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 effect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of Trustmark's borrowers, changes in Trustmark's ability to control expenses, changes in Trustmark's 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 Trustmark's filings with the Securities and Exchange Commission.

Although Management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Trustmark undertakes no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.

BUSINESS

The Corporation
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. TNB represents in excess of 98% of the assets and revenue 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 2,600 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 are as follows:

Commercial Banking - TNB provides a full range of commercial banking services to corporations and other business clients. 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 clients 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 September 30, 2009, TNB's mortgage loan portfolio totaled approximately $850 million, while its portfolio of mortgage loans serviced for others, including, FNMA, FHLMC and GNMA, totaled approximately $5.1 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 clients. 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, insurance, financial and estate planning and retirement plan services. TNB's wealth management division is also served by Trustmark Investment Advisors, Inc. (TIA), an SEC-registered investment adviser, and Trustmark Risk Management, Inc. (TRMI). TIA provides customized investment management services for TNB clients and also serves as investment advisor to The Performance Funds, a proprietary family of mutual funds. At September 30, 2009, assets under management and administration totaled $7.1 billion. TRMI engages in individual insurance product sales as a broker of life and long term care insurance.

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 clients are also provided life and health insurance, and personal line policies. TNB provides these services through The Bottrell Insurance Agency, Inc. (Bottrell), one of the largest agencies in Mississippi, which is based in Jackson, and Fisher-Brown, Incorporated (Fisher-Brown), a leading insurance agency in Northwest Florida.

Other subsidiaries of Trustmark include the following:

Somerville Bank & Trust Company - Somerville Bank & Trust Company (Somerville), headquartered in Somerville, Tennessee, provides banking services in the eastern Memphis MSA through five offices.

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 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

The strength of Trustmark's diverse banking and financial services franchise is reflected in its financial performance for the first nine months of 2009. That performance reflects enhanced capital strength, an improved net interest margin, proactive management of credit risks resulting from the slowdown in residential real estate and disciplined expense management. Management has carefully monitored 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 during 2009, in order to navigate the challenging economic environment.

Consistent profitability, sound balance sheet management and a prudent capital philosophy are of primary importance to Trustmark's continued capital strength. This is reflected by Trustmark's pre-tax, pre-provision earnings, which remain solid through the first nine months of 2009. In addition, Trustmark and TNB have exceeded all guidelines to be considered well-capitalized at September 30, 2009.

Trustmark continues to conduct extensive reviews of the construction and land development portfolio of its Florida Panhandle market and devote significant resources to managing credit risks resulting from the slowdown in residential real estate. Management will continue to monitor Trustmark's loans, including its Florida loan portfolio, in light of developments in the economy and the markets where Trustmark operates. Trustmark's other markets have experienced less of a decline in values and only a marginal increase in default rates to date. The non-Florida markets in which Trustmark operates did not experience the dramatic rise in real estate values prior to the recession as was prevalent in Florida and other sections of the country. As a result, the impact of the recession on property values in Trustmark's other non-Florida markets has been much less severe.

During 2009, Trustmark has not made significant changes to its loan underwriting standards. Trustmark's willingness to make loans to qualified applicants that meet its traditional, prudent lending standards has not changed. However, Trustmark has continued its efforts to reduce exposure to construction, land development and other land loans and indirect automobile financing. As a result, TNB has been more restrictive in granting credit involving certain categories of real estate, particularly in Florida. Furthermore, in the current economic environment, TNB makes fewer exceptions to its loan policy as compared to prior periods.

During 2009, Management continued its practice of maintaining excess funding capacity to provide Trustmark with adequate liquidity for its ongoing operations. In this regard, Trustmark benefits from a strong deposit base, a quality investment portfolio and access to funding from a variety of external funding sources, which has allowed Trustmark to reduce funding costs relative to other interest-bearing sources.

CRITICAL ACCOUNTING POLICIES

Trustmark's consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles 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 nine months of 2009.

FINANCIAL HIGHLIGHTS

Trustmark's net income available to common shareholders totaled $22.4 million in the third quarter of 2009, which represented basic earnings per common share of $0.39. Trustmark's third quarter 2009 net income produced a return on average tangible common equity of 13.06%. During the first nine months of 2009, Trustmark's net income available to common shareholders totaled $59.2 million, which represented basic earnings per common share of $1.03. Trustmark's performance during the first nine months of 2009 resulted in a return on average tangible common equity of 11.89%. Trustmark's Board of Directors declared a quarterly cash dividend of $0.23 per common share. The dividend is payable December 15, 2009, to shareholders of record on December 1, 2009.

