TRUSTMARK CORP - FORM 8-K - EX-99.1

Attached files

file	filename
8-K - TRUSTMARK CORPORATION EARNINGS RELEASE - TRUSTMARK CORP	form8k.htm

News Release

Trustmark Corporation Announces First Quarter 2012 Financial Results

and Declares $0.23 Quarterly Cash Dividend

Jackson, Miss. – April 24, 2012 – Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $30.3 million in the first quarter of 2012, which represented diluted earnings per common share of $0.47, an increase of 23.7% compared to the prior quarter and 27.0% relative to figures one year earlier. Trustmark’s performance during the first quarter of 2012 produced a return on average tangible common equity of 13.41% and a return on average assets of 1.25%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable June 15, 2012, to shareholders of record on June 1, 2012.

Gerard R. Host, President and CEO, stated, “Trustmark’s first quarter performance was a great start to the year. Total revenue increased 7.3% to $130.7 million due in part to solid performance in our banking, mortgage banking and insurance businesses. Credit quality continued to improve as evidenced by significantly lower net charge-offs and provisioning levels. We enhanced franchise value through an in-market acquisition in the Florida Panhandle. We also invested in a new fleet of state-of-the-art ATMs designed to enhance our competitive position. Thanks to our dedicated associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue meeting the needs of our customers and take advantage of opportunities to create value for our shareholders.”

Completion of Bay Bank Merger

·	Significantly enhanced presence in Florida Panhandle with addition of seven offices

·	Creates second largest deposit market share in Bay County, Florida

·	Seamless operational conversion

On March 16, 2012, Trustmark completed its previously announced merger with Bay Bank & Trust Co., Panama City, FL. At acquisition date, the carrying values of loans and deposits acquired were $98.1 million and $208.8 million, respectively. Earnings during the first quarter reflect a nonrecurring bargain purchase gain of $2.8 million which was partially offset by nonrecurring merger expenses of $1.6 million, net of taxes. Collectively, the net impact of these two items increased net income in the first quarter by approximately $1.2 million, or approximately $0.02 per share. Trustmark is pleased to provide an expanded array of banking and financial services to our newest customers in the Florida Panhandle.

Credit Quality

·	Net charge-offs totaled $1.9 million, or 0.13% of average loans

·	Allowance for loan losses represented 181.1% of nonperforming loans, excluding impaired loans

·	Nonperforming assets continued steady decline to $181.5 million

Trustmark continued to experience significant improvements in credit quality. Nonperforming loans totaled $105.8 million at March 31, 2012, a decline of 4.2% from the prior quarter and 16.6% from the prior year. Foreclosed other real estate experienced similar improvement, declining 4.2% from the prior quarter and 15.1% from levels one year earlier to total $75.7 million. Collectively, nonperforming assets totaled $181.5 million at March 31, 2012, the lowest level in the last 11 quarters. All of the above metrics exclude acquired loans and other real estate covered by FDIC loss-share agreements.

During the first quarter of 2012, net charge-offs totaled $1.9 million while the provision for loan losses totaled $3.3 million. Allocation of Trustmark’s $90.9 million allowance for loan losses represented 1.97% of commercial loans and 0.75% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.57% at March 31, 2012. The allowance for loan losses represented 181.1% of nonperforming loans, excluding impaired loans. All of the above metrics exclude acquired loans.

Capital Strength

·	Robust capital position provides strategic flexibility

·	Tangible common equity to tangible assets totaled 9.68%

·	Total risk-based capital ratio totaled 16.72%

Trustmark’s solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At March 31, 2012, tangible common equity totaled $931.6 million and represented 9.68% of tangible assets while the total risk-based capital ratio was 16.72%. Trustmark’s strong capital base provides the opportunity to support organic loan growth in an improving economy as well as the flexibility to expand via acquisitions designed to enhance long-term shareholder value.

Balance Sheet Management

·	Average earning assets expand to $8.7 billion

·	Net interest income (FTE) totaled $90.6 million

Loans held for investment and acquired loans totaled $5.9 billion at March 31, 2012, an increase of $15.6 million from the prior quarter. Excluding acquired loans, loan balances declined $82.7 million from the prior quarter. The single family mortgage loan portfolio declined by $38.6 million. Trustmark’s efforts to reduce exposure to construction and land development lending as well as the decision to discontinue indirect auto financing continued to be reflected in loan totals as these portfolios declined $8.6 million and $20.7 million, respectively.

During the first quarter of 2012, average earning assets increased $104.9 million, or 1.2%, relative to the prior quarter, to $8.7 billion. The increase was attributable to growth in investment securities and acquired loans. Average deposits increased $237.1 million, or 3.1%, relative to the prior quarter to total $7.8 billion, primarily due to seasonal growth in public deposits.

Prudent asset and liability management, including disciplined loan and deposit pricing, continued to produce solid net interest income and a strong net interest margin. Net interest income (FTE) totaled $90.6 million during the first quarter, resulting in a net interest margin of 4.19%. In the fourth quarter, net interest income totaled $92.7 million and included $3.8 million of recovery and accretion resulting from improved cash flows on acquired loans. Excluding this recovery and accretion, the net interest margin was 4.10% during the fourth quarter. The nine basis point expansion in the net interest margin reflected decreased premium amortization in the investment portfolio, higher yields on acquired covered loans and modest declines in deposit costs which were offset in part by continued downward re-pricing of fixed rate assets.

Noninterest Income

·	Noninterest income totaled $43.8 million, representing 33.5% of total revenue

·	Mortgage, Insurance and Wealth Management income expand

Trustmark continued to achieve solid financial results from its diverse financial services businesses. Mortgage banking income during the first quarter totaled $7.3 million, an increase of $1.3 million from the prior quarter. Performance in mortgage banking continued to reflect stable mortgage servicing income and increased secondary marketing gains of $1.8 million, which were partially offset by the increase in net hedge ineffectiveness of mortgage servicing rights of $687 thousand relative to the prior quarter. During the first quarter, mortgage production totaled $414.8 million, down 1.5% from the prior period but up 61.9% from levels one year earlier.

Insurance revenue during the first quarter totaled $6.6 million, an increase of 8.7% from the prior quarter due to firming insurance rates as well as seasonal growth in group health programs. Wealth management income increased 5.3% relative to the prior quarter to total $5.5 million due to growth in trust management and investment services.

Service charges on deposit accounts totaled $12.2 million in the first quarter, reflecting a seasonal decline from the prior quarter but a 2.6% increase from levels one year earlier. Bank card income increased 3.5% from the prior quarter and 13.7% from the prior year to $7.4 million due in part to increased card usage and ATM fees. Other miscellaneous income totaled $3.8 million in the first quarter and included the previously discussed $2.8 million bargain purchase gain related to the Bay Bank merger.

Noninterest Expense

·	Noninterest expense remained well-controlled

·	Efficiency ratio improved to 63.70%

Noninterest expense in the first quarter increased $2.8 million, or 3.3%, relative to the prior quarter to total $85.8 million. The increase was principally attributable to nonrecurring acquisition expenses totaling approximately $2.6 million related to the Bay Bank merger. Specifically, $1.9 million of one-time contract termination and other expenses is included in other expense and $672 thousand of change in control and severance expense is included in salaries and benefits. Separately, ORE foreclosure expense increased $1.1 million relative to the prior quarter. All discretionary expenses remained well-controlled. Relative to figures one year earlier, noninterest expense increased $5.8 million, reflecting in part additional salary and benefit expense from the Heritage merger as well as $1.9 million in additional loan expense and the aforementioned $2.6 million in nonrecurring acquisition expenses related to the Bay Bank transaction.

ADDITIONAL INFORMATION

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, April 25, 2012, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-6789, passcode 10008303, or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Thursday, May 10, 2012, in archived format at the same web address or by calling (877) 344-7529, passcode 10008303.

