Trustmark Corporation Announces Third Quarter 2011 Financial Results and Declares $0.23 Quarterly Cash Dividend

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) reported net income available to common shareholders of $27.0 million in the third quarter of 2011, which represented basic and diluted earnings per common share of $0.42. Trustmark’s performance during the quarter produced a return on average tangible common equity of 12.04% and a return on average assets of 1.12%. During the first nine months of 2011, Trustmark’s net income available to common shareholders totaled $82.6 million, which represented basic and diluted earnings per share of $1.29. Trustmark’s performance during the first nine months of 2011 resulted in a return on tangible common equity of 12.80% and a return on average assets of 1.15%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share. The dividend is payable December 15, 2011, to shareholders of record on December 1, 2011.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50040940&lang=en

Gerard R. Host, President and CEO, stated, “Trustmark continued to post strong financial performance as reflected in expanded profitability in our mortgage banking, wealth management and insurance businesses. Our banking business also experienced solid results due in part to continued improvement in credit quality, including reductions in nonperforming loans and net charge-offs. We continued investments to support revenue growth, including expanding our banking services to the Starkville, Mississippi market as well as opening a mortgage banking office in Birmingham, Alabama. Thanks to our dedicated associates, solid profitability and strong capital base, Trustmark remains well-positioned to continue meeting the needs of our customers and take advantage of opportunities to create value for our shareholders.”

Credit Quality

• Nonperforming loans declined 17.7% while nonperforming assets fell 10.4%
• Net charge-offs totaled $5.4 million and represented 0.36% of average loans
• Allowance for loan losses represented 248.8% of nonperforming loans, excluding impaired loans

During the third quarter, nonperforming loans (excluding covered loans) decreased $21.4 million, or 17.7%, relative to the prior quarter to total $99.6 million, or 1.66% of total loans, marking six consecutive quarters of improvement. Foreclosed other real estate (excluding covered ORE) decreased $402 thousand from the prior quarter to total $89.6 million. Collectively, nonperforming assets decreased $21.8 million, or 10.4%, to total $189.2 million at September 30, 2011. Trustmark has continued to make progress in the resolution of nonperforming assets as balances during the last 12 months decreased $54.9 million, or 22.5%, including a $40.2 million reduction in the Florida market.

Net charge-offs during the third quarter totaled $5.4 million and represented 0.36% of average loans (excluding covered loans). The provision for loan losses totaled $8.0 million. During the third quarter, Trustmark experienced a $26.3 million or 5.9% decline in criticized loans relative to the prior quarter. Relative to figures one year earlier, criticized loan balances decreased $84.4 million, or 16.8%, due in large part to a $51.5 million decline in the Florida market.

Allocation of Trustmark’s $89.5 million allowance for loan losses represented 1.94% of commercial loans and 0.76% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.55% as of September 30, 2011. The allowance for loan losses represented 248.8% of nonperforming loans, excluding impaired loans. All of these ratios exclude covered assets (covered loans and covered other real estate).

Trustmark continued to make significant progress in the resolution of its construction and land development portfolio in Florida. During the last 12 months, this portfolio was reduced by 30.5% to total $101.5 million. At September 30, 2011, the associated reserve for loan losses on this portfolio totaled $11.4 million, or 11.2%. Trustmark remains focused on managing credit risks resulting from current economic and real estate market conditions.

Capital Strength

• Tangible common equity to tangible assets expanded to 9.74%
• Total risk-based capital increased to 16.78%

Trustmark’s consistent profitability and sound balance sheet management continued to be reflected in its solid capital position. Tangible common equity totaled $915.6 million and represented 9.74% of tangible assets at September 30, 2011. Total risk-based capital increased to 16.78%, significantly exceeding the 10% regulatory requirement to be classified as “well-capitalized.” Trustmark’s strong capital base provides flexibility to support organic growth as well as acquisition opportunities that strengthen the value of the franchise.

Balance Sheet Management

• Average earning assets remained stable at $8.5 billion
• Net interest income (FTE) totaled $89.3 million

Loans, including loans held for investment and covered loans, totaled $5.9 billion at September 30, 2011, a decrease of $132.1 million from the prior quarter. Trustmark’s efforts to reduce exposure to construction and land development lending as well as the decision to discontinue indirect auto financing continued to be reflected in loan totals as these portfolios declined $33.5 million and $27.8 million, respectively. In addition, current economic conditions continued to constrain the demand for credit.

Average earning assets during the third quarter totaled $8.5 billion, a decrease of $49.5 million from the prior quarter. Growth in average investment securities was more than offset by a decline in average loans during the third quarter. Average deposits decreased $117.9 million, or 1.5%, relative to the prior quarter to total $7.6 billion. A seasonal reduction in public funds was the principle cause for the 3.6% decline in average interest-bearing deposits; average noninterest-bearing deposits increased 5.6% to represent 23.8% of average deposits in the third quarter of 2011.

Net interest income (FTE) totaled $89.3 million during the third quarter, a decrease of $2.1 million from the prior quarter. The decline in net interest income was primarily attributable to repricing of fixed rate assets to lower yields as well as accelerated premium amortization within the investment portfolio driven by the decline in interest rates during the quarter. Prudent asset and liability management, including disciplined loan and deposit pricing, continued to produce a strong net interest margin of 4.17% during the third quarter.

Noninterest Income

• Noninterest income totaled $44.3 million
• Fee income represented 33.1% of total revenue

Service charges on deposit accounts during the third quarter totaled $13.7 million, an increase of $829 thousand from the prior quarter principally due to an increase in the occurrence of NSF transactions. When compared to figures one year earlier, services charges were down $813 thousand, due in large part to a reduction in NSF fees resulting from the impact of regulatory changes. Bank cards and other fees totaled $7.0 million during the third quarter, up $179 thousand from the prior quarter and up $798 thousand from figures one year earlier as a result of increased debit card usage.

Trustmark continued to achieve solid financial performance from its diverse financial services businesses. Mortgage banking income totaled $9.8 million during the third quarter, an increase of $3.5 million from the prior quarter, reflecting stable mortgage servicing income, increased secondary marketing gains and successful hedging programs. In addition, insurance revenue totaled $7.5 million, an increase of 9.5%, reflecting a seasonal increase in commercial property and casualty income relative to the prior quarter. Income from wealth management services totaled $6.0 million during the third quarter, an increase of 4.0% from the prior quarter. Other income totaled $234 thousand in the third quarter, in line with the prior quarter when adjusted for the $7.5 million nonrecurring bargain purchase gain associated with an FDIC assisted transaction in the second quarter.

Noninterest Expense

• Salary and employee benefits expense growth contained to 1.1%
• ORE/Foreclosure expense totaled $5.6 million

During the third quarter of 2011, noninterest expense totaled $85.5 million, an increase of $4.1 million from the prior quarter. There were several notable items in the quarter, including costs associated with the resolution of long-standing litigation, expenses related to the realignment of certain business units, as well as compensatory mortgage foreclosure fees that collectively totaled $2.5 million. Adjusting for these notable items, noninterest expense increased $1.6 million, or 2.0%, relative to the prior quarter.

ADDITIONAL INFORMATION

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 26, 2011, 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 446676, or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Thursday, November 3, 2011, in archived format at the same web address or by calling [phone], passcode 446676.

