Trustmark Corporation Announces 2012 Financial Results and Declares $0.23 Quarterly Cash Dividend

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $117.3 million for the year ended December 31, 2012, which represented diluted earnings per share of $1.81, an increase of 9.0% compared to figures one year earlier. Trustmark’s performance during 2012 produced a return on average tangible common equity of 12.55% and a return on average assets of 1.20%. In the fourth quarter of 2012, Trustmark’s net income available to common shareholders totaled $27.7 million, which represented diluted earnings per common share of $0.43, an increase of 13.2% compared to the fourth quarter of 2011. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable March 15, 2013, to shareholders of record on March 1, 2013.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50537853&lang=en

Gerard R. Host, President and CEO, stated, “2012 was a year of significant achievement for Trustmark, particularly in light of prevailing economic conditions. We continued to build upon and expand customer relationships, the success of which is reflected in our strong financial performance. Thanks in part to the low interest rate environment, the profitability of our mortgage banking business reached record levels. We also experienced increased profitability in our insurance and wealth management businesses. Credit quality significantly improved in our banking business which, in turn, increased profitability. During the year, we completed an acquisition in Florida and announced plans to acquire Mobile, Alabama-based BancTrust Financial Group, which is expected to close during the first quarter of 2013 pending regulatory approval. We also made investments in technology designed to increase revenue and improve efficiency. Thanks to our dedicated associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue meeting the needs of our customers and creating value for our shareholders.”

Credit Quality

• Significant reduction in classified and criticized loan balances
• Nonperforming assets declined to lowest level in 16 quarters
• Improved credit quality reflected in reduced net charge-offs and provisioning

Nonperforming loans totaled $82.4 million at December 31, 2012, an increase of 2.1% from the prior quarter and a decline of 25.4% from the prior year. Foreclosed other real estate decreased 5.2% from the prior quarter and 1.1% from the prior year to total $78.2 million. Collectively, nonperforming assets totaled $160.6 million at December 31, 2012, the lowest level since year end 2008 and a decline of 1.6% from prior quarter and 15.3% from levels one year earlier. All of the above metrics exclude acquired loans and other real estate covered by FDIC loss-share agreements.

Net charge-offs during the fourth quarter of 2012 totaled $4.3 million and represented 0.29% of average loans, excluding acquired loans. During 2012, net charge-offs totaled $17.5 million, a 47.9% decline from levels one year earlier, and represented 0.30% of average loans. The provision for loan losses for loans held for investment (LHFI) in 2012 totaled $6.8 million, a 77.2% reduction from the prior year. During the fourth quarter, Trustmark’s provision for loan losses for LHFI was a negative $535 thousand as a result of improved credit quality within its loan portfolio. During the fourth quarter, Trustmark experienced a decline of $20.6 million, or 7.5%, in classified loans and a decline of $20.9 million, or 6.0%, in criticized loans relative to the prior quarter. Relative to figures one year earlier, classified loan balances decreased $61.5 million, or 19.5%, while criticized loan balances decreased $71.9 million, or 18.0%.

Allocation of Trustmark’s $78.7 million allowance for loan losses represented 1.59% of commercial loans and 0.97% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.41% at December 31, 2012, which represents a level management considers to be commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 174.5% of nonperforming loans, excluding impaired loans. All of the above metrics exclude acquired loans.

Capital Strength

• Tangible common equity to tangible assets expanded to 10.28%
• Total risk-based capital ratio of 17.22%

Trustmark’s solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At December 31, 2012, tangible common equity totaled $979.0 million and represented 10.28% of tangible assets while the total risk-based capital ratio was 17.22%, significantly exceeding the 10% benchmark to be classified as well capitalized. Trustmark’s strong capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.

Balance Sheet Management

• Loan demand improved during fourth quarter
• Average earning assets remained stable at $8.7 billion
• Net interest income (FTE) totaled $86.0 million in fourth quarter, $355.4 million in 2012

Loans held for investment and acquired loans totaled $5.7 billion at December 31, 2012, an increase of $50.7 million from the prior quarter. During the quarter Trustmark increased lending to public entities and school districts, which was reflected in other loan growth of $56.8 million. Trustmark also experienced growth in its construction and land development ($7.1 million) and commercial and industrial ($4.4 million) loan portfolios. Excluding anticipated run-off in the 1-4 family mortgage loan portfolio ($13.6 million) and in the indirect auto loan portfolio ($10.7 million), total loans increased $75.1 million relative to the prior quarter.

During the fourth quarter of 2012, average earning assets remained stable at $8.7 billion as growth in investment securities effectively offset declining loan balances. Average deposits declined $36.5 million, or 0.5%, to $7.8 billion. Average noninterest-bearing deposits increased 3.7% to represent 27.1% of average deposits in the fourth quarter of 2012.

Trustmark produced net interest income (FTE) of $86.0 million in the fourth quarter of 2012. The net interest margin was 3.94% during the fourth quarter, down 12 basis points from the prior quarter. The decline is primarily attributable to the continued downward repricing of loans and securities, partially offset by modest declines in the cost of interest-bearing deposits.

Noninterest Income

• Noninterest income totaled $42.8 million in fourth quarter, $175.2 million in 2012
• Mortgage banking revenue reaches record $11.3 million in fourth quarter, $41.0 million in 2012
• Tax credit investments reduced effective tax rate to 23.8% in fourth quarter

Noninterest income totaled $42.8 million in the fourth quarter, a decrease of $2.1 million from the prior quarter. This decline is a result of a $1.2 million gain on disposition of the Corporation’s proprietary mutual fund family that occurred in the third quarter as well as an increase in partnership amortization of $900 thousand related to tax credit investments that reduced the Corporation’s effective tax rate during the fourth quarter by approximately 3.6%. Each of these items was included in other noninterest income.

Trustmark continued to achieve solid financial performance from its diverse financial services businesses. Mortgage banking revenue continued at record levels due to strong loan production resulting from historically low interest rates. Mortgage loan production in the fourth quarter totaled $494.9 million, down 3.9% from the prior quarter but up 17.5% relative to levels one year earlier. During the fourth quarter, mortgage banking revenue totaled $11.3 million, reflecting increased mortgage servicing income and secondary marketing gains and a decrease in mortgage servicing hedge ineffectiveness. Mortgage loan production in 2012 totaled $1.9 billion, an increase of 48.8% from levels in 2011 while mortgage banking revenue increased 52.8% to $41.0 million.

Insurance revenue in the fourth quarter totaled $6.9 million, reflecting a seasonal decrease of 8.6% relative to the prior quarter and an increase of 13.3% from levels one year earlier. Improved performance year-over-year resulted from increased business development efforts as well as increasing insurance premium levels. Insurance revenue in 2012 totaled $28.2 million, an increase of 4.6% relative to the prior year.

Wealth management revenue totaled $6.2 million during the fourth quarter, an increase of 10.1% from the prior quarter and 18.3% from the comparable period one year ago. This growth was attributable in part to increased sales within investment services as well as improved profitability within the trust management business.

Bankcard and other fee income totaled $8.0 million in the fourth quarter, an increase of 15.2% from the prior quarter and 12.2% from the prior year. The growth is principally due to increased commercial credit related fee income and interchange income from debit cards. Service charges on deposit accounts totaled $12.4 million in the fourth quarter, reflecting a 5.7% decline from the prior quarter and 6.6% decrease from levels one year earlier due primarily to a reduction in NSF and overdraft fees.

Noninterest Expense

• Routine noninterest expense remained well-controlled
• ORE and foreclosure expense declined 31.5% in 2012
• Continued investments to support revenue growth and profitability

Noninterest expense in the fourth quarter totaled $87.3 million, an increase of $3.8 million from the prior quarter; excluding ORE and foreclosure expense, noninterest expense increased $2.4 million principally due to additional incentive accruals and commissions ($1.1 million and $545 thousand, respectively). Trustmark also made an additional contribution to its self-funded medical plan ($643 thousand), a portion of which was to support wellness and healthcare with the opening of an associate medical clinic in the Corporation’s main office. Each of these items is included in salary and employee benefits expense. ORE/foreclosure expense totaled $3.2 million in the fourth quarter, an increase of $1.5 million from the prior quarter due to additional write downs on foreclosed real estate.

