Trustmark Corporation Announces Second Quarter 2013 Financial Results and Declares $0.23 Quarterly Dividend

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $31.1 million in the second quarter of 2013, which resulted in diluted earnings per share of $0.46. Trustmark’s performance during the quarter produced a return on average tangible common equity of 14.09% and a return on average assets of 1.06%. During the first six months of 2013, Trustmark’s net income available to common shareholders totaled $56.0 million, or $0.84 per common share. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable September 15, 2013, to shareholders of record on September 1, 2013.

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Gerard R. Host, President and CEO, stated, “Trustmark’s momentum continued to build during the second quarter as total revenue increased 7.2% to $142.9 million. Our banking, mortgage banking, wealth management, and insurance businesses continued to perform well while credit quality continued to experience significant improvements, as evidenced by reduced net charge-offs and provisioning. Thanks to our dedicated associates, solid profitability and strong capital base, we are well-positioned to continue providing value for our customers and shareholders.”

BancTrust Merger Update

On February 15, 2013, Trustmark completed its previously announced merger with BancTrust Financial Group, Inc. (“BancTrust”), headquartered in Mobile, Alabama. In March 2013, BancTrust’s operating systems were successfully converted to Trustmark’s banking platform. Trustmark’s financial results in the second quarter of 2013 included revenue attributable to BancTrust of approximately $19.9 million and net income of $6.1 million; net income attributable to BancTrust included $2.0 million (after tax) from recoveries on pay-offs of acquired loans.

Credit Quality

• Nonperforming assets declined 4.8% during second quarter
• Improved credit quality reflected in reduced net charge-offs and provisioning

Nonperforming loans totaled $74.3 million at June 30, 2013, a decline of 10.8% from the prior quarter, while foreclosed other real estate totaled $117.7 million, a decline of 0.6% from the prior quarter. Collectively, nonperforming assets totaled $192.0 million at June 30, 2013, a decrease of 4.8% from the prior quarter.

During the second quarter recoveries exceeded charge-offs, resulting in a net recovery of $771 thousand, which represented -0.05% of average loans, excluding acquired loans. This compares to net recoveries of $1.1 million, or -0.08% of average loans, in the prior quarter. As a result of the net recovery position and improved credit quality, the provision for loan losses for loans held for investment was a negative $4.8 million in the second quarter.

Allocation of Trustmark’s $72.8 million allowance for loan losses represented 1.48% of commercial loans and 0.84% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.31% at June 30, 2013, which represents a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 158.8% of nonperforming loans, excluding impaired loans.

All of the above credit metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.

Balance Sheet Management

• Loans held for investment increased $45.6 million
• Net interest income (FTE) totaled $103.0 million, resulting in 4.02% net interest margin

Average earning assets totaled $10.3 billion during the second quarter, an increase of $839.7 million from the prior quarter, reflecting the first full quarter of operations following the BancTrust merger on February 15, 2013. During the quarter, total average loans increased $406.3 million to $6.7 billion while investment securities expanded $433.2 million to $3.5 billion. Average deposits totaled $9.8 billion, an increase of $940.4 million from the prior quarter; noninterest-bearing deposits represented 25.1% of total average deposits during the second quarter.

Net interest income (FTE) in the second quarter totaled $103.0 million, an increase of $10.3 million from the prior quarter, and resulted in a four basis point expansion of the net interest margin to 4.02%. The expansion in the net interest margin reflects the significant increase in average acquired loan balances from the BancTrust merger as well as a favorable decline in the cost of interest-bearing liabilities. Excluding acquired loans, the net interest margin compressed 11 basis points from the prior quarter to 3.55% as earning assets continued to reprice at lower rates more rapidly than did interest-bearing deposits.

Loans held for investment totaled $5.6 billion at June 30, 2013, an increase of $45.6 million from the prior quarter. Growth was generally broad based by type as well as by geography. Construction lending expanded $33.8 million during the quarter due to growth in Trustmark’s Texas, Mississippi, Alabama and Tennessee markets while commercial real estate loans increased $21.3 million, reflecting growth in Texas, Florida, Alabama and Mississippi. Other real estate secured loans grew $17.9 million, principally due to growth in Trustmark’s Mississippi and Tennessee markets. Increased lending to public entities and school districts in Mississippi and Alabama was reflected in other loan growth of $25.5 million. During the quarter, the 1-4 family mortgage loan portfolio declined $15.4 million as Trustmark elected to sell the vast majority of its quarterly production of these lower-rate, longer-term mortgages in the secondary market rather than replace run-off in this portfolio. Commercial and industrial loans declined $37.5 million, as growth in Alabama was more than offset by declines in Trustmark’s other markets during the quarter.

Capital Strength

• Optimized capital base with redemption of $33.0 million in trust preferred securities
• Total risk-based capital ratio of 13.89%

Trustmark’s common equity totaled $1.33 billion at June 30, 2013, down $26.1 million from March 31, 2013. This decrease included a decline in accumulated other comprehensive loss, net of tax, of $44.5 million for the quarter resulting largely from a reduction of unrealized gains on available for sale securities in a rising interest rate environment.

Trustmark continued to optimize its capital base during the second quarter with the previously announced redemption of $33.0 million in trust preferred securities acquired in conjunction with the BancTrust merger. At June 30, 2013, Trustmark’s tangible common equity to tangible assets ratio was 7.96% while the total risk-based capital ratio was 13.89%, significantly exceeding the 10.00% benchmark to be classified as “well-capitalized.” Trustmark’s solid capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.

Noninterest Income

• Service charges and bank card fees collectively increased $2.8 million, or 14.3%, from prior quarter
• Insurance revenue expanded 10.7% to $8.0 million

Reflecting the continued success of Trustmark’s diversified financial services businesses, noninterest income totaled $43.7 million during the second quarter, including $3.0 million attributable to BancTrust. Service charges on deposit accounts totaled $12.9 million in the second quarter, an increase of $1.2 million, or 10.7%, from the prior quarter principally attributable to BancTrust. Bank card and other fees totaled $9.5 million in the second quarter, an increase of $1.6 million, or 19.7%, from the prior quarter.

Mortgage loan production in the second quarter totaled $424.3 million, up 8.2% from the prior quarter in part due to additional refinancing activity from the Home Affordable Refinance Program. Total revenue from Trustmark’s mortgage banking unit totaled $8.3 million in the second quarter, down $3.3 million from the prior period principally due to lower secondary marketing gains resulting from tightening mortgage spreads during the quarter and lower positive mortgage servicing hedge ineffectiveness.

Insurance revenue totaled $8.0 million, an increase of 10.7% from the prior quarter and 11.6% relative to figures one year earlier due to expanded commercial insurance sales as well as the continued firming of insurance rates. Wealth management income totaled $6.9 million in the second quarter, including income from BancTrust of approximately $1.1 million. Wealth management income increased 0.9% from the prior quarter and 20.4% from levels one year earlier.

During the second quarter, other income decreased $954 thousand relative to the prior quarter due primarily to increased write-off of the FDIC indemnification asset resulting from the re-estimation of cash flows and loan payoffs.

Noninterest Expense

• Achieved additional merger-related efficiencies
• Operating expenses remain well-controlled

Noninterest expense in the second quarter totaled $107.2 million and included expenses of $11.4 million reflecting the first full quarter of operations following the BancTrust merger as well as non-routine litigation expense of $4.0 million related to a previously announced proposed settlement concerning Trustmark’s overdraft fees for insufficient funds on debit card purchases and ATM withdrawals. Salaries and employee benefits expense totaled $55.4 million in the second quarter, including BancTrust-related expense of $5.7 million. Excluding BancTrust-related expense, salaries and employee benefits expense totaled $49.7 million in the second quarter of 2013, up $1.0 million, or 2.1%, relative to comparable figures in the prior quarter.

Trustmark continued realignment of its branch network to enhance productivity and efficiency. As previously announced, two of Trustmark’s Houston offices were consolidated into a new administrative office on April 1. In addition, five overlapping offices in the Florida Panhandle were consolidated in May as a result of the BancTrust merger. Trustmark is committed to investments to support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Trustmark anticipates completing its previously announced plans to purchase two branch offices and assume selected deposit accounts of approximately $11.7 million from SOUTHBank, F.S.B. in the Oxford, Mississippi market at the close of business on Friday, July 26, 2013.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 24, 2013, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing [phone], passcode 10008303, or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Thursday, August 8, 2013, in archived format at the same web address or by calling [phone], passcode 10008303.

