Trustmark Corporation Announces Second Quarter 2017 Financial Results

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) reported net income of $24.0 million in the second quarter of 2017, representing diluted earnings per share of $0.35. Included in second quarter financial results were non-routine charges related to the termination of Trustmark’s defined benefit pension plan as well as charges related to the merger with RB Bancorporation and its subsidiary, Reliance Bank (“Reliance”), which reduced net income by $10.9 million and $2.0 million (net of tax), respectively. Separately, Trustmark received non-taxable proceeds related to life insurance acquired as part of a previous acquisition that increased net income in the second quarter by $4.9 million. Adjusting for the above items, net income in the second quarter totaled $32.0 million, representing diluted earnings per share of $0.47. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2017, to shareholders of record on September 1, 2017.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=51594706&lang=en.

Second Quarter Highlights

• Loans held for investment increased $291.4 million, or 3.6%, from the prior quarter and $890.9 million, or 12.0%, year-over-year
• Revenue (excluding income on acquired loans and life insurance proceeds) increased 1.9% from the prior quarter and 6.4% year-over-year to total $141.0 million in the second quarter
• Routine noninterest expense remained well controlled

Gerard R. Host, President and CEO, stated, “Trustmark continued to gain momentum and achieved solid financial results in the second quarter. We continued to experience robust loan growth across our five-state franchise, while maintaining historically low levels of other real estate and net charge-offs. Our mortgage, insurance and wealth management businesses continued to provide complementary revenue sources to our traditional banking business. Routine noninterest expense remained well controlled. We also completed the Reliance merger and conversion in the second quarter and had a very successful rollout of our myTrustmark℠ Business platform. Thanks to our associates, solid profitability and strong capital base, Trustmark remains well positioned to continue meeting the needs of our customers and creating long-term value for our shareholders.”

Completion of Reliance Merger

• Expanded presence in attractive Huntsville, Alabama, MSA with seven banking centers
• Completed seamless operational conversion

On April 7, 2017, Trustmark completed its previously announced merger with Reliance, headquartered in Athens, Alabama. At the merger date, the estimated fair values of loans and deposits acquired were $117.4 million and $166.2 million, respectively. The operations of Reliance are included in Trustmark’s operating results as of the merger date and did not have a material impact on Trustmark’s results of operations.

Balance Sheet Management

• Continued diversified legacy loan growth demonstrates the value of Trustmark’s five-state franchise
• Noninterest-bearing deposits represented 30.3% of total average deposits; total cost of deposits of 0.20% in the second quarter
• Solid capital base continues to provide flexibility in pursuing growth opportunities

Loans held for investment totaled $8.3 billion at June 30, 2017, reflecting an increase of 3.6% from the prior quarter and 12.0% year-over-year. Commercial and industrial loans increased $94.2 million during the quarter, reflecting growth in Mississippi, Alabama and Tennessee. Relative to the prior quarter, construction lending expanded $62.1 million, primarily due to growth in Texas and Alabama. Loans secured by nonfarm, nonresidential properties increased $45.0 million, principally driven by growth in Alabama, Texas and Florida. Other real estate secured loans, which include multifamily projects, grew $32.6 million, driven by growth in Alabama and Texas.

Acquired loans totaled $314.9 million at June 30, 2017, an increase of $96.7 million from the prior quarter due to the Reliance merger. Collectively, loans held for investment and acquired loans totaled $8.6 billion at June 30, 2017, up $388.1 million from the prior quarter.

Deposits totaled $10.4 billion at June 30, 2017. Excluding acquired deposits of $166.2 million, deposits increased $152.8 million, or 1.5%, from the previous quarter. Trustmark continues to maintain an attractive, low-cost deposit base with a total cost of deposits of 0.20%. The favorable mix of interest-bearing liabilities yielded a total cost of funds of 0.44% for the second quarter of 2017.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At June 30, 2017, Trustmark’s tangible equity to tangible assets ratio was 8.61%, while its total risk-based capital ratio was 13.11%. Tangible book value per share was $17.17 at June 30, 2017, up 2.4% year to date.

Credit Quality

• Nonperforming loans increased $12.8 million from the prior quarter, primarily due to a single healthcare-related credit moving to nonaccrual status during the quarter
• Other real estate decreased $6.0 million to total $50.0 million
• Recoveries exceeded charge-offs by $818 thousand
• Allowance for loan losses represented 277.4% of nonperforming loans, excluding specifically reviewed impaired loans

At June 30, 2017, nonperforming loans totaled $74.1 million while other real estate totaled $50.0 million. Collectively, nonperforming assets increased $6.8 million, or 5.8%, linked quarter while decreasing $10.5 million, or 7.8%, year-over-year.

Allocation of Trustmark's $76.2 million allowance for loan losses represented 0.99% of commercial loans and 0.67% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.92% at June 30, 2017, representing a level management considers commensurate with the inherent risk in the loan portfolio. Collectively, the allowance for both held for investment and acquired loan losses represented 0.97% of total loans, which include held for investment and acquired loans.

Unless noted otherwise, all of the above credit quality metrics exclude acquired loans and other real estate covered by FDIC loss-share agreement.

Revenue Generation

• Net interest income (FTE) excluding income on acquired loans totaled $100.7 million in the second quarter, an increase of 3.5% from the prior quarter
• Insurance and wealth management revenue demonstrated solid growth, increasing 5.8% and 3.5%, respectively, from the prior quarter
• Mortgage loan-production volume increased 22.8% linked quarter to $372.7 million

Net interest income (FTE) in the second quarter totaled $106.9 million, which resulted in a net interest margin of 3.49%. Compared to the prior quarter, net interest income (FTE) increased $4.5 million, which reflects continued growth in interest income from the held for sale and held for investment loan portfolios as well as growth in interest and fees on acquired loans. During the second quarter of 2017, the yield on acquired loans totaled 7.96% and included $952 thousand in recoveries from the settlement of debt, which represented approximately 1.21% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the second quarter of 2017 totaled 3.37% and remained relatively stable when compared to the first quarter of 2017, as growth in the yield on the loans held for investment and held for sale portfolio was offset by higher costs of interest-bearing deposits.

Noninterest income totaled $50.2 million in the second quarter. Excluding the previously mentioned non-taxable life insurance proceeds of $4.9 million, noninterest income was $45.3 million, a decline of 1.6% from the prior quarter and an increase of 2.4% over the previous year. Decreased mortgage hedge ineffectiveness was the main driver for the linked quarter decline. Mortgage banking revenue in the second quarter totaled $9.0 million, down $1.2 million from the prior quarter and up $2.3 million year-over-year. Relative to the prior quarter, both bank card and other fees and insurance commissions showed strong growth, increasing 13.4% and 5.8%, respectively.

Insurance revenue totaled $9.7 million in the second quarter, representing an increase of 5.8% from the prior quarter and 1.1% from the same period one year earlier. The performance this quarter was primarily driven by the commercial property and casualty line of business. Wealth management revenue in the second quarter totaled $7.7 million, up 3.5% over the prior quarter, but down 4.2% year-over-year. The linked quarter increase was primarily a result of higher brokerage asset management fees and recordkeeping fees.

Noninterest Expense

• Efficiency ratio improved to 64.5% in the second quarter
• Continued realignment of delivery channels

Excluding other real estate expense ($383 thousand), intangible amortization ($1.5 million), the one-time charges related to the pension plan termination ($17.6 million) and one-time expenses associated with the Reliance merger ($3.2 million), routine noninterest expense in the second quarter totaled $99.3 million. Trustmark estimates that the termination of the noncontributory tax-qualified defined benefit pension plan will reduce annual pension plan expense approximately $3.0 million to $4.0 million. Salaries and benefits expense – excluding the $17.6 million one-time pension plan termination charge – was $59.1 million, which increased marginally from the prior quarter due to inclusion of Reliance associates and higher commissions. Services and fees decreased $323 thousand from the prior quarter, while other real estate and foreclosure expense decreased $1.4 million. Other expense – excluding the $3.2 million charge related to the Reliance merger – totaled $11.7 million, a decrease of $1.1 million on a comparable basis from the prior quarter.

