.63% 0.62%
Nonperf assets/total loans+ORE 0.63% 0.62%
ALL/nonperforming loans 201.63% 274.73%
ALL/total loans 1.14% 1.38%
Net loans/total assets 70.60% 64.37%
COMMON STOCK PERFORMANCE
- ------------------------
Market value of stock-Close $ 29.250 $ 28.920
Market value of stock-High $ 31.150 $ 30.730
Market value of stock-Low $ 26.690 $ 25.890
Book value of stock $ 13.12 $ 12.28
Tangible book value of stock $ 10.16 $ 10.00
Tangible equity $ 576,801 $ 577,858
Market/Book value of stock 222.94% 235.50%
n/m - not meaningful
Quarter Ended
----------------------
AVERAGE BALANCES 6/30/2005 3/31/2005 $ Change % Change
- ---------------- ---------- ---------- --------- --------
Securities AFS-taxable $1,390,756 $1,504,392 $(113,636) -7.6%
Securities AFS-nontaxable 63,520 66,592 (3,072) -4.6%
Securities HTM-taxable 209,566 130,171 79,395 61.0%
Securities HTM-nontaxable 93,658 85,690 7,968 9.3%
---------- ---------- ---------
Total securities 1,757,500 1,786,845 (29,345) -1.6%
---------- ---------- ---------
Loans 5,669,110 5,489,018 180,092 3.3%
Fed funds sold and
rev repos 18,308 48,031 (29,723) -61.9%
---------- ---------- ---------
Total earning assets 7,444,918 7,323,894 121,024 1.7%
---------- ---------- ---------
Allowance for loan losses (66,243) (64,885) (1,358) 2.1%
Cash and due from banks 343,117 348,803 (5,686) -1.6%
Other assets 532,805 530,989 1,816 0.3%
---------- ---------- ---------
Total assets $8,254,597 $8,138,801 $ 115,796 1.4%
========== ========== =========
Int-bearing demand dep $1,251,831 $1,458,290 $(206,459) -14.2%
Savings deposits 1,124,568 955,906 168,662 17.6%
Time deposits less
than $100,000 1,312,717 1,305,877 6,840 0.5%
Time deposits of
$100,000 or more 588,732 549,299 39,433 7.2%
---------- ---------- ---------
Total interest-bearing dep 4,277,848 4,269,372 8,476 0.2%
Fed funds pch and repos 745,858 688,219 57,639 8.4%
Short-term borrowings 961,431 892,849 68,582 7.7%
Long-term FHLB advances 177,278 147,490 29,788 20.2%
---------- ---------- ---------
Total interest-bearing
liabilities 6,162,415 5,997,930 164,485 2.7%
Nonint-bearing deposits 1,261,788 1,317,140 (55,352) -4.2%
Other liabilities 78,121 70,761 7,360 10.4%
Shareholders' equity 752,273 752,970 (697) -0.1%
---------- ---------- ---------
Total liab and equity $8,254,597 $8,138,801 $ 115,796 1.4%
========== ========== =========
PERIOD END BALANCES 6/30/2005 3/31/2005 $ Change % Change
- ------------------- ---------- ---------- --------- --------
Sec available for sale $1,212,669 $1,527,247 $(314,578) -20.6%
Sec held to maturity 304,589 300,234 4,355 1.5%
---------- ---------- ---------
Total securities 1,517,258 1,827,481 (310,223) -17.0%
Loans 5,781,272 5,572,808 208,464 3.7%
Fed funds sold
and rev repos 24,025 10,378 13,647 131.5%
---------- ---------- ---------
Total earning assets 7,322,555 7,410,667 (88,112) -1.2%
---------- ---------- ---------
Allowance for loan losses (65,902) (66,787) 885 -1.3%
Cash and due from banks 300,585 286,868 13,717 4.8%
Mortgage servicing rights 51,561 55,484 (3,923) -7.1%
Goodwill 137,412 137,412 - 0.0%
Identifiable intangible
assets 30,425 31,214 (789) -2.5%
Other assets 318,558 325,135 (6,577) -2.0%
---------- ---------- ---------
Total assets $8,095,194 $8,179,993 $ (84,799) -1.0%
========== ========== =========
Nonint-bearing deposits $1,249,464 $1,265,814 $ (16,350) -1.3%
Int-bearing deposits 4,271,260 4,268,914 2,346 0.1%