Net income available to common shareholders for the nine months ended September 30, 2009, decreased $7.9 million, or 11.8% compared to the same time period in 2008. The decrease was primarily the result of preferred stock dividends and the accretion of preferred stock discount, which reduced net income available to common shareholders by approximately $9.4 million. Excluding preferred stock dividends and the accretion of preferred stock discount, net income increased $1.5 million, or 2.2%, compared to the same time period in 2008. This improvement resulted from an increase in net interest income of $34.2 million offset by a decrease in noninterest income of $11.0 million and an increase in noninterest expense of $20.4 million. The decrease in noninterest income was due largely to the reduction in other, net of $8.5 million, which resulted from gains booked in the first nine months of 2008 related to the sale of MasterCard shares ($5.4 million) as well as the Visa initial public offering ($1.0 million). The growth in noninterest expense primarily resulted from an increase in other expense of $20.9 million, which can be attributed to additional costs related to FDIC deposit insurance assessments ($11.0 million) as well as real estate foreclosures ($7.5 million). For additional information on the changes in noninterest income and noninterest expense, please see accompanying sections included in Results of Operations.

At September 30, 2009, nonperforming assets totaled $210.2 million, an increase of $57.6 million compared to December 31, 2008, and total nonaccrual loans were $138.5 million, representing an increase of $24.5 million relative to December 31, 2008. Total net charge-offs for the three and nine months ended September 30, 2009 were $14.5 million and $51.3 million, respectively, compared to total net charge-offs for the three and nine months ended September 30, 2008 of $10.2 million and $48.7 million, respectively.

Selected Financial Statement Data
($ in thousands, except per share data)

                                               Three Months Ended          Nine Months Ended September
                                                  September 30,                        30,
                                              2009             2008           2009             2008
Consolidated Statements of Income
Total interest income                      $  109,348       $  118,032     $  335,326       $  364,487
Total interest expense                         20,471           38,636         69,409          132,724
Net interest income                            88,877           79,396        265,917          231,763
Provision for loan losses                      15,770           14,473         59,403           59,728
Noninterest income                             44,139           41,950        127,959          138,932
Noninterest expense                            79,234           72,734        232,612          212,174
Income before income taxes                     38,012           34,139        101,861           98,793
Income taxes                                   12,502           10,785         33,291           31,708
Net Income                                     25,510           23,354         68,570           67,085
Preferred stock dividend/discount
accretion                                       3,140                -          9,398                -
Net Income Available to Common
Shareholders                               $   22,370       $   23,354     $   59,172       $   67,085


Common Share Data
Basic earnings per share                   $     0.39       $     0.41     $     1.03       $     1.17
Diluted earnings per share                       0.39             0.41           1.03             1.17
Cash dividends per share                         0.23             0.23           0.69             0.69

Performance Ratios
Return on common equity                          8.78 %           9.81 %         7.91 %           9.52 %
Return on average tangible common equity        13.06 %          15.16 %        11.89 %          14.80 %
Return on equity                                 8.32 %           9.81 %         7.60 %           9.52 %
Return on assets                                 1.07 %           1.02 %         0.95 %           0.99 %

Credit Quality Ratios
Net charge offs/average loans                    0.86 %           0.58 %         1.00 %           0.92 %
Provision for loan losses/average loans          0.93 %           0.83 %         1.16 %           1.13 %
Nonperforming loans/total loans (incl
LHFS)                                            2.09 %           1.53 %         2.09 %           1.53 %
Nonperforming assets/total loans (incl
LHFS) + ORE                                      3.14 %           1.99 %         3.14 %           1.99 %
ALL/total loans (excl LHFS)                      1.61 %           1.35 %         1.61 %           1.35 %

Capital Ratios
Total equity/total assets                       13.04 %          10.44 %
Common equity/total assets                      10.83 %          10.44 %
Tangible equity/tangible assets                 10.04 %           7.22 %
Tangible common equity/tangible assets           7.76 %           7.22 %
Tangible common equity/risk-weighted
assets                                          10.15 %           8.80 %
Tier 1 leverage ratio                           10.70 %           8.11 %
Tier 1 common risk-based capital ratio          10.15 %           8.91 %
Tier 1 risk-based capital ratio                 14.11 %           9.86 %
Total risk-based capital ratio                  16.09 %          11.80 %

