Trustmark Corporation Announces Second Quarter Earnings.JACKSON Jackson. 1 City (1990 pop. 37,446), seat of Jackson co., S Mich., on the Grand River; inc. 1857. It is an industrial and commercial center in a farm region. , Miss. -- Trustmark See TRUSTe. Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :TRMK) announced net income of $30.8 million in the second quarter of 2006, which represented basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.55. Trustmark's second quarter net income produced returns on average shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. and average assets of 15.78% and 1.51%, respectively. During the first six months of 2006, Trustmark's net income totaled $60.1 million, which represented basic and diluted earnings per share of $1.08. Trustmark's performance during the first half of 2006 resulted in returns on average shareholders' equity and average assets of 15.66% and 1.48%, respectively. Highlights include: --Expanded net interest income and net interest margin --Solid growth in wealth management and insurance revenues --Outstanding credit quality --Preparation for merger with Houston's Republic Bancshares of Texas, Inc. --Continued investment in banking center expansion program Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a G. Hickson Hickson is a surname, and may refer to
Houston (pronounced /'hjuːstən/) is the largest city in the state of Texas and the markets as well as by our Consumer Services Consumer Services refers to the formulation, deformulation, technical consulting and testing of most consumer products, such as food, herbs, beverages, vitamins, pharmaceuticals, cosmetics, hair products, household cleaners, [paints, plastics, metals, waxes, coatings, minerals, Division, which provides a broad range of lending services including automotive, credit card and student lending." "Average deposits during the second quarter of 2006 were $6.2 billion, an increase of $620 million, or 11.2%, relative to the same period in 2005. This growth was evident across much of our Mississippi Mississippi, state, United States Mississippi (mĭs'əsĭp`ē), one of the Deep South states of the United States. It is bordered by Alabama (E), the Gulf of Mexico (S), Arkansas and Louisiana, with most of the border formed by franchise, with notable increases in areas affected by Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. . Many of these markets experienced significant inflows of cash
as a result of insurance and assistance payments following Hurricane
Katrina. As a consequence, loan growth has been constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. . We anticipate that borrowing activity will accelerate in these markets in line with rebuilding activities," said Hickson. "We are pleased that Trustmark's losses related to Hurricane Katrina have not been as great as originally anticipated. We have updated our estimates for probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. losses resulting from Hurricane Katrina and reduced the allowance for loan losses by $1.7 million and other accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. by $266 thousand in the second quarter of 2006, which collectively increased net income during the second quarter by $1.2 million. At June June: see month. 30, 2006, Trustmark maintained specific Hurricane Katrina allocations in its allowance for loan losses of $4.9 million compared to $9.8 million at December December: see month. 31, 2005," said Hickson. "Credit quality indicators remained extremely strong during the second quarter. Non-performing assets totaled $28.2 million at June 30, 2006, down 22.3% from levels one year earlier, and the allowance coverage for non-performing loans A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms. was 286.0%. We are particularly pleased that recoveries exceeded charge-offs during the second quarter of 2006," said Hickson. The repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of the Corporation's balance sheet continued as lower yielding investment securities declined and were replaced with higher yielding loans. Similarly, higher cost borrowings were replaced with lower cost deposits. Collectively, this resulted in a richer mix of earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin , an improved interest rate risk profile, and an enhanced net interest margin of 3.90% during the second quarter of 2006. "Trustmark has made great strides in providing our clients with trusted financial advice. Our success in this regard is reflected by growth in net interest income and non-interest income as well as prudent non-interest expense management. We are particularly pleased with the continued solid growth of our wealth management and insurance businesses in the second quarter of 2006, which increased 8.3% and 4.2%, respectively, from figures one year earlier," said Hickson. As previously announced on April 13, 2006, Trustmark signed a definitive agreement in which Republic Bancshares of Texas, Inc., would merge See mail merge and concatenate. into Trustmark. This transaction provides an excellent opportunity for Trustmark to expand and enhance its franchise within the attractive and high-growth Houston Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. Economy The fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; marketplace. The transaction, which is subject to approval by Republic's shareholders and regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities , is expected to be completed during the third quarter of 2006. Richard G. Hickson stated, "I am pleased to report that our integration and conversion plans are on schedule. Trustmark and Republic associates are diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d working to ensure a seamless See seamless integration. transition and