Trustmark is committed to developing and maintaining relationships, supporting investments that promote profitable revenue growth and realigning retail delivery channels to support changing customer preferences. Trustmark recently renovated an office in Memphis that is co-branded with a leading coffee retailer in an effort to increase foot traffic and create additional opportunities to introduce Trustmark products and services to prospective customers. Trustmark also initiated a pilot program introducing myTeller℠, an interactive video teller service provided through a centralized teller center that delivers most functions provided by traditional tellers, at this location and others across the franchise. Investments in myTrustmark℠, a mobile and online banking platform, provides enhanced customer access to account information, payment services and financial management tools. Adoption of myTrustmark℠ has notably increased with approximately two-thirds of customers accessing the platform via mobile devices. Successful adoption of myTrustmark℠ served as the basis for the second quarter launch of myTrustmark℠ Business, which provides the features of myTrustmark℠ into a product offering specifically designed for commercial customers.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 26, 2017, at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing [phone] or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call. A replay of the conference call will also be available through Wednesday, August 9, 2017, in archived format at the same web address or by calling [phone], passcode 10110062.

Trustmark Corporation is a financial services company providing banking and financial solutions through 199 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

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 conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets as well as crude oil prices, 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, including the potential impact of issues relating to the European financial system 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 affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, including those associated with the planned termination of our noncontributory tax-qualified defined benefit pension plan, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Except as required by law, we undertake no obligation to update or revise any of this information, whether as the result of new information, future events or developments or otherwise.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES	6/30/2017			3/31/2017			6/30/2016			$ Change			% Change		$ Change			% Change
Securities AFS-taxable	$	2,334,600		$	2,252,162		$	2,214,040		$	82,438		3.7	%	$	120,560		5.4	%
Securities AFS-nontaxable		75,640			88,522			99,296			(12,882	)	-14.6	%		(23,656	)	-23.8	%
Securities HTM-taxable		1,108,158			1,124,692			1,122,463			(16,534	)	-1.5	%		(14,305	)	-1.3	%
Securities HTM-nontaxable		32,878			33,009			34,785			(131	)	-0.4	%		(1,907	)	-5.5	%
Total securities		3,551,276			3,498,385			3,470,584			52,891		1.5	%		80,692		2.3	%
Loans (including loans held for sale)		8,348,758			8,074,449			7,505,409			274,309		3.4	%		843,349		11.2	%
Acquired loans		315,558			250,482			349,740			65,076		26.0	%		(34,182	)	-9.8	%
Fed funds sold and rev repos		3,184			397			1,263			2,787		n/m			1,921		n/m
Other earning assets		77,770			79,515			64,000			(1,745	)	-2.2	%		13,770		21.5	%
Total earning assets		12,296,546			11,903,228			11,390,996			393,318		3.3	%		905,550		7.9	%
Allowance for loan losses		(83,328	)		(83,394	)		(83,614	)		66		0.1	%		286		0.3	%
Cash and due from banks		307,966			310,542			271,135			(2,576	)	-0.8	%		36,831		13.6	%
Other assets		1,229,981			1,235,469			1,240,846			(5,488	)	-0.4	%		(10,865	)	-0.9	%
Total assets	$	13,751,165		$	13,365,845		$	12,819,363		$	385,320		2.9	%	$	931,802		7.3	%
Interest-bearing demand deposits	$	2,035,491		$	1,981,982		$	1,830,107		$	53,509		2.7	%	$	205,384		11.2	%
Savings deposits		3,337,374			3,319,572			3,221,850			17,802		0.5	%		115,524		3.6	%
Time deposits		1,777,529			1,650,251			1,678,564			127,278		7.7	%		98,965		5.9	%
Total interest-bearing deposits		7,150,394			6,951,805			6,730,521			198,589		2.9	%		419,873		6.2	%
Fed funds purchased and repos		525,523			498,963			488,512			26,560		5.3	%		37,011		7.6	%
Short-term borrowings		1,047,107			887,848			319,288			159,259		17.9	%		727,819		n/m
Long-term FHLB advances		141,097			251,033			597,269			(109,936	)	-43.8	%		(456,172	)	-76.4	%
Subordinated notes		—			—			49,980			—		n/m			(49,980	)	-100.0	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Total interest-bearing liabilities		8,925,977			8,651,505			8,247,426			274,472		3.2	%		678,551		8.2	%
Noninterest-bearing deposits		3,110,125			3,008,176			2,927,469			101,949		3.4	%		182,656		6.2	%
Other liabilities		162,823			173,066			131,627			(10,243	)	-5.9	%		31,196		23.7	%
Total liabilities		12,198,925			11,832,747			11,306,522			366,178		3.1	%		892,403		7.9	%
Shareholders' equity		1,552,240			1,533,098			1,512,841			19,142		1.2	%		39,399		2.6	%
Total liabilities and equity	$	13,751,165		$	13,365,845		$	12,819,363		$	385,320		2.9	%	$	931,802		7.3	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
PERIOD END BALANCES	6/30/2017			3/31/2017			6/30/2016			$ Change			% Change		$ Change			% Change
Cash and due from banks	$	318,329		$	379,590		$	322,049		$	(61,261	)	-16.1	%	$	(3,720	)	-1.2	%
Fed funds sold and rev repos		6,900			500			3,198			6,400		n/m			3,702		n/m
Securities available for sale		2,447,688			2,365,554			2,388,306			82,134		3.5	%		59,382		2.5	%
Securities held to maturity		1,139,754			1,156,067			1,173,204			(16,313	)	-1.4	%		(33,450	)	-2.9	%
Loans held for sale (LHFS)		203,652			174,090			213,546			29,562		17.0	%		(9,894	)	-4.6	%
Loans held for investment (LHFI)		8,296,045			8,004,657			7,405,181			291,388		3.6	%		890,864		12.0	%
Allowance for loan losses		(76,184	)		(72,445	)		(71,796	)		(3,739	)	-5.2	%		(4,388	)	-6.1	%
Net LHFI		8,219,861			7,932,212			7,333,385			287,649		3.6	%		886,476		12.1	%
Acquired loans		314,910			218,242			339,035			96,668		44.3	%		(24,125	)	-7.1	%
Allowance for loan losses, acquired loans		(7,423	)		(10,006	)		(12,480	)		2,583		25.8	%		5,057		40.5	%
Net acquired loans		307,487			208,236			326,555			99,251		47.7	%		(19,068	)	-5.8	%
Net LHFI and acquired loans		8,527,348			8,140,448			7,659,940			386,900		4.8	%		867,408		11.3	%
Premises and equipment, net		182,315			183,311			192,732			(996	)	-0.5	%		(10,417	)	-5.4	%
Mortgage servicing rights		82,628			82,758			62,814			(130	)	-0.2	%		19,814		31.5	%
Goodwill		379,627			366,156			366,156			13,471		3.7	%		13,471		3.7	%
Identifiable intangible assets		19,422			19,117			24,058			305		1.6	%		(4,636	)	-19.3	%
Other real estate		49,958			55,968			69,890			(6,010	)	-10.7	%		(19,932	)	-28.5	%
Other assets		551,517			566,802			554,456			(15,285	)	-2.7	%		(2,939	)	-0.5	%
Total assets	$	13,909,138		$	13,490,361		$	13,030,349		$	418,777		3.1	%	$	878,789		6.7	%
Deposits:
Noninterest-bearing	$	3,092,915		$	3,209,727		$	2,921,016		$	(116,812	)	-3.6	%	$	171,899		5.9	%
Interest-bearing		7,330,476			6,894,745			6,610,508			435,731		6.3	%		719,968		10.9	%
Total deposits		10,423,391			10,104,472			9,531,524			318,919		3.2	%		891,867		9.4	%
Fed funds purchased and repos		508,068			524,335			606,336			(16,267	)	-3.1	%		(98,268	)	-16.2	%
Short-term borrowings		1,222,592			864,690			360,434			357,902		41.4	%		862,158		n/m
Long-term FHLB advances		978			250,994			751,106			(250,016	)	-99.6	%		(750,128	)	-99.9	%
