TRMK 10-Q Quarterly Report March 31, 2010

TRUSTMARK CORP

10-Ks and 10-Qs

10-Q	Quarter ended Sept. 30, 2025
10-Q	Quarter ended June 30, 2025
10-Q	Quarter ended March 31, 2025
10-K	Fiscal year ended Dec. 31, 2024
10-Q	Quarter ended Sept. 30, 2024
10-Q	Quarter ended June 30, 2024
10-Q	Quarter ended March 31, 2024
10-K	Fiscal year ended Dec. 31, 2023
10-Q	Quarter ended Sept. 30, 2023
10-Q	Quarter ended June 30, 2023
10-Q	Quarter ended March 31, 2023
10-K	Fiscal year ended Dec. 31, 2022
10-Q	Quarter ended Sept. 30, 2022
10-Q	Quarter ended June 30, 2022
10-Q	Quarter ended March 31, 2022
10-K	Fiscal year ended Dec. 31, 2021
10-Q	Quarter ended Sept. 30, 2021
10-Q	Quarter ended June 30, 2021
10-Q	Quarter ended March 31, 2021
10-K	Fiscal year ended Dec. 31, 2020
10-Q	Quarter ended Sept. 30, 2020
10-Q	Quarter ended June 30, 2020
10-Q	Quarter ended March 31, 2020
10-K	Fiscal year ended Dec. 31, 2019
10-Q	Quarter ended Sept. 30, 2019
10-Q	Quarter ended June 30, 2019
10-Q	Quarter ended March 31, 2019
10-K	Fiscal year ended Dec. 31, 2018
10-Q	Quarter ended Sept. 30, 2018
10-Q	Quarter ended June 30, 2018
10-Q	Quarter ended March 31, 2018
10-K	Fiscal year ended Dec. 31, 2017
10-Q	Quarter ended Sept. 30, 2017
10-Q	Quarter ended June 30, 2017
10-Q	Quarter ended March 31, 2017
10-K	Fiscal year ended Dec. 31, 2016
10-Q	Quarter ended Sept. 30, 2016
10-Q	Quarter ended June 30, 2016
10-Q	Quarter ended March 31, 2016
10-K	Fiscal year ended Dec. 31, 2015
10-Q	Quarter ended Sept. 30, 2015
10-Q	Quarter ended June 30, 2015
10-Q	Quarter ended March 31, 2015
10-K	Fiscal year ended Dec. 31, 2014
10-Q	Quarter ended Sept. 30, 2014
10-Q	Quarter ended June 30, 2014
10-Q	Quarter ended March 31, 2014
10-K	Fiscal year ended Dec. 31, 2013
10-Q	Quarter ended Sept. 30, 2013
10-Q	Quarter ended June 30, 2013
10-Q	Quarter ended March 31, 2013
10-K	Fiscal year ended Dec. 31, 2012
10-Q	Quarter ended Sept. 30, 2012
10-Q	Quarter ended June 30, 2012
10-Q	Quarter ended March 31, 2012
10-K	Fiscal year ended Dec. 31, 2011
10-Q	Quarter ended Sept. 30, 2011
10-Q	Quarter ended June 30, 2011
10-Q	Quarter ended March 31, 2011
10-K	Fiscal year ended Dec. 31, 2010
10-Q	Quarter ended Sept. 30, 2010
10-Q	Quarter ended June 30, 2010
10-Q	Quarter ended March 31, 2010
10-K	Fiscal year ended Dec. 31, 2009

PROXIES

DEF 14A	Filed on April 22, 2025
DEF 14A	Filed on March 12, 2025
DEF 14A	Filed on April 23, 2024
DEF 14A	Filed on March 13, 2024
DEF 14A	Filed on March 15, 2023
DEF 14A	Filed on April 26, 2022
DEF 14A	Filed on March 14, 2022
DEF 14A	Filed on March 15, 2021
DEF 14A	Filed on March 16, 2020
DEF 14A	Filed on March 11, 2019
DEF 14A	Filed on March 12, 2018
DEF 14A	Filed on March 13, 2017
DEF 14A	Filed on March 14, 2016
DEF 14A	Filed on March 16, 2015
DEF 14A	Filed on March 17, 2014
DEF 14A	Filed on March 25, 2013
DEF 14A	Filed on March 30, 2012
DEF 14A	Filed on April 1, 2011
DEF 14A	Filed on April 2, 2010

10-Q 1 form10-q.htm TRUSTMARK CORP 10-Q 3-31-2010 form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2010


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ___________________

Commission file number 000-03683

Trustmark Corporation

(Exact name of registrant as specified in its charter)


Mississippi		64-0471500
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

248 East Capitol Street, Jackson, Mississippi		39201
(Address of principal executive offices)		(Zip Code)

(601) 208-5111

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b of the Exchange Act.

	Large accelerated filer þ		Accelerated filer o
	Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of April 30, 2010, there were 63,868,674 shares outstanding of the registrant’s common stock (no par value).

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Trustmark Corporation and Subsidiaries

Consolidated Balance Sheets

($ in thousands)

	(Unaudited)
	March 31,		December 31,
	2010		2009
Assets
Cash and due from banks (noninterest-bearing)	$	191,973	$	213,519
Federal funds sold and securities purchased under reverse repurchase agreements		11,599		6,374
Securities available for sale (at fair value)		1,706,565		1,684,396
Securities held to maturity (fair value: $223,137-2010; $240,674-2009)		215,888		232,984
Loans held for sale		176,682		226,225
Loans		6,170,878		6,319,797
Less allowance for loan losses		101,643		103,662
Net loans		6,069,235		6,216,135
Premises and equipment, net		145,113		147,488
Mortgage servicing rights		50,037		50,513
Goodwill		291,104		291,104
Identifiable intangible assets		18,944		19,825
Other assets		416,075		437,455
Total Assets	$	9,293,215	$	9,526,018

Liabilities
Deposits:
Noninterest-bearing	$	1,511,080	$	1,685,187
Interest-bearing		5,635,973		5,503,278
Total deposits		7,147,053		7,188,465
Federal funds purchased and securities sold under repurchase agreements		571,711		653,032
Short-term borrowings		132,784		253,957
Long-term FHLB advance		75,000		75,000
Subordinated notes		49,782		49,774
Junior subordinated debt securities		70,104		70,104
Other liabilities		118,252		125,626
Total Liabilities		8,164,686		8,415,958

Shareholders ’ Equity
Common stock, no par value:
Authorized: 250,000,000 shares
Issued and outstanding: 63,844,500 shares - 2010; 63,673,839 shares - 2009		13,302		13,267
Capital surplus		250,365		244,864
Retained earnings		860,398		853,553
Accumulated other comprehensive income (loss), net of tax		4,464		(1,624	)
Total Shareholders ’ Equity		1,128,529		1,110,060
Total Liabilities and Shareholders ’ Equity	$	9,293,215	$	9,526,018

See notes to consolidated financial statements.

Trustmark Corporation and Subsidiaries

Consolidated Statements of Income

($ in thousands except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2010		2009
Interest Income
Interest and fees on loans	$	81,597	$	90,627
Interest on securities:
Taxable		19,735		21,654
Tax exempt		1,417		1,192
Interest on federal funds sold and securities purchased under reverse repurchase agreements		8		19
Other interest income		383		313
Total Interest Income		103,140		113,805

Interest Expense
Interest on deposits		13,904		22,540
Interest on federal funds purchased and securities sold under repurchase agreements		226		364
Other interest expense		1,592		2,352
Total Interest Expense		15,722		25,256
Net Interest Income		87,418		88,549
Provision for loan losses		15,095		16,866

Net Interest Income After Provision for Loan Losses		72,323		71,683

Noninterest Income
Service charges on deposit accounts		12,977		12,568
Insurance commissions		6,837		7,422
Wealth management		5,355		5,555
General banking - other		5,880		5,407
Mortgage banking, net		6,072		10,907
Other, net		879		1,115
Securities gains, net		369		30
Total Noninterest Income		38,369		43,004

Noninterest Expense
Salaries and employee benefits		42,854		43,425
Services and fees		10,255		10,000
Net occupancy - premises		5,034		5,178
Equipment expense		4,303		4,166
Other expense		13,915		11,638
Total Noninterest Expense		76,361		74,407
Income Before Income Taxes		34,331		40,280
Income taxes		10,876		13,795
Net Income		23,455		26,485
Preferred stock dividends		—		2,688
Accretion of discount on preferred stock		—		438
Net Income Available to Common Shareholders	$	23,455	$	23,359

Earnings Per Common Share
Basic	$	0.37	$	0.41

Diluted	$	0.37	$	0.41

Dividends Per Common Share	$	0.23	$	0.23

See notes to consolidated financial statements.

Trustmark Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders ’ Equity

($ in thousands)

(Unaudited)

	2010			2009
Balance, January 1,	$	1,110,060		$	1,178,466
Net income per consolidated statements of income		23,455			26,485
Other comprehensive income:
Net change in fair value of securities available for sale		5,583			9,176
Net change in defined benefit plans		505			444
Comprehensive income		29,543			36,105
Preferred dividends paid		—			(2,508	)
Common stock dividends paid		(14,817	)		(13,314	)
Common stock issued-net, long-term incentive plans		1,704			(275	)
Excess tax benefit from stock-based compensation arrangements		807			373
Compensation expense, long-term incentive plans		1,292			1,521
Other		(60	)		—
Balance, March 31,	$	1,128,529		$	1,200,368

See notes to consolidated financial statements.

Trustmark Corporation and Subsidiaries

Consolidated Statements of Cash Flows

($ in thousands)

(Unaudited)


	Three Months Ended March 31,
	2010			2009
Operating Activities
Net income	$	23,455		$	26,485
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		15,095			16,866
Depreciation and amortization		5,798			7,053
Net amortization (accretion) of securities		429			(48	)
Securities gains, net		(369	)		(30	)
Gains on sales of loans, net		(3,755	)		(4,614	)
Deferred income tax benefit		(165	)		(5,003	)
Proceeds from sales of loans held for sale		250,012			489,493
Purchases and originations of loans held for sale		(197,088	)		(567,326	)
Originations of mortgage servicing rights		(3,761	)		(5,369	)
Net decrease in other assets		18,425			20,268
Net (decrease) increase in other liabilities		(10,000	)		9,838
Other operating activities, net		4,263			1,634
Net cash provided by (used in) operating activities		102,339			(10,753	)

Investing Activities
Proceeds from calls and maturities of securities held to maturity		17,122			8,322
Proceeds from calls and maturities of securities available for sale		86,620			69,472
Proceeds from sales of securities available for sale		12,453			—
Purchases of securities held to maturity		—			(5,326	)
Purchases of securities available for sale		(108,094	)		(92,082	)
Net (increase) decrease in federal funds sold and securities purchased under reverse repurchase agreements		(5,225	)		15,387
Net decrease in loans		118,184			63,227
Purchases of premises and equipment		(935	)		(3,156	)
Proceeds from sales of premises and equipment		1			11
Proceeds from sales of other real estate		11,827			4,046
Net cash provided by investing activities		131,953			59,901

Financing Activities
Net (decrease) increase in deposits		(41,412	)		333,070
Net decrease in federal funds purchased and securities sold under repurchase agreements		(81,321	)		(204,046	)
Net decrease in short-term borrowings		(120,799	)		(264,167	)
Proceeds from long-term FHLB advances		—			75,000
Preferred stock dividends		—			(2,508	)
Common stock dividends		(14,817	)		(13,314	)
Common stock issued-net, long-term incentive plan		1,704			(275	)
Excess tax benefit from stock-based compensation arrangements		807			373
Net cash used in financing activities		(255,838	)		(75,867	)

Decrease in cash and cash equivalents		(21,546	)		(26,719	)
Cash and cash equivalents at beginning of period		213,519			257,930
Cash and cash equivalents at end of period	$	191,973		$	231,211

See notes to consolidated financial statements.

TRUSTMARK CORPORATION & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Financial Statement Presentation and Principles of Consolidation

The consolidated financial statements in this quarterly report on Form 10-Q include the accounts of Trustmark Corporation (Trustmark) and all other entities in which Trustmark has a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements, and notes thereto, included in Trustmark’s 2009 annual report on Form 10-K.

Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of these consolidated financial statements have been included. The preparation of financial statements in conformity with these accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expense during the reporting period and the related disclosures. Although Management’s estimates contemplate current conditions and how they are expected to change in the future, it is reasonably possible that in 2010 actual conditions could vary from those anticipated, which could affect our results of operations and financial condition. The allowance for loan losses, the valuation of other real estate, the fair value of mortgage servicing rights, the valuation of goodwill and other identifiable intangibles and the fair values of financial instruments are particularly subject to change.

Note 2 – Securities Available for Sale and Held to Maturity

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

	Securities Available for Sale									Securities Held to Maturity
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
March 31, 2010	Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value
U.S. Government agency obligations
Issued by U.S. Government agencies	$	18	$	—	$	—		$	18	$	—	$	—	$	—		$	—
Issued by U.S. Government sponsored agencies		68,685		101		(212	)		68,574		—		—		—			—
Obligations of states and political subdivisions		121,335		2,401		(444	)		123,292		69,975		2,554		(54	)		72,475
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		11,467		522		(3	)		11,986		6,801		45		(22	)		6,824
Issued by FNMA and FHLMC		51,140		428		(276	)		51,292		—		—		—			—
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		1,331,834		55,918		—			1,387,752		136,054		4,708		—			140,762
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		55,049		2,436		—			57,485		3,058		32		(14	)		3,076
Corporate debt securities		6,061		105		—			6,166		—		—		—			—
Total	$	1,645,589	$	61,911	$	(935	)	$	1,706,565	$	215,888	$	7,339	$	(90	)	$	223,137

December 31, 2009
U.S. Government agency obligations
Issued by U.S. Government agencies	$	20	$	—	$	—		$	20	$	—	$	—	$	—		$	—
Issued by U.S. Government sponsored agencies		48,685		—		(768	)		47,917		—		—		—			—
Obligations of states and political subdivisions		115,118		2,758		(368	)		117,508		74,643		2,551		(211	)		76,983
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		11,765		462		(35	)		12,192		7,044		10		(65	)		6,989
Issued by FNMA and FHLMC		49,510		366		(597	)		49,279		—		—		—			—
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		1,333,983		48,650		(77	)		1,382,556		148,226		5,448		—			153,674
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		67,294		1,506		(65	)		68,735		3,071		—		(43	)		3,028
Corporate debt securities		6,087		102		—			6,189		—		—		—			—
Total	$	1,632,462	$	53,844	$	(1,910	)	$	1,684,396	$	232,984	$	8,009	$	(319	)	$	240,674

Temporarily Impaired Securities

The table below includes securities available for sale and held to maturity with gross unrealized losses segregated by length of impairment ($ in thousands):

	Less than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
March 31, 2010	Fair Value		(Losses)			Fair Value		(Losses)			Fair Value		(Losses)
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	37,478	$	(212	)	$	—	$	—		$	37,478	$	(212	)
Obligations of states and political subdivisions		22,004		(326	)		5,649		(172	)		27,653		(498	)
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		4,839		(25	)		—		—			4,839		(25	)
Issued by FNMA and FHLMC		34,620		(276	)		—		—			34,620		(276	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		758		(14	)		—		—			758		(14	)
Total	$	99,699	$	(853	)	$	5,649	$	(172	)	$	105,348	$	(1,025	)

December 31, 2009
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	47,917	$	(768	)	$	—	$	—		$	47,917	$	(768	)
Obligations of states and political subdivisions		18,694		(280	)		6,476		(299	)		25,170		(579	)
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		8,461		(100	)		—		—			8,461		(100	)
Issued by FNMA and FHLMC		42,255		(597	)		—		—			42,255		(597	)
Other residential mortgage-backed securities Issued or guaranteed by FNMA, FHLMC or GNMA		40,109		(77	)		—		—			40,109		(77	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		26,514		(108	)		—		—			26,514		(108	)
Total	$	183,950	$	(1,930	)	$	6,476	$	(299	)	$	190,426	$	(2,229	)

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating other-than-temporary impairment losses, Management considers, among other things, the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of Trustmark to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. The unrealized losses shown above are primarily due to increases in market rates over the yields available at the time of purchase of the underlying securities and not credit quality. Because Trustmark does not intend to sell these securities and it is more likely than not that Trustmark will not be required to sell the investments before recovery of their amortized cost bases, which may be maturity, Trustmark does not consider these investments to be other-than-temporarily impaired at March 31, 2010.

Security Gains and Losses

Gains and losses as a result of calls and dispositions of securities were as follows ($ in thousands):

	Three Months Ended March 31,
Available for Sale	2010		2009
Proceeds from sales of securities	$	12,453	$	—
Gross realized gains		364		—
Gross realized (losses)		—		—

Held to Maturity
Proceeds from calls of securities	$	1,705	$	3,311
Gross realized gains		5		30

Realized gains and losses are determined using the specific identification method and are included in noninterest income as securities gains, net.

Contractual Maturities

The amortized cost and estimated fair value of securities available for sale and held to maturity at March 31, 2010, by contractual maturity, are shown below ($ in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.

	Securities				Securities
	Available for Sale				Held to Maturity
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	9,100	$	9,228	$	5,635	$	5,670
Due after one year through five years		24,496		25,285		15,202		15,583
Due after five years through ten years		134,310		135,116		36,286		37,664
Due after ten years		28,193		28,421		12,852		13,558
		196,099		198,050		69,975		72,475
Mortgage-backed securities		1,449,490		1,508,515		145,913		150,662
Total	$	1,645,589	$	1,706,565	$	215,888	$	223,137

Note 3 – Loans and Allowance for Loan Losses

For the periods presented, loans consisted of the following ($ in thousands):

	March 31,		December 31,
	2010		2009
Real estate loans:
Construction, land development and other land loans	$	803,942	$	830,069
Secured by 1- 4 family residential properties		1,637,121		1,650,743
Secured by nonfarm, nonresidential properties		1,466,296		1,467,307
Other real estate secured		194,641		197,421
Commercial and industrial loans		1,041,580		1,059,164
Consumer loans		542,488		606,315
Other loans		484,810		508,778
Loans		6,170,878		6,319,797
Less allowance for loan losses		101,643		103,662
Net loans	$	6,069,235	$	6,216,135

Trustmark does not have any loan concentrations other than those reflected in the preceding table, which exceed 10% of total loans. At March 31, 2010, Trustmark’s geographic loan distribution was concentrated primarily in its Florida, Mississippi, Tennessee and Texas markets. A substantial portion of construction, land development and other land loans are secured by real estate in markets in which Trustmark is located. Accordingly, the ultimate collectability of a substantial portion of these loans and the recovery of a substantial portion of the carrying amount of other real estate owned, are susceptible to changes in market conditions in these areas.

Changes in the allowance for loan losses were as follows for the periods presented ($ in thousands):

	Three Months Ended March 31,
	2010			2009
Beginning balance	$	103,662		$	94,922
Loans charged-off		(19,775	)		(14,015	)
Recoveries		2,661			2,585
Net charge-offs		(17,114	)		(11,430	)
Provision for loan losses		15,095			16,866
Balance at end of period	$	101,643		$	100,358

At March 31, 2010 and December 31, 2009, the carrying amounts of nonaccrual loans, which are considered for impairment analysis were $165.5 million and $141.2 million, respectively. When a loan is deemed impaired, the full difference between the carrying amount of the loan and the most likely estimate of the asset’s fair value less cost to sell, is charged-off. At March 31, 2010 and December 31, 2009, specifically evaluated impaired loans totaled $91.3 million and $74.2 million, respectively. The allowance for loan losses included a specific reserve for impaired loans of $4.1 million and $3.2 million at March 31, 2010 and December 31, 2009, respectively. Specific charge-offs related to impaired loans totaled $9.8 million and $4.9 million while the provisions charged to net income totaled $1.8 million and $3.0 million for the first quarter of 2010 and 2009, respectively.

At March 31, 2010 and December 31, 2009, nonaccrual loans, not specifically impaired and written down to fair value less cost to sell, totaled $74.2 million and $67.0 million, respectively. In addition, these nonaccrual loans had allocated allowance for loan losses of $10.5 million and $10.0 million at the end of the respective periods. No material interest income was recognized in the income statement on impaired or nonaccrual loans for the periods ended March 31, 2010 and December 31, 2009.

Loans past due 90 days or more totaled $57.0 million and $55.6 million at March 31, 2010 and December 31, 2009, respectively. Included in these amounts are $48.6 million and $46.7 million, respectively, of serviced loans eligible for repurchase, which are fully guaranteed by GNMA. GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When Trustmark is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans held for sale, regardless of whether Trustmark intends to exercise the buy-back option. These loans are reported as held for sale with the offsetting liability being reported as short-term borrowings. At March 31, 2010 and December 31, 2009, Trustmark has not exercised their buy-back option on any delinquent loans serviced for GNMA.

Note 4 – Mortgage Banking

Trustmark recognizes as assets the rights to service mortgage loans based on the estimated fair value of the mortgage servicing rights (MSR) when loans are sold and the associated servicing rights are retained. Trustmark also incorporates a hedging strategy, which utilizes a portfolio of derivative instruments to achieve a return that would substantially offset the changes in fair value of MSR attributable to interest rates. Changes in the fair value of these derivative instruments are recorded in noninterest income in mortgage banking, net and are offset by changes in the fair value of MSR.

The fair value of MSR is determined using discounted cash flow techniques benchmarked against third-party valuations. Estimates of fair value involve several assumptions, including the key valuation assumptions about market expectations of future prepayment rates and discount rates. Prepayment rates are projected using an industry standard prepayment model. The model considers other key factors, such as a wide range of standard industry assumptions tied to specific portfolio characteristics such as remittance cycles, escrow payment requirements, geographic factors, foreclosure loss exposure, VA no-bid exposure, delinquency rates and cost of servicing, including base cost and cost to service delinquent mortgages. Prevailing market conditions at the time of analysis are factored into the accumulation of assumptions and determination of servicing value.

Trustmark utilizes a portfolio of derivative instruments, such as Treasury note futures contracts and exchange-traded option contracts, to achieve a fair value return that offsets the changes in fair value of MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting. Changes in the fair value of these derivative instruments are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of MSR. MSR fair values represent the effect of present value decay and the effect of changes in interest rates. Ineffectiveness of hedging MSR fair value is measured by comparing total hedge cost to the change in fair value of the MSR attributable to interest rate changes. The impact of implementing this strategy resulted in a net positive ineffectiveness of $1.0 million and $2.1 million for the quarters ended March 31, 2010 and 2009, respectively. The accompanying table shows that the MSR value decreased $3.1 million for the quarter ended March 31, 2010 primarily due to a decline in mortgage rates. Offsetting the MSR change is a $4.1 million increase in the value of derivative instruments primarily from hedge income resulting from a steep yield curve and option premium.

The activity in MSR is detailed in the table below ($ in thousands):

	Three Months Ended March 31,
	2010			2009
Balance at beginning of period	$	50,513		$	42,882
Origination of servicing assets		4,518			7,205
Disposals of mortgage loans sold serviced released		(757	)		(1,836	)
Change in fair value:
Due to market changes		(3,067	)		(352	)
Due to runoff		(1,170	)		(2,643	)
Balance at end of period	$	50,037		$	45,256

Note 5 – Other Real Estate

Other real estate owned is recorded at the lower of cost or estimated fair value less the estimated cost of disposition. Fair value is based on independent appraisals and other relevant factors. Valuation adjustments required at foreclosure are charged to the allowance for loan losses.

For the periods presented, changes and losses, net on other real estate were as follows ($ in thousands):

	Three Months Ended March 31,
	2010			2009
Balance at beginning of period	$	90,095		$	38,566
Additions		13,621			7,760
Disposals		(12,120	)		(4,131	)
Writedowns		(420	)		(60	)
Balance at end of period	$	91,176		$	42,135

Losses, net on the sale of other real estate included in other expenses	$	(293	)	$	(85	)

Other real estate by type of property consisted of the following for the periods presented ($ in thousands):

	March 31,		December 31,
	2010		2009
Construction, land development and other land loans	$	66,680	$	60,276
1-4 family residential properties		11,247		11,001
Nonfarm, nonresidential properties		7,053		7,285
Other real estate loans		6,196		11,533
Total other real estate	$	91,176	$	90,095

Other real estate by geographic location consisted of the following for the periods presented ($ in thousands):

	March 31,		December 31,
	2010		2009
Florida	$	40,145	$	45,927
Mississippi (1)		23,082		22,373
Tennessee (2)		9,769		10,105
Texas		18,180		11,690
Total other real estate	$	91,176	$	90,095

(1) - Mississippi includes Central and Southern Mississippi Region

(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Region

Note 6 – Deposits

Deposits consisted of the following for the periods presented ($ in thousands):

	March 31,		December 31,
	2010		2009
Noninterest-bearing demand deposits	$	1,511,080	$	1,685,187
Interest-bearing demand		1,406,824		1,261,181
Savings		1,903,118		1,821,366
Time		2,326,031		2,420,731
Total	$	7,147,053	$	7,188,465

Note 7 – Defined Benefit and Other Postretirement Benefits

Capital Accumulation Plan

Trustmark maintains a noncontributory defined benefit pension plan (Trustmark Capital Accumulation Plan), which covers substantially all associates employed prior to January 1, 2007. The plan provides retirement benefits that are based on the length of credited service and final average compensation, as defined in the plan and vest upon three years of service. In an effort to control expenses, the Board voted to freeze plan benefits effective May 15, 2009. Individuals will not earn additional benefits, except for interest as required by the IRS regulations, after the effective date. Associates will retain their previously earned pension benefits.

The following table presents information regarding the plan’s net periodic benefit cost for the periods presented ($ in thousands):

	Three Months Ended March 31,
	2010			2009
Net periodic benefit cost
Service cost	$	137		$	55
Interest cost		1,194			1,209
Expected return on plan assets		(1,482	)		(1,509	)
Amortization of prior service credits		—			(127	)
Recognized net actuarial loss		850			750
Net periodic benefit cost	$	699		$	378

The acceptable range of contributions to the plan is determined each year by the plan’s actuary. Trustmark’s policy is to fund amounts allowable for federal income tax purposes. In 2010, Trustmark’s minimum required contribution is expected to be zero. For 2009, the minimum required contribution was also zero. The actual amount of the contribution will be determined based on the plan’s funded status and return on plan assets as of the measurement date, which is December 31. Trustmark does not expect to make any contributions during the remainder of 2010.

Supplemental Retirement Plan

Trustmark maintains a nonqualified supplemental retirement plan covering directors that elect to defer fees, and covered salary for key executive officers and senior officers. Effective March 1, 2010, the directors could no longer make future deferrals into the plan, while their vested benefits were frozen. The plan provides for retirement benefits based on a participant's deferred fees and/or covered salary. Trustmark has acquired life insurance contracts on the participants covered under the plan, which may be used to fund future payments under the plan. The measurement date for the plan is December 31. The following table presents information regarding the plan's net periodic benefit cost for the periods presented ($ in thousands):

	Three months ended March 31,
	2010		2009
Net periodic benefit cost
Service cost	$	187	$	233
Interest cost		560		552
Amortization of prior service cost		37		37
Recognized net actuarial loss		89		59
Net periodic benefit cost	$	873	$	881

Note 8 – Stock and Incentive Compensation Plans

Trustmark has granted and currently has outstanding, stock and incentive compensation awards subject to the provisions of the 1997 Long Term Incentive Plan (the 1997 Plan) and the 2005 Stock and Incentive Compensation Plan (the 2005 Plan). New awards have not been issued under the 1997 Plan since it was replaced by the 2005 Plan. The 2005 Plan is designed to provide flexibility to Trustmark regarding its ability to motivate, attract and retain the services of key associates and directors. The 2005 Plan allows Trustmark to make grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance units to key associates and directors.

Stock Option Grants

Stock option awards under the 2005 Plan are granted with an exercise price equal to the market price of Trustmark’s stock on the date of grant. Stock options granted under the 2005 Plan vest 20% per year and have a contractual term of seven years. Stock option awards, which were granted under the 1997 Plan, had an exercise price equal to the market price of Trustmark’s stock on the date of grant, vested equally over four years with a contractual ten-year term. Compensation expense for stock options granted under these plans is estimated using the fair value of each option granted using the Black-Scholes option-pricing model and is recognized on the straight-line method over the requisite service period. During the first three months of 2010, there were no grants of stock option awards.

Restricted Stock Grants

Performance Awards

Trustmark’s performance awards are granted to Trustmark’s executive and senior management team, as well as Trustmark’s Board of Directors. Performance awards granted vest based on performance goals of return on average tangible equity (ROATE) or return on average equity (ROAE) and total shareholder return (TSR) compared to a defined peer group. Awards based on TSR are valued utilizing a Monte Carlo simulation to estimate fair value of the awards at the grant date, while ROATE and ROAE awards are valued utilizing the fair value of Trustmark’s stock at the grant date based on the estimated number of shares expected to vest. The restriction period for performance awards covers a three-year vesting period. These awards are recognized on the straight-line method over the requisite service period. These awards provide for excess time-vested shares, if performance measures exceed 100%. Any excess time-vested shares granted are restricted for an additional three-year vesting period. The restricted share agreement provides for voting rights and dividend privileges.

On January 26, 2010, Trustmark awarded 55,787 shares of performance based restricted stock to key members of its executive management team. The performance based restricted stock issued on January 16, 2007, vested on December 31, 2009. On February 22, 2010, the stock related to this grant was issued to the participants free of restriction. As a result of achieving 100% of ROATE and 100% of TSR related to the performance goals during the performance period, 73,000 excess time-vested restricted shares were awarded and will vest at December 31, 2012.

Time-Vested Awards

Trustmark’s time-vested awards are granted in both employee recruitment and retention and are restricted for thirty-six months from the award dates. Time-vested awards are valued utilizing the fair value of Trustmark’s stock at the grant date. These awards are recognized on the straight-line method over the requisite service period. During the first three months of 2010, Trustmark awarded 72,605 shares of time-vested restricted stock to key members of its management team and board of directors.

Performance-Based Restricted Stock Unit Award

On January 27, 2009, Trustmark’s Chairman and CEO was granted a cash-settled performance-based restricted stock unit award (the RSU award) for 23,123 units, with each unit having the value of one share of Trustmark’s common stock. This award was granted in connection with an employment agreement dated November 20, 2008, that provides for in lieu of receiving an equity compensation award in 2010 or 2011, the 2009 equity compensation award to be twice the amount of a normal award, with one-half of the award being performance-based and one-half service-based. The RSU award was granted outside of the 2005 Plan in lieu of granting shares of performance-based restricted stock that would exceed the annual limit permitted to be granted under the 2005 Plan, in order to satisfy the equity compensation provisions of the employment agreement. Compensation expense for the RSU award is based on the fair value of Trustmark’s stock at the end of each reporting period presented.

The following table presents information regarding compensation expense for Stock and Incentive plans for the periods presented ($ in thousands):

	Three months ended March 31,
	2010		2009
Compensation expense - Stock and Incentive plans:
Stock option-based awards	$	163	$	177
Performance awards		455		468
Time-vested awards		674		876
RSU award (share price: $24.43 - 2010; $18.38 - 2009)		158		94
Total stock and incentive plan compensation expense	$	1,450	$	1,615

Note 9 – Contingencies

Lending Related

Letters of credit are conditional commitments issued by Trustmark to insure the performance of a customer to a third party. Trustmark issues financial and performance standby letters of credit in the normal course of business in order to fulfill the financing needs of its customers. A financial standby letter of credit irrevocably obligates Trustmark to pay a third-party beneficiary when a customer fails to repay an outstanding loan or debt instrument. A performance standby letter of credit irrevocably obligates Trustmark to pay a third-party beneficiary when a customer fails to perform some contractual, nonfinancial obligation. When issuing letters of credit, Trustmark uses essentially the same policies regarding credit risk and collateral, which are followed in the lending process. At March 31, 2010 and 2009, Trustmark’s maximum exposure to credit loss in the event of nonperformance by the other party for letters of credit was $192.1 million and $174.8 million, respectively. These amounts consist primarily of commitments with maturities of less than three years, which have an immaterial carrying value. Trustmark holds collateral to support standby letters of credit when deemed necessary. As of March 31, 2010, the fair value of collateral held was $57.6 million.

Legal Proceedings

Trustmark’s wholly-owned subsidiary, TNB, has been named as a defendant in a purported class action complaint that was filed on August 23, 2009 in the District Court of Harris County, Texas, by Peggy Roif Rotstain, Guthrie Abbott, Catherine Burnell, Steven Queyrouze, Jaime Alexis Arroyo Bornstein and Juan C. Olano, on behalf of themselves and all others similarly situated, naming TNB and four other financial institutions unaffiliated with the Company as defendants. The complaint seeks to recover (i) alleged fraudulent transfers from each of the defendants in the amount of fees received by each defendant from entities controlled by R. Allen Stanford (collectively, the “Stanford Financial Group”) and (ii) damages allegedly attributable to alleged conspiracies by one or more of the defendants with the Stanford Financial Group to commit fraud and/or aid and abet fraud arising from the facts set forth in pending federal criminal indictments and civil complaints against Mr. Stanford, other individuals and the Stanford Financial Group. Plaintiffs have demanded a jury trial. In November 2009, the lawsuit was removed to federal court by certain defendants and then transferred by the United States Panel on Multidistrict Litigation to federal court in the Northern District of Texas (Dallas) where multiple Stanford related matters are being consolidated for pre-trial proceedings.

TNB’s relationship with the Stanford Financial Group began as a result of Trustmark’s acquisition of a Houston-based bank in August 2006, and consisted of correspondent banking and other traditional banking services in the ordinary course of business. The lawsuit is in its preliminary stage and has been previously reported in the press. Trustmark believes that the lawsuit is entirely without merit and intends to defend vigorously against it.

