Trustmark Corporation Announces 2016 Financial Results

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

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Fourth Quarter Highlights

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

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

Balance Sheet Management

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

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

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

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

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

Credit Quality

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

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

Allocation of Trustmark's $71.3 million allowance for loan losses represented 0.97% of commercial loans and 0.68% of consumer and home mortgage loans, resulting in an allowance to total loans held for investment of 0.91% at December 31, 2016, representing a level management considers commensurate with the inherent risk in the loan portfolio. In aggregate, the allowance for both held for investment and acquired loan losses represented 1.02% of total loans, which include held for investment and acquired loans.

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

Revenue Generation

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

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

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

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

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

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

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

Noninterest Expense

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

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

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

Trustmark continued the optimization of its retail delivery channels to enhance productivity and efficiency as well as promote additional growth. During the fourth quarter, Trustmark opened a loan production office in Pensacola, Florida, and consolidated two banking centers. For the year, Trustmark consolidated nine branch offices across Alabama, Mississippi and Florida, and reallocated a portion of those resources into a new banking center in Tuscaloosa, Alabama, and a new loan production office in Pensacola, Florida. Overall, these collective efforts resulted in the consolidation of 36 branch offices and the establishment of nine banking centers over the past four years. Trustmark is committed to developing and maintaining relationships while supporting investments that promote profitable revenue growth as well as reengineering and efficiency opportunities to enhance shareholder value.

Additional Information

As previously announced, Trustmark will conduct a conference call with analysts on Wednesday, January 25, 2017, at 10:00 a.m. Central Time to discuss the Corporation’s financial results. Interested parties may listen to the conference call by dialing (877) 317-3051 or by clicking on the link provided under the Investor Relations section of our website at www.trustmark.com, which will also include a slide presentation Management will review during the conference call. A replay of the conference call will also be available through Wednesday, February 8, 2017, in archived format at the same web address or by calling (877) 344-7529, passcode 10098633.

