Trustmark Corporation Announces Fourth Quarter and Fiscal Year 2018 Financial Results

Trustmark Corporation (NASDAQ:TRMK) reported net income of $36.7 million in the fourth quarter of 2018, which represented diluted earnings per share of $0.55. Diluted earnings per share in the fourth quarter of 2018 increased 1.9% from the prior quarter and 14.6% when compared to the fourth quarter of 2017 excluding non-routine items.

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For the full year, Trustmark’s net income totaled $149.6 million, which represented diluted earnings per share of $2.21. This compares to reported diluted earnings per share in 2017 of $1.56, or $1.92 excluding non-routine items. Diluted earnings per share in 2018 increased 41.7% from reported EPS in 2017 and 15.1% when compared to earnings per share excluding non-routine items. Trustmark’s net income in 2018 produced a return on average tangible equity of 12.86% and a return on average assets of 1.11%.

Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share payable March 15, 2019, to shareholders of record on March 1, 2019.

2018 Highlights

• Loans held for investment increased $265.9 million, or 3.1%, during the year
• Credit quality remained solid; nonperforming assets declined 13.1%
• Deposits increased $786.9 million, or 7.4%
• Revenue excluding acquired loans totaled $587.1 million, an increase of 3.4%
• Core noninterest expense totaled $408.2 million, up 2.2%

Gerard R. Host, President and CEO, stated, “During 2018, we continued to focus on strategic initiatives of profitably growing each of our financial services businesses, optimizing our balance sheet, deploying capital through share repurchases and maintaining disciplined expense management. As we look forward in 2019, we will continue to provide the financial services and advice our customers have come to expect. We remain committed to managing the franchise for the long term, supporting investments to promote profitable revenue growth, realigning delivery channels to support changing customer preferences, as well as reengineering and efficiency opportunities that enhance long-term shareholder value.”

Balance Sheet Management

• Continued balance sheet optimization program as maturing investment securities were replaced in part by organic loan growth
• Repurchased $54.5 million of common stock in fourth quarter

Loans held for investment totaled $8.8 billion at December 31, 2018, an increase of 1.0% from the prior quarter and 3.1% from the same period one year earlier. During the quarter, growth in other real estate secured loans ($90.1 million), state and political subdivision loans ($44.6 million), construction, land development and other land loans ($25.1 million) and residential mortgage loans ($24.5 million) was offset in part by declines in commercial and industrial loans ($27.2 million) and loans secured by nonfarm, nonresidential properties ($73.4 million).

Acquired loans totaled $106.9 million at December 31, 2018, down $25.7 million from the prior quarter. Collectively, loans held for investment and acquired loans totaled $8.9 billion at December 31, 2018, up 0.7% from the prior quarter and 1.3% from the prior year.

Deposits totaled $11.4 billion at December 31, 2018, an increase of $407.5 million, or 3.7%, from the previous quarter and $786.9 million, or 7.4%, year-over-year. Both the linked quarter and year-over-year increase reflects growth in personal and public fund balances.

Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. During the fourth quarter, Trustmark repurchased approximately $54.5 million, or 1.8 million shares of its common stock. At December 31, 2018, Trustmark had $36.9 million in remaining authority under its existing stock repurchase program, which expires March 31, 2019. The repurchase program, which is subject to market conditions and management discretion, will continue to be implemented through open market repurchases or privately negotiated transactions. At December 31, 2018, Trustmark’s tangible equity to tangible assets ratio was 9.31%, while its total risk-based capital ratio was 13.07%. Tangible book value per share was $18.24 at December 31, 2018, up 5.1% year-over-year.

Credit Quality

• Allowance for loan losses represented 350.77% of nonperforming loans, excluding specifically reviewed impaired loans
• Nonperforming assets declined $8.0 million in the fourth quarter and $14.5 million year-over-year

Nonperforming loans totaled $61.6 million at December 31, 2018, down 9.2% from the prior quarter and 8.8% year-over-year. Other real estate totaled $34.7 million, reflecting a 5.0% linked-quarter decrease and a 19.8% year-over-year reduction. Collectively, nonperforming assets totaled $96.3 million, reflecting linked-quarter and year-over-year decreases of 7.7% and 13.1%, respectively.

Allocation of Trustmark's $79.3 million allowance for loan losses represented 0.99% of commercial loans and 0.57% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.90% at December 31, 2018. This represents a level management considers commensurate with the inherent risk in the loan portfolio. In aggregate, the allowance for both held for investment and acquired loan losses represented 0.90% of total loans held for investment and acquired loans.

Net charge-offs totaled $11.8 million in the fourth quarter resulting from resolution of two specific problem credits which were fully provisioned in prior periods.

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

Revenue Generation

• Net interest income (FTE) excluding acquired loans in 2018 totaled $415.1 million, up 3.0% from the prior year
• Noninterest income in 2018 totaled $184.8 million, representing 31.5% of total revenue excluding acquired loans

Revenue in the fourth quarter totaled $148.7 million, down 3.5% from the prior quarter, reflecting higher interest expense as well as a seasonal reduction in noninterest income. Net interest income (FTE) in the fourth quarter totaled $108.4 million, resulting in a net interest margin of 3.56%. Compared to the prior quarter, net interest income (FTE) decreased $1.7 million, as growth in total interest income was more than offset by increased total interest expense. During the fourth quarter of 2018, the yield on acquired loans totaled 9.89% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 3.52% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin (FTE) for the fourth quarter of 2018 remained stable at 3.50% when compared to the third quarter of 2018, as growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix were offset by higher costs of interest-bearing deposits. Net interest income (FTE) in 2018 totaled $432.2 million, resulting in a net interest margin (FTE) of 3.54%; excluding acquired loans, the net interest margin (FTE) was 3.46%.

Noninterest income totaled $43.6 million in the fourth quarter, down from the prior quarter primarily because of seasonally lower insurance commissions and reduced mortgage banking revenue. In the fourth quarter, bank card and other fees totaled $7.8 million, an increase of 3.9% from the prior quarter, while service charges on deposit accounts totaled $11.1 million, up 0.4% from the prior quarter. Other income, net increased $546 thousand linked quarter, primarily due to an increase in other miscellaneous income.

Insurance revenue in the fourth quarter totaled $9.6 million, reflecting a seasonal decrease of 11.2% from the prior quarter and an increase of 8.5% compared to one year earlier. Insurance revenue in 2018 totaled $40.5 million, up $2.3 million, or 6.0%, relative to the prior year. The solid performance in 2018 reflects increased business development efforts and initiatives that supported enhanced productivity.

Wealth management revenue totaled $7.5 million in the fourth quarter, a decrease of 3.7% when compared to the prior quarter and 2.8% from levels one year earlier. The decrease is primarily attributable to lower trust and investment management revenue. Wealth management revenue in 2018 totaled $30.3 million, in-line with the prior year. Trustmark remained focused on servicing clients and realigned processes to enhance productivity.

Mortgage banking revenue in the fourth quarter totaled $5.7 million, down $2.9 million from the prior quarter. The linked-quarter decrease reflects a decline in the fair value of loans held for sale, reduced secondary marketing gains, and negative mortgage servicing hedge ineffectiveness. Mortgage loan production in the fourth quarter totaled $303.7 million, a seasonal decrease of 23.7% from the prior quarter and a 10.0% decrease year-over-year, primarily due to lower refinancing activity and higher interest rates.

In 2018, mortgage banking revenue totaled $34.7 million, up 16.0% from the prior year, reflecting increased secondary marketing gains, positive mortgage servicing hedge ineffectiveness and increased mortgage servicing income. Mortgage loan production totaled $1.4 billion in 2018, up 3.4% from the prior year despite an extremely competitive third party origination environment.

Noninterest Expense

• Total noninterest expense decreased 1.2% from the prior quarter
• Effective Corporate tax rate in 2018 was 12.96%

Diligent expense management continues to be a priority for Trustmark. Core noninterest expense, which excludes other real estate expense ($61 thousand) and intangible amortization ($1.3 million), totaled $102.6 million in the fourth quarter, a decrease of $181 thousand on a comparable basis from the prior quarter and an increase of $1.8 million from the prior year.

