Trustmark Corporation Announces 2017 Financial Results

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ: TRMK) reported net income of $15.8 million in the fourth quarter of 2017, which represented diluted earnings per share of $0.23. Included in the fourth quarter financial results were one-time charges resulting from the re-measurement of Trustmark’s net deferred tax assets due to the enactment of the Tax Cuts and Jobs Act of 2017 (Tax Reform Act) and the elimination of a deferred tax valuation allowance related to a prior merger, which collectively reduced net income by $17.0 million, or $0.25 per diluted share. Adjusting for these items, net income in the fourth quarter totaled $32.7 million, representing diluted earnings per share of $0.48, an increase of 11.6% when compared to the same period in the prior year.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=51747177&lang=en

For the full year, Trustmark’s net income totaled $105.6 million, which represented diluted earnings per share of $1.56. Excluding the one-time charges referenced above as well as the non-routine items related to the termination of Trustmark’s defined benefit pension plan ($10.9 million), the RB Bancorporation merger ($2.0 million) and the non-taxable proceeds related to life insurance ($4.9 million), diluted earnings per share were $1.92 in 2017. Excluding non-routine items, diluted earnings per share were $1.70 in 2016.

Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2018, to shareholders of record on March 1, 2018.

2017 Highlights

• Loans held for investment increased $718.8 million, or 9.2%, during the year
• Credit quality remained solid as net charge-offs represented 11 basis points of average loans
• Deposits increased $521.5 million, or 5.2%
• Expanded presence in attractive Huntsville, Alabama MSA with the merger of RB Bancorporation
• Revenue totaled $592.2 million, an increase of $30.7 million, or 5.5%

Gerard R. Host, President and CEO, stated, “Trustmark made significant accomplishments in 2017. We continued to provide customers with the products and services they desired as evidenced by our fourth consecutive year of robust loan growth and solid performance across our financial services businesses. Our Mortgage Banking, Insurance Services and Wealth Management businesses posted another year of solid results. We expanded our digital banking platform with the introduction of myTrustmark^® Business, which was well received by our customers. We also made investments to enhance our customer contact center as well as to replace legacy-banking systems. In addition, we continued to realign delivery channels in response to changing customer preferences and embraced opportunities to enhance efficiency and profitability. Trustmark is well-positioned to meet the needs of our customers and create long-term value for our shareholders.”

Balance Sheet Management

• Continued balance sheet optimization as maturing investment securities were replaced with organic loan growth
• Deposit costs remained well controlled

Loans held for investment totaled $8.6 billion at December 31, 2017, an increase of 1.9% from the prior quarter and 9.2% from the same period one year earlier. Compared to the prior quarter, construction, land development and other land loans expanded $37.5 million, driven by growth in construction loans in Alabama. Other real estate secured loans increased by $35.8 million over the prior quarter, as growth in Mississippi and Alabama offset a minimal decrease in Tennessee. Loans secured by 1-4 family residential properties grew $26.6 million quarter over quarter, principally due to growth in Mississippi and Alabama. Other loans, which include loans to nonprofits and financial intermediaries, increased $25.4 million as growth in Mississippi, Texas and Tennessee more than offset declines in Alabama and Florida.

Acquired loans totaled $261.5 million at December 31, 2017, down $22.2 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $8.8 billion at December 31, 2017, up 1.6% from the prior quarter and 8.7% from the prior year.

Deposits totaled $10.6 billion at December 31, 2017, an increase of $345.8 million, or 3.4%, from the previous quarter and $521.5 million, or 5.2%, year-over-year. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 59% of deposits in checking accounts and a total cost of deposits of 0.28%. The total cost of interest-bearing liabilities was 0.56% for the fourth quarter of 2017.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At December 31, 2017, Trustmark’s tangible equity to tangible assets ratio was 8.77%, while its total risk-based capital ratio was 13.10%. Tangible book value per share was $17.35 at December 31, 2017, up 3.5% year-over-year.

Credit Quality

• Allowance for loan losses represented 320.8% of nonperforming loans, excluding specifically reviewed impaired loans
• Other real estate declined $5.1 million in the fourth quarter and $18.8 million year-over-year

Nonperforming loans totaled $67.6 million at December 31, 2017, down 2.5% from the prior quarter and up 37.3% year-over-year. Other real estate totaled $43.2 million, reflecting a 10.6% linked-quarter decrease and a 30.3% year-over-year reduction. Collectively, nonperforming assets totaled $110.8 million, reflecting a linked-quarter and year-over-year decrease of 5.8% and 0.4%, respectively.

Allocation of Trustmark's $76.7 million allowance for loan losses represented 0.95% of commercial loans and 0.68% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.90% at December 31, 2017. This represents a level management considers commensurate with the inherent risk in the loan portfolio. In aggregate, the allowance for both held for investment and acquired loan losses represented 0.92% of total loans held for investment and acquired loans.

Net charge-offs totaled $9.3 million in the fourth quarter resulting from two impaired loans being written-down to collateral value. One of the credits was impaired and reserved earlier in the year, while the other was an existing substandard credit that was impaired, provisioned and written-down during the fourth quarter.

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

Revenue Generation

• Net interest income (FTE) excluding acquired loans in 2017 totaled $402.9 million, up 7.2% from the prior year
• Noninterest income in 2017 totaled $184.7 million, up 6.2% from the prior year

Revenue in the fourth quarter totaled $148.0 million, down 0.3% from the prior quarter, reflecting in part a seasonal reduction in noninterest income. Net interest income (FTE) in the fourth quarter totaled $109.1 million, resulting in a net interest margin of 3.48%. Compared to the prior quarter, net interest income (FTE) increased $214 thousand primarily due to growth in interest income (FTE) from the held for sale and held for investment loan portfolios, which was offset in part by decreased yields on the securities portfolio. During the fourth quarter of 2017, the yield on acquired loans totaled 9.27% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 1.63% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the fourth quarter of 2017 remained stable compared to the third quarter of 2017, as increased yields on the loans held for investment and held for sale portfolio were offset by decreased yields on the securities portfolio and higher costs of interest-bearing deposits and other borrowings. Net interest income (FTE) in 2017 totaled $427.3 million, resulting in a net interest margin (FTE) of 3.48%; excluding acquired loans, the net interest margin (FTE) was 3.36%.

Noninterest income totaled $44.0 million in the fourth quarter, down from the prior quarter primarily because of seasonally lower insurance commissions. In the fourth quarter, bank card and other fees totaled $7.3 million, an increase of 1.6% from the prior quarter, while service charges on deposit accounts totaled $11.2 million, down 0.3% from the prior quarter. Other income, net decreased $1.1 million linked quarter, primarily due to a decline in other miscellaneous income.

Insurance revenue in the fourth quarter totaled $8.8 million, reflecting a seasonal decrease of 15.2% from the prior quarter and an increase of 4.2% compared to one year earlier. Insurance revenue in 2017 totaled $38.2 million, up $1.4 million relative to the prior year. The solid performance in 2017 reflects increased business development efforts and initiatives that supported enhanced productivity.

Wealth management revenue totaled $7.7 million in the fourth quarter, an increase of 2.6% when compared to the prior quarter and 2.9% from levels one year earlier. The year-over-year increase is primarily attributable to higher retail brokerage income. Wealth management revenue in 2017 totaled $30.3 million, in-line with the prior year. Trustmark remained focused on servicing clients and realigned processes to enhance productivity.

Mortgage banking revenue in the fourth quarter totaled $6.3 million, up $1.9 million from the prior quarter. The linked-quarter increase is primarily attributable to reduced net negative hedge ineffectiveness. Mortgage loan production in the fourth quarter totaled $337.5 million, a seasonal decrease of 1.2% from the prior quarter and a 17.0% decrease year-over-year, primarily due to lower refinancing activity and rising interest rates.

In 2017, mortgage banking revenue totaled $29.9 million, up 6.0% from the prior year as a net positive mortgage servicing hedge ineffectiveness and increased mortgage servicing income were offset in part by lower secondary marketing gains. Mortgage loan production totaled $1.4 billion in 2017, down 15.6% from the prior year primarily due to an extremely competitive third party origination environment.