Trustmark is a financial services company providing banking and financial solutions through over 150 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 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 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
September 30, 2011
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES	9/30/2011			6/30/2011			9/30/2010			$ Change			% Change		$ Change			% Change
Securities AFS-taxable	$	2,150,117		$	2,142,978		$	1,654,335		$	7,139		0.3	%	$	495,782		30.0	%
Securities AFS-nontaxable		170,714			151,471			111,959			19,243		12.7	%		58,755		52.5	%
Securities HTM-taxable		52,868			73,739			143,124			(20,871	)	-28.3	%		(90,256	)	-63.1	%
Securities HTM-nontaxable		24,062			25,797			37,703			(1,735	)	-6.7	%		(13,641	)	-36.2	%
Total securities		2,397,761			2,393,985			1,947,121			3,776		0.2	%		450,640		23.1	%
Loans (including loans held for sale)		5,985,730			6,044,232			6,230,961			(58,502	)	-1.0	%		(245,231	)	-3.9	%
Covered loans		83,811			77,858			-			5,953		7.6	%		83,811		n/m
Fed funds sold and rev repos		5,801			6,807			8,418			(1,006	)	-14.8	%		(2,617	)	-31.1	%
Other earning assets		32,327			32,028			33,615			299		0.9	%		(1,288	)	-3.8	%
Total earning assets		8,505,430			8,554,910			8,220,115			(49,480	)	-0.6	%		285,315		3.5	%
Allowance for loan losses		(88,888	)		(94,771	)		(102,528	)		5,883		-6.2	%		13,640		-13.3	%
Cash and due from banks		216,134			216,483			214,736			(349	)	-0.2	%		1,398		0.7	%
Other assets		939,780			937,503			885,600			2,277		0.2	%		54,180		6.1	%
Total assets	$	9,572,456		$	9,614,125		$	9,217,923		$	(41,669	)	-0.4	%	$	354,533		3.8	%
Interest-bearing demand deposits	$	1,558,318		$	1,579,894		$	1,363,377		$	(21,576	)	-1.4	%	$	194,941		14.3	%
Savings deposits		2,133,437			2,277,220			1,888,121			(143,783	)	-6.3	%		245,316		13.0	%
Time deposits less than $100,000		1,232,374			1,255,496			1,276,088			(23,122	)	-1.8	%		(43,714	)	-3.4	%
Time deposits of $100,000 or more		877,951			904,106			957,148			(26,155	)	-2.9	%		(79,197	)	-8.3	%
Total interest-bearing deposits		5,802,080			6,016,716			5,484,734			(214,636	)	-3.6	%		317,346		5.8	%
Fed funds purchased and repos		462,294			396,618			522,523			65,676		16.6	%		(60,229	)	-11.5	%
Short-term borrowings		85,678			92,077			202,017			(6,399	)	-6.9	%		(116,339	)	-57.6	%
Long-term FHLB advances		2,413			2,333			-			80		3.4	%		2,413		n/m
Subordinated notes		49,825			49,817			49,793			8		0.0	%		32		0.1	%
Junior subordinated debt securities		61,856			61,856			70,104			-		0.0	%		(8,248	)	-11.8	%
Total interest-bearing liabilities		6,464,146			6,619,417			6,329,171			(155,271	)	-2.3	%		134,975		2.1	%
Noninterest-bearing deposits		1,811,472			1,714,778			1,629,122			96,694		5.6	%		182,350		11.2	%
Other liabilities		85,404			98,154			104,576			(12,750	)	-13.0	%		(19,172	)	-18.3	%
Total liabilities		8,361,022			8,432,349			8,062,869			(71,327	)	-0.8	%		298,153		3.7	%
Shareholders' equity		1,211,434			1,181,776			1,155,054			29,658		2.5	%		56,380		4.9	%
Total liabilities and equity	$	9,572,456		$	9,614,125		$	9,217,923		$	(41,669	)	-0.4	%	$	354,533		3.8	%
										Linked Quarter					Year over Year
PERIOD END BALANCES	9/30/2011			6/30/2011			9/30/2010			$ Change			% Change		$ Change			% Change
Cash and due from banks	$	245,132		$	221,853		$	196,136		$	23,279		10.5	%	$	48,996		25.0	%
Fed funds sold and rev repos		8,810			4,576			6,655			4,234		92.5	%		2,155		32.4	%
Securities available for sale		2,476,905			2,399,042			1,968,624			77,863		3.2	%		508,281		25.8	%
Securities held to maturity		71,046			87,923			168,849			(16,877	)	-19.2	%		(97,803	)	-57.9	%
Loans held for sale (LHFS)		210,269			123,244			268,137			87,025		70.6	%		(57,868	)	-21.6	%
Loans held for investment (LHFI), excluding covered loans		5,783,712			5,906,316			5,998,704			(122,604	)	-2.1	%		(214,992	)	-3.6	%
Allowance for loan losses		(89,463	)		(86,846	)		(94,458	)		(2,617	)	3.0	%		4,995		-5.3	%
Net LHFI, excluding covered loans		5,694,249			5,819,470			5,904,246			(125,221	)	-2.2	%		(209,997	)	-3.6	%
Covered loans		79,064			88,558			-			(9,494	)	-10.7	%		79,064		n/m
Net LHFI and covered loans		5,773,313			5,908,028			5,904,246			(134,715	)	-2.3	%		(130,933	)	-2.2	%
Premises and equipment, net		141,639			140,640			143,393			999		0.7	%		(1,754	)	-1.2	%
Mortgage servicing rights		43,659			50,111			41,972			(6,452	)	-12.9	%		1,687		4.0	%
Goodwill		291,104			291,104			291,104			-		0.0	%		-		0.0	%
Identifiable intangible assets		14,861			15,651			17,181			(790	)	-5.0	%		(2,320	)	-13.5	%
Other real estate, excluding covered other real estate		89,597			89,999			84,722			(402	)	-0.4	%		4,875		5.8	%
Covered other real estate		7,197			7,485			-			(288	)	-3.8	%		7,197		n/m
FDIC indemnification asset		33,436			33,327			-			109		0.3	%		33,436		n/m
Other assets		298,953			325,468			325,886			(26,515	)	-8.1	%		(26,933	)	-8.3	%
Total assets	$	9,705,921		$	9,698,451		$	9,416,905		$	7,470		0.1	%	$	289,016		3.1	%
Deposits:
Noninterest-bearing	$	1,871,040		$	1,806,908		$	1,709,311		$	64,132		3.5	%	$	161,729		9.5	%
Interest-bearing		5,698,684			5,825,426			5,316,025			(126,742	)	-2.2	%		382,659		7.2	%
Total deposits		7,569,724			7,632,334			7,025,336			(62,610	)	-0.8	%		544,388		7.7	%
Fed funds purchased and repos		576,672			539,693			633,065			36,979		6.9	%		(56,393	)	-8.9	%
Short-term borrowings		98,887			90,156			318,457			8,731		9.7	%		(219,570	)	-68.9	%
Long-term FHLB advances		741			2,794			-			(2,053	)	-73.5	%		741		n/m
Subordinated notes		49,831			49,823			49,798			8		0.0	%		33		0.1	%
Junior subordinated debt securities		61,856			61,856			70,104			-		0.0	%		(8,248	)	-11.8	%
Other liabilities		126,604			129,025			161,353			(2,421	)	-1.9	%		(34,749	)	-21.5	%
Total liabilities		8,484,315			8,505,681			8,258,113			(21,366	)	-0.3	%		226,202		2.7	%
Common stock		13,359			13,359			13,311			-		0.0	%		48		0.4	%
Capital surplus		264,750			263,940			254,288			810		0.3	%		10,462		4.1	%
Retained earnings		923,891			911,797			881,545			12,094		1.3	%		42,346		4.8	%
Accum other comprehensive income, net of tax		19,606			3,674			9,648			15,932		n/m			9,958		n/m
Total shareholders' equity		1,221,606			1,192,770			1,158,792			28,836		2.4	%		62,814		5.4	%
Total liabilities and equity	$	9,705,921		$	9,698,451		$	9,416,905		$	7,470		0.1	%	$	289,016		3.1	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2011
($ in thousands except per share data)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
INCOME STATEMENTS	9/30/2011			6/30/2011			9/30/2010			$ Change			% Change		$ Change			% Change
Interest and fees on loans-FTE	$	79,256		$	80,202		$	83,374		$	(946	)	-1.2	%	$	(4,118	)	-4.9	%
Interest on securities-taxable		18,115			20,374			18,641			(2,259	)	-11.1	%		(526	)	-2.8	%
Interest on securities-tax exempt-FTE		2,155			2,115			2,080			40		1.9	%		75		3.6	%
Interest on fed funds sold and rev repos		5			7			9			(2	)	-28.6	%		(4	)	-44.4	%
Other interest income		329			333			332			(4	)	-1.2	%		(3	)	-0.9	%
Total interest income-FTE		99,860			103,031			104,436			(3,171	)	-3.1	%		(4,576	)	-4.4	%
Interest on deposits		9,455			9,936			11,609			(481	)	-4.8	%		(2,154	)	-18.6	%
Interest on fed funds pch and repos		216			216			294			-		0.0	%		(78	)	-26.5	%
Other interest expense		842			1,420			1,631			(578	)	-40.7	%		(789	)	-48.4	%