Subordinated notes		—			—			49,985			—		n/m			(49,985	)	-100.0	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Other liabilities		130,335			146,053			145,641			(15,718	)	-10.8	%		(15,306	)	-10.5	%
Total liabilities		12,347,220			11,952,400			11,506,882			394,820		3.3	%		840,338		7.3	%
Common stock		14,114			14,112			14,090			2		0.0	%		24		0.2	%
Capital surplus		367,075			365,951			364,516			1,124		0.3	%		2,559		0.7	%
Retained earnings		1,209,238			1,200,903			1,157,025			8,335		0.7	%		52,213		4.5	%
Accum other comprehensive loss, net of tax		(28,509	)		(43,005	)		(12,164	)		14,496		33.7	%		(16,345	)	n/m
Total shareholders' equity		1,561,918			1,537,961			1,523,467			23,957		1.6	%		38,451		2.5	%
Total liabilities and equity	$	13,909,138		$	13,490,361		$	13,030,349		$	418,777		3.1	%	$	878,789		6.7	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands except per share data)
(unaudited)
	Quarter Ended								Linked Quarter					Year over Year
INCOME STATEMENTS	6/30/2017			3/31/2017			6/30/2016		$ Change			% Change		$ Change			% Change
Interest and fees on LHFS & LHFI-FTE	$	89,486		$	83,790		$	77,777	$	5,696		6.8	%	$	11,709		15.1	%
Interest and fees on acquired loans		6,263			5,189			8,051		1,074		20.7	%		(1,788	)	-22.2	%
Interest on securities-taxable		19,377			19,197			19,402		180		0.9	%		(25	)	-0.1	%
Interest on securities-tax exempt-FTE		1,178			1,300			1,429		(122	)	-9.4	%		(251	)	-17.6	%
Interest on fed funds sold and rev repos		11			1			4		10		n/m			7		n/m
Other interest income		371			267			200		104		39.0	%		171		85.5	%
Total interest income-FTE		116,686			109,744			106,863		6,942		6.3	%		9,823		9.2	%
Interest on deposits		5,107			3,945			3,122		1,162		29.5	%		1,985		63.6	%
Interest on fed funds pch and repos		1,037			698			404		339		48.6	%		633		n/m
Other interest expense		3,628			2,673			2,428		955		35.7	%		1,200		49.4	%
Total interest expense		9,772			7,316			5,954		2,456		33.6	%		3,818		64.1	%
Net interest income-FTE		106,914			102,428			100,909		4,486		4.4	%		6,005		6.0	%
Provision for loan losses, LHFI		2,921			2,762			2,596		159		5.8	%		325		12.5	%
Provision for loan losses, acquired loans		(2,564	)		(1,605	)		607		(959	)	-59.8	%		(3,171	)	n/m
Net interest income after provision-FTE		106,557			101,271			97,706		5,286		5.2	%		8,851		9.1	%
Service charges on deposit accounts		10,755			10,832			11,051		(77	)	-0.7	%		(296	)	-2.7	%
Bank card and other fees		7,370			6,500			7,436		870		13.4	%		(66	)	-0.9	%
Mortgage banking, net		9,008			10,185			6,721		(1,177	)	-11.6	%		2,287		34.0	%
Insurance commissions		9,745			9,212			9,638		533		5.8	%		107		1.1	%
Wealth management		7,674			7,413			8,009		261		3.5	%		(335	)	-4.2	%
Other, net		5,637			1,891			1,372		3,746		n/m			4,265		n/m
Nonint inc-excl sec gains (losses), net		50,189			46,033			44,227		4,156		9.0	%		5,962		13.5	%
Security gains (losses), net		1			—			—		1		n/m			1		n/m
Total noninterest income		50,190			46,033			44,227		4,157		9.0	%		5,963		13.5	%
Salaries and employee benefits		59,060			57,302			67,018		1,758		3.1	%		(7,958	)	-11.9	%
Defined benefit plan termination		17,644			—			—		17,644		n/m			17,644		n/m
Services and fees		15,009			15,332			14,522		(323	)	-2.1	%		487		3.4	%
Net occupancy-premises		6,210			6,238			5,928		(28	)	-0.4	%		282		4.8	%
Equipment expense		6,162			5,998			5,896		164		2.7	%		266		4.5	%
Other real estate expense		383			1,759			1,193		(1,376	)	-78.2	%		(810	)	-67.9	%
FDIC assessment expense		2,686			2,640			2,959		46		1.7	%		(273	)	-9.2	%
Other expense		14,921			12,788			12,663		2,133		16.7	%		2,258		17.8	%
Total noninterest expense		122,075			102,057			110,179		20,018		19.6	%		11,896		10.8	%
Income before income taxes and tax eq adj		34,672			45,247			31,754		(10,575	)	-23.4	%		2,918		9.2	%
Tax equivalent adjustment		4,910			4,838			4,532		72		1.5	%		378		8.3	%
Income before income taxes		29,762			40,409			27,222		(10,647	)	-26.3	%		2,540		9.3	%
Income taxes		5,727			9,161			5,719		(3,434	)	-37.5	%		8		0.1	%
Net income	$	24,035		$	31,248		$	21,503	$	(7,213	)	-23.1	%	$	2,532		11.8	%
Per share data
Earnings per share - basic	$	0.35		$	0.46		$	0.32	$	(0.11	)	-23.9	%	$	0.03		9.4	%
Earnings per share - diluted	$	0.35		$	0.46		$	0.32	$	(0.11	)	-23.9	%	$	0.03		9.4	%
Dividends per share	$	0.23		$	0.23		$	0.23		—		0.0	%		—		0.0	%
Weighted average shares outstanding
Basic		67,736,298			67,687,365			67,619,571
Diluted		67,892,532			67,845,785			67,770,174
Period end shares outstanding		67,740,901			67,729,434			67,623,601
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)	6/30/2017			3/31/2017			6/30/2016			$ Change			% Change		$ Change			% Change
Nonaccrual loans
Alabama	$	1,723		$	1,649		$	1,379		$	74		4.5	%	$	344		24.9	%
Florida		3,174			3,559			1,806			(385	)	-10.8	%		1,368		75.7	%
Mississippi (2)		63,889			49,349			54,543			14,540		29.5	%		9,346		17.1	%
Tennessee (3)		4,975			5,185			5,345			(210	)	-4.1	%		(370	)	-6.9	%
Texas		383			1,565			2,055			(1,182	)	-75.5	%		(1,672	)	-81.4	%
Total nonaccrual loans		74,144			61,307			65,128			12,837		20.9	%		9,016		13.8	%
Other real estate
Alabama		13,301			13,953			18,031			(652	)	-4.7	%		(4,730	)	-26.2	%
Florida		17,377			21,577			28,052			(4,200	)	-19.5	%		(10,675	)	-38.1	%
Mississippi (2)		14,377			14,974			14,435			(597	)	-4.0	%		(58	)	-0.4	%
Tennessee (3)		3,363			4,706			7,432			(1,343	)	-28.5	%		(4,069	)	-54.7	%
Texas		1,540			758			1,552			782		n/m			(12	)	-0.8	%
Total other real estate		49,958			55,968			69,502			(6,010	)	-10.7	%		(19,544	)	-28.1	%
Total nonperforming assets	$	124,102		$	117,275		$	134,630		$	6,827		5.8	%	$	(10,528	)	-7.8	%
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,216		$	1,307		$	3,382		$	(91	)	-7.0	%	$	(2,166	)	-64.0	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	29,906		$	31,147		$	23,473		$	(1,241	)	-4.0	%	$	6,433		27.4	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (4)	6/30/2017			3/31/2017			6/30/2016			$ Change			% Change		$ Change			% Change
Beginning Balance	$	72,445		$	71,265		$	69,668		$	1,180		1.7	%	$	2,777		4.0	%
Provision for loan losses		2,921			2,762			2,596			159		5.8	%		325		12.5	%
Charge-offs		(2,118	)		(4,202	)		(3,251	)		2,084		49.6	%		1,133		34.9	%
Recoveries		2,936			2,620			2,783			316		12.1	%		153		5.5	%
Net recoveries (charge-offs)		818			(1,582	)		(468	)		2,400		n/m			1,286		n/m
Ending Balance	$	76,184		$	72,445		$	71,796		$	3,739		5.2	%	$	4,388		6.1	%
PROVISION FOR LOAN LOSSES (4)
Alabama	$	866		$	1,189		$	1,189		$	(323	)	-27.2	%	$	(323	)	-27.2	%
Florida		(975	)		3			(364	)		(978	)	n/m			(611	)	n/m
Mississippi (2)		2,268			1,826			(833	)		442		24.2	%		3,101		n/m
Tennessee (3)		322			208			726			114		54.8	%		(404	)	-55.6	%
Texas		440			(464	)		1,878			904		n/m			(1,438	)	-76.6	%
Total provision for loan losses	$	2,921		$	2,762		$	2,596		$	159		5.8	%	$	325		12.5	%
NET (RECOVERIES) CHARGE-OFFS (4)
Alabama	$	(29	)	$	66		$	436		$	(95	)	n/m		$	(465	)	n/m
Florida		(973	)		(155	)		(595	)		(818	)	n/m			(378	)	-63.5	%
Mississippi (2)		33			1,759			(237	)		(1,726	)	-98.1	%		270		n/m
Tennessee (3)		146			83			252			63		75.9	%		(106	)	-42.1	%
Texas		5			(171	)		612			176		n/m			(607	)	-99.2	%
Total net (recoveries) charge-offs	$	(818	)	$	1,582		$	468		$	(2,400	)	n/m		$	(1,286	)	n/m
(1) - Excludes acquired loans and covered other real estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes acquired loans
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands)
(unaudited)
	Quarter Ended															Six Months Ended
AVERAGE BALANCES	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016			6/30/2017			6/30/2016
