Good morning, ladies and gentlemen, and welcome to Trustmark Corporation’s First Quarter Earnings Conference Call. At this time, all participants will be in listen-only mode. Following the presentation this morning, there will be a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded. It’s now my pleasure to introduce Joey Rein, Director of Investor Relations at Trustmark.

Good morning and thank you. I would like to remind everyone that a copy of our first quarter earnings release and 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 want 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 and our other filings with the Securities and Exchange Commission. At this time, I will turn the call over to Trustmark President and CEO, Gerry Host.

Thank you, Joey, and good morning, everyone. Thank you for joining us. With me this morning in addition to Joey and available to answer questions after my comments are Louis Greer, our Chief Financial Officer; Barry Harvey, our Chief Credit Officer; Mitch Bleske, our Treasurer; and Art Stevens, President of our Retail Banking Group. Let me take a minute and cover some of the highlights of the first quarter. The completion of the BancTrust merger and our first quarter performance were great way to start the year. Our merger with Mobile-based BancTrust Financial Group was effective on February 15, and they are included in our financial results from this point forward. We are excited to serve our 66,000 new customers in Alabama and the Florida Panhandle. This is, I think, as we have stated before the largest transaction in our history. It’s added loans with fair value of $950 million and $1.7 billion in deposits. We have added 40 offices in Alabama and 9 in the Panhandle of Florida. It is meaningfully accretive to earrings per share and it is an opportunity to provide our full product set to these new markets. We are extremely pleased with the successful operational systems conversion that was completed during the weekend of March 23. This is a direct reflection on the efforts of our dedicated associates both with Trustmark and with BancTrust and I would like to thank them for all the hard work in completing this in a very successful way. Our management team in Alabama has been in place. Our Florida region has seamlessly been integrated into the existing Florida Trustmark structure. In Central Alabama, we have a seasoned Regional President, and we have supplemented that with a proven Trustmark executive. In the Southern Alabama region, we have a management team…

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And the first question comes from Steven Alexopoulos from JPMorgan.

Hey, everyone. This is actually Preeti Dixit on for Steve. I am just going to start with spread revenue, if we back out this $7.4 million in net interest income from BancTrust, I think NII was down just modestly in the quarter. Can you breakout how much accelerated accretion was in the spread revenue and then may be what the outlook is for a good run rate, I think you said about $2 million last quarter, but I am guessing the addition of BancTrust was that higher?

No, it was not for the quarter it was about $1 million of additional accretion just related to the difference in the coupon and the effective rates as well as any recoveries from payoff loans, so that was about $1 million for the quarter.

Okay. And is that a good run-rate from here?

It’s hard to guess what that run rate is, just been on one hand to the cash flows at least to part loan. So, you know I think prior – the last three quarters we averaged somewhere around $2 million to $2.5 million, it just happens to be down this quarter to about $1 million.

Okay, that’s helpful. And then shifting to mortgage credit, can you give us a sense if you think mortgage volumes continued to decline from these levels are you seeing enough of a shift in production away from refi into purchase or maybe more opportunities with BancTrust. And then just to follow-up on that, I think the gain on total margin was pretty steady quarter-over-quarter if we adjust further gain on those genie loan, so if maybe you could comment on why your margin are holding in so well compared to what we’ve seen from peers?

Well I think, one part of it was that we had, we were working loans through the pipeline, while they are in there that added some revenue for the quarter even though overall new production was down. Secondly, as far as your question related to production and what we expect, we would expect to see some continued decline probably not at the same rate we saw in the first quarter. I would think that would be somewhere in the 4% and 5% to 10% range for the remainder of the year. We still do have quite a few opportunities to refinance HARP loans that or loans that would be eligible for HARP refinancing. So, we think that will allow some continued opportunity for us going forward.

Okay, great. Thanks for the color.

Thank you.

Thank you. And the next question comes from Catherine Mealor from KBW.

Thanks guys. Just a quick follow-up on the accretable yield and maybe I am definitely wrong, but if you look at, you said that BancTrust added loans at about 5.8% if you back into what the other acquired loans yield is, look there is a pretty big jump. And then is there anything that’s going on there, I assume it was higher accretable yield that doesn’t seem to be the case?

I would say for the other portfolios that’s where most of that $1 million is coming from Catherine. So, specifically only BancTrust we disclose the affected yield that will change over time as cash flows change. So, we will continue to disclose the benefits of the acquired loans in future periods.

Okay, but you are saying you did not see a large increase in accretable yield this quarter from Heritage or Bay Bank?

That is as I said about $1 million.

