Note 4 –Loans Held for Investment (LHFI) and Allowance for Loan Losses, excluding Covered Loans

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

	September 30, 2011		December 31, 2010
Loans secured by real estate:
Construction, land development and other land loans	$	481,821	$	583,316
Secured by 1-4 family residential properties		1,717,366		1,732,056
Secured by nonfarm, nonresidential properties		1,437,573		1,498,108
Other		207,984		231,963
Commercial and industrial loans		1,083,753		1,068,369
Consumer loans		268,002		402,165
Other loans		587,213		544,265
LHFI, excluding covered loans		5,783,712		6,060,242
Less allowance for loan losses		89,463		93,510
Net LHFI, excluding covered loans	$	5,694,249	$	5,966,732

The following table details LHFI, excluding covered loans, individually and collectively evaluated for impairment at September 30, 2011 and December 31, 2010 ($ in thousands):

	September 30, 2011
	LHFI Evaluated for Impairment
	Individually		Collectively		Total

Loans secured by real estate:
Construction, land development and other land loans	$	29,594	$	452,227	$	481,821
Secured by 1-4 family residential properties		23,558		1,693,808		1,717,366
Secured by nonfarm, nonresidential properties		25,303		1,412,270		1,437,573
Other		4,821		203,163		207,984
Commercial and industrial loans		14,204		1,069,549		1,083,753
Consumer loans		907		267,095		268,002
Other loans		1,191		586,022		587,213
Total	$	99,578	$	5,684,134	$	5,783,712

	December 31, 2010
	LHFI Evaluated for Impairment
	Individually		Collectively		Total

Loans secured by real estate:
Construction, land development and other land loans	$	57,831	$	525,485	$	583,316
Secured by 1-4 family residential properties		30,313		1,701,743		1,732,056
Secured by nonfarm, nonresidential properties		29,013		1,469,095		1,498,108
Other		6,154		225,809		231,963
Commercial and industrial loans		16,107		1,052,262		1,068,369
Consumer loans		2,112		400,053		402,165
Other loans		1,393		542,872		544,265
Total	$	142,923	$	5,917,319	$	6,060,242

Loan Concentrations

Trustmark does not have any loan concentrations other than those reflected in the preceding table, which exceed 10% of total LHFI. At September 30, 2011, 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.

Nonaccrual/Impaired LHFI, Excluding Covered Loans

At September 30, 2011 and December 31, 2010, the carrying amounts of nonaccrual LHFI, excluding covered loans, which are considered for impairment analysis, were $99.6 million and $142.9 million, respectively. For collateral dependent loans, 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. All of Trustmark's specifically evaluated impaired LHFI are collateral dependent loans. At September 30, 2011 and December 31, 2010, specifically evaluated impaired LHFI totaled $66.2 million and $97.6 million, respectively. In addition, these specifically evaluated impaired LHFI had a related allowance of $6.3 million and $8.3 million at the end of the respective periods. Specific charge-offs related to impaired LHFI totaled $18.4 million and $26.9 million while the provisions charged to net income for these loans totaled $6.2 million and $9.6 million for the first nine months of 2011 and 2010, respectively.

All nonaccrual LHFI over $500 thousand are individually assessed for impairment. Impaired LHFI have been determined to be collateral dependent and assessed using a fair value approach. Fair value estimates begin with appraised values based on the current market value/as is value of the property being appraised, normally from recently received and reviewed appraisals. If a current appraisal, or one with an inspection date within the past 12 months, using the necessary assumptions is not in the file, a new appraisal is ordered. Appraisals are obtained from State-certified Appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property. The Appraisal Review Department has the authority to make adjustments to appraisals based on sales contracts, comparable sales and other pertinent information if an appraisal does not incorporate the effect of these assumptions. Appraised values are adjusted down for costs associated with asset disposal. Once the current appraisal is received and the estimated net realizable value determined, the value used in the impairment assessment is updated and adjustments are made to reflect further impairments. At the time a LHFI 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. However, as subsequent events dictate and estimated net realizable values decline, required reserves are established.

At September 30, 2011 and December 31, 2010, nonaccrual LHFI, excluding covered loans, not specifically impaired and written down to fair value less cost to sell, totaled $33.4 million and $45.3 million, respectively. In addition, these nonaccrual LHFI had allocated allowance for loan losses of $2.7 million and $3.5 million at the end of the respective periods. No material interest income was recognized in the income statement on impaired or nonaccrual loans for each of the periods ended September 30, 2011 and 2010.