During 2012, noninterest expense totaled $344.5 million; excluding ORE and foreclosure expense, noninterest expense was $333.3 million, an increase of $19.8 million, or 6.3% from levels one year earlier. Excluding non-routine transaction expense ($2.6 million) as well as on-going expense ($4.0 million) associated with the merger of Bay Bank and Trust Company in the first quarter, noninterest expense increased approximately 4.2% in 2012.

Trustmark continued to make investments and reallocate resources to support revenue growth and profitability. During the year, a new ATM fleet was deployed across the franchise which included deposit automation. Since implementation, ATM-originated deposit transactions have increased approximately 150%. In addition, new operating systems designed to enhance efficiency and productivity were introduced in the Corporation’s finance and human resources areas. During 2012, Trustmark continued realignment of its branch network as three branch offices were consolidated (two in Florida and one in Houston); plans are underway to consolidate two other offices in Houston into a new administrative office during the first quarter of 2013. Trustmark remains committed to identifying additional reengineering and efficiency opportunities to enhance shareholder value.

ADDITIONAL INFORMATION

As previously announced, Trustmark will conduct a conference call with analysts on Tuesday, January 22, 2013, at 4:00 p.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 Monday, February 4, 2013, in archived format at the same web address or by calling [phone], passcode 10008303.

