Trustmark Corporation Announces 2016 Financial Results

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) reported net income of $28.9 million in the fourth quarter of 2016, which represented diluted earnings per share of $0.43. Diluted earnings per share in the fourth quarter of 2016 increased 4.9% when compared to the same period in the prior year. For the full year, Trustmark’s net income totaled $108.4 million, which represented diluted earnings per share of $1.60, and produced a return on average tangible equity of 9.99% and a return on average assets of 0.84%. Excluding charges related to a voluntary early retirement program (ERP) and expense related to reducing the risk profile of the assets of the Corporation’s defined benefits plan prior to termination, diluted earnings per share in 2016 were $1.70, compared to $1.71 in 2015. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2017, to shareholders of record on March 1, 2017.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=51498291&lang=en

Fourth Quarter Highlights

• Loans held for investment increased $352.0 million, or 4.7%, from the prior quarter and $759.8 million, or 10.7%, from the comparable period one year earlier
• Credit quality remained solid; nonperforming assets declined 6.8% and 16.0% from the prior quarter and year-over-year, respectively
• Core noninterest expense remained well controlled at $97.1 million in the fourth quarter

Gerard R. Host, President and CEO, stated, “2016 was another year of significant achievement for Trustmark. We continued to provide customers with the products and services they desired as evidenced by our third consecutive year of double-digit loan growth and solid performance across our financial services businesses. We made investments in technology designed to enhance our customers’ experience and strengthen security. In addition, we continued to realign delivery channels in response to changing customer preferences and embraced opportunities to enhance efficiency and profitability. As we look forward in 2017, we will continue to manage the franchise for the long term by expanding and building sustainable relationships. 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

• Diversified loan growth reflects the value of the Trustmark franchise
• Average noninterest-bearing deposits in 2016 increased 7.7% and represented 31.0% of average total deposits; cost of deposits remained steady
• Solid capital base continues to provide flexibility in pursuing growth opportunities

Loans held for investment totaled $7.9 billion at December 31, 2016, an increase of 4.7% from the prior quarter and 10.7% from the same period one year earlier. Compared to the prior quarter, loans secured by nonfarm, nonresidential real estate expanded $118.0 million, reflecting growth across Trustmark’s franchise. Commercial and industrial loans increased $107.1 million as growth in Mississippi and Tennessee more than offset declines in Alabama, Florida and Texas. Single-family mortgage loans grew $67.6 million principally due to growth in Mississippi, Alabama and Florida. Construction, land development and other land loans expanded $64.7 million, driven primarily by growth in construction loans in Mississippi and Alabama. Loans to state and other political subdivisions increased $41.5 million, led principally by growth in Texas and Mississippi. Other loans, which include loans to nonprofits and real estate investment trusts, declined $47.9 million as growth in Texas was more than offset by declines in Mississippi and Tennessee.

Acquired loans totaled $272.2 million at December 31, 2016, down $23.5 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $8.1 billion at December 31, 2016, up 4.2% from the prior quarter and 8.6% from the prior year.

Deposits totaled $10.1 billion at December 31, 2016, an increase of $370.3 million from the prior quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 60% of deposits in checking accounts and a total cost of deposits of 0.14%. The total cost of interest-bearing liabilities was 0.31% for the fourth quarter of 2016.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. At December 31, 2016, Trustmark’s tangible equity to tangible assets ratio was 8.74%, while its total risk-based capital ratio was 13.59%. Tangible book value per share was $16.76 at December 31, 2016, up 4.9% year-over-year.

Credit Quality

• Nonperforming loans and other real estate decreased 11.0% and 19.6%, respectively, in 2016
• Allowance for loan losses represented 267.40% of nonperforming loans, excluding specifically reviewed impaired loans
• Net charge-offs represented 10 basis points of average loans in 2016

Nonperforming loans totaled $49.2 million at December 31, 2016, down 9.5% from the prior quarter and 11.0% year-over-year. Other real estate totaled $62.1 million, reflecting a 4.5% linked-quarter decrease and a 19.6% year-over-year reduction. Collectively, nonperforming assets totaled $111.3 million, reflecting a linked-quarter and year-over-year decrease of 6.8% and 16.0%, respectively.

Allocation of Trustmark's $71.3 million allowance for loan losses represented 0.97% of commercial loans and 0.68% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.91% at December 31, 2016, representing 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 1.02% of total loans, which include held for investment and acquired loans.

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

Revenue Generation

• Net interest income (FTE) excluding acquired loans in 2016 totaled $375.7 million, up 5.2% from the prior year
• Noninterest income in 2016 totaled $173.9 million, up 0.5% from the prior year
• Mortgage loan production volume in 2016 totaled $1.6 billion, up 8.4% from the prior year

Revenue in the fourth quarter totaled $140.6 million, down 1.2% from the prior quarter, reflecting in part a seasonal reduction in noninterest income. Net interest income (FTE) in the fourth quarter totaled $103.6 million, resulting in a net interest margin of 3.52%. Compared to the prior quarter, net interest income (FTE) increased $1.4 million primarily due to growth in interest income (FTE) from the held for sale and held for investment loan portfolios and the acquired loan portfolio, which were offset in part by decreased yields on the securities portfolio. The yield on acquired loans in the fourth quarter totaled 11.69% and included recoveries from settlement of debt of $3.8 million, which represented approximately 5.40% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin in the fourth quarter was 3.31%, down 7 basis points from the prior quarter. The contraction in the net interest margin is attributable to a reduction in the yield on the securities portfolio and the loans held for investment and held for sale portfolios. Net interest income (FTE) in 2016 totaled $405.9 million, resulting in a net interest margin (FTE) of 3.53%; excluding acquired loans, the net interest margin (FTE) was 3.37%.

Noninterest income totaled $41.7 million in the fourth quarter, down from the prior quarter primarily as a result of seasonally lower mortgage banking revenues and insurance commissions. In the fourth quarter, bank card and other fees totaled $6.8 million, unchanged from the prior quarter, while service charges on deposit accounts totaled $11.4 million, down 2.0% from the prior quarter. Other income, net increased $818 thousand linked quarter, reflecting an increase in other miscellaneous income as well as a gain on the disposition of a closed branch facility. Noninterest income for 2016 totaled $173.9 million and remained stable when compared to the prior year.

Insurance revenue in the fourth quarter totaled $8.5 million, reflecting a seasonal decrease of 16.0% from the prior quarter and in line with levels one year earlier. For the year, insurance revenue totaled $36.8 million, up $340 thousand relative to the prior year. The solid performance in 2016 reflects increased business development efforts and initiatives that supported enhanced productivity.

Wealth management revenue totaled $7.5 million in the fourth quarter, remaining stable relative to the prior quarter and down 4.2% from levels one year earlier. The year-over-year decline is primarily attributable to reduced annuity and trust management income. Wealth management revenue in 2016 totaled $30.5 million, down 2.8% relative to the prior year. Trustmark remained focused on servicing clients and realigned processes to enhance productivity.

Mortgage banking revenue in the fourth quarter totaled $5.4 million, down $1.9 million from the prior quarter. The linked-quarter decline is primarily attributable to a $2.6 million decline in fair value of mortgage loans held for sale, which was offset in part by reduced negative hedge ineffectiveness of $976 thousand. Mortgage loan production in the fourth quarter totaled $406.6 million, a seasonal decrease of 16.7% from the prior quarter and an increase of 19.6% year-over-year.

In 2016, mortgage banking revenue totaled $28.2 million, down 6.5% from the prior year; increased secondary marketing gains and mortgage servicing income were more than offset by negative mortgage servicing hedge ineffectiveness. Excluding mortgage servicing hedge ineffectiveness, mortgage banking revenue increased $2.8 million, or 9.8%, during the year. Mortgage loan production in 2016 totaled $1.6 billion, up 8.4% from the prior year.

Noninterest Expense

• Core noninterest expense in 2016 remained well controlled and totaled $388.7 million
• Results of the previously announced ERP produced savings of $2.1 million during the fourth quarter and $4.4 million during second half of 2016

Core noninterest expense, which excludes ORE expense ($525 thousand), intangible amortization ($1.7 million), expense related to reducing the risk profile of the assets of the Corporation’s defined benefit plan prior to termination ($664 thousand) and additional pension expense related to the ERP ($268 thousand), totaled $97.1 million in the fourth quarter, an increase of $496 thousand on a comparable basis from the prior quarter.