Trustmark is a financial services company providing banking and financial solutions through approximately 170 offices in Florida, Mississippi, Tennessee and Texas.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission in this report could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism and other risks described in our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.

Trustmark Investor Contacts:

Louis E. Greer

Treasurer and

Principal Financial Officer

601-208-2310

F. Joseph Rein, Jr.

Senior Vice President

601-208-6898

Trustmark Media Contact:

Melanie A. Morgan

Senior Vice President

601-208-2979

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2012

($ in thousands)

(unaudited)

										Linked Quarter						Year over Year
QUARTERLY AVERAGE BALANCES	3/31/2012			12/31/2011			3/31/2011			$ Change			% Change			$ Change			% Change
Securities AFS-taxable	$	2,327,572		$	2,241,361		$	2,050,502		$	86,211			3.8	%	$	277,070			13.5	%
Securities AFS-nontaxable		160,870			164,057			144,921			(3,187	)		-1.9	%		15,949			11.0	%
Securities HTM-taxable		33,270			41,106			97,710			(7,836	)		-19.1	%		(64,440	)		-66.0	%
Securities HTM-nontaxable		21,598			22,664			27,099			(1,066	)		-4.7	%		(5,501	)		-20.3	%
Total securities		2,543,310			2,469,188			2,320,232			74,122			3.0	%		223,078			9.6	%
Loans (including loans held for sale)		6,014,133			5,999,221			6,107,025			14,912			0.2	%		(92,892	)		-1.5	%
Acquired loans:
Noncovered loans		19,931			-			-			19,931			n/m			19,931			n/m
Covered loans		75,612			77,934			-			(2,322	)		-3.0	%		75,612			n/m
Fed funds sold and rev repos		9,568			10,516			8,359			(948	)		-9.0	%		1,209			14.5	%
Other earning assets		34,102			34,859			47,851			(757	)		-2.2	%		(13,749	)		-28.7	%
Total earning assets		8,696,656			8,591,718			8,483,467			104,938			1.2	%		213,189			2.5	%
Allowance for loan losses		(92,062	)		(90,857	)		(96,065	)		(1,205	)		1.3	%		4,003			-4.2	%
Cash and due from banks		232,139			221,278			222,380			10,861			4.9	%		9,759			4.4	%
Other assets		918,273			914,468			899,524			3,805			0.4	%		18,749			2.1	%
Total assets	$	9,755,006		$	9,636,607		$	9,509,306		$	118,399			1.2	%	$	245,700			2.6	%

Interest-bearing demand deposits	$	1,545,045		$	1,511,422		$	1,465,390		$	33,623			2.2	%	$	79,655			5.4	%
Savings deposits		2,339,166			2,067,431			2,045,874			271,735			13.1	%		293,292			14.3	%
Time deposits less than $100,000		1,190,888			1,212,190			1,210,219			(21,302	)		-1.8	%		(19,331	)		-1.6	%
Time deposits of $100,000 or more		825,214			844,565			876,975			(19,351	)		-2.3	%		(51,761	)		-5.9	%
Total interest-bearing deposits		5,900,313			5,635,608			5,598,458			264,705			4.7	%		301,855			5.4	%
Fed funds purchased and repos		437,270			526,740			647,881			(89,470	)		-17.0	%		(210,611	)		-32.5	%
Short-term borrowings		84,797			141,600			254,451			(56,803	)		-40.1	%		(169,654	)		-66.7	%
Long-term FHLB advances		-			197			-			(197	)		-100.0	%		-			n/m
Subordinated notes		49,842			49,833			49,809			9			0.0	%		33			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-			0.0	%		-			0.0	%
Total interest-bearing liabilities		6,534,078			6,415,834			6,612,455			118,244			1.8	%		(78,377	)		-1.2	%
Noninterest-bearing deposits		1,869,758			1,897,398			1,620,554			(27,640	)		-1.5	%		249,204			15.4	%
Other liabilities		122,668			100,274			116,399			22,394			22.3	%		6,269			5.4	%
Total liabilities		8,526,504			8,413,506			8,349,408			112,998			1.3	%		177,096			2.1	%
Shareholders' equity		1,228,502			1,223,101			1,159,898			5,401			0.4	%		68,604			5.9	%
Total liabilities and equity	$	9,755,006		$	9,636,607		$	9,509,306		$	118,399			1.2	%	$	245,700			2.6	%

										Linked Quarter						Year over Year
PERIOD END BALANCES	3/31/2012			12/31/2011			3/31/2011			$ Change			% Change			$ Change			% Change
Cash and due from banks	$	213,500		$	202,625		$	193,087		$	10,875			5.4	%	$	20,413			10.6	%
Fed funds sold and rev repos		6,301			9,258			1,726			(2,957	)		-31.9	%		4,575			n/m
Securities available for sale		2,595,664			2,468,993			2,309,704			126,671			5.1	%		285,960			12.4	%
Securities held to maturity		52,010			57,705			110,054			(5,695	)		-9.9	%		(58,044	)		-52.7	%
Loans held for sale (LHFS)		227,449			216,553			112,981			10,896			5.0	%		114,468			n/m
Loans held for investment (LHFI)		5,774,753			5,857,484			5,964,089			(82,731	)		-1.4	%		(189,336	)		-3.2	%
Allowance for loan losses		(90,879	)		(89,518	)		(93,398	)		(1,361	)		1.5	%		2,519			-2.7	%
Net LHFI		5,683,874			5,767,966			5,870,691			(84,092	)		-1.5	%		(186,817	)		-3.2	%
Acquired loans:
Noncovered loans		100,669			-			-			100,669			n/m			100,669			n/m
Covered loans		74,419			76,804			-			(2,385	)		-3.1	%		74,419			n/m
Allowance for loan losses, acquired loans		(773	)		(502	)		-			(271	)		54.0	%		(773	)		n/m
Net acquired loans		174,315			76,302			-			98,013			n/m			174,315			n/m
Net LHFI and acquired loans		5,858,189			5,844,268			5,870,691			13,921			0.2	%		(12,502	)		-0.2	%
Premises and equipment, net		156,158			142,582			141,524			13,576			9.5	%		14,634			10.3	%
Mortgage servicing rights		45,893			43,274			53,598			2,619			6.1	%		(7,705	)		-14.4	%
Goodwill		291,104			291,104			291,104			-			0.0	%		-			0.0	%
Identifiable intangible assets		18,821			14,076			15,532			4,745			33.7	%		3,289			21.2	%
Other real estate, excluding covered other real estate		75,742			79,053			89,198			(3,311	)		-4.2	%		(13,456	)		-15.1	%
Covered other real estate		5,824			6,331			-			(507	)		-8.0	%		5,824			n/m
FDIC indemnification asset		28,260			28,348			-			(88	)		-0.3	%		28,260			n/m
Other assets		356,678			322,837			325,263			33,841			10.5	%		31,415			9.7	%
Total assets	$	9,931,593		$	9,727,007		$	9,514,462		$	204,586			2.1	%	$	417,131			4.4	%

Deposits:
Noninterest-bearing	$	2,024,290		$	2,033,442		$	1,668,104		$	(9,152	)		-0.5	%	$	356,186			21.4	%
Interest-bearing		6,066,456			5,532,921			5,758,170			533,535			9.6	%		308,286			5.4	%
Total deposits		8,090,746			7,566,363			7,426,274			524,383			6.9	%		664,472			8.9	%
Fed funds purchased and repos		254,878			604,500			550,919			(349,622	)		-57.8	%		(296,041	)		-53.7	%
Short-term borrowings		82,023			87,628			154,585			(5,605	)		-6.4	%		(72,562	)		-46.9	%
Subordinated notes		49,847			49,839			49,814			8			0.0	%		33			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-			0.0	%		-			0.0	%
Other liabilities		150,723			141,784			110,785			8,939			6.3	%		39,938			36.1	%
Total liabilities		8,690,073			8,511,970			8,354,233			178,103			2.1	%		335,840			4.0	%
Common stock		13,494			13,364			13,333			130			1.0	%		161			1.2	%
Capital surplus		282,388			266,026			260,297			16,362			6.2	%		22,091			8.5	%
Retained earnings		944,101			932,526			898,222			11,575			1.2	%		45,879			5.1	%
Accum other comprehensive
income (loss), net of tax		1,537			3,121			(11,623	)		(1,584	)		-50.8	%		13,160			n/m
Total shareholders' equity		1,241,520			1,215,037			1,160,229			26,483			2.2	%		81,291			7.0	%
Total liabilities and equity	$	9,931,593		$	9,727,007		$	9,514,462		$	204,586			2.1	%	$	417,131			4.4	%

n/m - percentage changes greater than +/- 100% are considered not meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2012

