Trustmark Corporation Announces Third Quarter 2017 Financial Results

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) reported net income of $34.6 million in the third quarter of 2017, representing diluted earnings per share of $0.51. This level of earnings resulted in a return on average tangible common equity of 11.95% and a return on average assets of 0.99%. Included in the third quarter financial results was a specific reserve for loan losses related to Hurricane Harvey that reduced net income by $687 thousand, or $0.01 per share. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2017, to shareholders of record on December 1, 2017.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=51703832&lang=en

Gerard R. Host, President and CEO, stated, “Trustmark continued to gain momentum in the third quarter as reflected by its solid financial results. We continued to experience loan growth across our franchise while maintaining strong credit quality as evidenced by declining levels of nonperforming assets and historically low net charge-offs. Our low-cost, core deposit base remains a significant strength of the organization. Our mortgage, insurance and wealth management businesses continued to provide complementary revenue sources to our traditional banking business. While we continue to make investments to enhance the customer experience, we remain focused on disciplined expense management. 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.”

Balance Sheet Management

• Continued diversified loan growth
• Attractive core deposit base

Loans held for investment totaled $8.4 billion at September 30, 2017, reflecting an increase of $111.3 million, or 1.3%, from the prior quarter and $908.1 million, or 12.1%, from the prior year. Loans secured by nonfarm, nonresidential properties increased $63.5 million during the quarter, driven by growth in Mississippi, Florida, Alabama and Texas. Other real estate secured loans increased $50.0 million due to growth in Texas, Mississippi, Alabama and Tennessee. Construction, land development and other land loans increased $28.1 million as growth in construction lending in Alabama and Texas were offset in part by declines in Tennessee and Mississippi. Other loans, which include finance companies, mortgage warehousing and REITs, increased $41.4 million, driven by growth in Mississippi, Alabama and Tennessee. Commercial and industrial loans fell $66.4 million, as growth in Tennessee was more than offset by declines in Mississippi, Texas and Alabama.

Acquired loans totaled $283.8 million at September 30, 2017, a decrease of $31.2 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $8.7 billion at September 30, 2017, up $80.1 million from the prior quarter.

Securities available for sale and held to maturity declined $116.1 million in the third quarter as part of Trustmark’s interest rate risk management strategy and in accordance with Trustmark’s focus on enhancing the composition of its earning assets profile. At September 30, 2017, the balance of securities available for sale and held to maturity totaled $3.5 billion.

Deposits totaled $10.2 billion at September 30, 2017, a decrease of $191.6 million, or 1.8%, from the prior quarter as growth in consumer deposits was more than offset by a seasonal decline in public funds. Trustmark continues to maintain an attractive, low-cost deposit base with a total cost of deposits of 0.25%. The favorable mix of interest-bearing liabilities yielded a total cost of funds of 0.53% for the third quarter of 2017.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At September 30, 2017, Trustmark’s tangible equity to tangible assets ratio was 8.79%, while its total risk-based capital ratio was 13.19%. Tangible book value per share was $17.49 at September 30, 2017, up 4.4% year to date.

Credit Quality

• Specific reserve for loan losses related to Hurricane Harvey
• Recoveries exceeded charge-offs

In the aftermath of Hurricane Harvey, which made landfall in the Texas Gulf Coast region on August 25, 2017, Trustmark initiated a process to assess the storm’s impact on the company and its customers. Fortunately, none of Trustmark’s Houston area facilities sustained damage and reopened as soon as practical following the storm. Trustmark identified all loans where the collateral, project or mailing addresses were located within FEMA designated disaster zip codes and proactively surveyed customers to determine the extent of any damages. Trustmark achieved coverage of approximately 97% of the $1.3 billion of outstanding loans within the designated disaster area. Potential loss exposure was calculated based upon customer responses as to the extent of damage suffered and applicable insurance coverage. Actual results were extrapolated to the remainder of the population. As a result, management increased its allowance for loan losses due to the storm by $1.1 million, which reduced third quarter net income by $687 thousand, or $0.01 per share.

At September 30, 2017, nonperforming loans totaled $69.3 million while other real estate totaled $48.4 million. Collectively, nonperforming assets decreased $6.5 million, or 5.2%, linked quarter and $1.8 million, or 1.5%, year-over-year. Recoveries exceeded charge-offs by $476 thousand during the third quarter.

Allocation of Trustmark's $80.3 million allowance for loan losses represented 1.02% of commercial loans and 0.73% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.96% at September 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 0.99% of total held for investment and acquired loans. Allowance for loan losses represented 301.50% of nonperforming loans, excluding specifically reviewed impaired loans.

Unless noted otherwise, all of the above credit quality metrics exclude acquired loans.

Revenue Generation

• Continued growth in net interest income
• Insurance revenue increases

Net interest income (FTE) in the third quarter totaled $108.9 million, which resulted in a net interest margin of 3.47%. Compared to the prior quarter, net interest income (FTE) increased $2.0 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 third quarter of 2017, the yield on acquired loans totaled 8.78% and included $1.3 million in recoveries from the settlement of debt, which represented approximately 1.78% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the third quarter of 2017 totaled 3.34%, a decline of 3 basis points compared to the second quarter of 2017, primarily due to higher costs of interest-bearing deposits.

Noninterest income totaled $44.5 million in the third quarter, a decline of $5.7 million, or 11.4%, compared to the prior quarter and $236 thousand, or 0.5%, compared to the same period in the previous year. Excluding non-routine, non-taxable proceeds from life insurance acquired as part of a previous acquisition of $4.9 million in the second quarter of 2017, noninterest income declined $816 thousand linked quarter.

Service charges on deposit accounts totaled $11.2 million for the third quarter of 2017, an increase of $468 thousand, or 4.4%, from the prior quarter and a decline of $454 thousand, or 3.9%, year-over-year. The linked quarter change was attributable to a seasonal increase in occurrences of consumer overdrafts while the year-over-year decline reflects a decrease in consumer and business service charges and occurrences of overdrafts. Bank card and other fees totaled $7.2 million in the third quarter, a decline of $220 thousand, or 3.0%, linked quarter and an increase of $394 thousand, or 5.8%, year-over-year. The linked quarter decline reflected a seasonal reduction in interchange income as well as reduced revenue from customer derivatives while increased interchange income and other fees drove the increase year-over-year.

Mortgage banking revenue in the third quarter totaled $4.4 million, down $4.6 million from the prior quarter and $2.9 million year-over-year. The linked quarter decline was primarily due to the net negative mortgage hedge ineffectiveness and a negative mortgage valuation adjustment. Mortgage loan-production volume for the third quarter totaled $341.5 million. Insurance revenue totaled $10.4 million in the third quarter, representing an increase of $653 thousand, or 6.7%, from the prior quarter and $324 thousand, or 3.2%, from the same period one year earlier. These increases were primarily driven by growth in the commercial property and casualty lines of business. Wealth management revenue in the third quarter totaled $7.5 million, down $144 thousand, or 1.9%, from the prior quarter and $41 thousand, or 0.5%, year-over-year. The linked quarter decline was attributable to lower trust fees and brokerage commissions.

Other income, net totaled $3.7 million during the third quarter and included $2.7 million of non-taxable proceeds from bank-owned life insurance, compared to $5.6 million in the previous quarter, which included $4.9 million of non-taxable proceeds from life insurance acquired as part of a previous acquisition.