Trustmark is a financial services company providing banking and financial solutions through approximately 170 offices in 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 in this report 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 expected timing and likelihood of completion of the proposed merger with BancTrust Financial Group, Inc., (BancTrust), including the timing, receipt and terms and conditions of required regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, 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 and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect, the risk that the proposed merger with BancTrust is terminated prior to completion and results in significant transaction costs to Trustmark, 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
December 31, 2012
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES	12/31/2012			9/30/2012			12/31/2011			$ Change			% Change		$ Change				% Change
Securities AFS-taxable	$	2,466,738		$	2,409,292		$	2,241,361		$	57,446		2.4	%	$	225,377			10.1	%
Securities AFS-nontaxable		169,906			169,037			164,057			869		0.5	%		5,849			3.6	%
Securities HTM-taxable		26,510			28,333			41,106			(1,823	)	-6.4	%		(14,596	)		-35.5	%
Securities HTM-nontaxable		17,443			18,361			22,664			(918	)	-5.0	%		(5,221	)		-23.0	%
Total securities		2,680,597			2,625,023			2,469,188			55,574		2.1	%		211,409			8.6	%
Loans (including loans held for sale)		5,834,525			5,886,447			5,999,221			(51,922	)	-0.9	%		(164,696	)		-2.7	%
Acquired loans:
Noncovered loans		82,317			88,562			-			(6,245	)	-7.1	%		82,317			n/m
Covered loans		58,272			65,259			77,934			(6,987	)	-10.7	%		(19,662	)		-25.2	%
Fed funds sold and rev repos		8,747			6,583			10,516			2,164		32.9	%		(1,769	)		-16.8	%
Other earning assets		31,168			31,758			34,859			(590	)	-1.9	%		(3,691	)		-10.6	%
Total earning assets		8,695,626			8,703,632			8,591,718			(8,006	)	-0.1	%		103,908			1.2	%
Allowance for loan losses		(88,715	)		(86,865	)		(90,857	)		(1,850	)	2.1	%		2,142			-2.4	%
Cash and due from banks		238,976			236,566			221,278			2,410		1.0	%		17,698			8.0	%
Other assets		972,748			958,030			914,468			14,718		1.5	%		58,280			6.4	%
Total assets	$	9,818,635		$	9,811,363		$	9,636,607		$	7,272		0.1	%	$	182,028			1.9	%
Interest-bearing demand deposits	$	1,545,967		$	1,534,244		$	1,511,422		$	11,723		0.8	%	$	34,545			2.3	%
Savings deposits		2,275,569			2,348,413			2,067,431			(72,844	)	-3.1	%		208,138			10.1	%
Time deposits less than $100,000		1,120,735			1,150,620			1,212,190			(29,885	)	-2.6	%		(91,455	)		-7.5	%
Time deposits of $100,000 or more		760,363			781,926			844,565			(21,563	)	-2.8	%		(84,202	)		-10.0	%
Total interest-bearing deposits		5,702,634			5,815,203			5,635,608			(112,569	)	-1.9	%		67,026			1.2	%
Fed funds purchased and repos		388,007			374,885			526,740			13,122		3.5	%		(138,733	)		-26.3	%
Short-term borrowings		85,313			81,773			141,600			3,540		4.3	%		(56,287	)		-39.8	%
Long-term FHLB advances		-			-			197			-		n/m			(197	)		-100.0	%
Subordinated notes		49,866			49,858			49,833			8		0.0	%		33			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-		0.0	%		-			0.0	%
Total interest-bearing liabilities		6,287,676			6,383,575			6,415,834			(95,899	)	-1.5	%		(128,158	)		-2.0	%
Noninterest-bearing deposits		2,115,784			2,039,729			1,897,398			76,055		3.7	%		218,386			11.5	%
Other liabilities		126,953			114,454			100,274			12,499		10.9	%		26,679			26.6	%
Total liabilities		8,530,413			8,537,758			8,413,506			(7,345	)	-0.1	%		116,907			1.4	%
Shareholders' equity		1,288,222			1,273,605			1,223,101			14,617		1.1	%		65,121			5.3	%
Total liabilities and equity	$	9,818,635		$	9,811,363		$	9,636,607		$	7,272		0.1	%	$	182,028			1.9	%
										Linked Quarter					Year over Year
PERIOD END BALANCES	12/31/2012			9/30/2012			12/31/2011			$ Change			% Change		$ Change				% Change
Cash and due from banks	$	231,489		$	209,188		$	202,625		$	22,301		10.7	%	$	28,864			14.2	%
Fed funds sold and rev repos		7,046			5,295			9,258			1,751		33.1	%		(2,212	)		-23.9	%
Securities available for sale		2,657,745			2,724,446			2,468,993			(66,701	)	-2.4	%		188,752			7.6	%
Securities held to maturity		42,188			45,484			57,705			(3,296	)	-7.2	%		(15,517	)		-26.9	%
Loans held for sale (LHFS)		257,986			324,897			216,553			(66,911	)	-20.6	%		41,433			19.1	%
Loans held for investment (LHFI)		5,592,754			5,527,963			5,857,484			64,791		1.2	%		(264,730	)		-4.5	%
Allowance for loan losses		(78,738	)		(83,526	)		(89,518	)		4,788		-5.7	%		10,780			-12.0	%
Net LHFI		5,514,016			5,444,437			5,767,966			69,579		1.3	%		(253,950	)		-4.4	%
Acquired loans:
Noncovered loans		81,523			83,110			-			(1,587	)	-1.9	%		81,523			n/m
Covered loans		52,041			64,503			76,804			(12,462	)	-19.3	%		(24,763	)		-32.2	%
Allowance for loan losses, acquired loans		(6,075	)		(4,343	)		(502	)		(1,732	)	39.9	%		(5,573	)		n/m
Net acquired loans		127,489			143,270			76,302			(15,781	)	-11.0	%		51,187			67.1	%
Net LHFI and acquired loans		5,641,505			5,587,707			5,844,268			53,798		1.0	%		(202,763	)		-3.5	%
Premises and equipment, net		154,841			155,467			142,582			(626	)	-0.4	%		12,259			8.6	%
Mortgage servicing rights		47,341			44,211			43,274			3,130		7.1	%		4,067			9.4	%
Goodwill		291,104			291,104			291,104			-		0.0	%		-			0.0	%
Identifiable intangible assets		17,306			18,327			14,076			(1,021	)	-5.6	%		3,230			22.9	%
Other real estate, excluding covered other real estate		78,189			82,475			79,053			(4,286	)	-5.2	%		(864	)		-1.1	%
Covered other real estate		5,741			5,722			6,331			19		0.3	%		(590	)		-9.3	%
FDIC indemnification asset		21,774			23,979			28,348			(2,205	)	-9.2	%		(6,574	)		-23.2	%
Other assets		374,412			353,857			322,837			20,555		5.8	%		51,575			16.0	%
Total assets	$	9,828,667		$	9,872,159		$	9,727,007		$	(43,492	)	-0.4	%	$	101,660			1.0	%
Deposits:
Noninterest-bearing	$	2,254,211		$	2,118,853		$	2,033,442		$	135,358		6.4	%	$	220,769			10.9	%
Interest-bearing		5,642,306			5,685,188			5,532,921			(42,882	)	-0.8	%		109,385			2.0	%
Total deposits		7,896,517			7,804,041			7,566,363			92,476		1.2	%		330,154			4.4	%
Fed funds purchased and repos		288,829			408,711			604,500			(119,882	)	-29.3	%		(315,671	)		-52.2	%
Short-term borrowings		86,920			83,612			87,628			3,308		4.0	%		(708	)		-0.8	%
Subordinated notes		49,871			49,863			49,839			8		0.0	%		32			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-		0.0	%		-			0.0	%
Other liabilities		157,305			186,061			141,784			(28,756	)	-15.5	%		15,521			10.9	%
Total liabilities		8,541,298			8,594,144			8,511,970			(52,846	)	-0.6	%		29,328			0.3	%
Common stock		13,506			13,496			13,364			10		0.1	%		142			1.1	%
Capital surplus		285,905			284,089			266,026			1,816		0.6	%		19,879			7.5	%
Retained earnings		984,563			973,182			932,526			11,381		1.2	%		52,037			5.6	%
Accum other comprehensive income, net of tax		3,395			7,248			3,121			(3,853	)	-53.2	%		274			8.8	%
Total shareholders' equity		1,287,369			1,278,015			1,215,037			9,354		0.7	%		72,332			6.0	%
Total liabilities and equity	$	9,828,667		$	9,872,159		$	9,727,007		$	(43,492	)	-0.4	%	$	101,660			1.0	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2012
($ in thousands except per share data)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
INCOME STATEMENTS	12/31/2012			9/30/2012			12/31/2011			$ Change			% Change		$ Change				% Change
Interest and fees on loans-FTE	$	74,848		$	77,783		$	82,230		$	(2,935	)	-3.8	%	$	(7,382	)		-9.0	%
Interest on securities-taxable		15,305			15,909			17,362			(604	)	-3.8	%		(2,057	)		-11.8	%
Interest on securities-tax exempt-FTE		2,066			2,089			2,133			(23	)	-1.1	%		(67	)		-3.1	%
Interest on fed funds sold and rev repos		9			6			10			3		50.0	%		(1	)		-10.0	%
Other interest income		337			339			327			(2	)	-0.6	%		10			3.1	%
Total interest income-FTE		92,565			96,126			102,062			(3,561	)	-3.7	%		(9,497	)		-9.3	%
Interest on deposits		5,061			5,725			7,728			(664	)	-11.6	%		(2,667	)		-34.5	%
Interest on fed funds pch and repos		140			135			195			5		3.7	%		(55	)		-28.2	%
Other interest expense		1,346			1,358			1,418			(12	)	-0.9	%		(72	)		-5.1	%
Total interest expense		6,547			7,218			9,341			(671	)	-9.3	%		(2,794	)		-29.9	%
Net interest income-FTE		86,018			88,908			92,721			(2,890	)	-3.3	%		(6,703	)		-7.2	%
Provision for loan losses, LHFI		(535	)		3,358			6,073			(3,893	)	n/m			(6,608	)		n/m
Provision for loan losses, acquired loans		1,945			2,105			624			(160	)	-7.6	%		1,321			n/m
Net interest income after provision-FTE		84,608			83,445			86,024			1,163		1.4	%		(1,416	)		-1.6	%
Service charges on deposit accounts		12,391			13,135			13,269			(744	)	-5.7	%		(878	)		-6.6	%
Insurance commissions		6,887			7,533			6,076			(646	)	-8.6	%		811			13.3	%
Wealth management		6,181			5,612			5,223			569		10.1	%		958			18.3	%
Bank card and other fees		7,978			6,924			7,112			1,054		15.2	%		866			12.2	%
Mortgage banking, net		11,331			11,150			6,038			181		1.6	%		5,293			87.7	%
Other, net		(2,007	)		512			(4,928	)		(2,519	)	n/m			2,921			-59.3	%
Nonint inc-excl sec gains (losses), net		42,761			44,866			32,790			(2,105	)	-4.7	%		9,971			30.4	%
Security gains (losses), net		18			(1	)		(11	)		19		n/m			29			n/m
Total noninterest income		42,779			44,865			32,779			(2,086	)	-4.6	%		10,000			30.5	%
Salaries and employee benefits		49,724			47,404			45,616			2,320		4.9	%		4,108			9.0	%
Services and fees		12,572			11,682			11,323			890		7.6	%		1,249			11.0	%
Net occupancy-premises		5,023			5,352			5,038			(329	)	-6.1	%		(15	)		-0.3	%
Equipment expense		5,288			5,095			5,139			193		3.8	%		149			2.9	%
FDIC assessment expense		1,075			1,826			1,484			(751	)	-41.1	%		(409	)		-27.6	%
ORE/Foreclosure expense		3,173			1,702			2,760			1,471		86.4	%		413			15.0	%
Other expense		10,454			10,399			11,643			55		0.5	%		(1,189	)		-10.2	%
Total noninterest expense		87,309			83,460			83,003			3,849		4.6	%		4,306			5.2	%
Income before income taxes and tax eq adj		40,078			44,850			35,800			(4,772	)	-10.6	%		4,278			11.9	%
Tax equivalent adjustment		3,699			3,629			3,663			70		1.9	%		36			1.0	%