Securities AFS-taxable	$	2,334,600		$	2,252,162		$	2,271,503		$	2,249,109		$	2,214,040		$	2,293,609		$	2,212,760
Securities AFS-nontaxable		75,640			88,522			91,495			95,233			99,296			82,045			102,570
Securities HTM-taxable		1,108,158			1,124,692			1,101,382			1,115,053			1,122,463			1,116,379			1,132,449
Securities HTM-nontaxable		32,878			33,009			33,675			34,179			34,785			32,943			35,313
Total securities		3,551,276			3,498,385			3,498,055			3,493,574			3,470,584			3,524,976			3,483,092
Loans (including loans held for sale)		8,348,758			8,074,449			7,855,444			7,658,089			7,505,409			8,212,361			7,425,871
Acquired loans		315,558			250,482			282,197			317,273			349,740			283,200			364,088
Fed funds sold and rev repos		3,184			397			1,418			1,352			1,263			1,798			823
Other earning assets		77,770			79,515			80,608			68,706			64,000			78,638			65,351
Total earning assets		12,296,546			11,903,228			11,717,722			11,538,994			11,390,996			12,100,973			11,339,225
Allowance for loan losses		(83,328	)		(83,394	)		(82,604	)		(82,301	)		(83,614	)		(83,361	)		(82,376	)
Cash and due from banks		307,966			310,542			314,420			299,670			271,135			309,247			276,524
Other assets		1,229,981			1,235,469			1,238,029			1,243,854			1,240,846			1,232,710			1,247,062
Total assets	$	13,751,165		$	13,365,845		$	13,187,567		$	13,000,217		$	12,819,363		$	13,559,569		$	12,780,435
Interest-bearing demand deposits	$	2,035,491		$	1,981,982		$	1,920,273		$	1,848,084		$	1,830,107		$	2,008,884		$	1,848,075
Savings deposits		3,337,374			3,319,572			3,049,733			3,101,161			3,221,850			3,328,522			3,205,383
Time deposits		1,777,529			1,650,251			1,638,853			1,667,345			1,678,564			1,714,242			1,678,070
Total interest-bearing deposits		7,150,394			6,951,805			6,608,859			6,616,590			6,730,521			7,051,648			6,731,528
Fed funds purchased and repos		525,523			498,963			494,193			481,071			488,512			512,316			502,846
Short-term borrowings		1,047,107			887,848			435,576			311,473			319,288			967,917			366,452
Long-term FHLB advances		141,097			251,033			685,844			751,095			597,269			195,761			549,207
Subordinated notes		—			—			40,757			49,988			49,980			—			49,976
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		8,925,977			8,651,505			8,327,085			8,272,073			8,247,426			8,789,498			8,261,865
Noninterest-bearing deposits		3,110,125			3,008,176			3,160,959			3,060,331			2,927,469			3,059,432			2,881,876
Other liabilities		162,823			173,066			166,379			136,971			131,627			167,917			132,931
Total liabilities		12,198,925			11,832,747			11,654,423			11,469,375			11,306,522			12,016,847			11,276,672
Shareholders' equity		1,552,240			1,533,098			1,533,144			1,530,842			1,512,841			1,542,722			1,503,763
Total liabilities and equity	$	13,751,165		$	13,365,845		$	13,187,567		$	13,000,217		$	12,819,363		$	13,559,569		$	12,780,435
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands)
(unaudited)
PERIOD END BALANCES	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016
Cash and due from banks	$	318,329		$	379,590		$	327,706		$	383,945		$	322,049
Fed funds sold and rev repos		6,900			500			500			500			3,198
Securities available for sale		2,447,688			2,365,554			2,356,682			2,410,947			2,388,306
Securities held to maturity		1,139,754			1,156,067			1,158,643			1,143,234			1,173,204
Loans held for sale (LHFS)		203,652			174,090			175,927			242,097			213,546
Loans held for investment (LHFI)		8,296,045			8,004,657			7,851,213			7,499,204			7,405,181
Allowance for loan losses		(76,184	)		(72,445	)		(71,265	)		(70,871	)		(71,796	)
Net LHFI		8,219,861			7,932,212			7,779,948			7,428,333			7,333,385
Acquired loans		314,910			218,242			272,247			295,737			339,035
Allowance for loan losses, acquired loans		(7,423	)		(10,006	)		(11,397	)		(11,380	)		(12,480	)
Net acquired loans		307,487			208,236			260,850			284,357			326,555
Net LHFI and acquired loans		8,527,348			8,140,448			8,040,798			7,712,690			7,659,940
Premises and equipment, net		182,315			183,311			184,987			190,930			192,732
Mortgage servicing rights		82,628			82,758			80,239			65,514			62,814
Goodwill		379,627			366,156			366,156			366,156			366,156
Identifiable intangible assets		19,422			19,117			20,680			22,366			24,058
Other real estate		49,958			55,968			62,051			64,993			69,890
Other assets		551,517			566,802			577,964			558,166			554,456
Total assets	$	13,909,138		$	13,490,361		$	13,352,333		$	13,161,538		$	13,030,349
Deposits:
Noninterest-bearing	$	3,092,915		$	3,209,727		$	2,973,238		$	3,111,603		$	2,921,016
Interest-bearing		7,330,476			6,894,745			7,082,774			6,574,098			6,610,508
Total deposits		10,423,391			10,104,472			10,056,012			9,685,701			9,531,524
Fed funds purchased and repos		508,068			524,335			539,817			514,918			606,336
Short-term borrowings		1,222,592			864,690			769,778			412,792			360,434
Long-term FHLB advances		978			250,994			251,049			751,075			751,106
Subordinated notes		—			—			—			49,993			49,985
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		130,335			146,053			153,613			150,442			145,641
Total liabilities		12,347,220			11,952,400			11,832,125			11,626,777			11,506,882
Common stock		14,114			14,112			14,091			14,090			14,090
Capital surplus		367,075			365,951			366,563			365,553			364,516
Retained earnings		1,209,238			1,200,903			1,185,352			1,172,193			1,157,025
Accum other comprehensive loss, net of tax		(28,509	)		(43,005	)		(45,798	)		(17,075	)		(12,164	)
Total shareholders' equity		1,561,918			1,537,961			1,520,208			1,534,761			1,523,467
Total liabilities and equity	$	13,909,138		$	13,490,361		$	13,352,333		$	13,161,538		$	13,030,349
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands except per share data)
(unaudited)
	Quarter Ended													Six Months Ended
INCOME STATEMENTS	6/30/2017			3/31/2017			12/31/2016		9/30/2016			6/30/2016		6/30/2017			6/30/2016
Interest and fees on LHFS & LHFI-FTE	$	89,486		$	83,790		$	81,346	$	80,649		$	77,777	$	173,276		$	154,012
Interest and fees on acquired loans		6,263			5,189			8,290		6,781			8,051		11,452			15,073
Interest on securities-taxable		19,377			19,197			18,775		19,351			19,402		38,574			39,488
Interest on securities-tax exempt-FTE		1,178			1,300			1,340		1,388			1,429		2,478			2,926
Interest on fed funds sold and rev repos		11			1			4		5			4		12			5
Other interest income		371			267			335		223			200		638			430
Total interest income-FTE		116,686			109,744			110,090		108,397			106,863		226,430			211,934
Interest on deposits		5,107			3,945			3,380		3,208			3,122		9,052			6,160
Interest on fed funds pch and repos		1,037			698			471		411			404		1,735			835
Other interest expense		3,628			2,673			2,662		2,603			2,428		6,301			4,817
Total interest expense		9,772			7,316			6,513		6,222			5,954		17,088			11,812
Net interest income-FTE		106,914			102,428			103,577		102,175			100,909		209,342			200,122
Provision for loan losses, LHFI		2,921			2,762			1,834		4,284			2,596		5,683			4,839
Provision for loan losses, acquired loans		(2,564	)		(1,605	)		1,150		691			607		(4,169	)		1,916
Net interest income after provision-FTE		106,557			101,271			100,593		97,200			97,706		207,828			193,367
Service charges on deposit accounts		10,755			10,832			11,444		11,677			11,051		21,587			22,132
Bank card and other fees		7,370			6,500			6,796		6,756			7,436		13,870			14,354
Mortgage banking, net		9,008			10,185			5,428		7,364			6,721		19,193			15,420
Insurance commissions		9,745			9,212			8,459		10,074			9,638		18,957			18,231
Wealth management		7,674			7,413			7,505		7,571			8,009		15,087			15,416