we look forward with great anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, to welcoming Republic's clients and associates to the Trustmark family." "Our initiative to build additional banking centers in higher-growth markets within our four state franchise has been well received. Thus far in 2006, Trustmark has opened a total of five new banking centers in the Jackson, Memphis, and Houston suburban markets as well as the Mississippi Gulf Coast The Mississippi Gulf Coast refers to the three Mississippi counties which lie on the Gulf of Mexico: Hancock County, Mississippi, Harrison County, Mississippi, and Jackson County, Mississippi. market. We anticipate opening two additional banking centers during the remainder of 2006 as well as eight banking centers during 2007. This branching initiative reflects Trustmark's commitment to build long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. value for shareholders through continued investment in attractive, higher-growth markets," said Hickson. ADDITIONAL INFORMATION As previously announced, Trustmark will host a conference call with analysts on Wednesday Wednesday: see week. , July July: see month. 19 at 10:00 a.m. Central Time to discuss the Corporation's financial results. Interested parties may listen to the conference call by dialing (800) 289-0572, passcode 1471833 or by clicking on the link provided under the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, July 26 in archived format at the same web address or by calling (888) 203-1112, passcode 1471833. Trustmark is a financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. company providing banking and financial solutions through over 145 offices and 2,600 associates in Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and , Mississippi, Tennessee Tennessee, state, United States Tennessee (tĕn`əsē', tĕn'əsē`), state in the south-central United States. and Texas. For additional information, visit our website at www.trustmark.com. FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements contained in this document are not statements of historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements include, but are not limited to, statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , among other things and encompass any estimate, prediction "Prediction is very difficult, especially if it's about the future." - Niels Bohr A prediction is a statement or claim that a particular event will occur in the future in more certain terms than a forecast. , expectation, projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. , opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. Should one or more of these risks materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected. These risks could cause actual results to differ materially from current expectations of Management and include, but are not limited to, changes in the level of nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. and charge-offs, local, state and national economic and market conditions, material changes in market interest rates, the costs and effects of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and of unexpected or adverse outcomes in such litigation, competition in loan and deposit pricing, as well as the entry of new competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. into our markets through de novo [Latin, Anew.] A second time; afresh. A trial or a hearing that is ordered by an appellate court that has reviewed the record of a hearing in a lower court and sent the matter back to the original court for a new trial, as if it had not been previously heard nor decided. expansion and acquisitions, changes in existing regulations or the adoption of new regulations, natural disasters, acts of war Tom Clancy's Op-Center: Acts of War is a technothriller by Jeff Rovin Plot introduction The mobile Regional Operations Center (ROC) in Turkey investigates a dam blown up by Kurdish terrorists. or terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. , changes in consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. , borrowings and savings habits, technological changes, changes in the financial performance or condition of Trustmark's borrowers, the ability to control expenses, changes in Trustmark's compensation and benefit plans, greater than expected costs or difficulties related to the integration of, or a material delay in closing of, the Republic Bancshares of Texas merger, greater than expected costs or difficulties related to the integration of new products and lines of business and other risks described in Trustmark Corporation's filings with the Securities and Exchange Commission. Although Management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. 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 CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2006
($ in thousands)
(unaudited)
Quarter Ended June 30,
-------------------------
AVERAGE BALANCES 2006 2005 $ Change % Change
----------------------- ------------ ------------ ---------- ---------
Securities AFS-taxable $ 908,736 $ 1,390,756 $(482,020) -34.7%
Securities AFS-
nontaxable 58,265 63,520 (5,255) -8.3%
Securities HTM-taxable 203,272 209,566 (6,294) -3.0%
Securities HTM-
nontaxable 92,947 93,658 (711) -0.8%
------------ ------------ ----------
Total securities 1,263,220 1,757,500 (494,280) -28.1%
------------ ------------ ----------
Loans 6,078,847 5,669,110 409,737 7.2%
Fed funds sold and rev
repos 28,513 18,308 10,205 55.7%
------------ ------------ ----------
Total earning
assets 7,370,580 7,444,918 (74,338) -1.0%
------------ ------------ ----------
Allowance for loan
losses (73,679) (66,243) (7,436) 11.2%
Cash and due from banks 315,722 343,117 (27,395) -8.0%
Other assets 569,029 532,805 36,224 6.8%
------------ ------------ ----------