Income before income taxes		36,379			41,221			32,137			(4,842	)	-11.7	%		4,242			13.2	%
Income taxes		8,669			11,317			7,879			(2,648	)	-23.4	%		790			10.0	%
Net income available to common shareholders	$	27,710		$	29,904		$	24,258		$	(2,194	)	-7.3	%	$	3,452			14.2	%
Per common share data
Earnings per share - basic	$	0.43		$	0.46		$	0.38		$	(0.03	)	-6.5	%	$	0.05			13.2	%
Earnings per share - diluted	$	0.43		$	0.46		$	0.38		$	(0.03	)	-6.5	%	$	0.05			13.2	%
Dividends per share	$	0.23		$	0.23		$	0.23		$	-		0.0	%	$	-			0.0	%
Weighted average common shares outstanding
Basic		64,785,457			64,778,329			64,122,188
Diluted		65,007,281			64,992,614			64,330,242
Period end common shares outstanding		64,820,414			64,779,937			64,142,498
OTHER FINANCIAL DATA
Return on common equity		8.56	%		9.34	%		7.87	%
Return on average tangible common equity		11.51	%		12.61	%		10.70	%
Return on equity		8.56	%		9.34	%		7.87	%
Return on assets		1.12	%		1.21	%		1.00	%
Interest margin - Yield - FTE		4.23	%		4.39	%		4.71	%
Interest margin - Cost		0.30	%		0.33	%		0.43	%
Net interest margin - FTE		3.94	%		4.06	%		4.28	%
Efficiency ratio (1)		67.80	%		62.39	%		66.13	%
Full-time equivalent employees		2,666			2,632			2,537
COMMON STOCK PERFORMANCE
Market value-Close	$	22.46		$	24.34		$	24.29
Common book value	$	19.86		$	19.73		$	18.94
Tangible common book value	$	15.10		$	14.95		$	14.18
(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
December 31, 2012
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)	12/31/2012			9/30/2012			12/31/2011			$ Change			% Change		$ Change				% Change
Nonaccrual loans
Florida	$	19,314		$	21,456		$	23,002		$	(2,142	)	-10.0	%	$	(3,688	)		-16.0	%
Mississippi (2)		38,960			32,041			46,746			6,919		21.6	%		(7,786	)		-16.7	%
Tennessee (3)		8,401			7,388			15,791			1,013		13.7	%		(7,390	)		-46.8	%
Texas		15,688			19,773			24,919			(4,085	)	-20.7	%		(9,231	)		-37.0	%
Total nonaccrual loans		82,363			80,658			110,458			1,705		2.1	%		(28,095	)		-25.4	%
Other real estate
Florida		18,569			22,340			29,963			(3,771	)	-16.9	%		(11,394	)		-38.0	%
Mississippi (2)		27,771			27,113			19,483			658		2.4	%		8,288			42.5	%
Tennessee (3)		17,589			18,545			16,879			(956	)	-5.2	%		710			4.2	%
Texas		14,260			14,477			12,728			(217	)	-1.5	%		1,532			12.0	%
Total other real estate		78,189			82,475			79,053			(4,286	)	-5.2	%		(864	)		-1.1	%
Total nonperforming assets	$	160,552		$	163,133		$	189,511		$	(2,581	)	-1.6	%	$	(28,959	)		-15.3	%
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	6,378		$	5,699		$	4,230		$	679		11.9	%	$	2,148			50.8	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	43,073		$	39,492		$	39,379		$	3,581		9.1	%	$	3,694			9.4	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (4)	12/31/2012			9/30/2012			12/31/2011			$ Change			% Change		$ Change				% Change
Beginning Balance	$	83,526		$	84,809		$	89,463		$	(1,283	)	-1.5	%	$	(5,937	)		-6.6	%
Provision for loan losses		(535	)		3,358			6,073			(3,893	)	n/m			(6,608	)		n/m
Charge-offs		(8,829	)		(7,907	)		(8,457	)		(922	)	11.7	%		(372	)		4.4	%
Recoveries		4,576			3,266			2,439			1,310		40.1	%		2,137			87.6	%
Net charge-offs		(4,253	)		(4,641	)		(6,018	)		388		-8.4	%		1,765			-29.3	%
Ending Balance	$	78,738		$	83,526		$	89,518		$	(4,788	)	-5.7	%	$	(10,780	)		-12.0	%
PROVISION FOR LOAN LOSSES (4)																		`
Florida	$	(706	)	$	7		$	4,797		$	(713	)	n/m		$	(5,503	)		n/m
Mississippi (2)		2,031			466			3,783			1,565		n/m			(1,752	)		-46.3	%
Tennessee (3)		(1,037	)		687			(885	)		(1,724	)	n/m			(152	)		17.2	%
Texas		(823	)		2,198			(1,622	)		(3,021	)	n/m			799			-49.3	%
Total provision for loan losses	$	(535	)	$	3,358		$	6,073		$	(3,893	)	n/m		$	(6,608	)		n/m
NET CHARGE-OFFS (4)
Florida	$	(237	)	$	(488	)	$	2,576		$	251		-51.4	%	$	(2,813	)		n/m
Mississippi (2)		874			4,726			2,556			(3,852	)	-81.5	%		(1,682	)		-65.8	%
Tennessee (3)		(43	)		438			773			(481	)	n/m			(816	)		n/m
Texas		3,659			(35	)		113			3,694		n/m			3,546			n/m
Total net charge-offs	$	4,253		$	4,641		$	6,018		$	(388	)	-8.4	%	$	(1,765	)		-29.3	%
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.29	%		0.31	%		0.40	%
Provision for loan losses/average loans		-0.04	%		0.23	%		0.40	%
Nonperforming loans/total loans (incl LHFS)		1.41	%		1.38	%		1.82	%
Nonperforming assets/total loans (incl LHFS)		2.74	%		2.79	%		3.12	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.71	%		2.75	%		3.08	%
ALL/total loans (excl LHFS)		1.41	%		1.51	%		1.53	%
ALL-commercial/total commercial loans		1.59	%		1.79	%		1.91	%
ALL-consumer/total consumer and home mortgage loans		0.97	%		0.84	%		0.76	%
ALL/nonperforming loans		95.60	%		103.56	%		81.04	%
ALL/nonperforming loans -
(excl impaired loans)		174.46	%		174.09	%		194.19	%
CAPITAL RATIOS
Total equity/total assets		13.10	%		12.95	%		12.49	%
Common equity/total assets		13.10	%		12.95	%		12.49	%
Tangible common equity/tangible assets		10.28	%		10.13	%		9.66	%
Tangible common equity/risk-weighted assets		14.56	%		14.49	%		13.83	%
Tier 1 leverage ratio		10.97	%		10.83	%		10.43	%
Tier 1 common risk-based capital ratio		14.63	%		14.50	%		13.90	%
Tier 1 risk-based capital ratio		15.53	%		15.40	%		14.81	%
Total risk-based capital ratio		17.22	%		17.25	%		16.67	%
(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
December 31, 2012
($ in thousands)
(unaudited)
	Quarter Ended															Year Ended
AVERAGE BALANCES	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011			12/31/2012			12/31/2011
Securities AFS-taxable	$	2,466,738		$	2,409,292		$	2,341,475		$	2,327,572		$	2,241,361		$	2,386,552		$	2,146,773
Securities AFS-nontaxable		169,906			169,037			167,287			160,870			164,057			166,790			157,879
Securities HTM-taxable		26,510			28,333			30,136			33,270			41,106			29,551			66,164
Securities HTM-nontaxable		17,443			18,361			19,378			21,598			22,664			19,188			24,891
Total securities		2,680,597			2,625,023			2,558,276			2,543,310			2,469,188			2,602,081			2,395,707
Loans (including loans held for sale)		5,834,525			5,886,447			5,938,168			6,014,133			5,999,221			5,918,002			6,033,624
Acquired loans:
Noncovered loans		82,317			88,562			97,341			19,931			-			72,111			-
Covered loans		58,272			65,259			70,217			75,612			77,934			67,310			60,180
Fed funds sold and rev repos		8,747			6,583			5,309			9,568			10,516			7,552			7,871
Other earning assets		31,168			31,758			29,654			34,102			34,859			31,669			36,719
Total earning assets		8,695,626			8,703,632			8,698,965			8,696,656			8,591,718			8,698,725			8,534,101
Allowance for loan losses		(88,715	)		(86,865	)		(92,223	)		(92,062	)		(90,857	)		(89,954	)		(92,621	)
Cash and due from banks		238,976			236,566			272,283			232,139			221,278			244,952			219,058
Other assets		972,748			958,030			947,914			918,273			914,468			949,328			922,905
Total assets	$	9,818,635		$	9,811,363		$	9,826,939		$	9,755,006		$	9,636,607		$	9,803,051		$	9,583,443
Interest-bearing demand deposits	$	1,545,967		$	1,534,244		$	1,545,203		$	1,545,045		$	1,511,422		$	1,542,601		$	1,528,963
Savings deposits		2,275,569			2,348,413			2,467,546			2,339,166			2,067,431			2,357,424			2,131,057
Time deposits less than $100,000		1,120,735			1,150,620			1,169,532			1,190,888			1,212,190			1,157,822			1,227,588
Time deposits of $100,000 or more		760,363			781,926			813,530			825,214			844,565			795,126			875,816
Total interest-bearing deposits		5,702,634			5,815,203			5,995,811			5,900,313			5,635,608			5,852,973			5,763,424
Fed funds purchased and repos		388,007			374,885			280,726			437,270			526,740			370,283			507,925
Short-term borrowings		85,313			81,773			80,275			84,797			141,600			83,042			142,984
Long-term FHLB advances		-			-			-			-			197			-			1,240
Subordinated notes		49,866			49,858			49,850			49,842			49,833			49,854			49,821
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		6,287,676			6,383,575			6,468,518			6,534,078			6,415,834			6,418,008			6,527,250
Noninterest-bearing deposits		2,115,784			2,039,729			1,998,077			1,869,758			1,897,398			2,006,230			1,761,946
Other liabilities		126,953			114,454			104,628			122,668			100,274			117,196			99,974
Total liabilities		8,530,413			8,537,758			8,571,223			8,526,504			8,413,506			8,541,434			8,389,170
Shareholders' equity		1,288,222			1,273,605			1,255,716			1,228,502			1,223,101			1,261,617			1,194,273
Total liabilities and equity	$	9,818,635		$	9,811,363		$	9,826,939		$	9,755,006		$	9,636,607		$	9,803,051		$	9,583,443
PERIOD END BALANCES	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011
Cash and due from banks	$	231,489		$	209,188		$	284,735		$	213,500		$	202,625
Fed funds sold and rev repos		7,046			5,295			6,725			6,301			9,258
Securities available for sale		2,657,745			2,724,446			2,592,807			2,595,664			2,468,993
Securities held to maturity		42,188			45,484			47,867			52,010			57,705
Loans held for sale (LHFS)		257,986			324,897			286,221			227,449			216,553
Loans held for investment (LHFI)		5,592,754			5,527,963			5,650,548			5,774,753			5,857,484
Allowance for loan losses		(78,738	)		(83,526	)		(84,809	)		(90,879	)		(89,518	)
Net LHFI		5,514,016			5,444,437			5,565,739			5,683,874			5,767,966
Acquired loans:
Noncovered loans		81,523			83,110			94,013			100,669			-
Covered loans		52,041			64,503			66,015			74,419			76,804
Allowance for loan losses, acquired loans		(6,075	)		(4,343	)		(1,526	)		(773	)		(502	)
Net acquired loans		127,489			143,270			158,502			174,315			76,302
Net LHFI and acquired loans		5,641,505			5,587,707			5,724,241			5,858,189			5,844,268
Premises and equipment, net		154,841			155,467			156,089			156,158			142,582
Mortgage servicing rights		47,341			44,211			43,580			45,893			43,274
Goodwill		291,104			291,104			291,104			291,104			291,104
Identifiable intangible assets		17,306			18,327			19,356			18,821			14,076
Other real estate, excluding covered other real estate		78,189			82,475			73,673			75,742			79,053
Covered other real estate		5,741			5,722			6,482			5,824			6,331
FDIC indemnification asset		21,774			23,979			25,309			28,260			28,348
Other assets		374,412			353,857			332,657			356,678			322,837