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

Forward-Looking Statements

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

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

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

TRUSTMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
December 31, 2016
($ in thousands)
(unaudited)
																			Linked Quarter									Year over Year
QUARTERLY AVERAGE BALANCES				12/31/2016					9/30/2016					12/31/2015					$ Change					% Change				$ Change					% Change
Securities AFS-taxable				$	2,271,503				$	2,249,109				$	2,209,801				$	22,394				1.0	%			$	61,702				2.8	%
Securities AFS-nontaxable					91,495					95,233					110,290					(3,738	)			-3.9	%				(18,795	)			-17.0	%
Securities HTM-taxable					1,101,382					1,115,053					1,145,397					(13,671	)			-1.2	%				(44,015	)			-3.8	%
Securities HTM-nontaxable					33,675					34,179					35,755					(504	)			-1.5	%				(2,080	)			-5.8	%
Total securities					3,498,055					3,493,574					3,501,243					4,481				0.1	%				(3,188	)			-0.1	%
Loans (including loans held for sale)					7,855,444					7,658,089					7,089,672					197,355				2.6	%				765,772				10.8	%
Acquired loans:
Noncovered loans					278,460					306,809					384,306					(28,349	)			-9.2	%				(105,846	)			-27.5	%
Covered loans					3,737					10,464					18,341					(6,727	)			-64.3	%				(14,604	)			-79.6	%
Fed funds sold and rev repos					1,418					1,352					1,384					66				4.9	%				34				2.5	%
Other earning assets					80,608					68,706					68,016					11,902				17.3	%				12,592				18.5	%
Total earning assets					11,717,722					11,538,994					11,062,962					178,728				1.5	%				654,760				5.9	%
Allowance for loan losses					(82,604	)				(82,301	)				(78,652	)				(303	)			0.4	%				(3,952	)			5.0	%
Cash and due from banks					314,420					299,670					272,562					14,750				4.9	%				41,858				15.4	%
Other assets					1,238,029					1,243,854					1,266,712					(5,825	)			-0.5	%				(28,683	)			-2.3	%
Total assets				$	13,187,567				$	13,000,217				$	12,523,584				$	187,350				1.4	%			$	663,983				5.3	%
Interest-bearing demand deposits				$	1,920,273				$	1,848,084				$	1,917,598				$	72,189				3.9	%			$	2,675				0.1	%
Savings deposits					3,049,733					3,101,161					2,963,318					(51,428	)			-1.7	%				86,415				2.9	%
Time deposits less than $100,000					945,649					961,641					1,033,233					(15,992	)			-1.7	%				(87,584	)			-8.5	%
Time deposits of $100,000 or more					693,204					705,704					687,635					(12,500	)			-1.8	%				5,569				0.8	%
Total interest-bearing deposits					6,608,859					6,616,590					6,601,784					(7,731	)			-0.1	%				7,075				0.1	%
Fed funds purchased and repos					494,193					481,071					563,424					13,122				2.7	%				(69,231	)			-12.3	%
Short-term borrowings					435,576					311,473					733,365					124,103				39.8	%				(297,789	)			-40.6	%
Long-term FHLB advances					685,844					751,095					50,078					(65,251	)			-8.7	%				635,766				n/m
Subordinated notes					40,757					49,988					49,964					(9,231	)			-18.5	%				(9,207	)			-18.4	%
Junior subordinated debt securities					61,856					61,856					61,856					—				0.0	%				—				0.0	%
Total interest-bearing liabilities					8,327,085					8,272,073					8,060,471					55,012				0.7	%				266,614				3.3	%
Noninterest-bearing deposits					3,160,959					3,060,331					2,839,894					100,628				3.3	%				321,065				11.3	%
Other liabilities					166,379					136,971					141,925					29,408				21.5	%				24,454				17.2	%
Total liabilities					11,654,423					11,469,375					11,042,290					185,048				1.6	%				612,133				5.5	%
Shareholders' equity					1,533,144					1,530,842					1,481,294					2,302				0.2	%				51,850				3.5	%
Total liabilities and equity				$	13,187,567				$	13,000,217				$	12,523,584				$	187,350				1.4	%			$	663,983				5.3	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION December 31, 2016 ($ in thousands) (unaudited)
																			Linked Quarter									Year over Year
PERIOD END BALANCES				12/31/2016					9/30/2016					12/31/2015					$ Change					% Change				$ Change					% Change
Cash and due from banks				$	327,706				$	383,945				$	277,751				$	(56,239	)			-14.6	%			$	49,955				18.0	%
Fed funds sold and rev repos					500					500					250					—				0.0	%				250				100.0	%
Securities available for sale					2,356,682					2,410,947					2,345,422					(54,265	)			-2.3	%				11,260				0.5	%
Securities held to maturity					1,158,643					1,143,234					1,187,818					15,409				1.3	%				(29,175	)			-2.5	%
Loans held for sale (LHFS)					175,927					242,097					160,189					(66,170	)			-27.3	%				15,738				9.8	%
Loans held for investment (LHFI)					7,851,213					7,499,204					7,091,385					352,009				4.7	%				759,828				10.7	%
Allowance for loan losses					(71,265	)				(70,871	)				(67,619	)				(394	)			0.6	%				(3,646	)			5.4	%
Net LHFI					7,779,948					7,428,333					7,023,766					351,615				4.7	%				756,182				10.8	%
Acquired loans:
Noncovered loans					268,633					291,825					372,711					(23,192	)			-7.9	%				(104,078	)			-27.9	%
Covered loans					3,614					3,912					17,700					(298	)			-7.6	%				(14,086	)			-79.6	%
Allowance for loan losses, acquired loans					(11,397	)				(11,380	)				(11,992	)				(17	)			0.1	%				595				-5.0	%
Net acquired loans					260,850					284,357					378,419					(23,507	)			-8.3	%				(117,569	)			-31.1	%
Net LHFI and acquired loans					8,040,798					7,712,690					7,402,185					328,108				4.3	%				638,613				8.6	%
Premises and equipment, net					184,987					190,930					195,656					(5,943	)			-3.1	%				(10,669	)			-5.5	%
Mortgage servicing rights					80,239					65,514					74,007					14,725				22.5	%				6,232				8.4	%
Goodwill					366,156					366,156					366,156					—				0.0	%				—				0.0	%
Identifiable intangible assets					20,680					22,366					27,546					(1,686	)			-7.5	%				(6,866	)			-24.9	%
Other real estate, excluding covered other real estate					62,051					64,993					77,177					(2,942	)			-4.5	%				(15,126	)			-19.6	%
Covered other real estate					—					—					1,651					—				n/m					(1,651	)			-100.0	%
FDIC indemnification asset					—					—					738					—				n/m					(738	)			-100.0	%
