TRMK

Trustmark Corporation (TRMK)

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Trustmark Corporation (TRMK)

Q3 2009 Earnings Call

October 28, 2009 11:00 am ET

Executives

Richard Hickson – Chairman & Chief Executive Officer

Buddy Wood – Chief Risk Officer

Barry Harvey – Senior Vice President, Chief Credit Administrator

Bob Hardison – Chief Commercial Credit Officer

Louis Greer – Chief Financial Officer

Joey Rein – Director of Investor Relations

Analysts

Kevin Fitzsimmons – Sandler O'Neill & Partners

Steven Alexopoulos – JP Morgan

Jennifer Demba – Suntrust Robinson Humphrey

Adam Barkstrom – Sterne, Agee & Leach

Michael Rose – Raymond James

Andy Stapp – B. Riley & Company

Jeff Davis – FTN Equity Capital Markets

Brian Klock – Keefe, Bruyette & Woods

Albert Savastano – Fox-Pitt Kelton

Presentation

Operator

Welcome to the Trustmark Corporation's Third Quarter Earnings conference call. (Operator Instructions) It is now my pleasure to introduce Joey Rein, Director of Investor Relations at Trustmark.

Joey Rein

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 website 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'd like to turn the call over to Richard Hickson, Chairman and CEO of Trustmark.

Richard Hickson

I have with me this morning Buddy Wood our Chief Risk Officer, Barry Harvey and Bob Hardison, representing Credit Administration, and Louis Greer our CFO. Jerry Host is not with us this morning. He had a groundbreaking over at Jackson State University for a major real estate project for financing on campus.

I'm delighted to go through our third quarter financial highlights. Net income available common shareholders total $22.4 million or $0.39 a share. Return on tangible common equity of 13%. We have announced a quarterly cash dividend, which is the same as in the past few quarters, $0.23. We saw a diversified revenue growth, good growth across general banking, mortgage, insurance and wealth management. I'll discuss those in detail.

We had a robust net interest income of $91.3 million expanding the margin out to 4.28%. Most pleasing to us, our pre-tax pre-provision earnings were right at $54 million in line with our forecast and holding up and slightly increasing over the last few quarters, and we have continued disciplined non-interest expense management. We're focused on revenue generation, credit quality and expense management.

Covering capital, tangible common equity totaled a little over $700 million and reached 7.76%, an increase over last quarter. Total risk based capital with our senior preferred was 16%, without the senior preferred of $215 million. We are at an estimated 12.8%.

Trustmark has undergone a significant amount of stress testing, both with our forecast over the next three years, a mid stress level and what we would call a depression stress level. We have also stressed revenues and expenses and in all categories we remain above well capitalized. Relative to TARP repayment, we are still giving it very serious consideration and are looking at a point where we know the economy has moderated.

I'd like to talk about loans both volume and type and I think it would best followed by you if you go to Page 7 Note 2 of our stat sheet. Quarter-over-quarter averages loans were down about $240 million. What we would call our commercial portfolio of a little over $4 billion was down about $95 million, 60 of that was residential real estate and income producing real estate, 50 of that was normal C&I with line usage and some permanent real estate pay downs.

If you look at the line usage, and we have a quarter-over-quarter report that does that, it was principally larger companies, say in the poultry industry, taking down their inventories. Our consumer portfolio was down $75 million, as we expected, and intend our auto in that 75 was down $60 million. And we saw a small amount of pay down in home equity lines.

Our mortgage company one to four was down $70 million, and that was principally volume differentials and originations between the second and third quarter. You will recall that we did about $600 million in the second quarter and a little over $300 million in the third.

Relative to loan types, I would like you to focus under Note 2 at secured by non-farm, non-residential properties or what we would call commercial real estate, and that would be broken into two pieces. About $740 million would be income producing commercial real estate and about $730 million would be what we call owner occupied real estate.

I'm going to give you a flavor of the CRE portfolio, $400 of that $740 is in Mississippi. There are no skyscrapers. There has been very, except for one center in Madison County, there have been very little new shopping center building. This is principally real estate that did not appreciate in value and we're very pleased with the cash flows that we see.

Florida CRE income producing is $126 million. We make that available to you. We [dart] up having nothing above expectations there. Texas, $121 million and Tennessee, $89 million. As we drill down further into that CRE, retail is $170 million, office is about the same size at about $170 million, multifamily at about $100 million. Now, nursing homes and assisted living homes are considered income producing CRE and that's about $120 million number for us with substantially 95% of it in Mississippi.

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