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

Results include impact of BancTrust merger from acquisition date

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $24.9 million in the first quarter of 2013, which resulted in diluted earnings per share of $0.38. Included in first quarter results were non-routine merger costs that reduced after-tax net income by $5.8 million, or approximately $0.08 per diluted share. Excluding these non-routine merger costs, net income available to common shareholders totaled $30.6 million, or $0.46 per diluted share, in the first quarter of 2013. Trustmark’s performance during the first three months of 2013 produced a return on average tangible common equity of 10.82%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable June 15, 2013, to shareholders of record on June 1, 2013.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50615704&lang=en

On February 15, 2013, Trustmark completed its previously announced merger with BancTrust Financial Group, Inc. (“BancTrust”), headquartered in Mobile, Alabama. The results of the merger are reflected in Trustmark’s financial information from the date of acquisition. As of March 31, 2013, acquired loans and deposits from BancTrust totaled $929.1 million and $1.7 billion, respectively. During the first quarter of 2013, revenue attributable to BancTrust totaled $9.4 million while net income, excluding non-routine merger charges, totaled $2.0 million.

Gerard R. Host, President and CEO, stated, “Trustmark experienced a great start to the year as indicated by our solid financial results in the first quarter and the successful completion of the largest merger in our history. During the first quarter, total revenue increased 6.6% to $133.3 million due to the continued strong performance of our banking, mortgage banking, wealth management, and insurance businesses while credit quality continued to experience significant improvements, as evidenced by reduced net charge-offs and provisioning.”

“During the quarter, we welcomed the customers and associates of BancTrust to the Trustmark family. With the completion of the merger, the Trustmark franchise expanded to attractive Alabama markets, including Mobile, Montgomery and Selma, as well as increased in scale within our existing Florida markets. This merger, which is meaningfully accretive to earnings per share, provides significant opportunity to generate additional revenue by delivering Trustmark’s full suite of banking, mortgage, wealth management and insurance services to these new markets. We have successfully completed operational conversion of all banking systems and are able to provide our customers the convenience and service they expect through 220 offices across our five-state franchise. Thanks to our dedicated associates, solid profitability and strong capital base, we are well-positioned to continue providing value for our customers and shareholders,” said Host.

Credit Quality

• Significant reduction in classified and criticized loan balances
• Excluding other real estate acquired from BancTrust, nonperforming assets declined to lowest level in 17 quarters
• Improved credit quality reflected in reduced net charge-offs and provisioning

Nonperforming loans totaled $83.3 million at March 31, 2013, an increase of 1.2% from the prior quarter and a decline of 21.2% from the prior year. Foreclosed other real estate increased $40.2 million, or 51.4% from the prior quarter, and $42.7 million, or 56.3% from the prior year, to total $118.4 million, of which $41.2 million was attributable to the BancTrust merger. Excluding other real estate from the BancTrust merger, other real estate declined $951 thousand, or 1.2%, from the prior quarter. Collectively, nonperforming assets totaled $201.7 million at March 31, 2013, an increase of 25.6% from prior quarter and 11.1% from levels one year earlier.

During the first quarter, recoveries exceeded charge-offs, resulting in a net recovery of $1.1 million, which represented -0.08% of average loans, excluding acquired loans. This compares to net charge-offs of $4.3 million, or 0.29% of average loans, in the prior quarter and $1.9 million, or 0.13% of average loans, one year earlier. During the first quarter of 2013, Trustmark’s provision for loan losses for loans held for investment was a negative $3.0 million as a result of the net recovery position and improved credit quality. During the first quarter, Trustmark experienced a decline of $19.7 million, or 7.8%, in classified loans and a decline of $15.0 million, or 4.6%, in criticized loans relative to the prior quarter. Relative to figures one year earlier, classified loan balances decreased $76.9 million, or 24.7%, while criticized loan balances decreased $86.2 million, or 21.6%.

Allocation of Trustmark’s $76.9 million allowance for loan losses represented 1.56% of commercial loans and 0.98% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.40% at March 31, 2013, which represents a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 145.8% 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

• Average earning assets increased $736.6 million to $9.4 billion
• Net interest income (FTE) totaled $92.6 million, resulting in 3.98% NIM

During the first quarter total loans, including held for investment and acquired loans, increased $798.8 million to total $6.5 billion; this growth included acquired loans from BancTrust. Loans held for investment totaled $5.5 billion, down $118.4 million from the prior quarter due to the planned runoff of $124.6 million in the 1-4 family mortgage portfolio. As previously indicated, Trustmark elected to sell the majority of these lower-rate, longer-term mortgages in the secondary market rather than replace runoff in this portfolio.

Commercial and industrial loans increased $37.3 million during the quarter, reflecting growth in Trustmark’s Texas, Tennessee and Alabama markets of $15.7 million, $15.0 million and $6.2 million, respectively. Construction and land development loans increased $16.4 million during the quarter, reflecting growth in Trustmark’s Alabama, Mississippi, Tennessee and Texas markets.

Deposits totaled $9.9 billion at March 31, 2013, an increase of $2.0 billion from the prior quarter. Approximately $1.7 billion of this growth was attributable to the BancTrust merger with the balance in growth occurring across Trustmark’s legacy franchise. At March 31, 2013, noninterest-bearing deposits totaled $2.5 billion to represent 25.6% of deposits.

During the first quarter of 2013, average earning assets increased $736.6 million to $9.4 billion, driven by growth in both the loan and investment portfolios. Average total loans increased $346.7 million to $6.3 billion while average investment securities expanded $388.5 million to $3.1 billion. Average deposits increased $1.0 billion from the prior quarter to total $8.8 billion.

Net interest income (FTE) in the first quarter totaled $92.6 million, resulting in a four basis point expansion of the net interest margin to 3.98%. This increase from the prior quarter was attributable to the addition of higher yielding acquired loans from the BancTrust merger. The net interest margin excluding acquired loans was 3.66%, a decline of 11 basis points from the prior quarter. This reduction in margin was primarily attributable to a decline in yield on securities that was partially offset by a modest reduction in the cost of interest-bearing deposits.

Capital Strength

• Maintained strong capital base upon completion of BancTrust merger
• Tangible common equity to tangible assets ratio of 8.20%
• Total risk-based capital ratio of 14.52%

Trustmark’s total common equity was $1.35 billion at March 31, 2013, up $65.6 million from December 31, 2012. This increase included the issuance of 2.24 million common shares valued at $53.5 million as consideration in the BancTrust merger. During the quarter, goodwill and identifiable intangible assets increased $107.3 million principally due to the acquisition; as a result, tangible common equity totaled $937.2 million at March 31, 2013.

At March 31, 2013, Trustmark’s tangible common equity to tangible assets ratio was 8.20% while the total risk-based capital ratio was 14.52%, 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

• Noninterest income expanded to $44.3 million, represented 33.3% of total revenue in first quarter
• Mortgage banking, wealth management and insurance revenue increased
• BancTrust merger contributed approximately $2.0 million to noninterest income

Trustmark continued to achieve solid financial results from its diversified financial services businesses. Mortgage loan production in the first quarter totaled $392.1 million, down 20.8% from the prior quarter and 5.5% from levels one year earlier, due principally to the decline in refinancing activity following an extended low interest rate environment. Despite a decline from record mortgage production levels, the profitability of Trustmark’s mortgage banking unit increased 2.2% from the prior quarter to $11.6 million. This level of performance reflected stable mortgage servicing income, significant secondary marketing gains and effective mortgage servicing hedging strategies.

Insurance revenue totaled $7.2 million, an increase of 5.2% from the prior quarter and 9.6% relative to figures one year earlier due to expanded business development efforts as well as the continued firming of insurance rates. Wealth Management income totaled $6.9 million in the first quarter, an increase of $694 thousand, or 11.2%, from the prior quarter; BancTrust contributed approximately $576 thousand of the increase during the quarter.