At September 30, 2011 and December 31, 2010, LHFI, excluding covered loans, classified as troubled debt restructurings (TDRs) totaled $27.7 million and $19.2 million, respectively. For TDRs, Trustmark had a related loan loss allowance of $1.9 million at both September 30, 2011 and December 31, 2010. Specific charge-offs related to TDRs totaled $1.6 million for the nine months ended September 30, 2011 and 2010. LHFI that are TDRs are charged down to the most likely fair value estimate less a cost to sell estimate for collateral dependent loans, which would approximate net realizable value.

The following table illustrates the impact of modifications classified as TDRs as a whole at September 30, 2011 as well as those TDRs modified within 2011 for which there was a payment default during the year ($ in thousands):

	Nine Months Ended September 30, 2011
Troubled Debt Restructurings	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction, land development and other land loans		14	$	9,114	$	8,447
Secured by 1-4 family residential properties		15		5,112		3,549
Secured by nonfarm, nonresidential properties		4		4,368		4,196
Commercial and industrial		2		11,998		11,531
Total		35	$	30,592	$	27,723


	Three Months Ended September 30, 2011
Troubled Debt Restructurings	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Construction, land development and other land loans		1	$	1,843	$	1,843
Secured by 1-4 family residential properties		5		1,889		1,949
Total		6	$	3,732	$	3,792


	Nine Months Ended September 30, 2011
Troubled Debt Restructurings that Subsequently Defaulted	Number of Contracts				Recorded Investment
Construction, land development and other land loans		2			$	1,688
Secured by 1-4 family residential properties		2				1,485
Total		4			$	3,173

Trustmark's TDRs have resulted primarily from allowing the borrower to pay interest only for an extended period of time rather than from forgiveness. Accordingly, as shown above, these TDRs have a similar recorded investment for both the pre-modification and post-modification disclosure. Trustmark has utilized loans 90 days or more past due to define payment default in determining TDRs that have subsequently defaulted.

At September 30, 2011 and December 31, 2010, the following table details LHFI, excluding covered loans, classified as TDRs by loan type ($ in thousands):

	September 30, 2011
	Accruing		Nonaccrual		Total
Construction, land development and other land loans	$	244	$	8,203	$	8,447
Secured by 1-4 family residential properties		795		2,754		3,549
Secured by nonfarm, nonresidential properties		-		4,196		4,196
Commercial and industrial		-		11,531		11,531
Total Troubled Debt Restructurings by Type	$	1,039	$	26,684	$	27,723


	December 31, 2010
	Accruing		Nonaccrual		Total
Construction, land development and other land loans	$	-	$	3,181	$	3,181
Secured by 1-4 family residential properties		318		1,488		1,806
Secured by nonfarm, nonresidential properties		-		2,232		2,232
Commercial and industrial		-		11,997		11,997
Total Troubled Debt Restructurings by Type	$	318	$	18,898	$	19,216

At September 30, 2011 and December 31, 2010, the carrying amount of impaired loans, excluding covered loans, consisted of the following ($ in thousands):

	September 30, 2011
			Total LHFI
	Unpaid		with No Related		Total LHFI		Total				Average
	Principal		Allowance		with an Allowance		Carrying		Related		Recorded
	Balance		Recorded		Recorded		Amount		Allowance		Investment

Loans secured by real estate:
Construction, land development and other land loans	$	47,736	$	9,284	$	20,310	$	29,594	$	4,165	$	43,712
Secured by 1-4 family residential properties		32,273		3,624		19,934		23,558		540		26,935
Secured by nonfarm, nonresidential properties		29,547		13,841		11,462		25,303		1,510		27,158
Other		5,625		486		4,335		4,821		1,008		5,488
Commercial and industrial loans		15,966		8,833		5,371		14,204		1,454		15,155
Consumer loans		1,184		-		907		907		10		1,510
Other loans		2,725		17		1,174		1,191		275		1,292
Total	$	135,056	$	36,085	$	63,493	$	99,578	$	8,962	$	121,250

	December 31, 2010
			Total LHFI
	Unpaid		with No Related		Total LHFI		Total				Average
	Principal		Allowance		with an Allowance		Carrying		Related		Recorded
	Balance		Recorded		Recorded		Amount		Allowance		Investment