Noninterest Expense and Taxes

• Core noninterest expense in 2017 totaled $399.5 million
• Continued realignment of retail delivery channel
• Trustmark estimates its annual effective income tax rate will decrease to approximately 12% to 14% beginning in 2018 primarily as a result of the Tax Cuts and Jobs Act of 2017

Core noninterest expense, which excludes other real estate expense ($666 thousand), intangible amortization ($1.5 million) and non-recurring items, totaled $100.8 million in the fourth quarter, an increase of $80 thousand on a comparable basis from the prior quarter and $3.6 million from the prior year.

Salaries and benefits totaled $59.8 million in the fourth quarter, up 1.6% linked quarter primarily due to increased expense related to incentive compensation programs. Services and fees increased 1.9% from the prior quarter, reflecting higher spending on outside services and fees and advertising. Other real estate expense totaled $666 thousand during the fourth quarter, representing a 22.9% decrease compared to the prior quarter.

Trustmark’s fourth quarter and year ended effective income tax rate equaled 61.4% and 31.6%, respectively. Excluding the impact of the re-measurement of net deferred tax assets of $25.6 million related to the Tax Reform Act and the elimination of the deferred tax valuation allowance of $8.7 million during the fourth quarter, Trustmark’s fourth quarter and year ended effective tax rate would have been 19.9% and 20.6%, respectively. Beginning in 2018, Trustmark estimates its annual effective income tax rate will be approximately 12% to 14% primarily as a result of the Tax Reform Act. Trustmark’s effective income tax rate continues to be less than the statutory rate primarily due to various tax-exempt income items and its utilization of income tax credit programs.

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. During 2017, Trustmark consolidated three branch offices and reallocated a portion of those resources to opening a new banking center. Over the last five years, Trustmark has consolidated 38 branch offices with limited growth potential and established 10 banking centers in attractive growth markets. In addition, Trustmark is piloting myTeller℠, an interactive video teller service provided through a centralized teller center which delivers most functions provided by traditional tellers. The potential applications for this technology include deployment beyond the traditional branch network and expanded service hours, further enhancing customer convenience and improving operational efficiency. Trustmark also introduced myTrustmark^® Business, an enhanced and robust digital banking service for commercial customers to meet growing mobile and online demand. Trustmark remains committed to investments that promote profitable revenue growth as well as reengineering and efficiency opportunities that enhance long-term shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 24, 2018, 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, February 7, 2018, in archived format at the same web address or by calling [phone], passcode 10115328.