Salaries and benefits totaled $58.2 million in the fourth quarter, up 1.6% linked quarter due to increased expense related to incentive compensation programs. Services and fees declined 1.3% from the prior quarter, reflecting in part a reduction in communications expense and professional fees. ORE and foreclosure expense totaled $525 thousand during the fourth quarter, which compares to a gain on sale of ORE of $1.3 million in the prior quarter. Relative to 2015, core noninterest expense remained stable at $388.7 million.

Trustmark continued the optimization of its retail delivery channels to enhance productivity and efficiency as well as promote additional growth. During the fourth quarter, Trustmark opened a loan production office in Pensacola, Florida, and consolidated two banking centers. For the year, Trustmark consolidated nine branch offices across Alabama, Mississippi and Florida, and reallocated a portion of those resources into a new banking center in Tuscaloosa, Alabama, and a new loan production office in Pensacola, Florida. Overall, these collective efforts resulted in the consolidation of 36 branch offices and the establishment of nine banking centers over the past four years. Trustmark is committed to developing and maintaining relationships while supporting 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, January 25, 2017, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing [phone] or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call. A replay of the conference call will also be available through Wednesday, February 8, 2017, in archived format at the same web address or by calling [phone], passcode 10098633.

Trustmark Corporation is a financial services company providing banking and financial solutions through 193 offices in Alabama, Florida, Mississippi, Tennessee and Texas.

Forward-Looking Statements

Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future” or the negative of those terms or other words of similar meaning. You should read statements that contain these words carefully because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements include, but are not limited to, statements relating to anticipated future operating and financial performance measures, including net interest margin, credit quality, business initiatives, growth opportunities and growth rates, among other things, and encompass any estimate, prediction, expectation, projection, opinion, anticipation, outlook or statement of belief included therein as well as the management assumptions underlying these forward-looking statements. You should be aware that the occurrence of the events described under the caption “Risk Factors” in Trustmark’s filings with the Securities and Exchange Commission could have an adverse effect on our business, results of operations and financial condition. Should one or more of these risks materialize, or should any such underlying assumptions prove to be significantly different, actual results may vary significantly from those anticipated, estimated, projected or expected.

Risks that could cause actual results to differ materially from current expectations of Management include, but are not limited to, changes in the level of nonperforming assets and charge-offs, local, state and national economic and market conditions, including conditions in the housing and real estate markets in the regions in which Trustmark operates and the extent and duration of the current volatility in the credit and financial markets as well as crude oil prices, changes in our ability to measure the fair value of assets in our portfolio, material changes in the level and/or volatility of market interest rates, the performance and demand for the products and services we offer, including the level and timing of withdrawals from our deposit accounts, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, our ability to attract noninterest-bearing deposits and other low-cost funds, competition in loan and deposit pricing, as well as the entry of new competitors into our markets through de novo expansion and acquisitions, economic conditions, including the potential impact of issues relating to the European financial system and monetary and other governmental actions designed to address the level and volatility of interest rates and the volatility of securities, currency and other markets, the enactment of legislation and changes in existing regulations or enforcement practices or the adoption of new regulations, changes in accounting standards and practices, including changes in the interpretation of existing standards, that affect our consolidated financial statements, changes in consumer spending, borrowings and savings habits, technological changes, changes in the financial performance or condition of our borrowers, changes in our ability to control expenses, changes in our compensation and benefit plans, including those associated with the planned termination of our noncontributory tax-qualified defined benefit pension plan, greater than expected costs or difficulties related to the integration of acquisitions or new products and lines of business, cyber-attacks and other breaches which could affect our information system security, natural disasters, environmental disasters, acts of war or terrorism, and other risks described in our filings with the Securities and Exchange Commission.