Other, net		5,637			1,891			2,092		1,274			1,372		7,528			2,260
Nonint inc-excl sec gains (losses), net		50,189			46,033			41,724		44,716			44,227		96,222			87,813
Security gains (losses), net		1			—			—		—			—		1			(310	)
Total noninterest income		50,190			46,033			41,724		44,716			44,227		96,223			87,503
Salaries and employee benefits		59,060			57,302			58,168		57,250			67,018		116,362			124,219
Defined benefit plan termination		17,644			—			—		—			—		17,644			—
Services and fees		15,009			15,332			14,751		14,947			14,522		30,341			28,997
Net occupancy-premises		6,210			6,238			6,426		6,440			5,928		12,448			12,116
Equipment expense		6,162			5,998			6,172		6,063			5,896		12,160			11,990
Other real estate expense		383			1,759			525		(1,313	)		1,193		2,142			1,374
FDIC assessment expense		2,686			2,640			2,562		2,911			2,959		5,326			5,770
Other expense		14,921			12,788			11,663		11,610			12,663		27,709			24,657
Total noninterest expense		122,075			102,057			100,267		97,908			110,179		224,132			209,123
Income before income taxes and tax eq adj		34,672			45,247			42,050		44,008			31,754		79,919			71,747
Tax equivalent adjustment		4,910			4,838			4,725		4,611			4,532		9,748			9,005
Income before income taxes		29,762			40,409			37,325		39,397			27,222		70,171			62,742
Income taxes		5,727			9,161			8,402		8,415			5,719		14,888			14,236
Net income	$	24,035		$	31,248		$	28,923	$	30,982		$	21,503	$	55,283		$	48,506
Per share data
Earnings per share - basic	$	0.35		$	0.46		$	0.43	$	0.46		$	0.32	$	0.82		$	0.72
Earnings per share - diluted	$	0.35		$	0.46		$	0.43	$	0.46		$	0.32	$	0.81		$	0.72
Dividends per share	$	0.23		$	0.23		$	0.23	$	0.23		$	0.23	$	0.46		$	0.46
Weighted average shares outstanding
Basic		67,736,298			67,687,365			67,627,496		67,625,085			67,619,571		67,711,966			67,614,616
Diluted		67,892,532			67,845,785			67,817,770		67,793,203			67,770,174		67,864,414			67,761,315
Period end shares outstanding		67,740,901			67,729,434			67,628,618		67,626,939			67,623,601		67,740,901			67,623,601
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016
Nonaccrual loans
Alabama	$	1,723		$	1,649		$	665		$	1,403		$	1,379
Florida		3,174			3,559			3,644			3,719			1,806
Mississippi (2)		63,889			49,349			37,771			41,968			54,543
Tennessee (3)		4,975			5,185			6,213			6,620			5,345
Texas		383			1,565			941			700			2,055
Total nonaccrual loans		74,144			61,307			49,234			54,410			65,128
Other real estate
Alabama		13,301			13,953			15,989			15,574			18,031
Florida		17,377			21,577			22,582			25,147			28,052
Mississippi (2)		14,377			14,974			15,646			16,659			14,435
Tennessee (3)		3,363			4,706			6,183			6,061			7,432
Texas		1,540			758			1,651			1,552			1,552
Total other real estate		49,958			55,968			62,051			64,993			69,502
Total nonperforming assets	$	124,102		$	117,275		$	111,285		$	119,403		$	134,630
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,216		$	1,307		$	1,832		$	953		$	3,382
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	29,906		$	31,147		$	28,345		$	25,570		$	23,473
	Quarter Ended															Six Months Ended
ALLOWANCE FOR LOAN LOSSES (4)	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016			6/30/2017			6/30/2016
Beginning Balance	$	72,445		$	71,265		$	70,871		$	71,796		$	69,668		$	71,265		$	67,619
Provision for loan losses		2,921			2,762			1,834			4,284			2,596			5,683			4,839
Charge-offs		(2,118	)		(4,202	)		(4,037	)		(8,279	)		(3,251	)		(6,320	)		(6,614	)
Recoveries		2,936			2,620			2,597			3,070			2,783			5,556			5,952
Net recoveries (charge-offs)		818			(1,582	)		(1,440	)		(5,209	)		(468	)		(764	)		(662	)
Ending Balance	$	76,184		$	72,445		$	71,265		$	70,871		$	71,796		$	76,184		$	71,796
PROVISION FOR LOAN LOSSES (4)
Alabama	$	866		$	1,189		$	763		$	132		$	1,189		$	2,055		$	1,729
Florida		(975	)		3			(655	)		31			(364	)		(972	)		(1,182	)
Mississippi (2)		2,268			1,826			1,873			703			(833	)		4,094			1,015
Tennessee (3)		322			208			(118	)		151			726			530			864
Texas		440			(464	)		(29	)		3,267			1,878			(24	)		2,413
Total provision for loan losses	$	2,921		$	2,762		$	1,834		$	4,284		$	2,596		$	5,683		$	4,839
NET (RECOVERIES) CHARGE-OFFS (4)
Alabama	$	(29	)	$	66		$	368		$	38		$	436		$	37		$	499
Florida		(973	)		(155	)		(502	)		(169	)		(595	)		(1,128	)		(1,269	)
Mississippi (2)		33			1,759			1,591			2,484			(237	)		1,792			(311	)
Tennessee (3)		146			83			(8	)		74			252			229			260
Texas		5			(171	)		(9	)		2,782			612			(166	)		1,483
Total net (recoveries) charge-offs	$	(818	)	$	1,582		$	1,440		$	5,209		$	468		$	764		$	662
(1) - Excludes acquired loans and covered other real estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes acquired loans
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2017
(unaudited)
	Quarter Ended															Six Months Ended
FINANCIAL RATIOS AND OTHER DATA	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016			6/30/2017		6/30/2016
Return on equity		6.21	%		8.27	%		7.51	%		8.05	%		5.72	%	7.23	%	6.49	%
Return on average tangible equity		8.68	%		11.39	%		10.41	%		11.16	%		8.08	%	10.02	%	9.16	%
Return on assets		0.70	%		0.95	%		0.87	%		0.95	%		0.67	%	0.82	%	0.76	%
Interest margin - Yield - FTE		3.81	%		3.74	%		3.74	%		3.74	%		3.77	%	3.77	%	3.76	%
Interest margin - Cost		0.32	%		0.25	%		0.22	%		0.21	%		0.21	%	0.28	%	0.21	%
Net interest margin - FTE		3.49	%		3.49	%		3.52	%		3.52	%		3.56	%	3.49	%	3.55	%
Efficiency ratio (1)		64.50	%		66.67	%		66.08	%		63.81	%		67.20	%	65.57	%	67.04	%
Full-time equivalent employees		2,858			2,799			2,788			2,787			2,818
CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans		-0.04	%		0.08	%		0.07	%		0.27	%		0.03	%	0.02	%	0.02	%
Provision for loan losses/average loans		0.14	%		0.14	%		0.09	%		0.22	%		0.14	%	0.14	%	0.13	%
Nonperforming loans/total loans (incl LHFS)		0.87	%		0.75	%		0.61	%		0.70	%		0.85	%
Nonperforming assets/total loans (incl LHFS)		1.46	%		1.43	%		1.39	%		1.54	%		1.77	%
Nonperforming assets/total loans (incl LHFS) +ORE		1.45	%		1.42	%		1.38	%		1.53	%		1.75	%
ALL/total loans (excl LHFS)		0.92	%		0.91	%		0.91	%		0.95	%		0.97	%
ALL-commercial/total commercial loans		0.99	%		0.97	%		0.97	%		1.02	%		1.05	%
ALL-consumer/total consumer and home mortgage loans		0.67	%		0.67	%		0.68	%		0.68	%		0.70	%
ALL/nonperforming loans		102.75	%		118.17	%		144.75	%		130.25	%		110.24	%
ALL/nonperforming loans (excl specifically reviewed impaired loans)		277.42	%		263.73	%		267.40	%		256.56	%		231.13	%
CAPITAL RATIOS
Total equity/total assets		11.23	%		11.40	%		11.39	%		11.66	%		11.69	%
Tangible equity/tangible assets		8.61	%		8.80	%		8.74	%		8.97	%		8.97	%
Tangible equity/risk-weighted assets		11.19	%		11.49	%		11.39	%		11.85	%		11.85	%
Tier 1 leverage ratio		9.56	%		9.86	%		9.90	%		9.92	%		9.93	%
Common equity tier 1 capital ratio		11.73	%		12.19	%		12.16	%		12.35	%		12.32	%
Tier 1 risk-based capital ratio		12.30	%		12.79	%		12.76	%		12.97	%		12.94	%
Total risk-based capital ratio		13.11	%		13.61	%		13.59	%		13.82	%		13.82	%
STOCK PERFORMANCE
Market value-Close	$	32.16		$	31.79		$	35.65		$	27.56		$	24.85
Book value	$	23.06		$	22.71		$	22.48		$	22.69		$	22.53
Tangible book value	$	17.17		$	17.02		$	16.76		$	16.95		$	16.76
(1) - The efficiency ratio is noninterest expense to total net interest income (FTE) and noninterest income, excluding security gains (losses), amortization of partnership tax credits, amortization of purchased intangibles, and significant non-routine income and expense items as disclosed in Note 8.
(2) - Excludes acquired loans and covered other real estate.
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2017

