Trustmark Corporation Announces Third Quarter 2012 Financial Results and Declares $0.23 Quarterly Ca

Trustmark Corporation Announces Third Quarter 2012 Financial Results and Declares $0.23 Quarterly Cash Dividend

JACKSON, Miss.--(BUSINESS WIRE)-- Trustmark Corporation (NAS: TRMK) announced net income available to common shareholders of $29.9 million in the third quarter of 2012, which represented diluted earnings per common share of $0.46, an increase of 2.2% from the prior quarter and 9.5% when compared to the third quarter of 2011. Trustmark's performance during the third quarter of 2012 produced a return on average tangible common equity of 12.61% and a return on average assets of 1.21%. During the first nine months of 2012, Trustmark's net income available to common shareholders totaled $89.6 million, which represented diluted earnings per common share of $1.38, an increase of 7.0% from the comparable period one year earlier. Trustmark's performance during the first nine months of 2012 resulted in a return on average tangible common equity of 12.91% and a return on average assets of 1.22%. Trustmark's Board of Directors declared a quarterly cash dividend of $0.23 per common share payable December 15, 2012, to shareholders of record on December 1, 2012.

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Gerard R. Host, President and CEO, stated, "Trustmark achieved another solid quarter of financial performance despite sluggish economic conditions and the prolonged low interest rate environment. During the quarter, we continued building upon and expanding customer relationships. This was especially evident in our mortgage banking and insurance businesses. We continued to experience meaningful improvement in credit quality as reflected by significantly lower levels of classified and criticized loans as well as a 30.9% reduction in net charge-offs. Also we made progress toward our pending merger with BancTrust Financial Group, a $2.0 billion financial institution based in Mobile, Alabama. This transaction, which is expected to close during the first two months of 2013, is subject to regulatory approval."

Credit Quality

• Nonperforming loans declined 19.1% to $80.7 million

• Classified and criticized loans declined $15.9 million and $15.2 million, respectively

• Allowance for loan losses represented 174.1% of nonperforming loans, excluding impaired loans

Trustmark continued to experience significant improvements in credit quality. Nonperforming loans totaled $80.7 million at September 30, 2012, a decline of 19.1% from the prior quarter and 19.0% from the prior year. Foreclosed other real estate increased 11.9% from the prior quarter but decreased 7.9% from the prior year to total $82.5 million. Collectively, nonperforming assets totaled $163.1 million at September 30, 2012, the lowest level since year end 2008 and a decline of 36.4% from the peak of $256.7 million at March 31, 2010. All of the above metrics exclude acquired loans and other real estate covered by FDIC loss-share agreements.

Net charge-offs during the third quarter of 2012 totaled $4.6 million. The third quarter provision for loan losses totaled $3.4 million as sufficient reserves were previously established for both impaired and other substandard credits. During the third quarter, Trustmark experienced a $15.9 million, or 5.5%, decline in classified loans and a $15.2 million, or 4.2%, decline in criticized loans relative to the prior quarter. Relative to balances one year earlier, classified loans decreased $71.1 million, or 20.6%, while criticized loans decreased $69.0 million, or 16.5%.

Allocation of Trustmark's $83.5 million allowance for loan losses represented 1.79% of commercial loans and 0.84% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.51% at September 30, 2012, which represents a level management considers to be commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 174.1% of nonperforming loans, excluding impaired loans. All of the above metrics exclude acquired loans.

Capital Strength

• Tangible common equity to tangible assets expanded to 10.13%

• Total risk-based capital ratio increased to 17.25%

Trustmark's solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At September 30, 2012, tangible common equity totaled $968.6 million and represented 10.13% of tangible assets while the total risk-based capital ratio was 17.25%. Trustmark's strong capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.

Balance Sheet Management

• Average earning assets remained stable at $8.7 billion

• Net interest income (FTE) totaled $88.9 million

Loans held for investment and acquired loans totaled $5.7 billion at September 30, 2012, a decrease of $135.0 million from the prior quarter due principally to a $113.5 million decline in single family mortgage loans. During the quarter, many customers continued to take advantage of the opportunity to refinance existing mortgages at more attractive rates. In fact, Trustmark's mortgage production totaled $514.8 million in the third quarter, an increase of 10.7% from the prior quarter and 50.9% from levels one year earlier. Trustmark elected to sell the vast majority of these lower rate, longer-term home mortgages in the secondary market rather than replacing the runoff in its single family loan portfolio. Trustmark's decision to discontinue indirect auto financing continued to be reflected in loan totals as this portfolio declined $13.6 million in the third quarter to total $36.2 million. Commercial and industrial loans increased $20.4 million during the quarter, reflecting growth in Trustmark's Mississippi, Tennessee and Texas markets.

