TRMK

Trustmark Corporation (TRMK)

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Trustmark Corp (TRMK)

Q3 2008 Earnings Call

October 29, 2008 11:00 am

Executives

Richard Hickson - President & Chief Executive Officer

Louis Greer - Chief Financial Officer

Joe Rein - Director of IR

Bob Hardison - Chief Credit Officer

Analysts

John Pancari - J.P. Morgan

Charles Ernst - Sandler O’Neill & Partners

Brian Klock - Keefe, Bruyette & Woods

Andrew Stapp - B. Riley & Co.

Peyton Green - FTN Midwest Securities

Presentation

Operator

Good morning ladies and gentlemen and welcome to Trustmark Corporation's third quarter earnings conference call. (Operator instructions). At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Joe Rein, Director of Investor Relations. Please go ahead, sir.

Joey Rein

Good morning and thank you. I would like to remind everyone that a copy of our third quarter earnings release and supporting financial information is available on the Investor Relations section of our web site at trustmark.com by clicking on the news releases tab.

During the course of our call this morning, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties which are outlined in our earnings release and our other filings with the Securities and Exchange Commission.

At this time, I would like to turn the call over to our Chairman and CEO, Richard Hickson.

Richard Hickson

Thank you, Joey. Good morning. Thank you for joining us this morning. I have with me Jerry Host, our Chief Operating Officer, Louis Greer, our Chief Financial Officer; as well as others who will answer any questions you have after my comments.

This quarter, Trustmark earned $23 million and $0.41 a share. Clearly portraying a core earnings ability of the company, there were no significant unusual assets in the quarter. I think as I go through my comments, you will be able to have full transparency into the quarter. We're very pleased with performance ratios of a little over 15% return on tangible equity and low booked 1% on our ROA.

The results of the quarter reflect our enhanced capital strength and expanded net interest margin in a very difficult environment, a lower provision or loan losses as opposed to the second quarter and more in line with the first quarter that we referred to at the end of last quarter and continued disciplined expense management.

Earnings during the quarter reflect the core operating strength of the company and we'll give you more of a sense of our run rate at this time.

We are pursuing the U.S. Treasury Capital Purchase Program. We think this program provides an outstanding opportunity for strong healthy banks like Trustmark to support the recovery of the U.S. economy. This cost effective capital will support Trustmark's growth and expansion opportunities.

Bottom line, we had a profitable quarter, we're well capitalized, very strong liquidity, financial flexibility to succeed in what appears to be an ever challenging environment.

I'd like to speak first about trade quality. You may best be able to follow this from page three of the stat sheet. Non-accrual loans increased $10 million in the quarter primarily due to a single energy credit that we made everyone aware of which in Houston, which was early in the quarter. It's well secured. We feel it's appropriately reserved.

We did put it on non-accrual status and no additional write-downs are anticipated. We are expecting the loan to be repaid in full throughout out the course of '09. This is the company, Sim Crude. We're in the smaller facility of around 100 million to 150 million of the 2.5 billion. It is in a first position on the fixed assets and we are still anticipating no loss on the loan.

Non-accruals quarter end to quarter end remained unchanged in Florida and Mississippi and declined in Tennessee. Other real estate increased about $10 million principally due to foreclosures in Florida. Total non-performing assets increased approximately $20 million to $137 million, or right at 2% of total loans.

Net charge-offs were $10 million compared to the $26 million, or 58 basis points. The provision was 14.5 million.

This put our allowance for loan losses at 1.76% of our commercial loans and 64 basis points on our consumer loans. Total allowance, $135 million.

Now, within what I just said in the last four or five bullet sentences, an awful lot happened. When you take the quarter overall, what I can tell you is that there were no relationships that popped up as new issues or problems in Florida. There were five loans ranging three of them $2 million, one of them $1 million and one of them $3.5 million that we placed on non-accrual down in Florida.

Two of them are very small $2 million land loans, one was our only condominium exposure which was $3.5 million that's paid down by 50% during the quarter, one house in our wealth management area, about $2 million, and then $1 million lot loan relationship with about four small lots in it. And then saw them accruing. Anything more than that is $100,000 here or there.

We saw a paydown of a couple of million dollars on one large house down in San Destin in the Florida Panhandle. We had a large paydown of about a million dollars of a non-accrual loan on a physician group in Memphis. We had a builder paydown for nearly a million dollars in Memphis and we had a raw land paydown in Florida for a couple of million dollars.

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