Expense Management

• Core expense remains well-controlled
• Salary and benefit expense declined linked quarter

Noninterest expense totaled $103.1 million during the third quarter, a decline of $19.0 million, or 15.6%, from the prior quarter. Excluding the non-routine charges related to the termination of Trustmark’s defined benefit pension plan of $17.6 million as well as charges related to the RB Bancorporation merger of $3.2 million in the second quarter, noninterest expense increased $1.9 million. Excluding other real estate expense ($864 thousand) and intangible amortization ($1.5 million), core noninterest expense in the third quarter totaled $100.7 million. Salaries and benefits expense totaled $58.8 million, a marginal decrease from the prior quarter when excluding the aforementioned non-routine pension plan termination charge.

Trustmark remains committed to investments that promote profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 25, 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. A replay of the conference call will also be available through Wednesday, November 8, 2017, in archived format at the same web address or by calling [phone], passcode 10112612.

Trustmark Corporation is a financial services company providing banking and financial solutions through 198 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, 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
September 30, 2017
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES		9/30/2017			6/30/2017			9/30/2016		$ Change			% Change		$ Change			% Change
Securities AFS-taxable	$	2,349,736		$	2,334,600		$	2,249,109		$	15,136		0.6	%	$	100,627		4.5	%
Securities AFS-nontaxable		67,994			75,640			95,233			(7,646	)	-10.1	%		(27,239	)	-28.6	%
Securities HTM-taxable		1,086,773			1,108,158			1,115,053			(21,385	)	-1.9	%		(28,280	)	-2.5	%
Securities HTM-nontaxable		32,829			32,878			34,179			(49	)	-0.1	%		(1,350	)	-3.9	%
Total securities		3,537,332			3,551,276			3,493,574			(13,944	)	-0.4	%		43,758		1.3	%
Loans (including loans held for sale)		8,532,523			8,348,758			7,658,089			183,765		2.2	%		874,434		11.4	%
Acquired loans		299,221			315,558			317,273			(16,337	)	-5.2	%		(18,052	)	-5.7	%
Fed funds sold and rev repos		3,582			3,184			1,352			398		12.5	%		2,230		n/m
Other earning assets		84,320			77,770			68,706			6,550		8.4	%		15,614		22.7	%
Total earning assets		12,456,978			12,296,546			11,538,994			160,432		1.3	%		917,984		8.0	%
Allowance for loan losses		(85,363	)		(83,328	)		(82,301	)		(2,035	)	-2.4	%		(3,062	)	-3.7	%
Cash and due from banks		312,409			307,966			299,670			4,443		1.4	%		12,739		4.3	%
Other assets		1,202,766			1,229,981			1,243,854			(27,215	)	-2.2	%		(41,088	)	-3.3	%
Total assets	$	13,886,790		$	13,751,165		$	13,000,217		$	135,625		1.0	%	$	886,573		6.8	%
Interest-bearing demand deposits	$	2,192,064		$	2,035,491		$	1,848,084		$	156,573		7.7	%	$	343,980		18.6	%
Savings deposits		3,284,323			3,337,374			3,101,161			(53,051	)	-1.6	%		183,162		5.9	%
Time deposits		1,736,683			1,777,529			1,667,345			(40,846	)	-2.3	%		69,338		4.2	%
Total interest-bearing deposits		7,213,070			7,150,394			6,616,590			62,676		0.9	%		596,480		9.0	%
Fed funds purchased and repos		547,863			525,523			481,071			22,340		4.3	%		66,792		13.9	%
Short-term borrowings		1,335,476			1,047,107			311,473			288,369		27.5	%		1,024,003		n/m
Long-term FHLB advances		970			141,097			751,095			(140,127	)	-99.3	%		(750,125	)	-99.9	%
Subordinated notes		—			—			49,988			—		n/m			(49,988	)	-100.0	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Total interest-bearing liabilities		9,159,235			8,925,977			8,272,073			233,258		2.6	%		887,162		10.7	%
Noninterest-bearing deposits		3,003,763			3,110,125			3,060,331			(106,362	)	-3.4	%		(56,568	)	-1.8	%
Other liabilities		145,925			162,823			136,971			(16,898	)	-10.4	%		8,954		6.5	%
Total liabilities		12,308,923			12,198,925			11,469,375			109,998		0.9	%		839,548		7.3	%
Shareholders' equity		1,577,867			1,552,240			1,530,842			25,627		1.7	%		47,025		3.1	%
Total liabilities and equity	$	13,886,790		$	13,751,165		$	13,000,217		$	135,625		1.0	%	$	886,573		6.8	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
PERIOD END BALANCES		9/30/2017			6/30/2017			9/30/2016		$ Change			% Change		$ Change			% Change
Cash and due from banks	$	350,123		$	318,329		$	383,945		$	31,794		10.0	%	$	(33,822	)	-8.8	%
Fed funds sold and rev repos		3,215			6,900			500			(3,685	)	-53.4	%		2,715		n/m
Securities available for sale		2,369,089			2,447,688			2,410,947			(78,599	)	-3.2	%		(41,858	)	-1.7	%
Securities held to maturity		1,102,283			1,139,754			1,143,234			(37,471	)	-3.3	%		(40,951	)	-3.6	%
Loans held for sale (LHFS)		204,157			203,652			242,097			505		0.2	%		(37,940	)	-15.7	%
Loans held for investment (LHFI)		8,407,341			8,296,045			7,499,204			111,296		1.3	%		908,137		12.1	%
Allowance for loan losses		(80,332	)		(76,184	)		(70,871	)		(4,148	)	-5.4	%		(9,461	)	-13.3	%
Net LHFI		8,327,009			8,219,861			7,428,333			107,148		1.3	%		898,676		12.1	%
Acquired loans		283,757			314,910			295,737			(31,153	)	-9.9	%		(11,980	)	-4.1	%
Allowance for loan losses, acquired loans		(5,768	)		(7,423	)		(11,380	)		1,655		22.3	%		5,612		49.3	%
Net acquired loans		277,989			307,487			284,357			(29,498	)	-9.6	%		(6,368	)	-2.2	%
Net LHFI and acquired loans		8,604,998			8,527,348			7,712,690			77,650		0.9	%		892,308		11.6	%
Premises and equipment, net		181,312			182,315			190,930			(1,003	)	-0.6	%		(9,618	)	-5.0	%
Mortgage servicing rights		81,477			82,628			65,514			(1,151	)	-1.4	%		15,963		24.4	%
Goodwill		379,627			379,627			366,156			—		0.0	%		13,471		3.7	%
Identifiable intangible assets		17,883			19,422			22,366			(1,539	)	-7.9	%		(4,483	)	-20.0	%
Other real estate		48,356			49,958			64,993			(1,602	)	-3.2	%		(16,637	)	-25.6	%
Other assets		542,135			551,517			558,166			(9,382	)	-1.7	%		(16,031	)	-2.9	%
Total assets	$	13,884,655		$	13,909,138		$	13,161,538		$	(24,483	)	-0.2	%	$	723,117		5.5	%
Deposits:
Noninterest-bearing	$	2,998,013		$	3,092,915		$	3,111,603		$	(94,902	)	-3.1	%	$	(113,590	)	-3.7	%
Interest-bearing		7,233,729			7,330,476			6,574,098			(96,747	)	-1.3	%		659,631		10.0	%
Total deposits		10,231,742			10,423,391			9,685,701			(191,649	)	-1.8	%		546,041		5.6	%
Fed funds purchased and repos		545,603			508,068			514,918			37,535		7.4	%		30,685		6.0	%
Short-term borrowings		1,322,159			1,222,592			412,792			99,567		8.1	%		909,367		n/m
Long-term FHLB advances		962			978			751,075			(16	)	-1.6	%		(750,113	)	-99.9	%
Subordinated notes		—			—			49,993			—		n/m			(49,993	)	-100.0	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Other liabilities		139,798			130,335			150,442			9,463		7.3	%		(10,644	)	-7.1	%
Total liabilities		12,302,120			12,347,220			11,626,777			(45,100	)	-0.4	%		675,343		5.8	%
Common stock		14,114			14,114			14,090			—		0.0	%		24		0.2	%
Capital surplus		368,131			367,075			365,553			1,056		0.3	%		2,578		0.7	%
Retained earnings		1,228,115			1,209,238			1,172,193			18,877		1.6	%		55,922		4.8	%
Accum other comprehensive loss, net of tax		(27,825	)		(28,509	)		(17,075	)		684		2.4	%		(10,750	)	-63.0	%
Total shareholders' equity		1,582,535			1,561,918			1,534,761			20,617		1.3	%		47,774		3.1	%
Total liabilities and equity	$	13,884,655		$	13,909,138		$	13,161,538		$	(24,483	)	-0.2	%	$	723,117		5.5	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands except per share data)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
INCOME STATEMENTS		9/30/2017			6/30/2017			9/30/2016		$ Change			% Change		$ Change			% Change
Interest and fees on LHFS & LHFI-FTE	$	93,703		$	89,486		$	80,649		$	4,217		4.7	%	$	13,054		16.2	%
Interest and fees on acquired loans		6,625			6,263			6,781			362		5.8	%		(156	)	-2.3	%
Interest on securities-taxable		19,291			19,377			19,351			(86	)	-0.4	%		(60	)	-0.3	%
Interest on securities-tax exempt-FTE		1,104			1,178			1,388			(74	)	-6.3	%		(284	)	-20.5	%
Interest on fed funds sold and rev repos		14			11			5			3		27.3	%		9		n/m
Other interest income		355			371			223			(16	)	-4.3	%		132		59.2	%
Total interest income-FTE		121,092			116,686			108,397			4,406		3.8	%		12,695		11.7	%
Interest on deposits		6,381			5,107			3,208			1,274		24.9	%		3,173		98.9	%
Interest on fed funds pch and repos		1,301			1,037			411			264		25.5	%		890		n/m
Other interest expense		4,520			3,628			2,603			892		24.6	%		1,917		73.6	%
Total interest expense		12,202			9,772			6,222			2,430		24.9	%		5,980		96.1	%
Net interest income-FTE		108,890			106,914			102,175			1,976		1.8	%		6,715		6.6	%
Provision for loan losses, LHFI		3,672			2,921			4,284			751		25.7	%		(612	)	-14.3	%
Provision for loan losses, acquired loans		(1,653	)		(2,564	)		691			911		35.5	%		(2,344	)	n/m
Net interest income after provision-FTE		106,871			106,557			97,200			314		0.3	%		9,671		9.9	%
Service charges on deposit accounts		11,223			10,755			11,677			468		4.4	%		(454	)	-3.9	%
Bank card and other fees		7,150			7,370			6,756			(220	)	-3.0	%		394		5.8	%
Mortgage banking, net		4,425			9,008			7,364			(4,583	)	-50.9	%		(2,939	)	-39.9	%
Insurance commissions		10,398			9,745			10,074			653		6.7	%		324		3.2	%
Wealth management		7,530			7,674			7,571			(144	)	-1.9	%		(41	)	-0.5	%
Other, net		3,740			5,637			1,274			(1,897	)	-33.7	%		2,466		n/m
Nonint inc-excl sec gains (losses), net		44,466			50,189			44,716			(5,723	)	-11.4	%		(250	)	-0.6	%
Security gains (losses), net		14			1			—			13		n/m			14		n/m
Total noninterest income		44,480			50,190			44,716			(5,710	)	-11.4	%		(236	)	-0.5	%
Salaries and employee benefits		58,837			59,060			57,250			(223	)	-0.4	%		1,587		2.8	%
Defined benefit plan termination		—			17,644			—			(17,644	)	n/m			—		n/m
Services and fees		15,133			15,009			14,947			124		0.8	%		186		1.2	%
Net occupancy-premises		6,702			6,210			6,440			492		7.9	%		262		4.1	%
Equipment expense		6,297			6,162			6,063			135		2.2	%		234		3.9	%
Other real estate expense		864			383			(1,313	)		481		n/m			2,177		n/m
FDIC assessment expense		2,816			2,686			2,911			130		4.8	%		(95	)	-3.3	%
Other expense		12,437			14,921			11,610			(2,484	)	-16.6	%		827		7.1	%
Total noninterest expense		103,086			122,075			97,908			(18,989	)	-15.6	%		5,178		5.3	%
Income before income taxes and tax eq adj		48,265			34,672			44,008			13,593		39.2	%		4,257		9.7	%
Tax equivalent adjustment		4,978			4,910			4,611			68		1.4	%		367		8.0	%
Income before income taxes		43,287			29,762			39,397			13,525		45.4	%		3,890		9.9	%
Income taxes		8,708			5,727			8,415			2,981		52.1	%		293		3.5	%
Net income	$	34,579		$	24,035		$	30,982		$	10,544		43.9	%	$	3,597		11.6	%
Per share data
Earnings per share - basic	$	0.51		$	0.35		$	0.46		$	0.16		45.7	%	$	0.05		10.9	%
Earnings per share - diluted	$	0.51		$	0.35		$	0.46		$	0.16		45.7	%	$	0.05		10.9	%
Dividends per share	$	0.23		$	0.23		$	0.23			—		0.0	%		—		0.0	%
Weighted average shares outstanding
Basic		67,741,655			67,736,298			67,625,085
Diluted		67,916,418			67,892,532			67,793,203
Period end shares outstanding		67,742,135			67,740,901			67,626,939
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)		9/30/2017			6/30/2017			9/30/2016		$ Change			% Change		$ Change			% Change
Nonaccrual loans
Alabama	$	1,629		$	1,723		$	1,403		$	(94	)	-5.5	%	$	226		16.1	%
Florida		3,242			3,174			3,719			68		2.1	%		(477	)	-12.8	%
Mississippi (2)		59,483			63,889			41,968			(4,406	)	-6.9	%		17,515		41.7	%
Tennessee (3)		4,589			4,975			6,620			(386	)	-7.8	%		(2,031	)	-30.7	%
Texas		346			383			700			(37	)	-9.7	%		(354	)	-50.6	%
Total nonaccrual loans		69,289			74,144			54,410			(4,855	)	-6.5	%		14,879		27.3	%
Other real estate
Alabama		12,726			13,301			15,574			(575	)	-4.3	%		(2,848	)	-18.3	%
Florida		16,100			17,377			25,147			(1,277	)	-7.3	%		(9,047	)	-36.0	%
Mississippi (2)		15,319			14,377			16,659			942		6.6	%		(1,340	)	-8.0	%
Tennessee (3)		2,671			3,363			6,061			(692	)	-20.6	%		(3,390	)	-55.9	%
Texas		1,540			1,540			1,552			—		0.0	%		(12	)	-0.8	%
Total other real estate		48,356			49,958			64,993			(1,602	)	-3.2	%		(16,637	)	-25.6	%
Total nonperforming assets	$	117,645		$	124,102		$	119,403		$	(6,457	)	-5.2	%	$	(1,758	)	-1.5	%
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	2,244		$	1,216		$	953		$	1,028		84.5	%	$	1,291		n/m
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	32,332		$	29,906		$	25,570		$	2,426		8.1	%	$	6,762		26.4	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (1)		9/30/2017			6/30/2017			9/30/2016		$ Change			% Change		$ Change			% Change
Beginning Balance	$	76,184		$	72,445		$	71,796		$	3,739		5.2	%	$	4,388		6.1	%
Provision for loan losses		3,672			2,921			4,284			751		25.7	%		(612	)	-14.3	%
Charge-offs		(2,752	)		(2,118	)		(8,279	)		(634	)	-29.9	%		5,527		66.8	%
Recoveries		3,228			2,936			3,070			292		9.9	%		158		5.1	%
Net recoveries (charge-offs)		476			818			(5,209	)		(342	)	-41.8	%		5,685		n/m
Ending Balance	$	80,332		$	76,184		$	70,871		$	4,148		5.4	%	$	9,461		13.3	%
PROVISION FOR LOAN LOSSES (1)
Alabama	$	1,218		$	866		$	132		$	352		40.6	%	$	1,086		n/m
Florida		(744	)		(975	)		31			231		-23.7	%		(775	)	n/m
Mississippi (2)		1,860			2,268			703			(408	)	-18.0	%		1,157		n/m
Tennessee (3)		(72	)		322			151			(394	)	n/m			(223	)	n/m
Texas		1,410			440			3,267			970		n/m			(1,857	)	-56.8	%
Total provision for loan losses	$	3,672		$	2,921		$	4,284		$	751		25.7	%	$	(612	)	-14.3	%
NET (RECOVERIES) CHARGE-OFFS (1)
Alabama	$	314		$	(29	)	$	38		$	343		n/m		$	276		n/m
Florida		(796	)		(973	)		(169	)		177		18.2	%		(627	)	n/m
Mississippi (2)		(11	)		33			2,484			(44	)	n/m			(2,495	)	n/m
Tennessee (3)		85			146			74			(61	)	-41.8	%		11		14.9	%
Texas		(68	)		5			2,782			(73	)	n/m			(2,850	)	n/m
Total net (recoveries) charge-offs	$	(476	)	$	(818	)	$	5,209		$	342		41.8	%	$	(5,685	)	n/m
(1) - Excludes acquired loans.
(2) - Mississippi includes Central and Southern Mississippi Regions.
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands)
(unaudited)
	Quarter Ended															Nine Months Ended
AVERAGE BALANCES		9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
Securities AFS-taxable	$	2,349,736		$	2,334,600		$	2,252,162		$	2,271,503		$	2,249,109		$	2,312,523		$	2,224,964
Securities AFS-nontaxable		67,994			75,640			88,522			91,495			95,233			77,310			100,106
Securities HTM-taxable		1,086,773			1,108,158			1,124,692			1,101,382			1,115,053			1,106,402			1,126,608
Securities HTM-nontaxable		32,829			32,878			33,009			33,675			34,179			32,905			34,932
Total securities		3,537,332			3,551,276			3,498,385			3,498,055			3,493,574			3,529,140			3,486,610
Loans (including loans held for sale)		8,532,523			8,348,758			8,074,449			7,855,444			7,658,089			8,320,255			7,503,842
Acquired loans		299,221			315,558			250,482			282,197			317,273			288,599			348,369
Fed funds sold and rev repos		3,582			3,184			397			1,418			1,352			2,399			1,000
Other earning assets		84,320			77,770			79,515			80,608			68,706			80,553			66,477
Total earning assets		12,456,978			12,296,546			11,903,228			11,717,722			11,538,994			12,220,946			11,406,298
Allowance for loan losses		(85,363	)		(83,328	)		(83,394	)		(82,604	)		(82,301	)		(84,036	)		(82,351	)
Cash and due from banks		312,409			307,966			310,542			314,420			299,670			310,313			284,295
Other assets		1,202,766			1,229,981			1,235,469			1,238,029			1,243,854			1,222,619			1,245,988
Total assets	$	13,886,790		$	13,751,165		$	13,365,845		$	13,187,567		$	13,000,217		$	13,669,842		$	12,854,230
Interest-bearing demand deposits	$	2,192,064		$	2,035,491		$	1,981,982		$	1,920,273		$	1,848,084		$	2,070,615		$	1,848,078
Savings deposits		3,284,323			3,337,374			3,319,572			3,049,733			3,101,161			3,313,627			3,170,389
Time deposits		1,736,683			1,777,529			1,650,251			1,638,853			1,667,345			1,721,804			1,674,469
Total interest-bearing deposits		7,213,070			7,150,394			6,951,805			6,608,859			6,616,590			7,106,046			6,692,936
Fed funds purchased and repos		547,863			525,523			498,963			494,193			481,071			524,295			495,535
Short-term borrowings		1,335,476			1,047,107			887,848			435,576			311,473			1,091,783			347,992
Long-term FHLB advances		970			141,097			251,033			685,844			751,095			130,117			616,994
Subordinated notes		—			—			—			40,757			49,988			—			49,980
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		9,159,235			8,925,977			8,651,505			8,327,085			8,272,073			8,914,097			8,265,293
Noninterest-bearing deposits		3,003,763			3,110,125			3,008,176			3,160,959			3,060,331			3,040,672			2,941,795
Other liabilities		145,925			162,823			173,066			166,379			136,971			160,507			134,287
Total liabilities		12,308,923			12,198,925			11,832,747			11,654,423			11,469,375			12,115,276			11,341,375
Shareholders' equity		1,577,867			1,552,240			1,533,098			1,533,144			1,530,842			1,554,566			1,512,855
Total liabilities and equity	$	13,886,790		$	13,751,165		$	13,365,845		$	13,187,567		$	13,000,217		$	13,669,842		$	12,854,230
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands)
(unaudited)
PERIOD END BALANCES		9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016
Cash and due from banks	$	350,123		$	318,329		$	379,590		$	327,706		$	383,945
Fed funds sold and rev repos		3,215			6,900			500			500			500
Securities available for sale		2,369,089			2,447,688			2,365,554			2,356,682			2,410,947
Securities held to maturity		1,102,283			1,139,754			1,156,067			1,158,643			1,143,234
Loans held for sale (LHFS)		204,157			203,652			174,090			175,927			242,097
Loans held for investment (LHFI)		8,407,341			8,296,045			8,004,657			7,851,213			7,499,204
Allowance for loan losses		(80,332	)		(76,184	)		(72,445	)		(71,265	)		(70,871	)
Net LHFI		8,327,009			8,219,861			7,932,212			7,779,948			7,428,333
Acquired loans		283,757			314,910			218,242			272,247			295,737
Allowance for loan losses, acquired loans		(5,768	)		(7,423	)		(10,006	)		(11,397	)		(11,380	)
Net acquired loans		277,989			307,487			208,236			260,850			284,357
Net LHFI and acquired loans		8,604,998			8,527,348			8,140,448			8,040,798			7,712,690
Premises and equipment, net		181,312			182,315			183,311			184,987			190,930
Mortgage servicing rights		81,477			82,628			82,758			80,239			65,514
Goodwill		379,627			379,627			366,156			366,156			366,156
Identifiable intangible assets		17,883			19,422			19,117			20,680			22,366
Other real estate		48,356			49,958			55,968			62,051			64,993
Other assets		542,135			551,517			566,802			577,964			558,166
Total assets	$	13,884,655		$	13,909,138		$	13,490,361		$	13,352,333		$	13,161,538
Deposits:
Noninterest-bearing	$	2,998,013		$	3,092,915		$	3,209,727		$	2,973,238		$	3,111,603
Interest-bearing		7,233,729			7,330,476			6,894,745			7,082,774			6,574,098
Total deposits		10,231,742			10,423,391			10,104,472			10,056,012			9,685,701
Fed funds purchased and repos		545,603			508,068			524,335			539,817			514,918
Short-term borrowings		1,322,159			1,222,592			864,690			769,778			412,792
Long-term FHLB advances		962			978			250,994			251,049			751,075
Subordinated notes		—			—			—			—			49,993
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		139,798			130,335			146,053			153,613			150,442
Total liabilities		12,302,120			12,347,220			11,952,400			11,832,125			11,626,777
Common stock		14,114			14,114			14,112			14,091			14,090
Capital surplus		368,131			367,075			365,951			366,563			365,553
Retained earnings		1,228,115			1,209,238			1,200,903			1,185,352			1,172,193
Accum other comprehensive loss, net of tax		(27,825	)		(28,509	)		(43,005	)		(45,798	)		(17,075	)
Total shareholders' equity		1,582,535			1,561,918			1,537,961			1,520,208			1,534,761
Total liabilities and equity	$	13,884,655		$	13,909,138		$	13,490,361		$	13,352,333		$	13,161,538
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands except per share data)
(unaudited)
	Quarter Ended														Nine Months Ended
INCOME STATEMENTS		9/30/2017			6/30/2017			3/31/2017			12/31/2016		9/30/2016			9/30/2017			9/30/2016
Interest and fees on LHFS & LHFI-FTE	$	93,703		$	89,486		$	83,790		$	81,346	$	80,649		$	266,979		$	234,661
Interest and fees on acquired loans		6,625			6,263			5,189			8,290		6,781			18,077			21,854
Interest on securities-taxable		19,291			19,377			19,197			18,775		19,351			57,865			58,839
Interest on securities-tax exempt-FTE		1,104			1,178			1,300			1,340		1,388			3,582			4,314
Interest on fed funds sold and rev repos		14			11			1			4		5			26			10
Other interest income		355			371			267			335		223			993			653
Total interest income-FTE		121,092			116,686			109,744			110,090		108,397			347,522			320,331
Interest on deposits		6,381			5,107			3,945			3,380		3,208			15,433			9,368
Interest on fed funds pch and repos		1,301			1,037			698			471		411			3,036			1,246
Other interest expense		4,520			3,628			2,673			2,662		2,603			10,821			7,420
Total interest expense		12,202			9,772			7,316			6,513		6,222			29,290			18,034
Net interest income-FTE		108,890			106,914			102,428			103,577		102,175			318,232			302,297
Provision for loan losses, LHFI		3,672			2,921			2,762			1,834		4,284			9,355			9,123
Provision for loan losses, acquired loans		(1,653	)		(2,564	)		(1,605	)		1,150		691			(5,822	)		2,607
Net interest income after provision-FTE		106,871			106,557			101,271			100,593		97,200			314,699			290,567
Service charges on deposit accounts		11,223			10,755			10,832			11,444		11,677			32,810			33,809
Bank card and other fees		7,150			7,370			6,500			6,796		6,756			21,020			21,110
Mortgage banking, net		4,425			9,008			10,185			5,428		7,364			23,618			22,784
Insurance commissions		10,398			9,745			9,212			8,459		10,074			29,355			28,305
Wealth management		7,530			7,674			7,413			7,505		7,571			22,617			22,987
Other, net		3,740			5,637			1,891			2,092		1,274			11,268			3,534
Nonint inc-excl sec gains (losses), net		44,466			50,189			46,033			41,724		44,716			140,688			132,529