Okay, all right. And then I thought your IA amortization also increased this quarter, was that from any change in accounting or just from accelerating that asset just from better credit?

We did adopt the new accounting rules, but we were on the flexibility bench as opposed to the symmetrical. So the new accounting has very little impacts. So what you’re seeing is just normal amortization that I said based on what I’ll say is payoff loans we recognize that IA has set right off immediately. And then as cash flows, as loans pay down we amortize that amortization asset. And I do believe that the IA amortization was about $1.4 million for the quarter whereas it was about $743 prior. So it ticked up a little bit but related to loan pay downs as well as payoff.

And do you expect for that level to remain at that 1.4 million level going forward as you continue to work through that asset?

Would you look at page 13 of our stat sheet, you will see the five quarters related missing where from almost 0 to $2 million. So it fluctuates as we received that cash on those acquired loans. So that the guidance I can give you would expire the previous quarters and anticipate what that could be. So it could be fluctuated over time.

Okay, great thank you very much

Thank you, Catherine.

Thank you. (Operator Instructions) And our next question comes from Kevin Fitzsimmons from Sandler O'Neill.

Good morning, guys.

Good morning, Kevin.

Maybe there has been a few questions about spread revenues but maybe just taking a step back more broadly looking at it before this quarter, before the deal, I think we had four consecutive quarters of NII contracting linked quarter and I know there is a lot of moving parts there, the margin has been compressing, we’ve had some deliberate run off in the loan book, we’ve had some non-deliberate run off just from pay downs. So after we get to the noise, the link quarter noise with the deal fully coming in how – what is your outlook for NII, do you think you can keep it stable, is there a scenario where you can grow it or do we kind of return to more of a gradual decline and so we get a more pronounced pick up in loan growth or loan demand and I know a lot of that has to do with the time left to run off that you run it off? Thanks.

Thanks Kevin. And you are right there are an awful lot of assumptions in there. I want to ask Mitch if he will address that.

Good morning Kevin.

Good morning.

As Gerry noted in his first comments we try to give that number little to you to take the noise at least from a net interest margin percentage when we take out all the impact of BancTrust we really saw a pretty mild decline in interest margin, actually little bit less than what we anticipated. We held in pretty well in some of our loan yield little bit better and we continue to see some modest declines on the deposit cost. That set aside obviously would we continue to see margin compression and probably we’ll see a little but about the same amount this quarter than last quarter with probably a slowdown of that pace of decline as we get into the second half of the year. From a net interest income level which is probably more important that is going to be may be a small decline as we go through each quarter. Our expectation on a non-MTE basis will be about the mid 90s including all of BancTrust is where we expect to be.

Without any recovery associated with large payouts.

Exactly.

It’s hard, we can’t predict that.

So within – if I look loans about just the loans of non-acquired loans so just legacy loans, the run off that’s been happening in resi mortgage is that something that’s just going to continue or do we hit a certain point where that’s played out?

Well I’ll answer that, this is Gerry. Kevin at these levels roughly in the 270, 280 range that we’d be putting on 10 to 15 year product we just feel as though we’ll continue the strategy of selling everything and allowing run off to take place so, yes, we’ll see some continued run off. But we expect that will slow as we get through a lot of these refis. Our efforts right now are concentrated primarily on various types of business loans C&I. We’re seeing increased activity as we talked about in the construction and development loans in both Texas and in some cases in Memphis, we would anticipate some good loan growth in the Alabama market. Now, that we have gotten the conversion behind us. So, our focus is going to be more in the business side. We don’t anticipate with these rates below 3% on the 10, 15-year product that we will begin adding them back to the 1 to 4 portfolio.

Okay, okay understood. And just one credit-related question, I saw non-accrual loans, I know, I heard that the improvement in classifieds, but non-accruals actually ticked up slightly. Is there – is that just reaching a point of stabilizing or just wondering what’s happening there?

Hi, Kevin this is Barry. I think it’s really just more kind of a stabilizing on a temporary basis. I think we will continue our downward trend over time. I think in this particular quarter, we had really three credits that were have been credits on the books for a lengthy period of time that have continued to deteriorate that we have gone ahead and moved them on to the non-accrual and in which case from a reserving standpoint as you can tell from our negative to remain our reserve at a little to no impact, because we had a property reserve just getting to the point where they needed to be moved to non-accrual and we did so. But otherwise, it’s just a lack of other activities as far as non-accruals coming out. It’s definitely not an increase of additional inflows of non-accruals. It’s just really the lack of activity.

Okay, thanks guys.

Thanks, Kevin.

Thank you. (Operator Instructions) And our next question comes from Michael Rose with Raymond James.

