Fitch rates Trustmark following Cadence acquisition

by Wally Northway

Published: October 1,2010

Tags: banking and finance, debt, mergers and acquisitions

JACKSON — Fitch Ratings has affirmed the long-term and short-term Issuer Default Ratings (IDR) of Trustmark Corporation (TRMK) and Trustmark National Bank at “A-” and “F1,” respectively, following TRMK’s recent announcement of its intent to acquire Cadence Financial Corp. (CADE).

In addition, Fitch lowered TRMK’s Individual Rating to “B/C” from “B.”

The Rating Outlook remains “stable.”

Fitch said its “rating actions were primarily prompted by TRMK’s announcement of its intent to acquire CADE, $1.8-billion institution. CADE operates in many similar markets as TRMK, as well as providing access to additional contiguous markets. Fitch considers CADE to be a troubled institution and this is reflected in TRMK’s ability to acquire this institution at a significant discount to CADE’s tangible book value.

“Over the near term, Fitch regards the CADE transaction as neutral to the rating. This reflects the solid strategic and economic rationales for this deal, which in Fitch’s view are modestly offset by the increased burden of addressing CADE’s loan portfolio.

Fitch’s affirmation and “stable” outlook continue to reflect TRMK’s strong capital positions, solid core earnings strength, and good franchise, particularly in its home state of Mississippi. Moreover, assuming the successful acquisition and integration of CADE under the agreed upon terms, Fitch believes that TRMK’s competitive position in key markets will be further augmented.

“These strengths are tempered by Fitch’s view that TRMK’s own asset quality has shown modest weakening as evidenced by a higher non-performing asset ratio and lower reserves relative to non-performing loans compared to similarly rated institutions. This is the principal factor in lowering TRMK’s individual rating to ‘B/C.’ Fitch recognizes that TRMK has been relatively more aggressive in addressing its asset quality issues; however, Fitch believes these concerns are more reflective of a ‘B/C’ individual rating.”

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