Security gains (losses), net		14			1			—			—		—			15			(310	)
Total noninterest income		44,480			50,190			46,033			41,724		44,716			140,703			132,219
Salaries and employee benefits		58,837			59,060			57,302			58,168		57,250			175,199			181,469
Defined benefit plan termination		—			17,644			—			—		—			17,644			—
Services and fees		15,133			15,009			15,332			14,751		14,947			45,474			43,944
Net occupancy-premises		6,702			6,210			6,238			6,426		6,440			19,150			18,556
Equipment expense		6,297			6,162			5,998			6,172		6,063			18,457			18,053
Other real estate expense		864			383			1,759			525		(1,313	)		3,006			61
FDIC assessment expense		2,816			2,686			2,640			2,562		2,911			8,142			8,681
Other expense		12,437			14,921			12,788			11,663		11,610			40,146			36,267
Total noninterest expense		103,086			122,075			102,057			100,267		97,908			327,218			307,031
Income before income taxes and tax eq adj		48,265			34,672			45,247			42,050		44,008			128,184			115,755
Tax equivalent adjustment		4,978			4,910			4,838			4,725		4,611			14,726			13,616
Income before income taxes		43,287			29,762			40,409			37,325		39,397			113,458			102,139
Income taxes		8,708			5,727			9,161			8,402		8,415			23,596			22,651
Net income	$	34,579		$	24,035		$	31,248		$	28,923	$	30,982		$	89,862		$	79,488
Per share data
Earnings per share - basic	$	0.51		$	0.35		$	0.46		$	0.43	$	0.46		$	1.33		$	1.18
Earnings per share - diluted	$	0.51		$	0.35		$	0.46		$	0.43	$	0.46		$	1.32		$	1.17
Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23	$	0.23		$	0.69		$	0.69
Weighted average shares outstanding
Basic		67,741,655			67,736,298			67,687,365			67,627,496		67,625,085			67,721,971			67,618,131
Diluted		67,916,418			67,892,532			67,845,785			67,817,770		67,793,203			67,876,295			67,771,125
Period end shares outstanding		67,742,135			67,740,901			67,729,434			67,628,618		67,626,939			67,742,135			67,626,939
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)		9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016
Nonaccrual loans
Alabama	$	1,629		$	1,723		$	1,649		$	665		$	1,403
Florida		3,242			3,174			3,559			3,644			3,719
Mississippi (2)		59,483			63,889			49,349			37,771			41,968
Tennessee (3)		4,589			4,975			5,185			6,213			6,620
Texas		346			383			1,565			941			700
Total nonaccrual loans		69,289			74,144			61,307			49,234			54,410
Other real estate
Alabama		12,726			13,301			13,953			15,989			15,574
Florida		16,100			17,377			21,577			22,582			25,147
Mississippi (2)		15,319			14,377			14,974			15,646			16,659
Tennessee (3)		2,671			3,363			4,706			6,183			6,061
Texas		1,540			1,540			758			1,651			1,552
Total other real estate		48,356			49,958			55,968			62,051			64,993
Total nonperforming assets	$	117,645		$	124,102		$	117,275		$	111,285		$	119,403
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	2,244		$	1,216		$	1,307		$	1,832		$	953
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	32,332		$	29,906		$	31,147		$	28,345		$	25,570
	Quarter Ended															Nine Months Ended
ALLOWANCE FOR LOAN LOSSES (1)		9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
Beginning Balance	$	76,184		$	72,445		$	71,265		$	70,871		$	71,796		$	71,265		$	67,619
Provision for loan losses		3,672			2,921			2,762			1,834			4,284			9,355			9,123
Charge-offs		(2,752	)		(2,118	)		(4,202	)		(4,037	)		(8,279	)		(9,072	)		(14,893	)
Recoveries		3,228			2,936			2,620			2,597			3,070			8,784			9,022
Net recoveries (charge-offs)		476			818			(1,582	)		(1,440	)		(5,209	)		(288	)		(5,871	)
Ending Balance	$	80,332		$	76,184		$	72,445		$	71,265		$	70,871		$	80,332		$	70,871
PROVISION FOR LOAN LOSSES (1)
Alabama	$	1,218		$	866		$	1,189		$	763		$	132		$	3,273		$	1,861
Florida		(744	)		(975	)		3			(655	)		31			(1,716	)		(1,151	)
Mississippi (2)		1,860			2,268			1,826			1,873			703			5,954			1,718
Tennessee (3)		(72	)		322			208			(118	)		151			458			1,015
Texas		1,410			440			(464	)		(29	)		3,267			1,386			5,680
Total provision for loan losses	$	3,672		$	2,921		$	2,762		$	1,834		$	4,284		$	9,355		$	9,123
NET (RECOVERIES) CHARGE-OFFS (1)
Alabama	$	314		$	(29	)	$	66		$	368		$	38		$	351		$	537
Florida		(796	)		(973	)		(155	)		(502	)		(169	)		(1,924	)		(1,438	)
Mississippi (2)		(11	)		33			1,759			1,591			2,484			1,781			2,173
Tennessee (3)		85			146			83			(8	)		74			314			334
Texas		(68	)		5			(171	)		(9	)		2,782			(234	)		4,265
Total net (recoveries) charge-offs	$	(476	)	$	(818	)	$	1,582		$	1,440		$	5,209		$	288		$	5,871
(1) - Excludes acquired loans.
(2) - Mississippi includes Central and Southern Mississippi Regions.
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2017
(unaudited)
	Quarter Ended															Nine Months Ended
FINANCIAL RATIOS AND OTHER DATA		9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016		9/30/2017		9/30/2016
Return on equity		8.69	%		6.21	%		8.27	%		7.51	%		8.05	%	7.73	%	7.02	%
Return on average tangible equity		11.95	%		8.68	%		11.39	%		10.41	%		11.16	%	10.68	%	9.85	%
Return on assets		0.99	%		0.70	%		0.95	%		0.87	%		0.95	%	0.88	%	0.83	%
Interest margin - Yield - FTE		3.86	%		3.81	%		3.74	%		3.74	%		3.74	%	3.80	%	3.75	%
Interest margin - Cost		0.39	%		0.32	%		0.25	%		0.22	%		0.21	%	0.32	%	0.21	%
Net interest margin - FTE		3.47	%		3.49	%		3.49	%		3.52	%		3.52	%	3.48	%	3.54	%
Efficiency ratio (1)		65.14	%		64.50	%		66.67	%		66.08	%		63.81	%	65.43	%	65.95	%
Full-time equivalent employees		2,878			2,858			2,799			2,788			2,787
CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans		-0.02	%		-0.04	%		0.08	%		0.07	%		0.27	%	0.00	%	0.10	%
Provision for loan losses/average loans		0.17	%		0.14	%		0.14	%		0.09	%		0.22	%	0.15	%	0.16	%
Nonperforming loans/total loans (incl LHFS)		0.80	%		0.87	%		0.75	%		0.61	%		0.70	%
Nonperforming assets/total loans (incl LHFS)		1.37	%		1.46	%		1.43	%		1.39	%		1.54	%
Nonperforming assets/total loans (incl LHFS) +ORE		1.36	%		1.45	%		1.42	%		1.38	%		1.53	%
ALL/total loans (excl LHFS)		0.96	%		0.92	%		0.91	%		0.91	%		0.95	%
ALL-commercial/total commercial loans		1.02	%		0.99	%		0.97	%		0.97	%		1.02	%
ALL-consumer/total consumer and home mortgage loans		0.73	%		0.67	%		0.67	%		0.68	%		0.68	%
ALL/nonperforming loans		115.94	%		102.75	%		118.17	%		144.75	%		130.25	%
ALL/nonperforming loans (excl specifically reviewed impaired loans)		301.50	%		277.42	%		263.73	%		267.40	%		256.56	%
CAPITAL RATIOS
Total equity/total assets		11.40	%		11.23	%		11.40	%		11.39	%		11.66	%
Tangible equity/tangible assets		8.79	%		8.61	%		8.80	%		8.74	%		8.97	%
Tangible equity/risk-weighted assets		11.29	%		11.19	%		11.49	%		11.39	%		11.85	%
Tier 1 leverage ratio		9.61	%		9.56	%		9.86	%		9.90	%		9.92	%
Common equity tier 1 capital ratio		11.80	%		11.73	%		12.19	%		12.16	%		12.35	%
Tier 1 risk-based capital ratio		12.37	%		12.30	%		12.79	%		12.76	%		12.97	%
Total risk-based capital ratio		13.19	%		13.11	%		13.61	%		13.59	%		13.82	%
STOCK PERFORMANCE
Market value-Close	$	33.12		$	32.16		$	31.79		$	35.65		$	27.56
Book value	$	23.36		$	23.06		$	22.71		$	22.48		$	22.69
Tangible book value	$	17.49		$	17.17		$	17.02		$	16.76		$	16.95
(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.
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 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