Loans secured by real estate:
Construction, land development and other land loans	$	81,945	$	33,201	$	24,630	$	57,831	$	6,782	$	69,817
Secured by 1-4 family residential properties		41,475		3,082		27,231		30,313		1,745		30,888
Secured by nonfarm, nonresidential properties		35,679		18,582		10,431		29,013		1,580		23,535
Other		7,009		5,042		1,112		6,154		95		4,126
Commercial and industrial loans		17,413		9,172		6,935		16,107		1,514		11,369
Consumer loans		2,420		-		2,112		2,112		23		1,544
Other loans		2,868		1,107		286		1,393		58		765
Total	$	188,809	$	70,186	$	72,737	$	142,923	$	11,797	$	142,044

Credit Quality Indicators

Trustmark's loan portfolio credit quality indicators focus on six key quality ratios that are compared against bank tolerances. The loan indicators are total classified outstanding, total criticized outstanding, nonperforming loans, nonperforming assets, delinquencies and net loan losses. Due to the homogenous nature of consumer loans, Trustmark does not assign a formal internal risk rating to each credit and therefore the criticized and classified measures are unique to commercial loans.

In addition to monitoring portfolio credit quality indictors, Trustmark also measures how effectively the lending process is being managed and risks are being identified. As part of an ongoing monitoring process, Trustmark grades the commercial portfolio as it relates to financial statement exceptions, total policy exceptions, collateral exceptions and violations of law as shown below:

Financial Statement Exceptions – focuses on the officers' ongoing efforts to obtain, evaluate and/or document sufficient information to determine the quality and status of the credits. This area includes the quality and condition of the files in terms of content, completeness and organization. Included is an evaluation of the systems/procedures used to insure compliance with policy such as financial statements, review memos and loan agreement covenants.

Underwriting/Policy – evaluates whether credits are adequately analyzed, appropriately structured and properly approved within requirements of bank loan policy. A properly approved credit is approved by adequate authority in a timely manner with all conditions of approval fulfilled. Total policy exceptions measure the level of exceptions to loan policy within a loan portfolio.

Collateral Documentation – focuses on the adequacy of documentation to support the obligation, perfect Trustmark's collateral position and protect collateral value. There are two parts to this measure:

Collateral exceptions where certain collateral documentation is either not present, is not considered current or has expired.

90 days and over collateral exceptions are where certain collateral documentation is either not present, is not considered current or has expired and the exception has been identified in excess of 90 days.

Compliance with Law – focuses on underwriting, documentation, approval and reporting in compliance with banking laws and regulations. Primary emphasis is directed to Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and Regulation O requirements.

Commercial Credits

Trustmark has established a Loan Grading System that consists of ten individual Credit Risk Grades (Risk Ratings) that encompass a range from loans where the expectation of loss is negligible to loans where loss has been established. The model is based on the risk of default for an individual credit and establishes certain criteria to delineate the level of risk across the ten unique Credit Risk Grades. Credit risk grade definitions are as follows:

Risk Rate (RR) 1 through RR 6 – Grades one through six represent groups of loans that are not subject to adverse criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent low to moderate risk measured by using a variety of credit risk criteria such as cash flow coverage, debt service coverage, balance sheet leverage, liquidity, management experience, industry position, prevailing economic conditions, support from secondary sources of repayment and other credit factors that may be relevant to a specific loan. In general, these loans are supported by properly margined collateral and guarantees of principal parties.

Other Assets Especially Mentioned (OAEM) - (RR 7) – a loan that has a potential weakness that if not corrected will lead to a more severe rating. This rating is for credits that are currently protected but potentially weak because of an adverse feature or condition that if not corrected will lead to a further downgrade.

Substandard (RR 8) – a loan that has at least one identified weakness that is well defined. This rating is for credits where the primary sources of repayment are not viable at this time or where either the capital or collateral is not adequate to support the loan and the secondary means of repayment do not provide a sufficient level of support to offset the identified weakness but are sufficient to prevent a loss at this time. While these credits do not demonstrate any level of loss at this time, further deterioration would lead to a further downgrade.

Doubtful (RR 9) – a loan with an identified weakness that does not have a valid secondary source of repayment. Generally these credits have an impaired primary source of repayment and secondary sources are not sufficient to prevent a loss in the credit.