Non-GAAP Financial Measures

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

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

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

Reconciliation to GAAP Financial Measures
($ in thousands)                                 Three Months Ended              Nine Months Ended
                                              9/30/2009       9/30/2008       9/30/2009      9/30/2008
TANGIBLE COMMON EQUITY
AVERAGE BALANCES
Total shareholders' equity                   $ 1,216,987     $   946,897     $ 1,205,619     $  941,188
Less: Preferred stock                           (206,308 )             -        (205,865 )            -
Total average common equity                    1,010,679         946,897         999,754        941,188
Less: Goodwill                                  (291,104 )      (291,145 )      (291,104 )     (291,162 )
  Identifiable intangible assets                 (21,430 )       (25,540 )       (22,424 )      (26,608 )
Total average tangible common equity         $   698,145     $   630,212     $   686,226     $  623,418


PERIOD END BALANCES                           9/30/2009       9/30/2008
Total shareholders' equity                   $ 1,221,361     $   948,998
Less: Preferred stock                           (206,461 )             -
Total common equity                            1,014,900         948,998
Less: Goodwill                                  (291,104 )      (291,145 )
  Identifiable intangible assets                 (20,819 )       (24,887 )
Total tangible common equity          (a)    $   702,977     $   632,966

TANGIBLE ASSETS
Total assets                                 $ 9,368,498     $ 9,086,273
Less: Goodwill                                  (291,104 )      (291,145 )
  Identifiable intangible assets                 (20,819 )       (24,887 )
Total tangible assets                 (b)    $ 9,056,575     $ 8,770,241

Risk-weighted assets                  (c)    $ 6,923,907     $ 7,196,685

Reconciliation to GAAP Financial Measures (continued)
($ in thousands)                                           Three Months Ended                Nine Months Ended
                                                       9/30/2009        9/30/2008        9/30/2009        9/30/2008

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income available to common
shareholders                                          $     22,370     $     23,354     $     59,172     $    67,085
Plus:   Intangible amortization net
of tax                                                         619              662            1,855           1,986
Net income adjusted for intangible
amortization                                          $     22,989     $     24,016     $     61,027     $    69,071

Period end common shares outstanding  (d)               57,440,047       57,324,627

TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible common
equity 1                                                     13.06 %          15.16 %          11.89 %         14.80 %
Tangible common equity/tangible
assets                                (a)/(b)                 7.76 %           7.22 %
Tangible common equity/risk-weighted
assets                                (a)/(c)                10.15 %           8.80 %
Tangible common book value            (a)/(d)*1,000   $      12.24     $      11.04

TIER 1 COMMON RISK-BASED CAPITAL
Total shareholders' equity                            $  1,221,361     $    948,998
Eliminate qualifying AOCI                                   (3,072 )         16,331
Qualifying tier 1 capital                                   68,000           68,000
Disallowed goodwill                                       (291,104 )       (291,145 )
Adjustment to goodwill allowed for
deferred taxes                                               8,453                -
Other disallowed intangibles                               (20,819 )        (24,887 )
Disallowed servicing intangible                             (5,604 )         (7,855 )
Total tier 1 capital                                  $    977,215     $    709,442
Less:   Qualifying tier 1 capital                          (68,000 )        (68,000 )
       Preferred stock                                    (206,461 )              -
Total tier 1 common capital           (e)             $    702,754     $    641,442

Tier 1 common risk-based capital
ratio                                 (e)/(c)                10.15 %           8.91 %

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 three and nine month periods ended September 30, 2009 increased $9.7 million, or 11.8%, and $34.5 million, or 14.5%, respectively, when compared with the same time periods in 2008. Trustmark expanded its net interest margin while in a falling rate environment when compared to the previous year. This was accomplished through disciplined deposit pricing afforded to Trustmark due to a strong liquidity position, the purchase of fixed rate securities in 2008 and decreased funding costs. Also, prudent loan pricing, including required minimum loan rates, slowed erosion of loan yields. The combination of these factors resulted in a NIM of 4.28% during the . . .