Total assets $ 8,181,652 $ 8,254,597 $ (72,945) -0.9%
============ ============ ==========
Interest-bearing demand
deposits $ 914,548 $ 1,251,831 $(337,283) -26.9%
Savings deposits 1,666,594 1,124,568 542,026 48.2%
Time deposits less than
$100,000 1,425,602 1,312,717 112,885 8.6%
Time deposits of
$100,000 or more 778,831 588,732 190,099 32.3%
------------ ------------ ----------
Total interest-
bearing deposits 4,785,575 4,277,848 507,727 11.9%
Fed funds purchased and
repos 522,632 745,858 (223,226) -29.9%
Short-term borrowings 609,137 961,431 (352,294) -36.6%
Long-term FHLB advances 5,650 177,278 (171,628) -96.8%
------------ ------------ ----------
Total interest-
bearing
liabilities 5,922,994 6,162,415 (239,421) -3.9%
Noninterest-bearing
deposits 1,374,068 1,261,788 112,280 8.9%
Other
liabilities 102,611 78,121 24,490 31.3%
Shareholders' equity 781,979 752,273 29,706 3.9%
------------ ------------ ----------
Total liabilities
and equity $ 8,181,652 $ 8,254,597 $ (72,945) -0.9%
============ ============ ==========
Year-to-date June 30,
-------------------------
AVERAGE BALANCES 2006 2005 $ Change % Change
----------------------- ------------ ------------ ---------- ---------
Securities AFS-taxable $ 941,265 $ 1,447,260 $(505,995) -35.0%
Securities AFS-
nontaxable 59,139 65,048 (5,909) -9.1%
Securities HTM-taxable 202,970 170,088 32,882 19.3%
Securities HTM-
nontaxable 92,840 89,696 3,144 3.5%
------------ ------------ ----------
Total securities 1,296,214 1,772,092 (475,878) -26.9%
------------ ------------ ----------
Loans 6,063,141 5,579,561 483,580 8.7%
Fed funds sold and rev
repos 28,160 33,087 (4,927) -14.9%
------------ ------------ ----------
Total earning
assets 7,387,515 7,384,740 2,775 0.0%
------------ ------------ ----------
Allowance for loan
losses (75,268) (65,568) (9,700) 14.8%
Cash and due from banks 324,685 345,944 (21,259) -6.1%
Other assets 565,738 531,903 33,835 6.4%
------------ ------------ ----------
Total assets $ 8,202,670 $ 8,197,019 $ 5,651 0.1%
============ ============ ==========
Interest-bearing demand
deposits $ 877,728 $ 1,354,490 $(476,762) -35.2%
Savings deposits 1,701,771 1,040,703 661,068 63.5%
Time deposits less than
$100,000 1,430,848 1,309,317 121,531 9.3%
Time deposits of
$100,000 or more 785,945 569,124 216,821 38.1%
------------ ------------ ----------
Total interest-
bearing deposits 4,796,292 4,273,634 522,658 12.2%
Fed funds purchased and
repos 526,398 717,198 (190,800) -26.6%
Short-term borrowings 621,709 927,329 (305,620) -33.0%
Long-term FHLB advances 5,698 162,466 (156,768) -96.5%
------------ ------------ ----------
Total interest-
bearing
liabilities 5,950,097 6,080,627 (130,530) -2.1%
Noninterest-bearing
deposits 1,375,713 1,289,311 86,402 6.7%
Other
liabilities 102,990 74,461 28,529 38.3%
Shareholders' equity 773,870 752,620 21,250 2.8%
------------ ------------ ----------
Total liabilities
and equity $ 8,202,670 $ 8,197,019 $ 5,651 0.1%
============ ============ ==========
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2006
($ in thousands except per share data)
(unaudited)
June 30,
------------------------
PERIOD END BALANCES 2006 2005 $ Change % Change
----------------------- ------------ ------------ ---------- ---------
Securities available
for sale $ 905,573 $ 1,212,669 $(307,096) -25.3%
Securities held to
maturity 296,246 304,589 (8,343) -2.7%
------------ ------------ ----------
Total securities 1,201,819 1,517,258 (315,439) -20.8%
------------ ------------ ----------
Loans held for sale 127,107 144,665 (17,558) -12.1%
Loans 6,005,936 5,645,812 360,124 6.4%
Fed funds sold and rev
repos 33,420 24,025 9,395 39.1%
------------ ------------ ----------
Total earning
assets 7,368,282 7,331,760 36,522 0.5%
------------ ------------ ----------
Allowance for loan
losses (71,846) (65,902) (5,944) 9.0%
Cash and due from banks 353,888 300,585 53,303 17.7%
Mortgage servicing
rights 68,981 51,561 17,420 33.8%
Goodwill 137,368 137,412 (44) 0.0%
Identifiable intangible
assets 26,706 30,425 (3,719) -12.2%
Other assets 351,209 318,558 32,651 10.2%
------------ ------------ ----------
Total assets $ 8,234,588 $ 8,104,399 $ 130,189 1.6%
============ ============ ==========
Noninterest-bearing
deposits $ 1,453,178 $ 1,249,464 $ 203,714 16.3%
Interest-bearing
deposits 4,910,135 4,271,260 638,875 15.0%
------------ ------------ ----------
Total deposits 6,363,313 5,520,724 842,589 15.3%
Fed funds purchased and
repos 487,010 726,846 (239,836) -33.0%
Short-term borrowings 532,418 827,347 (294,929) -35.6%
Long-term FHLB advances - 205,827 (205,827) -100.0%
Other
liabilities 90,572 79,017 11,555 14.6%
------------ ------------ ----------
Total liabilities 7,473,313 7,359,761 113,552 1.5%
------------ ------------ ----------
Common stock 11,514 11,824 (310) -2.6%
Surplus 51,511 91,619 (40,108) -43.8%
Retained earnings 715,345 646,782 68,563 10.6%
Accum other
comprehensive loss,
net of tax (17,095) (5,587) (11,508) n/m
------------ ------------ ----------
Total
shareholders'
equity 761,275 744,638 16,637 2.2%
------------ ------------ ----------
Total liabilities
and equity $ 8,234,588 $ 8,104,399 $ 130,189 1.6%
============ ============ ==========
Total interest-
bearing
liabilities $ 5,929,563 $ 6,031,280 $(101,717) -1.7%
============ ============ ==========
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
June 30, 2006
($ in thousands except per share data)
(unaudited)
Quarter Ended June 30,
-------------------------
2006 2005 $ Change % Change
------------ ------------ ---------- ---------
Interest and fees on
loans-FTE $ 103,778 $ 85,641 $ 18,137 21.2%
Interest on securities-
taxable 11,310 13,993 (2,683) -19.2%
Interest on securities-
tax exempt-FTE 2,759 2,917 (158) -5.4%
Interest on fed funds
sold and rev repos 365 143 222 155.2%
Other interest income 31 22 9 40.9%