September 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):

	9/30/2017		6/30/2017		3/31/2017		12/31/2016		9/30/2016
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	49,723	$	51,277	$	53,247	$	55,763	$	58,234
Issued by U.S. Government sponsored agencies		271		272		274		276		283
Obligations of states and political subdivisions		89,144		96,514		109,895		115,373		124,641
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		60,902		58,422		42,667		42,786		36,788
Issued by FNMA and FHLMC		860,131		860,571		733,214		631,084		561,989
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,087,169		1,157,241		1,202,719		1,267,951		1,374,399
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		221,749		223,391		223,538		243,449		254,613
Total securities available for sale	$	2,369,089	$	2,447,688	$	2,365,554	$	2,356,682	$	2,410,947
SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	3,680	$	3,669	$	3,658	$	3,647	$	3,636
Obligations of states and political subdivisions		46,069		46,098		46,273		46,303		52,937
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		14,191		14,399		14,977		15,478		16,183
Issued by FNMA and FHLMC		139,172		144,282		118,733		81,299		39,989
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		708,715		740,042		771,296		803,474		831,662
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		190,456		191,264		201,130		208,442		198,827
Total securities held to maturity	$	1,102,283	$	1,139,754	$	1,156,067	$	1,158,643	$	1,143,234

At September 30, 2017, the net unamortized, unrealized loss included in accumulated other comprehensive loss in the accompanying balance sheet for securities held to maturity previously transferred from securities available for sale totaled approximately $20.6 million ($12.7 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

September 30, 2017

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016
Loans secured by real estate:
Construction, land development and other land loans	$	950,144		$	922,029		$	859,927		$	831,437		$	766,685
Secured by 1-4 family residential properties		1,648,733			1,655,968			1,656,837			1,660,043			1,592,453
Secured by nonfarm, nonresidential properties		2,172,885			2,109,367			2,064,352			2,034,176			1,916,153
Other real estate secured		482,163			432,208			399,636			318,148			317,680
Commercial and industrial loans		1,568,588			1,635,000			1,540,783			1,528,434			1,421,382
Consumer loans		173,061			170,858			166,314			170,562			170,073
State and other political subdivision loans		936,614			936,860			910,493			917,515			875,973
Other loans		475,153			433,755			406,315			390,898			438,805
LHFI		8,407,341			8,296,045			8,004,657			7,851,213			7,499,204
Allowance for loan losses		(80,332	)		(76,184	)		(72,445	)		(71,265	)		(70,871	)
Net LHFI	$	8,327,009		$	8,219,861		$	7,932,212		$	7,779,948		$	7,428,333

During the third quarter of 2017, Trustmark increased its allowance for loan losses by $1.1 million due to the potential loss exposure caused by Hurricane Harvey.

ACQUIRED LOANS BY TYPE (1)	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016
Loans secured by real estate:
Construction, land development and other land loans	$	29,384		$	35,054		$	17,651		$	20,850		$	25,040
Secured by 1-4 family residential properties		65,746			74,313			54,721			69,540			76,601
Secured by nonfarm, nonresidential properties		122,200			132,663			92,075			103,820			110,606
Other real estate secured		18,431			19,553			16,275			19,010			20,903
Commercial and industrial loans		34,124			34,375			20,691			36,896			39,519
Consumer loans		2,749			2,833			2,664			3,365			3,878
Other loans		11,123			16,119			14,165			18,766			19,190
Acquired loans		283,757			314,910			218,242			272,247			295,737
Allowance for loan losses, acquired loans		(5,768	)		(7,423	)		(10,006	)		(11,397	)		(11,380	)
Net acquired loans	$	277,989		$	307,487		$	208,236		$	260,850		$	284,357

(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

September 30, 2017

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)

	September 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	$	950,144	$	297,262	$	49,515	$	297,979	$	21,869	$	283,519
Secured by 1-4 family residential properties		1,648,733		102,412		46,613		1,388,912		94,344		16,452
Secured by nonfarm, nonresidential properties		2,172,885		367,466		221,513		922,241		146,668		514,997
Other real estate secured		482,163		70,826		2,684		209,436		47,050		152,167
Commercial and industrial loans		1,568,588		165,419		22,554		786,143		354,968		239,504
Consumer loans		173,061		23,023		4,104		125,951		17,703		2,280
State and other political subdivision loans		936,614		83,580		28,357		604,219		28,499		191,959
Other loans		475,153		63,557		17,796		308,787		45,815		39,198
Loans	$	8,407,341	$	1,173,545	$	393,136	$	4,643,668	$	756,916	$	1,440,076
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	55,527	$	11,380	$	16,436	$	22,777	$	2,344	$	2,590
Development		44,984		5,256		4,665		15,822		444		18,797
Unimproved land		98,740		13,974		15,136		37,977		14,750		16,903
1-4 family construction		191,035		57,999		10,467		79,394		2,666		40,509
Other construction		559,858		208,653		2,811		142,009		1,665		204,720
Construction, land development and other land loans	$	950,144	$	297,262	$	49,515	$	297,979	$	21,869	$	283,519
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	315,249	$	101,683	$	46,634	$	96,599	$	17,289	$	53,044
Office		221,939		45,521		21,813		72,333		6,072		76,200
Nursing homes/senior living		166,118		8,527		—		151,106		6,485		—
Hotel/motel		265,690		55,195		64,114		68,970		35,466		41,945
Mini-storage		132,839		12,695		6,563		43,716		567		69,298
Industrial		100,906		11,205		9,779		23,193		6,395		50,334
Health care		32,306		4,425		793		25,659		—		1,429
Convenience stores		20,962		1,375		—		8,889		897		9,801
Other		94,586		15,807		14,853		15,154		7,877		40,895
Total income producing loans		1,350,595		256,433		164,549		505,619		81,048		342,946
Owner-occupied:
Office		139,640		22,271		20,949		68,063		6,382		21,975
Churches		89,217		12,635		678		47,163		20,729		8,012
Industrial warehouses		137,277		9,096		3,565		54,179		11,027		59,410
Health care		117,445		23,151		4,102		71,032		4,410		14,750
Convenience stores		103,603		9,870		12,811		54,913		1,320		24,689
Retail		43,698		5,799		6,749		22,683		1,892		6,575
Restaurants		33,297		2,909		777		25,669		1,966		1,976
Auto dealerships		22,403		8,972		36		8,557		4,838		—
Other		135,710		16,330		7,297		64,363		13,056		34,664
Total owner-occupied loans		822,290		111,033		56,964		416,622		65,620		172,051
Loans secured by nonfarm, nonresidential properties	$	2,172,885	$	367,466	$	221,513	$	922,241	$	146,668	$	514,997
(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 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															Nine Months Ended
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
Securities – taxable		2.23	%		2.26	%		2.31	%		2.21	%		2.29	%		2.26	%		2.35	%
Securities – nontaxable		4.34	%		4.35	%		4.34	%		4.26	%		4.27	%		4.35	%		4.27	%
Securities – total		2.29	%		2.32	%		2.38	%		2.29	%		2.36	%		2.33	%		2.42	%
Loans - LHFI & LHFS		4.36	%		4.30	%		4.21	%		4.12	%		4.19	%		4.29	%		4.18	%
Acquired loans		8.78	%		7.96	%		8.40	%		11.69	%		8.50	%		8.37	%		8.38	%
Loans - total		4.51	%		4.43	%		4.33	%		4.38	%		4.36	%		4.43	%		4.36	%
FF sold & rev repo		1.55	%		1.39	%		1.02	%		1.12	%		1.47	%		1.45	%		1.34	%
Other earning assets		1.67	%		1.91	%		1.36	%		1.65	%		1.29	%		1.65	%		1.31	%
Total earning assets		3.86	%		3.81	%		3.74	%		3.74	%		3.74	%		3.80	%		3.75	%
Interest-bearing deposits		0.35	%		0.29	%		0.23	%		0.20	%		0.19	%		0.29	%		0.19	%
FF pch & repo		0.94	%		0.79	%		0.57	%		0.38	%		0.34	%		0.77	%		0.34	%
Other borrowings		1.28	%		1.16	%		0.90	%		0.87	%		0.88	%		1.13	%		0.92	%
Total interest-bearing liabilities		0.53	%		0.44	%		0.34	%		0.31	%		0.30	%		0.44	%		0.29	%
Net interest margin		3.47	%		3.49	%		3.49	%		3.52	%		3.52	%		3.48	%		3.54	%
Net interest margin excluding acquired loans		3.34	%		3.37	%		3.38	%		3.31	%		3.38	%		3.36	%		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 third quarter of 2017, the yield on acquired loans totaled 8.78% and included $1.3 million in recoveries from the settlement of debt, which represented approximately 1.78% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the third quarter of 2017 totaled 3.34%, a decline of 3 basis points compared to the second quarter of 2017, primarily due to higher costs of interest-bearing deposits and other borrowings.

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 negative ineffectiveness of $2.6 million and a net positive ineffectiveness of $835 thousand for the quarters ended September 30, 2017 and June 30, 2017, respectively.

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

	Quarter Ended															Nine Months Ended
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
Mortgage servicing income, net	$	5,295		$	5,439		$	5,458		$	5,218		$	5,271		$	16,192		$	15,506
Change in fair value-MSR from runoff		(2,892	)		(2,896	)		(2,387	)		(2,739	)		(2,862	)		(8,175	)		(7,367	)
Gain on sales of loans, net		5,083			5,001			3,550			6,054			6,410			13,634			14,481
Other, net		(450	)		629			772			(2,925	)		(299	)		951			2,841
Mortgage banking income before hedge ineffectiveness		7,036			8,173			7,393			5,608			8,520			22,602			25,461
Change in fair value-MSR from market changes		(2,393	)		(1,291	)		1,466			13,112			381			(2,218	)		(13,518	)
Change in fair value of derivatives		(218	)		2,126			1,326			(13,292	)		(1,537	)		3,234			10,841
Net (negative) positive hedge ineffectiveness		(2,611	)		835			2,792			(180	)		(1,156	)		1,016			(2,677	)
Mortgage banking, net	$	4,425		$	9,008		$	10,185		$	5,428		$	7,364		$	23,618		$	22,784

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 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															Nine Months Ended
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
Partnership amortization for tax credit purposes	$	(2,521	)	$	(2,287	)	$	(2,274	)	$	(2,479	)	$	(2,479	)	$	(7,082	)	$	(7,437	)
Increase in life insurance cash surrender value		1,813			1,782			1,714			1,751			1,746			5,309			5,140
Other miscellaneous income		4,448			6,142			2,451			2,820			2,007			13,041			5,831
Total other, net	$	3,740		$	5,637		$	1,891		$	2,092		$	1,274		$	11,268		$	3,534

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.

Trustmark received nontaxable proceeds of $2.7 million related to bank-owned life insurance and $4.9 million related to life insurance acquired as part of a previous acquisition during the third and second quarters of 2017, respectively, which were recorded in other miscellaneous income in the table above.

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

	Quarter Ended										Nine Months Ended
	9/30/2017		6/30/2017		3/31/2017		12/31/2016		9/30/2016		9/30/2017		9/30/2016
Loan expense	$	3,013	$	2,827	$	2,792	$	2,823	$	3,336	$	8,632	$	9,403
Amortization of intangibles		1,539		1,544		1,564		1,686		1,692		4,647		5,180
Other miscellaneous expense		7,885		10,550		8,432		7,154		6,582		26,867		21,684
Total other expense	$	12,437	$	14,921	$	12,788	$	11,663	$	11,610	$	40,146	$	36,267

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

September 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

September 30, 2017

($ in thousands)

(unaudited)

Note 8 – Non-GAAP Financial Measures (continued)

		Quarter Ended															Nine Months Ended
		9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity		$	1,577,867		$	1,552,240		$	1,533,098		$	1,533,144		$	1,530,842		$	1,554,566		$	1,512,855
Less:         Goodwill			(379,627	)		(378,191	)		(366,156	)		(366,156	)		(366,156	)		(374,707	)		(366,156	)
Identifiable intangible assets			(18,714	)		(19,713	)		(19,950	)		(21,585	)		(23,311	)		(19,454	)		(24,988	)
Total average tangible equity		$	1,179,526		$	1,154,336		$	1,146,992		$	1,145,403		$	1,141,375		$	1,160,405		$	1,121,711
PERIOD END BALANCES
Total shareholders' equity		$	1,582,535		$	1,561,918		$	1,537,961		$	1,520,208		$	1,534,761
Less:         Goodwill			(379,627	)		(379,627	)		(366,156	)		(366,156	)		(366,156	)
Identifiable intangible assets			(17,883	)		(19,422	)		(19,117	)		(20,680	)		(22,366	)
Total tangible equity	(a)	$	1,185,025		$	1,162,869		$	1,152,688		$	1,133,372		$	1,146,239
TANGIBLE ASSETS
Total assets		$	13,884,655		$	13,909,138		$	13,490,361		$	13,352,333		$	13,161,538
Less:         Goodwill			(379,627	)		(379,627	)		(366,156	)		(366,156	)		(366,156	)
Identifiable intangible assets			(17,883	)		(19,422	)		(19,117	)		(20,680	)		(22,366	)
Total tangible assets	(b)	$	13,487,145		$	13,510,089		$	13,105,088		$	12,965,497		$	12,773,016
Risk-weighted assets	(c)	$	10,498,582		$	10,391,912		$	10,031,410		$	9,952,123		$	9,670,302
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income		$	34,579		$	24,035		$	31,248		$	28,923		$	30,982		$	89,862		$	79,488
Plus: Intangible amortization net of tax			950			954			966			1,041			1,045			2,870			3,199
Net income adjusted for intangible amortization		$	35,529		$	24,989		$	32,214		$	29,964		$	32,027		$	92,732		$	82,687
Period end common shares outstanding	(d)		67,742,135			67,740,901			67,729,434			67,628,618			67,626,939
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)			11.95	%		8.68	%		11.39	%		10.41	%		11.16	%		10.68	%		9.85	%
Tangible equity/tangible assets	(a)/(b)		8.79	%		8.61	%		8.80	%		8.74	%		8.97	%
Tangible equity/risk-weighted assets	(a)/(c)		11.29	%		11.19	%		11.49	%		11.39	%		11.85	%
Tangible book value	(a)/(d)*1,000	$	17.49		$	17.17		$	17.02		$	16.76		$	16.95
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity		$	1,582,535		$	1,561,918		$	1,537,961		$	1,520,208		$	1,534,761
AOCI-related adjustments			27,825			28,509			43,005			45,798			17,075
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)			(359,841	)		(360,198	)		(347,085	)		(347,442	)		(347,800	)
Other adjustments and deductions for CET1 (2)			(11,359	)		(11,267	)		(10,803	)		(8,637	)		(9,307	)
CET1 capital	(e)		1,239,160			1,218,962			1,223,078			1,209,927			1,194,729
Additional tier 1 capital instruments plus related surplus			60,000			60,000			60,000			60,000			60,000
Less: additional tier 1 capital deductions			(471	)		(247	)		(159	)		(267	)		(276	)
Additional tier 1 capital			59,529			59,753			59,841			59,733			59,724
Tier 1 capital		$	1,298,689		$	1,278,715		$	1,282,919		$	1,269,660		$	1,254,453
Common equity tier 1 capital ratio	(e)/(c)		11.80	%		11.73	%		12.19	%		12.16	%		12.35	%
(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

September 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											Nine Months Ended
	9/30/2017					9/30/2016						9/30/2017						9/30/2016
	Amount			Diluted EPS		Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS
Net Income (GAAP)	$	34,579		$	0.509	$	30,982		$	0.457		$	89,862		$	1.324		$	79,488		$	1.173
Significant non-routine transactions (net of taxes):
Defined benefit plan termination		—			—		—			—			10,895			0.161			—			—
Reliance merger transaction expenses		—			—		—			—			1,999			0.029			—			—
Gain on life insurance proceeds		—			—		—			—			(4,894	)		(0.072	)		—			—
Early retirement program expense		—			—		146			0.002			—			—			5,884			0.087
Pension expense due to de-risking strategy in Plan Assets Portfolio		—			—		410			0.006			—			—			410			0.006
Net Income adjusted for significant non- routine transactions (Non-GAAP)	$	34,579		$	0.509	$	31,538		$	0.465		$	97,862		$	1.442		$	85,782		$	1.266
	Reported			Adjusted		Reported			Adjusted			Reported			Adjusted			Reported			Adjusted
	(GAAP)			(Non-GAAP)		(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)
Return on equity		8.69	%	n/a			8.05	%		8.20	%		7.73	%		8.42	%		7.02	%		7.57	%
Return on average tangible equity		11.95	%	n/a			11.16	%		11.36	%		10.68	%		11.61	%		9.85	%		10.60	%
Return on assets		0.99	%	n/a			0.95	%		0.97	%		0.88	%		0.96	%		0.83	%		0.89	%
n/a - not applicable