Note 8 – FDIC Indemnification Asset

Pursuant to the provisions of the loss-share agreement, TNB may be required to make a true-up payment to the FDIC at the termination of the loss-share agreement should actual losses be less than certain thresholds established in the agreement. TNB calculates the projected true-up payable to the FDIC quarterly and records a FDIC true-up provision for the present value of the projected true-up payable to the FDIC at the termination of the loss-share agreement. TNB’s FDIC true-up provision totaled $1.9 million and $1.7 million at March 31, 2014 and December 31, 2013, respectively.

Trustmark periodically re-estimates the expected cash flows on the acquired covered loans as required by FASB ASC Topic 310-30. For the first three months of 2014 and 2013, this analysis resulted in improvements in the estimated future cash flows of the acquired covered loans that remain outstanding as well as lower expected remaining losses on those loans, primarily due to pay-offs of acquired covered loans. The pay-offs and improvements in the estimated expected cash flows of the acquired covered loans resulted in a reduction of the expected loss-share receivable from the FDIC. Reductions of the FDIC indemnification asset resulting from improvements in expected cash flows and covered losses based on the re-estimation of acquired covered loans are amortized over the lesser of the remaining life or contractual period of the acquired covered loan as a yield adjustment consistent with the associated acquired covered loan. Other noninterest income for the first three months of 2014 included $332 thousand of amortization of the FDIC indemnification asset, compared to $54 thousand of accretion for the first three months of 2013, as a result of improvements in the expected cash flows and lower loss expectations. During the first three months of 2014 and 2013, other noninterest income included a reduction of the FDIC indemnification asset of $356 thousand and $1.4 million, respectively, primarily resulting from loan pay-offs partially offset by loan pools of acquired covered loans with increased loss expectations.

For the three months ended March 31, 2014 and 2013, changes in the FDIC indemnification asset were as follows ($ in thousands):

	Three Months Ended March 31,
	2014			2013
Balance at beginning of period	$	14,347		$	21,774
(Amortization) accretion		(332	)		54
Transfers to FDIC claims		(139	)		(270	)
Change in expected cash flows		(239	)		(1,335	)
Change in FDIC true-up provision		(150	)		(25	)
Balance at end of period	$	13,487		$	20,198