Salaries and benefits totaled $58.7 million in the fourth quarter, down 3.5% linked quarter primarily due to a seasonal decline in insurance commissions. Services and fees increased 9.2% from the prior quarter, reflecting higher spending on outside services and fees, data processing and advertising. Other real estate expense totaled $61 thousand during the fourth quarter, representing a 94.8% decrease compared to the prior quarter. Other expense totaled $12.3 million in the fourth quarter, an increase of 4.8% from the prior quarter primarily due to increased miscellaneous fees.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Thursday, January 24, 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 Thursday, February 7, 2019, in archived format at the same web address or by calling [phone], passcode 10127330.

Trustmark Corporation is a financial services company providing banking and financial solutions through 196 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.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands)
(unaudited)
														Linked Quarter								Year over Year
QUARTERLY AVERAGE BALANCES			12/31/2018				9/30/2018				12/31/2017			$ Change				% Change				$ Change				% Change
Securities AFS-taxable		$	1,847,421			$	1,937,807			$	2,247,247			$	(90,386	)		-4.7	%			$	(399,826	)		-17.8	%
Securities AFS-nontaxable			38,821				41,889				61,691				(3,068	)		-7.3	%				(22,870	)		-37.1	%
Securities HTM-taxable			893,186				933,294				1,045,723				(40,108	)		-4.3	%				(152,537	)		-14.6	%
Securities HTM-nontaxable			29,143				29,183				32,781				(40	)		-0.1	%				(3,638	)		-11.1	%
Total securities			2,808,571				2,942,173				3,387,442				(133,602	)		-4.5	%				(578,871	)		-17.1	%
Loans (including loans held for sale)			8,933,501				8,907,588				8,686,916				25,913			0.3	%				246,585			2.8	%
Acquired loans			127,747				147,811				273,918				(20,064	)		-13.6	%				(146,171	)		-53.4	%
Fed funds sold and rev repos			843				477				1,724				366			76.7	%				(881	)		-51.1	%
Other earning assets			200,282				189,471				80,218				10,811			5.7	%				120,064			n/m
Total earning assets			12,070,944				12,187,520				12,430,218				(116,576	)		-1.0	%				(359,274	)		-2.9	%
Allowance for loan losses			(85,842	)			(86,496	)			(86,704	)			654			0.8	%				862			1.0	%
Cash and due from banks			339,605				330,949				315,586				8,656			2.6	%				24,019			7.6	%
Other assets			1,023,226				1,035,327				1,192,464				(12,101	)		-1.2	%				(169,238	)		-14.2	%
Total assets		$	13,347,933			$	13,467,300			$	13,851,564			$	(119,367	)		-0.9	%			$	(503,631	)		-3.6	%
Interest-bearing demand deposits		$	2,722,841			$	2,602,658			$	2,244,625			$	120,183			4.6	%			$	478,216			21.3	%
Savings deposits			3,565,682				3,722,533				3,291,407				(156,851	)		-4.2	%				274,275			8.3	%
Time deposits			1,892,983				1,851,866				1,756,576				41,117			2.2	%				136,407			7.8	%
Total interest-bearing deposits			8,181,506				8,177,057				7,292,608				4,449			0.1	%				888,898			12.2	%
Fed funds purchased and repos			340,094				347,489				475,850				(7,395	)		-2.1	%				(135,756	)		-28.5	%
Short-term borrowings			89,364				186,293				1,276,543				(96,929	)		-52.0	%				(1,187,179	)		-93.0	%
Long-term FHLB advances			888				903				954				(15	)		-1.7	%				(66	)		-6.9	%
Junior subordinated debt securities			61,856				61,856				61,856				—			0.0	%				—			0.0	%
Total interest-bearing liabilities			8,673,708				8,773,598				9,107,811				(99,890	)		-1.1	%				(434,103	)		-4.8	%
Noninterest-bearing deposits			2,862,161				2,894,061				2,994,292				(31,900	)		-1.1	%				(132,131	)		-4.4	%
Other liabilities			216,932				202,053				169,828				14,879			7.4	%				47,104			27.7	%
Total liabilities			11,752,801				11,869,712				12,271,931				(116,911	)		-1.0	%				(519,130	)		-4.2	%
Shareholders' equity			1,595,132				1,597,588				1,579,633				(2,456	)		-0.2	%				15,499			1.0	%
Total liabilities and equity		$	13,347,933			$	13,467,300			$	13,851,564			$	(119,367	)		-0.9	%			$	(503,631	)		-3.6	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands)
(unaudited)
														Linked Quarter								Year over Year
PERIOD END BALANCES			12/31/2018				9/30/2018				12/31/2017			$ Change				% Change				$ Change				% Change
Cash and due from banks		$	349,561			$	432,471			$	335,768			$	(82,910	)		-19.2	%			$	13,793			4.1	%
Fed funds sold and rev repos			830				1,000				615				(170	)		-17.0	%				215			35.0	%
Securities available for sale			1,811,813				1,864,633				2,238,635				(52,820	)		-2.8	%				(426,822	)		-19.1	%
Securities held to maturity			909,643				943,883				1,056,486				(34,240	)		-3.6	%				(146,843	)		-13.9	%
Loans held for sale (LHFS)			153,799				182,664				180,512				(28,865	)		-15.8	%				(26,713	)		-14.8	%
Loans held for investment (LHFI)			8,835,868				8,747,030				8,569,967				88,838			1.0	%				265,901			3.1	%
Allowance for loan losses, LHFI			(79,290	)			(88,874	)			(76,733	)			9,584			10.8	%				(2,557	)		-3.3	%
Net LHFI			8,756,578				8,658,156				8,493,234				98,422			1.1	%				263,344			3.1	%
Acquired loans			106,932				132,615				261,517				(25,683	)		-19.4	%				(154,585	)		-59.1	%
Allowance for loan losses, acquired loans			(1,231	)			(1,714	)			(4,079	)			483			28.2	%				2,848			69.8	%
Net acquired loans			105,701				130,901				257,438				(25,200	)		-19.3	%				(151,737	)		-58.9	%
Net LHFI and acquired loans			8,862,279				8,789,057				8,750,672				73,222			0.8	%				111,607			1.3	%
Premises and equipment, net			178,668				178,739				179,339				(71	)		0.0	%				(671	)		-0.4	%
Mortgage servicing rights			95,596				101,374				84,269				(5,778	)		-5.7	%				11,327			13.4	%
Goodwill			379,627				379,627				379,627				—			0.0	%				—			0.0	%
Identifiable intangible assets			11,112				12,391				16,360				(1,279	)		-10.3	%				(5,248	)		-32.1	%
Other real estate			34,668				36,475				43,228				(1,807	)		-5.0	%				(8,560	)		-19.8	%
Other assets			498,864				517,498				532,442				(18,634	)		-3.6	%				(33,578	)		-6.3	%
Total assets		$	13,286,460			$	13,439,812			$	13,797,953			$	(153,352	)		-1.1	%			$	(511,493	)		-3.7	%
Deposits:
Noninterest-bearing		$	2,937,594			$	2,786,539			$	2,978,074			$	151,055			5.4	%			$	(40,480	)		-1.4	%
Interest-bearing			8,426,817				8,170,371				7,599,438				256,446			3.1	%				827,379			10.9	%
Total deposits			11,364,411				10,956,910				10,577,512				407,501			3.7	%				786,899			7.4	%
Fed funds purchased and repos			50,471				486,865				469,827				(436,394	)		-89.6	%				(419,356	)		-89.3	%
Short-term borrowings			79,006				190,023				971,049				(111,017	)		-58.4	%				(892,043	)		-91.9	%
Long-term FHLB advances			879				896				946				(17	)		-1.9	%				(67	)		-7.1	%
Junior subordinated debt securities			61,856				61,856				61,856				—			0.0	%				—			0.0	%
Other liabilities			138,384				143,658				145,062				(5,274	)		-3.7	%				(6,678	)		-4.6	%
Total liabilities			11,695,007				11,840,208				12,226,252				(145,201	)		-1.2	%				(531,245	)		-4.3	%
Common stock			13,717				14,089				14,115				(372	)		-2.6	%				(398	)		-2.8	%
Capital surplus			309,545				362,868				369,124				(53,323	)		-14.7	%				(59,579	)		-16.1	%
Retained earnings			1,323,870				1,302,593				1,228,187				21,277			1.6	%				95,683			7.8	%
Accum other comprehensive loss, net of tax			(55,679	)			(79,946	)			(39,725	)			24,267			30.4	%				(15,954	)		40.2	%
Total shareholders' equity			1,591,453				1,599,604				1,571,701				(8,151	)		-0.5	%				19,752			1.3	%
Total liabilities and equity		$	13,286,460			$	13,439,812			$	13,797,953			$	(153,352	)		-1.1	%			$	(511,493	)		-3.7	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands except per share data)
(unaudited)
		Quarter Ended												Linked Quarter								Year over Year
INCOME STATEMENTS			12/31/2018				9/30/2018				12/31/2017			$ Change				% Change				$ Change				% Change
Interest and fees on LHFS & LHFI-FTE		$	107,709			$	105,993			$	95,816			$	1,716			1.6	%			$	11,893			12.4	%
Interest and fees on acquired loans			3,183				4,033				6,401				(850	)		-21.1	%				(3,218	)		-50.3	%
Interest on securities-taxable			15,496				16,186				18,327				(690	)		-4.3	%				(2,831	)		-15.4	%
Interest on securities-tax exempt-FTE			617				656				1,035				(39	)		-5.9	%				(418	)		-40.4	%
Interest on fed funds sold and rev repos			4				3				7				1			33.3	%				(3	)		-42.9	%
Other interest income			1,158				1,050				473				108			10.3	%				685			n/m
Total interest income-FTE			128,167				127,921				122,059				246			0.2	%				6,108			5.0	%
Interest on deposits			17,334				14,972				7,284				2,362			15.8	%				10,050			n/m
Interest on fed funds pch and repos			1,528				1,348				1,116				180			13.4	%				412			36.9	%
Other interest expense			894				1,467				4,555				(573	)		-39.1	%				(3,661	)		-80.4	%
Total interest expense			19,756				17,787				12,955				1,969			11.1	%				6,801			52.5	%
Net interest income-FTE			108,411				110,134				109,104				(1,723	)		-1.6	%				(693	)		-0.6	%
Provision for loan losses, LHFI			2,192				8,673				5,739				(6,481	)		-74.7	%				(3,547	)		-61.8	%
Provision for loan losses, acquired loans			(247	)			(467	)			(1,573	)			220			47.1	%				1,326			84.3	%
Net interest income after provision-FTE			106,466				101,928				104,938				4,538			4.5	%				1,528			1.5	%
Service charges on deposit accounts			11,123				11,075				11,193				48			0.4	%				(70	)		-0.6	%
Bank card and other fees			7,750				7,459				7,266				291			3.9	%				484			6.7	%
Mortgage banking, net			5,716				8,647				6,284				(2,931	)		-33.9	%				(568	)		-9.0	%
Insurance commissions			9,562				10,765				8,813				(1,203	)		-11.2	%				749			8.5	%
Wealth management			7,504				7,789				7,723				(285	)		-3.7	%				(219	)		-2.8	%
Other, net			1,904				1,358				2,681				546			40.2	%				(777	)		-29.0	%
Nonint inc-excl sec gains (losses), net			43,559				47,093				43,960				(3,534	)		-7.5	%				(401	)		-0.9	%
Security gains (losses), net			—				—				—				—			n/m					—			n/m
Total noninterest income			43,559				47,093				43,960				(3,534	)		-7.5	%				(401	)		-0.9	%
Salaries and employee benefits			58,736				60,847				58,820				(2,111	)		-3.5	%				(84	)		-0.1	%
Defined benefit plan termination			—				—				—				—			n/m					—			n/m
Services and fees			17,910				16,404				15,419				1,506			9.2	%				2,491			16.2	%
Net occupancy-premises			6,741				6,910				6,617				(169	)		-2.4	%				124			1.9	%
Equipment expense			6,329				6,200				5,996				129			2.1	%				333			5.6	%
Other real estate expense, net			61				1,168				666				(1,107	)		-94.8	%				(605	)		-90.8	%
FDIC assessment expense			1,897				1,999				2,868				(102	)		-5.1	%				(971	)		-33.9	%
Other expense			12,253				11,695				12,565				558			4.8	%				(312	)		-2.5	%
Total noninterest expense			103,927				105,223				102,951				(1,296	)		-1.2	%				976			0.9	%
Income before income taxes and tax eq adj			46,098				43,798				45,947				2,300			5.3	%				151			0.3	%
Tax equivalent adjustment			3,231				3,151				5,060				80			2.5	%				(1,829	)		-36.1	%
Income before income taxes			42,867				40,647				40,887				2,220			5.5	%				1,980			4.8	%
Income taxes			6,179				4,394				25,119				1,785			40.6	%				(18,940	)		-75.4	%
Net income		$	36,688			$	36,253			$	15,768			$	435			1.2	%			$	20,920			n/m
Per share data
Earnings per share - basic		$	0.55			$	0.54			$	0.23			$	0.01			1.9	%			$	0.32			n/m
Earnings per share - diluted		$	0.55			$	0.54			$	0.23			$	0.01			1.9	%			$	0.32			n/m
Dividends per share		$	0.23			$	0.23			$	0.23				—			0.0	%				—			0.0	%
Weighted average shares outstanding
Basic			66,839,504				67,621,345				67,742,792
Diluted			67,028,978				67,796,346				67,938,986
Period end shares outstanding			65,834,395				67,621,369				67,746,094
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands)
(unaudited)
			Quarter Ended												Linked Quarter								Year over Year
NONPERFORMING ASSETS (1)				12/31/2018				9/30/2018				12/31/2017			$ Change				% Change				$ Change				% Change
Nonaccrual loans
Alabama			$	3,361			$	3,953			$	3,083			$	(592	)		-15.0	%			$	278			9.0	%
Florida				1,175				1,180				3,034				(5	)		-0.4	%				(1,859	)		-61.3	%
Mississippi (2)				44,331				41,351				49,129				2,980			7.2	%				(4,798	)		-9.8	%
Tennessee (3)				8,696				13,195				4,436				(4,499	)		-34.1	%				4,260			96.0	%
Texas				4,061				8,157				7,893				(4,096	)		-50.2	%				(3,832	)		-48.5	%
Total nonaccrual loans				61,624				67,836				67,575				(6,212	)		-9.2	%				(5,951	)		-8.8	%
Other real estate
Alabama				6,873				7,526				11,714				(653	)		-8.7	%				(4,841	)		-41.3	%
Florida				8,771				8,931				13,937				(160	)		-1.8	%				(5,166	)		-37.1	%
Mississippi (2)				17,255				18,191				14,260				(936	)		-5.1	%				2,995			21.0	%
Tennessee (3)				1,025				1,083				2,535				(58	)		-5.4	%				(1,510	)		-59.6	%
Texas				744				744				782				—			0.0	%				(38	)		-4.9	%
Total other real estate				34,668				36,475				43,228				(1,807	)		-5.0	%				(8,560	)		-19.8	%
Total nonperforming assets			$	96,292			$	104,311			$	110,803			$	(8,019	)		-7.7	%			$	(14,511	)		-13.1	%
LOANS PAST DUE OVER 90 DAYS (1)
LHFI			$	856			$	726			$	2,171			$	130			17.9	%			$	(1,315	)		-60.6	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)			$	37,384			$	34,115			$	35,544			$	3,269			9.6	%			$	1,840			5.2	%
			Quarter Ended												Linked Quarter								Year over Year
ALLOWANCE FOR LOAN LOSSES (1)				12/31/2018				9/30/2018				12/31/2017			$ Change				% Change				$ Change				% Change
Beginning Balance			$	88,874			$	83,566			$	80,332			$	5,308			6.4	%			$	8,542			10.6	%
Transfers (4)				—				772				—				(772	)		-100.0	%				—			n/m
Provision for loan losses				2,192				8,673				5,739				(6,481	)		-74.7	%				(3,547	)		-61.8	%
Charge-offs				(16,509	)			(7,017	)			(12,075	)			(9,492	)		n/m					(4,434	)		-36.7	%
Recoveries				4,733				2,880				2,737				1,853			64.3	%				1,996			72.9	%
Net (charge-offs) recoveries				(11,776	)			(4,137	)			(9,338	)			(7,639	)		n/m					(2,438	)		-26.1	%
Ending Balance			$	79,290			$	88,874			$	76,733			$	(9,584	)		-10.8	%			$	2,557			3.3	%
PROVISION FOR LOAN LOSSES (1)
Alabama			$	(346	)		$	593			$	559			$	(939	)		n/m				$	(905	)		n/m
Florida				(160	)			(431	)			(1,235	)			271			62.9	%				1,075			87.0	%
Mississippi (2)				(3,594	)			(1,630	)			2,779				(1,964	)		n/m					(6,373	)		n/m
Tennessee (3)				3,039				8,100				(439	)			(5,061	)		-62.5	%				3,478			n/m
Texas				3,253				2,041				4,075				1,212			59.4	%				(822	)		-20.2	%
Total provision for loan losses			$	2,192			$	8,673			$	5,739			$	(6,481	)		-74.7	%			$	(3,547	)		-61.8	%
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama			$	203			$	198			$	196			$	5			2.5	%			$	7			3.6	%
Florida				(238	)			(586	)			(946	)			348			59.4	%				708			74.8	%
Mississippi (2)				(1,873	)			4,677				5,574				(6,550	)		n/m					(7,447	)		n/m
Tennessee (3)				7,875				(96	)			79				7,971			n/m					7,796			n/m
Texas				5,809				(56	)			4,435				5,865			n/m					1,374			31.0	%
Total net charge-offs (recoveries)			$	11,776			$	4,137			$	9,338			$	7,639			n/m				$	2,438			26.1	%

(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.
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands)
(unaudited)
		Quarter Ended																				Year Ended
AVERAGE BALANCES			12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
Securities AFS-taxable		$	1,847,421			$	1,937,807			$	2,038,759			$	2,141,144			$	2,247,247			$	1,990,332			$	2,296,070
Securities AFS-nontaxable			38,821				41,889				50,035				57,972				61,691				47,112				73,373
Securities HTM-taxable			893,186				933,294				972,571				1,005,721				1,045,723				950,836				1,091,108
Securities HTM-nontaxable			29,143				29,183				30,337				32,734				32,781				30,336				32,874
Total securities			2,808,571				2,942,173				3,091,702				3,237,571				3,387,442				3,018,616				3,493,425
Loans (including loans held for sale)			8,933,501				8,907,588				8,707,466				8,636,967				8,686,916				8,797,498				8,412,673
Acquired loans			127,747				147,811				202,140				243,152				273,918				179,808				284,898
Fed funds sold and rev repos			843				477				1,063				478				1,724				716				2,229
Other earning assets			200,282				189,471				186,224				213,985				80,218				197,431				80,468
Total earning assets			12,070,944				12,187,520				12,188,595				12,332,153				12,430,218				12,194,069				12,273,693
Allowance for loan losses			(85,842	)			(86,496	)			(86,315	)			(82,304	)			(86,704	)			(85,252	)			(84,708	)
Cash and due from banks			339,605				330,949				319,075				336,642				315,586				331,574				311,642
Other assets			1,023,226				1,035,327				1,042,156				1,030,738				1,192,464				1,032,846				1,215,019
Total assets		$	13,347,933			$	13,467,300			$	13,463,511			$	13,617,229			$	13,851,564			$	13,473,237			$	13,715,646
Interest-bearing demand deposits		$	2,722,841			$	2,602,658			$	2,439,777			$	2,404,428			$	2,244,625			$	2,543,463			$	2,114,475
Savings deposits			3,565,682				3,722,533				3,860,096				3,737,507				3,291,407				3,720,987				3,308,027
Time deposits			1,892,983				1,851,866				1,798,855				1,748,645				1,756,576				1,823,562				1,730,569
Total interest-bearing deposits			8,181,506				8,177,057				8,098,728				7,890,580				7,292,608				8,088,012				7,153,071
Fed funds purchased and repos			340,094				347,489				352,256				277,877				475,850				329,649				512,085
Short-term borrowings			89,364				186,293				248,932				751,219				1,276,543				316,775				1,138,353
Long-term FHLB advances			888				903				921				938				954				912				97,561
Junior subordinated debt securities			61,856				61,856				61,856				61,856				61,856				61,856				61,856
Total interest-bearing liabilities			8,673,708				8,773,598				8,762,693				8,982,470				9,107,811				8,797,204				8,962,926
Noninterest-bearing deposits			2,862,161				2,894,061				2,930,726				2,881,374				2,994,292				2,892,033				3,028,982
Other liabilities			216,932				202,053				188,186				180,871				169,828				197,123				162,854
Total liabilities			11,752,801				11,869,712				11,881,605				12,044,715				12,271,931				11,886,360				12,154,762
Shareholders' equity			1,595,132				1,597,588				1,581,906				1,572,514				1,579,633				1,586,877				1,560,884
Total liabilities and equity		$	13,347,933			$	13,467,300			$	13,463,511			$	13,617,229			$	13,851,564			$	13,473,237			$	13,715,646
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands)
(unaudited)
PERIOD END BALANCES			12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017
Cash and due from banks		$	349,561			$	432,471			$	387,119			$	315,276			$	335,768
Fed funds sold and rev repos			830				1,000				—				112				615
Securities available for sale			1,811,813				1,864,633				1,974,675				2,097,497				2,238,635
Securities held to maturity			909,643				943,883				985,845				1,023,975				1,056,486
Loans held for sale (LHFS)			153,799				182,664				196,217				163,882				180,512
Loans held for investment (LHFI)			8,835,868				8,747,030				8,678,983				8,513,985				8,569,967
Allowance for loan losses, LHFI			(79,290	)			(88,874	)			(83,566	)			(81,235	)			(76,733	)
Net LHFI			8,756,578				8,658,156				8,595,417				8,432,750				8,493,234
Acquired loans			106,932				132,615				173,107				215,476				261,517
Allowance for loan losses, acquired loans			(1,231	)			(1,714	)			(3,046	)			(4,294	)			(4,079	)
Net acquired loans			105,701				130,901				170,061				211,182				257,438
Net LHFI and acquired loans			8,862,279				8,789,057				8,765,478				8,643,932				8,750,672
Premises and equipment, net			178,668				178,739				177,686				178,584				179,339
Mortgage servicing rights			95,596				101,374				97,411				94,850				84,269
Goodwill			379,627				379,627				379,627				379,627				379,627
Identifiable intangible assets			11,112				12,391				13,677				14,963				16,360
Other real estate			34,668				36,475				39,667				39,554				43,228
Other assets			498,864				517,498				507,863				511,187				532,442
Total assets		$	13,286,460			$	13,439,812			$	13,525,265			$	13,463,439			$	13,797,953
Deposits:
Noninterest-bearing		$	2,937,594			$	2,786,539			$	2,958,354			$	3,004,442			$	2,978,074
Interest-bearing			8,426,817				8,170,371				8,114,081				7,971,359				7,599,438
Total deposits			11,364,411				10,956,910				11,072,435				10,975,801				10,577,512
Fed funds purchased and repos			50,471				486,865				477,891				274,833				469,827
Short-term borrowings			79,006				190,023				186,647				442,689				971,049
Long-term FHLB advances			879				896				913				929				946
Junior subordinated debt securities			61,856				61,856				61,856				61,856				61,856
Other liabilities			138,384				143,658				141,451				137,194				145,062
Total liabilities			11,695,007				11,840,208				11,941,193				11,893,302				12,226,252
Common stock			13,717				14,089				14,089				14,121				14,115
Capital surplus			309,545				362,868				361,715				366,021				369,124
Retained earnings			1,323,870				1,302,593				1,282,007				1,257,881				1,228,187
Accum other comprehensive loss, net of tax			(55,679	)			(79,946	)			(73,739	)			(67,886	)			(39,725	)
Total shareholders' equity			1,591,453				1,599,604				1,584,072				1,570,137				1,571,701
Total liabilities and equity		$	13,286,460			$	13,439,812			$	13,525,265			$	13,463,439			$	13,797,953
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands except per share data)
(unaudited)
		Quarter Ended																			Year Ended
INCOME STATEMENTS			12/31/2018				9/30/2018				6/30/2018				3/31/2018			12/31/2017				12/31/2018				12/31/2017
Interest and fees on LHFS & LHFI-FTE		$	107,709			$	105,993			$	99,761			$	94,712		$	95,816			$	408,175			$	362,795
Interest and fees on acquired loans			3,183				4,033				5,022				4,877			6,401				17,115				24,478
Interest on securities-taxable			15,496				16,186				16,894				17,506			18,327				66,082				76,192
Interest on securities-tax exempt-FTE			617				656				733				824			1,035				2,830				4,617
Interest on fed funds sold and rev repos			4				3				5				2			7				14				33
Other interest income			1,158				1,050				1,054				934			473				4,196				1,466
Total interest income-FTE			128,167				127,921				123,469				118,855			122,059				498,412				469,581
Interest on deposits			17,334				14,972				12,139				9,491			7,284				53,936				22,717
Interest on fed funds pch and repos			1,528				1,348				1,250				662			1,116				4,788				4,152
Other interest expense			894				1,467				1,713				3,394			4,555				7,468				15,376
Total interest expense			19,756				17,787				15,102				13,547			12,955				66,192				42,245
Net interest income-FTE			108,411				110,134				108,367				105,308			109,104				432,220				427,336
Provision for loan losses, LHFI			2,192				8,673				3,167				3,961			5,739				17,993				15,094
Provision for loan losses, acquired loans			(247	)			(467	)			(441	)			150			(1,573	)			(1,005	)			(7,395	)
Net interest income after provision-FTE			106,466				101,928				105,641				101,197			104,938				415,232				419,637
Service charges on deposit accounts			11,123				11,075				10,647				10,857			11,193				43,702				44,003
Bank card and other fees			7,750				7,459				7,070				6,626			7,266				28,905				28,286
Mortgage banking, net			5,716				8,647				9,046				11,265			6,284				34,674				29,902
Insurance commissions			9,562				10,765				10,735				9,419			8,813				40,481				38,168
Wealth management			7,504				7,789				7,478				7,567			7,723				30,338				30,340
Other, net			1,904				1,358				2,415				1,059			2,681				6,736				13,949
Nonint inc-excl sec gains (losses), net			43,559				47,093				47,391				46,793			43,960				184,836				184,648
Security gains (losses), net			—				—				—				—			—				—				15
Total noninterest income			43,559				47,093				47,391				46,793			43,960				184,836				184,663
Salaries and employee benefits			58,736				60,847				59,975				58,475			58,820				238,033				229,265
Defined benefit plan termination			—				—				—				—			—				—				17,644
Services and fees			17,910				16,404				16,322				15,746			15,419				66,382				60,893
Net occupancy-premises			6,741				6,910				6,550				6,502			6,617				26,703				25,767
Equipment expense			6,329				6,200				6,202				6,099			5,996				24,830				24,453
Other real estate expense, net			61				1,168				(93	)			866			666				2,002				3,672
FDIC assessment expense			1,897				1,999				2,538				2,995			2,868				9,429				11,010
Other expense			12,253				11,695				12,306				11,782			12,565				48,036				57,465
Total noninterest expense			103,927				105,223				103,800				102,465			102,951				415,415				430,169
Income before income taxes and tax eq adj			46,098				43,798				49,232				45,525			45,947				184,653				174,131
Tax equivalent adjustment			3,231				3,151				3,203				3,215			5,060				12,800				19,786
Income before income taxes			42,867				40,647				46,029				42,310			40,887				171,853				154,345
Income taxes			6,179				4,394				6,216				5,480			25,119				22,269				48,715
Net income		$	36,688			$	36,253			$	39,813			$	36,830		$	15,768			$	149,584			$	105,630
Per share data
Earnings per share - basic		$	0.55			$	0.54			$	0.59			$	0.54		$	0.23			$	2.22			$	1.56
Earnings per share - diluted		$	0.55			$	0.54			$	0.59			$	0.54		$	0.23			$	2.21			$	1.56
Dividends per share		$	0.23			$	0.23			$	0.23			$	0.23		$	0.23			$	0.92			$	0.92
Weighted average shares outstanding
Basic			66,839,504				67,621,345				67,758,097				67,809,234			67,742,792				67,504,701				67,727,219
Diluted			67,028,978				67,796,346				67,907,267				67,960,583			67,938,986				67,658,984				67,886,805
Period end shares outstanding			65,834,395				67,621,369				67,621,111				67,775,068			67,746,094				65,834,395				67,746,094
See Notes to Consolidated Financials.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
($ in thousands)
(unaudited)
		Quarter Ended
NONPERFORMING ASSETS (1)			12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017
Nonaccrual loans
Alabama		$	3,361			$	3,953			$	3,685			$	3,121			$	3,083
Florida			1,175				1,180				2,978				2,116				3,034
Mississippi (2)			44,331				41,351				39,006				48,600				49,129
Tennessee (3)			8,696				13,195				5,338				5,530				4,436
Texas			4,061				8,157				10,356				9,329				7,893
Total nonaccrual loans			61,624				67,836				61,363				68,696				67,575
Other real estate
Alabama			6,873				7,526				8,290				8,962				11,714
Florida			8,771				8,931				9,789				12,550				13,937
Mississippi (2)			17,255				18,191				19,358				15,737				14,260
Tennessee (3)			1,025				1,083				1,486				1,523				2,535
Texas			744				744				744				782				782
Total other real estate			34,668				36,475				39,667				39,554				43,228
Total nonperforming assets		$	96,292			$	104,311			$	101,030			$	108,250			$	110,803
LOANS PAST DUE OVER 90 DAYS (1)
LHFI		$	856			$	726			$	529			$	1,419			$	2,171
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)		$	37,384			$	34,115			$	34,693			$	34,826			$	35,544
		Quarter Ended																				Year Ended
ALLOWANCE FOR LOAN LOSSES (1)			12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
Beginning Balance		$	88,874			$	83,566			$	81,235			$	76,733			$	80,332			$	76,733			$	71,265
Transfers (4)			—				772				782				—				—				1,554				—
Provision for loan losses			2,192				8,673				3,167				3,961				5,739				17,993				15,094
Charge-offs			(16,509	)			(7,017	)			(3,421	)			(2,542	)			(12,075	)			(29,489	)			(21,147	)
Recoveries			4,733				2,880				1,803				3,083				2,737				12,499				11,521
Net (charge-offs) recoveries			(11,776	)			(4,137	)			(1,618	)			541				(9,338	)			(16,990	)			(9,626	)
Ending Balance		$	79,290			$	88,874			$	83,566			$	81,235			$	76,733			$	79,290			$	76,733
PROVISION FOR LOAN LOSSES (1)
Alabama		$	(346	)		$	593			$	434			$	618			$	559			$	1,299			$	3,832
Florida			(160	)			(431	)			(811	)			(863	)			(1,235	)			(2,265	)			(2,951	)
Mississippi (2)			(3,594	)			(1,630	)			2,768				2,664				2,779				208				8,733
Tennessee (3)			3,039				8,100				82				(268	)			(439	)			10,953				19
Texas			3,253				2,041				694				1,810				4,075				7,798				5,461
Total provision for loan losses		$	2,192			$	8,673			$	3,167			$	3,961			$	5,739			$	17,993			$	15,094
NET CHARGE-OFFS (RECOVERIES) (1)
Alabama		$	203			$	198			$	112			$	84			$	196			$	597			$	547
Florida			(238	)			(586	)			(122	)			(960	)			(946	)			(1,906	)			(2,870	)
Mississippi (2)			(1,873	)			4,677				1,705				267				5,574				4,776				7,355
Tennessee (3)			7,875				(96	)			70				109				79				7,958				393
Texas			5,809				(56	)			(147	)			(41	)			4,435				5,565				4,201
Total net charge-offs (recoveries)		$	11,776			$	4,137			$	1,618			$	(541	)		$	9,338			$	16,990			$	9,626

(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.

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2018
(unaudited)
		Quarter Ended																				Year Ended
FINANCIAL RATIOS AND OTHER DATA			12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017			12/31/2018			12/31/2017
Return on equity			9.12	%			9.00	%			10.09	%			9.50	%			3.96	%		9.43	%		6.77	%
Return on average tangible equity			12.41	%			12.26	%			13.77	%			13.05	%			5.60	%		12.86	%		9.39	%
Return on assets			1.09	%			1.07	%			1.19	%			1.10	%			0.45	%		1.11	%		0.77	%
Interest margin - Yield - FTE			4.21	%			4.16	%			4.06	%			3.91	%			3.90	%		4.09	%		3.83	%
Interest margin - Cost			0.65	%			0.58	%			0.50	%			0.45	%			0.41	%		0.54	%		0.34	%
Net interest margin - FTE			3.56	%			3.59	%			3.57	%			3.46	%			3.48	%		3.54	%		3.48	%
Efficiency ratio (1)			66.62	%			65.19	%			64.90	%			65.50	%			65.21	%		65.55	%		65.37	%
Full-time equivalent employees			2,856				2,889				2,890				2,905				2,893
CREDIT QUALITY RATIOS (2)
Net charge-offs/average loans			0.52	%			0.18	%			0.07	%			-0.03	%			0.43	%		0.19	%		0.11	%
Provision for loan losses/average loans			0.10	%			0.39	%			0.15	%			0.19	%			0.26	%		0.20	%		0.18	%
Nonperforming loans/total loans (incl LHFS)			0.69	%			0.76	%			0.69	%			0.79	%			0.77	%
Nonperforming assets/total loans (incl LHFS)			1.07	%			1.17	%			1.14	%			1.25	%			1.27	%
Nonperforming assets/total loans (incl LHFS) +ORE			1.07	%			1.16	%			1.13	%			1.24	%			1.26	%
ALL/total loans (excl LHFS)			0.90	%			1.02	%			0.96	%			0.95	%			0.90	%
ALL-commercial/total commercial loans			0.99	%			1.13	%			1.05	%			1.04	%			0.95	%
ALL-consumer/total consumer and home mortgage loans			0.57	%			0.63	%			0.63	%			0.64	%			0.68	%
ALL/nonperforming loans			128.67	%			131.01	%			136.18	%			118.25	%			113.55	%
ALL/nonperforming loans (excl specifically reviewed impaired loans)			350.77	%			339.79	%			345.87	%			314.28	%			320.84	%
CAPITAL RATIOS
Total equity/total assets			11.98	%			11.90	%			11.71	%			11.66	%			11.39	%
Tangible equity/tangible assets			9.31	%			9.26	%			9.07	%			9.00	%			8.77	%
Tangible equity/risk-weighted assets			11.11	%			11.31	%			11.20	%			11.25	%			11.13	%
Tier 1 leverage ratio (3)			10.26	%			10.41	%			10.22	%			9.96	%			9.67	%
Common equity tier 1 capital ratio (3)			11.77	%			12.20	%			12.01	%			12.05	%			11.77	%
Tier 1 risk-based capital ratio (3)			12.33	%			12.76	%			12.58	%			12.62	%			12.33	%
Total risk-based capital ratio (3)			13.07	%			13.61	%			13.39	%			13.44	%			13.10	%
STOCK PERFORMANCE
Market value-Close		$	28.43			$	33.65			$	32.63			$	31.16			$	31.86
Book value		$	24.17			$	23.66			$	23.43			$	23.17			$	23.20
Tangible book value		$	18.24			$	17.86			$	17.61			$	17.34			$	17.35

(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.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2018

($ in thousands)

(unaudited)

Note 1 - Securities Available for Sale and Held to Maturity

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

		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017
SECURITIES AVAILABLE FOR SALE
U.S. Government agency obligations
Issued by U.S. Government agencies		$	30,335			$	32,371			$	36,414			$	40,381			$	45,285
Obligations of states and political subdivisions			50,676				57,264				65,348				75,013				79,229
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA			67,494				65,847				60,245				62,457				65,746
Issued by FNMA and FHLMC			666,684				684,474				727,433				767,676				814,450
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA			811,601				840,073				897,652				954,537				1,016,790
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA			185,023				184,604				187,583				197,433				217,135
Total securities available for sale		$	1,811,813			$	1,864,633			$	1,974,675			$	2,097,497			$	2,238,635
SECURITIES HELD TO MATURITY
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies		$	3,736			$	3,725			$	3,714			$	3,703			$	3,692
Obligations of states and political subdivisions			35,783				42,623				42,458				46,011				46,039
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA			12,090				12,316				12,756				12,974				13,539
Issued by FNMA and FHLMC			115,133				119,040				123,377				128,517				133,975
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA			578,827				600,635				627,470				653,325				678,926
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC, or GNMA			164,074				165,544				176,070				179,445				180,315
Total securities held to maturity		$	909,643			$	943,883			$	985,845			$	1,023,975			$	1,056,486

At December 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 $15.7 million ($11.8 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 97% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2018

($ in thousands)

(unaudited)

Note 2 – Loan Composition

LHFI BY TYPE (excluding acquired loans)		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017
Loans secured by real estate:
Construction, land development and other land loans		$	1,056,601			$	1,031,491			$	1,038,745			$	986,188			$	987,624
Secured by 1-4 family residential properties			1,825,492				1,801,029				1,742,496				1,698,885				1,675,311
Secured by nonfarm, nonresidential properties			2,220,914				2,294,289				2,321,734				2,257,899				2,193,823
Other real estate secured			543,820				453,687				397,538				425,664				517,956
Commercial and industrial loans			1,538,715				1,565,922				1,572,764				1,561,967				1,570,345
Consumer loans			182,448				182,709				175,261				168,469				171,918
State and other political subdivision loans			973,818				929,178				925,452				936,014				952,483
Other loans			494,060				488,725				504,993				478,899				500,507
LHFI			8,835,868				8,747,030				8,678,983				8,513,985				8,569,967
Allowance for loan losses			(79,290	)			(88,874	)			(83,566	)			(81,235	)			(76,733	)
Net LHFI		$	8,756,578			$	8,658,156			$	8,595,417			$	8,432,750			$	8,493,234
ACQUIRED LOANS BY TYPE		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017
Loans secured by real estate:
Construction, land development and other land loans		$	5,878			$	6,657			$	11,900			$	17,575			$	23,586
Secured by 1-4 family residential properties			22,556				25,274				36,419				49,289				61,751
Secured by nonfarm, nonresidential properties			47,979				66,865				85,117				100,285				114,694
Other real estate secured			8,253				8,507				9,862				14,581				16,746
Commercial and industrial loans			15,267				16,610				20,485				21,808				31,506
Consumer loans			1,356				1,514				1,700				1,920				2,600
Other loans			5,643				7,188				7,624				10,018				10,634
Acquired loans			106,932				132,615				173,107				215,476				261,517
Allowance for loan losses, acquired loans			(1,231	)			(1,714	)			(3,046	)			(4,294	)			(4,079	)
Net acquired loans		$	105,701			$	130,901			$	170,061			$	211,182			$	257,438

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2018

($ in thousands)

(unaudited)

Note 2 – Loan Composition (continued)