Total assets	$	9,828,667		$	9,872,159		$	9,890,846		$	9,931,593		$	9,727,007
Deposits:
Noninterest-bearing	$	2,254,211		$	2,118,853		$	2,063,261		$	2,024,290		$	2,033,442
Interest-bearing		5,642,306			5,685,188			5,932,596			6,066,456			5,532,921
Total deposits		7,896,517			7,804,041			7,995,857			8,090,746			7,566,363
Fed funds purchased and repos		288,829			408,711			297,669			254,878			604,500
Short-term borrowings		86,920			83,612			78,594			82,023			87,628
Subordinated notes		49,871			49,863			49,855			49,847			49,839
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		157,305			186,061			148,520			150,723			141,784
Total liabilities		8,541,298			8,594,144			8,632,351			8,690,073			8,511,970
Common stock		13,506			13,496			13,496			13,494			13,364
Capital surplus		285,905			284,089			283,023			282,388			266,026
Retained earnings		984,563			973,182			958,322			944,101			932,526
Accum other comprehensive income, net of tax		3,395			7,248			3,654			1,537			3,121
Total shareholders' equity		1,287,369			1,278,015			1,258,495			1,241,520			1,215,037
Total liabilities and equity	$	9,828,667		$	9,872,159		$	9,890,846		$	9,931,593		$	9,727,007
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2012
($ in thousands except per share data)
(unaudited)
	Quarter Ended															Year Ended
INCOME STATEMENTS	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011			12/31/2012			12/31/2011
Interest and fees on loans-FTE	$	74,848		$	77,783		$	78,046		$	78,718		$	82,230		$	309,395		$	320,804
Interest on securities-taxable		15,305			15,909			17,352			18,384			17,362			66,950			75,843
Interest on securities-tax exempt-FTE		2,066			2,089			2,086			2,102			2,133			8,343			8,531
Interest on fed funds sold and rev repos		9			6			5			6			10			26			30
Other interest income		337			339			336			330			327			1,342			1,321
Total interest income-FTE		92,565			96,126			97,825			99,540			102,062			386,056			406,529
Interest on deposits		5,061			5,725			6,465			7,353			7,728			24,604			36,294
Interest on fed funds pch and repos		140			135			142			171			195			588			965
Other interest expense		1,346			1,358			1,359			1,414			1,418			5,477			5,777
Total interest expense		6,547			7,218			7,966			8,938			9,341			30,669			43,036
Net interest income-FTE		86,018			88,908			89,859			90,602			92,721			355,387			363,493
Provision for loan losses, LHFI		(535	)		3,358			650			3,293			6,073			6,766			29,704
Provision for loan losses, acquired loans		1,945			2,105			1,672			(194	)		624			5,528			624
Net interest income after provision-FTE		84,608			83,445			87,537			87,503			86,024			343,093			333,165
Service charges on deposit accounts		12,391			13,135			12,614			12,211			13,269			50,351			51,707
Insurance commissions		6,887			7,533			7,179			6,606			6,076			28,205			26,966
Wealth management		6,181			5,612			5,762			5,501			5,223			23,056			22,962
Bank card and other fees		7,978			6,924			8,179			7,364			7,112			30,445			27,474
Mortgage banking, net		11,331			11,150			11,184			7,295			6,038			40,960			26,812
Other, net		(2,007	)		512			(1,150	)		3,758			(4,928	)		1,113			3,853
Nonint inc-excl sec gains (losses), net		42,761			44,866			43,768			42,735			32,790			174,130			159,774
Security gains (losses), net		18			(1	)		(8	)		1,050			(11	)		1,059			80
Total noninterest income		42,779			44,865			43,760			43,785			32,779			175,189			159,854
Salaries and employee benefits		49,724			47,404			46,959			46,432			45,616			190,519			178,556
Services and fees		12,572			11,682			11,750			10,747			11,323			46,751			43,858
Net occupancy-premises		5,023			5,352			4,954			4,938			5,038			20,267			20,254
Equipment expense		5,288			5,095			5,183			4,912			5,139			20,478			20,177
FDIC assessment expense		1,075			1,826			1,826			1,775			1,484			6,502			7,984
ORE/Foreclosure expense		3,173			1,702			2,388			3,902			2,760			11,165			16,293
Other expense		10,454			10,399			14,899			13,068			11,643			48,820			42,728
Total noninterest expense		87,309			83,460			87,959			85,774			83,003			344,502			329,850
Income before income taxes and tax eq adj		40,078			44,850			43,338			45,514			35,800			173,780			163,169
Tax equivalent adjustment		3,699			3,629			3,411			3,658			3,663			14,397			14,550
Income before income taxes		36,379			41,221			39,927			41,856			32,137			159,383			148,619
Income taxes		8,669			11,317			10,578			11,536			7,879			42,100			41,778
Net income available to common shareholders	$	27,710		$	29,904		$	29,349		$	30,320		$	24,258		$	117,283		$	106,841
Per common share data
Earnings per share - basic	$	0.43		$	0.46		$	0.45		$	0.47		$	0.38		$	1.81		$	1.67
Earnings per share - diluted	$	0.43		$	0.46		$	0.45		$	0.47		$	0.38		$	1.81		$	1.66
Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23		$	0.92		$	0.92
Weighted average common shares outstanding
Basic		64,785,457			64,778,329			64,771,530			64,297,038			64,122,188			64,658,765			64,066,599
Diluted		65,007,281			64,992,614			64,938,697			64,477,277			64,330,242			64,850,550			64,261,145
Period end common shares outstanding		64,820,414			64,779,937			64,775,694			64,765,581			64,142,498			64,820,414			64,142,498
OTHER FINANCIAL DATA
Return on common equity		8.56	%		9.34	%		9.40	%		9.93	%		7.87	%		9.30	%		8.95	%
Return on average tangible common equity		11.51	%		12.61	%		12.74	%		13.41	%		10.70	%		12.55	%		12.25	%
Return on equity		8.56	%		9.34	%		9.40	%		9.93	%		7.87	%		9.30	%		8.95	%
Return on assets		1.12	%		1.21	%		1.20	%		1.25	%		1.00	%		1.20	%		1.11	%
Interest margin - Yield - FTE		4.23	%		4.39	%		4.52	%		4.60	%		4.71	%		4.44	%		4.76	%
Interest margin - Cost		0.30	%		0.33	%		0.37	%		0.41	%		0.43	%		0.35	%		0.50	%
Net interest margin - FTE		3.94	%		4.06	%		4.15	%		4.19	%		4.28	%		4.09	%		4.26	%
Efficiency ratio (1)		67.80	%		62.39	%		66.26	%		63.70	%		66.13	%		65.02	%		63.95	%
Full-time equivalent employees		2,666			2,632			2,598			2,611			2,537
COMMON STOCK PERFORMANCE
Market value-Close	$	22.46		$	24.34		$	24.48		$	24.98		$	24.29
Common book value	$	19.86		$	19.73		$	19.43		$	19.17		$	18.94
Tangible common book value	$	15.10		$	14.95		$	14.64		$	14.38		$	14.18
(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
December 31, 2012
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011
Nonaccrual loans
Florida	$	19,314		$	21,456		$	22,260		$	22,174		$	23,002
Mississippi (2)		38,960			32,041			47,322			48,648			46,746
Tennessee (3)		8,401			7,388			11,171			13,972			15,791
Texas		15,688			19,773			18,927			20,979			24,919
Total nonaccrual loans		82,363			80,658			99,680			105,773			110,458
Other real estate
Florida		18,569			22,340			23,324			26,226			29,963
Mississippi (2)		27,771			27,113			19,511			19,240			19,483
Tennessee (3)		17,589			18,545			18,850			17,665			16,879
Texas		14,260			14,477			11,988			12,611			12,728
Total other real estate		78,189			82,475			73,673			75,742			79,053
Total nonperforming assets	$	160,552		$	163,133		$	173,353		$	181,515		$	189,511
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	6,378		$	5,699		$	1,843		$	1,553		$	4,230
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	43,073		$	39,492		$	35,270		$	39,496		$	39,379
	Quarter Ended															Year Ended
ALLOWANCE FOR LOAN LOSSES (4)	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011			12/31/2012			12/31/2011
Beginning Balance	$	83,526		$	84,809		$	90,879		$	89,518		$	89,463		$	89,518		$	93,510
Provision for loan losses		(535	)		3,358			650			3,293			6,073			6,766			29,704
Charge-offs		(8,829	)		(7,907	)		(9,264	)		(5,376	)		(8,457	)		(31,376	)		(45,769	)
Recoveries		4,576			3,266			2,544			3,444			2,439			13,830			12,073
Net charge-offs		(4,253	)		(4,641	)		(6,720	)		(1,932	)		(6,018	)		(17,546	)		(33,696	)
Ending Balance	$	78,738		$	83,526		$	84,809		$	90,879		$	89,518		$	78,738		$	89,518
PROVISION FOR LOAN LOSSES (4)
Florida	$	(706	)	$	7		$	(770	)	$	739		$	4,797		$	(730	)	$	16,500
Mississippi (2)		2,031			466			1,141			4,152			3,783			7,790			9,917
Tennessee (3)		(1,037	)		687			839			(29	)		(885	)		460			786
Texas		(823	)		2,198			(560	)		(1,569	)		(1,622	)		(754	)		2,501
Total provision for loan losses	$	(535	)	$	3,358		$	650		$	3,293		$	6,073		$	6,766		$	29,704
NET CHARGE-OFFS (4)
Florida	$	(237	)	$	(488	)	$	4,491		$	1,495		$	2,576		$	5,261		$	18,843
Mississippi (2)		874			4,726			1,751			251			2,556			7,602			8,355
Tennessee (3)		(43	)		438			536			223			773			1,154			2,575
Texas		3,659			(35	)		(58	)		(37	)		113			3,529			3,923
Total net charge-offs	$	4,253		$	4,641		$	6,720		$	1,932		$	6,018		$	17,546		$	33,696
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.29	%		0.31	%		0.46	%		0.13	%		0.40	%		0.30	%		0.56	%
Provision for loan losses/average loans		-0.04	%		0.23	%		0.04	%		0.22	%		0.40	%		0.11	%		0.49	%
Nonperforming loans/total loans (incl LHFS)		1.41	%		1.38	%		1.68	%		1.76	%		1.82	%
Nonperforming assets/total loans (incl LHFS)		2.74	%		2.79	%		2.92	%		3.02	%		3.12	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.71	%		2.75	%		2.88	%		2.99	%		3.08	%
ALL/total loans (excl LHFS)		1.41	%		1.51	%		1.50	%		1.57	%		1.53	%
ALL-commercial/total commercial loans		1.59	%		1.79	%		1.81	%		1.97	%		1.91	%
ALL-consumer/total consumer and home mortgage loans		0.97	%		0.84	%		0.81	%		0.75	%		0.76	%
ALL/nonperforming loans		95.60	%		103.56	%		85.08	%		85.92	%		81.04	%
ALL/nonperforming loans -
(excl impaired loans)		174.46	%		174.09	%		186.45	%		181.11	%		194.19	%
CAPITAL RATIOS
Total equity/total assets		13.10	%		12.95	%		12.72	%		12.50	%		12.49	%
Common equity/total assets		13.10	%		12.95	%		12.72	%		12.50	%		12.49	%
Tangible common equity/tangible assets		10.28	%		10.13	%		9.90	%		9.68	%		9.66	%
Tangible common equity/risk-weighted assets		14.56	%		14.49	%		14.30	%		13.89	%		13.83	%
Tier 1 leverage ratio		10.97	%		10.83	%		10.63	%		10.55	%		10.43	%
Tier 1 common risk-based capital ratio		14.63	%		14.50	%		14.36	%		13.98	%		13.90	%
Tier 1 risk-based capital ratio		15.53	%		15.40	%		15.26	%		14.87	%		14.81	%
Total risk-based capital ratio		17.22	%		17.25	%		17.12	%		16.72	%		16.67	%
(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