Other assets					577,964					558,166					562,350					19,798				3.5	%				15,614				2.8	%
Total assets				$	13,352,333				$	13,161,538				$	12,678,896				$	190,795				1.4	%			$	673,437				5.3	%
Deposits:
Noninterest-bearing				$	2,973,238				$	3,111,603				$	2,998,694				$	(138,365	)			-4.4	%			$	(25,456	)			-0.8	%
Interest-bearing					7,082,774					6,574,098					6,589,536					508,676				7.7	%				493,238				7.5	%
Total deposits					10,056,012					9,685,701					9,588,230					370,311				3.8	%				467,782				4.9	%
Fed funds purchased and repos					539,817					514,918					441,042					24,899				4.8	%				98,775				22.4	%
Short-term borrowings					769,778					412,792					412,617					356,986				86.5	%				357,161				86.6	%
Long-term FHLB advances					251,049					751,075					501,155					(500,026	)			-66.6	%				(250,106	)			-49.9	%
Subordinated notes					—					49,993					49,969					(49,993	)			-100.0	%				(49,969	)			-100.0	%
Junior subordinated debt securities					61,856					61,856					61,856					—				0.0	%				—				0.0	%
Other liabilities					153,613					150,442					150,970					3,171				2.1	%				2,643				1.8	%
Total liabilities					11,832,125					11,626,777					11,205,839					205,348				1.8	%				626,286				5.6	%
Common stock					14,091					14,090					14,076					1				0.0	%				15				0.1	%
Capital surplus					366,563					365,553					361,467					1,010				0.3	%				5,096				1.4	%
Retained earnings					1,185,352					1,172,193					1,142,908					13,159				1.1	%				42,444				3.7	%
Accum other comprehensive loss, net of tax					(45,798	)				(17,075	)				(45,394	)				(28,723	)			n/m					(404	)			0.9	%
Total shareholders' equity					1,520,208					1,534,761					1,473,057					(14,553	)			-0.9	%				47,151				3.2	%
Total liabilities and equity				$	13,352,333				$	13,161,538				$	12,678,896				$	190,795				1.4	%			$	673,437				5.3	%
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION December 31, 2016 ($ in thousands except per share data) (unaudited)
				Quarter Ended														Linked Quarter									Year over Year
INCOME STATEMENTS				12/31/2016				9/30/2016					12/31/2015					$ Change					% Change				$ Change					% Change
Interest and fees on LHFS & LHFI-FTE				$	81,346			$	80,649				$	74,383				$	697				0.9	%			$	6,963				9.4	%
Interest and fees on acquired loans					8,290				6,781					11,910					1,509				22.3	%				(3,620	)			-30.4	%
Interest on securities-taxable					18,775				19,351					21,149					(576	)			-3.0	%				(2,374	)			-11.2	%
Interest on securities-tax exempt-FTE					1,340				1,388					1,565					(48	)			-3.5	%				(225	)			-14.4	%
Interest on fed funds sold and rev repos					4				5					4					(1	)			-20.0	%				—				0.0	%
Other interest income					335				223					402					112				50.2	%				(67	)			-16.7	%
Total interest income-FTE					110,090				108,397					109,413					1,693				1.6	%				677				0.6	%
Interest on deposits					3,380				3,208					3,000					172				5.4	%				380				12.7	%
Interest on fed funds pch and repos					471				411					274					60				14.6	%				197				71.9	%
Other interest expense					2,662				2,603					1,987					59				2.3	%				675				34.0	%
Total interest expense					6,513				6,222					5,261					291				4.7	%				1,252				23.8	%
Net interest income-FTE					103,577				102,175					104,152					1,402				1.4	%				(575	)			-0.6	%
Provision for loan losses, LHFI					1,834				4,284					3,043					(2,450	)			-57.2	%				(1,209	)			-39.7	%
Provision for loan losses, acquired loans					1,150				691					997					459				66.4	%				153				15.3	%
Net interest income after provision-FTE					100,593				97,200					100,112					3,393				3.5	%				481				0.5	%
Service charges on deposit accounts					11,444				11,677					11,961					(233	)			-2.0	%				(517	)			-4.3	%
Bank card and other fees					6,796				6,756					7,156					40				0.6	%				(360	)			-5.0	%
Mortgage banking, net					5,428				7,364					4,287					(1,936	)			-26.3	%				1,141				26.6	%
Insurance commissions					8,459				10,074					8,501					(1,615	)			-16.0	%				(42	)			-0.5	%
Wealth management					7,505				7,571					7,831					(66	)			-0.9	%				(326	)			-4.2	%
Other, net					2,092				1,274					(466	)				818				64.2	%				2,558				n/m
Nonint inc-excl sec gains (losses), net					41,724				44,716					39,270					(2,992	)			-6.7	%				2,454				6.2	%
Security gains (losses), net					—				—					—					—				n/m					—				n/m
Total noninterest income					41,724				44,716					39,270					(2,992	)			-6.7	%				2,454				6.2	%
Salaries and employee benefits					58,168				57,250					57,366					918				1.6	%				802				1.4	%
Services and fees					14,751				14,947					13,717					(196	)			-1.3	%				1,034				7.5	%
Net occupancy-premises					6,426				6,440					6,304					(14	)			-0.2	%				122				1.9	%
Equipment expense					6,172				6,063					6,105					109				1.8	%				67				1.1	%
Other real estate expense					525				(1,313	)				(518	)				1,838				n/m					1,043				n/m
FDIC assessment expense					2,562				2,911					2,614					(349	)			-12.0	%				(52	)			-2.0	%
Other expense					11,663				11,610					13,032					53				0.5	%				(1,369	)			-10.5	%
Total noninterest expense					100,267				97,908					98,620					2,359				2.4	%				1,647				1.7	%
Income before income taxes and tax eq adj					42,050				44,008					40,762					(1,958	)			-4.4	%				1,288				3.2	%
Tax equivalent adjustment					4,725				4,611					4,334					114				2.5	%				391				9.0	%
Income before income taxes					37,325				39,397					36,428					(2,072	)			-5.3	%				897				2.5	%
Income taxes					8,402				8,415					8,570					(13	)			-0.2	%				(168	)			-2.0	%
Net income				$	28,923			$	30,982				$	27,858				$	(2,059	)			-6.6	%			$	1,065				3.8	%
Per share data
Earnings per share - basic				$	0.43			$	0.46				$	0.41				$	(0.03	)			-6.5	%			$	0.02				4.9	%
Earnings per share - diluted				$	0.43			$	0.46				$	0.41				$	(0.03	)			-6.5	%			$	0.02				4.9	%
Dividends per share				$	0.23			$	0.23				$	0.23					—				0.0	%				—				0.0	%
Weighted average shares outstanding
Basic					67,627,496				67,625,085					67,557,991
Diluted					67,817,770				67,793,203					67,734,109
Period end shares outstanding					67,628,618				67,626,939					67,559,128
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

TRUSTMARK CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION December 31, 2016 ($ in thousands) (unaudited)
				Quarter Ended															Linked Quarter									Year over Year
NONPERFORMING ASSETS (1)				12/31/2016					9/30/2016					12/31/2015					$ Change					% Change				$ Change					% Change
Nonaccrual loans
Alabama				$	665				$	1,403				$	1,776				$	(738	)			-52.6	%			$	(1,111	)			-62.6	%
Florida					3,644					3,719					5,180					(75	)			-2.0	%				(1,536	)			-29.7	%
Mississippi (2)					37,771					41,968					40,754					(4,197	)			-10.0	%				(2,983	)			-7.3	%
Tennessee (3)					6,213					6,620					5,106					(407	)			-6.1	%				1,107				21.7	%
Texas					941					700					2,496					241				34.4	%				(1,555	)			-62.3	%
Total nonaccrual loans					49,234					54,410					55,312					(5,176	)			-9.5	%				(6,078	)			-11.0	%
Other real estate
Alabama					15,989					15,574					21,578					415				2.7	%				(5,589	)			-25.9	%
Florida					22,582					25,147					29,579					(2,565	)			-10.2	%				(6,997	)			-23.7	%
Mississippi (2)					15,646					16,659					14,312					(1,013	)			-6.1	%				1,334				9.3	%
Tennessee (3)					6,183					6,061					9,974					122				2.0	%				(3,791	)			-38.0	%
Texas					1,651					1,552					1,734					99				6.4	%				(83	)			-4.8	%
Total other real estate					62,051					64,993					77,177					(2,942	)			-4.5	%				(15,126	)			-19.6	%
Total nonperforming assets				$	111,285				$	119,403				$	132,489				$	(8,118	)			-6.8	%			$	(21,204	)			-16.0	%
LOANS PAST DUE OVER 90 DAYS (4)
LHFI				$	1,832				$	953				$	2,300				$	879				92.2	%			$	(468	)			-20.3	%
LHFS-Guaranteed GNMA serviced loans
(no obligation to repurchase)				$	28,345				$	25,570				$	21,812				$	2,775				10.9	%			$	6,533				30.0	%
				Quarter Ended															Linked Quarter									Year over Year
ALLOWANCE FOR LOAN LOSSES (4)				12/31/2016					9/30/2016					12/31/2015					$ Change					% Change				$ Change					% Change
Beginning Balance				$	70,871				$	71,796				$	65,607				$	(925	)			-1.3	%			$	5,264				8.0	%
Provision for loan losses					1,834					4,284					3,043					(2,450	)			-57.2	%				(1,209	)			-39.7	%
Charge-offs					(4,037	)				(8,279	)				(3,781	)				4,242				-51.2	%				(256	)			6.8	%
Recoveries					2,597					3,070					2,750					(473	)			-15.4	%				(153	)			-5.6	%
Net charge-offs					(1,440	)				(5,209	)				(1,031	)				3,769				-72.4	%				(409	)			39.7	%
Ending Balance				$	71,265				$	70,871				$	67,619				$	394				0.6	%			$	3,646				5.4	%
PROVISION FOR LOAN LOSSES (4)
Alabama				$	763				$	132				$	1,453				$	631				n/m				$	(690	)			-47.5	%
Florida					(655	)				31					(1,357	)				(686	)			n/m					702				-51.7	%
Mississippi (2)					1,873					703					1,842					1,170				n/m					31				1.7	%
Tennessee (3)					(118	)				151					182					(269	)			n/m					(300	)			n/m
Texas					(29	)				3,267					923					(3,296	)			n/m					(952	)			n/m
Total provision for loan losses				$	1,834				$	4,284				$	3,043				$	(2,450	)			-57.2	%			$	(1,209	)			-39.7	%
NET CHARGE-OFFS (4)
Alabama				$	368				$	38				$	422				$	330				n/m				$	(54	)			-12.8	%
Florida					(502	)				(169	)				(389	)				(333	)			n/m					(113	)			29.0	%
Mississippi (2)					1,591					2,484					925					(893	)			-36.0	%				666				72.0	%
Tennessee (3)					(8	)				74					188					(82	)			n/m					(196	)			n/m
Texas					(9	)				2,782					(115	)				(2,791	)			n/m					106				-92.2	%
Total net charge-offs				$	1,440				$	5,209				$	1,031				$	(3,769	)			-72.4	%			$	409				39.7	%
(1) - Excludes acquired loans and covered other real estate
(2) - Mississippi includes Central and Southern Mississippi Regions
(3) - Tennessee includes Memphis, Tennessee and Northern Mississippi Regions
(4) - Excludes acquired loans
n/m - percentage changes greater than +/- 100% are considered not meaningful
See Notes to Consolidated Financials

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

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

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

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

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

Note 1 – Business Combinations

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

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

Note 2 - Securities Available for Sale and Held to Maturity

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

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

During 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity. The securities were transferred at fair value, which became the cost basis for the securities held to maturity. At the date of transfer, the net unrealized holding loss on the available for sale securities totaled approximately $46.6 million ($28.8 million, net of tax). The net unrealized holding loss is amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. At December 31, 2016, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive loss in the accompanying balance sheet totaled approximately $24.2 million ($14.9 million, net of tax).

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of approximately 95% of the portfolio in GSE-backed obligations and other Aaa rated securities as determined by Moody’s. None of the securities owned by Trustmark are collateralized by assets which are considered sub-prime. Furthermore, outside of stock ownership in the Federal Home Loan Bank of Dallas, Federal Home Loan Bank of Atlanta and Federal Reserve Bank, Trustmark does not hold any other equity investment in a GSE.

TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS December 31, 2016 ($ in thousands) (unaudited)
Note 3 – Loan Composition
LHFI BY TYPE (excluding acquired loans)				12/31/2016				9/30/2016				6/30/2016				3/31/2016				12/31/2015
Loans secured by real estate:
Construction, land development and other land loans				$	831,437			$	766,685			$	718,438			$	697,500			$	824,723
Secured by 1-4 family residential properties					1,660,043				1,592,453				1,620,013				1,640,015				1,649,501
Secured by nonfarm, nonresidential properties					2,034,176				1,916,153				1,900,784				1,893,240				1,736,476
Other real estate secured					318,148				317,680				323,734				273,752				211,228
Commercial and industrial loans					1,528,434				1,421,382				1,466,511				1,368,464				1,343,211
Consumer loans					170,562				170,073				166,436				164,544				169,135
State and other political subdivision loans					917,515				875,973				805,401				787,049				734,615
Other loans					390,898				438,805				403,864				443,458				422,496
LHFI					7,851,213				7,499,204				7,405,181				7,268,022				7,091,385
Allowance for loan losses					(71,265	)			(70,871	)			(71,796	)			(69,668	)			(67,619	)
Net LHFI				$	7,779,948			$	7,428,333			$	7,333,385			$	7,198,354			$	7,023,766

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

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

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

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

TRUSTMARK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIALS December 31, 2016 ($ in thousands) (unaudited)
Note 4 – Yields on Earning Assets and Interest-Bearing Liabilities
The following table illustrates the yields on earning assets by category as well as the rates paid on interest-bearing liabilities on a tax equivalent basis:
				Quarter Ended																				Year Ended
				12/31/2016				9/30/2016				6/30/2016				3/31/2016				12/31/2015				12/31/2016				12/31/2015
Securities – taxable				2.21	%			2.29	%			2.34	%			2.41	%			2.50	%			2.31	%			2.39	%
Securities – nontaxable				4.26	%			4.27	%			4.29	%			4.25	%			4.25	%			4.27	%			4.25	%
Securities – total				2.29	%			2.36	%			2.41	%			2.48	%			2.57	%			2.39	%			2.48	%
Loans - LHFI & LHFS				4.12	%			4.19	%			4.17	%			4.17	%			4.16	%			4.16	%			4.28	%
Acquired loans				11.69	%			8.50	%			9.26	%			7.46	%			11.74	%			9.09	%			11.06	%
Loans - total				4.38	%			4.36	%			4.39	%			4.33	%			4.57	%			4.37	%			4.71	%
FF sold & rev repo				1.12	%			1.47	%			1.27	%			1.05	%			1.15	%			1.27	%			0.96	%
Other earning assets				1.65	%			1.29	%			1.26	%			1.39	%			2.34	%			1.41	%			2.95	%
Total earning assets				3.74	%			3.74	%			3.77	%			3.74	%			3.92	%			3.75	%			3.97	%
Interest-bearing deposits				0.20	%			0.19	%			0.19	%			0.18	%			0.18	%			0.19	%			0.18	%
FF pch & repo				0.38	%			0.34	%			0.33	%			0.34	%			0.19	%			0.35	%			0.16	%
Other borrowings				0.87	%			0.88	%			0.95	%			0.94	%			0.88	%			0.91	%			1.31	%
Total interest-bearing liabilities				0.31	%			0.30	%			0.29	%			0.28	%			0.26	%			0.30	%			0.26	%
Net interest margin				3.52	%			3.52	%			3.56	%			3.54	%			3.74	%			3.53	%			3.78	%
Net interest margin excluding acquired loans				3.31	%			3.38	%			3.38	%			3.40	%			3.43	%			3.37	%			3.46	%

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

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

Note 5 – Mortgage Banking

Trustmark utilizes a portfolio of exchange-traded derivative instruments, such as Treasury note futures contracts and option contracts, to achieve a fair value return that offsets the changes in fair value of mortgage servicing rights (MSR) attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under generally accepted accounting principles (GAAP). Changes in the fair value of these exchange-traded derivative instruments, including administrative costs, are recorded in noninterest income in mortgage banking, net and are offset by the changes in the fair value of the MSR. The MSR fair value represents the present value of future cash flows, which among other things includes decay and the effect of changes in interest rates. Ineffectiveness of hedging the MSR fair value is measured by comparing the change in value of hedge instruments to the change in the fair value of the MSR asset attributable to changes in interest rates and other market driven changes in valuation inputs and assumptions. The impact of this strategy resulted in a net negative ineffectiveness of $180 thousand and $2.0 million for the quarters ended December 31, 2016 and 2015, respectively.

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

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

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

Note 6 – Salaries and Employee Benefit Plans

Early Retirement Program
In April 2016, Trustmark announced a voluntary early retirement program (ERP) for associates age 60 and above with five or more years of service. The cost of this program is reflected in a one-time, pre-tax charge of approximately $9.3 million (salaries and employee benefits expense of $9.1 million and other miscellaneous expense of $230 thousand), or $0.085 per basic share net of tax, in Trustmark’s second quarter 2016 earnings.