Total interest expense		10,513			11,572			13,534			(1,059	)	-9.2	%		(3,021	)	-22.3	%
Net interest income-FTE		89,347			91,459			90,902			(2,112	)	-2.3	%		(1,555	)	-1.7	%
Provision for loan losses		7,978			8,116			12,259			(138	)	-1.7	%		(4,281	)	-34.9	%
Net interest income after provision-FTE		81,369			83,343			78,643			(1,974	)	-2.4	%		2,726		3.5	%
Service charges on deposit accounts		13,680			12,851			14,493			829		6.5	%		(813	)	-5.6	%
Insurance commissions		7,516			6,862			7,746			654		9.5	%		(230	)	-3.0	%
Wealth management		5,993			5,760			5,199			233		4.0	%		794		15.3	%
Bank card and other fees		7,033			6,854			6,235			179		2.6	%		798		12.8	%
Mortgage banking, net		9,783			6,269			9,861			3,514		56.1	%		(78	)	-0.8	%
Other, net		234			7,785			441			(7,551	)	-97.0	%		(207	)	-46.9	%
Nonint inc-excl sec gains, net		44,239			46,381			43,975			(2,142	)	-4.6	%		264		0.6	%
Security gains, net		33			51			4			(18	)	-35.3	%		29		n/m
Total noninterest income		44,272			46,432			43,979			(2,160	)	-4.7	%		293		0.7	%
Salaries and employee benefits		44,701			44,203			44,034			498		1.1	%		667		1.5	%
Services and fees		11,485			10,780			10,709			705		6.5	%		776		7.2	%
Net occupancy-premises		5,093			5,050			4,961			43		0.9	%		132		2.7	%
Equipment expense		5,038			4,856			4,356			182		3.7	%		682		15.7	%
FDIC assessment expense		1,812			1,938			3,037			(126	)	-6.5	%		(1,225	)	-40.3	%
ORE/Foreclosure expense		5,616			4,704			8,728			912		19.4	%		(3,112	)	-35.7	%
Other expense		11,736			9,817			8,598			1,919		19.5	%		3,138		36.5	%
Total noninterest expense		85,481			81,348			84,423			4,133		5.1	%		1,058		1.3	%
Income before income taxes and tax eq adj		40,160			48,427			38,199			(8,267	)	-17.1	%		1,961		5.1	%
Tax equivalent adjustment		3,667			3,629			3,335			38		1.0	%		332		10.0	%
Income before income taxes		36,493			44,798			34,864			(8,305	)	-18.5	%		1,629		4.7	%
Income taxes		9,525			13,196			9,004			(3,671	)	-27.8	%		521		5.8	%
Net income available to common shareholders	$	26,968		$	31,602		$	25,860		$	(4,634	)	-14.7	%	$	1,108		4.3	%
Per common share data
Earnings per share - basic	$	0.42		$	0.49		$	0.40		$	(0.07	)	-14.3	%	$	0.02		5.0	%
Earnings per share - diluted	$	0.42		$	0.49		$	0.40		$	(0.07	)	-14.3	%	$	0.02		5.0	%
Dividends per share	$	0.23		$	0.23		$	0.23		$	-		0.0	%	$	-		0.0	%
Weighted average common shares outstanding
Basic		64,119,235			64,072,047			63,885,647
Diluted		64,310,453			64,281,348			64,066,798
Period end common shares outstanding		64,119,235			64,119,235			63,885,959
OTHER FINANCIAL DATA
Return on common equity		8.83	%		10.73	%		8.88	%
Return on average tangible common equity		12.04	%		14.71	%		12.38	%
Return on equity		8.83	%		10.73	%		8.88	%
Return on assets		1.12	%		1.32	%		1.11	%
Interest margin - Yield - FTE		4.66	%		4.83	%		5.04	%
Interest margin - Cost		0.49	%		0.54	%		0.65	%
Net interest margin - FTE		4.17	%		4.29	%		4.39	%
Efficiency ratio		63.99	%		62.39	%		62.59	%
Full-time equivalent employees		2,542			2,575			2,501
COMMON STOCK PERFORMANCE
Market value-Close	$	18.15		$	23.41		$	21.74
Common book value	$	19.05		$	18.60		$	18.14
Tangible common book value	$	14.28		$	13.82		$	13.31
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2011
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)	9/30/2011			6/30/2011			9/30/2010			$ Change			% Change		$ Change			% Change
Nonaccrual loans
Florida	$	27,263		$	30,752		$	65,759		$	(3,489	)	-11.3	%	$	(38,496	)	-58.5	%
Mississippi (2)		44,825			47,802			48,962			(2,977	)	-6.2	%		(4,137	)	-8.4	%
Tennessee (3)		14,575			17,564			9,207			(2,989	)	-17.0	%		5,368		58.3	%
Texas		12,915			24,900			35,388			(11,985	)	-48.1	%		(22,473	)	-63.5	%
Total nonaccrual loans		99,578			121,018			159,316			(21,440	)	-17.7	%		(59,738	)	-37.5	%
Other real estate
Florida		29,949			33,823			31,665			(3,874	)	-11.5	%		(1,716	)	-5.4	%
Mississippi (2)		21,027			22,921			24,548			(1,894	)	-8.3	%		(3,521	)	-14.3	%
Tennessee (3)		17,940			15,760			16,456			2,180		13.8	%		1,484		9.0	%
Texas		20,681			17,495			12,053			3,186		18.2	%		8,628		71.6	%
Total other real estate		89,597			89,999			84,722			(402	)	-0.4	%		4,875		5.8	%
Total nonperforming assets	$	189,175		$	211,017		$	244,038		$	(21,842	)	-10.4	%	$	(54,863	)	-22.5	%
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	3,166		$	6,993		$	5,795		$	(3,827	)	-54.7	%	$	(2,629	)	-45.4	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	32,956		$	24,708		$	50,246		$	8,248		33.4	%	$	(17,290	)	-34.4	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES		9/30/2011			6/30/2011			9/30/2010		$	Change		% Change		$	Change		% Change
Beginning Balance	$	86,846		$	93,398		$	100,656		$	(6,552	)	-7.0	%	$	(13,810	)	-13.7	%
Provision for loan losses		7,978			8,116			12,259			(138	)	-1.7	%		(4,281	)	-34.9	%
Charge-offs		(8,675	)		(17,505	)		(21,942	)		8,830		-50.4	%		13,267		-60.5	%
Recoveries		3,314			2,837			3,485			477		16.8	%		(171	)	-4.9	%
Net charge-offs		(5,361	)		(14,668	)		(18,457	)		9,307		-63.5	%		13,096		-71.0	%
Ending Balance	$	89,463		$	86,846		$	94,458		$	2,617		3.0	%	$	(4,995	)	-5.3	%
PROVISION FOR LOAN LOSSES
Florida	$	3,046		$	5,633		$	4,520		$	(2,587	)	-45.9	%	$	(1,474	)	-32.6	%
Mississippi (2)		3,732			1,331			4,398			2,401		n/m			(666	)	-15.1	%
Tennessee (3)		(105	)		157			(172	)		(262	)	n/m			67		-39.0	%
Texas		1,305			995			3,513			310		31.2	%		(2,208	)	-62.9	%
Total provision for loan losses	$	7,978		$	8,116		$	12,259		$	(138	)	-1.7	%	$	(4,281	)	-34.9	%
NET CHARGE-OFFS
Florida	$	2,909		$	7,880		$	8,951		$	(4,971	)	-63.1	%	$	(6,042	)	-67.5	%
Mississippi (2)		1,988			3,401			3,879			(1,413	)	-41.5	%		(1,891	)	-48.7	%
Tennessee (3)		499			324			3,475			175		54.0	%		(2,976	)	-85.6	%
Texas		(35	)		3,063			2,152			(3,098	)	n/m			(2,187	)	n/m
Total net charge-offs	$	5,361		$	14,668		$	18,457		$	(9,307	)	-63.5	%	$	(13,096	)	-71.0	%
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.36	%		0.97	%		1.18	%
Provision for loan losses/average loans		0.53	%		0.54	%		0.78	%
Nonperforming loans/total loans (incl LHFS)		1.66	%		2.01	%		2.54	%
Nonperforming assets/total loans (incl LHFS)		3.16	%		3.50	%		3.89	%
Nonperforming assets/total loans (incl LHFS) +ORE		3.11	%		3.45	%		3.84	%
ALL/total loans (excl LHFS)		1.55	%		1.47	%		1.57	%
ALL-commercial/total commercial loans		1.94	%		1.84	%		1.97	%
ALL-consumer/total consumer and home mortgage loans		0.76	%		0.76	%		0.81	%
ALL/nonperforming loans		89.84	%		71.76	%		59.29	%
ALL/nonperforming loans - (excl impaired loans)		248.82	%		181.95	%		140.94	%
CAPITAL RATIOS
Total equity/total assets		12.59	%		12.30	%		12.31	%
Common equity/total assets		12.59	%		12.30	%		12.31	%
Tangible common equity/tangible assets		9.74	%		9.43	%		9.34	%
Tangible common equity/risk-weighted assets		14.04	%		13.51	%		12.78	%
Tier 1 leverage ratio		10.38	%		10.18	%		10.26	%
Tier 1 common risk-based capital ratio		13.84	%		13.55	%		12.72	%
Tier 1 risk-based capital ratio		14.76	%		14.46	%		13.75	%
Total risk-based capital ratio		16.78	%		16.47	%		15.75	%
(1) - Excludes Covered Assets (Loans and Other Real Estate)
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Covered Loans
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2011
($ in thousands)
(unaudited)
	Quarter Ended															Nine Months Ended
AVERAGE BALANCES	9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010			9/30/2011			9/30/2010