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2012

($ in thousands)

(unaudited)

Note 1 – Business Combinations

BancTrust Financial Group, Inc.

On May 29, 2012, Trustmark Corporation (Trustmark) and BancTrust Financial Group, Inc. (BancTrust) announced the signing of a definitive agreement pursuant to which BancTrust will merge into Trustmark. BancTrust has 49 offices throughout Alabama and the Florida Panhandle with $1.2 billion in loans and $1.8 billion in deposits at September 30, 2012.

Under the terms of the definitive agreement, which was approved unanimously by the Boards of Directors of both companies, holders of BancTrust common stock will receive 0.125 of a share of Trustmark common stock for each share of BancTrust common stock in a tax-free exchange. Trustmark will issue approximately 2.25 million shares of its common stock for all issued and outstanding shares of BancTrust common stock. Trustmark intends to repurchase the $50.0 million of BancTrust preferred stock and associated warrant issued to the U.S. Department of Treasury under the Capital Purchase Program.

BancTrust shareholders approved the merger on September 26, 2012. Regulatory approval is still pending. On October 9, 2012, Trustmark and BancTrust announced that the definitive agreement dated May 28, 2012, pursuant to which BancTrust will merge into Trustmark, has been amended to extend the latest possible closing date for the merger from December 31, 2012, to February 28, 2013. This extension provides additional time in which to receive regulatory approval as well as to ensure a smooth transition and operational conversion to Trustmark systems in early 2013. All other material aspects of the definitive agreement remain unchanged.

Bay Bank & Trust Company

On March 16, 2012, Trustmark National Bank (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 valued at $12 million. This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805, “Business Combinations.” 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, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

Note 1 – Business Combinations (continued)

Heritage Banking Group

On April 15, 2011, the Mississippi Department of Banking and Consumer Finance closed the Heritage Banking Group (Heritage), a 90-year old financial institution headquartered in Carthage, Mississippi, and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. On the same date, Trustmark National Bank (TNB) entered into a purchase and assumption agreement with the FDIC in which TNB agreed to assume all of the deposits and purchased essentially all of the assets of Heritage. The FDIC and TNB entered into a loss-share transaction on approximately $151.9 million of Heritage assets, which covers substantially all loans and all other real estate. Under the loss-share agreement, the FDIC will cover 80% of covered loan and other real estate losses incurred. Because of the loss protection provided by the FDIC, the risk characteristics of the Heritage loans and other real estate covered by the loss-share agreement are significantly different from those assets not covered by this agreement. As a result, Trustmark will refer to loans and other real estate subject to the loss-share agreement as “covered” while loans and other real estate that are not subject to the loss-share agreement will be referred to as “noncovered” or “excluding covered.” The loss-share agreement applicable to single family residential mortgage loans and related foreclosed real estate provides for FDIC loss sharing and TNB’s reimbursement to the FDIC for recoveries of covered losses for ten years from the date on which the loss-share agreement was entered. The loss-share agreement applicable to commercial loans and related foreclosed real estate provides for FDIC loss sharing for five years from the date on which the loss-share agreement was entered and TNB’s reimbursement to the FDIC for recoveries of covered losses for an additional three years thereafter.