($ in thousands)

(unaudited)

Note 1 – Business Combinations

On April 7, 2017, Trustmark Corporation completed its merger with RB Bancorporation (Reliance), the holding company for Reliance Bank, which had seven offices serving the Huntsville, Alabama metropolitan service area (MSA). Reliance Bank was merged into Trustmark National Bank simultaneously with the merger of Trustmark and RB Bancorporation. Under the terms of the Merger Agreement dated November 14, 2016, Trustmark paid $22.00 in cash for each share of Reliance common stock outstanding, which represented total consideration for Reliance common shareholders of approximately $23.7 million.

The merger with Reliance was consistent with Trustmark’s strategic plan to selectively expand the Trustmark franchise and enhance the Trustmark franchise in north Alabama.

This merger was accounted for in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, “Business Combinations.” Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the merger date. The fair values of the assets acquired and liabilities assumed are subject to adjustment if additional information relative to the closing date fair values becomes available through the measurement period, which is not to exceed one year from the merger date of April 7, 2017.

The statement of assets purchased and liabilities assumed in the Reliance merger is presented below at their estimated fair values as of the merger date of April 7, 2017 ($ in thousands):

Assets:
Cash and due from banks	$	5,013
Federal funds sold and securities purchased under reverse repurchase agreements		6,900
Securities		54,843
Acquired loans		117,447
Premises and equipment, net		3,700
Identifiable intangible assets		1,850
Other real estate		475
Other assets		6,037
Total assets		196,265
Liabilities:
Deposits		166,158
Other borrowings		17,469
Other liabilities		1,322
Total liabilities		184,949
Net identifiable assets acquired at fair value		11,316
Goodwill		13,472
Net assets acquired at fair value	$	24,788

The excess of the consideration paid over the estimated fair value of the net assets acquired was $13.5 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represent the core deposit intangible at fair value at the merger date. The core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately ten years.

Loans acquired from Reliance were evaluated under a fair value process. Loans with evidence of deterioration in credit quality and for which it was probable at acquisition that Trustmark would not be able to collect all contractually required payments are referred to as acquired impaired loans and accounted for in accordance with FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

The operations of Reliance are included in Trustmark’s operating results from April 7, 2017 and did not have a material impact on Trustmark’s results of operations. During the second quarter of 2017, Trustmark included non-routine merger transaction expenses in other noninterest expense totaling $3.2 million (change in control expense of $1.3 million; professional fees, contract termination and other expenses of $1.9 million).

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2017

($ in thousands)

(unaudited)

Note 2 - Securities Available for Sale and Held to Maturity

The following table is a summary of the estimated fair value of securities available for sale and the amortized cost of securities held to maturity ($ in thousands):

	6/30/2017		3/31/2017		12/31/2016		9/30/2016		6/30/2016
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	51,277	$	53,247	$	55,763	$	58,234	$	61,359
Issued by U.S. Government sponsored agencies		272		274		276		283		286
Obligations of states and political subdivisions		96,514		109,895		115,373		124,641		129,285
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		58,422		42,667		42,786		36,788		29,282
Issued by FNMA and FHLMC		860,571		733,214		631,084		561,989		428,542
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,157,241		1,202,719		1,267,951		1,374,399		1,474,357
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		223,391		223,538		243,449		254,613		265,195
Total securities available for sale	$	2,447,688	$	2,365,554	$	2,356,682	$	2,410,947	$	2,388,306
SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	3,669	$	3,658	$	3,647	$	3,636	$	31,142
Obligations of states and political subdivisions		46,098		46,273		46,303		52,937		53,473
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		14,399		14,977		15,478		16,183		16,415
Issued by FNMA and FHLMC		144,282		118,733		81,299		39,989		42,267
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		740,042		771,296		803,474		831,662		824,175
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		191,264		201,130		208,442		198,827		205,732
Total securities held to maturity	$	1,139,754	$	1,156,067	$	1,158,643	$	1,143,234	$	1,173,204

During 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $46.6 million ($28.8 million, net of tax). The net unrealized holding loss is amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. At June 30, 2017, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive loss in the accompanying balance sheet totaled approximately $21.8 million ($13.4 million, net of tax).

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 96% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2017
($ in thousands)
(unaudited)
Note 3 – Loan Composition
LHFI BY TYPE (excluding acquired loans)	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016
Loans secured by real estate:
Construction, land development and other land loans	$	922,029		$	859,927		$	831,437		$	766,685		$	718,438
Secured by 1-4 family residential properties		1,655,968			1,656,837			1,660,043			1,592,453			1,620,013
Secured by nonfarm, nonresidential properties		2,109,367			2,064,352			2,034,176			1,916,153			1,900,784
Other real estate secured		432,208			399,636			318,148			317,680			323,734
Commercial and industrial loans		1,635,000			1,540,783			1,528,434			1,421,382			1,466,511
Consumer loans		170,858			166,314			170,562			170,073			166,436
State and other political subdivision loans		936,860			910,493			917,515			875,973			805,401
Other loans		433,755			406,315			390,898			438,805			403,864
LHFI		8,296,045			8,004,657			7,851,213			7,499,204			7,405,181
Allowance for loan losses		(76,184	)		(72,445	)		(71,265	)		(70,871	)		(71,796	)
Net LHFI	$	8,219,861		$	7,932,212		$	7,779,948		$	7,428,333		$	7,333,385
ACQUIRED LOANS BY TYPE (1)	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016
Loans secured by real estate:
Construction, land development and other land loans	$	35,054		$	17,651		$	20,850		$	25,040		$	38,016
Secured by 1-4 family residential properties		74,313			54,721			69,540			76,601			81,676
Secured by nonfarm, nonresidential properties		132,663			92,075			103,820			110,606			119,698
Other real estate secured		19,553			16,275			19,010			20,903			25,272
Commercial and industrial loans		34,375			20,691			36,896			39,519			49,760
Consumer loans		2,833			2,664			3,365			3,878			4,295
Other loans		16,119			14,165			18,766			19,190			20,318
Acquired loans		314,910			218,242			272,247			295,737			339,035
Allowance for loan losses, acquired loans		(7,423	)		(10,006	)		(11,397	)		(11,380	)		(12,480	)
Net acquired loans	$	307,487		$	208,236		$	260,850		$	284,357		$	326,555
(1) Trustmark revised the presentation of acquired loans by eliminating the segmentation of acquired noncovered loans and acquired covered loans due to the significantly reduced size of the acquired covered loan portfolio.

