Trustmark Corp (TRMK) 2008 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Third Quarter Earnings Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded.

And now at this time for opening remarks and introductions I would like to turn the conference over to Mr. Joey Rein, director of Investor Relations. Please go ahead.

Good morning and thank you. I would like to remind everyone that a copy of our third quarter earnings release and supporting financial information is available on the Investment 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 1955. 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 would like to turn it over to our Chairman and CEO, 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, as well as others who will answer any questions you have after my comments.

This quarter, Trustmark earned $23 million, $0.41 a share, clearly portraying a core earnings ability of the Company. There were no significant unusual assets in the quarter. I think as I go through my comments you will be able to have full transparency into the quarter. We're very pleased with the performance ratios of a little over 15% return on tangible equity and little above 1% on our ROA. The results of the quarter reflect our enhanced capital strength and expanded net interest margin in a very difficult environment, a lower provision or loan losses as opposed to the second quarter, and more in line with the first quarter that we referred to at the end of last quarter and continued disciplined expense management. Earnings during the quarter reflect the core operating strength of the Company and will give you more of a sense of our run rate at this time.

We are pursuing the US Treasury Capital Purchase program. We think this program provides an outstanding opportunity for strong, healthy banks like Trustmark to support the recovery of the US economy. This cost-effective capital will support Trustmark's growth and expansion opportunities. Bottom line we had a profitable quarter; we're well capitalized, very strong liquidity, financial flexibility to succeed in what appears to be an ever challenging environment.

I'd like to speak first about credit quality. You may best be able to follow this from page three of the stat sheet. Non-accrual loans increased $10 million in the quarter, primarily due to a single energy credit that we made everyone aware of, which in Houston, which was early in the quarter. It's well secured. We feel it is appropriately reserved. We did put in on non-accrual status and no additional write-downs are anticipated. We are expecting the loan to be repaid in full throughout the course of '09. This is the Company SemCrude. We're in the smaller facility of this around 100, $150 million of the $2.5 billion. It is in a first position on the fixed assets and we are still anticipating no loss on the loan.

Non-accruals quarter-end to quarter-end remain unchanged in Florida and Mississippi and declined in Tennessee. Other real-estate increased about $10 million, principally to due to foreclosures in Florida. Total nonperforming assets increased approximately $20 million to 137 or right at 2% of total loans.

Net charge offs were $10 million compared to the $26 million or 58 basis points and the provision was $14.5 million. This put our allowance for loan losses at 1.76% of our commercial loans and 64 basis points on our consumer loans, total allowance 135.

Now within what I just said in the last four or five bullet sentences an awful lot happened. When you take the quarter over all, what I can tell you is that there were no transactions that pop-- no relationships that popped up as new issues or problems in Florida. There were 5 loans ranging, 3 of them $2 million, 1 of them $1 million and 1 of them $3.5 million that we placed on non-accrual down in Florida. 2 of them were very small $2 million land loans; one was our only condominium exposure, which was $3.5 million that's paid down by 50% during the quarter; 1 house in our wealth management area, about $2 million, and then a $1 million lot loan relationship with about four small lots in it. We saw-- and then SemCrude-- anything more than that is $100,000 here or there.

We saw a pay-down of a couple of million dollars on one large house down in Sandestin in the Florida Panhandle. We had a large pay down of about $1million of a non-accrual loan on a physician group in Memphis. We had a builder paydown for nearly $1 million in Memphis and we had a raw land paydown in Florida for a couple of million dollars. So, it all totals up but there were no large transactions in here.

We sold a number of other small lots. We are really working the small lots with a lot of effort with a number of agents and we're riding them heavily. The buyers that we're seeing are strategic buyers, i.e. I think I want to buy a lot that I want to build on later. It's not financial buyers. We are not seeing buyers in the Panhandle coming in and saying we'd like $50 million worth of this or a $100 million worth of that.

Our Florida Special Assets Group is running in full gear. They have a little over $200 million that they're working on, about 200 notes. We are very much on top of the situation. We did not have this quarter anything new of any significance pop up. What we moved to foreclosure, some of you may recall that we had a client who had a tragic situation. She was killed in an airplane crash two years ago Christmas. We worked with their estate. We've gotten additional collateral and we've moved all of that relationship into foreclosure, last quarter. That was 5 or $6 million of the $10 million.