The assets purchased and liabilities assumed for the Heritage acquisition have been accounted for under the acquisition method of accounting (formerly the purchase method). The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date.

The bargain purchase gain from the Heritage acquisition represents the net of the estimated fair value of the assets acquired and liabilities assumed and is influenced significantly by the FDIC-assisted transaction process. Under the FDIC-assisted transaction process, only certain assets and liabilities are transferred to the acquirer and, depending on the nature and amount of the acquirer's bid, the FDIC may be required to make a cash payment to the acquirer. The pretax gain of $7.5 million ($4.6 million after tax) recognized by Trustmark is considered a bargain purchase transaction under FASB ASC Topic 805. The gain was recognized as other noninterest income in Trustmark’s consolidated statements of income for the year ended December 31, 2011.

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):

	12/31/2012		9/30/2012		6/30/2012		3/31/2012		12/31/2011
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	10	$	18	$	22	$	31	$	3
Issued by U.S. Government sponsored agencies		105,735		60,671		72,923		101,941		64,802
Obligations of states and political subdivisions		215,761		215,900		213,826		208,234		202,827
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		19,902		21,352		22,367		20,064		12,445
Issued by FNMA and FHLMC		208,564		237,886		264,018		286,169		347,932
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,466,366		1,565,290		1,570,226		1,619,920		1,614,965
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		399,780		381,207		354,453		330,318		226,019
Asset-backed securities / structured financial products		241,627		242,122		91,293		23,693		-
Corporate debt securities		-		-		3,679		5,294		-
Total securities available for sale	$	2,657,745	$	2,724,446	$	2,592,807	$	2,595,664	$	2,468,993
SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions	$	36,206	$	37,669	$	38,351	$	40,393	$	42,619
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		3,245		3,435		3,745		4,089		4,538
Issued by FNMA and FHLMC		572		580		583		586		588
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		-		1,624		3,000		4,743		7,749
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		2,165		2,176		2,188		2,199		2,211
Total securities held to maturity	$	42,188	$	45,484	$	47,867	$	52,010	$	57,705

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 89% 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)	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011
Loans secured by real estate:
Construction, land development and other land loans	$	468,975		$	460,599		$	464,349		$	465,486		$	474,082
Secured by 1-4 family residential properties		1,497,480			1,511,514			1,621,865			1,722,357			1,760,930
Secured by nonfarm, nonresidential properties		1,410,264			1,397,536			1,392,293			1,419,902			1,425,774
Other real estate secured		189,949			184,804			192,376			199,400			204,849
Commercial and industrial loans		1,169,513			1,163,681			1,142,282			1,142,813			1,139,365
Consumer loans		171,660			181,896			196,718			210,713			243,756
Other loans		684,913			627,933			640,665			614,082			608,728
LHFI		5,592,754			5,527,963			5,650,548			5,774,753			5,857,484
Allowance for loan losses		(78,738	)		(83,526	)		(84,809	)		(90,879	)		(89,518	)
Net LHFI	$	5,514,016		$	5,444,437		$	5,565,739		$	5,683,874		$	5,767,966
ACQUIRED NONCOVERED LOANS BY TYPE	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011
Loans secured by real estate:
Construction, land development and other land loans	$	10,056		$	11,504		$	13,154		$	14,346		$	-
Secured by 1-4 family residential properties		19,404			18,032			18,954			20,409			-
Secured by nonfarm, nonresidential properties		45,649			47,114			53,272			54,954			-
Other real estate secured		669			378			512			695			-
Commercial and industrial loans		3,035			3,371			4,822			5,732			-
Consumer loans		2,610			2,575			3,153			4,188			-
Other loans		100			136			146			345			-
Noncovered loans		81,523			83,110			94,013			100,669			-
Allowance for loan losses		(1,885	)		(817	)		(62	)		(37	)		-
Net noncovered loans	$	79,638		$	82,293		$	93,951		$	100,632		$	-
ACQUIRED COVERED LOANS BY TYPE	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011
Loans secured by real estate:
Construction, land development and other land loans	$	3,924		$	3,714		$	3,683		$	3,940		$	4,209
Secured by 1-4 family residential properties		23,990			24,949			27,218			30,221			31,874
Secured by nonfarm, nonresidential properties		18,407			28,291			27,464			30,737			30,889
Other real estate secured		3,567			4,198			4,580			5,087			5,126
Commercial and industrial loans		747			1,803			1,382			2,768			2,971
Consumer loans		177			172			205			206			290
Other loans		1,229			1,376			1,483			1,460			1,445
Covered loans		52,041			64,503			66,015			74,419			76,804
Allowance for loan losses		(4,190	)		(3,526	)		(1,464	)		(736	)		(502	)
Net covered loans	$	47,851		$	60,977		$	64,551		$	73,683		$	76,302

Note 3 – Loan Composition (continued)
	December 31, 2012
LHFI - COMPOSITION BY REGION (1)	Total		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	$	468,975	$	85,592	$	238,182	$	38,660	$	106,541
Secured by 1-4 family residential properties		1,497,480		50,598		1,281,057		141,613		24,212
Secured by nonfarm, nonresidential properties		1,410,264		144,718		750,771		173,472		341,303
Other real estate secured		189,949		9,391		146,729		5,957		27,872
Commercial and industrial loans		1,169,513		12,058		813,331		83,215		260,909
Consumer loans		171,660		1,769		148,005		18,466		3,420
Other loans		684,913		25,329		578,046		32,411		49,127
Loans	$	5,592,754	$	329,455	$	3,956,121	$	493,794	$	813,384
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	53,370	$	33,053	$	15,833	$	1,539	$	2,945
Development		80,184		9,399		49,479		4,467		16,839
Unimproved land		147,022		41,425		62,224		14,715		28,658
1-4 family construction		77,074		1,445		59,535		2,042		14,052
Other construction		111,325		270		51,111		15,897		44,047
Construction, land development and other land loans	$	468,975	$	85,592	$	238,182	$	38,660	$	106,541
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	162,229	$	41,379	$	65,160	$	23,491	$	32,199
Office		164,624		37,033		85,004		10,415		32,172
Nursing homes/assisted living		100,018		-		91,477		4,052		4,489
Hotel/motel		86,034		1,691		24,815		32,274		27,254
Industrial		55,317		8,262		12,553		369		34,133
Health care		15,589		-		10,331		130		5,128
Convenience stores		8,846		-		4,881		1,419		2,546
Other		144,489		14,565		71,628		6,327		51,969
Total income producing loans		737,146		102,930		365,849		78,477		189,890
Owner-occupied:
Office		110,149		13,143		68,545		4,928		23,533
Churches		80,918		3,128		45,665		27,102		5,023
Industrial warehouses		85,082		1,108		43,195		1,191		39,588
Health care		97,882		14,369		52,239		15,647		15,627
Convenience stores		59,848		1,747		37,441		3,923		16,737
Retail		36,929		3,720		24,318		2,989		5,902
Restaurants		32,287		987		24,991		4,761		1,548
Auto dealerships		14,342		437		11,993		1,851		61
Other		155,681		3,149		76,535		32,603		43,394
Total owner-occupied loans		673,118		41,788		384,922		94,995		151,413
Loans secured by nonfarm, nonresidential properties	$	1,410,264	$	144,718	$	750,771	$	173,472	$	341,303
(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										Year Ended
	12/31/2012		9/30/2012		6/30/2012		3/31/2012		12/31/2011		12/31/2012		12/31/2011
Securities – Taxable	2.44	%	2.60	%	2.94	%	3.13	%	3.02	%	2.77	%	3.43	%
Securities – Nontaxable	4.39	%	4.43	%	4.49	%	4.63	%	4.53	%	4.49	%	4.67	%
Securities – Total	2.58	%	2.73	%	3.06	%	3.24	%	3.13	%	2.89	%	3.52	%
Loans	4.98	%	5.12	%	5.14	%	5.18	%	5.37	%	5.11	%	5.26	%
FF Sold & Rev Repo	0.41	%	0.36	%	0.38	%	0.25	%	0.38	%	0.34	%	0.38	%
Other Earning Assets	4.30	%	4.25	%	4.56	%	3.89	%	3.72	%	4.24	%	3.60	%
Total Earning Assets	4.23	%	4.39	%	4.52	%	4.60	%	4.71	%	4.44	%	4.76	%
Interest-bearing Deposits	0.35	%	0.39	%	0.43	%	0.50	%	0.54	%	0.42	%	0.63	%
FF Pch & Repo	0.14	%	0.14	%	0.20	%	0.16	%	0.15	%	0.16	%	0.19	%
Other Borrowings	2.72	%	2.79	%	2.85	%	2.89	%	2.22	%	2.81	%	2.26	%
Total Interest-bearing Liabilities	0.41	%	0.45	%	0.50	%	0.55	%	0.58	%	0.48	%	0.66	%
Net interest margin	3.94	%	4.06	%	4.15	%	4.19	%	4.28	%	4.09	%	4.26	%