Trustmark Corporation is a financial services company providing banking and financial solutions through approximately 215 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of the European financial crisis on the U.S. economy and the markets we serve, and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the business and realize cost savings and any other synergies from the BancTrust merger as well as the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect, and other risks described in our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2013
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES		6/30/2013			3/31/2013			6/30/2012		$	Change		% Change		$	Change		% Change
Securities AFS-taxable	$	3,259,086		$	2,836,051		$	2,341,475		$	423,035		14.9	%	$	917,611		39.2	%
Securities AFS-nontaxable		171,974			167,773			167,287			4,201		2.5	%		4,687		2.8	%
Securities HTM-taxable		59,678			48,632			30,136			11,046		22.7	%		29,542		98.0	%
Securities HTM-nontaxable		11,520			16,648			19,378			(5,128	)	-30.8	%		(7,858	)	-40.6	%
Total securities		3,502,258			3,069,104			2,558,276			433,154		14.1	%		943,982		36.9	%
Loans (including loans held for sale)		5,735,296			5,741,340			5,938,168			(6,044	)	-0.1	%		(202,872	)	-3.4	%
Acquired loans:
Noncovered loans		949,367			530,643			97,341			418,724		78.9	%		852,026		n/m
Covered loans		43,425			49,815			70,217			(6,390	)	-12.8	%		(26,792	)	-38.2	%
Fed funds sold and rev repos		6,808			6,618			5,309			190		2.9	%		1,499		28.2	%
Other earning assets		34,752			34,661			29,654			91		0.3	%		5,098		17.2	%
Total earning assets		10,271,906			9,432,181			8,698,965			839,725		8.9	%		1,572,941		18.1	%
Allowance for loan losses		(84,574	)		(86,447	)		(92,223	)		1,873		-2.2	%		7,649		-8.3	%
Cash and due from banks		284,056			270,740			272,283			13,316		4.9	%		11,773		4.3	%
Other assets		1,311,262			1,183,493			947,914			127,769		10.8	%		363,348		38.3	%
Total assets	$	11,782,650		$	10,799,967		$	9,826,939		$	982,683		9.1	%	$	1,955,711		19.9	%
Interest-bearing demand deposits	$	1,811,402		$	1,703,336		$	1,545,203		$	108,066		6.3	%	$	266,199		17.2	%
Savings deposits		3,060,437			2,767,747			2,467,546			292,690		10.6	%		592,891		24.0	%
Time deposits less than $100,000		1,419,381			1,268,619			1,169,532			150,762		11.9	%		249,849		21.4	%
Time deposits of $100,000 or more		1,029,498			893,104			813,530			136,394		15.3	%		215,968		26.5	%
Total interest-bearing deposits		7,320,718			6,632,806			5,995,811			687,912		10.4	%		1,324,907		22.1	%
Fed funds purchased and repos		312,865			266,958			280,726			45,907		17.2	%		32,139		11.4	%
Short-term borrowings		51,718			66,999			80,275			(15,281	)	-22.8	%		(28,557	)	-35.6	%
Long-term FHLB advances		9,575			4,580			-			4,995		n/m			9,575		n/m
Subordinated notes		49,882			49,874			49,850			8		0.0	%		32		0.1	%
Junior subordinated debt securities		82,460			77,989			61,856			4,471		5.7	%		20,604		33.3	%
Total interest-bearing liabilities		7,827,218			7,099,206			6,468,518			728,012		10.3	%		1,358,700		21.0	%
Noninterest-bearing deposits		2,451,547			2,199,043			1,998,077			252,504		11.5	%		453,470		22.7	%
Other liabilities		159,525			176,210			104,628			(16,685	)	-9.5	%		54,897		52.5	%
Total liabilities		10,438,290			9,474,459			8,571,223			963,831		10.2	%		1,867,067		21.8	%
Shareholders' equity		1,344,360			1,325,508			1,255,716			18,852		1.4	%		88,644		7.1	%
Total liabilities and equity	$	11,782,650		$	10,799,967		$	9,826,939		$	982,683		9.1	%	$	1,955,711		19.9	%
										Linked Quarter					Year over Year
PERIOD END BALANCES		6/30/2013			3/31/2013			6/30/2012		$	Change		% Change		$	Change		% Change
Cash and due from banks	$	301,532		$	242,896		$	284,735		$	58,636		24.1	%	$	16,797		5.9	%
Fed funds sold and rev repos		7,869			5,926			6,725			1,943		32.8	%		1,144		17.0	%
Securities available for sale		3,511,683			3,546,083			2,592,807			(34,400	)	-1.0	%		918,876		35.4	%
Securities held to maturity		70,338			73,666			47,867			(3,328	)	-4.5	%		22,471		46.9	%
Loans held for sale (LHFS)		202,699			207,758			286,221			(5,059	)	-2.4	%		(83,522	)	-29.2	%
Loans held for investment (LHFI)		5,577,382			5,531,788			5,650,548			45,594		0.8	%		(73,166	)	-1.3	%
Allowance for loan losses		(72,825	)		(76,900	)		(84,809	)		4,075		-5.3	%		11,984		-14.1	%
Net LHFI		5,504,557			5,454,888			5,565,739			49,669		0.9	%		(61,182	)	-1.1	%
Acquired loans:
Noncovered loans		922,453			1,003,127			94,013			(80,674	)	-8.0	%		828,440		n/m
Covered loans		40,820			47,589			66,015			(6,769	)	-14.2	%		(25,195	)	-38.2	%
Allowance for loan losses, acquired loans		(2,690	)		(6,458	)		(1,526	)		3,768		-58.3	%		(1,164	)	76.3	%
Net acquired loans		960,583			1,044,258			158,502			(83,675	)	-8.0	%		802,081		n/m
Net LHFI and acquired loans		6,465,140			6,499,146			5,724,241			(34,006	)	-0.5	%		740,899		12.9	%
Premises and equipment, net		210,845			210,789			156,089			56		0.0	%		54,756		35.1	%
Mortgage servicing rights		60,380			51,529			43,580			8,851		17.2	%		16,800		38.5	%
Goodwill		368,315			366,366			291,104			1,949		0.5	%		77,211		26.5	%
Identifiable intangible assets		46,889			49,361			19,356			(2,472	)	-5.0	%		27,533		n/m
Other real estate, excluding covered other real estate		117,712			118,406			73,673			(694	)	-0.6	%		44,039		59.8	%
Covered other real estate		5,147			5,879			6,482			(732	)	-12.5	%		(1,335	)	-20.6	%
FDIC indemnification asset		17,342			20,198			25,309			(2,856	)	-14.1	%		(7,967	)	-31.5	%
Other assets		477,421			452,512			332,657			24,909		5.5	%		144,764		43.5	%
Total assets	$	11,863,312		$	11,850,515		$	9,890,846		$	12,797		0.1	%	$	1,972,466		19.9	%
Deposits:
Noninterest-bearing	$	2,520,895		$	2,534,287		$	2,063,261		$	(13,392	)	-0.5	%	$	457,634		22.2	%
Interest-bearing		7,296,697			7,375,144			5,932,596			(78,447	)	-1.1	%		1,364,101		23.0	%
Total deposits		9,817,592			9,909,431			7,995,857			(91,839	)	-0.9	%		1,821,735		22.8	%
Fed funds purchased and repos		374,021			219,769			297,669			154,252		70.2	%		76,352		25.6	%
Short-term borrowings		56,645			46,325			78,594			10,320		22.3	%		(21,949	)	-27.9	%
Long-term FHLB advances		8,679			10,969			-			(2,290	)	-20.9	%		8,679		n/m
Subordinated notes		49,888			49,879			49,855			9		0.0	%		33		0.1	%
Junior subordinated debt securities		61,856			94,856			61,856			(33,000	)	-34.8	%		-		0.0	%
Other liabilities		167,812			166,340			148,520			1,472		0.9	%		19,292		13.0	%
Total liabilities		10,536,493			10,497,569			8,632,351			38,924		0.4	%		1,904,142		22.1	%
Common stock		13,994			13,992			13,496			2		0.0	%		498		3.7	%
Capital surplus		342,359			342,233			283,023			126		0.0	%		59,336		21.0	%
Retained earnings		1,006,554			991,012			958,322			15,542		1.6	%		48,232		5.0	%
Accum other comprehensive
(loss) income, net of tax		(36,088	)		5,709			3,654			(41,797	)	n/m			(39,742	)	n/m
Total shareholders' equity		1,326,819			1,352,946			1,258,495			(26,127	)	-1.9	%		68,324		5.4	%
Total liabilities and equity	$	11,863,312		$	11,850,515		$	9,890,846		$	12,797		0.1	%	$	1,972,466		19.9	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2013
($ in thousands except per share data)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
INCOME STATEMENTS		6/30/2013			3/31/2013			6/30/2012		$	Change		% Change		$	Change		% Change
Interest and fees on LHFS & LHFI-FTE	$	67,750		$	67,412		$	72,949		$	338		0.5	%	$	(5,199	)	-7.1	%
Interest and fees on acquired loans		20,987			12,782			5,097			8,205		64.2	%		15,890		n/m
Interest on securities-taxable		18,547			16,539			17,352			2,008		12.1	%		1,195		6.9	%
Interest on securities-tax exempt-FTE		1,974			2,018			2,086			(44	)	-2.2	%		(112	)	-5.4	%
Interest on fed funds sold and rev repos		5			4			5			1		25.0	%		-		0.0	%