During the first quarter of 2017, Trustmark transferred the remaining balance of the acquired loans not accounted for under FASB ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” to LHFI due to the discount on these loans being fully amortized. The balance of these transferred loans totaled $36.7 million.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2017
($ in thousands)
(unaudited)
Note 3 – Loan Composition (continued)
	June 30, 2017
LHFI - COMPOSITION BY REGION (1)	Total		Alabama		Florida		Mississippi (Central and Southern Regions)		Tennessee (Memphis, TN and Northern MS Regions)		Texas
Loans secured by real estate:
Construction, land development and other land loans	$	922,029	$	257,674	$	51,436	$	312,059	$	37,529	$	263,331
Secured by 1-4 family residential properties		1,655,968		95,896		50,122		1,394,674		97,633		17,643
Secured by nonfarm, nonresidential properties		2,109,367		354,161		203,932		885,278		158,187		507,809
Other real estate secured		432,208		59,798		2,989		195,528		37,557		136,336
Commercial and industrial loans		1,635,000		168,627		23,317		843,150		347,865		252,041
Consumer loans		170,858		23,081		3,805		125,112		16,667		2,193
State and other political subdivision loans		936,860		83,549		28,670		582,333		29,366		212,942
Other loans		433,755		53,758		18,443		280,612		38,549		42,393
Loans	$	8,296,045	$	1,096,544	$	382,714	$	4,618,746	$	763,353	$	1,434,688
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	60,773	$	13,483	$	17,231	$	24,597	$	2,369	$	3,093
Development		47,140		6,061		5,332		14,709		550		20,488
Unimproved land		105,896		18,271		15,759		39,721		14,906		17,239
1-4 family construction		184,978		51,575		10,981		77,400		1,900		43,122
Other construction		523,242		168,284		2,133		155,632		17,804		179,389
Construction, land development and other land loans	$	922,029	$	257,674	$	51,436	$	312,059	$	37,529	$	263,331
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	311,186	$	101,742	$	46,732	$	100,677	$	17,662	$	44,373
Office		211,628		32,957		22,819		73,351		6,113		76,388
Nursing homes/assisted living		143,806		8,605		—		128,639		6,562		—
Hotel/motel		239,188		55,752		41,825		63,381		35,883		42,347
Mini-storage		137,633		12,583		—		41,384		14,255		69,411
Industrial		101,390		15,800		9,919		22,091		4,586		48,994
Health care		30,636		4,475		804		24,351		—		1,006
Convenience stores		21,306		1,381		—		9,080		930		9,915
Other		92,676		14,674		17,859		11,878		6,576		41,689
Total income producing loans		1,289,449		247,969		139,958		474,832		92,567		334,123
Owner-occupied:
Office		136,259		18,373		23,471		66,766		5,271		22,378
Churches		86,035		12,701		2,044		43,930		20,640		6,720
Industrial warehouses		143,292		4,508		3,497		61,953		13,172		60,162
Health care		119,754		23,479		7,167		69,204		4,441		15,463
Convenience stores		100,424		9,053		13,001		52,291		1,115		24,964
Retail		45,605		5,943		6,893		24,189		1,950		6,630
Restaurants		33,552		3,482		852		25,668		1,622		1,928
Auto dealerships		23,438		9,726		37		8,757		4,918		—
Other		131,559		18,927		7,012		57,688		12,491		35,441
Total owner-occupied loans		819,918		106,192		63,974		410,446		65,620		173,686
Loans secured by nonfarm, nonresidential properties	$	2,109,367	$	354,161	$	203,932	$	885,278	$	158,187	$	507,809
(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2017

($ in thousands)

(unaudited)

Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities

The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:

	Quarter Ended										Six Months Ended
	6/30/2017		3/31/2017		12/31/2016		9/30/2016		6/30/2016		6/30/2017		6/30/2016
Securities – taxable	2.26	%	2.31	%	2.21	%	2.29	%	2.34	%	2.28	%	2.37	%
Securities – nontaxable	4.35	%	4.34	%	4.26	%	4.27	%	4.29	%	4.35	%	4.27	%
Securities – total	2.32	%	2.38	%	2.29	%	2.36	%	2.41	%	2.35	%	2.45	%
Loans - LHFI & LHFS	4.30	%	4.21	%	4.12	%	4.19	%	4.17	%	4.25	%	4.17	%
Acquired loans	7.96	%	8.40	%	11.69	%	8.50	%	9.26	%	8.15	%	8.33	%
Loans - total	4.43	%	4.33	%	4.38	%	4.36	%	4.39	%	4.38	%	4.36	%
FF sold & rev repo	1.39	%	1.02	%	1.12	%	1.47	%	1.27	%	1.35	%	1.22	%
Other earning assets	1.91	%	1.36	%	1.65	%	1.29	%	1.26	%	1.64	%	1.32	%
Total earning assets	3.81	%	3.74	%	3.74	%	3.74	%	3.77	%	3.77	%	3.76	%
Interest-bearing deposits	0.29	%	0.23	%	0.20	%	0.19	%	0.19	%	0.26	%	0.18	%
FF pch & repo	0.79	%	0.57	%	0.38	%	0.34	%	0.33	%	0.68	%	0.33	%
Other borrowings	1.16	%	0.90	%	0.87	%	0.88	%	0.95	%	1.04	%	0.94	%
Total interest-bearing liabilities	0.44	%	0.34	%	0.31	%	0.30	%	0.29	%	0.39	%	0.29	%
Net interest margin	3.49	%	3.49	%	3.52	%	3.52	%	3.56	%	3.49	%	3.55	%
Net interest margin excluding acquired loans	3.37	%	3.38	%	3.31	%	3.38	%	3.38	%	3.38	%	3.39	%

Reflected in the table above are yields on earning assets and liabilities, along with the net interest margin which equals reported net interest income-FTE, annualized, as a percent of average earning assets. In addition, the table includes net interest margin excluding acquired loans, which equals reported net interest income-FTE excluding interest income on acquired loans, annualized, as a percent of average earning assets excluding average acquired loans.

During the second quarter of 2017, the yield on acquired loans totaled 7.96% and included $952 thousand in recoveries from the settlement of debt, which represented approximately 1.21% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the second quarter of 2017 totaled 3.37% and remained relatively stable when compared to the first quarter of 2017, as growth in the yield on the loans held for investment and held for sale portfolio was offset by higher costs of interest-bearing deposits.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net positive ineffectiveness of $835 thousand and $2.8 million for the quarters ended June 30, 2017 and March 31, 2017, respectively.

The following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:

	Quarter Ended															Six Months Ended
	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016			6/30/2017			6/30/2016
Mortgage servicing income, net	$	5,439		$	5,458		$	5,218		$	5,271		$	5,177		$	10,897		$	10,235
Change in fair value-MSR from runoff		(2,896	)		(2,387	)		(2,739	)		(2,862	)		(2,500	)		(5,283	)		(4,505	)
Gain on sales of loans, net		5,001			3,550			6,054			6,410			5,480			8,551			8,071
Other, net		629			772			(2,925	)		(299	)		498			1,401			3,140
Mortgage banking income before hedge ineffectiveness		8,173			7,393			5,608			8,520			8,655			15,566			16,941
Change in fair value-MSR from market changes		(1,291	)		1,466			13,112			381			(7,033	)		175			(13,899	)
Change in fair value of derivatives		2,126			1,326			(13,292	)		(1,537	)		5,099			3,452			12,378
Net positive (negative) hedge ineffectiveness		835			2,792			(180	)		(1,156	)		(1,934	)		3,627			(1,521	)
Mortgage banking, net	$	9,008		$	10,185		$	5,428		$	7,364		$	6,721		$	19,193		$	15,420

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2017

($ in thousands)

(unaudited)

Note 6 – Salaries and Employee Benefit Plans

Early Retirement Program

During the second quarter of 2016, Trustmark announced a voluntary early retirement program (ERP) for associates age 60 and above with five or more years of service. The cost of this program is reflected in a one-time, pre-tax charge of approximately $9.3 million (salaries and employee benefits expense of $9.1 million and other miscellaneous expense of $230 thousand), or $0.085 per basic share net of tax, in Trustmark’s second quarter 2016 earnings. As a result of the ERP, during the third and fourth quarters of 2016, Trustmark incurred additional expense of $236 thousand and $268 thousand, respectively, which primarily resulted from additional settlements from pension lump sum elections.

Defined Benefit Pension Plan

Trustmark maintained a noncontributory tax-qualified defined benefit pension plan (Trustmark Capital Accumulation Plan, the “Plan”), in which substantially all associates who began employment prior to 2007 participated. The Plan provided for retirement benefits based on the length of credited service and final average compensation, as defined in the Plan, which vested upon three years of service. Benefit accruals under the plan were frozen in 2009, with the exception of certain associates covered through plans obtained in acquisitions that were subsequently merged into the Plan. As previously reported, on July 26, 2016, the Board of Directors of Trustmark authorized the termination of the Plan, effective as of December 31, 2016. To satisfy commitments made by Trustmark to associates (collectively, the “Continuing Associates”) covered through acquired plans that were merged into the Plan, the Board also approved the spin-off of the portion of the Plan associated with the accrued benefits of the Continuing Associates into a new plan titled the Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions (the “Spin-Off Plan”), effective as of December 31, 2016, immediately prior to the termination of the Plan. In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, Trustmark was required to fully fund the Plan on a termination basis and contributed the additional assets necessary to do so. The final distributions were made from current plan assets and a one-time pension settlement expense of $17.6 million was recognized when paid by Trustmark during the second quarter of 2017. After the distribution of Plan assets during the second quarter of 2017, Trustmark estimates that the annual pension expense will be reduced by $3.0 million to $4.0 million.

Note 7 – Other Noninterest Income and Expense

Other noninterest income consisted of the following for the periods presented ($ in thousands):

	Quarter Ended															Six Months Ended
	6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016			6/30/2017			6/30/2016
Partnership amortization for tax credit purposes	$	(2,287	)	$	(2,274	)	$	(2,479	)	$	(2,479	)	$	(2,479	)	$	(4,561	)	$	(4,958	)
Increase in life insurance cash surrender value		1,782			1,714			1,751			1,746			1,702			3,496			3,394
Other miscellaneous income		6,142			2,451			2,820			2,007			2,149			8,593			3,824
Total other, net	$	5,637		$	1,891		$	2,092		$	1,274		$	1,372		$	7,528		$	2,260

Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.

During the second quarter of 2017, Trustmark received nontaxable proceeds of $4. 9 million related to life insurance acquired as part of a previous acquisition, which was recorded in other miscellaneous income in the table above.

Other noninterest expense consisted of the following for the periods presented ($ in thousands):

	Quarter Ended										Six Months Ended
	6/30/2017		3/31/2017		12/31/2016		9/30/2016		6/30/2016		6/30/2017		6/30/2016
Loan expense	$	2,827	$	2,792	$	2,823	$	3,336	$	3,024	$	5,619	$	6,067
Amortization of intangibles		1,544		1,564		1,686		1,692		1,692		3,108		3,488
Other miscellaneous expense		10,550		8,432		7,154		6,582		7,947		18,982		15,102
Total other expense	$	14,921	$	12,788	$	11,663	$	11,610	$	12,663	$	27,709	$	24,657

As previously discussed in Note 1 – Business Combinations, non-routine Reliance merger transaction expenses totaled $3.2 million and were included in other miscellaneous expense during the second quarter of 2017.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2017

($ in thousands)

(unaudited)

Note 8 – Non-GAAP Financial Measures

In addition to capital ratios defined by U.S. 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. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other tangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.

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. 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. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
June 30, 2017
($ in thousands)
(unaudited)
Note 8 – Non-GAAP Financial Measures (continued)
		Quarter Ended															Six Months Ended
		6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016			6/30/2017			6/30/2016
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity		$	1,552,240		$	1,533,098		$	1,533,144		$	1,530,842		$	1,512,841		$	1,542,722		$	1,503,763
Less: Goodwill			(378,191	)		(366,156	)		(366,156	)		(366,156	)		(366,156	)		(372,207	)		(366,156	)
Identifiable intangible assets			(19,713	)		(19,950	)		(21,585	)		(23,311	)		(24,961	)		(19,831	)		(25,835	)
Total average tangible equity		$	1,154,336		$	1,146,992		$	1,145,403		$	1,141,375		$	1,121,724		$	1,150,684		$	1,111,772
PERIOD END BALANCES
Total shareholders' equity		$	1,561,918		$	1,537,961		$	1,520,208		$	1,534,761		$	1,523,467
Less: Goodwill			(379,627	)		(366,156	)		(366,156	)		(366,156	)		(366,156	)
Identifiable intangible assets			(19,422	)		(19,117	)		(20,680	)		(22,366	)		(24,058	)
Total tangible equity	(a)	$	1,162,869		$	1,152,688		$	1,133,372		$	1,146,239		$	1,133,253
TANGIBLE ASSETS
Total assets		$	13,909,138		$	13,490,361		$	13,352,333		$	13,161,538		$	13,030,349
Less: Goodwill			(379,627	)		(366,156	)		(366,156	)		(366,156	)		(366,156	)
Identifiable intangible assets			(19,422	)		(19,117	)		(20,680	)		(22,366	)		(24,058	)
Total tangible assets	(b)	$	13,510,089		$	13,105,088		$	12,965,497		$	12,773,016		$	12,640,135
Risk-weighted assets	(c)	$	10,391,912		$	10,031,410		$	9,952,123		$	9,670,302		$	9,559,816
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income		$	24,035		$	31,248		$	28,923		$	30,982		$	21,503		$	55,283		$	48,506
Plus: Intangible amortization net of tax			954			966			1,041			1,045			1,045			1,920			2,154
Net income adjusted for intangible amortization		$	24,989		$	32,214		$	29,964		$	32,027		$	22,548		$	57,203		$	50,660
Period end common shares outstanding	(d)		67,740,901			67,729,434			67,628,618			67,626,939			67,623,601
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)			8.68	%		11.39	%		10.41	%		11.16	%		8.08	%		10.02	%		9.16	%
Tangible equity/tangible assets	(a)/(b)		8.61	%		8.80	%		8.74	%		8.97	%		8.97	%
Tangible equity/risk-weighted assets	(a)/(c)		11.19	%		11.49	%		11.39	%		11.85	%		11.85	%
Tangible book value	(a)/(d)*1,000	$	17.17		$	17.02		$	16.76		$	16.95		$	16.76
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity		$	1,561,918		$	1,537,961		$	1,520,208		$	1,534,761		$	1,523,467
AOCI-related adjustments			28,509			43,005			45,798			17,075			12,164
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)			(360,198	)		(347,085	)		(347,442	)		(347,800	)		(348,158	)
Other adjustments and deductions for CET1 (2)			(11,267	)		(10,803	)		(8,637	)		(9,307	)		(10,042	)
CET1 capital	(e)		1,218,962			1,223,078			1,209,927			1,194,729			1,177,431
Additional tier 1 capital instruments plus related surplus			60,000			60,000			60,000			60,000			60,000
Less: additional tier 1 capital deductions			(247	)		(159	)		(267	)		(276	)		(328	)
Additional tier 1 capital			59,753			59,841			59,733			59,724			59,672
Tier 1 capital		$	1,278,715		$	1,282,919		$	1,269,660		$	1,254,453		$	1,237,103
Common equity tier 1 capital ratio	(e)/(c)		11.73	%		12.19	%		12.16	%		12.35	%		12.32	%
(1) Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity.
(2) Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAS), threshold deductions and transition adjustments, as applicable.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2017

($ in thousands)

(unaudited)

Note 8 – Non-GAAP Financial Measures (continued)

Trustmark discloses certain non-GAAP financial measures, including net income adjusted for significant non-routine transactions, because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views net income adjusted for significant non-routine transactions as a measure of our core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. This non-GAAP measure also provides another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.

The following table presents adjustments to net income and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented ($ in thousands, except per share data):

	Quarter Ended												Six Months Ended
	6/30/2017						6/30/2016						6/30/2017						6/30/2016
	Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS
Net Income (GAAP)	$	24,035		$	0.354		$	21,503		$	0.317		$	55,283		$	0.815		$	48,506		$	0.716
Significant non-routine transactions (net of taxes):
Early retirement program expense		—			—			5,738			0.085			—			—			5,738			0.085
Defined benefit plan termination		10,895			0.160			—			—			10,895			0.161			—			—
Reliance merger transaction expenses		1,999			0.029			—			—			1,999			0.029			—			—
Gain on life insurance proceeds		(4,894	)		(0.072	)		—			—			(4,894	)		(0.072	)		—			—
Net Income adjusted for significant non-routine transactions (Non-GAAP)	$	32,035		$	0.471		$	27,241		$	0.402		$	63,283		$	0.933		$	54,244		$	0.801
	Reported			Adjusted			Reported			Adjusted			Reported			Adjusted			Reported			Adjusted
	(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)
Return on equity		6.21	%		8.28	%		5.72	%		7.24	%		7.23	%		8.27	%		6.49	%		7.25	%
Return on average tangible equity		8.68	%		11.46	%		8.08	%		10.14	%		10.02	%		11.43	%		9.16	%		10.20	%
Return on assets		0.70	%		0.93	%		0.67	%		0.85	%		0.82	%		0.94	%		0.76	%		0.85	%