The net interest margin for the fourth quarter of 2012 totaled 3.94% compared to a net interest margin in the prior quarter of 4.06% resulting in a decrease of twelve basis points. The decrease is primarily due to the downward repricing of loans and securities partially offset by modest declines in the cost of interest-bearing deposits.

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 the MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting. 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 negative ineffectiveness of $3.4 million for the year ended December 31, 2012 compared to a net positive ineffectiveness of $4.4 million for the year ended December 31, 2011.

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

	Quarter Ended															Year Ended
	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011			12/31/2012			12/31/2011
Mortgage servicing income, net	$	4,441		$	3,984		$	3,891		$	3,886		$	3,725		$	16,202		$	14,790
Change in fair value-MSR from runoff		(2,631	)		(2,751	)		(2,320	)		(2,106	)		(2,122	)		(9,808	)		(6,907	)
Gain on sales of loans, net		12,034			9,114			6,302			6,469			4,633			33,919			11,952
Other, net		(1,789	)		2,608			3,139			64			133			4,022			2,542
Mortgage banking income before hedge ineffectiveness		12,055			12,955			11,012			8,313			6,369			44,335			22,377
Change in fair value-MSR from market changes		(418	)		(3,282	)		(5,926	)		248			(2,842	)		(9,378	)		(15,130	)
Change in fair value of derivatives		(306	)		1,477			6,098			(1,266	)		2,511			6,003			19,565
Net (negative) positive hedge ineffectiveness		(724	)		(1,805	)		172			(1,018	)		(331	)		(3,375	)		4,435
Mortgage banking, net	$	11,331		$	11,150		$	11,184		$	7,295		$	6,038		$	40,960		$	26,812

Note 6 – Other Noninterest Income and Expense

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

	Quarter Ended															Year Ended
	12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011			12/31/2012			12/31/2011
Partnership amortization for tax credit purposes	$	(3,202	)	$	(2,302	)	$	(1,491	)	$	(1,422	)	$	(2,690	)	$	(8,417	)	$	(6,366	)
Bargain purchase gain on acquisition		-			-			881			2,754			-			3,635			7,456
Decrease in FDIC indemnification asset		(743	)		(609	)		(2,289	)		(81	)		(4,157	)		(3,722	)		(4,157	)
Other miscellaneous income		1,938			3,423			1,749			2,507			1,919			9,617			6,920
Total other, net	$	(2,007	)	$	512		$	(1,150	)	$	3,758		$	(4,928	)	$	1,113		$	3,853

Note 6 – Other Noninterest Income and Expense (continued)

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 fourth quarter of 2012, other noninterest income included a write-down of the FDIC indemnification asset of $743 thousand 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										Year Ended
	12/31/2012		9/30/2012		6/30/2012		3/31/2012		12/31/2011		12/31/2012		12/31/2011
Loan expense	$	3,274	$	3,150	$	8,299	$	5,525	$	5,788	$	20,248	$	18,229
Non-routine transaction expenses on acquisition		-		-		-		1,917		-		1,917		-
Amortization of intangibles		1,022		1,028		1,028		710		799		3,788		3,131
Other miscellaneous expense		6,158		6,221		5,572		4,916		5,056		22,867		21,368
Total other expense	$	10,454	$	10,399	$	14,899	$	13,068	$	11,643	$	48,820	$	42,728

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. At December 31, 2012, the reserve for mortgage loan servicing putback expenses totaled $7.8 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 generally accepted accounting principles (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															Year Ended
		12/31/2012			9/30/2012			6/30/2012			3/31/2012			12/31/2011			12/31/2012			12/31/2011
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' common equity		$	1,288,222		$	1,273,605		$	1,255,716		$	1,228,502		$	1,223,101		$	1,261,617		$	1,194,273
Less:   Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(17,933	)		(18,971	)		(17,762	)		(14,703	)		(14,550	)		(17,348	)		(15,464	)
Total average tangible common equity		$	979,185		$	963,530		$	946,850		$	922,695		$	917,447		$	953,165		$	887,705
PERIOD END BALANCES
Total shareholders' common equity		$	1,287,369		$	1,278,015		$	1,258,495		$	1,241,520		$	1,215,037
Less:   Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(17,306	)		(18,327	)		(19,356	)		(18,821	)		(14,076	)
Total tangible common equity	(a)	$	978,959		$	968,584		$	948,035		$	931,595		$	909,857
TANGIBLE ASSETS
Total assets		$	9,828,667		$	9,872,159		$	9,890,846		$	9,931,593		$	9,727,007
Less:   Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(17,306	)		(18,327	)		(19,356	)		(18,821	)		(14,076	)
Total tangible assets	(b)	$	9,520,257		$	9,562,728		$	9,580,386		$	9,621,668		$	9,421,827
Risk-weighted assets	(c)	$	6,723,259		$	6,684,820		$	6,631,887		$	6,707,026		$	6,576,953
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders		$	27,710		$	29,904		$	29,349		$	30,320		$	24,258		$	117,283		$	106,841
Plus:Intangible amortization net of tax			631			635			635			438			493			2,339			1,945
Net income adjusted for intangible amortization		$	28,341		$	30,539		$	29,984		$	30,758		$	24,751		$	119,622		$	108,786
Period end common shares outstanding	(d)		64,820,414			64,779,937			64,775,694			64,765,581			64,142,498
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity ^1			11.51	%		12.61	%		12.74	%		13.41	%		10.70	%		12.55	%		12.25	%
Tangible common equity/tangible assets	(a)/(b)		10.28	%		10.13	%		9.90	%		9.68	%		9.66	%
Tangible common equity/risk-weighted assets	(a)/(c)		14.56	%		14.49	%		14.30	%		13.89	%		13.83	%
Tangible common book value	(a)/(d)*1,000	$	15.10		$	14.95		$	14.64		$	14.38		$	14.18
TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity		$	1,287,369		$	1,278,015		$	1,258,495		$	1,241,520		$	1,215,037
Eliminate qualifying AOCI			(3,395	)		(7,248	)		(3,654	)		(1,537	)		(3,121	)
Qualifying tier 1 capital			60,000			60,000			60,000			60,000			60,000
Disallowed goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Adj to goodwill allowed for deferred taxes			13,035			12,683			12,330			11,978			11,625
Other disallowed intangibles			(17,306	)		(18,327	)		(19,356	)		(18,821	)		(14,076	)
Disallowed servicing intangible			(4,734	)		(4,421	)		(4,358	)		(4,589	)		(4,327	)
Total tier 1 capital		$	1,043,865		$	1,029,598		$	1,012,353		$	997,447		$	974,034
Less:Qualifying tier 1 capital			(60,000	)		(60,000	)		(60,000	)		(60,000	)		(60,000	)
Total tier 1 common capital	(e)	$	983,865		$	969,598		$	952,353		$	937,447		$	914,034
Tier 1 common risk-based capital ratio	(e)/(c)		14.63	%		14.50	%		14.36	%		13.98	%		13.90	%
^1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity