Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce Joey Rein, Director of Investor Relations at Trustmark.

Good morning and thank you. I'd like to remind everyone that a copy of our third quarter earnings release as well as supporting financial information is available on the Investor Relations section of our website at trustmark.com. During the course of our call this morning, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We'd like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release as well as in our other filings with the Securities and Exchange Commission. At this time, I'd like to introduce Jerry Host, President and CEO of Trustmark.

Thank you, Joey, and good morning, everyone. Also joining us this morning and available to answer questions after the presentation is Louis Greer, our Chief Financial Officer; Barry Harvey, our Chief Credit Officer; and Mitch Bleske, our Treasurer. First of all, let me cover a couple of highlights for the third quarter of 2012. There is not a lot of noise or non-recurring events to explain, so I think our numbers are fairly straightforward. The performance in the third quarter was very solid with total revenue exceeding $130 million. We experienced strong revenue performance across the board, particularly in our Mortgage Banking and Insurance businesses. Our credit quality continued to improve significantly during the quarter. Our net income available to common shareholders was just shy of $30 million. Our diluted earnings per share was $0.46. A very strong return on assets at 1.21% and our return on average tangible common equity was 12.61%. Yesterday at our regular board meeting, our Board declared a $0.23 dividend payable, it's a cash dividend and it's payable on December 15. Let's look, if we could, in just a little bit more detail. First of all, an update on the balance sheet. Total loans during the period declined at $135 million, $126 million of that was planned runoff. Otherwise, we'd say that loans were basically flat for the quarter. We're encouraged by growth in the C&I portfolio including Houston, Memphis, and across the Mississippi market. We remain very active in calling on customers and prospects and continue to maintain our credit and pricing disciplines in what we have seen to be a very competitive marketplace throughout our footprint. So far, the fourth quarter we're experiencing good activity as loans booked in prior quarters are now beginning to fund. Let's take a look -- I had…

Consistent.

Consistent, excuse me. What did I say?

Inconsistent.

Oh, I'm sorry. Our findings are consistent, definitely. Thank you. We're very pleased with the progress made thus far to combine our organizations and believe that this transaction is a great opportunity for Trustmark. As a consequence of adjusting our transaction timeline, we now anticipate that Trustmark will be under $10 billion in assets at December 31, which would postpone the affect of implementation of the Durbin Amendment until July 1, 2014. We view that as real a positive. In closing, we're pleased with our financial performance in the third quarter. We continue to be cautiously optimistic about loan growth opportunities going forward. We maintained a solid balance sheet and have the benefit of a strong, diversified revenue base. We are well positioned to serve our customers and gain new ones as the economy and demand for credit improves. I would be happy at this time to take any questions that you might have.

[Operator Instructions] And our first question is from Kevin Fitzsimmons of Sandler O'Neill. _

I appreciate the outlook you've given on the margin. So from what I heard, it sounds like you expect a similar case of compression in the fourth quarter. And I think what you guys have said in recent quarters is you are targeting more the dollars of net interest income as opposed to the percentage margin. So with that being said, a certain amount of loans are still running off. We are hearing from a lot of banks about the pace of loan growth slowing and the margins coming in. What's your outlook for those dollars of net interest income? Is it achievable to in the near-term to actually grow NII or is that going to be a challenge over the next few quarters? Thanks.

I think it will be a challenge and I'll ask Mitch if he will add some color. But the reality is when the Fed implemented QE3, it had a direct impact on that area of the curve and the specific products that most banks use in their investment portfolio. So, obviously, the lack of loan growth is -- will have to be translated into the investment portfolio. And as we made those projections earlier in the year was without the benefit of QE3. So, obviously it's going to be a challenge to hit that absolute dollar amount. But I think the good news is that we have worked to position the bank through the decrease and the indirect portfolio of the runoff from a peak in 2008 of about $1.3 billion in construction and land development to now about $480 million. We positioned ourselves as we see these opportunities arise, we can take advantage of them and we have the capacity. So, Mitch, any additional color you would like to add to the portfolio -- investment portfolio?

I can add a little bit more, Kevin. As we communicated before, you're right, we probably will continue to utilize the investment portfolio to maintain some adequate level of earning assets [ph]. But as you all are aware, the ability to earn the similar yield on those assets to our loan book is just not there. We're approximately 28% of assets in our investment portfolio, we do however see the mortgage portfolio that fits in your product that were less [ph] roll off really be a surrogate bond portfolio for us. And so as that continues to runoff, we're not really taking any undue interest rate risk by accumulating some high investment portfolio assets to replace that. So I would expect to see some of that increase. The challenge there though is trying to maintain the same level of yield without taking undue interest rate risks or credit risk [indiscernible] position, I do not feel that's prudent for us at this point in cycle. _

Okay, great. Can you also just -- I know you mentioned a couple of moving parts within expenses. If we look at your core, non-credit expenses, I think they were about $81.7 million for the quarter. Is that a decent run rate to think about going forward when we look at some moving parts going into the fourth quarter?

Yes, Kevin, I think that $81.5 million number, we've got a little bit of some expenses related to this acquisition here and there and not a lot. So I'd say $81.5 million to somewhere right in there is about the right run rate versus expenses. And that's excluding ORE expenses.

And our next question is from Michael Rose of Raymond James. Okay, we'll move onto the next question, which is from David Bishop of Stifel, Nicolaus.

Hey, I hopped on late on the call, so I apologize if you did cover this. But in terms of the margin outlook, following up on the question before, obviously, you've got the BankTrust acquisition coming on here. And I know it's early in the accounting process, but any sense in terms of offset would impact the accretable yield, accretion you're going to have there in terms of bolstering the margin?

Jerry, I don't have that number with me right now, but certainly I think we disclosed in one of earliers that we expected their margin to be somewhere in round of $370 million range based on the acquired assets at fair value.

Got you. Then in terms of -- just overall in terms of the competitive environment as it relates to loan pricing, just curious in terms of what you're seeing out there in terms -- across the various markets?

I would say that it's fairly consistent across all markets. Florida, Mississippi, Tennessee and Texas that competition for high quality loans has hit 2 fronts: one, pricing; the other, structure. We've held very firm to our disciplines relative to structure. We have, where the relationship warrants, have worked to maintain the customer by adjusting pricing. So a very competitive environment, the fact that despite the planned runoff in the 1 to 4 and the commercial -- and excuse me, in the indirect portfolio that we've been able to hold loans flat. We've had a number of large real estate transactions that have been in a mini-perm state that have paid out and gone to long-term financing in this low interest rate environment, especially since there are some larger insurance carriers that have been putting on those term loans again. So, we feel we've could have done a really good job and just maintaining this level. And as we mentioned earlier, we really have adjusted our mix to allow for increased capacity as the market begins to recover.

[Operator Instructions] And Michael Rose from Raymond James has re-entered the queue.

Hey, just wanted to get a little sense on the C&I loan growth this quarter. We've seen from a lot of other banks a little bit of a slowdown. And I just wanted to see if, from first to second is kind of flattish and then from second to third, you get a nice ramp up in growth. Was that just a timing issue or are you not seeing the reticence that some other banks are seeing in light of fiscal cliff and upcoming election, et cetera?

Good question. We continue to see healthy activity in the pipeline that obviously isn't what it was 3, 4, 5 years ago. But there are certain businesses, for instance, auto-related, ship building type businesses, energy support type businesses that we've seen good activity in, and we've actually seen somewhat of a rebound in the Texas market in the construction and building business. So we're -- as I mentioned earlier, we're very cautiously optimistic that this will continue, but very aware of where we are so close to the election and the fiscal cliff issues that had to be dealt with, and that is one of the main reasons we held so strong to our credit quality disciplines.

[Operator Instructions] And our next question is from Brian Klock of Keefe, Bruyette & Woods.

Jerry, maybe you can, I guess, talk about the mortgage pipeline. You had a good quarter out of the mortgage banking. So maybe, I guess, what are your expectation I guess fourth and first quarter as far as production compared to where you were in the third?

Well, it's purely a function, Brian, of maintaining a low interest rate environment. This primary spread, because that drives our ability to produce the secondary marketing gains. The capacity is there in terms of people and process. And I think the Mortgage Bankers Association has projected a downturn of about 20% to 25% next year. We're still seeing very strong demand. The other thing I would tell you is that we feel like, because of the strength of our mortgage operation that includes the retail production, the ability to price and sell in the secondary market and the servicing part of it, that once we close the BankTrust transaction there is going to be significant opportunity given the fact that they have 50 locations, a strong referral base. So again, a lot of it is dependent on what happens with interest rates. But with the Fed maintaining an influence there and buying the product, we would anticipate that we would continue to see success in that particular business unit.

All right. And maybe a follow-up question for Louis. On the accretable yield, it seems like the trend has been that it's been increasing in the past few quarters. One, is there any accelerated accretable yield impact in that? And I guess 2, with Jerry's guidance about maybe continued margin compressor at the same pace for this quarter should we -- what kind of accretable yield are you expecting to be in the next quarter, I guess relative to that guidance?

Well, Brian, as you know, as you re-estimate cash flow you reset the effective yield every time you do that, and as a result this last quarter we had about a 2.8% accretable up from about 2.1% in the second quarter. I would -- I can't predict it because we -- every time we re-estimate cash flow, there is a lot of moving parts in there. But I'd say it's somewhere between 2.1% and 2.7% on a quarterly basis I'd expect in the fourth quarter.

Okay. And I guess, so Jerry, there was 9 basis points of NIM compression just on a reported basis, so that's the kind of pressure we should expect in the next couple of quarters?

I think the trend is maybe what you should expect. I think earlier in the year, Brian, we had said that we felt like by year-end we'd be around 4% net interest margin. So, somewhere in that range is what we're thinking. We dropped 11 basis points from last quarter. So, we're somewhere in that -- excuse me -- 9 basis points from last quarter. So, we think somewhere within that range.

This concludes our question-and-answer session. I'd like to turn the conference back over to Jerry Host for any closing remarks.

Thank you very much, operator, and thank you all for joining the conference call this morning. We look forward to covering our fourth quarter and year-end results with you in January at that conference call. Thank you so much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.