------------ ------------ ----------
Total interest
income-FTE 118,243 102,716 15,527 15.1%
------------ ------------ ----------
Interest on deposits 33,469 18,326 15,143 82.6%
Interest on fed funds
pch and repos 5,748 4,995 753 15.1%
Other interest expense 7,301 9,413 (2,112) -22.4%
------------ ------------ ----------
Total interest
expense 46,518 32,734 13,784 42.1%
------------ ------------ ----------
Net interest
income-FTE 71,725 69,982 1,743 2.5%
Provision for loan
losses (1,964) 1,429 (3,393) n/m
------------ ------------ ----------
Net interest
income after
provision-FTE 73,689 68,553 5,136 7.5%
------------ ------------ ----------
Service charges on
deposit accounts 13,308 13,541 (233) -1.7%
Insurance commissions 8,718 8,370 348 4.2%
Wealth management 5,865 5,414 451 8.3%
General banking - other 5,470 5,284 186 3.5%
Mortgage banking, net 2,898 (3,246) 6,144 n/m
Other, net 2,740 2,644 96 3.6%
------------ ------------ ----------
Nonint inc-excl
sec gains
(losses) 38,999 32,007 6,992 21.8%
Security gains (losses) 384 (4,057) 4,441 n/m
------------ ------------ ----------
Total noninterest
income 39,383 27,950 11,433 40.9%
------------ ------------ ----------
Salaries and employee
benefits 39,567 37,245 2,322 6.2%
Services and fees 8,979 8,104 875 10.8%
Net occupancy-premises 4,070 3,661 409 11.2%
Equipment expense 3,589 3,855 (266) -6.9%
Other expense 7,547 7,396 151 2.0%
------------ ------------ ----------
Total noninterest
expense 63,752 60,261 3,491 5.8%
------------ ------------ ----------
Income before income
taxes 49,320 36,242 13,078 36.1%
Tax equivalent
adjustment 2,107 2,073 34 1.6%
Income taxes 16,439 11,963 4,476 37.4%
------------ ------------ ----------
Net income $ 30,774 $ 22,206 $ 8,568 38.6%
============ ============ ==========
Earnings per share
Basic $ 0.55 $ 0.39 $ 0.16 41.0%
============ ============ ==========
Diluted $ 0.55 $ 0.39 $ 0.16 41.0%
============ ============ ==========
Weighted average shares
outstanding
Basic 55,564,866 56,828,841 -2.2%
============ ============
Diluted 55,834,174 56,967,995 -2.0%
============ ============
Period end shares
outstanding 55,262,232 56,751,801 -2.6%
============ ============
Dividends per share $ 0.2100 $ 0.2000 5.0%
============ ============
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
June 30, 2006
($ in thousands except per share data)
(unaudited)
Year-to-date June 30,
-------------------------
2006 2005 $ Change % Change
------------ ------------ ---------- ---------
Interest and fees on
loans-FTE $ 201,926 $ 164,685 $ 37,241 22.6%
Interest on securities-
taxable 22,879 29,727 (6,848) -23.0%
Interest on securities-
tax exempt-FTE 5,562 5,780 (218) -3.8%
Interest on fed funds
sold and rev repos 672 416 256 61.5%
Other interest income 51 42 9 21.4%
------------ ------------ ----------
Total interest
income-FTE 231,090 200,650 30,440 15.2%
------------ ------------ ----------
Interest on deposits 63,444 34,694 28,750 82.9%
Interest on fed funds
pch and repos 10,804 8,643 2,161 25.0%
Other interest expense 14,662 16,910 (2,248) -13.3%
------------ ------------ ----------
Total interest
expense 88,910 60,247 28,663 47.6%
------------ ------------ ----------
Net interest
income-FTE 142,180 140,403 1,777 1.3%
Provision for loan
losses (4,948) 4,225 (9,173) n/m
------------ ------------ ----------
Net interest
income after
provision-FTE 147,128 136,178 10,950 8.0%
------------ ------------ ----------
Service charges on
deposit accounts 24,997 25,925 (928) -3.6%
Insurance commissions 17,067 16,232 835 5.1%
Wealth management 11,476 10,657 819 7.7%
General banking - other 10,665 10,036 629 6.3%
Mortgage banking, net 6,350 605 5,745 n/m
Other, net 4,268 5,097 (829) -16.3%
------------ ------------ ----------
Nonint inc-excl
sec losses 74,823 68,552 6,271 9.1%
Security losses 1,250 (4,054) 5,304 n/m
------------ ------------ ----------
Total noninterest
income 76,073 64,498 11,575 17.9%
------------ ------------ ----------
Salaries and employee
benefits 78,944 74,604 4,340 5.8%
Services and fees 17,743 17,062 681 4.0%
Net occupancy-premises 7,954 7,352 602 8.2%
Equipment expense 7,232 7,808 (576) -7.4%
Other expense 15,391 14,577 814 5.6%
------------ ------------ ----------
Total noninterest
expense 127,264 121,403 5,861 4.8%
------------ ------------ ----------
Income before income
taxes 95,937 79,273 16,664 21.0%
Tax equivalent
adjustment 4,321 4,085 236 5.8%
Income taxes 31,523 26,201 5,322 20.3%
------------ ------------ ----------
Net income $ 60,093 $ 48,987 $ 11,106 22.7%
============ ============ ==========
Earnings per share
Basic $ 1.08 $ 0.86 $ 0.22 25.6%
============ ============ ==========
Diluted $ 1.08 $ 0.86 $ 0.22 25.6%
============ ============ ==========
Weighted average shares
outstanding
Basic 55,630,270 57,112,559 -2.6%
============ ============
Diluted 55,806,439 57,251,397 -2.5%
============ ============
Period end shares
outstanding 55,262,232 56,751,801 -2.6%
============ ============
Dividends per share $ 0.4200 $ 0.4000 5.0%
============ ============
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2006
($ in thousands except per share data)
(unaudited)
June 30,
------------------------
NONPERFORMING ASSETS 2006 2005 $ Change % Change
----------------------- ------------ ------------ ---------- ---------
Nonaccrual loans $ 25,119 $ 32,684 $ (7,565) -23.1%
Restructured loans - - -
------------ ------------ ----------
Total
nonperforming
loans 25,119 32,684 (7,565) -23.1%
Other real estate 3,107 3,634 (527) -14.5%
------------ ------------ ----------
Total
nonperforming
assets 28,226 36,318 (8,092) -22.3%
Loans past due over 90
days
Included in Loan
Portfolio 6,578 1,698 4,880 287.4%
Serviced GNMA loans
eligible for repch 15,957 6,612 9,345 141.3%
------------ ------------ ----------
Total loans past
due over 90 days 22,535 8,310 14,225 171.2%