Service charges on deposit accounts totaled $11.7 million in the first quarter, reflecting a seasonal decline from the prior quarter, and included a $498 thousand contribution from BancTrust. Bank card and other fees totaled $7.9 million in the first quarter and included contributions from BancTrust of approximately $461 thousand. Excluding the contributions of BancTrust, bank card and other fees declined $495 thousand reflecting a seasonal decline from the previous quarter. Other income totaled a negative $1.2 million compared to a negative $2.0 million for the prior quarter and can be attributed to a reduction in the amortization of partnership interest for tax credits during the quarter of $1.1 million.

Noninterest Expense

• Noninterest expense, excluding merger-related expenses of $9.4 million, totaled $92.8 million
• Merger-related efficiencies will continue to be realized throughout 2013

Noninterest expense in the first quarter totaled $102.1 million and included non-routine merger- related expense of $9.4 million as well as operating expenses for BancTrust of approximately $6.7 million. Excluding these two items, noninterest expense totaled $86.1 million, a decline of $1.2 million from the prior quarter. Further adjustment to exclude ORE and foreclosure expense result in noninterest expense of $82.6 million in the first quarter, a decline of $1.5 million from comparable figures in the prior quarter.

Salaries and employee benefits expense totaled $53.6 million in the first quarter, including BancTrust-related expense of $4.9 million (including severance and change in control payments of $1.4 million). Excluding BancTrust-related expense, salaries and employee benefits expense totaled $48.7 million in the first quarter of 2013, down $1.0 million, or 2.1%, from the prior quarter. Other expense totaled $18.1 million and included merger-related expense of $7.9 million, as well as other operating expense of $917 thousand related to BancTrust. Excluding these merger-related expenses, other expense declined $1.2 million, or 11.9%, relative to the prior quarter due to reductions in mortgage loan-related expense.

In March 2013, BancTrust’s operating systems were successfully converted to Trustmark’s banking platform. Additional consolidation and cost reduction opportunities will be realized during the course of the year in a manner designed to preserve customer relationships and maintain customer service.

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 will be consolidated in early May as a result of the BancTrust merger; following these consolidations, Trustmark will have 17 convenient locations in the Bay, Okaloosa and Walton County area. Trustmark also announced plans to expand in the Oxford, Mississippi market with the purchase of two branch offices and the assumption of selected deposit accounts of approximately $11.8 million from SOUTHBank, F.S.B. This transaction, which is subject to regulatory approval and customary closing conditions, is expected to be completed during the summer of 2013. Trustmark is committed to investments to support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, April 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 Wednesday, May 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 220 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
March 31, 2013
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES		3/31/2013			12/31/2012			3/31/2012		$	Change		% Change		$	Change		% Change
Securities AFS-taxable	$	2,836,051		$	2,466,738		$	2,327,572		$	369,313		15.0	%	$	508,479		21.8	%
Securities AFS-nontaxable		167,773			169,906			160,870			(2,133	)	-1.3	%		6,903		4.3	%
Securities HTM-taxable		48,632			26,510			33,270			22,122		83.4	%		15,362		46.2	%
Securities HTM-nontaxable		16,648			17,443			21,598			(795	)	-4.6	%		(4,950	)	-22.9	%
Total securities		3,069,104			2,680,597			2,543,310			388,507		14.5	%		525,794		20.7	%
Loans (including loans held for sale)		5,741,340			5,834,525			6,014,133			(93,185	)	-1.6	%		(272,793	)	-4.5	%
Acquired loans:
Noncovered loans		530,643			82,317			19,931			448,326		n/m			510,712		n/m
Covered loans		49,815			58,272			75,612			(8,457	)	-14.5	%		(25,797	)	-34.1	%
Fed funds sold and rev repos		6,618			8,747			9,568			(2,129	)	-24.3	%		(2,950	)	-30.8	%
Other earning assets		34,661			31,168			34,102			3,493		11.2	%		559		1.6	%
Total earning assets		9,432,181			8,695,626			8,696,656			736,555		8.5	%		735,525		8.5	%
Allowance for loan losses		(86,447	)		(88,715	)		(92,062	)		2,268		-2.6	%		5,615		-6.1	%
Cash and due from banks		270,740			238,976			232,139			31,764		13.3	%		38,601		16.6	%
Other assets		1,183,493			972,748			918,273			210,745		21.7	%		265,220		28.9	%
Total assets	$	10,799,967		$	9,818,635		$	9,755,006		$	981,332		10.0	%	$	1,044,961		10.7	%
Interest-bearing demand deposits	$	1,703,336		$	1,545,967		$	1,545,045		$	157,369		10.2	%	$	158,291		10.2	%
Savings deposits		2,767,747			2,275,569			2,339,166			492,178		21.6	%		428,581		18.3	%
Time deposits less than $100,000		1,268,619			1,120,735			1,190,888			147,884		13.2	%		77,731		6.5	%
Time deposits of $100,000 or more		893,104			760,363			825,214			132,741		17.5	%		67,890		8.2	%
Total interest-bearing deposits		6,632,806			5,702,634			5,900,313			930,172		16.3	%		732,493		12.4	%
Fed funds purchased and repos		266,958			388,007			437,270			(121,049	)	-31.2	%		(170,312	)	-38.9	%
Short-term borrowings		66,999			85,313			84,797			(18,314	)	-21.5	%		(17,798	)	-21.0	%
Long-term FHLB advances		4,580			-			-			4,580		n/m			4,580		n/m
Subordinated notes		49,874			49,866			49,842			8		0.0	%		32		0.1	%
Junior subordinated debt securities		77,989			61,856			61,856			16,133		26.1	%		16,133		26.1	%
Total interest-bearing liabilities		7,099,206			6,287,676			6,534,078			811,530		12.9	%		565,128		8.6	%
Noninterest-bearing deposits		2,199,043			2,115,784			1,869,758			83,259		3.9	%		329,285		17.6	%
Other liabilities		176,210			126,953			122,668			49,257		38.8	%		53,542		43.6	%
Total liabilities		9,474,459			8,530,413			8,526,504			944,046		11.1	%		947,955		11.1	%
Shareholders' equity		1,325,508			1,288,222			1,228,502			37,286		2.9	%		97,006		7.9	%
Total liabilities and equity	$	10,799,967		$	9,818,635		$	9,755,006		$	981,332		10.0	%	$	1,044,961		10.7	%
										Linked Quarter					Year over Year
PERIOD END BALANCES		3/31/2013			12/31/2012			3/31/2012		$	Change		% Change		$	Change		% Change
Cash and due from banks	$	242,896		$	231,489		$	213,500		$	11,407		4.9	%	$	29,396		13.8	%
Fed funds sold and rev repos		5,926			7,046			6,301			(1,120	)	-15.9	%		(375	)	-6.0	%
Securities available for sale		3,546,083			2,657,745			2,595,664			888,338		33.4	%		950,419		36.6	%
Securities held to maturity		73,666			42,188			52,010			31,478		74.6	%		21,656		41.6	%
Loans held for sale (LHFS)		207,758			257,986			227,449			(50,228	)	-19.5	%		(19,691	)	-8.7	%
Loans held for investment (LHFI)		5,474,396			5,592,754			5,774,753			(118,358	)	-2.1	%		(300,357	)	-5.2	%
Allowance for loan losses		(76,900	)		(78,738	)		(90,879	)		1,838		-2.3	%		13,979		-15.4	%
Net LHFI		5,397,496			5,514,016			5,683,874			(116,520	)	-2.1	%		(286,378	)	-5.0	%
Acquired loans:
Noncovered loans		1,003,127			81,523			100,669			921,604		n/m			902,458		n/m
Covered loans		47,589			52,041			74,419			(4,452	)	-8.6	%		(26,830	)	-36.1	%
Allowance for loan losses, acquired loans		(6,458	)		(6,075	)		(773	)		(383	)	6.3	%		(5,685	)	n/m
Net acquired loans		1,044,258			127,489			174,315			916,769		n/m			869,943		n/m
Net LHFI and acquired loans		6,441,754			5,641,505			5,858,189			800,249		14.2	%		583,565		10.0	%
Premises and equipment, net		210,789			154,841			156,158			55,948		36.1	%		54,631		35.0	%
Mortgage servicing rights		51,529			47,341			45,893			4,188		8.8	%		5,636		12.3	%
Goodwill		366,366			291,104			291,104			75,262		25.9	%		75,262		25.9	%
Identifiable intangible assets		49,361			17,306			18,821			32,055		n/m			30,540		n/m
Other real estate, excluding covered other real estate		118,406			78,189			75,742			40,217		51.4	%		42,664		56.3	%
Covered other real estate		5,879			5,741			5,824			138		2.4	%		55		0.9	%
FDIC indemnification asset		20,198			21,774			28,260			(1,576	)	-7.2	%		(8,062	)	-28.5	%
Other assets		509,904			374,412			356,678			135,492		36.2	%		153,226		43.0	%
Total assets	$	11,850,515		$	9,828,667		$	9,931,593		$	2,021,848		20.6	%	$	1,918,922		19.3	%
Deposits:
Noninterest-bearing	$	2,534,287		$	2,254,211		$	2,024,290		$	280,076		12.4	%	$	509,997		25.2	%
Interest-bearing		7,375,144			5,642,306			6,066,456			1,732,838		30.7	%		1,308,688		21.6	%
Total deposits		9,909,431			7,896,517			8,090,746			2,012,914		25.5	%		1,818,685		22.5	%
Fed funds purchased and repos		219,769			288,829			254,878			(69,060	)	-23.9	%		(35,109	)	-13.8	%
Short-term borrowings		46,325			86,920			82,023			(40,595	)	-46.7	%		(35,698	)	-43.5	%
Long-term FHLB advances		10,969			-			-			10,969		n/m			10,969		n/m
Subordinated notes		49,879			49,871			49,847			8		0.0	%		32		0.1	%
Junior subordinated debt securities		94,856			61,856			61,856			33,000		53.3	%		33,000		53.3	%
Other liabilities		166,340			157,305			150,723			9,035		5.7	%		15,617		10.4	%
Total liabilities		10,497,569			8,541,298			8,690,073			1,956,271		22.9	%		1,807,496		20.8	%
Common stock		13,992			13,506			13,494			486		3.6	%		498		3.7	%
Capital surplus		342,233			285,905			282,388			56,328		19.7	%		59,845		21.2	%
Retained earnings		991,012			984,563			944,101			6,449		0.7	%		46,911		5.0	%
Accum other comprehensive
income, net of tax		5,709			3,395			1,537			2,314		68.2	%		4,172		n/m
Total shareholders' equity		1,352,946			1,287,369			1,241,520			65,577		5.1	%		111,426		9.0	%
Total liabilities and equity	$	11,850,515		$	9,828,667		$	9,931,593		$	2,021,848		20.6	%	$	1,918,922		19.3	%
n/m - percentage changes greater than +/- 100% are considered not meaningful