---------- ---------- ---------
Total deposits 5,520,724 5,534,728 (14,004) -0.3%
Fed funds pch and repos 726,846 770,273 (43,427) -5.6%
Short-term borrowings 818,142 964,687 (146,545) -15.2%
Long-term FHLB advances 205,827 105,862 99,965 94.4%
Other liabilities 79,017 72,937 6,080 8.3%
---------- ---------- ---------
Total liabilities 7,350,556 7,448,487 (97,931) -1.3%
---------- ---------- ---------
Common stock 11,824 11,873 (49) -0.4%
Surplus 91,619 97,692 (6,073) -6.2%
Retained earnings 646,782 635,935 10,847 1.7%
Accum other comprehensive
loss, net of tax (5,587) (13,994) 8,407 n/m
---------- ---------- ---------
Total shareholders' equity 744,638 731,506 13,132 1.8%
---------- ---------- ---------
Total liab and equity $8,095,194 $8,179,993 $ (84,799) -1.0%
========== ========== =========
Total int-bearing liab $6,022,075 $6,109,736 $ (87,661) -1.4%
========== ========== =========
n/m - not meaningful
Quarter Ended
-----------------------
INCOME STATEMENTS 6/30/2005 3/31/2005 $ Change % Change
- ----------------- ---------- ---------- --------- --------
Int and fees on loans-FTE $ 85,641 $ 79,044 $ 6,597 8.3%
Int on securities-taxable 13,993 15,734 (1,741) -11.1%
Int on securities-tax
exempt-FTE 2,917 2,863 54 1.9%
Int on fed funds sold
and rev repos 143 273 (130) -47.6%
Other interest income 22 20 2 10.0%
---------- ---------- ---------
Total interest income-FTE 102,716 97,934 4,782 4.9%
---------- ---------- ---------
Interest on deposits 18,326 16,368 1,958 12.0%
Interest on fed funds
pch and repos 4,995 3,648 1,347 36.9%
Other interest expense 9,413 7,497 1,916 25.6%
---------- ---------- ---------
Total interest expense 32,734 27,513 5,221 19.0%
---------- ---------- ---------
Net interest income-FTE 69,982 70,421 (439) -0.6%
Provision for loan losses 1,429 2,796 (1,367) -48.9%
---------- ---------- ---------
Net interest income after
provision-FTE 68,553 67,625 928 1.4%
---------- ---------- ---------
Service charges on
deposit accounts 13,541 12,384 1,157 9.3%
Insurance commissions 8,370 7,862 508 6.5%
Wealth management 5,414 5,243 171 3.3%
Retail banking - other 5,284 4,752 532 11.2%
Mortgage banking (3,246) 3,851 (7,097) -184.3%
Other, net 2,644 2,453 191 7.8%
---------- ---------- ---------
Nonint inc-excl sec
(losses)gains 32,007 36,545 (4,538) -12.4%
Security (losses) gains (4,057) 3 (4,060) n/m
---------- ---------- ---------
Total noninterest income 27,950 36,548 (8,598) -23.5%
---------- ---------- ---------
Salaries and employee
benefits 37,245 37,359 (114) -0.3%
Services and fees 8,104 8,958 (854) -9.5%
Net occupancy-premises 3,661 3,691 (30) -0.8%
Equipment expense 3,855 3,953 (98) -2.5%
Other expense 7,396 7,181 215 3.0%
---------- ---------- ---------
Total noninterest expense 60,261 61,142 (881) -1.4%
---------- ---------- ---------
Income before income taxes 36,242 43,031 (6,789) -15.8%
Tax equivalent adjustment 2,073 2,012 61 3.0%
Income taxes 11,963 14,238 (2,275) -16.0%
---------- ---------- ---------
Net income $ 22,206 $ 26,781 $ (4,575) -17.1%
========== ========== =========
Earnings per share
Basic $ 0.39 $ 0.47 $ (0.08) -17.0%
========== ========== =========
Diluted $ 0.39 $ 0.47 $ (0.08) -17.0%
========== ========== =========
Weighted average shares o/s
Basic 56,828,841 57,399,430 -1.0%
========== ==========
Diluted 56,967,995 57,545,056 -1.0%
========== ==========
