Trustmark Corporation Announces Second Quarter 2018 Financial Results

Loan growth, margin expansion and strong credit quality reflected in performance

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) reported net income of $39.8 million in the second quarter of 2018, representing diluted earnings per share of $0.59. Diluted earnings per share in the second quarter of 2018 increased 9.3% when compared to reported earnings in the previous quarter and 25.5% when compared to core earnings (reported net income excluding non-routine transactions) the same period in the prior year. This level of earnings resulted in a return on average tangible equity of 13.77% and a return on average assets of 1.19%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable September 15, 2018, to shareholders of record on September 1, 2018.

Printer friendly version of earnings release with consolidated financial statements and notes: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=51841494&lang=en

Second Quarter Highlights

• Revenue, excluding interest and fees on acquired loans, increased 2.4% linked quarter to total $147.5 million
• The net interest margin (FTE), excluding acquired loans, was 3.46% in the second quarter, up 9 basis points from the prior quarter
• Sustained strong credit performance reflected in reduced nonperforming assets
• Efficiency ratio improved to 64.90%

Gerard R. Host, President and CEO, stated, “The second quarter showed the value of the diverse Trustmark franchise, with solid loan growth across our five state footprint. We continued to focus on our strategic initiatives of balance sheet optimization, capital deployment through additional share repurchases and disciplined expense management. We also continued to maintain and expand customer relationships in our other lines of businesses, as evidenced by strength in insurance commissions and mortgage loan production volumes. This past quarter – as part of the J.D. Power 2018 U.S. Retail Banking Satisfaction Study – Trustmark was recognized as having the ‘Highest Customer Satisfaction with Retail Banking in the South Central Region’*. We appreciate this recognition from our customers and thank our associates for their commitment to excellent customer service. Thanks to our talented 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

• Loans held for investment expanded $165.0 million, or 1.9%, from the prior quarter and $382.9 million, or 4.6%, from the prior year
• Continued balance sheet and capital optimization through maturing investment securities run-off and share repurchases
• Noninterest-bearing deposits represent 26.7% of total deposits

Loans held for investment totaled $8.7 billion at June 30, 2018, reflecting an increase of $165.0 million, or 1.9%, linked quarter and $382.9 million, or 4.6%, from the prior year. Loans secured by nonfarm, nonresidential properties increased $63.8 million during the quarter, driven by growth in Alabama, Tennessee and Florida. Construction and land development loans increased $52.6 million as growth in construction lending in Texas, Mississippi, Florida and Tennessee were offset by a decline in Alabama. Residential loans grew $43.6 million driven by strong growth in Mississippi. Other loans, which include loans to finance companies, mortgage warehousing and REITs, increased $26.1 million, driven by strength in Mississippi and Alabama. Commercial and industrial loans grew $10.8 million, as growth in Texas and Tennessee more than offset declines in Alabama and Florida.

Deposits totaled $11.1 billion at June 30, 2018, up $96.6 million from the prior quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 60% of deposit balances in checking accounts. Interest-bearing deposit costs increased 11 basis point linked-quarter driven in part by growth in public fund deposits as well as a rising interest rate environment.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. During the second quarter, Trustmark repurchased $5.4 million of its common shares in open market transactions; at June 30, 2018, Trustmark had $91.4 million in remaining authority under its existing stock repurchase program, which expires March 31, 2019. At June 30, 2018, Trustmark’s tangible equity to tangible assets ratio was 9.07%, while the total risk-based capital ratio was 13.39%.

Credit Quality

• Nonperforming loans decreased 10.7% and 17.2% from the prior quarter and year-over-year, respectively
• Other real estate remained flat from the prior quarter and decreased 20.6% year-over-year
• Allowance for loan losses represented 345.87% of nonperforming loans, excluding specifically reviewed impaired loans

Nonperforming loans totaled $61.4 million at June 30, 2018, down $7.3 million from the prior quarter and $12.8 million year-over-year. Other real estate totaled $39.7 million, remaining flat from the prior quarter and declining $10.3 million from the same period one year earlier. Collectively, nonperforming assets totaled $101.0 million, reflecting a linked-quarter decrease of 6.7% and year-over-year decrease of 18.6%.

Allocation of Trustmark’s $83.6 million allowance for loan losses represented 1.05% of commercial loans and 0.63% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.96% at June 30, 2018, representing a level management considers commensurate with the inherent risk in the loan portfolio. Collectively, the allowance for both held for investment and acquired loan losses represented 0.98% of total loans, which includes held for investment and acquired loans.

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

Revenue Generation

• Net interest margin, excluding acquired loans, was 3.46%, an increase of 9 basis points from the prior quarter
• Maturing investment securities run-off is accretive to the net interest margin
• Deposit costs remain well controlled
• Noninterest income totaled $47.4 million, up 1.3% linked quarter

Net interest income (FTE) in the second quarter totaled $108.4 million, resulting in a net interest margin of 3.57%, up 11 basis points from the prior quarter. Relative to the prior quarter, net interest income (FTE) increased $3.1 million, reflecting a $4.6 million increase in interest income and a $1.6 million increase in interest expense. During the second quarter of 2018, the yield on acquired loans totaled 9.96% and included $1.6 million in recoveries from the settlement of debt, which represented approximately 3.20% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.46% for the second quarter of 2018, an increase of 9 basis points when compared to the first quarter of 2018, which was principally due to growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix offset by higher costs of interest-bearing deposits.

Noninterest income in the second quarter increased 1.3% from the prior quarter to total $47.4 million. Insurance revenue totaled $10.7 million in the second quarter, up 14.0% from the prior quarter and 10.2% year-over-year; this performance reflects growth in the property and casualty lines as well as seasonal factors. Mortgage banking revenue totaled $9.0 million in the second quarter, down $2.2 million from the prior quarter and flat year-over-year. The linked-quarter change reflects reduced net positive mortgage hedge ineffectiveness which more than offset an increase in gain on sale of loans. Mortgage loan production in the second quarter totaled $410.5 million, up 42.0% from the prior quarter and 10.2% year-over-year. Wealth management revenue in the second quarter totaled $7.5 million, down 1.2% and 2.6% from the prior quarter and year-over-year, respectively. The linked-quarter performance is primarily attributable to decreased trust management fees which more than offset strength in fee income from investment services. Bank card and other fees increased $444 thousand from the prior quarter primarily due to increased interchange income and customer derivative revenue. Service charges on deposit accounts remained stable when compared to both linked quarter and year-over-year.

Noninterest Expense

• Total noninterest expense increased 1.3% linked quarter and decreased 15.0% year-over-year to $103.8 million
• Core noninterest expense, which excludes other real estate expense and intangible amortization, totaled $102.6 million, up 2.4% from the prior quarter and 3.4% year-over-year

Salaries and employee benefits increased $1.5 million from the prior quarter to total $60.0 million, primarily due to higher insurance and mortgage commissions as a result of continued growth in both business lines. Services and fees rose 3.7%, or $576 thousand, linked-quarter primarily due to new software investments designed to improve efficiency and customer experience. Other real estate expense declined $959 thousand linked quarter while net occupancy-premises expense totaled $6.6 million, flat from the prior quarter. Other expense totaled $12.3 million, an increase of $524 thousand, or 4.4%, on a linked-quarter basis.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, July 25, 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, August 8, 2018, in archived format at the same web address or by calling [phone], passcode 10121520.

Trustmark 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, 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 credit, securities, and/or commodity 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, 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.

