Trustmark Announces 8.9% Increase in Third Quarter Earnings Per Share; Board Increases Quarterly Dividend 10% and Expands Share Repurchase Program

Business Wire, Oct 15, 2002

Business Editors

JACKSON, Miss.--(BUSINESS WIRE)--Oct. 15, 2002

Trustmark Corporation (NASDAQ:TRMK) announced basic and diluted earnings per share of $0.49 for the third quarter of 2002, which represents an 8.9% increase compared to $0.45 for the third quarter of 2001. Net income for the third quarter of 2002 totaled $30.1 million. Trustmark's performance for the quarter ended September 30, 2002, resulted in a return on average assets of 1.75% and a return on average shareholders' equity of 17.70%.

Basic earnings per share for the nine months ended September 30, 2002, were $1.47, up 16.7% compared to $1.26 for 2001. Trustmark's performance during the first nine months of 2002 resulted in a return on average assets of 1.80% and a return on average shareholders' equity of 18.20%. At September 30, 2002, Trustmark reported total loans of $4.6 billion, total assets of $7.1 billion, total deposits of $4.8 billion and shareholders' equity of $692.6 million.

Despite the weakened economy, Trustmark experienced a significant improvement in credit quality. Nonperforming assets declined 21% during the three months ended September 30, 2002, to a level of $37 million and the reserve coverage of nonperforming loans improved to 244%.

Richard G. Hickson, Chairman and CEO, stated, "We are pleased to report continued strong financial performance despite difficult economic and volatile financial environments. The decline in interest rates to the lowest levels in over 40 years provided Trustmark both challenges and opportunities. The effect of continued reductions in long-term mortgage rates reduced the value of our mortgage servicing portfolio. During the third quarter, Trustmark recorded a non-cash charge of $6.6 million, or $0.11 per share, net of taxes, to recognize this reduction in value of our mortgage servicing portfolio. This non-cash charge against income should be reversed, in whole or in part, as refinancing slows or the expected life of the mortgage lengthens. Trustmark also recognized a non-cash mark-to-market charge on its interest rate hedging position of $1.9 million, net of taxes, or $0.03 per share. This non-cash charge against income should also be reversed, in whole or in part, if interest rates increase.

"The current interest rate environment also provided a number of opportunities. During the third quarter, Trustmark realized an after-tax net gain of $7.4 million, or $0.12 per share, resulting from gains on security transactions. This net gain on sale of securities is the result of recent significant price changes, which provided Trustmark an opportunity to restructure a portion of its investment portfolio and reduce exposure to volatile interest rates.

"The collective result of these non-recurring items reduced Trustmark's net income by $1.1 million, or $0.02 per share in the third quarter. Despite a very challenging environment, the diversity of our banking, investments and risk management businesses has allowed Trustmark to continue to report strong operating earnings," said Hickson.

The Board of Directors of Trustmark Corporation announced a 10.0% increase in its regular quarterly dividend to $0.165 per share from $0.15 per share. The Board declared the dividend payable on December 15 to the shareholders of record as of December 1, 2002. This action raises the indicated annual dividend rate to $0.66 per share from $0.60 per share.

The Board of Directors of Trustmark Corporation also authorized the repurchase of up to an additional 5.0%, or approximately 3.1 million shares, of the Corporation's common stock. When combined with its previously existing share repurchase program, Trustmark now has authorization to repurchase up to an additional 4.1 million of its shares. During the first nine months of 2002, Trustmark repurchased approximately 2.1 million shares of its common stock, including 547 thousand in the third quarter. The repurchase program is subject to market conditions and management discretion and will continue to be implemented through open market purchases or privately negotiated transactions.

Hickson stated, "The increase in Trustmark's quarterly dividend has been made possible by continued improvement in profitability. Expansion of our share repurchase program is also another vote of confidence in the inherent value of Trustmark shares."

Trustmark Corporation is a diversified financial services company providing banking, investment and risk management solutions through over 150 offices and 2,400 associates in Mississippi and Tennessee. For additional financial information, visit Trustmark's web site at www.trustmark.com.

This press release contains forward-looking statements within the meaning of and pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A forward-looking statement in this press release encompasses any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein, as well as the management assumptions underlying those forward-looking statements. Such statements include, but may not be limited to effects of changes in interest rates on earnings. Factors that might cause future results to differ from such forward-looking statements are described in Trustmark's filings with the Securities and Exchange Commission. 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.