Period end shares o/s 56,751,801 56,982,701 -0.4%
========== ==========
Dividends per share $ 0.2000 $ 0.2000 0.0%
========== ==========
n/m - not meaningful
NONPERFORMING ASSETS 6/30/2005 3/31/2005 $ Change % Change
- -------------------- ---------- ---------- --------- --------
Nonaccrual loans $ 32,684 $ 36,595 $ (3,911) -10.7%
Restructured loans - - -
---------- ---------- ---------
Total nonperforming loans 32,684 36,595 (3,911) -10.7%
Other real estate 3,634 4,306 (672) -15.6%
---------- ---------- ---------
Total nonperforming assets 36,318 40,901 (4,583) -11.2%
Loans past due over 90 days 1,698 1,506 192 12.7%
---------- ---------- ---------
Total nonperforming
assets plus past
due over 90 days $ 38,016 $ 42,407 $ (4,391) -10.4%
========== ========== =========
Quarter Ended
-----------------------
ALLOWANCE FOR LOAN LOSSES 6/30/2005 3/31/2005
- ------------------------- ---------- ----------
Beginning Balance $ 66,787 $ 64,757 $ 2,030 3.1%
Charge-offs (4,443) (3,182) (1,261) 39.6%
Recoveries 2,129 2,416 (287) -11.9%
Provision for loan losses 1,429 2,796 (1,367) -48.9%
---------- ---------- ---------
Ending Balance $ 65,902 $ 66,787 $ (885) -1.3%
========== ========== =========
Quarter Ended
----------------------
RATIOS 6/30/2005 3/31/2005
- ------ ---------- ---------
ROA 1.08% 1.33%
ROE 11.84% 14.42%
Equity generation rate 5.77% 8.29%
EOP equity/ EOP assets 9.20% 8.94%
Average equity/average assets 9.11% 9.25%
Interest margin - Yield - FTE 5.53% 5.42%
Interest margin - Cost - FTE 1.76% 1.52%
Net interest margin - FTE 3.77% 3.90%
Rate on interest-bearing liab 2.13% 1.86%
Efficiency ratio 56.97% 59.37%
Net charge offs/average loans 0.16% 0.06%
Prov for loan losses/average loans 0.10% 0.21%
Nonperf loans/total loans 0.57% 0.66%
Nonperf assets/total loans 0.63% 0.73%
Nonperf assets/total loans+ORE 0.63% 0.73%
ALL/nonperforming loans 201.63% 182.50%
ALL/total loans 1.14% 1.20%
Net loans/total assets 70.60% 67.31%
COMMON STOCK PERFORMANCE
- ------------------------
Market value of stock-Close $ 29.250 $ 29.000
Market value of stock-High $ 29.670 $ 31.150
Market value of stock-Low $ 26.710 $ 26.690
Book value of stock $ 13.12 $ 12.84
Tangible book value of stock $ 10.16 $ 9.88
Tangible equity $ 576,801 $ 562,880
Market/Book value of stock 222.94% 225.86%
OTHER DATA
- ----------
EOP Employees - FTE 2,616 2,616
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2005
($ in thousands)
(unaudited)
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:
6/30/05 3/31/05 6/30/04
---------- ---------- ----------
Real estate loans:
Construction and land development $ 606,339 $ 545,995 $ 491,385
Secured by 1-4 family residential prop 1,973,807 1,874,966 1,820,338
Secured by nonfarm, nonresidential prop 943,037 903,872 896,290
Other 147,658 144,541 155,645
Loans to finance agricultural production 36,183 27,931 35,115
Commercial and industrial 866,493 900,680 884,340
Consumer 807,852 817,058 767,298
Oblig of states and political subdiv 186,099 175,067 174,204
Loans held for sale 135,460 116,914 81,696
Other loans 78,344 65,784 78,480
---------- ---------- ----------
Loans 5,781,272 5,572,808 5,384,791
Less Allowance for loan losses 65,902 66,787 74,179
---------- ---------- ----------
Net Loans $5,715,370 $5,506,021 $5,310,612
========== ========== ==========
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 experienced positive trends.