Trustmark and its subsidiaries are also parties to other lawsuits and other claims that arise in the ordinary course of business. Some of the lawsuits assert claims related to the lending, collection, servicing, investment, trust and other business activities, and some of the lawsuits allege substantial claims for damages. The cases are being vigorously contested. In the regular course of business, Management evaluates estimated losses or costs related to litigation, and provision is made for anticipated losses whenever Management believes that such losses are probable and can be reasonably estimated. At the present time, Management believes, based on the advice of legal counsel and Management’s evaluation, that the final resolution of pending legal proceedings will not have a material impact on Trustmark’s consolidated financial position or results of operations; however, Management is unable to estimate a range of potential loss on these matters because of the nature of the legal environment in states where Trustmark conducts business.

Note 10 – Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income by the weighted-average shares of common stock outstanding. Diluted EPS is computed by dividing net income by the weighted-average shares of common stock outstanding, adjusted for the effect of potentially dilutive stock awards outstanding during the period. Weighted-average antidilutive stock awards for the three months ended March 31, 2010 and 2009 totaled 1.273 million and 1.829 million, respectively, and accordingly, were excluded in determining diluted earnings per share. The following table reflects weighted-average shares used to calculate basic and diluted EPS for the periods presented (in thousands):

	Three Months Ended March 31,
	2010		2009
Basic shares		63,743		57,351
Dilutive shares		190		47
Diluted shares		63,933		57,398

Note 11 – Statements of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from banks. The following table reflects specific transaction amounts for the periods presented ($ in thousands):

	Three Months Ended March 31,
	2010		2009
Income taxes paid	$	375	$	6,280
Interest expense paid on deposits and borrowings		16,543		24,293
Noncash transfers from loans to foreclosed properties		13,621		7,759

Note 12 – Shareholders’ Equity

Common Stock Offering

On December 7, 2009, Trustmark completed a public offering of 6,216,216 shares of its common stock, including 810,810 shares issued pursuant to the exercise of the underwriters’ over-allotment option, at a price of $18.50 per share. Trustmark received net proceeds of approximately $109.3 million after deducting underwriting discounts, commissions and estimated offering expenses. Proceeds from this offering were used in the redemption of preferred stock discussed below.

Repurchase of Preferred Stock

On November 21, 2008, Trustmark issued 215,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, (Senior Preferred Stock) to the U.S. Treasury (Treasury) in a private placement transaction as part of the Troubled Assets Relief Program Capital Purchase Program (TARP CPP), a voluntary initiative for healthy U.S. financial institutions. As part of its participation in the TARP CPP, Trustmark also issued to the Treasury a ten-year warrant (the Warrant) to purchase up to 1,647,931 shares of Trustmark’s common stock, at an initial exercise price of $19.57 per share, subject to customary anti-dilution adjustments.

On December 9, 2009, Trustmark completed the repurchase of its 215,000 shares of Senior Preferred Stock from the Treasury at a purchase price of $215.0 million plus a final accrued dividend of $716.7 thousand. The repurchase of the Senior Preferred Stock resulted in a one-time, non-cash charge of approximately $8.2 million to net income available to common shareholders in Trustmark’s fourth quarter financial statements for the unaccreted discount recorded at the date of issuance of the Senior Preferred Stock. In addition, on December 30, 2009, Trustmark repurchased in full from the Treasury, the Warrant to purchase 1,647,931 shares of Trustmark’s common stock, which was issued to the Treasury pursuant to the TARP CPP. The purchase price paid by Trustmark to the Treasury for the Warrant was its fair value of $10.0 million.

Regulatory Capital

Trustmark and TNB are subject to minimum capital requirements, which are administered by various federal regulatory agencies. These capital requirements, as defined by federal guidelines, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional, discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB. As of March 31, 2010, Trustmark and TNB have exceeded all of the minimum capital standards for the parent company and its primary banking subsidiary as established by regulatory requirements. In addition, TNB has met applicable regulatory guidelines to be considered well-capitalized at March 31, 2010. To be categorized in this manner, TNB must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the accompanying table. There are no significant conditions or events that have occurred since March 31, 2010, which Management believes have affected TNB’s present classification.

Trustmark’s and TNB’s actual regulatory capital amounts and ratios are presented in the table below ($ in thousands):

											Minimum Regulatory
	Actual					Minimum Regulatory					Provision to be
	Regulatory Capital					Capital Required					Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At March 31, 2010:
Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,020,382		15.15	%	$	538,967		8.00	%		n/a		n/a
Trustmark National Bank		975,642		14.67	%		531,949		8.00	%	$	664,936		10.00	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	886,171		13.15	%	$	269,483		4.00	%		n/a		n/a
Trustmark National Bank		844,566		12.70	%		265,975		4.00	%	$	398,962		6.00	%

Tier 1 Capital (to Average Assets)
Trustmark Corporation	$	886,171		9.81	%	$	270,868		3.00	%		n/a		n/a
Trustmark National Bank		844,566		9.50	%		266,790		3.00	%	$	444,651		5.00	%

At December 31, 2009:
Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,008,980		14.58	%	$	553,504		8.00	%		n/a		n/a
Trustmark National Bank		967,224		14.16	%		546,344		8.00	%	$	682,930		10.00	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	872,509		12.61	%	$	276,752		4.00	%		n/a		n/a
Trustmark National Bank		834,056		12.21	%		273,172		4.00	%	$	409,758		6.00	%

Tier 1 Capital (to Average Assets)
Trustmark Corporation	$	872,509		9.74	%	$	268,868		3.00	%		n/a		n/a
Trustmark National Bank		834,056		9.45	%		264,817		3.00	%	$	441,361		5.00	%

Accumulated Other Comprehensive Income (Loss)

The following table presents the components of accumulated other comprehensive income (loss) and the related tax effects allocated to each component for the periods ended March 31, 2010 and 2009 ($ in thousands):

							Accumulated
							Other
	Before-Tax			Tax			Comprehensive
	Amount			Effect			Income (Loss)
Balance, January 1, 2010	$	(2,596	)	$	972		$	(1,624	)
Unrealized holding gains on AFS arising during period		9,411			(3,600	)		5,811
Adjustment for net gains realized in net income		(369	)		141			(228	)
Pension and other postretirement benefit plans		818			(313	)		505
Balance, March 31, 2010	$	7,264		$	(2,800	)	$	4,464

Balance, January 1, 2009	$	(23,800	)	$	9,083		$	(14,717	)
Unrealized holding losses on AFS arising during period		14,891			(5,696	)		9,195
Adjustment for net gains realized in net income		(30	)		11			(19	)
Pension and other postretirement benefit plans		719			(275	)		444
Balance, March 31, 2009	$	(8,220	)	$	3,123		$	(5,097	)

Note 13 – Other Noninterest Expense

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

	Three Months Ended March 31,
	2010		2009
FDIC assessment expense	$	3,147	$	2,777
ORE/Foreclosure expense		3,011		630
Other expense		7,757		8,231
Total other expense	$	13,915	$	11,638

Note 14 – Fair Value

Fair Value Measurements

FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements. The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. Depending on the nature of the asset or liability, Trustmark uses various valuation techniques and assumptions when estimating fair value. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. FASB ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that Trustmark has the ability to access at the measurement date.

Level 2 Inputs – Valuation is based upon quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability such as interest rates, yield curves, volatilities and default rates and inputs that are derived principally from or corroborated by observable market data.

Level 3 Inputs – Unobservable inputs reflecting the reporting entity’s own determination about the assumptions that market participants would use in pricing the asset or liability based on the best information available.

Financial Instruments Measured at Fair Value

The methodologies Trustmark uses in determining the fair values are based primarily on the use of independent, market-based data to reflect a value that would be reasonably expected upon exchange of the position in an orderly transaction between market participants at the measurement date. The large majority of assets that are stated at fair value are of a nature that can be valued using prices or inputs that are readily observable through a variety of independent data providers. The providers selected by Trustmark for fair valuation data are widely recognized and accepted vendors whose evaluations support the pricing functions of financial institutions, investment and mutual funds, and portfolio managers. Trustmark has documented and evaluated the pricing methodologies used by the vendors and maintains internal processes that regularly test valuations for anomalies.

Trustmark utilizes an independent pricing service to advise it on the carrying value of the securities available for sale portfolio. As part of Trustmark’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, Trustmark investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. Trustmark has also reviewed and confirmed its determinations in thorough discussions with the pricing source regarding their methods of price discovery.

Mortgage loan commitments are valued based on the securities prices of similar collateral, term, rate and delivery for which the loan is eligible to deliver in place of the particular security. Trustmark acquires a broad array of mortgage security prices that are supplied by a market data vendor, which in turn accumulates prices from a broad list of securities dealers. Prices are processed through a mortgage pipeline management system that accumulates and segregates all loan commitment and forward-sale transactions according to the similarity of various characteristics (maturity, term, rate, and collateral). Prices are matched to those positions that are deemed to be an eligible substitute or offset (i.e., “deliverable”) for a corresponding security observed in the market place.

Trustmark estimates fair value of MSR through the use of prevailing market participant assumptions and market participant valuation processes. This valuation is periodically tested and validated against other third-party firm valuations.

At this time, Trustmark presents no fair values that are derived through internal modeling. Should positions requiring fair valuation arise that are not relevant to existing methodologies, Trustmark will make every reasonable effort to obtain market participant assumptions, or independent evaluation.

Financial Assets and Liabilities

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2010 and December 31, 2009, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value ($ in thousands):

	March 31, 2010
	Total			Level 1			Level 2			Level 3
U.S. Government agency obligations	$	68,592		$	—		$	68,592		$	—
Obligations of states and political subdivisions		123,292			—			123,292			—
Mortgage-backed securities		1,508,515			—			1,508,515			—
Corporate debt securities		6,166			—			6,166			—
Securities available for sale		1,706,565			—			1,706,565			—
Loans held for sale		176,682			—			176,682			—
Mortgage servicing rights		50,037			—			—			50,037
Other assets - derivatives:
Futures contracts		(1,206	)		(1,206	)		—			—
Exchange traded purchased options		83			83			—			—
Over-the-counter written options (rate locks)		172			—			—			172
Other liabilities - derivatives:
Exchange traded written options		1,331			1,331			—			—
Forward contracts		(311	)		—			(311	)		—

	December 31, 2009
	Total			Level 1			Level 2			Level 3
U.S. Government agency obligations	$	47,937		$	—		$	47,937		$	—
Obligations of states and political subdivisions		117,508			—			117,508			—
Mortgage-backed securities		1,512,762			—			1,512,762			—
Corporate debt securities		6,189			—			6,189			—
Securities available for sale		1,684,396			—			1,684,396			—
Loans held for sale		226,225			—			226,225			—
Mortgage servicing rights		50,513			—			—			50,513
Other assets - derivatives:
Futures contracts		(3,873	)		(3,873	)		—			—
Exchange traded purchased options		312			312			—			—
Over-the-counter written options (rate locks)		(61	)		—			—			(61	)
Other liabilities - derivatives:
Exchange traded written options		935			935			—			—
Forward contracts		(2,156	)		—			(2,156	)		—

The changes in Level 3 assets measured at fair value on a recurring basis as of March 31, 2010 and 2009 are summarized as follows ($ in thousands):

	MSR			Other Assets - Derivatives
Balance, January 1, 2010	$	50,513		$	(61	)
Total net gains included in net income		3,761			557
Purchases, sales, issuances and settlements, net		(4,237	)		(324	)
Balance, March 31, 2010	$	50,037		$	172

The amount of total (losses) gains for the period included in earnings that are attributable to the change in unrealized gains or losses still held at March 31, 2010	$	(3,067	)	$	18

Balance, January 1, 2009	$	42,882		$	1,433
Total net (losses) gains included in net income		(2,995	)		3,640
Purchases, sales, issuances and settlements, net		5,369			(2,671	)
Balance, March 31, 2009	$	45,256		$	2,402

The amount of total (losses) gains for the period included in earnings that are attributable to the change in unrealized gains or losses still held at March 31, 2009	$	(352	)	$	15

Trustmark may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. Assets at March 31, 2010, which have been measured at fair value on a nonrecurring basis, include impaired loans. Loans for which it is probable Trustmark will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement are considered impaired. Specific allowances for impaired loans are based on comparisons of the recorded carrying values of the loans to the present value of the estimated cash flows of these loans at each loan’s original effective interest rate, the fair value of the collateral or the observable market prices of the loans. At March 31, 2010, Trustmark had outstanding balances of $91.3 million in impaired loans that were specifically identified for evaluation and written down to fair value of the underlying collateral less cost to sell based on the fair value of the collateral or other unobservable input compared with $74.2 million at December 31, 2009. These impaired loans are classified as Level 3 in the fair value hierarchy.

Nonfinancial Assets and Liabilities

Certain nonfinancial assets measured at fair value on a nonrecurring basis include foreclosed assets (upon initial recognition or subsequent impairment), nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other nonfinancial long-lived assets measured at fair value for impairment assessment.

Certain foreclosed assets, upon initial recognition, are remeasured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the foreclosed asset. The fair value of a foreclosed asset, upon initial recognition, is estimated using Level 3 inputs based on adjusted observable market data. Foreclosed assets measured at fair value upon initial recognition totaled $13.6 million (utilizing Level 3 valuation inputs) during the three months ended March 31, 2010 compared with $7.8 million for the same time period in 2009. In connection with the measurement and initial recognition of the foregoing foreclosed assets, Trustmark recognized charge-offs of the allowance for possible loan losses totaling $1.4 million and $784 thousand for the first quarter of 2010 and 2009, respectively. Other than foreclosed assets measured at fair value upon initial recognition, $1.5 million of foreclosed assets were remeasured during the first three months of 2010, requiring write-downs of $420 thousand to reach their current fair values. No foreclosed assets, other than foreclosed assets measured at fair value upon initial recognition, were remeasured at fair value during the three months ended March 31, 2009.

Fair Value of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at March 31, 2010 and December 31, 2009, are as follows ($ in thousands):


	March 31, 2010						December 31, 2009
	Carrying			Estimated			Carrying			Estimated
	Value			Fair Value			Value			Fair Value
Financial Assets:
Cash and short-term investments	$	203,572		$	203,572		$	219,893		$	219,893
Securities available for sale		1,706,565			1,706,565			1,684,396			1,684,396
Securities held to maturity		215,888			223,137			232,984			240,674
Loans held for sale		176,682			176,682			226,225			226,225
Net loans		6,069,235			6,139,172			6,216,135			6,269,054
Other assets - derivatives		(951	)		(951	)		(3,622	)		(3,622	)

Financial Liabilities:
Deposits		7,147,053			7,156,917			7,188,465			7,198,796
Short-term liabilities		704,495			704,495			906,989			906,989
Long-term FHLB advances		75,000			75,000			75,000			75,000
Subordinated notes		49,782			46,500			49,774			48,661
Junior subordinated debt securities		70,104			34,640			70,104			32,536
Other liabilities - derivatives		1,020			1,020			(1,221	)		(1,221	)

In cases where quoted market prices are not available, fair values are generally based on estimates using present value techniques. Trustmark’s premise in present value techniques is to represent the fair values on a basis of replacement value of the existing instrument given observed market rates on the measurement date. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates for those assets or liabilities cannot be necessarily substantiated by comparison to independent markets and, in many cases, may not be realizable in immediate settlement of the instruments. The estimated fair value of financial instruments with immediate and shorter-term maturities (generally 90 days or less) is assumed to be the same as the recorded book value. All nonfinancial instruments, by definition, have been excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of Trustmark.

The fair values of net loans are estimated for portfolios of loans with similar financial characteristics. For variable rate loans that reprice frequently with no significant change in credit risk, fair values are based on carrying values. The fair values of certain mortgage loans, such as 1-4 family residential properties, are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values of other types of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The processes for estimating the fair value of net loans described above does not represent an exit price under FASB ASC Topic 820 and such an exit price could potentially produce a different fair value estimate at March 31, 2010.

A detailed description of the valuation methodologies used in estimating the fair value of financial instruments can be found in Note 17 included in Item 8 of Trustmark’s Form 10-K Annual Report for the year ended December 31, 2009.

Note 15 – Derivative Financial Instruments

Trustmark maintains an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. Trustmark’s interest rate risk management strategy involves modifying the repricing characteristics of certain assets and liabilities so that changes in interest rates do not adversely affect the net interest margin and cash flows. Under the guidelines of FASB ASC Topic 815, “Derivatives and Hedging,” all derivative instruments are required to be recognized as either assets or liabilities and be carried at fair value on the balance sheet. The fair value of derivative positions outstanding is included in other assets and/or other liabilities in the accompanying consolidated balance sheets and in the net change in these financial statement line items in the accompanying consolidated statements of cash flows as well as included in noninterest income in mortgage banking, net in the accompanying consolidated statements of income.

Derivatives Designated as Hedging Instruments

As part of Trustmark’s risk management strategy in the mortgage banking area, derivative instruments such as forward sales contracts are utilized. Trustmark’s obligations under forward contracts consist of commitments to deliver mortgage loans, originated and/or purchased, in the secondary market at a future date. These derivative instruments are designated as fair value hedges of these transactions that qualify as fair value hedges under FASB ASC Topic 815, the ineffective portion of changes in the fair value of the forward contracts and changes in the fair value of the loans designated as loans held for sale are recorded in noninterest income in mortgage banking, net. Trustmark’s off-balance sheet obligations under these derivative instruments totaled $145.5 million at March 31, 2010, with a positive valuation adjustment of $311 thousand, compared to $188.1 million, with a positive valuation adjustment of $2.2 million as of December 31, 2009.

Derivatives not Designated as Hedging Instruments

Trustmark also utilizes derivative instruments such as interest rate lock commitments in its mortgage banking area. Rate lock commitments are residential mortgage loan commitments with customers, which guarantee a specified interest rate for a specified time period. Changes in the fair value of these derivative instruments are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of forward sales contracts. Trustmark’s off-balance sheet obligations under these derivative instruments totaled $99.5 million at March 31, 2010, with a positive valuation adjustment of $172 thousand, compared to $78.9 million, with a negative valuation adjustment of $61 thousand as of December 31, 2009.

Tabular Disclosures

The following tables disclose the fair value of derivative instruments in Trustmark’s balance sheets as well as the effect of these derivative instruments on Trustmark’s results of operations for the periods presented:


Fair Value of Derivative Instruments
($ in thousands)

	March 31,			December 31,
	2010			2009
Derivatives in net hedging relationships
Interest rate contracts:
Forward contracts included in other liabilities	$	(311	)	$	(2,156	)

Derivatives not designated as hedging instruments
Interest rate contracts:
Futures contracts included in other assets	$	(1,206	)	$	(3,873	)
Exchange traded purchased options included in other assets		83			312
OTC written options (rate locks) included in other assets		172			(61	)
Exchange traded written options included in other liabilities		1,331			935


	Three Months Ended March 31,
	2010			2009
Derivatives in net hedging relationships
Amount of loss recognized in mortgage banking, net	$	(1,845	)	$	(1,415	)

Derivatives not designated as hedging instruments
Amount of gain recognized in mortgage banking, net	$	4,340		$	3,377

Note 16 – Segment Information

Trustmark’s management reporting structure includes three segments: General Banking, Wealth Management and Insurance. General Banking is primarily responsible for all traditional banking products and services, including loans and deposits. The General Banking Division also consists of internal operations such as Human Resources, Executive Administration, Treasury (Funds Management), Public Affairs and Corporate Finance. The Wealth Management Division provides Trustmark’s customers with reliable guidance and sound, practical advice for accumulating, preserving and transferring wealth. Trustmark’s Insurance Division provides a full range of retail insurance products, including commercial risk management products, bonding, group benefits and personal lines coverage.

The accounting policies of each reportable segment are the same as those of Trustmark except for its internal allocations. Noninterest expenses for back-office operations support are allocated to segments based on estimated uses of those services. Trustmark measures the net interest income of its business segments with a process that assigns cost of funds or earnings credit on a matched-term basis. This process, called “funds transfer pricing”, charges an appropriate cost of funds to assets held by a business unit, or credits the business unit for potential earnings for carrying liabilities. The net of these charges and credits flows through to the General Banking segment, which contains the management team responsible for determining the bank’s funding and interest rate risk strategies.

The following table discloses financial information by reportable segment for the periods ended March 31, 2010 and 2009 ($ in thousands):

	Three Months Ended March 31,
	2010		2009
General Banking
Net interest income	$	86,312	$	87,487
Provision for loan losses		15,088		16,923
Noninterest income		26,049		29,936
Noninterest expense		65,831		63,646
Income before income taxes		31,442		36,854
Income taxes		9,852		12,551
General banking net income	$	21,590	$	24,303

Selected Financial Information
Average assets	$	9,224,942	$	9,660,675
Depreciation and amortization	$	5,587	$	6,875

Wealth Management
Net interest income	$	1,051	$	982
Provision for loan losses		7		(57	)
Noninterest income		5,573		5,743
Noninterest expense		5,085		5,026
Income before income taxes		1,532		1,756
Income taxes		516		631
Wealth management net income	$	1,016	$	1,125

Selected Financial Information
Average assets	$	92,856	$	99,208
Depreciation and amortization	$	68	$	72

Insurance
Net interest income	$	55	$	80
Provision for loan losses		—		—
Noninterest income		6,747		7,325
Noninterest expense		5,445		5,735
Income before income taxes		1,357		1,670
Income taxes		508		613
Insurance net income	$	849	$	1,057

Selected Financial Information
Average assets	$	17,040	$	17,931
Depreciation and amortization	$	143	$	106

Consolidated
Net interest income	$	87,418	$	88,549
Provision for loan losses		15,095		16,866
Noninterest income		38,369		43,004
Noninterest expense		76,361		74,407
Income before income taxes		34,331		40,280
Income taxes		10,876		13,795
Consolidated net income	$	23,455	$	26,485

Selected Financial Information
Average assets	$	9,334,838	$	9,777,814
Depreciation and amortization	$	5,798	$	7,053

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

ASU 2010-09, “Amendments to Certain Recognition and Disclosure Requirements.” In February 2010, the FASB issued Accounting Standards Update (ASU) 2010-09, to address potential practice issues associated with FASB ASC Topic 855 (Statement 165). The ASU eliminates the requirement for SEC filers to disclose the date through which subsequent events have been evaluated in originally issued and reissued financial statements. This change was immediately effective.

ASU 2010-06, “Improving Disclosures about Fair Value Measurements.” In January 2010, the FASB issued ASU 2010-06, which requires additional disclosures related to the transfers in and out of fair value hierarchy and the activity of Level 3 financial instruments. ASU 2010-06 further clarifies that (i) fair value measurement disclosures should be provided for each class of assets and liabilities (rather than major category), which would generally be a subset of assets or liabilities within a line item in the statement of financial position and (ii) company’s should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. The disclosures related to the gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy will be required for Trustmark beginning January 1, 2011. The remaining disclosure requirements and clarifications made by ASU 2010-06 became effective for Trustmark on January 1, 2010 and are reported in Note 14 – Fair Value.

SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).” In June 2009, the FASB issued SFAS No. 167, codified as ASU 2009-17, which modifies how a company determines when an variable interest entity (VIE) that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate a VIE is based on, among other things, the VIE’s purpose and design and a company’s ability to direct the activities of the VIE that most significantly impact the VIE’s economic performance. ASU 2009-17 requires additional disclosures about the reporting entity’s involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its effect on the entity’s financial statements. ASU 2009-17 became effective for Trustmark’s financial statements on January 1, 2010 and the adoption did not have a significant impact on Trustmark’s financial statements.

SFAS No. 166, “Accounting for Transfers of Financial Assets.” In June 2009, the FASB issued SFAS No. 166, codified as ASU 2009-16, which amended ASC Topic 860, “Transfers and Servicing,” to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. ASU 2009-16 eliminated the concept of a “qualifying special-purpose entity” and changed the requirements for derecognizing financial assets. ASU 2009-16 also required additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. ASU 2009-16 also modified the criteria that must be met in order for a transfer of a portion of a financial asset, such as a loan participation, to qualify for sale accounting. ASU 2009-16 became effective for Trustmark’s financial statements on January 1, 2010 and the adoption did not have a significant impact on Trustmark’s financial statements.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following provides a narrative discussion and analysis of Trustmark Corporation’s (Trustmark) financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements and the supplemental financial data included elsewhere in this report.

Forward-Looking Statements

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

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including the extent and duration of the current volatility in the credit and financial markets, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions 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, 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.

Description of Business

Trustmark Corporation (Trustmark), a Mississippi business corporation incorporated in 1968, is a bank holding company headquartered in Jackson, Mississippi. Trustmark’s principal subsidiary is Trustmark National Bank (TNB), initially chartered by the State of Mississippi in 1889. At March 31, 2010, TNB had total assets of $9.2 billion, which represents approximately 99% of the consolidated assets of Trustmark.

Through TNB and its other subsidiaries, Trustmark operates as a financial services organization providing banking and other financial solutions through approximately 150 offices and 2,506 full-time equivalent associates located in the states of Mississippi, Tennessee (in Memphis and the Northern Mississippi region, which is collectively referred to herein as Trustmark’s Tennessee market), Florida (primarily in the northwest or “Panhandle” region of that state) and Texas (primarily in Houston, which is referred to herein as Trustmark’s Texas market). The principal products produced and services rendered by TNB and Trustmark’s other subsidiaries are as follows:

Trustmark National Bank

Commercial Banking – TNB provides a full range of commercial banking services to corporations and other business customers. Loans are provided for a variety of general corporate purposes, including financing for commercial and industrial projects, income producing commercial real estate, owner-occupied real estate and construction and land development. TNB also provides deposit services, including checking, savings and money market accounts and certificates of deposit as well as treasury management services.

Consumer Banking – TNB provides banking services to consumers, including checking, savings, and money market accounts as well as certificates of deposit and individual retirement accounts. In addition, TNB provides consumer customers with installment and real estate loans and lines of credit.

Mortgage Banking – TNB provides mortgage banking services, including construction financing, production of conventional and government insured mortgages, secondary marketing and mortgage servicing. At March 31, 2010, TNB’s mortgage loan portfolio totaled approximately $1.0 billion, while its portfolio of mortgage loans serviced for others, including, FNMA, FHLMC and GNMA, totaled approximately $4.3 billion.

Wealth Management and Trust Services – TNB offers specialized services and expertise in the areas of wealth management, trust, investment and custodial services for corporate and individual customers. These services include the administration of personal trusts and estates as well as the management of investment accounts for individuals, employee benefit plans and charitable foundations. TNB also provides corporate trust and institutional custody, securities brokerage, financial and estate planning, retirement plan services as well as life insurance and other risk management services provided by TRMK Risk Management, Inc. (TRMI). TRMI engages in individual insurance product sales as a broker of life and long-term care insurance for wealth management customers. TNB’s wealth management division is also served by Trustmark Investment Advisors, Inc. (TIA), a Securities and Exchange Commission (SEC)-registered investment adviser. TIA provides customized investment management services for TNB customers and also serves as investment advisor to The Performance Funds, a proprietary family of mutual funds. At March 31, 2010, assets under management and administration totaled $7.3 billion.

Insurance – TNB provides a competitive array of insurance solutions for business and individual risk management needs. Business insurance offerings include services and specialized products for medical professionals, construction, manufacturing, hospitality, real estate and group life and health plans. Individual customers are also provided life and health insurance, and personal line policies. TNB provides these services through The Bottrell Insurance Agency, Inc. (Bottrell), which is based in Jackson, Mississippi, and Fisher-Brown, Incorporated (Fisher-Brown), headquartered in Pensacola, Florida.

Somerville Bank & Trust Company

Somerville Bank & Trust Company (Somerville), headquartered in Somerville, Tennessee, provides banking services in the eastern Memphis metropolitan statistical area (MSA) through five offices. At March 31, 2010, Somerville had total assets of $183 million.

Capital Trusts

Trustmark Preferred Capital Trust I (Trustmark Trust) is a Delaware trust affiliate formed in 2006 to facilitate a private placement of $60.0 million in trust preferred securities. Republic Bancshares Capital Trust I (Republic Trust) is a Delaware trust affiliate acquired as the result of Trustmark’s 2006 acquisition of Republic Bancshares of Texas, Inc. Republic Trust was formed to facilitate the issuance of $8.0 million in trust preferred securities. As defined in applicable accounting standards, both Trustmark Trust and Republic Trust are considered variable interest entities for which Trustmark is not the primary beneficiary. Accordingly, the accounts of both trusts are not included in Trustmark’s consolidated financial statements.

Executive Overview

During the first three months of 2010, the national economy showed signs of strengthening as seen by the third straight quarterly gain in economic performance. Still, first quarter growth of 3.2% was weaker than in the fourth quarter of last year, when the economy grew at 5.6%. The initial estimate of the first quarter Gross Domestic Product data recently released by Commerce Department shows important signs of continued U.S. economic recovery, but most economists agree that it will take a considerable amount of time to return to full economic health and full employment.

Management has continued to carefully monitor the impact of illiquidity in the financial markets, declining values of securities and other assets, loan performance, default rates and other financial and macro-economic indicators, in order to navigate the challenging economic environment. In order to reduce exposure to certain loan categories, Management has continued to reduce certain loan classifications, including construction, land development and other land loans and indirect auto loans. During the first three months of 2010 and throughout 2009, Trustmark and TNB’s capital ratios exceeded the minimum levels required for it to be ranked well-capitalized, both prior to and after Trustmark’s participation in the U.S. Treasury’s TARP CPP.

Trustmark did not make significant changes to its loan underwriting standards during the first three months of 2010. Trustmark’s willingness to make loans to qualified applicants that meet its traditional, prudent lending standards has not changed. However, TNB has revised its concentration limits of commercial real estate loans, which adheres to its primary regulator’s guidelines. As a result, TNB has been cautious in granting credit involving certain categories of real estate, particularly in Florida. Furthermore, in the current economic downturn, TNB makes fewer exceptions to its loan policy as compared to prior periods.

Management has continued its practice of maintaining excess funding capacity to provide Trustmark with adequate liquidity for its ongoing operations. In this regard, Trustmark benefits from its strong deposit base, its highly liquid investment portfolio and its access to funding from a variety of external funding sources such as upstream Federal funds lines, Federal Reserve Discount Window, FHLB advances, and brokered deposits.

TARP Capital Purchase Program

In the fourth quarter of 2008, Trustmark chose to participate in the TARP CPP in order to reinforce its strong capital position, advance the Treasury’s efforts to facilitate additional lending in the markets where Trustmark operates, maintain its competitive advantage over its less well-capitalized competitors, support its foreclosure mitigation programs and support its general operations. Trustmark’s decision to participate in the TARP CPP was also affected by discussions with its regulators, including the OCC, the Federal Reserve and the Treasury. Trustmark elected to participate in the TARP CPP as a healthy, well-capitalized bank.

As a participant in the TARP CPP, on November 21, 2008, Trustmark issued to the Treasury 215,000 shares of Senior Preferred Stock, as well as a ten-year warrant (the Warrant) to purchase up to 1,647,931 shares of Trustmark’s common stock, at an initial exercise price of $19.57 per share, subject to customary anti-dilution adjustments.

In the fourth quarter of 2009, Trustmark exited the TARP CPP. Following discussions with its federal banking regulators and the completion of the public offering of common stock discussed above, Trustmark redeemed all the Senior Preferred Stock from the Treasury on December 9, 2009. The amount paid by Trustmark to redeem the Senior Preferred Stock consisted of $215.0 million, which was equivalent to both the original issuance price and the liquidation value of the Senior Preferred Stock, plus a final accrued dividend of approximately $716.7 thousand. As a result of the redemption of the Senior Preferred Stock, in the fourth quarter of 2009, Trustmark incurred a one-time, non-cash charge of $8.2 million to net income available to common shareholders for the unaccreted discount recorded at the date of issuance of the Senior Preferred Stock. On December 30, 2009, Trustmark repurchased the Warrant from the Treasury for its fair value of $10.0 million.

Critical Accounting Policies

Trustmark’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) and follow general practices within the financial services industry. Application of these accounting principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the consolidated financial statements; accordingly, as this information changes, actual financial results could differ from those estimates.

Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. There have been no changes in Trustmark’s critical accounting estimates during the first three months of 2010.

Financial Highlights

Trustmark’s net income available to common shareholders totaled $23.5 million in the first quarter of 2010, which represented basic earnings per common share of $0.37. Trustmark’s net income for the first quarter of 2010 produced a return on average tangible common equity of 11.98%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per common share, which is payable June 15, 2010, to shareholders of record on June 1, 2010.

Net income available to common shareholders for the three months ended March 31, 2010, increased $96 thousand, or 0.4% when compared to the same time period in 2009. The slight increase was primarily the result of preferred stock dividends and the accretion of preferred stock discount during the first three months of 2009, which reduced net income available to common shareholders by approximately $3.1 million. Excluding preferred stock dividends and the accretion of preferred stock discount, net income decreased $3.0 million, or 11.4%, compared to the same time period in 2009. This decline resulted from decreases in both net interest income and noninterest income of $1.1 million and $4.6 million, respectively, and was partially offset by a decrease in the loan loss provision of $1.8 million. The decrease in noninterest income was due largely to the reduction in mortgage banking income of $4.8 million, which resulted from a significant reduction in mortgage production when the first three months of 2010 is compared to the same time period in 2009. The growth in noninterest expense primarily resulted from an increase in other expense of $2.3 million, which can be attributed to increased costs related to real estate foreclosure expenses. For additional information on the changes in noninterest income and noninterest expense, please see accompanying sections included in Results of Operations.

At March 31, 2010, nonperforming assets totaled $256.7 million, an increase of $25.4 million, or 11.0%, compared to December 31, 2009, and total nonaccrual loans were $165.5 million, representing an increase of $24.3 million relative to December 31, 2009. Total net charge-offs for the three months ended March 31, 2010 were $17.1 million compared to total net charge-offs for the three months ended March 31, 2009 of $11.4 million.

Selected Financial Data
($ in thousands)

Three Months Ended March 31,	2010			2009
Consolidated Statements of Income
Total interest income	$	103,140		$	113,805
Total interest expense		15,722			25,256
Net interest income		87,418			88,549
Provision for loan losses		15,095			16,866
Noninterest income		38,369			43,004
Noninterest expense		76,361			74,407
Income before income taxes		34,331			40,280
Income taxes		10,876			13,795
Net Income		23,455			26,485
Preferred stock dividends/discount accretion		—			3,126
Net Income Available to Common Shareholders	$	23,455		$	23,359

Common Share Data
Basic earnings per share	$	0.37		$	0.41
Diluted earnings per share		0.37			0.41
Cash dividends per share		0.23			0.23

Performance Ratios
Return on average common equity		8.47	%		9.60	%
Return on average tangible common equity		11.98	%		14.46	%
Return on average total equity		8.47	%		9.01	%
Return on average assets		1.02	%		1.10	%
Net interest margin (fully taxable equivalent)		4.42	%		4.18	%

Credit Quality Ratios
Net charge-offs/average loans		1.08	%		0.66	%
Provision for loan losses/average loans		0.95	%		0.98	%
Nonperforming loans/total loans (incl LHFS*)		2.61	%		1.94	%
Nonperforming assets/total loans (incl LHFS) plus ORE*		3.99	%		2.53	%
Allowance for loan losses/total loans (excl LHFS*)		1.65	%		1.51	%

March 31,	2010			2009
Consolidated Balance Sheets
Total assets	$	9,293,215		$	9,775,714
Securities		1,922,453			1,869,724
Loans (including loans held for sale)		6,347,560			6,942,288
Deposits		7,147,053			7,156,940
Common shareholders’ equity		1,128,529			994,804
Preferred shareholder’s equity		—			205,564

Common Stock Performance
Market value - close	$	24.43		$	18.38
Common book value		17.68			17.34
Tangible common book value		12.82			11.87

Capital Ratios
Total equity/total assets		12.14	%		12.28	%
Common equity/total assets		12.14	%		10.18	%
Tangible equity/tangible assets		9.11	%		9.37	%
Tangible common equity/tangible assets		9.11	%		7.20	%
Tangible common equity/risk-weighted assets		12.15	%		9.43	%
Tier 1 leverage ratio		9.81	%		10.17	%
Tier 1 common risk-based capital ratio		12.14	%		9.55	%
Tier 1 risk-based capital ratio		13.15	%		13.34	%
Total risk-based capital ratio		15.15	%		15.28	%

* - LHFS is Loans Held for Sale.
** - ORE is Other Real Estate.

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. In addition, 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.

Reconciliation of Non-GAAP Financial Measures ($ in thousands)
			Three Months Ended March 31,
			2010			2009
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders’ equity			$	1,123,356		$	1,192,398
Less:	Preferred stock			—			(205,417	)
Total average common equity				1,123,356			986,981
Less:	Goodwill			(291,104	)		(291,104	)
	Identifiable intangible assets		$	(19,484	)	$	(23,440	)
Total average tangible common equity			$	812,768		$	672,437

PERIOD END BALANCES
Total shareholders’ equity			$	1,128,529		$	1,200,368
Less:	Preferred stock			—			(205,564	)
Total common equity				1,128,529			994,804
Less:	Goodwill			(291,104	)		(291,104	)
	Identifiable intangible assets			(18,944	)		(22,820	)
Total tangible common equity		(a)	$	818,481		$	680,880

TANGIBLE ASSETS
Total assets			$	9,293,215		$	9,775,714
Less:	Goodwill			(291,104	)		(291,104	)
	Identifiable intangible assets			(18,944	)		(22,820	)
Total tangible assets		(b)	$	8,983,167		$	9,461,790

Risk-weighted assets		(c)	$	6,737,084		$	7,216,846

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common shareholders			$	23,455		$	23,359
Plus:	Intangible amortization net of tax			545			618
Net income adjusted for intangible amortization			$	24,000		$	23,977

Period end common shares outstanding		(d)		63,844,500			57,378,318

TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common equity 1				11.98	%		14.46	%
Tangible common equity/tangible assets		(a)/(b)		9.11	%		7.20	%
Tangible common equity/risk-weighted assets		(a)/(c)		12.15	%		9.43	%
Tangible common book value		(a)/(d)*1,000	$	12.82		$	11.87

TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders’ equity			$	1,128,529		$	1,200,368
Eliminate qualifying AOCI				(4,464	)		5,097
Qualifying tier 1 capital				68,000			68,000
Disallowed goodwill				(291,104	)		(291,104	)
Adj to goodwill allowed for deferred taxes				9,158			7,748
Other disallowed intangibles				(18,944	)		(22,820	)
Disallowed servicing intangible				(5,004	)		(4,526	)
Total tier 1 capital			$	886,171		$	962,763
Less:	Qualifying tier 1 capital			(68,000	)		(68,000	)
	Preferred stock			—			(205,564	)
Total tier 1 common capital		(e)	$	818,171		$	689,199

Tier 1 common risk-based capital ratio		(e)/(c)		12.14	%		9.55	%

1 Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible common equity

Results of Operations

Net Interest Income

Net interest income is the principal component of Trustmark’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The net interest margin (NIM) is computed by dividing fully taxable equivalent net interest income by average interest-earning assets and measures how effectively Trustmark utilizes its interest-earning assets in relationship to the interest cost of funding them. The accompanying Yield/Rate Analysis Table shows the average balances for all assets and liabilities of Trustmark and the interest income or expense associated with earning assets and interest-bearing liabilities. The yields and rates have been computed based upon interest income and expense adjusted to a fully taxable equivalent (FTE) basis using a 35% federal marginal tax rate for all periods shown. Nonaccruing loans have been included in the average loan balances, and interest collected prior to these loans having been placed on nonaccrual has been included in interest income. Loan fees included in interest associated with the average loan balances are immaterial.

Net interest income-FTE for the first three months of 2010 decreased $235 thousand, or 0.3%, compared to the same time period in 2009, due to lower average earning asset balances. The impact of lower earning asset balances was partially offset by a 24 basis point increase in the net interest margin to 4.42% during the first three months of 2010, compared to 4.18% for the first three months of 2009. The net interest margin increase was primarily a result of decreased deposit costs, as Trustmark focused on reducing higher cost certificates of deposits, as well as prudent loan pricing, including the use of interest rate floors in its commercial loan pricing. The impact of these two initiatives more than offset the gradual downward repricing of the bank’s long-term fixed rate assets.

Average interest-earning assets for the first three months of 2010 were $8.314 billion, compared with $8.833 billion for the same time period in 2009, a decrease of $518.5 million. This decline was primarily due to a decrease in average total loans of $569.3 million, or 8.2% during the first three months of 2010. This decrease reflects Trustmark’s on-going efforts to reduce exposure to construction and land development lending and the decision to discontinue indirect auto financing as well as the continued weak demand for loans. During the first three months of 2010, the yield on loans decreased five basis points when compared to the same time period in 2009 due to the downward repricing of fixed rate assets. Average total securities increased $50.5 million during the first three months of 2010 when compared to the same time period in 2009. The overall yield on securities decreased 49 basis points when compared to the same time period in 2009 due to the run-off of higher yielding securities being replaced with lower yielding securities. As a result of these factors, interest income-FTE decreased $9.8 million, or 8.4%, when the first quarter of 2010 is compared with the same time period in 2009. The impact of these changes is also illustrated by the decline in the yield on total earning assets, which fell from 5.34% for the first three months of 2009 to 5.19% for the same time period in 2010, a decrease of 15 basis points.

Average interest-bearing liabilities for the first three months of 2010 totaled $6.590 billion compared with $6.995 billion for the same time period in 2009, a decrease of $404.2 million, or 5.8%. During the first three months of 2010, interest-bearing deposits increased $100.5 million, or 1.8%, while the combination of federal funds purchased, securities sold under repurchase agreements and other borrowings decreased by $504.7 million, or 33.6% due to the reduction in loans coupled with stable deposits. Due to a reduction in higher-cost wholesale funding products, the overall yield on liabilities declined 49 basis points during the first three months of 2010 when compared with the same time period in 2009. As a result of these factors, total interest expense for the first three months of 2010 decreased $9.5 million, or 37.7%, when compared with the first three months of 2009.

Yield/Rate Analysis Table
($ in thousands)

	Three Months Ended March 31,
	2010								2009

	Average					Yield/			Average					Yield/
	Balance			Interest		Rate			Balance			Interest		Rate
Assets
Interest-earning assets:
Federal funds sold and securities purchased under reverse repurchase agreements	$	10,438		$	8		0.31	%	$	15,988		$	19		0.48	%
Securities - taxable		1,693,105			19,735		4.73	%		1,683,745			21,654		5.22	%
Securities - nontaxable		151,919			2,180		5.82	%		110,737			1,834		6.72	%
Loans (including loans held for sale)		6,412,671			84,127		5.32	%		6,981,921			92,382		5.37	%
Other earning assets		46,199			383		3.36	%		40,485			313		3.14	%
Total interest-earning assets		8,314,332			106,433		5.19	%		8,832,876			116,202		5.34	%
Cash and due from banks		216,305								239,508
Other assets		910,401								803,416
Allowance for loan losses		(106,200	)							(97,986	)
Total Assets	$	9,334,838							$	9,777,814

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	5,595,034			13,904		1.01	%	$	5,494,572			22,540		1.66	%
Federal funds purchased and securities sold under repurchase agreements		600,826			226		0.15	%		674,175			364		0.22	%
Other borrowings		394,431			1,592		1.64	%		825,785			2,352		1.16	%
Total interest-bearing liabilities		6,590,291			15,722		0.97	%		6,994,532			25,256		1.46	%
Noninterest-bearing demand deposits		1,535,209								1,470,822
Other liabilities		85,982								120,062
Shareholders’ equity		1,123,356								1,192,398
Total Liabilities and Shareholders’ Equity	$	9,334,838							$	9,777,814

Net Interest Margin					90,711		4.42	%					90,946		4.18	%

Less tax equivalent adjustment					3,293								2,397

Net Interest Margin per Consolidated Statements of Income				$	87,418							$	88,549

Provision for Loan Losses

The provision for loan losses is determined by Management as the amount necessary to adjust the allowance for loan losses to a level, which, in Management’s best estimate, is necessary to absorb probable losses within the existing loan portfolio. The provision for loan losses reflects loan quality trends, including the levels of and trends related to nonaccrual loans, past due loans, potential problem loans, criticized loans, net charge-offs or recoveries and growth in the loan portfolio among other factors. Accordingly, the amount of the provision reflects both the necessary increases in the allowance for loan losses related to newly identified criticized loans, as well as the actions taken related to other loans including, among other things, any necessary increases or decreases in required allowances for specific loans or loan pools. As shown in the table below, the provision for loan losses for the first three months of 2010 totaled $15.1 million, or 0.95% of average loans, compared to $16.9 million, or 0.98%, for the same time period in 2009.

Provision for Loan Losses
($ in thousands)

	Three Months Ended March 31,
	2010		2009
Florida	$	5,501	$	10,733
Mississippi (1)		3,748		4,386
Tennessee (2)		1,314		1,621
Texas		4,532		126
Total provision for loan losses	$	15,095	$	16,866

(1) - Mississippi includes Central and Southern Mississippi Regions

(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions

Trustmark continues to devote significant resources to managing credit risks resulting from the slowdown in commercial developments of residential real estate. Trustmark’s Management believes that the Florida construction and land development portfolio is appropriately risk rated and adequately reserved based on current conditions.

See the section captioned “Loans and Allowance for Loan Losses” elsewhere in this discussion for further analysis of the provision for loan losses, which includes the table of nonperforming assets.

Noninterest Income

Trustmark’s noninterest income continues to play an important role in improving net income and total shareholder value and represents 30.3% and 32.7% of total revenue, before securities gains, net for the first three months of 2010 and 2009, respectively. Total noninterest income before securities gains, net for the first three months of 2010 decreased $5.0 million, or 11.6%, compared to the same time period in 2009. The comparative components of noninterest income for the periods ended March 31, 2010 and 2009 are shown in the accompanying table.

Noninterest Income
($ in thousands)

	Three Months Ended March 31,
	2010		2009		$ Change			% Change
Service charges on deposit accounts	$	12,977	$	12,568	$	409			3.3	%
Insurance commissions		6,837		7,422		(585	)		-7.9	%
Wealth management		5,355		5,555		(200	)		-3.6	%
General banking-other		5,880		5,407		473			8.7	%
Mortgage banking, net		6,072		10,907		(4,835	)		-44.3	%
Other, net		879		1,115		(236	)		-21.2	%
Total Noninterest Income before securities gains, net		38,000		42,974		(4,974	)		-11.6	%
Securities gains, net		369		30		339			n/m
Total Noninterest Income	$	38,369	$	43,004	$	(4,635	)		-10.8	%

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

The single largest component of noninterest income continues to be service charges on deposit accounts, which increased $409 thousand, or 3.3%, during the first three months of 2010, when compared to the same time period in 2009. Service charges on deposit accounts include general account service charges and NSF fees. General account service charges decreased $445 thousand during the first three months of 2010 when compared to the same time period in 2009. The decrease in general account service charges during the first three months of 2010 is primarily attributable to increased usage of accounts that do not charge a monthly fee. NSF fees increased $854 thousand during the first three months of 2010 when compared to the same time period in 2009. The growth in NSF fees when comparing the first quarter of 2010 to the same time period in 2009 reflected increases in both collection percentage and NSF opportunities as well as an upgrade in the decisioning tools used for determining NSFs. In November 2009, the Federal Reserve Board adopted final rules that prohibit financial institutions, such as Trustmark, from charging customers for paying overdrafts on ATM and one-time debit card transactions, unless the consumer consents to the overdraft service for those products. This change will reduce the fees that Trustmark is able to charge when customers have insufficient funds in an account. Trustmark estimates that this charge, which becomes effective on July 1, 2010, may reduce noninterest income by approximately $5 million to $7 million for the year ending December 31, 2010.

Insurance commissions were $6.8 million during the first three months of 2010 compared with $7.4 million for the same time period in 2009. The decline in insurance commissions experienced during the first three months of 2010 were primarily due to lower commission volume on commercial property and casualty policies and lower construction bonding activity. Insurance commission revenues continue to face pressure from falling premium prices for similar insurable risks. Furthermore, a recessionary economy has greatly suppressed demand for insurance coverage by businesses for their inventories and equipment, workers’ compensation and general liability, as well as forced companies to downsize or close.

Wealth management income totaled $5.4 million for the first three months of 2010 compared with $5.6 million for the same time period in 2009. Wealth management consists of income related to investment management, trust and brokerage services. The decline in wealth management income during the first three months of 2010 is largely attributed to historically low short-term interest rates that have negatively impacted money management fee income from money market funds and sweep arrangements when compared to the same time period in 2009. In addition, during the first three months of 2010, revenues from brokerage services have increased primarily due to improved market conditions when compared to the same time period in 2009. At March 31, 2010 and 2009, Trustmark held assets under management and administration of $7.3 billion and $6.6 billion, respectively, and brokerage assets of $1.2 billion and $1.1 billion, respectively.

General banking-other totaled $5.9 million for the first three months of 2010 compared with $5.4 million for the same time period in 2009. General banking-other income consists primarily of fees on various bank products and services as well as bankcard fees and safe deposit box fees. The increase of $473 thousand during the first three months of 2010 was primarily the result of growth in fees earned on bankcard products due to increased consumer usage.

Net revenues from mortgage banking were $6.1 million for the first three months of 2010 compared with $10.9 million for the same time period in 2009, a decrease of $4.8 million, or 44.3%. As shown in the accompanying table, net mortgage servicing income decreased to $3.4 million for the first three months of 2010 compared to $4.0 million for the same time period in 2009. This decrease is primarily due to a drop in mortgage production during the first quarter of 2010 as well as the sale of approximately $920.9 million in mortgages serviced for others during the fourth quarter of 2009. As a result, loans serviced for others totaled $4.3 billion at March 31, 2010 compared with $5.0 billion at March 31, 2009.

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

Mortgage Banking Income
($ in thousands)

	Three Months Ended March 31,
	2010			2009			$ Change			% Change
Mortgage servicing income, net	$	3,449		$	4,001		$	(552	)		-13.8	%
Change in fair value-MSR from runoff		(1,170	)		(2,643	)		1,473			-55.7	%
Gain on sales of loans, net		3,755			4,004			(249	)		-6.2	%
Other, net		(1,002	)		3,490			(4,492	)		n/m
Mortgage banking income before hedge ineffectiveness		5,032			8,852			(3,820	)		-43.2	%
Change in fair value-MSR from market changes		(3,067	)		(352	)		(2,715	)		n/m
Change in fair value of derivatives		4,107			2,407			1,700			70.6	%
Net positive hedge ineffectiveness		1,040			2,055			(1,015	)		-49.4	%
Mortgage banking, net	$	6,072		$	10,907		$	(4,835	)		-44.3	%

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

As part of Trustmark’s risk management strategy, Trustmark utilizes derivatives instruments to offset changes in the fair value of MSR attributable to changes in interest rates. Changes in the fair value of the derivative instrument are recorded in mortgage banking, net and are offset by changes in the fair value of MSR. MSR fair values represent the effect of present value decay and the effect of changes in interest rates. Ineffectiveness of hedging MSR fair value is measured by comparing total hedge cost to the fair value of the MSR attributable to market changes. The impact of implementing this strategy resulted in a net positive ineffectiveness of $1.0 million and $2.1 million for the quarters ended March 31, 2010 and 2009, respectively. The MSR value decreased $3.1 million for the quarter ended March 31, 2010 primarily due to a decline in mortgage rates. Offsetting the MSR change is a $4.1 million increase in the value of derivative instruments primarily from hedge income resulting from a steep yield curve and option premium.

Representing a significant component of mortgage banking income are gains on the sales of loans, which equaled $3.8 million during the first three months of 2010 compared to $4.0 million for the same time period in 2009. When compared with the first quarter of 2009, the decline in the gain on sales of loans during the first quarter of 2010 resulted from a decrease in loan sales from secondary marketing activities of approximately $239.2 million offset by higher margins due to the current market environment.

The $4.5 million decrease in other mortgage banking income, net comes primarily from a decline in the valuation of loans held for sale when the first quarter of 2010 is compared to the same period in 2009. This decrease in valuation was affected by both a large decrease in loans held for sale, which fell from a balance of $301.7 million at March 31, 2009 to $176.7 million at March 31, 2010, and the impact this volume reduction had on the related profit margin.

Other income, net for the first three months of 2010 was $879 thousand compared to $1.1 million for the same time period in 2009. The decrease of $236 thousand, or 21.2%, during the first three months of 2010 primarily resulted from a significant reduction in gains on sales of student loans.

During the first three months of 2010, in order to manage the duration of the securities portfolio and capitalize upon advantageous market conditions, Trustmark sold approximately $12.5 million of primarily mortgage-related securities compared to no security sales for the same time period in 2009. This resulted in $369 thousand of securities gains, net for the first three months of 2010 compared to $30 thousand for the first quarter of 2009. Securities gains, net for the first three months of 2009 resulted from calls of held to maturity securities.

Noninterest Expense

Trustmark’s noninterest expense for the first three months of 2010 increased $2.0 million, or 2.6%, compared to the same time period in 2009. The increase during the first three months of 2010 was primarily attributable to higher real estate foreclosure expenses.

Management considers disciplined expense management a key area of focus in the support of improving shareholder value. The comparative components of noninterest expense are shown in the accompanying table.

Noninterest Expense
($ in thousands)

	Three Months Ended March 31,
	2010		2009		$ Change			% Change
Salaries and employee benefits	$	42,854	$	43,425	$	(571	)		-1.3	%
Services and fees		10,255		10,000		255			2.6	%
Net occupancy-premises		5,034		5,178		(144	)		-2.8	%
Equipment expense		4,303		4,166		137			3.3	%
Other expense:
FDIC assessment expense		3,147		2,777		370			13.3	%
ORE/Foreclosure expense		3,011		630		2,381			n/m
Other expense		7,757		8,231		(474	)		-5.8	%
Total other expense		13,915		11,638		2,277			19.6	%
Total noninterest expense	$	76,361	$	74,407	$	1,954			2.6	%

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

Salaries and employee benefits, the largest category of noninterest expense, were $42.9 million for the first three months of 2010 compared to $43.4 million for the same time period in 2009. During the first three months of 2010, salary expense decreased approximately $771 thousand when compared with the same time period in 2009. This decrease reflects lower stock-based and general incentive costs as well as Trustmark’s ongoing human capital management initiatives which resulted in a decrease of 83 FTE employees at March 31, 2010 compared to March 31, 2009. The decrease of 83 FTE employees was primarily accomplished through attrition resulting from technology improvements. Employee benefits expense for the first three months of 2010 increased by approximately $231 thousand when compared to the same time period in 2009 and is primarily attributed to increased costs for employee retirement programs.

Services and fees for the first three months of 2010 increased $255 thousand, or 2.6%, when compared with the same time period in 2009. The growth in services and fees expenses is primarily the result of the investment in a new core retail banking software system.

During the first three months of 2010, other expenses increased $2.3 million, or 19.6% compared to the same time period in 2009. The growth in other expenses during the first three months of 2010 was primarily from increased real estate foreclosure expenses, which resulted from higher other real estate balances when compared to March 31, 2009. In addition, FDIC insurance expense for the first quarter of 2010 increased $370 thousand when compared to the first quarter of 2009 due to growth in both fee assessment rates and deposits. On November 12, 2009, the FDIC adopted a final rule requiring a majority of institutions to prepay their quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. As of March 31, 2010, Trustmark’s remaining prepaid assessment amount was approximately $33.9 million. Also during 2009, the FDIC increased annual assessment rates uniformly by three basis points beginning in 2011 to address the need to return the Deposit Insurance Fund to its statutorily mandated minimum reserve ratio of 1.15% within eight years.

Segment Information

Results of Segment Operations

General Banking

Net interest income for the three months ended March 31, 2010 decreased $1.2 million, or 1.3%, when compared to the same period in 2009 due to lower average earning asset balances. The provision for loan losses for the three months ended March 31, 2010 totaled $15.1 million compared to $16.9 million for the same period in 2009, a decrease of $1.8 million, or 10.8%.

Noninterest income for the three months ended March 31, 2010 decreased $3.9 million, or 13.0%, when compared to the same period in 2009. The decrease during the three months ended March 31, 2010 was primarily due to a decrease in mortgage banking of $4.8 million offset against increases in NSF/OD charges and general banking-other of $851 thousand and $474 thousand, respectively. The decrease in mortgage banking is primarily attributed to a $4.5 million decrease in the quarterly mortgage valuation adjustment contained in other mortgage banking income, net.

Noninterest expense for the three months ended March 31, 2010 increased $2.2 million, or 3.4%, when compared to the same period in 2009. The increase during the three months ended March 31, 2010 was primarily due to a $2.3 million increase in real estate foreclosure expenses, which resulted from higher other real estate balances when compared to March 31, 2009. Also, data processing expenses and FDIC insurance expense increased $776 thousand and $364 thousand respectively, while salaries and benefits, communications expense and franchise taxes decreased $406 thousand, $256 thousand and $201 thousand, respectively.

Insurance

Trustmark’s Insurance Division includes two wholly-owned subsidiaries of TNB: Bottrell and Fisher-Brown. Through Bottrell and Fisher-Brown, Trustmark provides a full range of retail insurance products, including commercial risk management products, bonding, group benefits and personal lines coverage.

During the first quarter of 2010, net income for the Insurance Division decreased $208 thousand, or 19.7%, when compared with the same time period in 2009, primarily from a reduction in insurance commissions, which is contained in noninterest income. For more information on this change, please see the analysis of Insurance commissions included in Noninterest Income located elsewhere in this document.

At March 31, 2010, Trustmark performed an impairment analysis on the reporting unit in the Insurance Division due to current market conditions and concluded that no impairment charge was required. However, as a result of pressure from a generally soft insurance market, the spread between the Insurance Division’s fair value and book value has narrowed since year-end. A continuing period of falling prices and suppressed demand for the products of the Insurance Division may result in impairment of goodwill in the future.

Wealth Management

The Wealth Management Division has been strategically organized to serve Trustmark’s customers as a financial partner providing reliable guidance and sound, practical advice for accumulating, preserving, and transferring wealth. The Investment Services group, along with the Trust group, are the primary service providers in this segment. Two wholly-owned subsidiaries of TNB are included in Wealth Management. TIA is a registered investment adviser that provides investment management services to individual and institutional accounts as well as The Performance Fund Family of Mutual Funds. TRMI acts as an agent to provide life, long-term care and disability insurance services for wealth management customers.

Net income for the Wealth Management Division decreased $109 thousand, or 9.7%, when comparing the first quarter of 2010 with the same time period in 2009, primarily from a reduction in fees earned from trust services, which is contained in noninterest income. For more information on this change, please see the analysis of Wealth Management income included in Noninterest Income located elsewhere in this document.

Income Taxes

For the three months ended March 31, 2010, Trustmark’s combined effective tax rate was 31.7% compared to 34.2% for the same time period in 2009. The decrease in Trustmark’s effective tax rate is mainly due to an increase in investments providing federal and state income tax credits along with immaterial changes in permanent items as a percentage of pretax income.

Earning Assets

Earning assets serve as the primary revenue streams for Trustmark and are comprised of securities, loans, federal funds sold and securities purchased under resale agreements. Earning assets totaled $8.282 billion, or 89.1% of total assets, at March 31, 2010, compared with $8.470 billion, or 88.9% of total assets, at December 31, 2009, a decrease of $188.2 million, or 2.2%.

Securities

From 2005 through 2007, Trustmark allowed its investment portfolio to run-off given a flat yield curve and limited spread opportunity. The cash flow created by this run-off was reinvested in higher yielding loans resulting in an improved net interest margin percentage. In the first quarter of 2008, given a steeper yield curve and improved spread opportunities on investment securities versus traditional funding sources, Trustmark began purchasing securities.

When compared with December 31, 2009, total investment securities increased by $5.1 million during the first three months of 2010. This increase resulted primarily from purchases of Agency guaranteed securities offset by maturities and paydowns. In addition, during the first three months of 2010, Trustmark sold approximately $12.5 million in securities, generating a gain of approximately $369 thousand. This was a strategy undertaken primarily to manage the duration of the securities portfolio and capitalize upon advantageous market conditions.

The securities portfolio is one of many tools Management uses to control exposure to interest rate risk. Interest rate risk can be adjusted by altering both the duration and size of the portfolio. Trustmark has maintained a strategy of offsetting potential exposure to higher interest rates by keeping both the average life and the balance of investment securities at relatively low levels. The weighted-average life during the first three months of 2010 has lengthened when compared to the same time period in 2009 despite the investment strategy mentioned above primarily due to slower prepayment expectations for mortgage related securities. As a result, the weighted-average life of the portfolio increased to 3.50 years at March 31, 2010, compared to 1.94 years at March 31, 2009.

Available for sale (AFS) securities are carried at their estimated fair value with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders’ equity. At March 31, 2010, AFS securities totaled $1.707 billion, which represented 88.8% of the securities portfolio, compared to $1.684 billion, or 87.8%, at December 31, 2009. At March 31, 2010, unrealized gains, net on AFS securities totaled $61.0 million compared with unrealized gains, net of $51.9 million at December 31, 2009. At March 31, 2010, AFS securities consisted of obligations of states and political subdivisions, mortgage related securities, U.S. Government agency obligations and corporate securities.

Held to maturity (HTM) securities are carried at amortized cost and represent those securities that Trustmark both intends and has the ability to hold to maturity. At March 31, 2010, HTM securities totaled $215.9 million and represented 11.2% of the total portfolio, compared with $233.0 million, or 12.2%, at December 31, 2009.

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 that 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.

As of March 31, 2010, Trustmark did not hold securities of any one issuer with a carrying value exceeding ten percent of total shareholders’ equity, other than certain government-sponsored agencies that are exempt from inclusion. Management continues to closely monitor the credit quality as well as the ratings of the debt and mortgage-backed securities issued by the U.S. Government sponsored entities and held in Trustmark’s securities portfolio in light of issues currently facing these entities.

The following tables present Trustmark’s securities portfolio by amortized cost and estimated fair value and by credit rating at March 31, 2010.

Securities Portfolio by Credit Rating (1)

($ in thousands)


	March 31, 2010
	Amortized Cost					Estimated Fair Value
	Amount		%			Amount		%
Securities Available for Sale
AAA	$	1,518,190		92.3	%	$	1,577,104		92.5	%
Aa1 to Aa3		40,701		2.5	%		41,287		2.4	%
A1 to A3		25,092		1.5	%		25,195		1.5	%
Baa1 to Baa3		7,520		0.5	%		7,657		0.4	%
Not Rated (2)		54,086		3.2	%		55,322		3.2	%
Total securities available for sale	$	1,645,589		100.0	%	$	1,706,565		100.0	%

Securities Held to Maturity
AAA	$	147,558		68.3	%	$	152,360		68.3	%
Aa1 to Aa3		21,671		10.0	%		23,033		10.3	%
A1 to A3		14,444		6.7	%		14,778		6.6	%
Baa1 to Baa3		2,599		1.2	%		2,643		1.2	%
Not Rated (2)		29,616		13.8	%		30,323		13.6	%
Total securities held to maturity	$	215,888		100.0	%	$	223,137		100.0	%

(1) - Credit ratings obtained from Moody’s Investors Service
(2) - Not rated issues primarily consist of Mississippi municipal general obligations

The table presenting the credit rating of Trustmark’s securities is formatted to show the securities according to the credit rating category, and not by category of the underlying security. At March 31, 2010, approximately 93% of the available for sale securities are rated AAA investment grade and the same is true with respect to 68% of held to maturity securities, which are carried at amortized cost.

Loans Held for Sale

At March 31, 2010, loans held for sale totaled $176.7 million, consisting of $96.0 million of residential real estate mortgage loans in the process of being sold to third parties and $80.7 million of Government National Mortgage Association (GNMA) optional repurchase loans. At December 31, 2009, loans held for sale totaled $226.2 million, consisting of $145.2 million of residential real estate mortgage loans in the process of being sold to third parties and $81.0 million of Government National Mortgage Association (GNMA) optional repurchase loans. Please refer to the nonperforming assets table that follows for information on GNMA loans eligible for repurchase which are past due 90 days or more.

GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When Trustmark is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans held for sale, regardless of whether Trustmark intends to exercise the buy-back option. T hese loans are reported as held for sale with the offsetting liability being reported as short-term borrowings. At March 31, 2010, Trustmark has not exercised their buy-back option on any delinquent loans serviced for GNMA.

Loans and Allowance for Loan Losses

Loans at March 31, 2010 totaled $6.171 billion compared to $6.320 billion at December 31, 2009, a decrease of $148.9 million. These declines are directly attributable to a strategic focus to reduce certain loan classifications, specifically construction, land development and other land loans and indirect consumer auto loans. In addition, these loan classifications, as well as commercial and industrial loans, have been impacted by current economic conditions. The decline in construction, land development and other land loans can be primarily attributable to Trustmark’s Florida market, which at March 31, 2010 had loans totaling $183.7 million; a decrease of $15.2 million from December 31, 2009. This trend is expected to continue until the real estate market stabilizes in Florida and overall economic conditions improve. The consumer loan portfolio decrease of $63.8 million primarily represents a decrease in the indirect consumer auto portfolio. The indirect consumer auto portfolio balance at March 31, 2010 totaled $331.9 million compared to $386.0 million at December 31, 2009. The declines in these classifications reflect implementation of Management’s determination to reduce overall exposure to these types of assets.

In the following tables, loans reported by region (along with related nonperforming assets and net charge-offs) are associated with location of origination except for loans secured by 1-4 family residential properties (representing traditional mortgages), credit cards and indirect consumer auto loans. These loans are included in the Mississippi Region because they are centrally decisioned and approved as part of a specific line of business located at Trustmark’s headquarters in Jackson, Mississippi.

The table below shows the carrying value of the loan portfolio for the periods presented:

	March 31,		December 31,
	2010		2009
Real estate loans:
Construction, land development and other land loans	$	803,942	$	830,069
Secured by 1- 4 family residential properties		1,637,121		1,650,743
Secured by nonfarm, nonresidential properties		1,466,296		1,467,307
Other real estate secured		194,641		197,421
Commercial and industrial loans		1,041,580		1,059,164
Consumer loans		542,488		606,315
Other loans		484,810		508,778
Loans		6,170,878		6,319,797
Less allowance for loan losses		101,643		103,662
Net loans	$	6,069,235	$	6,216,135

The loan composition by region at March 31, 2010 is illustrated in the following tables ($ in thousands) and reflects a diversified mix of loans by region.


	March 31, 2010
Loan Composition by Region	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	$	803,942	$	183,670	$	299,664	$	57,320	$	263,288
Secured by 1-4 family residential properties		1,637,121		81,297		1,362,648		163,410		29,766
Secured by nonfarm, nonresidential properties		1,466,296		179,637		828,599		213,224		244,836
Other real estate secured		194,641		5,195		161,955		9,586		17,905
Commercial and industrial loans		1,041,580		22,100		767,215		68,973		183,292
Consumer loans		542,488		2,077		504,555		27,674		8,182
Other loans		484,810		29,480		404,848		19,637		30,845
Loans	$	6,170,878	$	503,456	$	4,329,484	$	559,824	$	778,114


(1) - Mississippi includes Central and Southern Mississippi Regions
(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions

Construction, Land Development and Other Land Loans by Region
Lots	$	91,812	$	57,436	$	23,634	$	3,315	$	7,427
Development		187,378		27,381		64,546		10,851		84,600
Unimproved land		267,386		71,271		106,402		31,136		58,577
1-4 family construction		121,518		10,247		76,440		5,031		29,800
Other construction		135,848		17,335		28,642		6,987		82,884
Construction, land development and other land loans	$	803,942	$	183,670	$	299,664	$	57,320	$	263,288

	March 31, 2010
Loans Secured by Nonfarm, Nonresidential Properties by Region	Total		Florida		Mississippi (Central and Southern Regions)		Tennessee (Memphis, TN and Northern MS Regions)		Texas
Income producing:
Retail	$	175,359	$	36,451	$	84,127	$	28,922	$	25,859
Office		157,738		55,025		81,212		11,429		10,072
Nursing homes/assisted living		131,735		—		121,538		4,822		5,375
Hotel/motel		67,436		12,810		30,711		11,043		12,872
Industrial		22,970		7,945		4,912		1,202		8,911
Health care		10,576		—		10,511		65		—
Convenience stores		7,533		298		4,735		1,307		1,193
Other existing		140,719		13,305		62,168		17,067		48,179
Total Income Producing		714,066		125,834		399,914		75,857		112,461

Owner-occupied:
Churches		120,474		2,315		53,167		60,508		4,484
Office		119,791		21,746		61,949		17,950		18,146
Health care		83,409		11,265		58,246		5,084		8,814
Industrial warehouses		86,059		1,387		57,245		423		27,004
Convenience stores		64,552		1,305		42,554		4,187		16,506
Retail		36,931		6,003		19,172		1,483		10,273
Auto dealerships		21,429		633		15,848		1,644		3,304
Restaurants		32,820		882		24,377		6,162		1,399
Miscellaneous commercial owner-occupied		186,765		8,267		96,127		39,926		42,445
Total Owner-Occupied		752,230		53,803		428,685		137,367		132,375

Loans secured by nonfarm, nonresidential properties	$	1,466,296	$	179,637	$	828,599	$	213,224	$	244,836

(1) - Mississippi includes Central and Southern Mississippi Regions

(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions

Trustmark makes loans in the normal course of business to certain directors, their immediate families and companies in which they are principal owners. Such loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectibility at the time of the transaction.

There is no industry standard definition of “subprime loans.” Trustmark categorizes certain loans as subprime for its purposes using a set of factors, which Management believes, are consistent with industry practice. TNB has not originated or purchased subprime mortgages. At March 31, 2010, Trustmark held “alt A” mortgages with an aggregate principal balance of approximately $6.0 million (0.15% of total loans secured by real estate at that date). These “alt A” loans have been originated by Trustmark as an accommodation to certain Trustmark customers for whom Trustmark determined that such loans were suitable under the purposes of the Fannie Mae “alt A” program and under Trustmark’s loan origination standards. Trustmark does not have any no-interest loans, other than a small number of loans made to customers that are charitable organizations, the aggregate amount of which is not material to Trustmark’s financial condition or results of operations.

The allowance for loan losses is established through provisions for estimated loan losses charged against net income. The allowance reflects Management’s best estimate of the probable loan losses related to specifically identified loans, as well as probable incurred loan losses in the remaining loan portfolio and requires considerable judgment. The allowance is based upon Management’s current judgments and the credit quality of the loan portfolio, including all internal and external factors that impact loan collectibility. Accordingly, the allowance is based upon both past events and current economic conditions.

Trustmark’s allowance has been developed using different factors to estimate losses based upon specific evaluation of identified individual loans considered impaired, estimated identified losses on various pools of loans and/or groups of risk rated loans with common risk characteristics and other external and internal factors of estimated probable losses based on other facts and circumstances.

Trustmark’s allowance for probable loan loss methodology is based on guidance provided in SAB No. 102 as well as other regulatory guidance. The level of Trustmark’s allowance reflects Management’s continuing evaluation of specific credit risks, loan loss experience, current loan portfolio growth, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. This evaluation takes into account other qualitative factors including recent acquisitions; national, regional and local economic trends and conditions; changes in industry and credit concentration; changes in levels and trends of delinquencies and nonperforming loans; changes in levels and trends of net charge-offs; and changes in interest rates and collateral, financial and underwriting exceptions.

During the quarter ended June 30, 2009, Trustmark refined its allowance for loan loss methodology for commercial loans based upon current regulatory guidance from its primary regulator. This refined methodology delineated the commercial purpose and commercial construction loan portfolios into 13 separate loan types (or pools), which had similar characteristics, such as, repayment, collateral and risk profiles. The 13 separate loan pools utilized a 10-point risk rating system to apply a reserve factor consisting of quantitative and qualitative components to determine the needed allowance by each loan type. This change expanded commercial loans from a single pool in 2008 and prior years to the thirteen separate pools and increased risk factors for commercial loan types to 130. The thirteen separate loan pools included nine basic loan groups, of which four groups were separated between Florida and non-Florida. This allowed Trustmark to reallocate loan loss reserves to loans that represent the highest risk. As a result, approximately $8.0 million in qualitative reserves were reallocated to specific reserves during the second quarter of 2009.

During the first quarter of 2010, Trustmark continued to refine the allowance for loan loss methodology for commercial loans by segregating the pools into Trustmark’s four key market regions, Florida, Mississippi, Tennessee and Texas, to take into consideration the uniqueness of each market while continuing to utilize a 10-point risk rating system for each pool. As a result, risk rate factors for commercial loan types increased to 360 while having an immaterial impact to the overall balance of the allowance for loan losses. The nine separate pools are segmented below:


Ø	Commercial Purpose Loans

	●	Real Estate – Owner Occupied
	●	Real Estate – Non-Owner Occupied
	●	Working Capital
	●	Non-Working Capital
	●	Land
	●	Lots and Development
	●	Political Subdivisions

Ø	Commercial Construction Loans

	●	1 to 4 Family
	●	Non-1 to 4 Family

The quantitative factors utilized in determining the required reserve are intended to reflect a three-year average by loan type; however, because of the current economic recession and the development of the refined reserve methodology, a historical 2008 loss ratio was utilized. Trustmark will develop its three-year loss factors utilizing 2008 as a base year. The qualitative factors utilize eight separate factors made up of unique characteristics that, when weighted and combined, produce an estimated level of reserve for each loan type.

At March 31, 2010, the allowance for loan losses was $101.6 million, a decrease of $2.0 million when compared with December 31, 2009, primarily resulting from $1.8 million in provisioning being required for $9.8 million in charge-offs related to loan impairment. Reserves in the amount of $8.0 million were already established for these loans. Trustmark has not experienced any abnormal credit deterioration, excluding the Florida Panhandle where, after a decade of growth, the economy has declined as a result of overbuilding commercial developments of residential real estate. Trustmark is actively engaged in the resolution of credit issues in the Florida Panhandle. Total allowance coverage of nonperforming loans, excluding impaired loans charged down to net realizable value, at March 31, 2010, was 131.4%, compared to 150.1% at December 31, 2009. Trustmark’s allocation of its allowance for loan losses represents 2.10% of commercial loans and 0.80% of consumer and home mortgage loans, resulting in an allowance to total loans of 1.65% at March 31, 2010. This compares with an allowance to total loans of 1.64% at December 31, 2009, which was allocated to commercial loans at 2.10% and to consumer and mortgage loans at 0.80%.

Managing credit risks resulting from the current economic and real estate market conditions continues to be a primary focus for Trustmark. Nonperforming assets totaled $256.7 million at March 31, 2010, an increase of $25.4 million relative to December 31, 2009. Collectively, total nonperforming assets to total loans and other real estate at March 31, 2010 was 3.99% compared to 3.48% at December 31, 2009. Net charge-offs totaled $17.1 million, or 1.08% of average loans, while the provision for loan losses totaled $15.1 million during the first three months of 2010. The increase in each of these metrics is principally attributable to residential real estate conditions, primarily in Trustmark’s Florida market. To put into proper perspective, the Florida market represented approximately 8.2% of Trustmark’s total loans but 46.7% of nonperforming assets, 36.4% of total provisioning and 52.5% of net charge-offs at March 31, 2010.

Total nonaccrual loans increased $24.3 million during the first three months of 2010 to $165.5 million, or 2.61% of total loans, due primarily to three residential real estate development credits in Trustmark’s Mississippi and Texas markets, which were impaired and written-down to fair value of the underlying collateral less cost to sell. Other real estate increased $1.1 million at March 31, 2010 compared to December 31, 2009, as continued progress was made in the disposition of foreclosed properties in Trustmark’s Florida market. During the first three months of 2010, there was $420 thousand in other real estate valuation adjustments due to a continual decline in commercial developments of residential real estate values.

Nonperforming Assets
($ in thousands)

	March 31, 2010			December 31, 2009
Nonaccrual loans
Florida	$	79,687		$	74,159
Mississippi (1)		41,795			31,050
Tennessee (2)		12,673			12,749
Texas		31,354			23,204
Total nonaccrual loans		165,509			141,162
Other real estate
Florida		40,145			45,927
Mississippi (1)		23,082			22,373
Tennessee (2)		9,769			10,105
Texas		18,180			11,690
Total other real estate		91,176			90,095
Total nonperforming assets	$	256,685		$	231,257

Nonperforming assets/total loans (including loans held for sale) and ORE		3.99	%		3.48	%

Loans Past Due 90 days or more
Loans held for investments	$	8,411		$	8,901

Serviced GNMA loans eligible for repurchase (no obligation to repurchase)	$	48,571		$	46,661

(1) - Mississippi includes Central and Southern Mississippi Regions
(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions

As reported in the table above, Government National Mortgage Association (GNMA) optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When Trustmark is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans held for sale, regardless of whether Trustmark intends to exercise the buy-back option. T hese loans are reported as held for sale with the offsetting liability being reported as short-term borrowings. At March 31, 2010, Trustmark has not exercised their buy-back option on any delinquent loans serviced for GNMA.

The following table illustrates nonaccrual loans by type of loan for the periods presented:

Nonaccrual Loans by Loan Type
($ in thousands)

	March 31,		December 31,
	2010		2009
Construction, land development and other land loans	$	97,207	$	81,805
Secured by 1-4 family residential properties		34,777		31,464
Secured by nonfarm, nonresidential properties		22,347		18,056
Other loans secured by real estate		1,879		2,097
Commercial and industrial		6,568		6,630
Consumer loans		1,576		973
Other loans		1,155		137
Total nonaccrual loans	$	165,509	$	141,162

The following table illustrates other real estate by type of property for the periods presented:

Other Real Estate by Property Type

($ in thousands)

	March 31,		December 31,
	2010		2009

Construction, land development and other land loans	$	66,680	$	60,276
1-4 family residential properties		11,247		11,001
Nonfarm, nonresidential properties		7,053		7,285
Other real estate loans		6,196		11,533
Total other real estate	$	91,176	$	90,095

Trustmark continued to make significant progress in the resolution of its construction and land development portfolio in Florida. During the last 12 months, this portfolio has been reduced by 33.5% to $183.7 million. At March 31, 2010, Florida non-impaired construction and land development loans totaled $148.8 million with an associated reserve for loan losses of $19.6 million, or 13.2%.

As seen in the table below, at March 31, 2010, approximately $82.9 million in construction, land development and other loans have been classified and reserved for at appropriate levels, including $34.8 million of impaired loans that have been charged down to fair value of the underlying collateral less cost to sell. Management believes that this portfolio is appropriately risk rated and adequately reserved based upon current conditions.

Florida Credit Quality

($ in thousands)

							Classified (3)
	Total Loans		Criticized Loans (1)		Special Mention (2)		Accruing		Nonimpaired Nonaccrual		Impaired Nonaccrual (4)
Construction, land development and other land loans:
Lots	$	57,436	$	23,282	$	1,323	$	8,630	$	9,878	$	3,451
Development		27,381		17,026		—		3,682		1,088		12,256
Unimproved land		71,271		46,649		19,915		12,469		1,513		12,752
1-4 family construction		10,247		8,314		1,487		3,013		442		3,372
Other construction		17,335		10,336		—		1,136		6,184		3,016
Construction, land development and other land loans		183,670		105,607		22,725		28,930		19,105		34,847
Commercial, commercial real estate and consumer		319,786		64,047		19,189		19,123		14,133		11,602

Total Florida loans	$	503,456	$	169,654	$	41,914	$	48,053	$	33,238	$	46,449


Florida Credit Quality (continued)	Total Loans Less Impaired Loans		Loan Loss Reserves		Loan Loss Reserve % of Nonimpaired Loans
Construction, land development and other land loans:
Lots	$	53,985	$	6,631		12.28	%
Development		15,125		1,943		12.85	%
Unimproved land		58,519		7,913		13.52	%
1-4 family construction		6,875		1,029		14.97	%
Other construction		14,319		2,131		14.88	%
Construction, land development and other land loans		148,823		19,647		13.20	%
Commercial, commercial real estate and consumer		308,184		5,529		1.79	%

Total Florida loans	$	457,007	$	25,176		5.51	%

(1)	Criticized loans equal all special mention and classified loans.

(2)	Special mention loans exhibit potential credit weaknesses that, if not resolved, may ultimately result in a more severe classification.

(3)	Classified loans include those loans identified by management as exhibiting well-defined credit weaknesses that may jeopardize repayment in full of the debt.

(4)

All nonaccrual loans over $1 million are individually assessed for impairment. Impaired loans have been determined to be collateral dependent and assessed using a fair value approach. Fair value estimates begin with appraised values, normally from recently received and reviewed appraisals. Appraised values are adjusted down for costs associated with asset disposal. When a loan is deemed to be impaired, the full difference between book value and the most likely estimate of the asset’s net realizable value is charged off.

Net charge-offs for the first three months of 2010 totaled $17.1 million, or 1.08% of average loans, compared to $11.4 million, or 0.66% for the same time period in 2009. This increase can be primarily attributed to a continued decline in commercial developments of residential real estate property values and sales activity. The net charge-offs for Florida and Mississippi shown in the table below exceed their provision for the first quarter of 2010 because a large portion of the current quarter charge-offs had been fully reserved in prior periods. Management continues to monitor the impact of declining real estate values on borrowers and is proactively managing these situations.

Net Charge-Offs

( $ in thousands)


	March 31,
	2010		2009
Florida	$	8,989	$	6,933
Mississippi (1)		6,777		3,455
Tennessee (2)		426		785
Texas		922		257
Total net charge-offs	$	17,114	$	11,430

(1) - Mississippi includes Central and Southern Mississippi Regions
(2) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions

Trustmark’s loan policy dictates the guidelines to be followed in determining when a loan is charged-off. Commercial purpose loans are charged-off when a determination is made that the loan is uncollectible and continuance as a bankable asset is not warranted. Consumer loans secured by commercial developments of residential real estate are generally charged-off or written down when the credit becomes severely delinquent, and the balance exceeds the fair value of the property less costs to sell. Non-real estate consumer purpose loans, including both secured and unsecured, are generally charged-off in full during the month in which the loan becomes 120 days past due. Credit card loans are generally charged-off in full when the loan becomes 180 days past due.

Other Earning Assets

Federal funds sold and securities purchased under reverse repurchase agreements were $11.6 million at March 31, 2010, an increase of $5.2 million when compared with December 31, 2009. Trustmark utilizes these products as offerings for its correspondent banking customers as well as a short-term investment alternative whenever it has excess liquidity.

Deposits and Other Interest-Bearing Liabilities

Trustmark’s deposit base is its primary source of funding and consists of core deposits from the communities served by Trustmark. Deposits include interest-bearing and noninterest-bearing demand accounts, savings, money market, certificates of deposit and individual retirement accounts. Total deposits were $7.147 billion at March 31, 2010, compared with $7.188 billion at December 31, 2009, a decrease of $41.4 million, or 0.6%. This decline in deposits is comprised of a decrease in noninterest-bearing of $174.1 million, which was mostly offset by an increase in interest-bearing deposits of $132.7 million. The decrease in noninterest-bearing deposits can be primarily attributed to normal fluctuations in business Demand Deposit Accounts (DDA) balances. Increases in interest-bearing deposits resulted primarily from anticipated seasonal growth in balances held by public entities.

Trustmark uses short-term borrowings to fund growth of earning assets in excess of deposit growth. Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, short-term FHLB advances, and the treasury tax and loan note option account. Short-term borrowings totaled $704.5 million at March 31, 2010, a decrease of $202.5 million, when compared with $907.0 million at December 31, 2009. This decrease results primarily from declines of $81.3 million in federal funds purchased and securities sold under repurchase agreements and $125.0 million in short-term FHLB advances as funding pressures lessened due to declining earning asset balances and relatively stable deposit balances.

Legal Environment

Off-Balance Sheet Arrangements

Trustmark makes commitments to extend credit and issues standby and commercial letters of credit in the normal course of business in order to fulfill the financing needs of its customers. These loan commitments and letters of credit are off-balance sheet arrangements.

Commitments to extend credit are agreements to lend money to customers pursuant to certain specified conditions. Commitments generally have fixed expiration dates or other termination clauses. Since many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Trustmark applies the same credit policies and standards as it does in the lending process when making these commitments. The collateral obtained is based upon the assessed creditworthiness of the borrower. At both March 31, 2010 and 2009, Trustmark had commitments to extend credit of $1.7 billion.

Standby and commercial letters of credit are conditional commitments issued by Trustmark to ensure the performance of a customer to a first party. When issuing letters of credit, Trustmark uses essentially the same policies regarding credit risk and collateral that are followed in the lending process. At March 31, 2010 and 2009, Trustmark’s maximum exposure to credit loss in the event of nonperformance by the other party for letters of credit was $192.1 million and $174.8 million, respectively. These amounts consist primarily of commitments with maturities of less than three years. Trustmark holds collateral to support certain letters of credit when deemed necessary.

Capital Resources

At March 31, 2010, Trustmark’s total shareholders’ equity was $1.129 billion, an increase of $18.5 million from its level at December 31, 2009. During the first three months of 2010, shareholders’ equity increased primarily as a result of net income of $23.5 million, an increase in accumulated other comprehensive income of $6.1 million. These increases were offset by common stock dividends of $14.8 million. Trustmark utilizes a capital model in order to provide Management with a monthly tool for analyzing changes in its strategic capital ratios. This allows Management to hold sufficient capital to provide for growth opportunities, protect the balance sheet against sudden adverse market conditions while maintaining an attractive return on equity to shareholders.

Common Stock Offering

Repurchase of Preferred Stock

Regulatory Capital

Trustmark and TNB are subject to minimum capital requirements, which are administered by various federal regulatory agencies. These capital requirements, as defined by federal guidelines, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional, discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of both Trustmark and TNB. Trustmark aims to exceed the well-capitalized guidelines for regulatory capital. As of March 31, 2010, Trustmark and TNB have exceeded all of the minimum capital standards for the parent company and its primary banking subsidiary as established by regulatory requirements. In addition, TNB has met applicable regulatory guidelines to be considered well-capitalized at March 31, 2010. To be categorized in this manner, TNB must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the accompanying table. There are no significant conditions or events that have occurred since March 31, 2010, which Management believes have affected TNB’s present classification.

In addition, during 2006, Trustmark enhanced its capital structure with the issuance of trust preferred securities and Subordinated Notes. For regulatory capital purposes, the trust preferred securities qualify as Tier 1 capital while the Subordinated Notes qualify as Tier 2 capital. The addition of these capital instruments provided Trustmark a cost effective manner in which to manage shareholders’ equity and enhance financial flexibility.

Regulatory Capital Table

($ in thousands)

											Minimum Regulatory
	Actual					Minimum Regulatory					Provision to be
	Regulatory Capital					Capital Required					Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At March 31, 2010:
Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,020,382		15.15	%	$	538,967		8.00	%		n/a		n/a
Trustmark National Bank		975,642		14.67	%		531,949		8.00	%	$	664,936		10.00	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	886,171		13.15	%	$	269,483		4.00	%		n/a		n/a
Trustmark National Bank		844,566		12.70	%		265,975		4.00	%	$	398,962		6.00	%

Tier 1 Capital (to Average Assets)
Trustmark Corporation	$	886,171		9.81	%	$	270,868		3.00	%		n/a		n/a
Trustmark National Bank		844,566		9.50	%		266,790		3.00	%	$	444,651		5.00	%

At December 31, 2009:
Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,008,980		14.58	%	$	553,504		8.00	%		n/a		n/a
Trustmark National Bank		967,224		14.16	%		546,344		8.00	%	$	682,930		10.00	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	872,509		12.61	%	$	276,752		4.00	%		n/a		n/a
Trustmark National Bank		834,056		12.21	%		273,172		4.00	%	$	409,758		6.00	%

Tier 1 Capital (to Average Assets)
Trustmark Corporation	$	872,509		9.74	%	$	268,868		3.00	%		n/a		n/a
Trustmark National Bank		834,056		9.45	%		264,817		3.00	%	$	441,361		5.00	%

Dividends on Common Stock

Dividends per common share for the three months ended March 31, 2010 and 2009 were $0.23. Trustmark’s indicated dividend for 2010 is $0.92 per common share, which is the same as dividends per common share in 2009.

Common Stock Repurchase Program

Trustmark did not repurchase any common shares during the first three months of 2010 and currently has no authorization from the Board of Directors to repurchase its common stock. Since 1998, capital management plans adopted by Trustmark repurchased approximately 22.7 million shares for $518.1 million. At the present time, Management is not expected to seek additional authorization from the Board of Directors to purchase additional shares.

Liquidity

Liquidity is the ability to meet asset funding requirements and operational cash outflows in a timely manner, in sufficient amount and without excess cost. Consistent cash flows from operations and adequate capital provide internally generated liquidity. Furthermore, Management maintains funding capacity from a variety of external sources to meet daily funding needs, such as those required to meet deposit withdrawals, loan disbursements and security settlements. Liquidity strategy also includes the use of wholesale funding sources to provide for the seasonal fluctuations of deposit and loan demand and the cyclical fluctuations of the economy that impact the availability of funds. Management keeps excess funding capacity available to meet potential demands associated with adverse circumstances.

The asset side of the balance sheet provides liquidity primarily through maturities and cash flows from loans and securities, as well as the ability to sell certain loans and securities while the liability portion of the balance sheet provides liquidity primarily through noninterest and interest-bearing deposits. Trustmark utilizes Federal funds purchased, brokered deposits, FHLB advances and securities sold under agreements to repurchase to provide additional liquidity. Access to these additional sources represents Trustmark’s incremental borrowing capacity.

Deposit accounts represent Trustmark’s largest funding source. Average deposits totaled to $7.130 billion for the first quarter of 2010 and represented approximately 76.4% of average liabilities and shareholders’ equity when compared to average deposits of $6.932 billion, which represented 74.8% of average liabilities and shareholders’ equity for the fourth quarter of 2009.

Trustmark utilizes a limited amount of brokered deposits to supplement other wholesale funding sources. At March 31, 2010, brokered sweep Money Market Deposit Account (MMDA) deposits totaled $113.9 million compared to $107.7 million at December 31, 2009. At March 31, 2010 and December 31, 2009, Trustmark had no outstanding brokered certificates of deposit.

At March 31, 2010, Trustmark had $386.4 million of upstream Federal funds purchased, compared to $454.0 million at December 31, 2009. Trustmark maintains adequate federal funds lines in excess of the amount utilized to provide sufficient short-term liquidity. Trustmark also maintains a relationship with the FHLB, which provided $75.0 million in advances at March 31, 2010, compared with $200.0 million in advances at December 31, 2009. Under the existing borrowing agreement, Trustmark had sufficient qualifying collateral to increase FHLB advances by $1.819 billion at March 31, 2010.

Additionally, during the first three months of 2010, Trustmark could utilize wholesale funding repurchase agreements as a source of borrowing due to increased levels of unencumbered investment securities. At March 31, 2010, Trustmark had approximately $28.5 million available in repurchase agreement capacity compared to $245.5 million at December 31, 2009. This decrease in capacity was mainly due to the utilization of securities to collateralize approximately $190 million in public deposit increases.

Another borrowing source is the Federal Reserve Discount Window (Discount Window). At March 31, 2010, Trustmark had approximately $868.7 million available in collateral capacity at the Discount Window from pledges of loans and securities, compared with $821.6 million at December 31, 2009.

During 2006, TNB issued $50.0 million aggregate principal amount of Subordinated Notes (the Notes) due December 15, 2016. At March 31, 2010, the carrying amount of the Notes was $49.8 million. The Notes were sold pursuant to the terms of regulations issued by the Office of the Comptroller of the Currency (OCC) and in reliance upon an exemption provided by the Securities Act of 1933, as amended. The Notes are unsecured and subordinate and junior in right of payment to TNB’s obligations to its depositors, its obligations under bankers’ acceptances and letters of credit, its obligations to any Federal Reserve Bank or the FDIC and its obligations to its other creditors, and to any rights acquired by the FDIC as a result of loans made by the FDIC to TNB. The Notes, which are not redeemable prior to maturity, qualify as Tier 2 capital for both TNB and Trustmark. Proceeds from the sale of the Notes were used for general corporate purposes.

Also during 2006, Trustmark completed a private placement of $60.0 million of trust preferred securities through a newly formed Delaware trust affiliate, Trustmark Preferred Capital Trust I, (the Trust). The trust preferred securities mature September 30, 2036 and are redeemable at Trustmark’s option beginning after five years. Under applicable regulatory guidelines, these trust preferred securities qualify as Tier 1 capital. The proceeds from the sale of the trust preferred securities were used by the Trust to purchase $61.856 million in aggregate principal amount of Trustmark’s junior subordinated debentures. The net proceeds to Trustmark from the sale of the junior subordinated debentures to the Trust were used to assist in financing Trustmark’s merger with Republic.

Another funding mechanism set into place in 2006 was Trustmark’s grant of a Class B banking license from the Cayman Islands Monetary Authority. Subsequently, Trustmark established a branch in the Cayman Islands through an agent bank. The branch was established as a mechanism to attract dollar denominated foreign deposits (i.e., Eurodollars) as an additional source of funding. At March 31, 2010, Trustmark had $44.4 million in Eurodollar deposits outstanding.

The Board of Directors currently has the authority to issue up to 20.0 million preferred shares with no par value. The ability to issue preferred shares in the future will provide Trustmark with additional financial and management flexibility for general corporate and acquisition purposes. Trustmark repurchased the 215,000 shares of Senior Preferred Stock from the Treasury in December 2009. Also, in December 2009, Trustmark issued common stock and received net proceeds of $109.3 million to use in the repurchase of the Senior Preferred Stock. At March 31, 2010, Trustmark has no shares of preferred stock issued. For further information regarding Trustmark’s repurchase of Senior Preferred Stock and the issuance of common stock, please refer to the section Capital Resources found elsewhere in this report.

Liquidity position and strategy are reviewed regularly by the Asset/Liability Committee and continuously adjusted in relationship to Trustmark’s overall strategy. Management believes that Trustmark has sufficient liquidity and capital resources to meet presently known cash flow requirements arising from ongoing business transactions.

Asset/Liability Management

Overview

Market risk reflects the potential risk of loss arising from adverse changes in interest rates and market prices. Trustmark has risk management policies to monitor and limit exposure to market risk. Trustmark’s primary market risk is interest rate risk created by core banking activities. Interest rate risk is the potential variability of the income generated by Trustmark’s financial products or services, which results from changes in various market interest rates. Market rate changes may take the form of absolute shifts, variances in the relationships between different rates and changes in the shape or slope of the interest rate term structure.

Management continually develops and applies cost-effective strategies to manage these risks. The Asset/Liability Committee sets the day-to-day operating guidelines, approves strategies affecting net interest income and coordinates activities within policy limits established by the Board of Directors. A key objective of the asset/liability management program is to quantify, monitor and manage interest rate risk and to assist Management in maintaining stability in the net interest margin under varying interest rate environments.

Derivatives

Trustmark uses financial derivatives for management of interest rate risk. The Asset/Liability Committee, in its oversight role for the management of interest rate risk, approves the use of derivatives in balance sheet hedging strategies. The most common derivatives employed by Trustmark are interest rate lock commitments, forward contracts, both futures contracts and options on futures contracts, interest rate swaps, interest rate caps and interest rate floors.

As part of Trustmark’s risk management strategy in the mortgage banking area, various derivative instruments such as interest rate lock commitments and forward sales contracts are utilized. Rate lock commitments are residential mortgage loan commitments with customers, which guarantee a specified interest rate for a specified period of time. Trustmark’s obligations under forward contracts consist of commitments to deliver mortgage loans, originated and/or purchased, in the secondary market at a future date. These derivative instruments are designated as fair value hedges for certain of these transactions that qualify as fair value hedges under FASB ASC Topic 815, “Derivatives and Hedging.” The gross, notional amount of Trustmark’s off-balance sheet obligations under these derivative instruments totaled $245.0 million at March 31, 2010, with a valuation adjustment of positive $483 thousand, compared to $267.0 million, with a valuation adjustment of positive $2.1 million as of December 31, 2009.

Market/Interest Rate Risk Management

The primary purpose in managing interest rate risk is to invest capital effectively and preserve the value created by the core banking business. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.

Financial simulation models are the primary tools used by Trustmark’s Asset/Liability Committee to measure interest rate exposure. Using a wide range of sophisticated simulation techniques provides Management with extensive information on the potential impact to net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Trustmark’s balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of Trustmark’s balance sheet, resulting from both strategic plans and customer behavior. In addition, the model incorporates Management’s assumptions and expectations regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates.

Based on the results of the simulation models using static balances at March 31, 2010, it is estimated that net interest income may decrease 2.8% in a one-year, shocked, up 200 basis point rate shift scenario, compared to a base case, flat rate scenario for the same time period. At March 31, 2009, the results of the simulation models using static balances indicated that net interest income would decrease 0.6% in the same one-year, shocked, up 200 basis point shift scenario. In the event of a 100 basis point decrease in interest rates using static balances at March 31, 2010, it is estimated net interest income may decrease by 1.6% compared to a 4.5% decrease at March 31, 2009. At March 31, 2010 and 2009, the impact of a 200 basis point drop scenario was not calculated due to the historically low interest rate environment.

The table below summarizes the effect various rate shift scenarios would have on net interest income at March 31, 2010 and 2009:

Interest Rate Exposure Analysis

	Estimated Annual % Change
	in Net Interest Income
	3/31/2010			3/31/2009
Change in Interest Rates
+200 basis points		-2.8	%		-0.6	%
+100 basis points		-2.0	%		0.3	%
-100 basis points		-1.6	%		-4.5	%

Management cannot provide any assurance about the actual effect of changes in interest rates on net interest income. The estimates provided do not include the effects of possible strategic changes in the balances of various assets and liabilities throughout 2010 or additional actions Trustmark could undertake in response to changes in interest rates. Management will continue to prudently manage the balance sheet in an effort to control interest rate risk and maintain profitability over the long term.

Another component of interest rate risk management is measuring the economic value-at-risk for a given change in market interest rates. The economic value-at-risk may indicate risks associated with longer-term balance sheet items that may not affect net interest income at risk over shorter time periods. Trustmark also uses computer-modeling techniques to determine the present value of all asset and liability cash flows (both on- and off-balance sheet), adjusted for prepayment expectations, using a market discount rate. The net change in the present value of the asset and liability cash flows in the different market rate environments is the amount of economic value at risk from those rate movements, which is referred to as net portfolio value. As of March 31, 2010, the economic value of equity at risk for an instantaneous up 200 basis point shift in rates produced an increase in net portfolio value of 0.2%, while an instantaneous 100 basis point decrease in interest rates produced a decline in net portfolio value of 4.1%. In comparison, the models indicated a net portfolio value decrease of 6.0% as of March 31, 2009, had interest rates moved up instantaneously 200 basis points, and a decrease of 2.0%, had an instantaneous 100 basis points decrease in interest rates occurred. The following table summarizes the effect that various rate shifts would have on net portfolio value at March 31, 2010 and 2009:

Economic Value - at - Risk

	Estimated % Change
	in Net Portfolio Value
	3/31/2010			3/31/2009
Change in Interest Rates
+200 basis points		0.2	%		-6.0	%
+100 basis points		1.0	%		-0.5	%
-100 basis points		-4.1	%		-2.0	%

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is included in the discussion of Market/Interest Rate Risk Management found in Management’s Discussion and Analysis.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by Trustmark’s Management, with the participation of its Chief Executive Officer and Treasurer and Principal Financial Officer (Principal Financial Officer), of the effectiveness of Trustmark’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and the Principal Financial Officer concluded that Trustmark’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There has been no change in Trustmark’s internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, Trustmark’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

There has been no material change in the risk factors previously disclosed in Trustmark’s Annual Report on Form 10-K for its fiscal year ended December 31, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Trustmark did not repurchase any common shares during the first three months of 2010 and currently has no authorization from the Board of Directors to repurchase its common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

The exhibits listed in the Exhibit Index are filed herewith or are incorporated herein by reference .

EXHIBIT INDEX

31-a	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31-b	Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32-a	Certification by Chief Executive Officer pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32-b	Certification by Principal Financial Officer pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	All other exhibits are omitted, as they are inapplicable or not required by the related instructions.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TRUSTMARK CORPORATION

BY:	/s/ Richard G. Hickson	BY:	/s/ Louis E. Greer
	Richard G. Hickson		Louis E. Greer
	Chairman of the Board, President		Treasurer and
	& Chief Executive Officer		Principal Financial Officer

DATE:	May 7, 2010	DATE:	May 7, 2010

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements Trustmark Corporation and Subsidiaries Consolidated Balance Sheets ($ in Thousands)Item 1. Financial Statements Note 1 Basis Of Financial Statement Presentation and Principles Of Consolidation Note 2 Securities Available For Sale and Held To Maturity Note 3 Loans and Allowance For Loan Losses Note 4 Mortgage Banking Note 5 Other Real Estate Note 6 Deposits Note 7 Defined Benefit and Other Postretirement Benefits Note 8 Stock and Incentive Compensation Plans Note 9 Contingencies Note 10 Earnings Per Share Note 11 Statements Of Cash Flows Note 12 Shareholders Equity Note 13 Other Noninterest Expense Note 14 Fair Value Note 15 Derivative Financial Instruments Note 16 Segment Information Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. (removed and Reserved)Item 5. Other Information Item 6. Exhibits

Exhibits

31-a Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31-b Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32-a Certification by Chief Executive Officer pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32-b Certification by Principal Financial Officer pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

TRMK 10-Q Quarter ended March 31, 2010

Exhibits