Note 18 – Shareholders’ Equity

Regulatory Capital

As of January 1, 2015, Trustmark and TNB were subject to revised capital requirements as described in the section captioned “Capital Adequacy” included in Part I. Item 1. – Business of this report. Trustmark and TNB are subject to minimum risk-based capital and leverage capital requirements, which are administered by the federal bank regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB and limit Trustmark’s and TNB’s ability to pay dividends. As of December 31, 2015, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at December 31, 2015. To be categorized in this manner, Trustmark and TNB maintained minimum common equity Tier 1 risk-based capital, Tier 1 risk-based capital, total risk-based capital and Tier 1 leverage ratios as set forth in the accompanying table, and were not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by their primary federal regulators to meet and maintain a specific capital level for any capital measures. There are no significant conditions or events that have occurred since December 31, 2015, which Management believes have affected Trustmark’s or TNB’s present classification.

The following table provides Trustmark’s and TNB’s actual regulatory capital amounts and ratios under regulatory capital standards in effect at December 31, 2015 (Basel III) and December 31, 2014 (Basel I) ($ in thousands):

	Actual
	Regulatory Capital					Minimum			To Be Well
	Amount		Ratio			Requirement			Capitalized
At December 31, 2015:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,161,598		12.57	%		4.50	%	n/a
Trustmark National Bank		1,201,113		13.00	%		4.50	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,220,535		13.21	%		6.00	%	n/a
Trustmark National Bank		1,201,113		13.00	%		6.00	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,300,146		14.07	%		8.00	%	n/a
Trustmark National Bank		1,280,724		13.86	%		8.00	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,220,535		10.03	%		4.00	%	n/a
Trustmark National Bank		1,201,113		9.89	%		4.00	%		5.00	%

At December 31, 2014:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,069,630		12.75	%	n/a			n/a
Trustmark National Bank		1,108,399		13.24	%	n/a			n/a

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,129,630		13.47	%		4.00	%	n/a
Trustmark National Bank		1,108,399		13.24	%		4.00	%		6.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,221,292		14.56	%		8.00	%	n/a
Trustmark National Bank		1,198,697		14.32	%		8.00	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,129,630		9.63	%		4.00	%	n/a
Trustmark National Bank		1,108,399		9.46	%		4.00	%		5.00	%

Dividends on Common Stock

Dividends paid by Trustmark are substantially funded from dividends received from TNB. Approval by TNB’s regulators is required if the total of all dividends declared in any calendar year exceeds the total of its net income for that year combined with its retained net income of the preceding two years. TNB will have available in 2016 approximately $114.3 million plus its net income for that year to pay as dividends.

Accumulated Other Comprehensive Loss

The following table presents the components of accumulated other comprehensive loss and the related tax effects allocated to each component for the years ended December 31, 2015, 2014 and 2013 ($ in thousands). Reclassification adjustments related to securities available for sale are included in securities gains, net in the accompanying consolidated statements of income. The amortization of prior service cost, recognized net loss due to BancTrust termination, recognized net loss due to lump sum settlements and change in net actuarial loss on pension and other postretirement benefit plans are included in the computation of net periodic benefit cost (see Note 15 – Defined Benefit and Other Postretirement Benefits for additional details). Reclassification adjustments related to the cash flow hedge derivative are included in other interest expense in the accompanying consolidated statements of income.

	Before Tax			Tax (Expense)			Net of Tax
	Amount			Benefit			Amount
Year Ended December 31, 2015:
Securities available for sale and transferred securities:
Unrealized holding losses arising during the period	$	(16,695	)	$	6,386		$	(10,309	)
Reclassification adjustment for net gains realized in net income		—			—			—
Change in net unrealized holding loss on securities transferred to held to maturity		6,345			(2,427	)		3,918
Total securities available for sale and transferred securities		(10,350	)		3,959			(6,391	)
Pension and other postretirement benefit plans:
Net change in prior service costs		250			(96	)		154
Recognized net loss due to lump sum settlements		2,221			(850	)		1,371
Change in net actuarial loss		3,647			(1,395	)		2,252
Total pension and other postretirement benefit plans		6,118			(2,341	)		3,777
Cash flow hedge derivatives:
Change in accumulated loss on effective cash flow hedge derivatives		(1,315	)		503			(812	)
Reclassification adjustment for loss realized in net income		836			(320	)		516
Total cash flow hedge derivatives		(479	)		183			(296	)
Total other comprehensive loss	$	(4,711	)	$	1,801		$	(2,910	)