We only impaired 3 loans last quarter. 2 of them were the 2 $2 million land loans that I mentioned and the other was a lot loan of about what was lots totaling about $4 million. Now, three or four significant situations last quarter in Florida, we were able to get additional collateral. One of them was the impaired loan, which is a number of lots over in the Bay County area, two or three others where we had land loans, people were able to come in and shore-up more collateral.

So when we look overall, Florida was rather flat and non-accruals, the one in Houston and then Mississippi was flat. When I move to charge-offs, $10 million. 5 of that was commercial related and when I broke it out and I looked at it, out of that $5 million there are about 12 loans. 8 of them were between $100,000 and $200,000 and they were scattered around. Most of them were lots or individual homes in Florida that had been working through the process. One was a commercial credit in Memphis for about $0.75 million and then we wrote down, wrote off one Florida land loan for a $1 million and a developed lot subdivision for $1.5 million and we are scrubbing this portfolio. So we were taking them as they came and I guess we just cleaned up a lot-- that's a pun-- in the second quarter when we did this massive number of appraisals and wrote down to those appraisal levels plus cost of carry in quite a bit of it.

Taking a look at our Florida portfolio, which I would take you to page eight, you can see that our total Florida portfolio is $617 million and I'll make some comparisons to last quarter-end for you. The total portfolio was down about $28 million and that's about $98 million year-to-date so we're on a glide down of about $30 million a quarter. Criticized loans were up $1 million, no acceleration in past dues, classified loans, which are included in the $172 million, at 117 were up $4 million. That was principally one relationship that we know well, that we feel that we have no loss in, although we have pool reserved it.

Non-accrual loans were flat, up $600,000; impaired loans were down $2.7 million; total loans less impaired, down $25 million. Loan-by-loan, relationship-by-relationship we re-looked at nearly every loan in the portfolio over a $0.25 million and reserving was flat, reserve on the real estate portfolio 5.67%, the total portfolio 3.76%.

The selling season is over. I don't see too much happening in the next, before the end of this quarter of sales, although I am hearing people say there's a deal here there's a deal there. If you buy this lot before next Friday the bank will give you a deal or if you'll buy this lot on the beach before so and so merges with so and so. Now to me that's good news. I asked one of our long-time real estate customers what has to happen for a market to begin clearing and he says people have to feel like they're getting a deal and they have to feel like if they don't buy it this week it'll be gone next week and I'm seeing some of that chatter up and down the Gulf Coast. I think maybe we're getting to a point that people are getting interested in it if we getting that chatter. I don't think we're home by a long shot and I think the global recession and a US recession is going to slow down the Florida recovery because I don't think it will recover until other places have recovered, particularly the capital markets.

Now on capital, we're seeing our tangible equity ratio move up. It actually moved up 34 basis points, [722]. Tier one and risk-based both moving up to that 986 and 1,180. I see this capital program as an opportunity to put Trustmark on the offensive in a number of our lines of business and we're ready to be on the offensive on something other than fraud or problem issues. We already have enough capital. We have stress tested, expected severe recession and depression in our portfolios and I believe we could get by just fine and hold our capital levels relatively steady but I think this very cost-effective capital is going to allow us to mentally get back in a very do business attitude and that's what we need. We have a good solid group of people working on Florida, we understand it.

We are not seeing a deterioration in our other portfolios. If you take a look at our consumer portfolio, which is in the range of $3 billion, our direct consumer, which would include everything in our branches which would be all of our (inaudible) logs and (inaudible) loans, was flat for the quarter, down around $20 million over the last year. Charge offs, in the quarter they're about 30 basis points annualized.

Our indirect consumer, which is for us is our oil portfolio, ended at $714 million, down from $860 million a year ago, down from around $777 million. Charge offs a year ago were 50 basis points. Now they're just a little bit over a 100 basis points. Unless something significantly changes, we think we've seen a peak in that. It was a little over $3 million of our $10 million of losses was in auto. Auto is shrinking; therefore, in two or three more months the number will shrink, the percentage of charge off well may go up a little bit.

Our mortgage area is still super for us. We're still letting it drop. Charge offs annualized in the quarter was 16 basis points. These were principally Florida loans and we cleared out the 3 or 4 that we were aware of.

Our balance sheet did not change much. Our construction land development loans, which we are working down, were down about $96 million, 1 to 4 residential down about 72. A lot of that was in our pipeline and consumer was down about $47 million, end of period loans down around $118 million.

When I look at it Houston just grew a little bit, Florida went down as we would hope. We've seen a number of very good loans in the last four to six weeks. I'm expecting some commercial loan growth this quarter and what we're looking at and what we're doing in Houston has some increased spreads on it. We had our Board Meeting in Houston. Our Corporate Board met there, had a great meeting, a lot of interaction with the top 20 or so Officers there with the Board, was very pleased with their presentations.

We are seeing a number of banks pull back down in Texas. I think this is going to give us some opportunities there to enter some relationships because of the exposure. We have the energy. It's very small. The exposure we have to real estate there is very small relative to our Company, so some opportunities there.

On the deposit side, average deposits decreased about $102 million. As I look at end of period, and I think this is some movement. Non-interest checking late quarter was up about $80 million. We saw some decrease, some seasonal decrease, in interest bearing and money market, principally school districts and the state. We have not seen or noticed any major movements of people out of the bank into treasuries or anything like that. Nothing has been brought to my attention. We have a couple of large customers that with their own liquidity issues used some of their money that might have been tied up some place else, auction rate or whatever.

We have not raised our interest rates to the level that some of these larger regionals have on CDs. We're having zero funding problems. Some days we fund near zero in cost. We have had no issue. We talk with all of our parties that we use with Fed funds. There aren't any problems with Trustmark.

On the non-interest income side on page 2 we had a very good length quarter. Service charges were up a little bit, insurance up a little bit, wealth management sort of flat. I expect they will be flat now for a while with the market down. Last quarter, of course, was that MasterCard gain of around $5 million.

Now the margin, we have just worked diligently to control deposit rates and everybody has been very focused on giving up least we can in relationships on loans. We were helped a little by LIBOR but LIBOR is not a significant thing here within our Company. We were able to buy some securities. I think we sold a few securities and were able to buy a few more and increase our yield. I think those securities increased less than $100 million in the quarter. These have been, you know, our timing on de-leveraging and coming back has worked just great.

On expenses, we're holding firm. Salary remained relatively flat and well controlled. We still have fewer people than we had a year ago. FDIC is moving up. I expect it to move up further and we saw about $1 million increase in foreclosures' expenses. That's about it.

That's about it. What's on our mind is managing our balance sheet, removing any assets that we appear can be toxic relative to loans, continue to build capital, take advantage of potential growth opportunities that we have in a number of lines and expansion opportunities, particularly to acquire reasonable deposits that we deem core in nature.

I'll be happy to have myself and my colleagues answer any questions for you.

(Operator Instructions) John Pancari with JPMorgan.

Can you talk a little bit more about the SemGroup credit? I just wanted to see how much was the reserve you took against it and then separately if you can give us any more detail about the size of your shared national credit book.

We checked the market where it was trading, John, and we're written down to what we had at offer to buy the credit for. That would be somewhere between 15 and 20% reserving against it. But there's really not much of a market in term facility B. We did get a couple of quotes. We could probably have worked the market more diligently but this fits in with our substandard pool as a percentage and so we just put it in the pool but we validate it.

On our shared national credit book is not a significant thing for us. I am going to ask Bob Hardison to think out loud on this. To my knowledge we don't have anything that's--

No typically our shared national credits have been limited to those companies that have a presence in our footprint, typically--

Got a broad number?

No I don't in front of me.

Who does? Let's get something.

$250 million.

Not more than $250 million, John, and [principally] if we had one it might be some of the gaming companies that we'd be in their revolver, be a couple of credits that we might age it and a few other Mississippi companies like public chicken process or something like that. We don't see it as an issue for us at this time.

