Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's second quarter earnings conference call. At this time, all participants are in listen-only mode. (Operator Instructions) Following the presentation this morning, there will be a question-and-answer session. (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. Please go ahead.

Good morning and thank you. I would like to remind everyone that a copy of our second 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, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We would 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 and our other filings with the Securities and Exchange Commission. At this time, I would like to introduce Gerry Host, President and CEO of Trustmark.

Thank you, Joey, and good morning everyone, thanks for joining us. Also with this morning are Louis Greer, our CFO, Barry Harvey our Chief Credit Officer, Breck Tyler, President of our Mortgage Company, and Buddy Wood our Chief Risk Officer. We continue to build momentum and experienced revenue growth in excess of 7% during the second quarter we recorded solid financial results across our business lines and various geographic markets. Let me cover with you some highlights of our second quarter of 2013. Highlights for the second quarter included net income of $31.1 million or $0.46 per share which produced a return on average tangible common equity of 14.09% and a return on average asset of 1.06%. As you may recall we completed our merger with BancTrust in February, and in March completed the operational conversion the second quarter was the first full quarter that included the financial results of the merger and I'm pleased to report net income attributable to BancTrust totaled $6.1 million in the second quarter which included $2 million after tax from recoveries on payoffs on acquired loans. Also our Board declared a quarterly cash dividend of $0.23 per share payable September 15 to shareholders of record on September 1. Let's review our second quarter accomplishments in more detail. First the balance sheet, average earning assets increased roughly $840 million in the second quarter reflecting the first full quarter following the BancTrust merger. Average total loans increased over $400 million while average investment securities increased more than $430 million. Average deposits increased approximately $940 million from the prior quarter. Loans held for investments, our legacy loan portfolio, totaled $5.6 billion at June 30, an increase of $46 million from the prior quarter. Growth was broad-based by type as well as by geography. Construction lending expanded $34…

We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Kevin Fitzsimmons with Sandler O'Neill. Please go ahead.

I appreciate the outlook on the core margin. Can you give us some help in how to look at or how you are looking at the reported margin from here, should we just be thinking about this kind of pace accretion income as declining overtime and take the reported margin down by similar or greater amount, if you can just give us your best sense on that? Thanks.

Kevin, what I would tell you is that we would anticipate the add-back from the acquired loans to continue for at least a couple of quarters. Although, that as you know, it's very unpredictable. But there certainly are loans that we are working on well in process of moving through either the [code] system or working with customers that we believe will continue to add some value. As far as the margin relative to our core loan portfolio and our investment portfolio, we feel as though as we just gave guidance that we'll take some continued tightening primarily due to a very competitive loan environment and obviously, a repricing of asset run-off roughly $600 million a year, a pace of $600 million a year into lower yielding securities. But we do believe that the decline we've seen in the last two quarters of 11 basis points each in that core margin has slowed and will continue to slow and flattened.

One quick follow-up, just in terms of the loan growth, when you mentioned the decline in C&I, you mentioned how growth in Alabama is getting offset elsewhere, can you just give us a sense on why we are seeing negative growth elsewhere, is that a matter of pay-downs, other people are taking loans from you or is that something that's deliberate that you are pulling back? Thanks.

It actually is primarily pay-downs on lines. So loans are not going away but we saw in the second quarter about six specific companies that had significant pay-downs relative to the C&I portfolio. So, again as those companies utilize those loans, we feel like we will see that volume come back. Pipeline for C&I looks good but it's probably one of the most competitive categories we are seeing out there. So, we are maintaining relationships, ensuring that we keep those loans, certain transactions, we are winning some and we are losing some. The public market, it's always the sixth. We competed on last week and we won four of the six. The ones we didn't lose were rates that we just didn't win. So, very competitive market, we are in the middle of it. We did experience pay-downs primarily due to people reducing their line balances and we would expect to see those utilized in the future.

Our next question comes from Catherine Mealor with KBW. Please go ahead.

On the provision, how should we think about provision going forward and how much lower you might be comfortable taking the reserve to one ratio? Can we see another couple of quarters of negative provision or do you think we are maybe path that we will just kind of see flat or maybe even zero provisioning to may be very modest provisioning as we move forward?

I'll ask Barry Harvey to respond to that question.

Catherine, I would think as we move into the second half of the year we may see some continuation of negative provisioning. What's driving the provisioning or the negative provisioning is a result of our -- when you look our quantitative part of our loan loss reserve, we've got a 12 quarter rolling average of historical losses. As you can look back and see the losses, the quarterly losses that are rolling out back from '10 are going to be fairly high in terms of our loss experience versus what we are experiencing today. So as we roll on a quarter with leverage and losses, we roll off older quarters with much, much higher losses, then there will be a natural progression for the reserves to move downward, just based upon the way the model has been. So from that perspective I would anticipate making some negative provisioning over the next few quarters and then maybe some flattening out and just kind of depends on what the economy does after that.