Year Ended December 31, 2014:
Securities available for sale and transferred securities:
Unrealized holding gains arising during the period	$	17,705		$	(6,772	)	$	10,933
Reclassification adjustment for net gains realized in net income		(300	)		115			(185	)
Change in net unrealized holding loss on securities transferred to held to maturity		6,010			(2,299	)		3,711
Total securities available for sale and transferred securities		23,415			(8,956	)		14,459
Pension and other postretirement benefit plans:
Net change in prior service costs		249			(95	)		154
Recognized net loss due to BancTrust termination		1,355			(518	)		837
Recognized net loss due to lump sum settlements		905			(346	)		559
Change in net actuarial loss		(21,657	)		8,283			(13,374	)
Total pension and other postretirement benefit plans		(19,148	)		7,324			(11,824	)
Cash flow hedge derivatives:
Change in accumulated gain on effective cash flow hedge derivatives		(2,246	)		859			(1,387	)
Reclassification adjustment for loss realized in net income		(2	)		1			(1	)
Total cash flow hedge derivatives		(2,248	)		860			(1,388	)
Total other comprehensive income	$	2,019		$	(772	)	$	1,247

Year Ended December 31, 2013:
Securities available for sale and transferred securities:
Unrealized holding losses arising during the period	$	(67,135	)	$	25,679		$	(41,456	)
Reclassification adjustment for net gains realized in net income		(485	)		186			(299	)
Net unrealized holding loss on securities transferred to held to maturity		(46,383	)		17,741			(28,642	)
Total securities available for sale and transferred securities		(114,003	)		43,606			(70,397	)
Pension and other postretirement benefit plans:
Net change in prior service costs		251			(96	)		155
Recognized net loss due to lump sum settlements		2,225			(851	)		1,374
Change in net actuarial loss		32,742			(12,524	)		20,218
Total pension and other postretirement benefit plans		35,218			(13,471	)		21,747
Cash flow hedge derivatives:
Change in accumulated gain on effective cash flow hedge derivatives		2,468			(944	)		1,524
Total other comprehensive loss	$	(76,317	)	$	29,191		$	(47,126	)

The following table presents the changes in the balances of each component of accumulated other comprehensive loss for the periods presented ($ in thousands). All amounts are presented net of tax.

	Securities Available for Sale and Transferred Securities			Defined Benefit Pension Items			Cash Flow Hedge Derivative			Total
Balance at January 1, 2013	$	44,935		$	(41,540	)	$	—		$	3,395
Other comprehensive (loss) income before reclassification		(70,098	)		21,747			1,524			(46,827	)
Amounts reclassified from accumulated other comprehensive loss		(299	)		—			—			(299	)
Net other comprehensive (loss) income		(70,397	)		21,747			1,524			(47,126	)
Balance at December 31, 2013		(25,462	)		(19,793	)		1,524			(43,731	)
Other comprehensive income (loss) before reclassification		14,644			(11,824	)		(1,387	)		1,433
Amounts reclassified from accumulated other comprehensive loss		(185	)		—			(1	)		(186	)
Net other comprehensive income (loss)		14,459			(11,824	)		(1,388	)		1,247
Balance at December 31, 2014		(11,003	)		(31,617	)		136			(42,484	)
Other comprehensive (loss) income before reclassification		(6,391	)		3,777			(812	)		(3,426	)
Amounts reclassified from accumulated other comprehensive loss		—			—			516			516
Net other comprehensive (loss) income		(6,391	)		3,777			(296	)		(2,910	)
Balance at December 31, 2015	$	(17,394	)	$	(27,840	)	$	(160	)	$	(45,394	)