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Hickson moving Trustmark toward new millennium

CEO putting new look on familiar face

Staid. Solid. Conservative. For years, these descriptives have epitomized Trustmark Corp., whose key performance indicators once again ranked the Jackson-based institution among the top 20 banks in the nation, according to the 1998 U.S. Banker Magazine/Keefe Bruyette & Woods annual survey of the largest U.S. banks.

But under the leadership of Richard Hickson – the new CEO, whose tenure began over a year ago – analysts and observers are adding several new adjectives to describe the longtime Sou- thern bank: pro -active, opportunistic and sales -oriented.

While Hickson, the former president of SouthTrust Corp.`s Atlanta bank, is appropriately respectful of Trustmark`s heritage and accomplishments under longtime chairman and CEO Frank R. Day, the reawakening of the $5.78-billion asset company has not gone unnoticed. Indeed, analysts who were once frustrated by the company`s stodgy ways are now lauding the company`s sharpened focus.

“This is truly an exciting time for the bank,” said Christopher Kelley, a senior bank research analyst with Morgan Keegan & Co., Memphis. “Any time a new CEO takes over, there`s going to be change. Mr. Day`s style was to run the bank in a business-as-usual manner, and that manner worked well for several years because the bank was strong and sound. But the Mississippi market is going through several meaningful changes and Hickson has realized that the acquisition of major competitors such as Deposit Guaranty has presented a once-in-a-lifetime opportunity to attain, build and reinforce customer relationships.”

Joseph Roberto, a Keefe, Bruyette & Woods analyst concurred. “With Hickson`s arrival, we`ve seen much more of an emphasis on a sales culture, and it couldn`t have come at a better time for Trustmark, with the Deposit Guaranty/First American merger shaking things up in the Mississippi market. Hickson knows what needs to be done with the company and he`s doing it.”

While Hickson doesn`t disavow the company`s past, “change” and “reinvigoration” have denoted Trustmark`s style and substance of the past year. While no one advocates change for change`s sake, it`s clear that many of Hickson`s strategies are paying off for the company. Recently released financials show that Trustmark`s net income for the second quarter was $0.28 per share, up 17% from the year-ago period. Loan growth accelerated from already strong rates, the result of retention of 15-year residential mortgage loans, with good growth in the indirect portfolio, according to analysts. Non-interest income rose 10% linked-quarter unannualized and 19% from the second quarter of 1997. Asset quality – a longtime benchmark of Trustmark Corp. – remains excellent, with non-performing assets to loans and foreclosed assets down over the past year. Second quarter, the company`s efficiency ratio trended down to 55.34% compared to 59.42% the same time a year ago. Moreover, Trustmark`s return on assets and return on equity also improved from a year ago, although the company`s ROE does not exceed 15%.

While a lot of CEOs analyze the concept of a sales culture more frequently than they implement it, Hickson is a pragmatist and has moved expediently to put strategies into action.

“A sales culture is merely a process you go through to determine service needs,” Hickson said. “One of our priorities has been to make sure from an efficiency and cost point of view that we free employees from bureaucracy and allow them to take care of customers from a sales and service point of view.”

This philosophy has been especially effective as the bank has focused its energies on loan growth. The ongoing goal is to increase loans by at least $25 million a month, with about a quarter of this growth coming from each of four areas: commercial, small business, retail and indirect lending. Small business lending is viewed as particularly opportunistic, and analyst Kelley said this makes sense as small business lending has not been as commoditized as other sectors.

Moreover, the company has put its board members to work, enlisting their assistance in commercial sector-prospecting efforts.

In addition to the company`s focus on internal growth of loans and deposits through its sales culture, other corporate mission priorities this year include continued technology upgrades to create revenue growth and expense reduction and the acquisition of financial institutions that offer both growth and an acceptable rate of return.

Indeed, many of Trustmark`s competitors quietly acknowledge that Hickson is doing exactly what he should be doing to move the company to the next level. While effecting a shift in culture is never an easy task, Hickson appears to be doing it in a manner that embraces enthusiasm from the troops and encourages teamwork among Trustmark associates. This is especially notable in an industry that has been chastised for its resistance to change.

While analysts are pleased with Trustmark`s progress, there are some issues that need to be addressed, they said. In a considerable departure from the past, Trustmark is aiming to reduce its capital ratio to about 9% of average assets during the next few years. While a strong capital position is imperative for banks in weathering fluctuating economic times, investors tend to favor those companies that put their excess capital to use.

“The capital issue needs attention because of its hampering effect on return on equity,” Kelley said.

Others have described Trustmark`s capital as “fortress-level” and Hickson acknowledges that the bank is moving to deploy the capital in a responsible manner. Potential options include acquisitions, share buybacks, a change in dividend policy and the application of resources toward internal growth.

Trustmark`s acquisition strategy will also be interesting to watch. While the company has had 12 mergers since 1987, it remains singularly a Mississippi institution. While Hickson did not disclose specifics, he did indicate that he was looking for markets with economic synergies where Trustmark can “differentiate itself, be competitive and grow.”

While long-term results will eventually speak for themselves, observers applaud Hickson`s emphasis on sales, teamwork and individual decision-making and accountability.

“The quarter`s results continued to show evidence of Trustmark`s efforts to genuinely improve its sales culture and the revenue outlook is good,” Roberto said.

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