Our next question comes from Steven Alexopoulos with JPMorgan.

This is actually Preeti Dixit on for Steve. Just wanted to ask you the TC ratio sitting around 8%, do you feel like you have capacity to do another deal here or will it be more of these one-off branch deals, maybe some color on what the opportunities, that looks like would be helpful?

Thank you. We do think that, well we know that our focus right now is on expanding the opportunities afforded in Alabama because of the $2 billion acquisition there. We continue as most other banks in our acquisition status. We continue to look at opportunities out there. It would depend on the size of the transaction as to whether or not we felt it, so we would have adequate capital. To do transaction that we have done in the past, in the $500 million range, we think we will be building capital, and it would be sufficient to handle those. Should we see something larger? We have to look at our options that would be available to us.

Okay, that's really helpful. And then could you give us some more color on the higher mortgage production this quarter, maybe how much is coming from refi versus purchase and also your outlook on volumes and the gain on sale margin, it would be helpful? I think your margin was about 180 basis points this quarter.

Sure, Breck Tyler will answer that.

This is Breck. As you indicated our first quarter volume was $392 million, that's about 66% refi. In the second quarter, the $424 million was 54% refi. So we're very encouraged by the purchase activity. About 55% of our monthly volume is retail internally generated. That gives us opportunities as rates move higher to spin a little bit more emphasis on the REIT that the third-party side to make up that volume, in fact if even rates go up and the volumes go down overall. So again as Gerry indicated, we're very encouraged in terms of the BancTrust opportunities. We will expand the Alabama footprint and some very significant markets backfilling the Florida markets that we have been in previously. Over the last five years or so, we've kind of been in a holding pattern in the Memphis market just due to the challenges there of housing and now we're aggressively expanding our origination platform. We see continued Houston opportunities to expand our retail production. And as Gerry indicated, we are seeing market share growth in our legacy markets, love it due to the market share we have in the banking side significant servicing portfolio to leverage also a pretty strong referral process. So yes, as Gerry indicated gain on sale margins do decrease as rates move higher and refis go lower and those are challenges throughout the industry, but we are encouraged by the opportunities that Gerry indicated and I have alluded to.

That's helpful. Is there a kind of a long-term gain on sale margin we should think about for you guys?

We're really not sure what the new norm is going to be with the changes in the marketplace and the different market players that are there. We feel like the new norm will be higher than what we've experienced over the last 15 years, but we're just not certain, but we probably continue to see some decrease in gain on sale margins from here as rates go up and refis decrease and competition continues to decide.

We'll move on to our next question now which is from [David Bishop]. Please go ahead.

Turning back to the mortgage side, I mean, obviously, non put volume production right now, are you going to close at a point or does it become a point here pretty soon or you would start to think about put volume net production?

Great question, thank you and yes. We are, we came a little bit lately about booking a 15-year production once rates dropped below 3%. Now that we're back above those levels, we believe that this production coming out of mortgage company present some opportunity, put some of these products back on the balance sheet. We're feeling you compare this even though we've had very, very high quality mortgage loan portfolio. When you compare the changes that had taken place in the industry over the last couple of years that we're booking much higher quality paper and now that the yields are backup again, it does provide us an opportunity to put some of this back on the balance sheet.

Got it. And then I think in the earnings preamble you talked about growth in the pipeline in terms of multi-family and commercial real estate, which markets were those again and maybe some color on those eligible markets in terms of those opportunities?

Well, we're actually seeing growth in the Texas market and the Alabama market and Tennessee would rank third and then Alabama next we're actually -- of course we're early into that market. We are working with our new group of lending offices over there. We have a number of senior credit officers that have gone into that market as well as a few leaders to work with our new Alabama associates and we are starting to see deals that they may not have been able to look at in the past available to us, they have just not yet come to fruition. The other thing I would say is that we talked two quarters ago about feeling good about some of the construction projects that we're involved in and that had come through the pipeline had booked. We are not really seeing the benefit of that because our programs required it as most banks said that the lenders utilize their cash in the projects first before they start borrowing down [on their lines]. And as the market is tightened, we have also seen the requirement at least from our perspective for a high percentage of cash into the transactions that we are doing and the effect is then to delay when these loans draw down. And I think during the third and fourth quarter of this year those projects are at a point where we will start to see increased utilization on those lines. Barry, are there any other comments you think should be added?