------------ ------------ ----------
Total
nonperforming
assets plus past
due over 90 days $ 50,761 $ 44,628 $ 6,133 13.7%
============ ============ ==========
Quarter Ended June 30,
-------------------------
ALLOWANCE FOR LOAN
LOSSES 2006 2005 $ Change % Change
----------------------- ------------ ------------ ---------- ---------
Beginning Balance $ 73,542 $ 66,787 $ 6,755 10.1%
Charge-offs (2,983) (4,443) 1,460 -32.9%
Recoveries 3,251 2,129 1,122 52.7%
Provision for loan
losses (1,964) 1,429 (3,393) n/m
------------ ------------ ----------
Ending Balance $ 71,846 $ 65,902 $ 5,944 9.0%
============ ============ ==========
RATIOS
------------
ROA 1.51% 1.08%
ROE 15.78% 11.84%
Equity generation rate 9.76% 5.77%
EOP equity/ EOP assets 9.24% 9.19%
Average equity/average
assets 9.56% 9.11%
Interest margin - Yield
- FTE 6.43% 5.53%
Interest margin - Cost
- FTE 2.53% 1.76%
Net interest margin -
FTE 3.90% 3.77%
Rate on interest-
bearing liabilities 3.15% 2.13%
Efficiency ratio 57.72% 56.97%
Net charge offs/average
loans -0.02% 0.16%
Provision for loan
losses/average loans -0.13% 0.10%
Nonperforming
loans/total loans 0.42% 0.58%
Nonperforming
assets/total loans 0.47% 0.64%
Nonperforming
assets/total loans+ORE 0.47% 0.64%
ALL/nonperforming loans 286.02% 201.63%
ALL/total loans 1.20% 1.17%
Net loans/total assets 72.06% 68.85%
COMMON STOCK PERFORMANCE
------------------------
Market value of stock-
Close $ 30.97 $ 29.25
Market value of stock-
High $ 32.25 $ 29.67
Market value of stock-
Low $ 29.34 $ 26.71
Book value of stock $ 13.78 $ 13.12
Tangible book value of
stock $ 10.81 $ 10.16
Tangible equity $ 597,201 $ 576,801
Market/Book value of
stock 224.75% 222.94%
OTHER DATA
------------
EOP Employees - FTE 2,585 2,616
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2006
($ in thousands except per share data)
(unaudited)
Year-to-date June 30,
-------------------------
ALLOWANCE FOR LOAN
LOSSES 2006 2005 $ Change % Change
----------------------- ------------ ------------ ---------- ---------
Beginning Balance $ 76,691 $ 64,757 $ 11,934 18.4%
Charge-offs (5,818) (7,625) 1,807 -23.7%
Recoveries 5,921 4,545 1,376 30.3%
Provision for loan
losses (4,948) 4,225 (9,173) n/m
------------ ------------ ----------
Ending Balance $ 71,846 $ 65,902 $ 5,944 9.0%
============ ============ ==========
RATIOS
------------
ROA 1.48% 1.21%
ROE 15.66% 13.13%
Equity generation rate 9.57% 7.02%
EOP equity/ EOP assets 9.24% 9.19%
Average equity/average
assets 9.43% 9.18%
Interest margin - Yield
- FTE 6.31% 5.48%
Interest margin - Cost
- FTE 2.43% 1.65%
Net interest margin -
FTE 3.88% 3.83%
Rate on interest-
bearing liabilities 3.01% 2.00%
Efficiency ratio 58.95% 57.83%
Net charge offs/average
loans 0.00% 0.11%
Provision for loan
losses/average loans -0.16% 0.15%
Nonperforming
loans/total loans 0.42% 0.58%
Nonperforming
assets/total loans 0.47% 0.64%
Nonperforming
assets/total loans+ORE 0.47% 0.64%
ALL/nonperforming loans 286.02% 201.63%
ALL/total loans 1.20% 1.17%
Net loans/total assets 72.06% 68.85%
COMMON STOCK PERFORMANCE
------------------------
Market value of stock-
Close $ 30.97 $ 29.25
Market value of stock-
High $ 32.25 $ 31.15
Market value of stock-
Low $ 27.01 $ 26.69
Book value of stock $ 13.78 $ 13.12
Tangible book value of
stock $ 10.81 $ 10.16
Tangible equity $ 597,201 $ 576,801
Market/Book value of
stock 224.75% 222.94%
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2006
($ in thousands)
(unaudited)
Quarter Ended
-------------------------
AVERAGE BALANCES 6/30/2006 3/31/2006 $ Change % Change
----------------------- ------------ ------------ ----------
Securities AFS-taxable $ 908,736 $ 974,155 $ (65,419) -6.7%
Securities AFS-
nontaxable 58,265 60,023 (1,758) -2.9%
Securities HTM-taxable 203,272 202,664 608 0.3%
Securities HTM-
nontaxable 92,947 92,732 215 0.2%
------------ ------------ ----------
Total securities 1,263,220 1,329,574 (66,354) -5.0%
------------ ------------ ----------
Loans 6,078,847 6,047,260 31,587 0.5%
Fed funds sold and rev
repos 28,513 27,804 709 2.5%
------------ ------------ ----------
Total earning
assets 7,370,580 7,404,638 (34,058) -0.5%
------------ ------------ ----------
Allowance for loan
losses (73,679) (76,875) 3,196 -4.2%
Cash and due from banks 315,722 333,748 (18,026) -5.4%
Other assets 569,029 562,410 6,619 1.2%
------------ ------------ ----------
Total assets $ 8,181,652 $ 8,223,921 $ (42,269) -0.5%
============ ============ ==========
Interest-bearing demand
deposits $ 914,548 $ 840,499 $ 74,049 8.8%
Savings deposits 1,666,594 1,737,338 (70,744) -4.1%
Time deposits less than
$100,000 1,425,602 1,436,152 (10,550) -0.7%
Time deposits of
$100,000 or more 778,831 793,139 (14,308) -1.8%
------------ ------------ ----------
Total interest-
bearing deposits 4,785,575 4,807,128 (21,553) -0.4%
Fed funds purchased and
repos 522,632 530,205 (7,573) -1.4%
Short-term borrowings 609,137 634,420 (25,283) -4.0%
Long-term FHLB advances 5,650 5,746 (96) -1.7%
------------ ------------ ----------
Total interest-
bearing
liabilities 5,922,994 5,977,499 (54,505) -0.9%
Noninterest-bearing
deposits 1,374,068 1,377,377 (3,309) -0.2%
Other liabilities 102,611 103,374 (763) -0.7%
Shareholders' equity 781,979 765,671 16,308 2.1%
------------ ------------ ----------
Total liabilities
and equity $ 8,181,652 $ 8,223,921 $ (42,269) -0.5%
============ ============ ==========
PERIOD END BALANCES 6/30/2006 3/31/2006
----------------------- ------------ ------------
Securities available
for sale $ 905,573 $ 976,673 $ (71,100) -7.3%
Securities held to
maturity 296,246 296,760 (514) -0.2%
------------ ------------ ----------
Total securities 1,201,819 1,273,433 (71,614) -5.6%
------------ ------------ ----------
Loans held for sale 127,107 154,151 (27,044) -17.5%
Loans 6,005,936 5,944,903 61,033 1.0%
Fed funds sold and rev