($ in thousands except per share data)

(unaudited)

	Quarter Ended									Linked Quarter						Year over Year
INCOME STATEMENTS	3/31/2012			12/31/2011			3/31/2011			$ Change			% Change			$ Change			% Change
Interest and fees on loans-FTE	$	78,718		$	82,230		$	79,116		$	(3,512	)		-4.3	%	$	(398	)		-0.5	%
Interest on securities-taxable		18,384			17,362			19,992			1,022			5.9	%		(1,608	)		-8.0	%
Interest on securities-tax exempt-FTE		2,102			2,133			2,128			(31	)		-1.5	%		(26	)		-1.2	%
Interest on fed funds sold and rev repos		6			10			8			(4	)		-40.0	%		(2	)		-25.0	%
Other interest income		330			327			332			3			0.9	%		(2	)		-0.6	%
Total interest income-FTE		99,540			102,062			101,576			(2,522	)		-2.5	%		(2,036	)		-2.0	%
Interest on deposits		7,353			7,728			9,719			(375	)		-4.9	%		(2,366	)		-24.3	%
Interest on fed funds pch and repos		171			195			338			(24	)		-12.3	%		(167	)		-49.4	%
Other interest expense		1,414			1,418			1,553			(4	)		-0.3	%		(139	)		-9.0	%
Total interest expense		8,938			9,341			11,610			(403	)		-4.3	%		(2,672	)		-23.0	%
Net interest income-FTE		90,602			92,721			89,966			(2,119	)		-2.3	%		636			0.7	%
Provision for loan losses, excluding acquired loans		3,293			6,073			7,537			(2,780	)		-45.8	%		(4,244	)		-56.3	%
Provision for acquired loan losses		(194	)		624			-			(818	)		n/m			(194	)		n/m
Net interest income after provision-FTE		87,503			86,024			82,429			1,479			1.7	%		5,074			6.2	%
Service charges on deposit accounts		12,211			13,269			11,907			(1,058	)		-8.0	%		304			2.6	%
Insurance commissions		6,606			6,076			6,512			530			8.7	%		94			1.4	%
Wealth management		5,501			5,223			5,986			278			5.3	%		(485	)		-8.1	%
Bank card and other fees		7,364			7,112			6,475			252			3.5	%		889			13.7	%
Mortgage banking, net		7,295			6,038			4,722			1,257			20.8	%		2,573			54.5	%
Other, net		3,758			(4,928	)		762			8,686			n/m			2,996			n/m
Nonint inc-excl sec gains, net		42,735			32,790			36,364			9,945			30.3	%		6,371			17.5	%
Security gains (losses), net		1,050			(11	)		7			1,061			n/m			1,043			n/m
Total noninterest income		43,785			32,779			36,371			11,006			33.6	%		7,414			20.4	%
Salaries and employee benefits		46,432			45,616			44,036			816			1.8	%		2,396			5.4	%
Services and fees		10,747			11,323			10,270			(576	)		-5.1	%		477			4.6	%
Net occupancy-premises		4,938			5,038			5,073			(100	)		-2.0	%		(135	)		-2.7	%
Equipment expense		4,912			5,139			5,144			(227	)		-4.4	%		(232	)		-4.5	%
FDIC assessment expense		1,775			1,484			2,750			291			19.6	%		(975	)		-35.5	%
ORE/Foreclosure expense		3,902			2,760			3,213			1,142			41.4	%		689			21.4	%
Other expense		13,068			11,643			9,532			1,425			12.2	%		3,536			37.1	%
Total noninterest expense		85,774			83,003			80,018			2,771			3.3	%		5,756			7.2	%
Income before income taxes and tax eq adj		45,514			35,800			38,782			9,714			27.1	%		6,732			17.4	%
Tax equivalent adjustment		3,658			3,663			3,591			(5	)		-0.1	%		67			1.9	%
Income before income taxes		41,856			32,137			35,191			9,719			30.2	%		6,665			18.9	%
Income taxes		11,536			7,879			11,178			3,657			46.4	%		358			3.2	%
Net income available to common shareholders	$	30,320		$	24,258		$	24,013		$	6,062			25.0	%	$	6,307			26.3	%


Per common share data
Earnings per share - basic	$	0.47		$	0.38		$	0.38		$	0.09			23.7	%	$	0.09			23.7	%

Earnings per share - diluted	$	0.47		$	0.38		$	0.37		$	0.09			23.7	%	$	0.10			27.0	%

Dividends per share	$	0.23		$	0.23		$	0.23		$	-			0.0	%	$	-			0.0	%

Weighted average common shares outstanding
Basic		64,297,038			64,122,188			63,950,461

Diluted		64,477,277			64,330,242			64,181,752

Period end common shares outstanding		64,765,581			64,142,498			63,987,064

OTHER FINANCIAL DATA
Return on common equity		9.93	%		7.87	%		8.40	%
Return on average tangible common equity		13.41	%		10.70	%		11.65	%
Return on equity		9.93	%		7.87	%		8.40	%
Return on assets		1.25	%		1.00	%		1.02	%
Interest margin - Yield - FTE		4.60	%		4.71	%		4.86	%
Interest margin - Cost		0.41	%		0.43	%		0.56	%
Net interest margin - FTE		4.19	%		4.28	%		4.30	%
Efficiency ratio (1)		63.70	%		66.13	%		63.34	%
Full-time equivalent employees		2,611			2,537			2,489

COMMON STOCK PERFORMANCE
Market value-Close	$	24.98		$	24.29		$	23.42
Common book value	$	19.17		$	18.94		$	18.13
Tangible common book value	$	14.38		$	14.18		$	13.34


(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and one-time acquisition related transaction expenses.

n/m - percentage changes greater than +/- 100% are considered not meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2012

($ in thousands)

(unaudited)

	Quarter Ended									Linked Quarter						Year over Year
NONPERFORMING ASSETS (1)	3/31/2012			12/31/2011			3/31/2011			$ Change			% Change			$ Change			% Change
Nonaccrual loans
Florida	$	22,174		$	23,002		$	44,548		$	(828	)		-3.6	%	$	(22,374	)		-50.2	%
Mississippi (2)		48,648			46,746			40,226			1,902			4.1	%		8,422			20.9	%
Tennessee (3)		13,972			15,791			13,886			(1,819	)		-11.5	%		86			0.6	%
Texas		20,979			24,919			28,130			(3,940	)		-15.8	%		(7,151	)		-25.4	%
Total nonaccrual loans		105,773			110,458			126,790			(4,685	)		-4.2	%		(21,017	)		-16.6	%
Other real estate
Florida		26,226			29,963			31,339			(3,737	)		-12.5	%		(5,113	)		-16.3	%
Mississippi (2)		19,240			19,483			22,084			(243	)		-1.2	%		(2,844	)		-12.9	%
Tennessee (3)		17,665			16,879			16,920			786			4.7	%		745			4.4	%
Texas		12,611			12,728			18,855			(117	)		-0.9	%		(6,244	)		-33.1	%
Total other real estate		75,742			79,053			89,198			(3,311	)		-4.2	%		(13,456	)		-15.1	%
Total nonperforming assets	$	181,515		$	189,511		$	215,988		$	(7,996	)		-4.2	%	$	(34,473	)		-16.0	%

LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,553		$	4,230		$	5,010		$	(2,677	)		-63.3	%	$	(3,457	)		-69.0	%

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	39,496		$	39,379		$	19,808		$	117			0.3	%	$	19,688			99.4	%

	Quarter Ended									Linked Quarter						Year over Year
ALLOWANCE FOR LOAN LOSSES (4)	3/31/2012			12/31/2011			3/31/2011			$ Change			% Change			$ Change			% Change
Beginning Balance	$	89,518		$	89,463		$	93,510		$	55			0.1	%	$	(3,992	)		-4.3	%
Provision for loan losses		3,293			6,073			7,537			(2,780	)		-45.8	%		(4,244	)		-56.3	%
Charge-offs		(5,376	)		(8,457	)		(11,132	)		3,081			-36.4	%		5,756			-51.7	%
Recoveries		3,444			2,439			3,483			1,005			41.2	%		(39	)		-1.1	%
Net charge-offs		(1,932	)		(6,018	)		(7,649	)		4,086			-67.9	%		5,717			-74.7	%
Ending Balance	$	90,879		$	89,518		$	93,398		$	1,361			1.5	%	$	(2,519	)		-2.7	%

PROVISION FOR LOAN LOSSES (4)
Florida	$	739		$	4,797		$	3,024		$	(4,058	)		-84.6	%	$	(2,285	)		-75.6	%
Mississippi (2)		4,152			3,783			1,071			369			9.8	%		3,081			n/m
Tennessee (3)		(29	)		(885	)		1,619			856			-96.7	%		(1,648	)		n/m
Texas		(1,569	)		(1,622	)		1,823			53			-3.3	%		(3,392	)		n/m
Total provision for loan losses	$	3,293		$	6,073		$	7,537		$	(2,780	)		-45.8	%	$	(4,244	)		-56.3	%

NET CHARGE-OFFS (4)
Florida	$	1,495		$	2,576		$	5,478		$	(1,081	)		-42.0	%	$	(3,983	)		-72.7	%
Mississippi (2)		251			2,556			410			(2,305	)		-90.2	%		(159	)		-38.8	%
Tennessee (3)		223			773			979			(550	)		-71.2	%		(756	)		-77.2	%
Texas		(37	)		113			782			(150	)		n/m			(819	)		n/m
Total net charge-offs	$	1,932		$	6,018		$	7,649		$	(4,086	)		-67.9	%	$	(5,717	)		-74.7	%

CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.13	%		0.40	%		0.51	%
Provision for loan losses/average loans		0.22	%		0.40	%		0.50	%
Nonperforming loans/total loans (incl LHFS)		1.76	%		1.82	%		2.09	%
Nonperforming assets/total loans (incl LHFS)		3.02	%		3.12	%		3.55	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.99	%		3.08	%		3.50	%
ALL/total loans (excl LHFS)		1.57	%		1.53	%		1.57	%
ALL-commercial/total commercial loans		1.97	%		1.91	%		1.98	%
ALL-consumer/total consumer and home mortgage loans		0.75	%		0.76	%		0.76	%
ALL/nonperforming loans		85.92	%		81.04	%		73.66	%
ALL/nonperforming loans -
(excl impaired loans)		181.11	%		194.19	%		215.40	%

CAPITAL RATIOS
Total equity/total assets		12.50	%		12.49	%		12.19	%
Common equity/total assets		12.50	%		12.49	%		12.19	%
Tangible common equity/tangible assets		9.68	%		9.66	%		9.27	%
Tangible common equity/risk-weighted assets		13.89	%		13.83	%		13.06	%
Tier 1 leverage ratio		10.55	%		10.43	%		10.10	%
Tier 1 common risk-based capital ratio		13.98	%		13.90	%		13.32	%
Tier 1 risk-based capital ratio		14.87	%		14.81	%		14.24	%
Total risk-based capital ratio		16.72	%		16.67	%		16.25	%

(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans

n/m - percentage changes greater than +/- 100% are considered not meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2012

($ in thousands)

(unaudited)

	Quarter Ended
AVERAGE BALANCES	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Securities AFS-taxable	$	2,327,572		$	2,241,361		$	2,150,117		$	2,142,978		$	2,050,502
Securities AFS-nontaxable		160,870			164,057			170,714			151,471			144,921
Securities HTM-taxable		33,270			41,106			52,868			73,739			97,710
Securities HTM-nontaxable		21,598			22,664			24,062			25,797			27,099
Total securities		2,543,310			2,469,188			2,397,761			2,393,985			2,320,232
Loans (including loans held for sale)		6,014,133			5,999,221			5,985,730			6,044,232			6,107,025
Acquired loans:
Noncovered loans		19,931			-			-			-			-
Covered loans		75,612			77,934			83,811			77,858			-
Fed funds sold and rev repos		9,568			10,516			5,801			6,807			8,359
Other earning assets		34,102			34,859			32,327			32,028			47,851
Total earning assets		8,696,656			8,591,718			8,505,430			8,554,910			8,483,467
Allowance for loan losses		(92,062	)		(90,857	)		(88,888	)		(94,771	)		(96,065	)
Cash and due from banks		232,139			221,278			216,134			216,483			222,380
Other assets		918,273			914,468			939,780			937,503			899,524
Total assets	$	9,755,006		$	9,636,607		$	9,572,456		$	9,614,125		$	9,509,306

Interest-bearing demand deposits	$	1,545,045		$	1,511,422		$	1,558,318		$	1,579,894		$	1,465,390
Savings deposits		2,339,166			2,067,431			2,133,437			2,277,220			2,045,874
Time deposits less than $100,000		1,190,888			1,212,190			1,232,374			1,255,496			1,210,219
Time deposits of $100,000 or more		825,214			844,565			877,951			904,106			876,975
Total interest-bearing deposits		5,900,313			5,635,608			5,802,080			6,016,716			5,598,458
Fed funds purchased and repos		437,270			526,740			462,294			396,618			647,881
Short-term borrowings		84,797			141,600			85,678			92,077			254,451
Long-term FHLB advances		-			197			2,413			2,333			-
Subordinated notes		49,842			49,833			49,825			49,817			49,809
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		6,534,078			6,415,834			6,464,146			6,619,417			6,612,455
Noninterest-bearing deposits		1,869,758			1,897,398			1,811,472			1,714,778			1,620,554
Other liabilities		122,668			100,274			85,404			98,154			116,399
Total liabilities		8,526,504			8,413,506			8,361,022			8,432,349			8,349,408
Shareholders' equity		1,228,502			1,223,101			1,211,434			1,181,776			1,159,898
Total liabilities and equity	$	9,755,006		$	9,636,607		$	9,572,456		$	9,614,125		$	9,509,306

PERIOD END BALANCES	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Cash and due from banks	$	213,500		$	202,625		$	245,132		$	221,853		$	193,087
Fed funds sold and rev repos		6,301			9,258			8,810			4,576			1,726
Securities available for sale		2,595,664			2,468,993			2,476,905			2,399,042			2,309,704
Securities held to maturity		52,010			57,705			71,046			87,923			110,054
Loans held for sale (LHFS)		227,449			216,553			210,269			123,244			112,981
Loans held for investment (LHFI)		5,774,753			5,857,484			5,783,712			5,906,316			5,964,089
Allowance for loan losses		(90,879	)		(89,518	)		(89,463	)		(86,846	)		(93,398	)
Net LHFI		5,683,874			5,767,966			5,694,249			5,819,470			5,870,691
Acquired loans:
Noncovered loans		100,669			-			-			-			-
Covered loans		74,419			76,804			79,064			88,558			-
Allowance for loan losses, acquired loans		(773	)		(502	)		-			-			-
Net acquired loans		174,315			76,302			79,064			88,558			-
Net LHFI and acquired loans		5,858,189			5,844,268			5,773,313			5,908,028			5,870,691
Premises and equipment, net		156,158			142,582			141,639			140,640			141,524
Mortgage servicing rights		45,893			43,274			43,659			50,111			53,598
Goodwill		291,104			291,104			291,104			291,104			291,104
Identifiable intangible assets		18,821			14,076			14,861			15,651			15,532
Other real estate, excluding covered other real estate		75,742			79,053			89,597			89,999			89,198
Covered other real estate		5,824			6,331			7,197			7,485			-
FDIC indemnification asset		28,260			28,348			33,436			33,327			-
Other assets		356,678			322,837			298,953			325,468			325,263
Total assets	$	9,931,593		$	9,727,007		$	9,705,921		$	9,698,451		$	9,514,462

