TRUSTMARK CORP - FORM 8-K - EX-99.1

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8-K - TRUSTMARK CORPORATION EARNINGS RELEASE - TRUSTMARK CORP	form8k.htm

News Release

Trustmark Corporation Announces Second Quarter 2012 Financial Results

and Declares $0.23 Quarterly Cash Dividend

Jackson, Miss. – July 24, 2012 – Trustmark Corporation (NASDAQ:TRMK) announced net income available to common shareholders of $29.3 million in the second quarter of 2012, which represented diluted earnings per common share of $0.45. Trustmark’s performance during the quarter produced a return on average tangible common equity of 12.74% and a return on average assets of 1.20%. During the first six months of 2012, Trustmark’s net income available to common shareholders totaled $59.7 million, which represented diluted earnings per common share of $0.92. Trustmark’s performance during the first half of 2012 resulted in a return on average tangible common equity of 13.07% and a return on average assets of 1.23%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable September 15, 2012, to shareholders of record on September 1, 2012.

Gerard R. Host, President and CEO, stated, “Trustmark continued to achieve solid financial performance in the second quarter. Total revenue for the quarter exceeded $130 million due in part to solid performance in our banking, mortgage banking, wealth management and insurance businesses. Credit quality continued to improve as evidenced by significantly lower nonaccrual loans and provisioning levels. In May, we announced plans to acquire BancTrust Financial Group, a $2.0 billion financial institution based in Mobile, Alabama. This transaction, which is expected to close during the fourth quarter of 2012, is subject to approval by regulatory authorities and BancTrust’s shareholders. 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

·	Classified and criticized loans declined $20.7 million and $35.2 million, respectively, relative to the prior quarter

·	Allowance for loan losses represented 186.5% of nonperforming loans, excluding impaired loans

Trustmark continued to experience significant improvements in credit quality. Nonperforming loans totaled $99.7 million at June 30, 2012, a decline of 5.8% from the prior quarter and 17.6% from the prior year. Foreclosed other real estate experienced similar improvement, declining 2.7% from the prior quarter and 18.1% from levels one year earlier to total $73.7 million. Collectively, nonperforming assets totaled $173.4 million at June 30, 2012, the lowest level since year end 2008. All of the above metrics exclude acquired loans and other real estate covered by FDIC loss-share agreements.

Net charge-offs during the second quarter of 2012 totaled $6.7 million. The second quarter provision for loan losses totaled $650 thousand for non-acquired loans as sufficient reserves were previously established for both impaired and other substandard credits, net loan risk rate upgrades and balance reductions on criticized credits. During the second quarter, Trustmark experienced a $20.7 million, or 6.7%, decline in classified loans and a $35.2 million, or 8.8%, decline in criticized loans relative to the prior quarter. Relative to figures one year earlier, classified loan balances decreased $68.0 million, or 19.0%, while criticized loan balances decreased $80.0 million, or 18.0%.

Allocation of Trustmark’s $84.8 million allowance for loan losses represented 1.81% of commercial loans and 0.81% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.50% at June 30, 2012, which represents a level management considers to be commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 186.5% of nonperforming loans, excluding impaired loans. All of the above metrics exclude acquired loans.

Capital Strength

·	Tangible common equity to tangible assets expanded to 9.90%

·	Total risk-based capital ratio increased to 17.12%

Trustmark’s solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At June 30, 2012, tangible common equity totaled $948.0 million and represented 9.90% of tangible assets while the total risk-based capital ratio was 17.12%. 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

·	Average earning assets totaled $8.7 billion

·	Net interest income (FTE) totaled $89.9 million

Loans held for investment and acquired loans totaled $5.8 billion at June 30, 2012, a decrease of $139.3 million from the prior quarter due principally to a $105.0 million decline in single family mortgage loans. During the quarter, many customers took advantage of the opportunity to refinance existing mortgages at more attractive rates. In fact, Trustmark’s mortgage production totaled $465.1 million in the second quarter, an increase of 12.1% from the prior quarter and 84.9% from levels one year earlier. Trustmark elected to sell the vast majority of these lower rate, longer term home mortgages in the secondary market rather than replacing the runoff in its single family loan portfolio. Trustmark’s decision to discontinue indirect auto financing continued to be reflected in loan totals as this portfolio declined $16.2 million in the second quarter. In addition, current economic conditions continued to constrain the demand for credit as reflected by a $32.6 million decline in nonfarm, nonresidential loans.

During the second quarter of 2012, average earning assets remained stable at $8.7 billion while average deposits increased $223.8 million, or 2.9%, relative to the prior quarter to total $8.0 billion. Average noninterest-bearing deposits increased 6.9% to represent 25.0% of average deposits in the second quarter of 2012.

Prudent asset and liability management, including disciplined loan and deposit pricing, continued to produce solid net interest income and a strong net interest margin. Net interest income (FTE) totaled $89.9 million during the second quarter, resulting in a net interest margin of 4.15%, four basis points lower than the prior quarter. The decrease is due to the downward repricing of fixed rate loans and securities, partially offset by improvements in the accreted yield on acquired covered loans and modest declines in the cost of interest-bearing deposits.

Noninterest Income

·	Noninterest income totaled $43.8 million, representing 33.6% of total revenue

·	Mortgage, Insurance and Wealth Management income expand

Trustmark continued to achieve solid financial results from its diverse financial services businesses. Mortgage banking income during the second quarter totaled $11.2 million, an increase of $3.9 million from the prior quarter. Performance in mortgage banking continued to reflect stable mortgage servicing income, solid secondary marketing gains, and successful hedging programs. During the quarter, mortgage banking results included mark-to-market adjustments on mortgage loans held for sale of $3.1 million due largely to increased refinancing activity resulting from lower mortgage rates.

Insurance revenue during the second quarter totaled $7.2 million, an increase of 8.7% from the prior quarter due to increased commercial insurance business as well as a firming of insurance rates. Insurance revenue increased 4.6% from levels one year earlier. Wealth management income increased 4.7% relative to the prior quarter to total $5.8 million due to growth in trust fees and brokerage service revenues. During the second quarter, Trustmark announced the pending sale of its proprietary mutual fund business. While not a material transaction financially, this transaction will allow Trustmark to fully embrace open architecture in its wealth management business and focus additional resources on managing client relationships.

Service charges on deposit accounts totaled $12.6 million in the second quarter, reflecting a 3.3% seasonal increase from the prior quarter and a 1.8% decrease from levels one year earlier. Bank card and other fee income increased 11.1% from the prior quarter and 19.3% from the prior year to $8.2 million due in part to increased debit card usage and other banking fees.

Other noninterest income declined $4.9 million relative to the prior quarter, principally due to acquisition related activities. During the second quarter, the fair values associated with the Bay Bank acquisition were finalized and resulted in a bargain purchase gain of $881 thousand in addition to the $2.8 million recorded in the first quarter of 2012. In addition, the FDIC indemnification asset on acquired covered loans from the Heritage transaction was reduced by $2.3 million during the second quarter as a result of the re-estimation of cash flows and loan payoffs.

Noninterest Expense

·	ORE/Foreclosure expense declined to lowest level in 12 quarters

·	Noninterest expense remained well-controlled

Noninterest expense in the second quarter increased $2.2 million, or 2.5%, relative to the prior quarter to total $88.0 million. Excluding acquisition expenses related to the Bay Bank merger recorded in the first quarter of $2.6 million ($1.9 million in contract termination and other expenses included in other expense and $672 thousand of change in control and severance expense included in salaries and benefits), noninterest expense increased $4.8 million in the second quarter. Salaries and benefits expense increased $1.2 million, or 2.6%, in the second quarter relative to recurring expenses in the prior quarter. Approximately $730 thousand of this increase is attributable to the first full quarter of the Bay Bank acquisition.

ORE/Foreclosure expense totaled $2.4 million, a decline of 38.8% relative to the prior quarter and 49.2% when compared to figures one year earlier. Services and fees totaled $11.8 million in the second quarter, an increase of $1.0 million relative to the prior quarter. This increase includes costs associated with the installation of new computer software systems and expenses related to the realignment of certain business units.

Other expense totaled $14.9 million in the second quarter, an increase of $3.7 million when compared to recurring expenses in the prior quarter. During the second quarter of 2012, Trustmark updated its quarterly analysis of mortgage loan repurchase exposure. This analysis, along with recent trends of increased mortgage loan repurchase activity in the mortgage industry, resulted in Trustmark providing an additional reserve of approximately $4.0 million in the second quarter. At June 30, 2012, the reserve for mortgage loan repurchases totaled $9.2 million. Notwithstanding significant changes in future behaviors and the demand patterns of investors, Trustmark believes that it is appropriately reserved for potential mortgage loan repurchase requests.

ADDITIONAL INFORMATION

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 25, 2012, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877)317-6789, passcode 10008303, or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Thursday, August 9, 2012, in archived format at the same web address or by calling (877)344-7529, 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 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 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 diversion of management’s time and attention from Trustmark’s ongoing business during this time period, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses 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 Investor Contacts:

Louis E. Greer

Treasurer and

Principal Financial Officer

601-208-2310

F. Joseph Rein, Jr.

Senior Vice President

601-208-6898

Trustmark Media Contact:

Melanie A. Morgan

Senior Vice President

601-208-2979

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2012

($ in thousands)

(unaudited)

										Linked Quarter						Year over Year
QUARTERLY AVERAGE BALANCES	6/30/2012			3/31/2012			6/30/2011			$ Change			% Change			$ Change			% Change
Securities AFS-taxable	$	2,341,475		$	2,327,572		$	2,142,978		$	13,903			0.6	%	$	198,497			9.3	%
Securities AFS-nontaxable		167,287			160,870			151,471			6,417			4.0	%		15,816			10.4	%
Securities HTM-taxable		30,136			33,270			73,739			(3,134	)		-9.4	%		(43,603	)		-59.1	%
Securities HTM-nontaxable		19,378			21,598			25,797			(2,220	)		-10.3	%		(6,419	)		-24.9	%
Total securities		2,558,276			2,543,310			2,393,985			14,966			0.6	%		164,291			6.9	%
Loans (including loans held for sale)		5,938,168			6,014,133			6,044,232			(75,965	)		-1.3	%		(106,064	)		-1.8	%
Acquired loans:
Noncovered loans		97,341			19,931			-			77,410			n/m			97,341			n/m
Covered loans		70,217			75,612			77,858			(5,395	)		-7.1	%		(7,641	)		-9.8	%
Fed funds sold and rev repos		5,309			9,568			6,807			(4,259	)		-44.5	%		(1,498	)		-22.0	%
Other earning assets		29,654			34,102			32,028			(4,448	)		-13.0	%		(2,374	)		-7.4	%
Total earning assets		8,698,965			8,696,656			8,554,910			2,309			0.0	%		144,055			1.7	%
Allowance for loan losses		(92,223	)		(92,062	)		(94,771	)		(161	)		0.2	%		2,548			-2.7	%
Cash and due from banks		272,283			232,139			216,483			40,144			17.3	%		55,800			25.8	%
Other assets		947,914			918,273			937,503			29,641			3.2	%		10,411			1.1	%
Total assets	$	9,826,939		$	9,755,006		$	9,614,125		$	71,933			0.7	%	$	212,814			2.2	%

Interest-bearing demand deposits	$	1,545,203		$	1,545,045		$	1,579,894		$	158			0.0	%	$	(34,691	)		-2.2	%
Savings deposits		2,467,546			2,339,166			2,277,220			128,380			5.5	%		190,326			8.4	%
Time deposits less than $100,000		1,169,532			1,190,888			1,255,496			(21,356	)		-1.8	%		(85,964	)		-6.8	%
Time deposits of $100,000 or more		813,530			825,214			904,106			(11,684	)		-1.4	%		(90,576	)		-10.0	%
Total interest-bearing deposits		5,995,811			5,900,313			6,016,716			95,498			1.6	%		(20,905	)		-0.3	%
Fed funds purchased and repos		280,726			437,270			396,618			(156,544	)		-35.8	%		(115,892	)		-29.2	%
Short-term borrowings		80,275			84,797			92,077			(4,522	)		-5.3	%		(11,802	)		-12.8	%
Long-term FHLB advances		-			-			2,333			-			n/m			(2,333	)		-100.0	%
Subordinated notes		49,850			49,842			49,817			8			0.0	%		33			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-			0.0	%		-			0.0	%
Total interest-bearing liabilities		6,468,518			6,534,078			6,619,417			(65,560	)		-1.0	%		(150,899	)		-2.3	%
Noninterest-bearing deposits		1,998,077			1,869,758			1,714,778			128,319			6.9	%		283,299			16.5	%
Other liabilities		104,628			122,668			98,154			(18,040	)		-14.7	%		6,474			6.6	%
Total liabilities		8,571,223			8,526,504			8,432,349			44,719			0.5	%		138,874			1.6	%
Shareholders' equity		1,255,716			1,228,502			1,181,776			27,214			2.2	%		73,940			6.3	%
Total liabilities and equity	$	9,826,939		$	9,755,006		$	9,614,125		$	71,933			0.7	%	$	212,814			2.2	%

										Linked Quarter						Year over Year
PERIOD END BALANCES	6/30/2012			3/31/2012			6/30/2011			$ Change			% Change			$ Change			% Change
Cash and due from banks	$	284,735		$	213,500		$	221,853		$	71,235			33.4	%	$	62,882			28.3	%
Fed funds sold and rev repos		6,725			6,301			4,576			424			6.7	%		2,149			47.0	%
Securities available for sale		2,592,807			2,595,664			2,399,042			(2,857	)		-0.1	%		193,765			8.1	%
Securities held to maturity		47,867			52,010			87,923			(4,143	)		-8.0	%		(40,056	)		-45.6	%
Loans held for sale (LHFS)		286,221			227,449			123,244			58,772			25.8	%		162,977			n/m
Loans held for investment (LHFI)		5,650,548			5,774,753			5,906,316			(124,205	)		-2.2	%		(255,768	)		-4.3	%
Allowance for loan losses		(84,809	)		(90,879	)		(86,846	)		6,070			-6.7	%		2,037			-2.3	%
Net LHFI		5,565,739			5,683,874			5,819,470			(118,135	)		-2.1	%		(253,731	)		-4.4	%
Acquired loans:
Noncovered loans		94,013			100,669			-			(6,656	)		-6.6	%		94,013			n/m
Covered loans		66,015			74,419			88,558			(8,404	)		-11.3	%		(22,543	)		-25.5	%
Allowance for loan losses, acquired loans		(1,526	)		(773	)		-			(753	)		97.4	%		(1,526	)		n/m
Net acquired loans		158,502			174,315			88,558			(15,813	)		-9.1	%		69,944			79.0	%
Net LHFI and acquired loans		5,724,241			5,858,189			5,908,028			(133,948	)		-2.3	%		(183,787	)		-3.1	%
Premises and equipment, net		156,089			156,158			140,640			(69	)		0.0	%		15,449			11.0	%
Mortgage servicing rights		43,580			45,893			50,111			(2,313	)		-5.0	%		(6,531	)		-13.0	%
Goodwill		291,104			291,104			291,104			-			0.0	%		-			0.0	%
Identifiable intangible assets		19,356			18,821			15,651			535			2.8	%		3,705			23.7	%
Other real estate, excluding covered other real estate		73,673			75,742			89,999			(2,069	)		-2.7	%		(16,326	)		-18.1	%
Covered other real estate		6,482			5,824			7,485			658			11.3	%		(1,003	)		-13.4	%
FDIC indemnification asset		25,309			28,260			33,327			(2,951	)		-10.4	%		(8,018	)		-24.1	%
Other assets		332,657			356,678			325,468			(24,021	)		-6.7	%		7,189			2.2	%
Total assets	$	9,890,846		$	9,931,593		$	9,698,451		$	(40,747	)		-0.4	%	$	192,395			2.0	%

Deposits:
Noninterest-bearing	$	2,063,261		$	2,024,290		$	1,806,908		$	38,971			1.9	%	$	256,353			14.2	%
Interest-bearing		5,932,596			6,066,456			5,825,426			(133,860	)		-2.2	%		107,170			1.8	%
Total deposits		7,995,857			8,090,746			7,632,334			(94,889	)		-1.2	%		363,523			4.8	%
Fed funds purchased and repos		297,669			254,878			539,693			42,791			16.8	%		(242,024	)		-44.8	%
Short-term borrowings		78,594			82,023			90,156			(3,429	)		-4.2	%		(11,562	)		-12.8	%
Long-term FHLB advances		-			-			2,794			-			n/m			(2,794	)		-100.0	%
Subordinated notes		49,855			49,847			49,823			8			0.0	%		32			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-			0.0	%		-			0.0	%
Other liabilities		148,520			150,723			129,025			(2,203	)		-1.5	%		19,495			15.1	%
Total liabilities		8,632,351			8,690,073			8,505,681			(57,722	)		-0.7	%		126,670			1.5	%
Common stock		13,496			13,494			13,359			2			0.0	%		137			1.0	%
Capital surplus		283,023			282,388			263,940			635			0.2	%		19,083			7.2	%
Retained earnings		958,322			944,101			911,797			14,221			1.5	%		46,525			5.1	%
Accum other comprehensive
income, net of tax		3,654			1,537			3,674			2,117			n/m			(20	)		-0.5	%
Total shareholders' equity		1,258,495			1,241,520			1,192,770			16,975			1.4	%		65,725			5.5	%
Total liabilities and equity	$	9,890,846		$	9,931,593		$	9,698,451		$	(40,747	)		-0.4	%	$	192,395			2.0	%

n/m - percentage changes greater than +/- 100% are considered not meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2012

($ in thousands except per share data)

(unaudited)

	Quarter Ended									Linked Quarter						Year over Year
INCOME STATEMENTS	6/30/2012			3/31/2012			6/30/2011			$ Change			% Change			$ Change			% Change
Interest and fees on loans-FTE	$	78,046		$	78,718		$	80,202		$	(672	)		-0.9	%	$	(2,156	)		-2.7	%
Interest on securities-taxable		17,352			18,384			20,374			(1,032	)		-5.6	%		(3,022	)		-14.8	%
Interest on securities-tax exempt-FTE		2,086			2,102			2,115			(16	)		-0.8	%		(29	)		-1.4	%
Interest on fed funds sold and rev repos		5			6			7			(1	)		-16.7	%		(2	)		-28.6	%
Other interest income		336			330			333			6			1.8	%		3			0.9	%
Total interest income-FTE		97,825			99,540			103,031			(1,715	)		-1.7	%		(5,206	)		-5.1	%
Interest on deposits		6,465			7,353			9,936			(888	)		-12.1	%		(3,471	)		-34.9	%
Interest on fed funds pch and repos		142			171			216			(29	)		-17.0	%		(74	)		-34.3	%
Other interest expense		1,359			1,414			1,420			(55	)		-3.9	%		(61	)		-4.3	%
Total interest expense		7,966			8,938			11,572			(972	)		-10.9	%		(3,606	)		-31.2	%
Net interest income-FTE		89,859			90,602			91,459			(743	)		-0.8	%		(1,600	)		-1.7	%
Provision for loan losses, excluding acquired loans		650			3,293			8,116			(2,643	)		-80.3	%		(7,466	)		-92.0	%
Provision for acquired loan losses		1,672			(194	)		-			1,866			n/m			1,672			n/m
Net interest income after provision-FTE		87,537			87,503			83,343			34			0.0	%		4,194			5.0	%
Service charges on deposit accounts		12,614			12,211			12,851			403			3.3	%		(237	)		-1.8	%
Insurance commissions		7,179			6,606			6,862			573			8.7	%		317			4.6	%
Wealth management		5,762			5,501			5,760			261			4.7	%		2			0.0	%
Bank card and other fees		8,179			7,364			6,854			815			11.1	%		1,325			19.3	%
Mortgage banking, net		11,184			7,295			6,269			3,889			53.3	%		4,915			78.4	%
Other, net		(1,150	)		3,758			7,785			(4,908	)		n/m			(8,935	)		n/m
Nonint inc-excl sec gains, net		43,768			42,735			46,381			1,033			2.4	%		(2,613	)		-5.6	%
Security (losses) gains, net		(8	)		1,050			51			(1,058	)		n/m			(59	)		n/m
Total noninterest income		43,760			43,785			46,432			(25	)		-0.1	%		(2,672	)		-5.8	%
Salaries and employee benefits		46,959			46,432			44,203			527			1.1	%		2,756			6.2	%
Services and fees		11,750			10,747			10,780			1,003			9.3	%		970			9.0	%
Net occupancy-premises		4,954			4,938			5,050			16			0.3	%		(96	)		-1.9	%
Equipment expense		5,183			4,912			4,856			271			5.5	%		327			6.7	%
FDIC assessment expense		1,826			1,775			1,938			51			2.9	%		(112	)		-5.8	%
ORE/Foreclosure expense		2,388			3,902			4,704			(1,514	)		-38.8	%		(2,316	)		-49.2	%
Other expense		14,899			13,068			9,817			1,831			14.0	%		5,082			51.8	%
Total noninterest expense		87,959			85,774			81,348			2,185			2.5	%		6,611			8.1	%
Income before income taxes and tax eq adj		43,338			45,514			48,427			(2,176	)		-4.8	%		(5,089	)		-10.5	%
Tax equivalent adjustment		3,411			3,658			3,629			(247	)		-6.8	%		(218	)		-6.0	%
Income before income taxes		39,927			41,856			44,798			(1,929	)		-4.6	%		(4,871	)		-10.9	%
Income taxes		10,578			11,536			13,196			(958	)		-8.3	%		(2,618	)		-19.8	%
Net income available to common shareholders	$	29,349		$	30,320		$	31,602		$	(971	)		-3.2	%	$	(2,253	)		-7.1	%


Per common share data
Earnings per share - basic	$	0.45		$	0.47		$	0.49		$	(0.02	)		-4.3	%	$	(0.04	)		-8.2	%

Earnings per share - diluted	$	0.45		$	0.47		$	0.49		$	(0.02	)		-4.3	%	$	(0.04	)		-8.2	%

Dividends per share	$	0.23		$	0.23		$	0.23		$	-			0.0	%	$	-			0.0	%

Weighted average common shares outstanding
Basic		64,771,530			64,297,038			64,072,047

Diluted		64,938,697			64,477,277			64,281,348

Period end common shares outstanding		64,775,694			64,765,581			64,119,235

OTHER FINANCIAL DATA
Return on common equity		9.40	%		9.93	%		10.73	%
Return on average tangible common equity		12.74	%		13.41	%		14.71	%
Return on equity		9.40	%		9.93	%		10.73	%
Return on assets		1.20	%		1.25	%		1.32	%
Interest margin - Yield - FTE		4.52	%		4.60	%		4.83	%
Interest margin - Cost		0.37	%		0.41	%		0.54	%
Net interest margin - FTE		4.15	%		4.19	%		4.29	%
Efficiency ratio (1)		66.26	%		63.70	%		62.39	%
Full-time equivalent employees		2,598			2,611			2,575

COMMON STOCK PERFORMANCE
Market value-Close	$	24.48		$	24.98		$	23.41
Common book value	$	19.43		$	19.17		$	18.60
Tangible common book value	$	14.64		$	14.38		$	13.82


(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and one-time acquisition related transaction expenses.

n/m - percentage changes greater than +/- 100% are considered not meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2012

($ in thousands)

(unaudited)

	Quarter Ended									Linked Quarter						Year over Year
NONPERFORMING ASSETS (1)	6/30/2012			3/31/2012			6/30/2011			$ Change			% Change			$ Change			% Change
Nonaccrual loans
Florida	$	22,260		$	22,174		$	30,752		$	86			0.4	%	$	(8,492	)		-27.6	%
Mississippi (2)		47,322			48,648			47,802			(1,326	)		-2.7	%		(480	)		-1.0	%
Tennessee (3)		11,171			13,972			17,564			(2,801	)		-20.0	%		(6,393	)		-36.4	%
Texas		18,927			20,979			24,900			(2,052	)		-9.8	%		(5,973	)		-24.0	%
Total nonaccrual loans		99,680			105,773			121,018			(6,093	)		-5.8	%		(21,338	)		-17.6	%
Other real estate
Florida		23,324			26,226			33,823			(2,902	)		-11.1	%		(10,499	)		-31.0	%
Mississippi (2)		19,511			19,240			22,921			271			1.4	%		(3,410	)		-14.9	%
Tennessee (3)		18,850			17,665			15,760			1,185			6.7	%		3,090			19.6	%
Texas		11,988			12,611			17,495			(623	)		-4.9	%		(5,507	)		-31.5	%
Total other real estate		73,673			75,742			89,999			(2,069	)		-2.7	%		(16,326	)		-18.1	%
Total nonperforming assets	$	173,353		$	181,515		$	211,017		$	(8,162	)		-4.5	%	$	(37,664	)		-17.8	%

LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,843		$	1,553		$	6,993		$	290			18.7	%	$	(5,150	)		-73.6	%

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	35,270		$	39,496		$	24,708		$	(4,226	)		-10.7	%	$	10,562			42.7	%

	Quarter Ended									Linked Quarter						Year over Year
ALLOWANCE FOR LOAN LOSSES (4)	6/30/2012			3/31/2012			6/30/2011			$ Change			% Change			$ Change			% Change
Beginning Balance	$	90,879		$	89,518		$	93,398		$	1,361			1.5	%	$	(2,519	)		-2.7	%
Provision for loan losses		650			3,293			8,116			(2,643	)		-80.3	%		(7,466	)		-92.0	%
Charge-offs		(9,264	)		(5,376	)		(17,505	)		(3,888	)		72.3	%		8,241			-47.1	%
Recoveries		2,544			3,444			2,837			(900	)		-26.1	%		(293	)		-10.3	%
Net charge-offs		(6,720	)		(1,932	)		(14,668	)		(4,788	)		n/m			7,948			-54.2	%
Ending Balance	$	84,809		$	90,879		$	86,846		$	(6,070	)		-6.7	%	$	(2,037	)		-2.3	%

PROVISION FOR LOAN LOSSES (4)
Florida	$	(770	)	$	739		$	5,633		$	(1,509	)		n/m		$	(6,403	)		n/m
Mississippi (2)		1,141			4,152			1,331			(3,011	)		-72.5	%		(190	)		-14.3	%
Tennessee (3)		839			(29	)		157			868			n/m			682			n/m
Texas		(560	)		(1,569	)		995			1,009			-64.3	%		(1,555	)		n/m
Total provision for loan losses	$	650		$	3,293		$	8,116		$	(2,643	)		-80.3	%	$	(7,466	)		-92.0	%

NET CHARGE-OFFS (4)
Florida	$	4,491		$	1,495		$	7,880		$	2,996			n/m		$	(3,389	)		-43.0	%
Mississippi (2)		1,751			251			3,401			1,500			n/m			(1,650	)		-48.5	%
Tennessee (3)		536			223			324			313			n/m			212			65.4	%
Texas		(58	)		(37	)		3,063			(21	)		56.8	%		(3,121	)		n/m
Total net charge-offs	$	6,720		$	1,932		$	14,668		$	4,788			n/m		$	(7,948	)		-54.2	%

CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.46	%		0.13	%		0.97	%
Provision for loan losses/average loans		0.04	%		0.22	%		0.54	%
Nonperforming loans/total loans (incl LHFS)		1.68	%		1.76	%		2.01	%
Nonperforming assets/total loans (incl LHFS)		2.92	%		3.02	%		3.50	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.88	%		2.99	%		3.45	%
ALL/total loans (excl LHFS)		1.50	%		1.57	%		1.47	%
ALL-commercial/total commercial loans		1.81	%		1.97	%		1.84	%
ALL-consumer/total consumer and home mortgage loans		0.81	%		0.75	%		0.76	%
ALL/nonperforming loans		85.08	%		85.92	%		71.76	%
ALL/nonperforming loans -
(excl impaired loans)		186.45	%		181.11	%		181.95	%

CAPITAL RATIOS
Total equity/total assets		12.72	%		12.50	%		12.30	%
Common equity/total assets		12.72	%		12.50	%		12.30	%
Tangible common equity/tangible assets		9.90	%		9.68	%		9.43	%
Tangible common equity/risk-weighted assets		14.30	%		13.89	%		13.51	%
Tier 1 leverage ratio		10.63	%		10.55	%		10.18	%
Tier 1 common risk-based capital ratio		14.36	%		13.98	%		13.55	%
Tier 1 risk-based capital ratio		15.26	%		14.87	%		14.46	%
Total risk-based capital ratio		17.12	%		16.72	%		16.47	%

(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans

n/m - percentage changes greater than +/- 100% are considered not meaningful

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2012

($ in thousands)

(unaudited)

	Quarter Ended															Six Months Ended
AVERAGE BALANCES	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011			6/30/2012			6/30/2011
Securities AFS-taxable	$	2,341,475		$	2,327,572		$	2,241,361		$	2,150,117		$	2,142,978		$	2,334,524		$	2,096,995
Securities AFS-nontaxable		167,287			160,870			164,057			170,714			151,471			164,079			148,214
Securities HTM-taxable		30,136			33,270			41,106			52,868			73,739			31,703			85,658
Securities HTM-nontaxable		19,378			21,598			22,664			24,062			25,797			20,488			26,444
Total securities		2,558,276			2,543,310			2,469,188			2,397,761			2,393,985			2,550,794			2,357,311
Loans (including loans held for sale)		5,938,168			6,014,133			5,999,221			5,985,730			6,044,232			5,976,151			6,075,455
Acquired loans:
Noncovered loans		97,341			19,931			-			-			-			58,636			-
Covered loans		70,217			75,612			77,934			83,811			77,858			72,915			39,144
Fed funds sold and rev repos		5,309			9,568			10,516			5,801			6,807			7,439			7,579
Other earning assets		29,654			34,102			34,859			32,327			32,028			31,878			39,896
Total earning assets		8,698,965			8,696,656			8,591,718			8,505,430			8,554,910			8,697,813			8,519,385
Allowance for loan losses		(92,223	)		(92,062	)		(90,857	)		(88,888	)		(94,771	)		(92,143	)		(95,415	)
Cash and due from banks		272,283			232,139			221,278			216,134			216,483			252,211			219,415
Other assets		947,914			918,273			914,468			939,780			937,503			933,092			918,620
Total assets	$	9,826,939		$	9,755,006		$	9,636,607		$	9,572,456		$	9,614,125		$	9,790,973		$	9,562,005

Interest-bearing demand deposits	$	1,545,203		$	1,545,045		$	1,511,422		$	1,558,318		$	1,579,894		$	1,545,124		$	1,522,958
Savings deposits		2,467,546			2,339,166			2,067,431			2,133,437			2,277,220			2,403,356			2,162,186
Time deposits less than $100,000		1,169,532			1,190,888			1,212,190			1,232,374			1,255,496			1,180,210			1,232,982
Time deposits of $100,000 or more		813,530			825,214			844,565			877,951			904,106			819,372			890,615
Total interest-bearing deposits		5,995,811			5,900,313			5,635,608			5,802,080			6,016,716			5,948,062			5,808,741
Fed funds purchased and repos		280,726			437,270			526,740			462,294			396,618			358,998			521,555
Short-term borrowings		80,275			84,797			141,600			85,678			92,077			82,536			172,815
Long-term FHLB advances		-			-			197			2,413			2,333			-			1,173
Subordinated notes		49,850			49,842			49,833			49,825			49,817			49,846			49,813
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		6,468,518			6,534,078			6,415,834			6,464,146			6,619,417			6,501,298			6,615,953
Noninterest-bearing deposits		1,998,077			1,869,758			1,897,398			1,811,472			1,714,778			1,933,918			1,667,926
Other liabilities		104,628			122,668			100,274			85,404			98,154			113,648			107,229
Total liabilities		8,571,223			8,526,504			8,413,506			8,361,022			8,432,349			8,548,864			8,391,108
Shareholders' equity		1,255,716			1,228,502			1,223,101			1,211,434			1,181,776			1,242,109			1,170,897
Total liabilities and equity	$	9,826,939		$	9,755,006		$	9,636,607		$	9,572,456		$	9,614,125		$	9,790,973		$	9,562,005

PERIOD END BALANCES	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Cash and due from banks	$	284,735		$	213,500		$	202,625		$	245,132		$	221,853
Fed funds sold and rev repos		6,725			6,301			9,258			8,810			4,576
Securities available for sale		2,592,807			2,595,664			2,468,993			2,476,905			2,399,042
Securities held to maturity		47,867			52,010			57,705			71,046			87,923
Loans held for sale (LHFS)		286,221			227,449			216,553			210,269			123,244
Loans held for investment (LHFI)		5,650,548			5,774,753			5,857,484			5,783,712			5,906,316
Allowance for loan losses		(84,809	)		(90,879	)		(89,518	)		(89,463	)		(86,846	)
Net LHFI		5,565,739			5,683,874			5,767,966			5,694,249			5,819,470
Acquired loans:
Noncovered loans		94,013			100,669			-			-			-
Covered loans		66,015			74,419			76,804			79,064			88,558
Allowance for loan losses, acquired loans		(1,526	)		(773	)		(502	)		-			-
Net acquired loans		158,502			174,315			76,302			79,064			88,558
Net LHFI and acquired loans		5,724,241			5,858,189			5,844,268			5,773,313			5,908,028
Premises and equipment, net		156,089			156,158			142,582			141,639			140,640
Mortgage servicing rights		43,580			45,893			43,274			43,659			50,111
Goodwill		291,104			291,104			291,104			291,104			291,104
Identifiable intangible assets		19,356			18,821			14,076			14,861			15,651
Other real estate, excluding covered other real estate		73,673			75,742			79,053			89,597			89,999
Covered other real estate		6,482			5,824			6,331			7,197			7,485
FDIC indemnification asset		25,309			28,260			28,348			33,436			33,327
Other assets		332,657			356,678			322,837			298,953			325,468
Total assets	$	9,890,846		$	9,931,593		$	9,727,007		$	9,705,921		$	9,698,451

Deposits:
Noninterest-bearing	$	2,063,261		$	2,024,290		$	2,033,442		$	1,871,040		$	1,806,908
Interest-bearing		5,932,596			6,066,456			5,532,921			5,698,684			5,825,426
Total deposits		7,995,857			8,090,746			7,566,363			7,569,724			7,632,334
Fed funds purchased and repos		297,669			254,878			604,500			576,672			539,693
Short-term borrowings		78,594			82,023			87,628			98,887			90,156
Long-term FHLB advances		-			-			-			741			2,794
Subordinated notes		49,855			49,847			49,839			49,831			49,823
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		148,520			150,723			141,784			126,604			129,025
Total liabilities		8,632,351			8,690,073			8,511,970			8,484,315			8,505,681
Common stock		13,496			13,494			13,364			13,359			13,359
Capital surplus		283,023			282,388			266,026			264,750			263,940
Retained earnings		958,322			944,101			932,526			923,891			911,797
Accum other comprehensive
income, net of tax		3,654			1,537			3,121			19,606			3,674
Total shareholders' equity		1,258,495			1,241,520			1,215,037			1,221,606			1,192,770
Total liabilities and equity	$	9,890,846		$	9,931,593		$	9,727,007		$	9,705,921		$	9,698,451

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2012

($ in thousands except per share data)

(unaudited)

	Quarter Ended															Six Months Ended
INCOME STATEMENTS	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011			6/30/2012			6/30/2011
Interest and fees on loans-FTE	$	78,046		$	78,718		$	82,230		$	79,256		$	80,202		$	156,764		$	159,318
Interest on securities-taxable		17,352			18,384			17,362			18,115			20,374			35,736			40,366
Interest on securities-tax exempt-FTE		2,086			2,102			2,133			2,155			2,115			4,188			4,243
Interest on fed funds sold and rev repos		5			6			10			5			7			11			15
Other interest income		336			330			327			329			333			666			665
Total interest income-FTE		97,825			99,540			102,062			99,860			103,031			197,365			204,607
Interest on deposits		6,465			7,353			7,728			8,911			9,936			13,818			19,655
Interest on fed funds pch and repos		142			171			195			216			216			313			554
Other interest expense		1,359			1,414			1,418			1,386			1,420			2,773			2,973
Total interest expense		7,966			8,938			9,341			10,513			11,572			16,904			23,182
Net interest income-FTE		89,859			90,602			92,721			89,347			91,459			180,461			181,425
Provision for loan losses, excluding acquired loans		650			3,293			6,073			7,978			8,116			3,943			15,653
Provision for acquired loan losses		1,672			(194	)		624			-			-			1,478			-
Net interest income after provision-FTE		87,537			87,503			86,024			81,369			83,343			175,040			165,772
Service charges on deposit accounts		12,614			12,211			13,269			13,680			12,851			24,825			24,758
Insurance commissions		7,179			6,606			6,076			7,516			6,862			13,785			13,374
Wealth management		5,762			5,501			5,223			5,993			5,760			11,263			11,746
Bank card and other fees		8,179			7,364			7,112			7,033			6,854			15,543			13,329
Mortgage banking, net		11,184			7,295			6,038			9,783			6,269			18,479			10,991
Other, net		(1,150	)		3,758			(4,928	)		234			7,785			2,608			8,547
Nonint inc-excl sec gains, net		43,768			42,735			32,790			44,239			46,381			86,503			82,745
Security (losses) gains, net		(8	)		1,050			(11	)		33			51			1,042			58
Total noninterest income		43,760			43,785			32,779			44,272			46,432			87,545			82,803
Salaries and employee benefits		46,959			46,432			45,616			44,701			44,203			93,391			88,239
Services and fees		11,750			10,747			11,323			11,485			10,780			22,497			21,050
Net occupancy-premises		4,954			4,938			5,038			5,093			5,050			9,892			10,123
Equipment expense		5,183			4,912			5,139			5,038			4,856			10,095			10,000
FDIC assessment expense		1,826			1,775			1,484			1,812			1,938			3,601			4,688
ORE/Foreclosure expense		2,388			3,902			2,760			5,616			4,704			6,290			7,917
Other expense		14,899			13,068			11,643			11,736			9,817			27,967			19,349
Total noninterest expense		87,959			85,774			83,003			85,481			81,348			173,733			161,366
Income before income taxes and tax eq adj		43,338			45,514			35,800			40,160			48,427			88,852			87,209
Tax equivalent adjustment		3,411			3,658			3,663			3,667			3,629			7,069			7,220
Income before income taxes		39,927			41,856			32,137			36,493			44,798			81,783			79,989
Income taxes		10,578			11,536			7,879			9,525			13,196			22,114			24,374
Net income available to common shareholders	$	29,349		$	30,320		$	24,258		$	26,968		$	31,602		$	59,669		$	55,615

Per common share data
Earnings per share - basic	$	0.45		$	0.47		$	0.38		$	0.42		$	0.49		$	0.92		$	0.87

Earnings per share - diluted	$	0.45		$	0.47		$	0.38		$	0.42		$	0.49		$	0.92		$	0.87

Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23		$	0.46		$	0.46

Weighted average common shares outstanding
Basic		64,771,530			64,297,038			64,122,188			64,119,235			64,072,047			64,534,284			64,011,590

Diluted		64,938,697			64,477,277			64,330,242			64,310,453			64,281,348			64,698,200			64,230,216

Period end common shares outstanding		64,775,694			64,765,581			64,142,498			64,119,235			64,119,235			64,775,694			64,119,235


OTHER FINANCIAL DATA
Return on common equity		9.40	%		9.93	%		7.87	%		8.83	%		10.73	%		9.66	%		9.58	%
Return on average tangible common equity		12.74	%		13.41	%		10.70	%		12.04	%		14.71	%		13.07	%		13.21	%
Return on equity		9.40	%		9.93	%		7.87	%		8.83	%		10.73	%		9.66	%		9.58	%
Return on assets		1.20	%		1.25	%		1.00	%		1.12	%		1.32	%		1.23	%		1.17	%
Interest margin - Yield - FTE		4.52	%		4.60	%		4.71	%		4.66	%		4.83	%		4.56	%		4.84	%
Interest margin - Cost		0.37	%		0.41	%		0.43	%		0.49	%		0.54	%		0.39	%		0.55	%
Net interest margin - FTE		4.15	%		4.19	%		4.28	%		4.17	%		4.29	%		4.17	%		4.29	%
Efficiency ratio (1)		66.26	%		63.70	%		66.13	%		63.99	%		62.39	%		64.99	%		62.86	%
Full-time equivalent employees		2,598			2,611			2,537			2,542			2,575


COMMON STOCK PERFORMANCE
Market value-Close	$	24.48		$	24.98		$	24.29		$	18.15		$	23.41
Common book value	$	19.43		$	19.17		$	18.94		$	19.05		$	18.60
Tangible common book value	$	14.64		$	14.38		$	14.18		$	14.28		$	13.82


(1) - Excludes nonrecurring income and expense items such as securities gains or losses, bargain purchase gains and one-time acquisition related transaction expenses.

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

June 30, 2012

($ in thousands)

(unaudited)

	Quarter Ended
NONPERFORMING ASSETS (1)	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Nonaccrual loans
Florida	$	22,260		$	22,174		$	23,002		$	27,263		$	30,752
Mississippi (2)		47,322			48,648			46,746			44,825			47,802
Tennessee (3)		11,171			13,972			15,791			14,575			17,564
Texas		18,927			20,979			24,919			12,915			24,900
Total nonaccrual loans		99,680			105,773			110,458			99,578			121,018
Other real estate
Florida		23,324			26,226			29,963			29,949			33,823
Mississippi (2)		19,511			19,240			19,483			21,027			22,921
Tennessee (3)		18,850			17,665			16,879			17,940			15,760
Texas		11,988			12,611			12,728			20,681			17,495
Total other real estate		73,673			75,742			79,053			89,597			89,999
Total nonperforming assets	$	173,353		$	181,515		$	189,511		$	189,175		$	211,017

LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,843		$	1,553		$	4,230		$	3,166		$	6,993

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	35,270		$	39,496		$	39,379		$	32,956		$	24,708


	Quarter Ended															Six Months Ended
ALLOWANCE FOR LOAN LOSSES (4)	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011			6/30/2012			6/30/2011
Beginning Balance	$	90,879		$	89,518		$	89,463		$	86,846		$	93,398		$	89,518		$	93,510
Provision for loan losses		650			3,293			6,073			7,978			8,116			3,943			15,653
Charge-offs		(9,264	)		(5,376	)		(8,457	)		(8,675	)		(17,505	)		(14,640	)		(28,637	)
Recoveries		2,544			3,444			2,439			3,314			2,837			5,988			6,320
Net charge-offs		(6,720	)		(1,932	)		(6,018	)		(5,361	)		(14,668	)		(8,652	)		(22,317	)
Ending Balance	$	84,809		$	90,879		$	89,518		$	89,463		$	86,846		$	84,809		$	86,846

PROVISION FOR LOAN LOSSES (4)
Florida	$	(770	)	$	739		$	4,797		$	3,046		$	5,633		$	(31	)	$	8,657
Mississippi (2)		1,141			4,152			3,783			3,732			1,331			5,293			2,402
Tennessee (3)		839			(29	)		(885	)		(105	)		157			810			1,776
Texas		(560	)		(1,569	)		(1,622	)		1,305			995			(2,129	)		2,818
Total provision for loan losses	$	650		$	3,293		$	6,073		$	7,978		$	8,116		$	3,943		$	15,653

NET CHARGE-OFFS (4)
Florida	$	4,491		$	1,495		$	2,576		$	2,909		$	7,880		$	5,986		$	13,358
Mississippi (2)		1,751			251			2,556			1,988			3,401			2,002			3,811
Tennessee (3)		536			223			773			499			324			759			1,303
Texas		(58	)		(37	)		113			(35	)		3,063			(95	)		3,845
Total net charge-offs	$	6,720		$	1,932		$	6,018		$	5,361		$	14,668		$	8,652		$	22,317

CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.46	%		0.13	%		0.40	%		0.36	%		0.97	%		0.29	%		0.74	%
Provision for loan losses/average loans		0.04	%		0.22	%		0.40	%		0.53	%		0.54	%		0.13	%		0.52	%
Nonperforming loans/total loans (incl LHFS)		1.68	%		1.76	%		1.82	%		1.66	%		2.01	%
Nonperforming assets/total loans (incl LHFS)		2.92	%		3.02	%		3.12	%		3.16	%		3.50	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.88	%		2.99	%		3.08	%		3.11	%		3.45	%
ALL/total loans (excl LHFS)		1.50	%		1.57	%		1.53	%		1.55	%		1.47	%
ALL-commercial/total commercial loans		1.81	%		1.97	%		1.91	%		1.94	%		1.84	%
ALL-consumer/total consumer and home mortgage loans		0.81	%		0.75	%		0.76	%		0.76	%		0.76	%
ALL/nonperforming loans		85.08	%		85.92	%		81.04	%		89.84	%		71.76	%
ALL/nonperforming loans -
(excl impaired loans)		186.45	%		181.11	%		194.19	%		248.82	%		181.95	%

CAPITAL RATIOS
Total equity/total assets		12.72	%		12.50	%		12.49	%		12.59	%		12.30	%
Common equity/total assets		12.72	%		12.50	%		12.49	%		12.59	%		12.30	%
Tangible common equity/tangible assets		9.90	%		9.68	%		9.66	%		9.74	%		9.43	%
Tangible common equity/risk-weighted assets		14.30	%		13.89	%		13.83	%		14.04	%		13.51	%
Tier 1 leverage ratio		10.63	%		10.55	%		10.43	%		10.38	%		10.18	%
Tier 1 common risk-based capital ratio		14.36	%		13.98	%		13.90	%		13.84	%		13.55	%
Tier 1 risk-based capital ratio		15.26	%		14.87	%		14.81	%		14.76	%		14.46	%
Total risk-based capital ratio		17.12	%		16.72	%		16.67	%		16.78	%		16.47	%


(1) - Excludes Acquired Loans and Covered Other Real Estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes Acquired Loans

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 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 $1.3 billion in loans and $1.8 billion in deposits at March 31, 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 2,245,923 shares of its common stock for all issued and outstanding shares of BancTrust common stock. Based upon a price of $24.66 per share of Trustmark common stock, the transaction is valued at approximately $55.4 million, or $3.08 per share 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.

The transaction is expected to close during the fourth quarter of 2012 and is subject to approval by regulatory authorities and BancTrust’s shareholders, as well as certain other customary closing conditions.

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 value 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 $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).

All loans acquired from Bay Bank, with the exception of revolving credit agreements, 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 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.”

The operations of Bay Bank are included in TNB’s operating results from March 16, 2012 and added revenue of $5.6 million and net income available to common shareholders of $1.8 million through June 30, 2012. Such operating results are not necessarily indicative of future operating results.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2012

($ in thousands)

(unaudited)

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, 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 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 TNB 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 three months ended June 30, 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):

	6/30/2012		3/31/2012		12/31/2011		9/30/2011		6/30/2011
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	22	$	31	$	3	$	5	$	7
Issued by U.S. Government sponsored agencies		72,923		101,941		64,802		61,870		102,940
Obligations of states and political subdivisions		213,826		208,234		202,827		207,781		186,034
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		22,367		20,064		12,445		14,637		14,990
Issued by FNMA and FHLMC		264,018		286,169		347,932		400,589		413,493
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,570,226		1,619,920		1,614,965		1,579,698		1,556,676
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		354,453		330,318		226,019		212,325		124,902
Asset-backed securities / structured financial products		91,293		23,693		-		-		-
Corporate debt securities		3,679		5,294		-		-		-
Total securities available for sale	$	2,592,807	$	2,595,664	$	2,468,993	$	2,476,905	$	2,399,042

SECURITIES HELD TO MATURITY
Obligations of states and political subdivisions	$	38,351	$	40,393	$	42,619	$	43,246	$	46,931
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		3,745		4,089		4,538		5,291		5,547
Issued by FNMA and FHLMC		583		586		588		753		753
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		3,000		4,743		7,749		19,534		32,456
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		2,188		2,199		2,211		2,222		2,236
Total securities held to maturity	$	47,867	$	52,010	$	57,705	$	71,046	$	87,923

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 and the Federal Reserve Bank, Trustmark does not hold any equity investment in government sponsored entities.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2012

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Loans secured by real estate:
Construction, land development and other land loans	$	464,349		$	465,486		$	474,082		$	481,821		$	510,867
Secured by 1-4 family residential properties		1,621,865			1,722,357			1,760,930			1,717,366			1,737,744
Secured by nonfarm, nonresidential properties		1,392,293			1,419,902			1,425,774			1,437,573			1,457,328
Other real estate secured		192,376			199,400			204,849			207,984			208,797
Commercial and industrial loans		1,142,282			1,142,813			1,139,365			1,083,753			1,082,127
Consumer loans		196,718			210,713			243,756			268,002			332,032
Other loans		640,665			614,082			608,728			587,213			577,421
LHFI		5,650,548			5,774,753			5,857,484			5,783,712			5,906,316
Allowance for loan losses		(84,809	)		(90,879	)		(89,518	)		(89,463	)		(86,846	)
Net LHFI	$	5,565,739		$	5,683,874		$	5,767,966		$	5,694,249		$	5,819,470


ACQUIRED NONCOVERED LOANS BY TYPE	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Loans secured by real estate:
Construction, land development and other land loans	$	13,154		$	14,346		$	-		$	-		$	-
Secured by 1-4 family residential properties		18,954			20,409			-			-			-
Secured by nonfarm, nonresidential properties		53,272			54,954			-			-			-
Other real estate secured		512			695			-			-			-
Commercial and industrial loans		4,822			5,732			-			-			-
Consumer loans		3,153			4,188			-			-			-
Other loans		146			345			-			-			-
Noncovered loans		94,013			100,669			-			-			-
Allowance for loan losses		(62	)		(37	)		-			-			-
Net noncovered loans	$	93,951		$	100,632		$	-		$	-		$	-


ACQUIRED COVERED LOANS BY TYPE	6/30/2012			3/31/2012			12/31/2011			9/30/2011		6/30/2011
Loans secured by real estate:
Construction, land development and other land loans	$	3,683		$	3,940		$	4,209		$	4,024	$	8,477
Secured by 1-4 family residential properties		27,218			30,221			31,874			32,735		32,124
Secured by nonfarm, nonresidential properties		27,464			30,737			30,889			33,601		35,846
Other real estate secured		4,580			5,087			5,126			5,294		5,363
Commercial and industrial loans		1,382			2,768			2,971			1,772		5,570
Consumer loans		205			206			290			158		163
Other loans		1,483			1,460			1,445			1,480		1,015
Covered loans		66,015			74,419			76,804			79,064		88,558
Allowance for loan losses		(1,464	)		(736	)		(502	)		-		-
Net covered loans	$	64,551		$	73,683		$	76,302		$	79,064	$	88,558

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2012

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)
	June 30, 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	$	464,349	$	89,082	$	224,822	$	32,692	$	117,753
Secured by 1-4 family residential properties		1,621,865		56,097		1,395,357		141,644		28,767
Secured by nonfarm, nonresidential properties		1,392,293		152,491		749,681		164,270		325,851
Other real estate secured		192,376		8,815		136,719		5,020		41,822
Commercial and industrial loans		1,142,282		14,630		775,678		81,314		270,660
Consumer loans		196,718		1,374		170,972		19,934		4,438
Other loans		640,665		25,165		543,222		21,910		50,368
Loans	$	5,650,548	$	347,654	$	3,996,451	$	466,784	$	839,659


CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	58,972	$	35,499	$	17,311	$	1,617	$	4,545
Development		103,956		9,036		55,825		5,974		33,121
Unimproved land		154,849		42,335		68,518		16,763		27,233
1-4 family construction		74,250		1,933		57,212		2,369		12,736
Other construction		72,322		279		25,956		5,969		40,118
Construction, land development and other land loans	$	464,349	$	89,082	$	224,822	$	32,692	$	117,753


LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	158,044	$	41,004	$	63,709	$	23,310	$	30,021
Office		137,786		37,259		68,996		9,772		21,759
Nursing homes/assisted living		92,772		-		83,302		4,238		5,232
Hotel/motel		82,176		8,593		28,754		17,442		27,387
Industrial		52,954		8,677		13,521		269		30,487
Health care		16,620		-		10,735		149		5,736
Convenience stores		9,393		196		4,461		1,468		3,268
Other		137,788		15,667		70,850		6,606		44,665
Total income producing loans		687,533		111,396		344,328		63,254		168,555

Owner-occupied:
Office		116,381		16,116		68,697		6,872		24,696
Churches		87,073		2,066		51,605		28,325		5,077
Industrial warehouses		94,212		2,375		51,604		325		39,908
Health care		95,299		10,469		50,794		16,461		17,575
Convenience stores		60,977		1,452		37,375		5,199		16,951
Retail		38,809		4,259		26,205		1,736		6,609
Restaurants		34,682		594		26,038		6,687		1,363
Auto dealerships		20,269		499		17,829		1,874		67
Other		157,058		3,265		75,206		33,537		45,050
Total owner-occupied loans		704,760		41,095		405,353		101,016		157,296

Loans secured by nonfarm, nonresidential properties	$	1,392,293	$	152,491	$	749,681	$	164,270	$	325,851

(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2012

($ in thousands)

(unaudited)

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

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

	Quarter Ended															Six Months Ended
	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011			6/30/2012			6/30/2011
Securities – Taxable		2.94	%		3.13	%		3.02	%		3.26	%		3.69	%		3.04	%		3.73	%
Securities – Nontaxable		4.49	%		4.63	%		4.53	%		4.39	%		4.79	%		4.56	%		4.90	%
Securities – Total		3.06	%		3.24	%		3.13	%		3.35	%		3.77	%		3.15	%		3.82	%
Loans		5.14	%		5.18	%		5.37	%		5.18	%		5.25	%		5.16	%		5.25	%
FF Sold & Rev Repo		0.38	%		0.25	%		0.38	%		0.34	%		0.41	%		0.30	%		0.40	%
Other Earning Assets		4.56	%		3.89	%		3.72	%		4.04	%		4.17	%		4.20	%		3.36	%
Total Earning Assets		4.52	%		4.60	%		4.71	%		4.66	%		4.83	%		4.56	%		4.84	%

Interest-bearing Deposits		0.43	%		0.50	%		0.54	%		0.61	%		0.66	%		0.47	%		0.68	%
FF Pch & Repo		0.20	%		0.16	%		0.15	%		0.19	%		0.22	%		0.18	%		0.21	%
Other Borrowings		2.85	%		2.89	%		2.22	%		2.75	%		2.76	%		2.87	%		2.10	%
Total Interest-bearing Liabilities		0.50	%		0.55	%		0.58	%		0.65	%		0.70	%		0.52	%		0.71	%

Net interest margin		4.15	%		4.19	%		4.28	%		4.17	%		4.29	%		4.17	%		4.29	%

The net interest margin for the second quarter of 2012 totaled 4.15% compared to a net interest margin in the prior quarter of 4.19% resulting in a decrease of four basis points. The decrease is mostly due to the downward repricing of loans and securities, partially offset by improvements in the accreted yield of acquired covered loans and 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 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 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 changes in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net positive ineffectiveness of $172 thousand and $1.7 million for the quarters ended June 30, 2012 and 2011, respectively.

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

	Quarter Ended															Six Months Ended
	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011			6/30/2012			6/30/2011
Mortgage servicing income, net	$	3,891		$	3,886		$	3,725		$	3,738		$	3,713		$	7,777		$	7,327
Change in fair value-MSR from runoff		(2,320	)		(2,106	)		(2,122	)		(2,039	)		(1,455	)		(4,426	)		(2,746	)
Gain on sales of loans, net		6,302			6,469			4,633			2,366			1,852			12,771			4,953
Other, net		3,139			64			133			2,926			448			3,203			(517	)
Mortgage banking income before hedge ineffectiveness		11,012			8,313			6,369			6,991			4,558			19,325			9,017
Change in fair value-MSR from market changes		(5,926	)		248			(2,842	)		(7,614	)		(4,931	)		(5,678	)		(4,674	)
Change in fair value of derivatives		6,098			(1,266	)		2,511			10,406			6,642			4,832			6,648
Net positive (negative) hedge ineffectiveness		172			(1,018	)		(331	)		2,792			1,711			(846	)		1,974
Mortgage banking, net	$	11,184		$	7,295		$	6,038		$	9,783		$	6,269		$	18,479		$	10,991

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2012

($ in thousands)

(unaudited)

Note 6 – Other Noninterest Income and Expense

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

	Quarter Ended															Six Months Ended
	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011			6/30/2012			6/30/2011
Partnership amortization for tax credit purposes	$	(1,491	)	$	(1,422	)	$	(2,690	)	$	(1,417	)	$	(1,137	)	$	(2,913	)	$	(2,259	)
Bargain purchase gain on acquisition		881			2,754			-			-			7,456			3,635			7,456
Decrease in FDIC indemnification asset		(2,289	)		(81	)		(4,157	)		-			-			(2,370	)		-
Other miscellaneous income		1,749			2,507			1,919			1,651			1,466			4,256			3,350
Total other, net	$	(1,150	)	$	3,758		$	(4,928	)	$	234		$	7,785		$	2,608		$	8,547

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

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

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

	Quarter Ended										Six Months Ended
	6/30/2012		3/31/2012		12/31/2011		9/30/2011		6/30/2011		6/30/2012		6/30/2011
Loan expense	$	8,299	$	5,525	$	5,788	$	4,632	$	4,139	$	13,824	$	7,812
Non-routine transaction expenses on acquisition		-		1,917		-		-		-		1,917		-
Amortization of intangibles		1,028		710		799		792		783		1,738		1,538
Other miscellaneous expense		5,572		4,916		5,056		6,312		4,895		10,488		9,999
Total other expense	$	14,899	$	13,068	$	11,643	$	11,736	$	9,817	$	27,967	$	19,349

During the second quarter of 2012, Trustmark updated its quarterly analysis of mortgage loan repurchase exposure. This analysis, along with recent trends of increased mortgage loan repurchase activity in the mortgage industry, resulted in Trustmark providing an additional reserve of approximately $4.0 million in the second quarter. At June 30, 2012, the reserve for mortgage loan repurchases totaled $9.2 million. Notwithstanding significant changes in future behaviors and the demand patterns of investors, Trustmark believes that it is appropriately reserved for potential mortgage loan repurchase 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.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2012

($ in thousands)

(unaudited)

Note 7 - Non-GAAP Financial Measures (continued)
			Quarter Ended															Six Months Ended
			6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011			6/30/2012			6/30/2011
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' common equity			$	1,255,716		$	1,228,502		$	1,223,101		$	1,211,434		$	1,181,776		$	1,242,109		$	1,170,897
Less:	Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
	Identifiable intangible assets			(17,762	)		(14,703	)		(14,550	)		(15,343	)		(15,976	)		(16,233	)		(15,989	)
Total average tangible common equity			$	946,850		$	922,695		$	917,447		$	904,987		$	874,696		$	934,772		$	863,804

PERIOD END BALANCES
Total shareholders' common equity			$	1,258,495		$	1,241,520		$	1,215,037		$	1,221,606		$	1,192,770
Less:	Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
	Identifiable intangible assets			(19,356	)		(18,821	)		(14,076	)		(14,861	)		(15,651	)
Total tangible common equity		(a)	$	948,035		$	931,595		$	909,857		$	915,641		$	886,015

TANGIBLE ASSETS
Total assets			$	9,890,846		$	9,931,593		$	9,727,007		$	9,705,291		$	9,698,451
Less:	Goodwill			(291,104	)		(291,104	)		(291,104	)		(291,104	)		(291,104	)
	Identifiable intangible assets			(19,356	)		(18,821	)		(14,076	)		(14,861	)		(15,651	)
Total tangible assets		(b)	$	9,580,386		$	9,621,668		$	9,421,827		$	9,399,326		$	9,391,696

Risk-weighted assets		(c)	$	6,631,887		$	6,707,026		$	6,576,953		$	6,522,468		$	6,556,690

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders			$	29,349		$	30,320		$	24,258		$	26,968		$	31,602		$	59,669		$	55,615
Plus:	Intangible amortization net of tax			635			438			493			489			483			1,073			963
Net income adjusted for intangible amortization			$	29,984		$	30,758		$	24,751		$	27,457		$	32,085		$	60,742		$	56,578

Period end common shares outstanding		(d)		64,775,694			64,765,581			64,142,498			64,119,235			64,119,235

TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity 1				12.74	%		13.41	%		10.70	%		12.04	%		14.71	%		13.07	%		13.21	%
Tangible common equity/tangible assets		(a)/(b)		9.90	%		9.68	%		9.66	%		9.74	%		9.43	%
Tangible common equity/risk-weighted assets		(a)/(c)		14.30	%		13.89	%		13.83	%		14.04	%		13.51	%
Tangible common book value		(a)/(d)*1,000	$	14.64		$	14.38		$	14.18		$	14.28		$	13.82

TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity			$	1,258,495		$	1,241,520		$	1,215,037		$	1,221,606		$	1,192,770
Eliminate qualifying AOCI				(3,654	)		(1,537	)		(3,121	)		(19,606	)		(3,674	)
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				12,330			11,978			11,625			11,273			10,920
Other disallowed intangibles				(19,356	)		(18,821	)		(14,076	)		(14,861	)		(15,651	)
Disallowed servicing intangible				(4,358	)		(4,589	)		(4,327	)		(4,366	)		(5,011	)
Total tier 1 capital			$	1,012,353		$	997,447		$	974,034		$	962,942		$	948,250
Less:	Qualifying tier 1 capital			(60,000	)		(60,000	)		(60,000	)		(60,000	)		(60,000	)
Total tier 1 common capital		(e)	$	952,353		$	937,447		$	914,034		$	902,942		$	888,250

Tier 1 common risk-based capital ratio		(e)/(c)		14.36	%		13.98	%		13.90	%		13.84	%		13.55	%

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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