TRMK

Trustmark Corporation (TRMK)

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Trustmark Corporation Inc. (TRMK)

Q2 2010 Earnings Call

July 28, 2010; 11:00 am ET

Executives

Richard Hickson - Chairman, President & Chief Executive Officer

Jerry Host - Chief Operating Officer

Louis Greer - Chief Financial Officer

Joey Rein - Director of Investor Relations

Analysts

Steven Alexopoulos - JPMorgan

Kevin Fitzsimmons - Sandler O'Neill

Andy Stapp - B. Riley & Company

Caron Jacobson - KBW

Al Savastano - Macquarie

Presentation

Operator

Good morning ladies and gentlemen and welcome to the Trustmark Corporation second quarter earnings conference call. At this time all participants are in a listen-only mode. Following the presentation this morning there will be a question-and-answer session. (Operator Instructions)

It is now my pleasure to introduce Joey Rein, Director of Investor Relations at Trustmark.

Joey Rein

[Audio Gap] Our earnings release as well as supporting financial information is available on the Investor Relations section of our website at trustmark.com.

During the course of our call this morning, we 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 risk 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 introduce Richard Hickson, Chairman and CEO of Trustmark.

Richard Hickson

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 and other Executives representing our investment department and credit administration to answer any questions that you might have this morning.

Let me begin by saying I feel it was a good quarter, from some perspectives a very good quarter. There were no really significant surprises. We remain cautious about the further; however, I would say that Trustmark has turned its ship and moved to the [authentic].

Someone said at our Board meeting yesterday as we were looking where we are and where others are, we are fully cognizant that we are seeing a number of institutions still incurring problems in our market. We are aware of that, we are very cautions of that and we are concerned of that.

Someone told me yesterday that today’s peacock is always tomorrow’s feather duster. So we know we had a very good quarter, but we surely don’t think we are at the end of anything, maybe it dropped down to a new level, but we’ll talk about that and you can form your own opinions.

Net income available to common shareholders was approximately $26 million, $0.41 a share. Our return on tangible common equity which we key towards was approximately 13% up from about 12% on the length quarter.

Our Board did declare its usual cash dividend of $0.43, which we had a good converge ration on. Pretax, pre-prevision earnings were all steady at approximately $49 million.

We saw some revenue growth compared to a year ago, some improved credit quality and we continue with a very disciplined expense management, which will be more granular later in our call.

We have two items which you might consider non-core; one was 2.3 million positive after tax as we hedge our MSR. Buddy Wood will have some comments about why, and our expectations later on that.

Our security gains now are approaching $70 million, $65 million to $70 million. We took about $1.1 million in after tax gains. That was credits that we felt that caused with any move would take away the income.

In my mind, as we take very small profits in the bond portfolio, it is contracting from the future margin, maybe over a three or four year period, so margin would be even better if we had not been taking these small profits. We will address that issues and what is the best opinion of our investment department as they know our portfolio very well.

Tangible common equity contingent to grow is now about $833 million or about 9.3%, risk based capital continues to grow principally with the types of loans that are leaving our balance sheet and loans leaving as we are de-risking. I can comment on the whole portfolio for a moment at this time, last quarter it was down about $150 million.

Looking at it, land and land development was down $67 million. Consumer auto was down $50 million, that gives you your $115 million. Everything else was essentially flat. We are seeing some renewed activity which we’ll discuss more in depth on the C&I front. There is not going to be much loan growth until the economy turns, but we are seeing the loans move off that we wish to move off.

The construction land development was principally about $40 million in Texas and $15 in Mississippi and about $10 in Florida. So, that many of us would view as positive when a construction loan pays off or migrates, it’s a big help. We no longer have any kind of concentration when it comes to construction or total CRE and Barry Harvey will cover those numbers later if you have a question about.

I’m going to go ahead into credit quality. It was the best quarter we have had in quite awhile. I would say the major reason that we have seen this peaking and I might take you to page six of our stat sheet so you can see five quarters across with assets, provisions, charge-offs, etcetera.

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