Other interest income		372			355			336			17		4.8	%		36		10.7	%
Total interest income-FTE		109,635			99,110			97,825			10,525		10.6	%		11,810		12.1	%
Interest on deposits		5,071			4,909			6,465			162		3.3	%		(1,394	)	-21.6	%
Interest on fed funds pch and repos		88			81			142			7		8.6	%		(54	)	-38.0	%
Other interest expense		1,513			1,490			1,359			23		1.5	%		154		11.3	%
Total interest expense		6,672			6,480			7,966			192		3.0	%		(1,294	)	-16.2	%
Net interest income-FTE		102,963			92,630			89,859			10,333		11.2	%		13,104		14.6	%
Provision for loan losses, LHFI		(4,846	)		(2,968	)		650			(1,878	)	63.3	%		(5,496	)	n/m
Provision for loan losses, acquired loans		(1,552	)		130			1,672			(1,682	)	n/m			(3,224	)	n/m
Net interest income after provision-FTE		109,361			95,468			87,537			13,893		14.6	%		21,824		24.9	%
Service charges on deposit accounts		12,929			11,681			12,614			1,248		10.7	%		315		2.5	%
Insurance commissions		8,014			7,242			7,179			772		10.7	%		835		11.6	%
Wealth management		6,940			6,875			5,762			65		0.9	%		1,178		20.4	%
Bank card and other fees		9,507			7,945			8,179			1,562		19.7	%		1,328		16.2	%
Mortgage banking, net		8,295			11,583			11,184			(3,288	)	-28.4	%		(2,889	)	-25.8	%
Other, net		(2,145	)		(1,191	)		(1,150	)		(954	)	80.1	%		(995	)	86.5	%
Nonint inc-excl sec gains (losses), net		43,540			44,135			43,768			(595	)	-1.3	%		(228	)	-0.5	%
Security gains (losses), net		174			204			(8	)		(30	)	-14.7	%		182		n/m
Total noninterest income		43,714			44,339			43,760			(625	)	-1.4	%		(46	)	-0.1	%
Salaries and employee benefits		55,405			53,592			46,959			1,813		3.4	%		8,446		18.0	%
Services and fees		12,816			13,032			11,750			(216	)	-1.7	%		1,066		9.1	%
Net occupancy-premises		6,703			5,955			4,954			748		12.6	%		1,749		35.3	%
Equipment expense		6,193			5,674			5,183			519		9.1	%		1,010		19.5	%
FDIC assessment expense		2,376			2,021			1,826			355		17.6	%		550		30.1	%
ORE/Foreclosure expense		5,131			3,820			2,388			1,311		34.3	%		2,743		n/m
Other expense		18,571			18,051			14,899			520		2.9	%		3,672		24.6	%
Total noninterest expense		107,195			102,145			87,959			5,050		4.9	%		19,236		21.9	%
Income before income taxes and tax eq adj		45,880			37,662			43,338			8,218		21.8	%		2,542		5.9	%
Tax equivalent adjustment		3,735			3,655			3,411			80		2.2	%		324		9.5	%
Income before income taxes		42,145			34,007			39,927			8,138		23.9	%		2,218		5.6	%
Income taxes		11,024			9,141			10,578			1,883		20.6	%		446		4.2	%
Net income available to common shareholders	$	31,121		$	24,866		$	29,349		$	6,255		25.2	%	$	1,772		6.0	%
Per common share data
Earnings per share - basic	$	0.46		$	0.38		$	0.45		$	0.08		21.1	%	$	0.01		2.2	%
Earnings per share - diluted	$	0.46		$	0.38		$	0.45		$	0.08		21.1	%	$	0.01		2.2	%
Dividends per share	$	0.23		$	0.23		$	0.23		$	-		0.0	%	$	-		0.0	%
Weighted average common shares outstanding
Basic		67,162,530			65,983,204			64,771,530
Diluted		67,344,117			66,149,656			64,938,697
Period end common shares outstanding		67,163,195			67,151,087			64,775,694
OTHER FINANCIAL DATA
Return on common equity		9.29	%		7.61	%		9.40	%
Return on average tangible common equity		14.09	%		10.82	%		12.74	%
Return on assets		1.06	%		0.93	%		1.20	%
Interest margin - Yield - FTE		4.28	%		4.26	%		4.52	%
Interest margin - Cost		0.26	%		0.28	%		0.37	%
Net interest margin - FTE		4.02	%		3.98	%		4.15	%
Efficiency ratio (1)		70.44	%		67.84	%		66.26	%
Full-time equivalent employees		3,119			3,164			2,598
COMMON STOCK PERFORMANCE
Market value-Close	$	24.58		$	25.01		$	24.48
Common book value	$	19.76		$	20.15		$	19.43
Tangible common book value	$	13.57		$	13.96		$	14.64
(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and non-routine acquisition related transaction expenses.
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2013
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)		6/30/2013			3/31/2013			6/30/2012		$	Change		% Change		$	Change		% Change
Nonaccrual loans
Alabama	$	73		$	-		$	-		$	73		n/m		$	73		n/m
Florida		15,916			14,046			22,260			1,870		13.3	%		(6,344	)	-28.5	%
Mississippi (2)		41,761			46,697			47,322			(4,936	)	-10.6	%		(5,561	)	-11.8	%
Tennessee (3)		4,482			4,877			11,171			(395	)	-8.1	%		(6,689	)	-59.9	%
Texas		12,086			17,702			18,927			(5,616	)	-31.7	%		(6,841	)	-36.1	%
Total nonaccrual loans		74,318			83,322			99,680			(9,004	)	-10.8	%		(25,362	)	-25.4	%
Other real estate
Alabama		27,245			28,870			-			(1,625	)	-5.6	%		27,245		n/m
Florida		35,025			30,662			23,324			4,363		14.2	%		11,701		50.2	%
Mississippi (2)		26,843			26,457			19,511			386		1.5	%		7,332		37.6	%
Tennessee (3)		15,811			18,339			18,850			(2,528	)	-13.8	%		(3,039	)	-16.1	%
Texas		12,788			14,078			11,988			(1,290	)	-9.2	%		800		6.7	%
Total other real estate		117,712			118,406			73,673			(694	)	-0.6	%		44,039		59.8	%
Total nonperforming assets	$	192,030		$	201,728		$	173,353		$	(9,698	)	-4.8	%	$	18,677		10.8	%
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	4,194		$	2,772		$	1,843		$	1,422		51.3	%	$	2,351		n/m
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	14,003		$	4,469		$	35,270		$	9,534		n/m		$	(21,267	)	-60.3	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (4)		6/30/2013			3/31/2013			6/30/2012		$	Change		% Change		$	Change		% Change
Beginning Balance	$	76,900		$	78,738		$	90,879		$	(1,838	)	-2.3	%	$	(13,979	)	-15.4	%
Provision for loan losses		(4,846	)		(2,968	)		650			(1,878	)	63.3	%		(5,496	)	n/m
Charge-offs		(3,031	)		(3,325	)		(9,264	)		294		-8.8	%		6,233		-67.3	%
Recoveries		3,802			4,455			2,544			(653	)	-14.7	%		1,258		49.4	%
Net recoveries (charge-offs)		771			1,130			(6,720	)		(359	)	-31.8	%		7,491		n/m
Ending Balance	$	72,825		$	76,900		$	84,809		$	(4,075	)	-5.3	%	$	(11,984	)	-14.1	%
PROVISION FOR LOAN LOSSES (4)
Alabama	$	232		$	676		$	-		$	(444	)	-65.7	%	$	232		n/m
Florida		(3,425	)		(3,675	)		(770	)		250		-6.8	%		(2,655	)	n/m
Mississippi (2)		(520	)		(1,920	)		1,141			1,400		-72.9	%		(1,661	)	n/m
Tennessee (3)		(335	)		(378	)		839			43		-11.4	%		(1,174	)	n/m
Texas		(798	)		2,329			(560	)		(3,127	)	n/m			(238	)	42.5	%
Total provision for loan losses	$	(4,846	)	$	(2,968	)	$	650		$	(1,878	)	63.3	%	$	(5,496	)	n/m
NET CHARGE-OFFS (4)
Alabama	$	67		$	11		$	-		$	56		n/m		$	67		n/m
Florida		(1,426	)		(849	)		4,491			(577	)	68.0	%		(5,917	)	n/m
Mississippi (2)		291			(290	)		1,751			581		n/m			(1,460	)	-83.4	%
Tennessee (3)		103			249			536			(146	)	-58.6	%		(433	)	-80.8	%
Texas		194			(251	)		(58	)		445		n/m			252		n/m
Total net (recoveries) charge-offs	$	(771	)	$	(1,130	)	$	6,720		$	359		-31.8	%	$	(7,491	)	n/m
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		-0.05	%		-0.08	%		0.46	%
Provision for loan losses/average loans		-0.34	%		-0.21	%		0.04	%
Nonperforming loans/total loans (incl LHFS)		1.29	%		1.45	%		1.68	%
Nonperforming assets/total loans (incl LHFS)		3.32	%		3.51	%		2.92	%
Nonperforming assets/total loans (incl LHFS) +ORE		3.26	%		3.44	%		2.88	%
ALL/total loans (excl LHFS)		1.31	%		1.39	%		1.50	%
ALL-commercial/total commercial loans		1.48	%		1.56	%		1.81	%
ALL-consumer/total consumer and home mortgage loans		0.84	%		0.94	%		0.81	%
ALL/nonperforming loans		97.99	%		92.29	%		85.08	%
ALL/nonperforming loans -
(excl impaired loans)		158.75	%		145.83	%		186.45	%
CAPITAL RATIOS
Common equity/total assets		11.18	%		11.42	%		12.72	%
Tangible common equity/tangible assets		7.96	%		8.20	%		9.90	%
Tangible common equity/risk-weighted assets		11.57	%		11.92	%		14.30	%
Tier 1 leverage ratio		8.71	%		9.83	%		10.63	%
Tier 1 common risk-based capital ratio		11.79	%		11.79	%		14.36	%
Tier 1 risk-based capital ratio		12.55	%		12.97	%		15.26	%
Total risk-based capital ratio		13.89	%		14.42	%		17.12	%
(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2013
($ in thousands)
(unaudited)
	Quarter Ended															Six Months Ended
AVERAGE BALANCES		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012			6/30/2013			6/30/2012
Securities AFS-taxable	$	3,259,086		$	2,836,051		$	2,466,738		$	2,409,292		$	2,341,475		$	3,048,737		$	2,334,524
Securities AFS-nontaxable		171,974			167,773			169,906			169,037			167,287			169,885			164,079
Securities HTM-taxable		59,678			48,632			26,510			28,333			30,136			54,186			31,703
Securities HTM-nontaxable		11,520			16,648			17,443			18,361			19,378			14,070			20,488
Total securities		3,502,258			3,069,104			2,680,597			2,625,023			2,558,276			3,286,878			2,550,794
Loans (including loans held for sale)		5,735,296			5,741,340			5,834,525			5,886,447			5,938,168			5,738,301			5,976,151
Acquired loans:
Noncovered loans		949,367			530,643			82,317			88,562			97,341			741,162			58,636
Covered loans		43,425			49,815			58,272			65,259			70,217			46,602			72,915
Fed funds sold and rev repos		6,808			6,618			8,747			6,583			5,309			6,714			7,439
Other earning assets		34,752			34,661			31,168			31,758			29,654			34,707			31,878
Total earning assets		10,271,906			9,432,181			8,695,626			8,703,632			8,698,965			9,854,364			8,697,813
Allowance for loan losses		(84,574	)		(86,447	)		(88,715	)		(86,865	)		(92,223	)		(85,505	)		(92,143	)
Cash and due from banks		284,056			270,740			238,976			236,566			272,283			277,435			252,211
Other assets		1,311,262			1,183,493			972,748			958,030			947,914			1,247,729			933,092
Total assets	$	11,782,650		$	10,799,967		$	9,818,635		$	9,811,363		$	9,826,939		$	11,294,023		$	9,790,973
Interest-bearing demand deposits	$	1,811,402		$	1,703,336		$	1,545,967		$	1,534,244		$	1,545,203		$	1,757,668		$	1,545,124
Savings deposits		3,060,437			2,767,747			2,275,569			2,348,413			2,467,546			2,914,901			2,403,356
Time deposits less than $100,000		1,419,381			1,268,619			1,120,735			1,150,620			1,169,532			1,344,416			1,180,210
Time deposits of $100,000 or more		1,029,498			893,104			760,363			781,926			813,530			961,678			819,372
Total interest-bearing deposits		7,320,718			6,632,806			5,702,634			5,815,203			5,995,811			6,978,663			5,948,062
Fed funds purchased and repos		312,865			266,958			388,007			374,885			280,726			290,038			358,998
Short-term borrowings		51,718			66,999			85,313			81,773			80,275			59,316			82,536
Long-term FHLB advances		9,575			4,580			-			-			-			7,091			-
Subordinated notes		49,882			49,874			49,866			49,858			49,850			49,878			49,846
Junior subordinated debt securities		82,460			77,989			61,856			61,856			61,856			80,237			61,856
Total interest-bearing liabilities		7,827,218			7,099,206			6,287,676			6,383,575			6,468,518			7,465,223			6,501,298
Noninterest-bearing deposits		2,451,547			2,199,043			2,115,784			2,039,729			1,998,077			2,325,993			1,933,918
Other liabilities		159,525			176,210			126,953			114,454			104,628			167,821			113,648
Total liabilities		10,438,290			9,474,459			8,530,413			8,537,758			8,571,223			9,959,037			8,548,864
Shareholders' equity		1,344,360			1,325,508			1,288,222			1,273,605			1,255,716			1,334,986			1,242,109
Total liabilities and equity	$	11,782,650		$	10,799,967		$	9,818,635		$	9,811,363		$	9,826,939		$	11,294,023		$	9,790,973
PERIOD END BALANCES		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012
Cash and due from banks	$	301,532		$	242,896		$	231,489		$	209,188		$	284,735
Fed funds sold and rev repos		7,869			5,926			7,046			5,295			6,725
Securities available for sale		3,511,683			3,546,083			2,657,745			2,724,446			2,592,807
Securities held to maturity		70,338			73,666			42,188			45,484			47,867
Loans held for sale (LHFS)		202,699			207,758			257,986			324,897			286,221
Loans held for investment (LHFI)		5,577,382			5,531,788			5,592,754			5,527,963			5,650,548
Allowance for loan losses		(72,825	)		(76,900	)		(78,738	)		(83,526	)		(84,809	)
Net LHFI		5,504,557			5,454,888			5,514,016			5,444,437			5,565,739
Acquired loans:
Noncovered loans		922,453			1,003,127			81,523			83,110			94,013
Covered loans		40,820			47,589			52,041			64,503			66,015
Allowance for loan losses, acquired loans		(2,690	)		(6,458	)		(6,075	)		(4,343	)		(1,526	)
Net acquired loans		960,583			1,044,258			127,489			143,270			158,502
Net LHFI and acquired loans		6,465,140			6,499,146			5,641,505			5,587,707			5,724,241
Premises and equipment, net		210,845			210,789			154,841			155,467			156,089
Mortgage servicing rights		60,380			51,529			47,341			44,211			43,580
Goodwill		368,315			366,366			291,104			291,104			291,104
Identifiable intangible assets		46,889			49,361			17,306			18,327			19,356
Other real estate, excluding covered other real estate		117,712			118,406			78,189			82,475			73,673
Covered other real estate		5,147			5,879			5,741			5,722			6,482
FDIC indemnification asset		17,342			20,198			21,774			23,979			25,309
Other assets		477,421			452,512			374,412			353,857			332,657
Total assets	$	11,863,312		$	11,850,515		$	9,828,667		$	9,872,159		$	9,890,846
Deposits:
Noninterest-bearing	$	2,520,895		$	2,534,287		$	2,254,211		$	2,118,853		$	2,063,261
Interest-bearing		7,296,697			7,375,144			5,642,306			5,685,188			5,932,596
Total deposits		9,817,592			9,909,431			7,896,517			7,804,041			7,995,857
Fed funds purchased and repos		374,021			219,769			288,829			408,711			297,669
Short-term borrowings		56,645			46,325			86,920			83,612			78,594
Long-term FHLB advances		8,679			10,969			-			-			-
Subordinated notes		49,888			49,879			49,871			49,863			49,855
Junior subordinated debt securities		61,856			94,856			61,856			61,856			61,856
Other liabilities		167,812			166,340			157,305			186,061			148,520
Total liabilities		10,536,493			10,497,569			8,541,298			8,594,144			8,632,351
Common stock		13,994			13,992			13,506			13,496			13,496
Capital surplus		342,359			342,233			285,905			284,089			283,023
Retained earnings		1,006,554			991,012			984,563			973,182			958,322
Accum other comprehensive
(loss) income, net of tax		(36,088	)		5,709			3,395			7,248			3,654
Total shareholders' equity		1,326,819			1,352,946			1,287,369			1,278,015			1,258,495
Total liabilities and equity	$	11,863,312		$	11,850,515		$	9,828,667		$	9,872,159		$	9,890,846
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2013
($ in thousands except per share data)
(unaudited)
	Quarter Ended															Six Months Ended
INCOME STATEMENTS		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012			6/30/2013			6/30/2012
Interest and fees on LHFS & LHFI-FTE	$	67,750		$	67,412		$	69,989		$	72,554		$	72,949		$	135,162		$	148,730
Interest and fees on acquired loans		20,987			12,782			4,859			5,229			5,097			33,769			8,034
Interest on securities-taxable		18,547			16,539			15,305			15,909			17,352			35,086			35,736
Interest on securities-tax exempt-FTE		1,974			2,018			2,066			2,089			2,086			3,992			4,188
Interest on fed funds sold and rev repos		5			4			9			6			5			9			11
Other interest income		372			355			337			339			336			727			666
Total interest income-FTE		109,635			99,110			92,565			96,126			97,825			208,745			197,365
Interest on deposits		5,071			4,909			5,061			5,725			6,465			9,980			13,818
Interest on fed funds pch and repos		88			81			140			135			142			169			313
Other interest expense		1,513			1,490			1,346			1,358			1,359			3,003			2,773
Total interest expense		6,672			6,480			6,547			7,218			7,966			13,152			16,904
Net interest income-FTE		102,963			92,630			86,018			88,908			89,859			195,593			180,461
Provision for loan losses, LHFI		(4,846	)		(2,968	)		(535	)		3,358			650			(7,814	)		3,943
Provision for loan losses, acquired loans		(1,552	)		130			1,945			2,105			1,672			(1,422	)		1,478
Net interest income after provision-FTE		109,361			95,468			84,608			83,445			87,537			204,829			175,040
Service charges on deposit accounts		12,929			11,681			12,391			13,135			12,614			24,610			24,825
Insurance commissions		8,014			7,242			6,887			7,533			7,179			15,256			13,785
Wealth management		6,940			6,875			6,181			5,612			5,762			13,815			11,263
Bank card and other fees		9,507			7,945			7,978			6,924			8,179			17,452			15,543
Mortgage banking, net		8,295			11,583			11,331			11,150			11,184			19,878			18,479
Other, net		(2,145	)		(1,191	)		(2,007	)		512			(1,150	)		(3,336	)		2,608
Nonint inc-excl sec gains (losses), net		43,540			44,135			42,761			44,866			43,768			87,675			86,503
Security gains (losses), net		174			204			18			(1	)		(8	)		378			1,042
Total noninterest income		43,714			44,339			42,779			44,865			43,760			88,053			87,545
Salaries and employee benefits		55,405			53,592			49,724			47,404			46,959			108,997			93,391
Services and fees		12,816			13,032			12,572			11,682			11,750			25,848			22,497
Net occupancy-premises		6,703			5,955			5,023			5,352			4,954			12,658			9,892
Equipment expense		6,193			5,674			5,288			5,095			5,183			11,867			10,095
FDIC assessment expense		2,376			2,021			1,075			1,826			1,826			4,397			3,601
ORE/Foreclosure expense		5,131			3,820			3,173			1,702			2,388			8,951			6,290
Other expense		18,571			18,051			10,454			10,399			14,899			36,622			27,967
Total noninterest expense		107,195			102,145			87,309			83,460			87,959			209,340			173,733
Income before income taxes and tax eq adj		45,880			37,662			40,078			44,850			43,338			83,542			88,852
Tax equivalent adjustment		3,735			3,655			3,699			3,629			3,411			7,390			7,069
Income before income taxes		42,145			34,007			36,379			41,221			39,927			76,152			81,783
Income taxes		11,024			9,141			8,669			11,317			10,578			20,165			22,114
Net income available to common shareholders	$	31,121		$	24,866		$	27,710		$	29,904		$	29,349		$	55,987		$	59,669
Per common share data
Earnings per share - basic	$	0.46		$	0.38		$	0.43		$	0.46		$	0.45		$	0.84		$	0.92
Earnings per share - diluted	$	0.46		$	0.38		$	0.43		$	0.46		$	0.45		$	0.84		$	0.92
Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23		$	0.46		$	0.46
Weighted average common shares outstanding
Basic		67,162,530			65,983,204			64,785,457			64,778,329			64,771,530			66,576,125			64,534,284
Diluted		67,344,117			66,149,656			65,007,281			64,992,614			64,938,697			66,748,713			64,698,200
Period end common shares outstanding		67,163,195			67,151,087			64,820,414			64,779,937			64,775,694			67,163,195			64,775,694
OTHER FINANCIAL DATA
Return on common equity		9.29	%		7.61	%		8.56	%		9.34	%		9.40	%		8.46	%		9.66	%
Return on average tangible common equity		14.09	%		10.82	%		11.51	%		12.61	%		12.74	%		12.43	%		13.07	%
Return on assets		1.06	%		0.93	%		1.12	%		1.21	%		1.20	%		1.00	%		1.23	%
Interest margin - Yield - FTE		4.28	%		4.26	%		4.23	%		4.39	%		4.52	%		4.27	%		4.56	%
Interest margin - Cost		0.26	%		0.28	%		0.30	%		0.33	%		0.37	%		0.27	%		0.39	%
Net interest margin - FTE		4.02	%		3.98	%		3.94	%		4.06	%		4.15	%		4.00	%		4.17	%
Efficiency ratio (1)		70.44	%		67.84	%		67.80	%		62.39	%		66.26	%		69.19	%		64.99	%
Full-time equivalent employees		3,119			3,164			2,666			2,632			2,598
COMMON STOCK PERFORMANCE
Market value-Close	$	24.58		$	25.01		$	22.46		$	24.34		$	24.48
Common book value	$	19.76		$	20.15		$	19.86		$	19.73		$	19.43
Tangible common book value	$	13.57		$	13.96		$	15.10		$	14.95		$	14.64
(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and non-routine acquisition related transaction expenses.
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2013
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012
Nonaccrual loans
Alabama	$	73		$	-		$	-		$	-		$	-
Florida		15,916			14,046			19,314			21,456			22,260
Mississippi (2)		41,761			46,697			38,960			32,041			47,322
Tennessee (3)		4,482			4,877			8,401			7,388			11,171
Texas		12,086			17,702			15,688			19,773			18,927
Total nonaccrual loans		74,318			83,322			82,363			80,658			99,680
Other real estate
Alabama		27,245			28,870			-			-			-
Florida		35,025			30,662			18,569			22,340			23,324
Mississippi (2)		26,843			26,457			27,771			27,113			19,511
Tennessee (3)		15,811			18,339			17,589			18,545			18,850
Texas		12,788			14,078			14,260			14,477			11,988
Total other real estate		117,712			118,406			78,189			82,475			73,673
Total nonperforming assets	$	192,030		$	201,728		$	160,552		$	163,133		$	173,353
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	4,194		$	2,772		$	6,378		$	5,699		$	1,843
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	14,003		$	4,469		$	43,073		$	39,492		$	35,270
	Quarter Ended															Six Months Ended
ALLOWANCE FOR LOAN LOSSES (4)		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012			6/30/2013			6/30/2012
Beginning Balance	$	76,900		$	78,738		$	83,526		$	84,809		$	90,879		$	78,738		$	89,518
Provision for loan losses		(4,846	)		(2,968	)		(535	)		3,358			650			(7,814	)		3,943
Charge-offs		(3,031	)		(3,325	)		(8,829	)		(7,907	)		(9,264	)		(6,356	)		(14,640	)
Recoveries		3,802			4,455			4,576			3,266			2,544			8,257			5,988
Net recoveries (charge-offs)		771			1,130			(4,253	)		(4,641	)		(6,720	)		1,901			(8,652	)
Ending Balance	$	72,825		$	76,900		$	78,738		$	83,526		$	84,809		$	72,825		$	84,809
PROVISION FOR LOAN LOSSES (4)
Alabama	$	232		$	676		$	-		$	-		$	-		$	908		$	-
Florida		(3,425	)		(3,675	)		(706	)		7			(770	)		(7,100	)		(31	)
Mississippi (2)		(520	)		(1,920	)		2,031			466			1,141			(2,440	)		5,293
Tennessee (3)		(335	)		(378	)		(1,037	)		687			839			(713	)		810
Texas		(798	)		2,329			(823	)		2,198			(560	)		1,531			(2,129	)
Total provision for loan losses	$	(4,846	)	$	(2,968	)	$	(535	)	$	3,358		$	650		$	(7,814	)	$	3,943
NET CHARGE-OFFS (4)
Alabama	$	67		$	11		$	-		$	-		$	-		$	78		$	-
Florida		(1,426	)		(849	)		(237	)		(488	)		4,491			(2,275	)		5,986
Mississippi (2)		291			(290	)		874			4,726			1,751			1			2,002
Tennessee (3)		103			249			(43	)		438			536			352			759
Texas		194			(251	)		3,659			(35	)		(58	)		(57	)		(95	)
Total net (recoveries) charge-offs	$	(771	)	$	(1,130	)	$	4,253		$	4,641		$	6,720		$	(1,901	)	$	8,652
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		-0.05	%		-0.08	%		0.29	%		0.31	%		0.46	%		-0.07	%		0.29	%
Provision for loan losses/average loans		-0.34	%		-0.21	%		-0.04	%		0.23	%		0.04	%		-0.27	%		0.13	%
Nonperforming loans/total loans (incl LHFS)		1.29	%		1.45	%		1.41	%		1.38	%		1.68	%
Nonperforming assets/total loans (incl LHFS)		3.32	%		3.51	%		2.74	%		2.79	%		2.92	%
Nonperforming assets/total loans (incl LHFS) +ORE		3.26	%		3.44	%		2.71	%		2.75	%		2.88	%
ALL/total loans (excl LHFS)		1.31	%		1.39	%		1.41	%		1.51	%		1.50	%
ALL-commercial/total commercial loans		1.48	%		1.56	%		1.59	%		1.79	%		1.81	%
ALL-consumer/total consumer and home mortgage loans		0.84	%		0.94	%		0.97	%		0.84	%		0.81	%
ALL/nonperforming loans		97.99	%		92.29	%		95.60	%		103.56	%		85.08	%
ALL/nonperforming loans - (excl impaired loans)		158.75	%		145.83	%		174.46	%		174.09	%		186.45	%
CAPITAL RATIOS
Common equity/total assets		11.18	%		11.42	%		13.10	%		12.95	%		12.72	%
Tangible common equity/tangible assets		7.96	%		8.20	%		10.28	%		10.13	%		9.90	%
Tangible common equity/risk-weighted assets		11.57	%		11.92	%		14.56	%		14.49	%		14.30	%
Tier 1 leverage ratio		8.71	%		9.83	%		10.97	%		10.83	%		10.63	%
Tier 1 common risk-based capital ratio		11.79	%		11.79	%		14.63	%		14.50	%		14.36	%
Tier 1 risk-based capital ratio		12.55	%		12.97	%		15.53	%		15.40	%		15.26	%
Total risk-based capital ratio		13.89	%		14.42	%		17.22	%		17.25	%		17.12	%
(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2013

($ in thousands)

(unaudited)

Note 1 – Business Combinations

Oxford, Mississippi Branches

On March 29, 2013, Trustmark National Bank (TNB), a subsidiary of Trustmark Corporation (Trustmark), announced the signing of a definitive Branch Purchase and Assumption Agreement (the Agreement) pursuant to which TNB will acquire the two branches of SOUTHBank, F.S.B. (SOUTHBank), serving the Oxford, Mississippi market. The Agreement contemplates the assumption of selected deposit accounts of approximately $11.7 million as well as the purchase of the physical branch offices. The proposed transaction, which is subject to customary closing conditions, is expected to be completed as of the close of business on July 26, 2013. The proposed transaction is not material to Trustmark’s consolidated financial statements and is not considered a business combination in accordance with FASB ASC Topic 805, “Business Combinations.”

BancTrust Financial Group, Inc.

On February 15, 2013, Trustmark completed its merger with BancTrust Financial Group, Inc. (BancTrust), a 26-year-old bank holding company headquartered in Mobile, Alabama. In accordance with the terms of the definitive agreement, the holders of BancTrust common stock received 0.125 of a share of Trustmark common stock for each share of BancTrust common stock in a tax-free exchange. Trustmark issued approximately 2.24 million shares of its common stock for all issued and outstanding shares of BancTrust common stock. The total value of the 2.24 million shares of Trustmark common stock issued to the BancTrust shareholders on the acquisition date was approximately $53.5 million, based on a closing stock price of $23.83 per share of Trustmark common stock on February 15, 2013. At closing, Trustmark repurchased the $50.0 million of BancTrust preferred stock and associated warrant issued to the U.S. Department of Treasury under the Capital Purchase Program for approximately $52.6 million.

The acquisition of BancTrust is consistent with Trustmark’s strategic plan to selectively expand the Trustmark franchise. The acquisition of BancTrust provided Trustmark entry into more than 15 markets in Alabama and enhanced the Trustmark franchise in the Florida Panhandle.

This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, are recorded at their estimated fair values as of the acquisition date. The fair values of assets acquired and liabilities assumed are subject to adjustment if additional information becomes available to indicate a more accurate or appropriate value for an asset or liability during the measurement period, which is not to exceed one year from the acquisition date of February 15, 2013.

During the second quarter of 2013, Trustmark recorded an additional $1.9 million in goodwill based on changes to the estimated fair value of certain acquired loans and other real estate. These measurement period adjustments have been presented on a retrospective basis, consistent with applicable accounting guidance. The estimated fair values were considered preliminary as of June 30, 2013 and are subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period. The statement of assets purchased and liabilities assumed in the BancTrust acquisition is presented below at their adjusted estimated fair values as of the acquisition date of February 15, 2013 ($ in thousands):

Cash and due from banks	$	141,616
Securities		528,016
Loans held for sale		1,050
Acquired noncovered loans		950,487
Premises and equipment, net		55,579
Identifiable intangible assets		33,498
Other real estate		40,103
Other assets		99,580
Total Assets		1,849,929
Liabilities:
Deposits		1,740,254
Other borrowings		64,051
Other liabilities		16,761
Total Liabilities		1,821,066
Net identified assets acquired at fair value		28,863
Goodwill		77,211
Net assets acquired at fair value	$	106,074

The excess of the consideration paid over the estimated fair value of the net assets acquired was $77.2 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the acquisition date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years.

Loans acquired from BancTrust were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements and leases, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

Note 1 – Business Combinations (continued)

The operations of BancTrust are included in Trustmark’s operating results from February 15, 2013, and added revenue of $19.9 million and net income available to common shareholders of $6.1 million for the second quarter of 2013. Included in BancTrust’s net income available to common shareholders for the second quarter of 2013 are recoveries on pay-offs of acquired loans of $2.0 million (after tax).

Included in Trustmark’s noninterest expense during the first quarter of 2013 are non-routine BancTrust transaction expenses totaling approximately $9.4 million (change in control and severance expense of $1.4 million included in salaries and benefits; professional fees, contract termination and other expenses of $7.9 million included in other expense).

Bay Bank & Trust Company

On March 16, 2012, Trustmark completed its merger with Bay Bank & Trust Co. (Bay Bank), a 76-year old financial institution headquartered in Panama City, Florida. Trustmark acquired all outstanding common stock of Bay Bank for approximately $22 million in cash and stock, comprised of $10 million in cash and the issuance of approximately 510 thousand shares of Trustmark common stock valued at $12 million. This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, are recorded at their estimated fair values as of the acquisition date. The purchase price allocation was deemed preliminary as of March 31, 2012 and was finalized in the second quarter of 2012.

The statement of assets purchased and liabilities assumed in the Bay Bank acquisition is presented below at their estimated fair values as of the acquisition date of March 16, 2012 ($ in thousands):

Assets
Cash and due from banks	$	88,154
Securities available for sale		26,369
Acquired noncovered loans		97,914
Premises and equipment, net		9,466
Identifiable intangible assets		7,017
Other real estate		2,569
Other assets		3,471
Total Assets		234,960
Liabilities
Deposits		208,796
Other liabilities		526
Total Liabilities		209,322
Net assets acquired at fair value		25,638
Consideration paid to Bay Bank		22,003
Bargain purchase gain		3,635
Income taxes		-
Bargain purchase gain, net of taxes	$	3,635

The bargain purchase gain represents the excess of the net of the estimated fair value of the assets acquired and liabilities assumed over the consideration paid to Bay Bank. Initially, Trustmark recognized a bargain purchase gain of $2.8 million during the first quarter of 2012 and subsequently increased the bargain purchase gain by $881 thousand during the second quarter of 2012 as the fair values associated with the Bay Bank acquisition were finalized. The gain of $3.6 million recognized by Trustmark is considered a gain from a bargain purchase under FASB ASC Topic 805 and is included in other noninterest income. Included in noninterest expense during the first quarter of 2012 are non-routine Bay Bank transaction expenses totaling approximately $2.6 million (change in control and severance expense of $672 thousand included in salaries and benefits; contract termination and other expenses of $1.9 million included in other expense).

Loans acquired from Bay Bank were evaluated under a fair value process involving various degrees of deterioration in credit quality since origination, and also for those loans for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments. These loans, with the exception of revolving credit agreements, are referred to as acquired impaired loans and are accounted for in accordance with FASB ASC Topic 310-30.

Note 2 - Securities Available for Sale and Held to Maturity

The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):

		6/30/2013		3/31/2013		12/31/2012		9/30/2012		6/30/2012
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities	$	505	$	506	$	-	$	-	$	-
U.S. Government agency obligations
Issued by U.S. Government agencies		139,066		141,226		10		18		22
Issued by U.S. Government sponsored agencies		133,791		186,293		105,735		60,671		72,923
Obligations of states and political subdivisions		212,204		218,467		215,761		215,900		213,826
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		46,330		51,138		19,902		21,352		22,367
Issued by FNMA and FHLMC		227,927		241,365		208,564		237,886		264,018
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		2,156,320		2,090,516		1,466,366		1,565,290		1,570,226
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		361,575		377,070		399,780		381,207		354,453
Asset-backed securities		233,965		239,502		241,627		242,122		91,293
Corporate debt securities		-		-		-		-		3,679
Total securities available for sale	$	3,511,683	$	3,546,083	$	2,657,745	$	2,724,446	$	2,592,807
SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions	$	30,295	$	33,071	$	36,206	$	37,669	$	38,351
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		2,547		2,932		3,245		3,435		3,745
Issued by FNMA and FHLMC		567		569		572		580		583
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		-		-		-		1,624		3,000
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		36,929		37,094		2,165		2,176		2,188
Total securities held to maturity	$	70,338	$	73,666	$	42,188	$	45,484	$	47,867

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 92% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of membership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any equity investment in any GSE.

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012
Loans secured by real estate:
Construction, land development and other land loans	$	519,263		$	485,419		$	468,975		$	460,599		$	464,349
Secured by 1-4 family residential properties (1)		1,414,871			1,430,293			1,497,480			1,511,514			1,621,865
Secured by nonfarm, nonresidential properties		1,406,930			1,385,669			1,410,264			1,397,536			1,392,293
Other real estate secured		192,568			174,680			189,949			184,804			192,376
Commercial and industrial loans		1,169,327			1,206,851			1,169,513			1,163,681			1,142,282
Consumer loans		160,318			160,253			171,660			181,896			196,718
Other loans		714,105			688,623			684,913			627,933			640,665
LHFI		5,577,382			5,531,788			5,592,754			5,527,963			5,650,548
Allowance for loan losses		(72,825	)		(76,900	)		(78,738	)		(83,526	)		(84,809	)
Net LHFI	$	5,504,557		$	5,454,888		$	5,514,016		$	5,444,437		$	5,565,739
(1) Previously reported 3/31/2013 balance was increased by $57.4 million due to the misclassification of the proceeds received from the GNMA delinquent loan sale, which should have decreased Other Assets.

ACQUIRED NONCOVERED LOANS BY TYPE		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012
Loans secured by real estate:
Construction, land development and other land loans	$	132,116		$	138,442		$	10,056		$	11,504		$	13,154
Secured by 1-4 family residential properties		184,928			209,658			19,404			18,032			18,954
Secured by nonfarm, nonresidential properties		318,603			339,953			45,649			47,114			53,272
Other real estate secured		34,869			32,208			669			378			512
Commercial and industrial loans		206,338			235,286			3,035			3,371			4,822
Consumer loans		27,420			32,694			2,610			2,575			3,153
Other loans		18,179			14,886			100			136			146
Noncovered loans		922,453			1,003,127			81,523			83,110			94,013
Allowance for loan losses		(112	)		(1,961	)		(1,885	)		(817	)		(62	)
Net noncovered loans	$	922,341		$	1,001,166		$	79,638		$	82,293		$	93,951

ACQUIRED COVERED LOANS BY TYPE		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012
Loans secured by real estate:
Construction, land development and other land loans	$	3,662		$	3,875		$	3,924		$	3,714		$	3,683
Secured by 1-4 family residential properties		18,899			20,980			23,990			24,949			27,218
Secured by nonfarm, nonresidential properties		13,341			17,355			18,407			28,291			27,464
Other real estate secured		2,929			3,365			3,567			4,198			4,580
Commercial and industrial loans		543			648			747			1,803			1,382
Consumer loans		173			179			177			172			205
Other loans		1,273			1,187			1,229			1,376			1,483
Covered loans		40,820			47,589			52,041			64,503			66,015
Allowance for loan losses		(2,578	)		(4,497	)		(4,190	)		(3,526	)		(1,464	)
Net covered loans	$	38,242		$	43,092		$	47,851		$	60,977		$	64,551

Note 3 – Loan Composition (continued)
	June 30, 2013
LHFI - COMPOSITION BY REGION (1)	Total		Alabama		Florida		Mississippi (Central and Southern Regions)		Tennessee (Memphis, TN and Northern MS Regions)		Texas
Loans secured by real estate:
Construction, land development and other land loans	$	519,263	$	6,976	$	81,982	$	260,588	$	46,453	$	123,264
Secured by 1-4 family residential properties		1,414,871		1,876		48,361		1,205,131		137,289		22,214
Secured by nonfarm, nonresidential properties		1,406,930		7,456		151,360		747,660		155,089		345,365
Other real estate secured		192,568		3,885		5,508		145,885		9,888		27,402
Commercial and industrial loans		1,169,327		9,207		11,730		776,215		96,661		275,514
Consumer loans		160,318		5,766		2,460		131,823		17,579		2,690
Other loans		714,105		9,023		24,968		579,980		31,496		68,638
Loans	$	5,577,382	$	44,189	$	326,369	$	3,847,282	$	494,455	$	865,087
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	48,459	$	252	$	31,247	$	13,055	$	888	$	3,017
Development		72,660		-		9,148		42,729		4,216		16,567
Unimproved land		142,970		1,985		39,055		62,371		15,419		24,140
1-4 family construction		81,058		3,337		2,532		56,507		1,520		17,162
Other construction		174,116		1,402		-		85,926		24,410		62,378
Construction, land development and other land loans	$	519,263	$	6,976	$	81,982	$	260,588	$	46,453	$	123,264
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	147,926	$	575	$	40,289	$	56,413	$	18,806	$	31,843
Office		178,142		2,205		35,442		88,632		6,987		44,876
Nursing homes/assisted living		100,307		-		-		91,651		4,527		4,129
Hotel/motel		64,430		-		853		29,094		25,208		9,275
Industrial		54,172		703		8,823		12,785		144		31,717
Health care		20,154		213		-		10,827		113		9,001
Convenience stores		9,169		-		-		5,988		744		2,437
Other		153,903		2,667		20,854		72,510		4,802		53,070
Total income producing loans		728,203		6,363		106,261		367,900		61,331		186,348
Owner-occupied:
Office		105,474		396		14,594		63,427		3,742		23,315
Churches		80,270		-		3,143		43,397		26,206		7,524
Industrial warehouses		95,028		213		3,224		44,435		3,312		43,844
Health care		105,630		-		14,058		60,635		15,491		15,446
Convenience stores		59,769		-		1,698		35,335		3,764		18,972
Retail		36,763		-		3,737		24,859		3,076		5,091
Restaurants		30,817		-		889		23,572		4,606		1,750
Auto dealerships		13,876		-		333		11,721		1,772		50
Other		151,100		484		3,423		72,379		31,789		43,025
Total owner-occupied loans		678,727		1,093		45,099		379,760		93,758		159,017
Loans secured by nonfarm, nonresidential properties	$	1,406,930	$	7,456	$	151,360	$	747,660	$	155,089	$	345,365
(1) Excludes acquired loans.

Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities

The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:

	Quarter Ended					Six Months Ended
	6/30/2013	3/31/2013	12/31/2012	9/30/2012	6/30/2012	6/30/2013	6/30/2012
Securities – taxable	2.24%	2.33%	2.44%	2.60%	2.94%	2.28%	3.04%
Securities – nontaxable	4.31%	4.44%	4.39%	4.43%	4.49%	4.38%	4.56%
Securities – total	2.35%	2.45%	2.58%	2.73%	3.06%	2.40%	3.15%
Loans - LHFI & LHFS	4.74%	4.76%	4.77%	4.90%	4.94%	4.75%	5.00%
Acquired loans	8.48%	8.93%	13.75%	13.52%	12.23%	8.64%	12.28%
Loans - total	5.29%	5.14%	4.98%	5.12%	5.14%	5.22%	5.16%
FF sold & rev repo	0.29%	0.25%	0.41%	0.36%	0.38%	0.27%	0.30%
Other earning assets	4.29%	4.15%	4.30%	4.25%	4.56%	4.22%	4.20%
Total earning assets	4.28%	4.26%	4.23%	4.39%	4.52%	4.27%	4.56%
Interest-bearing deposits	0.28%	0.30%	0.35%	0.39%	0.43%	0.29%	0.47%
FF pch & repo	0.11%	0.12%	0.14%	0.14%	0.20%	0.12%	0.18%
Other borrowings	3.13%	3.03%	2.72%	2.79%	2.85%	3.08%	2.87%
Total interest-bearing liabilities	0.34%	0.37%	0.41%	0.45%	0.50%	0.36%	0.52%
Net interest margin	4.02%	3.98%	3.94%	4.06%	4.15%	4.00%	4.17%
Net interest margin excluding acquired loans	3.55%	3.66%	3.77%	3.89%	4.00%	3.60%	4.05%

Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans.

The net interest margin expanded 4 basis points during the second quarter of 2013 primarily due to the significant increase in average acquired loans as well as a favorable decline in the cost of interest-bearing liabilities. The net interest margin excluding acquired loans compressed 11 basis points as earning assets continued to reprice at lower rates, which was partially offset by lower deposit costs.

During the second quarter of 2013, the yield on average acquired loans includes approximately $6.5 million in recoveries, or an annualized 2.66% of the average acquired loan balance. Approximately $3.0 million of the recoveries occurred from pay-offs of acquired covered loans, which contributed to the write-down of the indemnification asset as provided in Note 6 – Other Noninterest Income and Expense.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net positive ineffectiveness of $121 thousand and $172 thousand for the quarters ended June 30, 2013 and 2012, respectively.

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:

	Quarter Ended															Six Months Ended
		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012			6/30/2013			6/30/2012
Mortgage servicing income, net	$	4,385		$	4,267		$	4,441		$	3,984		$	3,891		$	8,652		$	7,777
Change in fair value-MSR from runoff		(2,756	)		(2,460	)		(2,631	)		(2,751	)		(2,320	)		(5,216	)		(4,426	)
Gain on sales of loans, net		7,597			10,165			12,034			9,114			6,302			17,762			12,771
Other, net		(1,052	)		(1,649	)		(1,789	)		2,608			3,139			(2,701	)		3,203
Mortgage banking income before hedge ineffectiveness		8,174			10,323			12,055			12,955			11,012			18,497			19,325
Change in fair value-MSR from market changes		6,467			1,127			(418	)		(3,282	)		(5,926	)		7,594			(5,678	)
Change in fair value of derivatives		(6,346	)		133			(306	)		1,477			6,098			(6,213	)		4,832
Net positive (negative) hedge ineffectiveness		121			1,260			(724	)		(1,805	)		172			1,381			(846	)
Mortgage banking, net	$	8,295		$	11,583		$	11,331		$	11,150		$	11,184		$	19,878		$	18,479

During the first quarter of 2013, Trustmark exercised its option to repurchase delinquent loans serviced for GNMA. These loans were subsequently sold to a third party under different repurchase provisions. Trustmark retained the servicing for these loans, which are fully guaranteed by FHA/VA. As a result of this repurchase and sale, the loans are no longer carried as "LHFS-Guaranteed GNMA serviced loans" (see pages 3 and 6). The transaction resulted in a gain of $534 thousand, which was recorded during the first quarter of 2013 and is included in the table above as "Gain on sales of loans, net.”

Note 6 – Other Noninterest Income and Expense

Other noninterest income consisted of the following for the periods presented ($ in thousands):

	Quarter Ended															Six Months Ended
		6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012			6/30/2013			6/30/2012
Partnership amortization for tax credit purposes	$	(2,221	)	$	(2,117	)	$	(3,202	)	$	(2,302	)	$	(1,491	)	$	(4,338	)	$	(2,913	)
Bargain purchase gain on acquisition		-			-			-			-			881			-			3,635
Decrease in FDIC indemnification asset		(2,317	)		(1,365	)		(743	)		(609	)		(2,289	)		(3,682	)		(2,370	)
Other miscellaneous income		2,393			2,291			1,938			3,423			1,749			4,684			4,256
Total other, net	$	(2,145	)	$	(1,191	)	$	(2,007	)	$	512		$	(1,150	)	$	(3,336	)	$	2,608

Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits or historical tax credits). These investments are recorded based on the equity method of accounting, which requires the equity in partnership losses to be recognized when incurred and are recorded as a reduction in other income. The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.

As previously mentioned in Note 1 – Business Combinations, during the second quarter of 2012, the bargain purchase gain for Bay Bank was increased $881 thousand from $2.8 million that was recorded during the first quarter of 2012, as the fair values associated with the Bay Bank acquisition were finalized. In addition, during the second quarter of 2013, other noninterest income included a write-down of the FDIC indemnification asset of $2.3 million on acquired covered loans obtained from Heritage as a result of loan payoffs and improved cash flow projections and lower loss expectations for loan pools.

During the third quarter of 2012, Trustmark completed the sale of the Performance Funds by Trustmark Investment Advisors, Inc. (TIA) to Federated Investors, Inc. (Federated) and certain of Federated’s subsidiaries, pursuant to the terms of the previously announced definitive agreement between Federated, TIA, and TNB. The sale resulted in a gain of $1.2 million for Trustmark, which was recorded as other miscellaneous income.

Other noninterest expense consisted of the following for the periods presented ($ in thousands):

	Quarter Ended										Six Months Ended
		6/30/2013		3/31/2013		12/31/2012		9/30/2012		6/30/2012		6/30/2013		6/30/2012
Loan expense	$	4,267	$	2,995	$	3,274	$	3,150	$	8,299	$	7,262	$	13,824
Non-routine transaction expenses on acquisition		-		7,920		-		-		-		7,920		1,917
Amortization of intangibles		2,472		1,442		1,022		1,028		1,028		3,914		1,738
Other miscellaneous expense		11,832		5,694		6,158		6,221		5,572		17,526		10,488
Total other expense	$	18,571	$	18,051	$	10,454	$	10,399	$	14,899	$	36,622	$	27,967

Other miscellaneous expense increased during the second quarter of 2013 due to a non-routine litigation expense of $4.0 million related to a proposed settlement on Trustmark’s overdraft fees for insufficient funds on debit card purchases and ATM withdrawals as previously disclosed in the Form 8-K filed on June 26, 2013.

As previously mentioned in Note 1 – Business Combinations, during the first quarter of 2013, Trustmark incurred $7.9 million of non-routine BancTrust transaction expenses in other noninterest expense. These non-routine transaction expenses include $2.2 million of professional fees and $5.7 million of contract termination and other expenses.

During the second quarter of 2012, Trustmark updated its quarterly analysis of mortgage loan putback exposure. This analysis, along with recent trends of increased mortgage loan putback activity in the mortgage industry, resulted in Trustmark providing an additional reserve of approximately $4.0 million in loan expense in the second quarter of 2012. At June 30, 2013, the reserve for mortgage loan servicing putback expenses totaled $5.9 million. Notwithstanding significant changes in future behaviors and the demand patterns of investors, Trustmark believes that it is appropriately reserved for potential mortgage loan putback requests.

Note 7 – Non-GAAP Financial Measures

In addition to capital ratios defined by GAAP and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.

Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations.

These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.

Note 7 - Non-GAAP Financial Measures (continued)
		Quarter Ended															Six Months Ended
			6/30/2013			3/31/2013			12/31/2012			9/30/2012			6/30/2012			6/30/2013			6/30/2012
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' common equity		$	1,344,360		$	1,325,508		$	1,288,222		$	1,273,605		$	1,255,716		$	1,334,986		$	1,242,109
Less:Goodwill			(366,592	)		(324,902	)		(291,104	)		(291,104	)		(291,104	)		(345,862	)		(291,104	)
Identifiable intangible assets			(48,402	)		(35,187	)		(17,933	)		(18,971	)		(17,762	)		(41,831	)		(16,233	)
Total average tangible common equity		$	929,366		$	965,419		$	979,185		$	963,530		$	946,850		$	947,293		$	934,772
PERIOD END BALANCES
Total shareholders' common equity		$	1,326,819		$	1,352,946		$	1,287,369		$	1,278,015		$	1,258,495
Less:Goodwill			(368,315	)		(366,366	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(46,889	)		(49,361	)		(17,306	)		(18,327	)		(19,356	)
Total tangible common equity	(a)	$	911,615		$	937,219		$	978,959		$	968,584		$	948,035
TANGIBLE ASSETS
Total assets		$	11,863,312		$	11,850,515		$	9,828,667		$	9,872,159		$	9,890,846
Less:Goodwill			(368,315	)		(366,366	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(46,889	)		(49,361	)		(17,306	)		(18,327	)		(19,356	)
Total tangible assets	(b)	$	11,448,108		$	11,434,788		$	9,520,257		$	9,562,728		$	9,580,386
Risk-weighted assets	(c)	$	7,878,281		$	7,862,884		$	6,723,259		$	6,684,820		$	6,631,887
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders		$	31,121		$	24,866		$	27,710		$	29,904		$	29,349		$	55,987		$	59,669
Plus:Intangible amortization net of tax			1,526			890			631			635			635			2,416			1,073
Net income adjusted for intangible amortization		$	32,647		$	25,756		$	28,341		$	30,539		$	29,984		$	58,403		$	60,742
Period end common shares outstanding	(d)		67,163,195			67,151,087			64,820,414			64,779,937			64,775,694
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity ^1			14.09	%		10.82	%		11.51	%		12.61	%		12.74	%		12.43	%		13.07	%
Tangible common equity/tangible assets	(a)/(b)		7.96	%		8.20	%		10.28	%		10.13	%		9.90	%
Tangible common equity/risk-weighted assets	(a)/(c)		11.57	%		11.92	%		14.56	%		14.49	%		14.30	%
Tangible common book value	(a)/(d)*1,000	$	13.57		$	13.96		$	15.10		$	14.95		$	14.64
TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity		$	1,326,819		$	1,352,946		$	1,287,369		$	1,278,015		$	1,258,495
Eliminate qualifying AOCI			36,088			(5,709	)		(3,395	)		(7,248	)		(3,654	)
Qualifying tier 1 capital			60,000			93,000			60,000			60,000			60,000
Disallowed goodwill			(368,315	)		(366,366	)		(291,104	)		(291,104	)		(291,104	)
Adj to goodwill allowed for deferred taxes			13,740			13,388			13,035			12,683			12,330
Other disallowed intangibles			(46,889	)		(49,361	)		(17,306	)		(18,327	)		(19,356	)
Disallowed servicing intangible			(6,038	)		(5,153	)		(4,734	)		(4,421	)		(4,358	)
Disallowed deferred taxes			(26,411	)		(12,575	)		-			-			-
Total tier 1 capital		$	988,994		$	1,020,170		$	1,043,865		$	1,029,598		$	1,012,353
Less:Qualifying tier 1 capital			(60,000	)		(93,000	)		(60,000	)		(60,000	)		(60,000	)
Total tier 1 common capital	(e)	$	928,994		$	927,170		$	983,865		$	969,598		$	952,353
Tier 1 common risk-based capital ratio	(e)/(c)		11.79	%		11.79	%		14.63	%		14.50	%		14.36	%
^1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity