Trustmark Corporation Announces Third Quarter 2019 Financial Results

Loan growth and disciplined expense management contribute to performance

JACKSON, Miss.--(BUSINESS WIRE)--Trustmark Corporation (NASDAQ:TRMK) reported net income of $41.0 million in the third quarter of 2019, representing diluted earnings per share of $0.64. Diluted earnings per share decreased 1.5% linked-quarter and increased 18.5% compared to the same quarter in the prior year. This level of earnings resulted in a return on average tangible equity of 13.31% and a return on average assets of 1.21%. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable December 15, 2019, to shareholders of record on December 1, 2019.

Printer friendly version of earnings release with consolidated financial statements and notes: https://www.businesswire.com/news/home/52115206/en

Third Quarter Highlights

• Loans held for investment increased $106.9 million, or 1.2%, linked-quarter and $476.6 million, or 5.4%, from the prior year
• The net interest margin (FTE), excluding acquired loans, was 3.61% in the third quarter, up 1 basis point from the prior quarter and 11 basis points year-over-year
• Core noninterest expense, which excludes other real estate expense and intangible amortization, totaled $105.3 million, up 0.3% from the prior quarter and 2.5% year-over-year

Gerard R. Host, President and CEO, stated, “We are pleased to report solid financial results for the third quarter, reflecting Trustmark’s proven ability to successfully perform in the face of a challenging interest rate environment. Our third-quarter results were driven by continued loan growth and disciplined expense management. Trustmark also continued evaluating opportunities to better align delivery channels with customer preferences and deploy resources in higher growth markets. With a team of dedicated associates, a history of consistent performance, and a focus on our strategic initiatives, Trustmark is well positioned to continue meeting the needs of our customers and creating long-term value for shareholders.”

Balance Sheet Management

• Loans held for investment grew for the sixth consecutive quarter
• Continued balance sheet and capital optimization through maturing investment securities run-off and share repurchases
• Noninterest-bearing deposits represented 27.2% of total deposits at September 30, 2019

Loans held for investment totaled $9.2 billion at September 30, 2019, reflecting an increase of 1.2% linked-quarter and 5.4% from the prior year. The growth was driven primarily by commercial real estate and construction and development loans. Acquired loans totaled $81.0 million at September 30, 2019, down $6.9 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $9.3 billion at the end of the third quarter of 2019, up $100.0 million, or 1.1%, from the prior quarter and $425.0 million, or 4.8%, year-over-year.

Deposits totaled $11.3 billion at September 30, 2019, down $312.4 million from the prior quarter and up $297.3 million year-over-year. The linked-quarter decline is primarily attributable to a seasonal decline in public funds. The deposit mix shifted favorably during the third quarter as noninterest-bearing deposits increased 5.3% linked-quarter and 10.0% year-over-year to total $3.1 billion, representing 27.2% of total deposits. Interest-bearing deposit costs totaled 0.96% in the third quarter, a decrease of 3 basis points linked-quarter. Trustmark continues to maintain an attractive, low-cost deposit base with approximately 57% of deposit balances in checking accounts.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. During the third quarter, Trustmark repurchased $4.5 million, or approximately 139 thousand of its common shares in open market transactions. At September 30, 2019, Trustmark had $82.5 million in remaining authority under its existing stock repurchase program, which expires March 31, 2020. At September 30, 2019, Trustmark’s tangible equity to tangible assets ratio was 9.53%, while the total risk-based capital ratio was 13.15%.

Credit Quality

• Allowance for loan losses represented 357.15% of nonperforming loans, excluding specifically reviewed impaired loans
• Net charge-offs represented 0.01% of average loans in the third quarter

Nonperforming loans totaled $59.0 million at September 30, 2019, up $6.1 million from the prior quarter and down $8.8 million year-over-year. Other real estate totaled $32.0 million, up $731 thousand from the prior quarter and down $4.5 million from the same period one year earlier. Collectively, nonperforming assets totaled $91.0 million, reflecting a linked-quarter increase of 8.2% and year-over-year decrease of 12.8%.

Allocation of Trustmark's $83.2 million allowance for loan losses represented 0.98% of commercial loans and 0.61% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.90% at September 30, 2019, representing a level management considers commensurate with the inherent risk in the loan portfolio.

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

Revenue Generation

• Net interest margin (FTE), excluding acquired loans, was 3.61%, up 1 basis point from the prior quarter and 11 basis points from the previous year
• Net interest income (FTE) totaled $111.7 million in the third quarter, up 0.7% linked-quarter and 1.4% year-over-year
• Noninterest income totaled $48.3 million in the third quarter, representing 31.3% of revenue excluding acquired loans

Net interest income (FTE) in the third quarter totaled $111.7 million, resulting in a net interest margin of 3.66%, up 2 basis points from the prior quarter. Relative to the prior quarter, net interest income (FTE) increased $743 thousand, reflecting a $93 thousand increase in interest income and a $650 thousand decrease in interest expense. During the third quarter of 2019, the yield on acquired loans totaled 11.08% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 5.09% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin totaled 3.61% for the third quarter of 2019, up 1 basis point from the prior quarter as a decline in the yield on the loans held for investment and held for sale portfolio was offset by runoff of maturing investment securities, decline in other earning assets, favorable funding mix, and lower cost of interest-bearing deposits.

Noninterest income in the third quarter totaled $48.3 million, a decrease of $1.3 million from the prior quarter and an increase of $1.2 million when compared to the same period in the prior year. Mortgage loan production in the third quarter totaled $566.2 million, up 36.7% from the prior quarter and 42.4% year-over-year. Gain on sales of loans, net totaled $8.5 million in the third quarter, up $2.9 million from the second quarter. This increase was more than offset by a $3.7 million increase in negative net mortgage hedge ineffectiveness. Mortgage banking revenue totaled $8.2 million in the third quarter.

Insurance revenue totaled $11.1 million in the third quarter, unchanged from the prior quarter and up 2.9% year-over-year due to broad based growth in commissions. Wealth management revenue in the third quarter totaled $7.7 million, unchanged from the second quarter as increases in brokerage and investment services were offset by a decline in trust management fees. Bank card and other fees increased 4.3% from the prior quarter and 11.9% year-over-year primarily due to higher customer derivative revenue. Service charges on deposit accounts increased 6.6% from the prior quarter and remained flat year-over-year.

Noninterest Expense

• Total noninterest expense for the third quarter was $106.9 million, up 0.7% from the prior quarter and 1.5% year-over-year
• Effective tax rate declined to 12.8% in the third quarter
• Continued to realign delivery channels to reflect changing customer preferences

Salaries and employee benefits increased $546 thousand from the prior quarter to total $62.5 million, primarily due to higher mortgage commissions as a result of increased production. Services and fees rose $829 thousand linked-quarter reflecting continued software investments designed to improve efficiency and customer experience as well as an increase in professional fees. Other real estate expense, net increased $399 thousand linked-quarter while other expense declined $1.0 million linked-quarter to total $10.8 million.

Included in other expense in the third quarter is a recovery of $1.6 million in litigation related expenses incurred in prior periods. Other expense also reflects contributions totaling $1.1 million related to Trustmark’s participation in The Children’s Promise Act, which provides a dollar-for-dollar Mississippi state tax credit to individuals and businesses for donations to eligible charitable organizations. This tax benefit is reflected in Trustmark’s effective tax rate of 12.8% in the third quarter.

Trustmark continues to evaluate delivery channels across its footprint to reflect changing customer preferences and reallocate resources to markets with attractive growth opportunities. Trustmark remains committed to providing the highest quality service in its legacy markets while seeking to further establish a presence in higher growth markets. In the third quarter of 2019, Trustmark closed three offices and opened one office; year-to-date, Trustmark closed five offices and opened two offices.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, October 23, 2019 at 8:30 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing [phone] or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com. A replay of the conference call will also be available through Wednesday, November 6, 2019, in archived format at the same web address or by calling [phone], passcode 10135486.

Trustmark 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 potential market impacts of efforts by the Board of Governors of the Federal Reserve System (FRB) 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.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2019
($ in thousands)
(unaudited)
				Linked Quarter		Year over Year
QUARTERLY AVERAGE BALANCES	9/30/2019	6/30/2019	9/30/2018	$ Change	% Change	$ Change	% Change
Securities AFS-taxable	$ 1,570,803	$ 1,661,464	$ 1,937,807	$ (90,661)	-5.5%	$ (367,004)	-18.9%
Securities AFS-nontaxable	25,096	31,474	41,889	(6,378)	-20.3%	(16,793)	-40.1%
Securities HTM-taxable	778,098	821,357	933,294	(43,259)	-5.3%	(155,196)	-16.6%
Securities HTM-nontaxable	26,088	27,035	29,183	(947)	-3.5%	(3,095)	-10.6%
Total securities	2,400,085	2,541,330	2,942,173	(141,245)	-5.6%	(542,088)	-18.4%
Loans (including loans held for sale)	9,436,287	9,260,028	8,907,588	176,259	1.9%	528,699	5.9%
Acquired loans	82,641	91,217	147,811	(8,576)	-9.4%	(65,170)	-44.1%
Fed funds sold and rev repos	3,662	34,057	477	(30,395)	-89.2%	3,185	n/m
Other earning assets	176,163	316,604	189,471	(140,441)	-44.4%	(13,308)	-7.0%
Total earning assets	12,098,838	12,243,236	12,187,520	(144,398)	-1.2%	(88,682)	-0.7%
Allowance for loan losses	(83,756)	(81,996)	(86,496)	(1,760)	-2.1%	2,740	3.2%
Other assets	1,447,977	1,467,462	1,366,276	(19,485)	-1.3%	81,701	6.0%
Total assets	$ 13,463,059	$ 13,628,702	$ 13,467,300	$ (165,643)	-1.2%	$ (4,241)	0.0%
Interest-bearing demand deposits	$ 3,085,758	$ 3,048,876	$ 2,602,658	$ 36,882	1.2%	$ 483,100	18.6%
Savings deposits	3,568,403	3,801,187	3,722,533	(232,784)	-6.1%	(154,130)	-4.1%
Time deposits	1,753,083	1,840,065	1,851,866	(86,982)	-4.7%	(98,783)	-5.3%
Total interest-bearing deposits	8,407,244	8,690,128	8,177,057	(282,884)	-3.3%	230,187	2.8%
Fed funds purchased and repos	142,064	51,264	347,489	90,800	n/m	(205,425)	-59.1%
Other borrowings	78,404	81,352	187,196	(2,948)	-3.6%	(108,792)	-58.1%
Junior subordinated debt securities	61,856	61,856	61,856	—	0.0%	—	0.0%
Total interest-bearing liabilities	8,689,568	8,884,600	8,773,598	(195,032)	-2.2%	(84,030)	-1.0%
Noninterest-bearing deposits	2,932,754	2,898,266	2,894,061	34,488	1.2%	38,693	1.3%
Other liabilities	206,091	240,091	202,053	(34,000)	-14.2%	4,038	2.0%
Total liabilities	11,828,413	12,022,957	11,869,712	(194,544)	-1.6%	(41,299)	-0.3%
Shareholders' equity	1,634,646	1,605,745	1,597,588	28,901	1.8%	37,058	2.3%
Total liabilities and equity	$ 13,463,059	$ 13,628,702	$ 13,467,300	$ (165,643)	-1.2%	$ (4,241)	0.0%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2019
($ in thousands)
(unaudited)
										Linked Quarter					Year over Year
PERIOD END BALANCES	9/30/2019			6/30/2019			9/30/2018			$ Change			% Change		$ Change			% Change
Cash and due from banks	$	486,263		$	404,413		$	432,471		$	81,850		20.2	%	$	53,792		12.4	%
Fed funds sold and rev repos	—				75,499			1,000			(75,499	)	-100.0	%		(1,000	)	-100.0	%
Securities available for sale		1,553,705			1,643,725			1,864,633			(90,020	)	-5.5	%		(310,928	)	-16.7	%
Securities held to maturity		785,422			825,536			943,883			(40,114	)	-4.9	%		(158,461	)	-16.8	%
Loans held for sale (LHFS)		292,800			240,380			182,664			52,420		21.8	%		110,136		60.3	%
Loans held for investment (LHFI)		9,223,668			9,116,759			8,747,030			106,909		1.2	%		476,638		5.4	%
Allowance for loan losses, LHFI		(83,226	)		(80,399	)		(88,874	)		(2,827	)	-3.5	%		5,648		6.4	%
Net LHFI		9,140,442			9,036,360			8,658,156			104,082		1.2	%		482,286		5.6	%
Acquired loans		81,004			87,884			132,615			(6,880	)	-7.8	%		(51,611	)	-38.9	%
Allowance for loan losses, acquired loans		(1,249	)		(1,398	)		(1,714	)		149		10.7	%		465		27.1	%
Net acquired loans		79,755			86,486			130,901			(6,731	)	-7.8	%		(51,146	)	-39.1	%
Net LHFI and acquired loans		9,220,197			9,122,846			8,789,057			97,351		1.1	%		431,140		4.9	%
Premises and equipment, net		188,423			189,820			178,739			(1,397	)	-0.7	%		9,684		5.4	%
Mortgage servicing rights		73,016			79,283			101,374			(6,267	)	-7.9	%		(28,358	)	-28.0	%
Goodwill		379,627			379,627			379,627		—			0.0	%	—			0.0	%
Identifiable intangible assets		8,345			9,101			12,391			(756	)	-8.3	%		(4,046	)	-32.7	%
Other real estate		31,974			31,243			36,475			731		2.3	%		(4,501	)	-12.3	%
Operating lease right-of-use assets		33,180			32,762		—				418		1.3	%		33,180		n/m
Other assets		531,834			514,723			517,498			17,111		3.3	%		14,336		2.8	%
Total assets	$	13,584,786		$	13,548,958		$	13,439,812		$	35,828		0.3	%	$	144,974		1.1	%
Deposits:
Noninterest-bearing	$	3,064,127		$	2,909,141		$	2,786,539		$	154,986		5.3	%	$	277,588		10.0	%
Interest-bearing		8,190,056			8,657,488			8,170,371			(467,432	)	-5.4	%		19,685		0.2	%
Total deposits		11,254,183			11,566,629			10,956,910			(312,446	)	-2.7	%		297,273		2.7	%
Fed funds purchased and repos		376,712			51,800			486,865			324,912		n/m			(110,153	)	-22.6	%
Other borrowings		76,685			79,012			190,919			(2,327	)	-2.9	%		(114,234	)	-59.8	%
Junior subordinated debt securities		61,856			61,856			61,856		—			0.0	%	—			0.0	%
Operating lease liabilities		34,319			33,878			—			441		1.3	%		34,319		n/m
Other liabilities		135,669			137,233			143,658			(1,564	)	-1.1	%		(7,989	)	-5.6	%
Total liabilities		11,939,424			11,930,408			11,840,208			9,016		0.1	%		99,216		0.8	%
Common stock		13,390			13,418			14,089			(28	)	-0.2	%		(699	)	-5.0	%
Capital surplus		257,370			260,619			362,868			(3,249	)	-1.2	%		(105,498	)	-29.1	%
Retained earnings		1,395,460			1,369,329			1,302,593			26,131		1.9	%		92,867		7.1	%
Accum other comprehensive loss, net of tax		(20,858	)		(24,816	)		(79,946	)		3,958		15.9	%		59,088		73.9	%
Total shareholders' equity		1,645,362			1,618,550			1,599,604			26,812		1.7	%		45,758		2.9	%
Total liabilities and equity	$	13,584,786		$	13,548,958		$	13,439,812		$	35,828		0.3	%	$	144,974		1.1	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2019
($ in thousands except per share data)
(unaudited)
	Quarter Ended								Linked Quarter					Year over Year
INCOME STATEMENTS	9/30/2019			6/30/2019		9/30/2018			$ Change			% Change		$ Change			% Change
Interest and fees on LHFS & LHFI-FTE	$	116,432		$	114,873	$	105,993		$	1,559		1.4	%	$	10,439		9.8	%
Interest and fees on acquired loans		2,309			2,010		4,033			299		14.9	%		(1,724	)	-42.7	%
Interest on securities-taxable		13,184			13,916		16,186			(732	)	-5.3	%		(3,002	)	-18.5	%
Interest on securities-tax exempt-FTE		485			551		656			(66	)	-12.0	%		(171	)	-26.1	%
Interest on fed funds sold and rev repos		23			214		3			(191	)	-89.3	%		20		n/m
Other interest income		1,044			1,820		1,050			(776	)	-42.6	%		(6	)	-0.6	%
Total interest income-FTE		133,477			133,384		127,921			93		0.1	%		5,556		4.3	%
Interest on deposits		20,385			21,500		14,972			(1,115	)	-5.2	%		5,413		36.2	%
Interest on fed funds pch and repos		547			81		1,348			466		n/m			(801	)	-59.4	%
Other interest expense		830			831		1,467			(1	)	-0.1	%		(637	)	-43.4	%
Total interest expense		21,762			22,412		17,787			(650	)	-2.9	%		3,975		22.3	%
Net interest income-FTE		111,715			110,972		110,134			743		0.7	%		1,581		1.4	%
Provision for loan losses, LHFI		3,039			2,486		8,673			553		22.2	%		(5,634	)	-65.0	%
Provision for loan losses, acquired loans		(140	)		106		(467	)		(246	)	n/m			327		70.0	%
Net interest income after provision-FTE		108,816			108,380		101,928			436		0.4	%		6,888		6.8	%
Service charges on deposit accounts		11,065			10,379		11,075			686		6.6	%		(10	)	-0.1	%
Bank card and other fees		8,349			8,004		7,459			345		4.3	%		890		11.9	%
Mortgage banking, net		8,171			10,295		8,647			(2,124	)	-20.6	%		(476	)	-5.5	%
Insurance commissions		11,072			11,089		10,765			(17	)	-0.2	%		307		2.9	%
Wealth management		7,691			7,742		7,789			(51	)	-0.7	%		(98	)	-1.3	%
Other, net		1,989			2,130		1,358			(141	)	-6.6	%		631		46.5	%
Nonint inc-excl sec gains (losses), net		48,337			49,639		47,093			(1,302	)	-2.6	%		1,244		2.6	%
Security gains (losses), net		—			—		—			—		n/m			—		n/m
Total noninterest income		48,337			49,639		47,093			(1,302	)	-2.6	%		1,244		2.6	%
Salaries and employee benefits		62,495			61,949		60,847			546		0.9	%		1,648		2.7	%
Services and fees		18,838			18,009		16,404			829		4.6	%		2,434		14.8	%
Net occupancy-premises		6,831			6,403		6,910			428		6.7	%		(79	)	-1.1	%
Equipment expense		5,971			5,958		6,200			13		0.2	%		(229	)	-3.7	%
Other real estate expense, net		531			132		1,168			399		n/m			(637	)	-54.5	%
FDIC assessment expense		1,400			1,836		1,999			(436	)	-23.7	%		(599	)	-30.0	%
Other expense		10,787			11,814		11,695			(1,027	)	-8.7	%		(908	)	-7.8	%
Total noninterest expense		106,853			106,101		105,223			752		0.7	%		1,630		1.5	%
Income before income taxes and tax eq adj		50,300			51,918		43,798			(1,618	)	-3.1	%		6,502		14.8	%
Tax equivalent adjustment		3,249			3,248		3,151			1		0.0	%		98		3.1	%
Income before income taxes		47,051			48,670		40,647			(1,619	)	-3.3	%		6,404		15.8	%
Income taxes		6,016			6,530		4,394			(514	)	-7.9	%		1,622		36.9	%
Net income	$	41,035		$	42,140	$	36,253		$	(1,105	)	-2.6	%	$	4,782		13.2	%
Per share data
Earnings per share - basic	$	0.64		$	0.65	$	0.54		$	(0.01	)	-1.5	%	$	0.10		18.5	%
Earnings per share - diluted	$	0.64		$	0.65	$	0.54		$	(0.01	)	-1.5	%	$	0.10		18.5	%
Dividends per share	$	0.23		$	0.23	$	0.23			—		0.0	%		—		0.0	%
Weighted average shares outstanding
Basic		64,358,540			64,677,889		67,621,345
Diluted		64,514,605			64,815,029		67,796,346
Period end shares outstanding		64,262,779			64,398,846		67,621,369
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
Net interest income after provision-FTE
($ in thousands)
(unaudited)
	Quarter Ended									Linked Quarter					Year over Year
NONPERFORMING ASSETS (1)	9/30/2019			6/30/2019			9/30/2018			$ Change			% Change		$ Change			% Change
Nonaccrual loans
Alabama	$	2,936		$	2,327		$	3,953		$	609		26.2	%	$	(1,017	)	-25.7	%
Florida		311			330			1,180			(19	)	-5.8	%		(869	)	-73.6	%
Mississippi (2)		43,895			39,373			41,351			4,522		11.5	%		2,544		6.2	%
Tennessee (3)		10,193			8,455			13,195			1,738		20.6	%		(3,002	)	-22.8	%
Texas		1,695			2,403			8,157			(708	)	-29.5	%		(6,462	)	-79.2	%
Total nonaccrual loans		59,030			52,888			67,836			6,142		11.6	%		(8,806	)	-13.0	%
Other real estate
Alabama		6,501			6,451			7,526			50		0.8	%		(1,025	)	-13.6	%
Florida		6,983			7,826			8,931			(843	)	-10.8	%		(1,948	)	-21.8	%
Mississippi (2)		17,646			15,511			18,191			2,135		13.8	%		(545	)	-3.0	%
Tennessee (3)		844			815			1,083			29		3.6	%		(239	)	-22.1	%
Texas		—			640			744			(640	)	-100.0	%		(744	)	-100.0	%
Total other real estate		31,974			31,243			36,475			731		2.3	%		(4,501	)	-12.3	%
Total nonperforming assets	$	91,004		$	84,131		$	104,311		$	6,873		8.2	%	$	(13,307	)	-12.8	%
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	878		$	1,245		$	726		$	(367	)	-29.5	%	$	152		20.9	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	36,445		$	38,355		$	34,115		$	(1,910	)	-5.0	%	$	2,330		6.8	%
	Quarter Ended									Linked Quarter					Year over Year
ALLOWANCE FOR LOAN LOSSES (1)	9/30/2019			6/30/2019			9/30/2018			$ Change			% Change		$ Change			% Change
Beginning Balance	$	80,399		$	79,005		$	83,566		$	1,394		1.8	%	$	(3,167	)	-3.8	%
Transfers (4)		—			—			772			—		n/m			(772	)	-100.0	%
Provision for loan losses		3,039			2,486			8,673			553		22.2	%		(5,634	)	-65.0	%
Charge-offs		(2,892	)		(2,937	)		(7,017	)		45		1.5	%		4,125		58.8	%
Recoveries		2,680			1,845			2,880			835		45.3	%		(200	)	-6.9	%
Net (charge-offs) recoveries		(212	)		(1,092	)		(4,137	)		880		80.6	%		3,925		-94.9	%
Ending Balance	$	83,226		$	80,399		$	88,874		$	2,827		3.5	%	$	(5,648	)	-6.4	%
PROVISION FOR LOAN LOSSES (1)
Alabama	$	561		$	1,187		$	593		$	(626	)	-52.7	%	$	(32	)	-5.4	%
Florida		(154	)		48			(431	)		(202	)	n/m			277		64.3	%
Mississippi (2)		1,528			1,970			(1,630	)		(442	)	-22.4	%		3,158		n/m
Tennessee (3)		2,175			514			8,100			1,661		n/m			(5,925	)	-73.1	%
Texas		(1,071	)		(1,233	)		2,041			162		13.1	%		(3,112	)	n/m
Total provision for loan losses	$	3,039		$	2,486		$	8,673		$	553		22.2	%	$	(5,634	)	-65.0	%
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama	$	329		$	278		$	198		$	51		18.3	%	$	131		66.2	%
Florida		(136	)		(130	)		(586	)		(6	)	-4.6	%		450		76.8	%
Mississippi (2)		(391	)		907			4,677			(1,298	)	n/m			(5,068	)	n/m
Tennessee (3)		483			44			(96	)		439		n/m			579		n/m
Texas		(73	)		(7	)		(56	)		(66	)	n/m			(17	)	-30.4	%
Total net charge-offs (recoveries)	$	212		$	1,092		$	4,137		$	(880	)	-80.6	%	$	(3,925	)	-94.9	%

(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 Heritage acquisition and the Reliance merger, which were transferred from acquired impaired loans to LHFI during the third 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
September 30, 2019
($ in thousands)
(unaudited)
	Quarter Ended															Nine Months Ended
AVERAGE BALANCES	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
Securities AFS-taxable	$	1,570,803		$	1,661,464		$	1,753,268		$	1,847,421		$	1,937,807		$	1,661,177		$	2,038,492
Securities AFS-nontaxable		25,096			31,474			40,159			38,821			41,889			32,188			49,906
Securities HTM-taxable		778,098			821,357			866,665			893,186			933,294			821,716			970,263
Securities HTM-nontaxable		26,088			27,035			28,710			29,143			29,183			27,268			30,738
Total securities		2,400,085			2,541,330			2,688,802			2,808,571			2,942,173			2,542,349			3,089,399
Loans (including loans held for sale)		9,436,287			9,260,028			9,038,204			8,933,501			8,907,588			9,246,298			8,751,665
Acquired loans		82,641			91,217			104,316			127,747			147,811			92,645			197,352
Fed funds sold and rev repos		3,662			34,057			277			843			477			12,678			673
Other earning assets		176,163			316,604			243,493			200,282			189,471			245,173			196,470
Total earning assets		12,098,838			12,243,236			12,075,092			12,070,944			12,187,520			12,139,143			12,235,559
Allowance for loan losses		(83,756	)		(81,996	)		(82,227	)		(85,842	)		(86,496	)		(82,665	)		(85,054	)
Other assets		1,447,977			1,467,462			1,447,611			1,362,831			1,366,276			1,454,350			1,364,959
Total assets	$	13,463,059		$	13,628,702		$	13,440,476		$	13,347,933		$	13,467,300		$	13,510,828		$	13,515,464
Interest-bearing demand deposits	$	3,085,758		$	3,048,876		$	2,899,467		$	2,722,841		$	2,602,658		$	3,012,049		$	2,483,014
Savings deposits		3,568,403			3,801,187			3,786,835			3,565,682			3,722,533			3,718,008			3,773,324
Time deposits		1,753,083			1,840,065			1,881,556			1,892,983			1,851,866			1,824,431			1,800,167
Total interest-bearing deposits		8,407,244			8,690,128			8,567,858			8,181,506			8,177,057			8,554,488			8,056,505
Fed funds purchased and repos		142,064			51,264			84,352			340,094			347,489			92,771			326,129
Other borrowings		78,404			81,352			90,804			90,252			187,196			83,475			394,333
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856			61,856			61,856
Total interest-bearing liabilities		8,689,568			8,884,600			8,804,870			8,673,708			8,773,598			8,792,590			8,838,823
Noninterest-bearing deposits		2,932,754			2,898,266			2,824,220			2,862,161			2,894,061			2,885,478			2,902,100
Other liabilities		206,091			240,091			221,199			216,932			202,053			222,404			190,446
Total liabilities		11,828,413			12,022,957			11,850,289			11,752,801			11,869,712			11,900,472			11,931,369
Shareholders' equity		1,634,646			1,605,745			1,590,187			1,595,132			1,597,588			1,610,356			1,584,095
Total liabilities and equity	$	13,463,059		$	13,628,702		$	13,440,476		$	13,347,933		$	13,467,300		$	13,510,828		$	13,515,464
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2019
($ in thousands)
(unaudited)
PERIOD END BALANCES	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Cash and due from banks	$	486,263		$	404,413		$	454,047		$	349,561		$	432,471
Fed funds sold and rev repos	—				75,499		—				830			1,000
Securities available for sale		1,553,705			1,643,725			1,723,445			1,811,813			1,864,633
Securities held to maturity		785,422			825,536			884,319			909,643			943,883
Loans held for sale (LHFS)		292,800			240,380			172,683			153,799			182,664
Loans held for investment (LHFI)		9,223,668			9,116,759			8,995,014			8,835,868			8,747,030
Allowance for loan losses, LHFI		(83,226	)		(80,399	)		(79,005	)		(79,290	)		(88,874	)
Net LHFI		9,140,442			9,036,360			8,916,009			8,756,578			8,658,156
Acquired loans		81,004			87,884			93,201			106,932			132,615
Allowance for loan losses, acquired loans		(1,249	)		(1,398	)		(1,297	)		(1,231	)		(1,714	)
Net acquired loans		79,755			86,486			91,904			105,701			130,901
Net LHFI and acquired loans		9,220,197			9,122,846			9,007,913			8,862,279			8,789,057
Premises and equipment, net		188,423			189,820			189,743			178,668			178,739
Mortgage servicing rights		73,016			79,283			86,842			95,596			101,374
Goodwill		379,627			379,627			379,627			379,627			379,627
Identifiable intangible assets		8,345			9,101			10,092			11,112			12,391
Other real estate		31,974			31,243			32,139			34,668			36,475
Operating lease right-of-use assets		33,180			32,762			33,861		—			—
Other assets		531,834			514,723			503,306			498,864			517,498
Total assets	$	13,584,786		$	13,548,958		$	13,478,017		$	13,286,460		$	13,439,812
Deposits:
Noninterest-bearing	$	3,064,127		$	2,909,141		$	2,867,778		$	2,937,594		$	2,786,539
Interest-bearing		8,190,056			8,657,488			8,667,037			8,426,817			8,170,371
Total deposits		11,254,183			11,566,629			11,534,815			11,364,411			10,956,910
Fed funds purchased and repos		376,712			51,800			46,867			50,471			486,865
Other borrowings		76,685			79,012			83,265			79,885			190,919
Junior subordinated debt securities		61,856			61,856			61,856			61,856			61,856
Operating lease liabilities		34,319			33,878			34,921		—			—
Other liabilities		135,669			137,233			129,265			138,384			143,658
Total liabilities		11,939,424			11,930,408			11,890,989			11,695,007			11,840,208
Common stock		13,390			13,418			13,499			13,717			14,089
Capital surplus		257,370			260,619			272,268			309,545			362,868
Retained earnings		1,395,460			1,369,329			1,342,176			1,323,870			1,302,593
Accum other comprehensive loss, net of tax		(20,858	)		(24,816	)		(40,915	)		(55,679	)		(79,946	)
Total shareholders' equity		1,645,362			1,618,550			1,587,028			1,591,453			1,599,604
Total liabilities and equity	$	13,584,786		$	13,548,958		$	13,478,017		$	13,286,460		$	13,439,812
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2019
($ in thousands except per share data)
(unaudited)
	Quarter Ended													Nine Months Ended
INCOME STATEMENTS	9/30/2019			6/30/2019		3/31/2019		12/31/2018			9/30/2018			9/30/2019		9/30/2018
Interest and fees on LHFS & LHFI-FTE	$	116,432		$	114,873	$	109,890	$	107,709		$	105,993		$	341,195	$	300,466
Interest and fees on acquired loans		2,309			2,010		1,916		3,183			4,033			6,235		13,932
Interest on securities-taxable		13,184			13,916		14,665		15,496			16,186			41,765		50,586
Interest on securities-tax exempt-FTE		485			551		646		617			656			1,682		2,213
Interest on fed funds sold and rev repos		23			214		2		4			3			239		10
Other interest income		1,044			1,820		1,603		1,158			1,050			4,467		3,038
Total interest income-FTE		133,477			133,384		128,722		128,167			127,921			395,583		370,245
Interest on deposits		20,385			21,500		19,570		17,334			14,972			61,455		36,602
Interest on fed funds pch and repos		547			81		288		1,528			1,348			916		3,260
Other interest expense		830			831		825		894			1,467			2,486		6,574
Total interest expense		21,762			22,412		20,683		19,756			17,787			64,857		46,436
Net interest income-FTE		111,715			110,972		108,039		108,411			110,134			330,726		323,809
Provision for loan losses, LHFI		3,039			2,486		1,611		2,192			8,673			7,136		15,801
Provision for loan losses, acquired loans		(140	)		106		78		(247	)		(467	)		44		(758	)
Net interest income after provision-FTE		108,816			108,380		106,350		106,466			101,928			323,546		308,766
Service charges on deposit accounts		11,065			10,379		10,265		11,123			11,075			31,709		32,579
Bank card and other fees		8,349			8,004		7,191		7,750			7,459			23,544		21,155
Mortgage banking, net		8,171			10,295		3,442		5,716			8,647			21,908		28,958
Insurance commissions		11,072			11,089		10,871		9,562			10,765			33,032		30,919
Wealth management		7,691			7,742		7,483		7,504			7,789			22,916		22,834
Other, net		1,989			2,130		2,239		1,904			1,358			6,358		4,832
Nonint inc-excl sec gains (losses), net		48,337			49,639		41,491		43,559			47,093			139,467		141,277
Security gains (losses), net		—			—		—		—			—			—		—
Total noninterest income		48,337			49,639		41,491		43,559			47,093			139,467		141,277
Salaries and employee benefits		62,495			61,949		60,954		58,736			60,847			185,398		179,297
Services and fees		18,838			18,009		16,968		17,910			16,404			53,815		48,472
Net occupancy-premises		6,831			6,403		6,454		6,741			6,910			19,688		19,962
Equipment expense		5,971			5,958		5,924		6,329			6,200			17,853		18,501
Other real estate expense, net		531			132		1,752		61			1,168			2,415		1,941
FDIC assessment expense		1,400			1,836		1,758		1,897			1,999			4,994		7,532
Other expense		10,787			11,814		12,211		12,253			11,695			34,812		35,783
Total noninterest expense		106,853			106,101		106,021		103,927			105,223			318,975		311,488
Income before income taxes and tax eq adj		50,300			51,918		41,820		46,098			43,798			144,038		138,555
Tax equivalent adjustment		3,249			3,248		3,231		3,231			3,151			9,728		9,569
Income before income taxes		47,051			48,670		38,589		42,867			40,647			134,310		128,986
Income taxes		6,016			6,530		5,250		6,179			4,394			17,796		16,090
Net income	$	41,035		$	42,140	$	33,339	$	36,688		$	36,253		$	116,514	$	112,896
Per share data
Earnings per share - basic	$	0.64		$	0.65	$	0.51	$	0.55		$	0.54		$	1.80	$	1.67
Earnings per share - diluted	$	0.64		$	0.65	$	0.51	$	0.55		$	0.54		$	1.80	$	1.67
Dividends per share	$	0.23		$	0.23	$	0.23	$	0.23		$	0.23		$	0.69	$	0.69
Weighted average shares outstanding
Basic		64,358,540			64,677,889		65,239,470		66,839,504			67,621,345			64,755,406		67,728,871
Diluted		64,514,605			64,815,029		65,378,500		67,028,978			67,796,346			64,889,916		67,875,925
Period end shares outstanding		64,262,779			64,398,846		64,789,943		65,834,395			67,621,369			64,262,779		67,621,369
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2019
($ in thousands)
(unaudited)
	Quarter Ended
NONPERFORMING ASSETS (1)	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Nonaccrual loans
Alabama	$	2,936		$	2,327		$	2,971		$	3,361		$	3,953
Florida		311			330			408			1,175			1,180
Mississippi (2)		43,895			39,373			41,145			44,331			41,351
Tennessee (3)		10,193			8,455			8,806			8,696			13,195
Texas		1,695			2,403			3,093			4,061			8,157
Total nonaccrual loans		59,030			52,888			56,423			61,624			67,836
Other real estate
Alabama		6,501			6,451			6,878			6,873			7,526
Florida		6,983			7,826			8,120			8,771			8,931
Mississippi (2)		17,646			15,511			15,421			17,255			18,191
Tennessee (3)		844			815			994			1,025			1,083
Texas	—				640			726			744			744
Total other real estate		31,974			31,243			32,139			34,668			36,475
Total nonperforming assets	$	91,004		$	84,131		$	88,562		$	96,292		$	104,311
LOANS PAST DUE OVER 90 DAYS (1)
LHFI	$	878		$	1,245		$	670		$	856		$	726
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)	$	36,445		$	38,355		$	40,793		$	37,384		$	34,115
	Quarter Ended															Nine Months Ended
ALLOWANCE FOR LOAN LOSSES (1)	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
Beginning Balance	$	80,399		$	79,005		$	79,290		$	88,874		$	83,566		$	79,290		$	76,733
Transfers (4)	—				—			—			—			772			—			1,554
Provision for loan losses		3,039			2,486			1,611			2,192			8,673			7,136			15,801
Charge-offs		(2,892	)		(2,937	)		(4,033	)		(16,509	)		(7,017	)		(9,862	)		(12,980	)
Recoveries		2,680			1,845			2,137			4,733			2,880			6,662			7,766
Net (charge-offs) recoveries		(212	)		(1,092	)		(1,896	)		(11,776	)		(4,137	)		(3,200	)		(5,214	)
Ending Balance	$	83,226		$	80,399		$	79,005		$	79,290		$	88,874		$	83,226		$	88,874
PROVISION FOR LOAN LOSSES (1)
Alabama	$	561		$	1,187		$	791		$	(346	)	$	593		$	2,539		$	1,645
Florida		(154	)		48			(595	)		(160	)		(431	)		(701	)		(2,105	)
Mississippi (2)		1,528			1,970			119			(3,594	)		(1,630	)		3,617			3,802
Tennessee (3)		2,175			514			(234	)		3,039			8,100			2,455			7,914
Texas		(1,071	)		(1,233	)		1,530			3,253			2,041			(774	)		4,545
Total provision for loan losses	$	3,039		$	2,486		$	1,611		$	2,192		$	8,673		$	7,136		$	15,801
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama	$	329		$	278		$	15		$	203		$	198		$	622		$	394
Florida		(136	)		(130	)		(227	)		(238	)		(586	)		(493	)		(1,668	)
Mississippi (2)		(391	)		907			2,130			(1,873	)		4,677			2,646			6,649
Tennessee (3)		483			44			50			7,875			(96	)		577			83
Texas		(73	)		(7	)		(72	)		5,809			(56	)		(152	)		(244	)
Total net charge-offs (recoveries)	$	212		$	1,092		$	1,896		$	11,776		$	4,137		$	3,200		$	5,214

(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 merger, which were transferred from acquired impaired loans to LHFI during the second quarter of 2018, and the remaining loans acquired in the Heritage acquisition and the Reliance merger, which were transferred from acquired impaired loans to LHFI during the third quarter of 2018.
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
September 30, 2019
(unaudited)
		Quarter Ended															Nine Months Ended
	FINANCIAL RATIOS AND OTHER DATA	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019		9/30/2018
	Return on equity		9.96	%		10.53	%		8.50	%		9.12	%		9.00	%	9.67	%	9.53	%
	Return on average tangible equity		13.31	%		14.14	%		11.55	%		12.41	%		12.26	%	13.01	%	13.02	%
	Return on assets		1.21	%		1.24	%		1.01	%		1.09	%		1.07	%	1.15	%	1.12	%
	Interest margin - Yield - FTE		4.38	%		4.37	%		4.32	%		4.21	%		4.16	%	4.36	%	4.05	%
	Interest margin - Cost		0.71	%		0.73	%		0.69	%		0.65	%		0.58	%	0.71	%	0.51	%
	Net interest margin - FTE		3.66	%		3.64	%		3.63	%		3.56	%		3.59	%	3.64	%	3.54	%
	Efficiency ratio (1)		64.98	%		64.55	%		68.08	%		66.58	%		64.46	%	65.82	%	64.78	%
	Full-time equivalent employees		2,835			2,819			2,839			2,856			2,889
	CREDIT QUALITY RATIOS (2)
	Net charge-offs/average loans		0.01	%		0.05	%		0.09	%		0.52	%		0.18	%	0.05	%	0.08	%
	Provision for loan losses/average loans		0.13	%		0.11	%		0.07	%		0.10	%		0.39	%	0.10	%	0.24	%
	Nonperforming loans/total loans (incl LHFS)		0.62	%		0.57	%		0.62	%		0.69	%		0.76	%
	Nonperforming assets/total loans (incl LHFS)		0.96	%		0.90	%		0.97	%		1.07	%		1.17	%
	Nonperforming assets/total loans (incl LHFS) +ORE		0.95	%		0.90	%		0.96	%		1.07	%		1.16	%
	ALL/total loans (excl LHFS)		0.90	%		0.88	%		0.88	%		0.90	%		1.02	%
	ALL-commercial/total commercial loans		0.98	%		0.96	%		0.96	%		0.99	%		1.13	%
	ALL-consumer/total consumer and home mortgage loans		0.61	%		0.60	%		0.57	%		0.57	%		0.63	%
	ALL/nonperforming loans		140.99	%		152.02	%		140.02	%		128.67	%		131.01	%
	ALL/nonperforming loans (excl specifically reviewed impaired loans)		357.15	%		383.19	%		342.97	%		350.77	%		339.79	%
	CAPITAL RATIOS
	Total equity/total assets		12.11	%		11.95	%		11.77	%		11.98	%		11.90	%
	Tangible equity/tangible assets		9.53	%		9.34	%		9.15	%		9.31	%		9.26	%
	Tangible equity/risk-weighted assets		11.50	%		11.39	%		11.35	%		11.11	%		11.31	%
	Tier 1 leverage ratio		10.34	%		10.03	%		10.05	%		10.26	%		10.41	%
	Common equity tier 1 capital ratio		11.83	%		11.76	%		11.88	%		11.77	%		12.20	%
	Tier 1 risk-based capital ratio		12.38	%		12.31	%		12.45	%		12.33	%		12.76	%
	Total risk-based capital ratio		13.15	%		13.07	%		13.21	%		13.07	%		13.61	%
	STOCK PERFORMANCE
	Market value-Close	$	34.11		$	33.25		$	33.63		$	28.43		$	33.65
	Book value	$	25.60		$	25.13		$	24.49		$	24.17		$	23.66
	Tangible book value	$	19.57		$	19.10		$	18.48		$	18.24		$	17.86

(1)	The efficiency ratio is noninterest expense (excluding amortization of purchased intangibles and other real estate expense, net) to total net interest income (FTE) and noninterest income (excluding security gains (losses), net and amortization of partnership tax credits). Any significant non-routine income and expense items are adjusted accordingly.
(2)	Excludes acquired loans.
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2019

($ in thousands)

(unaudited)

Note 1 – Leases

ASU 2016-02, “Leases (Topic 842)” became effective for Trustmark on January 1, 2019. As a result, during the first quarter of 2019, Trustmark recorded operating lease right-of-use assets and operating lease liabilities of $33.9 million and $34.9 million, respectively, in its consolidated balance sheet. In addition, Trustmark recorded finance lease right-of-use assets, net of accumulated depreciation of $11.2 million in premises and equipment, net and finance lease liabilities of $11.2 million in other borrowings. The effect on Trustmark’s consolidated income statement is considered immaterial.

Note 2 - Securities Available for Sale and Held to Maturity

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

	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations	$	24,697	$	26,646	$	28,008	$	30,335	$	32,371
Obligations of states and political subdivisions		35,001		38,698		50,954		50,676		57,264
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		63,391		65,716		66,176		67,494		65,847
Issued by FNMA and FHLMC		589,962		624,364		645,958		666,684		684,474
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		705,601		751,371		784,566		811,601		840,073
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		135,053		136,930		147,783		185,023		184,604
Total securities available for sale	$	1,553,705	$	1,643,725	$	1,723,445	$	1,811,813	$	1,864,633
SECURITIES HELD TO MATURITY
U.S. Government agency obligations	$	3,770	$	3,758	$	3,747	$	3,736	$	3,725
Obligations of states and political subdivisions		31,806		32,860		35,352		35,783		42,623
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		10,994		11,184		11,710		12,090		12,316
Issued by FNMA and FHLMC		102,048		106,755		111,962		115,133		119,040
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		510,770		536,166		559,690		578,827		600,635
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA		126,034		134,813		161,858		164,074		165,544
Total securities held to maturity	$	785,422	$	825,536	$	884,319	$	909,643	$	943,883

At September 30, 2019, 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 $12.9 million ($9.6 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 97.1% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2019

($ in thousands)

(unaudited)

Note 3 – Loan Composition

LHFI BY TYPE (excluding acquired loans)	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Loans secured by real estate:
Construction, land development and other land loans	$	1,135,999		$	1,111,297		$	1,209,761		$	1,056,601		$	1,031,491
Secured by 1-4 family residential properties		1,820,455			1,818,126			1,810,872			1,825,492			1,801,029
Secured by nonfarm, nonresidential properties		2,442,308			2,326,312			2,241,072			2,220,914			2,294,289
Other real estate secured		668,667			635,839			528,032			543,820			453,687
Commercial and industrial loans		1,491,367			1,533,318			1,558,057			1,538,715			1,565,922
Consumer loans		176,894			176,133			176,619			182,448			182,709
State and other political subdivision loans		978,456			982,187			982,626			973,818			929,178
Other loans		509,522			533,547			487,975			494,060			488,725
LHFI		9,223,668			9,116,759			8,995,014			8,835,868			8,747,030
Allowance for loan losses		(83,226	)		(80,399	)		(79,005	)		(79,290	)		(88,874	)
Net LHFI	$	9,140,442		$	9,036,360		$	8,916,009		$	8,756,578		$	8,658,156

ACQUIRED LOANS BY TYPE	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Loans secured by real estate:
Construction, land development and other land loans	$	5,417		$	5,705		$	5,728		$	5,878		$	6,657
Secured by 1-4 family residential properties		18,437			19,967			21,441			22,556			25,274
Secured by nonfarm, nonresidential properties		40,930			43,444			46,492			47,979			66,865
Other real estate secured		6,887			7,416			8,026			8,253			8,507
Commercial and industrial loans		4,925			6,193			6,359			15,267			16,610
Consumer loans		593			852			1,033			1,356			1,514
Other loans		3,815			4,307			4,122			5,643			7,188
Acquired loans		81,004			87,884			93,201			106,932			132,615
Allowance for loan losses, acquired loans		(1,249	)		(1,398	)		(1,297	)		(1,231	)		(1,714	)
Net acquired loans	$	79,755		$	86,486		$	91,904		$	105,701		$	130,901

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2019

($ in thousands)

(unaudited)

Note 3 – Loan Composition (continued)

	September 30, 2019
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	$	1,135,999	$	392,477	$	66,158	$	333,988	$	26,091	$	317,285
Secured by 1-4 family residential properties		1,820,455		121,831		38,897		1,562,384		82,598		14,745
Secured by nonfarm, nonresidential properties		2,442,308		659,792		240,514		913,696		154,075		474,231
Other real estate secured		668,667		190,140		28,558		265,986		10,081		173,902
Commercial and industrial loans		1,491,367		213,605		22,804		768,433		309,075		177,450
Consumer loans		176,894		24,232		7,220		124,288		18,577		2,577
State and other political subdivision loans		978,456		106,533		40,628		608,661		27,691		194,943
Other loans		509,522		78,614		17,333		311,756		59,367		42,452
Loans	$	9,223,668	$	1,787,224	$	462,112	$	4,889,192	$	687,555	$	1,397,585
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots	$	63,792	$	17,389	$	13,804	$	23,876	$	1,955	$	6,768
Development		65,661		10,008		7,148		27,030		4,666		16,809
Unimproved land		104,624		21,497		15,442		34,692		12,880		20,113
1-4 family construction		244,493		110,665		18,765		83,839		2,729		28,495
Other construction		657,429		232,918		10,999		164,551		3,861		245,100
Construction, land development and other land loans	$	1,135,999	$	392,477	$	66,158	$	333,988	$	26,091	$	317,285
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Non-owner occupied:
Retail	$	403,515	$	172,009	$	47,835	$	97,741	$	23,734	$	62,196
Office		238,781		60,140		17,465		61,779		7,839		91,558
Hotel/motel		306,027		110,834		90,205		53,726		40,188		11,074
Mini-storage		103,819		11,587		3,225		41,274		569		47,164
Industrial		181,466		88,938		6,290		27,012		2,254		56,972
Health care		52,598		11,199		3,267		34,321		—		3,811
Convenience stores		22,339		3,189		—		8,481		657		10,012
Other		54,467		4,314		6,679		10,125		5,965		27,384
Total non-owner occupied loans		1,363,012		462,210		174,966		334,459		81,206		310,171
Owner-occupied:
Office		143,386		35,961		26,856		50,830		5,336		24,403
Churches		102,277		22,837		6,454		43,770		14,321		14,895
Industrial warehouses		145,760		11,818		3,420		65,102		12,483		52,937
Health care		124,138		18,622		7,453		82,350		2,568		13,145
Convenience stores		106,546		13,072		7,159		63,830		908		21,577
Retail		70,423		16,398		7,422		25,770		4,379		16,454
Restaurants		54,942		3,897		1,339		31,144		16,698		1,864
Auto dealerships		29,944		7,657		305		13,512		8,470		—
Nursing homes/senior living		216,863		62,871		—		148,061		5,931		—
Other		85,017		4,449		5,140		54,868		1,775		18,785
Total owner-occupied loans		1,079,296		197,582		65,548		579,237		72,869		164,060
Loans secured by nonfarm, nonresidential properties	$	2,442,308	$	659,792	$	240,514	$	913,696	$	154,075	$	474,231
(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2019

($ in thousands)

(unaudited)

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

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

	Quarter Ended															Nine Months Ended
	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
Securities – taxable		2.23	%		2.25	%		2.27	%		2.24	%		2.24	%		2.25	%		2.25	%
Securities – nontaxable		3.76	%		3.78	%		3.80	%		3.60	%		3.66	%		3.78	%		3.67	%
Securities – total		2.26	%		2.28	%		2.31	%		2.28	%		2.27	%		2.28	%		2.28	%
Loans - LHFI & LHFS		4.90	%		4.98	%		4.93	%		4.78	%		4.72	%		4.93	%		4.59	%
Acquired loans		11.08	%		8.84	%		7.45	%		9.89	%		10.82	%		9.00	%		9.44	%
Loans - total		4.95	%		5.01	%		4.96	%		4.86	%		4.82	%		4.97	%		4.70	%
FF sold & rev repo		2.49	%		2.52	%		2.93	%		1.88	%		2.50	%		2.52	%		1.99	%
Other earning assets		2.35	%		2.31	%		2.67	%		2.29	%		2.20	%		2.44	%		2.07	%
Total earning assets		4.38	%		4.37	%		4.32	%		4.21	%		4.16	%		4.36	%		4.05	%
Interest-bearing deposits		0.96	%		0.99	%		0.93	%		0.84	%		0.73	%		0.96	%		0.61	%
FF pch & repo		1.53	%		0.63	%		1.38	%		1.78	%		1.54	%		1.32	%		1.34	%
Other borrowings		2.35	%		2.33	%		2.19	%		2.33	%		2.34	%		2.29	%		1.93	%
Total interest-bearing liabilities		0.99	%		1.01	%		0.95	%		0.90	%		0.80	%		0.99	%		0.70	%
Net interest margin		3.66	%		3.64	%		3.63	%		3.56	%		3.59	%		3.64	%		3.54	%
Net interest margin excluding acquired loans		3.61	%		3.60	%		3.60	%		3.50	%		3.50	%		3.60	%		3.44	%

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

During the third quarter of 2019, the yield on acquired loans totaled 11.08% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 5.09% of the annualized total acquired loan yield. During the second quarter of 2019, the yield on acquired loans totaled 8.84% and included $583 thousand in recoveries from the settlement of debt, which represented approximately 2.56% of the annualized total acquired loan yield.

Excluding acquired loans, the net interest margin increased to 3.61% for the third quarter of 2019 when compared to the second quarter of 2019, as a decline in the yield on the loans held for investment and held for sale portfolio was offset by runoff of maturing investment securities, decline in other earning assets, favorable funding mix, and lower costs of interest-bearing deposits.

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net negative ineffectiveness of $3.7 million primarily due to market volatility and lower rates during the third quarter of 2019.

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

	Quarter Ended															Nine Months Ended
	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
Mortgage servicing income, net	$	5,688		$	5,734		$	5,607		$	5,730		$	5,428		$	17,029		$	16,518
Change in fair value-MSR from runoff		(3,569	)		(2,918	)		(2,398	)		(2,752	)		(3,181	)		(8,885	)		(9,022	)
Gain on sales of loans, net		8,458			5,522			3,576			5,206			6,411			17,556			16,410
Other, net		1,341			2,010			1,405			(1,393	)		(83	)		4,756			1,577
Mortgage banking income before hedge ineffectiveness		11,918			10,348			8,190			6,791			8,575			30,456			25,483
Change in fair value-MSR from market changes		(8,054	)		(8,209	)		(8,863	)		(6,537	)		2,615			(25,126	)		13,879
Change in fair value of derivatives		4,307			8,156			4,115			5,462			(2,543	)		16,578			(10,404	)
Net positive (negative) hedge ineffectiveness		(3,747	)		(53	)		(4,748	)		(1,075	)		72			(8,548	)		3,475
Mortgage banking, net	$	8,171		$	10,295		$	3,442		$	5,716		$	8,647		$	21,908		$	28,958

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2019

($ in thousands)

(unaudited)

Note 6 – Other Noninterest Income and Expense

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

	Quarter Ended															Nine Months Ended
	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
Partnership amortization for tax credit purposes	$	(1,994	)	$	(2,010	)	$	(2,010	)	$	(2,101	)	$	(2,202	)	$	(6,014	)	$	(6,606	)
Increase in life insurance cash surrender value		1,814			1,803			1,783			1,808			1,805			5,400			5,313
Other miscellaneous income		2,169			2,337			2,466			2,197			1,755			6,972			6,125
Total other, net	$	1,989		$	2,130		$	2,239		$	1,904		$	1,358		$	6,358		$	4,832

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										Nine Months Ended
	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018		9/30/2019		9/30/2018
Loan expense	$	2,886	$	3,003	$	2,697	$	2,425	$	2,824	$	8,586	$	8,661
Amortization of intangibles		1,021		992		1,101		1,279		1,286		3,114		3,969
Other miscellaneous expense		6,880		7,819		8,413		8,549		7,585		23,112		23,153
Total other expense	$	10,787	$	11,814	$	12,211	$	12,253	$	11,695	$	34,812	$	35,783

Note 7 – Non-GAAP Financial Measures

In addition to capital ratios defined by U.S. generally accepted accounting principles (GAAP) and banking regulators, Trustmark utilizes various tangible common equity measures when evaluating capital utilization and adequacy. Tangible common equity, as defined by Trustmark, represents common equity less goodwill and identifiable intangible assets.

Trustmark believes these measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of Trustmark’s capitalization to other organizations. These ratios differ from capital measures defined by banking regulators principally in that the numerator excludes shareholders’ equity associated with preferred securities, the nature and extent of which varies across organizations. In Management’s experience, many stock analysts use tangible common equity measures in conjunction with more traditional bank capital ratios to compare capital adequacy of banking organizations with significant amounts of goodwill or other tangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions.

These calculations are intended to complement the capital ratios defined by GAAP and banking regulators. Because GAAP does not include these capital ratio measures, Trustmark believes there are no comparable GAAP financial measures to these tangible common equity ratios. Despite the importance of these measures to Trustmark, there are no standardized definitions for them and, as a result, Trustmark’s calculations may not be comparable with other organizations. Also there may be limits in the usefulness of these measures to investors. As a result, Trustmark encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure. The following table reconciles Trustmark’s calculation of these measures to amounts reported under GAAP.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

September 30, 2019

($ in thousands)

(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

		Quarter Ended															Nine Months Ended
		9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity		$	1,634,646		$	1,605,745		$	1,590,187		$	1,595,132		$	1,597,588		$	1,610,356		$	1,584,095
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(379,627	)		(379,627	)		(379,627	)		(379,627	)
Identifiable intangible assets			(8,706	)		(9,631	)		(10,666	)		(11,811	)		(13,083	)		(9,660	)		(14,405	)
Total average tangible equity		$	1,246,313		$	1,216,487		$	1,199,894		$	1,203,694		$	1,204,878		$	1,221,069		$	1,190,063
PERIOD END BALANCES
Total shareholders' equity		$	1,645,362		$	1,618,550		$	1,587,028		$	1,591,453		$	1,599,604
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(379,627	)		(379,627	)
Identifiable intangible assets			(8,345	)		(9,101	)		(10,092	)		(11,112	)		(12,391	)
Total tangible equity	(a)	$	1,257,390		$	1,229,822		$	1,197,309		$	1,200,714		$	1,207,586
TANGIBLE ASSETS
Total assets		$	13,584,786		$	13,548,958		$	13,478,017		$	13,286,460		$	13,439,812
Less: Goodwill			(379,627	)		(379,627	)		(379,627	)		(379,627	)		(379,627	)
Identifiable intangible assets			(8,345	)		(9,101	)		(10,092	)		(11,112	)		(12,391	)
Total tangible assets	(b)	$	13,196,814		$	13,160,230		$	13,088,298		$	12,895,721		$	13,047,794
Risk-weighted assets	(c)	$	10,935,018		$	10,796,903		$	10,548,472		$	10,803,313		$	10,681,621
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income		$	41,035		$	42,140		$	33,339		$	36,688		$	36,253		$	116,514		$	112,896
Plus: Intangible amortization net of tax			766			744			826			959			965			2,336			2,979
Net income adjusted for intangible amortization		$	41,801		$	42,884		$	34,165		$	37,647		$	37,218		$	118,850		$	115,875
Period end common shares outstanding	(d)		64,262,779			64,398,846			64,789,943			65,834,395			67,621,369
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)			13.31	%		14.14	%		11.55	%		12.41	%		12.26	%		13.01	%		13.02	%
Tangible equity/tangible assets	(a)/(b)		9.53	%		9.34	%		9.15	%		9.31	%		9.26	%
Tangible equity/risk-weighted assets	(a)/(c)		11.50	%		11.39	%		11.35	%		11.11	%		11.31	%
Tangible book value	(a)/(d)*1,000	$	19.57		$	19.10		$	18.48		$	18.24		$	17.86
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity		$	1,645,362		$	1,618,550		$	1,587,028		$	1,591,453		$	1,599,604
AOCI-related adjustments			20,858			24,816			40,915			55,679			79,946
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)			(365,741	)		(365,745	)		(365,748	)		(365,779	)		(365,823	)
Other adjustments and deductions for CET1 (2)			(6,671	)		(8,268	)		(9,099	)		(9,815	)		(10,868	)
CET1 capital	(e)		1,293,808			1,269,353			1,253,096			1,271,538			1,302,859
Additional tier 1 capital instruments plus related surplus			60,000			60,000			60,000			60,000			60,000
Less: additional tier 1 capital deductions			—			—			—			—			—
Additional tier 1 capital			60,000			60,000			60,000			60,000			60,000
Tier 1 capital		$	1,353,808		$	1,329,353		$	1,313,096		$	1,331,538		$	1,362,859
Common equity tier 1 capital ratio	(e)/(c)		11.83	%		11.76	%		11.88	%		11.77	%		12.20	%

(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.