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 potential market impacts of efforts by the Federal Reserve Board to reduce the size of its balance sheet and 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 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
December 31, 2017
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES		12/31/2017			9/30/2017			12/31/2016		$ Change			% Change		$ Change			% Change
Securities AFS-taxable	$	2,247,247		$	2,349,736		$	2,271,503		$	(102,489	)	-4.4	%	$	(24,256	)	-1.1	%
Securities AFS-nontaxable		61,691			67,994			91,495			(6,303	)	-9.3	%		(29,804	)	-32.6	%
Securities HTM-taxable		1,045,723			1,086,773			1,101,382			(41,050	)	-3.8	%		(55,659	)	-5.1	%
Securities HTM-nontaxable		32,781			32,829			33,675			(48	)	-0.1	%		(894	)	-2.7	%
Total securities		3,387,442			3,537,332			3,498,055			(149,890	)	-4.2	%		(110,613	)	-3.2	%
Loans (including loans held for sale)		8,686,916			8,532,523			7,855,444			154,393		1.8	%		831,472		10.6	%
Acquired loans		273,918			299,221			282,197			(25,303	)	-8.5	%		(8,279	)	-2.9	%
Fed funds sold and rev repos		1,724			3,582			1,418			(1,858	)	-51.9	%		306		21.6	%
Other earning assets		80,218			84,320			80,608			(4,102	)	-4.9	%		(390	)	-0.5	%
Total earning assets		12,430,218			12,456,978			11,717,722			(26,760	)	-0.2	%		712,496		6.1	%
Allowance for loan losses		(86,704	)		(85,363	)		(82,604	)		(1,341	)	-1.6	%		(4,100	)	-5.0	%
Cash and due from banks		315,586			312,409			314,420			3,177		1.0	%		1,166		0.4	%
Other assets		1,192,464			1,202,766			1,238,029			(10,302	)	-0.9	%		(45,565	)	-3.7	%
Total assets	$	13,851,564		$	13,886,790		$	13,187,567		$	(35,226	)	-0.3	%	$	663,997		5.0	%
Interest-bearing demand deposits	$	2,244,625		$	2,192,064		$	1,920,273		$	52,561		2.4	%	$	324,352		16.9	%
Savings deposits		3,291,407			3,284,323			3,049,733			7,084		0.2	%		241,674		7.9	%
Time deposits		1,756,576			1,736,683			1,638,853			19,893		1.1	%		117,723		7.2	%
Total interest-bearing deposits		7,292,608			7,213,070			6,608,859			79,538		1.1	%		683,749		10.3	%
Fed funds purchased and repos		475,850			547,863			494,193			(72,013	)	-13.1	%		(18,343	)	-3.7	%
Short-term borrowings		1,276,543			1,335,476			435,576			(58,933	)	-4.4	%		840,967		n/m
Long-term FHLB advances		954			970			685,844			(16	)	-1.6	%		(684,890	)	-99.9	%
Subordinated notes		—			—			40,757			—		n/m			(40,757	)	-100.0	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Total interest-bearing liabilities		9,107,811			9,159,235			8,327,085			(51,424	)	-0.6	%		780,726		9.4	%
Noninterest-bearing deposits		2,994,292			3,003,763			3,160,959			(9,471	)	-0.3	%		(166,667	)	-5.3	%
Other liabilities		169,828			145,925			166,379			23,903		16.4	%		3,449		2.1	%
Total liabilities		12,271,931			12,308,923			11,654,423			(36,992	)	-0.3	%		617,508		5.3	%
Shareholders' equity		1,579,633			1,577,867			1,533,144			1,766		0.1	%		46,489		3.0	%
Total liabilities and equity	$	13,851,564		$	13,886,790		$	13,187,567		$	(35,226	)	-0.3	%	$	663,997		5.0	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
PERIOD END BALANCES		12/31/2017			9/30/2017			12/31/2016		$ Change			% Change		$ Change			% Change
Cash and due from banks	$	335,768		$	350,123		$	327,706		$	(14,355	)	-4.1	%	$	8,062		2.5	%
Fed funds sold and rev repos		615			3,215			500			(2,600	)	-80.9	%		115		23.0	%
Securities available for sale		2,238,635			2,369,089			2,356,682			(130,454	)	-5.5	%		(118,047	)	-5.0	%
Securities held to maturity		1,056,486			1,102,283			1,158,643			(45,797	)	-4.2	%		(102,157	)	-8.8	%
Loans held for sale (LHFS)		180,512			204,157			175,927			(23,645	)	-11.6	%		4,585		2.6	%
Loans held for investment (LHFI)		8,569,967			8,407,341			7,851,213			162,626		1.9	%		718,754		9.2	%
Allowance for loan losses		(76,733	)		(80,332	)		(71,265	)		3,599		4.5	%		(5,468	)	-7.7	%
Net LHFI		8,493,234			8,327,009			7,779,948			166,225		2.0	%		713,286		9.2	%
Acquired loans		261,517			283,757			272,247			(22,240	)	-7.8	%		(10,730	)	-3.9	%
Allowance for loan losses, acquired loans		(4,079	)		(5,768	)		(11,397	)		1,689		29.3	%		7,318		64.2	%
Net acquired loans		257,438			277,989			260,850			(20,551	)	-7.4	%		(3,412	)	-1.3	%
Net LHFI and acquired loans		8,750,672			8,604,998			8,040,798			145,674		1.7	%		709,874		8.8	%
Premises and equipment, net		179,339			181,312			184,987			(1,973	)	-1.1	%		(5,648	)	-3.1	%
Mortgage servicing rights		84,269			81,477			80,239			2,792		3.4	%		4,030		5.0	%
Goodwill		379,627			379,627			366,156			—		0.0	%		13,471		3.7	%
Identifiable intangible assets		16,360			17,883			20,680			(1,523	)	-8.5	%		(4,320	)	-20.9	%
Other real estate		43,228			48,356			62,051			(5,128	)	-10.6	%		(18,823	)	-30.3	%
Other assets		532,442			542,135			577,964			(9,693	)	-1.8	%		(45,522	)	-7.9	%
Total assets	$	13,797,953		$	13,884,655		$	13,352,333		$	(86,702	)	-0.6	%	$	445,620		3.3	%
Deposits:
Noninterest-bearing	$	2,978,074		$	2,998,013		$	2,973,238		$	(19,939	)	-0.7	%	$	4,836		0.2	%
Interest-bearing		7,599,438			7,233,729			7,082,774			365,709		5.1	%		516,664		7.3	%
Total deposits		10,577,512			10,231,742			10,056,012			345,770		3.4	%		521,500		5.2	%
Fed funds purchased and repos		469,827			545,603			539,817			(75,776	)	-13.9	%		(69,990	)	-13.0	%
Short-term borrowings		971,049			1,322,159			769,778			(351,110	)	-26.6	%		201,271		26.1	%
Long-term FHLB advances		946			962			251,049			(16	)	-1.7	%		(250,103	)	-99.6	%
Subordinated notes		—			—			—			—		n/m			—		n/m
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Other liabilities		145,062			139,798			153,613			5,264		3.8	%		(8,551	)	-5.6	%
Total liabilities		12,226,252			12,302,120			11,832,125			(75,868	)	-0.6	%		394,127		3.3	%
Common stock		14,115			14,114			14,091			1		0.0	%		24		0.2	%
Capital surplus		369,124			368,131			366,563			993		0.3	%		2,561		0.7	%
Retained earnings		1,228,187			1,228,115			1,185,352			72		0.0	%		42,835		3.6	%
Accum other comprehensive loss, net of tax		(39,725	)		(27,825	)		(45,798	)		(11,900	)	-42.8	%		6,073		13.3	%
Total shareholders' equity		1,571,701			1,582,535			1,520,208			(10,834	)	-0.7	%		51,493		3.4	%
Total liabilities and equity	$	13,797,953		$	13,884,655		$	13,352,333		$	(86,702	)	-0.6	%	$	445,620		3.3	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands except per share data)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
INCOME STATEMENTS		12/31/2017			9/30/2017			12/31/2016		$ Change			% Change		$ Change			% Change
Interest and fees on LHFS & LHFI-FTE	$	95,816		$	93,703		$	81,346		$	2,113		2.3	%	$	14,470		17.8	%
Interest and fees on acquired loans		6,401			6,625			8,290			(224	)	-3.4	%		(1,889	)	-22.8	%
Interest on securities-taxable		18,327			19,291			18,775			(964	)	-5.0	%		(448	)	-2.4	%
Interest on securities-tax exempt-FTE		1,035			1,104			1,340			(69	)	-6.3	%		(305	)	-22.8	%
Interest on fed funds sold and rev repos		7			14			4			(7	)	-50.0	%		3		75.0	%
Other interest income		473			355			335			118		33.2	%		138		41.2	%
Total interest income-FTE		122,059			121,092			110,090			967		0.8	%		11,969		10.9	%
Interest on deposits		7,284			6,381			3,380			903		14.2	%		3,904		n/m
Interest on fed funds pch and repos		1,116			1,301			471			(185	)	-14.2	%		645		n/m
Other interest expense		4,555			4,520			2,662			35		0.8	%		1,893		71.1	%
Total interest expense		12,955			12,202			6,513			753		6.2	%		6,442		98.9	%
Net interest income-FTE		109,104			108,890			103,577			214		0.2	%		5,527		5.3	%
Provision for loan losses, LHFI		5,739			3,672			1,834			2,067		56.3	%		3,905		n/m
Provision for loan losses, acquired loans		(1,573	)		(1,653	)		1,150			80		4.8	%		(2,723	)	n/m
Net interest income after provision-FTE		104,938			106,871			100,593			(1,933	)	-1.8	%		4,345		4.3	%
Service charges on deposit accounts		11,193			11,223			11,444			(30	)	-0.3	%		(251	)	-2.2	%
Bank card and other fees		7,266			7,150			6,796			116		1.6	%		470		6.9	%
Mortgage banking, net		6,284			4,425			5,428			1,859		42.0	%		856		15.8	%
Insurance commissions		8,813			10,398			8,459			(1,585	)	-15.2	%		354		4.2	%
Wealth management		7,723			7,530			7,505			193		2.6	%		218		2.9	%
Other, net		2,681			3,740			2,092			(1,059	)	-28.3	%		589		28.2	%
Nonint inc-excl sec gains (losses), net		43,960			44,466			41,724			(506	)	-1.1	%		2,236		5.4	%
Security gains (losses), net		—			14			—			(14	)	-100.0	%		—		n/m
Total noninterest income		43,960			44,480			41,724			(520	)	-1.2	%		2,236		5.4	%
Salaries and employee benefits		59,788			58,837			58,168			951		1.6	%		1,620		2.8	%
Defined benefit plan termination		—			—			—			—		n/m			—		n/m
Services and fees		15,419			15,133			14,751			286		1.9	%		668		4.5	%
Net occupancy-premises		6,617			6,702			6,426			(85	)	-1.3	%		191		3.0	%
Equipment expense		5,996			6,297			6,172			(301	)	-4.8	%		(176	)	-2.9	%
Other real estate expense		666			864			525			(198	)	-22.9	%		141		26.9	%
FDIC assessment expense		2,868			2,816			2,562			52		1.8	%		306		11.9	%
Other expense		11,597			12,437			11,663			(840	)	-6.8	%		(66	)	-0.6	%
Total noninterest expense		102,951			103,086			100,267			(135	)	-0.1	%		2,684		2.7	%
Income before income taxes and tax eq adj		45,947			48,265			42,050			(2,318	)	-4.8	%		3,897		9.3	%
Tax equivalent adjustment		5,060			4,978			4,725			82		1.6	%		335		7.1	%
Income before income taxes		40,887			43,287			37,325			(2,400	)	-5.5	%		3,562		9.5	%
Income taxes		25,119			8,708			8,402			16,411		n/m			16,717		n/m
Net income	$	15,768		$	34,579		$	28,923		$	(18,811	)	-54.4	%	$	(13,155	)	-45.5	%