Loss (RR 10) – a loan or a portion of a loan that is deemed to be uncollectible.

By definition, credit risk grades OAEM (RR 7), substandard (RR 8), doubtful (RR 9) and loss (RR 10) are criticized loans while substandard (RR 8), doubtful (RR 9) and loss (RR 10) are classified loans. These definitions are standardized by all bank regulatory agencies and are generally equally applied to each individual lending institution. The remaining credit risk grades are considered pass credits and are solely defined by Trustmark.

The credit risk grades represent the probability of default (PD) for an individual credit and as such is not a direct indication of loss given default (LGD). The LGD aspect of the subject risk ratings is neither uniform across the nine primary commercial loan groups or constant between the geographic areas. To account for the variance in the LGD aspects of the risk rate system, the loss expectations for each risk rating is integrated into the allowance for loan loss methodology where the calculated LGD is allotted for each individual risk rating with respect to the individual loan group and unique geographic area. The LGD aspect of the reserve methodology is calculated each quarter as a component of the overall reserve factor for each risk grade by loan group and geographic area.

To enhance this process, loans of a certain size that are rated in one of the criticized categories are routinely reviewed to establish an expectation of loss, if any, and if such examination indicates that the level of reserve is not adequate to cover the expectation of loss, a special reserve or impairment is generally applied.

Each loan officer assesses the appropriateness of the internal risk rating assigned to their credits on an ongoing basis. Trustmark's Asset Review area conducts independent credit quality reviews of the majority of the bank's commercial loan portfolio concentrations both on the underlying credit quality of each individual loan portfolio as well as the adherence to bank loan policy and the loan administration process. In general, Asset Review conducts reviews of each lending area within a six to eighteen month window depending on the overall credit quality results of the individual area.

The distribution of the losses is accomplished by means of a loss distribution model that assigns a loss factor to each risk rating (1 to 9) in each commercial loan pool. A factor is not applied to risk rate 10 (Loss) as loans classified as Losses are not carried on the bank's books over quarter ends as they are charged off within the period that the loss is determined.

The expected loss distribution is spread across the various risk ratings by the perceived level of risk for loss. The nine grade scale above ranges from a negligible risk of loss to an identified loss across its breadth. The loss distribution factors are graduated through the scale on a basis proportional to the degree of risk that appears manifest in each individual rating and assumes that migration through the loan grading system will occur.

In addition to the ongoing internal risk rate monitoring described above, Trustmark conducts monthly credit quality reviews (CQR) as well as semi-annual analysis and stress testing on all residential real estate development credits and non-owner occupied commercial real estate (CRE) credits of $1.0 million or more as described below:

Trustmark's Credit Quality Review Committee meets monthly and performs the following functions: detailed review and evaluation of all loans of $100 thousand or more that are either delinquent thirty days or more or on nonaccrual, including determination of appropriate risk ratings, accrual status, and appropriate servicing officer; review of risk rate changes for relationships of $100 thousand or more; quarterly review of all nonaccruals less than $100 thousand to determine whether the credit should be charged off, returned to accrual, or remain in nonaccrual status; monthly/quarterly review of continuous action plans for all credits rated seven or worse for relationships of $100 thousand or more; monthly review of all commercial charge-offs of $25 thousand or more for the preceding month.

Residential real estate developments - a development project analysis is performed on all projects regardless of size. Performance of the development is assessed through an evaluation of the number of lots remaining, the payout ratios, and the loan-to-value ratios. Results are stress tested as to absorption and price of lots. This information is reviewed by each senior credit officer for that market to determine the need for any risk rate or accrual status changes.

Non-owner occupied commercial real estate – a cash flow analysis is performed on all projects with an outstanding balance of $1.0 million or more. In addition, credits are stress tested for vacancies and rate sensitivity. Confirmation is obtained that guarantor's financial statements are current, taxes have been paid, and that there are no other issues that need to be addressed. This information is reviewed by each senior credit officer for that market to determine the need for any risk rate or accrual status changes.

Consumer Credits

Loans that do not meet a minimum custom credit score are reviewed quarterly by Management. The Retail Credit Review Committee reviews the volume and percentage of approvals that did not meet the minimum passing custom score by region, individual location, and officer. To assure that Trustmark continues to originate quality loans, this process allows Management to make necessary changes such as changes to underwriting procedures, credit policies, or changes in loan authority to Trustmark personnel.