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

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES	12/31/2016			9/30/2016			12/31/2015			$ Change			% Change		$ Change			% Change
Securities AFS-taxable	$	2,271,503		$	2,249,109		$	2,209,801		$	22,394		1.0	%	$	61,702		2.8	%
Securities AFS-nontaxable		91,495			95,233			110,290			(3,738	)	-3.9	%		(18,795	)	-17.0	%
Securities HTM-taxable		1,101,382			1,115,053			1,145,397			(13,671	)	-1.2	%		(44,015	)	-3.8	%
Securities HTM-nontaxable		33,675			34,179			35,755			(504	)	-1.5	%		(2,080	)	-5.8	%
Total securities		3,498,055			3,493,574			3,501,243			4,481		0.1	%		(3,188	)	-0.1	%
Loans (including loans held for sale)		7,855,444			7,658,089			7,089,672			197,355		2.6	%		765,772		10.8	%
Acquired loans:
Noncovered loans		278,460			306,809			384,306			(28,349	)	-9.2	%		(105,846	)	-27.5	%
Covered loans		3,737			10,464			18,341			(6,727	)	-64.3	%		(14,604	)	-79.6	%
Fed funds sold and rev repos		1,418			1,352			1,384			66		4.9	%		34		2.5	%
Other earning assets		80,608			68,706			68,016			11,902		17.3	%		12,592		18.5	%
Total earning assets		11,717,722			11,538,994			11,062,962			178,728		1.5	%		654,760		5.9	%
Allowance for loan losses		(82,604	)		(82,301	)		(78,652	)		(303	)	0.4	%		(3,952	)	5.0	%
Cash and due from banks		314,420			299,670			272,562			14,750		4.9	%		41,858		15.4	%
Other assets		1,238,029			1,243,854			1,266,712			(5,825	)	-0.5	%		(28,683	)	-2.3	%
Total assets	$	13,187,567		$	13,000,217		$	12,523,584		$	187,350		1.4	%	$	663,983		5.3	%
Interest-bearing demand deposits	$	1,920,273		$	1,848,084		$	1,917,598		$	72,189		3.9	%	$	2,675		0.1	%
Savings deposits		3,049,733			3,101,161			2,963,318			(51,428	)	-1.7	%		86,415		2.9	%
Time deposits less than $100,000		945,649			961,641			1,033,233			(15,992	)	-1.7	%		(87,584	)	-8.5	%
Time deposits of $100,000 or more		693,204			705,704			687,635			(12,500	)	-1.8	%		5,569		0.8	%
Total interest-bearing deposits		6,608,859			6,616,590			6,601,784			(7,731	)	-0.1	%		7,075		0.1	%
Fed funds purchased and repos		494,193			481,071			563,424			13,122		2.7	%		(69,231	)	-12.3	%
Short-term borrowings		435,576			311,473			733,365			124,103		39.8	%		(297,789	)	-40.6	%
Long-term FHLB advances		685,844			751,095			50,078			(65,251	)	-8.7	%		635,766		n/m
Subordinated notes		40,757			49,988			49,964			(9,231	)	-18.5	%		(9,207	)	-18.4	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Total interest-bearing liabilities		8,327,085			8,272,073			8,060,471			55,012		0.7	%		266,614		3.3	%
Noninterest-bearing deposits		3,160,959			3,060,331			2,839,894			100,628		3.3	%		321,065		11.3	%
Other liabilities		166,379			136,971			141,925			29,408		21.5	%		24,454		17.2	%
Total liabilities		11,654,423			11,469,375			11,042,290			185,048		1.6	%		612,133		5.5	%
Shareholders' equity		1,533,144			1,530,842			1,481,294			2,302		0.2	%		51,850		3.5	%
Total liabilities and equity	$	13,187,567		$	13,000,217		$	12,523,584		$	187,350		1.4	%	$	663,983		5.3	%
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, 2016 ($ in thousands) (unaudited)
										Linked Quarter					Year over Year
PERIOD END BALANCES	12/31/2016			9/30/2016			12/31/2015			$ Change			% Change		$ Change			% Change
Cash and due from banks	$	327,706		$	383,945		$	277,751		$	(56,239	)	-14.6	%	$	49,955		18.0	%
Fed funds sold and rev repos		500			500			250			—		0.0	%		250		100.0	%
Securities available for sale		2,356,682			2,410,947			2,345,422			(54,265	)	-2.3	%		11,260		0.5	%
Securities held to maturity		1,158,643			1,143,234			1,187,818			15,409		1.3	%		(29,175	)	-2.5	%
Loans held for sale (LHFS)		175,927			242,097			160,189			(66,170	)	-27.3	%		15,738		9.8	%
Loans held for investment (LHFI)		7,851,213			7,499,204			7,091,385			352,009		4.7	%		759,828		10.7	%
Allowance for loan losses		(71,265	)		(70,871	)		(67,619	)		(394	)	0.6	%		(3,646	)	5.4	%
Net LHFI		7,779,948			7,428,333			7,023,766			351,615		4.7	%		756,182		10.8	%
Acquired loans:
Noncovered loans		268,633			291,825			372,711			(23,192	)	-7.9	%		(104,078	)	-27.9	%
Covered loans		3,614			3,912			17,700			(298	)	-7.6	%		(14,086	)	-79.6	%
Allowance for loan losses, acquired loans		(11,397	)		(11,380	)		(11,992	)		(17	)	0.1	%		595		-5.0	%
Net acquired loans		260,850			284,357			378,419			(23,507	)	-8.3	%		(117,569	)	-31.1	%
Net LHFI and acquired loans		8,040,798			7,712,690			7,402,185			328,108		4.3	%		638,613		8.6	%
Premises and equipment, net		184,987			190,930			195,656			(5,943	)	-3.1	%		(10,669	)	-5.5	%
Mortgage servicing rights		80,239			65,514			74,007			14,725		22.5	%		6,232		8.4	%
Goodwill		366,156			366,156			366,156			—		0.0	%		—		0.0	%
Identifiable intangible assets		20,680			22,366			27,546			(1,686	)	-7.5	%		(6,866	)	-24.9	%
Other real estate, excluding covered other real estate		62,051			64,993			77,177			(2,942	)	-4.5	%		(15,126	)	-19.6	%
Covered other real estate		—			—			1,651			—		n/m			(1,651	)	-100.0	%
FDIC indemnification asset		—			—			738			—		n/m			(738	)	-100.0	%
Other assets		577,964			558,166			562,350			19,798		3.5	%		15,614		2.8	%
Total assets	$	13,352,333		$	13,161,538		$	12,678,896		$	190,795		1.4	%	$	673,437		5.3	%
Deposits:
Noninterest-bearing	$	2,973,238		$	3,111,603		$	2,998,694		$	(138,365	)	-4.4	%	$	(25,456	)	-0.8	%
Interest-bearing		7,082,774			6,574,098			6,589,536			508,676		7.7	%		493,238		7.5	%
Total deposits		10,056,012			9,685,701			9,588,230			370,311		3.8	%		467,782		4.9	%
Fed funds purchased and repos		539,817			514,918			441,042			24,899		4.8	%		98,775		22.4	%
Short-term borrowings		769,778			412,792			412,617			356,986		86.5	%		357,161		86.6	%
Long-term FHLB advances		251,049			751,075			501,155			(500,026	)	-66.6	%		(250,106	)	-49.9	%
Subordinated notes		—			49,993			49,969			(49,993	)	-100.0	%		(49,969	)	-100.0	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Other liabilities		153,613			150,442			150,970			3,171		2.1	%		2,643		1.8	%
Total liabilities		11,832,125			11,626,777			11,205,839			205,348		1.8	%		626,286		5.6	%
Common stock		14,091			14,090			14,076			1		0.0	%		15		0.1	%
Capital surplus		366,563			365,553			361,467			1,010		0.3	%		5,096		1.4	%
Retained earnings		1,185,352			1,172,193			1,142,908			13,159		1.1	%		42,444		3.7	%
Accum other comprehensive loss, net of tax		(45,798	)		(17,075	)		(45,394	)		(28,723	)	n/m			(404	)	0.9	%
Total shareholders' equity		1,520,208			1,534,761			1,473,057			(14,553	)	-0.9	%		47,151		3.2	%
Total liabilities and equity	$	13,352,333		$	13,161,538		$	12,678,896		$	190,795		1.4	%	$	673,437		5.3	%
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, 2016 ($ in thousands except per share data) (unaudited)
	Quarter Ended								Linked Quarter					Year over Year
INCOME STATEMENTS	12/31/2016		9/30/2016			12/31/2015			$ Change			% Change		$ Change			% Change
Interest and fees on LHFS & LHFI-FTE	$	81,346	$	80,649		$	74,383		$	697		0.9	%	$	6,963		9.4	%
Interest and fees on acquired loans		8,290		6,781			11,910			1,509		22.3	%		(3,620	)	-30.4	%
Interest on securities-taxable		18,775		19,351			21,149			(576	)	-3.0	%		(2,374	)	-11.2	%
Interest on securities-tax exempt-FTE		1,340		1,388			1,565			(48	)	-3.5	%		(225	)	-14.4	%
Interest on fed funds sold and rev repos		4		5			4			(1	)	-20.0	%		—		0.0	%
Other interest income		335		223			402			112		50.2	%		(67	)	-16.7	%
Total interest income-FTE		110,090		108,397			109,413			1,693		1.6	%		677		0.6	%
Interest on deposits		3,380		3,208			3,000			172		5.4	%		380		12.7	%
Interest on fed funds pch and repos		471		411			274			60		14.6	%		197		71.9	%
Other interest expense		2,662		2,603			1,987			59		2.3	%		675		34.0	%
Total interest expense		6,513		6,222			5,261			291		4.7	%		1,252		23.8	%
Net interest income-FTE		103,577		102,175			104,152			1,402		1.4	%		(575	)	-0.6	%
Provision for loan losses, LHFI		1,834		4,284			3,043			(2,450	)	-57.2	%		(1,209	)	-39.7	%
Provision for loan losses, acquired loans		1,150		691			997			459		66.4	%		153		15.3	%
Net interest income after provision-FTE		100,593		97,200			100,112			3,393		3.5	%		481		0.5	%
Service charges on deposit accounts		11,444		11,677			11,961			(233	)	-2.0	%		(517	)	-4.3	%
Bank card and other fees		6,796		6,756			7,156			40		0.6	%		(360	)	-5.0	%
Mortgage banking, net		5,428		7,364			4,287			(1,936	)	-26.3	%		1,141		26.6	%
Insurance commissions		8,459		10,074			8,501			(1,615	)	-16.0	%		(42	)	-0.5	%
Wealth management		7,505		7,571			7,831			(66	)	-0.9	%		(326	)	-4.2	%
Other, net		2,092		1,274			(466	)		818		64.2	%		2,558		n/m
Nonint inc-excl sec gains (losses), net		41,724		44,716			39,270			(2,992	)	-6.7	%		2,454		6.2	%
Security gains (losses), net		—		—			—			—		n/m			—		n/m
Total noninterest income		41,724		44,716			39,270			(2,992	)	-6.7	%		2,454		6.2	%
Salaries and employee benefits		58,168		57,250			57,366			918		1.6	%		802		1.4	%
Services and fees		14,751		14,947			13,717			(196	)	-1.3	%		1,034		7.5	%
Net occupancy-premises		6,426		6,440			6,304			(14	)	-0.2	%		122		1.9	%
Equipment expense		6,172		6,063			6,105			109		1.8	%		67		1.1	%
Other real estate expense		525		(1,313	)		(518	)		1,838		n/m			1,043		n/m
FDIC assessment expense		2,562		2,911			2,614			(349	)	-12.0	%		(52	)	-2.0	%
Other expense		11,663		11,610			13,032			53		0.5	%		(1,369	)	-10.5	%
Total noninterest expense		100,267		97,908			98,620			2,359		2.4	%		1,647		1.7	%
Income before income taxes and tax eq adj		42,050		44,008			40,762			(1,958	)	-4.4	%		1,288		3.2	%
Tax equivalent adjustment		4,725		4,611			4,334			114		2.5	%		391		9.0	%
Income before income taxes		37,325		39,397			36,428			(2,072	)	-5.3	%		897		2.5	%
Income taxes		8,402		8,415			8,570			(13	)	-0.2	%		(168	)	-2.0	%
Net income	$	28,923	$	30,982		$	27,858		$	(2,059	)	-6.6	%	$	1,065		3.8	%
Per share data
Earnings per share - basic	$	0.43	$	0.46		$	0.41		$	(0.03	)	-6.5	%	$	0.02		4.9	%
Earnings per share - diluted	$	0.43	$	0.46		$	0.41		$	(0.03	)	-6.5	%	$	0.02		4.9	%
Dividends per share	$	0.23	$	0.23		$	0.23			—		0.0	%		—		0.0	%
Weighted average shares outstanding
Basic		67,627,496		67,625,085			67,557,991
Diluted		67,817,770		67,793,203			67,734,109
Period end shares outstanding		67,628,618		67,626,939			67,559,128
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, 2016 ($ in thousands) (unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)	12/31/2016			9/30/2016			12/31/2015			$ Change			% Change		$ Change			% Change
Nonaccrual loans
Alabama	$	665		$	1,403		$	1,776		$	(738	)	-52.6	%	$	(1,111	)	-62.6	%
Florida		3,644			3,719			5,180			(75	)	-2.0	%		(1,536	)	-29.7	%
Mississippi (2)		37,771			41,968			40,754			(4,197	)	-10.0	%		(2,983	)	-7.3	%
Tennessee (3)		6,213			6,620			5,106			(407	)	-6.1	%		1,107		21.7	%
Texas		941			700			2,496			241		34.4	%		(1,555	)	-62.3	%
Total nonaccrual loans		49,234			54,410			55,312			(5,176	)	-9.5	%		(6,078	)	-11.0	%
Other real estate
Alabama		15,989			15,574			21,578			415		2.7	%		(5,589	)	-25.9	%
Florida		22,582			25,147			29,579			(2,565	)	-10.2	%		(6,997	)	-23.7	%
Mississippi (2)		15,646			16,659			14,312			(1,013	)	-6.1	%		1,334		9.3	%
Tennessee (3)		6,183			6,061			9,974			122		2.0	%		(3,791	)	-38.0	%
Texas		1,651			1,552			1,734			99		6.4	%		(83	)	-4.8	%
Total other real estate		62,051			64,993			77,177			(2,942	)	-4.5	%		(15,126	)	-19.6	%
Total nonperforming assets	$	111,285		$	119,403		$	132,489		$	(8,118	)	-6.8	%	$	(21,204	)	-16.0	%
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,832		$	953		$	2,300		$	879		92.2	%	$	(468	)	-20.3	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	28,345		$	25,570		$	21,812		$	2,775		10.9	%	$	6,533		30.0	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (4)	12/31/2016			9/30/2016			12/31/2015			$ Change			% Change		$ Change			% Change
Beginning Balance	$	70,871		$	71,796		$	65,607		$	(925	)	-1.3	%	$	5,264		8.0	%
Provision for loan losses		1,834			4,284			3,043			(2,450	)	-57.2	%		(1,209	)	-39.7	%
Charge-offs		(4,037	)		(8,279	)		(3,781	)		4,242		-51.2	%		(256	)	6.8	%
Recoveries		2,597			3,070			2,750			(473	)	-15.4	%		(153	)	-5.6	%
Net charge-offs		(1,440	)		(5,209	)		(1,031	)		3,769		-72.4	%		(409	)	39.7	%
Ending Balance	$	71,265		$	70,871		$	67,619		$	394		0.6	%	$	3,646		5.4	%
PROVISION FOR LOAN LOSSES (4)
Alabama	$	763		$	132		$	1,453		$	631		n/m		$	(690	)	-47.5	%
Florida		(655	)		31			(1,357	)		(686	)	n/m			702		-51.7	%
Mississippi (2)		1,873			703			1,842			1,170		n/m			31		1.7	%
Tennessee (3)		(118	)		151			182			(269	)	n/m			(300	)	n/m
Texas		(29	)		3,267			923			(3,296	)	n/m			(952	)	n/m
Total provision for loan losses	$	1,834		$	4,284		$	3,043		$	(2,450	)	-57.2	%	$	(1,209	)	-39.7	%
NET CHARGE-OFFS (4)
Alabama	$	368		$	38		$	422		$	330		n/m		$	(54	)	-12.8	%
Florida		(502	)		(169	)		(389	)		(333	)	n/m			(113	)	29.0	%
Mississippi (2)		1,591			2,484			925			(893	)	-36.0	%		666		72.0	%
Tennessee (3)		(8	)		74			188			(82	)	n/m			(196	)	n/m
Texas		(9	)		2,782			(115	)		(2,791	)	n/m			106		-92.2	%
Total net charge-offs	$	1,440		$	5,209		$	1,031		$	(3,769	)	-72.4	%	$	409		39.7	%
(1) - Excludes acquired loans and covered other real estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes acquired loans
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands)
(unaudited)
	Quarter Ended															Year Ended
AVERAGE BALANCES	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015			12/31/2016				12/31/2015
Securities AFS-taxable	$	2,271,503		$	2,249,109		$	2,214,040		$	2,211,479		$	2,209,801		$	2,236,663		$	2,231,507
Securities AFS-nontaxable		91,495			95,233			99,296			105,844			110,290			97,942			118,579
Securities HTM-taxable		1,101,382			1,115,053			1,122,463			1,142,434			1,145,397			1,120,267			1,140,182
Securities HTM-nontaxable		33,675			34,179			34,785			35,841			35,755			34,616			37,883
Total securities		3,498,055			3,493,574			3,470,584			3,495,598			3,501,243			3,489,488			3,528,151
Loans (including loans held for sale)		7,855,444			7,658,089			7,505,409			7,346,333			7,089,672			7,592,223			6,745,970
Acquired loans:
Noncovered loans		278,460			306,809			335,012			361,772			384,306			320,361			442,248
Covered loans		3,737			10,464			14,728			16,663			18,341			11,375			20,354
Fed funds sold and rev repos		1,418			1,352			1,263			382			1,384			1,105			835
Other earning assets		80,608			68,706			64,000			66,702			68,016			70,029			53,613
Total earning assets		11,717,722			11,538,994			11,390,996			11,287,450			11,062,962			11,484,581			10,791,171
Allowance for loan losses		(82,604	)		(82,301	)		(83,614	)		(81,138	)		(78,652	)		(82,414	)		(82,361	)
Cash and due from banks		314,420			299,670			271,135			281,912			272,562			291,868			275,246
Other assets		1,238,029			1,243,854			1,240,846			1,253,282			1,266,712			1,243,985			1,286,139
Total assets	$	13,187,567		$	13,000,217		$	12,819,363		$	12,741,506		$	12,523,584		$	12,938,020		$	12,270,195
Interest-bearing demand deposits	$	1,920,273		$	1,848,084		$	1,830,107		$	1,866,043		$	1,917,598		$	1,866,225		$	1,901,478
Savings deposits		3,049,733			3,101,161			3,221,850			3,188,916			2,963,318			3,140,060			3,124,393
Time deposits less than $100,000		945,649			961,641			978,678			994,406			1,033,233			970,003			1,086,417
Time deposits of $100,000 or more		693,204			705,704			699,886			683,170			687,635			695,513			734,020
Total interest-bearing deposits		6,608,859			6,616,590			6,730,521			6,732,535			6,601,784			6,671,801			6,846,308
Fed funds purchased and repos		494,193			481,071			488,512			517,180			563,424			495,197			503,077
Short-term borrowings		435,576			311,473			319,288			413,616			733,365			370,008			415,081
Long-term FHLB advances		685,844			751,095			597,269			501,144			50,078			634,300			13,533
Subordinated notes		40,757			49,988			49,980			49,972			49,964			47,662			49,951
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		8,327,085			8,272,073			8,247,426			8,276,303			8,060,471			8,280,824			7,889,806
Noninterest-bearing deposits		3,160,959			3,060,331			2,927,469			2,836,283			2,839,894			2,996,886			2,781,682
Other liabilities		166,379			136,971			131,627			134,236			141,925			142,355			138,057
Total liabilities		11,654,423			11,469,375			11,306,522			11,246,822			11,042,290			11,420,065			10,809,545
Shareholders' equity		1,533,144			1,530,842			1,512,841			1,494,684			1,481,294			1,517,955			1,460,650
Total liabilities and equity	$	13,187,567		$	13,000,217		$	12,819,363		$	12,741,506		$	12,523,584		$	12,938,020		$	12,270,195
See Notes to Consolidated Financials
TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION December 31, 2016 ($ in thousands) (unaudited)
PERIOD END BALANCES	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015
Cash and due from banks	$	327,706		$	383,945		$	322,049		$	228,498		$	277,751
Fed funds sold and rev repos		500			500			3,198			—			250
Securities available for sale		2,356,682			2,410,947			2,388,306			2,368,120			2,345,422
Securities held to maturity		1,158,643			1,143,234			1,173,204			1,168,203			1,187,818
Loans held for sale (LHFS)		175,927			242,097			213,546			191,028			160,189
Loans held for investment (LHFI)		7,851,213			7,499,204			7,405,181			7,268,022			7,091,385
Allowance for loan losses		(71,265	)		(70,871	)		(71,796	)		(69,668	)		(67,619	)
Net LHFI		7,779,948			7,428,333			7,333,385			7,198,354			7,023,766
Acquired loans:
Noncovered loans		268,633			291,825			325,196			349,781			372,711
Covered loans		3,614			3,912			13,839			14,974			17,700
Allowance for loan losses, acquired loans		(11,397	)		(11,380	)		(12,480	)		(13,535	)		(11,992	)
Net acquired loans		260,850			284,357			326,555			351,220			378,419
Net LHFI and acquired loans		8,040,798			7,712,690			7,659,940			7,549,574			7,402,185
Premises and equipment, net		184,987			190,930			192,732			194,453			195,656
Mortgage servicing rights		80,239			65,514			62,814			68,208			74,007
Goodwill		366,156			366,156			366,156			366,156			366,156
Identifiable intangible assets		20,680			22,366			24,058			25,751			27,546
Other real estate, excluding covered other real estate		62,051			64,993			69,502			71,806			77,177
Covered other real estate		—			—			388			496			1,651
FDIC indemnification asset		—			—			—			506			738
Other assets		577,964			558,166			554,456			542,397			562,350
Total assets	$	13,352,333		$	13,161,538		$	13,030,349		$	12,775,196		$	12,678,896
Deposits:
Noninterest-bearing	$	2,973,238		$	3,111,603		$	2,921,016		$	2,874,306		$	2,998,694
Interest-bearing		7,082,774			6,574,098			6,610,508			6,759,337			6,589,536
Total deposits		10,056,012			9,685,701			9,531,524			9,633,643			9,588,230
Fed funds purchased and repos		539,817			514,918			606,336			466,436			441,042
Short-term borrowings		769,778			412,792			360,434			411,385			412,617
Long-term FHLB advances		251,049			751,075			751,106			501,124			501,155
Subordinated notes		—			49,993			49,985			49,977			49,969
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		153,613			150,442			145,641			142,519			150,970
Total liabilities		11,832,125			11,626,777			11,506,882			11,266,940			11,205,839
Common stock		14,091			14,090			14,090			14,093			14,076
Capital surplus		366,563			365,553			364,516			363,979			361,467
Retained earnings		1,185,352			1,172,193			1,157,025			1,151,757			1,142,908
Accum other comprehensive loss, net of tax		(45,798	)		(17,075	)		(12,164	)		(21,573	)		(45,394	)
Total shareholders' equity		1,520,208			1,534,761			1,523,467			1,508,256			1,473,057
Total liabilities and equity	$	13,352,333		$	13,161,538		$	13,030,349		$	12,775,196		$	12,678,896
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands except per share data)
(unaudited)
	Quarter Ended													Year Ended
INCOME STATEMENTS	12/31/2016		9/30/2016			6/30/2016		3/31/2016			12/31/2015			12/31/2016			12/31/2015
Interest and fees on LHFS & LHFI-FTE	$	81,346	$	80,649		$	77,777	$	76,235		$	74,383		$	316,007		$	288,538
Interest and fees on acquired loans		8,290		6,781			8,051		7,022			11,910			30,144			51,152
Interest on securities-taxable		18,775		19,351			19,402		20,086			21,149			77,614			80,730
Interest on securities-tax exempt-FTE		1,340		1,388			1,429		1,497			1,565			5,654			6,651
Interest on fed funds sold and rev repos		4		5			4		1			4			14			8
Other interest income		335		223			200		230			402			988			1,579
Total interest income-FTE		110,090		108,397			106,863		105,071			109,413			430,421			428,658
Interest on deposits		3,380		3,208			3,122		3,038			3,000			12,748			12,598
Interest on fed funds pch and repos		471		411			404		431			274			1,717			801
Other interest expense		2,662		2,603			2,428		2,389			1,987			10,082			7,061
Total interest expense		6,513		6,222			5,954		5,858			5,261			24,547			20,460
Net interest income-FTE		103,577		102,175			100,909		99,213			104,152			405,874			408,198
Provision for loan losses, LHFI		1,834		4,284			2,596		2,243			3,043			10,957			8,375
Provision for loan losses, acquired loans		1,150		691			607		1,309			997			3,757			3,425
Net interest income after provision-FTE		100,593		97,200			97,706		95,661			100,112			391,160			396,398
Service charges on deposit accounts		11,444		11,677			11,051		11,081			11,961			45,253			47,366
Bank card and other fees		6,796		6,756			7,436		6,918			7,156			27,906			28,298
Mortgage banking, net		5,428		7,364			6,721		8,699			4,287			28,212			30,176
Insurance commissions		8,459		10,074			9,638		8,593			8,501			36,764			36,424
Wealth management		7,505		7,571			8,009		7,407			7,831			30,492			31,369
Other, net		2,092		1,274			1,372		888			(466	)		5,626			(484	)
Nonint inc-excl sec gains (losses), net		41,724		44,716			44,227		43,586			39,270			174,253			173,149
Security gains (losses), net		—		—			—		(310	)		—			(310	)		—
Total noninterest income		41,724		44,716			44,227		43,276			39,270			173,943			173,149
Salaries and employee benefits		58,168		57,250			67,018		57,201			57,366			239,637			230,198
Services and fees		14,751		14,947			14,522		14,475			13,717			58,695			57,534
Net occupancy-premises		6,426		6,440			5,928		6,188			6,304			24,982			25,318
Equipment expense		6,172		6,063			5,896		6,094			6,105			24,225			23,859
Other real estate expense		525		(1,313	)		1,193		181			(518	)		586			4,903
FDIC assessment expense		2,562		2,911			2,959		2,811			2,614			11,243			10,728
Other expense		11,663		11,610			12,663		11,994			13,032			47,930			49,122
Total noninterest expense		100,267		97,908			110,179		98,944			98,620			407,298			401,662
Income before income taxes and tax eq adj		42,050		44,008			31,754		39,993			40,762			157,805			167,885
Tax equivalent adjustment		4,725		4,611			4,532		4,473			4,334			18,341			16,433
Income before income taxes		37,325		39,397			27,222		35,520			36,428			139,464			151,452
Income taxes		8,402		8,415			5,719		8,517			8,570			31,053			35,414
Net income	$	28,923	$	30,982		$	21,503	$	27,003		$	27,858		$	108,411		$	116,038
Per share data
Earnings per share - basic	$	0.43	$	0.46		$	0.32	$	0.40		$	0.41		$	1.60		$	1.72
Earnings per share - diluted	$	0.43	$	0.46		$	0.32	$	0.40		$	0.41		$	1.60		$	1.71
Dividends per share	$	0.23	$	0.23		$	0.23	$	0.23		$	0.23		$	0.92		$	0.92
Weighted average shares outstanding
Basic		67,627,496		67,625,085			67,619,571		67,609,662			67,557,991			67,620,485			67,549,611
Diluted		67,817,770		67,793,203			67,770,174		67,746,592			67,734,109			67,784,464			67,691,821
Period end shares outstanding		67,628,618		67,626,939			67,623,601		67,639,832			67,559,128			67,628,618			67,559,128
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015
Nonaccrual loans
Alabama	$	665		$	1,403		$	1,379		$	1,788		$	1,776
Florida		3,644			3,719			1,806			4,952			5,180
Mississippi (2)		37,771			41,968			54,543			56,590			40,754
Tennessee (3)		6,213			6,620			5,345			5,849			5,106
Texas		941			700			2,055			1,515			2,496
Total nonaccrual loans		49,234			54,410			65,128			70,694			55,312
Other real estate
Alabama		15,989			15,574			18,031			19,137			21,578
Florida		22,582			25,147			28,052			27,907			29,579
Mississippi (2)		15,646			16,659			14,435			14,511			14,312
Tennessee (3)		6,183			6,061			7,432			8,699			9,974
Texas		1,651			1,552			1,552			1,552			1,734
Total other real estate		62,051			64,993			69,502			71,806			77,177
Total nonperforming assets	$	111,285		$	119,403		$	134,630		$	142,500		$	132,489
LOANS PAST DUE OVER 90 DAYS (4)
LHFI	$	1,832		$	953		$	3,382		$	611		$	2,300
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	28,345		$	25,570		$	23,473		$	24,110		$	21,812
	Quarter Ended															Year Ended
ALLOWANCE FOR LOAN LOSSES (4)	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015			12/31/2016			12/31/2015
Beginning Balance	$	70,871		$	71,796		$	69,668		$	67,619		$	65,607		$	67,619		$	69,616
Provision for loan losses		1,834			4,284			2,596			2,243			3,043			10,957			8,375
Charge-offs		(4,037	)		(8,279	)		(3,251	)		(3,363	)		(3,781	)		(18,930	)		(22,469	)
Recoveries		2,597			3,070			2,783			3,169			2,750			11,619			12,097
Net charge-offs		(1,440	)		(5,209	)		(468	)		(194	)		(1,031	)		(7,311	)		(10,372	)
Ending Balance	$	71,265		$	70,871		$	71,796		$	69,668		$	67,619		$	71,265		$	67,619
PROVISION FOR LOAN LOSSES (4)
Alabama	$	763		$	132		$	1,189		$	540		$	1,453		$	2,624		$	2,767
Florida		(655	)		31			(364	)		(818	)		(1,357	)		(1,806	)		(2,122	)
Mississippi (2)		1,873			703			(833	)		1,848			1,842			3,591			5,380
Tennessee (3)		(118	)		151			726			138			182			897			81
Texas		(29	)		3,267			1,878			535			923			5,651			2,269
Total provision for loan losses	$	1,834		$	4,284		$	2,596		$	2,243		$	3,043		$	10,957		$	8,375
NET CHARGE-OFFS (4)
Alabama	$	368		$	38		$	436		$	63		$	422		$	905		$	945
Florida		(502	)		(169	)		(595	)		(674	)		(389	)		(1,940	)		(968	)
Mississippi (2)		1,591			2,484			(237	)		(74	)		925			3,764			9,487
Tennessee (3)		(8	)		74			252			8			188			326			525
Texas		(9	)		2,782			612			871			(115	)		4,256			383
Total net charge-offs	$	1,440		$	5,209		$	468		$	194		$	1,031		$	7,311		$	10,372
(1) - Excludes acquired loans and covered other real estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes acquired loans
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
(unaudited)
	Quarter Ended															Year Ended
FINANCIAL RATIOS AND OTHER DATA	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015			12/31/2016		12/31/2015
Return on equity		7.51	%		8.05	%		5.72	%		7.27	%		7.46	%	7.14	%	7.94	%
Return on average tangible equity		10.41	%		11.16	%		8.08	%		10.26	%		10.61	%	9.99	%	11.36	%
Return on assets		0.87	%		0.95	%		0.67	%		0.85	%		0.88	%	0.84	%	0.95	%
Interest margin - Yield - FTE		3.74	%		3.74	%		3.77	%		3.74	%		3.92	%	3.75	%	3.97	%
Interest margin - Cost		0.22	%		0.21	%		0.21	%		0.21	%		0.19	%	0.21	%	0.19	%
Net interest margin - FTE		3.52	%		3.52	%		3.56	%		3.54	%		3.74	%	3.53	%	3.78	%
Efficiency ratio (1)		66.08	%		63.81	%		67.20	%		66.87	%		66.03	%	65.98	%	66.60	%
Full-time equivalent employees		2,788			2,787			2,818			2,946			2,941
CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans		0.07	%		0.27	%		0.03	%		0.01	%		0.06	%	0.10	%	0.15	%
Provision for loan losses/average loans		0.09	%		0.22	%		0.14	%		0.12	%		0.17	%	0.14	%	0.12	%
Nonperforming loans/total loans (incl LHFS)		0.61	%		0.70	%		0.85	%		0.95	%		0.76	%
Nonperforming assets/total loans (incl LHFS)		1.39	%		1.54	%		1.77	%		1.91	%		1.83	%
Nonperforming assets/total loans (incl LHFS) +ORE		1.38	%		1.53	%		1.75	%		1.89	%		1.81	%
ALL/total loans (excl LHFS)		0.91	%		0.95	%		0.97	%		0.96	%		0.95	%
ALL-commercial/total commercial loans		0.97	%		1.02	%		1.05	%		1.06	%		1.05	%
ALL-consumer/total consumer and home mortgage loans		0.68	%		0.68	%		0.70	%		0.65	%		0.66	%
ALL/nonperforming loans		144.75	%		130.25	%		110.24	%		98.55	%		122.25	%
ALL/nonperforming loans (excl specifically reviewed impaired loans)		267.40	%		256.56	%		231.13	%		203.24	%		210.32	%
CAPITAL RATIOS
Total equity/total assets		11.39	%		11.66	%		11.69	%		11.81	%		11.62	%
Tangible equity/tangible assets		8.74	%		8.97	%		8.97	%		9.01	%		8.79	%
Tangible equity/risk-weighted assets	11.39 %				11.85	%		11.85	%		11.84	%		11.68	%
Tier 1 leverage ratio		9.90	%		9.92	%		9.93	%		9.93	%		10.03	%
Common equity tier 1 capital ratio		12.16	%		12.35	%		12.32	%		12.41	%		12.57	%
Tier 1 risk-based capital ratio		12.76	%		12.97	%		12.94	%		13.04	%		13.21	%
Total risk-based capital ratio		13.59	%		13.82	%		13.82	%		13.92	%		14.07	%
STOCK PERFORMANCE
Market value-Close	$	35.65		$	27.56		$	24.85		$	23.03		$	23.04
Book value	$	22.48		$	22.69		$	22.53		$	22.30		$	21.80
Tangible book value	$	16.76		$	16.95		$	16.76		$	16.50		$	15.98
(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 nonroutine income and expense items.
(2) - Excludes acquired loans and covered other real estate
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2016
($ in thousands)
(unaudited)

Note 1 – Business Combinations

On November 14, 2016, Trustmark and RB Bancorporation announced the signing of a definitive agreement pursuant to which RB Bancorporation would merge into Trustmark. RB Bancorporation, with assets of $210.0 million as of September 30, 2016, is the holding company for Reliance Bank, which has seven offices serving the Huntsville, Alabama MSA.

Under the terms of the definitive agreement, which has been approved unanimously by the Boards of Directors of both companies, holders of RB Bancorporation common stock will receive $22.00 in cash for each share of RB Bancorporation; the aggregate value of the transaction is approximately $25.6 million. The transaction, which is subject to satisfaction of customary closing conditions, including the approval of RB Bancorporation shareholders and regulatory authorities, is expected to be completed in the first half of 2017. RB Bancorporation’s bank subsidiary, Reliance Bank, will merge into TNB simultaneously with the merger of the respective parent companies.

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):

	12/31/2016		9/30/2016		6/30/2016		3/31/2016		12/31/2015
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	55,763	$	58,234	$	61,359	$	63,814	$	68,135
Issued by U.S. Government sponsored agencies		276		283		286		286		281
Obligations of states and political subdivisions		115,373		124,641		129,285		135,655		138,609
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		42,786		36,788		29,282		25,081		25,812
Issued by FNMA and FHLMC		631,084		561,989		428,542		330,558		225,542
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		1,267,951		1,374,399		1,474,357		1,540,541		1,582,860
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		243,449		254,613		265,195		272,185		279,226
Asset-backed securities and structured financial products		—		—		—		—		24,957
Total securities available for sale	$	2,356,682	$	2,410,947	$	2,388,306	$	2,368,120	$	2,345,422
SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	3,647	$	3,636	$	31,142	$	63,085	$	101,782
Obligations of states and political subdivisions		46,303		52,937		53,473		54,278		55,892
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		15,478		16,183		16,415		16,590		17,363
Issued by FNMA and FHLMC		81,299		39,989		42,267		9,871		10,368
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		803,474		831,662		824,175		818,201		820,012
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		208,442		198,827		205,732		206,178		182,401
Total securities held to maturity	$	1,158,643	$	1,143,234	$	1,173,204	$	1,168,203	$	1,187,818

During 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $46.6 million ($28.8 million, net of tax). The net unrealized holding loss is amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. At December 31, 2016, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive loss in the accompanying balance sheet totaled approximately $24.2 million ($14.9 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 95% 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, 2016 ($ in thousands) (unaudited)
Note 3 – Loan Composition
LHFI BY TYPE (excluding acquired loans)	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015
Loans secured by real estate:
Construction, land development and other land loans	$	831,437		$	766,685		$	718,438		$	697,500		$	824,723
Secured by 1-4 family residential properties		1,660,043			1,592,453			1,620,013			1,640,015			1,649,501
Secured by nonfarm, nonresidential properties		2,034,176			1,916,153			1,900,784			1,893,240			1,736,476
Other real estate secured		318,148			317,680			323,734			273,752			211,228
Commercial and industrial loans		1,528,434			1,421,382			1,466,511			1,368,464			1,343,211
Consumer loans		170,562			170,073			166,436			164,544			169,135
State and other political subdivision loans		917,515			875,973			805,401			787,049			734,615
Other loans		390,898			438,805			403,864			443,458			422,496
LHFI		7,851,213			7,499,204			7,405,181			7,268,022			7,091,385
Allowance for loan losses		(71,265	)		(70,871	)		(71,796	)		(69,668	)		(67,619	)
Net LHFI	$	7,779,948		$	7,428,333		$	7,333,385		$	7,198,354		$	7,023,766

ACQUIRED NONCOVERED LOANS BY TYPE	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015
Loans secured by real estate:
Construction, land development and other land loans	$	20,850		$	25,040		$	37,682		$	41,097		$	41,623
Secured by 1-4 family residential properties		65,926			72,689			73,313			81,314			86,950
Secured by nonfarm, nonresidential properties		103,820			110,606			115,989			126,177			135,626
Other real estate secured		19,010			20,903			24,015			24,374			23,860
Commercial and industrial loans		36,896			39,519			49,639			51,663			55,075
Consumer loans		3,365			3,878			4,295			5,027			5,641
Other loans		18,766			19,190			20,263			20,129			23,936
Noncovered loans		268,633			291,825			325,196			349,781			372,711
Allowance for loan losses		(11,312	)		(11,330	)		(12,218	)		(13,212	)		(11,259	)
Net noncovered loans	$	257,321		$	280,495		$	312,978		$	336,569		$	361,452

ACQUIRED COVERED LOANS BY TYPE (1)	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015
Loans secured by real estate:
Construction, land development and other land loans	$	—		$	—		$	334		$	387		$	1,021
Secured by 1-4 family residential properties		3,614			3,912			8,363			8,564			10,058
Secured by nonfarm, nonresidential properties		—			—			3,709			3,679			4,638
Other real estate secured		—			—			1,257			1,132			1,286
Commercial and industrial loans		—			—			121			1,143			624
Consumer loans		—			—			—			—			—
Other loans		—			—			55			69			73
Covered loans		3,614			3,912			13,839			14,974			17,700
Allowance for loan losses		(85	)		(50	)		(262	)		(323	)		(733	)
Net covered loans	$	3,529		$	3,862		$	13,577		$	14,651		$	16,967

(1) Trustmark’s loss share agreement with the FDIC covering the acquired covered loans other than loans secured by 1-4 family residential properties expired on June 30, 2016. Trustmark’s loss share agreement with the FDIC covering the acquired covered loans secured by 1-4 family residential properties will expire in 2021. Effective July 1, 2016, all acquired covered loans excluding the acquired covered loans secured by 1-4 family residential properties were reclassified to acquired noncovered loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS December 31, 2016 ($ in thousands) (unaudited)
Note 3 – Loan Composition (continued)
	December 31, 2016
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	$	831,437	$	167,886	$	57,780	$	316,518	$	52,747	$	236,506
Secured by 1-4 family residential properties		1,660,043		79,087		49,393		1,412,078		102,076		17,409
Secured by nonfarm, nonresidential properties		2,034,176		283,756		177,455		908,591		169,499		494,875
Other real estate secured		318,148		28,866		3,511		159,369		17,688		108,714
Commercial and industrial loans		1,528,434		129,621		15,194		795,311		308,380		279,928
Consumer loans		170,562		20,811		3,683		126,711		17,180		2,177
State and other political subdivision loans		917,515		76,228		29,450		564,707		32,714		214,416
Other loans		390,898		37,394		19,140		261,612		38,946		33,806
Loans	$	7,851,213	$	823,649	$	355,606	$	4,544,897	$	739,230	$	1,387,831
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	60,820	$	14,045	$	18,952	$	23,405	$	2,564	$	1,854
Development		52,669		6,763		5,534		21,421		615		18,336
Unimproved land		111,418		15,436		16,240		45,451		16,011		18,280
1-4 family construction		174,344		41,324		9,058		82,576		2,964		38,422
Other construction		432,186		90,318		7,996		143,665		30,593		159,614
Construction, land development and other land loans	$	831,437	$	167,886	$	57,780	$	316,518	$	52,747	$	236,506
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	279,040	$	74,393	$	36,196	$	96,009	$	21,850	$	50,592
Office		220,750		31,966		30,479		76,745		9,259		72,301
Nursing homes/assisted living		116,307		—		—		109,579		6,728		—
Hotel/motel		227,088		46,007		31,121		62,395		41,794		45,771
Mini-storage		145,456		9,963		5,300		58,430		13,999		57,764
Industrial		121,906		10,159		10,210		20,983		5,467		75,087
Health care		25,937		2,050		826		22,002		—		1,059
Convenience stores		19,624		1,554		—		10,905		993		6,172
Other		73,364		8,031		10,519		25,269		2,804		26,741
Total income producing loans		1,229,472		184,123		124,651		482,317		102,894		335,487
Owner-occupied:
Office		146,004		17,886		23,697		74,816		7,041		22,564
Churches		87,031		10,379		2,098		44,962		22,730		6,862
Industrial warehouses		127,544		6,414		3,517		64,274		10,082		43,257
Health care		116,585		22,859		6,830		62,925		4,661		19,310
Convenience stores		94,618		7,732		7,088		54,080		1,168		24,550
Retail		38,173		4,746		5,012		20,720		1,995		5,700
Restaurants		34,741		3,530		912		24,781		3,474		2,044
Auto dealerships		14,909		9,144		41		4,600		1,124		—
Other		145,099		16,943		3,609		75,116		14,330		35,101
Total owner-occupied loans		804,704		99,633		52,804		426,274		66,605		159,388
Loans secured by nonfarm, nonresidential properties	$	2,034,176	$	283,756	$	177,455	$	908,591	$	169,499	$	494,875
(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS December 31, 2016 ($ 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
	12/31/2016		9/30/2016		6/30/2016		3/31/2016		12/31/2015		12/31/2016		12/31/2015
Securities – taxable	2.21	%	2.29	%	2.34	%	2.41	%	2.50	%	2.31	%	2.39	%
Securities – nontaxable	4.26	%	4.27	%	4.29	%	4.25	%	4.25	%	4.27	%	4.25	%
Securities – total	2.29	%	2.36	%	2.41	%	2.48	%	2.57	%	2.39	%	2.48	%
Loans - LHFI & LHFS	4.12	%	4.19	%	4.17	%	4.17	%	4.16	%	4.16	%	4.28	%
Acquired loans	11.69	%	8.50	%	9.26	%	7.46	%	11.74	%	9.09	%	11.06	%
Loans - total	4.38	%	4.36	%	4.39	%	4.33	%	4.57	%	4.37	%	4.71	%
FF sold & rev repo	1.12	%	1.47	%	1.27	%	1.05	%	1.15	%	1.27	%	0.96	%
Other earning assets	1.65	%	1.29	%	1.26	%	1.39	%	2.34	%	1.41	%	2.95	%
Total earning assets	3.74	%	3.74	%	3.77	%	3.74	%	3.92	%	3.75	%	3.97	%
Interest-bearing deposits	0.20	%	0.19	%	0.19	%	0.18	%	0.18	%	0.19	%	0.18	%
FF pch & repo	0.38	%	0.34	%	0.33	%	0.34	%	0.19	%	0.35	%	0.16	%
Other borrowings	0.87	%	0.88	%	0.95	%	0.94	%	0.88	%	0.91	%	1.31	%
Total interest-bearing liabilities	0.31	%	0.30	%	0.29	%	0.28	%	0.26	%	0.30	%	0.26	%
Net interest margin	3.52	%	3.52	%	3.56	%	3.54	%	3.74	%	3.53	%	3.78	%
Net interest margin excluding acquired loans	3.31	%	3.38	%	3.38	%	3.40	%	3.43	%	3.37	%	3.46	%

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 2016, the yield on acquired loans totaled 11.69% and included $3.8 million in recoveries from the settlement of debt, which represented approximately 5.40% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.31% for the fourth quarter of 2016, a decrease of 7 basis points when compared to the third quarter of 2016. This decline was primarily due to a reduction in the yield on the securities portfolio and the loans held for investment and held for sale portfolio.

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 $180 thousand and $2.0 million for the quarters ended December 31, 2016 and 2015, respectively.

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

	Quarter Ended															Year Ended
	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015			12/31/2016			12/31/2015
Mortgage servicing income, net	$	5,218		$	5,271		$	5,177		$	5,058		$	5,126		$	20,724		$	19,625
Change in fair value-MSR from runoff		(2,739	)		(2,862	)		(2,500	)		(2,005	)		(2,091	)		(10,106	)		(9,527	)
Gain on sales of loans, net		6,054			6,410			5,480			2,591			4,656			20,535			17,965
Other, net		(2,925	)		(299	)		498			2,642			(1,433	)		(84	)		233
Mortgage banking income before hedge ineffectiveness		5,608			8,520			8,655			8,286			6,258			31,069			28,296
Change in fair value-MSR from market changes		13,112			381			(7,033	)		(6,866	)		2,010			(406	)		1,577
Change in fair value of derivatives		(13,292	)		(1,537	)		5,099			7,279			(3,981	)		(2,451	)		303
Net (negative) positive hedge ineffectiveness		(180	)		(1,156	)		(1,934	)		413			(1,971	)		(2,857	)		1,880
Mortgage banking, net	$	5,428		$	7,364		$	6,721		$	8,699		$	4,287		$	28,212		$	30,176

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2016
($ in thousands)
(unaudited)

Note 6 – Salaries and Employee Benefit Plans

Early Retirement Program
In April 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 maintains 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 participate. The Plan provides retirement benefits that are based on the length of credited service and final average compensation, as defined in the Plan, and vest upon three years of service. Benefit accruals under the plan have been frozen since 2009, with the exception of certain associates covered through plans obtained in acquisitions that were subsequently merged into the Plan. Other than the associates covered through these acquired plans that were merged into the Plan, associates have not earned additional benefits, except for interest as required by law, since the Plan was frozen. Current and former associates who participate in the Plan retain their right to receive benefits that accrued before the Plan was frozen.

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 is required to fully fund the Plan on a termination basis and will contribute the additional assets necessary to do so. The final distributions will be made from current plan assets and a one-time pension settlement expense of approximately $17.5 million will be recognized when paid by Trustmark during the second quarter of 2017. Further, as a result of Trustmark’s de-risking investment strategy for the Plan as of June 30, 2016, the expected rate of return on plan assets during the second half of 2016 will decrease from 6.0% to 2.5%. Accordingly, Trustmark's increased periodic benefit costs for the Plan during the fourth quarter of 2016 was $664 thousand and totaled $1.3 million during the second half of 2016. Participants in the Plan will have a choice of receiving a lump sum cash payment or annuity payments under a group annuity contract purchased from an insurance carrier, subject to certain exceptions. As a result of the termination of the Plan, each participant will become fully vested in his or her accrued benefits under the Plan. 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.

The Board reserved the right to defer or revoke the termination of the Plan if circumstances change such that deferral or revocation would be warranted, but has no intent to do so at this time.

Note 7 – Other Noninterest Income and Expense

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

	Quarter Ended															Year Ended
	12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015			12/31/2016			12/31/2015
Partnership amortization for tax credit purposes	$	(2,479	)	$	(2,479	)	$	(2,479	)	$	(2,479	)	$	(3,015	)	$	(9,916	)	$	(10,050	)
Decrease in FDIC indemnification asset		(80	)		(72	)		(118	)		(99	)		(827	)		(369	)		(3,513	)
Increase in life insurance cash surrender value		1,751			1,746			1,702			1,692			1,667			6,891			6,702
Other miscellaneous income		2,900			2,079			2,267			1,774			1,709			9,020			6,377
Total other, net	$	2,092		$	1,274		$	1,372		$	888		$	(466	)	$	5,626		$	(484	)

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.

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

	Quarter Ended										Year Ended
	12/31/2016		9/30/2016		6/30/2016		3/31/2016		12/31/2015		12/31/2016		12/31/2015
Loan expense	$	2,823	$	3,336	$	3,024	$	3,043	$	3,356	$	12,226	$	12,835
Amortization of intangibles		1,686		1,692		1,692		1,796		1,927		6,866		7,819
Other miscellaneous expense		7,154		6,582		7,947		7,155		7,749		28,838		28,468
Total other expense	$	11,663	$	11,610	$	12,663	$	11,994	$	13,032	$	47,930	$	49,122

TRUSTMARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIALS
December 31, 2016
($ 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
December 31, 2016
($ in thousands)
(unaudited)

Note 8 – Non-GAAP Financial Measures (continued)

			Quarter Ended															Year Ended
			12/31/2016			9/30/2016			6/30/2016			3/31/2016			12/31/2015			12/31/2016			12/31/2015
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity			$	1,533,144		$	1,530,842		$	1,512,841		$	1,494,684		$	1,481,294		$	1,517,955		$	1,460,650
Less: Goodwill				(366,156	)		(366,156	)		(366,156	)		(366,156	)		(365,945	)		(366,156	)		(365,613	)
Identifiable intangible assets				(21,585	)		(23,311	)		(24,961	)		(26,709	)		(28,851	)		(24,132	)		(30,686	)
Total average tangible equity			$	1,145,403		$	1,141,375		$	1,121,724		$	1,101,819		$	1,086,498		$	1,127,667		$	1,064,351
PERIOD END BALANCES
Total shareholders' equity			$	1,520,208		$	1,534,761		$	1,523,467		$	1,508,256		$	1,473,057
Less: Goodwill				(366,156	)		(366,156	)		(366,156	)		(366,156	)		(366,156	)
Identifiable intangible assets				(20,680	)		(22,366	)		(24,058	)		(25,751	)		(27,546	)
Total tangible equity	(a)		$	1,133,372		$	1,146,239		$	1,133,253		$	1,116,349		$	1,079,355
TANGIBLE ASSETS
Total assets			$	13,352,333		$	13,161,538		$	13,030,349		$	12,775,196		$	12,678,896
Less: Goodwill				(366,156	)		(366,156	)		(366,156	)		(366,156	)		(366,156	)
Identifiable intangible assets				(20,680	)		(22,366	)		(24,058	)		(25,751	)		(27,546	)
Total tangible assets	(b)		$	12,965,497		$	12,773,016		$	12,640,135		$	12,383,289		$	12,285,194
Risk-weighted assets	(c)		$	9,952,123		$	9,670,302		$	9,559,816		$	9,431,021		$	9,242,902
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income			$	28,923		$	30,982		$	21,503		$	27,003		$	27,858		$	108,411		$	116,038
Plus: Intangible amortization net of tax				1,041			1,045			1,045			1,109			1,191			4,240			4,829
Net income adjusted for intangible amortization			$	29,964		$	32,027		$	22,548		$	28,112		$	29,049		$	112,651		$	120,867
Period end common shares outstanding	(d)			67,628,618			67,626,939			67,623,601			67,639,832			67,559,128
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)				10.41	%		11.16	%		8.08	%		10.26	%		10.61	%		9.99	%		11.36	%
Tangible equity/tangible assets	(a	)/(b)		8.74	%		8.97	%		8.97	%		9.01	%		8.79	%
Tangible equity/risk-weighted assets	(a	)/(c)		11.39	%		11.85	%		11.85	%		11.84	%		11.68	%
Tangible book value	(a)/(d)*1,000		$	16.76		$	16.95		$	16.76		$	16.50		$	15.98
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity			$	1,520,208		$	1,534,761		$	1,523,467		$	1,508,256		$	1,473,057
AOCI-related adjustments				45,798			17,075			12,164			21,573			45,394
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)				(347,442	)		(347,800	)		(348,158	)		(348,515	)		(348,873	)
Other adjustments and deductions for CET1 (2)				(8,637	)		(9,307	)		(10,042	)		(10,861	)		(7,980	)
CET1 capital	(e)			1,209,927			1,194,729			1,177,431			1,170,453			1,161,598
Additional tier 1 capital instruments plus related surplus				60,000			60,000			60,000			60,000			60,000
Less: additional tier 1 capital deductions				(267	)		(276	)		(328	)		(434	)		(1,063	)
Additional tier 1 capital				59,733			59,724			59,672			59,566			58,937
Tier 1 capital			$	1,269,660		$	1,254,453		$	1,237,103		$	1,230,019		$	1,220,535
Common equity tier 1 capital ratio	(e	)/(c)		12.16	%		12.35	%		12.32	%		12.41	%		12.57	%
(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
December 31, 2016
($ 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											Year Ended
	12/31/2016						12/31/2015					12/31/2016						12/31/2015
	Amount			Diluted EPS			Amount			Diluted EPS		Amount			Diluted EPS			Amount			Diluted EPS
Net Income (GAAP)	$	28,923		$	0.426		$	27,858		$	0.411	$	108,411		$	1.599		$	116,038		$	1.714
Significant non-routine transactions (net of taxes):
Non-routine early retirement program expense		165			0.002			—			—		6,049			0.089			—			—
Non-routine 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)	$	29,498		$	0.434		$	27,858		$	0.411	$	115,280		$	1.700		$	116,038		$	1.714
	Reported			Adjusted			Reported			Adjusted		Reported			Adjusted			Reported			Adjusted
	(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)		(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)
Return on equity		7.51	%		7.65	%		7.46	%	n/a			7.14	%		7.59	%		7.94	%	n/a
Return on average tangible equity		10.41	%		10.61	%		10.61	%	n/a			9.99	%		10.60	%		11.36	%	n/a
Return on assets		0.87	%		0.89	%		0.88	%	n/a			0.84	%		0.89	%		0.95	%	n/a
n/a - not applicable