We are not active participants in the syndication market.

And of that $250 million how much of that are you agent, lead agent on?

We're agent on one $120 million credit. Is that about what it is, 120?

That's about right.

Yes and there are 3 or 4 other Mississippi credits that we don't agent because our [whole] level would be $25 million and it might be B of A or Wells or somebody that we bring in to agent the credit.

Okay and then on SemGroup one other thing, there is what-- we saw quite a few other banks that had exposure put that-- move that credit onto non-performer last quarter. Trying to see why it was not moved on to a non-performer last quarter at Trustmark.

It was, John.

Yes it was put on non-performing very early last quarter.

Well I meant in second quarter we saw the moves by other [actual] banks.

I think it depends on where you were in the credit. We're not in the revolver and we waited. Number one, it wasn't material to us. Number two, we wanted to find out what the collateral positions were and what was actually going on with the credit and it was all non-accrual here probably in the middle of the first month of last quarter or early. We discussed it very thoroughly with the regulators and we wanted to see what the status was. Had we been in the non-secured revolver, I think that you would have said-- but remember now this is the [simile] we're in is I believe $110 million out of--

And let me answer your question another way. You've got a Bank here with $7 billion of loans and only $3 million past-due 90 days that's not on non-accrual so there's been no foot dragging here.

All right and then lastly, can you just discuss your-- the trends in your total criticized and classified credits? I know you gave this to a Florida piece. Can you give us an indication on what happened in your total criticizing classified for all the regions?

Yes it didn't change much but let me see if I can round that up. One second. Somewhere in here I'll have it by region. I don't have it broken out by region here with me. Total criticized and classified loans is in the 300 level. It looks like 325, which didn't change significantly for the quarter, actually changed 30 or so million dollars, John.

Up 30 or so million?

Yes and I don't have that-- I just happened to have my monthly briefing book where I was looking back and not a lot of new things coming into it and when you look at the size of the Bank. Does that answer your question?

Yes that's off. Okay and one more question and I'll hop off here, on your reserve coverage being that the coverage ratio is right around 86%, still somewhat thin, if you could just talk about your comfort with the-- in that context? And the reason why I am focusing on that ratio is that a lot of your credit pressure has been coming out of Florida and it's been proven here that the loss content of these Florida non-performers has been much higher than other markets and much higher than what quite a few of management teams that peer banks have expected, so if you could just talk about your comfort with the coverage ratio at the 86% level?

I really appreciate you asking that question. If you take a look at it-- I've got to get the papers back here. If I look at Florida and the impaired loan level of $40 million and the total non-accrual number in Florida I believe the number was 70. The 40 is inside the 70. The $40 million of impaired loans have been written down by 42%, written off by 42%.

All right thank you.

We did a very, very significant appraisal of a great deal of this portfolio in the second quarter and the categories that we took those losses in our appraisals holistically validate that loss level when we look at the total number of appraisals by SIC Code of loans. We don't have any loans of any significant size that aren't already classified and reserved against and we reserve against these loans holistically in our pool even though we may see no loss in these loans, whether it be land or whatever so, John, we've done it. We're fortunate. I think that there are just a couple hundred loans here above [$250,000] and so we've been able to go loan by loan by loan so are non-performing's over with in Florida? Absolutely not. Have we appraised our portfolio and have current update appraisals on it? Yes, sir.

Okay thanks for taking my questions.

Charles Ernst with Sandler O'Neill.

Richard, can you just talk a little bit about the OREO in Florida and just discuss the volume of transactions out of that portfolio in the quarter and just what you're seeing on the-- from a pricing basis?

Well, the-- it's mostly land and lots, a few individual houses. We are seeing the houses once we get them. We have a lot of interest in them. The one major ORE that we have over in Panama City, I think it was 17 houses and 40 lots, very attractive; 4 or 5 of the houses went under contract to individuals. I visited with the head of ORE and he told me that they wanted them. 2 or 3 of them were out of town for beach houses.

Builders are beginning to pick up the lots and they're coming in at where we're carrying them. 2 or 3 other properties moved and there was no real loss in them from where we carried them but very little is moving and we don't have a significant amount in ORE at this time.

We have 2 or 3 finished vertical properties and lots of bids, generally one of in particular but the people have had trouble getting financing and we're not financing people to take them out at this stage of the game. I haven't heard or seen of any bulk sales. A number of things have been moving in auction. We haven't participated in an auction. Does anybody else at the table want to talk about the ORE?

I think it's moved at the rates we expected it to move. Bob, any other comments about it?

No we've not had any significant write-downs on what we've sold. It's just like Richard said. It's just very, very slow, not a lot moving down there.

Okay and then I apologize if I missed it but can you comment on what the dollar amount of the December SemGroup loan is in--?

$10 million.

$10 million.

$10 million.

So it was pretty much all the increase in [Texas] and NPAs in the quarter?

It was all the increase in Texas.

And in Tex-- we had our Loan Review Team in Texas thorough, thorough, thorough. They went into Memphis during the quarter very thoroughly. They re-worked end the quarter with our Florida Special Assets Group, so we don't talk about regulatory exams but there have been plenty of exams.

Okay and then the last question, given the reg cut that's already happened and then the one expected today, any comments as to what you're expecting for the margin over the quarter?

Well, Buddy Wood tells me that because of the bonds we purchased we're a little bit positively gapped but you know when it lowered rates 0.5 point we took things right on down. It's getting close to the point that there's not much more to go. However, I think putting a bond portfolio back on the books at this $1.2 billion level big in one level from $700 million has helped us a little bit, Charlie. I'm not expecting-- you know, we when we were 390 said we thought the margin looked pretty good. I don't think anybody could tell you whether it will be 390 or 407 at the end of this quarter but this LIBOR situation is helping us a little bit. And you know, where was the [Fed] bunch ready, set, buddy 1.5? I don't think that's been in place for a couple of 3, 4 weeks. I mean I think overnight funds are finding their home at very healthy institutions at rates a little bit better than the Fed targets.

Brian Klock with KBW.

Richard, I guess I wonder if you could expand a little bit on the TARP and I guess more specifically related to applying to the TARP and are you applying to the maximum and I guess can you comment on the dividend? Last quarter you did in the Release actually say that you were confident with the sustainability of the dividend. That language wasn't there this quarter. Should we--?

Well, we felt like the earnings pretty well said they'd be there. What was our payout ratio on an annual? Below 60%. We did not increase the dividend because we are applying for the TARP. We could have increased the dividend but we are solid Americans down here and we feel that's not the way to go. Now I have-- I've not been listening to the radio. I've been down there in Houston with the Board and calling on customers and whatever so I don't know if anybody said how much or what TARP they're going to do so I am not going to say that but we wouldn't go to all this effort for the minimum. And that's where-- are other people telling you how much they are applying for?

Yes.

Before or after?

Some do, some don't, some say they're planning to apply for the max and then actually they shortly have already been approved so--

Well, I will just say we have what I believe extremely good relationships with both of our primary regulators and we see this as a significant opportunity to bolster our capital and put us in an offensive position of doing business and we'll announce how much once they tell us.

I think you've already answered some of my other questions. I guess just thinking about the funding side and you had growth in DDA. You did talk about some movement in the interest bearing deposits being down and you also were able to actually bring the funding costs down quite a bit on your interest bearing deposits. You probably already answered this but it seems like probably less flexibility if we have the other, the Fed's cuts here today. Maybe you can talk about the funding and the ability to sort of maintain your core deposits here in the next couple of quarters or do you see that there may be an opportunity to see some funds flow in, or maybe just talk about your liquidity there.

I think answers to questions like do we think funds will flow in or flow out would be one of those things that I could say something and it would be a gut feel, Brian. You know we have an ad that we run in the paper and I remember a couple of Sundays ago one very large regional bank was running CDs at way over 4% for 7 months and another smaller regional bank was running this and they were both on the left hand side of business section, kind of innocuous, just rates. We ran a full-page ad with our National Bank Board and it said "Cornerstone of stability, still here to take care of you" and a big picture of every Director, all 20 of us. I would surmise that anybody who is old enough to get a paycheck in Mississippi probably works for somebody whose picture they saw on that page or their wife does or husband or their brother and it just the greatest strength of Trustmark is its Board and I walked into Sunday School last Sunday morning at nine fifteen, a little bit late, and the whole room was talking about Trustmark and that ad and how strong it was. Anybody with any money is not the least bit worried about Trustmark if they live in Mississippi.

As far as the Federal Home Loan Bank we have tremendous capacity there because we're not using them and we have this $700 million pristine bond portfolio. Our auto portfolio is at the Atlanta Fed. We've never used that. A lot of people are using that. We're sort of thinking, or hoping, that Wells Fargo will not want to pay these massively high rates and maybe that other big regional over in Alabama will get to the point with TARP and all that they will lower their rates. If not we'll have to gut it out or raise rates a little bit.

Okay appreciate you taking the call.

(Operator Instructions) Andy Stapp with B. Riley.

Could you tell us how 30 day, 90 day delinquencies compared on a sequential quarter basis?

Yes you all have a lot of very detailed questions, which we think are good. We started to put that on the report but we don't want our stat sheet to move into our investor report because a lot of these investor reports have been companies that aren't as healthy as us so when I am looking at it direct consumer went from 29 basis points to 31. Auto went from 87 to 113. Credit cards went down from 197 to 166 and total commercial dropped from 158 to 120. So when I look at it overall and I look a year ago just direct consumer is year-end, quarter was 13 basis points to 31. Auto was about 50, 49 basis points the fourth quarter of '07; now it's 113. Credit cards was running around 130, 140; now it's 160 so yes. So I was giving you charge offs. They're pointing to me.

90-day delinquencies, yes I've got that-- 126 to 131 on direct consumer, auto 170 to 205. Our small business portfolio of $800 million actually dropped from 328 to 279; mortgage 93 basis points to 127; credit cards 148, 166. The total retail portfolio from 169 to 179 and fourth quarter last year was 173 so none of these big numbers that you might read from someone who isn't making every loan in front of a desk looking at somebody.

Now was that 90-day delinquencies or was that 30-day?

That was 30-days. Do we have 90?

90 is on page 3.

Yes that's in there, okay.

Delinquencies of the whole Company is $3 million.

$3.6 million.

And that's what it was last quarter, $3 million is nothing. See all these consumer debts get charged off when, Barry?

By 120 days.

All consumer is charged off by 120 days in the Company. Well, why don't we have anymore than $3 million if that's all that's 90 days past due? Are we charging some of it off early?

Sure. We just don't have-- we just high credit quality.

Doesn't exist right now.

Thank you. All of my other questions have been answered.

And I answ-- That's a lot of numbers. I am sorry I misunderstood it. I went to charge-offs.

No problem.

Amazed we have all this stuff at the ready; this is good.

Peyton Green with FTN Midwest Securities.

Notwithstanding your good relationships with your regulators, I mean why volunteer for more regulatory pressure down the road or increased I guess exposure to the US Government?

Well now, we're a National Bank and a well regulated National Bank and our holding company regulator is a Federal Reserve. Be very difficult for them to regulate us more than they regulate us now. I guess I've read 5 press releases about banks that have said they'd been approved. I don't see the penalties. You know, we don't have big old golden parachutes here. It doesn't really affect us.

I guess that Jerry Host and I are one of a couple of the two guys in the United States whose Board if we had a change of control doesn't cover our excise taxes. We're just moving on so the compensation side of it is not something that's going to keep us from moving ahead and we like the idea of having some money around if some opportunities come up and we're not interested in buying a bunch of failed deposits because we think those wouldn't be very good deposits and I'm not sure anybody is going to fail within 4 or 500 miles of us that's got any age and maturity on them but as we run our models and we look at it, this capital really props up a stock transaction very, very well and we're planning on remaining Trustmark and we are planning on expanding our lines of business so I don't see any downside. If we decide we don't need it we'll pay it back in 3 years and it might be a little bit dilutive but we'd work on that.

Okay and then I guess-- I mean let's say M&A opportunities don't come up and you're dependent on growing the loan book with the money, where are you seeing increased opportunity on the loan side?

I don't see any increased opportunity on the loan side except in that massive Houston market where we now have lots of lending officers, an $800 million loan portfolio with no problems in it except one credit that about everybody in America is in that they are going to work out, so I see tremendous opportunity there. Will we let Houston grow enough to leverage the TARP? Doubt it. Wouldn't take many mortgage backed securities to take the dilution out of this and you know we're in a position in there with this capital that if these big old regionals and super regionals want to fly in here and see some of our customers we can pretty well protect ourselves now.

I don't think anybody in the country sees a whole lot of loan demand at this time. I'm just very thankful we're down there in Texas with this Bank. You know, 5 years ago we closed Allied and 2.5 years ago we closed Republic and it's good, solid, lots of people so we were down there with the Board and they were all making presentations and I said you're making it sound too easy for the Board. There are an awful lot of lending opportunities down there but we just don't want to do a bunch of participations.

Okay and then loan spreads, to what degree did you see them increase in the quarter and do you think there's any opportunity or do you think the--?

That's a very granular question. I can tell you about 3 loans that will make you feel real good and I can tell you about 3 that would make you feel real bad. It is very competitive in the Mississippi market for a company borrowing some money, banks all over the place, banks flying in here on our one or two flights. We did-- Jerry Host and I did go back a couple of times on some pretty good loans and knocked it up 25, 30 basis points from where the officer thought it should be and the customer and we kept credit. Now I had one good sized loan that everybody bid and we bid 50 basis points higher and it was a customer and they said I'll pay 50 points more for Trustmark, didn't want to go to California with their loan.

But is it really changing? I don't know. I don't-- just a smidgeon. Now out there in Houston the answer is yes but you have smarter competition. Now we're not lowering rates on these land and development construction loans that moved down so much during the quarter and if somebody wants to move one of those it's okay with us.

Okay and then I guess when you do call on customers how do they feel generically, I mean ignoring the headlines in the paper and the television? I mean, are they--?

When you what? When we do what?

When you call on prospects or existing customers to get more of their business, I mean are they seeing increased opportunity compared to maybe a year ago when competitive conditions were just tough or I mean how do they feel?

It depends on what they do for a living. If they made bricks or hardwood floors they feel rather tough. If it's a big Delta farmer they're feeling pretty good so I think it's just industry driven. Most of our large homebuilders in Mississippi had backed down. We had a very thorough presentation from the company, Metro Study. It's Houston based on Houston for the second quarter-- for the third quarter's numbers.

We were the first people to see those numbers and presented to our Board and they were rather pleased that home starts and sales were coming down together, that they just weren't seeing any significant change in the Case-Shiller and they're still feeling obviously Houston is down but the amount of product, developers, the number of lots has come down with sales and they felt pretty good about Houston.

Memphis is I feel like the problems there have been identified and over with. You may have a different feeling there, before Trustmark, so anybody else have any customer flavor? They're all just kind of hunkered down, as they say down here, and watching their capital no one's jumping out building a lot of things. We've had a couple of acquisitions in high quality brand beverages and whatever and we had one of those and we said we'll finance the real estate but out of state, two, three out of state banks are financing the blue sky and that's where we like it.

Good enough. Thank you.

And with no further questions at this time I'd like to turn things back to Mr. Hickson for any additional or closing comments.

Thank you for joining us. It's an awful lot easier to come into this conference room than it was last quarter. We aren't seeing anything at this time that's any different from the third quarter earnings report. We're all focused. We have gotten to a point so that Florida is not taking all the awakened hours of executive management. We have a very good team in place managing that. Jerry Host and I are out calling on customers and he was out a lot more than I was the last couple of weeks because of this TARP but we have that figured out now and we're just out after doing business and getting some good commercial loans on the books.

Appreciate you joining us. I know you'll rework your models. I hope you'll recommend someone buy some of our stock. Thank you very much.

That does conclude today's conference call. We would again like to thank you for your participation and you may disconnect at this time.