Trustmark monitors the levels and severity of past due consumer loans on a daily basis through its collection activities. A detailed assessment of consumer loan delinquencies is performed monthly at both a product and market level by delivery channel, which incorporates the perceived level of risk at time of underwriting. Trustmark also monitors its consumer loan delinquency trends by comparing them to quarterly industry averages.

The allowance calculation methodology delineates the consumer loan portfolio into homogeneous pools of loans that contain similar structure, repayment, collateral and risk profile, which include residential mortgage, direct consumer loans, auto finance, credit cards, and overdrafts. For these pools, the historical loss experience is determined by calculating a 20-quarter rolling average and that loss factor is applied to each homogeneous pool to establish the quantitative aspect of the methodology. Where the loss experience does not fully cover the anticipated loss for a pool, an estimate is also applied to each homogeneous pool to establish the qualitative aspect of the methodology. The qualitative portion is the allocation of perceived risks across the loan portfolio to derive the potential losses that exist at the current point in time. This methodology utilizes five separate factors where each factor is made up of unique components that when weighted and combined produce an estimated level of reserve for each of the loan pools. The five factors include economic indicators, performance trends, management experience, lending policy measures, and credit concentrations.

The risk measure for each factor is converted to a scale ranging from 0 (No risk) to 100 (High Risk) to ensure that the combination of such factors is proportional. The determination of the risk measurement for each qualitative factor is done for each market, so that the risk measurements for the qualitative factors are market-specific. The resulting estimated reserve factor is then applied to each pool.

The resulting ratings from the individual factors are weighted and summed to establish the weighted average qualitative factor of a specific loan portfolio. This weighted average qualitative factor is then applied over the five loan pools.

The table below illustrates the carrying amount of loans, excluding covered loans, by credit quality indicator at September 30, 2011 and December 31, 2010 ($ in thousands):

	September 30, 2011
			Commercial Loans
			Pass -		Special Mention -		Substandard -		Doubtful -
			Categories 1-6		Category 7		Category 8		Category 9		Subtotal
Loans secured by real estate:
Construction, land development and other land loans			$	305,155	$	28,014	$	96,487	$	69	$	429,725
Secured by 1-4 family residential properties				118,644		147		16,795		-		135,586
Secured by nonfarm, nonresidential properties				1,291,830		13,123		131,656		51		1,436,660
Other				190,265		314		10,180		-		200,759
Commercial and industrial loans				999,567		24,922		55,456		1,405		1,081,350
Consumer loans				796		24		-		-		820
Other loans				572,818		5,994		2,469		553		581,834
			$	3,479,075	$	72,538	$	313,043	$	2,078	$	3,866,734

	Consumer Loans
			Past Due		Past Due Greater						Total LHFI, excluding
	Current		30-89 Days		Than 90 days		Nonaccrual		Subtotal		covered loans
Loans secured by real estate:
Construction, land development and other land loans	$	49,668	$	490	$	176	$	1,762	$	52,096	$	481,821
Secured by 1-4 family residential properties		1,551,510		11,346		1,742		17,182		1,581,780		1,717,366
Secured by nonfarm, nonresidential properties		876		37		-		-		913		1,437,573
Other		7,189		6		-		30		7,225		207,984
Commercial and industrial loans		2,327		52		-		24		2,403		1,083,753
Consumer loans		258,724		6,973		579		906		267,182		268,002
Other loans		5,348		31		-		-		5,379		587,213
	$	1,875,642	$	18,935	$	2,497	$	19,904	$	1,916,978	$	5,783,712

	December 31, 2010
			Commercial Loans
			Pass -		Special Mention -		Substandard -		Doubtful -
			Categories 1-6		Category 7		Category 8		Category 9		Subtotal
Loans secured by real estate:
Construction, land development and other land loans			$	347,287	$	44,459	$	134,503	$	512	$	526,761
Secured by 1-4 family residential properties				113,776		780		25,167		226		139,949
Secured by nonfarm, nonresidential properties				1,353,794		16,858		126,050		431		1,497,133
Other				216,022		180		7,418		-		223,620
Commercial and industrial loans				977,793		25,642		58,307		1,416		1,063,158
Consumer loans				524		-		-		-		524
Other loans				535,110		210		3,633		146		539,099
			$	3,544,306	$	88,129	$	355,078	$	2,731	$	3,990,244