As a result of the ERP, during the third and fourth quarters of 2016, Trustmark incurred additional expense of $236 thousand and $268 thousand, respectively, which primarily resulted from additional settlements from pension lump sum elections.

Defined Benefit Pension Plan
Trustmark maintains a noncontributory tax-qualified defined benefit pension plan (Trustmark Capital Accumulation Plan, the “Plan”), in which substantially all associates who began employment prior to 2007 participate. The Plan provides retirement benefits that are based on the length of credited service and final average compensation, as defined in the Plan, and vest upon three years of service. Benefit accruals under the plan have been frozen since 2009, with the exception of certain associates covered through plans obtained in acquisitions that were subsequently merged into the Plan. Other than the associates covered through these acquired plans that were merged into the Plan, associates have not earned additional benefits, except for interest as required by law, since the Plan was frozen. Current and former associates who participate in the Plan retain their right to receive benefits that accrued before the Plan was frozen.

On July 26, 2016, the Board of Directors of Trustmark authorized the termination of the Plan, effective as of December 31, 2016. To satisfy commitments made by Trustmark to associates (collectively, the “Continuing Associates”) covered through acquired plans that were merged into the Plan, the Board also approved the spin-off of the portion of the Plan associated with the accrued benefits of the Continuing Associates into a new plan titled the Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions (the “Spin-Off Plan”), effective as of December 31, 2016, immediately prior to the termination of the Plan.

In order to terminate the Plan, in accordance with Internal Revenue Service and Pension Benefit Guaranty Corporation requirements, Trustmark is required to fully fund the Plan on a termination basis and will contribute the additional assets necessary to do so. The final distributions will be made from current plan assets and a one-time pension settlement expense of approximately $17.5 million will be recognized when paid by Trustmark during the second quarter of 2017. Further, as a result of Trustmark’s de-risking investment strategy for the Plan as of June 30, 2016, the expected rate of return on plan assets during the second half of 2016 will decrease from 6.0% to 2.5%. Accordingly, Trustmark's increased periodic benefit costs for the Plan during the fourth quarter of 2016 was $664 thousand and totaled $1.3 million during the second half of 2016. Participants in the Plan will have a choice of receiving a lump sum cash payment or annuity payments under a group annuity contract purchased from an insurance carrier, subject to certain exceptions. As a result of the termination of the Plan, each participant will become fully vested in his or her accrued benefits under the Plan. After the distribution of Plan assets during the second quarter of 2017, Trustmark estimates that the annual pension expense will be reduced by $3.0 million to $4.0 million.

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

Note 7 – Other Noninterest Income and Expense

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

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

Trustmark invests in partnerships that provide income tax credits on a Federal and/or State basis (i.e., new market tax credits, low income housing tax credits and historical tax credits). The income tax credits related to these partnerships are utilized as specifically allowed by income tax law and are recorded as a reduction in income tax expense.

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

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

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

Note 8 – Non-GAAP Financial Measures

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

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

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

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

Note 8 – Non-GAAP Financial Measures (continued)