Per share data
Earnings per share - basic	$	0.23		$	0.51		$	0.43		$	(0.28	)	-54.9	%	$	(0.20	)	-46.5	%
Earnings per share - diluted	$	0.23		$	0.51		$	0.43		$	(0.28	)	-54.9	%	$	(0.20	)	-46.5	%
Dividends per share	$	0.23		$	0.23		$	0.23			—		0.0	%		—		0.0	%
Weighted average shares outstanding
Basic		67,742,792			67,741,655			67,627,496
Diluted		67,938,986			67,916,418			67,817,770
Period end shares outstanding		67,746,094			67,742,135			67,628,618
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)		12/31/2017			9/30/2017			12/31/2016		$ Change			% Change		$ Change			% Change
Nonaccrual loans
Alabama	$	3,083		$	1,629		$	665		$	1,454		89.3	%	$	2,418		n/m
Florida		3,034			3,242			3,644			(208	)	-6.4	%		(610	)	-16.7	%
Mississippi (2)		49,129			59,483			37,771			(10,354	)	-17.4	%		11,358		30.1	%
Tennessee (3)		4,436			4,589			6,213			(153	)	-3.3	%		(1,777	)	-28.6	%
Texas		7,893			346			941			7,547		n/m			6,952		n/m
Total nonaccrual loans		67,575			69,289			49,234			(1,714	)	-2.5	%		18,341		37.3	%
Other real estate
Alabama		11,714			12,726			15,989			(1,012	)	-8.0	%		(4,275	)	-26.7	%
Florida		13,937			16,100			22,582			(2,163	)	-13.4	%		(8,645	)	-38.3	%
Mississippi (2)		14,260			15,319			15,646			(1,059	)	-6.9	%		(1,386	)	-8.9	%
Tennessee (3)		2,535			2,671			6,183			(136	)	-5.1	%		(3,648	)	-59.0	%
Texas		782			1,540			1,651			(758	)	-49.2	%		(869	)	-52.6	%
Total other real estate		43,228			48,356			62,051			(5,128	)	-10.6	%		(18,823	)	-30.3	%
Total nonperforming assets	$	110,803		$	117,645		$	111,285		$	(6,842	)	-5.8	%	$	(482	)	-0.4	%
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	2,171		$	2,244		$	1,832		$	(73	)	-3.3	%	$	339		18.5	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	35,544		$	32,332		$	28,345		$	3,212		9.9	%	$	7,199		25.4	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (1)		12/31/2017			9/30/2017			12/31/2016		$ Change			% Change		$ Change			% Change
Beginning Balance	$	80,332		$	76,184		$	70,871		$	4,148		5.4	%	$	9,461		13.3	%
Provision for loan losses		5,739			3,672			1,834			2,067		56.3	%		3,905		n/m
Charge-offs		(12,075	)		(2,752	)		(4,037	)		(9,323	)	n/m			(8,038	)	n/m
Recoveries		2,737			3,228			2,597			(491	)	-15.2	%		140		5.4	%
Net (charge-offs) recoveries		(9,338	)		476			(1,440	)		(9,814	)	n/m			(7,898	)	n/m
Ending Balance	$	76,733		$	80,332		$	71,265		$	(3,599	)	-4.5	%	$	5,468		7.7	%
PROVISION FOR LOAN LOSSES (1)
Alabama	$	559		$	1,218		$	763		$	(659	)	-54.1	%	$	(204	)	-26.7	%
Florida		(1,235	)		(744	)		(655	)		(491	)	-66.0	%		(580	)	-88.5	%
Mississippi (2)		2,779			1,860			1,873			919		49.4	%		906		48.4	%
Tennessee (3)		(439	)		(72	)		(118	)		(367	)	n/m			(321	)	n/m
Texas		4,075			1,410			(29	)		2,665		n/m			4,104		n/m
Total provision for loan losses	$	5,739		$	3,672		$	1,834		$	2,067		56.3	%	$	3,905		n/m
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama	$	196		$	314		$	368		$	(118	)	-37.6	%	$	(172	)	-46.7	%
Florida		(946	)		(796	)		(502	)		(150	)	-18.8	%		(444	)	-88.4	%
Mississippi (2)		5,574			(11	)		1,591			5,585		n/m			3,983		n/m
Tennessee (3)		79			85			(8	)		(6	)	-7.1	%		87		n/m
Texas		4,435			(68	)		(9	)		4,503		n/m			4,444		n/m
Total net charge-offs (recoveries)	$	9,338		$	(476	)	$	1,440		$	9,814		n/m		$	7,898		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
December 31, 2017
($ in thousands)
(unaudited)
	Quarter Ended															Year Ended
AVERAGE BALANCES		12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
Securities AFS-taxable	$	2,247,247		$	2,349,736		$	2,334,600		$	2,252,162		$	2,271,503		$	2,296,070		$	2,236,663
Securities AFS-nontaxable		61,691			67,994			75,640			88,522			91,495			73,373			97,942
Securities HTM-taxable		1,045,723			1,086,773			1,108,158			1,124,692			1,101,382			1,091,108			1,120,267
Securities HTM-nontaxable		32,781			32,829			32,878			33,009			33,675			32,874			34,616
Total securities		3,387,442			3,537,332			3,551,276			3,498,385			3,498,055			3,493,425			3,489,488
Loans (including loans held for sale)		8,686,916			8,532,523			8,348,758			8,074,449			7,855,444			8,412,673			7,592,223
Acquired loans		273,918			299,221			315,558			250,482			282,197			284,898			331,736
Fed funds sold and rev repos		1,724			3,582			3,184			397			1,418			2,229			1,105
Other earning assets		80,218			84,320			77,770			79,515			80,608			80,468			70,029
Total earning assets		12,430,218			12,456,978			12,296,546			11,903,228			11,717,722			12,273,693			11,484,581
Allowance for loan losses		(86,704	)		(85,363	)		(83,328	)		(83,394	)		(82,604	)		(84,708	)		(82,414	)
Cash and due from banks		315,586			312,409			307,966			310,542			314,420			311,642			291,868
Other assets		1,192,464			1,202,766			1,229,981			1,235,469			1,238,029			1,215,019			1,243,985
Total assets	$	13,851,564		$	13,886,790		$	13,751,165		$	13,365,845		$	13,187,567		$	13,715,646		$	12,938,020
Interest-bearing demand deposits	$	2,244,625		$	2,192,064		$	2,035,491		$	1,981,982		$	1,920,273		$	2,114,475		$	1,866,225
Savings deposits		3,291,407			3,284,323			3,337,374			3,319,572			3,049,733			3,308,027			3,140,060
Time deposits		1,756,576			1,736,683			1,777,529			1,650,251			1,638,853			1,730,569			1,665,516
Total interest-bearing deposits		7,292,608			7,213,070			7,150,394			6,951,805			6,608,859			7,153,071			6,671,801
Fed funds purchased and repos		475,850			547,863			525,523			498,963			494,193			512,085			495,197
Short-term borrowings		1,276,543			1,335,476			1,047,107			887,848			435,576			1,138,353			370,008
Long-term FHLB advances		954			970			141,097			251,033			685,844			97,561			634,300
Subordinated notes		—			—			—			—			40,757			—			47,662
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		9,107,811			9,159,235			8,925,977			8,651,505			8,327,085			8,962,926			8,280,824
Noninterest-bearing deposits		2,994,292			3,003,763			3,110,125			3,008,176			3,160,959			3,028,982			2,996,886
Other liabilities		169,828			145,925			162,823			173,066			166,379			162,854			142,355
Total liabilities		12,271,931			12,308,923			12,198,925			11,832,747			11,654,423			12,154,762			11,420,065
Shareholders' equity		1,579,633			1,577,867			1,552,240			1,533,098			1,533,144			1,560,884			1,517,955
Total liabilities and equity	$	13,851,564		$	13,886,790		$	13,751,165		$	13,365,845		$	13,187,567		$	13,715,646		$	12,938,020
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
PERIOD END BALANCES		12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016
Cash and due from banks	$	335,768		$	350,123		$	318,329		$	379,590		$	327,706
Fed funds sold and rev repos		615			3,215			6,900			500			500
Securities available for sale		2,238,635			2,369,089			2,447,688			2,365,554			2,356,682
Securities held to maturity		1,056,486			1,102,283			1,139,754			1,156,067			1,158,643
Loans held for sale (LHFS)		180,512			204,157			203,652			174,090			175,927
Loans held for investment (LHFI)		8,569,967			8,407,341			8,296,045			8,004,657			7,851,213
Allowance for loan losses		(76,733	)		(80,332	)		(76,184	)		(72,445	)		(71,265	)
Net LHFI		8,493,234			8,327,009			8,219,861			7,932,212			7,779,948
Acquired loans		261,517			283,757			314,910			218,242			272,247
Allowance for loan losses, acquired loans		(4,079	)		(5,768	)		(7,423	)		(10,006	)		(11,397	)
Net acquired loans		257,438			277,989			307,487			208,236			260,850
Net LHFI and acquired loans		8,750,672			8,604,998			8,527,348			8,140,448			8,040,798
Premises and equipment, net		179,339			181,312			182,315			183,311			184,987
Mortgage servicing rights		84,269			81,477			82,628			82,758			80,239
Goodwill		379,627			379,627			379,627			366,156			366,156
Identifiable intangible assets		16,360			17,883			19,422			19,117			20,680
Other real estate		43,228			48,356			49,958			55,968			62,051
Other assets		532,442			542,135			551,517			566,802			577,964
Total assets	$	13,797,953		$	13,884,655		$	13,909,138		$	13,490,361		$	13,352,333
Deposits:
Noninterest-bearing	$	2,978,074		$	2,998,013		$	3,092,915		$	3,209,727		$	2,973,238
Interest-bearing		7,599,438			7,233,729			7,330,476			6,894,745			7,082,774
Total deposits		10,577,512			10,231,742			10,423,391			10,104,472			10,056,012
Fed funds purchased and repos		469,827			545,603			508,068			524,335			539,817
Short-term borrowings		971,049			1,322,159			1,222,592			864,690			769,778
Long-term FHLB advances		946			962			978			250,994			251,049
Subordinated notes		—			—			—			—			—
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		145,062			139,798			130,335			146,053			153,613
Total liabilities		12,226,252			12,302,120			12,347,220			11,952,400			11,832,125
Common stock		14,115			14,114			14,114			14,112			14,091
Capital surplus		369,124			368,131			367,075			365,951			366,563
Retained earnings		1,228,187			1,228,115			1,209,238			1,200,903			1,185,352
Accum other comprehensive loss, net of tax		(39,725	)		(27,825	)		(28,509	)		(43,005	)		(45,798	)
Total shareholders' equity		1,571,701			1,582,535			1,561,918			1,537,961			1,520,208
Total liabilities and equity	$	13,797,953		$	13,884,655		$	13,909,138		$	13,490,361		$	13,352,333
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands except per share data)
(unaudited)
	Quarter Ended															Year Ended
INCOME STATEMENTS		12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
Interest and fees on LHFS & LHFI-FTE	$	95,816		$	93,703		$	89,486		$	83,790		$	81,346		$	362,795		$	316,007
Interest and fees on acquired loans		6,401			6,625			6,263			5,189			8,290			24,478			30,144
Interest on securities-taxable		18,327			19,291			19,377			19,197			18,775			76,192			77,614
Interest on securities-tax exempt-FTE		1,035			1,104			1,178			1,300			1,340			4,617			5,654
Interest on fed funds sold and rev repos		7			14			11			1			4			33			14
Other interest income		473			355			371			267			335			1,466			988
Total interest income-FTE		122,059			121,092			116,686			109,744			110,090			469,581			430,421
Interest on deposits		7,284			6,381			5,107			3,945			3,380			22,717			12,748
Interest on fed funds pch and repos		1,116			1,301			1,037			698			471			4,152			1,717
Other interest expense		4,555			4,520			3,628			2,673			2,662			15,376			10,082
Total interest expense		12,955			12,202			9,772			7,316			6,513			42,245			24,547
Net interest income-FTE		109,104			108,890			106,914			102,428			103,577			427,336			405,874
Provision for loan losses, LHFI		5,739			3,672			2,921			2,762			1,834			15,094			10,957
Provision for loan losses, acquired loans		(1,573	)		(1,653	)		(2,564	)		(1,605	)		1,150			(7,395	)		3,757
Net interest income after provision-FTE		104,938			106,871			106,557			101,271			100,593			419,637			391,160
Service charges on deposit accounts		11,193			11,223			10,755			10,832			11,444			44,003			45,253
Bank card and other fees		7,266			7,150			7,370			6,500			6,796			28,286			27,906
Mortgage banking, net		6,284			4,425			9,008			10,185			5,428			29,902			28,212
Insurance commissions		8,813			10,398			9,745			9,212			8,459			38,168			36,764
Wealth management		7,723			7,530			7,674			7,413			7,505			30,340			30,492
Other, net		2,681			3,740			5,637			1,891			2,092			13,949			5,626
Nonint inc-excl sec gains (losses), net		43,960			44,466			50,189			46,033			41,724			184,648			174,253
Security gains (losses), net		—			14			1			—			—			15			(310	)
Total noninterest income		43,960			44,480			50,190			46,033			41,724			184,663			173,943
Salaries and employee benefits		59,788			58,837			59,060			57,302			58,168			234,987			239,637
Defined benefit plan termination		—			—			17,644			—			—			17,644			—
Services and fees		15,419			15,133			15,009			15,332			14,751			60,893			58,695
Net occupancy-premises		6,617			6,702			6,210			6,238			6,426			25,767			24,982
Equipment expense		5,996			6,297			6,162			5,998			6,172			24,453			24,225
Other real estate expense		666			864			383			1,759			525			3,672			586
FDIC assessment expense		2,868			2,816			2,686			2,640			2,562			11,010			11,243
Other expense		11,597			12,437			14,921			12,788			11,663			51,743			47,930
Total noninterest expense		102,951			103,086			122,075			102,057			100,267			430,169			407,298
Income before income taxes and tax eq adj		45,947			48,265			34,672			45,247			42,050			174,131			157,805
Tax equivalent adjustment		5,060			4,978			4,910			4,838			4,725			19,786			18,341
Income before income taxes		40,887			43,287			29,762			40,409			37,325			154,345			139,464
Income taxes		25,119			8,708			5,727			9,161			8,402			48,715			31,053
Net income	$	15,768		$	34,579		$	24,035		$	31,248		$	28,923		$	105,630		$	108,411
Per share data
Earnings per share - basic	$	0.23		$	0.51		$	0.35		$	0.46		$	0.43		$	1.56		$	1.60
Earnings per share - diluted	$	0.23		$	0.51		$	0.35		$	0.46		$	0.43		$	1.56		$	1.60
Dividends per share	$	0.23		$	0.23		$	0.23		$	0.23		$	0.23		$	0.92		$	0.92
Weighted average shares outstanding
Basic		67,742,792			67,741,655			67,736,298			67,687,365			67,627,496			67,727,219			67,620,485
Diluted		67,938,986			67,916,418			67,892,532			67,845,785			67,817,770			67,886,805			67,784,464
Period end shares outstanding		67,746,094			67,742,135			67,740,901			67,729,434			67,628,618			67,746,094			67,628,618
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2017
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)		12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016
Nonaccrual loans
Alabama	$	3,083		$	1,629		$	1,723		$	1,649		$	665
Florida		3,034			3,242			3,174			3,559			3,644
Mississippi (2)		49,129			59,483			63,889			49,349			37,771
Tennessee (3)		4,436			4,589			4,975			5,185			6,213
Texas		7,893			346			383			1,565			941
Total nonaccrual loans		67,575			69,289			74,144			61,307			49,234
Other real estate
Alabama		11,714			12,726			13,301			13,953			15,989
Florida		13,937			16,100			17,377			21,577			22,582
Mississippi (2)		14,260			15,319			14,377			14,974			15,646
Tennessee (3)		2,535			2,671			3,363			4,706			6,183
Texas		782			1,540			1,540			758			1,651
Total other real estate		43,228			48,356			49,958			55,968			62,051
Total nonperforming assets	$	110,803		$	117,645		$	124,102		$	117,275		$	111,285
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	2,171		$	2,244		$	1,216		$	1,307		$	1,832
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	35,544		$	32,332		$	29,906		$	31,147		$	28,345
	Quarter Ended															Year Ended
ALLOWANCE FOR LOAN LOSSES (1)		12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
Beginning Balance	$	80,332		$	76,184		$	72,445		$	71,265		$	70,871		$	71,265		$	67,619
Provision for loan losses		5,739			3,672			2,921			2,762			1,834			15,094			10,957
Charge-offs		(12,075	)		(2,752	)		(2,118	)		(4,202	)		(4,037	)		(21,147	)		(18,930	)
Recoveries		2,737			3,228			2,936			2,620			2,597			11,521			11,619
Net (charge-offs) recoveries		(9,338	)		476			818			(1,582	)		(1,440	)		(9,626	)		(7,311	)
Ending Balance	$	76,733		$	80,332		$	76,184		$	72,445		$	71,265		$	76,733		$	71,265
PROVISION FOR LOAN LOSSES (1)
Alabama	$	559		$	1,218		$	866		$	1,189		$	763		$	3,832		$	2,624
Florida		(1,235	)		(744	)		(975	)		3			(655	)		(2,951	)		(1,806	)
Mississippi (2)		2,779			1,860			2,268			1,826			1,873			8,733			3,591
Tennessee (3)		(439	)		(72	)		322			208			(118	)		19			897
Texas		4,075			1,410			440			(464	)		(29	)		5,461			5,651
Total provision for loan losses	$	5,739		$	3,672		$	2,921		$	2,762		$	1,834		$	15,094		$	10,957
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama	$	196		$	314		$	(29	)	$	66		$	368		$	547		$	905
Florida		(946	)		(796	)		(973	)		(155	)		(502	)		(2,870	)		(1,940	)
Mississippi (2)		5,574			(11	)		33			1,759			1,591			7,355			3,764
Tennessee (3)		79			85			146			83			(8	)		393			326
Texas		4,435			(68	)		5			(171	)		(9	)		4,201			4,256
Total net charge-offs (recoveries)	$	9,338		$	(476	)	$	(818	)	$	1,582		$	1,440		$	9,626		$	7,311
(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
December 31, 2017
(unaudited)
	Quarter Ended															Year Ended
FINANCIAL RATIOS AND OTHER DATA		12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
Return on equity		3.96	%		8.69	%		6.21	%		8.27	%		7.51	%		6.77	%		7.14	%
Return on average tangible equity		5.60	%		11.95	%		8.68	%		11.39	%		10.41	%		9.39	%		9.99	%
Return on assets		0.45	%		0.99	%		0.70	%		0.95	%		0.87	%		0.77	%		0.84	%
Interest margin - Yield - FTE		3.90	%		3.86	%		3.81	%		3.74	%		3.74	%		3.83	%		3.75	%
Interest margin - Cost		0.41	%		0.39	%		0.32	%		0.25	%		0.22	%		0.34	%		0.21	%
Net interest margin - FTE		3.48	%		3.47	%		3.49	%		3.49	%		3.52	%		3.48	%		3.53	%
Efficiency ratio (1)		65.21	%		65.14	%		64.50	%		66.67	%		66.08	%		65.37	%		65.98	%
Full-time equivalent employees		2,893			2,878			2,858			2,799			2,788
CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans		0.43	%		-0.02	%		-0.04	%		0.08	%		0.07	%		0.11	%		0.10	%
Provision for loan losses/average loans		0.26	%		0.17	%		0.14	%		0.14	%		0.09	%		0.18	%		0.14	%
Nonperforming loans/total loans (incl LHFS)		0.77	%		0.80	%		0.87	%		0.75	%		0.61	%
Nonperforming assets/total loans (incl LHFS)		1.27	%		1.37	%		1.46	%		1.43	%		1.39	%
Nonperforming assets/total loans (incl LHFS) +ORE		1.26	%		1.36	%		1.45	%		1.42	%		1.38	%
ALL/total loans (excl LHFS)		0.90	%		0.96	%		0.92	%		0.91	%		0.91	%
ALL-commercial/total commercial loans		0.95	%		1.02	%		0.99	%		0.97	%		0.97	%
ALL-consumer/total consumer and home mortgage loans		0.68	%		0.73	%		0.67	%		0.67	%		0.68	%
ALL/nonperforming loans		113.55	%		115.94	%		102.75	%		118.17	%		144.75	%
ALL/nonperforming loans (excl specifically reviewed impaired loans)		320.84	%		301.50	%		277.42	%		263.73	%		267.40	%
CAPITAL RATIOS
Total equity/total assets		11.39	%		11.40	%		11.23	%		11.40	%		11.39	%
Tangible equity/tangible assets		8.77	%		8.79	%		8.61	%		8.80	%		8.74	%
Tangible equity/risk-weighted assets		11.13	%		11.29	%		11.19	%		11.49	%		11.39	%
Tier 1 leverage ratio (3)		9.67	%		9.61	%		9.56	%		9.86	%		9.90	%
Common equity tier 1 capital ratio (3)		11.77	%		11.80	%		11.73	%		12.19	%		12.16	%
Tier 1 risk-based capital ratio (3)		12.33	%		12.37	%		12.30	%		12.79	%		12.76	%
Total risk-based capital ratio (3)		13.10	%		13.19	%		13.11	%		13.61	%		13.59	%
STOCK PERFORMANCE
Market value-Close	$	31.86		$	33.12		$	32.16		$	31.79		$	35.65
Book value	$	23.20		$	23.36		$	23.06		$	22.71		$	22.48
Tangible book value	$	17.35		$	17.49		$	17.17		$	17.02		$	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 9.
(2) - Excludes acquired loans.
(3) - The regulatory capital ratios for December 31, 2017 contain a reclassification adjustment of $8.5 million from AOCI to retained earnings as allowed by regulatory agencies in an interagency statement released January 18, 2018 to address disproportionate tax effect in AOCI resulting from the recent enactment of the Tax Cuts and Jobs Act of 2017 and the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes.
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 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

December 31, 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):

	12/31/2017		9/30/2017		6/30/2017		3/31/2017		12/31/2016
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	45,018	$	49,723	$	51,277	$	53,247	$	55,763
Issued by U.S. Government sponsored agencies		267		271		272		274		276
Obligations of states and political subdivisions		79,229		89,144		96,514		109,895		115,373
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		65,746		60,902		58,422		42,667		42,786
Issued by FNMA and FHLMC		814,450		860,131		860,571		733,214		631,084
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,016,790		1,087,169		1,157,241		1,202,719		1,267,951
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		217,135		221,749		223,391		223,538		243,449
Total securities available for sale	$	2,238,635	$	2,369,089	$	2,447,688	$	2,365,554	$	2,356,682
SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	3,692	$	3,680	$	3,669	$	3,658	$	3,647
Obligations of states and political subdivisions		46,039		46,069		46,098		46,273		46,303
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		13,539		14,191		14,399		14,977		15,478
Issued by FNMA and FHLMC		133,975		139,172		144,282		118,733		81,299
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		678,926		708,715		740,042		771,296		803,474
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		180,315		190,456		191,264		201,130		208,442
Total securities held to maturity	$	1,056,486	$	1,102,283	$	1,139,754	$	1,156,067	$	1,158,643

At December 31, 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 $19.5 million ($12.0 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

December 31, 2017

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)	12/31/2017		9/30/2017		6/30/2017		3/31/2017		12/31/2016
Loans secured by real estate:
Construction, land development and other land loans	$	987,624	$	950,144	$	922,029	$	859,927	$	831,437
Secured by 1-4 family residential properties		1,675,311		1,648,733		1,655,968		1,656,837		1,660,043
Secured by nonfarm, nonresidential properties		2,193,823		2,172,885		2,109,367		2,064,352		2,034,176
Other real estate secured		517,956		482,163		432,208		399,636		318,148
Commercial and industrial loans		1,570,345		1,568,588		1,635,000		1,540,783		1,528,434
Consumer loans		171,918		173,061		170,858		166,314		170,562
State and other political subdivision loans		952,483		936,614		936,860		910,493		917,515
Other loans		500,507		475,153		433,755		406,315		390,898
LHFI		8,569,967		8,407,341		8,296,045		8,004,657		7,851,213
Allowance for loan losses		(76,733)		(80,332)		(76,184)		(72,445)		(71,265)
Net LHFI	$	8,493,234	$	8,327,009	$	8,219,861	$	7,932,212	$	7,779,948
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)	12/31/2017		9/30/2017		6/30/2017		3/31/2017		12/31/2016
Loans secured by real estate:
Construction, land development and other land loans	$	23,586	$	29,384	$	35,054	$	17,651	$	20,850
Secured by 1-4 family residential properties		61,751		65,746		74,313		54,721		69,540
Secured by nonfarm, nonresidential properties		114,694		122,200		132,663		92,075		103,820
Other real estate secured		16,746		18,431		19,553		16,275		19,010
Commercial and industrial loans		31,506		34,124		34,375		20,691		36,896
Consumer loans		2,600		2,749		2,833		2,664		3,365
Other loans		10,634		11,123		16,119		14,165		18,766
Acquired loans		261,517		283,757		314,910		218,242		272,247
Allowance for loan losses, acquired loans		(4,079)		(5,768)		(7,423)		(10,006)		(11,397)
Net acquired loans	$	257,438	$	277,989	$	307,487	$	208,236	$	260,850
(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

December 31, 2017

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)

	December 31, 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	$	987,624	$	373,107	$	47,592	$	274,415	$	21,741	$	270,769
Secured by 1-4 family residential properties		1,675,311		105,281		47,500		1,411,503		93,625		17,402
Secured by nonfarm, nonresidential properties		2,193,823		368,337		213,404		947,708		151,526		512,848
Other real estate secured		517,956		84,973		2,801		231,750		46,414		152,018
Commercial and industrial loans		1,570,345		206,677		20,897		800,297		331,536		210,938
Consumer loans		171,918		22,274		4,231		125,980		17,229		2,204
State and other political subdivision loans		952,483		83,300		28,185		626,119		28,410		186,469
Other loans		500,507		55,740		17,431		324,295		50,272		52,769
Loans	$	8,569,967	$	1,299,689	$	382,041	$	4,742,067	$	740,753	$	1,405,417
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	57,616	$	13,100	$	14,795	$	23,193	$	2,249	$	4,279
Development		47,050		5,382		4,711		21,484		255		15,218
Unimproved land		95,856		12,336		14,682		35,395		14,860		18,583
1-4 family construction		188,561		61,709		10,352		80,511		2,406		33,583
Other construction		598,541		280,580		3,052		113,832		1,971		199,106
Construction, land development and other land loans	$	987,624	$	373,107	$	47,592	$	274,415	$	21,741	$	270,769
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	308,452	$	89,530	$	44,797	$	101,584	$	16,900	$	55,641
Office		213,049		36,678		20,741		72,605		5,909		77,116
Nursing homes/senior living		191,845		18,507		—		166,932		6,406		—
Hotel/motel		263,768		54,658		60,968		58,575		35,014		54,553
Mini-storage		126,117		14,539		6,403		43,632		560		60,983
Industrial		93,481		11,467		9,613		19,903		4,553		47,945
Health care		32,442		11,303		782		19,138		—		1,219
Convenience stores		25,101		1,353		—		13,207		865		9,676
Other		87,729		10,773		14,823		14,772		7,750		39,611
Total income producing loans		1,341,984		248,808		158,127		510,348		77,957		346,744
Owner-occupied:
Office		145,072		24,329		19,805		74,663		6,136		20,139
Churches		92,059		17,082		658		46,753		19,883		7,683
Industrial warehouses		138,536		8,932		3,557		56,904		13,785		55,358
Health care		113,702		23,372		4,019		67,488		4,373		14,450
Convenience stores		104,740		10,200		12,623		54,222		1,298		26,397
Retail		43,132		5,877		6,756		22,040		1,830		6,629
Restaurants		33,908		2,848		702		26,484		1,922		1,952
Auto dealerships		31,486		8,949		34		12,828		9,675		—
Other		149,204		17,940		7,123		75,978		14,667		33,496
Total owner-occupied loans		851,839		119,529		55,277		437,360		73,569		166,104
Loans secured by nonfarm, nonresidential properties	$	2,193,823	$	368,337	$	213,404	$	947,708	$	151,526	$	512,848
(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 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															Year Ended
	12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
Securities – taxable		2.21	%		2.23	%		2.26	%		2.31	%		2.21	%		2.25	%		2.31	%
Securities – nontaxable		4.35	%		4.34	%		4.35	%		4.34	%		4.26	%		4.35	%		4.27	%
Securities – total		2.27	%		2.29	%		2.32	%		2.38	%		2.29	%		2.31	%		2.39	%
Loans - LHFI & LHFS		4.38	%		4.36	%		4.30	%		4.21	%		4.12	%		4.31	%		4.16	%
Acquired loans		9.27	%		8.78	%		7.96	%		8.40	%		11.69	%		8.59	%		9.09	%
Loans - total		4.53	%		4.51	%		4.43	%		4.33	%		4.38	%		4.45	%		4.37	%
FF sold & rev repo		1.61	%		1.55	%		1.39	%		1.02	%		1.12	%		1.48	%		1.27	%
Other earning assets		2.34	%		1.67	%		1.91	%		1.36	%		1.65	%		1.82	%		1.41	%
Total earning assets		3.90	%		3.86	%		3.81	%		3.74	%		3.74	%		3.83	%		3.75	%
Interest-bearing deposits		0.40	%		0.35	%		0.29	%		0.23	%		0.20	%		0.32	%		0.19	%
FF pch & repo		0.93	%		0.94	%		0.79	%		0.57	%		0.38	%		0.81	%		0.35	%
Other borrowings		1.35	%		1.28	%		1.16	%		0.90	%		0.87	%		1.18	%		0.91	%
Total interest-bearing liabilities		0.56	%		0.53	%		0.44	%		0.34	%		0.31	%		0.47	%		0.30	%
Net interest margin		3.48	%		3.47	%		3.49	%		3.49	%		3.52	%		3.48	%		3.53	%
Net interest margin excluding acquired loans		3.35	%		3.34	%		3.37	%		3.38	%		3.31	%		3.36	%		3.37	%

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 fourth quarter of 2017, the yield on acquired loans totaled 9.27% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 1.63% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin for the fourth quarter of 2017 remained relatively flat compared to the third quarter of 2017, as increased yields on the loans held for investment and held for sale portfolio were offset by decreased yields on the securities portfolio and 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 following table illustrates the components of mortgage banking revenues included in noninterest income in the accompanying income statements:

	Quarter Ended															Year Ended
	12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
Mortgage servicing income, net	$	5,471		$	5,295		$	5,439		$	5,458		$	5,218		$	21,663		$	20,724
Change in fair value-MSR from runoff		(2,605	)		(2,892	)		(2,896	)		(2,387	)		(2,739	)		(10,780	)		(10,106	)
Gain on sales of loans, net		5,300			5,083			5,001			3,550			6,054			18,934			20,535
Other, net		(1,120	)		(450	)		629			772			(2,925	)		(169	)		(84	)
Mortgage banking income before hedge ineffectiveness		7,046			7,036			8,173			7,393			5,608			29,648			31,069
Change in fair value-MSR from market changes		1,168			(2,393	)		(1,291	)		1,466			13,112			(1,050	)		(406	)
Change in fair value of derivatives		(1,930	)		(218	)		2,126			1,326			(13,292	)		1,304			(2,451	)
Net (negative) positive hedge ineffectiveness		(762	)		(2,611	)		835			2,792			(180	)		254			(2,857	)
Mortgage banking, net	$	6,284		$	4,425		$	9,008		$	10,185		$	5,428		$	29,902		$	28,212

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 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															Year Ended
	12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
Partnership amortization for tax credit purposes	$	(2,478	)	$	(2,521	)	$	(2,287	)	$	(2,274	)	$	(2,479	)	$	(9,560	)	$	(9,916	)
Increase in life insurance cash surrender value		1,816			1,813			1,782			1,714			1,751			7,125			6,891
Other miscellaneous income		3,343			4,448			6,142			2,451			2,820			16,384			8,651
Total other, net	$	2,681		$	3,740		$	5,637		$	1,891		$	2,092		$	13,949		$	5,626

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 $1.7 million and $2.7 million related to bank-owned life insurance during the fourth and third quarters of 2017, respectively, and $4.9 million related to life insurance acquired as part of a previous acquisition during the second quarter of 2017, 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										Year Ended
	12/31/2017		9/30/2017		6/30/2017		3/31/2017		12/31/2016		12/31/2017		12/31/2016
Loan expense	$	2,276	$	3,013	$	2,827	$	2,792	$	2,823	$	10,908	$	12,226
Amortization of intangibles		1,522		1,539		1,544		1,564		1,686		6,169		6,866
Other miscellaneous expense		7,799		7,885		10,550		8,432		7,154		34,666		28,838
Total other expense	$	11,597	$	12,437	$	14,921	$	12,788	$	11,663	$	51,743	$	47,930

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

December 31, 2017

($ in thousands)

(unaudited)

Note 8 – Income Taxes

The income tax provision consisted of the following for the periods presented ($ in thousands):

	Quarter Ended											Year Ended
	12/31/2017			9/30/2017		6/30/2017		3/31/2017		12/31/2016		12/31/2017			12/31/2016
Current	$	3,850		$	8,108	$	5,427	$	5,261	$	3,302	$	22,646		$	13,053
Deferred		4,300			600		300		3,900		5,100		9,100			18,000
Elimination of deferred tax valuation allowance		(8,650	)		—		—		—		—		(8,650	)		—
Income tax provision before re-measurement		(500	)		8,708		5,727		9,161		8,402		23,096			31,053
Re-measurement of net deferred tax assets		25,619			—		—		—		—		25,619			—
Income tax provision	$	25,119		$	8,708	$	5,727	$	9,161	$	8,402	$	48,715		$	31,053

During 2013, a deferred tax valuation allowance was created as a result of Trustmark’s merger with BancTrust Financial Group, Inc. and was established to reduce deferred tax assets to the amount that was more likely than not to be realized in future years. Trustmark has continually evaluated this allowance since inception and, based on the weight of the available evidence, has determined that the deferred tax assets will not be subject to the limitations on the deductibility of built-in losses (Internal Revenue Service Code, Section 382) in future years. Therefore, during the fourth quarter of 2017, the valuation allowance was eliminated creating a decrease in deferred income tax expense of $8.7 million.

Following the recent enactment of the Tax Cuts and Jobs Act of 2017 (Tax Reform Act) which resulted in the reduction of the corporate federal income tax rate, Trustmark re-measured its net deferred tax assets and recorded an increase in deferred income tax expense of $25.6 million during the fourth quarter of 2017. In addition, Trustmark estimates its effective income tax rate to decrease from approximately 21% (excluding the elimination of the deferred tax valuation allowance and the re-measurement of net deferred tax assets) in 2017 to approximately 12% to 14% beginning in 2018, primarily as a result of the Tax Reform Act. Trustmark’s effective tax rate continues to be less than the statutory rate primarily due to various tax-exempt income items and its utilization of income tax credit programs.

Note 9 – 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

December 31, 2017

($ in thousands)

(unaudited)

Note 9 – Non-GAAP Financial Measures (continued)

		Quarter Ended															Year Ended
		12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016			12/31/2017			12/31/2016
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity		$	1,579,633		$	1,577,867		$	1,552,240		$	1,533,098		$	1,533,144		$	1,560,884		$	1,517,955
Less: Goodwill			(379,627	)		(379,627	)		(378,191	)		(366,156	)		(366,156	)		(375,947	)		(366,156	)
Identifiable intangible assets			(17,196	)		(18,714	)		(19,713	)		(19,950	)		(21,585	)		(18,885	)		(24,132	)
Total average tangible equity		$	1,182,810		$	1,179,526		$	1,154,336		$	1,146,992		$	1,145,403		$	1,166,052		$	1,127,667
PERIOD END BALANCES
Total shareholders' equity		$	1,571,701		$	1,582,535		$	1,561,918		$	1,537,961		$	1,520,208
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(366,156	)		(366,156	)
Identifiable intangible assets			(16,360	)		(17,883	)		(19,422	)		(19,117	)		(20,680	)
Total tangible equity	(a)	$	1,175,714		$	1,185,025		$	1,162,869		$	1,152,688		$	1,133,372
TANGIBLE ASSETS
Total assets		$	13,797,953		$	13,884,655		$	13,909,138		$	13,490,361		$	13,352,333
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(366,156	)		(366,156	)
Identifiable intangible assets			(16,360	)		(17,883	)		(19,422	)		(19,117	)		(20,680	)
Total tangible assets	(b)	$	13,401,966		$	13,487,145		$	13,510,089		$	13,105,088		$	12,965,497
Risk-weighted assets	(c)	$	10,566,818		$	10,498,582		$	10,391,912		$	10,031,410		$	9,952,123
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income		$	15,768		$	34,579		$	24,035		$	31,248		$	28,923		$	105,630		$	108,411
Plus: Intangible amortization net of tax			940			950			954			966			1,041			3,810			4,240
Net income adjusted for intangible amortization		$	16,708		$	35,529		$	24,989		$	32,214		$	29,964		$	109,440		$	112,651
Period end common shares outstanding	(d)		67,746,094			67,742,135			67,740,901			67,729,434			67,628,618
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)			5.60	%		11.95	%		8.68	%		11.39	%		10.41	%		9.39	%		9.99	%
Tangible equity/tangible assets	(a)/(b)		8.77	%		8.79	%		8.61	%		8.80	%		8.74	%
Tangible equity/risk-weighted assets	(a)/(c)		11.13	%		11.29	%		11.19	%		11.49	%		11.39	%
Tangible book value	(a)/(d)*1,000	$	17.35		$	17.49		$	17.17		$	17.02		$	16.76
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity		$	1,571,701		$	1,582,535		$	1,561,918		$	1,537,961		$	1,520,208
AOCI-related adjustments (3)			48,248			27,825			28,509			43,005			45,798
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)			(366,461	)		(359,841	)		(360,198	)		(347,085	)		(347,442	)
Other adjustments and deductions for CET1 (2)			(10,248	)		(11,359	)		(11,267	)		(10,803	)		(8,637	)
CET1 capital	(e)		1,243,240			1,239,160			1,218,962			1,223,078			1,209,927
Additional tier 1 capital instruments plus related surplus			60,000			60,000			60,000			60,000			60,000
Less: additional tier 1 capital deductions			(2	)		(471	)		(247	)		(159	)		(267	)
Additional tier 1 capital			59,998			59,529			59,753			59,841			59,733
Tier 1 capital		$	1,303,238		$	1,298,689		$	1,278,715		$	1,282,919		$	1,269,660
Common equity tier 1 capital ratio	(e)/(c)		11.77	%		11.80	%		11.73	%		12.19	%		12.16	%
(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.
(3) The December 31, 2017 amount contains a reclassification adjustment of $8.5 million from AOCI to retained earnings as allowed by regulatory agencies in an interagency statement released January 18, 2018 to address disproportionate tax effect in AOCI resulting from the recent enactment of the Tax Cuts and Jobs Act of 2017 and the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2017

($ in thousands except per share data)

(unaudited)

Note 9 – 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												Year Ended
	12/31/2017						12/31/2016						12/31/2017						12/31/2016
	Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS
Net Income (GAAP)	$	15,768		$	0.232		$	28,923		$	0.426		$	105,630		$	1.556		$	108,411		$	1.599
Significant non-routine transactions (net of taxes):
Re-measurement of net deferred taxes		25,619			0.377			—			—			25,619			0.377
Elimination of deferred tax valuation allowance		(8,650	)		(0.127	)		—			—			(8,650	)		(0.127	)
Defined benefit plan termination		—			—			—			—			10,895			0.160			—			—
Reliance merger transaction expenses		—			—			—			—			1,999			0.029			—			—
Gain on life insurance proceeds		—			—			—			—			(4,894	)		(0.072	)		—			—
Early retirement program expense		—			—			165			0.002			—			—			6,049			0.089
Pension expense due to de-risking strategy in Plan Assets Portfolio		—			—			410			0.006			—			—			820			0.012
Net Income adjusted for significant non- routine transactions (Non-GAAP)	$	32,737		$	0.482		$	29,498		$	0.434		$	130,599		$	1.923		$	115,280		$	1.700
	Reported			Adjusted			Reported			Adjusted			Reported			Adjusted			Reported			Adjusted
	(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)
Return on equity		3.96	%		8.22	%		7.51	%		7.65	%		6.77	%		8.37	%		7.14	%		7.59	%
Return on average tangible equity		5.60	%		11.30	%		10.41	%		10.61	%		9.39	%		11.53	%		9.99	%		10.60	%
Return on assets		0.45	%		0.94	%		0.87	%		0.89	%		0.77	%		0.95	%		0.84	%		0.89	%