	Consumer Loans
			Past Due		Past Due Greater						Total LHFI, excluding
	Current		30-89 Days		Than 90 days		Nonaccrual		Subtotal		covered loans
Loans secured by real estate:
Construction, land development and other land loans	$	53,797	$	223	$	-	$	2,535	$	56,555	$	583,316
Secured by 1-4 family residential properties		1,559,611		10,302		1,278		20,916		1,592,107		1,732,056
Secured by nonfarm, nonresidential properties		975		-		-		-		975		1,498,108
Other		8,282		26		-		35		8,343		231,963
Commercial and industrial loans		5,075		97		-		39		5,211		1,068,369
Consumer loans		383,529		13,741		2,260		2,111		401,641		402,165
Other loans		5,166		-		-		-		5,166		544,265
	$	2,016,435	$	24,389	$	3,538	$	25,636	$	2,069,998	$	6,060,242

Past Due LHFI, Excluding Covered Loans

LHFI past due 90 days or more totaled $36.1 million and $19.4 million at September 30, 2011 and December 31, 2010, respectively. Included in these amounts are $33.0 million and $15.8 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. During December of 2010, Trustmark purchased approximately $53.9 million of GNMA serviced loans, which were subsequently sold to a third party. Trustmark will retain the servicing for these loans, which are fully guaranteed by FHA/VA. Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during the first nine months of 2011.

The following table provides an aging analysis of past due and nonaccrual LHFI, excluding covered loans, by class at September 30, 2011 and December 31, 2010 ($ in thousands):

	September 30, 2011
	Past Due
			Greater than						Current		Total LHFI, excluding
	30-89 Days		90 Days (1)		Total		Nonaccrual		Loans		covered loans

Loans secured by real estate:
Construction, land development and other land loans	$	4,653	$	844	$	5,497	$	29,594	$	446,730	$	481,821
Secured by 1-4 family residential properties		12,798		1,743		14,541		23,558		1,679,267		1,717,366
Secured by nonfarm, nonresidential properties		19,863		-		19,863		25,303		1,392,407		1,437,573
Other		63		-		63		4,821		203,100		207,984
Commercial and industrial loans		8,781		-		8,781		14,204		1,060,768		1,083,753
Consumer loans		6,973		579		7,552		907		259,543		268,002
Other loans		785		-		785		1,191		585,237		587,213
Total past due LHFI	$	53,916	$	3,166	$	57,082	$	99,578	$	5,627,052	$	5,783,712

(1) - Past due greater than 90 days but still accruing interest.

	December 31, 2010
	Past Due
			Greater than						Current		Total LHFI, excluding
	30-89 Days		90 Days (1)		Total		Nonaccrual		Loans		covered loans

Loans secured by real estate:
Construction, land development and other land loans	$	1,651	$	-	$	1,651	$	57,831	$	523,834	$	583,316
Secured by 1-4 family residential properties		11,654		1,278		12,932		30,313		1,688,811		1,732,056
Secured by nonfarm, nonresidential properties		9,149		31		9,180		29,013		1,459,915		1,498,108
Other		441		-		441		6,154		225,368		231,963
Commercial and industrial loans		4,178		39		4,217		16,107		1,048,045		1,068,369
Consumer loans		13,741		2,260		16,001		2,112		384,052		402,165
Other loans		67		-		67		1,393		542,805		544,265
Total past due LHFI	$	40,881	$	3,608	$	44,489	$	142,923	$	5,872,830	$	6,060,242

(1) - Past due greater than 90 days but still accruing interest.

Allowance for Loan Losses

During 2009, Trustmark refined its allowance for loan loss methodology for commercial loans based upon 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. During the first quarter of 2010, Trustmark refined 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:

Commercial Purpose Loans

Real Estate – Owner Occupied

Real Estate – Non-Owner Occupied

Working Capital

Non-Working Capital

Land

Lots and Development

Political Subdivisions

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 twelve-quarter rolling average, one quarter in arrears, by loan type within each key market region, unless subsequent market factors suggests that a different method is called for. Prior to converting to a twelve-quarter rolling average at September 30, 2011, the quantitative factors reflected a three-year rolling average for its commercial loan book of business. Because of the severe economic environment at the time, starting in 2009, Management determined to alter the methodology of calculating historical loss to use data from the single year for 2008 as the historical loss factor for 2009, and use the average historical loss for 2008 and 2009 for 2010.