			December 31, 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			$	1,056,601			$	360,363			$	88,170			$	303,166			$	19,512			$	285,390
Secured by 1-4 family residential properties				1,825,492				112,659				48,538				1,566,004				84,187				14,104
Secured by nonfarm, nonresidential properties				2,220,914				517,407				224,110				891,780				154,576				433,041
Other real estate secured				543,820				107,585				11,652				265,024				11,296				148,263
Commercial and industrial loans				1,538,715				203,322				17,912				784,265				354,131				179,085
Consumer loans				182,448				23,450				5,285				131,902				19,641				2,170
State and other political subdivision loans				973,818				89,244				41,979				601,579				30,201				210,815
Other loans				494,060				70,254				17,085				321,480				42,338				42,903
Loans			$	8,835,868			$	1,484,284			$	454,731			$	4,865,200			$	715,882			$	1,315,771
CONSTRUCTION, LAND DEVELOPMENT AND OTHER LAND LOANS BY REGION (1)
Lots			$	63,092			$	15,956			$	20,124			$	21,699			$	1,617			$	3,696
Development				62,467				8,711				8,726				32,275				695				12,060
Unimproved land				101,885				19,318				15,810				32,660				12,895				21,202
1-4 family construction				223,427				92,661				11,303				88,929				1,398				29,136
Other construction				605,730				223,717				32,207				127,603				2,907				219,296
Construction, land development and other land loans			$	1,056,601			$	360,363			$	88,170			$	303,166			$	19,512			$	285,390
LOANS SECURED BY NONFARM, NONRESIDENTIAL PROPERTIES BY REGION (1)
Non-owner occupied:
Retail			$	367,722			$	133,354			$	53,685			$	99,728			$	25,273			$	55,682
Office				231,642				75,179				20,623				85,040				7,848				42,952
Nursing homes/senior living				191,042				40,316				—				144,602				6,124				—
Hotel/motel				247,276				65,020				54,287				52,197				33,735				42,037
Mini-storage				100,078				11,779				6,056				35,756				606				45,881
Industrial				97,998				21,836				9,479				15,001				1,466				50,216
Health care				44,155				14,623				1,439				26,059				—				2,034
Convenience stores				30,549				3,163				—				16,600				730				10,056
Other				61,875				7,573				8,423				13,279				6,939				25,661
Total non-owner occupied loans				1,372,337				372,843				153,992				488,262				82,721				274,519
Owner-occupied:
Office				157,762				33,428				26,123				54,448				6,591				37,172
Churches				91,542				19,046				6,611				45,426				15,839				4,620
Industrial warehouses				137,681				11,473				3,819				54,853				13,235				54,301
Health care				107,489				23,758				6,278				61,094				2,762				13,597
Convenience stores				113,378				14,526				12,803				62,101				1,206				22,742
Retail				85,025				24,664				7,619				32,491				3,858				16,393
Restaurants				52,002				4,100				1,512				27,368				17,021				2,001
Auto dealerships				31,895				8,144				319				14,428				9,004				—
Other				71,803				5,425				5,034				51,309				2,339				7,696
Total owner-occupied loans				848,577				144,564				70,118				403,518				71,855				158,522
Loans secured by nonfarm, nonresidential properties			$	2,220,914			$	517,407			$	224,110			$	891,780			$	154,576			$	433,041
(1) Excludes acquired loans.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2018

($ in thousands)

(unaudited)

Note 3 – Yields on Earning Assets and Interest-Bearing Liabilities

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

		Quarter Ended																				Year Ended
		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
Securities – taxable			2.24	%			2.24	%			2.25	%			2.26	%			2.21	%			2.25	%			2.25	%
Securities – nontaxable			3.60	%			3.66	%			3.66	%			3.68	%			4.35	%			3.65	%			4.35	%
Securities – total			2.28	%			2.27	%			2.29	%			2.30	%			2.27	%			2.28	%			2.31	%
Loans - LHFI & LHFS			4.78	%			4.72	%			4.60	%			4.45	%			4.38	%			4.64	%			4.31	%
Acquired loans			9.89	%			10.82	%			9.96	%			8.13	%			9.27	%			9.52	%			8.59	%
Loans - total			4.86	%			4.82	%			4.72	%			4.55	%			4.53	%			4.74	%			4.45	%
FF sold & rev repo			1.88	%			2.50	%			1.89	%			1.70	%			1.61	%			1.96	%			1.48	%
Other earning assets			2.29	%			2.20	%			2.27	%			1.77	%			2.34	%			2.13	%			1.82	%
Total earning assets			4.21	%			4.16	%			4.06	%			3.91	%			3.90	%			4.09	%			3.83	%
Interest-bearing deposits			0.84	%			0.73	%			0.60	%			0.49	%			0.40	%			0.67	%			0.32	%
FF pch & repo			1.78	%			1.54	%			1.42	%			0.97	%			0.93	%			1.45	%			0.81	%
Other borrowings			2.33	%			2.34	%			2.20	%			1.69	%			1.35	%			1.97	%			1.18	%
Total interest-bearing liabilities			0.90	%			0.80	%			0.69	%			0.61	%			0.56	%			0.75	%			0.47	%
Net interest margin			3.56	%			3.59	%			3.57	%			3.46	%			3.48	%			3.54	%			3.48	%
Net interest margin excluding acquired loans			3.50	%			3.50	%			3.46	%			3.37	%			3.35	%			3.46	%			3.36	%

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

During the fourth quarter of 2018, the yield on acquired loans totaled 9.89% and included $1.1 million in recoveries from the settlement of debt, which represented approximately 3.52% of the annualized total acquired loan yield. Excluding acquired loans, the net interest margin remained flat at 3.50% for the fourth quarter of 2018 when compared to the third quarter of 2018, as growth in the yield on the loans held for investment and held for sale portfolio, runoff of maturing investment securities, and favorable funding mix were offset by higher costs of interest-bearing deposits.

Note 4 – Mortgage Banking

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

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

		Quarter Ended																				Year Ended
		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
Mortgage servicing income, net		$	5,730			$	5,428			$	5,502			$	5,588			$	5,471			$	22,248			$	21,663
Change in fair value-MSR from runoff			(2,752	)			(3,181	)			(3,334	)			(2,507	)			(2,605	)			(11,774	)			(10,780	)
Gain on sales of loans, net			5,206				6,411				5,414				4,585				5,300				21,616				18,934
Other, net			(1,393	)			(83	)			1,365				295				(1,120	)			184				(169	)
Mortgage banking income before hedge ineffectiveness			6,791				8,575				8,947				7,961				7,046				32,274				29,648
Change in fair value-MSR from market changes			(6,537	)			2,615				1,743				9,521				1,168				7,342				(1,050	)
Change in fair value of derivatives			5,462				(2,543	)			(1,644	)			(6,217	)			(1,930	)			(4,942	)			1,304
Net positive (negative) hedge ineffectiveness			(1,075	)			72				99				3,304				(762	)			2,400				254
Mortgage banking, net		$	5,716			$	8,647			$	9,046			$	11,265			$	6,284			$	34,674			$	29,902

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2018

($ in thousands)

(unaudited)

Note 5 – Other Noninterest Income and Expense

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

		Quarter Ended																				Year Ended
		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
Partnership amortization for tax credit purposes		$	(2,101	)		$	(2,202	)		$	(2,202	)		$	(2,202	)		$	(2,478	)		$	(8,707	)		$	(9,560	)
Increase in life insurance cash surrender value			1,808				1,805				1,770				1,738				1,816				7,121				7,125
Other miscellaneous income			2,197				1,755				2,847				1,523				3,343				8,322				16,384
Total other, net		$	1,904			$	1,358			$	2,415			$	1,059			$	2,681			$	6,736			$	13,949

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 $24 thousand, $13 thousand and $1.2 million of nontaxable proceeds related to bank-owned life insurance during the fourth quarter of 2018, the third quarter of 2018 and the second quarter of 2018, respectively. Trustmark received no nontaxable proceeds related to bank-owned life insurance during the first quarter of 2018 compared to $1.7 million during the fourth 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																				Year Ended
		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
Loan expense		$	2,425			$	2,824			$	3,046			$	2,791			$	2,276			$	11,086			$	10,908
Amortization of intangibles			1,279				1,286				1,286				1,397				1,522				5,248				6,169
Defined benefit plans non-service cost reclass from salaries  and employee benefits			885				885				885				885				968				3,540				5,722
Other miscellaneous expense			7,664				6,700				7,089				6,709				7,799				28,162				34,666
Total other expense		$	12,253			$	11,695			$	12,306			$	11,782			$	12,565			$	48,036			$	57,465