Hey, good morning guys. How are you?

Good morning, Michael.

Just a question on how aggressive you expect to be on OREO disposition going forward obviously with what was added this quarter and given the kind of stabilization improvement in real estate values and how does that translate into your expectation for other real estate expense going forward? Thanks.

Well, I’ll let Barry comment, but from a broad standpoint, our approach to ORE has been to look at each piece of property individually, evaluate what our options are relative to that, and move it out rather than utilize a bulk sale method. And that’s we feel has proven to be a very good process. And I’ll let Barry since he is overseeing the process for BancTrust comment on that.

Okay. And Michael, during the quarter, we actually sold about $8.1 million, $8.2 million worth of ORE. The impact of that was a negative $15,000. So, there was – we sold it exactly before the end of March. So, we feel good about that aspect of it. As it relates to ORE, of course, as you can see it went up $40 million, $41 million increase came from BancTrust. So, really, we are basically flat on the quarter. When you look at BancTrust and their ORE from the initial reporting back in 03/31/12, the ORE had been written down 53% in that portfolio, from when it actually entered ORE, it’s been written down 61%. So, we feel very good about the March we have there. We have gone through every single piece of ORE they have. We are actively marketing it. We feel I can get it priced at the right place. We’ve got a list with right agents. And we are going to be aggressive in terms of moving out the ORE. I think our mark gives us that opportunity, and we feel very comfortable that in aggregate, we are going to be in good shape as we are able to move out the ORE in terms of where we’ve got it marked.

Okay, that’s really helpful. And then just moving back to M&A from here, obviously BancTrust was a relatively large deal. How should we think about future M&A and what it means for Trustmark and how soon do you think you could potentially be back in the market? Thanks.

Well, as far as where we think going forward we are constantly looking for opportunities, primarily in the Southeast. And we are looking in the size range of anywhere from $300 million to $3 billion in size. Obviously with our capital levels after this acquisition dropping to $820 million, which is we believe a good position to be in. We’ll have to reevaluate size of forward opportunities. And as far as timing we have completed, as you noted we’ve completed the BancTrust acquisition. Our focus right now is looking internally on ensuring that we can get the most out of this acquisition, while we focus on some restructuring in Houston around business lines as well as in Memphis. As we look at internal efficiencies, we digest the changes of a new general ledger system and HR system, so we step through all of those things that we completed this last year and the first part of this year. I think it gives us a great platform by which we can focus on some organic growth, but we are always looking for the next opportunity available.

Great, thanks for taking my questions.

Thank you.

Thank you. And the next question comes from Jennifer Demba from SunTrust Robinson Humphrey.

Good morning, I jumped on late, so if you covered this I apologize. Your loan losses have obviously been improving through the last few quarters, I am wondering if you are expecting them to be very, very modest for the next few and therefore provisioning being close to zero on one of the other sides?

Jennifer, this is Barry. Let me just kind of step you through how we ended up with the negative $3 million for this quarter and basically the bottom line of it was on the reserve – we were lease reserves of about $2.7 million that related to existing or new impaired loans. And then we had gross charge offs which were about $4.5 million less than we averaged during 2012 for a quarter. Then we had recoveries about $1 million greater than we’ve averaged during each quarter in 2012. And then we didn’t have any additional need for reserving for existing impaired loans looking forward over the next four quarters. All those four things contributed to a $3 million negative provision. With that in mind, with lots of things as we continue to work through this stuff very aggressively both with BancTrust as well as now on BancTrust that we would – that our provisioning would continue to be well below last year and that’s really kind of how we got there today for this quarter. We hope its going to be indicative of how things go going forward. But I think all we know is that we are going to continue to put forth the same effort as we have in terms of working out the problems, resolving those to the best benefit of the bank and then same will be true with ORE or with problem loans.

Okay. Thank you.

Thank you, Jennifer.

Thank you. And then the next question comes from Peyton Green with Sterne Agee.

Yes, good morning. I was wondering if you could talk a little bit about maybe what the expectation is in terms of run off from BancTrust, certainly you get a lot of liquidity day one with it, but in a loan portfolio of about $950 million that’s been marked but not all their customers are going to fit the credit profile of Trustmark. I know in past acquisitions you’ve had to some extent some run off before you can grow that again I mean what’s the realistic expectation of how that might look given where we are today?

Very good question Peyton and something that we can’t answer completely accurately, but our best guess is this, as we look at this first 45 days we have actually seen new growth in that market gross growth of around $20 million which has offset some of the runoff that we have experienced so far. So, there was some pent up demand out there that we’ve been able to address and it’s been a positively think there will even more of that as things begin to settle down. We would hope that if we could keep their portfolio level throughout the year that gives us a chance to sort through things and the new growth opportunities will offset some of that as you say that doesn’t quite work under our credit standards. And in the meantime as Barry has talked about we’re going to focus on some of the marked assets that we have acquired and see how we can improve on those.