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. The qualitative factors considered are the following:

National and regional economic trends and conditions

Impact of recent performance trends

Experience, ability and effectiveness of management

Adherence to Trustmark's loan policies, procedures and internal controls

Collateral, financial and underwriting exception trends

Credit concentrations

Acquisitions

Catastrophe

The measure for each qualitative factor is converted to a scale ranging from 0 (No risk) to 100 (High Risk), other than the last two factors, which are applied on a dollar-for-dollar basis, to ensure that the combination of such factors is proportional. The resulting ratings from the individual factors are weighted and summed to establish the weighted average qualitative factor of a specific loan portfolio within each key market region. This weighted average qualitative factor is then distributed over the nine primary loan pools within each key market region based on the ranking by risk of each.

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

	Nine Months Ended September 30,
	2011			2010
Balance at January 1,	$	93,510		$	103,662
Loans charged-off		(37,312	)		(56,014	)
Recoveries		9,634			9,058
Net charge-offs		(27,678	)		(46,956	)
Provision for loan losses		23,631			37,752
Balance at September 30,	$	89,463		$	94,458

The following tables detail the balance in the allowance for loan losses by portfolio segment at September 30, 2011 and 2010, respectively ($ in thousands):

	Allowance for Loan Losses
	Balance										Balance
	January 1,							Provision for			September 30,
	2011		Charge-offs			Recoveries		Loan Losses			2011
Loans secured by real estate:
Construction, land development and other land loans	$	35,562	$	(14,375	)	$	-	$	8,353		$	29,540
Secured by 1-4 family residential properties		13,051		(7,461	)		410		5,538			11,538
Secured by nonfarm, nonresidential properties		20,980		(3,124	)		-		4,882			22,738
Other		1,582		(577	)		-		1,969			2,974
Commercial and industrial loans		14,775		(3,811	)		2,259		2,529			15,752
Consumer loans		5,400		(4,410	)		4,475		(1,474	)		3,991
Other loans		2,160		(3,554	)		2,490		1,834			2,930
Total	$	93,510	$	(37,312	)	$	9,634	$	23,631		$	89,463


						Allowance for Loan Losses
						Disaggregated by Impairment Method
						Individually		Collectively			Total
Loans secured by real estate:
Construction, land development and other land loans						$	4,165	$	25,375		$	29,540
Secured by 1-4 family residential properties							540		10,998			11,538
Secured by nonfarm, nonresidential properties							1,510		21,228			22,738
Other							1,008		1,966			2,974
Commercial and industrial loans							1,454		14,298			15,752
Consumer loans							10		3,981			3,991
Other loans							275		2,655			2,930
Total						$	8,962	$	80,501		$	89,463

	Allowance for Loan Losses
	Balance									Balance
	January 1,							Provision for		September 30,
	2010		Charge-offs			Recoveries		Loan Losses		2010
Loans secured by real estate:
Construction, land development and other land loans	$	43,552	$	(25,462	)	$	-	$	15,915	$	34,005
Secured by 1-4 family residential properties		13,151		(8,569	)		372		6,941		11,895
Secured by nonfarm, nonresidential properties		20,110		(5,183	)		-		6,345		21,272
Other		1,631		(576	)		-		480		1,535
Commercial and industrial loans		16,275		(2,515	)		1,617		2,120		17,497
Consumer loans		7,246		(8,175	)		4,698		2,137		5,906
Other loans		1,697		(5,534	)		2,371		3,814		2,348
Total	$	103,662	$	(56,014	)	$	9,058	$	37,752	$	94,458


						Allowance for Loan Losses
						Disaggregated by Impairment Method
						Individually		Collectively		Total
Loans secured by real estate:
Construction, land development and other land loans						$	4,706	$	29,299	$	34,005
Secured by 1-4 family residential properties							755		11,140		11,895
Secured by nonfarm, nonresidential properties							1,398		19,874		21,272
Other							203		1,332		1,535
Commercial and industrial loans							4,528		12,969		17,497
Consumer loans							17		5,889		5,906
Other loans							38		2,310		2,348
Total						$	11,645	$	82,813	$	94,458