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Trustmark Corporation Announces Fourth Quarter and Fiscal Year 2018 Financial Results

January 23, 2019 4:30 PM

JACKSON, Miss.--(BUSINESS WIRE)-- 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

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

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

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

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

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 (877) 317-3051 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 (877) 344-7529, 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
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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 %
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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.

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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
�

Trustmark Investor Contacts:

Louis E. Greer

Treasurer and

Principal Financial Officer

601-208-2310



F. Joseph Rein, Jr.

Senior Vice President

601-208-6898



Trustmark Media Contact:

Melanie A. Morgan

Senior Vice President

601-208-2979

Source: Trustmark Corporation

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