No, other than the fact Gerry that I think when we talk about competition and how competitive is on the C&I side and it is very competitive from CRE side as well, but there maybe one or two less players just because there are several banks. We still have quite a bit of CRE that they're trying to work down from to the levels they currently are. So it does present an opportunity for us to be in there among a few less banks from deal to deal looking at it and we have focused on a very, very strong developers who are as we said earlier putting in many cases 30%, 35% to 40% of their own money into the deal before we get opportunity to fund. So it has delayed our funding which will eventually occur and will come quicker when it does, but it has put us probably six months behind when they would normally begin to fund on those projects we have on the books.

Yeah, the only other thing I'm going to add Dave is that we have remained extremely disciplined as the economy has begun to recover relative to our lending practices both with structure, quality and pricing and where we from time to time are getting looks and criticism about slow growth. We remain disciplined. We are comfortable with what we are doing. We are growing in the categories. We have the capacity to grow in and have the opportunity. We are not chasing deals outside of our markets, outside of our experiences, and as a result we continue to fight that battle of paydowns on these acquired loans. Without that, we would have seen growth this quarter and we do feel good about where the pipelines are, but we will continue to be disciplined in our lending practices.

We have a question from Blair Brantley from BB&T Capital Markets. Blair Brantley - BB&T Capital Markets: I had a quick question about kind of the operating expense run rate going forward and how we should kind of think about it in terms of how much more cost savings are from BancTrust and what your kind of targeted number might be for the near-term?

Great, Blair. Thanks. Louis Greer will answer that.

The question is the expense run rate going forward as well as the cost saves from BancTrust. I think as Gerry mentioned in his comments that we had [$100 million] roughly $11 million worth savings from BancTrust. You annualize that you are looking around $44 million, $45 million. If you remember, BancTrust had a run rate of somewhere between $58 million and $60 million. So we've accomplished somewhere between 23% and 24% of cost saves in their original run rate and we're looking at we acquired BancTrust. So I think we're almost there on BancTrust on our cost saves. So their run rate is going to be about [$11 billion] a quarter. When you look at trust market, I think Gerry mentioned in his comments, when we look at core expenses with your total expenses less ORE expenses less our CDI and I think CDI on a quarterly basis is roughly 2.5 and I think this quarter we had about $5 million. Hopefully we will expect that going forward. So reconcile that, I think Gerry mentioned about $95 million run rate per core expense. If I remember that excludes ORE expenses as well as CDI amortization. Blair Brantley - BB&T Capital Markets: Okay, and your OREO bucket, how much is BancTrust this quarter?

I am sorry, I didn't hear that. Blair Brantley - BB&T Capital Markets: In your OREO bucket, how much is BancTrust for this quarter?

And you wanted the expenses or balances? Blair Brantley - BB&T Capital Markets: The balances, I am sorry.

It's going to be about $45 million of the OREO. Blair Brantley - BB&T Capital Markets: Okay. And then let me get some question on theory, are you guys seeing any increase from the non-bank compensation for that, so there is credits from insurance company, or anything else like that?

It's limited, when we do it's in our Houston market, but predominantly it's still going to be traditional banks or the majority of the competition even in the Houston market that we see, but outside of Houston, we see very little competition from our non-banks or CRE projects.

I will add though that we are seeing and some of the larger participations and we do not have that large a book. We are seeing that some of the larger lead participants are taking more of a particular deal at renewal and squeezing out some of the smaller participants. So that I guess is one area, of other area of competition per volume. Blair Brantley - BB&T Capital Markets: And then in terms of rates have you seen any new change of rates at this point with the [slicking] of yield curve, any color on that, those competitions have failed pretty fast?

On the C&I side we really haven't, I mean what we do see that we haven't chased is there are some banks that are providing continued provide lower rates and longer terms and those are deals we're not chasing. But from the standpoint of most floating rate product still remains extremely competitive. Blair Brantley - BB&T Capital Markets: And then in terms of some other fix rate theory, (inaudible) has there have been any change, there?

I think Barry mentioned there are quite as many players that have ability to get slightly higher yields and where we've been over the last several years has been good as far as committing to those deals we're actually working with customers on swaps and are very competitive there. Blair Brantley - BB&T Capital Markets: Okay. Thank you very much.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Gerry Host for any closing remarks.

Thank you, operator and thank you all for joining us today and we feel like we've got good momentum going, we're pleased where we are relative to the BancTrust transaction and believe we will see continued momentum and opportunities in that market. And again we appreciate you joining us today and look forward to our third quarter conference call.

The conference has now concluded. And thank you for attending today's presentation. You may now disconnect.