Securities AFS-taxable	$	2,150,117		$	2,142,978		$	2,050,502		$	1,817,996		$	1,654,335		$	2,114,897		$	1,585,357
Securities AFS-nontaxable		170,714			151,471			144,921			140,139			111,959			155,796			109,357
Securities HTM-taxable		52,868			73,739			97,710			121,278			143,124			74,608			161,499
Securities HTM-nontaxable		24,062			25,797			27,099			33,138			37,703			25,641			42,027
Total securities		2,397,761			2,393,985			2,320,232			2,112,551			1,947,121			2,370,942			1,898,240
Loans (including loans held for sale)		5,985,730			6,044,232			6,107,025			6,199,875			6,230,961			6,045,218			6,314,279
Covered loans		83,811			77,858			-			-			-			54,197			-
Fed funds sold and rev repos		5,801			6,807			8,359			10,766			8,418			6,980			8,771
Other earning assets		32,327			32,028			47,851			41,359			33,615			37,345			39,480
Total earning assets		8,505,430			8,554,910			8,483,467			8,364,551			8,220,115			8,514,682			8,260,770
Allowance for loan losses		(88,888	)		(94,771	)		(96,065	)		(96,559	)		(102,528	)		(93,215	)		(104,501	)
Cash and due from banks		216,134			216,483			222,380			207,874			214,736			218,310			212,898
Other assets		939,780			937,503			899,524			888,666			885,600			925,750			898,159
Total assets	$	9,572,456		$	9,614,125		$	9,509,306		$	9,364,532		$	9,217,923		$	9,565,527		$	9,267,326
Interest-bearing demand deposits	$	1,558,318		$	1,579,894		$	1,465,390		$	1,347,252		$	1,363,377		$	1,534,874		$	1,314,001
Savings deposits		2,133,437			2,277,220			2,045,874			1,794,352			1,888,121			2,152,498			1,969,241
Time deposits less than $100,000		1,232,374			1,255,496			1,210,219			1,235,529			1,276,088			1,232,777			1,313,094
Time deposits of $100,000 or more		877,951			904,106			876,975			932,744			957,148			886,348			986,649
Total interest-bearing deposits		5,802,080			6,016,716			5,598,458			5,309,877			5,484,734			5,806,497			5,582,985
Fed funds purchased and repos		462,294			396,618			647,881			701,978			522,523			501,585			539,464
Short-term borrowings		85,678			92,077			254,451			254,442			202,017			143,450			194,421
Long-term FHLB advances		2,413			2,333			-			-			-			1,591			30,003
Subordinated notes		49,825			49,817			49,809			49,801			49,793			49,817			49,785
Junior subordinated debt securities		61,856			61,856			61,856			64,546			70,104			61,856			70,104
Total interest-bearing liabilities		6,464,146			6,619,417			6,612,455			6,380,644			6,329,171			6,564,796			6,466,762
Noninterest-bearing deposits		1,811,472			1,714,778			1,620,554			1,706,089			1,629,122			1,716,300			1,567,172
Other liabilities		85,404			98,154			116,399			117,741			104,576			99,873			94,161
Total liabilities		8,361,022			8,432,349			8,349,408			8,204,474			8,062,869			8,380,969			8,128,095
Shareholders' equity		1,211,434			1,181,776			1,159,898			1,160,058			1,155,054			1,184,558			1,139,231
Total liabilities and equity	$	9,572,456		$	9,614,125		$	9,509,306		$	9,364,532		$	9,217,923		$	9,565,527		$	9,267,326
PERIOD END BALANCES	9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010
Cash and due from banks	$	245,132		$	221,853		$	193,087		$	161,544		$	196,136
Fed funds sold and rev repos		8,810			4,576			1,726			11,773			6,655
Securities available for sale		2,476,905			2,399,042			2,309,704			2,177,249			1,968,624
Securities held to maturity		71,046			87,923			110,054			140,847			168,849
Loans held for sale (LHFS)		210,269			123,244			112,981			153,044			268,137
Loans held for investment (LHFI), excluding covered loans		5,783,712			5,906,316			5,964,089			6,060,242			5,998,704
Allowance for loan losses		(89,463	)		(86,846	)		(93,398	)		(93,510	)		(94,458	)
Net LHFI, excluding covered loans		5,694,249			5,819,470			5,870,691			5,966,732			5,904,246
Covered loans		79,064			88,558			-			-			-
Net LHFI and covered loans		5,773,313			5,908,028			5,870,691			5,966,732			5,904,246
Premises and equipment, net		141,639			140,640			141,524			142,289			143,393
Mortgage servicing rights		43,659			50,111			53,598			51,151			41,972
Goodwill		291,104			291,104			291,104			291,104			291,104
Identifiable intangible assets		14,861			15,651			15,532			16,306			17,181
Other real estate, excluding covered other real estate		89,597			89,999			89,198			86,704			84,722
Covered other real estate		7,197			7,485			-			-			-
FDIC indemnification asset		33,436			33,327			-			-			-
Other assets		298,953			325,468			325,263			355,159			325,886
Total assets	$	9,705,921		$	9,698,451		$	9,514,462		$	9,553,902		$	9,416,905
Deposits:
Noninterest-bearing	$	1,871,040		$	1,806,908		$	1,668,104		$	1,636,625		$	1,709,311
Interest-bearing		5,698,684			5,825,426			5,758,170			5,407,942			5,316,025
Total deposits		7,569,724			7,632,334			7,426,274			7,044,567			7,025,336
Fed funds purchased and repos		576,672			539,693			550,919			700,138			633,065
Short-term borrowings		98,887			90,156			154,585			425,343			318,457
Long-term FHLB advances		741			2,794			-			-			-
Subordinated notes		49,831			49,823			49,814			49,806			49,798
Junior subordinated debt securities		61,856			61,856			61,856			61,856			70,104
Other liabilities		126,604			129,025			110,785			122,708			161,353
Total liabilities		8,484,315			8,505,681			8,354,233			8,404,418			8,258,113
Common stock		13,359			13,359			13,333			13,318			13,311
Capital surplus		264,750			263,940			260,297			256,675			254,288
Retained earnings		923,891			911,797			898,222			890,917			881,545
Accum other comprehensive income (loss), net of tax		19,606			3,674			(11,623	)		(11,426	)		9,648
Total shareholders' equity		1,221,606			1,192,770			1,160,229			1,149,484			1,158,792
Total liabilities and equity	$	9,705,921		$	9,698,451		$	9,514,462		$	9,553,902		$	9,416,905
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2011
($ in thousands except per share data)
(unaudited)
	Quarter Ended															Nine Months Ended
INCOME STATEMENTS	9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010			9/30/2011			9/30/2010
Interest and fees on loans-FTE	$	79,256		$	80,202		$	79,116		$	82,664		$	83,374		$	238,574		$	251,863
Interest on securities-taxable		18,115			20,374			19,992			19,076			18,641			58,481			58,002
Interest on securities-tax exempt-FTE		2,155			2,115			2,128			2,169			2,080			6,398			6,411
Interest on fed funds sold and rev repos		5			7			8			12			9			20			24
Other interest income		329			333			332			328			332			994			1,081
Total interest income-FTE		99,860			103,031			101,576			104,249			104,436			304,467			317,381
Interest on deposits		9,455			9,936			9,719			10,359			11,609			29,110			38,298
Interest on fed funds pch and repos		216			216			338			403			294			770			780
Other interest expense		842			1,420			1,553			1,535			1,631			3,815			4,820
Total interest expense		10,513			11,572			11,610			12,297			13,534			33,695			43,898
Net interest income-FTE		89,347			91,459			89,966			91,952			90,902			270,772			273,483
Provision for loan losses		7,978			8,116			7,537			11,794			12,259			23,631			37,752
Net interest income after provision-FTE		81,369			83,343			82,429			80,158			78,643			247,141			235,731
Service charges on deposit accounts		13,680			12,851			11,907			13,493			14,493			38,438			41,690
Insurance commissions		7,516			6,862			6,512			6,224			7,746			20,890			21,467
Wealth management		5,993			5,760			5,986			5,760			5,199			17,739			16,112