Deposits:
Noninterest-bearing	$	2,024,290		$	2,033,442		$	1,871,040		$	1,806,908		$	1,668,104
Interest-bearing		6,066,456			5,532,921			5,698,684			5,825,426			5,758,170
Total deposits		8,090,746			7,566,363			7,569,724			7,632,334			7,426,274
Fed funds purchased and repos		254,878			604,500			576,672			539,693			550,919
Short-term borrowings		82,023			87,628			98,887			90,156			154,585
Long-term FHLB advances		-			-			741			2,794			-
Subordinated notes		49,847			49,839			49,831			49,823			49,814
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		150,723			141,784			126,604			129,025			110,785
Total liabilities		8,690,073			8,511,970			8,484,315			8,505,681			8,354,233
Common stock		13,494			13,364			13,359			13,359			13,333
Capital surplus		282,388			266,026			264,750			263,940			260,297
Retained earnings		944,101			932,526			923,891			911,797			898,222
Accum other comprehensive
income (loss), net of tax		1,537			3,121			19,606			3,674			(11,623	)
Total shareholders' equity		1,241,520			1,215,037			1,221,606			1,192,770			1,160,229
Total liabilities and equity	$	9,931,593		$	9,727,007		$	9,705,921		$	9,698,451		$	9,514,462


See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2012

($ in thousands except per share data)

(unaudited)

	Quarter Ended
INCOME STATEMENTS	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Interest and fees on loans-FTE	$	78,718		$	82,230		$	79,256		$	80,202		$	79,116
Interest on securities-taxable		18,384			17,362			18,115			20,374			19,992
Interest on securities-tax exempt-FTE		2,102			2,133			2,155			2,115			2,128
Interest on fed funds sold and rev repos		6			10			5			7			8
Other interest income		330			327			329			333			332
Total interest income-FTE		99,540			102,062			99,860			103,031			101,576
Interest on deposits		7,353			7,728			8,911			9,936			9,719
Interest on fed funds pch and repos		171			195			216			216			338
Other interest expense		1,414			1,418			1,386			1,420			1,553
Total interest expense		8,938			9,341			10,513			11,572			11,610
Net interest income-FTE		90,602			92,721			89,347			91,459			89,966
Provision for loan losses, excluding acquired loans		3,293			6,073			7,978			8,116			7,537
Provision for acquired loan losses		(194	)		624			-			-			-
Net interest income after provision-FTE		87,503			86,024			81,369			83,343			82,429
Service charges on deposit accounts		12,211			13,269			13,680			12,851			11,907
Insurance commissions		6,606			6,076			7,516			6,862			6,512
Wealth management		5,501			5,223			5,993			5,760			5,986
Bank card and other fees		7,364			7,112			7,033			6,854			6,475
Mortgage banking, net		7,295			6,038			9,783			6,269			4,722
Other, net		3,758			(4,928	)		234			7,785			762
Nonint inc-excl sec gains, net		42,735			32,790			44,239			46,381			36,364
Security gains (losses), net		1,050			(11	)		33			51			7
Total noninterest income		43,785			32,779			44,272			46,432			36,371
Salaries and employee benefits		46,432			45,616			44,701			44,203			44,036
Services and fees		10,747			11,323			11,485			10,780			10,270
Net occupancy-premises		4,938			5,038			5,093			5,050			5,073
Equipment expense		4,912			5,139			5,038			4,856			5,144
FDIC assessment expense		1,775			1,484			1,812			1,938			2,750
ORE/Foreclosure expense		3,902			2,760			5,616			4,704			3,213
Other expense		13,068			11,643			11,736			9,817			9,532
Total noninterest expense		85,774			83,003			85,481			81,348			80,018
Income before income taxes and tax eq adj		45,514			35,800			40,160			48,427			38,782
Tax equivalent adjustment		3,658			3,663			3,667			3,629			3,591
Income before income taxes		41,856			32,137			36,493			44,798			35,191
Income taxes		11,536			7,879			9,525			13,196			11,178
Net income available to common shareholders	$	30,320		$	24,258		$	26,968		$	31,602		$	24,013

Per common share data
Earnings per share - basic	$	0.47		$	0.38		$	0.42		$	0.49		$	0.38

Earnings per share - diluted	$	0.47		$	0.38		$	0.42		$	0.49		$	0.37

Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23

Weighted average common shares outstanding
Basic		64,297,038			64,122,188			64,119,235			64,072,047			63,950,461

Diluted		64,477,277			64,330,242			64,310,453			64,281,348			64,181,752

Period end common shares outstanding		64,765,581			64,142,498			64,119,235			64,119,235			63,987,064


OTHER FINANCIAL DATA
Return on common equity		9.93	%		7.87	%		8.83	%		10.73	%		8.40	%
Return on average tangible common equity		13.41	%		10.70	%		12.04	%		14.71	%		11.65	%
Return on equity		9.93	%		7.87	%		8.83	%		10.73	%		8.40	%
Return on assets		1.25	%		1.00	%		1.12	%		1.32	%		1.02	%
Interest margin - Yield - FTE		4.60	%		4.71	%		4.66	%		4.83	%		4.86	%
Interest margin - Cost		0.41	%		0.43	%		0.49	%		0.54	%		0.56	%
Net interest margin - FTE		4.19	%		4.28	%		4.17	%		4.29	%		4.30	%
Efficiency ratio (1)		63.70	%		66.13	%		63.99	%		62.39	%		63.34	%
Full-time equivalent employees		2,611			2,537			2,542			2,575			2,489


COMMON STOCK PERFORMANCE
Market value-Close	$	24.98		$	24.29		$	18.15		$	23.41		$	23.42
Common book value	$	19.17		$	18.94		$	19.05		$	18.60		$	18.13
Tangible common book value	$	14.38		$	14.18		$	14.28		$	13.82		$	13.34


(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and one-time acquisition related transaction expenses.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

March 31, 2012

($ in thousands)

(unaudited)

	Quarter Ended
NONPERFORMING ASSETS (1)	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Nonaccrual loans
Florida	$	22,174		$	23,002		$	27,263		$	30,752		$	44,548
Mississippi (2)		48,648			46,746			44,825			47,802			40,226
Tennessee (3)		13,972			15,791			14,575			17,564			13,886
Texas		20,979			24,919			12,915			24,900			28,130
Total nonaccrual loans		105,773			110,458			99,578			121,018			126,790
Other real estate
Florida		26,226			29,963			29,949			33,823			31,339
Mississippi (2)		19,240			19,483			21,027			22,921			22,084
Tennessee (3)		17,665			16,879			17,940			15,760			16,920
Texas		12,611			12,728			20,681			17,495			18,855
Total other real estate		75,742			79,053			89,597			89,999			89,198
Total nonperforming assets	$	181,515		$	189,511		$	189,175		$	211,017		$	215,988

LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,553		$	4,230		$	3,166		$	6,993		$	5,010

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	39,496		$	39,379		$	32,956		$	24,708		$	19,808


	Quarter Ended
ALLOWANCE FOR LOAN LOSSES (4)	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Beginning Balance	$	89,518		$	89,463		$	86,846		$	93,398		$	93,510
Provision for loan losses		3,293			6,073			7,978			8,116			7,537
Charge-offs		(5,376	)		(8,457	)		(8,675	)		(17,505	)		(11,132	)
Recoveries		3,444			2,439			3,314			2,837			3,483
Net charge-offs		(1,932	)		(6,018	)		(5,361	)		(14,668	)		(7,649	)
Ending Balance	$	90,879		$	89,518		$	89,463		$	86,846		$	93,398

PROVISION FOR LOAN LOSSES (4)
Florida	$	739		$	4,797		$	3,046		$	5,633		$	3,024
Mississippi (2)		4,152			3,783			3,732			1,331			1,071
Tennessee (3)		(29	)		(885	)		(105	)		157			1,619
Texas		(1,569	)		(1,622	)		1,305			995			1,823
Total provision for loan losses	$	3,293		$	6,073		$	7,978		$	8,116		$	7,537

NET CHARGE-OFFS (4)
Florida	$	1,495		$	2,576		$	2,909		$	7,880		$	5,478
Mississippi (2)		251			2,556			1,988			3,401			410
Tennessee (3)		223			773			499			324			979
Texas		(37	)		113			(35	)		3,063			782
Total net charge-offs	$	1,932		$	6,018		$	5,361		$	14,668		$	7,649

CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.13	%		0.40	%		0.36	%		0.97	%		0.51	%
Provision for loan losses/average loans		0.22	%		0.40	%		0.53	%		0.54	%		0.50	%
Nonperforming loans/total loans (incl LHFS)		1.76	%		1.82	%		1.66	%		2.01	%		2.09	%
Nonperforming assets/total loans (incl LHFS)		3.02	%		3.12	%		3.16	%		3.50	%		3.55	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.99	%		3.08	%		3.11	%		3.45	%		3.50	%
ALL/total loans (excl LHFS)		1.57	%		1.53	%		1.55	%		1.47	%		1.57	%
ALL-commercial/total commercial loans		1.97	%		1.91	%		1.94	%		1.84	%		1.98	%
ALL-consumer/total consumer and home mortgage loans		0.75	%		0.76	%		0.76	%		0.76	%		0.76	%
ALL/nonperforming loans		85.92	%		81.04	%		89.84	%		71.76	%		73.66	%
ALL/nonperforming loans -
(excl impaired loans)		181.11	%		194.19	%		248.82	%		181.95	%		215.40	%

CAPITAL RATIOS
Total equity/total assets		12.50	%		12.49	%		12.59	%		12.30	%		12.19	%
Common equity/total assets		12.50	%		12.49	%		12.59	%		12.30	%		12.19	%
Tangible common equity/tangible assets		9.68	%		9.66	%		9.74	%		9.43	%		9.27	%
Tangible common equity/risk-weighted assets		13.89	%		13.83	%		14.04	%		13.51	%		13.06	%
Tier 1 leverage ratio		10.55	%		10.43	%		10.38	%		10.18	%		10.10	%
Tier 1 common risk-based capital ratio		13.98	%		13.90	%		13.84	%		13.55	%		13.32	%
Tier 1 risk-based capital ratio		14.87	%		14.81	%		14.76	%		14.46	%		14.24	%
Total risk-based capital ratio		16.72	%		16.67	%		16.78	%		16.47	%		16.25	%


(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

March 31, 2012

($ in thousands)

(unaudited)

Note 1 – Business Combinations

Bay Bank & Trust Company

On March 16, 2012, Trustmark National Bank (TNB) completed its merger with Bay Bank & Trust Co. (Bay Bank), a 76-year old financial institution headquartered in Panama City, Florida. Trustmark acquired all outstanding common stock of Bay Bank for approximately $22 million in cash and stock, comprised of $10 million in cash and the issuance of approximately 510 thousand shares of Trustmark common stock valued at $12 million. This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805, “Business Combinations.” Accordingly, the assets and liabilities, both tangible and intangible, are recorded at their estimated fair values as of the acquisition date. The purchase price allocation is deemed preliminary as of March 31, 2012 and is expected to be finalized in the second quarter of 2012.

The statement of assets purchased and liabilities assumed in the Bay Bank acquisition is presented below at their estimated fair values as of the acquisition date of March 16, 2012 ($ in thousands):

Assets
Cash and due from banks	$	88,154
Securities available for sale		26,369
Acquired noncovered loans		98,053
Premises and equipment, net		9,466
Identifiable intangible assets		5,454
Other real estate		2,569
Other assets		4,014
Total Assets		234,079

Liabilities
Deposits		208,796
Other liabilities		526
Total Liabilities		209,322

Net assets acquired at fair value		24,757
Consideration paid to Bay Bank		22,003

Bargain purchase gain		2,754
Income taxes		-
Bargain purchase gain, net of taxes	$	2,754

The preliminary bargain purchase gain represents the excess of the net of the estimated fair value of the assets acquired and liabilities assumed over the consideration paid to Bay Bank. The gain of $2.8 million recognized by Trustmark is considered a gain from a bargain purchase under FASB ASC Topic 805. The gain was recognized as other noninterest income in Trustmark’s consolidated statements of income for the three months ended March 31, 2012. Included in noninterest expense are one-time Bay Bank transaction expenses totaling approximately $2.6 million (change in control and severance expense of $672 thousand included in salaries and benefits; contract termination and other expenses of $1.9 million included in other expense).

All loans acquired from Bay Bank, with the exception of revolving credit agreements, were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that TNB would not be able to collect all contractually required payments. These loans are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

The operations of Bay Bank are included in TNB’s operating results from March 16, 2012 and did not have a material impact on TNB’s results of operations.

Heritage Banking Group

On April 15, 2011, the Mississippi Department of Banking and Consumer Finance closed the Heritage Banking Group (Heritage), a 90-year old financial institution headquartered in Carthage, Mississippi, and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. On the same date, Trustmark National Bank (TNB) entered into a purchase and assumption agreement with the FDIC in which TNB agreed to assume all of the deposits and purchased essentially all of the assets of Heritage. The FDIC and TNB entered into a loss-share transaction on approximately $151.9 million of Heritage assets, which covers substantially all loans and all other real estate. Under the loss-share agreement, the FDIC will cover 80% of covered loan and other real estate losses incurred. Because of the loss protection provided by the FDIC, the risk characteristics of the Heritage loans and other real estate covered by the loss-share agreement are significantly different from those assets not covered by this agreement. As a result, Trustmark will refer to loans and other real estate subject to the loss-share agreement as “covered” while loans and other real estate that are not subject to the loss-share agreement will be referred to as “noncovered” or “excluding covered.” The loss-share agreement applicable to single family residential mortgage loans and related foreclosed real estate provides for FDIC loss sharing and TNB’s reimbursement to the FDIC for recoveries of covered losses for ten years from the date on which the loss-share agreement was entered. The loss-share agreement applicable to commercial loans and related foreclosed real estate provides for FDIC loss sharing for five years from the date on which the loss-share agreement was entered and TNB’s reimbursement to the FDIC for recoveries of covered losses for an additional three years thereafter.

The assets purchased and liabilities assumed for the Heritage acquisition have been accounted for under the acquisition method of accounting (formerly the purchase method). The assets and liabilities, both tangible and intangible, are recorded at their estimated fair values as of the acquisition date. The fair value amounts are subject to change for up to one year after the closing date as additional information relating to closing date fair values becomes available. The amounts are also subject to adjustments based upon final settlement with the FDIC.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

March 31, 2012

($ in thousands)

(unaudited)

Note 1 – Business Combinations (continued)

The bargain purchase gain from the Heritage acquisition represents the net of the estimated fair value of the assets acquired and liabilities assumed and is influenced significantly by the FDIC-assisted transaction process. Under the FDIC-assisted transaction process, only certain assets and liabilities are transferred to the acquirer and, depending on the nature and amount of the acquirer's bid, the FDIC may be required to make a cash payment to the acquirer. The pretax gain of $7.5 million ($4.6 million after tax) recognized by TNB is considered a bargain purchase transaction under FASB ASC Topic 805. The gain was recognized as other noninterest income in Trustmark’s consolidated statements of income for the three months ended June 30, 2011.

During the first quarter of 2012, the operations of Heritage included total revenues of $3.1 million and net income available to shareholders of $1.7 million.

Note 2 - Securities Available for Sale and Held to Maturity

The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):

	3/31/2012		12/31/2011		9/30/2011		6/30/2011		3/31/2011
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	31	$	3	$	5	$	7	$	10
Issued by U.S. Government sponsored agencies		101,941		64,802		61,870		102,940		136,168
Obligations of states and political subdivisions		208,234		202,827		207,781		186,034		161,909
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		20,064		12,445		14,637		14,990		12,079
Issued by FNMA and FHLMC		286,169		347,932		400,589		413,493		417,022
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,619,920		1,614,965		1,579,698		1,556,676		1,486,872
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		330,318		226,019		212,325		124,902		95,644
Asset-backed securities / structured financial products		23,693		-		-		-		-
Corporate debt securities		5,294		-		-		-		-
Total securities available for sale	$	2,595,664	$	2,468,993	$	2,476,905	$	2,399,042	$	2,309,704

SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions	$	40,393	$	42,619	$	43,246	$	46,931	$	49,129
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		4,089		4,538		5,291		5,547		5,650
Issued by FNMA and FHLMC		586		588		753		753		759
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		4,743		7,749		19,534		32,456		52,272
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		2,199		2,211		2,222		2,236		2,244
Total securities held to maturity	$	52,010	$	57,705	$	71,046	$	87,923	$	110,054

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 90% of the portfolio in U.S. Government agency-backed obligations and other AAA rated securities. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of membership in the Federal Home Loan Bank of Dallas or the Federal Reserve Bank, Trustmark does not hold any equity investment in government sponsored entities.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

March 31, 2012

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Loans secured by real estate:
Construction, land development and other land loans	$	465,486		$	474,082		$	481,821		$	510,867		$	552,956
Secured by 1-4 family residential properties		1,722,357			1,760,930			1,717,366			1,737,744			1,737,018
Secured by nonfarm, nonresidential properties		1,419,902			1,425,774			1,437,573			1,457,328			1,488,711
Other real estate secured		199,400			204,849			207,984			208,797			216,986
Commercial and industrial loans		1,142,813			1,139,365			1,083,753			1,082,127			1,082,258
Consumer loans		210,713			243,756			268,002			332,032			357,870
Other loans		614,082			608,728			587,213			577,421			528,290
LHFI		5,774,753			5,857,484			5,783,712			5,906,316			5,964,089
Allowance for loan losses		(90,879	)		(89,518	)		(89,463	)		(86,846	)		(93,398	)
Net LHFI	$	5,683,874		$	5,767,966		$	5,694,249		$	5,819,470		$	5,870,691


ACQUIRED NONCOVERED LOANS BY TYPE	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Loans secured by real estate:
Construction, land development and other land loans	$	14,346		$	-		$	-		$	-		$	-
Secured by 1-4 family residential properties		20,409			-			-			-			-
Secured by nonfarm, nonresidential properties		54,954			-			-			-			-
Other real estate secured		695			-			-			-			-
Commercial and industrial loans		5,732			-			-			-			-
Consumer loans		4,188			-			-			-			-
Other loans		345			-			-			-			-
Noncovered loans		100,669			-			-			-			-
Allowance for loan losses		-			-			-			-			-
Net noncovered loans	$	100,669		$	-		$	-		$	-		$	-

ACQUIRED COVERED LOANS BY TYPE	3/31/2012			12/31/2011			9/30/2011		6/30/2011		3/31/2011
Loans secured by real estate:
Construction, land development and other land loans	$	3,940		$	4,209		$	4,024	$	8,477	$	-
Secured by 1-4 family residential properties		30,221			31,874			32,735		32,124		-
Secured by nonfarm, nonresidential properties		30,737			30,889			33,601		35,846		-
Other real estate secured		5,087			5,126			5,294		5,363		-
Commercial and industrial loans		2,768			2,971			1,772		5,570		-
Consumer loans		206			290			158		163		-
Other loans		1,460			1,445			1,480		1,015		-
Covered loans		74,419			76,804			79,064		88,558		-
Allowance for loan losses		(773	)		(502	)		-		-		-
Net covered loans	$	73,646		$	76,302		$	79,064	$	88,558	$	-

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

March 31, 2012

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)
	March 31, 2012
LHFI - COMPOSITION BY REGION (1)	Total		Florida		Mississippi (Central and Southern Regions)		Tennessee (Memphis, TN and Northern MS Regions)		Texas
Loans secured by real estate:
Construction, land development and other land loans	$	465,486	$	92,043	$	227,611	$	31,828	$	114,004
Secured by 1-4 family residential properties		1,722,357		57,943		1,492,158		142,489		29,767
Secured by nonfarm, nonresidential properties		1,419,902		159,139		768,969		173,542		318,252
Other real estate secured		199,400		10,548		141,826		5,208		41,818
Commercial and industrial loans		1,142,813		14,406		778,648		84,944		264,815
Consumer loans		210,713		1,477		185,666		19,714		3,856
Other loans		614,082		26,992		518,899		21,119		47,072
Loans	$	5,774,753	$	362,548	$	4,113,777	$	478,844	$	819,584



CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	61,861	$	36,801	$	19,116	$	1,623	$	4,321
Development		107,615		10,782		57,977		6,226		32,630
Unimproved land		162,187		42,841		71,765		17,440		30,141
1-4 family construction		73,306		1,336		57,945		2,688		11,337
Other construction		60,517		283		20,808		3,851		35,575
Construction, land development and other land loans	$	465,486	$	92,043	$	227,611	$	31,828	$	114,004




LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	160,186	$	41,273	$	64,154	$	24,139	$	30,620
Office		140,505		38,167		73,839		11,208		17,291
Nursing homes/assisted living		107,520		-		97,919		4,330		5,271
Hotel/motel		85,042		10,702		29,195		17,690		27,455
Industrial		41,815		8,825		12,108		272		20,610
Health care		16,926		-		11,392		160		5,374
Convenience stores		9,289		198		4,278		1,492		3,321
Other		153,213		15,712		73,620		11,350		52,531
Total income producing loans		714,496		114,877		366,505		70,641		162,473

Owner-occupied:
Office		117,060		17,810		65,878		7,040		26,332
Churches		86,630		2,089		50,758		28,881		4,902
Industrial warehouses		94,367		2,404		54,740		488		36,735
Health care		92,994		10,563		47,973		16,723		17,735
Convenience stores		61,274		1,460		37,344		5,270		17,200
Retail		34,584		4,298		21,787		1,781		6,718
Restaurants		35,536		609		26,652		6,735		1,540
Auto dealerships		20,027		529		17,516		1,910		72
Other		162,934		4,500		79,816		34,073		44,545
Total owner-occupied loans		705,406		44,262		402,464		102,901		155,779

Loans secured by nonfarm, nonresidential properties	$	1,419,902	$	159,139	$	768,969	$	173,542	$	318,252

(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

March 31, 2012

($ in thousands)

(unaudited)

Note 4 – Yields on 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
	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Securities – Taxable		3.13	%		3.02	%		3.26	%		3.69	%		3.77	%
Securities – Nontaxable		4.63	%		4.53	%		4.39	%		4.79	%		5.02	%
Securities – Total		3.24	%		3.13	%		3.35	%		3.77	%		3.87	%
Loans		5.18	%		5.37	%		5.18	%		5.25	%		5.25	%
FF Sold & Rev Repo		0.25	%		0.38	%		0.34	%		0.41	%		0.39	%
Other Earning Assets		3.89	%		3.72	%		4.04	%		4.17	%		2.81	%
Total Earning Assets		4.60	%		4.71	%		4.66	%		4.83	%		4.86	%