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.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2018

($ in thousands)

(unaudited)

Note 6 – Income Taxes

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

		Quarter Ended																				Year Ended
		12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
Current		$	51			$	2,782			$	5,516			$	2,180			$	3,850			$	10,529			$	22,646
Deferred			6,128				1,612				700				3,300				4,300				11,740				9,100
Elimination of deferred tax valuation allowance			—				—				—				—				(8,650	)			—				(8,650	)
Income tax provision before re-measurement			6,179				4,394				6,216				5,480				(500	)			22,269				23,096
Re-measurement of net deferred tax assets			—				—				—				—				25,619				—				25,619
Income tax provision		$	6,179			$	4,394			$	6,216			$	5,480			$	25,119			$	22,269			$	48,715

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 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

December 31, 2018

($ in thousands except per share data)

(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

				Quarter Ended																				Year Ended
				12/31/2018				9/30/2018				6/30/2018				3/31/2018				12/31/2017				12/31/2018				12/31/2017
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity				$	1,595,132			$	1,597,588			$	1,581,906			$	1,572,514			$	1,579,633			$	1,586,877			$	1,560,884
Less: Goodwill					(379,627	)			(379,627	)			(379,627	)			(379,627	)			(379,627	)			(379,627	)			(375,947	)
Identifiable intangible assets					(11,811	)			(13,083	)			(14,380	)			(15,782	)			(17,196	)			(13,751	)			(18,885	)
Total average tangible equity				$	1,203,694			$	1,204,878			$	1,187,899			$	1,177,105			$	1,182,810			$	1,193,499			$	1,166,052
PERIOD END BALANCES
Total shareholders' equity				$	1,591,453			$	1,599,604			$	1,584,072			$	1,570,137			$	1,571,701
Less: Goodwill					(379,627	)			(379,627	)			(379,627	)			(379,627	)			(379,627	)
Identifiable intangible assets					(11,112	)			(12,391	)			(13,677	)			(14,963	)			(16,360	)
Total tangible equity		(a)		$	1,200,714			$	1,207,586			$	1,190,768			$	1,175,547			$	1,175,714
TANGIBLE ASSETS
Total assets				$	13,286,460			$	13,439,812			$	13,525,265			$	13,463,439			$	13,797,953
Less: Goodwill					(379,627	)			(379,627	)			(379,627	)			(379,627	)			(379,627	)
Identifiable intangible assets					(11,112	)			(12,391	)			(13,677	)			(14,963	)			(16,360	)
Total tangible assets		(b)		$	12,895,721			$	13,047,794			$	13,131,961			$	13,068,849			$	13,401,966
Risk-weighted assets		(c)		$	10,803,313			$	10,681,621			$	10,633,646			$	10,449,352			$	10,566,818
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income				$	36,688			$	36,253			$	39,813			$	36,830			$	15,768			$	149,584			$	105,630
Plus: Intangible amortization net of tax					959				965				965				1,049				940				3,938				3,810
Net income adjusted for intangible amortization				$	37,647			$	37,218			$	40,778			$	37,879			$	16,708			$	153,522			$	109,440
Period end common shares outstanding		(d)			65,834,395				67,621,369				67,621,111				67,775,068				67,746,094
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)					12.41	%			12.26	%			13.77	%			13.05	%			5.60	%			12.86	%			9.39	%
Tangible equity/tangible assets		(a)/(b)			9.31	%			9.26	%			9.07	%			9.00	%			8.77	%
Tangible equity/risk-weighted assets		(a)/(c)			11.11	%			11.31	%			11.20	%			11.25	%			11.13	%
Tangible book value		(a)/(d)*1,000		$	18.24			$	17.86			$	17.61			$	17.34			$	17.35
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity				$	1,591,453			$	1,599,604			$	1,584,072			$	1,570,137			$	1,571,701
AOCI-related adjustments (3)					55,679				79,946				73,739				67,886				48,248
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)					(365,779	)			(365,823	)			(366,036	)			(366,248	)			(366,461	)
Other adjustments and deductions for CET1 (2)					(9,815	)			(10,868	)			(14,204	)			(12,233	)			(10,248	)
CET1 capital		(e)			1,271,538				1,302,859				1,277,571				1,259,542				1,243,240
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	)
Additional tier 1 capital					60,000				60,000				60,000				59,286				59,998
Tier 1 capital				$	1,331,538			$	1,362,859			$	1,337,571			$	1,318,828			$	1,303,238
Common equity tier 1 capital ratio		(e)/(c)			11.77	%			12.20	%			12.01	%			12.05	%			11.77	%

(1)		Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity
(2)		Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAS), threshold deductions and transition adjustments, as applicable.
(3)		The December 31, 2017 amount contains a reclassification adjustment of $8.5 million from AOCI to retained earnings as allowed by regulatory agencies in an interagency statement released January 18, 2018 to address disproportionate tax effect in AOCI resulting from the recent enactment of the Tax Cuts and Jobs Act of 2017 and the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes.

TRUSTMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALS

December 31, 2018

($ in thousands except per share data)

(unaudited)

Note 7 – Non-GAAP Financial Measures (continued)

Trustmark discloses certain non-GAAP financial measures, including net income adjusted for significant non-routine transactions, because Management uses these measures for business planning purposes, including to manage Trustmark’s business against internal projected results of operations and to measure Trustmark’s performance. Trustmark views net income adjusted for significant non-routine transactions as a measure of our core operating business, which excludes the impact of the items detailed below, as these items are generally not operational in nature. This non-GAAP measure also provides another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the audited consolidated financial statements by excluding potential differences caused by non-operational and unusual or non-recurring items. Readers are cautioned that these adjustments are not permitted under GAAP. Trustmark encourages readers to consider its consolidated financial statements and the notes related thereto in their entirety, and not to rely on any single financial measure.

The following table presents adjustments to net income and select financial ratios as reported in accordance with GAAP resulting from significant non-routine items occurring during the periods presented ($ in thousands, except per share data):

		Quarter Ended																		Year Ended
		12/31/2018									12/31/2017									12/31/2018									12/31/2017
		Amount				Diluted EPS					Amount				Diluted EPS					Amount				Diluted EPS					Amount				Diluted EPS
Net Income (GAAP)		$	36,688				0.547				$	15,768			$	0.232				$	149,584			$	2.211				$	105,630			$	1.556
Significant non-routine transactions (net of taxes):
Re-measurement of net deferred taxes			—				—					25,619				0.377					—				—					25,619				0.377
Elimination of deferred tax valuation allowance			—				—					(8,650	)			(0.127	)				—				—					(8,650	)			(0.127	)
Defined benefit plan termination			—				—					—				—					—				—					10,895				0.160
Reliance merger transaction expenses			—				—					—				—					—				—					1,999				0.029
Gain on life insurance proceeds			—				—					—				—					—				—					(4,894	)			(0.072	)
Net Income adjusted for significant non-routine transactions (Non-GAAP)		$	36,688			$	0.547				$	32,737			$	0.482				$	149,584			$	2.211				$	130,599			$	1.923
		Reported				Adjusted					Reported				Adjusted					Reported				Adjusted					Reported				Adjusted
		(GAAP)				(Non-GAAP)					(GAAP)				(Non-GAAP)					(GAAP)				(Non-GAAP)					(GAAP)				(Non-GAAP)
Return on equity			9.12	%		n/a						3.96	%			8.22	%				9.43	%		n/a						6.77	%			8.37	%
Return on average tangible equity			12.41	%		n/a						5.60	%			11.30	%				12.86	%		n/a						9.39	%			11.53	%
Return on assets			1.09	%		n/a						0.45	%			0.94	%				1.11	%		n/a						0.77	%			0.95	%
n/a - not applicable

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