Bank card and other fees		7,033			6,854			6,475			6,482			6,235			20,362			18,532
Mortgage banking, net		9,783			6,269			4,722			4,502			9,861			20,774			24,843
Other, net		234			7,785			762			2,070			441			8,781			2,423
Nonint inc-excl sec gains, net		44,239			46,381			36,364			38,531			43,975			126,984			125,067
Security gains, net		33			51			7			101			4			91			2,228
Total noninterest income		44,272			46,432			36,371			38,632			43,979			127,075			127,295
Salaries and employee benefits		44,701			44,203			44,036			44,412			44,034			132,940			130,170
Services and fees		11,485			10,780			10,270			10,462			10,709			32,535			31,487
Net occupancy-premises		5,093			5,050			5,073			4,896			4,961			15,216			14,912
Equipment expense		5,038			4,856			5,144			4,229			4,356			15,038			12,906
FDIC assessment expense		1,812			1,938			2,750			2,942			3,037			6,500			9,219
ORE/Foreclosure expense		5,616			4,704			3,213			3,310			8,728			13,533			21,067
Other expense		11,736			9,817			9,532			10,186			8,598			31,085			25,451
Total noninterest expense		85,481			81,348			80,018			80,437			84,423			246,847			245,212
Income before income taxes and tax eq adj		40,160			48,427			38,782			38,353			38,199			127,369			117,814
Tax equivalent adjustment		3,667			3,629			3,591			3,400			3,335			10,887			10,012
Income before income taxes		36,493			44,798			35,191			34,953			34,864			116,482			107,802
Income taxes		9,525			13,196			11,178			9,793			9,004			33,899			32,326
Net income available to common shareholders	$	26,968		$	31,602		$	24,013		$	25,160		$	25,860		$	82,583		$	75,476
Per common share data
Earnings per share - basic	$	0.42		$	0.49		$	0.38		$	0.39		$	0.40		$	1.29		$	1.18
Earnings per share - diluted	$	0.42		$	0.49		$	0.37		$	0.39		$	0.40		$	1.29		$	1.18
Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23		$	0.69		$	0.69
Weighted average common shares outstanding
Basic		64,119,235			64,072,047			63,950,461			63,892,362			63,885,647			64,047,866			63,834,464
Diluted		64,310,453			64,281,348			64,181,752			64,105,064			64,066,798			64,251,025			64,016,341
Period end common shares outstanding		64,119,235			64,119,235			63,987,064			63,917,591			63,885,959			64,119,235			63,885,959
OTHER FINANCIAL DATA
Return on common equity		8.83	%		10.73	%		8.40	%		8.60	%		8.88	%		9.32	%		8.86	%
Return on average tangible common equity		12.04	%		14.71	%		11.65	%		11.96	%		12.38	%		12.80	%		12.43	%
Return on equity		8.83	%		10.73	%		8.40	%		8.60	%		8.88	%		9.32	%		8.86	%
Return on assets		1.12	%		1.32	%		1.02	%		1.07	%		1.11	%		1.15	%		1.09	%
Interest margin - Yield - FTE		4.66	%		4.83	%		4.86	%		4.94	%		5.04	%		4.78	%		5.14	%
Interest margin - Cost		0.49	%		0.54	%		0.56	%		0.58	%		0.65	%		0.53	%		0.71	%
Net interest margin - FTE		4.17	%		4.29	%		4.30	%		4.36	%		4.39	%		4.25	%		4.43	%
Efficiency ratio		63.99	%		62.39	%		63.34	%		61.65	%		62.59	%		63.25	%		61.53	%
Full-time equivalent employees		2,542			2,575			2,489			2,490			2,501
COMMON STOCK PERFORMANCE
Market value-Close	$	18.15		$	23.41		$	23.42		$	24.84		$	21.74
Common book value	$	19.05		$	18.60		$	18.13		$	17.98		$	18.14
Tangible common book value	$	14.28		$	13.82		$	13.34		$	13.17		$	13.31
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2011
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)	9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010
Nonaccrual loans
Florida	$	27,263		$	30,752		$	44,548		$	53,773		$	65,759
Mississippi (2)		44,825			47,802			40,226			39,803			48,962
Tennessee (3)		14,575			17,564			13,886			14,703			9,207
Texas		12,915			24,900			28,130			34,644			35,388
Total nonaccrual loans		99,578			121,018			126,790			142,923			159,316
Other real estate
Florida		29,949			33,823			31,339			32,370			31,665
Mississippi (2)		21,027			22,921			22,084			24,181			24,548
Tennessee (3)		17,940			15,760			16,920			16,407			16,456
Texas		20,681			17,495			18,855			13,746			12,053
Total other real estate		89,597			89,999			89,198			86,704			84,722
Total nonperforming assets	$	189,175		$	211,017		$	215,988		$	229,627		$	244,038
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	3,166		$	6,993		$	5,010		$	3,608		$	5,795
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	32,956		$	24,708		$	19,808		$	15,777		$	50,246
	Quarter Ended															Nine Months Ended
ALLOWANCE FOR LOAN LOSSES	9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010			9/30/2011			9/30/2010
Beginning Balance	$	86,846		$	93,398		$	93,510		$	94,458		$	100,656		$	93,510		$	103,662
Provision for loan losses		7,978			8,116			7,537			11,794			12,259			23,631			37,752
Charge-offs		(8,675	)		(17,505	)		(11,132	)		(15,883	)		(21,942	)		(37,312	)		(56,014	)
Recoveries		3,314			2,837			3,483			3,141			3,485			9,634			9,058
Net charge-offs		(5,361	)		(14,668	)		(7,649	)		(12,742	)		(18,457	)		(27,678	)		(46,956	)
Ending Balance	$	89,463		$	86,846		$	93,398		$	93,510		$	94,458		$	89,463		$	94,458
PROVISION FOR LOAN LOSSES
Florida	$	3,046		$	5,633		$	3,024		$	7,473		$	4,520		$	11,703		$	12,453
Mississippi (2)		3,732			1,331			1,071			2,673			4,398			6,134			11,576
Tennessee (3)		(105	)		157			1,619			910			(172	)		1,671			4,702
Texas		1,305			995			1,823			738			3,513			4,123			9,021
Total provision for loan losses	$	7,978		$	8,116		$	7,537		$	11,794		$	12,259		$	23,631		$	37,752
NET CHARGE-OFFS
Florida	$	2,909		$	7,880		$	5,478		$	4,830		$	8,951		$	16,267		$	23,820
Mississippi (2)		1,988			3,401			410			4,422			3,879			5,799			14,541
Tennessee (3)		499			324			979			1,646			3,475			1,802			4,932
Texas		(35	)		3,063			782			1,844			2,152			3,810			3,663
Total net charge-offs	$	5,361		$	14,668		$	7,649		$	12,742		$	18,457		$	27,678		$	46,956
CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.36	%		0.97	%		0.51	%		0.82	%		1.18	%		0.61	%		0.99	%
Provision for loan losses/average loans		0.53	%		0.54	%		0.50	%		0.75	%		0.78	%		0.52	%		0.80	%
Nonperforming loans/total loans (incl LHFS)		1.66	%		2.01	%		2.09	%		2.30	%		2.54	%
Nonperforming assets/total loans (incl LHFS)		3.16	%		3.50	%		3.55	%		3.70	%		3.89	%
Nonperforming assets/total loans (incl LHFS) +ORE		3.11	%		3.45	%		3.50	%		3.64	%		3.84	%
ALL/total loans (excl LHFS)		1.55	%		1.47	%		1.57	%		1.54	%		1.57	%
ALL-commercial/total commercial loans		1.94	%		1.84	%		1.98	%		1.94	%		1.97	%
ALL-consumer/total consumer and home mortgage loans		0.76	%		0.76	%		0.76	%		0.78	%		0.81	%
ALL/nonperforming loans		89.84	%		71.76	%		73.66	%		65.43	%		59.29	%
ALL/nonperforming loans - (excl impaired loans)		248.82	%		181.95	%		215.40	%		188.11	%		140.94	%
CAPITAL RATIOS
Total equity/total assets		12.59	%		12.30	%		12.19	%		12.03	%		12.31	%
Common equity/total assets		12.59	%		12.30	%		12.19	%		12.03	%		12.31	%
Tangible common equity/tangible assets		9.74	%		9.43	%		9.27	%		9.11	%		9.34	%
Tangible common equity/risk-weighted assets		14.04	%		13.51	%		13.06	%		12.62	%		12.78	%
Tier 1 leverage ratio		10.38	%		10.18	%		10.10	%		10.14	%		10.26	%
Tier 1 common risk-based capital ratio		13.84	%		13.55	%		13.32	%		12.87	%		12.72	%
Tier 1 risk-based capital ratio		14.76	%		14.46	%		14.24	%		13.77	%		13.75	%
Total risk-based capital ratio		16.78	%		16.47	%		16.25	%		15.77	%		15.75	%
(1) - Excludes Covered Assets (Loans and Other Real Estate)
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Covered Loans
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2011