*Disclaimer

Trustmark National Bank received the highest score in the South Central region in the J.D. Power 2016 and 2018 U.S. Retail Banking Satisfaction Studies of customers’ satisfaction with their retail bank. Visit jdpower.com/awards

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
QUARTERLY AVERAGE BALANCES		6/30/2018			3/31/2018			6/30/2017		$	Change		% Change		$	Change		% Change
Securities AFS-taxable	$	2,038,759		$	2,141,144		$	2,334,600		$	(102,385	)	-4.8	%	$	(295,841	)	-12.7	%
Securities AFS-nontaxable		50,035			57,972			75,640			(7,937	)	-13.7	%		(25,605	)	-33.9	%
Securities HTM-taxable		972,571			1,005,721			1,108,158			(33,150	)	-3.3	%		(135,587	)	-12.2	%
Securities HTM-nontaxable		30,337			32,734			32,878			(2,397	)	-7.3	%		(2,541	)	-7.7	%
Total securities		3,091,702			3,237,571			3,551,276			(145,869	)	-4.5	%		(459,574	)	-12.9	%
Loans (including loans held for sale)		8,707,466			8,636,967			8,348,758			70,499		0.8	%		358,708		4.3	%
Acquired loans		202,140			243,152			315,558			(41,012	)	-16.9	%		(113,418	)	-35.9	%
Fed funds sold and rev repos		1,063			478			3,184			585		n/m			(2,121	)	-66.6	%
Other earning assets		186,224			213,985			77,770			(27,761	)	-13.0	%		108,454		n/m
Total earning assets		12,188,595			12,332,153			12,296,546			(143,558	)	-1.2	%		(107,951	)	-0.9	%
Allowance for loan losses		(86,315	)		(82,304	)		(83,328	)		(4,011	)	-4.9	%		(2,987	)	-3.6	%
Cash and due from banks		319,075			336,642			307,966			(17,567	)	-5.2	%		11,109		3.6	%
Other assets		1,042,156			1,030,738			1,229,981			11,418		1.1	%		(187,825	)	-15.3	%
Total assets	$	13,463,511		$	13,617,229		$	13,751,165		$	(153,718	)	-1.1	%	$	(287,654	)	-2.1	%
Interest-bearing demand deposits	$	2,439,777		$	2,404,428		$	2,035,491		$	35,349		1.5	%	$	404,286		19.9	%
Savings deposits		3,860,096			3,737,507			3,337,374			122,589		3.3	%		522,722		15.7	%
Time deposits		1,798,855			1,748,645			1,777,529			50,210		2.9	%		21,326		1.2	%
Total interest-bearing deposits		8,098,728			7,890,580			7,150,394			208,148		2.6	%		948,334		13.3	%
Fed funds purchased and repos		352,256			277,877			525,523			74,379		26.8	%		(173,267	)	-33.0	%
Short-term borrowings		248,932			751,219			1,047,107			(502,287	)	-66.9	%		(798,175	)	-76.2	%
Long-term FHLB advances		921			938			141,097			(17	)	-1.8	%		(140,176	)	-99.3	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Total interest-bearing liabilities		8,762,693			8,982,470			8,925,977			(219,777	)	-2.4	%		(163,284	)	-1.8	%
Noninterest-bearing deposits		2,930,726			2,881,374			3,110,125			49,352		1.7	%		(179,399	)	-5.8	%
Other liabilities		188,186			180,871			162,823			7,315		4.0	%		25,363		15.6	%
Total liabilities		11,881,605			12,044,715			12,198,925			(163,110	)	-1.4	%		(317,320	)	-2.6	%
Shareholders’ equity		1,581,906			1,572,514			1,552,240			9,392		0.6	%		29,666		1.9	%
Total liabilities and equity	$	13,463,511		$	13,617,229		$	13,751,165		$	(153,718	)	-1.1	%	$	(287,654	)	-2.1	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
PERIOD END BALANCES		6/30/2018			3/31/2018			6/30/2017		$	Change		% Change		$	Change		% Change
Cash and due from banks	$	387,119		$	315,276		$	318,329		$	71,843		22.8	%	$	68,790		21.6	%
Fed funds sold and rev repos		—			112			6,900			(112	)	-100.0	%		(6,900	)	-100.0	%
Securities available for sale		1,974,675			2,097,497			2,447,688			(122,822	)	-5.9	%		(473,013	)	-19.3	%
Securities held to maturity		985,845			1,023,975			1,139,754			(38,130	)	-3.7	%		(153,909	)	-13.5	%
Loans held for sale (LHFS)		196,217			163,882			203,652			32,335		19.7	%		(7,435	)	-3.7	%
Loans held for investment (LHFI)		8,678,983			8,513,985			8,296,045			164,998		1.9	%		382,938		4.6	%
Allowance for loan losses, LHFI		(83,566	)		(81,235	)		(76,184	)		(2,331	)	-2.9	%		(7,382	)	-9.7	%
Net LHFI		8,595,417			8,432,750			8,219,861			162,667		1.9	%		375,556		4.6	%
Acquired loans		173,107			215,476			314,910			(42,369	)	-19.7	%		(141,803	)	-45.0	%
Allowance for loan losses, acquired loans		(3,046	)		(4,294	)		(7,423	)		1,248		29.1	%		4,377		59.0	%
Net acquired loans		170,061			211,182			307,487			(41,121	)	-19.5	%		(137,426	)	-44.7	%
Net LHFI and acquired loans		8,765,478			8,643,932			8,527,348			121,546		1.4	%		238,130		2.8	%
Premises and equipment, net		177,686			178,584			182,315			(898	)	-0.5	%		(4,629	)	-2.5	%
Mortgage servicing rights		97,411			94,850			82,628			2,561		2.7	%		14,783		17.9	%
Goodwill		379,627			379,627			379,627			—		0.0	%		—		0.0	%
Identifiable intangible assets		13,677			14,963			19,422			(1,286	)	-8.6	%		(5,745	)	-29.6	%
Other real estate		39,667			39,554			49,958			113		0.3	%		(10,291	)	-20.6	%
Other assets		507,863			511,187			551,517			(3,324	)	-0.7	%		(43,654	)	-7.9	%
Total assets	$	13,525,265		$	13,463,439		$	13,909,138		$	61,826		0.5	%	$	(383,873	)	-2.8	%
Deposits:
Noninterest-bearing	$	2,958,354		$	3,004,442		$	3,092,915		$	(46,088	)	-1.5	%	$	(134,561	)	-4.4	%
Interest-bearing		8,114,081			7,971,359			7,330,476			142,722		1.8	%		783,605		10.7	%
Total deposits		11,072,435			10,975,801			10,423,391			96,634		0.9	%		649,044		6.2	%
Fed funds purchased and repos		477,891			274,833			508,068			203,058		73.9	%		(30,177	)	-5.9	%
Short-term borrowings		186,647			442,689			1,222,592			(256,042	)	-57.8	%		(1,035,945	)	-84.7	%
Long-term FHLB advances		913			929			978			(16	)	-1.7	%		(65	)	-6.6	%
Junior subordinated debt securities		61,856			61,856			61,856			—		0.0	%		—		0.0	%
Other liabilities		141,451			137,194			130,335			4,257		3.1	%		11,116		8.5	%
Total liabilities		11,941,193			11,893,302			12,347,220			47,891		0.4	%		(406,027	)	-3.3	%
Common stock		14,089			14,121			14,114			(32	)	-0.2	%		(25	)	-0.2	%
Capital surplus		361,715			366,021			367,075			(4,306	)	-1.2	%		(5,360	)	-1.5	%
Retained earnings		1,282,007			1,257,881			1,209,238			24,126		1.9	%		72,769		6.0	%
Accum other comprehensive loss, net of tax		(73,739	)		(67,886	)		(28,509	)		(5,853	)	-8.6	%		(45,230	)	n/m
Total shareholders’ equity		1,584,072			1,570,137			1,561,918			13,935		0.9	%		22,154		1.4	%
Total liabilities and equity	$	13,525,265		$	13,463,439		$	13,909,138		$	61,826		0.5	%	$	(383,873	)	-2.8	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands except per share data)
(unaudited)
	Quarter Ended								Linked Quarter					Year over Year