Interest-bearing Deposits		0.50	%		0.54	%		0.61	%		0.66	%		0.70	%
FF Pch & Repo		0.16	%		0.15	%		0.19	%		0.22	%		0.21	%
Other Borrowings		2.89	%		2.22	%		2.75	%		2.76	%		1.72	%
Total Interest-bearing Liabilities		0.55	%		0.58	%		0.65	%		0.70	%		0.71	%

Net interest margin		4.19	%		4.28	%		4.17	%		4.29	%		4.30	%

The net interest margin for the first quarter of 2012 totaled 4.19% compared to a core net interest margin in the prior quarter of 4.10% resulting in an increase of nine basis points. The increase is primarily due to decelerated premium amortization from the investment portfolio, improved accreted yield from acquired covered loans, as well as a modest decline in the cost of interest-bearing liabilities. During the fourth quarter of 2011, net interest income included $3.8 million associated with the re-estimation of cash flows on acquired covered loans required by FASB ASC 310-30 accounting guidelines. This re-estimation increased the fourth quarter net interest margin by 18 basis points.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting. Changes in the fair value of these exchange-traded derivative instruments are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the total hedge cost to the changes in the fair value of the MSR asset attributable to interest rate changes. The impact of this strategy resulted in a net negative ineffectiveness of $1.0 million and a net positive ineffectiveness of $263 thousand for the quarters ended March 31, 2012 and 2011, respectively.

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:

	Quarter Ended
	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Mortgage servicing income, net	$	3,886		$	3,725		$	3,738		$	3,713		$	3,614
Change in fair value-MSR from runoff		(2,106	)		(2,122	)		(2,039	)		(1,455	)		(1,291	)
Gain on sales of loans, net		6,469			4,633			2,366			1,852			3,101
Other, net		64			133			2,926			448			(965	)
Mortgage banking income before hedge ineffectiveness		8,313			6,369			6,991			4,558			4,459
Change in fair value-MSR from market changes		248			(2,842	)		(7,614	)		(4,931	)		257
Change in fair value of derivatives		(1,266	)		2,511			10,406			6,642			6
Net (negative) positive hedge ineffectiveness		(1,018	)		(331	)		2,792			1,711			263
Mortgage banking, net	$	7,295		$	6,038		$	9,783		$	6,269		$	4,722

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

March 31, 2012

($ in thousands)

(unaudited)

Note 6 – Other Noninterest Income and Expense

Other noninterest income consisted of the following for the periods presented ($ in thousands):

	Quarter Ended
	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Partnership amortization for tax credit purposes	$	(1,422	)	$	(2,690	)	$	(1,417	)	$	(1,137	)	$	(1,122	)
Bargain purchase gain on acquisition		2,754			-			-			7,456			-
Decrease in FDIC indemnification asset		(81	)		(4,157	)		-			-			-
Other miscellaneous income		2,507			1,919			1,651			1,466			1,884
Total other, net	$	3,758		$	(4,928	)	$	234		$	7,785		$	762

Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits or historical tax credits). These investments are recorded based on the equity method of accounting, which requires the equity in partnership losses to be recognized when incurred and are recorded as a reduction in other income. The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.

As previously mentioned in Note 1 – Business Combinations, during the first quarter of 2012, other noninterest income included a bargain purchase gain which resulted from the acquisition of Bay Bank of $2.8 million. In addition, during the fourth quarter of 2011, other noninterest income included a write-down of the FDIC indemnification asset of $4.2 million on acquired covered loans obtained from Heritage as a result of loan payoffs and improved cash flow projections and lower loss expectations for loan pools.

Other noninterest expense consisted of the following for the periods presented ($ in thousands):

	Quarter Ended
	3/31/2012		12/31/2011		9/30/2011		6/30/2011		3/31/2011
Loan expense	$	5,525	$	5,788	$	4,632	$	4,139	$	3,670
One-time transaction expenses on acquisition		1,917		-		-		-		-
Amortization of intangibles		710		799		792		783		775
Other miscellaneous expense		4,916		5,056		6,312		4,895		5,087
Total other expense	$	13,068	$	11,643	$	11,736	$	9,817	$	9,532

Note 7 – Non-GAAP Financial Measures

In addition to capital ratios defined by generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.

Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations.

These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

March 31, 2012

($ in thousands)

(unaudited)

Note 7 - Non-GAAP Financial Measures (continued)
			Quarter Ended
			3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' common equity			$	1,228,502		$	1,223,101		$	1,211,434		$	1,181,776		$	1,159,898
Less:	Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
	Identifiable intangible assets			(14,703	)		(14,550	)		(15,343	)		(15,976	)		(16,003	)
Total average tangible common equity			$	922,695		$	917,447		$	904,987		$	874,696		$	852,791

PERIOD END BALANCES
Total shareholders' common equity			$	1,241,520		$	1,215,037		$	1,221,606		$	1,192,770		$	1,160,229
Less:	Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
	Identifiable intangible assets			(18,821	)		(14,076	)		(14,861	)		(15,651	)		(15,532	)
Total tangible common equity		(a)	$	931,595		$	909,857		$	915,641		$	886,015		$	853,593

TANGIBLE ASSETS
Total assets			$	9,931,593		$	9,727,007		$	9,705,291		$	9,698,451		$	9,514,462
Less:	Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
	Identifiable intangible assets			(18,821	)		(14,076	)		(14,861	)		(15,651	)		(15,532	)
Total tangible assets		(b)	$	9,621,668		$	9,421,827		$	9,399,326		$	9,391,696		$	9,207,826

Risk-weighted assets		(c)	$	6,707,026		$	6,576,953		$	6,522,468		$	6,556,690		$	6,536,056

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders			$	30,320		$	24,258		$	26,968		$	31,602		$	24,013
Plus:	Intangible amortization net of tax			438			493			489			483			480
Net income adjusted for intangible amortization			$	30,758		$	24,751		$	27,457		$	32,085		$	24,493

Period end common shares outstanding		(d)		64,765,581			64,142,498			64,119,235			64,119,235			63,987,064

TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity 1				13.41	%		10.70	%		12.04	%		14.71	%		11.65	%
Tangible common equity/tangible assets		(a)/(b)		9.68	%		9.66	%		9.74	%		9.43	%		9.27	%
Tangible common equity/risk-weighted assets		(a)/(c)		13.89	%		13.83	%		14.04	%		13.51	%		13.06	%
Tangible common book value		(a)/(d)*1,000	$	14.38		$	14.18		$	14.28		$	13.82		$	13.34

TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity			$	1,241,520		$	1,215,037		$	1,221,606		$	1,192,770		$	1,160,229
Eliminate qualifying AOCI				(1,537	)		(3,121	)		(19,606	)		(3,674	)		11,623
Qualifying tier 1 capital				60,000			60,000			60,000			60,000			60,000
Disallowed goodwill				(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Adj to goodwill allowed for deferred taxes				11,978			11,625			11,273			10,920			10,568
Other disallowed intangibles				(18,821	)		(14,076	)		(14,861	)		(15,651	)		(15,532	)
Disallowed servicing intangible				(4,589	)		(4,327	)		(4,366	)		(5,011	)		(5,360	)
Total tier 1 capital			$	997,447		$	974,034		$	962,942		$	948,250		$	930,424
Less:	Qualifying tier 1 capital			(60,000	)		(60,000	)		(60,000	)		(60,000	)		(60,000	)
Total tier 1 common capital		(e)	$	937,447		$	914,034		$	902,942		$	888,250		$	870,424

Tier 1 common risk-based capital ratio		(e)/(c)		13.98	%		13.90	%		13.84	%		13.55	%		13.32	%

1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity

Attached files

Stock widget

Investing forum

TRUSTMARK CORP Reports