($ in thousands)

(unaudited)

Note 1 – Business Combinations

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 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 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 agreements as “covered” while loans and other real estate that are not subject to the loss share agreement will be referred to as “excluding covered.” The loss share agreements applicable to single family residential mortgage loans and related foreclosed real estate provide 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 agreements applicable to commercial loans and related foreclosed real estate provide 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, are recorded at their estimated fair values as of the acquisition date. The fair value amounts are subject to change for up to one year after the closing date as additional information relating to closing date fair values becomes available. The amounts are also subject to adjustments based upon final settlement with the FDIC.

The statement of assets purchased and liabilities assumed in the Heritage acquisition are presented below at their estimated fair values as of the acquisition date of April 15, 2011 ($ in thousands):

Assets
Cash and due from banks	$	50,447
Federal funds sold		1,000
Securities available for sale		6,389
LHFI, excluding covered loans		9,644
Covered loans		97,770
Premises and equipment, net		55
Identifiable intangible assets		902
Covered other real estate		7,485
FDIC indemnification asset		33,333
Other assets		218
Total Assets		207,243
Liabilities
Deposits		204,349
Short-term borrowings		23,157
Other liabilities		730
Total Liabilities		228,236
Net assets acquired at fair value		(20,993	)
Cash received on acquisition		28,449
Bargain purchase gain		7,456
Income taxes		2,852
Bargain purchase gain, net of taxes	$	4,604

The bargain purchase gain 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 recognized by Trustmark is considered a bargain purchase transaction under FASB ASC Topic 805, “Business Combinations.” The gain was recognized as other noninterest income in Trustmark’s consolidated statements of income for the three and six months ended June 30, 2011.

The operations of Heritage are included in Trustmark’s operating results from April 15, 2011, and added revenue of $11.1 million and net income available to common shareholders of $5.9 million through September 30, 2011. Such operating results are not necessarily indicative of future operating results.

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):
	9/30/2011		6/30/2011		3/31/2011		12/31/2010		9/30/2010
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	5	$	7	$	10	$	12	$	14
Issued by U.S. Government sponsored agencies		61,870		102,940		136,168		122,023		149,588
Obligations of states and political subdivisions		207,781		186,034		161,909		159,637		148,772
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		14,637		14,990		12,079		12,442		13,273
Issued by FNMA and FHLMC		400,589		413,493		417,022		426,504		243,220
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,579,698		1,556,676		1,486,872		1,400,816		1,366,373
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		212,325		124,902		95,644		55,815		41,359
Corporate debt securities		-		-		-		-		6,025
Total securities available for sale	$	2,476,905	$	2,399,042	$	2,309,704	$	2,177,249	$	1,968,624
SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions	$	43,246	$	46,931	$	49,129	$	53,246	$	61,139
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		5,291		5,547		5,650		6,058		6,462
Issued by FNMA and FHLMC		753		753		759		763		766
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		19,534		32,456		52,272		78,526		98,217
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		2,222		2,236		2,244		2,254		2,265
Total securities held to maturity	$	71,046	$	87,923	$	110,054	$	140,847	$	168,849

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 90% 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 sub-prime. Furthermore, outside of membership in the Federal Home Loan Bank of Dallas, Federal Reserve Bank and Depository Trust and Clearing Corporation, Trustmark does not hold any equity investment in government sponsored entities.

Note 3 – Loan Composition
LHFI BY TYPE (excluding covered loans)	9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010
Loans secured by real estate:
Construction, land development and other land loans	$	481,821		$	510,867		$	552,956		$	583,316		$	615,554
Secured by 1-4 family residential properties		1,717,366			1,737,744			1,737,018			1,732,056			1,672,199
Secured by nonfarm, nonresidential properties		1,437,573			1,457,328			1,488,711			1,498,108			1,531,953
Other real estate secured		207,984			208,797			216,986			231,963			203,931
Commercial and industrial loans		1,083,753			1,082,127			1,082,258			1,068,369			1,016,292
Consumer loans		268,002			332,032			357,870			402,165			444,927
Other loans		587,213			577,421			528,290			544,265			513,848
LHFI, excluding covered loans		5,783,712			5,906,316			5,964,089			6,060,242			5,998,704
Allowance for loan losses		(89,463	)		(86,846	)		(93,398	)		(93,510	)		(94,458	)
Net LHFI, excluding covered loans	$	5,694,249		$	5,819,470		$	5,870,691		$	5,966,732		$	5,904,246
COVERED LOANS BY TYPE		9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010
Loans secured by real estate:
Construction, land development and other land loans	$	4,024		$	8,477		$	-		$	-		$	-
Secured by 1-4 family residential properties		32,735			32,124			-			-			-
Secured by nonfarm, nonresidential properties		33,601			35,846			-			-			-
Other real estate secured		5,294			5,363			-			-			-
Commercial and industrial loans		1,772			5,570			-			-			-
Consumer loans		158			163			-			-			-
Other loans		1,480			1,015			-			-			-
Covered loans	$	79,064		$	88,558		$	-		$	-		$	-

Note 3 – Loan Composition (continued)
	September 30, 2011
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	$	481,821	$	101,450	$	232,555	$	32,155	$	115,661
Secured by 1-4 family residential properties		1,717,366		62,236		1,477,200		146,086		31,844
Secured by nonfarm, nonresidential properties		1,437,573		160,701		779,899		173,977		322,996
Other real estate secured		207,984		11,046		149,807		7,410		39,721
Commercial and industrial loans		1,083,753		12,670		781,978		81,902		207,203
Consumer loans		268,002		1,241		239,837		21,752		5,172
Other loans		587,213		27,252		492,283		27,976		39,702
Loans	$	5,783,712	$	376,596	$	4,153,559	$	491,258	$	762,299
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	68,439	$	41,099	$	20,682	$	1,717	$	4,941
Development		119,820		11,885		58,492		5,751		43,692
Unimproved land		181,649		47,303		82,084		18,825		33,437
1-4 family construction		74,398		872		54,510		3,771		15,245
Other construction		37,515		291		16,787		2,091		18,346
Construction, land development and other land loans	$	481,821	$	101,450	$	232,555	$	32,155	$	115,661
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	159,569	$	39,954	$	63,786	$	24,366	$	31,463
Office		147,390		41,795		76,938		11,702		16,955
Nursing homes/assisted living		124,533		-		114,673		4,510		5,350
Hotel/motel		79,150		10,869		29,946		10,808		27,527
Industrial		32,266		8,879		6,182		450		16,755
Health care		12,978		-		11,880		50		1,048
Convenience stores		9,878		203		4,998		2,337		2,340
Other		164,536		13,806		72,629		13,509		64,592
Total income producing loans		730,300		115,506		381,032		67,732		166,030
Owner-occupied:
Office		112,458		16,396		60,061		9,878		26,123
Churches		91,303		2,119		51,746		32,499		4,939
Industrial warehouses		90,182		3,521		51,166		502		34,993
Health care		84,395		10,761		52,602		14,236		6,796
Convenience stores		64,844		1,246		36,454		2,634		24,510
Retail		34,271		4,061		21,408		1,855		6,947
Restaurants		33,510		631		25,298		5,913		1,668
Auto dealerships		18,689		549		14,422		1,981		1,737
Other		177,621		5,911		85,710		36,747		49,253
Total owner-occupied loans		707,273		45,195		398,867		106,245		156,966
Loans secured by nonfarm, nonresidential properties	$	1,437,573	$	160,701	$	779,899	$	173,977	$	322,996
(1) Excludes covered loans.

Note 3 – Loan Composition (continued)
		September 30, 2011
									Classified (3)
FLORIDA CREDIT QUALITY		Total Loans		Criticized Loans (1)		Special Mention (2)			Accruing		Nonimpaired Nonaccrual		Impaired Nonaccrual (4)
	Construction, land development and other land loans:
	Lots	$	41,099	$	13,991	$	2,347		$	8,005	$	1,940	$	1,699
	Development		11,885		2,356		-			-		85		2,271
	Unimproved land		47,303		29,982		20,114			4,768		447		4,653
	1-4 family construction		872		-		-			-		-		-
	Other construction		291		291		-			291		-		-
	Construction, land development and other land loans		101,450		46,620		22,461			13,064		2,472		8,623
	Commercial, commercial real estate and consumer		275,146		56,626		8,472			31,986		3,303		12,865
	Total Florida loans	$	376,596	$	103,246	$	30,933		$	45,050	$	5,775	$	21,488
FLORIDA LOAN LOSS RESERVES BY LOAN TYPE		Total Loans		Loan Loss Reserves		Loan Loss Reserve % of Total Loans
	Construction, land development and other land loans:
	Lots	$	41,099	$	3,956		9.63	%
	Development		11,885		952		8.01	%
	Unimproved land		47,303		6,365		13.46	%
	1-4 family construction		872		28		3.21	%
	Other construction		291		73		25.09	%
	Construction, land development and other land loans		101,450		11,374		11.21	%
	Commercial, commercial real estate and consumer		275,146		7,722		2.81	%
	Total Florida loans	$	376,596	$	19,096		5.07	%
(1)	Criticized loans equal all special mention and classified loans.
(2)	Special mention loans exhibit potential credit weaknesses that, if not resolved, may ultimately result in a more severe classification.
(3)	Classified loans include those loans identified by management as exhibiting well-defined credit weaknesses that may jeopardize repayment in full of the debt.
(4)	All nonaccrual loans over $500 thousand are individually assessed for impairment. Impaired loans have been determined to be collateral dependent and assessed using a fair value approach. Fair value estimates begin with appraised values, normally from recently received and reviewed appraisals. Appraised values are adjusted down for costs associated with asset disposal. At the time a loan is deemed to be impaired, the full difference between book value and the most likely estimate of the asset’s net realizable value is charged off. However, as subsequent events dictate and estimated net realizable values decline, required reserves are established.

LOAN COMPOSITION - FLORIDA	9/30/2011		6/30/2011		3/31/2011		12/31/2010		9/30/2010
Loans secured by real estate:
Construction, land development and other land loans	$	101,450	$	111,131	$	122,445	$	132,021	$	145,907
Secured by 1-4 family residential properties		62,236		65,532		69,552		72,114		73,738
Secured by nonfarm, nonresidential properties		160,701		174,655		177,943		183,250		184,992
Other real estate secured		11,046		12,852		13,472		14,038		12,223
Commercial and industrial loans		12,670		14,267		14,774		16,053		17,512
Consumer loans		1,241		1,256		1,476		1,487		1,636
Other loans		27,252		27,471		27,694		25,488		28,194
Loans	$	376,596	$	407,164	$	427,356	$	444,451	$	464,202
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS - FLORIDA
Lots	$	41,099	$	42,990	$	44,742	$	46,907	$	48,700
Development		11,885		13,086		20,524		21,144		24,060
Unimproved land		47,303		49,910		52,177		57,811		61,676
1-4 family construction		872		1,130		1,078		2,277		7,864
Other construction		291		4,015		3,924		3,882		3,607
Construction, land development and other land loans	$	101,450	$	111,131	$	122,445	$	132,021	$	145,907

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										Nine Months Ended
	9/30/2011		6/30/2011		3/31/2011		12/31/2010		9/30/2010		9/30/2011		9/30/2010
Securities – Taxable	3.26	%	3.69	%	3.77	%	3.90	%	4.11	%	3.57	%	4.44	%
Securities – Nontaxable	4.39	%	4.79	%	5.02	%	4.97	%	5.51	%	4.71	%	5.66	%
Securities – Total	3.35	%	3.77	%	3.87	%	3.99	%	4.22	%	3.66	%	4.54	%
Loans	5.18	%	5.25	%	5.25	%	5.29	%	5.31	%	5.23	%	5.33	%
FF Sold & Rev Repo	0.34	%	0.41	%	0.39	%	0.44	%	0.42	%	0.38	%	0.37	%
Other Earning Assets	4.04	%	4.17	%	2.81	%	3.15	%	3.92	%	3.56	%	3.66	%
Total Earning Assets	4.66	%	4.83	%	4.86	%	4.94	%	5.04	%	4.78	%	5.14	%
Interest-bearing Deposits	0.65	%	0.66	%	0.70	%	0.77	%	0.84	%	0.67	%	0.92	%
FF Pch & Repo	0.19	%	0.22	%	0.21	%	0.23	%	0.22	%	0.21	%	0.19	%
Other Borrowings	1.67	%	2.76	%	1.72	%	1.65	%	2.01	%	1.99	%	1.87	%
Total Interest-bearing Liabilities	0.65	%	0.70	%	0.71	%	0.76	%	0.85	%	0.69	%	0.91	%
Net interest margin	4.17	%	4.29	%	4.30	%	4.36	%	4.39	%	4.25	%	4.43	%

During the third quarter of 2011, the net interest margin declined 12 basis points to 4.17%, from 4.29% during the second quarter of 2011. The decline is due to the downward repricing of Trustmark's earning assets, primarily securities, which were only partially offset by a modest decrease in liability costs.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and exchange-traded option contracts, to achieve a fair value return that offsets the changes in fair value of 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 are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of MSR. The MSR fair value represents the effect of present value decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the total hedge cost to the changes in the fair value of the MSR asset attributable to interest rate changes. The impact of this strategy resulted in a net positive ineffectiveness of $2.8 million and $2.9 million for the quarters ended September 30, 2011 and 2010, respectively.

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:
	Quarter Ended															Nine Months Ended
	9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010			9/30/2011			9/30/2010
Mortgage servicing income, net	$	3,738		$	3,713		$	3,614		$	3,577		$	3,406		$	11,065		$	10,350
Change in fair value-MSR from runoff		(2,039	)		(1,455	)		(1,291	)		(2,506	)		(2,255	)		(4,785	)		(4,799	)
Gain on sales of loans, net		2,366			1,852			3,101			5,754			3,911			7,319			9,563
Other, net		2,926			448			(965	)		(2,016	)		1,919			2,409			2,110
Mortgage banking income before hedge ineffectiveness		6,991			4,558			4,459			4,809			6,981			16,008			17,224
Change in fair value-MSR from market changes		(7,614	)		(4,931	)		257			5,870			(3,115	)		(12,288	)		(14,813	)
Change in fair value of derivatives		10,406			6,642			6			(6,177	)		5,995			17,054			22,432
Net positive (negative) hedge ineffectiveness		2,792			1,711			263			(307	)		2,880			4,766			7,619
Mortgage banking, net	$	9,783		$	6,269		$	4,722		$	4,502		$	9,861		$	20,774		$	24,843

During the first quarter of 2010, Trustmark completed the final settlement of the sale of approximately $920.9 million in mortgages serviced for others, which reduced Trustmark’s MSR by approximately $8.5 million. In addition, during December of 2010, Trustmark purchased approximately $53.9 million of GNMA serviced loans, which were subsequently sold to a third party. Trustmark will retain the servicing for these loans, which are fully guaranteed by FHA/VA. The effect of these transactions did not have a material impact on Trustmark's results of operations.

Note 6 – 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 6 - Non-GAAP Financial Measures (continued)
		Quarter Ended															Nine Months Ended
		9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010			9/30/2011			9/30/2010
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' common equity		$	1,211,434		$	1,181,776		$	1,159,898		$	1,160,058		$	1,155,054		$	1,184,558		$	1,139,231
Less: Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(15,343	)		(15,976	)		(16,003	)		(16,835	)		(17,716	)		(15,772	)		(18,594	)
Total average tangible common equity		$	904,987		$	874,696		$	852,791		$	852,119		$	846,234		$	877,682		$	829,533
PERIOD END BALANCES
Total shareholders' common equity		$	1,221,606		$	1,192,770		$	1,160,229		$	1,149,484		$	1,158,792
Less: Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(14,861	)		(15,651	)		(15,532	)		(16,306	)		(17,181	)
Total tangible common equity	(a)	$	915,641		$	886,015		$	853,593		$	842,074		$	850,507
TANGIBLE ASSETS
Total assets		$	9,705,291		$	9,698,451		$	9,514,462		$	9,553,902		$	9,416,905
Less: Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Identifiable intangible assets			(14,861	)		(15,651	)		(15,532	)		(16,306	)		(17,181	)
Total tangible assets	(b)	$	9,399,326		$	9,391,696		$	9,207,826		$	9,246,492		$	9,108,620
Risk-weighted assets	(c)	$	6,522,468		$	6,556,690		$	6,536,056		$	6,672,174		$	6,653,479
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders		$	26,968		$	31,602		$	24,013		$	25,160		$	25,860		$	82,583		$	75,476
Plus: Intangible amortization net of tax			489			483			480			538			545			1,452			1,635
Net income adjusted for intangible amortization		$	27,457		$	32,085		$	24,493		$	25,698		$	26,405		$	84,035		$	77,111
Period end common shares outstanding	(d)		64,119,235			64,119,235			63,987,064			63,917,591			63,885,959
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity ^1			12.04	%		14.71	%		11.65	%		11.96	%		12.38	%		12.80	%		12.43	%
Tangible common equity/tangible assets	(a)/(b)		9.74	%		9.43	%		9.27	%		9.11	%		9.34	%
Tangible common equity/risk-weighted assets	(a)/(c)		14.04	%		13.51	%		13.06	%		12.62	%		12.78	%
Tangible common book value	(a)/(d)*1,000	$	14.28		$	13.82		$	13.34		$	13.17		$	13.31
TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity		$	1,221,606		$	1,192,770		$	1,160,229		$	1,149,484		$	1,158,792
Eliminate qualifying AOCI			(19,606	)		(3,674	)		11,623			11,426			(9,648	)
Qualifying tier 1 capital			60,000			60,000			60,000			60,000			68,000
Disallowed goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
Adj to goodwill allowed for deferred taxes			11,273			10,920			10,568			10,215			9,863
Other disallowed intangibles			(14,861	)		(15,651	)		(15,532	)		(16,306	)		(17,181	)
Disallowed servicing intangible			(4,366	)		(5,011	)		(5,360	)		(5,115	)		(4,197	)
Total tier 1 capital		$	962,942		$	948,250		$	930,424		$	918,600		$	914,525
Less: Qualifying tier 1 capital			(60,000	)		(60,000	)		(60,000	)		(60,000	)		(68,000	)
Total tier 1 common capital	(e)	$	902,942		$	888,250		$	870,424		$	858,600		$	846,525
Tier 1 common risk-based capital ratio	(e)/(c)		13.84	%		13.55	%		13.32	%		12.87	%		12.72	%
^1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity

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