INCOME STATEMENTS		6/30/2018			3/31/2018		6/30/2017		$	Change		% Change		$	Change		% Change
Interest and fees on LHFS & LHFI-FTE	$	99,761		$	94,712	$	89,486		$	5,049		5.3	%	$	10,275		11.5	%
Interest and fees on acquired loans		5,022			4,877		6,263			145		3.0	%		(1,241	)	-19.8	%
Interest on securities-taxable		16,894			17,506		19,377			(612	)	-3.5	%		(2,483	)	-12.8	%
Interest on securities-tax exempt-FTE		733			824		1,178			(91	)	-11.0	%		(445	)	-37.8	%
Interest on fed funds sold and rev repos		5			2		11			3		n/m			(6	)	-54.5	%
Other interest income		1,054			934		371			120		12.8	%		683		n/m
Total interest income-FTE		123,469			118,855		116,686			4,614		3.9	%		6,783		5.8	%
Interest on deposits		12,139			9,491		5,107			2,648		27.9	%		7,032		n/m
Interest on fed funds pch and repos		1,250			662		1,037			588		88.8	%		213		20.5	%
Other interest expense		1,713			3,394		3,628			(1,681	)	-49.5	%		(1,915	)	-52.8	%
Total interest expense		15,102			13,547		9,772			1,555		11.5	%		5,330		54.5	%
Net interest income-FTE		108,367			105,308		106,914			3,059		2.9	%		1,453		1.4	%
Provision for loan losses, LHFI		3,167			3,961		2,921			(794	)	-20.0	%		246		8.4	%
Provision for loan losses, acquired loans		(441	)		150		(2,564	)		(591	)	n/m			2,123		82.8	%
Net interest income after provision-FTE		105,641			101,197		106,557			4,444		4.4	%		(916	)	-0.9	%
Service charges on deposit accounts		10,647			10,857		10,755			(210	)	-1.9	%		(108	)	-1.0	%
Bank card and other fees		7,070			6,626		7,370			444		6.7	%		(300	)	-4.1	%
Mortgage banking, net		9,046			11,265		9,008			(2,219	)	-19.7	%		38		0.4	%
Insurance commissions		10,735			9,419		9,745			1,316		14.0	%		990		10.2	%
Wealth management		7,478			7,567		7,674			(89	)	-1.2	%		(196	)	-2.6	%
Other, net		2,415			1,059		5,637			1,356		n/m			(3,222	)	-57.2	%
Nonint inc-excl sec gains (losses), net		47,391			46,793		50,189			598		1.3	%		(2,798	)	-5.6	%
Security gains (losses), net		—			—		1			—		n/m			(1	)	-100.0	%
Total noninterest income		47,391			46,793		50,190			598		1.3	%		(2,799	)	-5.6	%
Salaries and employee benefits		59,975			58,475		57,185			1,500		2.6	%		2,790		4.9	%
Defined benefit plan termination		—			—		17,644			—		n/m			(17,644	)	-100.0	%
Services and fees		16,322			15,746		15,009			576		3.7	%		1,313		8.7	%
Net occupancy-premises		6,550			6,502		6,210			48		0.7	%		340		5.5	%
Equipment expense		6,202			6,099		6,162			103		1.7	%		40		0.6	%
Other real estate expense, net		(93	)		866		383			(959	)	n/m			(476	)	n/m
FDIC assessment expense		2,538			2,995		2,686			(457	)	-15.3	%		(148	)	-5.5	%
Other expense		12,306			11,782		16,796			524		4.4	%		(4,490	)	-26.7	%
Total noninterest expense		103,800			102,465		122,075			1,335		1.3	%		(18,275	)	-15.0	%
Income before income taxes and tax eq adj		49,232			45,525		34,672			3,707		8.1	%		14,560		42.0	%
Tax equivalent adjustment		3,203			3,215		4,910			(12	)	-0.4	%		(1,707	)	-34.8	%
Income before income taxes		46,029			42,310		29,762			3,719		8.8	%		16,267		54.7	%
Income taxes		6,216			5,480		5,727			736		13.4	%		489		8.5	%
Net income	$	39,813		$	36,830	$	24,035		$	2,983		8.1	%	$	15,778		65.6	%
Per share data
Earnings per share - basic	$	0.59		$	0.54	$	0.35		$	0.05		9.3	%	$	0.24		68.6	%
Earnings per share - diluted	$	0.59		$	0.54	$	0.35		$	0.05		9.3	%	$	0.24		68.6	%
Dividends per share	$	0.23		$	0.23	$	0.23			—		0.0	%		—		0.0	%
Weighted average shares outstanding
Basic		67,758,097			67,809,234		67,736,298
Diluted		67,907,267			67,960,583		67,892,532
Period end shares outstanding		67,621,111			67,775,068		67,740,901
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)		6/30/2018			3/31/2018			6/30/2017		$	Change		% Change		$	Change		% Change
Nonaccrual loans
Alabama	$	3,685		$	3,121		$	1,723		$	564		18.1	%	$	1,962		n/m
Florida		2,978			2,116			3,174			862		40.7	%		(196	)	-6.2	%
Mississippi (2)		39,006			48,600			63,889			(9,594	)	-19.7	%		(24,883	)	-38.9	%
Tennessee (3)		5,338			5,530			4,975			(192	)	-3.5	%		363		7.3	%
Texas		10,356			9,329			383			1,027		11.0	%		9,973		n/m
Total nonaccrual loans		61,363			68,696			74,144			(7,333	)	-10.7	%		(12,781	)	-17.2	%
Other real estate
Alabama		8,290			8,962			13,301			(672	)	-7.5	%		(5,011	)	-37.7	%
Florida		9,789			12,550			17,377			(2,761	)	-22.0	%		(7,588	)	-43.7	%
Mississippi (2)		19,358			15,737			14,377			3,621		23.0	%		4,981		34.6	%
Tennessee (3)		1,486			1,523			3,363			(37	)	-2.4	%		(1,877	)	-55.8	%
Texas		744			782			1,540			(38	)	-4.9	%		(796	)	-51.7	%
Total other real estate		39,667			39,554			49,958			113		0.3	%		(10,291	)	-20.6	%
Total nonperforming assets	$	101,030		$	108,250		$	124,102		$	(7,220	)	-6.7	%	$	(23,072	)	-18.6	%
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	529		$	1,419		$	1,216		$	(890	)	-62.7	%	$	(687	)	-56.5	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	34,693		$	34,826		$	29,906		$	(133	)	-0.4	%	$	4,787		16.0	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (1)		6/30/2018			3/31/2018			6/30/2017		$	Change		% Change		$	Change		% Change
Beginning Balance	$	81,235		$	76,733		$	72,445		$	4,502		5.9	%	$	8,790		12.1	%
Transfers (4)		782			—			—			782		n/m			782		n/m
Provision for loan losses		3,167			3,961			2,921			(794	)	-20.0	%		246		8.4	%
Charge-offs		(3,421	)		(2,542	)		(2,118	)		(879	)	-34.6	%		(1,303	)	-61.5	%
Recoveries		1,803			3,083			2,936			(1,280	)	-41.5	%		(1,133	)	-38.6	%
Net (charge-offs) recoveries		(1,618	)		541			818			(2,159	)	n/m			(2,436	)	n/m
Ending Balance	$	83,566		$	81,235		$	76,184		$	2,331		2.9	%	$	7,382		9.7	%
PROVISION FOR LOAN LOSSES (1)
Alabama	$	434		$	618		$	866		$	(184	)	-29.8	%	$	(432	)	-49.9	%
Florida		(811	)		(863	)		(975	)		52		6.0	%		164		16.8	%
Mississippi (2)		2,768			2,664			2,268			104		3.9	%		500		22.0	%
Tennessee (3)		82			(268	)		322			350		n/m			(240	)	-74.5	%
Texas		694			1,810			440			(1,116	)	-61.7	%		254		57.7	%
Total provision for loan losses	$	3,167		$	3,961		$	2,921		$	(794	)	-20.0	%	$	246		8.4	%
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama	$	112		$	84		$	(29	)	$	28		33.3	%	$	141		n/m
Florida		(122	)		(960	)		(973	)		838		87.3	%		851		87.5	%
Mississippi (2)		1,705			267			33			1,438		n/m			1,672		n/m
Tennessee (3)		70			109			146			(39	)	-35.8	%		(76	)	-52.1	%
Texas		(147	)		(41	)		5			(106	)	n/m			(152	)	n/m
Total net charge-offs (recoveries)	$	1,618		$	(541	)	$	(818	)	$	2,159		n/m		$	2,436		n/m

(1)	-	Excludes acquired loans.
(2)	-	Mississippi includes Central and Southern Mississippi Regions.
(3)	-	Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
(4)	-	The allowance for loan losses balance related to the remaining loans acquired in the Bay Bank & Trust Company merger on March 16, 2012.
		Total loans of $14.6 million were reclassified from acquired loans to LHFI during the second quarter of 2018.
n/m	-	percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
	Quarter Ended															Six Months Ended
AVERAGE BALANCES		6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Securities AFS-taxable	$	2,038,759		$	2,141,144		$	2,247,247		$	2,349,736		$	2,334,600		$	2,089,669		$	2,293,609
Securities AFS-nontaxable		50,035			57,972			61,691			67,994			75,640			53,982			82,045
Securities HTM-taxable		972,571			1,005,721			1,045,723			1,086,773			1,108,158			989,054			1,116,379
Securities HTM-nontaxable		30,337			32,734			32,781			32,829			32,878			31,529			32,943
Total securities		3,091,702			3,237,571			3,387,442			3,537,332			3,551,276			3,164,234			3,524,976
Loans (including loans held for sale)		8,707,466			8,636,967			8,686,916			8,532,523			8,348,758			8,672,411			8,212,361
Acquired loans		202,140			243,152			273,918			299,221			315,558			222,533			283,200
Fed funds sold and rev repos		1,063			478			1,724			3,582			3,184			772			1,798
Other earning assets		186,224			213,985			80,218			84,320			77,770			200,028			78,638
Total earning assets		12,188,595			12,332,153			12,430,218			12,456,978			12,296,546			12,259,978			12,100,973
Allowance for loan losses		(86,315	)		(82,304	)		(86,704	)		(85,363	)		(83,328	)		(84,321	)		(83,361	)
Cash and due from banks		319,075			336,642			315,586			312,409			307,966			327,810			309,247
Other assets		1,042,156			1,030,738			1,192,464			1,202,766			1,229,981			1,036,478			1,232,710
Total assets	$	13,463,511		$	13,617,229		$	13,851,564		$	13,886,790		$	13,751,165		$	13,539,945		$	13,559,569
Interest-bearing demand deposits	$	2,439,777		$	2,404,428		$	2,244,625		$	2,192,064		$	2,035,491		$	2,422,200		$	2,008,884
Savings deposits		3,860,096			3,737,507			3,291,407			3,284,323			3,337,374			3,799,140			3,328,522
Time deposits		1,798,855			1,748,645			1,756,576			1,736,683			1,777,529			1,773,889			1,714,242
Total interest-bearing deposits		8,098,728			7,890,580			7,292,608			7,213,070			7,150,394			7,995,229			7,051,648
Fed funds purchased and repos		352,256			277,877			475,850			547,863			525,523			315,272			512,316
Short-term borrowings		248,932			751,219			1,276,543			1,335,476			1,047,107			498,688			967,917
Long-term FHLB advances		921			938			954			970			141,097			929			195,761
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		8,762,693			8,982,470			9,107,811			9,159,235			8,925,977			8,871,974			8,789,498
Noninterest-bearing deposits		2,930,726			2,881,374			2,994,292			3,003,763			3,110,125			2,906,186			3,059,432
Other liabilities		188,186			180,871			169,828			145,925			162,823			184,549			167,917
Total liabilities		11,881,605			12,044,715			12,271,931			12,308,923			12,198,925			11,962,709			12,016,847
Shareholders’ equity		1,581,906			1,572,514			1,579,633			1,577,867			1,552,240			1,577,236			1,542,722
Total liabilities and equity	$	13,463,511		$	13,617,229		$	13,851,564		$	13,886,790		$	13,751,165		$	13,539,945		$	13,559,569
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
PERIOD END BALANCES		6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Cash and due from banks	$	387,119		$	315,276		$	335,768		$	350,123		$	318,329
Fed funds sold and rev repos		—			112			615			3,215			6,900
Securities available for sale		1,974,675			2,097,497			2,238,635			2,369,089			2,447,688
Securities held to maturity		985,845			1,023,975			1,056,486			1,102,283			1,139,754
Loans held for sale (LHFS)		196,217			163,882			180,512			204,157			203,652
Loans held for investment (LHFI)		8,678,983			8,513,985			8,569,967			8,407,341			8,296,045
Allowance for loan losses, LHFI		(83,566	)		(81,235	)		(76,733	)		(80,332	)		(76,184	)
Net LHFI		8,595,417			8,432,750			8,493,234			8,327,009			8,219,861
Acquired loans		173,107			215,476			261,517			283,757			314,910
Allowance for loan losses, acquired loans		(3,046	)		(4,294	)		(4,079	)		(5,768	)		(7,423	)
Net acquired loans		170,061			211,182			257,438			277,989			307,487
Net LHFI and acquired loans		8,765,478			8,643,932			8,750,672			8,604,998			8,527,348
Premises and equipment, net		177,686			178,584			179,339			181,312			182,315
Mortgage servicing rights		97,411			94,850			84,269			81,477			82,628
Goodwill		379,627			379,627			379,627			379,627			379,627
Identifiable intangible assets		13,677			14,963			16,360			17,883			19,422
Other real estate		39,667			39,554			43,228			48,356			49,958
Other assets		507,863			511,187			532,442			542,135			551,517
Total assets	$	13,525,265		$	13,463,439		$	13,797,953		$	13,884,655		$	13,909,138
Deposits:
Noninterest-bearing	$	2,958,354		$	3,004,442		$	2,978,074		$	2,998,013		$	3,092,915
Interest-bearing		8,114,081			7,971,359			7,599,438			7,233,729			7,330,476
Total deposits		11,072,435			10,975,801			10,577,512			10,231,742			10,423,391
Fed funds purchased and repos		477,891			274,833			469,827			545,603			508,068
Short-term borrowings		186,647			442,689			971,049			1,322,159			1,222,592
Long-term FHLB advances		913			929			946			962			978
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Other liabilities		141,451			137,194			145,062			139,798			130,335
Total liabilities		11,941,193			11,893,302			12,226,252			12,302,120			12,347,220
Common stock		14,089			14,121			14,115			14,114			14,114
Capital surplus		361,715			366,021			369,124			368,131			367,075
Retained earnings		1,282,007			1,257,881			1,228,187			1,228,115			1,209,238
Accum other comprehensive loss, net of tax		(73,739	)		(67,886	)		(39,725	)		(27,825	)		(28,509	)
Total shareholders’ equity		1,584,072			1,570,137			1,571,701			1,582,535			1,561,918
Total liabilities and equity	$	13,525,265		$	13,463,439		$	13,797,953		$	13,884,655		$	13,909,138
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands except per share data)
(unaudited)
	Quarter Ended														Six Months Ended
INCOME STATEMENTS		6/30/2018			3/31/2018		12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Interest and fees on LHFS & LHFI-FTE	$	99,761		$	94,712	$	95,816		$	93,703		$	89,486		$	194,473		$	173,276
Interest and fees on acquired loans		5,022			4,877		6,401			6,625			6,263			9,899			11,452
Interest on securities-taxable		16,894			17,506		18,327			19,291			19,377			34,400			38,574
Interest on securities-tax exempt-FTE		733			824		1,035			1,104			1,178			1,557			2,478
Interest on fed funds sold and rev repos		5			2		7			14			11			7			12
Other interest income		1,054			934		473			355			371			1,988			638
Total interest income-FTE		123,469			118,855		122,059			121,092			116,686			242,324			226,430
Interest on deposits		12,139			9,491		7,284			6,381			5,107			21,630			9,052
Interest on fed funds pch and repos		1,250			662		1,116			1,301			1,037			1,912			1,735
Other interest expense		1,713			3,394		4,555			4,520			3,628			5,107			6,301
Total interest expense		15,102			13,547		12,955			12,202			9,772			28,649			17,088
Net interest income-FTE		108,367			105,308		109,104			108,890			106,914			213,675			209,342
Provision for loan losses, LHFI		3,167			3,961		5,739			3,672			2,921			7,128			5,683
Provision for loan losses, acquired loans		(441	)		150		(1,573	)		(1,653	)		(2,564	)		(291	)		(4,169	)
Net interest income after provision-FTE		105,641			101,197		104,938			106,871			106,557			206,838			207,828
Service charges on deposit accounts		10,647			10,857		11,193			11,223			10,755			21,504			21,587
Bank card and other fees		7,070			6,626		7,266			7,150			7,370			13,696			13,870
Mortgage banking, net		9,046			11,265		6,284			4,425			9,008			20,311			19,193
Insurance commissions		10,735			9,419		8,813			10,398			9,745			20,154			18,957
Wealth management		7,478			7,567		7,723			7,530			7,674			15,045			15,087
Other, net		2,415			1,059		2,681			3,740			5,637			3,474			7,528
Nonint inc-excl sec gains (losses), net		47,391			46,793		43,960			44,466			50,189			94,184			96,222
Security gains (losses), net		—			—		—			14			1			—			1
Total noninterest income		47,391			46,793		43,960			44,480			50,190			94,184			96,223
Salaries and employee benefits		59,975			58,475		58,820			57,871			57,185			118,450			112,574
Defined benefit plan termination		—			—		—			—			17,644			—			17,644
Services and fees		16,322			15,746		15,419			15,133			15,009			32,068			30,341
Net occupancy-premises		6,550			6,502		6,617			6,702			6,210			13,052			12,448
Equipment expense		6,202			6,099		5,996			6,297			6,162			12,301			12,160
Other real estate expense, net		(93	)		866		666			864			383			773			2,142
FDIC assessment expense		2,538			2,995		2,868			2,816			2,686			5,533			5,326
Other expense		12,306			11,782		12,565			13,403			16,796			24,088			31,497
Total noninterest expense		103,800			102,465		102,951			103,086			122,075			206,265			224,132
Income before income taxes and tax eq adj		49,232			45,525		45,947			48,265			34,672			94,757			79,919
Tax equivalent adjustment		3,203			3,215		5,060			4,978			4,910			6,418			9,748
Income before income taxes		46,029			42,310		40,887			43,287			29,762			88,339			70,171
Income taxes		6,216			5,480		25,119			8,708			5,727			11,696			14,888
Net income	$	39,813		$	36,830	$	15,768		$	34,579		$	24,035		$	76,643		$	55,283
Per share data
Earnings per share - basic	$	0.59		$	0.54	$	0.23		$	0.51		$	0.35		$	1.13		$	0.82
Earnings per share - diluted	$	0.59		$	0.54	$	0.23		$	0.51		$	0.35		$	1.13		$	0.81
Dividends per share	$	0.23		$	0.23	$	0.23		$	0.23		$	0.23		$	0.46		$	0.46
Weighted average shares outstanding
Basic		67,758,097			67,809,234		67,742,792			67,741,655			67,736,298			67,783,524			67,711,966
Diluted		67,907,267			67,960,583		67,938,986			67,916,418			67,892,532			67,928,829			67,864,414
Period end shares outstanding		67,621,111			67,775,068		67,746,094			67,742,135			67,740,901			67,621,111			67,740,901
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)		6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Nonaccrual loans
Alabama	$	3,685		$	3,121		$	3,083		$	1,629		$	1,723
Florida		2,978			2,116			3,034			3,242			3,174
Mississippi (2)		39,006			48,600			49,129			59,483			63,889
Tennessee (3)		5,338			5,530			4,436			4,589			4,975
Texas		10,356			9,329			7,893			346			383
Total nonaccrual loans		61,363			68,696			67,575			69,289			74,144
Other real estate
Alabama		8,290			8,962			11,714			12,726			13,301
Florida		9,789			12,550			13,937			16,100			17,377
Mississippi (2)		19,358			15,737			14,260			15,319			14,377
Tennessee (3)		1,486			1,523			2,535			2,671			3,363
Texas		744			782			782			1,540			1,540
Total other real estate		39,667			39,554			43,228			48,356			49,958
Total nonperforming assets	$	101,030		$	108,250		$	110,803		$	117,645		$	124,102
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	529		$	1,419		$	2,171		$	2,244		$	1,216
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	34,693		$	34,826		$	35,544		$	32,332		$	29,906
	Quarter Ended															Six Months Ended
ALLOWANCE FOR LOAN LOSSES (1)		6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Beginning Balance	$	81,235		$	76,733		$	80,332		$	76,184		$	72,445		$	76,733		$	71,265
Transfers (4)		782			—			—			—			—			782			—
Provision for loan losses		3,167			3,961			5,739			3,672			2,921			7,128			5,683
Charge-offs		(3,421	)		(2,542	)		(12,075	)		(2,752	)		(2,118	)		(5,963	)		(6,320	)
Recoveries		1,803			3,083			2,737			3,228			2,936			4,886			5,556
Net (charge-offs) recoveries		(1,618	)		541			(9,338	)		476			818			(1,077	)		(764	)
Ending Balance	$	83,566		$	81,235		$	76,733		$	80,332		$	76,184		$	83,566		$	76,184
PROVISION FOR LOAN LOSSES (1)
Alabama	$	434		$	618		$	559		$	1,218		$	866		$	1,052		$	2,055
Florida		(811	)		(863	)		(1,235	)		(744	)		(975	)		(1,674	)		(972	)
Mississippi (2)		2,768			2,664			2,779			1,860			2,268			5,432			4,094
Tennessee (3)		82			(268	)		(439	)		(72	)		322			(186	)		530
Texas		694			1,810			4,075			1,410			440			2,504			(24	)
Total provision for loan losses	$	3,167		$	3,961		$	5,739		$	3,672		$	2,921		$	7,128		$	5,683
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama	$	112		$	84		$	196		$	314		$	(29	)	$	196		$	37
Florida		(122	)		(960	)		(946	)		(796	)		(973	)		(1,082	)		(1,128	)
Mississippi (2)		1,705			267			5,574			(11	)		33			1,972			1,792
Tennessee (3)		70			109			79			85			146			179			229
Texas		(147	)		(41	)		4,435			(68	)		5			(188	)		(166	)
Total net charge-offs (recoveries)	$	1,618		$	(541	)	$	9,338		$	(476	)	$	(818	)	$	1,077		$	764

(1)	-	Excludes acquired loans.
(2)	-	Mississippi includes Central and Southern Mississippi Regions.
(3)	-	Tennessee includes Memphis, Tennessee and Northern Mississippi Regions.
(4)	-	The allowance for loan losses balance related to the remaining loans acquired in the Bay Bank & Trust Company merger on March 16, 2012.
		Total loans of $14.6 million were reclassified from acquired loans to LHFI during the second quarter of 2018.
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
June 30, 2018
(unaudited)
	Quarter Ended															Six Months Ended
FINANCIAL RATIOS AND OTHER DATA		6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017		6/30/2018		6/30/2017
Return on equity		10.09	%		9.50	%		3.96	%		8.69	%		6.21	%	9.80	%	7.23	%
Return on average tangible equity		13.77	%		13.05	%		5.60	%		11.95	%		8.68	%	13.41	%	10.02	%
Return on assets		1.19	%		1.10	%		0.45	%		0.99	%		0.70	%	1.14	%	0.82	%
Interest margin - Yield - FTE		4.06	%		3.91	%		3.90	%		3.86	%		3.81	%	3.99	%	3.77	%
Interest margin - Cost		0.50	%		0.45	%		0.41	%		0.39	%		0.32	%	0.47	%	0.28	%
Net interest margin - FTE		3.57	%		3.46	%		3.48	%		3.47	%		3.49	%	3.51	%	3.49	%
Efficiency ratio (1)		64.90	%		65.50	%		65.21	%		65.14	%		64.50	%	65.20	%	65.57	%
Full-time equivalent employees		2,890			2,905			2,893			2,878			2,858
CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans		0.07	%		-0.03	%		0.43	%		-0.02	%		-0.04	%	0.03	%	0.02	%
Provision for loan losses/average loans		0.15	%		0.19	%		0.26	%		0.17	%		0.14	%	0.17	%	0.14	%
Nonperforming loans/total loans (incl LHFS)		0.69	%		0.79	%		0.77	%		0.80	%		0.87	%
Nonperforming assets/total loans (incl LHFS)		1.14	%		1.25	%		1.27	%		1.37	%		1.46	%
Nonperforming assets/total loans (incl LHFS) +ORE		1.13	%		1.24	%		1.26	%		1.36	%		1.45	%
ALL/total loans (excl LHFS)		0.96	%		0.95	%		0.90	%		0.96	%		0.92	%
ALL-commercial/total commercial loans		1.05	%		1.04	%		0.95	%		1.02	%		0.99	%
ALL-consumer/total consumer and home mortgage loans		0.63	%		0.64	%		0.68	%		0.73	%		0.67	%
ALL/nonperforming loans		136.18	%		118.25	%		113.55	%		115.94	%		102.75	%
ALL/nonperforming loans (excl specifically reviewed impaired loans)		345.87	%		314.28	%		320.84	%		301.50	%		277.42	%
CAPITAL RATIOS
Total equity/total assets		11.71	%		11.66	%		11.39	%		11.40	%		11.23	%
Tangible equity/tangible assets		9.07	%		9.00	%		8.77	%		8.79	%		8.61	%
Tangible equity/risk-weighted assets		11.20	%		11.25	%		11.13	%		11.29	%		11.19	%
Tier 1 leverage ratio (3)		10.22	%		9.96	%		9.67	%		9.61	%		9.56	%
Common equity tier 1 capital ratio (3)		12.01	%		12.05	%		11.77	%		11.80	%		11.73	%
Tier 1 risk-based capital ratio (3)		12.58	%		12.62	%		12.33	%		12.37	%		12.30	%
Total risk-based capital ratio (3)		13.39	%		13.44	%		13.10	%		13.19	%		13.11	%
STOCK PERFORMANCE
Market value-Close	$	32.63		$	31.16		$	31.86		$	33.12		$	32.16
Book value	$	23.43		$	23.17		$	23.20		$	23.36		$	23.06
Tangible book value	$	17.61		$	17.34		$	17.35		$	17.49		$	17.17

(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.
(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

June 30, 2018

($ 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. In addition, Trustmark paid off Reliance Preferred Stock of $1.1 million bringing the total consideration paid to $24.8 million.

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 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).

Note 2 - Securities Available for Sale and Held to Maturity

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

	6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies	$	36,414	$	40,381	$	45,285	$	49,994	$	51,549
Obligations of states and political subdivisions		65,348		75,013		79,229		89,144		96,514
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		60,245		62,457		65,746		60,902		58,422
Issued by FNMA and FHLMC		727,433		767,676		814,450		860,131		860,571
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		897,652		954,537		1,016,790		1,087,169		1,157,241
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		187,583		197,433		217,135		221,749		223,391
Total securities available for sale	$	1,974,675	$	2,097,497	$	2,238,635	$	2,369,089	$	2,447,688
SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	3,714	$	3,703	$	3,692	$	3,680	$	3,669
Obligations of states and political subdivisions		42,458		46,011		46,039		46,069		46,098
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		12,756		12,974		13,539		14,191		14,399
Issued by FNMA and FHLMC		123,377		128,517		133,975		139,172		144,282
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		627,470		653,325		678,926		708,715		740,042
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		176,070		179,445		180,315		190,456		191,264
Total securities held to maturity	$	985,845	$	1,023,975	$	1,056,486	$	1,102,283	$	1,139,754

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018

($ in thousands)

(unaudited)

Note 2 - Securities Available for Sale and Held to Maturity (continued)

At March 31, 2018, 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 $17.5 million ($13.2 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.

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Loans secured by real estate:
Construction, land development and other land loans	$	1,038,745		$	986,188		$	987,624		$	950,144		$	922,029
Secured by 1-4 family residential properties		1,742,496			1,698,885			1,675,311			1,648,733			1,655,968
Secured by nonfarm, nonresidential properties		2,321,734			2,257,899			2,193,823			2,172,885			2,109,367
Other real estate secured		397,538			425,664			517,956			482,163			432,208
Commercial and industrial loans		1,572,764			1,561,967			1,570,345			1,568,588			1,635,000
Consumer loans		175,261			168,469			171,918			173,061			170,858
State and other political subdivision loans		925,452			936,014			952,483			936,614			936,860
Other loans		504,993			478,899			500,507			475,153			433,755
LHFI		8,678,983			8,513,985			8,569,967			8,407,341			8,296,045
Allowance for loan losses		(83,566	)		(81,235	)		(76,733	)		(80,332	)		(76,184	)
Net LHFI	$	8,595,417		$	8,432,750		$	8,493,234		$	8,327,009		$	8,219,861

ACQUIRED LOANS BY TYPE	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Loans secured by real estate:
Construction, land development and other land loans	$	11,900		$	17,575		$	23,586		$	29,384		$	35,054
Secured by 1-4 family residential properties		36,419			49,289			61,751			65,746			74,313
Secured by nonfarm, nonresidential properties		85,117			100,285			114,694			122,200			132,663
Other real estate secured		9,862			14,581			16,746			18,431			19,553
Commercial and industrial loans		20,485			21,808			31,506			34,124			34,375
Consumer loans		1,700			1,920			2,600			2,749			2,833
Other loans		7,624			10,018			10,634			11,123			16,119
Acquired loans		173,107			215,476			261,517			283,757			314,910
Allowance for loan losses, acquired loans		(3,046	)		(4,294	)		(4,079	)		(5,768	)		(7,423	)
Net acquired loans	$	170,061		$	211,182		$	257,438		$	277,989		$	307,487

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)

	June 30, 2018
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	$	1,038,745	$	338,286	$	67,056	$	306,078	$	22,089	$	305,236
Secured by 1-4 family residential properties		1,742,496		112,472		47,643		1,478,209		87,299		16,873
Secured by nonfarm, nonresidential properties		2,321,734		485,588		240,787		907,939		159,890		527,530
Other real estate secured		397,538		74,362		3,701		216,478		11,662		91,335
Commercial and industrial loans		1,572,764		205,704		8,832		788,659		352,345		217,224
Consumer loans		175,261		22,702		4,978		125,690		18,879		3,012
State and other political subdivision loans		925,452		81,002		27,370		603,044		23,986		190,050
Other loans		504,993		74,914		16,788		331,733		47,097		34,461
Loans	$	8,678,983	$	1,395,030	$	417,155	$	4,757,830	$	723,247	$	1,385,721
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	63,811	$	18,054	$	19,386	$	21,610	$	1,538	$	3,223
Development		61,053		5,568		5,888		30,437		532		18,628
Unimproved land		89,458		11,540		15,950		30,459		13,559		17,950
1-4 family construction		200,018		72,175		8,352		83,219		2,396		33,876
Other construction		624,405		230,949		17,480		140,353		4,064		231,559
Construction, land development and other land loans	$	1,038,745	$	338,286	$	67,056	$	306,078	$	22,089	$	305,236
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Income producing:
Retail	$	366,464	$	117,397	$	53,814	$	105,967	$	23,984	$	65,302
Office		215,773		68,265		20,850		69,322		4,347		52,989
Nursing homes/senior living		192,350		32,524		—		153,568		6,258		—
Hotel/motel		289,365		74,937		58,642		55,133		34,286		66,367
Mini-storage		131,473		12,834		5,775		42,694		616		69,554
Industrial		72,122		11,844		9,300		8,989		1,120		40,869
Health care		35,182		16,611		759		14,975		—		2,837
Convenience stores		30,375		2,818		122		17,223		798		9,414
Other		97,349		14,332		18,929		16,928		11,487		35,673
Total income producing loans		1,430,453		351,562		168,191		484,799		82,896		343,005
Owner-occupied:
Office		149,465		25,115		27,535		58,077		3,901		34,837
Churches		92,316		17,459		6,327		46,324		17,197		5,009
Industrial warehouses		147,855		11,414		3,109		58,071		14,704		60,557
Health care		107,106		21,089		6,624		64,475		946		13,972
Convenience stores		99,966		12,492		12,247		50,537		1,252		23,438
Retail		51,725		15,998		7,645		19,580		1,773		6,729
Restaurants		51,179		2,829		788		28,372		17,329		1,861
Auto dealerships		30,640		8,430		152		12,736		9,322		—
Other		161,029		19,200		8,169		84,968		10,570		38,122
Total owner-occupied loans		891,281		134,026		72,596		423,140		76,994		184,525
Loans secured by nonfarm, nonresidential properties	$	2,321,734	$	485,588	$	240,787	$	907,939	$	159,890	$	527,530
(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018

($ in thousands)

(unaudited)

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

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

	Quarter Ended															Six Months Ended
	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Securities – taxable		2.25	%		2.26	%		2.21	%		2.23	%		2.26	%		2.25	%		2.28	%
Securities – nontaxable		3.66	%		3.68	%		4.35	%		4.34	%		4.35	%		3.67	%		4.35	%
Securities – total		2.29	%		2.30	%		2.27	%		2.29	%		2.32	%		2.29	%		2.35	%
Loans - LHFI & LHFS		4.60	%		4.45	%		4.38	%		4.36	%		4.30	%		4.52	%		4.25	%
Acquired loans		9.96	%		8.13	%		9.27	%		8.78	%		7.96	%		8.97	%		8.15	%
Loans - total		4.72	%		4.55	%		4.53	%		4.51	%		4.43	%		4.63	%		4.38	%
FF sold & rev repo		1.89	%		1.70	%		1.61	%		1.55	%		1.39	%		1.83	%		1.35	%
Other earning assets		2.27	%		1.77	%		2.34	%		1.67	%		1.91	%		2.00	%		1.64	%
Total earning assets		4.06	%		3.91	%		3.90	%		3.86	%		3.81	%		3.99	%		3.77	%
Interest-bearing deposits		0.60	%		0.49	%		0.40	%		0.35	%		0.29	%		0.55	%		0.26	%
FF pch & repo		1.42	%		0.97	%		0.93	%		0.94	%		0.79	%		1.22	%		0.68	%
Other borrowings		2.20	%		1.69	%		1.35	%		1.28	%		1.16	%		1.83	%		1.04	%
Total interest-bearing liabilities		0.69	%		0.61	%		0.56	%		0.53	%		0.44	%		0.65	%		0.39	%
Net interest margin		3.57	%		3.46	%		3.48	%		3.47	%		3.49	%		3.51	%		3.49	%
Net interest margin excluding acquired loans		3.46	%		3.37	%		3.35	%		3.34	%		3.37	%		3.41	%		3.38	%

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

During the second quarter of 2018, the yield on acquired loans totaled 9.96% and included $1.6 million in recoveries from the settlement of debt, which represented approximately 3.20% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.46% for the second quarter of 2018, an increase of 9 basis points when compared to the first quarter of 2018, which was principally due to growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix offset by higher costs of interest-bearing deposits.

Note 5 – Mortgage Banking

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

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

	Quarter Ended															Six Months Ended
	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Mortgage servicing income, net	$	5,502		$	5,588		$	5,471		$	5,295		$	5,439		$	11,090		$	10,897
Change in fair value-MSR from runoff		(3,334	)		(2,507	)		(2,605	)		(2,892	)		(2,896	)		(5,841	)		(5,283	)
Gain on sales of loans, net		5,414			4,585			5,300			5,083			5,001			9,999			8,551
Other, net		1,365			295			(1,120	)		(450	)		629			1,660			1,401
Mortgage banking income before hedge ineffectiveness		8,947			7,961			7,046			7,036			8,173			16,908			15,566
Change in fair value-MSR from market changes		1,743			9,521			1,168			(2,393	)		(1,291	)		11,264			175
Change in fair value of derivatives		(1,644	)		(6,217	)		(1,930	)		(218	)		2,126			(7,861	)		3,452
Net positive (negative) hedge ineffectiveness		99			3,304			(762	)		(2,611	)		835			3,403			3,627
Mortgage banking, net	$	9,046		$	11,265		$	6,284		$	4,425		$	9,008		$	20,311		$	19,193

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018

($ in thousands)

(unaudited)

Note 6 – Salaries and Employee Benefit Plans

Defined Benefit Pension Plan

Prior to 2017, 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. 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.

Note 7 – Other Noninterest Income and Expense

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

	Quarter Ended															Six Months Ended
	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Partnership amortization for tax credit purposes	$	(2,202	)	$	(2,202	)	$	(2,478	)	$	(2,521	)	$	(2,287	)	$	(4,404	)	$	(4,561	)
Increase in life insurance cash surrender value		1,770			1,738			1,816			1,813			1,782			3,508			3,496
Other miscellaneous income		2,847			1,523			3,343			4,448			6,142			4,370			8,593
Total other, net	$	2,415		$	1,059		$	2,681		$	3,740		$	5,637		$	3,474		$	7,528

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 $1.2 million of nontaxable proceeds related to bank-owned life insurance during the second quarter of 2018 compared to none received during the first quarter of 2018. Trustmark received nontaxable proceeds related to bank-owned life insurance of $1.7 million and $2.7 million 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. These proceeds 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										Six Months Ended
	6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017		6/30/2018		6/30/2017
Loan expense	$	3,046	$	2,791	$	2,276	$	3,013	$	2,827	$	5,837	$	5,619
Amortization of intangibles		1,286		1,397		1,522		1,539		1,544		2,683		3,108
Defined benefit plans non-service cost reclass from salaries and employee benefits		885		885		968		966		1,875		1,770		3,788
Other miscellaneous expense		7,089		6,709		7,799		7,885		10,550		13,798		18,982
Total other expense	$	12,306	$	11,782	$	12,565	$	13,403	$	16,796	$	24,088	$	31,497

Trustmark adopted ASU 2017-07, “Compensation-Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” effective January 1, 2018 and was required to reclassify the defined benefit plans non-service cost from salaries and employee benefits to other expense on the consolidated statements of income for each period presented.

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

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

June 30, 2018

($ in thousands)

(unaudited)

Note 8 – Income Taxes

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

	Quarter Ended											Six Months Ended
	6/30/2018		3/31/2018		12/31/2017			9/30/2017		6/30/2017		6/30/2018		6/30/2017
Current	$	5,516	$	2,180	$	3,850		$	8,108	$	5,427	$	7,696	$	10,688
Deferred		700		3,300		4,300			600		300		4,000		4,200
Elimination of deferred tax valuation allowance		—		—		(8,650	)		—		—		—		—
Income tax provision before re-measurement		6,216		5,480		(500	)		8,708		5,727		11,696		14,888
Re-measurement of net deferred tax assets		—		—		25,619			—		—		—		—
Income tax provision	$	6,216	$	5,480	$	25,119		$	8,708	$	5,727	$	11,696	$	14,888

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 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.

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

June 30, 2018

($ in thousands except per share data)

(unaudited)

Note 9 – Non-GAAP Financial Measures (continued)

		Quarter Ended															Six Months Ended
		6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders’ equity		$	1,581,906		$	1,572,514		$	1,579,633		$	1,577,867		$	1,552,240		$	1,577,236		$	1,542,722
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(379,627	)		(378,191	)		(379,627	)		(372,207	)
Identifiable intangible assets			(14,380	)		(15,782	)		(17,196	)		(18,714	)		(19,713	)		(15,077	)		(19,831	)
Total average tangible equity		$	1,187,899		$	1,177,105		$	1,182,810		$	1,179,526		$	1,154,336		$	1,182,532		$	1,150,684
PERIOD END BALANCES
Total shareholders’ equity		$	1,584,072		$	1,570,137		$	1,571,701		$	1,582,535		$	1,561,918
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(379,627	)		(379,627	)
Identifiable intangible assets			(13,677	)		(14,963	)		(16,360	)		(17,883	)		(19,422	)
Total tangible equity	(a)	$	1,190,768		$	1,175,547		$	1,175,714		$	1,185,025		$	1,162,869
TANGIBLE ASSETS
Total assets		$	13,525,265		$	13,463,439		$	13,797,953		$	13,884,655		$	13,909,138
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(379,627	)		(379,627	)
Identifiable intangible assets			(13,677	)		(14,963	)		(16,360	)		(17,883	)		(19,422	)
Total tangible assets	(b)	$	13,131,961		$	13,068,849		$	13,401,966		$	13,487,145		$	13,510,089
Risk-weighted assets	(c)	$	10,633,646		$	10,449,352		$	10,566,818		$	10,498,582		$	10,391,912
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income		$	39,813		$	36,830		$	15,768		$	34,579		$	24,035		$	76,643		$	55,283
Plus: Intangible amortization net of tax			965			1,049			940			950			954			2,014			1,920
Net income adjusted for intangible amortization		$	40,778		$	37,879		$	16,708		$	35,529		$	24,989		$	78,657		$	57,203
Period end common shares outstanding	(d)		67,621,111			67,775,068			67,746,094			67,742,135			67,740,901
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)			13.77	%		13.05	%		5.60	%		11.95	%		8.68	%		13.41	%		10.02	%
Tangible equity/tangible assets	(a)/(b)		9.07	%		9.00	%		8.77	%		8.79	%		8.61	%
Tangible equity/risk-weighted assets	(a)/(c)		11.20	%		11.25	%		11.13	%		11.29	%		11.19	%
Tangible book value	(a)/(d)*1,000	$	17.61		$	17.34		$	17.35		$	17.49		$	17.17
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders’ equity		$	1,584,072		$	1,570,137		$	1,571,701		$	1,582,535		$	1,561,918
AOCI-related adjustments (3)			73,739			67,886			48,248			27,825			28,509
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)			(366,036	)		(366,248	)		(366,461	)		(359,841	)		(360,198	)
Other adjustments and deductions for CET1 (2)			(14,204	)		(12,233	)		(10,248	)		(11,359	)		(11,267	)
CET1 capital	(e)		1,277,571			1,259,542			1,243,240			1,239,160			1,218,962
Additional tier 1 capital instruments plus related surplus			60,000			60,000			60,000			60,000			60,000
Less: additional tier 1 capital deductions			—			(714	)		(2	)		(471	)		(247	)
Additional tier 1 capital			60,000			59,286			59,998			59,529			59,753
Tier 1 capital		$	1,337,571		$	1,318,828		$	1,303,238		$	1,298,689		$	1,278,715
Common equity tier 1 capital ratio	(e)/(c)		12.01	%		12.05	%		11.77	%		11.80	%		11.73	%

(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

June 30, 2018

($ 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											Six Months Ended
	6/30/2018					6/30/2017						6/30/2018					6/30/2017
	Amount			Diluted EPS		Amount			Diluted EPS			Amount			Diluted EPS		Amount			Diluted EPS
Net Income (GAAP)	$	39,813		$	0.586	$	24,035		$	0.354		$	76,643		$	1.128	$	55,283		$	0.815
Significant non-routine transactions (net of taxes):
Defined benefit plan termination		—			—		10,895			0.160			—			—		10,895			0.161
Reliance merger transaction expenses		—			—		1,999			0.029			—			—		1,999			0.029
Gain on life insurance proceeds		—			—		(4,894	)		(0.072	)		—			—		(4,894	)		(0.072	)
Net Income adjusted for significant non-routine   transactions (Non-GAAP)	$	39,813		$	0.586	$	32,035		$	0.471		$	76,643		$	1.128	$	63,283		$	0.933
	Reported			Adjusted		Reported			Adjusted			Reported			Adjusted		Reported			Adjusted
	(GAAP)			(Non-GAAP)		(GAAP)			(Non-GAAP)			(GAAP)			(Non-GAAP)		(GAAP)			(Non-GAAP)
Return on equity		10.09	%	n/a			6.21	%		8.28	%		9.80	%	n/a			7.23	%		8.27	%
Return on average tangible equity		13.77	%	n/a			8.68	%		11.46	%		13.41	%	n/a			10.02	%		11.43	%
Return on assets		1.19	%	n/a			0.70	%		0.93	%		1.14	%	n/a			0.82	%		0.94	%
n/a - not applicable