During the third quarter of 2012, average earning assets remained stable at $8.7 billion as growth in investment securities effectively offset declining loan balances. Average deposits decreased $139.0 million, or 1.7%, relative to the prior quarter to total $7.9 billion. Average noninterest-bearing deposits increased 2.1% to represent 26.0% of average deposits in the third quarter of 2012.

While not immune to the extended low interest rate environment and continued sluggish economic conditions that have impacted the banking industry, Trustmark's prudent asset and liability management produced net interest income (FTE) of $88.9 million in the third quarter of 2012. The net interest margin was 4.06% during the third quarter, down nine basis points from the prior quarter. The decrease is primarily due to the downward repricing of loans and securities, partially offset by modest declines in the cost of interest-bearing deposits.

Noninterest Income

• Noninterest income totaled $44.9 million, representing 34.5% of total revenue

• Mortgage banking momentum continued with year-to-date income of $29.6 million

Mortgage banking income continued at record levels due to strong loan production resulting from historically low interest rates. During the third quarter, mortgage banking income totaled $11.2 million, reflecting stable mortgage servicing income and increased secondary marketing gains, which were offset in part by increased mortgage servicing hedge ineffectiveness. Mortgage banking results for the quarter included mark-to-market adjustments on mortgage loans held for sale of $2.6 million due largely to increased refinancing activity resulting from lower mortgage rates.

Insurance revenue during the third quarter totaled $7.5 million, an increase of 4.9% from the prior quarter due to seasonal increases in commercial insurance business as well as a firming of insurance rates as renewals occur. Insurance revenue was stable relative to levels one year earlier. Wealth management income totaled $5.6 million in the third quarter, down approximately $150 thousand from the prior quarter and $381 thousand from levels one year earlier due largely to the diminishing profitability of its proprietary mutual fund business. During the third quarter, Trustmark completed the previously announced sale and reorganization of its proprietary mutual fund business for a pretax payment of $1.2 million, which is reflected in other noninterest income. As a result of this transaction, Trustmark is able to fully embrace open architecture in its wealth management business and focus additional resources on managing client relationships.

Service charges on deposit accounts totaled $13.1 million in the third quarter, reflecting a 4.1% increase from the prior quarter and a 4.0% decrease from levels one year earlier. Bank card and other fee income totaled $6.9 million, down $1.3 million from the prior quarter principally due to reduced commercial credit related fee income, and in-line with levels one year earlier.

Noninterest Expense

• Noninterest expense remained well-controlled

• ORE/Foreclosure expense declined to lowest level in 13 quarters

Noninterest expense in the third quarter totaled $83.5 million, down $4.5 million from the prior quarter and $2.0 million from levels one year earlier. Salary and employee benefit expense remained well-controlled, increasing 0.9% from the prior quarter to total $47.4 million. Services and fees as well as equipment expense declined relative to the prior quarter. Occupancy expense totaled $5.4 million, an increase of approximately $400 thousand from the prior quarter due largely to a write-off of leasehold improvements associated with a pending branch office consolidation.

ORE/Foreclosure expense continued to reflect positive trends. During the third quarter of 2012, ORE/Foreclosure expense totaled $1.7 million, a decline of 28.7% relative to the prior quarter and 69.7% when compared to figures one year earlier. Other expense totaled $10.4 million in the third quarter, a decline of $4.5 million from the prior quarter. This decline is directly attributed to Trustmark's additional $4.0 million reserve for mortgage repurchases in the second quarter of 2012.

ADDITIONAL INFORMATION

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 24, 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, November 8, 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, including the potential impact of the European financial crisis on the U.S. economy and the markets we serve, 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 acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, the expected timing and likelihood of completion of the proposed merger with BancTrust Financial Group, Inc., (BancTrust), including the timing, receipt and terms and conditions of required regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the business and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect, the risk that the proposed merger with BancTrust is terminated prior to completion and results in significant transaction costs to Trustmark, 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.