repos 33,420 46,941 (13,521) -28.8%
------------ ------------ ----------
Total earning
assets 7,368,282 7,419,428 (51,146) -0.7%
------------ ------------ ----------
Allowance for loan
losses (71,846) (73,542) 1,696 -2.3%
Cash and due from banks 353,888 321,662 32,226 10.0%
Mortgage servicing
rights 68,981 64,283 4,698 7.3%
Goodwill 137,368 137,368 - 0.0%
Identifiable intangible
assets 26,706 27,933 (1,227) -4.4%
Other assets 351,209 340,556 10,653 3.1%
------------ ------------ ----------
Total assets $ 8,234,588 $ 8,237,688 $ (3,100) 0.0%
============ ============ ==========
Noninterest-bearing
deposits $ 1,453,178 $ 1,428,206 $ 24,972 1.7%
Interest-bearing
deposits 4,910,135 4,892,826 17,309 0.4%
------------ ------------ ----------
Total deposits 6,363,313 6,321,032 42,281 0.7%
Fed funds purchased and
repos 487,010 366,443 120,567 32.9%
Short-term borrowings 532,418 692,295 (159,877) -23.1%
Long-term FHLB advances - 5,707 (5,707) -100.0%
Other liabilities 90,572 96,526 (5,954) -6.2%
------------ ------------ ----------
Total liabilities 7,473,313 7,482,003 (8,690) -0.1%
------------ ------------ ----------
Common stock 11,514 11,604 (90) -0.8%
Surplus 51,511 63,674 (12,163) -19.1%
Retained earnings 715,345 696,236 19,109 2.7%
Accum other
comprehensive loss,
net of tax (17,095) (15,829) (1,266) 8.0%
------------ ------------ ----------
Total
shareholders'
equity 761,275 755,685 5,590 0.7%
------------ ------------ ----------
Total liabilities
and equity $ 8,234,588 $ 8,237,688 $ (3,100) 0.0%
============ ============ ==========
Total interest-
bearing
liabilities $ 5,929,563 $ 5,957,271 $ (27,708) -0.5%
============ ============ ==========
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
June 30, 2006
($ in thousands except per share data)
(unaudited)
Quarter Ended
-------------------------
6/30/2006 3/31/2006 $ Change % Change
------------ ------------ ----------
Interest and fees on
loans-FTE $ 103,778 $ 98,148 $ 5,630 5.7%
Interest on securities-
taxable 11,310 11,569 (259) -2.2%
Interest on securities-
tax exempt-FTE 2,759 2,803 (44) -1.6%
Interest on fed funds
sold and rev repos 365 307 58 18.9%
Other interest income 31 20 11 55.0%
------------ ------------ ----------
Total interest
income-FTE 118,243 112,847 5,396 4.8%
------------ ------------ ----------
Interest on deposits 33,469 29,975 3,494 11.7%
Interest on fed funds
pch and repos 5,748 5,056 692 13.7%
Other interest expense 7,301 7,361 (60) -0.8%
------------ ------------ ----------
Total interest
expense 46,518 42,392 4,126 9.7%
------------ ------------ ----------
Net interest
income-FTE 71,725 70,455 1,270 1.8%
Provision for loan
losses (1,964) (2,984) 1,020 -34.2%
------------ ------------ ----------
Net interest
income after
provision-FTE 73,689 73,439 250 0.3%
------------ ------------ ----------
Service charges on
deposit accounts 13,308 11,689 1,619 13.9%
Insurance commissions 8,718 8,349 369 4.4%
Wealth management 5,865 5,611 254 4.5%
General banking - other 5,470 5,195 275 5.3%
Mortgage banking, net 2,898 3,452 (554) -16.0%
Other, net 2,740 1,528 1,212 79.3%
------------ ------------ ----------
Nonint inc-excl
sec gains 38,999 35,824 3,175 8.9%
Security gains 384 866 (482) -55.7%
------------ ------------ ----------
Total noninterest
income 39,383 36,690 2,693 7.3%
------------ ------------ ----------
Salaries and employee
benefits 39,567 39,377 190 0.5%
Services and fees 8,979 8,764 215 2.5%
Net occupancy-premises 4,070 3,884 186 4.8%
Equipment expense 3,589 3,643 (54) -1.5%
Other expense 7,547 7,844 (297) -3.8%
------------ ------------ ----------
Total noninterest
expense 63,752 63,512 240 0.4%
------------ ------------ ----------
Income before income
taxes 49,320 46,617 2,703 5.8%
Tax equivalent
adjustment 2,107 2,214 (107) -4.8%
Income taxes 16,439 15,084 1,355 9.0%
------------ ------------ ----------
Net income $ 30,774 $ 29,319 $ 1,455 5.0%
============ ============ ==========
Earnings per share
Basic $ 0.55 $ 0.53 $ 0.02 3.8%
============ ============ ==========
Diluted $ 0.55 $ 0.52 $ 0.03 5.8%
============ ============ ==========
Weighted average shares
outstanding
Basic 55,564,866 55,696,401 -0.2%
============ ============
Diluted 55,834,174 56,035,548 -0.4%
============ ============
Period end shares
outstanding 55,262,232 55,680,234 -0.8%
============ ============
Dividends per share $ 0.2100 $ 0.2100 0.0%
============ ============
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2006
($ in thousands except per share data)
(unaudited)
Quarter Ended
------------------------
NONPERFORMING ASSETS 6/30/2006 3/31/2006 $ Change % Change
----------------------- ------------ ------------ ---------- ---------
Nonaccrual loans $ 25,119 $ 27,211 $ (2,092) -7.7%
Restructured loans - - -
------------ ------------ ----------
Total
nonperforming
loans 25,119 27,211 (2,092) -7.7%
Other real estate 3,107 3,342 (235) -7.0%
------------ ------------ ----------
Total
nonperforming
assets 28,226 30,553 (2,327) -7.6%
Loans past due over 90
days
Included in Loan
Portfolio 6,578 1,274 5,304 416.3%
Serviced GNMA loans
eligible for repch 15,957 14,702 1,255 8.5%
------------ ------------ ----------
Total loans past
due over 90 days 22,535 15,976 6,559 41.1%
------------ ------------ ----------
Total
nonperforming
assets plus past
due over 90 days $ 50,761 $ 46,529 $ 4,232 9.1%
============ ============ ==========
Quarter Ended
-------------------------
ALLOWANCE FOR LOAN
LOSSES 6/30/2006 3/31/2006
----------------------- ------------ ------------
Beginning Balance $ 73,542 $ 76,691 $ (3,149) -4.1%
Charge-offs (2,983) (2,834) (149) 5.3%
Recoveries 3,251 2,669 582 21.8%
Provision for loan
losses (1,964) (2,984) 1,020 -34.2%
------------ ------------ ----------
Ending Balance $ 71,846 $ 73,542 $ (1,696) -2.3%
============ ============ ==========
RATIOS
------------
ROA 1.51% 1.45%
ROE 15.78% 15.53%
Equity generation rate 9.76% 9.38%
EOP equity/ EOP assets 9.24% 9.17%
Average equity/average
assets 9.56% 9.31%
Interest margin - Yield
- FTE 6.43% 6.18%
Interest margin - Cost
- FTE 2.53% 2.32%
Net interest margin -
FTE 3.90% 3.86%
Rate on interest-
bearing liabilities 3.15% 2.88%
Efficiency ratio 57.72% 60.23%
Net charge offs/average
loans -0.02% 0.01%
Provision for loan
losses/average loans -0.13% -0.20%
Nonperforming
loans/total loans 0.42% 0.46%
Nonperforming
assets/total loans 0.47% 0.51%
Nonperforming
assets/total loans+ORE 0.47% 0.51%
ALL/nonperforming loans 286.02% 270.27%
ALL/total loans 1.20% 1.24%
Net loans/total assets 72.06% 71.27%
COMMON STOCK PERFORMANCE
------------------------
Market value of stock-
Close $ 30.97 $ 31.64
Market value of stock-
High $ 32.25 $ 32.00
Market value of stock-
Low $ 29.34 $ 27.01
Book value of stock $ 13.78 $ 13.57
Tangible book value of
stock $ 10.81 $ 10.60
Tangible equity $ 597,201 $ 590,384
Market/Book value of
stock 224.75% 233.16%
OTHER DATA
-----------------------
EOP Employees - FTE 2,585 2,604
n/m - not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2006
($ in thousands)
(unaudited)
Note 1 - Financial Performance Non-GAAP
Management is presenting in the following table adjustments to net
income as reported in accordance with generally accepted accounting
principles for significant items resulting from Hurricane Katrina.
Management believes this information will help users compare
Trustmark's current results to prior periods.
Financial Performance
Net Income Adjusted for Specific Items (Non-GAAP)
Quarter Ended 6/30/06 Year-to-Date 6/30/06
--------------------- --------------------
$ Basic EPS $ Basic EPS
-------- ----------- -------- ----------
Net Income as
reported - GAAP $30,774 $0.554 $60,093 $1.080
Adjustments (net of taxes):
Less Hurricane Katrina
reserves released
Provision for loan
losses (1,047) (0.019) (2,991) (0.054)
Mortgage related
charges (164) (0.003) (680) (0.012)
-------- ----------- -------- ----------
(1,211) (0.022) (3,671) (0.066)
-------- ----------- -------- ----------
Net Income adjusted for
specific items (Non-GAAP) $29,563 $0.532 $56,422 $1.014
======== =========== ======== ==========
On August 29, 2005, Hurricane Katrina struck the Mississippi Gulf
Coast and Central and Eastern Mississippi causing significant damages.
Immediately following the storm, Trustmark initiated a process to
assess the storm's impact on its customers and on Trustmark's
consolidated financial statements. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 5, "Accounting for
Contingencies," Trustmark determined, through reasonable estimates,
that specific losses were probable and initially increased its
allowance for loan losses by $9.8 million and established other
reserves for losses totaling $2.1 million, on a pre-tax basis.
Trustmark continually reevaluates its estimates for probable losses
resulting from Hurricane Katrina. As a result, during 2006, Trustmark
has released allowance for loan losses of $4.8 million and other
reserves of $1.1 million on a pre-tax basis. At June 30, 2006, the
allowance for loan losses included specific Katrina reserves totaling
$4.9 million, comprised of $2.9 million for mortgage loans, $0.5
million for commercial loans and $1.5 million for consumer loans.
Management's estimates, assumptions and judgments are based on
information available as of the date of the consolidated financial
statements; accordingly, as the information changes, actual results
could differ from those estimates.
Note 2 - Loans and Allowance for Loan Losses
For the periods presented, loans consisted of the following:
6/30/06 3/31/06 6/30/05
----------- ----------- -----------
Real estate loans:
Construction and land
development $ 812,748 $ 789,134 $ 758,111
Secured by 1-4 family
residential properties 1,837,392 1,865,124 1,804,427
Secured by nonfarm,
nonresidential properties 1,110,566 1,078,519 954,519
Other 107,517 115,193 153,784
Loans to finance agricultural
production 27,230 27,550 36,183
Commercial and industrial 948,647 920,184 866,493
Consumer 912,718 891,405 807,852
Obligations of states and
political subdivisions 192,463 213,363 186,099
Other loans 56,655 44,431 78,344
----------- ----------- -----------
Loans 6,005,936 5,944,903 5,645,812
Less Allowance for loan losses 71,846 73,542 65,902
----------- ----------- -----------
Net Loans $5,934,090 $5,871,361 $5,579,910
=========== =========== ===========
The allowance for loans 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 nonaccrual loans, past due loans, potential problem loans,
criticized loans and net charge-offs or recoveries and other factors.
Note 3 - Mortgage Banking
For the periods presented, the carrying amount of mortgage servicing
rights are as follows:
6/30/06 3/31/06 6/30/05
--------- --------- ---------
Mortgage Servicing Rights $ 68,981 $ 64,283 $ 59,694
Valuation Allowance - - (8,133)
--------- --------- ---------
Mortgage Servicing Rights, net $ 68,981 $ 64,283 $ 51,561
========= ========= =========
On March 17, 2006, the Financial Accounting Standard Board (FASB)
released SFAS No. 156, "Accounting for Servicing Financial Assets, an
amendment of SFAS No. 140." This statement amends SFAS No. 140 to
require that all separately recognized servicing assets and
liabilities be initially measured at fair value, if practical. The
effective date of this statement is as of the beginning of its first
fiscal year that begins after September 15, 2006, however early
adoption is permitted as of the beginning of any fiscal year, provided
the entity has not issued financial statements for the interim period.
The initial recognition and measurement of servicing assets and
servicing liabilities are required to be applied prospectively to
transaction occurring after the effective date.
