Stock and Incentive Compensation Plans

9 Months Ended

Sep. 30, 2011

Stock and Incentive Compensation Plans [Abstract]

Stock and Incentive Compensation Plans

Note 10 – Stock and Incentive Compensation Plans

Trustmark has granted, and currently has outstanding, stock and incentive compensation awards subject to the provisions of the 1997 Long Term Incentive Plan (the 1997 Plan) and the 2005 Stock and Incentive Compensation Plan (the 2005 Plan).  New awards have not been issued under the 1997 Plan since it was replaced by the 2005 Plan. The 2005 Plan is designed to provide flexibility to Trustmark regarding its ability to motivate, attract and retain the services of key associates and directors.  The 2005 Plan allows Trustmark to make grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance units to key associates and directors.

Stock Option Grants

Stock option awards under the 2005 Plan are granted with an exercise price equal to the market price of Trustmark's stock on the date of grant.  Stock options granted under the 2005 Plan vest 20% per year and have a contractual term of seven years.  Stock option awards, which were granted under the 1997 Plan, had an exercise price equal to the market price of Trustmark's stock on the date of grant, vested equally over four years with a contractual ten-year term.  During the second quarter of 2011, compensation expense related to stock options had been fully recognized.  Compensation expense for stock options granted under these plans was estimated using the fair value of each option granted using the Black-Scholes option-pricing model and was recognized on the straight-line method over the requisite service period.  No stock options have been granted since 2006 when Trustmark began granting restricted stock awards exclusively.

Restricted Stock Grants

Performance Awards

Trustmark's performance awards are granted to Trustmark's executive and senior management team.  Performance awards granted vest based on performance goals of return on average tangible equity (ROATE) or return on average equity (ROAE) and total shareholder return (TSR) compared to a defined peer group. Awards based on TSR are valued utilizing a Monte Carlo simulation to estimate fair value of the awards at the grant date, while ROATE and ROAE awards are valued utilizing the fair value of Trustmark's stock at the grant date based on the estimated number of shares expected to vest. The restriction period for performance awards covers a three-year vesting period.  These awards are recognized on the straight-line method over the requisite service period.  These awards provide for excess shares, if performance measures exceed 100%.  Any excess shares granted are restricted for an additional three-year vesting period.  The restricted share agreement provides for voting rights and dividend privileges.

Time-Vested Awards

Trustmark's time-vested awards are granted to Trustmark's executive and senior management team in both employee recruitment and retention.  These awards are also granted to Trustmark's Board of Directors and are restricted for thirty-six months from the award dates.  Time-vested awards are valued utilizing the fair value of Trustmark's stock at the grant date.  These awards are recognized on the straight-line method over the requisite service period.

Performance-Based Restricted Stock Unit Award

During 2009, Trustmark's previous Chairman and CEO was granted a cash-settled performance-based restricted stock unit award (the RSU award), with each unit having the value of one share of Trustmark's common stock.  The performance period covered a two-year period.  This award was granted in connection with an employment agreement dated November 20, 2008, that provides for in lieu of receiving an equity compensation award in 2010 or 2011, the 2009 equity compensation award to be twice the amount of a normal award, with one-half of the award being performance-based and one-half service-based.  The RSU award was granted outside of the 2005 Plan in lieu of granting shares of performance-based restricted stock that would exceed the annual limit permitted to be granted under the 2005 Plan, in order to satisfy the equity compensation provisions of the employment agreement.  This award provided for excess shares, if performance goals of ROATE and TSR exceeded 100%.  Both the performance awards and excess shares vested during the second quarter of 2011.  Compensation expense for the RSU award was based on the approximate fair value of Trustmark's stock at the end of each of the reporting periods and was finalized on the vesting date.

The following tables summarize the stock and incentive plan activity for the periods presented:

	Three Months ended September 30, 2011
	Stock			Performance		Time-Vested
	Options			Awards		Awards
Outstanding/Nonvested shares or units, beginning of period		1,208,500			180,322		365,275
Granted		-			-		4,318
Expired		(800	)		-		-
Outstanding/Nonvested shares or units, end of period		1,207,700			180,322		369,593

	Nine Months ended September 30, 2011
	Stock			Performance			Time-Vested			RSU Award
	Options			Awards			Awards			(Cash-Settled)
Outstanding/Nonvested shares or units, beginning of period		1,311,925			210,797			343,469			23,123
Granted		-			53,863			73,057			-
Granted - excess shares		-			-			84,121			23,123
Exercised or released from restriction		(69,525	)		(84,338	)		(126,596	)		(46,246	)
Expired		(33,400	)		-			-			-
Forfeited		(1,300	)		-			(4,458	)		-
Outstanding/Nonvested shares or units, end of period		1,207,700			180,322			369,593			-

The following table presents information regarding compensation expense for stock and incentive plans for the periods presented ($ in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
Compensation expense - Stock and Incentive plans:
Stock option-based awards	$	-	$	78	$	100	$	355
Performance awards		214		251		655		752
Time-vested awards		671		838		2,172		2,580
RSU award (share price: $23.65-2011, $20.82-2010)		-		166		184		490
Total	$	885	$	1,333	$	3,111	$	4,177