Note 3 - Mortgage Banking
For the periods presented, the carrying amount of mortgage servicing rights are
as follows:
6/30/05 3/31/05 6/30/04
--------- --------- ---------
Mortgage Servicing Rights $ 59,694 $ 58,796 $ 59,315
Valuation Allowance (8,133) (3,312) (4,680)
--------- --------- ---------
Mortgage Servicing Rights, net $ 51,561 $ 55,484 $ 54,635
========= ========= =========
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 June 30, 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
---------------------------------
6/30/05 3/31/05 6/30/04
--------- --------- ---------
Mortgage servicing income $ 4,217 $ 4,195 $ 4,217
Mortgage guaranty fees (1,129) (1,099) (1,126)
--------- --------- ---------
Mortgage servicing, net 3,088 3,096 3,091
Amortization of mortgage
servicing rights (2,620) (2,620) (2,800)
(Impairment)/Recovery of
mortgage servicing rights (4,821) 2,732 6,760
Gain on sale of loans 374 334 1,797
Other, net 733 309 253
--------- --------- ---------
Mortgage banking $ (3,246) $ 3,851 $ 9,101
========= ========= =========
Year-to-date
---------------------
6/30/05 6/30/04
--------- ---------
Mortgage servicing income $ 8,412 $ 8,445
Mortgage guaranty fees (2,228) (2,221)
--------- ---------
Mortgage servicing, net 6,184 6,224
Amortization of mortgage
servicing rights (5,240) (6,401)
(Impairment)/Recovery of
mortgage servicing rights (2,089) 4,627
Gain on sale of loans 708 2,347
Other, net 1,042 401
--------- ---------
Mortgage banking $ 605 $ 7,198
========= =========
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
---------------------------------
6/30/05 3/31/05 6/30/04
--------- --------- ---------
Securities - Taxable 3.51% 3.90% 2.95%
Securities - Nontaxable 7.44% 7.62% 7.66%
Securities - Total 3.86% 4.22% 3.29%
Loans 6.06% 5.84% 5.62%
FF Sold & Rev Repo 3.13% 2.31% 1.05%
Total Earning Assets 5.53% 5.42% 4.93%
Interest-bearing Deposits 1.72% 1.55% 1.30%
FF Pch & Repo 2.69% 2.15% 0.97%
Borrowings 3.32% 2.92% 1.60%
Total Interest-bearing Liab 2.13% 1.86% 1.31%
Net interest margin 3.77% 3.90% 3.84%
Year-to-date
---------------------
6/30/05 6/30/04
--------- ---------
Securities - Taxable 3.71% 3.13%
Securities - Nontaxable 7.53% 7.67%
Securities - Total 4.04% 3.47%
Loans 5.95% 5.65%
FF Sold & Rev Repo 2.54% 1.03%
Total Earning Assets 5.48% 4.99%
Interest-bearing Deposits 1.64% 1.33%
FF Pch & Repo 2.43% 0.96%
Borrowings 3.13% 1.73%
Total Interest-bearing Liab 2.00% 1.34%
Net interest margin 3.83% 3.89%
Since the fourth quarter of 2003, management has been adjusting the balance
sheet in preparation for the risk of rising rates. This preparation has been
well founded as short-term interest rates have risen 225 basis points over that
time period. However, the upward shift in the short-term rates without a
proportionate upward shift in long term rates have diminished the profitability
of holding long term assets. If ignored, persistent interest rate behavior of
this nature could lead to significant negative impact on margin. In preparation
for potential adverse risks to margin, management implemented a strategy of
exiting certain assets, and reducing balances of funding sources that would bear
the highest costs in such a rate environment. This began in fourth quarter of
2004, with the sale of $304 million in mortgage-related and U.S. Treasury
securities, which reduced fourth quarter net income by $2.9 million, or $0.050
per share. In continuation of this strategy, during the second quarter 2005,
Trustmark sold $256 million in U.S. Government Agency and U.S. Treasury
securities, which reduced second quarter net income by $2.5 million, or $0.045
per share. The average maturity of these securities was 2.14 years, with an
average book yield of 2.94%. Projected funding costs to carry these investments
to their remaining maturity may have generated a greater negative margin impact
than the actual losses incurred at sale. Proceeds from sales were used to reduce
balances of higher-cost funding sources. Trustmark intends to maintain lower
balances of investment securities, and reduce its dependence on wholesale
funding until market conditions provide more attractive opportunities. While
this strategy has reduced current earnings, the mitigation of future risks to
earnings is expected to be beneficial. At June 30, 2005, the investment
portfolio comprised 19% of total assets and had an average duration of 2.46
years.
As mortgage rates fell during second quarter, and prepayment expectations
increased, premium amortization expense on mortgage related securities was
accelerated to $2.3 million. This compares to a $0.9 million expense in first
quarter 2005, and a $5.7 million expense in second quarter 2004. Premium
amortization expense has diminished considerably, as this expense averaged $4.5
million per quarter in 2004. Remaining net unamortized premium on mortgage
related securities currently stands at $7.3 million, down from $10.2 million at
year-end 2004, and $29.3 million at year-end 2003.
Note 5 - Basis of Presentation
Certain reclassifications have been made to prior period amounts to conform with
the current period presentation.