Trustmark elected to early adopt SFAS No. 156 in the first quarter of
2006 and has recorded its Mortgage Servicing Rights (MSR) and
derivative hedged financial instruments utilized to mitigate risk
inherent in the MSR at fair value. This election, effective January 1,
2006, increased MSR by $1.4 million while also increasing retained
earnings by $0.8 million, net of taxes. For the quarter ended June 30,
2006, the fair value for MSR decreased by $0.2 million pretax and the
cost of hedging increased by $1.9 million pretax, which is included in
mortgage banking, net, included in the consolidated income statements
(see table below).
In the first quarter, Trustmark began utilizing derivative instruments
to offset changes in the fair value of MSR attributable to changes in
interest rates. Changes in the fair value of the derivative instrument
are recorded in noninterest income in mortgage banking, net and are
offset by the changes in the fair value of MSR, as shown in the table
below. MSR fair values represent the effect of present value decay and
the effect of changes in interest rates. Ineffectiveness of hedging
MSR fair value is measured by comparing total hedge cost to the fair
value of the MSR asset attributable to interest rate changes. During
the second quarter, gross MSR values increased $2.0 million due to
changes in interest rates, while hedge cost totaled $1.9 million,
resulting in net positive ineffectiveness from hedging of $0.1
million.
Prior to January 1, 2006, Trustmark purchased servicing rights were
capitalized at cost. For loans originated and sold where the servicing
rights had been retained, Trustmark allocated the cost of the loan and
servicing right based on their relative fair values. MSR were
amortized over the estimated period of the related net servicing
income. MSR were evaluated quarterly for impairment and recorded as a
valuation allowance. Impairment occurred when the estimated fair value
of the MSR fell below its carrying value.
The following table illustrates the components of mortgage banking,
net included in noninterest income in the accompanying income
statements:
Quarter Ended Year-to-date
-------------------------- -----------------
6/30/06 3/31/06 6/30/05 6/30/06 6/30/05
-------- -------- -------- -------- --------
Mortgage servicing
income, net $3,239 $3,335 $3,088 $6,574 $6,184
Change in fair value MSR
from market changes 2,202 3,812 - 6,014 -
Change in fair value MSR
from runoff (2,400) (2,052) - (4,452) -
Change in fair value of
derivatives (1,881) (2,556) - (4,437) -
Amortization of MSR - - (2,620) - (5,240)
Impairment of MSR - - (4,821) - (2,089)
Gain on sale of loans 1,613 1,041 374 2,654 708
Other, net 125 (128) 733 (3) 1,042
-------- -------- -------- -------- --------
Mortgage banking, net $2,898 $3,452 $(3,246) $6,350 $605
======== ======== ======== ======== ========
Note 4 - Nonperforming Assets
Government National Mortgage Association (GNMA) optional repurchase
programs allow financial institutions to buy back individual
delinquent mortgage loans that meet certain criteria from the
securitized loan pool for which the institution provides servicing. At
the servicer's option and without GNMA's prior authorization, the
servicer may repurchase such a delinquent loan for an amount equal to
100 percent of the remaining principal balance of the loan. Under SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities-a replacement of SFAS No. 125,"
this buy-back option is considered a conditional option until the
delinquency criteria are met, at which time the option becomes
unconditional. When Trustmark is deemed to have regained effective
control over these loans, the loans can no longer be reported as sold
and must be brought back onto the balance sheet as loans held for
sale, regardless of whether Trustmark intends to exercise the buy-back
option. During 2005, Trustmark began reporting delinquent GNMA loans
that are eligible for repurchase as past due in accordance with their
contractual repayment terms. At June 30, 2006, GNMA loans eligible for
repurchase totaled $16.0 million compared with $14.7 million at March
31, 2006 and $6.6 million at June 30, 2005.
Note 5 - 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 Year-to-date
-------------------------- -----------------
6/30/06 3/31/06 6/30/05 6/30/06 6/30/05
-------- -------- -------- -------- --------
Securities - Taxable 4.08% 3.99% 3.51% 4.03% 3.71%
Securities - Nontaxable 7.32% 7.44% 7.44% 7.38% 7.53%
Securities - Total 4.47% 4.38% 3.86% 4.42% 4.04%
Loans 6.85% 6.58% 6.06% 6.72% 5.95%
FF Sold & Rev Repo 5.13% 4.48% 3.13% 4.81% 2.54%
Total Earning Assets 6.43% 6.18% 5.53% 6.31% 5.48%
Interest-bearing Deposits 2.81% 2.53% 1.72% 2.67% 1.64%
FF Pch & Repo 4.41% 3.87% 2.69% 4.14% 2.43%
Borrowings 4.76% 4.66% 3.32% 4.71% 3.13%
Total Interest-
bearing Liabilities 3.15% 2.88% 2.13% 3.01% 2.00%
Net interest margin 3.90% 3.86% 3.77% 3.88% 3.83%
Note 6 - Business Combinations
On April 13, 2006, Trustmark and Republic Bancshares of Texas, Inc.
(Republic), headquartered in Houston, Texas, announced the signing of
a definitive agreement in which Republic will merge into Trustmark.
Republic has six banking centers with $475 million in loans and $589
million in deposits as of March 31, 2006. Including Trustmark's
Houston market presence at March 31, 2006, the combined company would
have $670 million in loans and $750 million in deposits in the Houston
market. Under the terms of the definitive agreement, the transaction
is valued at approximately $210 million based upon a price of $31.50
per share of Trustmark common stock. Republic shareholders have the
right to elect to receive either cash, or Trustmark common stock, or a
combination of cash and Trustmark common stock provided that 51% of
the total consideration is paid in Trustmark stock. The consideration
to be paid in Trustmark common stock is based upon a fixed exchange
ratio. Elections will be subject to standard proration procedures. The
proposed transaction, which is subject to approval by Republic's
shareholders and regulatory authorities, is expected to be completed
during the third quarter of 2006.
Note 7 - Basis of Presentation
Certain reclassifications have been made to prior period amounts to
conform with current period presentation.
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