						Quarter Ended																									Year Ended
						12/31/2016					9/30/2016					6/30/2016					3/31/2016					12/31/2015					12/31/2016					12/31/2015
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity						$	1,533,144				$	1,530,842				$	1,512,841				$	1,494,684				$	1,481,294				$	1,517,955				$	1,460,650
Less: Goodwill							(366,156	)				(366,156	)				(366,156	)				(366,156	)				(365,945	)				(366,156	)				(365,613	)
Identifiable intangible assets							(21,585	)				(23,311	)				(24,961	)				(26,709	)				(28,851	)				(24,132	)				(30,686	)
Total average tangible equity						$	1,145,403				$	1,141,375				$	1,121,724				$	1,101,819				$	1,086,498				$	1,127,667				$	1,064,351
PERIOD END BALANCES
Total shareholders' equity						$	1,520,208				$	1,534,761				$	1,523,467				$	1,508,256				$	1,473,057
Less: Goodwill							(366,156	)				(366,156	)				(366,156	)				(366,156	)				(366,156	)
Identifiable intangible assets							(20,680	)				(22,366	)				(24,058	)				(25,751	)				(27,546	)
Total tangible equity	(a)					$	1,133,372				$	1,146,239				$	1,133,253				$	1,116,349				$	1,079,355
TANGIBLE ASSETS
Total assets						$	13,352,333				$	13,161,538				$	13,030,349				$	12,775,196				$	12,678,896
Less: Goodwill							(366,156	)				(366,156	)				(366,156	)				(366,156	)				(366,156	)
Identifiable intangible assets							(20,680	)				(22,366	)				(24,058	)				(25,751	)				(27,546	)
Total tangible assets	(b)					$	12,965,497				$	12,773,016				$	12,640,135				$	12,383,289				$	12,285,194
Risk-weighted assets	(c)					$	9,952,123				$	9,670,302				$	9,559,816				$	9,431,021				$	9,242,902
NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income						$	28,923				$	30,982				$	21,503				$	27,003				$	27,858				$	108,411				$	116,038
Plus: Intangible amortization net of tax							1,041					1,045					1,045					1,109					1,191					4,240					4,829
Net income adjusted for intangible amortization						$	29,964				$	32,027				$	22,548				$	28,112				$	29,049				$	112,651				$	120,867
Period end common shares outstanding	(d)						67,628,618					67,626,939					67,623,601					67,639,832					67,559,128
TANGIBLE COMMON EQUITY MEASUREMENTS
Return on average tangible equity (1)							10.41	%				11.16	%				8.08	%				10.26	%				10.61	%				9.99	%				11.36	%
Tangible equity/tangible assets	(a	)/(b)					8.74	%				8.97	%				8.97	%				9.01	%				8.79	%
Tangible equity/risk-weighted assets	(a	)/(c)					11.39	%				11.85	%				11.85	%				11.84	%				11.68	%
Tangible book value	(a)/(d)*1,000					$	16.76				$	16.95				$	16.76				$	16.50				$	15.98
COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity						$	1,520,208				$	1,534,761				$	1,523,467				$	1,508,256				$	1,473,057
AOCI-related adjustments							45,798					17,075					12,164					21,573					45,394
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)							(347,442	)				(347,800	)				(348,158	)				(348,515	)				(348,873	)
Other adjustments and deductions for CET1 (2)							(8,637	)				(9,307	)				(10,042	)				(10,861	)				(7,980	)
CET1 capital	(e)						1,209,927					1,194,729					1,177,431					1,170,453					1,161,598
Additional tier 1 capital instruments plus related surplus							60,000					60,000					60,000					60,000					60,000
Less: additional tier 1 capital deductions							(267	)				(276	)				(328	)				(434	)				(1,063	)
Additional tier 1 capital							59,733					59,724					59,672					59,566					58,937
Tier 1 capital						$	1,269,660				$	1,254,453				$	1,237,103				$	1,230,019				$	1,220,535
Common equity tier 1 capital ratio	(e	)/(c)					12.16	%				12.35	%				12.32	%				12.41	%				12.57	%
(1) Calculation = ((net income adjusted for intangible amortization/number of days in period)*number of days in year)/total average tangible equity
(2) Includes other intangible assets, net of DTLs, disallowed deferred tax assets (DTAS), threshold deductions and transition adjustments, as applicable.

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

Note 8 – Non-GAAP Financial Measures (continued)

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

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

				Quarter Ended																			Year Ended
				12/31/2016										12/31/2015									12/31/2016										12/31/2015
				Amount					Diluted EPS					Amount					Diluted EPS				Amount					Diluted EPS					Amount					Diluted EPS
Net Income (GAAP)				$	28,923				$	0.426				$	27,858				$	0.411			$	108,411				$	1.599				$	116,038				$	1.714
Significant non-routine transactions (net of taxes):
Non-routine early retirement program expense					165					0.002					—					—				6,049					0.089					—					—
Non-routine pension expense due to de-risking strategy in Plan assets portfolio					410					0.006					—					—				820					0.012					—					—
Net Income adjusted for significant non-routine transactions (Non-GAAP)				$	29,498				$	0.434				$	27,858				$	0.411			$	115,280				$	1.700				$	116,038				$	1.714
				Reported					Adjusted					Reported					Adjusted				Reported					Adjusted					Reported					Adjusted
				(GAAP)					(Non-GAAP)					(GAAP)					(Non-GAAP)				(GAAP)					(Non-GAAP)					(GAAP)					(Non-GAAP)
Return on equity					7.51	%				7.65	%				7.46	%			n/a					7.14	%				7.59	%				7.94	%			n/a
Return on average tangible equity					10.41	%				10.61	%				10.61	%			n/a					9.99	%				10.60	%				11.36	%			n/a
Return on assets					0.87	%				0.89	%				0.88	%			n/a					0.84	%				0.89	%				0.95	%			n/a
n/a - not applicable

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