Okay and then just in terms of the overall footprint I mean some of the markets are markets they have some pretty good loan growth potential over time, but some are not and I am just wondering if there is any thoughts to rationalizing what they have and really getting it down to what exactly you want or will you take it for what it is as you try to manage this as best you can.

I think it’s a little bit early but if you look at what we’ve done with our own franchise we obviously have some low growth markets within our existing franchise. What we’ve been able to do though is to look very closely at the profitabilities of those low growth markets and improve on them and we would anticipate taking a very similar approach with what we’ve acquired in Alabama with BancTrust.

Okay. And you think from a competitive prospective I mean that you can copy what you’ve done in Mississippi and Alabama?

Well the markets are similar and I’ll let Art Stevens answer that. Art is, heads up our retail area and Art is effectively, well he is actually from Alabama but he has actually been spending an awful lot of time in those markets and I think he can comment more accurately.

Thanks Gerry. The only thing I would add with Gerry just said is that, yes I do think that the markets we’re in, the lower growth markets that we’re in Alabama are very similar to the lower growth markets that we’re in Mississippi and one distinction that I would point out is most of those markets enjoy a pretty good market share. In Mississippi what we’ve been able to do is cross sell that client base with other products and services from our organization that lots of smaller banks don’t necessarily offer in those markets and in turn be able to get a little more revenue out of those markets. So I think that would be our strategy going forward with the low growth markets in Alabama.

Okay great thank you.

Thank you, Peyton.

Thank you. And the next question comes from Blair Brantley with BB&T.

Good morning Blair. Blair Brantley - BB&T: Good morning everyone. A couple of just kind of housekeeping questions. One, tax rate going forward should we expect a similar see this quarter or little bit kind of bumped up versus last quarter?

Well, Blair this is Louis. I think we can see a fairly constant rate throughout the year somewhere around that 27% little under, little over. Blair Brantley - BB&T: Okay. Regarding mortgage how much business does HARP account for?

Blair, I don’t know specifically the answer, I know that we’re about 65% refi total this last quarter and I’m sorry, I don’t know the specific number on what HARP accounts for. Blair Brantley - BB&T: Oka,y I was just curious given the extension that they had on. And then just kind of a broader, kind of broader question, obviously you guys are above that 10 billion asset threshold. Is the goal just to continue driving higher and higher given some of the extra cost that you had to deal with and with the Durban impact and things like that is there a target number that you’re trying to get to in your head, that’s kind of, one is kind of a breakeven one is kind of an optimal number or you are just kind of just taking at one step at a time?

As far as asset growth, right.

I think that we will take it as it comes. We’re certainly focused on changing the mix and as the opportunities on the loan side presents itself and that’s really, we’re going to take advantage of those. We, right now is in an environment which we were out competing for a lot of the same loans right now and obviously it’s very competitive. Blair Brantley - BB&T: Okay thank you very much. I appreciate it.

Thank you. The next question is a follow-up from Peyton Green with Sterne Agee.

Yes sure. This is maybe a follow-up on the idea of M&A going forward. But I mean just looking at the disclosure on the BancTrust deal, I mean you bought that assets at about 31 million and I guess the goodwill created was about 75 million. I mean is that for a deal like this, is that the right kind of magnitude to think about in terms of goodwill or intangible book dilution for a deal this size going forward or I meant Trustmark historically has been really good about compounding tangible book and this represents a bit of step back and I was just wondering if you could comment a little bit on that?

Well I think Peyton that this was a unique situation. As you know BancTrust had worked to recapitalize itself it didn’t work out. We have been talking with the bank and as a result we have the opportunity to acquire it knowing that it had a loan portfolio that had a lot of work to be done in it. And so we think there is some real opportunity there, would you say that this was the norm for what we do? No, but it was a very unique situation. And we think something that we can create a lot of benefit to the shareholders both from the standpoint of working through the problem loans and the opportunity to grow in this Alabama market.

Okay, great. Thank you.

Thank you.

Thank you. And as there are no more questions at the present time, let me turn the call back over to Gerry Host for any closing remarks.

Thank you so much. I would like to thank everyone for joining us on the call and your interest in Trustmark and we look forward to talking with you again at the end of the second quarter. Have a great day.

Thank you. That concludes today’s teleconference. You may now disconnect your phone lines. Thank you for participating and have a nice day.