Shareholders' Equity

9 Months Ended

Sep. 30, 2020

Note 16 – Shareholders’ Equity

Regulatory Capital

Trustmark and TNB are subject to minimum risk-based capital and leverage capital requirements, as described in the section captioned “Capital Adequacy” included in Part I. Item 1. – Business of Trustmark’s 2019 Annual Report, 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. Trustmark’s and TNB’s minimum risk-based capital requirements include a capital conservation buffer of 2.50% at September 30, 2020 and December 31, 2019. Accumulated other comprehensive income (loss), net of tax, is not included in computing regulatory capital. Trustmark has elected the five-year phase-in transition period related to adopting FASB ASU 2016-13 for regulatory capital purposes. 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 September 30, 2020, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at September 30, 2020. 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 September 30, 2020, 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 September 30, 2020 and December 31, 2019 ($ in thousands):

	Actual
	Regulatory Capital					Minimum			To Be Well
	Amount		Ratio			Requirement			Capitalized
At September 30, 2020:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,358,889		11.36	%		7.00	%	n/a
Trustmark National Bank		1,384,436		11.57	%		7.00	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,418,889		11.86	%		8.50	%	n/a
Trustmark National Bank		1,384,436		11.57	%		8.50	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,541,261		12.88	%		10.50	%	n/a
Trustmark National Bank		1,506,808		12.60	%		10.50	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,418,889		9.20	%		4.00	%	n/a
Trustmark National Bank		1,384,436		9.00	%		4.00	%		5.00	%

At December 31, 2019:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,312,668		11.93	%		7.00	%	n/a
Trustmark National Bank		1,352,893		12.30	%		7.00	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,372,668		12.48	%		8.50	%	n/a
Trustmark National Bank		1,352,893		12.30	%		8.50	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,457,760		13.25	%		10.50	%	n/a
Trustmark National Bank		1,437,985		13.07	%		10.50	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,372,668		10.48	%		4.00	%	n/a
Trustmark National Bank		1,352,893		10.35	%		4.00	%		5.00	%

Stock Repurchase Program

On March 11, 2016, the Board of Directors of Trustmark authorized a stock repurchase program under which $100.0 million of Trustmark’s outstanding common stock could be acquired through March 31, 2019. Trustmark repurchased approximately 1.2 million shares of its common stock valued at $36.9 million during the three months ended March 31, 2019. Under this authority, Trustmark repurchased approximately 3.2 million shares valued at $100.0 million.

On April 1, 2019, the Board of Directors of Trustmark authorized a stock repurchase program under which $100.0 million of Trustmark’s outstanding common stock could be acquired through March 31, 2020. Trustmark repurchased approximately 887 thousand shares of its common stock valued at $27.5 million during the three months ended March 31, 2020. Under this authority, Trustmark repurchased approximately 1.5 million shares valued at $47.2 million.

On January 28, 2020, the Board of Directors of Trustmark authorized a new stock repurchase program, effective April 1, 2020, under which $100.0 million of Trustmark’s outstanding common stock may be acquired through December 31, 2021. The shares may be purchased from time to time at prevailing market prices, through open market or private transactions, depending on market conditions.

On March 9, 2020, Trustmark suspended its share repurchase programs to preserve capital to support customers during the COVID-19 pandemic. Trustmark may begin repurchases under the program at any time at Management’s discretion and subject to any necessary

regulatory approvals, but there is no guarantee that the program will be reinstated or as to the number of shares that will be repurchased, if any, by Trustmark.

Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)

The following tables present the net change in the components of accumulated other comprehensive income (loss) and the related tax effects allocated to each component for the periods presented ($ in thousands). The amortization of prior service cost, recognized net loss due to lump sum settlements and change in net actuarial loss are included in the computation of net periodic benefit cost (see Note 11 – Defined Benefit and Other Postretirement Benefits for additional details). Reclassification adjustments related to pension and other postretirement benefit plans are included in salaries and employee benefits and other expense in the accompanying consolidated statements of income. Reclassification adjustments related to the cash flow hedge derivative are included in other interest expense in the accompanying consolidated statements of income.

	Three Months Ended September 30, 2020									Three Months Ended September 30, 2019
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount

Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	(7,707	)	$	1,926		$	(5,781	)	$	4,154		$	(1,038	)	$	3,116
Change in net unrealized holding loss on securities transferred to held to maturity		804			(201	)		603			849			(212	)		637
Total securities available for sale and transferred securities		(6,903	)		1,725			(5,178	)		5,003			(1,250	)		3,753
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		37			(9	)		28			62			(16	)		46
Recognized net loss due to lump sum settlements		40			(10	)		30			47			(13	)		34
Change in net actuarial loss		319			(80	)		239			247			(61	)		186
Total pension and other postretirement benefit plans		396			(99	)		297			356			(90	)		266
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		—			—			—			19			(5	)		14
Reclassification adjustment for (gain) loss realized in net income		—			—			—			(101	)		26			(75	)
Total cash flow hedge derivatives		—			—			—			(82	)		21			(61	)
Total other comprehensive income (loss)	$	(6,507	)	$	1,626		$	(4,881	)	$	5,277		$	(1,319	)	$	3,958

	Nine Months Ended September 30, 2020							Nine Months Ended September 30, 2019
	Before Tax Amount		Tax (Expense) Benefit			Net of Tax Amount		Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	35,448	$	(8,863	)	$	26,585	$	43,057		$	(10,764	)	$	32,293
Change in net unrealized holding loss on securities transferred to held to maturity		2,443		(611	)		1,832		2,852			(713	)		2,139
Total securities available for sale and transferred securities		37,891		(9,474	)		28,417		45,909			(11,477	)		34,432
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		112		(28	)		84		187			(47	)		140
Recognized net loss due to lump sum settlements		80		(20	)		60		141			(36	)		105
Change in net actuarial loss		964		(241	)		723		749			(187	)		562
Total pension and other postretirement benefit plans		1,156		(289	)		867		1,077			(270	)		807
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		—		—			—		(145	)		36			(109	)
Reclassification adjustment for (gain) loss realized in net income		—		—			—		(413	)		104			(309	)
Total cash flow hedge derivatives		—		—			—		(558	)		140			(418	)
Total other comprehensive income (loss)	$	39,047	$	(9,763	)	$	29,284	$	46,428		$	(11,607	)	$	34,821

The following table presents the changes in the balances of each component of accumulated other comprehensive income (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 Derivatives			Total
Balance at January 1, 2020	$	(8,017	)	$	(15,583	)	$	—		$	(23,600	)
Other comprehensive income (loss) before reclassification		28,417			—			—			28,417
Amounts reclassified from accumulated other comprehensive income (loss)		—			867			—			867
Net other comprehensive income (loss)		28,417			867			—			29,284
Balance at September 30, 2020	$	20,400		$	(14,716	)	$	—		$	5,684

Balance at January 1, 2019	$	(43,824	)	$	(12,324	)	$	469		$	(55,679	)
Other comprehensive income (loss) before reclassification		34,432			—			(109	)		34,323
Amounts reclassified from accumulated other comprehensive income (loss)		—			807			(309	)		498
Net other comprehensive income (loss)		34,432			807			(418	)		34,821
Balance at September 30, 2019	$	(9,392	)	$	(11,517	)	$	51		$	(20,858	)