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
March 31, 2013
($ in thousands except per share data)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
INCOME STATEMENTS		3/31/2013			12/31/2012			3/31/2012		$	Change		% Change		$	Change		% Change
Interest and fees on LHFS & LHFI-FTE	$	67,412		$	69,989		$	75,781		$	(2,577	)	-3.7	%	$	(8,369	)	-11.0	%
Interest and fees on acquired loans		12,782			4,859			2,937			7,923		n/m			9,845		n/m
Interest on securities-taxable		16,539			15,305			18,384			1,234		8.1	%		(1,845	)	-10.0	%
Interest on securities-tax exempt-FTE		2,018			2,066			2,102			(48	)	-2.3	%		(84	)	-4.0	%
Interest on fed funds sold and rev repos		4			9			6			(5	)	-55.6	%		(2	)	-33.3	%
Other interest income		355			337			330			18		5.3	%		25		7.6	%
Total interest income-FTE		99,110			92,565			99,540			6,545		7.1	%		(430	)	-0.4	%
Interest on deposits		4,909			5,061			7,353			(152	)	-3.0	%		(2,444	)	-33.2	%
Interest on fed funds pch and repos		81			140			171			(59	)	-42.1	%		(90	)	-52.6	%
Other interest expense		1,490			1,346			1,414			144		10.7	%		76		5.4	%
Total interest expense		6,480			6,547			8,938			(67	)	-1.0	%		(2,458	)	-27.5	%
Net interest income-FTE		92,630			86,018			90,602			6,612		7.7	%		2,028		2.2	%
Provision for loan losses, LHFI		(2,968	)		(535	)		3,293			(2,433	)	n/m			(6,261	)	n/m
Provision for loan losses, acquired loans		130			1,945			(194	)		(1,815	)	-93.3	%		324		n/m
Net interest income after provision-FTE		95,468			84,608			87,503			10,860		12.8	%		7,965		9.1	%
Service charges on deposit accounts		11,681			12,391			12,211			(710	)	-5.7	%		(530	)	-4.3	%
Insurance commissions		7,242			6,887			6,606			355		5.2	%		636		9.6	%
Wealth management		6,875			6,181			5,501			694		11.2	%		1,374		25.0	%
Bank card and other fees		7,945			7,978			7,364			(33	)	-0.4	%		581		7.9	%
Mortgage banking, net		11,583			11,331			7,295			252		2.2	%		4,288		58.8	%
Other, net		(1,191	)		(2,007	)		3,758			816		-40.7	%		(4,949	)	n/m
Nonint inc-excl sec gains (losses), net		44,135			42,761			42,735			1,374		3.2	%		1,400		3.3	%
Security gains (losses), net		204			18			1,050			186		n/m			(846	)	-80.6	%
Total noninterest income		44,339			42,779			43,785			1,560		3.6	%		554		1.3	%
Salaries and employee benefits		53,592			49,724			46,432			3,868		7.8	%		7,160		15.4	%
Services and fees		13,032			12,572			10,747			460		3.7	%		2,285		21.3	%
Net occupancy-premises		5,955			5,023			4,938			932		18.6	%		1,017		20.6	%
Equipment expense		5,674			5,288			4,912			386		7.3	%		762		15.5	%
FDIC assessment expense		2,021			1,075			1,775			946		88.0	%		246		13.9	%
ORE/Foreclosure expense		3,820			3,173			3,902			647		20.4	%		(82	)	-2.1	%
Other expense		18,051			10,454			13,068			7,597		72.7	%		4,983		38.1	%
Total noninterest expense		102,145			87,309			85,774			14,836		17.0	%		16,371		19.1	%
Income before income taxes and tax eq adj		37,662			40,078			45,514			(2,416	)	-6.0	%		(7,852	)	-17.3	%
Tax equivalent adjustment		3,655			3,699			3,658			(44	)	-1.2	%		(3	)	-0.1	%
Income before income taxes		34,007			36,379			41,856			(2,372	)	-6.5	%		(7,849	)	-18.8	%
Income taxes		9,141			8,669			11,536			472		5.4	%		(2,395	)	-20.8	%
Net income available to common shareholders	$	24,866		$	27,710		$	30,320		$	(2,844	)	-10.3	%	$	(5,454	)	-18.0	%
Per common share data
Earnings per share - basic	$	0.38		$	0.43		$	0.47		$	(0.05	)	-11.6	%	$	(0.09	)	-19.1	%
Earnings per share - diluted	$	0.38		$	0.43		$	0.47		$	(0.05	)	-11.6	%	$	(0.09	)	-19.1	%
Dividends per share	$	0.23		$	0.23		$	0.23		$	-		0.0	%	$	-		0.0	%
Weighted average common shares outstanding
Basic		65,983,204			64,785,457			64,297,038
Diluted		66,149,656			65,007,281			64,477,277
Period end common shares outstanding		67,151,087			64,820,414			64,765,581
OTHER FINANCIAL DATA
Return on common equity		7.61	%		8.56	%		9.93	%
Return on average tangible common equity		10.82	%		11.51	%		13.41	%
Return on assets		0.93	%		1.12	%		1.25	%
Interest margin - Yield - FTE		4.26	%		4.23	%		4.60	%
Interest margin - Cost		0.28	%		0.30	%		0.41	%
Net interest margin - FTE		3.98	%		3.94	%		4.19	%
Efficiency ratio (1)		67.84	%		67.80	%		63.70	%
Full-time equivalent employees		3,164			2,666			2,611
COMMON STOCK PERFORMANCE
Market value-Close	$	25.01		$	22.46		$	24.98
Common book value	$	20.15		$	19.86		$	19.17
Tangible common book value	$	13.96		$	15.10		$	14.38
(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

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
March 31, 2013
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)		3/31/2013			12/31/2012			3/31/2012		$	Change		% Change		$	Change		% Change
Nonaccrual loans
Alabama	$	-		$	-		$	-		$	-		n/m		$	-		n/m
Florida		14,046			19,314			22,174			(5,268	)	-27.3	%		(8,128	)	-36.7	%
Mississippi (2)		46,697			38,960			48,648			7,737		19.9	%		(1,951	)	-4.0	%
Tennessee (3)		4,877			8,401			13,972			(3,524	)	-41.9	%		(9,095	)	-65.1	%
Texas		17,702			15,688			20,979			2,014		12.8	%		(3,277	)	-15.6	%
Total nonaccrual loans		83,322			82,363			105,773			959		1.2	%		(22,451	)	-21.2	%
Other real estate
Alabama		28,870			-			-			28,870		n/m			28,870		n/m
Florida		30,662			18,569			26,226			12,093		65.1	%		4,436		16.9	%
Mississippi (2)		26,457			27,771			19,240			(1,314	)	-4.7	%		7,217		37.5	%
Tennessee (3)		18,339			17,589			17,665			750		4.3	%		674		3.8	%
Texas		14,078			14,260			12,611			(182	)	-1.3	%		1,467		11.6	%
Total other real estate		118,406			78,189			75,742			40,217		51.4	%		42,664		56.3	%
Total nonperforming assets	$	201,728		$	160,552		$	181,515		$	41,176		25.6	%	$	20,213		11.1	%
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	2,772		$	6,378		$	1,553		$	(3,606	)	-56.5	%	$	1,219		78.5	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	4,469		$	43,073		$	39,496		$	(38,604	)	-89.6	%	$	(35,027	)	-88.7	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (4)		3/31/2013			12/31/2012			3/31/2012		$	Change		% Change		$	Change		% Change
Beginning Balance	$	78,738		$	83,526		$	89,518		$	(4,788	)	-5.7	%	$	(10,780	)	-12.0	%
Provision for loan losses		(2,968	)		(535	)		3,293			(2,433	)	n/m			(6,261	)	n/m
Charge-offs		(3,325	)		(8,829	)		(5,376	)		5,504		-62.3	%		2,051		-38.2	%
Recoveries		4,455			4,576			3,444			(121	)	-2.6	%		1,011		29.4	%
Net recoveries (charge-offs)		1,130			(4,253	)		(1,932	)		5,383		n/m			3,062		n/m
Ending Balance	$	76,900		$	78,738		$	90,879		$	(1,838	)	-2.3	%	$	(13,979	)	-15.4	%
PROVISION FOR LOAN LOSSES (4)
Alabama	$	676		$	-		$	-		$	676		n/m		$	676		n/m
Florida		(3,675	)		(706	)		739			(2,969	)	n/m			(4,414	)	n/m
Mississippi (2)		(1,920	)		2,031			4,152			(3,951	)	n/m			(6,072	)	n/m
Tennessee (3)		(378	)		(1,037	)		(29	)		659		-63.5	%		(349	)	n/m
Texas		2,329			(823	)		(1,569	)		3,152		n/m			3,898		n/m
Total provision for loan losses	$	(2,968	)	$	(535	)	$	3,293		$	(2,433	)	n/m		$	(6,261	)	n/m
NET CHARGE-OFFS (4)
Alabama	$	11		$	-		$	-		$	11		n/m		$	11		n/m
Florida		(849	)		(237	)		1,495			(612	)	n/m			(2,344	)	n/m
Mississippi (2)		(290	)		874			251			(1,164	)	n/m			(541	)	n/m
Tennessee (3)		249			(43	)		223			292		n/m			26		11.7	%
Texas		(251	)		3,659			(37	)		(3,910	)	n/m			(214	)	n/m
Total net (recoveries) charge-offs	$	(1,130	)	$	4,253		$	1,932		$	(5,383	)	n/m		$	(3,062	)	n/m
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		-0.08	%		0.29	%		0.13	%
Provision for loan losses/average loans		-0.21	%		-0.04	%		0.22	%
Nonperforming loans/total loans (incl LHFS)		1.47	%		1.41	%		1.76	%
Nonperforming assets/total loans (incl LHFS)		3.55	%		2.74	%		3.02	%
Nonperforming assets/total loans (incl LHFS) +ORE		3.48	%		2.71	%		2.99	%
ALL/total loans (excl LHFS)		1.40	%		1.41	%		1.57	%
ALL-commercial/total commercial loans		1.56	%		1.59	%		1.97	%
ALL-consumer/total consumer and home mortgage loans		0.98	%		0.97	%		0.75	%
ALL/nonperforming loans		92.29	%		95.60	%		85.92	%
ALL/nonperforming loans - (excl impaired loans)		145.83	%		174.46	%		181.11	%
CAPITAL RATIOS
Common equity/total assets		11.42	%		13.10	%		12.50	%
Tangible common equity/tangible assets		8.20	%		10.28	%		9.68	%
Tangible common equity/risk-weighted assets		11.88	%		14.56	%		13.89	%
Tier 1 leverage ratio		9.94	%		10.97	%		10.55	%
Tier 1 common risk-based capital ratio		11.91	%		14.63	%		13.98	%
Tier 1 risk-based capital ratio		13.09	%		15.53	%		14.87	%
Total risk-based capital ratio		14.52	%		17.22	%		16.72	%
(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

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
March 31, 2013
($ in thousands)
(unaudited)
	Quarter Ended
AVERAGE BALANCES		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Securities AFS-taxable	$	2,836,051		$	2,466,738		$	2,409,292		$	2,341,475		$	2,327,572
Securities AFS-nontaxable		167,773			169,906			169,037			167,287			160,870
Securities HTM-taxable		48,632			26,510			28,333			30,136			33,270
Securities HTM-nontaxable		16,648			17,443			18,361			19,378			21,598
Total securities		3,069,104			2,680,597			2,625,023			2,558,276			2,543,310
Loans (including loans held for sale)		5,741,340			5,834,525			5,886,447			5,938,168			6,014,133
Acquired loans:
Noncovered loans		530,643			82,317			88,562			97,341			19,931
Covered loans		49,815			58,272			65,259			70,217			75,612
Fed funds sold and rev repos		6,618			8,747			6,583			5,309			9,568
Other earning assets		34,661			31,168			31,758			29,654			34,102
Total earning assets		9,432,181			8,695,626			8,703,632			8,698,965			8,696,656
Allowance for loan losses		(86,447	)		(88,715	)		(86,865	)		(92,223	)		(92,062	)
Cash and due from banks		270,740			238,976			236,566			272,283			232,139
Other assets		1,183,493			972,748			958,030			947,914			918,273
Total assets	$	10,799,967		$	9,818,635		$	9,811,363		$	9,826,939		$	9,755,006
Interest-bearing demand deposits	$	1,703,336		$	1,545,967		$	1,534,244		$	1,545,203		$	1,545,045
Savings deposits		2,767,747			2,275,569			2,348,413			2,467,546			2,339,166
Time deposits less than $100,000		1,268,619			1,120,735			1,150,620			1,169,532			1,190,888
Time deposits of $100,000 or more		893,104			760,363			781,926			813,530			825,214
Total interest-bearing deposits		6,632,806			5,702,634			5,815,203			5,995,811			5,900,313
Fed funds purchased and repos		266,958			388,007			374,885			280,726			437,270
Short-term borrowings		66,999			85,313			81,773			80,275			84,797
Long-term FHLB advances		4,580			-			-			-			-
Subordinated notes		49,874			49,866			49,858			49,850			49,842
Junior subordinated debt securities		77,989			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		7,099,206			6,287,676			6,383,575			6,468,518			6,534,078
Noninterest-bearing deposits		2,199,043			2,115,784			2,039,729			1,998,077			1,869,758
Other liabilities		176,210			126,953			114,454			104,628			122,668
Total liabilities		9,474,459			8,530,413			8,537,758			8,571,223			8,526,504
Shareholders' equity		1,325,508			1,288,222			1,273,605			1,255,716			1,228,502
Total liabilities and equity	$	10,799,967		$	9,818,635		$	9,811,363		$	9,826,939		$	9,755,006
PERIOD END BALANCES		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Cash and due from banks	$	242,896		$	231,489		$	209,188		$	284,735		$	213,500
Fed funds sold and rev repos		5,926			7,046			5,295			6,725			6,301
Securities available for sale		3,546,083			2,657,745			2,724,446			2,592,807			2,595,664
Securities held to maturity		73,666			42,188			45,484			47,867			52,010
Loans held for sale (LHFS)		207,758			257,986			324,897			286,221			227,449
Loans held for investment (LHFI)		5,474,396			5,592,754			5,527,963			5,650,548			5,774,753
Allowance for loan losses		(76,900	)		(78,738	)		(83,526	)		(84,809	)		(90,879	)
Net LHFI		5,397,496			5,514,016			5,444,437			5,565,739			5,683,874
Acquired loans:
Noncovered loans		1,003,127			81,523			83,110			94,013			100,669
Covered loans		47,589			52,041			64,503			66,015			74,419
Allowance for loan losses, acquired loans		(6,458	)		(6,075	)		(4,343	)		(1,526	)		(773	)
Net acquired loans		1,044,258			127,489			143,270			158,502			174,315
Net LHFI and acquired loans		6,441,754			5,641,505			5,587,707			5,724,241			5,858,189
Premises and equipment, net		210,789			154,841			155,467			156,089			156,158
Mortgage servicing rights		51,529			47,341			44,211			43,580			45,893
Goodwill		366,366			291,104			291,104			291,104			291,104
Identifiable intangible assets		49,361			17,306			18,327			19,356			18,821
Other real estate, excluding covered other real estate		118,406			78,189			82,475			73,673			75,742
Covered other real estate		5,879			5,741			5,722			6,482			5,824
FDIC indemnification asset		20,198			21,774			23,979			25,309			28,260
Other assets		509,904			374,412			353,857			332,657			356,678
Total assets	$	11,850,515		$	9,828,667		$	9,872,159		$	9,890,846		$	9,931,593
Deposits:
Noninterest-bearing	$	2,534,287		$	2,254,211		$	2,118,853		$	2,063,261		$	2,024,290
Interest-bearing		7,375,144			5,642,306			5,685,188			5,932,596			6,066,456
Total deposits		9,909,431			7,896,517			7,804,041			7,995,857			8,090,746
Fed funds purchased and repos		219,769			288,829			408,711			297,669			254,878
Short-term borrowings		46,325			86,920			83,612			78,594			82,023
Long-term FHLB advances		10,969			-			-			-			-
Subordinated notes		49,879			49,871			49,863			49,855			49,847
Junior subordinated debt securities		94,856			61,856			61,856			61,856			61,856
Other liabilities		166,340			157,305			186,061			148,520			150,723
Total liabilities		10,497,569			8,541,298			8,594,144			8,632,351			8,690,073
Common stock		13,992			13,506			13,496			13,496			13,494
Capital surplus		342,233			285,905			284,089			283,023			282,388
Retained earnings		991,012			984,563			973,182			958,322			944,101
Accum other comprehensive income, net of tax		5,709			3,395			7,248			3,654			1,537
Total shareholders' equity		1,352,946			1,287,369			1,278,015			1,258,495			1,241,520
Total liabilities and equity	$	11,850,515		$	9,828,667		$	9,872,159		$	9,890,846		$	9,931,593

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
March 31, 2013
($ in thousands except per share data)
(unaudited)
	Quarter Ended
INCOME STATEMENTS		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Interest and fees on LHFS & LHFI-FTE	$	67,412		$	69,989		$	72,554		$	73,669		$	75,781
Interest and fees on acquired loans		12,782			4,859			5,229			4,377			2,937
Interest on securities-taxable		16,539			15,305			15,909			17,352			18,384
Interest on securities-tax exempt-FTE		2,018			2,066			2,089			2,086			2,102
Interest on fed funds sold and rev repos		4			9			6			5			6
Other interest income		355			337			339			336			330
Total interest income-FTE		99,110			92,565			96,126			97,825			99,540
Interest on deposits		4,909			5,061			5,725			6,465			7,353
Interest on fed funds pch and repos		81			140			135			142			171
Other interest expense		1,490			1,346			1,358			1,359			1,414
Total interest expense		6,480			6,547			7,218			7,966			8,938
Net interest income-FTE		92,630			86,018			88,908			89,859			90,602
Provision for loan losses, LHFI		(2,968	)		(535	)		3,358			650			3,293
Provision for loan losses, acquired loans		130			1,945			2,105			1,672			(194	)
Net interest income after provision-FTE		95,468			84,608			83,445			87,537			87,503
Service charges on deposit accounts		11,681			12,391			13,135			12,614			12,211
Insurance commissions		7,242			6,887			7,533			7,179			6,606
Wealth management		6,875			6,181			5,612			5,762			5,501
Bank card and other fees		7,945			7,978			6,924			8,179			7,364
Mortgage banking, net		11,583			11,331			11,150			11,184			7,295
Other, net		(1,191	)		(2,007	)		512			(1,150	)		3,758
Nonint inc-excl sec gains (losses), net		44,135			42,761			44,866			43,768			42,735
Security gains (losses), net		204			18			(1	)		(8	)		1,050
Total noninterest income		44,339			42,779			44,865			43,760			43,785
Salaries and employee benefits		53,592			49,724			47,404			46,959			46,432
Services and fees		13,032			12,572			11,682			11,750			10,747
Net occupancy-premises		5,955			5,023			5,352			4,954			4,938
Equipment expense		5,674			5,288			5,095			5,183			4,912
FDIC assessment expense		2,021			1,075			1,826			1,826			1,775
ORE/Foreclosure expense		3,820			3,173			1,702			2,388			3,902
Other expense		18,051			10,454			10,399			14,899			13,068
Total noninterest expense		102,145			87,309			83,460			87,959			85,774
Income before income taxes and tax eq adj		37,662			40,078			44,850			43,338			45,514
Tax equivalent adjustment		3,655			3,699			3,629			3,411			3,658
Income before income taxes		34,007			36,379			41,221			39,927			41,856
Income taxes		9,141			8,669			11,317			10,578			11,536
Net income available to common shareholders	$	24,866		$	27,710		$	29,904		$	29,349		$	30,320
Per common share data
Earnings per share - basic	$	0.38		$	0.43		$	0.46		$	0.45		$	0.47
Earnings per share - diluted	$	0.38		$	0.43		$	0.46		$	0.45		$	0.47
Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23
Weighted average common shares outstanding
Basic		65,983,204			64,785,457			64,778,329			64,771,530			64,297,038
Diluted		66,149,656			65,007,281			64,992,614			64,938,697			64,477,277
Period end common shares outstanding		67,151,087			64,820,414			64,779,937			64,775,694			64,765,581
OTHER FINANCIAL DATA
Return on common equity		7.61	%		8.56	%		9.34	%		9.40	%		9.93	%
Return on average tangible common equity		10.82	%		11.51	%		12.61	%		12.74	%		13.41	%
Return on assets		0.93	%		1.12	%		1.21	%		1.20	%		1.25	%
Interest margin - Yield - FTE		4.26	%		4.23	%		4.39	%		4.52	%		4.60	%
Interest margin - Cost		0.28	%		0.30	%		0.33	%		0.37	%		0.41	%
Net interest margin - FTE		3.98	%		3.94	%		4.06	%		4.15	%		4.19	%
Efficiency ratio (1)		67.84	%		67.80	%		62.39	%		66.26	%		63.70	%
Full-time equivalent employees		3,164			2,666			2,632			2,598			2,611
COMMON STOCK PERFORMANCE
Market value-Close	$	25.01		$	22.46		$	24.34		$	24.48		$	24.98
Common book value	$	20.15		$	19.86		$	19.73		$	19.43		$	19.17
Tangible common book value	$	13.96		$	15.10		$	14.95		$	14.64		$	14.38
(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and non-routine acquisition related transaction expenses.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
March 31, 2013
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Nonaccrual loans
Alabama	$	-		$	-		$	-		$	-		$	-
Florida		14,046			19,314			21,456			22,260			22,174
Mississippi (2)		46,697			38,960			32,041			47,322			48,648
Tennessee (3)		4,877			8,401			7,388			11,171			13,972
Texas		17,702			15,688			19,773			18,927			20,979
Total nonaccrual loans		83,322			82,363			80,658			99,680			105,773
Other real estate
Alabama		28,870			-			-			-			-
Florida		30,662			18,569			22,340			23,324			26,226
Mississippi (2)		26,457			27,771			27,113			19,511			19,240
Tennessee (3)		18,339			17,589			18,545			18,850			17,665
Texas		14,078			14,260			14,477			11,988			12,611
Total other real estate		118,406			78,189			82,475			73,673			75,742
Total nonperforming assets	$	201,728		$	160,552		$	163,133		$	173,353		$	181,515
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	2,772		$	6,378		$	5,699		$	1,843		$	1,553
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	4,469		$	43,073		$	39,492		$	35,270		$	39,496
	Quarter Ended
ALLOWANCE FOR LOAN LOSSES (4)		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Beginning Balance	$	78,738		$	83,526		$	84,809		$	90,879		$	89,518
Provision for loan losses		(2,968	)		(535	)		3,358			650			3,293
Charge-offs		(3,325	)		(8,829	)		(7,907	)		(9,264	)		(5,376	)
Recoveries		4,455			4,576			3,266			2,544			3,444
Net recoveries (charge-offs)		1,130			(4,253	)		(4,641	)		(6,720	)		(1,932	)
Ending Balance	$	76,900		$	78,738		$	83,526		$	84,809		$	90,879
PROVISION FOR LOAN LOSSES (4)
Alabama	$	676		$	-		$	-		$	-		$	-
Florida		(3,675	)		(706	)		7			(770	)		739
Mississippi (2)		(1,920	)		2,031			466			1,141			4,152
Tennessee (3)		(378	)		(1,037	)		687			839			(29	)
Texas		2,329			(823	)		2,198			(560	)		(1,569	)
Total provision for loan losses	$	(2,968	)	$	(535	)	$	3,358		$	650		$	3,293
NET CHARGE-OFFS (4)
Alabama	$	11		$	-		$	-		$	-		$	-
Florida		(849	)		(237	)		(488	)		4,491			1,495
Mississippi (2)		(290	)		874			4,726			1,751			251
Tennessee (3)		249			(43	)		438			536			223
Texas		(251	)		3,659			(35	)		(58	)		(37	)
Total net (recoveries) charge-offs	$	(1,130	)	$	4,253		$	4,641		$	6,720		$	1,932
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		-0.08	%		0.29	%		0.31	%		0.46	%		0.13	%
Provision for loan losses/average loans		-0.21	%		-0.04	%		0.23	%		0.04	%		0.22	%
Nonperforming loans/total loans (incl LHFS)		1.47	%		1.41	%		1.38	%		1.68	%		1.76	%
Nonperforming assets/total loans (incl LHFS)		3.55	%		2.74	%		2.79	%		2.92	%		3.02	%
Nonperforming assets/total loans (incl LHFS) +ORE		3.48	%		2.71	%		2.75	%		2.88	%		2.99	%
ALL/total loans (excl LHFS)		1.40	%		1.41	%		1.51	%		1.50	%		1.57	%
ALL-commercial/total commercial loans		1.56	%		1.59	%		1.79	%		1.81	%		1.97	%
ALL-consumer/total consumer and home mortgage loans		0.98	%		0.97	%		0.84	%		0.81	%		0.75	%
ALL/nonperforming loans		92.29	%		95.60	%		103.56	%		85.08	%		85.92	%
ALL/nonperforming loans -
(excl impaired loans)		145.83	%		174.46	%		174.09	%		186.45	%		181.11	%
CAPITAL RATIOS
Common equity/total assets		11.42	%		13.10	%		12.95	%		12.72	%		12.50	%
Tangible common equity/tangible assets		8.20	%		10.28	%		10.13	%		9.90	%		9.68	%
Tangible common equity/risk-weighted assets		11.88	%		14.56	%		14.49	%		14.30	%		13.89	%
Tier 1 leverage ratio		9.94	%		10.97	%		10.83	%		10.63	%		10.55	%
Tier 1 common risk-based capital ratio		11.91	%		14.63	%		14.50	%		14.36	%		13.98	%
Tier 1 risk-based capital ratio		13.09	%		15.53	%		15.40	%		15.26	%		14.87	%
Total risk-based capital ratio		14.52	%		17.22	%		17.25	%		17.12	%		16.72	%
(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

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 $11.8 million as well as the purchase of the physical branch offices. The proposed transaction, which is subject to regulatory approval and customary closing conditions, is expected to be completed during the summer of 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.

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 estimated fair values were considered preliminary as of March 31, 2013 and are subject to refinement as additional information relative to the closing date fair values become available through the measurement period, not to exceed one year.

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. The statement of assets purchased and liabilities assumed in the BancTrust acquisition is presented below at their estimated fair values as of the acquisition date of February 15, 2013 ($ in thousands):

Assets:
Cash and due from banks	$	141,616
Securities		528,016
Loans held for sale		1,050
Acquired noncovered loans		951,011
Premises and equipment, net		57,146
Identifiable intangible assets		33,498
Other real estate		41,168
Other assets		98,373
Total Assets		1,851,878
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		30,812
Goodwill		75,262
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 $75.3 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 TNB 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 following table illustrates loans and other real estate acquired from BancTrust, the credit mark and the resulting fair values as of February 15, 2013:

	Balance		Total Credit Mark				Fair Value
		2/15/2013		$	%			2/15/2013
Loans secured by real estate:
Construction, land development and other land loans	$	236,237	$	100,045	42.3	%	$	136,192
Secured by 1-4 family residential properties		216,444		22,914	10.6	%		193,530
Secured by nonfarm, nonresidential properties		329,026		28,140	8.6	%		300,886
Other real estate secured		34,715		2,751	7.9	%		31,964
Commercial and industrial loans		262,536		25,489	9.7	%		237,047
Consumer loans		40,808		2,152	5.3	%		38,656
Other loans		14,248		462	3.2	%		13,786
Total loans acquired from BancTrust		1,134,014		181,953	16.0	%		952,061
Other real estate		58,083		16,915	29.1	%		41,168
Total loans and other real estate acquired from BancTrust	$	1,192,097	$	198,868	16.7	%	$	993,229

The operations of BancTrust are included in Trustmark’s operating results from February 15, 2013, and added revenue of $9.4 million and net income available to common shareholders, excluding non-routine transaction expenses, of approximately $2.0 million through March 31, 2013. Such operating results are not necessarily indicative of future operating results. 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, TNB 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 value 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 TNB 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):

		3/31/2013		12/31/2012		9/30/2012		6/30/2012		3/31/2012
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities	$	506	$	-	$	-	$	-	$	-
U.S. Government agency obligations
Issued by U.S. Government agencies		141,226		10		18		22		31
Issued by U.S. Government sponsored agencies		186,293		105,735		60,671		72,923		101,941
Obligations of states and political subdivisions		218,467		215,761		215,900		213,826		208,234
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		51,138		19,902		21,352		22,367		20,064
Issued by FNMA and FHLMC		241,365		208,564		237,886		264,018		286,169
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		2,090,516		1,466,366		1,565,290		1,570,226		1,619,920
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		377,070		399,780		381,207		354,453		330,318
Asset-backed securities		239,502		241,627		242,122		91,293		23,693
Corporate debt securities		-		-		-		3,679		5,294
Total securities available for sale	$	3,546,083	$	2,657,745	$	2,724,446	$	2,592,807	$	2,595,664
SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions	$	33,071	$	36,206	$	37,669	$	38,351	$	40,393
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		2,932		3,245		3,435		3,745		4,089
Issued by FNMA and FHLMC		569		572		580		583		586
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		-		-		1,624		3,000		4,743
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		37,094		2,165		2,176		2,188		2,199
Total securities held to maturity	$	73,666	$	42,188	$	45,484	$	47,867	$	52,010

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 U.S. Government agency-backed obligations and other Aaa rated securities. None of the securities owned by Trustmark are collateralized by assets which are considered subprime. Furthermore, outside of membership in the Federal Home Loan Bank of Dallas and Federal Reserve Bank, Trustmark does not hold any equity investment in government sponsored entities.

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Loans secured by real estate:
Construction, land development and other land loans	$	485,419		$	468,975		$	460,599		$	464,349		$	465,486
Secured by 1-4 family residential properties		1,372,901			1,497,480			1,511,514			1,621,865			1,722,357
Secured by nonfarm, nonresidential properties		1,385,669			1,410,264			1,397,536			1,392,293			1,419,902
Other real estate secured		174,680			189,949			184,804			192,376			199,400
Commercial and industrial loans		1,206,851			1,169,513			1,163,681			1,142,282			1,142,813
Consumer loans		160,253			171,660			181,896			196,718			210,713
Other loans		688,623			684,913			627,933			640,665			614,082
LHFI		5,474,396			5,592,754			5,527,963			5,650,548			5,774,753
Allowance for loan losses		(76,900	)		(78,738	)		(83,526	)		(84,809	)		(90,879	)
Net LHFI	$	5,397,496		$	5,514,016		$	5,444,437		$	5,565,739		$	5,683,874

ACQUIRED NONCOVERED LOANS BY TYPE		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Loans secured by real estate:
Construction, land development and other land loans	$	138,442		$	10,056		$	11,504		$	13,154		$	14,346
Secured by 1-4 family residential properties		209,658			19,404			18,032			18,954			20,409
Secured by nonfarm, nonresidential properties		339,953			45,649			47,114			53,272			54,954
Other real estate secured		32,208			669			378			512			695
Commercial and industrial loans		235,286			3,035			3,371			4,822			5,732
Consumer loans		32,694			2,610			2,575			3,153			4,188
Other loans		14,886			100			136			146			345
Noncovered loans		1,003,127			81,523			83,110			94,013			100,669
Allowance for loan losses		(1,961	)		(1,885	)		(817	)		(62	)		(37	)
Net noncovered loans	$	1,001,166		$	79,638		$	82,293		$	93,951		$	100,632

ACQUIRED COVERED LOANS BY TYPE		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Loans secured by real estate:
Construction, land development and other land loans	$	3,875		$	3,924		$	3,714		$	3,683		$	3,940
Secured by 1-4 family residential properties		20,980			23,990			24,949			27,218			30,221
Secured by nonfarm, nonresidential properties		17,355			18,407			28,291			27,464			30,737
Other real estate secured		3,365			3,567			4,198			4,580			5,087
Commercial and industrial loans		648			747			1,803			1,382			2,768
Consumer loans		179			177			172			205			206
Other loans		1,187			1,229			1,376			1,483			1,460
Covered loans		47,589			52,041			64,503			66,015			74,419
Allowance for loan losses		(4,497	)		(4,190	)		(3,526	)		(1,464	)		(736	)
Net covered loans	$	43,092		$	47,851		$	60,977		$	64,551		$	73,683

Note 3 – Loan Composition (continued)
	March 31, 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	$	485,419	$	2,540	$	84,686	$	246,754	$	43,266	$	108,173
Secured by 1-4 family residential properties		1,372,901		613		49,380		1,161,420		138,571		22,917
Secured by nonfarm, nonresidential properties		1,385,669		2,603		144,339		746,474		162,217		330,036
Other real estate secured		174,680		3,200		6,217		131,678		5,961		27,624
Commercial and industrial loans		1,206,851		6,191		12,711		813,092		98,209		276,648
Consumer loans		160,253		2,749		2,099		134,163		18,018		3,224
Other loans		688,623		2,246		24,392		562,682		33,835		65,468
Loans	$	5,474,396	$	20,142	$	323,824	$	3,796,263	$	500,077	$	834,090
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	50,532	$	23	$	32,081	$	14,586	$	1,202	$	2,640
Development		80,771		188		9,457		47,150		4,436		19,540
Unimproved land		145,466		1,956		40,248		61,215		16,406		25,641
1-4 family construction		76,738		328		2,304		55,772		1,023		17,311
Other construction		131,912		45		596		68,031		20,199		43,041
Construction, land development and other land loans	$	485,419	$	2,540	$	84,686	$	246,754	$	43,266	$	108,173
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	157,141	$	-	$	41,108	$	62,068	$	22,836	$	31,129
Office		159,386		-		37,048		83,666		8,452		30,220
Nursing homes/assisted living		98,842		-		-		90,576		3,957		4,309
Hotel/motel		62,254		-		391		27,077		25,451		9,335
Industrial		60,349		-		8,931		14,111		375		36,932
Health care		17,488		-		-		10,144		121		7,223
Convenience stores		8,660		-		-		4,776		1,393		2,491
Other		137,901		995		14,209		68,543		5,036		49,118
Total income producing loans		702,021		995		101,687		360,961		67,621		170,757
Owner-occupied:
Office		107,049		-		14,146		65,372		4,068		23,463
Churches		78,573		-		3,117		43,684		26,807		4,965
Industrial warehouses		91,497		-		1,312		42,958		3,012		44,215
Health care		107,527		-		14,203		62,078		15,650		15,596
Convenience stores		62,072		-		1,723		36,561		3,843		19,945
Retail		37,472		-		3,713		25,793		3,087		4,879
Restaurants		31,619		-		963		24,189		4,682		1,785
Auto dealerships		14,099		-		395		11,837		1,812		55
Other		153,740		1,608		3,080		73,041		31,635		44,376
Total owner-occupied loans		683,648		1,608		42,652		385,513		94,596		159,279
Loans secured by nonfarm, nonresidential properties	$	1,385,669	$	2,603	$	144,339	$	746,474	$	162,217	$	330,036
(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
	3/31/2013		12/31/2012		9/30/2012		6/30/2012		3/31/2012
Securities – taxable	2.33	%	2.44	%	2.60	%	2.94	%	3.13	%
Securities – nontaxable	4.44	%	4.39	%	4.43	%	4.49	%	4.63	%
Securities – total	2.45	%	2.58	%	2.73	%	3.06	%	3.24	%
Loans - LHFI & LHFS	4.76	%	4.77	%	4.90	%	4.99	%	5.07	%
Acquired loans	8.93	%	13.75	%	13.52	%	10.51	%	12.36	%
Loans - total	5.14	%	4.98	%	5.12	%	5.14	%	5.18	%
FF sold & rev repo	0.25	%	0.41	%	0.36	%	0.38	%	0.25	%
Other earning assets	4.15	%	4.30	%	4.25	%	4.56	%	3.89	%
Total earning assets	4.26	%	4.23	%	4.39	%	4.52	%	4.60	%
Interest-bearing deposits	0.30	%	0.35	%	0.39	%	0.43	%	0.50	%
FF pch & repo	0.12	%	0.14	%	0.14	%	0.20	%	0.16	%
Other borrowings	3.03	%	2.72	%	2.79	%	2.85	%	2.89	%
Total interest-bearing liabilities	0.37	%	0.41	%	0.45	%	0.50	%	0.55	%
Net interest margin	3.98	%	3.94	%	4.06	%	4.15	%	4.19	%
Net interest margin excluding acquired loans	3.66	%	3.77	%	3.89	%	4.03	%	4.10	%

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 first quarter primarily due to the significant increase in acquired loans from the BancTrust acquisition, which had an effective yield of approximately 5.80%, as well as a favorable decline in 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.

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 $1.3 million for the quarter ended March 31, 2013 compared to a net negative ineffectiveness of $1.0 million for the quarter ended March 31, 2012.

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

	Quarter Ended
		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Mortgage servicing income, net	$	4,267		$	4,441		$	3,984		$	3,891		$	3,886
Change in fair value-MSR from runoff		(2,460	)		(2,631	)		(2,751	)		(2,320	)		(2,106	)
Gain on sales of loans, net		10,165			12,034			9,114			6,302			6,469
Other, net		(1,649	)		(1,789	)		2,608			3,139			64
Mortgage banking income before hedge ineffectiveness		10,323			12,055			12,955			11,012			8,313
Change in fair value-MSR from market changes		1,127			(418	)		(3,282	)		(5,926	)		248
Change in fair value of derivatives		133			(306	)		1,477			6,098			(1,266	)
Net positive (negative) hedge ineffectiveness		1,260			(724	)		(1,805	)		172			(1,018	)
Mortgage banking, net	$	11,583		$	11,331		$	11,150		$	11,184		$	7,295

During the first quarter of 2013, Trustmark exercised its option to repurchase delinquent loans serviced for GNMA. The loans were subsequently sold to a third party under different repurchase provisions. Trustmark will retain 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). A gain of $542 thousand resulted from the transaction 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
		3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Partnership amortization for tax credit purposes	$	(2,117	)	$	(3,202	)	$	(2,302	)	$	(1,491	)	$	(1,422	)
Bargain purchase gain on acquisition		-			-			-			881			2,754
Decrease in FDIC indemnification asset		(1,365	)		(743	)		(609	)		(2,289	)		(81	)
Other miscellaneous income		2,291			1,938			3,423			1,749			2,507
Total other, net	$	(1,191	)	$	(2,007	)	$	512		$	(1,150	)	$	3,758

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 and 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 first quarter of 2013, other noninterest income included a write-down of the FDIC indemnification asset of $1.4 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
		3/31/2013		12/31/2012		9/30/2012		6/30/2012		3/31/2012
Loan expense	$	2,995	$	3,274	$	3,150	$	8,299	$	5,525
Non-routine transaction expenses on acquisition		7,920		-		-		-		1,917
Amortization of intangibles		1,442		1,022		1,028		1,028		710
Other miscellaneous expense		5,694		6,158		6,221		5,572		4,916
Total other expense	$	18,051	$	10,454	$	10,399	$	14,899	$	13,068

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 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 the second quarter of 2012. At March 31, 2013, the reserve for mortgage loan servicing putback expenses totaled $7.3 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
			3/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' common equity		$	1,325,508		$	1,288,222		$	1,273,605		$	1,255,716		$	1,228,502
Less: Goodwill			(324,902	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(35,187	)		(17,933	)		(18,971	)		(17,762	)		(14,703	)
Total average tangible common equity		$	965,419		$	979,185		$	963,530		$	946,850		$	922,695
PERIOD END BALANCES
Total shareholders' common equity		$	1,352,946		$	1,287,369		$	1,278,015		$	1,258,495		$	1,241,520
Less: Goodwill			(366,366	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(49,361	)		(17,306	)		(18,327	)		(19,356	)		(18,821	)
Total tangible common equity	(a)	$	937,219		$	978,959		$	968,584		$	948,035		$	931,595
TANGIBLE ASSETS
Total assets		$	11,850,515		$	9,828,667		$	9,872,159		$	9,890,846		$	9,931,593
Less: Goodwill			(366,366	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(49,361	)		(17,306	)		(18,327	)		(19,356	)		(18,821	)
Total tangible assets	(b)	$	11,434,788		$	9,520,257		$	9,562,728		$	9,580,386		$	9,621,668
Risk-weighted assets	(c)	$	7,891,580		$	6,723,259		$	6,684,820		$	6,631,887		$	6,707,026
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders		$	24,866		$	27,710		$	29,904		$	29,349		$	30,320
Plus: Intangible amortization net of tax			890			631			635			635			438
Net income adjusted for intangible amortization		$	25,756		$	28,341		$	30,539		$	29,984		$	30,758
Period end common shares outstanding	(d)		67,151,087			64,820,414			64,779,937			64,775,694			64,765,581
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity ^1			10.82	%		11.51	%		12.61	%		12.74	%		13.41	%
Tangible common equity/tangible assets	(a)/(b)		8.20	%		10.28	%		10.13	%		9.90	%		9.68	%
Tangible common equity/risk-weighted assets	(a)/(c)		11.88	%		14.56	%		14.49	%		14.30	%		13.89	%
Tangible common book value	(a)/(d)*1,000	$	13.96		$	15.10		$	14.95		$	14.64		$	14.38
TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity		$	1,352,946		$	1,287,369		$	1,278,015		$	1,258,495		$	1,241,520
Eliminate qualifying AOCI			(5,709	)		(3,395	)		(7,248	)		(3,654	)		(1,537	)
Qualifying tier 1 capital			93,000			60,000			60,000			60,000			60,000
Disallowed goodwill			(366,366	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Adj to goodwill allowed for deferred taxes			13,388			13,035			12,683			12,330			11,978
Other disallowed intangibles			(49,361	)		(17,306	)		(18,327	)		(19,356	)		(18,821	)
Disallowed servicing intangible			(5,153	)		(4,734	)		(4,421	)		(4,358	)		(4,589	)
Total tier 1 capital		$	1,032,745		$	1,043,865		$	1,029,598		$	1,012,353		$	997,447
Less: Qualifying tier 1 capital			(93,000	)		(60,000	)		(60,000	)		(60,000	)		(60,000	)
Total tier 1 common capital	(e)	$	939,745		$	983,865		$	969,598		$	952,353		$	937,447
Tier 1 common risk-based capital ratio	(e)/(c)		11.91	%		14.63	%		14.50	%		14.36	%		13.98	%
^1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity