TRUSTMARK CORP - FORM 8-K - EX-99.1

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8-K - TRUSTMARK CORPORATION - FORM 8-K - TRUSTMARK CORP	form8k.htm

News Release

Trustmark Corporation Announces 2013 Financial Results

JACKSON, Miss. – January 28, 2014 – Trustmark Corporation (NASDAQ:TRMK) reported net income available to common shareholders of $28.0 million in the fourth quarter of 2013, which represented diluted earnings per common share of $0.42. For the full year 2013, net income available to common shareholders totaled $117.1 million, resulting in diluted earnings per share of $1.75. Excluding non-routine merger costs and litigation expense that reduced after-tax net income by $8.3 million, or approximately $0.12 per diluted share, Trustmark’s net income available to common shareholders in 2013 totaled $125.3 million, or $1.87 per diluted share. Trustmark’s performance during 2013 produced a return on average tangible common equity of 13.09% and a return on average assets of 1.02%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable March 15, 2014, to shareholders of record on March 1, 2014. Since inception, Trustmark has consistently paid quarterly cash dividends to its shareholders. These dividends have grown over time – and have never decreased – due to the quality and sustainability of earnings.

Gerard R. Host, President and CEO, stated, “Trustmark’s achievements in 2013 were significant. We continued to build upon and expand customer relationships, as reflected by growth in our banking, wealth management and insurance businesses. Over the course of the year, revenue increased 8.9% to a record level of $562.3 million. Credit quality continued to improve and was an important contributor to our financial success. During the year, we successfully completed the largest acquisition in our history, entering a number of new markets throughout Alabama as well as enhancing our position in the Florida panhandle. We also continued investing in technology to increase revenue and improve efficiency. Thanks to our 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 as we enter our 125th year.”

Balance Sheet Management

·	Loans held for investment increased $102.2 million in fourth quarter, $206.1 million in 2013

·	Net interest income (FTE) totaled $105.6 million in fourth quarter, resulting in 4.10% net interest margin

Loans held for investment totaled $5.8 billion at December 31, 2013, an increase of $102.2 million, or 1.8% (7.2% annualized), from the prior quarter and $206.1 million, or 3.7%, from one year earlier. From a geographic perspective, loans in Trustmark’s Alabama, Mississippi, Texas and Tennessee markets expanded $44.2 million, $42.2 million, $12.8 million, and $7.4 million, from the prior quarter respectively, while loans in the Florida market declined $4.5 million.

Growth was also diversified by loan type. During the fourth quarter, increased lending to medical facilities and public entities in Mississippi, Alabama, and Tennessee was reflected in Other loan growth of $49.5 million. Construction lending expanded $24.8 million due to growth in Trustmark’s Texas, Alabama, Tennessee and Mississippi markets. Commercial and industrial loans increased $24.8 million principally due to growth in Trustmark’s Texas and Alabama markets. Commercial real estate loans increased $6.8 million as growth in Mississippi and Alabama was offset in part by declines in Texas and Tennessee. Trustmark’s single-family mortgage portfolio increased $2.6 million as growth in Alabama and Tennessee was offset in part by declines in Mississippi and Florida. Trustmark’s consumer lending portfolio was relatively flat while other real estate secured loans decreased $7.0 million.

Acquired loans totaled $804.2 million at December 31, 2013, down $70.9 million from the prior quarter but up $670.6 million from one year earlier. Collectively, loans held for investment and acquired loans totaled $6.6 billion at year-end 2013, up $31.3 million from the prior quarter and $876.8 million from the prior year.

During the fourth quarter of 2013, average earning assets totaled $10.2 billion; while average deposits were stable at $9.7 billion, average noninterest bearing deposits increased to 27.0% of average total deposits.

Net interest income (FTE) in the fourth quarter totaled $105.6 million, an increase of $3.5 million from the prior quarter, and resulted in a 16 basis point expansion of the net interest margin to 4.10%, principally attributable to increased recoveries on acquired loans. The yield on acquired loans totaled 10.95% and included recoveries on loan pay-offs of $9.3 million, which represented approximately 4.35% of the total acquired annualized loan yield in the fourth quarter. Excluding acquired loans, the net interest margin in the fourth quarter totaled 3.48% compared to 3.52% in the prior quarter.

Trustmark’s solid capital position reflects the consistent profitability of its diversified financial services businesses as well as prudent balance sheet management. At December 31, 2013, Trustmark’s tangible common equity to tangible assets ratio was 8.26% while the total risk-based capital ratio was 14.18%, significantly exceeding the 10.00% benchmark to be classified as “well-capitalized.” Trustmark’s solid capital base provides the opportunity to support organic loan growth in an improving economy and enhance long-term shareholder value.

Credit Quality

·	Significant reduction in classified and criticized loan balances

·	Nonperforming loans declined 20.8% during the year

·	Improved credit quality reflected in net recoveries and negative provisioning in 2013

Nonperforming loans totaled $65.2 million at December 31, 2013, a decline of 11.1% from the prior quarter and 20.8% from the prior year. Foreclosed other real estate totaled $106.5 million, a decline of $9.8 million, or 8.4%, from the prior quarter. Relative to levels one-year earlier, other real estate increased $28.4 million; excluding the acquisition-related increase of $44.3 million attributable to BancTrust, other real estate declined $16.0 million, or 20.4%.

Net charge-offs during the fourth quarter of 2013 totaled $201 thousand and represented 0.01% of average loans. During 2013, recoveries exceeded charge-offs, resulting in a net recovery of $1.1 million, which represented a negative 0.02% of average loans. This compares favorably to net charge-offs in 2012 of $17.5 million, or 0.30% of average loans. The provision for loan losses for loans held for investment was a negative $2.0 million in the fourth quarter of 2013, reflecting the net recovery position and improved credit quality. For the year ended December 31, 2013, the provision for loan losses for loans held for investment was a negative $13.4 million; during 2012, the provision for loan losses for loans held for investment was a positive $6.8 million.

During the fourth quarter, Trustmark experienced a decline of $22.6 million, or 9.28%, in classified loans and a decline of $23.9 million, or 8.49%, in criticized loans relative to the prior quarter. Relative to the prior year, classified loan balances decreased $32.9 million, or 12.95%, while criticized loan balances decreased $71.1 million, or 21.63%.

Allocation of Trustmark’s $66.4 million allowance for loan losses represented 1.30% of commercial loans and 0.75% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 1.15% at December 31, 2013, which represents a level management considers commensurate with the inherent risk in the loan portfolio. The allowance for loan losses represented 190.70% of nonperforming loans, excluding impaired loans.

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

Noninterest Income

·	Noninterest income totaled $173.9 million in 2013

·	Wealth management revenue achieved record level in 2013

·	Tax credit investments reduced effective tax rate to 23.99% in 2013

Noninterest income totaled $38.7 million in the fourth quarter, a decrease of $8.5 million from the prior quarter. This decline resulted in part from an increase in partnership amortization of $3.3 million related to additional tax credit investments that reduced the Corporation’s effective tax rate during the fourth quarter as well as a $2.6 million reduction in the FDIC indemnification asset resulting from the re-estimation of cash flows and loan pay-offs. Each of these items was included in other noninterest income.

Mortgage banking revenue in the fourth quarter totaled $5.2 million, a decline of $3.3 million from the prior quarter due principally to lower secondary marketing gains resulting from tightening mortgage spreads and reduced volume during the quarter and lower positive mortgage servicing hedge ineffectiveness. Mortgage loan production in the fourth quarter totaled $276.0 million, down 22.9% from the prior quarter and 44.2% from levels one year earlier, reflecting the decline in refinance activity following an extended low interest rate environment. Mortgage loan production in 2013 totaled $1.45 billion, a decline of 23.3% from levels in 2012, while mortgage banking revenue declined 18.2% to $33.5 million.

Insurance revenue in the fourth quarter totaled $7.3 million, reflecting a seasonal decrease of 10.7% relative to the prior quarter and an increase of 6.6% from levels one year earlier. Improved performance year-over-year resulted from increased business development efforts as well as increasing insurance premium levels. During the fourth quarter, new insurance offices opened in Oxford, MS and Nashville, TN. Insurance revenue in 2013 totaled $30.8 million, an increase of 9.3% relative to the prior year.

Wealth management revenue totaled $8.1 million during the fourth quarter, an increase of 8.3% from the prior quarter and 31.8% from the comparable period one year earlier. This growth is attributable to increased sales within investment services resulting from improved market conditions as well as improved profitability within the trust management business and reflects the merger with BancTrust. Wealth management revenue in 2013 totaled $29.5 million, an increase of 27.9% relative to the prior year.

Bank card and other fees totaled $9.6 million in the fourth quarter, an increase of 7.3% from the prior quarter and 20.1% from the comparable period one year earlier. This growth was due in part to increased interchange income from debit cards. Service charges on deposit accounts totaled $13.1 million, a decrease of 5.3% from the prior quarter primarily resulting from a reduction in NSF and overdraft fees; relative to the fourth quarter of 2012, service charges increased 5.8%.

Noninterest Expense

·	Routine noninterest expense remained well-controlled

·	Continued realignment of branch network to enhance efficiency and revenue growth

Noninterest expense totaled $104.9 million in the fourth quarter. Excluding ORE and intangible amortization of $5.5 million, noninterest expense during the fourth quarter totaled $99.4 million, an increase of $3.4 million from comparable expenses in the prior quarter. The increase during the quarter was primarily reflected in salaries and benefits, services and fees and other expenses. Salaries and benefits reflected an increase of $644 thousand, which included an additional year-end incentive accrual of $1.2 million and additional medical expenses of $200 thousand offset by reductions in salaries and commissions of $802 thousand. Services and fees increased by $896 thousand principally due to additional advertising during the fourth quarter of approximately $384 thousand and increased professional service fees of approximately $450 thousand. Other expense increased by $1.9 million, which was primarily attributed to additional reserves for potential mortgage loan repurchases of $615 thousand and increased mortgage foreclosure expenses of $454 thousand.

Trustmark continued realignment of its branch network to enhance productivity and efficiency as well as promote additional revenue growth. As previously announced, Trustmark consolidated six banking centers during the fourth quarter – two each in Alabama, Mississippi, and Houston, Texas. Over the course of 2013, Trustmark consolidated 14 banking centers and opened three new offices – one each in Houston, Jackson and Memphis. Trustmark is committed to investments to support profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 29, 2014, 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 Wednesday, February 12, 2014, in archived format at the same web address or by calling (877) 344-7529, passcode 10008303.

Trustmark Corporation is a financial services company providing banking and financial solutions through 208 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

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

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, a material decline in, or changes in our ability to measure the fair value of assets in our portfolio (including loans and investment securities), 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, acceleration of significantly extended deterioration in loan performance and default levels, a significant increase in foreclosure activity, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of the European financial crisis on the U.S. economy and the markets we serve, and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations, or enforcement practices, or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, natural disasters, environmental disasters, acts of war or terrorism, 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

December 31, 2013

($ in thousands)

(unaudited)

										Linked Quarter						Year over Year
QUARTERLY AVERAGE BALANCES	12/31/2013			9/30/2013			12/31/2012			$ Change			% Change			$ Change			% Change
Securities AFS-taxable	$	3,026,186		$	3,279,606		$	2,466,738		$	(253,420	)		-7.7	%	$	559,448			22.7	%
Securities AFS-nontaxable		160,989			172,055			169,906			(11,066	)		-6.4	%		(8,917	)		-5.2	%
Securities HTM-taxable		265,792			59,168			26,510			206,624			n/m			239,282			n/m
Securities HTM-nontaxable		21,172			11,024			17,443			10,148			92.1	%		3,729			21.4	%
Total securities		3,474,139			3,521,853			2,680,597			(47,714	)		-1.4	%		793,542			29.6	%
Loans (including loans held for sale)		5,847,557			5,784,170			5,834,525			63,387			1.1	%		13,032			0.2	%
Acquired loans:
Noncovered loans		812,426			888,883			82,317			(76,457	)		-8.6	%		730,109			n/m
Covered loans		34,640			39,561			58,272			(4,921	)		-12.4	%		(23,632	)		-40.6	%
Fed funds sold and rev repos		11,094			8,978			8,747			2,116			23.6	%		2,347			26.8	%
Other earning assets		32,118			38,226			31,168			(6,108	)		-16.0	%		950			3.0	%
Total earning assets		10,211,974			10,281,671			8,695,626			(69,697	)		-0.7	%		1,516,348			17.4	%
Allowance for loan losses		(78,742	)		(79,696	)		(88,715	)		954			-1.2	%		9,973			-11.2	%
Cash and due from banks		275,051			272,320			238,976			2,731			1.0	%		36,075			15.1	%
Other assets		1,360,712			1,284,813			972,748			75,899			5.9	%		387,964			39.9	%
Total assets	$	11,768,995		$	11,759,108		$	9,818,635		$	9,887			0.1	%	$	1,950,360			19.9	%

Interest-bearing demand deposits	$	1,803,956		$	1,842,379		$	1,545,967		$	(38,423	)		-2.1	%	$	257,989			16.7	%
Savings deposits		2,952,472			2,995,110			2,275,569			(42,638	)		-1.4	%		676,903			29.7	%
Time deposits less than $100,000		1,344,488			1,380,954			1,120,735			(36,466	)		-2.6	%		223,753			20.0	%
Time deposits of $100,000 or more		961,075			993,948			760,363			(32,873	)		-3.3	%		200,712			26.4	%
Total interest-bearing deposits		7,061,991			7,212,391			5,702,634			(150,400	)		-2.1	%		1,359,357			23.8	%
Fed funds purchased and repos		361,758			364,446			388,007			(2,688	)		-0.7	%		(26,249	)		-6.8	%
Short-term borrowings		63,531			59,324			85,313			4,207			7.1	%		(21,782	)		-25.5	%
Long-term FHLB advances		8,507			8,620			-			(113	)		-1.3	%		8,507			n/m
Subordinated notes		49,898			49,890			49,866			8			0.0	%		32			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-			0.0	%		-			0.0	%
Total interest-bearing liabilities		7,607,541			7,756,527			6,287,676			(148,986	)		-1.9	%		1,319,865			21.0	%
Noninterest-bearing deposits		2,611,209			2,479,082			2,115,784			132,127			5.3	%		495,425			23.4	%
Other liabilities		203,270			190,143			126,953			13,127			6.9	%		76,317			60.1	%
Total liabilities		10,422,020			10,425,752			8,530,413			(3,732	)		0.0	%		1,891,607			22.2	%
Shareholders' equity		1,346,975			1,333,356			1,288,222			13,619			1.0	%		58,753			4.6	%
Total liabilities and equity	$	11,768,995		$	11,759,108		$	9,818,635		$	9,887			0.1	%	$	1,950,360			19.9	%

										Linked Quarter						Year over Year
PERIOD END BALANCES	12/31/2013			9/30/2013			12/31/2012			$ Change			% Change			$ Change			% Change
Cash and due from banks	$	345,761		$	335,695		$	231,489		$	10,066			3.0	%	$	114,272			49.4	%
Fed funds sold and rev repos		7,253			7,867			7,046			(614	)		-7.8	%		207			2.9	%
Securities available for sale		2,194,154			3,372,101			2,657,745			(1,177,947	)		-34.9	%		(463,591	)		-17.4	%
Securities held to maturity		1,168,728			69,980			42,188			1,098,748			n/m			1,126,540			n/m
Loans held for sale (LHFS)		149,169			119,986			257,986			29,183			24.3	%		(108,817	)		-42.2	%
Loans held for investment (LHFI)		5,798,881			5,696,641			5,592,754			102,240			1.8	%		206,127			3.7	%
Allowance for loan losses		(66,448	)		(68,632	)		(78,738	)		2,184			-3.2	%		12,290			-15.6	%
Net LHFI		5,732,433			5,628,009			5,514,016			104,424			1.9	%		218,417			4.0	%
Acquired loans:
Noncovered loans		769,990			837,875			81,523			(67,885	)		-8.1	%		688,467			n/m
Covered loans		34,216			37,250			52,041			(3,034	)		-8.1	%		(17,825	)		-34.3	%
Allowance for loan losses, acquired loans		(9,636	)		(5,333	)		(6,075	)		(4,303	)		80.7	%		(3,561	)		58.6	%
Net acquired loans		794,570			869,792			127,489			(75,222	)		-8.6	%		667,081			n/m
Net LHFI and acquired loans		6,527,003			6,497,801			5,641,505			29,202			0.4	%		885,498			15.7	%
Premises and equipment, net		207,283			208,837			154,841			(1,554	)		-0.7	%		52,442			33.9	%
Mortgage servicing rights		67,834			63,150			47,341			4,684			7.4	%		20,493			43.3	%
Goodwill		372,851			372,463			291,104			388			0.1	%		81,747			28.1	%
Identifiable intangible assets		41,990			44,424			17,306			(2,434	)		-5.5	%		24,684			n/m
Other real estate, excluding covered other real estate		106,539			116,329			78,189			(9,790	)		-8.4	%		28,350			36.3	%
Covered other real estate		5,108			5,092			5,741			16			0.3	%		(633	)		-11.0	%
FDIC indemnification asset		14,347			17,085			21,774			(2,738	)		-16.0	%		(7,427	)		-34.1	%
Other assets		582,363			574,387			374,412			7,976			1.4	%		207,951			55.5	%
Total assets	$	11,790,383		$	11,805,197		$	9,828,667		$	(14,814	)		-0.1	%	$	1,961,716			20.0	%

Deposits:
Noninterest-bearing	$	2,663,503		$	2,643,612		$	2,254,211		$	19,891			0.8	%	$	409,292			18.2	%
Interest-bearing		7,196,399			7,143,622			5,642,306			52,777			0.7	%		1,554,093			27.5	%
Total deposits		9,859,902			9,787,234			7,896,517			72,668			0.7	%		1,963,385			24.9	%
Fed funds purchased and repos		251,587			342,465			288,829			(90,878	)		-26.5	%		(37,242	)		-12.9	%
Short-term borrowings		66,385			60,698			86,920			5,687			9.4	%		(20,535	)		-23.6	%
Long-term FHLB advances		8,458			8,562			-			(104	)		-1.2	%		8,458			n/m
Subordinated notes		49,904			49,896			49,871			8			0.0	%		33			0.1	%
Junior subordinated debt securities		61,856			61,856			61,856			-			0.0	%		-			0.0	%
Other liabilities		137,338			164,972			157,305			(27,634	)		-16.8	%		(19,967	)		-12.7	%
Total liabilities		10,435,430			10,475,683			8,541,298			(40,253	)		-0.4	%		1,894,132			22.2	%
Common stock		14,038			13,998			13,506			40			0.3	%		532			3.9	%
Capital surplus		349,680			343,759			285,905			5,921			1.7	%		63,775			22.3	%
Retained earnings		1,034,966			1,023,983			984,563			10,983			1.1	%		50,403			5.1	%
Accum other comprehensive
(loss) income, net of tax		(43,731	)		(52,226	)		3,395			8,495			-16.3	%		(47,126	)		n/m
Total shareholders' equity		1,354,953			1,329,514			1,287,369			25,439			1.9	%		67,584			5.2	%
Total liabilities and equity	$	11,790,383		$	11,805,197		$	9,828,667		$	(14,814	)		-0.1	%	$	1,961,716			20.0	%

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

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands except per share data)

(unaudited)

	Quarter Ended									Linked Quarter						Year over Year
INCOME STATEMENTS	12/31/2013			9/30/2013			12/31/2012			$ Change			% Change			$ Change			% Change
Interest and fees on LHFS & LHFI-FTE	$	67,038		$	68,417		$	69,989		$	(1,379	)		-2.0	%	$	(2,951	)		-4.2	%
Interest and fees on acquired loans		23,384			19,183			4,859			4,201			21.9	%		18,525			n/m
Interest on securities-taxable		19,078			18,654			15,305			424			2.3	%		3,773			24.7	%
Interest on securities-tax exempt-FTE		1,963			1,960			2,066			3			0.2	%		(103	)		-5.0	%
Interest on fed funds sold and rev repos		14			8			9			6			75.0	%		5			55.6	%
Other interest income		367			372			337			(5	)		-1.3	%		30			8.9	%
Total interest income-FTE		111,844			108,594			92,565			3,250			3.0	%		19,279			20.8	%
Interest on deposits		4,768			4,970			5,061			(202	)		-4.1	%		(293	)		-5.8	%
Interest on fed funds pch and repos		104			106			140			(2	)		-1.9	%		(36	)		-25.7	%
Other interest expense		1,370			1,389			1,346			(19	)		-1.4	%		24			1.8	%
Total interest expense		6,242			6,465			6,547			(223	)		-3.4	%		(305	)		-4.7	%
Net interest income-FTE		105,602			102,129			86,018			3,473			3.4	%		19,584			22.8	%
Provision for loan losses, LHFI		(1,983	)		(3,624	)		(535	)		1,641			-45.3	%		(1,448	)		n/m
Provision for loan losses, acquired loans		4,169			3,292			1,945			877			26.6	%		2,224			n/m
Net interest income after provision-FTE		103,416			102,461			84,608			955			0.9	%		18,808			22.2	%
Service charges on deposit accounts		13,114			13,852			12,391			(738	)		-5.3	%		723			5.8	%
Insurance commissions		7,343			8,227			6,887			(884	)		-10.7	%		456			6.6	%
Wealth management		8,145			7,520			6,181			625			8.3	%		1,964			31.8	%
Bank card and other fees		9,580			8,929			7,978			651			7.3	%		1,602			20.1	%
Mortgage banking, net		5,186			8,440			11,331			(3,254	)		-38.6	%		(6,145	)		-54.2	%
Other, net		(4,802	)		165			(2,007	)		(4,967	)		n/m			(2,795	)		n/m
Nonint inc-excl sec gains (losses), net		38,566			47,133			42,761			(8,567	)		-18.2	%		(4,195	)		-9.8	%
Security gains (losses), net		107			-			18			107			n/m			89			n/m
Total noninterest income		38,673			47,133			42,779			(8,460	)		-17.9	%		(4,106	)		-9.6	%
Salaries and employee benefits		56,687			56,043			49,724			644			1.1	%		6,963			14.0	%
Services and fees		14,476			13,580			12,572			896			6.6	%		1,904			15.1	%
Net occupancy-premises		6,659			6,644			5,023			15			0.2	%		1,636			32.6	%
Equipment expense		6,400			6,271			5,288			129			2.1	%		1,112			21.0	%
FDIC assessment expense		2,228			2,376			1,075			(148	)		-6.2	%		1,153			n/m
ORE/Foreclosure expense		3,009			3,079			3,173			(70	)		-2.3	%		(164	)		-5.2	%
Other expense		15,408			13,531			10,454			1,877			13.9	%		4,954			47.4	%
Total noninterest expense		104,867			101,524			87,309			3,343			3.3	%		17,558			20.1	%
Income before income taxes and tax eq adj		37,222			48,070			40,078			(10,848	)		-22.6	%		(2,856	)		-7.1	%
Tax equivalent adjustment		3,747			3,700			3,699			47			1.3	%		48			1.3	%
Income before income taxes		33,475			44,370			36,379			(10,895	)		-24.6	%		(2,904	)		-8.0	%
Income taxes		5,436			11,336			8,669			(5,900	)		-52.0	%		(3,233	)		-37.3	%
Net income available to common shareholders	$	28,039		$	33,034		$	27,710		$	(4,995	)		-15.1	%	$	329			1.2	%


Per common share data
Earnings per share - basic	$	0.42		$	0.49		$	0.43		$	(0.07	)		-14.3	%	$	(0.01	)		-2.3	%

Earnings per share - diluted	$	0.42		$	0.49		$	0.43		$	(0.07	)		-14.3	%	$	(0.01	)		-2.3	%

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

Weighted average common shares outstanding
Basic		67,249,877			67,177,013			64,785,457

Diluted		67,449,778			67,382,478			65,007,281

Period end common shares outstanding		67,372,980			67,181,694			64,820,414

OTHER FINANCIAL DATA
Return on common equity		8.26	%		9.83	%		8.56	%
Return on average tangible common equity		12.59	%		14.92	%		11.51	%
Return on assets		0.95	%		1.11	%		1.12	%
Interest margin - Yield - FTE		4.35	%		4.19	%		4.23	%
Interest margin - Cost		0.24	%		0.25	%		0.30	%
Net interest margin - FTE		4.10	%		3.94	%		3.94	%
Efficiency ratio (1)		72.74	%		68.02	%		67.80	%
Full-time equivalent employees		3,110			3,110			2,666

COMMON STOCK PERFORMANCE
Market value-Close	$	26.84		$	25.60		$	22.46
Common book value	$	20.11		$	19.79		$	19.86
Tangible common book value	$	13.95		$	13.58		$	15.10


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

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

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

	Quarter Ended									Linked Quarter						Year over Year
NONPERFORMING ASSETS (1)	12/31/2013			9/30/2013			12/31/2012			$ Change			% Change			$ Change			% Change
Nonaccrual loans
Alabama	$	14		$	81		$	-		$	(67	)		-82.7	%	$	14			n/m
Florida		12,278			14,619			19,314			(2,341	)		-16.0	%		(7,036	)		-36.4	%
Mississippi (2)		42,307			43,132			38,960			(825	)		-1.9	%		3,347			8.6	%
Tennessee (3)		4,390			5,596			8,401			(1,206	)		-21.6	%		(4,011	)		-47.7	%
Texas		6,249			9,953			15,688			(3,704	)		-37.2	%		(9,439	)		-60.2	%
Total nonaccrual loans		65,238			73,381			82,363			(8,143	)		-11.1	%		(17,125	)		-20.8	%
Other real estate
Alabama		25,912			25,308			-			604			2.4	%		25,912			n/m
Florida		34,480			39,198			18,569			(4,718	)		-12.0	%		15,911			85.7	%
Mississippi (2)		22,766			25,439			27,771			(2,673	)		-10.5	%		(5,005	)		-18.0	%
Tennessee (3)		12,892			14,615			17,589			(1,723	)		-11.8	%		(4,697	)		-26.7	%
Texas		10,489			11,769			14,260			(1,280	)		-10.9	%		(3,771	)		-26.4	%
Total other real estate		106,539			116,329			78,189			(9,790	)		-8.4	%		28,350			36.3	%
Total nonperforming assets	$	171,777		$	189,710		$	160,552		$	(17,933	)		-9.5	%	$	11,225			7.0	%

LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	3,298		$	2,344		$	6,378		$	954			40.7	%	$	(3,080	)		-48.3	%

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	21,540		$	18,432		$	43,073		$	3,108			16.9	%	$	(21,533	)		-50.0	%

	Quarter Ended									Linked Quarter						Year over Year
ALLOWANCE FOR LOAN LOSSES (4)	12/31/2013			9/30/2013			12/31/2012			$ Change			% Change			$ Change			% Change
Beginning Balance	$	68,632		$	72,825		$	83,526		$	(4,193	)		-5.8	%	$	(14,894	)		-17.8	%
Provision for loan losses		(1,983	)		(3,624	)		(535	)		1,641			-45.3	%		(1,448	)		n/m
Charge-offs		(3,305	)		(3,817	)		(8,829	)		512			-13.4	%		5,524			-62.6	%
Recoveries		3,104			3,248			4,576			(144	)		-4.4	%		(1,472	)		-32.2	%
Net (charge-offs) recoveries		(201	)		(569	)		(4,253	)		368			-64.7	%		4,052			-95.3	%
Ending Balance	$	66,448		$	68,632		$	78,738		$	(2,184	)		-3.2	%	$	(12,290	)		-15.6	%

PROVISION FOR LOAN LOSSES (4)
Alabama	$	332		$	550		$	-		$	(218	)		-39.6	%	$	332			n/m
Florida		(2,350	)		(2,642	)		(706	)		292			-11.1	%		(1,644	)		n/m
Mississippi (2)		3,336			(1,051	)		2,031			4,387			n/m			1,305			64.3	%
Tennessee (3)		(117	)		(150	)		(1,037	)		33			-22.0	%		920			-88.7	%
Texas		(3,184	)		(331	)		(823	)		(2,853	)		n/m			(2,361	)		n/m
Total provision for loan losses	$	(1,983	)	$	(3,624	)	$	(535	)	$	1,641			-45.3	%	$	(1,448	)		n/m

NET CHARGE-OFFS (4)
Alabama	$	74		$	132		$	-		$	(58	)		-43.9	%	$	74			n/m
Florida		(634	)		(138	)		(237	)		(496	)		n/m			(397	)		n/m
Mississippi (2)		393			375			874			18			4.8	%		(481	)		-55.0	%
Tennessee (3)		506			(153	)		(43	)		659			n/m			549			n/m
Texas		(138	)		353			3,659			(491	)		n/m			(3,797	)		n/m
Total net charge-offs (recoveries)	$	201		$	569		$	4,253		$	(368	)		-64.7	%	$	(4,052	)		-95.3	%

CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.01	%		0.04	%		0.29	%
Provision for loan losses/average loans		-0.13	%		-0.25	%		-0.04	%
Nonperforming loans/total loans (incl LHFS)		1.10	%		1.26	%		1.41	%
Nonperforming assets/total loans (incl LHFS)		2.89	%		3.26	%		2.74	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.84	%		3.20	%		2.71	%
ALL/total loans (excl LHFS)		1.15	%		1.20	%		1.41	%
ALL-commercial/total commercial loans		1.30	%		1.39	%		1.59	%
ALL-consumer/total consumer and home mortgage loans		0.75	%		0.73	%		0.97	%
ALL/nonperforming loans		101.86	%		93.53	%		95.60	%
ALL/nonperforming loans -
(excl impaired loans)		190.70	%		161.96	%		174.46	%

CAPITAL RATIOS
Common equity/total assets		11.49	%		11.26	%		13.10	%
Tangible common equity/tangible assets		8.26	%		8.01	%		10.28	%
Tangible common equity/risk-weighted assets		11.88	%		11.66	%		14.56	%
Tier 1 leverage ratio		9.06	%		8.78	%		10.97	%
Tier 1 common risk-based capital ratio		12.21	%		11.92	%		14.63	%
Tier 1 risk-based capital ratio		12.97	%		12.69	%		15.53	%
Total risk-based capital ratio		14.18	%		14.02	%		17.22	%

(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

December 31, 2013

($ in thousands)

(unaudited)

	Quarter Ended															Year Ended
AVERAGE BALANCES	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012			12/31/2013			12/31/2012
Securities AFS-taxable	$	3,026,186		$	3,279,606		$	3,259,086		$	2,836,051		$	2,466,738		$	3,101,245		$	2,386,552
Securities AFS-nontaxable		160,989			172,055			171,974			167,773			169,906			168,190			166,790
Securities HTM-taxable		265,792			59,168			59,678			48,632			26,510			108,778			29,551
Securities HTM-nontaxable		21,172			11,024			11,520			16,648			17,443			15,092			19,188
Total securities		3,474,139			3,521,853			3,502,258			3,069,104			2,680,597			3,393,305			2,602,081
Loans (including loans held for sale)		5,847,557			5,784,170			5,735,296			5,741,340			5,834,525			5,777,401			5,918,002
Acquired loans:
Noncovered loans		812,426			888,883			949,367			530,643			82,317			796,358			72,111
Covered loans		34,640			39,561			43,425			49,815			58,272			41,812			67,310
Fed funds sold and rev repos		11,094			8,978			6,808			6,618			8,747			8,388			7,552
Other earning assets		32,118			38,226			34,752			34,661			31,168			34,941			31,669
Total earning assets		10,211,974			10,281,671			10,271,906			9,432,181			8,695,626			10,052,205			8,698,725
Allowance for loan losses		(78,742	)		(79,696	)		(84,574	)		(86,447	)		(88,715	)		(82,336	)		(89,954	)
Cash and due from banks		275,051			272,320			284,056			270,740			238,976			275,545			244,952
Other assets		1,360,712			1,284,813			1,311,262			1,183,493			972,748			1,285,555			949,328
Total assets	$	11,768,995		$	11,759,108		$	11,782,650		$	10,799,967		$	9,818,635		$	11,530,969		$	9,803,051

Interest-bearing demand deposits	$	1,803,956		$	1,842,379		$	1,811,402		$	1,703,336		$	1,545,967		$	1,790,687		$	1,542,601
Savings deposits		2,952,472			2,995,110			3,060,437			2,767,747			2,275,569			2,944,588			2,357,424
Time deposits less than $100,000		1,344,488			1,380,954			1,419,381			1,268,619			1,120,735			1,353,643			1,157,822
Time deposits of $100,000 or more		961,075			993,948			1,029,498			893,104			760,363			969,660			795,126
Total interest-bearing deposits		7,061,991			7,212,391			7,320,718			6,632,806			5,702,634			7,058,578			5,852,973
Fed funds purchased and repos		361,758			364,446			312,865			266,958			388,007			326,870			370,283
Short-term borrowings		63,531			59,324			51,718			66,999			85,313			60,381			83,042
Long-term FHLB advances		8,507			8,620			9,575			4,580			-			7,833			-
Subordinated notes		49,898			49,890			49,882			49,874			49,866			49,886			49,854
Junior subordinated debt securities		61,856			61,856			82,460			77,989			61,856			70,971			61,856
Total interest-bearing liabilities		7,607,541			7,756,527			7,827,218			7,099,206			6,287,676			7,574,519			6,418,008
Noninterest-bearing deposits		2,611,209			2,479,082			2,451,547			2,199,043			2,115,784			2,436,470			2,006,230
Other liabilities		203,270			190,143			159,525			176,210			126,953			182,383			117,196
Total liabilities		10,422,020			10,425,752			10,438,290			9,474,459			8,530,413			10,193,372			8,541,434
Shareholders' equity		1,346,975			1,333,356			1,344,360			1,325,508			1,288,222			1,337,597			1,261,617
Total liabilities and equity	$	11,768,995		$	11,759,108		$	11,782,650		$	10,799,967		$	9,818,635		$	11,530,969		$	9,803,051

PERIOD END BALANCES	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012
Cash and due from banks	$	345,761		$	335,695		$	301,532		$	242,896		$	231,489
Fed funds sold and rev repos		7,253			7,867			7,869			5,926			7,046
Securities available for sale		2,194,154			3,372,101			3,511,683			3,546,083			2,657,745
Securities held to maturity		1,168,728			69,980			70,338			73,666			42,188
Loans held for sale (LHFS)		149,169			119,986			202,699			207,758			257,986
Loans held for investment (LHFI)		5,798,881			5,696,641			5,577,382			5,531,788			5,592,754
Allowance for loan losses		(66,448	)		(68,632	)		(72,825	)		(76,900	)		(78,738	)
Net LHFI		5,732,433			5,628,009			5,504,557			5,454,888			5,514,016
Acquired loans:
Noncovered loans		769,990			837,875			922,453			1,003,127			81,523
Covered loans		34,216			37,250			40,820			47,589			52,041
Allowance for loan losses, acquired loans		(9,636	)		(5,333	)		(2,690	)		(6,458	)		(6,075	)
Net acquired loans		794,570			869,792			960,583			1,044,258			127,489
Net LHFI and acquired loans		6,527,003			6,497,801			6,465,140			6,499,146			5,641,505
Premises and equipment, net		207,283			208,837			210,845			210,789			154,841
Mortgage servicing rights		67,834			63,150			60,380			51,529			47,341
Goodwill		372,851			372,463			368,315			366,366			291,104
Identifiable intangible assets		41,990			44,424			46,889			49,361			17,306
Other real estate, excluding covered other real estate		106,539			116,329			117,712			118,406			78,189
Covered other real estate		5,108			5,092			5,147			5,879			5,741
FDIC indemnification asset		14,347			17,085			17,342			20,198			21,774
Other assets		582,363			574,387			477,421			452,512			374,412
Total assets	$	11,790,383		$	11,805,197		$	11,863,312		$	11,850,515		$	9,828,667

Deposits:
Noninterest-bearing	$	2,663,503		$	2,643,612		$	2,520,895		$	2,534,287		$	2,254,211
Interest-bearing		7,196,399			7,143,622			7,296,697			7,375,144			5,642,306
Total deposits		9,859,902			9,787,234			9,817,592			9,909,431			7,896,517
Fed funds purchased and repos		251,587			342,465			374,021			219,769			288,829
Short-term borrowings		66,385			60,698			56,645			46,325			86,920
Long-term FHLB advances		8,458			8,562			8,679			10,969			-
Subordinated notes		49,904			49,896			49,888			49,879			49,871
Junior subordinated debt securities		61,856			61,856			61,856			94,856			61,856
Other liabilities		137,338			164,972			167,812			166,340			157,305
Total liabilities		10,435,430			10,475,683			10,536,493			10,497,569			8,541,298
Common stock		14,038			13,998			13,994			13,992			13,506
Capital surplus		349,680			343,759			342,359			342,233			285,905
Retained earnings		1,034,966			1,023,983			1,006,554			991,012			984,563
Accum other comprehensive
(loss) income, net of tax		(43,731	)		(52,226	)		(36,088	)		5,709			3,395
Total shareholders' equity		1,354,953			1,329,514			1,326,819			1,352,946			1,287,369
Total liabilities and equity	$	11,790,383		$	11,805,197		$	11,863,312		$	11,850,515		$	9,828,667

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands except per share data)

(unaudited)

	Quarter Ended															Year Ended
INCOME STATEMENTS	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012			12/31/2013			12/31/2012
Interest and fees on LHFS & LHFI-FTE	$	67,038		$	68,417		$	67,750		$	67,412		$	69,989		$	270,617		$	291,273
Interest and fees on acquired loans		23,384			19,183			20,987			12,782			4,859			76,336			18,122
Interest on securities-taxable		19,078			18,654			18,547			16,539			15,305			72,818			66,950
Interest on securities-tax exempt-FTE		1,963			1,960			1,974			2,018			2,066			7,915			8,343
Interest on fed funds sold and rev repos		14			8			5			4			9			31			26
Other interest income		367			372			372			355			337			1,466			1,342
Total interest income-FTE		111,844			108,594			109,635			99,110			92,565			429,183			386,056
Interest on deposits		4,768			4,970			5,071			4,909			5,061			19,718			24,604
Interest on fed funds pch and repos		104			106			88			81			140			379			588
Other interest expense		1,370			1,389			1,513			1,490			1,346			5,762			5,477
Total interest expense		6,242			6,465			6,672			6,480			6,547			25,859			30,669
Net interest income-FTE		105,602			102,129			102,963			92,630			86,018			403,324			355,387
Provision for loan losses, LHFI		(1,983	)		(3,624	)		(4,846	)		(2,968	)		(535	)		(13,421	)		6,766
Provision for loan losses, acquired loans		4,169			3,292			(1,552	)		130			1,945			6,039			5,528
Net interest income after provision-FTE		103,416			102,461			109,361			95,468			84,608			410,706			343,093
Service charges on deposit accounts		13,114			13,852			12,929			11,681			12,391			51,576			50,351
Insurance commissions		7,343			8,227			8,014			7,242			6,887			30,826			28,205
Wealth management		8,145			7,520			6,940			6,875			6,181			29,480			23,056
Bank card and other fees		9,580			8,929			9,507			7,945			7,978			35,961			30,445
Mortgage banking, net		5,186			8,440			8,295			11,583			11,331			33,504			40,960
Other, net		(4,802	)		165			(2,145	)		(1,191	)		(2,007	)		(7,973	)		1,113
Nonint inc-excl sec gains (losses), net		38,566			47,133			43,540			44,135			42,761			173,374			174,130
Security gains (losses), net		107			-			174			204			18			485			1,059
Total noninterest income		38,673			47,133			43,714			44,339			42,779			173,859			175,189
Salaries and employee benefits		56,687			56,043			55,405			53,592			49,724			221,727			190,519
Services and fees		14,476			13,580			12,816			13,032			12,572			53,904			46,751
Net occupancy-premises		6,659			6,644			6,703			5,955			5,023			25,961			20,267
Equipment expense		6,400			6,271			6,193			5,674			5,288			24,538			20,478
FDIC assessment expense		2,228			2,376			2,376			2,021			1,075			9,001			6,502
ORE/Foreclosure expense		3,009			3,079			5,131			3,820			3,173			15,039			11,165
Other expense		15,408			13,531			18,571			18,051			10,454			65,561			48,820
Total noninterest expense		104,867			101,524			107,195			102,145			87,309			415,731			344,502
Income before income taxes and tax eq adj		37,222			48,070			45,880			37,662			40,078			168,834			173,780
Tax equivalent adjustment		3,747			3,700			3,735			3,655			3,699			14,837			14,397
Income before income taxes		33,475			44,370			42,145			34,007			36,379			153,997			159,383
Income taxes		5,436			11,336			11,024			9,141			8,669			36,937			42,100
Net income available to common shareholders	$	28,039		$	33,034		$	31,121		$	24,866		$	27,710		$	117,060		$	117,283

Per common share data
Earnings per share - basic	$	0.42		$	0.49		$	0.46		$	0.38		$	0.43		$	1.75		$	1.81

Earnings per share - diluted	$	0.42		$	0.49		$	0.46		$	0.38		$	0.43		$	1.75		$	1.81

Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23		$	0.92		$	0.92

Weighted average common shares outstanding
Basic		67,249,877			67,177,013			67,162,530			65,983,204			64,785,457			66,897,404			64,658,765

Diluted		67,449,778			67,382,478			67,344,117			66,149,656			65,007,281			67,073,072			64,850,550

Period end common shares outstanding		67,372,980			67,181,694			67,163,195			67,151,087			64,820,414			67,372,980			64,820,414


OTHER FINANCIAL DATA
Return on common equity		8.26	%		9.83	%		9.29	%		7.61	%		8.56	%		8.75	%		9.30	%
Return on average tangible common equity		12.59	%		14.92	%		14.09	%		10.82	%		11.51	%		13.09	%		12.55	%
Return on assets		0.95	%		1.11	%		1.06	%		0.93	%		1.12	%		1.02	%		1.20	%
Interest margin - Yield - FTE		4.35	%		4.19	%		4.28	%		4.26	%		4.23	%		4.27	%		4.44	%
Interest margin - Cost		0.24	%		0.25	%		0.26	%		0.28	%		0.30	%		0.26	%		0.35	%
Net interest margin - FTE		4.10	%		3.94	%		4.02	%		3.98	%		3.94	%		4.01	%		4.09	%
Efficiency ratio (1)		72.74	%		68.02	%		70.44	%		67.84	%		67.80	%		69.77	%		65.02	%
Full-time equivalent employees		3,110			3,110			3,119			3,164			2,666


COMMON STOCK PERFORMANCE
Market value-Close	$	26.84		$	25.60		$	24.58		$	25.01		$	22.46
Common book value	$	20.11		$	19.79		$	19.76		$	20.15		$	19.86
Tangible common book value	$	13.95		$	13.58		$	13.57		$	13.96		$	15.10


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

See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

	Quarter Ended
NONPERFORMING ASSETS (1)	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012
Nonaccrual loans
Alabama	$	14		$	81		$	73		$	-		$	-
Florida		12,278			14,619			15,916			14,046			19,314
Mississippi (2)		42,307			43,132			41,761			46,697			38,960
Tennessee (3)		4,390			5,596			4,482			4,877			8,401
Texas		6,249			9,953			12,086			17,702			15,688
Total nonaccrual loans		65,238			73,381			74,318			83,322			82,363
Other real estate
Alabama		25,912			25,308			27,245			28,870			-
Florida		34,480			39,198			35,025			30,662			18,569
Mississippi (2)		22,766			25,439			26,843			26,457			27,771
Tennessee (3)		12,892			14,615			15,811			18,339			17,589
Texas		10,489			11,769			12,788			14,078			14,260
Total other real estate		106,539			116,329			117,712			118,406			78,189
Total nonperforming assets	$	171,777		$	189,710		$	192,030		$	201,728		$	160,552

LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	3,298		$	2,344		$	4,194		$	2,772		$	6,378

LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	21,540		$	18,432		$	14,003		$	4,469		$	43,073


	Quarter Ended															Year Ended
ALLOWANCE FOR LOAN LOSSES (4)	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012			12/31/2013			12/31/2012
Beginning Balance	$	68,632		$	72,825		$	76,900		$	78,738		$	83,526		$	78,738		$	89,518
Provision for loan losses		(1,983	)		(3,624	)		(4,846	)		(2,968	)		(535	)		(13,421	)		6,766
Charge-offs		(3,305	)		(3,817	)		(3,031	)		(3,325	)		(8,829	)		(13,478	)		(31,376	)
Recoveries		3,104			3,248			3,802			4,455			4,576			14,609			13,830
Net (charge-offs) recoveries		(201	)		(569	)		771			1,130			(4,253	)		1,131			(17,546	)
Ending Balance	$	66,448		$	68,632		$	72,825		$	76,900		$	78,738		$	66,448		$	78,738

PROVISION FOR LOAN LOSSES (4)
Alabama	$	332		$	550		$	232		$	676		$	-		$	1,790		$	-
Florida		(2,350	)		(2,642	)		(3,425	)		(3,675	)		(706	)		(12,092	)		(730	)
Mississippi (2)		3,336			(1,051	)		(520	)		(1,920	)		2,031			(155	)		7,790
Tennessee (3)		(117	)		(150	)		(335	)		(378	)		(1,037	)		(980	)		460
Texas		(3,184	)		(331	)		(798	)		2,329			(823	)		(1,984	)		(754	)
Total provision for loan losses	$	(1,983	)	$	(3,624	)	$	(4,846	)	$	(2,968	)	$	(535	)	$	(13,421	)	$	6,766

NET CHARGE-OFFS (4)
Alabama	$	74		$	132		$	67		$	11		$	-		$	284		$	-
Florida		(634	)		(138	)		(1,426	)		(849	)		(237	)		(3,047	)		5,261
Mississippi (2)		393			375			291			(290	)		874			769			7,602
Tennessee (3)		506			(153	)		103			249			(43	)		705			1,154
Texas		(138	)		353			194			(251	)		3,659			158			3,529
Total net charge-offs (recoveries)	$	201		$	569		$	(771	)	$	(1,130	)	$	4,253		$	(1,131	)	$	17,546

CREDIT QUALITY RATIOS (1)
Net charge offs/average loans		0.01	%		0.04	%		-0.05	%		-0.08	%		0.29	%		-0.02	%		0.30	%
Provision for loan losses/average loans		-0.13	%		-0.25	%		-0.34	%		-0.21	%		-0.04	%		-0.23	%		0.11	%
Nonperforming loans/total loans (incl LHFS)		1.10	%		1.26	%		1.29	%		1.45	%		1.41	%
Nonperforming assets/total loans (incl LHFS)		2.89	%		3.26	%		3.32	%		3.51	%		2.74	%
Nonperforming assets/total loans (incl LHFS) +ORE		2.84	%		3.20	%		3.26	%		3.44	%		2.71	%
ALL/total loans (excl LHFS)		1.15	%		1.20	%		1.31	%		1.39	%		1.41	%
ALL-commercial/total commercial loans		1.30	%		1.39	%		1.48	%		1.56	%		1.59	%
ALL-consumer/total consumer and home mortgage loans		0.75	%		0.73	%		0.84	%		0.94	%		0.97	%
ALL/nonperforming loans		101.86	%		93.53	%		97.99	%		92.29	%		95.60	%
ALL/nonperforming loans -
(excl impaired loans)		190.70	%		161.96	%		158.75	%		145.83	%		174.46	%

CAPITAL RATIOS
Common equity/total assets		11.49	%		11.26	%		11.18	%		11.42	%		13.10	%
Tangible common equity/tangible assets		8.26	%		8.01	%		7.96	%		8.20	%		10.28	%
Tangible common equity/risk-weighted assets		11.88	%		11.66	%		11.57	%		11.92	%		14.56	%
Tier 1 leverage ratio		9.06	%		8.78	%		8.71	%		9.83	%		10.97	%
Tier 1 common risk-based capital ratio		12.21	%		11.92	%		11.79	%		11.79	%		14.63	%
Tier 1 risk-based capital ratio		12.97	%		12.69	%		12.55	%		12.97	%		15.53	%
Total risk-based capital ratio		14.18	%		14.02	%		13.89	%		14.42	%		17.22	%


(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 FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

Note 1 – Business Combinations

Oxford, Mississippi Branches

On July 26, 2013, Trustmark National Bank (TNB), a subsidiary of Trustmark Corporation (Trustmark), completed its acquisition of two branches of SOUTHBank, F.S.B. (SOUTHBank), located in Oxford, Mississippi. As a result of this acquisition, TNB assumed deposit accounts of approximately $11.7 million in addition to purchasing the two physical branch offices. The transaction was not material to Trustmark’s consolidated financial statements and was not considered a business combination in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations.”

BancTrust Financial Group, Inc.

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

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

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

Since the end of the first quarter of 2013, Trustmark has recorded an additional $6.3 million in goodwill based on changes to the estimated fair value of certain acquired loans, other real estate and premises and equipment, net. These measurement period adjustments have been presented on a retrospective basis, consistent with applicable accounting guidance. The estimated fair values were considered preliminary as of December 31, 2013 and are subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period. The statement of assets purchased and liabilities assumed in the BancTrust acquisition is presented below at their adjusted estimated fair values as of the acquisition date of February 15, 2013 ($ in thousands):

Assets
Cash and due from banks	$	141,616
Securities		528,016
Loans held for sale		1,050
Acquired noncovered loans		944,235
Premises and equipment, net		54,952
Identifiable intangible assets		33,498
Other real estate		40,103
Other assets		102,073
Total Assets		1,845,543

Liabilities
Deposits		1,740,254
Other borrowings		64,051
Other liabilities		16,761
Total Liabilities		1,821,066

Net identified assets acquired at fair value		24,477
Goodwill		81,597
Net assets acquired at fair value	$	106,074

The excess of the consideration paid over the estimated fair value of the net assets acquired was $81.6 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the acquisition date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years.

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

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

Note 1 – Business Combinations (continued)

The operations of BancTrust are included in Trustmark’s operating results from February 15, 2013, and added revenue of $21.4 million and net income available to common shareholders of $3.7 million for the fourth quarter of 2013. Included in Trustmark’s noninterest expense during the first quarter of 2013 are non-routine BancTrust transaction expenses totaling approximately $9.4 million (change in control and severance expense of $1.4 million included in salaries and benefits; professional fees, contract termination and other expenses of $7.9 million included in other expense).

Bay Bank & Trust Company

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

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

Assets
Cash and due from banks	$	88,154
Securities available for sale		26,369
Acquired noncovered loans		97,914
Premises and equipment, net		9,466
Identifiable intangible assets		7,017
Other real estate		2,569
Other assets		3,471
Total Assets		234,960

Liabilities
Deposits		208,796
Other liabilities		526
Total Liabilities		209,322

Net assets acquired at fair value		25,638
Consideration paid to Bay Bank		22,003

Bargain purchase gain		3,635
Income taxes		-
Bargain purchase gain, net of taxes	$	3,635

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

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

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

Note 2 - Securities Available for Sale and Held to Maturity

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

	12/31/2013		9/30/2013		6/30/2013		3/31/2013		12/31/2012
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities	$	502	$	503	$	505	$	506	$	-
U.S. Government agency obligations
Issued by U.S. Government agencies		129,293		133,013		139,066		141,226		10
Issued by U.S. Government sponsored agencies		40,179		132,425		133,791		186,293		105,735
Obligations of states and political subdivisions		171,738		212,991		212,204		218,467		215,761
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		14,474		48,240		46,330		51,138		19,902
Issued by FNMA and FHLMC		241,118		214,795		227,927		241,365		208,564
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,290,741		2,048,275		2,156,320		2,090,516		1,466,366
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		242,172		354,131		361,575		377,070		399,780
Asset-backed securities and structured financial products		63,937		227,728		233,965		239,502		241,627
Total securities available for sale	$	2,194,154	$	3,372,101	$	3,511,683	$	3,546,083	$	2,657,745

SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	100,159	$	-	$	-	$	-	$	-
Obligations of states and political subdivisions		65,987		30,229		30,295		33,071		36,206
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		9,433		2,420		2,547		2,932		3,245
Issued by FNMA and FHLMC		12,724		564		567		569		572
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		837,393		-		-		-		-
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		143,032		36,767		36,929		37,094		2,165
Total securities held to maturity	$	1,168,728	$	69,980	$	70,338	$	73,666	$	42,188

During the fourth quarter of 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $46.6 million ($28.8 million, net of tax). These unrealized holding losses are amortized over the remaining life of the security as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. At December 31, 2013, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive (loss) income in the accompanying balance sheet totaled approximately $46.4 million ($28.6 million, net of tax).

During the 4th quarter of 2013, Trustmark sold $135.6 million of Collateralized Loan Obligations (CLO) generating a net gain of $1.3 million. These securities were identified as available for sale and had been carried in the asset-backed securities and structured financial products line item in the table shown above. This sale leaves Trustmark with a CLO balance of $25.8 million at December 31, 2013, which was subsequently sold in January 2014.

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 93% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of membership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any equity investment in any GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012
Loans secured by real estate:
Construction, land development and other land loans	$	596,889		$	572,057		$	519,263		$	485,419		$	468,975
Secured by 1-4 family residential properties (1)		1,485,564			1,482,963			1,414,871			1,430,293			1,497,480
Secured by nonfarm, nonresidential properties		1,415,139			1,408,342			1,406,930			1,385,669			1,410,264
Other real estate secured		189,362			196,328			192,568			174,680			189,949
Commercial and industrial loans		1,157,614			1,132,863			1,169,327			1,206,851			1,169,513
Consumer loans		165,308			164,612			160,318			160,253			171,660
Other loans		789,005			739,476			714,105			688,623			684,913
LHFI		5,798,881			5,696,641			5,577,382			5,531,788			5,592,754
Allowance for loan losses		(66,448	)		(68,632	)		(72,825	)		(76,900	)		(78,738	)
Net LHFI	$	5,732,433		$	5,628,009		$	5,504,557		$	5,454,888		$	5,514,016

(1) Previously reported 3/31/2013 balance was increased by $57.4 million due to the misclassification
of the proceeds received from the GNMA delinquent loan sale, which should have decreased Other Assets.

ACQUIRED NONCOVERED LOANS BY TYPE	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012
Loans secured by real estate:
Construction, land development and other land loans	$	98,928		$	106,655		$	132,116		$	138,442		$	10,056
Secured by 1-4 family residential properties		157,914			168,573			184,928			209,658			19,404
Secured by nonfarm, nonresidential properties		287,136			301,686			318,603			339,953			45,649
Other real estate secured		33,948			35,051			34,869			32,208			669
Commercial and industrial loans		149,495			186,649			206,338			235,286			3,035
Consumer loans		18,428			22,251			27,420			32,694			2,610
Other loans		24,141			17,010			18,179			14,886			100
Noncovered loans		769,990			837,875			922,453			1,003,127			81,523
Allowance for loan losses		(7,249	)		(3,007	)		(112	)		(1,961	)		(1,885	)
Net noncovered loans	$	762,741		$	834,868		$	922,341		$	1,001,166		$	79,638

ACQUIRED COVERED LOANS BY TYPE	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012
Loans secured by real estate:
Construction, land development and other land loans	$	2,363		$	2,585		$	3,662		$	3,875		$	3,924
Secured by 1-4 family residential properties		16,416			17,785			18,899			20,980			23,990
Secured by nonfarm, nonresidential properties		10,945			12,120			13,341			17,355			18,407
Other real estate secured		2,644			2,817			2,929			3,365			3,567
Commercial and industrial loans		394			478			543			648			747
Consumer loans		119			151			173			179			177
Other loans		1,335			1,314			1,273			1,187			1,229
Covered loans		34,216			37,250			40,820			47,589			52,041
Allowance for loan losses		(2,387	)		(2,326	)		(2,578	)		(4,497	)		(4,190	)
Net covered loans	$	31,829		$	34,924		$	38,242		$	43,092		$	47,851

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)
	December 31, 2013
LHFI - COMPOSITION BY REGION (1)	Total		Alabama		Florida		Mississippi (Central and Southern Regions)		Tennessee (Memphis, TN and Northern MS Regions)		Texas
Loans secured by real estate:
Construction, land development and other land loans	$	596,889	$	19,996	$	76,240	$	289,112	$	44,066	$	167,475
Secured by 1-4 family residential properties		1,485,564		15,041		47,462		1,263,409		137,133		22,519
Secured by nonfarm, nonresidential properties		1,415,139		24,628		148,350		756,457		148,372		337,332
Other real estate secured		189,362		3,441		4,873		132,925		22,092		26,031
Commercial and industrial loans		1,157,614		26,147		12,182		760,366		85,615		273,304
Consumer loans		165,308		12,934		2,617		128,922		18,443		2,392
Other loans		789,005		20,496		24,458		630,116		51,302		62,633
Loans	$	5,798,881	$	122,683	$	316,182	$	3,961,307	$	507,023	$	891,686



CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	47,605	$	885	$	29,155	$	13,461	$	1,539	$	2,565
Development		95,672		766		25,252		41,399		3,601		24,654
Unimproved land		112,758		1,467		18,997		61,926		14,338		16,030
1-4 family construction		96,518		9,419		2,214		58,020		3,060		23,805
Other construction		244,336		7,459		622		114,306		21,528		100,421
Construction, land development and other land loans	$	596,889	$	19,996	$	76,240	$	289,112	$	44,066	$	167,475




LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	160,086	$	2,930	$	40,720	$	63,776	$	17,000	$	35,660
Office		168,741		3,868		34,578		85,385		6,801		38,109
Nursing homes/assisted living		101,771		-		-		93,542		4,280		3,949
Hotel/motel		68,339		-		367		34,307		24,500		9,165
Industrial		68,173		693		6,018		26,458		152		34,852
Health care		13,908		3,100		-		10,711		97		-
Convenience stores		10,806		256		-		6,652		706		3,192
Other		154,761		5,264		19,950		75,792		3,818		49,937
Total income producing loans		746,585		16,111		101,633		396,623		57,354		174,864

Owner-occupied:
Office		104,576		1,550		14,910		60,003		4,458		23,655
Churches		81,312		2,008		2,983		40,363		25,342		10,616
Industrial warehouses		97,403		928		3,142		42,143		7,358		43,832
Health care		101,187		-		14,169		56,948		14,917		15,153
Convenience stores		56,026		-		1,649		31,496		3,277		19,604
Retail		28,374		464		3,665		17,003		3,258		3,984
Restaurants		34,714		-		1,830		28,400		3,330		1,154
Auto dealerships		12,056		-		246		10,077		1,692		41
Other		152,906		3,567		4,123		73,401		27,386		44,429
Total owner-occupied loans		668,554		8,517		46,717		359,834		91,018		162,468

Loans secured by nonfarm, nonresidential properties	$	1,415,139	$	24,628	$	148,350	$	756,457	$	148,372	$	337,332

(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ 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															Year Ended
	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012			12/31/2013			12/31/2012
Securities – taxable		2.30	%		2.22	%		2.24	%		2.33	%		2.44	%		2.27	%		2.77	%
Securities – nontaxable		4.28	%		4.25	%		4.31	%		4.44	%		4.39	%		4.32	%		4.49	%
Securities – total		2.40	%		2.32	%		2.35	%		2.45	%		2.58	%		2.38	%		2.89	%
Loans - LHFI & LHFS		4.55	%		4.69	%		4.74	%		4.76	%		4.77	%		4.68	%		4.92	%
Acquired loans		10.95	%		8.20	%		8.48	%		8.93	%		13.75	%		9.11	%		13.00	%
Loans - total		5.36	%		5.18	%		5.29	%		5.14	%		4.98	%		5.24	%		5.11	%
FF sold & rev repo		0.50	%		0.35	%		0.29	%		0.25	%		0.41	%		0.37	%		0.34	%
Other earning assets		4.53	%		3.86	%		4.29	%		4.15	%		4.30	%		4.20	%		4.24	%
Total earning assets		4.35	%		4.19	%		4.28	%		4.26	%		4.23	%		4.27	%		4.44	%

Interest-bearing deposits		0.27	%		0.27	%		0.28	%		0.30	%		0.35	%		0.28	%		0.42	%
FF pch & repo		0.11	%		0.12	%		0.11	%		0.12	%		0.14	%		0.12	%		0.16	%
Other borrowings		2.96	%		3.07	%		3.13	%		3.03	%		2.72	%		3.05	%		2.81	%
Total interest-bearing liabilities		0.33	%		0.33	%		0.34	%		0.37	%		0.41	%		0.34	%		0.48	%

Net interest margin		4.10	%		3.94	%		4.02	%		3.98	%		3.94	%		4.01	%		4.09	%
Net interest margin excluding acquired loans		3.48	%		3.52	%		3.55	%		3.66	%		3.77	%		3.55	%		3.94	%

Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans. The net interest margin improved 16 basis points during the fourth quarter of 2013 primarily due to an increase in interest and fees on acquired loans, which was the result of increased acquired loan recoveries during the quarter.

During the fourth quarter of 2013, the yield on average acquired loans includes approximately $9.3 million in recoveries, or an annualized 4.35% of the average acquired loan balance. Excluding the recoveries on acquired loans, the yield on average acquired loans totaled 6.60%.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net positive ineffectiveness of $1.0 million for the quarter ended December 31, 2013 compared to a net negative ineffectiveness of $724 thousand for the quarter ended December 31, 2012.

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

	Quarter Ended															Year Ended
	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012			12/31/2013			12/31/2012
Mortgage servicing income, net	$	4,688		$	4,552		$	4,385		$	4,267		$	4,441		$	17,892		$	16,202
Change in fair value-MSR from runoff		(2,182	)		(2,407	)		(2,756	)		(2,460	)		(2,631	)		(9,805	)		(9,808	)
Gain on sales of loans, net		2,202			6,465			7,597			10,165			12,034			26,429			33,919
Other, net		(533	)		(1,485	)		(1,052	)		(1,649	)		(1,789	)		(4,719	)		4,022
Mortgage banking income before hedge ineffectiveness		4,175			7,125			8,174			10,323			12,055			29,797			44,335
Change in fair value-MSR from market changes		3,937			287			6,467			1,127			(418	)		11,818			(9,378	)
Change in fair value of derivatives		(2,926	)		1,028			(6,346	)		133			(306	)		(8,111	)		6,003
Net positive (negative) hedge ineffectiveness		1,011			1,315			121			1,260			(724	)		3,707			(3,375	)
Mortgage banking, net	$	5,186		$	8,440		$	8,295		$	11,583		$	11,331		$	33,504		$	40,960

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

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ 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															Year Ended
	12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012			12/31/2013			12/31/2012
Partnership amortization for tax credit purposes	$	(5,642	)	$	(2,388	)	$	(2,221	)	$	(2,117	)	$	(3,202	)	$	(12,368	)	$	(8,417	)
Bargain purchase gain on Bay Bank acquisition		-			-			-			-			-			-			3,635
(Decrease) increase in FDIC indemnification asset		(2,429	)		211			(2,317	)		(1,365	)		(743	)		(5,900	)		(3,722	)
Other miscellaneous income		3,269			2,342			2,393			2,291			1,938			10,295			9,617
Total other, net	$	(4,802	)	$	165		$	(2,145	)	$	(1,191	)	$	(2,007	)	$	(7,973	)	$	1,113

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.

During the fourth quarter of 2013, other noninterest income included a write-down of the FDIC indemnification asset of $2.4 million on acquired covered loans obtained from Heritage as a result of loan pay-offs, 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										Year Ended
	12/31/2013		9/30/2013		6/30/2013		3/31/2013		12/31/2012		12/31/2013		12/31/2012
Loan expense	$	4,419	$	3,390	$	4,267	$	2,995	$	3,274	$	15,071	$	20,248
Non-routine transaction expenses on acquisitions		-		-		-		7,920		-		7,920		1,917
Amortization of intangibles		2,434		2,466		2,472		1,442		1,022		8,814		3,788
Other miscellaneous expense		8,555		7,675		11,832		5,694		6,158		33,756		22,867
Total other expense	$	15,408	$	13,531	$	18,571	$	18,051	$	10,454	$	65,561	$	48,820

Other miscellaneous expense increased during the second quarter of 2013 due to a non-routine litigation expense of $4.0 million related to a proposed settlement on Trustmark’s overdraft fees for insufficient funds on debit card purchases and ATM withdrawals as previously disclosed in the Form 8-K filed on June 26, 2013. During the third quarter of 2013, the United States District Court for the Southern District of Mississippi preliminarily approved the settlement. The court will hold a hearing on March 25, 2014 to determine whether to issue final approval of the settlement.

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

Note 7 – Non-GAAP Financial Measures

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

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

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

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL INFORMATION

December 31, 2013

($ in thousands)

(unaudited)

Note 7 - Non-GAAP Financial Measures (continued)
			Quarter Ended															Year Ended
			12/31/2013			9/30/2013			6/30/2013			3/31/2013			12/31/2012			12/31/2013			12/31/2012
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' common equity			$	1,346,975		$	1,333,356		$	1,344,360		$	1,325,508		$	1,288,222		$	1,337,597		$	1,261,617
Less:	Goodwill			(372,468	)		(368,482	)		(366,592	)		(324,902	)		(291,104	)		(358,270	)		(291,104	)
	Identifiable intangible assets			(43,532	)		(45,988	)		(48,402	)		(35,187	)		(17,933	)		(43,308	)		(17,348	)
Total average tangible common equity			$	930,975		$	918,886		$	929,366		$	965,419		$	979,185		$	936,020		$	953,165

PERIOD END BALANCES
Total shareholders' common equity			$	1,354,953		$	1,329,514		$	1,326,819		$	1,352,946		$	1,287,369
Less:	Goodwill			(372,851	)		(372,463	)		(368,315	)		(366,366	)		(291,104	)
	Identifiable intangible assets			(41,990	)		(44,424	)		(46,889	)		(49,361	)		(17,306	)
Total tangible common equity		(a)	$	940,112		$	912,627		$	911,615		$	937,219		$	978,959

TANGIBLE ASSETS
Total assets			$	11,790,383		$	11,805,197		$	11,863,312		$	11,850,515		$	9,828,667
Less:	Goodwill			(372,851	)		(372,463	)		(368,315	)		(366,366	)		(291,104	)
	Identifiable intangible assets			(41,990	)		(44,424	)		(46,889	)		(49,361	)		(17,306	)
Total tangible assets		(b)	$	11,375,542		$	11,388,310		$	11,448,108		$	11,434,788		$	9,520,257

Risk-weighted assets		(c)	$	7,916,378		$	7,825,839		$	7,878,281		$	7,862,884		$	6,723,259

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders			$	28,039		$	33,034		$	31,121		$	24,866		$	27,710		$	117,060		$	117,283
Plus:	Intangible amortization net of tax			1,503			1,523			1,526			890			631			5,442			2,339
Net income adjusted for intangible amortization			$	29,542		$	34,557		$	32,647		$	25,756		$	28,341		$	122,502		$	119,622

Period end common shares outstanding		(d)		67,372,980			67,181,694			67,163,195			67,151,087			64,820,414

TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity 1				12.59	%		14.92	%		14.09	%		10.82	%		11.51	%		13.09	%		12.55	%
Tangible common equity/tangible assets		(a)/(b)		8.26	%		8.01	%		7.96	%		8.20	%		10.28	%
Tangible common equity/risk-weighted assets		(a)/(c)		11.88	%		11.66	%		11.57	%		11.92	%		14.56	%
Tangible common book value		(a)/(d)*1,000	$	13.95		$	13.58		$	13.57		$	13.96		$	15.10

TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity			$	1,354,953		$	1,329,514		$	1,326,819		$	1,352,946		$	1,287,369
Eliminate qualifying AOCI				43,731			52,226			36,088			(5,709	)		(3,395	)
Qualifying tier 1 capital				60,000			60,000			60,000			93,000			60,000
Disallowed goodwill				(372,851	)		(372,463	)		(368,315	)		(366,366	)		(291,104	)
Adj to goodwill allowed for deferred taxes				14,445			14,093			13,740			13,388			13,035
Other disallowed intangibles				(41,990	)		(44,424	)		(46,889	)		(49,361	)		(17,306	)
Disallowed servicing intangible				(6,783	)		(6,315	)		(6,038	)		(5,153	)		(4,734	)
Disallowed deferred taxes				(24,647	)		(39,476	)		(26,411	)		(12,575	)		-
Total tier 1 capital				1,026,858			993,155			988,994			1,020,170			1,043,865
Less:	Qualifying tier 1 capital			(60,000	)		(60,000	)		(60,000	)		(93,000	)		(60,000	)
Total tier 1 common capital		(e)	$	966,858		$	933,155		$	928,994		$	927,170		$	983,865

Tier 1 common risk-based capital ratio		(e)/(c)		12.21	%		11.92	%		11.79	%		11.79	%		14.63	%

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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